Two Harbors Hit with $198.9M Liability in Termination Dispute Ruling
The company’s legal battle over its 2020 management agreement termination ends in a costly setback after court ruling.
May 30, 2025
Two Harbors Faces Major Financial Impact After Court Rejects Termination Claims
Two Harbors Investment Corp. is preparing to take a $198.9 million hit to its May financials, following a federal court decision that challenged its 2020 termination of a management agreement with PRCM Advisers. The ruling puts the company on the hook for a significant contingency liability, reflecting both the original termination fee and the accrued interest.
Back in July 2020, Two Harbors informed PRCM Advisers that it was ending their agreement for cause, citing major breaches and gross negligence. PRCM pushed back immediately, filing a complaint in federal court and later expanding the case to include Pine River Capital Management and Pine River Domestic Management. Their claims ranged from:
- Misappropriation of trade secrets
- Breach of contract
- Unjust enrichment
- Tortious interference and unfair competition
Both sides moved for summary judgment in late 2023, each arguing that the facts supported a win before trial. On March 31, 2025, a magistrate judge reviewed those motions and recommended that Two Harbors’ claims be denied outright. The court agreed, overruling objections from Two Harbors on May 23.
As a result, PRCM’s position was partially upheld—most notably, that the company lacked a valid basis to end the agreement for cause. The rest of PRCM’s claims will continue through the legal process, and Two Harbors’ counterclaims have been dismissed.
Now the company is recording nearly $199 million in expenses tied to the ruling. That includes:
- A $139.8 million termination fee
- Pre-judgment interest accrued through the end of May
Two Harbors clarified that no additional liabilities are being recognized at this time for the remaining unresolved claims, given that management doesn’t believe further losses are currently estimable.
Ongoing Evaluation of Legal Risk
The company evaluates potential legal exposures on a quarterly basis and updates its accounting positions in consultation with outside counsel. It’s a process meant to ensure accuracy under the accounting rules governing contingencies. Still, legal matters can evolve quickly. The company acknowledged that future developments could change its financial exposure and lead to further adjustments.
For now, the immediate impact is clear. Two Harbors is absorbing a sizable expense tied to a long-running dispute over how it handled the end of a key external relationship. The case continues—but with this ruling, a major chapter has been closed.
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