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10-Q Alert: DDR Discusses its $500M Lawsuit with JV Partner Coventry
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Coventry Real Estate Advisors distributed a press release last week announcing it had filed suit against its commercial real estate joint venture partner, Developers Diversified Realty Corp. (DDR). The press release and lawsuit seemed to take DDR by surprise; they responded with a press release of their own saying:
"Developers Diversified ... received a copy of the press release issued today by Coventry Real Estate Advisors. While the Company has not been served with the lawsuit or seen the complaint, in response to the allegations in the press release, the Company stated that it vehemently denies the allegations set forth in the press release, and will vigorously defend itself against such allegations in any legal proceeding. Further, the Company stated that it has not received notice of termination of any agreement with Coventry, and denies that it has breached any terms of any such agreements."
In its 10-Q filed just short of 5 p.m. on Friday, DDR discussed the lawsuit:
The Company is a party to various joint ventures with Coventry Real Estate Fund II L.L.C. through which 11 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. All properties were acquired by the joint ventures as value-add investments, with major renovation and/or ground-up development contemplated for many of these properties. The Company is generally responsible for day-to-day management of the retail properties. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, “Coventry”) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements, (ii) breached its fiduciary duties as a member of various limited liability companies, (iii) fraudulently induced the plaintiffs to enter into certain agreements and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties should be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million as well as punitive damages.
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