Dahl v. Bain Capital Hearing Dec, 19, 2012

Case 1:07-cv-12388-EFH Document 758 Filed 01/07/13 Page 1 of 227
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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS * * * * * * * * * * * * * * * KLEIN, et al * Plaintiffs, * * vs. * * BAIN CAPITAL PARTNERS, * LLC, et al * Defendants. * * * * * * * * * * * * * * * *
CIVIL ACTION No. 07-12388-EFH
BEFORE THE HONORABLE EDWARD F. HARRINGTON UNITED STATES DISTRICT SENIOR JUDGE DAY TWO MOTION HEARING A P P E A R A N C E S
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Courtroom No. 13 John J. Moakley Courthouse 1 Courthouse Way Boston, Massachusetts 02210 December 19, 2012 10:00 a.m. ROBBINS GELLER RUDMAN & DOWD LLP Post Montgomery Center One Montgomery Street, Suite 1800 San Francisco, California 94104 for the plaintiffs By: Patrick J. Coughlin, Esq. ROBINS, KAPLAN, MILLER & CIRESI LLP 2800 LaSalle Plaza 800 LaSalle Avenue Minneapolis, Minnesota 55402-2015 for the plaintiffs, By: K. Craig Wildfang, Esq. George D. Carroll, Esq. Stacey P. Slaughter, Esq.
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APPEARANCES, CONTINUED
SCOTT & SCOTT LLP 707 Broadway, 10th Floor San Diego, California 92101 for the plaintiffs By: Christopher M. Burke, Esq. Walter W. Noss, Esq.
WAGSTAFF & CARTMELL LLP 4740 Grand Avenue, Suite 300 Kansas City, Missouri 64112 for the plaintiffs By: Tyler W. Hudson, Esq. KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W. Washington, D.C. 20005 for the defendants By: Craig S. Primis, Esq. David R. Dempsey, Esq. SIMPSON THACHER & BARTLETT LLP 425 Lexington Avenue New York, New York 10017-3954 for the defendants By: Joseph F. Tringali, Esq. Ryan A. Kane, Esq. SIMPSON THACHER & BARTLETT LLP 1155 F Street, N.W. Washington, D.C. 20004 for the defendants By: Peter C. Thomas, Esq.
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SULLIVAN & CROMWELL LLP 125 Broad Street New York, New York 10004-2498 for the defendants By: Richard C. Pepperman, II, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP One Beacon Street Boston, Massachusetts 02108 for the defendants By: James R. Carroll, Esq. WEIL, GOTSHAL & MANGES LLP 1300 Eye Street NW, Suite 900 Washington, D.C. 20005-3314 for the defendants By: Carrie M. Anderson, Esq.
WILLKIE FARR & GALLAGHER LLP 787 Seventh Avenue New York, New York 10019-6099 for the defendants By: Wesley R. Powell, Esq. LATHAM & WATKINS LLP 555 Eleventh street, N.W., Suite 1000 Washington, D.C. 20004-1304 for the defendants By: William R. Sherman, Esq. WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153-0019 for the defendants By: James W. Quinn, Esq.
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SUSMAN GODFREY LLP 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 for the defendants By: Mary Kathryn Sammons, Esq.
CAROL LYNN SCOTT, CSR, RMR Official Court Reporter One Courthouse Way, Suite 7204 Boston, Massachusetts 02210 (617) 330-1377
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P R O C E E D I N G S THE CLERK: All rise. Please be seated.
Court is in session. MR. WILDFANG:
Your Honor, may I address the
Court before we get started this morning? Just a suggestion, Your Honor absorbed a lot of information yesterday and again today you are going to do that. We'd like to have a few minutes at the end of the day
just to sort of sum up and tie things together. MR. PRIMIS: Good morning, Your Honor. Craig
Primis from Kirkland & Ellis. Capital today.
I'm here on behalf of Bain
And before I get started, Judge, the first
thing I want to do on behalf of all the defendants is to thank you for all the time that you gave us yesterday to present our argument. and we appreciate it. I also want to say that we have ten arguments today, ten separate arguments, and each side is going -THE COURT: MR. PRIMIS: They better be short. Short, yes, and that's my point. The You were very generous with your time
Each side had been given ten minutes for these.
defendants have talked and we're going to do our level best to stick to that ten minutes and abide by that. And we hope
our colleagues on the other side will do so as well, just so we can get through all the material today.
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So with that in mind, and I hope I don't violate the promise I just made by starting off first, but I'm here for Bain Capital and I want to address our individual motion. As the defense group explained yesterday with Mr. Tringali, there is no overarching conspiracy. There is
a complete failure of proof on that central allegation. And -THE COURT: MR. PRIMIS: THE COURT: Let me ask you this. Yes. Is the thrust of your argument
that there is no conspiracy or that you are not a member of the conspiracy? I don't know whether there is a distinction
there but there might well be. MR. PRIMIS: The argument is really, they're
the same argument from our perspective, Judge, because there was no conspiracy. We couldn't have been part of a And I'm not going to say that
conspiracy that didn't exist.
the rest of these guys were in a conspiracy and we weren't in it. There is no overarching conspiracy. That is our
position. And what we wanted to do in our standalone motion is just to underscore that Bain was not part of any overarching conspiracy. And we have our own evidence from
our files and from our conduct that underscored the lack of
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any overarching conspiracy that we could have been a part of so our motion is focused on Count 1, just like yesterday. And we do not want to reargue all of the good, strong points that Mr. Tringali made yesterday. to do that. Bain Capital is not going We
The defendants are not going to do that.
think the Court understood both sides' arguments yesterday. What I want to do is just highlight a few pieces of evidence specific to Bain that underscore that there is no overarching conspiracy. And I am not going to walk through Time doesn't permit
every transaction Bain was involved in.
it and at the end of the day it's really not relevant to the question that Your Honor posed to the plaintiffs which is where is the proof of the overarching conspiracy and the Court didn't get an answer to that. And I'm going to show
you some additional documents and just a few points from Bain's files that show that we were not part of any overarching conspiracy. Before Your Honor came in I handed up a very short slide deck, just four slides that says, "Bain Capital, Individual Summary Judgment Motion." And the first document I want to highlight for the Court is one that the Court may have seen or focused on before and it's on slide one. in this case the "Wow" email. want to give a little context. And it has come to be called And the "Wow" email, I just
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If there were an overarching conspiracy in this case, this email written contemporaneously with the closing or with the signing of the Neiman Marcus transaction, this email could not exist. Mr. Bekenstein who wrote this email
is the managing director of Bain who handled the Neiman Marcus transaction. He is the senior most level, at the
senior most level of Bain Capital. THE COURT: (Laughter.) MR. PRIMIS: Judge, without wading into a I thought Romney was.
political debate, I think that Mr. Romney left the firm well before the events in this case. position. At least that was his
I don't know if the electorate bought it.
But, in any event, Mr. Romney is gone. Mr. Bekenstein is one of the handful of individuals who were managing directors of Bain and he was in charge of this Neiman Marcus transaction. Now, if there were an overarching conspiracy, if this deal, the Neiman Marcus deal had been allocated to TPG, this document wouldn't exist and Mr. Bekenstein would have had advance knowledge of who's going to win the Neiman Marcus transaction and at what price. So what does this document show? The bottom half
of the document shows that Mr. Bekenstein found out who won at Neiman Marcus from the Wall Street Journal. He had no
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advance knowledge. to win.
He had no information that TPG was going
And there was no overarching conspiracy that told
everybody how to bid, okay. And when he gets it, what does he do? He sends it
to his partners who were on the deal and he writes, "Wow." Now, he put it in the largest typesetting he could do on his computer. points. He put it in bold. He put ten exclamation
And he said, "If we were going to lose, I am glad
it is by a lot." What this document shows is he had no idea what the winning bid was. He had no idea who was going to bid and
that Bain Capital was never prepared to bid as much as the winner. There was no allocation of this deal to any There was a competitive auction and there
particular firm.
is no overarching conspiracy. Now, what's equally significant about this document, Judge, is that the plaintiffs have had this for years. They had Mr. Bekenstein at his deposition. They
questioned him for eight hours.
You would think they would
show him this document and ask how it fits into their theory of the overarching conspiracy. The plaintiffs went eight They never asked
hours and never showed him this document.
him what does this mean, how is it consistent with the overarching conspiracy. But you know what? At the end of the deposition we
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did, because we got to ask questions too. Mr. Bekenstein this document.
So we showed
And this is the testimony the It's why they didn't
plaintiffs didn't want in the record. show it to him.
It's on the next slide. Why would you put 'wow' in bold with
"QUESTION:
ten exclamation points in a huge font in this email?" And his answer, "Because I was so totally and completely shocked that someone would pay $100 when we thought a very high-stretched price was 92." That is evidence of competition, not collusion, and it disproves the overarching conspiracy allegation. The next document I want to show, Judge, and, again, I am not going to go through every transaction, just three. The next one is on slide three. And this relates
to a deal where Bain didn't lose but Bain won and they acquired Toys "R" Us which I'm sure Your Honor is familiar with. Now, Bain won that auction fair and square. And it
went into a bidding contest with another defendant, Goldman Sachs. Now, Goldman Sachs found out that Bain had won the
auction and these are emails from Goldman Sachs' files. In the top email Mr. Cornell says, "If, if, if this is true." That's three ifs. He had no idea in advance what He says, "If, if, if
Bain was going to bid on Toys "R" Us.
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this is true, I feel better, but I'm also wondering what are they thinking?" He can't believe the price that Bain paid
once he learns about it after the auction is closed. And then the Goldman Sachs team, they were actually mocking Bain for paying that much. If you look down at the
next email, Mr. Berlinski, another senior member of Goldman Sachs, he writes just to pay for this deal, "Every Bain partner will be obligated to buy $100,000 of toys annually to support the cause." Now, that's a lot of Barbie dolls, Your Honor; but what he's saying is this is a crazy price. advance knowledge. We had no
We didn't even have current knowledge.
We found out after the auction was over and Bain won fair and square at a very high price. One more example and then I will stop with that is the Michaels transaction. It's on the next slide. Michaels
is an arts and crafts department store and they go throughout the country. Bain acquired the Michaels The auction was
department store chain through an auction. competitive.
It had three rounds of bidding.
Now, one of the companies that was competing against Bain in the Michaels transaction was KKR. And on
slide 4 we have an internal email chain that says what KKR was thinking about Michaels. On the bottom email which is the first one from
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Mr. Calbert he had learned that Bain was in the competition and he goes, "Bain is hot on our trail on Michaels." Now, if this deal had been allocated to Bain because Bain won, if that's the conspiracy, Mr. Calbert should have said oh, well, we'll get the next one. that's not what they say. KKR writes back, "Don't let them win." That line But
could not exist in a contemporaneous email if there is an overarching conspiracy. "Don't let them win." It doesn't
say let them win, we'll get the next one. let them win."
It says, "Don't
And Mr. Calbert goes back to say, "I'm giving it everything I have (and more)." competing. In other words, I'm
"If they beat me, they have crossed over into
'stupid territory.'" And, in fact, Bain did beat KKR and that was a final price that KKR had concluded was too stupid to pay and they were at that point happy to let Bain win it. So we
have three examples here where the competitors and three of the auctions in this case have no advance knowledge, no clue who is going to win. surprise. There is active competition. There is
And then there is actual mocking of the winner That is not an overarching conspiracy.
for paying too much.
Now, what do the plaintiffs do with this evidence? Because we put it in our briefs, there's a lot of briefs, we
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put it in the omnibus brief and we put it in the Bain brief. They ignore it. briefing. They never address these documents in their
And the plaintiffs never showed these documents
to the witnesses. And the reason they didn't is they didn't want this evidence in the record and they didn't want witnesses telling the Court what really happened. Now, in a case like this, and I'm not going to redo the Matsushita standard, but we know that once there is evidence of independent conduct, they need to find evidence that tends to rebut it but they can't ignore it, which is what they have done in this case. Now, the plaintiffs deposed essentially every senior manager at Bain. They never asked a single one of
them if they were aware of an overarching conspiracy, if they participated in an overarching conspiracy, if they had ever heard of an overarching conspiracy. But once again we
asked those questions because we get to do that at the end and the Bain managing directors not only denied it unequivocally, they didn't even know what the plaintiffs were talking about. it is unrebutted. Now, before I sit down I just want to say what we expect to hear from the plaintiffs today. They're going to And that testimony is in the record and
pluck out individual documents from individual deals, the
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same individual deals that they disclaimed yesterday were individual conspiracies. And what they're going to do is
say, well, this deal doesn't look as competitive as it might have been and we think they didn't compete in this deal; but they're not going to be able to answer the question the Court asked yesterday which is where is the proof of the overarching agreement and where does it put Bain Capital in an overarching agreement. So I'll reserve the rest of my time for rebuttal but our position is quite clear. As Mr. Tringali argued
yesterday, there is no overarching conspiracy and Bain Capital never agreed to one. MR. NOSS: Walter Noss, Scott & Scott, on
behalf of the plaintiffs. Your Honor, I have a presentation. the bench? THE COURT: Yes. May I approach
(Whereupon, a slide deck presentation was given to the Court, the Clerk and the Law Clerk.) MR. NOSS: Your Honor, just as I begin and as
I began yesterday with Apollo, what the standard is here to hold a defendant in, and I remind you that it is knowledge, intent and interdependence. There is a lot of evidence. evidence from Mr. Primis. You heard some
He gave you some examples of
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their defense, facts -THE COURT: MR. NOSS: of this matter. Keep your voice up a little. Facts they would argue in defense
I want to show you evidence of bid rigging I want to show you evidence
by Bain, of standing down.
about overarching conspiracy, evidence in the various deals, the various acts that Bain took. reduce competition. The joining of clubs to
Again, never jumping announced deals. Remember, Your Honor, if it's my If it's your deal, I'll stay out
that is, it's my deal.
deal, you stay out of it. of it.
The manipulation of auctions, bid rigging in three Monitor, reward and discipline.
different cases.
And I'll move quickly here but Bain manipulated the auctions in AMC and Loews and so -- and AMC was a Goldman transaction that brought Bain in and Bain's responsibility was the Loews end. What they did was in putting these two
companies together they manipulated the Loews auction. Now, Bain agreed to bid separately. Bain was
bidding separately with Carlyle but before and during the process of the bidding there was communications between Carlyle and Bain and these are handwritten notes to reflect this. Mr. John Connaughton -- these are Carlyle's notes. John Connaughton is a senior director at Bain. Those This
numbers 1450, 1550, those are prices for the company.
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is handwritten notes between competitors discussing prices, discussing collapse at the 11th hour and discussing how they're going to divide it up. And what happens is Bain wins. And what we see is
Bain intends to officially invite us in at the point of signing. In other words, they agreed, they agreed that no
matter who won -- and we'll see this again and again and again -- they're both going to split the company. Fundamentally, Your Honor, why would you ever compete if you know that you're going to come in at the end? You're not. In these other deals Bain receives various investment allocations, Nalco, Texas Genco, so when they say they didn't, they aren't involved in these deals, they're affiliates of parts of them afterwards. But let's skip ahead to the Toys deal which we heard about. Beginning as early as January Bain and KKR
wanted to partner, though they pursued the deal separately. Eventually they came together. And the reason, desire to
effectively eliminate a competitor. Let me give you another instance, and Your Honor pointed yesterday about the HCA deal having powerful evidence, that you thought it was powerful. deal, Your Honor. The SunGard
In SunGard you had Silver Lake, you had TPG and Blackstone
Bain, KKR, Lee and Carlyle, one group.
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were another group.
These are the only people who competed These are the big boys. This
for this deal at this point. is the big deal.
This document reflects conversations from Bain's senior management director Mr. Pagliuca and Mr. Bonderman at TPG. And what they're figuring out is we're both competing Are we going to compete or should we just come
for this. together?
What did they decide? email right here (indicating). senior people, Tony and Jim.
And this is reflected in an And this email copies the
That's Tony James, the head of
Blackstone, Jim Coulter, cofounder of TPG. "I wanted to confirm our conversations yesterday. We agreed to bring your firms into the Solar Consortium organized by Silver Lake on an equal basis." Express evidence of an agreement to wipe out competition. And Bain knows this is wrong because
Mr. Pagliuca writes, "The management, financing sources, and board don't know this so for now need to remain confidential as if it gets out will cause more problems." In other words, they know the just wiped out competition. They can't go right to the board and so they
actually ask Blackstone and TPG to just bow out and not elaborate until they can get their story straight on why this happens. And that's what TPG agrees to do.
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And we heard about contemporaneous documents and what's said and how that's, what kind of -- there is weight to that because that's what's being written at the time before the lawsuit and for the deposition testimonies where people denied things. And SunGard -- this is a Blackstone memorandum. They don't talk about the need for equity or diversification, these arguments that you hear today and you've seen in the papers. "As a result of the threat or
our competing offer, the Silver Lake consortium invited Blackstone and TPG to join its group." Not because they needed more equity, not to diversify, as a result of competition they eliminated it. EDMC is another example of a bid rig where you have one group, Goldman/Providence on one hand, and you have Bain and Carlyle on the other, and they make an agreement: Whoever wins brings the losers in or gives the losers the opportunity to come in. And so these NDAs, which Your Honor asked about, nondisclosure agreements, prohibit cross talk between competitors. And they all signed it. You can't talk to
your competitors. But what do they do? Here is an email from Carlyle Carlyle is emailing its
two or three days before the bids.
competitor on behalf of itself and on behalf of Bain, "Can
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you please call me on cell?
New developments."
And we say,
"Just tried you, when is a good time to reach you?" And what happens is, as reported by email, they're discussing the specifics of the bid. Now, the bidding on There is
EDMC happened just like this, Your Honor.
communications right before the bid with the defendants. Providence and Goldman bid 42.50. fifty cents less. communication. 43. Bain and Carlyle bid 42, There is
There is another round.
Carlyle or Providence and Goldman go up to That's it, it's
Bain and Carlyle go up fifty cents.
done, and they get the opportunity to come into the deal per their agreement. Again, just like Loews, I have an agreement with you that we're going to split this up ahead of time. I going to bid? It makes no sense. Why am
You heard about the Michaels deal, one of the documents -- I'll address each of the documents here real quickly -- but Michaels -THE COURT: Let me ask you this:
Let's say that the market has the price, say $50. Are LBOs required to make purchases at $60? Is that -- or
if they purchase it, say, for 51, what I am getting at is -maybe I am not explaining it well but is there a requirement that LBOs have to bid to raise the price artificially? MR. NOSS: There is no requirement, we don't
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dispute that there is actually no requirement of competition. But that's not what this case is about.
When you decide you are going to compete, you can't agree with your competitors that you're not going to. We submit from our economic expert reports that the bids in these cases in a competitive market, that's what Williams talk about in auction theory, that these prices aren't right. So our point is not that you have to pay if a competitor's market value is 50 bucks, you have to pay $51, no. What we are saying is it's below that. The reason is
because they're bid rigging. other's deals.
They're standing down on each
And as a result the evidence shows it's less
than what a competitive market price should have been but for this conspiracy. THE COURT: Through the course of this, let's Are
assume that the stock market showed that it was 50.
there any or many of the transactions where the price paid was less than 50? MR. NOSS: company -THE COURT: says $50 a share. MR. NOSS: THE COURT: Sure. Of these 27 transactions, are Say you look in the paper and it So there is a stock price for the
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there any where the price was 48? MR. NOSS: These transactions occur above the
stock price but that's not -THE COURT: No, I understand that. But my
question is are there any examples of these 27 transactions where the price was lower than what was reported in the paper at the time of the purchase? MR. NOSS: that's not the measure. THE COURT: I understand that. But in a way, No, Your Honor, and that's, but
and I must say I don't know what the law is on that, but what the plaintiffs might be requiring is that people in this business, the LBOs, are required to make purchases far in excess of the real worth of the stock. MR. NOSS: at all. And let me -THE COURT: will get a sense of it. So here's my question, just so I I don't know because I haven't seen Is there That's not what we were suggesting
it in the multitudinous amount of paper I read.
any example of these 27 transactions where the price was less than 50, if 50 was the going price at the time of the sale? MR. NOSS: again, the -THE COURT: I know. I understand. I see the There is not, Your Honor, but,
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distinction but that's my question, is there -MR. NOSS: THE COURT: 48 -MR. NOSS: THE COURT: When it was less than --- or are you demanding these No. -- was there any time when it was
people, who in a sense cut their own throat -MR. NOSS: No, no, no, not at all, Your Honor.
Your Honor, these deals occur at what they call a premium above the stock price because they're taking control of the company so they have to pay a premium. What we're saying is -- now, they say, look, we've paid a premium above the stock price. Our argument is the
damages, the damage is that they should have paid more but for their agreement. THE COURT: that. (Whereupon, counsel conferred.) THE COURT: I know that, that when there is a I I understand that. I understand
sale of a company that you are going to pay more. understand that. The question is how much more? MR. NOSS:
Well, that's what we contend, that
because of these agreements they didn't pay any competitive price. Not that they didn't pay a premium to the going
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market price. that.
They certainly did that.
We don't contest
What we say is that but for these agreements, they
would have paid more. THE COURT: Maybe, but is the real, is the
real value of the stock that much as you were requiring them to pay? MR. NOSS: to yesterday. Well, in this case -- let's go back
In this case we see valuations -THE COURT: Let's take the Nabisco case where Is that what -- I
supposedly it went up 40 percent higher.
mean, do LBOs have to do that or do they have to pay 40 percent higher than it is worth? MR. NOSS: percentage. THE COURT: MR. NOSS: THE COURT: No, but 40 is -We contend -I mean, I mean, you can't require There is no magic number of
corporations to at least engage in that type of competition. MR. NOSS: Your Honor, actually my partner In PanAmSat the purchase price
Mr. Burke has corrected me.
was less than the stock price. THE COURT: MR. NOSS: But -THE COURT: PanAm? What transaction was that? That's in the PanAmSat transaction.
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MR. NOSS:
PanAmSat, yes, Your Honor.
But to your point, we're not -- what we are saying is they can't agree not to compete. record is valuations such as -THE COURT: strictly the law. I understand, I am not talking And what we see in the
I am talking somewhat practice, practice
that demanding -- I understand that a premium or a higher price has to be paid in these circumstances. think of the Nabisco case, 40 percent higher? But when you I mean, no
reasonable businessman would engage in that type of purchasing. MR. NOSS: But one of the defendants in this
case just did that so that's kind of our point, is that the competitive market prices go up. because of the agreement. THE COURT: MR. NOSS: Okay. I know I've gone long so I just Here they're depressed
want to highlight a couple of things really quickly. So we see in EDMC, you know, again, the suppression. The same thing in Philips. My partner
Mr. Burke will cover Silver Lake for you. The Michaels deal they traded favors. So KKR who
we saw, you know, I'll take care of Michaels, well, KKR and Apollo were offered a piece afterwards of that deal and Bain was okay with it. You scratch our back, we scratch your
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back. THE COURT: Let me ask you this:
Bain came in and they referred to three documents, I think three or four. MR. NOSS: THE COURT: Sure, I have them right here. Relating to the overarching
conspiracy allegation, that is what we are here for. MR. NOSS: THE COURT: MR. NOSS: Right. How do you answer those? Certainly I can answer those.
First of all, the "wow" email it's called, right. It's not -- defendants have continually -- and I was making this point yesterday -- have continually mischaracterized what the overarching conspiracy is. And they do it so they
can fit it within the body of law and get rid of this case today. THE COURT: An overarching conspiracy is a
conspiracy of these 11 entities to engage in fixing the price of approximately 27 or a substantial number of the 27 transactions. That is what is alleged. MR. NOSS: Exactly, exactly right. But what
defendants characterize it as, well, this kind of pure allocation strategy where everyone knows exactly what deal they're going to get. deals. They're going to get X number of That's not
They're going to make X amount of money.
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the conspiracy, Your Honor. and you stay away from it.
The conspiracy is I have a deal We don't compete. That's the
gentlemen's agreement, the club etiquette.
So when he says
if we're going to lose, oh, this is evidence because if they knew it was preassigned, that's not the conspiracy we alleged. And we don't need to allege and prove that
conspiracy to prove a violation of the antitrust laws. THE COURT: of minds. MR. NOSS: THE COURT: That's right. It seems to me, or at least there Yes, but a conspiracy is a meeting
is an interpretation that this fellow Bekenstein, his mind hasn't met at least with respect to -(Laughter.) MR. NOSS: Your Honor, let me offer you the
plaintiffs' interpretation of this event. THE COURT: MR. NOSS: All right. All right. And this just really
comes down to a factual interpretation and who is going to decide that. that. If we are going to lose, that can be as consistently read in the conspiracy. it's not our deal. We're going to lose, It wasn't Well, Your Honor should let a jury decide
Wow, I'm glad it's by a lot.
my deal, I'm glad I didn't have to buy that one at that
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price.
That's not inconsistent with the conspiracy.
In
fact, Bain, if I can flip all the way back in my presentation, Bain has a habit of telling people, their parting line is when they lose they paid too much. their documents. In fact, in the Freescale deal, you know, about HCA and Freescale when they stood down and they, you know, they upset their competitors and they had to stand down, that was specifically mentioned -- can you go to the second to last slide, please. Specifically let's not do our usual party line of paid too much. So that's an element. That's not It's in
inconsistent with the conspiracy. Mr. Bekenstein's testimony here. thing. much. It wasn't their deal.
The same thing with That's just the same
I'm glad we didn't pay that
There is nothing, there is nothing contradictory to the conspiracy that we have alleged and we can prove that competitors from time to time are upset, they don't get a deal or that they think the other side paid too much for it. That's not inconsistent with our overarching conspiracy which is don't drive up the price. So, again, we see evidence in the record that Bain is bid rigging in Loews, EDMC and in Philips/NXP. connections between Loews and AMC. We see
We know EDMC is
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connected to Michaels because they owe paybacks.
We see
Kinder Morgan is involved because Bain is tied to that through paybacks. And then we see Bain standing down. And
that's consistent with conspiratorial conduct. So, and this slide in evidence shows, Your Honor, there is plenty of evidence, there is plenty of stand downs, there's plenty of actions that are consistent with an overarching conspiracy. And with that I'll end my argument as I know I have gone way past my allotted time. THE COURT: All right. He has set forth a lot
of interaction between Bain and a lot of these alleged co-conspirators with respect to certain transactions. do you say? MR. PRIMIS: First, Judge, he did exactly what What
I predicted, which is put up deals -- put up emails pulled out of specific deals, characterize them in a certain way and then we say we didn't compete. What I would say to that is they're not probative at all of the overarching conspiracy. THE COURT: MR. PRIMIS: Why not? Because they don't, nothing that
Mr. Noss showed you -- and he was moving very quickly and saying a lot of things, and I think that's intentional. None of them tied together the conduct in any sort of way.
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You pointed out Mr. Bekenstein had no meeting of the minds whatsoever on that Neiman's transaction. There is
no meeting of the minds among these 11 defendants, Bain Capital with them, across anything that he just showed you. All that you have seen on these slides that he shows are in the course of transactions companies that sometimes partner with each other and companies that sometimes compete -THE COURT: Is your argument that there is
no -- there is 27 conspiracies but not one? MR. PRIMIS: is no conspiracy. there is not 27. There is no -- to be clear, there
There is not one overarching one and But even if the Court had some concern
that of the 27 there was some handful of them where there might be factual disputes -THE COURT: MR. PRIMIS: THE COURT: MR. PRIMIS: THE COURT: Let's say this. Okay. In HCA -Yes. -- although an argument was made
yesterday by the defendants that, you know, but at least that one is fairly strong and with the sequence of stepping down it would appear that it is a jury question. Why they
stepped down, the inference is that it might have been because of the order of whoever issued it, I forget the
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gentleman's name; but the answer is that, as argued by the defense counsel, namely, that they thought it was already in the bag. But that is at least sufficient I would think on
first glance to get to the jury, and there may be others. MR. PRIMIS: Judge, I can't do better than
Mr. Thomas did yesterday at setting forth the defendants' position on why the HCA transaction -THE COURT: MR. PRIMIS: here. He made an excellent argument. And I don't want to redo that
All I would say is just a couple of points as it
relates to Bain Capital. First off, Bain was one of the acquiring parties of HCA. Bain was sued by shareholders who tried to hold up the
transaction and Bain and the other purchasers settled that case and Bain's released from HCA, okay. in Count 2. And you can't save Count 1 because Count 2 might have validity, and I'm here arguing on Count 1 but in particular on HCA since the Court raised it -THE COURT: Count 1 -MR. PRIMIS: THE COURT: It is. -- as one of the transactions and What I am saying is HCA is in So we're not even
that is, compared to the others, fairly strong. MR. PRIMIS: And Bain, as I said, the evidence
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relating to HCA can't be used against Bain because we have been released from it. THE COURT: No, I am not saying it is.
Suppose there were 27 transactions who had the sufficiency of the evidence as set forth in HCA. Would you say that
although there is 27 conspiracies there is not one overall overarching conspiracy? MR. PRIMIS: THE COURT: I would say, yes, I would say -It is a theoretical question I
suppose but what is your answer? MR. PRIMIS: If there are separate Under
conspiracies, there is still no meeting of the minds.
the antitrust laws there has to be a conscious commitment to a common scheme. And there is no common scheme if you have
all these different conspiracies just hypothetically. So the first answer to the question is absolutely, 27 conspiracies or 20 or 15 or 3, that's not a global overarching conspiracy. And we were all here yesterday and
we heard in court and it's on record that the plaintiffs are not bringing the case that Your Honor just described and so they shouldn't be allowed to proceed on a case they don't even want to bring. That's the first answer.
The second answer is I only showed the Court examples from three transactions so, and there was clearly competition, a high price paid and unwitting losers in those
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deals and they have no answer for it, okay. And you asked Mr. Noss, he can't explain it. you asked him how those fit in with the overarching conspiracy, they keep changing what the conspiracy is just to try and survive today. judgment. That's not the purpose of summary When
We know what the conspiracy is and the evidence
doesn't line up with it. And the only thing I would just conclude on, because I know HCA is troubling the Court, there is one piece of evidence that didn't come to the Court yesterday on HCA. I just want to close by showing it to Your Honor, if I
could approach. Here's one document -THE COURT: this case. MR. PRIMIS: We're not but -- well, you I thought you weren't involved in
pointed out it's in Section -- I don't want to waive my right to stand on that release but I think that is an important document that the Court might want to see. THE COURT: All right.
(Whereupon, a document was given to the Court and the Law Clerk.) MR. PRIMIS: And this will be brief.
Judge, this is an email from the HCA transaction. It's out of Bain Capital's files. Mr. Pagliuca is a
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managing director at Bain.
And if you look at the re: line
on the email, "It says Warburg, Apollo, BC," that's Blackstone, "competing bid for HCA?" And what is Mr. Pagliuca's response? on." Okay. This is not somebody who -THE COURT: that industry. (Laughter.) MR. PRIMIS: it on." There was no fix. There are. And he said, "Bring There are a lot of tough guys in "Bring it
He was ready for the competition We should be let out of Count 1
and Bain Capital competes. of the complaint.
Thank you, Your Honor. MR. NOSS: I just need to address this
document, Your Honor, very quickly. Mr. Primis is an excellent lawyer. there is no evidence in the conspiracy. If you look at our 56.1 Statement of Facts, I deposed Mr. Pagliuca. He testified that the price they That's all the gas they had Bring it on,
paid, 51, that's all they had. left in the tank.
So the reason he's saying bring it on,
because they can't, according to his testimony, they couldn't bid any higher. The reason he's saying bring it on is because he knows nobody is going to do it because I showed you
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yesterday Apollo wasn't going to topple the KKR deal. Again, Your Honor, these are factual questions that need to go to a jury. Thank you. THE COURT: witness." (Laughter.) MR. WILDFANG: the plaintiffs. Your Honor, Craig Wildfang for Okay. Next -- I almost said "next
I want to make a suggestion to the Court
that I think might expedite things. If Your Honor would just ask one question of every defense counsel, do they have an example of where their client jumped somebody else's deal after the deal was announced and I think they will all have to state no, they don't have an example of that. The agreement, the overarching conspiracy here, Your Honor, was once there is an announced deal, no one is going to compete. that. (Pause in proceedings.) THE COURT: MR. THOMAS: Are you representing all four? No, for today I am representing Peter Thomas on behalf of the So ask them if there is an example of
Blackstone Group, Your Honor. Blackstone Group. THE COURT:
And they are one of the four --
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MR. THOMAS:
They are one of the HCA
THE COURT: three were involved? MR. THOMAS: (Laughter.) MR. THOMAS:
So what do you say, the other
No.
There was not a conspiracy on HCA
and there was -- I associate myself entirely with Mr. Primis' arguments that -- the point of my argument here is that there was no single overarching conspiracy as pled in Count 1 and Blackstone didn't participate in any such conspiracy. Just as an addendum on HCA -THE COURT: MR. THOMAS: THE COURT: MR. THOMAS: THE COURT: MR. THOMAS: So you are doing Count 1 now. We're in Count 1. Yes, that is right. Right. Just as an --
Yesterday you argued on Count 2. That's right. But I did want to,
Your Honor, just because HCA was raised at the end of that last argument. Your Honor asked me yesterday at one point He is the cofounder of HCA that And you asked me wouldn't he have You know,
about Tommy Frist.
handpicked Bain and KKR.
been happier if the price had been raised.
wouldn't he have been happier if they got a bid for 55
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rather than 51. And one additional point that I think it is very important to make sure Your Honor understands is that, again, Mr. Frist or Dr. Frist was a buyer, he was part of the consortium that was buying the company and taking it private. So like a lot of buyers, he had 800 million He wanted to buy low and sell high
dollars worth of equity. later.
So there is another reason why he wouldn't
necessarily have had any interest in a much higher price at that time. What I want, Your Honor, because I focused so much on HCA yesterday, I want to talk to Your Honor briefly today, I will try to keep myself within the time limits. I have passed out a notebook. And behind this
notebook, what I really just want to show Your Honor are some additional examples like what Mr. Tringali showed you yesterday of evidence that is inconsistent with any suggestion of the overarching conspiracy pled in Count 1. And what's interesting and somewhat surprising, Your Honor, is that the plaintiffs in this case, there is not just contemporaneous emails that support what I just said but the plaintiffs surprisingly in their 56.1 response gave us many admissions, many admissions about there being no single overarching conspiracy and nothing that Blackstone was a part of it. So I am going to take Your Honor through
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some of that. Behind tab one, I have provided just behind tab one a table that lists all 27 deals. And in the first column I
have put a check next to each deal where there are admissions by the plaintiffs in the record as to either conduct of Blackstone that was inconsistent with a conspiracy and/or admissions that Blackstone had independent reasons for its conduct. And as you can see, a very large
number, almost all of them are checked. And I have end notes at the end of this chart which will take Your Honor to the portions of the record where these admissions exist. And then there are at least ten deals where on this summary judgment record the plaintiffs have not even tried to present any evidence against Blackstone. Your Honor, let me take you to a few examples as I just mentioned. Stores. Mr. Primis talked to you about Michael If
I just want to tell you the rest of the story.
you turn behind tab two, this is from plaintiffs 56.1 response to our 56.1 statement. And as you can see, we
said, "Bain, Blackstone's lone remaining partner in the final round of bidding, wanted to bid only $43.75 per share." In other words, you know, Bain didn't know what KKR
had been saying internally but it didn't want to go into stupid territory. "But Blackstone, believing it needed to
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bid at least $44 per share to win, sought to convince Bain to bid $44." "Plaintiffs' response: Admitted."
So the plaintiffs have admitted in that third and final round of competition, which shouldn't have even been taking place because why would we still be bidding in the third round? Why hadn't KKR and TPG, that we were bidding We're
against, why hadn't they gracefully bowed out by now? in a third round of bidding. to go higher.
The third time bids are going
And we, we're convincing our partner Bain to And the plaintiffs admit that that conduct
come up higher. occurred.
If you go to the next tab, Your Honor, this is an internal email written exactly at that time within Blackstone's files. And the Blackstone deal team leader
writes to Mr. Schwarzman and Mr. James among others and he says, "I think Bain Cap understands in this light 43.75 is silly. Pushing them to do 44.00, and if they have more to
put it out there as any bit above 44.00 may help." Now, why is Blackstone pushing Bain to even go above 44.00 if that will get it done? competition. conspiracy. One other vignette, Your Honor. to tab 7 of this binder. If I can take you This is evidence of
This is not evidence of any kind of
And this relates to the Kinder
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Morgan management-led buyout by Rich Kinder. deal where Blackstone has been released. that objection.
And this is a
We don't waive
We are only bringing this up in response to
the plaintiffs' attempt to rely on this deal. But this is a really interesting story, Your Honor. In this deal what happened was Blackstone was given the opportunity to participate for a billion dollars, be one of the participants. And you would have thought that if this
was low-priced merchandise, the result of some price suppression conspiracy, that Blackstone would have leaped for the spoils, right? opportunity. Blackstone passed on the
They thought the company, the private equity
side of the company thought it was too highly priced and they didn't have enough time to do due diligence and they passed, okay. conspiracy. So what happened next? Well, Blackstone has a So that's conduct inconsistent with the
financial advisory group, sort of an investment banking side. And they advise companies on M&A transactions. So
what did they do?
If you look at the -- this is again from I'm
the plaintiffs' opposition to the 56.1 statement. looking at the bottom part.
"After receiving the buyout offer," so after it was Goldman Sachs, along with Carlyle, along with management, Rich Kinder, they submitted a buyout offer. And the board
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of Kinder Morgan had to consider it. share. What happened?
It was for $100 per
Morgan, the financial advisor at The Kinder Morgan board
that point -- I'm sorry.
immediately established a special committee, a special committee to consider the proposal. And on June 12, 2006 the special committee retained who? They retained Blackstone as one of the financial Plaintiffs' response: Admitted.
advisers to the committee.
And behind tab eight what happened?
During the
course of the -- what the special committee then does is try to negotiate the price up. share. that. They didn't want the $100 per
They weren't going to let the company be sold for Advised by Blackstone, the special committee was able
to get the consortium that was attempting to take the company private to bid up the price by $7.50 per share -that is worth hundreds of millions of dollars. Hundreds of
millions of dollars for the public shareholders -- above the price that the supposed co-conspirators were willing to pay and had offered. So here's Blackstone on the other side of the fence extracting more value for the public shareholders. that consistent with an overarching conspiracy? make any sense. And behind tab nine, Your Honor, is an email from Tony James and -- I have to get some water. How is
It doesn't
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Your Honor has heard his name in this courtroom as the author of some interesting emails at times. But here's
Tony James writing internally at Blackstone, an internal email, and he is referring to Oglesby. Blackstone investment banker. That is the lead
And he's saying, "Oglesby That means internal
figures it is a 10 to 14 percent IRR." rate of return.
A very low rate return, now that they've
got a very high price extracted, $107.50. And James says, "Oglesby and the special committee did an excellent job getting Goldman to make such a large bump from their initial bid of $100 per share." That's not consistent with conspiracy. You can't
look at this evidence, and it's not just about Blackstone. There cannot be a single overarching conspiracy with this kind of behavior going on. And the final example I'll take Your Honor to, I mentioned this yesterday briefly, but in connection with the Philips/NXP deal, if you look behind tab 14, Your Honor. During that very competitive auction that also went three rounds and frenzied bidding, during the course of that Blackstone got wind of the fact that KKR and Silver Lake were attempting to use a special kind of financing structure that was prohibited by the financial advisory group Target. And you can see, this again comes from the plaintiffs' admissions, you know, that we said, "Philips had
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prohibited the use of back leverage for the financing of offers for its semiconductor business but the Blackstone consortium believed that the KKR group's bid included back leverage." Plaintiffs' response: "Admitted."
And then we went on to assert that, "On July 30, 2006 Chip Schorr," he's with Blackstone, "noted that: 'Back leverage is officially off the table for all parties. KKR/SLP,'" that's Silver Lake, "'rumored to be furious.'" Another email noted, "We killed this for KKR. They It
are calling banks, on a witch hunt to discover who told. has to be hurting their financial models." In other words, this is hard-nosed competition.
This is Blackstone and its partner TPG trying to get an edge in this auction in the final round. And what do the "Admitted."
plaintiffs say in response to that assertion?
And on the last, if you look behind the last tab, Your Honor, that's the internal email that I just referred to. This is the internal email from Mr. Schorr to And he's glorifying in the fact that, "We killed
Mr. James.
this for KKR." Your Honor, with evidence like this, there is no single overarching conspiracy that purports to allocate and pull together and connect 27 large transactions. happened. This evidence absolutely refutes it. It never
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I respectfully request that Your Honor grant summary judgment on behalf of the Blackstone Group. (Pause in proceedings.) MR. HUDSON: Your Honor, may I approach?
(Whereupon, a binder was handed to the Court, the Clerk and the Law Clerk.) MR. HUDSON: Your Honor, I'd just like to
start by giving you a little bit of background on Blackstone. Blackstone is one of the industry leaders.
They're like the Niki or the Coca-Cola of private equity. By any measure they're one of the top five largest funds and they had mega funds or equity pools totaling 28 billion dollars. So this is one of the industry titans. As you're going to see from the specific evidence, they lie at the heart of this conspiracy. And what you're
going to see throughout the evidence is that their leaders, Steve Schwarzman, Tony James and Blackstone as a whole repeatedly expressed a conscious commitment to a common scheme designed to avoid price competition between private equity firms and large LBOs. One of the things Your Honor has asked is how does this all tie together? overarching conspiracy? How does -- why is this an And what I would submit to you is
that Blackstone is a great example as an industry leader. And if you look at our chart that we've got here, this
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pullout that we gave you yesterday, and you go to Blackstone and you go across and you look, you're going to see that Blackstone is doing deals and interacting with every one of the defendants. And if I could just by way of example, and I apologize, I'll try to do this fairly fast; but at the very -THE COURT: is normal. The fact that they are doing deals
If somebody started off by saying that the fact
that they jointly bid was indicia of illegality, that is a start towards conspiracy. But my understanding and the
answers made here in the courtroom is that it is a common practice. MR. HUDSON: absolutely. It became a common practice,
And if it was just joint bidding, it might be a
different case but -THE COURT: So it has to be more than people
joining together to make a purchase. MR. HUDSON: Absolutely. And so forming a And we know that
club, that's one of the things they did.
they did that to eliminate competition from Mr. Burke's presentation yesterday. They're manipulating auctions. You heard Mr. Noss
talk about that, how they're going out and they're trying to figure out a way to eliminate all the competition in these
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auctions. They're agreeing not to jump a deal. And what that
means is yesterday in HCA you heard about the valuations where you've got competitors that, they're running what are called internal rates of return. How much money can they
make in a few years when they flip this investment. Well, their valuations are showing the minimum that they're making on these deals is 10 to 15 percent. That's
what they're projecting out that they're going to be able to make. Not bad considering, you know, a money market you get Their minimum that they're getting
about one percent now. is 10 to 15 percent.
On a lot of these deals they're
projecting out 20, 25, 30 percent. And what our experts did was they went and looked at that data and they said, hey, are these guys acting rationally. Are they choosing, are they choosing to jump in
and bid when they've got these valuations, they're showing they can make billions of dollars on these deals if they go and they bid at a higher price. So when you talk about the stock market, absolutely, are most of these higher than the stock prices, they're a premium, yes. But the question is, the question
is is do these defendants know that they've got valuations that show they could make a lot more money on these deals, that the internal rate of return, that they could make 20
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percent, 15 percent, 25 percent, but they're choosing to stand down and not bid because they know if they stand down on this deal -THE COURT: The thrust of your argument is not
the fact of joint bidding but that coupled with standing down? MR. HUDSON: Coupled with it, exactly, and Formed a club, get rid of
that's on this chart, you know. auctions.
We don't like auctions because you've got to, you If the seller says, hey,
kind of have to bid in an auction.
you can't work together, you can't form this club, now we got an auction. And then if we don't do that, the bottom line is no matter what, once the merger agreement gets signed, we're not jumping this deal and we are not competing with each other. And then we've got to monitor, reward and discipline. So, you know, everybody, the emails that
they're showing, everybody still wants to act in their own self-interests in the sense that they want to make as much money as they can but within the constraints of the conspiracy without upsetting anybody else. And so I would submit to you that the evidence where you see people upset or -- that's not the natural reaction to competition. That's part of the monitor, reward
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and discipline. And so for Blackstone, if you look at those things and you look at the different examples. For example, I
mean, just in 2003 in Nalco they're doing business with KKR, Apollo and Goldman Sachs where Blackstone goes and bids for the deal. agreement. They get the deal signed up. They got the merger
And then all of a sudden KKR, Apollo and Goldman
Sachs get part of the deal. Why if Blackstone is projecting a 20 percent rate of return on this investment and they've spoken for the entire deal, the whole check, why are they going out and giving these guys part of the deal? irrational. That's economically
And that's where our experts come in, because And they didn't say this They
they went and looked at the data.
just happened in Nalco or this just happened in HCA.
said that happened across the board in 19 of 22 deals, you know, or 17 of 22 deals. These auctions were not happening efficiently, the valuations that are in the files that show the potential for great returns. And the reason why is because at the end of
the day if they all bid on all these deals during this three- or four-year period, what happens? bid up on everything. So you've got examples of them working with Texas and Nalco working with KKR, Apollo and Goldman Sachs. In The price gets
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that same time period in Texas Genco they were able to eliminate competition and work with TPG and Blackstone. In PanAmSat they were able to work with Providence, Carlyle and again KKR. THE COURT: In all these transactions that you
just referenced, were there step downs on all of them? MR. HUDSON: There was -- and this is -If you could just
that's, I appreciate you getting there.
give me one second, Judge, I'll try to wrap it up -THE COURT: The fact that they worked
together, there is only 10 or 11 of these LBOs in the country and so they are going to either work together or be in competition with each other on everything. MR. HUDSON: Potentially, yeah. And what they
can't do is they can't get together and say we're going to restrain trade. communications. And so if you look at -- if we could go to the map, the connections. So if you just click, again, going back to this map, just click Blackstone and you look at the deals they're connected to. Texas Genco. And then you click on Nalco. You click on PanAmSat. You click on They can't have those direct
You click on AMC and
you click on SunGard. THE COURT: Again, the fact that they have
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some connection with these deals, that itself doesn't mean that there is any illegality; does it? MR. HUDSON: Well, so the point here of this
chart is it's all interconnected. THE COURT: MR. HUDSON: They had to be working -You have to be working towards a
common purpose, right, towards a common goal. THE COURT: No, what I am saying is even if
there wasn't a common purpose, Blackstone would be involved in all these deals; wouldn't it? MR. HUDSON: THE COURT: But for the conspiracy -So there has to be something -Let's assume there is
no, say there is no conspiracy.
absolutely no conspiracy for the sake of this question. Wouldn't Blackstone be involved in all of these transactions of which they were; wouldn't they? MR. HUDSON: They were potentially interested
in these transactions, yes. THE COURT: So the fact that there is a
connection with Blackstone in these transactions doesn't in itself mean that there is an illegality. something more. MR. HUDSON: Right. And what this shows is There has to be
they're all working together, they all know each other -THE COURT: But --
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 stand down? engaging --
MR. HUDSON: THE COURT: they working together?
-- and now let's go to the --- that is the point. How are
What are they doing? They're buying companies.
MR. HUDSON:
They're jumping -- they're agreeing not to jump deals. THE COURT: MR. HUDSON: But they -- well, that is -They're standing down. They're
THE COURT:
How many of these deals -- so the
point is agreeing to stand down, is that the point? MR. HUDSON: THE COURT: Yes. It is not that they are working
together because nobody is contesting the fact that they can work together. There has to be something more. There has to be something -What is it? The "more" is is that in addition
MR. HUDSON: THE COURT: MR. HUDSON:
to working together they're also standing down when they, when there is not the ability to work together. THE COURT: So there is 27, in these 27 deals
how many times did Blackstone stand down? MR. HUDSON: They stood -THE COURT: If that is an indicia of How many times did Blackstone
illegality, and it appears to be.
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MR. HUDSON:
Right.
So in all of those deals,
one, two, three, four, five, six, seven, eight, nine, ten, I mean, that's the -- there is the 19 deals and they purchased 5 of those 19 deals so the other 14, there's your competition, Judge. I mean, that's -- and if you go to the
next slide, this is the competition -THE COURT: So you are saying in 14 of them
they consciously stood down? MR. HUDSON: between these two. There is no direct competition
I mean, when there is auctions -No, but the fact is there is no
THE COURT:
requirement to be in competition. MR. HUDSON: THE COURT: Right. With respect to those 14, you say
out of 19 deals they were successful in 5, meaning there is 14 others that they had some relationship with? MR. HUDSON: THE COURT: Right. With respect to those 14, how many
did they stand down, did they actually stand down and did it for some type of quid pro quo? MR. HUDSON: After the merger agreement was
signed, you see from this chart there was never any competition at all. chart -THE COURT: I know, I know there is no And that's what you see from this
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competition; but the fact there is no competition, there is no requirement for competition. The question is is there
evidence that they stepped down for a quid pro quo? MR. HUDSON: that they stood down. THE COURT: what is the evidence? MR. HUDSON: There were six, six deals that we So with respect to these 14 deals, Absolutely, there is evidence
can point to the record specific evidence that they stood down. There were three deals that were auctions where they
were able to manipulate or rig the auctions so that there was, it eliminated the competition. And that is what ties
this all together, is the, it's the -- it's not just, like you said, looking at one deal and saying, well, three people worked together. It's, this is the industry leader.
You can look at, you can see their patterns of conduct over this four-year period. They're specifically
choosing to stand down when they're not competing and they're getting rewarded with quid pro quos. And the net
effect of that, what they have succeeded in doing was buying all of these companies with no, virtually no competition between each other and absolutely no competition at all after a merger agreement was signed. And what, again, they've got valuations in their files. They're interested in buying these companies. It's
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just like in HCA like we talked about yesterday. down request comes in.
The stand You Why
You got a $51 purchase price.
have got valuations in your files that show 55 or 59. are you standing down? billions of dollars. So, and if we could just -THE COURT:
You've got the potential to make
I am used to conspiracy cases on
the criminal side and invariably, if not one hundred percent of the cases, in 99 percent of the cases, in order to be able to prove a conspiracy case, there has to be the so-called unindicted co-conspirator to tie it all together. It is not required as a matter of law but as a matter of practice, it is almost impossible in my experience on the criminal side to try a conspiracy case without the unindicted co-conspirator or somebody had a deal that has been made with them. The fact that you have no in a sense co-conspirator who is testifying on your behalf, that hurts your case practically; does it not? MR. HUDSON: That we don't have a
co-conspirator that would testify? THE COURT: Yes. I mean, it is very difficult
to get a conspiracy case without some insider testifying. MR. HUDSON: Judge. I would say a couple things,
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 tried. right.
One is in civil antitrust cases like this, direct evidence is very rare, okay. illegal. This is a conspiracy that's
And so they're not going to put down on paper
that, hey, we're are going to get together and we're going to eliminate competition. THE COURT: on paper. That's why these -I understand it is not going to be
But you haven't got an insider testifying. MR. HUDSON: THE COURT: Well, in a sense-So in a way, you have to admit it
makes your case weaker than going on, I mean, the case is a lot stronger if you have an insider testifying. MR. HUDSON: I can't dispute that, you're
The case would be at trial when we -THE COURT: Most conspiracy cases are so
MR. HUDSON:
Right.
And when we go to trial
and we try this case and the jury has to make the fact question, make the decision, is that can they infer from this evidence from the lack of competition, from the statements -- and if we can go back to the PowerPoint -- the statements that these leaders, that's a few leaders of these firms over and over and over, it's the repetitive nature of their statements. conduct. It's the repetitive nature of their
It's our experts -THE COURT: Let me give you how I am
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tentatively feeling.
I don't want to be tied down to
specifics but in certain of these transactions, in certain of the separate transactions you have some evidence of a conspiracy. In others it may be unclear but I don't know
whether there is one, whether there is one or whether there is several separate, it may be several separate, it may be three, maybe five, maybe seven; but the problem is is there one? And even at the start my instinct was one conspiracy, jeez, without a so-called testifying co-conspirator, that is very difficult to prove. MR. HUDSON: And I would say, Your Honor, that
what we've got is we've got, in terms of the evidence, and you heard the HCA evidence yesterday. say -THE COURT: got? MR. HUDSON: I would say that the evidence is Yes, but that is the best you have You heard Mr. Noss
pretty good, is equal to that in the majority, overwhelming majority of these deals. THE COURT: but I don't think so. I don't think so but it may be,
But even HCA, which to me is the
strongest, defense counsel yesterday at least presented a case that would give a jury some, some consideration, there is no doubt about it. Whether he was strong enough to say
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the case wouldn't go to the jury, I don't know; but he made some good points in my judgment. conspiracy you have, by far. MR. HUDSON: What I would say, Judge, is where So far it is the best
is the evidence of real direct head-to-head competition? Where is -- when is a defendant going to stand up and say, hey, they had this deal and we came in and we paid 5 or 10 or 20 percent more because that's what our valuation showed and we can still make a good deal and we can still make money head-to-head? What you're going to see is you're going to see little skirmishes where the price goes up two or three percent. Where he talks about Kinder Morgan where
Blackstone is advising the special committee and the price rises 7 1/2 percent. THE COURT: bother me. One, they have a right to work together; and, two, there is no requirement that they compete. Those two There are two things though that
factors make your unitary conspiracy more difficult to prove, there is no doubt about it. MR. HUDSON: It makes it more difficult to
prove, true, but it doesn't change the fact, Judge, that they've got, we've got, our experts have analyzed the data. They've looked at the market. They were acting against
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their own economic self-interest.
That tends to exclude the And at We have
possibility that they're acting independently.
summary judgment today, that's what we have to do.
to tend to exclude the possibility that they're acting independently. collusion. I mean, the statements that you hear by them over and over and over in deal after deal after deal, and it's not just HCA and it's not just Nalco and it's not just PanAmSat, they show up in deal after deal after deal. You We have to put forth some evidence of
know, emails like this, that the question today is does that tend to exclude the possibility that they're acting independently? And it's the repeated patterns of conduct
and it's the repeated statements in deal after deal after deal that for purposes of summary judgment is enough to get to a jury. All of the things you raised I completely agree with. It's going to make our case to a jury much more
difficult but for them to tend -THE COURT: Let me tell you, to try this case
with the so-called co-conspirator exception to the hearsay rule is going to be a difficult matter. MR. HUDSON: prepared. It will be difficult and we'll be
And we're hoping that the defendants will be here
at the trial and testifies and we're going to get the
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opportunity to cross-examine them on that evidence.
And,
you know, we're confident that the evidence between the statements that we have, the lack of competition, the chart that you see, it's not -- it's pled as one count because it's like a snowball rolling down the hill. is it one or is it 15 or is it 17 -THE COURT: Big difference though, big That is the thing that has I mean, you say
difference, I will tell you. caused me enormous problems.
I can analyze a lot easier 15 separate conspiracies because then you look at the evidence and see if it is sufficient to get to a jury. But when you claim one Why you did
conspiracy, it puts it in a different category. it this way, I don't know.
But I will tell you, it has
caused me a lot of problems. MR. HUDSON: I understand that, Judge. We
simply went where the evidence was.
And the evidence is in
that pullout and you see the patterns of conduct and so -THE COURT: But the question is, and the thing
that we all have to grapple with is whether there is one overarching conspiracy, whether there are several, there may well be, but whether there is one overarching one definitely has been giving me trouble from the very start. All right, thank you. MR. HUDSON: Thank you.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 am saying.
THE COURT: MR. THOMAS: THE COURT: MR. THOMAS:
Who is next? Just a brief -Yes, brief, please. Your Honor, I just want to say
with respect to -- Your Honor is absolutely right that there is nothing wrong with working together -THE COURT: MR. THOMAS: (Laughter.) THE COURT: Half the time I don't know what I Everybody is saying I am right -Well --
(Laughter.) MR. THOMAS: Well, when you say it's perfectly
legitimate for people to work together at times and compete at other times, working together to pool capitals, spread risk on larger deals, you're absolutely right. The fact of a step down during the course of the bidding process, there are, as I said yesterday, there are tons of legitimate independent reasons why someone would decide not to bid -THE COURT: Counsel for the plaintiff asked, I
how about these step downs, how do you explain them?
don't think they occurred in all of the 27 but in some -MR. THOMAS: Right, they didn't, Your Honor;
but the point is that in each of those situations there are
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a myriad of reasons why it would be in the defendants' independent interest to decide not to bid higher because maybe they've concluded that the target is overvalued or not to bid at all because, again, maybe -THE COURT: Well, they argued though, hey, if
they had bid a little higher, they would have got 30 percent on their money or something. MR. THOMAS: But the point is that, also that
by definition in any of these processes someone will step down because at some point, I mean, even if there is no conspiracy because at some point in the process the losing bidders are going to conclude that they're just not willing to pay an extra dime or an extra quarter or an extra $50 per share. And that's completely consistent with their
independent interest. You can't expect, as Your Honor said earlier this morning, these defendants to pay higher and higher and higher. They don't have an obligation to, you know, pay for At some point they have a legitimate right to say Plus there could be,
the moon.
it's just not worth it to us anymore. those aren't the only reasons.
There are non-price reasons
also why a defendant would legitimately step down. The only other point I'd make, Your Honor, is, you know, counsel got up and began by saying how big Blackstone is and, you know, how we were involved or interested in
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every deal and so forth.
Well, you know, the fact that we
only, only participated in five of the 19 public-to-private deals that are the subject of this action, that ought to tell you that it wasn't such a great conspiracy if there was a conspiracy for Blackstone. You would expect that we would
get a few more spoils out of this thing. We only had 7 of the 27 deals if you take it all together. It doesn't make a lot of sense.
And I can take you, if I had the time, I could take you through each of the 14 deals out of that 19 and I could show you that in each case the plaintiffs have, again, either admitted that we engaged in conduct inconsistent with conspiracy or that we had independent reasons for our bidding behavior. And, I mean, just to give you just one example. On
the TXU deal which was a deal where KKR teamed with TPG and they announced the deal, it was the largest, at that point, it was early 2007, the largest LBO at that point, even larger than HCA. that? And what did Blackstone do in response to
Well, first of all, notice Blackstone wasn't invited We
by KKR to be part of that group so, again, no reward.
didn't get anything for anything that happened back on HCA. We weren't invited in. Now, if we had a deal that we were just looking to make any attempt to jump a deal, that we would have said to
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ourselves internally we're not interested in TXU because it's pre-allocated or KKR has this one already. didn't do that. What the evidence shows, and it's admitted in the record, is that we proceeded to form a rival consortium, that we explored financing structures, that we presented them to the financial advisor for TXU but we concluded ultimately with the financial advisor for TXU that we just couldn't get there on price. We just couldn't get or put Well, we
together a structure that would work on price. Plus, and, Your Honor, in the notebook I gave you, I can take you to tab 11, because this is important. The
plaintiffs -- price was the key reason why we couldn't do it. But, again, notice, if we had an agreement that we'd
never jump someone else's deals, if that was the agreement, why would we go to all the time and expense to work with a financial advisor and develop an alternative structure, present it to the advisor for the target? done that. But in our 56.l statement we said, "On March 7, 2007 David Foley," he's of Blackstone, "wrote in an email: 'This deal is dead. Not enough IRR,'" that's not enough We wouldn't have
internal rate of return, investment returns, "'no matter how we sliced it.' David Foley also indicated that there just
isn't enough juice left in the deal KKR signed up to get
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excited about this." So that's obviously a legitimate independent reason for not proceeding. That's not an illegal step down.
That's a lawful, that's a lawful conduct. The plaintiffs to our surprise, Your Honor, first they admitted that. They admit that that's true. That's an
admission that we had an independent reason and then they went on and added, they said not only did Mr. Foley say those things, he went on to recount the political hurdles that the deals faced -- the deal faced, the liability that the TXU CEO had become, the reverse breakup fee, all of which would create problems for any potential buyer. So the plaintiffs in their admissions just added a litany of additional independent reasons that Blackstone had at that point for not proceeding. Again, Your Honor, this deal also is not part of any overarching conspiracy because that conspiracy never existed. MR. HUDSON: Judge, just real quickly.
I'm really glad he mentioned TXU because this shows exactly the kind of evidence that we have in these 14 deals where they stand down. In TXU Blackstone internally, David Foley, the guy who he's talking about, they want to contact the special committee and get them to do an auction so that they might
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be able to get involved in the competition. if you can't see the slide. THE COURT: MR. HUDSON: internally about this. Go ahead.
I'm on page 6,
So here's what Blackstone says
"Can accomplish the same goal with
oral communication and we do not establish a precedent of submitting an admittedly (currently) non-actionable bid against an announced deal." agreement. Unclear if they're going to jump the deal. Now Foley goes and talks to Tony James, and what's Tony James say: Stand down. We are not going to compete. They wanted to try to We are not going to break the
They wanted in this deal.
buy TXU but at the end of the day they weren't willing to break the agreement. And, again, Judge, as Mr. Wildfang said again, where, where is the evidence that they, you know, where is the defense counsel providing the Court with an example where they're jumping a deal? It's just not there. They're
standing down and in return they're getting to buy deals without competition and it permeates this entire area. Thank you. (Pause in proceedings.) MR. PEPPERMAN: Good morning, Your Honor.
Richard Pepperman from Sullivan & Cromwell on behalf of
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Goldman Sachs.
And, Your Honor, rather than repeating areas
that have already been covered, I am going to use my time this morning to focus on the unique reasons why plaintiffs' conspiracy claims fail as to Goldman Sachs. And all of those reasons flow from one fact and that is that the Goldman Sachs Group is not a private equity firm. It is instead a diversified financial services
company that provides many different services to many different clients. And the fact that Goldman Sachs' private
equity business is a small part of a larger overall business affects Goldman Sachs' economic incentives. And Goldman
Sachs' economic incentives here are contrary to its participation in any conspiracy to depress the price paid in LBOs. And I want to the focus my argument on two different aspects of Goldman Sachs' business, because Goldman Sachs has many businesses. One aspect is that Goldman Sachs' Investment Banking Division provides investment banking, financial advisory and brokerage services to firms, many clients and those clients include private equity firms such as the other defendants here, where Goldman Sachs represents those private equity firms as their financial advisor to assist them in purchasing other companies, or alternatively Goldman Sachs investment bankers might represent the selling company
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in selling its company as part of an LBO or other transaction. THE COURT: So Goldman Sachs does not engage
in any purchases themselves? MR. PEPPERMAN: Honor. Oh, yes, they have, Your And to
Goldman Sachs also has a private equity arm.
set it up, just sort of schematically, the defendant here is the Goldman Sachs Group. The Goldman Sachs Group has a Goldman Sachs & Co. That
subsidiary called Goldman Sachs & Co.
has a division called the Merchant Banking Division.
division has a group called the Principal Investment Area. So Goldman Sachs does have a private equity business but it is a small part of a much larger firm. And why Goldman Sachs' economic incentives matter for purposes of the overarching conspiracy claim here is that in the 17 LBOs that the plaintiffs focus on, Goldman Sachs was part of the winning consortium in 7 of those 17. And if it doesn't make economic sense for Goldman Sachs the corporation to participate in a conspiracy to depress LBO prices, that blows a big hole also in plaintiffs' overarching conspiracy claim against all of the defendants. THE COURT: Let me ask you, why is it in their
interests to suppress the price? MR. PEPPERMAN: THE COURT: Why is it not?
Yes.
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MR. PEPPERMAN:
Let me go through -- I have
four reasons, I'll go through them one at time, four reasons why Goldman Sachs' economic incentives are different. Reasons two and three relate directly to Your Honor's questions but I want to take them because I think they flow more logically in this order. Reason No. one why Goldman Sachs' economic interests are different is that Goldman Sachs' private equity arm decided on its own in 1991, 12 years before the alleged conspiracy in this case, decided on its own to pursue a business model of doing only joint private equity deals. There is no dispute about that. Since 1991, since
when Goldman Sachs entered the business, it only did joint deals. Now, plaintiffs argued yesterday, Mr. Burke and Mr. Wildfang, that the defendants changed their course of conduct in 2003 and began predominantly pursuing joint bids then. That's demonstrably not true for Goldman Sachs.
Goldman Sachs pursued joint, has been pursuing joint bids for over 20 years going back to 1991. And the reason why Goldman Sachs on its own adopted this business model, the reason why it was in Goldman Sachs' own independent interests are two reasons. One, many
private equity firms are Goldman Sachs' investment banking clients. Goldman Sachs decided that it would be less
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disruptive to those investment banking relationships and that Goldman Sachs would be able to better preserve them going forward if Goldman Sachs bid with their clients as part of joint bids as opposed to bidding all by themselves. And, second, Goldman Sachs on its own made a decision that it did not want alone to own a controlling interest in a company because that company might compete with one of Goldman Sachs' corporate investment banking clients. So, for example, Goldman Sachs wouldn't want to own a controlling interest, a hundred percent interest or otherwise, in a hospital company because Goldman Sachs has investment banking clients that are hospital companies so they prefer to join with other firms and end up with a smaller, noncontrolling interest. So the fact that Goldman Sachs' strategy and conduct here have remained unchanged for over two decades defeats any claim that Goldman Sachs altered its approach to private equity investing in 2003 as part of some overarching conspiracy. Now, reason No. two, Goldman Sachs is often hired by the selling company to serve as what's called as a sell-side financial advisor. So it's hired by a company
that's seeking to sell itself, either through an LBO transaction or through some other merger or sale. And, in
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fact, here Goldman Sachs acted as the sell-side advisor, meaning it was representing the selling company in six of the 17 LBO transactions at issue. We heard a lot yesterday about the Freescale transaction. Freescale. Goldman Sachs there was representing
It was Goldman Sachs' job to get the highest
possible price for Freescale. Now, as an investment bank that's in the business of getting the highest price for its clients, Goldman Sachs' entire reputation as a sell-side financial advisor is dependent on its ability successfully to obtain the highest possible price for its clients. THE COURT: And not only is Goldman --
You are saying on six of these
transactions your division represented the seller? MR. PEPPERMAN: Yes, sir, in six of the 17
LBOs Goldman Sachs' Investment Banking Division represented the seller, meaning that -THE COURT: Count 1? MR. PEPPERMAN: that fact is not disputed. Yes, yes. Six of the 17, and Six of the transactions in this
In six of the 17.
What I also want to focus on is not just Goldman Sachs' reputation but also Goldman Sachs -THE COURT: Who is the defendant in this case,
the division or the corporate parent?
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MR. PEPPERMAN:
The named defendant in this
case is the overarching holding company, the Goldman Sachs Group, Incorporated, the overarching holding company that owns all of Goldman Sachs' varied business all around the globe. And from, one point that's in our papers, from the beginning of this case we pointed out to the plaintiffs that they've sued the wrong Goldman Sachs defendant, that the holding company didn't engage in any of the conduct at issue here but -THE COURT: Maybe their theory is agency. Well, their theory as it came
MR. PEPPERMAN:
out in the summary judgment papers is that the Court should pierce the corporate veil. But, of course, to pierce the You can't just
corporate veil the Court needs evidence. rely on lawyers' arguments.
And there's no evidence here.
But what I also wanted to point out about the sell-side financial advisory engagements and what's critical is Goldman Sachs' economic interest is on the line. When
Goldman Sachs represents the seller as it did in six of the 17 transactions, Goldman Sachs' fee is set as a percentage of the purchase price. So, in other words, the higher the purchase price, the higher Goldman Sachs' fee. Much like when you sell your
house, the real estate broker's commission is a percentage
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of the purchase price.
So this creates a powerful economic
incentive for Goldman Sachs to achieve the highest sales price for its clients, which is totally and completely at odds with the goals -THE COURT: named? MR. PEPPERMAN: THE COURT: Why do I think we're named? So why do you think you were
Yes. I think we're named why a lot
MR. PEPPERMAN:
of defendants were named here, that is, the plaintiffs just sort of gerrymandered together a number of transactions and then just named all the firms that were involved. You're going to hear shortly after me, I think next, from J.P. Morgan. And the J.P. Morgan defendant here
wasn't a private equity investor in any of these transactions. And this all just goes back to -THE COURT: with it. MR. PEPPERMAN: They worked as financial They must have had something to do
advisor in some -- I'll let J.P. Morgan make its own argument. But the fact that this so-called overarching conspiracy encompasses so many divergent different defendants with different business models, different economic interests, the fact that they're all roped
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together, roped together in this overarching conspiracy just demonstrates the implausibility of it. I said I had four reasons, I've gone through two. Reason No. three: When Goldman Sachs investment
bankers are not acting as sell-side advisor, what its investment bankers are doing is completely at odds with the supposed conspiracy. What its investment bankers are doing
when a company announces a sale transaction, an LBO, and Goldman Sachs investment bankers aren't hired to represent the sellers, the bankers then go out and actively attempt to convince the firm's private equity clients to submit a competing bid. I mean, Goldman Sachs' bankers want to be They're not hired by the
hired as financial advisers. sellers.
So then they go out in the marketplace and they
try to convince potential purchasers to hire them as an advisor and make a bid. They try to create competition
which, again, is totally a hundred percent at odds with a participation in a conspiracy. What I wanted to point out is this is exactly what happened with Goldman Sachs and HCA. Goldman Sachs is named But you
as a defendant in the HCA count, it shouldn't be.
will see there is a Carlyle document which is Exhibit Q to our motion and says that once HCA announced the transaction with Bain and KKR the Goldman Sachs bankers were, quote, in a frenzy trying to organize a competing consortium, conduct
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that is completely inconsistent with Goldman Sachs participating in a conspiracy not to compete. And the evidence shows that Goldman Sachs' bankers were out there and contacted seven private equity firms encouraging them to submit a bid during the go shop period. So, again, the idea that Goldman Sachs, the corporation, the Goldman Sachs Group entered into a conspiracy to suppress competition is just contrary to the facts. The Goldman Sachs investment bankers were going out
to their private equity clients -THE COURT: Is Goldman Sachs named as one of
the defendants in Count 2? MR. PEPPERMAN: Yes. We are one of the four.
We shouldn't be but we're one of the four. And then, fourth, fourth, my last reason is that, like all large firms, Goldman Sachs has a conflict of interest policy. And that conflict of interest policy bars
its private equity arm from submitting a bid if Goldman Sachs is representing the seller. It doesn't want to be on
the purchase side if it's been hired to represent the seller. Potential conflict of interest. And the evidence also shows that Goldman Sachs as a firm, the corporation, strongly prefers the sell-side financial advisory position in any transaction because then Goldman Sachs is guaranteed to get paid no matter who wins
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the bid.
No matter who buys the house or no matter who buys
the company, Goldman Sachs will get paid and will get paid a percentage of the purchase price. That's its first choice.
So what this means is that the Goldman Sachs' private equity arm is excluded from even considering investing in many LBOs. Indeed, in six of the 17 LBOs here It couldn't bid.
Goldman Sachs was representing the seller.
It was barred because both of its conflicts policy and because of its institutional preference to represent the sellers. So because Goldman Sachs would be barred from even participating in many of the LBOs, it would be irrational for Goldman Sachs to enter into an overarching conspiracy to buy the market or allocate deals because its term would come up. All right, Goldman Sachs, it's your turn, it's your Goldman Sachs, well, I can't even
turn to be the winner.
participate, we're representing the seller here. It wouldn't make sense to forgo current business opportunities for the promise of future business opportunities when you would be barred from your own conflicts policy perhaps in participating. THE COURT: Let me ask you this:
Suppose they had named the appropriate defendant, namely, the division. What is your response? In other
words, I understand your argument, it is a very strong
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argument with regard to the corporate and it is the corporation or the holding company that is named and that is who we are concerned with. But assume for the sake of this
question that it had been the division. MR. PEPPERMAN: good question. THE COURT: what, five or seven? MR. PEPPERMAN: We were involved in six as the You said you were involved in, Well, Your Honor, it's a very
sell-side advisor and seven as an investor. Now, Your Honor, the direct answer to your question is that the plaintiffs can't do what you proposed and I'll explain why. If they had not named the holding company, if
they had not named the Goldman Sachs Group, Incorporated, then the argument that I think is Roman I of our brief that they sued the wrong defendant, that would fall by the wayside. Okay. Now, what would be the relevant corporate
entity then would be Goldman Sachs & Co. which is the holding company's principal operating affiliate or subsidiary. Investment banking and private equity are both
units of that subsidiary so there is Goldman Sachs & Co. has an investment banking division and part of that investment banking division is the financial sponsors group which represents private equity firms. And Goldman Sachs & Co.
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has a merchant banking division and part of that is the private equity arm. But they're all part of one corporate
entity, Goldman Sachs & Co., which is managed based on its overall economic interests. You know, it's not possible obviously in litigation to sue a division of a corporation. You know, a division is You have to sue
not a legal entity that the law recognizes. the corporation.
So if they had sued Goldman Sachs & Co.,
they would probably fix their wrong defendant issue because they wouldn't be suing the holding company but they still have the same problem that Goldman Sachs & Co. as Goldman investment banking business and a private equity business and its economic interests are different because it has those two competing businesses. It doesn't do things in its
private equity business that would be foolish and destroy -THE COURT: You are saying basically it is
contrary to the economic interests of Goldman Sachs to have participated in a so-called overarching conspiracy? MR. PEPPERMAN: Correct. Because to have
participated in the overarching conspiracy to lower or depress the prices in LBOs would be very, very damaging to its investment banking business which is out there telling businesses hire us, we can get you the highest possible price. THE COURT: Let me ask the plaintiff, why are
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they in here, especially it would appear that, at least on the basis of his argument, that at least the wrong entity has been sued. But more than that, going to the substance
of his argument, it seems that it would be completely unreasonable, at least if I accept his argument, for someone who represents sellers to be involved at the same time and seeking to depress the price. MS. SLAUGHTER: Your Honor, I wouldn't be so
quick to accept his argument and give me a chance to go through my argument -THE COURT: I am just posing the issue. I appreciate that.
MS. SLAUGHTER: THE COURT:
But if he is correct, it means
that -- well, let me hear your argument but that argument is pretty strong. MS. SLAUGHTER: actually not that strong. Can I approach? THE COURT: Sure. Thanks. Your Honor, I submit it's
And I'm going to go through this.
MS. SLAUGHTER:
I think once you hear what I have to say you'll agree with me that this argument is a house of cards that will fall down. Now, if you want me to go straight to why -THE COURT: Before you start, are you saying
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that the named defendant is the one who participated in the conspiracy or is it your position that it was really a subsidiary and that the wrong defendant was named? MS. SLAUGHTER: Yes, Your Honor, I don't think
(ph.) it is the wrong defendant's name and if there is any confusion about that, it was created by Goldman Sachs. I'll tell you, we took a 30(b)(6) deposition of Goldman Sachs Group, Inc., the man's name is Philip Grovit. Plaintiff's Exhibit 19. THE COURT: And he was asked -Keep your voice up just a little. Sure. He was asked if the It's at And
MS. SLAUGHTER:
Private Equity Group was in, within, a business segment within Goldman Sachs Group, Inc. Merchant Banking Division. He said yes, within the
And you just heard counsel say That's point No. one.
you can't sue a division, okay.
Point No. two, if you go to slide 19 which is the very last slide in my presentation, Goldman Sachs Group, Inc. is listed as a buyer in the Kinder Morgan deal, okay. Two more points. Executives of Goldman Sachs
Group, Inc. were explicitly involved in meetings with other private equity firms to discuss partnering on deals. We
will talk about that in a little minute, a little bit; but the CEO of Goldman Sachs Group, Inc., Lloyd Blankfein, was involved in these meetings and so was the head of the Private Equity Group Mr. Friedman. And he said --
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THE COURT:
Let's go to the heart of his If as he
argument, no matter what entity is named.
represents that Goldman Sachs, at least one of their entities is involved as a, one of the many bases of their business to serve as a financial advisor to a seller, why would they be involved in a conspiracy to depress the price of the stock? MS. SLAUGHTER: Because that is ignoring the
other business that he just told you about, which is they have a private equity group, an investment banking group and the investment bank can provide debt financing for the private equity LBOs as well as provides advising to buyers of those companies. And what Goldman Sachs representative Sanjeev Mehra testified is when Goldman can get all three of those roles in a deal, that's called a "triple play" for Goldman and they make a lot of money for doing that. And what the evidence also shows is if they aren't advising the company, okay, or if they are advising the company, then they're not going to be able to have that role so it's a one or the other. But when they have that private
equity role or that investment banking role or they're advising the buyers in the LBO, that's where you see, where the rubber meets the road and you see some of the most disturbing explicit agreements to not compete. And that's
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where I'd like to go with you on this. And, by the way, Goldman Sachs never jumped a deal. THE COURT: They what? I missed that.
MS. SLAUGHTER:
Never jumped a deal.
Why don't we start, Your Honor, you're right, they have a right to partner. What they don't have a right to do
is to agree to partner for the purpose of eliminating competition. That's a per se violation of the Sherman Act.
And when you combine that with an agreement to not jump a deal or an agreement to stand down when other private equity defendants asked you to do, those are all indicia of an overarching conspiracy, okay. All right. You asked yesterday whether it was a You've heard counsel say it was I encourage you to take a look This is an excerpt from It
common practice to partner. Goldman's common practice.
at slide three of the presentation.
Exhibit 655 or Plaintiffs' Exhibit 15A, all right. describes Goldman Sachs' private equity -THE COURT: Here is the question:
We have got an overarching, one, conspiracy, yet within that one conspiracy, at least as represented by counsel for Goldman Sachs, that in certain transactions Goldman Sachs is with the sellers and with other transactions Goldman Sachs is with the purchasers or the potential purchasers. Those are inherently contradictory
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positions. How can Goldman Sachs be involved in a unitary conspiracy when they have two inherent contradictory positions? It doesn't appear to be logical. MS. SLAUGHTER: Well, I'll show you how they
do it and then you can decide whether the business justification or the argument that it doesn't make logical sense meets up with the evidence and whether a jury can say you know what, they did this, they engaged in this conduct so, yeah, I don't understand why. THE COURT: They might have engaged in the
conduct but it militates against a unified conspiracy because they are inconsistent positions. MS. SLAUGHTER: THE COURT: The role --
It means that they are taking a
different tact on seven of the transactions contrary to what they did on five or vice versa. contradictory positions. They are inherently
It is not logical. I'm going to get to their role
MS. SLAUGHTER:
and what they knew when they served as advisers to companies, okay. And we'll get to that.
Let's focus for now on what they knew and what they did when they were investing as a private equity division, okay. If I could walk you through this and help you
understand this, I think --
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THE COURT:
Let's assume they did all kinds of That is
conspiratorial activities in the private equity.
separate from their position on the other transactions when they were advising the sellers. MS. SLAUGHTER: THE COURT: Well, I --
Am I wrong there? No, since you really want to
MS. SLAUGHTER: go there, I'll tell you. THE COURT:
Well, I have to.
If there is a
unitary conspiracy, you can't be a partner in one conspiracy and have inherently contradictory positions. MS. SLAUGHTER: contradictory positions. making, but they're not. The advisers to the company, when they served as an advisor -THE COURT: Well, then answer this question: These aren't inherently
That's the argument that they're
Why is it not contradictory that if one part of Goldman Sachs is depressing the sale which affects their advice on, as sellers? MS. SLAUGHTER: Because they are never in the It's a conflict for them.
same deal doing those two roles.
And they'll tell you this, they will never be an adviser to the company at the same time that they're either advising the buyers, that they're providing debt financing or they're
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providing private equity funds. in a single transaction. contradictory. Let's go back.
It's never going to happen
That's why they're not
I want to start, the idea that this
is a common practice for the group's partner that's been longstanding, that Goldman Sachs has had this strategy since 1991, I'm going to show you a couple of pieces of evidence that dispute this. All right. This is a fact question for the jury. If you take a look at slide No. three,
this shows you that in 1998 Goldman Sachs only co-invested with other private equity sponsors 22.5 percent of co-investment funds. That's in 1998. It's inverse by 2004, But I'm not just
88 percent of the funds are co-invested. relying on this alone.
Mr. Friedman, Rich Friedman, who was the head of the Private Equity Group at Goldman Sachs in three separate parts of his testimony at Plaintiffs' Exhibit 15A in discussing the club deals from 2003 to 2007 testified the following: That the mandate of most private equity firms is
to, quote, buy companies on their own, because I think frankly that's how most of the firms like doing things because, frankly, they would rather work on these deals than own them themselves. "But the preference of most of the firms is to sort of do the deals on their own, it always has been."
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Another quote, "Most of the transactions that we're financing now," because we also have a debt financing business, "most of these firms are doing -- are just doing deals on their own because they don't need to have any other co-investment partners. And, frankly, they would prefer not
to because, frankly, they would rather work on their own." How many times can you have Goldman Sachs, the head of their Private Equity Group, say that firms would rather work on their own, to know that this is not a longstanding business tradition. the jury. THE COURT: It was unrefuted yesterday, there And it's at least a fact question for
is no -- the plaintiffs do not contest that the working together constitutes any indicia of illegality. MS. SLAUGHTER: You're right. That alone
isn't illegal but partnering for the specific purpose of eliminating competition or reducing competition -THE COURT: Oh, there is no doubt about it. Yes, it's -But there has to be
MS. SLAUGHTER: THE COURT: evidence of that. MS. SLAUGHTER: THE COURT:
I agree.
And we're getting to it.
But the fact that they are working
together is -- nobody contests that. MS. SLAUGHTER: You're right.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 do that?
Let's take a look at slide 4. persuasive. I think a jury will, okay.
You might find this
It's Exhibit 1491 from Plaintiffs' Exhibit 15B describing the Goldman Sachs private equity transaction overview. In this document Goldman Sachs recognized that
what financial buyers tried to do in order to minimize the purchase price is avoid competition. This assumes that I
want to buy the company but I want to minimize the purchase price. How am I going to do it? I'm going to avoid competition. How am I going to
I'm going to partner for the specific purpose of I'm going to agree to not jump
eliminating my competition.
anybody's deal and I'm going to agree to stand down when other private firms ask me to. THE COURT: There is no doubt. But the
question is not the law, the question is the evidence that supports that. the evidence? That is what we are concerned with. What is
I am not saying it is not there but where is
the evidence as to a unitary conspiracy -- overarching conspiracy? That is what I am looking for, not a recitation
of hornbook law but the evidence. MS. SLAUGHTER: of the evidence. To understand Goldman's role in this conspiracy we should start in 2005. That's when they raised at the time Okay. Let's talk about some
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the largest private equity fund of any of the other defendants in this case, it was 8.5 billion dollars. KKR,
one of the defendants in this case, saw this fund as a competitive threat. KKR's cofounder Henry Kravis was very
public about the fact that he saw this as a competitive threat. If you turn to slide 5, he's quoted as saying that Goldman Sachs had never competed with them and that, "As long as they continue to perform as partners as opposed to competitors, we believe their private equity business will continue to fit within Goldman Sachs." You can't get any more public about the fact that at least KKR and Goldman Sachs had an understanding that Goldman Sachs wasn't going to compete in the private equity business with KKR. This is evidence, the kind of evidence In fact, after Goldman Sachs raised
that you're asking for.
this historic amount of private equity funds, the CEO of Goldman Sachs Group, Inc., Lloyd Blankfein, and Richard Friedman, the head of Goldman Sachs Private Equity Division, met with Henry Kravis at KKR's office to specifically discuss the fact that they intended to continue to partner on deals even though they had raised such a large amount of money for investing. That's at Plaintiffs' Exhibit 15B,
Mr. Friedman's testimony 392 to four. THE COURT: Let's take a 7-minute break at
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this time and then we will get back.
We have got to pick up
the pace because we still, what do we have, seven more today, so you have got to -- both sides are allocated to approximately ten minutes. main points. THE CLERK: All rise. We have got to just hit on the
Court is in recess.
(Recess.)
THE CLERK:
All rise. Please be seated.
Court is back in session. THE COURT:
For the sake of the plaintiffs,
what I am looking for from the plaintiffs is, so-called under the terms of the cases, the so-called larger picture, the tieing it together and it has to be more than joint bidding and the failure to compete. There has to be this
overarching agreement that affects all or most of these transactions. That is what was pled.
And going into the minutiae that may be in this case, there might be a conspiracy as to that transaction is going to be insufficient so, I am not going to tell you how to argue your case but sometimes going into the minutiae is not helpful on the overriding issue which is the overarching agreement and that is what I am looking for.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 minute. right. that.
MR. WILDFANG:
Your Honor, if I could jump in?
I plan to address at the end of the day how all this fits together so I think we will give you answers to the questions you have. THE COURT: Okay. And I --
We have got to move. And I have two responses to
MS. SLAUGHTER: Bear with me.
If you take the evidence, the various evidence from the different deals, you can infer the overarching conspiracy. That's the case law. But maybe we should look
at this as like a drug, criminal drug conspiracy, okay. Say we have a conspiracy to sell cocaine, all That's the overarching conspiracy and then there are John Connor, our renowned
episodes in that conspiracy.
expert on the cartel theory, he talks about this in the expert report, there are episodes. You might think of the
LBOs, the different leverage buyouts as episodes of this conspiracy to restrain competition. But let's keep with the drug conspiracy for a One episode in that conspiracy might be your He
street-level drug dealer and his deal is successful. gets the money, he exchanges the drugs.
One other episode of that drug conspiracy might be
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that the drug dealer gets robbed so he's not successful in completing that conspiracy. Another one might be your street-level drug dealer turns informant, okay. So you have three different examples, one of which you would say was affected to execute the goals of the conspiracy. The other two not so effective. But that
doesn't mean that there is not a conspiracy to sell drugs. THE COURT: No, but the difference is in that
case all of the participants have a meeting of minds and they are tending towards the same object. There is some
evidence presented by the defendants that show that on certain of these transactions there was not a meeting of minds, or at least that is what is argued. MS. SLAUGHTER: disputed on that. Right. The evidence is
So they argue in some instances they But actually I think
didn't have a meeting of the minds.
the evidence we've shown is they all have a common scheme, a common understanding that they want to limit competition, restrain competition on these deals. THE COURT: But here are the two facts that
you have to get over or prove that there is something in addition to these facts. One fact is they have a right or at least it has not been contested that they can work together.
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Two, there is no compulsion or obligation under the law to compete. So, therefore, there has to be some type of
agreement between the 11 defendants that something in addition, namely, we all agree that we are going to limit competition by in every case where -- well, we are going to stand down on every case, that is an agreement. that? Where is
Where is it that they entered into this agreement?
That is what I am looking for. MS. SLAUGHTER: It's evidenced in each of the
deals that we've pointed out to you where this has happened. THE COURT: Yes, but it didn't happen in all
In every single one --
It might have been the conspiracy.
There is evidence that there might be a conspiracy in certain transactions. HCA is a clear example at least to my
way of thinking tentatively that maybe that matter should go to the jury. MS. SLAUGHTER: going to go through these -THE COURT: Well, you haven't got enough time. But the point is where is Kinder Morgan, SunGard, I'm
I have heard yesterday on that.
the agreement between all of them regarding 27 transactions? MS. SLAUGHTER: That's not something that And
we're required to prove under the law though.
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defendants have set this up so that -THE COURT: There has to be sufficient I didn't draft this
evidence that there is one conspiracy. complaint. MS. SLAUGHTER: conspiracy -THE COURT: about this one.
So when you have a drug
I understand the drug, I am asking
There is one overarching conspiracy In some of the transactions it
involving 27 transactions.
is obvious that there is no conspiracy. MS. SLAUGHTER: Some of the transactions don't
achieve the goal of the conspiracy, maybe -THE COURT: They shouldn't be in there then. Well, if that's what you are
MS. SLAUGHTER: saying -THE COURT:
That is what has been alleged. This is --
Why was it alleged this way? This is something -- because
MS. SLAUGHTER: they're connected.
They are connected in some way. Well, that is the point. Show the
THE COURT:
connection on all of them or most of them. MS. SLAUGHTER: Okay. And I agree with you.
And if that's what you need, at the end of the hearing today we are prepared to show that. Mr. Burke will run through
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every transaction with you and show how they're all connected. THE COURT: next week. Maybe you will have to come back
There is not going to be a chance to go through We still have got seven other people that If
every one today. have to talk.
I mean, yesterday was the time for that.
you want to come back next week or the week after, I am available. MS. SLAUGHTER: If it means that I can
represent my client and explain why this case shouldn't be tossed, why it -THE COURT: Tie them together. You had ten
minutes for this, let's do it. MS. SLAUGHTER: Morgan deal, Your Honor. All right. Here's the Kinder
If you look at the Kinder Morgan This is the deal
deal, go to page seven in your slides. that Goldman Sachs identified.
They invited several other
defendant private equity firms to join a consortium to invest in the deal. And they included Apollo, Bain,
Blackstone, KKR, TPG and Carlyle. And Mr. Friedman believed that no one would compete with Goldman on the deal because an agreement to not compete was in place, an explicit agreement. And there was some
rumors that some of the defendants who decided not to participate with Goldman were going to compete. And
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Mr. Friedman testified that that's not a possibility, "it would be a franchise killer." He calls the club of other private equity firms a franchise. He said, "It was my belief at this time we had
agreements that they either would work with us or they would not compete against us." That's an explicit per se unlawful agreement to not compete. And if you need a document for that, look at page, slide eight, all right. This is the specific provision of
the agreement which says that these defendants will either work with Goldman or they won't compete against them. Ken Pontarelli who was a managing director of Goldman Sachs testified the defendants that we discussed, Apollo, Blackstone, KKR, TPG, Carlyle, all signed this agreement. That's at Plaintiffs' Exhibit 21, page 83. THE COURT: Assume that this is sufficient
evidence as to a conspiracy as to that particular transaction. Are these people involved in all the others? MS. SLAUGHTER: the others. THE COURT: No, but are they involved in -They're involved in a lot of
did they agree that they were going to have some involvement in all of these transactions or substantially all of them? I mean, that is what is pled here. That is what is pled
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here:
An agreement, an overarching agreement involving 11
people and a lot of co-conspirators involving 27 transactions. It is, I tell you, it is almost mind boggling
to get your mind around it. MS. SLAUGHTER: What the agreement does is it
allows the defendants to participate if they want to, okay. If they want to. THE COURT: Here is my only point. I
indicated there may well be evidence of certain conspiracies as to certain separate transactions. pled here. That is the problem. That is not what is
There is evidence that on
several of these transactions there was no conspiracy, at least with many of the defendants, but they are all lumped together. MS. SLAUGHTER: Let me tie the Kinder Morgan
to the HCA because that's not something that has been done. It may illuminate something for you, okay. will be very interesting. You saw yesterday in the HCA deal it was announced July 24, 2006. If you go to slide 12 you will see that I think this
Goldman Sachs was trying to ask Bain Capital to get into the deal. "This is the preferred path for us." In other words,
we want in this deal with you guys, KKR and Bain, we don't want to compete. to KKR. But then they also say they've reached out
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Take a look at slide 13. THE COURT: 13? 13, the very next one. You
MS. SLAUGHTER:
Remember, July 24 was when HCA was announced.
have us Alison Mass of Goldman Sachs telling George Roberts of KKR, "Wish we were with you here," okay, in this HCA deal. Look at his response: "Merrill played role GS should have done in Kinder." Do you know what he was telling Goldman Sachs here? You should have acted like an investment bank instead of a private equity firm doing a triple play in this Kinder Morgan deal. That should have been something that we did.
We should have -- KKR should have done this Kinder Morgan deal and you should have stayed in your role as an investment bank. Ms. Mass forwards this on to the head of Goldman Sachs Private Equity Group Richard Friedman and he says, "I suspect they will resist allowing us to join HCA to teach us a lesson." Okay. John Connor, one of the classic mechanisms This is
of conspiracy is reward, punishment and monitoring.
punishment, he is explicitly saying, so now you have a link between Kinder Morgan and HCA. Now, look at what Mr. Friedman says later. We
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should try to get in, as opposed to going after this, okay, as opposed to competing. Can you imagine the fallout with
KKR and Bain if we teamed up with some other private equity firms, okay. The very next slide, two days later it's confirmed that Goldman Sachs is not going to compete on this deal. Even though they wanted in, they recognized they're being punished for not giving KKR the kind of role KKR wanted in Kinder Morgan, okay. THE COURT: Okay. Try to, you know, bring --
you only have ten minutes for each of these. MS. SLAUGHTER: THE COURT: I know.
Make your high points. All right. Look, they didn't That's in the
MS. SLAUGHTER: jump the deal. testimony.
They never jumped a deal.
That's in the record.
There is a genuine issue of material fact here about how these deals are related, whether they're paybacks, rewards, standing down, no jumping, that's something that should go to the jury. decide. It's not something that you have to And we'd like the
It's a jury question.
opportunity to try this case in front of Your Honor and pull out all the evidence we have, not just in ten minutes of the individual arguments. And I will step down now and --
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. there.
THE COURT:
Well, you have got something
Judge Ford who used to sit on this court always It
said, "I always denied motions for summary judgment. makes life a lot easier." (Laughter.) THE COURT: This is a hard one.
Go ahead, next one. MR. PEPPERMAN: to make two brief points. First -THE COURT:
Quick, just quick response. Sure, Your Honor. I just want
She said she was misled by your
client as to how to designate the defendant; and, secondly -MR. PEPPERMAN: THE COURT: Well, look --
-- both parts of your organization
do work different sides of the street depending on what the transaction is. MR. PEPPERMAN: Well, that's not correct, Your
Just on the organizational issue, and I don't want to belabor this, it is true, of course, that all parts of Goldman Sachs ultimately flow up to the holding company. That doesn't mean that it's the holding company that engaged in the challenged conduct. Both the Investment Banking Division and the
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Merchant Banking Division are all part of Goldman Sachs & Co. which is managed as, not surprisingly, as an overall entity. My two points, Your Honor, are, first, there is no dispute that Goldman Sachs represented the seller in six of the 17 LBOs at issue: AMC, Clear Channel, Freescale, It, therefore, was not
Michaels, Neiman Marcus and Sabre.
in Goldman Sachs' economic interests to enter into -THE COURT: So you are saying at least with
respect to those transactions, it is almost metaphysically impossible for you to have been a co-conspirator? MR. PEPPERMAN: Correct, because our fee is a We want to get the price as
percentage of the sales price. high as possible.
But, Your Honor, the fact that we were the seller's representative in over one-third of the LBOs of interest here, it's also strong evidence that it's not in our economic interests to participate in this overarching conspiracy. the seller. And just with respect to the HCA count, because we have been thrown in there, I urge the Court to look at Exhibit Q to our motion which describes what the Goldman Sachs investment bankers were doing when the HCA LBO was announced. And the Carlyle email reads, "Goldman Sachs," More than one-third of them we're representing
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the investment bankers, "is in a frenzy trying to organize a competing consortium. They've reached out to us, TPG and
Blackstone as potential leads and have spoken to Warburg, Goldman Sachs PIA, Apollo, Thomas Lee, and Madison Dearborn as well." Now, is that evidence of a corporation that has agreed to stand down when it's in a frenzy trying to contact people -THE COURT: (Laughter.) MR. COUGHLIN: Your Honor, Patrick Coughlin I am one I got it. I got it. Next.
for the plaintiffs, if I might just for a second.
of the lead counsel and I had the benefit of actually maybe not being here yesterday so -THE COURT: (Laughter.) MR. COUGHLIN: down in Atlanta. I was lucky. I was in court You are lucky.
So I have a suggestion.
I heard what Your Honor is asking and the questions about give me the overarching conspiracy, give me the agreement, you know, about not jumping the deals, give me a way away that everybody can be involved even if they're not involved in these seven deals or that. So I have a
suggestion to try to answer that question, because time is running short and we've spent a lot more time on each of
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these deals. I would suggest that the defendants who want their argument about each one of these deals, each one of the deals that they're in, each defendant in the deals that they're in, let them go ahead and conclude. Let them go
ahead and do their ten-minute argument right now, or 15 if it takes 15 or 20. I'm not trying to limit their time.
Let us wait till the end to tie those deals together. And we won't stand up in the middle, they can go
ahead and go -THE COURT: accept it. MR. COUGHLIN: THE COURT: Okay. Thank you, Your Honor. If that is your suggestion, I
You are going -I'm sorry, Your Honor, I'm
MS. ANDERSON:
actually not sure that that's something that defendants would agree with. THE COURT: What is that? We actually -- this is the
MS. ANDERSON:
proposal that we had submitted to Your Honor as to how the arguments would proceed, that we would be able to avoid actually having to confront arguments by individual defendants. We objected, you agreed to the schedule that
would force them to take -THE COURT: Well, he doesn't have to --
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MR. COUGHLIN:
No, that's right. Go ahead.
I'm not
cutting off their right to argue. MS. ANDERSON: address the issue. MR. COUGHLIN: arguments at the end. THE COURT:
So you are just not going to
I will address the individual
He has a right to conduct his
argument the way he wishes. MS. ANDERSON: THE COURT: Thank you, Your Honor.
Identify yourself for the record. I'm sorry. Carrie Anderson on
MS. ANDERSON:
behalf of Providence Equity Partners. THE COURT: Okay. Because we are, you know,
running out of time, let's stay as close to ten minutes as you can. And they are waiving their response at this time
and saving their argument until after all the defendants have finished. MR. CARROLL: Your Honor, my name is James With me is Alisha
Carroll from Skadden Arps here in Boston.
Nanda and I'm here on behalf of J.P. Morgan Chase & Company, a defendant in Count 1 only. I emphasize it is J.P. Morgan Chase & Company because there used to be a defendant in the case called J.P. Morgan Partners. They're out of the case and I'm going to
come back to them in a moment.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 things.
THE COURT:
Why are they out?
I forgot.
MR. CARROLL:
They're out because you
appropriately dismissed them because the only deals in which they were involved had releases associated with them. have been out of the case for three years or so. So J.P. Morgan Chase is a defendant in the case. Mr. Pepperman set the table for this. The fundamental They
reason, and I'll expand on it, why they don't belong in this case now and why they never belonged in this case is because they are not and have never been a private equity firm. this talk about standing down from bids is entirely inapplicable. bidder. bid. They don't bid. They've never been a winning They don't All
They've never been a losing bidder.
They're not in the private equity business and they
have never been in that business. As nonsensical as this overarching theory is in general, it particularly makes no sense for an entity that is not even in the private equity business. What does J.P. Morgan do here? It does a couple of
Much like Mr. Pepperman explained with respect to They
Goldman, J.P. Morgan represents in some deals sellers.
worked with the management of the company to help them sell the company. That happened here in Michaels stores and I'll That's the first thing they do.
come back to that.
The second thing they do is work --
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THE COURT:
Did you advise sellers?
Out of
the 27 how many sellers did you advise? MR. CARROLL: Michaels stores, Alltel are the
ones we were principally sellers helping to sell the businesses. In other deals, a number of the other deals, not all of them but a bunch of them, what J.P. Morgan does is provide financing and advice. The L in LBO, leverage, means
that these private equity firms who are buying it, they put in a lot of their own money and do equity, they also need to raise a lot of money. And J.P. Morgan helps them do that
and gives them advice as to how to do that as well so these are the two things that we do. As with Mr. Pepperman's client with respect to the advisory business for sellers, we get paid more if the price is higher. That's what we did in Michaels. There was a
competitive auction. up.
The price went back and forth, it went
The public shareholders as a result of that option got
more than 200 million dollars more that they would have gotten if the initial bid became the deal price. it went up by more than 200 million dollars. It wasn't,
J.P. Morgan
got a little piece of that, almost an extra million dollars in fee. Our interest in representing sellers is aligned with the shareholders and is for the price to be higher. It
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is completely antithetical to the core theory that the plaintiffs have that the point of the conspiracy was to depress the price. It makes no sense as to us. It makes no
sense as to others as well but in particular when you think about J.P. Morgan it makes no sense. Think about, Your Honor, the other part of what it is that J.P. Morgan does in these deals. It provides
financing so that these deals can be financed and advice in that regard. How does it get paid there? As a general matter in
terms of providing financing it gets paid for the work that they do and they get paid more based upon the size of the financing. If you arrange for greater financing, you are
able to charge a greater fee. Yet again, our economic interest is -THE COURT: Are you saying that if the price
of the share of stock is higher, it requires more financing to pay for it and you get a bigger fee? MR. CARROLL: Yes, it is that clear. If the
deal goes off at a lower price, less financing is needed and there is a smaller opportunity to make financing fees. THE COURT: So why are you, why do you believe
that you are in this case? MR. CARROLL: Judge, I have been trying to get
your attention on that question for five years.
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(Laughter.) THE COURT: I always said after -Well, in all seriousness --
MR. CARROLL: THE COURT:
-- I said, I knew you were in a
separate category and I didn't want to get into it until all discovery was concluded. MR. CARROLL: summary judgment -THE COURT: But what is the rationale, and the That's right. And we moved for
plaintiffs will tell me, but why do you believe? MR. CARROLL: I believe that they put us in
this case because they try and mix us together and confuse J.P. Morgan, the entity I'm here representing today, with the business that J.P. Morgan used to but does not have anymore, a private equity business called J.P. Morgan Partners. Let me address that directly. to your earlier point. judgment motion. I want to come back
This is, indeed, our second summary
As soon as that first phase of discovery
was over we moved immediately for summary judgment and Your Honor said come back -THE COURT: I recall. -- later.
MR. CARROLL: THE COURT:
We put it off. And no amount of discovery, one
MR. CARROLL:
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phase, two phases or three phases can turn us into a private equity firm. We don't bid. The notion of us agreeing not
to bid and that being part of an agreement that's value to anybody is nonsense. involved. We always stand down. We are never
It makes no sense. The
So here's I think what the plaintiffs do.
first thing is they confuse, they attempt to confuse J.P. Morgan with a different business J.P. Morgan Partners. This
isn't as it was with Goldman where they just tried to sue a division. They -- that's a separate legal entity that was a We
defendant in this case and was dismissed years ago. don't have that business anymore.
The people who did that are off running a different private equity firm competing away in the marketplace. is not us. That entity has been dismissed. That
There is no
basis in this record for us to be responsible for any of those allegations as to that dismissed party. first thing they do. And that big chart that the plaintiffs had up that looks like somebody's quilt with boxes and different colors on it, they used the term "J.P. Morgan" in there to refer to activities of J.P. Morgan Partners. J.P. Morgan Partners That's That's the
had been involved in the Aramark deal as a bidder. not us. That's dismissed. That doesn't work.
The second thing, the second thing that the
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plaintiffs do is they pick a few snippets, minutiae out of the few deals, and try and say that that is enough to weave us in. I'll give you an example of just one. You heard
some reference to it yesterday, I'm sure you'll see it again. There is an email that deals with a SunGard transaction. That was one that was led by Silver Lake. And they
Silver Lake was using J.P. Morgan for financing.
point to an email that suggests that Silver Lake put a call into someone at J.P. Morgan to try and discourage somebody else from bidding. That's the argument that they make.
What they don't tell you about that email is at the time of that email Silver Lake already had a deal. THE COURT: Had what? They had a deal. They had an
MR. CARROLL: agreement with the board.
This is a deal they cut
themselves, went to the board and then were in a position that they had to go out and find people to partner up to do the deal because they didn't have enough money to do it themselves. They had to go out to other financial sponsors,
the Blackstones of the world, to say would you like to come in and be part of our deal and contribute some equity. So they'll show you an email on the face of it and give you a nefarious spin but they don't give you the rest of the story. It's a classic example of taking a little
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minutia out of context and trying to spin it into something grand. And even if you take for a moment, accept how
they'll try and spin an email like that, two things about it. One, it only relates to one deal. One deal. There
is no nexus with this overarching or overreaching conspiracy allegation, none at all. Second, it talks about a request to make a phone call. There is no evidence in the record that the phone None at all.
call was made.
So when you combine the legitimate business reason why Silver Lake is in a position to have to go out and find somebody, they need more money. with the management. They have got a deal cut
They need somebody else to come and
give them some equity. You take that legitimate business reason, you take the fact there is no evidence in the record of any inappropriate conduct other than what the plaintiffs spin is a request and you look at the immateriality which, of course, is important for J.P. Morgan of such an inbound phone call making a request with nothing more. possibly be material. Judge, we -THE COURT: Next. Okay, I got it. It can't
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MR. CARROLL:
Thank you.
(Pause in proceedings.) THE COURT: you yesterday. (Laughter.) MR. TRINGALI: Your Honor, I think you Ten minutes. I heard enough from
probably heard enough from me yesterday. THE COURT: Who do you represent? KKR, Your Honor.
MR. TRINGALI:
I apologize for us not being as glitzy as some of the others with their presentations, Your Honor, but we are trying to do this quickly. Your Honor, fundamental to what you have been talking about today is this overarching agreement to allocate deals. One of the points that is being missed
today by the plaintiffs is the difference between auctions and proprietary transactions which I raised with you yesterday. They say no one is topping deals, side deals. they're referring to are proprietary transactions. there are a number of reasons which we went through yesterday as to why people do not jump a proprietary transaction. Remember one of the documents I showed you, I'll just take it, the one that said we're going to be a day And What
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late, a dollar short and lose.
What they're leaving out is
that 9 of the 17 LBOs that they're seeking damages for, those were auctions, Your Honor. And in those auctions
defendants, including KKR, were bidding against each other, in successive rounds of bidding and ultimately one or the other was losing. THE COURT: nine are auctions? MR. TRINGALI: THE COURT: Absolutely -So out of the 17 or 19 you say
And --- a bid war bidding against
MR. TRINGALI: each other. THE COURT:
Is it 17 or 19? What it is, Your Honor, let me
MR. TRINGALI: explain that.
There are 19 transactions that they say are LBOs. Two of them they're not seeking damages for. PanAmSat,
because Your Honor dismissed PanAmSat for damages purposes because of the structure of PanAmSat, it was not an LBO. There were no -- the shareholders, public shareholders were not bought out by the defendants. Texas Genco is the other And as a
one that has the same structure as PanAmSat.
result, they don't have standing and they are not seeking damages. THE COURT: So we are talking about 17.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. auctions? for.
MR. TRINGALI:
17 that they're seeking damages
THE COURT:
So out of those how many are
MR. TRINGALI:
Nine.
So when they talk -- so,
Your Honor, that, quite frankly, that's the easiest thing you have to deal with in terms of there not being a global conspiracy as to the 27 transactions because nine -THE COURT: What they are saying, that the
strongest evidence that they have of conspiracy or conspiracies here is the stand down. MR. TRINGALI: And what I'm saying -THE COURT: You are saying that doesn't apply That's what they call it, yeah.
to nine of the transactions? MR. TRINGALI: I'm saying -- absolutely, Your
I'm not saying that it applies to the other
transactions -THE COURT: No. -- but what I'm telling you is
MR. TRINGALI:
that in nine transactions you have active bidding among the defendants against each other. They have got a few of them But
where they say, oh, there was some rigging going on. what they always forget to tell you about is in one
situation they're going to say, oh, these two defendants
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communicated with each other or these three defendants.
But
then they don't tell you that three other defendants were competing against that group. So how do you have -- even in that situation where they have evidence of rigging in a particular deal, they never tell you about the other defendants who are still competing in the deal. So in every one of those auction situations, Your Honor, you have people bidding in successive rounds against each other and the price continuing to go up. THE COURT: So the stand down claim and maybe
evidence in certain instances relates to proprietary purchases? MR. TRINGALI: That's how they have -- yes,
Your Honor, because what that is, what they're saying there is you have a proprietary deal, other defendants don't know about it until it's announced publicly for the reasons I went through yesterday. kept quiet. Some companies would prefer to be
But then there is what they call a "go shop"
period where someone can come in with a superior proposal and what they're saying is no one comes in with a superior proposal. THE COURT: To take their argument, let me ask
you this, in those seven -MR. TRINGALI: Yes.
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THE COURT:
-- proprietary deals during the go
shop period is there evidence that there was a conspiracy in at least those instances to stand down? MR. TRINGALI: example is Freescale. No, Your Honor, and the best
In the Freescale transaction, you
will remember that KKR, Bain and Silver Lake came in at the 11th hour just as they were about to sign a proprietary deal with Blackstone, TPG and -- I'm actually forgetting who else it was -- and KKR and that group came in at the final hour. And the plaintiffs say it was by mistake, that they didn't know, okay. Because that's what KKR told you.
But if you turn to tab eight which is an internal KKR document, you will see that the highlighted portion, KKR knew exactly what they were doing. "We understand that the
company is in the final stages of a take private with Blackstone and TPG, our primary competition in the NXP/Philips transaction." And if you look below that, it says, "Goldman communicated our interests to the board," that's Goldman Sachs, "who was advising Freescale who has asked us to respond. Goldman confirmed that a process is being run with
a potential deal near completion." And with that knowledge KKR and Silver Lake and Bain submitted their indication of interest which caused the Blackstone bidding group to pay almost an extra billion
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dollars.
And you know what the reaction was of the group,
of the KKR group when someone says internally at KKR -- and this is tab 11 -- "Sorry about Freescale." Ann Clammer who headed the team says, "Don't be sorry. levels. them. I couldn't be more pleased with the outcome on many Sometimes losing is a good thing and this is one of
I like NXP at our price," that's the one we won a Between us
month before, "much more than Freescale at $40.
we cost those guys 1.3 billion dollars in purchase price, all equity. Will be fun to watch them finance this thing."
Your Honor, that is the words of a competitor who is thrilled what he has just done to his supposed conspirator. And that is an example where we knew there was
a deal about to be signed, we knew it was a proprietary deal and we stepped and in we tried to upset it. And what we ended up doing instead is cause -- we lost and we cost our competitors 1.3 billion in purchase price and we were elated. That, Your Honor, is competition,
not conspiracy, and that goes to the proprietary transactions. But, Your Honor, you don't even need to get to that because they have the fundamental problem -THE COURT: Let me get it straight. According
to you, with respect to auctions -MR. TRINGALI: Yes.
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THE COURT:
-- is there any allegation or
evidence as to "stand down" during those proceedings? MR. TRINGALI: What you find in the auction
situation time and time again, I went through this yesterday and I mentioned a number of them to you, is people continuing to bid against each other. And that's why you
find those documents that we went through yesterday and I'll go through a few quickly today that say -THE COURT: What you are saying then legally
is that there can't be an overarching conspiracy that relates to nine auctions if the indicia of the illegality is the stand down as it may or may not occur in some of the proprietary transactions? MR. TRINGALI: Absolutely, Your Honor. And
even in the, whether it's proprietary or auction, what you find is people at some point say -- at some point lose, for example, and they find out, you know, remember the "wow" document. They were bidding until they got to that point
and then they find out that someone has beat them, okay. THE COURT: How about during the evidence
there are -- I can't remember who said it -- but if there is a deal, you know, we should all stand down or the practice is to stand down, words to that effect? MR. TRINGALI: Yes, there is a document, Your
Honor, and what it is is a document written by someone at
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another firm, okay, at Carlyle, after KKR puts in its indication of interest in Freescale and disrupts the Freescale bid. And someone at Carlyle who has never been
deposed by the plaintiffs writes, "And just to think KKR told the industry to step down." Plaintiffs never took that person's deposition. have no idea, and they have no idea and nothing is put before you as to what was the source of that person's information, whether he read it in the newspaper, whether he talked to somebody at Carlyle and what specifically KKR told them. As Your Honor recognized, if KKR said to people don't waste your time trying to disrupt HCA because we have all these contractual protections and we have Tommy Frist with us, the principal shareholder, so you're just going to, you're going to, as many people recognized in their documents, just waste time, effort and money and you're going to end up with nothing, that is perfectly permissible. But more importantly for Your Honor, it nowhere gets you to the overarching agreement that you have been looking for and that they pled. Let me just go very quickly, Your Honor -THE COURT: Very quickly. What? We
MR. TRINGALI: THE COURT:
You have got three minutes.
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MR. TRINGALI:
Okay.
Then I'll be very quick.
I want to give you just a few examples of this auction situation I told you about. THE COURT: The what? Auction situation. Because if
MR. TRINGALI:
9 of the 17 don't even make it, I think you have a very easy way of saying there is no global overarching conspiracy. So if you look at tab 1, this is the Alltel transaction which was an auction. find is -- tab one, Your Honor. In Alltel what you find is that the winning bidder came in -- this is the dawn raid that Goldman Sachs pulled off with TPG at $71.50. And you have Mr. Navab who headed And in Alltel what you
this transaction for KKR saying he's surprised and disappointed. And what price was he at? 65 to 67.5.
Significantly below the 71.5. So he writes, "As a result a price of 71.5 would have been extremely challenging for us. While we are
disappointed by the process, we would not have been excited or competitive at this price range." That, Your Honor, is an example of an auction where we attempted to bid against someone as opposed to divide up the deals, as opposed to rig prices, and we couldn't get to that price. In Clear Channel, that's Exhibit 2, again, "We
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raised our bid," this is again the leader of the deal team, "to 36.85 which we believe to be an absolute stretch. However, T.H. Lee and Bain got up to 37.60 this morning, quite a monumental jump. disappointing outcome. Obviously a very, very
I must say I'm at a bit of a loss
and can't explain their price and any rational basis. Extremely disappointed but we did everything we could and stretched very far." THE COURT: of them. MR. TRINGALI: Okay, Your Honor. Okay. I will go through the rest
The simple point I was trying to make is every auction situation has documents like that. And they cannot
be part of this stand down because, as you have said now repeatedly, people have no obligation, under the antitrust laws or otherwise, to continue to bid once they've gotten to their maximum, what they think is a competitive -- first of all, there is no obligation to bid period but there is definitely no obligation to keep bidding after you've reached your maximum. Thank you. THE COURT: Next argument. We will go till
1:30 and then we will take a half-hour break. MS. ANDERSON: Good morning, Your Honor.
Carrie Anderson for Providence Equity.
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Providence is one of the defendants named only in Count 1 so it's the overarching conspiracy claim. going to repeat what everybody has already said. I'm not I have
four things I just want to tell you about Providence and why the conspiracies particularly don't apply with respect to Providence. The first point is that Providence is not a generalized private equity firm. private equity firm. THE COURT: It is not a what? They are not a generalized They were They're a specialized
MS. ANDERSON: private equity firm.
They're a specialty firm.
founded only to invest really in two industries, in media and communications. They set up their fund agreements and As a
they solicit investors based on that specialization.
result of that focus Providence's participation in this conspiracy is particularly implausible. to participate in the conspiracy -THE COURT: You are saying you are a specialty They have no motive
firm in what type of industry? MS. ANDERSON: Media and communications. They
invest in companies in media and communications. THE COURT: Like television? Television, telephones, media,
MS. ANDERSON:
they have invested in entertainment companies, anything in
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that space.
What they won't invest in would be Neiman Wouldn't invest in Toys "R" Us.
Marcus, a department start.
Wouldn't invest in HCA, a hospital, Freescale, Philips, Kinder Morgan, all of the transactions that were discussed yesterday at length, Providence would have nothing to do with those transactions. They're well outside of
Providence's area of specialization. This matters because the Supreme Court has clearly stated that a lack of motive bears on the range of permissible conclusions that can be drawn from ambiguous evidence. If Providence had no rational economic motive to
conspire and if their conduct is consistent with other equally plausible explanations, the conduct cannot give rise to an inference of conspiracy. Now, there is undisputed testimony on the record by a senior executive from Providence Equity Partners that transactions outside of its specialization would be completely off their radar screen. And if I may, Your
Honor, I will hand up some materials that I won't walk through at length but there are a couple of quotations in there to which I am referring. THE COURT: minutes. MS. ANDERSON: more, Your Honor. I have approximately three You have approximately ten
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Slide two, Your Honor, has the deposition testimony from Providence Equity's chief operating officer where plaintiffs' counsel actually elicited the testimony that any transactions that are outside of Providence's specialization be completely off their radar screen. And he asked, So a
transaction such as HCA would be completely out of your realm? The answer is yes, Providence wouldn't consider it
even if HCA had approached them to bid. In fact, half of the 27 transactions are well outside of Providence's area of specialization. An allocation, which is what the plaintiffs' complaint alleges, means that each participant agrees to refrain from bidding on certain transactions in order to be rewarded with participation in other transactions. no sense for a specialized firm like Providence to participate in this conspiracy. It couldn't gain from It makes
participating in a conspiracy to allocate investments when half of them are investments in which it wouldn't invest in the first place. Now, this is a common sense argument but there is also a firm economic underpinning here. Providence was one
of the only, actually the only individual defendant to retain and to submit an expert report from an expert witness. Professor Kevin Murphy who is an expert from the
University of Chicago in economics testified in the report
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in economic terms why Providence's business model would not be conducive to collusion under plaintiffs' theory and its participation in the overarching conspiracy is implausible. There is a quotation from the report in the deck that I have handed you. The report is in the record. None
of plaintiffs' three experts disputed anything that Mr. Murphy had to say on this point in our report. Now, third, this isn't at this point in time a theoretical exercise any longer. We don't actually have to
wonder what Providence may have done or what maybe they didn't have an incentive to do. did. We know exactly what they They deposed
The record has been fully developed.
everybody that they wanted to depose from Providence. Providence produced millions of pages of documents. And what does the record reveal? It reveals that
Providence had no involvement in the vast majority of plaintiffs' 27 transactions. Instead the record shows that
Providence competed on every transaction in its area of expertise of which it was aware. That's it.
Providence won some transactions, they lost some transactions, but it competed. And it acted in its own
independent interest at all times. This is how you would expect Providence to behave in the absence of a conspiracy. to infer a conspiracy. You shouldn't use that then
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Now, I would be happy to walk through all the transactions. I'm sure that the plaintiffs have a binder
and many slides about the transactions that Providence was involved in but the briefing has been extensive. We've
addressed I believe in all of our papers the quotations that they're likely to point out and show you. But the fact of
the matter is that as you have repeatedly pointed out, there is nothing in the record that links all of these transactions together with respect to any defendant. certainly isn't anything -THE COURT: client participate in? MS. ANDERSON: We bid, Your Honor, on 13, or How many transactions did your There
there were 13 transactions that were definitely outside of our area. here. We bid and won on five transactions. lost on three transactions. We bid and We bid and won on five I believe. I may have it
And there are six transactions
that arguably could fall within our realm of expertise of which we did not bid. And the record is very clear that in
the instances where we knew about it in advance, we had a business rationale, a very clear business rationale not to participate. But, in fact, most of these transactions of
the six in which we did not bid we didn't know about until we read it in the paper.
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And there are contemporaneous emails produced by Providence that show that repeatedly. yesterday. We saw some of them
Mr. Tringali used some examples of the evidence
that was inconsistent with conspiratorial conduct. You have instances where, you know, the CEO, the chairman of Providence Equity Partners, there is a contemporaneous email that says how did I not know about this deal. So in addition to the conduct that is consistent with independent conduct Providence actually has produced quite a few documents demonstrating internal contemporaneous emails showing that Providence was caught by surprise or was outbid despite its best efforts. Documents that, as
Mr. Tringali said, evidenced conduct consistent with competition, not with conspiracy. So at the end of the day, Your Honor, plaintiffs have had five years to prove this case against everybody, against Providence as well. Today they can point to no
agreement, there is no conscious commitment by Providence or anybody else to a common scheme to allocate these 27 transactions. With respect to Providence its specialization makes this particularly ridiculous. And for those reasons we
believe that summary judgment should be granted for Providence.
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THE COURT: MR. POWELL:
Okay.
Next up.
Your Honor, I have a chart, just
one document that I will be showing you today. (Whereupon, a chart was handed to the Court, the Clerk and the Law Clerk.) MR. POWELL: name is Wesley Powell. Good afternoon, Your Honor. My
I'm from Willkie Farr & Gallagher
and I represent Silver Lake. And, Your Honor, we appreciate the opportunity to argue to you why Silver Lake never should have been in this case and our summary judgment motion should be granted now. I'm going to focus on, Your Honor, what distinguishes Silver Lake. It's going to sound somewhat
familiar because there is a similarity to the argument that you heard from Providence. Silver Lake is a technology only investor. It's
not a private equity firm that invests in a broad range of industries. It invests in tech and tech only. That
limitation, Your Honor, is embodied in Silver Lake's agreements with its investors in which it pledges to them that it will invest in technology and technology-enabled industries only. That's it. In the words of one of its
cofounders, "Silver Lake is and always has been all tech all the time." And there is -- plaintiffs have made no claim in
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their briefs and supporting papers that Silver Lake has ever strayed from that investment mandate. that -THE COURT: were in that field? MR. POWELL: Your Honor, if you look at the How many of these 27 transactions And so, Your Honor,
chart that I offered up, on the left column, Your Honor, those are the 27 deals in this case, the LBOs and the related non-LBO transactions. The red strike-throughs, Your
Honor, show that there are 21 of these deals that are outside of technology that Silver Lake never could have invested in because it was barred from doing so by its investment mandate. 27 deals in health care, that included
HCA, Your Honor, which is why Silver Lake is not in Count 2, it could never have invested in HCA. And it leaves six transactions, Your Honor, that Silver Lake had any ability to invest in. Those are the six
transactions, Your Honor, that are in the middle column. PanAmSat, Alltel, Freescale, SunGard, Philips/NXP and Sabre. Those are the only six, Your Honor, that Silver Lake ever could have invested in. And if you look at this, Your Honor, as plaintiffs have pled this case, the 27-deal conspiracy, ask yourself how does it possibly make sense that Silver Lake committed to a conspiracy to allocate all 27 of those deals? 21 of
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them it was contractually off the -- contractually off limits to Silver Lake. Never could have looked at them.
Why would Silver Lake have any incentive to participate in that conspiracy? It makes no sense at all.
As to the six deals, Your Honor, where the plaintiffs no doubt will suggest and have suggested in their briefs, well, Silver Lake could have simply agreed to a little slice of the conspiracy. Honor. Just the six deals, Your If
That doesn't make any sense either, Your Honor.
there -THE COURT: MR. POWELL: Why not? If there were only six deals,
Your Honor, in a space of five years, Silver Lake has only six of these large transactions that it has any ability to invest in, why would it agree with a group of firms that had the ability to invest in absolutely anything that it's going to stand down from some of the six technology deals it could participate in? Why would it agree to limit its investment
ability in that way? And, in fact, Your Honor, the plaintiffs have conceded that that didn't happen. At page 169 of their
opposition brief, Your Honor, plaintiffs make a key -THE COURT: Just one thing, on the ones you
invested in, did you win any of them? MR. POWELL: Your Honor, the last -- the third
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column, Your Honor, are the deals that Silver Lake took an ownership interest in. Sabre. That's SunGard, Philips/NXP and
Philips/NXP, Your Honor, as you I think have heard, It was the purchase of a portion of a
is not an LBO. company.
These plaintiffs have no standing to claim injury
or damage as related to that deal, it's really off the table. Sabre, Your Honor, is a travel technology company. Silver Lake is one of the buyers of that company. After
that deal was announced there was a shareholder strike suit that Silver Lake settled and got a broad release and you have dismissed Silver Lake from that claim. SunGard, Your Honor. briefly -THE COURT: MR. POWELL: about it. All right, get to that. -- because you've heard something It just leaves
And I'd like to touch on SunGard
Before I do that, if I could make just one
additional point, Your Honor. In plaintiffs' brief at page 169, they make an important admission that I think really goes to how implausible this conspiracy is with Silver Lake. They say
that, Moreover, the evidence shows that Silver Lake pursued all six tech deals. to Silver Lake. They admitted six tech deals available
Silver Lake pursued all six of them.
If there was an overarching conspiracy let's say
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that Silver Lake participated in related to just six deals, how is it consistent with that conspiracy that Silver Lake pursued all of them, that it did not stand down from any of those deals? If there were an overarching conspiracy,
Silver Lake would have agreed by definition I think that it will get some of those deals and it will not get some of those deals. Why they'd invest time, money and other
resources pursuing those deals and plaintiffs have -- I haven't made that up. Plaintiffs admit that Silver Lake
pursued those deals, Your Honor. So this theory -THE COURT: pursued six or three? MR. POWELL: So we pursued as in participated Let me get you straight. You
in some aspect of the bidding or looked at the deal -- let me just show you this briefly, Your Honor. THE COURT: MR. POWELL: On six? On all six. If you look at the
middle column, Your Honor, I'll just tick this off briefly. In PanAmSat, Your Honor, Silver Lake briefly looked at the deal, put in an initial indication of interest, decided that it didn't make financial sense to pursue it. It wasn't interested. Those facts are undisputed.
Alltel, Your Honor, Silver Lake was aware of the Alltel, the Alltel deal, had looked at it, didn't
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participate in the bidding.
After a deal was done, TPG and
Goldman, who were among the purchasers of Alltel, approached Silver Lake, said would you like to come in as a co-investor and take some of the equity. Silver Lake did a little bit of diligence and in the words of one of its cofounders at his deposition concluded it was a bad deal and it went no further. Freescale, Your Honor, you've heard a lot about already. Silver Lake was the other firm along with KKR that
put in an indicative bid that caused its supposed co-conspirator Blackstone to pay a billion dollars more. I won't repeat that argument, Your Honor. But the
one thing that I note about that is that plaintiffs have suggested that there was some type of quid pro quo connection between Freescale and HCA. evidence doesn't support that. One thing you know for sure, Silver Lake couldn't have been part of any sort of quid pro quo because it was contractually barred from investing in HCA. participate in it. It couldn't You've heard why the
It's why it's not in the HCA count.
It's why it's not in any of the emails that the plaintiffs have mentioned. So it by definition could not have been
part of any supposed quid pro quo which, again, the evidence doesn't support. So, Your Honor, that takes us to SunGard because I
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have explained why NXP and Sabre are really, you know, off the table. Honor. Here's what you need to know about SunGard, Your
A few points. You may have heard the plaintiffs say in a couple
of instances that Silver Lake was the ringleader of the SunGard deal. Your Honor, the Board of Directors of SunGard The board of It determined at
was the ringleader of the SunGard deal. directors controlled the entire process. the outset it didn't want an option.
It wanted a
proprietary transaction for a variety of reasons that are SunGard's business. And it had established a relationship
with Silver Lake and it decided that it wanted to negotiate with Silver Lake and do it as a proprietary transaction. That's the first point. So SunGard was never interested in entertaining other bids. It had a variety of reasons that it wanted to
deal with Silver Lake alone. As you heard J.P. Morgan's counsel say, Your Honor, my second point on SunGard, Silver Lake agreed to pay what the board demanded, $36 a share. negotiations. we're walking. There were rounds of
The board said you don't give us $36 a share, Silver Lake agreed to pay $36 a share at
around the 1st week of February in 2005, before it had ever spoken to another private equity firm. The price was set.
The SunGard board recognizing that Silver Lake is a
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very small firm and needed other investors allowed it to go forward. And let me pause on that for a moment, Your Honor. At the time of the SunGard transaction, Silver Lake had a fund that it was investing from that had 3.5 billion dollars in it. 3.5 billion dollars. The equity required Even if Silver Lake
for SunGard was 3.6 billion dollars.
wanted to engage in gross negligence to its shareholders and plunk its entire 3.5 billion dollars into a deal, it wouldn't have gotten them SunGard. go to other private equity firms. deal otherwise. And, ultimately, based on its fund limits, it's undisputed that Silver Lake concluded that it could only contribute about 500 million dollars to that deal. Your By definition it had to It couldn't have done the
Honor, that is why you end up with seven private equity firms invested in SunGard. Silver Lake had to go out and
get 500 million dollars more a piece from six other investors. deal. That's why they're seven participants in that
It wasn't for the purpose of constraining the price,
Your Honor. And their whole theory is that the reason these firms partner is to constrain the price. The price had been
set, Your Honor, before Silver Lake ever went out to partner with firms. It's undisputed. THE COURT: Okay. Let's wrap it up.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. Honor.
MR. POWELL:
I think that may be it, Your
There is one other point that I wanted to make, Your Honor, and I'll end with this. You have asked again and again for the plaintiffs to show you some connection among these deals and the only thing they've really shown you is that chart with all the red lines that they say shows an intertwining of all of these deals. And during their discussion of it yesterday
they mentioned that Silver Lake sort of started it all with SunGard. And they showed lines coming out from Silver Lake
that it ended up being in all these other deals. All that shows you, Your Honor, is this: It shows you that firms having developed relationships in one deal chose to partner with each other in subsequent deals and so on and so forth and that's how you see all of those lines. There is nothing anticompetitive about that, Your
And with all respect to my colleagues who represent the plaintiffs, you can take a red pen and you could diagram all of the instances in which these same lawyers and same law firms for the plaintiffs have worked together on dozens and dozens of class actions over the last ten years. They
didn't do that because there was a grand conspiracy to
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allocate class action litigation.
They did it because they
developed relationships that worked for them that they were prepared to repeat again and again. That's all it shows,
Your Honor, and that's all that you see here. So that chart that they showed you in reference to Silver Lake and others tells you nothing about the overarching conspiracy. THE COURT: All right, next. We will try to
get one more in before 1:30. (Pause in proceedings.) (Whereupon, a slide deck was handed to the Court, the Clerk and to the Law Clerk.) MR. SHERMAN: Your Honor, William Sherman from
Latham & Watkins for defendant TC Group III and TC Group IV which I'll refer to as Carlyle. And, Your Honor, in light of the short amount of time left before lunch, I'm going to confine my remarks to one issue which is obviously on your mind and that is the question of the step down email. points to clarify. THE COURT: That seems to be -- if the And just a couple of
corporations can bid together, nobody contests that, and there is no requirement to compete, and I don't believe there is, then the stand down agreement, if any there be, is the lynchpin that constitutes or is indicative of
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illegality. MR. SHERMAN: And, Your Honor, the key to what And that's the And
you just said is the "stand down agreement."
problem, because there is no agreement to stand down.
that's why I'm going to go through for you now why -- the evidence of the stand down memo does not get the case to a jury. THE COURT: Before you start -Yes.
MR. SHERMAN: THE COURT:
-- the so-called stand down
concept, does it only relate to proprietary investments? MR. SHERMAN: THE COURT: portions? MR. SHERMAN: I believe in the plaintiffs' Well --
Rather -- does it relate to
theory as Mr. Tringali has said that the stand down concept relates only to proprietary. down email in this case. But there is only one stand
So to the extent that there were
references to the stand down concept, that is simply something made up by plaintiffs, whether it has to do -THE COURT: Well, if it can be proved, that is
the piece of evidence which would warrant at least certain of these separate conspiracies if they had been so charged to go to the jury. That is what I am looking for -Right, Your Honor, and what
MR. SHERMAN:
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you -THE COURT: stand down. MR. SHERMAN: agreement. Ah, exactly. Some type of an -- some type of an agreement to
And instead what you're getting is you've got a
single stand down email, I'm going to deal with that, but the concept that because people don't top proprietary deals once they're done, that does not constitute an agreement. There is no difference between a private equity firm deciding not to continue bidding up an auction and deciding not to jump on a proprietary deal after it's already been done -THE COURT: But the argument has been made
that why wouldn't they compete because they could make a lot of money even though they would raise the price? MR. SHERMAN: But the answer is, Your Honor,
that in all the cases, the undisputed evidence, and now speaking just for Carlyle so I'm talking about Carlyle's evidence but I believe it's true in all proprietary deals, the evidence shows the defendants looking at those deals, looking at the proprietary deals and deciding for their own independent reasons that it wasn't worth going in and trying to top it. Usually it's because there was a break-up fee,
usually because management is already working with the group that's got the proprietary deal. Usually there are a number
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of factors -THE COURT: that? MR. SHERMAN: The break-up fee means in order What is the break-up fee, what is
for someone to come in and top it, there is going to be an additional cost. The break-up fee is written into the
proprietary deal so it adds, you know, millions and millions of dollars to someone, they're going to have to bid on what's already been done for the proprietary deal. So there are a number of reasons. And just as
there is no obligation for a firm to go in and continue to bid in an auction, there is no obligation to go into a proprietary deal. What the plaintiffs need to show you, what you asked them continually yesterday, what you asked them today is show me the evidence of an agreement and you never got it. You got them trying to tie things together. You got
them telling you over and over again that there was some agreement -THE COURT: Their argument is that it happened
at least on several occasions and that a jury should be allowed to draw the inference that because of this pattern of behavior, so argued, that a jury could find an agreement. MR. SHERMAN: But it's not a pattern, Your And, in fact, I'm
Honor, because each deal is different.
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going to deal right now with the one case where there is a step down email and explain to you why even that does not get to the jury. THE COURT: What case is that? This is in the step down email
MR. SHERMAN: for HCA, all right.
So what -That to me, that is the strong
THE COURT: case.
You've said that, Your Honor.
That is a pretty strong case. You've said that and that's why
MR. SHERMAN:
I want to explain to you why it's not enough to get the case to the jury. THE COURT: Especially when three of the
corporations dropped out in about three days after they got that harsh warning. MR. SHERMAN: Ah, now, there, Your Honor, The heart
you've gotten right to the heart of the problem.
of the problem is, first of all, let's clarify what the step down email was. It was not written -- it was written by It was not
someone who worked at Carlyle, Mr. Akerson. written at the time of the HCA deal. six weeks later.
It was written about
And it was written in the context, as
Mr. Tringali said, and Mr. Thomas said yesterday, in the context of the Freescale deal where a consortium came in.
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The KKR people came in to a deal that was about to be done, jumped in and cost the Freescale purchasers an extra 800 million dollars. And Mr. Akerson wrote an email saying, "And just think, KKR asked the industry to step down on HCA." Now, yesterday the plaintiffs said to you, And those defendants went and stepped down right after getting that order. Well, first of all, the order, let's be clear, He was describing what someone
was not from Mr. Akerson. had said KKR said.
But that email doesn't identify any time
frame, where he heard the information or anything else about it. So for plaintiffs to say, well, two days after they got
it they all stepped down, there is nothing in the record to suggest that. Now, you would think that if this is the lynchpin of their supposed conspiracy, that they would want to have Mr. Akerson under oath in a deposition to find out exactly what he meant, who he heard it from and to establish the basis, the foundation for making this admissible, because there are a lot of admissibility issues about the document, okay. Did they do it? No. No, they've never in the course
of the discovery in this case put Mr. Akerson on their deposition list. Why? Well, you found out yesterday, because it And
allows them to speculate about exactly what that means.
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to say things like within days everyone stepped down. is no basis for that.
There
Now, you asked a very important question yesterday which the plaintiffs' counsel did not answer. You asked is
it illegal for competitors to decide not to bid to curry favor even if they're requested to stand down. The answer is no, it is not illegal. It is not.
The plaintiffs must produce evidence that the stepping down was the product of an agreement. The fact that there was a
request, and, again, we don't have much information other than Akerson's email to say whether there was actually a request. But let's assume for a second you would admit that against Carlyle and it was a request. The request coupled
with the stepping down is not enough for the plaintiffs to get the case to the jury. you that. And there are cases which tell
The Viasys (ph.) case which we cite in our brief Let me just for a second give you
out of the Fifth Circuit.
the background of the case. Viasys (ph.) was an orthodontist who designed a bracket that he claimed reduced the time that kids had to wear braces. He entered into a contract with a company But he alleged that
called GAC to market and distribute it.
as a result of threats by the American Association of Orthodontists GAC terminated the relationship. The court
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granted the judgment to the defendants, judgment after their case in chief, J&L judgment. And he said, and the Fifth "Evidence that a
Circuit affirmed it and said this:
manufacturer took certain actions does not tend to exclude the possibility," remember the Matsushita standard, "of independent conduct if the actions were in the manufacturer's independent self-interest. In other words,
even if Viasys (ph.) proved that the AAO or its regional affiliates threatened GAC, he must also show that GAC decided to end its relationship in response to those threats. If GAC ignored the threats but ended the
relationship with Viasys (ph.) based on an independent evaluation of its best interests, GAC acted independently and there was no conspiracy." And it cites some cases and finishes, "Viasys (ph.) failed to demonstrate that GAC's decision to alter its relationship was contrary to its own interests." THE COURT: The difference here might be that
there was a 50-day go shop period and the stepping down was within I believe three days or approximately three days. That is unusual I would think. MR. SHERMAN: Your Honor, I'm glad you raised It's perfectly
that because it isn't in this circumstance. consistent with Carlyle's self-interests.
And I'd like to
ask you to look at the slides that I just passed up to you.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 price.
You have seen some of these before, Your Honor, and I'll go through them very quickly but this is -THE COURT: are out of here. MR. SHERMAN: Your Honor. These slides have to do with what it was that led Carlyle to decide to step down, to tell KKR they weren't going to pursue HCA. The first one, you have seen the major issue is I'll be done in five minutes, Go ahead, five minutes and then we
The second one, you have also seen, "My sense is that a competing consortium is a losing proposition. Tommy
Frist is rolling over 800 million and is teamed up with KKR and Bain. I don't think they will lose and the likely
outcome is forcing them to pay one billion more and souring two relationships." Now, this one you haven't seen, at the bottom, "On a promising note, or promising front, Will Johnston --" THE COURT: Where are you now? I'm sorry?
Which one are you on now? I'm still on No. two, I'm sorry.
Okay. "Is relatively close with Tommy
MR. SHERMAN:
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Frist with whom we spoke yesterday. about joining the KKR/Bain Group."
Will approached Tommy
The next one, the internal one to Carlyle, "After looking at the HCA information and reviewing the other hospital companies that might be interesting, I think we should have the health care team look at CHS, and not waste too much energy on HCA unless Frist decides to let us in his deal." And she goes on to say why she thinks CHS is a better company. The next one, Rubenstein to Akerson and Holt. "I
think HCA is probably a long shot now and Community Health would be a much better deal -- particularly if we can be the lead," okay. And, finally, the last one is the one you have seen before which is Mr. Attwood's email two days later to KKR saying, "We are not forming a competing group, we are not signing an NDA. We would, of course, love to join you if
you need any more equity." Now, Your Honor, this explains exactly why Carlyle would inform KKR early in the go shop period that they were not forming another group. They'd like to get in the deal.
They know their only chance of getting in the deal is getting in with KKR and Tommy Frist. There is no reason for them to wait two months to
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tell them.
In fact, it makes much more sense to tell them
right up front and to try to work the avenues they had to get into the deal that way. So what you have here on HCA for Carlyle is you've got, No. one, the reasons, and the undisputed contemporaneous evidence why they're not interested, unless they can get in through KKR, because they know KKR is going to win. They're looking at CHS. They think that's a better
avenue to get in.
So that's undisputed evidence that that's
what motivated them, okay. Then you have the evidence we talked about yesterday. If it was pursuant to some agreement, what did They got no reward at all.
Carlyle get?
Now, yesterday when you asked plaintiffs about this, they stood up and they were sort of scattered and they said, well, they got Alltel. didn't win Alltel. Well, Your Honor, Carlyle So if the
Carlyle lost Alltel.
conspiracy had some plan that that was Carlyle's reward, that's not a reward. They didn't get that.
And then the plaintiffs said, well, what about PanAmSat, that was the reward. PanAmSat is the reward.
Well, Your Honor, there are a couple of problems with that. Even putting aside the fact that you have taken PanAmSat out of the case for purposes of the damages, No. one, plaintiffs allege that the reward in PanAmSat was in
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PanAmSat, that Carlyle's reward from coming together at the back end was the reward. But the real problem is PanAmSat How could the reward
was two and a half years before HCA.
for standing down in HCA have happened two and a half years earlier? It makes no sense. And it makes no sense because
Carlyle acted in its own self-interest in deciding not to form a rival consortium. It is not enough that there was a
stand down request and Carlyle informing KKR that they weren't going to pursue it. And in the presence of
undisputed contemporaneous evidence that Carlyle had their own reasons for doing it, that there was no quid pro quo and, frankly, that this whole notion of a request to stand down is consistent with the overarching conspiracy. If there was an overarching conspiracy, there would be no reason for that request. the evidence. The plaintiffs don't have
They don't have the agreement. THE COURT: All right. A quarter past two.
MR. SHERMAN: THE CLERK:
Thank you, Your Honor.
All rise.
Court is in recess.
(Luncheon recess.)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 minutes.
AFTERNOON PROCEEDINGS THE CLERK: All rise. Please be seated. Jim
Court is back in session. MR. QUINN:
Good afternoon, Your Honor.
Quinn on behalf of THL, the Thomas H. Lee Partners right here in Boston, with whatever hometown advantage we can get -THE COURT: you've got the edge? (Laughter.) MR. QUINN: Well, I hope so. I was going to say. Do you think
Let me just start out by saying I was sitting yesterday in the jury box and was listening hard to all of the supposed evidence that was going back and forth. Having
done that, I'm convinced this case should not go to a jury because there is simply no evidence to support an overarching conspiracy with regard to any of these defendants and certainly not with regard to T.H. Lee. I'm going to take you through, I have the obligatory booklet. THE COURT: MR. QUINN: Can you do it in ten minutes? I can march through it in ten And
(Whereupon, the booklet was handed to the Court, the Clerk and the Law Clerk.)
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MR. QUINN:
I tried to make the print big so I
could read it and hopefully you could too. Your Honor, you indicated, and I think hopefully a little jokingly, that it might be just easier to send this all to the jury because it is complicated and it is difficult. THE COURT: Well, I mean, you are never wrong
if you deny motions for summary judgment, throw the case to the jury and let them worry about it. MR. QUINN: And that may be true in some It's higher
instances but the standard here is higher.
because of the Matsushita case and because of the White case here in the First Circuit. And that's what they said. Your
job is a little tougher, I'm sorry, we're making it tougher on you, but you have to actually find in order to let this case go to the jury that each of these defendants, each of these defendants made a commitment to be involved in an overarching conspiracy. And you heard from some of them And it also makes no sense
already where it makes no sense. for T.H. Lee. THE COURT:
Because what it seems, that,
again, I can be persuaded, I haven't read all this material, but it seems to be the law, even if there were 27 separate individual conspiracies, there has to be something more to link them all together to an overarching conspiracy.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 interlinking.
MR. QUINN: what the law is.
There is no question that that is
That's what they pled and that's what they
have to here at the summary judgment stage come forth with real evidence of a real agreement. THE COURT: And there has to be an
And that is, I hope -- not that I hope but I
am sure the plaintiffs are going to try to show that interlinking with all of the defendants. MR. QUINN: I think what they're going to try
to do, Your Honor, is they're going to put that ball of yarn up there that -THE COURT: that stunned me. MR. QUINN: But as you, Your Honor, have Oh, I tell you, when I saw that,
already pointed out, alls that really shows is that each of these companies from time to time worked with each other. That's all it shows. It shows nothing. There is no
evidence, no written evidence -- they took 50 depositions, 50 depositions and were unable to come up with even snippets from depositions. Now, in a real case, in a real conspiracy you're going to find something out there. millions of documents. They have tens of
Other than the couple of handful of
documents that might show some going back and forth with regard to a particular transaction, they haven't shown
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anything.
Where is that unindicted co-conspirator?
There are hundreds and hundreds of people who are involved in all these deals. come forward? Do you think maybe one could
They didn't even bother with regard to T.H.
Lee or anybody else to go out to third parties and depose people -THE COURT: They should have made a deal with
your client and let them out of the case and let them testify. (Laughter.) MR. QUINN: Well, because they, you know
something, they did testify, Judge, and that's what's under the first tab. They did testify. They took the depositions
of the leaders of T.H.L.
And what did the leaders say?
Now, they didn't ask them any direct questions about this. We had to ask them questions. But the leaders under oath They
with their hands up said no agreement, no way, no how.
don't -- they have to come forward with some evidence to refute that. They can't point to experts. Experts aren't
evidence at the summary judgment stage.
That's what the
White court says and we can give you a bunch of other cases that find you can't refute, you can't defeat summary judgment by coming in with some expert opinions. to have evidence. You have to have facts. You have
You have to have
something that refutes sworn testimony by 40 or 50 people,
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in this case all the leaders of T.H.L. who say they never agreed to any kind of a conspiracy, overarching, under-arching, middle arching, nothing. never. It didn't happen. And T.H.L. only ended up in three deals, right. Two of them were auctions in which they were bid up, prices were bid up. And, in fact, I'll show you in a minute, in As one said, nada,
fact, we did jump the deal, the biggest deal we've ever done, Clear Channel -THE COURT: involved in three? MR. QUINN: No, we won three and we were You say you won three or you were
involved in I think three plus -- we were involved in eight. We dropped out because of price with regard to four of them and the other one we lost and we lost big even though we were bidding. That was the Neiman Marcus situation.
So the bottom line is with regard to the three we did win, two were auctions where there were multiple rounds of bidding. Lots of competition.
The other one was a proprietary deal, the Aramark deal. We were released on that. There is no basis for
T.H.L., no basis for any of these defendants to be sitting here having to deal with Count 1. Count 2. I was persuaded by Mr. Thomas yesterday that that We had nothing to do with
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case should also not go to the jury for the reasons that he said because it was no quid pro quo. quid pro quo, what's the point? And if there is no
There is no point.
And what you will see here from the testimony of our folks as well, this is the testimony of Scott Sperling, this is on No. two. It talks about with regard to the
overarching conspiracy and any involvement by T.H.L. "It would be impossible to agree in any way on allocating transactions because you don't know what transactions occur, you don't know which ones are going to work, which ones are going to work. business. It's a very competitive
It's certainly true that when we have to, we
cooperate on specific transactions because of the need to create a competitive bidder through a consortium approach." Create a competitive bidder. It's pro competitive
when they're actually bidding because it means that somebody more, you have more people to actually bid, not anticompetitive. And then he says, "But the idea that we would let anybody win when we want to win a company is ridiculous." And it is, Your Honor. evidence shows. And that's what the
It shows it as to T.H.L. and it shows it as
to all of the defendants. Now, looking at the, look at the contemporaneous evidence, the emails that were written at the time that
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these deals were done and that's in No. three, Your Honor. Okay. First, T.H.L. talking about SunGard. They
wanted to be different.
From a tactical perspective we And
could get more recognition from not doing this deal.
then they say, this is another one of the leaders of T.H.L., "We walk to a different drum beat," which is why they didn't get involved in SunGard. Similarly with regard to Freescale, "I prefer where everybody else isn't." That's what the actual writing, what
people are writing back and forth at the time, that shows that they want not to march to everybody else's drummer, they are going to compete on their own. And they only do a
club deal or a joint bid when they need to do it to create competition, not to get rid of competition. With regard to being cut in, I have no -- this is on the Neiman Marcus deal which they make a lot of. no interest in this deal, none, nada, zero, nada." Contemporary emails written at the time by the people in charge. And with regard to the Clear Channel deal, the one that we did win, He ignored how intense the auction was and how it squeezed every last penny from us. Now, that's the deal, Your Honor, that I said, they wanted to ask, well, did they ever jump any deals? jumped that deal. We "I have
What happened was with regard to Clear
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Channel, it came out on the news that they were about to do a proprietary deal with KKR and Providence and Blackstone I think it was. So what did we do? We went in and jumped the deal.
We caused it to move from a proprietary deal to an auction. And there were three rounds of bidding. but it squeezed every penny out of us. We ended up winning That was what the
contemporaneous evidence showed at the time, squeezed every penny. We did jump the deal, big time. And, you know,
there is some, if they look back in that deal right now, we'd say maybe we overpaid for the deal. other issue. That's a whole
The reality is some deals you do well on, some
deals you don't. Now, let's talk about the etiquette, the club etiquette and how it applies to T.H.L because, first of all, these rules are nonsense. the bottom line. It's stuff they made up. That's
I've tried a lot of antitrust cases, Your
Honor, and this rule of etiquette is all junk. But T.H.L., first of all, this is in No. 4, T.H.L. preferred not to partner. leader's testimony. This is DiNovi, one of our
"All things being equal, our preference
would not be to partner with other firms." And the reason for that is they would rather, and often do, just bid on their own. But where they don't have
the wherewithal, where they want to be able to actually
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create a bid, they will partner up. And one of the things that was said the other day, yesterday, was that, well, all this partnering up didn't really start until 2003. That's not true. T.H.L. was doing
joint bids back in the '90s. before 2003.
We counted them up, a dozen There was
That's what the actual record is.
nothing that -- the only thing that happened in 2003 is some of the deals got bigger so there were probably more, a bigger effort to put people together because that was the only way the deals were going to get done. business works. And what the plaintiffs have done is they've just contorted it, they picked a particular period of time and said let's just pick 27 deals. How about all the other That's how this
deals that were out there, where there was an enormous amount of competition by all, all of these defendants. Looking at the same slide, testimony from Scott Sperling: But the idea that there were any, and this goes
to this whole stand down issue, let anybody win a deal would be ridiculous. We never stood down. We did not cut anyone
else, other private equity firms into our deals and we never got cut into any of their deals. The bottom line is there was no quid pro quo with regard to any of the things that THL was involved in. So
why in the world would we have committed to an overarching
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conspiracy involving supposedly all 11 defendants and 27 deals when we got nothing out of it? Nothing. Except
perhaps overbidding for Clear Channel. And at some point they made up something about score cards. We asked both Mr. DiNovi and Mr. Sperling
about it and their testimony is it was nonsense, it didn't happen. Now, let me just point to you the next slide which is a slide which shows an email, interoffice email relating to the Clear Channel deal. jumped a bid. And this is the deal where we
And here is what Mr. Bressler is telling "Want to give you "We
Mr. DiNovi right after we won the bid.
something to warm your heart on CCU," Clear Channel. took out Jimmy Lee, J.P. Morgan, Jonathan Nelson, Providence, Alex Navab, KKR and Steve Schwarzman, Blackstone, all in one deal." That's competition, Your Honor, that's not collusion. do. They are gloating about it.
That's what people
It's a tough business.
As Your Honor said, these are
some pretty tough guys but they like to compete with each other. And that's what happened. That's what T.H.L. has
always been devoted to. In the very, I guess the next to last, here is the evidence with regard to T.H.L. rules. We didn't stand down. We broke all the so-called We jumped deals. We didn't
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cut others in.
We competed.
We didn't collude.
There was
no quid and no quo.
That's the facts.
And whenever they get up here at the end, it's interesting, the last day and a half you haven't heard much about T.H.L. because they weren't that involved but, for sure, they were always, they always wanted to march to their own drummer. That's how T.H.L. worked. There are
And you see all the other defendants.
eight million stories in the Naked City, there is no question about it, but the reason why this overarching conspiracy makes no sense is precisely because there are all these different reasons why it makes no sense and they still haven't come up with anything. I agree with plaintiffs' counsel, no way they're going to have some writing, they're not going to have a constitution that shows everybody trying to allocate deals. That's not the real world. But they don't have any evidence
of anything else that shows any commitment by all 11 of these folks to allocate the 27 deals and that is what their allegation is. And at summary judgment, I always remember the court, I think it was in New York, typically would be in New York, where the judge said summary judgment time is put up or shut up time. Now, they have not put up any evidence to
show, in fact, that there was an overarching conspiracy.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 did you?
The last slide which I'm not going to go through is simply setting forth -- and this one is difficult to read -the reasons why with regard to nine of them we had no interest from a business standpoint or lots of different good business reasons, not one of which is being refuted by the plaintiffs here, and, in addition, the reasons why they dropped out of four deals because in each instance we thought the price was too high, it just wasn't worth it. lost. And I think this quote is the one internal memo when they lost the Neiman Marcus bid, this is one of our internal folks saying, "We lost. know. Very depressing. Think TPG won but don't Will read We
Don't know price either.
it tomorrow." Your Honor, does that sound like a conspiracy? They had no idea who won, for sure who won and at what price. It makes no sense. Thank you, Your Honor. THE COURT: You made a reference to a movie,
Was that Naked City? MR. QUINN: No, it was the television show.
Yes, it was Naked City and -THE COURT: MR. QUINN: it into a movie. But there was a movie in 1948. Yeah, that's true, they later made
And it definitely proves our point, Your
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Honor. (Laughter.) MS. SAMMONS: Your Honor, I'm Katie Sammons
and I'm here today talking for TPG, the last of the 11 defendants. You have heard a lot testimony over the last two days from all the lawyers and I don't want to go back over stuff that has been talked about before. You will not be
surprised to know that there was no overarching conspiracy and that my client TPG was not a member of any overarching conspiracy. And our brief sets out 27 transactions in detail. It tells you which ones we bid on, which ones we didn't, why we didn't bid on them, and I'm not going to go through all 27. I want to focus on two things that this Court has One is evidence of competition. And And
expressed interest in.
then the second is whether or not people stepped down. I want to talk about it for TPG, my client. Let's look at evidence of competition.
There were
two deals I want to talk about real briefly that we participated in that are evidence of competition. them were auctions. won. In the Neiman Marcus transaction, which is an amazing transaction that you should get to know if you're Both of
One of them we lost and one of them we
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looking at whether or not there could be an overarching conspiracy here, that is a transaction in which Goldman Sachs represented the seller Neiman Marcus, okay. They
represented the seller and they ran the strictest auction you could ever see. with. They told people who they could pair
They told people they could only pair with two It had to be teams of two and they were absolutely
people.
strict about every aspect of the process. My client preferred to -- my client has a specialty in department stores and they really wanted this asset and they preferred to team with somebody that they knew, somebody they worked with before, like KKR or Bain. not who we got. us Warburg. That's not who Goldman gave us. That's
They gave
Warburg is not a defendant.
We teamed with Warburg in that case and we fought hard, as hard as we possibly could to make sure that we won that deal. And you know what, we did win that deal. Even
though it was with a partner we've never worked with before, we wanted it really bad. We had no idea what anybody else
was going to bid and so we came in with a bid of $100 per share. That is over $5 more than the next closest bid, $5
more than the next closest bid. That wasn't a result of us knowing what anybody else's bid was or a result of us bidding as low as we possibly could to think so that we could keep the price
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down, it was $100 per share.
It was the amount that all of
these other people who bid on Neiman Marcus said "wow" and "oh, my goodness," and "they overpaid." and that was competition. The other transaction we participated in where we didn't win but we did compete was Michaels. In the Michaels That's what we did
transaction there were three different rounds of bidding. We also won -THE COURT: Was that an auction? It was an auction. It
MS. SAMMONS: absolutely was an auction.
There were three different rounds of bidding and we worked very hard in each round to try and force our price up just a little bit further, just a little bit further. had to keep going back, working hard on it. We
We would get to
a different point and then we found out that somebody else topped us. So we would go back to the drawing board, start
over and try to get our dollars up. We lost that transaction ultimately by 50 cents a share. And to show that it was competition, not only does
TPG have evidence in the record that says, oh, gosh, we are so disappointed that we lost, by people like Jonathan Coslet who is one of the big three of the company, who put his heart and soul into that transaction, not only did we do that but we did something which I think we haven't even
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heard anybody else talk about today and will be the sole piece of evidence that I can show you in this argument, we actually conducted a postmortem after that. May I approach the bench? (Whereupon, a document was handed to the Court, the Clerk and the Law Clerk.) MS. SAMMONS: After we lost the transaction,
the Michaels transaction, after we put in all that work and did all those bids we sat down and conducted a postmortem to see why was it that we lost. And you can see from looking at this document that the postmortem includes things like revenue, due diligence, deep dive lacking, which I think means they didn't go do their due diligence thoroughly enough because they had limited management availability and three weeks of full data room access. thinking. THE COURT: Where is that? I'm sorry? It's under the one That's a reason, that's a reason we were
MS. SAMMONS:
that says the Bain/Blackstone consortium may have agreed to partner with the Wiley family, it's in yellow. the -- there is only one page; right? THE COURT: Project Mustang? Yes. It says, The Bain -- the It's on
MS. SAMMONS:
Project Mustang, that is this transaction, see how it says
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"postmortem." THE COURT: Yes. Then it says, "The winning bid
MS. SAMMONS:
Bain/Blackstone was $44 per share versus TPG's final bid of 43.50." And then it says, "Since the deal was announced, we have heard the following with regard to the winning consortium's bid." So they're telling what they heard.
And, in fact, if you look at the third bullet, they're actually speculating. They're saying, "The
Bain/Blackstone consortium," that's the one who won, "may have agreed to partner with the Wiley family." some of the biggest shareholders. Those were
That was our speculation.
We didn't know but we thought that might be a reason that we lost. Right below that is the one that I was talking about where it says, Revenue due diligence, deep dive lacking. It says in the context of limited management
availability and three weeks of full data room access. What's important here is that we were sitting down, all of the players who made these bids, including the big guys in our firm, we were sitting down and we were trying to figure out why we lost so that we wouldn't lose the last time. You do not do that if you are part of an overarching That is evidence of competition.
conspiracy.
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I want to turn real quickly to this question of step down. together. I looked at the chart that the plaintiffs put Remember they had that chart where you've got all
the defendants up here and the defendants here (indicating). And I looked at what they have for TPG. And I really hope
that you look at that chart carefully before just accepting what's on it. According to that chart there are three instances in which TPG stepped down according to the plaintiffs. That's what they have down there. different times. Interestingly, one of those times is a transaction called Aramark. They don't even have any allegations in TPG TPG stepped down three
their complaint about TPG with respect to Aramark. never even considered Aramark. TPG stood down.
It is not a situation where
It is a situation where TPG was never It wasn't an
interested in competing in the first place. industry we cared about.
The second transaction that they have listed as one we stepped down from is AMC, the theater transaction. didn't step down from AMC theater either. We
In fact, we were
offered, we were offered a co-invest in AMC and we didn't take it. If we had wanted to be in the deal and we thought We didn't step down
it was a good deal, we could take it. from anything.
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The reason we didn't do AMC, the record is clear, is we don't like movie theaters. movie theaters. out. We don't want to be in
That was a movie theater chain and so we're Those are unilateral
Those are not step downs.
decisions not to compete, which is perfectly legal. The third instance of step down that they give us And I want to talk about HCA for a minute because
we are one of the losers who is still a defendant in the second count of HCA. HCA was a very difficult transaction for us because TPG has experience in health care. We heard rumblings, and
the evidence is clear on this, we heard rumblings of a deal and we did everything we could do, calling people, calling people who we thought were our friends to try and see if there was a deal being done and nobody returned our calls. Then the deal was announced. of days to look at the deal. And we took a couple
And one thing you have to
remember is that when a deal is announced, you have to sign a noncompete agreement or a confidentiality agreement that says you can get nonpublic information and you can use that nonpublic information. That's what we did.
What did we find out when we got that nonpublic information? We found out that under the agreement that the
winning consortium had done with HCA, under the existing agreement we had no chance of winning. And the reason we
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had no chance of winning was not just because the Frist family had chosen Merrill Lynch, Bain and KKR to be the winners and had worked with them from the very beginning, not only that, but the document had been written, the deal document was written in such a way that it gave match rights, extremely onerous match rights to that team. And what that meant was TPG had the option, we could go out, we could go do weeks and weeks of due diligence, go through all of their documents and try and figure out what we thought the value of that company was based on nonpublic information, the true value of the company, we could do that and we could spend millions of dollars doing that. Under the contract's matching rights, if we bid a dollar more than the existing consortium, the existing consortium got the right to just match our dollar, to just say, okay, we agree, we will pay that extra dollar. lost. And we
And we knew that the Frist brothers wanted that
consortium and that consortium wanted the deal. So we had to make a decision do we spend millions trying to look at this and then lose or do we just say we're not going to do it. We decided not to do it.
Now, when we decided not to do it, we did like the deal -THE COURT: Is that a jury question?
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MS. SAMMONS:
No, because there is no
undisputed -- the undisputed evidence, the only evidence in the record is that there is a reason we didn't do it and the reason we didn't do it was because of the matching provision. record. THE COURT: The only other thing is the There is no other contrary evidence in the
decision not to involve your corporation in that transaction occurred in a very, it would appear at least from my view, in a very limited amount of time. MS. SAMMONS: Yes. And if we had made that
decision because we thought it wasn't worth the price it was paid, I could see how it would take a long time for us to go through all the data and figure that out. The reason it didn't take a long time here was because there was a deal document and that we got access to that deal document by signing the non-confidentiality or the confidentiality agreement. So we looked at the deal document and it had the matching rights spelled out in it. So once we saw the
matching rights, we had lots of discussions internally and then we decided it's not worth it. It's not worth putting
the money in when they didn't bring us in in the first place, they have a different preferred team, and they get to match whatever we do. That's what the evidence is, okay.
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The evidence is also though that we called, we did call the winners after we made the decision not to compete. And we did that for a very clear unilateral reason. We
called them to tell them we were not going to compete not because they asked us not to compete, there is no evidence anybody asked us not to compete, we just decided we weren't going to compete. And then we called them and told them
because we wanted in on the deal. And the record is full of evidence that shows how badly we wanted in on the deal. We called KKR. We called
Bain, both of which under the plaintiffs' theory are our conspirator friends. the deal. We ended up going to Merrill Lynch and begging and cajoling and pleading saying please let us in this deal. And you know what? deal. Nobody said yes. We wanted in this Neither one of them would let us into
We took a calculated risk.
We said we're not going
to win, let's try and curry favor, let's go ahead and approach them, tell them we're not going to win, and they'll let us into the deal. Exactly the conduct that according to We did it
the plaintiffs is how this whole thing worked. and nobody let us in.
That is not evidence of an overarching conspiracy and it is not evidence that we are part of any overarching conspiracy.
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Thank you. THE COURT: I will hear from the plaintiffs. Your Honor, Patrick Coughlin
MR. COUGHLIN: for the plaintiffs.
I'm going to talk hopefully briefly
about the facts and then my co-counsel Craig Wildfang will deal with some of the law that applies here. If I might just hand out these slides. They're not
quite in order because I was going to do KKR with Mr. Tringali. (Whereupon, a binder was handed to the Court, the Clerk and the Law Clerk.) MR. COUGHLIN: in an overarching manner. Your Honor, I would like to deal with four things. I would like to deal with the issue of the unindicted co-conspirator that's not here to kind of put meat on the bones and tie it all together. I'd like to deal with the, I don't know if it's the accusations or the statements that there is no evidence of this overarching conspiracy. I'd like to deal with the questions that just came up about auctions being proprietary deals. And I'd like to deal with companies with a particular focus. But I can't help myself as I'm about to deal with When we decided to address it
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those four things not to address just the last couple of statements of the person who just got up and talked about TPG. She got up here and said, well, we wanted to get in We wanted to do this. We wanted to do that. We
that deal.
didn't, you know.
The internal email from TPG says that
they didn't bid because they didn't want to crash somebody's party. That's what they said. And then, of course, they
called and said they weren't going to bid. They also, if they wanted in so bad as she just spent five minutes talking about getting in that deal, we asked, we begged, we pleaded, why didn't they bid during the 50-day go shop period? Why didn't they? Because that's not
what was happening during this time with these people who had agreed not to jump a single bid. And I'll get to how
auctions and proprietary transactions kind of meld together in this deal and how the agreement stays consistent throughout. THE COURT: to? MR. COUGHLIN: TPG -THE COURT: All right. -- wanting to get in that so I was referring to HCA and What transaction are you referring
MR. COUGHLIN: badly.
How about a bid, you know, why did they just keep
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asking to do a combination? go shop period.
They could have bid during the
They said they called immediately within
three days as Your Honor noted and said they're not going to bid. But let me deal with the unindicted co-conspirator. Wouldn't it be great if we were still -- I was with the government nearly a decade time trying conspiracy cases. Wouldn't it be great if I had the power in the grand jury to threaten somebody with getting indicted, have them come in here and explain what it is. But that's not who we are. We
are civil lawyers and we don't have that power. THE COURT: My only point was that in almost
every criminal conspiracy case of any magnitude you have the unindicted co-conspirator who could put it together. Without it there is no case. MR. COUGHLIN: And I want to address that
because I think that's an important point. That's right. When I was with the government, I
could threaten the little people on the line whether it was the T.H. Lee, you know, who you made a comment about, you know, well, they might have offered you a deal, you know, the Naked City comment, and he would have put them on the stand and you would have said, okay, you're not going to get here, now tell us how this all operated and how it worked. Of course, we don't have, you know, that power to do that. And that's -- but that's fine, that's where we are.
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There wasn't a single unindicted co-conspirator that I ever put on the stand in the nearly decade that I was trying those cases that I didn't call a liar. that person was in the conspiracy. First of all,
I would tell the jury You
that you couldn't believe a word that person said.
couldn't because he lied to get there and he was probably lying on the stand. It helps you form the road map but I'll tell you what, you better have independent evidence of what that conspiracy was, what that agreement was to join that conspiracy, especially if it deals with companies that are in legitimate businesses. If there is a conspiracy, you better have independent evidence of it to show an agreement to come together to suppress competition. And I suggest, I would But the
say here we have that in every one of these deals.
question you have been asking, I mean, there are emails that are damning in every one of these deals. he'll say there. Call Joe, see what
What about Bob, did we get ahold of him? Let's see what they're Can we come in
Let's not submit this bid here. going to bid. later -THE COURT:
We'll put in a soft bid.
My point is this:
Assuming that you have that type of evidence but 27 deals, what is the interconnection?
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MR. COUGHLIN: THE COURT:
What's the glue?
Yes. The glue that keeps those deals
MR. COUGHLIN:
together is because the agreement is the stand down agreement, the agreement is to not go above the bid. Can you put up the first. I think you've already seen this chart here yesterday and I don't have a slide of it today, Your Honor, but -- no, the first one. These are the deals, these are the deals that are at issue here. There is not a single deal, not a single
deal that once it was announced that that was -- that it was overbid or jumped. You know, they got up here and said, oh, The agreement is not to have That didn't occur in a That's
we jumped this, we did this.
jumped an announced deal, okay.
single one of these transactions, not a one. evidence. THE COURT: How many are there? 19.
MR. COUGHLIN: we're talking about.
Those are the 19 deals
Two of them don't have damages for So there is 17
various reasons as we've talked about. damage deals but there is 19 deals.
Not a single deal was jumped, okay. the next slide -THE COURT:
If we go to
But it was argued by one of the
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counsel that nine of them were auctions so -MR. COUGHLIN: THE COURT: That's right.
-- we are talking about seven. Absolutely not, okay. Because
MR. COUGHLIN:
with the conduct that occurred in the proprietary deals, once it was signed, everybody agreed not to bid and HCA, you had the blatant example where everybody told them, told their competitor they wouldn't bid during the first three days of the go shop period, okay. The auctions, of course,
happened differently, okay, because now the company says, oh, we're going to put it out for auctions so you have people initially, competition occurs, right. THE COURT: Yes. But once, but during that
MR. COUGHLIN:
competition a number of things happened among these co-conspirators that make that conduct and the stand down agreement exactly the same as in the proprietary deals, okay. If you flip to the next chart, you'll see, Your Honor, when the auctions start, okay, you do get some competition, okay. You get competition -- the auctions are The first seven deals are the
the last nine deals.
agreement, okay, the proprietary deals. THE COURT: Yes. Okay. And the last nine deals
MR. COUGHLIN:
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are, quote, where there is competition, it's supposedly broken out right there bidding against each other. That
bidding process, okay, our experts have said that these bids are between 10 and 15 percent below what the market should pay for these. So even though sometimes it got up to nearly
six percent, okay, in some of these initial things, it never got higher. Why? Because once all the players saw who was
bidding, a number of things happened. And I'm going to take you through a transaction that I think is exactly what happened basically in the nine but just to show you that we have documents in evidence because I won't go through all nine to establish what happened in this, quote, bidding process. It wasn't fair. It wasn't competitive. It became
anticompetitive because these competitors came in and bid. They wanted this company, right, and then a number of things happened. They combined so they wouldn't bid higher. They
agreed to put in a soft bid so the bid wouldn't get higher. They agreed to combine in later deals. So the agreement,
the overarching agreement stays the same in the seven proprietary deals as in the nine later auctions. That's why
this case has the glue where you don't have a single, not a single jumped bid. You have other activity that is illegal
like bid rigging and other things like that but that's not the agreement.
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The agreement is not to jump a signed deal or a deal that hit a certain level in an action and they had reached an agreement not to jump that because that would cost everybody money and that would cost everybody money in the next deals. And that agreement was consistent. You
know, they said whether it was the companies that just had a smaller focus or companies that were in all the deals. I'd like to take a look at the next chart. next one. THE COURT: So your position so far that in 19 The
or 17 of the transactions there was a stand down on all of them? MR. COUGHLIN: This stand down occurred across
the board in all of these transactions, okay, in one form or another, but the agreement remained in tact, okay. Either
the bidding stopped and there was a combination that restricted the competition or once a signed deal happened, you know, that was it. I think the Freescale -What is your term, "signed deal"? A signed deal, a signed deal,
THE COURT:
MR. COUGHLIN: proprietary signed deal.
In other words, I'm equating the
auctions with a, I call it a signed deal, a proprietary deal, so we keep the language the same. Let's talk -- the next slide. Let's talk about I
the -- I think this is the Freescale transaction, okay.
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think somebody got up here earlier from the Carlyle Group and said, well, there is one email that talks about, you know, not jumping, not getting in or not bidding as a result. There are literally hundreds of these emails that This is Freescale. Henry
talk -- that go down like this.
Kravis, okay, called Blackstone president Tony James to assure him as he had before that KKR was standing down and that KKR -- this is this whole thing about throwing in this $800 (sic) bid above in Freescale, would not have jumped a signed deal, okay. That language comes from the internal emails of the top guys at the time. In other words, it was very We wouldn't have
interesting the way they phrased that.
done that, I mean, if we were real competition because we bid 800, you know, we cost them $800 million dollars, the actual documents show that they knew it wasn't a signed deal yet, that it wasn't a proprietary deal yet, okay, and there was competition to get the deal, to get the proprietary deal. The agreement was not to raise the price after And that worked in different
somebody got the deal, okay.
ways, in the auctions in a number of different ways. But in the proprietary deals there is not a single instance of somebody during the 50-day go shop period of jumping that deal. When KKR locked that bid in that cost
Blackstone another 800 million dollars, okay, there still
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was not a signed deal and KKR knew about it and that's a real distinction, okay. Days later competition, the three separate deals involving six defendants, they all benefited. "We would Together
much rather work with you guys than against you. we can be unstoppable. lot of money."
In opposition we cost each other a
Roberts responded, "Agreed."
That's a co-conspirator agreeing with the statement of the conspiracy not to compete, okay. That's the type of But the
evidence that we have throughout this deal.
evidence that pulls it all together is that all of these people, all of the main players were involved in the 27 transactions in one way or another. top -THE COURT: I always felt from being involved In other words, the
in this case so long and preparing for these hearings over the last couple months that HCA and -- what was the name you just mentioned? MR. COUGHLIN: THE COURT: Freescale.
Freescale and Philips were, there
was some evidence that there might well have been some type of conspiracy with respect to those particular participants. But my problem has been how do you use those stronger transactions to connect with the whole? MR. COUGHLIN: That is my problem. And I think
I understand that.
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any time when you have conspiracy and you have different transactions that are coming together and there are big cases where, that were actually a lot bigger than this, and in some of the deals with stronger, whether it was NASDAQ or something else, but any time when you have a disparate number of deals and you're relying on the evidence of the internal documents, you're going to have better evidence, you're going to have better evidence of the conspiracy in some deals than the other. And, let's be frank about it. In some deals the
activity or the illegal activity to suppress competition was much stronger, okay. There is no doubt about that. You
know, so I'm sure that actually some of the other deals you were thinking about, maybe Kinder Morgan, Texas Genco, TXU, SunGard, HCA, PanAmSat, Freescale, Clear Channel and Toys "R" Us, yes, there is a hierarchy of deals where the evidence is better. the defendants? If we can go to the next one. Next slide. If we look And does that work the same way with
I'm going back to the connection slide.
at the connecting slide, it works the same way with the defendants. There are people that are involved, KKR, Bain,
TPG, Blackstone, Goldman Sachs, there are players -- and Carlyle -- there are players that are much bigger, that's right. That J.P. Morgan, you know, presentation today, you
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say, hey, what are they still doing here?
We believe they
were connected and even the lowest member, in the conspiracy law even the lowest member is liable for the whole thing. A jury could easily or Your Honor even in summary judgment could say, hey, I look at J.P. Morgan and I don't see enough to keep them in. Apollo. No doubt. I take a look at
They weren't in enough deals or influenced enough
to keep them in, okay. Now, we get into a different territory when we talk about Providence and Silver Lake. They said they only Why would it
focused on a certain, on certain industries. benefit them?
Well, the reality is they had to be part of
this boy's group, big boy's group to get into those deals, okay, that they had an interest in because they had a smaller focus, okay. So they were very much restrained, you
know, by the conspiracy and involved in it. You know, Silver Lake, the main example is the SunGard case, okay, where they got all kinds of benefits, okay, for orchestrating that and keeping that the way that it -- and there is good evidence of the combination there. And then the favor that flowed from some of that. Now, the favors that flow about getting in the other deals and combining, you know, those favors, that is not the overarching agreement but that's what you get for following in and being a part of the overall agreement. But
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that's right, if you just take a look at the big six, TPG, Bain, KKR, Blackstone, Goldman and Carlyle, you get all the deals, because it happened in all those deals, proprietary or auction, okay, and you connect everybody up and these are the bigger funds. And so the bigger funds, the money, you
know, for the most part controlled the auction versus the smaller funds or maybe a focused fund like Providence or Silver Lake. So you do have different levels and different players, okay. But it doesn't mean that that wasn't part of Even if the evidence,
the agreement and affected by it.
even if a jury could let that deal out or that defendant, you could do that, you know, on summary judgment and say I see that as to these six, you know, there is plenty of evidence, it's a little less here as to these three, it's not so good at all as to these two, as to the final five. We think we have presented enough evidence that we should get to the jury on all 11, on all of the deals and all of the damage deals, the 17 damage deals, okay. We
think we have provided evidence, we certainly provided evidence of the agreement that had the impact to not have a single bid jumped, okay. And so that should get us there at
least for the big six and for at least those ten deals that I mentioned earlier. jury questions. Without a doubt those are I believe
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 fit?
And I think that's what you struggled with here. You say where is the evidence in a Neiman Marcus deal that was an auction deal that the internal evidence that I have seen so far where people say that was fully bagged (ph.) and I don't really, I wouldn't have really bid for that. Well, that's right and you kind of -- how does that Well, why didn't the deal ever change from the $100 The reason, because the conspiracy was in effect
price tag?
so to every one of these deals that we mentioned and to each one of these defendants we at least have evidence of their involvement in it. And they may not be the big guy. And some of those Some
of them are the smaller people.
decisions, you know, may be made. We want to present a complete picture about the overall conspiracy, you know, to the jury. And that's why
we have all the players that were involved in it listed here and we have got evidence as to each one and their involvement, you know. They like to dismiss the case, that it might have been released for another reason that didn't have damages because of the ownership like PanAmSat, you know, but they don't want to deal with the evidence in there like about the combination. And let's take a look at PanAmSat for a second. Let's do this first. This is the HCA. Your Honor, this is
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the one they were talking about them, you know, standing down within in days and the calls come in, boom, boom, boom at HCA, you know. TPG and Goldman Sachs all told us we're Kravis receives a call from Tony
not going to compete. James today.
Blackstone not going to bid on HCA. Let's go down
Let's go down to here (indicating).
here, KKR later returned the favor and agreed not to jump TPG's Freescale deal. TPG's managing director John Marren
stated, "KKR has agreed not to jump our deal since no one in private equity ever jumps an announced deal." We have an explicit statement about the agreement in the evidence here and it's linking up to deals in the past and a deal coming forward. you know, in those emails. And that's what he says,
That's pretty strong evidence of
an overarching conspiracy connecting the various deals. Is there better evidence for some versus others? Absolutely, Your Honor. And that's why I thought if
everybody, I made the suggestion if we finished off with the individual defendants and they made their points, and some of them had good points. person, Goldman Sachs? holding company. Did we name the right, you know, We named the That's what
We think we did.
We couldn't sue a division.
we thought we should do.
Goldman Sachs is a big player.
You know, J.P. Morgan, yeah, they have a better argument about whether they should be in or not. And I
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understand the Court's grappling with that. But to get an overall picture of those that were involved in this conspiracy, you know, we named the people that we had evidence to and we presented that evidence to the Court and I will let my colleague -THE COURT: One of the thrusts of your
argument is the so-called, as you phrased it, an agreement not to jump a signed deal; is that the phrase? MR. COUGHLIN: Absolutely. It's a signed deal
and it takes -- and, of course, I showed it takes a little variance when you do the auctions about how the side deals come about. THE COURT: And you represented that that
occurred in the seven key transactions or at least in the seven proprietary transactions. MR. COUGHLIN: occurred in the seven. auctions is as follows: There would be competition, I showed you how the price rose almost six percent, there would be competition. But along the way there were deals being made to suppress competition there and then once the final agreement was made about who would get it and how they would get it, you know, and who would stand down and who would come in the combinations, which essentially is an agreement -Well, absolutely without doubt
And the way that it occurred in the
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THE COURT:
I will say that is the strongest
argument for the connection. What I'd like is, now that we have got at least an argument that there is a connection, I would like someone on the defendants' side, I don't know who it would be, to contest -MR. COUGHLIN: And let me show you what I mean
on the auctions so we get it right so when Mr. Tringali comes up and challenges me here, like he's going to do in a second -THE COURT: Is he the one who is going to? I'm sure he is.
MR. COUGHLIN: (Laughter.) MR. COUGHLIN: THE COURT: (Laughter.) MR. COUGHLIN: THE COURT: proprietary -MR. COUGHLIN:
I'm sure he is in a second.
Is that right?
If we could go to PanAmSat.
Well, I know what it means to be
Right.
We are going to go to
THE COURT:
Yes, go to an auction.
I kind of
understand it but it is somewhat unclear. MR. COUGHLIN: THE COURT: Now I don't see it.
But just explain it as you did
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before.
I have got it but -MR. COUGHLIN: Here's how -- so there is an
auction starts, a company wants to, let's say PanAmSat wants to sell off a division, okay. damage section. So that's why it's not in the
And so they say, okay, we are going to put Then we have a couple of the And, in
it up for auction, okay.
defendants here that are going to bid for it, okay.
fact, KKR is bidding for it and they say -- and they find out that three of the other defendants are also interested and I can't -- I think they're Carlyle, Silver Lake and Blackstone, and I probably misspoke as to one and they're going to sue me in a minute. But, so three other defendants are interested in the deal. And they're actually talking about combining and KKR learns about that. They
coming together against KKR.
start talking about what their -- first of all, a bid goes in, okay. Good. I'll come back -- it's Carlyle and
Providence.
And Blackstone was going to drop out.
So they start talking about what they're going to bid in the next round, okay. And they agree over here
(indicating) that they would both bid and then come together later, okay. The consortium would like a second option, it
promised Blackstone it would submit a soft bid allowing KKR to win, okay. That's how this came about. KKR then wins
the bid and cuts in Carlyle and Providence into the deal as
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limited partners, okay. context.
That's how that operated in that
So literally three defendants stood down, you
know, said that they would put in a soft bid if that's what they wanted them to do. And then they did put in a soft bid, two of the defendants got together, Carlyle and Providence, put in the soft bid which made KKR's bid look all that more attractive to PanAmSat, you know, for PanAmSat. They get the deal and You
KKR tells management we can do this deal all alone. know, all this stuff you hear about we need to pool resources to able to do these deals. No, KKR tells
management we can do this deal completely by ourselves. The whole time they're talking, and we have the emails to support all this evidence, the whole time they're talking in the background about we're going let you in, you know, we can do a four-way deal, you can put in a soft bid, different ways to stand down, okay. Sure enough, within, well, less than a month later KKR cuts in losing bidder Carlyle and Providence, they cut them in before even telling the seller that they're cutting them in. And they cut them in the deal and they get the
same amount of profits per their percentage investment as KKR who orchestrated the deal. profitable deal. That's the way it worked in auctions. The And this was a very, very
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defendants who have a stand down agreement, that was easily set for proprietary deals, in auctions they stood down in various ways but the competition was suppressed in the same way and the agreement remained the same. would stand down, okay. At some point you
In the auctions it took a little
while and you saw a little bump up in the competition but there's the overarching agreement that ties all of those together. THE COURT: So the thrust of the
interconnection as argued by the plaintiffs is the agreement to stand down? MR. COUGHLIN: THE COURT: Yes. What do you say?
All right.
MR. TRINGALI: THE COURT: did he not? MR. TRINGALI: because -(Laughter.) MR. TRINGALI:
They're wrong.
He made a fairly strong argument;
No, he didn't, Your Honor,
And I will tell you why.
You know, he said, he used the PanAmSat example. Let's take that as the first example. You know what he
didn't tell you about is there were three bidding groups. And you know what? After Carlyle and Blackstone and
Providence dropped out and then came in later on the KKR
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bid, guess what?
KKR was bidding against T.H. Lee and Bain,
two of the other defendants here. There was another round of bidding and KKR was bidding against them. And it was only when KKR then outbid
those two other bidders that Mr. Coughlin conveniently omitted did KKR then invite Providence, Blackstone and Carlyle into the deal and Blackstone declined because it thought KKR had paid too much. tell you. That's what he forgot to
And that's his best example in the auction
situation, Your Honor. His best example in an auction situation is where he has forget to tell you about the final bid where the defendants are bidding against each other. THE COURT: Well, let me ask you this. Let's
stay away from the auction because that is somewhat amorphous; but with respect to the proprietary, he made a strong argument that there was -- that in every proprietary deal that there was an agreement to step down and the agreement can be inferred by the fact that everybody did stand down. MR. TRINGALI: THE COURT: The problem --
My question is is that so and if
it is, should at least Count 1 go to the jury with respect to at least the seven proprietary transactions? MR. TRINGALI: Well, first of all, Your Honor,
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it shouldn't because of the discussion we had yesterday about, you know, Mr. Coughlin wasn't here yesterday so he didn't hear his co-counsel say that -THE COURT: (Laughter.) MR. TRINGALI: Luckily he wasn't here He is lucky.
yesterday but unfortunately he didn't hear his counsel say that they were sticking with the 27-deal conspiracy. THE COURT: Well, that is true. But for
fairness, could I cut something out or could they dismiss all the other transactions and just go with the seven? MR. TRINGALI: And they can't for all the
reasons that Mr. Primis explained to you yesterday, Your Honor. is -THE COURT: substance -MR. TRINGALI: substance. THE COURT: -- on those seven proprietary. Absolutely, Your Honor. Okay, let's get to the Well, let's get to the They can't. And the, so the problem they have now
MR. TRINGALI:
First of all, we have the Freescale situation where we did come in at the last minute knowing they were about to sign the transaction. The reason why you try to do it then
is because you're not then caught up with what Ms. Sammons
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told you about having to deal with all the contractual protections that one gets once one signs a deal. So you
don't have to then deal with the fact that somebody's got matching rights so they can match your offer and you don't have to pay a breakup fee, as well as the fact that they've already aligned with management. And the other problem, practical problem, Your Honor, that we haven't even mentioned to you today, the reason why people don't want to mess with the time and money and effort in signed deals is because the person who made the signed deal, they have been doing diligence on that company for months, months, and now you're asking somebody to jump the deal, okay, to put in a new signed deal in a limited period of time having limited ability for diligence, knowing full well that whatever price they put in there are these contractual protections that allow the winning bidder to match and get the deal. And they say why didn't Ms. Sammons' client bid higher than $51 and they like to point out how KKR and Bain were saying that $51 was as high as they were willing to go. Well, what they forget to tell you is that KKR and Bain didn't tell the other defendants that that was as high as they were going to go. KKR and Bain said that internally
and to the board of HCA which thought that was a fair price. And I might add the board moved up the price. The price
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started I think $48 and the board kept negotiating with Bain and Merrill, not a defendant here, and KKR until it got to $51 and then it accepted the price. But the other bidders, the other potential bidders who stepped down, they knew that KKR was committed to the deal and you see what their documents say. What is in their
mind, in their independent interest under the Matsushita test, Your Honor, which the plaintiffs conveniently forget about, they're thinking that Kravis would never let this happen, he's going to match any offer. They don't know what
they're saying in their own internal documents. And then furthermore on these, on this whole issue, Your Honor, of not jumping a signed deal, remember I read to you yesterday and I showed you some documents as to why people decided not to jump a signed deal. Apollo, for
example -- and this was tab 22 of the binder I gave you yesterday on Aramark -- saying, "We'd probably spend money and time and piss off friends and they'd pay a few bucks more and we get nothing." THE COURT: Let me ask you this question:
With respect to the seven proprietary transactions, if there is evidence that there was a step down, is that sufficient to at least let it go to the jury if, if, again, I am not going into the pleading aspects of this case, but assume there was only seven transactions which were the
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object of this overarching conspiracy. And if we had evidence relating to a lack -- not a lack -- a step down in these transactions, would that be sufficient at least at this stage in the proceedings to allow the case to go to a jury? MR. TRINGALI: If all those things happened,
Your Honor, that you posited, the problem is, you know, first of all, that's not the conspiracy obviously and I think the -THE COURT: No --- the fact that I brought
MR. TRINGALI: up -THE COURT: problem --
-- from the so-called procedural
(Whereupon, counsel is talking simultaneously with the Court.) MR. TRINGALI: But the other problem Your
Honor has is that there is no such agreement and they haven't shown you an agreement. THE COURT: But couldn't the jury draw -The jury needs --
-- from the facts? No, Your Honor, because it
MR. TRINGALI:
doesn't meet the Matsushita test which is a test for you under summary judgment, for summary judgment as the First
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Circuit said under those special rules. And in each of these transactions, each of those proprietary transactions, defendants here have independent reasons that they have documented contemporaneously as to why they're not pursuing a signed deal. In some cases, for It's a movie
example, AMC is a proprietary transaction. theater chain.
You heard Ms. Sammons say her client had no My client KKR bought a movie It went into
interest in movie theaters. theater chain Regal. bankruptcy.
You know what happened?
Do you think they didn't want to do another No, so they didn't bid on it.
movie theater deal?
Kinder Morgan is another proprietary transaction. You know what happened there? Four defendants were asked if
they would want to participate in the Kinder Morgan transaction. They were invited to join that transaction. They were invited in by
They didn't have to jump any deal. Goldman Sachs and they declined. Why is that stepping down?
They had an invitation And The
to come in at the price Goldman Sachs was coming in. you know what happened in that situation, Your Honor?
price continued to get bid up because the board of Kinder Morgan didn't like the price that was being offered so they had to continue to bid up the price, I think it went from something like close to $100 to $107 until Mr. Kinder actually had to, in order to let the deal happen because his
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partners didn't want to pay that money, he had to for his share, his stock, he had to -- he agreed to accept a lower price. So that's what happening on these proprietary deals. Aramark is the same situation. So just because
something is a proprietary deal, Harrah's, another example, a gambling casino. Do you know how many defendants, because
gambling casinos make you go through state gambling commissions and you have to put in lots of regulatory information so they don't want to do it. uncontested. do that. So the idea that people step down, the example that the plaintiffs say there is no examples of people coming in after a signed deal, you have to evaluate that under the Matsushita test and they simply have a failure of proof there. But the most important thing for Your Honor is they've now made up after two days, after being here for two days, they have now made up what the -- it took someone who wasn't here yesterday to come up with something to give Your Honor to wrap your arms around it and say it's an agreement to stand down. And I'm going to throw the auctions in even That's
It's uncontested that defendants chose not to
though Your Honor saw how many documents over the last two days, both the documents I showed you in the omnibus motion
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and the individual documents of the defendants where they're involved in an auction situation and they say I gave it my best shot, is was an absolute stretch. higher. I can't go any
I don't know what they're thinking. And the plaintiffs say we've agreed not to bid up
the price.
We've agreed to stand down.
Your Honor's
recognized that we have no obligation to continue to bid when we think it doesn't fit our -- when we think the price has gone too high. And how do you possibly, how do you
possibly, Your Honor, look at that evidence and then say Mr. Coughlin is correct when he says, oh, it spanned all these deals, proprietary and auction? He gives you the one example, PanAmSat, and he leaves out the end of the story. And he doesn't even go
into the rest of them, like Neiman Marcus where Bain says -sorry. THE COURT: Let me ask you this and then I
will get back to the plaintiff. Suppose they were to dismiss at this stage, I am not saying they can or should or what, but suppose they did and just got down to what the plaintiffs characterize as the six major players and they relate to ten. the conspiracy? MR. TRINGALI: Your Honor, we go back to Would that cut
yesterday's question and the whole response you got
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yesterday and what the law is, that you can't change at summary judgment, to defeat a summary judgment motion. have made your strategic choice like Judge Breyer said, you're stuck with that. A strategic choice that they have You
known about, they've known your scepticism but they kept it. And yesterday they said they were keeping it and they weren't trying to limit it either by defendant or deals. It's only today that Mr. Coughlin tells you we'll limit it to some deals, maybe we can limit it to some. deals aren't so good. Maybe some
Maybe some defendants aren't so good
because they have read your comments. But, Your Honor, there is law here, there is law here that they cannot just for strategic reasons to try to defeat a summary judgment motion suddenly change their case and come up with a new conspiracy. And the conspiracy, as Mr. Primis explained to you yesterday, is going to change dramatically. It's now going
to be a different conspiracy because if you have only six defendants, then the question is what about the other five who they were saying until now were essential to the conspiracy and part of the conspiracy and part of the allegation, those people could be bidding. If you are dealing now with only six deals or seven deals, how does that change the dynamic of the conspiracy? So it becomes an entirely new case, a new pleading, a new
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complaint.
Do we have a sixth amended complaint, Your
Honor, after six years or how many years we've been here? I think the law is very clear the answer is no. I
think the plaintiffs told you yesterday the answer should be no, that that's not what they're interested in. And I think
now to come up with a theory that it's proprietary deals which actually doesn't even meet, their evidence doesn't even meet the Matsushita test because of the independent reasons people had, and, A, procedurally it's incorrect and, B, substantively it's incorrect because they don't even have the evidence as to those transactions. THE COURT: All right. Any response?
MR. COUGHLIN: the law.
Just quickly and then we'll hit What
Absolutely I'm not cutting down the case.
I'm acknowledging is that there is better evidence as to certain defendants and as to certain deals, okay. And actually there's nine proprietary deals as I just counted them up: Freescale, HCA, SunGard, Harrah's, So there
AMC, TXU, Aramark, Texas Genco and Kinder Morgan.
is no question that those nine deals that the conspiracy was in effect, a jury could say, okay, I'm going to look at the auctions and they might come to a different conclusion. We think it's very strong as to the auctions too and you saw that they came together, they put in a soft bid, they rigged that bid. That was in essence a stand down
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agreement.
They talked about the bid as it went in.
You
know, this idea that this other group was a serious bidder was not the case. market price. But every one of these auctions has that same type of activity going on so we have the overarching conspiracy. Just because we have that, and that's the way we pled it, that's right, that doesn't mean Your Honor or a jury couldn't throw out certain deals. pleadings. pled it. That doesn't affect our That was the one deal that was below
That doesn't affect our conspiracy or how we
Somebody could find, yeah, I don't think that, I
don't think that J.P. Morgan was really a part of this conspiracy. They certainly weren't a controlling part so They're
I'm not going to hold them in as a co-conspirator. not going to be liable.
That happens every day in conspiracy trials.
That
doesn't mean the indictment is somehow flawed or if you lose one co-conspirator, then does the whole case go out against the other five? No way. Countless cases get tried, you
know, I can't remember how many -THE COURT: But defendants' argument is even
if your complaint involved only five or six of the defendants on seven or eight or nine transactions, that they are at most individual conspiracies and there is no overarching agreement.
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MR. COUGHLIN:
You could have brought this,
you could have brought this case maybe that way too and just done it individually; but the way this agreement worked is why it was overarching. In other words, it was a stand down
agreement so that you could do the next deal and know somebody wouldn't jump yours. suppressed the process. That was the agreement. That
That protected you.
That was the
main benefit that each of these defendants got, okay. So we could have pled it smaller and, in fact, the government all the time charges, has unindicted co-conspirators that aren't cooperating, don't come in, they were just part of the conspiracy and evidence is put on to them as to their involvement. lower five here. You could have done with the
We could have said they're, you know,
we're not charging them, we're, you know, we're not naming them in our complaint but they participated in this conspiracy but they were at such a level that we didn't. That doesn't undermine our pleadings. What we did in this case, we named all the conspirators and we named the deals that were involved. there is a uniform system that goes into place here. can show it on any given deal. And
And we
And if she wants to go
through every one of those PanAmSat docs, I'll do it, I'll do it right now about that competition and we'll show you that there was talk between those competitors as they put in
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those bids and they came together later.
And that satisfied
what the agreement was to stand down, to move away, to come back in later. And that happened in both the proprietary
deals and the auction deals. And so the fact that we pled this way, you know, even if we lose a few of the people, it doesn't mean they weren't conspirators. a role. It doesn't mean they still don't have So they're
They don't even need to be named, okay.
wrong about that. You're right, I wasn't here for yesterday's argument and I wish I was now that I heard what they're arguing today but -THE COURT: (Laughter.) MR. COUGHLIN: I had a long day too. But, It was a long day.
Your Honor, I think that our pleading stands.
Whether we
lose a few deals or lose a few defendants, I'm not saying that we should, I'm saying that it is a jury question of whether we should or not. What I was acknowledging is what Your Honor was struggling with as you tried to say I can see that in Freescale you have some, I can see that in HCA, I see what is happening in, you know, SunGard and TXU. and that makes sense to me. I can see that
And I see that these four or
five people were involved in each of those deals, you know.
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And then you have a tougher time with some of the smaller players or some of the smaller deals, okay. We think those are jury questions. have sent enough in to do that. We think we
The fact that I acknowledge
that we have weaknesses, that's just what I should be doing, you know, and Mr. Tringali knows that, you know. I want to
be candid and say, yeah, that's right, some deals we have unbelievable stunning evidence like just an admission about what the whole conspiracy is about like that last document. But I'll sit down, Your Honor, and have my colleague argue the law just for a minute. MR. WILDFANG: Good afternoon, Your Honor.
Again, I echo the defendants' words earlier, you have been very patient with us and I'm going to take a little bit more of your time here but I hope it will be productive time. Let me start by -- may I approach? (Whereupon, some documents were handed to the Court, the Clerk and the Law Clerk.) MR. WILDFANG: Your Honor, yesterday I made
mention of the fact that there was a case that I had the privilege to work on when I was at the Department of Justice. It's commonly referred to as the NASDAQ case. I
have handed you a copy of the complaint and the competitive impact statement in that case. inside information. I didn't get this from any
It's on their website.
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But I want to take you through some parts of this because there are important features of the NASDAQ case that we find here and I think it will give Your Honor some comfort about how to look at these multi party, multi deal kinds of conspiracies. So -What is the name of this case? Well, the caption is United
THE COURT:
MR. WILDFANG:
States of America versus Alex Brown & Sons. THE COURT: Right. These are all NASDAQ market
MR. WILDFANG:
makers so it's commonly referred to as the "NASDAQ case." NASDAQ is an electronic trading market like the New York Stock Exchange only it's electronic. And the allegation in this case, which was I think ultimately proven, was that there was a, what's called a quoting convention agreed to pay all 33 of these big firms. You will notice Goldman Sachs is there. Securities was a defendant in that case. They entered into a consent judgment to stop the quoting convention but what's interesting is the defendants in the NASDAQ case made the same arguments you hear here, that it's implausible, how could you possibly maintain this conspiracy over so many deals and so many stocks. It was proven that there was this agreement. And if you look at paragraph 40 on page eight where We did. J.P. Morgan
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the government alleges that -THE COURT: Of the complaint? Of the complaint, yes. I'm
MR. WILDFANG: sorry, Your Honor.
Beginning at least as early as 1989 and continuing to the date of this complaint a common understanding arose among the defendants and other NASDAQ market makers concerning, among other things, the manner in which bids and asks would be displayed on the NASDAQ and that was the quoting convention. next two pages. If you turn to page 10, paragraph G, you will note that the government alleged that when widespread news reports and a Justice Department investigation came to be known to the defendants, they abruptly changed their behavior. That's what happened in this case, shortly after It's described in greater detail in the
the Department of Justice made known that there was an investigation of these defendants. If you look at the competitive impact statement, Your Honor, at page 22. One of the sources of evidence for
the government in that case was a document obtained from the defendants where, it's the small blocked indented quote on page 22. It says, "There was a typographical in the We're
newsletter STANY, which was an industry organization. certain you'll realize it was misquoted.
As you're all
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aware, it is clearly unethical to make a Chinese market or to run ahead of an order." This is the equivalent of the statement that you see on the slide that KKR has agreed that no one in private equity ever jumps an announced deal. equivalent. They're legally
They are an admission of an overarching And
agreement followed consistently by these defendants.
you recall, Your Honor, this morning I got up and I asked, you know, were there any examples of jumped deals. THE COURT: just made? MR. WILDFANG: Marren of TPG. THE COURT: transaction, HCA? MR. WILDFANG: Well, I think it relates to all And with respect to what John Marren of TPG. John Who said that? That statement you
the transactions because what he says is KKR has agreed not to jump our deal in this deal but they say no one in private equity ever jumps an announced deal. That's the conspiracy. Very
That's the common understanding that we have alleged.
similar to the common understanding that was alleged in the government's case against the NASDAQ market makers. Your Honor, let me -THE COURT: Let me ask you this:
Assume that is admissible against the person who,
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
now that we are talking about it, the admissibility of evidence; but if that is the heart of the conspiracy, it is admissible against the person who wrote it. admissible against the co-defendants? MR. WILDFANG: Well, statements of How is that
co-conspirators, Your Honor, can come in under the co-conspirator exception. THE COURT: Yes, but only if there is evidence
to show prior thereto the existence of a conspiracy. MR. WILDFANG: plenty of evidence. Exactly. And we think we have
You know, let me bring out the chart You know, at trial we will be
that you saw yesterday.
prepared to put into evidence all of this information announced as to all of these deals and all of these interrelationships. And then it will be a jury question for
the jury to find is there sufficient evidence -- we know there is an agreement. They've admitted the agreement.
Then the question is is there sufficient evidence to tie each defendant into that agreement. And let me turn, Your Honor, to some jury instructions that I think are relevant here. Jury
instructions that were given by Judge Hogan in the vitamins case. They are -- do you have the binder that I gave you
yesterday? (Laughter.)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: me his instructions.
I am sure I have it.
You can read
What did he say? So at tab 4 are some of the And
MR. WILDFANG:
jury instructions that Judge Hogan gave in that case.
in particular, instruction No. 31 which is on numbered page 36, which is I think indisputably what the law is with respect to antitrust conspiracies, so I won't read it all but let me hit some of the high points. At the bottom of page 36, the last paragraph, Judge Hogan instructs the jury, "To prove a conspiracy the evidence does not have to show that the defendant entered into an express detailed written agreement." The defendants have argued that we have to do that. He goes on to say, "Price-fixing agreements rarely are proven by explicit agreements. Often such agreements
are proven not by direct evidence but by inferences from what the defendant and others said and did." THE COURT: This is hornbook law. Right, but the point is, Your
MR. WILDFANG:
Honor, these instructions, you will probably give the jury in our case very similar instructions. And then the
question is for the jury whether or not there is sufficient evidence. But the one I really wanted to point Your Honor to is the second paragraph on numbered page 37. "The evidence
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does not have to show that all of the means or methods alleged by the plaintiffs were agreed on by every member of the conspiracy to carry out the alleged conspiracy, nor that all of the means or methods that were agreed on were actually used; nor that all persons alleged to be members of the conspiracy actually were members." That is hornbook law, Your Honor, and that -THE COURT: No doubt. But they have -- that
is true but prior -- and I am not saying you haven't reached it -- but this means after there is evidence of an agreement. MR. WILDFANG: THE COURT: Well, Your Honor --
After there is evidence of an
agreement, the participation of each of the alleged co-conspirators is different. That is some, you know, in a
criminal case some drive a car, some carry the gun, but there is an agreement first. MR. WILDFANG: That is fundamental. Absolutely, Your Honor, and
that's why I read the last paragraph on page 36, because that is hornbook law. And especially in antitrust
conspiracies you rarely find explicit written or summarized agreements. The slide I showed you, that Mr. Coughlin showed you -THE COURT: But that is true in any
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conspiracy, even a criminal conspiracy has less documentation. MR. WILDFANG: But my point, Your Honor, is
that that statement is -- that's direct evidence of a conspiracy. It says there is an agreement. So we are, we And
are past having to prove that there was an agreement. there is plenty of other evidence besides that. want to focus only on that.
I don't
But all of those emails that
say no one jumps deals, I won't jump your deal, I'll stand down on this one, all of that is circumstantial evidence, persuasive circumstantial evidence of an agreement. Your Honor, let me turn to one of the cases that I mentioned yesterday that I think actually is quite instructive. It's the decision in the In Re High Fructose
Corn Syrup Antitrust Litigation and it's found at tab eight of my binder. And this is case is important for a couple of reasons. One, it's written by Judge Posner who is widely
regarded as one of the premium antitrust scholars in the country. And if you turn to page 655 of this opinion, in
the second paragraph in the left-hand column. This is a case where Judge Posner reversed a grant of summary judgment in an antitrust conspiracy case. And
what he is describing here is that the defendants cleverly, he says cleverly laid the track for the trial judge by
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enticing the judge to do some things that they shouldn't do. So first he says, It's not the judge's job to weigh the conflicting evidence. He says, "The second trap to be
avoided in evaluating evidence of an antitrust conspiracy for purposes of a summary judgment motion is to suppose that if no single item of evidence presented by the plaintiff points unequivocally to conspiracy, the evidence as a whole cannot defeat summary judgment." He goes on to say, "It is true that zero plus zero equals zero. But evidence can be susceptible of different
interpretations, only one of which supports the party sponsoring it, without being wholly devoid of probative value. Otherwise what need would there be for a trial?" And then the third, on the next page, the third trap he says is "failing to distinguish between the existence of a conspiracy and its efficacy." In other words, it may be that there is an agreement and it didn't have the impact that we claim it did but that doesn't mean there is not an agreement. Now, also, going back to the jury instruction, the fact that not every defendant acted in conformity with the agreement on every occasion doesn't disprove the agreement. It may create a jury question but the fact that on some occasion -- go back to the drug conspiracy analogy. If one
of the conspirators doesn't show up to drive the car on a
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given day, you know, is that evidence that maybe he was acting not in furtherance of the conspiracy? Maybe. But
what if he shows up the next day to drive the car? What Judge Posner is saying here is it is the judge's job at summary judgment in the district court to look at all of the evidence, not to parse it, to look at all of it. And, Your Honor, one last point, on page 656 in the middle of the right-hand column, Judge Posner discusses the plaintiffs' economic expert and he says -THE COURT: What page is this now? Page 656, the middle of the
MR. WILDFANG:
right-hand column, the last paragraph. THE COURT: Yes. He says, "The plaintiffs'
MR. WILDFANG:
economic expert opined in his report and the defendants pretty much concede that the structure of the HFCS market," high fructose corn syrup, "far from being inimical to secret price fixing, is favorable to it." And he credited that testimony. We have exactly
that testimony from our expert in our case, that you can look at the economic evidence and see circumstantial evidence of an agreement because you would expect to find certain things in markets that are behaving competitively. In contrast you might expect to find other things, things
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that we find in this market when the market is behaving uncompetitively. Your Honor, let me -- two last points. THE COURT: I would like, after you are
finished with the law, I would like the defendants to comment on the plaintiffs' reference to that statement as being indicative of an agreement. And, you know, that
statement is one of those that is some strong evidence and that is why it makes that HCA case somewhat stronger at least than a lot of the others but I would like a response on that. MR. WILDFANG: brief. In tab one of the binder that I have given you, there are slides I made reference to yesterday. could turn to slide 21. THE COURT: Which one is this now? It is the first tab of the It says If you Your Honor, I will try to be
MR. WILDFANG:
binder and it's slide 21, with blue on the top. American Tobacco Company versus United States. THE COURT: Yes, I have it.
MR. WILDFANG:
The point here, Your Honor, is,
what the court says, which again I think is black letter law, "It is not of importance whether the means used to accomplish the unlawful objective are in themselves lawful
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or unlawful.
Acts done to give effect to the conspiracy may
be in themselves wholly innocent acts." Your Honor, the fact that we conceived that a single benign joint bid is not necessarily a violation of the antitrust laws doesn't mean that the joint bidding here is not probative of an agreement, especially when you see that there was very little club bidding before 2003, very little club bidding after the DOJ announced their investigation. conspiracy. Oh, Your Honor, last point. The defendants gave I had That change of behavior is indicative of a
you a booklet yesterday with cases on your questions.
just a few minutes last night, I had a chance to take a look at them. They are completely inapposite but we would like But I do have three cases
an opportunity to address them. for Your Honor -THE COURT:
The most important case to me,
well, I am sure there are others, but the ones that I am familiar with and have read fairly thoroughly is Mat- -MR. WILDFANG: THE COURT: Matsushita.
-- Matsushita and I think the case Those seem to me to
called White in the First Circuit. cover the law in this area. MR. WILDFANG:
Your Honor, I think both
Matsushita and White are accurate statements of the law.
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The problem is the defendants have not accurately characterized the import of what the words on the page meant. And that's why, Your Honor, I really encourage you
to read the Kodak case and read Judge Posner's opinions in High Fructose that specifically discusses the application, the correct application of the Matsushita case. I'm going to hand up three copies, three different decisions, Your Honor. I'm not going to go through them.
They are -- they simply stand for the proposition that you can dismiss out pieces of a case without the whole conspiracy collapsing. I think that's what they stand for.
But I want to finish by calling the Court's attention to tab nine in our binder. MR. TRINGALI: those cases? MR. WILDFANG: Yes. Counsel, do you have copies of
Tab 9 is Judge Hogan's opinion denying summary judgment largely but granting in part in the vitamins case. It actually is important for Your Honor to read this case as well because it is relevant for a couple of reasons. One, Judge Hogan ended up granting -THE COURT: referring to? What -MR. WILDFANG: Tab nine in the binder that I I want to be sure, what are you
gave you, which is a decision In Re: Vitamins Antitrust
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Litigation. THE COURT: I have so many binders here, I am
not quite sure -- oh, I think I have got it. No, on nine there is nothing. MR. WILDFANG: Someone stole tab nine. Let me
hand you my copy, Your Honor. (Laughter.) MR. WILDFANG: Again, Your Honor, this is the
case which we really encourage Your Honor to read and read carefully before deciding these motions. Judge Hogan was faced with a part of the vitamins conspiracy that related to a single vitamin called choline chloride or Vitamin B4. And there were I believe five
defendants left in the case at that point and they were going to trial. And they brought a summary judgment motion.
And the question that he addresses in his opinion is is there sufficient evidence to go to trial against all five defendants. Each of the five defendants made at least some
of the arguments the defendants here have made about there are legitimate business reasons for why we did what we did, there is not enough evidence to hold us in to a conspiracy. Very similar arguments. And what Judge Hogan did is he looked at all of the evidence and he concluded that only one of the five defendants was entitled to summary judgment because there
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was insufficient evidence.
The other four went to trial.
Now, he didn't rule that that means the conspiracy didn't exist and, therefore, no one goes to trial. to trial with the four remaining. And the other import of the vitamins decision, Your Honor, is that Judge Hogan had the benefit of the Matsushita opinion as well as Judge Posner's High Fructose opinion. And Judge Hogan, as Judge Posner did, correctly applied the Matsushita case, not incorrectly as the defendants have invited you to do, Your Honor. Your Honor, we would like an opportunity to submit something in writing on the cases that were submitted to you. THE COURT: I will give you this back. You He went
have referred to that case on many occasions so I am aware of it. MR. WILDFANG: THE COURT: Thank you.
He claims that that reference of
standing down -- excuse me -- that it never happens, or it always happens I guess, is evidence of the overarching conspiracy that binds as it were or interconnects all these defendants, and it is a strong statement. MR. TRINGALI: Why doesn't it?
Well, two reasons, Your Honor.
First of all, where they're talking about never jumping a signed deal, that refers to proprietary, not
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auction.
So despite the distinction they try to give you, That's No. one.
that is referring to an announced deal.
No. two, that just talks about -THE COURT: What is the difference between an
announced deal and a signed deal? MR. TRINGALI: I'm saying. They're the same. That's what
That's a reference to proprietary.
The other problem with that in terms -- so you have already eliminated their conspiracy, the conspiracy that they have alleged from day one, the 27-deal conspiracy, okay. That's No. one. So it's not an agreement as to that
conspiracy. No. two, it is not an agreement, what they say, what he is saying -THE COURT: Is it an agreement -Let me -- go ahead, I'm sorry.
MR. TRINGALI: THE COURT: or nine proprietary? MR. TRINGALI:
Is it an agreement as to the seven
No, Your Honor.
And the reason
for that is, No. one, let me, first of all, point out to you -THE COURT: Go ahead. -- that Mr. Marren who is
MR. TRINGALI:
quoted there, he like several others who wrote emails that they like wasn't deposed by the plaintiffs. So he was never
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
asked to explain what he was referring to in that email.
He
wasn't asked whether no one in private equity doesn't jump the deal is because they agreed not to or because as I have now showed you and others have showed you in numerous documents, they made an independent decision not to do so because they're going to lose. Again, I come back to the document I showed you yesterday from Carlyle, I believe it was on TXU where they said they would be a day late, a dollar short and lose. THE COURT: But -That's completely --
I agree, that is a strong argument
but is it a jury question? MR. TRINGALI: why, it's Matsushita. case. No, Your Honor, and the reason
Matsushita is a summary judgment
And Matsushita says -- and I know I have been accused All I have been doing
now several times of distorting it. is reading it but -(Laughter.) MR. TRINGALI:
It says, "Antitrust laws limits
the range of permissible inferences from ambiguous evidence in a Section 1 case. Conduct that is consistent with
permissible competition as with illegal conspiracy does not standing alone support an inference of antitrust conspiracy. A plaintiff seeking damages for a violation of Section 1 to
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
survive a motion for summary judgment," not anything to do with trial, "must present evidence that tends to exclude the possibility that the alleged conspirators acted independently." This is summary judgment, Your Honor, in order to survive a motion for summary judgment and when you have document after document of the defendants saying that I am not jumping a signed deal because I am going to waste my time, my effort, my money and I'm going to lose anyway, that has got to be an independent decision. satisfy the Matsushita standard. And I also remind Your Honor, the cases I mentioned yesterday about the jump ball, if you even think we're in that realm, that the courts have held that it is equally, if it is equally plausible that defendants acted in their own self-independent -- own self-interests independent of one another, then the district court properly grants summary judgment. And as the other case I cited to you which was affirmed by the First Circuit said, "Only when a theory of rational independent action is less attractive than that of concerted action." That's the DM Research case that I That has got to
mentioned to you yesterday. Those are summary judgment standards, Your Honor. They're not trial issues. Nothing to do with what the jury,
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
whether it survives a jury verdict or not.
It has to do
with whether you even let it get to the jury. And I submit to Your Honor that even under this now much smaller conspiracy -THE COURT: hopefully. MR. TRINGALI: Okay. Does that mean it's This may be my last question,
going to be my last thing I'm going to be able to say to you? THE COURT: Assume that Count 1 charged the
seven or nine proprietary transactions and only those defendants who were named therein and used evidence such as that and several other references to standing down. There
might well be a dispute over the interpretation of some remark like that but might it not be a jury question? MR. TRINGALI: THE COURT: No, Your Honor.
Why? Because of Matsushita, the
MR. TRINGALI:
Matsushita standard and the other cases interpreting Matsushita. That the inference has to be, they have to
have, it can't be even in equipoise, okay, but we have legitimate, contemporaneous, independent documents talking about independent decision making, independent actions, why things are in our independent interests, the day late, dollar short, we're going to lose anyway, that doesn't get
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
to a jury under Matsushita and the cases interpreting Matsushita. And that's -THE COURT: There is no doubt if that type of
allegation had been made, you are going to analyze the case a lot better. This is a giant case and there are so many I have never seen anything like it. I
different facts.
have been involved in some patent cases which have gone on for six or seven weeks and five years of discovery but I have never seen anything like this. Although it is not entering into my thinking, the plaintiffs have to realize that if this case were to go to trial, it would be a circus. I mean, it is just almost too
gigantic to get your arms around it. MR. TRINGALI: issues, many problems. Your Honor, the case has many
And just to address the issue you
raised, the added problem in addition to the co-conspirator issue and everything else, you also have the release issue where evidence as to transactions where a defendant has a release isn't admissible against that defendant. So are you
going to have 25 juries or are you going to have limiting instructions that are going to actually potentially -THE COURT: Well, we are not going to get into
the trial; but there is no doubt a trial would be -MR. TRINGALI: A nightmare.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 time.
THE COURT:
And it would take a long, long
MR. TRINGALI:
It would take a long time.
But, Your Honor, and that's why Matsushita says we have, and the First Circuit has said we have special rules for antitrust conspiracy cases because they are large cases. They are complex cases. And there is also concern in the
case law that to let a case like this go to the jury, if it doesn't pass the Matsushita test of excluding, tending to exclude the possibility of independent action, of showing that the inference of independent action is less plausible than the inference of conspiracy, that that chills competitive conduct, and the Supreme Court has recognized that, and other courts have recognized that, Your Honor. And that is why they have this rule for the antitrust cases so that normal competition, the things that Your Honor mentioned today during the course of the argument that you said were completely legitimate like the club bidding -and, by the way, Your Honor, you know that great map that they put on and then Mr. Coughlin did as well where all the lines, you know, cross. THE COURT: Let me tell you -That is tough to contend with. I
mean, that is persuasive; is it not? MR. TRINGALI: It is not persuasive, because
you know what it represents, Your Honor?
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 meaningless.
THE COURT:
It has great impact. It has visual impact but it is They'll draw a It
MR. TRINGALI:
meaningless because you know what it shows?
line from KKR to a transaction that KKR considered. could be a transaction that KKR won. It could be a
transaction that KKR decided that, from the documents you have seen, gave it its absolute best shot and lost. There is no -- those lines don't satisfy, don't attempt to satisfy the Matsushita test. They're not telling
you what the conduct is that gets there, that gets to those lines. They're just drawing a line if they can in some way
and say so and so considered a transaction, so they can say that defendant A considered AMC. Defendant A could have They still get that
legitimately decided not to pursue it. line. THE COURT: Okay.
MR. TRINGALI:
So you have a chart that is
THE COURT:
I will let the plaintiffs -What you don't have in that
MR. TRINGALI:
whole, all those interconnections is the agreement that you have been looking for. What you don't have is a line that
links every defendant to every transaction as to an agreement. The agreement that they tried to give you today for
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
the first time is an agreement not to compete, although they have a real problem trying to figure out how they get that to the auction. So what they do is say, well, maybe some
deals are aren't so good. If Your Honor looks at our 56.1 statement, you will see multiple instances in auction situations of multiple rounds of bidding. Michaels. Look at Clear Channel. Look at Sabre. Look at Look at
Look at Neiman.
Susquehanna.
Look at Texas Genco. THE COURT: Okay.
Look at Toys "R" Us.
MR. TRINGALI:
There is plenty, that is my
point, that is my point, because they made it sound to you as if it is all rigged. THE COURT: All right. And it is not.
Just a quick response. Your Honor, I won't go more
MR. COUGHLIN: than two minutes.
One, they talked about the agreement not to go over, that kind of statement doesn't spill over to the auctions. In Clear Channel it says Alex from KKR, Alex
Navab, he says, "Clearly we would be viewed as bust up of a current deal with T.H. Lee and Bain along with the family and that will have implication for all our deals going forward."
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Not just the proprietary deals, this is an auction deal that he's talking about. And if they lobbed in a bid,
it would not only have an impact on the auction deal but all their deals. So we think it covers both the auctions and proprietary deals. Two things. One, the Supreme Court case deals with
indirect evidence, not direct evidence like that we had up on the board. Finally, if they say something is tough, if they say something is tough and that's why we shouldn't go to trial because it's going to be so complicated and big, that's no reason. I try big cases -I am not saying it is but the case
THE COURT:
has got to be streamlined for trial. MR. COUGHLIN: It does, Your Honor. And I
tried a big case against the tobacco companies -THE COURT: You have got to admit, this is We have
massive, massive, it has gone on for five years. how many documents, how many depositions? MR. COUGHLIN: THE COURT: A lot of trees.
It is overwhelming. A lot of trees have died. But
MR. COUGHLIN:
I think that we can, you know, bring it down into a manageable way to present it to a jury so a jury can
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
understand it. And as far as all those lines on that chart, all of those lines deal with our statements in our 56.1 statement and they all have backing in the papers we've submitted. We think this should not, we think that summary judgment should be denied, Your Honor. Thank you. THE COURT: parties, the attorneys. Okay. I want to thank the
I was just noting to my law clerk
that this has been a complex case, a very interesting case, but at least as far as the Court is concerned, it has been handled by the attorneys in a very professional manner. really has. It
You would think a case of this magnitude and
the amount of money that is involved, that the Court would have had more problems with administering the case. It has been very, let me say wonderful dealing with everybody, very professional. The only time it seemed that
we might have been thrown off kilter was when the New York Times got involved. (Laughter.) THE COURT: But other than that, I have been
very happy working with everybody. I have got a lot of stuff to read and so it is going to take me some time. I have indicated, at least
preliminarily, how I felt when I came in here but I am going
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
to reconsider everything. I am sure that the decision will not be made within a month. I am hopeful that it will be finished in 60 days,
that is at least what I am hoping, but there is a lot of stuff to go through. But the arguments have been very
elucidating and I have been well educated. Thank you very much. VOICES: Thank you, Your Honor. All rise.
THE CLERK:
Court is adjourned.
(WHEREUPON, the proceedings were recessed at 4:10 p.m.)
C E R T I F I C A T E
I, Carol Lynn Scott, Official Court Reporter for the United States District Court for the District of Massachusetts, do hereby certify that the foregoing pages are a true and accurate transcription of my shorthand notes taken in the aforementioned matter to the best of my skill and ability.
/S/CAROL LYNN SCOTT
_________________________________________ CAROL LYNN SCOTT Official Court Reporter John J. Moakley Courthouse 1 Courthouse Way, Suite 7204 Boston, Massachusetts 02210 (617) 330-1377
DATE: January 4, 2013

Dahl v. Bain Capital Hearing Dec, 19, 2012

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Dahl v. Bain Capital Hearing Dec, 19, 2012

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Case 1:07-cv-12388-EFH Document 758 Filed 01/07/13 Page 1 of 227

CIVIL ACTION No. 07-12388-EFH

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P R O C E E D I N G S THE CLERK: All rise. Please be seated.

Court is in session. MR. WILDFANG:

Your Honor, may I address the

Primis from Kirkland & Ellis. Capital today.

I'm here on behalf of Bain

And before I get started, Judge, the first

Each side had been given ten minutes for these.

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conspiracy that didn't exist.

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The defendants are not going to do that.

every transaction Bain was involved in.

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I don't know if the electorate bought it.

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advance knowledge. to win.

He had no information that TPG was going

And there was no overarching conspiracy that told

And he said, "If we were going to lose, I am glad

questioned him for eight hours.

You would think they would

hours and never showed him this document.

Case 1:07-cv-12388-EFH Document 758 Filed 01/07/13 Page 10 of 227 10

And this is the testimony the It's why they didn't

plaintiffs didn't want in the record. show it to him.

Bain was going to bid on Toys "R" Us.

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We didn't even have current knowledge.

department store chain through an auction. competitive.

It had three rounds of bidding.

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"If they beat me, they have crossed over into

for paying too much.

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And the plaintiffs never showed these documents

pluck out individual documents from individual deals, the

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He gave you some examples of

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by Bain, of standing down.

that is, it's my deal.

deal, you stay out of it. of it.

numbers 1450, 1550, those are prices for the company.

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Bain, KKR, Lee and Carlyle, one group.

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were another group.

for this deal at this point. is the big deal.

for this. together?

And this is reflected in an And this email copies the

That's Tony James, the head of

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two or three days before the bids.

competitor on behalf of itself and on behalf of Bain, "Can

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you please call me on cell?

EDMC happened just like this, Your Honor.

There is another round.