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MELLON FILES SUITS AGAINST SMITH BARNEY AND OTHERS TO ENFORCE NON-COMPETE OBLIGATION

 PITTSBURGH, Sept. 13 /PRNewswire/ -- Mellon Bank Corporation (NYSE: MEL) has filed complaints in U.S. District Court for the Western District of Pennsylvania against four financial services companies.
 The complaints involve claims arising from the breach of the contract under which Mellon purchased The Boston Company, as well as violations of other obligations to Mellon. The claims relate to administrative services Mellon provides to a family of mutual funds now known as the Smith Barney Shearson Funds. The defendant companies are: Smith Barney, Harris Upham & Co. Incorporated (Smith Barney); its parent organization, Primerica Incorporated; Lehman Brothers, Inc. (formerly Shearson Lehman Brothers); and its parent organization, American Express Company. Mellon's mutual funds administrative services are provided through The Boston Company.
 The contract by which Mellon purchased The Boston Company from Shearson Lehman Brothers (Shearson), stipulated that neither Shearson nor any of its affiliates would provide custodial or administrative services to any mutual fund for which Shearson or any of its subsidiaries served as investment advisor or underwriter or placement agent; and that Shearson and its subsidiaries would recommend The Boston Company as the provider of custody and administrative services for all Shearson mutual funds.
 In a complaint against Smith Barney and Primerica (which purchased Shearson's mutual fund and brokerage businesses in 1993), Mellon asserts that, despite expressly agreeing that they were bound by, and would comply with, the terms and provisions of the contract between Shearson and Mellon, Smith Barney and Primerica have willfully violated that contract.
 The complaint charges that, among other actions, Smith Barney, in violation of its contractual obligations, has created new mutual funds that are virtual clones of existing Shearson funds serviced by The Boston Company; has initiated mergers of Shearson funds into Smith Barney funds not serviced by The Boston Company; and has otherwise attempted or threatened to attempt to siphon off assets from the Shearson funds. Mellon is seeking a court order requiring that Smith Barney and Primerica cease such unlawful conduct and honor the contract between Mellon and Shearson. Mellon also is seeking punitive damages from Smith Barney and Primerica on the basis of the defendants' willful, malicious and intentional conduct.
 In its complaint against Lehman Brothers and American Express, Mellon asserts that Lehman Brothers has breached the contract under which it sold The Boston Company to Mellon. Mellon also asserts in this complaint that American Express has interfered with that contract by selling the Shearson assets to Primerica.
 "The failure of these companies to honor their legal obligations to Mellon is a very serious matter, and these lawsuits reflect our resolve to protect our shareholders' interests against such unlawful behavior," said Frank V. Cahouet, chairman, president and chief executive officer of Mellon Bank Corporation. "We have filed these complaints to ensure that we are not harmed by actions which so blatantly violate the contractual obligations to Mellon. Those obligations are clear and explicit, and we have great confidence in the strength of our position."
 /delval/
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 /Note to Editors: Additional background on these lawsuits follows.
 Background
 In September 1992, Mellon announced its intention to purchase The Boston Company, then a subsidiary of American Express Company's Shearson Lehman Brothers unit (since re-named Lehman Brothers, Inc.). As part of that acquisition, Mellon sought and received contractual protection against the possibility that American Express, Shearson or their affiliates could offer, provide or recommend mutual fund custody or administrative services in competition with The Boston Company.
 Mellon and Shearson agreed, among other things, that for a period of seven years, neither Shearson nor any of its affiliates would provide custodial or administrative services to any mutual fund for which Shearson or any of its subsidiaries served as investment advisor or underwriter or placement agent; and that Shearson and its subsidiaries would recommend The Boston Company as the provider of custody and administrative services for all Shearson mutual funds.
 In March 1993, Smith Barney and Primerica entered into an agreement to purchase certain assets of Shearson, including the parts of Shearson's business involved in the creation and management of mutual funds that were subject to the agreement between Mellon and Shearson. As part of that agreement with Shearson, Smith Barney and Primerica expressly agreed that they were bound by, and would comply with, the terms and provisions of the agreement between Shearson and Mellon relating to the provision of custody and administrative services for mutual funds. Further, Smith Barney announced publicly that it did not plan to merge or combine its mutual funds with the Shearson funds and, thereafter, repeatedly assured Mellon that Smith Barney was fully bound by, and would live up to, the agreement between Mellon and Shearson.
 Mellon asserts that, despite those assurances, Smith Barney and Primerica have, since closing their transaction with Shearson in August, engaged in conduct intended to frustrate and render valueless the terms of the agreement between Mellon and Shearson./
 /CONTACT: Charles M. Johnston, analysts, 412-234-5601, or Thomas W. Butch, media, 412-234-6436, of Mellon Bank/
 (MEL)


CO: Mellon Bank Corporation; Smith Barney, Harris & Upham & Co.
 Incorporated; Primerica Incorporated; Lehman Brothers, Inc. ST: Pennsylvania IN: FIN SU:


CD -- PG004 -- 1099 09/13/93 08:08 EDT
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Publication:PR Newswire
Date:Sep 13, 1993
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