NBA, BNY, Rambus, Morgan Stanley, Madoff in Court News

The National Basketball Association was sued by New York Knicks forward Carmelo Anthony over claims the league conspired to force players to agree to a “massive reduction” in compensation.

The complaint in federal court in Oakland, California, was filed Nov. 15 by Anthony and four other NBA athletes on behalf of all players under contract with the association. The class- action complaint names the 30 NBA member teams as defendants. A similar group lawsuit was filed against the league by Caron Butler of the Dallas Mavericks in federal court in Minneapolis.

NBA players on Nov. 14 dissolved their union, a first for the group, to allow for antitrust lawsuits against the league after negotiations over a new labor agreement collapsed. The sides were negotiating over how to split money from a league that had about $4.3 billion in revenue last season. The NBA season was to start Nov. 1.

Mike Bass, an NBA spokesman, didn’t immediately respond to an e-mail message seeking comment about the lawsuits.

The case is Anthony v. NBA, 11-05525, U.S. District Court, Northern District of California (Oakland).

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L.A. Dodgers Sue Fox in Bankruptcy Court Over TV Contract

The Los Angeles Dodgers sued News Corp. (NWSA)’s Fox Sports, accusing the broadcaster of interfering with the bankrupt baseball team’s plan to sell itself and its television rights through a court-sanctioned auction.

Fox Sports sent a letter that “constitutes a deliberate attempt by Fox to interfere with the ability of LAD and its advisers, including Blackstone Advisory, to sell LAD’s assets,” the team said in papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

Team owner Frank McCourt has agreed to sell the Dodgers in a process where separate bids would be accepted for the team and its television rights. Fox Sports Net West 2 LLC has the current TV contract, which gives it the exclusive right to negotiate an extension until November 2012.

The Dodgers have filed court papers seeking approval to immediately start talking with potential buyers of the television rights, the team’s most lucrative asset. Under the proposal, the team would negotiate with Fox for 45 days. If no deal was struck, the Dodgers would talk to competing bidders.

In its filing yesterday, the team asked U.S. Bankruptcy Judge Kevin Gross to bar Fox from “taking any act that otherwise interferes with any property rights of the LAD estate, including existing and future media rights.”

Fox has said it plans to challenge any early sale, or negotiations, of the media rights. The company said it may update a lawsuit filed against the Dodgers in September.

“This is just the latest chapter in the current owner’s ongoing scheme to avoid honoring his contractual obligations,” Fox said in an e-mailed statement. “The full truth of this unfortunate situation will soon become apparent to all.”

The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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Lawsuits/Pretrial

AT&T Denies All Claims in Lawsuits by Sprint, Cellular South

AT&T Inc. (T) denied all claims in antitrust lawsuits by Sprint Nextel Corp. (S) and Cellular South Inc. over its proposed purchase of T-Mobile USA Inc.

AT&T, in separate filings yesterday in federal court in Washington, rejected allegations by Sprint and Cellular South that the $39 billion transaction would harm the companies’ ability to compete in the wireless mobile-phone market.

“The expansion of capacity and other overwhelming efficiencies that will result from this transaction will benefit consumers, such that the transaction is in the public interest,” AT&T said in the filings.

The Justice Department sued Dallas-based AT&T and T-Mobile Aug. 31, saying a combination of the two companies would “substantially” reduce competition. Seven states and Puerto Rico joined the effort to block the deal, which would make AT&T the biggest U.S. wireless carrier.

Sprint, the third-biggest U.S. wireless carrier, filed its antitrust lawsuit in Sept. 6, saying the proposed merger would weaken its ability to compete with AT&T, the second-biggest, and Verizon Communications Inc. (VZ), the market leader.

Cellular South, based in Ridgeland, Mississippi, sued on Sept. 19, claiming the merger threatened to “substantially” cut competition.

U.S. District Judge Ellen Segal Huvelle on Nov. 2 said that the suits by Sprint and Cellular South can proceed. Huvelle dismissed several claims, limiting the cases to Sprint’s allegations regarding access to mobile devices and Cellular South’s complaints involving roaming fees as well as devices.

Huvelle scheduled a hearing in the Sprint and Cellular South cases for Dec. 9.

The government’s case is U.S. v. AT&T Inc., 11-01560; Sprint’s case is Sprint Nextel Corp. v. AT&T Inc., 11-01600; and Cellular South’s case is Cellular South Inc. v. AT&T Inc., 11-01690, U.S. District Court, District of Columbia (Washington).

BNY Seeks Dismissal of Florida Currency-Trading Lawsuit

Bank of New York Mellon Corp. (BK) asked a court to dismiss a lawsuit brought by the Florida attorney general that accuses the bank of profiting from foreign-exchange trades at the expense of the state retirement fund.

The state’s complaint should be thrown out because the bank never promised to trade currencies the way the attorney general described, BNY Mellon said in a Nov. 14 court filing in Leon County, Florida.

“The contract does not contain any promise to buy and sell foreign currencies to and from the fund at ‘actual cost’ or at the rates that BNYM itself obtained on the interbank market,” the bank said in the filing.

BNY Mellon is fighting several lawsuits over how it conducts foreign-exchange transactions on behalf of public pension funds.

Florida Attorney General Pam Bondi claims the bank caused the Florida Retirement System Trust Fund to pay more than it should have for currency purchases and receive less than it should have for sales. BNY Mellon overcharged the fund by millions of dollars, Bondi said in a statement in August.

The case is State of Florida v. Bank of New York Mellon, 2009 CA 4140, Second Judicial Circuit, Leon County.

Penn State May Seek Immunity After Skirting Public Laws

Pennsylvania State University, after years of skirting public-school rules, may claim protection from liability under commonwealth laws that shield government entities, if it faces suits related to a child-sex scandal.

Moody’s Investors Service is examining the school’s relationship with the state to see whether claims of sovereign immunity apply, analysts said Nov. 15. Fallout from abuse charges against an assistant football coach and perjury accusations against two administrators led to the dismissal of Joe Paterno, the head coach, and Penn State’s president.

The commonwealth’s flagship state-supported school has successfully claimed to be exempt from freedom-of-information laws that apply to most public institutions, including competitors such as Ohio State University and the University of Texas. Penn State’s unusual position has for years shielded the school and its football program from public scrutiny.

“Because this is an unprecedented development in many areas of liability risk, it may not be clear even to them what the situation is,” John Nelson, a Moody’s analyst in New York, said in a telephone interview. “These are things that have to be decided by counsel and possibly the courts. It could just take a while to evolve.”

Jerry Sandusky, the former assistant coach, faces charges of sexually abusing boys as young as 10 at the school. Timothy Curley, the athletic director, and Gary Schultz, vice president for finance and business, were charged with failing to report an allegation related to Sandusky and then lying to a grand jury.

In addition to Paterno, 84, college football’s most successful coach, with 409 wins, the scandal claimed the job of President Graham B. Spanier, 63. Both were fired Nov. 10.

Sandusky is accused of assaults on eight boys from 1994 to 2009, when he ran The Second Mile, a charitable children’s organization, according to Pennsylvania Attorney General Linda Kelly. Sandusky, 67, denied the accusations against him in a telephone interview Nov. 14 with Bob Costas of NBC News.

“For the immediate future we are more focused on examining what went wrong at Penn State in the past and how to make sure Penn State meets the expectations the public has for us going forward,” Bill Mahon, a spokesman for the university, said in an e-mail, responding to questions about possible legal strategy.

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Trials/Appeals

Ingersoll Rand Jury Begins Hearing Worker Payout Dispute

Federal jurors began hearing a contract dispute yesterday over whether Ingersoll-Rand Plc (IR) owes $11 million or $72 million to 130 employees under an incentive plan tied to its sale of a subsidiary, Dresser-Rand Group Inc. (DRC)

Ingersoll Rand, which makes heating and ventilation equipment, offered the plan, dated in 2000, to retain workers when it began trying to sell Dresser-Rand. After Dresser-Rand, which makes oilfield equipment, was sold in 2004 for $1.2 billion, Ingersoll Rand said the 2000 plan no longer applied. Workers sued in federal court in Newark, New Jersey, and a judge ruled the plan remains in effect, setting up the trial.

“This case is about an attempt by Ingersoll Rand to get out of the legal requirement of the contract by playing around with the figures,” Rusty Hardin, an attorney for the workers, said in an opening statement. It’s an attempt to cheat “these people out of what they contracted and promised them,” he said.

The amount paid will depend on a formula tied to the net sale price, after deductions for taxes and transaction costs, and additions for other items. Ingersoll Rand claims it owes $11 million, while workers say they are due $72 million. Workers say the judge can add interest of at least $25.5 million.

Barry Ostrager, an attorney for Ingersoll Rand, said the jury should value the 704,196 SVUs at $16.18 each, not the $102.74 that the workers seek. He pointed out that the top three workers would get bonuses of $5 million each under the plaintiffs’ plan. The difference between the two sides, he said, is $61 million.

“If their calculations are correct, these plaintiffs are going to get a boatload of money,” Ostrager said. “You have to decide whether this $61 million should stay with Ingersoll Rand so it can run its business and employ more people or whether it should go to these 130 plaintiffs.”

The case is Nye v. Ingersoll Rand Co., 08-cv-03481, U.S. District Court, District of New Jersey (Newark).

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Verdicts/Settlements

MERS Wins Appeal of Decision Limiting Michigan Foreclosures

Mortgage Electronic Registration Systems Inc. won reversal of a lower court decision that limited the company’s right to foreclose on residences in Michigan when it doesn’t own a debt.

The Michigan Supreme Court yesterday reversed an April decision voiding two property seizures. The Michigan Court of Appeals had ruled that MERS didn’t have the right to use non- judicial foreclose by advertisement, the state’s method for seizing homes in default, when it didn’t own or have an interest in the underlying debt.

State law didn’t permit non-judicial foreclosure in the name of an agent or nominee, the lower court said. The Michigan Supreme Court disagreed in a two-page ruling.

The April ruling “is inconsistent with established legal principles governing Michigan’s real property law, and specifically foreclosure by advertising,” the Michigan high court said. Michigan law allows such foreclosure by parties acting as servicing agents, the court said.

The lower court decision was cited in multiple lawsuits in Michigan courts since April seeking to prevent or void foreclosures. The suits in federal court had been put on hold pending the Supreme Court decision.

Yesterday’s ruling “affirms MERS business model and will allow the Michigan real estate industry to get back to business as usual,” Bill Beckmann, MERSCorp.’s president and chief executive officer, said in an e-mailed statement. “The Saurman ruling caused considerable confusion, delayed property transactions, and triggered unnecessary litigation.”

The reversal of the earlier ruling “is an embarrassment to those of us who care about the property records of this state, and more importantly the citizens who are affected by these foreclosures,” Curtis Hertel, Ingham County Register of Deeds, said in an e-mail.

The homeowners suits are Residential Funding Co. v. Saurman, 143178, and Bank of New York Trust Co. v. Messner, 143179, Michigan Supreme Court (Lansing).

Rambus Loses Chip Pricing Jury Trial Against Hynix, Micron

Rambus Inc. (RMBS) lost a jury trial over its allegations that Micron Technology Inc. (MU) and Hynix Semiconductor Inc. (000660) conspired to prevent its product from becoming an industry standard.

A state court jury in San Francisco yesterday by a 9-3 vote rejected Rambus’s claims that Boise, Idaho-based Micron and Ichon, South Korea-based Hynix are liable for colluding to manipulate prices of dynamic random access memory, or DRAM, chips in violation of California antitrust law. Jurors also found, by the same vote, that the two companies aren’t liable for plotting to interfere with Rambus’s business relationship with Intel Corp. and driving the world’s largest chipmaker away from their collaboration on RDRAM, or Rambus-designed memory, that began in the 1990s.

Rambus said it would have made $3.95 billion in royalties without the alleged conspiracy. Under California law, a jury finding of antitrust damages in that amount would have been automatically tripled to $11.9 billion.

“We are disappointed with this verdict as we believe strongly in our case,” Harold Hughes, president and chief executive officer of Rambus, said in an e-mailed statement. “We do not agree with several rulings that affected how this case was presented to the jury and we are reviewing our options for appeal.”

The case is Rambus Inc. v. Micron Technology Inc., 04-0431105, California Superior Court (San Francisco).

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Kendrion, Fardem Lose Bagmaker Cartel Fine EU Court Appeal

Kendrion NV (KENDR) and its former subsidiary Fardem Packaging BV lost appeals at a European Union court against fines for unlawfully fixing prices with competitors in an industrial bags cartel.

The EU General Court in Luxembourg yesterday dismissed both appeals, while reducing a fine against Low & Bonar Plc (LWB) and its Bonar Technical Fabrics unit to 9.2 million euros ($12.4 million) from 12.2 million euros.

The Brussels-based commission in November 2005 fined 16 companies 290.7 million euros for colluding on prices of plastic bags used for industrial products. UPM-Kymmene Oyj (UPM1V), which received the biggest fine of 56.5 million euros in the cartel, still has an appeal pending at the EU court.

The commission, the 27-nation EU’s antitrust regulator, had fined Zeist, Netherlands-based Kendrion and Fardem a combined 34 million euros.

“We are very disappointed,” Piet Veenema, chief executive officer of Kendrion, said in an e-mailed statement. “Based partly on various legal opinions, we took, and continue to take, the position that the fine imposed was out of all proportion. We will therefore most likely lodge an appeal with the Court of Justice.”

Decisions by the EU General Court can be appealed to the EU Court of Justice, the region’s highest tribunal. Fardem declined to comment, referring questions to Kendrion.

The cases are: T-51/06, T-54/06, T-55/06 and T-66/06, T-59/06, T-68/06, T-72/06, T-76/06, T-78/06, T-79/06.

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Morgan Stanley (MS) to Pay $3.3 Million Over Advisory-Fee Claims

Morgan Stanley will pay $3.3 million to settle U.S. Securities and Exchange Commission claims that an investment- management unit facilitated payments by a fund for advisory services that weren’t delivered.

Malaysia Fund investors paid $1.85 million from 1996 to 2007 for research and advisory assistance that Morgan Stanley Investment Management said was provided by a subsidiary of AM Bank Group, the SEC said yesterday. Investigators found that the Malaysia-based sub-adviser provided only two monthly reports, which were based on publicly available information that Morgan Stanley neither requested nor used, the SEC said in a statement.

“MSIM failed in its duty to provide the fund’s board members with the information they needed to fulfill their significant responsibility of reviewing and approving the sub- adviser’s contract,” Bruce Karpati, co-chief of the SEC Enforcement Division’s Asset Management Unit, said in the statement. “MSIM’s failure undermined the integrity of a board’s oversight process.”

The action is the first to come from a broader SEC review of how contracts are renewed and fees are set in the investment advisory industry, the agency said.

Morgan Stanley agreed to resolve the matter without admitting or denying wrongdoing, the SEC said.

“This settlement fully resolves the SEC’s investigation into MSIM, and we are pleased to put the matter behind us,” said Mark Lake, a Morgan Stanley spokesman. “MSIM terminated the sub-adviser back in 2008.”

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Litigation Departments

Nick Leeson Defense Lawyer Stephen Pollard Joins Wilmer Hale

Stephen Pollard, the U.K. criminal defense lawyer who advised trader Nick Leeson after the collapse of Barings Plc, is leaving the law firm Kingsley Napley LLP to join Washington- based Wilmer Hale LLP.

Pollard is leaving the London-based firm after 22 years, he said in a statement from Kingsley Napley yesterday. He advised on the Financial Services Authority’s first criminal prosecution and several investigations by the Serious Fraud Office.

Pollard is also representing Moore Capital Management LLC’s Julian Rifat, who was arrested in an FSA investigation into an alleged insider trading ring involving employees from Deutsche Bank AG, Exane BNP Paribas and Moore Capital.

“He has been a star at the firm for many years and we have valued his professionalism, legal ability and friendship,” said Linda Woolley, Kingsley Napley’s managing partner. “Naturally we are very sorry to lose someone of Stephen’s caliber.”

Madoff Trustee Picard Spent $434 Million Through September

The trustee for Bernard L. Madoff’s defunct firm spent $434 million liquidating the estate through September, including fees for himself and his law firm of more than $200 million.

Irving Picard, the trustee, said the funds for fees and administration came from the Securities Investor Protection Corp., which advanced more than $1.2 billion. About $785.3 million of the SIPC money was used to pay allowed customer claims, Picard said in a filing Nov. 15 in U.S. Bankruptcy Court in Manhattan reporting his work for the past six months.

Picard, who has filed 1,000 lawsuits seeking $100 billion from banks such as HSBC Holdings Plc (HSBA) and JPMorgan Chase & Co. (JPM), has seen more than $28 billion of his claims tossed by district judges. His $59 billion suit against UniCredit SpA (UCG) and Bank Medici AG founder Sonja Kohn is being reviewed by U.S. District Judge Jed Rakoff.

Most of the $8.6 billion the trustee has said he recovered for Madoff customers who lost money is tied up in court challenges.

Amanda Remus, a Picard spokeswoman, didn’t respond to an e- mail seeking comment on the filing.

Rakoff challenged Picard’s fees in a court hearing on the UniCredit case.

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

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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: Michael Hytha at mhytha@bloomberg.net.

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