4th U.S. Circuit Court of Appeals
The district court did not err in dismissing this case, which arose from the merger of two financial-services companies. After the merger, shareholders of one company discovered information about the other’s financial condition that indicated it was worth less and was less healthy than represented in the proxy statement that induced their vote for the merger. Believing they had been misled, the shareholders sued on grounds that the proxy statement was false and misleading under the federal securities laws.
But the statements complained of were not false or misleading, and the alleged omissions were addressed by narrowly tailored warning language. The federal securities laws don’t guarantee financial success or render carefully tailored warnings meaningless. Words matter. When the words of a proxy statement, like the ones in this case, are not false or misleading and contain tailored and specific warnings about the very omissions that are the subject of the allegations, those words render the claim for relief implausible.
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