United States District Court, D. Delaware
DAVID JAROSLAWICZ., Individually and on behalf of all others similarly situated, Plaintiffs,
M&T BANK CORPORATION, HUDSON CITY BANCORP, INC., ROBERT G. WILMERS, RENE F. JONES, MARK J. CZARNECKI, BRENT D. BAIRD, C. ANGELA BONTEMPO, ROBERT T. BRADY, T. JEFFERSON CUNNINGHAM III, GARY N. GEISEL, JOHN D. HAWKE, JR., PATRICK W.E. HODGSON, RICHARD G. KING, JORGE G. PEREIRA, MELINDA R. RICH, ROBERT E. SADLER, JR., HERBERT L. WASHINGTON, DENIS J. SALAMONE, MICHAEL W. AZZARA, VICTORIA H. BRUNI, DONALD O. QUEST, JOSEPH G. SPONHOLZ, CORNELIUS E. GOLDING, WILLIAM G. BARDEL, and SCOTT A. BELAIR, Defendants.
Francis J. Murphy, Jr., Esq. and Jonathan L. Parshall, Esq.
of Murphy & Landon, Wilmington, DE; Laurence D.
Paskowitz, Esq. of Paskowitz Law Firm P.C., New York, NY;
Deborah R. Gross, Esq. of Kaufman, Coren & Ress, P.C.,
Philadelphia, PA; Roy Jacobs, Esq. of Roy Jacobs &
Associates, New York, NY. Counsel for Plaintiffs.
C. Cordrey, Esq. of Reed Smith LLP, Wilmington, DE; Geroge T.
Conway III, Esq., Bradley R. Wilson, Esq., and Jordan L.
Pietzsch, Esq. of Watchtell, Lipton, Rosen & Katz, New
York, NY. Counsel for Defendants M&T Bank Corporation,
Robert G. Wilmers, Rene F. Jones, Mark J. Czarnecki, Brent D.
Baird, C. Angela Bontempo, Robert T. Brady, T. Jefferson
Cunningham III, Gary N. Geisel, John D. Hawke, Jr., Patrick
W.E. Hodgson, Richard G. King, Jorge G. Pereira, Melinda R.
Rich, Robert E. Sadler, Jr., and Herbert L. Washington.
R. Shannon, Esq. of Potter Anderson & Corroon,
Wilmington, DE; Tracy Richelle High, Esq. and Christen M.
Martosella, Esq. of Sullivan & Cromwell LLP, New York,
NY. Counsel for Defendants Hudson City Bancorp, Inc., Denis
J. Salamone, Victoria H. Bruni, Donald O. Quest, Joseph G.
Sponholz, Scott A. Belair, Michael W. Azzara, William G.
Bardel, and Cornelius E. Golding.
ANDREWS, U.S., District Judge
are former stockholders of Hudson City Bancorp before it
merged with M&T Bank Corporation. (D.I. 72 ¶ 26).
Defendants are Hudson City, M&T, and their directors and
officers at the time of the merger. (Id. at
¶¶ 27-53). Pending before the court is
Defendants' motion to dismiss Plaintiffs' second
amended class action complaint (the "complaint").
(D.I. 75). The complaint alleges that Defendants violated
Section 14(a) of the Securities Exchange Act of 1934 (the
"1934 Act") by failing to make mandatory
disclosures and making misleading disclosures in the proxy
statement (the "Proxy") issued in connection with
the merger. (D.I. 72 ¶¶ 129-54). For the reasons
discussed below, Defendants' motion is granted and the
complaint is dismissed without prejudice.
argue that Defendants violated Section 14(a) by failing to
disclose that M&T was not in compliance with certain
banking regulations, which would delay regulatory approval
and consequently the closing of the merger. Plaintiffs'
arguments are based on disclosures in the Proxy, an April 12,
2013 press release, and an April 15, 2013 earnings conference
call, the last two items referred to by Plaintiffs as the
"April Disclosures." This section provides a rough
timeline of events before discussing in more detail the
contents of the Proxy and the April Disclosures.
Timeline of Events
August 27, 2012, Defendants executed a merger agreement
pursuant to which M&T would acquire Hudson City, and
Hudson City stockholders could elect to receive either shares
of M&T stock or cash having a roughly equivalent value.
(D.I. 72 ¶ 58). Hudson City filed a preliminary Proxy
with the SEC on October 15, 2012 that became effective on
February 22, 2013. (Id. at ¶ 11). At the time
the Proxy became effective, Defendants expected the merger to
close in the second quarter of 2013. (D.I. 77-1 at 103). On
April 12, 2013, Defendants issued a press release announcing
delays in closing the merger due to additional time needed to
obtain regulatory approval from the Federal Reserve Board.
(D.I. 72 ¶ 90). According to the press release, the
Federal Reserve had raised "concerns" about
"M&T's procedures, systems and processes
relating to M&T's Bank Secrecy Act and
anti-money-laundering compliance program." (Id.
at ¶ 11). M&T would need additional time to
"demonstrate its efficacy to the satisfaction of the
Federal Reserve and otherwise meet any other regulatory
requirements that may be imposed in connection with these
matters." (Id. at ¶ 90). On April 15,
2013, M&T had its first quarter 2013 earnings conference
call during which it discussed the contents of the press
release. (Id. at ¶ 91).
April 18, 2013, Hudson City stockholders voted to approve the
merger. (Id. at ¶ 6). Over a year later, on
October 9, 2014, the Consumer Financial Protection Bureau
("CFPB") announced that it had taken action against
M&T for violating consumer disclosure laws by offering
free checking, but then switching customers to accounts which
carried fees. (Id. at ¶¶ 7-8). A year
after that, on September 30, 2015, the Federal Reserve
approved the merger. (Id. at ¶ 117). The
complaint alleges that the Federal Reserve delayed its
approval due to M&T's non-compliance with the Bank
Secrecy Act and anti-money-laundering regulations
("BSA/AML Regulations") and violations of the
consumer disclosure laws (the "Consumer
Regulations") addressed by the CFPB. (Id. at
¶¶ 4, 117). The merger closed on November 1, 2015.
(Id. at ¶ 6).
The Proxy Disclosures
complaint alleges that the italicized portions of the
following statements were misleading. The first statement
discusses compliance and appears in M&T's annual
report on Form 10-K for the year ended December 31, 2011,
which was incorporated into the Proxy by reference. The
second statement discusses timing and appears in the Proxy.
[The USA Patriot Act] imposes obligations on U.S. financial
institutions, including banks and broker dealer subsidiaries,
to implement and maintain appropriate policies, procedures
and controls which are reasonably designed to prevent, detect
and report instances of money laundering .... In addition,
provisions of the USA Patriot Act require the federal
financial institution regulatory agencies to consider the
effectiveness of a financial institution's anti-money
laundering activities when reviewing bank mergers and BHC
acquisitions. Failure of a financial institution to maintain
and implement adequate programs to combat money laundering
and terrorist financing could have serious legal and
reputational consequences for the institution. The
Registrant and its impacted subsidiaries have approved
policies and procedures that are believed to be compliant
with the USA Patriot Act.
(D.I. 72 ¶ 80 (alterations and emphasis in original)).
Although we currently believe we should be able to obtain
all required regulatory approvals in a timely manner, we
cannot be certain when or if we will obtain them or, if
obtained, whether they will contain terms, conditions or
restrictions not currently contemplated that will be
detrimental to or have a material adverse effect on M&T
or its subsidiaries after the completion of the merger.
(Id. at ¶ 81 (emphasis in original)). Several
other sections of the Proxy discussed timing for closing the
merger. For example, the section quoted by Plaintiffs refers
to another section of the Proxy, titled "The
Merger-Regulatory Approvals Required, " for more
details. That section states:
There can be no assurances that the regulatory approvals
discussed above will be received on a timely basis .... In
recent similar transactions, the Federal Reserve Board has
taken a longer time to render a decision on applications than
the typical time period for approval set forth in the Federal
Reserve Board's regulations.
(D.I. 77-1 at 101). In addition, the section titled
"Effective Time of the Merger" warns "there
can be no assurance as to when or if the merger will