X-Caliber Funding LLC v. Petersen

Background

X-Caliber Funding LLC, acting as servicer for U.S. Bank, N.A., as trustee of the XCAL 2019-IL-1 Mortgage Trust, sued Mark Petersen in New York state court to enforce Petersen’s guarantee of a loan made to seven limited liability companies operating nursing-home facilities in Illinois. The loan’s principal amount was $40 million. The companies allegedly defaulted in December 2023, and X-Caliber sought repayment from Petersen under the guarantee.

A related foreclosure and security-enforcement case was pending in the Northern District of Illinois. That court had appointed a receiver for the companies and their facilities. The receiver filed a motion proposing procedures for selling the facilities, but the sale had not occurred, no bids had been made, and Petersen objected to aspects of the proposed procedures.

Petersen had removed the New York action to the Southern District of New York. He opposed X-Caliber’s motion for summary judgment and asserted a counterclaim against X-Caliber and third-party claims against Joseph Tutera, Walnut Creek Management, L.L.C., and Illinois Debt Acquisition Company, L.L.C. Those claims generally alleged that X-Caliber and others worked together to reduce the facilities’ value and increase Petersen’s obligation under the guarantee. Motions to dismiss those claims were pending.

Petersen’s request for a stay

Petersen requested a pre-motion conference so he could seek a stay of all proceedings until the Illinois court entered an order addressing the proposed sale procedures. He argued that a sale for enough money to cover his loan obligations could eliminate his liability under the guarantee. He also argued that he could be harmed if the court granted summary judgment for an amount greater than what remained owed after the sale.

The court explained that stays are discretionary and that courts consider the interests of the parties, the courts, nonparties, and the public, with the central concern being possible prejudice. The court rejected Petersen’s argument that the possible sale required a stay. It distinguished Petersen’s potential liability from the later question of how much money might be owed, noting that the precise amount of monetary relief could be addressed separately if necessary.

The court also found that the proposed stay was too speculative. The timing of any sale was uncertain because Petersen and others had objected to the proposed sale procedures. No bids had been submitted, and the facilities’ actual value was unknown. The court therefore concluded that a stay of indefinite duration was not justified.

The court further concluded that the Illinois case had little bearing on Petersen’s counterclaim and third-party claims at that point. If those claims survived the pending motions to dismiss, discovery could address Petersen’s allegations about the alleged scheme, including whether certain conduct reduced the facilities’ profitability or increased his exposure under the guarantee. The court found that proceeding with those matters would not prejudice Petersen in the Illinois case.

Ruling and effect

The court denied Petersen’s request for a pre-motion conference to consider a proposed stay and denied the proposed motion for a stay. The court did not decide X-Caliber’s pending summary-judgment motion, the pending motions to dismiss Petersen’s counterclaim and third-party claims, or the ultimate liability and amount owed under the guarantee.

The court ordered Petersen and X-Caliber to submit a joint status report about the pending facility sale by June 10, 2025, or when a court approved the sale, whichever occurred first. Judge Victor Marrero entered the order on March 14, 2025.