UPDATE 1-Delaware court told bad policy to hold bankers liable in M&A
(Adds Breakingviews link)
By Tom Hals
DOVER, Del., Sept 30 (Reuters) - The Delaware Supreme Court was told on Wednesday that it would be bad public policy to allow a closely watched ruling to stand that found investment bankers could be held liable for the decisions of the corporate boards they advise.
RBC Capital Markets is seeking to reverse a 2014 ruling by the Court of Chancery, the nation's premier venue for corporate disputes, that found it manipulated the sale of ambulance company Rural/Metro and had to pay $76 million to compensate the firm's shareholders.
The lower court found RBC was liable for its role in advising the Rural/Metro board and convincing it to rush into a buyout that undervalued the company.
RBC, a unit of Royal Bank of Canada, never disclosed it was also trying to win the more lucrative role of providing financing to the buyer, private equity firm Warburg Pincus.
"You can't expect bankers to monitor the activity of directors. That's not very good policy," said RBC's attorney, Alan Stone.
Shareholders argued the lower court ruling by Delaware Judge Travis Laster has changed Wall Street behavior for the better, with directors policing investment bankers' potential conflicts.
"Maybe Delaware law under-enforces the conduct of bankers," said Joel Friedlander, who represents the class of Rural/Metro shareholders. Continued...