In the case First New York Securities vs. United Rentals Inc., a panel of three judges from the U.S. Second Circuit Court of Appeals affirmed the district court’s ruling that United Rentals was not guilty of fraud.

The case arose from securities fraud claims stemming from the failed 2007 merger between United Rentals and affiliates of Cerberus Capital Partners. At the outset of the bidding process, in April 2007, United Rental’s common stock jumped from $27.55 per share to $32.36 per share upon news of the possible merger. After entertaining at least one other potential bidder, United Rentals and Cerberus signed a merger agreement in July 2007.

Over the next few months, as the parties worked to close the transaction, credit and debt markets deteriorated. According to the court documents, in late August 2007, Cerberus contacted United Rentals’ bankers and stated that due to deterioration in the credit markets, it wanted to renegotiate the purchase price. United Rentals expressed reluctance at the time. One week later, the rental company replied and flatly refused to re-open the negotiations. On Nov. 14, 2007, Cerberus informed United Rentals that it was repudiating the merger agreement. United Rentals’ stock opened that day at $34.37 and closed at $23.50.

The plaintiffs, which included several investment groups, alleged that United Rentals had a duty to reveal that Cerberus was trying to renogiate the deal. The judges affirmed the lower court’s ruling that United Rentals believed that, due to a performance clause in the signed merger agreement, the deal would close as originally negotiated, so no fraud was committed.