Good Technology Inc. is a mobile security provider that is today owned by BlackBerry Limited. How BlackBerry acquired the company and the price they paid is at the heart of the controversy, a controversy involving lender liability and conflict of interest claims against JP Morgan Chase bank.
Good Technology works behind the scenes to manage and secure data and mobile devices. It also works with many app providers. Like a tiny but strategically situated country that has been invaded many times, Good Technology was a popular target because of its market leading data security products. In September of 2015, the company was acquired by BlackBerry Limited for $425 million.
Some folks are unhappy with the sale and they are blaming JP Morgan Chase. A lawsuit filed in Delaware accuses the bank of undervaluing the company and forcing a sale simply to line its own pockets. One of those disgruntled folks is the company’s former CEO.
According to the complaint, J.P. Morgan Chase was both a customer of Good Technology and one of its financial advisers. (The WSJ says the bank was its largest customer.) In its role as a customer, the lawsuit says that the bank wrongfully withheld a $12 million payment it owed the company. Because the bank was a such a large customer, that missed payment put the company in a severe cash crunch and meant the company had to be sold quickly to raise cash.
Who was helping in the sale? JP Morgan Chase, of course. The complaint says they received a $4.1 million fee for assisting in the sale.
If that conflict of interest isn’t enough, the complaint also says that the bank was hoping to gain business from BlackBerry and therefore minimized the price BlackBerry paid for the company.
The accusations are certainly bold. Although this is not one of our lender liability cases, we have seen similar conflicts of interest with other banks.
The relationship between bank and borrower is usually not considered a fiduciary one. Bank’s usually just owe a duty of good faith and fair dealing. Nothing more. Those relationships become tricky for the bank when it elects to where multiple hats or when the bank becomes an adviser. If the allegations in this complaint are true, JP Morgan could find itself in deep trouble. (The company was allegedly valued at $1 billion before the sale and sold for less than half that.)
We often see cases where banks try to wear many hats or have mixed loyalties. In the latter case, sometimes a banker will forego a long term relationship with a smaller customer simply in the hopes of landing a larger customer. When those customers are competitors, bad things can happen to the smaller business.
Unfortunately, there are few lawyers willing to sue banks. Most lender liability lawyers work for the banks. Those that don’t often charge outrageous fees. Suing a bank isn’t easy but those cases can be won. Banks tend to get away with these conflicts because they are rarely called on the carpet. When they are sued, they will try to outspend and “wear out” their opponents. And when that doesn’t work, they will often settle on the courthouse steps.
Why don’t we ever read of these settlements? Because the banks settle subject to a confidentiality order preventing the customer or us from telling people the outcome or how much money changed hands. If you can get the bank to trial, they will often settle but they certainly don’t want that word getting around.
Conflicts of interest abound in the financial world. Your friendly banker today could be your bitter enemy or even a competitor tomorrow. If you have lost several million dollars or more because of bank misconduct, give us a call.
“How do I sue my bank?” That is a question we are asked every day. Call us and let us explain how. For more information, contact attorney Chris Katers at [hidden email] or the author of this post, attorney Brian Mahany at [hidden email] or by telephone at 877-858-8018.
MahanyLaw and Judge, Lang & Katers – America’s Lender Liability Lawyers. We Sue Banks