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NEW YORK, July 31 (Reuters) - A New York judge has narrowed the scope of a $100 million defamation lawsuit filed by billionaire hedge fund manager Louis Bacon against Canadian fashion designer Peter Nygård, part of a bitter dispute over neighboring properties they own in the Bahamas.
In a decision made public on Friday, Justice Cynthia Kern in State Supreme Court in Manhattan dismissed 105 of the 135 allegedly defamatory statements that formed the basis for Bacon's $100 million lawsuit in January, accusing Nygård of orchestrating an "obsessive" smear campaign.
Bacon, the founder of Moore Capital Management, can continue to pursue the remaining defamation claims.
Nygård, for his part, filed a $50 million countersuit in April accusing Bacon of a "vendetta" against him, including harassment and frivolous litigation. Bacon's lawyers have asked Kern to throw out Nygård's claims.
Each man has denied the other's allegations.
The fight stems from Bacon's opposition to Nygård's plans to rebuild his estate in their gated Bahamas community, following a 2009 fire. Bacon has said the work could harm the environment.
In his countersuit, Nygård claimed that Bacon may have prompted a groundskeeper to set the fire. Bacon has denied any role in the fire.
Bacon's lawsuit accused Nygård of falsely linking him to drug smuggling, insider trading and the Ku Klux Klan.
In a decision dated July 28, Kern said many of the purportedly defamatory statements were made more than one year before the lawsuit was filed, thus exceeding the state's statute of limitations.
"The argument by Bacon that he could not bring the present action against defendants until at least 2014 because he only had suspicions and did not have any hard proof is without basis," Kern wrote.
Bacon had claimed that Nygård concealed his role in the alleged harassment, making it impossible to sue sooner.
In a statement, Nygård's lawyer Aaron Marks called the decision a "significant victory" and added, "Bacon's remaining claims in the case are frivolous and we expect that they will be similarly disposed."
Orin Snyder, a lawyer for Bacon, said in a statement that while he disagreed with the dismissal of some claims, "we are confident that, when Mr. Nygård's egregious conduct is exposed in court, we will prevail."
The case is Bacon v Nygård et al, New York State Supreme Court, New York County, No. 150400/2015. (Reporting by Joseph Ax; Editing by David Gregorio)