2 wey ane 10 i 12 13, 14 15 16 17 18 19 2B m4 25 26 28 COPY LOUIS R. MILLER (State Bar No. 54141) smiller@ millerbarondess.com JAMES GOLDMAN (State Bar No. 57127) jgoldman @millerbarondess.com ‘A, SASHA FRID (State Bar No. 216800) sfrid @millerbarondess.com JASON H. TOKORO (State Bar No. 252345) jtokoro@millerbarondess.com JAN 15 2016 ‘MILLER BARONDESS, LLP 7 1999 Avenue of the Stars, Suite 1000 Sher R Cre, Executive fier Cle Los Angeles, California $0067 By Darnetta Smith, Deputy Telephone: " (310) 352-4400 Facsimile: (310) 552-8400 STEVEN ZELIG (State Bar No. 94654) WLA Legal Services, Inc. 1543 7th Street, Third Floor Santa Monica, California 90401 GASE MANAGEMENT CONFERENCE Telephone: (310) 393-6702 - Facsimile: (310) 393-6703 way 8 4 9018 supce GERALD ROSENBERG Date : Attorneys for Plaintiff Teor NEIL SHEKHTER SUPERIOR COURT OF THE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES, WEST STRICT NEIL SHEKHTER, CASE NO. #9259 Plaintiff, COMPLAINT FOR: v. (1) INTENTIONAL MISREPRESENTATIO! JESSE SHARF, (2) NEGLIGENT MISREPRESENTATION; Defendant, (3) CONCEALMENT; (4) CONSTRUCTIVE FRAUD (JURY TRIAL DEMANDED] 27678311 COMPLAINTMILLER BARONDESS, LLP Plaintiff Neil Shekhter (“Shekhter”) alleges as follows: INTRODUCTION 1. Defendant Jesse Sharf (“Sharf”) was a trusted friend and business advisor to Shekhter until he sold out Shekhter’s confidences and double-crossed Shekhter for his own personal gain, 2. Plaintiff Shekhter is a successful Los Angeles-based apartment building developer and owner through his company, NMS Properties, Inc. (“NMS”). Sharf is a business advisor and lawyer. Sharf assertively initiated a friendship and business relationship with Shekhter in 2011 Sharf told Shekhter that he could trust him and that he had his best interests in mind. In turn, Shekhter revealed sensitive data and information about his business to Sharf. Sharf advised and assisted Shekhter with his business plans and strategies, 3. While Sharf is a lawyer, this lawsuit is not about Sharf's legal skills, services or advice; nor is it about Sharf’s practice of law. Rather, this lawsuit is about Sharf’s dishonest and deceitful conduct in gaining the trust and confidence of, and obtaining critical confidential information from, Shekhter; and then funneling the information to a third party, as set forth below. 4, After ingratiating himself with Shekhter, Sharf sold oat Shekhter’s confidences to get work from AEW Capital Management, L.P. (“AEW”), one of the largest hedge funds in the world with over $60 billion in assets. Sharf was for all intents and purposes a double-agent. 5, Sharf obtained confidential information from Shekhter and passed it on to AEW. in return, AEW used Sharf’s law firm for legal services, thereby generating massive fees; and Sharf made 1 ions for himself in the process. 6. After Sharf provided AEW with Shekhter’s confidential information, AEW sought to appropriate for itself a valuable portfolio of properties that Shekhter developed over the years. Sharf concealed his passing of Shekhter's confidential information to AEW; continued to act as Shekhter's friend and advisor while simultaneously conveying Shekhter’s plans and thoughts to AEW; and affirmatively told Shekhter he was acting in his best interests, 7. Sharf committed fraud and breached his duties, causing damages to Shekhter believed to be in excess of $100 million. Sharf must be held responsible. aeT93.1 1 ‘COMPLAINTMILLER BARONDESS, LLP 27 28 PARTIES AND VENUE 8. Shekhter is, and at all times relevant to this Complaint was, a real estate developer and owner and operator of apartment buildings with offices in Santa Monica, California. Several of the apartment buildings owned and operated by Shekhter are located in Santa Monica, California, 9. Sharf is, and at all times relevant to this Complaint was, an individual residing in Santa Monica, California. 10. Sharf is subject to this Court's jurisdiction because, as alleged above, he resides in Santa Monica, California, Venue in this Court is proper because Sharf resides in Santa Monica and because the conduct alleged herein occurred, in large part, in Santa Monica, California. FACTS COMMON TO ALL CAUSES OF ACTIO) Sharf Ingratiates Himself with Shekhter 11, Inearly 2011, Sharf initiated a relationship with Shekhter. They met through the Jewish Federation and AIPAC. Sharf ingratiated himself with Shekhter by commending Shekhter on his chatitable work with the organizations. Sharf saw this as an opportunity. Sharf would continually call, text message and email Shekhter. 12. Initially, it appeared that Sharf wanted to get Shekhter as a client for bis firm. He constantly talked up the firm to Shekhter, Sharf repeatedly told Shekhter that he respected him and his xccomplishments; he offered to assist him in any way he could. 13, Throughout 2011 and 2012, Sharf invited Shekhter to charity functions, business events, real estate junkets, conferences and symposiums. Sharf would follow-up these invitations with emails advising Shekhter on what he should attend. He also recommended events where he for Shekhter to meet. Sharf held himself out as a resource, thought there were “good folks advisor and confidant to Shekhter 14, Sharf and Shekhter became friends, Sharf invited Shekhter to dinners and gave him tickets to sporting events. They went to dinners with their spouses; Sharf had Shekhter and his wife over at his house. 15, Sharf made it appear that he was a generous guy who shared common interests with 276793.11 2 ‘COMPLAINTMILLER BARONDESS, LLP Shekhter. He seemed to genuinely want to help Shekhter in his business endeavors. Shekhter viewed Sharf as his advisor and someone in whom he could place his trust and confidence. 16. Once Sharf secured Shekhter’s trust, he began (o inquire about Shekhter’s business and offer advice. Shekhter has extensive experience as a builder/developer of apartment buildings, but he was not experienced in financing. Sharf bragged about his connections and relationships with banks, lenders, investors and the like. Sharf told Shekhter that he would help him and that he could trust him. 17, Shekhter began to discuss his business ventures, needs and plans with Sharf. They talked about confidential matters pertaining to his business, plans and strategies, including those involving his joint venture with AEW. For example, in November 2011, Sharf referred an attorney to help Shekhter in a case. In May 2012, Sharf recommended a real estate lawyer who Shekhter hired as general counsel for his company. 18. Shekhter trusted Sharf and relied on his advice and counsel relating to financial matters. Sharf continually asked Shekhter about his business plans and offered to assist in any way he could. Sharf told Shekhter that he had his best interests in mind. As a result, Shekhter confided in Sharf about his business, providing him confidential information. B. Shar Becomes Shekhter’s Business Advisor and Confidant 19. Little did Shekhter know that starting in or around 2012, Sharf had sold out Shekhter to another client—AEW—a $60 billion hedge fund, far bigger than Shekhter’s business Sharf wanted to expand his firm's representation of AEW. This was the perfect opportunity for Sharf. He had something for AEW—confidential information from and about Shekhter. Sharf disclosed it to solidify his relationship with ABW. 20. In 2010, Shekhter and his company entered into a joint venture with ABW. The joint venture was effectively a high-priced $60 million loan from ABW. Shekhter was paying a 24% annual return on AEW’s investment. The money was used to develop apartment buildings in Santa Monica and on the Westside, Per the deal, Shekhter transferred properties to the joint venture for less than their fair market value; once Shekhter paid back AEW, he would get all the economic benefit, a6. 3 - ‘COMPLAINTMILLER BARONDESS, 1 21. From 2011 until 2013, at Sharf’s prompting, Shekhter repeatedly discussed the 2|| AEW joint venture with Sharf. Among other things, Shekhter told Sharf that he intended to 3 |} reacquite his properties by taking-out AEW’s interest in the joint venture around September 2013 4 || through re-financings and outside capital. Shekhter told Sharf, “I have a very expensive partner,” or words to that effect. Sharf asked specific questions about AEW and the deal and how Shekhter intended to take-out AEW. Sharf told Shekhter that he could help him refinance the properties; Sharf referred Shekhter to various real estate financers including Fortress, UBS, Bentall Kennedy, LP. Morgan, Rock Point Group, and Jamestown. 22. Shekhter did not know that Sharf was funneling Shekhter’s confidential 10 |] information and plans to AEW. Sharf double-crossed Shekhter while continuing to act as 11 |] Shekhter’s friend, assuring Shekhter he had Shekhter’s best interest in mind, 12 23, Shekhter and Shart’s friendship deepened as Sharf and Shekhter continued to 13 ]] socialize and attend events together. For example, Sharf asked Shekhter to participate in a 14 |] September 2012 Jewish Federation breakfast, where Sharf did a presentation in which he 15 || interviewed Shekhter about his life and business. In October 2012, Sharf arranged for Shekhter’s 16 |] son to meet James Ellis, Dean of the USC Marshall School of Business, the school Shekhter’s son 17]| was hoping to attend, And in the same month, Stacy Sharf, Sharf’s wife, invited Shekhter and his 18 ]] wife to a surprise birthday party for Shar. Sharf Betrays Shekhter 20 24, Sharf concealed from Shekhter that he was providing Shekhter’s confidences to 21 || AEW. Not knowing that Sharf was secretly doing this, Shekhter continued to discuss confidential 22 || matters with Sharf including details about his joint venture with AEW. Shekhter discussed 23 | specific provisions of the joint venture agreement with Sharf including the right to pay-back and 24 || take-out AEW pursuant to the agreement. Shekhter also talked to Sharf about the issues with the 25 || “buy-out” provision found in another section of the agreement. They talked about those 26 |} provisions, the rights Shekhter had under those provisions and what Shekhter understood them to 27] mean. Sharf disclosed those confidential discussions to AEW; and AEW, in turn, put forth a 28 || strategy to prevent Shekhter from asserting his legal right to take-out AEW. 27679311 4 COMPLAINTMILLER BARONDESS, LLP a z awa i 12 3 i4 IS 16 17 18 19 20 21 22 23 24 28 26 27 28 25. While he was doing this, Sharf continued to pretend to be Shekhter’s friend and continued to advise him, all so that he could exploit the relationship for AEW. For example, on January 14, 2013, Sharf sent an email to Shekhter about setting up a meeting with Centerbridge, a New York-based private equity fund. He also helped facilitate meetings with Colony Capital and Blackstone for Shekhter to obtain financing, This was all a ruse. 26. In June 2013, Shekhter offered to pay AEW all of the money needed to take-out AEW’s interest in the joint venture. The letter proposed a single take-out transaction by which Shekhter would refinance some of the joint venture properties and put in additional capital. 27. On August 2, 2013, not having heard back from ABW, Shekhter sent ABW another letter. Shekhter told AEW that he had offers from Ares, Blackstone and Starwood to refinance the joint venture properties so that Shekhter could take-out AEW’s interest, Blackstone was one of the lenders Sharf recommended to Shekhter. 28. Sharf tuned his back on Shekhter; he disclosed Shekhhter’s confidential information to AEW. In turn, AEW devised and implemented a scheme to prevent Shekhter from reacquiring his properties, which by then had substantial equity above and beyond the 24% annual return to which AEW was otherwise entitled. 29. — Sharf chose the multi-billion dollar hedge fund over the local developer. For Jesse Sharf, it’s all about who can make him the most money. 30. Sharf knew that Shekhter was not sophisticated in complex financial transactions and did not have experience with joint ventures, such as the one with ABW. Sharf also knew that Shekhter was relying on him for advice relating to the joint venture and his efforts to take-out AEW. Sharf exploited this trust and led Shekhter to believe he was working to resolve the issues in Shekhter’s favor. Quite the opposite: Sharf misled Shekhter and attempted to placate his concems by false promises and assurances that AEW was doing the right thing, when, in fact, AEW was endeavoring to take Shekhter’s portfolio of real estate for itself. 31. In August 2013, Sharf told Shekhter that AEW wanted him to get involved with the joint venture, Sharf said that it would either be him or someone else from his firm, and it would be much better for Shekhter if it was Sharf. Sharf told Shekhter that “my representation of the 27s793.1 5 COMPLAINTMILLER BARONDESS, LLP Bon ee ee 10 rn 12 1B 4 15 16 7 18, 19 20 21 22 23 25 26 27 28 joint venture will be good for you” and that he would help Shekhter get the resolution he was seeking. Shekhter still saw Sharf as his friend and confidential advisor and had no reason not to trust this representation from Sharf. 32. Sharf continued to pretend to be Shekhter’s friend and advisor so that he could pump Shekhter for information for the benefit of AEW. By way of example, after the August 2013 conversation, Sharf invited Shekhter to his home. At Sharf’s prompting, Shekbter discussed the joint venture and the issues Shekhter was having with AEW in connection with his efforts— and offer—to take-out AEW’s interest. Shekhter disclosed to Sharf his strategies and plans for enforcing his rights under the joint venture agreement, as well as his concerns about why AEW had not responded to his June 2013 offer. In an effort to appear like he was on Shekhter’s side, ‘Sharf told him that he thought that Erik Samek, the ABW employee with whom Shekhter had been dealing, was going to be fired because AEW was unhappy about Shekhter’s ability to take-out AEW’s interest. 33. Sharf purposely lured Shekhter into a false sense of security by pretending to be his friend and business advisor and by telling him that his and his firm’s representation of the joint venture would be good for Shekhter. AEW used confidential information Sharf obtained from Shekhter to develop and implement AEW’s strategy to string Shekhter along and fabricate defaults in order to eliminate his ability to take-out ABW. Sharf wanted to keep Shekhter at bay so that AEW could execute the next step in its plan to strip Shekhter of his take-out right. 34. On November 22, 2013, AEW finally responded to Shekhter and rejected his offers. AEW said that Shekhter did not have a “buy-out right” and accused him of breaching the joint venture agreement. 35. After receiving ABW’s response, Shekhter could have filed a lawsuit to enforce his, rights under the joint venture agreement, He did not do so because he was advised by Sharf to work things out with AEW. Sharf assured Shekhter that everything would be fine. Sharf did not tell Shekhter that he was providing AEW with the confidential information Shekhter disclosed to him. Sharf was still pumping Shekhter for information that he could provide to AEW. 36. Throughout the summer of 2014, Sharf remained in contact with Shekhter. While 27609311 6 ‘COMPLAINTMILLER BARONDESS, LLP a ws that was going on, AEW went on the offensive against Shekhter. AEW began to manufacture events of default that it would use to remove Shekhter and his company as the “Operating Member” of the joint venture, 37. It was not until late 2014, early 2015 that Shekhter discovered that Sharf was actually trying to harm him. Thereafter, Shekhter sent Sharf an email in which he wrote When you approached me for the first time and tried your very best to be my friend you told me that you appreciated everything that I was doing for the [Jewish] Federation and AIPAC. You also told me that I was doing all that and did not ask for anything in return. You told me that you respected that and asked me if there’s anything you can personally do in order to help [] my company. Tdon’t think that being part of a team that is trying to steal money from me my family and my company and trying to destroy my reputation with the lenders and the community while making money for Jesse and your law firm [] is a definition of helping someone, ‘What is the difference between stealing the money yourself or trying to help someone [] steal the money? By the way you should Iook up the definition of a friend. 38. Sharf did not respond to this email. He had nothing to say after he had betrayed Shekhter’s confidences to AEW. 39. Because of Sharf's conduct, AEW is preventing Shekhter from taking-out AEW. Shekhter has suffered damages in excess of $100 million as a result. FIRST CAUSE OF ACTIO! (Intentional Misrepresentation — Shekhter Against Sharf) 40. Plaintiff incorporates by reference herein the preceding paragraphs of this Complaint, including subparagraphs. 41, Sharf, numerous times, intentionally made materially false or misleading representations to Shekhter that he knew were false when made, or at a minimum, was reckless concerning whether they were true. These mistepresentations include but are not limited to Sharf"s statements that he wanted to help Shekhter and that his personal representation of the joint venture would be good for Shekhter. Sharf"s representations were not true, and he did not believe 276793.11 7 COMPLAINTMILLER BARONDESS, LLP aa them to be true, as he was secretly funneling Shekhter’s confidential information to AEW and helping AEW to devise a scheme to strip Shekhter of his ability to take-out AEW. 42. Sharf made the misrepresentations with the intent to defraud Shekhter; that is, he made the misrepresentations to induce Shekhter to rely upon them and to act or refrain from acting in reliance thereon. Specifically, Sharf told Shekhter that he wanted to help him in order to gain and keep Shekhter’s trust and confidence so that Shekhter would reveal confidential information to him, and Sharf said that his representation of the joint venture would be good for Shekhter in order to lull him into a false sense of security in order to gain time for AEW to implement the strategy Sharf and AEW were developing based on the confidential information, Sharf also purposely held himself out as Shekhter’s friend and advisor so that Shekhter would trust him and rely on his misrepresentation in guiding his actions, and Sharf knew that Shekhter trusted him, as he had observed Shekhter repeatedly heeding his recommendations and taking his advice. 43. Shekhter was unaware of the falsity of Sharf’s representations. 44, Shekhter acted in reliance upon the truth of the representations by, but not limited to, providing confidences to Sharf, acting on Sharf"s advice, and delaying trying to force ABW to allow him to exercise his rights under the joint venture agreement. 45. Shekhter was justified in relying upon the representations. It was reasonable in the light of the circumstances to accept Sharf"s representations without making an independent inquiry or investigation, especially given Shekhter and Sharf's relationship, Sharf’s superior experience and knowledge concerning the real estate field outside of real estate development, and Sharf's superior knowledge of his own intentions and actions, 46. Asa result of Shekhter’s reliance upon the truth of the representations, Shekhter has sustained over $100 million in damages because ABW is now claiming that Shekhter does not have any ability to take-out AEW, and Shekhter must defend against claims of the same. SECOND CAUSE OF ACTION (Negligent Misrepresentation ~ Shekhter Against Sharf) 47. Plaintiff incorporates by reference herein the preceding paragraphs of this Complaint, including subparagraphs, 276793.11 8 ‘COMPLAINTER BARONDESS, LLP 48. On numerous occasions, Sharf made materially false or misleading representations to Shekhter without any reasonable ground for believing them to be true. These misrepresentations include but are not limited to Sharf"s statements that he wanted to help Shekhter and that his personal representation of the joint venture would be good for Shekhter 49. Sharf made the representations negligently without regard for the truth intending for Shekhter to rely on them. Sharf knew that Shekhter trusted him, and he had observed Shekhter repeatedly heeding his recommendations and taking his advice. 50. Shekhter was unaware of the falsity of Sharf’s representations, 51. SheKhter acted in reliance upon the truth of the representations by, but not limited to, providing confidences to Sharf, acting on Sharf’s advice, and delaying trying to force ABW to allow him to exercise his rights under the joint venture agreement. 52. Shekhter was justified in relying on the representations. It was reasonable in the light of the circumstances to accept Sharf’s representations and promises without making an independent inquiry or investigation, especially given Shekhter and Sharf’s relationship, Sharf’s superior experience and knowledge concerning the real estate field outside of real estate development, and Sharf’s superior knowledge of his own intentions and actions. 53. Asaresult of the reliance upon the truth of the representations, Shekhter has sustained over $100 million in damages because AEW is now claiming that Shekhter does not have any ability to take-out AEW, and Shekhter must defend against claims of the same. ‘THIRD CAUSE OF ACTION (Concealment — Shekhter Against Sharf) 54. Plaintiff incorporates by reference herein the preceding paragraphs of this, Complaint, including subparagraphs. 55. Numerous times, Sharf intentionally concealed or suppressed material facts from Shekhter. These material facts include but are not limited to Sharf's selling of Shekhter’s confidences to AEW, Sharf’s secret representation of the joint venture and ABW, and AEW’s plan to lull Shekhter into a false sense of security and fabricate defaults in order to try to eliminate Shekhter's ability to reacquire 276793.1 9 COMPLAINTMILLER BARONDESS, LLP 56. Sharf was under a duty to disclose the facts to Shekhter because he was Shekhter’s fiduciary due to the confidential relationship he instigated and formed with Shekhter over several years. Under the circumstances, Shekhter’s trust and confidence were reasonably reposed in the integrity and fidelity of Sharf. Additionally, Sharf had a duty to disclose the material facts because he knew the material facts and also knew that the facts were neither known nor readily accessible to Shekhter. And he had a duty to disclose because he gave information of other facts that were likely to mislead for want of communication of the concealed or suppressed facts and did not speak honestly and made misleading statements or suppressed facts that materially qualified those statements. 57. Sharf intentionally concealed or suppressed the facts with the intent to defraud Shekhter. He also actively prevented investigation and discovery of the material facts by Shekhter by assuring Shekhter he was working on his behalf and that his personal representation of the joint venture would be good for Shekhter 58. ‘Shekhter was unaware of the facts and would not have acted as he did if he had known of the concealed or suppressed facts. 59, The concealment or suppression of the facts caused Shekhter to sustain over $100 million in damages because AEW is now claiming that Shekhter does not have any ability to take- out AEW, and Shekhter must defend against claims of the same. FOURTH CAUSE OF ACTION (Constructive Fraud ~ Shekhter Against Sharf) 60. Plaintiff incorporates by reference herein the preceding paragraphs of this Complaint, including subparagraphs. 61. A confidential relationship existed between Shekhter and Sharf. Shekhter, under the circumstances, reasonably reposed trust and confidence in the integrity and fidelity of Sharf, and Sharf obtained control over Shekhter’s affairs. This includes but is not limited to Shekhter’s confidential data and information concerning his business, plans and strategies, and Sharf’s control and influence over the same. 62. Sharf possessed information material to Shekhter’s interests including but not 27679311 10 ‘COMPLAINTee ee 10 i Z 12 MILLER BARONDESS, LLP 20 21 23 24 25 26 27 28 limited to his knowledge that he had double-crossed Shekhter, was secretly personally representing the joint venture and AEW, AEW’s desire to prevent Shekhter from exercising his take-out rights or otherwise allow him to gain the benefit of his bargain with AEW, and AEW’s strategy to fabricate defaults. 63. Sharf knew or should have known that this information was material to Shekhter’s interests. 64. Sharf to disclose this material information to Shekhter. He also made misrepresentations including but not limited to Sharf’s statements that he wanted to help Shekhter ‘and that his personal representation of the joint venture would be good for Shekhter 65. This nondisclosure and misrepresentations have caused Shekhter to suffer over $100 million in damages, loss and harm, including because AEW is now claiming that Shekhter does not have any ability to take-out AEW, and Shekhter must defend against claims of the same. PRAYER FOR RELIER WHEREFORE, Plaintiff prays that he be awarded: 1, Compensatory damages according to proof believed to be in excess of $100 million; Pre- and post-judgment interest at the maximum rate permitted by law; Costs of the suit and litigation expenses, including attorneys’ fees; Exemplary and punitive damages according to proof; and yeep Such other and further relief as the Court deems just and proper. DATED: January 15, 2016 MILLER BARDNDESS, LLP p> LOUIS R. MILLER ‘Attorneys for Plaintiff NEIL SHEKHTER By: 276793, ub COMPLAINTMiter BARONDES: DEMAND FOR JURY TRIAL Plaintiff hereby demands a trial by jury. DATED: January 15, 2016 MILLER BAR®NDESS, LLP pod LOUIS. MILLER Attomeys for Plaintiff NEIL SHEKHTER By: n6793.11 nD COMPLAINT.