A Los Angeles jury has awarded $184 million in damages to former investors in a series of limited partnerships run by Los Angeles apartment tycoon Alan I. Casden.
The jury Tuesday awarded $92 million in punitive damages to about 18,000 investors who sold their interests in Casden-run partnerships that owned apartment complexes. It came four days after the same panel granted $92 million in general damages to the investors after finding Casden and his associates at Casden Properties Inc. guilty of violating federal securities laws and breaching their fiduciary duties.
The case is the first of its type to be tried for damages since the passage of the Private Securities Litigation Act of 1995. The law was intended to prevent frivolous class-action suits by making it more difficult for lawyers to file them, according to the investors' New York law firm, Goodkind Labaton Rudoff & Sucharow.
Casden Properties is owned by Denver-based Apartment Investment & Management Co., which bought closely held Casden in March for more than $800 million. Aimco said it's not liable for the award.
Nicholas Chimicles, who represented some of the investors, agreed that Aimco is "fully indemnified" from the judgments and that it's the individual defendants, including Casden, who are on the hook for the damages.
Casden is expected to appeal the awards.
"It was excessive and inappropriate and not supported either by the facts or the law," Casden spokeswoman Barbara Casey said.
The 56-year-old Casden is listed on the Forbes 400 list of wealthy Americans with an estimated net worth of $800 million. He has developed or acquired about 90,000 apartment units, mostly in Southern California, since the 1970s. In addition to building market-rate apartments, including a luxury project recently completed next to Park La Brea in Los Angeles, Casden has been heavily involved in developing affordable housing financed in part with tax credits.
The majority of securities class-action lawsuits are settled before trial, experts said. But Casden, who has a reputation as a scrappy negotiator, apparently thought he could win in court.
"That's the danger of going to the jury in the current climate, where investors are feeling so cheated and wronged," said Jim Newman, executive director of Rockville, Md.-based Securities Class Action Services, which tracks class-action suits.
The Casden lawsuit, filed in 1998, charged that Casden Properties unlawfully made misleading statements in seeking investors' votes to approve a transfer of ownership in 98 apartment-complex partnerships.
"Our expert says they were shortchanged by about $77 million," noted plaintiffs lawyer Lawrence Sucharow.
In addition to Alan Casden, who owned National Partnership Investments Corp., the managing general partner for the investors group, other defendants included his brother Henry Casden, Bruce Nelson and Charles Boxenbaum. Those three were officers or directors of National Partnership.
The 1998 transaction transferred the apartment partnerships to Casden Properties, which also acquired National Partnership.
The apartment complexes in the lawsuit are mostly California properties that are considered affordable for low-income tenants. The limited partnership interests "were acquired with substantial due diligence and backed up with fairness opinions," Casey said. "Three years later we sold them for less than we paid."
In January 1999 Casden Properties completed a private stock offering worth $390 million, which converted the firm to a private real estate investment trust.
Aimco shares rose 10 cents to $37.60 on the New York Stock Exchange.
Bloomberg News was used in compiling this report.