Dykema Obtains $9+ Million Award in Arbitration for Client Against Billionaire Partner

Jeff Huron, Jon Cantor, Andy Kolozsvary, Cliff Riley, Ryan Borelo, and paralegal Efrain Bailon obtained a $9.5 million award after an 11-day arbitration for firm client Nicholas Keros against his billionaire partner Don Hankey and his company obtained a $9.5 million award, including attorney’s fees and costs of $2.3 million, for firm client Nicholas Keros after an 11-day arbitration. Mr. Keros sued Hankey Capital, LLC (HC) and Hankey Investment Co. LP (HIC), owned by billionaire Don Hankey, for breach of fiduciary duty in connection with a partnership to build a mansion on Tanager Way in the Hollywood Hills.

Mr. Keros contributed the property on Tanager Way and HIC arranged for HC to make a $19 million construction loan to the partnership, secured by the property. The deal went sideways because of substantial delays and massive cost overruns largely attributable to the general contractor, who Mr. Keros chose. During the construction, and with $7 million left to draw, HC stopped approving draws until there was a new budget and more funding in place. HIC thereafter agreed to increase the construction loan by $3.3 million. But it reserved $1.8 million of that amount for interest, leaving less money than the parties agreed was needed to complete construction. HIC also required Mr. Keros to make an additional capital contribution of $400,000 and to adjust the profit distribution more in HIC’s favor.

After HIC resumed funding construction draws, the project further fell behind schedule and over budget. HIC blamed Keros and removed him and the project manager from the site. When the construction loan matured, HIC caused HC to record a notice of default. HC then acquired the property through foreclosure, transferred it to another entity owned by HIC, terminated the contractor, and continued to complete the project without Mr. Keros.

Mr. Keros contended and proved that HIC breached the operating agreement and its fiduciary duties by placing a hold on construction funds; removing Keros from the project; failing to enforce the construction contract; eliminating Keros’ involvement in the construction draw process; agreeing to increases in the construction budget without Keros' participation; and taking the property for itself through foreclosure. The arbitrator also found that HIC and HC were alter egos.