AUSTIN – A lawsuit alleging a complex civil conspiracy to essentially swindle assets from two real estate partnerships is being litigated in Travis County.
The two plaintiff partnerships are 1st and Trinity Super Majority and 3rd and Congress Super Majority.
The defendants named in the suit include Gregory Milligan, individually and as receiver for the partnerships, along with the Roy F. & JoAnn Cole Mitte Foundation. Three attorneys are also named as defendants: Stephen Lemmon, Ray Chester and Rhonda Mates.
According to the plaintiffs’ first amended petition, filed July 13, the Mitte Foundation holds only a 15.84 percent minority limited partnership interest in Trinity and therefore has no authority to control the affairs of the partnership.
However, the Mitte Foundation is a “repeat offender having breached these obligations with abandon, in collusion with the other named defendants and with their knowledge, approval, and active assistance,” the suit states.
The Mitte Foundations only holds 6.83 percent interest in Congress, according to the lawsuit.
“As is the case with the Trinity Limited Partnership, since the inception of the Congress Limited Partnership and its purchase of this real property, the value of the real property has appreciated significantly, and the value of the partnership’s assets currently significantly exceeds its debts,” the suit states. “Again … the Mitte Foundation is a repeat offender, having breached these contractual obligations with abandon.”
In 2018, the partnerships and Mitte Foundation were locked in a dispute over agents of the foundation interfering with the affairs of the partnerships. The agents, according to the suit, were sharing confidential information with third parties and soliciting offers to purchase the partnerships’ assets.
During the course of the dispute, the Mitte Foundation requested access to the partnerships records. Troubled by the request, the partnerships advised Mitte the information would be protected under a non-disclosure agreement, according to the lawsuit.
“Incensed at the notion of being asked to uphold their obligation to keep the information of the Limited Partnerships confidential, on December 27, 2018, Mitte brought suit in Travis County District Court seeking injunctive relief,” the suit states.
“In February 2019, the Limited Partnerships and General Partners initiated arbitration proceedings under the Partnership Agreements against Mitte for its multiple and continued breaches of the Partnership Agreements, seeking to end the toxic relationship with Mitte, which had proven itself to be a rogue limited partner.”
During the course of the arbitration proceeding, Mitte sought the appointment of a receiver over the partnerships, and on Oct. 4, 2019, Mitte put forward Milligan as a “neutral” receiver, the lawsuit states.
The super majority later discovered, however, that Mitte’s relationship with Milligan dated back to as early as Aug. 20, 2019, when the foundation had started providing Milligan documents that were subject to a district court protective order, according to the suit.
“In other words, well before Milligan was proffered by Mitte as a ‘neutral’ and disinterested party, he was being provided confidential information concerning the Limited Partnerships or belonging to the Limited Partnerships in violation of a district court protective order,” the suit states.
“Further, Mitte disingenuously proffered Milligan as a ‘neutral’ party when in reality he had been conferring and conspiring with the Mitte Foundation about how they could use him to effectuate a sale of the Limited Partnerships assets, attempting to achieve a result unavailable to them under the Partnership Agreements, well before the hearings on the appointment of a receiver.”
The partnerships allege Mitte hand-selected Milligan, who “undoubtedly” complied in “anticipation of a hefty pay day,” in order to have a “partisan bagman” to achieve what it could not – commandeer the management of the partnerships to sell assets.
Without knowing everything, the arbitrator appointed Milligan as receiver on Oct. 11, 2019, the suit states.
The partnerships assert the evidence shows that Milligan, by himself and through his counsel Lemmon and Mates, began taking active steps as a putative receiver well before he was appointed, including pre-determining at the direction of Mitte that he would make a recommendation to sell assets once appointed as receiver.
Prior to the receivership hearing, email correspondence between Chester, Lemmon, Mates and Milligan show that as early as Sept. 4, 2019 the parties were aware the arbitration receivership would likely not have any effect until confirmed by a district court.
According to the suit, the partnerships obtained documents revealing hundreds of communications that show that Milligan, Chester, Lemmon, Mates, and Mitte had been colluding and working together since August 2019, if not before, scheming to effectuate a sale of assets through receivership.
“Milligan is receiving a guaranteed hourly fee but also stands to be rewarded with an outrageously disproportionate contingency fee at the conclusion of this litigation,” the suit states. “He has blatantly acted not in the best interest of the Limited Partnerships but at the behest of the Mitte Foundation, Lemmon, Mates, and Chester, and has certainly entirely failed to take into consideration the best interests of the Super Majority Partners.
“If he were successful in his efforts, including engineering a fire sale of the properties, that his compensation could … result in a nearly $4 million pay day to Milligan, which notably is greater than the fair market value of Mitte’s entire interest in both Partnerships.”
The super majority is asking that the court declare the receiverships null and void.
They are represented by Michael Wynne, attorney for the Houston law firm of Gregor Wynne Arney.
Cause No. D-1-GN-20-003550