Citigroup Inc. (C) and Guy Hands’s Terra Firma Capital Partners Ltd. will litigate their dispute over the 2007 sale of EMI Group Ltd. in the U.K., both sides said after agreeing to drop a $2.2 billion case awaiting retrial in New York.
A federal appeals court in Manhattan last year overturned the 2010 verdict in which Citigroup defeated Hands’s claim that it tricked him into overpaying for EMI, the London-based music company. The appeals court ordered a new trial, ruling that the judge made an error in explaining the law to the jury.
“Terra Firma and Citigroup have together decided that their disputes should be resolved in one set of proceedings,” the two sides said in a joint statement today. “As a result, the parties have consented to the transfer of the claim before the New York court to England, to be consolidated with the proceedings that are ongoing before the English court.”
Hands claimed that a Citigroup banker, David Wormsley, lied to him in phone calls the weekend before the EMI auction on May 21, 2007, a Monday, leading his private-equity firm to overbid in a deal that lost money for all involved.
Hands said Wormsley told him that Cerberus Capital Management LP planned to submit a bid when Cerberus had in fact decided to withdraw from the auction, leaving Terra Firma without competition.
After a 2 1/2-week trial, a jury ruled in favor of Citigroup in November 2010. U.S. District Judge Jed Rakoff, who called the dispute “a catfight between two rich companies,” ruled that punitive damages weren’t appropriate, lowering the maximum possible damages to $2.2 billion from $8.3 billion.
The appeals court ruled that Rakoff incorrectly told jurors that, under English law, Terra Firma had to prove it relied on one or more misrepresentations by Wormsley and that the misrepresentations were a substantial factor in the decision to bid on EMI.
Both sides agreed before trial that English law applied to the dispute. They filed court papers withdrawing the New York case today.
The case is Terra Firma Investments (GP) 2 Ltd. v. Citigroup, 11-126, U.S. Court of Appeals for the Second Circuit, (Manhattan).
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