Sugar on Top: Christopher Milito on the Fight Over The Domino Sugar Factory
Daniel Geiger Sept. 18, 2012, 7:45 a.m.
Christopher Milito, who is 37, joined the law firm Morrison Cohen almost a year ago and quickly got swept up in one of the most prominent real estate deals of the year: the Domino Sugar factory. Mr. Milito represents the Katan Group, which owns the Domino site in partnership with the Community Preservation Corporation, and he has led the company’s efforts to block CPC’s efforts to sell the site—including a deal with Two Trees—for what it claims are below-market prices. Mr. Milito spoke to The Commercial Observer about why winning in the courtroom isn’t always the goal of a good litigator and his time learning the ropes of litigating while starting out in the Manhattan District Attorney’s office.
The Commercial Observer: That’s a great watch you’re wearing. A Rolex, that’s the standard watch of any lawyer’s lawyer, right?
Mr. Milito: It is, I guess. It’s my first and only nice watch; when I proposed to my fiancé, we didn’t have any money, so I used my mother’s diamond, which is like less than half a carat—my dad was a cop, but they got divorced. There was an Italian tradition: when you get engaged, the woman’s family buys you a nice watch, and so I told my wife’s family this, half in jest. They’re from Korea, but they know someone in the jewelry business, and next thing I know I have a Rolex. It’s the nicest thing I own, literally.
You’re involved in litigation, but do you do transaction work?
I think some people get better at one versus the other. Make no mistake, 90 percent of what I do is litigation. But because we service businesses, there’s always a business or a deal component to it, to the litigation. Ninety percent of the time you’re working out a settlement that’s a business transaction. It may come through as a legal document, but underneath it’s a business arrangement.
So in your cases, the litigation often blends with transaction work, essentially?
Yes. The more transactional guys probably have less experience with the litigation side of it, but the litigation guys always almost get wound up in what the business deal was, and if you’re not going to trial, you’re structuring a new transaction, in the case of a settlement. We have a corporate department that does the labor of drafting those documents. But in negotiating that settlement the litigators, we have to understand what the business goal is and how it needs to be structured, which I think is an overlooked thing that litigators often wind up doing.
You’re the lawyer representing the Katan Group on the Domino Sugar Factory site. That turned into a huge story. What has that done for your career?
Well look, part of it is luck, I was the attorney put on it here. There is an element of luck in any success professionally. I would like to think we’ve handled it well.
It seemed like Katan lost in the first round of litigation that you launched earlier this year. What is the status now?
It’s not over yet. The status is there is a motion pending for a preliminary injunction enjoining the sale to Two Trees.
So, stopping that transaction?
When do you find out if you get it?
A week? A day?
No, I would hope in two weeks. The closing is set for October 15.
If you get the preliminary injunctions, what do you want to do? Break up the sale to Two Trees and do a better deal?
That’s exactly right.
What are the chances of that happening? Of you being successful in this suit?
The law is good for us on the injunction side. There is a body of case law that says when a company is selling some or all of its assets, the directors need to engage a process to get the most value, which is common sense—you want the most money possible. What CPCR did was not [to] have a process; they identified Two Trees early on and they offered $160 million, and CPCR came to us and said we’re going to take this offer.
They later came back and said they’d offer $180 million. Is that indicative of the way CPCR did not conduct a competitive process?
I think it’s one of the best pieces of evidence we have. Just a few days later—this is in our motion—CPCR said we’ll take $160 million on Friday, but on Monday Katan brought in a check from Joe Chetrit for another $20 million higher than that. Weeks went by, and there was back and forth, and eventually Two Trees raised it. What is really indicative, they raised it in the late afternoon, and in the early evening they signed a contract, and we said, “Look, if Two Trees raises, give us a window to let Chetrit or others do better and push this thing even higher.”
If what you’re alleging is true, that they didn’t conduct a competitive and proper auction for the Domino site, what would be their motive? After it all, you’ll both share in the money.
I can’t speculate. I can look at the facts and say that something went wrong, but I can’t speculate what is going through their minds.
There have been reports that CPC has been hurt financially by overextending itself in real estate development and lending. Could it be they are under pressure to strike a deal quickly?
That has occurred to me. We found out that CPC, the parent company, took some really sizable loans from a consortium of banks, and they were forced to put up all of this collateral for it, so there’s no question they’re under the financial gun. But the logical conclusion to me is then, well, you get the most money from what you’re trying to sell so you can pay back your lenders. We’ve gotten offers up to $210 million. There were even higher offers out there, so CPCR is literally leaving tens of millions on the table. Why would you do that if you’re under such duress? And they are. I won’t imply any ulterior motives or any ulterior deal between them and Two Trees, but I don’t know what to think. Thankfully, as a lawyer, I don’t have to prove a motive, I just have to show that they conducted this sale the wrong way, and they did, and that under the law we should get relief, and we should.
This has been in litigation for months now. Remind me, what were the previous cases?
Their initial deal was to do a transaction with the lender, Pacific, which had a total value of $149 million, which is much lower than the Two Trees deal. That’s why we originally went to court—that’s a drastic undervaluation. And we were right: Two Trees said, “We’ll give $160 million.”
Didn’t you lose in the fight for that injunction?
We didn’t get the preliminary injunction. But the case wasn’t lost; we think we won, because we held it up long enough to bring in Chetrit, at $180 million, which pushed the price up. We lost the battle but won the war. That’s why I say there’s a business end to litigation. We were litigating on the one hand and on the other we were trying to set up a business transaction. At first it was $149 million, and we stalled and said that’s too low, and then they wanted to sell it for $160, and we got Chetrit, and then they offered 180 million. We would like to think we pushed this up; if we didn’t do anything, they would have sold it for $149 million in March.
If the courts didn’t stop it then, why would they now with Two Trees?
We have a different fact pattern. The major difference is that what CPC was telling the court back in March is that they had to do this deal because we were in default and there’s no other deal that will allow us to pay this off, and the court found that compelling and credible. As it turns out, there were other offers, there were people willing to pay more. Once that got pushed into CPC’s mind, they acted somewhat reasonably—$160 is better than $149 and $180 is better than $160, but you know they weren’t the ones going out there getting that. One thing that gets lost in this is that in April or May, Katan was talking to Two Trees, pitching them. It wasn’t like CPCR went out and found Two Trees and did preliminary negotiations. But because we don’t control the refinery, as the managing partner CPCR had to conduct the formal negotiations.
Has Two Trees talked to you about upping its offer yet again and settling this whole thing?
No. I have to presume they aren’t interested in that. It’s still a good deal for them. Chetrit thre another five million on the table over their offer. There was a $210 million offer.
How did you come to join Morrison Cohen LLP?
I had done a trial against David Scharf, and at the end of the trial, he offered me a job. He knew this [Domino] would be litigated pretty heavily, and he knew he wanted someone who was comfortable in court and doing a trial.
What David’s first name? He uses a Y initial first.
It’s Yehuda. He goes professionally by David, though.
Do you call him Yehuda?
I call him David. But he also answers to Yehuda.
What happened in the case you fought against him initially?
I was repping an Italian group and he was repping Extell. They were partners in a deal and there was an arbitration. It wound up in a fight, it went south.
When David made you the offer to join a big firm like Morrison Cohen, was that an easy decision?
I watch him on trial, and some pride themselves on being trial lawyers and I’m one of them, and he’s cut from the same cloth. And I realized I could learn a lot from a guy like that. David has a theory I have adopted. When a client comes with a problem, a lot of lawyers will say, “We’ll see what we can do.” David says, “Let’s find a path, find a way to succeed in the litigation or on the business side.” You have to do that early on in the case. It’s not about winning a litigation, it’s solving the client’s problem. It’s an important way to think.
You used to work for the Manhattan District Attorney’s office?
That was actually my first job out of law school. It was the best legal job in the world, working under Morgenthau. They pay you nothing. I was hired at $33,000 a year—you have to defer your loans from school. I got put in the special narcotics bureau, which handles mostly drug crimes, they’re all felonies. It was really a good experience. The best thing was, if you didn’t think that a person was guilty, there is no pressure to prosecute. They really believe that if 10 guilty men go free, it’s better than one innocent man going to jail. You got the sense you were doing the right thing.