A federal bankruptcy judge has ordered commercial real estate news and events firm Bisnow to return nearly $200,000 after allegations it had been improperly paid by a company locked in a tense legal battle over copyright infringement.
Chief Judge Christopher S. Sontchi entered a default judgment for $199,639.39 against Bisnow on May 3 and formally closed the case this week after the company did not contest the lawsuit seeking repayment of potentially fraudulent payments. A call to Will Friend, Bisnow’s chief executive, was returned by Mark Bonner, the top editor for Bisnow’s news service and vice president of content, who said the company would have no comment.
The judgment is a surprise twist in a long-running Chapter 7 case in the U.S. Bankruptcy Court for the District of Delaware to liquidate a real estate data firm called Xceligent. Xceligent collapsed in late 2017 after spending a year litigating against CoStar Group. A federal judge in Xceligent’s hometown of Kansas City, Missouri, ordered the company to pay $500 million for massive copyright infringement of CoStar Group photos and misappropriation of CoStar Group data.
Xceligent ousted then-CEO Doug Curry a few weeks before declaring bankruptcy. But before he was removed, a claim filed by the trustee in the bankruptcy case alleges Curry and his wife Erin set out to launch a public relations offensive.
The lawsuit alleged that in “September 2017, as Xceligent teetered on the brink, and just three months before its bankruptcy, Doug and Erin caused Xceligent to pay Bisnow, an online business publication, $85,000 for that month alone to post positive coverage of Xceligent and its litigation efforts.”
All told, Bisnow collected nearly $200,000 in the weeks and months before Curry’s ouster and Xceligent’s bankruptcy, and according to the lawsuit, it could have been more. “An email from Doug to Erin and an Xceligent Marketing Director shows that Doug was considering signing a $500,000 contract with Bisnow,” the lawsuit says.
It is not known what if anything the Currys or Xceligent received for the payments. Bisnow operates an events and advertising business as well as a daily news email service. A competitor of CoStar News, Bisnow covered the legal battle closely at the time and published at least two “Bisnow Exclusives.” One, on June 8 before the payments, detailed Xceligent’s countersuit against CoStar’s claims and another, in January after Curry had left the company, about his efforts to start anew, with plans to launch another real estate data company to compete with CoStar.
When a company files for bankruptcy, it is common for trustees to examine spending in the months immediately prior and seek to claw back fraudulent transfers and improper preference payments. CoStar Group, by virtue of its lawsuit against Xceligent, was Xceligent’s largest creditor and was involved in the bankruptcy proceedings, ultimately accepting a $10.75 million settlement from the company’s insurer in October 2019.
In legal filings, Xceligent trustee Alfred T. Giuliano characterized the Bisnow invoices as “reckless spending” by the Currys that breached their “fiduciary duties and deepened Xceligent’s insolvency, as demonstrated by the company failing spectacularly shortly after the Currys’ firing on or about October 24, 2017.”
Giuliano sued Bisnow to return the money in December 2019 with a deadline to respond by Jan. 16, 2020. Bisnow never answered, thus earning the default, according to court documents.
The trustee’s attorney in the case declined comment.
The trustee now could enforce the judgment, potentially going after Bisnow’s bank accounts and assets to collect, according to Joseph Lemkin, a bankruptcy attorney with Stark & Stark, a firm with offices in Pennsylvania, New Jersey and New York. Lemkin has no connection to the Xceligent bankruptcy nor CoStar.
“Bisnow can try to vacate the default judgment,” Lemkin said by email. “Bisnow would need to show good cause and that the neglect was excusable in terms of not appearing in the case.”