Mike Arnold, Neil Shekhter, Andrew Florence, Ben Bacal, Robert Shapiro (Credit: Pixabay, Public Domain Pictures)
The year proved to be a tough one for many in Tinseltown, as it was filled a series of sexual harassment scandals that brought down many men in power (not to mention the devastating wildfires). The world of real estate was not spared the drama, as 2017 brought about some of the juiciest lawsuits in years — featuring everything from an alleged Ponzi scheme to cocaine-filled cars.
The Real Deal kept a vigilant eye of what was occurring in the courtroom this year.
1.) Billion-dollar fraud
The Woodbridge Group of Companies stands accused of running a Ponzi scheme that duped more than 8,000 investors, with leader Robert Shapiro now facing a $1.2 billion lawsuit from the Securities and Exchange Commission. The mega-mansion developer also dragged residential brokerage Mercer Vine through the mud, with the SEC labeling the boutique brokerage a “relief defendant” in the case. We’ll be seeing how this one pans out well into the New Year.
2.) Sexual harassment and cocaine-filled cars
It wouldn’t be 2017 if there wasn’t at least one sexual harassment lawsuit on the list. An anonymous former employee of Newmark Grubb Knight Frank filed a behemoth complaint against the brokerage and its former managing director, Mike Arnold, in April. In the suit, the female former staffer — with the help of Michael Jackson’s former celebrity attorney, Mark Geragos — claims she was sexually harassed, discriminated against and wrongfully terminated from the firm. Oh, and that conference all the real estate pros attend in Vegas? She claims it was a drug-fueled event where employees engaged in debauchery on the company dime, including managers pressuring junior employees to drive cocaine across state lines. The case is still pending.
3.) Broker tug-of-war
Former partners Ben Bacal and Ryan Davis continued to battle it out in the courtroom over an unresolved payout on four different properties, including the luxurious 1 Electra Court. Davis, now at Compass, filed the lawsuit in 2013, alleging Bacal broke their agreement to go Dutch on the commission they earned while at Sotheby’s International Realty. Combined, the properties are valued at $96 million. Last we heard, Bacal’s lawyers were petitioning for the case to move into arbitration — and out of the eyes of the press.
4.) A coast-to-coast, transpacific EB-5 swindle
In a recent lawsuit, Los Angeles-based 8th Bridge Capital was sued for allegedly swindling an Atlanta firm, Southeast Regional Center, out of profits earned from marketing projects overseas. SRC owner Moses Choi claims 8th Bridge head Young Hun Kim used over half a million dollars of Choi’s personal funds to market EB-5 projects in Asia, among other shady activities. Among those projects is the Ace Hotel in Manhattan, adding to the trendy inn’s flurry of lawsuits already in play. As of December, the suit was still very much ongoing.
5.) SaMo developer’s ‘criminal enterprise’
While the saga involving Santa Monica developer Neil Shekhter’s firm NMS Properties and AEW Capital Management included rather boring disagreements on joint-venture contracts, it also featured allegations of assault, doctored legal contracts and the testimony of a Secret Service agent. NMS accused AEW of reneging on their agreement allowing NMS to buy out AEW’s stake, bringing eight lawsuits against its former partner. AEW counter-sued, claiming Shekhter acted like a “criminal enterprise” by forging documents and physically assaulting reps for the new owners of a property portfolio sold by AEW. A judge denied Shekhter’s motion to dismiss one of the lawsuits this summer, meaning we’ll likely be hearing more about this next summer when Shekhter heads to trial.
6.) Malibu a safe space for Whole Foods
A hotly debated measure that limited chain stores and forced major development projects to be put to a public vote in Malibu is now kaput, thanks to a fight led by developer Steve Soboroff. A Los Angeles Superior Court Judge voted to uphold a lower court ruling and eradicate the measure this summer, on the grounds that it was illegal for a cap on chain stores to be based on the type of tenant as opposed to the use of the space. Soboroff, who is also vice president of the L.A. Police Commission, is now free to develop his 24,000-square-foot Whole Foods Market in the wealthy enclave.
7.) CoStar coming for everyone
Commercial real estate data company CoStar Group spent much of 2017 in court this year as it took on almost everybody in its way. In March, a federal judge granted CoStar a victory in its fight against Orange County-based Apartment Hunters for publishing listings and photographs stolen from CoStar subsidiary Apartments.com. The firm was also involved in a long-running dispute with competing data firm Xceligent for copyright infringement, a problem that was solved in mid-December, when Xceligent filed Chapter 7 liquidation and shut down operations. CoStar’s response? “We… stand by ready to help Xceligent’s former customers.”
8.) “Million Dollar Listing,” multimillion-dollar litigation
Power agents Josh and Matt Altman got slapped with a $3.7 million lawsuit from a former Hilton & Hyland client for allegedly misleading Peter Kleidman into selling his home for cheap. Kleidman, who was a client of Hilton & Hyland but not the Altman brothers at the time, claims he got duped when the brokerage sold his home for $5.3 million to a buyer who later resold it for $10 million. Kleidman, who filed for bankruptcy shortly after hiring the brokerage, is seeking damages from the court. Hilton & Hyland and the “Million Dollar Listing Los Angeles” stars have been trying to get the suit dismissed.
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