Zayat Seeks Dismissal of Fifth Third Case
Updated: Thursday, April 8, 2010 8:39 AM
Posted: Wednesday, April 7, 2010 3:26 PM
Attorneys for Ahmed Zayat have filed a motion requesting that allegations of default against Zayat Stables filed by Fifth Third Bank be dismissed and that the bank pay compensatory and punitive damages, plus other costs, in connection with the case.
The motion was filed in federal bankruptcy court in New Jersey, where Zayat Stables filed for Chapter 11 reorganization. The bankruptcy filing was precipitated by a lawsuit filed by Fifth Third alleging that Zayat Stables had defaulted on loans totaling more than $34 million. The bank sought to take possession of the more than 200 horses owned by Zayat and to force the owner to sell his horses to pay off the loans.
Since being established by Zayat in 2005, in a short period of time Zayat Stables has grown into one of the largest and most successful racing operations in North America. Among the horses campaigned by Zayat have been Pioneerof the Nile
, runner-up in last year’s Kentucky Derby Presented by Yum! Brands (gr. I), and Eskendereya
, whose victories in the Wood Memorial (gr. I) and Fasig-Tipton Fountain of Youth (gr. II) have stamped him as frontrunner for this year’s Derby.
Zayat contends that he was misled by Fifth Third officers into believing that his line of credit would be restructured and extended in late 2009; otherwise, he would have sold horses in order to make the payments necessary to satisfy the bank.
In the latest motion, as in previous filings, Zayat’s attorneys paint a scenario in which “on numerous occasions” in mid-2009, bank representatives “promised and assured Zayat Stables that all existing loans would be restructured, re-amortized, and extended and further represented to Zayat Stables that in lieu of satisfying maturing and/or matured loans, a year-end principal payment of no more than $7 million (which was later reduced to $5 million) would be accepted by the bank...”
Relying upon such assurances from the bank, Zayat backed off a plan to sell horses at Keeneland in September and November to satisfy the loan payments. In addition, in late 2009 Zayat Stables, with the bank’s “knowledge and assent,” according to the court document, borrowed $3.2 million from Keeneland to purchase additional horses.
Later that year, however, Zayat was informed that Fifth Third was not willing to restructure and re-amortize the loan and that the full amount was due, the documents state.
In the latest court filing, Zayat alleges that even while ensuring the owner that his debt would be restructured, Fifth Third officials were proceeding behind the scenes to foreclose on the stable.
“The bank’s intentional misrepresentations... all of which were made in bad faith, relating to the contemplated restructuring and extension of the loans, frustrated Zayat Stables’ ability to perform its purported obligations with respect to the loans, thus constituting a material breach of the implied covenant of good faith and fair dealing,” the motion states. “The bank’s conduct... was willful, wanton and in reckless disregard of Zayat Stables’ rights and was otherwise wrongful.”
Zayat requests that the court declare Fifth Third’s default declaration on behalf of Zayat Stables as void and that “no principal, interest, default interest or other payments are presently due and owing from Zayat Stables to the bank with respect to the loans.
“Zayat Stables respectfully requests entry of judgment against the bank for compensatory damages, punitive damages, interest, attorneys’ fees and costs, and such other and further relief as the court deems just and equitable.”
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