Updated from 12:42 p.m. EDT:SunTrust's ( STI) quest to break up a planned merger between Wachovia ( WB) and First Union ( FTU) suffered a big legal setback Friday, as a North Carolina judge refused to nullify a hefty breakup fee. As part of their friendly merger agreement announced in mid-April, Wachovia and First Union agreed to a breakup provision that would allow First Union to acquire a 19.9% stake in Wachovia, valued at up to $780 million, if the deal did not go through. SunTrust charged that the breakup provision attempted to coerce Wachovia shareholders into voting for the First Union merger. But North Carolina Judge Ben Tennille rejected that argument, saying the court was convinced Wachovia shareholders could make an "uncoerced, fully informed decision" about how to vote. However, the court did approve a motion by SunTrust to invalidate a nontermination provision that essentially would have barred another company from making an unsolicited bid for Wachovia before January 2002. This helps SunTrust some; if Wachovia does vote against a First Union merger at its shareholder meeting on Aug. 3, it will allow SunTrust to move forward with its hostile bid. First Union agreed to acquire Wachovia this spring in a stock swap valued at about $14 billion.