Facts

Kaiperm Federal Credit Union was the former owner of 2101 Broadway in Oakland (Property). Years prior to Aug. 30, 2007, its principal office and financial services were located at the Property.

In May 2007, 625 3rd Street Associates LP (the Associates) was solicited by Kaiperm's broker to consider investing in a lease-back transaction with Kaiperm involving the Property. The Associates was informed that Kaiperm was financially sound and its financial plan included a sale of the Property to increase Kaiperm's liquidity.

The Associates executed a letter of intent to purchase the property for $8 million, provided that the National Credit Union Association (NCUA) approved the transaction and Kaiperm executed a lease to commence upon close of escrow. Kaiperm was solely reponsible for obtaining NCUA's approval.

During its due diligence period, a review of Kaiperm's financial statements revealed that Kaiperm was adequately capitalized and its representatives, including Stanley Abrams, its chief executive officer, verbally assured the Associates that Kaiperm was financially stable. Plaintiff was allegedly aware that Kaiperm had sustained major losses in the year before the transaction, and had access to Kaiperm's past financial statements.

On Aug. 27, the Associates was informed that NCUA approved the transaction. Escrow closed on Aug. 31, and Kaiperm became the tenant of the property under a 15-year lease.

On May 15, 2008, Kaiperm's attorney informed the Associates that Kaiperm was in financial trouble and that it would be merging with Alliant Credit Union. Alliant wished to "cut a deal" regarding the Lease. Kaiperm and Alliant merged. At the outset, Alliant decided it would rather not take on the lease and sought to buy out the lease. The negotiations came to an impasse as of July 1. Under the merger agreement, Alliant agreed to assume of Kaiperm's liabilities, including the lease, and assumed complete control over Kaiperm as of May 23, 2008. The Associates alleged that Alliant devised a means to avoid continuing liability under the lease which resulted in a repudiation of the lease for Alliant's benefit. Alliant abandoned the Property on Oct. 30, 2008. The lease was deemed terminated by operation of law, as permitted under federal liquidation statutes.

The Associates filed a complaint against the Board of the National Credit Union Administration alleging that Kaiperm knowingly concealed its financial troubles to the Associates in order to effectuate the lease-back transaction. The Associates alleged causes of action for interference with contractual relations against Alliant, inducement to breach of contract against Alliant, inducement to breach of contract against Alliant, interference with prospective economic advantage against Alliant, intentional misrepresentation against Abrams, and fraudulent concealment against Abrams.

Settlement Discussions

The Associates settled its claims against Alliant prior to trial for $300,000.

Result

The jury rendered a verdict for the plaintiff on its fraud claims and awarded a total of $630,000 in damages, which consisted of $315,000 as to Kaiperm and $315,000 as to Abrams.