A federal judge for the Southern District of New York granted a rare motion to reopen a lender liability suit between an Atlanta-based developer and a Manhattan lender over what was supposed to be one of the biggest mixed-use developments in the Dallas-Fort Worth area.
The litigation began in August 2020, when developer Stan Thomas filed for Chapter 11 bankruptcy to consolidate his Wade Park Holdings — the entities tied to the troubled $2 billion mixed-use development. The complaint was moved to federal court when Wade Park Holdings officially filed a complaint against New York-based Gamma Real Estate, its president Jonathan Kalikow, and other affiliates alleging fraud, breach of contract, money laundering, theft of trade secrets, racketeering and tortious interference with business relations.
Back in March, U.S. District Judge Lewis Liman dismissed the lawsuit with prejudice in a 90-page decision. The plaintiffs immediately moved to amend the judgment and file an amended complaint claiming additional evidence to “support their fraudulent-transfer claims.”
In the latest decision handed down last week, Judge Liman decided to reopen the case and will now allow Wade Park Land Holdings to amend its complaint against Gamma Real Estate Capital and its associates.
The plaintiff’s lawyers argued that the March decision was handed down with “bad faith, dilatory motive, and undue prejudice,” according to court documents. The defense argued that the alleged evidence should have been included in the original lawsuit, which it called, “a one-sentence footnote” that failed to identify additional facts or legal theories.
The judge’s ruling was limited, however, allowing the plaintiff only to replead counts Twelve and Thirteen of their original complaint with additional facts, but denying the request to add a new claim of fraudulent inducement.
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The project at the center of the lawsuit — formerly called Wade Park or “Project X” — was a planned 112-acre development that would feature a high-rise office building, an entertainment venue, hotels, high-end retail space, plus thousands of luxury residential housing units. The ambitious Wade Park would have gone up right across the street from the landmark Dallas Cowboys’ $1.5 billion Star development in Frisco.
As Thomas’ team described in the lawsuit, “the story starts innocently enough, with a relatively traditional real-estate loan—albeit a large one.” In 2017, Gamma Real Estate Capital extended a four-month $82.75 million bridge loan.
However, work on the development came to an abrupt halt a few months later, leaving just a giant pit and two partially constructed buildings. After more than a year of extensions and numerous threats of foreclosure, Gamma took ownership of the 175-acre property in 2019 via a deed-in-lieu agreement. Construction on the site is still stalled. Last year, a local paper described the state of the property as “a cross between an abandoned dump and a bombed-out shell of a Wild West town.”
The recently reopened lawsuit by Wade Park Holdings accuses Gamma, its president, Jonathan Kalikow, and others of a ‘loan-to-own’ scheme designed to wrangle ownership of the Dallas development from Thomas. The suit claims that the defendants conspired to prevent Thomas from acquiring capital to pay back the bridge loan.