The United States Court of Appeals for the Third Circuit recently overturned a District Court decision in favor of a trust fund seeking to do business with an Investment adviser in contravention of a non-competition agreement between the investment adviser and its former hedge fund.
The trust fund, which had been a client of the former hedge fund, argued unsuccessfully that the hedge fund had breached its fiduciary duties to the trust fund by preventing it from moving its assets to the investment adviser's new hedge fund. The trust fund argued that the hedge fund had breached its fiduciary duties under the Employee Retirement Income Security Act of 1976 (ERISA) with respect to employee benefit plan assets covered by under ERISA, and under the Investment Advisers Act of 1940 with respect to non-ERISA assets.
Although the District Court had found in favor of the trust fund on both counts, the Court of Appeals overturned the decision. As a result, the investment adviser and its new hedge fund were prevented from doing business with the trust fund for a period of five years, as contemplated by the terms of the non-competition agreement the investment adviser had entered into with its former hedge fund.
If you would like further information relating to hedge funds and their investment managers, contact Howard Neuman at (212) 818-9200.SATTERLEE STEPHENS BURKE & BURKE LLP230 Park Avenue New York, N.Y. 10169 Phone: (212) 818-9200 Fax: (212) 818-960747 Maple Street Summit, N.J. 07901-2518 Phone: (908) 277-2221 Fax: (908) 277-2038World Wide Web Site:http://www.ssbb.com
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To take action on any of the information contained in this report, you should seek professional advice.