Colony vote under fire

“This is just odd.”

U.S. Bankruptcy Judge K. Rodney May made the statement during the Colony Beach & Tennis Resort bankruptcy hearing Monday in Tampa, which centered around whether a unit owner vote to approve a settlement is valid.

May made the comment after attorneys took the stand as witnesses and he watched them argue about submitting emails that potentially contradicted previous statements. At one point, May characterized an attempt to enter the emails into the record as trying to “pull a fraud card” on Colony Beach & Tennis Resort Association attorney Jeff Warren.

In the end, though, a day that started with the hope of May making decisions on a proposed settlement and confirmation of bankruptcy plans before the holidays ended like most Colony bankruptcy hearings do: scheduling more time for another day to resolve issues.

May set aside Tuesday, Dec. 3, for closing arguments and another attempt to make rulings on matters that are years in the making.

What’s still at stake is a settlement that gives $3 million to longtime Colony owner Dr. Murray “Murf” Klauber and doles out $2.3 million to a U.S. bankruptcy Chapter 7 trustee to pay creditors. The settlement also absolves the association from a $25 million judgment for damages Klauber won in a bankruptcy appeals court last year.

The association, though, still hasn’t negotiated 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 and is seeking to get paid.

Monday’s hearing, which was a continuation of a Nov. 22 hearing, also centered on the validity of the unit owner vote held last week and whether Colony unit owner and developer Andy Adam’s block of 58 votes — which are crucial to the 75% majority vote needed to approve the settlement — can be counted as votes for approval.

Colony Lender LLC attorney Michael Assaf asserted to May “it’s quite clear to me the unit owner vote fell way shy of the 75% majority needed.

“If that vote fails, there can be no settlement approval, no bankruptcy confirmation, and a motion to dismiss this case could be granted,” Assaf said.

At the Nov. 22 hearing, Colony Beach & Tennis Resort Association President Jay Yablon noted the association chose to disregard the list of conditions that Adams placed on his block of 58 approval votes.

After a lunch break Monday — to the surprise of the association and everyone in the courtroom — Assaf called Warren to the stand instead of Adams.

Assaf attempted to submit emails into the record that revealed Warren had accepted the list of conditions from Adams’ attorney, Bob Goodrich, during the unit owner meeting Nov. 20. According to Assaf, after the owners meeting during which they approved the settlement, Warren informed Goodrich later in an email that the association had been advised to accept the votes but not address the list of conditions.
Goodrich confirmed Assaf’s statement.

“The votes were turned around on my client,” said Goodrich on the witness stand. “That’s not the way to do business. The votes were never unconditional.”

Goodrich maintained that the block of Adams’ votes didn’t count as approval votes unless the conditions were addressed. Those conditions included waiving Adams and his family members from any liability involved with the Colony and the settlement involving the purchase of Adams’ 5% interest in a recreational facilities lease.

May observed Goodrich’s testimony as “an alliance shift.”

“I don’t know where we are now,” May said. “If this thing is falling apart, we need to regroup and come back another day.”

Goodrich and Warren, though, confirmed they are still holding discussions on how to resolve the vote issue and could have them addressed before the settlement is approved.

Assaf asked Goodrich why Adams would offer the votes if they had a list of conditions attached.

Said Goodrich: “A no vote says we are done and then we are blamed for stalling the settlement work that’s been done. That’s not my client’s message. A conditional vote says we are for this plan, but some things have to be worked out.”

After the vote discussion, May let the parties know that he “never thought of the (unit owner) vote being decisive here” as part of his future ruling.

The comment frustrated Assaf.

“Your honor, you previously told us that today was the end and the association was out of gas,” Assaf said. “We’ve been at this for 11 months now and my client just wants to be paid and to move on.”

Assaf continued to press for a decision, suggesting again that Klauber’s entities should not be in Chapter 11 because there’s nothing to reorganize.

May, though, again urged all parties to try and “work a deal.”

“I’m not prepared to rule today,” May said.

May, though, relayed to the parties he has issues with a proposed settlement that forces the transfer of property, including interests obtained by Colony Lender and Adams’ Breakpointe LLC in the recreational facilities lease (property that resides in the middle of the resort), “without paying them.”

Although May urged the parties to consider delaying a court hearing for three weeks while they enter into mediation again to work things out, Colony Lender didn’t express a willingness to do so.

Assaf noted May gave Colony Lender permission to hold a public foreclosure sale Dec. 6 in Sarasota “that will set a price for the assets.”

May continues to stress his rulings Dec. 3 “will only be appealed” in the hopes the parties reach a monetary understanding before the hearing.

“It’s time to bring all this in for a landing,” May said. “It’s time for everyone to be paid and for people to cut a deal.”

Contact Kurt Schultheis at [email protected]