The REAL Deal: The First Case Tried to a Jury Verdict Following the Enactment of the PSLRA: A Landmark Victory. A Firm of Firsts.In re Real Estate Associates Limited Partnership Litigation
The Real Estate Associates Limited Partnerships ("REAL Partnerships") were supposedly attractive investment vehicles created between 1977-1984 to acquire interests in affordable housing projects. With the government providing competitive financing and guaranteeing a portion of monthly rent, the terms appeared so favorable that the General Partner raised hundreds of millions of dollars selling limited partnership interests to risk averse investors. In 1998, the General Partner sought to create for its own benefit a Real Estate Investment Trust (REIT) that was to include the limited partner interests. Unfortunately, the General Partner failed to meet the high disclosure and truthfulness requirements mandated by law when engaging in a self-dealing transaction. As a result of the information missing from, and misinformation contained in, the voting documents, the limited partners were convinced to transfer their interests to the REIT for substantially less than their fair value.
But a partner is a partner. And a partner deserves better treatment.
After four years of intense litigation, including a five-week trial in federal court and six days of jury deliberations, Labaton Sucharow, as co-Lead Counsel to the class of harmed investors, secured a unanimous verdict and a $185 million jury award. While the punitive damage award was later reduced to the maximum amount allowed under California law and the action was settled following the Defendants' appeal, the final settlement figure represented 118% of damages claimed.
This landmark case - the first securities action successfully tried to a jury verdict following the enactment of the Private Securities Litigation Reform Act (PSLRA) - highlights the important role such legal action can play in leveling the playing field and protecting investors. It also serves as a reminder that even though the PSLRA erected barriers making it more difficult to successfully prosecute such actions, the trial team at Labaton Sucharow continues to battle for investors and continues to win.