Firm Wins Decisive Final Judgment in Hotel Ownership Litigation

April 17, 2025 – Hughes Hubbard prevailed at trial in a case involving the ownership of a historic hotel on the Jersey Shore. The firm represents William C. Iler, one of the members of the limited liability company (LLC) that owns the hotel.

The case was tried before Judge Clarkson S. Fisher, Jr. in the Superior Court of New Jersey, Monmouth County, Chancery Division. Iler retained Hughes Hubbard after an initial trial, an appeal to New Jersey's Appellate Division and a remand for further fact finding. Judge Fisher heard testimony in a bench trial over four days in January.

Iler and Thomas Kiely formed the LLC to develop a unique property in Highlands, NJ – a hotel comprised of 10 cottages and a main house. The hotel was initially built in the early 20th century to accommodate families visiting the Jersey Shore for the summer season. But Hurricane Sandy destroyed the property in 2012, resulting in the need for substantial renovation to restore the hotel to an operating business.

In 2017, Michael Marzovilla joined the LLC as a member to help fund the renovation. At that time, the parties agreed that the ownership of the LLC would be divided as 50% to Iler, 25% to Kiely and 25% to Marzovilla, reflecting their respective capital contributions. Iler had restored several historic properties in and around Highlands. The parties made him managing member of the LLC, and he agreed to serve as construction manager for the renovation of the hotel. During the first eight months of 2017, Iler transformed an abandoned, uninhabitable property into a hotel ready for guests. The hotel, called Summerhouse, opened just before Labor Day 2017.

The hotel was immediately profitable, but the three members of the LLC, who had not known each other previously, were soon fighting over how to operate the business. Iler was the initial manager of the hotel. In November 2018, after the first full season of operations, Kiely and Marzovilla met without Iler and voted to remove Iler as managing member. The LLC's operating agreement required a majority ownership interest to modify its terms and to change the managing member. Kiely and Marzovilla held only 50% of the LLC, so at their meeting, they “recognized" a transfer of part of Iler's ownership interest to Marzovilla before they began to amend the LLC's operating agreement. Among other changes, Kiely and Marzovilla made Kiely the managing member. All of this took place without Iler's knowledge or consent.

In January 2019, the parties commenced nearly simultaneous lawsuits in the Superior Court of New Jersey before the General Equity Judge in Monmouth County. The judge entered a preliminary injunction maintaining the status quo – keeping Kiely in charge – while the case progressed.

The case ultimately went to trial in 2021. In their verified complaint, Kiely and Marzovilla accused Iler of many different types of wrongdoing, including the misuse of LLC funds. In his opinion, the trial judge noted the parties' bitterness toward one another and observed that this case was “as close as I've ever come to having a business dispute really come before the Court almost like a matrimonial case." He decided to mandate the sale of the LLC and its assets, even though none of the parties requested that relief. Kiely and Marzovilla appealed.

In February 2024, New Jersey's Appellate Division reversed the decision, holding that the trial court failed to make sufficient findings of fact to support its decision. The appellate court took no position on the outcome of any of the substantive issues raised in the lawsuit. On remand, a new judge was assigned to the case because the initial trial judge had retired.

Iler retained Hughes Hubbard to represent him in the remanded matter. The new judge asked for a limited trial involving only the parties as witnesses to evaluate their credibility. The court would also rely on the original trial record to the extent that it was helpful and necessary.

The parties tried their case over four days in January and then submitted written summations and rebuttals. The firm showed the court how hard Iler worked to make Summerhouse a successful business. Iler's good faith appeared to persuade the court, as he received the benefit of the doubt on multiple factual disputes.

On April 17, the court issued a final judgment and opinion, agreeing with Iler on the vast majority of the parties' claims, restoring him as managing member, and reversing the actions that Kiely and Marzovilla took at the November 2018 meeting, which the court characterized as a “coup" and found “void ab initio," meaning the actions never had a legal effect. The court also ordered the disgorgement of potentially hundreds of thousands of dollars that Kiely and Marzovilla took from the LLC's coffers without authorization in order to fund the litigation.

The court found Iler had proven that Kiely and Marzovilla violated their fiduciary duty to Iler and acted in bad faith in violation of statutory and common law. The court granted Iler his taxable costs, which are significant following the lengthy litigation. The court also dismissed all of the claims of wrongdoing that Kiely and Marzovilla had asserted against Iler, including the claim – now proven false – that Iler commingled funds from the LLC's business with his own money.

The only significant part of the judgment that went against Iler was the court's finding that he had conveyed 8% of his ownership interest in the LLC to Marzovilla in February 2018. However, the court made the transfer effective as of the date of the final judgment based on Marzovilla's demonstrated bad faith.

Eric Blumenfeld represented Iler.