December 18, 2017

Disclosure: Court Rejects Claims Based on Timing of Regulatory Approval

In any deal requiring regulatory approval, the time required to complete the regulatory process is a bit of a wild card – but that doesn’t mean you won’t get sued over it if there’s an unanticipated delay.

Fortunately, this Wachtell memo reports that a federal court wasn’t buying the claims in a recent lawsuit that statements about the anticipated timing of regulatory approval of a pending merger between M&T Bank and Hudson City Bancorp were misleading. Here’s an excerpt summarizing the plaintiffs’ claims and the court’s decision:

They alleged that statements of opinion about, among other things, the timing of the merger (“we currently believe we should be able to obtain all required regulatory approvals in a timely manner”) were misleading because, in light of regulatory issues that surfaced, the merger was likely to be delayed. The district court dismissed that claim as well.

In its decision last week, the court held those statements to be opinions, and that, as such, they were subject to the high bar set by the Supreme Court’s recent Omnicare decision. The district court stressed the importance of context—thecautionary language in the proxy. The allegedly misleading language, the court held,was “cherry-picked” out of surrounding warnings that M&T and Hudson City could not be certain if or when regulatory approvals would occur—that, indeed,there was “no assurance as to when or if the merger will occur.” Those warnings, and other failures of pleading, compelled the dismissal of the complaint.

The memo says that the court’s decision in this and an earlier proceeding are “an emphatic reminder” of the need for appropriate cautionary language in a merger proxy statement.

John Jenkins