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UNITVirginia Bankshares, Inc. v. SandbergU.S. Supreme Court501 U.S. 1083 (1991)Landmark CaseIssueCan false statements phrased as opinions and beliefs in a proxy solicitationviolate SEC Rule 14a-9, which prohibits the soliciting proxies byusing materially false or misleading statements?FactsSandberg owned stock as a minorityshareholder in First American Bank of Virginia. Aspart of a “freeze-out” merger, the bank directors ofFirst American Bank of Virginia recommended thatthe bank merge into another bank, Virginia Bankshares,Inc., which was a subsidiary of the petitionerFirst American Bankshare, Inc. The directorssolicited proxies for the merger proposal. A proxyis a document in which a shareholder appointsanother person to act as his or her agent to vote thecorporate stock. The directors stated “that they hadapproved the plan because of its opportunity forthe minority shareholders to achieve a ‘high’value. . . for their stock.” The executive committee ofFirst American Bank of Virginia, along with itsboard of directors, approved a price of $42 pershare for the minority stockholders. After themerger was completed, the minority stockholderswould lose their interest in the bank. Sandbergrefused to give a proxy authorizing another personto vote for approval of the merger. Sandberg wasnot satisfied by the offer of $42 per share and didnot believe that the statements made by the leadershipof First American Bank of Virginia werefair to the minority stockholders.After the merger was approved without hervote, Sandberg brought a civil action against bothbanking corporations and the directors of First668 Unit 6: Starting a BusinessAmerican Bank. In her complaint, Sandbergalleged that the directors of First American Bankhad not believed that the price offered for thestock was “high”. Instead, she alleged that theymade the recommendation for merger so that theycould remain on the board of directors. Sandbergclaimed that the directors violated the Rule 14a-9of the SEC, which prohibits using materially falseor misleading statements in soliciting proxies. Attrial, the jury awarded Sandberg an additional $18per share, the sum she would have received if thestock had been properly valued. The jury alsoinformed Sandberg that she could prevail in herlawsuit without seeking to prove that she relied onFirst American Bank’s misstatements. Rather, sheonly needed to prove that the misstatements werematerial and that the proxy solicitation wasessential to the success of the merger.OpinionThe federal government createdthe Securities and Exchange Commission inresponse to the stock market crash of 1929. Priorto the stock market crash, worthless securities werebeing traded, and many investors fell victim toscams. The Securities Exchange Act of 1934 gavethe Securities and Exchange Commission theauthority to declare rules that regulate solicitingproxies. As a result, the SEC adopted Rule 14a-9,