In re JPMorgan & Chase: Challenging A Merger of Two Giants

JP Morgan Chase and Bank One agreed to merge. JPMC shareholders filed a class action suit based upon a New York Times article reporting that the Bank One CEO offered to merge at no premium if he was immediately appointed CEO of the combined company. In their complaint, the plaintiffs alleged that JPMC CEO Harrison payed a 14% premium ($7 billion) on the acquisition of Bank One for no purpose other than to retain his position as CEO. Among other things, plaintiffs alleged that the board did not contain a majority of independent directors.

Among the types of relationships the plaintiffs attacked were three directors who were current or former directors of companies whom JPMC issued debt to, and a director who was CEO and chairman of a company that allegedly received $2 billion from a bank managed by JPMC. In all cases, the court held that the plaintiffs had not sufficiently alleged a connection between these directors and the specific transactions that gave rise to the relationship their other companies had with JPMC. In the opinion of the court, the plaintiffs would have needed to show how these financial relationships would impede the directors’ ability to exercise independent decision making.

Plaintiffs' complaint and the chancery court opinion are located on the DU Corporate Governance web site.