Preston Hollow and Nuveen lay out initial defamation case arguments

Register now

Preston Hollow Capital LLC is aiming to parlay one court’s conclusions that Nuveen Investments used “threats and lies” to undercut its business into a defamation ruling in another court.

PHC’s original case accusing Nuveen of defamation, antitrust and unlawful business interference ended with an April opinion from the Delaware Chancery Court finding that Nuveen had committed intentional tortious interference with business relations.

Delaware Superior Court Judge Mary Miller Johnston, who is presiding over PHC's defamation case, is in the middle row, standing, second from the left.

The chancery court dismissed Preston Hollow's defamation charge because it required jury consideration and chancery court cases are decided by a judge. PHC filed the charge in Delaware Superior Court but it was stayed pending the outcome of the chancery court case.

One of Nuveen’s arguments is to label its comments as opinions, not false, and protected by the U.S. Constitution.

“Some or all of the challenged statements or alleged implications…are true or substantially true, and thus cannot give rise to any claim,” Nuveen writes in its first major filing in the defamation case.

“Nuveen vigorously defended against those allegations through a two- day trial with live testimony from ten witnesses. The Court of Chancery ultimately made detailed findings of fact with respect to certain defamatory statements at issue here. Those findings are binding in this case, and Nuveen is estopped from contesting those findings in this case,” PHC lawyers write in new filings asking the Delaware Superior Court for summary judgment on several of defamation claims addressed in the prior court case.

Nuveen declined to comment on the latest filing.

The smaller, Dallas-based direct lender of high-yield loans first lodged its legal complaint accusing Chicago-based Nuveen of trying to choke off its access to capital and deals by threatening banks and broker-dealers with a loss of its business in February 2019.

The chancery court ruled in PHC's favor in April. “I find that Nuveen used threats and lies in a successful attempt to damage the plaintiff in its business relationships,” Delaware Chancery Court Vice Chancellor Sam Glasscock III wrote in his 59-page opinion. “The record, taken as a whole, shows consistent, systematic efforts by Nuveen to shut down Preston Hollow’s ability to continue to do business.”

But Glasscock concluded the relief sought by PHC — banning Nuveen from future interference and imposing supervisory requirements — was not available. He also declined to rule on a count alleging antitrust violations under New York State’s Donnelly Act for legal reasons. “The plaintiff has failed to demonstrate entitlement to an injunction,” he wrote. PHC had not sought monetary damages.

The defamation claim — case # N19C-10-107 MMJ — is now moving forward in the superior court with PHC’s filing of an amended complaint May 1 and Nuveen’s response May 29 and PHC’s request for a partial summary judgment filed this week. A scheduling conference is slated for July 9 before Judge Mary Miller Johnston.

In its May filing, PHC tells the court the alleged defamation has damaged “Preston Hollow’s reputation and its ability to originate and execute new municipal bond transactions.” PHC seeks compensatory damages to be determined at trial, including general and special damages in an amount of no less than $100 million, and seeks punitive damages and compensation for its costs, including attorneys’ fees.

PHC lays out a series of claims it calls “unlawful” and “defamatory” based in large part on transcripts presented during the chancery court proceedings of calls between Nuveen’s municipal investment team including its head John Miller and bank and broker-dealer professionals. The communications ran from April 2018 through January 2019.

“Recordings of these calls reveal that Miller and his associates made numerous false statements to broker-dealers about Preston Hollow,” the PHC filing reads. “These statements were either intentionally false or manifested reckless disregard for the truth in order to harm Preston Hollow’s business” and were “intended to, and did, deprive Preston Hollow of future business opportunities.”

The filing accuses Nuveen of “falsely” telling broker-dealers that PHC “fleeced” borrowers and “engaged in predatory lending,” that deals were “rushed” and “covenant-light,” and that it had “evidence of Preston Hollow’s purported misconduct.”

Founded in 2014, PHC said its business had grown by 37% in 2017 and 34% in 2018 but inquiries dried up beginning in January 2019 and resulted in a decline in origination of new deals.

Nuveen, in its May 29 response, acknowledges the recorded conversations but disputes the portrayal of its comments in some instances as false or defamatory.

While making clear that it in no way admits that PHC’s characterizations are accurate, Nuveen goes on to charge that some statements are opinion, not false, and constitutionally protected by rights of free speech.

“Some or all of the challenged statements or alleged implications complained of by plaintiff are true or substantially true, and thus cannot give rise to any claim against defendants. Some or all of the challenged statements complained of by plaintiff do not assert verifiably false facts, and/or constitute rhetorical hyperbole or subjective statements of opinion, and thus cannot give rise to any claim against defendants,” Nuveen argues.

Nuveen also accuses PHC of mischaracterizing the Glasscock opinion, descriptions of the municipal bond market, and counters that specific quotes from the transcripts were taken out of context.

“Defendants deny that Preston Hollow’s characterization of that written opinion is either complete or correct and refer the court to the opinion for its complete and accurate contents," the brief says. "Defendants specifically deny the factual inferences drawn therein and deny that they have any relevance to this separate action.”

Nuveen further argues that punitive damages are barred based on what it describes as a “retraction” letter it sent to broker-dealers on February 22, 2019.

PHC this week asked the judge to block any re-litigation of some statements by seeking a partial summary judgment under the legal theory that there’s no need to re-argue issues decided by a prior court if the issues received a full and fair airing.

PHC argues in the new filing that some of the current claims laid out in the case were decided by the chancery court and “were essential to its judgment” and so Nuveen can’t dispute “either the existence, falsity, or malicious nature of those statements.”

“Nuveen not only had a full and fair opportunity to litigate the issues, it actually did defend itself vigorously. It would be both unfair to PHC and a waste of judicial resources to re-try the same issues that were already decided in the Court of Chancery,” PHC writes.

PHC is a Delaware limited liability company formed in 2014 with $2.1 billion in assets and $1.3 billion in equity capital. Nuveen is a global asset manager, with municipal bonds forming a subset of its various asset classes with fixed income assets under management of $150 billion.

Nuveen is represented Potter Anderson & Corroon LLP and Winston & Strawn LLP.

PHC has been represented by Morris Nichols Arsht & Tunnel and Wollmuth Maher & Deutsch LLP.

When PHC filed the case in late February 2019 it cracked the window open on cutthroat competition in the high-yield municipal market. Its accusations sparked debate on the accusations of whether strong-arm tactics broke the law, broker-dealer complicity and resistance, and what constitutes pricing fairness.

During the proceedings, filings disclosed that a “governmental entity,” which could range from agencies with regulatory oversight or criminal prosecution powers, was interested in the recordings. Court documents showed that the PHC had contacted the unidentified entity about the litigation.

For reprint and licensing requests for this article, click here.
Lawsuits Preston Hollow Nuveen Sell side Buy side Private placements