Proposed Mediated Lawsuit Settlement Will Cost Ginn and Lubert-Adler $25 Million
Unsecured Tesoro and Quail West creditors would get between 30 and 50 cents on the dollar. Attorney for the debtors would receive 30% ($7.5 million) of the settlement proceeds.
Palm Coast, FL – October 19, 2012 – Drew Dillworth, trustee for the Tesoro and Quail West Chapter 7 bankruptcies, has filed a Motion to Approve Settlement of Adversary Proceeding Against Ginn, Lubert-Adler, et.al. If the motion is granted at a scheduled November 14th hearing, the defendants will pay Tesoro and Quail West debtors $25 million to settle all claims. The attorney for the debtors will receive 30% ($7.5 million) of the settlement proceeds. Unsecured creditors are expected to receive between 30% and 50% of their claims.
The lawsuit, filed on May 10, 2010, stems from the December 23, 2008 Chapter 7 bankruptcy of two Ginn developments in Florida; Tesoro, in Port St. Lucie and Quail West, near Naples. The bankruptcy was triggered by Ginn-LA’s default on a $675 million loan from Credit Suisse. In addition to the twin bankruptcies, the default triggered the sale of Laurelmor, another Ginn development in North Carolina, and the forfeiture through foreclosure of a significant portion of Ginn sur Mer, a $4.9 billion project on Grand Bahama.
In the Credit Suisse transaction, the Ginn developments were cross-collateralized to guarantee the $675 million loan. Credit Swiss allowed (some charge they encouraged) Ginn and Lubert-Adler to directly receive approximately $330 million of the loan proceeds as an "advanced profit" distribution. The distribution allegedly left the indebted communities insolvent, unable to repay the loan.
The Trustee’s claim for breach of fiduciary duty names Defendants: Ginn; ERG Enterprises, Dean Adler; and various Lubert-Adler real estate funds. The Defendants have each filed Answers disputing Dillworth’s claims and asserted a variety of Affirmative Defenses. The case is in the fact discovery phase.
Earlier this year, the Trustee and the Ginn and Lubert-Adler Defendants agreed to participate in a formal mediation, in an effort to achieve a compromise that would avoid the costs, delays, and risks inherent in complex litigation and jury trials. The proposed settlement is the result.
Assuming the Trustee’s request for approval of the Settlement is granted and the order of approval is sustained, the $25 million paid by the Ginn and Lubert-Adler parties will be allocated as follows: $23.8 million to the Tesoro Debtors’ Estates and the balance, $1.2 million, to the Quail West Debtors’ Estates.
The Adversary Proceeding shall then be dismissed with prejudice and certain releases shall be exchanged. 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.
The Debtors (Plaintiff) were represented by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
Debtors Attorney may get $ 7.5 million
Debtors Attorney may get $7.5 million
Is this Fair to the Debtors?
Fairness?
The debtors’ principles (Ginn and LA) still have retained $10’s of millions from the $330 million loan, liquidation of the Tesoro Beach Club and third golf course properties (which were carved out of the debtors’ assets) and "other" transactions. No one should question whether anything is "fair" to them. The creditors are the ones who took the financial hit from the bankruptcy/breach of fiduciary duty and could not afford to prosecute this case without Stearns Weaver litigating on contingency.
Reply to Tom
The debtors did not have money to fund a legal effort. The attorney took the lawsuit on a contingency basis. The fee was on a sliding scale from 20% to 40%, depending on how far the lawsuit went before settling.