(Adds BP in Top section, Commerce Bancshares in Verdicts and Kynikos in Lawsuits. Updates Rothstein in Lawsuits section.)
Dec. 27 (Bloomberg) -- Cameron International Corp. lost its appeal to derail the February nonjury trial over which companies should be blamed for the 2010 BP Plc oil spill in the Gulf of Mexico.
A panel of the U.S. Court of Appeals for the Fifth Circuit rejected Cameron’s claim that U.S. District Judge Carl Barbier wrongly cited maritime law to allow him to conduct a nonjury trial over liability for the incident. Cameron contended that claims against the company fall under the federal Outer Continental Shelf Lands Act, which allows for a jury trial.
“The district court did not clearly err in concluding that the limitation proceeding is within the court’s admiralty jurisdiction,” the three-judge panel said in a one-paragraph decision yesterday. The court rejected review of other issues raised by Cameron.
Cameron asked the appeals court to throw out the existing trial plan and rule that the company has a right to a trial before a jury. Yesterday’s ruling removes a possible obstacle to the nonjury trial before Barbier that is scheduled to begin Feb. 27 in New Orleans to determine liability and apportion fault.
Barbier plans two subsequent nonjury phases on the size of the spill and efforts to contain it. Test jury trials on damages would follow, the judge said. Cameron, which settled damage claims with BP this month, said the trial plan violates its constitutional rights.
“There is not a claim against Cameron that does not implicate our right to a jury trial under the Seventh Amendment,” Russell Post, a Cameron attorney, told the judges at the hearing Dec. 22 in federal court in Dallas. That amendment to the U.S. Constitution guarantees citizens’ and companies’ rights to jury trials in civil disputes.
David Beck, Cameron lawyer, didn’t respond to an e-mail seeking comment on the decision yesterday.
The April 2010 Macondo well blowout and explosion killed 11 workers and caused the worst offshore oil spill in U.S. history. The accident spawned hundreds of lawsuits against BP and its partners, including Cameron, Transocean Ltd., the Switzerland- based owner and operator of the Deepwater Horizon drilling rig that exploded, and Halliburton Co., which provided cementing services.
The appeals case is In re Cameron International, 11-30987, U.S. Court of Appeals for the Fifth Circuit. The lawsuits are combined in 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).
Commerce Bancshares Unit Agrees to Settle Overdraft Suits
Commerce Bancshares Inc. said a unit of the company agreed to pay $18.3 million to settle consumer lawsuits accusing the Colorado bank of illegally charging excessive overdraft fees.
Officials of the unit, Denver-based Commerce Bank, agreed to resolve customers’ claims that the bank “improperly charged overdraft fees on certain debit card transactions,” according to a company filing Dec. 23 with the U.S. Securities and Exchange Commission.
“The bank, while admitting no wrongdoing, agreed to the settlement in order to resolve the litigation and avoid further expense,” officials said in the filing.
Commerce Bancshares, based in Kansas City, Missouri, is among more than a dozen banks across the U.S. that settled suits targeting overdraft policies which customers contend were engineered to generate fees unfairly.
Consumers said banks including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. had policies that allowed them to debit account holders’ funds in a way that made it more likely customers would incur overdraft fees.
The Federal Reserve last year prohibited lenders from automatically charging fees when consumers have insufficient funds for electronic or debit-card transactions.
The case is Wolfgeher v. Commerce Bank, 1:10-cv-22017, U.S. District Court, Southern District of Florida (Miami). The consolidated case is In re Checking Account Overdraft Litigation, 09-02036, U.S. District Court, Southern District of Florida (Miami).
GE Settles U.S. Investigation Into Muni-Bond Bid Rigging
General Electric Co. agreed to pay $70.4 million to resolve a criminal investigation and civil claims for conspiring to rig bids on U.S. municipal-bond deals, overcharging state and local governments on investments.
GE Funding Capital Market Services, a former unit, is the fifth company to settle in a federal probe of more than five- years. The accord will settle cases with the Justice Department, Securities and Exchange Commission, Internal Revenue Service and 25 states, the Justice Department said Dec. 23 in a statement.
“GE Funding’s former traders entered into illegal agreements to manipulate the bidding process on municipal investment contracts,” said Sharis A. Pozen, acting assistant attorney general in charge of the department’s antitrust division. “This anticompetitive conduct harmed municipalities as well as taxpayers.”
The settlement will bring to $743 million the amount that banks have paid to end the investigation. Some of which is being returned to localities that were overcharged, the SEC said in a news release. Bank of America Corp., JPMorgan Chase & Co., UBS AG and Wells Fargo & Co. previously settled similar cases.
GE’s settlement stems from an investigation that centered on three now-former employees at a unit the finance division discontinued in April 2010, the Fairfield, Connecticut-based company said in a statement Dec. 23. The conduct took place between 1999 and 2004, GE said.
The settlement won’t have a “material impact” on earnings, according to GE, the world’s biggest maker of jet engines and power-generation equipment. It takes about $100 million in profit to yield 1 cent in per-share earnings at GE, whose operations span energy, aviation, health care, transportation and financial services.
The Justice Department said it agreed not to prosecute GE Funding because it admitted its illegal conduct, cooperated with the investigation and took steps to address anticompetitive conduct. The department also cited GE Funding’s commitment to make restitution.
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Murchison to Pay A$25 Million to Settle Chameleon Court Dispute
Murchison Metals Ltd., an Australian iron ore producer for the Chinese market, agreed to pay A$25 million ($25.3 million) to Chameleon Mining NL to settle a dispute over the ownership of an iron ore project.
The settlement doesn’t cover litigation involving Chameleon, Murchison and Murchison’s former director, Phillip Grimaldi, Murchison said in a statement to the Australian Stock Exchange Dec. 23.
Murchison is building a A$4 billion iron ore rail and port project with Mitsubishi Corp. The companies are partners in Crosslands Resources Ltd., which is developing the Jack Hills project in Western Australia.
Chameleon, a gold explorer, said Murchison used its money to help a company called Winterfall make a A$350,000 payment to buy the western Australian property and as a result it was entitled to a stake in the project. Murchison, which had said the transfer was a loan, later bought Winterfall to obtain the mining property.
Federal Court Judge Peter Jacobson ruled in October 2010 that Chameleon is entitled to a portion of the profit from the project, not a stake in it nor in Murchison’s shares in Crosslands. Chameleon appealed the ruling.
For the latest verdict and settlement news, click here.
Delphi Financial Sued by Pension Over Tokio Marine’s Buyout
Tokio Marine Holdings Inc.’s $2.7 billion buyout of insurer Delphi Financial Group Inc. shortchanges Delphi investors while unfairly enriching the company’s top executive, a shareholder said in a lawsuit.
Tokio Marine, Japan’s second-largest casualty insurer, agreed on Dec. 21 to pay $2.7 billion in cash for Delphi, a U.S.-based insurer that sells workers’ compensation and group- life coverage. The deal is structured to discourage other bidders and provides $55 million to Delphi Chief Executive Officer Robert Rosenkranz, who didn’t shop for the highest offer for the insurer, a Michigan-based pension said in the suit.
Rosenkranz, Delphi’s founder, is using his position “to benefit personally at the direct expense of Delphi’s public shareholders,” lawyers for the Pontiac General Employees Retirement System said in the suit filed in Delaware Chancery Court in Wilmington.
Tokio Marine’s offer comes as Japanese insurers are looking overseas and grappling with an aging society and declines in returns on securities holdings in the aftermath of the nation’s record earthquake and tsunami in March. The acquisition will boost Tokio Marine’s overseas profit contribution to 46 percent of earnings from 37 percent, company officials said earlier this week.
Bernard Kilkelly, a Delphi spokesman, didn’t return a call Dec. 23 for comment on the suit over the Tokio Marine buyout.
The case is Pontiac General Employees Retirement System v. Brine, CA No. 7144, Delaware Chancery Court (Wilmington).
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Kynikos, Third Point Are Dismissed From $8 Billion Fairfax Suit
James Chanos’s Kynikos Associates LP and Daniel Loeb’s Third Point LLC won dismissal from an $8 billion lawsuit accusing the two hedge funds of spreading negative information to drive down Fairfax Financial Holdings Ltd.’s stock price.
New Jersey Superior Court Judge Stephan C. Hansbury in Morristown granted their requests Dec. 23, saying they couldn’t be sued in New Jersey. Hansbury also dismissed Institutional Credit Partners LLC. All three firms are based in New York. In addition to Chanos and Loeb, also dropped from the suit were Jeffrey Perry, an analyst at Third Point, and William Gahan, who was an analyst at ICP.
In September, Hansbury dismissed billionaire Steven A. Cohen and his Stamford, Connecticut-based SAC Capital Advisors LP from the case.
“One must establish that the defendants purposely availed themselves of the State of New Jersey and that the alleged improper conduct was expected or intended to be felt within the State of New Jersey,” Hansbury wrote. He said Fairfax didn’t do that.
Fairfax, a Toronto-based insurer, sued the hedge funds in 2006, alleging they acted to harm the company because they were betting its stock price would decline. The hedge funds named in the suit have denied Fairfax’s accusations.
“We thought Fairfax was engaged in some pretty blatant forum shopping and it took a while but the judge saw through it,” Bill Carmody, a lawyer for Third Point at Susman Godfrey LLP in New York, said in a phone interview.
“We are gratified by the court’s decision, but otherwise have no comment,” Chanos said in an e-mail.
Michael Bowe, a lawyer for Fairfax, said in an e-mail that the dismissal of its claims against the funds was “entirely incorrect.” He said the evidence shows that “these parties engaged in a vicious and unrelenting attack” on Fairfax.
Fairfax plans to appeal the judge’s decision, said Bowe, who is a partner at Kasowitz Benson Torres & Friedman LLP in New York.
Fairfax said the funds coaxed John Gwynn, a former insurance analyst at Morgan Keegan & Co. in Memphis, Tennessee, into giving them his negative Fairfax reports before they were published. It also said they hired an outside analyst, Spyro Contogouris, to spread false Fairfax information.
The case is Fairfax Financial Holdings Ltd. v. SAC Capital Management LLC, L-2032-06, Superior Court of New Jersey, Morris County (Morristown).
SEC Backs Lehman Brokerage in $3 Billion Barclays Dispute
The U.S. Securities and Exchange Commission sided with the Lehman Brothers Holdings Inc. brokerage in a $3 billion dispute over assets with Barclays Plc, saying a judge ruled correctly that the U.K. bank’s claim to securities in customer reserve accounts was conditional.
If the SEC prevails, Barclays may lose its claim to as much as $1.3 billion reserved for customers, according to a Dec. 22 SEC court filing.
Michael O’Looney, a Barclays spokesman, declined to comment on the SEC filing.
Barclays and Lehman Brothers Inc. both appealed U.S. Bankruptcy Judge James Peck’s ruling that told Barclays to return $2 billion in margin assets to the bankrupt brokerage, and said it had “only a conditional right” to $769 million in the customer reserve account. Brokerage trustee James Giddens is fighting Peck’s order to give the bank at least $1.1 billion, and possibly the $769 million, if it leaves enough in the reserve account to satisfy remaining customer claims.
As much as $1.3 billion in reserve assets can’t go to Barclays if customers suffer as a result, and Giddens has said he needs the assets to satisfy claims, the SEC said in the filing. In addition to the $769 million, a second pool of funds, $507 million in margin for customer transactions at the Options Clearing Corp., raises similar issues, the SEC said.
SEC staff members told both parties in 2008 when Barclays bought Lehman’s North American business that they might violate a customer protection rule if Barclays took the assets, according to the filing.
The dueling between London-based Barclays and trustee Giddens follows a bankruptcy court trial held in 2010 before Peck in Manhattan.
The district court case is Giddens v. Barclays Capital Inc., 11-cv-06052, U.S. District Court, Southern District of New York (Manhattan).
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Rothstein Says TD Bank Played ‘Critical’ Role in Ponzi Scheme
Scott Rothstein, the Florida lawyer convicted in a $1.2 billion investment fraud, said Toronto-Dominion Bank played a “critical” role in his Ponzi scheme, according to a transcript of a sworn deposition made public Dec. 22.
Rothstein, sentenced to 50 years in prison, said that on a scale from one to 10, the assistance he got from Canada’s second-biggest bank rated a 10.
“They were assisting me in putting fake balance statements into the hands of my investors,” he said, according to a transcript of the deposition taken this month at the federal courthouse in Miami as part of Rothstein’s former law firm’s bankruptcy case. A copy of the transcript was provided by the law firm Conrad & Scherer, which represents investors seeking to recover money.
Rothstein, formerly of Rothstein Rosenfeldt Adler PA in Fort Lauderdale, Florida, pleaded guilty in January 2010 to five counts of racketeering, money laundering and wire fraud after admitting he sold investors interests in bogus settlements of sexual-harassment and whistle-blower lawsuits.
“We fundamentally disagree with many of the characterizations contained in Mr. Rothstein’s deposition and will continue to vigorously defend the bank against claims related to Rothstein’s acts,” Maria Leung, a spokeswoman for Toronto-based TD Bank, said in an e-mail. “Beyond that, we cannot comment on pending litigation.”
TD Bank was “critical in providing real letters to go on top of the fake balance statements,” Rothstein said, according to the transcript. “They were critical in the fact that they had TD Bank employees actually handing me those phony statements in front of the investors.”
Rothstein also said George Levin, then-chief executive officer of hedge fund Banyon Investments, knew of the fraud, according to deposition transcripts.
Nicole Vinson and William Merlin, lawyers for Levin, didn’t immediately respond to e-mails and a telephone call seeking comment on Rothstein’s testimony. Levin has previously denied claims that he knew of the Ponzi scheme. The fund manager really was a whistle-blower, contacting the U.S. Attorney’s office in November 2009 to report “irregularities” after Rothstein failed to make a payment, Jesse Derris, a spokesman, said in 2009.
In his guilty plea, Rothstein said he used the law firm to run a scheme that financed his lavish lifestyle and let him buy political influence.
The bankruptcy case is In re Rothstein Rosenfeldt Adler PA, 09-34791, and the trustee’s case is Stettin v. TD Bank NA, 11- ap-2368, U.S. Bankruptcy Court, District of Southern Florida (Fort Lauderdale).
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Nomura’s Mamadou Loses Bid to Strike Out Deutsche Bank Suit
Daniel Mamadou, the head of Nomura Holdings Inc.’s Asia corporate solutions and financing group outside Japan, lost a bid to strike out a lawsuit against him by his former employer Deutsche Bank AG.
The court has jurisdiction because the claim is substantially about breach of confidence regarding the remuneration packages of Deutsche Bank colleagues, Deputy High Court Judge David Lok ruled Dec. 23 in Hong Kong.
Deutsche Bank alleges Mamadou disclosed employee information to Nomura to assist in recruiting them, according to the Dec. 23 decision.
Lok gave the Frankfurt-based bank 21 days to amend its claim against Mamadou, its former Asia capital markets and treasury solutions co-head, to include the breach of confidence claim. Mamadou had argued the case should be heard by the city’s Labour Tribunal.
Lok said in the ruling that Deutsche Bank needs to expressly plead its allegation that Mamadou passed confidential information, and its claim is defective without that. The bank was ordered to pay the costs of the amendments.
Tokyo-based Nomura, Japan’s largest brokerage, hired nine other Deutsche Bank employees for Mamadou’s team in August.
Deutsche Bank’s Singapore-based spokesman Mark Bennewith declined to comment on the case when contacted by phone Dec. 23. Mamadou didn’t respond to an e-mail and a call to his mobile and to his direct office line.
“These allegations are baseless and I will vigorously contest them,” he said before the ruling.
The case is Deutsche Bank AG (Hong Kong Branch) and Daniel Mamadou-Blanco, HCA1514/2011 , Court of First Instance (Hong Kong).
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Ethical Coffee Pursues Nespresso Case After Losing Swiss Appeal
Ethical Coffee Co. said it will appeal a ruling by a court in the Swiss canton of Vaud upholding a nationwide injunction against sales of the company’s capsules that that fit in Nespresso machines.
The decision earlier this month barring sales of Ethical Coffee capsule by Metro AG’s Media Markt stores doesn’t match a ruling in a St. Gallen cantonal court that overturned a similar prohibition against another retailer, the Fribourg, Switzerland- based manufacturer said Dec. 23 in a statement.
“We are very surprised by the court decision,” Chief Executive Officer Jean-Paul Gaillard said in the statement. The cases against the two retailers are, on a factual and legal basis, “totally similar, and we do not see any reason for upholding a decision which was not upheld in St. Gallen.”
Nespresso’s owner, Vevey, Switzerland-based Nestle SA, has pursued legal action against Ethical Coffee and the U.S. foodmaker Sara Lee Corp. since they began last year offering coffee-filled capsules compatible with its machines. The St. Gallen dispute centered on Swiss supermarket chain Denner, which was allowed to resume selling Nespresso-compatible capsules made by another supplier, Alice Allison SA, after a temporary halt was ordered in July.
Nestle is pleased with the decision in the Media Markt case, the company said in a statement. “This ruling, which is subject to the final decision of the court, supports the Nespresso arguments.”
For the latest trial and appeals news, click here.
News Corp. Said to Be in Talks on Zweifach as General Counsel
News Corp. is in talks to hire Gerson Zweifach, a partner with the Washington law firm of Williams & Connolly LLP, as general counsel, a person with knowledge of the situation said.
The discussions are at an advanced stage, according to the person, who declined to speak publicly because the talks are private. In more than 29 years at Williams & Connolly, Zweifach has tried antitrust, securities, libel and commercial cases, according to the firm’s website.
As top legal officer, a new general counsel may become point person for News Corp.’s handling of the phone-hacking scandal that led to the closing of the company’s News of the World tabloid in the U.K. and at least 21 arrests. Joel Klein, a board member and former federal prosecutor, is overseeing the company’s internal probe of its newspaper journalists’ actions.
Zweifach would replace Lawrence Jacobs, who left in June. Janet Nova, a board member of the company’s News International publishing unit, has served as interim general counsel. The Wall Street Journal, owned by News Corp., reported the talks with Zweifach Dec. 22.
Jack Horner, a spokesman for New York-based News Corp., declined to comment. Officials with Williams & Connolly couldn’t be reached for comment by telephone after normal business hours. Zweifach didn’t respond to an e-mail seeking comment.
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--With assistance from Linda Sandler, Edmund Lee, Felice Maranz, David Glovin and Martin Z. Braun in New York; Ronald Grover in Los Angeles; Dermot Doherty in Geneva; Jef Feeley in Wilmington, Delaware; Joe Schneider in Sydney; Debra Mao and Wendy Mock in Hong Kong; Tanya Angerer in Singapore; Susannah Nesmith in Miami; Thom Weidlich in Brooklyn, New York; and Margaret Cronin Fisk in Southfield, Michigan. Editor: Charles Carter
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