Guy Hands will have his day in court, again.
An appeals court in New York has thrown out the verdict in Terra Firma’s 2010 case that saw Citigroup successfully defend itself against claims that it had duped Terra Firma into overpaying for music publisher EMI.
A new trial has been ordered after the court ruled that Judge Jed Rakoff made an error when explaining the law to the jury. Judge Rakoff instructed the jury that Terra Firma had to prove it relied on “one or more misrepresentations” from Citi’s David Wormsley to make its bid for EMI when “such an instruction was inconsistent with English law and therefore was an error”, Judge John Walker wrote in an appeals decision.
“Because the district court’s jury instructions were based on an inaccurate understanding of the relevant English law, the case must be vacated and remanded for a new trial”, Judge Walker wrote.
With the jury instructions now resolved in our favour, we expect to prevail in any subsequent trial
Terra Firma lost the legal battle with Citi in 2010 when a court ruled that the bank did not trick the private equity firm into buying EMI. Citi attorney Theodore Wells had argued that Terra Firma founder Hands brought the lawsuit against Wormsley as a way to make up for the struggling EMI investment.
“We continue to believe that we have a strong claim, and with the jury instructions now resolved in our favour, we expect to prevail in any subsequent trial,” spokesperson for Terra Firma Jonathan Doorley told Private Equity International in an email.
Friday’s decision will not result in a new verdict for Terra Firma, according to Citigroup.
“We are confident we will again prevail at trial as Citi’s conduct in the EMI transaction was entirely proper,” Citi spokesperson Danielle Romero-Apsilos wrote in an email. “The original verdict made clear that Terra Firma’s baseless accusations of fraud were simply an attempt to gain leverage in debt restructuring negotiations.”
Had the jury found Citi liable, the bank would have owed damages to Terra Firma, up to a maximum of £1.5 billion (€1.8 billion: $2.3 billion). Terra Firma entered the lawsuit with three claims for damages totaling £7 billion, sources said at the time. Judge Rakoff eventually threw out two of the three claims, drastically reducing the amount of money Terra Firma could have been awarded.
Terra Firma first filed the suit in December 2009. The high profile trial, which kicked off in New York in late October 2010, lasted less than three weeks and saw Hands testifying against Wormsley, his long-time banker and friend. Wormsley denied all allegations that he misled Hands into bidding for EMI.