Deutsche Bank and Credit Suisse Win Dismissal of Fraud Action in Merger Suit

On November 20, 2015, the Texas Supreme Court declined to hear arguments in a securities fraud case against Cravath clients Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, bringing an end to litigation against the banks over a failed merger from 2008. The case was originally filed in Texas District Court (Montgomery County) by various MatlinPatterson companies, former shareholders in Huntsman Corporation, which sought to recover hundreds of millions of dollars in alleged damages for purported violations of Texas statutory law and common law fraud relating to the failed acquisition of Huntsman by Momentive Specialty Chemicals Inc. (formerly known as Hexion Specialty Chemicals, Inc.). Specifically, plaintiffs alleged that defendants’ purported misrepresentations in a commitment letter and other communications regarding the defendants’ financing of the Hexion/Huntsman merger induced Huntsman to abandon an agreed‑upon transaction with Basell Holdings and instead pursue the Hexion transaction to the detriment of plaintiffs.

Cravath filed a motion for judgment on the pleadings on behalf of defendants in the trial court, arguing that the lawsuit repeats claims previously asserted by Huntsman that have been settled and released, and that plaintiffs, as former Huntsman shareholders, could not bring direct claims against the banks. On December 21, 2012, the trial court granted defendants’ motion and dismissed the action with prejudice.

On May 15, 2014, the Texas Court of Appeals affirmed the trial court’s decision adopting defendants’ argument that, under both Delaware and Texas law, plaintiffs’ claims are derivative of the corporation’s, and therefore plaintiffs do not have standing to sue individually. The Texas Supreme Court has now denied plaintiffs’ petition for review, following full briefing on the merits of the suit.

Cravath also handled the prior litigations brought by Huntsman and Hexion against Credit Suisse and Deutsche Bank following the failed merger. Hexion’s claims were dismissed with prejudice. Huntsman ultimately settled its claims with the banks for a mere fraction of the almost $14 billion in cash damages it had sought.

The Cravath team included partners Richard W. Clary and Robert H. Baron and associates Lillian S. Grossbard, David Litterine‑Kaufman, Alexander V. Maugeri and David H. Korn.