Facts

This action arose out of two commercial real estate investments spearheaded by defendants Michael Younessi and Alea Investments, LLC ("Alea"): Pacific View Plaza, LLC ("PVP") a commercial development of a vacant piece of land; and Ocean Plaza Investments, LLC ("OPI"), an office building. Through numerous false representations (some of which were in writing) and material omissions about themselves and PVP and OPI, Younessi and Alea solicited Diamond Enterprises, Ltd., LP ("Diamond") to invest approximately $2.3 million in PVP and OPI. Younessi also embezzled nearly $1 million from OPI, which Younessi then used to pay his personal debts.

In its complaint, Diamond alleged claims for fraud, breach of fiduciary duty, securities violation, breach of contract, and removal of manager seeking to (a) recover the $2.3 million it invested in PVP and OPI; (b) recover the monies Younessi embezzled from OPI; and (c) permanently remove Alea (and Younessi) as manager of the OPI Investment. Diamond also alleged derivative claims against Younessi and Alea on PVP and OPI's behalf.

At trial, Younessi and Alea denied liability claiming that Diamond's damages were the result of the economic downturn in the economy. Younessi also claimed that Diamond's reliance on Younessi's false statements was unreasonable since, according to Younessi, it is well known that Persians exaggerate the truth (Younessi is Persian).

Younessi and Alea filed a cross-complaint in response to Diamond's complaint. Younessi alleged claims for invasion of privacy and defamation against Diamond's principal, Dr. Bruce Houman.

Younessi sought unspecified damages, including punitive damages. Unable to substantiate his claims with any evidence, Younessi sought to dismiss his claims without prejudice on the last day of trial.

Alea alleged a breach of contract claim pertaining to PVP against Diamond. Alea also included Dr. Houman and members of Dr. Houman's family as cross-defendants on its claim. At trial, Alea sought over $3 million against all cross-defendant claiming that Diamond's refusal to contribute additional monies to PVP resulted in PVP's failure.

Settlement Discussions

Prior to trial, Diamond offered to settle the case for $800,000. Younessi and Alea rejected Diamond's offer and proposed to settle the case for an unsecured amount of $300,000, most of which to be paid over time and without any interest.

Result

On Sept. 10, 2012, the Court issued a Statement of Decision and corresponding Judgment. As to the credibility of the parties, the court found Dr. Houman to be highly credibly and Younessi to be very self-serving, evasive and not credible. As to Diamond's complaint, the Court found in Diamond's favor on Diamond's claims for fraud, breach of fiduciary duty, securities violation, breach of contract, awarding a total of $3,979,243 in damages. Diamond also prevailed on its claim for removal of manager, thereby permanently removing Alea (and Younessi) as manager from the OPI Investment. The Court found against Alea on the cross-complaint. The Court also ruled that Younessi's dismissal of his invasion of privacy and defamation claims was with prejudice.

Other Information

FILING DATE: July 1, 2009.