Foreclosure Lawsuits, Citigroup, BP, RBS, Pfizer, BT Group in Court News

Home to more foreclosures than 47 U.S. states, Florida sought to clear out its backlog with a system of special court hearings that dispensed with cases quickly, sometimes in less than a minute, Bloomberg News’ David McLaughlin reports.

Homeowners like Nicole West now threaten to slow that system, Florida’s so-called rocket docket, to a crawl. West, who has been fighting to save her Jensen Beach house from foreclosure, has leveled a new allegation in her three-year battle: the entire process is based on fraud.

West said her case is rife with the kind of flawed mortgage documents that have caused lenders including Bank of America Corp. and JPMorgan Chase & Co. to stop the process of foreclosures and evictions across the country. The banks said they are investigating homeowner charges like West’s that signatures were forged and documents were backdated.

“It’s not right,” said West, 40, who lives about an hour’s drive north of West Palm Beach. “It’s like lying to the judge. It’s like lying about what’s really going on.”

The bank moratoriums are already thwarting the initiative by Florida officials to clear jammed court dockets. Now, efforts by homeowners such as West to bring claims of fraud to the attention of judges are further prolonging evictions, and in turn slowing purchases of foreclosed properties.

Florida Attorney General Bill McCollum, meanwhile, is investigating four law firms in the state that specialize in foreclosure cases on behalf of lenders, according to Ryan Wiggins, his spokeswoman. Yesterday, McCollum said he requested meetings with firms including Bank of America, JPMorgan and Goldman Sachs Group Inc. unit Litton Loan Servicing to “discuss ways to promptly and effectively redeem the integrity of the foreclosure process.”

McCollum accused law firms of “unfair and deceptive actions” and said thousands of foreclosures that had been approved by judges may have been the result of improper actions by law firms. He said the firms appear to be “fabricating and/or presenting false and misleading documents.”

As many as 9 million U.S. mortgages that have been or are being foreclosed may face challenges over the validity of legal documents, according to a report yesterday by Morgan Stanley.

This case is Deutsche Bank National Trust Co. v. West, 07- 00311, Florida Circuit Court of the 13th Judicial District in and for Martin County (Stuart).

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Litigation Departments

Citigroup Stops Using Law Firm in Foreclosure Inquiry

Citigroup Inc. said it stopped steering foreclosure work to a Florida law firm whose court filings to support home seizures are under investigation by the state’s attorney general.

The bank, which is proceeding with seizures as some rivals stop to recheck documents, had used the Law Offices of David J. Stern PA. Florida Attorney General Bill McCollum said Aug. 10 it is examining whether Stern and two other firms filed “improper documentation” with the state’s courts to speed proceedings.

“Pending the outcome of the AG’s investigation, Citi is not referring new matters to this firm,” the New York-based bank said in an e-mailed statement. Citigroup services loans for government-sponsored entities, such as Fannie Mae and Freddie Mac. Stern “was approved by the GSEs during the time in which it was retained by Citi,” the bank said.

Lawmakers, attorneys general and consumer groups have pressed mortgage firms to follow Bank of America Corp., the biggest U.S. lender, which last week suspended all foreclosures to check whether faulty documents were used to confiscate homes. JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit froze seizures or evictions in Florida and 22 other states. Citigroup said last week it doesn’t plan to join them.

McCollum’s office “hasn’t made any charges or allegations of fault,” said Jeffrey Tew, an outside attorney for Plantation, Florida-based Stern, who declined to discuss its work for Citigroup. “I believe they’re a client. I can’t go into any details.”

Citigroup, the third-largest U.S. bank by assets, said in an e-mailed statement Oct. 8 that it provides “strong training” for its employees and periodically reviews document- handling procedures within the company’s foreclosure group.

“At this point, we have no reason to believe our employees haven’t been following our procedures, so we do not believe a suspension is necessary,” it said.

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Manatt Law Firm Banned 5 Years From N.Y. Pension Funds

Law firm Manatt Phelps & Phillips LLP agreed to be banned for five years from appearing before any New York public pension fund and will pay $550,000 to the state, Attorney General Andrew Cuomo said.

The accord stems from Manatt’s representation of financial firms seeking investments from public pension funds without a securities license, Cuomo said yesterday in an e-mailed statement.

Manatt, based in Los Angeles, secured meetings on behalf of firms seeking investments from pension funds in states such as New York and California. From 2004 to 2006, Manatt and a California-based lobbyist partner, Platinum Advisors, each received $187,500 in fees for helping place a $25 million investment by the California Public Employees’ Retirement System in Levine Leichtman Capital Partners Fund, Cuomo said.

“Unlicensed agents are untrained, unsupervised and typically traffic in political and personal connections to get access to public money,” Cuomo said in the statement. “We have seen all varieties of this risky behavior and now it includes a prominent national law firm.”

Manatt also made or tried to make introductions to pension funds for New York state and city employees and to the state teachers retirement system, though no investments resulted from those efforts and the firm received no compensation, Cuomo said.

The firm is quoted in Cuomo’s statement saying it is “pleased to put this matter behind us.”

“We commend Attorney General Cuomo for investigating the placement process for pension fund investments and we embrace his new Reform Code of Conduct,” the firm said.

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New Suits

Federal Reserve Sued by Minnesota Bank on Debit Caps

TCF Financial Corp., a Minnesota bank, sued the Federal Reserve to block a U.S. law that limits the fees charged to retailers on debit-card transactions.

The provision of the Dodd-Frank Act known as the Durbin Amendment puts the biggest U.S. banks at a competitive disadvantage as it forces them to provide debit-card services below cost and exempts smaller banks, the Wayzata-based company said in a lawsuit filed yesterday in Sioux Falls, South Dakota, federal court.

The law is akin to Congress telling Burger King “you can only charge for the hamburger and the bun,” TCF Chief Executive Officer William A. Cooper said in a telephone interview. “Ignore all the costs of the overhead and the cooks and the advertising and the interest expense.”

The bank claims that the law unconstitutionally takes away its property in the form of legitimate fees and violates its constitutional right to equal protection by favoring smaller banks.

Visa Inc. and MasterCard Inc., the world’s biggest electronic payment networks, set interchange fees and pass the money to card-issuing banks. Interchange is the largest component of the fees U.S. merchants pay when they accept Visa and MasterCard debit cards. The fees last year totaled $19.7 billion and averaged 1.6 percent of each sale, according to the Nilson Report, an industry newsletter.

TCF “fundamentally misunderstands” the law, Durbin, a Democrat and the senior senator from Illinois, said in a statement responding to the lawsuit. The law doesn’t set interchange rates, he said.

“Our language simply ensures that debit interchange fees charged to retailers by the card networks -- not the banks --are ‘reasonable and proportional’ to the cost of processing transactions,” Durbin said.

The case is TCF National Bank v. Bernanke, 10-cv-04149, U.S. District Court for South Dakota (Sioux Falls).

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Genzyme Sued by Investors Over Sanofi Buyout Bid

Genzyme Corp., which spurned Sanofi-Aventis SA’s $18.5 billion takeover bid, was sued by investors who contend the biotechnology company is wrongfully depriving shareholders of the chance to profit from the offer.

Two Genzyme shareholders sued the company’s board in federal court in Boston seeking to have a judge order the largest maker of medicines for rare genetic diseases to consider Sanofi’s $69-a-share bid. Genzyme officials have repeatedly rejected Sanofi’s overtures and urged shareholders to reject the French drugmaker’s tender offer.

By failing to pursue the offers, Genzyme directors are denying investors the right “to receive maximum value for their shares,” lawyers for Genzyme shareholder Bernard Malina said in a lawsuit filed last month.

Officials of Cambridge, Massachusetts-based Genzyme contend executives of Paris-based Sanofi have indicated they would pay as much as $80 a share for the biotech company, according to a U.S. regulatory filing Oct. 11. Jean-Marc Podvin, a Sanofi spokesman, disputed that assertion, saying the drugmaker hadn’t offered a price range for its bid.

Genzyme spokesman Bo Piela declined to comment on the suits in a telephone interview yesterday. Company officials have urged investors not to act on Sanofi’s offer until after it reviews the proposal with financial and legal advisers. Genzyme said in an Oct. 4 statement it would make its recommendation within 10 business days in a regulatory filing.

The cases are Field v. Termeer, 10-CV-11565, and Malina v. Genzyme Corp., 10-CV-11532, both U.S. District Court for the District of Massachusetts (Boston).

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BankAtlantic Ignored Guidelines, Misled Investors, Lawyer Says

BankAtlantic Bancorp Inc. officials ignored lending guidelines in approving land-development loans and then misled investors about the strength of those loans, a lawyer for shareholders said at the start of a trial of their securities- fraud lawsuit.

The bank’s executives hid losses on the loans to inflate the bank’s stock price, misleading investors in conference calls and in press releases, the attorney, Mark Arisohn, told jurors yesterday in federal court in Fort Lauderdale, Florida.

“The picture they painted was that the bank’s lending business was less risky than it really was,” Arisohn said in his opening statement. BankAtlantic investors “paid too much because they didn’t know the truth.”

BankAtlantic, based in Fort Lauderdale, contends that it properly disclosed problems with the loans. Company officials “gave plenty of warning” that Florida real-estate loans had grown risky by 2007, Eugene Stearns, the bank’s attorney, said in his opening statement. The investors sued that year.

Chief Executive Officer Alan Levan told investors the bank’s loan portfolio was solid, while at the same time worrying in an internal e-mail about “a parade of land loans coming in for extensions,” Arisohn told jurors.

The case is In re BankAtlantic Bancorp Inc. Securities Litigation, 07-cv-61542, U.S. District Court, Southern District of Florida (Fort Lauderdale).

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RBS Wins Lawsuit Against Liverpool Owners Over Board

Royal Bank of Scotland Group Plc won an order from a London court reversing changes to Liverpool soccer club’s board, possibly clearing the way for a planned sale to a group that controls the Boston Red Sox baseball team.

Owners Tom Hicks and George Gillett had sought to halt the sale of Britain’s most successful team, saying the 300 million- pound ($476 million) bid from New England Sports Ventures LLC is too low. RBS says the Americans breached their contract with the bank when they tried to replace board members who are in favor of the sale and asked the court to step in.

Liverpool said it was consulting with attorneys, and planned a board meeting for later today. Gillett and Hicks tried to force through board changes to block the sale to the group led by Red Sox owner John W. Henry. Justice Christopher Floyd today ruled for RBS, dismissed the owners’ countersuit and denied them an appeal, although they can go to a higher court.

The case is Royal Bank of Scotland Plc v. Hicks, HC10C03206, High Court of Justice, Chancery Division.

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BP, Investors Get First Deadline in Spill Share Suits

Lawyers for BP Plc and investors suing over billions of dollars in market losses tied to the Gulf of Mexico oil spill must submit lawsuit leadership proposals by Oct. 27, a judge overseeing the suits said.

“We should start with ideas about how to select the lead plaintiff and class counsel,” said U.S. District Judge Keith P. Ellison yesterday, at the first hearing over investor suits combined in his court.

Lawsuits by investors in U.S. shares of BP allege the company misrepresented the risks of its offshore drilling programs, artificially inflating the value of its American depositary receipts. The suits, brought by shareholders against BP for their own losses or derivatively on behalf of the company, claim BP’s directors and senior managers are responsible for as much as $50 billion in lost stock value after the spill.

“BP’s procedures for minimizing its financial losses from drilling rig problems were no more than fantasies,” Stanley M. Chesley, an attorney for one of the investor cases consolidated in Houston federal court, said in a court filing. “BP was simply not the enterprise that its public communications pictured.”

The investor lawsuits were combined before Ellison in August in a multidistrict litigation, or MDL, for evidence- gathering and pretrial decisions.

BP is facing more than 400 lawsuits over the largest offshore oil spill in U.S. history, set off by the April 20 explosion of the Deepwater Horizon drilling rig.

The case is In re BP Plc Securities Litigation, MDL 2185, U.S. District Courts, Southern District of Texas (Houston).

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Drill Ban Over, U.S. Tells Judge Weighing Challenge

The U.S. has lifted its moratorium on deep-water offshore oil drilling, Interior Secretary Kenneth Salazar told the New Orleans judge weighing a challenge to the ban.

U.S. regulators imposed the moratorium on drilling in waters deeper than 500 feet on July 12, to replace an earlier ban struck down by U.S. District Judge Martin Feldman in New Orleans. Feldman reversed the earlier ban, imposed after the BP Plc oil spill, as too broad.

Offshore-service companies challenged the second moratorium as well, in a lawsuit pending before Feldman. The U.S. earlier asked Feldman to reject this lawsuit, calling the ban a matter of public policy.

The U.S. is ending “the suspension on all deep-water drilling effective immediately,” Salazar said in a filing yesterday in Feldman’s court. “This new decision memorandum may be relevant to the court’s consideration” of the U.S. request to dismiss the lawsuit, lawyers for Salazar said.

The case is Ensco Offshore Co. v. Salazar, 2:10-cv-1941, Eastern District of Louisiana (New Orleans).

ICAP Stifling Rivals by Blocking Broker Moves, Tradition Says

ICAP Plc is trying to “stifle healthy competition” by seeking to prevent the Singapore unit of Compagnie Financiere Tradition SA from recruiting 38 of its brokers, the Swiss company said in court papers.

There are no trade secrets in inter-dealer broking where prices change constantly and clients are shared by all, Stephen Miles, the managing director of Tradition’s Singapore operations, said in a filing yesterday asking the Singapore High Court to lift its temporary order preventing the hiring.

ICAP, the world’s largest broker of trades between banks, last month won the order stopping the Singapore-based employees from joining Tradition until the dispute is resolved, arguing that the workers had access to confidential data including client lists, trading strategies and brokers’ pay.

Tradition, based in Lausanne, Switzerland, didn’t induce the employees to breach their contracts with ICAP, Miles said in his filing. Their departure was predicated on “push” factors, he said, including a move into electronic trading that would have resulted in job cuts.

“The individuals have a right to work and should not be deprived of this fundamental right,” Miles said of the brokers who have been prevented from joining Tradition, the world’s third-largest inter-dealer broker.

Miles noted that ICAP said in its Sept. 30 trading statement that it didn’t view the impact of the potential Singapore defections as being material.

“This lawsuit is simply about protecting our commercial interests through enforcing the terms of employment contracts that both we and our employees have agreed,” Mike Sheard, a London-based ICAP spokesman, said in an e-mail yesterday.

The case is ICAP AP (Singapore) Pte. vs. M. Divakaran & Ors S724/2010 in the Singapore High Court.

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Pfizer Rejected by U.S. Supreme Court on Menopause Drug Suit

The U.S. Supreme Court rejected an appeal from Pfizer Inc. and other makers of hormone-replacement treatments, leaving intact a ruling that lets 123 women who developed breast cancer sue in Minnesota state court.

The appeal sought to reinstate a federal trial court ruling that dismissed 116 of the plaintiffs because their claims duplicated previously filed suits.

The issue in the Supreme Court appeal turned on the complex rules governing efforts by corporate defendants to move suits out of plaintiff-friendly state courts and into federal tribunals.

In the Pfizer case, a federal appeals court said the trial judge shouldn’t have dismissed the 116 plaintiffs and instead should have immediately sent the entire matter back to Minnesota state court, where the suits were filed.

More than 6 million women took menopause drugs made by Pfizer’s Wyeth unit to treat symptoms including hot flashes and mood swings before a 2002 study highlighted their links to cancer.

The other companies being sued include units of Teva Pharmaceutical Industries Ltd., Mead Johnson Nutrition Co., Novartis AG, Abbott Laboratories and Watson Pharmaceuticals Inc.

The case is Wyeth v. Kirkland, 10-222, U.S. Supreme Court (Washington).

BT Must Lower Access Fees Charged to Competitors, Court Rules

BT Group Plc, the U.K.’s biggest phone company, must lower the fees it charges competitors to access the company’s phone and broadband lines because of errors by a regulator, an appeals court ruled.

Price caps put in place in May 2009 by telecommunications regulator Ofcom were too high due to the watchdog’s errors in calculating inflation and efficiency, the Competition Appeal Tribunal ruled Oct. 11 in London.

Ofcom should adopt new price controls “as soon as possible,” a three-judge panel of the tribunal said in the ruling. “Once the price controls are adopted, BT will be bound to comply with their terms.”

The ruling follows a finding by Britain’s antitrust regulator, the Competition Commission, in support of some claims in the appeal by TalkTalk Telecom Group Plc and British Sky Broadcasting Group Plc. BT said last year that the price cap was already too low to allow the company to recover costs.

Ofcom spokeswoman Elizabeth de Winton said the Competition Commission had “overwhelmingly endorsed” its approach to price controls, and that the changes will result in an adjustment of about 4 million pounds ($6.32 million).

BT spokeswoman Gemma Thomas said Ofcom’s errors were “relatively small” compared with what TalkTalk argued in court. The prices apply to BT’s Openreach unit.

“Only minor price changes should be made,” Thomas said yesterday in an e-mail.

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To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at

To contact the editor responsible for this story: David E. Rovella at

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