The Seventh Circuit has upheld a lower court’s dismissal of a claim under section 14(a) of the Securities Exchange Act, finding that plaintiff failed adequately to allege that there were misrepresentations in a proxy statement issued during a bidding war for a real estate investment trust.  

Plaintiff, a shareholder of the investment trust, asserted a derivative claim against the trust’s directors for violating section 14(a), which proscribes material misrepresentations or omissions in soliciting a shareholder’s proxy vote. Plaintiff asserted that the proxy statements were misleading because defendants had recommended that shareholders accept a purchase offer which plaintiff alleged was less valuable than the competing bidder’s offer. The court rejected plaintiff’s argument, concluding that, even though defendants recommended a lower per-share offer which contained a breakup fee, it was superior to the competing bid which contained a stock component and was subject to shareholder approval. The court also rejected plaintiff’s argument that the proxy solicitation which recommended the allegedly inferior offer was mailed to shareholders less than 14 days before the shareholder vote, finding that the Securities and Exchange Commission, not the court, should impose a notice rule if warranted. (Beck v. Debrowski, 2009 WL 723172 (7th Cir. March 20, 2009))