ANNAPOLIS – The Maryland Court of Special Appeals ruled Friday that the Baltimore Gas and Electric Co. board of directors acted in good faith in its now-defunct bid to merge with Potomac Electric Power Co.
Janice Wittman, who owns 300 shares of BGE stock, challenged the proposed merger in court on Sept. 25, 1995, the day the deal was announced. Both PEPCO and BG&E have since backed out of the deal for unrelated reasons.
Wittman argued in Baltimore County Circuit Court that board members should not have been allowed to vote on the deal, since they each stood a chance of being named to the board of the new company.
Wittman also said the investment advisers retained by the board, Goldman Sachs & Co., stood to gain $8.5 million by recommending the merger.
Court documents also said that, based on a draft proxy statement on the merger to the Securities and Exchange Commission, accused the directors of breaching their duty of candor to shareholders.
But Circuit Judge J. Norris Byrnes rejected all the charges in her suit in March 1996, saying Wittman’s claims were not supported by the facts in the case.
Three days later, BG&E shareholders approved the proposed merger by more than 97 percent of the vote.
Wittman filed another complaint a little more than a month after the vote. That was rejected on Oct. 3, 1996, by Byrnes, who again said Wittman had not made her case.
Six days later, Wittman applied with the court to recoup her attorney’s fees, saying that it was her suit that had prodded the directors to file a more informative proxy statement in the case.
Byrnes rejected that request in February 1997. He ruled that Wittman did not meet any of the legal standards that determine whether a losing plaintiff is entitled to attorney’s fees from a defendant. He ruled that Wittman’s suit was not meritorious when it was filed.
A three-judge panel of the appeals court yesterday backed Byrnes on all counts, saying he “carefully considered each of the appropriate factors before making” his rulings.
“There is simply no evidence that the appellees (the board members) failed to act in good faith,” the appeals court ruled.
It also upheld Byrnes’ refusal to award Wittman “counsel fees (because they) were being sought on behalf of a plaintiff whose case was dismissed for failure to state a claim.”
A spokeswoman at BGE said Wittman’s lawsuit was “out of this world outrageous.”
Neither Wittman nor her attorneys could be reached for comment on Friday’s ruling.