SAN FRANCISCO— Manatt, Phelps & Phillips LLP, won a lender liability/wrongful foreclosure action on March 25, 2013, obtaining a complete defense verdict in favor of its clients, including certain affiliates of the San Francisco-based real estate investment firm Carmel Partners. Marla J. Miller, judge of the San Francisco Superior Court, issued a 56-page statement finding for the defendants on all claims. Plaintiffs were represented at trial principally by David Boies and David W. Shapiro of Boies, Schiller & Flexner LLP.
The case stems from a series of commercial transactions that began in 2007, when Richard D. Cohen, founder of the New York-based real estate firm Capital Properties, purchased a high-rise apartment complex in San Francisco known as Rincon Residential Towers for $143 million. Cohen’s entities took out a two-year, $110-million loan from Bear Stearns to fund the purchase.
Bear Stearns collapsed in spring 2008, and the loan was eventually acquired by a Carmel Partners entity–CP III Rincon Towers Inc.
Prior to the marketing of the loan for sale, Cohen tried to negotiate a multiyear extension of the loan or to purchase it himself at a steep discount, but he was unsuccessful. Judge Miller found that Cohen threatened to file and then filed this lawsuit as part of a strategy to disrupt any sale of the loan. During the marketing of the loan, Cohen’s attorneys at Greenberg Traurig LLP, in an attempt to dissuade bidding, wrote threatening letters that would need to be disclosed to prospective buyers. Cohen’s entities then filed a lawsuit in February 2010 and recording a lis pendens on the property.
Manatt’s real estate and litigation groups worked together to advise CP III on the validity of Cohen’s claims, and Manatt litigators in both San Francisco and New York represented various Carmel Partners entities along with co-defendants and third party witnesses in connection with the litigation after CP III purchased the loan.
Manatt obtained summary judgment on the original claims in September 2010, defeated plaintiffs' multiple attempts to enjoin foreclosure and completed a non-judicial foreclosure of the property in October 2010. Since foreclosure, CP III has renamed the property Carmel Rincon Luxury Apartments and conducted significant renovations under management by Carmel Partners.
The court gave plaintiffs leave to amend their complaint several times, however, such that the trial focused on a fifth amended complaint, by which plaintiffs sought to regain the property along with damages in excess of $40 million. In addition to Boies Schiller and Greenberg Traurig, plaintiffs were also represented in the lawsuit by Fried, Frank, Harris, Shriver & Jacobson LLP and Friedman & Atherton LLP.
At trial, Cohen contended that loan defaults had been wrongfully declared and the lenders had interfered with his ability to refinance the loan. Cohen’s attorneys fashioned these allegations into claims for breach of contract, fraud, to set aside foreclosure, slander of title, unfair competition, trade secret misappropriation and accounting, but Judge Miller found that that loan was in default as early as December 2008 and that “Plaintiffs’ claims are without merit.” Judge Miller ordered that the lis pendens be expunged on January 23, 2013.
Manatt’s trial team was led by Barry W. Lee and Ann M. Heimberger and included Lenard G. Weiss, Kimo S. Peluso, Christian E. Baker, Christopher A. Rheinheimer and Amanda M. Knudsen, with litigation support from Faye Stephenson, Demetrio Marquez and Patricia Rivera. Marv Pearlstein and Joshua Taylor of the real estate group also provided advice and support.