Sterling Bank and Trust Co., the tiny Baltimore bank that sued an institution many times its size to enforce a merger agreement, won $650,000 in an out-of-court settlement.
Sterling agreed to settle with $2.3 billion-asset Provident Bankshares because legal costs were mounting and neither side wanted to take a chance with a jury trial.
"The cost of litigation is just unending, and the amount of settlement dollars was very significant to a bank our size," said Arthur L. Silber, president and chief executive of Sterling, a $77 million-asset bank.
Nevertheless, Mr. Silber was pleased with the outcome. The shareholders will split the proceeds from the settlement, and he stands to pocket more than $60,000.
"We got a pretty nice check," he said. "The best part of it is that it is over."
The settlement was approved by the Baltimore City Circuit Court on March 28, three weeks after the trial was to begin.
"It (the $650,000) was the price we thought we had to pay to get rid of a nuisance," said Carl W. Stearn, Provident's chairman and chief executive. "I'm unhappy we got into this in the first place. We thought it was a decent business decision."
Provident wanted the $76 million-asset Sterling for its base of wealthy business customers. A deal appeared to be inked on Dec. 15, 1993, when Provident announced that it had signed a letter of intent to buy Sterling and that its board had approved the agreement in principle. Two months later, Mr. Stearn telephoned Mr. Silber and told him the deal was off, Mr. Silber said.
The spat spilled into the open when Sterling sued Provident for breaching a merger agreement. Sterling not only sought to enforce the agreement, but also wanted $5.4 million in damages.
Provident officials denied the allegations and countered with a press release claiming Sterling officials misled the company about the quality of the bank's loan portfolio. A month later it filed a counterclaim seeking $5 million in damages.
Mr. Stearn said the company settled because it wasn't assured of a victory in a jury trial.
"Their (Sterling's) situation was much less of a chance of winning, but there is always a chance," Mr. Stearn said.
He said the payment was small relative to what Sterling was seeking. "They didn't accomplish what they tried to do," he said.
When asked what he learned from the experience, Mr. Stearn said, "Try not to get sued."
