Court Tosses UBS Lawsuit Against Highland

Jul 27 2011 | 11:50am ET

A New York State appeals court has all but ended UBS' legal battle with Highland Capital Management over losses it suffered in a collateralized debt restructuring.

The court dismissed most of the bank's second lawsuit against the hedge fund, ruling that UBS' amended fraud complaints were covered by the dismissal of most its first lawsuit at the beginning of last year. UBS refiled the case last June, accusing Highland of fraudulently inducing it to restructure the CDO in 2008 by providing "false, incomplete and otherwise misleading" information.

But "UBS's claims against Highland in the original action and in this action all arise out of the restructured warehousing transaction. While the claim against Highland in the original action was based on Highland's alleged obligation to indemnify UBS for actions taken by the affiliated funds, and the claims against Highland in the second action arose out of Highland's alleged manipulation of those funds, they form a single factual grouping," the court ruled last week. "Both are related to the same business deal and to the diminution in the value of the securities placed with UBS as a result of that deal."

The appeals court did say that UBS would be permitted to sue Highland for breach of good faith and fraudulent conveyance, but only for "conduct alleged to have occurred after the commencement of the prior action" in early 2009.


In Depth

Q&A: TCA Fund Management's Bob Press on Small-Cap Private Equity

Aug 25 2016 | 8:55pm ET

The emergence of private credit as a replacement for traditional bank financing...

Lifestyle

Kiawah: Island Reversal

Aug 24 2016 | 9:59pm ET

Looking for real estate investments but the typical real estate fare isn’t cutting...

Guest Contributor

Old Hill Partners: Embrace Illiquidity

Aug 9 2016 | 2:39pm ET

The age-old financial concept that higher yields are the result of higher risk and...