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Private equity's court battles

June 25, 2013: 12:47 PM ET

gavelRecent developments in several cases involving private equity and venture capital firms.

FORTUNE -- A large number of private equity and venture capital firms are currently involved in litigation, some as defendants and some as plaintiffs. Four of these cases have had recent developments, so here is a quick rundown:

Dahl: This is the massive private equity bid-rigging case, which has accused 10 private equity firms of conspiring on nearly two dozen buyouts that occurred before the financial crisis. A Boston federal court judge last week rejected a motion brought by four firms – Blackstone, Carlyle, Goldman Sachs and TPG – to dismiss plaintiff claims specific to the $33 buyout of hospital chain HCA (the firms that actually bought HCA – Bain, KKR and Merrill Lynch – are no longer parties to this particular charge). The judge also has not yet ruled on a motion to dismiss the broader bid-rigging charges against the entire defendant group, although an earlier ruling suggested that he was leaning toward doing so.

CMEA: A San Francisco Superior Court judge has rejected CMEA Capital's motion to compel arbitration, in a sexual harassment and retaliation lawsuit brought against it by three former female employees. The plaintiffs have now issued a demand for jury trial, but no word yet on if CMEA plans to appeal the ruling.

Kleiner Perkins: Speaking of appeals, Kleiner Perkins Caufield & Byers last week had its appeal heard of a lower court ruling that it could not compel arbitration in the gender discrimination suit brought against it last year by former partner Ellen Pao. Expect an appeals court ruling within the next few weeks.

OpenGate vs. Thermo Fisher: This is the case of the private equity firm that bought a lab equipment subsidiary from a public company, only to (allegedly) learn that the subsidiary's primary manufacturing facility in Mexico had been overrun by a violent drug cartel. The defendant, Thermo Fisher, has asked a court to dismiss the case in a reply that never addresses the central question: Whether or not it was aware of cartel activity at the facility. Thermo Fisher hints at such knowledge repeatedly  – for example, mentioning how a buyer should have known that there is lots of cartel activity in the facility's general geography – but won't come out and say it. Same tapdance from a spokesman I rang yesterday.

So Thermo Fisher is basically offering a two-part argument: (a) OpenGate didn't ask, and we were under no obligation to offer up information that wasn't explicitly requested; and (b) Even if we did know and should have disclosed it, the cartel's presence hasn't had a material impact on the business.

An OpenGate spokeswoman tells me the following: "There is criminal activity perpetrated by organized groups in nearly every city of the world and a seller certainly doesn't have an obligation to provide historical facts of a city's criminal activity. But, when the activity includes individuals or an organized criminal group actually on the physical property, including trespass, we believe a seller has an absolute obligation to be forthright and disclose that information in a clear, articulate and obvious manner… The cartel activity has not caused a disruption to the manufacturing process of the business [but] it has cost us significant money to investigate, analyze and pursue remedies and safety measure."

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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