JASON DE BRETTEVILLE, State Bar No. 195069
jdebretteville@stradlinglaw.com
JUSTIN OWENS, State Bar No. 254733
jowens@stradlinglaw.com
VIVIAN BICKFORD, State Bar No. 328604
vbickford@stradlinglaw.com
STRADLING YOCCA CARLSON & RAUTH
A PROFESSIONAL CORPORATION
660 Newport Center Drive, Suite 1600 Newport Beach, CA 92660-6422
Telephone: 949 725 4000
Facsimile: 949 725 4100
Attorneys for Plaintiff GS 1975 LLC
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES
GS 1975 LLC, Plaintiff, vs. JASON GROSFELD; MICHAEL RADOVAN; MARTELL CAPITAL GROUP LLC; JG MARTELL GROUP LLC; IRONGATE LLC; COSTA PALMAS BEACH AND YACHT CLUB (US), LLC, and DOES 1 through 10, inclusive
Defendants.
CASE NO. 23STCV06016
FIRST AMENDED COMPLAINT FOR:
1. FRAUDULENT MISREPRESENTATION AND CONCEALMENT
2. NEGLIGENT MISREPRESENATION
3. BREACH OF CONTRACT
4. BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
5. INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS
6. VIOLATION OF BUS. & PROF. CODE § 17200
DEMAND FOR JURY TRIAL
Plaintiff GS 1975 LLC (“Plaintiff”), for its Complaint against Defendants Jason Grosfeld, Michael Radovan, Martell Capital Group LLC, JG Martell Group LLC, Irongate LLC, and Costa Palmas Beach And Yacht Club (US) LLC (collectively, the “Defendants”), and Does 1-10, inclusive, alleges as follows:
INTRODUCTION
1. Plaintiff brings this Action to hold Defendants accountable for fraudulently inducing Plaintiff’s purchase of a multi-million dollar luxury residence in the Costa Palmas development in Cabo San Lucas, Mexico. In late 2017, Defendants solicited Plaintiff to be one of the first owners in their fledgling Costa Palmas luxury home development near Cabo San Lucas, Mexico. In furtherance of that solicitation, Defendants repeatedly assured Plaintiff that they would complete the home no later than June 2019. For example, Michael Radovan, Irongate’s Managing Director of Sales, promised: “We will build the home in 15 months because we have to” in order to open the affiliated Four Seasons Hotel. In reliance upon these representations, Plaintiff paid over $5 million in deposit money.
2. Contrary to Defendants’ false promises, however, the Four Seasons Hotel opened, the June 2019 completion date came and went, and Plaintiff’s residence was uncompleted and uninhabitable. Even worse, Defendants still had not completed the home a year later in June 2020, another year later in June 2021, or even another year later in June 2022. In fact, as of the filing of this Complaint nearly four years later, Plaintiff’s residence remains uncompleted and uninhabitable, with no end in sight.
3. But for Defendants’ fraudulent inducements, Plaintiff would have purchased a comparable luxury home with guaranteed delivery by June 2019 (or earlier, in the case of an existing home), and would have enjoyed the use value of that home over the past three years and nine months. As Plaintiff learned too late, however, it had become the victim of Defendants’ scheme to use false representations to secure Plaintiff’s early commitment to purchase the home. The fraud consisted, in part, of:
• Falsely promising Plaintiff that the residence “had to be” completed by June 2019 because failure to do so would hold up the opening of an adjacent Four Seasons Hotel.
• Falsely representing to Plaintiff that Defendants had done and would do everything necessary under Mexican law to secure title to the land and build the home under the applicable environmental and other regulations; and
• Diverting funds paid by Plaintiff for his home for purposes other than construction of that home thereby delaying completion of the home for years.
4. In late 2022, despite their failure to complete the residence as promised more than three years earlier, Defendants remained eager to get their hands on the remaining $5,250,000 of the purchase price, and doubled-down on their fraud. Specifically, in September 2022, Defendants conspired to falsely represent to Plaintiff that the residence was “substantially complete,” thereby triggering Plaintiff’s immediate obligation to pay a “substantial completion deposit” on the residence. It was not until after Plaintiff paid this substantial completion deposit, and after paying its own expenses to travel to Mexico and inspect the property firsthand, that the patently uninhabitable state of the residence was discovered, including non-functioning toilets, missing sinks and appliances, unfinished stairs, un-repaired water damage, and more.
5. Plaintiff has since learned that these unfair and misleading business tactics are standard operating procedure for Defendants, and that many other owners in the Costa Palmas development were pressured into taking possession of their residence and paying Defendants the full purchase price on false promises of imminent completion, only to see their residences remain unfinished many months and even years after full payment was made. Plaintiff is informed that Mexican authorities have issued a subpoena for Defendants including Grosfeld, to appear in connection with a criminal fraud investigation that is, on information and belief, related to the Costa Palmas development.
6. After Plaintiff filed this action on March 17, 2023, Defendants doubled down on their bad acts by directing newly-added Defendant Costa Palmas Beach And Yacht Club (US)
LLC to terminate Plaintiff’s valuable beach club membership. The sole purpose for the termination was to retaliate against Plaintiff’s lawful exercise of its legal rights, and to deprive Plaintiff of the significant value of the Beach Club membership, including the ability to transfer that membership to a subsequent purchaser of the residence, in order to coerce Plaintiff into waiving his legal rights.
7. Plaintiff now seeks to hold Defendants accountable, and to recover its actual damages incurred as the result of Defendants’ wrongful acts. Plaintiff also seeks punitive and exemplary damages to prevent Defendants from engaging in such conduct in the future.
THE PARTIES
8. Plaintiff GS 1975 LLC is a Delaware limited liability company with its principal place of business in California.
9. Defendant Martell Capital Group LLC is a Delaware limited liability company with its principal place of business at 10880 Wilshire Blvd., Los Angeles, California. Defendant Martell Capital Group LLC is registered to do business under the service mark “Irongate,” and as recently as March 2023 it has filed fictious business name statements in Los Angeles County stating that it is doing business as “Irongate” and “Irongate LLC.”
10. Defendant JG Martell Group LLC is a Delaware limited liability company with its principal place of business at 10880 Wilshire Blvd., Los Angeles, California.
11. Defendant Irongate LLC is a limited liability company with its principal place of business at 10877 Wilshire Blvd., Los Angeles, California.
12. Defendant Costa Palmas Beach and Yacht Club (US) LLC is a Delaware limited liability company that conducts business from its offices in California, maintains employees in California, and has entered into a significant number of contracts with citizens and residents of California.
13. Defendant Jason Grosfeld is an individual who resides in Los Angeles County, California. Defendant Grosfeld is a principal of Defendants Martell Capital Group LLC, JG Martell Group LLC, Irongate LLC, and Costa Palmas Beach and Yacht Club (US) LLC.
14. Defendant Michael Radovan is an individual who served at all relevant times as Managing Director of Sales for the entity Defendants and was the main point of contact with Plaintiff throughout the sales process.
15. The true names and capacities, whether individual, corporate, associate, partner or otherwise, of DOES 1 through 10, inclusive, are unknown to Plaintiff, who therefore sues said defendants by such fictitious names. Plaintiff will move to amend this Complaint to show their true names and capacities when the same have been ascertained. Plaintiff is also unaware of the basis of liability as to some or all fictitious defendants sued herein as DOES 1 through 10, inclusive, but believes that their liability arises out of the same general facts as set forth herein. Plaintiff will move to amend this Complaint to assert the theories of liability of said fictitiously named defendants when they have been ascertained.
16. Plaintiff is informed and believes that, at all times mentioned in this Complaint, each of Defendants Jason Grosfeld, Michael Radovan, Martell Capital Group LLC, JG Martell Group LLC, Irongate LLC, Costa Palmas Beach and Yacht Club (US) LLC and DOES 1 through 10, were acting as the agents, servants, employees, partners, or joint venturers of each other and were acting within the full course and scope of their agency, employment or joint venture with respect to the acts complained of in this Complaint and with the full knowledge and consent, either express or implied, of each other. As such, and based on the theories of liability detailed in this Complaint, Defendants and DOES 1 through 10 are jointly and severally liable to Plaintiff.
JURISDICTION AND VENUE
17. The Court has jurisdiction over this action, including pursuant to Code of Civil Procedure section 410.10. This action seeks an amount in excess of the jurisdictional minimum of this Court.
18. Jurisdiction exists over Defendants because Defendants Grosfeld and Radovan are and at all relevant times were residents of California, and Defendants Martell Capital Group LLC, JG Martell Group LLC, Irongate LLC, and Costa Palmas Beach and Yacht Club
(US) LLC each do business in California and maintain their principal places of business in Los Angeles, California.
19. Venue is proper in this Court pursuant to Code of Civil Procedure 395(a), as each of the Defendants resides in or maintains it principal places of business in Los Angeles, California.
GENERAL ALLEGATIONS
Defendants’ History Of Deceptive Real Estate Offerings In Mexico, Including With The Trump Organization
20. Unbeknownst to Plaintiff, by the time Defendants solicited Plaintiff to invest in the Costa Palmas development in December of 2017, Defendants had a history of defrauding real estate investors in similar offerings for luxury residences in Mexico. As Plaintiff has since learned, more than 100 plaintiffs sued Defendants (and their predecessor entities) in 2008 in an action alleging fraud in the sale and marketing of a luxury condominium development joint venture project with Donald Trump and the Trump Organization in Baja, California (the “Trump Lawsuit”).
21. As alleged in the Trump Lawsuit, “the [Baja development] was marketed as a partnership between the Trump Organization CEO, Donald J. Trump on the one hand, and the self-described ‘Los Angeles-based real estate development and investment company,’ IRONGATE and IRONGATE’S principals, on the other hand.” Among the named defendants in the Trump Lawsuit were Jason Grosfeld, Irongate Development, Irongate Wilshire, and Irongate Capital Partners.
22. According to the allegations in the Trump Lawsuit, Grosfeld and the Irongate corporate entities misrepresented the role of Donald Trump in the Baja development, claiming that Donald Trump was a “co-developer” and that the Baja project was part of the Trump real estate portfolio. Potential buyers allegedly were misled by various press releases and by representations made at lavish promotional events sponsored by Grosfeld and Irongate, and attend by Ivanka Trump and Donald Trump, Jr. The Trump Lawsuit further alleges that
Defendants had in fact merely licensed the “Trump” name for use in promoting the development.
23. Similar to the false representations made to Plaintiff in this case, the Trump Lawsuit further alleges that Grosfeld and the Irongate companies falsely claimed that the Baja project would be fully permitted and would be completed on schedule, that the buyers’ money would be held in escrow and used solely for construction on their units, and that the success of this Baja project was assured by a history of similar successful developments. In addition, as in this case, the Trump Lawsuit alleges that Grosfeld and Irongate used special-purpose Mexican entities in an attempt to shield themselves from liability. The Trump Lawsuit further alleges that Grosfeld and the Irongate entities collected and spent all the deposit money, and then failed to get a construction loan.
The Current Defendants Are A Continuation Of The Same Irongate Defendants Accused Of Fraud In The Trump Lawsuit
24. Each of the Irongate corporate entities sued as defendants in the Trump Lawsuit was subsequently dissolved and terminated, in an apparent attempt by Defendants to cover their tracks and prevent future buyers from learning the truth about Irongate. Although the Irongate corporate entities named in the Trump Lawsuit have since been disbanded, the corporate entities named as Defendants in the instant lawsuit are obvious continuations of those entities. For example, named Defendants Martell Capital Group LLC and JG Martell Group LLC operate out of the same building used by the now-dissolved Irongate entities: 10880 Wilshire Blvd., in Los Angeles. And current Defendant Irongate LLC maintains its offices directly across the street, at 10877 Wilshire Blvd. The current and former Irongate corporate entities share Jason Grosfeld as their principal officer.
25. While the corporate names may have changed since the Trump Lawsuit, the fraudulent tactics have not: Grosfeld and his Wilshire Boulevard real estate development companies are once again using false representations and underhanded business tactics to induce buyers to invest in a “can’t miss” luxury development in Mexico.
Defendants Use False Promises To Induce Plaintiff’s Purchase Of A Home In
The Costa Palmas Development
26. In 2017, Defendants approached Plaintiff with an opportunity to get in on the “ground floor” of what Defendants described as the most prestigious new residential development in Cabo San Lucas, arguably Mexico’s premier destination for luxury travel. A primary selling point of the Costa Palmas residence was its association with the Four Seasons, and the construction of a Four Seasons Hotel with associated amenities on the same property as the residence.
27. The development was called “Costa Palmas,” and Irongate’s website (irongp.com) described it as follows:
Costa Palmas is a 1000-acre master plan on Baja’s scenic East Cape. Set on two miles of white sand swimmable beach on the Sea of Cortés, the resort plans include a full-service marina, a golf course designed by Robert Trent Jones II, a marina village, organic farms, and the members-only Costa Palmas Beach & Yacht Club. It will also be home to Four Seasons Resort Los Cabos and ultimately at least two more internationally positioned hospitality and lifestyle brands.
28. Plaintiff was one of the very first potential buyers solicited by Defendants to purchase a luxury home in the Costa Palmas development. Eager to use Plaintiff’s purchase as a selling point to secure needed capital and project credibility to other prospective buyers and lenders, Defendants repeatedly assured Plaintiff that the residence would be completed in short order, and in no case later than the “outside completion date” of June 2019.
29. When pressed by Plaintiff regarding their ability to complete the residence in approximately 15 months, Defendants claimed that missing the June 2019 completion date was simply not an option: Defendants explained that they could not let that date slip because the neighboring Four Seasons Hotel which anchors the development project could not open until construction on Plaintiff’s residence was completed.
30. For example, during an in-person sales meeting with Plaintiff at the Costa Palmas development in Mexico in December 2017, Defendant Michael Radovan represented that Defendants had no choice but to complete Plaintiff’s residence on (or ahead of) schedule
because the neighboring Four Seasons Hotel could not open until Defendants completed construction on the residences. According to Radovan, the high standards of the Four Seasons prevented it from operating the hotel in a location “immediately adjacent to construction.”
During this face-to-face meeting in December 2017 Radovan thus made the unqualified assurance to Plaintiff that: “We will build the home in 15 months because we have to.” This promise was made repeatedly in 2017 and 2018, in the months leading up to Plaintiff’s execution of the PSA.
31. In addition to false promises regarding the completion date, Defendants including CEO Jason Grosfeld repeatedly assured Plaintiff that the residence in the Costa Palmas development would be built to the highest quality standards, consistent with the standards of the Four Seasons, and that their extensive experience with similar developments assured the timely and successful construction of the residence. Among other occasions, these representations were made by Grosfeld during a telephone conference in February 2018, shortly before Plaintiff agreed to purchase the residence.
32. Defendants Grosfeld and Radovan further assured Plaintiff that the Costa Palmas development had obtained all necessary permits and was compliant in all respects with Mexican law regarding private coastal access and environmental mitigation.
33. These promises were false. Defendants had no intention of completing the residence by June 2019, and contrary to their assertions the neighboring Four Seasons hotel opened for business despite ongoing construction on the “adjacent residences,” including the home purchased by Plaintiff. Contrary to the assurances Defendants made to Plaintiff, the supposed hard “outside” deadline that Defendants claimed would require them to complete the residence by June 2019 did not exist.
34. Moreover, there was no meaningful track record of similar successful developments, as Defendants had claimed. Rather, as discussed above, Defendants’ previous attempt at a luxury residential development in Mexico had been disastrous, and the result was the Trump Lawsuit.
35. In addition, Plaintiff has learned that Defendants did not in fact obtain the necessary permits for the Costa Palmas development, as represented to Plaintiff by Defendants Grosfeld and Radovan. Permits that should have been obtained by Defendants but on information and belief were not included permits relating to construction, safety, beach access, and environmental regulations.
36. More fundamentally, Plaintiff has learned that his property interests in the residence may be at risk because Defendants failed to obtain all necessary permits from the Mexican Ministry of Agriculture and/or the Ejido Authority (a rural authority which protects the land and rights of the community). This same situation also affects the property rights of the Costa Palma development, in general.
37. On the basis of these false promises from Defendant, in April 2018 Plaintiff proceeded to purchase the residence.
After the Sale, Defendants Continued To Mislead Plaintiff Regarding “Progress” On The Residence
38. It is now almost four years past the June 2019 completion date promised by Defendants, and Plaintiff’s residence still has not been completed. This is despite Plaintiff’s full cooperation and compliance, including progress payments made by Plaintiff in good faith, even when construction of the residence was woefully behind schedule. Notably, the June 2019 “outside” completion date promised by Defendants was well before any impacts of the COVID-19 global pandemic that began nine-months later, in March 2020.
39. Throughout this time, and in an effort to prevent Plaintiff from demanding return of its deposit, Defendants repeatedly misrepresented the status of construction on the residence by overstating progress and assuring Plaintiff that completion was imminent, when it was not. Defendants’ conduct in this case reflects a blatant disregard for the rights and interests of Plaintiff and others who purchased residences in Irongate developments. Defendants are willing to say whatever is expedient to induce purchasers to make “progress” payments toward their homes, even when that progress is a sham.
To Induce A $1.575 Million Payment From Plaintiff, Defendants Falsely Claim That The Residence Is “Substantially Complete”
40. On September 6, 2022, with the residence still not completed more than three years after the June 2019 completion date, Defendants sent Plaintiff a notice stating that “Substantial Completion ha[d] occurred” on the residence, and claiming that Plaintiff was thus obligated to make a “Substantial Completion Deposit” of $1,575,000 within one week.
41. When Plaintiff asked for additional time and information to inspect the home before paying the deposit, Defendants took a hardline approach: (i) insisting that “Substantial Completion of the Unit has occurred,” and (ii) refusing to extend Plaintiff’s time to inspect the home by more than a few days. This letter and all related correspondence from Defendants was emailed to Plaintiff from Mitch Laufer, using the following signature block: “Director, Legal (US), Irongate.”
42. It was only after paying the $1.575 million to Defendants, and also paying expenses to travel to Mexico for an inspection, that Plaintiff learned Defendants’ substantial completion notice had been a sham. Upon arriving at the residence to perform an inspection on September 21, 2022, Plaintiff found the residence in a state of total disarray: the stove and other basic appliances were not installed; restrooms had no sinks, countertops, or running water, and toilets did not flush; staircases were still being built; the temperature control systems were not installed, etc.
The following are just three photographs taken during the inspection that occurred weeks after Defendants claimed the home was substantially complete and ready to be occupied:
43. In all, Plaintiff identified over 600 unfinished, damaged and inferior build quality items in the home, and noted in many instances where the construction fell decidedly short of the “highest standards” promised by Defendants. Far from being “substantially complete,” the home was not even remotely inhabitable, and Defendants could not possibly have believed that it was. Instead, Defendants had fraudulently issued the Substantial Completion Notice knowing the residence was uninhabitable, and for the purpose of inducing Plaintiff to pay the $1,575,000 Substantial Completion Deposit before Plaintiff could inspect the residence.
44. Only after Defendants ran out of lies did they admit the obvious: Plaintiff’s home was not and had never been in a state of “substantial completion.” In October 2022, Defendants wrote to Plaintiff admitting that their representation of substantial completion had been false and retracting the “Original Substantial Completion Notice.” As of the filing of this Complaint, nearly five months later, the home remains uninhabitable and Defendants still have not issued a new notice of substantial completion.
45. Defendants’ attempt to deliver the home with hundreds of obvious and visible defects, while simultaneously refusing to provide construction drawings and related documentation, suggests that the home also suffers from serious structural deficiencies.
Indeed, since Defendants began delivering homes in the Costa Palmas development to their owners, a partial list of reported issues includes a collapsed roof, HVAC systems that needed to be replaced because they were inadequately designed and could not heat the units, sewage backups in the residences, propane systems with such limited capacity that they could not supply the owners’ basic needs, outside decks that directed runoff towards the structure and resulted in flooding, and non-existent or incomplete barriers to lead to flooding of units. Even worse, in a near-tragic accident, a young child was pulled underwater in a hot tub at a newly delivered Costa Palmas unit when their hair was sucked into an improperly-configured water intake pipe, trapped underwater until adults could pull the child free.
46. Plaintiff’s attempts to assess the true extent of defects at the residence, however, have been repeatedly thwarted by Defendants, who refuse to provide Plaintiff access to basic construction documents, plans, specifications and experts, all while insisting that Plaintiff instead rely on their “just trust us” assurances.
Defendants Retaliate Against Plaintiff By Wrongfully Terminating Its Beach Club Membership
47. In connection with its purchase of the residence, Plaintiff was offered, and accepted, membership in the Beach and Yacht Club (the “Beach Club”) that is managed by Costa Palmas Beach and Yacht Club (US) LLC. Membership in the Beach Club has significant value to residents of Costa Palmas, and provides access to exclusive restaurants, shops, and facilities not available to non-members. Membership in the Beach Club is valuable not only for the access and experiences it provides, but also because the membership is transferable to a subsequent purchaser of a Costa Palmas residence and thus greatly increases the resale value of the residences.
48. Prior to the filing of this action, Plaintiff informed Defendants that it intended to protect its legal interests as necessary, including by initiating a lawsuit. Defendants’ response was to intimidate Plaintiff with repeated threats to cancel its membership at the Beach Club in retaliation for legal action. For example, Defendant Radovan made the following threat in a January 4, 2023 email to Steve Anderson, while claiming to act as Plaintiff’s “advocate”:
The other component to this is your Club Membership. Filing lawsuits, posting disparaging videos etc. are all putting that at risk, whether its suspension and or termination. They can terminate your membership for this. I don’t want that to happen and neither do you. It’s also a poor path for your real estate investment if you don’t have a membership attached. This is a very important consideration. Again, this is not a threat but my advice solely as your advocate.
49. This action was filed on March 17, 2023, and just one week later Defendants carried through on their retaliatory threats: on March 24, 2023 Costa Palmas Beach and Yacht Club (US) LLC informed Plaintiff that its membership in the Beach Club had been terminated. The termination notice openly conceded that termination was a response to this lawsuit, and expressly referenced the “complaint” filed by Plaintiff “with the Superior Court of the State of California for the County of Los Angeles.” The notice of termination went on to state that, “[a]ccordingly, pursuant to the ‘Discipline’ section of the Rules and Regulations, your Club membership and all privileges associated therewith (including, but not limited to, the ability to transfer your Club membership to a subsequent purchaser of your residence in the Community) are terminated effective immediately.”
50. The termination of Plaintiff’s Beach Club membership was inherently wrongful, not least because as it was carried out in retaliation for Plaintiff’s legitimate exercise of its legal rights. The termination was also wrongful because it violated the terms of the very Membership Plan and Rules and Regulations that Costa Palmas Beach and Yacht Club (US) LLC claimed to rely upon. Those documents do not permit termination on the basis of a member’s exercise of legal rights, particularly considering that the Costa Palmas Beach and Yacht Club (US) LLC was not a named defendant to the original complaint filed in this action. Moreover, the Costa Palmas Beach and Yacht Club (US) LLC violated its own Rules and Regulations by terminating Plaintiff’s membership without notice and without a hearing both of which are required prior to disciplinary action.
51. The termination of Plaintiff’s Beach Club membership agreement was carried out at the direction of Defendants Grosfeld, Radovan, Martell Capital Group LLC, JG Martell Group LLC, and Irongate LLC, none of whom was a party to the membership agreement.
Indeed, Mr. Radovan acting on behalf of the entity Defendants had threatened to terminate Plaintiff’s Beach Club membership if it filed suit.
52. As a result of the Defendants’ retaliation against Plaintiff by terminating its Beach Club membership, Plaintiff has been significantly damaged. Plaintiff’s damages include the value of its lost use and enjoyment of Beach Club, and the reduced resale value of Plaintiff’s residence resulting from Defendants’ assertion that, as a consequence of the termination, Plaintiff can no longer transfer its membership rights to a subsequent purchaser of the residence.
FIRST CAUSE OF ACTION
Fraudulent Misrepresentation and Concealment
(Against Defendants Jason Grosfeld, Michael Radovan, Martell Capital Group LLC, JG Martell Group LLC, and Irongate LLC)
53. Plaintiff adopts and reasserts the allegations in paragraphs 1-52 as if fully set forth herein.
54. In promoting the Costa Palmas development and soliciting Plaintiff’s purchase of the residence, Defendants made false and fraudulent representations to Plaintiff, while concealing material facts. Defendants assured Plaintiff that the residence would be completed in short order, and in no case later than the “outside completion date” of June 2019. Defendant Michael Radovan, represented that Defendants had no choice but to complete Plaintiff’s residence on (or ahead of) schedule because Defendants would be unable to open the neighboring Four Seasons Hotel until the residence was completed. As Radovan represented to Plaintiff during an in-person meeting in December 2017: “We will build the home in 15 months because we have to.” According to Defendants, the high standards of the Four Seasons prevented it from operating the hotel in a location “immediately adjacent to construction.”
55. Defendants—including CEO Jason Grosfeld also assured Plaintiff that the residence in the Costa Palmas development would be built to the highest quality standards, and that their extensive experience with similar developments assured the timely and successful
construction of the residence. These representations were made by Grosfeld during a telephone conference in February 2018, shortly before Plaintiff agreed to purchase the residence.
56. Defendants Grosfeld and Radovan further assured Plaintiff that the Costa Palmas development had obtained all permits and was compliant in all respects with Mexican law.
57. In fact, these promises were each false. Defendants had no intention of completing the residence by June 2019, and contrary to their assertions the neighboring Four Seasons hotel ultimately opened for business despite ongoing construction on their residences. Moreover, there was no meaningful track record of similar successful developments: as discussed above, Defendants’ previous attempt at a luxury residential development in Mexico had been disastrous, and the result was the Trump Lawsuit.
58. In addition, Plaintiff has now learned that Defendants did not obtain necessary permits for the Costa Palmas development, as previously represented to Plaintiff by Defendants Grosfeld and Radovan. Permits that should have been obtained by Defendants but on information and belief were not include permits and authorizations relating to property transfer, construction, safety, beach access and environmental regulations and ordinances.
59. For example, Defendants did not follow the necessary procedures to develop the Mexican “Ejido” land, or land in which multiple members of a traditional community have ownership rights, for transfer to foreign owners. Defendants’ failure to obtain these required permits threatens Plaintiff’s property interests in the home and the viability of the Costa Palmas development in general. On the basis of these false promises from Defendants, Plaintiff proceeded to purchase the residence in April 2018. Had Plaintiff known the falsity of Defendants’ representations, it never would have agreed to purchase the residence.
60. After Plaintiff agreed to purchase the home and deposited millions of dollars towards its construction, Defendants made additional false and fraudulent representations to Plaintiff. Among other false statements and concealments, on September 6, 2022, with the residence still not completed more than three years after the June 2019 completion date,
Defendants sent Plaintiff a “Substantial Completion Notice & Closing Notice” (the “Notice”). According to the Notice, “Substantial Completion ha[d] occurred” at the residence and thus Plaintiff was obligated to make a “Substantial Completion Deposit” of $1,575,000 within one week.
61. When Plaintiff asked for additional time and information to inspect the home before paying the deposit, Defendants took a hardline approach: (i) insisting that “Substantial Completion of the Unit has occurred,” and (ii) refusing to extend Plaintiff’s time to inspect the home by more than a few days. Notably, this letter and all related correspondence from Defendants were emailed to Plaintiff from Mitch Laufer, using the following signature block: “Director, Legal (US), Irongate.”
62. It was only after being pressured into paying the $1.575 million, and also paying expenses to travel to Mexico for an inspection, that Plaintiff learned Defendants’ substantial completion notice had been a sham. Far from being “substantially complete,” the home was nowhere near inhabitable and Defendants could not have possibly believed that it was. Instead, Defendants issued the Substantial Completion Notice knowing the uninhabitable state of the residence, and for the purpose of inducing Plaintiff to pay the $1,575,000 Substantial Completion Deposit before an inspection could take place.
63. In fact, after Plaintiff traveled to Mexico, documented the condition of the home, and confronted Defendants with their blatant misrepresentations regarding the alleged “substantial completion,” Defendants were forced to admit that their prior statements were lies. In a letter dated October 12, 2022, again emailed from “Irongate” counsel, Defendants admitted: “Upon further consideration and review of the Unit at the time of your inspection thereof, Seller agrees that the Original Substantial Completion Notice was delivered prematurely, and hereby retracts the Original Substantial Completion Notice.”
64. Plaintiff has since learned that this conduct is consistent with Defendants’ pattern and practice of delivering homes to purchasers as supposedly “complete,” and then refusing to complete the obviously defective “punch list” items in a reasonable manner,
thereby allowing Defendants to collect large sums of deposit money while leaving the homes in an uninhabitable or otherwise unfinished state.
65. As a direct and proximate result of Defendants’ actions, Plaintiff has suffered injuries and damages, including direct and consequential damages, in an amount to be ascertained according to proof at trial, but believed to exceed $20 million.
66. The conduct of Defendants was intentional and committed willfully, maliciously, with fraud, oppression, ill will and in conscious disregard of Plaintiff’ rights, and constitutes clear and convincing evidence of despicable, outrageous, oppressive, and malicious conduct pursuant to California Code of Civil Procedure section 3294. Plaintiffs are entitled to punitive and exemplary damages against Defendants, and each of them, in an amount as the jury may find necessary for the sake of example to punish these Defendants for their unlawful conduct and in an amount sufficient to deter Defendants from engaging in similar conduct against others in the future.
SECOND CAUSE OF ACTION
Negligent Misrepresentation
(Against Defendants Jason Grosfeld, Michael Radovan, Martell Capital Group LLC, JG Martell Group LLC, and Irongate LLC)
67. Plaintiff adopts and reasserts the allegations in paragraphs 1-66 as if fully set forth herein.
68. As alleged herein, Defendants made multiple false representations, both before and after Plaintiff agreed to purchase the residence, including the following: that Defendants had no choice but to complete Plaintiff’s residence on (or ahead of) schedule because Defendants would be unable to open the neighboring Four Seasons Hotel until the residence was completed; that the residence in the Costa Palmas development would be built to the highest quality standards and that their extensive experience with similar developments assured the timely and successful construction of the residence; that the Costa Palmas development had obtained all permits and was compliant in all respects with Mexican law
regarding coastal access, property rights, and environmental mitigation; and that the residence was “substantially complete” as of September 6, 2022.
69. Defendants had no reasonable ground for believing the representations were true when they made them. Defendants made the representations for the purpose of inducing Plaintiff to rely upon them or to refrain from acting in reliance thereon. Plaintiff, at the time that Defendants made these false representations, was unaware of the falsity of the representations. Plaintiff could not, through the exercise of reasonable diligence, have discovered the fraud that was perpetrated by these Defendants. Plaintiff justifiably relied on the false representations made by Defendants.
70. As a direct and proximate result of Defendants’ actions, Plaintiff has suffered injuries and damages, including direct and consequential damages, in an amount to be ascertained according to proof at trial, but believed to exceed $20 million.
THIRD CAUSE OF ACTION Breach of Contract
(Against Costa Palmas Beach and Yacht Club (US) LLC)
71. Plaintiff adopts and reasserts the allegations in paragraphs 1-70 as if fully set forth herein.
72. Plaintiff entered into a binding and enforceable contract with the Costa Palmas Beach and Yacht Club (US) LLC, granting Plaintiff membership rights at the Beach Club.
73. Plaintiff has performed all of its obligations under the contract with Costa Palmas Beach and Yacht Club (US) LLC, or has been excused from such performance.
74. Costa Palmas Beach and Yacht Club (US) LLC breached its obligations under the contract with Plaintiff by terminating Plaintiff’s membership on improper grounds. One week after Plaintiff filed this lawsuit, on March 24, 2023, Costa Palmas Beach and Yacht Club (US) LLC informed Plaintiff that its membership in the Beach Club had been terminated. The termination notice openly conceded that the termination was in response to this lawsuit, and expressly referenced the “complaint” filed by Plaintiff “with the Superior Court of the State of California for the County of Los Angeles.” The notice of termination went on to state that,
“[a]ccordingly, pursuant to the ‘Discipline’ section of the Rules and Regulations, your Club membership and all privileges associated therewith (including, but not limited to, the ability to transfer your Club membership to a subsequent purchaser of your residence in the Community) are terminated effective immediately.” The termination of Plaintiff’s Beach Club membership was inherently wrongful, and was carried out in retaliation for Plaintiff’s legitimate exercise of legal rights. The termination was also wrongful according to the terms of the very Membership Plan and Rules and Regulations that Costa Palmas Beach and Yacht Club (US) LLC claimed to rely upon. Those documents do not permit termination on the basis of a member’s exercise of legal rights, particularly considering that the Costa Palmas Beach and Yacht Club (US) LLC was not a named defendant to the original complaint filed in this action.
75. The Costa Palmas Beach and Yacht Club (US) LLC also breached the contract with Plaintiff when it violated its own Rules and Regulations by terminating Plaintiff’s membership without notice and without a hearing—both of which are required prior to disciplinary action.
76. As a direct and proximate cause of the breaches of contract by the Costa Palmas Beach and Yacht Club (US) LLC, Plaintiff has been damaged in an amount according to proof, including but not limited to the lost use and enjoyment of the Beach Club, and the diminished value of Plaintiff’s residence given that Defendants have asserted that, as a consequence of the termination, Plaintiff cannot transfer its membership rights to a subsequent purchaser of the residence.
FOURTH CAUSE OF ACTION
Breach of Covenant of Good Faith And Fair Dealing
(Against Costa Palmas Beach and Yacht Club (US) LLC)
77. Plaintiff adopts and reasserts the allegations in paragraphs 1-76 as if fully set forth herein.
78. Plaintiff entered into a contract with the Costa Palmas Beach and Yacht Club (US) LLC , as described herein. The covenant of good faith and fair dealing is implied in the
contract between Plaintiff and the Costa Palmas Beach and Yacht Club (US) LLC, and Costa Palmas Beach and Yacht Club (US) LLC was thus bound by a covenant to act in good faith and deal fairly with Plaintiff, and to not act in a manner that would interfere with the rights, privileges, and benefits provided to Plaintiff under that contract.
79. Plaintiff did all, or substantially all of the significant things that the contract required it to do, or was excused from having to do those things;
80. All conditions required for Costa Palmas Beach and Yacht Club (US) LLC’s performance of the contract had occurred or were excused;
81. Despite this, the Costa Palmas Beach and Yacht Club (US) LLC has prevented Plaintiff from receiving the rights, privileges, and benefits to which it was entitled under the contract. Specifically, the Costa Palmas Beach and Yacht Club (US) LLC acted unfairly by terminating Plaintiff’s membership in retaliation for Plaintiff’s legitimate initiation of legal proceedings against non-parties to the contract
82. In doing so, Costa Palmas Beach and Yacht Club (US) LLC did not act fairly or in good faith.
83. As a direct and proximate result of Costa Palmas Beach and Yacht Club (US) LLC’s breach of the covenant of good faith and fair dealing, Plaintiff has been damaged in an amount according to proof at trial.
FIFTH CAUSE OF ACTION
Intentional Interference With Contractual Relations
(Against Defendants Jason Grosfeld, Michael Radovan, Martell Capital Group LLC, JG Martell Group LLC, and Irongate LLC)
84. Plaintiff adopts and reasserts the allegations in paragraphs 1-83 as if fully set forth herein.
85. Plaintiff was in contractual relationships with third parties, including the Purchase Sales Agreement with Desarrolladora La Ribera, S. De R.L. De CV (“La Ribera”) dated April 19, 2018 (the “Sales Agreement”), and the Beach Club membership agreement with Costa Palmas Beach and Yacht Club (US) LLC.
86. Defendants knew of Plaintiff’s contracts with La Ribera and Costa Palmas Beach and Yacht Club (US) LLC.
87. Despite this knowledge, Defendants took steps to cause La Ribera to breach the Sales Agreement with Plaintiff, or otherwise prevent performance of the contract or make performance more expensive or difficult. Defendants further took steps to cause Costa Palmas Beach and Yacht Club (US) LLC to breach the membership agreement with Plaintiff, or otherwise prevent performance of the contract or make performance more expensive or difficult.
88. Defendants’ misconduct in fact caused La Ribera to breach the Sales Agreement. Among other things, Defendants caused La Ribera to breach the Sales Agreement by missing the Outside Completion Date, failing to construct the residence according to the agreed-upon specifications, and by sending a Substantial Completion Notice in bad faith, and with knowledge that the residence was not in fact substantially complete.
89. Defendants intended for their conduct to disrupt the performance of the contract between Plaintiff and La Ribera or, at minimum, Defendants knew that such disruption was substantially certain to occur.
90. In addition, Defendants’ misconduct in fact caused Costa Palmas Beach and Yacht Club (US) LLC to breach the membership agreement with Plaintiff, by terminating the agreement in retaliation for Plaintiff’s legitimate exercise of its legal rights. This termination was unjustified, and violated not only the contract between Plaintiff and Costa Palmas Beach and Yacht Club (US) LLC, but also violated the terms of the Costa Palmas Beach and Yacht Club (US) LLC’s own Rules and Regulations.
91. Defendants intended for their conduct to disrupt the performance of the contract between Plaintiff and Costa Palmas Beach and Yacht Club (US) LLC or, at minimum, Defendants knew that such disruption was substantially certain to occur.
92. Plaintiff has suffered actual and consequential damages from Defendants’ interference in an amount to be proven at trial. Moreover, the conduct of Defendants was intentional and committed willfully, maliciously, with fraud, oppression, ill will and in
conscious disregard of Plaintiff’s rights, and constitutes clear and convincing evidence of despicable, outrageous, oppressive, and malicious conduct pursuant to California Code of Civil Procedure section 3294. Plaintiffs are entitled to punitive and exemplary damages against Defendants, and each of them, in an amount as the jury may find necessary for the sake of example to punish these Defendants for their unlawful conduct, and to deter Defendants from engaging in similar conduct in the future.
SIXTH CAUSE OF ACTION
Violation Of Business & Professions Code Section 17200
(Against All Defendants)
93. Plaintiff realleges and incorporates by reference paragraphs 1-92 as if fully set forth herein.
94. The Defendants’ wrongful acts alleged herein constitute unlawful, unfair, and fraudulent business practices within the meaning of Business & Professions Code §§ 17200, et seq.
95. Plaintiff seeks to enjoin Defendants from engaging in these fraudulent, unfair, and unlawful business practices. As a proximate result of the unlawful, unfair, and fraudulent business acts and practices alleged herein, Plaintiff paid approximately $6,825,000 to Defendants. Plaintiff demands restitution of all amounts paid to Defendants, and seeks to enjoin Defendants from further unlawful conduct.
PRAYER FOR RELIEF
Plaintiff prays for the following relief:
1. For punitive and exemplary damages according to proof at trial.
2. For damages in an amount according to proof at trial;
3. For pre-judgment and post-judgment interest;
4. For restitution and/or disgorgement according to proof;
5. For preliminary and permanent injunctive relief enjoining Defendants’ unfair business acts and practices;
6. For civil penalties as provided by law;
7. For attorneys’ fees and costs incurred; and
8. For such other relief as the Court deems just and proper.
DATED: May 3, 2023
STRADLING YOCCA CARLSON & RAUTH, A Professional Corporation
By: Jason de Bretteville Justin Owens Vivian Bickford Attorneys for Plaintiff GS 1975 LLC
DEMAND FOR JURY TRIAL
Plaintiff respectfully demands a trial by jury of all causes of action so triable.
DATED: May 3, 2023
STRADLING YOCCA CARLSON & RAUTH, A Professional Corporation
By: Jason de Bretteville Justin OwensVivian
BickfordAttorneys for Plaintiff GS 1975 LLC
PROOF OF SERVICE
STATE OF CALIFORNIA
COUNTY OF ORANGE
I am employed by Stradling Yocca Carlson & Rauth A Professional Corporation in the County of Orange, State of California. I am over the age of 18 and not a party to the within action. My business address is: 660 Newport Center Drive, Suite 1600, Newport Beach, CA 92660-6422. On May 3, 2023, I served the within documents: FIRST AMENDED COMPLAINT FOR:
1. FRAUDULENT MISREPRESENTATION AND CONCEALMENT
2. NEGLIGENT MISREPRESENATION
3. BREACH OF CONTRACT
4. BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
5. INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS
6. VIOLATION OF BUS. & PROF. CODE § 17200 DEMAND FOR JURY TRIAL
By email or electronic transmission. Based on a court order or an agreement of the parties to accept service by electronic transmission, I caused a copy of the document(s) to be sent from e-mail address kmilanowski@stradlinglaw.com to the person(s) at the email address(es) as set forth below. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful.
STALWART LAW GROUP
David M. Angeloff - david@stalwartlaw.com
Cindy Hickox - cindy@stalwartlaw.com
Dylan Ruga - dylan@stalwartlaw.com
8752 Holloway Drive
West Hollywood, CA 90069
T: 310-954-2000
F: 310-943-0303
cc: josh@stalwartlaw.com
Attorneys for Defendant Jason Grosfeld, Irongate AZREP BW LLC, Irongate LLC, JG Martell Group LLC, Martell Capital Group LLC, Michael Radovan
I declare that I am employed in the office of a member of the bar of this court whose direction the service was made. I declare under penalty of perjury under the laws of the State of California that the above is true and correct.
Executed on May 3, 2023 at Newport Beach, California
By: Kayla Milanowski