February 13, 2017 News

Appellate Court Affirms Dismissal of Claims Against Mortgage Sub-Servicer

February 13, 2017 -- The Appellate Division, First Department unanimously affirmed a lower court's award of summary judgment dismissing all claims against Morrison Cohen clients Arbor Realty Trust and its affiliate Arbor Participation (collectively “Arbor”).  Arbor had been sued by P7 Owner LLC (an affiliate of Square Mile Capital) for allegedly breaching a sub-participation and sub-servicing agreement pursuant to which Arbor was to service a $70 million junior interest in a $125 million mortgage loan on the James Hotel in Chicago.  P7 alleged that, in connection with a workout of the defaulted mortgage loan, Arbor had improperly allocated all of the loan modification losses to P7.

Morrison Cohen was brought into the defend the action after the court refused to dismiss the case at an early stage and synthesized a complex series of agreements for the court and successfully established through documentary and testimonial evidence that Arbor properly met all obligations under the sub-servicing agreement, and that the loan workout comported with accepted servicing practices.  As such, Arbor properly allocated all loan modification losses to P7's subordinate participation interest and was not liable to P7 in any way.  For a copy of the decision, please click here.

The Morrison Cohen team included Y. David Scharf, Kristin T. Roy David Piedra and Joaquin Ezcurra.