Delaware Judge Slams Lawyers Over Bank Of America Suit
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 nomotivation 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 rationa
I liked this part.
“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.”