Trials & Litigation

Lawyer finds two words that doom billion-dollar case

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A lawyer with a BigLaw firm was able to thwart a billion-dollar qui tam case against the Lennar Corp. when she found a California real estate developer’s name on a change-of-counsel form.

Reuters columnist Jenna Greene has the story on the find by O’Melveny & Myers counsel Megan Smith. Greene described Smith as “a discovery sleuth who struck gold, unraveling a billion-dollar case with just two words buried in an innocuous document.”

The real estate developer, Nicolas Marsch III, was previously a creditor who agreed to waive all claims related to a bankrupt Lennar Corp. entity, LandSource Communities Development, after the Lennar Corp. contributed nearly $140 million to the bankrupt estate.

The Lennar Corp. suspected that Marsch was behind the qui tam case filed by an entity called Citizens Against Corporate Crime but had no proof ahead of discovery.

The qui tam case had alleged that LandSource Communities Development used inflated appraisals and made material misrepresentations, costing the nation’s largest public pension fund, CalPERS, a LandSource Communities Development investor, about $970 million.

After Smith found that Marsch’s signature was on the form in the qui tam case, a Delaware court blocked the lawsuit because of the release of claims in bankruptcy.

The decision was upheld by the 3rd U.S. Circuit Court of Appeals at Philadelphia, Law360 reported in December 2020. The U.S. Supreme Court refused to hear the case last month.

Marsch had a bitter history with the Lennar Corp., according to Reuters.

His company, Briarwood Capital, had become embroiled in litigation with the Lennar Corp. when their joint work on a development near San Diego turned sour. The Lennar Corp. won the case in 2011. The Lennar Corp. alleged in a separate lawsuit that Marsch procured a report falsely accusing it of accounting fraud. The Lennar Corp. won a default judgment for defamation and obtained $1 billion in damages in 2013, according to the San Diego Union-Tribune.

Marsch’s current lawyer, Robert Barnes of Barnes Law, told Reuters that the 3rd Circuit opinion was “more political cover-up than competent legal analysis.” He noted that two former California attorneys general had declined to intervene in the qui tam suit.

The fact that the two former officials “who showed such little interest in the case, and often overtly obstructed it by their inexplicable legal maneuverings, are now vice president and the secretary of Health and Human Services might explain things a bit,” he said.

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