An aggrieved New York businessman?s civil suit against a Bermuda-based company providing services to hedge funds was dismissed last week by a New York federal court for being a ?misuse? of the court?s time.

The lawsuit, filed in 2003 by Thomas B. Donovan and family members in New York?s Eastern US District Court, was thrown out by District Judge Dora L. Irizarry because of being ?yet another unfortunate example of a litigant?s misuse? of the federal court to try and avoid a state court ruling.

A state decision two years earlier went against the Donovans.

Mr. Donovan, the principal of several companies specialising in distressed mortgage investments, sought millions of dollars in damages from defendants, claiming he was ?induced? by investment advisory company Riverside Capital Advisors to purchase mortgages only to find financial backing was withheld, resulting in Donovan?s company defaulting on client obligations.

Defendants in the suit were Riverside, hedge fund administrator Olympia Capital International Inc. of Bermuda, its chairman Oskar Lewnowski, affiliate company, Winchester Global Trust of Bermuda, and Factored Receivables Trust, a Bermuda hedge fund that loaned $7.6 million to a Donovan company eight years ago.

Carolynn Hiron, in-house legal counsel for Olympia Capital, yesterday said the company was ?gratified that the judge has seen this litigation for exactly what it is ? a misuse of the federal courts in an attempt to avoid a judgment of a state court?.

Mr. Donovan?s complaint was that anticipated additional funding to back his mortgage investments beyond the initial $7.6 million loan had not materialised. He also claimed that a ?usurious? interest rate was levied on the loan.

Riverside handled investment decisions for Factored Receivables Trust, including arranging the loan between Factored and Donovan company, First Secured Capital Corp.

Winchester was Factored?s trustee and Olympia its administrator. Fund administrators provide various services to the hedge fund industry from accounting to issuing shareholder reports. Olympia was founded in 1990 by Mr. Lewnowski, an investment bank executive. It is a leading offshore fund administrator with $50 billion in hedge fund assets under administration. Mr. Donovan?s federal lawsuit was launched around the same time as a 2003 decision in favour of a petition from Factored Receivables Trust, ordering the Donovan companies to pay $22 million. The award is still outstanding, according to an Olympia Capital representative yesterday. The earlier case, heard by the Supreme Court of New York, Nassau County, was brought after Mr. Donovan, through various companies he controlled, defaulted on the then three-year old loan.

Olympia was not involved in the loan transaction but as the fund?s administrator was involved in attempts to recover monies under the loan agreement between Factored Receivables Trust and First Secured Capital. Mr. Donovan?s suit included four claims of violations under the Racketeer Influenced and Corrupt Organizations Act, one claim of common law fraud, and one claim each for violation of the federal and New York Fair Credit Reporting Acts.

All but the claims under the Fair Credit Reporting Act were dismissed in the federal court decision, which amounts to all claims against Olympia, Winchester and Factored being dismissed, the company said.