Broker-dealer Morgan Keegan & Co. and Exis Capital Management Inc. won the dismissal of racketeering claims in an $8 billion lawsuit brought by Canadian insurer Fairfax Financial Holdings Ltd.
New Jersey Superior Court Judge Stephan C. Hansbury in Morristown ruled that Fairfax couldn’t apply state law in bringing such claims. Fairfax, in its 2006 lawsuit, accused investors of conspiring with analysts and researchers to drive down its stock price by spreading false rumors in a so-called bear raid.
The allegations “make clear that New York law presumptively applies,” Hansbury ruled May 11 in an opinion made public today. Fairfax’s allegations of an enterprise to deflate its stock value through a conspiracy of lies “clearly took place in New York,” he ruled.
Hansbury will hold a trial in September on the remaining claims, which include tortious interference and disparagement, said Fairfax attorney Michael J. Bowe of Kasowitz Benson Torres & Friedman LLP.
“This decision is wrong and we will appeal it,” Bowe said in a phone interview. “But the fact is the defendants are still facing a September trial on plaintiffs’ remaining claims involving the same multiple-billion dollar damages covered by the dismissed” racketeering claims.
Raymond James Financial Inc. last month completed a $1.2 billion acquisition of Morgan Keegan from Regions Financial Corp.
“We’re pleased that the court refused to allow Fairfax’s RICO against Morgan Keegan and the remaining defendants to go forward,” Kathy Ridley, a spokeswoman for Memphis, Tennessee-based Morgan Keegan, said in an interview. “As the judge pointed out, Fairfax lost the opportunity for treble damages and reimbursements of their fees and costs.”
The case is Fairfax Financial Holdings Ltd. v. SAC Capital Management LLC, L-2032-06, Superior Court of New Jersey, Morris County (Morristown).