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BUXBAUM v. DEUTSCHE BANK AG

February 8, 2002

HADASSA Y. BUXBAUM, ET AL., PLAINTIFFS,
V.
DEUTSCHE BANK AG AND ROLF-ERNST BREUER, DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, United States District Judge

OPINION AND ORDER

This is a class action brought on behalf of all persons who sold Bankers Trust Corporation ("Bankers Trust") common stock or call options, or purchased Bankers Trust put options, on the open market between October 26, 1998 and November 20, 1998.*fn1 Defendant Deutsche Bank AG ("Deutsche Bank") is a German corporation which acquired Bankers Trust in a transaction approved by the companies' respective boards on November 29, 1998. Defendant Rolf-Ernst Breuer is, and was at all relevant times, the spokesman of Deutsche Bank's management board. (Declaration of Michael L. Herschfeld, dated May 4, 2001 ("Hirschfeld Decl."), Ex. 2 at 6.) Breuer's role at Deutsche Bank is similar to that of the chief executive officer in an American corporation. (Id.)

The plaintiffs allege violations of § 10(b) of the -Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and § 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). (Am. Compl. ¶¶ 55, 59.) The defendants have moved for summary judgment and the plaintiffs have moved for partial summary judgment on the issue of liability.

I

There is no dispute as to the following facts, except as noted. On Thursday, October 22, 1998, Breuer was interviewed by a reporter from Der Spiegel, a popular German newsweekly. (Hirschfeld Decl., Ex. 2 at 140-42.) The interview was conducted in German, and was published in the October 26, 1998 edition of Der Spiegel. (Pl. App., Ex. 50.) In the week leading up to the interview there were media reports that Bankers Trust and Deutsche Bank were engaged in talks. In particular, the Financial Times reported on Tuesday, October 20, 1998 that "Deutsche Bank. . . has opened preliminary takeover talks with Bankers Trust. . . ." (Pl. App., Ex. 49.) In the course of the Der Spiegel interview, the reporter asked, and Breuer answered, several questions about the possibility of a transaction involving Deutsche Bank and Bankers Trust. (Pl. App., Ex. 50 at 120, 122.)

While the parties do not dispute that the interview, as published, accurately reflects what was said in German, the translation of the exchange into English is a matter of dispute. The plaintiffs' translation is:

Spiegel: Are you interested in the U.S. investment bank Bankers Trust, as the media reported this week? Breuer: There is nothing to report to shareholders. Spiegel: But you did talk to the Americans, didn't you [?] Breuer: In this business everybody speaks to everyone. But there was no talk of any takeover. Spiegel: But Bankers Trust lets you in on their books? Breuer: No. After all, that would already be like pillow talk.

(Pl. App., Ex. 23 at 4 (emphasis added).) The defendants' translation of the same excerpt reads:

Spiegel: Are you interested in the American investment bank Bankers Trust, as the media reported this week? Breuer: There is nothing I could tell the shareholders. Spiegel: But you did have talks with the Americans, didn't you? Breuer: In this industry, everybody talks to everyone. But there were no takeover talks. Spiegel: But Bankers Trust is letting you have a look at their books? Breuer: No. After all, that would already be pillow talk.

(Hirschfeld Decl., Ex. 21 ¶ 11 (emphasis added).)

A number of financial newspapers around the world published accounts of the Der Spiegel interview on October 25 and 26. (Pl. App., Exs. 106 & 107.) On October 26, the first day of trading following publication of the Der Spiegel interview and reports of the interview from other news sources, the price of Bankers Trust common stock fell, ending the day approximately 6% below the previous closing price. (Pl. App., Ex. 96 at 5.) In the previous week, when reports that Bankers Trust and Deutsche Bank were in talks had circulated (Pl. App., Exs. 49 & 105), the stock's price had risen by approximately 30% (Pl. App., Ex. 96 at 5). On November 23, the day that Bankers Trust and Deutsche Bank publicly announced that they were in the advanced stages of merger talks (Pl. App., Ex. 108), Bankers Trust stock ended the day approximately 9% higher than its previous closing price (Pl. App., Ex. 96 at 3-4).

Several possibly relevant contacts between Deutsche Bank and Bankers Trust officials had taken place by the time of the Der Spiegel interview. The first contacts took place in July, 1998. Late in the evening of July 15, Edson Mitchell of Deutsche Bank spoke with Bankers Trust vice-chairman Yves de Balmann on the telephone in order to advise de Balmann of certain thinking at Deutsche Bank about Bankers Trust, in anticipation of a dinner involving executives of the two banks. (Pl. App., Ex. 6 at 46-47.) Mitchell said that Breuer knew he was calling and Mitchell conveyed, according to de Balmann's notes of the call, that Deutsche Bank was looking strategically, that Bankers Trust was a name that made sense, and that a combined entity would have a powerful United States and European franchise. (Pl. App., Ex. 6 at 58-59; Pl. App., Ex. 82.) That same evening, de Balmann informed Frank Newman, Bankers Trust's Chief Executive Officer, about his telephone call with Mitchell. (Pl. App., Ex. 6 at 67-68.)

The following evening, July 16, Ronaldo Schmitz, a member of the Deutsche Bank management board, had dinner in New York City with Newman and Phillip Griffiths, a Bankers Trust board member who was also an acquaintance of Schmitz's. (Hirschfeld Decl., Ex. 13 at 70-71 & Ex. 15 at 81.) While the parties dispute the exact substance of the dinner conversation, there was some talk by Schmitz of Deutsche Bank's interest in some form of combining forces with Bankers Trust, and Newman conveyed that he was not interested because, "at this time," Bankers Trust had its own strategies that it was pursuing. (Declaration of Michael L. Hirschfeld, dated June 1, 2001 ("Hirschfeld Opp. Decl."), Ex. V at 27-28.)

The July and October, 1998 contacts between Deutsche Bank and Bankers Trust executives did not take place in a vacuum. From July 14 through October 22, Deutsche Bank prepared numerous documents analyzing Bankers Trust and considering the prospect of a combination between the banks. (Pl. App., Exs. 29, 30, 51, 52, 63, 81.) Breuer, Schmitz, and Deutsche Bank corporate strategy head Tillman Lauk also met in Wiesbaden, Germany with Ken Wilson, a managing director of Goldman Sachs ("Goldman") on September 11, 1998, and discussed possible acquisitions for Deutsche Bank. (Pl. App., Ex. 11 at 11, 79-80.) At that point, Deutsche Bank engaged Goldman as an advisor, based at least in part on the firm's familiarity with Bankers Trust and the relationship that Ken Wilson had with Newman. (Pl. App., Ex. 4 at 63.) Breuer made it clear, however, that he was personally in charge of the process. (Pl. App., Ex. 17 at 174.)

Goldman thereafter researched possible United States acquisition targets for Deutsche Bank. (Pl. App., Exs. 37, 54, 67, 86, 93.) Goldman also produced financial analyses of Bankers Trust for Deutsche Bank, along with presentations regarding a possible combination between Deutsche Bank and Bankers Trust and "scripts" containing talking points that Breuer might use in discussions with Newman. (Pl. App., Exs. 36, 55, 71, 77, 87.)

In addition to supervising Goldman's analytical work, Wilson engaged in discussions which contemplated the possibility of a transaction between Deutsche Bank and Bankers Trust. On September 18, Wilson contacted Victor Lewkow, a partner at Cleary, Gottlieb, Steen & Hamilton ("Cleary"), in connection with Cleary's work as legal advisor for Deutsche Bank in a possible business combination with any of a number of United States financial institutions. (Pl. App., Ex. 27 at X22292; Ex. 22 at 39-41.) On September 24, Wilson met again with Breuer, Lauk, and other senior Deutsche Bank officials for one to two hours, and it was agreed that Bankers Trust would be the first institution that Deutsche Bank approached. (Pl. App., Ex. 11 at 111.) At or right after that meeting, Deutsche Bank decided that Breuer should set up a meeting with Newman and, as noted above, the two met on October 5 in Washington, DC. (Pl. App., Ex. 22 at 80.) Wilson also met with Newman and Jeffrey Goldstein, one of Newman's principal aides, at least once during the period October 6 to October 23. (Pl. App., Ex. 22 at 52-53.) Wilson testified that Newman said that he ...


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