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Developer Pays $7M To Settle Suit Over Trump Mexico Resort

By January 2, 2012 No Comments

A Los Angeles Superior Court judge on Tuesday approved a $7.25 million settlement between a co-developer of the now-defunct Trump Ocean Resort Baja Mexico and 190 prospective buyers who claimed they lost more than $20 million in deposits when the project failed in 2008. Judge Anthony J. Mohr approved the deal for approximately one third of the alleged losses offered by Irongate Wilshire LLC principal Jason Grosfeld and several development affiliates as a “good faith” settlement, despite objections from co-defendant Donald Trump, who argued that Grosfeld should take responsibility for 100 percent of the plaintiffs’ claims. Though the buyers alleged that the Grosfeld defendants and Trump made representations in marketing materials that the Trump Ocean Resort Baja was being developed by both parties, Trump argued that he only acted as a licensor for the Tijuana project and never took in any money for deposits, and could therefore not be held responsible for the plaintiffs’ losses. “Grosfeld defendants settled because it was the right thing to do at this time … [we] believe the Trumps’ opposition to our settlement was without merit or basis and the court obviously agreed with us,” the settling defendants said in a statement Thursday. Irongate teamed up with Trump in 2006 to market the Trump Ocean Resort Baja, a high-rise luxury condominium project on 17 acres of coastal property, after the tremendous success of a similar development in Waikiki, Hawaii. Just as with the Waikiki project, Trump had a heavy hand in advertising the Baja development, mailing newsletters and making videos with is daughter, Ivanka, touting their involvement. Trump and Irongate allegedly said in numerous marketing materials that they had secured construction financing for the project, even going so far as to suggest at one point that while other companies may be struggling to complete developments, the Trumps were doing fine, according to plaintiffs’ attorney Daniel King. The plaintiffs alleged that these marketing materials gave the impression that Trump was co-developing the property, so when the project fell apart during the credit crisis of 2008, they sued both the Trump Organization and Irongate to recover the millions they’d been required to deposit for the as-yet-unbuilt condominiums. Their attorneys point to a provision in the Interstate Land Sales Full Disclosure Act that effectively makes an entity the developer or seller of a property if it presents itself in that way. “The Trump defendants are not in the lawsuit as a defendant simply because of their ‘name’ or ‘reputation.’ They are not in this lawsuit as mere window-dressing,” the plaintiffs said in a position brief on the settlement. “The Trump defendants are in this lawsuit because each and ever plaintiff was led to believe that ‘Trump’ was the developer of the project.” But Trump’s camp contends that he only lent his name to the project, and had no hand in developing, building or selling the units. The Trump defendants filed a cross-claim against Irongate on Tuesday seeking indemnification for the suit, citing an obligation under the licensing agreement for the resort. They also allege that when the project began to fail in 2008, Grosfeld and another principal at Irongate used $6 million in buyer deposits to pay off a substantial portion of the mortgage on the property. “The Grosfeld group was the developer of the project. They are the ones that entered into contracts with the buyers, they are the ones that took the buyers’ deposits, they are the ones that managed the buyers’ deposits and they are the ones that spent the buyers’ deposits,” Alan Garten, executive vice president and litigation counsel with the Trump Organization, told Law360 on Thursday. The Grosfeld defendants’ deal provides closure for the majority of the prospective buyers at Trump Ocean Resort Baja, but several other complaints in the coordinated action remain pending. The plaintiffs are represented by Daniel J. King and Bart I. Ring. The Grosfeld defendants are represented by Michael McNamara, Kirsten Spira and Dylan Ruga of Steptoe & Johnson LLP. The Trump defendants are represented by a team led by Betty Shumener of Shumener Odson & Oh LLP. The case is Derek O’Brien et al. v. Donald J. Trump et al., case number JCCP4642, in the Superior Court of the State of California, County of Los Angeles. –Editing by Katherine Rautenberg.

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