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LLF Obtains Dismissal of Bad Faith Margin Call Claim Against Investment Bank
On September 16, 2009, LLF prevailed on a motion to dismiss a lawsuit for allegedly excessive margin calls brought by a hedge fund against its former prime broker, a money center investment bank.
The plaintiffs alleged that the broker breached its implied duty of good faith when allegedly excessive margin calls were issued on financing and derivatives contracts between affiliates of the brokerage firm and the plaintiff. The affiliates were not sued in the case.
In the decision, Justice Bernard Fried, of the New York Supreme Court in Manhattan, held that the prime broker's agreement with the plaintiff did not encompass any duties relating to the margin calls and the implied duty of good faith could not be used to impose such duties on the broker.
Levi Lubarsky & Feigenbaum llp