Bloomberg News

BP, Merrill, Monsanto, Google, Apple in Court News

February 27, 2012

BP Plc (BP/) and plaintiffs suing over the 2010 Gulf of Mexico oil spill are discussing a $14 billion accord that would be funded with money originally set aside by the company for out-of-court settlements, according to three people familiar with the talks.

BP would agree to close down its $20 billion Gulf Coast Claims Facility and shift the remaining $14 billion to plaintiffs who contend the spill harmed their businesses and properties, the people said. A deal with the plaintiffs wouldn’t include potential pollution fines. BP set up the GCCF in August 2010 to allow spill victims to receive compensation more quickly than by pursuing lawsuits. The fund has paid out about $6 billion so far, according to its website.

The April 2010 Macondo well blowout sent more than 4 million barrels of oil spewing into the gulf over 87 days, making it the largest offshore spill in U.S. history. The disaster spawned hundreds of lawsuits against BP and its partners, including Transocean Ltd. (RIG), the Vernier, Switzerland- based owner and operator of the Deepwater Horizon drilling rig, and Houston-based Halliburton Co. (HAL), which provided cementing services at the facility.

The progress in settlement discussions allowed BP to persuade a federal judge in New Orleans yesterday to delay a multibillion-dollar liability trial over the spill that was set to begin today. They asked for extra time to allow talks to continue, the company and plaintiffs said in a joint statement. They didn’t make reference to the $14 billion proposal.

Ellen Moskowitz, a spokeswoman for BP, declined to comment on the proposed accord beyond the earlier joint statement. David Falkenstein, a spokesman for the lead plaintiffs’ lawyers in the case, didn’t return calls seeking comment yesterday.

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Trials/Appeals

Merrill Lynch Advisers Can Sue as a Group, Court Rules

Black Merrill Lynch financial advisers suing for discrimination can pursue their case as a group, an appeals court ruled on Feb. 24, reversing a lower-court decision.

The U.S. Appeals Court panel in Chicago, in a unanimous decision written by Circuit Judge Richard A. Posner, said allowing class treatment will prevent courts from having to decide in individual trials whether the challenged practices by Merrill Lynch, now part of Bank of America Corp., were illegal.

Broker George McReynolds of Nashville, Tennessee, sued in 2005, alleging Merrill Lynch’s practices and procedures favored white financial advisers over their black counterparts, impairing their ability to make comparable incomes. He, along with other plaintiffs who joined the case, sought to represent about 700 advisers and trainees who worked in the firm’s Global Private Client unit since January 2001.

“We disagree with the ruling and we are still evaluating the decision but believe that the ruling does not fundamentally change our views that the allegations lack merit,” Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e-mail.

The case is McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc., 11-3639, U.S. Court of Appeals for the Seventh Circuit (Chicago), and 05-cv-6583, U.S. District Court, Northern District of Illinois (Chicago).

Vulcan, Martin Marietta to Face Off in Trial Over Takeover Bid

Vulcan Materials Co. (VMC) and hostile suitor Martin Marietta Materials Inc. (MLM) face off in Delaware Chancery Court tomorrow in a trial over a $4.7 billion takeover that would create the world’s largest producer of sand, gravel and crushed stone.

The court’s chief judge, Leo Strine Jr., must decide whether a 2010 agreement between the companies prohibits Martin Marietta from offering to buy Vulcan’s public shares and soliciting votes for five nominees for its board, according to court papers. Strine also has to say whether the agreement limits litigation to courts in Delaware. Martin Marietta filed the case, asking the court to declare that it hasn’t violated any agreement with Vulcan.

Martin Marietta, based in Raleigh, North Carolina, offered on Dec. 12 to exchange half a share for each share of Vulcan and pay a quarterly dividend equal to 20 cents a Vulcan share to partly restore the dividend cut to 1 cent last year.

Vulcan Chairman Don James has said Martin Marietta is trying to take advantage of a construction recession to buy Vulcan with a “very low-ball” offer. Vulcan has been saddled with debt and losses after it paid $4.2 billion for Florida Rock Industries Inc. in 2007 just before the industry slumped.

The case is Martin Marietta Materials v. Vulcan Materials, CA7102, Delaware Chancery Court (Wilmington).

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For the latest trial and appeals news, click here.

Lawsuits/Pretrial

MF Global Judge Urges Plaintiffs’ Lawyers to Get Organized

The judge who may oversee investor lawsuits against Jon Corzine, MF Global Holdings Ltd.’s former chief executive officer, and separate cases filed by customers of the firm suggested that plaintiffs’ lawyers organize themselves to push the suits forward.

“Something big happened at MF Global last December,” U.S. District Judge Victor Marrero said at an initial conference on Friday in Manhattan federal court, where dozens of lawyers in at least three set of lawsuits gathered. “Whether the case is in New York or Chicago or somewhere else, you’re going to need a leadership structure.”

A panel of judges from federal judicial districts across the country will hear arguments on March 29 on where lawsuits stemming from the collapse of MF Global will be heard. The suits name Corzine and other executives. Separate bankruptcy litigation is proceeding in New York.

At least three sets of cases are pending: a class action, or group, suit by holders of MF Global securities; a group of suits claiming violations of commodities laws by customers of brokerage MF Global Inc.; and another customer case by Sapere CTA Fund LP, which says it lost $90 million at the brokerage.

Law firms Bernstein Litowitz Berger & Grossman LLP (142230L) and Labaton Sucharow LLP are taking the lead in the securities cases on behalf of investors. Attorneys for clients who lost money at the brokerage are still negotiating over leadership.

Marrero said he wouldn’t issue orders until the multidistrict litigation panel determines where the cases will proceed.

The main case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).

Privacy Group Can’t Force FTC Google Action, Judge Rules

A legal challenge to Google Inc. (GOOG)’s privacy policy was dismissed by a judge who said she lacked authority to order the Federal Trade Commission to take action against the world’s most popular search engine.

U.S. District Judge Amy Berman Jackson in a ruling on Friday in Washington said Congress didn’t give federal courts jurisdiction to monitor FTC enforcement of consent decrees.

The Electronic Privacy Information Center, or EPIC, sued Feb. 8, claiming Google’s planned changes to its privacy policy violate a consent order requiring the company to protect consumer data.

“EPIC -- along with many other individuals and organizations -- has advanced serious concerns that may well be legitimate,” Jackson wrote in her ruling. “The FTC, which has advised the court that the matter is under review, may ultimately decide to institute an enforcement action.”

Google, based in Mountain View, California, announced plans on Jan. 24 to unify privacy policies for 60 services and products including YouTube videos and Android software for mobile phones. The move, set to take effect March 1, would simplify conditions for user agreements, the company said.

“The judge did not reach the merits of the EPIC complaint,” Marc Rotenberg, EPIC’s executive director, said in an e-mail. The group filed a notice of appeal with the court Friday.

“We take our settlement orders very seriously, but only the FTC and not outside parties should be able to enforce them,” Claudia Bourne Farrell, a commission spokeswoman, said in an e-mail. Chris Gaither, a Google spokesman, said in an e- mailed statement that the new policy will make the company’s privacy practices easier to understand and reflects the company’s desire to create a “seamless experience” for its signed-in users.

The case is Electronic Privacy Information Center v. Federal Trade Commission, 12-00206, U.S. District Court, District of Columbia (Washington).

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U.S. Attorney Seeks Jerry Sandusky Records From Penn State

The U.S. Attorney’s Office in Harrisburg, Pennsylvania, subpoenaed records in the sexual-abuse case of former Pennsylvania State University assistant football coach Jerry Sandusky.

Penn State received the request around Feb. 2 from U.S. Attorney Peter J. Smith, said Lisa Powers, a spokeswoman for the university. Prosecutors are seeking information about Sandusky and The Second Mile charity he founded in 1977, the university, former Penn State President Graham Spanier, athletic director Tim Curley and former senior vice president Gary Schultz.

“The university is fully cooperating with this request for information,” Powers said in an e-mail Feb. 24.

The subpoena requested information from 1998 to the present, as well as records of any payments by board members to the university or to third parties on the university’s behalf, Powers said in another e-mail. The subpoena also seeks reporting requirements of employers and staff relating to allegations of misconduct by staff or individuals associated with the university, Powers said.

Nils Frederiksen, a spokesman for state Attorney General Linda Kelly, declined to comment on whether the subpoena is part of a joint investigation. Heidi Havens, a spokeswoman for Smith in Harrisburg, also declined to comment.

Joseph Amendola, Sandusky’s attorney, didn’t immediately respond to an e-mail seeking comment.

The Sandusky case is Commonwealth of Pennsylvania v. Sandusky, CP-14-2422-2011, Court of Common Pleas, Centre County, Pennsylvania (Bellefonte).

New York Schools Can Be Used for Worship, U.S. Judge Says

New York City said it will immediately appeal a Manhattan federal judge’s refusal to unblock the city’s ban of worship inside public school facilities.

U.S. District Judge Loretta Preska on Feb. 24 granted a request from the Bronx Household of Faith that will allow its members to continue meeting in a city public school on Sundays despite the city’s ban on the use of public schools for worship services.

The legal battle dates to 1995, when the church sued the city. The church argued the city was violating the First Amendment by denying it use of a school while allowing other community groups access to campuses for their activities.

Last year, the U.S. Court of Appeals in Manhattan, overturning Preska’s 2007 decision in favor of the church, ruled that the city may prohibit religious groups from using school facilities outside of regular school hours for worship services.

Preska has since issued orders allowing churches to worship at public schools, finding on other legal grounds that they have a right to do so. The latest ruling came Feb. 24 in a 51-page opinion.

The case is Bronx Household of Faith v. Board of Education of the City of New York, 01-cv-08598, U.S. District Court, Southern District of New York (Manhattan).

For the latest lawsuits news, click here.

Verdicts, Settlements and Pleas

Monsanto Settles West Virginia Lawsuits Over Nitro Plant

Monsanto Co. (MON), the world’s biggest seed company, agreed to settle all pending litigation relating to dioxin contamination from a plant in Nitro, West Virginia, that produced Agent Orange herbicide decades ago.

The settlements to the litigation, which include class- action lawsuits filed in the state, provide as much as $9 million to have 4,500 homes professionally cleaned, St. Louis- based Monsanto said Feb. 24 in a statement. Monsanto also will provide as much as $84 million over 30 years for medical monitoring of current and former residents, workers and students, and it will pay the community’s legal fees and court costs over the past seven years.

The plant, which operated from 1929 to 2004 under various owners, produced Agent Orange, used during the Vietnam War to defoliate jungle vegetation. The process to make Agent Orange was found to produce dioxins, which are linked to cancer and other ailments. Monsanto hasn’t made Agent Orange since 1969.

“We are please to resolve this matter and end any concerns about historic operations at the Nitro plant,” Scott Partridge, Monsanto counsel, said in the statement.

“The settlements provide needed medical benefits and remediation services to the people of Nitro and broader community,” Stuart Caldwell, class counsel, said in the statement.

California Investor Pleads Guilty in Bid-Rigging Scheme

A California real estate investor admitted that he conspired to rig bids at foreclosure auctions, becoming the 10th person to plead guilty in a U.S. probe of the practice, authorities said.

Wiley Chandler pleaded guilty in federal court in Sacramento, California, to conspiring with other real estate investors to rig bids at real estate foreclosure auctions in San Joaquin County, according to a Feb. 24 statement by the U.S. Justice Department and federal prosecutors in Sacramento.

A defense attorney, Claudia Quiroz, didn’t immediately return a call seeking comment on the plea.

Nine others have pleaded guilty in a scheme that ran from September 2008 to at least October 2009, prosecutors said.

The case is U.S. v. Chandler, 11-cr-00511, U.S. District Court, Eastern District of California (Sacramento).

Glaxo Has Right to Sell Generic Paxil CR, U.S. Judge Rules

GlaxoSmithKline Plc (GSK) has the right to sell an authorized copy of its Paxil CR antidepressant to Apotex Inc., a U.S. judge ruled, denying a bid by Mylan (MYL) Inc. to block such sales.

Mylan (MYL), the generic-drug company which signed a two-year licensing agreement in 2008 to market a copy of Paxil CR, claimed that Glaxo breached that contract by working with Toronto-based Apotex to sell a copy of the drug. U.S. District Judge Joel Pisano ruled that the agreement allowed Glaxo to sell generic Paxil CR to Apotex.

The license was “clear and unambiguous” and that let London-based Glaxo choose whomever it wanted to work with, Pisano ruled Feb. 23 in federal court in Trenton, New Jersey.

“The language plainly states that GSK may commence marketing and selling of authorized generic Paxil CR after Mylan’s two-year period of exclusivity,” Pisano ruled. “GSK did exactly that. It marketed and sold authorized generic Paxil CR to Apotex.”

The case is Mylan Inc. v. SmithKline Beecham Corp., 10- cv-4809, U.S. District Court, District of New Jersey (Trenton).

Fairey Pleads Guilty to Criminal Count Involving Obama Image

Shepard Fairey, the artist who created an iconic 2008 election poster of Barack Obama based on an Associated Press photo, pleaded guilty to criminal counts of destroying documents and manufacturing evidence.

Fairey, 42, of Los Angeles, entered his plea Feb. 24 before Magistrate Judge Frank Maas in federal court in Manhattan, U.S. Attorney Preet Bharara said in an e-mailed statement. Fairey faces as long as six months in prison.

The criminal plea stems from a civil copyright case Fairey and AP settled last year, Geoffrey Stewart, Fairey’s lawyer in that case, said in an interview. Friday’s plea doesn’t jeopardize the settlement, Stewart said.

Fairey “went to extreme lengths to obtain an unfair and illegal advantage in his civil litigation, creating fake documents and destroying others in an effort to subvert the civil discovery process,” Bharara said in the statement.

Dan Gitner, Fairey’s lawyer in the criminal case, didn’t immediately return a call seeking comment on the plea.

In support of Obama’s 2008 presidential campaign, Fairey made posters using a stylized likeness of the candidate with the words “Hope” and “Progress” below the images, relying on a photograph copyrighted by AP, according to the statement.

The criminal case is U.S. v. Fairey, U.S. District Court, Southern District of New York (Manhattan). The civil case is Fairey v. Associated Press, 09-cv-01123, U.S. District Court, Southern District of New York (Manhattan).

Ex-Flextronics Manager Walter Shimoon Settles Case With SEC

Walter Shimoon, a former Flextronics International Ltd. (FLEX) executive who pleaded guilty last year to insider trading, has settled a related civil case with the Securities and Exchange Commission, according to court records.

Shimoon won’t pay a civil penalty because he is cooperating with the agency’s investigation of insider trading, according to a filing Feb. 24 in federal court in Manhattan. He agreed to be “precluded from arguing” in the future that he didn’t violate federal securities laws.

Shimoon pleaded guilty in July to conspiracy and securities fraud. At the time, Shimoon told a judge that he passed illegal tips to John Kinnucan, founder of Broadband Research LLC, while working as a consultant for Primary Global Research LLC and Broadband Research. Shimoon is also cooperating with prosecutors.

Kinnucan, whose Portland, Oregon-based firm provides research on technology companies to hedge funds and mutual funds, was arrested on insider-trading charges last week.

Henry Mazurek, Shimoon’s lawyer, declined to comment on the settlement.

The case is U.S. v. Shimoon, 11-cv-753, U.S. District Court, Southern District of New York (Manhattan).

For the latest verdict and settlement news, click here.

New Suits

Proview Sues Apple in U.S. Court Over 2009 IPAD Trademark Deal

Proview International Holdings Ltd. (334), seeking to block shipments of Apple Inc. (AAPL)’s iPad tablet computer in and out of China, separately asked a court in California to stop the U.S. company from using IPAD trademarks.

A December 2009 agreement in which a Proview unit agreed to sell IPAD trademarks to Apple’s IP Application Development Ltd. should be canceled, Proview said in a Feb. 17 filing to the California Superior Court in Santa Clara. IP Application made “false” statements to Proview in correspondence before the agreement, the filing said.

Apple acquired Proview’s worldwide rights to the iPad trademark in 10 countries, including China, the Cupertino, California-based company said Feb. 14. Proview is refusing to honor an agreement with Apple in China, Apple said. Carolyn Wu, a Beijing-based spokeswoman at Apple, declined to comment on Proview’s U.S. lawsuit beyond the statement last week.

Graham Robinson, an agent for IP Application, used the name Jonathan Hargreaves in correspondence with Proview before the Dec. 23, 2009 agreement to acquire all of Proview’s IPAD-related trademarks for 35,000 pounds ($55,267), the court filing said.

Proview applied to China’s Customs Bureau to block exports as well as imports of the iPad tablet computer, Roger Xie, a lawyer for Proview, said last week.

The case is Proview Electronics Co. v. Apple Inc. and IP Application Development, 12-cv-219219, California Superior Court, Santa Clara County.

Kenneth Cole Sued Over Founder’s Bid to Take Company Private

Kenneth Cole Productions Inc. (KCP) and its namesake founder were sued by a shareholder seeking to block a bid to take the shoe and clothing maker private.

Astor BK Realty Trust accused the company, founder Kenneth D. Cole, Chief Executive Officer Paul Blum and four board members of breaching their fiduciary duties in the lawsuit filed Feb. 24 in New York State Supreme Court in Manhattan.

“The buyout is designed to unlawfully divest KCP’s stockholders of a large portion of the valuable assets of the company for inadequate consideration,” Astor said in the complaint. “Cole knows that the company possesses numerous assets that will continue to produce substantial revenue and earnings, which he wishes to keep for himself.”

Kenneth Cole, who holds 47 percent of the New York-based company’s outstanding shares, offered to buy the remaining stake Feb. 24 in a deal that valued the business at $280 million. The bid of $15 a share is 15 percent more than the closing price on Feb. 23.

A telephone message left at Kenneth Cole Productions headquarters seeking comment on the lawsuit wasn’t immediately returned.

The case is Astor BK Realty Trust v. Cole, 650521/2012, New York State Supreme Court (Manhattan).

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Court Filings

The bankruptcy of Eastman Kodak Co. (EK) was the most-read docket on the Bloomberg Law system last week.

On Feb. 15, the photography pioneer won a judge’s approval to borrow the full amount of a $950 million debt financing commitment that the company will use to support operations while it restructures.

The company has also ended its sponsorship of the theater in Los Angeles where last night’s Oscars took place. U.S. Bankruptcy Judge Allan Gropper in Manhattan approved a request to end the sponsorship agreement to save money as the company restructures. Kodak pays $3.6 million a year and had $38 million in payments left on the contract, Pauline Morgan, a Kodak lawyer, said in court.

The case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

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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