A Rockville company on the hook for an $8 million judgment it owes a former landlord has suffered two legal setbacks this month.
A U.S. Bankruptcy Court judge dismissed Ronald Cohen Management Co.’s Chapter 11 bankruptcy filing, ruling it was made in bad faith last year. And a Montgomery County Circuit Court judge denied its motion to dismiss a second lawsuit brought by the landlord, Tower Oaks Boulevard LLC, accusing the company of setting up “sham” holding companies and fraudulently conveying millions of dollars.
“Three judges have now found they acted in bad faith and fraudulently,” said Christopher C. Fogleman, Tower Oaks’ lawyer, in an interview last week. “Hopefully we’re making progress, but we still haven’t been paid a dime.”
Ronald Cohen Management filed its bankruptcy petition minutes before three of its properties were scheduled to be auctioned in August in order to help satisfy the judgement owed to Tower Oaks. The bankruptcy filing listed as “disputed” a $6.7 million claim from Tower Oaks, which has alleged Ronald Cohen Management Co. and Ronald Cohen Investments twice forced Tower Oaks into foreclosure by failing to pay rent.
The properties include The Shops at Congressional Village, a Rockville Pike strip shopping center that has been assessed at more than $37 million. Tower Oaks had attached the three properties after obtaining its verdict against the defendant Cohen companies.
Eric Siegel, principal and legal counsel for Cohen Siegel Investors LLC, has said the defendant Cohen companies have no ownership stake in any of the properties, which are owned by Cohen family members through holding companies. Cohen Siegel is the new name for the Cohen Cos., the real estate investment firm founded by Ronald J. Cohen.
Bankruptcy Judge Thomas J. Catliota, in a Feb. 5 opinion, noted Ronald Cohen Management “candidly admits” it filed for bankruptcy to stop the foreclosure of the properties that it also claims are not part of its estate because they are owned by other companies.
“In this sense, the Debtor seeks to have it both ways,” Catliota wrote. “Because the Debtor filed this case to invoke the automatic stay not on its behalf, but to attempt to protect entities who it concedes are not included in the estate, the court concludes that the case was filed with subjective bad faith.”
Ronald Cohen Management has since filed a motion to reconsider the dismissal, according to bankruptcy court records.
The property owners filed third-party motions in state court to remove the writs of attachment. But Judge Ronald B. Rubin in August denied those motions and “pierced the corporate veil,” describing the holding companies as “shells” and “a conduit to keep control of money” and ruling they belong to the defendant Cohen companies.
Tower Oaks then filed a second lawsuit against the Cohen companies, alleging each holding company is a “sham” and should be liable for the judgment against the Cohen defendants.
“They keep setting up new corporations to do their business but there is no money in them,” said Fogleman, of Gleason, Flynn, Emig & Fogleman Chtd. in Rockville.
The second lawsuit also alleges the Cohen companies fraudulently conveyed millions of dollars to Ronald Cohen and his family, money Cohen used to pay personal income taxes and medical bills, among other allegations.
Judge Anne Korbel Albright denied the Cohen companies’ motion to dismiss the second lawsuit following a hearing Feb. 11. A status hearing in the case is scheduled for August.
In the first state court case, a Montgomery County jury in January 2014 awarded Tower Oaks more than $4.5 million in compensatory damages. That was in addition to $600,000 for unpaid rent that Tower Oaks had won in a pretrial summary judgment motion. In November 2011, Tower Oaks had been awarded another $600,000 in unpaid rent.
The jury also found that Tower Oaks was entitled to punitive damages but did not determine the amount.
Four months later, following a bench trial, Rubin awarded Tower Oaks punitive damages of $2.2 million as well as attorneys’ fees.
Neither Glenn C. Etelson, who represents the Cohen defendants in state court, nor Stephen A. Metz, who represents Ronald Cohen Management in bankruptcy court, responded to requests for comment. Both lawyers are with Shulman Rogers Gandal Pordy & Ecker, P.A. in Potomac.
The first state court case is Tower Oaks Boulevard LLC, et al. v. CWCapital Asset Management LLC, et al., 368256V. The second is Tower Oaks Boulevard LLC, et al. v. Ronald J. Cohen, et al., 397215V.