Client Alert

Court Reaffirms Investment Banks Have No Fiduciary Duties to Shareholders Beyond Engagement Letters

September 15, 2008

Carl Sanchez and Deyan Spiridonov

On August 19, 2008, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of a claim asserted by the shareholders of 21st Century Telecom Group, Inc. (21st Century) against Morgan Stanley & Co., Inc. (Morgan Stanley) for an alleged breach of extra-contractual fiduciary duties to the shareholders of 21st Century. In rejecting the claim, the Court of Appeals has reaffirmed its position that an investment banks responsibilities to its clients are set by contract. Absent an express agreement to the contrary, those fiduciary duties do not run to a clients shareholders.

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