Amboy Bancorporation v. Bank Advisory Group, Inc.
432 F. App'x 102
3rd Cir.2011Background
- Amboy Bancorporation sued Jenkens & Gilchrist and BAG for professional negligence, breach of fiduciary duty, and breach of contract arising from a proxy statement prepared for a cash-out merger in 1997.
- BAG provided a fairness opinion concluding $73 per share was fair, incorporating a 25% minority discount and a 15% marketability discount; Amboy used BAG and Jenkens to facilitate a Subchapter S election.
- Proxy statement stated $73 per share as fair value and referenced BAG’s fairness opinion; minority dissenters could pursue fair value claims.
- New Jersey cases held that misrepresentations in the proxy could render dissenters eligible for fair value recovery, with damages tied to the difference between offered price and fair value.
- Judgment on damages in state court ultimately awarded about $33 million based on a fair value of $114 per share; Amboy then sued Jenkens and BAG in federal court for damages unsupported by the proxy’s supposed influence.
- District Court granted partial summary judgment denying proximate causation; on appeal, Third Circuit vacated and remanded to reconsider Casey v. Brennan’s materiality of the proxy misstatement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether proxy misrepresentations can be a proximate cause of damages. | Amboy argues misrepresentations opened the door to fair value recovery. | Jenkens and BAG contend Casey preserved no proximate-cause link. | Yes; misrepresentation was proximate cause; vacated partial summary judgment. |
| Did Casey v. Brennan make all shareholders’ claims for fair value independent of fiduciary breach? | Casey held misstatement allowed fair value claims. | Casey did not tie all fair-value claims to independent duty; implied broader entitlement. | Casey supports materiality of proxy misstatement for fair-value recovery. |
| Should BAG remain a party under Rule 19 for complete relief? | Amboy contends BAG is necessary for complete relief. | BAG argues not necessary due to NJ comparative fault; complete relief may be attainable otherwise. | Yes; BAG remains a party to ensure complete relief. |
| Are the breach-of-contract and breach-of-fiduciary-duty claims viable separate claims? | Amboy alleges distinct contractual and fiduciary duties. | Claims merely recast negligence; not distinct duties. | Affirmed dismissal of both as redundant to professional negligence. |
| Did BAG's untimeliness in summary judgment warrant reversal of denial? | Not an abuse of discretion; BAG’s motion denied on timeliness grounds. |
Key Cases Cited
- Casey v. Brennan, 780 A.2d 553 (N.J. Super. Ct. App. Div. 2001) (misleading proxy can enable fair-value claims by minority)
- Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (two-tier burden of proof; duty of candor in fair dealing)
- Bershad v. Curtiss-Wright Corp., 535 A.2d 840 (Del. 1987) (informing minority restricts recovery under estoppel doctrine)
- Kahn v. Lynch Communication Systems, Inc., 638 A.2d 1110 (Del. 1994) (overruled Bershad implicitly; fairness standard context)
- Landy v. Amsterdam, 815 F.2d 925 (3d Cir. 1987) (practical sense of balancing burdens in mergers)