On this blog, I typically write about decisions and motions involving third parties. But every once in a while, tooting your own horn is appropriate. Here’s how we won $19 million for our client in January 2022.
This case arose out of a construction loan for an historic hotel in Miami. Under the management of the defendant, who was also a loan guarantor, the hotel was defaulting on the loan. Our client, an LLC whose members included another loan guarantor, who wanted to avoid the draconian results of going into default (such as default interest rates, attorneys’ fees, stopping construction of the hotel — and personal liability) bought the loan. Then, standing in the shoes of the original lender, the LLC enforced the guarantee against the defendant co-guarantor.
Co-counsel in Dallas and the client contributed a mastery of the facts, spanning hundreds of pages of loan documents and correspondence. Together, we tied into a neat package selected provisions of the agreements; the hotel’s construction history; and how to add up the amounts owed in a fashion that apparently was indisputable. We amassed the facts and documents in a tidy argument and sued in New York Supreme, Commercial Division for New York County (a more streamlined forum for cases worth more than $500,000).
We brought a motion for summary judgment in lieu of complaint; when the complaint seeks to enforce an instrument for money only, you can go straight to summary judgment without any discovery. What’s there to talk about? Whether the note was signed and whether the defendant defaulted.
In response, the defendant put all his eggs in one basket: he didn’t oppose summary judgment but instead filed a cross-motion to argue that the New York court lacked personal jurisdiction (as if magically and dramatically to remove the defendant from a losing situation). But defendant failed to allege any facts that challenged the demand for $19 million. Instead, our adversary argued that the defendant is in Florida, the property is in Florida, and the plaintiff that purchased the loan is in Dallas. According to him, this meant the loan had nothing to do with New York.
But he left out that the loan (and the guarantees) provided that they were governed by New York law, and enforceable in New York County. We argued that a sale of the loan to our client outside of New York could not magically eviscerate the agreement’s New York choice of law and choice of forum. (Also, the plaintiff did not owe a “fiduciary duty” to refrain from suing a co-guarantor who hadn’t contributed any money to pay off the debt.) Sure enough, when the judge reached his decision, he simply wrote about “the lender,” without caring whether the plaintiff was the original or new lender. And, succinctly and fatally, the court wrote that “The choice of law is clear” and denied the motion to dismiss. Defendant failed to dispute the amounts owed, wrongly assuming he’d get another chance to oppose our motion, so the court simply granted the amount we had requested.
[We had also brought a motion to attach the individual’s membership interest in a company that had money tied up in another hotel in Detroit. In the intervening six months, and a few weeks before oral argument was scheduled, the LLC with assets in Detroit filed for bankruptcy. So, we withdrew the plaintiff’s motion to attach, which was the final nail in the coffin for the defendant. The only arguments that he had made to contest summary judgment, tangentially and without any supporting evidence, were in the papers he filed against our motion for attachment.]
So, the court awarded summary judgment for the unpaid loan amounting to almost $19 million. Whether the plaintiff will collect some or all of that amount is another lawsuit for another day — but meanwhile, the judgment racks up 9% interest, under New York law.
We try to end with a moral to the story, so: don’t put your eggs in one basket. And let us carry your baskets.