BNY Mellon, Citigroup, Berkshire Hathaway in Court News

Bank of New York Mellon Corp., the world’s largest custody bank, may head to trial to defend against a lawsuit by Virginia claiming the state’s pension funds were defrauded in foreign-currency trades.

A state judge in Fairfax, Virginia, rejected the bank’s request for a so-called plea in bar hearing where BNY Mellon could seek dismissal of the case by presenting evidence it claims shows Virginia agreed to its pricing procedures for currency trades.

“I think we need to have a full trial on this issue,” Fairfax County Circuit Judge Terrence Ney said, according to a transcript of a Feb. 17 hearing. “I just don’t think it makes sense to take what is really the heart of the bank’s defense and try to squeeze it down into a plea in bar when it’s really about the entire case.”

Virginia Attorney General Kenneth Cuccinelli sued the New York-based bank in August, claiming it violated state law by charging “undisclosed markups” on currency-exchange trades to six retirement funds. Virginia is seeking about $931.6 million in damages.

BNY Mellon has twice sought to have the case dismissed, arguing that it can’t be sued under the Virginia Fraud Against Taxpayers Act because the alleged false or fraudulent claims weren’t submitted to the state for payment.

“The court’s decision is procedural and not a ruling on the merits of the case,” Kevin Heine, a BNY Mellon spokesman, said yesterday. “We continue to believe this lawsuit reflects a flawed understanding of foreign currency markets.”

Brian Gottstein, a spokesman for Cuccinelli, didn’t respond to phone and e-mail messages seeking comment on the ruling.

Attorneys general in New York and Florida, as well as U.S. Attorney Preet Bharara in Manhattan, have sued over the same issue. Massachusetts filed an administrative action against the bank.

The case is Commonwealth of Virginia v. Bank of New York Mellon Corp., 09-15377, Circuit Court for the County of Fairfax, Virginia (Fairfax).


Citibank Judgment Against Developer Upheld by Appeals Court

Sheldon H. Solow, the billionaire real-estate developer, lost a bid to have an appeals court overturn a $98.9 million judgment against him in a suit brought by Citigroup Inc.’s Citibank NA unit.

Citibank sued Solow in 2008, saying he failed to make payments on a $503 million line of credit it provided to develop a site along New York’s East River. Solow said the bank rebuffed his offer of more collateral and instead sold his initial collateral for millions of dollars less than fair market value.

New York State Supreme Court Justice Bernard Fried in March 2010 granted the bank’s request for a verdict before trial and awarded the company $85.7 million plus fees and damages.

A New York appeals court upheld that ruling yesterday, saying that Solow didn’t support his claim that the value of the collateral was “determined in bad faith.” The sale of the collateral was “commercially reasonable” because New York-based Citibank wasn’t bound to wait and risk a declining market and the sale price wasn’t significantly lower than the market value, the appeals court said.

Donald A. Corbett, an attorney at Lowenstein Sandler PC in New York who represented Solow in his appeal, didn’t immediately return a voice-mail message left at his office seeking comment on the ruling.

The case is Citibank NA v. Solow, 603697/2008, New York State Supreme Court (Manhattan).

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Buffett’s Berkshire Hathaway Dropped From Ex-Employee Suit

Warren Buffett’s Berkshire Hathaway Inc. was dismissed from a lawsuit filed in Indiana by a former manager at its Forest River unit who said he was fired after complaining about illegal transactions.

U.S. District Judge James T. Moody in South Bend dismissed Berkshire Hathaway in a decision dated Feb. 22. Forest River, which makes recreational vehicles, and founder Peter J. Liegl, remain defendants in the suit brought by Brad A. Mart, who was general manager of Forest River Financial Services.

“Because no claims remain against Berkshire Hathaway, it is dismissed from the case,” Moody wrote in his decision, which was entered in the case docket yesterday.

Berkshire Hathaway, based in Omaha, Nebraska, agreed to buy Forest River in 2005 for an undisclosed price. Mart said Liegl agreed to make him chief executive officer of Elkhart, Indiana-based Forest River when the founder retired in 2008.

Stephen A. Kennedy, a lawyer for Mart in Dallas, didn’t immediately return a call for comment on the ruling.

“With respect to the pending claims, the company intends to defend them vigorously,” Steven J. Pearlman, a lawyer for Forest River and Liegl with Seyfarth Shaw LLP in Chicago, said in a telephone interview.

The case is Mart v. Forest River, 10-cv-118, U.S. District Court, Northern District of Indiana (South Bend).

Mark Madoff’s Ex-Wife Says Trustee Suit Is ‘Time-Barred’

The late Mark Madoff’s ex-wife, Susan Elkin, challenged a bid by the liquidator of Bernard L. Madoff’s firm to name her in an amended complaint against the family, saying his effort to recover money is “time-barred” as it was received beyond the six years allowed by New York law.

Mark Madoff, the convicted confidence man’s son, married Elkin in 1989. The couple divorced in 2000, more than eight years before Madoff’s 2008 arrest and his firm’s bankruptcy, Elkin said yesterday in a bankruptcy court filing in Manhattan.

The Madoff trustee, Irving Picard, knew of the marriage and can’t “plausibly claim,” as he has tried to do, that he would have named her in the original complaint if he hadn’t mistaken her identity, she said.

Martin Flumenbaum, a lawyer for Andrew Madoff and Mark Madoff’s estate, has said the lawsuit is “wholly without merit.” Picard’s spokeswoman, Amanda Remus, didn’t immediately respond to an e-mail seeking comment on Elkin’s filing.

The case is Picard v. Estate of Mark Madoff, 09-01503, U.S. District Court, Southern District of New York (Manhattan).

Syracuse University Wins Bid to Move Sex-Abuse Suit Upstate

A lawsuit filed against Syracuse University by two men who claim they were sexually molested by former assistant basketball coach Bernie Fine was moved out of New York City to an upstate courthouse.

New York State Supreme Court Justice Brian F. DeJoseph in Syracuse Feb. 22 granted a motion by lawyers for the university and co-defendant Jim Boeheim, the head men’s basketball coach, to have the case heard in Onondoga County, where the school is based and where plaintiff Robert “Bobby” Davis lives.

Davis and his stepbrother Michael Lang, of Oswego County, who both served as ball boys for the Syracuse basketball program, sued the school and Boeheim in in Manhattan on Dec. 13. Fine, who has denied wrongdoing, wasn’t named in the suit and the university has declined to comment on the complaint.

The plaintiffs argued that the case should stay in Manhattan as local media coverage has “tainted the local jury pool,” DeJoseph said in his ruling. “The plaintiffs’ arguments are well-crafted and are certainly worth of review from this court, but they still equate to nothing more than mere beliefs, suspicions and a feeling of possible bias.”

Syracuse fired Fine, who was in his 36th season at the upstate New York university, on Nov. 27 after he was accused of sexually abusing the two former ball boys. Onondaga County District Attorney William Fitzpatrick said on Dec. 8 that Fine won’t face charges related to those allegations because the claims are too old to prosecute.

The judge, a graduate of Syracuse University, said in his decision that articles from national and local outlets after Fine’s dismissal aren’t completely one-sided and can’t be considered “unduly unfair.”

Gloria Allred, an attorney representing Davis and Lang, said she is reviewing the university’s move for a change of venue.

The cases are Davis v. Boeheim, 000255/2012, Onondaga County Supreme Court (Syracuse); and Davis v. Boeheim, 113967/2011, New York State Supreme Court (Manhattan).

Expert Networker Kinnucan Can Be Freed on $5 Million Bond

A federal judge in Manhattan ruled that John Kinnucan, the Broadband Research LLC founder indicted Feb. 21 for insider trading, can be freed on $5 million bond, rejecting prosecutors’ claims he engaged in a “campaign” of threats.

U.S. District Judge Deborah Batts agreed to release Kinnucan on the bond, ordering it be secured by $100,000 cash and property and signed by four financially responsible people.

Prosecutors yesterday argued Kinnucan, 54, posed a danger to the community and a threat to authorities handling his case, citing at least 24 voice-mail messages he left after hours at the office phones of federal prosecutors and Federal Bureau of Investigation agents and also at the homes of two cooperating witnesses during the past two months.

Batts said prosecutors had come “extremely close” to convincing her he should remain in custody before trial because he posed a danger to the community, prosecutors and agents.

“In the last two months Mr. Kinnucan has engaged in a campaign of obstruction, harassment and intimidation,” Assistant U.S. Attorney Chris LaVigne said in court. “These are the actions of a calculated man dead set upon acting.”

Thomas Hester, Kinnucan’s court-appointed lawyer in Oregon, argued his client was “no John Gotti” and had recently been under stress, which triggered the spate of calls, including the recent deaths of two brothers and his mother.

The case is U.S. v. Kinnucan, 12-cv-163, U.S District Court, Southern District of New York (Manhattan).

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Verdicts, Settlements, Pleas

Two Investors Plead Guilty to Tax Lien Auction Bid-Rigging

Two investors pleaded guilty to conspiring to rig bids at municipal tax lien auctions in New Jersey and are cooperating in a larger U.S. investigation, the Justice Department said.

The men admitted yesterday after being charged in U.S. District Court in Newark, New Jersey, that they conspired to eliminate competition by allocating bids at public auctions by the state’s 566 municipalities. Bidders are supposed to compete fairly for the right to buy liens and collect taxes on property, with bidding starting at 18 percent and then going lower.

Robert W. Stein, of Huntington Valley, Pennsylvania, and David M. Farber, of Cherry Hill, New Jersey, admitted they worked to limit competition and buy liens which returned a higher interest rate. On Aug. 24, three other people pleaded guilty to bid-rigging in New Jersey auctions.

The cases are U.S. v. Stein and U.S. v. Farber, U.S. District Court, District of New Jersey (Newark).

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Whitney Bank Will Pay $6.8 Million to End Overdraft Case

Hancock Holding Co.’s Whitney Bank reached a preliminary agreement to pay $6.8 million to settle litigation claiming that it gouged customers on overdraft fees for checking accounts, court records show.

The proposed settlement will be filed with the federal court in Tampa, Florida, within 45 days, according to court records.

“The recovery is excellent for customers, and it offers them the easiest process to get paid,” Jeffrey Ostrow, the plaintiff’s attorney, said in a telephone interview.

“While the company admits no wrongdoing, in order to fully and finally resolve the litigation and avoid significant costs and expenses that would be involved in defending the case as well as the distraction caused by the litigation, Whitney Bank has entered into an agreement in principle,” the bank said yesterday in a regulatory filing.

At least 30 banks have been sued over their overdraft-fee policies. The customers say the banks reorder debit-card transactions in their computers to maximize overdraft fees. Bank of America Corp., the second-biggest U.S. bank by assets, agreed last year to pay $410 million without admitting liability to settle an overdraft lawsuit brought by its customers.

The case is Angelique LaCour v. Whitney Bank, 11-cv-1896, U.S. District Court, Middle District of Florida (Tampa).

For the latest verdict and settlement news, click here.

New Suits

HSH Nordbank Sues Barclays Over Mortgage Backed Securities

HSH Nordbank AG, a regional German lender that was bailed out during the financial crisis, sued Barclays Bank Plc in New York over the purchase of $122.7 million in residential mortgage-backed securities.

Barclays made “misrepresentations and omissions” in offering materials about characteristics of the mortgage loans underlying the securities, including the percentage of properties occupied by the owners, Hamburg-based HSH Nordbank said in a complaint filed yesterday in New York State Supreme Court in Manhattan.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

A phone call to the press office at Barclays headquarters in London after normal business hours seeking comment on the lawsuit wasn’t answered.

The case is HSH Nordbank AG v. Barclays Bank Plc, 650508/2012, New York State Supreme Court (Manhattan).

Exxon Mobil Sues Insurers to Recover Asbestos Suit Money

Exxon Mobil Corp., the world’s second-most valuable company, sued dozens of insurers in New York state court to recover money for asbestos lawsuits.

The oil producer filed the lawsuit yesterday against some underwriters at Lloyd’s of London and other insurers, seeking a declaration of their “rights, duties and obligations” to cover Exxon Mobil’s defense costs and indemnify the company for money it’s obligated to pay as a result of asbestos claims.

The claims arise from alleged exposure during several decades to asbestos-containing materials at facilities owned by Exxon Corp. and Mobil Corp., and Mobil’s manufacture and distribution of asbestos-containing products from 1963 until about 1980, according to the filing. Exxon bought Mobil in 1999 for $85.2 billion in stock and assumed debt.

“Claims by thousands of plaintiffs against Exxon Mobil have been settled or otherwise disposed of,” the Irving, Texas-based company said in the complaint. “Thousands more remain pending against Exxon Mobil, and Exxon Mobil expects many more to be filed in the future.”

Lloyd’s of London declined to comment on the lawsuit.

Apple Inc. is the world’s biggest company by market value.

The case is Exxon Mobil Corp. v. Certain Underwriters at Lloyd’s, London, 650503/2012, New York State Supreme Court (Manhattan).

Vitro Units Sued in New York by U.S. Bank Over Unpaid Notes

Units of Vitro SAB, the Mexican glassmaker that defaulted in 2009, were sued by a trustee for noteholders, which is seeking to recover $311 million on unpaid notes.

U.S. Bank NA, the trustee for Vitro’s 11.75 percent senior notes due in 2013, sued subsidiaries to recover principal, interest and fees owed, according to a complaint filed Feb. 22 in New York State Supreme Court. The bank is seeking damages on behalf of noteholders of about $311 million, according to the filing.

Vitro said this month that a Mexican judge gave final approval to its plan to restructure $1.5 billion in defaulted debt. U.S. noteholders fought the plan, and U.S. Bank said in its court filing that it was appealing the Mexico decision along with other creditors.

The Vitro units sued by U.S. Bank guaranteed the notes, and the trustee is seeking a court ruling that the guaranty obligations can’t be discharged through the Mexican proceeding, according to the court filing.

The guaranties have been discharged under the approved restructuring plan, according to a statement from Roberto Riva Palacio, a Vitro spokesman.

The case is U.S. Bank NA v. Vitro Automotriz SA, 650506-2012, New York State Supreme Court (Manhattan).

Glaxo Sues XenoPort Over Contract for Restless-Leg Medicine

A GlaxoSmithKline Plc unit sued XenoPort Inc. in federal court in Delaware, seeking a ruling that it properly promoted the restless-leg medicine Horizant in the U.S.

Glaxo Group of Middlesex, England, and Santa Clara, California-based XenoPort agreed to collaborate on Horizant starting in 2007 and the drug was approved by the U.S. Food and Drug Administration last year, according to court papers.

Last month, XenoPort told Glaxo it wasn’t doing enough “to commercialize and promote Horizant” or reach certain milestones, and said it would terminate the agreement, Glaxo contends in the suit.

The British company asked a federal judge in Wilmington to rule it has complied with XenoPort’s terms and to preserve Glaxo’s “exclusive license rights” to Horizant.

Jackie Cossmon, a XenoPort spokeswoman, didn’t immediately reply to voice and e-mail messages seeking comment on the lawsuit.

The case is Glaxo Group Ltd. v. XenoPort Inc., U.S. District Court, District of Delaware (Wilmington).

News Corp. Sued Over Phone Hacking by Former Union Chief

News Corp. was sued by a former union leader over claims tabloids hacked into his phone messages, adding to the company’s legal troubles as it seeks to avoid the first civil trial over the scandal.

Andy Gilchrist, the U.K. general secretary for the Fire Brigades Union from 2000 to 2005, sued Feb. 10 in London over “incidents” during that period, his lawyer Tom Jones, of Thompsons Solicitors, said yesterday in a phone interview.

The phone-hacking litigation has focused on the defunct News of the World tabloid. Jones declined to say which title is involved in the Gilchrist case. Gilchrist told the Independent newspaper last year that police were investigating whether News Corp.’s daily Sun newspaper hacked his phone during a union pay dispute.

News Corp. Chairman Rupert Murdoch, who shuttered the News of the World in July to help contain public anger over the scandal, flew to London this month to tell Sun staff he’s committed to the paper after 10 of its journalists were arrested in a probe of reporters’ bribing public officials.

News Corp.’s U.K. unit, News International, is preparing to start its first Sunday edition of the Sun to replace the News of the World.

News International’s spokeswoman, Daisy Dunlop, said the company isn’t aware of the lawsuit’s being filed. A spokesman for the Metropolitan Police, who couldn’t be identified in line with office policy, declined to comment on the hacking accusation.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

The case is Gilchrist v. News Group Newspapers, HC12C00562, High Court of Justice, Chancery Division (London).

Michael Jordan Sues Chinese Sportswear Company Over Use of Name

Michael Jordan, the hall-of-fame basketball player who heads his own division at the world’s largest sporting-goods maker Nike Inc., sued a Chinese maker of sportswear and shoes for unauthorized use of his name.

Jordan, who won six National Basketball Association championships with the Chicago Bulls, filed the lawsuit with a Chinese court against Qiaodan Sports Co., according to a statement. The Chinese company, which is preparing to raise 1.06 billion yuan ($168 million) in a listing in Shanghai, is accused of using Jordan’s Chinese name and jersey number 23 without permission.

“It is deeply disappointing to see a company build a business off my Chinese name without my permission, use the number 23 and even attempt to use the names of my children,” Jordan said in a statement. “I am taking this action to preserve ownership of my name and my brand.”

“‘Qiaodan’ is a brand we registered according to Chinese law, and its lawful use should be protected,” Qiaodan said in a statement posted on its website Feb. 22. “We will make further clarification through our website if there’s any development.” The company said it hadn’t received any court notice as of noon yesterday.

Jordan said in the statement issued yesterday that any monetary awards from the lawsuit “will be invested in growing the sport of basketball in China.”

Seven States Sue Over Health-Care Law Birth Control Mandate

Seven states sued the U.S. seeking to block a government mandate requiring religious organizations to offer birth control for their employees.

The lawsuit, filed yesterday in federal court in Nebraska by the state’s attorney General Jon Bruning, claims the requirement violates free exercise of religion and freedom of speech rights. The case, brought on behalf of Catholic schools, organizations, and individuals, was joined by Florida, Michigan, Ohio, Oklahoma, South Carolina and Texas.

The mandate is part of the Patient Protection and Affordable Care Act, which President Barack Obama signed into law in 2010. This month, Obama offered a compromise that would force health insurers, and not religious-affiliated charities, to pay for contraceptives for employees of those institutions. Republican lawmakers have vowed to push for a measure in Congress to repeal the policy.

Erin Shields, a spokeswoman for the U.S. Department of Health and Human Services, declined to comment on pending litigation.

The case is Nebraska v. U.S. Department of Health and Human Services, 12-CV-03035, U.S. District Court for the District of Nebraska.

Comcast Sues Sprint Unit Over Four Telecommunications Patents

Comcast Corp., the largest U.S. cable company, sued a unit of Sprint Nextel Corp. alleging infringement of four telecommunications patents.

Comcast, in a complaint filed Feb. 21 in Delaware federal court, contends that services provided by Sprint, the nation’s third-largest wireless phone company, misappropriate technology used for accessing communication data, determining a telephone number and optimizing a telephony network.

Comcast last week filed a separate suit against Sprint claiming infringement of four other telecommunication patents in federal court in Philadelphia. Sprint sued Philadelphia-based Comcast and three other cable companies in December alleging infringement of patents related to transmitting phone calls over digital lines.

Scott M. Sloat, a spokesman for Overland Park, Kansas-based Sprint, said the company couldn’t immediately comment on the lawsuit.

To see the patents, click: 7,012,916; 7,206,304; 7,903,641 and 6,873,694.

The case is Comcast v. Sprint, 12-cv-00205, U.S. District Court, District of Delaware (Wilmington).

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