Highland Capital and Ex-Manager Daugherty to Go to Trial

Oct. 28 (Bloomberg) -- Highland Capital Management LP’s legal feud with former executive Patrick Daugherty must go to trial, a Dallas judge ruled.

State court Judge Martin Hoffman at a hearing today denied requests by both sides for rulings in their favor in a case that started in April 2012 when the investment firm and Chief Executive Officer James Dondero sued Daugherty over claims he breached his contract when he left the firm in 2011 and made derogatory comments to investors.

Daugherty, who led the Dallas-based firm’s distressed situations and private equity investments unit, claimed in a countersuit that the firm owes him money and that Dondero defamed him.

“I’m denying summary judgment in total,” Hoffman said today.

The trial is scheduled for Jan. 14. Highland is seeking damages and wants Daugherty to return trade secrets to the company and be restrained from using that information, Marc Katz, a lawyer for the firm, told the judge. Daugherty is seeking $160 million in damages, said one of his lawyers, Ruth Ann Daniels.

While Hoffman pared several claims from Daugherty’s countersuit, he let stand Daugherty’s claims for breach of fiduciary duty, defamation and exemplary damages.

The case is Highland Capital Management LP v. Daugherty, 12-04005, District Court of Dallas County, Texas, 68th Judicial District (Dallas).

To contact the reporters on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net: Tom Korosec in Dallas state court at tkorosec@sbcglobal.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net