MP, LLC gets court authority to pursue punitive damages against TD Bank in fraud claim

Waldman Barnett’s Glen Waldman convinced a Florida judge to allow a punitive damage claim to go to the jury against TD Bank, based on its alleged conspiracy to defraud Waldman’s client MP, LLC. As a result of TD Bank’s actions, MP lost its multi-million dollar investment in a profitable Hialeah warehouse district, Palmetto Gardens Industrial Park.

This latest ruling comes in a case originally filed by Waldman against multiple defendants. Claims against all other defendants were successfully settled, leaving TD Bank as MP’s sole remaining adversary after the Third District Court of Appeal ruled that the case against TD Bank should proceed.

The claims stem from 2010, when TD Bank was in the process of buying Mercantile Bank. The suit alleges that in an effort to boost Mercantile’s loan portfolio and make it more attractive to purchaser TD Bank, Mercantile conspired with four of MP’s co-investors to use Palmetto Gardens’ income as collateral for other non-performing loans, totaling $30 million, held by the investors of other warehouse parks with which MP had no involvement. These were the largest non-performing loans in Mercantile’s Florida portfolio.

To execute the scheme, documents were forged to make it appear MP was not a member of the LLC that owned the performing property, even though all parties, including Mercantile, were aware of MP’s existence. The Bank’s outside counsel, who handled the transaction, testified that had MP’s existence been disclosed (as opposed to covered up) the cross collateralization of Palmetto Gardens with the other lesser performing properties could not have happened without MP’s signature.

MP also alleges that after the suit was filed, TD conspired to manufacture a technical default of the loans and drove the deal to execute a short sale to the benefit of the Bank and the other members, which harmed MP. MP could have cured the “technical default” and avoided the property being sold as part of the short sale but for the cross-collateralization of the loan with the lesser performing properties. The short sale agreement included forgiveness of the other partners’ substantial personal guarantees. As a result, the short sale was consummated and, with the sale, MP’s multimillion-dollar minority interest evaporated.

Waldman successfully argued in the Motion to Add Punitive Damages: “The Court should permit MP to seek punitive damages because we believe the Bank significantly injured MP and deliberately disregarded MP’s rights as part of an intentional scheme to hide fraudulent documents and self-dealing transactions from both MP and the Bank’s regulators, for its own benefit.”

The case is likely to go to trial in the fall of 2019. Partners Eleanor Barnett and Michael Azre and Associate Sean McCleary are also actively involved in the case.

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