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Davis Wright Tremaine LLP, one of the Northwest’s largest law firms, is being sued for violating Oregon securities law by investors in Sunwest Management Inc., the disgraced senior living operator.

The Portland office of Davis Wright Tremaine referred calls to the public relations department in its Seattle office, which could not be reached to comment.

The lawsuit filed in Multnomah County Circuit Court names a series of Oregon limited liability corporations as plaintiffs and seeks to represent approximately 1,200 Oregon investors as a class action matter.

The named plaintiffs all invested in senior housing communities controlled by Jon Harder and Sunwest Management.

The suit accuses Davis Wright Tremaine and Timothy Dozois, a partner in the firm, of misleading investors into thinking they were buying into specific properties and that they would receive rent payments from Sunwest, which managed the series of allegedly independent properties. The suit seeks compensation for damages from the loss of value of Sunwest Management, once a $2 billion-plus company.

Damages could run into the hundreds of millions of dollars.

Attorneys involved in the case said they do not know the limits of Davis Wright Tremaine’s professional liability insurance. Oregon is the only state that mandates malpractice insurance for attorneys, but the amount is limited to about $300,000 per related case, according to the Oregon State Bar Professional Liability Fund. Large firms often carry excess insurance.

The suit seeks to hold Sunwest’s lawyers accountable to investors for misleading them about the nature of their investments.

“The defendants omitted material facts in connection with their own statements to investors. Defendants and other attorneys in Portland, Oregon also participated and materially assisted in the unlawful sale of these securities through their relationship with (Sunwest founder and controlling owner) Jon M. Harder and his enterprise of closely related Oregon companies,” plaintiffs claim.

Harder, who has filed for personal bankruptcy, is not a defendant in the case.

Justine Fischer, a Portland attorney working for the plaintiff’s team, said the next step is to have the suit designated as a “complex” case and assigned to a judge already hearing other legal matters pertaining to Harder and the Sunwest matter.

The investor suit mirrors a lawsuit filed in U.S. District Court for Oregon by the U.S. Securities and Exchange Commission.

Like the investor suit, the SEC suit characterizes Sunwest as a “Ponzi” scheme and said the company improperly managed its empire, which once included about 250 senior living centers, as a single operation instead of the unrelated businesses it described to investors.

Investors purchased shares of the real estate as tenants in common and were supposed to be paid rent by Sunwest Management.

Instead, Sunwest diverted funds from profitable properties to pay costs of unprofitable ones. When the economy collapsed and Sunwest could not secure credit, the company stopped making mortgage payments on some properties, triggering dozens of foreclosures and other legal actions.

The suit accuses Davis Wright Tremaine of facilitating the scheme by misrepresenting the “unitary” nature of the operation.

The suit says Davis Wright Tremaine and Dozois prepared numerous documents that misled investors into thinking they were buying into particular properties, including memoranda, disclosure materials, tenancy in common agreements, triple net lease documents, warranty deeds, operating agreements, real property purchase agreements and escrow instructions.

“The defendants and the Harder Enterprise did not tell investors that revenue generated in connection with the property they were investing in could be commingled and used to help fund less profitable properties owned and operated by the Harder Enterprise or would be loaned to less profitable properties. Investors also were not told that the Harder Enterprise had engaged extensively in such commingling of funds in the past and intended to continue do to so in the future,” the suit claims.

In addition to Fischer, the plaintiffs are being represented by two Washington, D.C., law firms, Cohen Milstein Sellers & Toll PLLC and the Law Office of Herbert Adelman.

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