Fed. Sec. L. Rep. P 98,601 South Coast Services Corp., a California Corporation v. Santa Ana Valley Irrigation Co.

This lawsuit concerns the adequacy of proxy statements soliciting shareholder approval of the sale of the assets of Santa Ana Valley Irrigation Company (SAVI) to Intercoast Investments, Inc. (Intercoast). Plaintiffs-Appellants, invoking this court’s jurisdiction under 28 U.S.C. § 1291 (1976), appeal from an order of the District Court for the Central District of California denying a claim for injunctive relief for alleged violations of section 14(a) of the Securities Exchange Act of 1934 (the Act), 15 U.S.C. § 78 (n) (1976) and Rule 14a-9 of the Securities and Exchange Commission, 17 C.F.R. § 240 .14a-9 (1981). Because we find that the proxy materials in question were not materially false or misleading we affirm the judgment of the district court.

FACTS

Appellants are former shareholders and directors of appellee corporation, Santa Ana Valley Irrigation Company (SAVI). SAVI was organized in 1877 to distribute water to irrigate the farms of its member shareholders in what is now the eastern portion of Orange County, California. As urban sprawl displaced farming in southern California, SAVI’s emphasis shifted from irrigation to real estate holding and development. By the end of…

dissenting:

Appellant shareholders and directors contend that the SAVI proxy materials misled shareholders by disclosing only the historical cost of S A Vi’s realty and omitting the board’s own estimates of the present market value of the SAVI properties. As noted in the majority opinion, the district court rejected this contention on the basis of its understanding of SEC policy with regard to appraisal information and its assessment of the estimates’ reliability. The district court’s analysis was incomplete, however, for it failed to take the necessary first step of determining materiality.

Generally speaking, rule 14a-9 is violated if a proxy statement fails to disclose a material fact. In TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 , 96 S.Ct. 2126 , 48 L.Ed.2d 757 (1976), the Supreme Court posited the following test for materiality:

Id. at 449 , 96 S.Ct. at 2132 . In viewing the sale of SAVI’s assets within the framework of this standard of materiality, numerous factors persuade me that a reasonable shareholder would have considered the valuations placed on the assets by the board important in deciding how to vote. SAVI was a company whose value was principally in…

669 F.2d 1265 Fed. Sec. L. Rep. P 98,601 SOUTH COAST SERVICES CORP., a California corporation, et al., Plaintiffs-Appellants. v. SANTA ANA VALLEY IRRIGATION CO., et al., Defendants-Appellees. No. 78-1964. United States Court of Appeals, Ninth Circuit. Argued and Submitted Feb. 6, 1980. Decided Feb. 4, 1982. Dissenting Opinion Filed Feb. 24, 1982. Frederic J. Milberg, William S. Lerach, Milberg, Weiss, Bershad & Specthrie, San Diego, Cal., for plaintiffs-appellants. Thomas S. Salinger, Rutan & Tucker, Santa Ana, Cal., for defendants-appellees. Appeal from the United States District Court for the Central District of California. Before KENNEDY, FLETCHER, and POOLE, Circuit Judges. POOLE, Circuit Judge: 1 This lawsuit concerns the adequacy of proxy statements soliciting shareholder approval of the sale of the assets of Santa Ana Valley Irrigation Company (SAVI) to Intercoast Investments, Inc. (Intercoast). Plaintiffs-Appellants, invoking this court's jurisdiction under 28 U.S.C. § 1291 (1976), appeal from an order of the District Court for the Central District of California denying a claim for injunctive relief for alleged violations of section 14(a) of the Securities…