New York Court Dismisses Investor Lawsuit Against Philip Falcone and Harbinger Capital

Judge Alison Nathan of the Southern District of New York dismissed with prejudice all direct, putative class action claims brought against Paul, Weiss client Philip Falcone and the general partner and management entities for six private investment funds operated by Paul, Weiss client Harbinger Capital Partners. The court declined to exercise supplemental jurisdiction over the remaining state law derivative claims and dismissed them without prejudice. The plaintiffs, a putative class of all persons who acquired limited partnership interests in the funds, claimed that the defendants made fraudulent and/or grossly negligent misstatements and omissions to investors, in violation of defendants' fiduciary duties, with respect to the funds' investments and positions in LightSquared Inc., formerly a publicly traded telecommunications company called SkyTerra Communications, Inc., which the funds acquired and took private in 2010, and which filed for bankruptcy protection in May 2012.

Judge Nathan had previously dismissed the plaintiffs' claims to the extent they were predicated on the purchase of SkyTerra on the grounds that those claims, brought under state law, were precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), but allowed the plaintiffs to amend their complaint to replead their remaining allegations. Judge Nathan adopted nearly all of the defendants' reasoning to dismiss the amended complaint, holding that the plaintiffs' repleaded fraud and negligence claims were still precluded by SLUSA because their allegations, arising while LightSquared was private, were "inevitably intertwined" with their allegations regarding the purchase of SkyTerra and that the direct breach of fiduciary duty claims were subject to, but did not meet, the heightened pleading standards of Rule 9(b).

The Paul, Weiss team included litigation partners Daniel Leffell and Leslie Fagen and counsel Steven Herzog.