A state appellate court affirmed a lower court ruling handing AEW Capital Management full control of a nine-property portfolio that’s the subject of a dispute with Santa Monica developer Neil Shekhter’s NMS Capital Partners, its former joint venture partner, who is accused of destroying evidence.
The 2nd District Court of Appeal ruled in an unpublished decision on June 20 upheld AEW’s authority to sell the disputed properties. The court stated that Shekhter’s destruction of evidence merited the terminating sanctions.
The November 2016 ruling and several follow-up orders by Los Angeles County Superior Court Judge Suzanne Bruguera essentially handed control of the joint portfolio to AEW, which sold the properties to a subsidiary of San Francisco’s SPI Holdings shortly afterward for more than $420 million.
The nine properties at issue in the dispute include apartment developments in West Hollywood, Santa Monica and Culver City.
But the appellate court reversed Bruguera’s $6 million sanctions order against NMS, ruling the company’s due process rights were violated when she handed down the order at a hearing in which the company was not allowed to participate.
The three-judge panel also reversed the terminating sanctions Bruguera handed down on 10 of the 11 parties involved in the case.
The case began in 2014 when Shekhter and NMS Capital Partners sued AEW, alleging it had reneged on amended deal terms that allowed NMS to buyout AEW’s stake in the venture. AEW counter-sued alleging Shekhter had forged documents and violated the terms of the joint venture agreement.
Louis “Skip” Miller of Century City’s Miller Barondess law firm said his client plans to appeal part of the court’s ruling to the California Supreme Court. On the issues where his client won, NMS will argue at trial that it was fraudulently induced into the joint venture, Miller said.
“I, frankly, think we’re going to win in front of a jury,” Miller said. “If we prevail then their sale (to SPI Holdings) goes by the board and we’ll get a big damage award.”
Meanwhile, AEW’s legal team declared victory.
“We are gratified that the Court of Appeal recognized that no trial court should be forced to put up with the type of misconduct engaged in by NMS and its principals,” said James Fogelman, who leads the AEW team out of Gibson Dunn & Crutcher’s Century City office, in a statement.
Real estate reporter Ciaran McEvoy can be reached at email@example.com or (323) 556-8337.
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