Developer Neil Shekhter and his company NMS lost another two rounds in court recently in the long running battle over several Santa Monica rental properties.
In the first of two separate rulings, a judge ruled against a request from Shekhter regarding the opposing attorneys representing hedge fund AEW in their dispute over ownership of several buildings. In the second hearing a judge finalized a tentative ruling stating AEW had the right to sell the buildings and the current owners have legal right to the property.
Both rulings stem from a case involving a 2010 joint venture agreement between Shekhter and AEW to build and manage nine properties in Santa Monica and West Los Angeles.
Shekhter tried to buy out AEW with a payment of $60 million plus interest. However, AEW refused to accept the buyout money and NMS filed a lawsuit over the ownership of the properties.
During litigation, the trial court found Shekhter destroyed his personal computer, deleted files and failed to produce several devices that had access to the details of the joint venture. The court also said the Plaintiffs, including Shekhter, had forged documents related to the case.
Shekhter had accused attorneys Gibson, Dunn & Crutcher (GDC), who represent AEW in the case, of inappropriately gaining access to documents that were stored on a flash drive given to the defendants as part of the evidentiary process.
The court dismissed that accusation saying the documents were not covered by attorney-client privilege and that the Plaintiffs should have known they would be accessed when they turned over the drive.
“In addition, the Court was examining GDC’s use of the documents in circumstances in which the Plaintiffs were engaged in the use of computers to forge documents and conceal information,” said the ruling. “The Court subsequently found that the Plaintiffs’ widespread discovery abuse had infected the entire proceeding and that it had irreparably injured the Defendants’ ability to prepare a defense. The Plaintiffs had provided the documents on a thumb drive for forensic analysis. In these circumstances, it was foreseeable to a reasonably prudent person that GDC would discover the documents on the thumb drive when the forensic analysis occurred. As a result, the Court found that, in circumstances where it is foreseeable that the documents would be discovered, the Plaintiffs’ conduct in producing a thumb drive containing deleted litigation documents for a forensic analysis without taking precautions was a waiver.”
Gibson, Dunn & Crutcher LLP partner James Fogelman said the ruling concluded Shekhter’s claims against AEW in that case.
“We are grateful for the Court’s ruling,” he said. “Nobody should be allowed to forge documents, commit perjury or destroy evidence in a civil suit, let alone do all three.”
Four days after that ruling, a judge formalized his opinion that neither Shekhter or NMS have ownership or management rights to the properties.
Attorneys for the new owners, SPI Holdings, had argued that NMS/Shekhter did not own the properties, did not manage the properties, had no right to hold themselves out as managers for the properties, had no right to control the buildings, cannot take rent from tenants, cannot enter/occupy the buildings and that SPI are the sole owners of the properties.
Judge Lawrence Cho agreed with those claims despite arguments from attorneys representing Shekhter/NMS that a pending accusation of fraud against AEW had to be resolved before determining ownership.
“We respectfully disagree with the judge’s decision and plan to appeal,” said Shekhter/NMS spokesman Eric Rose. “We still feel very good about our case, and we feel very confident in our positions and prevailing.”
editor@smdp.com
