DETROIT -- A U.S. judge on Wednesday struck down part of DaimlerChrysler call for the dismissal of multibillion-dollar lawsuits over the merger that formed the company, saying investors could not reasonably have suspected the so-called "merger of equals" was a takeover.
In his ruling, Delaware District Court Judge Joseph Farnan chided DaimlerChrysler for its claim that media speculation about the deal between Daimler-Benz AG and Chrysler Corp. was sufficient to put Chrysler shareholders on alert, especially in view of repeated company statements to the contrary.
The shareholder lawsuits contend that Daimler-Benz planned and executed a takeover of Chrysler in 1998 but used the "merger of equals" language to get the deal done at a cheaper price.
As part of its motion for dismissal, DaimlerChrysler had argued that the plaintiffs, including wealthy investor Kirk Kerkorian, had been aware of the doubts surrounding the merger since 1998 or 1999, and that the statute of limitations gave them only a one-year window to file a lawsuit.
"I find (DaimlerChrysler's) position untenable," Farnan said in his ruling. "Defendants are basically seeking to punish plaintiffs for trusting their word, a position which I find to be at odds with their role as corporate insiders."
Farnan did not rule on the rest of DaimlerChrysler's motion for summary judgment, saying he would do so at a later date.
But the federal judge dealt another blow to DaimlerChrysler by granting class-action status to various lawsuits against the German-American automaker earlier this month.
The suits were filed after DaimlerChrysler Chairman Juergen Schrempp told the Financial Times that he had always meant to relegate Chrysler to a division of Daimler. Kerkorian and other former Chrysler shareholders contend that, had the deal been billed as a takeover of Chrysler by Daimler, they would have demanded a higher price for their shares.
DaimlerChrysler stressed, in a statement reacting to Farnan's ruling, that he had ruled on only one issue raised by the company's motion for summary judgment.
"The company remains committed to a vigorous defense of these cases, which it believes lack any valid basis," the statement said.
Farnan peppered Wednesday's ruling with some caustic commentary about DaimlerChrysler as he paved the way, at least in part, for the case to go to trial in December, however.
He said the automaker had "assured plaintiffs and the public that partly cloudy skies and mild winds were not the precursors of any storm. Rather, the clouds would surely break and the wind would surely die down, giving way to an overall calm and sunny day for DaimlerChrysler.
"Given this forecast, I cannot fault plaintiffs for being caught without their umbrellas," Farnan wrote.