NEW YORK - Federal securities class action lawsuits continue to be filed at a record pace in 2012, based in large part on a continued high level of merger objection case filings, according to a mid-year report issued July 24 by NERA Economic Consulting.
MIAMI - The Florida Insurance Guaranty Association Inc. (FIGA) did not have a duty to defend and indemnify a personal injury lawsuit because a surplus lines insurance policy acceded by an insolvent insurer through a merger is excluded under FIGA's statutory provisions, a Florida appeals panel held July 18, reversing and remanding for entry of final summary judgment in favor of FIGA (Florida Insurance Guaranty Association Inc. v. William Karelas and Christine Karelas, No. 3D10-3015, Fla. App., 3rd Dist.; 2012 Fla. App. LEXIS 11530).
NEW YORK - A company's purchase of substantially all of an asbestos-containing valve company's assets creates sufficient questions regarding whether the purchase constituted a de facto merger, a New York justice held in an opinion posted July 12 (Robert N. Wexler and Betsy Wexler v. A.O. Smith Water Products Co., No. 190223/11, N.Y. Sup., New York Co.; 2012 N.Y. Misc. LEXIS 3233).
NEW YORK - Energy company Dynegy Inc. filed for Chapter 11 bankruptcy on July 6 in the U.S. Bankruptcy Court for the Southern District of New York, citing liabilities greater than $5.13 billion and seeking joint administration of its bankruptcy proceeding with its wholly owned subsidiary Dynegy Holdings LLC, which filed for bankruptcy in 2011 (In Re: Dynegy Inc., No. 12-36728, Chapter 11, S.D. N.Y. Bkcy.). Subscribers may view the petition available within the full article.
WILMINGTON, Del. - Shareholders of a corporation asked the Delaware Chancery Court on June 29 to approve a $49 million settlement with the corporation's directors and officers in a shareholder lawsuit over the corporation's merger with another company (In Re Delphi Financial Group Shareholders Litigation, No. 7144-VCG, Del. Chanc.).
WASHINGTON, D.C. - The U.S. Supreme Court on June 25 granted the Federal Trade Commission's petition for a writ of certiorari seeking review of an 11th Circuit U.S. Court of Appeals ruling that although a merger between two Georgia hospitals would substantially lessen competition or tend to create a monopoly, the state-action doctrine immunized the conduct from a challenge by the FTC (Federal Trade Commission v. Phoebe Putney Health System, Inc., et al. No. 11-1160, U.S. Sup.).
Follow this link to review a complimentary copy of the complete Mealey's article.
WASHINGTON, D.C. - The U.S. Supreme Court today granted the Federal Trade Commission's petition for a writ of certiorari seeking review of an 11th Circuit U.S. Court of Appeals ruling that although a merger between two Georgia hospitals would substantially lessen competition or tend to create a monopoly, the state-action doctrine immunized the conduct from a challenge by the FTC (Federal Trade Commission v. Phoebe Putney Health System, Inc., et al., No. 11-1160, U.S. Sup.).
'General Corporate Powers'
In seeking review, the FTC asked the Supreme Court to determine "hether the Georgia legislature, by vesting the local government entity with general corporate powers to acquire and lease out hospitals and other property, has 'clearly articulated and affirmatively expressed' a 'state policy to displace competition' in the market for hospital services" and "hether such a state policy, even if clearly articulated, would be sufficient to validate the anticompetitive conduct in this case, given that the local government entity neither actively participated in negotiating the terms of the hospital sale nor has any practical means of overseeing the hospital's operation."
The FTC argued that review was warranted "to correct a line of decisions that erroneously places a large segment of commerce outside the reach of federal competition law."
The 11th Circuit's "reliance on a grant of general corporate powers reflects an entrenched misapplication of this Court's precedents that squarely conflicts with decisions from the Fifth, Sixth, Ninth, and Tenth Circuits. As many other courts have recognized, such commonplace grants of corporate authority reflect only a 'State's position . . . of mere neutrality' that cannot support a state action defense," the FTC argued.
In addition, the 11th Circuit erred "by assuming that Georgia's supposed policy authorizing the Authority to engage in anticompetitive conduct amounts to the State's endorsement of what in substance is an unsupervised private merger. Yet such a policy would violate this Court's clear rule that 'a State may not confer antitrust immunity on private persons by fiat,'" the FTC said, quoting FTC v. Ticor Title Ins. Co. (504 U.S. 621, 633 ).
The FTC challenged Phoebe Putney Memorial Hospital's (PPMH) proposed acquisition of Palmyra Park Hospital Inc. Palmyra, a for-profit institution, is the largest and chief competitor of PPMH for acute-care services in the region. PPMH, a not-for-profit hospital, is a wholly owned subsidiary of Phoebe Putney Health Systems Inc. (PPHS). PPMH's assets are owned by the Hospital Authority of Albany/Dougherty County, which leases the assets to PPMH on a long-term basis but has no control over PPMH's operations.
The acquisition plan, which provided that PPHS would acquire Palmyra's assets and would lease those assets to PPHS or a nonprofit PPHS subsidiary, was approved by the Hospital Authority.
The FTC alleged that the deal would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Dougherty County and surrounding areas in violation of Section 7 of the Clayton Act. The FTC sought a preliminary injunction against the Hospital Authority, PPMH and Palmyra.
The U.S. District Court for the Middle District of Georgia granted the defendants' motion to dismiss the FTC's complaint, holding that the state-action doctrine immunized the defendants from antitrust liability.
On Dec. 9, the 11th Circuit affirmed, finding that the state "authorized the Authority's acquisition of Palmyra and, in doing so, clearly articulated a policy to displace competition." The appeals panel concluded that the "anticompetitive consequences were a foreseeable result of the statute authorizing the Authority's conduct."
The court explained that, through the Hospital Authorities Law, "the Georgia legislature granted powers of impressive breadth to the hospital authorities," including the powers to "operate projects," including hospitals, to "construct, reconstruct, improve, alter, and repair projects," to "establish rates and charges for the services and use of the facilities of the authority," to "sue and be sued," to "exchange, transfer, assign, pledge, mortgage, or dispose of any real or personal property or interest therein" and to "borrow money for any corporate purpose."
"Most important in this case, however, is the Georgia legislature's grant of the power to 'acquire by purchase, lease, or otherwise . . . projects,' . . . which, again, include hospitals, . . . and the power to 'lease . . . for operation by others any project.' . . . This grant makes clear that the Authority is authorized to acquire and lease Palmyra. Moreover, in granting the power to acquire hospitals, the legislature must have anticipated that such acquisitions would produce anticompetitive effects. Foreseeably, acquisitions could consolidate ownership of competing hospitals, eliminating competition between them," the appeals court said.
The petition was filed by Solicitor General Donald B. Verrilli Jr., Acting Assistant Attorney General Sharis A. Pozen, Deputy Solicitor General Malcolm L. Stewart and Assistant to the Solicitor General Benjamin J. Horwich of the U.S. Department of Justice and General Counsel Willard K. Tom, Deputy General Counsel for Litigation John F. Daly and Attorney Imad D. Abyad of the FTC. All are in Washington.
The respondents are represented by Seth P. Waxman, Edward C. DuMont and Eric F. Citron of Wilmer Cutler Pickering Hale and Dorr in Washington. The Hospital Authority is also represented by James E. Reynolds Jr. of Perry & Walters in Albany, Ga. PPMH and Palmyra are also represented by Thomas S. Chambless of PPHS in Albany.
Mealey's is now available in eBook format!
NEW YORK - Bankrupt power company Dynegy Holdings LLC on June 18 moved in the U.S. Bankruptcy Court for the Southern District of New York for approval of a reorganization plan that would include a merger with Dynegy Inc., an affiliate that would have to file for bankruptcy to complete the deal (In Re: Dynegy Holdings LLC, No. 11-38111, Chapter 11, S.D. N.Y. Bkcy.). Subscribers may view the plan available within the full article.
NEW YORK - A federal district court properly dismissed a shareholder's state and federal securities law claims against a company for failure to provide shareholders dissenter's rights as part of a merger deal because, under Nevada law, the company qualified for an exemption to Nevada's dissenters' rights statute, a Second Circuit U.S. Court of Appeals panel ruled June 13 (Tiberius Capital LLC v. PetroSearch Energy Corp., et al., No. 11-1745, 2nd Cir.). Subscribers may view the summary order available within the full article.
WILMINGTON, Del. - A shareholder argues in a June 8 filing in a Delaware court that presuit demand to a board of directors would have been futile because a majority of the board is allegedly not disinterested (Joel A. Gerber v. EPE Holdings, LLC n/k/a Enterprise Products Holdings, LLC, et al., No. 3543-VCN, Del. Chanc.).
COLUMBUS, Ohio - The language of an insurance agent's noncompete agreement dictates that a surviving insurance brokerage firm cannot enforce the agreement after a merger with another brokerage firm as if it had stepped into the shoes of the original brokerage firm, a majority of the Ohio Supreme Court concluded May 24 (Acordia of Ohio LLC v. Michael Fishel, et al., No. 2012-Ohio-2297, Ohio Sup.; 2012 Ohio LEXIS 1360).
SAN FRANCISCO - With shareholders failing to prove that certain alleged misstatements would have altered a shareholder vote regarding a merger, a federal judge in California on May 29 said the court lacked subject matter jurisdiction and dismissed the shareholders' derivative suit against a company and certain of its directors and officers (Board of Trustees of City of Hialeah Employees' Retirement System v. Mendes, et al., No. 11-cv-05692, N.D. Calif.). Subscribers may view the order available within the full update.
WILMINGTON, Del. - The directors and officers of a corporation settled a shareholder lawsuit over the corporation's merger with another company for $49 million in the Delaware Chancery Court on May 15 (In Re Delphi Financial Group Shareholders Litigation, No. 7144-VGC, Del. Chanc.). Subscribers may view the stipulation and agreement of compromise available within the full update.
BOSTON - Nearly all acquisitions of large U.S. public companies that were announced in 2010 or 2011 resulted in the filing of multiple lawsuits, according to a report issued by Cornerstone Research and made available on April 30. Subscribers may view the report available within the full update.
PITTSBURGH - A federal judge in Pennsylvania on April 25 ruled that pharmacies and pharmacy trade groups challenging the consummated $29 billion merger of pharmaceutical benefit management companies Express Scripts Inc. (ESI) and Medco Health Solutions Inc. were not entitled to a preliminary injunction because they failed to establish the likelihood of immediate, irreparable harm that could be alleviated by the issuance of a preliminary injunction (National Association of Chain Drug Stores, et al. v. Express Scripts, Inc., et al., No. 2:12-cv-00395-CB, W.D. Pa.; 2012 U.S. Dist. LEXIS 57884).
NEWARK, N.J. - Finding that a settlement agreement between shareholders and directors and officers of Medco Health Solutions Inc. was fair, adequate and reasonable, a federal judge in New Jersey on April 18 granted a motion to approve the settlement agreement in an unpublished opinion (Louisiana Municipal Police Employees' Retirement System v. Medco Health Solutions, Inc., et al., No. 11-cv-4211, D. N.J.).
NEW YORK - The filing of financial crisis-related securities lawsuits continued to drop in 2011, while securities lawsuit filings regarding mergers and acquisitions (M&A) emerged as a growing area of litigation, according to an annual study issued by Pricewaterhouse Coopers (PwC) on April 11.
ST. PAUL, Minn. - Minnesota Gov. Mark Dayton on April 9 vetoed a bill seeking to limit the liabilities of companies whose asbestos liabilities arose from mergers or consolidation before Jan. 1, 1972. Subscribers may view Senate File 1236 and Governor Dayton's letter within the full update.
NEW YORK - Lead plaintiffs in a securities class action lawsuit against Transocean Ltd. and others have properly pleaded material misrepresentations in making the federal securities law claims against the defendants for alleged misrepresentations made in connection with a merger between an oil and gas drilling contractor and Transocean, a federal judge in New York ruled March 30 (Bricklayers and Masons Local Union No. 5 Ohio Pension Fund v. Transocean Ltd., et al., No. 10-7498, S.D. N.Y.' 2012 U.S. Dist. LEXIS 46202).
BOSTON - Shareholders in two similar and consolidated securities class action lawsuits against two companies that are the subject of a merger deal and a number of individual defendants have properly pleaded that the individual defendants breached their fiduciary duties in the planning and execution of the deal, a federal judge in Massachusetts ruled March 30 (In re PHC, Inc. Shareholder Litigation, No. 11-11049, D. Mass.; 2012 U.S. Dist. LEXIS 44616).
WASHINGTON, D.C. - The Federal Trade Commission on March 23 filed a petition for a writ of certiorari seeking review of an 11th Circuit U.S. Court of Appeals ruling that although a merger between two Georgia hospitals would substantially lessen competition or tend to create a monopoly, the state-action doctrine immunized the conduct from a challenge by the FTC (Federal Trade Commission v. Phoebe Putney Health System, Inc., et al., No. 11-1160, U.S. Sup.; See December 2011).