COURT: Nuveen dodges tortious interference claim as Delaware judge trims Preston Hollow antitrust suit - Debtwire

COURT: Nuveen dodges tortious interference claim as Delaware judge trims Preston Hollow antitrust suit

14 May 2019 - 12:00 am

A Delaware Chancery Court Judge today lopped off one claim of tortious interference against Nuveen LLC in Preston Hollow Capital’s suit, alleging the mutual fund giant engaged in an illegal scheme to cut its smaller competitor out of the municipal bond market.


Vice Chancellor Sam Glasscock III’s decision axed Preston Hollow’s claim of tortious interference with a contract but left standing additional claims of tortious interference with a business relationship and violations of New York’s antitrust law. Glasscock withheld judgment on a fourth claim against Nuveen for defamation.


Glasscock cleared the way for discovery proceedings to commence on the two claims upheld against Nuveen in a bench ruling delivered today.


No contract


In striking down the claim of tortious interference with a contract, Glasscock said Preston Hollow failed to establish that its financing arrangement with Deutsche Bank constituted a binding contract.


In its amended complaint, Preston Hollow accused Nuveen of threatening to withhold business from Deutsche Bank, unless it terminated its ongoing “funding arrangements” with the smaller competitor.


However, the brief never explicitly stated that these arrangements were subject to a contract.


Preston Hollow attorney Dave Wollmuth, of Wollmuth, Maher & Deutsch, said during a 30 April hearing, that the “word choice” in the brief was “unfortunate,” but that the arrangements were indeed contracts.


Glasscock ruled today however that, having failed to identify a contract between the parties, Preston Hollow’s claim that Nuveen induced the bank to violate a contract could not stand.




Glasscock declined to rule on Preston Hollow’s claims that Nuveen head of municipals, John V Miller defamed it through disparaging statements to broker-dealers and financial institutions, saying the firm’s request for injunctive relief raised questions about prohibitions in Delaware’s constitution against restriction on speech through prior restraint.


Glasscock asked the parties for additional briefs on whether Preston Hollow’s request for an injunction against further allegedly defamatory statements by Nuveen complies with the state constitution.


Tortious interference


Nuveen struck out on its effort to nix a second tortious interference claim related to Preston Hollow’s prospective business relations.


It is “reasonably plausible” from Preston Hollow’s complaint that Nuveen unlawfully interfered with the smaller firm’s business prospects in a way that went beyond legally permissible competitive behavior, Glasscock said.


Unlike the requirement for a tortious interference claim involving a contract, Delaware’s statute for tortious interference with prospective business relations does not require the plaintiff to show damage to an existing contractual relationship in order to state a claim, Glasscock noted.




Glasscock also rejected Nuveen’s argument that Preston Hollow’s antitrust claim under New York State’s Donnelly Act is preempted by the federal Sherman Act, because Nuveen’s alleged behavior primarily impacted interstate commerce, rather than commercial activity specific to New York.


The centrality of New York in the municipal bond market, and the fact that each of the broker-dealers and financial institutions alleged to have participated in Nuveen’s alleged scheme to squeeze Preston Hollow out of the market have a presence in the state, indicate a sufficient impact on commerce within the state to allow the claims to move forward, said Glasscock.


Horizontal boycott


Preston Hollow in April accused Nuveen of attempting to engineer a “horizontal boycott” of its business offering “bespoke” 100% placements of municipal bond issues.


According to Preston Hollow, Nuveen attempted to threaten and cajole banks and broker-dealers into abandoning existing and future dealings with Preston Hollow, as part of an effort to starve the smaller company of financing and deal-flow.


Nuveen has argued Preston Hollow’s complaint amounts to a combination of unsupported, speculative allegations and descriptions of legally permissible competitive behavior.


Attorneys for Nuveen said during the 30 April hearing that the horizontal boycott scheme alleged by Preston Hollow amounts to a “wheel-and-spoke … with no rim”, meaning each of the broker-dealers had been in contact with Nuveen about cutting off relations with Preston Hollow but did not actively coordinate with each other, a necessary element for Preston Hollow’s antitrust allegations to succeed.


But Glasscock said Preston Hollow’s contentions are supported by sufficient evidence to allow the firm to seek hard evidence that a “rim” existed, through discovery of communications about the alleged scheme between the broker-dealers and Miller.


A trial in the case is scheduled to begin at the end of July.


The case is Preston Hollow Capital LLC v. Nuveen LLC et al, C.A. No. 2019-0169-SG, in the Court of Chancery of the State of Delaware.


by Chuck Stanley


Related links:
Preston Hollow complaint 
Nuveen’s motion to dismiss