February 25, 2008

An Important New Fairness Opinion Decision

Last week, the US Court of Appeals for the Seventh Circuit – in The HA2003 Liquidating Trust v. Credit Suisse Securities – affirmed the decision of US District Court for the Northern District of Illinois absolving Credit Suisse of liability relating to the rendering of a fairness opinion. Kevin Miller of Alston & Bird notes that this succinct – 8 pages, single column – and extremely well-written decision by Chief Judge Easterbrook evidences a clear understanding of the terms of the contracts pursuant to which fairness opinions are rendered. Here is a copy of the opinion.

Although the opinion is worth reading in its entirety, highlights include:

– “CSFB did not write an insurance policy against managers’ errors of business judgment.”

– “In the end, the Trust wants us to throw out the detailed contract that HA-LO and CSFB had negotiated and to make up a set of duties as if this were tort litigation. That would be a mistake.”

– “The engagement contract says that CSFB has no duty to doublecheck the predictions about [the Target]’s future revenues and no duty to update its opinion. CSFB did what it was hired to do. The Trust’s belief that CSFB should have been hired to do something different is not a basis of liability.”

In his blog, Professor Steven Davidoff has a few words on this opinion too.