The complicated sale of the lease to operate and develop the Queen Mary resumed its slow and unsteady progress toward closure Thursday morning in bankruptcy court when Judge Vincent Zurzulo approved an unusual $1.15 million settlement of a dispute lodged by small contracting company AAC Shoreline — after disgruntled development company, Bandero LLC, withdrew its objection to that settlement, preferring to fight in another court another day.

AAC Shoreline was what’s called a sub-sub-tenant of QSDI, the company that held the lease to operate the Queen Mary for more than 10 years until filing bankruptcy in March 2005. AAC Shoreline became a sub-sub-tenant when it was hired by Bandero — a sub-tenant of QSDI — to do some construction. AAC Shoreline claimed it had invested some $500,000 in the project, but that contention had been denied until Oct. 19. That’s when the Ninth Circuit Court of Appeals — basically, one step below the Supreme Court — halted the sale of the Queen Mary lease to a consortium called Save The Queen just three days before the deal was scheduled to close.

A protracted legal fight would have been immensely expensive for all the participants in the sale — according to sources, as much as a half-million dollars per month. Consequently, most of the other players in the bankruptcy case chipped in to pay AAC Shoreline $1.15 million — the breakdown is itemized in an Oct. 31 story in the Press-Telegram.

But Bandero submitted an objection to that settlement early today, concerned that it might damage the $200 million lawsuit that it has filed against Save The Queen frontman Jeff Klein.

“Our concern was that the this settlement with AAC Shoreline might give Klein ownership of a claim that AAC Shoreline might have against Bandero–and that he might use it to fight the lawsuit we have filed against him,” said Lee Durst, who heads Bandero. “When we were given assurances that this was not so, we withdrew our objection to the settlement.”

However, Durst could not resist pointing out what he called “the illogic” of recognizing AAC Shoreline’s right to a claim against QSDI while continuing to deny Bandero’s right — when it was Bandero that hired AAC Shoreline.

In 2003, when Joe Prevratil was CEO of QSDI and desperate for cash, Bandero says it paid him $6 million for 24 percent of the company and an option to buy the rest, and subsequently invested millions more into development plans. But Bandero’s rights have been denied by the City of Long Beach, which insists it never formally approved Bandero.

Bandero subsequently joined forces with Klein as he mounted a $43 million bid for the lease at auction Aug. 14. One day after Save The Queen won rights to the lease, however, it sent a letter to Bandero rejecting its claims to a place in the partnership.

Barring further legal wrangling — O&S Holdings, the original bidder for the Queen Mary lease, is still the fallback buyer if Save The Queen can’t come through — purchase of the lease to operate the Queen Mary and 64 acres of surrounding land may be finalized by next week. That certainly won’t be the end of litigation, however.

Tags: Bandero, Jeff Klein, Joe Prevratil, Judge Vincent Zurzulo, Lee Durst, Long Beach, O&S Holdings, QSDI, Queen Mary