Plaintiffs finally assert that the 1979 proxy statement failed
to disclose that the restructuring of Esmark in 1980 would
unfairly increase the value of the LTGP awards and that the
performance periods utilized in calculating awards under the plan
would overlap so as to permit the Compensation Committee to count
the earnings of a profitable year more than once. Neither of
these alleged nondisclosures, however, are actionable under
section 14. Defendants were under no obligation to disclose
plaintiffs' theory concerning the potential effect of Esmark's
restructuring, a project which was not even anticipated at the
time the Board submitted the LTGP for shareholder approval.*fn39
Moreover, as already noted, plaintiffs' theory does not
accurately describe the effect of Esmark's restructuring.
Defendants cannot be held to a standard of disclosure which
requires consideration of all possible contingencies and all
possible results flowing from those contingencies.
Similarly, defendants were under no obligation to disclose the
overlap between performance periods in the LTGP. The terms of the
LTGP made relatively clear that since performance periods
generally extended over more than one year, the calculation of
LTGP awards in successive years would necessarily include
overlapping performance periods. In contrast to the conflicting
mix of disclosures concerning the inclusion of capital gains in
the LTGP formula, nothing in the LTGP itself or in the summary of
the LTGP could lead a reasonable shareholder to believe that
performance periods would not overlap. This purported
nondisclosure, therefore, was not material.
Accordingly, with those exceptions already noted, defendants'
motions for summary judgment on plaintiffs' first claim in Count
II is granted. It is so ordered.
In their second claim in Count II, plaintiffs allege that the
1981 award of restricted stock under the LTGP constituted a
scheme to defraud Esmark and its shareholders in violation of
section 10 of the Securities Exchange Act of 1934 and SEC Rule
10b-5. Second Amended Complaint, ¶ 56. This conclusory
allegation, however, is clearly insufficient to support a cause
of action under section 10. Except for those state law objections
raised in Count I, plaintiffs fail to allege how either Esmark or
its shareholders were deceived in connection with the 1981 LTGP
grant. To the extent the award of the grant itself constituted
the scheme or device to defraud, plaintiffs' claim is entirely
subsumed within Count I and does not support a cause of action
under the federal securities laws. Santa Fe Industries, supra,
430 U.S. at 477-79, 97 S.Ct. at 1302-04. Accordingly, defendants'
motions for summary judgment as to plaintiffs' second claim
(Count II) is granted. It is so ordered.
In summary, defendants' motions to dismiss with prejudice or
for summary judgment are granted as to certain allegations
contained in plaintiffs' first and second claims under Count I.
Defendants' motions are also granted as to the entirety of
plaintiffs' third, fourth, fifth, sixth and seventh claims under
Count I. Plaintiffs' eighth claim under Count I is dismissed.
Defendants' motions are denied with respect to those allegations
contained in plaintiffs' first and second claims under Count I as
identified in the text of the opinion.
Defendants' motions are also granted as to certain allegations
contained in plaintiffs' first claim under Count II and as to all
of plaintiffs' second claim under Count II as well as the
entirety of Count III. Defendants' motions are denied with
respect to those allegations contained in plaintiffs' first claim
under Count II as identified in the text of the opinion. It is so