In this securities class action suit, a class of shareholders sued M&T Bank as a result of its intended merger with Hudson Bank. The two banks issued a joint proxy to their shareholders pursuant to the Securities Exchange Act and related regulations in order to apprise their respective shareholders of the risks and rewards of the potential merger. Not mentioned in the proxy was M&T’s practice of switching its customers checking accounts from free to fee-based without notice. During the pendency of the merger, this came to light and MM&T agreed to pay a substantial fine for that unlawful practice.
Shareholders filed suit, alleging that the omission of the checking-account issue was a material omission from the proxy and that the omission rendered the M&T’s opinion statement about adherence to regulatory laws misleading. The District Court granted summary judgment in favor of the banks. On appeal, the 3rd Circuit vacated the order regarding the latter charge about misleading shareholders by failing to note the improper account practices but affirmed with regard to the material omission allegation. The tone of Judge Matey’s opinion leaves little doubt the Court felt no pleasure in permitting the case to go forward based on what the Court clearly saw as a minor infraction.
