A U.S. Bankruptcy Court judge has denied the Town of Huntington’s motion to dismiss a lawsuit filed by the trustee of the shuttered Thatched Cottage, according to a decision filed Wednesday in Central Islip.
Bankruptcy trustee R. Kenneth Barnard sued the town and several of its officials in February, accusing them of interfering with the sale of the Centerport venue by condemning it four days before the high bidder, Hicksville-based Suzan Tina Properties, was to close the sale.
The company’s executive director, Yama Raj, has said the condemnation was a major factor in the decision to walk away from the $4.65 million deal, forfeiting a $651,000 deposit.
Barnard is seeking unspecified punitive damages, interest and legal fees for the Nov. 20, 2014, condemnation.
Judge Robert E. Grossman denied all but one of the town’s motions for dismissal, saying it would be “inappropriate” to dismiss the majority of the trustee’s claims without a “more complete factual record,” in a memo filed Wednesday.
The attorney representing Huntington, Lee J. Mendelson of Garden City-based Moritt Hock & Hamroff, said in an email Thursday that the town couldn’t comment on the active litigation.
In the town’s April 11 motion to dismiss, Mendelson argued that the condemnation had little impact on the cottage’s value, was not the reason Suzan Tina failed to close, and caused no injury to the estate.
He also argued the cottage’s condition was dire, and an imminent danger to the public, requiring condemnation.
Grossman found the arguments problematic when taken together.
“These arguments are inherently inconsistent and these contradictory assertions raise more questions than they resolve,” he wrote.
Grossman said the core of the trustee’s complaint was that the town violated its own regulations.
“Dismissal of the complaint is not appropriate where the facts as alleged . . . support a plausible nexus between those acts, which are alleged to be unlawful, and the harm suffered by the plaintiffs,” Grossman wrote.
Grossman ruled in favor of the town on one motion, in which Mendelson sought dismissal of the trustee’s claim that Huntington violated a stay in a bankruptcy proceeding. Mendelson argued such a stay applies to individuals, not to a trustee representing a debtors’ estate.
Grossman dismissed that cause of action without prejudice — meaning the trustee’s attorney could later reintroduce the argument.