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Judge upholds most charges in Ginn case

  • The plaintiffs are seeking $24 billion in punitive damages for an alleged “loan to own” scheme involving Ginn Sur Mer and three other U.S. resorts. File Photo

Guardian Business Editor

Published: Apr 05, 2012

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An Idaho federal judge has upheld the majority of charges against Credit Suisse and Cushman & Wakefield in a $24 billion punitive class action involving the former Ginn Sur Mer development.

The $4.9 billion "mega-mix" resort, one of four luxury resort communities implicated in the case, was allegedly the victim of a "loan to own” scheme that brought down the project.  After reviewing recommendations by U.S. Magistrate Judge Ronald E. Bush, District Judge Edward J. Lodge failed to dismiss a series of charges against the defendants, including fraud, negligent misrepresentation, and tortious interference and negligence claims.

However, the judge did toss out a number of other charges, including breach of fiduciary duty, unjust enrichment and Consumer Protection Act violations.

Some fraud and negligence claims were also trimmed off the case.

Credit Suisse and Cushman & Wakefield deny all charges.

According to court documents obtained by Guardian Business, filed in the United States District Court in Idaho, the judge let stand causes of action for tortious interference and negligence in regards to the plaintiffs' claim that Credit Suisse's loans interfered with the resorts' ability to deliver amenities to investors.

"The allegations, if true, make up the elements of a tortious interference claim as they state the existence of a contract, known to both defendants, intentionally interfered with by defendants' actions in the loan to own scheme, and, as a result, injury to plaintiffs," he court document said.  "For the reasons stated in the court's prior order as well as in the report, the Court finds the Motion to Dismiss this claim should be denied."

That said, the judge noted that "surviving summary judgement, however, will be a much greater challenge for this claim".

The document, however, completed dispelled the notion of fiduciary duty, saying the allegations only showed Credit suisse acted as a lender to the developers in an arms-length lender-borrower relationship.

While the plaintiffs allege a conspiracy by the defendants, it does not create a fiduciary duty, the judge stated.  At most, he said, it may allege a claim for fraud.

"Where no fiduciary duty exists absent a conspiracy, the allegation that defendants conspired does not create such a duty. Furthermore, the allegations that Credit Suisse became a 'co-developer', thereby creating a fiduciary relationship with plaintiffs, is too generalized in which to find a fiduciary relationship existed," the document continued.

The ruling sets the stage for a case that could have wide-ranging implications for investors in the former Ginn Sur Mer development.

Comprising nearly 900 homes, two championship ocean-front golf courses, 4,400 condominium hotel units, two marinas, a casino, a medical facility and a private airport expansion, investors allege the project was on track before Credit Suisse forced it into default in 2008.

The defendants claim they were induced to borrow "unreasonably excessive amounts" based on inflated valuations.

Credit Suisse, court documents claim, subsequently charged tens of millions in "exorbitant" loan fees which eventually caused the project to become financially insolvent and fail.

One of the plaintiffs in the case, L.J. Gibson, was an investor and property owner in the Ginn Sur Mer development.

According to this latest court document obtained by Guardian Business, fraud and negligence misrepresentation claims were not dismissed for Gibson.

The other resorts seeking damages in the case include Tamarack Resort ,Yellowstone Club and Lake Las Vegas.

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