A US appeals court has thrown out a 2010 ruling against a claim by Guy Hands that he had been tricked by Citigroup into overpaying for EMI, setting the stage for a fresh showdown between the private-equity mogul and the bank over the sale of the London-based music business.
Mr Hands’s Terra Firma Capital paid more than £4bn for EMI in 2007, at the height of the leveraged buyout bubble that popped when the credit crunch hit the financial sector.
The deal proved disastrous, and led to a bitter courtroom battle in which Mr Hands claimed he had been misled by David Wormsley, a high-profile Citigroup banker in London, into overpaying for the business. Citigroup helped finance the deal.
The allegation was rejected in a trial before US District Judge Jed Rakoff in 2010. Soon after, Citigroup took control of EMI and eventually broke up and sold the business.
However, yesterday the 2nd Circuit Court of Appeals ruled that Judge Rakoff had incorrectly instructed the jury in the original trial on the English legal provisions relevant to the case, and that the matter should therefore be retried.
Citigroup said it was hopeful that it would succeed once again when the case returns to court.
“The original verdict made clear that Terra Firma’s baseless accusations of fraud were simply an attempt to gain leverage in debt restructuring negotiations,” the bank said.
A spokesman for Terra Firma told Reuters: “We continue to believe that we have a strong claim, and with the jury instructions now resolved in our favour, we expect to prevail in any subsequent trial.”