A U.S. judge has thrown out a long-running lawsuit in which Fairfax Financial Holdings Ltd sought billions of dollars from hedge funds it claimed spread false and negative rumors about the Canadian insurer to drive down its stock price.
Judge Donald Coburn of the Superior Court in Morristown, New Jersey, on Wednesday dismissed what remained of the six-year-old case, as a scheduled trial was about to begin.
Another New Jersey state court judge, Stephan Hansbury, had earlier dismissed several well-known hedge funds as defendants, including Steven Cohen's SAC Capital Advisors LP, Jim Chanos' Kynikos Associates PC and Daniel Loeb's Third Point LLC.
Wednesday's decision threw out the case against the remaining defendants, which included hedge fund Exis Capital Management Inc and brokerage Morgan Keegan & Co.
Fairfax alleged in its civil racketeering lawsuit that hedge funds had worked with industry consultants to persuade financial reporters to write negative stories about the Toronto-based insurer from 2003 to 2006, in a "bear raid" designed to help the funds profit from short sales.
It originally sought $8 billion, though Exis said on Wednesday that about $3.2 billion of claims still remained following the earlier dismissals.
Michael Bowe, a lawyer for Fairfax, said the insurer plans to appeal. He pointed to earlier rulings by the court that his client had suffered a "massive" loss, and that email evidence explicitly stated an intent to "kill" the company.
"We strongly disagree with the decision that the massive damage caused by that indisputable and intentional conduct is not recoverable," said Bowe, a partner at Kasowitz, Benson, Torres & Friedman in New York.
In a statement, Exis said Coburn rejected as "speculative" and "unreliable" the insurer's damages claims for commercial disparagement.
"Our company plays by the rules and this lawsuit should never have been filed," Exis founder Adam Sender, who was also a defendant, said in a statement.
Steve Hollister, a spokesman for St. Petersburg, Florida-based Raymond James Financial Inc, which owns Morgan Keegan, declined to comment.
The case is Fairfax Financial Holdings Ltd v. SAC Capital Management LLC et al, Superior Court of New Jersey, Morris County, No. L-002032-06.
(Reporting By Jonathan Stempel in New York; Editing by Martha Graybow and Tim Dobbyn)