Thursday, September 14, 2006
Ind. Decisions - 7th Circuit decides two Indiana cases
In Shepard, Gregory v. State Automobile Mutual Ins. (SD Ind., David F. Hamilton, Judge), a 13-page opiion, Circuit Judge Williams writes:
The plaintiffs-appellants sued the defendants, claiming that the defendants breached a confidentiality agreement by relying upon the plaintiffs’ confidential disclosures to acquire Meridian Insurance Group, Inc. Because the plaintiffs cannot establish either causation or damages, we affirm the district court’s grant of summary judgment to the defendants.
In Massey, James v. Merrill Lynch & Co (SD Ind., Richard L. Young, Judge), a 17-page opinion, Circuit Judge Williams writes:
Plaintiffs-appellants James Massey and Dennis Murray, former directors of Conseco, Inc., sued appellee Merrill Lynch, claiming that Merrill Lynch committed fraud and breached its fiduciary duty by providing an intentionally misleading opinion to Conseco’s Board of Directors (the “Board”) pertaining to the financial soundness of Conseco’s proposed acquisition of Green Tree Financial Corporation (“Green Tree”). Because the plaintiffs’ claims are solely derivative claims and can only be brought on behalf of the corporation (Conseco), we affirm the district court’s dismissal of the plaintiffs’ claims. * * *
As a final note, it would be a curious—and unfair—result if, as the plaintiffs argue, corporate insiders were permitted to maintain direct actions that “ordinary shareholders” could not bring. Such a result would provide greater protections to insiders, who presumably have the greatest access to information on the future prospects of a corporation. Those with the most well-informed front-end risk assessments would also receive the greatest financial protections at the back-end of a deal gone wrong. This would invert the basic structure of corporate and securities fraud laws, particularly the prohibitions on insider trading, which generally aim to curtail trading advantages by corporate insiders and protect investors from such abuses. [extensive citations omitted] We are not inclined to create such a generous exception to bedrock corporate law principles, and instead hold that the plaintiffs must take their proper place in the recovery line along with all other investors.
Posted by Marcia Oddi on September 14, 2006 12:32 PM
Posted to Ind. (7th Cir.) Decisions