We Won a Usury Lawsuit and Obtained a Favorable Settlement for San Francisco Apartment Building Owners

September 30th, 2013

Macdonald Fernandez LLP obtained a chapter 11 settlement providing for maximum return.

The Company:
A couple owned a San Francisco apartment building.

The Problem:
In 2011, we handled a Chapter 11 case for a couple that owned a San Francisco apartment building. They had three loans totaling approximately $1.5 million secured by liens against the property, at an annual interest rate of 12%.

The Solution:
Although it is notoriously difficult, Macdonald Fernandez LLP filed a chapter 11 bankruptcy case, sued the lender for usury, and won.

In this case, the actions of the lender's broker were determinative of the outcome. Because the broker did not negotiate the loan and performed only minimal tasks, the loan did not qualify for an exception to California's usury laws.

Macdonald Fernandez LLP prevailed at the liability phase of the usury trial. We also prevailed on interesting issues regarding the Statute of Limitations. We were able to avoid the effects of the Statute of Limitations because our claim was brought in the bankruptcy case in the nature of a recoupment claim.

The Impact:
Before proceeding to the damages phase of trial, we were able to extract a favorable settlement from the lender, reducing the interest rate from 12% to 7%, extending the term of payment from one year to seven years, and reducing the principle amount by approximately half.

The Client Testimonial:
"The clients first cried in my office when I met them, so they went from tears to cheers."
- Reno Fernandez, Partner, Macdonald Fernandez LLP