US court rejects lawsuit against Desmond

US HEDGE fund billionaire Stanley Druckenmiller failed in a last-ditch appeal against the decision of a New York judge who threw out his multimillion dollar lawsuit against Irish financier Dermot Desmond.

The decision to deny Mr Druckenmiller’s appeal marks the final chapter in a long and lurid legal battle that had dragged on since 2003, after David Morrison, Desmond’s former star fund manager, was dismissed over an alleged indiscretion with a chambermaid at the Sandy Lane Resort in Barbados, a luxury hotel complex owned by Mr Desmond and fellow Irish financiers John Magnier and JP McManus.

Mr Desmond, meanwhile, is understood to be happy that the legal victory confirmed his long-held view that Mr Druckenmiller’s case was without merit.

Mr Druckenmiller, formerly the chief investment strategist for hedge fund billionaire George Soros, in 2001 invested around $5 million with Cayman Islands-based Macro Fund, an investment vehicle owned by Mr Desmond’s IIU Capital. Mr Druckenmiller made the investment through his Druck Corporation.

Mr Druckenmiller, who has an estimated net worth of more than $3.5 billion, withdrew his money after Mr Desmond fired Mr Morrison following the allegations of sexual misconduct at the Sandy Lane and IIU Capital withheld its 10 per cent redemption fee.

But Mr Druckenmiller sued claiming breach of contract and breach of fiduciary duty. His legal team alleged that the $175 million Macro Fund had not done as it has promised in prospectuses.

In court, Mr Desmond’s defence team argued that Mr Druckenmiller had no right to pursue the case because he was no longer a shareholder in the Macro Fund.

Courtroom exchanges were long and heated, with weeks of argument over such seemingly simple issues as the venue in which the case should be heard.

David Trachtenberg, a lawyer acting for Mr Druckenmiller, argued the case should be held in New York where his client had signed contracts, while Mr Desmond’s team wanted the case to go ahead in the Cayman Islands, where the fund was based.

In January 2007, the judge hearing the proceedings issued a summary judgment in favour of Mr Desmond, IIU Capital and the Macro Fund and closed the case. But Mr Druckenmiller appealed.

The case was thrown open again in August last year when Mr Druckenmiller’s legal team appeared back in court, this time before a three-judge appeals panel in New York. But the appeal was quickly dismissed on every count.

Mr Trachtenberg had little to say when contacted by The Irish Times other than to confirm that Mr Druckenmiller’s almost six-year case “is now closed”. Lawyers who acted on behalf of Mr Desmond declined to return calls seeking comment.

After he sacked Mr Morrison, Mr Desmond sued the former fund manager for $2.6 million in London, also claiming breach of contract and fiduciary duty. That claim was settled out of court.

Charges brought against Mr Morrison in Barbados were also dismissed after he agreed to pay the Sandy Lane chambermaid he allegedly assaulted about €3,000.