Lehman Sued, Suing

The suit, which seeks class action status, was filed Tuesday in U.S. District Court in Manhattan, 11 days after Lehman named the company’s affiliate, Store It, and Seth Kincaid, president and CEO of parent The Kincaid Group, as defendants in a suit it filed in the New York State Supreme Court. That suit also charges breaches of the loan application/commitment letter and the rate lock agreement.

Both suits include the same documents in support of their opposing arguments.

Lehman Brothers Bank had sent, on Sept. 19, a letter to the Kincaid Group stating that it has “decided that we do not wish to proceed any further with respect to a financing of the property” and has “terminated all hedges.”

It further sought $36,955, in addition to the $186,500 it already had received, for hedge losses of $193,215 and expenses totaling $30,240.

Although the suit against Lehman, filed by Stor It, GP, admits that Lehman was “obligated to return all rate lock payments and fees less any hedged losses,” it claims that Lehman failed to provide “any evidence that defendant engaged in any hedging activities contemplated by the rate lock agreement or any losses hereto.”

The suit alleges that Lehman “wrongfully used the fiction of a hedge loss” to induce Stor It and others in its class to pay a rate higher than the locked rate.

Stor It further alleges that the amount of the loan, requested for Store It Holiday, a 564-unit storage facility in Holiday, Fla., was reduced from $3.30 million to $3.05 million and the applicable spread was raised from 130 basis points to 160 BPS, before settling at 150 BPS in violation of rate-lock agreement.

The suit seeks unspecified damages, attorney fees and costs as well as certification as a class action.

The Lehman Brothers Bank suit charges that Store It had agreed to pay certain fees and expenses, including the costs of hedge transactions to protect against future interest rate fluctuations, but had failed to reimburse Lehman for losses incurred under the rate lock agreement.

Lehman is seeking payment of $36,955 for the balances of its expenses and hedge losses, plus interest, costs, attorney’s fees and other relief.

A Lehman spokesman, contacted by MortgageDaily.com, would not comment on the Stor It suit, other than to point to Lehman’s suit against Store It, GP and President and CEO Kincaid, implying that the Stor It suit was a response to the Lehman suit.

Stor It’s Kincaid also told MortgageDaily.com that he had no comment on the suit against him and Store It.

Although the suit against Lehman lists as plaintiff Stor It, GP, that complaint also uses the Store It spelling and the Lehman action uses only the Store It spelling. The companies are part of the Kincaid Group, all based in Johnson City, Tenn.