Attorneys for Davidson Kempner Capital Management gave notice of their plan to appeal a New York state judge’s dismissal of a suit DKCM filed against C-III Asset Management over the special servicer’s sale of loans from CSMC 2007-C5, according to a court filing.
DKCM said it plans to appeal “each and every part of the decision and order” of Judge O. Peter Sherwood of the Supreme Court of the State of New York to the court’s Appellate Division, according to the filing. DKCM must file documents detailing the reasons for its appeal within nine months, according to a person briefed.
In his 31 July ruling, Judge Sherwood found that DKCM didn’t have standing to sue in part due to the pooling and servicing agreement’s no-action clause, which includes a provision stating that only certificate holders owning no less than 25% of the trust’s voting rights are eligible to make a request to file suit on behalf of the trust, as reported (see story, 3 August).
DKCM had argued that it had standing to sue because it held more than 25% of the deal’s AJ certificates. But Sherwood rejected that reasoning. “The most natural reading of the no-action clause requires plaintiffs to represent at least 25% of the total voting rights amongst any and all certificates,” Sherwood wrote. “In this case, the PSA is unambiguous.”
The suit filed last year by DKCM on behalf of the CMBS trust alleged a scheme by C-III to sell loans out of the trust at artificially low prices, as reported. The case spotlighted the use of the controversial fair value purchase option in CMBS deals, which have drawn increased scrutiny from some investors who fear special servicers are taking unfair advantage of their option to purchase specially serviced loans at low prices under certain circumstances. C-III said it acted in accordance with governing documents.
Attorneys for DKCM and C-III did not immediately respond to separate requests for comment.