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Wal-Mart, Lion’s Gate, Kraft, Tullett in Court News

The U.S. Supreme Court, heeding calls from companies to consider curbing class actions, agreed to decide whether Wal-Mart Stores Inc. must face a gender-bias suit on behalf of potentially 1 million of its workers.

The justices yesterday said they will review a federal appeals court decision that approved a single suit to cover the claims of women who worked at the retailer’s 4,400 Wal-Mart and Sam’s Club stores since 2001. The suit, which threatens Wal-Mart with billions of dollars in liability, would be the largest-ever U.S. employment class action.

The dispute, perhaps the biggest business case of the court’s nine-month term, may affect several pending suits. A suit on behalf of more than 700 women against Costco Wholesale Corp. is on hold until the Supreme Court resolves the Wal-Mart case. Tobacco companies including Altria Group Inc. say the Wal- Mart case may affect their challenge to a Louisiana court order requiring them to spend more than $270 million on a smoking cessation program.

The lower court ruling “would dramatically broaden the circumstances where classes can be certified in all types of cases against all types of companies,” Wal-Mart’s lawyer, Theodore Boutrous, said in an interview.

Wal-Mart is accused in the 9-year-old suit of paying women less than men for the same jobs and giving female workers fewer promotions. Six women are seeking to serve as class representatives, including Betty Dukes, a Wal-Mart greeter in Pittsburg, California.

Wal-Mart said in a statement it was pleased the Supreme Court granted review. “The current confusion in class-action law is harmful for everyone -- employers, employees, businesses of all types and sizes and the civil justice system,” the company said.

“We are confident that the decision to certify the class was sound,” Joseph Sellers, who represents the women, said in a statement.

The case is Wal-Mart Stores v. Dukes, 10-277, U.S. Supreme Court (Washington).

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Lehman Europe Asks Court to Force Swap Counterparties to Pay

Lehman Brothers Holdings Inc.’s U.K. unit asked a London court to decide whether it can force parties on the opposite side of swap agreements to pay the failed bank if they haven’t terminated the contracts.

Lehman Brothers International Europe is seeking a ruling on whether, under rules established by the International Swaps and Derivatives Association, a counterparty must keep making payments if the other defaults.

“They need to know what the position is,” LBIE’s lawyer, William Trower, told Judge Michael Briggs yesterday in the first day of a trial scheduled to last three days. “What we’re asking for is a determination of a point of principle.”

LBIE had about 2,000 open swap transactions at the time it went into administration in September 2008, its lawyer David Swanson said in a court filing posted in June on the website of LBIE administrator PricewaterhouseCoopers. Of those, at least 1,693 had been closed at the time of the filing. The failed bank has also asked the court decide whether the rule is unenforceable or void because it would deprive LBIE of an asset, which it says conflicts with U.K. insolvency law.

At least four counterparties have relied on the provision “to avoid obligations that otherwise would have accrued and will otherwise accrue to LBIE’s favor” under the agreements, Swanson said.

AEP, Utilities Get Supreme Court Review on Warming

The U.S. Supreme Court said it will hear an appeal by four power companies including American Electric Power Co., agreeing to decide whether they must face a suit by states seeking a reduction in carbon dioxide emissions.

The eight states, including New York and California, say plants operated by AEP, Xcel Energy Inc., Duke Energy Corp., Southern Co. and the Tennessee Valley Authority contribute to global warming by pumping 650 million tons of carbon dioxide into the atmosphere each year. The suit seeks to force cuts in emissions from the plants.

A ruling barring the suit would be a victory for businesses beyond the utilities involved in the case. Trade groups representing automakers, oil companies, farmers, mining companies, chemical companies and manufacturers all filed briefs urging Supreme Court intervention, in some cases saying their members might face similar lawsuits.

The lower court ruling “has staggering economic implications,” the U.S. Chamber of Commerce said in a court filing supporting the utilities.

The case will put the Obama administration the position of arguing alongside the power industry. In a brief filed on behalf of the TVA, acting U.S. Solicitor General Neal Katyal said the courts should defer to Congress and the executive branch on what steps to take against climate change.

Katyal had urged the court to set aside the lower court ruling and order reconsideration, rather than granting a hearing.

The case is American Electric Power v. Connecticut, 10-174, U.S. Supreme Court (Washington).

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Johnson & Johnson Warned on Levaquin Risk, Lawyer Says

Johnson & Johnson didn’t hide the risk of tendon damage linked to its antibiotic Levaquin and properly warned doctors, a lawyer for the drugmaker told jurors at the end of a trial in Minnesota.

“The information was not concealed,” John Dames, a J&J attorney, said yesterday in his closing argument in federal court in Minneapolis. “We provide warnings that give doctors the means to care adequately for their patients.”

John Schedin, 82, sued in 2008, claiming he ruptured the Achilles tendons in both feet after taking the drug. Schedin claims J&J and its Ortho-McNeil-Janssen Pharmaceuticals unit failed to warn doctors and patients of Levaquin’s association with tendon damage.

Schedin’s case is the first trial on more than 2,600 claims in U.S. courts alleging that Levaquin caused tendon damage in patients taking the drug and J&J failed to adequately disclose the risk. The U.S. Food and Drug Administration in 2008 required an upgraded warning on tendon damage posed by Levaquin and similar drugs.

The plaintiffs claim the warning should have been enhanced earlier and remains inadequate. They also claim J&J and Ortho- McNeil-Janssen boosted sales by downplaying risks.

The lawsuit is Schedin v. Johnson & Johnson, 08-cv-05743, combined for trial in In re Levaquin Products Liability Litigation, 08-md-01943, U.S. District Court, District of Minnesota (Minneapolis).

For the latest trial and appeals news, click here.

New Suits

Lions Gate Files New Complaint Against Icahn Over MGM

Lions Gate Entertainment Corp. filed an amended complaint against billionaire Carl Icahn, reiterating that he was “secretly plotting” to profit from merging the studio with Metro-Goldwyn-Mayer Inc. while telling investors the deal would be a “debacle.”

Icahn should correct his misstatements, compensate Lions Gate investors and pay damages for interfering in the company’s plans, the Vancouver-based studio said in a Dec. 3 filing in U.S. District Court in New York.

Separately, Lions Gate asked a judge to force Icahn to disclose the extent and value of his holdings of MGM debt and the history of his trading in the debt. The studio said he should do this before his tender offer for Lions Gate closed on Dec. 10, “so that Lions Gate shareholders can make an informed decision” on whether to sell him their shares or vote for his nominees to Lions Gate’s board.

Icahn and his investing group “believe that Lions Gate’s lawsuit and its claims continue to be completely without merit,” the New York investor said yesterday in a statement.

The case is Lions Gate Entertainment Corp. v. Icahn, 10- cv-8169, U.S. District Court, Southern District of New York (Manhattan).

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Kraft Sues Starbucks Over Deal to Sell Branded Coffee

Kraft Foods Inc. said it is seeking a court order forcing Starbucks Corp. to honor an agreement giving Kraft the exclusive right to sell Starbucks coffee in grocery stores.

Kraft said in a statement yesterday that it sued Starbucks in federal court in New York to obtain a preliminary injunction to stop the world’s biggest coffee-shop chain from violating a distribution agreement.

According to a copy of the complaint provided by Northfield, Illinois-based Kraft, the company has an exclusive right until 2014 to sell Starbucks roasted whole bean and ground coffee to grocery stores and other retailers, and Starbucks has decided to take over the business.

In 12 years, “Kraft has grown the sales of Starbucks consumer packaged goods products tenfold, increasing annual revenue from approximately $50 million to approximately $500 million,” according to the complaint.

“Starbucks has repeatedly said that we have terminated our agreement with Kraft and we continue to look forward to assuming full responsibility for the sales” as of March 1, the company said in a statement. Seattle-based Starbucks called the lawsuit a “delaying tactic.”

The case is Kraft Foods Global Inc. v. Starbucks Corp., 10- cv-09085, U.S. District Court, Southern District of New York (White Plains).

Discover Deceives Credit-Card Holders, Minnesota Says

Discover Bank telemarketers, selling identity-theft and credit-score monitoring services, fail to tell consumers when they’re agreeing to purchase those products, Minnesota Attorney General Lori Swanson claims in a lawsuit.

The credit-card company, a unit of Discover Financial Services, reaped more than $300 million in revenue last year from selling those products, Swanson said yesterday in a statement announcing the filing of the suit in Minneapolis.

“It is particularly ironic for credit-card companies like Discover to charge people’s accounts for optional fee-based products without their informed consent because the credit-card company touts its fraud prevention capabilities,” she said.

Discover Bank and Riverwoods, Illinois-based Discover Financial are each named as defendants in the lawsuit, which Swanson said seeks injunctive relief, civil penalties and restitution.

“It’s not in Discover’s interest to sell a product that doesn’t enhance our relationship with our cardmembers,” Matthew Towson, a spokesman for the company, said in an e-mailed statement.

Isilon Systems Sued by Shareholder Over EMC Purchase

Isilon Systems Inc. was sued by a shareholder who claims EMC Corp.’s $2.25 billion purchase of the company is unfair and doesn’t reflect its true value.

The purchase price is “wholly inadequate,” considering Isilon could grow 36 percent annually to an estimated $4 billion by 2014, lawyers for shareholder Saravanan Coimbatore said, citing market research firm International Data Corp. in the complaint filed yesterday.

“As such, EMC, in possession of non-public information regarding the performance of Isilon, is taking advantage of its position to acquire the company at a substantial discount to its true value,” lawyers for Coimbatore said in the complaint filed in Delaware Chancery Court in Wilmington.

EMC announced Nov. 15 that it would purchase Isilon for $33.85 a share in cash to gain video-storage equipment. The price is 29 percent higher than Seattle-based Isilon’s closing price on Nov. 12. The acquisition pushes EMC deeper into the $19 billion external-storage market and allows it to challenge rivals NetApp Inc. and International Business Machines Corp.

Chris Blessington, a spokesman for Isilon, didn’t return phone and e-mail messages seeking comment.

Coimbatore, who is seeking to bar the deal, accused Isilon directors of agreeing to the acquisition to reap “windfall benefits” from the proposed transaction in the form of change of control payments for both vested and unvested stock options and severance payments. Isilon founder Sujal Patel stands to collect more than $17.8 million in change-of-control payments, according to the complaint.

The case is Saravanan Coimbatore v. Isilon Systems Inc., CA6050, Delaware Chancery Court (Wilmington).

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Lawsuits/Pretrial

Tullett Says BGC Claims It’s Stealing Treasury Data Are False

A BGC Partners Inc. unit’s claims that a Tullett Prebon Plc affiliate is stealing data are false and seek to bypass requirements that disagreements be settled through an arbitrator, Tullett said in a court petition.

BGC Capital Markets LP sued Tullett Prebon Americas Corp. on Nov. 9 over claims it misused proprietary U.S. Treasury prices in “a long history of stealing data,” earning profits of “at least hundreds of millions of dollars.” Tullett gives its brokers Treasury prices derived from BGC’s eSpeed trading system “to compete -- on an improper and unfair basis,” according to BGC’s lawsuit. “The contract with Tullett Financial specifically prohibits the use of such data by Tullett Americas’ brokers,” it said.

In a petition filed in New York state Supreme Court, Tullett said it has access to the BGC data under a 2002 agreement between Prebon Yamane International Ltd. and Cantor Fitzgerald LP, the broker that spun off its interdealer brokerage business into BGC Partners in 2004.

Under the agreement, Prebon Yamane licensed the data for use by its brokers and those of its affiliates, according to a petition filed Dec. 3. Prebon Yamane was acquired by Tullett Prebon’s predecessor, Collins Stewart Tullett Plc.

Tullett is asking the courts to compel arbitration of the dispute, saying that the data agreement requires disputes to be heard by the American Arbitration Association. BGC spokesman Robert Hubbell declined to comment on Tullett’s petition.

The case is BGC Capital Markets LP v. Tullett Prebon Americas Corp., 651954/2010, New York State Supreme Court (Manhattan).

Investment Fraud Sweep Nets 343 Criminal Defendants

A crackdown on investment frauds including Ponzi schemes and stock market manipulation resulted in U.S. enforcement action against 343 criminal defendants and 189 civil defendants since August, the Justice Department said.

The criminal cases alone involved more than $8.3 billion in estimated losses and more than 120,000 victims nationwide, Attorney General Eric Holder said at a news conference in Washington yesterday.

The criminal cases resulted in 64 arrests, according to the Justice Department. The Justice Department enforcement numbers also include indictments, convictions and sentencings. In some cases the same defendants faced civil and criminal enforcement actions, according to the Justice Department.

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For the latest lawsuits news, click here.

Verdicts/Settlement

Ex-KBR Consultant Pleads Guilty in Nigerian Bribe Case

Wojciech J. Chodan, a former consultant to a U.K. unit of KBR Inc., pleaded guilty to U.S. charges that he conspired to bribe Nigerian officials to obtain $6 billion in contracts for a liquefied natural gas project.

Chodan, a U.K. citizen who was extradited on Dec. 3, pleaded guilty yesterday in federal court in Houston to conspiring to violate the U.S. Foreign Corrupt Practices Act, an anti-bribery law. He faces as long as five years in prison when he’s sentenced on Feb. 22. He is cooperating with the government and has agreed to forfeit $726,885, according to court filings.

“Chodan admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain engineering, procurement and construction contracts,” the U.S. Justice Department said yesterday in a statement.

The Bonny Island project in Nigeria pipes liquefied natural gas from wellheads to processing plants, purifies it and loads it onto tankers for export. Engineering, procurement and construction contracts for the project were worth more than $6 billion, prosecutors said.

Andrew Lourie, a lawyer for Chodan, declined to comment.

The case is U.S. v. Chodan, 4:09-cr-00098, U.S. District Court, Southern District of Texas (Houston).

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Union Bancaire, Madoff Feeder Fund, Settles Claims

Union Bancaire Privee, a private Swiss bank, agreed to pay as much as $500 million to settle claims it helped Bernard Madoff commit his fraud.

Under the settlement, which must be approved by a bankruptcy judge, UBP will pay $470 million to Irving Picard, the New York lawyer appointed as trustee in the liquidation of the con man’s former investment firm. The deal provides for an additional payment of as much as $30 million, according to court papers seeking approval for the terms.

“The UBP settlement agreement is the largest feeder fund bank cash settlement to date and the first major international bank settlement,” Picard said yesterday in a statement.

The settlement brings to $2 billion Picard’s recoveries for creditors of Bernard L. Madoff Investment Securities LLC. He has filed suits seeking more than $33 billion from Madoff, his family and former employees, banks, feeder funds and investors who profited from Madoff’s fraud.

Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after admitting he directed the biggest Ponzi scheme in history.

At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal.

The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-ap-1789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Ex-SP Bell Director Banned by U.K. FSA for Share-Price Scheme

A former director of defunct brokerage SP Bell Ltd. was banned from working in the finance industry by a U.K. regulator because of his role in a scheme to manipulate the share price of Fundamental-E Investments Plc.

A London tribunal is also considering how much Graham Betton should be fined, the Financial Services Authority said in a statement on its website yesterday. Simon Eagle, the former head of Fundamental-E Investments and SP Bell, was fined 2.8 million pounds and banned by the FSA in May for taking part in the fraud.

Eagle conducted a share-ramping scheme in 2003 and 2004 by purchasing 85 percent of FEI and also acquiring SP Bell to use as a conduit to sell FEI shares and inflate their price. Betton, who had 30 years of experience as a stockbroker, told SP Bell workers to push the shares to its clients, the regulator said.

Betton worked with Close Brothers Group Plc’s market making unit Winterflood Securities to carry out the trades, the FSA said. In April, Winterflood was fined 4 million pounds for its role.

Betton’s lawyer, David Mawdsley, couldn’t be immediately reached for comment.

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To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

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

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