Compass Lexecon Clients First Connecticut Bancorp and its Board of Directors Prevail in Shareholder Proxy Statement Litigation

Court Relies on Compass Lexecon Senior Managing Director Dr. Adel Turki

On April 9, 2021, the U.S. District Court for the District of Maryland granted summary judgment in favor of Compass Lexecon’s clients First Connecticut Bancorp, Inc. and its board of directors on all claims made by a shareholder plaintiff proposing to represent a class of all First Connecticut shareholders. Plaintiff had alleged that, in the acquisition of First Connecticut by People’s United Financial, Inc., the merger proxy statement issued to First Connecticut shareholders failed to disclose certain projections for after-tax free cash flows, and that the First Connecticut directors negligently failed to properly review the merger proxy statement appropriately.

In dismissing Plaintiff’s claims in their entirety, the court relied on the testimony of Compass Lexecon expert Dr. Adel Turki. The court cited Dr. Turki’s empirical study of comparable bank mergers, which showed that less than 3% of proxy statements in these mergers provided the type of projections that Plaintiff claimed should have been included in First Connecticut’s proxy statement. The court stated that, in light of this fact, “[t]o hold that the omission of cash flow projections in the context of [the First Connecticut acquisition] would fly in the face of regular practice and is simply unsupported by the record in this case.” The court also cited Dr. Turki’s conclusion that the omission of cash flow projections could not have caused economic harm to the First Connecticut shareholders in concluding that there is no issue of material fact on the issue of loss causation.

The court also favorably cited the testimony of a second expert, Jonathan Foster, who was supported by a Compass Lexecon team. Mr. Foster demonstrated that, as a matter of custom and practice, directors of the selling company review the merger proxy statement but do not decide on the inclusion or exclusion of specific items or seek to verify specific information in the proxy statement. The court stated that “Plaintiffs have not provided any evidence that refutes this testimony.”

Compass Lexecon was retained by Robert R. Long, Elizabeth Gingold Clark, and Timothy J. Fitzmaurice of Alston & Bird, LLC, who represented First Connecticut and its directors. Dr. Turki was supported by a Compass Lexecon team led by Cliff Ang, and Mr. Foster was supported by a Compass Lexecon team led by Todd D. Kendall.