Sandberg v. Virginia Bankshares, Inc.
| Decision Date | 15 December 1989 |
| Docket Number | Nos. 88-2658,s. 88-2658 |
| Citation | 891 F.2d 1112 |
| Parties | Fed. Sec. L. Rep. P 94,810, 15 Fed.R.Serv.3d 357 Doris I. SANDBERG, individually and on behalf of other minority stockholders, Plaintiff-Appellant, v. VIRGINIA BANKSHARES, INC.; First American Bankshares, Inc.; Jack W. Beddow; Milton L. Drewer, Jr.; E. Guy Ridgely; Emanuel A. Baker, Jr.; Harriet F. Bradley; Joel T. Broyhill; Thomas B. Chamberlin; Thomas P. Chisman; Sidney O. Dewberry; Eric W. Erdossy; George W. Johnson; Charles T. Lindsay, Jr.; Donald R. Maxfield; Linda H. Michael; Milton V. Peterson; Glenn W. Saunders, Jr.; Charles H. Smith, Jr.; Verlin W. Smith; Henry A. Thomas; Stephen G. Yeonas, Defendants-Appellees, Thomas G. Mays; Dwight C. Schar, Defendants. (Two Cases) Doris I. SANDBERG, individually and on behalf of other minority stockholders, Plaintiff-Appellee, v. Jack W. BEDDOW; Milton L. Drewer, Jr.; E. Guy Ridgely; Emanuel A. Baker, Jr.; Harriet F. Bradley; Joel T. Broyhill; Thomas B. Chamberlin; Thomas P. Chisman; Sidney O. Dewberry; Eric W. Erdossy; George W. Johnson; Charles T. Lindsay, Jr.; Donald R. Maxfield; Linda H. Michael; Milton V. Peterson; Glenn W. Saunders, Jr.; Charles H. Smith, Jr.; Verlin W. Smith; Henry A. Thomas; Stephen G. Yeonas, Defendants-Appellants, and Virginia Bankshares, Inc.; First American Bankshares, Inc.; Thomas G. Mays; Dwight C. Schar, Defendants. Doris I. SANDBERG, individually and on behalf of other minority stockholders, Plaintiff-Appellee, v. VIRGINIA BANKSHARES, INC.; First American Bankshares, Inc., Defendants-Appellants, and Jack W. Beddow; Milton L. Drewer, Jr.; E. Guy Ridgely; Emanuel A. Baker, Jr.; Harriet F. Bradley; Joel T. Broyhill; Thomas B. Chamberlin; Thomas P. Chisman; Sidney O. Dewberry; Eric W. Erdossy; George W. Johnson; Charles T. Lindsay, Jr.; Donald R. Maxfield; Thomas G. Mays; Linda H. Michael; Milton V. Peterson; Glenn W. Saunders, Jr.; Dwight C. Schar; Charles H. Smith, Jr.; Verlin W. Smith; Henry A. Thomas; Stephen G. Yeonas, Defendants. Paul H. WEINSTEIN, et al., Plaintiffs-Appellees, v. Jack |
| Court | U.S. Court of Appeals — Fourth Circuit |
Lewis Thomas Booker, Richmond, Va. (Thomas J. Cawley and Stephen M. Sayers, Hunton & Williams, Fairfax, Va., on brief), John Sutton Stump (Thomas E. Spahn, Sean F. Murphy, and Robert R. Vieth, McGuire, Woods, Battle & Boothe, McLean, Va., on brief), for appellants.
Joseph Mark Hassett (John C. Keeney, Jr., George H. Mernick, III, Silver Spring, Md., David G. Leitch, and Albert W. Turnbull, Alexandria, Va., Hogan & Hartson, McLean, Va., on brief) for appellees.
Before HALL, Circuit Judge, GORDON, Senior United States District Judge for the Middle District of North Carolina, sitting by designation, and VOORHEES, United States District Judge for the Western District of North Carolina, sitting by designation.
First American Bankshares, Inc. ("FABI"), its wholly-owned subsidiary, Virginia Bankshares, Inc. ("VBI" and, collectively with FABI, "Bankshares"), First American Bank of Virginia ("Bank"), and various directors of the Bank, were defendants below in each of these two cases. In Sandberg, they appeal from the judgment entered on a jury verdict for the plaintiff, Doris Sandberg, based on federal securities law violations and state law breach of fiduciary duties. In Weinstein II, they appeal from a summary judgment entered on the basis of the Sandberg judgment on behalf of sixteen plaintiffs. Sandberg cross-appeals from the denial of her motion for class certification, and the Weinstein II plaintiffs cross-appeal from the district court's imposition of a cap on the maximum liability of the individual Bank directors on the state law claims. Both Sandberg and the Weinstein II plaintiffs cross-appeal from the denial of attorneys' fees in their respective actions. Finding no error in the trial of the Sandberg action, we affirm that judgment; however, we find that the lower court erred in denying class certification, and remand for entry of an appropriate order. In light of our rulings, we remand for reconsideration of the denial of attorneys' fees in Sandberg. We find no error in the grant of summary judgment to the Weinstein II plaintiffs, in the denial of attorneys' fees or in the imposition of a cap on each director's liability and, accordingly, we affirm.
These cases arise from FABI's decision to seek a merger of the Bank with VBI through the purchase by VBI of the 15% of the Bank stock owned by the minority stockholders. Although VBI's ownership of 85% of the Bank's stock was sufficient for approval of the merger, Virginia law required the Bank's directors to issue a proxy statement recommending the plan of merger and to call a stockholders' meeting to vote on the merger. Va.Code Ann. § 13.1-718(B)(1) (1989). The activities of Bankshares and the Bank's directors surrounding this merger, particularly the issuance of the proxy statement, form the basis of the damage actions brought by various minority stockholders.
FABI retained an investment advisor, Keefe, Bruyette and Woods [KBW] to furnish an opinion regarding a "fair price" to pay for the minority-held shares. KBW submitted its opinion that $42 per share was fair. Through arrangements made by Jack Beddow, an officer of both FABI and the Bank, KBW made a presentation to a small group of the Bank's directors and stockholders on January 29, 1987. On the same day, the Bank's executive committee members present at this presentation drafted a two-sentence statement recommending that the board of directors accept FABI's tender offer of $42 per share. At the board meeting held on February 12, 1987, the Bank's directors voted to approve the merger and to recommend to the minority stockholders that they accept the $42 per share offer. No independent investment advisor was retained by the Bank to determine a fair value for the minority-held stock.
A proxy statement was prepared and sent to each stockholder. At the April 21, 1987, stockholders' meeting, the merger proposal garnered 85% of the minority stockholders' votes. On May 27, 1987, the merger was consummated and the minority-held stock was converted to a right to receive $42 per share.
One week prior to the April 21, 1987, stockholders meeting, Paul Weinstein and twelve other minority stockholders filed suit in Virginia state court to enjoin defendants from effecting the proposed merger and to enjoin any merger which did not provide a "fair price per share" to the minority stockholders. (Weinstein I ). This request was denied. The complaint was then amended to add three plaintiffs and to include a claim for damages against VBI and the Bank's directors for breach of state law fiduciary duties. This amended complaint prayed for an equitable appraisal pursuant to Va.Code Ann. § 13.1-730 (1989). By order dated October 16, 1987, the amended complaint was dismissed, and the Weinstein I plaintiffs' appeal of this order to the Supreme Court of Virginia was pending when the Sandberg and Weinstein II judgments were entered.
After the merger, Doris Sandberg, a Bank stockholder who owned 2,442 shares, filed a class action in federal district court claiming violations of federal securities laws and breach of fiduciary duties imposed by state law. Her complaint described the putative plaintiff class as "all former shareholders of [the Bank], excluding defendants" which she alleged to consist of approximately 2,017 persons. Named as defendants were FABI, VBI, and individual directors of the bank. The crux of Sandberg's complaint was that the Bank's proxy solicitation contained material misrepresentations and omitted important facts. More particularly, she alleged that Bankshares orchestrated the entire merger and, abetted by an unquestioning and compliant Bank board of directors, led the minority shareholders to believe that $42 per share was a reasonable price when in fact the stock was worth substantially more.
Class certification was denied and the case proceeded to trial. The jury found that the shares were worth an additional $18 each and awarded Sandberg $43,956 on each claim; judgment was entered upon the verdict for this amount. The judgment is against all defendants, jointly and severally, on Count I (federal securities law); an "alternative" judgment was entered...
To continue reading
Request your trial
- Virginia Bankshares, Inc v. Sandberg
-
Kimberly-Clark v. Delaware County Regional Water, Civil Action No. 07-2688.
... ... See Pramco, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51, 54 (1st Cir.2006); Handelsman, v. Bedford Vill. Assocs ... ...
-
Royal Business Group, Inc. v. Realist, Inc.
... ... Page 1057 ... Edward P. Leibensperger, with whom Virginia A. Bonesteel, Julie A. Trachten, and Nutter, McClennen & Fish, Boston, Mass., were on brief, for ... number of shares to approve the transaction without any vote from the minority." Sandberg v. Virginia Bankshares, Inc., 891 F.2d 1112, 1120-21 (4th Cir.1989), cert. granted, --- U.S. ----, ... ...
-
WLR Foods, Inc. v. Tyson Foods, Inc.
... ... Realty Trust, Incorporated; Universal Corporation; ... Commonwealth of Virginia, Amici Curiae ... No. 95-1039 ... United States Court of Appeals, ... Fourth Circuit ... The case of Sandberg v. Virginia Bankshares, Inc., 891 F.2d 1112 (4th Cir.1989), rev'd on other grounds, 501 U.S. 1083, ... ...