Paul Parshall is back at it.
SI Financial Group, the parent company of Willimantic-based Savings Institute Bank and Trust, disclosed yesterday that Parshall is suing the company in Baltimore County Circuit Court for breaching its fiduciary duties to stockholders in connection with its impending acquisition by the parent company of Boston-based Berkshire Bank.
Berkshire announced in December that it would purchase the $1.6 billion asset Savings Institute in an all stock transaction valued at $180 million.
Parshall’s complaint alleges that the SI team failed to secure adequate value for stockholders in connection with the deal and that the bank’s disclosure on Feb. 4 contains materially incomplete information regarding the deal.
Lawsuits like this are common for stock banks being acquired; plaintiffs can typically win attorney fees or a mootness fee from the bank, to which they are entitled if the additional disclosures provide some benefit to stockholders, whether or not they were material to the vote. The cases rarely proceed to court and are typically withdrawn by the plaintiff, but have had some success against community banks that want to avoid lawsuits.
“I think it’s fair to say that most of these cases don’t serve any purpose other than for plaintiff’s lawyers to have a business model to earn some fees,” Deborah Birnbach, a partner at Goodwin Proctor, previously told Banker & Tradesman. “After you see so many of these cases, you can almost predict what they are going to say without reading them.”
The lawsuits typically allege that the bank’s holding company and its board of directors violated federal securities laws or breached its fiduciary duties by omitting certain material information from its definitive proxy statement.
Once a merger or acquisition is announced, stock banks must submit a proxy report that details certain “material” information regarding the events that led to the merger, such as all the times the bank’s board met, and the different bidders interested in purchasing the bank. But a plaintiff can always allege that the bank did not disclose enough, Birnbach said.
Parshall has also sued other recently acquired banks in the area including Warwick, Rhode Island-based Coastway Bank, which was acquired by Brockton, Massachusetts-based HarborOne Bank, and Blue Hills Bank, which was acquired by Rockland Trust.
