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Minor Family Hotels, the Controlling Entity Over the Long-stalled
 Landmark Hotel Project in Downtown Charlottesville, Virginia,
 Files for Bankruptcy

By Tasha Kates, The Daily Progress, Charlottesville, Va.McClatchy-Tribune Regional News

September 02, 2010 --Minor Family Hotels LLC, Halsey Minor's company that owns the Landmark Hotel project, has filed for Chapter 11 bankruptcy, according to court records.

The company announced Thursday in a news release that it filed a Chapter 11 petition on Wednesday in the U.S. Bankruptcy Court for the Western District of Virginia in Lynchburg to "more quickly resolve the burdensome lawsuits that have prevented it from completing construction and putting people back to work."

"After 18 months and significant costs, the company is no closer to resolving the litigation surrounding this project," Minor said in the release. "It is unfortunate that our lenders and the [Federal Deposit Insurance Corp.] have forced us to take this step."

Construction halted on the Downtown Mall hotel in November 2008, at which point Minor and former developer Lee Danielson began making conflicting statements about the status of the project and filing suits against each other's companies. Minor Family Hotels also is involved in litigation over the loan payments for the hotel project with the FDIC, which took over the parent company of the Atlanta-based lender Specialty Finance Group.

Chapter 11 allows businesses to reorganize while allowing most debtors to retain control of business operations.

According to the release, the company believes Chapter 11 will "streamline the process, ensuring that the judicial system's valuable resources are not wasted on duplicative litigation." Richard C. Maxwell, an attorney with the Roanoke-based Woods Rogers PLC firm that is representing the company in its bankruptcy proceedings, said it's unclear whether the filing will speed up resolutions in the pending suits.

Minor Family Hotels owes money to dozens of entities and individuals, according to court filings. Among the largest unsecured claims is more than $3 million owed to DLA Piper, the Los Angeles-based firm that has been representing the company in its litigation. However, the court filings show that Minor Family Hotels is asking the court to allow DLA Piper to be special counsel on the bankruptcy case.

Betty Shumener, a DLA Piper partner who has dealt with much of Minor Family Hotels' hotel-related suits, is mentioned in the request as a principal attorney in the case billing at a standard rate of $790 an hour. She didn't immediately return a call seeking comment for this story.

Other creditors include court reporting companies, law firms and consultants. Minor Family Hotels' total debt isn't explicitly stated in the filings, although the forms indicate that the company has between $10 million and $50 million of liabilities. Maxwell said eventually Minor Family Hotels will propose a reorganization plan that will be voted upon by the creditors.

C. Connor Crook, the attorney for the Danielson-owned Hotel Charlottesville LLC, said creditors can have options after a company has filed Chapter 11. Crook said creditors can file a motion to lift an automatic stay under Chapter 11 that stops others from foreclosures, lawsuits and debt collection. Creditors also can petition for filings to be converted to Chapter 7, which provides for company liquidation, or move to dismiss the Chapter 11 proceeding.

Hotel Charlottesville's choice is to have Minor Family Hotels in Chapter 11. Crook said the final decision belongs to the court, but everyone will be heard before any decisions are made.

The Chapter 11 filing doesn't appear to have an effect on Minor Family Hotels' recent arbitration award, Crook said. A Charlottesville judge recently signed off on the award for Minor Family Hotels for $4.2 million in damages and $2.2 million in attorneys' and other fees to be paid by Hotel Charlottesville. Debtors in Chapter 11 bankruptcy can continue to conduct business, enforce judgments and litigate lawsuits, Crook said.

Crook, who handles bankruptcy cases, said he thought the most interesting thing about Minor Family Hotels' filing is that the Chapter 11 proceeding doesn't affect Halsey Minor individually. The attorney indicated that it's possible for a creditor to come after Minor himself or another entity for which he has signed guarantees on business debts.

"Oftentimes, a strategic decision about which one of the entities you put in bankruptcy is how best to protect your clients," Crook said.

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Minor Family Hotels, the controlling entity over the long-stalled Landmark Hotel project in downtown Charlottesville, has filed for Chapter 11 bankruptcy court protection, according to a news release from the organization this morning.

"Our goal is to complete this project, save taxpayers additional costs, and provide much needed jobs for the community as well as bolster local businesses by completing this first-class hotel," said Chief Executive Officer Halsey Minor in the news release. "I am committed to seeing this through and the Chapter 11 process allows us to resolve the legal disputes delaying this important project for my hometown."

The Landmark project has been involved in numerous legal tangles in the past 18 months. Last month, an arbitrator sided with Minor in one of the key disputes, with developer Lee Danielson.

Stay tuned to DailyProgress.com for updates.

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Copyright (c) 2010, The Daily Progress, Charlottesville, Va.

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