Fed. Sec. L. Rep. P 96,263 Frank S. Yamamoto, Individually And, Derivatively, on Behalf of Investors Finance, Inc. v. Kazuo Omiya

564 F.2d 1319 Fed. Sec. L. Rep. P 96,263 Frank S. YAMAMOTO, Individually and, derivatively, on behalf of Investors Finance, Inc., Appellant, v. Kazuo OMIYA et al., Appellees. No. 76-1069. United States Court of Appeals, Ninth Circuit. Nov. 28, 1977. Edward A. Jaffe (argued), Honolulu, Hawaii, for appellant. Ton Seek Pai (argued), R. Patrick Jaress (argued), Jack C. Morse (argued), Honolulu, Hawaii, for appellees. Appeal from the United States District Court for the District of Hawaii. Before ELY, HUFSTEDLER and WRIGHT, Circuit Judges. ELY, Circuit Judge: 1 This interlocutory appeal presents three questions 1 relating to orders entered by the District Court in a suit arising out of an allegedly deceptive proxy solicitation. We affirm the District Court's order striking the prayer for injunctive and other equitable relief, and also the court's order granting summary judgment in favor of Dr. Lee. We vacate the order denying class certification. I. 2 The controversy centers on the affairs of Investors Finance Inc. (Investors). Investors is a publicly held company with 1601 shareholders in 24 states and is required to register its stock with the Securities and Exchange Commission. All…

This interlocutory appeal presents three questions 1 relating to orders entered by the District Court in a suit arising out of an allegedly deceptive proxy solicitation. We affirm the District Court’s order striking the prayer for injunctive and other equitable relief, and also the court’s order granting summary judgment in favor of Dr. Lee. We vacate the order denying class certification.

I.

The controversy centers on the affairs of Investors Finance Inc. (Investors). Investors is a publicly held company with 1601 shareholders in 24 states and is required to register its stock with the Securities and Exchange Commission. All solicitations of Investors stockholders are subject to the proxy regulations under section 14(a) of the Securities Exchange Act, 15 U.S.C. § 78n (1971).

The directors 2 of Investors decided, in September of 1971, that they should consider selling the principal asset of the company, the Investors Finance Building. The asserted reason for this decision was to increase the rate of return of the company by freeing additional funds for industrial loans, claimed to be the company’s primary business. At the September 16, 1971 meeting of the Board of Directors,…

concurring and dissenting:

In order to grant summary judgment to Lee, the district court had to decide, as a matter of law, that (1) Lee was not liable for alleged misleading statements in the proxy materials, and (2) appellant and his fellow stockholders were not entitled to rescind the sale of the real property to Lee by reason of the misrepresentations in the proxy materials. I agree with my brothers that the district court correctly decided the first issue, but I cannot agree that the district court could eliminate equitable relief at this stage of the case. The majority opinion’s holding on this point is contrary to the Federal Rules of Civil Procedure and to the explicit teaching of the Supreme Court in Mills v. Electric Auto-Lite Co. (1969), 396 U.S. 375 , 90 S.Ct. 616 , 24 L.Ed.2d 593 and J. I. Case Co. v. Borak (1964), 377 U.S. 426 , 84 S.Ct. 1555 , 12 L.Ed.2d 423 .

If appellant stated a claim for equitable relief against the directors for violating Section 14(a) of the Securities Act of 1934, and if that claim was not destroyed by undisputed facts in the record which could be read into the complaint, Lee could not be dismissed from the case. The district court knew…