Carlyle Group LP was exonerated in a lawsuit tied to the collapse of a mortgage fund from 2008, avoiding $1 billion in damages sought by the pool's liquidators.

Chief Investment Officer Bill Conway and other Carlyle entities acted in the best interests of Carlyle Capital Corp. during the 2008 financial crisis and the fund's insolvency was due to an unforeseen liquidity crunch, the Royal Court of Guernsey ruled Monday.

The decision comes after a years-long dispute between Washington-based Carlyle and the fund's liquidators, who alleged that the partnership and fund's board of directors were negligent, grossly negligent or had willfully mismanaged the pool and breached certain fiduciary duties. The trial in Guernsey, an island in the English Channel, spanned the second half of 2016.

Carlyle Capital was a leveraged mortgage-bond fund formed in 2006 at the height of the real estate bubble. The pool met its demise in March 2008 when its mortgage-backed collateral plummeted and the fund defaulted on $16.6 billion in debt. That month, Guernsey liquidators seized the fund's assets.

Plaintiffs including the liquidators sought $1 billion in damages through complaints filed in July 2010 in Delaware, New York, the District of Columbia and Guernsey.

The litigation ensnared Carlyle executives, including co-founder Conway, requiring them to appear in court in Guernsey. It's unclear whether the liquidators will appeal the decision, Carlyle said in a statement Monday.

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