Judge Approves $25 Million Settlement in Ginn, Lubert-Adler Bankruptcy Lawsuit

Bankruptcy trustee v. Ginn-LA lawsuit charged breach of fiduciary duty. The settlement agreement was struck shortly before depositions of key Ginn-LA executives Bobby Ginn and Bobby Masters were to be

Palm Coast, FL – November 16, 2012 – Dillworth v. Ginn-LA, one of the most watched lawsuits against Bobby Ginn related development companies, came to a close Wednesday when Paul Hyman, Chief Judge, U.S. Bankruptcy Court of the Southern District of Florida approved a $25 million settlement agreement. The agreement was reached shortly before depositions of key Ginn-LA executives Bobby Ginn and Bobby Masters were to take place.
The 28-page claims register list of unsecured creditors includes several Tesoro residents and property owners. Of $83.3 million total claims, the court allowed $70.6 million; several in excess of $1 million. Creditors will likely receive between 30 and 50 percent of allowable claims. The Debtors (Plaintiff) were represented by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., who will receive 30% ($7.5 million) of the settlement proceeds.
In 2008, Ginn defaulted on a $675 million loan from Credit Suisse, triggering the chapter 7 bankruptcy of five Ginn related entities at Tesoro, in Port St. Lucie, and Quail West, near Naples. To support the loan, Tesoro and Quail West were cross-collateralized with two other Ginn developments; Ginn sur Mer, on Great Bahama, and Laurelmor, near Blowing Rock, N.C. Laurelmor was sold at a fire-sale price while Ginn sur Mer went through foreclosure.
The CS transaction included an "advanced profit" distribution of approximately $330 million from the loan proceeds to Ginn and Lubert-Adler. Plaintiff argued that the distribution was fraudulent and resulted in the insolvency of the collateralized developments, leaving unsecured creditors holding the bag.
The Ginn loan was only one of more than a dozen similar Credit Suisse loans to luxury resort developers. It is alleged in other lawsuits that these loans were based on fraudulent appraisals by Cushman and Wakefield. CS and C&W are defendants in multiple lawsuits, but the bankruptcy trustee let Credit Suisse off the hook in the Tesoro/Quail West case, granting a release in return for CS providing interim financing. As Judge Hyman stated in an earlier ruling, "The Court obviously questions why the Trustee agreed to release Credit Suisse and the First Lien Lenders, but that issue is not before the Court."
Dillworth’s remaining option was to seek compensation from Ginn; ERG Enterprises, Dean Adler; and various Lubert-Adler real estate funds for breach of fiduciary duty. The case was in the fact discovery phase when the settlement was reached. The settlement "shall not be deemed evidence or an admission of guilt, liability, or wrongdoing, but rather as a compromise of disputed claims for the purpose of avoiding the costs and inconvenience of further litigation." Its affect on other pending lawsuits is uncertain.
5 replies
  1. Tesoro Creditor
    Tesoro Creditor says:

    Never say never…

    From "Links" magazine, Fall 2008 interview with Bobby Ginn about the lawsuits:"…I’m no virgin at this…I’m sorry this is the way (the buyers) chose to resolve this,…we’ll duke it out. I hope we NEVER (emphasis added) settle a case. I want to go to court because I did nothing wrong." The lawyers called his bluff and got him to settle for something meaningful, for the first time ever. So, Bobby, having trouble eating and swallowing those cocky, arrogant words? Don’t choke on them before you pay up. Advice: never say never, at least when it appears in print for posterity.

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply