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MERMELSTEIN v. BANK OF NEW YORK CO.

December 17, 1997

NORMAN MERMELSTEIN and JULES BERNSTEIN, Plaintiffs, against THE BANK OF NEW YORK COMPANY, INC., Defendants.

Eugene H. Nickerson, U.S.D.J.


The opinion of the court was delivered by: NICKERSON

NICKERSON, District Judge:

 This is a class action brought pursuant to Section 22 of the Securities Act of 1933, 15 U.S.C. § 77v. The class consists of all persons who purchased shares of common stock of the defendant Bank of New York Company, Inc. (Bank of New York) in reliance to their detriment on false and misleading statements in prospectuses issued by the bank in connection with its acquisition of the Irving Bank Corporation (Irving Bank).

 The parties entered into a settlement agreement dated January 9, 1995 (the Agreement) in which Bank of New York agreed to offer for purchase by "Qualifying Class Members" discounted shares of Bank of New York stock. Plaintiffs have asked the court to confirm the Class Administrator's Claims Report calculating the claims of Qualifying Class Members eligible to buy discounted shares. The Bank of New York opposes the motion in part.

 I

 On September 25, 1987 Bank of New York announced that it intended to make an offer for all outstanding shares of Irving Bank common stock. After the Bank of New York improved the offer, the Board of Directors of Irving Bank unanimously approved it on October 7, 1988.

 On November 29, 1988 the Bank of New York accepted the Irving Bank shares tendered pursuant to the offer, acquiring other such shares on December 30, 1988 through a freeze-out merger. The Bank of New York shares exchanged for the Irving Bank shares pursuant to the offer were not issued or delivered until some time after November 29, 1988.

 In connection with the acquisition Bank of New York issued prospectuses, one on March 19, 1988 and a supplement on November 14, 1988, as well as an information statement attached to its registration statement filed with the Securities Exchange Commission. In these acquisition documents Bank of New York made statements concerning its provisions for loan loss reserves.

 On October 12, 1989 Bank of New York announced an addition of $ 600 million to its loan loss reserves and a resulting third quarter loss of $ 271.2 million. A little less than a year later, on October 3, 1990, this action was brought, alleging that in 1988 Bank of New York had made material and false statements in the acquisition documents as to its earnings, assets, and net worth, statements on which the persons who exchanged Irving Bank shares for Bank of New York shares had relied.

 Discovery in the case ensued, and finally the parties agreed to settle and entered into the Agreement dated January 9, 1995, later amended on July 16, 1996. Under the terms of the Agreement the Bank of New York agreed to make available to "Qualifying Class Members" for purchase four shares of Bank of New York common stock at a 5% discount off market price for each five shares of Irving Bank Stock exchanged pursuant to the acquisition offer.

 The Class Counsel has moved to confirm the Claims Report of the Class Administrator. The Bank of New York opposes the motion insofar as the report approves eight claims the Bank of New York says were made by persons who were not "Qualifying Class Members" and three claims filed late.

 II

 The Class Administrator's Claims Report approved eight claims of persons who, sometime after November 29, 1988, received Bank of New York shares "in exchange" for their Irving Bank shares "in connection with" the acquisition, but did not sell those specific shares "before January 15, 1992". In 1988 before ...


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