Banks Face Liability Claims Over Role in Buyout Deals

JPMorgan and Morgan Stanley are facing lawsuits over their roles in multibillion-dollar buyout deals. Shareholders claim that the banks helped steer sales of public companies to private equity firms with which they have business ties, at prices that undervalued the shares.

The suits were filed in Delaware Chancery Court after a recent corporate-law overhaul failed to protect financial advisers from potential liability.

According to Gail Weinstein, a corporate attorney at Fried, Frank, Harris Shriver & Jacobson, the threat of litigation gives banks an 'extra impetus for carefulness,' resulting in more focus on disclosing conflicts to a board early on and throughout the process.