A German bank and its affiliate that invested in two collateralized debt obligations (CDOs) sponsored and managed by Lynn Tilton’s firm, Patriarch Partners, have sued Tilton and the collateral managers of those CDOs in New York State Supreme Court for fraud and negligent misrepresentation.  The investors allege that the defendants improperly invested the CDOs’ assets in controlling equity positions in portfolio companies, enabling them to extract “excessive management fees” from those companies and benefit themselves at the expense of their investors.  The plaintiffs, who are seeking damages of more than $45 million, claim that the CDOs were in fact “poorly run and incredibly risky private equity ventures,” rather than traditional CDOs that invested in portfolios of debt.  This article summarizes the factual background of the dispute, the defendants’ alleged misconduct and the investors’ specific claims.  The suit follows the March 2015 SEC enforcement action against Tilton and the collateral managers of three CDOs sponsored by Patriarch Partners.  See “SEC Fraud Charges Against Lynn Tilton, So-Called ‘Diva of Distressed,’ Confirm the Agency’s Focus on Valuation and Conflicts of Interest,” Hedge Fund Law Report, Vol. 8, No. 14 (Apr. 9, 2015).