Last edited 3:42 p.m., Nov. 6, 2014Over 30 hotels and other properties owned by the trust of late hotelier John Q. Hammons may have to be sold to his persistent legal foe, Jonathan Eilian, according to a recent judgment in Delaware.
The court ruled Oct. 1 that J.D. Holdings LLC - Eilian’s holding company that in 2005 helped privatize John Q. Hammons Hotels Inc. - has the first right of refusal to purchase properties Hammons developed outside the scope of his public company. However, the judge has yet to decide which properties Eilian would have the first right to purchase.
Plaintiffs J.D. Holdings were successful in securing the decision that supported its first right of refusal to buy hotel properties Hammons developed or helped to develop.
Based on the judgment, J.D. Holdings would have no obligation to buy, but it could exercise its rights to do so as early as November 2017, about four and a half years after Hammons' death. What remains unclear is what properties would have to be sold should J.D. Holdings execute its purchase rights.
While the court ruled in favor of J.D. Holdings on four counts regarding the sale of Hammons’ developments not already owned by Eilian, no determination was made on the interest held by Hammons’ trusts in hotel properties with Winegardner & Hammons Inc., W&H Realty Inc. and Des Plaines Development LP.
As part of the 2005 privatization, Eilian’s J.D. Holdings indirectly owned 43 Hammons’ hotels and managed 15 others. Hammons avoided taxes associated with selling off the public company and secured $300 million in credit to develop other hotels, according to case details. Hammons’ management company also was allowed to continue to manage the hotels he developed, but no longer owned, according to the judgment.
According to the judgment, the case supplants legal actions Eilian and J.D. Holdings’ affiliates had taken prior to Hammons’ death as the parties disagreed about the terms of the complex 2005 agreement.
Sordid historyThe legal history between Eilian and Hammons’ company had been sordid leading up to the Springfield hotelier’s death in May 2013.
In July 2011, Atrium TRS LLC, led by Eilian, and its affiliates claimed John Q. Hammons Hotels Inc. CEO Jacquie Dowdy violated a management contract by appointing herself CEO in 2010 and assuming Hammons’ $200,000 salary.
In April 2012, Rogers Funding LLC, also led by Eilian, claimed Dowdy inflated the net worth of Hammons’ trust by $1 billion when refinancing a loan for a hotel and convention center in Rogers, Ark. A
lawsuit filed last year in Cook County, Ill., by Eilian’s SFI Belmont LLC – which seeks to recover $140 million on a $275 million line of credit backed by the Hammons’ estate – is ongoing.
Sheri Smith, a Dallas-based spokeswoman for Hammons Hotels, declined an interview request on behalf of the company, but provided a statement by email.
“The John Q. Hammons companies will continue to aggressively defend our interests during this ongoing litigation while actively pursuing our claims,” the statement reads.
