Private Fund Manager Prevails in Defamation Lawsuit Against Background Investigation Firm

The Appellate Division of the New Jersey Superior Court (Court) recently affirmed a decision to award significant damages to a fund manager and its principals for damage they suffered as a result of defamatory statements in background reports prepared by an investigation firm. After two juries found for the fund manager during this long-running litigation, the Court’s verdict specifically focused on the investigation firm’s challenge regarding the reputational harm allegedly suffered by the manager and principal. The Court’s recent decision considers issues about the nature and extent of damage suffered by the plaintiffs, as well as whether that damage was caused by the background investigation firm. This article explores the circumstances of the dispute and the Court’s reasoning. For more on background investigations, see “The Role of Background Checks in Fund Investor Due Diligence and Fund Manager Hiring” (Aug. 21, 2014); and “SEC Commences Fraud Action Against a Purported Private Fund Manager for Providing False Background Information and Including False Information on a Website” (Nov. 17, 2011).

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