Barazani v Haiem

Mr. Horwitz represented the plaintiff in this action on claims of breach of fiduciary duty, breach of contract and intentional misrepresentation.  The action arose out of a scam whereby the defendants conned the plaintiff into giving them $535,000 as the down payment to purchase buildings containing 44 apartment units. The buildings were within walking distance of the Staple Center in Los Angeles.  The defendants performed no inspections whatsoever prior to using the plaintiffs money as the down payment.  The buildings were purchased from a convicted slumlord on 5 year, interest only notes.  After about 4 ½ years the defendants stopped making mortgage payments, and the landlord foreclosed on the buildings. The plaintiff lost his deposit. The defendants used the rental income for their personal benefit. The landlord received $535,000 down, interest payments for about 5 years, and ultimately took the buildings back. The defendants held themselves out as professional property managers.  However, during the time the defendants managed the properties, the LAHD issued multiple notices to comply, leading in 38 units being placed in the REAP program, which provided the tenants with a 50% rent reduction and severely affected the cash flow. The defendants failed to timely file an appeal, assuring the loss of the rents. At a May 20, 2014 hearing, it was determined that there were 90 outstanding code violations and the matter was referred to the Los Angeles City Attorney’s office to consider criminal charges. The defendants failed to file tax returns from 2008-2013 until after they were sued. They use company cash as they desired, moving money around between their accounts.  Mr. Horwitz obtained checks showing: (a) payments to their children, (b) lease payments on their Mercedes Benz, BMW and Lexus, (c)  cash withdrawals of approximately $141,000 between 2011 and 2013.  The defendants failed to maintain adequate financial records, such as a general ledger, profit and loss or income statements.  They also failed to pay the mortgage, leading to the loss of the buildings in foreclosure.

After a month long jury trial, the jury found, by clear and convincing evidence, the defendants liable, jointly and severally, for fraud, breach of fiduciary duty, intentional misrepresentation, concealment, and awarded punitive damages.  The underlying award was for $853,000.  As the jury was being seated to decide the amount of punitive damages to award the plaintiff, the defendants agreed to pay an additional $250,000 to settle the punitive damages award.  The total amount defendants were held liable for was $1,104,832.00.  The defendants agreed to a payment plan in lieu of judgment being entered.