Preston Hollow Capital LLC v. Nuveen LLC

• Court: Court of Chancery of Delaware
• Decided: April 9, 2020
• Docket: CA No. 2019-0169-SG
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PRESTON HOLLOW CAPITAL LLC, ) ) Plaintiff, ) ) v. ) C.A. No. 2019-0169-SG ) NUVEEN LLC, NUVEEN ) INVESTMENTS, INC., NUVEEN ) SECURITIES LLC, and NUVEEN ) ASSET MANAGEMENT LLC, ) ) Defendants. )

MEMORANDUM OPINION

Date Submitted: January 8, 2020 Date Decided: April 9, 2020

R. Judson Scaggs, Jr., Barnaby Grzaslewicz, and Elizabeth A. Mullin, of MORRIS NICHOLS ARSHT & TUNNEL, Wilmington, Delaware; OF COUNSEL: David H. Wollmuth, R. Scott Thompson, Michael C. Ledley, Sean P. McGonigle, William A. Maher, Nicole C. Rende, and Jay S. Handlin, of WOLLMUTH MAHER & DEUTSCH LLP, New York, New York, Attorneys for Plaintiff.

Peter J. Walsh, Jr., Jennifer C. Wasson, David A. Seal, and Robert J. Kumor, of POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; OF COUNSEL: Eva W. Cole, John E. Schreiber, Molly M. Donovan, Joseph A. Litman, and Mikaela E. Evans-Aziz, of WINSTON & STRAWN LLP, New York, New York, Attorneys for Defendants.

GLASSCOCK, Vice Chancellor Plaintiff Preston Hollow Capital LLC (“Preston Hollow”) and Defendants

Nuveen LLC, Nuveen Investments, Inc., Nuveen Securities LLC and Nuveen Asset

Management LLC (collectively, “Nuveen”) are all institutional investors in

municipal bonds. Preston Hollow and Nuveen are competitors in that market.

Preston Hollow alleges that Nuveen tortiously contacted institutions that Preston

Hollow had business relationships with, lied about Preston Hollow’s business

practices, and threatened to remove its considerable business from those institutions

if they continued doing business with Preston Hollow. Nuveen denies that it made

false representations about Preston Hollow.

In Gulliver’s Travels, Swift puts Gulliver in contact with the Houyhnhnms,

beings so moral and rational that they cannot comprehend the art of lying. They do

not even have a word for the concept, and are forced to describe a lie as “the thing

which is not.” After hearing the testimony of some of Nuveen’s witnesses, one

might think they were such beings. Their circumlocutions for falsehoods—“hedge,”

“bluff,” “exaggeration,” “role-play,” “scenario,” “overstatement,” “blustering,”

“short-cutting,” “puff,” “shorthand,” “overblowing”—in situations where more

quotidian creatures would simply say “lie,” might make one doubt that the latter

word is in their vocabulary. Their testimony was generally that institutional

investors and their bankers speak in an argot of forceful misstatements that all parties

involved know is posturing, so that no real untruth is conveyed. Perhaps. Far more likely is that institutional investors, like the rest of us Yahoos, make statements of

fact, true or false, with the intent to be believed. In this post-trial Memorandum

Opinion, I find that Nuveen used threats and lies in a successful attempt to damage

the Plaintiff in its business relationships. Accordingly, Nuveen is responsible for the

tort of intentional interference with business relations. I find the equitable relief

sought by Preston Hollow is unavailable, however.

My reasoning follows.

I. BACKGROUND1

This is a post-trial Memorandum Opinion. The trial took place over two days,

July 29 – July 30, 2019. The parties lodged 37 depositions and submitted 832 joint

exhibits. The following facts were stipulated by the parties or proven by a

preponderance of evidence at trial.2

A. The Parties

The Plaintiff, Preston Hollow, is a Delaware limited liability company.3

Preston Hollow formed in 2014, and it operates as a finance company targeted at

1 Citations to Joint Trial Exhibits (“JX”) are expressed as JX __, at __. Page numbers for JXs are derived from the stamp on each JX page. Citations in the form “Trial Tr.” refer to the trial transcript. Several key exhibits are recordings of phone conversations; these are cited by page and line like regular transcripts, e.g. JX __, at __:__. 2 To the extent there was conflicting evidence, I have weighed the evidence and made findings based on the preponderance of the evidence. In pursuit of brevity, I sometimes omit from this Background discussion testimony in conflict with the preponderance of the evidence. In such cases, I considered the conflicted testimony, and I rejected it. 3 See Joint Pre-Trial Stipulation and Order, D.I. 346 (“PTO”), ¶ 1.

2 investing in municipal finance.4 It operates nationwide.5 Currently, it has

approximately $2.1 billion in assets and $1.3 billion in equity capital.6

Defendants Nuveen LLC, Nuveen Securities LLC, and Nuveen Asset

Management LLC are Delaware limited liability companies.7 Defendant Nuveen

Investments, Inc. is a Delaware corporation.8 As noted above, I refer to the

Defendants, collectively, as “Nuveen.” Nuveen is a global asset manager, with

municipal bonds forming a subset of its various asset classes.9 Nuveen has

municipal fixed income assets under management of approximately $150 billion.10

Non-parties John Miller, Steve Hlavin, and Karen Davern are Nuveen

employees.11

B. The Municipal Bond Market

1. A Municipal Bond Primer

Preston Hollow and Nuveen are both investors in the municipal bond market.

Municipal bonds are debt securities issued by cities, counties, states, and other

4 Id. 5 Id. 6 Id. 7 Id. ¶¶ 2, 4–5. 8 Id. ¶ 3. 9 Trial Tr. 311:7–17 (Miller); JX 541, ¶¶ 63–64. 10 PTO, ¶ 6. 11 Id. ¶ 20.

3 governmental or non-profit entities to fund day-to-day obligations and to finance

public works projects.12 The vast majority of municipalities have some form of

outstanding debt, and so the market is nationwide and vast.13 The municipal

securities market is valued at approximately $3.82 trillion, with approximately fifty

thousand municipal issuers and one million unique securities.14 One appeal of

municipal bonds to investors is that the bonds usually pay interest that is exempt

from federal, and sometimes state income taxes.15 As in other securities markets,

new bonds are issued on the “primary” market and then traded on the “secondary”

market.16

Similar to other bonds, numerous qualities differentiate municipal bonds from

one another; the identity of the issuer, credit rating, source of funds to service the

debt, and the terms of the debt are all factors.17 “Investment grade” bonds are those

with a credit rating of BBB- or higher from Standard & Poor’s or Fitch, or at least

Baa3 by Moody’s.18 Generally, higher credit ratings indicate lower risk.19 By

12 Id. ¶ 7. 13 JX 537, at 3; JX 541, ¶ 37. 14 JX 537, at 3; JX 541, ¶ 37; Trial Tr. 47:8–18 (Metzold). 15 PTO, ¶ 7. 16 Id. 17 Id. ¶ 10. 18 Id. ¶ 11. 19 Id.

4 contrast, high-yield municipal bonds carry higher default risks and by extension

higher yields than their investment-grade cousins.20 About ninety percent of

municipal bonds are investment grade.21

Municipal bond issuances typically involve at least three parties: the issuer,

the broker-dealer, and the investor.22 The issuers (the supply side of the market) are

municipalities—many municipal bond issuances seek to finance public works

projects.23 As the ultimate purchasers of the issuers’ bonds, the investors (the

demand side) finance these public works projects by purchasing the bonds.24

Finally, broker-dealers act as intermediaries and assist in facilitating the issuance by

providing services like marketing, pricing, underwriting, and closing.25 Investors

are numerous and run the gamut from individuals to sophisticated institutional

investors like the parties in this case.26

In general, there are three different types of issuances: (1) public offerings,

which are competitive and negotiated sales with multiple buyers; (2) limited public

offerings, which are offers to a select number of investors who meet established

20 Trial Tr. 48:12–24 (Metzold). 21 Id. at 47:23–48:11 (Metzold). 22 PTO, ¶¶ 7, 9. 23 Id. ¶ 7; Trial Tr. 533:11–534:2 (Snyder). 24 Trial Tr. 533:13–534:2 (Snyder). 25 JX 541, ¶¶ 51–53; Trial Tr. 534:5–11 (Snyder); PTO, ¶ 9. 26 JX 541, ¶ 48.

5 standards as qualified purchasers, and (3) private placements, which are placed

directly with an investor without the use of an underwriter.27 When a single investor

buys the entirety of a bond’s primary issuance, it is called a “100% placement”

transaction.28 I refer to these throughout simply as “100% placements.” A 100%

placement can be done in a public or private issuance.29 Issuing bonds to a single

investor can offer advantages in terms of financing flexibility, which makes 100%

placements attractive to certain issuers.30 On the other hand, because a single

investor in a 100% placement purchases all the bonds, such a transaction may lack

the same degree of competitive market check a wider issuance would enjoy.31

An issuer may engage broker-dealers as investment bankers to facilitate the

issuance of its municipal bonds.32 The broker-dealer can serve as intermediary

between the issuer and prospective investors.33 In public offerings, a broker-dealer

also acts as an underwriter to orchestrate the transaction and ensure proper due

27 PTO, ¶ 13. 28 Trial Tr. 52:13–53:4 (Metzold). 29 Id. at 52:13–53:12 (Metzold). 30 See, e.g., id. at 84:7–90:17 (Albarran), 501:1–9 (Harris). 31 E.g. JX 224, at 63–64 (Preston Hollow noting in an agreement for a 100% placement that “the terms . . . including the price, were determined pursuant to a negotiation . . . [t]here will be no market clearing rate for the [bonds]”). 32 PTO, ¶ 9. 33 Id.

6 diligence.34 Having a top-tier underwriter can increase the attractiveness of the issue

by lending credibility to the transaction and thus increasing the marketability of the

bonds.35 A broker-dealer acting as an underwriter has a duty to the issuer under rules

of the Municipal Securities Rulemaking Board (MSRB) to purchase bonds at a price

that is fair and reasonable to the issuer and to sell the securities at a price that is fair

and reasonable to the investor.36

The typical municipal bond trader lives in the fast-paced world of finance,

where a trader requires rapid communication, strong relationships, and the ability to

move quickly to succeed.37 One tool municipal bond traders use to leverage desired

actions is to express displeasure by putting another party or entity “in the box.”38

This bond-trader colloquialism is well-known in the industry, and both Nuveen and

Preston Hollow use it regularly.39 A broker-dealer can also put a trader or other

34 Trial Tr. 51:17–52:3 (Metzold). Id. at 51:12–53:12 (Metzold). Certain of Metzold’s testimony, including testimony on this issue, 35

was the subject of a Motion in Limine from Nuveen, dealt with below. 36 JX 541, ¶ 52. 37 Trial Tr. 377:22–380:4-14 (Davern). 38 Id. at 386:10–387:2 (Davern) (“Q: Why would you use the phrase ‘in the box’? A: Sometimes it means something. Sometimes it doesn’t mean something . . . you’ve probably done something to make me mad, to make us mad. . .”); Sorenson Dep. at 58:25–59:2 (“It’s my opinion that it’s the ability to politely say we’re unhappy.”). 39 Trial Tr. 386:12–15 (Davern), 588:7–14 (Costello), 30:7–21 (Thompson). The etymology is uncertain. See Cool Hand Luke (Warner Bros. 1967) (Carr the Floorwalker explains the camp rules).

7 counterparty in the box.40 At its most basic, it is simply a way for a party to leverage

action.41 Being “in the box” has no official repercussions and so can be used

somewhat casually.42 At the same time, being “in the box” can lead to more serious

consequences, such as a temporary cessation of business between parties.43

2. Nuveen’s and Preston Hollow’s Place in the Municipal Bond Market

Both Nuveen and Preston Hollow purchase municipal bonds, including high-

yield bonds, on the primary market and trade them on the secondary market.44 But

the parties operate under distinct business structures. Preston Hollow styles itself as

a “bespoke solution provider” that custom-designs its deal structures to lend

flexibility and security to issuers through 100% placements.45 Preston Hollow’s

business and finance model are relatively unique and new in the municipal bond

market.46 The majority of Preston Hollow’s financing deals are 100% placements.47

40 E.g., Trial Tr. 583:18–584:12 (Chang). 41 Sorenson Dep. at 55:4–13 (“It’s a relationship tool”); Trial Tr. 338:5–9 (Miller) (“Q: In your experience, has telling someone that they’re in the box influenced their behavior? A: Sometimes it does and sometimes it doesn’t.”). 42 E.g. Trial Tr. 584:24–585:8 (Jentis), 388:18–389:5 (Davern). 43 E.g. id. at 584:22–585:8 (Jentis). 44 PTO, ¶ 12. 45 Trial Tr. 15:22–16:24, 17:11–19 (Thompson), 83:5–90:17 (Albarran). Haskell Dep. at 29:13–20 (“There [are] not a lot of people that have Preston Hollow’s business 46

model. It is somewhat new to the municipal marketplace . . . it’s new and it’s something that the market is digesting”); see also JX 189, at 8; JX 935, at 2. 47 Trial Tr. 28:2 – 22 (Thompson). Preston Hollow does “[m]ostly primary” bond issuances, and of those primary issuances, it only “[o]ccasionally” purchases something less than 100% of the 8 It employs a permanent capital model that permits it to provide flexible financing

solutions.48 Most of its transactions come to it through its broker-dealers, although

it also originates deals on its own that it takes to broker-dealers to partner.49 It has

approximately $2.1 billion in assets and $1.3 billion in equity capital.50

Nuveen has approximately $150 billion in municipal assets, with $27 billion

in high-yield municipal bond funds.51 Several employees testified that it is “the

largest high-yield [municipal] fund in the world.”52 Nuveen’s model, in contrast

with Preston Hollow’s permanent capital financing, is a mutual fund, which requires

liquidity to absorb the inflows and outflows of cash as investors withdraw or deposit

in the fund.53 When there are inflows, Nuveen seeks new bond issuances to invest

the cash.54 Therefore, the opportunity to purchase new issuances in the primary

market—in municipal bond parlance to “see deals”—allows Nuveen to meet market

issuance. Id.; see also id. at 79:18–80:3 (Albarran), 439:20–440:12 (Weiner). Preston Hollow also manages other investments as a smaller profile part of its business. Id. at 28:17–29:6 (Thompson). 48 Id. 85:4–15 (Albarran). Among the features Preston Hollow offers are initial commitment, interim financing, “draw down” bonds (i.e. guaranteed funding through incremental as-needed purchases of bonds), rate locks, waiver of reserve funds, and post-closing changes to financing terms. Id. at 83:22–90:17 (Albarran). 49 Id. at 82:10–17 (Albarran), 441:15–24 (Weiner). 50 PTO, ¶ 1. 51 Id. ¶ 6; Trial Tr. 57:14–58:1 (Metzold). 52 Trial Tr. 237:7–9 (Miller); JX 263, at 17:24–18:1. 53 Davern Dep. at 39:17–19; Trial Tr. 85:4–19 (Albarran). 54 Davern Dep. at 43:10–44:24; Trial Tr. 388:12–17 (Davern).

9 demand.55 As a result, in evaluating broker-dealers for partnering, Nuveen

consistently rates “seeing deals” as the most important factor in the relationship.56

As a smaller subset of its business, like Preston Hollow, Nuveen will also structure

high-yield municipal bonds directly with issuers and engage in 100% placements.57

When Preston Hollow conducts 100% placements, it funds the entire issuance,

and consequently Nuveen does not “see” these deals before the bonds reach the

wider market.58 This lessens Nuveen’s ability to meet market demand because it

diminishes the array of purchase options available to it.59

In the fall of 2018, Preston Hollow engaged in several transactions important

to this litigation. On September 26, 2018, Preston Hollow closed an approximately

$196 million bond issuance with Roosevelt University, located in Chicago, Illinois.60

Wells Fargo served as underwriter for the transaction.61 Roosevelt University

required a refinancing of existing debt within ninety days to relieve financial

distress.62 Nuveen had previously purchased bonds from Roosevelt University.63

55 Trial Tr. 388:12–17 (Davern), 321:18–322:5 (Miller). 56 JX 111, at 1. 57 Trial Tr. 313:5–10, 317:19–318:23 (Miller). 58 Id. at 392:1–393:10 (Davern). 59 Id. at 389:15–391:4 (Davern). 60 PTO, ¶ 16. 61 Id. 62 Trial Tr. 492:8–24 (Harris). 63 PTO, ¶17; JX 263, at 4:10–13; Trial Tr. 498:7–499:6 (Harris).

10 Later that fall, Preston Hollow closed another deal, investing approximately $33.2

million in municipal bonds issued by Howard University, located in Washington

D.C. (the “Howard Center” transaction), to fund construction of student housing.64

Bank of America Merrill Lynch (“BAML”) served as underwriter for the

transaction.65 Because both deals were 100% placements, Nuveen was unable to

participate in either bond issuance.66

C. Nuveen’s Efforts Against Preston Hollow and 100% Placement Transactions

Nuveen’s opposition to Preston Hollow and its business model focusing on

100% placements began as early as August 2017, when Preston Hollow was first

emerging as a serious player in the high-yield bond market.67 Even at that time, in

an internal chat, Nuveen’s Chief Investing Officer John Miller described broker-

dealers working with Preston Hollow as “stab[bing] us in the back” and suggested

his stance to broker-dealers would be that “if you want to build your business around

Preston [Hollow], go ahead, but don’t think you can ever call us again.”68

64 PTO, ¶ 18; JX 224, at 8–9. 65 PTO, ¶ 18. 66 See id. ¶ 19. 67 See JX 79, at 1 (Chief Investing Officer Miller describing plans to impose choice on broker- dealers between doing business with Nuveen or Preston Hollow); see also JX 81, at 1 (Davern and Stifel representative discussing in August 2017 “how to keep [Preston Hollow] from getting more and more of the [high-yield] market.”). 68 JX 79, at 1.

11 This dispute, however, largely centers on the time period between December

2018 and February 2019, when Nuveen employees, led by Miller, held a series of

phone calls and meetings with various broker-dealers as well as with Deutsche Bank

(“Deutsche”).69 During that time, Nuveen employees discussed Preston Hollow and

the 100% placement model with Deutsche, BAML, Goldman Sachs (“Goldman”),

JPMorgan Chase & Co. (“JPMorgan”), Mesirow Financial (“Mesirow”), Morgan

Stanley (“Morgan”), RBC Capital Markets (“RBC”), Stifel Nicolaus (“Stifel”), and

Wells Fargo.70 In addition, Nuveen had previously discussed Preston Hollow with

KeyBanc Capital Markets (“KeyBanc”) in April 2018.71

The entities listed above had all conducted business with Preston Hollow in

the past, though not all of them had conducted 100% placements. The calls with

Deutsche, Goldman, Morgan, and RBC were recorded.72 Below, I recite the facts

regarding each third party’s communications with Nuveen and its relationship with

Preston Hollow separately.

1. Deutsche

Deutsche is Preston Hollow’s primary lender, including its source of tender

offer bond financing (“TOB financing”), a common method of financing

69 PTO, ¶ 20. 70 Id. 71 Moriarty Dep. at 40:4–19; JX 123. 72 PTO, ¶ 21.

12 investments in municipal bonds.73 Deutsche financed the Roosevelt University and

Howard Center transactions described above.74 On December 20, 2018, Miller

informed his team that if Deutsche provided TOB financing to Preston Hollow for

the Howard Center issuance, Nuveen would remove its business from Deutsche.75

That same day, Hlavin called Deutsche and stated that Nuveen “will not be

conducting high-yield business with anyone who is involved in these types of

transactions [i.e. 100% placements] with Preston Hollow.”76 Hlavin represented on

this phone call that Nuveen was “going to every single bank and broker-dealer” that

day, and that “the policy going forward is that if you are doing – if you are actively

doing business with [Preston Hollow], Nuveen will not be doing business with

you.”77 At trial, Hlavin testified that he did not intend his words to be taken

seriously, but that he needed to “make exaggerated statements” to “strengthen [his]

position.”78 Hlavin testified that when he referenced Preston Hollow, he was “short-

handing” for 100% placement transactions.79

73 Trial Tr. 430:10–13 (Weiner), 139:22–140:7 (Hlavin); PTO, ¶ 15. 74 Trial Tr. 430:10–13 (Weiner), 140:16–141:5 (Hlavin). 75 JX 305, at 2 (Miller writing “If [Deutsche] TOB’s Howard University student housing for [Preston Hollow], we will be taking our business with them to $0 as soon as practicable.”). 76 JX 263R, at 7:4–7. 77 Id. at 24:21–25:2. 78 Trial Tr. 149:7–17 (Hlavin). 79 Id. at 184:23–185:6 (Hlavin).

13 In addition to this “devastating” ultimatum,80 Hlavin represented to Deutsche

on this call that Preston Hollow lied to issuers by misrepresenting things about

Nuveen.81 Hlavin said Preston Hollow was “demonstrating predatory lending

practices” toward borrowers and would “take [the borrowers] into bankruptcy.”82 In

a second call with Deutsche later that day, Hlavin claimed he possessed “direct

evidence” of Preston Hollow’s lies, though it is apparent from his testimony that he

based this statement on what he overheard at Nuveen’s trading desk.83 At trial,

Hlavin testified that he did not need to verify his allegations because he was “role

playing” to “build a position” and “challenge someone in debate.”84

On December 21, 2018, Miller also called Deutsche.85 In that call, Miller

stated that he had a “firm commitment” from Wells Fargo, BAML, Goldman, and

JPMorgan to “never do business with Preston Hollow again.”86 At trial, Miller

testified that he exaggerated these statements; by “firm commitment,” he meant the

80 See JX 263R, at 25:2–7 (Hlavin and Deutsche representative agreeing “[This is] devastating news”; “It’s devastating news”; “It’s devastating.”). 81 Id. at 29:2–14 (Hlavin stating Preston Hollow is “just sitting in front of issuers lying to them . . . directly bashing Nuveen to the issuer.”). 82 Id. at 4:17–5:2, 7:18–8:5. 83 JX 393R, at 8:11–9:8; Trial Tr. 186:23–187:20 (Hlavin) (testifying, “I overhead it on the desk, and that was enough to give me concern to go to Deutsche Bank about my concerns”). 84 Trial Tr. 156:20–158:15 (Hlavin). 85 JX 310R. 86 Id. at 4:15–5:7.

14 broker-dealers “were going to look into their private versus public practices.”87 He

testified he “was overstating, shortcutting, and blustering a little bit to try and get

their attention.”88 Miller did not consider these statements to be problematic, as he

testified that in the high-yield municipal bond market, other parties “[are] blustering

and exaggerating to me. And I’m blustering and exaggerating back to them. And

we kind of know what’s going on.”89

Additionally, Miller represented that Preston Hollow conducted unethical

business practices, or “dirty deals.”90 He informed Deutsche that Roosevelt

University “got fleeced” by Preston Hollow based on the yield on the bonds in that

transaction.91 Like Hlavin, he labeled Preston Hollow’s lending practices

“predatory.”92 He claimed it “rushed” broker-dealers through deals without allowing

for proper evaluation.93

87 Trial Tr. 287:2–9 (Miller) (Miller testifying “I exaggerated the nature of those conversations that happened with those other firms . . . [i]t was not that type of commitment.”). 88 Id. at 291:17–23 (Miller). 89 Id. at 337:3–7 (Miller). 90 JX 310R, at 8:6–9 (Miller stating, “[i]t’s an . . . ethical behavior firm versus . . . the opposite”), 31:14–32:14, 21:9–13 (Miller stating, “some of these dirty deals are going to become less financeable”). 91 Id. at 4:5–14. 92 Id. at 2:18–3:1 (Miller stating, “the deals are not coming at market levels because of the predatory nature of the way in which they’re pitched and prepackaged between Preston [Hollow] and the issuer.”). 93 Id. at 23:1–7.

15 Miller informed Deutsche that he would reduce Nuveen’s TOB business by

$300 million with further reductions to come as a result of Deutsche’s business

relationship with Preston Hollow.94 To date, Nuveen has reduced the amount of its

TOB financing with Deutsche by $1 billion, from $1.9 billion to $900 million. 95

Nuveen represented it reduced its TOB financing for business reasons related to

counterparty risk.96 An additional motive in reducing its TOB financing with

Deutsche was ultimately to cut off Preston Hollow’s access to financing in general.97

Deutsche has not withdrawn financing from Preston Hollow.98 Deutsche affirmed

its intent to continue to provide financing and has renewed all relevant financing

contracts.99

94 Id. at 23:24–26:3; Sorensen Dep. at 284:5–285:12. 95 Trial Tr. 227:15–20 (Hlavin). 96 Id. at 225:18–228:7 (Hlavin). In simplified form, Nuveen argued that because Deutsche mixed bonds from various high-yield investors in its TOB trusts, Preston Hollow’s higher risk bonds damaged the overall performance of the TOB trust, thereby necessitating Nuveen’s withdrawal. Id. 97 See JX 310R, at 11:5–12:20 (Miller stating to Deutsche representative, “who else are they going to get financing from when Wells Fargo, Goldman, JPMorgan, BAML, and Citi have . . . agreed to . . . not do this business anymore? I don’t know where they’re going to get the financing from.”), 17:13–16 (Miller stating, “[b]ut where are they getting the money to do the predatory lending? I think you’re – I think you’re far and away number one”), 21:9–13 (Miller stating, “some of these dirty deals are going to become less financeable, in my opinion. That’s my effort. That’s my goal, one of my goals, just so you know.”); see also Van Den Handel Dep. at 44:1–48:20, 72:9–73:11 (Van Den Handel testifying that Miller was “clearly saying that those firms listed will not provide financing, and the implication is that . . . there isn’t a significant player out there who can do it in their absence.”). 98 Trial Tr. 355:14–24 (Van Den Handel). 99 Id. at 356:12–357:3 (Van Den Handel); JX 509, at 1–2.

16 2. BAML

BAML served as underwriter for Preston Hollow’s Howard Center

transaction, which closed on November 28, 2018.100 On December 20, Davern

called BAML and placed it in the box for its role as underwriter in the Howard

Center transaction.101 Miller later told Davern that if BAML was financing Preston

Hollow, he would not “even speak for BAML for 2019 for BBB and below” (i.e.

high-yield bonds).102 That same day, Miller also spoke on the phone with another

BAML representative.103 On that call, Miller shared “research” regarding Preston

Hollow and asked that BAML not conduct 100% placements without making the

deals publicly available.104

The following day, BAML conducted internal discussions, and it agreed that

going forward it would not participate in 100% placements without a public

100 See JX 224. 101 JX 299R, at 4:13–22 (Davern stating in phone conversation, “BAML . . . is in the box effective today as a result of a deal”); JX 310R, at 5:1–7 (Miller stating in phone conversation, “we stopped doing business with [BAML] temporarily”); see also JX 271R, at 2:8–16; Davern Dep. at 270:14– 24; Chang Dep. at 57:13–58:24. Both BAML representatives later testified not recalling if they were “in the box,” but contemporaneous email correspondence from the BAML representative to Miller on December 20, 2018 stated that Davern “made it very clear we are in the ‘box’ with you guys.” JX 308, at 1. 102 Trial Tr. 374:14–375:14 (Davern). 103 JX 308, at 1; Jentis Dep. at 62:15–63:2. 104 Jentis Dep. at 68:17–70:3; Miller Dep. at 277:8–278:19.

17 offering.105 A BAML representative communicated the new policy to Miller.106

Though this new policy was purportedly a general response to the market, the

Howard Center transaction served at the impetus.107 However, it also appears that

Preston Hollow sought to replace BAML as underwriter for a follow-on transaction

due to issues with the BAML representative on the previous Howard Center

transaction.108 BAML has not engaged in any 100% placements with Preston

Hollow since its role in the Howard Center transaction.109

3. Goldman

Prior to December 2018, Preston Hollow had never completed a 100%

placement with Goldman.110 However, the two parties had a business relationship:

Goldman had expressed interest in serving as underwriter to the Howard Center

transaction before it was awarded to BAML, and as of late 2018, Goldman was in

discussion with Preston Hollow regarding twelve potential transactions.111 The

record does not reflect the stage of each of these potential transactions, though at

105 Jentis Dep. at 70:11–74:15, 79:2–10, 83:22–84:24. 106 Id. at 83:22–84:10. 107 Id. at 83:22–84:17 (Jentis testifying, “the Howard [Center] deal was the example, the impetus for [the change in policy]”). 108 See JX 484, at 2. 109 Jentis Dep. at 93:22–94:12. 110 Trial Tr. 470:11–16 (Weiner). 111 Id. at 477:9–23 (Scruggs), 20:1–18 (Thompson), 94:22–96:6 (Albarran), 422:8–18 (Weiner); Scruggs Dep. at 54:12–58:21.

18 least some of them were still in early, speculative form.112 Goldman generally

considered Preston Hollow a potential partner and a “portion of [its] continued

business plan.”113

On December 21, Miller called his contact at Goldman.114 After discussing

Preston Hollow’s growth as a company, Miller said that “to be a partner with Nuveen

. . . you can’t do any of this private bullshit business with Preston Hollow.”115 He

also stated that Goldman would “have to choose who [it does] business with.

Because I don’t want to do business with those firms that do business with Preston

Hollow.”116 At trial, Miller testified this was “a very blustery introduction . . . to get

his attention.”117 He also testified that referencing Preston Hollow was only “a

shortcut” to discuss 100% placements.118 Miller represented to Goldman that he had

“five dealers so far” in agreement not to do business with Preston Hollow, and that

E.g. Scruggs Dep. at 28:21–29:6 (Scruggs testifying, “[t]here is no transaction at this time . . . 112

LAX doesn’t even know if they have a project yet.”). 113 Id. at 64:20–25 (Scruggs testifying, “[w]e are actively engaged with [Preston Hollow] on multiple potential projects and they represent a portion of our continued business plan.”). 114 JX 267R. 115 Id. at 6:13–7:2. 116 Id. at 22:9–18. 117 Trial Tr. 247:17–248:3 (Miller). 118 Id. at 248:4–12 (Miller).

19 he would be attempting to get more.119 Again, at trial, Miller testified regarding this

purported agreement that he was “exaggerating a little . . . to get a reaction.”120

In addition, Miller told Goldman that Preston Hollow lied to issuers.121 He

told Goldman that issuers fell for Preston Hollow’s “predatory practices” after

hearing its “predatory sales pitch.”122 He also stated that “issuers are being told

things that are not true,” and that Preston Hollow would “rush the issuer into” unfair

or suspect transactions.123 He proffered that he had “a lot of evidence” to support

the allegations.124 Attempting to put some of this evidence forward, Miller told

Goldman that multiple states’ attorneys general had contacted Preston Hollow over

“unethical practices,” sent it “nastygrams,” and told it, “[d]on’t come into my town

again.”125 Miller based this allegation on a letter from a single city attorney that

suggested one of Preston Hollow’s transactions might not meet state attorney general

119 JX 267R, at 33:23–34:3. 120 Trial Tr. 276:23–277:5 (Miller). 121 JX 267R, at 19:10–16 (Miller stating in phone conversation, “issuers are being told things that are not true.”), 42:3–4 (Miller stating, “[w]hat did Preston Hollow tell that issuer? It wasn’t the truth”); see also Trial Tr. 263:2–264:24 (Miller). 122 JX 267R, at 17:11–20, 31:21–32:22. 123 Id. at 44:2–12; 19:10–20:3. 124 Id. at 21:1–5. 125 Id. at 20:4–19.

20 requirements with regard to a bond issue.126 Miller testified the dissonance presented

by his allegation and his evidence was “a little bit of a shortcut.”127

Following this call, an internal email circulated at Goldman discussing the

phone conversation and noting Miller’s message that “he is going around to all the

major dealers who cover him and let them know that if they do business with Preston

Hollow then Nuveen will not do business with them.”128 Goldman representatives

met with Miller on January 22, 2019.129 At that meeting, Miller reiterated Nuveen’s

position that if Goldman did business with Preston Hollow, Nuveen would not do

business with Goldman.130

Beginning in late January, following the meeting with Miller, Goldman began

to develop internal “boundaries”—a “matrix”—to evaluate whether to underwrite

100% placements.131 Goldman’s representative testified that the discussions with

Miller prompted the creation of this matrix.132 The “matrix” remains under

126 Trial Tr. 270:1–14 (Miller). 127 Id. at 270:20–22 (Miller). 128 JX 293, at 2. 129 Scruggs Dep. at 81:21–23. 130 Trial Tr. 480:23–481:11 (Scruggs); Scruggs Dep. at 85:4–15. 131 Scruggs Dep. at 41:16–45:23. 132 Trial Tr. 485:20–486:44 (Scruggs) (Scruggs testifying, “Nuveen’s threat or comment or call, whichever you’d like to refer them, absolutely spurred us to look at these types of transactions and to put together potential boundaries under which we would be comfortable moving forward with the whole general category of limited public offering single purchaser transactions”).

21 review.133 In the meantime, Goldman has declined to move forward with any of the

twelve transactions in discussion as of December 2018 and is not currently in

discussion about any future deals.134 Despite its previously expressed interest,

Goldman also declined to serve as an underwriter for Preston Hollow’s 2019 follow-

up transaction with Howard University (the “Howard Quad” transaction), citing

concerns with the timeline and difficulty “in terms of filling out the matrix” it had

developed internally to evaluate 100% placements.135

4. JPMorgan

Prior to December 2018, JPMorgan had not completed any 100% placements

with Preston Hollow.136 The two parties, however, had a developing business

relationship: internal communications suggest JPMorgan intended to develop

business with Preston Hollow.137 On or around November 20, 2018, JPMorgan sent

a request to be considered to finance the upcoming Howard Quad transaction.138

On or around December 20, Miller called his contact at JPMorgan.139 Miller

discussed Nuveen’s disapproval of broker-dealers engaging in 100% placements, in

133 Id. at 481:12–19, 485:16–486:4 (Scruggs); Scruggs Dep. at 35:4–14; 102:13–104:3, 105:5–11. 134 Trial Tr. 483:6–16 (Scruggs), 98:8–11 (Albarran). 135 Scruggs Dep. at 101:2–101:10; Trial Tr. 482:5–19 (Scruggs). 136 Trial Tr. 471:23–472:5 (Weiner). 137 JX 180, at 1. 138 JX 217, at 1. 139 O’Loughlin Dep. at 36:9–14.

22 particular the Roosevelt University transaction.140 Miller then inquired about

JPMorgan’s process for evaluating and engaging in transactions.141 When Preston

Hollow contacted JPMorgan in February 2019 to move forward with the Howard

Quad transaction, JPMorgan declined to serve as underwriter, despite its prior

solicitation.142 It cited concerns with adequate time to secure internal approvals and

potential interference with Howard University’s existing relationship with BAML,

who financed the Howard Center transaction.143 Preston Hollow inquired about a

reasonable length of time that would permit the needed approvals, but JPMorgan

declined to offer a specific timeline.144

5. KeyBanc

Prior to December 2018, KeyBanc had completed four 100% placements with

Preston Hollow.145 In April 2018, Davern called KeyBanc and placed it in the box—

effectively ceasing to do any business with it—for a recent 100% placement with

Preston Hollow.146 Also as a response to KeyBanc’s work with Preston Hollow,

140 Id. at 36:21–39:4. 141 Id. at 38:19–39:4. 142 JX 484, at 1–2. 143 Id. It appears that Preston Hollow sought to replace BAML as underwriter due to issues with the BAML representative on the previous Howard Center transaction. See id. at 2. 144 Id. at 1–2; Trial Tr. 419:10–422:7 (Weiner). 145 See Weiner Dep. at 90:18–25, 105:6–15, 106:11–18; Levin Dep. at 161:23–162:5. 146 Moriarty Dep. at 40:4–19; JX 123, at 1 (KeyBank Representative stating in internal email that Davern called, and that “Nuveen will not do any more municipal business with [KeyBanc] . . . this call is a direct response to the 125mm El Centro deal that we placed privately last week. John 23 Nuveen withdrew a purchase order on an $85 million issuance for which KeyBanc

was acting as underwriter.147 KeyBanc made a commitment in the summer of 2018

to show Nuveen every deal, and after that commitment Nuveen and KeyBanc

resumed business.148

KeyBanc continues to underwrite 100% placements that Preston Hollow

originates, but it has not originated any 100% placements for Preston Hollow.149 In

addition, to stay out of the box, all 100% placements are initially shown to

Nuveen.150

6. Mesirow

Prior to December 2018, Mesirow had not completed any 100% placement

deals with Preston Hollow; however, as of December, the parties were working

together on six 100% placements.151 Five of these deals, referred to as the “Hutto

dirt deals,” were to take place in Texas.152

Miller who runs the department has determined that they will not do any business with us at all, until at least late August. And they will only resume activity once they have been assured we will no longer place deals privately.”). 147 JX 123; Moriarty Dep. at 55:13–56:11. 148 Moriarty Dep. at 56:18–59:6. 149 Trial Tr. 425:8–21, 443:11–16 (Weiner); Czajkowski Dep. at 41:2–42:25, 64:10–65:24, 71:2– 73:25. 150 Trial Tr. 443:11–16 (Weiner); Moriarty Dep. at 58:7–25. 151 Trial Tr. 20:19–21:5 (Thompson), 418:17–419:9, 424:21–425:7 (Weiner). 152 Id. at 20:19–21:5 (Thompson).

24 There is no direct evidence of a communication between Nuveen and

Mesirow, but Miller told Deutsche that he had Mesirow “onboard with our . . .

procedures on . . . a going forward basis.”153 Additionally, Hlavin informed

Deutsche that Nuveen was responsible for blocking the “five dirt deals out of

Texas.”154 This matches testimony from Preston Hollow that one week before the

first of the Hutto deals was set to close, Mesirow “threw up some issues they knew

would not be acceptable” related to credit committee approval, and as a result

Preston Hollow terminated Mesirow’s role in the transaction.155 Preston Hollow did

not close any of the six transactions underway in December 2018 with Mesirow, and

Mesirow has not brought any transactions to Preston Hollow since.156 Preston

Hollow, however, has since closed or is moving toward closing the same deals with

other partners.157

153 JX 310R, at 7:12–16. 154 JX 393R, at 2:14–3:6. At trial, Hlavin testified that “[a]t the time that I made that call . . . I think I was referring to Wells Fargo.” Trial Tr. 189:5–10 (Hlavin). I find it more likely, given that Mesirow was involved in five “Hutto dirt deals” in Texas with Preston Hollow, and that Wells Fargo had no similar transactions pending, that Hlavin was referring to communications with Mesirow, and that he either blocked or attempted to block those transactions. 155 Trial Tr. 445:13–23 (Weiner). 156 Id. at 424:21–425:7, 418:17–419:9 (Weiner), 20:19–21:5 (Thompson). 157 Id. at 449:2–11 (Weiner); Albarran Dep. at 93:19–97:9. Albarran testified he did not believe the changes in partnering the Hutto deals resulted in any changes in the deal terms. Albarran Dep. at 101:8–13.

25 7. Morgan

During 2017 and 2018, Morgan conducted two 100% placements with Preston

Hollow.158 On December 20, Davern made three phone calls to Morgan

representatives.159 Davern told them that Morgan was in the box for its work on a

100% placement with Preston Hollow, and that Nuveen would not do business with

Morgan if it continued to do 100% placements with Preston Hollow.160 Davern

informed Morgan that Miller was “building a book of dealers” that would not engage

in Preston Hollow’s private financing deals, and that if Morgan was “going to do

that kind of business, we will not be doing business with you.”161 Davern added that

Miller was “infuriated by Preston Hollow’s way of doing business,” and that Preston

Hollow were “bad people.”162 Davern noted that Nuveen would make the

requirement “uniform across the street,” first because “muni debt . . . is being

removed from [Nuveen’s] ability to buy it,” and also because Nuveen believed 100%

placements were “not right for the municipal bond business in general.”163

158 Trial Tr. 419:1–3 (Weiner); JX 388, at 1–2. 159 JX 271; JX 277; JX 299. 160 JX 299R, at 4:4–5:24 (Davern stating in phone call, “you’re in the box right now if you list out every single deal you have done with Preston Hollow. We will not do high-yield business with MorganStanley. This is how serious this is.”); see also Costello Dep. at 39:3–41:24, 45:6–47:9. 161 JX 277R, at 2:19–3:11, 4:21–5:6. 162 Id. 163 JX 299R, at 10:20–11:11 (Davern stating in phone call, “[i]t’s going to be uniform across the street.”), 6:20–24 (“[Preston Hollow is] going and sourcing muni debt that is being removed from our ability to buy it and your bankers are saying, yes, let’s do it. . .”); JX 277R, 2:19–3:5.

26 According to Davern, other broker-dealers—specifically BAML and Citibank—had

already been put “in the box” or “straightened out” for participating in 100%

placements with Preston Hollow.164 Further communications between Nuveen and

Morgan during late December 2018 and January 2019 cleared the air, and the two

parties resumed ordinary business after the holidays.165

In late December 2018, Morgan and Preston Hollow were working toward the

close of an issuance dubbed the “Rixey deal.”166 Although Preston Hollow testified

that Morgan “kicked [them] out of the Rixey deal,” it appears that the issuer

terminated Preston Hollow for issues specific to the transaction and unrelated to

Nuveen.167 Morgan has not engaged with Preston Hollow in any 100% placements

since.168

8. RBC

In 2017, RBC conducted approximately $14.5 million worth of 100%

placements with Preston Hollow.169 In 2018, that number declined to $127,971.170

On January 9 and 11, 2019, Davern and Miller conducted two phone calls with a

164 JX 299R, at 4:13–22, 10:20–11:11. 165 Haskel Dep. at 83:8–21, 108:8–114:14. 166 Id. at 50:3–22. 167 Trial Tr. 422:19–24 (Weiner); Haskel Dep. at 56:8–20, 107:11–108:7. 168 Haskell Dep. at 166:5–12; Trial Tr. 422:19–24 (Weiner). 169 JX 740, at 1. 170 Id.

27 representative at RBC.171 Davern informed RBC of Nuveen’s new policy “about

how [the major broker-dealers] have to stop doing this business” and indicated that

Nuveen had “turned around” dealers who did 100% placements previously but

“would never do it again.”172 The RBC representative stated that he had fought

against 100% placements for three years, provided information on deals between

Preston Hollow and other broker-dealers, including Stifel, and after the phone calls

in January continued to provide information on Preston Hollow deals.173 Since

January 2019, RBC has continued to do business with Preston Hollow, including

working on a 100% placement.174

9. Stifel

Prior to December 2018, Stifel had completed several 100% placement deals

with Preston Hollow, including deals that Stifel originated.175 In October 2018,

Davern met with Stifel representatives and indicated that Nuveen would consider

curtailing business if Stifel failed to show it every transaction.176 Late in 2018, Stifel

171 JX 383R; JX 396R. 172 JX 396R, at 2:4–12; 5:13–20. 173 JX 383R, at 28:24–31:6; see also JX 450; JX 452. 174 Trial Tr. 437:15–438:12 (Weiner); Hummel Dep. at 608:12–15. The parties disagree on the nature and quality of the recent 100% transaction. Preston Hollow contends that while it is a 100% placement, it is “not a real deal” because it was only given to them after being shown to “every single [investor].” Trial Tr. 437:15–438:12 (Weiner). 175 E.g. Challis Dep. at 127:18–128:3. 176 Davern Dep. at 192:10–22, 193:13–18; see also JX 198.

28 began to enforce an informal preexisting policy not to originate 100% placements.177

In February, Stifel explained this policy to Preston Hollow.178 The evidence

suggests that the choice to enforce this policy was due, at least in part, to pressure

from Nuveen: the head of Stifel’s municipal securities group testified that “since

John Miller yelled” at him, Stifel had not “given any exclusive on deals we

control.”179 In 2019, Stifel has not offered 100% placements to Preston Hollow, but

it has completed 100% placements that Preston Hollow originates.180

10. Wells Fargo

Prior to December 2018, Wells Fargo had completed one 100% placement

with Preston Hollow, the Roosevelt University transaction.181 Internal emails

suggest Wells Fargo foresaw backlash from Nuveen over the deal.182 After the deal

closed in October 2018, Nuveen put Wells Fargo in the box for failing to offer the

177 Czajkowski Dep. at 15:22–17:2, 17:16–18:11. 178 Id. at 73:2–25. 179 JX 430; Czajkowski Dep. at 64:10–65:24. 180 Trial Tr. 441:3–442:10 (Weiner); see also JX 429 (Stifel representative noting, “I don’t think [anyone] will [be] able [to] block Preston from getting deals where they have done both sides… they will find dealers to execute that trade.”). 181 Trial Tr. 392:16–19 (Davern); see also JX 974. 182 See JX 184, at 1 (Wells Fargo stating in internal email, “[t]his would be considered salt in the wound from a Nuveen perspective . . . Lesson learned is there are relationship costs to having an exclusive with one buyer. Smaller transactions it is more understandable but larger ones need a wider audience for a variety of reasons.”).

29 issuance on the public market.183 Miller testified that Nuveen “stopped doing

business with Wells Fargo for about six weeks” and that Wells Fargo “removed their

head of public finance . . . responsible for . . . that deal.”184 Miller met with Wells

Fargo in January, 2019, and at that time Wells Fargo agreed it would change its

process so that Nuveen saw every deal, at which time business between Nuveen and

Wells Fargo resumed.185 Wells Fargo continues to do 100% placements with Preston

Hollow.186

D. Preston Hollow’s Response

On January 15, 2019, Preston Hollow sent Nuveen a cease-and-desist letter.187

The letter demanded that Nuveen stop its allegedly unlawful and tortious

communication, conduct an internal investigation, share the findings with Preston

Hollow, remediate the alleged harm, and adopt new supervisory procedures.188 On

February 22, 2019, just over a month later, Nuveen’s General Counsel sent a letter

(the “Response Letter”) to each of the legal departments at the firms Preston Hollow

183 Trial Tr. 152:9–153:5 (Hlavin), 283:12–19 (Miller); JX 310R, at 4:15–7:16; Davern Dep. at 204:21–209:15; Markeiwicz Dep. at 82:8–21. Miller described Wells Fargo’s box as “kind of a minor softer version” of the box. Miller Dep. at 287:22–288:7. 184 Trial Tr. 285:17–23 (Miller); JX 310R, at 4:15–22. Miller testified at his deposition, however, that business with Wells Fargo was merely “diminished” and that Nuveen “continued to do business with [Wells Fargo] as a whole.” Miller Dep. at 162:17–163:2. 185 Miller Dep. at 173:18–174:12; Markiewicz Dep. at 110:17–114:11. 186 Albarran Dep. at 60:17–61:10; JX 740, at 1, 4, 15, 26; Weiner Dep. at 147:18–148:12. 187 PTO, ¶ 29. 188 Id.

30 identified as having received threats from Miller and his team.189 The Response

Letter read, in pertinent part:

Nuveen does not and will not seek any agreement or commitment from your firm concerning the counterparties it does business with. We fully acknowledge your firm is free to conduct its trading business in a manner and with firms and counterparties of your choosing . . . With respect to [Preston Hollow] specifically, and for the avoidance of doubt, Nuveen seeks no agreement or commitment from your firm regarding [Preston Hollow] . . . of course, Nuveen reserves the right to conduct its trading business with firms within its lawful discretion and to hold and express its views and judgments in pursuing its investment advisory and trading activities.190

Nuveen’s Head of Fixed Income and Equities, Bill Huffman, testified that he

instructed the Nuveen team to “stop any activities that they were doing and to stop

talking about Preston Hollow.”191

E. Procedural Posture

Preston Hollow filed suit on February 28, 2019.192 The Complaint pled four

counts: (1) tortious interference with contract; (2) tortious interference with

prospective business relations; (3) violation of New York State’s Donnelly Antitrust

Act; and (4) defamation.193 Preston Hollow seeks permanent injunctive relief—it

189 Id. ¶ 30. 190 Id. 191 Trial Tr. 579:4–8 (Huffman). 192 Verified Compl. for Inj. Relief, Docket Item (“D.I.”) 1 (“Compl.”). 193 Id.

31 does not seek damages.194 Along with its Complaint, Preston Hollow also filed a

Motion for Preliminary Injunction and a Motion to Expedite.195 I granted the Motion

to Expedite and denied preliminary injunctive relief on March 14, 2019.196

On May 14, 2019, I granted the Defendants’ Motion to Dismiss Count I for

tortious interference with contract.197 At that time, I directed the parties to proceed

to trial in July on the request for permanent injunctive relief, and trial on Counts II

and III was held on July 29–30, 2019. On August 13, 2019, I issued an Opinion

granting the Defendants’ Motion to Dismiss Count IV for defamation.198 On

September 16, 2019, I heard post-trial argument. I suspended consideration of the

remaining issues on December 13, 2019, to allow the parties to discuss settlement at

my recommendation.199 When the parties informed me on January 8, 2020 that these

negotiations had ultimately failed, I considered the matter fully submitted. This

194 PTO, ¶¶ 14–15. 195 Pl. Mot. to Expedite, D.I. 3; Pl.’s Mot. for Preliminary Inj., D.I. 4. 196 Tr. of the Telephonic Oral Argument of Pl.’s Mot. to Expedite and Ruling of the Court, D.I. 73. 197 Telephonic Partial Rulings of the Court on Defs.’ Mot. to Dismiss, D.I. 192. 198 Preston Hollow Capital LLC v. Nuveen LLC, 216 A.3d 1 (Del. Ch. 2019). On October 11, 2019, I approved Plaintiff’s election to transfer the defamation count to the Complex Commercial Litigation Division in the Delaware Superior Court. Order Granting Pl.’s Election to Transfer Proceedings, D.I. 399. 199 Dec. 13, 2019 - Telephonic Rulings of the Court on Defs.’ Mot. to Reopen and Supplement the Trial Record, D.I. 411.

32 post-trial Memorandum Opinion concerns Count II for tortious interference with

business relations and Count III for violations of New York’s Donnelly Act.

II. ANALYSIS

A. Nuveen is Liable for Tortious Interference with Business Relations

Under Delaware law, the elements of tortious interference with business

relations are: (1) reasonable probability of business opportunity; (2) intentional

interference by defendant with that business opportunity; (3) proximate causation;

and (4) damages.200 The tort is unusual, in that its application, even if these elements

are met, is circumscribed by consideration of competing rights. Thus, the elements

of the tort must be considered in light of a defendant’s privilege to compete in a

lawful manner.201 The tort may implicate free speech rights as well; that is to say, a

person may be permitted to air a grievance or state an opinion, which may have the

effect of harming another’s business relationship, but which does not amount to

tortious interference.202 Tortious interference with a business relationship, I note,

does not require an existing contract between the parties.203

200 Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *5 (Del. Ch. Jan. 20, 2009) (citing DeBonaventura v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)); Beard Research, Inc. v. Kates, 8 A.3d 573, 608 (Del. Ch. 2010), aff’d sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010). 201 Agilent, 2009 WL 119865, *5; Beard, 8 A.3d at 608. 202 Bove v. Goldenberg, 2007 WL 446014, at *4 (Del. Super. Feb. 7, 2007). 203 Id.

33 1. Preston Hollow Had a Reasonable Probability of Business Opportunity

A reasonable probability of a business opportunity requires showing

“something more than a mere hope or the innate optimism of the salesman” or “mere

perception of a prospective business relationship.”204 Our courts reject “vague

statements about unknown customers,”205 allegations of “a nebulous,

unascertainable class of business relationships,” or speculative prospects.206 Instead,

to succeed, Preston Hollow must show a “bona fide expectancy” of opportunity.207

Meeting this standard requires Preston Hollow to “identify a specific party who was

prepared to enter into a business relationship but was dissuaded from doing so by

the defendant.”208

In determining whether a business opportunity constitutes a bona fide

expectancy, this Court makes a factual inquiry into the reasonableness of the

expectation. On the one hand, in Dionisi v. DeCampli,209 the Court found the

204 Agilent, 2009 WL 119865, at *7. 205 Id. 206 Organovo Holdings, Inc. v. Dimitrov, 162 A.3d 102, 122 (Del. Ch. 2017) (internal citations omitted). For example, in the case Nuveen cites, the Superior Court rejected business expectancy because the plaintiff’s hopes were contingent upon one of its business partner’s new business models succeeding. Kable Products Services, Inc. v. TNG GP, 2017 WL 2558270, at *10 (Del. Super. June 13, 2017). Such a tenuous expectancy was too speculative. Id. 207 Kable Prods., 2017 WL 2558270, at *10 n.84. 208 Organovo, 162 A.3d at 122 (internal quotations omitted) (citing Agilent, 2009 WL 119865, at *7). 209 1995 WL 398536 (Del. Ch. June 28, 1995).

34 business relationship too informal and inconsistent to create a “realistic” expectancy

of future contractual relations.210 In that case, the highly-discretionary, one-off

nature of the business the plaintiff (a small, independent graphic designer) had

received in the past from its client (a corporate giant) failed to form a bona fide

expectancy.211 On the other hand, in Beard Research Inc. v. Kates,212 long-standing

customer relationships were found to give the plaintiff a “reasonable probability of

obtaining repeat business,” even without contemplating specific transactions.213 The

customers’ satisfaction and consistency, combined with the plaintiff’s unique

position in the market, meant it “reasonably could have expected its one-off and

catalog customers to continue using its services.”214 In sum, whether a business

opportunity creates a bona fide expectancy is a factual inquiry evaluating the

reasonableness of the expectation.

I find that Preston Hollow had a reasonable expectation of business

opportunity with Deutsche as well as with each of the broker-dealers discussed

above with the exceptions of BAML and RBC. First, concerning Deutsche, Preston

210 Id. at *13 (finding plaintiff “failed to prove [it] had either an actual contractual relationship entitling [it] to additional work with its clients or a realistic expectancy that its clients would hire [it] again.”). 211 Id. 212 8 A.3d 573 (Del. Ch. 2010), aff'd 11 A.3d 749 (Del. 2010). 213 Id. at 611. 214 Id.

35 Hollow had a formalized relationship that included contractual renewals of its TOB

financing, creating a reasonable expectancy.215 Second, Preston Hollow had

transactions in the works with several broker-dealers at the time of Nuveen’s actions.

Its relationship with Goldman, while not formalized, involved twelve identified

potential transactions, Goldman’s interest in the Howard Quad transaction, and its

confirmation that Preston Hollow was a part of its business plan.216 Discussing a

dozen potential transactions with a named business partner, in this context, creates a

business expectancy. Preston Hollow also had named transactions underway with

Mesirow and Morgan.217 Third, Preston Hollow received interest and entered into

discussions with Goldman and JPMorgan regarding the possibility of underwriting

the Howard Quad transaction.218 These discussions and inquiries for an

215 JX 509, at 1–2; Trial Tr. 430:10–13 (Weiner), 356:12–257:3 (Van Den Handel). 216 Trial Tr. 477:9–23 (Scruggs) (Goldman representative testifying, “Q: And was [Goldman] interested at that time in potentially serving as the underwriter for the Howard Center Transaction? A: [Y]es, we were”), 20:1–18 (Thompson) (Preston Hollow testifying, “In December [2018] we were working on, give or take, a dozen things in various stages of development.”), 422:8–18 (Weiner), 94:22–95:10 (Albarran) (Preston Hollow testifying, “[Goldman] was also introducing us to the investment bankers that . . . [they] thought would have clients that would need the type of investments and services that we could provide”); Scruggs Dep. at 64:20–25 (Goldman representative testifying, “[w]e are actively engaged with [Preston Hollow] on multiple potential projects and they represent a portion of our continued business plan.”). Nuveen argues that these transactions with Goldman should be excluded for untimely disclosure. I do not find that Nuveen was prejudiced. The deals were discussed by Goldman’s representative at his deposition, and Preston Hollow did not fail to allege business relations with Goldman. 217 Trial Tr. 20:19–21:5 (Thompson), 418:17–419:9, 424:21–425:7 (Weiner); Haskel Dep. at 50:3– 22. 218 JX 217, at 1; JX 224; Scruggs Dep. at 101:2–10; Trial Tr. 482:5–19 (Scruggs).

36 underwriting contract are not too speculative to support a reasonable expectation of

future business.

Regarding the remaining five broker-dealers for whom no specific

transactions were identified—BAML, KeyBanc, RBC, Stifel, and Wells Fargo—

Nuveen contends the lack of named deals translates to a lack of business expectancy.

I disagree in part. Preston Hollow had completed several 100% placement deals in

the past with both KeyBanc and Stifel, making these two broker-dealers its most

frequent partners for this type of transaction.219 Similarly, Wells Fargo served as

underwriter for the Roosevelt University transaction. All three continue to do 100%

placements that Preston Hollow originates.220 The strength and consistency of these

relationships creates a reasonable expectation in this case.

By contrast, Preston Hollow’s history with BAML and RBC does not evince

the same type of relationship. Business relations with RBC appeared to be in

decline.221 Following the single 100% placement completed with BAML—the

Howard Center transaction—Preston Hollow attempted to switch underwriters for

219 See Weiner Dep. at 90:18–25, 105:6–15, 106:11–18; Levin Dep. at 161:23–162:5; Challis Dep. at 127:18–128:3. 220 Trial Tr. 425:8–21, 441:3–442:10, 443:11–16 (Weiner); Czajkowski Dep. at 41:2–42:25, 64:10–65:24, 71:2–73:25; JX 430; JX 421. 221 See JX 740, at 1.

37 the follow-on Howard Quad transaction.222 These declining or one-off relationships

do not show a reasonable expectation of business opportunity. In sum, I find that

Preston Hollow had a business expectancy with regard to Deutsche and each of the

broker-dealers except for BAML and RBC.

2. Nuveen Intentionally Interfered with Preston Hollow’s Business Opportunities

The second prong of the tort asks whether Nuveen intentionally interfered

with Preston Hollow’s business expectations.223 Nuveen argues that there is no

intentional interference because Nuveen was targeting the 100% placement model,

which it considers harmful, and not Preston Hollow.224 Nuveen called Deutsche and

Morgan on December 20, 2018 and Goldman on December 21, 2018.225 Its

employees testified at trial that their intention on these phone calls was merely to

curtail a harmful trend in the industry. According to their testimony, referencing

“Preston Hollow” was not intended to identify that entity in particular. Instead, it

was only a “shortcut” for talking about 100% placements, and the phone calls had

See JX 484, at 2 (Preston Hollow stating in email to JPMorgan, “[f]rankly, the BAML banker 222

was a difficult person and we are suggesting a change”). 223 Nuveen, along with some Delaware case law, elides the second prong of the tort with the privilege to compete and deals with the propriety of the interference at this stage. See, e.g. Kable Prod. Servs., Inc. v. TNG GP, 2017 WL 2558270, at *11 (Del. Super. June 13, 2017); Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *8 (Del. Ch. Jan. 20, 2009). For clarity’s sake, I deal with the wrongfulness aspects separately below. 224 E.g. Trial Tr. 184:23–185:6 (Hlavin), 248:4–12 (Miller). 225 PTO, ¶¶ 20–27.

38 little or nothing to do with Preston Hollow beyond the fact that it performed this type

of transaction.226 I found this testimony both self-serving and disingenuous. I find

that the Nuveen personnel meant what they said. These communications evidence

a common theme: Nuveen called broker-dealers and told them to stop doing business

with Preston Hollow or face consequences—including being put “in the box” and

losing their business with Nuveen. This activity, which Preston Hollow aptly

characterizes as a campaign, demonstrates an intent to interfere.

Not all of Nuveen’s efforts were memorialized in recordings. Miller called

JPMorgan around December 20, 2018 and met with Wells Fargo in January 2019.

Davern called KeyBanc in April 2018 and met with Stifel in October 2018.227 Hlavin

contacted Mesirow prior to its closing the Hutto transactions.228 While these

communications were not recorded, the evidence leads me to believe they were part

of the same pattern of conduct intended to end these broker-dealers’ relationships

with Preston Hollow. Nuveen itself corroborates this conclusion: it told Deutsche

that it was “going to every single bank and broker-dealer” and that “the policy going

forward is that . . . if you are actively doing business with [Preston Hollow], Nuveen

226 Davern testified that she “said ‘Preston Hollow,’ but it could have been BlackRock or Vanguard or anyone else.” Trial Tr. 360:5–8 (Davern). Likewise, Miller and Hlavin both testified that “Preston Hollow” was a shortcut for “one-hundred percent placements.” Trial Tr. 184:23–185:6 (Hlavin), 248:4–12 (Miller). 227 PTO, ¶ 20; Moriarty Dep. at 40:4–19. 228 See JX 393R, at 2:17–4:7.

39 will not be doing business with you.”229 Miller named some of these broker-dealers

specifically, claiming he had a “firm commitment” from JPMorgan and Wells Fargo

(the two broker-dealers he contacted in December 2018 and January 2019) not to do

business with Preston Hollow.230 Davern told Morgan that Nuveen was “building a

book of dealers” that would refuse to do business with Preston Hollow.231 After

hearing Nuveen’s testimony, I can conclude that the meetings and phone calls that

went unrecorded were cut from the same cloth and demonstrate a specific intent to

disrupt the relationships between broker-dealers and Preston Hollow. Therefore, I

find intentional interference with relation to Deutsche and all remaining broker-

dealers.

3. Nuveen’s Interference Proximately Caused Preston Hollow Harm

“In Delaware, proximate cause is that direct cause without which the incident

would not have happened.”232 In disputing causation, Nuveen points out that the

broker-dealers offer explanations for their increasing distance from Preston Hollow.

These explanations may be true, but they do not rebut causation because Nuveen

229 JX 263R, at 24:21–25:2. 230 JX 310R, at 4:15–5:7. 231 JX 277, at 2:19–3:11, 4:21–5:6. 232 Beard Research, Inc. v. Kates, 8 A.3d 573, 609 (Del. Ch. 2010), aff’d sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010).

40 motivated these changes in policy and business behavior. I find causation exists for

Goldman, JPMorgan, KeyBanc, Mesirow, Stifel, and Wells Fargo.

Goldman was in discussions regarding twelve deals with Preston Hollow.233

After phone calls from Nuveen, internal reviews of “boundaries” and “matrixes”

arose, and business with Preston Hollow evaporated.234 Goldman’s deal “matrix”

may be genuine; the point is that Nuveen motivated its creation.235 The story repeats

with JPMorgan. In November 2018, JPMorgan inquired about underwriting the

Howard Quad transaction.236 Then, just before Christmas, it had discussions with

Miller about 100% placements, and soon after, an internal approval process arose

that kept it from engaging in the deal for which it had recently asked to be

considered.237 Similarly, with KeyBanc, Davern called in April 2018 and put it “in

the box” and withdrew business as a result of its involvement with Preston

Hollow.238 Afterward, it committed to show Nuveen every deal and stopped

originating 100% placements for Preston Hollow.239 Mesirow was working with

233 Trial Tr. 477:9–23 (Scruggs), 20:1–18 (Thompson), 94:22–96:6 (Albarran), 422:8–18 (Weiner); Scruggs Dep. at 55:25–58:21. 234 Scruggs Dep. at 41:16–45:23. 235 Trial Tr. 485:14–24 (Scruggs). 236 JX 217, at 1. 237 O’Loughlin Dep. at 36:9–14; JX 484, at 1–2. JPMorgan also cited concerns of interfering with its relationship with BAML. JX 484, at 1–2. 238 Moriarty Dep. at 40:4–19; JX 123. 239 Moriarty Dep. at 56:18–59:6.

41 Preston Hollow on the five Hutto transactions, but at the last minute, Mesirow

introduced terms that got it fired from the first of the Hutto deals, and it has not

completed any since.240 Hlavin told Deutsche he “blocked” the “fire dirt deals” out

of Texas, which matches the Hutto transactions.241 Davern met with Stifel

representatives in October 2018 and Miller also contacted them, after which Stifel

enforced a policy under which it stopped originating 100% placements for Preston

Hollow.242 After a fallout from the Roosevelt deal, Miller met with Wells Fargo in

January 2019, and it agreed not to commit to 100% placements without showing

Nuveen the deals first.243

These interferences tell a repeated story: Nuveen went to the broker-dealers

and gave them a clear message, and in response the broker-dealers took actions that

curtailed the business expectancies of Preston Hollow. The record shows that when

broker-dealers introduced or began enforcing pre-existing policies effectively

prohibiting the origination of 100% placements, these policies and their enforcement

were in response to Nuveen’s threats.

240 Trial Tr. 445:13–23, 424:21–425:7, 418:17–419:9 (Weiner), 20:19–21:5 (Thompson). 241 JX 393R, at 2:14–3:6. 242 Davern Dep. at 192:10–22, 193:13–18; Czajkowski Dep. at 64:10–65:24; JX 430. 243 Miller Dep. at 173:18–174:12; Markiewicz Dep. at 110:17–114:11.

42 By contrast, I find no causation regarding Deutsche or Morgan. Deutsche did

not reduce its business with Preston Hollow.244 While Preston Hollow contends that

Nuveen’s threat is ongoing, I see no indication that Deutsche is merely performing

under the Court’s scrutiny.245 The record demonstrates a firm dedication by

Deutsche to continue working with Preston Hollow.246 Regarding Morgan, it

appears that the Rixey transaction failed to go forward for reasons specific to Preston

Hollow and unrelated to Nuveen.247

4. Preston Hollow has Demonstrated Harm

I am left to evaluate harm on the following business expectancies: Goldman,

JPMorgan, KeyBanc, Mesirow, Stifel, and Wells Fargo. I find resulting damage to

all six business relations.

Goldman and JPMorgan were potential underwriters for the Howard Quad

transaction, but they withdrew. Nuveen argues this did not cause harm because

Preston Hollow closed the deal with another underwriter, Loop Capital, without

changing any terms. Preston Hollow, in turn, argues that the use of a non-bulge

bracket underwriter (i.e. not among the top echelon) hurts its ability to move the

244 Trial Tr. 355:14–24 (Van Den Handel). 245 Id. at 356:12–257:3 (Van Den Handel); JX 509, at 1–2. 246 Because I find no causation or damages regarding Deutsche, I do not address Nuveen’s argument regarding its concern over TOB counterparty risk described in its briefing. 247 See Haskel Dep. at 56:8–20, 107:11–108:7.

43 bonds in the secondary market.248 A top-tier underwriter gives its stamp of approval

to a transaction by underwriting the deal, which can enhance the marketability of the

bonds.249 Obtaining the desired terms, therefore, while being shut out from selecting

previously interested bulge-bracket underwriters demonstrates harm resulted from

the interference.250

Further, Preston Hollow was developing a book of business with Goldman but

is now shut out. The deals were in varying nascent stages, but it demonstrates harm

because it prevented Preston Hollow’s developing any of these potential projects

with one of the most important broker-dealers in the field. Regarding KeyBanc and

Stifel, Preston Hollow suffered harm because both these broker-dealers ceased to

originate 100% placements. Both continue to do business with Preston Hollow—

248 Trial Tr. 117:19–118:9, 131:16–132:14 (Albarran), 474:21–475:18 (Weiner). 249 Id. at 51:12–53:12 (Metzold) (testifying that “when you have a top-tier underwriter’s name on the documents, it’s sort of that good housekeeping seal of approval . . . it makes [the bond] a lot easier to sell, certainly in the primary market, and very much so in the secondary market, because people assume that the necessary diligence has been performed.”). 250 Nuveen filed a pre-trial Motion in Limine that sought to exclude, among many other things, Metzold’s testimony on this subject of harm based on preclusion from top-tier underwriters, claiming that it represented a new theory of harm not outlined in his expert report. After reviewing the evidence, the expert report, and the trial testimony, I do not find that Metzold’s testimony regarding this issue should be excluded or that it presented a “new theory” of harm such that the evidence prejudiced Nuveen. In Metzold’s expert report, he stated, “I believe that Nuveen’s actions will significantly harm Preston Hollow. Without the flow of deals and liquidity financing from the largest dealers, Preston Hollow’s business would decline and suffer dramatically.” Defs.’ Mot. In Limine to Exclude Certain Expert Testimony of Thomas Metzold, D.I. 318, Ex. A, Expert Report of Thomas Metzold (“Metzold Report”), at 15. At his deposition, Metzold expanded on this harm, explaining the value of top-tier underwriters, i.e. the “largest dealers.” Metzold Dep. at 188:25–192:2. He testified to this same issue at trial, offering Nuveen the chance to cross-examine him on this aspect of his opinion regarding harm to Preston Hollow.

44 including 100% placements—but Preston Hollow’s relationship has been harmed

because it no longer receives 100% placements brought to the table by these two

broker-dealers. Regarding Mesirow, Preston Hollow found other underwriters and

has closed some of the Hutto deals, while others remain underway.251 Nonetheless,

I find harm because Preston Hollow was forced to fire Mesirow as an underwriter

and seek an alternative at the last minute, which delayed the transactions. Finally,

Wells Fargo continues to do business with Preston Hollow, but after the Roosevelt

Transaction, it will only conduct 100% placements following a “first look” by

Nuveen. This practice harms Preston Hollow because it prevents access to the

exclusivity that makes 100% placements valuable to its business model.

5. Nuveen’s Actions do not Fall in the Business Competition Exception

As noted above, claims for tortious interference with business relations must

be examined in light of the privilege to compete in a lawful manner.252 Delaware

follows the Restatement (Second) of Torts (the “Restatement”) regarding the

privilege to compete. To excuse liability, § 768 of the Restatement requires that:

(a) the relation concerns a matter involved in the competition between the actor and the other and (b) the actor does not employ wrongful

251 See Albarran 30(b)(6) Dep. 94:11–97:9; 101:8–13; Trial Tr. 449:2–250:1 (Weiner); see also JX 938. 252 Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *5 (Del. Ch. Jan. 20, 2009) (citing DeBonaventura v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)); Beard Research, Inc. v. Kates, 8 A.3d 573, 608 (Del. Ch. 2010), aff’d sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010).

45 means and (c) his action does not create or continue an unlawful restraint of trade and (d) his purpose is at least in part to advance his interest in competing with the other.253

Before I excuse Nuveen under this analysis, I must find that all four factors are met.

I focus on the second requirement, the employment of wrongful means. Because I

find that Nuveen employed wrongful means in competing with Preston Hollow, I do

not address the other elements.

A finding of wrongfulness, in turn, must be based on a seven-part test outlined

in § 767 of the Restatement. This balancing tests asks me to weigh (1) the nature of

Nuveen’s conduct, (2) Nuveen’s motive, (3) Preston Hollow’s interests with which

Nuveen interfered, (4) the interests Nuveen sought to advance, (5) social interests in

protecting freedom of action versus contractual interests, (6) proximity of Nuveen’s

conduct to the interference, and (7) the relationship between Nuveen and Preston

Hollow.254 The chief factor in this analysis is the nature of the actor’s conduct

because this cuts to the heart of whether wrongful means were employed.255 Section

767 lists several wrongful means, of which I find two obtain: misrepresentation and

economic pressure.

253 Restatement (Second) of Torts (1979) (“Restatement”), § 768. 254 Id. § 767. 255 Id. § 767 cmt. c. (“The nature of the actor’s conduct is a chief factor in determining whether the conduct is improper or not”).

46 a. Nuveen’s Misrepresentations to Goldman

According to the Restatement, “[f]raudulent misrepresentations . . . make an

interference improper.”256 To prove fraudulent intent, “a misrepresentation must be

made either knowingly, intentionally, or with reckless indifference to the truth.”257

Nuveen’s phone calls with Deutsche, Goldman, Morgan, and RBC were recorded,

but of these third-parties, I have found tortious interference only with relation to

Goldman, and so I consider only the statements made to Goldman.

Some of Nuveen’s statements, such as stating that Preston Hollow had

“predatory” lending practices and sales pitches, may or may not be opinions. I need

not resolve this issue. Nuveen told Goldman that Preston Hollow lied to issuers, and

it promised it had evidence to support this allegation when it had only rumors from

the trading desk.258 This amounts to a reckless indifference to the truth. Similarly,

allegations that Preston Hollow’s “unethical practices” had “caught the attention of

the states’ attorney generals” who sent “nastygrams,” was a misrepresentation of the

“evidence” Miller actually possessed: a single letter from a single city attorney.259

Miller’s testimony that this lie was “a little bit of a shortcut” does not keep it from

256 Id. 257 Metro Comm’n Corp. BVI v. Advanced Mobilecomm Tech., 854 A.2d 121, 143 (Del. Ch. 2004). 258 JX 267R, at 19:10–16, 42:3–4; Trial Tr. 263:2–266:16 (Miller). 259 Trial Tr. 270:1–272:14 (Miller).

47 constituting a knowing misrepresentation intended to interfere with Preston

Hollow’s business.

b. Nuveen’s Improper Economic Pressure

A party loses its privilege to compete if it exerts improper economic

pressure.260 The commentary on § 767 of the Restatement makes it clear that the

propriety of economic pressure is a contextual inquiry: there is no “crystallized set

of definite rules,” and the “decision therefore depends upon a judgment and choice

of values in each situation.”261 Determining whether economic pressure is improper

requires examining

the circumstances in which it is exerted, the object sought to be accomplished by the actor, the degree of coercion involved, the extent of the harm that it threatens, the effect upon the neutral parties drawn into the situation, the effects upon competition, and the general reasonableness and appropriateness of this pressure as a means of accomplishing the actor’s objective.262

260 Nuveen argues that for economic pressure to be wrongful, it must be “extreme,” but this is not the standard either in the Restatement or in Delaware law. The case Nuveen cites analyzes tortious interference with prospective business advantage under New York law. Raytheon Co. v. BAE Sys. Tech. Solutions & Servs. Inc., 2017 WL 5075376, at *13 (Del. Super. Oct. 30, 2017) (“New York allows a party to demonstrate ‘unlawful means’ through an independent tort, or extreme and unfair economic pressure.”). Nuveen also cites § 766B of the Restatement, but this section does not impose a requirement that economic pressure be “extreme.” See Restatement, § 766B. 261 Restatement, § 767 cmt. b. (“[T]his branch of tort law has not developed a crystallized set of definite rules as to the existence or non-existence of a privilege to act . . . The issue in each case is whether the interference is improper or not under the circumstances; whether, upon a consideration of the relative significance of the factors involved, the conduct should be permitted without liability, despite its effect of harm to another. The decision therefore depends upon a judgment and choice of values in each situation.”). 262 Id. § 767 cmt. c.

48 Expanding further on the analysis, § 768, comment e of the Restatement permits a

defendant to “exert limited economic pressure.”263 As long as a party avoids an

illegal restraint on trade, “he may refuse to deal with the third persons in the business

in which he competes with the competitor if they deal with the competitor” and “he

may refuse other business transactions with the third person relating to that

business.”264 While such limited choice-of-business-partner pressure is acceptable

competition, Delaware law also recognizes that when a defendant intends the

interference to drive a competitor out of business and “shut its doors,” this

constitutes wrongful means, and the conduct is not privileged.265

I find that Nuveen exerted improper economic pressure on Preston Hollow.

In this instance, it is proper to look at the entire picture to understand the economic

pressure applied. In other words, each of Nuveen’s interactions with broker-dealers

may or may not have risen, individually, to wrongful means, but under the

Restatement, I consider the context as a whole to determine the propriety of

Nuveen’s pressure.266 100% placements comprise the majority of Preston Hollow’s

263 Id. § 768 cmt. e. 264 Id. 265 See Beard Research, Inc. v. Kates, 8 A.3d 573, 611–12 (Del. Ch. 2010), aff’d sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010). 266 Restatement, § 767 cmt. b. (“The issue in each case is whether the interference is improper or not under the circumstances; whether, upon a consideration of the relative significance of the factors involved, the conduct should be permitted without liability, despite its effect of harm to another. The decision therefore depends upon a judgment and choice of values in each situation.”).

49 business.267 Davern informed Morgan that Nuveen was attempting to make the

prohibition on 100% placements “uniform across [Wall Street].”268 Miller informed

Deutsche and Goldman that he had agreements with many of the major broker-

dealers not only to cease 100% placements, but to cut off Preston Hollow entirely,

and that he was seeking more of these agreements.269 Nuveen made it clear that

there would be punitive measures absent capitulation: Davern told Morgan and RBC

that Nuveen had “straightened out” or “turned around” noncompliant broker-

dealers.270 Further, the record shows that part of Miller’s aim was to cut off Preston

Hollow’s financing.271 The record, taken as a whole, shows consistent, systematic

efforts by Nuveen to shut down Preston Hollow’s ability to continue to do business.

Again, communications with each of the individual broker-dealers may evince

limited—that is, non-tortious—economic pressure; the choice to refrain from

267 Trial Tr. 28:2–22 (Thompson) (testifying that Preston Hollow does “[m]ostly primary” bond issuances and only “[o]ccasionally” purchases something less than 100% of the issuance), 439:20– 440:12 (Weiner) (testifying that “100 percent placement transactions . . . is almost all of our business.”). 268 JX 299R, at 10:20–11:11. 269 JX 310R, at 4:15–5:7; JX 267R, at 33:23–34:3. 270 JX 299R, at 4:13–22, 10:20–11:11; JX 396R, at 2:4–12; 5:13–20. 271 See JX 310R, at 11:5–12:20 (Miller stating in phone call, “who else are they going to get financing from when Wells Fargo, Goldman, JPMorgan, BAML, and Citi have . . . agreed to – to not do this business anymore? I don’t know where they’re going to get the financing from.”), 17:13–16 (“But where are they getting the money to do the predatory lending? I think you’re – I think you’re far and away number one”), 21:9–13 (“some of these dirty deals are going to become less financeable, in my opinion. That’s my effort. That’s my goal, one of my goals, just so you know.”); see also Van Den Handel Dep. 43:15–47:4, 72:9-73:11.

50 business with a third-party who conducts business with a competitor. The facts

revealed in litigation, however, show that as Preston Hollow was becoming a

contender in the high-yield municipal bond market, Nuveen, the self-styled “largest

high-yield [municipal] fund in the world,”272 sought an industry-wide agreement not

to conduct business with Preston Hollow. Although part of Nuveen’s motive was

its interest in “seeing all the deals,” its behavior shows that its object was also an

attack directed at Preston Hollow’s ability to operate. The evidence demonstrated

an aggressive and widely dispersed campaign to use almost any pressure necessary

to cut off a competitor from its chief source of business as well as its financing. I

find that Nuveen was not simply attempting to achieve a competitive edge; it meant

to use the leverage resulting from its size in the market to destroy Preston Hollow.

Considering the context as a whole, as the Restatement urges, I find that Nuveen

exerted improper economic pressure on Preston Hollow, and so its actions regarding

Goldman, JPMorgan, KeyBanc, Mesirow, Stifel, and Wells Fargo were not

privileged by its right to lawfully compete. Therefore, Nuveen is liable for tortious

interference with business relations.

272 Trial Tr. 237:7–9 (Miller); JX 263, at 17:24–18:1.

51 B. New York State’s Donnelly Act

In its third count, Preston Hollow claims Nuveen violated New York State’s

Donnelly Act of 1899 (the “Donnelly Act”).273 Preston Hollow argues that Nuveen

organized a boycott among broker-dealers (many of whom are based in New York)

that constitutes an illegal restraint on trade in that state. After review of the

applicable statutes and case law, I decline to rule on this count, as I believe it would

constitute an imprudent determination of New York law when it is unclear whether

New York law would permit Preston Hollow’s claim seeking injunctive relief.

The law on the availability of injunctive relief to private parties under the

Donnelly Act is limited and conflicted.274 At least one New York decision found

such private party relief unavailable under the Donnelly Act.275 On its face, the

statute permits only the attorney general to seek injunctive relief.276 Preston Hollow

argues that this is largely irrelevant because “[t]he Donnelly Act was modelled on

the Federal Sherman Act of 1890,” and therefore it should “generally be construed

273 N.Y. Gen. Bus. Law §§ 340–47. 274 Compare Peekskill Theater v. Advance Theatrical Co. of N.Y., 206 A.D. 138 (N.Y. App. Div. 1923) (New York appellate court granting injunction to private litigant without analyzing the permissibility under the statute) with Blumenthal v. Am. Soc’y of Travel Agents, Inc., 1977 WL 18392, at *4 (N.Y. Sup. Ct. July 5, 1977) (New York trial court analyzing the statute and denying injunctive relief to private litigant without addressing Peekskill precedent). 275 Blumenthal, 1977 WL 18392, at *4. 276 N.Y. Gen. Bus. Law § 342 (“The attorney-general may bring an action in the name and in behalf of the people of the state against any [party] to restrain and prevent the doing in this state of any act herein declared to be illegal.”).

52 in light of Federal precedent and given a different interpretation only where State

policy, differences in the statutory language or the legislative history justify such a

result.”277 However, this argument is undermined by a close look at the statutory

background, starting with the Sherman Act of 1890.278 Under the Sherman Act,

equitable relief was only available to the United States Attorney General.279 In 1914,

Congress added the Clayton Act,280 expressly extending equitable relief under the

Sherman Act to private parties.281 The Donnelly Act is modeled after the Sherman

Act, but it has not been supplemented with an analogous Clayton Act. Therefore,

“differences in the statutory language or the legislative history” suggest I ought not

bypass the conflicting New York law to follow federal precedent.

277 People v. Rattenni, 81 N.Y.2d 166, 171 (N.Y. 1993); see also Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327, 334 (N.Y. 1988). 278 15 U.S.C. §§ 1–11. 279 15 U.S.C. § 4 (“[I]t shall be the duty of the several United States attorneys, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations.”). 280 15 U.S.C. §§ 12–27. 281 15 U.S.C. § 26 (“Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws . . .”). Federal case law appears to corroborate that injunctive relief became a private remedy after the addition of the Clayton Act. Compare State of Minnesota v. N. Sec. Co., 194 U.S. 48, 71 (1904) (“taking all the sections of [the Sherman Act] together, we think that its intention was to limit direct proceedings in equity . . . to those instituted in the name of the United States, under the 4th section of the act, by district attorneys of the United States, acting under the direction of the Attorney General”) with Wilk v. Am. Med. Ass’n, 895 F.2d 352, 355 (7th Cir. 1990) (noting that defendant was liable under § 1 of the Sherman Act and equitable relief was granted under § 26 of the Clayton Act).

53 Delaware has a policy against innovating in sister-states’ laws.282 Here,

granting injunctive relief would determine an ambiguous question of New York law.

It would therefore be imprudent under principles of comity to rule on the injunctive

relief sought under the Donnelly Act. “If litigants want innovative common law,

they should address their claims to the courts of the state whose law applies.”283

Declining to make a determination on this count moots the issue of Nuveen’s

liability under the Donnelly Act for the purposes of this litigation. Therefore, I need

not address the substantial issue of whether, in light of the interstate nature of both

Nuveen’s and Preston Hollow’s business, federal law would preclude application of

the Donnelly Act here.284

C. Preston Hollow is not Entitled to Permanent Injunctive Relief

Nuveen has committed a tort; the usual remedy for loss caused by tort is

money damages. Such damages would be available here, had Preston Hollow sought

to demonstrate them. It is quite true that in any case of interference with a business

relationship, damages may be difficult to calculate with certainty. It is equally true

282 See RBC Capital Markets, LLC v. Educ. Loan Tr. IV, 2011 WL 6152282, at *6 n.43 (Del. Ch. Dec. 6, 2011) (citing Viking Pump, Inc. v. Century Indem. Co., 2009 WL 3297559, at *25 n.144 (Del. Ch. Oct. 14, 2009)). 283 Id. 284 Assuming the Donnelly Act did apply, I note that numerous factual issues, not analyzed here, regarding formation of alleged agreements between the broker-dealers and Nuveen to boycott Preston Hollow, as well as the broker-dealers’ oversight of one another in furtherance of the alleged boycott, would need to be addressed.

54 that Preston Hollow bears the burden to demonstrate damages; had it sought

damages and utterly failed to prove them, it would have failed in an element of the

tort, and would be without a remedy.285 Nonetheless, it is also true that the burden

of proof to create a record on which a court may establish a damage calculation is

not high, and is less than for the substantive elements of the tort.286 Even based on

the record here—created in light of Preston Hollow’s decision to eschew damages—

it seems quite likely the Plaintiff could have created a sufficient ground for a non-

speculative damages metric.

However, Preston Hollow expressly does not seek damages for its claim of

tortious interference; instead, it seeks only equitable relief.287 It asks this Court to

(1) permanently enjoin Nuveen from repeating its tortious behavior, (2) force

Nuveen to disavow and repudiate its tortious behavior “and to take all other actions

necessary to restore [Preston Hollow]’s right to freely and fairly compete,” and (3)

direct Nuveen to adopt internal supervisory procedures and policies to prevent future

repetition of the tort.288

285 See Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2020 WL 948513 (Del. Ch. Feb. 27, 2020) at *17–20 (finding lack of proof of damages prevents recovery). 286 Id. at *20 (finding that the “quantum of proof required to establish the amount of damage is not as great as that required to establish the fact of damage.” (quoting Total Care Physicians, P.A. v. O’Hara, 2003 WL 21733023, at *3 (Del. Super. July 10, 2003))); see also Medicalgorithmics S.A. v. AMI Monitoring, Inc., 2016 WL 4401038, at *26 (Del. Ch. Aug. 18, 2016); Beard Research, Inc. v. Kates, 8 A.3d 573, 613 (Del. Ch. 2010). 287 Pl. Written Closing Argument, D.I. 372 (“Pl.’s Post-Trial Br.”), at 24. 288 Id. at 62.

55 Equitable relief for tortious behavior is an extraordinary remedy. It is

commonly available, however, to prevent ongoing wrong in the context of the

interference torts.289 “The elements for permanent injunctive relief are: (1) actual

success on the merits; (2) irreparable harm will be suffered if injunctive relief is not

granted; and (3) the harm that will result from a failure to enjoin the actions that

threaten plaintiff outweighs the harm that will befall the defendant if an injunction

is granted.”290 In determining that Nuveen is liable for tortious interference with

business relations, the “merits prong” of the test is met, for the reasons expressed

above.

Permanent injunctive relief is usually applied to prevent an ongoing harm; an

encroachment on real property, for instance.291 It is but sparingly applied in the case

of a past wrong which a plaintiff apprehends may be repeated.292 I start with the

289 See Organovo Holdings, Inc. v. Dimitrov, 162 A.3d 102, 122 (Del. Ch. 2017) (“[I]injunctive relief is a common and non-controversial remedy for tortious interference with prospective economic advantage.” (citing Copi of Del., Inc. v. Kelly, 1996 WL 633302, at *4–5 (Del. Ch. Oct. 25, 1996); Bowl–Mor Co. v. Brunswick Corp., 297 A.2d 61, 62 (Del. Ch. 1972) aff’d, 297 A.2d 67 (Del. 1972))). 290 Sierra Club v. DNREC, 2006 WL 1716913, at *3 (Del. Ch. June 19, 2006), aff’d sub nom. Sierra Club v. Delaware Dep't of Nat. Res. & Envtl. Control, 919 A.2d 547 (Del. 2007). 291 E.g. Smith v. Stanphyle Corp., 1978 WL 22013, at *1 (Del. Ch. Dec. 13, 1978) (granting permanent injunctive relief to enjoin trespass); Hammond v. Dutton, 1978 WL 22451, at *3 (Del. Ch. Dec. 20, 1978) (granting permanent injunctive relief to enjoin trucking operation that constituted private nuisance); Plantation Park Ass’n, Inc. v. George, 2007 WL 316391, at *5 (Del. Ch. Jan. 25, 2007) (granting permanent injunctive relief to prohibit defendant’s covenant-violative trailer). 292 See State ex rel. Brady v. Pettinaro Enters., 870 A.2d 513, 536 (Del. Ch. 2005) (denying injunction “on the basis of unsubstantiated fear that a legal duty may be breached in an uncertain future.”); Young v. Red Clay Consol. Sch. Dist., 159 A.3d 713, 780 (Del. Ch. 2017) (“A permanent 56 proposition that equity does not presume future intentional wrongdoing.293 I

presume that Preston Hollow suffered irreparable harm as a result of Nuveen’s

tortious behavior. Nonetheless, before receiving injunctive relief here, it must

demonstrate that it faces a likelihood that Nuveen will repeat its tortious behavior.

In light of the facts of record, I find that unlikely. First, I note, upon receiving

Preston Hollow’s demand that it desist in its disparaging and threatening behavior,

Nuveen notified those with whom it had thus communicated as follows:

Nuveen does not and will not seek any agreement or commitment from your firm concerning the counterparties it does business with. We fully acknowledge your firm is free to conduct its trading business in a manner and with firms and counterparties of your choosing . . . With respect to [Preston Hollow] specifically, and for the avoidance of doubt, Nuveen seeks no agreement or commitment from your firm regarding [Preston Hollow] . . . of course, Nuveen reserves the right to conduct its trading business with firms within its lawful discretion and to hold and express its views and judgments in pursuing its investment advisory and trading activities.294

Preston Hollow notes, correctly, that Nuveen retains the right to pursue its own

interests, and it reads this as a veiled threat. But even under the relief Preston Hollow

injunction against future conduct is not warranted simply because a court has found past conduct illegal.”). 293 Organovo, 162 A.3d at 114 (citing Young v. Red Clay Consol. Sch. Dist., 2017 WL 2271390, at *53 (Del. Ch. May 24, 2017); Christiana Town Ctr., LLC v. New Castle Ctr., 2003 WL 21314499, at *3 (Del. Ch. June 6, 2003) (“[T]he court must presume that [parties] will respect any decision rendered by any competent court of this State.”); Reeder v. Del. Dep’t of Ins., 2006 WL 510067, at *16 (Del. Ch. Feb. 24, 2006) (“There is no justification on this record for an injunction requiring the [defendant] to do what it must do in any event—comply with applicable statutory constraints on its behavior.”)). 294 PTO, ¶ 30.

57 seeks, Nuveen must also be able to pursue its business interests, to the extent it does

not do so tortiously.

Next, I note, Nuveen is not pursuing an ongoing campaign of threats or

falsehood, and Preston Hollow does not argue that during the course of this litigation

Nuveen has committed further wrongs. Nuveen executive Huffman has directed

Nuveen personnel to cease disparaging Preston Hollow going forward.295

Furthermore, in light of this decision, it would be exceedingly unwise for Nuveen to

mount a similar campaign of malicious behavior. Third, the negative relief Preston

Hollow seeks—ordering Nuveen to commit bad acts no more (that is, to speak badly

of Preston Hollow only where true) would be unusually difficult for the Court to

oversee. Finally, both that relief and the positive relief Preston Hollow seeks—

forcing Nuveen to write a letter to its contacts that its past behavior was tortious, and

promising not to do it again—raise First Amendment issues; and with respect to a

mea culpa letter, it would add little, I suspect, to the conclusions in this

Memorandum Opinion, which, of course, Preston Hollow may circulate as it sees

fit.

In order to receive the injunctive relief it seeks, Preston Hollow must show a

likelihood of harm absent relief. In other words, it is insufficient to show past harm;

for the relief it seeks, Preston Hollow must show that without the injunction, it is

295 Trial Tr. 579:4–8 (Huffman).

58 likely to suffer harm that the injunction could prevent.296 I find that Preston Hollow

has failed to carry this burden.

It is canonical that equity will not fail to supply a remedy to a wrong.297 Here,

the remedy available was damages.298 Those, the Plaintiff elected to forgo. If the

wrongdoing were ongoing, I would not hesitate to act. Here, however, the Plaintiff

has shown only past tortious behavior; it has not shown a likelihood of future harm

absent injunctive relief. Accordingly, its request for a permanent injunction is

denied.

III. CONCLUSION

For the foregoing reasons, I find Nuveen committed the tort alleged in Count

II, tortious interference with business relations. I decline to rule on Count III,

violation of New York State’s Donnelly Act. The Plaintiff has failed to demonstrate

entitlement to an injunction. The Parties should supply an appropriate form of order.

296 See, e.g. McMahon v. New Castle Assocs., 532 A.2d 601, 606 (Del. Ch. 1987) (requiring that facts show “a reasonable apprehension of a future wrong” to grant injunction because defendants cannot simply “be enjoined from breaching such duty again.”). 297 See Weinberger v. UOP, Inc., 1985 WL 11546, at *9 (Del. Ch. Jan. 30, 1985), aff’d, 497 A.2d 792 (Del. 1985) (TABLE) (“[E]quity will not suffer a wrong without remedy.”) 298 Preston Hollow sought relief for defamation based on Nuveen’s behavior at issue here. I found such relief unavailable in equity. Preston Hollow Capital LLC v. Nuveen LLC, 216 A.3d 1 (Del. Ch. 2019). Preston Hollow received leave to pursue this action in Superior Court; damages, if appropriate, are available there.