Deutsche Boerse AG (DB1) and NYSE Euronext settled shareholder lawsuits challenging the $9.53 billion buyout of the parent company of the New York Stock Exchange by offering to pay $910 million in dividends earlier this month, court papers show.
The agreement to pay the dividends helped to resolve suits in Delaware and New York alleging the all-stock deal provided too little for investors, according to a filing in Delaware Chancery Court. The payout totals about 620 million euros, equal to 2 euros a Deutsche Boerse share or $1.37 a NYSE share, company officials said June 7.
“We are pleased with the result here, because this dividend will give shareholders a quantifiable and immediate payment,” Mark Lebovitch, a New York-based lawyer for NYSE shareholders, said yesterday in an e-mailed statement.
Deutsche Boerse agreed to buy NYSE Euronext (NYX), owner of the New York Stock Exchange and the Liffe derivatives market, for $9.53 billion in February. IntercontinentalExchange Inc. (ICE) and Nasdaq OMX Group Inc. (NDAQ) dropped a competing bid last month after the U.S. Justice Department threatened an antitrust lawsuit.
Rich Adamonis, spokesman for New York-based NYSE Euronext, didn’t return a phone call for comment yesterday. Tim Lynch, a spokesman for Frankfurt-based Deutsche Boerse, declined to comment.
The exchanges agreed to pay the dividends and settle the suit in hopes of winning support for the deal in a vote next month. Deutsche Boerse needs 75 percent of shareholders to approve its purchase of NYSE Euronext by July 13.
Investors can opt to “terminate the settlement” if the exchanges decide against paying the dividends, according to court papers.
NYSE Euronext investors sued in Delaware in February, calling Deutsche Boerse’s offer “grossly inadequate.” The shareholders alleged the bid valued NYSE Euronext at less than targets in similar deals, such as London Stock Exchange Group Plc’s purchase of Canada’s TMX Group Inc.
Deutsche Boerse officials acknowledged that the lawsuits “were a factor” in the decision to pay the dividends, lawyers for NYSE Euronext investors said in court papers. The suits also helped persuade NYSE officials to give investors an opportunity to have the value of their shares appraised, according to the June 17 filing.
Delaware Chancery Court Judge Leo Strine must decide whether to give the accord final approval.
The case is In re NYSE Euronext Shareholders Litigation, CA No. 6220, Delaware Chancery Court (Wilmington).
JPMorgan to Return $800 Million to Lehman Brokerage Clients
U.S. Bankruptcy Judge James M. Peck yesterday approved the accord, struck in April between the second-biggest U.S. bank and the trustee liquidating the remains of the brokerage, Lehman Brothers Inc.
JPMorgan was the main clearing bank for the Lehman brokerage, processing billions of dollars of transactions and lending it tens of billions of dollars daily, according to court filings. While some loans were secured by securities in the brokerage’s accounts, the bank didn’t have a valid lien on the $800 million in customer property that is being returned, according to filings.
“Customer property held by the LBI estate available for distribution will increase by more than $800 million,” the trustee, James Giddens, said in an e-mailed statement yesterday. “This is a significant and positive result from two years of investigation and close cooperation with JPMorgan.”
Consenting to return the assets in April, the bank said the settlement would have “no material financial impact,” as most of the assets had already been set aside to satisfy potential claims by the trustee.
Separately, JPMorgan is seeking dismissal of an $8.6 billion lawsuit by the Lehman parent.
The brokerage bankruptcy case is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Drug Marketing Curbs Voided by Top Court on Speech Grounds
The 6-3 ruling is a victory for the pharmaceutical industry and so-called data-mining companies that sell information to drugmakers about the prescription-writing practices of individual doctors. The invalidated measure barred use of that data for marketing without the doctor’s consent.
The Vermont law targeted “detailing,” the industry practice of one-on-one marketing to doctors to persuade them to prescribe particular drugs. Companies spend more than $8 billion a year on detailing, according to trial testimony in the case.
“The state may not burden the speech of others in order to tilt public debate in a preferred direction,” Justice Anthony Kennedy wrote for the majority.
Vermont is one of three New England states that restricted the use of prescription records for marketing, and similar legislation has been introduced in two dozen other states.
Justices Stephen Breyer, Ruth Bader Ginsburg and Elena Kagan dissented. Breyer said the law was part of the state’s legitimate efforts to protect public health.
The case is Sorrell v. IMS Health, 10-779, U.S. Supreme Court (Washington).
Generic-Drug Makers Shielded From Lawsuits, Top Court Says
The U.S. Supreme Court gave a new legal shield to the generic-drug industry, ruling that companies can’t be sued for failing to warn patients about the risk of dangerous side effects.
The 5-4 ruling bars two women from suing units of Mylan Inc. and Teva Pharmaceutical Industries Ltd. (TEVA) over metoclopramide, a stomach drug they say caused them to contract a severe neurological disorder.
The decision limits the reach of a 2009 Supreme Court ruling that required brand-name drugmakers to defend against failure-to-warn suits filed under state product liability law. Generic-drug companies successfully argued that they shouldn’t held to the same standard because federal law requires them to copy the packaging inserts used by brand-name manufacturers.
“If the manufacturers had independently changed their labels to satisfy their state-law duty, they would have violated federal law,” Justice Clarence Thomas wrote for the court.
The ruling divided the court along familiar lines, with Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy and Samuel Alito joining Thomas in the majority.
In dissent, Justice Sonia Sotomayor said the ruling “leads to so many absurd consequences that I cannot fathom that Congress would have intended to preempt state law in these cases.”
The cases are Pliva v. Mensing, 09-993; Actavis Elizabeth v. Mensing, 09-1039; and Actavis v. Demahy, 09-1501, U.S. Supreme Court (Washington).
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GlaxoSmithKline, SB Pharmco to Settle With 37 States, D.C.
GlaxoSmithKline LLC and SB Pharmco Puerto Rico Inc. entered into a $40.8 million accord with 37 U.S. states and the District of Columbia to resolve allegations they breached drug manufacturing standards, Illinois Attorney General Lisa Madigan said.
Madigan, in a press statement issued yesterday, said that between 2001 and 2004 the companies made bad batches of the anti-nausea drug Kytril, which is used by chemotherapy patients; Avandamet, a drug used to treat diabetes; the antidepressant Paxil CR and the antibiotic topical treatment Bactroban.
“Consumers put their faith in drug companies that the medications they purchase are safe,” the attorney general said. “My office will not tolerate pharmaceutical companies cutting corners at the potential expense of consumer health.”
Madigan, in a complaint and settlement agreement she said was filed yesterday at the Illinois state courthouse in Chicago, accused the drug companies of unfair and deceptive practices.
“There is no current cause for concern for patients,” she said, adding that the products in question had previously been recalled or have since expired and the manufacturing facility has closed.
“The company chose to settle the matter, which it initially disclosed in its 2010 fourth quarter results and its 2010 annual report, to avoid the expense and uncertainty of protracted litigation and trial,” according to a GlaxoSmithKline statement issued yesterday.
The drugmaker, which has offices in Philadelphia and Research Triangle Park, North Carolina, didn’t admit to any wrongdoing or liability. The company is a unit of London-based GlaxoSmithKline Plc. (GSK)
Railroads Lose Supreme Court Fight Over Worker Suits
The U.S. Supreme Court, ruling against a CSX Corp. (CSX) unit, made it easier for railroad industry workers to win lawsuits blaming their company for injuries they suffered on the job.
The justices, voting 5-4, yesterday upheld a $184,250 award to a locomotive engineer who said CSX Transportation Inc. was responsible for a hand injury he suffered while at the helm of a train.
The case centered on the test for determining whether a railroad’s negligence was the cause of an employee’s injury. The federal judge overseeing the CSX trial in Benton, Illinois, told the jury that the railroad was responsible if its negligence “played a part -- no matter how small -- in bringing about the injury.”
CSX contended workers should have to meet the more demanding standard, known as proximate cause, that applies in other types of personal-injury suits.
In upholding the award, the Supreme Court said the Federal Employers’ Liability Act, which governs railroad industry suits, lets workers recover damages without meeting the proximate cause test.
Justice Ruth Bader Ginsburg wrote the court’s majority opinion. Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy and Samuel Alito dissented.
The case is CSX Transportation v. McBride, 10-235, U.S. Supreme Court (Washington).
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Viacom Sues Cablevision Over Distribution of Shows on IPad
Viacom seeks a court order directing the Bethpage, New York-based cable provider to halt “unauthorized distribution” of its copyrighted entertainment programming via wireless portable devices using an iPad application.
New York-based Viacom also seeks unspecified damages stemming from Cablevision’s April 2 launch of the computer application which allows its users to get live streaming feeds of what Viacom says is its copyrighted entertainment.
“On April 2, 2011, despite Viacom’s repeated objections, Cablevision launched the iPad to its cable television subscribers, and included nineteen of Viacom’s programming channels, in violation of the parties’ agreements and Viacom’s intellectual property rights,” Viacom said in the complaint.
Viacom said that both sides have since engaged in discussions to resolve the dispute without success, while Cablevision “continues to refuse to remove Viacom’s programming from its iPad services.”
James Maiella, a spokesman for Cablevision, said the company was preparing a statement and that he didn’t have an immediate comment on the litigation.
The case is Viacom Inc. v. Cablevision Systems Corp. 11-CV- 4265, Southern District of New York (Manhattan).
Nakheel’s Ex-CEO Sues the Developer for Breach of Contract
Nakheel PJSC’s former chief executive officer, Chris O’Donnell, is suing the company for breach of contract in the Dubai World Special tribunal.
The CEO, who quit earlier this month after five years at the developer’s helm, filed a lawsuit June 22 without saying how much he’s seeking, according to court records. Nakheel has 14 days to acknowledge the claim.
Nakheel, which built palm tree-shaped islands off Dubai’s coast, is restructuring $10.5 billion of debt after the global credit crisis caused property demand in Dubai to evaporate. Home prices slid by more than 60 from their peak in mid-2008, forcing developers to cancel and delay projects.
The tribunal’s website lists 33 cases involving Nakheel and contractors, buyers and developers including Kleindienst Properties Limited. The Austrian developer, which bought six islands on Nakheel’s man-made archipelago shaped as a world map, was sued by Nakheel on June 12 for breach of contract, the court’s website shows. Nakheel is seeking $199 million.
“There is a difference of opinion between ourselves and Nakheel on the amount due for the islands purchased by the Kleindienst Group, and the time frame in which this is due,” Kleindienst said in an e-mailed statement.
Josef Kleindienst, CEO at the family-owned company, has acknowledged the claim and the case will go to court, the company said. Meanwhile, work on Kleindienst’s 3.1 billion- dirham ($840 million) project has been suspended.
A spokeswoman for Nakheel declined to comment on the cases.
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HSBC Seeks Dismissal of $9 Billion Madoff Trustee Lawsuit
HSBC Holdings Plc (HSBA), seeking dismissal of a $9 billion lawsuit by the trustee liquidating Bernard Madoff’s firm, said he isn’t allowed by law to bring such cases on behalf of the confidence man’s former customers.
Irving Picard, the trustee, sued HSBC and a dozen so-called feeder funds for $9 billion in December, accusing them of aiding Madoff’s fraud. Yesterday, Picard and HSBC, which acted as custodian for the funds, argued in front of U.S. District Judge Jed Rakoff in Manhattan over whether the case should be dismissed.
Picard is mistakenly suing HSBC for damages on the theory that it had a duty to investigate the Madoff fraud and that it hurt all of the con man’s investors by not doing so, said Thomas Moloney, a lawyer for the bank.
“HSBC owes no duty to these customers,” Moloney said. “HSBC was not the watchman” for all Madoff investors, he said.
Rakoff said he will rule on HSBC’s request by the end of July. The dispute pits Europe’s biggest lender against the lawyer liquidating Bernard L. Madoff Investment Securities LLC, which perpetrated the largest Ponzi scheme in U.S. history. Picard has filed 1,000 lawsuits in bankruptcy court to recover $90 billion from banks and former Madoff investors who allegedly profited from the fraud.
The district court case is Irving H. Picard v. HSBC Bank Plc, 11-cv-0763, U.S. District Court, Southern District of New York (Manhattan).
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Carl Icahn Suit Against Raynor, R2 Investments Dismissed
Carl Icahn’s lawsuit seeking at least $100 million from Texas hedge-fund promoter Geoffrey Raynor, his R2 Investments LDC and others was dismissed by a New York state judge.
In the suit, filed in February 2010, Icahn said Raynor interfered with a $2 billion bond offering by Icahn Enterprises LP and other Icahn companies. Justice Eileen Bransten in Manhattan yesterday dismissed the case, which included claims of tortious interference with contract, libel and abuse of process.
Raynor and Icahn formed a partnership in 2001 to acquire debt securities issued by Federal Mogul Corp., which was in bankruptcy at the time, Bransten said in her decision. After a dispute over the right to purchase some Federal Mogul stock, Raynor made a securities filing in January 2010 disclosing a suit commenced the same day by Raynor-affiliated Nineteen Eighty-Nine LLC seeking to impose a “constructive trust” on the shares, Bransten said.
Icahn, 75, said the timing of the regulatory filing and suit lowered demand for the bond offering. He sued Raynor, R2, Nineteen Eighty-Nine and five other defendants.
A message left with Icahn’s secretary wasn’t returned. A message left with attorneys for Raynor also wasn’t returned.
The case is Icahn v. Raynor, 150040/2010, New York state Supreme Court (Manhattan).
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Anglo Irish Says U.S. Assets Sale, Merger Are ‘Sovereign’ Acts
Anglo Irish Bank Corp. defended a sale of its U.S. loan portfolio that was ordered by the Irish government and its acquisition of Irish Nationwide Building Society, calling them “non-commercial, sovereign acts.”
Anglo Irish Bank made the statement in a letter June 22 to U.S. District Judge Paul G. Gardephe in Manhattan, who had directed the bank to disclose whether it has sold substantial commercial assets in the U.S. and whether a sale of its remaining U.S. assets was imminent. The letter was obtained by Bloomberg News.
Fir Tree Partners, a New York investment firm, sued Anglo Irish Bank in February, claiming it owns $200 million of notes the bank issued in the U.S. Fir Tree seeks an order blocking Anglo Irish Bank from transferring any U.S. assets out of the country so it can force the bank to honor its debt obligations.
Fir Tree sent a letter to the judge on June 20 asking for an expedited hearing on the issue.
Anglo Irish Bank said the sale of its U.S. assets and its acquisition of Irish Nationwide Building Society in “the next week or two weeks” had been reported in the global press and were consistent with and anticipated in statements it has made to the court, according to yesterday’s letter.
Paul Smith, a lawyer for Fir Tree, and Walter Stuart, a lawyer for Anglo Irish Bank, didn’t return calls for comment after regular business hours yesterday.
The case is Fir Tree Capital Opportunity Master Fund LP v. Anglo Irish Bank Corp., 11-CV-0955, Southern District of New York (Manhattan).
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Strauss-Kahn Accuser Hires French Lawyer to Find Other Victims
The woman who accused Dominique Strauss-Kahn of attempted rape and sexual assault in New York hired a Paris lawyer to look for women in France who may have been victimized by the former International Monetary Fund chief.
Kenneth P. Thompson, a former federal prosecutor who is representing the accuser in New York, hired Thibault de Montbrial to provide legal support, the French lawyer said yesterday.
“I am working with him, I am the contact for his firm in France, notably to see if there exist other victims of Mr. Strauss-Kahn,” de Montbrial said in a telephone interview.
Strauss-Kahn, 62, was arrested May 14 and later indicted on seven counts, including criminal sex act, attempted rape, sexual abuse, unlawful imprisonment and forcible touching. If convicted of the top charges, he faces as long as 25 years in prison. He has pleaded not guilty.
He allegedly attacked a housekeeper, a 32-year-old from Guinea, at the Midtown Manhattan Sofitel on May 14, grabbing her breasts and trying to pull down her pantyhose, prosecutors said in court papers. The former IMF chief attempted to rape her and forced her to perform oral sex, according to the indictment.
De Montbrial represented former Renault SA employee Matthieu Tenenbaum in his wrongful-firing case over false claims he sold information on the automaker’s electric-car program. De Montbrial declined to say when he was hired or comment on how information he uncovers would be used.
Emily Browne, a spokeswoman for Thompson, had no immediate comment. Benjamin Brafman, a lawyer for Strauss-Kahn, declined to comment.
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