By Chris Mays, Brattleboro Reformer
BURLINGTON — Claims alleging that investors in the company which purchased Hermitage Club assets in Wilmington and Dover had "insider status" are being challenged in federal civil court through objections to appeals from former club owner Jim Barnes regarding the sale.
"Barnes baldly asserts that the Member Group was 'advantaged' in the sale process by virtue of their prior patronage of a club controlled by Barnes. Nothing could be farther from the truth!" the member group's attorney Peter J. Haley of Nelson Mullins Riley & Scarborough in Boston wrote in a recent court filing. "The Member Group has (and had) no affiliation with the Chapter 7 Trustee, nor did (or would) the Trustee have any reason to favor the Member Group as a potential buyer."
Barnes continues trying to prevent the member group from moving forward with the purchase, Haley wrote. He described the sale of the private ski resort in Wilmington, a golf course and several inns to the group as beneficial to Deerfield Valley communities.
Raymond J. Obuchowski, the trustee assigned to the Hermitage bankruptcy case, said more than six months went into selling and marketing the properties.
"Any interested parties had access to due diligence information," he wrote in court documents. "These facts evidence that even with the limited number of qualified bidders at the time of auction, assertions of an insider favored transaction don't exist."
He said court documents alleging insider status of members of the purchasing group did not identify anyone in particular.
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Two initial bidders who were "third party purchasers" set off the process to schedule an auction in March, Obuchowski wrote. He noted that hearings in January and February allowed objections to come up before the court approved a sale procedure.
Barnstormer Summit Lift LLC, a group of members who invested in a chairlift when the club was run by companies owned by Barnes, also object to the appeal. The initial bidders are not alleged to have insider status and the new owners only came forward with an offer after the first bidders' figures were deemed acceptable by the court to begin the sale process, wrote Barnstormer's attorney David Dunn of Phillips, Dunn, Shriver & Carroll in Brattleboro.
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The chairlift and other properties ended up being sold together to the member group, which had the highest bid of $8,060,000 at an auction in March. Efforts to get the ski resort ready for winter are underway.
Barnes' attorney William E. Whittington of Whittington Law Associates of Hanover, N.H. raised concerns about having no hearings to determine whether the purchasing group acted in good faith. He said several individuals who spearheaded the creation of the member group and continue to be involved in managing Barnstormer worked for Barnes before his companies filed for bankruptcy by serving as members of the board of managers or ad hoc committees appointed by Barnes "to provide a layer of additional oversight for the club members."
"They acted in such roles while subject to extensive confidentiality and non-disclosure agreements, which they circumvented once the opportunity to grab the Hermitage Club away from Mr. Barnes presented itself to them as the businesses continued to struggle," Whittington wrote.
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The new owners maintain that the appeal is moot.
"Barnes' final act of attempted subterfuge in this case has now manifested itself in the demonstrably false allegation that the Member Group did not act in good faith," Haley wrote. "It is Barnes, however, who is the avatar of bad faith. The Member Group is simply a large group of victims of Barnes 'gross mismanagement' who now seek that relief promised to them by the Bankruptcy Code and the binding precedent in the Second Circuit."
Haley said the member group, Obuchowski and Berkshire Bank's real estate expert "each submitted affidavits attesting to the good faith elements of the sale." The bank foreclosed Hermitage properties in 2018.
"In addition to a lack of good faith challenge by Barnes at the trial level, the Bankruptcy Court found that the Member Group had in fact acted in good faith," Haley wrote. "Such factual findings are reviewed for clear error ... Thus for Barnes' lack of good faith argument to be successful, this Court would need to have a firm conviction that a mistake had been committed at the trial level. The record, however, is devoid of any facts to support such a determination."
Reach staff writer Chris Mays at cmays@reformer.com and at @CMaysBR on Twitter.
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July 28, 2020 at 08:18AM
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Groups, trustee reject Hermitage Club 'insider' label - Brattleboro Reformer
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