Louis Cappelli sues Bank of Scotland for $50M
White Plains real estate developer Louis R. Cappelli has struck back at the Bank of Scotland over recent allegations made against him, demanding $50 million for reputational damages.
Cappelli accused the bank and executive Andrew Fuge of malicious prosecution and libel in a March 15 complaint filed in Westchester Supreme Court. Bank of Scotland had sued Cappelli for $17.4 million in January for allegedly defaulting on a loan.
The bank’s case included an affidavit by Fuge “filled with falsehoods,” Cappelli claims, “knowing full well that a lawsuit of this type would upend the business relationships which Cappelli has forged for years.”
Attorneys from Arnold & Porter Kaye Scholer, the Manhattan law firm that represented the bank in its lawsuit against Cappelli, did not respond to a request for comment.
The dispute traces back to 2018, when Cappelli owed $15 million on a 2008 loan and renegotiated terms with the bank.
Cappelli agreed to pay $250,000 up front and then $40,000 a month until April 2020, when the loan matured. Then, if Cappelli had made all of the payments totaling $2,225,000, he could pay $1.04 million to satisfy a promissory note.
If he had defaulted on loan payments, he would have to pay the full amount. Bank of Scotland sued, claiming he had defaulted and as of Jan. 11 owed $17.4 million in principal and interest.
Cappelli responded that he had never received a default notice, as required by the promissory note, or given 10 days to cure the default.
He says he had messaged Fuge more than a year ago, asking to extend the loan maturity date. He received no reply, and he continued paying $40,000 a month until the bank sued him.
The “fatal flaw” in Bank of Scotland”™s case, according to Cappelli, was the failure to formally notify him of a default. On March 5, the bank withdrew its lawsuit.
Then the bank formally issued a default notice and demanded $700,000, not $17.4 million, to satisfy Cappelli”™s obligation. He paid.
But by then, Cappelli says in his complaint, the damage was done.
He had not known about the purported default until a Westchester County Business Journal reporter asked him to comment on the Bank of Scotland lawsuit.
Google Alerts, Facebook and at least 20 more social media outlets re-published the Business Journal story.
Lenders and business partners immediately contacted Cappelli and demanded an explanation, according to his complaint. Holds were put on lines of credit, on insurance for $700 million in bonds, and on projects.
Credit worthiness is the lifeblood of business venture, the complaint states. Now his business was being disrupted and he was incurring legal fees and costs to defend himself.
Cappelli had worked with Bank of Scotland for 17 years. The bank and Fuge were aware of the “critical importance of maintaining confidence with his lenders in order to obtain access to hundreds of millions of dollars of capital from bonding companies, development partners and opportunity funds.”
They had failed to take the appropriate steps, the complaint states, “that any prudent person would have taken” to verify that a default notice had been properly issued.
White Plains attorney Alfred E. Donnellan represents Cappelli.