Private equity firms lose bid to dismiss antitrust lawsuit

Updated with correction.

A federal judge declined to dismiss a case against 11 of the largest buyout firms and investment banks for allegedly colluding to suppress competition, according to an order filed Wednesday.

The lawsuit was brought by former shareholders of mega-buyout targets including $3.4 billion Detroit Police & Fire Retirement System and $477 million Omaha Police and Fire Retirement System.

U.S. District Court Judge Edward Harrington denied all motions for summary judgment but one brought by a who’s-who list of private equity firms including Bain Capital Partners, Blackstone Group, Apollo Global Management, Carlyle Group, GS Capital Partners, Kohlberg Kravis Roberts & Co., J.P. Morgan Chase and Permira Advisers.

The case concerned leveraged buyouts between 2003 and 2007, including SunGard, Neiman Marcus, Michaels Stores, Kinder Morgan, HCA, Freescale Semiconductor and Target Stores.

The judge dismissed the case against J.P. Morgan because the evidence did not establish that the firm was in the business of bidding on leveraged buyouts.

While Mr. Harrington denied the remaining 11 motions, he wrote that the firms could try to dispose of the action in another summary judgment motion, contending the evidence did not show a genuine dispute as to the private equity firms’ and investment banks’ participation in bid rigging.

The court narrowed the case to apply only to proprietary buyout deals, excluding transactions that resulted from auctions, noted Chris Burke, partner at law firm Scott & Scott, lead counsel for the plaintiffs in the case.

“It’s still a multibillion-(dollar) case. It will be easier to try because it will be cleaner and more manageable,” Mr. Burke said.

The next step is to seek class-action certification; the trial is expected to start as early as 2014.

J.P. Morgan executives declined to comment, said spokeswoman Charlotte Powell.

— Contact Arleen Jacobius at ajacobius@pionline.com | @Jacobius_PI