In re BGC Partners, Inc. Derivative Litigation

Court: Delaware Court of Chancery
Case Number: C.A. No. 2018-0722-AGB
Case Leader: Jeroen van Kwawegen
Case Team: Andrew Blumberg, Rebecca L. Reyhani

This stockholder derivative action challenges related-party transactions proposed and structured by Howard Lutnick (“Lutnick”) and Cantor Fitzgerald, L.P. (“Cantor”), BGC Partners. Inc’s (“BGC” or the “Company”) controlling stockholders, to extract nearly $1 billion in cash from BGC while saddling the Company with massive debt to third-party lenders. The challenged transaction was approved through an unfair process by non-independent directors and resulted in unfair payments by BGC to Cantor affiliates.  Lutnick, who is “famously sharp-elbowed” and has a “reputation as a Wall Street bruiser,” used his control of Cantor and BGC and the challenged transactions to pocket millions of dollars for himself at the expense of BGC’s public stockholders.

In the challenged transaction, Lutnick and Cantor caused BGC to take on $975 million in debt to: (i) purchase Berkeley Point Financial LLC (“Berkley Point”) from Cantor Commercial Real Estate Company, L.P. (“CCRE”), a Cantor affiliate, for the overinflated price of $875 million (the “Berkeley Point Acquisition”) and (ii) commit to invest $100 million for a 27% interest in CCRE’s remaining commercial mortgage-backed securities business (the “CMBS Business”) (the “Joint Venture” and, together with the Berkeley Point Acquisition, the “Related Party Transaction”). Since the Related Party Transaction presented an inherent conflict of interest for Lutnick and Cantor, BGC created a special committee consisting of BGC’s remaining four directors (the “Special Committee”). However, the “independent” members of the Special Committee were anything but. Each member of the Special Committee was dominated and controlled by Lutnick and Cantor as exhibited by: (i) their deep, extensive relationships with Lutnick; (ii) the material income derived from serving on various Lutnick/Cantor related boards of directors; and (iii) their knowing abdication of their fiduciary duties in connection with the Related Party Transaction. As a result, Lutnick and Cantor were able to pocket millions of dollars through the challenged transactions at the expense of the Company and its stockholders.

On October 5, 2018, we filed the initial complaint in the Delaware Court of Chancery (the “Court”). On February 12, 2019, we filed the operative Amended Complaint. Defendants filed motions to dismiss the Amended Complaint on March 19, 2019 and the Court held the hearing on June 6, 2019. On September 30, 2019, the Court denied Defendants’ motions to dismiss. We have completed fact and expert discovery. On February 10, 2021, Defendants filed motions for summary judgment and on March 29, 2021, we opposed the motions. Oral argument on Defendants’ motions for summary judgment was heard on June 22, 2021. On September 20, 2021, the Court granted in part and denied in part Defendants’ motions for summary judgment. A five day trial was held from October 11-15. The Court heard post-trial argument on March 2, 2022 and requested supplemental submissions on April 14, 2022. The supplemental submissions were filed on May 13, 2022. On August 19, 2022, the Court issued a memorandum opinion finding in favor of Defendants. On September 27, 2022, we noticed an appeal of the Court’s decision. The appeal was fully briefed as of January 17, 2023. Argument on the appeal has not yet been scheduled.