United States District Court, D. Maryland
U.S. HOME CORPORATION, Plaintiff/Counter-Defendant
SETTLER'S CROSSING, LLC, et al., Defendants/Counter-Plaintiff and LENNAR CORPORATION, Counter-Defendant and STEVEN B. SANDLER, Defendant
REPORT AND RECOMMENDATIONS RELATED TO MOTION FOR
ATTORNEYS' FEES BY DEFENDANT iSTAR FINANCIAL,
L. Simms United States Magistrate Judge
“Report and Recommendations” addresses the
petitions for attorneys' fees and costs filed by
Defendant/Counter-Plaintiff iStar Financial, Inc.
(“iStar Financial”). (ECF Nos. 736, 787, 796).
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. L.R. 105.6. As set forth more fully below,
I ultimately recommend that the Court GRANT IN PART,
DENY IN PART the motion for attorneys' fees,
costs, and expenses, with the reductions as set forth more
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, 624, 707, 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
2007, 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
(“Collateral Assignment”). (ECF No. 691).
Settlement was to occur on December 5, 2007.
on 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. (ECF No. 707, p.
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
judgment in U.S. District Court for the Eastern District of
Virginia (“ED VA Action”). In this 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.
Court for the District of 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 Sellers 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).
consequence of the May 27, 2008 Bevard Property sale not
occurring was that Sellers defaulted on their mortgage bridge
loan with iStar Financial.
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). 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
Sandler refused to honor.
2008, iStar Financial had assumed the rights under the
Collateral Assignment. Thereafter, 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
August 11, 2008, Settler's Crossing, WPE, Sandler, and
iStar Financial filed a motion to consolidate the First
Maryland Action with the Instant Case.
September 16, 2008, iStar Financial, SC, WPE, BDC, Sandler
(“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 Defendants' summary judgment motion and filed
its own summary judgment 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,
p. 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 judgment
in the First Maryland Action. (FMA, ECF Nos. 97, 98). Also in
that Opinion, Judge Chasanow resolved pre-discovery cross
motions for summary judgment, denying Defendants' and
Plaintiff's summary judgment motions, which allowed the
litigation to continue. (ECF No. 42).
18, 2009, U.S. Home filed its First Amended Complaint. 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. Only Count VII related to all Defendants,
including iStar Financial. In Count VII, U.S. Home sought a
declaratory judgment that it was under no obligation to sell
the Bevard Property based on the alleged failure of the
Sellers to satisfy various conditions precedent; thus, it was
entitled to the return of the $20 million deposit, as well as
interest, attorney's fees, and costs. (ECF No.
30, 2009, iStar Financial and Sandler-controlled entities
WPE, Settler's Crossing, and BDC 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).
on September 24, 2009, iStar Financial exercised its rights
under the Collateral Assignment by initiating a foreclosure
action in the Circuit Court for Prince George's County.
(ECF No. 649). In November 2009, the Bevard Property was sold
to a limited liability company formed by iStar Financial.
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 RELEVANT TO DETERMINING
REASONABLENESS OF PETITION
Long and Litigious Discovery Phase
20, 2009, represented 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 four 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 issued
another order directing that U.S. Home must “commence
and conclude” its inspection of the Bevard Property
between 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 life of 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 same law
firm primarily represented Defendant/Counter-Plaintiff iStar
Financial. A second law firm also represented iStar Financial
in connection with the appeal. What is abundantly clear is
that counsel for all parties dedicated a substantial amount
of time and resources to this litigation.
August 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). iStar Financial opposed
the summary judgment motion, and also filed a cross-motion
for partial summary judgment (breach of contract, breach of
environmental representations and warranties, declaratory
judgment claims), and also sought injunctive relief. (ECF
Nos. 575, 579, 605). Sandler, WPE, SC, and BDC also opposed
U.S. Home's motion, and sought partial summary judgment
on U.S. Home's fraud-related claims against them. (ECF
Nos. 571 - 574).
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). Judge Chasanow entered judgment in favor of U.S. Home
against iStar Financial as to the fraud and negligent
misrepresentation claims in iStar Financial's Amended
Counterclaim. (Id.). With respect to Sandler, Judge
Chasanow denied its cross motion for summary judgment, and
denied U.S. Home's 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. Home's First Amended Complaint.
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, p.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 the Property (depending on the outcome
of some zoning issues). (Id.).
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. 707, p.
Judge Chasanow also found the testimony of U.S. Home's
experts non-persuasive, and in the case of one expert, she
found the expert to be not credible. (Id., p. 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., p. 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, pp. 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
Sellers had not breached its obligations under the Purchase
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 access to the Property through
the court, Purchaser never exercised that right. . .
Purchaser was determined to ‘terminate [the] contract
and get [its] deposit back via legal action.'
(ECF No. 707, pp. 71-73).
Chasanow found that iStar Financial was entitled to relief
under the Purchase Agreement because of U.S. Home's
default because it “[stood] in the shoes of
[Sellers].” (ECF No. 707, pp. 73-74). The Second
Amendment to the Purchase Agreement required specific
performance in the form of proceeding to settlement with the
purchase price to be paid to iStar Financial. (Id.).
the Joint Counterclaim, Judge Chasanow dismissed it as moot,
ruling that the November 2009 foreclosure sale meant that the
Sellers no longer had an interest in the Bevard property.
(ECF Nos. 707, p.31; 708).
judgment could be entered in favor of iStar Financial on
Counts I-III of its amended counterclaim, and before the
amount of damages could be quantified, issues related to 2013
zoning regulations and their potential impact on the Bevard
Property had to be resolved, which required additional
briefing. (ECF No. 730, pp. 2-3). iStar Financial and U.S.
Home submitted post-trial briefs, and following a November
2014 hearing, Judge Chasanow issued another comprehensive
memorandum opinion and order. (ECF Nos. 730, 731).
Ultimately, Judge Chasanow entered judgment in favor of iStar
Financial and Sandler against U.S. Home on Counts I-III of
its First Amended Complaint. She directed U.S. Home to
proceed to settlement within 30 days. Judge Chasanow further
held that iStar Financial should be awarded $114 million,
plus interest, at the rate of 12% per year, calculated on a
per diem basis, from May 27, 2008, until U.S. Home proceeded
to Settlement. (ECF Nos. 730, p. 45; 731).