A headline-grabbing lawsuit filed four years ago against a landlord that was formerly among Chicago’s largest may have been centered on a faulty premise.
That’s the rationale behind Pangea Properties’ recent request for sanctions against attorneys representing a group of tenants in a class action complaint filed in 2022.
In their original filing, attorneys claimed that Pangea, led by Peter Martay, had allowed its portfolio of 423 properties to rack up “tens of thousands of code violations,” resulting in poor living conditions that violated tenant rights. At the time, the accusations made news and cast doubt on the quality of Pangea’s properties.
A few months later, the landlord sold its entire portfolio of more than 7,200 units in Chicago to a New York-based firm, Emerald Empire, for $600 million. The sale was the largest commercial transaction in Chicago in 2022.
Because Emerald Empire did not take over control of the properties until after the lawsuit was filed, it is not named in the complaint.
Years into the litigation, Pangea argues that the plaintiff’s attorneys have failed to provide sufficient evidence to back up their claims, despite the company turning over tens of thousands of documents during the discovery process.
“Plaintiffs admit that they cannot produce anything that substantiates their pleaded allegations that the properties had ‘tens of thousands’ of violations. Still, plaintiffs unbelievably argue supporting [Department of Building] data exists, but they lack the technical skills to download and produce that data,” the sanctions request reads.
The tenants’ attorneys argue that they have not been able to properly analyze the records they have received during discovery and are also seeking additional documentation.
Pangea’s attorneys claim that argument is likely more of a stall tactic than a legitimate rationale. They also claim that several requests from plaintiffs for substitute judges constitute another stall tactic known as “judge shopping.”
The sanctions request goes on to add that the tenants are represented by “three different law firms, including a 1,200-attorney firm,” and that “it is implausible that plaintiffs’ counsel lacks the technical ability to download a large data set from a public website.”
While disputing the trustworthiness of an allegation is typical in legal proceedings, the defendant’s call for sanctions takes Pangea’s defense to a new level. Not only are the company’s attorneys claiming that the lawsuit is frivolous, they are also requesting that a judge essentially punish the tenants’ attorneys for wasting the resources of the court system on a claim they allege the plaintiffs had no ability to back up from the beginning.
The attorneys representing the tenants work for Faegre Drinker Biddle & Reath, Hughes Socol Piers Resnick & Dym and The Legal Aid Society of Metropolitan Family Services.
The sanctions request also notes that records provided by Pangea show that “Plaintiff’s own documents indicated … the [Chicago Housing Authority] performed 7,300 inspections at the subject properties and … there were only 25 instances in which the CHA permanently terminated payments over the relevant 5.5 year time period. CHA routinely subsidizes defendants’ apartments … and ‘had a nearly 100 percent pass rate from HUD inspectors,’” according to one testimony.
The filing states that sanctions are necessary because of “plaintiffs’ disregard for the truth” and “persistence with groundless litigation after warnings.”
Issuing the sanctions would “protect defendants from further harassment and the integrity of this court,” the filing also states.
At one point, a judge in the tenant’s class action lawsuit dismissed the lawsuit without prejudice but attorneys re-filed their claim shortly after.
Pangea’s attorneys also argue that the sale of the portfolio for considerably more than it was bought for, was proof the company’s properties were well taken care of.
Martay began assembling the portfolio shortly after the great financial crisis, buying many properties for as little as $20,000 per unit. When he sold the properties in 2022, the price came out to about $75,000 per unit.
A judge will consider the request for sanctions on December 15 and will hold a status call on December 23.
Pangea was also hit with a whistleblower lawsuit in 2018 over allegedly adding surcharges to units rented by HUD voucher holders. That case, however, was dismissed in August.
Any specific damages awarded to the federal government or the whistleblower were not outlined in the court filings.
Previously, Pangea denied committing fraud or systemic overcharging while admitting that there were some isolated cases of overcharging.
Around the same time that the voucher dispute was dismissed, the portfolio’s new owners, Emerald Empire, appeared to be running into trouble of their own.
Fannie Mae struck a forbearance agreement in August with Moshe Wechsler’s New York-based firm on at least $125 million worth of loans attached to Chicago apartment properties.
“The loans in question are currently in forbearance and are performing in accordance with the agreement,” a Fannie Mae spokesperson said at the time.
According to public records, the properties in forbearance are encumbered by a tranche of debt within a bigger $430 million financing package.