Fed. Sec. L. Rep. P 95,512 Marvyn Gould, of the Estate of J. Donald Rogasner, in No. 75-1338. v. American-Hawaiian Steamship Company, Cross-Appellants

VAN DUSEN, Circuit Judge

(concurring and dissenting):

I respectfully dissent from the conclusions reached by the majority opinion under (a) at pages 771-773, (c) at pages 773-774 and (a) at pages 775-777, because they affirm the district court’s holding 1 that the individual defendant, Casey, is liable as a matter of law on summary judgment despite the uncontradicted affidavit of Malcolm McLean (80a-83a, 85a), related deposition testimony (see, for example, 694a), and exhibits (see, for example, DX-82 at 627a).

I believe that Casey was entitled to a trial, since the above evidence and reasonable inferences therefrom indicate (1) that the McLean Company needed 300 million to 500 million dollars in order to continue to compete in the container shipping business, (2) that McLean common stock would have been worth far less than $40.00 per share if Reynolds had not promptly supplied credit to this enterprise, and (3) that no other source of such credit was available. Further, Casey was entitled to show at a trial that Reynolds would have withdrawn from this venture if it had not been consummated promptly by payment of the “premium” to the large stockholders, since their favorable vote was essential to secure the two-thirds stockholder vote required for approval of the merger.

In my view, the above-described evidence was sufficient to create fact issues, the resolution of which in Casey’s favor at a trial could have resulted in a determination that any misrepresentations and omissions described in parts (a) and (c) of the majority opinion were not material. See Laurenzano v. Einbender, 448 F.2d 1, 5-6 (2d Cir. 1971) . Casey should have the opportunity to prove that, as a practical matter, the “favored defendants” would have voted, and fully intended to vote, for the merger in any event. Even accepting the conclusion that the proxy materials were misleading because there was no legally binding obligation to vote for the merger, the disparity between the actual facts and the misstated facts may be insignificant and the misstatement therefore immaterial. See Laurenzano v. Einbender, supra. In addition, I believe reasonable men could differ on the adequacy of the disclosure of the various conflicts and that that issue should not be determined as a matter of law. The relevant information is contained in the first few pages of the proxy materials and, as we stated in Kohn v. American Metal Climax, 458 F.2d 255, 267 (3d Cir. 1972) , “reasonable latitude in this area is important if nit-picking is not to become the name of the game.”

Where the record at a hearing on motion for summary judgment discloses issues of fact, a trial is required. See, e. g., Adickes v. Kress & Co., 398 U.S. 144 , 90 S.Ct. 1598 , 26 L.Ed.2d 142 (1970); Smith v. Pittsburgh Gage and Supply Co., 464 F.2d 870, 874 (3d *786 Cir. 1972); 10 Wright & Miller, Federal Practice & Procedure: Civil § 2716 (1973). Where a judgment of over one million dollars is involved, surely this principle should not be overlooked.

Finally, because material favorable to Casey, including the evidence described in the first sentence of this dissent and the inferences from such evidence could be very pertinent in his defense to the contention that he is liable for negligence, I do not believe Casey can be held to have been negligent as a matter of law, as determined by the majority opinion at pages 775-777. The only evidence at this stage on the negligence issue is that Casey read the proxy statement in draft form and failed to correct it. In my view, that evidence, standing alone, is not a sufficient basis for holding Casey, who is neither a lawyer nor an inside director, liable by summary procedure. I believe Casey was entitled to a decision by a fact finder after trial on the factual issues needed to determine whether a reasonable director in his position was negligent in not objecting to, or referring to Monroe’s or Litton’s counsel, the possible omissions, including failure adequately to reveal conflicts of interest, in the proxy materials.

There is no proof that Casey was consciously aware of the alleged misstatements and omissions or of their materiality. The critical question is whether he should have noticed and corrected the defects. But the defects themselves are quite technical. The defect relating to the alleged agreement to vote hinges on reading the language of the proxy materials as connoting a legally binding obligation to vote for the merger on the part of Litton and Monroe. Similarly, the thrust of the majority opinion with respect to the disclosure of the alleged conflicts of interest is that Casey should have realized that the relevant facts were not presented in sufficiently prominent form and that the disclosure was therefore inadequate. As a non-lawyer and an outside director, Casey might easily be excused for not having his antennae so finely tuned to semantic and formal “defects.” In any event, he should be permitted to show that, under the circumstances of this case, particularly those noted in the first sentence of this dissent and this paragraph, he would have reasonably considered these misstatements and omissions to be insignificant.

In all other respects, I join in Judge Maris’ characteristically excellent opinion, although, under my view stated above, it would not be necessary to reach the damage issue at pages 781-784 and the prejudgment interest issue at pages 784-785 of the majority opinion.

. I note that the district court appears to have adopted and applied the more liberal test of materiality explicitly rejected by the majority at pages 770-771. Gould v. American-Hawaiian Steamship Co., 319 F.Supp. 795, 802 (D.Del.1970); see General Time Corp. v. Talley Industries, 403 F.2d 159, 162 (2d Cir. 1968).