BREAKINGVIEWS-Countrywide legal escape aided by investor apathy
By Reynolds Holding
NEW YORK, Sept 11 (Reuters Breakingviews) - A U.S. court says shareholders lost the right to sue on the mortgage lender's behalf after it was sold to BofA. That squelches one way to hold the likes of ex-CEO Mozilo to account. And it's a reminder to litigious stock owners to cover all their bases sooner rather than later.
Full view will be published shortly.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: www.breakingviews.com/TOPNewsSubscription
- Former shareholders of Countrywide Financial lost their right to sue directors on the mortgage lender's behalf after its 2008 takeover by Bank of America (BAC.N), the Delaware Supreme Court ruled on Sept. 10. The court said the shareholders could not pursue a so-called derivative action because relinquishing their shares in the acquisition meant they no longer had legal standing.
- Delaware law includes an exception to that rule when the sole purpose of a transaction is to shield officers and directors from liability and deprive shareholders of the power to sue. But the court decided that the Countrywide investors didn't qualify, even though alleged wrongdoing by the board may have made the BofA acquisition necessary.
- The court opinion was issued at the request of the U.S. Court of Appeals in San Francisco, which is hearing the shareholders' appeal of their lawsuit's dismissal and needed an interpretation of Delaware law, which governs the question of the investors' standing.
- Court opinion: link.reuters.com/caq92v
Regulator rising [ID:nL1N0FW0S2]
Two's company [ID:nL1E9CH7J3]
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
- For previous columns by the author, Reuters customers can click on [HOLDING/]
(Editing by Antony Currie and Martin Langfield)
((firstname.lastname@example.org)(Reuters messaging email@example.com)) Keywords: BREAKINGVIEWS COUNTRYWIDE/
(C) Reuters 2012. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing, or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
- Tweet this
- Share this
- Digg this
- Bodies, black boxes handed over from Ukraine crash site
- India keeps world guessing in countdown to landmark trade pact deadline
- India to probe corruption in healthcare after TV sting
- Modi's BJP puts political twist on local sex abuse case
- China food scandal spreads, drags in Starbucks, Burger King and McNuggets in Japan