Dahl v. Bain Capital Hearing Dec, 19, 2012

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1 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

2 * * * * * * * * * * * * * * *

3 KLEIN, et al * Plaintiffs, *

4 * vs. * CIVIL ACTION

5 * No. 07-12388-EFH BAIN CAPITAL PARTNERS, *

6 LLC, et al * Defendants. *

7 * * * * * * * * * * * * * * *

8 BEFORE THE HONORABLE EDWARD F. HARRINGTON UNITED STATES DISTRICT SENIOR JUDGE

9 DAY TWO MOTION HEARING

10 A P P E A R A N C E S

11 ROBINS, KAPLAN, MILLER & CIRESI LLP

12 2800 LaSalle Plaza 800 LaSalle Avenue

13 Minneapolis, Minnesota 55402-2015 for the plaintiffs,

14 By: K. Craig Wildfang, Esq. George D. Carroll, Esq.

15 Stacey P. Slaughter, Esq.

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17 ROBBINS GELLER RUDMAN & DOWD LLP Post Montgomery Center

18 One Montgomery Street, Suite 1800 San Francisco, California 94104

19 for the plaintiffs By: Patrick J. Coughlin, Esq.

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21 Courtroom No. 13

22 John J. Moakley Courthouse 1 Courthouse Way

23 Boston, Massachusetts 02210 December 19, 2012

24 10:00 a.m.

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Case 1:07-cv-12388-EFH Document 758 Filed 01/07/13 Page 1 of 227

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1 APPEARANCES, CONTINUED

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3 SCOTT & SCOTT LLP 707 Broadway, 10th Floor

4 San Diego, California 92101 for the plaintiffs

5 By: Christopher M. Burke, Esq. Walter W. Noss, Esq.

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7 WAGSTAFF & CARTMELL LLP

8 4740 Grand Avenue, Suite 300 Kansas City, Missouri 64112

9 for the plaintiffs By: Tyler W. Hudson, Esq.

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11 KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W.

12 Washington, D.C. 20005 for the defendants

13 By: Craig S. Primis, Esq. David R. Dempsey, Esq.

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15 SIMPSON THACHER & BARTLETT LLP 425 Lexington Avenue

16 New York, New York 10017-3954 for the defendants

17 By: Joseph F. Tringali, Esq. Ryan A. Kane, Esq.

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19 SIMPSON THACHER & BARTLETT LLP 1155 F Street, N.W.

20 Washington, D.C. 20004 for the defendants

21 By: Peter C. Thomas, Esq.

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3 SULLIVAN & CROMWELL LLP 125 Broad Street


5 By: Richard C. Pepperman, II, Esq.

6 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

7 One Beacon Street Boston, Massachusetts 02108

8 for the defendants By: James R. Carroll, Esq.

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10 WEIL, GOTSHAL & MANGES LLP 1300 Eye Street NW, Suite 900

11 Washington, D.C. 20005-3314 for the defendants

12 By: Carrie M. Anderson, Esq.

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14 WILLKIE FARR & GALLAGHER LLP 787 Seventh Avenue


16 By: Wesley R. Powell, Esq.

17 LATHAM & WATKINS LLP

18 555 Eleventh street, N.W., Suite 1000 Washington, D.C. 20004-1304

19 for the defendants By: William R. Sherman, Esq.

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21 WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue


23 By: James W. Quinn, Esq.

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3 SUSMAN GODFREY LLP 1000 Louisiana Street, Suite 5100

4 Houston, Texas 77002 for the defendants

5 By: Mary Kathryn Sammons, Esq.

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22 CAROL LYNN SCOTT, CSR, RMR Official Court Reporter

23 One Courthouse Way, Suite 7204 Boston, Massachusetts 02210

24 (617) 330-1377

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1 P R O C E E D I N G S

2 THE CLERK: All rise.

3 Court is in session. Please be seated.

4 MR. WILDFANG: Your Honor, may I address the

5 Court before we get started this morning?

6 Just a suggestion, Your Honor absorbed a lot of

7 information yesterday and again today you are going to do

8 that. We'd like to have a few minutes at the end of the day

9 just to sort of sum up and tie things together.

10 MR. PRIMIS: Good morning, Your Honor. Craig

11 Primis from Kirkland & Ellis. I'm here on behalf of Bain

12 Capital today. And before I get started, Judge, the first

13 thing I want to do on behalf of all the defendants is to

14 thank you for all the time that you gave us yesterday to

15 present our argument. You were very generous with your time

16 and we appreciate it.

17 I also want to say that we have ten arguments

18 today, ten separate arguments, and each side is going --

19 THE COURT: They better be short.

20 MR. PRIMIS: Short, yes, and that's my point.

21 Each side had been given ten minutes for these. The

22 defendants have talked and we're going to do our level best

23 to stick to that ten minutes and abide by that. And we hope

24 our colleagues on the other side will do so as well, just so

25 we can get through all the material today.


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1 So with that in mind, and I hope I don't violate

2 the promise I just made by starting off first, but I'm here

3 for Bain Capital and I want to address our individual

4 motion.

5 As the defense group explained yesterday with

6 Mr. Tringali, there is no overarching conspiracy. There is

7 a complete failure of proof on that central allegation.

8 And --

9 THE COURT: Let me ask you this.

10 MR. PRIMIS: Yes.

11 THE COURT: Is the thrust of your argument

12 that there is no conspiracy or that you are not a member of

13 the conspiracy? I don't know whether there is a distinction

14 there but there might well be.

15 MR. PRIMIS: The argument is really, they're

16 the same argument from our perspective, Judge, because there

17 was no conspiracy. We couldn't have been part of a

18 conspiracy that didn't exist. And I'm not going to say that

19 the rest of these guys were in a conspiracy and we weren't

20 in it. There is no overarching conspiracy. That is our

21 position.

22 And what we wanted to do in our standalone motion

23 is just to underscore that Bain was not part of any

24 overarching conspiracy. And we have our own evidence from

25 our files and from our conduct that underscored the lack of


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1 any overarching conspiracy that we could have been a part of

2 so our motion is focused on Count 1, just like yesterday.

3 And we do not want to reargue all of the good, strong points

4 that Mr. Tringali made yesterday. Bain Capital is not going

5 to do that. The defendants are not going to do that. We

6 think the Court understood both sides' arguments yesterday.

7 What I want to do is just highlight a few pieces of

8 evidence specific to Bain that underscore that there is no

9 overarching conspiracy. And I am not going to walk through

10 every transaction Bain was involved in. Time doesn't permit

11 it and at the end of the day it's really not relevant to the

12 question that Your Honor posed to the plaintiffs which is

13 where is the proof of the overarching conspiracy and the

14 Court didn't get an answer to that. And I'm going to show

15 you some additional documents and just a few points from

16 Bain's files that show that we were not part of any

17 overarching conspiracy.

18 Before Your Honor came in I handed up a very short

19 slide deck, just four slides that says, "Bain Capital,

20 Individual Summary Judgment Motion."

21 And the first document I want to highlight for the

22 Court is one that the Court may have seen or focused on

23 before and it's on slide one. And it has come to be called

24 in this case the "Wow" email. And the "Wow" email, I just

25 want to give a little context.


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1 If there were an overarching conspiracy in this

2 case, this email written contemporaneously with the closing

3 or with the signing of the Neiman Marcus transaction, this

4 email could not exist. Mr. Bekenstein who wrote this email

5 is the managing director of Bain who handled the Neiman

6 Marcus transaction. He is the senior most level, at the

7 senior most level of Bain Capital.

8 THE COURT: I thought Romney was.

9 (Laughter.)

10 MR. PRIMIS: Judge, without wading into a

11 political debate, I think that Mr. Romney left the firm well

12 before the events in this case. At least that was his

13 position. I don't know if the electorate bought it.

14 But, in any event, Mr. Romney is gone.

15 Mr. Bekenstein is one of the handful of individuals who were

16 managing directors of Bain and he was in charge of this

17 Neiman Marcus transaction.

18 Now, if there were an overarching conspiracy, if

19 this deal, the Neiman Marcus deal had been allocated to TPG,

20 this document wouldn't exist and Mr. Bekenstein would have

21 had advance knowledge of who's going to win the Neiman

22 Marcus transaction and at what price.

23 So what does this document show? The bottom half

24 of the document shows that Mr. Bekenstein found out who won

25 at Neiman Marcus from the Wall Street Journal. He had no


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1 advance knowledge. He had no information that TPG was going

2 to win. And there was no overarching conspiracy that told

3 everybody how to bid, okay.

4 And when he gets it, what does he do? He sends it

5 to his partners who were on the deal and he writes, "Wow."

6 Now, he put it in the largest typesetting he could do on his

7 computer. He put it in bold. He put ten exclamation

8 points. And he said, "If we were going to lose, I am glad

9 it is by a lot."

10 What this document shows is he had no idea what the

11 winning bid was. He had no idea who was going to bid and

12 that Bain Capital was never prepared to bid as much as the

13 winner. There was no allocation of this deal to any

14 particular firm. There was a competitive auction and there

15 is no overarching conspiracy.

16 Now, what's equally significant about this

17 document, Judge, is that the plaintiffs have had this for

18 years. They had Mr. Bekenstein at his deposition. They

19 questioned him for eight hours. You would think they would

20 show him this document and ask how it fits into their theory

21 of the overarching conspiracy. The plaintiffs went eight

22 hours and never showed him this document. They never asked

23 him what does this mean, how is it consistent with the


25 But you know what? At the end of the deposition we


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1 did, because we got to ask questions too. So we showed

2 Mr. Bekenstein this document. And this is the testimony the

3 plaintiffs didn't want in the record. It's why they didn't

4 show it to him. It's on the next slide.

5 "QUESTION: Why would you put 'wow' in bold with

6 ten exclamation points in a huge font in this email?"

7 And his answer, "Because I was so totally and

8 completely shocked that someone would pay $100 when we

9 thought a very high-stretched price was 92."

10 That is evidence of competition, not collusion, and

11 it disproves the overarching conspiracy allegation.

12 The next document I want to show, Judge, and,

13 again, I am not going to go through every transaction, just

14 three.

15 The next one is on slide three. And this relates

16 to a deal where Bain didn't lose but Bain won and they

17 acquired Toys "R" Us which I'm sure Your Honor is familiar

18 with.

19 Now, Bain won that auction fair and square. And it

20 went into a bidding contest with another defendant, Goldman

21 Sachs. Now, Goldman Sachs found out that Bain had won the

22 auction and these are emails from Goldman Sachs' files.

23 In the top email Mr. Cornell says, "If, if, if this

24 is true." That's three ifs. He had no idea in advance what

25 Bain was going to bid on Toys "R" Us. He says, "If, if, if


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1 this is true, I feel better, but I'm also wondering what are

2 they thinking?" He can't believe the price that Bain paid

3 once he learns about it after the auction is closed.

4 And then the Goldman Sachs team, they were actually

5 mocking Bain for paying that much. If you look down at the

6 next email, Mr. Berlinski, another senior member of Goldman

7 Sachs, he writes just to pay for this deal, "Every Bain

8 partner will be obligated to buy $100,000 of toys annually

9 to support the cause."

10 Now, that's a lot of Barbie dolls, Your Honor; but

11 what he's saying is this is a crazy price. We had no

12 advance knowledge. We didn't even have current knowledge.

13 We found out after the auction was over and Bain won fair

14 and square at a very high price.

15 One more example and then I will stop with that is

16 the Michaels transaction. It's on the next slide. Michaels

17 is an arts and crafts department store and they go

18 throughout the country. Bain acquired the Michaels

19 department store chain through an auction. The auction was

20 competitive. It had three rounds of bidding.

21 Now, one of the companies that was competing

22 against Bain in the Michaels transaction was KKR. And on

23 slide 4 we have an internal email chain that says what KKR

24 was thinking about Michaels.

25 On the bottom email which is the first one from


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1 Mr. Calbert he had learned that Bain was in the competition

2 and he goes, "Bain is hot on our trail on Michaels."

3 Now, if this deal had been allocated to Bain

4 because Bain won, if that's the conspiracy, Mr. Calbert

5 should have said oh, well, we'll get the next one. But

6 that's not what they say.

7 KKR writes back, "Don't let them win." That line

8 could not exist in a contemporaneous email if there is an

9 overarching conspiracy. "Don't let them win." It doesn't

10 say let them win, we'll get the next one. It says, "Don't

11 let them win."

12 And Mr. Calbert goes back to say, "I'm giving it

13 everything I have (and more)." In other words, I'm

14 competing. "If they beat me, they have crossed over into

15 'stupid territory.'"

16 And, in fact, Bain did beat KKR and that was a

17 final price that KKR had concluded was too stupid to pay and

18 they were at that point happy to let Bain win it. So we

19 have three examples here where the competitors and three of

20 the auctions in this case have no advance knowledge, no clue

21 who is going to win. There is active competition. There is

22 surprise. And then there is actual mocking of the winner

23 for paying too much. That is not an overarching conspiracy.

24 Now, what do the plaintiffs do with this evidence?

25 Because we put it in our briefs, there's a lot of briefs, we


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1 put it in the omnibus brief and we put it in the Bain brief.

2 They ignore it. They never address these documents in their

3 briefing. And the plaintiffs never showed these documents

4 to the witnesses.

5 And the reason they didn't is they didn't want this

6 evidence in the record and they didn't want witnesses

7 telling the Court what really happened.

8 Now, in a case like this, and I'm not going to redo

9 the Matsushita standard, but we know that once there is

10 evidence of independent conduct, they need to find evidence

11 that tends to rebut it but they can't ignore it, which is

12 what they have done in this case.

13 Now, the plaintiffs deposed essentially every

14 senior manager at Bain. They never asked a single one of

15 them if they were aware of an overarching conspiracy, if

16 they participated in an overarching conspiracy, if they had

17 ever heard of an overarching conspiracy. But once again we

18 asked those questions because we get to do that at the end

19 and the Bain managing directors not only denied it

20 unequivocally, they didn't even know what the plaintiffs

21 were talking about. And that testimony is in the record and

22 it is unrebutted.

23 Now, before I sit down I just want to say what we

24 expect to hear from the plaintiffs today. They're going to

25 pluck out individual documents from individual deals, the


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1 same individual deals that they disclaimed yesterday were

2 individual conspiracies. And what they're going to do is

3 say, well, this deal doesn't look as competitive as it might

4 have been and we think they didn't compete in this deal; but

5 they're not going to be able to answer the question the

6 Court asked yesterday which is where is the proof of the

7 overarching agreement and where does it put Bain Capital in

8 an overarching agreement.

9 So I'll reserve the rest of my time for rebuttal

10 but our position is quite clear. As Mr. Tringali argued

11 yesterday, there is no overarching conspiracy and Bain

12 Capital never agreed to one.

13 MR. NOSS: Walter Noss, Scott & Scott, on

14 behalf of the plaintiffs.

15 Your Honor, I have a presentation. May I approach

16 the bench?

17 THE COURT: Yes.

18 (Whereupon, a slide deck presentation was given to

19 the Court, the Clerk and the Law Clerk.)

20 MR. NOSS: Your Honor, just as I begin and as

21 I began yesterday with Apollo, what the standard is here to

22 hold a defendant in, and I remind you that it is knowledge,

23 intent and interdependence.

24 There is a lot of evidence. You heard some

25 evidence from Mr. Primis. He gave you some examples of


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1 their defense, facts --

2 THE COURT: Keep your voice up a little.

3 MR. NOSS: Facts they would argue in defense

4 of this matter. I want to show you evidence of bid rigging

5 by Bain, of standing down. I want to show you evidence

6 about overarching conspiracy, evidence in the various deals,

7 the various acts that Bain took. The joining of clubs to

8 reduce competition. Again, never jumping announced deals.

9 that is, it's my deal. Remember, Your Honor, if it's my

10 deal, you stay out of it. If it's your deal, I'll stay out

11 of it. The manipulation of auctions, bid rigging in three

12 different cases. Monitor, reward and discipline.

13 And I'll move quickly here but Bain manipulated the

14 auctions in AMC and Loews and so -- and AMC was a Goldman

15 transaction that brought Bain in and Bain's responsibility

16 was the Loews end. What they did was in putting these two

17 companies together they manipulated the Loews auction.

18 Now, Bain agreed to bid separately. Bain was

19 bidding separately with Carlyle but before and during the

20 process of the bidding there was communications between

21 Carlyle and Bain and these are handwritten notes to reflect

22 this.

23 Mr. John Connaughton -- these are Carlyle's notes.

24 John Connaughton is a senior director at Bain. Those

25 numbers 1450, 1550, those are prices for the company. This


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1 is handwritten notes between competitors discussing prices,

2 discussing collapse at the 11th hour and discussing how

3 they're going to divide it up.

4 And what happens is Bain wins. And what we see is

5 Bain intends to officially invite us in at the point of

6 signing. In other words, they agreed, they agreed that no

7 matter who won -- and we'll see this again and again and

8 again -- they're both going to split the company.

9 Fundamentally, Your Honor, why would you ever

10 compete if you know that you're going to come in at the end?

11 You're not.

12 In these other deals Bain receives various

13 investment allocations, Nalco, Texas Genco, so when they say

14 they didn't, they aren't involved in these deals, they're

15 affiliates of parts of them afterwards.

16 But let's skip ahead to the Toys deal which we

17 heard about. Beginning as early as January Bain and KKR

18 wanted to partner, though they pursued the deal separately.

19 Eventually they came together. And the reason, desire to

20 effectively eliminate a competitor.

21 Let me give you another instance, and Your Honor

22 pointed yesterday about the HCA deal having powerful

23 evidence, that you thought it was powerful. The SunGard

24 deal, Your Honor. In SunGard you had Silver Lake, you had

25 Bain, KKR, Lee and Carlyle, one group. TPG and Blackstone


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1 were another group. These are the only people who competed

2 for this deal at this point. These are the big boys. This

3 is the big deal.

4 This document reflects conversations from Bain's

5 senior management director Mr. Pagliuca and Mr. Bonderman at

6 TPG. And what they're figuring out is we're both competing

7 for this. Are we going to compete or should we just come

8 together?

9 What did they decide? And this is reflected in an

10 email right here (indicating). And this email copies the

11 senior people, Tony and Jim. That's Tony James, the head of

12 Blackstone, Jim Coulter, cofounder of TPG.

13 "I wanted to confirm our conversations yesterday.

14 We agreed to bring your firms into the Solar Consortium

15 organized by Silver Lake on an equal basis."

16 Express evidence of an agreement to wipe out

17 competition. And Bain knows this is wrong because

18 Mr. Pagliuca writes, "The management, financing sources, and

19 board don't know this so for now need to remain confidential

20 as if it gets out will cause more problems."

21 In other words, they know the just wiped out

22 competition. They can't go right to the board and so they

23 actually ask Blackstone and TPG to just bow out and not

24 elaborate until they can get their story straight on why

25 this happens. And that's what TPG agrees to do.


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1 And we heard about contemporaneous documents and

2 what's said and how that's, what kind of -- there is weight

3 to that because that's what's being written at the time

4 before the lawsuit and for the deposition testimonies where

5 people denied things.

6 And SunGard -- this is a Blackstone memorandum.

7 They don't talk about the need for equity or

8 diversification, these arguments that you hear today and

9 you've seen in the papers. "As a result of the threat or

10 our competing offer, the Silver Lake consortium invited

11 Blackstone and TPG to join its group."

12 Not because they needed more equity, not to

13 diversify, as a result of competition they eliminated it.

14 EDMC is another example of a bid rig where you have

15 one group, Goldman/Providence on one hand, and you have Bain

16 and Carlyle on the other, and they make an agreement:

17 Whoever wins brings the losers in or gives the losers the

18 opportunity to come in.

19 And so these NDAs, which Your Honor asked about,

20 nondisclosure agreements, prohibit cross talk between

21 competitors. And they all signed it. You can't talk to

22 your competitors.

23 But what do they do? Here is an email from Carlyle

24 two or three days before the bids. Carlyle is emailing its

25 competitor on behalf of itself and on behalf of Bain, "Can


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1 you please call me on cell? New developments." And we say,

2 "Just tried you, when is a good time to reach you?"

3 And what happens is, as reported by email, they're

4 discussing the specifics of the bid. Now, the bidding on

5 EDMC happened just like this, Your Honor. There is

6 communications right before the bid with the defendants.

7 Providence and Goldman bid 42.50. Bain and Carlyle bid 42,

8 fifty cents less. There is another round. There is

9 communication. Carlyle or Providence and Goldman go up to

10 43. Bain and Carlyle go up fifty cents. That's it, it's

11 done, and they get the opportunity to come into the deal per

12 their agreement.

13 Again, just like Loews, I have an agreement with

14 you that we're going to split this up ahead of time. Why am

15 I going to bid? It makes no sense.

16 You heard about the Michaels deal, one of the

17 documents -- I'll address each of the documents here real

18 quickly -- but Michaels --

19 THE COURT: Let me ask you this:

20 Let's say that the market has the price, say $50.

21 Are LBOs required to make purchases at $60? Is that -- or

22 if they purchase it, say, for 51, what I am getting at is --

23 maybe I am not explaining it well but is there a requirement

24 that LBOs have to bid to raise the price artificially?

25 MR. NOSS: There is no requirement, we don't


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1 dispute that there is actually no requirement of

2 competition. But that's not what this case is about.

3 When you decide you are going to compete, you can't

4 agree with your competitors that you're not going to.

5 We submit from our economic expert reports that the

6 bids in these cases in a competitive market, that's what

7 Williams talk about in auction theory, that these prices

8 aren't right.

9 So our point is not that you have to pay if a

10 competitor's market value is 50 bucks, you have to pay $51,

11 no. What we are saying is it's below that. The reason is

12 because they're bid rigging. They're standing down on each

13 other's deals. And as a result the evidence shows it's less

14 than what a competitive market price should have been but

15 for this conspiracy.

16 THE COURT: Through the course of this, let's

17 assume that the stock market showed that it was 50. Are

18 there any or many of the transactions where the price paid

19 was less than 50?

20 MR. NOSS: So there is a stock price for the

21 company --

22 THE COURT: Say you look in the paper and it

23 says $50 a share.

24 MR. NOSS: Sure.

25 THE COURT: Of these 27 transactions, are


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1 there any where the price was 48?

2 MR. NOSS: These transactions occur above the

3 stock price but that's not --

4 THE COURT: No, I understand that. But my

5 question is are there any examples of these 27 transactions

6 where the price was lower than what was reported in the

7 paper at the time of the purchase?

8 MR. NOSS: No, Your Honor, and that's, but

9 that's not the measure.

10 THE COURT: I understand that. But in a way,

11 and I must say I don't know what the law is on that, but

12 what the plaintiffs might be requiring is that people in

13 this business, the LBOs, are required to make purchases far

14 in excess of the real worth of the stock.

15 MR. NOSS: That's not what we were suggesting

16 at all. And let me --

17 THE COURT: So here's my question, just so I

18 will get a sense of it. I don't know because I haven't seen

19 it in the multitudinous amount of paper I read. Is there

20 any example of these 27 transactions where the price was

21 less than 50, if 50 was the going price at the time of the

22 sale?

23 MR. NOSS: There is not, Your Honor, but,

24 again, the --

25 THE COURT: I know. I understand. I see the


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1 distinction but that's my question, is there --

2 MR. NOSS: No.

3 THE COURT: -- was there any time when it was

4 48 --

5 MR. NOSS: When it was less than --

6 THE COURT: -- or are you demanding these

7 people, who in a sense cut their own throat --

8 MR. NOSS: No, no, no, not at all, Your Honor.

9 Your Honor, these deals occur at what they call a premium

10 above the stock price because they're taking control of the

11 company so they have to pay a premium.

12 What we're saying is -- now, they say, look, we've

13 paid a premium above the stock price. Our argument is the

14 damages, the damage is that they should have paid more but

15 for their agreement.

16 THE COURT: I understand that. I understand

17 that.

18 (Whereupon, counsel conferred.)

19 THE COURT: I know that, that when there is a

20 sale of a company that you are going to pay more. I

21 understand that.

22 The question is how much more?

23 MR. NOSS: Well, that's what we contend, that

24 because of these agreements they didn't pay any competitive

25 price. Not that they didn't pay a premium to the going


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1 market price. They certainly did that. We don't contest

2 that. What we say is that but for these agreements, they

3 would have paid more.

4 THE COURT: Maybe, but is the real, is the

5 real value of the stock that much as you were requiring them

6 to pay?

7 MR. NOSS: Well, in this case -- let's go back

8 to yesterday. In this case we see valuations --

9 THE COURT: Let's take the Nabisco case where

10 supposedly it went up 40 percent higher. Is that what -- I

11 mean, do LBOs have to do that or do they have to pay 40

12 percent higher than it is worth?

13 MR. NOSS: There is no magic number of

14 percentage.

15 THE COURT: No, but 40 is --

16 MR. NOSS: We contend --

17 THE COURT: I mean, I mean, you can't require

18 corporations to at least engage in that type of competition.

19 MR. NOSS: Your Honor, actually my partner

20 Mr. Burke has corrected me. In PanAmSat the purchase price

21 was less than the stock price.

22 THE COURT: What transaction was that?

23 MR. NOSS: That's in the PanAmSat transaction.

24 But --

25 THE COURT: PanAm?


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1 MR. NOSS: PanAmSat, yes, Your Honor.

2 But to your point, we're not -- what we are saying

3 is they can't agree not to compete. And what we see in the

4 record is valuations such as --

5 THE COURT: I understand, I am not talking

6 strictly the law. I am talking somewhat practice, practice

7 that demanding -- I understand that a premium or a higher

8 price has to be paid in these circumstances. But when you

9 think of the Nabisco case, 40 percent higher? I mean, no

10 reasonable businessman would engage in that type of

11 purchasing.

12 MR. NOSS: But one of the defendants in this

13 case just did that so that's kind of our point, is that the

14 competitive market prices go up. Here they're depressed

15 because of the agreement.

16 THE COURT: Okay.

17 MR. NOSS: I know I've gone long so I just

18 want to highlight a couple of things really quickly.

19 So we see in EDMC, you know, again, the

20 suppression. The same thing in Philips. My partner

21 Mr. Burke will cover Silver Lake for you.

22 The Michaels deal they traded favors. So KKR who

23 we saw, you know, I'll take care of Michaels, well, KKR and

24 Apollo were offered a piece afterwards of that deal and Bain

25 was okay with it. You scratch our back, we scratch your


25

1 back.


3 Bain came in and they referred to three documents,

4 I think three or four.

5 MR. NOSS: Sure, I have them right here.

6 THE COURT: Relating to the overarching

7 conspiracy allegation, that is what we are here for.

8 MR. NOSS: Right.

9 THE COURT: How do you answer those?

10 MR. NOSS: Certainly I can answer those.

11 First of all, the "wow" email it's called, right.

12 It's not -- defendants have continually -- and I was making

13 this point yesterday -- have continually mischaracterized

14 what the overarching conspiracy is. And they do it so they

15 can fit it within the body of law and get rid of this case

16 today.

17 THE COURT: An overarching conspiracy is a

18 conspiracy of these 11 entities to engage in fixing the

19 price of approximately 27 or a substantial number of the 27

20 transactions. That is what is alleged.

21 MR. NOSS: Exactly, exactly right. But what

22 defendants characterize it as, well, this kind of pure

23 allocation strategy where everyone knows exactly what deal

24 they're going to get. They're going to get X number of

25 deals. They're going to make X amount of money. That's not


26

1 the conspiracy, Your Honor. The conspiracy is I have a deal

2 and you stay away from it. We don't compete. That's the

3 gentlemen's agreement, the club etiquette. So when he says

4 if we're going to lose, oh, this is evidence because if they

5 knew it was preassigned, that's not the conspiracy we

6 alleged. And we don't need to allege and prove that

7 conspiracy to prove a violation of the antitrust laws.

8 THE COURT: Yes, but a conspiracy is a meeting

9 of minds.

10 MR. NOSS: That's right.

11 THE COURT: It seems to me, or at least there

12 is an interpretation that this fellow Bekenstein, his mind

13 hasn't met at least with respect to --

14 (Laughter.)

15 MR. NOSS: Your Honor, let me offer you the

16 plaintiffs' interpretation of this event.

17 THE COURT: All right.

18 MR. NOSS: All right. And this just really

19 comes down to a factual interpretation and who is going to

20 decide that. Well, Your Honor should let a jury decide

21 that.

22 If we are going to lose, that can be as

23 consistently read in the conspiracy. We're going to lose,

24 it's not our deal. Wow, I'm glad it's by a lot. It wasn't

25 my deal, I'm glad I didn't have to buy that one at that


27

1 price. That's not inconsistent with the conspiracy. In

2 fact, Bain, if I can flip all the way back in my

3 presentation, Bain has a habit of telling people, their

4 parting line is when they lose they paid too much. It's in

5 their documents.

6 In fact, in the Freescale deal, you know, about HCA

7 and Freescale when they stood down and they, you know, they

8 upset their competitors and they had to stand down, that was

9 specifically mentioned -- can you go to the second to last

10 slide, please.

11 Specifically let's not do our usual party line of

12 paid too much. So that's an element. That's not

13 inconsistent with the conspiracy. The same thing with

14 Mr. Bekenstein's testimony here. That's just the same

15 thing. It wasn't their deal. I'm glad we didn't pay that

16 much.

17 There is nothing, there is nothing contradictory to

18 the conspiracy that we have alleged and we can prove that

19 competitors from time to time are upset, they don't get a

20 deal or that they think the other side paid too much for it.

21 That's not inconsistent with our overarching conspiracy

22 which is don't drive up the price.

23 So, again, we see evidence in the record that Bain

24 is bid rigging in Loews, EDMC and in Philips/NXP. We see

25 connections between Loews and AMC. We know EDMC is


28

1 connected to Michaels because they owe paybacks. We see

2 Kinder Morgan is involved because Bain is tied to that

3 through paybacks. And then we see Bain standing down. And

4 that's consistent with conspiratorial conduct.

5 So, and this slide in evidence shows, Your Honor,

6 there is plenty of evidence, there is plenty of stand downs,

7 there's plenty of actions that are consistent with an


9 And with that I'll end my argument as I know I have

10 gone way past my allotted time.

11 THE COURT: All right. He has set forth a lot

12 of interaction between Bain and a lot of these alleged

13 co-conspirators with respect to certain transactions. What

14 do you say?

15 MR. PRIMIS: First, Judge, he did exactly what

16 I predicted, which is put up deals -- put up emails pulled

17 out of specific deals, characterize them in a certain way

18 and then we say we didn't compete.

19 What I would say to that is they're not probative

20 at all of the overarching conspiracy.

21 THE COURT: Why not?

22 MR. PRIMIS: Because they don't, nothing that

23 Mr. Noss showed you -- and he was moving very quickly and

24 saying a lot of things, and I think that's intentional.

25 None of them tied together the conduct in any sort of way.


29

1 You pointed out Mr. Bekenstein had no meeting of

2 the minds whatsoever on that Neiman's transaction. There is

3 no meeting of the minds among these 11 defendants, Bain

4 Capital with them, across anything that he just showed you.

5 All that you have seen on these slides that he

6 shows are in the course of transactions companies that

7 sometimes partner with each other and companies that

8 sometimes compete --

9 THE COURT: Is your argument that there is

10 no -- there is 27 conspiracies but not one?

11 MR. PRIMIS: There is no -- to be clear, there

12 is no conspiracy. There is not one overarching one and

13 there is not 27. But even if the Court had some concern

14 that of the 27 there was some handful of them where there

15 might be factual disputes --

16 THE COURT: Let's say this.

17 MR. PRIMIS: Okay.

18 THE COURT: In HCA --

19 MR. PRIMIS: Yes.

20 THE COURT: -- although an argument was made

21 yesterday by the defendants that, you know, but at least

22 that one is fairly strong and with the sequence of stepping

23 down it would appear that it is a jury question. Why they

24 stepped down, the inference is that it might have been

25 because of the order of whoever issued it, I forget the


30

1 gentleman's name; but the answer is that, as argued by the

2 defense counsel, namely, that they thought it was already in

3 the bag. But that is at least sufficient I would think on

4 first glance to get to the jury, and there may be others.

5 MR. PRIMIS: Judge, I can't do better than

6 Mr. Thomas did yesterday at setting forth the defendants'

7 position on why the HCA transaction --

8 THE COURT: He made an excellent argument.

9 MR. PRIMIS: And I don't want to redo that

10 here. All I would say is just a couple of points as it

11 relates to Bain Capital.

12 First off, Bain was one of the acquiring parties of

13 HCA. Bain was sued by shareholders who tried to hold up the

14 transaction and Bain and the other purchasers settled that

15 case and Bain's released from HCA, okay. So we're not even

16 in Count 2.

17 And you can't save Count 1 because Count 2 might

18 have validity, and I'm here arguing on Count 1 but in

19 particular on HCA since the Court raised it --

20 THE COURT: What I am saying is HCA is in

21 Count 1 --

22 MR. PRIMIS: It is.

23 THE COURT: -- as one of the transactions and

24 that is, compared to the others, fairly strong.

25 MR. PRIMIS: And Bain, as I said, the evidence


31

1 relating to HCA can't be used against Bain because we have

2 been released from it.

3 THE COURT: No, I am not saying it is.

4 Suppose there were 27 transactions who had the sufficiency

5 of the evidence as set forth in HCA. Would you say that

6 although there is 27 conspiracies there is not one overall

7 overarching conspiracy?

8 MR. PRIMIS: I would say, yes, I would say --

9 THE COURT: It is a theoretical question I

10 suppose but what is your answer?

11 MR. PRIMIS: If there are separate

12 conspiracies, there is still no meeting of the minds. Under

13 the antitrust laws there has to be a conscious commitment to

14 a common scheme. And there is no common scheme if you have

15 all these different conspiracies just hypothetically.

16 So the first answer to the question is absolutely,

17 27 conspiracies or 20 or 15 or 3, that's not a global

18 overarching conspiracy. And we were all here yesterday and

19 we heard in court and it's on record that the plaintiffs are

20 not bringing the case that Your Honor just described and so

21 they shouldn't be allowed to proceed on a case they don't

22 even want to bring. That's the first answer.

23 The second answer is I only showed the Court

24 examples from three transactions so, and there was clearly

25 competition, a high price paid and unwitting losers in those


32

1 deals and they have no answer for it, okay.

2 And you asked Mr. Noss, he can't explain it. When

3 you asked him how those fit in with the overarching

4 conspiracy, they keep changing what the conspiracy is just

5 to try and survive today. That's not the purpose of summary

6 judgment. We know what the conspiracy is and the evidence

7 doesn't line up with it.

8 And the only thing I would just conclude on,

9 because I know HCA is troubling the Court, there is one

10 piece of evidence that didn't come to the Court yesterday on

11 HCA. I just want to close by showing it to Your Honor, if I

12 could approach.

13 Here's one document --

14 THE COURT: I thought you weren't involved in

15 this case.

16 MR. PRIMIS: We're not but -- well, you

17 pointed out it's in Section -- I don't want to waive my

18 right to stand on that release but I think that is an

19 important document that the Court might want to see.


21 (Whereupon, a document was given to the Court and

22 the Law Clerk.)

23 MR. PRIMIS: And this will be brief.

24 Judge, this is an email from the HCA transaction.

25 It's out of Bain Capital's files. Mr. Pagliuca is a


33

1 managing director at Bain. And if you look at the re: line

2 on the email, "It says Warburg, Apollo, BC," that's

3 Blackstone, "competing bid for HCA?"

4 And what is Mr. Pagliuca's response? "Bring it

5 on." Okay. This is not somebody who --

6 THE COURT: There are a lot of tough guys in

7 that industry.

8 (Laughter.)

9 MR. PRIMIS: There are. And he said, "Bring

10 it on." There was no fix. He was ready for the competition

11 and Bain Capital competes. We should be let out of Count 1

12 of the complaint.

13 Thank you, Your Honor.

14 MR. NOSS: I just need to address this

15 document, Your Honor, very quickly.

16 Mr. Primis is an excellent lawyer. Bring it on,

17 there is no evidence in the conspiracy.

18 If you look at our 56.1 Statement of Facts, I

19 deposed Mr. Pagliuca. He testified that the price they

20 paid, 51, that's all they had. That's all the gas they had

21 left in the tank. So the reason he's saying bring it on,

22 because they can't, according to his testimony, they

23 couldn't bid any higher.

24 The reason he's saying bring it on is because he

25 knows nobody is going to do it because I showed you


34

1 yesterday Apollo wasn't going to topple the KKR deal.

2 Again, Your Honor, these are factual questions that

3 need to go to a jury.

4 Thank you.

5 THE COURT: Okay. Next -- I almost said "next

6 witness."

7 (Laughter.)

8 MR. WILDFANG: Your Honor, Craig Wildfang for

9 the plaintiffs. I want to make a suggestion to the Court

10 that I think might expedite things.

11 If Your Honor would just ask one question of every

12 defense counsel, do they have an example of where their

13 client jumped somebody else's deal after the deal was

14 announced and I think they will all have to state no, they

15 don't have an example of that.

16 The agreement, the overarching conspiracy here,

17 Your Honor, was once there is an announced deal, no one is

18 going to compete. So ask them if there is an example of

19 that.

20 (Pause in proceedings.)

21 THE COURT: Are you representing all four?

22 MR. THOMAS: No, for today I am representing

23 Blackstone Group, Your Honor. Peter Thomas on behalf of the

24 Blackstone Group.

25 THE COURT: And they are one of the four --


35

1 MR. THOMAS: They are one of the HCA

2 defendants.

3 THE COURT: So what do you say, the other

4 three were involved?

5 MR. THOMAS: No.

6 (Laughter.)

7 MR. THOMAS: There was not a conspiracy on HCA

8 and there was -- I associate myself entirely with

9 Mr. Primis' arguments that -- the point of my argument here

10 is that there was no single overarching conspiracy as pled

11 in Count 1 and Blackstone didn't participate in any such

12 conspiracy.

13 Just as an addendum on HCA --

14 THE COURT: So you are doing Count 1 now.

15 MR. THOMAS: We're in Count 1.

16 THE COURT: Yes, that is right.

17 MR. THOMAS: Right. Just as an --

18 THE COURT: Yesterday you argued on Count 2.

19 MR. THOMAS: That's right. But I did want to,

20 Your Honor, just because HCA was raised at the end of that

21 last argument. Your Honor asked me yesterday at one point

22 about Tommy Frist. He is the cofounder of HCA that

23 handpicked Bain and KKR. And you asked me wouldn't he have

24 been happier if the price had been raised. You know,

25 wouldn't he have been happier if they got a bid for 55


36

1 rather than 51.

2 And one additional point that I think it is very

3 important to make sure Your Honor understands is that,

4 again, Mr. Frist or Dr. Frist was a buyer, he was part of

5 the consortium that was buying the company and taking it

6 private. So like a lot of buyers, he had 800 million

7 dollars worth of equity. He wanted to buy low and sell high

8 later. So there is another reason why he wouldn't

9 necessarily have had any interest in a much higher price at

10 that time.

11 What I want, Your Honor, because I focused so much

12 on HCA yesterday, I want to talk to Your Honor briefly

13 today, I will try to keep myself within the time limits.

14 I have passed out a notebook. And behind this

15 notebook, what I really just want to show Your Honor are

16 some additional examples like what Mr. Tringali showed you

17 yesterday of evidence that is inconsistent with any

18 suggestion of the overarching conspiracy pled in Count 1.

19 And what's interesting and somewhat surprising,

20 Your Honor, is that the plaintiffs in this case, there is

21 not just contemporaneous emails that support what I just

22 said but the plaintiffs surprisingly in their 56.1 response

23 gave us many admissions, many admissions about there being

24 no single overarching conspiracy and nothing that Blackstone

25 was a part of it. So I am going to take Your Honor through


37

1 some of that.

2 Behind tab one, I have provided just behind tab one

3 a table that lists all 27 deals. And in the first column I

4 have put a check next to each deal where there are

5 admissions by the plaintiffs in the record as to either

6 conduct of Blackstone that was inconsistent with a

7 conspiracy and/or admissions that Blackstone had independent

8 reasons for its conduct. And as you can see, a very large

9 number, almost all of them are checked.

10 And I have end notes at the end of this chart which

11 will take Your Honor to the portions of the record where

12 these admissions exist.

13 And then there are at least ten deals where on this

14 summary judgment record the plaintiffs have not even tried

15 to present any evidence against Blackstone.

16 Your Honor, let me take you to a few examples as I

17 just mentioned. Mr. Primis talked to you about Michael

18 Stores. I just want to tell you the rest of the story. If

19 you turn behind tab two, this is from plaintiffs 56.1

20 response to our 56.1 statement. And as you can see, we

21 said, "Bain, Blackstone's lone remaining partner in the

22 final round of bidding, wanted to bid only $43.75 per

23 share." In other words, you know, Bain didn't know what KKR

24 had been saying internally but it didn't want to go into

25 stupid territory. "But Blackstone, believing it needed to


38

1 bid at least $44 per share to win, sought to convince Bain

2 to bid $44."

3 "Plaintiffs' response: Admitted."

4 So the plaintiffs have admitted in that third and

5 final round of competition, which shouldn't have even been

6 taking place because why would we still be bidding in the

7 third round? Why hadn't KKR and TPG, that we were bidding

8 against, why hadn't they gracefully bowed out by now? We're

9 in a third round of bidding. The third time bids are going

10 to go higher. And we, we're convincing our partner Bain to

11 come up higher. And the plaintiffs admit that that conduct

12 occurred.

13 If you go to the next tab, Your Honor, this is an

14 internal email written exactly at that time within

15 Blackstone's files. And the Blackstone deal team leader

16 writes to Mr. Schwarzman and Mr. James among others and he

17 says, "I think Bain Cap understands in this light 43.75 is

18 silly. Pushing them to do 44.00, and if they have more to

19 put it out there as any bit above 44.00 may help."

20 Now, why is Blackstone pushing Bain to even go

21 above 44.00 if that will get it done? This is evidence of

22 competition. This is not evidence of any kind of

23 conspiracy.

24 One other vignette, Your Honor. If I can take you

25 to tab 7 of this binder. And this relates to the Kinder


39

1 Morgan management-led buyout by Rich Kinder. And this is a

2 deal where Blackstone has been released. We don't waive

3 that objection. We are only bringing this up in response to

4 the plaintiffs' attempt to rely on this deal.

5 But this is a really interesting story, Your Honor.

6 In this deal what happened was Blackstone was given the

7 opportunity to participate for a billion dollars, be one of

8 the participants. And you would have thought that if this

9 was low-priced merchandise, the result of some price

10 suppression conspiracy, that Blackstone would have leaped

11 for the spoils, right? Blackstone passed on the

12 opportunity. They thought the company, the private equity

13 side of the company thought it was too highly priced and

14 they didn't have enough time to do due diligence and they

15 passed, okay. So that's conduct inconsistent with the

16 conspiracy.

17 So what happened next? Well, Blackstone has a

18 financial advisory group, sort of an investment banking

19 side. And they advise companies on M&A transactions. So

20 what did they do? If you look at the -- this is again from

21 the plaintiffs' opposition to the 56.1 statement. I'm

22 looking at the bottom part.

23 "After receiving the buyout offer," so after it was

24 Goldman Sachs, along with Carlyle, along with management,

25 Rich Kinder, they submitted a buyout offer. And the board


40

1 of Kinder Morgan had to consider it. It was for $100 per

2 share. What happened? Morgan, the financial advisor at

3 that point -- I'm sorry. The Kinder Morgan board

4 immediately established a special committee, a special

5 committee to consider the proposal.

6 And on June 12, 2006 the special committee retained

7 who? They retained Blackstone as one of the financial

8 advisers to the committee. Plaintiffs' response: Admitted.

9 And behind tab eight what happened? During the

10 course of the -- what the special committee then does is try

11 to negotiate the price up. They didn't want the $100 per

12 share. They weren't going to let the company be sold for

13 that. Advised by Blackstone, the special committee was able

14 to get the consortium that was attempting to take the

15 company private to bid up the price by $7.50 per share --

16 that is worth hundreds of millions of dollars. Hundreds of

17 millions of dollars for the public shareholders -- above the

18 price that the supposed co-conspirators were willing to pay

19 and had offered.

20 So here's Blackstone on the other side of the fence

21 extracting more value for the public shareholders. How is

22 that consistent with an overarching conspiracy? It doesn't

23 make any sense.

24 And behind tab nine, Your Honor, is an email from

25 Tony James and -- I have to get some water.


41

1 Your Honor has heard his name in this courtroom as

2 the author of some interesting emails at times. But here's

3 Tony James writing internally at Blackstone, an internal

4 email, and he is referring to Oglesby. That is the lead

5 Blackstone investment banker. And he's saying, "Oglesby

6 figures it is a 10 to 14 percent IRR." That means internal

7 rate of return. A very low rate return, now that they've

8 got a very high price extracted, $107.50.

9 And James says, "Oglesby and the special committee

10 did an excellent job getting Goldman to make such a large

11 bump from their initial bid of $100 per share."

12 That's not consistent with conspiracy. You can't

13 look at this evidence, and it's not just about Blackstone.

14 There cannot be a single overarching conspiracy with this

15 kind of behavior going on.

16 And the final example I'll take Your Honor to, I

17 mentioned this yesterday briefly, but in connection with the

18 Philips/NXP deal, if you look behind tab 14, Your Honor.

19 During that very competitive auction that also went three

20 rounds and frenzied bidding, during the course of that

21 Blackstone got wind of the fact that KKR and Silver Lake

22 were attempting to use a special kind of financing structure

23 that was prohibited by the financial advisory group Target.

24 And you can see, this again comes from the

25 plaintiffs' admissions, you know, that we said, "Philips had


42

1 prohibited the use of back leverage for the financing of

2 offers for its semiconductor business but the Blackstone

3 consortium believed that the KKR group's bid included back

4 leverage."

5 Plaintiffs' response: "Admitted."

6 And then we went on to assert that, "On July 30,

7 2006 Chip Schorr," he's with Blackstone, "noted that: 'Back

8 leverage is officially off the table for all parties.

9 KKR/SLP,'" that's Silver Lake, "'rumored to be furious.'"

10 Another email noted, "We killed this for KKR. They

11 are calling banks, on a witch hunt to discover who told. It

12 has to be hurting their financial models."

13 In other words, this is hard-nosed competition.

14 This is Blackstone and its partner TPG trying to get an edge

15 in this auction in the final round. And what do the

16 plaintiffs say in response to that assertion? "Admitted."

17 And on the last, if you look behind the last tab,

18 Your Honor, that's the internal email that I just referred

19 to. This is the internal email from Mr. Schorr to

20 Mr. James. And he's glorifying in the fact that, "We killed

21 this for KKR."

22 Your Honor, with evidence like this, there is no

23 single overarching conspiracy that purports to allocate and

24 pull together and connect 27 large transactions. It never

25 happened. This evidence absolutely refutes it.


43

1 I respectfully request that Your Honor grant

2 summary judgment on behalf of the Blackstone Group.


4 MR. HUDSON: Your Honor, may I approach?

5 (Whereupon, a binder was handed to the Court, the

6 Clerk and the Law Clerk.)

7 MR. HUDSON: Your Honor, I'd just like to

8 start by giving you a little bit of background on

9 Blackstone. Blackstone is one of the industry leaders.

10 They're like the Niki or the Coca-Cola of private equity.

11 By any measure they're one of the top five largest funds and

12 they had mega funds or equity pools totaling 28 billion

13 dollars. So this is one of the industry titans.

14 As you're going to see from the specific evidence,

15 they lie at the heart of this conspiracy. And what you're

16 going to see throughout the evidence is that their leaders,

17 Steve Schwarzman, Tony James and Blackstone as a whole

18 repeatedly expressed a conscious commitment to a common

19 scheme designed to avoid price competition between private

20 equity firms and large LBOs.

21 One of the things Your Honor has asked is how does

22 this all tie together? How does -- why is this an

23 overarching conspiracy? And what I would submit to you is

24 that Blackstone is a great example as an industry leader.

25 And if you look at our chart that we've got here, this


44

1 pullout that we gave you yesterday, and you go to Blackstone

2 and you go across and you look, you're going to see that

3 Blackstone is doing deals and interacting with every one of

4 the defendants.

5 And if I could just by way of example, and I

6 apologize, I'll try to do this fairly fast; but at the

7 very --

8 THE COURT: The fact that they are doing deals

9 is normal. If somebody started off by saying that the fact

10 that they jointly bid was indicia of illegality, that is a

11 start towards conspiracy. But my understanding and the

12 answers made here in the courtroom is that it is a common

13 practice.

14 MR. HUDSON: It became a common practice,

15 absolutely. And if it was just joint bidding, it might be a

16 different case but --

17 THE COURT: So it has to be more than people

18 joining together to make a purchase.

19 MR. HUDSON: Absolutely. And so forming a

20 club, that's one of the things they did. And we know that

21 they did that to eliminate competition from Mr. Burke's

22 presentation yesterday.

23 They're manipulating auctions. You heard Mr. Noss

24 talk about that, how they're going out and they're trying to

25 figure out a way to eliminate all the competition in these


45

1 auctions.

2 They're agreeing not to jump a deal. And what that

3 means is yesterday in HCA you heard about the valuations

4 where you've got competitors that, they're running what are

5 called internal rates of return. How much money can they

6 make in a few years when they flip this investment.

7 Well, their valuations are showing the minimum that

8 they're making on these deals is 10 to 15 percent. That's

9 what they're projecting out that they're going to be able to

10 make. Not bad considering, you know, a money market you get

11 about one percent now. Their minimum that they're getting

12 is 10 to 15 percent. On a lot of these deals they're

13 projecting out 20, 25, 30 percent.

14 And what our experts did was they went and looked

15 at that data and they said, hey, are these guys acting

16 rationally. Are they choosing, are they choosing to jump in

17 and bid when they've got these valuations, they're showing

18 they can make billions of dollars on these deals if they go

19 and they bid at a higher price.

20 So when you talk about the stock market,

21 absolutely, are most of these higher than the stock prices,

22 they're a premium, yes. But the question is, the question

23 is is do these defendants know that they've got valuations

24 that show they could make a lot more money on these deals,

25 that the internal rate of return, that they could make 20


46

1 percent, 15 percent, 25 percent, but they're choosing to

2 stand down and not bid because they know if they stand down

3 on this deal --

4 THE COURT: The thrust of your argument is not

5 the fact of joint bidding but that coupled with standing

6 down?

7 MR. HUDSON: Coupled with it, exactly, and

8 that's on this chart, you know. Formed a club, get rid of

9 auctions. We don't like auctions because you've got to, you

10 kind of have to bid in an auction. If the seller says, hey,

11 you can't work together, you can't form this club, now we

12 got an auction.

13 And then if we don't do that, the bottom line is no

14 matter what, once the merger agreement gets signed, we're

15 not jumping this deal and we are not competing with each

16 other.

17 And then we've got to monitor, reward and

18 discipline. So, you know, everybody, the emails that

19 they're showing, everybody still wants to act in their own

20 self-interests in the sense that they want to make as much

21 money as they can but within the constraints of the

22 conspiracy without upsetting anybody else.

23 And so I would submit to you that the evidence

24 where you see people upset or -- that's not the natural

25 reaction to competition. That's part of the monitor, reward


47

1 and discipline.

2 And so for Blackstone, if you look at those things

3 and you look at the different examples. For example, I

4 mean, just in 2003 in Nalco they're doing business with KKR,

5 Apollo and Goldman Sachs where Blackstone goes and bids for

6 the deal. They get the deal signed up. They got the merger

7 agreement. And then all of a sudden KKR, Apollo and Goldman

8 Sachs get part of the deal.

9 Why if Blackstone is projecting a 20 percent rate

10 of return on this investment and they've spoken for the

11 entire deal, the whole check, why are they going out and

12 giving these guys part of the deal? That's economically

13 irrational. And that's where our experts come in, because

14 they went and looked at the data. And they didn't say this

15 just happened in Nalco or this just happened in HCA. They

16 said that happened across the board in 19 of 22 deals, you

17 know, or 17 of 22 deals.

18 These auctions were not happening efficiently, the

19 valuations that are in the files that show the potential for

20 great returns. And the reason why is because at the end of

21 the day if they all bid on all these deals during this

22 three- or four-year period, what happens? The price gets

23 bid up on everything.

24 So you've got examples of them working with Texas

25 and Nalco working with KKR, Apollo and Goldman Sachs. In


48

1 that same time period in Texas Genco they were able to

2 eliminate competition and work with TPG and Blackstone.

3 In PanAmSat they were able to work with Providence,

4 Carlyle and again KKR.

5 THE COURT: In all these transactions that you

6 just referenced, were there step downs on all of them?

7 MR. HUDSON: There was -- and this is --

8 that's, I appreciate you getting there. If you could just

9 give me one second, Judge, I'll try to wrap it up --

10 THE COURT: The fact that they worked

11 together, there is only 10 or 11 of these LBOs in the

12 country and so they are going to either work together or be

13 in competition with each other on everything.

14 MR. HUDSON: Potentially, yeah. And what they

15 can't do is they can't get together and say we're going to

16 restrain trade. They can't have those direct

17 communications.

18 And so if you look at -- if we could go to the map,

19 the connections.

20 So if you just click, again, going back to this

21 map, just click Blackstone and you look at the deals they're

22 connected to. And then you click on Nalco. You click on

23 Texas Genco. You click on PanAmSat. You click on AMC and

24 you click on SunGard.

25 THE COURT: Again, the fact that they have


49

1 some connection with these deals, that itself doesn't mean

2 that there is any illegality; does it?

3 MR. HUDSON: Well, so the point here of this

4 chart is it's all interconnected.

5 THE COURT: They had to be working --

6 MR. HUDSON: You have to be working towards a

7 common purpose, right, towards a common goal.

8 THE COURT: No, what I am saying is even if

9 there wasn't a common purpose, Blackstone would be involved

10 in all these deals; wouldn't it?

11 MR. HUDSON: But for the conspiracy --

12 THE COURT: So there has to be something --

13 no, say there is no conspiracy. Let's assume there is

14 absolutely no conspiracy for the sake of this question.

15 Wouldn't Blackstone be involved in all of these transactions

16 of which they were; wouldn't they?

17 MR. HUDSON: They were potentially interested

18 in these transactions, yes.

19 THE COURT: So the fact that there is a

20 connection with Blackstone in these transactions doesn't in

21 itself mean that there is an illegality. There has to be

22 something more.

23 MR. HUDSON: Right. And what this shows is

24 they're all working together, they all know each other --

25 THE COURT: But --


50

1 MR. HUDSON: -- and now let's go to the --

2 THE COURT: -- that is the point. How are

3 they working together? What are they doing?

4 MR. HUDSON: They're buying companies.

5 They're jumping -- they're agreeing not to jump deals.

6 THE COURT: But they -- well, that is --

7 MR. HUDSON: They're standing down. They're

8 engaging --

9 THE COURT: How many of these deals -- so the

10 point is agreeing to stand down, is that the point?

11 MR. HUDSON: Yes.

12 THE COURT: It is not that they are working

13 together because nobody is contesting the fact that they can

14 work together. There has to be something more.

15 MR. HUDSON: There has to be something --

16 THE COURT: What is it?

17 MR. HUDSON: The "more" is is that in addition

18 to working together they're also standing down when they,

19 when there is not the ability to work together.

20 THE COURT: So there is 27, in these 27 deals

21 how many times did Blackstone stand down?

22 MR. HUDSON: How many times did Blackstone

23 stand down? They stood --

24 THE COURT: If that is an indicia of

25 illegality, and it appears to be.


51

1 MR. HUDSON: Right. So in all of those deals,

2 one, two, three, four, five, six, seven, eight, nine, ten, I

3 mean, that's the -- there is the 19 deals and they purchased

4 5 of those 19 deals so the other 14, there's your

5 competition, Judge. I mean, that's -- and if you go to the

6 next slide, this is the competition --

7 THE COURT: So you are saying in 14 of them

8 they consciously stood down?

9 MR. HUDSON: There is no direct competition

10 between these two. I mean, when there is auctions --

11 THE COURT: No, but the fact is there is no

12 requirement to be in competition.

13 MR. HUDSON: Right.

14 THE COURT: With respect to those 14, you say

15 out of 19 deals they were successful in 5, meaning there is

16 14 others that they had some relationship with?

17 MR. HUDSON: Right.

18 THE COURT: With respect to those 14, how many

19 did they stand down, did they actually stand down and did it

20 for some type of quid pro quo?

21 MR. HUDSON: After the merger agreement was

22 signed, you see from this chart there was never any

23 competition at all. And that's what you see from this

24 chart --

25 THE COURT: I know, I know there is no


52

1 competition; but the fact there is no competition, there is

2 no requirement for competition. The question is is there

3 evidence that they stepped down for a quid pro quo?

4 MR. HUDSON: Absolutely, there is evidence

5 that they stood down.

6 THE COURT: So with respect to these 14 deals,

7 what is the evidence?

8 MR. HUDSON: There were six, six deals that we

9 can point to the record specific evidence that they stood

10 down. There were three deals that were auctions where they

11 were able to manipulate or rig the auctions so that there

12 was, it eliminated the competition. And that is what ties

13 this all together, is the, it's the -- it's not just, like

14 you said, looking at one deal and saying, well, three people

15 worked together. It's, this is the industry leader.

16 You can look at, you can see their patterns of

17 conduct over this four-year period. They're specifically

18 choosing to stand down when they're not competing and

19 they're getting rewarded with quid pro quos. And the net

20 effect of that, what they have succeeded in doing was buying

21 all of these companies with no, virtually no competition

22 between each other and absolutely no competition at all

23 after a merger agreement was signed.

24 And what, again, they've got valuations in their

25 files. They're interested in buying these companies. It's


53

1 just like in HCA like we talked about yesterday. The stand

2 down request comes in. You got a $51 purchase price. You

3 have got valuations in your files that show 55 or 59. Why

4 are you standing down? You've got the potential to make

5 billions of dollars.

6 So, and if we could just --

7 THE COURT: I am used to conspiracy cases on

8 the criminal side and invariably, if not one hundred percent

9 of the cases, in 99 percent of the cases, in order to be

10 able to prove a conspiracy case, there has to be the

11 so-called unindicted co-conspirator to tie it all together.

12 It is not required as a matter of law but as a matter of

13 practice, it is almost impossible in my experience on the

14 criminal side to try a conspiracy case without the

15 unindicted co-conspirator or somebody had a deal that has

16 been made with them.

17 The fact that you have no in a sense co-conspirator

18 who is testifying on your behalf, that hurts your case

19 practically; does it not?

20 MR. HUDSON: That we don't have a

21 co-conspirator that would testify?

22 THE COURT: Yes. I mean, it is very difficult

23 to get a conspiracy case without some insider testifying.

24 MR. HUDSON: I would say a couple things,

25 Judge.


54

1 One is in civil antitrust cases like this, direct

2 evidence is very rare, okay. This is a conspiracy that's

3 illegal. And so they're not going to put down on paper

4 that, hey, we're are going to get together and we're going

5 to eliminate competition. That's why these --

6 THE COURT: I understand it is not going to be

7 on paper. But you haven't got an insider testifying.

8 MR. HUDSON: Well, in a sense--

9 THE COURT: So in a way, you have to admit it

10 makes your case weaker than going on, I mean, the case is a

11 lot stronger if you have an insider testifying.

12 MR. HUDSON: I can't dispute that, you're

13 right. The case would be at trial when we --

14 THE COURT: Most conspiracy cases are so

15 tried.

16 MR. HUDSON: Right. And when we go to trial

17 and we try this case and the jury has to make the fact

18 question, make the decision, is that can they infer from

19 this evidence from the lack of competition, from the

20 statements -- and if we can go back to the PowerPoint -- the

21 statements that these leaders, that's a few leaders of these

22 firms over and over and over, it's the repetitive nature of

23 their statements. It's the repetitive nature of their

24 conduct. It's our experts --

25 THE COURT: Let me give you how I am


55

1 tentatively feeling. I don't want to be tied down to

2 specifics but in certain of these transactions, in certain

3 of the separate transactions you have some evidence of a

4 conspiracy. In others it may be unclear but I don't know

5 whether there is one, whether there is one or whether there

6 is several separate, it may be several separate, it may be

7 three, maybe five, maybe seven; but the problem is is there

8 one?

9 And even at the start my instinct was one

10 conspiracy, jeez, without a so-called testifying

11 co-conspirator, that is very difficult to prove.

12 MR. HUDSON: And I would say, Your Honor, that

13 what we've got is we've got, in terms of the evidence, and

14 you heard the HCA evidence yesterday. You heard Mr. Noss

15 say --

16 THE COURT: Yes, but that is the best you have

17 got?

18 MR. HUDSON: I would say that the evidence is

19 pretty good, is equal to that in the majority, overwhelming

20 majority of these deals.

21 THE COURT: I don't think so but it may be,

22 but I don't think so. But even HCA, which to me is the

23 strongest, defense counsel yesterday at least presented a

24 case that would give a jury some, some consideration, there

25 is no doubt about it. Whether he was strong enough to say


56

1 the case wouldn't go to the jury, I don't know; but he made

2 some good points in my judgment. So far it is the best

3 conspiracy you have, by far.

4 MR. HUDSON: What I would say, Judge, is where

5 is the evidence of real direct head-to-head competition?

6 Where is -- when is a defendant going to stand up and say,

7 hey, they had this deal and we came in and we paid 5 or 10

8 or 20 percent more because that's what our valuation showed

9 and we can still make a good deal and we can still make

10 money head-to-head?

11 What you're going to see is you're going to see

12 little skirmishes where the price goes up two or three

13 percent. Where he talks about Kinder Morgan where

14 Blackstone is advising the special committee and the price

15 rises 7 1/2 percent.

16 THE COURT: There are two things though that

17 bother me.

18 One, they have a right to work together; and, two,

19 there is no requirement that they compete. Those two

20 factors make your unitary conspiracy more difficult to

21 prove, there is no doubt about it.

22 MR. HUDSON: It makes it more difficult to

23 prove, true, but it doesn't change the fact, Judge, that

24 they've got, we've got, our experts have analyzed the data.

25 They've looked at the market. They were acting against


57

1 their own economic self-interest. That tends to exclude the

2 possibility that they're acting independently. And at

3 summary judgment today, that's what we have to do. We have

4 to tend to exclude the possibility that they're acting

5 independently. We have to put forth some evidence of

6 collusion.

7 I mean, the statements that you hear by them over

8 and over and over in deal after deal after deal, and it's

9 not just HCA and it's not just Nalco and it's not just

10 PanAmSat, they show up in deal after deal after deal. You

11 know, emails like this, that the question today is does that

12 tend to exclude the possibility that they're acting

13 independently? And it's the repeated patterns of conduct

14 and it's the repeated statements in deal after deal after

15 deal that for purposes of summary judgment is enough to get

16 to a jury.

17 All of the things you raised I completely agree

18 with. It's going to make our case to a jury much more

19 difficult but for them to tend --

20 THE COURT: Let me tell you, to try this case

21 with the so-called co-conspirator exception to the hearsay

22 rule is going to be a difficult matter.

23 MR. HUDSON: It will be difficult and we'll be

24 prepared. And we're hoping that the defendants will be here

25 at the trial and testifies and we're going to get the


58

1 opportunity to cross-examine them on that evidence. And,

2 you know, we're confident that the evidence between the

3 statements that we have, the lack of competition, the chart

4 that you see, it's not -- it's pled as one count because

5 it's like a snowball rolling down the hill. I mean, you say

6 is it one or is it 15 or is it 17 --

7 THE COURT: Big difference though, big

8 difference, I will tell you. That is the thing that has

9 caused me enormous problems.

10 I can analyze a lot easier 15 separate conspiracies

11 because then you look at the evidence and see if it is

12 sufficient to get to a jury. But when you claim one

13 conspiracy, it puts it in a different category. Why you did

14 it this way, I don't know. But I will tell you, it has

15 caused me a lot of problems.

16 MR. HUDSON: I understand that, Judge. We

17 simply went where the evidence was. And the evidence is in

18 that pullout and you see the patterns of conduct and so --

19 THE COURT: But the question is, and the thing

20 that we all have to grapple with is whether there is one

21 overarching conspiracy, whether there are several, there may

22 well be, but whether there is one overarching one definitely

23 has been giving me trouble from the very start.

24 All right, thank you.

25 MR. HUDSON: Thank you.


59

1 THE COURT: Who is next?

2 MR. THOMAS: Just a brief --

3 THE COURT: Yes, brief, please.

4 MR. THOMAS: Your Honor, I just want to say

5 with respect to -- Your Honor is absolutely right that there

6 is nothing wrong with working together --

7 THE COURT: Everybody is saying I am right --

8 MR. THOMAS: Well --

9 (Laughter.)

10 THE COURT: Half the time I don't know what I

11 am saying.

12 (Laughter.)

13 MR. THOMAS: Well, when you say it's perfectly

14 legitimate for people to work together at times and compete

15 at other times, working together to pool capitals, spread

16 risk on larger deals, you're absolutely right.

17 The fact of a step down during the course of the

18 bidding process, there are, as I said yesterday, there are

19 tons of legitimate independent reasons why someone would

20 decide not to bid --

21 THE COURT: Counsel for the plaintiff asked,

22 how about these step downs, how do you explain them? I

23 don't think they occurred in all of the 27 but in some --

24 MR. THOMAS: Right, they didn't, Your Honor;

25 but the point is that in each of those situations there are


60

1 a myriad of reasons why it would be in the defendants'

2 independent interest to decide not to bid higher because

3 maybe they've concluded that the target is overvalued or not

4 to bid at all because, again, maybe --

5 THE COURT: Well, they argued though, hey, if

6 they had bid a little higher, they would have got 30 percent

7 on their money or something.

8 MR. THOMAS: But the point is that, also that

9 by definition in any of these processes someone will step

10 down because at some point, I mean, even if there is no

11 conspiracy because at some point in the process the losing

12 bidders are going to conclude that they're just not willing

13 to pay an extra dime or an extra quarter or an extra $50 per

14 share. And that's completely consistent with their

15 independent interest.

16 You can't expect, as Your Honor said earlier this

17 morning, these defendants to pay higher and higher and

18 higher. They don't have an obligation to, you know, pay for

19 the moon. At some point they have a legitimate right to say

20 it's just not worth it to us anymore. Plus there could be,

21 those aren't the only reasons. There are non-price reasons

22 also why a defendant would legitimately step down.

23 The only other point I'd make, Your Honor, is, you

24 know, counsel got up and began by saying how big Blackstone

25 is and, you know, how we were involved or interested in


61

1 every deal and so forth. Well, you know, the fact that we

2 only, only participated in five of the 19 public-to-private

3 deals that are the subject of this action, that ought to

4 tell you that it wasn't such a great conspiracy if there was

5 a conspiracy for Blackstone. You would expect that we would

6 get a few more spoils out of this thing.

7 We only had 7 of the 27 deals if you take it all

8 together. It doesn't make a lot of sense.

9 And I can take you, if I had the time, I could take

10 you through each of the 14 deals out of that 19 and I could

11 show you that in each case the plaintiffs have, again,

12 either admitted that we engaged in conduct inconsistent with

13 conspiracy or that we had independent reasons for our

14 bidding behavior.

15 And, I mean, just to give you just one example. On

16 the TXU deal which was a deal where KKR teamed with TPG and

17 they announced the deal, it was the largest, at that point,

18 it was early 2007, the largest LBO at that point, even

19 larger than HCA. And what did Blackstone do in response to

20 that? Well, first of all, notice Blackstone wasn't invited

21 by KKR to be part of that group so, again, no reward. We

22 didn't get anything for anything that happened back on HCA.

23 We weren't invited in.

24 Now, if we had a deal that we were just looking to

25 make any attempt to jump a deal, that we would have said to


62

1 ourselves internally we're not interested in TXU because

2 it's pre-allocated or KKR has this one already. Well, we

3 didn't do that.

4 What the evidence shows, and it's admitted in the

5 record, is that we proceeded to form a rival consortium,

6 that we explored financing structures, that we presented

7 them to the financial advisor for TXU but we concluded

8 ultimately with the financial advisor for TXU that we just

9 couldn't get there on price. We just couldn't get or put

10 together a structure that would work on price.

11 Plus, and, Your Honor, in the notebook I gave you,

12 I can take you to tab 11, because this is important. The

13 plaintiffs -- price was the key reason why we couldn't do

14 it. But, again, notice, if we had an agreement that we'd

15 never jump someone else's deals, if that was the agreement,

16 why would we go to all the time and expense to work with a

17 financial advisor and develop an alternative structure,

18 present it to the advisor for the target? We wouldn't have

19 done that.

20 But in our 56.l statement we said, "On March 7,

21 2007 David Foley," he's of Blackstone, "wrote in an email:

22 'This deal is dead. Not enough IRR,'" that's not enough

23 internal rate of return, investment returns, "'no matter how

24 we sliced it.' David Foley also indicated that there just

25 isn't enough juice left in the deal KKR signed up to get


63

1 excited about this."

2 So that's obviously a legitimate independent reason

3 for not proceeding. That's not an illegal step down.

4 That's a lawful, that's a lawful conduct.

5 The plaintiffs to our surprise, Your Honor, first

6 they admitted that. They admit that that's true. That's an

7 admission that we had an independent reason and then they

8 went on and added, they said not only did Mr. Foley say

9 those things, he went on to recount the political hurdles

10 that the deals faced -- the deal faced, the liability that

11 the TXU CEO had become, the reverse breakup fee, all of

12 which would create problems for any potential buyer.

13 So the plaintiffs in their admissions just added a

14 litany of additional independent reasons that Blackstone had

15 at that point for not proceeding.

16 Again, Your Honor, this deal also is not part of

17 any overarching conspiracy because that conspiracy never

18 existed.

19 MR. HUDSON: Judge, just real quickly.

20 I'm really glad he mentioned TXU because this shows

21 exactly the kind of evidence that we have in these 14 deals

22 where they stand down.

23 In TXU Blackstone internally, David Foley, the guy

24 who he's talking about, they want to contact the special

25 committee and get them to do an auction so that they might


64

1 be able to get involved in the competition. I'm on page 6,

2 if you can't see the slide.

3 THE COURT: Go ahead.

4 MR. HUDSON: So here's what Blackstone says

5 internally about this. "Can accomplish the same goal with

6 oral communication and we do not establish a precedent of

7 submitting an admittedly (currently) non-actionable bid

8 against an announced deal." We are not going to break the

9 agreement.

10 Unclear if they're going to jump the deal.

11 Now Foley goes and talks to Tony James, and what's

12 Tony James say: Stand down. We are not going to compete.

13 They wanted in this deal. They wanted to try to

14 buy TXU but at the end of the day they weren't willing to

15 break the agreement.

16 And, again, Judge, as Mr. Wildfang said again,

17 where, where is the evidence that they, you know, where is

18 the defense counsel providing the Court with an example

19 where they're jumping a deal? It's just not there. They're

20 standing down and in return they're getting to buy deals

21 without competition and it permeates this entire area.

22 Thank you.


24 MR. PEPPERMAN: Good morning, Your Honor.

25 Richard Pepperman from Sullivan & Cromwell on behalf of


65

1 Goldman Sachs. And, Your Honor, rather than repeating areas

2 that have already been covered, I am going to use my time

3 this morning to focus on the unique reasons why plaintiffs'

4 conspiracy claims fail as to Goldman Sachs.

5 And all of those reasons flow from one fact and

6 that is that the Goldman Sachs Group is not a private equity

7 firm. It is instead a diversified financial services

8 company that provides many different services to many

9 different clients. And the fact that Goldman Sachs' private

10 equity business is a small part of a larger overall business

11 affects Goldman Sachs' economic incentives. And Goldman

12 Sachs' economic incentives here are contrary to its

13 participation in any conspiracy to depress the price paid in

14 LBOs.

15 And I want to the focus my argument on two

16 different aspects of Goldman Sachs' business, because

17 Goldman Sachs has many businesses.

18 One aspect is that Goldman Sachs' Investment

19 Banking Division provides investment banking, financial

20 advisory and brokerage services to firms, many clients and

21 those clients include private equity firms such as the other

22 defendants here, where Goldman Sachs represents those

23 private equity firms as their financial advisor to assist

24 them in purchasing other companies, or alternatively Goldman

25 Sachs investment bankers might represent the selling company


66

1 in selling its company as part of an LBO or other

2 transaction.

3 THE COURT: So Goldman Sachs does not engage

4 in any purchases themselves?

5 MR. PEPPERMAN: Oh, yes, they have, Your

6 Honor. Goldman Sachs also has a private equity arm. And to

7 set it up, just sort of schematically, the defendant here is

8 the Goldman Sachs Group. The Goldman Sachs Group has a

9 subsidiary called Goldman Sachs & Co. Goldman Sachs & Co.

10 has a division called the Merchant Banking Division. That

11 division has a group called the Principal Investment Area.

12 So Goldman Sachs does have a private equity business but it

13 is a small part of a much larger firm.

14 And why Goldman Sachs' economic incentives matter

15 for purposes of the overarching conspiracy claim here is

16 that in the 17 LBOs that the plaintiffs focus on, Goldman

17 Sachs was part of the winning consortium in 7 of those 17.

18 And if it doesn't make economic sense for Goldman Sachs the

19 corporation to participate in a conspiracy to depress LBO

20 prices, that blows a big hole also in plaintiffs'

21 overarching conspiracy claim against all of the defendants.

22 THE COURT: Let me ask you, why is it in their

23 interests to suppress the price?

24 MR. PEPPERMAN: Why is it not?

25 THE COURT: Yes.


67

1 MR. PEPPERMAN: Let me go through -- I have

2 four reasons, I'll go through them one at time, four reasons

3 why Goldman Sachs' economic incentives are different.

4 Reasons two and three relate directly to Your

5 Honor's questions but I want to take them because I think

6 they flow more logically in this order.

7 Reason No. one why Goldman Sachs' economic

8 interests are different is that Goldman Sachs' private

9 equity arm decided on its own in 1991, 12 years before the

10 alleged conspiracy in this case, decided on its own to

11 pursue a business model of doing only joint private equity

12 deals. There is no dispute about that. Since 1991, since

13 when Goldman Sachs entered the business, it only did joint

14 deals.

15 Now, plaintiffs argued yesterday, Mr. Burke and

16 Mr. Wildfang, that the defendants changed their course of

17 conduct in 2003 and began predominantly pursuing joint bids

18 then. That's demonstrably not true for Goldman Sachs.

19 Goldman Sachs pursued joint, has been pursuing joint bids

20 for over 20 years going back to 1991.

21 And the reason why Goldman Sachs on its own adopted

22 this business model, the reason why it was in Goldman Sachs'

23 own independent interests are two reasons. One, many

24 private equity firms are Goldman Sachs' investment banking

25 clients. Goldman Sachs decided that it would be less


68

1 disruptive to those investment banking relationships and

2 that Goldman Sachs would be able to better preserve them

3 going forward if Goldman Sachs bid with their clients as

4 part of joint bids as opposed to bidding all by themselves.

5 And, second, Goldman Sachs on its own made a

6 decision that it did not want alone to own a controlling

7 interest in a company because that company might compete

8 with one of Goldman Sachs' corporate investment banking

9 clients.

10 So, for example, Goldman Sachs wouldn't want to own

11 a controlling interest, a hundred percent interest or

12 otherwise, in a hospital company because Goldman Sachs has

13 investment banking clients that are hospital companies so

14 they prefer to join with other firms and end up with a

15 smaller, noncontrolling interest.

16 So the fact that Goldman Sachs' strategy and

17 conduct here have remained unchanged for over two decades

18 defeats any claim that Goldman Sachs altered its approach to

19 private equity investing in 2003 as part of some overarching

20 conspiracy.

21 Now, reason No. two, Goldman Sachs is often hired

22 by the selling company to serve as what's called as a

23 sell-side financial advisor. So it's hired by a company

24 that's seeking to sell itself, either through an LBO

25 transaction or through some other merger or sale. And, in


69

1 fact, here Goldman Sachs acted as the sell-side advisor,

2 meaning it was representing the selling company in six of

3 the 17 LBO transactions at issue.

4 We heard a lot yesterday about the Freescale

5 transaction. Goldman Sachs there was representing

6 Freescale. It was Goldman Sachs' job to get the highest

7 possible price for Freescale.

8 Now, as an investment bank that's in the business

9 of getting the highest price for its clients, Goldman Sachs'

10 entire reputation as a sell-side financial advisor is

11 dependent on its ability successfully to obtain the highest

12 possible price for its clients. And not only is Goldman --

13 THE COURT: You are saying on six of these

14 transactions your division represented the seller?

15 MR. PEPPERMAN: Yes, sir, in six of the 17

16 LBOs Goldman Sachs' Investment Banking Division represented

17 the seller, meaning that --

18 THE COURT: Six of the transactions in this

19 Count 1?

20 MR. PEPPERMAN: Yes, yes. Six of the 17, and

21 that fact is not disputed. In six of the 17.

22 What I also want to focus on is not just Goldman

23 Sachs' reputation but also Goldman Sachs --

24 THE COURT: Who is the defendant in this case,

25 the division or the corporate parent?


70

1 MR. PEPPERMAN: The named defendant in this

2 case is the overarching holding company, the Goldman Sachs

3 Group, Incorporated, the overarching holding company that

4 owns all of Goldman Sachs' varied business all around the

5 globe.

6 And from, one point that's in our papers, from the

7 beginning of this case we pointed out to the plaintiffs that

8 they've sued the wrong Goldman Sachs defendant, that the

9 holding company didn't engage in any of the conduct at issue

10 here but --

11 THE COURT: Maybe their theory is agency.

12 MR. PEPPERMAN: Well, their theory as it came

13 out in the summary judgment papers is that the Court should

14 pierce the corporate veil. But, of course, to pierce the

15 corporate veil the Court needs evidence. You can't just

16 rely on lawyers' arguments. And there's no evidence here.

17 But what I also wanted to point out about the

18 sell-side financial advisory engagements and what's critical

19 is Goldman Sachs' economic interest is on the line. When

20 Goldman Sachs represents the seller as it did in six of the

21 17 transactions, Goldman Sachs' fee is set as a percentage

22 of the purchase price.

23 So, in other words, the higher the purchase price,

24 the higher Goldman Sachs' fee. Much like when you sell your

25 house, the real estate broker's commission is a percentage


71

1 of the purchase price. So this creates a powerful economic

2 incentive for Goldman Sachs to achieve the highest sales

3 price for its clients, which is totally and completely at

4 odds with the goals --

5 THE COURT: So why do you think you were

6 named?

7 MR. PEPPERMAN: Why do I think we're named?

8 THE COURT: Yes.

9 MR. PEPPERMAN: I think we're named why a lot

10 of defendants were named here, that is, the plaintiffs just

11 sort of gerrymandered together a number of transactions and

12 then just named all the firms that were involved.

13 You're going to hear shortly after me, I think

14 next, from J.P. Morgan. And the J.P. Morgan defendant here

15 wasn't a private equity investor in any of these

16 transactions. And this all just goes back to --

17 THE COURT: They must have had something to do

18 with it.

19 MR. PEPPERMAN: They worked as financial

20 advisor in some -- I'll let J.P. Morgan make its own

21 argument.

22 But the fact that this so-called overarching

23 conspiracy encompasses so many divergent different

24 defendants with different business models, different

25 economic interests, the fact that they're all roped


72

1 together, roped together in this overarching conspiracy just

2 demonstrates the implausibility of it.

3 I said I had four reasons, I've gone through two.

4 Reason No. three: When Goldman Sachs investment

5 bankers are not acting as sell-side advisor, what its

6 investment bankers are doing is completely at odds with the

7 supposed conspiracy. What its investment bankers are doing

8 when a company announces a sale transaction, an LBO, and

9 Goldman Sachs investment bankers aren't hired to represent

10 the sellers, the bankers then go out and actively attempt to

11 convince the firm's private equity clients to submit a

12 competing bid. I mean, Goldman Sachs' bankers want to be

13 hired as financial advisers. They're not hired by the

14 sellers. So then they go out in the marketplace and they

15 try to convince potential purchasers to hire them as an

16 advisor and make a bid. They try to create competition

17 which, again, is totally a hundred percent at odds with a

18 participation in a conspiracy.

19 What I wanted to point out is this is exactly what

20 happened with Goldman Sachs and HCA. Goldman Sachs is named

21 as a defendant in the HCA count, it shouldn't be. But you

22 will see there is a Carlyle document which is Exhibit Q to

23 our motion and says that once HCA announced the transaction

24 with Bain and KKR the Goldman Sachs bankers were, quote, in

25 a frenzy trying to organize a competing consortium, conduct


73

1 that is completely inconsistent with Goldman Sachs

2 participating in a conspiracy not to compete.

3 And the evidence shows that Goldman Sachs' bankers

4 were out there and contacted seven private equity firms

5 encouraging them to submit a bid during the go shop period.

6 So, again, the idea that Goldman Sachs, the

7 corporation, the Goldman Sachs Group entered into a

8 conspiracy to suppress competition is just contrary to the

9 facts. The Goldman Sachs investment bankers were going out

10 to their private equity clients --

11 THE COURT: Is Goldman Sachs named as one of

12 the defendants in Count 2?

13 MR. PEPPERMAN: Yes. We are one of the four.

14 We shouldn't be but we're one of the four.

15 And then, fourth, fourth, my last reason is that,

16 like all large firms, Goldman Sachs has a conflict of

17 interest policy. And that conflict of interest policy bars

18 its private equity arm from submitting a bid if Goldman

19 Sachs is representing the seller. It doesn't want to be on

20 the purchase side if it's been hired to represent the

21 seller. Potential conflict of interest.

22 And the evidence also shows that Goldman Sachs as a

23 firm, the corporation, strongly prefers the sell-side

24 financial advisory position in any transaction because then

25 Goldman Sachs is guaranteed to get paid no matter who wins


74

1 the bid. No matter who buys the house or no matter who buys

2 the company, Goldman Sachs will get paid and will get paid a

3 percentage of the purchase price. That's its first choice.

4 So what this means is that the Goldman Sachs'

5 private equity arm is excluded from even considering

6 investing in many LBOs. Indeed, in six of the 17 LBOs here

7 Goldman Sachs was representing the seller. It couldn't bid.

8 It was barred because both of its conflicts policy and

9 because of its institutional preference to represent the

10 sellers.

11 So because Goldman Sachs would be barred from even

12 participating in many of the LBOs, it would be irrational

13 for Goldman Sachs to enter into an overarching conspiracy to

14 buy the market or allocate deals because its term would come

15 up. All right, Goldman Sachs, it's your turn, it's your

16 turn to be the winner. Goldman Sachs, well, I can't even

17 participate, we're representing the seller here.

18 It wouldn't make sense to forgo current business

19 opportunities for the promise of future business

20 opportunities when you would be barred from your own

21 conflicts policy perhaps in participating.


23 Suppose they had named the appropriate defendant,

24 namely, the division. What is your response? In other

25 words, I understand your argument, it is a very strong


75

1 argument with regard to the corporate and it is the

2 corporation or the holding company that is named and that is

3 who we are concerned with. But assume for the sake of this

4 question that it had been the division.

5 MR. PEPPERMAN: Well, Your Honor, it's a very

6 good question.

7 THE COURT: You said you were involved in,

8 what, five or seven?

9 MR. PEPPERMAN: We were involved in six as the

10 sell-side advisor and seven as an investor.

11 Now, Your Honor, the direct answer to your question

12 is that the plaintiffs can't do what you proposed and I'll

13 explain why. If they had not named the holding company, if

14 they had not named the Goldman Sachs Group, Incorporated,

15 then the argument that I think is Roman I of our brief that

16 they sued the wrong defendant, that would fall by the

17 wayside.

18 Okay. Now, what would be the relevant corporate

19 entity then would be Goldman Sachs & Co. which is the

20 holding company's principal operating affiliate or

21 subsidiary. Investment banking and private equity are both

22 units of that subsidiary so there is Goldman Sachs & Co. has

23 an investment banking division and part of that investment

24 banking division is the financial sponsors group which

25 represents private equity firms. And Goldman Sachs & Co.


76

1 has a merchant banking division and part of that is the

2 private equity arm. But they're all part of one corporate

3 entity, Goldman Sachs & Co., which is managed based on its

4 overall economic interests.

5 You know, it's not possible obviously in litigation

6 to sue a division of a corporation. You know, a division is

7 not a legal entity that the law recognizes. You have to sue

8 the corporation. So if they had sued Goldman Sachs & Co.,

9 they would probably fix their wrong defendant issue because

10 they wouldn't be suing the holding company but they still

11 have the same problem that Goldman Sachs & Co. as Goldman

12 investment banking business and a private equity business

13 and its economic interests are different because it has

14 those two competing businesses. It doesn't do things in its

15 private equity business that would be foolish and destroy --

16 THE COURT: You are saying basically it is

17 contrary to the economic interests of Goldman Sachs to have

18 participated in a so-called overarching conspiracy?

19 MR. PEPPERMAN: Correct. Because to have

20 participated in the overarching conspiracy to lower or

21 depress the prices in LBOs would be very, very damaging to

22 its investment banking business which is out there telling

23 businesses hire us, we can get you the highest possible

24 price.

25 THE COURT: Let me ask the plaintiff, why are


77

1 they in here, especially it would appear that, at least on

2 the basis of his argument, that at least the wrong entity

3 has been sued. But more than that, going to the substance

4 of his argument, it seems that it would be completely

5 unreasonable, at least if I accept his argument, for someone

6 who represents sellers to be involved at the same time and

7 seeking to depress the price.

8 MS. SLAUGHTER: Your Honor, I wouldn't be so

9 quick to accept his argument and give me a chance to go

10 through my argument --

11 THE COURT: I am just posing the issue.

12 MS. SLAUGHTER: I appreciate that.

13 THE COURT: But if he is correct, it means

14 that -- well, let me hear your argument but that argument is

15 pretty strong.

16 MS. SLAUGHTER: Your Honor, I submit it's

17 actually not that strong. And I'm going to go through this.

18 Can I approach?

19 THE COURT: Sure.

20 MS. SLAUGHTER: Thanks.

21 I think once you hear what I have to say you'll

22 agree with me that this argument is a house of cards that

23 will fall down.

24 Now, if you want me to go straight to why --

25 THE COURT: Before you start, are you saying


78

1 that the named defendant is the one who participated in the

2 conspiracy or is it your position that it was really a

3 subsidiary and that the wrong defendant was named?

4 MS. SLAUGHTER: Yes, Your Honor, I don't think

5 (ph.) it is the wrong defendant's name and if there is any

6 confusion about that, it was created by Goldman Sachs. And

7 I'll tell you, we took a 30(b)(6) deposition of Goldman

8 Sachs Group, Inc., the man's name is Philip Grovit. It's at

9 Plaintiff's Exhibit 19. And he was asked --

10 THE COURT: Keep your voice up just a little.

11 MS. SLAUGHTER: Sure. He was asked if the

12 Private Equity Group was in, within, a business segment

13 within Goldman Sachs Group, Inc. He said yes, within the

14 Merchant Banking Division. And you just heard counsel say

15 you can't sue a division, okay. That's point No. one.

16 Point No. two, if you go to slide 19 which is the

17 very last slide in my presentation, Goldman Sachs Group,

18 Inc. is listed as a buyer in the Kinder Morgan deal, okay.

19 Two more points. Executives of Goldman Sachs

20 Group, Inc. were explicitly involved in meetings with other

21 private equity firms to discuss partnering on deals. We

22 will talk about that in a little minute, a little bit; but

23 the CEO of Goldman Sachs Group, Inc., Lloyd Blankfein, was

24 involved in these meetings and so was the head of the

25 Private Equity Group Mr. Friedman. And he said --


79

1 THE COURT: Let's go to the heart of his

2 argument, no matter what entity is named. If as he

3 represents that Goldman Sachs, at least one of their

4 entities is involved as a, one of the many bases of their

5 business to serve as a financial advisor to a seller, why

6 would they be involved in a conspiracy to depress the price

7 of the stock?

8 MS. SLAUGHTER: Because that is ignoring the

9 other business that he just told you about, which is they

10 have a private equity group, an investment banking group and

11 the investment bank can provide debt financing for the

12 private equity LBOs as well as provides advising to buyers

13 of those companies.

14 And what Goldman Sachs representative Sanjeev Mehra

15 testified is when Goldman can get all three of those roles

16 in a deal, that's called a "triple play" for Goldman and

17 they make a lot of money for doing that.

18 And what the evidence also shows is if they aren't

19 advising the company, okay, or if they are advising the

20 company, then they're not going to be able to have that role

21 so it's a one or the other. But when they have that private

22 equity role or that investment banking role or they're

23 advising the buyers in the LBO, that's where you see, where

24 the rubber meets the road and you see some of the most

25 disturbing explicit agreements to not compete. And that's


80

1 where I'd like to go with you on this.

2 And, by the way, Goldman Sachs never jumped a deal.

3 THE COURT: They what? I missed that.

4 MS. SLAUGHTER: Never jumped a deal.

5 Why don't we start, Your Honor, you're right, they

6 have a right to partner. What they don't have a right to do

7 is to agree to partner for the purpose of eliminating

8 competition. That's a per se violation of the Sherman Act.

9 And when you combine that with an agreement to not jump a

10 deal or an agreement to stand down when other private equity

11 defendants asked you to do, those are all indicia of an

12 overarching conspiracy, okay.

13 All right. You asked yesterday whether it was a

14 common practice to partner. You've heard counsel say it was

15 Goldman's common practice. I encourage you to take a look

16 at slide three of the presentation. This is an excerpt from

17 Exhibit 655 or Plaintiffs' Exhibit 15A, all right. It

18 describes Goldman Sachs' private equity --

19 THE COURT: Here is the question:

20 We have got an overarching, one, conspiracy, yet

21 within that one conspiracy, at least as represented by

22 counsel for Goldman Sachs, that in certain transactions

23 Goldman Sachs is with the sellers and with other

24 transactions Goldman Sachs is with the purchasers or the

25 potential purchasers. Those are inherently contradictory


81

1 positions.

2 How can Goldman Sachs be involved in a unitary

3 conspiracy when they have two inherent contradictory

4 positions? It doesn't appear to be logical.

5 MS. SLAUGHTER: Well, I'll show you how they

6 do it and then you can decide whether the business

7 justification or the argument that it doesn't make logical

8 sense meets up with the evidence and whether a jury can say

9 you know what, they did this, they engaged in this conduct

10 so, yeah, I don't understand why.

11 THE COURT: They might have engaged in the

12 conduct but it militates against a unified conspiracy

13 because they are inconsistent positions.

14 MS. SLAUGHTER: The role --

15 THE COURT: It means that they are taking a

16 different tact on seven of the transactions contrary to what

17 they did on five or vice versa. They are inherently

18 contradictory positions. It is not logical.

19 MS. SLAUGHTER: I'm going to get to their role

20 and what they knew when they served as advisers to

21 companies, okay. And we'll get to that.

22 Let's focus for now on what they knew and what they

23 did when they were investing as a private equity division,

24 okay. If I could walk you through this and help you

25 understand this, I think --


82

1 THE COURT: Let's assume they did all kinds of

2 conspiratorial activities in the private equity. That is

3 separate from their position on the other transactions when

4 they were advising the sellers.

5 MS. SLAUGHTER: Well, I --

6 THE COURT: Am I wrong there?

7 MS. SLAUGHTER: No, since you really want to

8 go there, I'll tell you.

9 THE COURT: Well, I have to. If there is a

10 unitary conspiracy, you can't be a partner in one conspiracy

11 and have inherently contradictory positions.

12 MS. SLAUGHTER: These aren't inherently

13 contradictory positions. That's the argument that they're

14 making, but they're not.

15 The advisers to the company, when they served as an

16 advisor --

17 THE COURT: Well, then answer this question:

18 Why is it not contradictory that if one part of

19 Goldman Sachs is depressing the sale which affects their

20 advice on, as sellers?

21 MS. SLAUGHTER: Because they are never in the

22 same deal doing those two roles. It's a conflict for them.

23 And they'll tell you this, they will never be an adviser to

24 the company at the same time that they're either advising

25 the buyers, that they're providing debt financing or they're


83

1 providing private equity funds. It's never going to happen

2 in a single transaction. That's why they're not

3 contradictory.

4 Let's go back. I want to start, the idea that this

5 is a common practice for the group's partner that's been

6 longstanding, that Goldman Sachs has had this strategy since

7 1991, I'm going to show you a couple of pieces of evidence

8 that dispute this. This is a fact question for the jury.

9 All right. If you take a look at slide No. three,

10 this shows you that in 1998 Goldman Sachs only co-invested

11 with other private equity sponsors 22.5 percent of

12 co-investment funds. That's in 1998. It's inverse by 2004,

13 88 percent of the funds are co-invested. But I'm not just

14 relying on this alone.

15 Mr. Friedman, Rich Friedman, who was the head of

16 the Private Equity Group at Goldman Sachs in three separate

17 parts of his testimony at Plaintiffs' Exhibit 15A in

18 discussing the club deals from 2003 to 2007 testified the

19 following: That the mandate of most private equity firms is

20 to, quote, buy companies on their own, because I think

21 frankly that's how most of the firms like doing things

22 because, frankly, they would rather work on these deals than

23 own them themselves.

24 "But the preference of most of the firms is to sort

25 of do the deals on their own, it always has been."


84

1 Another quote, "Most of the transactions that we're

2 financing now," because we also have a debt financing

3 business, "most of these firms are doing -- are just doing

4 deals on their own because they don't need to have any other

5 co-investment partners. And, frankly, they would prefer not

6 to because, frankly, they would rather work on their own."

7 How many times can you have Goldman Sachs, the head

8 of their Private Equity Group, say that firms would rather

9 work on their own, to know that this is not a longstanding

10 business tradition. And it's at least a fact question for

11 the jury.

12 THE COURT: It was unrefuted yesterday, there

13 is no -- the plaintiffs do not contest that the working

14 together constitutes any indicia of illegality.

15 MS. SLAUGHTER: You're right. That alone

16 isn't illegal but partnering for the specific purpose of

17 eliminating competition or reducing competition --

18 THE COURT: Oh, there is no doubt about it.

19 MS. SLAUGHTER: Yes, it's --

20 THE COURT: I agree. But there has to be

21 evidence of that.

22 MS. SLAUGHTER: And we're getting to it.

23 THE COURT: But the fact that they are working

24 together is -- nobody contests that.

25 MS. SLAUGHTER: You're right.


85

1 Let's take a look at slide 4. You might find this

2 persuasive. I think a jury will, okay.

3 It's Exhibit 1491 from Plaintiffs' Exhibit 15B

4 describing the Goldman Sachs private equity transaction

5 overview. In this document Goldman Sachs recognized that

6 what financial buyers tried to do in order to minimize the

7 purchase price is avoid competition. This assumes that I

8 want to buy the company but I want to minimize the purchase

9 price. How am I going to do it?

10 I'm going to avoid competition. How am I going to

11 do that? I'm going to partner for the specific purpose of

12 eliminating my competition. I'm going to agree to not jump

13 anybody's deal and I'm going to agree to stand down when

14 other private firms ask me to.

15 THE COURT: There is no doubt. But the

16 question is not the law, the question is the evidence that

17 supports that. That is what we are concerned with. What is

18 the evidence? I am not saying it is not there but where is

19 the evidence as to a unitary conspiracy -- overarching

20 conspiracy? That is what I am looking for, not a recitation

21 of hornbook law but the evidence.

22 MS. SLAUGHTER: Okay. Let's talk about some

23 of the evidence.

24 To understand Goldman's role in this conspiracy we

25 should start in 2005. That's when they raised at the time


86

1 the largest private equity fund of any of the other

2 defendants in this case, it was 8.5 billion dollars. KKR,

3 one of the defendants in this case, saw this fund as a

4 competitive threat. KKR's cofounder Henry Kravis was very

5 public about the fact that he saw this as a competitive

6 threat.

7 If you turn to slide 5, he's quoted as saying that

8 Goldman Sachs had never competed with them and that, "As

9 long as they continue to perform as partners as opposed to

10 competitors, we believe their private equity business will

11 continue to fit within Goldman Sachs."

12 You can't get any more public about the fact that

13 at least KKR and Goldman Sachs had an understanding that

14 Goldman Sachs wasn't going to compete in the private equity

15 business with KKR. This is evidence, the kind of evidence

16 that you're asking for. In fact, after Goldman Sachs raised

17 this historic amount of private equity funds, the CEO of

18 Goldman Sachs Group, Inc., Lloyd Blankfein, and Richard

19 Friedman, the head of Goldman Sachs Private Equity Division,

20 met with Henry Kravis at KKR's office to specifically

21 discuss the fact that they intended to continue to partner

22 on deals even though they had raised such a large amount of

23 money for investing. That's at Plaintiffs' Exhibit 15B,

24 Mr. Friedman's testimony 392 to four.

25 THE COURT: Let's take a 7-minute break at


87

1 this time and then we will get back. We have got to pick up

2 the pace because we still, what do we have, seven more

3 today, so you have got to -- both sides are allocated to

4 approximately ten minutes. We have got to just hit on the

5 main points.


7 Court is in recess.

8

9 (Recess.)

10


12 Court is back in session. Please be seated.

13 THE COURT: For the sake of the plaintiffs,

14 what I am looking for from the plaintiffs is, so-called

15 under the terms of the cases, the so-called larger picture,

16 the tieing it together and it has to be more than joint

17 bidding and the failure to compete. There has to be this

18 overarching agreement that affects all or most of these

19 transactions. That is what was pled.

20 And going into the minutiae that may be in this

21 case, there might be a conspiracy as to that transaction is

22 going to be insufficient so, I am not going to tell you how

23 to argue your case but sometimes going into the minutiae is

24 not helpful on the overriding issue which is the overarching

25 agreement and that is what I am looking for.


88

1 MR. WILDFANG: Your Honor, if I could jump in?

2 I plan to address at the end of the day how all

3 this fits together so I think we will give you answers to

4 the questions you have.

5 THE COURT: Okay.

6 MS. SLAUGHTER: And I --

7 THE COURT: We have got to move.

8 MS. SLAUGHTER: And I have two responses to

9 that. Bear with me.

10 If you take the evidence, the various evidence from

11 the different deals, you can infer the overarching

12 conspiracy. That's the case law. But maybe we should look

13 at this as like a drug, criminal drug conspiracy, okay.

14 Say we have a conspiracy to sell cocaine, all

15 right. That's the overarching conspiracy and then there are

16 episodes in that conspiracy. John Connor, our renowned

17 expert on the cartel theory, he talks about this in the

18 expert report, there are episodes. You might think of the

19 LBOs, the different leverage buyouts as episodes of this

20 conspiracy to restrain competition.

21 But let's keep with the drug conspiracy for a

22 minute. One episode in that conspiracy might be your

23 street-level drug dealer and his deal is successful. He

24 gets the money, he exchanges the drugs.

25 One other episode of that drug conspiracy might be


89

1 that the drug dealer gets robbed so he's not successful in

2 completing that conspiracy.

3 Another one might be your street-level drug dealer

4 turns informant, okay.

5 So you have three different examples, one of which

6 you would say was affected to execute the goals of the

7 conspiracy. The other two not so effective. But that

8 doesn't mean that there is not a conspiracy to sell drugs.

9 THE COURT: No, but the difference is in that

10 case all of the participants have a meeting of minds and

11 they are tending towards the same object. There is some

12 evidence presented by the defendants that show that on

13 certain of these transactions there was not a meeting of

14 minds, or at least that is what is argued.

15 MS. SLAUGHTER: Right. The evidence is

16 disputed on that. So they argue in some instances they

17 didn't have a meeting of the minds. But actually I think

18 the evidence we've shown is they all have a common scheme, a

19 common understanding that they want to limit competition,

20 restrain competition on these deals.

21 THE COURT: But here are the two facts that

22 you have to get over or prove that there is something in

23 addition to these facts.

24 One fact is they have a right or at least it has

25 not been contested that they can work together.


90

1 Two, there is no compulsion or obligation under the

2 law to compete. So, therefore, there has to be some type of

3 agreement between the 11 defendants that something in

4 addition, namely, we all agree that we are going to limit

5 competition by in every case where -- well, we are going to

6 stand down on every case, that is an agreement. Where is

7 that? Where is it that they entered into this agreement?

8 That is what I am looking for.

9 MS. SLAUGHTER: It's evidenced in each of the

10 deals that we've pointed out to you where this has happened.

11 THE COURT: Yes, but it didn't happen in all

12 of them.

13 MS. SLAUGHTER: In every single one --

14 THE COURT: It might have been the conspiracy.

15 There is evidence that there might be a conspiracy in

16 certain transactions. HCA is a clear example at least to my

17 way of thinking tentatively that maybe that matter should go

18 to the jury.

19 MS. SLAUGHTER: Kinder Morgan, SunGard, I'm

20 going to go through these --

21 THE COURT: Well, you haven't got enough time.

22 I have heard yesterday on that. But the point is where is

23 the agreement between all of them regarding 27 transactions?

24 MS. SLAUGHTER: That's not something that

25 we're required to prove under the law though. And


91

1 defendants have set this up so that --

2 THE COURT: There has to be sufficient

3 evidence that there is one conspiracy. I didn't draft this

4 complaint.

5 MS. SLAUGHTER: So when you have a drug

6 conspiracy --

7 THE COURT: I understand the drug, I am asking

8 about this one. There is one overarching conspiracy

9 involving 27 transactions. In some of the transactions it

10 is obvious that there is no conspiracy.

11 MS. SLAUGHTER: Some of the transactions don't

12 achieve the goal of the conspiracy, maybe --

13 THE COURT: They shouldn't be in there then.

14 MS. SLAUGHTER: Well, if that's what you are

15 saying --

16 THE COURT: That is what has been alleged.

17 MS. SLAUGHTER: This is --

18 THE COURT: Why was it alleged this way?

19 MS. SLAUGHTER: This is something -- because

20 they're connected. They are connected in some way.

21 THE COURT: Well, that is the point. Show the

22 connection on all of them or most of them.

23 MS. SLAUGHTER: Okay. And I agree with you.

24 And if that's what you need, at the end of the hearing today

25 we are prepared to show that. Mr. Burke will run through


92

1 every transaction with you and show how they're all

2 connected.

3 THE COURT: Maybe you will have to come back

4 next week. There is not going to be a chance to go through

5 every one today. We still have got seven other people that

6 have to talk. I mean, yesterday was the time for that. If

7 you want to come back next week or the week after, I am

8 available.

9 MS. SLAUGHTER: If it means that I can

10 represent my client and explain why this case shouldn't be

11 tossed, why it --

12 THE COURT: Tie them together. You had ten

13 minutes for this, let's do it.

14 MS. SLAUGHTER: All right. Here's the Kinder

15 Morgan deal, Your Honor. If you look at the Kinder Morgan

16 deal, go to page seven in your slides. This is the deal

17 that Goldman Sachs identified. They invited several other

18 defendant private equity firms to join a consortium to

19 invest in the deal. And they included Apollo, Bain,

20 Blackstone, KKR, TPG and Carlyle.

21 And Mr. Friedman believed that no one would compete

22 with Goldman on the deal because an agreement to not compete

23 was in place, an explicit agreement. And there was some

24 rumors that some of the defendants who decided not to

25 participate with Goldman were going to compete. And


93

1 Mr. Friedman testified that that's not a possibility, "it

2 would be a franchise killer."

3 He calls the club of other private equity firms a

4 franchise. He said, "It was my belief at this time we had

5 agreements that they either would work with us or they would

6 not compete against us."

7 That's an explicit per se unlawful agreement to not

8 compete.

9 And if you need a document for that, look at page,

10 slide eight, all right. This is the specific provision of

11 the agreement which says that these defendants will either

12 work with Goldman or they won't compete against them.

13 Ken Pontarelli who was a managing director of

14 Goldman Sachs testified the defendants that we discussed,

15 Apollo, Blackstone, KKR, TPG, Carlyle, all signed this

16 agreement. That's at Plaintiffs' Exhibit 21, page 83.

17 THE COURT: Assume that this is sufficient

18 evidence as to a conspiracy as to that particular

19 transaction. Are these people involved in all the others?

20 MS. SLAUGHTER: They're involved in a lot of

21 the others.

22 THE COURT: No, but are they involved in --

23 did they agree that they were going to have some involvement

24 in all of these transactions or substantially all of them?

25 I mean, that is what is pled here. That is what is pled


94

1 here: An agreement, an overarching agreement involving 11

2 people and a lot of co-conspirators involving 27

3 transactions. It is, I tell you, it is almost mind boggling

4 to get your mind around it.

5 MS. SLAUGHTER: What the agreement does is it

6 allows the defendants to participate if they want to, okay.

7 If they want to.

8 THE COURT: Here is my only point. I

9 indicated there may well be evidence of certain conspiracies

10 as to certain separate transactions. That is not what is

11 pled here. That is the problem. There is evidence that on

12 several of these transactions there was no conspiracy, at

13 least with many of the defendants, but they are all lumped

14 together.

15 MS. SLAUGHTER: Let me tie the Kinder Morgan

16 to the HCA because that's not something that has been done.

17 It may illuminate something for you, okay. I think this

18 will be very interesting.

19 You saw yesterday in the HCA deal it was announced

20 July 24, 2006. If you go to slide 12 you will see that

21 Goldman Sachs was trying to ask Bain Capital to get into the

22 deal. "This is the preferred path for us." In other words,

23 we want in this deal with you guys, KKR and Bain, we don't

24 want to compete. But then they also say they've reached out

25 to KKR.


95

1 Take a look at slide 13.

2 THE COURT: 13?

3 MS. SLAUGHTER: 13, the very next one.

4 Remember, July 24 was when HCA was announced. You

5 have us Alison Mass of Goldman Sachs telling George Roberts

6 of KKR, "Wish we were with you here," okay, in this HCA

7 deal.

8 Look at his response: "Merrill played role GS

9 should have done in Kinder."

10 Do you know what he was telling Goldman Sachs here?

11 You should have acted like an investment bank instead of a

12 private equity firm doing a triple play in this Kinder

13 Morgan deal. That should have been something that we did.

14 We should have -- KKR should have done this Kinder Morgan

15 deal and you should have stayed in your role as an

16 investment bank.

17 Ms. Mass forwards this on to the head of Goldman

18 Sachs Private Equity Group Richard Friedman and he says, "I

19 suspect they will resist allowing us to join HCA to teach us

20 a lesson."

21 Okay. John Connor, one of the classic mechanisms

22 of conspiracy is reward, punishment and monitoring. This is

23 punishment, he is explicitly saying, so now you have a link

24 between Kinder Morgan and HCA.

25 Now, look at what Mr. Friedman says later. We


96

1 should try to get in, as opposed to going after this, okay,

2 as opposed to competing. Can you imagine the fallout with

3 KKR and Bain if we teamed up with some other private equity

4 firms, okay.

5 The very next slide, two days later it's confirmed

6 that Goldman Sachs is not going to compete on this deal.

7 Even though they wanted in, they recognized they're being

8 punished for not giving KKR the kind of role KKR wanted in

9 Kinder Morgan, okay.

10 THE COURT: Okay. Try to, you know, bring --

11 you only have ten minutes for each of these.

12 MS. SLAUGHTER: I know.

13 THE COURT: Make your high points.

14 MS. SLAUGHTER: All right. Look, they didn't

15 jump the deal. They never jumped a deal. That's in the

16 testimony. That's in the record.

17 There is a genuine issue of material fact here

18 about how these deals are related, whether they're paybacks,

19 rewards, standing down, no jumping, that's something that

20 should go to the jury. It's not something that you have to

21 decide. It's a jury question. And we'd like the

22 opportunity to try this case in front of Your Honor and pull

23 out all the evidence we have, not just in ten minutes of the

24 individual arguments.

25 And I will step down now and --


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1 THE COURT: Well, you have got something

2 there. Judge Ford who used to sit on this court always

3 said, "I always denied motions for summary judgment. It

4 makes life a lot easier."

5 (Laughter.)

6 THE COURT: This is a hard one.

7 Go ahead, next one. Quick, just quick response.

8 MR. PEPPERMAN: Sure, Your Honor. I just want

9 to make two brief points.

10 First --

11 THE COURT: She said she was misled by your

12 client as to how to designate the defendant; and,

13 secondly --

14 MR. PEPPERMAN: Well, look --

15 THE COURT: -- both parts of your organization

16 do work different sides of the street depending on what the

17 transaction is.

18 MR. PEPPERMAN: Well, that's not correct, Your

19 Honor.

20 Just on the organizational issue, and I don't want

21 to belabor this, it is true, of course, that all parts of

22 Goldman Sachs ultimately flow up to the holding company.

23 That doesn't mean that it's the holding company that engaged

24 in the challenged conduct.

25 Both the Investment Banking Division and the


98

1 Merchant Banking Division are all part of Goldman Sachs &

2 Co. which is managed as, not surprisingly, as an overall

3 entity.

4 My two points, Your Honor, are, first, there is no

5 dispute that Goldman Sachs represented the seller in six of

6 the 17 LBOs at issue: AMC, Clear Channel, Freescale,

7 Michaels, Neiman Marcus and Sabre. It, therefore, was not

8 in Goldman Sachs' economic interests to enter into --

9 THE COURT: So you are saying at least with

10 respect to those transactions, it is almost metaphysically

11 impossible for you to have been a co-conspirator?

12 MR. PEPPERMAN: Correct, because our fee is a

13 percentage of the sales price. We want to get the price as

14 high as possible.

15 But, Your Honor, the fact that we were the seller's

16 representative in over one-third of the LBOs of interest

17 here, it's also strong evidence that it's not in our

18 economic interests to participate in this overarching

19 conspiracy. More than one-third of them we're representing

20 the seller.

21 And just with respect to the HCA count, because we

22 have been thrown in there, I urge the Court to look at

23 Exhibit Q to our motion which describes what the Goldman

24 Sachs investment bankers were doing when the HCA LBO was

25 announced. And the Carlyle email reads, "Goldman Sachs,"


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1 the investment bankers, "is in a frenzy trying to organize a

2 competing consortium. They've reached out to us, TPG and

3 Blackstone as potential leads and have spoken to Warburg,

4 Goldman Sachs PIA, Apollo, Thomas Lee, and Madison Dearborn

5 as well."

6 Now, is that evidence of a corporation that has

7 agreed to stand down when it's in a frenzy trying to contact

8 people --

9 THE COURT: I got it. I got it. Next.

10 (Laughter.)

11 MR. COUGHLIN: Your Honor, Patrick Coughlin

12 for the plaintiffs, if I might just for a second. I am one

13 of the lead counsel and I had the benefit of actually maybe

14 not being here yesterday so --

15 THE COURT: You are lucky.

16 (Laughter.)

17 MR. COUGHLIN: I was lucky. I was in court

18 down in Atlanta. So I have a suggestion.

19 I heard what Your Honor is asking and the questions

20 about give me the overarching conspiracy, give me the

21 agreement, you know, about not jumping the deals, give me a

22 way away that everybody can be involved even if they're not

23 involved in these seven deals or that. So I have a

24 suggestion to try to answer that question, because time is

25 running short and we've spent a lot more time on each of


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1 these deals.

2 I would suggest that the defendants who want their

3 argument about each one of these deals, each one of the

4 deals that they're in, each defendant in the deals that

5 they're in, let them go ahead and conclude. Let them go

6 ahead and do their ten-minute argument right now, or 15 if

7 it takes 15 or 20. I'm not trying to limit their time.

8 Let us wait till the end to tie those deals

9 together. And we won't stand up in the middle, they can go

10 ahead and go --

11 THE COURT: If that is your suggestion, I

12 accept it.

13 MR. COUGHLIN: Okay. Thank you, Your Honor.

14 THE COURT: You are going --

15 MS. ANDERSON: I'm sorry, Your Honor, I'm

16 actually not sure that that's something that defendants

17 would agree with.

18 THE COURT: What is that?

19 MS. ANDERSON: We actually -- this is the

20 proposal that we had submitted to Your Honor as to how the

21 arguments would proceed, that we would be able to avoid

22 actually having to confront arguments by individual

23 defendants. We objected, you agreed to the schedule that

24 would force them to take --

25 THE COURT: Well, he doesn't have to --


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1 MR. COUGHLIN: No, that's right. I'm not

2 cutting off their right to argue. Go ahead.

3 MS. ANDERSON: So you are just not going to

4 address the issue.

5 MR. COUGHLIN: I will address the individual

6 arguments at the end.

7 THE COURT: He has a right to conduct his

8 argument the way he wishes.

9 MS. ANDERSON: Thank you, Your Honor.

10 THE COURT: Identify yourself for the record.

11 MS. ANDERSON: I'm sorry. Carrie Anderson on

12 behalf of Providence Equity Partners.

13 THE COURT: Okay. Because we are, you know,

14 running out of time, let's stay as close to ten minutes as

15 you can. And they are waiving their response at this time

16 and saving their argument until after all the defendants

17 have finished.

18 MR. CARROLL: Your Honor, my name is James

19 Carroll from Skadden Arps here in Boston. With me is Alisha

20 Nanda and I'm here on behalf of J.P. Morgan Chase & Company,

21 a defendant in Count 1 only.

22 I emphasize it is J.P. Morgan Chase & Company

23 because there used to be a defendant in the case called J.P.

24 Morgan Partners. They're out of the case and I'm going to

25 come back to them in a moment.


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1 THE COURT: Why are they out? I forgot.

2 MR. CARROLL: They're out because you

3 appropriately dismissed them because the only deals in which

4 they were involved had releases associated with them. They

5 have been out of the case for three years or so.

6 So J.P. Morgan Chase is a defendant in the case.

7 Mr. Pepperman set the table for this. The fundamental

8 reason, and I'll expand on it, why they don't belong in this

9 case now and why they never belonged in this case is because

10 they are not and have never been a private equity firm. All

11 this talk about standing down from bids is entirely

12 inapplicable. They don't bid. They've never been a winning

13 bidder. They've never been a losing bidder. They don't

14 bid. They're not in the private equity business and they

15 have never been in that business.

16 As nonsensical as this overarching theory is in

17 general, it particularly makes no sense for an entity that

18 is not even in the private equity business.

19 What does J.P. Morgan do here? It does a couple of

20 things. Much like Mr. Pepperman explained with respect to

21 Goldman, J.P. Morgan represents in some deals sellers. They

22 worked with the management of the company to help them sell

23 the company. That happened here in Michaels stores and I'll

24 come back to that. That's the first thing they do.

25 The second thing they do is work --


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1 THE COURT: Did you advise sellers? Out of

2 the 27 how many sellers did you advise?

3 MR. CARROLL: Michaels stores, Alltel are the

4 ones we were principally sellers helping to sell the

5 businesses.

6 In other deals, a number of the other deals, not

7 all of them but a bunch of them, what J.P. Morgan does is

8 provide financing and advice. The L in LBO, leverage, means

9 that these private equity firms who are buying it, they put

10 in a lot of their own money and do equity, they also need to

11 raise a lot of money. And J.P. Morgan helps them do that

12 and gives them advice as to how to do that as well so these

13 are the two things that we do.

14 As with Mr. Pepperman's client with respect to the

15 advisory business for sellers, we get paid more if the price

16 is higher. That's what we did in Michaels. There was a

17 competitive auction. The price went back and forth, it went

18 up. The public shareholders as a result of that option got

19 more than 200 million dollars more that they would have

20 gotten if the initial bid became the deal price. It wasn't,

21 it went up by more than 200 million dollars. J.P. Morgan

22 got a little piece of that, almost an extra million dollars

23 in fee.

24 Our interest in representing sellers is aligned

25 with the shareholders and is for the price to be higher. It


104

1 is completely antithetical to the core theory that the

2 plaintiffs have that the point of the conspiracy was to

3 depress the price. It makes no sense as to us. It makes no

4 sense as to others as well but in particular when you think

5 about J.P. Morgan it makes no sense.

6 Think about, Your Honor, the other part of what it

7 is that J.P. Morgan does in these deals. It provides

8 financing so that these deals can be financed and advice in

9 that regard.

10 How does it get paid there? As a general matter in

11 terms of providing financing it gets paid for the work that

12 they do and they get paid more based upon the size of the

13 financing. If you arrange for greater financing, you are

14 able to charge a greater fee.

15 Yet again, our economic interest is --

16 THE COURT: Are you saying that if the price

17 of the share of stock is higher, it requires more financing

18 to pay for it and you get a bigger fee?

19 MR. CARROLL: Yes, it is that clear. If the

20 deal goes off at a lower price, less financing is needed and

21 there is a smaller opportunity to make financing fees.

22 THE COURT: So why are you, why do you believe

23 that you are in this case?

24 MR. CARROLL: Judge, I have been trying to get

25 your attention on that question for five years.


105

1 (Laughter.)

2 THE COURT: I always said after --

3 MR. CARROLL: Well, in all seriousness --

4 THE COURT: -- I said, I knew you were in a

5 separate category and I didn't want to get into it until all

6 discovery was concluded.

7 MR. CARROLL: That's right. And we moved for

8 summary judgment --

9 THE COURT: But what is the rationale, and the

10 plaintiffs will tell me, but why do you believe?

11 MR. CARROLL: I believe that they put us in

12 this case because they try and mix us together and confuse

13 J.P. Morgan, the entity I'm here representing today, with

14 the business that J.P. Morgan used to but does not have

15 anymore, a private equity business called J.P. Morgan

16 Partners.

17 Let me address that directly. I want to come back

18 to your earlier point. This is, indeed, our second summary

19 judgment motion. As soon as that first phase of discovery

20 was over we moved immediately for summary judgment and Your

21 Honor said come back --

22 THE COURT: I recall.

23 MR. CARROLL: -- later.

24 THE COURT: We put it off.

25 MR. CARROLL: And no amount of discovery, one


106

1 phase, two phases or three phases can turn us into a private

2 equity firm. We don't bid. The notion of us agreeing not

3 to bid and that being part of an agreement that's value to

4 anybody is nonsense. We always stand down. We are never

5 involved. It makes no sense.

6 So here's I think what the plaintiffs do. The

7 first thing is they confuse, they attempt to confuse J.P.

8 Morgan with a different business J.P. Morgan Partners. This

9 isn't as it was with Goldman where they just tried to sue a

10 division. They -- that's a separate legal entity that was a

11 defendant in this case and was dismissed years ago. We

12 don't have that business anymore.

13 The people who did that are off running a different

14 private equity firm competing away in the marketplace. That

15 is not us. That entity has been dismissed. There is no

16 basis in this record for us to be responsible for any of

17 those allegations as to that dismissed party. That's the

18 first thing they do.

19 And that big chart that the plaintiffs had up that

20 looks like somebody's quilt with boxes and different colors

21 on it, they used the term "J.P. Morgan" in there to refer to

22 activities of J.P. Morgan Partners. J.P. Morgan Partners

23 had been involved in the Aramark deal as a bidder. That's

24 not us. That's dismissed. That doesn't work.

25 The second thing, the second thing that the


107

1 plaintiffs do is they pick a few snippets, minutiae out of

2 the few deals, and try and say that that is enough to weave

3 us in. I'll give you an example of just one. You heard

4 some reference to it yesterday, I'm sure you'll see it

5 again.

6 There is an email that deals with a SunGard

7 transaction. That was one that was led by Silver Lake.

8 Silver Lake was using J.P. Morgan for financing. And they

9 point to an email that suggests that Silver Lake put a call

10 into someone at J.P. Morgan to try and discourage somebody

11 else from bidding. That's the argument that they make.

12 What they don't tell you about that email is at the

13 time of that email Silver Lake already had a deal.

14 THE COURT: Had what?

15 MR. CARROLL: They had a deal. They had an

16 agreement with the board. This is a deal they cut

17 themselves, went to the board and then were in a position

18 that they had to go out and find people to partner up to do

19 the deal because they didn't have enough money to do it

20 themselves. They had to go out to other financial sponsors,

21 the Blackstones of the world, to say would you like to come

22 in and be part of our deal and contribute some equity.

23 So they'll show you an email on the face of it and

24 give you a nefarious spin but they don't give you the rest

25 of the story. It's a classic example of taking a little


108

1 minutia out of context and trying to spin it into something

2 grand. And even if you take for a moment, accept how

3 they'll try and spin an email like that, two things about

4 it.

5 One, it only relates to one deal. One deal. There

6 is no nexus with this overarching or overreaching conspiracy

7 allegation, none at all.

8 Second, it talks about a request to make a phone

9 call. There is no evidence in the record that the phone

10 call was made. None at all.

11 So when you combine the legitimate business reason

12 why Silver Lake is in a position to have to go out and find

13 somebody, they need more money. They have got a deal cut

14 with the management. They need somebody else to come and

15 give them some equity.

16 You take that legitimate business reason, you take

17 the fact there is no evidence in the record of any

18 inappropriate conduct other than what the plaintiffs spin is

19 a request and you look at the immateriality which, of

20 course, is important for J.P. Morgan of such an inbound

21 phone call making a request with nothing more. It can't

22 possibly be material.

23 Judge, we --

24 THE COURT: Okay, I got it.

25 Next.


109

1 MR. CARROLL: Thank you.


3 THE COURT: Ten minutes. I heard enough from

4 you yesterday.

5 (Laughter.)

6 MR. TRINGALI: Your Honor, I think you

7 probably heard enough from me yesterday.

8 THE COURT: Who do you represent?

9 MR. TRINGALI: KKR, Your Honor.

10 I apologize for us not being as glitzy as some of

11 the others with their presentations, Your Honor, but we are

12 trying to do this quickly.

13 Your Honor, fundamental to what you have been

14 talking about today is this overarching agreement to

15 allocate deals. One of the points that is being missed

16 today by the plaintiffs is the difference between auctions

17 and proprietary transactions which I raised with you

18 yesterday.

19 They say no one is topping deals, side deals. What

20 they're referring to are proprietary transactions. And

21 there are a number of reasons which we went through

22 yesterday as to why people do not jump a proprietary

23 transaction.

24 Remember one of the documents I showed you, I'll

25 just take it, the one that said we're going to be a day


110

1 late, a dollar short and lose. What they're leaving out is

2 that 9 of the 17 LBOs that they're seeking damages for,

3 those were auctions, Your Honor. And in those auctions

4 defendants, including KKR, were bidding against each other,

5 in successive rounds of bidding and ultimately one or the

6 other was losing.

7 THE COURT: So out of the 17 or 19 you say

8 nine are auctions?

9 MR. TRINGALI: Absolutely --

10 THE COURT: And --

11 MR. TRINGALI: -- a bid war bidding against

12 each other.

13 THE COURT: Is it 17 or 19?

14 MR. TRINGALI: What it is, Your Honor, let me

15 explain that.

16 There are 19 transactions that they say are LBOs.

17 Two of them they're not seeking damages for. PanAmSat,

18 because Your Honor dismissed PanAmSat for damages purposes

19 because of the structure of PanAmSat, it was not an LBO.

20 There were no -- the shareholders, public shareholders were

21 not bought out by the defendants. Texas Genco is the other

22 one that has the same structure as PanAmSat. And as a

23 result, they don't have standing and they are not seeking

24 damages.

25 THE COURT: So we are talking about 17.


111

1 MR. TRINGALI: 17 that they're seeking damages

2 for.

3 THE COURT: So out of those how many are

4 auctions?

5 MR. TRINGALI: Nine. So when they talk -- so,

6 Your Honor, that, quite frankly, that's the easiest thing

7 you have to deal with in terms of there not being a global

8 conspiracy as to the 27 transactions because nine --

9 THE COURT: What they are saying, that the

10 strongest evidence that they have of conspiracy or

11 conspiracies here is the stand down.

12 MR. TRINGALI: That's what they call it, yeah.

13 And what I'm saying --

14 THE COURT: You are saying that doesn't apply

15 to nine of the transactions?

16 MR. TRINGALI: I'm saying -- absolutely, Your

17 Honor. I'm not saying that it applies to the other

18 transactions --

19 THE COURT: No.

20 MR. TRINGALI: -- but what I'm telling you is

21 that in nine transactions you have active bidding among the

22 defendants against each other. They have got a few of them

23 where they say, oh, there was some rigging going on. But

24 what they always forget to tell you about is in one

25 situation they're going to say, oh, these two defendants


112

1 communicated with each other or these three defendants. But

2 then they don't tell you that three other defendants were

3 competing against that group.

4 So how do you have -- even in that situation where

5 they have evidence of rigging in a particular deal, they

6 never tell you about the other defendants who are still

7 competing in the deal.

8 So in every one of those auction situations, Your

9 Honor, you have people bidding in successive rounds against

10 each other and the price continuing to go up.

11 THE COURT: So the stand down claim and maybe

12 evidence in certain instances relates to proprietary

13 purchases?

14 MR. TRINGALI: That's how they have -- yes,

15 Your Honor, because what that is, what they're saying there

16 is you have a proprietary deal, other defendants don't know

17 about it until it's announced publicly for the reasons I

18 went through yesterday. Some companies would prefer to be

19 kept quiet. But then there is what they call a "go shop"

20 period where someone can come in with a superior proposal

21 and what they're saying is no one comes in with a superior

22 proposal.

23 THE COURT: To take their argument, let me ask

24 you this, in those seven --

25 MR. TRINGALI: Yes.


113

1 THE COURT: -- proprietary deals during the go

2 shop period is there evidence that there was a conspiracy in

3 at least those instances to stand down?

4 MR. TRINGALI: No, Your Honor, and the best

5 example is Freescale. In the Freescale transaction, you

6 will remember that KKR, Bain and Silver Lake came in at the

7 11th hour just as they were about to sign a proprietary deal

8 with Blackstone, TPG and -- I'm actually forgetting who else

9 it was -- and KKR and that group came in at the final hour.

10 And the plaintiffs say it was by mistake, that they didn't

11 know, okay. Because that's what KKR told you.

12 But if you turn to tab eight which is an internal

13 KKR document, you will see that the highlighted portion, KKR

14 knew exactly what they were doing. "We understand that the

15 company is in the final stages of a take private with

16 Blackstone and TPG, our primary competition in the

17 NXP/Philips transaction."

18 And if you look below that, it says, "Goldman

19 communicated our interests to the board," that's Goldman

20 Sachs, "who was advising Freescale who has asked us to

21 respond. Goldman confirmed that a process is being run with

22 a potential deal near completion."

23 And with that knowledge KKR and Silver Lake and

24 Bain submitted their indication of interest which caused the

25 Blackstone bidding group to pay almost an extra billion


114

1 dollars. And you know what the reaction was of the group,

2 of the KKR group when someone says internally at KKR -- and

3 this is tab 11 -- "Sorry about Freescale."

4 Ann Clammer who headed the team says, "Don't be

5 sorry. I couldn't be more pleased with the outcome on many

6 levels. Sometimes losing is a good thing and this is one of

7 them. I like NXP at our price," that's the one we won a

8 month before, "much more than Freescale at $40. Between us

9 we cost those guys 1.3 billion dollars in purchase price,

10 all equity. Will be fun to watch them finance this thing."

11 Your Honor, that is the words of a competitor who

12 is thrilled what he has just done to his supposed

13 conspirator. And that is an example where we knew there was

14 a deal about to be signed, we knew it was a proprietary deal

15 and we stepped and in we tried to upset it.

16 And what we ended up doing instead is cause -- we

17 lost and we cost our competitors 1.3 billion in purchase

18 price and we were elated. That, Your Honor, is competition,

19 not conspiracy, and that goes to the proprietary

20 transactions.

21 But, Your Honor, you don't even need to get to that

22 because they have the fundamental problem --

23 THE COURT: Let me get it straight. According

24 to you, with respect to auctions --

25 MR. TRINGALI: Yes.


115

1 THE COURT: -- is there any allegation or

2 evidence as to "stand down" during those proceedings?

3 MR. TRINGALI: What you find in the auction

4 situation time and time again, I went through this yesterday

5 and I mentioned a number of them to you, is people

6 continuing to bid against each other. And that's why you

7 find those documents that we went through yesterday and I'll

8 go through a few quickly today that say --

9 THE COURT: What you are saying then legally

10 is that there can't be an overarching conspiracy that

11 relates to nine auctions if the indicia of the illegality is

12 the stand down as it may or may not occur in some of the

13 proprietary transactions?

14 MR. TRINGALI: Absolutely, Your Honor. And

15 even in the, whether it's proprietary or auction, what you

16 find is people at some point say -- at some point lose, for

17 example, and they find out, you know, remember the "wow"

18 document. They were bidding until they got to that point

19 and then they find out that someone has beat them, okay.

20 THE COURT: How about during the evidence

21 there are -- I can't remember who said it -- but if there is

22 a deal, you know, we should all stand down or the practice

23 is to stand down, words to that effect?

24 MR. TRINGALI: Yes, there is a document, Your

25 Honor, and what it is is a document written by someone at


116

1 another firm, okay, at Carlyle, after KKR puts in its

2 indication of interest in Freescale and disrupts the

3 Freescale bid. And someone at Carlyle who has never been

4 deposed by the plaintiffs writes, "And just to think KKR

5 told the industry to step down."

6 Plaintiffs never took that person's deposition. We

7 have no idea, and they have no idea and nothing is put

8 before you as to what was the source of that person's

9 information, whether he read it in the newspaper, whether he

10 talked to somebody at Carlyle and what specifically KKR told

11 them.

12 As Your Honor recognized, if KKR said to people

13 don't waste your time trying to disrupt HCA because we have

14 all these contractual protections and we have Tommy Frist

15 with us, the principal shareholder, so you're just going to,

16 you're going to, as many people recognized in their

17 documents, just waste time, effort and money and you're

18 going to end up with nothing, that is perfectly permissible.

19 But more importantly for Your Honor, it nowhere

20 gets you to the overarching agreement that you have been

21 looking for and that they pled.

22 Let me just go very quickly, Your Honor --

23 THE COURT: Very quickly.

24 MR. TRINGALI: What?

25 THE COURT: You have got three minutes.


117

1 MR. TRINGALI: Okay. Then I'll be very quick.

2 I want to give you just a few examples of this

3 auction situation I told you about.

4 THE COURT: The what?

5 MR. TRINGALI: Auction situation. Because if

6 9 of the 17 don't even make it, I think you have a very easy

7 way of saying there is no global overarching conspiracy.

8 So if you look at tab 1, this is the Alltel

9 transaction which was an auction. And in Alltel what you

10 find is -- tab one, Your Honor.

11 In Alltel what you find is that the winning bidder

12 came in -- this is the dawn raid that Goldman Sachs pulled

13 off with TPG at $71.50. And you have Mr. Navab who headed

14 this transaction for KKR saying he's surprised and

15 disappointed. And what price was he at? 65 to 67.5.

16 Significantly below the 71.5.

17 So he writes, "As a result a price of 71.5 would

18 have been extremely challenging for us. While we are

19 disappointed by the process, we would not have been excited

20 or competitive at this price range."

21 That, Your Honor, is an example of an auction where

22 we attempted to bid against someone as opposed to divide up

23 the deals, as opposed to rig prices, and we couldn't get to

24 that price.

25 In Clear Channel, that's Exhibit 2, again, "We


118

1 raised our bid," this is again the leader of the deal team,

2 "to 36.85 which we believe to be an absolute stretch.

3 However, T.H. Lee and Bain got up to 37.60 this morning,

4 quite a monumental jump. Obviously a very, very

5 disappointing outcome. I must say I'm at a bit of a loss

6 and can't explain their price and any rational basis.

7 Extremely disappointed but we did everything we could and

8 stretched very far."

9 THE COURT: Okay. I will go through the rest

10 of them.

11 MR. TRINGALI: Okay, Your Honor.

12 The simple point I was trying to make is every

13 auction situation has documents like that. And they cannot

14 be part of this stand down because, as you have said now

15 repeatedly, people have no obligation, under the antitrust

16 laws or otherwise, to continue to bid once they've gotten to

17 their maximum, what they think is a competitive -- first of

18 all, there is no obligation to bid period but there is

19 definitely no obligation to keep bidding after you've

20 reached your maximum.

21 Thank you.

22 THE COURT: Next argument. We will go till

23 1:30 and then we will take a half-hour break.

24 MS. ANDERSON: Good morning, Your Honor.

25 Carrie Anderson for Providence Equity.


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1 Providence is one of the defendants named only in

2 Count 1 so it's the overarching conspiracy claim. I'm not

3 going to repeat what everybody has already said. I have

4 four things I just want to tell you about Providence and why

5 the conspiracies particularly don't apply with respect to

6 Providence.

7 The first point is that Providence is not a

8 generalized private equity firm. They're a specialized

9 private equity firm.

10 THE COURT: It is not a what?

11 MS. ANDERSON: They are not a generalized

12 private equity firm. They're a specialty firm. They were

13 founded only to invest really in two industries, in media

14 and communications. They set up their fund agreements and

15 they solicit investors based on that specialization. As a

16 result of that focus Providence's participation in this

17 conspiracy is particularly implausible. They have no motive

18 to participate in the conspiracy --

19 THE COURT: You are saying you are a specialty

20 firm in what type of industry?

21 MS. ANDERSON: Media and communications. They

22 invest in companies in media and communications.

23 THE COURT: Like television?

24 MS. ANDERSON: Television, telephones, media,

25 they have invested in entertainment companies, anything in


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1 that space. What they won't invest in would be Neiman

2 Marcus, a department start. Wouldn't invest in Toys "R" Us.

3 Wouldn't invest in HCA, a hospital, Freescale, Philips,

4 Kinder Morgan, all of the transactions that were discussed

5 yesterday at length, Providence would have nothing to do

6 with those transactions. They're well outside of

7 Providence's area of specialization.

8 This matters because the Supreme Court has clearly

9 stated that a lack of motive bears on the range of

10 permissible conclusions that can be drawn from ambiguous

11 evidence. If Providence had no rational economic motive to

12 conspire and if their conduct is consistent with other

13 equally plausible explanations, the conduct cannot give rise

14 to an inference of conspiracy.

15 Now, there is undisputed testimony on the record by

16 a senior executive from Providence Equity Partners that

17 transactions outside of its specialization would be

18 completely off their radar screen. And if I may, Your

19 Honor, I will hand up some materials that I won't walk

20 through at length but there are a couple of quotations in

21 there to which I am referring.

22 THE COURT: You have approximately ten

23 minutes.

24 MS. ANDERSON: I have approximately three

25 more, Your Honor.


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1 Slide two, Your Honor, has the deposition testimony

2 from Providence Equity's chief operating officer where

3 plaintiffs' counsel actually elicited the testimony that any

4 transactions that are outside of Providence's specialization

5 be completely off their radar screen. And he asked, So a

6 transaction such as HCA would be completely out of your

7 realm? The answer is yes, Providence wouldn't consider it

8 even if HCA had approached them to bid.

9 In fact, half of the 27 transactions are well

10 outside of Providence's area of specialization.

11 An allocation, which is what the plaintiffs'

12 complaint alleges, means that each participant agrees to

13 refrain from bidding on certain transactions in order to be

14 rewarded with participation in other transactions. It makes

15 no sense for a specialized firm like Providence to

16 participate in this conspiracy. It couldn't gain from

17 participating in a conspiracy to allocate investments when

18 half of them are investments in which it wouldn't invest in

19 the first place.

20 Now, this is a common sense argument but there is

21 also a firm economic underpinning here. Providence was one

22 of the only, actually the only individual defendant to

23 retain and to submit an expert report from an expert

24 witness. Professor Kevin Murphy who is an expert from the

25 University of Chicago in economics testified in the report


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1 in economic terms why Providence's business model would not

2 be conducive to collusion under plaintiffs' theory and its

3 participation in the overarching conspiracy is implausible.

4 There is a quotation from the report in the deck

5 that I have handed you. The report is in the record. None

6 of plaintiffs' three experts disputed anything that

7 Mr. Murphy had to say on this point in our report.

8 Now, third, this isn't at this point in time a

9 theoretical exercise any longer. We don't actually have to

10 wonder what Providence may have done or what maybe they

11 didn't have an incentive to do. We know exactly what they

12 did. The record has been fully developed. They deposed

13 everybody that they wanted to depose from Providence.

14 Providence produced millions of pages of documents.

15 And what does the record reveal? It reveals that

16 Providence had no involvement in the vast majority of

17 plaintiffs' 27 transactions. Instead the record shows that

18 Providence competed on every transaction in its area of

19 expertise of which it was aware. That's it.

20 Providence won some transactions, they lost some

21 transactions, but it competed. And it acted in its own

22 independent interest at all times.

23 This is how you would expect Providence to behave

24 in the absence of a conspiracy. You shouldn't use that then

25 to infer a conspiracy.


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1 Now, I would be happy to walk through all the

2 transactions. I'm sure that the plaintiffs have a binder

3 and many slides about the transactions that Providence was

4 involved in but the briefing has been extensive. We've

5 addressed I believe in all of our papers the quotations that

6 they're likely to point out and show you. But the fact of

7 the matter is that as you have repeatedly pointed out, there

8 is nothing in the record that links all of these

9 transactions together with respect to any defendant. There

10 certainly isn't anything --

11 THE COURT: How many transactions did your

12 client participate in?

13 MS. ANDERSON: We bid, Your Honor, on 13, or

14 there were 13 transactions that were definitely outside of

15 our area. We bid and won on five I believe. I may have it

16 here.

17 We bid and won on five transactions. We bid and

18 lost on three transactions. And there are six transactions

19 that arguably could fall within our realm of expertise of

20 which we did not bid. And the record is very clear that in

21 the instances where we knew about it in advance, we had a

22 business rationale, a very clear business rationale not to

23 participate. But, in fact, most of these transactions of

24 the six in which we did not bid we didn't know about until

25 we read it in the paper.


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1 And there are contemporaneous emails produced by

2 Providence that show that repeatedly. We saw some of them

3 yesterday. Mr. Tringali used some examples of the evidence

4 that was inconsistent with conspiratorial conduct.

5 You have instances where, you know, the CEO, the

6 chairman of Providence Equity Partners, there is a

7 contemporaneous email that says how did I not know about

8 this deal.

9 So in addition to the conduct that is consistent

10 with independent conduct Providence actually has produced

11 quite a few documents demonstrating internal contemporaneous

12 emails showing that Providence was caught by surprise or was

13 outbid despite its best efforts. Documents that, as

14 Mr. Tringali said, evidenced conduct consistent with

15 competition, not with conspiracy.

16 So at the end of the day, Your Honor, plaintiffs

17 have had five years to prove this case against everybody,

18 against Providence as well. Today they can point to no

19 agreement, there is no conscious commitment by Providence or

20 anybody else to a common scheme to allocate these 27

21 transactions.

22 With respect to Providence its specialization makes

23 this particularly ridiculous. And for those reasons we

24 believe that summary judgment should be granted for

25 Providence.


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1 THE COURT: Okay. Next up.

2 MR. POWELL: Your Honor, I have a chart, just

3 one document that I will be showing you today.

4 (Whereupon, a chart was handed to the Court, the


6 MR. POWELL: Good afternoon, Your Honor. My

7 name is Wesley Powell. I'm from Willkie Farr & Gallagher

8 and I represent Silver Lake.

9 And, Your Honor, we appreciate the opportunity to

10 argue to you why Silver Lake never should have been in this

11 case and our summary judgment motion should be granted now.

12 I'm going to focus on, Your Honor, what

13 distinguishes Silver Lake. It's going to sound somewhat

14 familiar because there is a similarity to the argument that

15 you heard from Providence.

16 Silver Lake is a technology only investor. It's

17 not a private equity firm that invests in a broad range of

18 industries. It invests in tech and tech only. That

19 limitation, Your Honor, is embodied in Silver Lake's

20 agreements with its investors in which it pledges to them

21 that it will invest in technology and technology-enabled

22 industries only. That's it. In the words of one of its

23 cofounders, "Silver Lake is and always has been all tech all

24 the time."

25 And there is -- plaintiffs have made no claim in


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1 their briefs and supporting papers that Silver Lake has ever

2 strayed from that investment mandate. And so, Your Honor,

3 that --

4 THE COURT: How many of these 27 transactions

5 were in that field?

6 MR. POWELL: Your Honor, if you look at the

7 chart that I offered up, on the left column, Your Honor,

8 those are the 27 deals in this case, the LBOs and the

9 related non-LBO transactions. The red strike-throughs, Your

10 Honor, show that there are 21 of these deals that are

11 outside of technology that Silver Lake never could have

12 invested in because it was barred from doing so by its

13 investment mandate. 27 deals in health care, that included

14 HCA, Your Honor, which is why Silver Lake is not in Count 2,

15 it could never have invested in HCA.

16 And it leaves six transactions, Your Honor, that

17 Silver Lake had any ability to invest in. Those are the six

18 transactions, Your Honor, that are in the middle column.

19 PanAmSat, Alltel, Freescale, SunGard, Philips/NXP and Sabre.

20 Those are the only six, Your Honor, that Silver Lake ever

21 could have invested in.

22 And if you look at this, Your Honor, as plaintiffs

23 have pled this case, the 27-deal conspiracy, ask yourself

24 how does it possibly make sense that Silver Lake committed

25 to a conspiracy to allocate all 27 of those deals? 21 of


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1 them it was contractually off the -- contractually off

2 limits to Silver Lake. Never could have looked at them.

3 Why would Silver Lake have any incentive to

4 participate in that conspiracy? It makes no sense at all.

5 As to the six deals, Your Honor, where the

6 plaintiffs no doubt will suggest and have suggested in their

7 briefs, well, Silver Lake could have simply agreed to a

8 little slice of the conspiracy. Just the six deals, Your

9 Honor. That doesn't make any sense either, Your Honor. If

10 there --

11 THE COURT: Why not?

12 MR. POWELL: If there were only six deals,

13 Your Honor, in a space of five years, Silver Lake has only

14 six of these large transactions that it has any ability to

15 invest in, why would it agree with a group of firms that had

16 the ability to invest in absolutely anything that it's going

17 to stand down from some of the six technology deals it could

18 participate in? Why would it agree to limit its investment

19 ability in that way?

20 And, in fact, Your Honor, the plaintiffs have

21 conceded that that didn't happen. At page 169 of their

22 opposition brief, Your Honor, plaintiffs make a key --

23 THE COURT: Just one thing, on the ones you

24 invested in, did you win any of them?

25 MR. POWELL: Your Honor, the last -- the third


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1 column, Your Honor, are the deals that Silver Lake took an

2 ownership interest in. That's SunGard, Philips/NXP and

3 Sabre. Philips/NXP, Your Honor, as you I think have heard,

4 is not an LBO. It was the purchase of a portion of a

5 company. These plaintiffs have no standing to claim injury

6 or damage as related to that deal, it's really off the

7 table.

8 Sabre, Your Honor, is a travel technology company.

9 Silver Lake is one of the buyers of that company. After

10 that deal was announced there was a shareholder strike suit

11 that Silver Lake settled and got a broad release and you

12 have dismissed Silver Lake from that claim. It just leaves

13 SunGard, Your Honor. And I'd like to touch on SunGard

14 briefly --

15 THE COURT: All right, get to that.

16 MR. POWELL: -- because you've heard something

17 about it. Before I do that, if I could make just one

18 additional point, Your Honor.

19 In plaintiffs' brief at page 169, they make an

20 important admission that I think really goes to how

21 implausible this conspiracy is with Silver Lake. They say

22 that, Moreover, the evidence shows that Silver Lake pursued

23 all six tech deals. They admitted six tech deals available

24 to Silver Lake. Silver Lake pursued all six of them.

25 If there was an overarching conspiracy let's say


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1 that Silver Lake participated in related to just six deals,

2 how is it consistent with that conspiracy that Silver Lake

3 pursued all of them, that it did not stand down from any of

4 those deals? If there were an overarching conspiracy,

5 Silver Lake would have agreed by definition I think that it

6 will get some of those deals and it will not get some of

7 those deals. Why they'd invest time, money and other

8 resources pursuing those deals and plaintiffs have -- I

9 haven't made that up. Plaintiffs admit that Silver Lake

10 pursued those deals, Your Honor.

11 So this theory --

12 THE COURT: Let me get you straight. You

13 pursued six or three?

14 MR. POWELL: So we pursued as in participated

15 in some aspect of the bidding or looked at the deal -- let

16 me just show you this briefly, Your Honor.

17 THE COURT: On six?

18 MR. POWELL: On all six. If you look at the

19 middle column, Your Honor, I'll just tick this off briefly.

20 In PanAmSat, Your Honor, Silver Lake briefly looked

21 at the deal, put in an initial indication of interest,

22 decided that it didn't make financial sense to pursue it.

23 It wasn't interested. Those facts are undisputed.

24 Alltel, Your Honor, Silver Lake was aware of the

25 Alltel, the Alltel deal, had looked at it, didn't


130

1 participate in the bidding. After a deal was done, TPG and

2 Goldman, who were among the purchasers of Alltel, approached

3 Silver Lake, said would you like to come in as a co-investor

4 and take some of the equity.

5 Silver Lake did a little bit of diligence and in

6 the words of one of its cofounders at his deposition

7 concluded it was a bad deal and it went no further.

8 Freescale, Your Honor, you've heard a lot about

9 already. Silver Lake was the other firm along with KKR that

10 put in an indicative bid that caused its supposed

11 co-conspirator Blackstone to pay a billion dollars more.

12 I won't repeat that argument, Your Honor. But the

13 one thing that I note about that is that plaintiffs have

14 suggested that there was some type of quid pro quo

15 connection between Freescale and HCA. You've heard why the

16 evidence doesn't support that.

17 One thing you know for sure, Silver Lake couldn't

18 have been part of any sort of quid pro quo because it was

19 contractually barred from investing in HCA. It couldn't

20 participate in it. It's why it's not in the HCA count.

21 It's why it's not in any of the emails that the plaintiffs

22 have mentioned. So it by definition could not have been

23 part of any supposed quid pro quo which, again, the evidence

24 doesn't support.

25 So, Your Honor, that takes us to SunGard because I


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1 have explained why NXP and Sabre are really, you know, off

2 the table. Here's what you need to know about SunGard, Your

3 Honor. A few points.

4 You may have heard the plaintiffs say in a couple

5 of instances that Silver Lake was the ringleader of the

6 SunGard deal. Your Honor, the Board of Directors of SunGard

7 was the ringleader of the SunGard deal. The board of

8 directors controlled the entire process. It determined at

9 the outset it didn't want an option. It wanted a

10 proprietary transaction for a variety of reasons that are

11 SunGard's business. And it had established a relationship

12 with Silver Lake and it decided that it wanted to negotiate

13 with Silver Lake and do it as a proprietary transaction.

14 That's the first point.

15 So SunGard was never interested in entertaining

16 other bids. It had a variety of reasons that it wanted to

17 deal with Silver Lake alone.

18 As you heard J.P. Morgan's counsel say, Your Honor,

19 my second point on SunGard, Silver Lake agreed to pay what

20 the board demanded, $36 a share. There were rounds of

21 negotiations. The board said you don't give us $36 a share,

22 we're walking. Silver Lake agreed to pay $36 a share at

23 around the 1st week of February in 2005, before it had ever

24 spoken to another private equity firm. The price was set.

25 The SunGard board recognizing that Silver Lake is a


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1 very small firm and needed other investors allowed it to go

2 forward. And let me pause on that for a moment, Your Honor.

3 At the time of the SunGard transaction, Silver Lake

4 had a fund that it was investing from that had 3.5 billion

5 dollars in it. 3.5 billion dollars. The equity required

6 for SunGard was 3.6 billion dollars. Even if Silver Lake

7 wanted to engage in gross negligence to its shareholders and

8 plunk its entire 3.5 billion dollars into a deal, it

9 wouldn't have gotten them SunGard. By definition it had to

10 go to other private equity firms. It couldn't have done the

11 deal otherwise.

12 And, ultimately, based on its fund limits, it's

13 undisputed that Silver Lake concluded that it could only

14 contribute about 500 million dollars to that deal. Your

15 Honor, that is why you end up with seven private equity

16 firms invested in SunGard. Silver Lake had to go out and

17 get 500 million dollars more a piece from six other

18 investors. That's why they're seven participants in that

19 deal. It wasn't for the purpose of constraining the price,

20 Your Honor.

21 And their whole theory is that the reason these

22 firms partner is to constrain the price. The price had been

23 set, Your Honor, before Silver Lake ever went out to partner

24 with firms. It's undisputed.

25 THE COURT: Okay. Let's wrap it up.


133

1 MR. POWELL: I think that may be it, Your

2 Honor.

3 There is one other point that I wanted to make,

4 Your Honor, and I'll end with this.

5 You have asked again and again for the plaintiffs

6 to show you some connection among these deals and the only

7 thing they've really shown you is that chart with all the

8 red lines that they say shows an intertwining of all of

9 these deals. And during their discussion of it yesterday

10 they mentioned that Silver Lake sort of started it all with

11 SunGard. And they showed lines coming out from Silver Lake

12 that it ended up being in all these other deals.

13 All that shows you, Your Honor, is this:

14 It shows you that firms having developed

15 relationships in one deal chose to partner with each other

16 in subsequent deals and so on and so forth and that's how

17 you see all of those lines.

18 There is nothing anticompetitive about that, Your

19 Honor.

20 And with all respect to my colleagues who represent

21 the plaintiffs, you can take a red pen and you could diagram

22 all of the instances in which these same lawyers and same

23 law firms for the plaintiffs have worked together on dozens

24 and dozens of class actions over the last ten years. They

25 didn't do that because there was a grand conspiracy to


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1 allocate class action litigation. They did it because they

2 developed relationships that worked for them that they were

3 prepared to repeat again and again. That's all it shows,

4 Your Honor, and that's all that you see here.

5 So that chart that they showed you in reference to

6 Silver Lake and others tells you nothing about the


8 THE COURT: All right, next. We will try to

9 get one more in before 1:30.


11 (Whereupon, a slide deck was handed to the Court,

12 the Clerk and to the Law Clerk.)

13 MR. SHERMAN: Your Honor, William Sherman from

14 Latham & Watkins for defendant TC Group III and TC Group IV

15 which I'll refer to as Carlyle.

16 And, Your Honor, in light of the short amount of

17 time left before lunch, I'm going to confine my remarks to

18 one issue which is obviously on your mind and that is the

19 question of the step down email. And just a couple of

20 points to clarify.

21 THE COURT: That seems to be -- if the

22 corporations can bid together, nobody contests that, and

23 there is no requirement to compete, and I don't believe

24 there is, then the stand down agreement, if any there be, is

25 the lynchpin that constitutes or is indicative of


135

1 illegality.

2 MR. SHERMAN: And, Your Honor, the key to what

3 you just said is the "stand down agreement." And that's the

4 problem, because there is no agreement to stand down. And

5 that's why I'm going to go through for you now why -- the

6 evidence of the stand down memo does not get the case to a

7 jury.

8 THE COURT: Before you start --

9 MR. SHERMAN: Yes.

10 THE COURT: -- the so-called stand down

11 concept, does it only relate to proprietary investments?

12 MR. SHERMAN: Well --

13 THE COURT: Rather -- does it relate to

14 portions?

15 MR. SHERMAN: I believe in the plaintiffs'

16 theory as Mr. Tringali has said that the stand down concept

17 relates only to proprietary. But there is only one stand

18 down email in this case. So to the extent that there were

19 references to the stand down concept, that is simply

20 something made up by plaintiffs, whether it has to do --

21 THE COURT: Well, if it can be proved, that is

22 the piece of evidence which would warrant at least certain

23 of these separate conspiracies if they had been so charged

24 to go to the jury. That is what I am looking for --

25 MR. SHERMAN: Right, Your Honor, and what


136

1 you --

2 THE COURT: -- some type of an agreement to

3 stand down.

4 MR. SHERMAN: Ah, exactly. Some type of an

5 agreement. And instead what you're getting is you've got a

6 single stand down email, I'm going to deal with that, but

7 the concept that because people don't top proprietary deals

8 once they're done, that does not constitute an agreement.

9 There is no difference between a private equity firm

10 deciding not to continue bidding up an auction and deciding

11 not to jump on a proprietary deal after it's already been

12 done --

13 THE COURT: But the argument has been made

14 that why wouldn't they compete because they could make a lot

15 of money even though they would raise the price?

16 MR. SHERMAN: But the answer is, Your Honor,

17 that in all the cases, the undisputed evidence, and now

18 speaking just for Carlyle so I'm talking about Carlyle's

19 evidence but I believe it's true in all proprietary deals,

20 the evidence shows the defendants looking at those deals,

21 looking at the proprietary deals and deciding for their own

22 independent reasons that it wasn't worth going in and trying

23 to top it. Usually it's because there was a break-up fee,

24 usually because management is already working with the group

25 that's got the proprietary deal. Usually there are a number


137

1 of factors --

2 THE COURT: What is the break-up fee, what is

3 that?

4 MR. SHERMAN: The break-up fee means in order

5 for someone to come in and top it, there is going to be an

6 additional cost. The break-up fee is written into the

7 proprietary deal so it adds, you know, millions and millions

8 of dollars to someone, they're going to have to bid on

9 what's already been done for the proprietary deal.

10 So there are a number of reasons. And just as

11 there is no obligation for a firm to go in and continue to

12 bid in an auction, there is no obligation to go into a

13 proprietary deal.

14 What the plaintiffs need to show you, what you

15 asked them continually yesterday, what you asked them today

16 is show me the evidence of an agreement and you never got

17 it. You got them trying to tie things together. You got

18 them telling you over and over again that there was some

19 agreement --

20 THE COURT: Their argument is that it happened

21 at least on several occasions and that a jury should be

22 allowed to draw the inference that because of this pattern

23 of behavior, so argued, that a jury could find an agreement.

24 MR. SHERMAN: But it's not a pattern, Your

25 Honor, because each deal is different. And, in fact, I'm


138

1 going to deal right now with the one case where there is a

2 step down email and explain to you why even that does not

3 get to the jury.

4 THE COURT: What case is that?

5 MR. SHERMAN: This is in the step down email

6 for HCA, all right. So what --

7 THE COURT: That to me, that is the strong

8 case.

9 MR. SHERMAN: You've said that, Your Honor.

10 THE COURT: That is a pretty strong case.

11 MR. SHERMAN: You've said that and that's why

12 I want to explain to you why it's not enough to get the case

13 to the jury.

14 THE COURT: Especially when three of the

15 corporations dropped out in about three days after they got

16 that harsh warning.

17 MR. SHERMAN: Ah, now, there, Your Honor,

18 you've gotten right to the heart of the problem. The heart

19 of the problem is, first of all, let's clarify what the step

20 down email was. It was not written -- it was written by

21 someone who worked at Carlyle, Mr. Akerson. It was not

22 written at the time of the HCA deal. It was written about

23 six weeks later. And it was written in the context, as

24 Mr. Tringali said, and Mr. Thomas said yesterday, in the

25 context of the Freescale deal where a consortium came in.


139

1 The KKR people came in to a deal that was about to be done,

2 jumped in and cost the Freescale purchasers an extra 800

3 million dollars.

4 And Mr. Akerson wrote an email saying, "And just

5 think, KKR asked the industry to step down on HCA."

6 Now, yesterday the plaintiffs said to you, And

7 those defendants went and stepped down right after getting

8 that order. Well, first of all, the order, let's be clear,

9 was not from Mr. Akerson. He was describing what someone

10 had said KKR said. But that email doesn't identify any time

11 frame, where he heard the information or anything else about

12 it. So for plaintiffs to say, well, two days after they got

13 it they all stepped down, there is nothing in the record to

14 suggest that.

15 Now, you would think that if this is the lynchpin

16 of their supposed conspiracy, that they would want to have

17 Mr. Akerson under oath in a deposition to find out exactly

18 what he meant, who he heard it from and to establish the

19 basis, the foundation for making this admissible, because

20 there are a lot of admissibility issues about the document,

21 okay. Did they do it? No. No, they've never in the course

22 of the discovery in this case put Mr. Akerson on their

23 deposition list.

24 Why? Well, you found out yesterday, because it

25 allows them to speculate about exactly what that means. And


140

1 to say things like within days everyone stepped down. There

2 is no basis for that.

3 Now, you asked a very important question yesterday

4 which the plaintiffs' counsel did not answer. You asked is

5 it illegal for competitors to decide not to bid to curry

6 favor even if they're requested to stand down.

7 The answer is no, it is not illegal. It is not.

8 The plaintiffs must produce evidence that the stepping down

9 was the product of an agreement. The fact that there was a

10 request, and, again, we don't have much information other

11 than Akerson's email to say whether there was actually a

12 request.

13 But let's assume for a second you would admit that

14 against Carlyle and it was a request. The request coupled

15 with the stepping down is not enough for the plaintiffs to

16 get the case to the jury. And there are cases which tell

17 you that. The Viasys (ph.) case which we cite in our brief

18 out of the Fifth Circuit. Let me just for a second give you

19 the background of the case.

20 Viasys (ph.) was an orthodontist who designed a

21 bracket that he claimed reduced the time that kids had to

22 wear braces. He entered into a contract with a company

23 called GAC to market and distribute it. But he alleged that

24 as a result of threats by the American Association of

25 Orthodontists GAC terminated the relationship. The court


141

1 granted the judgment to the defendants, judgment after their

2 case in chief, J&L judgment. And he said, and the Fifth

3 Circuit affirmed it and said this: "Evidence that a

4 manufacturer took certain actions does not tend to exclude

5 the possibility," remember the Matsushita standard, "of

6 independent conduct if the actions were in the

7 manufacturer's independent self-interest. In other words,

8 even if Viasys (ph.) proved that the AAO or its regional

9 affiliates threatened GAC, he must also show that GAC

10 decided to end its relationship in response to those

11 threats. If GAC ignored the threats but ended the

12 relationship with Viasys (ph.) based on an independent

13 evaluation of its best interests, GAC acted independently

14 and there was no conspiracy."

15 And it cites some cases and finishes, "Viasys (ph.)

16 failed to demonstrate that GAC's decision to alter its

17 relationship was contrary to its own interests."

18 THE COURT: The difference here might be that

19 there was a 50-day go shop period and the stepping down was

20 within I believe three days or approximately three days.

21 That is unusual I would think.

22 MR. SHERMAN: Your Honor, I'm glad you raised

23 that because it isn't in this circumstance. It's perfectly

24 consistent with Carlyle's self-interests. And I'd like to

25 ask you to look at the slides that I just passed up to you.


142

1 You have seen some of these before, Your Honor, and

2 I'll go through them very quickly but this is --

3 THE COURT: Go ahead, five minutes and then we

4 are out of here.

5 MR. SHERMAN: I'll be done in five minutes,

6 Your Honor.

7 These slides have to do with what it was that led

8 Carlyle to decide to step down, to tell KKR they weren't

9 going to pursue HCA.

10 The first one, you have seen the major issue is

11 price.

12 The second one, you have also seen, "My sense is

13 that a competing consortium is a losing proposition. Tommy

14 Frist is rolling over 800 million and is teamed up with KKR

15 and Bain. I don't think they will lose and the likely

16 outcome is forcing them to pay one billion more and souring

17 two relationships."

18 Now, this one you haven't seen, at the bottom, "On

19 a promising note, or promising front, Will Johnston --"

20 THE COURT: Where are you now?

21 MR. SHERMAN: I'm sorry?

22 THE COURT: Which one are you on now?

23 MR. SHERMAN: I'm still on No. two, I'm sorry.

24 THE COURT: Okay.

25 MR. SHERMAN: "Is relatively close with Tommy


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1 Frist with whom we spoke yesterday. Will approached Tommy

2 about joining the KKR/Bain Group."

3 The next one, the internal one to Carlyle, "After

4 looking at the HCA information and reviewing the other

5 hospital companies that might be interesting, I think we

6 should have the health care team look at CHS, and not waste

7 too much energy on HCA unless Frist decides to let us in his

8 deal."

9 And she goes on to say why she thinks CHS is a

10 better company.

11 The next one, Rubenstein to Akerson and Holt. "I

12 think HCA is probably a long shot now and Community Health

13 would be a much better deal -- particularly if we can be the

14 lead," okay.

15 And, finally, the last one is the one you have seen

16 before which is Mr. Attwood's email two days later to KKR

17 saying, "We are not forming a competing group, we are not

18 signing an NDA. We would, of course, love to join you if

19 you need any more equity."

20 Now, Your Honor, this explains exactly why Carlyle

21 would inform KKR early in the go shop period that they were

22 not forming another group. They'd like to get in the deal.

23 They know their only chance of getting in the deal is

24 getting in with KKR and Tommy Frist.

25 There is no reason for them to wait two months to


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1 tell them. In fact, it makes much more sense to tell them

2 right up front and to try to work the avenues they had to

3 get into the deal that way.

4 So what you have here on HCA for Carlyle is you've

5 got, No. one, the reasons, and the undisputed

6 contemporaneous evidence why they're not interested, unless

7 they can get in through KKR, because they know KKR is going

8 to win. They're looking at CHS. They think that's a better

9 avenue to get in. So that's undisputed evidence that that's

10 what motivated them, okay.

11 Then you have the evidence we talked about

12 yesterday. If it was pursuant to some agreement, what did

13 Carlyle get? They got no reward at all.

14 Now, yesterday when you asked plaintiffs about

15 this, they stood up and they were sort of scattered and they

16 said, well, they got Alltel. Well, Your Honor, Carlyle

17 didn't win Alltel. Carlyle lost Alltel. So if the

18 conspiracy had some plan that that was Carlyle's reward,

19 that's not a reward. They didn't get that.

20 And then the plaintiffs said, well, what about

21 PanAmSat, that was the reward. PanAmSat is the reward.

22 Well, Your Honor, there are a couple of problems with that.

23 Even putting aside the fact that you have taken

24 PanAmSat out of the case for purposes of the damages, No.

25 one, plaintiffs allege that the reward in PanAmSat was in


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1 PanAmSat, that Carlyle's reward from coming together at the

2 back end was the reward. But the real problem is PanAmSat

3 was two and a half years before HCA. How could the reward

4 for standing down in HCA have happened two and a half years

5 earlier? It makes no sense. And it makes no sense because

6 Carlyle acted in its own self-interest in deciding not to

7 form a rival consortium. It is not enough that there was a

8 stand down request and Carlyle informing KKR that they

9 weren't going to pursue it. And in the presence of

10 undisputed contemporaneous evidence that Carlyle had their

11 own reasons for doing it, that there was no quid pro quo

12 and, frankly, that this whole notion of a request to stand

13 down is consistent with the overarching conspiracy.

14 If there was an overarching conspiracy, there would

15 be no reason for that request. The plaintiffs don't have

16 the evidence. They don't have the agreement.

17 THE COURT: All right. A quarter past two.

18 MR. SHERMAN: Thank you, Your Honor.


20 Court is in recess.

21

22 (Luncheon recess.)

23

24

25


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1 AFTERNOON PROCEEDINGS


3 Court is back in session. Please be seated.

4 MR. QUINN: Good afternoon, Your Honor. Jim

5 Quinn on behalf of THL, the Thomas H. Lee Partners right

6 here in Boston, with whatever hometown advantage we can

7 get --

8 THE COURT: I was going to say. Do you think

9 you've got the edge?

10 (Laughter.)

11 MR. QUINN: Well, I hope so.

12 Let me just start out by saying I was sitting

13 yesterday in the jury box and was listening hard to all of

14 the supposed evidence that was going back and forth. Having

15 done that, I'm convinced this case should not go to a jury

16 because there is simply no evidence to support an

17 overarching conspiracy with regard to any of these

18 defendants and certainly not with regard to T.H. Lee. And

19 I'm going to take you through, I have the obligatory

20 booklet.

21 THE COURT: Can you do it in ten minutes?

22 MR. QUINN: I can march through it in ten

23 minutes.

24 (Whereupon, the booklet was handed to the Court,

25 the Clerk and the Law Clerk.)


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1 MR. QUINN: I tried to make the print big so I

2 could read it and hopefully you could too.

3 Your Honor, you indicated, and I think hopefully a

4 little jokingly, that it might be just easier to send this

5 all to the jury because it is complicated and it is

6 difficult.

7 THE COURT: Well, I mean, you are never wrong

8 if you deny motions for summary judgment, throw the case to

9 the jury and let them worry about it.

10 MR. QUINN: And that may be true in some

11 instances but the standard here is higher. It's higher

12 because of the Matsushita case and because of the White case

13 here in the First Circuit. And that's what they said. Your

14 job is a little tougher, I'm sorry, we're making it tougher

15 on you, but you have to actually find in order to let this

16 case go to the jury that each of these defendants, each of

17 these defendants made a commitment to be involved in an

18 overarching conspiracy. And you heard from some of them

19 already where it makes no sense. And it also makes no sense

20 for T.H. Lee.

21 THE COURT: Because what it seems, that,

22 again, I can be persuaded, I haven't read all this material,

23 but it seems to be the law, even if there were 27 separate

24 individual conspiracies, there has to be something more to

25 link them all together to an overarching conspiracy.


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1 MR. QUINN: There is no question that that is

2 what the law is. That's what they pled and that's what they

3 have to here at the summary judgment stage come forth with

4 real evidence of a real agreement.

5 THE COURT: And there has to be an

6 interlinking. And that is, I hope -- not that I hope but I

7 am sure the plaintiffs are going to try to show that

8 interlinking with all of the defendants.

9 MR. QUINN: I think what they're going to try

10 to do, Your Honor, is they're going to put that ball of yarn

11 up there that --

12 THE COURT: Oh, I tell you, when I saw that,

13 that stunned me.

14 MR. QUINN: But as you, Your Honor, have

15 already pointed out, alls that really shows is that each of

16 these companies from time to time worked with each other.

17 That's all it shows. It shows nothing. There is no

18 evidence, no written evidence -- they took 50 depositions,

19 50 depositions and were unable to come up with even snippets

20 from depositions.

21 Now, in a real case, in a real conspiracy you're

22 going to find something out there. They have tens of

23 millions of documents. Other than the couple of handful of

24 documents that might show some going back and forth with

25 regard to a particular transaction, they haven't shown


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1 anything. Where is that unindicted co-conspirator?

2 There are hundreds and hundreds of people who are

3 involved in all these deals. Do you think maybe one could

4 come forward? They didn't even bother with regard to T.H.

5 Lee or anybody else to go out to third parties and depose

6 people --

7 THE COURT: They should have made a deal with

8 your client and let them out of the case and let them

9 testify.

10 (Laughter.)

11 MR. QUINN: Well, because they, you know

12 something, they did testify, Judge, and that's what's under

13 the first tab. They did testify. They took the depositions

14 of the leaders of T.H.L. And what did the leaders say?

15 Now, they didn't ask them any direct questions about this.

16 We had to ask them questions. But the leaders under oath

17 with their hands up said no agreement, no way, no how. They

18 don't -- they have to come forward with some evidence to

19 refute that. They can't point to experts. Experts aren't

20 evidence at the summary judgment stage. That's what the

21 White court says and we can give you a bunch of other cases

22 that find you can't refute, you can't defeat summary

23 judgment by coming in with some expert opinions. You have

24 to have evidence. You have to have facts. You have to have

25 something that refutes sworn testimony by 40 or 50 people,


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1 in this case all the leaders of T.H.L. who say they never

2 agreed to any kind of a conspiracy, overarching,

3 under-arching, middle arching, nothing. As one said, nada,

4 never. It didn't happen.

5 And T.H.L. only ended up in three deals, right.

6 Two of them were auctions in which they were bid up, prices

7 were bid up. And, in fact, I'll show you in a minute, in

8 fact, we did jump the deal, the biggest deal we've ever

9 done, Clear Channel --

10 THE COURT: You say you won three or you were

11 involved in three?

12 MR. QUINN: No, we won three and we were

13 involved in I think three plus -- we were involved in eight.

14 We dropped out because of price with regard to four of them

15 and the other one we lost and we lost big even though we

16 were bidding. That was the Neiman Marcus situation.

17 So the bottom line is with regard to the three we

18 did win, two were auctions where there were multiple rounds

19 of bidding. Lots of competition.

20 The other one was a proprietary deal, the Aramark

21 deal. We were released on that. There is no basis for

22 T.H.L., no basis for any of these defendants to be sitting

23 here having to deal with Count 1. We had nothing to do with

24 Count 2.

25 I was persuaded by Mr. Thomas yesterday that that


151

1 case should also not go to the jury for the reasons that he

2 said because it was no quid pro quo. And if there is no

3 quid pro quo, what's the point? There is no point.

4 And what you will see here from the testimony of

5 our folks as well, this is the testimony of Scott Sperling,

6 this is on No. two. It talks about with regard to the

7 overarching conspiracy and any involvement by T.H.L.

8 "It would be impossible to agree in any way on

9 allocating transactions because you don't know what

10 transactions occur, you don't know which ones are going to

11 work, which ones are going to work. It's a very competitive

12 business. It's certainly true that when we have to, we

13 cooperate on specific transactions because of the need to

14 create a competitive bidder through a consortium approach."

15 Create a competitive bidder. It's pro competitive

16 when they're actually bidding because it means that somebody

17 more, you have more people to actually bid, not

18 anticompetitive.

19 And then he says, "But the idea that we would let

20 anybody win when we want to win a company is ridiculous."

21 And it is, Your Honor. And that's what the

22 evidence shows. It shows it as to T.H.L. and it shows it as

23 to all of the defendants.

24 Now, looking at the, look at the contemporaneous

25 evidence, the emails that were written at the time that


152

1 these deals were done and that's in No. three, Your Honor.

2 Okay. First, T.H.L. talking about SunGard. They

3 wanted to be different. From a tactical perspective we

4 could get more recognition from not doing this deal. And

5 then they say, this is another one of the leaders of T.H.L.,

6 "We walk to a different drum beat," which is why they didn't

7 get involved in SunGard.

8 Similarly with regard to Freescale, "I prefer where

9 everybody else isn't." That's what the actual writing, what

10 people are writing back and forth at the time, that shows

11 that they want not to march to everybody else's drummer,

12 they are going to compete on their own. And they only do a

13 club deal or a joint bid when they need to do it to create

14 competition, not to get rid of competition.

15 With regard to being cut in, I have no -- this is

16 on the Neiman Marcus deal which they make a lot of. "I have

17 no interest in this deal, none, nada, zero, nada."

18 Contemporary emails written at the time by the

19 people in charge.

20 And with regard to the Clear Channel deal, the one

21 that we did win, He ignored how intense the auction was and

22 how it squeezed every last penny from us.

23 Now, that's the deal, Your Honor, that I said, they

24 wanted to ask, well, did they ever jump any deals? We

25 jumped that deal. What happened was with regard to Clear


153

1 Channel, it came out on the news that they were about to do

2 a proprietary deal with KKR and Providence and Blackstone I

3 think it was.

4 So what did we do? We went in and jumped the deal.

5 We caused it to move from a proprietary deal to an auction.

6 And there were three rounds of bidding. We ended up winning

7 but it squeezed every penny out of us. That was what the

8 contemporaneous evidence showed at the time, squeezed every

9 penny. We did jump the deal, big time. And, you know,

10 there is some, if they look back in that deal right now,

11 we'd say maybe we overpaid for the deal. That's a whole

12 other issue. The reality is some deals you do well on, some

13 deals you don't.

14 Now, let's talk about the etiquette, the club

15 etiquette and how it applies to T.H.L because, first of all,

16 these rules are nonsense. It's stuff they made up. That's

17 the bottom line. I've tried a lot of antitrust cases, Your

18 Honor, and this rule of etiquette is all junk.

19 But T.H.L., first of all, this is in No. 4, T.H.L.

20 preferred not to partner. This is DiNovi, one of our

21 leader's testimony. "All things being equal, our preference

22 would not be to partner with other firms."

23 And the reason for that is they would rather, and

24 often do, just bid on their own. But where they don't have

25 the wherewithal, where they want to be able to actually


154

1 create a bid, they will partner up.

2 And one of the things that was said the other day,

3 yesterday, was that, well, all this partnering up didn't

4 really start until 2003. That's not true. T.H.L. was doing

5 joint bids back in the '90s. We counted them up, a dozen

6 before 2003. That's what the actual record is. There was

7 nothing that -- the only thing that happened in 2003 is some

8 of the deals got bigger so there were probably more, a

9 bigger effort to put people together because that was the

10 only way the deals were going to get done. That's how this

11 business works.

12 And what the plaintiffs have done is they've just

13 contorted it, they picked a particular period of time and

14 said let's just pick 27 deals. How about all the other

15 deals that were out there, where there was an enormous

16 amount of competition by all, all of these defendants.

17 Looking at the same slide, testimony from Scott

18 Sperling: But the idea that there were any, and this goes

19 to this whole stand down issue, let anybody win a deal would

20 be ridiculous. We never stood down. We did not cut anyone

21 else, other private equity firms into our deals and we never

22 got cut into any of their deals.

23 The bottom line is there was no quid pro quo with

24 regard to any of the things that THL was involved in. So

25 why in the world would we have committed to an overarching


155

1 conspiracy involving supposedly all 11 defendants and 27

2 deals when we got nothing out of it? Nothing. Except

3 perhaps overbidding for Clear Channel.

4 And at some point they made up something about

5 score cards. We asked both Mr. DiNovi and Mr. Sperling

6 about it and their testimony is it was nonsense, it didn't

7 happen.

8 Now, let me just point to you the next slide which

9 is a slide which shows an email, interoffice email relating

10 to the Clear Channel deal. And this is the deal where we

11 jumped a bid. And here is what Mr. Bressler is telling

12 Mr. DiNovi right after we won the bid. "Want to give you

13 something to warm your heart on CCU," Clear Channel. "We

14 took out Jimmy Lee, J.P. Morgan, Jonathan Nelson,

15 Providence, Alex Navab, KKR and Steve Schwarzman,

16 Blackstone, all in one deal."

17 That's competition, Your Honor, that's not

18 collusion. They are gloating about it. That's what people

19 do. It's a tough business. As Your Honor said, these are

20 some pretty tough guys but they like to compete with each

21 other. And that's what happened. That's what T.H.L. has

22 always been devoted to.

23 In the very, I guess the next to last, here is the

24 evidence with regard to T.H.L. We broke all the so-called

25 rules. We didn't stand down. We jumped deals. We didn't


156

1 cut others in. We competed. We didn't collude. There was

2 no quid and no quo. That's the facts.

3 And whenever they get up here at the end, it's

4 interesting, the last day and a half you haven't heard much

5 about T.H.L. because they weren't that involved but, for

6 sure, they were always, they always wanted to march to their

7 own drummer. That's how T.H.L. worked.

8 And you see all the other defendants. There are

9 eight million stories in the Naked City, there is no

10 question about it, but the reason why this overarching

11 conspiracy makes no sense is precisely because there are all

12 these different reasons why it makes no sense and they still

13 haven't come up with anything.

14 I agree with plaintiffs' counsel, no way they're

15 going to have some writing, they're not going to have a

16 constitution that shows everybody trying to allocate deals.

17 That's not the real world. But they don't have any evidence

18 of anything else that shows any commitment by all 11 of

19 these folks to allocate the 27 deals and that is what their

20 allegation is.

21 And at summary judgment, I always remember the

22 court, I think it was in New York, typically would be in New

23 York, where the judge said summary judgment time is put up

24 or shut up time. Now, they have not put up any evidence to

25 show, in fact, that there was an overarching conspiracy.


157

1 The last slide which I'm not going to go through is

2 simply setting forth -- and this one is difficult to read --

3 the reasons why with regard to nine of them we had no

4 interest from a business standpoint or lots of different

5 good business reasons, not one of which is being refuted by

6 the plaintiffs here, and, in addition, the reasons why they

7 dropped out of four deals because in each instance we

8 thought the price was too high, it just wasn't worth it. We

9 lost.

10 And I think this quote is the one internal memo

11 when they lost the Neiman Marcus bid, this is one of our

12 internal folks saying, "We lost. Think TPG won but don't

13 know. Very depressing. Don't know price either. Will read

14 it tomorrow."

15 Your Honor, does that sound like a conspiracy?

16 They had no idea who won, for sure who won and at what

17 price. It makes no sense.

18 Thank you, Your Honor.

19 THE COURT: You made a reference to a movie,

20 did you? Was that Naked City?

21 MR. QUINN: No, it was the television show.

22 Yes, it was Naked City and --

23 THE COURT: But there was a movie in 1948.

24 MR. QUINN: Yeah, that's true, they later made

25 it into a movie. And it definitely proves our point, Your


158

1 Honor.

2 (Laughter.)

3 MS. SAMMONS: Your Honor, I'm Katie Sammons

4 and I'm here today talking for TPG, the last of the 11

5 defendants.

6 You have heard a lot testimony over the last two

7 days from all the lawyers and I don't want to go back over

8 stuff that has been talked about before. You will not be

9 surprised to know that there was no overarching conspiracy

10 and that my client TPG was not a member of any overarching

11 conspiracy.

12 And our brief sets out 27 transactions in detail.

13 It tells you which ones we bid on, which ones we didn't, why

14 we didn't bid on them, and I'm not going to go through all

15 27. I want to focus on two things that this Court has

16 expressed interest in. One is evidence of competition. And

17 then the second is whether or not people stepped down. And

18 I want to talk about it for TPG, my client.

19 Let's look at evidence of competition. There were

20 two deals I want to talk about real briefly that we

21 participated in that are evidence of competition. Both of

22 them were auctions. One of them we lost and one of them we

23 won.

24 In the Neiman Marcus transaction, which is an

25 amazing transaction that you should get to know if you're


159

1 looking at whether or not there could be an overarching

2 conspiracy here, that is a transaction in which Goldman

3 Sachs represented the seller Neiman Marcus, okay. They

4 represented the seller and they ran the strictest auction

5 you could ever see. They told people who they could pair

6 with. They told people they could only pair with two

7 people. It had to be teams of two and they were absolutely

8 strict about every aspect of the process.

9 My client preferred to -- my client has a specialty

10 in department stores and they really wanted this asset and

11 they preferred to team with somebody that they knew,

12 somebody they worked with before, like KKR or Bain. That's

13 not who we got. That's not who Goldman gave us. They gave

14 us Warburg. Warburg is not a defendant.

15 We teamed with Warburg in that case and we fought

16 hard, as hard as we possibly could to make sure that we won

17 that deal. And you know what, we did win that deal. Even

18 though it was with a partner we've never worked with before,

19 we wanted it really bad. We had no idea what anybody else

20 was going to bid and so we came in with a bid of $100 per

21 share. That is over $5 more than the next closest bid, $5

22 more than the next closest bid.

23 That wasn't a result of us knowing what anybody

24 else's bid was or a result of us bidding as low as we

25 possibly could to think so that we could keep the price


160

1 down, it was $100 per share. It was the amount that all of

2 these other people who bid on Neiman Marcus said "wow" and

3 "oh, my goodness," and "they overpaid." That's what we did

4 and that was competition.

5 The other transaction we participated in where we

6 didn't win but we did compete was Michaels. In the Michaels

7 transaction there were three different rounds of bidding.

8 We also won --

9 THE COURT: Was that an auction?

10 MS. SAMMONS: It was an auction. It

11 absolutely was an auction.

12 There were three different rounds of bidding and we

13 worked very hard in each round to try and force our price up

14 just a little bit further, just a little bit further. We

15 had to keep going back, working hard on it. We would get to

16 a different point and then we found out that somebody else

17 topped us. So we would go back to the drawing board, start

18 over and try to get our dollars up.

19 We lost that transaction ultimately by 50 cents a

20 share. And to show that it was competition, not only does

21 TPG have evidence in the record that says, oh, gosh, we are

22 so disappointed that we lost, by people like Jonathan Coslet

23 who is one of the big three of the company, who put his

24 heart and soul into that transaction, not only did we do

25 that but we did something which I think we haven't even


161

1 heard anybody else talk about today and will be the sole

2 piece of evidence that I can show you in this argument, we

3 actually conducted a postmortem after that.

4 May I approach the bench?

5 (Whereupon, a document was handed to the Court, the


7 MS. SAMMONS: After we lost the transaction,

8 the Michaels transaction, after we put in all that work and

9 did all those bids we sat down and conducted a postmortem to

10 see why was it that we lost.

11 And you can see from looking at this document that

12 the postmortem includes things like revenue, due diligence,

13 deep dive lacking, which I think means they didn't go do

14 their due diligence thoroughly enough because they had

15 limited management availability and three weeks of full data

16 room access. That's a reason, that's a reason we were

17 thinking.

18 THE COURT: Where is that?

19 MS. SAMMONS: I'm sorry? It's under the one

20 that says the Bain/Blackstone consortium may have agreed to

21 partner with the Wiley family, it's in yellow. It's on

22 the -- there is only one page; right?

23 THE COURT: Project Mustang?

24 MS. SAMMONS: Yes. It says, The Bain -- the

25 Project Mustang, that is this transaction, see how it says


162

1 "postmortem."

2 THE COURT: Yes.

3 MS. SAMMONS: Then it says, "The winning bid

4 Bain/Blackstone was $44 per share versus TPG's final bid of

5 43.50."

6 And then it says, "Since the deal was announced, we

7 have heard the following with regard to the winning

8 consortium's bid." So they're telling what they heard.

9 And, in fact, if you look at the third bullet,

10 they're actually speculating. They're saying, "The

11 Bain/Blackstone consortium," that's the one who won, "may

12 have agreed to partner with the Wiley family." Those were

13 some of the biggest shareholders. That was our speculation.

14 We didn't know but we thought that might be a reason that we

15 lost.

16 Right below that is the one that I was talking

17 about where it says, Revenue due diligence, deep dive

18 lacking. It says in the context of limited management

19 availability and three weeks of full data room access.

20 What's important here is that we were sitting down,

21 all of the players who made these bids, including the big

22 guys in our firm, we were sitting down and we were trying to

23 figure out why we lost so that we wouldn't lose the last

24 time. You do not do that if you are part of an overarching

25 conspiracy. That is evidence of competition.


163

1 I want to turn real quickly to this question of

2 step down. I looked at the chart that the plaintiffs put

3 together. Remember they had that chart where you've got all

4 the defendants up here and the defendants here (indicating).

5 And I looked at what they have for TPG. And I really hope

6 that you look at that chart carefully before just accepting

7 what's on it.

8 According to that chart there are three instances

9 in which TPG stepped down according to the plaintiffs.

10 That's what they have down there. TPG stepped down three

11 different times.

12 Interestingly, one of those times is a transaction

13 called Aramark. They don't even have any allegations in

14 their complaint about TPG with respect to Aramark. TPG

15 never even considered Aramark. It is not a situation where

16 TPG stood down. It is a situation where TPG was never

17 interested in competing in the first place. It wasn't an

18 industry we cared about.

19 The second transaction that they have listed as one

20 we stepped down from is AMC, the theater transaction. We

21 didn't step down from AMC theater either. In fact, we were

22 offered, we were offered a co-invest in AMC and we didn't

23 take it. If we had wanted to be in the deal and we thought

24 it was a good deal, we could take it. We didn't step down

25 from anything.


164

1 The reason we didn't do AMC, the record is clear,

2 is we don't like movie theaters. We don't want to be in

3 movie theaters. That was a movie theater chain and so we're

4 out. Those are not step downs. Those are unilateral

5 decisions not to compete, which is perfectly legal.

6 The third instance of step down that they give us

7 is HCA. And I want to talk about HCA for a minute because

8 we are one of the losers who is still a defendant in the

9 second count of HCA.

10 HCA was a very difficult transaction for us because

11 TPG has experience in health care. We heard rumblings, and

12 the evidence is clear on this, we heard rumblings of a deal

13 and we did everything we could do, calling people, calling

14 people who we thought were our friends to try and see if

15 there was a deal being done and nobody returned our calls.

16 Then the deal was announced. And we took a couple

17 of days to look at the deal. And one thing you have to

18 remember is that when a deal is announced, you have to sign

19 a noncompete agreement or a confidentiality agreement that

20 says you can get nonpublic information and you can use that

21 nonpublic information. That's what we did.

22 What did we find out when we got that nonpublic

23 information? We found out that under the agreement that the

24 winning consortium had done with HCA, under the existing

25 agreement we had no chance of winning. And the reason we


165

1 had no chance of winning was not just because the Frist

2 family had chosen Merrill Lynch, Bain and KKR to be the

3 winners and had worked with them from the very beginning,

4 not only that, but the document had been written, the deal

5 document was written in such a way that it gave match

6 rights, extremely onerous match rights to that team.

7 And what that meant was TPG had the option, we

8 could go out, we could go do weeks and weeks of due

9 diligence, go through all of their documents and try and

10 figure out what we thought the value of that company was

11 based on nonpublic information, the true value of the

12 company, we could do that and we could spend millions of

13 dollars doing that.

14 Under the contract's matching rights, if we bid a

15 dollar more than the existing consortium, the existing

16 consortium got the right to just match our dollar, to just

17 say, okay, we agree, we will pay that extra dollar. And we

18 lost. And we knew that the Frist brothers wanted that

19 consortium and that consortium wanted the deal.

20 So we had to make a decision do we spend millions

21 trying to look at this and then lose or do we just say we're

22 not going to do it. We decided not to do it.

23 Now, when we decided not to do it, we did like the

24 deal --

25 THE COURT: Is that a jury question?


166

1 MS. SAMMONS: No, because there is no

2 undisputed -- the undisputed evidence, the only evidence in

3 the record is that there is a reason we didn't do it and the

4 reason we didn't do it was because of the matching

5 provision. There is no other contrary evidence in the

6 record.

7 THE COURT: The only other thing is the

8 decision not to involve your corporation in that transaction

9 occurred in a very, it would appear at least from my view,

10 in a very limited amount of time.

11 MS. SAMMONS: Yes. And if we had made that

12 decision because we thought it wasn't worth the price it was

13 paid, I could see how it would take a long time for us to go

14 through all the data and figure that out.

15 The reason it didn't take a long time here was

16 because there was a deal document and that we got access to

17 that deal document by signing the non-confidentiality or the

18 confidentiality agreement.

19 So we looked at the deal document and it had the

20 matching rights spelled out in it. So once we saw the

21 matching rights, we had lots of discussions internally and

22 then we decided it's not worth it. It's not worth putting

23 the money in when they didn't bring us in in the first

24 place, they have a different preferred team, and they get to

25 match whatever we do. That's what the evidence is, okay.


167

1 The evidence is also though that we called, we did

2 call the winners after we made the decision not to compete.

3 And we did that for a very clear unilateral reason. We

4 called them to tell them we were not going to compete not

5 because they asked us not to compete, there is no evidence

6 anybody asked us not to compete, we just decided we weren't

7 going to compete. And then we called them and told them

8 because we wanted in on the deal.

9 And the record is full of evidence that shows how

10 badly we wanted in on the deal. We called KKR. We called

11 Bain, both of which under the plaintiffs' theory are our

12 conspirator friends. Neither one of them would let us into

13 the deal.

14 We ended up going to Merrill Lynch and begging and

15 cajoling and pleading saying please let us in this deal.

16 And you know what? Nobody said yes. We wanted in this

17 deal. We took a calculated risk. We said we're not going

18 to win, let's try and curry favor, let's go ahead and

19 approach them, tell them we're not going to win, and they'll

20 let us into the deal. Exactly the conduct that according to

21 the plaintiffs is how this whole thing worked. We did it

22 and nobody let us in.

23 That is not evidence of an overarching conspiracy

24 and it is not evidence that we are part of any overarching

25 conspiracy.


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1 Thank you.

2 THE COURT: I will hear from the plaintiffs.

3 MR. COUGHLIN: Your Honor, Patrick Coughlin

4 for the plaintiffs. I'm going to talk hopefully briefly

5 about the facts and then my co-counsel Craig Wildfang will

6 deal with some of the law that applies here.

7 If I might just hand out these slides. They're not

8 quite in order because I was going to do KKR with

9 Mr. Tringali.

10 (Whereupon, a binder was handed to the Court, the


12 MR. COUGHLIN: When we decided to address it

13 in an overarching manner.

14 Your Honor, I would like to deal with four things.

15 I would like to deal with the issue of the unindicted

16 co-conspirator that's not here to kind of put meat on the

17 bones and tie it all together.

18 I'd like to deal with the, I don't know if it's the

19 accusations or the statements that there is no evidence of

20 this overarching conspiracy.

21 I'd like to deal with the questions that just came

22 up about auctions being proprietary deals.

23 And I'd like to deal with companies with a

24 particular focus.

25 But I can't help myself as I'm about to deal with


169

1 those four things not to address just the last couple of

2 statements of the person who just got up and talked about

3 TPG. She got up here and said, well, we wanted to get in

4 that deal. We wanted to do this. We wanted to do that. We

5 didn't, you know. The internal email from TPG says that

6 they didn't bid because they didn't want to crash somebody's

7 party. That's what they said. And then, of course, they

8 called and said they weren't going to bid.

9 They also, if they wanted in so bad as she just

10 spent five minutes talking about getting in that deal, we

11 asked, we begged, we pleaded, why didn't they bid during the

12 50-day go shop period? Why didn't they? Because that's not

13 what was happening during this time with these people who

14 had agreed not to jump a single bid. And I'll get to how

15 auctions and proprietary transactions kind of meld together

16 in this deal and how the agreement stays consistent

17 throughout.

18 THE COURT: What transaction are you referring

19 to?

20 MR. COUGHLIN: I was referring to HCA and

21 TPG --


23 MR. COUGHLIN: -- wanting to get in that so

24 badly.

25 How about a bid, you know, why did they just keep


170

1 asking to do a combination? They could have bid during the

2 go shop period. They said they called immediately within

3 three days as Your Honor noted and said they're not going to

4 bid. But let me deal with the unindicted co-conspirator.

5 Wouldn't it be great if we were still -- I was with

6 the government nearly a decade time trying conspiracy cases.

7 Wouldn't it be great if I had the power in the grand jury to

8 threaten somebody with getting indicted, have them come in

9 here and explain what it is. But that's not who we are. We

10 are civil lawyers and we don't have that power.

11 THE COURT: My only point was that in almost

12 every criminal conspiracy case of any magnitude you have the

13 unindicted co-conspirator who could put it together.

14 Without it there is no case.

15 MR. COUGHLIN: And I want to address that

16 because I think that's an important point.

17 That's right. When I was with the government, I

18 could threaten the little people on the line whether it was

19 the T.H. Lee, you know, who you made a comment about, you

20 know, well, they might have offered you a deal, you know,

21 the Naked City comment, and he would have put them on the

22 stand and you would have said, okay, you're not going to get

23 here, now tell us how this all operated and how it worked.

24 Of course, we don't have, you know, that power to do that.

25 And that's -- but that's fine, that's where we are.


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1 There wasn't a single unindicted co-conspirator

2 that I ever put on the stand in the nearly decade that I was

3 trying those cases that I didn't call a liar. First of all,

4 that person was in the conspiracy. I would tell the jury

5 that you couldn't believe a word that person said. You

6 couldn't because he lied to get there and he was probably

7 lying on the stand.

8 It helps you form the road map but I'll tell you

9 what, you better have independent evidence of what that

10 conspiracy was, what that agreement was to join that

11 conspiracy, especially if it deals with companies that are

12 in legitimate businesses.

13 If there is a conspiracy, you better have

14 independent evidence of it to show an agreement to come

15 together to suppress competition. And I suggest, I would

16 say here we have that in every one of these deals. But the

17 question you have been asking, I mean, there are emails that

18 are damning in every one of these deals. Call Joe, see what

19 he'll say there. What about Bob, did we get ahold of him?

20 Let's not submit this bid here. Let's see what they're

21 going to bid. We'll put in a soft bid. Can we come in

22 later --

23 THE COURT: My point is this:

24 Assuming that you have that type of evidence but 27

25 deals, what is the interconnection?


172

1 MR. COUGHLIN: What's the glue?

2 THE COURT: Yes.

3 MR. COUGHLIN: The glue that keeps those deals

4 together is because the agreement is the stand down

5 agreement, the agreement is to not go above the bid.

6 Can you put up the first.

7 I think you've already seen this chart here

8 yesterday and I don't have a slide of it today, Your Honor,

9 but -- no, the first one.

10 These are the deals, these are the deals that are

11 at issue here. There is not a single deal, not a single

12 deal that once it was announced that that was -- that it was

13 overbid or jumped. You know, they got up here and said, oh,

14 we jumped this, we did this. The agreement is not to have

15 jumped an announced deal, okay. That didn't occur in a

16 single one of these transactions, not a one. That's

17 evidence.

18 THE COURT: How many are there?

19 MR. COUGHLIN: 19. Those are the 19 deals

20 we're talking about. Two of them don't have damages for

21 various reasons as we've talked about. So there is 17

22 damage deals but there is 19 deals.

23 Not a single deal was jumped, okay. If we go to

24 the next slide --

25 THE COURT: But it was argued by one of the


173

1 counsel that nine of them were auctions so --

2 MR. COUGHLIN: That's right.

3 THE COURT: -- we are talking about seven.

4 MR. COUGHLIN: Absolutely not, okay. Because

5 with the conduct that occurred in the proprietary deals,

6 once it was signed, everybody agreed not to bid and HCA, you

7 had the blatant example where everybody told them, told

8 their competitor they wouldn't bid during the first three

9 days of the go shop period, okay. The auctions, of course,

10 happened differently, okay, because now the company says,

11 oh, we're going to put it out for auctions so you have

12 people initially, competition occurs, right.

13 THE COURT: Yes.

14 MR. COUGHLIN: But once, but during that

15 competition a number of things happened among these

16 co-conspirators that make that conduct and the stand down

17 agreement exactly the same as in the proprietary deals,

18 okay.

19 If you flip to the next chart, you'll see, Your

20 Honor, when the auctions start, okay, you do get some

21 competition, okay. You get competition -- the auctions are

22 the last nine deals. The first seven deals are the

23 agreement, okay, the proprietary deals.

24 THE COURT: Yes.

25 MR. COUGHLIN: Okay. And the last nine deals


174

1 are, quote, where there is competition, it's supposedly

2 broken out right there bidding against each other. That

3 bidding process, okay, our experts have said that these bids

4 are between 10 and 15 percent below what the market should

5 pay for these. So even though sometimes it got up to nearly

6 six percent, okay, in some of these initial things, it never

7 got higher. Why? Because once all the players saw who was

8 bidding, a number of things happened.

9 And I'm going to take you through a transaction

10 that I think is exactly what happened basically in the nine

11 but just to show you that we have documents in evidence

12 because I won't go through all nine to establish what

13 happened in this, quote, bidding process.

14 It wasn't fair. It wasn't competitive. It became

15 anticompetitive because these competitors came in and bid.

16 They wanted this company, right, and then a number of things

17 happened. They combined so they wouldn't bid higher. They

18 agreed to put in a soft bid so the bid wouldn't get higher.

19 They agreed to combine in later deals. So the agreement,

20 the overarching agreement stays the same in the seven

21 proprietary deals as in the nine later auctions. That's why

22 this case has the glue where you don't have a single, not a

23 single jumped bid. You have other activity that is illegal

24 like bid rigging and other things like that but that's not

25 the agreement.


175

1 The agreement is not to jump a signed deal or a

2 deal that hit a certain level in an action and they had

3 reached an agreement not to jump that because that would

4 cost everybody money and that would cost everybody money in

5 the next deals. And that agreement was consistent. You

6 know, they said whether it was the companies that just had a

7 smaller focus or companies that were in all the deals.

8 I'd like to take a look at the next chart. The

9 next one.

10 THE COURT: So your position so far that in 19

11 or 17 of the transactions there was a stand down on all of

12 them?

13 MR. COUGHLIN: This stand down occurred across

14 the board in all of these transactions, okay, in one form or

15 another, but the agreement remained in tact, okay. Either

16 the bidding stopped and there was a combination that

17 restricted the competition or once a signed deal happened,

18 you know, that was it. I think the Freescale --

19 THE COURT: What is your term, "signed deal"?

20 MR. COUGHLIN: A signed deal, a signed deal,

21 proprietary signed deal. In other words, I'm equating the

22 auctions with a, I call it a signed deal, a proprietary

23 deal, so we keep the language the same.

24 Let's talk -- the next slide. Let's talk about

25 the -- I think this is the Freescale transaction, okay. I


176

1 think somebody got up here earlier from the Carlyle Group

2 and said, well, there is one email that talks about, you

3 know, not jumping, not getting in or not bidding as a

4 result. There are literally hundreds of these emails that

5 talk -- that go down like this. This is Freescale. Henry

6 Kravis, okay, called Blackstone president Tony James to

7 assure him as he had before that KKR was standing down and

8 that KKR -- this is this whole thing about throwing in this

9 $800 (sic) bid above in Freescale, would not have jumped a

10 signed deal, okay.

11 That language comes from the internal emails of the

12 top guys at the time. In other words, it was very

13 interesting the way they phrased that. We wouldn't have

14 done that, I mean, if we were real competition because we

15 bid 800, you know, we cost them $800 million dollars, the

16 actual documents show that they knew it wasn't a signed deal

17 yet, that it wasn't a proprietary deal yet, okay, and there

18 was competition to get the deal, to get the proprietary

19 deal. The agreement was not to raise the price after

20 somebody got the deal, okay. And that worked in different

21 ways, in the auctions in a number of different ways.

22 But in the proprietary deals there is not a single

23 instance of somebody during the 50-day go shop period of

24 jumping that deal. When KKR locked that bid in that cost

25 Blackstone another 800 million dollars, okay, there still


177

1 was not a signed deal and KKR knew about it and that's a

2 real distinction, okay.

3 Days later competition, the three separate deals

4 involving six defendants, they all benefited. "We would

5 much rather work with you guys than against you. Together

6 we can be unstoppable. In opposition we cost each other a

7 lot of money." Roberts responded, "Agreed."

8 That's a co-conspirator agreeing with the statement

9 of the conspiracy not to compete, okay. That's the type of

10 evidence that we have throughout this deal. But the

11 evidence that pulls it all together is that all of these

12 people, all of the main players were involved in the 27

13 transactions in one way or another. In other words, the

14 top --

15 THE COURT: I always felt from being involved

16 in this case so long and preparing for these hearings over

17 the last couple months that HCA and -- what was the name you

18 just mentioned?

19 MR. COUGHLIN: Freescale.

20 THE COURT: Freescale and Philips were, there

21 was some evidence that there might well have been some type

22 of conspiracy with respect to those particular participants.

23 But my problem has been how do you use those stronger

24 transactions to connect with the whole? That is my problem.

25 MR. COUGHLIN: I understand that. And I think


178

1 any time when you have conspiracy and you have different

2 transactions that are coming together and there are big

3 cases where, that were actually a lot bigger than this, and

4 in some of the deals with stronger, whether it was NASDAQ or

5 something else, but any time when you have a disparate

6 number of deals and you're relying on the evidence of the

7 internal documents, you're going to have better evidence,

8 you're going to have better evidence of the conspiracy in

9 some deals than the other.

10 And, let's be frank about it. In some deals the

11 activity or the illegal activity to suppress competition was

12 much stronger, okay. There is no doubt about that. You

13 know, so I'm sure that actually some of the other deals you

14 were thinking about, maybe Kinder Morgan, Texas Genco, TXU,

15 SunGard, HCA, PanAmSat, Freescale, Clear Channel and Toys

16 "R" Us, yes, there is a hierarchy of deals where the

17 evidence is better. And does that work the same way with

18 the defendants?

19 If we can go to the next one. Next slide.

20 I'm going back to the connection slide. If we look

21 at the connecting slide, it works the same way with the

22 defendants. There are people that are involved, KKR, Bain,

23 TPG, Blackstone, Goldman Sachs, there are players -- and

24 Carlyle -- there are players that are much bigger, that's

25 right. That J.P. Morgan, you know, presentation today, you


179

1 say, hey, what are they still doing here? We believe they

2 were connected and even the lowest member, in the conspiracy

3 law even the lowest member is liable for the whole thing.

4 A jury could easily or Your Honor even in summary

5 judgment could say, hey, I look at J.P. Morgan and I don't

6 see enough to keep them in. No doubt. I take a look at

7 Apollo. They weren't in enough deals or influenced enough

8 to keep them in, okay.

9 Now, we get into a different territory when we talk

10 about Providence and Silver Lake. They said they only

11 focused on a certain, on certain industries. Why would it

12 benefit them? Well, the reality is they had to be part of

13 this boy's group, big boy's group to get into those deals,

14 okay, that they had an interest in because they had a

15 smaller focus, okay. So they were very much restrained, you

16 know, by the conspiracy and involved in it.

17 You know, Silver Lake, the main example is the

18 SunGard case, okay, where they got all kinds of benefits,

19 okay, for orchestrating that and keeping that the way that

20 it -- and there is good evidence of the combination there.

21 And then the favor that flowed from some of that.

22 Now, the favors that flow about getting in the

23 other deals and combining, you know, those favors, that is

24 not the overarching agreement but that's what you get for

25 following in and being a part of the overall agreement. But


180

1 that's right, if you just take a look at the big six, TPG,

2 Bain, KKR, Blackstone, Goldman and Carlyle, you get all the

3 deals, because it happened in all those deals, proprietary

4 or auction, okay, and you connect everybody up and these are

5 the bigger funds. And so the bigger funds, the money, you

6 know, for the most part controlled the auction versus the

7 smaller funds or maybe a focused fund like Providence or

8 Silver Lake.

9 So you do have different levels and different

10 players, okay. But it doesn't mean that that wasn't part of

11 the agreement and affected by it. Even if the evidence,

12 even if a jury could let that deal out or that defendant,

13 you could do that, you know, on summary judgment and say I

14 see that as to these six, you know, there is plenty of

15 evidence, it's a little less here as to these three, it's

16 not so good at all as to these two, as to the final five.

17 We think we have presented enough evidence that we

18 should get to the jury on all 11, on all of the deals and

19 all of the damage deals, the 17 damage deals, okay. We

20 think we have provided evidence, we certainly provided

21 evidence of the agreement that had the impact to not have a

22 single bid jumped, okay. And so that should get us there at

23 least for the big six and for at least those ten deals that

24 I mentioned earlier. Without a doubt those are I believe

25 jury questions.


181

1 And I think that's what you struggled with here.

2 You say where is the evidence in a Neiman Marcus deal that

3 was an auction deal that the internal evidence that I have

4 seen so far where people say that was fully bagged (ph.) and

5 I don't really, I wouldn't have really bid for that.

6 Well, that's right and you kind of -- how does that

7 fit? Well, why didn't the deal ever change from the $100

8 price tag? The reason, because the conspiracy was in effect

9 so to every one of these deals that we mentioned and to each

10 one of these defendants we at least have evidence of their

11 involvement in it. And they may not be the big guy. Some

12 of them are the smaller people. And some of those

13 decisions, you know, may be made.

14 We want to present a complete picture about the

15 overall conspiracy, you know, to the jury. And that's why

16 we have all the players that were involved in it listed here

17 and we have got evidence as to each one and their

18 involvement, you know.

19 They like to dismiss the case, that it might have

20 been released for another reason that didn't have damages

21 because of the ownership like PanAmSat, you know, but they

22 don't want to deal with the evidence in there like about the

23 combination.

24 And let's take a look at PanAmSat for a second.

25 Let's do this first. This is the HCA. Your Honor, this is


182

1 the one they were talking about them, you know, standing

2 down within in days and the calls come in, boom, boom, boom

3 at HCA, you know. TPG and Goldman Sachs all told us we're

4 not going to compete. Kravis receives a call from Tony

5 James today. Blackstone not going to bid on HCA.

6 Let's go down to here (indicating). Let's go down

7 here, KKR later returned the favor and agreed not to jump

8 TPG's Freescale deal. TPG's managing director John Marren

9 stated, "KKR has agreed not to jump our deal since no one in

10 private equity ever jumps an announced deal."

11 We have an explicit statement about the agreement

12 in the evidence here and it's linking up to deals in the

13 past and a deal coming forward. And that's what he says,

14 you know, in those emails. That's pretty strong evidence of

15 an overarching conspiracy connecting the various deals.

16 Is there better evidence for some versus others?

17 Absolutely, Your Honor. And that's why I thought if

18 everybody, I made the suggestion if we finished off with the

19 individual defendants and they made their points, and some

20 of them had good points. Did we name the right, you know,

21 person, Goldman Sachs? We think we did. We named the

22 holding company. We couldn't sue a division. That's what

23 we thought we should do. Goldman Sachs is a big player.

24 You know, J.P. Morgan, yeah, they have a better

25 argument about whether they should be in or not. And I


183

1 understand the Court's grappling with that.

2 But to get an overall picture of those that were

3 involved in this conspiracy, you know, we named the people

4 that we had evidence to and we presented that evidence to

5 the Court and I will let my colleague --

6 THE COURT: One of the thrusts of your

7 argument is the so-called, as you phrased it, an agreement

8 not to jump a signed deal; is that the phrase?

9 MR. COUGHLIN: Absolutely. It's a signed deal

10 and it takes -- and, of course, I showed it takes a little

11 variance when you do the auctions about how the side deals

12 come about.

13 THE COURT: And you represented that that

14 occurred in the seven key transactions or at least in the

15 seven proprietary transactions.

16 MR. COUGHLIN: Well, absolutely without doubt

17 occurred in the seven. And the way that it occurred in the

18 auctions is as follows:

19 There would be competition, I showed you how the

20 price rose almost six percent, there would be competition.

21 But along the way there were deals being made to suppress

22 competition there and then once the final agreement was made

23 about who would get it and how they would get it, you know,

24 and who would stand down and who would come in the

25 combinations, which essentially is an agreement --


184

1 THE COURT: I will say that is the strongest

2 argument for the connection.

3 What I'd like is, now that we have got at least an

4 argument that there is a connection, I would like someone on

5 the defendants' side, I don't know who it would be, to

6 contest --

7 MR. COUGHLIN: And let me show you what I mean

8 on the auctions so we get it right so when Mr. Tringali

9 comes up and challenges me here, like he's going to do in a

10 second --

11 THE COURT: Is he the one who is going to?

12 MR. COUGHLIN: I'm sure he is.

13 (Laughter.)

14 MR. COUGHLIN: I'm sure he is in a second.

15 THE COURT: Is that right?

16 (Laughter.)

17 MR. COUGHLIN: If we could go to PanAmSat.

18 THE COURT: Well, I know what it means to be

19 proprietary --

20 MR. COUGHLIN: Right. We are going to go to

21 an auction.

22 THE COURT: Yes, go to an auction. I kind of

23 understand it but it is somewhat unclear.

24 MR. COUGHLIN: Now I don't see it.

25 THE COURT: But just explain it as you did


185

1 before. I have got it but --

2 MR. COUGHLIN: Here's how -- so there is an

3 auction starts, a company wants to, let's say PanAmSat wants

4 to sell off a division, okay. So that's why it's not in the

5 damage section. And so they say, okay, we are going to put

6 it up for auction, okay. Then we have a couple of the

7 defendants here that are going to bid for it, okay. And, in

8 fact, KKR is bidding for it and they say -- and they find

9 out that three of the other defendants are also interested

10 and I can't -- I think they're Carlyle, Silver Lake and

11 Blackstone, and I probably misspoke as to one and they're

12 going to sue me in a minute.

13 But, so three other defendants are interested in

14 the deal. And they're actually talking about combining and

15 coming together against KKR. KKR learns about that. They

16 start talking about what their -- first of all, a bid goes

17 in, okay. Good. I'll come back -- it's Carlyle and

18 Providence. And Blackstone was going to drop out.

19 So they start talking about what they're going to

20 bid in the next round, okay. And they agree over here

21 (indicating) that they would both bid and then come together

22 later, okay. The consortium would like a second option, it

23 promised Blackstone it would submit a soft bid allowing KKR

24 to win, okay. That's how this came about. KKR then wins

25 the bid and cuts in Carlyle and Providence into the deal as


186

1 limited partners, okay. That's how that operated in that

2 context. So literally three defendants stood down, you

3 know, said that they would put in a soft bid if that's what

4 they wanted them to do.

5 And then they did put in a soft bid, two of the

6 defendants got together, Carlyle and Providence, put in the

7 soft bid which made KKR's bid look all that more attractive

8 to PanAmSat, you know, for PanAmSat. They get the deal and

9 KKR tells management we can do this deal all alone. You

10 know, all this stuff you hear about we need to pool

11 resources to able to do these deals. No, KKR tells

12 management we can do this deal completely by ourselves.

13 The whole time they're talking, and we have the

14 emails to support all this evidence, the whole time they're

15 talking in the background about we're going let you in, you

16 know, we can do a four-way deal, you can put in a soft bid,

17 different ways to stand down, okay.

18 Sure enough, within, well, less than a month later

19 KKR cuts in losing bidder Carlyle and Providence, they cut

20 them in before even telling the seller that they're cutting

21 them in. And they cut them in the deal and they get the

22 same amount of profits per their percentage investment as

23 KKR who orchestrated the deal. And this was a very, very

24 profitable deal.

25 That's the way it worked in auctions. The


187

1 defendants who have a stand down agreement, that was easily

2 set for proprietary deals, in auctions they stood down in

3 various ways but the competition was suppressed in the same

4 way and the agreement remained the same. At some point you

5 would stand down, okay. In the auctions it took a little

6 while and you saw a little bump up in the competition but

7 there's the overarching agreement that ties all of those

8 together.

9 THE COURT: So the thrust of the

10 interconnection as argued by the plaintiffs is the agreement

11 to stand down?

12 MR. COUGHLIN: Yes.

13 THE COURT: All right. What do you say?

14 MR. TRINGALI: They're wrong.

15 THE COURT: He made a fairly strong argument;

16 did he not?

17 MR. TRINGALI: No, he didn't, Your Honor,

18 because --

19 (Laughter.)

20 MR. TRINGALI: And I will tell you why.

21 You know, he said, he used the PanAmSat example.

22 Let's take that as the first example. You know what he

23 didn't tell you about is there were three bidding groups.

24 And you know what? After Carlyle and Blackstone and

25 Providence dropped out and then came in later on the KKR


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1 bid, guess what? KKR was bidding against T.H. Lee and Bain,

2 two of the other defendants here.

3 There was another round of bidding and KKR was

4 bidding against them. And it was only when KKR then outbid

5 those two other bidders that Mr. Coughlin conveniently

6 omitted did KKR then invite Providence, Blackstone and

7 Carlyle into the deal and Blackstone declined because it

8 thought KKR had paid too much. That's what he forgot to

9 tell you. And that's his best example in the auction

10 situation, Your Honor.

11 His best example in an auction situation is where

12 he has forget to tell you about the final bid where the

13 defendants are bidding against each other.

14 THE COURT: Well, let me ask you this. Let's

15 stay away from the auction because that is somewhat

16 amorphous; but with respect to the proprietary, he made a

17 strong argument that there was -- that in every proprietary

18 deal that there was an agreement to step down and the

19 agreement can be inferred by the fact that everybody did

20 stand down.

21 MR. TRINGALI: The problem --

22 THE COURT: My question is is that so and if

23 it is, should at least Count 1 go to the jury with respect

24 to at least the seven proprietary transactions?

25 MR. TRINGALI: Well, first of all, Your Honor,


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1 it shouldn't because of the discussion we had yesterday

2 about, you know, Mr. Coughlin wasn't here yesterday so he

3 didn't hear his co-counsel say that --

4 THE COURT: He is lucky.

5 (Laughter.)

6 MR. TRINGALI: Luckily he wasn't here

7 yesterday but unfortunately he didn't hear his counsel say

8 that they were sticking with the 27-deal conspiracy.

9 THE COURT: Well, that is true. But for

10 fairness, could I cut something out or could they dismiss

11 all the other transactions and just go with the seven?

12 MR. TRINGALI: And they can't for all the

13 reasons that Mr. Primis explained to you yesterday, Your

14 Honor. They can't. And the, so the problem they have now

15 is --

16 THE COURT: Well, let's get to the

17 substance --

18 MR. TRINGALI: Okay, let's get to the

19 substance.

20 THE COURT: -- on those seven proprietary.

21 MR. TRINGALI: Absolutely, Your Honor.

22 First of all, we have the Freescale situation where

23 we did come in at the last minute knowing they were about to

24 sign the transaction. The reason why you try to do it then

25 is because you're not then caught up with what Ms. Sammons


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1 told you about having to deal with all the contractual

2 protections that one gets once one signs a deal. So you

3 don't have to then deal with the fact that somebody's got

4 matching rights so they can match your offer and you don't

5 have to pay a breakup fee, as well as the fact that they've

6 already aligned with management.

7 And the other problem, practical problem, Your

8 Honor, that we haven't even mentioned to you today, the

9 reason why people don't want to mess with the time and money

10 and effort in signed deals is because the person who made

11 the signed deal, they have been doing diligence on that

12 company for months, months, and now you're asking somebody

13 to jump the deal, okay, to put in a new signed deal in a

14 limited period of time having limited ability for diligence,

15 knowing full well that whatever price they put in there are

16 these contractual protections that allow the winning bidder

17 to match and get the deal.

18 And they say why didn't Ms. Sammons' client bid

19 higher than $51 and they like to point out how KKR and Bain

20 were saying that $51 was as high as they were willing to go.

21 Well, what they forget to tell you is that KKR and Bain

22 didn't tell the other defendants that that was as high as

23 they were going to go. KKR and Bain said that internally

24 and to the board of HCA which thought that was a fair price.

25 And I might add the board moved up the price. The price


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1 started I think $48 and the board kept negotiating with Bain

2 and Merrill, not a defendant here, and KKR until it got to

3 $51 and then it accepted the price.

4 But the other bidders, the other potential bidders

5 who stepped down, they knew that KKR was committed to the

6 deal and you see what their documents say. What is in their

7 mind, in their independent interest under the Matsushita

8 test, Your Honor, which the plaintiffs conveniently forget

9 about, they're thinking that Kravis would never let this

10 happen, he's going to match any offer. They don't know what

11 they're saying in their own internal documents.

12 And then furthermore on these, on this whole issue,

13 Your Honor, of not jumping a signed deal, remember I read to

14 you yesterday and I showed you some documents as to why

15 people decided not to jump a signed deal. Apollo, for

16 example -- and this was tab 22 of the binder I gave you

17 yesterday on Aramark -- saying, "We'd probably spend money

18 and time and piss off friends and they'd pay a few bucks

19 more and we get nothing."

20 THE COURT: Let me ask you this question:

21 With respect to the seven proprietary transactions,

22 if there is evidence that there was a step down, is that

23 sufficient to at least let it go to the jury if, if, again,

24 I am not going into the pleading aspects of this case, but

25 assume there was only seven transactions which were the


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1 object of this overarching conspiracy.

2 And if we had evidence relating to a lack -- not a

3 lack -- a step down in these transactions, would that be

4 sufficient at least at this stage in the proceedings to

5 allow the case to go to a jury?

6 MR. TRINGALI: If all those things happened,

7 Your Honor, that you posited, the problem is, you know,

8 first of all, that's not the conspiracy obviously and I

9 think the --

10 THE COURT: No --

11 MR. TRINGALI: -- the fact that I brought

12 up --

13 THE COURT: -- from the so-called procedural

14 problem --

15 (Whereupon, counsel is talking simultaneously with

16 the Court.)

17 MR. TRINGALI: But the other problem Your

18 Honor has is that there is no such agreement and they

19 haven't shown you an agreement.

20 THE COURT: But couldn't the jury draw --

21 MR. TRINGALI: The jury needs --

22 THE COURT: -- from the facts?

23 MR. TRINGALI: No, Your Honor, because it

24 doesn't meet the Matsushita test which is a test for you

25 under summary judgment, for summary judgment as the First


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1 Circuit said under those special rules.

2 And in each of these transactions, each of those

3 proprietary transactions, defendants here have independent

4 reasons that they have documented contemporaneously as to

5 why they're not pursuing a signed deal. In some cases, for

6 example, AMC is a proprietary transaction. It's a movie

7 theater chain. You heard Ms. Sammons say her client had no

8 interest in movie theaters. My client KKR bought a movie

9 theater chain Regal. You know what happened? It went into

10 bankruptcy. Do you think they didn't want to do another

11 movie theater deal? No, so they didn't bid on it.

12 Kinder Morgan is another proprietary transaction.

13 You know what happened there? Four defendants were asked if

14 they would want to participate in the Kinder Morgan

15 transaction. They were invited to join that transaction.

16 They didn't have to jump any deal. They were invited in by

17 Goldman Sachs and they declined.

18 Why is that stepping down? They had an invitation

19 to come in at the price Goldman Sachs was coming in. And

20 you know what happened in that situation, Your Honor? The

21 price continued to get bid up because the board of Kinder

22 Morgan didn't like the price that was being offered so they

23 had to continue to bid up the price, I think it went from

24 something like close to $100 to $107 until Mr. Kinder

25 actually had to, in order to let the deal happen because his


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1 partners didn't want to pay that money, he had to for his

2 share, his stock, he had to -- he agreed to accept a lower

3 price.

4 So that's what happening on these proprietary

5 deals. Aramark is the same situation. So just because

6 something is a proprietary deal, Harrah's, another example,

7 a gambling casino. Do you know how many defendants, because

8 gambling casinos make you go through state gambling

9 commissions and you have to put in lots of regulatory

10 information so they don't want to do it. That's

11 uncontested. It's uncontested that defendants chose not to

12 do that.

13 So the idea that people step down, the example that

14 the plaintiffs say there is no examples of people coming in

15 after a signed deal, you have to evaluate that under the

16 Matsushita test and they simply have a failure of proof

17 there.

18 But the most important thing for Your Honor is

19 they've now made up after two days, after being here for two

20 days, they have now made up what the -- it took someone who

21 wasn't here yesterday to come up with something to give Your

22 Honor to wrap your arms around it and say it's an agreement

23 to stand down. And I'm going to throw the auctions in even

24 though Your Honor saw how many documents over the last two

25 days, both the documents I showed you in the omnibus motion


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1 and the individual documents of the defendants where they're

2 involved in an auction situation and they say I gave it my

3 best shot, is was an absolute stretch. I can't go any

4 higher. I don't know what they're thinking.

5 And the plaintiffs say we've agreed not to bid up

6 the price. We've agreed to stand down. Your Honor's

7 recognized that we have no obligation to continue to bid

8 when we think it doesn't fit our -- when we think the price

9 has gone too high. And how do you possibly, how do you

10 possibly, Your Honor, look at that evidence and then say

11 Mr. Coughlin is correct when he says, oh, it spanned all

12 these deals, proprietary and auction?

13 He gives you the one example, PanAmSat, and he

14 leaves out the end of the story. And he doesn't even go

15 into the rest of them, like Neiman Marcus where Bain says --

16 sorry.

17 THE COURT: Let me ask you this and then I

18 will get back to the plaintiff.

19 Suppose they were to dismiss at this stage, I am

20 not saying they can or should or what, but suppose they did

21 and just got down to what the plaintiffs characterize as the

22 six major players and they relate to ten. Would that cut

23 the conspiracy?

24 MR. TRINGALI: Your Honor, we go back to

25 yesterday's question and the whole response you got


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1 yesterday and what the law is, that you can't change at

2 summary judgment, to defeat a summary judgment motion. You

3 have made your strategic choice like Judge Breyer said,

4 you're stuck with that. A strategic choice that they have

5 known about, they've known your scepticism but they kept it.

6 And yesterday they said they were keeping it and they

7 weren't trying to limit it either by defendant or deals.

8 It's only today that Mr. Coughlin tells you we'll limit it

9 to some deals, maybe we can limit it to some. Maybe some

10 deals aren't so good. Maybe some defendants aren't so good

11 because they have read your comments.

12 But, Your Honor, there is law here, there is law

13 here that they cannot just for strategic reasons to try to

14 defeat a summary judgment motion suddenly change their case

15 and come up with a new conspiracy.

16 And the conspiracy, as Mr. Primis explained to you

17 yesterday, is going to change dramatically. It's now going

18 to be a different conspiracy because if you have only six

19 defendants, then the question is what about the other five

20 who they were saying until now were essential to the

21 conspiracy and part of the conspiracy and part of the

22 allegation, those people could be bidding.

23 If you are dealing now with only six deals or seven

24 deals, how does that change the dynamic of the conspiracy?

25 So it becomes an entirely new case, a new pleading, a new


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1 complaint. Do we have a sixth amended complaint, Your

2 Honor, after six years or how many years we've been here?

3 I think the law is very clear the answer is no. I

4 think the plaintiffs told you yesterday the answer should be

5 no, that that's not what they're interested in. And I think

6 now to come up with a theory that it's proprietary deals

7 which actually doesn't even meet, their evidence doesn't

8 even meet the Matsushita test because of the independent

9 reasons people had, and, A, procedurally it's incorrect and,

10 B, substantively it's incorrect because they don't even have

11 the evidence as to those transactions.

12 THE COURT: All right. Any response?

13 MR. COUGHLIN: Just quickly and then we'll hit

14 the law. Absolutely I'm not cutting down the case. What

15 I'm acknowledging is that there is better evidence as to

16 certain defendants and as to certain deals, okay.

17 And actually there's nine proprietary deals as I

18 just counted them up: Freescale, HCA, SunGard, Harrah's,

19 AMC, TXU, Aramark, Texas Genco and Kinder Morgan. So there

20 is no question that those nine deals that the conspiracy was

21 in effect, a jury could say, okay, I'm going to look at the

22 auctions and they might come to a different conclusion.

23 We think it's very strong as to the auctions too

24 and you saw that they came together, they put in a soft bid,

25 they rigged that bid. That was in essence a stand down


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1 agreement. They talked about the bid as it went in. You

2 know, this idea that this other group was a serious bidder

3 was not the case. That was the one deal that was below

4 market price.

5 But every one of these auctions has that same type

6 of activity going on so we have the overarching conspiracy.

7 Just because we have that, and that's the way we pled it,

8 that's right, that doesn't mean Your Honor or a jury

9 couldn't throw out certain deals. That doesn't affect our

10 pleadings. That doesn't affect our conspiracy or how we

11 pled it. Somebody could find, yeah, I don't think that, I

12 don't think that J.P. Morgan was really a part of this

13 conspiracy. They certainly weren't a controlling part so

14 I'm not going to hold them in as a co-conspirator. They're

15 not going to be liable.

16 That happens every day in conspiracy trials. That

17 doesn't mean the indictment is somehow flawed or if you lose

18 one co-conspirator, then does the whole case go out against

19 the other five? No way. Countless cases get tried, you

20 know, I can't remember how many --

21 THE COURT: But defendants' argument is even

22 if your complaint involved only five or six of the

23 defendants on seven or eight or nine transactions, that they

24 are at most individual conspiracies and there is no

25 overarching agreement.


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1 MR. COUGHLIN: You could have brought this,

2 you could have brought this case maybe that way too and just

3 done it individually; but the way this agreement worked is

4 why it was overarching. In other words, it was a stand down

5 agreement so that you could do the next deal and know

6 somebody wouldn't jump yours. That was the agreement. That

7 suppressed the process. That protected you. That was the

8 main benefit that each of these defendants got, okay.

9 So we could have pled it smaller and, in fact, the

10 government all the time charges, has unindicted

11 co-conspirators that aren't cooperating, don't come in, they

12 were just part of the conspiracy and evidence is put on to

13 them as to their involvement. You could have done with the

14 lower five here. We could have said they're, you know,

15 we're not charging them, we're, you know, we're not naming

16 them in our complaint but they participated in this

17 conspiracy but they were at such a level that we didn't.

18 That doesn't undermine our pleadings.

19 What we did in this case, we named all the

20 conspirators and we named the deals that were involved. And

21 there is a uniform system that goes into place here. And we

22 can show it on any given deal. And if she wants to go

23 through every one of those PanAmSat docs, I'll do it, I'll

24 do it right now about that competition and we'll show you

25 that there was talk between those competitors as they put in


200

1 those bids and they came together later. And that satisfied

2 what the agreement was to stand down, to move away, to come

3 back in later. And that happened in both the proprietary

4 deals and the auction deals.

5 And so the fact that we pled this way, you know,

6 even if we lose a few of the people, it doesn't mean they

7 weren't conspirators. It doesn't mean they still don't have

8 a role. They don't even need to be named, okay. So they're

9 wrong about that.

10 You're right, I wasn't here for yesterday's

11 argument and I wish I was now that I heard what they're

12 arguing today but --

13 THE COURT: It was a long day.

14 (Laughter.)

15 MR. COUGHLIN: I had a long day too. But,

16 Your Honor, I think that our pleading stands. Whether we

17 lose a few deals or lose a few defendants, I'm not saying

18 that we should, I'm saying that it is a jury question of

19 whether we should or not.

20 What I was acknowledging is what Your Honor was

21 struggling with as you tried to say I can see that in

22 Freescale you have some, I can see that in HCA, I see what

23 is happening in, you know, SunGard and TXU. I can see that

24 and that makes sense to me. And I see that these four or

25 five people were involved in each of those deals, you know.


201

1 And then you have a tougher time with some of the smaller

2 players or some of the smaller deals, okay.

3 We think those are jury questions. We think we

4 have sent enough in to do that. The fact that I acknowledge

5 that we have weaknesses, that's just what I should be doing,

6 you know, and Mr. Tringali knows that, you know. I want to

7 be candid and say, yeah, that's right, some deals we have

8 unbelievable stunning evidence like just an admission about

9 what the whole conspiracy is about like that last document.

10 But I'll sit down, Your Honor, and have my

11 colleague argue the law just for a minute.

12 MR. WILDFANG: Good afternoon, Your Honor.

13 Again, I echo the defendants' words earlier, you have been

14 very patient with us and I'm going to take a little bit more

15 of your time here but I hope it will be productive time.

16 Let me start by -- may I approach?

17 (Whereupon, some documents were handed to the

18 Court, the Clerk and the Law Clerk.)

19 MR. WILDFANG: Your Honor, yesterday I made

20 mention of the fact that there was a case that I had the

21 privilege to work on when I was at the Department of

22 Justice. It's commonly referred to as the NASDAQ case. I

23 have handed you a copy of the complaint and the competitive

24 impact statement in that case. I didn't get this from any

25 inside information. It's on their website.


202

1 But I want to take you through some parts of this

2 because there are important features of the NASDAQ case that

3 we find here and I think it will give Your Honor some

4 comfort about how to look at these multi party, multi deal

5 kinds of conspiracies. So --

6 THE COURT: What is the name of this case?

7 MR. WILDFANG: Well, the caption is United

8 States of America versus Alex Brown & Sons.

9 THE COURT: Right.

10 MR. WILDFANG: These are all NASDAQ market

11 makers so it's commonly referred to as the "NASDAQ case."

12 NASDAQ is an electronic trading market like the New York

13 Stock Exchange only it's electronic.

14 And the allegation in this case, which was I think

15 ultimately proven, was that there was a, what's called a

16 quoting convention agreed to pay all 33 of these big firms.

17 You will notice Goldman Sachs is there. J.P. Morgan

18 Securities was a defendant in that case.

19 They entered into a consent judgment to stop the

20 quoting convention but what's interesting is the defendants

21 in the NASDAQ case made the same arguments you hear here,

22 that it's implausible, how could you possibly maintain this

23 conspiracy over so many deals and so many stocks. We did.

24 It was proven that there was this agreement.

25 And if you look at paragraph 40 on page eight where


203

1 the government alleges that --

2 THE COURT: Of the complaint?

3 MR. WILDFANG: Of the complaint, yes. I'm

4 sorry, Your Honor.

5 Beginning at least as early as 1989 and continuing

6 to the date of this complaint a common understanding arose

7 among the defendants and other NASDAQ market makers

8 concerning, among other things, the manner in which bids and

9 asks would be displayed on the NASDAQ and that was the

10 quoting convention. It's described in greater detail in the

11 next two pages.

12 If you turn to page 10, paragraph G, you will note

13 that the government alleged that when widespread news

14 reports and a Justice Department investigation came to be

15 known to the defendants, they abruptly changed their

16 behavior. That's what happened in this case, shortly after

17 the Department of Justice made known that there was an

18 investigation of these defendants.

19 If you look at the competitive impact statement,

20 Your Honor, at page 22. One of the sources of evidence for

21 the government in that case was a document obtained from the

22 defendants where, it's the small blocked indented quote on

23 page 22. It says, "There was a typographical in the

24 newsletter STANY, which was an industry organization. We're

25 certain you'll realize it was misquoted. As you're all


204

1 aware, it is clearly unethical to make a Chinese market or

2 to run ahead of an order."

3 This is the equivalent of the statement that you

4 see on the slide that KKR has agreed that no one in private

5 equity ever jumps an announced deal. They're legally

6 equivalent. They are an admission of an overarching

7 agreement followed consistently by these defendants. And

8 you recall, Your Honor, this morning I got up and I asked,

9 you know, were there any examples of jumped deals.

10 THE COURT: Who said that? That statement you

11 just made?

12 MR. WILDFANG: John Marren of TPG. John

13 Marren of TPG.

14 THE COURT: And with respect to what

15 transaction, HCA?

16 MR. WILDFANG: Well, I think it relates to all

17 the transactions because what he says is KKR has agreed not

18 to jump our deal in this deal but they say no one in private

19 equity ever jumps an announced deal. That's the conspiracy.

20 That's the common understanding that we have alleged. Very

21 similar to the common understanding that was alleged in the

22 government's case against the NASDAQ market makers.

23 Your Honor, let me --


25 Assume that is admissible against the person who,


205

1 now that we are talking about it, the admissibility of

2 evidence; but if that is the heart of the conspiracy, it is

3 admissible against the person who wrote it. How is that

4 admissible against the co-defendants?

5 MR. WILDFANG: Well, statements of

6 co-conspirators, Your Honor, can come in under the

7 co-conspirator exception.

8 THE COURT: Yes, but only if there is evidence

9 to show prior thereto the existence of a conspiracy.

10 MR. WILDFANG: Exactly. And we think we have

11 plenty of evidence. You know, let me bring out the chart

12 that you saw yesterday. You know, at trial we will be

13 prepared to put into evidence all of this information

14 announced as to all of these deals and all of these

15 interrelationships. And then it will be a jury question for

16 the jury to find is there sufficient evidence -- we know

17 there is an agreement. They've admitted the agreement.

18 Then the question is is there sufficient evidence to tie

19 each defendant into that agreement.

20 And let me turn, Your Honor, to some jury

21 instructions that I think are relevant here. Jury

22 instructions that were given by Judge Hogan in the vitamins

23 case. They are -- do you have the binder that I gave you

24 yesterday?

25 (Laughter.)


206

1 THE COURT: I am sure I have it. You can read

2 me his instructions. What did he say?

3 MR. WILDFANG: So at tab 4 are some of the

4 jury instructions that Judge Hogan gave in that case. And

5 in particular, instruction No. 31 which is on numbered page

6 36, which is I think indisputably what the law is with

7 respect to antitrust conspiracies, so I won't read it all

8 but let me hit some of the high points.

9 At the bottom of page 36, the last paragraph, Judge

10 Hogan instructs the jury, "To prove a conspiracy the

11 evidence does not have to show that the defendant entered

12 into an express detailed written agreement."

13 The defendants have argued that we have to do that.

14 He goes on to say, "Price-fixing agreements rarely

15 are proven by explicit agreements. Often such agreements

16 are proven not by direct evidence but by inferences from

17 what the defendant and others said and did."

18 THE COURT: This is hornbook law.

19 MR. WILDFANG: Right, but the point is, Your

20 Honor, these instructions, you will probably give the jury

21 in our case very similar instructions. And then the

22 question is for the jury whether or not there is sufficient

23 evidence.

24 But the one I really wanted to point Your Honor to

25 is the second paragraph on numbered page 37. "The evidence


207

1 does not have to show that all of the means or methods

2 alleged by the plaintiffs were agreed on by every member of

3 the conspiracy to carry out the alleged conspiracy, nor that

4 all of the means or methods that were agreed on were

5 actually used; nor that all persons alleged to be members of

6 the conspiracy actually were members."

7 That is hornbook law, Your Honor, and that --

8 THE COURT: No doubt. But they have -- that

9 is true but prior -- and I am not saying you haven't reached

10 it -- but this means after there is evidence of an

11 agreement.

12 MR. WILDFANG: Well, Your Honor --

13 THE COURT: After there is evidence of an

14 agreement, the participation of each of the alleged

15 co-conspirators is different. That is some, you know, in a

16 criminal case some drive a car, some carry the gun, but

17 there is an agreement first. That is fundamental.

18 MR. WILDFANG: Absolutely, Your Honor, and

19 that's why I read the last paragraph on page 36, because

20 that is hornbook law. And especially in antitrust

21 conspiracies you rarely find explicit written or summarized

22 agreements.

23 The slide I showed you, that Mr. Coughlin showed

24 you --

25 THE COURT: But that is true in any


208

1 conspiracy, even a criminal conspiracy has less

2 documentation.

3 MR. WILDFANG: But my point, Your Honor, is

4 that that statement is -- that's direct evidence of a

5 conspiracy. It says there is an agreement. So we are, we

6 are past having to prove that there was an agreement. And

7 there is plenty of other evidence besides that. I don't

8 want to focus only on that. But all of those emails that

9 say no one jumps deals, I won't jump your deal, I'll stand

10 down on this one, all of that is circumstantial evidence,

11 persuasive circumstantial evidence of an agreement.

12 Your Honor, let me turn to one of the cases that I

13 mentioned yesterday that I think actually is quite

14 instructive. It's the decision in the In Re High Fructose

15 Corn Syrup Antitrust Litigation and it's found at tab eight

16 of my binder.

17 And this is case is important for a couple of

18 reasons. One, it's written by Judge Posner who is widely

19 regarded as one of the premium antitrust scholars in the

20 country. And if you turn to page 655 of this opinion, in

21 the second paragraph in the left-hand column.

22 This is a case where Judge Posner reversed a grant

23 of summary judgment in an antitrust conspiracy case. And

24 what he is describing here is that the defendants cleverly,

25 he says cleverly laid the track for the trial judge by


209

1 enticing the judge to do some things that they shouldn't do.

2 So first he says, It's not the judge's job to weigh the

3 conflicting evidence. He says, "The second trap to be

4 avoided in evaluating evidence of an antitrust conspiracy

5 for purposes of a summary judgment motion is to suppose that

6 if no single item of evidence presented by the plaintiff

7 points unequivocally to conspiracy, the evidence as a whole

8 cannot defeat summary judgment."

9 He goes on to say, "It is true that zero plus zero

10 equals zero. But evidence can be susceptible of different

11 interpretations, only one of which supports the party

12 sponsoring it, without being wholly devoid of probative

13 value. Otherwise what need would there be for a trial?"

14 And then the third, on the next page, the third

15 trap he says is "failing to distinguish between the

16 existence of a conspiracy and its efficacy."

17 In other words, it may be that there is an

18 agreement and it didn't have the impact that we claim it did

19 but that doesn't mean there is not an agreement.

20 Now, also, going back to the jury instruction, the

21 fact that not every defendant acted in conformity with the

22 agreement on every occasion doesn't disprove the agreement.

23 It may create a jury question but the fact that on some

24 occasion -- go back to the drug conspiracy analogy. If one

25 of the conspirators doesn't show up to drive the car on a


210

1 given day, you know, is that evidence that maybe he was

2 acting not in furtherance of the conspiracy? Maybe. But

3 what if he shows up the next day to drive the car?

4 What Judge Posner is saying here is it is the

5 judge's job at summary judgment in the district court to

6 look at all of the evidence, not to parse it, to look at all

7 of it.

8 And, Your Honor, one last point, on page 656 in the

9 middle of the right-hand column, Judge Posner discusses the

10 plaintiffs' economic expert and he says --

11 THE COURT: What page is this now?

12 MR. WILDFANG: Page 656, the middle of the

13 right-hand column, the last paragraph.

14 THE COURT: Yes.

15 MR. WILDFANG: He says, "The plaintiffs'

16 economic expert opined in his report and the defendants

17 pretty much concede that the structure of the HFCS market,"

18 high fructose corn syrup, "far from being inimical to secret

19 price fixing, is favorable to it."

20 And he credited that testimony. We have exactly

21 that testimony from our expert in our case, that you can

22 look at the economic evidence and see circumstantial

23 evidence of an agreement because you would expect to find

24 certain things in markets that are behaving competitively.

25 In contrast you might expect to find other things, things


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1 that we find in this market when the market is behaving

2 uncompetitively.

3 Your Honor, let me -- two last points.

4 THE COURT: I would like, after you are

5 finished with the law, I would like the defendants to

6 comment on the plaintiffs' reference to that statement as

7 being indicative of an agreement. And, you know, that

8 statement is one of those that is some strong evidence and

9 that is why it makes that HCA case somewhat stronger at

10 least than a lot of the others but I would like a response

11 on that.

12 MR. WILDFANG: Your Honor, I will try to be

13 brief.

14 In tab one of the binder that I have given you,

15 there are slides I made reference to yesterday. If you

16 could turn to slide 21.

17 THE COURT: Which one is this now?

18 MR. WILDFANG: It is the first tab of the

19 binder and it's slide 21, with blue on the top. It says

20 American Tobacco Company versus United States.

21 THE COURT: Yes, I have it.

22 MR. WILDFANG: The point here, Your Honor, is,

23 what the court says, which again I think is black letter

24 law, "It is not of importance whether the means used to

25 accomplish the unlawful objective are in themselves lawful


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1 or unlawful. Acts done to give effect to the conspiracy may

2 be in themselves wholly innocent acts."

3 Your Honor, the fact that we conceived that a

4 single benign joint bid is not necessarily a violation of

5 the antitrust laws doesn't mean that the joint bidding here

6 is not probative of an agreement, especially when you see

7 that there was very little club bidding before 2003, very

8 little club bidding after the DOJ announced their

9 investigation. That change of behavior is indicative of a

10 conspiracy.

11 Oh, Your Honor, last point. The defendants gave

12 you a booklet yesterday with cases on your questions. I had

13 just a few minutes last night, I had a chance to take a look

14 at them. They are completely inapposite but we would like

15 an opportunity to address them. But I do have three cases

16 for Your Honor --

17 THE COURT: The most important case to me,

18 well, I am sure there are others, but the ones that I am

19 familiar with and have read fairly thoroughly is Mat- --

20 MR. WILDFANG: Matsushita.

21 THE COURT: -- Matsushita and I think the case

22 called White in the First Circuit. Those seem to me to

23 cover the law in this area.

24 MR. WILDFANG: Your Honor, I think both

25 Matsushita and White are accurate statements of the law.


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1 The problem is the defendants have not accurately

2 characterized the import of what the words on the page

3 meant. And that's why, Your Honor, I really encourage you

4 to read the Kodak case and read Judge Posner's opinions in

5 High Fructose that specifically discusses the application,

6 the correct application of the Matsushita case.

7 I'm going to hand up three copies, three different

8 decisions, Your Honor. I'm not going to go through them.

9 They are -- they simply stand for the proposition that you

10 can dismiss out pieces of a case without the whole

11 conspiracy collapsing. I think that's what they stand for.

12 But I want to finish by calling the Court's

13 attention to tab nine in our binder.

14 MR. TRINGALI: Counsel, do you have copies of

15 those cases?

16 MR. WILDFANG: Yes.

17 Tab 9 is Judge Hogan's opinion denying summary

18 judgment largely but granting in part in the vitamins case.

19 It actually is important for Your Honor to read this case as

20 well because it is relevant for a couple of reasons.

21 One, Judge Hogan ended up granting --

22 THE COURT: I want to be sure, what are you

23 referring to? What --

24 MR. WILDFANG: Tab nine in the binder that I

25 gave you, which is a decision In Re: Vitamins Antitrust


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1 Litigation.

2 THE COURT: I have so many binders here, I am

3 not quite sure -- oh, I think I have got it.

4 No, on nine there is nothing.

5 MR. WILDFANG: Someone stole tab nine. Let me

6 hand you my copy, Your Honor.

7 (Laughter.)

8 MR. WILDFANG: Again, Your Honor, this is the

9 case which we really encourage Your Honor to read and read

10 carefully before deciding these motions.

11 Judge Hogan was faced with a part of the vitamins

12 conspiracy that related to a single vitamin called choline

13 chloride or Vitamin B4. And there were I believe five

14 defendants left in the case at that point and they were

15 going to trial. And they brought a summary judgment motion.

16 And the question that he addresses in his opinion is is

17 there sufficient evidence to go to trial against all five

18 defendants. Each of the five defendants made at least some

19 of the arguments the defendants here have made about there

20 are legitimate business reasons for why we did what we did,

21 there is not enough evidence to hold us in to a conspiracy.

22 Very similar arguments.

23 And what Judge Hogan did is he looked at all of the

24 evidence and he concluded that only one of the five

25 defendants was entitled to summary judgment because there


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1 was insufficient evidence. The other four went to trial.

2 Now, he didn't rule that that means the conspiracy

3 didn't exist and, therefore, no one goes to trial. He went

4 to trial with the four remaining.

5 And the other import of the vitamins decision, Your

6 Honor, is that Judge Hogan had the benefit of the Matsushita

7 opinion as well as Judge Posner's High Fructose opinion.

8 And Judge Hogan, as Judge Posner did, correctly applied the

9 Matsushita case, not incorrectly as the defendants have

10 invited you to do, Your Honor.

11 Your Honor, we would like an opportunity to submit

12 something in writing on the cases that were submitted to

13 you.

14 THE COURT: I will give you this back. You

15 have referred to that case on many occasions so I am aware

16 of it.

17 MR. WILDFANG: Thank you.

18 THE COURT: He claims that that reference of

19 standing down -- excuse me -- that it never happens, or it

20 always happens I guess, is evidence of the overarching

21 conspiracy that binds as it were or interconnects all these

22 defendants, and it is a strong statement. Why doesn't it?

23 MR. TRINGALI: Well, two reasons, Your Honor.

24 First of all, where they're talking about never

25 jumping a signed deal, that refers to proprietary, not


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1 auction. So despite the distinction they try to give you,

2 that is referring to an announced deal. That's No. one.

3 No. two, that just talks about --

4 THE COURT: What is the difference between an

5 announced deal and a signed deal?

6 MR. TRINGALI: They're the same. That's what

7 I'm saying. That's a reference to proprietary.

8 The other problem with that in terms -- so you have

9 already eliminated their conspiracy, the conspiracy that

10 they have alleged from day one, the 27-deal conspiracy,

11 okay. That's No. one. So it's not an agreement as to that

12 conspiracy.

13 No. two, it is not an agreement, what they say,

14 what he is saying --

15 THE COURT: Is it an agreement --

16 MR. TRINGALI: Let me -- go ahead, I'm sorry.

17 THE COURT: Is it an agreement as to the seven

18 or nine proprietary?

19 MR. TRINGALI: No, Your Honor. And the reason

20 for that is, No. one, let me, first of all, point out to

21 you --

22 THE COURT: Go ahead.

23 MR. TRINGALI: -- that Mr. Marren who is

24 quoted there, he like several others who wrote emails that

25 they like wasn't deposed by the plaintiffs. So he was never


217

1 asked to explain what he was referring to in that email. He

2 wasn't asked whether no one in private equity doesn't jump

3 the deal is because they agreed not to or because as I have

4 now showed you and others have showed you in numerous

5 documents, they made an independent decision not to do so

6 because they're going to lose.

7 Again, I come back to the document I showed you

8 yesterday from Carlyle, I believe it was on TXU where they

9 said they would be a day late, a dollar short and lose.

10 THE COURT: But --

11 MR. TRINGALI: That's completely --

12 THE COURT: I agree, that is a strong argument

13 but is it a jury question?

14 MR. TRINGALI: No, Your Honor, and the reason

15 why, it's Matsushita. Matsushita is a summary judgment

16 case. And Matsushita says -- and I know I have been accused

17 now several times of distorting it. All I have been doing

18 is reading it but --

19 (Laughter.)

20 MR. TRINGALI: It says, "Antitrust laws limits

21 the range of permissible inferences from ambiguous evidence

22 in a Section 1 case. Conduct that is consistent with

23 permissible competition as with illegal conspiracy does not

24 standing alone support an inference of antitrust conspiracy.

25 A plaintiff seeking damages for a violation of Section 1 to


218

1 survive a motion for summary judgment," not anything to do

2 with trial, "must present evidence that tends to exclude the

3 possibility that the alleged conspirators acted

4 independently."

5 This is summary judgment, Your Honor, in order to

6 survive a motion for summary judgment and when you have

7 document after document of the defendants saying that I am

8 not jumping a signed deal because I am going to waste my

9 time, my effort, my money and I'm going to lose anyway, that

10 has got to be an independent decision. That has got to

11 satisfy the Matsushita standard.

12 And I also remind Your Honor, the cases I mentioned

13 yesterday about the jump ball, if you even think we're in

14 that realm, that the courts have held that it is equally, if

15 it is equally plausible that defendants acted in their own

16 self-independent -- own self-interests independent of one

17 another, then the district court properly grants summary

18 judgment.

19 And as the other case I cited to you which was

20 affirmed by the First Circuit said, "Only when a theory of

21 rational independent action is less attractive than that of

22 concerted action." That's the DM Research case that I

23 mentioned to you yesterday.

24 Those are summary judgment standards, Your Honor.

25 They're not trial issues. Nothing to do with what the jury,


219

1 whether it survives a jury verdict or not. It has to do

2 with whether you even let it get to the jury.

3 And I submit to Your Honor that even under this now

4 much smaller conspiracy --

5 THE COURT: This may be my last question,

6 hopefully.

7 MR. TRINGALI: Okay. Does that mean it's

8 going to be my last thing I'm going to be able to say to

9 you?

10 THE COURT: Assume that Count 1 charged the

11 seven or nine proprietary transactions and only those

12 defendants who were named therein and used evidence such as

13 that and several other references to standing down. There

14 might well be a dispute over the interpretation of some

15 remark like that but might it not be a jury question?

16 MR. TRINGALI: No, Your Honor.

17 THE COURT: Why?

18 MR. TRINGALI: Because of Matsushita, the

19 Matsushita standard and the other cases interpreting

20 Matsushita. That the inference has to be, they have to

21 have, it can't be even in equipoise, okay, but we have

22 legitimate, contemporaneous, independent documents talking

23 about independent decision making, independent actions, why

24 things are in our independent interests, the day late,

25 dollar short, we're going to lose anyway, that doesn't get


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1 to a jury under Matsushita and the cases interpreting

2 Matsushita.

3 And that's --

4 THE COURT: There is no doubt if that type of

5 allegation had been made, you are going to analyze the case

6 a lot better. This is a giant case and there are so many

7 different facts. I have never seen anything like it. I

8 have been involved in some patent cases which have gone on

9 for six or seven weeks and five years of discovery but I

10 have never seen anything like this.

11 Although it is not entering into my thinking, the

12 plaintiffs have to realize that if this case were to go to

13 trial, it would be a circus. I mean, it is just almost too

14 gigantic to get your arms around it.

15 MR. TRINGALI: Your Honor, the case has many

16 issues, many problems. And just to address the issue you

17 raised, the added problem in addition to the co-conspirator

18 issue and everything else, you also have the release issue

19 where evidence as to transactions where a defendant has a

20 release isn't admissible against that defendant. So are you

21 going to have 25 juries or are you going to have limiting

22 instructions that are going to actually potentially --

23 THE COURT: Well, we are not going to get into

24 the trial; but there is no doubt a trial would be --

25 MR. TRINGALI: A nightmare.


221

1 THE COURT: And it would take a long, long

2 time.

3 MR. TRINGALI: It would take a long time.

4 But, Your Honor, and that's why Matsushita says we

5 have, and the First Circuit has said we have special rules

6 for antitrust conspiracy cases because they are large cases.

7 They are complex cases. And there is also concern in the

8 case law that to let a case like this go to the jury, if it

9 doesn't pass the Matsushita test of excluding, tending to

10 exclude the possibility of independent action, of showing

11 that the inference of independent action is less plausible

12 than the inference of conspiracy, that that chills

13 competitive conduct, and the Supreme Court has recognized

14 that, and other courts have recognized that, Your Honor.

15 And that is why they have this rule for the antitrust cases

16 so that normal competition, the things that Your Honor

17 mentioned today during the course of the argument that you

18 said were completely legitimate like the club bidding --

19 and, by the way, Your Honor, you know that great map that

20 they put on and then Mr. Coughlin did as well where all the

21 lines, you know, cross. Let me tell you --

22 THE COURT: That is tough to contend with. I

23 mean, that is persuasive; is it not?

24 MR. TRINGALI: It is not persuasive, because

25 you know what it represents, Your Honor?


222

1 THE COURT: It has great impact.

2 MR. TRINGALI: It has visual impact but it is

3 meaningless because you know what it shows? They'll draw a

4 line from KKR to a transaction that KKR considered. It

5 could be a transaction that KKR won. It could be a

6 transaction that KKR decided that, from the documents you

7 have seen, gave it its absolute best shot and lost.

8 There is no -- those lines don't satisfy, don't

9 attempt to satisfy the Matsushita test. They're not telling

10 you what the conduct is that gets there, that gets to those

11 lines. They're just drawing a line if they can in some way

12 and say so and so considered a transaction, so they can say

13 that defendant A considered AMC. Defendant A could have

14 legitimately decided not to pursue it. They still get that

15 line.

16 THE COURT: Okay.

17 MR. TRINGALI: So you have a chart that is

18 meaningless.

19 THE COURT: I will let the plaintiffs --

20 MR. TRINGALI: What you don't have in that

21 whole, all those interconnections is the agreement that you

22 have been looking for. What you don't have is a line that

23 links every defendant to every transaction as to an

24 agreement.

25 The agreement that they tried to give you today for


223

1 the first time is an agreement not to compete, although they

2 have a real problem trying to figure out how they get that

3 to the auction. So what they do is say, well, maybe some

4 deals are aren't so good.

5 If Your Honor looks at our 56.1 statement, you will

6 see multiple instances in auction situations of multiple

7 rounds of bidding. Look at Clear Channel. Look at

8 Michaels. Look at Neiman. Look at Sabre. Look at

9 Susquehanna. Look at Texas Genco. Look at Toys "R" Us.

10 THE COURT: Okay.

11 MR. TRINGALI: There is plenty, that is my

12 point, that is my point, because they made it sound to you

13 as if it is all rigged.


15 MR. TRINGALI: And it is not.

16 THE COURT: Just a quick response.

17 MR. COUGHLIN: Your Honor, I won't go more

18 than two minutes.

19 One, they talked about the agreement not to go

20 over, that kind of statement doesn't spill over to the

21 auctions. In Clear Channel it says Alex from KKR, Alex

22 Navab, he says, "Clearly we would be viewed as bust up of a

23 current deal with T.H. Lee and Bain along with the family

24 and that will have implication for all our deals going

25 forward."


224

1 Not just the proprietary deals, this is an auction

2 deal that he's talking about. And if they lobbed in a bid,

3 it would not only have an impact on the auction deal but all

4 their deals.

5 So we think it covers both the auctions and

6 proprietary deals.

7 Two things. One, the Supreme Court case deals with

8 indirect evidence, not direct evidence like that we had up

9 on the board.

10 Finally, if they say something is tough, if they

11 say something is tough and that's why we shouldn't go to

12 trial because it's going to be so complicated and big,

13 that's no reason. I try big cases --

14 THE COURT: I am not saying it is but the case

15 has got to be streamlined for trial.

16 MR. COUGHLIN: It does, Your Honor. And I

17 tried a big case against the tobacco companies --

18 THE COURT: You have got to admit, this is

19 massive, massive, it has gone on for five years. We have

20 how many documents, how many depositions?

21 MR. COUGHLIN: A lot of trees.

22 THE COURT: It is overwhelming.

23 MR. COUGHLIN: A lot of trees have died. But

24 I think that we can, you know, bring it down into a

25 manageable way to present it to a jury so a jury can


225

1 understand it.

2 And as far as all those lines on that chart, all of

3 those lines deal with our statements in our 56.1 statement

4 and they all have backing in the papers we've submitted.

5 We think this should not, we think that summary

6 judgment should be denied, Your Honor.

7 Thank you.

8 THE COURT: Okay. I want to thank the

9 parties, the attorneys. I was just noting to my law clerk

10 that this has been a complex case, a very interesting case,

11 but at least as far as the Court is concerned, it has been

12 handled by the attorneys in a very professional manner. It

13 really has. You would think a case of this magnitude and

14 the amount of money that is involved, that the Court would

15 have had more problems with administering the case.

16 It has been very, let me say wonderful dealing with

17 everybody, very professional. The only time it seemed that

18 we might have been thrown off kilter was when the New York

19 Times got involved.

20 (Laughter.)

21 THE COURT: But other than that, I have been

22 very happy working with everybody.

23 I have got a lot of stuff to read and so it is

24 going to take me some time. I have indicated, at least

25 preliminarily, how I felt when I came in here but I am going


226

1 to reconsider everything.

2 I am sure that the decision will not be made within

3 a month. I am hopeful that it will be finished in 60 days,

4 that is at least what I am hoping, but there is a lot of

5 stuff to go through. But the arguments have been very

6 elucidating and I have been well educated.

7 Thank you very much.

8 VOICES: Thank you, Your Honor.


10 Court is adjourned.

11

12 (WHEREUPON, the proceedings were recessed at 4:10

13 p.m.)

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C E R T I F I C A T E

I, Carol Lynn Scott, Official Court Reporter for

the United States District Court for the District of

Massachusetts, do hereby certify that the foregoing pages

are a true and accurate transcription of my shorthand notes

taken in the aforementioned matter to the best of my skill

and ability.

/S/CAROL LYNN SCOTT

_________________________________________

CAROL LYNN SCOTT Official Court Reporter John J. Moakley Courthouse 1 Courthouse Way, Suite 7204 Boston, Massachusetts 02210

(617) 330-1377

DATE: January 4, 2013
