James Dondero’s No-Holds-Barred Highland Embraced Bankruptcy (1)

James Dondero doesn’t back down.

That’s what helped him build Highland Capital Management into a credit giant that at one point oversaw $40 billion. But it has also embroiled the business in numerous lawsuits and the firm has dwindled to a quarter of that size.

That approach was on display on Wednesday when a Highland unit filed for bankruptcy, faced with a claim stemming from a fund that it shuttered during the 2008 financial crisis. The decision confounded some of the fund’s investors -- known as the Redeemer Committee -- who in the prior days had anticipated agreeing on ...