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Luxury Homeowners Can Proceed With Lawsuit Against Credit Suisse
The American Lawyer
When we think of predatory lending, we usually think of victims who are relatively poor and unsophisticated. But a group of luxury resort homeowners in Nevada, Idaho, the Grand Bahamas, and Montana are moving forward with claims that they, too, were taken advantage of by a predatory lending scheme orchestrated by Credit Suisse and Cushman Wakefield. Last week, a federal magistrate judge denied the defendants' motion to dismiss all the plaintiffs' claims, but he did dismiss their RICO claims with prejudice.
Seeking $8 billion in damages, seven homeowners and one development company filed a 115-page purported class action on behalf of 3,000 individuals or entities that bought land and property in the resort developments of Lake Las Vegas, Tamarack, Ginn Sur Mer, and Yellowstone Club. The complaint accuses the defendants of running a predatory "loan-to-own" scheme in which Credit Suisse made loans to the resort development companies that they could not pay back, resulting in Credit Suisse taking control of the properties. Cushman Wakefield assisted this scheme by giving inflated appraisals, the plaintiffs allege. These actions harmed the plaintiffs because, among other things, the defendants failed to follow through on their contractual obligation to develop the resorts as promised.
Cushman Wakefield had argued in its motion to dismiss that the plaintiffs were aware that the appraisals for the resorts were not based on conventional market values. Credit Suisse maintained in its motion to dismiss that it had made loans to the developers, and not to the plaintiffs, and thus the plaintiffs had no standing.
In a 52-page decision, Idaho federal magistrate Judge Ronald Bush refused to dismiss negligence and conspiracy claims against both defendants, as well as a breach of fiduciary duty claim against Credit Suisse. Bush did dismiss other counts, including civil RICO, common law fraud, negligent misrepresentation and unjust enrichment claims against both defendants, and tortious interference and breach of fiduciary duty claims against Cushman. With the exception of the RICO claims, Bush allowed the plaintiffs to refile these counts.
"We think the RICO case was a close issue," plaintiffs attorney Michael Flynn told The Am Law Litigation Daily. "As far as the other claims, we're confident that we'll prevail." Flynn noted that the magistrate judge suggested that the developers might have a RICO claim. "We've had ongoing dialogue with the developers about joining or filing their own RICO claim. In some form or another, we will proceed along RICO lines, probably with one or more developers," Flynn told us.
"We welcome the magistrate judge's recommendations that many of the plaintiffs claims should be dismissed," Duncan King, a spokesperson for Credit Suisse, told us. "We remain confident that the remaining claims are without merit and intend to vigorously defend against them." Credit Suisse's lead attorney, David Lender of Weil, Gotshal & Manges, declined to comment, while Cushman Wakefield's lead attorney, Donald Morrow of Paul, Hastings, Janofsky & Walker, did not respond to requests for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.