Judge throws out Bear suit
A New York State Supreme Court justice yesterday dismissed a shareholder class action against The Bear Stearns Cos. Inc.’s officers and directors challenging its merger with JPMorgan Chase & Co.
A New York State Supreme Court justice yesterday dismissed a shareholder class action against The Bear Stearns Cos. Inc.’s officers and directors challenging its merger with JPMorgan Chase & Co.
The lawsuit charged that the $10-per-share stock-for-stock deal was inadequate.
It sought damages from Bear Stearns directors for “violation of their fiduciary duties” and from JPMorgan for its “tortious conduct.”
Both firms are based in New York.
State Supreme Court Justice Herman Cahn rejected the consolidated class action in a 44-page ruling, saying that the decision to merge was protected by the “business judgment rule,” meaning that the board of directors made an informed decision in what it believed was the best interest of the company and therefore were not liable.
The merger was brokered by the Federal Reserve to prevent a bankruptcy at Bear Stearns, “an event with potentially cataclysmic consequences for the broader economy as well as for the shareholders,” wrote Mr. Cahn.
Initially, JPMorgan agreed to purchase Bear Stearns shares for $2. An amended agreement increased share value when the companies expressed concerns about their guaranty obligations and liability.
Of Bear Stearns stockholders who voted, 71% approved the transaction in late May.
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