On September 4, 2017, the Royal Court of Guernsey issued a definitive ruling in favor of the former directors and managers of Carlyle Capital Corporation (“CCC”), a Guernsey-based fund launched by the Carlyle Group. CCC was incorporated in 2006 and invested principally in AAA-rated residential mortgage-backed securities. CCC entered liquidation during the 2008 financial crisis — days before Bear Stearns failed — when it lost the ability to finance its $23 billion portfolio of mortgage securities. CCC’s liquidators brought suit against Carlyle and CCC’s former directors and managers, alleging they had acted irresponsibly and should have begun winding down the fund months earlier. The plaintiff-liquidators sought nearly $2 billion in damages. Robbins Russell represented CCC’s former independent directors.
Following more than seven years of litigation and the largest-ever trial in Guernsey (consuming nearly six months), the Guernsey court dismissed all claims against all defendants. In its sweeping 525-page decision, the court ruled that the defendants acted reasonably and appropriately in the management and governance of CCC. It dismissed each and every allegation of breach made by the plaintiff-liquidators, rejected their theory of the case as “entirely wise with hindsight,” and criticized their pursuit of unmeritorious claims. It is unclear whether the liquidators will appeal.
Robbins Russell partners Gary Orseck, Alison Barnes, and William Trunk led the engagement. Their work involved all aspects of the litigation, including pretrial matters, extensive work with expert and factual witnesses, and participation in the Guernsey trial.