NY Judge Shoots Down NYSE Attempt to Toss Out Seat Holder Lawsuit Over Proposed Archipelago Merger

NY Judge Shoots Down NYSE Attempt to Toss Out Seat Holder Lawsuit Over Proposed Archipelago Merger

Judge Recognizes Possible Web of Conflict of Interests Between John Thain, Goldman Sachs and Lazard Freres; Decision Raises 'Doubt of the Board Members' Independence,' Allowing Class Action by Seat Holders William Higgins and William Caldwell to Continue

NEW YORK, Sept. 2 /PRNewswire/ -- Writing that the "Defendants again fail to recognize the nature of the harm Plaintiffs allege," New York State Supreme Court Judge Charles Ramos rejected an attempt by the New York Stock Exchange to stop a class action suit seeking to block the NYSE's proposed merger with Archipelago Holdings Inc. This is the latest in a string of victories led by longtime seat holder William Higgins, who claims the merger is wholly unfavorable to the Exchange's 1,366 members

Mr. Higgins, who continues to gain support from fellow seat holders, is joined by fellow Exchange member William Tipton Caldwell in what is now a consolidated class action. Their lawsuit alleges that the NYSE board abdicated its fiduciary duties by structuring merger terms with Chicago-based Archipelago (AX) that grossly undervalues seat holders' stake in a combined, for-profit trading company -- NYSE Group Inc.

They also accuse NYSE chair John Thain and fellow board members of numerous conflicts of interest in using Goldman Sachs to arrange the deal, as well as the firm of Lazard Freres, which issued an appraisal valuing the merger. Goldman Sachs serves as investment banker to both the Exchange and to Archipelago on the merger, and also holds a major investment stake in Archipelago. Mr. Thain, meanwhile, previously served as president of Goldman Sachs prior to becoming chair of the NYSE last year.

In a 53-page opinion issued on September 1, Judge Ramos tossed out a joint motion by the NYSE and Goldman Sachs to dismiss the suit. The ruling is a virtual green light for Mr. Higgins and Mr. Caldwell to pursue their action on behalf of all seat holders.

Mr. Higgins is represented jointly by prominent shareholder law firm Grant & Eisenhofer P.A., along with the major Philadelphia-based firm Raynes McCarty.

"Judge Ramos recognized that this proposed deal is strikingly unfair to the seat holders of the New York Stock Exchange," said Jay Eisenhofer, name partner of Grant & Eisenhofer, which is represents Mr. Higgins and Mr. Caldwell. "The decision highlights that the merger was in fact one huge conflict of interest -- one that was approved with the intent of harming and devaluing the property of the Exchange's true owners."

Pointing out a web of apparent conflicts undermining the Exchange/Archipelago merger, the court's decision has propelled the class action forward to trial. In addition to addressing allegations of unfair pricing, the decision focuses in on the conflicts surrounding the Exchange's two principal advisors, Goldman Sachs and Lazard. Lazard served as an advisor to both Archipelago and the NYSE in the proposed merger, while Goldman was simultaneously underwriting Lazard's IPO. John Thain, CEO of the Exchange, is a former president, CEO and current shareholder of Goldman.

Among the highlights of Judge Ramos's ruling:

" ... the court concludes that Plaintiffs have raised doubt of the Board members' independence sufficient to overcome dismissal at this stage of the pleading."

"Plaintiffs' allegations raise doubt that the Board effectively discharged its obligation to oversee Lazard ... "

"The Court is satisfied that the facts alleged in the complaints and accompanying affidavits sufficiently state that by relying on Lazard, an allegedly conflicted financial advisor to render a fairness opinion that contained serious omissions, such as failure to assess several key terms of the merger that plaintiffs complain of, in addition to errors, the defendants did not discharge their duty of care."

" ... the Engagement Letter establishes Goldman's knowledge of the alleged improprieties involved in such a role."

In previous seat holder victories, Judge Charles Ramos ordered the Exchange to grant seat holders Robert Dill and Michael Quinn access to all books and records associated with the Archipelago deal.

Wilmington and New York-based Grant & Eisenhofer represents institutional investors in securities litigation. The firm, which has recovered more than $2 billion for shareholders in the last five years, is currently lead counsel in securities actions against Global Crossing, Tyco, Parmalat and most recently, Marsh & McLennan. For more on the firm, go to http://www.gelaw.com/.

Philadelphia-based Raynes McCarty is an internationally renowned trial and appellate firm securing landmark results for its clients for over 35 years. For more on the firm go to http://www.raynesmccarty.com/.

To arrange an interview with Jay Eisenhofer or further details about the rulings in this case, please call Allan Ripp 212-721-7468.

Contacts: Allan Ripp
212-721-7468
arippnyc@aol.com

Source: Grant & Eisenhfoer

CONTACT: Allan Ripp of Ripp Media, +1-212-721-7468, arippnyc@aol.com,
for Grant & Eisenhfoer

Web site: http://www.gelaw.com/
http://www.raynesmccarty.com/

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