Meritage Homes Corp. is objecting to the Chapter 11 plan for a massive failed Nevada housing project known as "Inspirada," calling it "gamesmanship" that will leave Meritage unfairly exposed to future legal trouble.
The bankruptcy exit plan calls for KB Home, Beazer Homes USA Inc. and Toll Brothers Inc. to pay lenders as much as $340 million and get ownership of Inspirada "free and clear" of claims.
It is up for review Monday in the U.S. Bankruptcy Court in Las Vegas.
Besides getting the project, the builders that back the plan will be free of the threat of litigation if the plan is confirmed, Meritage said. "The settling builders are driving this boat, and clearly (and transparently) trying to improve their position against Meritage," attorneys for Meritage wrote in a filing Monday.
JPMorgan Chase & Co. and other lenders that pushed Inspirada owner South Edge LLC into bankruptcy will also be shielded from future legal trouble over the defaults that snagged the 2,000-acre project.
Inspirada's plan is designed to allow the lenders to be paid in full and bow out of Inspirada, where worked stopped in 2008.
Only Meritage will still be in danger of having to face the music over Inspirada's development troubles, lawyers for the holdout builder said in court papers.
A member of the joint venture that launched the housing development in 2004, Meritage said it wants no part of Inspirada's "very uncertain" future. That is why Meritage did not join in the settlements among the builders and lenders that form the foundation of the Chapter 11 plan for Inspirada, the company's attorneys said.
Disputes among lenders and builders erupted only a few years after Inspirada was conceived, as the collapse of the housing bubble made the ambitious experiment in "new urbanism" unwise. Besides 8,500 residences in seven "villages," Inspirada was to have retail and gambling facilities, schools, fire and police stations.
At the time, the $557 million purchase price for the land was a record for the Las Vegas Valley, according to court papers. Two of the seven original home builders that conceived the project — Kimball Hill and Alameda Investments — went into Chapter 11 liquidation.
The prospect of more litigation prompted the Chapter 11 trustee Cynthia Nelson to support Inspirada's settlement-based bankruptcy emergence plan. The "only alternative" to the Chapter 11 plan, she said, is more courtroom quarreling over business wrongs, including cases against KB, Beazer, Toll Brothers and Meritage. That litigation carries too much risk, and offers an uncertain payoff, said Nelson, who's with FTI Consulting Inc.
Meritage, however, said it is looking toward "substantial post-confirmation litigation" and it does not want Inspirada's Chapter 11 plan to cut off its legal rights.
JPMorgan Chase and Meritage are already suing each other in courts in Nevada and Ohio over the project financing.
Meritage predicts more lawsuits and is calling for language to be added to Inspirada's plan that makes sure it is not losing rights under the plan. "But for the plan's convoluted structure, [the claims the other builders have] against Meritage would be subject to a host of defenses and offsets in Meritage's favor," attorneys for Meritage wrote.
