Shareholders Obtain Record $590 Million Recovery Against Private Equity Firms

U.S. District Judge William G. Young held a final approval hearing on February 11, 2015 regarding a series of settlements totaling $590.5 million for shareholders in the antitrust class action against some of the world’s largest and most powerful private equity firms. After almost seven years of litigation, Robbins Geller attorneys successfully altered the way private equity firms do business. The aggregate settlement is the largest class action antitrust settlement ever in which no civil or criminal government antitrust action was taken.

The settlements, obtained from Bain Capital Partners, Goldman Sachs, The Blackstone Group, Kohlberg Kravis Roberts & Co., TPG Capital, Carlyle and Silver Lake Technology Management, resolve claims that these private equity firms suppressed competition in certain leveraged buyouts (“LBOs”) from 2003-2007, and as a result, paid shareholders less per share for their stock holdings.  As part of the settlements, defendants have agreed to compensate shareholders who sold or exchanged stock in connection with some of the largest LBOs in history, including the $45 billion TXU, $32 billion HCA, and $17.5 billion Freescale LBOs. 

First filed in the District of Massachusetts in December 2007, plaintiffs alleged that the world’s largest private equity firms violated the Sherman Act, 15 U.S.C. §1, by conspiring to suppress the prices paid to shareholders in large LBOs, where purchasers, often private equity firms, acquire most of a company’s outstanding shares with a substantial amount of debt financing, subsequently take the company private by withdrawing its shares from the public exchange, operate it for a period of time, and thereafter sell it or conduct an IPO.  The settlements are the culmination of years of intense litigation in the face of defendants’ repeated and steadfast attempts to defeat plaintiffs’ claims.

After the court denied defendants’ motion to dismiss, concluding that plaintiffs had sufficiently pled their Sherman Act claim, plaintiffs obtained discovery as to nine LBOs.  As the case proceeded, the parties fought numerous battles over the scope of discovery.  Plaintiffs filed two successful motions to expand discovery into additional phases, which allowed plaintiffs to uncover further conspiratorial conduct in an additional 18 transactions.  Plaintiffs obtained and reviewed over 13 million pages of documents and took the depositions of 48 fact witnesses, including many of defendants’ senior-most executives.

Defendants next filed individual and omnibus summary judgment motions on the overarching conspiracy claim, and certain defendants filed a separate motion on the HCA claim. After extensive briefing totaling over 1,000 pages, the submission of nearly 2,500 exhibits, and a two-day hearing, the court denied summary judgment on both claims and narrowed the overarching conspiracy to an overarching agreement between defendants to refrain from “jumping” each other’s announced proprietary deals.  The court found that TPG’s statement regarding the Freescale LBO that “KKR has agreed not to jump our deal since no one in private equity ever jumps an announced deal,” the fact that no announced proprietary LBOs were ever “jumped,” and other incriminating evidence “suggests that the practice was not the result of mere independent conduct.”

Defendants then filed renewed motions for summary judgment as to their participation in the redefined overarching conspiracy, which the court largely denied on July 18, 2013.  The court found the evidence as to each of the seven settling defendants sufficient “to exclude the possibility that each of the . . . [d]efendants [was] acting independently when choosing not to ‘jump’ announced proprietary deals.” Silver Lake subsequently moved for reconsideration of the July 18 order, which the court summarily denied.  Carlyle filed a motion to amend the court’s order to permit interlocutory review, which was also denied. Additionally, the court rejected Goldman Sachs, Carlyle, TPG, and Blackstone’s attempt to seek reconsideration of the denial of summary judgment as to the HCA claim.

With a hearing fast approaching on plaintiffs’ motion to certify the classes, trial scheduled for November 2014, and in the wake of numerous mediations and further informal settlement discussions, plaintiffs secured their first settlements with Bain and Goldman Sachs for $54 million and $67 million, respectively, in June 2014. The following month, plaintiffs reached a settlement with Silver Lake for $29.5 million, and in mid-July settled with Blackstone, KKR and TPG for $325 million. 

Carlyle, the lone remaining defendant, moved for summary judgment yet again, and moved to strike plaintiffs’ expert witnesses. In advance of trial, plaintiffs and Carlyle exchanged trial exhibits, witness lists, deposition designations and multiple expert reports. With trial only two months away, plaintiffs obtained a $115 million settlement with Carlyle, bringing the total settlement amount with all defendants to $590.5 million.

“This excellent result, after years of fierce litigation where there were no charges or allegations made by governmental authorities, demonstrates our Firm’s resolve to vindicate the rights of shareholders,” said David W. Mitchell, one of Robbins Geller’s lead trial attorneys.

Attorneys David W. Mitchell, Randi D. Bandman and Vincent M. Serra led Robbins Geller’s team on behalf of the plaintiffs.

Kirk Dahl, et al. v. Bain Capital Partners, LLC, et al., No. 07-12388 (D. Mass.).