Colony Lender, Unicorp face sanctions

U.S. Bankruptcy Judge K. Rodney May has dealt a blow to Orlando-based Unicorp National Development Inc. in its quest to redevelop the Colony Beach & Tennis Resort. 

May revealed Tuesday in his Tampa courtroom that he plans to file an order against Colony Lender LLC and Orlando-based Unicorp National Development Inc. for a list of sanctions.

After he finalizes and enters his order, Colony Lender will have 14 days to dismiss lawsuits it filed in state court against all Colony unit owners. Colony Lender and Unicorp sought more than $5 million in damages for unpaid rent plus interest on a disputed recreational facilities lease. May ruled last month that those letters violated an automatic bankruptcy stay.

“There will be no further steps to collect,” May said. 

May also is requiring Colony Lender LLC principals David Siegal and Randy Langley, along with Unicorp President Chuck Whittall, to write a letter to every unit owner on official company letterhead that includes their names, stating that the claims against them are being dismissed. 

And five unit owners who sold their units to Unicorp last year for $20,000 each after receiving demand letters in August stating they could face millions of dollars in liabilities if they did not sell their units to Unicorp, will have  a 30-day period to get their units back. 

Liens Colony Lender and Unicorp placed on units for rent will be removed as part of the pending order.

May requested that Colony Association Attorney Jeff Warren draft an order that also includes a cost and damages study to assess the monetary sanctions Colony Lender and Unicorp should be required to pay for their actions. May said both punitive and actual damages unit owners accrued paying for legal fees associated with the lawsuits will be considered. 

Punitive damages would be money Colony Lender and Unicorp would ordered to pay to make an example of certain actions. Actual damages would be assessed for costs and delays unit owners had to endure for the state court lawsuits while they wait for a resort to be developed.

May will also rule that Colony Lender has no other claims in other pending bankruptcy estates.

Colony Association President Jay Yablon said “it’s important Colony Lender has been brought back down to earth.”

“It’s good news for the unit owners that Judge May appears to be prepared to order Colony Lender to withdraw its state court lawsuits against the owners,” Yablon said. “We’re very appreciative for his indication he will allow us to recover the legal fees that have been wasted frivolously on the lawsuits brought by Colony Lender. And it’s extremely important May has ruled Colony Lender has no other claims in any pending bankruptcy estates.”

Siegal said he wasn’t surprised by May’s decisions Tuesday.

“He’s going along with what he said he was going to do,” he said. “And we will continue to appeal.”

Colony Lender will ask for a stay to appeal the written order as soon as it’s entered, Colony Lender attorney Michael Assaf said Tuesday in court. Once an appeal is made, May will make time for hearings to hear the appeal. If he denies the appeal, Siegal said Colony Lender will appeal to U.S. District Court Middle District of Florida Judge Steven Merryday.  

May initially decided that Warren needed to file an order for his review by April 28 that included a cost and damages study.  May was prepared to give Colony Lender until May 5 to file objections related to damage assessments. 

But Assaf requested a stay of two weeks so he could prepare an appeal to May’s rulings. 

But May told those in attendance he’s not entering an order yet and wants to wait to review a draft order in the coming weeks. 

“Nothing is final here yet,” May said. “I will rule on a written motion after orders are entered. Then you can appeal.”

When May gave a theoretical example of entering his written rulings in July, Assaf rose to the podium to ask for urgency.

“Further delay is prejudicial to people that have skin in the game,” Assaf said. “Every day we delay raises the price for everyone who wants to see a new development. Think about bringing matters to a head.”

May took offense to Assaf’s comments, explaining he has no intention of waiting until July to rule. 

“If you want to bring matters to a head, I suggested mediation, and I recall everyone but Colony Lender agreed to a mediation last time we met,” May said. 

Assaf countered that mediation is useless at this point.

Assaf also suggested May recuse himself on future hearings involving Colony Lender and Unicorp.

“There’s a concern we are not getting a fair hearing,” Assaf said. 

The comment irked May further, and he ended the hearing shortly after Assaf’s request.

“It’s irresponsible for me to move this complex thing I’ve been involved with for years to one of my overworked colleagues,” May said. “I disagree that I can’t make impartial decisions on these matters.”

What brought about the sanctions?

Colony Lender, which purchased overdue bank loans from longtime Colony owner Dr. Murray “Murf” Klauber, including an 80% interest in loans on the 2.3-acre recreational property, plus a 15% interest in the same property, argues that the recreational facilities lease is attached to the land and it has a right to pursue damages. It attempted in state court to get past due rent from unit owners for 80% of the recreational property.

It’s a claim the Colony Beach & Tennis Resort Association denies, noting Colony Lender has a 15% ownership interest in the property.

Colony Lender Attorney Michael Assaf disagrees with U.S. Bankruptcy Judge K. Rodney May’s pending order to dismiss state court actions to get back rent from unit owners and asked May to allow Colony Lender to amend the state action to 15%. May denied the request.

“He says we sued for too much,” Colony Lender Principal David Siegal said. “But we still need to find out from him what he thinks we have a right to and what past rent and interest we can collect.”