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Preston Hollow Capital LLC v. Nuveen LLC

Court of Chancery of Delaware

August 13, 2019

PRESTON HOLLOW CAPITAL LLC, Plaintiff,
v.
NUVEEN LLC, Nuveen Investments, Inc., Nuveen Securities LLC, and Nuveen Asset Management LLC, Defendants.

         Date Submitted: June 7, 2019

Page 2

[Copyrighted Material Omitted]

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          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.

          OPINION

         GLASSCOCK, Vice Chancellor

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          Equity will not enjoin a libel .

          This Opinion involves a single issue: the Defendants, business competitors of the Plaintiff, made statements about the Plaintiff to third parties. The Plaintiff believes itself traduced. It seeks solely equitable relief for the alleged common-law slander: injunction of future (potential) defamatory utterances by the Defendants.

         The Amended Complaint alleges another tort for which injunctive relief is sought, tortious interference with prospective business relations, which has withstood the Defendants’ Motion to Dismiss.[1] The matter is before me on the remainder of that Motion, on which I withheld judgment, concerning the Plaintiff’s request that I find common-law defamation, and enjoin future defamatory utterances, as described above.[2] This Opinion considers whether equity will entertain such a request to enjoin future defamatory speech.

          Equity will not enjoin a libel.

          Maxims of equity are legendarily pithy expressions of general Chancery practice. Law (and particularly its more flexible component, equity) is a creature of nuance and fine-but-significant gradations, and pithiness, like garlic, may both enhance the savor of a discourse, and at the same time mask its subtle flavors. Maxims, in other words, are often best defined by their exceptions. It is true, nonetheless, that generally, equity will not enjoin future speech on the ground that such speech, if uttered, may be defamatory.

          The Court of Chancery is a court of limited jurisdiction; when addressing a common-law tort, this Court may act only if equity is required in remedy, due to an insufficiency of remedies at law.[3] Moreover, because of the implications on speech of the application of remedies, legal or equitable, to tortious speech, slander and libel are seen as denizens of the Superior Court, and are subject to the findings made there by juries regarding the speech of their peers. Thus, Chancery is said to have no jurisdiction over libel. This principle was recently affirmed by Vice Chancellor Slights, who dismissed a defamation case (subject to transfer to Superior Court) on that ground.[4]

         A single case in this jurisdiction supports a so-called trade-libel exception to the rule that Chancery will not exercise

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jurisdiction over a request to enjoin a libel: J.C. Pitman & Sons, Inc. v. Pitman .[5] Pitman has recently been subject to scholarly consideration by Vice Chancellor Laster; [6] nonetheless, I confess I find the Pitman decision somewhat opaque. I conclude, however, that Pitman stands for the following proposition: The general rule is that equity lacks jurisdiction over a request to enjoin common-law defamation. In a limited subset of cases, however, a separate tort (in Pitman, the tort of unfair business competition) is alleged where relief at law is insufficient, and where the equitable remedy sought is, incidentally, an injunction of a "trade libel"— that is, a libelous statement to consumers that falsely disparages a plaintiff’s goods or services. In such a case, the matter is within this Court’s jurisdiction, because the underlying behavior being examined without a jury is not mere speech, but involves other tortious activity where tradition and constitutional considerations do not require the findings of a jury. Further, this Court may enjoin that tortious behavior, even if the injunction incidentally enjoins the trade libel. In other words, under Pitman, where this Court has jurisdiction over business torts, it may, in an appropriate case, enjoin their threatened continuation, even if the injunction suppresses speech. In this case, for instance, the Plaintiff has adequately pled tortious interference with business relations; if it proves that claim, it may seek equitable remedies, as appropriate.

         Contrary to the Plaintiff’s argument, addressed below, I do not read Pitman to support a separate count of common-law slander, as the Plaintiff contends, nor does Pitman support the kind of forward-looking suppression of new defamatory statements of the variety sought here.

          The Plaintiff’s broad request to enjoin future speech raises substantial state and federal constitutional questions. However, I need not reach these questions, as I find I am without jurisdiction on the basis that equity will not enjoin a libel .

          I explain my reasoning further, below.

          I. BACKGROUND

         At this Motion to Dismiss stage, I assume as true the facts pled in the Amended Complaint.[7]

          A. The Parties

         Plaintiff Preston Hollow Capital LLC ("Preston Hollow") is a Delaware limited liability company.[8] Preston Hollow invests in high-yield municipal bonds.[9] It was formed in 2014 and currently has approximately $1.8 billion in assets and $1.3 billion in equity capital.[10]

         Defendant Nuveen LLC is a Delaware limited liability company.[11]

         Defendant Nuveen Investments, Inc. is a Delaware corporation.[12]

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          Defendant Nuveen Securities LLC is a Delaware limited liability company.[13]

         Defendant Nuveen Asset Management LLC is a Delaware limited liability company.[14] I refer to the Defendants, collectively, as "Nuveen." Nuveen is "one of the world’s largest institutional investors in municipal bonds, with municipal fixed income ...


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