Facts

Plaintiffs were members and limited partners in dozens of real estate businesses owned and operated by their family. They sued their father, who was the general partner and general manager of many of the entities, as well as his wholly owned corporation, seeking damages for purported breach of fiduciary duty, declaratory relief, unjust enrichment, and conversion. Plaintiffs proceeded to trial on their conversion and breach of fiduciary duty claims.

PLAINTIFF'S CONTENTIONS:
Plaintiffs alleged that their father, Eli Reinhard, had improperly diverted partnership and LLC distributions, which should have gone to directly to them, into entities Eli controlled. Plaintiffs sought to recover the allegedly diverted distributions as well as to effectuate an "economic divorce" from their father. Plaintiffs also asserted that their father had improperly used partnership assets for his own personal gain.

DEFENDANT'S CONTENTIONS:
Defendants denied the allegations and alleged defenses including statute of limitations and equitable estoppel. Defendants asserted that Plaintiffs had been made millionaires many times over as a result of their investments in the family businesses.

Defense expert testimony showed that Plaintiffs' wealth was derived from reinstatements of gifts and inheritances provided by Defendants, which resulted in an internal rate of over 20 percent. In addition, as a result of Defendants' efforts, Plaintiffs were the owners of millions of dollars in successful investments.

Settlement Discussions

Plaintiffs' initial offer after the settlement conference was for a total of $34 million. Defendants countered with an offer to pay zero for the litigation claims and to buy out plaintiffs' interests for a total of $18 million. Defendants refused to increase their price, and after two week of motion practice and one week of trial by jury, Plaintiffs accepted Defendants' offer.

Damages

Plaintiffs claimed damages of $38.6 million, plus interest, according to their expert calculation.

Result

Before trial, Defendants unsuccessfully attempted to bifurcate the case, to exclude Plaintiffs' conversion claim, to exclude the fiduciary duty claims, and to exclude Plaintiffs' damages expert. After two weeks of motion arguments and one week of jury trial, the parties settled the case for $18 million, payable immediately, plus an additional $485,000, and agreed to the "economic divorce" sought by Plaintiffs.

Other Information

FILING DATE: Oct. 2, 2009.