After several years of litigation, contentious hearings and unexpected twists, a settlement has been reached between various parties in the protracted conflict concerning the failed redevelopment of the Fashion Mall in Plantation.
The settlement dismisses all complaints brought by the parties against one another, including a $48 million lawsuit by the bankruptcy estate against an investor and several companies. It also enables Chinese investor Wei Chen to retain custody of a $1 million flower shop holding that the trustee had sought in legal proceedings.
The case appeared headed for resolution in the last two months.
On July 26 U.S. Bankruptcy Judge John K. Olson approved the terms of a settlement agreement between bankruptcy trustee Kenneth A. Welt, and feuding former business partners — Chen, his affiliated parties, and their opponent, Chinese businessman Zhen Zeng Du and his Tangshan Ganglu Iron & Steel Co.
By Aug. 16, Olson had also ordered the dismissal of another piece of the litigation: Welt’s adversary proceedings against a company called Jin Zhi Star, for which Chen had served as an officer and shareholder.
Welt, Chen, Du and their respective affiliates were all locked in entangling lawsuits against one another over the failed venture to redevelop the Fashion Mall. The mall had opened in 1988 but was closed after significant damage from Hurricane Wilma in 2005.
Du and Chen had intended to transform the site into a live-work-play community called 321 North, with storefronts, a high-rise condominium, a branded hotel and more.
With $300 million allegedly invested into the project, tensions rose between the partners and the venture fell apart. Chen was meant to oversee the U.S. companies involved in the project while Du remained in China. But Du accused Chen of misappropriating millions of dollars.
Welt entered the picture as a court-appointed bankruptcy trustee. In 2015 he successfully moved to halt the Chapter 11 reorganization, saying the estate would recover more by selling the former mall through competitive bidding.
The property was sold in a bankruptcy auction on April 2015 for $37.7 million. Welt then filed an adversary complaint in August 2016 to recover more than $9 million that Chen allegedly diverted from the project.
Read the complaint filed by Kenneth Welt against Wei Chen:
Attorneys on both sides say their clients are relieved to move beyond years of fighting.
“Good meditations mean that nobody is thrilled to death, but he was satisfied and happy that a fair result came out of it,” said Jerry M. Markowitz, one of the attorneys representing Chen. Markowitz, a managing partner at Markowitz Ringel Trusty + Hartog in Miami, added that the mediator, attorney Russell M. Blain, “did a fantastic job in bringing everyone together,” especially considering the significant period of animosity between the various parties.
Welt’s attorney, Glenn D. Moses of Genovese Joblove & Battista, also seemed pleased with the outcome.
“The settlement resulted in the elimination of over $11.5 million in claims, ended contentious litigation, and paved the way for a 100 percent distribution to the unsecured creditors in two of the debtor estates and a 33 percent distribution, to date, in the third,” Moses said. “The trustee recently distributed over $8.5 million to creditors and expects to make a further distribution in short order.”
“Full payment to unsecured creditors is a rare event in a bankruptcy case, and therefore the trustee is proud of the results he and his professionals obtained thus far,” Moses added. ”The trustee is evaluating one remaining cause of action which may result in further funds being made available for creditors, which will be addressed in the very near future.”
Scott A. Underwood, a Tampa shareholder with Buchanan Ingersoll & Rooney, represented Chen’s Jin Zhi Star company. The company had been accused of facilitating the fraudulent transfer of millions of dollars. Underwood shares both Markowitz and Moses’ satisfaction with the approved settlement.
“My client was a much smaller entity with far less funds than its adversary, Ganglu Iron & Steel, and had substantially less litigation funds at its disposal. In light of that reality, and the depleting funds being used in the case to fund litigation by the trustee, I feel the settlement was a very positive result for my client,” Underwood told the Daily Business Review. “Because the Fashion Mall now has new ownership, I suspect this litigation will not continue to impact the Fashion Mall or its development.”
Blank Rome partner Richard E. Berman and associate Alen H. Hsu represented Chen and several of his companies and associated parties. They said their client was particularly pleased that he was able to keep the flower shop, a small property situated in front of the Fashion Mall and valued at nearly $1 million. Chen was also happy to see the claims dismissed as millions of dollars were at stake.
“[Chen] is pleased with the result of the settlement… even though he waived his claims of $900,000, he got to keep the flower shop,” Hsu said. “He’s pleased that the case is over. It’s unfortunate that it took so long and was so costly, but the result is something that he’s happy with.”
Read Judge Olson’s order dismissing the suit against Jin Zhi Star: