Defendant's Attorney: Not Available

Description: Newark, New Jersey personal injury lawyer represented the Plaintiffs who sued the Defendants on fraudulent inducement negligent misrepresentation; breach of contract; breach of fiduciary duty; violations of the Federal Racketeer Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962(c) and (d) ; and conversion.


In a seven-count complaint, Dwyer asserts claims for fraudulent inducement; negligent misrepresentation; breach of contract; breach of fiduciary duty; violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962(c) and and conversion (Count Seven). Patel asserts crossclaims for fraudulent inducement and misrepresentation against Bhaumik, negligent misrepresentation against CIM and Bhaumik; breach of fiduciary duty against Bhaumik, fraudulent inducement against Bhaumik, breach of contract against Bhaumik, breach of the implied covenant of good faith and fair dealing against Bhaumik, contribution and indemnification against CIM and Bhaumik, and unjust enrichment against Bhaumik.

A. Dwyer's Complaint

Dwyer resides in New Jersey. CIM is an investment LLC based in Pennsylvania. Dwyer alleges Bhaumik and Patel are the managing members of CIM. Dwyer alleges that Patel worked as an engineer with Dwyer's IT company. Around late 2017 or early 2018, Patel introduced Dwyer to Bhaumik, who Patel told Dwyer was one of his business partners in CIM, an investment entity.

Dwyer's action arises from his investing $700,000 in two installments - $200,000 in June 2018 and $500,000 in July 2018 - in two Pennsylvania special-purpose limited liability companies through CIM, the managing member of both companies. The two companies, or Funds, were 6951 South Merrill Fund I, LLC, and 5001 South Drexel Blvd Fund II, LLC. According to their operating agreements, the Funds were purposed to purchase their namesake properties in Chicago, Illinois. Dwyer's $700,000 was invested in the South Merrill Fund, giving Dwyer a 39.34% membership interest. The South Merrill Fund then invested $200,000 in the South Drexel Fund, giving the South Merrill Fund a 9.16% membership interest.

Dwyer alleges that to induce him to invest in the Funds, Bhaumik and Patel repeatedly told him that he would receive an 8% guaranteed preferred return on his investment, payable monthly; that a refinance of the Chicago properties was in process; that the refinancing would close within 90 days and result in available cash; and that upon closing, Dwyer would retain his membership interest in the entities owning and managing the properties, he would continue to receive his preferred 8% returns, and he could elect to receive a full return of his initial investment or “roll it over” into another project.

In May 2019, almost a year later, Bhaumik began emailing Dwyer status summaries related to a receivership action pending in the United States District Court for the Northern District of Illinois. The Illinois district court entered an order on August 17, 2018 (“Receivership Order”), on an emergency motion by the Securities and Exchange Commission, appointing a receiver to “marshal[] and preserv[e] all assets of Defendants Equitybuild, Inc., Equitybuild Finance, LLC, their affiliates, and the affiliate entities of Defendants Jerome Cohen and Shaun Cohen.” Among the Receivership Defendants are “5001 S Drexel LLC” and “6951 S Merrill LLC.” The namesake real estate properties, 5001 S. Drexel Blvd. and 6951 S. Merrill Ave., are Receivership Assets being managed and disposed of by the Receiver. (Equitybuild, Civ. No. 18-5587 (N.D. Ill.), ECF Nos. 164, 1560.) The Receivership Action and its parent case are ongoing. Bhaumik's communications identified entities other than the Funds - none of which Dwyer had ever heard of - as having interest in the Chicago properties and claims in the Receivership Action. Dwyer saw no indication that the Funds had any claim in the Receivership Action.

Later in 2019, Dwyer alleges, Bhaumik tried to cover up his and Patel's “scheme,” providing Dwyer with an electronic receipt for two wire payments totaling $700,000 with notations of 8% interest earned and repeating some of their promises of returns and reinvestments. (ECF No. 1 ¶¶ 40-42.) Bhaumik also asked Dwyer to invest more money in the Funds, collateralized by funds that Bhaumik held in a separate account. (Id. ¶ 43.)

By email in December 2019, Dwyer asked Bhaumik how the Receivership Action concerned the South Merrill property. (ECF No. 1 ¶ 44.) Unsatisfied with the lack of explanation, Dwyer demanded a refund of his investment. (Id. ¶ 45.) Bhaumik and Patel did not respond. (Id.)

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Dwyer conducted a title search and confirmed that neither of the Funds ever had title to either of the named properties. (Id. ¶¶ 46; 55-56.) Then, by letter in August 2020, Dwyer's counsel requested that Bhaumik and Patel furnish records reflecting the “state of the business and financial condition of” the Funds, to which Dwyer was entitled under the operating agreements. (Id. ¶¶ 4647; ECF No. 1-1 § 6.2; ECF No. 1-2 § 6.2.) Bhaumik and Patel did not respond. (ECF No. 1 ¶ 48.) Dwyer made two more requests, in October 2020 and March 2021. And still, Bhaumik and Patel did not furnish the requested information. (Id. ¶¶ 49-52.)

Dwyer alleges, on information and belief, that “both of the Funds secretly invested substantial amounts of their funding” in one of the Equitybuild defendants in the Receivership Action. (ECF No. 1 ¶ 53.) Dwyer further alleges that CIM induced him and other investors to invest in the funds “so that CIM . . . could then invest the Funds' capital in [Equitybuild]” and that CIM “never intended for the Funds to actually purchase the Properties.” (Id. ¶ 57.)

B. Patel's Crossclaims

Patel's crossclaims allege that Bhaumik, who claimed to have “extensive experience” managing millions in assets, pitched Patel the Equitybuild investment model as a “crowdfunding investor” with 1,800 to 2,000 units in Chicago and “a lot of upside,” potentially a 15 to 20% rate of return. (ECF No. 13 ¶¶ 6-8.[4]) Bhaumik often touted his claimed experience to induce investors, including Patel's family and friends, to invest. (Id. ¶ 9.) Moved by Bhaumik's success stories, as well as his continued pressure, Patel agreed to help Bhaumik market investment opportunities, first using Capital Investors LLC (CI)[5] for debt investments, and later using CIM for equity investments.

Patel alleges that CI offered clients “different real estate investment opportunities” that “shared the same essential characteristics”: each involved an “outside third-party entity seeking to borrow funds in a debt arrangement to aid the development/acquisition of a real estate project, in the form of a note (debt) secured by the real estate being developed/acquired by the outside third-party entity”; “[e]ach note would be secured by a first lien position security interest in the subject property”; and each “investment opportunity . . . would be completed on an individual basis with its own limited liability company and an operating agreement for the limited liability company.” (ECF No. 13 ¶¶ 11-12.) CIM, which came later, worked similarly. Only instead of debt investments, CIM acquired equity in real estate development or acquisition projects. (Id. ¶ 13.)

Patel alleges that Equitybuild gathered debt tied to real estate and sold it to outside entities like CI, offering returns of 15 to 16% on the secured notes. (ECF No. 13 ¶ 15.) For CI's first Equitybuild-related property investment, called “Juneway,” Patel invested $50,000 of his own money through CI and Equitybuild and raised $250,000 as a secured note, which Patel alleges CI still holds. Bhaumik did not contribute. (Id. ¶¶ 16-17.) Given the amount of capital CI raised, Equitybuild recommended that CI buy equity in the real estate, with an 8% preferred rate of return on investments plus other potential returns like rental income. And so, to accommodate the equity investment model, Bhaumik and Patel formed CIM, designating themselves as equal owners in the December 2017 Operating Agreement.[6] (Id. ¶¶ 10, 18.)

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Patel alleges that Bhaumik pushed the Equitybuild model first to Patel, and then to all of Patel's friends, family, and acquaintances - including Dwyer. (ECF No. 13 ¶ 19.) Bhaumik and Dwyer grew close, spending more and more time together without Patel. (Id. ¶¶ 20-21.) In fact, Patel learned about the details of Dwyer's investment in CIM from Bhaumik. (Id. ¶ 22.) Before investing, Dwyer met with Bhaumik, Patel, and Shaun Cohen of Equitybuild for dinner to discuss the South Merrill property and Equitybuild's involvement. (Id. ¶ 23.) Shaun Cohen is a named defendant in the Receivership Action.

In August 2018, Patel and Bhaumik discovered that Equitybuild was in receivership and was being sued by the SEC. Patel recommended that they immediately notify CI's and CIM's investors, including Dwyer. Bhaumik disagreed. (ECF No. 13 ¶ 24.) Still, Patel retained counsel to secure CI's and CIM's claims in the Receivership Action. (Id. ¶ 25.) But when Patel pressed Bhaumik to notify CI's and CIM's investors, Bhaumik tried to seize control of CIM under the pretense that Patel was not bringing in enough investors or being a “good partner.” (Id. ¶ 27.)

In September 2018, Bhaumik forced Patel to forfeit 10% of his interest in CIM, giving Patel the opportunity to “clawback” the interest if his performance improved. (ECF No. 13 ¶ 28.) In October 2018, Bhaumik forced Patel to forfeit another 10% interest, and in December 2018 another 10%, each time with the same clawback terms. (Id. ¶¶ 29-30.) In January 2019, Patel ceded his remaining 10% interest in CIM, having never received compensation for his original 50% interest. (Id. ¶¶ 31-32.) After that, Patel's involvement with CIM ended. (Id. ¶ 37.)...
Dwyer v. Capital Inv'rs Mgmt., Civil Action 23-00003 (GC) (DEA) (D. N.J. Dec 29, 2023)

Outcome: Bhaumik and CIM's motions to stay Dwyer's claims and Patel's crossclaims (ECF Nos. 16 & 19) are GRANTED. The alternative motions to dismiss are moot and thus DENIED without prejudice. An appropriate Order follows.

Plaintiff's Experts:

Defendant's Experts:

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