Securities Regulation Keyed to Coffee
Virginia Bankshares, Inc. v. Sandberg
Facts
Virginia Bankshares, a subsidiary of a bank holding company, possessed 85% of the shares of a different bank and in a plot hatched by its parent, Virginia Bankshares suggested to merge the bank with the institution where it possessed a majority interest into itself in a “freeze out”, to do this however, would require the 15% of outstanding shares still held by a few thousand minority shareholders. It hired an investment banking firm to give an opinion on the suitable price for the minority shares, with the firm opining that a reasonable price would be $42 a share and the board of directors approving. The solicitation materials provided at the annual shareholders meeting, where the plan would be voted on and attended by the recently solicited proxies, stated that the board of directors had approved the merger due to the its ability to provide minority shareholders with a “high value” and “fair price” for their stock. While a majority of the minority shareholders provided the proxies demanded, Sandberg failed to. Sandberg claimed, in a federal district court action, that the board of Virginia Bankshares was in violation of the SecuritiesExchange Act § 14(a) and Rule 14a-9 and had violated the fiduciary duties to the shareholders due to its members distrusting that the price presentedto the minority was high or fair, and that the merger was only suggested to keep their board seats. A jury concurred with Sandberg with the Fourth Circuit affirming. The Supreme Court granted certiorari.
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