J.I. CASE CO. v. BORAK 377 U.S. 426 (1964) CASE BRIEF

J.I. CASE CO. V. BORAK

377 U.S. 426 (1964)

NATURE OF THE CASE: J.I. (D) appealed a reversal of a lower court decision in Borak's (P), stockholder, civil action in federal court for deprivation of his preemptive rights by reason of a merger involving the company, allegedly effected through use of a false and misleading proxy statement. The Court of Appeals held that the state law was inapplicable and that the District Court had power to grant remedial relief.

FACTS: P owned 2,000 shares of D and sought to enjoin a proposed merger between D and the American Tractor Corporation (ATC) on grounds of a breach of the fiduciary duties of the D directors, self-dealing among the management of D and ATC and misrepresentations contained in the material circulated to obtain proxies. The injunction was denied. D filed successive amended complaints alleging that D, solicited or permitted their names to be used in the solicitation of proxies for use at a special stockholders' meeting at which the proposed merger with ATC was to be voted upon; that the proxy solicitation material so circulated was false and misleading in violation of 14(a) of the Act and Rule 14a-9. The merger in fact had been approved by a small number of votes and that but for the false and misleading statements in the proxy solicitation it would not have been approved. P sought a judgment holding the merger void and damages for himself and all other stockholders similarly situated, as well as such further relief 'as equity shall require.' The District Court found that its jurisdiction was limited to declaratory relief in a private, as opposed to a government, suit alleging violation of 14(a) of the Act. Since the additional equitable relief and damages prayed for by the respondent would therefore be available only under state law, it ruled those claims subject to the security for expenses statute. The court dismissed the complaint, save that portion of Count 2 seeking a declaration that the proxy solicitation material was false and misleading and that the proxies and, hence, the merger were void. The Court of Appeals held that the state law was inapplicable and that the District Court had power to grant remedial relief. The Supreme Court granted certiorari.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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