Citigroup (NYSE:C) Trying to Get Terra Firma Lawsuit Moved to London

Citigroup’s  (NYSE:C) latest move in its legal battle with British private equity firm Terra Firma over their acquisition of EMI Group, a major music business based in Britain, is to try to get the venue changed from the United States to London, saying its not the proper forum to hear the case.

Citigroup spokeswoman Danielle Romero-Apsilos stated, “We do not believe that the United States is the appropriate forum for this unfounded claim to be heard. The fact that we are disputing the forum in no way dilutes our assertion that the claim is without merit and we will vigorously defend ourselves regardless of jurisdiction.”

The lawsuit, filed by Terra Firma in December, alleges Citigroup is guilty of fraud in relationship to their dealings when they acquired EMI in 2007. Terra Firma is seeking billions in damages in the case, possibly the reason Citigroup would prefer to litigate the case in the UK rather than the U.S., where they are in a more hostile legal environment.

I say more hostile in the sense of the United States being much more receptive to punishing businesses via lawsuits than their counterparts across the pond, including countries in Europe. Of course the transaction involved a British company and so the request makes sense. Even so, I think they would rather battle it out in the UK than in the U.S. based on the reasons stated. Even if they were to lose, the damages could be far less in Britain than they may be in the United States, especially at times where there is a very negative perception on the part of the public towards banks and other financial institutions.

The basis of the case is centered around the accusation by Terra Firma that Citigroup inflated the price they paid for EMI by failing to reveal their only other bidder in the auction, Cerberus Capital Management, had withdrawn their bid several hours before the auction for EMI closed. Terra Firma believes if they had known about the withdrawal beforehand, they could have saved a lot of money and a lower bid and ultimately costs, would have made the acquisition much cheaper for them.

The role of Citigroup with Terra Firm was to finance the deal if they won the bidding, and for EMI they were broker, and also their lender in the situation.

Consequently, it’s the belief they’ve overpaid for EMI that generated the lawsuit, which Citigroup contends is “without merit,” and which they communicated would “defend ourselves vigorously” concerning it.

This would be a big blow to Citigroup and its shareholders if they were to lose the lawsuit. But as mentioned above, it seems this is a bigger deal than it looks on the outside, as it would probably put it in a much more positive light to have it litigated in Britain than in the U.S.