Two of Wall Street’s most powerful banks are fighting to dismiss shareholder lawsuits that accuse them of helping private equity firms snap up public companies on the cheap. JPMorgan Chase and Morgan Stanley are each contesting remaining claims in Delaware Chancery Court, where shareholders allege the banks orchestrated multibillion-dollar buyouts at prices that shortchanged the very investors they were supposed to protect.
The cases center on a legal theory that has quietly gained traction in Delaware: that financial advisers can be held liable for aiding and abetting breaches of fiduciary duty by company directors. And thanks to a recent overhaul of Delaware corporate law, these banks may have become easier to sue than the directors who actually approved the deals.
The deals in question
JPMorgan’s legal headache stems from its role in the $1.4 billion acquisition of Snap One Holdings Corp. by private equity firm Hellman & Friedman. Shareholders claim JPMorgan had conflicts of interest rooted in prior relationships with the buyer, yet still served as financial adviser to Snap One during the sale.
Morgan Stanley faces a parallel complaint tied to the $1.5 billion purchase of Couchbase Inc. by Haveli Investments. Shareholders say Morgan Stanley’s pre-existing ties to the acquirer compromised its ability to negotiate the best possible price for the company being sold.
