predicated." Schlifke, 866 F.2d at 949-950; Craig v. First American Capital Resources, Inc., 740 F. Supp. 530, 537 (N.D. Ill. 1990). In this case, plaintiff has only plead facts sufficient to allege that members of the Labe board of directors had potential control over supporting Koplin's bid to obtain approval for acquisition of 80% of Labe stock. As evidenced by the letter sent to the FHLBB, the members of the board of directors not only had the potential to control the decision to support or oppose Koplin's application, they exercised that control. Plaintiff has not shown, however, that the directors had the potential to control matters connected with the other viable misrepresentations and omissions -- the omission of information regarding the Greenblatt litigation and settlement or the non-disclosure of new investment strategies. While the directors may have occupied positions where they could have had control over such disclosure decisions, plaintiff has not provided any facts which show that the directors had actual control over these matters. Therefore, § 20(a) allegations against the directors (other than Donald Klein who has sufficient claims leveled against him in the complaint to allege primary responsibility) can only be brought with regard to the FHLBB application and the losses incurred in connection with proffering that application.
Plaintiff brings a further securities violation claim under § 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a),
and Rule 14a-9, 17 C.F.R. § 240.14a-9.
For a plaintiff to make a claim under § 14(a) and Rule 14a-9, he must establish that proxy solicitations contained misrepresentations or omissions of material facts which he relied upon to his detriment. Koplin's § 14(a) claim fails in this case because he is unable to establish the omission of material facts. Koplin claims that defendants did not include information about changes in the association's investment strategies from loans to mortgage-backed securities in their proxy statement. Koplin is correct in asserting that this information was not disclosed in the 1990 proxy statement and accompanying annual reports. However, Koplin is incorrect in asserting that this information was never disclosed. Labe's 1989 annual report contains balance sheets entries reflecting the association's change in investment emphasis from loans to mortgage-backed securities. See, e.g., Memorandum in Support of Defendants' Motion to Dismiss, Exhibit A, Labe Federal Savings and Loan 1989 Annual Report at 2, 11, and 12. In addition, references in the body of the annual report allude to changes in investment strategies. See e.g., Id. at 3. Since the investment strategy information had already been disclosed, its inclusion in the 1990 proxy statement was not necessary. See Frigitemp Corp. v. Financial Dynamics Fund, 524 F.2d 275, 282 (2d Cir. 1975) (if information known to appellants, no reason for defendant to disclose it). Therefore, no omission occurred.
Further, plaintiff claims that defendants should have disclosed in the proxy statement the risks involved with these investment strategies. It is sufficient that defendants have disclosed the existence of the investment strategy themselves. If the underlying facts are provided, shareholders can then draw their own conclusions about the riskiness or chance of success of particular strategies. See Telvest, Inc. v. Wisconsin Real Estate Investment Trust, 489 F. Supp. 250, 254 (E.D. Wisc. 1980) (as long as existence of disputed trust payments disclosed, assessment of whether trust declaration violated need not be provided); Gulf & Western Industries, Inc. v. Great A. & P. Tea Co. Inc., 476 F.2d 687, 697 (2d Cir. 1973) ("the disclosure requirements of the securities laws require 'nothing more than the disclosure of basic facts so that outsiders may draw upon their own evaluative experience in reaching their own investment decisions. . .'"). Defendants need not provide their own evaluations.
In addition, the riskiness of the association's investment ventures does not have sufficient involvement with the issues of the proxy vote to make the omissions material. The proxy vote dealt with the reelection of two directors to the board. Omissions from proxy materials soliciting reelection of directors are only actionable where they relate to questions of directors' self-dealing, not questions of business judgment. United States v. Matthews, 787 F.2d 38, 48 (2d Cir. 1986) (omission only actionable insofar as it alleged self-dealing by directors); Dixon v. Ladish Co., 597 F. Supp. 20, 32 (E.D. Wisc. 1984) (corporate mismanagement claim does not bootstrap case into federal court), aff'd, Kademian v. Ladish Co., 792 F.2d 614 (7th Cir. 1986); Gaines v. Haughton, 645 F.2d 761, 779 (9th Cir. 1981) (absent allegations of self-dealing for the direct and personal benefit of the directors, director misconduct need not be disclosed in proxy solicitations for director elections), rev'd on other grounds, In Re McLinn, 739 F.2d 1395 (9th Cir. 1984), cited with approval in Shields on Behalf of Sundstrand Corp. v. Erickson, 710 F. Supp. 686, 693 (N.D. Ill. 1989). The omission raised by plaintiff -- non-disclosure of the riskiness of the strategies pursued by the association -- bears on the directors' business judgment, not their personal integrity. Nowhere in connection with the investment decisions of the association does Koplin allege that the directors acted for their own benefit. This investment information, therefore, need not be disclosed. Since the omissions claimed by plaintiff were either not omitted or not material, plaintiff fails to establish a § 14(a) claim. Count II is dismissed.
II. State Law Violations
Counts III, V, VI, VII
Since portions of plaintiff's § 10(b) and 10b-5 claims remain, this court retains jurisdiction over the state law claims that plaintiff also brings in his complaint. Counts III, V, VI and VII will stand.
Defendants' motion to dismiss the complaint has been granted in part and denied in part. Count II of the complaint alleging a § 14(b) violation is dismissed. Count I alleging § 10(b) and Rule 10b-5 violations is not dismissed in its entirety, but plaintiff's potential recovery under this count has been limited. Plaintiff may only recover for any decrease in market value of his Labe shares caused by the omission of information on the Greenblatt litigation and settlement. Plaintiff may allege misrepresentations related to the opportunity for and support of his purchase of 80% of Labe stock, but he may only claim the costs and expenses incurred in preparing and submitting his FHLBB application as losses. Potential recovery against the directors of Labe, other than Klein, is limited to any costs incurred in the preparation and submission of the FHLBB application. As for the remaining counts of the complaint, Counts III-VII stand.
IT IS SO ORDERED.