New York Attorney General Andrew M. Cuomo said four insurers, including Zurich Financial Services AG and Ace Ltd., agreed to pay almost $120 million to settle claims they collected too much in workers’ compensation fees.
Pennsylvania Manufacturers’ Association Insurance Co. and CNA Financial Corp. also entered into the settlement, Cuomo said Dec. 31 in an e-mailed statement.
“These four groups of insurance companies have done the responsible thing by agreeing to resolve their disputes with the state,” Cuomo said in the statement. “Other insurers who still retain excess funds should follow their lead or they will be brought to justice.”
The state Workers’ Compensation Board charges annual fees to workers’ compensation insurers, and insurers cover these costs by collecting a surcharge on premiums from policyholders, Cuomo said.
The board changed its formula for calculating surcharges in 2000, Cuomo said. Some insurers collected too little in surcharges from their policyholders, while others -- including Ace, Zurich, Pennsylvania Manufacturers and CNA -- collected too much.
Under the settlements, the Ace companies agreed to pay $70 million, the Zurich companies $37.5 million, the Pennsylvania Manufacturer companies $5.9 million, and the CNA companies $5.75 million, according to Cuomo.
Stephen Wasdick, a spokesman for Ace, said in a phone interview that “two conflicting state rules” created a discrepancy between the surcharge and the assessment formulas used by New York’s workers’ compensation system.
Steve McKay, a spokesman for Zurich in North America, said in an e-mail the agreement with Cuomo resolves “a difference of opinion as to the proper legal interpretation” of laws enacted in 2009 and 2010.
Katrina Parker, a CNA spokeswoman, and Diane Nafranowicz, spokeswoman for Pennsylvania Manufacturers, didn’t immediately respond to requests for comment. CNA is owned by Loews Corp.
Netflix Faces Class Action in Subscriber DVD Lawsuit
U.S. District Judge Phyllis Hamilton said that the subscribers bringing suit against the companies in 2009 were “united by common and overlapping issues of fact and law,” in an order dated Dec. 23 and filed in federal court in Oakland, California.
The plaintiffs argue Netflix and Wal-Mart conspired in 2005 to divide the market for selling and renting DVDs in order to reduce competition. The companies formed an agreement in which Wal-Mart.com would stop renting DVDs online and Netflix wouldn’t offer them for sale. The agreement came after Blockbuster Inc. began offering DVD rentals online, according to the lawsuits.
Wal-Mart and the plaintiffs reached a preliminary settlement of the lawsuit that could pay as much as $40 million, according to a motion filed in federal court in Oakland Dec. 14. A hearing on that motion is set for Feb. 9. The settlement doesn’t include Netflix.
“The plaintiffs believe this settlement is fair and reasonable and they are pleased they were able to reach this resolution with Wal-Mart,” Robert Abrams, one of their attorneys, said in an e-mailed message. He added that his clients look forward to proceeding against Netflix, and achieving a resolution through “trial or settlement.”
Steve Swasey, a Netflix spokesman, said in a telephone interview that “the case has no merit and we’re going to continue to defend it.” He declined to comment on the Wal-Mart settlement.
David Tovar, a Wal-Mart spokesman, didn’t immediately return messages for comment.
The case is In re Online DVD Rental Antitrust Litigation, 09-02029, U.S. District Court, Northern District of California (Oakland).
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MBIA Climbs on Prospects of Resuming Municipal Insurer
Bond insurer MBIA Inc. last week gained the most in more than two months after a court development raised prospects it may resume guaranteeing city and state debt.
The company, based in Armonk, New York, has held off insuring municipal bonds because of a 2009 lawsuit by Bank of America Corp., JPMorgan Chase & Co., Barclays Plc and 15 of the world’s largest financial companies challenging MBIA’s decision to separate its municipal bond insurance business from its structured-finance guarantees.
JPMorgan and Barclays said they were withdrawing from the lawsuit on Dec. 29 and Royal Bank of Canada followed, dropping the litigation as well two days later.
“There is going to be a market for public finance insurance and if the split is upheld, I think the market would invest in a pure municipal finance insurer,” Brian Charles, an analyst with R.W. Pressprich & Co. in New York, said in a telephone interview.
MBIA soared 15 percent to $11.87 on Dec. 30, the most in the Russell 1000 Index and its largest percentage jump since Oct. 14.
MBIA hasn’t insured municipal bonds since losing its AAA credit ratings in 2008.
The lawsuit over dividing the company will continue for the remaining plaintiffs, according to a Dec. 29 filing in the New York State Supreme Court in Manhattan.
The case is ABN Amro Bank NV v. Dinallo, 601846109, New York State Supreme Court, New York County (Manhattan).
Court Blocks U.S. From Taking Over Texas Emissions Program
A federal appeals court temporarily blocked the U.S. Environmental Protection Agency from taking control of Texas’s carbon-emission rules while it considers the state’s bid to fend off federal intervention.
Texas filed a petition with the U.S. Court of Appeals in Washington Dec. 30, saying the EPA didn’t give adequate notice or allow for comments on a proposed federal takeover of the state’s air permitting program. The court ordered the agency to hold off on its plan while the court considers whether to delay the move until the case is resolved.
The appeals court ordered the EPA to respond to Texas’s motion by Jan. 6. Challenges to federal rules are brought directly to appeals courts.
“The EPA is both unlawfully commandeering Texas’ environmental enforcement program and violating federal laws that give the state and its residents the opportunity to fully participate in the regulatory process,” Texas Attorney General Greg Abbott said in a Dec. 30 statement.
Wyn Hornbuckle, a Justice Department spokesman, declined to comment, citing the pending litigation.
The case is Texas v. Environmental Protection Agency, 10- 1425, U.S. Court of Appeals; District of Columbia (Washington).
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Pfizer Ordered to Pay $1.5 Million in Prempro Damages
Pfizer Inc. must pay $1.5 million in damages to a woman who developed breast cancer after taking one of the company’s menopause drugs, a jury in Puerto Rico ruled.
Jurors in federal court in San Juan deliberated about seven hours over two days before finding on Dec. 30 that Pfizer’s Wyeth subsidiary failed to properly warn Helen Rivera-Adams and her doctors about the health risks of its Prempro menopause medicine, one of her lawyers said in an interview.
Rivera-Adams, suffering from the late stages of cancer, pushed ahead with the trial “to get the message out that this drug is dangerous,” Michael Robb, one of her lawyers, said in a telephone interview Dec. 31. “I don’t know how many times Wyeth executives will have to hear that this drug ruins women’s lives before they acknowledge it.”
More than 6 million women took Prempro and related menopause drugs to treat symptoms such as hot flashes and mood swings before a 2002 study highlighted their links to cancer.
Until 1995, many menopausal women combined Premarin, Wyeth’s estrogen-based drug, with progestin-laden Provera, made by Pfizer’s Upjohn unit, to relieve their symptoms. Wyeth combined the two hormones in Prempro.
“We are disappointed with the jury’s verdict and believe there is no basis in fact or law for this decision,” Christopher Loder, a spokesman for New York-based Pfizer, said Dec. 31 in an e-mailed statement. The company is weighing its legal options.
Rivera-Adams, 62, is a pharmacist in San Juan who owns her own drugstore, Robb said. She and her family had sought $8 million in damages, he said.
The case is Rivera-Adams v. Wyeth, 03-1713 (JAF), U.S. District Court, District of Puerto Rico (San Juan).
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N.Y. ‘Gruesome’ Anti-Smoking Ads Mandate Struck Down by Judge
A New York City health regulation requiring the display of graphic anti-smoking ads wherever tobacco products are sold is preempted by a federal law governing cigarette labeling, a federal judge ruled.
The decision by U.S. District Judge Jed Rakoff puts tobacco marketing under the U.S. Food and Drug Administration, which is developing its own set of warnings to reduce smoking-related illnesses.
Altria Group Inc., Reynolds American Inc. and other cigarette companies can’t sell their products in the U.S. after Oct. 22, 2012, without labels pairing graphic images with text such as “Smoking can kill you” under marketing rules the agency issued last month.
“Even merchants of morbidity are entitled to the full protection of the law, for our sake as well as theirs,” Rakoff said in a Dec. 29 written opinion. The regulation “imposes burdens on the promotion of cigarettes that only the federal government may prescribe,” the judge said.
The decision stems from a suit filed in June by the three biggest U.S. cigarette makers and groups representing convenience stores. At the start of the case, the city agreed to postpone enforcement of the rule until Jan. 1.
“We are disappointed that this important health initiative was rejected by the court,” Nicholas Ciappetta, the city lawyer who handled the case, said in a statement. “We are studying the decision and considering our legal options.”
A federal law passed last year authorized the FDA to require new warning labels and bar certain marketing practices.
More than 20 percent of adults in the U.S., or 46 million people, smoke cigarettes, according to the Centers for Disease Control and Prevention in Atlanta. Smoking is the biggest cause of preventable death in the U.S., killing about 443,000 people a year, according to the CDC.
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On The Docket
PharmAthene, Siga to Begin Trial Over Smallpox Drug Rights
PharmAthene, of Annapolis, Maryland, sued New York-based Siga in 2006 asking a Delaware Chancery Court judge to affirm a purported licensing agreement for PharmAthene to make the drug, known as ST-246. Siga, which had worked with PharmAthene, contends there is no license.
PharmAthene is trying “to lay claim to the fruits of Siga’s skills and labor” in developing a treatment “crucial to this country’s national security,” Siga lawyer Andre Bouchard said in a pretrial brief. Both companies develop products used to combat biological warfare.
In 2005, “Siga was out of cash and out of options,” and PharmAthene “lent Siga $3 million to fund their joint development” of the drug, with PharmAthene “either to merge with Siga or else get an exclusive license,” PharmAthene lawyer Christopher Selzer told Judge Donald Parsons Jr. in his brief.
The case is PharmAthene Inc. v. Siga Technologies Inc., CA2627, Delaware Chancery Court (Wilmington).
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Lehman Brothers Most Popular Docket on Bloomberg
Lehman Brothers Holdings Inc., which filed the biggest bankruptcy in U.S. history more than two years ago with assets of $639 billion, had the most-read litigation docket on the Bloomberg Law system last week.
U.S. Bankruptcy Judge James Peck said last week that his order requiring Bank of America Corp. to pay Lehman Brothers Holdings Inc. $590 million in compensation for taking its deposits was not a “final judgment.” He said a final judgment will come later and the bank must delay its appeal until then.
Bank of America, a lender to Lehman in September 2008, appealed Peck’s November ruling that it must return $500 million of deposits taken in violation of bankruptcy law and pay interest.
Also last week, Lehman Chief Executive Officer Bryan Marsal said the company is planning “important” real estate sales in the first half of this year. Lehman creditors allowed Marsal to manage illiquid assets for as long as five years, investing in them with the hope of recovering some of their value if prices rose. He said in September he aims to raise $57.5 billion for creditors in the next five years.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the editor responsible for this story: David E. Rovella at email@example.com.