January 4, 2019

Tilton Loses Latest Bid To Beat German Bank’s Fraud Suit

Law360 (January 2, 2019, 2:35 PM EST) — A New York state judge has refused to dismiss a German bank’s $45 million fraud suit against investment manager Lynn Tilton, saying it was different enough from the U.S. Securities and Exchange Commission‘s failed case against her that it should be allowed to advance.

Justice Eileen Bransten rejected the argument that Norddeutsche Landesbank Girozentrale, or Nord/LB, had sued Tilton and her Patriarch Partners companies too late, and said Nord/LB’s allegations had met legal requirements. The judge also said in her Dec. 27 ruling that Tilton’s triumph over the SEC didn’t mean the bank should be denied the chance to sue Tilton and her companies.

“The mere fact that plaintiffs would have benefited from a ruling against defendants in the SEC proceeding and the fact that the SEC planned to call Nord/LB as a witness does not establish that plaintiffs were in privity with the SEC,” the judge wrote. Therefore, the German bank and its affiliate are not estopped from suing.


Justice Bransten also rejected the notion that an SEC in-house judge’s remark that a little “basic math” would have protected investors was applicable to the Nord/LB case. She also concluded that Tilton was properly a defendant because she was a principal and controlling member of the Zohar funds’ collateral managers.

Jenny Kim, a lawyer for Nord/LB and its affiliate, expressed satisfaction with the decision in a statement to Law360.

“Defendants made the same arguments that they made over two years ago in their first motion to dismiss,” she said. “Those arguments were wrong then, and they are wrong now. We look forward to seeing defendants at trial.”

A spokesman for Patriarch Partners declined to comment Wednesday.

Nord/LB is represented by Michael M. Fay, Jenny H. Kim and Chris Sprengle of Berg & Androphy PC.

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