Court Rules Against Costa Brava—Again

Apr 23 2007 | 12:21pm ET

The third time was not a charm for Boston-based hedge fund Costa Brava Partnership III in its battle with IT company Telos Corp. In fact, it was more of the same.

A Baltimore court has denied a Costa Brava motion seeking to block Telos from pursuing or closing any asset sale until May 31, when Costa Brava, which owns about 16% of Telos, hopes to elect a pair of directors to Telos’ board. The same court has, within the past year, denied Costa Brava motions for receivership and another seeking an injunction against the sale of assets.

Judge Albert Matricciani wrote that “plaintiffs are unable to establish the likelihood of success on the merits” and that “Maryland corporation law does not permit plaintiffs to challenge such a transaction so long as it is approved by a majority of disinterested directors.”

Telos CEO John Wood, predictably, applauded the decision, calling Costa Brava’s legal campaign a series of “nuisance filings.”

Costa Brava’s lawsuit accuses Telos of, among other things, operating the company as majority owner John Porter’s “personal checkbook.” The hedge fund declined to comment on Jude Matricciani’s decision, noting that the case is still pending.

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