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UNITED STATES COURT OF APPEALS FOR THE
FOURTH CIRCUIT LOUIS F. ALLEN; CARL K. BAKER; JOYCE
P. BAKER; PETER D. BERRINGTON; OLIVER BIRCKHEAD; FLORENCE BLAUSTEIN, MARY L.
BRAY; T. K. BROOKER; DONALD J. BROOKS; JOSEPH CALLAGHAN; JAMES CASSEL; TERRY G.
CHAPMAN; J. A. CLAWSON; JOHN K. COLVIN; FRED B. COX; JOHN RAWLYN CHARLES
CRABTREE; CHRISTOPHER P. CLUP; GORDON C. DAVIDSON; RUTHERFORD DAY; DONALD D.
DOTY; M. D. A. EMBLIN; AUDREY FISHER; DONALD B. GIMBEL; KENNETH J. GIMBEL;
KATHERINE GOOCH; B. G. HARRISON; YUMIKO HONDA; HERBERT W. HOOVER, III; MARGARET
W. JONES; DONALD K. KENT; E. R. KINNEBREW, III; WALTER J. LEVY; ROLAND LEY;
SUZANNE RHULEN LOUGHLIN; GEORGE C. LYMAN, JR.; CHARLES P. LYON; MICHAEL L.
MCDERMOTT; ROBERT T. MCINERNY; ARTHUR G. MICHELS; WALTER P. MUSKAT; WALTER W.
MUSKAT; A. D. PISTILLI; ROBERT A. POSNER; JUDSON P. REIS; HARRY W. RHULEN;
WALTER A. RHULEN; J. O. RICKE; E. JOY ROSE; MARK S. ROSE; A. F. SMITH; OWN B.
TABOR; ALLEN M. TAYLOR; TRUDE C. TAYLOR; KARL ARONSON; JOAN R. FARROW AND
JONATHAN M. FARROW FOR THE ESTATE OF JESSE M. FARROW; JACK FLECK; MARILYN
FRANCKX; ISABEL L. GALLAGHER; JENNIFER A. GALLAGHER; MARY CLAIR GALLAGHER;
ROBERT E. GALLAGHER; ROBERT E. GALLAGHER, JR.; THOMAS J. GALLAGHER; THOMAS H.
GREEN; HENRY G. HAGER; THORNTON HUTCHINS; VINCE A. KONEN; C. C. LUCAS; HERBERT
A. MIDDENDORFF; ROBERT S. DENEBEIM; DANA FISHER, SR.; WILLIAM ALEXANDER
FLORENCE; ANNE M. GALLAGHER; J. PATRICK GALLAGHER; MARK E. GALLAGHER; MARY
CLAIRE GALLAGHER AS EXECUTRIX FOR JOHN P. GALLAGHER; KATHERINE GALLAGHER GOESE;
ALLEN S. GREEN; ROBERT W. HATCH; MARY CLAIR G. JOHNSON; THOMAS V. LEEDS; GUY A.
MAIN; EUGENE F. MIDDLEKAMP; MICHAEL MONTANA; BARBARA H. PISANI; RICHARD B. SANDERS;
JACK R. TAYLOR; KEN NOACK; ROBERT L. PISANI; LARRY D. STROUP; NEVILLE G.
WILLIAMS, Plaintiffs - Appellees, 94 F.3d 923; 1996 U.S. App. LEXIS
23167; Fed. Sec. L. Rep. (CCH) P99,306 No. 96-2158
PRIOR
HISTORY: [*1]
Appeal from the United States District Court for the Eastern District of
Virginia, at Richmond. Robert E. Payne, District Judge. (CA-96-522). DISPOSITION: REVERSED AND REMANDED WITH
INSTRUCTIONS COUNSEL: ARGUED: Harvey L. Pitt,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York, New York, for
Appellants. JUDGES: Before NIEMEYER, MICHAEL,
and MOTZ, Circuit Judges. Judge Niemeyer wrote the opinion, in which Judge
Michael and Judge Motz joined. OPINION: NIEMEYER, Circuit Judge: In
1995, Lloyd’s of London announced a $ 22 billion “Plan for
Reconstruction and Renewal” to restructure the Lloyd’s market’s
reinsurance needs and to revitalize the market. The Plan included an offer by
Lloyd’s managers to settle, for $ 4.8 billion, all intra-market
disputes, including existing and potential lawsuits by “Names,”
members of the Lloyd’s market who underwrite insurance there.
Ninety-three American Names filed this action in the Eastern District of
Virginia under United States securities laws to compel Lloyd’s to
disclose more financial information about its proposed [*3] plan. The Names also sought a
preliminary injunction prohibiting Lloyd’s from forcing American Names
to make “an irrevocable election respecting their investment”
by an August 28, 1996 deadline established by Lloyd’s. Applying
United States securities laws, the district court granted the Names’
motion for a preliminary injunction on August 23, 1996. The court directed
Lloyd’s to make disclosures as required by § 14(a)
of the Securities Exchange Act of 1934 by September 23, 1996, and prohibited
Lloyd’s from taking steps to collect any amounts from American Names
pending completion of the disclosure and review process. The court also
scheduled a trial on the merits for November 4, 1996. Lloyd’s
appealed the district court’s preliminary injunction and sought
expedited review because Names wishing to accept the settlement proposal that
Lloyd’s offered as part of its Plan were required to advise Lloyd’s
of their decision by noon on August 28, 1996. We scheduled oral argument for
August 27, 1996, and, following argument, entered the following order from the
bench, reversing the district court:
On
the motion of appellants to stay the district court’s injunction
entered August 23, [*4]
1996, and upon consideration of the briefs, papers, and extensive arguments of
counsel, the court grants the motion. Because the court’s decision
rests on its determination, to be articulated in a later opinion, that the
contractual provisions among the parties selecting the law of and a forum in
the United Kingdom should be enforced, we reverse and remand this case with
instructions that the district court dismiss it.
This
opinion provides the reasoning for our order. I Lloyd’s
of London manages an insurance market that was created over 300 years ago in a
London coffee shop to insure shipping risks. The market today is a large,
complex arrangement under which “Names,” who as members of
the Society of Lloyd’s become members in the market, join individual
underwriting syndicates formed to insure a broad range of risks. Managing
agents assemble the syndicates, collect premiums from the insureds, assess the
Names, manage the risks, and provide annual accountings to the Names. The
underwriting capital for each syndicate is supplied by cash advanced by the
Names, and excess losses — those that exceed the premiums paid —
are insured by the Names’ commitment to pay losses from [*5] their personal assets “down
to their last cufflinks.” The integrity of the market is also assured
by a Central Fund, created from assessments of Names, which the market’s
managing body, the Council of Lloyd’s, controls and maintains to
disburse to insureds when Names default. The
Lloyd’s market is governed by a series of acts of Parliament, enacted
over the last 100 years, authorizing the Council of Lloyd’s to adopt
rules and bylaws to regulate the market. As a condition of their membership in
the Society, Names are required to execute a “General Undertaking,”
by which they agree to comply with the controlling acts of Parliament as well
as the rules and bylaws of Lloyd’s. Over
34,000 Names from 80 different countries participate in the Lloyd’s
market; 3,000 Names are Americans. While individuals are solicited in countries
other than the United Kingdom, each prospective Name is required to travel to
London to participate in a personal interview during which the Name’s
financial commitment is explained. Names are advised that they undertake
unlimited personal liability for their respective shares of the risks insured by
the policies they underwrite and that they cannot resign from [*6] the market until all such
obligations have been discharged. They are also advised that any disputes over
their participation in the market must be resolved in British courts according to
British law. The
Lloyd’s market operates under a three year accounting cycle. At the
end of the third year after a syndicate is formed, underwriting profits and
losses for each syndicate year are calculated, and the estimated liabilities
are routinely reinsured by another syndicate. Through this process, Lloyd’s
reinsures undischarged risks to close the account. When the magnitude of
potential liabilities for a syndicate cannot reasonably be estimated at the end
of three years, the syndicate cannot reinsure them, and the participating Names
remain liable on their undertaking. During
the late 1980’s and early 1990’s, unanticipated losses from
asbestosis and pollution claims, together with a string of catastrophic events
such as Hurricane Hugo and the bombing of Pan Am Flight 103, caused losses far
greater than the amounts of premiums that had been collected. By Lloyd’s
estimation, the excess losses for the years before 1993 will total
approximately $ 22 billion. As
losses mounted, intra-market disputes [*7] arose. Names accused managing
agents and underwriters of mismanagement in assessing risks and even fraud in
assessing and disclosing the risks to Names choosing syndicates. A considerable
number of Names also became unable or unwilling to satisfy their obligations
and began to incur debts to the Central Fund, and the ensuing litigation made
it difficult for the Central Fund to collect from non-paying Names. The
integrity and viability of the entire Lloyd’s market was thus called
into doubt. To
restore the integrity of its market, Lloyd’s embarked on a massive and
complex effort to develop a restructuring plan. After three years and the
expenditure of over $ 100 million, Lloyd’s issued a Plan for
Reconstruction and Renewal with two gross components: (1) the settlement of
intra-market litigation whereby Names release all claims against Lloyd’s
and its various market participants in exchange for $ 4.8 billion in credits
and (2) the reinsurance of Names’ pre-1993 underwriting obligations by
a newly formed company, Equitas Reinsurance Ltd. Under the Plan, Equitas’
capital is to be funded by loans, a cash call on Names, and the $ 4.8 billion
in credits assembled by Lloyd’s for the settlement [*8] of the Names’ claims. Lloyd’s
circulated its Plan and offered each Name the opportunity to settle with Lloyd’s
for a specified share of the settlement funds. The Plan provides that if enough
Names agree to settle, those Names who do not agree will nevertheless be forced
to contribute capital to Equitas through assessments authorized by their
original commitment to Lloyd’s. Under the Plan, any capital that
remains after Equitas has satisfied all outstanding pre-1993 obligations will
be returned to the Names. Lloyd’s offered its settlement with Names
subject to the condition that Names respond by August 28, 1996, a deadline that
Lloyd’s claims was necessary because the continued solvency of its
market is in jeopardy and the season for underwriting reinsurance traditionally
begins in the fall. The
93 American Names who have demanded more information about the Plan filed suit
in the Virginia district court, claiming that Lloyd’s was denying them
disclosure rights guaranteed by United States securities laws. Lloyd’s
moved to dismiss the complaint on the ground that the Names had agreed to
litigate all disputes relating to the Lloyd’s market in the United
Kingdom under British law. The [*9] district court denied Lloyd’s motion. Applying
United States securities laws, the court also enjoined Lloyd’s from
demanding settlement from the American Names without providing the disclosures
required by the securities laws and ordered that Lloyd’s provide such
disclosures within 30 days. This appeal followed. II In
reversing the district court by our August 27, 1996 order, we determined that
“the contractual provisions among the parties selecting the law of and
a forum in the United Kingdom should be enforced.” Those contractual
provisions, which appear in the General Undertaking between Lloyd’s
and the Names, specify that “any dispute and/or controversy of
whatsoever nature arising out of or relating to” Names’
participation in Lloyd’s be submitted to the exclusive jurisdiction of
the British courts and that British law govern all matters referred to in the
General Undertaking, including the parties’ “rights and
obligations … arising out of or relating to” the Names’
participation in Lloyd’s. Since
its seminal decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 32 L. Ed. 2d
513, 92 S. Ct. 1907 (1972), the Supreme Court has consistently accorded choice
of forum and choice of law provisions presumptive [*10] validity, rejecting the
“parochial concept” that “notwithstanding solemn
contracts … all disputes must be resolved under our laws and in our
courts.” Id. at 9; see also Vimar Seguros Y Reaseguros, S.A. v. M/V Sky
Reefer, 515
U.S. 528, 132 L. Ed. 2d 462, 115 S. Ct. 2322, 2329 (1995); Carnival Cruise
Lines, Inc. v. Shute, 499 U.S. 585, 595, 113 L. Ed. 2d 622, 111 S. Ct. 1522 (1991); Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 87 L. Ed. 2d 444,
105 S. Ct. 3346 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 41 L.
Ed. 2d 270, 94 S. Ct. 2449 (1974). But the presumption of enforceability that
forum selection and choice of law provisions enjoy is not absolute and,
therefore, may be overcome by a clear showing that they are “‘unreasonable’
under the circumstances.” The Bremen, 407 U.S. at 10. Choice of forum
and law provisions may be found unreasonable if (1) their formation was induced
by fraud or overreaching; (2) the complaining party “will for all
practical purposes be deprived of his day in court” because of the
grave inconvenience or unfairness of the selected forum; (3) the fundamental
unfairness of the chosen law may deprive the plaintiff of a remedy; or (4)
their enforcement would contravene a strong public policy of the forum state. See
Carnival [*11]
Cruise Lines, 499 U.S. at 595; The Bremen, 407 U.S. at 12-13, 15, 18. In
determining whether any of the foregoing circumstances apply in this case to
preclude enforcement of the parties’ choice of forum and law, the
district court first observed that “there is no contention by the
Names that they were fraudulently induced into agreeing to the forum selection
or choice of law clauses.” Nor did the court believe it “‘gravely
inconvenient’ for the Names to litigate in England.” Noting
that “United States courts have consistently found English tribunals
to be neutral and just,” the district court further found that the
“plaintiffs would not be effectively ‘denied their day in
court’ were they forced to present their claims in front of an English
tribunal.” But applying the last basis for unreasonableness, the court
denied enforcement to the parties’ choice of forum and law provisions
on the ground that they subverted a strong public policy of the United States—namely,
the unwaivable investor protections provided by the American securities laws’
disclosure requirements. Although
we agree with the district court that the first three bases for finding
unreasonableness do not apply [*12] here, we disagree with its conclusion that the public
policy underlying the United States securities laws justify denying enforcement
of the parties’ choice of forum and law clauses. III
By
adopting a policy of full disclosure of relevant information to replace the
doctrine of caveat emptor, the United States securities laws play a critical
role in sustaining honest and efficient domestic capital markets. See, e.g.,
SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186-87, 11 L. Ed. 2d
237, 84 S. Ct. 275 (1963). Indeed, the United States securities laws prohibit
attempts to waive their disclosure requirements. See 15 U.S.C. §§ 77n,
78cc(a). But the question remains in this case whether the choice of forum and
law clauses to which the Names agreed when entering the Lloyd’s
insurance market implicate the anti-fraud and disclosure policies that underlie
the United States securities laws to the extent that those clauses cannot be
enforced. We
do not believe that enforcing the parties’ forum selection and choice
of law provisions in this case will subvert the United States securities laws’
policy of prohibiting fraud. British law not only prohibits fraud and
misrepresentations as do the [*13] United States securities laws, but also affords Names
adequate remedies in the United Kingdom. See Shell v. R.W. Sturge Ltd., 55 F.3d 1227, 1231 (6th
Cir. 1995); Bonny v. Society of Lloyd’s, 3 F.3d 156, 161 (7th Cir. 1993), cert.
denied, 510
U.S. 1113, 127 L. Ed. 2d 378, 114 S. Ct. 1057 (1994); Roby v. Corporation of
Lloyd’s, 996 F.2d 1353, 1365 (2d Cir.), cert. denied, 510 U.S. 945, 126 L. Ed.
2d 333, 114 S. Ct. 385 (1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 958 (10th
Cir.), cert. denied, 506 U.S. 1021, 121 L. Ed. 2d 584, 113 S. Ct. 658 (1992). Under
British law, the Names could bring claims based on the tort of deceit, breach
of contract, negligence, and breach of fiduciary duty, and could obtain
injunctive, declaratory, rescissionary, and restitutionary relief. See Shell, 55 F.3d at 1230-31. And
“the fact that an international transaction may be subject to laws and
remedies different or less favorable than those of the United States is not a
valid basis to deny enforcement.” Riley, 969 F.2d at 958. Moreover,
we do not believe that Congress intended that the disclosure requirements of
the United States securities law be exported and imposed as governing
principles on markets conducted entirely in other countries [*14] simply because membership in
such markets is solicited in the United States. See Leasco Data Processing
Equip. Corp. v. Maxwell, 468 F.2d 1326, 1334 (2d Cir. 1972) (finding language of
Securities Exchange Act “too inconclusive” to find that
“Congress meant to impose rules governing conduct throughout the world
in every instance where an American company bought or sold a security”).
“Confronted with [a] transaction that on any view [is] predominantly foreign,
[we] must seek to determine whether Congress would have wished the precious
resources of United States courts and law enforcement agencies to be devoted to
them rather than leave the problem to foreign countries.” Bersch v.
Drexel Firestone, Inc., 519 F.2d 974, 985 (2d Cir.), cert. denied, 423 U.S. 1018, 96 S. Ct.
453, 46 L. Ed. 2d 389 (1975). For
over 300 years, Lloyd’s has been regulating an insurance market in
London where members underwrite risks which are pooled into syndicates and
managed by agents. While Lloyd’s offers membership in the market to
persons outside the United Kingdom, including Americans, syndicates are formed
and managed at the market. When an individual from a country other than the
United Kingdom is solicited for [*15] membership, market rules require that he travel to London
for a personal interview. The would-be Name is provided with written materials
advising him that he will be joining underwriting syndicates formed in London
to insure risks from around the world under laws adopted by Parliament and
bylaws promulgated by Lloyd’s regulators. Prospective Names are also
informed of the commitment of membership, which requires that Names have
sufficient means committed to the market in London. Relieving
Names of their agreements is not justified in these circumstances simply
because solicitation for membership in the market occurs in the United States.
Membership solicitation is incidental to the formation of underwriting
syndicates and the management of risks, all of which occur in London. Moreover,
when members are solicited for membership, they are not solicited to join
particular syndicates or to underwrite identified risks. Those matters are
unknown until syndicates are actually created at the market. The United States nexus
to the transactions involved in this case is thus incidental and tangential. Although
American courts have on occasion applied United States securities laws’
anti-fraud [*16] provisions to
predominantly foreign transactions, the “anti-fraud provisions of
American securities laws have broader extraterritorial reach than American
filing requirements.” Consolidated Gold Fields PLC v. Minorco S.A., 871 F.2d 252, 262 (2d
Cir. 1989). This is because “an interest in punishing fraudulent or
manipulative conduct is entitled to greater weight than are routine
administrative requirements.” Restatement (Third) of the Foreign
Relations Law of the United States § 416 cmt. a (1986). To
permit the Names to escape their agreements to be bound by the laws and rules
of the British market just at a time when they face losses would also violate
the most fundamental precepts of international comity. See Consolidated Gold
Fields, 871 F.2d at 263 (“[A] court may abstain from exercising
enforcement jurisdiction when the extraterritorial effect of a particular
remedy is so disproportionate to harm within the United States as to offend
principles of comity”). Imposing United States securities laws on this
foreign market would directly contravene the very rules and regulations adopted
in Britain for the creation and operation of the Lloyd’s market to
which the Names [*17]
subscribed. Finally,
significant United States and foreign interests would be adversely affected if
we were to insist that Lloyd’s insurance underwriting syndicates
comply with United States disclosure requirements. Such a ruling would place at
risk billions of dollars of insurance coverage for United States citizens
because American Names could demand rescission on the ground that their
syndicates, even though they include citizens of various countries, did not
comply with United States securities registration and disclosure requirements.
Insurance commissioners from several states have described the potential mass
confusion and damage to the domestic insurance market that such a ruling would
cause. In
short, we conclude that enforcement of the Names’ agreements to
litigate disputes in the United Kingdom under British law does not contravene
or undermine any policy of the United States securities laws. And we reach that
same conclusion when we apply the specific provisions of the securities laws,
to which we now turn. IV The
Names advance two arguments to support their assertion that United States
securities laws apply to the Lloyd’s Reconstruction and Renewal Plan.
First, they [*18]
argue that the interests in Equitas offered by Lloyd’s as part of the
Plan are “investment contracts,” subject to the disclosure and
anti-fraud requirements of the 1933 and 1934 Acts. And second, they argue that
their investments in Lloyd’s pursuant to the General Undertaking are
equity securities under the applicable securities acts and that the Plan is,
therefore, a solicitation for “consent or authorization in respect of
[a] security,” subject to the requirements of § 14(a)
of the 1934 Act, 15 U.S.C. § 78n(a). To
determine whether Lloyd’s Plan constitutes an “investment
contract” subject to the requirements of the securities laws, we apply
the test announced in SEC v. W.J. Howey Co., 328 U.S. 293, 90 L. Ed. 1244, 66 S.
Ct. 1100 (1946). In Howey, the Supreme Court established that “an
investment contract … means a contract, transaction or scheme whereby
a person [1] invests his money [2] in a common enterprise and [3] is led to
expect profits [4] solely from the efforts of [others].” 328 U.S. at
298-99. And the Court later instructed that the Howey test is to be applied
with an eye to “the substance — the economic realities of the
transaction — rather than the names that may have [*19] been employed by the parties.”
United Hous. Found., Inc. v. Forman, 421 U.S. 837, 851-52, 44 L. Ed. 2d
621, 95 S. Ct. 2051 (1975). Focusing
on the substance of the Plan before us, we discern two components: the
settlement offer and the reinsurance through Equitas. The settlement component
satisfies none of the Howey factors and, therefore, cannot make the Plan a
security. And, whatever else might be said about the Equitas component, it does
not satisfy the third Howey factor; none of the Names can expect to receive
profits from their participation in Equitas. Indeed, the Plan creates Equitas
solely to reinsure and discharge Names’ preexisting obligations, not
to underwrite new risks for profit. While Names may receive rebates should
Equitas’ initial capitalization ultimately prove greater than needed
to discharge the Names’ outstanding liabilities, such rebates are not
profits, but rather a return of capital. See Forman, 421 U.S. at 854. Furthermore,
Equitas is forbidden by its Articles of Association from paying dividends, and
Lloyd’s has indicated that, in the unlikely event that it generates
profits by investing Equitas’ capital during its operation, Lloyd’s
would donate such profits to charity. [*20] Because Lloyd’s is not
“inducing purchases [in Equitas] by emphasizing the possibility of
profits” or offering “profits [from Equitas] … in
the form of capital appreciation or participation in earnings,” Teague
v. Bakker,
35 F.3d 978, 987 (4th Cir. 1994), cert. denied, 513 U.S. 1153, 130 L. Ed. 2d 1073,
115 S. Ct. 1107 (1995), we readily conclude that no part of the Plan qualifies
as a security for purposes of the securities laws. We
are similarly unpersuaded by the Names’ second argument —
that their initial investment in Lloyd’s pursuant to the General
Undertaking is a security and that the Plan is, therefore, a solicitation for
“consent or authorization in respect of [a] security” subject
to § 14(a) of the 1934 Act. Section 14(a) makes it “unlawful
for any person, by the use of … any means or instrumentality of
interstate commerce … to solicit … any proxy or consent or
authorization in respect of any [registered] security” in
contravention of the rules and regulations prescribed by the Securities
Exchange Commission. 15 U.S.C. § 78n(a). Although the parties
vigorously dispute whether the Names’ initial investment in Lloyd’s
qualifies as an “equity security” within the meaning [*21] of the Act, we need not resolve
that issue because the Plan does not “solicit … any proxy or
consent or authorization.” Section
14(a) embodies a policy of broad disclosure designed to protect the basic right
of corporate suffrage. See J.I. Case Co. v. Borak, 377 U.S. 426, 431-32, 12
L. Ed. 2d 423, 84 S. Ct. 1555 (1964); see also Mills v. Electric Auto-Lite
Co., 396
U.S. 375, 381, 24 L. Ed. 2d 593, 90 S. Ct. 616 (1970); H.R. Rep. No. 1383, 73d
Cong., 2d Sess., at 13 (1934) (“Fair corporate suffrage is an
important right that should attach to every equity security bought on a public
exchange”). But not every communication from management to corporate
shareholders amounts to solicitation under § 14(a). Sargent
v. Genesco, 492 F.2d 750, 767 (5th Cir. 1974); see also Brown v. Chicago,
Rock Island & Pacific R.R., 328 F.2d 122, 125 (7th Cir. 1964); see generally 4 Louis Loss & Joel
Seligman, Securities Regulation 1952 (3d ed. 1990) (listing examples of
communications not covered by § 14(a) rules). Rather, it is
only when management seeks consent or authorization for actions “requiring
such approval” that § 14(a) steps in to ensure that
approval is given with full knowledge. Gaines v. Haughton, 645 F.2d 761, 775 (9th
Cir. [*22] 1981), cert.
denied, 454
U.S. 1145, 71 L. Ed. 2d 297, 102 S. Ct. 1006 (1982); see also Ash v. GAF
Corp., 723
F.2d 1090, 1094 (3d Cir. 1983) (holding that “complainant must show
that he suffered harm from the infringement of his corporate suffrage rights”
to state a claim under § 14(a)); cf. TSC Indus., Inc. v.
Northway, Inc.,
426 U.S. 438, 449, 48 L. Ed. 2d 757, 96 S. Ct. 2126 (1976) (indicating that
securities laws require accurate disclosure only of facts that would have
assumed actual significance in a reasonable investor’s
decisionmaking). Neither
British law nor the General Undertaking signed by each Name grants Names any
role in the decision to form and capitalize Equitas. Authorization to impose
reinsurance through Equitas on the Names does not derive from their consent,
but by virtue of a Lloyd’s bylaw passed in December 1995. Thus, the
Plan is not a solicitation within the meaning of § 14(a). Similarly,
Lloyd’s settlement offer is not subject to the disclosure requirements
of § 14(a). The offer of settlement presents each Name with
the choice of whether to waive his claim against Lloyd’s and its
agents in exchange for Lloyd’s partial funding of his share of the
Equitas premium. The Names have not presented, and we have [*23] been unable to find, any
authority indicating that settlement offers in securities cases seek “consent
or authorization in respect of [a] security,” and we cannot conclude
that Congress intended to bring all such communications within the purview of
the securities laws. V In
summary, the policies of the United States securities laws do not override the
parties’ choice of forum and law for resolving disputes in this case.
Indeed, because Lloyd’s Plan for Reconstruction and Renewal is neither
a security nor a solicitation in respect of a security, the Plan is not
regulated by the United States securities laws. For these reasons we vacated
the district court’s August 23, 1996 order by our August 27, 1996
order and remanded this case with instructions to the district court to dismiss
the action. REVERSED
AND REMANDED WITH INSTRUCTIONS |