JPMorgan and Morgan Stanley face shareholder suits over buyout advisory roles

A new wave of shareholder litigation is in focus for JPMorgan Chase (JPM) and Morgan Stanley (MS), after Delaware's March 2025 corporate-law overhaul extended liability protections to executives and directors in insider deals but left financial advisers exposed. Bloomberg's court-records analysis counts at least five cases against banks since the changes passed, with law firm Block & Leviton bringing four of them. The next filings to track are JPMorgan's dismissal motion in the Snap One Holdings case and Morgan Stanley's new complaint over the $1.5 billion Couchbase buyout.

The suits in play

The legal theory runs through Delaware Chancery Court: even if directors are now shielded, claims against banks can proceed when a breach of fiduciary duty is established. Such cases have historically been rare, given how hard it is to prove a financial adviser knew about wrongdoing. But the Delaware overhaul, fueled partly by Elon Musk's decision to move Tesla's incorporation to Texas, created an opening, and plaintiffs have moved into it.

JPMorgan faced two suits. One, tied to 3G Capital's $9.4 billion buyout of Skechers USA, fell away earlier this month after a judge selected a different lead plaintiff who had not named the bank as a defendant. The second, which alleges JPMorgan helped private equity firm Hellman & Friedman sell out of Snap One Holdings at the expense of public stockholders, is still live. JPMorgan has moved to dismiss, arguing the deal bore all the hallmarks of a legitimate and well-executed sale process.

Morgan Stanley secured a dismissal in July in the Envestnet case, after a judge found the complaint failed to allege the bank took any action without board direction or concealed information from the board. A fresh suit now targets Morgan Stanley's advisory role on the $1.5 billion buyout of database software provider Couchbase by Austin-based private equity firm Haveli Investments.

What to watch

The Goldman Sachs (GS) ruling in February set the frame. Judge Travis Laster declined to drop Goldman from a suit over the $4 billion take-private of EngageSmart by Vista Equity Partners, a deal in which Vista handed a $500 million dividend to General Atlantic, then the company's controlling shareholder. Laster wrote that a financial adviser's central role in a sales process makes it more conceivable that, when a breach occurs, the adviser will have assisted and understood its nature.

The large banks' extensive ties to private equity firms make conflict-of-interest claims harder to dismiss. The same institution can lend to a buyout shop, help it raise capital, and advise that shop's portfolio companies on deals. Gail Weinstein, a corporate attorney at Fried, Frank, Harris Shriver & Jacobson, said the litigation threat gives banks an extra impetus for carefulness and that judges have increasingly pressed advisers to detail relationships with bidders and provide context on their fees. Kimberly Evans of Block & Leviton said the Delaware changes seem to be prompting more suits against banks. The proceedings that matter now are JPMorgan's Snap One dismissal motion and the early stages of the Couchbase complaint against Morgan Stanley.