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News / Business / Clark County Business

Two American Equities investor groups file suit

Lawsuits target law firm, which denies it had role in collapse of Vancouver-based firm

By Anthony Macuk, Columbian business reporter
Published: March 11, 2020, 6:02am

Two groups of investors recently filed lawsuits seeking to reclaim money they lost in last year’s collapse of 15 mortgage pools from Vancouver-based American Equities. The pools were declared insolvent and placed into receivership in May.

The pair of lawsuits were filed about a week after Portland-based Hamstreet and Associates — the financial firm appointed as the receiver for the mortgage pools — filed its own lawsuit against American Equities and its president Ross Miles, alleging that mismanagement and self-dealing contributed to the pools’ insolvency.

Unlike Hamstreet, the investor groups’ lawsuits aren’t targeting American Equities itself. Instead, the complaints were filed against Seattle-based law firm Davis Wright Tremaine LLP, alleging that lawyers at the firm’s Portland office helped American Equities sell securities to new pool investors.

Davis Wright Tremaine pushed back on the lawsuit in a statement to The Columbian.

“These allegations are without merit. Davis Wright Tremaine has not done work for American Equities in more than 10 years,” the firm wrote. “The allegations relate to events that occurred years after AEI (American Equities, Inc.) was no longer a client, and our firm has no knowledge of those events or complaints by investors. The plaintiffs are clearly grasping at straws and extreme legal theories to manufacture a case nearly a decade later.”

Two lawsuits

The first lawsuit was filed on behalf of seven Oregon investors seeking to recover their individual damages, which they claim total more than $3.7 million. The lawsuit is also seeking class-action status, alleging that the seven plaintiffs represent 93 individuals with total losses exceeding $17 million.

The second lawsuit was filed on behalf of five other investors who live in Washington but purchased securities in Oregon, as well as three investors who live in Oklahoma and purchased their securities there. The eight plaintiffs also seek to recover individual damages totaling more than $3.7 million, although the lawsuit does not seek class-action status.

Both lawsuits were filed Feb. 25 in Multnomah County Circuit Court. The first lawsuit was jointly filed by the Portland-based law firms Larkins Vacura Kayser LLP, and Esler, Stephens & Buckley, LLP. The second was filed by Portland-based attorney Jon Hunt.

Attorneys Christopher Kayser and Michael Esler said they filed the class-action case on behalf of Oregon investors who worked with Davis Wright Tremaine because Oregon law places comparatively greater responsibility on professionals and organizations who assist in the sale of securities.

“They’ve got a duty to do more than just rubber-stamp these offerings,” Kayser said.

The case highlights the difference between Oregon and Washington securities law, Esler said — Washington law makes it harder to target intermediaries like Davis Wright. The Oregon investors in the class-action lawsuit represent only about 20 to 25 percent of the pools’ total investors, but the law firms did not believe Washington investors would be able to qualify as members of the class, Esler said.

According to previous court filings from Hamstreet, there are roughly 250 investors across the 15 insolvent pools. Most of the investors live in the Portland metro area or surrounding counties, although there are also a handful in other states such as Oklahoma.


Esler said the firms chose to sue Davis Wright Tremaine rather than Ross Miles or American Equities itself because they’re trying to avoid doubling up on targets that Hamstreet is already pursuing, since the proceeds will go to investors either way if the lawsuits are successful.

“Our goal is to help people recover money,” Esler said. “We don’t want to have Ross Miles spend all his money on defense costs.”

“We certainly have Ross in our sights,” Kayser added.

As the receiver, Hamstreet is tasked with liquidating the pools’ assets and distributing the proceeds to investors in the most equitably manner possible, but the reality is that it’s unlikely that investors will recover all of their money; when the receivership began, an initial estimate found that the pools collectively held roughly $34 million in assets against $77 million in liabilities.

The new round of investor lawsuits is seeking to recoup the full value of the investments for the plaintiffs and, in the case the class-action suit, the other members of the class.

That’s admittedly an unequal outcome, Esler said, but he again pointed to the differences between Oregon and Washington securities law — the Oregon investors are taking advantage of an additional legal avenue that unfortunately isn’t available to Washington investors. And if the Oregon investor suit is successful, the proceeds won’t be drawn from money that could have otherwise gone to Washington investors.

“Washington investors aren’t as well-protected as Oregon investors,” he said. “I think that’s an important protection that Washington could do something about.”

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