Liability?
Trustee in ongoing adversary proceeding in a bankruptcy case seeks to recover $1.75 million from Seattle Hilton owner
10-1301 HSW OWNER, LLC, a Westbrook Partners controlled entity[1] that owns the Seattle Hilton, is a defendant in an adversary proceeding in the US Bankruptcy Court, Central District of California. The trustee in the case alleges on information and belief that 10-1301 HSW OWNER, LLC is the beneficiary of $1.75 million in fraudulent transfer. Defendant admits “Debtor made certain payments to Defendant” but denied the characterization of any transfers as fraudulent.[2] The December 2023 status report indicates that the parties expect discovery to be completed by 6/31/2024 and a trial to occur in January 2025.[3]
This adversary case is related to the larger Urban Commons LLC bankruptcy. Urban Commons is a Los-Angeles base investment company founded by Howard Wu and Taylor Woods.
Urban Commons’ founders, Taylor Woods and Howard Wu, were labeled “fraudsters” by a Delaware judge in November 15, 2021 in an order finding Woods and Wu in contempt of a preliminary injunction.[4] [5]
US Bankruptcy Judge Christopher Sontchi in a November 22, 2021 order imposing a sanction for contempt stated: “Mr. Woods refused to take personal responsibility for the fraudulent PPP loan application, which he signed under penalty of perjury, and the diversion of the proceeds to their company – blaming, instead, his staff; and (vi) the accounting of their assets was incomplete, vague and inconsistent with documents from May 2021 – indicating that either the previous or current document was fraudulent.” The Judge ruled that defendants could avoid certain obligations of the preliminary injunction order by either placing $2,437,500 in an escrow account, or obtaining a bond in that amount.[6]
Defendants appealed the bankruptcy courts order granting summary judgement, and later moved for voluntary dismissal of the appeal.[7]
Li Mei Chen brought an adversary proceeding against Howard Wu, over a $300,000 investment in Urban Commons 6th Ave Seattle, LLC, for the purpose of acquiring the Seattle Hilton. The parties agreed to a settlement as follows:[8]
“The Settlement Agreement provides, among other things, that Wu will pay $200,000.00 (two-hundred thousand) (“Total Settlement Amount”) by May 31, 2027 to settle the debts owed by Wu to Plaintiff in this Adversary Proceeding and the Civil Action as follows: a. $10,000.00 due on or before December 31, 2023; b. $25,000.00 due on or before May 31, 2024; c. $25,000.00 due on or before May 31, 2025; d. $50,000.00 due on or before May 31, 2026; e. $90,000.00 due on or before May 31, 2027. J. The Settlement Agreement further provides for immediate entry of judgment against Wu in this Adversary Proceeding in the amount of $600,000.00 plus attorneys’ fees incurred to enforce the judgment which shall be non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(plus attorneys’ fees) is higher than the Total Settlement Amount and hence any remaining installments following a Material Breach (as defined in the Settlement Agreement), fully understanding this, the Parties expressly agree upon the $600,000 based on the amount constituting a compromise as to the amount of the underlying debt, which is substantially higher than the $600,000, as the underlying debt consists of the default judgment amount of $1,056,304.90, plus post-judgment interest, and $46,744.00 in attorneys’ fees which has been awarded by the Court and $2,166.00 in costs also awarded by the Court.”
Urban Commons 6th Ave Seattle, LLC never acquired the Seattle Hilton.
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