mills electric argued november decided january petitioners minority shareholders respondent electric brought action derivatively behalf minority shareholders class set aside merger mergenthaler linotype merger owned half stock petitioners charged proxy solicitation merger management materially misleading violated securities exchange act rule thereunder merger recommended shareholders company directors without disclosing nominees controlled mergenthaler district petitioners motion summary judgment ruled claimed defect proxy statement material omission hearing concluded without votes minority stockholders approval merger achieved causal relationship thus shown finding violation alleged injury petitioners referred case master consider appropriate relief interlocutory appeal appeals affirmed conclusion proxy statement materially deficient held granting summary judgment respect causation erroneous necessary resolve trial whether causal relationship deficiency proxy statement merger finding causation directly established impracticalities determining many votes affected ruled issue determined proof fairness merger respondents prove fairness concluded sufficient number shareholders approved merger regardless misrepresentation held fairness merger terms constitute defense private action violation act complaining materially misleading solicitation proxies authorized corporate merger pp permitting liability foreclosed basis finding merger fair contravene purpose bypassing stockholders pp imposing small shareholders burden rebutting corporation evidence fairness discourage private enforcement proxy rules provides necessary supplement commission action case borak pp evidence submitted hearing causal relationship proxy material merger sufficient establish petitioners cause action proof misstatement omission proxy statement material showing defect might considered important shaping shareholders vote sufficient without proof appeals erroneously held necessary effect decisive pp devising retrospective relief violation proxy rules federal courts guided principles equity pp fairness merger may relevant consideration determining appropriate relief merger set aside equity concludes circumstances equitable pp damages recoverable extent proved pp petitioners established violation securities laws corporation officials entitled interim award litigation expenses reasonable attorneys fees incurred proving violation since expenses petitioners incurred benefit corporation stockholders decide question reimbursement litigation expenses incurred ensuing proceedings pp arnold shure argued cause petitioners briefs robert sprecher edward gadsby mozart ratner albert jenner argued cause respondents brief jerold solovy john stifler solicitor general griswold lawrence wallace philip loomis david ferber meyer eisenberg filed brief amicus curiae justice harlan delivered opinion case requires us consider basic aspect implied private right action violation securities exchange act recognized case borak borak asserted wrong corporate merger accomplished use proxy statement materially false misleading question deal causal relationship must shown statement merger establish cause action based violation act count ii amended complaint count us petitioners predicated jurisdiction act alleged proxy statement sent management solicit shareholders votes favor merger misleading violation act sec rule thereunder cfr petitioners recited merger mergenthaler owned outstanding shares common stock control two years american manufacturing turn owned outstanding shares mergenthaler two years voting control mergenthaler petitioners charged light circumstances proxy statement misleading told shareholders board directors recommended approval merger without also informing directors nominees mergenthaler control domination mergenthaler petitioners asserted right complain alleged violation derivatively behalf representatives class minority shareholders petitioners motion summary judgment respect count ii district northern district illinois ruled matter law claimed defect proxy statement light circumstances statement made material omission district concluded reading borak opinion hold hearing issue whether causal connection finding violation disclosure requirements alleged injury plaintiffs consider remedies appropriate unreported opinion dated february holding hearing found terms merger agreement affirmative vote shares required approval merger respondent companies owned controlled outstanding shares therefore obtain authorization merger respondents secure approval substantial number minority shareholders stockholders meeting approximately shares shares outstanding voted favor merger included votes obtained proxy minority shareholders votes necessary indispensable approval merger district concluded causal relationship thus shown granted interlocutory judgment favor petitioners issue liability referring case master consideration appropriate relief unreported findings conclusions dated opinion reported supp district made certification required respondents took interlocutory appeal appeals seventh circuit affirmed district conclusion proxy statement materially deficient reversed question causation acknowledged injunction sought sufficient time stockholders meeting corrective measures appropriate however since suit brought late preventive action courts determine whether misleading statement omission caused submission sufficient proxies prerequisite determination liability act respondents show preponderance probabilities merger received sufficient vote even proxy statement misleading respect found petitioners entitled relief kind appeals acknowledged test corresponds fraud test whether injured party relied misrepresentation however rightly concluding eliance thousands individuals scarcely inquired ruled issue determined proof fairness terms merger respondents show merger merit fair minority shareholders trial justified concluding sufficient number shareholders approved merger deficiency proxy statement case respondents entitled judgment favor claiming appeals construed decision borak manner frustrates statute policy enforcement private litigation petitioners sought review granted certiorari believing resolution basic issue made stage litigation postponed trial appeals decision ii result insulate private redress entire category proxy violations relating matters terms merger even outrageous misrepresentations proxy solicitation relate terms transaction give rise cause action particularly carried enforcement actions securities exchange commission result subvert congressional purpose ensuring full fair disclosure shareholders recognition fairness merger complete defense confront small shareholders additional obstacle making successful challenge proposal recommended defective proxy statement risk unable rebut corporation evidence fairness proposal thus establish cause action bound discourage shareholders private enforcement proxy rules provides necessary supplement commission action case borak frustration congressional policy required anything wording statute opinion borak case section declares unlawful solicit proxies contravention commission rules sec rule prohibits solicitations containing statement false misleading respect material fact omits state material fact necessary order make statements therein false misleading use solicitation materially misleading violation law appeals recognized stating injunctive relief available remedy defect sought prior stockholders meeting borak came dismissal complaint limited inquiry whether violation gives rise federal cause action rescission damages referring argument made petitioners merger dissolved fraudulent issues upon proxy material bear stated causal relationship proxy material merger questions fact resolved trial therefore discuss point present case hearing specifically directed causation problem question whether facts found basis hearing sufficient law establish petitioners cause action conclude misstatement omission proxy statement shown material found determination indubitably embodies conclusion defect character might considered important reasonable shareholder process deciding vote requirement defect significant propensity affect voting process found express terms rule adequately serves purpose ensuring cause action established proof defect trivial unrelated transaction approval sought correction defect imposition liability interests protected need supplement requirement appeals requirement proof whether defect actually decisive effect voting finding materiality shareholder made sufficient showing causal relationship violation injury seeks redress proves proxy solicitation rather particular defect solicitation materials essential link accomplishment transaction objective test avoid impracticalities determining many votes affected resolving doubts favor statute designed protect effectuate congressional policy ensuring shareholders able make informed choice consulted corporate transactions cf union pac chicago supp loss securities regulation ed supp iii read act declares contracts made violation act rule thereunder void regards rights violator knowing successors interest requiring merger set aside simply merger agreement void contract language establishes guilty party precluded enforcing contract unwilling innocent party compel conclusion contract nullity creating enforceable rights even party innocent violation lower federal courts read counterparts holding company act investment company act investment advisers act rendering contract merely voidable option innocent party see greater iowa mclendon cir royal air properties smith cir bankers life cas bellanca cir kaminsky abrams supp maher williston beane supp cf green brown supp remanded grounds cir investment company act see also loss supra supp interpretation eminently sensible interests victim sufficiently protected giving right rescind regard contract void invoked right create possibility hardships others without necessarily advancing statutory policy disclosure amicus curiae points representatives minority shareholders petitioners parties merger agreement thus enjoy statutory right set aside furthermore derivative right invoke status party agreement determination relief granted name must hinge whether setting aside merger best interests shareholders whole short context suit one leaves matter relief borak without specific statutory language merger set aside equity concludes circumstances equitable cf sec national securities monetary relief course also possibility defect proxy solicitation relates specific terms merger district might appropriately order accounting ensure shareholders receive value represented coming hand misleading aspect solicitation relate terms merger monetary relief might afforded shareholders merger resulted reduction earnings earnings potential holdings short damages recoverable extent shown commingling assets operations merged companies makes impossible establish direct injury merger relief might predicated determination fairness terms merger time approved questions course decision first instance district remand singling possibilities intended exclude others iv absence express statutory authorization award attorneys fees suit preclude award cases type suit stockholders recover profits corporation act appeals second circuit awarded attorneys fees despite lack provision theory corporation received benefit attorney services pay reasonable value thereof smolowe delendo cir held congress inclusion act express provisions recovery attorneys fees certain types suits impinge upon result reach absence statute sections merely enforce additional penalty wrongdoer ibid agree second circuit specific provisions read denying courts power award counsel fees suits sections act circumstances make award appropriate express creation sections private liabilities negates possibility implied right action remedial provisions act far different lanham act stat held preclude award attorneys fees suit trademark infringement fleischmann maier brewing since congress lanham act meticulously detailed remedies available plaintiff proves valid trademark infringed fleischmann concluded express remedial provisions intended mark boundaries power award monetary relief cases arising act contrast fairly infer securities exchange act purpose circumscribe courts power grant appropriate remedies cf bakery workers union ratner app act makes provision private recovery violation declaration voidness leaving courts task faced borak deciding whether private right action implied courts must similarly determine whether special circumstances exist justify award attorneys fees including reasonable expenses litigation statutory costs general american rule attorneys fees ordinarily recoverable costs courts congress developed exceptions rule situations overriding considerations indicate need recovery primary exception award expenses plaintiff successfully maintained suit usually behalf class benefits group others manner see fleischmann maier brewing allow others obtain full benefit plaintiff efforts without contributing equally litigation expenses enrich others unjustly plaintiff expense suit presents situation dissemination misleading proxy solicitations deceit practiced stockholders group case borak expenses petitioners lawsuit incurred benefit corporation shareholders fact suit yet produced may never produce monetary recovery fees paid preclude award based rationale although earliest cases recognizing right reimbursement involved litigation produced preserved common fund benefit group nothing cases indicates suit must actually bring money prerequisite power order reimbursement expenses foundation historic practice granting reimbursement costs litigation conventional taxable costs part original authority chancellor equity particular situation sprague ticonic nat bank sprague upheld district power grant reimbursement plaintiff litigation expenses even though sued behalf class success stare decisis effect entitling others recover specific assets defendant although others parties forced contribute costs suit order reimbursing plaintiff defendant assets recoveries later come observed absence avowed class suit creation fund stare decisis rather decree hardly touch es power equity justice party beneficiaries litigation cases departed traditional metes bounds doctrine permit reimbursement cases litigation conferred substantial benefit members ascertainable class jurisdiction subject matter suit makes possible award operate spread costs proportionately among development pronounced shareholders derivative actions courts increasingly recognized expenses incurred one shareholder vindication corporate right action spread among shareholders award corporation regardless whether actual money recovery obtained corporation favor example awards sustained suits stockholders complaining shares corporation issued wrongfully inadequate consideration successful suit type resulting cancellation shares bring fund add assets corporation benefit holders remaining shares enhancing value similarly holders voting trust certificates allowed reimbursement expenses corporation succeeded terminating voting trust obtaining certificate holders right vote shares cases common fund sense jurisdiction corporation nominal defendant made possible assess fees shareholders award corporation many instances benefit conferred capable expression monetary terms estimating increase market value shares attributable successful litigation however increasing number lower courts acknowledged corporation may receive substantial benefit derivative suit justifying award counsel fees regardless whether benefit pecuniary nature leading case bosch meeker cooperative light power stockholder reimbursed expenses obtaining judicial declaration election certain corporation directors invalid minnesota stated action stockholder results substantial benefit corporation recover costs expenses substantial benefit must something technical consequence one accomplishes result corrects prevents abuse prejudicial rights interests corporation affect enjoyment protection essential right stockholder interest foregoing reasons conclude judgment appeals vacated case remanded proceedings consistent opinion ordered footnotes two counts petitioners alleged fraud merger ultra vires ohio law petitioners order entered district two days summary judgment favor deleting judgment conclusion law nder provisions section securities exchange act merger effectuated violation section act void deletion apparently made purpose avoiding prejudice question relief remained open consideration master light disposition respondents appeal appeals need consider respondents ask review conclusion lower courts proxy statement misleading material respect petitioners naturally raise question petition certiorari respondents filed since reversal appeals ruling question dictate affirmance judgment remanded case proceedings determine causation rather elimination petitioners rights thereunder consider question circumstances american ry exp langnes green morley constr maryland cas stern gressman practice ed appeals ruling causation may negated proof fairness merger also rests dubious behavioral assumption justification presuming shareholders every corporation willing accept every fair merger offer put yet presumption implicit opinion appeals gave indication evidence petitioners might adduce respondents established merger proposal equitable order show shareholders nevertheless rejected solicitation misleading proof actual reliance thousands individuals acknowledged feasible see jennings marsh securities regulation cases materials ed reliance nondisclosure fact particularly difficult matter define prove see loss securities regulation ed practice therefore objective fairness proposal seemingly determinative liability view many factors might lead shareholders prefer current position owners larger combined enterprise pure conjecture assume fairness proposal always determinative vote cf wirtz hotel motel club employees union cf list fashion park cir general time talley industries cir restatement second torts tent draft loss securities regulation ed supp case misleading aspect solicitation involved failure reveal serious conflict interest part directors appeals concluded crucial question determining materiality whether minority shareholders sufficiently alerted board relationship adversary guard adequate disclosure relationship warned stockholders give careful scrutiny terms merger might one recommended entirely disinterested board thus failure make disclosure found material defect matter law thwarting informed decision statute aims regardless whether terms merger reasonable stockholder approved transaction careful analysis see also swanson american consumer industries cir need decide case whether causation shown management controls sufficient number shares approve transaction without votes minority even situation management finds necessary legal practical reasons solicit proxies minority shareholders least one held proxy solicitation might sufficiently related merger satisfy causation requirement see laurenzano einbender supp cf swanson american consumer industries cir eagle horvath supp globus jaroff supp comment shareholders derivative suit enforce corporate right action directors sec rule rev see hoover allen supp barnett anaconda supp robbins banner industries supp see generally loss securities regulation supp section provides pertinent part every contract made violation provision chapter rule regulation thereunder shall void regards rights person violation provision rule regulation shall made contract regards rights person party contract shall acquired right thereunder actual knowledge facts reason making contract violation provision rule regulation see eastside church christ national plan cir cf goldstein groesbeck cir see public utility holding company act stat investment company act stat investment advisers act stat petitioners submitted proxies favor merger response unlawful solicitation appear language seem give innocent parties transaction right rescind proxies clear case petitioners combined holdings shares rescission affect authorization merger appeals might modified judgment district extent referred issue relief master fed rule civ proc appeals opinion indicates doubt whether referral appropriate issue us believe question reimbursement expenses sufficiently close relationship determination constitutes cause action appropriate decision time urges consider also whether petitioners entitled recoup expenses reasonably incurred litigation question relief urged hold expenses reimbursed regardless whether petitioners ultimately successful obtaining significant relief however question reimbursement future expenses resolved first instance lower courts issue relief litigated record established concerning need award express view matter juncture provisions deal respectively manipulation security prices misleading statements documents filed commission see cf note attorney fees shall ultimate burden lie vand rev many commentators argued thoroughgoing abandonment rule see ehrenzweig reimbursement counsel fees great society rev kuenzel attorney fee cost litigation iowa rev mccormick counsel fees expenses litigation element damages rev stoebuck counsel fees included costs logical development rev note supra see trustees greenough central banking pettus hornstein counsel fee stockholder derivative suits rev even original fund case recognized power equity award fees restricted ability provide reimbursement fund hard successful plaintiff turn away without allowance unjust give parties entitled participate benefits fund unfair advantage worked well reimbursed fund contribute due proportion expenses fairly incurred make charge upon fund equitable way securing contribution trustees greenough see holthusen edward budd mfg supp runswick floor utah cases cited infra see generally hornstein legal therapeutics salvage factor counsel fee awards harv rev smith recovery plaintiff attorney fees corporate litigation bar bull hartman oatman gold mining milling greenough coeur lead idaho cf riverside oil refining lynch allen chase nat bank misc sup sequel allen chase nat bank misc sup cf note allowance counsel fees fund new jersey experience rutgers rev see schechtman wolfson cir grant hartman ranch cal app cal rptr treves servel del ch del sup saks gamble del ch yap wah yen ki tuk tsen nin hue haw berger amana society iowa bosch meeker cooperative light power eisenberg central zone property app div sup aff per curiam martin foundation app div sup abrams textile realty misc sup op referee long park brunswick theatres app div sup aff per curiam smith supra shareholder suits pecuniary benefit unnecessary counsel fee award stan rev murphy north american light power supp cf hornstein supra justice black concurring part dissenting part substantially agree parts ii iii opinion holding stockholders sufficiently proved violation securities exchange act thus entitled recover whatever damages suffered result misleading corporate statements perhaps equitable setting aside merger agree however appears holding part iv stockholders hire lawyers prosecute claims case recover attorneys fees absence valid contractual agreement providing explicit statute creating right recovery courts interpreters creators legal rights recover need recovery attorneys fees effectuate policies act involved need judgment met congress