Bank of America Corp. and UBS AG filed claims in London against the region of Lombardy, pre- empting the municipal authority’s plan to sue the banks in the Italian courts in a dispute about derivatives fees.
An investigation by Milan’s prosecutor said the banks hid 95 million euros ($125 million) in fees when they sold the region derivatives that adjust payments on a $1 billion bond from 2002. The prosecutor dropped his criminal probe because it would breach the statute of limitations. Lombardy hired Italian lawyers in June to prepare a civil suit against the firms.
Bank of America’s Merrill Lynch unit filed a claim at London’s high court on July 13, and UBS submitted its claim on July 21, court papers show. The banks are seeking to confirm that contracts with the region are valid and that they met their obligations, according to three people familiar with the claims who declined to be identified because the dispute is private. The London claims make it tougher for Lombardy to pursue the banks locally, lawyers said.
“The jurisdiction chosen by the parties at the time of the swap was England,” said Dario Loiacono, a banking lawyer at Loiacono e Associati in Milan who isn’t involved in the case. “If the plaintiff sues in another jurisdiction, the defendant can challenge it. The banks’ claim was probably designed to avoid having to challenge the jurisdiction in Milan, and it’s unlikely that the High Court would back a challenge by Lombardy.”
Officials at UBS and Bank of America declined to comment, and a spokesman for the region of Milan declined to comment.
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Goldman Sachs Says High Court Case Bars Basis Capital Suit
Goldman Sachs Group Inc. asked a New York judge to dismiss a $1 billion lawsuit by Australian hedge fund Basis Capital, arguing that a June U.S. Supreme Court decision bars the claim.
The lawsuit by Basis Capital’s Basis Yield Alpha Fund focuses on Goldman Sachs’s sale of the “Timberwolf” collateralized debt obligation. The complaint, filed June 9 in Manhattan federal court, says the fund was forced into insolvency after buying mortgage-linked securities created by Goldman Sachs, in what one of its own executives described internally as a “shi**y deal.”
Goldman Sachs argued that the suit is barred by the Supreme Court’s June 24 ruling in Morrison v. National Australia Bank. In that case, the high court held that U.S. securities laws don’t apply to the claims of foreign buyers of non-U.S. securities on foreign exchanges.
“This litigation presents a contract dispute between two foreign entities, executed abroad and governed by English law, and Morrison makes clear that it does not belong in this court,” New York-based Goldman said in a filing dated Aug. 2.
The case is Basis Yield v. Goldman Sachs, 1:10-cv-04537, U.S. District Court, Southern District of New York (Manhattan).
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Buffett Spared Deposition by Judge in Berkshire Suit
Warren Buffett was spared from giving a deposition in the lawsuit brought by a former executive who said he was wrongly dismissed by the recreational-vehicle unit of the billionaire’s Berkshire Hathaway Inc.
U.S. Magistrate Judge Christopher Nuechterlein in South Bend, Indiana, made the ruling Aug. 2 and said Berkshire Chief Financial Officer Marc Hamburg may be questioned by lawyers for the plaintiff, Brad Mart.
Mart said he was fired from the Elkhart, Indiana-based Forest River RV unit after bringing allegations of fraud to executives, including to Buffett in six phone conversations. Mart had requested Buffett’s deposition to combat Omaha, Nebraska-based Berkshire’s claim that it should be dropped from the lawsuit for lack of jurisdiction.
“Even Mart’s own recount of the conversations reveal that Buffett communicated that he did not get involved in personnel matters and that Mart should seek an audience elsewhere for relief,” the judge wrote.
Forrest Krutter, Berkshire’s secretary, had no comment. Stephen Kennedy, a lawyer for Mart, declined through an assistant to comment.
The case is Mart v. Berkshire Hathaway Inc., 3:10-cv-00118, U.S. District Court, Northern District of Indiana (South Bend).
Deutsche Bank Wins Dismissal of Pforzheim Utility Swaps Case
Deutsche Bank AG won dismissal of a lawsuit by a German municipal utility seeking damages related to derivatives it bought from the lender.
The Frankfurt higher regional court ruled in favor of the bank, overturning a previous decision by a lower court that backed the utility in Pforzheim, Germany, court spokesman Ingo Noehre said yesterday. The ruling can be appealed, he said.
The court ruled that Deutsche Bank sufficiently informed the utility about risks related to so-called spread-ladder swaps, the bank said. The utility was seeking damages of 3.9 million euros ($5.2 million), according to a separate statement from the Frankfurt court.
Pforzheim’s case is one of several filed by German local governments, community-owned utilities and midsize companies that claim the Frankfurt-based lender didn’t adequately disclose the risks of investing in the derivatives.
Seven of nine higher-regional-court decisions have been in favor of the bank, Deutsche Bank’s lawyer Christian Duve said.
Picower Settlement Talks Over Madoff Snagged, Lawyer Says
A trustee overseeing the liquidation of Bernard Madoff’s firm has hit a pair of roadblocks in negotiations to settle a lawsuit seeking $7.2 billion from the estate of investor Jeffry Picower, a lawyer said.
Disputes over the settlement cost and the ability of private investors to sue for more money have snagged the talks, said William Zabel, a lawyer for the estate of Picower, a Florida businessman who drowned last October.
Zabel is battling trustee Irving Picard, who claims Picower should have known Madoff ran a Ponzi scheme before his 2008 arrest. Picard claims Picower, his charitable foundation and related entities withdrew $7.2 billion from Madoff’s firm over 20 years, including $2.4 billion in the six years before Madoff’s arrest.
“The negotiations still must resolve the overall dollar figure” and block all third-party claims, said Zabel, of Schulte Roth & Zabel LLP, in an interview. “The range is between $2.4 billion and $7.2 billion.”
Picard has recovered more than $1.5 billion for Madoff’s victims that he determined lost more than they put into Bernard L. Madoff Investment Securities LLC. He filed lawsuits seeking to recover $15 billion from feeder funds, Madoff friends and family, and others. Madoff, 72, pleaded guilty last year and is serving a 150-year sentence for running the largest Ponzi scheme in U.S. history.
The case is Picard v. Fox, 10-3114, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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AstraZeneca Said to Pay $55 Million Over Seroquel
AstraZeneca Plc, the U.K.’s second-biggest drugmaker, agreed to pay about $55 million to settle around 5,500 lawsuits related to side effects of the antipsychotic Seroquel, people familiar with the accords said.
The settlements, with an average payout of about $10,000 per case, resulted from mediation involving 26,000 suits filed over Seroquel, the people said. The London-based company previously agreed to pay $2 million to resolve more than 200 allegations that Seroquel causes diabetes in some users, people familiar with those accords said last month.
“It implies that the overall exposure is very low” for AstraZeneca, Navid Malik, an analyst at Matrix Corporate Capital in London, said yesterday in an interview. “$10,000 per patient doesn’t seem high” to settle drug-safety suits.
AstraZeneca is moving to resolve Seroquel claims as it faces expiring patents on the drug and the ulcer treatment Nexium in the next four years. Seroquel, the company’s second- biggest seller after Nexium, generated sales of $4.87 billion last year, or 15 percent of AstraZeneca’s total revenue.
The 5,500 settlements include 4,000 that AstraZeneca acknowledged in a July 29 regulatory filing, the people said. The company hasn’t disclosed terms of the accords and wouldn’t comment on them Aug. 3. The settlements stemmed from mediation ordered by the judge in Orlando, Florida, who was overseeing all federal-court litigation over the drug.
AstraZeneca “continues to participate in good faith in the mediation process, with multiple mediation sessions scheduled throughout the summer,” Tony Jewell, a company spokesman in Wilmington, Delaware, said in an e-mailed statement. He declined to comment further, citing the mediator’s request for confidentiality.
The consolidated Seroquel case is In re Seroquel Products Litigation, 06-MD-01769, U.S. District Court, Middle District of Florida (Orlando).
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Intel Can’t Use Threats Under U.S. Accord, FTC Says
Intel Corp., the world’s largest computer chipmaker, cannot use threats or bundled prices to block customers from buying competitors’ products under a settlement of antitrust charges, the U.S. Federal Trade Commission said.
The settlement covers graphics and central processors, the FTC said.
“This case demonstrates that the FTC is willing to challenge anticompetitive conduct by even the most powerful companies in the fastest-moving industries,” FTC Chairman Jon Leibowitz said in a statement yesterday.
The FTC sued in December, accusing Santa Clara, California- based Intel of illegally using its dominance for a decade to block customers from buying competitors’ products. The agency said Intel forced computer makers into exclusive deals and blocked rivals from making their chips work with Intel’s.
An Intel official said in a statement yesterday that the chipmaker hasn’t admitted any violation of the law or accepted the facts alleged by the complaint.
“This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products and the best price,” said Doug Melamed, Intel’s general counsel, in the statement. It “enables us to put an end to the expense and distraction of the FTC litigation.”
BP, Chevron Settle Gasoline-Additive Pollution Cases
BP Plc, Chevron Corp. and Royal Dutch Shell Plc units were among dozens of energy companies that agreed to pay $42 million to settle claims brought by communities on New York’s Long Island alleging contamination of water with a gasoline additive.
The companies and the plaintiffs, including water districts and the towns of Southampton, East Hampton and Huntington, filed notice yesterday of their motion to dismiss the lawsuits. The suits, part of larger litigation over methyl tertiary butyl ether, were brought by 23 Long Island districts, said Marc Bern, a lawyer for the plaintiffs, who said the accord’s financial terms were confidential. The total amount was $42 million, according to a person familiar with the settlement.
“Everybody has signed onto the settlement and we’re just waiting for the payments to be made,” Bern, of Napoli Bern Ripka LLP in New York, said in a phone interview. “We’ll be sending the districts their individual settlements in the next two weeks or so.”
More than 70 lawsuits filed by water providers and state and local governments were consolidated before U.S. District Judge Shira Scheindlin in Manhattan for pretrial information- gathering, according to an energy industry website. In October, a federal jury in New York ordered Exxon Mobil Corp. to pay $104.7 million in damages after finding the company liable for poisoning New York City water wells with the additive.
Bill Tanner, a spokesman for Shell, didn’t have an immediate comment. Sean Comey, a spokesman for Chevron, and Daren Beaudo, a spokesman for BP, didn’t return calls for comment.
MTBE renders water undrinkable and can cause nausea and other maladies, the plaintiffs have argued.
The case is In Re Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation, 00-cv-1898, U.S. District Court, Southern District of New York (Manhattan).
Total Purchase of OMV Gas Stations Ruled Valid by German Court
“The planned merger won’t strengthen a dominant position,” the Higher Regional Court in Dusseldorf said in a statement on its website yesterday. The ruling isn’t yet binding.
The Bonn-based Federal Cartel Office last year blocked the deal, involving 59 OMV filling stations, saying it would have increased the dominant position Total holds with Royal Dutch Shell Plc, BP Plc, ConocoPhillips and Exxon Mobil Corp. for gasoline and diesel sales.
Yesterday’s ruling “doesn’t correspond to the findings by the Federal Cartel Office in the fuel sector probe or the merger case,” Andreas Mundt, president of the antitrust agency, said in an e-mailed statement. “We will thoroughly study the possibilities of an appeal.”
The regulator has a month to appeal the decision to the Federal Court of Justice, Germany’s highest civil tribunal, the Dusseldorf court said.
“With close to 8 percent market share in Germany we are definitely not part of an oligopoly,” Hans-Christian Guetzkow, managing director of Total Germany, said in an e-mailed statement. The acquisition “will strengthen” competition in the German market, he said.
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On the Docket
Singapore Court to Hear U.K. Author’s Contempt Case on Aug. 30
The hearing of Alan Shadrake, the British author charged with contempt of court for challenging the integrity and independence of Singapore’s judiciary in a book, will resume on Aug. 30, his lawyer M. Ravi said yesterday.
Shadrake’s trial was adjourned on July 30 after Ravi sought time to file affidavits. The author of “Once a Jolly Hangman: Singapore’s Justice in the Dock” will have to provide a list of his sources by Aug. 13, Ravi said in a phone interview yesterday.
The 75-year-old writer is also being investigated for criminal defamation by Singapore authorities. His book suggests that the government “succumbs to political and economic pressures” in meting out the death penalty, the Attorney- General’s Chambers has said.
The case is Attorney-General vs Alan Shadrake OS720/2010 in the Singapore High Court.