CHARLESTON, W.Va. — Lawyers for the State Tax Department are asking for a federal bankruptcy case over a defaulting Morgantown hotel to be transferred from a Florida courtroom to West Virginia, accusing the hotel owner of “blatant forum shopping.”
Meanwhile, in a separate but related case, the plaintiffs in a lawsuit over defaulting hotels in Clarksburg and Morgantown object to the State Tax Department trying to enter the proceedings.
The cases are all related. The hotels are owned by investment groups headed by developer William Abruzzino, a Shinnston native who now lives in Florida.
Earlier this month, the state Tax Department took legal action in two cases involving the hotels to claim more than a million dollars in consumer sales taxes that were collected but never passed on to the state.
Lawyers for the state filed a motion to intervene in a lawsuit over a Hilton Garden Inn in Morgantown. They followed up by filing to intervene in a lawsuit over a Hilton Garden Inn in Clarksburg and a Hampton Inn in Elkins.
The state claims it is owed $587,000 in taxes that were collected over several years by the Morgantown hotel but then not passed on. The total that should have been passed on by the Clarksburg and Elkins hotels is even greater, $720,000.
Abruzzino’s ownership group for the Morgantown hotel, Mountain Blue, was kicked out of bankruptcy in the Northern District of Georgia this month because it had failed to meet a deadline to prove it had workers compensation insurance.
Mountain Blue then filed the same day for Chapter 11 reorganization in the Middle District of Florida.
That placed an automatic stay in a federal lawsuit that had been filed in the Northern District of West Virginia.
The lawyers for the State Tax Department are saying the rightful venue for Mountain Blue’s bankruptcy is in West Virginia, where the hotel is.
This past Wednesday, lawyers for the tax department filed a motion to transfer the venue.
“Moreover, while the debtor claims this district as its principal place of business, the debtor does not appear, upon information and belief, to own or lease office space in Florida, is not even registered to do business in Florida and can hardly claim the Middle District of Florida as its principal place of business,” wrote the lawyers for the state.
“But perhaps most importantly, for present purposes, all of the debtors business operations and assets are located outside this district and within the Northern District of West Virginia, where the bankruptcy cases of two different affiliates of the debtor remain pending.”
The lawyers for the state note that Mountain Blue’s corporate filings still show its main office in Fairmont.
“Upon information and belief, Mr. Abruzzino managed the debtors’ and many of his affiliated entities out of offices located in Fairmont, West Virginia, for many years until he recently closed that office and ‘moved’ the affiliated debtor entities’ ‘principal place of business’ to this District,” the lawyers wrote.
The lawyers for the state also note that the hotel owes Monongalia County government thousands of dollars in unpaid business and hotel taxes.
“The bottom line, considering all of the relevant facts and circumstances identified by the courts, including this court, is that the case belongs in the Northern District of West Virginia where the debtor’s operations, properties, and assets and most of its creditors and other parties in interest, including the state and local governments, reside,” the lawyers wrote.
Meanwhile, the lender for the hotels in Clarksburg and Elkins has objected to the State Tax Department’s motion to intervene in that case. The lender says Mountain West Hospitality is defaulting on a $19 million loan for the two hotels.
The plaintiff says the case that it filed is not the proper forum for the state to pursue its own claim.
“While it is clear that both the plaintiff and the State have been economically harmed by Defendant’s conduct, that fact alone is not sufficient grounds to allow intervention,” wrote the lender’s attorneys.
The lender contends that the hotels have resumed paying taxes while under the management of a receiver.
“All post-receivership taxes are being paid. As to the pre-receivership taxes, the State has its full range of remedies available in this and other forums, and therefore Plaintiff need not protect the State’s interest in enforcing its tax laws.”