A New Jersey Superior Court judge dismissed a $3.2 billion lawsuit alleging that brokerage Morgan Keegan, hedge fund Exis Capital Management and other defendants had conspired to drive down the share price of Canadian firm Fairfax Financial in a ruling issued today.
Fairfax sued Morgan Keegan, Exis and other hedge funds in 2006, alleging that defendants bet against Fairfax stock, then attempted to drive down share prices by engaging in a campaign to spread negative information. While charges against hedge funds such as Steven A. Cohen’s SAC Capital, James Chanos’ Kynikos Associates and Dan Loeb’s Third Point were dismissed in a series of earlier decisions, the New Jersey court had agreed to consider a portion of the original suit.
After hearing pretrial arguments on various claims for damages, Judge Donald S. Coburn dismissed all charges against remaining defendants, including Exis executives Adam Sender and Andrew Heller, said Mark Werbner, an attorney for Exis, in a phone interview with The Observer.“The judge found legal flaws to all of the damage claims,” Mr. Werbner told us. “They’ve been pursuing the lawsuit for illegitimate purposes, trying to stifle criticism and stop people from shorting the stock. This resounding defeat should be a message that the litigation is not legally sound.”
In an emailed statement, Fairfax attorney Michael J. Bowe, pointed to a previous judge’s ruling that Fairfax “suffered massive pecuniary/economic loss in this case.”
“We strongly disagree with the decision that the massive damage caused by that indisputable and intentional conduct is not recoverable,” said Mr. Bowe in the statement. “We will appeal this erroneous ruling and are confident the appellate court will find there is a remedy for what the trial court has described as “a scheme of tremendous proportions.”
Steve Hollister, a spokesman for Raymond James, which acquired Morgan Keegan earlier this year, confirmed that charges against the brokerage had been dismissed, but declined to comment on the judge’s ruling.