Virginia Bankshares, Inc. v. Sandberg

The board of Virginia Bankshares, Inc. (VBI) (defendant) proposed a freezeout merger with its subsidiary First American Bank of Virginia (First American). VBI owned 85 percent of First American’s stock, and minority shareholders held the remaining 15 percent. By law, VBI did not need minority votes to complete the merger. Still, VBI’s board sent a proxy solicitation to minority shareholders soliciting their votes. The solicitation represented that minority shares would be cashed out at $42 per share, this price provided a “premium” of 26 percent above book value, and the directors believed the price was a “high value.” The merger was approved. Minority shareholder Doris Sandberg (plaintiff) sued VBI, alleging the proxy solicitation contained materially misleading statements that violated § 14(a) of the Securities Exchange Act. Sandberg presented evidence that, at issuance, the $42 price was below the shares’ properly calculated book value, the shares’ true value was $60, and VBI’s directors knew both facts. VBI argued the alleged misrepresentations were opinions, not facts, and that any misleading statement caused no damages because the merger would have occurred regardless of minority votes. A jury found for Sandberg and awarded her the $18 price difference. The court of appeals affirmed. The United States Supreme Court granted certiorari.