A jury will not be asked to consider potential punitive damages for Terra Firma private equity firm in its civil fraud claim against Citigroup Inc over the 2007 purchase of EMI music company, a U.S. judge said on Monday.
U.S. District Judge Jed Rakoff, presiding over the trial that pits the word of Terra Firma founder Guy Hands against onetime Citigroup banker friend David Wormsley, indicated that he believed punitive damages were not appropriate under the law in the multibillion-dollar case.
“This is a cat fight between two rich companies,” Rakoff commented at a nighttime hearing in the absence of the jury, which began hearing trial evidence on Oct. 18.
“Punitive damages in most jurisdictions involves some threat to the public,” the judge said. “This case doesn’t have that.”
A Terra Firma spokesman declined comment. Citigroup lawyers declined comment.
Last week, the judge made rulings that reduced to about $2 billion from about $8 billion the potential amount that the jury could decide to award Terra Firma.
If the jury decided Terra Firma had been defrauded, Citigroup’s reputation for facilitating mergers and acquisitions could suffer.
Terra Firma’s ill-fated 4 billion pounds ($6.4 billion) purchase of the storied music company that once had The Beatles and scores of other music stars on its label has become a symbol of some of the worst aspects of the credit boom and bust. EMI is sagging under the weight of its debt and problems in the music recording and music publishing business.
If Terra Firma lost at trial, it could be forced to hand over EMI to Citigroup, which provided 2.6 billion pounds ($4 billion) in loans for the acquisition.
The jury of nine New Yorkers will begin deliberations later this week after closing arguments, which are expected on Tuesday or Wednesday.
The trial centers around three phone conversations between Hands, 51, and Wormsley, 50, in the days leading up to the EMI bid deadline of May 21, 2007.
Hands has testified during the trial that he made a high bid of 265 pence per share for EMI only because the banker and friend he trusted lied to him about a rival offer from Cerberus Capital Management LP at 262 pence per share that he had to beat. The Cerberus bid turned out to be non-existent.
Wormsley, during his testimony, denied misleading or lying to Hands.
The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 09-10459. ($1 = 0.623196 pound)
(Reporting by Grant McCool; Editing by Gary Hill)
Was this article valuable?
Here are more articles you may enjoy.