Colony Lender’s sanctions appeal is denied

Colony Lender LLC and Unicorp National Development’s appeal of U.S. Bankruptcy Judge K. Rodney May’s sanctions was denied a motion for stay pending appeal in an order Wednesday by U.S. Middle District of Florida Judge James D. Whittemore.

The news means Colony Lender and Unicorp National Development Inc. must now comply with U.S. Bankruptcy Judge K. Rodney May’s order to drop lawsuits against unit owners in state court while May finalizes sanctions and agrees to monetary sanctions against them in September.

Colony Lender and Unicorp, though, still have the right to appeal the sanctions order once May finalizes sanctions sometime next month.

Colony Beach & Tennis Resort Association President Jay Yablon called the order “important for those waiting for roadblocks to be removed to pave the way for Colony settlements.”

Colony Lender principal David Siegal called the order “nothing more than an indication that Judge Whittemore wants the sanctions to become final before we make the appeal again.”

The sanctions appeal order comes on the heels of the association’s news that it has reached a settlement with U.S. Bankruptcy Chapter 7 Trustee Douglas Menchise — who controls everything regarding the rec lease and a rec lease judgment for $2.5 million. May must schedule a hearing to decide whether to approve that settlement, which Colony Lender will oppose because it believes the recreational land it owns came along with the rec lease and the $2.5 million judgment it can use to assess unit owners. 

Colony Lender and Unicorp filed the sanctions appeal that was reviewed by Whittemore. The parties sought relief from sanctions issued by May on May 12, which ordered all three parties to dismiss within 14 days lawsuits against all Colony unit owners, in which Colony Lender and Unicorp seek more than $5 million in damages for unpaid rent plus interest on a disputed recreational facilities lease. May said those letters violated an automatic bankruptcy stay.

Whittemore called Colony Lender’s arguments for the appeal “borderline disingenuous” and also stated a number of times in his order that Colony Lender did not provide any legal support for their positions.

As part of May’s sanctions ruling, he required Colony Lender 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 on it, asserting the claims being sought against them are being dismissed.

“We will write and send letters and dismiss the state lawsuits against unit owners,” Siegal said. 

And five Colony unit owners that sold their units to Unicorp last year for $20,000 apiece after all owners received demand letters in August, telling them they could face millions of dollars in liabilities if they do not sell their units to Unicorp, will have a 30-day opportunity window to get their units back.

Liens placed on Colony units for rent by Colony Lender and Unicorp are required to be removed as part of the order.

May has requested the association submit memos for a cost and damages study to assess what kind of monetary sanctions (both punitive and actual damages unit owners accrued by paying for legal fees associated with the lawsuit) the parties should be required to pay for its actions.

Punitive damages would be money ordered to pay to make an example of certain Colony Lender actions and 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.

As part of May’s sanctions ruling, he ruled that Colony Lender has no other claims in other pending bankruptcy estates.

Sanction hearings are scheduled to continue through September.

“This just means we have to wait awhile longer for Judge May to finish his sanctions decision,” Siegal said. “Then we will re-file our appeal.”

Yablon, though, said the order gives the association a glimpse of future settlements. 

“I am convinced that at the end of the day the courts will uphold these sanctions," Yablon said. "And we will continue to pursue sanctions remedies and recoveries against them (Colony Lender and Unicorp) to the maximum degree that the law permits.”

For more information, pick up a copy of next week's Longboat Observer.

Contact Kurt Schultheis at [email protected].