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Banks face Delaware lawsuits tied to multibillion-dollar buyout deals
JPMorgan and Morgan Stanley are named in shareholder suits, including claims tied to Snap One and Couchbase buyouts totaling $1.5 billion, as Delaware law shields insiders but not banks.
JPMorgan Chase and Morgan Stanley are among banks targeted by shareholder lawsuits over their roles in multibillion-dollar buyout deals, after changes to Delaware corporate law made it harder to sue certain executives and directors in insider transactions. According to suits filed in Delaware Chancery Court, plaintiffs argue banks helped steer public company sales to private equity firms in ways that undervalued shares, and that banks knew this could involve breaches of fiduciary duty.
The revision of Delaware law last year, prompted in part by Elon Musk’s decision to leave the state and reincorporate Tesla Inc. in Texas, is central to the litigation shift. The changes made it tougher for shareholders to pursue some claims against top insiders, but left banks more exposed, creating additional paths for plaintiffs to challenge deal conduct and conflicts.
JPMorgan has faced two such suits, including a case in which it sought dismissal of a complaint tied to its alleged role in Hellman & Friedman’s exit from Snap One Holdings Corp. JPMorgan argued the transaction reflected a legitimate and well-executed sales process.
Morgan Stanley is also facing new litigation connected to its work on the $1.5 billion buyout of Couchbase Inc. by Haveli Investments, and both banks deny wrongdoing in court filings. According to a corporate attorney quoted by Insurance Journal, the threat of litigation is pushing banks toward earlier and more consistent disclosure of conflicts to boards, with judges increasingly expecting advisers to detail bidder relationships and the context for fees.