Terra Firma v. Citigroup

Last Thursday, a federal court jury rejected a multi-billion dollar damage claim brought by Terra Firma, a British private equity firm, and returned a defense verdict on behalf of Citigroup, represented by Ted Wells, Jay Cohen, Jack Baughman and others at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP. The trial, which attracted widespread publicity in both the United States and the United Kingdom, was presided over by the Honorable Judge Jed Rakoff in the Southern District of New York.

Terra Firma alleged that it purchased EMI, a music company now in financial distress, as a result of misrepresentations by Citigroup. Terra Firma originally sought over $8 billion in damages plus punitive damages and hired three experts who issued reports supporting this claim. Compass Lexecon’s President, Professor Daniel R. Fischel, was retained by Jay Cohen of Paul Weiss on behalf of Citigroup to analyze the relevant economic evidence and respond to Terra Firma's three experts. Professor Fischel issued a report which strongly criticized plaintiff's three experts and concluded that plaintiff suffered no damages. Both sides then filed Daubert motions. Judge Rakoff excluded two of the three plaintiff's experts and after a hearing, limited the testimony of the third which lowered the potential recoverable damages significantly. None of Professor Fischel's proposed testimony was excluded.

The case proceeded to trial where plaintiff's remaining expert testified that Terra Firma suffered $2 billion in damages. Professor Fischel then testified about the results of various economic studies which exposed the flaws in plaintiff's damage claim and further demonstrated that the proper measure of damages was zero. After closing arguments, the jury returned a complete defense verdict.

Professor Fischel was assisted by a team in Compass Lexecon's Chicago office including David Gross, Jessica Mandel, Rahul Sekhar, Laurel Van Allen, Jerry Lumer, Tim McAnally, Cliff Ang, David Strahlberg, Otto Hansen and Zach Frankel.