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A New Jersey appeals court has upheld a $40 million verdict in a libel lawsuit brought by a hedge fund and its principals over criticism of their company in a report for prospective investors.

BackTrack Reports, which was left on the hook for nearly $15 million in the case, appealed decisions by the trial judge in the libel case denying motions for judgment notwithstanding the verdict and claims of legal error during the trial. But the appeals court found no basis to grant the company’s motions.

BackTrack Reports, a New York company now known as First Advantage Litigation Consulting, filed its appeal in a suit by NuWave Investment Corp. and two NuWave principals, Troy Buckner and John Ryan.

BackTrack began researching NuWave in 2005 at the request of New Finance, a London asset management firm that was contemplating a major investment in NuWave.  BackTrack issued a report accusing Buckner and Ryan of theft and incompetence in their prior jobs at a commodities trading firm, Hyman Beck & Co., in Florham Park. Buckner left Hyman Beck in 2000 to found NuWave, and Ryan followed in 2001. BackTrack elicited those allegations in interviews with two principals at Hyman Beck.

New Finance, whose leaders had a favorable view of NuWave before receiving the BackTrack report, called off plans to invest in the company when they received it. But New Finance then performed its own research into NuWave and concluded the BackTrack report was without merit. New Finance ultimately proceeded with its investment in NuWave, but put $4 million into the fund instead of the $10 million it previously planned.

NuWave, Buckner and Ryan sued Hyman Beck, its two principals, as well as BackTrack. But Hyman Beck and its principals were dismissed from the case based on the one-year statute of limitations for libel actions.

A jury awarded NuWave $2.6 million in actual and presumed damages after its first trial against BackTrack in 2015, but the Supreme Court threw out that verdict because presumed and actual damages cannot be awarded in the same case.

After a retrial in 2016, the jury awarded $2 million in actual, special damages, which are based on measurable dollar amounts of actual loss; $38 million in actual, general damages, which are based on intangible losses that can be inferred from special damages and other facts surrounding the case; and $800,000 in punitive damages.

At both trials, juries were asked on verdict sheets to consider the relative liability of Hyman Beck, its principals, and BackTrack, even though Hyman Beck was no longer a party in the case. After the second trial, the judge entered a molded verdict applying the comparative liability ratio from the first trial—37% to BackTrack and 63% to Hyman Beck. Judgment was entered against BackTrack for nearly $15 million.

In the parties’ second trip to the Appellate Division, Judges Carmen Messano, Douglas Fasciale and Lisa Rose rejected BackTrack’s appeal of the trial judge’s decision denying a judgment notwithstanding the verdict concerning the award of $2 million in actual special damages to NuWave. That amount included costs incurred by NuWave to hire a public relations firm to rehabilitate its image and to commission an audit to submit to another prospective investor.

Noting that such costs came to nearly $2 million, the same amount awarded, the appeals court said the award was supported by sufficient evidence and BackTrack’s challenge “lacks sufficient merit to warrant extensive discussion.”

The appeals court also rejected BackTrack’s claim that the $38 million award for reputational harm was not supported by the evidence. Testimony presented by NuWave of colleagues in the investment management industry who knew of the unfavorable report supported the plaintiffs’ assertion that the report affected the reputations of NuWave and its principals, the appeals court said.

The Appellate Division judges also rejected claims by BackTrack that the trial judge’s exclusion of a report concerning items that the plaintiffs deemed defamatory but the first jury found were was a miscarriage of justice. The appeals court said that decision “had no adverse effect upon defendant’s ability to argue to the jury that the defamatory statements were not a proximate cause of the alleged damages.”

Thomas Smith of K&L Gates in Pittsburgh, who argued for NuWave, Buckner and Ryan at the Appellate Division, said of the ruling, “We are very pleased with the decision of the court. We obviously believe it is exactly right and we are very happy for our clients, who have battled to try and restore their reputations for 13 years now in this litigation.”

Kim Watterson of Reed Smith in Los Angeles, who argued for BackTrack on appeal, did not return a call seeking comment.