## Facts

- Chrysler adopted a shareholder-rights plan (“poison pill”) in 1988 that issued rights to common shareholders, becoming exercisable upon specified ownership/tender-offer triggers and permitting discounted purchases of Chrysler or an acquirer’s stock in certain events.
- Chrysler amended the plan in 1989 by lowering the trigger threshold and adding an “Adverse Person” mechanism allowing the board to trigger rights based on specified ownership and board determinations.
- In December 1990, after investor Kirk Kerkorian accumulated over 9% of Chrysler stock, Chrysler again amended the plan and issued a press release announcing the purchases and amendments.
- The press release stated the amendments were intended to enhance the board’s ability to act in the best interests of all shareholders if someone sought control or substantial influence over Chrysler.
- Plaintiffs (a class of Chrysler shareholders) alleged the press release and related statements were materially misleading because the amendments were actually designed to entrench management and deter takeovers, and because Chrysler did not disclose the amendments’ effect on takeover feasibility or quantify potential loss of a control premium.
- Plaintiffs filed a federal securities-fraud class action under Exchange Act § 10(b) and SEC Rule 10b-5.
- The district court dismissed the complaint twice under Rule 12(b)(6), concluding plaintiffs lacked standing; plaintiffs appealed.

## Issues

1. Whether the complaint alleged, with Rule 9(b) particularity, any material misrepresentation or omission actionable under § 10(b) and Rule 10b-5 based on Chrysler’s press release and related public statements about poison-pill amendments.
2. Whether alleged nondisclosure of management’s entrenchment motive, takeover-deterrent effects, or an estimate of foregone control premium stated a Rule 10b-5 omission claim.

## Decision

- The Third Circuit affirmed dismissal under Rule 12(b)(6), but on a ground different from the district court’s standing rationale.
- The court held plaintiffs failed to allege with particularity any actionable misrepresentation or omission under § 10(b) and Rule 10b-5 as required by Rule 9(b).
- The court treated the challenged “best interests of shareholders” language as generalized opinion/business judgment rather than a concrete, verifiable factual representation.
- The court found the complaint relied largely on conclusory assertions of entrenchment and did not tie those assertions to specific, objectively false statements or to a cognizable disclosure duty requiring the omitted information.

## Legal Principles

- A Rule 10b-5 claim requires a materially false or misleading statement or omission made with scienter in connection with the purchase or sale of securities; pleading must satisfy Rule 9(b) particularity for fraud.
- Under Rule 9(b) in securities cases, plaintiffs must identify the specific statements alleged to be misleading, explain why they are misleading, and plead supporting facts rather than conclusory accusations.
- Statements expressing corporate purpose or judgment (e.g., actions “intended” to serve shareholders’ best interests) are generally nonactionable absent particularized allegations showing a misleading statement of fact.
- Rule 10b-5 does not impose a general duty to disclose internal motives or to quantify all potential economic consequences of defensive corporate measures absent a specific duty to disclose.

## Conclusion

The Third Circuit affirmed dismissal of the shareholders’ § 10(b)/Rule 10b-5 class action because the complaint did not plead, with Rule 9(b) specificity, any materially false statement or actionable omission; allegations that poison-pill amendments were motivated by management entrenchment and might reduce takeover premiums were treated as corporate-governance complaints, not adequately pled securities fraud.


Lewis v. Chrysler Corp., 949 F.2d 644 (3d Cir. 1991)