A group of institutional investors including BlackRock Inc. (BLK) persuaded a federal appeals court to consider its request to return an $8.5 billion bond settlement with Bank of America (BAC) Corp. to state court for a judge’s approval.
The U.S. Court of Appeals in New York yesterday agreed to review the appeal of U.S. District Judge William Pauley’s ruling in October to keep the case in federal court for review, rather than remanding it to New York State Supreme Court.
The proposed agreement, first filed in New York state court, would settle claims from investors in the mortgage bonds of Countrywide Financial Corp., which Charlotte, North Carolina- based Bank of America bought in 2008. The deal was reached with the institutional investor group that includes BlackRock and Pacific Investment Management Co. and would apply to 530 mortgage-securitization trusts.
Bank of New York Mellon Corp. (BK), the trustee for the mortgage-bond trusts, filed the settlement in state court and planned to seek approval of it there. Under the state proceeding, approval would bind investors outside the group that negotiated the agreement.
An investor group, Walnut Place LLC and related entities, moved the case to federal court and is fighting the bid to return it to state court.
The case is Bank of New York Mellon v. Walnut Place LLC, 11-4554, 11-4571, U.S. Court of Appeals for the Second Circuit (Manhattan).
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BP’s McKay to Testify at Gulf Oil Spill Liability Trial
BP America Inc. Chairman and President Lamar McKay, BP Plc (BP/)’s highest-ranking U.S. executive, was subpoenaed to testify at the February trial that will determine liability for the 2010 Gulf of Mexico oil spill.
BP faces at least 350 lawsuits by thousands of coastal property owners and businesses claiming damages from the more than 4.1 million barrels of oil that gushed from the company’s well off the Louisiana coast last year.
The lawsuits were consolidated for pretrial processing by U.S. District Judge Carl Barbier in New Orleans. Also sued in the combined cases are Transocean Ltd. (RIG), which owned the Deepwater Horizon drilling rig, and Halliburton Co. (HAL), which provided cementing services to the well.
Barbier scheduled a nonjury trial to begin Feb. 27 to determine which companies share blame for the explosion. The judge has said he’ll use findings from the liability trial to guide decisions in later trial phases over damages caused by efforts to contain and clean up the historic spill, which killed 11 workers and caused the worst offshore oil spill in U.S. history.
BP, based in London, accepted responsibility for the spill and set up a $20 billion fund to compensate victims for spill- related losses. BP sued Vernier, Switzerland-based Transocean and Houston-based Halliburton on claims its contractors share blame for the disaster and should share the costs.
Transocean and Halliburton have repeatedly denied any fault for the explosion or spill in court filings.
The case is In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
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BP Released From Probation in Prudhoe Bay Spill by Judge
BP Plc didn’t violate a plea agreement in a criminal case over a 2006 spill in Alaska’s Prudhoe Bay, a judge ruled, rejecting a request by federal prosecutors to revoke the company’s probation.
BP pleaded guilty in 2007 to violating the Clean Water Act by spilling 200,000 gallons of oil from its Prudhoe Bay field into water on Alaska’s North Slope in 2006. It paid a $12 million fine and $8 million for restitution and community service and was put on three years’ probation.
The government asked U.S. District Judge Ralph Beistline in Anchorage to revoke the probation, saying London-based BP broke the agreement when it spilled about 13,500 gallons of oil near Prudhoe Bay in November 2009. Beistline rejected the U.S. request yesterday and released the company from probation.
“The court certainly cannot fault the government for the position it has taken in this matter for there clearly were reasons for concern,” Beistline wrote in an order. “There can be no doubt that the government takes its responsibility seriously to monitor the industry and to ensure compliance with environmental laws.”
“We are pleased with the decision,” Steve Rinehart, BP spokesman, said in an e-mail. “We know that the privilege of working in Alaska comes with a responsibility to maintain high standards. We will continue our commitment to running safe and compliant operations.”
Wyn Hornbuckle, a Justice Department spokesman, didn’t return an e-mail seeking comment.
The case is U.S. v. BP Exploration (Alaska) Inc., 3:07- cr-00125, U.S. District Court, District of Alaska (Anchorage).
Citigroup Suit Should Be Put on Hold During Appeal, SEC Says
The U.S. Securities and Exchange Commission asked a federal appeals court to put an emergency hold on its lawsuit against Citigroup Inc. (C) over mortgage-backed securities, and to expedite its appeal of a judge’s rejection of a $285 million settlement in the case.
Citigroup consented to the requests, the SEC said in a filing yesterday with the U.S. Court of Appeals in New York. The agency is challenging U.S. District Judge Jed Rakoff’s refusal last month to approve an accord resolving claims that New York- based Citigroup misled investors in a $1 billion financial product linked to risky mortgages. It said halting the case was necessary because Rakoff told Citigroup to respond to the SEC’s complaint next week.
“The commission seeks a stay on an emergency basis because the Jan. 3 deadline for Citigroup to answer creates an exigency that threatens the commission with additional irreparable harm,” the regulator said in court papers.
In his Nov. 28 ruling, Rakoff criticized the agency’s practice of settling without requiring the subject of the allegations to admit wrongdoing. The Manhattan judge said the Citigroup settlement didn’t provide him with “any proven or admitted facts” to inform his judgment.
The SEC said it wanted to preserve agency resources by putting the case on hold while the appeals court considers Rakoff’s ruling.
“We respectfully disagree with the court’s ruling and believe the settlement fully complies with long-established legal standards,” Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in an e-mailed statement. “In the event the case is tried, we would present substantial factual and legal defenses to the charges.”
The case is U.S. Securities and Exchange Commission v. Citigroup Global Markets Inc., 11-05227, U.S. Court of Appeals for the Second Circuit (New York).
Sharp, Samsung Agree on $539 Million to End Antitrust Cases
Sharp Corp., Samsung Electronics Co. (005930) and five other makers of liquid crystal display panels used in computers and televisions agreed to pay $538.6 million to settle antitrust claims by indirect purchasers.
Earlier this month, the panel makers agreed to pay $388 million to settle price-fixing claims by direct buyers of the products as part of a series of cases consolidated in federal court in San Francisco. Under the new agreement, about $501 million will be available for partial refunds to consumers and about $37 million to compensate governments and other public entities for damages, according to a court filing dated Dec. 23.
The companies allegedly fixed prices of thin-film liquid crystal display panels, driving up prices for purchasers of televisions, notebook computers and monitors from 1999 to 2006, according to a class action, or group, lawsuit filed in 2007. The attorneys general of eight states, including Florida, California and New York, were part of the settlement agreements with the manufacturers.
“Price-fixing is detrimental to Florida’s consumers, governmental agencies, and the economy,” Pam Bondi, Florida’s attorney general, said in a statement. “I am pleased that we will be able to return funds to those who were harmed by this illegal and deceptive behavior.”
New York taxpayers may receive as much as $11 million from the settlement, according to a release from the state’s attorney general, Eric Schneiderman.
Besides the $538.6 million settlement of the antitrust claims, five of the companies also agreed to pay more than $14 million in civil fines and penalties to New York, according to the statement from Schneiderman.
“This price-fixing scheme manipulated the playing field for businesses that abide by the rules, and left consumers to pay artificially higher costs for televisions, computers and other electronics,” Schneiderman said in the statement.
The case is In Re TFT-LCD (Flat Panel) Antitrust Litigation, 07-01827, U.S. District Court for the Northern District of California (San Francisco).
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Hawker Beechcraft Sues U.S. Over Aircraft Contract Exclusion
Hawker Beechcraft Co., the jet maker part-owned by Goldman Sachs Group Inc. (GS), said a unit asked a federal judge to block the U.S. Air Force from awarding an almost $1 billion contract for light attack aircraft, claiming the government won’t say why it was excluded from consideration.
Hawker Beechcraft Defense Co. sued the U.S. yesterday in the U.S. Court of Federal Claims in Washington challenging the Air Force’s exclusion of the Beechcraft AT-6 from the Light Air Support competition. The lawsuit was filed after the U.S. Government Accountability Office on Dec. 22 dismissed the company’s bid protest.
“We were relying on their investigation to provide transparency into what has been a bidding process of inconsistent, irregular and constantly changing requirements,” Bill Boisture, chairman and chief executive officer of Hawker Beechcraft Co., said in an e-mailed statement. We “continue to believe that our exclusion from this important contract was made without basis in process or fact,” he said.
The Air Force, in a one-page memorandum, notified the company on Nov. 1 that the AT-6 was excluded from consideration, according to a court filing.
Laura Sweeney, a Justice Department spokeswoman, declined to comment on the lawsuit.
The case is Hawker Beechcraft Defense Company LLC v. U.S., 11-897, U.S. Court of Federal Claims (Washington).
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On The Docket
Intel’s February Antitrust Trial Canceled by U.S. Judge
A federal judge ruled that Intel Corp. (INTC) won’t face a February trial in an antitrust lawsuit filed by New York state officials who claim the chipmaker attempted to monopolize the market.
U.S. District Judge Leonard Stark in Wilmington, Delaware, canceled Dec. 23 the Feb. 14 trial while lawyers for Intel, the world’s largest semiconductor maker, and the state of New York set up a schedule to hold arguments about whether the case should be dismissed.
New York sued Santa Clara, California-based Intel in November 2009, accusing it of using threats and billions of dollars in illegal payments to pressure and unfairly persuade computer manufacturers to use the company’s chips.
An Intel spokeswoman, Laura Anderson, didn’t return calls seeking comment on the judge’s ruling. Danny Kanner, a spokesman for New York Attorney General Eric Schneiderman, declined in an e-mail to comment on the decision.
Intel has battled allegations over the years that its salespeople engaged in anticompetitive behavior. The company has paid more than $2.7 billion to resolve antitrust litigation over its chips.
Schneiderman’s predecessor, Andrew Cuomo, accused Intel of engaging in illegal business practices to cement its dominance of the market for microprocessor chips. Those tactics stifled competition from Advanced Micro Devices Inc. and artificially inflated the prices consumers paid for computers, Cuomo, who is now New York’s governor, said in the suit.
Stark already threw out some of the claims, including one seeking triple damages for anticompetitive acts. The judge also narrowed the scope of the case by saying New York can only focus on computer purchases for a three-year period. State officials had sought to use a six-year period.
The case is State of New York v. Intel Corp., 09-cv-827, U.S. District Court, District of Delaware (Wilmington).
Lehman Pays Marsal Firm Almost $500 Million to Manage Bankruptcy
Lehman Brothers Holdings Inc. (LEHMQ) has paid almost half a billion dollars in fees to restructuring firm Alvarez & Marsal LLC during its bankruptcy, according to a court filing.
The firm, whose co-founder Bryan Marsal runs the defunct investment bank, charged $496.2 million in fees for 38 1/2 months of “interim management,” including $8.6 million in November, according to the filing in U.S. Bankruptcy Court in Manhattan Dec. 23.
Lehman, which has spent more than $1.5 billion on fees since filing the biggest bankruptcy in U.S. history in September 2008, paid $30.6 million to lawyers and managers in November, according to the filing.
The Lehman bankruptcy became America’s most costly in April 2010, when it topped the $757 million cost of energy trader Enron Corp.’s three-year liquidation, according to data compiled by Lynn LoPucki, a bankruptcy-law professor at the University of California, Los Angeles.
Fees earned by Weil, Gotshal & Manges LLP, based in New York, total $366.6 million so far for acting as Lehman’s lead bankruptcy law firm, including $8 million in November.
Marsal, who bills Lehman hourly, has said he will start distributing some cash to the defunct firm’s creditors by next year, more than three years after the bankruptcy filing. He has court approval for a $65 billion liquidation plan that would pay the average Lehman creditor less than 18 cents on the dollar in the next few years, according to court papers.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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