General Growth pushes back against class action suit
General Growth Properties Inc. filed a motion in bankruptcy court seeking to hold a stockholder named James Young and his lawyers in contempt for filing a shareholders' derivative suit in state court in Illinois shortly after Simon Property Group Inc. said it made a $10 billion offer to acquire the shopping center owner.
General Growth contends the shareholders' class action was a knowing and willful violation of the so-called automatic stay because it "strikes directly at the heart of the bankruptcy court's exclusive jurisdiction."
The suit, according to General Growth, would have the Illinois state court judge direct the company's board to go ahead with the Simon offer, thus ousting the bankruptcy court of its authority to control the company's destiny.
Besides a ruling that the Illinois suit violates the prohibition against lawsuits outside bankruptcy court, General Growth wants Young and his lawyers held in contempt. In addition, General Growth wants Young and the lawyers to reimburse the company's attorneys' fees spent in stopping the suit.
Young is represented in the Illinois suit by Coughlin Stoia Geller Rudman & Robbins LLP and Johnson Bottini LLP. General Growth called the firms "sophisticated class-action counsel." Both firms are from San Diego. Calls for comment by both firms weren't returned.
After the Simon offer went public, General Growth said it landed an agreement in principle for Brookfield Asset Management Inc. to finance a reorganization plan by investing $2.65 billion cash in return for 30 percent of the stock. The Brookfield offer is said to be worth $15 a share for existing General Growth shareholders while the Simon offer prices out at an estimated $9 a share. Both proposals would pay all creditors in full. To read about the offers, click here for the Feb. 25 Bloomberg daily bankruptcy report.
In four batches of confirmations in December, January and February, Chapter 11 plans were approved for property-owning General Growth subsidiaries having 111 loans representing $11.6 billion in debt, not including companies whose plans were confirmed in last month.
Before the February confirmations, 35 properties with $3.3 billion in loans remained to be restructured. Similarly, the holding companies must reorganize their debt.
General Growth began the largest real estate reorganization in history by filing under Chapter 11 in April. The books of the Chicago-based company had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31, 2008. It owns or manages more than 200 shopping-mall properties.
The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).