Comments on: Exclusivity Agreements, the Bailout Act, and Section 126(c)

By: John Maszka

John Maszka — Mon, 06 Oct 2008 20:14:12 +0000

This bailout is just one more example of the indivisible handjob stroking irresponsible CEOs and CFOs with billions so that they can run the American economy even further into the ground. So much for Keynesian economics. If the goal is to stimulate the economy, why not give the money directly to the American taxpayers? We could do twice as much good for the economy by giving half as much money directly to hardworking American taxpayers. A bird in the hand is worth two in the bush administration.

By: Ben

Ben — Mon, 06 Oct 2008 08:28:19 +0000

Who is “any such person” in the last para?

1) Why can’t it include “any insured depository institution” — they are mostly legal persons, no?
2) If they successfuly acquire “all or part” of the institution, then the deal will not be enforcable anyway since the persons in a-c will be the persons to sue.
3) “as such enforcement or liability shall be contrary to public policy” — enforcement against the third party is contrary to public policy then enforcement against the “depository institution” is surely also contrary to public policy, which is grounds for the court to decline to enforce it even if it is not specifically vacated.

I think this will get a broad reading, and there will be no order to perform the exclusivity agreement.

By: Not a Law Blogger

Not a Law Blogger — Mon, 06 Oct 2008 05:07:13 +0000

Would Wachovia have gone into bankruptcy or FDIC receivership?

This amendment certainly preempts by virtue of the Supremacy Clause of the U.S. Constitution Citi’s tortious interference and other claims against Wells Fargo as a matter of law (no disputed facts to be found or trial needed).

The exclusivity agreement by its own terms terminates on Monday, October 6th, thus denying Citi of any injunctive relief against Wachovia accepting Wells’ offer on October 7th.

Citi’s claim for damages – now limited to Wachovia – would appear to have to focus on the poison pill provisions (such as issuance of preferred to Wells equal to 40% of the vote) as those preclude Citi from effectively negotiating and counteroffering.

Absent those poison pill provisions, Citi is not damaged by Wachovia accepting Wells’ offer two business days earlier than appears to be permitted by the exclusivity agreement b/c the ultimate test is what Wachovia’s shareholders want.

Fascinating stuff!