Judge Joel B. Rosenthal of the U.S. Bankruptcy Court for the District of Massachusetts in Worcester has concluded a two-year dispute between two Chapter 11 debtors and their lender.

The judge ruled in favor of Boston-based law firm Hanify & King, Professional Corp.’s client, 219 Forest Street LLC and 201 Forest Street LLC, and against LBM Financial LLC.

The court struck LBM’s attempts to collect default interest and late fees which resulted in the debtors being charged an annual percentage rate in excess of 41 percent on account of loans made to the Forest Street properties in Marlborough.

The ruling effectively disallowed more than $3 million in default interest and other asserted claims by LBM, and awarded in excess of $1.1 million in punitive damages to the Forest Street entities and against both LBM and its owner, Marcello Mallegni, of Southborough, and ordered that LBM pay Forest Street’s attorney fees. 

"We are very pleased with Judge Rosenthal’s detailed findings and well reasoned rulings. The Forest Street entities will now have the opportunity to move forward with the reorganization of their business," said Bennett. "The ruling confirmed the fact that Forest Street entities were subjected to unfair lending practices."
Hanify & King Attorney Charles R. Bennett Jr. represented the Forest Street entities in the litigation.