A judge in Delaware approved a settlement of a shareholders’ lawsuit against National City Corp., awarding shareholder attorneys $400,000 and releasing more than 400 pages of documents that detail the Cleveland-based bank’s scramble to find a buyer last fall.
The settlement approved by Delaware Chancery Court Judge William Chandler III awarded the shareholders’ attorneys one-third of the sum they originally sought.
The settlement was negotiated last year between National City and the eight investors who sued the Cleveland-based bank, which was purchased by PNC Financial Services Group Inc.
The investors had claimed that National City board members breached their duties to shareholders by proposing to sell the bank to PNC, of Pittsburgh, at a cut-rate price of $5.2 billion. The eventual selling price was $5.6 billion.
PNC had received $7.7 billion from the U.S. Treasury’s Troubled Asset Relief Program, including money that might have gone to National City.
Under the settlement terms, investors dropped their claims in return for the release of more than 400 pages of documents that National City had wanted to remain sealed.
The court unsealed them after The (Cleveland) Plain Dealer, The Columbus Dispatch and The Associated Press argued the information should be public. The documents showed National City’s scramble to find a buyer last fall.
In his opinion, Chandler said the new disclosures “provided a benefit, albeit a meager benefit” to shareholders. The judge called the $1.2 million the shareholders’ attorneys originally wanted a “princely sum” for a “non-monetary, therapeutic and modest achievement.”
The settlement calls for PNC to pay the $400,000 in attorneys’ fees. Spokesman Brian Goerke said the company doesn’t comment on litigation.
The disclosures noted by Chandler included:
- National City’s potential participation in the federal government’s asset relief program.
- A potential conflict with National City’s financial adviser, Goldman Sachs, which advised both PNC and National City at various times.
- Information on how National City’s board searched for buyers.
- National City’s plans for future growth had it remained independent.
The Delaware lawsuit was just one of many filed in the wake of the National City sale. There were roughly a dozen lawsuits from shareholders filed in Cuyahoga County and elsewhere, including one that accused National City and PNC of filing a “false and misleading proxy statement” and claimed the sales process favors the banks and company insiders.
Information from: The Plain Dealer, www.cleveland.com
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