materiality thresholds

In 1967 the Atomic Energy Commission granted Vermont Yankee a construction permit for a nuclear power plant in Vernon, Vermont, after the required adjudicatory hearing and reviews. Vermont Yankee later applied for an operating license; NRDC intervened and objected to exclusion of fuel-reprocessing and waste-disposal impacts from the hearing. In November 1972 the Commission opened a separate rulemaking proceeding on those fuel-cycle issues, noticed two alternative approaches based on its Environmental Survey, and conducted a February 1973 hearing at which more than forty participants submitted comments but no discovery or cross-examination occurred. In April 1974 the Commission adopted a rule assigning numerical values to fuel-cycle impacts and applied it prospectively. In January 1969 Consumers Power applied for permits to build two nuclear reactors in Midland, Michigan. After staff and ACRS review, Saginaw and Mapleton intervened and raised 119 environmental contentions, including seventeen on energy conservation. The Licensing Board held hearings on radiological issues, the staff issued a final environmental impact statement in March 1972, and further hearings occurred in May and June 1972; Saginaw declined to participate in the later hearings or submit proposed findings. The Licensing Board granted the construction permit, the Appeal Board affirmed, and the Commission declined further review. In November 1973 the Commission ruled in another case that energy-conservation evidence meeting threshold tests could be considered, but it later refused Saginaw's motion to reopen the Consumers Power record. NRDC appealed the Vermont Yankee license and rule to the D.C. Circuit; Saginaw and others appealed the Consumers Power permit. In 1976 the Court of Appeals remanded both matters, holding the fuel-cycle rulemaking procedures inadequate, the Consumers Power environmental impact statement defective for omitting energy conservation, and the ACRS report insufficiently explained. The Supreme Court granted certiorari in 1977. The Commission is the successor agency to the Atomic Energy Commission under the Energy Reorganization Act of 1974. All licensing proceedings followed the two-stage process of construction permit followed by operating license under the Atomic Energy Act of 1954, with NEPA environmental reviews added after 1969.

The cases involve two nuclear power projects regulated by the Atomic Energy Commission. In December 1967, the Commission granted Vermont Yankee Nuclear Power Corp. a permit to build a nuclear power plant in Vernon, Vermont. Vermont Yankee subsequently applied for an operating license, prompting an adjudicatory hearing in August 1971 at which the Natural Resources Defense Council participated and objected to the exclusion of fuel reprocessing and waste disposal environmental effects. In November 1972 the Commission began informal rulemaking to address the environmental effects of the uranium fuel cycle for light water reactors, publishing notice of two proposed alternatives based on its Environmental Survey. Hearings occurred in February 1973 with over forty participants submitting written comments; the Commission allowed oral statements but prohibited discovery and cross-examination, instead permitting questioning by the Commission itself. The Commission adopted the second alternative in April 1974, incorporating numerical values into a table for cost-benefit analyses. In January 1969 Consumers Power Co. applied for a construction permit for two nuclear reactors in Midland, Michigan. Intervenors including Saginaw and Mapleton submitted numerous environmental contentions and discovery requests, which the Licensing Board largely denied before holding hearings in 1972. Although Saginaw raised energy conservation issues in comments on the draft environmental impact statement, it did not present evidence at the hearings or participate further after the final statement issued. The Court of Appeals for the District of Columbia Circuit in 1976 remanded both the Vermont Yankee operating license and the Consumers Power construction permit. It found the fuel cycle rulemaking procedurally inadequate and required consideration of energy conservation alternatives as well as further development of the Advisory Committee on Reactor Safeguards report. The Supreme Court granted certiorari in 1977.

In February 1969 National Industries, Inc. acquired 34% of TSC Industries, Inc.'s voting securities from Charles E. Schmidt and his family. Schmidt, TSC's founder and principal shareholder, resigned from the board along with his son. Five National nominees then joined TSC's board. Stanley R. Yarmuth, National's president and chief executive officer, became chairman of the TSC board. Charles F. Simonelli, National's executive vice president, became chairman of the TSC executive committee. On October 16, 1969, the TSC board, with the National nominees abstaining, approved a proposal to liquidate and sell all of TSC's assets to National in exchange for National Series B preferred stock and warrants. On November 12, 1969, TSC and National issued a joint proxy statement to their shareholders recommending approval of the proposal. The proxy solicitation succeeded. TSC entered liquidation and dissolution, and the share exchange was completed. Northway, Inc., a TSC shareholder, filed suit on December 4, 1969, in the United States District Court for the Northern District of Illinois against TSC and National. The complaint alleged that the joint proxy statement violated section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9. It claimed the statement failed to disclose that the Schmidt interests transfer had given National control of TSC. It also claimed the statement omitted material facts concerning the degree of National's control over TSC and the favorability of the transaction terms to TSC shareholders. The District Court denied Northway's motion for summary judgment on liability. The Court of Appeals for the Seventh Circuit affirmed that a genuine issue of fact existed regarding whether National had acquired control through the Schmidt purchase. This precluded summary judgment on the Rule 14a-3 claim. But the court reversed on the Rule 14a-9 claims and ordered partial summary judgment for Northway. It held that certain omissions were material as a matter of law. The Supreme Court granted certiorari to address the standard of materiality applied by the Court of Appeals.

In December 1986, First American Bankshares, Inc. (FABI), a bank holding company, began a freeze-out merger in which the First American Bank of Virginia (Bank) eventually merged into Virginia Bankshares, Inc. (VBI), a wholly owned subsidiary of FABI. VBI owned 85 percent of the Bank's shares, with the remaining 15 percent held by approximately 2,000 minority shareholders. FABI hired the investment banking firm of Keefe, Bruyette & Woods (KBW) to opine on the appropriate price for the minority shares. Based on market quotations and unverified information from FABI, KBW advised the Bank's executive committee that $42 per share would be a fair price. The executive committee approved the merger proposal at that price, and the full board followed suit. Although Virginia law required only that the merger proposal be submitted to a vote at a shareholders' meeting preceded by circulation of a statement of information, the directors solicited proxies for voting on the proposal at the annual meeting set for April 21, 1987. In the solicitation, the directors urged adoption of the proposal and stated they had approved the plan because it provided an opportunity for the minority shareholders to achieve a high value for their shares, which they elsewhere described as a fair price. Respondent Sandberg, a minority shareholder who did not provide the requested proxy, filed suit in the United States District Court for the Eastern District of Virginia against VBI, FABI, and the Bank's directors. She alleged violations of section 14(a) and Rule 14a-9. She also alleged breaches of fiduciary duties under state law. Sandberg claimed the directors did not believe the $42 price was high or the merger terms fair but recommended the merger only to retain their board seats. At trial, the jury returned verdicts for Sandberg on both counts and awarded her $18 per share after finding she would have received $60 if the stock had been valued adequately. While Sandberg's case was pending, other minority shareholders including respondent Weinstein filed a similar action in the United States District Court for the District of Columbia. That case was transferred to the Eastern District of Virginia. After Sandberg's trial, the Weinstein respondents obtained summary judgment on liability through collateral estoppel. On appeal, the United States Court of Appeals for the Fourth Circuit affirmed the judgments, holding that certain statements in the proxy solicitation were materially misleading and that the respondents could maintain their action even though their votes had not been needed to effectuate the merger. The Supreme Court granted certiorari.