Judge orders arbitration in Bellevue Towers suit

A judge has ordered binding arbitration in a lawsuit by six people who say the developers of the upscale Bellevue Towers condominiums illegally snatched tens of thousands of dollars of their earnest money after their loans fell through.

The six would-be condo buyers sued Bellevue Towers and J.P. Morgan Chase Bank in February, saying the companies falsified loan documents by inflating the borrowers' income to obtain preapprovals for loans on pricey condo units in downtown Bellevue.

The lawsuit alleged that the company should have known the customers would never qualify for the loans, but salespeople assured the buyers they could afford to buy the condos. By the time they realized how much the monthly payments actually would be, the terms of the contract allowed Bellevue Towers to keep the earnest money -- as much as $75,000 per person in some cases -- because the buyers hadn't backed out in time.

King County Superior Court Judge John Erlick has ordered the lawsuit halted. He didn't rule on the merits of the case but agreed with Bellevue Towers' lawyers that the dispute must be handled in arbitration because a clause in the condo-sale agreement demands it.

Erlick also ordered the plaintiffs to pay $4,600 to Bellevue Towers to cover the legal bills incurred to get the arbitration order.

Patrick Clark, an owner of Realty Trust, the company that markets Bellevue Towers, said he was "pleased with the court's decision."

The company has previously said the contracts were clear and legal, and the plaintiffs have no right to get their money back.

"We understand that these are challenging economic times, and we remain committed to working with all of our buyers to help them complete the purchase of their new home," Clark said Thursday.

But the attorney for the plaintiffs, James Robinson, of Seattle, said his next step is to fight the constitutionality of the contract, which he says allowed the condo company to take his clients' money without due process.

Robinson said his clients have no money to pay the $4,600, which was due May 15.

He unsuccessfully opposed the case being sent to arbitration, which would cost the plaintiffs thousands of dollars, saying it would be "unconscionable" because of his clients' financial predicaments and the public interest in the issue.

"Their whole strategy is to beat up on my clients financially," Robinson said. "They are not open to any settlement discussion whatsoever. They are just beating up on poor people."

Robinson said he has not sought a date with an arbitrator because he first plans to ask Erlick to find the contract unconstitutional.

At the heart of Robinson's argument is a 2005 state law that allows real-estate sellers to keep earnest money without proving any actual damages from a deal fizzling.

Robinson argues the law amounts to government participation in denying due process before property is taken by private parties.

The plaintiffs in the case are immigrants from former Soviet republics. They allege that Bellevue Towers took advantage of their American dreams and their real-estate naiveté to get them to buy luxury condos they couldn't afford.

They said in the suit that Chase mortgage brokers, working in cahoots with Bellevue Towers, inflated the incomes on preapproval applications. One plaintiff, Danil Kasimov, alleged Chase preapproved him for a $1.5 million condo, with a payment of more than $7,000 a month, even though he made only $1,700 a month as a limo driver.

In a Seattle Times story about the lawsuit in February, Kasimov, who is from Uzbekistan, was portrayed as a first-time homebuyer who was deceived by the complexity of the sales contract.

However, Kasimov had actually bought a condo two years before he signed the Bellevue Towers contract, and he bought houses in Bellevue and Redmond around the same time that he agreed to buy into Bellevue Towers.

Robinson, though, said that's irrelevant to the lawsuit.

"The only issue is the contract, and the contract was designed to steal people's earnest money," he said.

Ian Ith: 206-464-2109 or iith@seattletimes.com