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Jury awards $1.6M in dispute between business partners

A San Diego Superior Court jury returned a $1.6 million verdict in favor of San Diego businessman Rudy Medina Aug. 31 in his real estate dispute with former business partner, John Sarkisian.

The three-week trial is part of a lengthy legal battle between the two over their real estate development company, Del Mar Heritage LLC.

The jury found Sarkisian liable for intentional misrepresentation, fraudulent concealment, breach of fiduciary duty, and breach of contract. Medina claimed Sarkisian duped him into selling his interests in two Del Mar Heritage projects to Sarkisian’s friend, Willy Ayyad, a San Diego real estate investor, for roughly 50 percent of their value.

"I really feel like we delivered justice to a guy who deserved it," said San Diego attorney Ken Fitzgerald, who represented Medina. "Mr. Sarkisian steadfastly denied that he did anything wrong. He swore under oath that he did the very best he could for Rudy. I think the overwhelming evidence was to the contrary."

The jury, however, also awarded Sarkisian $200,000 against Medina on a cross-complaint for breach of contract.

"The verdict is very much in conflict," said San Francisco attorney Robert Wallach, who represented Sarkisian. "If the jury found that John committed breach of fiduciary duty, how do they give him money on his complaint because they all arose out of the same contractual agreement?"

Wallach said his client will file a motion for another trial and a motion for a "judgment notwithstanding the verdict."

Sarkisian, the former CEO of Pat & Oscar’s Restaurants and the current CEO of Pro Performance Sports LLC, and Medina were 50/50 partners in Del Mar Heritage, which developed and owned commercial and residential properties throughout San Diego.

According to Medina, Sarkisian told him in June 2006 that he wanted to disassociate from Medina and separate their interests. Medina claimed he was misled into signing his final separation agreement with Sarkisian by misrepresentations and concealments of fact.

Medina said Sarkisian persuaded him to sell his interests to Ayyad for a fraction of their values based on statements by Sarkisian that one of the projects would be held for life and that another project was not likely to be sold.

According to Medina, shortly after his separation was complete, the projects were actually sold for substantial gains, leading Ayyad to reap substantial short-term profits off of Medina’s interests.

"We feel it's a case of seller's remorse, and the jury felt differently," Wallach said.

According to Wallach, Sarkisian said it was Medina who initiated the efforts to sell his interest in the two properties, and Medina even negotiated his own price. Wallach claims Medina sold the first property because he wanted cash immediately, and the second one was not on the market, but an offer came in "out of the blue."

The jury awarded Medina $1,591,586, the amount he would have made if he had retained his interests in the two projects when they were sold to Ayyad, shortly after his separation from Sarkisian was finalized.

"They worked together," said Fitzgerald, a partner at Chapin Fitzgerald & Bottini. "They played together. (Medina) viewed Sarkisian as one he could trust his life with and didn’t' think he'd take advantage of him.

"(Medina) trusted (Sarkisian) as much as one man could trust another. They really were like brothers."

Sarkisian initially sued Medina for defamation and tortious interference in June 2007, after Medina sent a letter to Del Mar Heritage investors and others detailing what he claimed were improprieties by Sarkisian in the management of a condo conversion project and in the separation of their interests in Del Mar Heritage.

Medina cross-complained against Sarkisian for fraud, breach of fiduciary duty and breach of contract.

Sarkisian amended his complaint to include claims for fraud and breach of contract, based on allegations that Medina owed money to Sarkisian to cover costs on projects that were unfinished at the time their separation was finalized.

In January 2011, a jury rejected Sarkisian's defamation and fraud claims but deadlocked on all of Medina's claims against Sarkisian.

"It was very fact-intensive and document-intensive," Fitzgerald said of the re-trial. "It was a real challenge to simplify for a jury."

Wallach said the case is "far from over."

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