Developer: Jurisdiction not followed
Baton Rouge developer J.T. “Tommy” Spinosa asked the 5th U.S. Circuit Court of Appeals on Thursday to throw out a court decision that permits an Ohio lender to sell the Perkins Rowe mixed-use project at foreclosure.
Mark R. Beebe, Spinosa’s lead attorney in the dispute, said he wants the 5th Circuit to “order the District Court to dismiss or relinquish the case because it does not have jurisdiction.”
U.S. District Judge James J. Brady ruled Sept. 4 that Spinosa and three of his Perkins Rowe companies owe KeyBank National Association of Cleveland and eight other lenders $201.9 million in principal and interest on unpaid construction loans. Brady also ruled that KeyBank, as the representative of the eight other banks, could immediately initiate the sale of Perkins Rowe at foreclosure.
In three separate rulings in the past three years, Brady rejected Spinosa’s argument that the dispute should have been routed to state district court because one of the minor lenders, Bank of New Orleans, is based in Louisiana.
KeyBank officials have stated in court filings that the other lenders authorized KeyBank to represent them in the bitter courthouse dispute.
Shortly after KeyBank filed its civil suit in July 2009, the judge stripped Spinosa of control over the development’s 87 condominiums, 226 apartments, more than 60 shops and restaurants, its book store, grocery store, movie complex and pharmacy. Since then, the unfinished development has operated at a profit under a court-appointed manager, Jones Lang LaSalle Americas of Chicago.
On Thursday, Beebe and co-counsel William D. Shea formally notified Brady of Spinosa’s decision to appeal the judge’s decision. Beebe and Shea also asked the judge to issue a stay of his Sept. 4 ruling so that Perkins Rowe cannot be sold while the 5th Circuit considers Spinosa’s argument that the dispute should have been heard in state district court.
In New Orleans, Beebe wrote the 5th Circuit that Brady “committed clear and indisputable jurisdictional error by disregarding long-standing precedents” to send the case to state court, rather than federal court.
Beebe also said that, unless Brady issues the stay of his own ruling or the 5th Circuit sends the case to state court for trial, “Perkins Rowe’s harm is real, imminent and irreparable.”
A foreclosure sale of the 23-acre property near the intersection of Bluebonnet Boulevard and Perkins Road would do serious damage to Spinosa and his Perkins Rowe companies, Beebe told the 5th Circuit.
If that sale occurs because of Brady’s ruling, Beebe told the appellate court, Spinosa and his firms will be back in New Orleans to ask the 5th Circuit to “unscramble the eggs of the District Court’s jurisdictional error.”
Federal court is reserved for disputes between parties in different states, said Beebe, adding that Bank of New Orleans’ in-state participation in the package of loans granted to Spinosa’s companies means that the case has to be decided in state court.
Bank of New Orleans and seven other lenders did not surrender their rights to 80 percent of the original Perkins Rowe loan, Beebe argued.
It does not matter, Beebe told the 5th Circuit, that the “eight lenders made KeyBank their agent for the purpose of enforcing their notes through litigation.”
The case still belongs in state court, he said.