Judge Holds Weekend Court at Home Over Wachovia Buyout Tussle
Updated: Citigroup lawyers made a weekend trip to a judge’s home in Connecticut in an attempt to block a Wachovia buyout by Wells Fargo, but the judge had no authority to delay the deal in part because he issued his order from another state, a state appeals court judge later ruled.
The New York Times had details of the flurry of weekend legal moves, supplied by a source described as a person close to the situation.
Judge Charles Ramos considered a 16-page complaint carried to his home in Cornwall on Saturday by Citigroup chief legal officer Michael Helfer and two deputies, the story says. Two other high-profile lawyers made arguments by phone: David Boies, representing Wachovia, and Paul Rowe, representing Wells Fargo.
Citigroup had agreed to buy Wachovia for $2.2 billion in a deal brokered by the Federal Deposit Insurance Corp. last week. The Citigroup offer included an exclusivity agreement that barred Wachovia from negotiating a merger until Monday, Oct. 6. Citigroup lawyers say the exclusivity provisions required Ramos to block Wells Fargo’s $15 billion offer for the bank while Citigroup negotiated its deal.
The bank was apparently seeking specific performance of the exclusivity agreement and making a claim of tortious interference with contract and possibly a prospective contract right, according to a report on the New York Times’ DealBook blog.
Ramos issued an order freezing buyout negotiations for five days, but a state appeals judge who appeared for a special court hearing on Sunday overturned the order, in part because Ramos does not have the authority to rule from Connecticut, the New York Times story says.
Wells Fargo and Wachovia lawyers tried to move the case into federal court on the ground that the bailout bill signed by President Bush on Friday made the case a federal issue. U.S. District Judge John Koeltl agreed to hold an emergency hearing but postponed it until Tuesday. In the federal suit, Wachovia claims the exclusivity agreement is void under the bailout law, DealBook says.
Meanwhile Federal Reserve officials were pushing Citigroup and Wells Fargo to reach a compromise, perhaps by dividing Wachovia, the Wall Street Journal reports.
On Thursday, Citigroup announced it was giving up its bid to buy Wachovia, but it would continue to pursue the state court lawsuit seeking $60 billion in damages. “Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisers and others for breach of contract and for tortious interference with contract,” Citigroup said in a statement.
Updated at 9:30 a.m. to include information from the New York Times DealBook blog. Updated on Friday to include information about Citigroup’s decision to give up its buyout bid.
