Navigating real estate deals

Lessons from the billion dollar legal battle amongst brothers

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The recent trial in a case involving four brothers provides a stark reminder of the importance of having clear agreements when engaging in real estate transactions in California. Specifically, Shashikant Jogani v. Haresh Jogani, et al., arose from a dispute where it was alleged brothers had formed a partnership—with no formal agreement—to engage in business concerning the diamond trade, private money lending, securities and investments. All of the brothers were born and raised in India which led to them to “both culturally and in actuality” conduct business as partners. Many agreements within the family’s partnership were based on “binding oral agreements and handshakes in which an individual’s word is his or her bond”.

One brother, Plaintiff Shashikant Jogani, acquired about 6,500 units of residential apartment properties owned separately from the family partnership. After years of success, Plaintiff’s separately owned real estate portfolio required funding due to the economic recession and real estate depression. The family partnership orally agreed to provide capital and invest in Plaintiff’s properties. In return, Plaintiff orally agreed to transfer his properties into a holding company that the brothers formed. Further, Plaintiff agreed to provide and invest his time, experience, and expertise to asset manage the existing properties and to identify, acquire and asset manage additional properties. According to the Plaintiff, the brothers also orally agreed all partners would share in the proceeds after the partnership received back their principal plus interest. Specifically, according to Plaintiff, after the partnership was paid back its investment plus interest, Plaintiff would be entitled to one-half of all profits, proceeds and value concerning the partnership and its assets, which included the real estate holding companies[1].

For years, the parties performed pursuant to the oral agreement. That is, Plaintiff continued to pay back the money borrowed, and the partnership extended a line of credit for Plaintiff to continue purchasing properties for the partnership. However, issues arose after the partnership was paid back their investment, in full including interest, and Plaintiff wanted his one-half distribution of profit from the properties and portfolio pursuant to the brothers’ oral agreement. Specifically, when Plaintiff made a $2.4 million distribution to himself and an equal $2.4 million distribution to Defendant Haresh Jogani, who Plaintiff said was “the central controller and managing partner” of the partnership, Haresh refused to acknowledge Plaintiff as a 50% owner of the partnership, rather Haresh considered the one-half distribution to Plaintiff to be a loan and demanded repayment. When Plaintiff refused to repay the distribution as a loan, he was forcibly removed from asset management of the partnership portfolio and was refused any further disbursements. It was clear that the brothers were not in agreement on what the terms and conditions were regarding their partnership in the real estate holdings.

As a result, in 2003, Plaintiff initiated a lawsuit alleging: (1) Breach of Contract; (2) Breach of Fiduciary Duty; (3) Fraud; (4) Unjust enrichment; (5) Quantum Meruit; (6) Constructive Trust; and (7) Accounting. After a lengthy trial that began in October 2023 and concluded in February 2024, and multiple appeals, the jury awarded Plaintiff substantial damages and property interests, including the 50% stake in the real estate holding companies that the verbal agreement originally called for and $1.8 billion in damages.

This high-profile lawsuit, which concluded with a Los Angeles jury awarding billions to a brother in a dispute over a vast real estate empire, highlights several key precautions individuals should take before entering any real estate agreement.

The Jogani brothers’ case is a cautionary tale of the importance of meticulous preparation and clear documentation in real estate transactions. While oral agreements are legally binding in certain contexts, they can lead to significant disputes that can take years to resolve at a significant cost. For example, oral agreements regarding real estate transactions often lead not just to breach of contract and fraud claims, as in this case, but also to quiet title actions, recission actions and/or specific performance actions, which we have written about previously. (See also our article on the power of the lis pendens.)

Plaintiff in the Jogani case was lucky that he was able to produce witnesses and corroborating documents to prevail on his version of the terms of the oral agreement, including proof that he would have used third party investors if his brothers did not offer him a similar deal. Further, the parties in that case were fortunate enough to afford litigation lasting several years, which many litigants cannot do.

The Jogani case underscores the importance of having written contracts that clearly outline the terms of real estate transactions and partnerships, even with family members. This helps prevent misunderstandings and provides clear evidence of the agreed-upon terms. By spending a little money up front on these precautions, individuals can protect their interests and avoid the pitfalls that can lead to lengthy and costly legal disputes.

If you are facing real estate disputes or seeks proactive legal guidance, we invite you to contact one of the many qualified legal professionals at Scali Rasmussen to explore our firm's expertise in this area and discover how we can help safeguard your interests.

[1] The real estate partnership owned real property, bank accounts, intellectual property, investment accounts, stock market accounts, brokerage accounts, licenses, subsidiaries, contracts, and tangible and intangible property.