Highland Capital Management won a $40 million jury award after successfully arguing Credit Suisse AG duped the debt manager into refinancing a shaky real estate development.
The Dallas jury, which began its deliberations Wednesday, found Credit Suisse 65% at fault on Friday, limiting the judgment. A lawyer for the Swiss bank said the award will be offset.
“The court has not yet applied other settlement credits to this and when those amounts are applied, this is a take-nothing judgment,” the lawyer, Jeffrey Tillotson, said in an interview after the verdict.
Highland's Claymore Holdings said Credit Suisse knowingly used a flawed appraisal to prod investment in Lake Las Vegas, a 3,592-acre residential and resort community that filed for bankruptcy in 2008. Zurich-based Credit Suisse said the investment soured because of the recession and Highland wasn't misled.
The 2013 lawsuit mirrors one brought by two other Highland entities against Credit Suisse in New York state court that claimed the bank marketed loans for the Yellowstone Club in Montana and other developments based on fraudulent appraisals. That lawsuit, which was seeking more than $350 million, was rejected by the New York court.
Mr. Tillotson said lawsuits between Credit Suisse and Highland “have Highland in the hole in terms of this battle.”
Highland said the bank used a flawed appraisal that inflated the value of collateral backing $540 million in loans for a refinancing of Lake Las Vegas in 2007. The deceit was motivated by the fees the bank earned to underwrite the transaction, Highland claimed.
“They had $7 million reasons to do this deal,” William Reid, Highland's attorney, said in closing arguments Wednesday, referring to the fees. “They were not doing it to help Highland Capital.”
Credit Suisse worked with the appraiser to raise the value of the collateral, Mr. Reid said. Mistakes known to Credit Suisse were deliberately left in the appraisal given to Highland, he said.
“We were tricked. We were duped. We were misled,” Mr. Reid told the jury.