A $32 million lawsuit has been filed in an Ohio Court against Patriarch Partners and Patriarch’s CEO and founder, Lynn Tilton. The suit was filed on behalf of MA Equipment Leasing I LLC and MA 265 North Hamilton Road LLC.

The suit, (case number 09CVH 08 12912 ) filed in the Common Pleas Court of Franklin County in Columbus, Ohio, follows a previous decision and order of $5.74 million for damages in favor of MA 265 as well as an additional decision awarding nearly $600,000 in attorney’s fees and costs in favor of MA Equipment (case number 07CVH02-2297). The award addressed the material breach of certain building and equipment leases, and a failed attempt to improperly move leased equipment and machinery to Monterrey, Mexico by Zohar Waterworks, which is owned by an affiliate of Patriarch. Zohar Waterworks, a Columbus-based manufacturer and distributor of water cooler systems, filed for bankruptcy in April 2009, just weeks before a judgment was to be entered on these claims.

According to the complaint, Patriarch and Tilton controlled and dominated Zohar Waterworks and were responsible for Zohar Waterworks’ filing for bankruptcy in an effort to thwart that imminent judgment and protect Patriarch and Tilton’s interests. The complaint further asserts that subsequent bankruptcy court rulings preserve any claims that MA Equipment and MA 265 had against Tilton and Patriarch.

The earlier trial court found that an employee of a Patriarch affiliate, John Harrington, “affirmatively” lied to MA Equipment, concealed material information from MA Equipment, “surreptitiously” ordered Zohar Waterworks’ employees to remove and transport the leased equipment and machinery to Mexico, and “intentionally disregarded” an admonishment by MA Equipment not to do so. The court found Harrington’s “truculence” and “belligerent attitude” forced MA Equipment to file a request for a temporary restraining order against Zohar Waterworks, resulting in a court order directing that the equipment and machinery be returned to Columbus. Zohar Waterworks “knowingly and willfully violated” that equipment lease by “improperly removing, relocating or transferring MA Equipment’s equipment to Monterrey, Mexico without obtaining MA Equipment’s prior written consent.” The trial court found that this and other “misconduct” of Harrington amounted to a material breach of the equipment lease.

The most recent lawsuit alleges Tilton, Harrington, Patriarch and other affiliates of Patriarch unlawfully interfered with and prevented Zohar Waterworks’ performance of those equipment and building leases with MA Equipment and MA 265. The suit, filed by the Ohio-based law firm Hahn Loeser & Parks LLP, also alleges fraud against Tilton and Patriarch Partners asserting that they had no intention of permitting Zohar Waterworks to perform its obligations under the leases and that they “… knowingly and maliciously misused the corporate form to defraud and unjustly damage Plaintiffs [MA Equipment and MA 265]….”

The $32 million claim includes $7 million in compensatory damages and $25 million for punitive damages.

MA Equipment is a private investment company specializing in leasing manufacturing equipment. MA 265 is an industrial real estate investment company.

For additional information or comments, please contact MA Equipment and MA 265 attorney John Marsh at 614-233-5102.