Colony parties to return for three more hearings

U.S. Bankruptcy Court Judge K. Rodney May and the Colony Beach & Tennis Resort interests haven’t seen the last of one another.

On Wednesday, May 2, May agreed to schedule three separate hearings July 13 — Friday the 13th, as May pointed out — to individually address three rulings following a request by Colony Beach & Tennis Resort Association attorney Jeffrey Warren. Warren felt that the opposing counsel’s arguments were “an effort to lump-tag” events and activities related to the case.

Warren’s request came after Miami attorney Jordi Guso, who represents Chapter 7 Bankruptcy Trustee William Maloney, and Tampa attorney Roberta Colton asked May to vacate an August 2010 ejectment order that gave unit owners possession of their units. They argued that May should return possession of units to the trustee and award damages of $7,751,470 to the Partnership that ran the Colony — i.e. Dr. Murray “Murf” Klauber and other entities.

The damage scenario was one of two options U.S. District Judge Steven D. Merryday gave May when he remanded the case back to bankruptcy court. He also remanded to the bankruptcy court the Association’s counter claims, previously declared moot, which could significantly impact any award of damages.

Guso argued that it would be the result that “maximally vindicates the Partnership’s rights and minimally upsets in either bankruptcy the decisions that are unduly difficult or impossible to reverse,” quoting Merryday’s rulings.

The scenario would fit within the Association’s Chapter 11 reorganization plan, requiring payments to the Partnership of approximately $380,000 per quarter at a rate of 6% interest. With those funds, Guso argued, Maloney could convert the Partnership’s Chapter 7 bankruptcy case back to Chapter 11 and operate it as he briefly did in his role as Chapter 11 Trustee or arrange for a sale.

The alternative scenario outlined by Merryday of damages of $20,646,312 to the Partnership and no return of units would require payments of approximately $1 million per quarter at 6% interest.

Colton told the court to focus on the issue of possession. Vacating the ejectment order would return possession to the Trustee, not the Partnership, she said.

The Association had challenged Maloney’s standing in a response to a motion, arguing that as a Chapter 7 trustee, he is charged with liquidating the Partnership and “has no authority to operate any business of the Partnership … ”

But Colton argued that Maloney could ask for temporary authority to operate the Colony, and May could convert the case from Chapter 7 back to Chapter 11.

She said that unit owners “have not provided even the basic maintenance” on the property since the ejectment order.

Both she and Guso argued that the ejectment order could be vacated because it was based on a judgment that Merryday found to be in error — that the Association was not responsible for various maintenance and repair costs.

Warren, however, argued that the court should focus on its task — to determine whether it has cause to vacate its motion.

“We’re not here to do anything other than to follow the instructions,” he said.

He described any award of damages as “premature” and took issue with some of their claims but said that he could better make his arguments with the cases separated.

May agreed to Warren’s request and scheduled the three hearings:

One will address May’s ejectment order.

Another will focus on Merryday’s ruling that reversed the bankruptcy court’s rejection of damage models outlined by the Partnership’s expert, Dr. Henry Fishkind, and remanded the case to bankruptcy court to determine one of two damage models for the Partnership.

A third proceeding will address Merryday’s ruling that remanded the dispute of a recreational lease, which previously allowed unit owners to use the tennis courts when the resort was operating, to bankruptcy court to recommend an amount of damages owed to Klauber and other lessors.

May also asked for a sworn affidavit from the parties detailing the current condition of the Colony property.