Curlin Foreclosure Motion Continued
Updated: Thursday, February 21, 2008 4:06 PM
Posted: Wednesday, February 20, 2008 10:23 AM
Photo: Anne M. Eberhardt
Curlin co-owner William Gallion.
A Kentucky judge delayed ruling on the latest motion asking to foreclose on assets in the company that owns a minority interest in reigning Horse of the Year Curlin Feb. 19, leaving in place, at least temporarily, the colt's clouded ownership structure.
Senior Judge Roger Crittenden chose to continue to March 21 the hearing on the foreclosure request on the assets of Tandy, the Kentucky entity headed by attorneys Shirley Cunningham Jr. and William Gallion. The two attorneys, along with fellow attorney Melbourne Mills Jr., were ordered last year to pay a $42 million judgment to more than 400 former clients they represented in the prominent fen-phen class-action lawsuit.
The hearing in Frankfort County Circuit Court was the latest development in a series of complicated legal battles against Cunningham and Gallion, who through Tandy own a 20% interest in Curlin. Jess Jackson’s Stonestreet Stable controls the majority 80% interest in Curlin, who is currently training in Dubai in preparation for a pending test in the $6 million Dubai World Cup (UAE-I) March 29.
Crittenden early in the 90-minute hearing indicated he was prepared to overrule the latest foreclosure motion authored by the fen-phen plaintiffs’ attorney, Angela Ford, similar in action to a denial he delivered on another motion in a Jan. 22 hearing
But after being told Tandy attorney Andre Regard had not had time to submit an answer to the motion (which was filed Feb. 15), and hearing Ford's frustrations in trying to obtain financial records for the defendants' various companies, Crittenden delayed his ruling at least until March.
Crittenden made clear his feelings about what he considers to be the foundation of the case to those assembled in the court room, however.
“There was a judgment that says the plaintiffs are entitled to $62 million,” he said, noting the total judgment size awarded by a previous judge in the case. “You can call it what you want. It is a judgment. And we are enforcing that judgment.”
The motion filed by Ford asked the court to appoint a receiver to manage the affairs of Tandy, and to "authorize the receiver to do anything the company could have done, including sell assets” to pay on the judgment. In addition to Curlin’s interest, Tandy’s racing arm, Midnight Cry Stable, also owns horses such as grade-I winner Einstein and stakes winner Stormin Baghdad.
“The debtors' bad faith is not without consequences, as Tandy's expenses pile up, its income dries up, and its business opportunities are lost,” the motion said.
But Regard claimed Tandy has realized about $115,000 in race earnings in the last two months. He said a previous court-appointed receivership set up to govern funds realized from racing Curlin hasn’t worked.
“The receivership hasn’t paid one bill that has been submitted in a timely fashion,” he told the court. “To say you can’t use the money from Curlin to pay bills of the company make absolutely no sense.”
Ford said after the hearing she was encouraged Crittenden made statements suggesting he would look at case law aimed at uncovering funds held in limited liability companies.
“I think he may have a preference of proceeding against those assets in a different manner,” she said. “There are different ways of going at it.
“The bottom line is, there is a recognition that Tandy, as well as the other (affiliated) LLCs...appear to have been established after the settlement,” she continued. “There is a very strong suggestion they were asset-funded with settlement funds that belonged to their former clients.”
Cunningham, Gallion, and Mills are currently incarcerated in a Boone County, Ky. jail due to rulings in a separate federal criminal action against them. Court documents say the three attorneys paid themselves and others more than $126 million out of the $200 million total settlement in the fen-phen case.
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