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8th Circuit Rejects Hedge Fund’s Debt Collection Practice

Law.com – The 8th U.S. Circuit Court of Appeals has become the first circuit in the country to rebuff efforts by a hedge fund to call in a debt based on an alleged technical violation of bond terms in a dispute over an $850 million note issued to United Health Group Inc.

The circuit noted that at least three other federal judges and a New York state court have come down the same way, rejecting the practice used to assert a default claim against United Health in United Health Group Inc. v. Wilmington Trust Co., No. 08-1904 (8th Cir.)

Claims similar to Wilmington Trust’s have cropped up in other cases as an investment strategy derided by attorney Robert Giuffra, as a "shakedown strategy" that takes from shareholders and gives to bondholders. Giuffra of Sullivan & Cromwell in New York represented United Health in the case. "We are pleased with the 8th Circuit’s decision holding that United fully complied with the terms of its indenture, the relevant federal statute and acted in good faith," he said.

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