October 14, 2008
The Suit that Could Have Been: Citibank v. Wachovia
The Wall Street Journal Law Blog is in mourning. "Oh what fun it could have been," laments the blog. We haven't had a knock-down, drag-out tortious interference with contractual relations claim like this since the glory days of the Texaco-Pennzoil fight over Getty Oil.
Citigroup thought it had a deal to buy Wachovia's banking operations for $2.2 billion. Instead, Wachovia agreed to permit Wells Fargo to purchase all its operations for $15.4 billion. The case was filed in the New York Supreme Court's Commercial Division, where it landed on Justice Ramos's docket. The complaint alleged causes of action for breach of contract and tortious interference with contract and sought specific performance, injunctive relief and damages of (pinky finger rising to the corner of the mouth) $60 billion. Justice Ramos extended the deadline on an exclusivity agreement between Citi and Wachovia in order to preserve the status quo until the matter could be decided.
Meanwhile, Wachovia filed its own suit in Federal District Court, relying on some provisions of the recently adopted $700 billion bail-out bill (the Emergency Economic Stabilization Act of 2008, or "EECS!!"). Tulane Law's Elizabeth Nowicki, advising the Law Blog, suggested that Wachovia's reliance on the Bail Out bill was misplaced. Over the weekend, James McGuire of the New York State's Appellate Division, reversed Justice Ramos's order, in part because the emergency hearing was held in Justice Ramos's Connecticut home and it was unclear that a New York State Justice could issue an order from outside of his own jurisdiction. Justice McGuire gave additional reasons, but I like that one. Also over the weekend, the Charlotte News & Observer reported that, in a suit brought by Wachovia shareholders, a North Carolina state court judge entered a temporary restraining order enjoining Citigroup from enforcing its exclusivity agreement.
And then, on Thursday, Citigroup announced that it would not oppose the Wachovia/Wells Fargo merger. It still intends to pursue damages claims on behalf of its shareholders. That's good news for litigators, who will be racking up the billable hours on the case. Professor Nowicki thinks there might be some meat to Citigroup's claims against Wachovia, but the Bail-Out Bill might just protect Wells Fargo from liability.
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