Mick Mulvaney's South Carolina Land Shenanigans All Under Seal

Last year the Washington Post covered Mick Mulvaney's South Carolina land deal gone sour. It was a pretty amazing case that is fantastic for teaching purposes. Mick's moves would have made some of the most sophisticated distressed debt funds (not to mention a real estate developer president) blush with shame (or green with envy).

I've got an update on the case that appears quite troubling: it seems that the South Carolina court has put everything except the docket entry list under seal, including previously public available documents. If I am correct, this is really disturbing because would indicate a willingness by the South Carolina court system to accommodate Mick's desire to shield keep his business dealings from any public scrutiny, even though there is no legitimate reason that I can see for the court to turn seal all the documents in a public judicial proceeding about a commercial real estate foreclosure action. 

Here's the brief recap. Mick formed a company to develop a strip mall. The company borrowed money from a bank with a first lien and from a wealthy local individual, secured by a second lien. The mall never got developed and faced with a default on the bank loan, Mick formed a new company, which bought the first lien loan from the bank. Mick's new company, as holder of the first lien loan on the old company moved to foreclose on the lien. If Mick's new company were merely to credit bid its debt, it could probably win the foreclosure sale and own the property free and clear, as the effect of the foreclosure would be to discharge the lien on the second lien debt, which would render the second lien creditor an unsecured creditor of Mick's old company--a corporate shell with no assets. It's a nice illustration of how a foreclosure sale discharges junior liens. 

Mick's move is allowed by the rules, but also totally in bad faith. Not surprisingly the second lien holder raised this bad faith as a defense. (I wonder if there's also a doctrine of merger issue here--there certainly would be if the corporate entities were disregarded as shams. To the extent Mick personally guarantied the first lien debt, there might be such an argument.) 

After teaching Mick's bad faith move to my financial restructuring class this year, I decided to see if there were any updates on the story. Since the Post's coverage, it's been radio silence in the press. Moreover the URLs in the old coverage that linked to case documents are all dead now. I'm not entirely sure why, but it seems that everything in the case is now under seal. It's possible that I just don't know how to navigate the state court's docketing system, but if I'm right and it's all sealed, then that's pretty outrageous--documents that have been publicly available shouldn't become sealed and there's really no good reason for anything in this case be sealed. Indeed, even the motion for sealing is sealed so it cannot be evaluated.

But the and somethings can be gleaned. I'm not 100% confident in my reading of the docket, but it seems as if there were a summary judgment motion filed by Mick's outfit (Indian Land Ventures, LLC) in August 2019, with an order on it in November.

Incredibly, even the court's order is under seal. I've never seen an order deciding a foreclosure action that is under seal. It's frankly ridiculous. This is a dodgy land deal, not a state secret.

There was then a motion to reconsider that appears to have been filed by the defendant (which suggests that the defendant lost), but then on December 30, a notice of appeal that appears. It looks to have been filed by Mick's company, which would suggest that Mick lost in the end, but the disposition date given in the docket is the November summary judgment order date, which would indicate otherwise. Perhaps the docket is showing that Mick receive a notice that an appeal had been filed?  

Hopefully some enterprising journalist can either figure out a way to get the records unsealed or find someone in South Carolina who is willing to talk about the status of the case because Mulvaney's business dealings seem to confirm his modus operandi as chief of staff. I think there's likely a good story here...