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Piggybankblog posted on 02/06/13
Cross linked with forbes.com
One more item for the Bank of America/Countrywide/mortgage meltdown file. Delaware Chancery Court Judge Leo Strine delivered a scathing attack on lawyers who tried to pursue a derivative suit against Bank of America over its disastrous Countrywide purchase, saying they failed to come up with a rational explanation for why BoA directors allegedly broke the law.
Derivative suits lie at the cheesy end of the securities class-action business, where lawyers try to sue a company’s directors on behalf of shareholders, theoretically because the company won’t file such a suit itself. To level the playing field, Delaware requires those lawyers to first ask the company to sue itself, or prove that such a demand would be futile. Strine, in a ruling from the bench on Monday, said lawyers at Cooch & Taylor and Pomerantz Grossman had not only failed to prove futility, but had tactically chosen not to cite records that might explain why directors had chosen to violate the law. He dismissed the suit without prejudice, saying another plaintiff with better lawyers might find a valid reason to sue BoA directors over the Countrywide fiasco, but not these.
Strine’s words are always entertaining so here are some excerpts:
“This complaint was constructed in precisely the manner that the Delaware Supreme Court has admonished time and time again plaintiffs not to use.”
“When you read the pleading, there is no motivation for it to have been a dumb decision. It was a risky decision that went wrong. Mr. Lewis probably thinks of Countrywide every day and it makes him cringe, given how many years he put into the institution. But they buy into this thing, and it turns out to be horrible.”
“None of the independent directors had anything rational to gain that would compare to the potential loss of their net wealth if they became the target of 50 AGs and the federal government, much less plaintiffs’ lawyers. Put aside plaintiffs’ lawyers. The federal government and 50 Attorneys General are on the scene.”
To succeed with such a lawsuit “would take actually taking the time to seriously investigate what the role of these directors was, to take a look at the information flow they received, and to match it with what was going on, and then to level the serious accusation of a criminal state of mind, which I believe is the only fair way to put the accusations at this level.”
“I always tell my kids, `There are two words as you get older you should say less: Always and never.’ And in order to protect the best interests of the stockholders of Bank of America, I don’t think it’s fair to foreclose a future group of plaintiffs who might actually use the books and records, and might actually show that based on an information flow to the committee, the committees in question, that they, frankly, knowingly engaged in a course of conduct that they knew would essentially result in a continuing pattern of law violation in order to profit the company. That’s the theory of these plaintiffs.”
My name is John Wright AND I AM FIGHTING BACK!
All Rise! .The Honorable Judge Wright has left The Courtroom of Public Opinion!
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