High-Value Litigation Involving Developer Bankruptcies and Breach of Contract

High-Value Litigation Involving Developer Bankruptcies and Breach of Contract on Major Real Estate Projects

Rising interest costs, tighter credit, and construction inflation have pushed more large U.S. companies into distress, and real estate developers are no exception. The result for Florida and other gateway markets in 2025–2026 is a visible uptick in high-value disputes tied to stalled projects, missed milestones, and bankruptcies. For owners, lenders, contractors, and trade creditors, the litigation playbook now blends bankruptcy law, lien/bond remedies, and hard-fought contract claims.

Why Bankruptcy Is Back in the Conversation

Large corporate filings have trended above historical averages. Independent research notes that 1H 2025 saw elevated Chapter 11 activity, including a jump in “mega” bankruptcies (>$1B assets), compared with long-term norms. See the mid-year data overview here:
Cornerstone Research – Bankruptcy & Financial Distress, Mid-2025 (PDF).
For a neutral primer on how Chapter 11 works, see the U.S. Courts’ resources:
Chapter 11 – Bankruptcy Basics and
Bankruptcy Basics (Overview).

What Changes When a Developer Files Chapter 11

• Automatic stay freezes most litigation and lien enforcement. Creditors must seek stay relief to proceed (see Title 11 generally:
  11 U.S.C.).
• Executory contracts can be assumed or rejected under 11 U.S.C. § 365. Construction contracts, development agreements, and ground leases may be “assumed” (cured and continued) or “rejected” (breached as of filing), with significant damages and project-control implications:
  11 U.S.C. § 365.
  For DOJ background:
  DOJ – Executory Contracts.
• Preference and fraudulent-transfer exposure. Pre-petition payments and collateral grants may be attacked as preferences or fraudulent transfers, impacting contractors, vendors, and insiders:
  § 547 (Preferences),
  § 548 (Fraudulent Transfers),
  and related recovery under
  § 550.
• Plan leverage and timing. Debtors often have an exclusive window to propose a plan of reorganization; creditors need strategy for disclosure-statement challenges, valuation fights, and cram-down. See:
  U.S. Courts – Process in Chapter 11.

Florida Remedies Still Matter: Liens and Bonds

Florida’s lien and bond framework continues to drive outcomes on large vertical and mixed-use projects, even when a bankruptcy is pending (subject to the stay).

• Construction liens (private projects). Florida’s Construction Lien Law (Chapter 713, Part I) governs notices, recording, priority, and transfers to security:
  Fla. Stat. ch. 713, Part I.
• Payment bonds (unconditional). On bonded private jobs, claims typically proceed under
  § 713.23, Fla. Stat.
  (timely notices still critical).
• Conditional payment bonds. When the bond is properly recorded and identified as “conditional,” downstream lienors may be limited to lien rights to the extent the owner pays the contractor:
  § 713.245, Fla. Stat.
• Public projects. No liens attach to public property; claimants proceed on statutory bonds under
  § 255.05, Fla. Stat.

Common High-Value Disputes on Major Projects

• Milestone and delivery slippage. Owners allege delay, defective work, or failure to meet financing/absorption targets; developers counter with force-majeure, change-order, and interference defenses.
• Rejection/assumption battles in bankruptcy. Whether a development agreement or GMP contract is assumable (with cure) or rejectable; what “adequate assurance” looks like for continued performance under
  § 365.
• Lien priority and bond exposure. Contests over perfection dates, transfer-to-bond amounts, and whether a conditional bond was properly established under
  § 713.245.
• Preference/fraudulent transfer claims. Clawback of late-stage payments or collateral granted to trades, sureties, or insiders prior to filing:
  § 547,
  § 548.
• Single-asset or single-project filings. Courts continue to scrutinize “bad-faith” or tactical filings involving one development asset; see recent reporting on limits to abusive filings:
  Reuters coverage: restrictions on filings (2025).

Playbook for Owners, Lenders, and Trade Creditors

1. Audit contracts and security early. Confirm guarantees, collateral, and step-in rights; calendar notice and cure periods that affect termination or default interest.
2. Preserve lien/bond rights. Track Chapter 713 deadlines and bond notice requirements precisely:
   Florida Construction Lien Law,
   Public Project Bonds.
3. Prepare for bankruptcy dynamics. Map contract-assumption risk, cure claims, and potential clawbacks under
   § 365,
   § 547,
   § 548.
4. Control the record. Keep contemporaneous schedules, pay apps, meeting minutes, RFIs, and critical-path analyses—essential in delay and damages models.
5. Use ADR strategically. On multi-party towers and mixed-use projects, early mediation can unlock bond proceeds, minimize stay disputes, and manage reputational risk.

What Developers Should Do Before a Filing

• Stabilize the cap stack. Evaluate DIP financing prospects and adequate protection for secured lenders; analyze milestones you can actually hit under a 13-week cash flow.
• Prioritize assumable contracts. Identify trade partners critical to completion and the cure costs to assume those contracts under
  § 365.
• Assess clawback risk. Model exposure for recent transfers (preferences/fraudulent transfer) and shore up “ordinary course,” “new value,” and solvency defenses (see
  § 547,
  definition of “new value”,
  § 548).
• Coordinate with sureties. On bonded jobs, align with surety claims handling so performance/payment issues don’t derail the case or violate the stay.

Feinstein Real Estate Litigation & Business Law

We represent owners, developers, lenders, and construction stakeholders in high-value disputes involving developer insolvency, construction delays/defects, lien and bond claims, and complex contract litigation. Our team handles emergency stay relief, adversary proceedings, preference/fraudulent-transfer defense, plan negotiations, and Florida lien/bond litigation under Chapters
713 and
255.
We also offer mediation services for multi-party project disputes, helping clients reach practical resolutions before value erodes.

Feinstein Real Estate Litigation & Business Law
501 E Las Olas Blvd, Suite 300, Fort Lauderdale, FL 33301
Phone: (954) 767-9662
Website: www.feinsteinlaw.net