Firm Secures Significant Appellate Victory in a Complex Commercial Real Estate Litigation

On November 4, 2021, the Firm secured a significant victory for our commercial real estate clients Security National Properties Holding Company, LLC and related entities (collectively, “SNP”) in an appeal filed in the First Department of the Appellate Division of New York State Supreme Court. 

The lawsuit, filed by affiliates of Colony Capital, alleged that SNP breached three separate mortgage loan agreements and a mezzanine loan agreement totaling $150 million, as well as four different guaranties executed by an SNP executive, when the manager of twenty-eight different commercial real estate properties filed suit against the property-owners for non-payment of management fees. 

In October 2020, the Firm successfully argued a motion to dismiss the case, which resulted in the dismissal of the plaintiffs’ complaint in its entirety.  Specifically, the court held that the three mortgage loan agreements, the mezzanine loan agreement, and the guaranties had not been breached by the property manager’s separate lawsuit against the property owners.

The plaintiffs appealed.  The case was argued before a panel of the First Department on October 12, 2021.  In its opinion, the First Department affirmed the trial court’s decision in all respects.  Among other things the First Department emphasized that the property manager’s separate lawsuit against the property owners for its unpaid management fees did not breach subordination agreements that subordinated the management fees to repayment of the loans.  The First Department also specified that the forum selection clauses in the subordination agreements did not apply to the property manager’s separate lawsuit because the lawsuit did not arise out of or relate to the subordination agreements.

SNP was represented by Muhammad Faridi, Jacqueline Brandon, and Isaac Weingram.

To read the decision, please click here.