Lightstone

The ruling marks a victory for lenders, including Bank of America Corp., Wells Fargo & Co.'s Wachovia Corp. and the Federal Reserve's Maiden Lane fund as successor to Bear, Stearns & Co. Those lenders collectively provided Lightstone roughly $2 billion of mezzanine loans, but their claims were wiped out after Extended Stay filed for bankruptcy protection in 2009.

Judge Rules Against Lightstone Kris Hudson 2011

Last year, Mr. Lichtenstein sold Lightstone's Prime Outlets shopping center division to Simon Property Group Inc. for $700 million.

Judge Rules Against Lightstone Kris Hudson 2011

Ultimately, Lightstone lost its grip on Extended Stay in the bankruptcy.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

Similarly, the trustee's lawsuit accuses Mr. Lichtenstein of delaying the "inevitable" bankruptcy filing as he tried trying to cut cutting a deal to preserve some of his equity and extricate Lightstone from the bad-boy clause.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

They say Mr. Lichtenstein instead opted for bankruptcy in the hope that he could strike a deal in court for Lightstone to retain keep a small ownership stake in Extended Stay.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

Mr. Lichtenstein is appealing the ruling, but it already has been painful for the 50-year-old Brooklyn native, who built Lightstone Group into an empire of apartments, shopping centers and hotels.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

The case dates back to 2007 when Lightstone acquired Extended Stay from Blackstone Group LP for $8 billion.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

Getty Images A San Rafael, Calif., hotel in the Extended Stay chain, which was placed under bankruptcy protection in 2009 by owner Lightstone Group.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

Lightstone Group David Lichtenstein In his first interview since a July ruling in New York State Supreme Court, Mr. Lichtenstein, owner of Lightstone Group, said earlier this month he had been ready to forfeit the debt-laden hotel chain to a group of its mortgage holders in 2009, but a lawsuit filed by junior lenders left him little choice but to place Extended Stay under Chapter 11 bankruptcy protection.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011

Lightstone appeared to have survived relatively unscathed, having contributed only $200 million in equity.

Lightstone Chief Defends a Bankruptcy Kris Hudson 2011