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BMEF San Diego, L.L.C. v. Gray East Village San Diego L.L.C.

Court of Chancery of Delaware

September 30, 2014

BMEF San Diego, L.L.C.
Gray East Village San Diego L.L.C.

Submitted: September 25, 2014

Dear Counsel:

Plaintiffs BMEF San Diego, L.L.C. ("BMEF") and East Village San Diego, L.L.C. (the "L.L.C.") have moved for an expedited trial on the merits in December 2014 because of a dispute with Defendants Gray East Village San Diego L.L.C. ("Gray East") and Gray California Architects, Inc., which has made the lender for the L.L.C.'s $146 million project in San Diego, California unwilling to lend essential funds. A judgment is needed by mid-January 2015 in order to avoid the loss of a valuable municipal project approval as a result of the inability to pay an $8 million fee for an essential permit that will otherwise lapse.[1] Not only would seeking a new approval cause delay, but also the project costs would escalate because of modifications in the interim to the applicable building code.[2]

The dispute between the Plaintiffs and Gray East has been well-known since at least the beginning of 2014.[3] Indeed, Gray East, which had served as the managing member of the L.L.C. for the project, has essentially been eliminated from that position. The dispute between Plaintiffs and Defendants is largely about cash: whether the Plaintiffs owe Defendants and whether the Defendants owe the Plaintiffs. Although the Plaintiffs filed this action in July, they did not move to expedite until the latter half of September. There is a non-monetary aspect to the relief which the Plaintiffs seek: BMEF, as anticipated in its agreement with Gray East, has recalculated capital percentages.[4] The adjustment of capital percentages is necessary, according to BMEF, because of various defaults by Gray East.[5]

If this were simply a dispute between Plaintiffs and Defendants, expediting this proceeding would not be appropriate. Money is the principal topic of their dispute, and it is unclear why the timing of when the percentages are effectively reallocated matters. Moreover, because of the delay between knowing of the dispute and seeking expedition of the litigation, the Plaintiffs have simply waited too long. Whether characterized as laches or simply undue delay, imposition of the burdens of expedited proceedings upon the Defendants and the Court cannot be reconciled with Plaintiffs' failure to proceed with alacrity.

The question presented by the Plaintiffs, however, is different.[6] The exigency that is the motivating force is the conduct of a private third party, i.e., the project lender. The project lender has known of problems between Plaintiffs and Defendants for some significant time; the lender did not appear to be that troubled by the differing positions; indeed, the lender's recent refusal to fund the project appears to have come as something of a surprise to the Plaintiffs.

The lender, which is not a party to this litigation, has not had the opportunity to explain why it has taken the steps that it has taken. The Plaintiffs have done little to justify to the Court why these time-sensitive problems occurred at the behest of the lender. The timing of the lender's change of heart with respect to its funding commitment is not clear. The Plaintiffs refer to the timing of that decision under the label of "recently."[7] Thus, it is not clear how long the Plaintiffs have known of the lender's refusal to fund or, possibly, its growing reluctance to fund.[8]In short, the Plaintiffs have not fully described why they are in the position with their lender that they now find themselves.[9]

Perhaps the private party's recent change in position with respect to funding the loan is not a sufficient basis for granting the motion to expedite, but there is another problem for which the Plaintiffs shoulder a substantial responsibility. It does not appear that it is practicable to have this case ready for trial in less than three months and have it decided in less than four months.[10] Launching an expedited proceeding with trial and final judgment as the objectives on such a limited timeframe is cause for concern. In addition, the Plaintiffs have not made clear exactly what it is that the lender demands. Whether a decision by the Court would suffice or whether an unappealable, final decision is necessary is not clear. Coming to judgment and allowing the appeal period to expire would be impossible as a practical matter in the time that the Plaintiffs have allowed the Defendants and the Court.

In conclusion, there is too much uncertainty as to why the demand for expedition on such a compressed schedule has become necessary, and the Plaintiffs have failed to meet their burden of demonstrating why the commitment of substantial resources to reach final judgment on an unreasonably tight schedule is warranted.[11]

Accordingly, Plaintiffs' Motion to Expedite is denied.


Very truly yours,

John W. Noble J.

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