A Boston-based lender has accused Westport law firm Berkowitz, Trager & Trager of submitting a faulty opinion letter in support of a loan that later defaulted to the tune of $13 million.
In an eight-page complaint filed Aug. 4, UCF I Trust 1 and a trustee claimed Berkowitz Trager misrepresented the ownership interest firm PWSMA 1 held in the borrower. PWSMA 1 was acting as collateral for the loan.
UCFT, a Delaware statutory trust, issued a mezzanine loan to Park Square West Members Associates. A mezzanine loan allows the lender to take an equity or ownership stake in the borrower if they default.
Berkowitz Trager, which represented the borrower, said in its November 2012 opinion letter that PSWMA I owned 100 percent of Park Square West Members Associates, according to the complaint.
When the association defaulted on the loan, it was revealed PSWMA I owned no part of Park Square West Members Associates, the complaint said. Rather, a quarter of the membership was held by Seaboard Realty and the rest was owned by a network of other individuals and entities.
Park Square West Members Associates and its related entities filed for bankruptcy in 2015, causing an affiliate of UCFT to purchase real estate owned by Park Square West Members Associates for $43 million, UCFT claimed.
“As PSWMA I did not own 100% of [Park Square West Members Associates], UCFT’s security interest did not attach to the 100% interest in PSW Mezzanine Borrower,” UCFT said in the complaint filed by its attorneys, Jeffrey M. Sklarz and Evangeline V. Kliegman, from Green & Sklarz.
“As a result, UCFT’s loss with respect to the PSW Mezzanine Loan is in excess of $13,000,000.”
It was not clear from the filing who from Berkowitz Trager submitted the opinion letter. Representatives from the firm did not respond to a request for comment.
The three-count complaint, which asks for money damages, accuses Berkowitz Trager of breach of contract, negligent misrepresentation and violation the implied covenant of good faith and fair dealing.
The case, UCF I Trust 1 v. Berkowitz, Trager & Trager, is assigned to U.S. District Judge Victor A. Bolden of the District of Connecticut.
Sklarz and Kliegman were not immediately available to comment on the complaint.
Contact Tom McParland at firstname.lastname@example.org.