Adam Leitman Bailey, P.C. was retained by a title company to represent a lender in a shareholder derivative action which was commenced by a limited partner, individually and on behalf of the partnership, alleging that the general partners were using the partnership as their own personal piggy bank taking out millions of dollar in unauthorized loans to enrich themselves in breach of the partnership agreement and their fiduciary obligations.

Specifically, Plaintiff sought to discharge Adam Leitman Bailey, P.C.’s client’s $2.9 million mortgage arguing that the lender should have known that the mortgage was in violation of the partnership agreement. After assessing the action, Adam Leitman Bailey, P.C. saw that this action was nothing more than a partnership dispute. The general partners were protected under the business judgment rule in making the decision to take out the subject mortgage.

However, knowing that the partners would need motivation to actual settle the matter, Adam Leitman Bailey, P.C. filed a comprehensive answer that include counter-claims, cross-claims, and third-party claims that included claims ranging from unjust enrichment to indemnification. Additionally, the lender sent a notice of default warning the partners that this dispute was a breach under the mortgage, and the lender may elect to commence foreclosure proceedings. The fact that the lender could now commence foreclosure proceeding was especially concerning to the partners, as the partnership’s sole asset was the property.

Over the course of 10 depositions, it was evident that there was no basis to discharge the lender’s mortgage. It became clear to all parties involved that this partnership dispute should be resolved by settlement. The parties agreed to mediation, and after a full day session the general partners agreed to buy out the limited partner plaintiff. The general partners never disputed the lender’s mortgage, and Adam Leitman Bailey, P.C. was able to preserve the lender’s mortgage without additional motion practice.

Danny Ramrattan, Esq. at Adam Leitman Bailey, P.C. secured this result for its client.