Court Preps for Clear Channel Trial

NEW YORK (Reuters) – The iconic New York State Supreme Court house, a popular backdrop for movies and television shows, was busy preparing for Monday's showdown over the $20 billion buyout of Clear Channel Communications.

Technicians set up laptops, projection screens, monitors and audio equipment in the 71-year-old courtroom on Friday where Judge Helen Freedman is to hear the case between private equity firms Thomas H. Lee Partners and Bain Capital and a syndicate of six banks.

One court officer said he had received more than 100 phone calls by noon on Friday asking about the trial.

The trial, in which the equity firms are accusing the banks of trying to get out of financing their purchase of Clear Channel for $39.20 a share, is expected to last five days, a court officer said.

Freedman, a judge since 1979 and author of New York Objections, a handbook on trial practice, has been known to rule from the bench, court officers said.

The private equity firms said they won over regulators and shareholders of Clear Channel, the largest radio and outdoor advertising company in the United States with significant international operations, on the basis of the financing the banks said they would provide, according to court papers.

Freedman tossed out three of the four claims against the banks — Citigroup Inc, Morgan Stanley, Credit Suisse Group, Royal Bank of Scotland Group Plc, Deutsche Bank AG and Wachovia Corp — on Wednesday.

She dismissed claims made against the banks including fraud and civil conspiracy, and said the case would go to trial on a breach of contract claim against them. 

The private equity firms are seeking “specific performance” of a commitment letter detailing plans to fund the deal. Specific performance is when one party asks a judge to order another party to stick to a contract.

The banks have argued that under New York law, except in cases involving real property, a party cannot enforce a contract to lend money.

Arbitrage traders, who bet on the spread between a deal offer price and the company's share price, have been following the Clear Channel intently deal. Pre-trial hearings have been packed with BlackBerry carrying traders messaging their trading desks with the latest from the court.

“Last time there was anything like this in her courtroom, it was Broadway,” he said referring to her decision in November before the Thanksgiving holiday to force the St. James Theater to open for performances of 'Dr. Seuss' How the Grinch Stole Christmas! The Musical',” the court officer said. Broadway had been darkened by a strike by stagehands.

The courthouse steps provide a set for the popular television program, “Law and Order,” and scenes from “The Godfather” and “Miracle on 34th Street” were also filmed there.

Testimony is expected to begin at 9:30 a.m. and the small gallery is expected to be filled. Two rows of seats in the gallery have already been reserved for the banks' lawyers.

By Leslie Gevirtz

(Additional reporting by Megan Davies; Editing by Toni Reinhold)