United States District Court, N.D. Illinois, Eastern Division
Bletchley Hotel at O'Hare Field LLC, Appellant,
represented by Gus Anthony Paloian, Seyfarth Shaw LLP, James
B. Sowka, Seyfarth Shaw LLP & Michael Ryan Pinkston, Seyfarth
Road Hotel Partners, LLC, Appellee, represented by Brian A.
Audette, Perkins Coie LLP, David M. Neff, Perkins Coie LLP &
Eric E. Walker, Perkins Coie LLP.
Capital Markets & Co., Appellee, represented by William John
Barrett, Barack Ferrazzano Kirschbaum & Nagelberg LLP.
Patrick S Layng, Amicus, represented by Stephen G. Wolfe,
Office of the United States Trustee.
MEMORANDUM OPINION AND ORDER
D. LEINENWEBER, District Judge.
the Court is an appeal from a judgment by the United States
Bankruptcy Court for the Northern District of Illinois
brought by Bletchley Hotel at O'Hare Field LLC
("Bletchley"), and the cross-appeal of FBR Capital
Markets & Co. ("FBR"). FBR also moves to have
Bletchley's appeal dismissed as frivolous, [ECF No. 31].
For the reasons stated herein, the decision of the Bankruptcy
Court is affirmed, and FBR's Motion is denied.
appeal stems from the bankruptcy of River Road Hotel
Partners, LLC and its affiliates ("the Debtors").
The bankruptcy relates to the commercial failure of the
former Intercontinental Hotel at O'Hare Airport, which
opened its doors right before the start of the financial
crisis in 2008. When the business went south and the Debtors
began to contemplate Chapter 11 bankruptcy, they hired FBR as
their financial advisor to oversee a planned restructuring.
The parties signed an engagement letter in August of 2009
detailing the terms of their agreement. The Bankruptcy Court
officially approved Debtors' retention of FBR in
September of 2009 in a court order ("the Retention
Order"). The interplay between language in the
engagement letter and the Retention Order form the bulk of
the basis for this appeal.
engagement letter set out several types of fees that Debtors
would pay to FBR for its work. Central to this dispute is the
"restructuring fee, " a fee contingent on an
eventual restructuring. FBR performed services under the
contract for 22 months and still had not closed a deal when a
third-party, Amalgamated Bank, proposed its own Chapter 11
restructuring plan, pursuant to which the Debtors would lose
all of their assets. The Bankruptcy Court approved
Amalgamated's plan on July 7, 2011. The plan created
Bletchley Hotel at O'Hare LLC ("Bletchley"),
which was responsible for the payment of expenses and is the
entity bringing this appeal. FBR's efforts as financial
advisor thus failed; it was not the party responsible for the
final, successful restructuring.
FBR is entitled to the restructuring fee turns on how the
relevant documents define the fee. It was "payable
concurrently with the consummation of any
Restructuring." (App. Appellants' Br. Ex. 3). The
engagement letter defined a "restructuring, " in
relevant part, as "any restructuring, reorganization
and/or recapitalization... that involves all or a significant
portion of the Company's outstanding indebtedness."
Id . The fee amount was to be computed as a
percentage of the total indebtedness involved in the final
first blush, this all seems simple enough: the restructuring
fee was payable upon the occurrence of any restructuring,
regardless of whether it was completed by FBR. This Court
previously held, however, that the Bankruptcy Court's
Retention Order implementing the terms of the engagement
letter created some ambiguity surrounding the fee. See,
FBR Capital Markets & Co. v. Bletchley Hotel at O'Hare
LLC, 2013 WL 5408848 (N.D. Ill. September 24, 2013).
Specifically, the Retention Order stated that the payment of
the restructuring fee would be "contingent upon the
consummation of a restructuring contemplated by the
engagement letter." (App. Appellants' Br. Ex. 4). Of
that language, this Court previously observed: "By
indicating that some restructurings would be contemplated by
the Engagement Letter and others would not, the Retention
Order creates an ambiguity regarding which restructurings
count. Even though the Engagement Letter is broad, it does
not answer that question." FBR, 2013 WL
5408848, at *3. Due to the ambiguity, the Court remanded the
case back to the Bankruptcy Court for a bench trial to
consider extrinsic evidence and decide which restructurings
were contemplated under the agreement.
evidence introduced at trial proved inconclusive on this
issue. The Bankruptcy Court's findings of fact adeptly
explain the impasse, see, In re River Road Hotel
Partners, LLC, 520 B.R. 691 (Bankr. N.D.Ill. 2014); the
following is only a brief recap. FBR's witnesses
testified that they understood the contract at the time of
drafting in the terms most favorable to their side. For
example, Brian Taylor, a director at FBR who helped draft the
engagement letter, testified that he did not intend the
restructuring fee's payment to be conditioned on
FBR's success as opposed to some other party. He claimed
that FBR never would have accepted such a deal. Steven
Goldberg, another key employee of FBR, made similar
statements when deposed. David Neff, counsel for the Debtors,
had input into the proposed Retention Order. He made some
modifications to a draft, but added no language to make
payment of the restructuring fee explicitly contingent on
FBR's closure of a deal. At trial, he did not offer a
clear rationale for why he failed to include more specific
language that would support the interpretation of the
engagement letter now advanced by Bletchley. Neff merely
insisted that the Retention Order should reflect that payment
of the fee be contingent on a restructuring
"contemplated by the engagement letter." And to
reiterate, the engagement letter broadly defines a
restructuring without reference to a particular party.
Bankruptcy Court ultimately found that the Debtors were
responsible for the ambiguity and so it should be construed
against Bletchley; the court thus ruled in favor of FBR and
ordered Bletchley to pay the restructuring fee. This Court
reviews the Bankruptcy Court's findings of fact for clear