TH Lee Wins Dismissal In Collusion Suit

  • Firm’s ties to alleged conspiracy not established
  • Shareholders allege conspiracy not to “jump” others’ deals
  • Lawyer for shareholders still to pursue class certification

U.S. District Judge Edward Harrington in Boston said he erred in ruling on July 18 that email evidence established TH Lee’s ties to an alleged “overarching” conspiracy among private equity firms not to outbid, or “jump,” each other after transactions were announced. Harrington said he now believes the emails concerning the takeovers of casino operator Harrah’s and food service company Aramark left open the possibility that TH Lee “acted independently” in making its decisions.

The decision eliminates one target for shareholders in formerly publicly traded companies who claim they received too little for their shares in buyouts between 2003 and 2007.

Eight buyouts totaling over $100 billion remain in the case, as do seven defendants: Bain Capital Partners LLC, The Blackstone Group LP, The Carlyle Group LP, Goldman Sachs Group Inc’s private equity arm GS Capital Partners LP, Kohlberg Kravis Roberts & Co, Silver Lake and TPG Capital Management.

In the case of Harrah’s, which was bought for $17.3 billion by TPG and Apollo Global Management LLC, one TH Lee executive told another “I knew we typically don’t bust things up,” prompting the other to lament “ambulance chasing” of buyouts by rivals.

Meanwhile, in the case of Aramark, which a group including TH Lee and Goldman bought, one Goldman executive suggested getting the word out that the buyout was a “done deal,” which could create the implication that rivals knew to stand down.

But Harrington said that while the emails suggested a TH Lee link to an anti-jumping conspiracy, the first left open the possibility that the firm had “an independent fear of retaliation by TPG,” and the second the possibility that it wanted to deter a last-minute competing bid.

Christopher Burke, a lawyer for the plaintiffs, said the dismissal of TH Lee “doesn’t change the scope or magnitude of the case, and we’re going forward with our briefing on class certification.”

A TH Lee spokesman declined to comment.

In March, Harrington narrowed the six-year-old lawsuit to focus on the jumping claims, saying there was not enough evidence of a broader price-fixing conspiracy. Apollo was dismissed from the case in his July 18 ruling.

Jonathan Stempel is a correspondent for Reuters in New York.