Ayer v. Lightstone Value Plus REIT (Undisclosed $59.8M Chairman Conflict in Liquidation-Delay Proxy)
A federal judge let a class action proceed against three Lightstone Value Plus REITs, alleging 2022 proxies seeking to scrap liquidation deadlines hid the chairman's $59.8M conflicting stake.
U.S. District Judge Michael A. Shipp denied a motion to dismiss a putative class action against Lightstone Value Plus REIT I, II, and III, their external advisers, and individual directors, finding that 2022 proxy statements soliciting approval of charter amendments that eliminated scheduled liquidation deadlines may have concealed chairman David Lichtenstein's conflicting financial stake in the outcome. Plaintiffs allege Lichtenstein held subordinated participation interests worth over $59.8M that would have been worthless had the REITs liquidated on schedule, and that solicitors misleadingly told undecided shareholders a 'yes' vote was the path to liquidity. All four counts, including breach of fiduciary duty claims, survive into discovery.
Why it matters: Signals that courts will scrutinize bundled, omnibus REIT charter-amendment proxies — especially those pairing liquidation-timeline changes with fiduciary-duty waivers, quorum reductions, or indemnification expansions — for whether insiders' financial stakes in the outcome were meaningfully disclosed, not just nominally mentioned. Non-traded REIT sponsors, external advisers, and independent directors involved in comparable extension votes should expect increased plaintiff interest and revisit both proxy drafting practices and D&O coverage.
