The StellarOne location at 9605 Gayton Road. (Photo by Michael Schwartz)
It didn’t take long for the lawyers to pick up on the scent.
Almost as soon as news broke last week of the biggest Richmond banking deal in years, at least a half-dozen law firms from New York to New Orleans announced that they are “investigating” the StellarOne Corp. board of directors related to the company’s proposed $445 million acquisition by Richmond-based Union First Market Bankshares.
In an attempt to entice StellarOne shareholders to sign on as lead plaintiffs in potential class action lawsuits, the firms all zero in on what they say are potential breaches of fiduciary duty by the StellarOne board. They question whether the deal maximizes StellarOne shareholder value, whether the company adequately shopped itself around and whether Union is underpaying for the $3 billion Christiansburg bank.
The announcements illustrate a side of the legal industry that’s potentially lucrative for lawyers but an increasingly common and expensive thorn in the side of companies doing deals.
“Anytime you see a significant takeover or a drop in share price, the class action guys start looking for cases,” said Andrew Stoltmann, an attorney with Stoltmann Law Offices, a securities litigation firm in Chicago.
“They are primarily trolling for cases and clients. Right now, the lawyers are looking for a lead plaintiff.”
Some firms, like Brower Piven, set up automated hotlines for curious shareholders.
“If you are shareholder inquiring about a recent press release and would like further information …” the automated menu offers.
It’s an act first, ask questions later approach, Stoltmann said.
“When you see the big deal announced, [the law firms] assume there’s liability, and then they look for a client and try to find the liability after that,” he said.
Stoltmann said lead plaintiffs are found in such instances about 50 percent of the time. But that doesn’t mean a case will go anywhere.
“Sometimes those actions are dismissed. Sometimes they’re settled for relatively [minimal] amounts and sometimes for significant amounts.”
Union CEO Billy Beale
Although Union First Market Bank and its parent company haven’t been targeted for potential litigation in this deal, Union chief executive Billy Beale said both his bank and StellarOne were ready for such a response.
“The sad thing is you budget for it,” Beale said. “You set aside a certain amount of money based on what everybody’s best guess is what it would take to settle it out.”
Both banks have their lawyers geared up to deal with potential cases. Union uses LeClairRyan, and StellarOne has Troutman Sanders on its side.
Sometimes it’s cheaper and more beneficial to settle, Beale said.
“Deep in your heart of hearts, I think all of us want to fight it — because it’s without basis,” he said. “But the problem is then you end up in protracted litigation. It’s going to take time and money and slow down the process of getting the deal done.”
Robert Harwood’s New York firm Harwood Feffer is one of the firms that jumped into the fray last week.
“I look to see if a deal has been fairly priced,” Harwood said. “If I think it hasn’t been, we continue on from there.”
He declined to comment further on the StellarOne-Union deal specifically.
“I’m in the process of looking at it,” he said.
Attorney Michael Palestina of Kahn Swick & Foti said his firm looks to see how executives and insiders at a company being acquired might benefit financially from a deal. They also try to discern whether any potential payoffs for those insiders, often called golden parachutes, might have influenced their decisions.
“Right now we’re just looking back at past SEC filings,” Palestina said.
He declined to discuss exactly how the firm builds its case and identifies clients.
“That’s something we do internally and wouldn’t normally share,” he said.
Valued at about $445 million, Union’s proposed acquisition would pay StellarOne shareholders 0.97 shares of Union common stock for each of their StellarOne shares.
Shareholders and regulators must still approve the deal. It is expected to close by early 2014.
The StellarOne location at 9605 Gayton Road. (Photo by Michael Schwartz)
It didn’t take long for the lawyers to pick up on the scent.
Almost as soon as news broke last week of the biggest Richmond banking deal in years, at least a half-dozen law firms from New York to New Orleans announced that they are “investigating” the StellarOne Corp. board of directors related to the company’s proposed $445 million acquisition by Richmond-based Union First Market Bankshares.
In an attempt to entice StellarOne shareholders to sign on as lead plaintiffs in potential class action lawsuits, the firms all zero in on what they say are potential breaches of fiduciary duty by the StellarOne board. They question whether the deal maximizes StellarOne shareholder value, whether the company adequately shopped itself around and whether Union is underpaying for the $3 billion Christiansburg bank.
The announcements illustrate a side of the legal industry that’s potentially lucrative for lawyers but an increasingly common and expensive thorn in the side of companies doing deals.
“Anytime you see a significant takeover or a drop in share price, the class action guys start looking for cases,” said Andrew Stoltmann, an attorney with Stoltmann Law Offices, a securities litigation firm in Chicago.
“They are primarily trolling for cases and clients. Right now, the lawyers are looking for a lead plaintiff.”
Some firms, like Brower Piven, set up automated hotlines for curious shareholders.
“If you are shareholder inquiring about a recent press release and would like further information …” the automated menu offers.
It’s an act first, ask questions later approach, Stoltmann said.
“When you see the big deal announced, [the law firms] assume there’s liability, and then they look for a client and try to find the liability after that,” he said.
Stoltmann said lead plaintiffs are found in such instances about 50 percent of the time. But that doesn’t mean a case will go anywhere.
“Sometimes those actions are dismissed. Sometimes they’re settled for relatively [minimal] amounts and sometimes for significant amounts.”
Union CEO Billy Beale
Although Union First Market Bank and its parent company haven’t been targeted for potential litigation in this deal, Union chief executive Billy Beale said both his bank and StellarOne were ready for such a response.
“The sad thing is you budget for it,” Beale said. “You set aside a certain amount of money based on what everybody’s best guess is what it would take to settle it out.”
Both banks have their lawyers geared up to deal with potential cases. Union uses LeClairRyan, and StellarOne has Troutman Sanders on its side.
Sometimes it’s cheaper and more beneficial to settle, Beale said.
“Deep in your heart of hearts, I think all of us want to fight it — because it’s without basis,” he said. “But the problem is then you end up in protracted litigation. It’s going to take time and money and slow down the process of getting the deal done.”
Robert Harwood’s New York firm Harwood Feffer is one of the firms that jumped into the fray last week.
“I look to see if a deal has been fairly priced,” Harwood said. “If I think it hasn’t been, we continue on from there.”
He declined to comment further on the StellarOne-Union deal specifically.
“I’m in the process of looking at it,” he said.
Attorney Michael Palestina of Kahn Swick & Foti said his firm looks to see how executives and insiders at a company being acquired might benefit financially from a deal. They also try to discern whether any potential payoffs for those insiders, often called golden parachutes, might have influenced their decisions.
“Right now we’re just looking back at past SEC filings,” Palestina said.
He declined to discuss exactly how the firm builds its case and identifies clients.
“That’s something we do internally and wouldn’t normally share,” he said.
Valued at about $445 million, Union’s proposed acquisition would pay StellarOne shareholders 0.97 shares of Union common stock for each of their StellarOne shares.
Shareholders and regulators must still approve the deal. It is expected to close by early 2014.
Shakespeare absolutely had it right!
you man when he said “Good counselors lack no clients”?
And what is criminal is that I have been party to six of these types of class actions since 2005.
The companies settled for over $ 9 billion in those suits, the lawyers collected nearly $5 billion in fees and expenses and I, as a shareholder, netted a whopping $14.82.
And of course the $9 billion can out of the companies’ equity so the value of my holdings fell.
Obviously, these lawsuits are strictly for the benefit of the lawyers and they need to be stopped. Any other field and they’d call it extortion.