• Thursday, March 28, 2024
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Bermuda court orders halt to US lawsuit against Apollo

Bermuda court orders halt to US lawsuit against Apollo

A Bermuda court has ordered a halt to a lawsuit filed in New York against Apollo Global Management in a decision that could have implications for investors in foreign-registered companies traded on US stock exchanges.

The temporary injunction was obtained by Apollo’s affiliated life insurance company, Athene Holding, which is listed on the New York Stock Exchange but incorporated in the island territory of Bermuda.

The order purports to bar a US-based Athene shareholder, Central Laborers’ Pension Fund, from pursuing a lawsuit that accuses Apollo of “looting” the insurance company by charging “extravagantly expensive” fees running into hundreds of millions of dollars a year.

Apollo and Athene declined to comment on the Bermuda order. Apollo has said it will “vigorously” defend the case, and that the allegations lack any legal or factual basis. The private equity firm’s contract to manage a $130bn portfolio of assets on behalf of Athene accounts for one-third of the management fees earned by the private equity firm.

It is unclear whether the Bermuda order will prevent the New York lawsuit from proceeding. “[US] courts often will respect the judgments of foreign courts, though they may not be obligated to do so,” said Aryeh Portnoy, a partner at law firm Crowell & Moring. But he added that “context matters”, with judges likely to consider factors such as when the foreign lawsuit was filed and whether any constitutional rights are engaged.

Even before the Bermuda court issued its injunction, the pension fund faced a potential battle to persuade judges that they should hear the lawsuit in New York.

Athene maintains that the suit should have been filed in Bermuda itself, which, under the company’s articles of incorporation has sole authority to adjudicate matters relating to the directors’ conduct. The pension fund says those articles do not apply because it is suing Apollo, rather than the Athene board.

The injunction attempts to take that judgment out of the hands of the Manhattan court. Athene’s lawyers have insisted that Central Laborers ask to have their lawsuit put on hold, although in a letter to New York judge Peter Sherwood, the pension fund sought to resist that demand.

Bermuda-registered companies account for about a dozen of the 500 or so foreign companies listed on the New York Stock Exchange.

If Athene’s legal ploy works, that number could increase, according to Neil Wertlieb, a lecturer at UC Berkeley School of Law. “No company enjoys having a group of shareholders dictate its fate by suing its contractual counterparties on its behalf,” Mr Wertlieb said.

Companies have increasingly included in their corporate documents provisions that force investors to bring lawsuits in specific jurisdictions. Experts are researching how such corporate governance features can affect share prices.

“Shareholders in the public market should be on notice that an exclusive forum bylaw exists and therefore market trading prices should also reflect that fact,” said Jill Fisch, a professor of law at the University of Pennsylvania.