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Jaroslawicz v. M&T Bank Corp.

United States Court of Appeals for the Third Circuit

July 17, 2018, Argued; June 18, 2020, Filed

No. 17-3695

Opinion

MATEY, Circuit Judge.

It is a familiar story in the life of a publicly held business. A corporation identifies an opportunity and decides to ask its shareholders for their approval to pursue. But the business runs in a highly regulated space like finance. So the company proceeds through a thick web of laws and regulations that detail how to explain both the risks and the rewards of the opportunity to the shareholders. With a bit of good fortune, all the hard work pays off when the shareholders give their blessing. And then, after the deal is done, only the class action hurdle remains. That is because for more than five decades, these transactions have been subject to a three-tier system of enforcement: oversight by Congress, supervision by regulators like the Securities and Exchange Commission, and "private attorneys general"3 pursuing "a private right of action." Gen. Elec. Co. v. Cathcart, 980 F.2d 927, 932 (3d Cir. 1992) (citing J.I. Case Co. v. Borak, 377 U.S. 426, 430-31, 84 S. Ct. 1555, 12 L. Ed. 2d 423 (1964)).

We consider that final frontier of enforcement in this appeal. Hudson City Bank ("Hudson") and M&T Bank Corporation ("M&T") successfully merged in 2015. But their union triggered a protest [*3]  by a few Hudson shareholders, who filed a putative class action (together, the "Shareholders"). The complaint alleged the banks didn't disclose material information about M&T's practice of adding fees to no-fee "free" checking accounts or its failure to comply with federal anti-money laundering regulations. And despite a healthy return on their investment, the Shareholders argue these omissions or misstatements caused all Hudson shareholders financial harm. In a comprehensive opinion, the District Court dismissed these claims. We now vacate and remand for further proceedings based on prior decisions allowing suits alleging inadequate transparency or deception. We reiterate the longstanding limitations on securities fraud actions that insulate issuers from second-guesses, hindsight clarity, and a regime of total disclosure.

I. Background

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2020 U.S. App. LEXIS 19135 *

DAVID JAROSLAWICZ v. M&T BANK CORPORATION; HUDSON CITY BANCORP INC.;1 THE ESTATE OF ROBERT G. WILMERS, BY ITS PERSONAL REPRESENTATIVES ELISABETH ROCHE WILMERS, PETER MILLIKEN, AND HOLLY MCALLISTER SWETT; RENE F. JONES; MARK J. CZARNECKI; BRENT D. BAIRD; ANGELA C. 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; SCOTT A. BELAIR BELINA FAMILY; JEFF KRUBLIT, Appellants

Prior History:  [*1] On Appeal from the United States District Court for the District of Delaware. (D.C. No. 1-15-cv-00897). District Judge: Honorable Richard G. Andrews.

Jaroslawicz v. M&T Bank Corp., 296 F. Supp. 3d 670, 2017 U.S. Dist. LEXIS 178070 (D. Del., Oct. 27, 2017)

CORE TERMS

Shareholders, Proxy, merger, compliance, disclosure, omission, misleading, consumer, investor, competitors, registrant, customers, quotation, concise, noncompliance, issuers, misrepresentation, reputational, speculative, laundering, diligence

Securities Law, Postoffering & Secondary Distributions, Proxies, Minimum Disclosure Standards, Banking Law, Banking & Finance, Commercial Banks, Anti-Money Laundering & Bank Secrecy, Mergers & Acquisitions Law, Mergers, Regulators, US Federal Reserve System, Board of Governors, Civil Procedure, Appeals, Standards of Review, De Novo Review, Pleadings, Complaints, Requirements for Complaint, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Governments, Legislation, Statutory Remedies & Rights, Private Rights of Action, Materiality, Interpretation