Liquid Realty Sues Companies Run By Its Former Execs

San Francisco real estate investments

By Sharon Simonson

San Francisco private equity real estate firm Liquid Realty Advisors LLC and its chief executive, Scott Landress, have sued Clairvue Realty Advisors LLC and related entities, accusing them of stealing trade secrets and using the information to create a competing business.

San Francisco real estate investmentsClairvue is also San Francisco-based.

In a more than 30-page complaint filed July 13 in San Francisco Superior Court, Landress alleges that Clairvue and three companion companies are responsible for millions of dollars in losses by Liquid Realty and at fault for damaged relationships with customers and clients.

The plaintiffs seek a jury trial and judgment to force Clairvue and its related firms to “disgorge” profits gained from the alleged “misappropriation” of the trade secrets, to pay royalties to Liquid based on their unauthorized use of the trade secrets and to pay compensatory, punitive and exemplary damages to Liquid as well as its attorney’s fees. They also seek an injunction to force defendants to stop using the trade secrets, to return all paper originals and copies of such secrets and to destroy all electronic versions.

Clairvue was founded in 2010 by Jeffrey Giller, Brendan MacDonald and Josh Cleveland, according to the complaint and an announcement distributed about Clairvue in May 2010 by Giller and MacDonald.

Landress founded Liquid Realty in 2001 to operate in the largely illiquid private-equity real estate market. Liquid was organized to buy existing interests in real estate funds, partnerships, joint ventures, separate accounts, trusts and other private-investment vehicles on the secondary market. The firm also pursued opportunities to recapitalize existing real estate portfolios. Investments are called “private-equity secondaries” or simply “secondaries.”

Over the course of its life, Liquid accepted $1.5 bilion in capital commitments and closed 47 investments, according to the company’s profile on LinkedIn. Its investment partners included pension funds, endowments, foundations, insurance companies and sovereign wealth funds.

Landress and Liquid Realty spent years and millions of dollars creating what they claim are unique and proprietary tools to pursue the business, according to the complaint. The tools include a database of more than 22,000 contact names and information regarding those contacts, as well as a so-called “Equity Book” with more than 2,000 active institutional investors and their plans to invest in or to sell real estate secondaries.

The company and Landress emphasize the confidentiality and uniqueness of the databases, software, models and other business tools developed for the business.

In an October 2011 email to “friends and colleagues,” Cleveland described Clairvue’s business as offering “recapitali[zation of] real estate funds, joint ventures, and private real estate companies in addition to acquiring secondary interests from existing investors in those vehicles.”

Clairvue’s founders had no experience in the real estate secondaries business prior to joining Liquid, according to the suit.

Giller, MacDonald and Cleveland along with Landress were the most senior executives at Liquid, positions at the company that match those they now have at Clairvue, the complaint alleges. Andrew Jensen, Liquid’s former director of accounting, is now finance and accounting advisor at Clairvue, according to the complaint and the Clairvue Web site.

Jensen, who is not a Clairvue founder, left Liquid in early 2008. The three Clairvue founders left in the fall of 2009.

Giller is the managing partner and chief investment officer for Clairvue, the same titles he held while at Liquid, according to the Clairvue Web site. MacDonald was director of acquisitions at Liquid and is now a partner at Clairvue. Cleveland was director of business development at Liquid and is now a partner at Clairvue.

The suit does not name Giller, MacDonald or Cleveland personally as defendants because all three have arbitration agreements with Liquid. Landress and his related entities are pursuing claims against them via arbitration, according to the suit. All three men are identified repeatedly throughout the text of the lawsuit.

Liquid Realty is now shuttering its businesses, saying investors in its fourth fund forced it to close and forfeit its fees. Managers for a fifth Liquid Realty fund were unable to raise investor capital, according to the complaint.

Giller declined comment for this story, citing the litigation. A spokesman for Clairvue disputed the allegations in the suit in a prepared statement: “We were disappointed to learn that Liquid Realty decided to suspend fundraising. However, their challenges in the fundraising market had nothing to do with Clairvue, their allegations are baseless, and we will defend ourselves in the appropriate forum,” Greg Miller said.

Clairvue got $250 million from Goldman Sachs Asset Management’s Private Equity Group for its first fund, Clairvue Capital Partners I. Goldman also invested as a partner in Clairvue Realty Advisors, Clairvue’s management company. Clairvue’s founders met the Goldman Private Equity Group executives while working at Liquid, according to the complaint.

Landress has retained Campbell attorney Ben F. Pierce Gore of Pratt & Associates as well as New York’s Fleischman Law Firm and New Jersey’s Stone Bonner & Rocco LLP to represent it in the dispute. Gore said in a brief interview that the plaintiff had no allegations to add to the suit.

“The Clairvue Defendants used the trade secrets stolen from Liquid to enter into multi-million dollar real estate secondaries investments, including several deals that had specifically been identified by Liquid, unjustly enriching themselves with profits that rightly belonged to Plaintiffs,” the complaint says.