The opinion of the court was delivered by: Sprizzo, District Judge:
MEMORANDUM OPINION AND ORDER
All defendants in the above-captioned action move for partial
summary judgment dismissing counts I and II of plaintiffs'
complaint. At Oral Argument of this motion on December 6, 1990
the Court reserved decision as to whether defendants are
entitled to judgment as a matter of law dismissing plaintiffs'
claims that the failure to disclose pending shareholder
litigations arising out of the 1989 grounding of the Exxon
Valdez and the creation of an independent litigation committee
to investigate those claims in proxy materials sent to
shareholders in April 1989 or the failure to amend those proxy
materials to reflect that information prior to the shareholders
meeting violated section 14(a) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78n(a) (1988), and Rule 14a-9 promulgated
thereunder, 17 C.F.R. § 240.14a-9 (1990). For the reasons that
follow, the motion is denied.
In order to be liable under section 14(a) and Rule 14a-9, the
defendants must have omitted a material fact from the proxy
statement which renders the proxy statement false or
misleading. "An omitted [or concealed] fact is material if
there is a substantial likelihood that a reasonable shareholder
would consider it important in deciding how to vote." TSC
Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct.
2126, 2132, 48 L.Ed.2d 757 (1976). Moreover, if a reasonable
shareholder would have viewed disclosure of an omitted fact "as
having significantly altered the `total mix' of information
made available" then the fact is material. Id. Furthermore, the
Second Circuit has recently stated: "Because materiality is a
mixed question of law and fact, it is a question especially
well suited for jury determination and summary judgment may be
granted only when reasonable minds could not differ on the
issue." Mendell v. Greenberg, Nos. 89-7718, -7760, slip op. at
15, 1990 WL 166726 (2d Cir. Nov. 1, 1990).
Tested by these precepts, the Court cannot say that the
alleged nondisclosures are not material as a matter of law.
While it is true that there is no requirement to disclose each
and every allegation of management misconduct or breaches of
fiduciary duty, including those set forth in pending civil
litigation, see 17 C.F.R. §§ 229.401, 240.14a-101; see also
Field v. Trump, 850 F.2d 938, 948 (2d Cir. 1988), cert. denied,
489 U.S. 1012, 109 S.Ct. 1122, 103 L.Ed.2d 185 (1989); United
States v. Matthews, 787 F.2d 38, 48 (2d Cir. 1986); Weisberg v.
Coastal States Gas Corp., 609 F.2d 650, 655 (2d Cir. 1979),
cert. denied, 445 U.S. 951, 100 S.Ct. 1600, 63 L.Ed.2d 786
(1980); Maldonado v. Flynn, 597 F.2d 789, 796 (2d Cir. 1979),
where, as here, the company has taken the extraordinary step of
setting up an independent litigation committee to look into
such charges, a new factor has been added to the "factual mix"
which supports the conclusion that the complaint should not be
dismissed as a matter of law at this stage of the proceedings.
This is especially true since the Court must take into account
the context in which the alleged nondisclosures occurred, i.e.,
in connection with a corporate proposal to provide substantial
financial benefits to current management.
This case differs from GAF because the allegations of
misconduct here are directly related not only to Exxon's
business but also to the substantive matters to be addressed at
the meetings for which proxies were solicited. Moreover, as
noted above, Exxon deemed the allegations sufficiently serious
to warrant the appointment of an independent litigation
committee. Accordingly, the motion for summary judgment is
For the reasons set forth above and at Oral Argument, the
motion for partial summary judgment is denied. The action shall
be stayed until July 31, 1991 while the independent litigation
committee investigates the allegations asserted against the
defendants. A Pre-Trial Conference shall be held on July 26,
1991 at 10:30 A.M. in Courtroom 129.