Split Decision In Highland Feud

Feb 10 2014 | 10:33am ET

One of the more bitter battles in hedge-fund history has come to an end, with both sides battered and neither looking much like a winner.

On paper, at least, Highland Capital Management appears to have gotten the better of a Dallas jury's split decision: The firm's former private-equity chief, Patrick Daugherty, was ordered to pay the hedge fund $2.8 million, while Highland was ordered to pay him only $2.6 million, and in spite of the jury's finding that Highland defamed Daugherty, it refused to award him any damages on that count. Certainly, Highland sounded more upbeat about the decision than did Daugherty.

"The verdict is further proof that Pat Daugherty lied extensively and the facts only got in the way of his stories," Highland founder James Dondero said. "Highland never wanted this litigation but was forced to act when Mr. Daugherty refused repeated requests that he comply with his employment agreement."

For his part, Daugherty said he was "disappointed" by the ruling, and questioned how the jury could "find I was defamed and there were no damages."

Highland sued Daugherty in 2012, a year after he left the firm, accusing him of defaming it and of refusing to return proprietary documents. Daugherty shot back with a countersuit, alleging that the hedge fund had defamed him and was withholding his bonuses.

The $2.6 million the jury awarded Daugherty covered his compensation claim. Highland was awarded $2.8 million to cover its legal fees.

Dondero will be back in a Texas courtroom in June as his divorce case winds on. Highland's lawsuit against Daugherty came two weeks after the former executive testified in that trial on Dondero's wife's behalf.

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