Colony Partnership, Klauber awarded $20 million damage claim

A U.S. bankruptcy judge in Tampa Friday afternoon recommended leaving control of the Colony Beach & Tennis Resort units with its unit owners and their association, but he also awarded more than $20 million in damages to longtime Colony owner Dr. Murray “Murf” Klauber, his partnership with the association and the resort's limited partners.

The decision is likely to lead to further appeals and two more years of court hearings unless a settlement among Colony parties can be reached, according to parties involved in the dispute.

U.S. District Judge Stephen D. Merryday outlined on Oct. 12, 2011, two damages options to U.S. Bankruptcy Judge K. Rodney May: Grant a $7,751,470 damages award that also came with restoring the partnership that allowed Klauber to control the hotel and the units; or award $20,646,312 in damages without restoring the partnership.

May chose the latter. The potential now exists for Klauber, who is a member of the partnership along with unit owners and other limited partners, to receive a damages award of about $23 million if May agrees to include a pre-petition expense claim of more than $2 million that Colony attorney Charles Bartlett asked the judge to consider.

A damages ruling pertaining to a Colony recreational-facilities lease — which May also issued Friday — could increase the damages pot to $25 million. May recommended a $2.2 million judgment for the owners of a recreational lease on the property, which is roughly three years’ rent that would be divided among three owners: 80% would be distributed to Klauber, 15% to Carolyn Field and 5% to a William Merrill trust.

The damages money would be used to pay off a list of Colony creditors before Klauber and other limited partners could receive any money.

Katie Klauber Moulton, longtime president and general manager of the Colony, was pleased with the hearing.

“My father and my entire family are delighted,” Moulton said.

Bartlett told the Longboat Observer the ruling was expected.

“It was a great day for Dr. Klauber,” Bartlett said. “Frankly, the judge did everything he could have done and what we asked him to do.”

May’s recommended orders now must be sent back to Merryday to be reviewed and finalized. Merryday has the final say on May's orders. That decision could take a couple months.

Bartlett said May’s ruling means it’s now more important than ever for all parties to reach a settlement because an appeal to the Atlanta-based U.S. Court of Appeals is coming from the association.

“We won’t let a $22 million judgment stand,” said Colony Association President Jay Yablon, who said the association expected May’s decision. “We will appeal, but it’s always been in all the parties’ best interests to settle this, and we will continue to try and do so.”

An appeal in Atlanta could take another two years and would most likely be the final decision rendered, unless the U.S. Supreme Court gets involved, which is unlikely, Bartlett said.

It would cost unit owners more than $100,000 apiece to pay the damages over a five-year period, and Bartlett said he hopes May’s ruling provides an incentive for all parties to settle and revitalize the resort.

For more information on Friday’s hearing, pick up a copy of Thursday’s Oct. 18 Longboat Observer.

Contact Kurt Schultheis at [email protected].