Tuesday, October 13, 2009
The BAC-ML legal stew continues to simmer. In the SEC-BAC case, parties are gearing up for trial and BAC has signaled its intention to waive the attorney client privilege. Remember, in the federal case, BAC is arguing, in effect, that it relied on advice from counsel regarding which disclosures were material. Indeed, I think Lewis' defense is something like, "I don't do disclosures. That's lawyer work."
Here's the statement from the SEC:
"We have reached agreement with theon proposed terms of a court order governing disclosure of information previously withheld on the basis of legal privileges. The order is subject to the approval of Judge Jed Rakoff. If entered by the court, the order would result in a broad waiver of the attorney-client and other legal privileges on matters that are the subject of our pending action against the Bank as well as ongoing investigation.
In the BAC-ML shareholder suit in Delaware, Vice Chancellor Strine refused to dismiss the case. The two sides' arguments can be summarized as follows (HT: Bloomberg):
Lawyer Lawrence Portnoy, representing the bank’s directors, told Strine they didn’t act in bad faith toward shareholders, and that Merrill’s distress “was not a secret” and the losses weren’t unexpected.
Investors’ lawyer Robert J. Kriner Jr. told Strine bank directors showed a “lack of care,” and said in court papers that “directors faithlessly subverted the best interest of Bank of America and its stockholders.”
This case is interesting. And if the plaintiff's duty of care argument is going to work, then the case may turn on whether in the face of a known duty to disclose (as told to them by their counsel) the directors chose not to. Myself, I'm waiting for someone at BAC to try to raise a statutory defense (DGCL Sec. 122(12)), but that's just me.