Bloomberg News

SAP-Oracle, AT&T, Comcast-NBC, Goldman Sachs in Court News

September 02, 2011

(Updates Comcast-NBC, adds Google in Lawsuits/Pretrial.)

Sept. 2 (Bloomberg) -- SAP AG, the largest maker of business-management software, won its bid to overturn a jury’s $1.3 billion award to Oracle Corp. in a copyright-infringement lawsuit.

U.S. District Judge Phyllis Hamilton in Oakland, California, yesterday called the award “grossly excessive” and granted SAP’s motion to throw it out. She ruled that SAP should get a new trial for damages if Oracle rejects her decision to reduce the amount to $272 million, which she said should be the maximum in damages based on the evidence at trial.

“The verdict grossly exceeded the actual harm to Oracle,” Hamilton said in the ruling. The jury verdict “was contrary to the weight of the evidence, and was grossly excessive.”

The jury award in November was the largest ever for copyright infringement. In the 11-day trial, Oracle accused SAP’s TomorrowNow software-maintenance unit of making hundreds of thousands of illegal downloads and several thousand copies of Oracle’s software to avoid paying licensing fees in an effort to steal customers.

“There was voluminous evidence regarding the massive scope of the theft, clear involvement of SAP management in the misconduct and the tremendous value of the IP stolen,” Deborah Hellinger, an Oracle spokeswoman, said yesterday in an e-mail. “We believe the jury got it right and we intend to pursue the full measure of damages that we believe are owed to Oracle.”

SAP and Redwood City, California-based Oracle, the second- biggest maker of business software, are competitors in the market for programs that businesses use to automate payroll, human resources, accounting and other tasks.

SAP, based in Walldorf, Germany, didn’t contest that it was liable for the infringement by TomorrowNow, which it closed in 2008. Jurors based their award on the value of a hypothetical license that SAP would have needed to use Oracle’s software.

Such a license would never have existed between two fierce competitors, so the damage award should have been based on profits that Oracle lost and SAP gained as a result of the infringement, SAP said in court filings. That amount was $28 million to $407.8 million, SAP said.

“We are very gratified with the court’s decision,” Jim Dever, an SAP spokesman, said yesterday in an e-mail. “We believe the jury’s verdict was wrong and are pleased at the significant reduction in damages.”

The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).

Lawsuits/Pretrial

Google Wins Dismissal of Price-Shopping Site’s Antitrust Case

Google Inc., the biggest Internet search company, won the dismissal of antitrust claims filed against it by a price- comparison website that accused it of anticompetitive practices.

MyTriggers.com Inc. had responded to a 2009 Google lawsuit seeking $335,000 in advertising payments by accusing the Mountain View, California-based company of raising the minimum price for keywords that would lead Google users to MyTriggers.com, effectively eliminating it as a possible competitor.

Judge John P. Bessey in Columbus rejected the countersuit in a 14-page ruling Aug. 31.

“The counterclaim only alleges harm to MyTriggers itself,” Bessey wrote, noting the company concedes Google does business with other price-comparison websites. “Such an allegation undercuts MyTriggers’ argument that competition as a whole within the relevant market is being injured,” the judge said.

MyTriggers’ legal team was aided by Charles F. “Rick” Rule, who has represented Microsoft Corp., and its claims were supported by Ohio’s then-Attorney General Richard Cordray, who recently became the head of the new U.S. Consumer Financial Protection Bureau.

Neither Rule, who leads the antitrust practice group at New York-based Cadwalader Wickersham & Taft LLP, nor Cincinnati attorney Stanley M. Chesley, who also represented MyTriggers, immediately returned calls seeking comment on the decision.

Google’s media office didn’t immediately reply to an e- mailed request for comment.

The case is Google Inc. v. MyTriggers.com Inc., 09- cvh-10-14836, Franklin County, Ohio, Court of Common Pleas (Columbus).

Agency May Have Violated Law With Microsoft Contract, Judge Says

A federal agency may have violated U.S. procurement laws when it selected Microsoft Corp.’s products over Google Inc.’s without full competition for a planned $59.3 million e-mail services contract, a judge said.

Google, vying with Microsoft to gain a foothold in the $20 billion government cloud-computing market, sued the U.S. Interior Department in October over the contract. In a complaint filed in the U.S. Court of Federal Claims in Washington, lawyers for Google said the agency didn’t fully consider the company’s “Google Apps for Government” product.

“There is a justifiable basis for me to find” violations of procurement laws, Judge Susan Braden said yesterday at a hearing.

Braden said she had written a 41-page opinion and will issue it next week after deciding whether to require the agency to hire an independent expert. That expert would evaluate whether Google’s products meet the agency’s security needs, she said.

“The public interest would be well-served by doing that,” she said.

Braden ordered the Interior in January to hold off on making an award while she considered the case.

Andrew Kovacs, a Google spokesman, declined to comment after the hearing.

The case is Google Inc. v. U.S., 10-743, U.S. Court of Federal Claims (Washington).

For more, click here.

Comcast-NBC Universal Merger Wins Approval From U.S. Judge

Comcast Corp.’s takeover of NBC Universal was approved by a federal judge with conditions that will maintain the court’s oversight of the deal for two more years.

U.S. District Judge Richard Leon ruled yesterday in Washington that the Justice Department and the combined company must report to him on arbitration actions initiated by online video distributors and the outcome of those proceedings.

“Since neither the court nor the parties has a crystal ball to forecast” how the final judgment will work out, the additional steps are needed to protect the public interest, Leon wrote.

Comcast’s proposed acquisition of NBC Universal won approval Jan. 18 from U.S. regulators under an agreement with the Federal Communications Commission and the Justice Department. Its terms, which needed court approval, imposed conditions designed to protect the emerging online-video market.

Comcast is “pleased the court approved the consent decree,” Sena Fitzmaurice, a spokeswoman for the Philadelphia- based company, said in an e-mail.

Jessica Smith, a Justice Department spokeswoman, said in an e-mail that the department also was pleased Leon ruled the settlement “to be in the public interest.”

The case is U.S. v. Comcast, 11-cv-00106, U.S. District Court, District of Columbia (Washington).

Goldman Trader Tourre Says Abacus Deal Done by Jersey Firms

Goldman Sachs Group Inc. trader Fabrice Tourre, accused of misleading investors in a collateralized debt obligation, said in a court filing that IKB Deutsche Industriebank AG’s alleged $150 million investment was actually made by two Jersey-based companies.

Tourre wants to take testimony of witnesses at Loreley Financing (Jersey) No. 29 Ltd. and Loreley Financing (Jersey) No. 30 Ltd., according to the filing Aug. 31 in federal court in Manhattan. The U.S. Securities and Exchange Commission has said Duesseldorf, Germany-based IKB made the investment in the CDO, Abacus 2007-AC1.

“Discovery in this matter thus far has shown, however, that IKB’s alleged $150 million investment was, in fact, made by” the Jersey-based companies, Tourre’s lawyers wrote in the filing.

On June 10, U.S. District Judge Barbara Jones in Manhattan declined to dismiss the case against Tourre. The judge said the SEC had met its burden for pursuing a claim that Tourre violated a securities law designed to prevent fraudulent sales of securities and should stand trial.

John Nester, an SEC spokesman; Jorg Chittka, an IKB spokesman; and David Esseks, a lawyer for Tourre at Allen & Overy LLP in New York, declined to comment on the filing. Pamela Rogers Chepiga, another lawyer representing Tourre, didn’t immediately return a call and e-mail after business hours inquiring about the Jersey-based companies’ investments.

IKB advised Loreley on the investment, according to Tourre’s filing.

The SEC initially sued the London-based trader in April 2010, saying he defrauded investors by not disclosing that hedge fund Paulson & Co. had helped pick the underlying securities for the CDO and planned to bet against them. After reaching a $550 million settlement with New York-based Goldman Sachs, the SEC filed a new claim against Tourre, saying he gave the company “substantial assistance” as it misled investors.

The SEC said IKB wouldn’t have invested if it had known of Paulson’s involvement in the portfolio selection, according to this week’s filing.

“IKB’s role was apparently limited to that of investment adviser to the Loreley companies, in which capacity IKB could only recommend to the directors of the Loreley companies that they enter into securities transactions,” according to the filing.

Yet the “factual record” in the case contains almost no evidence of the Loreley companies, according to the filing.

Citing last year’s U.S. Supreme Court ruling in Morrison v. National Australia Bank, Jones, in June, threw out some claims involving IKB, which allegedly lost almost all of its $150 million investment, and ABN Amro Bank NV, which assumed the credit risk associated with a portion of Abacus.

In Morrison, the high court ruled that U.S. securities laws don’t protect foreign investors who buy stocks on overseas exchanges.

The case is SEC v. Tourre, 10-03229, U.S. District Court, Southern District of New York (Manhattan).

For the latest lawsuits news, click here.

Verdicts/Settlements

BofA Settlement Should Return to State Court, Judge Told

Bank of New York Mellon Corp. asked a federal judge to return Bank of America Corp.’s proposed $8.5 billion mortgage- bond settlement to the New York state court where it had been submitted for approval.

A group of bond investors moved the case to federal court in Manhattan on Aug. 26, arguing that that court has jurisdiction under federal class-action laws.

BNY Mellon, the trustee for 530 securitization trusts that hold loans underlying the bonds asked U.S. District Judge William Pauley yesterday to send the case back to state court in Manhattan. Countrywide Financial, which originated the loans, was acquired by Charlotte, North Carolina-based Bank of America in 2008.

“There is no basis for removal” to federal court, Matthew Ingber, a lawyer for BNY Mellon, told Pauley at yesterday’s scheduling hearing. The judge said he will hear arguments on the question on Sept. 21.

The Federal Deposit Insurance Corp., the Federal Housing Finance Agency, pension funds and other investors have objected to the settlement, saying they need more information to determine whether it’s fair. New York Attorney General Eric Schneiderman has also protested the settlement, claiming the state may have claims against Bank of America.

The $8.5 billion settlement, which was negotiated with a group of institutional investors, including BlackRock Inc. and Pacific Investment Management Co., would apply to all the investors if approved.

The case is Bank of New York Mellon v. Walnut Place LLC, 11-cv-5988, U.S. District Court, Southern District of New York (Manhattan).

For the latest verdict and settlement news, click here.

New Suits

T-Mobile Antitrust Challenge Gives AT&T Little Recourse

AT&T Inc. wouldn’t have much luck trying to salvage its proposed $39 billion takeover of T-Mobile USA Inc. through negotiation with the U.S. Justice Department, leaving a court fight as its only recourse, lawyers said.

The combination of the country’s second- and fourth-largest wireless carriers would violate antitrust law and “substantially lessen competition,” the U.S. said in a lawsuit filed Aug. 31 in federal court in Washington. The Justice Department asked U.S. District Judge Ellen Segal Huvelle to block the deal, the largest announced acquisition of the year according to data compiled by Bloomberg.

AT&T Chief Executive Officer Randall Stephenson in March announced the proposed purchase of Bellevue, Washington-based T- Mobile, a unit of Deutsche Telekom AG. If the transaction falls apart, Dallas-based AT&T would owe the German carrier a breakup fee and concessions worth as much as $7 billion.

“Given the size of the cancellation fee that was negotiated into this agreement, AT&T has the incentive to fight,” said Andrew Gavil, who teaches antitrust law at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point.”

Huvelle, the judge assigned to the case, has ruled against the Justice Department in antitrust matters before. In 2001, the judge allowed SunGard Data Systems Inc. to acquire Comdisco Inc.’s disaster recovery business for $825 million, rejecting U.S. arguments that the deal would hurt competition.

The case is U.S. v. AT&T Inc., 11-01560, U.S. District Court, District of Columbia (Washington).

For more, click here.

JPMorgan Sued by HSH Nordbank Over Mortgage Securities

HSH Nordbank AG sued JPMorgan Chase & Co. to recover damages it incurred after buying $159 million in mortgage-backed securities from the New York bank that allegedly were less safe an investment than advertised.

Mortgage loans underlying the securities posed a greater credit risk and were more prone to default than represented, Hamburg-based HSH Nordbank said in a summons filed yesterday in New York state Supreme Court in Manhattan. Offering materials contained “misrepresentations and omissions” regarding underwriting standards for the loans, it said.

“The securities have performed worse than expected due to the poorer-quality collateral, and defendants’ wrongdoing has led directly to the plaintiffs’ damages,” said the German lender, which was bailed out during the financial crisis.

HSH Nordbank said it’s seeking damages of at least $42 million.

Tasha Pelio, a JPMorgan spokeswoman, declined comment on the lawsuit.

The case is HSH Nordbank AG v. JPMorgan Chase Bank NA, 652416-2011, New York State Supreme Court (Manhattan).

Barclays Sued by Madoff Trustee Picard for $67.4 Million

Barclays Plc was sued for $67.4 million by the trustee liquidating the money management firm of convicted Ponzi scheme mastermind Bernard Madoff, according to court records.

Trustee Irving Picard, who is seeking to recover money transferred from Madoff’s company, also sued Sumitomo Mitsui Trust Holdings Inc. for $54.3 million, Korea Exchange Bank for $33.6 million, Cathay Life Insurance Co. for $41.7 million, Banque Privee Espirito Santo SA for $11.4 million and Banca Carige SpA for $10.5 million.

All the transfers to the entities sued were derived from investment made with Bernard L. Madoff Investment Securities LLC by Fairfield Sentry, a Madoff feeder fund run by Fairfield Greenwich Group, Picard said.

The funds the trustee seeks to recover from Barclays were “transfers of customer property collectively made to the Barclays defendants,” Picard wrote in the complaint against the London-based bank.

Madoff is serving a 150-year prison sentence for running the biggest Ponzi scheme in history.

The cases are Picard v. Barclays Bank (Suisse) SA, 11- ap-2569, Picard v. Cathay Life Insurance Co., 11-ap-2568, Picard v. Banca Carige SpA, 11-ap-2570, Picard v. Banque Privee Espirito Santo SA, 11-ap-2571, Picard v. Korea Exchange Bank, 11-ap-2572, Picard v. Sumitomo Mitsui Trust Holdings Inc., 11- ap-2573, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Microsoft Sued by Woman Saying Company Tracks Phone Location

Microsoft Corp. was sued by a mobile phone user claiming the company illegally tracks location information from mobile devices in violation of state and federal privacy laws.

The company has designed its mobile operating software Windows Phone 7 to track users’ location deceptively even after users choose to disable the feature, according to a complaint filed in federal court in Seattle yesterday. The software is in mobile devices made by Samsung Electronics Co., HTC Corp. and LG Electronics Inc., and transfers the location data to company server computers, the complaint shows.

Michigan resident Rebecca Cousineau filed the lawsuit on behalf of tens of thousands of consumers who use phones with the Microsoft software and had their location data tracked after they disabled the feature. The complaint seeks a court order barring the company from tracking users’ phone locations, $1,000 for each violation, and unspecified punitive damages.

Kevin Kutz, a Microsoft spokesman, didn’t immediately return a voice-mail message seeking comment about the lawsuit.

The case is Cousineau v. Microsoft, 11-1438, U.S. District Court, District of Washington (Seattle).

Trials/Appeals

U.S. Seeks to Vacate ‘Don’t Ask, Don’t Tell’ Ruling as Moot

The U.S. asked a federal appeals court to vacate as moot the ruling by a federal judge last year that the military’s “Don’t Ask, Don’t Tell” ban on openly gay and lesbian service members is unconstitutional.

A panel of the U.S. Court of Appeals heard the government’s arguments yesterday in Pasadena, California. The judges last month asked President Barack Obama’s administration to explain why the appeal shouldn’t be dismissed after Congress repealed the 1993 law last year.

Obama, Defense Secretary Leon Panetta and Navy Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, on July 22 signed the certification attesting that the U.S. Defense Department is prepared to repeal the ban. That certification ends enforcement of “Don’t Ask, Don’t Tell” as of Sept. 20.

U.S. District Judge Virginia Phillips in Riverside, California, ruled last year that the law establishing the policy violated constitutionally protected rights to due process and free speech. The appeals court delayed enforcement of the judge’s order while the administration appealed her decision.

The U.S. said in a July 14 filing with the appeals court that once repeal takes effect, there are no remaining controversies in the lawsuit and the case becomes moot.

The Log Cabin Republicans, who brought the suit challenging “Don’t Ask, Don’t Tell,” have said Phillips’s ruling should not be lifted because it sets a precedent.

“It is mind-boggling that throughout this case, the Obama administration has said repeatedly that it favors open military service, yet it has fought us every step of the way and is now appealing the court’s judgment in our client’s favor,” Dan Woods, a lawyer for the group, said Aug. 31 in an e-mailed statement.

The case is Log Cabin Republicans v. U.S., 10-56634, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

For the latest trial and appeals news, click here.

--With assistance from Patricia Hurtado, David McLaughlin, Bob Van Voris and Thom Weidlich in New York; Tom Schoenberg, Sara Forden, Leah Nylen and Jeff Bliss in Washington; Karen Gullo in San Francisco; Edvard Pettersson in Los Angeles; and Andrew Harris in Chicago. Editor: Mary Romano

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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