Main Menu Jump to Content Search
News & Resources

First Department Upholds Fund Manager’s Broad Discretion in Managing Fund Assets

November 16, 2011

Our litigation practice group, lead by Thomas J. Fleming, Herbert C. Ross and Peter M. Sartorius, prevailed in the Appellate Division, First Department, in the final chapter of a major hedge fund’s legal battle with an investor in the wake of the 2008 market collapse. The investor sued alleging that the fund manager breached his fiduciary duty by failing to suspend redemptions during the market turmoil in late 2008. We convinced the Trial Court to dismiss the Complaint, relying upon limited partnership documents that protected the general partner from all claims, other than those based on gross negligence or willful misconduct. The Appellate Division affirmed in Aris Multi-Strategy Fund, LP v. Accipiter Life Sciences Fund II, QP, L.P., 2011 NY Slip Op 7719 (1st Dep’t Nov. 3, 2011), enforcing the disclaimer of fiduciary duty clause. The First Department specifically held that the allegations that the general partner’s decision to continue with the fund, rather than suspend redemptions or prepare to liquidate, were insufficient to allege gross negligence. The Appellate Division also gave full force to the business judgment rule, holding that the general partner’s decision not to fulfill purported representations about liquidation and the personal purchase of illiquid positions by the General Partner “cannot overcome the presumptions that these were business decisions made on an informed basis.”

Practice Areas

Back to Page