Court Tosses Highland Ex-CEO’s Sanction for Suing Current Chief

Highland Capital Management LP’s former chief executive’s $240,000 bankruptcy court sanction was vacated Thursday after a divided federal appeals court said the bankruptcy court exceeded its authority.

The sanction against James Dondero stemmed from the bankruptcy court’s finding that Dondero violated an order not to sue the company’s current CEO outside bankruptcy court.

While the bankruptcy court could fine Dondero to compensate Highland for the costs of litigating a motion filed in district court against the current CEO, the nearly $240,000 fine went beyond those costs, the Fifth Circuit said.

“Both the bankruptcy judge and the district court reasoned that ...