Court hearings postponed as financial institutions extend litigation freeze

Citigroup Inc., Wachovia Corp. and Wells Fargo & Co. announced that they had extended an agreement to freeze litigation activity through 8 AM Friday. According to Citigroup, the agreement provides for:

1. A standstill of all formal litigation activity effective immediately;

2. Ceasing any formal discovery activities, and

3. Cooperating in good faith to agree among themselves to secure orders where necessary in all applicable cases in all jurisdictions tolling any schedules for the filing of litigation papers or court appearances or any other formal litigation deadlines, with the goal of preserving the status quo during the litigation standstill period.

In light of the extension, hearings scheduled for Wednesday in the New York State Supreme Court and the US District Court for the Southern District of New York were postponed. Bloomberg News has more. The Charlotte Observer has local coverage.

The initial standstill agreement was announced Monday after a weekend of legal maneuvering in Citigroup's and Wells Fargo's efforts to acquire Wachovia. Wachovia and Citigroup reached an "agreement in principle" last Monday providing that Citigroup would acquire a substantial portion of Wachovia operations for about $2.1 billion. As negotiations faltered, Wachovia announced on Friday that Wells Fargo had offered to buy it as an intact company for $15.4 billion. Later that day, Citigroup brought suit against Wachovia in the New York Supreme Court, which on Saturday extended an agreement providing for exclusive negotiations between those parties.

On Sunday, the same court's Appellate Division overturned that order. On Saturday, Wachovia filed a federal lawsuit in US district court, requesting an order declaring the agreement with Wells Fargo "valid, proper, and not prohibited" by its agreement with Citigroup. On Monday, Citigroup filed yet another state lawsuit against Wachovia and Wells Fargo, claiming that both had interfered with the acquisition process.

(Published by Jurist - October 9, 2008)