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Indus. v. Northway - 426 U.S. 438, 96 S. Ct. 2126, 48 L. Ed. 2d 757, 1976 U.S. LEXIS 155


In considering whether summary judgment on the issue of materiality is appropriate, the court must bear in mind that the underlying objective facts, which will often be free from dispute, are merely the starting point for the ultimate determination of materiality. The determination requires delicate assessments of the inferences a reasonable shareholder would draw from a given set of facts and the significance of those inferences to him, and these assessments are peculiarly ones for the trier of fact. Only if the established omissions are so obviously important to an investor, that reasonable minds cannot differ on the question of materiality, is the ultimate issue of materiality appropriately resolved as a matter of law by summary judgment.


After National Industries, Inc. (National) acquired 34 percent of the voting securities of TSC Industries, Inc. (TSC), the two corporations issued to their shareholders a joint proxy statement recommending approval of a proposal for the exchange of TSC stock for National stock. Plaintiff Northway, a TSC corporate shareholder, brought this action against both National and TSC, seeking money damages and restitution, claiming that defendant companies' joint proxy statement was incomplete and materially misleading in violation of 15 U.S.C.S. § 78n (a). More specifically, Plaintiff Northway's claim under 17 C.F.R. § 240.14a-3 was that Defendants National and TSC omitted material facts relating to the degree of Defendant National's control, at the time of the proxy solicitation, over Defendant TSC and the favorability of the terms of the proposal to TSC shareholders. The District Court denied the plaintiff Northway's motion for partial summary judgment on the issue of Defendants' liability but the United States Court of Appeals for Seventh Circuit reversed the denial of summary judgment to Northway on its 14a-9 claims. National and TSC petitioned for certiorari review by the United States Supreme Court.


Did the appellate court err in granting partial summary judgment in favor of the corporate shareholder proper?




The United States Supreme Court reversed the judgment of the appellate court, which granted partial summary judgment to respondent shareholder. A genuine issue of material fact existed with respect to whether there was manipulation sufficient to bar summary judgment. None of the omissions claimed to have been in violation were materially misleading as a matter of law. Therefore, summary judgment was inappropriate.

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