Chinese investors sue Lewis Brisbois over $92.5M loss

Lewis Brisbois Bisgaard & Smith LLP and its investor client were sued by 185 Chinese investor plaintiffs who claim the firm’s mishandling of loan agreements resulted in the complete loss of their $92.5 million capital investment in a $2.5 billion hotel and residential redevelopment project in Century City.

The plaintiffs claim the firm, while representing CMB Export LLC, a lender for the renovation project, intentionally withheld terms of loan and participation agreements that they say would have otherwise protected their lost interest.

“This action concerns co-general partners and their long-time outside counsel failing to take reasonable steps to protect the limited partner investors. Rather than admit their own wrongdoing, defendants shifted blame to others, and conspired and undertook a scheme to defraud plaintiffs through a systematic campaign of sham litigation, fraudulent objections, and dilatory conduct,” the lawsuit stated. Shi Bai et al. v. CMB Export Infrastructure Investment Group 48 LP et al., (E.D. Cal., filed Mar. 14, 2024).

A representative of Lewis Brisbois released a statement Monday in response to the lawsuit: “Lewis Brisbois does not generally comment on claims against clients or the firm. The firm represented CMB in separate litigation and is in the process of responding to the allegations in the newly filed complaint,” the statement read.

The investor plaintiffs are represented by California-licensed attorney Keren E. Gesund of the Law Offices of Robert V. Cornish Jr. PC in Wyoming. She did not respond to an email or phone call by press deadline Monday.

The redevelopment project at the heart of the lawsuit consists of the renovation of the Century Plaza Hotel, which closed in 2016 and reopened in 2021 as the Fairmount Century Plaza, and the construction of two, 44-story, residential, condominium towers located in the Avenue of the Stars complex.

According to the lawsuit, the plaintiffs were limited partners of CMB and invested $500,000 each in the project. In 2021, after the project’s borrower defaulted, CMB did not notify the foreign investors of their one-time right to obtain complete control of the profits under a participation agreement, the lawsuit claims. In the following years, while represented by Lewis Brisbois, CMB filed state lawsuits in California and New York against the senior lender on allegations the company was tricked into signing an intercreditor agreement and claimed the lender fraudulently concealed the participation agreement between the company and the borrower, the lawsuit claimed.

However, according to the federal lawsuit filed this month, emails that surfaced during the discovery process of the state cases suggested CMB and Lewis Brisbois’ lawyers knew about the terms of the participation agreement all along and never mentioned their receipt of a term sheet, the predecessor document of the agreement, Gesund wrote.

“Lewis Brisbois and CMB filed numerous lawsuits blaming the lender for CMB and Lewis Brisbois’ lack of competence and diligence. To cover up its own malpractice, Lewis Brisbois accumulated $3.8 million in legal fees filing frivolous lawsuits to bring false allegations against the lender in an unsuccessful attempt to conceal the shortcomings of both CMB and of itself in representing them,” the lawsuit stated. “Indeed, as explained by both the California and New York courts, it was Lewis Brisbois and CMB’s inaction – not lender’s alleged fraudulent actions – that resulted in the loss of plaintiff’s investment.”

In the New York state court action, the appellate court dismissed all of CMB’s claims, Gesund wrote. “Plaintiffs to date have not received any money back from their investments in Century Plaza, as the litigation … continues in California. Given the rulings of the New York court, the writing is on the wall for the merciful end of the frivolous California Action prosecuted by Lewis Brisbois on behalf of CMB,” the lawsuit stated.

The federal lawsuit filed in Sacramento brings 12 causes of actions against Lewis Brisbois and CMB, including several claims of neglect, misrepresentation, malpractice and Racketeer Influenced and Corrupt Organizations violations.