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Michael Luciani; Paul Luciani v. Mark Anthony Luciani

October 17, 2012

MICHAEL LUCIANI; PAUL LUCIANI;
KATHRYN LEE; AND PHILLIP LINSSEN, PLAINTIFFS
v.
MARK ANTHONY LUCIANI, AN INDIVIDUAL;
LUCIANI STORAGE MANAGEMENT, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY;
SAV-ON SYSTEMS, L.P., A CALIFORNIA LIMITED PARTNERSHIP; AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Jeffrreyy T. Mililller United States States Judge

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

On November 17, 2010, Michael Luciani, Paul Luciani, Kathryn Lee, and Phillip Linssen ("Plaintiffs") filed a complaint against Mark Anthony Luciani ("Tony Luciani"), Luciani Storage Management, LLC ("LSM"), a California limited liability company, and Sav-On Systems, L.P. ("Sav-On"), a California limited partnership ("Defendants") in the Superior Court for the State of California, San Diego ("Superior Court").

On December 15, 2010, Defendants removed the action to federal court citing federal question jurisdiction under 28 U.S.C. § 1331 because Plaintiffs' second claim encompassed § 10(b) and Rule 10b-5 of the Securities Exchange Act. Dkt. 1 at 2. This court dismissed this initial complaint, due to pleading defects under the Private Securities Litigation Reform Act of 1995. Specifically, this court noted that Plaintiffs (1) made several allegations based on "information and belief" without stating the relevant facts that formed that belief and (2) Plaintiffs did not identify allegedly misleading individual statements within those documents.

After Plaintiffs filed an amended complaint ("FAC") alleging the same causes of action, Defendants again sought to dismiss the FAC on the same grounds that this court dismissed the original complaint. But on September 1, 2011, this court denied Defendants' motion to dismiss the FAC, noting in part that Plaintiffs' claims were no longer deficient under PSLRA.1 Defendants later filed an answer to the amended complaint on September 20, 2011.

On August 31, 2012, Defendants filed a motion for summary judgment ("MSJ"), summary adjudication of claims, and ascertainment of material facts without substantial controversy. For the following reasons, Defendants' motion for summary judgment is DENIED.

Background

On March 23, 2009, in an agreement retroactively dated effective on December 31, 2008, Defendant Tony Luciani purchased Plaintiffs' limited partnership interests in Defendant Sav-On, a company that owns and operates a self-storage facility in San Diego County ("Sav-On"). Opposition to Summary Judgment ("OSJ") at 2. He then owned and continues to own 100% of

The FAC included significantly greater detail regarding the letters and reports allegedly sent by Tony Luciani that were designed to create a negative outlook on Sav-On's valuation and future prospects that resolved the original complaint's deficiencies. For example, Plaintiffs explained that the December 19, 2008 letter and Background and Analysis Re Value report exclusively valued the partnership's assets based on its operating business and not as a seller of real estate assets. FAC ¶¶23-24. In addition to repeating their allegation that Tony Luciani's January 12, 2009 letter portrayed him as distressed buyer whose ability to pay would be limited, Plaintiffs also explained that the statements were misleading because Tony Luciani knew but failed to disclose that he would have a greater ability to pay after the Irongate Property was sold. Id. ¶¶25-26.

Sav-On. FAC ¶ 2. Plaintiffs, Tony Luciani's two brothers, a sister, and a more distant relative, claim Tony Luciani defrauded them by inducing them to sell their interests to him for less than their true value. Id. ¶ 4; OSJ at 2.

Prior to purchasing Plaintiffs' partnership interests, Tony Luciani held a majority ownership interest in Sav-On, controlling 71.31% of Sav-On. FAC ¶ 9; OSJ at 2. In 2006, he became the general partner and majority limited partner. OSJ at 2. Plaintiffs claim to have been exclusively passive investors while Tony Luciani managed and controlled Sav-On. FAC ¶¶ 12,

On or around March 21, 2008, Tony Luciani directed Sav-On to initiate formal dissolution proceedings in Superior Court ("Dissolution"). FAC ¶ 20; OSJ at 2. According to Plaintiffs, Tony Luciani also allegedly planned to submit a "'low ball' bid" for Plaintiffs' interests and set the price at "an artificially low level" if the Dissolution ended in a forced sale of Sav-On. Id. ¶ 21. He knew that only he had financial resources to purchase the partnership's assets. Id. ¶ 22.

Plaintiffs identify three separate communications in which Tony Luciani allegedly made false representations concerning the value of Plaintiffs' holdings after he filed for Dissolution.

Id. ¶ 22. First, in a letter dated December 19, 2008, Tony Luciani's attorneys presented Plaintiffs with a detailed analysis of Sav-On's fair market value, concluding in a low valuation. Id. ¶ 23. Second, around the same date, Tony Luciani's attorneys presented Plaintiffs with a document entitled "Background & Analysis Re Value," which valued their assets at a historically low figure due to the then current economic situation. Id. ¶ 24. Both documents valued Sav-On based on its expected future profits from operation of the self-storage business without contemplating the possibility of selling a portion of Sav-On's land. Id. ¶¶ 23-24. Third, in a January 12, 2009 letter, Tony Luciani's attorneys informed Plaintiffs that Tony Luciani was a "distressed buyer" whose limited ability to pay severely constrained the value they could expect to receive for the Sav-On assets. Id. ¶¶ 25-26. The combined effect of these communications allegedly "cast Sav-On [] and its assets in the worst possible light," and, when combined with the threat of a forced court sale of the partnership's assets, induced Plaintiffs to sell their partnership interests to Tony Luciani at "distressed values." Id. ¶¶ 27-28.

Plaintiffs claim that Tony Luciani knew the Sav-On assets to be worth far more than he represented. OSJ at 2. Shortly before Tony Luciani filed for Dissolution, the San Diego Metropolitan Transit Service ("MTS") had expressed interest in purchasing a 2.43-acre portion of the property owned by Sav-On (the "Irongate Property"). FAC ¶ 29. Tony Luciani obtained a firm commitment from MTS to purchase the Irongate Property from the partnership six weeks before he purchased Plaintiffs' partnership interests. OSJ at 3. Plaintiffs claim they were unaware of parallel negotiations between Tony Luciani and MTS prior to agreeing to sell him their shares. Id.

Tony Luciani purchased Plaintiffs' partnership interests with cash and promissory notes pursuant to the Dissolution settlement agreement. Id. at 2. After purchasing Plaintiffs' partnership interests, Tony Luciani sold the Irongate Property to MTS for approximately twice the value that Tony Luciani had claimed the interests were worth. FAC ¶ 30.

After the sale, Toni Luciani formed LSM "for the purpose of becoming the new General Partner of [Sav-On] effective immediately after Tony Luciani fraudulently induced Plaintiffs to sell him all of their limited partnership interests." Id. ΒΆΒΆ 11, 31. Plaintiffs discovered Tony ...


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