AREI II Cases

Plaintiffs are investors who purchased tenant in common (TIC) ownership interests in a senior housing facility from Asset Real Estate and Investment Company (AREI). AREI allegedly violated state securities law by failing to disclose that its sole owner was a convicted felon and by concealing the existence of a second loan that grossly overleveraged the property. Plaintiffs sued various parties associated with the transaction, including the defendant investment bankers, who structured joint ventures between AREI and various lenders but had no involvement in the sales of TIC interests to plaintiffs. According to plaintiffs, the investment bankers knew that AREI did not disclose its owner’s felony conviction or the second loan to potential investors. Plaintiffs alleged causes of action against the investment bankers for materially assisting in AREI’s violation of securities law and for fraud based upon a conspiracy. On appeal, plaintiffs contend the trial court erred in sustaining the investment bankers’ demurrer.

We conclude the operative second amended complaint (the complaint) does not state a cause of action against the investment bankers for materially assisting in a…