CBL malls, Chattanooga businessman settle dispute

CBL malls, Chattanooga businessman settle dispute

July 19th, 2019 by Mike Pare in Business Around the Region

A dispute has been settled between four malls owned by Chattanooga-based CBL Properties and well-known local businessman Emerson Russell that had spilled over into bankruptcy court.

U.S. Bankruptcy Court Judge Nicholas Whittenburg in Chattanooga dismissed the case after the parties entered into mediation and reached a resolution last week, according to court papers.

Russell, Chattanooga's 2016 manager of the year, agreed to pay $500,000 to the CBL entities, the settlement said, and that sum was in addition to $250,000 paid earlier.

A joint statement from the parties released by Russell attorney M. Craig Smith said the parties have resolved all disputes between themselves.

Emerson Russell

Emerson Russell

Photo by Staff File Photo /Times Free Press.

"CBL has no reason to believe Mr. Russell is insolvent and wishes him well with his many ongoing business ventures and projects," the statement said. "Emerson Russell has enjoyed years of business relationships with CBL and he wishes them well too."

In May, the four malls sought an involuntary Chapter 7 bankruptcy petition against Russell along with $1 million in payment.

CBL attorney Jeffery Curry said in court papers that Russell had signed sponsorship agreements at the malls valued at a total of $1 million. He said in a letter that $62,500 was to be paid by Russell to each of the malls within 10 days of Dec. 1, 2018.

"For the four sponsorship agreements, this amounts to an aggregate of $250,000. No such payments have been received by the landlords as of the date thereof," Curry said in the April 26 letter to Russell.

The letter said that the landlords would terminate the sponsorship agreements and accelerate all sums due under the agreements, or $1 million, and an action would be taken to collect the full amount. On May 5, CBL filed the petition in Bankrutpcy Court to try to force Russell into bankruptcy in order to recover the debt.

But Smith in court papers called the filing of the involuntary bankruptcy petition "to say the least an extreme remedy with serious consequences" to the businessman.

He said the filing against Russell is a way for the CBL malls to "use this court as their own collection agency to the detriment of Mr. Russell and his other creditors in what is a two-party dispute between the businessman and CBL & Associates Management Inc."

Smith said Russell had enjoyed a decades-long professional relationship with CBL, one of the largest owners and operators of shopping malls in the country. Companies formerly owned and controlled by Russell provided services including maintenance and security for many of CBL's centers, he said.

In 2017, Russell's businesses, the ERMC entities, entered into negotiations to sell substantially all its assets including numerous service contracts with CBL to SecurAmerica LLC and its affiliates, Smith said in court papers.

He said CBL's consent was required for the ERMC entities to have the ability to assign the CBL contracts to SecurAmerica. Smith said CBL threatened to withhold consent unless Russell and SecurAmerica agreed to provide CBL with certain consideration.

Russell then entered into the sponsorship agreements, in which Russell agreed to be the sponsor of community partnership programs at the four malls in St. Louis, Missouri; Asheville, North Carolina; Larado, Texas, and Monroeville, Louisiana, paying sponsorship fees of $62,500 per year for four years, Smith said.

He said Russell made it clear to CBL that he wouldn't pay the fees until he received "an earnout" from the transaction with SecurAmerica, which he expected this spring.

But Smith said CBL consistently reached out to him seeking payment of $250,000 for the first year.

Russell received the earnout last April and he and CBL were in discussions concerning a separate obligation owned to CBL, which was secured by an office building on Lee Highway, the attorney said.

He said CBL refused payment in full on that obligation unless and until Russell also satisfied the obligations owned under the sponsorships. Russell objected, saying the two obligations weren't linked, and as a result, Russell's intended performance under the sponsorships was delayed, Smith said.

CBL then sent the April 26 letter seeking payment for the full $1 million, he said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twittter @MikePareTFP.