Treble Damages for Improper LP Distributions

US Supreme Court Building

On July 21, 2022, the California Supreme Court provided a decision in a high-profile lawsuit, Siry Investments vs. Saeed Farkhondehpour. This decision adopts a limited partners position that the state’s civil theft statue applies to the theft of business funds. If business disputes and other cases where a defendant allegedly stole a form of property, will now qualify for treble damages.

Background of Initial Treble Damages Lawsuit

According to Legal Newswire, Siry Investment, L.P., was a limited partner that joined a partnership with a real estate company. Additionally, the company’s main shared asset was a Los Angeles building used by small business for swap meets. Furthermore, the asset in use would provide income for the partnership via rent collection from the tenants. As a result of a resolution from a prior lawsuit by other limited partners, Siry filed a second lawsuit to recover damages. Also in this lawsuit, Siry claimed the damages were allegedly caused by other partners’ misdeeds in managing the partnership. In addition, after the first trial, Siry was awarded $3.5 million in damages, which was reversed by appeal.

In 2013, following the appeal, Siry sought treble damages and attorney’s fees under California’s civil theft statute. After a research period, Siry obtained a dismissal and a default judgment against other partners. After extensive court arguments, the court found that the civil theft statute does not apply to theft of partnership funds. Because the statute does not apply to theft of partnership funds, it eliminates attorney’s fees and treble damages. However, Cooper, on behalf of Siry, challenged the Court’s decision, successfully obtaining a review in the California Supreme Court. Therefore, the California Supreme Court found that the statute applies to all forms of commercial and non-commercial litigation.

In the end, this decision is a substantial change in California’s court system. The damaged partner in a case can now collect up to three times the damages awarded in the case. A partner can receive damage in different ways by the other partner, including:

  • The partner is allegedly illegally and intentionally diverting money to another partner through failing to pay due dividends
  • Locking out a partner of a company
  • Setting up side business to divert partnership revenue

MWA’s National Commercial Litigation Attorneys

Our national commercial litigation attorneys are no stranger to unfair partners trying to make the most money for themselves. Our track record includes a $24 million verdict in a commercial breach of fiduciary duty case involving a locked out partner. We have years of experience litigating a broad range of commercial lawsuits against even the largest corporations. Our team is will passionately advocate for your business’ right to receive compensation for injustices that threaten your business.

If you need an attorney to represent you in your commercial litigation matters, contact McCune Wright Arevalo today by completing the form or calling (909) 345-8110 today!

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