RBS Asks U.K. Court to Block Highland’s Texas Fraud Claim
Royal Bank of Scotland Group Plc asked a London appeal court to block Highland Capital Management LP from suing it in Texas over a collapsed debt deal even though one of the lender’s witnesses lied at a previous hearing.
RBS failed in May to win a U.K. court order stopping Highland’s $100 million U.S. lawsuit accusing the British lender of fraudulently terminating a collateralized-debt obligation at the height of the 2008 financial crisis. Judge Michael Burton criticized RBS at the time after finding one of its witnesses lied in evidence given to the court.
Appealing that decision today, RBS lawyer John Nicholls said while the bank accepted its evidence had been dishonest, that wasn’t “an independent and strong reason” for not granting the injunction.
Highland also appealed against part of the May ruling, which said the Dallas-based firm was liable to pay RBS about 19 million pounds ($30.5 million) for the failed CDO deal.
Highland claims Edinburgh-based RBS used an accounting provision in 2008 to terminate the Highland CDO and seize the underlying loans at a profit. The firm, founded by James Dondero and Mark Okada in 1993, invests chiefly in credit markets.
RBS apologized to Highland and the court after Judge Burton found one its employees, Sam Griffiths, had lied about the transfer of the loans, Nicholls said.
Highland dropped a Dallas lawsuit against Citigroup Inc. (C) in June over the management of a $921 million collateralized loan obligation. The firm has been involved in litigation with UBS AG, a Houston pension fund and rapper Jay-Z over disputed debt deals.
The May ruling “found that RBS misled both the court and Highland Capital,” Stefan Prelog, a spokesman for Highland, said in an e-mail. “We are confident the appellate court will support this finding.”
RBS declined to comment.
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