Preston Hollow seeks to keep defamation claim alive

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Preston Hollow Capital LLC is seeking to keep its defamation claim against Nuveen Investments alive as a court decision looms on its lawsuit alleging Nuveen orchestrated an industry boycott against its smaller private lender rival.

The Dallas-based lender made the request late last week to move the dismissed claim to the Delaware Superior Court, which has general jurisdiction over civil and criminal matters, from the Delaware Chancery Court, which presides over corporate issues, trusts, estates, other fiduciary matters, and contractual matters.

The clock was ticking on the deadline to seek such a move as Delaware Chancery Court Vice Chancellor Sam Glasscock III ruled during a hearing in July that his court lacked the jurisdiction to consider the defamation claim. A formal opinion was filed in August. It followed his prior decision to drop one count of tortious interference with a contract.

Two counts — one on tortious interference with prospective business relationships and the other on a violation of New York’s Donnelly Antitrust Act based on the allegation that Chicago-based Nuveen engaged in wrongful tactics to choke off PHC’s access to capital and deals — moved forward.


A decision from Glasscock on those remaining claims is expected at any time.

Glasscock ultimately concluded on the defamation issue that his court did not provide the proper venue to deliver the requested relief if he had ultimately sided with PHC. Glasscock also concluded that a recent chancery court ruling from another judge had found because the implications on speech of the application of remedies, legal or equitable, to tortious speech, slander and libel are seen “as denizens of the Superior Court.”

Such claims “are subject to the findings made there by juries regarding the speech of their peers. Thus, Chancery is said to have no jurisdiction over libel,” Glasscock wrote.

“Accordingly, I find that the defamation claim must be dismissed or transferred, at Preston Hollow’s discretion,” he wrote. In chancery court, trials are non-juried with the chancellor overseeing the decisions.

PHC submitted the request Thursday. “Plaintiff intends to transfer to the Superior Court only the fourth cause of action (defamation) which your honor dismissed for lack of jurisdiction and granted leave to transfer in your order … plaintiff does not intend to affect in any way the proceedings remaining before your honor and does not believe the transfer would affect any claims or issues currently before your honor for decision,” read the letter from PHC’s attorney R. Judson Scaggs Jr., of Morris, Nichols, Arnst & Tunnell LLP, to Glasscock.

Glasscock approved the order Friday. Nuveen declined to comment on the transfer.

PHC is not asking for damages on the remaining claims. Instead, it asks the court for a preliminary and permanent injunction ordering Nuveen to cease the alleged conduct, to order Nuveen to rectify the harm already caused by withdrawing and disavowing retaliatory threats, and it asks that Nuveen be directed to adopt supervisory procedures to ensure ban future misconduct that is alleged.

Preston Hollow sums up in the opening lines of its closing statements what drove it to seek legal intervention through the filing of its lawsuit in late February, how Nuveen’s threats have allegedly damaged its business relationships, and threatened its long-term viability.

“In December 2018, three Nuveen employees, including John Miller, the head of Nuveen’s municipal bond group, called every major broker-dealer with which Preston Hollow Capital does business and threatened to stop doing business with them if they continued to do business with PHC,” the document reads.

Nuveen fires back in its closing arguments by accusing of PHC of blowing out of proportion Miller and his associates’ threats. Those threats were captured on calls that became part of the court record when PHC subpoenaed the recordings made by broker-dealers under regulatory guidelines. Nuveen counters the PHC allegations as practices that are fair in a competitive market and argues PHC fell far short of proving violations of any laws.

When PHC filed the case in late February it cracked the window open on the cutthroat competition in the high-yield municipal market. Its accusations sparked debate on whether strong-arm tactics broke the law, broker-dealer complicity and resistance, and what constitutes pricing fairness as Nuveen labeled PHC’s yields “predatory.”

The case pits the newer and smaller non-bank finance company specializing in high-yield municipal specialty finance against an institutional powerhouse. The reputations of both firms remains at stake. Settlement talks pressed by the judge have proved fruitless.

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