-------- Original Message -------Subject: FW: NMS

From: Eric Samek <esamek@AEW.com<mailto:esamek@AEW.com>>

Date: Wed, May 19, 2010 6:48 pm
To: 'Neil Shekhter' "James L. Anderson (Jim@NMSPR.com<mailto:Jim@NMSPR.com>)"
<Jim@NMSPR.com<mailto:Jim@NMSPR.com>>, "Edward L. Zimbler
(ed.zimbler@berkadia.com<mailto:ed.zimbler@berkadia.com>)"
<ed.zimbler@berkadia.com<mailto:ed.zimbler@berkadia.com>>
Mazel tov.
thx
From: Eric Samek
Sent: Wednesday, May 19, 2010 5:28 PM
To: 'Mendelson, Richard C.'; Jon A. Watson (jwatson@aew.com<mailto:jwatson@aew.com>)
Subject: RE: NMS

Rich,
We've agreed to terms with NMS and are moving forward with Lincoln and Broadway. Marc has already
approved the terms but we will have to circle back with the rest of the Boston guys at the end of next
week b/c the deal is slightly different. We should move forward with the docs in the interim.
I will get you an executed copy of the LOI from the NMS guys before the end of the week. Please draft
the docs with the following changes in terms:
1) AEW minimum equity multiple of 1.75x and top hurdle in waterfall goes from 21% to 24%,
compounded annually
2) If NMS monetizes all of AEW's investment within 5 years then NMS will keep all proceeds above
AEW's 24% annual return. If our investment is outstanding longer than 5 years then NMS gets a 45%
promote above the top hurdle of 24%.
3) AEW will fund equity up front (currently estimated at $3.5mm on each deal) so long as deal is on
track (NMS has their 1/3 share of the equity in the deal, the construction loan is in place, the budget is
fully funded, etc). As an fyi the loan is already done for Broadway but not for Lincoln.
This structure will be used for the deals in their existing portfolio (4 deals and roughly $20mm of equity)
and then we'll go back to the original terms for any new deals (roughly $30mm of equity in next 24-36
months) where basis contribution isn't an issue.
thx
From: Mendelson, Richard C. [mailto:Richard.Mendelson@dlapiper.com]
Sent: Sunday, May 16, 2010 2:38 PM
To: Eric Samek; Jonathan Watson

Subject: NMS
Just wondering what was going on with this one? Enjoy the rest of the weekend!
Richard C. Mendelson
DLA Piper US LLP
550 South Hope Street, Suite 2300
Los Angeles, California 90071
Phone: (213) 330-7745
Fax: (213) 330-7545
E-mail: richard.mendelson@dlapiper.com<mailto:richard.mendelson@dlapiper.com>
Circular 230 Notice: In accordance with Treasury Regulations which became applicable to all tax
practitioners as of June 20, 2005, please note that any tax advice given herein (and in any attachments)
is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (1)
avoiding tax penalties or (2) promoting, marketing or recommending to another party any transaction or
matter addressed herein.
Please consider the environment before printing this email.
The information contained in this email may be confidential and/or legally privileged. It has been sent
for the sole use of the intended recipient(s). If the reader of this message is not an intended recipient,
you are hereby notified that any unauthorized review, use, disclosure, dissemination, distribution, or
copying of this communication, or any of its contents, is strictly prohibited. If you have received this
communication in error, please reply to the sender and destroy all copies of the message. To contact us
directly, send to postmaster@dlapiper.com<mailto:postmaster@dlapiper.com>. Thank you.

1
2
3
4

5
6
7

LOUIS R. MILLER (State Bar No. 54141)

smiller@millerbarondess.com
JAMES GOLDMAN (State Bar No. 57127)
jgo1dman~mi11erbarondess.com
A. SASHA FRID (State Bar No. 216800)
sfrid@millerbarondess.com
JASON H. TOKORO (State Bar No. 252345)
jtokoro~mi11erbarondess.com
MILLER BARONDESS, LLP
1999 Avenue of the Stars, Suite 1000
Los Angeles, California 90067
Telephone:
(310) 552-4400
Facsimile:
(310) 552-8400

CONFORMED COPY
ORIGINAL FILED,

JAN 132016
Sherri K. LaILL,
%.JLIIcerIcierk
~ Deputy
Nata,sha Rose
~

STEVEN ZELIG (State Bar No. 94654)

WLA LEGAL SERVICES, INC.
9 1543 7th Street, Third Floor
Santa Monica, California 90401
10 Telephone:
(310) 393-6702
Facsimile:
(310) 393-6703
11
Attorneys for Plaintiffs
12

g,

13

SUPERIOR COURT OF THE STATE OF CALIFORNIA

~JI

14

COUNTY OF LOS ANGELES, CENTRAL DISTRICT

z ~
o~g

15
16

17
18
19
20
21
22
23
24
25

LINCOLN STUDIOS, LLC, a California

Limited Liability Company; NEIL
SHEKHTER, individually and as Trustee of
THE NMS FAMILY LIVING TRUST
DATED SEPTEMBER 3, 1991 (2000
RESTATEMENT); MARGOT SHEKHTER
individually and as Trustee of THE NMS
FAMILY LIVING TRUST DATED
SEPTEMBER 3, 1991 (2000
RESTATEMENT); THE NMS FAMILY
LIVING TRUST DATED SEPTEMBER 3,
1991 (2000 RESTATEMENT); NMS
CAPITAL PARTNERS, LLC; NMS
CAPITAL PARTNERS I, LLC;
NMSLUXE375, LLC, a California Limited
Liability Company; NMSLUXE41 5, LLC, a
California Limited Liability Company, 9901
LUXE, LLC, a California Limited Liability
Company,

26
27
28

CASE NO. BC551551

(Previously Related to Case BC550227)
THIRD AMENDED COMPLAINT
AND REQUEST FOR TRIAL BY JURY
Assigned for All Purposes to:
Hon. Suzanne 0. Bruguera, Dept. 71
Action Filed:
Trial Date:

July 15, 2014

None Set

Plaintiffs,
v.
ERIC SAMEK: MARC DAVIDSON: AEW:

THIRD AMENDED COMPLAINT

ORM

1
2
3
4

P6 LA MF HOLDINGS SPE, LLC; AEW

CAPITAL MANAGEMENT, L.P.; AEW
PARTNERS VI, L.P.; AEW PARTNERS VI,
INC.; AEW VI, L.P.; P6 LA MF HOLDINGS
I LLC; LINCOLN WALK STUDIOS, LP,
LUXE WASHINGTON, LLC; LUXE LA
CIENEGA, LLC, NMS BROADWAY, L.P.;
and DOES 1 through 100, inclusive,

5
Defendants.
6
7
8
9
10
11
C
C

12
*

o~

13

~2
053

14

-J

~ ~; S

15

16

-J

~
0
18
19
20
21
22
23
24
25
26
27
28

THIRD AMENDED COMPLAINT

Plaintiffs, Lincoln Studios, LLC, a California Limited Liability Company, Neil Shekhter,
2

individually and as Trustee of The NMS Family Living Trust Dated September 3, 1991 (2000

Restatement), Margot Shekhter, individually and as Trustee of the NMS Family Living Trust Dated

September 3, 1991(2000 Restatement), the NMS Family Living Trust Dated September 3, 1991 (2000

Restatement), NMS Capital Partners, LLC, a California Limited Liability Company, NMS Capital

Partners I, LLC, a California Limited Liability Company, NMSLuxe375, LLC, a California Limited

Liability Company, 9901 Luxe, LLC, a California Limited Liability Company, and NMSLuxe4I5,

LLC, a California Limited Liability Company (collectively, Plaintiffs) allege, for their Third

9 Amended Complaint (Complaint), as follows:

10

INTRODUCTION

11

~ i!

1.

AEW Capital Management, L.P. (AEW) is one of the largest hedge Thnds in the

12

world; it is headquartered on the East Coast, with assets over $60 billion, and operates throughout the

13

country, including in California. It is a sophisticated international investment company that prides

14

itself on generating high returns for its investors.

15
16

2.
Eric Samek is a high-level executive at AEW in charge of AEWs operations on the
West Coast. This lawsuit arises, in large part, from AEW and Samek concocting a scheme to cheat

17 Plaintiff Neil Shekhter (Neil) and his family

18

local apartment building developers and owners

out of the fruits of their labor and their valuable portfolio of real estate projects.

19

3.

In its scheme, AEW breached the parties written agreement, committed fraud, and

20 made false, scurrilous and defamatory allegations against Neil; and has engaged in what has been
21

described as legal thuggery, all to deflect from its, AEWs, own wrongdoing.

22

4.

Samek was introduced to Neil in early 2010 by Ed Zimbler (Zimbler), a broker with

23

Berkadia Commercial Mortgage, LLC (Berkadia). Samek befriended Neil and gained his trust and

24

confidence. He proposed that Neil partner with AEW to acquire, develop and operate residential and

25

commercial real estate projects in Los Angeles, California.

26

5.

Samek told Neil that under AEWs program, Neil could monetize, or take-out,

27 AEWs interest in the joint venture by paying AEW the greater of: (1) 1.75 times its invested capital,
28

or (2) a 24% annual return. Neil relied on Zimblers recommendation and on Sameks representations
278950.2

THIRD AMENDED COMPLAINT

and agreed to proceed with ajoint venture with AEW on that basis. Neil trusted Samek and believed

2 he was honest.
3

6.

On May 19, 2010, Samek and AEW sent an e-mail confirming the deal on which Neil

4 and Samek had agreed: AEW minimum equity multiple [would be] 1.75 and that ifNeil monetizes
5

all of AEWs investment within 5 years, then [Neil] will keep all proceeds above AEWs 24% annual

6 return.
7

7.

The joint venture was formed in September2010, with a company formed by AEW as

the Investor Member and a company formed by Neil as the Operating Member. The Investor

Member was responsible for providing or arranging for the funding of the majority ofthe capital. The

10 Operating Member was responsible for the day-to-day operations, including development,
11

construction, operations and leasing; and also contributed the valuable properties to the venture; and

12

invested its own capital.

13
8.
The Investor Member and Operating Member (together, the Members) executed a
14 Limited Liability Company Agreement dated as of September 8, 2010 (JVA or Joint Venture

i I!

OD~t

15 Agreement or LLC Agreement). Consistent with Neils discussions with Samek, Section 6 of the
16 LLC Agreement provides that Neils company will be entitled to all of the economic benefits in the

~ ~

17 Joint Venture if, within five years, AEW receives the greater of 1.75 times its invested capital or a
18

24% annual return.

19

9.

Thus, Section 6.l(b)(vii) states, in relevant part, that one hundred percent (100%)

20 shall be distributed to the Operating Member if within five (5) years from the date hereof Investor
21

Member receives all amounts it is entitled to receive under Section 6.1(i) through (yfl (the

22

Monetization Amount). Section 6.1 was intended by the Members to, and did, implement the terms

23

set forth in SamekIAEWs May 19, 2010 e-mail referenced in paragraph 6, above.

24

10.

Section 6.1 is consistent in the so-called versions of the Joint Venture Agreement and

25

allows for Neil to monetize or take-out AEWs interest in the joint venture within five years of its

26

fonnation.

27

11.

Neil immediately got to work identifying investment properties for the Joint Venture.

28 Neil also transferred four valuable properties worth over $70 million to the Joint Venture for
278950.2

2
THIRD AMENDED COMPLAINT

approximately $36 million. Neil made the transfers at less than market value only because Samek

assured him that he could monetize, or take-out, AEWs interest, as he and Samek had agreed.

Samek explained to Neil that transferring the properties at below-market prices would free up capital,

4 allowing the Joint Venture to diversii~ and acquire more properties in an appreciating market, and that
5 the amount at which the properties would be contributed to the partnership would be irrelevant in light
6

of Neils right and intention to take out AEW at or after three years.

12.

comprised of nine projects in prime areas with approximately 700 apartment units and 45,00t square

feet of commercial space, worth hundreds of millions of dollars.

10

13.

Venture, Neil notified AEW pursuant to Section 6 that he intended to monetize, or take-out, AEWs

12

interest in the Joint Venture by paying it the Monetization Amount, as provided for in Section 6 of

13

the parties Joint Venture Agreement. Neil wrote to Samek:

As you know, pursuant to Section 6(b) of the LLC Agreement, the Investor Members
economic interest becomes zero if, within 5 years of the date of the LLC Agreement,
the Investor Member receives all amounts it is entitled to receive under Section
6.1(b)(i) through (vi) of the LLC Agreement (essentially, the Investor Member has
received (i) an IRR of 24% and (ii) aggregate distributions equal to the product of 1.75
multiplied by the Investor Members aggregate Capital Contributions). While we have
previously discussed cleaning up the LLC Agreement (e.g., to provide for the
withdrawal of the Investor Member from the Company once its economic interest
becomes zero, and to allow the Operating Member to use outside Thnds to get the
Investor Member to an IRR of 24% and 1.75 multiple), we would like to propose to
you, for your consideration and approval, the structuring of a single transaction where
the Investor Member would receive, concurrently with the closing of such transaction,
(i) an IRR of 24% and (ii) aggregate distributions equal to the product of 1.75
multiplied by the Investor Members aggregate Capital Contributions. Upon such
payment, the Investor Member would withdraw as a Member of the Company and
have no further rights or obligations under the LLC Agreement.

15
16

~ ~!

In June 2013, shortly before the three-year anniversary of the formation of the Joint

11

14
a

As a result of Neils labors, the Joint Venture came to own a portfolio of real estate,

17
18
19
20
21
22
23

14.

AEW initially ignored the notice. Then, in November 2013, after multiple overtures by

24 Neil, it repudiated its obligations in the LLC Agreement and claimed that Neil did not have the
25

monetization right that he was promised and given in Section 6 of the LLC Agreement. The

26 properties had appreciated significantly in value; and motivated by greed, AEW/Samek wanted it all
27

for themselves.

28

15.
278950.2

Recently, as explained below, Neil reiterated his offers of tender, made in 2013, and
3
THIRD AMENDED COMPLAINT

offered to pay AEW the sum of$ 106,265,500 over $106 million

equating to a $46 million profit

2 forAEW.
3

16.

After repudiating its obligations, AEW fabricated defaults under the LLC Agreement to

4 try to remove Neil from operating the properties he had transferred to the Joint Venture and that he
5 had developed and operated. AEW also sought to cut off his cash flow and destroy his reputation by
6 making knowingly false accusations of wrongdoing. This was, and is, all part of AEWs scheme to
7 misappropriate the properties for itself
8
9

17.

This case involves a scheme to defraud and material breaches of a written contract. As

a result, Plaintiffs have suffered damages in the hundreds of millions of dollars. Plaintiffs brings this

10 lawsuit to recover, inter cilia, the benefit of the bargain they reached with AEW in 2010 in entering
11

into the Joint Venture. They seek to hold AEW to the terms of the Joint Venture Agreement.

12
~

tj~

13

14

THE PARTIES
18.

Plaintiffs.
a.

Neil and his wife, Margot Shekhter (Margot), are the Trustees of The NMS

013

~ ~:

15 Family Living Trust Dated September 3, 1991 (2000 Restatement) (the Trust).
16
b.
The Trust is a member of NMS Capital Partners, LLC (NMS Capital
17 Partners), the sole member and manager of NMS Capital Partners I, LLC (NMS Capital or the
18

Operating Member), which is the Operating Member of a limited liability company known as P6

19 LA MF Holdings I LLC, i.e., the Joint Venture.

20
21

c.

Neil is, and at all relevant times has been, the chief executive officer ofNMS

Properties, Inc. (NMS), and is also the manager of: (I) NMS Capital; (2) NMS Capital Partners;

22 (3) NMSLuxe375, LLC, a California limited liability company; (4) NMSLUXE41 5, LLC, a California
23

limited liability company; (5) 9901 Luxe, LLC, a California limited liability company; and (6) Lincoln

24

Studios, LLC, a California limited liability company.

25

19.

26

a.

27
28

Defendants.
The AEW Defendants.
i.

SamekJAEW. At all relevant times, Samek has been an officer, director

and/or managing agent of the following entities: (a) AEW Partners VI, L.P., a Delaware limited
278950.2

4
THIRD AMENDED COMPLAINT

partnership (AEW Partners VI, UP.), and the find managed by AEW Capital Management that

2 invested, indirectly, in the Joint Venture; (b) AEW VI, L.P., a Delaware limited partnership, who was
3

actively acting through its general partner AEW Partners VI, Inc.; (c) AEW Capital Management,

4 L.P., a Delaware limited partnership (AEW Capital Management); (d) P6 LA MF Holdings SPE,
5

LLC, a Delaware limited liability company and the the Investor Member in the Joint Venture (the

Investor Member); and (e) AEW Partners VI, Inc., a Delaware corporation. (These entities are

7 hereinafter referred to as AEW or the AEW Entities.) At all relevant times, Samek was acting
8

individually and on behalf of AEW in connection with the matters that are the subject of this action.

Samek obtained personal benefits from AEW by engaging in the malfeasance described herein.

10

Samek culpably participated in the misconduct on which Plaintiffs claims are based.

11

ii.

Davidson. At all relevant times, Marc Davidson (Davidson) has been

12 an officer, director and/or managing agent of AEW and was actively acting individually and on behalf
~

I~

01St

13

of AEW in connection with the matters that are the subject of this action. Davidson obtained personal

14 benefits from AEW by engaging in the malfeasance described herein. Davidson served as supervisor
15

to Samek, knowingly authorized and approved of Sameks conduct in connection with the matters that

16

are the subject of this action, and personally and culpably participated in the misconduct on which

17
18

Plaintiffs claims are based. Davidson personally made misrepresentations and concealed material
facts from Neil.

19

b.

20

Alter Ego Allegations Regarding The AEW Defendants.

i.

Except for AEW Capital Management, the AEW Entities do not

21

function as separate entities, but are mere shells designed to allow AEW Capital Management to

22

circumvent laws and regulations and to otherwise gain unfair advantages.

23

ii.

Except for AEW Capital Management, the AEW Entities have no

24 employees, specific offices, banlc accounts, or letterhead.

25

iii.

They utilize the same employees, i.e., employees of AEW Capital

26

Management, and the same e-mail address, i.e., (name)@aew.com. AEW Capital Management

27

controls the operations of the other AEW Entities.

28

iv.
278950.2

The entities other than AEW Capital Management do not observe

5
THIRD AMENDED COMPLAINT

entity formalities.
v.

The AEW Entities are conducted as a common enterprise, lacking

3 independence or any kind of arms-length relationship.

4

vi.

Except for AEW Capital Management, the AEW Entities are

5 materially undercapitalized.

vii.

obtain authorization to do or transact business in California to further an unlawful practice of

avoiding paying taxes to the Franchise Tax Board of the State of California.
viii.

0
0
0

The Investor Member did not open or maintain a bank account or

AEW has filed or caused to be filed false tax returns, using another

10

entitys tax identification number, for purposes of perpetuating its tax avoidance scheme; and has

11

failed to properly account for capital contributions from Plaintiffs. Specifically, AEW has filed

12 tax returns on behalf of AEW Partners VI, L.P. (the AEW fund) and P6 LA MF Holdings SPE,

z
4

C)

0
0

-J
~1~
U,

Wa

0
z

0
0
0

0
0

W
-J
-J

13

LLC (the Investor Member) using the same tax identification number:

14

Partners Share of Income, Deductions,

Credits, etc.
s~ back of form and separate Instructions.

15

Information About the Partnership

16

a
0

17
z
C.
C,
0

empioycr Ithmtiflcaticn number

263188687

0
0

Partnerships

18
19

Partr*rshipsnarne, addruss, city, sate, arid ZIP code

AEW PARTNERS VI, L.P.

C/C AEW CAPITAL MANAGEMENT,
TWO SEAPORT LANE
BQSTQN., MA 02210

20
21

L.P.

22
Part It

23

Information About the Partner

E PnWs ideraiifyi~ numbtr

263188687 +~~
F Pn~ecs name. address, city. s~te1 and ZIP code
P6 LA NP HOLDINGS SPE, LLC
dO AEW CAPITAL MANAGMENT

24
25
26

~wo

SEAPORT LANE
BOSTON, MA 02210

27
28

ix.
278950.2

Based on the way that they have operated, the AEW Entities should
6
THIRD AMENDED COMPLAINT

not be viewed as separate or independent entities for legal purposes.

x.

Except for AEW Capital Management, the AEW Entities are mere

instrumentalities of AEW Capital Management.

xi.

It would be manifestly unjust to treat the AEW Entities as anything

5 but alter egos of each other.

6

c.

Does. The true names and capacities of Defendants Does 1 through 100 are

7 unknown to Plaintiffs who therefore sue said Defendants by such fictitious names. Plaintiffs will, if
8

necessary, amend this Complaint to show the true names and capacities of Does 1 through 100 when

9 their names and capacities have been ascertained. Does 1 through 100 culpably participated in or are
10 in some other way are responsible for the misconduct committed by the other defendants and liable for

11

the damages sustained by Plaintiffs, as alleged herein.

12
13

d.
Agency/Conspiracy/Aiding And Abetting Allegations. At all relevant times,
each of the defendants was the agent of each of the other defendants and was acting within the course

14

and scope of such agency and with the permission of the other defendants. Defendants conspired with

15

and aided and abetted each other in connection with the misconduct alleged herein.

16
~

FACTUAL BACKGROUND

17

20.

18

Zimbler Approaches Neil About A Joint Venture With AEW.

a.

In early 2010, Zimbler was approached by Davidson and Samek (and other

19 individuals employed by AEW), who said that AEW was looking for an operating partner with which
20 it could enter into ajoint venture to develop multi-family residential projects in the Los Angeles area
21

and that AEW would give its partner in the joint venture the right to acquire the interest of AEW

22 through various mechanisms at an acceptable rate within a set amount of time.

23

b.

Thereafier, in February 2010, Zimbler contacted Neil to set up a joint venture

24 between Neil and AEW. Zimblers intention was, in part, for the joint venture between Neil and
25

AEW to use Berkadia to procure financing for the acquisition and development of the joint venture

26 properties.
27

c.

In the past, Neil had previously done substantial business with Zimbler, who

28 had provided Neil with advice and counsel, and the two had developed a friendship and relationship of
278950.2

7
THIRD AMENDED COMPLAINT

trust and confidence. Zimbler told Neil about AEWs joint venture program and, in particular, a

2 feature that was unusual, if not unique

3

that its joint venture partner could take-out, or monetize,

AEW at the amount invested by AEW, plus an interest rate and/or a multiplier. Based on Zimblers

4 representations and the trust that he placed in Zimbler, Neil agreed to begin preliminary negotiations
5 with AEW.
6

21.

Negotiations With AEW.

a.

Meeting In February 2010. Zimbler arranged for Zimbler, Samek and Neil to

8 meet to discuss the possibility that AEW would provide capital for Neil to further his acquisition and
9

development plans. During the meeting:

10
11

i.

nature or complexity that were being considered.

12
13

Neil said that he had no experience in financing transactions of the

ii.

Neil said that because his business was a family business, he would only

consider a partnership with someone having the highest level of integrity and honesty, and only if he

14 would have the right to take-out AEW on ternis initially acceptable. Neil explained that, regardless of
15 the form of the transaction, he was merely looking for short-term financing, not a long-term equity
16 partner.
~

17
18

iii.

Samek assured Neil that AEW had a sterling reputation and was a

company worthy of Neils trust. He noted that its investors were largely pension funds, that AEW was

19 highly regulated, and therefore, that Neil could expect that AEW would exercise the highest level of
20 honesty, good faith and integrity.
21

iv.

Samek confirmed that Neil would have the right to take-out AEWs

22

interest in exchange for re-payment of the amount of its net investment plus a return, and that, in that

23

respect, the substance of the transaction was effectively a high interest loan, as Neil wanted. Samek

24 discussed the mechanism and equation by which this could occur: AEW would be paid back its
25

investment plus substantial additional amounts either at a high interest rate or by taking the amount of

26

its investment and multiplying it by a multiplier.

27
28

v.

Samek explained that the joint venture would include two members:

(1) the Operating Member, whose role would be fulfilled by Neil or an affiliated entity, and whose
278950.2

8
THIRD AMENDED COMPLAINT

responsibility would be to conduct the day-to-day operations ofthe venture, including the construction

2 and management of the properties; and (2) the Investor Member, whose role would be fulfilled by
3

AEW or an affiliated entity, and whose primary responsibility would be to provide funding for the

4 venture.
5

vi.

Samek confirmed that the Operating Member would have the right to

6 take-out, or monetize, AEW at an amount and within a time frame that would be acceptable to Neil.
7

Samek also told Neil, as had Zimbler earlier, that the take-out feature of AEWs program was

8 uncommon if not unique to AEW and that it was a compelling reason for Neil to enter into the joint
9 venture with AEW, as opposed to availing himself of the other capital sources that were available.
10
11

vii.

Samek also explained to Neil that if AEW was to enter into a joint

venture with him, and effectively contribute tens of millions of dollars, AEW would require him to

12 transfer some of his properties to the joint venture for amounts below their fair market value, but that

~ ~!~: !aj

13 the low prices would be of no moment because of Neils right and intention to take-out AEWs
14 interest within a few years and because this would free up more money, allowing the venture to
15 diversify and expand by acquiring and/or developing more projects.
16
viii.
Samek explained to Neil that the standard operating procedure in a

~~

17 transaction of this nature was to first negotiate the deal points and then, when a deal in principle was
18

struck, give the data to a lawyer for the purpose of neutrally drafting a fair agreement that included the

19 terms upon which the parties had agreed, and that because the law firm and its lawyers would
20 represent the joint venture, they would be the fiduciaries of both sides of the joint venture.
21

ix.

Neither Zimbler nor Samek mentioned anything about the following

22 facts even though both were well aware of them: AEW had agreed to give Zimbler a 5% interest in
23

AEWs share in the joint venture and all other transactions between Neil and AEW; AEW was not

24 honest or trustworthy; AEWs pattern and practice was to cheat people, including its partners and
25

co-venturers; and AEW had no intention of permitting Neil to take-out AEWs interest in the joint

26 venture. Had Neil known of these facts, he would have terminated negotiations with AEW.
27
28

b.

Negotiations In March. April And May2010. During March May2010, Neil

continued negotiating with Samek, over the telephone and in face-to-face meetings. During these
278950.2

9
THIRD AMENDED COMPLAINT

discussions:

2
3

i.

Neil reiterated the importance of the take-out feature and of the honesty

and integrity of his partner; and Samek continued to assure Neil that he understood and appreciated

4 the importance of these points to Neil.

5

ii.

Samek provided details regarding the take-out feature. Specifically, he

explained that Neil would be able to take-out AEWs interest, by paying, within five years, an amount

equal to the greater of: (1) AEWs net capital contributions times 1.75, and (2) the amount needed to

ensure that AEW would receive an internal rate of return (IRR) of 24% per year.

iii.

Neil agreed to these terms. He always wanted to keep the properties

10 within the Shekhter family. He made it clear that he would definitely exercise his take-outright, or
11

what was sometimes referred to as his right to monetize AEW, at the first opportunity when it made

12

economic sense to do so, which was on or about the three-year anniversary of the formation of the

13 jointventure.
14
15

iv.

Neil and Samek and Davidson specifically discussed the fact that it did

not make sense for Neil to monetize AEW before the three-year anniversary because of the minimum

16 requirement that AEW receive 1.75 times its net invested capital, or to do so significantly after the
~~

17 three-year anniversary because of the maximum requirement that AEW receive a 24% annual IRR.
18

v.

Samek told Neil that the plan was a win-win because AEW would

19 receive high benefits for its investors (i.e., the greater of 75% or 24% per year), while Neil would get
20 financing for his projects.
21

c.

Confirmation Of The Deal. On May 19,2010, Samek and AEW sent an e-mail

22

congratulating Neil on the deal that had been struck. In an e-mail that was attached, sent to Richard

23

Mendelson at DLA Piper (DLA), the law firm selected to prepare the Joint Venture Agreement,

24

Samek confirmed this critical deal point: AEW minimum equity multiple [would be] 1.75 and that

25

if Neil monetizes all of AEWs investment within 5 years, then [Neil] will keep all proceeds above

26 AEWs 24% annual return. A copy of the May 19, 2010 e-mail is attached hereto as Exhibit A.
27

22.

28

The Joint Venture Agreement.

a.

278950.2

At Sameks suggestion, NMS and AEW engaged DLA to draft the agreement
10
THIRD AMENDED COMPLAINT

by which the parties would operate, which took the form of a Limited Liability Company Agreement

2 for the limited liability company formed for the purpose of carrying out the Joint Venture, called P6
3

LA MF Holdings I, LLC.

b.

A Joint Venture Agreement was drafted; and, on or about September 8,2010,

5 Neil was given the signature pages electronically, which he signed on behalf of the Operating
6

Member. A copy of the Joint Venture Agreement is attached hereto as Exhibit B. A new version,

Version 2, was created by AEW (Samek) shortly thereafter to correct a mistake in Version 1

relating to Article 11, as explained below. Thereafter, at least two more versions ofthe JVA, Version

3 and Version 4, were created by AEW, without Plaintiffs knowledge or consent. None of these

10 became effective; none was executed and delivered by all of the Members of the Joint Venture, as
11

required by Section 15.10 of the JVA.

12

13

c.

Insofar as this case is concerned, the important portion of the Joint Venture

Agreement is Section 6, which details the manner in which Net Operating Cash Flow and Net

14 Capital Proceeds would be distributed to the members of the Joint Venture and the amount that

~ ~

15

would be required to monetize, or take-out, the Investor Member (or AEWs investment). Insofar as

16

the monetization provision in Section 6 is concerned, all versions of the Joint Venture Agreement

17

are the same; and, therefore, it makes no difference which version of the Joint Venture Agreement

18

controlled when Neil advised AEW in 2013 that he wanted to exercise his right to take-out or

19

monetize AEW.

20

d.

Section 6.1(b) of the JVA includes what is referred to as the Waterfall,

21

outlining how distributions are to occur. The Waterfall includes seven different levels, all of which

22

together constitute a formula for distributing cash flow generated from operations of the Joint Venture

23

properties and from capital transactions, such as a refinancing or sale ofthe Joint Ventures properties.

24 Before proceeding to the last level, i.e., the seventh level, the Investor Member (AEW) must first
25

receive the greater of: (a) an IRR of 24%, or (b) 1.75 times its invested capital.

26

e.

Section 6.1 (b)(vii) contains the critical last level of the Waterfall. Specifically,

27

it provides that if the Investor Member receives all amounts it is entitled to receive under [the first six

28

levels of the Waterfall] within five (5) years from the date hereof, one hundred percent of the cash
278950.2

11
THIRD AMENDED COMPLAINT

flow and capital proceeds shall be distributed to the Operating Member. The purpose and effect of

2 this provision were to confirm the take-out terms, or monetization feature, on which Neil and Samek
3

had agreed and that had been confirmed in Sameks e-mail of May 19, 2010. The AEW Defendants

4 knew that Plaintiffs understood that this is how the Joint Venture Agreement, including Section 6,
5 would work. Plaintiffs would not have entered into the Joint Venture Agreement without that
6 understanding.
f.

The AEW Defendants own internal projections set forth below which are an

admission by the AEW Defendants show that if the Investor Member received the greater of an IRR

of 24% or 1.75 times its invested capital, it would be zeroed out and not receive any farther

10 distributions or economic benefit from the Joint Venture. This was the parties deal and intent.
11
12
C-

~O

-~

C?

,d,

13

~~M~q

16

17

100%
S0%
65%
0%

Pcrcan~eorpme~c4t. dlfldhtted to 17% 1R1

Icrccnlflc alpmeccth dI~tribuied to Z4% IRP
Pcrn~ofrntce41mb*dsbavc 24%IRJ

14
15

-J

Pcrcenmgcofpmcocthdi~tributedto 12% IRF

g.

(1%
20%
35%
100%

In Section 11, the JVA also includes whats called a shotgun Buy/Sell

feature. It permits the Members to provide a Buy/Sell Offer Notice and, in the Notice, to specify a
Buy/Sell Value, in which case the receiving Member must either permit the noticing Member to
purchase the receiving Members membership interest in the Joint Venture, or it must purchase the

18

noticing Members interest. It is not implicated here, because Neil, in 2013, exercise his right under

19

Section 6 of the JVA to monetize, or take-out, AEW after three years. AEW refused Neils tender in

20

2013 and thereby breached and repudiated Section 6 of the Joint Venture Agreement.

21

h.

In its efforts to cheat and malign Neil, and in violation of law, AEW has made

22

false and scurrilous allegations of forgery relating to the Joint Venture Agreement all a smokescreen

23

to deflect its own wrongdoing.

24

23.

25

Transfer Of Properties To The Joint Venture.

a.

In October2010, Neil transferred to the Joint Venture his interest in the entity,

26 NMS Broadway, LP, that owned a real estate project located on Broadway in Santa Monica, for
27

approximately $4.3 million. The fair market value of the property was over $10 million.

28

encouraging Neil to make the transfer, Samek told Neil that because ofNeils right per Section 6, and
278950.2

12
THIRD AMENDED COMPLAINT

In

his plan to take-out AEW, Neil could transfer the property for zero dollars, it would make no

2 difference in the end, because a transfer of this nature would be a win-win for both the Operating
3

Member and Investor Member in that it would allow the venture to diversify and expand its

4 investments.
5

b.

In November 2010, Neil authorized and arranged for Lincoln Studios, LLC to

6 transfer its interest in a real estate project located at 1447 Lincoln Boulevard, Santa Monica,
7

California to the Joint Venture for $8.97 million.

approximately $15 million.

c.

The fair market value of the property was

In January2011, Neil authorized and arranged for 9901 LUXE LLC to transfer

10 its interest in the real estate project located at 9901 Washington, Los Angeles, California to the Joint
11

Venture for $12 million. The fair market value of the property was approximately $25 million.

12
13

d.

In January 2012, the Joint Venture purchased what the parties have referred to

as the 15th and Broadway Properties to the Joint Venture. Samek induced Neil to contribute, or have

14 one of his companies contribute, approximately $1.5 million toward the purchase price without
15 receiving a capital contribution credit. Samek told Neil that he could not get approval for the
16
~

acquisition unless it was handled in this way. Samek explained that, in light of Neils right and intent

17 to monetize AEW per Section 6, it made no difference to Neil whether or not he would receive credit

18

for the $1.5 million contribution.

19

e.

In March 2012, Neil authorized and arranged for NMSLUXE375, LLC and

20 NMSLUXE41 5, LLC to transfer their interests in the real estate project located at 375 N. La Cienega,
21

Los Angeles, California to the Joint Venture for $11 million. The fair market value of the property

22 was approximately $21 million.

23

f.

Each time Neil transferred a property into the Joint Venture, an Amendment to

24 the Joint Venture Agreement was entered into by Neil/NMS and AEW. Several of the properties were
25

transferred into the Joint Venture at pre-entitlement, below-market valuations.

Copies of the

26 Amendments to the Joint Venture Agreement are attached hereto as Exhibit C.

27

g.

All of these transactions were induced by SamekJAEW, who represented to

28 Neil that it would not affect him because of his take-out right per Section 6; and would enable more
278950.2

13
THIRD AMENDED COMPLAINT

investment and support an expanded portfolio, and thus, in the end, serve Neils interests.

2
3

24.

Guarantees. After formation of the Joint Venture, the Trust, Neil and Margot executed

and affirmed guarantees of various financial obligations of the Joint Venture or its subsidiaries,

4 including loans obtained from third-party financial institutions to ffind the development of Joint
5 Venture projects. This occurred on or about December 9, 2010, April 13, 2011, July 27, 2011,
6

September 27, 2011, January 9,2012, and June 1,2012. They did this because of the take-out, or

7 monetization, provision in Section 6.1 permitting them to take-out AEW within five years.
8

25.

Confinnation Of The Monetization Feature.

On multiple occasions after the Joint

9 Venture was fonned, Samek confirmed to Neil that he had the right to monetize, or take-out, AEW
10 provided that AEW received the greater of 1.75 times its invested capital and a 24% IRR; and that he
11

understood that Neil would exercise that right at or soon after the three-year anniversary of the

12 formation. This point was discussed at meetings on or about, or in: (a) September 2010;
13
~ ~

Qis

(b) November 2010; (c) January 2011; (d) August 2011; (e) early September 2011;

14 2011; (g) January2012; (h) May2012; and (i) August 2012, among others.
15

26.

16
~

(0 November

Notice Of Intent To Take-Out AEW And Related Communications.

a.

On June 26, 2013, Neil sent a letter to Samek. He stated therein that, under

17

Section 6(b) of the Joint Venture Agreement, the Investor Members economic interest in the Joint

18

Venture would become zero if, within five years of the formation of the Joint Venture, the Investor

19 Member had received 1.75 times its invested capital and a 24% IRR; and that they had previously
20 discussed cleaning up the Joint Venture Agreement to provide for the Investor Members
21

withdrawal under these circumstances. Neil suggested this be accomplished in a single transaction

22 whereby the Investor Member would receive everything to which it was entitled under Section 6 and
23

would thereupon withdraw as a member of the Joint Venture. A copy of Neils letter is attached

24 hereto as Exhibit D.
25

b.

On August 2, 2013, Neil sent another letter to Samek advising him that NMS

26 had received multiple offers to refinance the Joint Ventures properties. Neil noted that the proceeds
27

from the refinancing would provide a significant portion, if not all, of the funds that would be needed

28

to enable the Investor Member to receive a return of its capital contributions and the monetization
278950.2

14
THIRD AMENDED COMPLAINT

amount to which it would be entitled under Section 6.

2
3

c.

As Neil advised Samek, during this time period, Neil had liquidated assets in

his personal portfolio in order to raise the funds that would be needed to monetize AEW. Samek did

4 not respond. He did not deny, or dispute in any way, that Neil/NMS had the right to monetize, or
5 take-out, AEW. In fact, by the end of October 2013, Samek and AEW still had not denied that the
6

Operating Member had the right to monetize AEW.

d.

On November 18, 2013, Neil sent an e-mail to Samek inquiring, among other

8 things, as to why AEW had not responded to his letters and reiterating that the Operating Member had
9 a right to acquire the Investor Members interest in the Joint Venture by monetizing it as provided in
10

Section 6 of the LLC Agreement.

11

e.

On or about November22, 2013, Samek sent Neil an e-mail stating, for the first

12 time ever, that the Operating Member did not have the right to acquire the Investor Members interest
13
~

under the Joint Venture Agreement, but he did not deny that Neil/NMS had the right to monetize

14 AEW pursuant to Section 6. Samek also falsely accused Neil of fabricating Version 2 of the JVA and

0.13

15 threatened to remove NMS Capital as the Operating Member of the Joint Venture.
Ls-J

16

f.

On December 11, 2013, Neil sent a text message to Samek, again asking him

17 why AEW was not responding to his points about the right to monetize AEW under Section 6 of the
18

Joint Venture Agreement. Specifically, Neil said:

19

I dont understand why you told me that you will tell the truth when
asked, but keep referring to AEW attorneys and playing games and not
talking to me regarding the agreement we made re 1.75/24% Buy-out.

20
21

I never imagined that institutional partners can act this way. The truth
will come out. Many people where (sic) present during our meetings
and know what you promised for the last few years. You where (sic)
even discussing with me doing a deal at 20% per a year on Lincoln in
case you forgot. You never told me why AEW is not living up to the
deal we made. Let me know. Thanks.

22
23
24
25

Samek did not respond to Neil.

26

g.

On December 13,2013, Neil sent Samek another text, stating: Why cant you

27 tell the truth regarding the buy-out deal we made? Is your job and potentially more profit more
28

important to you then (sic) truth and integrity. Again, although a statement ofthis nature warranted a
278950.2

15
THIRD AMENDED COMPLMNT

response, Samek gave none.

2
3

h.

Plaintiffs did not suspect or have any reason to suspect that they had been

defrauded, until November 2013, when Samek, acting on behalf of the Investor Member, for the first

4 time, repudiated Section 6 of the Joint Venture Agreement by claiming that the Operating Member did
5

not have the right to acquire the Investor Members interest.

27.

Subsequent Developments.
a.

AEW Attempts To Concoct Defaults. Afler it became clear that Neil, through

NMS Capital, was intent on exercising his right to monetize AEWs investment, AEW decided to put

into high gear its scheme to deprive Neil of that right and to misappropriate Neils interest in the Joint

10 Venture properties. Specifically, it fabricated false defaults on the part of the Operating Member for
11

the purpose of seeking to remove NMS Capital as the Operating Member, as explained below:

12

i.

Samek contended that Neil had fabricated a false version of the Joint

~1

C.i.a

CD?

13

Venture Agreement and that doing so constituted a default and Removal Event under the Joint

14 Venture Agreement. As Samek knew, the contention was false. (It bears restating that, insofar as the
15

provision on which Neil relied in providing notice to AEW of his intent to monetize AEW is

16

concerned, all versions of the Joint Venture Agreement are the same, so Neil would have no reason or

17 motive to do this.)
18

ii.

In January2015, AEW falsely claimed that the Joint Venture had been

19 randomly selected for a year end fund audit to be conducted in January 2015 on behalf ofAEW
20 PVI (Partners VI, L.P. and AEW Partners VI, Inc.). It selected Grobstein Teeple LLP (Grobstein)
21

to be the auditor and instructed Grobstein to do anything that it could to fabricate alleged defaults by

22

the Operating Member, even though it knew that there was none. During the course of the audit,

23

and in aid of the scheme, Grobstein imposed unreasonable demands on the Operating Member for

24 documents and then falsely claimed that it was not cooperating with those demands; and it falsely
25

claimed that NMS had been involved in the misappropriation of Joint Venture funds, even though

26

nothing of the sort had occurred.

27
28

iii.

As a result, on March 4,2015, Samek sent a letter to Neil declaring the

Operating Member to be in default under the Joint Venture Agreement. As Samek knew, there was no
278950.2

16
THIRD AMENDED COMPLAINT

such default. The letter was a ruse and is of no force or effect.

b.

AEW Refuses To Consider Opportunities To Sell Properties.

i.

During 2014 and 2015, AEW received multiple offers and letters of

4 interest from third parties relating to one or more of the Joint Ventures projects, including, but not
5

necessarily limited to: (a) a letter of interest received from a third party on February 27, 2015

concerning the purchase of the Joint Ventures portfolio for $500 million; (b) a March 6, 2015 offer

from a third party to purchase the entire portfolio for $501 million; and (c) an offer received on

April 27, 2015 from a third party to purchase the La Cienega project for $74 million. In addition,

9 Neil, either directly or on behalf of an affiliate, made multiple offers to acquire the Joint Ventures
10 portfolio at amounts in excess of the third-party offers. AEW ignored or rejected all of these
11

opportunities. It did so in bad faith, in violation of its contractual obligations, and in violation of its

12

fiduciary duties, and, in particular, to enable it to contend that its investment had not been

13

monetized.

14

ii.

15

NMSs Purchase Offers.

(1)

On April 17, 2015, the Operating Member made an

16 unconditional offer to buy the entire portfolio for $520 million. On April 27,2015, Shekhter sent a
~

17

letter to Sarnek stating that if the Investor Member would not accept or even respond to the Operating

18

Members $520 million offer, the Investor Member should purchase the portfolio for that amount, i.e.,

19

$520 million. AEW refused in bad faith.

20
21

(2)

In June, July and August 2015, the Operating Member made

unconditional offers to buy the portfolio, all for amounts significantly in excess of the fair market

22 value of the portfolio. AEW and the Investor Member ignored and/or rejected the offers in bad faith
23

and for the same reasons that it earlier ignored or rejected the other offers.

24

c.

AEW Refuses To Refinance The Properties. In January 2015, the Operating

25

Member recommended to AEW that the Joint Venture properties be refinanced, in part because

26

construction financing was about to mature. AEW ignored these recommendations in bad faith.

27

d.

28

Purported Removal.
i.

278950.2

On August 28, 2015, AEW requested that NMS Capital execute, as the
17
THIRD AMENDED COMPLAINT

Operating Member, a loan modification agreement relating to the financing for one ofthe properties in

2 the portfolio. AEW knew that the lender, KeyBank National Association, N.A. (KeyBank), would
3

not complete the financing without NMS Capital signing the agreement as the Operating Member.

4 NMS advised AEW that, in light of AEWs threat to remove NMS Capital as the Operating Member,
5

it would not have NMS Capital sign the loan modification agreement as the Operating Member

6 without a clean, unconditional written instruction from AEW, i.e., one that did not reserve any right
7 that AEW had to remove NMS Capital as the Operating Member based on anything that had occurred
8

to date. AEW provided such an instruction to NMS, and NMS complied with the instruction.

ii.

Almost immediately after NMS Capital signed the loan modification

10 agreement with KeyBank, AEW reneged on its commitment and sent it a notice purporting to remove
N

11

NMS Capital as the Operating Member, just days before the five-year anniversary of the formation of

12 the Joint Venture. None of the grounds cited in the letter for the removal had any legitimate factual or
13

legal basis, as AEW knew. AEW purported to remove NMS Capital as the Operating Member in bad

14 faith and for the purpose of misappropriating its interests in the Joint Venture and its rights as the
15

Operating Member. AEW purported to attempt to remove NMS Capital when it clearly knew that

16 NMS Capital had the right to monetize AEW pursuant to Section 6 of the Joint Venture Agreement.
17

28.

AEW Repudiates NMS Capitals Buy/Sell Rights. In October 2015, Neil contacted

18

Samek. He pointed out that more than five years had passed since the formation of the Joint Venture;

19

and, therefore, regardless of NMS Capitals rights under Section 6 of the Joint Venture Agreement,

20 NMS Capital had the right to serve a Buy/Sell Notice at that time regardless of which version of the
21

Joint Venture Agreement was the operative agreement. Neil pointed out that it would be very time

22

consuming and costly to make arrangements to be in a position to complete a purchase of the Investor

23

Members interest and, therefore, inquired as to what AEWs position was regarding NMS Capitals

24

Buy/Sell rights. Sameks bad faith response was that AEW had removed NMS Capital as the

25

Operating Member and, therefore, that NMS no longer had any such rights.

26

29.

AEW Engages In Legal Thuggery.

In 2015, AEW made false and baseless

27

allegations of forgery relating to the Joint Venture Agreement, preventing and obfuscating discovery,

28

and interfering with witnesses. AEW operated in what a Court has described as a culture of
278950.2

18
THIRD AMENDED COMPLAINT

discovery abuse.

30.

NMS Reiterates Its June 2013 Offers Of Tender. In December 2015, Neil sent a letter

to Samek/AEW reiterating and confirming NMS Capitals June 26,2013 and August 2,2013 offers to

4 fully monetize AEWs investment in the Joint Venture pursuant to Section 6 of the JVA. Neil wrote:
5

This letter reiterates and confirms my (NMS) previous offers of tender.

Those offers were made by way of letters to you (AEW) dated June 26,
2013 and August 2, 2013, through which I offered to fully monetize

6
7

AEWs investment pursuant to Section 6.1 of our Joint Venture

Agreement. My offers of performance provide AEW with all of the
money to which it is entitled under Section 6.1a 24% yearly return and
1.75 times its invested capital of approximately $60 million. As aresult,
and as specified in Section 6.1, AEWs economic interest in the Joint
Venture will go to zero.

8
9
10

In my letters, I suggested, along with my offers of repayment, a way in

which AEW could withdraw from the Joint Venture, if it so desired. I

11
12
~

6 ~

didnt think AEW would want to stay in the JV if it had no economic

interest. I was trying to accommodate AEW. My letters are attached
here as Exhibit 1 and Exhibit 2.

13

~!

14

~E~

15

You did not object to the amount, form or timeliness of my tender of

performance. Instead, in a November 22, 2013 email, attached as
Exhibits 3, you replied that [tjhe members rights and obligations are

16

spelled out in the LLC agreement and do not include the buy-out right
that you contend that you have. While I suggested a buy-out for your
consideration and convenience, my offer was to fully monetize AEW for
its investment in the JV as provided in Section 6.1.

17
18

19

I want to repay AEW in full, now. Its that simple. If you dont want to
transfer your interest, and want to stay in the JV, thats up to you. I

20

suggested because I think it makes sense.

21

By this letter, I am reiterating and confirming my previous tender.

Weve done the calculation and, based thereon, will pay AEW the sum
of$ 106,256,500; and there will be an accounting of all contributions and
distributions. Attached as Exhibit 4 is the calculation based on Section
6.1 of the JV Agreement. For your information, I also enclose as Exhibit
5 commitments from Cantor Commercial Real Estate offering to provide
me $290 million in funding, more than enough to fully monetize AEWs

22
23
24
25

investment at the agreed-upon rate. Also enclosed as Exhibit 6 are

materials confirming Cantors ability to perform; it is a multi-billion
dollar company.

26
27

In sum, I am ready, willing and able to pay AEW every penny required
to monetize AEW per the terms of the Joint Venture Agreement. Please
send wire instructions so I can send AEW this money. I trust AEWs

28
278950.2

19
THIRD AMENDED COMPLAINT

investors will be pleased with receiving a 24% annual return on their

money.
Samek/AEW did not respond to Neils letter. A copy of the December 22, 2015 letter

31.

is attached hereto as Exhibit E.

32.
6

and attempted to monetize, or take-out, AEW and get his properties back. AEW has stonewalled,
causing Plaintiffs to sustain hundreds of millions of dollars in damages.

FIRST CAUSE OF ACTION FOR BREACH OF CONTRACT (RE SECTION 6 OF THE

JOINT VENTURE AGREEMENT)

10

(By NMS Capital against the Investor Member and Does 1-25)

11

c~

~
O<D~
z
~~

Neil has done everything he can to obtain the benefit of his bargain. He has offered

Plaintiffs incorporate by reference herein the preceding paragi~aphs of this Complaint,

12 including subparagraphs.
34.
NMS Capital complied with all of its obligations under the Joint Venture Agreement
13
except insofar as such compliance was excused or prevented by the AEW Defendants.
14
35.
The Joint Venture Agreement prohibits the Investor Member from taking any act in
15
16 contravention of the Joint Venture Agreement. The Investor Member breached its obligations under
17 the Joint Venture Agreement, by refusing to accept, and rejecting, Neils offers, which he made on
18 behalf ofNMS Capital, to provide sufficient funds to monetize, or take-out, the Investor Members
19

investment pursuant to Section 6 of the Joint Venture Agreement.

20
21

36.

The Investor Member was entitled to receive the greater of: (a) 1.75 times its net

invested capital, or (b) a 24% IRR, i.e., approximately $105 million. By refusing to accept, and by

22 repudiating its obligation to accept, this sum, the Investor Member violated its obligations and the
23

Operating Members rights under Section 6 of the Joint Venture Agreement. The Investor Member

24 had a duty to accept the Operating Members offer of tender of$ 106 million to the Investor Member
25

pursuant to the terms of the Joint Venture Agreement.

26

37.

All breaches of contract alleged herein were made in bad faith.

27

38.

NMS Capital requests that the Court enforce its June 26, 2013 and August 2, 2013

28

offers of tender to monetize AEWs investment in the Joint Venture pursuant to Section 6 ofthe JVA.
278950.2

20
THIRD AMENDED COMPLAINT

39.
2

in damages, the specific amount of which will be established at trial.

SECOND CAUSE OF ACTION FOR BREACH OF CONTRACT (RE OTHER

PROVISIONS IN THE JOINT VENTURE AGREEMENT)

(By NMS Capital against the Investor Member and Does 1-25)

6
7

40.

Plaintiffs incorporate by reference herein the preceding paragraphs of this Complaint,

including subparagraphs.

41.

NMS Capital complied with all of its obligations under the Joint Venture Agreement

except insofar as such compliance was excused or prevented by the AEW Defendants.

10

42.

The Joint Venture Agreement prohibits the Investor Member from taking any act in

11

contravention of the Joint Venture Agreement. The Investor Member breached its obligations under

12

the Joint Venture Agreement in various ways, including but not limited to, the breaches identified

13

below (in addition to the breach in the First Cause of Action):

14

As a result of the foregoing, NMS Capital has suffered hundreds of millions of dollars

a.

By declaring NMS Capital to be in default of its obligations as the Operating

15

Member when it was not in default, thus wrongfully repudiating and violating the Operating

16

Members rights under the Joint Venture Agreement;

17

b.

By purporting to remove NMS Capital as the Operating Member despite the

18

absence of any valid factual or legal basis for the removal, thus repudiating and violating the

19

Operating Members rights under the Joint Venture Agreement;

20
21

c.
it did not make;

22
23

By insisting that it be given, and by taking, credit for capital contributions that

d.

By not giving credit to NMS Capital for capital contributions it made to the

e.

By causing the Joint Venture to make distributions directly to an affiliate in

Joint Venture;

24
25

violation of a provision in the Joint Venture Agreement requiring that distributions be made only to

26

the Members of the Joint Venture and doing so for the purpose of evading regulatory and tax

27 requirements;
28

f.
278950.2

By wrongfully appropriating Joint Venture funds to conduct an audit that it was

21
THIRD AMENDED COMPLAINT

not entitled to conduct and then causing it to be conducted in bad faith and for the purpose of

fabricating a basis to remove NMS Capital as the Operating Member and without having any basis for

believing that an audit was legitimately needed;

4
5

g.

By repudiating NMS Capitals right to serve a Buy/Sell Notice on the factually

and legally baseless grounds it had been removed as the Operating Member;

h.

By exercising self-help to usurp management of the Joint Venture properties

7 from NMS; and

8

i.

By causing the Joint Venture to file false tax returns, using another entitys tax

9 identification number, for purposes of perpetuating its tax avoidance scheme and thereby subjecting
10 the Joint Venture to potential tax liabilities.
11

43.

By these breaches, the Investor Member violated its obligations and the Operating

12 Members rights under Sections 4, 5, 6, 7, 8, 10 and 14 of the Joint Venture Agreement.

13

44.

As a result of the foregoing, NMS Capital has suffered hundreds of millions of dollars

14 in damages, the specific amount of which will be established at trial. In addition, the Investor

~P
~ ~

15 Member has been unjustly enriched by millions of dollars contributed by NMS Capital that the
16 Investor Member has never accounted for. NMS Capital seeks restitution and disgorgement of those
17

funds by which the Investor Member was unjustly enriched.

18
19

45.

In light of the Investor Members filing of fraudulent tax returns, NMS Capital also

seeks indemnification for any tax liability that results therefrom.

20

THIRD CAUSE OF ACTION FOR FRAUD

21

(By all Plaintiffs against the AEW Entities, Samek, Davidson, and Does 1-25)

22
23

46.

including subparagraphs.

24
25

Plaintiffs incorporate by reference herein the preceding paragraphs of this Complaint,

47.

This Cause of Action concerns statements made by the AEW Defendants during the

negotiations for the Joint Venture Agreement and after the Joint Venture Agreement was executed.

26

48.

The AEW Defendants conspired with each other to defraud Plaintiffs in multiple

27 ways, including the following:

28

a.
278950.2

During the negotiations relating to the Joint Venture, the AEW Defendants
22
THIRD AMENDED COMPLAINT

knowingly made materially false or misleading representations to Plaintiffs about their joint venture

2 program and, in particular, the Operating Members right to monetize the Investor Member; and
3

b.

After the Joint Venture Agreement was executed, and in connection with the

4 transfer of properties into the Joint Venture, the AEW Defendants fraudulently induced Plaintiffs to
5

transfer several properties into the Joint Venture at pre-entitlement, below-market valuations, based on

6 the knowingly false and highly material representation that the valuations did not matter and would
7

enable the venture to obtain more money.

49.

The AEW Defendants made their materially false or misleading representations, as

alleged above, knowing that they were false or misleading, with the intent and having the effect of

10

deceiving Plaintiffs, with the expectation that Plaintiffs would rely on them to their detriment, and,

11

after making them, with the knowledge that Plaintiffs had, in fact, relied on them and had, in fact,

12 been deceived.
13

The AEW Defendants conducted themselves with malice, for the purpose of

oppressing Plaintiffs and with utter disregard for the devastating consequences of their actions, all to

14 enrich themselves at Plaintiffs expense.

a

15

50.

Plaintiffs reasonably and innocently relied on the AEW Defendants knowingly false

16 representations to their detriment by, among other things, entering into the Joint Venture, executing
~

17

the Joint Venture Agreement, expending a substantial amount of time undertaking the duties of the

18

Operating Member, transferring their assets to the Joint Venture, and arranging to complete the

19 monetization and/or take-out of the Investor Member.

20

51.

21

Code section 1572.

22

52.

23

The conduct of the AEW Defendants amounts to actual fraud under California Civil

As a result of the fraudulent conduct, as alleged above, Plaintiffs have suffered

hundreds of millions of dollars in damages, the specific amount of which will be established at trial.

24

53.

In light of the fraudulent, malicious and oppressive nature of the fraudulent conduct, as

25

alleged above, Plaintiffs are entitled to recover exemplary damages in an amount sufficient to punish

26

and/or deter the AEW Defendants.

27
28
278950.2

23
THIRD AMENDED COMPLAINT

FOURTH CAUSE OF ACTION FOR FALSE PROMISE

2

(By NMS Capital against the Investor Member and Does 1-25)

54.

Plaintiffs incorporate by reference herein the preceding paragraphs of this Complaint,

4 including subparagraphs.
5
6

55.

The Investor Member knowingly made false promises and undertook obligations with

an intent to defraud NMS Capital, including but not limited to:

a.

The Investor Member made promises and undertook obligations in the Joint

8 Venture Agreement relating to the monetization feature, NMS Capitals take-out right, and NMS
9 Capitals buy/sell right that it did not intend to perform or honor;
10
11

b.

The Investor Member entered into the Joint Venture Agreement with the

intention of repudiating and refusing to comply with its terms, including, but not limited to, those

12 relating to monetization in Section 6 and the buy/sell provision in Section 11; and
13
c.
The AEW Defendants knew that Plaintiffs understood the Joint Venture

14 Agreement to mean what Samek had represented would be the case

to wit, that the Operating

01St

~ I!

~! ~

15 Member had the right to monetize the Investor Member by providing for the Investor Member to
16 receive, within five years of the creation of the Joint Venture, the greater of 1.75 times its invested
17

capital and a 24% IRR; the AEW Defendants also knew and intended that, if the Operating Member

18

attempted to exercise that right, they would contend that the Operating Member had no such right

19 under the Joint Venture Agreement; and the AEW Defendants concealed this fact from Plaintiffs for
20 the purpose of deceiving them and the Operating Member to enter into the Joint Venture, and with
21

knowledge of the fact that Plaintiffs had been deceived.

22
23

56.

of inducing NMS Capital to rely upon them and, in particular, to enter into the Joint Venture.

24
25

The AEW Defendants made these false promises for the purpose and having the effect

57.

Plaintiffs were unaware ofthe Investor Members intention not to perfonri the promises

that it made and not to honor the obligations that it undertook in the Joint Venture Agreement, and

26 NMS Capital acted or refrained from acting in reliance upon them.

27
28

58.

NMS Capital reasonably and innocently relied to its detriment on the Investor

Members promises and undertakings, as alleged above, by, among other things, entering into the
278950.2

24
THIRD AMENDED COMPLAINT

Joint Venture, executing the Joint Venture Agreement, expending a substantial amount of time

2 undertaking the duties of the Operating Member, transferring or arranging for the transfer of assets to
3

the Joint Venture, and arranging to complete the monetization andlor take-out ofthe Investor Member.

59.

Code section 1572.

60.

As a result of the fraudulent conduct, as alleged above, NMS Capital has suffered

hundreds of millions of dollars in damages, the specific amount of which will be established at trial.

8
9

The conduct of the Investor Member amounts to actual fraud under California Civil

61.

In light of the fraudulent, malicious and oppressive nature of the conduct, as alleged

above, NMS Capital is entitled to recover exemplary damages in an amount sufficient to punish and/or

10 deter the Investor Member.

11

FIFTH CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY

12

(By NMS Capital against the Investor Member, Samek and Does 1-25)

13

62.

Plaintiffs incorporate by reference herein the preceding paragraphs of this Complaint,

14 including subparagraphs.

2~
~ ~:

15

63.

The AEW Defendants named in this cause of action owed fiduciary duties to NMS

16

Capital because they possessed by virtue of, among other things, the tents of the Joint Venture

17

Agreement, and because they exercised, total control over the Joint Venture and, therefore, over the

18

massive investment that NMS Capital had made; NMS Capitals principals, and Neil in particular,

19

reposed trust and confidence in AEW and Samek, and AEW and Samek accepted the entrustment; the

20 relationship, by its very nature, was one of trust and confidence; and during the course of their
21

relationship, the relationship between Neil and Samek evolved from a purely business relationship to,

22

as Neil had been led to perceive it, one of friendship.

23

64.

The AEW Defendants named in this cause of action knowingly and in bad faith

24 breached their fiduciary duties to NMS Capital by doing the things alleged in the preceding Causes of
25

Action and by intentionally mismanaging and operating the Joint Venture in such a way as to diminish

26 NMS Capitals interest in the Joint Venture and to misappropriate the Joint Ventures assets for
27

themselves and to the detriment of NMS Capital.

28

65.
278950.2

As a result of the foregoing, NMS Capital has suffered hundreds of millions of dollars
25
THIRD AMENDED COMPLAINT

in damages, the specific amount of which will be established at trial.

2
3

66.

In light of the fraudulent, malicious and oppressive nature of the conduct, as alleged

above, Plaintiffs are entitled to recover exemplary damages in an amount sufficient to punish and/or

4 deter.
5

SIXTH CAUSE OF ACTION FOR CONSTRUCTIVE FRAUD

(By NMS Capital against the Investor Member, Samek and Does 1-25)

7
8

67.

Plaintiffs incorporate by reference herein the preceding paragraphs of this Complaint,

including subparagraphs.

68.

The AEW Defendants named in this cause of action owed duties to NMS Capital

10 because they possessed by virtue of, among other things, the teniis of the Joint Venture Agreement,
11

and they exercised total control over the Joint Venture and, therefore, over the massive investment that

12 NMS Capital had made; NMS Capitals principals, and Neil in particular, reposed trust and
13

confidence in AEW and Samek, and AEW and Samek accepted the entrustment; the relationship, by

14 its very nature, was one of trust and confidence; and during the course of their relationship, the

Qis
5

15

relationship between Neil and Samek evolved from a purely business relationship to, as Neil had been

16

led to perceive it, one of friendship.

~O5~

17

69.

The AEW Defendants named in this cause of action knowingly and in bad faith

18 breached their fiduciary duties to NMS Capital by doing the things alleged in the preceding Causes of
19 Action and by intentionally mismanaging and operating the Joint Venture in such a way as to diminish
20 NMS Capitals interest in the Joint Venture and to misappropriate the Joint Ventures assets for
21

themselves and to the detriment of NMS Capital.

22
23

70.

As a result of the foregoing, NMS Capital has suffered hundreds of millions of dollars

in damages, the specific amount of which will be established at trial.

24

71.

In light of the fraudulent, malicious and oppressive nature of the conduct, as alleged

25

above, Plaintiffs are entitled to recover exemplary damages in an amount sufficient to punish and/or

26

deter.

27
28
278950.2

26
THIRD AMENDED COMPLANT

PRAYER FOR RELIEF

2

WHEREFORE, Plaintiffs pray that they be awarded:

1.

Enforcement of NMS Capitals June 26, 2013 and August 2, 2013 offers of tender

4 to monetize AEWs investment in the Joint Venture pursuant to Section 6 of the JVA;
5

2.

Actual damages according to proof believed to be in excess of $100 million;

3.

Pre- and post-judgment interest at the maximum rate permitted by law;

4.

Costs of the suit and litigation expenses, including attorneys fees;

5.

Exemplary and punitive damages according to proof;

6.

Indemnification by the Investor Member for any potential tax liability to NMS

10 Capital for the Investor Members filing of fraudulent tax returns; and
11

7.

Such other and further relief as the Court deems just and proper.

12
5 ~

13

~LH

14

DATED: January 13, 2016

15

MILLER BARONDESS, LLP

By:

16

LOUISR.MILLER
Attorneys for Plaintiffs

2789502

27
THIRD AMENDED COMPLAINT

1
2

DEMAND FOR JURY TRIAL

Plaintiffs hereby emand a trial by jury.

3
4 DATED: January 13, 2016

MILLER BARONDESS, LLP

At

5
6
7

By:

/0
LOUIS R. MILLER
Attorneys for Plaintiffs

8
9
10
11
0
0

12

6D

II

j>~
2

13
14
15

c~

~
~

17

18
19
20
21
22
23
24
25
26
27
28
28
DEMAND FOR JURY TRIAL