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Texas appeals court affirms Highland Capital victory in Credit Suisse fraud case

The Texas Court of Appeals in Dallas on Tuesday upheld an award totaling $351 million to Highland Capital Management Fund Advisors in a case alleging real estate fraud by Credit Suisse, court documents show.

In 2007, Claymore Holdings, a division of Highland Capital Management, invested $250 million through the Highland Floating Rate Opportunities Fund and the NexPoint Credit Strategies Fund for refinancing of Lake Las Vegas, a 3,600-acre residential and resort development that filed for bankruptcy in 2008. Credit Suisse acted as the administrative agent for the refinancing deal.

Claymore sued Credit Suisse in Texas District Court in Dallas in 2013, alleging the firm "manipulated the appraisal to inflate the value of the property," citing the loss of the entire $250 million investment "because of Credit Suisse's fraud and breach of contract," the appellate court brief showed.

In a jury trial, Claymore Holdings was awarded $40 million in damages in relation to one fraud charge. In response to Claymore's breach-of-contract claims, a court trial awarded an additional $212 million in damages and $75 million in prejudgment interest, as well as court costs and post-judgment interest.

Credit Suisse appealed the original judgment, but the appellate court affirmed the lower court's decision, said Judge Elizabeth Lang-Miers in the court majority opinion document.

The most recent decision can be appealed to the Texas Supreme Court.

Nicole Sharp, a spokeswoman for Credit Suisse, could not immediately be reached for comment.

"We are pleased the appellate court recognized the harm caused to our investors by Credit Suisse's fraud and breaches of contract," said James Dondero, co-founder of Highland Capital Management, which owns Highland Capital Management Fund Advisors, in a company news release.

Highland Capital Management manages about $14 billion in private credit strategies.