Facts

San Jose Midtown Development LLC (SJMD) is a limited liability company formed in February 2014 by Charles Rosendahl and Jerry Calvin Martin to develop two properties in San Jose, California, 740 W. San Carlos Street and 777 W. San Carlos Street. In September 2014, SJMD executed an amended and restated operating agreement to account for the addition of Gregory Malley as a member of SJMD at a 16.33% interest and 16.67% economic interest. The agreement allowed SJMD's members to determine when additional capital contributions were needed to conduct SJMD's business. In November 2014, SJMD executed a purchase and sale agreement to sell the property to another development company, Bay Area Property Developers, LLC (BAPD). For the next two years, SJMD obtained the necessary approvals and permits to remediate environmental conditions and construct multiple residential units on the property. In May 2016, a legal dispute arose between SJMD and BAPD suspending the close of escrow and creating significant expenses for SJMD. An agreement was reached between the parties, which gave BAPD until November 2019 to close escrow on the sale of the property. SJMD sold the property for $11.2 million dollars with escrow closing in March 2020. Malley was informed by Sangeeth Patel that he would not receive any distributions related to the sale of the property until he waived his right to bring any action against defendants. On March 18, 2020, Malley filed a complaint against SJMD, Peruri, Ashish Patel, Peruri Capital Partners, LLC, Gates Capital, LLC, Procurator Holdings, LLC, and Thomas Malgesini, alleging various federal law and state law claims.

PLAINTIFF'S CONTENTIONS: Plaintiff alleged that during the time the property was supposed to close escrow, a Peruri-led group of SJMD's majority members forced minority members like plaintiff to bear the brunt of all costs associated with developing the property and BAPD litigation by making calls for additional capital contributions. Further, plaintiff contended that SJMD adopted five amendments to the operating agreement that allowed them to charge its members usury interest for taking out loans to help cover their additional capital contributions and allowed members to amend the operating agreement without unanimous written consent of its members. Moreover, plaintiff maintained that with the introduction of these amendments, he and other borrowing members were required to pay different forms of interest than other members. Plaintiff alleged that when any member objected to the rate of interest charged by defendants, Peruri would falsely state that he was a licensed real estate broker who could charge above the legal interest rate. Thus, plaintiff alleged that defendants engaged in a pattern of racketeering activity and collection of unlawful debts.

DEFENDANTS' CONTENTIONS: Defendants denied all contentions.

Result

The court granted defendants' motion to dismiss.