It keeps going

Though legal battles involving Perkins Rowe have lasted for years, don't assume the end is near.

Published Sep 17, 2012 at 6:02 pm (Updated Sep 17, 2012)

When U.S. District Judge James Brady certified his final judgment earlier this month against Tommy Spinosa in the Perkins Rowe case—ruling KeyBank National Associates can foreclose on the mixed-used development and collect more than $200 million owed by the developer—one might have assumed the case was over. Or, at least, nearing an end.

But as in previous rulings that have gone against Spinosa, the developer's attorneys show no signs of giving up, vowing to appeal and suggesting the three-year-old case could continue to drag on for months, if not years.

With judgments in favor of the bank and other creditors continuing to mount against the developer, many wonder how much longer Spinosa can hang on. More relevant questions to ask, however, may be why the case is taking so long—if, from a legal perspective, it really is—and how many times a court can order a defendant to pay up, as the judge has done in this case, before he finally does.

The answers, say legal experts, are not comforting to anyone waiting on a check from Spinosa.

“Three years is really not that long in a case of a large commercial dispute,” says Dane Ciolino, a professor at Loyola University's College of Law in New Orleans. “It's not uncommon for complex, commercial litigation to go on for three, four, five years or more.”

Indeed, some local attorneys who have watched the Perkins Rowe case more closely than Ciolino, and do not want to be quoted by name, say they've seen complex, commercial cases extend for decades. While no one is predicting such an epic for the Perkins Rowe litigation, there are several reasons it could play out for quite a while.

For one, the U.S. legal system is pretty generous when it comes to protecting the rights of borrowers. As in other types of cases, the law assumes a borrower is innocent and entitled to keep his property until proven otherwise.

“There are all sorts of legal protections built into the law for borrowers,” Ciolino says.

Attorneys on both sides may also have a vested interest in keeping the case going—and not just because they're getting paid handsomely. Granted, attorneys in the Perkins Rowe case are probably billing between $200 and $400 an hour, according to experts who say that's the going rate for top-flight corporate attorneys in this market. But it's often in the best interest of the client to exhaust every possibility, so as long as the defendant—in this case, Spinosa—can keep paying hefty legal bills, there's no real incentive on anyone's part to move things forward.

“Unless it's clearly ridiculous from a legal standpoint, the courts are pretty lenient about letting people fight it out,” observes one local corporate attorney, who asked not to be identified.

In the federal court system, this process can take even longer than it would in state court. In the Perkins Rowe case, Brady and his magistrate judge, Stephen Riedlinger, customarily give each party several weeks to file a response to a motion from the other side. It may be several more weeks before the ruling on that particular issue comes down. And then, as has been customary in this case, the losing side—which on most issues has been Spinosa—attorneys ask the judge to reconsider, a request he typically denies. Either way, it keeps the case moving, if at snail's pace.

Often, ancillary legal issues arise. For instance, both sides have periodically asked that certain financial information be kept out of the public record, which might result in opposition from the other side. It can take a couple of months for the court to resolve that type of dispute.

There's also a dirty little secret about foreclosure suits in general, which is that while lenders initiate them, they don't really want to be saddled with the real estate development they'll get to take back if they win. In other words, while a lender might complain in court records about the lack of a resolution to its case, it might be actually negotiating with the defendant in private at the same time.

“Banks are not in the business of owning real estate if they can help it,” notes one local attorney. “So sometimes these suits drag on, but it's not because the defendant is dragging things out. The other party may be hoping for a settlement instead of pulling the final trigger.”

Complicating the Perkins Rowe case, specifically, is the fact there are several simultaneous legal battles. Not long after KeyBank sued Spinosa in 2009, his attorneys filed a countersuit, essentially blaming KeyBank for the circumstances that caused the foreclosure. As a result, two parallel cases have been winding their way through the court.

Meanwhile, dozens of other creditors have filed suits against Spinosa and Perkins Rowe, some of which have had a tangential impact on the foreclosure suit. Not only does that complicate matters from a legal perspective, it can lead to misunderstandings on the part of the public.

“This isn't a cookie-cutter case,” says a New Orleans attorney who has been following the matter closely and requested anonymity. “This is complex litigation, and complex litigation takes a very long time to resolve.”

Now that Brady has certified his final judgment on the main issues of dispute—in other words, made it official—the case may be one step closer to resolution. Even now, though, Spinosa's attorneys have said they plan to appeal. “And nothing moves fast on appeal, either,” Ciolino says.

Should the Fifth Circuit Court of Appeals uphold Brady's ruling, Spinosa could still take his chances before the Louisiana Supreme Court. If not, he might finally be forced to give up the development and pay the $200 million back to the bank. But some doubt it will come to that, pointing out Brady's rulings have so often favored KeyBank, Spinosa's attorneys may be able to make a compelling argument for judicial bias.

“When you look at some of Brady's rulings, that may open the door for a judicial bias aspect of this case,” observes the New Orleans attorney. “Whatever you may think of Spinosa, everyone is entitled to a fair and impartial system.”