Colony battle wages on in appeal

U.S. District Judge Steven Merryday didn’t make a ruling at an Aug. 16 hearing in the battle over the shuttered Colony Beach & Tennis Resort after hearing from attorneys for longtime resort owner Dr. Murray “Murf” Klauber and the Colony Beach & Tennis Resort Association. But he ended the hearing by saying that he faced a “knottier problem” than both parties may realize, stating he believed that the case should have remained in Sarasota County court, where judges are familiar with condominium law, but instead it ended up in bankruptcy court.

Merryday gave his final thoughts after hearing from Klauber’s attorney, Charles Bartlett, and Colony Association attorney Jeffrey Warren. The hearing took place two weeks after Merryday ruled in favor of Klauber in his appeal of the August 2009 bankruptcy rulings.

Bartlett urged the judge not to send the case back to bankruptcy court. He argued that such a decision would essentially be equivalent to “kicking the can down the road.” He suggested that Merryday could take a “what’s done is done” approach, calculating damages owed by the Association to Klauber — a course that would be simplest, but not the course his client favors. Another approach, favored by Klauber, would be for the judge to restore the Partnership agreement to what it was prior to the Association’s bankruptcy filing in 2008.

But Warren contended that previous bankruptcy rulings that certified the Association’s reorganization prohibited Merryday from re-establishing the Partnership. He argued that the case should go back to bankruptcy court and said he believes that because of past rulings, Merryday’s reversal rulings only allow him to rule on monetary judgments for not making assessments or recreational lease payments.
Warren told the judge that he couldn’t “roll back the clock” on the Association’s Chapter 11 plan of reorganization.

“What’s before you is to allow or disallow claims,” he said. “The final order of the bankruptcy court is not appealable by you,” he said.

Merryday sparred with Warren on that point.

“Why not?” Merryday asked. “ … Any judge in the Middle District can reach the order I have and review this case.”

“Um,” Warren responded.

“‘Um’ is a good answer because it’s the truth,” Merryday said.

Merryday said at the end of the hearing that he does not know how he will rule.

“I haven’t made up my mind yet about anything,” he said. “That’s the reason for this hearing today.”

He compared the parties’ dispute to World War I.

“Bloody battle after bloody battle after bloody battle … Until there’s nothing left to seek but more warfare,” he said.

Shortly before calling the court to recess, he asked both parties if they had tried mediation. Both Bartlett and Warren told the judge that previous mediation efforts had been unsuccessful. But the judge and both parties agreed that mediation was the most likely course for the Colony, because the Association has vowed to appeal any ruling in favor of Klauber. From there, the case would head to an 11th Circuit Court of Appeals — which would probably order both sides to mediation.

“I even know who the mediator will be and where she’ll mediate it,” Merryday said.

The day after the hearing, Katie Moulton, longtime president and general manager of the Colony, said that she was pleased with Bartlett’s arguments and the judge’s consideration of the case.

“I think the judge continues to be extremely thoughtful in his approach to his decisions,” she said.

Jay Yablon, president of the Association’s board, who did not attend the hearing, said:

“At this point, we’re waiting to hear from Judge Merryday, as I’m sure everybody else is.”