Bank of America Corp. won dismissal of a lawsuit by investors in mortgage-backed bonds that said the bank should buy back defective loans underlying more than $1 billion in securities.
New York State Supreme Court Justice Barbara Kapnick dismissed the complaint filed last year by Walnut Place LLC and related entities, saying the lawsuit was “premature,” according to a decision dated March 28.
Bank of America’s Countrywide Financial unit was accused of making false representations and warranties about the loans backing the bonds, according to the complaint. Walnut Place owns about $1.4 billion in face value of the securities at issue, it said in court papers.
Walnut Place is a pseudonym used by hedge fund Baupost Group LLC, according to Theodore Mirvis, a Bank of America attorney. Boston-based Baupost, founded by Seth Klarman, is the “real plaintiff” in the case, Mirvis said at a court hearing, according to a transcript.
Elaine Mann, a spokeswoman for Baupost, said the firm’s general policy is not to comment on specific investments, whether the fund holds them or not.
Walnut Place had said in court papers that it was suing because Bank of New York Mellon Corp., as trustee for bondholders, “unreasonably failed” to sue Bank of America to enforce the obligation to repurchase loans.
Bank of America spokesman Lawrence Grayson said the North Carolina-based lender was pleased with the decision. David Grais, a lawyer for Walnut Place, didn’t return a phone message seeking comment.
“We are pleased the court recognized that BNY Mellon acted properly in this matter,” bank spokesman Kevin Heine said in a statement. “As we’ve said in the past, we believe that at all times we’ve acted in accordance with our duties as trustee.”
The case is Walnut Place LLC v. Countrywide Home Loans Inc., 650497-2011, New York State Supreme Court (Manhattan).
Pfizer Judge Certifies Class Action in Celebrex Suits
Pfizer Inc. (PFE) lost a bid to block class-action, or group, status for investors who sued the world’s biggest drugmaker over claims it misled them about the prospects of two chronic pain- relief drugs, Celebrex and Bextra.
U.S. District Judge Laura Taylor Swain in New York, who is presiding over a series of investor suits filed in 2004, yesterday ruled that the main class of plaintiffs will be those who purchased stock from Oct. 31, 2000, to Oct. 19, 2005.
The stockholders claimed New York-based Pfizer and its top officers deliberately hid or misrepresented the results of studies that suggested the drugs may have adverse cardiovascular effects.
“Over the past seven years, this court has become familiar with both the parties to and the subject matter of this action, and so believes that concentrating this litigation in this forum would promote judicial economy,” Swain said in her 30-page ruling.
Swain said there’s an adequate similarity of claims that would benefit from granting the request for class-action status, which joins individual cases and allows plaintiffs to pool financial and legal resources.
Celebrex was linked to heart risks at high doses in research released in November 2004, sending shares down as much as 7.6 percent on Nov. 4, 2004. Bextra was among the drugs that a U.S. Food and Drug Administration reviewer identified as unsafe that month.
Swain hasn’t ruled on the merits of the lawsuit.
“We are disappointed in the court’s order and will continue to vigorously defend the litigation,” Chris Loder, a spokesman for Pfizer, said in an e-mail. “It is important to note that the order does not address the underlying merits of the litigation, which we strongly dispute.”
The cases are In Re Pfizer Inc. Securities Litigation, 04- cv-9866, 05-MD-1688, U.S. District Court, Southern District of New York (Manhattan).
Wells Fargo, SEC Told to Meet to Resolve Subpoena Requests
Lawyers for Wells Fargo & Co. (WFC) and the U.S. Securities and Exchange Commission were ordered to meet to resolve differences over the the agency’s subpoenas for documents related to a probe into mortgage-backed securities.
U.S. Magistrate Judge Laurel Beeler in San Francisco rejected the SEC’s request for an order compelling the bank, the largest U.S. home lender, to deliver documents it agreed to produce under subpoenas dating from September, according to a court filing yesterday. Beeler said the lawyers for the parties should meet in person, and if that doesn’t work, file a letter to her.
Regulators said in a March 23 filing that Wells Fargo failed to hand over documents demanded in U.S. subpoenas and should be forced to cooperate with a probe into its sale of almost $60 billion in residential mortgage-backed securities.
The SEC said it’s looking into possible fraud by the San Francisco-based company and hasn’t concluded that anyone broke the law.
The agency asked a federal judge to compel the bank to deliver the documents. The matter was referred to Beeler.
Marc Fagel, the head of the SEC’s office in San Francisco, didn’t immediately return an e-mail and phone call after regular business hours yesterday seeking comment on the ruling.
Ancel Martinez, a Wells Fargo spokesman, didn’t have an immediate comment.
MERS Judge Sets Aside Bankruptcy Court’s Critical Ruling
Merscorp Inc., operator of the electronic-registration system for about half of all U.S. home mortgages, got a court to set aside a bankruptcy judge’s opinion criticizing its right to transfer the mortgages among members.
U.S. District Judge Joanna Seybert in Central Islip, New York, vacated March 28 part of U.S. Bankruptcy Judge Robert E. Grossman’s February 2011 decision in the bankruptcy of Ferrel L. Agard. Merscorp, based in Reston, Virginia, runs Mortgage Electronic Registrations Systems, or MERS.
“The issue of whether MERS had authority to assign the mortgage was no longer before the bankruptcy court,” Seybert wrote. “There was no longer a live case or controversy.”
Merscorp was created in 1995 to help county officials cope with the growing volume of mortgage transfers, the company has said. It tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing participating banks to buy and sell the loans without having to record the transfer with the county. MERS helped Wall Street to quickly bundle mortgages together in securitized trusts.
“I thought it was a poor decision because it was decided only on procedural grounds,” George E. Bassias, a lawyer for Agard in Queens, New York, said of Seybert’s ruling in a phone interview yesterday. “In my opinion she’s wrong on the procedure too.”
“We have long believed that those who sought to use the In re Agard decision against MERS were wrong to do so,” Janis Smith, a Merscorp spokeswoman, said in a statement. “Any future challenges to MERS’ business model will have to be done without citing to Judge Grossman’s now vacated opinion.”
The appeals are Agard v. Select Portfolio Servicing Inc., 11-cv-1826, and Mortgage Electronic Registration Systems Inc. v. Agard, 11-cv-2366, U.S. District Court, Eastern District of New York (Central Islip). The bankruptcy case is In re Agard, 10-77338, U.S. Bankruptcy Court, Eastern District of New York (Central Islip).
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Express Scripts, Medco Sued by Trade Groups Over Merger Plan
Express Scripts Inc. (ESRX) and Medco Health Solutions Inc. (MHS) were sued in federal court by trade groups representing retail drug stores and pharmacists seeking to block the companies’ proposed merger.
The National Association of Chain Drug Stores and the National Community Pharmacists Association filed the lawsuit yesterday in federal court in the Western District of Pennsylvania saying the proposed merger violates antitrust laws.
“Retail community pharmacies throughout the United States that provide critical services to millions of patients are threatened with substantial, imminent and irreparable harm as a result of this acquisition,” the groups alleged in the complaint.
Express Scripts, based in St. Louis, agreed in July to buy Franklin Lakes, New Jersey-based Medco for $29.1 billion, saying the deal would help consumers by giving them more power to negotiate prices.
The companies act as middlemen among drugmakers, pharmacies and health-plan sponsors to manage patients’ benefits.
Express Scripts spokesman Brian Henry declined to comment on the lawsuit. Jennifer Luddy, spokeswoman for Medco, said by e-mail, “We stand by our recent 8K filing, in which we stated that we expect the merger to be completed as early as the week of April 2, 2012.”
The Federal Trade Commission, which has been conducting an antitrust review of the proposed transaction, is expected to rule on the case as soon as today, two people familiar with the case told Bloomberg yesterday.
The case is National Association of Chain Stores v. Express Scripts, 2:05-mc-02025, U.S. District Court, Western District of Pennsylvania.
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Deutsche Bank Unit Sued Over Mortgage Repurchase Claims
A Deutsche Bank AG (DBK) unit was sued over the sale of mortgage bonds by investors who claim $250 million in damages and are demanding that the bank repurchase loans underlying their securities.
DB Structured Products Inc. breached representations made to investors about the loans packaged and sold as securities, according to a summons filed March 28 in New York State Supreme Court in Manhattan.
The Deutsche Bank unit agreed to repurchase loans that breached representations, plaintiffs RMBS Recovery Holdings 4 LLC and VP Structured Products LLC said. They sued on behalf of all securities holders in a mortgage securitization trust.
“We intend to vigorously defend ourselves against this action and believe it is without merit,” Renee Calabro, a spokeswoman for Frankfurt-based Deutsche Bank, said in an e- mailed statement.
The case is RMBS Recovery Holdings 4 LLC v. DB Structured Products Inc., 650980-2012, New York State Supreme Court (Manhattan).
Adams Golf Sued by Investor Over $70 Million Adidas Offer
Adams Golf Inc. (ADGF), whose golf clubs are used by players including Tom Watson and Kenny Perry, was sued by an investor claiming a $70 million offer for the company by Adidas AG (ADS) is inadequate.
The proposed transaction represents a “paltry premium of just 9.5 percent” over Adams Golf’s closing price on March 18, the day before the announcement, and fails to adequately compensate shareholders for the “significant synergies” created by the merger, shareholder Daniel Tarsha said in the complaint.
Adams Golf directors “have exacerbated their breaches of fiduciary duty by agreeing to lock up the proposed transaction with deal protection devices that preclude other bidders,” Tarsha said in the complaint made public yesterday in Delaware Chancery Court (1400L).
Adidas, the owner of the TaylorMade brand, said it would pay $10.80 a share in cash for Plano, Texas-based Adams. The deal, which will be financed through cash or existing credit lines, is expected to be completed in mid-2012, Adidas said.
The deal includes provisions that prevent Adams Golf from soliciting other bidders, gives Adidas four days to match any competing offer and requires the company to pay Adidas a termination fee of about 4 percent of the total offer, Tarsha said in his complaint.
Tarsha is seeking to represent all Adams Golf shareholders in his request for a court order barring the deal. Adams Golf officials weren’t immediately available to comment.
The case is Tarsha v. B.H. Adams, CA7362, Delaware Chancery Court (Wilmington).
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Ex-McKinsey Consultant Banki to Be Retried Over Iran Embargo
Mahmoud Reza Banki, a former McKinsey & Co. consultant whose 2010 conviction for violating a trade embargo with Iran was partly set aside in October, will be retried, federal prosecutors said.
The naturalized U.S. citizen, who was born in Iran, was sentenced to 2 1/2 years in prison following a jury trial in New York. Banki was freed in November after an appeals panel overturned convictions on three of five counts. The U.S. appealed and the same panel in February amended the decision, giving prosecutors the option to retry him on the three counts.
“The government has already proven and will again prove” that Banki “committed each offense,” Assistant U.S. Attorney Jason Hernandez said March 28 in papers filed in federal court in Manhattan.
The U.S. is also seeking a restraining order on more than $2.6 million of assets controlled by Banki.
“Courts in this circuit have regularly imposed restraining orders to ensure that the forfeiture penalty mandated by numerous criminal statutes will not be frustrated by dissipation of the defendant’s assets,” Hernandez said.
The defendant, who has a doctorate in chemical engineering from Princeton University, was originally accused of running a “hawala” or “value-transfer” business that essentially moved money to residents of Iran from 2006 to 2009 in violation of the U.S. embargo.
The appeals panel in October reversed three counts and sent them back for possible retrial. Those charges include conspiring to violate the Iran trade embargo, violating the embargo and operating an unlicensed money-transmitting business.
Defense lawyers had argued Banki didn’t violate the law because he got the money from his family and reported the funds to the U.S. government.
Christine Chung, a lawyer for Banki, didn’t immediately return a voice-mail message left at her office seeking comment on the filing by prosecutors.
The case is U.S. v. Banki, 1:10-cr-00008, U.S. District Court, Southern District of New York (Manhattan).
Australia Cigarette Law Sterilizes Property Rights, BAT Says
British American Tobacco Plc (BATS) said an Australian law prohibiting the display of tobacco companies’ logos, labels and trademarks “sterilizes” their intellectual property rights and must be declared unconstitutional.
“The Commonwealth has assumed control over a substantial aspect of the plaintiff’s property, business, goodwill and reputation,” the cigarette maker said in a March 26 filing to the High Court of Australia.
BAT, Philip Morris International Inc. (PM) and Imperial Tobacco Group Plc (IMT) are challenging the validity of the Australian law and will present their arguments against it in Canberra beginning April 17. Australia is the first country in the world to ban logos on cigarette packaging, with the law slated to go into effect in December.
The Australian Constitution, like its U.S. counterpart, was drafted recognizing the right of the state to acquire private property for public purposes only if “full indemnification” is provided to the former owner, rather than with the view based on the feudal notion that all property ultimately belonged to the sovereign, Imperial Tobacco’s Australian unit said in its submission to the court.
The tobacco companies have said they will seek billions of dollars of damages from the Australian government should they lose the right to their trademarks.
At the hearing scheduled for April, the companies will ask the High Court to declare that the plain-packaging legislation results in acquisition of property without proper compensation and that the law is unconstitutional, according to the filing posted on the court’s website.
The Australian government announced the plan to ban branding on cigarette packs in April last year, along with a 25 percent increase in tobacco taxes and an A$85 million ($88 million) advertising campaign to combat smoking.
“We won’t be bullied by tobacco companies threatening litigation and we are prepared to fight them if they do,” then- Health Minister Nicola Roxon said after the passage of the law.
The case is British American Tobacco Australia Ltd. v the Commonwealth of Australia. S389/2011. High Court of Australia (Canberra).
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Telefonica Loses Fight on 152 Million-Euro EU Antitrust Fine
Telefonica SA (TEF) lost a court challenge to a 152 million-euro ($202 million) antitrust fine by European Union regulators.
The EU’s General Court rejected the appeal by Spain’s biggest phone company and said the European Commission “rightly held that Telefonica had abused its dominant position” over the Spanish Internet market, according to a statement. The court also backed regulators’ view that deliberately underpricing wholesale services to hurt rivals, called “margin squeeze,” was a form of monopoly abuse.
Telefonica was fined by the commission in 2007 for abusing its monopoly over broadband Internet access in Spain by charging wholesale rates that were too close to retail prices between 2001 and 2006. Regulators said this prevented rivals from making a profit.
Telefonica will appeal the ruling to the region’s highest tribunal and is in “complete and profound disagreement” with yesterday’s decision, it said in an e-mailed statement. The company “scrupulously abided by the telecommunications regulations imposed” by Spanish regulators.
The EU antitrust agency said the judgments “are important because they confirm the commission’s methodology for determining the existence of a margin squeeze and the commission’s power to intervene” in monopoly abuse cases in regulated markets, such as telecommunications, according to a statement published on its website.
The court said Telefonica must have been aware that compliance with Spanish rules didn’t prevent the EU from applying its own competition rules and that the Madrid-based company was allowed to increase its prices at any time.
The case is T-336/07 Telefonica and Telefonica de Espana v. Commission.
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