There are various aspects of this case that GPLLC believes to be highly unusual, if not unprecedented.
​
FH Acted Contrary to its Own Financial Interests
​
From GPLLC's perspective, the transfer of GPLLC's loan to FH's special asset group represented the ultimate indication of FH's bad faith.
​
FH's avowed reason for transferring the loan to SAG was concern about GPLLC's liquidity, principally its debt service coverage ratio. On the November 14 phone call between GPLLC and FH, Schaefer explicitly identified the DSCR as FH's sole concern. The irony was not lost on GPLLC; it was striking: it was GPLLC's hyper-liquidity, and not FH's concerns about illiquidity, that worried FH.
​
Early in the call with Schaefer on November 14, John asked Schaefer if he was aware that GPLLC had $3.7 million in cash and liquid securities in an account at Vanguard. This account, as an asset of GPLLC, secured GPLLC's obligations under the mortgage loan and the swap. Schaefer replied that he was unaware of this account. This of course could not be true. Kuzynowski's principal concern when she met me on July 19 at the Galleria Plaza was the recent transfer by GPLLC of approximately $2 million in cash to this Vanguard account. It was this very liquid account, coupled with GPLLC's avowed intent to make a significant pay down on the loan, that concerned FH.
​
As a practical matter, any special asset group has a limited number of arrows in its quiver.
First, It can enter into a loan modification or loan restructuring that makes certain concessions to the distressed borrower designed to facilitate the borrower's ability to address the lender's principal concern, in this case GPLLC's alleged illiquidity. This could include changing the payment amount, payment dates, maturity date, or interest rate. FH never proposed or even suggested a loan restructuring.
​
Second, it can propose that the borrower reduce expenses to spur greater liquidity. This is a difficult option, with uncertain results and the obvious potential to impair service and revenues..
​
​Third, it can propose to the borrower that it sell non-core assets to generate an immediate infusion of liquidity. This option is generally the first option for any special asset group because of its immediate and certain effect.
It just so happened GPLLC had a non-core asset that had significant value but had been for 12 years a negative-income producing asset: the undeveloped outparcel. FH knew (or should have known) that this parcel had very high site development costs. The parcel's stormwater drainage had to be vaulted underground, and the parcel's proximity to Alligator Creek required a retaining wall along the parcel's northern border. This increased the costs associated with making the lot "pad ready" from approximately $150,000 to approximately $400,000.
The proposed sale of the lot confronted FH with two options: (i) it could permit the sale and convert its collateral from a problematic parcel of dirt into $1 million in cash, or (ii) it could block the sale transaction and compel GPLLC to develop the site and incur the very high site development costs, which would exacerbate GPLLC's alleged liquidity problem.​ FH of course implicitly opted for the second alternative by blocking the sale transaction.
Even if FH had been genuinely temporizing over the sale transaction because of some concern that the purchase price was less than the value of the parcel, SAG would still be compelled under the circumstances to consent to the sale and the application of the proceeds to pay down the loan.
​​
There were less than 3.5 years until maturity when GPLLC approached FH about a loan pay down in November 2023. FH's loan was overcollateralized 10 to 1 between the value of the Galleria Plaza, GPLLC's large cash reserves, and John's personal guaranty of the loan. The plaza could burn to the ground on the same day the stock market crashed 1929-style and full recovery of FH's loan would not be in doubt. FH's only concern in this situation is that the loan becomes non-performing as a consequence of its alleged illiquidity (John's very significant portfolio of liquid securities backs his guaranty, but John has no obligation to divert those assets to GPLLC to redress liquidity problems). In this situation, SAG should have leapt at the parcel sale option even if the appraised value of the parcel substantially exceeded the sale price.
​
This appears to be the very unusual situation where a sophisticated, large financial institution acted against its own economic/financial interests in tortiously interfering with our land sale contract. This simplifies matters enormously, avoiding the necessity of wading into the murky and ill-defined waters of "improper methods." FH's methods were of course strikingly improper, but its actions against its own interests are highly unusual in the tortious interference caselaw, and conclusive evidence of FH's nefarious motives in blocking the land sale.
​
FH Acted at All Times With an Imperturbable Sense of Impunity
​
At no time did FH evince any concern in the face of repeated accusations of bad faith and threats to initiate legal action. Indeed, they doubled down on their scheme in reaction to these threats.
​
FH was aware their stance on the swap agreements was bad faith. The threats of legal action were credible, specifically alleging various actions taken by FH that gave rise to potential FH legal exposure, and were made by a representative of GPLLC who could credibly purport to have substantial experience in matters relating to credit agreements and rate swap transactions.
​
Furthermore, these threats of legal recourse were being made by an entity who had demonstrated a willingness to litigate, and appeared to have on occasion improvidently incurred massive legal expenses in pursuit of its fixation on achieving vindication in court.
​​
The first seven years of GPLLC's existence were consumed by litigation and court battles.* FH was aware of this. GPLLC and John spent nearly $2 million on litigation over that period, expenditures that were clearly indicated in GPLLC's and John's financial disclosure to FH. And yet, when confronted with credible threats of litigation from a small borrower with a pronounced avidity for litigation, FH never blinked, so great was its certitude that the immense wealth/power imbalance between FH and its borrower was an impenetrable shield against legal consequences.
​
FH Was Utterly Undeterred by Credible Threats of Punitive Damages
​
FH was repeatedly confronted by credible threats of punitive damages associated with their egregious, bad faith repudiation of the swap contracts and their tortious interference with the land sale contract. They gave no indication they were deterred in the least. Instead, they cynically exploited their wealth and power to bully a small company based in Venice, FL over a relatively complex derivative instrument, thereby also seeking to exploit a presumed knowledge and expertise disparity with its borrower.
​
I have not found a case where a large financial institution exhibited such blithe disregard for the potential (and, given GPLLC's history, the seeming inevitability) of legal exposure and punitive damages. FH was absolutely insensate to legal consequences. The courts speak of flagrant and gross behavior as the basis for large punitive awards. Based upon my admittedly limited review of the caselaw, it seems apparent that large financial institutions don't really do "flagrant and gross." They're too smart, and don't put themselves in a position where they would have to resort to flagrant and gross behavior.
​
Until we find a case where a large financial institution conducted itself so loutishly, so maniacally heedless of consequences, I am inclined to push the envelope on punitive damages.
​
This case presents an opportunity to confront the court with a conundrum: in such a case, where the defendant has so clearly and repeatedly demonstrated that they were undeterred by credible threats of conventional punitive damages for egregious and bad faith behavior, the courts can either make an exception to their oft-stated antipathy to wealth-based damages, or in essence deem the defendant incorrigible and beyond deterrence.
​
____________
* FH was aware that the first seven years of GPLLC's existence (2011 through 2018) were consumed by litigation and threats of litigation.
The Galleria Plaza was purchased for $6.25 million in 2012 in a short-sale negotiated with PNC Bank, which held an $11 million mortgage on the plaza. The purchase of the Galleria Plaza was plagued by concerted efforts by the seller of the plaza (Venice developer Mike Miller) and his broker to interfere with the transaction. GPLLC had been prepared to file suit for tortious interference had the matter not been resolved.
Six months after the purchase of the plaza was consummated in March 2012, John's wife filed for divorce. Realizing her fantastic tale of John spontaneously ripping up and rescinding a post-nuptial agreement was a losing strategy, she and her attorney conceived a plan to exploit her role as co-managing member and owner with John of the company as tenants by the entirety. She blocked all actions by the company other than day-to-day operations, including a $6.5 million refinancing with FH's predecessor 2014. She and her attorney effectively held GPLLC hostage to her divorce demands. GPLLC obtained a court order compelling her to desist from further obstruction and to cooperate in the proposed refinancing. John's wife voluntarily withdrew from the company in early 2015 as GPLLC was preparing to file a Motion for Contempt for her violations of the court order.
GPLLC and John spent lavishly on the divorce proceeding and the legal efforts to eject his wife from the company. John engaged noted Miami divorce lawyer Albert Caruana. Blalock Walters represented GPLLC in its dispute with John's wife.
John's divorce was settled in November 2015. That very month, John learned that Joellen had been paying herself far more to manage GPLLC than they had agreed upon (she revealed her compensation in a deposition taken in connection with the divorce proceeding). John terminated Joellen on December 31, 2015. GPLLC discovered about a week later that there were substantial sums missing from the company. It was determined that funds had been diverted from GPLLC to entities associated with Joellen's husband, who had large real estate holdings in the Washington, D.C. area. GPLLC sued Joellen and her husband in 2016 and obtained a judgment for $1.45 million in November 2018.
Immediately following the conclusion of the case against our sister and her husband, Frank Entertainment Group, the Galleria Plaza's anchor tenant, filed Ch. 11 in December 2018. There ensued a six-month battle for control of the movie theatre. FEG's financial advisor in the bankruptcy case attempted to coerce GPLLC into accepting his proposed terms for a lease of the theatre by his company. GPLLC spearheaded an effort by the creditors committee to have the advisor disqualified for conflict of interest and self-dealing.