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July 2018

Multi-Office Team Reaches Settlement in Complex, International Investment and Real Estate Dispute

A Gordon Rees Scully Mansukhani team recently reached a settlement in an international investment and real estate dispute. The team, led by Phoenix co-managing partner Leon Silver, included Phoenix attorneys Scott Theobald and Annelise Dominguez, and Miami attorneys Joseph Sacher and Eric Thompson.

The firm’s client, as borrower, entered into a loan agreement with one of its former shareholders as a pledgor, a B.V.I. Company guarantor, and a Delaware limited liability company lender for approximately $3.8 million in funding related to the construction and operation of a petroleum products recycling plant in Casa Grande, Arizona. The parties entered into affiliated agreements, including an escrow withholding agreement and promissory note. A deed of trust was recorded encumbering the plant as security for the loan. The parties challenged the interpretation and effect of all of the documents.

A dispute arose as to the obligations under the loan agreement and whether, or to what extent, the loan amount was paid. Financial documents produced in a related action in Florida revealed that at least some of the loan amount expected was paid to a third party Florida corporation.

In July 2017, the lender and investor initiated a lawsuit against the client claiming that our client breached the loan agreement and had defrauded the complaining investor out of his shares. The suit also sought the immediate imposition of a receiver. We previously reported that our Phoenix office successfully prevented the receivership.

Through the course of litigation, the team identified a number of suspicious financial transactions, involving parties in several countries, and being funneled through Miami entities. This led to the filing of a counterclaim alleging breach of contract claims, wrongful lien, fraud, Arizona Civil RICO claims, and various business torts, in the Arizona action and a threatened Federal Lawsuit to be brought in Miami against the several related parties who resided both within the United States, and in Colombia, Venezuela, and the Dominican Republic.

The aggressive pursuit of the counterclaim and threatened Miami lawsuit led quickly to settlement discussions. Considering the number of counsel and parties involved, as well as the number of potential claims at issue, the geography and language barriers, the settlement took three months to negotiate and execute. Facilitating the dismissal of all claims and counterclaims involved creative strategizing around an unrepresented entity that could not appear by itself to agree to dismiss its claims. The settlement was finalized and after considerable briefing, the Court dismissed the remaining claims and counterclaims with prejudice as to all parties. The settlement reached was very favorable to our client.

Joseph A. Sacher
Scott M. Theobald
Eric R. Thompson