Bancorp shareholder drops suit

March 09, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

A shareholder suit claiming Baltimore Bancorp committed securities fraud in denying that it was in merger talks with Mellon Bank Corp. of Pittsburgh has been withdrawn in the face of a threatened motion to have the plaintiff and his lawyer sanctioned.

The company, parent of the Bank of Baltimore, and lawyers for shareholder Francis Jemellaro and other stock owners, agreed Friday to dismiss a suit that was filed in U.S. District Court on Jan. 21.

The end of the ill-fated lawsuit came in a tart exchange of letters between the bank's lawyers at Miles & Stockbridge and Charles J. Piven, the attorney for Mr. Jemellaro and the other class-action plaintiffs.

In his letter, Mr. Piven complained to Miles & Stockbridge attorneys Mark D. Gately and Robert S. Brennen that the bank had threatened Mr. Jemellaro and the lawyers with sanctions under court rules that bar the filing of frivolous lawsuits.

"Your sanctions motion against Mr. Jemellaro, individually, has had its intended chilling effect," Mr. Piven wrote. Mr. Jemellaro "agrees to dismiss this class action."

Mr. Piven yesterday declined to comment on the dismissal, saying, "I feel it would be inappropriate for me to explain what went on."

Mr. Brennen's letter called Mr. Piven's complaint "completely self-serving. Obviously, had you truly been confident in the merit of your claim, the litigation would have proceeded," he wrote.

The lawsuit grew out of the wild trading in the bank's stock on Jan. 13. The stock climbed from $14 a share at the Jan. 12 close to $16.25, on rumors that Mellon was trying to convince Baltimore Bancorp to agree to be taken over for $21 a share. The Baltimore bank initially declined to comment, then denied the rumors, which sent the stock back to $15 before it rallied again to close at $15.625.

After the close, Baltimore Bancorp put out another statement admitting that while it was not talking to Mellon, it had received takeover proposals from other banks and had hired Alex. Brown Inc. to represent Baltimore Bancorp in any merger discussions. After that statement, the stock rose above $17 a share the next day.

Mr. Jemellaro claimed he sold 900 shares of stock during the temporary dip after the company's second statement and received an unfairly low price because he inferred that Baltimore Bancorp was not contemplating any takeover.

To win the case, the plaintiffs would have had to show that the denial was part of an effort to defraud investors.

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