Facts

Alan Casden engaged in numerous business transactions with Cerberus Partners LP, a New York-based private equity firm. Among those transactions was the creation of the Real Estate Investment Trust (REIT), Casden Properties Inc. (CPI). In 2001, Casden explored a potential merger of CPI with another REIT, Apartment Investment and Management Co. Inc. (AIMCO). AIMCO was initially willing to pay $800 million to acquire CPI, but later agreed to pay an additional $125 million.

Casden, Cerberus, and AIMCO also agreed to create a new entity, Casden Properties LLC (CPLLC). Cerberus committed $150 million to fund the new entity, and Casden and AIMCO each agreed to fund up to $50 million. However, the day before AIMCO was scheduled to announce the merger, Cerberus informed Casden that it wanted a larger participation percentage in CPLLC.

Although Cerberus had originally agreed to 60 percent, it now wanted 70 percent. Casden agreed, in order to make the overall transaction complete. However, AIMCO required that Casden have 20 percent interest in CPLLC. Thus, Casden and Cerberus both agreed to a complicated transaction in order to maintain that appearance. The parties agreed to a Supplemental Agreement where Casden would borrow $25 million from Cerberus, and Cerberus would receive payments as CPLLC successfully developed properties. Thus, the loan between Casden and Cerberus would provide a mechanism where Cerberus would receive an increased percentage of profits from CPLLC.

As part of the closing of the deal between the parties, Madeleine LLC entered into a promissory note for $25 million. The promissory note provided a mechanism for the loan drawdowns, and contained various interest provisions.

Madeleine later filed suit against Casden.

PLAINTIFF'S CONTENTIONS:
Madeleine claimed that Casden was in default on its loan and promissory note, and sued to recover the amounts it was due under the note.

DEFENDANT'S CONTENTIONS:
Casden argued that the loan was not in default, and that there was no breach of the agreement when all of the various loan documents were read together in context. The purpose of the loan documents had been to enable Cerberus to receive an additional 10 percent of CPLLC's profits, and they did as they had agreed upon.

Result

The court ruled in favor of the defendants, finding that their interpretation of the loan documents was correct and that there was no breach of agreement.