Monday, January 31, 2022


              In 2015 South State Bank domesticated a judgment against Kyle Tauch for $4,635,877 plus interest. Then, the Bank started settlement negotiations with Kyle, culminating in Kyle’s offer to purchase the judgment for $1 million.

            At that juncture the debt was over $6 million. The Bank’s vice president responded to Kyle by email on April 11, 2016, rejected the offer, countered with $2 million, and stated that the Bank was poised to “look at other collection alternatives.”

            Kyle did not reply.

            The Bank then discussed the possibility of selling the Judgment to The Gobsmack Gift Trust. On April 13, still without receiving a response from Kyle, the Bank assigned the Judgment to the Trust. As consideration, the Bank would receive the first $3 million collected on the Judgment. The Trust would receive all excess sums.

            The Trust’s attorney made Kyle aware of the transfer at 4.27 pm on April 13. Kyle’s lawyer requested documentation of the assignment, which was furnished the same day at 5.23 pm.

            Kyle replied to the Bank at 6.12 pm on April 13 purporting to accept the Bank’s $2 million offer of April 11. On April 15 the Bank responded to advise Kyle that the Bank made Kyle’s attorney aware that the Judgment had been assigned before Kyle attempted to accept the previous settlement offer. And that the Bank’s offer was no longer capable of acceptance, as it had been revoked through subsequent actions taken by the Bank to accept another offer.

            Kyle denied that the settlement offer had been effectively revoked, and insisted that a valid settlement agreement had been formed. So the Trust sued Kyle seeking a declaration that Kyle’s April 13 acceptance of the Bank’s $2 million settlement offer was too late and not binding.

            Kyle asserted a counterclaim contending that he had a valid contract with the Bank, through timely offer and acceptance, to resolve the $6+ million debt for $2 million.

            The trial court granted summary judgment for the Trust, determining that Kyle’s acceptance was too late. Then the appeals started.

            The court of appeals reversed the judgment of the trial court, finding that Kyle’s acceptance was timely and formed a binding $2 million contract. Another appeal followed.

            It was time for the Supreme Court to weigh the facts and apply the laws. The first fundamental analysis involves the right of the one who makes an offer to retract it before it is accepted. Timely revocation removes the ability to accept the offer that had been extended.

            Typical revocations involve direct communications such as “Your counteroffer is rejected,” “My initial offer is no longer outstanding,” or similar. However, offers and counteroffers may also be rescinded based on “definition action [that is] inconsistent with an intention to enter into the proposed contract.

            I’ll spare you 40 pages of text by concluding that the Bank’s settlement offer as previously extended to Kyle was revoked by the Bank’s later inconsistent action. And that the later inconsistent action became known to Kyle’s attorney before Kyle attempted to accept the then no-longer-outstanding-Bank-offer.

             The court of appeals’ judgment is reversed; the trial court’s judgment is reinstated. The Trust wins and Kyle Tauch loses. See Virginia Angel, Trustee for the Gobsmack Gift Trust v. Tauch; Texas Supreme Court, Case No. 19-0793, January 14, 2022:

            Lessons / Questions / Observations:

1.      Lesson. Possibly I would not be writing about counter-offer acceptance, rejection, and initial offer revocation if the Bank’s first email to Kyle stated that the Bank’s offer could be rescinded at any time before acceptance, without advance notice.

2.      Observation. Possibly I would not be writing about counter-offer acceptance, rejection, and initial offer revocation if the Bank had sent to Kyle, at the time of the Bank’s acceptance of the Trust’s offer, an email stating that all offers and counteroffers were withdrawn and terminated.

3.      Question. Have you ever extended a settlement offer, and then become engaged in protracted discussions with multiple offers and counter-offers? You might consider ending each email with a provision that you reserve the right to end all discussions and withdraw all offers without advance notice.

                                                                                    Stuart A. Lautin, Esq.*



* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.


Monday, January 3, 2022


              Dajia Insurance, a corporation organized under laws of the People’s Republic of China, owns Strategic Hotels & Resorts, a Delaware LLC, through an intermediary entity, AB Stable VIII. Strategic owns 15 other LLCs, each of which, in turn, own a luxury hotel in USA.

            After leadership changes and new regulations restricted Chinese companies from investing in non-China assets, Dajia decided to sell the hotels and instructed AB Stable to open bidding for Strategic in April 2019. Mirae Asset Financial Group from South Korea tendered a bid of $5.8 billion to acquire 100% of Strategic. During the purchase and sale process, Mirae created MAPS Hotels to buy and own Strategic.

            MAPS Hotel (Buyer) and AB Stable VIII (Seller), executed a Contract in September 2019. In it, Stable agreed to sell its membership interests in Strategic to MAPS Hotel after title issues were resolved.

            April 6, 2020 was the proposed closing date. But then, COVID 19 struck. Worldwide market upheaval was rampant by February 2020, which was the time that Goldman Sachs informed MAPS that previously committed financing is no longer available.

            Stable’s hotels business started to feel the effects of COVID 19 cancellations.

            As contractual negotiations stretched into March 2020, COVID 19 continued to wreak havoc on all markets, and debt funding became unavailable. Bridge lending seemed to be the only alternative, but even those lenders retreated.

            Due to travel decreases, Stable temporarily closed two USA hotels on March 24, 2020. Others continued to operate in a “closed but open” manner, offering only room service dining. All other amenities, such as restaurants, health clubs, pools, spas, lounges, valets, concierge, bellhops, and retail stores were closed.

            More than 5,200 full-time employees were either fired or furloughed by Stable. Remaining employees saw their work week shortened, and pay increases deferred.

            MAPS proposed delaying closing for three months. Stable insisted on closing by April 8, 2020, but otherwise Stable would consider a three-month extension if MAPS: (a) doubled its earnest money deposit; (b) agreed that all closing conditions were waived; (c) acknowledged that no further pricing adjustments would be considered; and (d) compensated Stable with an additional $400 million in funding costs.

            Stable’s extension proposal was rejected the day it was proposed.

            When MAPS failed to conclude the deal, Stable filed a lawsuit on April 27, 2020 for specific performance. MAP’s response was to terminate the Contract, claiming Stable had breached.

            Then, MAPS filed counterclaims.

            The lower court convened a trial in August 2020, at which the court concluded that Stable breached the “Ordinary Course Covenant” of the Contract by making “extraordinary changes to its business” that “departed radically from the normal and routine operation of the Hotels and were wholly inconsistent with past practice.”      

            The trial court found that it was Stable’s duty to maintain commercially reasonable levels of assets and services such as food and beverage, furniture, toiletries, amenities, and similar items required in luxury hotel operations.

            The trial court then determined that Stable had significantly altered the operations of the business, which were inconsistent with past practice.

            On appeal, Stable contends that the trial court should have permitted reasonable, industry-standard responses to systemic risks that MAPS was also experiencing at its own properties.           

            MAPS disagreed, claiming that the changes were a drastic departure from past practice. It was the appellate Court’s burden to determine what Buyer and Seller intended.

            Section 5.1 of the Contract obligated Seller, absent Buyer’s prior written consent, to continue business operations “consistent with past practices in all material respects.” Stable’s “closed but open” strategy was far from consistent with past practices.           

            Buyer (MAPS) wins; Seller (Stable) loses. See AB Stable VIII v. MAPS Hotels and Resorts; Case 71,2021; Supreme Court of Delaware; December 8, 2021:,44

            Lessons / Questions / Observations:

1.      Question. This Seller was confronting an absolute standard of continuing business operations as it had been in the past. What would have been the result if Seller had leeway to alter business practices if it was reasonable to do so, perhaps as evidenced by its industry peers?

2.      Lesson. Continuation of business operations is a standard clause in most Contracts. It’s high time to review those clauses, to be sure it is fair to both parties when unanticipated situations arise.

3.      Observation. Wishing all my readers a healthy and Happy New Year!

                                                                                    Stuart A. Lautin, Esq.*



* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.