Chancery Finds Tortious Interference By Financial Industry Competitor and Addresses the Requirements for Obtaining Permanent Injunctive Relief
Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. 2019-0169-SG (Del. Ch. April 9, 2020).
This case illustrates the type of competitive conduct that will qualify as tortious interference with business relationships while demonstrating that permanent injunctive relief is unavailable absent a likelihood of future irreparable harm.
Plaintiff Preston Hollow Capital LLC (“Preston Hollow”) sued defendants Nuveen LLC, Nuveen Investments, Inc., Nuveen Securities LLC and Nuveen Asset Management LLC (collectively, “Nuveen”) for tortious interference with business relations. Preston Hollow and Nuveen are competitors as institutional investors in the municipal bond market. The alleged tortious interference occurred when Nuveen made misrepresentations and threats to institutions with which Preston Hollow had relationships. For example, Nuveen threatened that if Deutsche Bank provided financing to Preston Hollow for a large transaction, Nuveen would remove its business from Deutsche Bank. Nuveen intimated that it would not conduct business with anyone that engaged in 100% placements with Preston Hollow. Additionally, Nuveen misrepresented to institutions that it had evidence of Preston Hollow lying to issuers and using “‘predatory lending practices’ toward borrowers and . . . ‘tak[ing] [the borrowers] into bankruptcy,’” among other things. The Court of Chancery held that Nuveen was liable for tortious interference with business relations because without lawful privilege it exerted improper economic pressure to try to destroy Preston Hollow.
As relief, Preston Hollow sought no damages, instead asking the Court of Chancery to enjoin Nuveen from repeating its tortious behavior. Pre-trial, Preston Hollow had sent Nuveen a cease and desist letter and, in response, Nuveen notified the firms with whom it communicated that Nuveen would not seek any agreement regarding those firms’ use of Preston Hollow as a counterparty in financial transactions. A Nuveen executive also had directed its personnel to stop disparaging Preston Hollow. The record reflected no evidence that Nuveen had committed additional tortious acts since the litigation began. Finding an inadequate showing of a likelihood of future harm absent injunctive relief under the circumstances, the Court of Chancery declined to award injunctive relief based solely on Nuveen’s past tortious conduct. According to the Court, the appropriate remedy would have been damages, but Preston Hollow had chosen to forego requesting that relief.