November 2014 Newsletter


•  Scott+ Scott Recovers $590.5 Million in Private Equity Antitrust Case

•  Scott+ Scott Files Case on Behalf of Payment Card Issuers Affected By Home Depot Data Breach

•  Global FX Investigations Heat Up

 Court Holds Umbrella Damages Are Available Under California’s Cartwright Act

•  Conferences and Educational Seminars


Scott+Scott Recovers $590.5 Million in Private Equity Antitrust Case

On September 29, 2014, the United States District Court for the District of Massachusetts preliminarily approved a $590.5 million settlement negotiated by Scott+Scott and its co-lead counsel, bringing to resolution Dahl v. Bain Capital Partners, LLC, No. 1:07-cv-12388-WGY (D. Mass.), a longstanding antitrust case against many of the most prominent private equity firms in the United States.  The proposed settlement is between plaintiff shareholders and defendant private equity firms Bain Capital, Goldman Sachs, Silver Lake, Blackstone, KKR, TPG, and Carlyle.

Filed in 2007, the case was brought on behalf of former shareholders of U.S. public companies who sold their shares to defendants in certain leveraged buyouts (LBO) between 2003 and 2007.  In an LBO, a private equity firm acquires substantially all of the outstanding shares of a company using a combination of equity and debt to fund the purchase.  The private equity firm then withdraws any publicly-traded shares from stock exchanges, thereby taking the company private.  After operating the company for a period of time,  the private equity firm then typically sells the company to other private buyers or conducts a public offering.

After multiple rounds of summary judgment, the court sustained two antitrust claims.  The first alleged that defendants agreed not to compete on eight deals during the time between the announcement of the deals and their closings, generally known as the “go-shop” period.  This claim was brought on behalf of shareholders in Freescale, HCA, SunGard, Harrah’s, AMC, TXU, Aramark, and Kinder Morgan.  The second claim alleged an agreement not to compete on the HCA LBO on behalf of a class of HCA shareholders.

After seven years of hard-fought litigation, which included the review of millions of pages of documents, taking over fifty depositions, and the submission of nearly 20 expert reports, the parties settled the case before trial was scheduled to begin on November 3, 2014.  At the time of the settlement, summary judgment and class certification motions were pending, which created substantial litigation risk to both sides.  The case remains in the United States District Court for the District of Massachusetts pending final approval of the settlement.  The final approval hearing is scheduled for February 11, 2015.

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Scott+Scott Files Case on Behalf of Payment Card Issuers Affected By Home Depot Data Breach

On September 8, 2014, The Home Depot, Inc. (“Home Depot”) acknowledged that a massive data breach had occurred at its retail stores between approximately April and September 2014.  Home Depot disclosed this information about one week after it learned of the data breach.  In a September 18, 2014 press release, Home Depot acknowledged that “[t]he cyber-attach is estimated to have put payment card information at risk for approximately 56 million unique payment cards.”  This amounts to one of the largest data security breaches in American history.

In the breach, computer hackers stole data consisting of customers’ debit and credit card information, including card numbers, account holders’ names, and the address of the Home Depot retail location where the card was used.  Initial calculations from BillGuard, a private security firm, estimate that the accounts compromised in the data breach could result in $2-3 billion in fraudulent charges.

Hackers in possession of this data package of customer information will sell it over black markets to thieves.  Such sophisticated criminals can recreate debit or credit cards by burning the stolen information onto magnetic strips on counterfeit cards.  Furthermore, some thieves are using the stolen information to change a cardholder’s PIN number on stolen debit cards to make ATM withdrawals from Home Depot customers’ accounts.  Indeed, a West Coast bank reported on September 8, 2014 that it “lost more than $300,000 in two hours today to PIN fraud on multiple debit cards that had all been used recently at Home Depot.”

To aid consumers whose data may have been stolen, banks and credit unions are forced to reissue millions of debit and credit cards.  This process, which costs several dollars per card, imposes substantial costs on such banks and credit unions, who also incur many administrative expenses and overhead charges dealing with monitoring and preventing fraud.  Such banks and credit unions must also reimburse fraudulent charges and lose interest and transaction fees.

Merchants like Home Depot are required to comply with the Payment Card Industry Data Security Standards, a list of twelve information security requirements.  These Standards are designed to protect cardholder data, ensure the maintenance of vulnerability management programs, implement strong access control measures, regularly monitor and test networks, and ensure the maintenance of information security policies.  Over the last few weeks, additional information regarding Home Depot’s data security practices and procedures has emerged.  In a September 19, 2014 New York Times article, former employees confirm that they had raised alarms in Home Depot’s cyber-security as far back as 2008.

As a result of the data breach, numerous federal and state investigations have been launched.  A group of state attorneys general have opened an investigation, led by Connecticut Attorney General George Jepsen, in coordination with Illinois Attorney General Lisa Madigan and California Attorney General Kamala D. Harris.  Furthermore, United States Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut have called on the Federal Trade Commission to investigate, calling into question whether “Home Depot failed to adequately protect customer information.”

On behalf of a financial institution, Scott+Scott has filed a class action lawsuit in the Northern District of Georgia, Savings Institute Bank and Trust Company v. The Home Depot, Inc., 14-cv-03178-ODE, to recover damages incurred as a result of the data breach.

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Global FX Investigations Heat Up

The worldwide government investigations into the foreign currency exchange market have been heating up in the last three months.  The investigations focus on whether traders at competing banks colluded to manipulate the “4 p.m. London fix” for currencies.  The 4 p.m. London fix is used in the spot market to trade currencies, as well as to value positions.  Just this month, Bloomberg reported that the United States Department of Justice is preparing to bring criminal charges against a bank for rigging currency rates by the end of 2014 and against individuals in 2015.  In addition, as The New York Times reported, several financial institutions are expected to enter guilty pleas.     

Investigations in the United Kingdom are reportedly even more advanced.  The Serious Fraud Office announced that it has launched a criminal investigation into the foreign exchange market.  In addition, news has recently surfaced that the Financial Conduct Authority (“FCA”), the financial regulatory body that regulates financial firms in the UK, is in settlement talks with several banks with the hope of obtaining a settlement by November.  According to The New York Times, the FCA “met last month with six banks – Citigroup, JPMorgan, Barclays, UBS, the Royal Bank of Scotland and HSBC – to discuss the contours of a collective settlement that it plans to announce this fall.”  The FCA is reportedly seeking to collect fines that total up to $3.3 billion. 

One of the banks at the center of the scandal – UBS – has not denied these reports.  In fact, UBS recently explained in its prospectus to investors that:


Some investigating authorities have initiated discussions of possible terms of a resolution of their investigations.  The terms proposed include findings that UBS failed to have adequate controls in relation to its foreign exchange business that were adequate to prevent misconduct, and would involve material monetary penalties. 

UBS added that “[i]t is possible that other investigating authorities may seek to commence discussions of potential resolutions in the near future.” 

Scott+Scott is lead counsel for a proposed nationwide class of victims in In re Foreign Exchange Benchmark Rates Antitrust Litigation, 13-cv-07789 (LGS) (S.D.N.Y.).  The lawsuit alleges that traders at the largest banks in the world conspired to manipulate the 4 p.m. London fix at the expense of their clients.

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Court Holds Umbrella Damages Are Available Under California’s Cartwright Act

Plaintiffs bringing antirust claims under California’s Cartwright Act won an important victory over the availability of “umbrella damages” under California law.  Under the U.S. District Court for the Northern District of California’s decision in County of San Mateo v. CSL Limited, et al., No. 10-cv-5686 (N.D. Cal.), plaintiffs may seek damages resulting from the effect a cartel has on the prices charged by non-cartel members in the same market under California state law.  In contrast, such umbrella damages, the Court held, are not available under federal antitrust laws.  In the case, the plaintiff, the County of San Mateo (“San Mateo”), alleged that certain manufacturers of pharmaceutical products derived from human blood plasma conspired to restrict the supply of those products.  This caused San Mateo to pay supra-competitively high prices for the products because of the artificial shortages. 

On June 27, 2014, Defendants CSL Limited, CSL LLC, CSL Plasma (collectively “CSL”), Baxter International Inc. (“Baxter”), and Plasma Protein Therapeutics Association (collectively “Defendants”) brought a motion for partial summary judgment.  Defendants argued that, as a matter of law, San Mateo could not obtain damages from Defendants for products purchased from rival non-conspirators that were inflated by Defendants’ conspiracy.  Such damages are commonly referred to as umbrella damages.  Defendants argued that umbrella damages were unavailable to Plaintiff because they were “unacceptably speculative,” and that Plaintiffs lacked standing to seek such damages.  The Court denied Defendants’ motion for partial summary judgment. 

The only claim that remained for summary judgment was the alleged violation of Section 16750(a) of the California Cartwright Act.  This section allows anyone “injured in his or her business or property” by conduct deemed anticompetitive by the Cartwright Act to recover triple damages.  The Court held that claims for umbrella damages by indirect purchasers, like San Mateo, were not “unduly speculative” as a matter of law because “[t]he overcharge damages flowing from purchases from non-conspiring rivals are based on the same calculation that must be made for damages flowing from purchases from Defendants; that is, the amount over the price that would have occurred in the absence of the anticompetitive conduct.” 

However, the Court highlighted that “California law, in contrast to federal law, allows indirect purchasers in a multi-tiered distribution chain to sue and collect damages, such as overcharges, from antitrust defendants.”  The Court further opined that the differences between federal law and California law on the issue of umbrella damages made the difference in the Court allowing San Mateo’s allegations to move forward.  “At bottom, Defendants’ argument is that because the Ninth Circuit has held that umbrella damages are not recoverable under the Sherman Act, they are not recoverable under the Cartright [sic] Act.  The Court disagrees.” The Court further held that California courts had not addressed the issue and that “the Ninth Circuit’s decision . . . construing federal antitrust law is not binding on this Court’s interpretation of California’s Cartwright Act.”        

The Court allowing umbrella damages is noteworthy because it is expressly conflicts with the holding of another judge in the Northern District of California.  In In re TFT-LCD (Flat Panel) Antitrust Litigation, the Court held, under the same reasoning that barred umbrella damages under federal law, that “an indirect purchaser’s claims for umbrella damages arising from a multi-tiered distribution chain are barred under the Cartwright Act.”  Therefore, debate remains over the applicability of California Cartwright Act umbrella damages in California.  

The Court in San Mateo found Defendants’ argument that Plaintiff lacked standing under the Cartwright Act to be non-controversial.  It held that federal courts in the Northern District had reached different conclusions about whether the seminal federal antitrust standing case, Associated General Contractors of California, Inc. v. California State Council of Carpenters (“AGC”), applied to Cartwright Act claims, but that even if it did, Plaintiffs here still clearly had standing, noting that San Mateo’s umbrella damages claims were “not inherently speculative,” and that just because the alleged harm may be speculative in nature, that San Mateo still had standing.

Allowing indirect purchasers bringing California Cartwright Act claims to recover umbrella damages is important because, as the Court stated, “allowing umbrella damages actually promotes the policy concern identified [by the California Supreme Court]  since the availability of umbrella damages is an additional incentive for an injured party to file suit.” 

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November Events

Conferences and Educational Seminars


            +November 11-14, 2014

State Association of County Retirement Systems Annual Fall Conference (SACRS)

Monterey Hyatt

Monterey, CA


SACRSis an association of twenty California county retirement systems formed in 1937 under the California County Employees Retirement Law.  The California Government Code sets forth the policies and regulations governing the actions of the county retirement systems.  Those  who serve on a Board of Retirement (or Board of Investment) and those who lead and staff  county pension systems  will  be required to know more about managing retirement plans as more regulations are legislated, etc.  In these turbulent economic times the members, beneficiaries and stakeholders of  member systems  want to be assured,  more than ever, that their interests are appropriately served by the fiduciaries they elected or appointed to the governing Boards and that the management of the retirement systems is as professional as ever.  The SACRS conference provides the trustees a venue for education, problem solving and networking.



+November 17-19, 2014


18th Annual Endowment and Foundation Forum produced by Opal Financial Group

Boston Marriott Long Wharf

Boston, Massachusetts


This year’s conference will feature independent perspectives by actual endowment and foundation investors including investing in private equity.  The changing landscape for endowments and  foundations include CIO outsourcing, a new wave of alternative strategies and the impact of governance issues. Risk management, sustainable investing and fiduciary duty topics will be covered in core sessions.  Guest Speakers will target industry sectors and show how a particular organization’s fiscal strategy is based on its goals within its sector.


+November 19, 2014


             New England Institutional Investor Forum produced by US Markets


Boston, Massachusetts

            More than 100 plan sponsors, pension administrators, corporate treasurers and public trustees from New England will come together to consult with a team of highly experienced service providers. The forum is specially designed to cover topics of interest in the following areas: domestic investments, fiduciary responsibilities,legal and legislative issues and best practices in plan management.  US Markets has produced more than 100 regional conferences since 2009 with an educational platform created in collaboration with academics and experts in the pension, endowment and foundation arena.


+November 19-24, 2014


National League of Cities  (NLC)

Austin Convention Center

Austin, Texas


The four day Annual National League of Cities conference is dedicated to providing city leaders with resources for building better communities.  The NLC works in partnership with 49 municipal leagues and serves as an advocate for more than 19,000 communities. Cities and towns join NLC and the elected officials and staff from those cities and towns in participating in NLC’s programs, activities and governance.  State municipal leagues guide the organization’s priorities and serve as an important link to cities in their state.  NLC, unlike most municipal leagues, offers membership opportunities for members of the private sector.  The annual conference allows, through its Corporate Partners Program, the private sector to exchange ideas between corporate leaders and leaders of America’s cities in order to strengthen local government and promote corporate-civic engagement.  Participation in the NLC Corporate Partners Program is by invitation of the NLC Leadership.


+November 23-25, 2014


County Commissioners Association of Pennsylvania (CCAP) Annual Conference

The Hotel Hershey

Dauphin County, Pennsylvannia


The County Commissioners Association of Pennsylvania is a statewide, nonprofit, bipartisan association representing the commissioners, chief clerks, administrators, their equivalents in home rule counties, and solicitors of Pennsylvania's 67 counties.  The County Commissioners Association of Pennsylvania (CCAP) and its member counties are committed to excellence in county government.  CCAP advocates for and provides leadership on those issues that will enhance and strengthen the ability of county commissioners to better serve their citizens and govern more effectively and efficiently.  The Association strives to educate and inform the public, administrative, legislative and regulatory bodies, decision makers, and the media about county government.  The fall conference is exhibit free, however, networking activities take place throughout the conference.  There are more than a dozen committee meetings from agriculture committee meetings to shareholder action committee meetings which meet the first day of the conference.  Most participants belong to at least one committee.  On second day, there is a time block set aside for those who participate in the democrat or republican caucus sessions.


Government Finance Officers’ Association Conferences


+November 11-14, 2014

Government Finance Officers’ Association of Texas

Westin Riverwalk Hotel

San Antonio, Texas


+November 18, 2014

Connecticut GFOA

Aqua Turf Club

Planstville, CT



+November 18-21, 2014

Colorado GFOA

Vail Cascade Hotel & Conference Center

Vail, Colorado 

Scott + Scott LLP is a nationally recognized law firm headquartered inConnecticut with offices in New York City, Ohio and California. The firm represents 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: + UK Tel: 0808.234.1396