$375M Settlement in REIT Management Dispute

Minnesota Lawyer
Laura Brown
September 5, 2025

In Brief
• Ciresi Conlin secures eye-popping $375 million settlement for client.
• Ends years-long litigation between Pine River and Two Harbors over management.
• Raises questions for externally managed REITs moving forward.

Minneapolis-based Ciresi Conlin has announced a $375 million settlement it secured on behalf of its client Pine River Capital Management after a years-long management battle with Two Harbors Investment Corp. Beyond the settlement number, the resolution might fundamentally shape the governance and contract structures in externally managed real estate investment trusts (REITs).

Pine River, an alternative asset manager, was founded in 2002. Two Harbors Investment Corp, started in 2009, was an externally managed REIT. The manager of Two Harbors was PRCM, an affiliate of Pine River. Two Harbors paid PRCM a management fee. Under their agreement, the personnel and intellectual property that would run Two Harbors would be provided by PRCM. Under PRCM’s management, according to Pine River’s summary judgment filings, Two Harbors swelled from $125 million in equity to billions in assets.

In April 2020, Two Harbors announced the non-renewal of the management agreement, asserting that it would become a self-managed company. It cited cost savings, as well as enhanced returns on future capital growth, as reasons for the split.

“The Board anticipates a smooth and timely transition of all functions necessary to operate the Company’s business without interruption,” Two Harbors said in a press release following the anticipated termination. At the time, Two Harbors anticipated paying a termination fee of about $144 million.

Then, in July 2020, Two Harbors announced that it had provided PRCM Advisers with notice that it had terminated the management agreement. Two Harbors said it did so “for cause” under Section 15(a) of the agreement, alleging “material breaches of the Management Agreement” and “gross negligence in the performance of its duties thereunder.”

Two Harbors stated that an independent committee evaluated PRCM’s performance, and determined that there were material breaches by PRCM that could not be cured within the time period and certain events of gross negligence. It argued that Pine River created conflicts of interests through incentive-sharing arrangements with its former CEO and CIO that were undisclosed and compromised Two Harbor’s ability to consider making management internal. The independent committee approved the termination. Since it now claimed that it was doing so for cause, Two Harbors concluded that no termination fee would be payable to PRCM.

Pine River filed a federal lawsuit in the Southern District of New York, including claims such as breach of contract, misappropriation of trade secrets, and tortious interference. It alleged that Two Harbors had staged a “coup” to get control of the business that Pine River said it built. It also claimed that Two Harbors was trying to take its personnel, as well as its intellectual property, proprietary software, and trade secrets.

The litigation was noteworthy for several reasons. The first one was its breadth. It consisted of 27 fact depositions and 17 expert depositions. There were many summary judgment motions from both parties, and complicated disputes over issues including conflicts of interest, executive pay, and technology systems ownership.

But the litigation also raised several novel issues for the courts to consider, and the parties to explore. This litigation is the first case where an external REIT manager was terminated “for cause” under a management agreement, according to an expert report filed in this litigation. Parties had to answer the question of whether an externally managed REIT could retroactively void its management contract due to misconduct that was later alleged.

In March 2025, Magistrate Judge Barbara Moses of the Southern District of New York recommended that all 12 of Two Harbors’ counterclaims be dismissed. It concluded that Pine River was entitled to summary judgment for breach of contract. U.S. District Judge Lewis Kaplan affirmed in May 2025.

In his May 23, 2025, order, Kaplan rejected Two Harbors’ argument that Moses’ ruling and recommendation (R&R) was inconsistent with the court’s prior rulings. “The R&R properly entertained those arguments at summary judgment and correctly concluded that (1) ‘the alleged misconduct, which was many leagues removed from its investment advisory duties, did not ‘permeate [Pine River’s] service in the most material and substantial part,’ as required for a faithless servant claim,’ and (2) ‘the record does not show that any misconduct was committed,’” Kaplan wrote.

On August 20, 2025, a settlement was reached. It ends all claims between Two Harbors and Pine River. Two Harbors agreed to pay Pine River $375 million. The settlement amount is more than double the originally claimed termination fee. Pine River agrees to relinquish all intellectual property that it licensed, conveyed, or developed for Two Harbors.

Goodwin Procter LLP represented Two Harbors. Attorneys did not return request for comment.

“The resolution of this matter is an important development for our company that allows us to move forward with clarity and certainty of purpose,” said Bill Greenberg, president and CEO of Two Harbors, in a press release. “We believe we are well-positioned with the depth of expertise, investment strategy and operational opportunities to execute and deliver value for our stockholders.”

Ciresi Conlin founding partner Jan Conlin and partner Barry Landy served as lead trial counsel for Pine River.