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Dec. 16, 2016

Kramer Levin Prevails Over Sutton Place Developer in Bankruptcy in Favor of Gamma Real Estate and Affiliates

On Dec. 1, 2016, following a five-day bench trial, the United States Bankruptcy Court for the Southern District of New York entered an order in favor of Kramer Levin clients, Gamma Real Estate and its affiliates, sustaining all of Gamma’s claims against the debtors and rejecting the debtors’ claims against Gamma relating to the debtors’ development project at Sutton Place and 58th Street. In its 83-page decision, the Court upheld Gamma’s actions, including finding that Gamma had not engaged in any inequitable conduct warranting subordination of its $147.25 million of loans, and that Gamma had no fiduciary duties to the debtors. The Court also agreed with Gamma that its loan exit fees were not unconscionable and that Gamma did not breach any of its contractual obligations. This decision cleared the way for Gamma to credit bid its debt at the auction of the property, which took place on Dec. 13, 2016. Gamma prevailed at the auction following competitive bidding, with Gamma’s bid of $86 million as the highest and best bid.

The case was handled on an expedited basis, with only four months between the date of the debtors’ filing of a 26-count, 123-page complaint against Gamma and the successful conclusion of the trial. During that short time, the parties exchanged hundreds of thousands of pages of documents, 34 third-party subpoenas were issued, 15 depositions took place and 10 witnesses testified at trial.

 

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