A federal judge today threw out an investor's fraud claims against 19 Baltimore Bancorp officers and directors in a lawsuit tied to the banking company's rejection of a $17-per-share takeover bid by First Maryland Bancorp last year.
Judge Marvin J. Garbis, in an opinion filed in U.S. District Court here, left Baltimore Bancorp as the lone defendant in the case.
He granted all the individual defendants' dismissal motions.
Garbis also dismissed Alex. Brown Inc., Baltimore Bancorp's adviser in the First Maryland deal, as a defendant.
Garbis said plaintiff Frank Tischler, a Parkton investor, sued some of the individual defendants "indiscriminately . . . with no more justification than his knowledge of their status as officers and directors.
"The court does not disregard the possibility that the plaintiff has filed his complaint in order to give his counsel the opportunity to engage in discovery and search for a cause of [legal] action.
"The balance of relevant factors tips, although only slightly, in favor of plaintiff," Garbis said.
But he noted that his ruling does not mean there is "any merit, or even any substance" to Tischler's claims against Baltimore Bancorp, only that the case "cannot be dismissed . . . at the pleading stage."
Tischler alleged that the bank's officers and directors violated the Securities and Exchange Act by hiding from stockholders "adverse material information" about its loan portfolio and its true "finances, financial condition and future prospects" when the company twice rejected First Maryland's stock tender offer last May as "inadequate."
First Maryland Bancorp renewed the tender but withdrew it last Nov. 1, which caused Baltimore Bancorp's stock to plummet from about $10-$11 per share to about $5 per share.
Tischler, of Parkton, bought 500 shares of Baltimore Bancorp common stock Aug. 31, 1990 for $4,500, or $9.50 per share.
He would have made $3,750 profit if the banking company had accepted First Maryland's $17 offer.
Garbis, however, rejected Tischler's claims that Baltimore Bancorp's officers and directors knowingly engaged in "culpable conduct."
The judge said Tischler "failed to allege facts which specify each (or any) individual defendant's culpable conduct" and failed to show any facts which indicated that the individual defendants acted with specific knowledge that their actions would cause Baltimore Bancorp's stock price to drop.
The suit named Harry L. Robinson, chairman of the board and executive committee of Baltimore Bancorp; John C. Haigh, president and chief executive; James H. Langmead, controller and chief financial officer; and 16 directors as individual defendants.
Tischler also claimed that Alex. Brown's advice to Baltimore Bancorp -- that the stock was worth $20 to $22 a share -- was "slipshod" and negligently based on "pure conjecture" after officials at the Baltimore-based brokerage reviewed the company's financial records while the tender was alive.
"The charge of fraud against Alex. Brown threatens the reputation of an investment banking firm, which, like an accounting or law firm, relies heavily on its reputation for honesty and careful work for continued business," Garbis said in his opinion.
He dismissed the claim against Alex. Brown "without prejudice," however, which means Tischler can renew it if he obtains sufficient evidence to support the claim.