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HomeNewsLocal newsMolloy Removed, Third Circuit Appellate Judge Assigned to Caneel Bay Case

Molloy Removed, Third Circuit Appellate Judge Assigned to Caneel Bay Case

An aerial photo shows the extent of destruction at Caneel Bay from Hurricane Irma in September 2017. (NPS image)

V.I. District Court Chief Judge Robert Molloy has been removed and a Third Circuit Court of Appeals judge assigned in his place to preside over the lawsuit that will determine the ownership of the Caneel Bay Resort property on St. John, according to the latest filing in the case.

Molloy has presided over the case since EHI Acquisitions sued the government in June 2022 for ownership of the property it has managed under a Retained Use Estate agreement since 2004.

Thursday’s brief entry on the court docket did not offer an explanation for the move. “This case is reassigned to the Honorable Cheryl Ann Krause for all further proceedings. Chief Judge Robert A. Molloy is no longer assigned to this case,” the entry read.

Krause is an appellate judge for the Third Circuit Court of Appeals, which serves Pennsylvania, New Jersey, Delaware, and the Virgin Islands. She was nominated by President Barack Obama in February 2014 and confirmed by the U.S. Senate that July, according to her biography on the court’s website. Previously, she served as a law clerk for Supreme Court Justice Anthony M. Kennedy, and among other roles is an adjunct professor of law at the University of Pennsylvania Law School.

EHI’s attorney, Chad Messier of Dudley Topper and Feuerzeig, did not respond to a request for comment regarding Molloy’s removal. U.S. Attorney Joycelyn Hewlett referred questions to Clerk of Court Glenda Lake, who did not reply.

However, according to one legal source, the move is unusual in that it appears to have come without a recusal or disqualification, and because normally another District Court judge would be assigned to the case or, barring that, it would go to a trial judge in the Third Circuit, not an appellate judge.

Filed on June 30, 2022, the lawsuit has seemingly been stalled since Oct. 26 when attorney Henry C. Smock, the mediator in the case, reported that the parties “have reached a total impasse” and “all issues require Court action.”

At issue in the suit is who owns the beachfront property that the once-tony resort — shuttered since it was badly damaged by Hurricane Irma in 2017 — occupies on St. John.

When Laurance S. Rockefeller in 1956 donated the land that today makes up the Virgin Islands National Park, he held back roughly 150 acres for the Caneel Bay Resort. Jackson Hole Preserve, a Rockefeller entity, donated the land to the park in 1983. However, it came with a Retained Use Estate agreement that gave the Preserve free use of the property and its facilities for 40 years. At the end of that four-decade period, September 2023, the RUE document dictated that the buildings and their improvements would be donated to the Park Service.

While the Preserve initially held the RUE, it was passed down to other companies, and finally to CBI Acquisitions in 2004, of which EHI is a subsidiary.

CBI principal Gary Engle has maintained that it would cost $100 million to restore the hurricane-damaged property and sought to extend the RUE for 60 years to recoup such an investment. When that effort failed, EHI and CBI offered to terminate the RUE and sell the resort to the government for $70 million on the condition that EHI and CBI be released from all environmental liabilities related to the RUE and Caneel Bay land and improvements.

Engle asserted that if the government rejected the offer to buy the property, then the title to the premises would revert automatically to EHI, per the RUE agreement. However, Interior Department Solicitor Daniel Jorjani rejected that claim, writing in a June 2019 response that the agreement did not authorize demands for payment, indemnification, or releases as a condition of the RUE termination.

EHI subsequently filed suit in 2022, and the matter has been tied up in court ever since.

A trial that was scheduled to begin Oct. 16 was stayed after Molloy granted U.S. Attorney Delia Smith’s request that the court await his rulings on pending motions, including one by her office to dismiss the case and motions by both sides for summary judgments.

Molloy wrote in his order — issued on Sept. 28, two days before the RUE expired — that “the Court determines that it can resolve the issues in this case upon the written submissions of the parties.” He also ordered federal officials to leave the area untouched, pending further court action.

However, removal of asbestos from the property will proceed early next year, the National Park Service announced on Nov. 30.

This first phase of environmental cleanup at Caneel Bay will focus on removing asbestos-containing debris from 2017 hurricanes Irma and Maria, park officials said. On-site work will be conducted pursuant to NPS’s delegated authority under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, it said.

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