Irene Dixon v. Ladish Company Incor
2012 U.S. App. LEXIS 1417
| 7th Cir. | 2012Background
- Ladish Co. agreed to be acquired by Allegheny Technologies, Inc. in November 2010, with consideration of $24 cash plus 0.4556 Allegheny shares per Ladish share.
- After the merger announcement, Allegheny stock trade implied a package value of $46.75 per Ladish share, a 59% premium to Ladish's pre-announcement price.
- The merger closed on May 9, 2011, with Ladish becoming ATI Ladish LLC.
- Irene Dixon filed a lawsuit alleging omissions in Ladish's registration statement and proxy materials regarding four sets of material facts, including Ladish's long-term plan, adviser process, alternative suitors, and Baird’s fairness opinion.
- The district court granted judgment on the pleadings in favor of Ladish/defendants, dismissing federal PSLRA claims and then applying Wisconsin's business judgment rule to bar state-law damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SLUSA preempts Dixon's state-law claims | Dixon argues SLUSA preempts most claims based on statements in or omissions from registration/proxy documents. | Defendants contend SLUSA preemption applies and bars state-law claims. | Preemption not decisive; the statute's scope not decided due to forfeiture and mootness concerns. |
| Whether Wisconsin's business judgment rule bars damages for disclosure omissions | Dixon contends the rule does not apply to disclosure duties (duty of candor). | Defendants rely on §180.0828 to immunize directors from damages absent willful misconduct or loyalty violations. | Wisconsin law bars damages under §180.0828 for this transaction; no liability for the directors. |
| Whether the directors violated their duty of loyalty | Dixon asserts concealment/omission breached loyalty. | No loyalty breach since directors' interests aligned and disclosures were adequate regarding conflicts. | No violation of the duty of loyalty; damages not available under Wisconsin law. |
| Whether the damages claim remains viable after merger completion (mootness) | Damages claims survive irreversibility of the merger and are not moot. | Damages claims moot because merger closed and improved proxy materials could not be issued. | Damages claim not mooted; nonetheless, Wisconsin immunity bars recovery. |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) ( PSLRA pleading standards for falsity and materiality)
- Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986) (merger price considerations and directors' duties in takeovers)
- Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (defining directors' duties in mergers and the scope of the business judgment rule)
- Trans Union Corp. v. Citizens Bank, 488 A.2d 705 (Del. 1985) (early articulations influencing business judgment and director duties)
- Brown v. Calamos, 664 F.3d 123 (7th Cir. 2011) (SLUSA preemption as a defense, and its treatment as forfeited under certain circumstances)