Highland Capital Fight With Ex-Executive Daugherty Goes to Jury

Former Highland Capital Management LP executive Patrick Daugherty hurt the investment firm he left in 2011, taking data with him that he refused to return, an attorney for the firm told a Dallas jury.

“Mr. Daugherty refused to live up to his promises and he refused to return the documents and information he stole,” lawyer Marc Katz said in his closing arguments on a state court trial that began Jan. 16.

Highland, which manages $18.7 billion in assets according to its website, sued Daugherty, its former chief of stressed situations and private equity investing, in April 2012, six months after he left the Dallas firm and about two weeks after he testified against Highland co-founder James Dondero on behalf of Dondero’s wife, Becky, in a divorce proceeding.

When Daugherty left the firm amid a pay dispute, he was angry and wanted to harm Highland, Katz said. He asked jurors to hold Daugherty accountable for breaching an employment agreement, taking trade secrets and disparaging the firm. He didn’t ask for a specific amount of money.

Addressing the panel of nine women and three men, defense lawyer Ruth Ann Daniels asked them to award her client almost $10 million in his countersuit seeking payouts from firm incentive programs, his partnership interest and severance pay.

James Dondero, she said, went through two divorces in 2012, referring to his parting from his estranged spouse and from Daugherty.

Damaged Reputation

“Dondero was determined not to pay either of them what he owed,” she said. Highland failed to prove her client hurt the firm, Daniels said. She also said expert testimony showed Daugherty is owed as much as $11 million for damages to his reputation.

Katz told jurors that Daugherty took 59,000 documents when he left Highland and used some to set up a competing business. Others he shared with the media in an attempt to disparage the firm, he said.

The documents didn’t contain “the formula to Coca-Cola” or ingredients to “the secret sauce,” Daniels countered. She said it took Highland four months to ask for the papers to be returned, which she said proved they weren’t trade secrets or “the keys to the kingdom.”

Jurors began their deliberations this afternoon.

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

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