Morgan Stanley Dean Witter is being sued over the Y2K readiness of a company it helped sell ... Charged with fraud.
Though the number of Y2K suits is still minuscule, the dark clouds of litigation are billowing on the horizon. In fact, they've already closed in on Morgan Stanley Dean Witter & Co., which in a suit before a Pittsburgh federal court is being accused of misrepresenting the Y2K-readiness of a company that then-independent Dean Witter Reynolds Inc. helped sell in 1996 ...
As very likely the first of its kind, the little-reported case explores territory that will send New Year's shudders through investment banks: What legal responsibility do they have for companies they represent in mergers or acquisitions that are later found to be afflicted by costly Y2K problems? ...
... in practice, "very few people go around suing underwriters." Still, that could change, considering the number of mergers and acquisitions that occurred in the 1990s. How many buyers inherited costly Y2K problems that, had they known about them, would have killed mergers? ...
"A year and a half ago, not only were we not seeing this addressed in documents, people were saying 'what's this?'" explains Cathleen C. Judge, co-chair of the information technology law group at Philadelphia law firm Ballard Spahr Andrews & Ingersoll, who has helped draft Y2K language in contracts. "I think this is going to be mostly an issue in deals done in 1997 and 1998, not 1999."
[Cathleen & I had dinner in NYC more than a year ago, and discussed this specific issue. Neat lady. Very bright.]
Originally filed in July, 1998, the suit charges both Dean Witter and Compucare with fraud and breach of contract. In March, U.S. District Court Judge D. Brooks Smith threw out the fraud claims against Compucare ... But he left intact the fraud claims against Dean Witter ...
businessweek.com
Interesting article.
Cheryl |
