A temporary ceasefire has been declared in the legal battle embroiling Wachovia Corp.
Wachovia, Wells Fargo & Co. and Citigroup Inc. issued a press release today in which the banks, in consultation with the Federal Reserve, have agreed to three stipulations as part of trying to resolve the fate of Wachovia.
The "standstill agreement" expires at noon Wednesday unless it is extended, the banks said.
Various media reports have said today that the Federal Reserve is trying to reach a compromise with Citigroup and Wells Fargo in which they agree to split the Wachovia branches.
One solution that has surfaced involves Citigroup getting the branches in the mid-Atlantic and Northeast markets and Wells Fargo in the Southeast and other markets.
Wells Fargo also would get Wachovia Securities and Evergreen Asset Management.
It is not clear which bank would get Wachovia Wealth Management in such as deal. That division is based in Winston-Salem.
The banks said they have agreed to:
A standstill of all formal litigation activity effective immediately;
To cease any formal discovery activities, and
Cooperate in good faith to preserve the status quo during the litigation standstill period.
The latest legal filing came from Citigroup. It is pursuing more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference. Citigroup also is pursuing relief from Wachovia for what it called its bad-faith breach of the banks' contract.
Citigroup offered on Sept. 29, in a hastily-brokered deal with the federal government, to buy a collapsing Wachovia for $2.2 billion — or $1 a share — and $95 billion in assumed debt and loan losses.
Since Wells Fargo announced its plans Friday to buy all of Wachovia, which was valued initially at $15.1 billion, the banks have been involved in lawsuits and counter lawsuits in New York and North Carolina.
One of those lawsuits, filed Sunday in Mecklenburg County Superior Court, involves Bud Baker, the former chairman and chief executive of Wachovia, and another Wachovia shareholder.
The Mecklenburg Superior Court judge issued a temporary restraining order prohibiting Citigroup, from taking any action to enforce any of the provisions regarding the exclusivity limitations in the letter agreement between Citigroup and Wachovia dated Sept. 29.
The order also prohibits Citigroup from filing or continuing any legal action against Wachovia or Wells Fargo to enforce the terms of the exclusivity limitations, making public representations about the validity of the exclusivity limitations, and making public representations about the invalidity of the Wachovia/Wells Fargo merger agreement.
The goal of the Baker lawsuit is to allow North Carolina court the ability to interpret state law in a case involving a company in North Carolina, said Mark Merritt, a lawyer from Robinson Bradshaw & Hinson who is representing Baker and Mary Louise Guttmann.
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