Potential damages in EMI case reduced

NEW YORK (BestGrowthStock) – The amount of potential damages that British private equity firm Terra Firma could receive if a case against Citigroup Inc regarding music group EMI goes its way has fallen, according to court documents.

The dispute is between British financier Guy Hands’ Terra Firma and Citigroup over Hands’s $6.4 billion buyout of legendary music company EMI in 2007.

Hands’s Terra Firma Capital Partners accuses Citi banker David Wormsley and Citigroup of duping Hands into thinking there was a rival bid in the offing by private equity firm Cerberus Capital Management for the EMI company he coveted. As it turned out, there were no other offers.

The Financial Times and Wall Street Journal reported that the judge presiding over the case on Wednesday threw out one of three premises that supported Terra Firma’s claim for about $8 billion, and asked that the firm’s lawyers withdraw another, reducing the amount of potential damages to about $2 billion.

According to a court document, the court determined on Wednesday that the methodology used by a Marianne deMario, listed in Terra Firma’s witness list, as applied to the issue of lost profits from the investment was “insufficiently reliable” to allow her to testify about those kinds of damages.

The plaintiff also withdrew its proffer of testimony by her on the issue of “locked in damages,” the document said.

DeMario had calculated ‘lost profits damages’ of 4.4 billion euros which it was claimed Terra Firma would have earned on the money it invested in EMI, had it been put to use elsewhere, a separate court document said.

Terra Firma has been seeking as much as $8 billion in damages for its fraud claim at the trial, which started on October 18 and is expected to end on November 5.

The deal has come to reflect some of the worst aspects of the credit boom, when companies were loaded with debt.

If Terra Firma loses at trial, it could be forced to hand over EMI to creditor bank Citigroup, which provided 2.6 billion pounds ($4 billion) in loans for the acquisition. The bank’s reputation for facilitating such deals could suffer if the jury decides Hands was defrauded.

Terra Firma and Citi declined comment.

The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 09-10459.

Potential damages in EMI case reduced