Morrison Cohen Wins Key Victory for Borrowers in Dispute with Lender and Special Servicer

Morrison Cohen successfully represented a group of borrowers in their battle against the lender and special servicer in a complex loan dispute, defeating a motion for summary judgment brought by the lender and special servicer.

The dispute arose after the borrowers entered into a loan agreement in 2018 in the amount of $93 million with Cantor Commercial Real Estate Lending, L.P. to refinance seven commercial properties located in New Jersey. The loan was ultimately securitized into a commercial mortgage-backed securities pool, with Wells Fargo Bank as the noteholder trustee, and Midland Loan Services as the loan servicer.

The dispute centers around whether the plaintiffs engaged in non-monetary defaults under the loan agreement and whether the agreement allowed for the borrowers to sell a single property out of the collateral package. The borrowers heavily disputed the lender’s and Midland’s allegations based on, among other things, written consents that Wells Fargo and Midland provided that permitted the borrowers to undertake certain actions.

On February 25, 2025, Hon. Nancy M. Bannon of New York State Supreme Court denied the lender’s and special servicer’s motion for summary judgment and ruled that there were unresolved factual issues regarding whether the borrowers were in default and what actions they were permitted to undertake. In its Decision denying summary judgment, the Court cited to evidence uncovered by the borrowers in discovery concerning among other issues, the existence of multiple versions of the loan agreement that had inconsistent terms, and consents that the lender/special servicer had provided to the borrowers, from which they were trying to walk away. 

As a result of those issues identified in discovery, the Court also permitted the borrowers to proceed to trial on their claim that the lender and special servicer had breached the loan agreement. This rare and favorable outcome for the borrowers, particularly on their affirmative claim against the lender and special servicer based on the unusual circumstances uncovered by the borrowers, is a significant win within the otherwise lender-favorable legal landscape in New York.

The Morrison Cohen Litigation team was led by Chair and Co-Managing Partner Y. David Scharf, Partner Aaron B. Lauchheimer and Counsel Yuliya Neverova.