July 2014 Newsletter


•  First Settlements Reached in Private Equity Antitrust Litigation

•  Supreme Court Sets New Standards For Securities Class Actions

•  Cartels in EU Must Pay “Umbrella” Damages

•  The Era of Safe Havens for Antitrust Fugitives Nears an End

•  Conferences and Educational Seminars


First Settlements Reached in Private Equity Antitrust Litigation

On June 11, 2014, Scott+Scott and its co-lead counsel filed a motion for preliminary approval of two settlements in Dahl v. Bain Capital Partners, LLC, No. 07-cv-12388 (D. Mass), an antitrust class action alleging collusion among private equity firms for large, U.S.-company targets.  The proposed settlements are between the plaintiff investors and defendants Bain Capital and Goldman Sachs.  Together, the settlements provide for $121 million in monetary relief for the benefit of the proposed settlement class.  Five defendants remain, including private equity firms Silver Lake, KKR, TPG, Carlyle, and Blackstone.

This longstanding action was brought on behalf of former shareholders of U.S. public companies who sold their shares to the defendant private equity firms in large, leveraged buyouts (“LBOs”) between 2003 and 2007.  In an LBO, a private equity firm acquires substantially all the outstanding shares of a target company using a combination of equity and debt to fund the purchase.  The purchaser withdraws the shares of the company from the public stock exchange, thereby taking the company private.  The purchaser then operates the company for a period of time before either selling the company to other private buyers or conducting a public offering for its shares.

After multiple rounds of summary judgment briefing, the court sustained two antitrust claims.  The first claim alleges that the defendants agreed not to compete on eight deals during the time between the signing of the deals and their closings, generally known as the “go-shop” period.  The eight deals are Freescale, HCA, SunGard, Harrah’s, AMC, TXU, Aramark, Texas Genco, and Kinder Morgan.  The second claim asserts an agreement not to compete on the HCA deal.

The settlement comes as the parties await the Court’s ruling on class certification, which the parties have fully briefed. The Court will consider whether to preliminarily approve the settlements and grant class certification at a hearing in Boston on July 14, 2014.

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Supreme Court Sets New Standards For Securities Class Actions

On June 23, 2014, the Supreme Court of the United States issued its long awaited and much anticipated decision in Halliburton Co. v. Erica P. John Fund, Inc., (No. 13-317), a securities class action case originally filed in 2002. 

The case alleges that between June 3, 1999, and December 7, 2001, Halliburton made a series of misrepresentations regarding its potential liability in asbestos litigation, its expected revenue from certain construction contracts, and the anticipated benefits of its merger with another company in order to artificially inflate the price of its stock.  Halliburton subsequently made a number of disclosures that corrected the prior misrepresentations, and which the plaintiff contended caused the company’s price to drop and investors to lose money.

The district court originally ruled that the case could not proceed as a class action, which decision was upheld by the Fifth Circuit Court of Appeals.  The Supreme Court reversed the Fifth Circuit’s decision and sent the case back down to the district court.  Based on the Supreme Court’s decision, the district court granted class certification, a ruling that was upheld by the Fifth Circuit.  The Supreme Court agreed to hear the case again in November, and then heard oral argument on March 5, 2014.

In its appeal, Halliburton contested the viability of the “fraud-on-the-market” presumption of reliance, and sought to overturn Basic v. Levinson, a 1988 case where the fraud-on-the-market presumption was first recognized.  The fraud-on-the-market presumption makes it easier for shareholders to pursue securities fraud lawsuits on a class basis because it does not require shareholders to have individually relied on a misrepresentation.  This presumption rests on the principle that public, material information regarding a publicly traded company affects the price of the company’s stock, that the market digests that information, and accordingly, that investors rely on that information when they purchase securities.

The Supreme Court determined that it would not overrule Basic, finding that Halliburton failed to set forth a “special justification” to entirely overturn that landmark decision.  The Supreme Court did rule, however, that defendants in securities class actions should be allowed to rebut the fraud-on-the-market presumption before the class certification stage of the litigation.  Such a showing would be possible if a defendant sets forth evidence that an alleged misrepresentation did not affect the stock price.  While defendants have been able to proffer such evidence at the class certification stage and later during litigation, it had previously been unclear whether they could do so before class certification.

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Cartels in EU Must Pay “Umbrella” Damages

In a landmark opinion that largely diverges from U.S. federal case law, the European Union’s (“EU”) highest court ruled on June 5, 2014, that all victims of illegal price-fixing may be compensated for their losses, regardless of whether they purchased the price-fixed goods from the alleged cartel members or their innocent rivals.    

In Kone AG and Others, ÖBB-Infrastrukter AG, a subsidiary of the Austrian Federal Railways, brought claims against members of cartels relating to the installation and maintenance of elevators and escalators for damages suffered as a result of paying higher prices to both cartel members and non-cartel members.  Relying on the “umbrella pricing effect,” ÖBB-Infrastruktur AG claimed damages as a result of buying products from non-cartel members at a higher price than it would have paid but for the existence of the cartel on the basis that those non-cartel members benefited from the existence of the cartel.  However, under Austrian national law, damages resulting from umbrella pricing are precluded because there is no adequate causal link between the cartel and the loss potentially suffered by a buyer since it is a side effect of an independent decision that a person not party to a cartel has taken on the basis of his own business considerations. 

The EU’s Court of Justice struck down the Austrian law as inconsistent with the purpose underlying Article 101 of the Treaty on the Functioning of the European Union (“TFEU”), the European Union’s antitrust law.  “The full effectiveness of Article 101 TFEU…would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition.” 

The Court concluded that any person is entitled to claim compensation for the harm suffered where there is some causal relationship between that harm and an agreement or practice prohibited under Article 101 TFEU.  Such a causal connection exists in circumstances of umbrella pricing, because market price is one of the main factors taken into consideration by an entity when it determines the price at which it will offer its goods or services.  “[E]ven if the determination of an offer price is regarded as a purely autonomous decision, taken by the undertaking not party to a cartel, it must none the less be stated that such a decision has been able to be taken by reference to a market price distorted by that cartel and, as a result, contrary to the competition rules”.  Therefore, umbrella pricing was a foreseeable effect of the cartel.

The U.S. Supreme Court has yet to address the issue of whether, under U.S. federal law, parties injured by price-fixing may recover damages from conspirators for higher prices paid to innocent rivals.  However, the majority of U.S. District Courts that have confronted the issue have rejected claims for damages resulting from umbrella pricing on the basis that the damages would be speculative and complex given the wide range of factors that influence a non-cartel members’ pricing policies.  In other words, the non-cartel members’ independent pricing decisions constitute intervening causes that break the chain of causation from the price-fixing conduct to the paying of higher prices. 

The EU’s Court of Justice’s opinion is likely to have significant impact on the number of claimants bringing private suits for price-fixing damages and the amount of damages awarded in those cases.

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The Era of Safe Havens for Antitrust Fugitives Nears an End

In April of this year, as detailed in Scott+Scott’s May 2014 Newsletter, the United States Department of Justice (“DOJ”) announced a significant achievement with the successful extradition of an Italian foreign national who was charged in a price-fixing scheme involving the marine hose manufacturer Parker ITR, SLR.  This extradition was a first for the DOJ, which for decades had tried unsuccessfully to convince other countries to extradite foreign executives to the United States who are charged with price-fixing or other anti-competitive conduct.

At that time, legal and political pundits questioned whether the DOJ’s first ever successful extra-territorial extradition was a harbinger of things to come, or was simply an exception to the general rule that antitrust scofflaws could find safe haven from U.S. enforcement by fleeing or residing abroad.  Recently, the DOJ’s top criminal antitrust enforcer weighed in on that debate, predicting that growing criminalization of antitrust violations around the globe will increasingly deny safe haven to foreign executives charged in the United States with such violations.

Brent Snyder, the deputy assistant attorney general for criminal enforcement at the DOJ’s Antitrust Division recently attended a New York State Bar Association panel and applauded the DOJ’s efforts in extra-territorial extradition.  Calling the DOJ’s extradition of the Italian national involved in the marine hose price-fixing scheme a “very, very significant development,” Snyder stated that changes in political winds around the world will only increase the likelihood that the DOJ will be able to seek and win future extra-territorial extraditions.

Specifically, Snyder noted that more and more countries are beginning to criminalize antitrust violations and that national self-interest will dictate global cooperation in enforcement.  “Much like we have had a proliferation of leniency programs in recent years, we also have seen more and more jurisdictions that are adopting criminal antitrust statutes, and . . . that will make extradition more easy to obtain,” Snyder said.  Additionally, Snyder believes that increasing recognition of antitrust laws will encourage individuals charged with such violations to come forward without the need for extradition.  “We believe this will hopefully either encourage more people who are either actual fugitives or contemplating being fugitives to come in, accept responsibility and put this behind them because there are going to be, I think, fewer and fewer safe havens all the time.”

Acknowledging that there will always be some far-flung places where fugitives on the run will be able to evade extradition, Snyder said he still believes that the era of safe havens is near an end.  “You may believe you live in a country that will not extradite to the United States, but if you want to get on an airplane, you want to travel to another country, you are going to increasingly be at a high risk of being extradited to the United States,” Snyder concluded.

Despite this anticipated change in the extradition climate, there are still some doubts as to whether jurisdictions that are only recently recognizing criminal antitrust violations will have the appetite for extraditing one of its own citizens to the United States.  Nevertheless, victories like the DOJ’s recent extradition make it increasingly likely that more foreign nationals will be extradited to the United States to face antitrust charges and that the era of true safe havens for antitrust fugitives is, at the very least, on the wane.   

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July Events


National Conferences and Educational Seminars



+June 29 - July 2, 2014


Florida Public Pension Trustee Association’s 30th Annual Conference (FPPTA)

Hilton Bonnet Creek Conference Center

Orlando, Florida


FPPTA’s primary purpose in conducting an annual educational forum is to provide the basis for improved financial and operational performance of the public employee retirement systems in the state.  FPPTA acts as a central resource for educational purposes for the public pension industry, including topics such as the political reality of public pension plans and private sector public sector plans.



+July 6-9, 2014


International Brotherhood of Electrical Workers (IBEW) Fourth District Progress Meeting

The Galt House Hotel

Louisville, Kentucky


The IBEW Fourth District Progress Meeting provides a formal setting of educational and related programs for IBEW locals in the states of Ohio, Kentucky, Virginia, West Virginia, Maryland, and Washington D.C.  Its primary objective is to disseminate information through scheduled seminars and written and verbal communications.  The purpose of the seminars will be to provide information on specific issues of common interest and create resources for the IBEWs in the fourth district.  Additionally, the seminars will provide a forum for discussion on national and regional issues of interest to the IBEW.



+July 9-11, 2014


Missouri Association of Public Employee Retirement Systems (MO-MAPERS)

Tan-Tar-A Resort

Osage Beach, Missouri


The Missouri Association of Public Employee Retirement Systems (MAPERS) began in October of 1987.  Since that time, the organization has worked to bring together individuals and organizations interested in expanding their knowledge of pension and investment issues.  The purpose of the association is to provide education, information, and ideas to strengthen and protect Missouri's public employee retirement systems.  Plan sponsor membership is open to trustees and administrators of all public pension funds in the State of Missouri.  Corporate membership is open to commercial financial and investment groups and associate membership is open to organizations affiliated with public retirement systems including unions, lobbying groups, etc.  MAPERS holds its annual conference each summer, attended by members from all three membership categories.  The agenda includes nationally known speakers from the financial, legal, and retirement arenas.



+July 11-14, 2014


National Association of Counties 79th Annual Conference (NACo)

Morial Convention Center

Orleans Parish, New Orleans, Louisianna

The National Association of Counties (NACo) is the only national organization that represents county governments in the United States.  Founded in 1935, NACo provides essential services to the nation’s 3,069 counties.  Forty-eight of the 50 states have operational county governments.  Connecticut and Rhode Island are divided into geographic regions called counties, but they do not have functioning governments.  Alaska calls its counties boroughs and Louisiana calls them parishes.  The population of counties varies from Loving County, Texas, with 140 residents to Los Angeles County, California, which is home to 9.2 million people. 



+July 14-18, 2014


International Association of Fire Fighters, AFL-CIO, CLC (IAFF) Biennial Convention

Duke Energy Convention Center

Cincinnati, Ohio


This is the 52nd International Association of Fire Fighters Convention where officers and delegates from Canada and the U.S. meet with political leaders, service providers, and each other to exchange ideas and receive financial and legislative updates.  The IAFF, headquartered in Washington DC, is one of the most influential lobbying organizations in Washington, representing more than 300,000 members.  The IAFF’s mission is to build and grow a stronger union while educating its members.



+July 19-23, 2014


National Association of Police Organizations 36th Annual Convention (NAPO)

Hilton Garden Inn

Kalispell, Montana


The National Association of Police Organizations, NAPO, serves to improve the working conditions of member organizations through legislative issues, awareness, and modification of the rights of law enforcement personnel.  It is also an effective mechanism to educate the public with regard to achieving improved public safety and crime reduction.  The objective of this Association shall be to unite all police officer organizations within the United States and surrounding nations, territories, and islands in order to promote and maintain federal legislation most beneficial to law enforcement in general and the protection of the citizens of this Nation.  The aim of  this year’s conference is  to stimulate mutual cooperation between law enforcement organizations and to assist in the economic, social, and professional advancement of all law enforcement officers, whether active or retired, in various areas including issues regarding Pension and Healthcare Reform.



+July 20-24, 2014


Pennsylvania State Association of County Controllers 100th Annual Conference (PSACC)

Wyndham Gettysburg

Adams County, Gettysburg, Pennsylvania


The Pennsylvania State Association of County Controllers is an organization of county government finance professionals.  The organization’s purpose is to encourage the discussion and resolution of issues arising in the discharge of the duties and functions of the office of County Controller.  The organization advances the professional development of its members through a conscientiously applied program of continuing professional education and training.  PSACC is comprised of the County Controllers, or “fiscal watchdogs” from 38 counties across the state, their deputies, solicitors, and staff.



+July 21-23, 2014


Public Funds Summit produced by Opal Financial Group

Newport Marriott

Newport, Rhode Island


Opal Financial Group's annual public funds conference will address issues that are most critical to the investment success of senior public pension fund officers and trustees.  The Summit will cover among several additional fiduciary topics, the processes for selection and evaluation of service providers and legal concerns with fund investment and management policies as well as the benefits and pitfalls of a wide variety of investment strategies, including investment policy statements.




+July 23-25, 2014


International Brotherhood of Electrical Workers (IBEW), Ninth District Union Progress Meeting

Grand Wailea, Waldorf Astoria Resort and Conference Center

Maui, Hawaii


The ninth district of IBEW includes electrical workers from the states of Hawaii, Alaska, Washington, Oregon, California, Nevada, and the northern area of Idaho, as well as Guam and Saipan.  With  close to 130,000 members,  the IBEW serves as a unified voice for union electrical workers in the business and political arena while providing the most comprehensive training programs in the industry.  IBEW works to promote the principles of trade unionism, speaking on behalf of its members, all striving toward the same goals, providing security and dignity for all members.



Government Finance Officers’ Association Conferences



+July 10-13, 2014


Municipal Association of South Carolina

Charleston Place Hotel

Charleston, South Carolina




+July 20-22, 2014


North Carolina Government Finance Officers’ Association (NCGFOA)

Holiday Inn Resort

Wrightsville Beach, North Carolina




+July 23-25, 2014


Arkansas Government Finance Officers’ Association

The Arkansas Municipal League

North Little Rock, Arkansas



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Scott + Scott LLP is a nationally recognized law firm headquartered inConnecticut with offices in New York City, Ohio and California. The firmrepresents individual as well as institutional investors who have suffered from corporate stock fraud. Scott+Scott has participated in recovering billions of dollars and achieved precedent-setting reforms in corporate governance on behalf of its clients. In addition to being involved in complex shareholder securities and corporate governance actions, Scott+Scott also has a significant national practice in antitrust, ERISA, consumer, civil rights and human rights litigation. Through its efforts, Scott+Scott promotes corporate social responsibility.

Scott+Scott’s PT+SM System is the firm’s proprietary investment portfolio tracking service. Carefully combining the firm’s proprietary computer-based portfolio monitoring software with Scott+Scott’s hands-on approach to client  relations is a proven method for institutional investors and their trustees to successfully

  • Monitor their investment portfolios  
  • Identify losses arising from corporate fraud    
  • Consider what level of participation any given situation requires   
  • Recover funds obtained on their behalf through investor litigation action  

To obtain more information about Scott+Scott’s PT+SM services or to schedulea presentation to fund trustees, fund advisors or asset managers, please contact:    David R. Scott + Toll Free: 800.404.7770     email: drscott@scott-scott.com + UK Tel: 0808.234.1396