CBOE, Barnes & Noble, Kenneth Starr in Court News

CBOE Holdings Inc. and McGraw-Hill Cos. won an Illinois court ruling barring the International Securities Exchange LLC from providing a forum for the trading of S&P 500 and Dow Jones Industrial Average index options.

The parent of the Chicago Board Options Exchange, together with McGraw-Hill and Dow Jones, sued the ISE in 2006 to block it from competing with them. This year, CME Group Inc. acquired 90 percent of the Dow Jones index business from News Corp.’s Dow Jones.

State court Judge William Maki in Chicago, in a ruling yesterday, barred ISE from featuring the listings. Allowing the listings would deprive New York-based McGraw Hill and CME Group of their rights to license use of the indexes, the judge ruled. CBOE holds an exclusive license to offer options based on the indexes, he wrote.

The Chicago exchange is the biggest U.S. options exchange. The last major U.S. exchange owned by its members, it raised $339 million last month in an initial public offering.

Molly McGregor, a spokeswoman for New York-based ISE, said the exchange would appeal Maki’s ruling.

“We believe this result is incorrect based on the facts and the applicable law in this case,” she said in a phone interview. ISE’s parent company is Frankfurt-based Deutsche Boerse AG.

The case is Chicago Board of Options Exchange v. International Securities Exchange LLC, 06CH24798, Cook County, Illinois Circuit Court, Chancery Division (Chicago).

Dutch Supreme Court Dismisses ASM International Probe Ruling

The Dutch Supreme Court dismissed a probe into ASM International NV’s management and sent the case back to the Amsterdam Court of Appeal’s Enterprise Chamber for reconsideration.

The Netherlands’ highest court said the Enterprise Chamber based its decision on an incorrect legal interpretation of the way a company’s management has to perform.

The lower court “lost sight of the fact that it is ASMI’s management that is primarily responsible for the strategy to be followed,” the Supreme Court said in a statement on its website today.

The Enterprise Chamber will now have to reconsider whether there are grounds to order an investigation requested by shareholders Hermes Focus Asset Management Europe Ltd. and Fursa Alternative Strategies U.K. Ltd. into ASMI’s management.

The Enterprise Chamber in August ordered the investigation of Europe’s second-largest maker of semiconductor equipment following the investors’ request. The company didn’t give its external shareholders sufficient chance to influence strategy and corporate governance, the court said at that time.

Hermes and Fursa opposed the issuance of shares to a foundation created to safeguard ASMI’s independence. The investors were attempting to oust Chief Executive Officer Chuck del Prado at the time.

ASMI co-founder and former board member Arthur del Prado and the foundation appealed the ruling. The Supreme Court, based in The Hague, set aside an advisory opinion from Advocate General Vino Timmerman, who in April said there were valid reasons to “doubt proper management.”

Trials/Appeals

Yucaipa’s Burkle Challenges Barnes & Noble ‘Pill’

Yucaipa Cos.’ Ron Burkle told a judge he wants to improve Barnes & Noble Inc.’s business as he seeks to invalidate the bookseller’s poison-pill defense against takeovers and buy more shares.

Yucaipa accuses Barnes & Noble directors, including Chairman Leonard Riggio, of engineering a “self-dealing scheme designed to entrench the Riggio family” as controlling shareholders and to stymie Burkle’s efforts to gain seats on the board. Los Angeles-based Yucaipa is the biggest outside shareholder of the bookstore chain, the largest in the U.S.

Burkle’s firm invests in promising businesses because “we want to try to make them better companies,” he told Delaware Chancery Court Judge Leo Strine Jr. as trial began yesterday in Wilmington. At the same time, “we wouldn’t want to keep them forever,” Burkle said.

Yucaipa considered pursuing a buyout bid for Barnes & Noble at $25 a share before deciding the effort would be “a waste of time” considering the Riggios’ 32 percent stake, Burkle testified. Barnes & Noble, based in New York, adopted the poison pill plan in November and said it would come up for shareholder ratification within a year.

Michael Pittenger, a Barnes & Noble lawyer, wrote in a filing that the company’s board, “reasonably fearing a hostile attack,” set up the poison pill on the advice of legal and financial advisers after learning that Burkle had bought almost 18 percent of the stock.

The poison pill is a shareholder rights agreement that would allow investors to buy large amounts of stock at cut-rate prices when an outsider acquires 20 percent or more of the shares. The plan, designed to make a hostile takeover prohibitively expensive, “is intended to protect our shareholders from actions that are inconsistent with their best interests,” Barnes & Noble said in court papers.

The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).

New Suits

Martin Scorsese Sued by Kenneth I. Starr Receiver

The receiver for firms once controlled by jailed money manager Kenneth I. Starr sued filmmaker Martin Scorsese and his production company for about $600,000.

The complaint, filed yesterday by receiver Aurora Cassirer in New York state court in Manhattan, said Scorsese’s Sikelia Productions Inc. owes the Starr companies payment for bookkeeping, accounting and other services.

“Martin Scorsese’s Sikelia Productions has paid substantial fees to his former business manager’s firm, and if it has been determined that there is anything still outstanding, it will be rectified,” Michelle Benson, a spokeswoman for the Oscar-winning director of “The Departed” and “Goodfellas,” said in an e-mail.

Starr, 66, is charged with 20 counts of wire fraud and one each of securities fraud, money laundering and fraud by an investment adviser. He’s being held without bail and denies the charges. If convicted of wire fraud, Starr faces as much as 20 years in prison.

He was arrested May 27 and accused of defrauding clients, including heiress Rachel “Bunny” Mellon, in a scheme to buy a $7.5 million Manhattan apartment. Prosecutors expanded the allegations in a subsequent indictment.

The suit is Cassirer v. Sikelia Productions, New York state Supreme Court (Manhattan). The criminal case is U.S. v. Starr, 1:10-cr-520, U.S. District Court, Southern District of New York (Manhattan).

Tyco Electronics Faces Whistleblower Suit by Manager

Tyco Electronics Corp. was sued by a former employee who claims he was fired for revealing information about fraudulent accounting practices at the maker of electronic connectors.

Jeffrey Wiest, who worked for 31 years in the company’s accounting office in Harrisburg, Pennsylvania, said he was “constructively discharged” for providing information about Tyco’s “illegal attempts” to process payments for “extravagant parties,” according to the complaint filed July 7 in U.S. District Court in Philadelphia.

Wiest, 54, said in mid-2007 that he began questioning expenses that didn’t meet accounting standards, including the “legitimacy of a $350,000 event being held at the Atlantis Resort in the Bahamas,” court papers show.

The former account manager said he “was amazed that his supervisors authorized an island party with disturbing similarities to the past issues raised under Dennis Kozlowski.”

“Mr. Wiest’s claims of any inappropriate activity or accounting are completely without merit,” Martinique Woods, a spokeswoman for Tyco Electronics, said in an e-mailed statement. “Our company has reviewed all of the allegations raised by Mr. Wiest and concluded that our accounting was proper for this business event.”

Tyco International Ltd. spun off Tyco Electronics in 2007. Both are based in Schaffhausen, Switzerland. Kozlowski, Tyco International’s former chief executive officer, was convicted in 2005 of securities fraud, grand larceny and falsifying business records.

Wiest asked for a jury trial, reimbursement for medical expenses, and compensation for legal fees, pain and suffering.

The case is Wiest v. Tyco Electronics Corp., 10-cv-03288, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

Genzyme Sues Anika for Patent Infringement by Arthritis Drug

Genzyme Corp., the world’s largest maker of drugs for rare genetic diseases, sued Anika Therapeutics Inc., claiming its proposed osteoarthritis treatment Monovisc would infringe two patents.

The patents, issued in 1992 and 1995, relate to gels used to deliver drugs into the body. Genzyme is seeking a court ruling to prevent further use of its inventions, plus cash compensation.

“Anika’s activities have been without express or implied license from Genzyme,” Cambridge, Massachusetts-based Genzyme said in the complaint, filed July 7 in federal court in Boston.

Anika plans to sell Monovisc in the second half of this year, the company said May 10. Officials with the company didn’t return a message seeking comment. Bedford, Massachusetts-based Anika reported $40.1 million in sales last year.

The case is Genzyme Corp. v. Anika Therapeutics Inc., 10cv11146, U.S. District Court for the District of Massachusetts (Boston).

Shire Sues Cadila Healthcare to Block Generic Lialda

Shire Plc sued Cadila Healthcare Ltd. to prevent sales of a generic version of ulcerative colitis treatment Lialda until a patent expires in 2020.

Cadila, based in Ahmedabad, India, and its Zydus unit are seeking U.S. Food and Drug Administration approval to sell a lower-cost version of the drug, according to Shire’s complaint filed July 7 in federal court in Wilmington, Delaware. Shire wants the court to block approval until the patent expires.

Lialda generated $236 million in sales last year for Dublin-based Shire, according to Bloomberg data. The patent is for a way of controlling how the drug is released into the body.

In its application with the FDA, Zydus said it wouldn’t infringe the patent. It didn’t make any claims that the patent is invalid or unenforceable, Shire said in the complaint.

Under federal drug law, lawsuits are commonly filed to clarify patent rights at the same time the FDA is considering the generic-drug maker’s application.

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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