A lawsuit that grabbed worldwide attention because it involved one of Guam’s grandest properties — The Hyatt Regency Guam — and legal maneuvering over international law and local business issues has been settled after almost nine years.
The amount of the settlement over repayment of loans to build the Hyatt is a well-kept secret; however word in the legal community is that EIE Guam Corp. agreed in the end to pay “tens of millions” to Resolution and Collection Corp. Neither side would reveal the terms of the settlement or an exact amount in the case of EIE Guam Corp. vs. The Long Term Credit Bank of Japan Ltd. The case was dismissed with prejudice by District Judge Edward Rafeedie on Jan. 7 and it closed with the signing of documents on the same day at Pacific American Title Insurance & Escrow Co.
“The bank is pleased that litigation has come to an end but doesn’t want to publicly go beyond what’s in the record ” said G. Patrick Civille an attorney for Teker Civille Torres & Tang which represented the bank now known as the Shinsei Bank Ltd. and the Resolution and Collection Corp. a government entity that acquired some of the bank’s troublesome loans.
Eduardo A. Calvo attorney for Calvo and Clark LLP who represented EIE Guam said “The path was clear to go to trial and RCC didn’t want to go to trial.” He said the case was “long by anyone’s standards. It has gone through a few judges in several courts. We’re happy it’s not in litigation any longer.”
As an emphatic end to the protracted litigation EIE Guam which does business as Hyatt Regency Guam and which is no longer a subsidiary of EIE International on March 22 filed paperwork with the Guam Department of Revenue and Taxation that changed its name to Marianas Hospitality Corp.
During the course of the litigation LTCB was nationalized and failed in 1999. A portion of the LTCB was purchased by Ripplewood an American investment group and that portion is now known as Shinsei Bank. RCC is an instrumentality of the Japanese government that was formed to collect bad loans in an effort to deal with the banking crisis that hit the country in the early 1990s.
The case went up and down through appellate courts over the years. Appellate issues were resolved finally when the 9th U.S. Circuit Court of Appeals on Feb. 27 2003 remanded it for trial in the District Court of Guam and a subsequent request to be heard by the U.S. Supreme Court was denied. Trial would have started this summer.
Calvo said the case was about breach of fiduciary duty and lender liability but it was not a typical case because it involved fraud and unlawful activity. “A bank in trouble took advantage of and had complete leverage and control over a borrower. web security The bank took advantage to benefit itself at the expense of the borrower and other creditors ” Calvo said. “We felt very good about our chances at trial and they approached us about settling.”
The Hyatt Regency Guam was at the heart of the lawsuit. In 1986 the Long Term Credit Bank of Japan a consortium of several Japanese banks made loans to EIE International. EIE International used $70 million to set up a wholly owned subsidiary EIE Guam Corp. Guam where is to build the Hyatt Guam. On Dec. 4 1988 Harunori Takahashi president of EIE International and Guam landowner Manuel Jose signed the lease for the 47 337-square-meter site on which the 448-room Hyatt would be built. EIE International had become a visible presence in the Pacific Australia and other parts of the world through development of several high-class resort hotels and office buildings. The company’s relationship with LTCB began with some of these investments long before EIE’s presence on Guam.
The Hyatt was half finished in the early 1990s when EIE International began experiencing financial problems. EIE International sold some of its other properties to help pay a $4.6 billion debt. In July 1992 EIE Guam Corp. obtained a loan of $110.3 million from the Long Term Credit Bank of Japan to finish construction of the Hyatt Guam with the hotel as collateral. They executed a construction-loan agreement note and mortgage on the hotel. ask sai baba EIE defaulted on the loan in 1993 according to court documents. Facing possible foreclosure EIE Guam filed suit against the bank in the Superior Court of Guam which enjoined the bank from foreclosing on the hotel.
The loan was extended by a year but then fell back into default. A forbearance agreement was executed by the parties but EIE Guam made no payments to the bank after January 1995. The bank started foreclosure proceedings on May 8 1995. EIE filed the long-running lawsuit in August 1995. In August 1999 the bank assigned to RCC its notes security instruments and claims in the litigation. The case then was moved to the district court. subdomains . Thereafter the parties engaged in mediation on the island of Maui. Six days before the trial in federal court was scheduled to begin the parties executed a document called the Maui Term Sheet settling litigation and agreeing to dismiss a related action.
In an attempt to iron out remaining differences the parties engaged in further negotiations but reached an impasse. They then asked the district court to interpret the Maui Term Sheet which resulted in an order in July 2001. That order held that the Maui Term Sheet was an enforceable settlement. Nonetheless EIE and the other parties failed to agree on the forms of the releases to be executed and failed to close the deal by the Aug. 9 2001 deadline provided in the Maui Term Sheet. The district court in May 2002 held that it had the power to enforce the settlement agreement and set a new closing date of Nov. 25 2002; however the parties appealed.
When EIE began experiencing financial difficulties the bank took over EIE’s board of directors thereby engaging in “self-dealing ” Calvo said in an interview with Guam Business magazine for the June 1998 issue. “You don’t serve two masters in a single transaction ” he said. EIE borrowed the money with a short-term promissory note with the intent of rolling it over into long-term financing. When EIE International couldn’t pay the interest on the loan the bank forced EIE Guam to sign a one-year loan agreement for $100 million.
One of EIE Guam’s arguments in the case involved cross-border financing and captured national attention due in part to an article in the April 31 1997 edition of the International Banking Regulator. The American Bankers Association joined with the Institute of International Bankers to file an amicus brief with the Guam Supreme Court in the case. EIE Guam in attempting to block the foreclosure in 1995 argued that the agreements were unenforceable because the LTCB didn’t have a Guam business license or statement of exemption and therefore was not paying proper taxes. A Superior Court judge ruled in favor of EIE on Aug. 19 1996 making the loans unenforceable. The court said that foreign banks must obtain business licenses to make loans even if they do not maintain a branch on Guam. Institutions that fail to get licenses forfeit their right to foreclose on properties the court said. That decision later was overturned by the Supreme Court of Guam.
Meanwhile tempers flared on talk radio and in public hearings at the legislature in 1998 on Bill No. 475 which would have amended Guam law so that if a Guam court found a party to be conducting business activities without a license any contract liens or obligations created by that business would be deleted from government records. domain fungi . The unsuccessful bill which was introduced on Jan. 7 1998 in the 24th Guam Legislature appeared closely tied to the court case which then was on appeal before the Guam Supreme Court. Opponents called it the “EIE don’t owe bill ” and the “Hyatt relief act.” MBJ