Canadian insurer Fairfax Financial Holdings Ltd. (FFH) suffered “massive” economic loss because of a campaign of negative information that led it to sue broker-dealer Morgan Keegan & Co. and Exis Capital Management Inc., a judge ruled.
A state judge in Morristown, New Jersey, narrowed the lawsuit yesterday, dismissing a claim against Morgan Keegan, Exis and two others, while allowing three claims to go to trial on Sept. 10. Fairfax seeks $8 billion in damages through its lawsuit, filed in 2006.
Fairfax, which owns stakes in Canadian and U.S. insurers, claims that Morgan Keegan and Exis coordinated with stock analysts to drive down its stock price by spreading false rumors in a so-called bear raid.
“There is no question that there was a campaign of negative information being circulated about Fairfax,” Superior Court Judge Stephan Hansbury ruled. “There is absolutely no question in this litigation, and defendants do not contest, that plaintiffs’ suffered massive pecuniary/economic loss in this case.”
The judge dismissed a claim of tortious interference with prospective economic advantage, while letting Toronto-based Fairfax proceed to trial on claims of conspiracy, trade libel and tortious interference with contract. Seven of the eight hedge funds that Fairfax originally sued, including Steven A. Cohen’s SAC Capital Advisors LP, earlier won dismissal from the case.
“This decision clears the way for plaintiffs to present their substantial claims to a jury,” said Fairfax attorney Michael Bowe in an e-mail. The judge “acknowledges the indisputable facts that defendants widely disparaged plaintiffs and inflicted enormous harm doing so.”
Eric Bran, a spokesman for Memphis, Tennessee-based Morgan Keegan, had no immediate comment on the judge’s ruling. Raymond James Financial Inc. last month completed a $1.2 billion acquisition of Morgan Keegan from Regions Financial Corp. (RF:US) Andrew Heller, chief operating officer for Exis, didn’t immediately return a call seeking comment.
Bowe, of Kasowitz Benson Torres & Friedman LLP in New York, said that Superior Court Judge Donald Coburn will oversee the trial in September.
The case is Fairfax Financial Holdings Ltd. v. SAC Capital Management LLC, L-2032-06, Superior Court of New Jersey, Morris County (Morristown).
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