Proxy information provided by corporation in connection seeking shareholder approval of settlement trust was not materially misleading. Shareholders alleged that it was materially misleading for corporation to state that shareholders could vote on amendments without stating that any amendment needed to be approved by the trustees. Statements or omissions qualify as misrepresentations when they are misleading or false, and a misleading or false statement is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. Materiality of a particular omission needs to be evaluated in light of the totality of information available to shareholders.
In keeping with a recommendation by Huna Totem Corporation’s board of directors, the company’s shareholders voted to put a large sum of available funds into a settlement trust. Certain shareholders later filed a class action, alleging that proxy information Huna Totem sent them in creating the trust was materially misleading because it failed to disclose that, once established, the trust could not be modified or terminated by shareholders unless two-thirds of its trustees recommended the action. After a bench trial, the superior court entered judgment for Huna Totem, finding that, although some of its proxy information was incomplete and ambiguous, the totality of the information was not materially misleading. Because the superior court applied the correct test of materiality and the evidence supports its ruling, we affirm the judgment in Huna Totem’s favor.Huna Totem Corporation is an Alaska Native village corporation organized under the Alaska Native Claims Settlement Act (ANCSA).[1] In 1993 Huna Totem entered into a tax settlement with the IRS that left the corporation with more than $ 35 million in unrestricted cash in 1994. In debating what to do with these funds, Huna Totem’s board of directors grew interested in the idea of establishing a settlement trust, and eventually the board proposed that its shareholders dedicate the settlement funds to a settlement trust.[2]In May 1994 the board sent shareholders an introductory “Shareholder Information Packet” describing the recent IRS settlement and introducing the idea of a settlement trust. This packet described the proposed trust in general terms, emphasizing that the information it contained was “not by any means a complete discussion of all of the important aspects of the Trust.” In addressing how the trust could be modified or changed once adopted, the packet said only that “at periodic intervals — initially five years after the Trust is established, and then once every ten years thereafter — the beneficiaries could, by vote of a two thirds of all units, choose to distribute some or all of the accumulated income and principal, or to terminate the Trust entirely.” The preliminary packet promised that “shareholders will be hearing and learning more about the Trust in the upcoming months, and will receive additional, detailed information.”
Clarifies what shareholder communications and voting-related conduct trigger (or don�t trigger) regulatory and corporate-law requirements.