United States District Court, D. Maryland
U.S. HOME CORPORATION, Plaintiff/Counterdefendant
SETTLERS CROSSING, L.L.C., et. al. Defendants/CounterPlaintiff and LENNAR CORPORATION, Counterdefendant and STEVEN B. SANDLER, Defendant
REPORT AND RECOMMENDATIONS RELATED TO MOTION FOR
ATTORNEY'S FEES AND COSTS BY DEFENDANT STEVEN B.
L. Simms, United States Magistrate Judge.
“Report and Recommendations” addresses the
petitions for attorneys' fees and costs filed by
Defendant Steven B. Sandler (“Sandler”)(ECF Nos.
735, 786, 804).
to 28 U.S.C. § 636, and Local Rule 301.5(b), the
Honorable Paula Xinis referred this matter to me to issue a
report and make recommendations (ECF No. 795). The parties
have submitted numerous memoranda and supporting
documentation, thoroughly arguing their respective positions.
(ECF Nos. 735, 786, 789, 791, 792, 804, 820, 823, 829, 839,
831, 846). I believe that the issues have been fully briefed,
and do not believe that any additional hearings are
necessary. Local Rule 105.6. As set forth more fully
below, I ultimately recommend that the Court grant the
motions for attorneys' fees and award costs, however,
reduce the amounts sought as set forth more fully herein.
FACTUAL & PROCEDURAL BACKGROUND
a case about a commercial real estate transaction that was
never consummated, which led to approximately nine years of
heated, protracted litigation between the parties. Detailed
descriptions of the facts can be found in the comprehensive
memorandum opinions issued by the Honorable Deborah K.
Chasanow in 2009, 2014 and 2015 (See, e.g., ECF Nos.
41, 624707, 730, 765). This report includes a,
relatively-speaking, shorter summary of facts which I believe
are relevant to the issues raised in Sandler's attorney
fee petition. The summary is culled from Judge Chasanow's
opinions, and from my review of more than 700 docket sheet
entries and many of the corresponding pleadings filed.
2005, Plaintiff/Counter-defendant U.S. Home Corporation, a
subsidiary of Counter-Defendant Lennar Corporation
(“U.S. Home, ” “Lennar, ” or
“Purchaser”), agreed to purchase from
Defendant/Counter-Plaintiff Settler's Crossing, LLC
(“SC”) its entire membership interest in
Defendant/Counter-Plaintiff Washington Park Estates, LLC
(“WPE”). WPE held title to approximately 1, 250
acres of undeveloped farmland in Prince George's County,
Maryland (“Bevard Property”) that was of interest
to U.S. Home for residential development. Thus, through the
membership interest transaction, U.S. Home would acquire the
Bevard Property, and erect single family homes upon it. (ECF
effectuate the transaction, on November 15, 2005 U.S. Home
entered into an agreement of purchase and sale of the WPE
membership interests (“Purchase Agreement”) with
S.C. and WPE (“the Sellers”). Simultaneously,
U.S. Home and Defendant/Counter-Plaintiff Bevard Development
Company (“BDC”) executed a “Contract for
Services, ” pursuant to which BDC would perform certain
development work on the Bevard Property. In total, U.S. Home
agreed to pay $200 million for these contracts, and made
deposits totaling $20 million. In early December 2005,
Defendant Sandler, who controlled the Sellers and BDC, signed
two guaranty agreements, personally promising the return of
U.S. Home's deposit money should Sellers breach the
contracts. (ECF No. 707).
late 2005 until at least the Spring 2006, the Purchaser and
Sellers cooperated with each other in their
development-related efforts, with Seller granting Purchaser
and its engineering or environmental consultants access to
the Bevard Property to conduct investigations and analyses.
(ECF No. 624). U.S. Home learned that some of the land
contained heavy metals and sludge. U.S. Home also contracted
someone to engage in remediation work on the property.
to the Purchase Agreement, several conditions precedent
needed to be satisfied before U.S. Home was obligated to go
to settlement. By the Summer of 2006, at least one or two
conditions remained unsatisfied; a closing date of March 30,
2007 was set. Id. When the residential housing
market showed signs of softening in 2006, U.S. Home sought to
renegotiate the Purchase Agreement. (ECF No. 707). In May
2017, U.S. Home, its parent, Lennar, and Sellers executed a
Second Amendment to the Purchase Agreement and a First
Amendment to the Contract for Services. The price for these
contracts was about $134 million. The conditions precedent to
closing were modified, one of which was that U.S. Home had to
certify that it had no actual knowledge that the Sellers'
initial representations and warranties (including related to
the environmental condition of the property) were untrue.
Id. Another condition was that U.S. Home would
guarantee specific performance under the contract.
about the same time that U.S. Home and Sellers sought to
renegotiate the Purchase Agreement, Sellers experienced
financial difficulties and sought a mortgage bridge loan form
Defendant/Counter-Plaintiff iStar Financial, Inc.
(“iStar Financial”). On June 19, 2007, iStar
Financial made a $100 million loan to Sellers, using the
Bevard Property as security, with the idea that it would be
repaid at the time of closing. In addition, Sellers
collaterally assigned their respective rights, title, and
interests under the Second Amendment to the Purchase
Agreement and under Contract for Services to iStar Financial.
Id. The collateral assignments included Defendant
Sandler's consent as guarantor. (ECF No. 649). Settlement
was to occur on December 5, 2007.
that same day, U.S. Home and Sellers executed a Third
Amendment to the Purchase Agreement, which provided that if
iStar had to foreclose on the property then the Purchase
Agreement would be modified such that the Bevard Property
would be sold instead of the WPE membership interest being
sold. Id. Finally, on June 19, 2007, U.S. Home
entered into a “Consent and Estoppel Agreement”
with iStar Financial, acknowledging Sellers' assignment
of rights to iStar Financial. By this agreement, U.S. Home
also made certain representations about the Bevard property,
including that “to the best of [Purchaser's]
knowledge, having made due inquiry, ” U.S. Home had
“no existing defenses, offsets claims or credits with
respect to the performance of its obligations [under the two
contracts], ” and that neither party was in
“breach of any of [its] respective obligations under
the [agreements].” (ECF No. 707, p. 13).
with the signing of the above-referenced agreements, Lennar
began seeking a joint venture partner for the Bevard-related
transaction to alleviate some of Lennar's financial
concerns as U.S. housing market conditions continued to
decline. (ECF 707). Lennar represented to at least one
potential partner that it was unaware of any hazardous
conditions on the Bevard Property. Id. Later, when
its efforts to locate a financial partner were unsuccessful,
“Lennar began to investigate strategies to delay the
[December 5, 2017] settlement date, if not avoid closing
altogether.” (ECF No. 707, p.16). Documents and
testimony later adduced at trial showed that Lennar was
analyzing the agreements and was actively “looking at
ways to off-load the deal, ” including looking for an
“escape clause” in the contract. (Id.,
Sellers noted that development work had ceased on the Bevard
Property, they made inquiries of Purchaser as to the status,
which were ignored. Id. On November 21, 2007, Lennar
notified Sellers that Sellers had failed to satisfy
conditions precedent to closing; however, it did not identify
those deficiencies. Thereafter, on December 5, 2007,
Purchaser failed to appear for settlement.
December 6, 2007, the Sellers filed an action for declaratory
judgement in U.S. District Court for the Eastern District of
Virginia (“ED VA Action”). In that action,
Sellers did not allege breach of the Purchase Agreement by
U.S. Home, but, rather, sought that court's assistance in
identifying U.S. Home's list of unsatisfied conditions
precedent that were a barrier to the sale occurring. (ECF No.
707). Following Sellers' initiation of suit against
Purchaser on December 6, 2007, U.S. Home filed a motion to
transfer that case to U.S. District Court in Maryland on
December 26, 2007. On January 25, 2008, U.S. District Judge
Claude Hilton granted U.S. Home's request, and the
Eastern District of Virginia case was transferred to U.S.
District Court-Maryland and assigned to Judge Chasanow, No.
DKC 08-267 (“First Maryland Action” or
“FMA”) (FMA, ECF Nos. 15, 16).
January 2008, U.S. Home sought permission to
“enter” the Bevard Property to conduct
“investigations, studies and tests [that it deemed]
necessary or appropriate.” (ECF No. 707). U.S. Home
asserted that a provision in the Purchase Agreement gave them
the right to such access. Sellers, suspicious of U.S. Home,
denied access. Id.
January 2008 - March 2008, Sellers continued to work to
resolve questions regarding whether the conditions precedent
to the sale were satisfied so that settlement could occur.
(ECF No. 707). On March 12, 2008, the First Maryland Action
was referred to U.S. Magistrate Judge William Connelly for
discovery and scheduling (FMA ECF No. 29). In April 2008,
U.S. Home filed a motion to compel inspect of the Bevard
Property, and also called for settlement to occur on May 27,
2008. (ECF Nos. 649, 707).
16, 2008, U.S. Home notified Sellers that they were in
default because of an alleged refusal to grant U.S. Home
access to the Bevard property. Id. This default
triggered contractual cure obligations for Seller and iStar
Financial under their respective agreements. (ECF No. 707).
Subsequently, U.S. Home notified Sellers that it was not
obligated to proceed to settlement, which Sellers responded
to by serving a May 30, 2008 notice of default on U.S. Home.
(ECF Nos. 649, 707).
24, 2008, U.S. Magistrate Judge William Connelly held a
motions hearing in the First Maryland Action, addressing
issues including U.S. Home's motion to compel inspection
of the Bevard Property. (FMA ECF No. 64). Thereafter, by
Order dated June 27, 2008, Judge Connelly found that U.S.
Home had the right to inspect the Bevard Property, and gave
them a given a six-week period to accomplish this.
Id. Despite Judge Connelly's June 27, 2008
Order, U.S. Home never availed itself of its right to inspect
the Bevard Property (ECF No. 707). Instead, on July 3, 2008,
it terminated the Purchase Agreement and Contract for
Services “as it had planned to do since shortly after
[Sellers denied its request for access].” (ECF No. 707,
p. 26). U.S. Home demanded the refund of the $20 million
deposits, which Sellers and Sander refused to honor.
on July 17, 2008, U.S. Home filed a four-count Complaint
against iStar Financial, Sandler and the three entities that
he controlled, No. PX-08-1863 (“the Instant
Case”). The complaint contained several breach of
contract claims related to Sellers “refusal” to
grant Lennar access to the Bevard Property. U.S. Home sought
return of its $20 million deposit.
18, 2009, U.S. Home filed its First Amended Complaint which
contained seven counts. Counts I, IV, V and VI related to two
entities that Sandler controlled: WPE and Settler's
Crossing. Counts II and III, related to Defendants BDC and
Sandler, respectively. Count VII related to all Defendants.
In brief, the First Amended Complaint added fraud claims
based on the Sellers' alleged failure to disclose certain
environmental conditions on the property (e.g., sewage
sludge), as well as breach of environmental representations
and warranties. The First Amended Complaint also alleged
breaches of the duties to return the deposits equaling $20
million. Sandler and the entities that he controlled-- BDC,
Settler's Crossing and WPE-- were identified in various
counts. (ECF. No. 52). iStar Financial was also named in the
First Amended Complaint.
30, 2009, iStar Financial and Sandler-controlled entities
WPE, Settler's Crossing and BDE filed a joint
counterclaim for declaratory relief and seeking specific
performance of U.S. Home's obligations under the Purchase
Agreement and Contract for Services (ECF No. 66).
consequence of the May 27, 2008 Bevard Property sale not
occurring was that Sellers defaulted on their mortgage bridge
loan with iStar Financial. Thus, on September 24, 2009, iStar
Financial exercised its rights under the collateral
assignments to the Purchase Agreement and Contract for
Services by initiating a foreclosure action in the Circuit
Court of Prince George's County. (ECF No. 649). In
November 2009, the Bevard Property was sold to a limited
liability company formed by iStar Financial. Id.
December 22, 2011, iStar Financial filed a motion for leave
to separately amend its counterclaim, alleging that new facts
and claims had been unearthed during discovery. (ECF Nos.
294, 447). iStar Financial's First Amended Counterclaim
had a total of six claims: three of which sought injunctive
relief identical to that sought by WPE, SC, and BDC in the
Joint Counterclaim; and the other three raised claims against
U.S. Home for fraudulent inducement, negligent
misrepresentation, and fraudulent concealment related to the
consent and estoppel agreement. Id. iStar Financial
was the only party to the Amended
ADDITIONAL PROCEDURAL BACKGROUND: OFTEN SIMULTANEOUS &
First Maryland Action
February 8, 2008, a scheduling order was entered, which set
June 23, 2008 as the deadline for the close of discovery (ECF
No. 41). Between February 2008 - July 2008, before the
Instant Case was filed, SC, WPE, and U.S. Home vigorously
litigated the First Maryland Action. For example, in May
2008, SC and WPE moved for summary judgment, asserting that
all conditions precedent to the settlement had been satisfied
and seeking specific performance of U.S. Home under the
Purchase Agreement. (FMA ECF No. 36). Later in May 2008, U.S.
Home moved to dismiss the First Maryland Action on
jurisdictional grounds (FMA ECF No. 45). In addition, U.S.
Home filed a motion for leave to file an amended Answer (FMA
ECF. No. 51). Moreover, the parties filed various
discovery-related motions cross motions for protective
orders, and a motion to compel inspection of the property
(FMA, ECF No. 33, 35).
August 11, 2008, Settler's Crossing, WPE, Sandler, and
iStar Financial filed a motion to consolidate the First
Maryland Action with the Instant Case.
mid-August 2008 - November 2008, the parties continued to
vigorously litigate the First Maryland Action, while, as
outlined below in Section II.B., simultaneously litigating
issues in the Instant Case. In the First Maryland Action, the
parties also engaged in supplemental briefing related to the
dispositive motions, and filed additional discovery-related
The Instant Case
the August 2008 filing of the motion to consolidate the First
Maryland Action with the Instant Case, SC, WPE, BDC, Sandler
and iStar Financial, Inc. (“Defendants”) filed a
motion for summary judgment in the Instant Case. (ECF No.
14). Between September 2008 - February 2009, U.S. Home
(“Plaintiff”) opposed the Defendant's summary
judgement motion and filed its own summary judgement motion.
Memorandum Opinion and Order issued on March 19, 2009, Judge
Chasanow granted U.S. Home's motion to dismiss the First
Maryland Action, finding that Sellers' complaint had
failed to set forth a ripe case or controversy. (ECF No. 41
at 3). Judge Chasanow denied as moot the motion
to consolidate the First Maryland Action and the Instant
Action, and denied as moot Sellers' motion for summary
judgement in the First Maryland Action. (FMA, ECF Nos. 97,
98). Also in that Opinion, Judge Chasanow resolved
pre-discovery cross motions for summary judgement, denying
Defendants' and Plaintiff's summary judgment motions,
which allowed the litigation to continue. (ECF No. 42).
Long and Litigious Discovery Phase
20, 2009 was a significant marker in the Instant Case: it was
the day that Judge Connelly began presiding over what would
become a lengthy, highly-contentious, discovery process that
lasted approximately 4 years.
a roughly four-year period, more than 500 docket entries were
generated. Motions to compel documents, motion to compel
depositions, motions to quash subpoenas, motions for
protective orders, motions for clarifications of orders,
motions to increase the number of fact witness depositions,
motions to stay the proceedings, and motions to seal were
just a few of the myriad of pleadings filed. There were also
two evidentiary disputes related to attorney client
privilege; attorney-client privilege and work product issues
later became the subject of an appeal to the Fourth Circuit.
All of these pleadings were fully briefed, and in some cases
these motions resulted in hearings, followed by orders issued
by Judge Chasanow or Judge Connelly (some of which were
appealed to Judge Chasanow).
during discovery in the Instant Case, Judge Connelly another
order directing that U.S. Home must “commence and
conclude” its inspection of the Bevard Property during
June 2010 - July 2010. U.S. Home never availed itself of this
second opportunity, (ECF. No. 114). Furthermore, during this
protracted litigation, there were interrogatories, requests
for production of documents, numerous document subpoenas
(some served on third parties), depositions of more than 60
people were taken. Moreover, at one point, Judge Connelly
required weekly status reports regarding discovery disputes.
the lives of both the First Maryland Action and the Instant
Case, U.S. Home/Lennar employed seven law firms, which
handled the myriad of discovery-related, and later, trial and
appellate issues. In contrast, the law firms representing
Defendants/Counter-Plaintiffs Sandler, the Sandler-related
entities and iStar Financial remained virtually the same.
What is abundantly clear is that counsel for all parties
dedicated a substantial amount of time and resources to this
2013, U.S. Home filed a motion for summary judgment as to all
breach of contract and breach of guaranty claims, the fraud
and negligent misrepresentation claims, and all claims for
injunctive relief. (ECF No. 558). Sandler opposed the summary
judgment motions, and also filed a cross-motion for summary
judgment as to U.S. Homes' breach of guaranty claims
lodged against him (ECF Nos. 571, 572). WPE, SC, and BDC also
opposed U.S. motion, and sought partial summary judgment on
U.S. Homes' fraud-related claims against them (ECF Nos.,
573, 574). iStar Financial also filed a motion for partial
summary judgment (breach of contract, breach of environmental
representations and warranties, declaratory judgment claims),
and also sought injunctive relief (ECF No. 575).
January 2014, Judge Chasanow issued a memorandum opinion and
order on all of the post-discovery summary judgment and cross
summary judgment motions that were filed (ECF Nos. 624, 625).
With respect to Sandler, Judge Chasanow denied its cross
motion for summary judgment, and denied U.S. Homes'
summary judgment motion. Regarding WPE, SC, and BDC, Judge
Chasanow entered judgment in their favor against U.S. Home as
to the fraud claims advanced in U.S. Homes' First Amended
Complaint. Judge Chasanow also entered judgment in favor of
U.S. Homes against iStar Financial as to the fraud and
negligent misrepresentation claims in iStar Financial's
Amended Counterclaim, and granted iStar Financial summary
judgment motion on U.S. Homes' fraud claims.
Judge Chasanow's rulings, then, two issues remained for
trial, namely: (a) whether Sellers breached the environmental
representations and warranties provision in the Purchase
Agreement; and (b) whether Sellers breached the Purchase
Agreement by denying U.S. Home's request for access to
the Bevard Property. (ECF No. 707 at 32). If Sellers were
in breach under either of these two theories, then U.S. Home
would be entitled to the return of its deposits. If Sellers
were not in breach under either of these two theories, then
iStar Financial could have been entitled to specific
performance- sale of Property (depending on the outcome of
some zoning issues). Id.
SC, and BDC remained in the litigation in the form of the
Joint Counterclaim until after the 2014 bench trial in the
Instant Case, when Judge Chasanow issued her memorandum
opinion containing her findings of fact and conclusions of
law. (ECF Nos. 707, 708).
Bench Trial and Post- Trial Litigation
March 31, 2014- April 15, 2014, Judge Chasanow conducted a
bench trial in the Instant Case. The evidence adduced at
trial included more than 100 exhibits and testimony by
environmental experts called by both parties. (ECF Nos.
675-692). Regarding Sellers' environmental
representations, Judge Chasanow found “highly
credible” the testimony of iStar Financial's four
scientific expert witnesses (ECF No. 70 at 52). Judge
Chasanow also found the testimony of U.S. Home's experts
non-persuasive, and in the case of one expert, she found it
to be not credible. (Id. at 49). Judge Chasanow held
that U.S. Home failed to demonstrate, inter
alia, that the source of the hazardous materials
“ was something other than what was disclosed in the
environmental reports provided by seller." (Id.
at 61). Furthermore, Judge Chasanow held that
Sellers' denial of property access to U.S. Home did not
constitute a breach of the contract for a myriad of reasons.
(ECF No. 707 at 65-73). For instance, Judge Chasanow found
that U.S. Home acted in bad faith in its access request; it
was merely a tactic to delay purchasing the property, which
made Sellers' denial of that request reasonable, and
Seller was had not breached its obligations under the
The evidence demonstrated that, by at least October 1, 2007,
Purchaser viewed the Bevard transaction as a financial
albatross and actively sought to relieve itself of this
burden. . . . When Purchaser was unable to find a joint
venture partner. . .to assume its contractual obligations, it
retained a ‘team of high priced lawyers and
consultants' to search for an “escape clause”
in the Purchase Agreement. . . . The evidence shows that the
purpose of Purchaser's request for access was to delay
closing while it settled on a strategy to avoid its
obligations under the Bevard contracts. This conclusion is
supported by the fact that Purchaser later rejected
Seller's offer of compromise as to the access issue and
that, after gaining a right of ...