Suit Alleges Mishandling of Balboa Inn Sale Proposal

The financial fiasco involving the bankrupt Balboa Inn partnership headed by National Basketball Assn. stars Kareem Abdul-Jabbar and Ralph Sampson has produced another lawsuit with a Huntington Beach management company suing a Laguna Hills bankruptcy lawyer over the handling of a proposed sale of the hotel.

In the suit, John Glenn Mangun and his Merlin Management Ltd. accused Michael J. Bartlett of fraud, negligence and interference with business opportunities and business dealings by failing to seek U.S. Bankruptcy Court approval for the sale of the Balboa Inn in February.

The suit, filed in U.S. Bankruptcy Court in Santa Ana on Tuesday, seeks $28,500 in actual damages and $200,000 in punitive damages.

Merlin, hired by the failing partnership to find a buyer, came up with a company that offered $5.75 million and, after a majority of the partners turned it down, proposed a second package that the partners approved.

The suit claims that Bartlett, hired to handle a Chapter 11 reorganization, failed to present either proposal to the court for approval and that he acted on his own to convert the proceeding into a Chapter 7 liquidation, allowing a noteholder to foreclose on the hotel.