U.S. Bankruptcy Judge K. Rodney May set aside an entire day Nov. 22 to review a Colony Beach & Tennis Resort proposed settlement and confirmation of bankruptcy plans for three longtime Colony owner Dr. Murray “Murf” Klauber’s Colony entities that are in Chapter 11 bankruptcy.
It wasn’t enough time.
A settlement that provides Klauber $3 million over five years through a “Klauber Family Consulting Agreement” will continue to be discussed 9 a.m. Monday in May’s Tampa courtroom. May has set aside the entire day for the proceedings.
May is expected to decide whether to approve the settlement on Monday.
The settlement, which a U.S. bankruptcy trustee also signed off on, doles out $2.3 million to the trustee to pay creditors and absolves the association from a $25 million judgment for damages Klauber won in a bankruptcy appeals court last year.
The association still has to negotiate a settlement with Colony Lender LLC, which owns bank loans on Klauber’s property and is seeking to collect on a recent judgment of more than $13 million. Colony Lender is the largest affected creditor in the bankruptcy case.
On Nov. 22, the Colony Beach and Tennis Resort Association rested its case, which urged May to approve the settlement and confirm a Chapter 11 bankruptcy reorganization plan.
“Many people said no settlement could ever be made because the matters ran too deep and there was too much animosity,” said association attorney Jeff Warren. “But what began as an impossible task was accomplished to end the controversies. The last obstacle is to approve this settlement.”
The association called U.S. bankruptcy trustee William Maloney to the stand first. Maloney told the court the proposed settlement was in the best interest of the Chapter 7 creditors he represents.
Colony Lender attorney Michael Assaf asked Maloney why the $2.3 million he would receive over five years in the settlement was better than a $2.3 million cash offer he was offered from Orlando-based Unicorp National Development Inc. (Colony Lender’s developer of choice).
Maloney said he “considered the offer ridiculous.”
“Colony Lender would exercise its lien rights if I took that offer and would leave me with no money to pay creditors,” Maloney said. “You have to look at more than the cash.”
Although Maloney confirmed Colony Lender agreed not to exercise lien rights if Maloney took the Unicorp cash, he said Colony Lender refused to indemnify Maloney from unit owner claims that could arise and leave Maloney with less money.
“The settlement we’re discussing indemnifies me from both,” Maloney said.
Longtime Colony General Manager Katie Klauber Moulton was the next witness called to the stand.
Moulton said she and her family agreed to the settlement “because the litigation has to end.”
Moulton also said the settlement has to come along with the transfer of properties that makes the entire 18-ace site whole.
“As the operator of the resort for years, I have held the strong opinion that operating the property in the future without the recreational property in the middle is not good for business or for future guests,” Moulton said.
Assaf questioned Moulton about Klauber’s ability to be a consultant for a future Colony project, noting that he’s 86 years old. He also suggested the $3 million was not really a consultant fee and was the amount of money Klauber asked for if they wanted his signature on the settlement.
“We worked together as a family on this,” Moulton said. “We believe Dr. Klauber is owed more, but it’s about the future of this resort and bringing it back to life.”
Assaf continued his questions on the matter.
“They why take any money at all if it’s about the future of this resort?” Assaf said.
Said Moulton: “So my father can live. He lost everything.”
Moulton also denied any claims that Klauber can’t be a consultant.
“I have never known such a remarkable 86-year-old,” Moulton said. “He’s healthy and active. He forgets things sometimes, but so does everybody.”
Colony Lender principal David Siegal took the stand next to discuss Colony Lender’s interest and background concerning the property.
Siegal told the court Colony Lender doesn’t support the settlement and instead supports Unicorp’s offer to pay the trustee and other parties “because they will pay our loan and put the pieces together.”
“We’re not even included in this settlement,” Siegal said.
Carolyn Field, of the Field Family Trust, also took the stand. Field and her attorney, Morgan Bentley, noted repeatedly throughout the hearing that Field, who sold her 15% interest in a recreational facilities lease to Colony Lender, didn’t waive her right as a party of interest through the sale and is also not included as part of the settlement.
The last witness to take the stand was Colony Beach & Tennis Resort Association President Jay Yablon.
Upon cross-examination, Yablon noted the association has chosen to disregard the list of conditions that developer Andy Adams placed on his block of 58 approval votes. Assaf and Bentley called those approval votes into question.
Right before Yablon took the stand, Adams, who was in the audience, left the courtroom.
“We don’t look at conditions, just if the box is checked yes or no,” Yablon said. “Our counsel’s advice said the checkmark is the only thing we need to recognize on the ballots.”
Yablon also confirmed that the first batch of Adams’ votes received were blank and only contained the conditions. The timing of the ballots and when new votes were received was also questioned.
Yablon said the board continued the meeting from Nov. 18, when ballots were due, to Nov. 20, to acquire Adams’ approval votes.
Yablon said Colony Lender hasn’t been involved in the settlement “because only one number has been offered and they haven’t moved from that number.”
“We will do what we can with you guys,” Yablon said.
Yablon also explained it’s his belief the association will acquire a developer once the settlement is approved.
“The owners were told we would pay settlement costs through assessments if we don’t have a developer,” Yablon said.
Yablon said “it’s time” to approve this settlement, which he believes will lead to a new Colony.
“I was 50 when this mess started. Now I’m 60 and talking to the children of unit owners that have passed during this dispute,” Yablon said. “The owners have finally come around to the view that enough is enough.”
For more information on Monday’s continued hearing, check www.yourobserver.com for updates and pick up a copy of next week’s Longboat Observer.
Contact Kurt Schultheis at [email protected].