ANOTHER VICTORY IN THE COSMOPOLITAN LITIGATION
After a trial in December 2017, the Central District of California has just issued its Order and Judgment in Estakhrian v. Obenstine, awarding the Plaintiffs $12 million.
The case sought restitution and damages against a group of attorneys who purported to litigate the claims of hundreds of people who lost the money they paid to purchase condominium units in the planned Cosmopolitan development in Las Vegas, which was never built. That litigation, Watt v. Nevada Property I LLC, was settled. Our subsequent lawsuit asserted that the attorneys for the purchasers acted improperly in connection with the litigation.
Our claims against defendants King & Spalding LLP and attorney Benjamin Easterlin were settled in 2015. (Those settlement funds have been fully distributed.) The claims against the remaining defendant, Mark Obenstine, were tried in December 2017. In its just-issued decision, the Court found that Mr. Obenstine violated his fiduciary duties to his clients and committed unlawful business practices, and ordered him to disgorge the entire $12 million improperly taken as attorneys’ fees. For example, the Court found that Obenstine wrongfully:
• employed a woman named Donna Billiter to solicit Cosmopolitan purchasers to sign up as his clients in the Watt case, paying her for her efforts, in violation of Cal. Bus. & Prof. Code sec. 6152;
• knowingly allowed Ms. Billiter to use an alias, “Kay Jackson,” in communicating with his clients, and falsified documents submitted to his clients and the court to make it look as if she purchased a unit in the Cosmopolitan, when she did not;
• failed to disclose his fee-sharing agreements with his co-counsel to his clients or the court in Watt, in violation of the Rules of Professional Conduct and Bus. & Prof. Code sec. 6068(d);
• failed to inform his clients he was not licensed to practice law in Nevada, where the Watt litigation was filed and conducted; and
• concealed from his clients and the court the fact that his co-counsel had a serious and acknowledged conflict of interest.
A copy of the Court’s Order and Judgment are attached here.
We are gratified that the Court has ruled in our favor and called Mr. Obenstine to account for his wrongdoing. However, there are still several issues to work out. In particular, Obenstine has claimed that he has spent and is no longer in possession of the funds he received through the Cosmopolitan litigation. We are continuing to investigate, and to evaluate all options for collection of the Judgment. If any additional funds are recovered, the amounts remaining remaining after payment of Class Counsel’s costs and attorneys’ fees — the amount of which will be determined by the Court — will be distributed to the class members pro rata, in proportion to their relative losses, just as they were previously.
Please be patient. It will take some time before we know what additional funds can be recovered.
Notice re Pending Appeal:
On April 24, 2019, Defendant Obenstine filed Notice of Appeal of the District Court’s orders and judgments. Unfortunately, this tactic will result in a significant delay in the proceedings. We will post updated information about the upcoming deadlines.