It's been tough going since private equity behemoth Blackstone Group (NYSE: BX) went public last summer. Shares have fallen about 47%, earnings have dried up, and the once-resilient market for cheap money that fueled massive buyouts has skidded to a halt.

Now it can add one more headache to the list: Lawsuits from former relationships.

Alliance Data Systems (NYSE: ADS), which had agreed to be bought out by Blackstone last May, claims the private equity firm sent a deal termination notice last Friday, adding to a three-month cat fight that at times looks like it should be resolved on Divorce Court. Alliance Data filed a lawsuit back in January after Blackstone tried to weasel out of the transaction, but promptly withdrew the suit after, it claims, Blackstone reassured it the deal would close.

'Til death do us part?
Fast-forward three months, and the Bickersons appear to be going at it again. Alliance Data now claims Blackstone should be on the hook for the $170 million breakup fee agreed upon before the proposed $6.4 billion deal was originally struck last May. Breakup fees are common in mergers and buyouts, and are typically paid if a deal falls apart after the handshakes, like the corporate version of a prenuptial agreement.

Never one to go out without a fight, Blackstone disagrees, firing back that specific terms set by an outside organization put completing the deal out of reach. According to an article in The Wall Street Journal, Blackstone claims the Office of the Comptroller of the Currency, or OCC, imposed a condition that would require Blackstone to put up $400 million to stand behind Alliance Data's credit card bank. With the so-called backstop put in place, Blackstone didn't feel the deal could be pulled off.

And then the bickering began. Alliance Data shot back, claiming the terms could easily be completed by simply reducing the purchase price by $400 million and using the savings to satisfy the OCC's requirements. Move a few bucks around, agree to lower terms, and everyone's happy, according to Alliance Data. Seems like a reasonable concession.

Blackstone takes a different stance, claiming it has already used its entire arsenal of tactics to appease the OCC, to no avail. Alliance Data rebutted by claiming that Blackstone is simply suffering from "buyer's remorse" and is pulling out all the stops to forgo a deal that was made in a more robust capital market and resilient economy.

Enough, you two
Who's to blame in this corporate feud? I'm siding with Alliance Data on this one. Lowering the purchase price by $400 million and using the savings to satisfy regulatory requirements seems like a tenable solution, and it's easy to come up with a slew of reasons why skipping out on the deal would benefit Blackstone.

A number of deals, including the proposed buyouts of Sallie Mae (NYSE: SLM), United Rentals (NYSE: URI), and Clear Channel Communications (NYSE: CCU), have either fallen apart or remain in jeopardy amid a financial market that looks starkly different than it did just one year ago. High-profile deals like Bank of America's (NYSE: BAC) proposed buyout of Countrywide (NYSE: CFC) trade at huge discounts to their offered price, signaling investors are cautious about the merger's prospects.

Blackstone's earnings recently took a precipitous tumble, suggesting the blossoming profits it was once accustomed to are facing headwinds. Even though Alliance Data expects strong first-quarter profits, the amount of uncertainty -- especially in the financial sector -- could easily be enough to prompt Blackstone to get the heck out of Dodge before testing the wrath of the financial market.

Then again, Alliance Data has a serious interest in the deal coming to fruition. The $6.4 billion represents a premium of about 55% to where shares are trading now. A completed deal would have been a sweet gift for shareholders, who've seen shares fall more than 15% since before the deal was first announced. The $170 million breakup fee represents almost the same amount Alliance Data made in net income during all of 2007 -- a prize well worth fighting for.

In any case, it's clear the buyout has gone up in smoke, and Alliance Data will continue as a stand-alone company. Best of luck in singlehood, Alliance Data. Perhaps your next mate will understand that all successful relationships require compromise.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool's disclosure policy doesn't get involved in games of "He said, she said." Then again, it can't really talk.