First National Realty Partners LLC, et al. v. James May, et al.

Opinion

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Civ. No. 25-1119 (MAS)(JBD) FIRST NATIONAL REALTY PARTNERS LLC, et al., MEMORANDUM ORDER

Plaintiffs,

v.

JAMES MAY, et al.,

Defendants.

Defendants in the above-captioned case, Civil Action No. 25-1119 (hereinafter, “May”), and plaintiffs in McGrath et al. v. First National Realty Partners, LLC, et al., Civil Action No. 25-13714 (hereinafter, “McGrath”), move to consolidate the May and McGrath cases. First National Realty Partners, LLC (“FNRP”)—plaintiff in May and defendant in McGrath—opposes the motion.1 Upon review of the parties’ submissions, and considering the procedural posture of the cases and applicable law, the Court concludes that consolidation is premature and therefore denies the motion without prejudice. I. BACKGROUND FNRP is a private equity firm specializing in domestic commercial real estate investments. [Dkt. 1] ¶ 5. FNRP serves as an investment sponsor, creating and managing commercial real estate investment opportunities for its investor partners.

1 In addition to FNRP, numerous individuals and investment entities that FNRP sponsored are named as plaintiffs in May and defendants in McGrath. For simplicity’s sake, however, the Court refers only to FNRP. Id. FNRP’s core business involves raising funds from high-net-worth accredited investors and using the acquired capital to purchase shopping centers and other types of commercial properties. Id. Relevant here, FNRP sold shares in various

funds, structured as LLCs, which, in turn, purchased commercial properties for investment (the “Underlying Properties”). [Dkt. 51] ¶ 1 n.3, 56; McGrath, [Dkt. 1] ¶ 1 n.2; 72. Defendants in May and plaintiffs in McGrath invested in these funds. The disputes in both cases concern those investments. Specifically, throughout 2022 and 2023, the May defendants collectively invested about $12.2 million in 21 separate FNRP-sponsored funds, and the

McGrath plaintiffs collectively invested about $9.4 million in 28 FNRP-sponsored funds. [Dkt. 51] ¶¶ 1 n.3, 36-56, 111-117; McGrath, [Dkt. 1] ¶¶ 1 n.2, 44-72, 139. In connection with these investments, each investor and the corresponding investment funds entered into written agreements containing an arbitration clause. [Dkt. 1] ¶¶ 55-60; [Dkts. 7, 22]; [Dkt. 72] at 7. Several years after their initial investments, counsel for a group of investors that ultimately became the May defendants began accusing FNRP and its agents of

fraud. [Dkt. 1] ¶ 61, 70. In February 2025, counsel for these investors presented FNRP with a draft complaint that the investors intended to file, which included a range of claims based on allegations that FNRP defrauded them into investing into various funds that held commercial real estate. [Dkt. 1] ¶¶ 62, 70. After efforts to avoid litigation regarding these claims failed, FNRP preemptively filed suit against the investors in the May case. Several months later, other investors sued FNRP in McGrath asserting similar claims. A. May

On February 10, 2025, FNRP filed a complaint in the May case seeking to enjoin defendants from filing their draft complaint or commencing any action based on the same or similar allegations. [Dkt. 1.] Specifically, FNRP brings three counts against the May defendants: (1) declaratory judgment that the agreements and arbitration provisions therein are valid and enforceable and that the agreements require the defendants to arbitrate the claims asserted in their draft complaint;

(2) failure to arbitrate under the agreements; and (3) injunctive relief. Id. ¶¶ 76-95. In addition to their complaint, FNRP filed a motion for a temporary restraining order and preliminary injunction, which the Court denied. [Dkts. 2, 43, 44.] FNRP also filed a motion to compel arbitration and stay litigation after defendants filed a complaint against them in the United States District Court for the Eastern District of New York that was virtually identical to the draft complaint that they had previously presented. [Dkt. 25] at 17-21. With that motion still pending, on

June 25, 2025, the May defendants filed an answer to the complaint along with several counterclaims. [Dkt. 51.] In broad terms, the counterclaims allege that FNRP engaged in a “conspiracy to defraud [the May defendants] with respect to their investments” in the LLCs, by, among other things, engaging in a “systematic pattern of deception and fraud in connection with” their marketing and sale of investment shares in the various LLCs, “paying illegal commissions to their salespersons,” “overvaluing the Underlying Properties,” “making unauthorized transfers and distributions,” and making a host of misrepresentations about the financial health of the Underlying

Properties and the agreements entered into with investors. Id. ¶¶ 1-14. Based on this alleged conduct, the May defendants bring 30 common law and state and federal statutory causes of action against FNRP. Id. ¶¶ 118-286. In light of the pending motion to compel arbitration and stay litigation, the parties in May have agreed to defer the deadline for FNRP to answer or otherwise respond to the counterclaims, if necessary, until 21 days after the Court rules on

that motion. [Dkt. 54.] B. McGrath On July 24, 2025, roughly one month after the May defendants filed their counterclaims, the McGrath plaintiffs—again, investors in FNRP-sponsored funds backed by commercial real estate properties—filed a complaint in this Court against FNRP. McGrath, [Dkt. 1]. Like the May defendants’ counterclaims, the McGrath complaint alleges, inter alia, that FNRP engaged in a “conspiracy to defraud

[the McGrath plaintiffs] with respect to their investments in the [relevant LLCs],” by, among other things, engaging in a “systematic pattern of deception and fraud in connection with” their marketing and sale of investment shares in the various LLCs, “paying illegal commissions to their salespersons,” “overvaluing the Underlying Properties,” “making unauthorized transfers and distributions,” and making a host of misrepresentations about the financial health of the Underlying Properties. Id. ¶¶ 1-13. Based on this conduct, the McGrath plaintiffs bring 34 common law and state and federal statutory causes of action against FNRP, which are similar in substance to the counterclaims asserted in the May case. Id.

¶¶ 140-337. C. Motion to Consolidate and Subsequent Proceedings On September 9, 2025, the May defendants and McGrath plaintiffs filed the present motion to consolidate the two cases, which FNRP opposes. [Dkts. 66, 68.] Shortly after the parties completed briefing on the motion, they agreed to defer defendants’ deadline to answer or otherwise respond to the complaint in McGrath,

if necessary, until 21 days after the Court rules on that motion. McGrath, [Dkt. 14]. Given the similarity in the two cases, the parties also agreed that the Court’s ruling on the pending motion to compel arbitration in May will be binding on and applicable to the parties in McGrath. Id. II. LEGAL STANDARDS Federal Rule of Civil Procedure 42(a) provides, in pertinent part, that “[i]f actions before the court involve a common question of law or fact, the court may

. . . consolidate the actions.” Fed. R. Civ. P. 42(a)(2). “The burden is on the moving party to show that consolidation is appropriate.” MicroBilt Corp. v. Fid. Nat. Info. Servs., Civ. No. 12-3861 (JAP), 2012 WL 4955267, at *2 (D.N.J. Oct. 16, 2012) (citing In re Consol. Parlodel Litig., 182 F.R.D. 441, 444 (D.N.J. 1998)). A “prerequisite” for consolidation is a “common question of law or fact shared by all of the cases.” Parlodel, 182 F.R.D. at 444. However, the presence of common issues does not require consolidation. Id. Rather, “[t]he decision to consolidate rests in the sound discretion of the district court.” Id.; accord Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65, 80 (D.N.J. 1993) (“Rule 42(a) gives the district

court broad powers” to determine whether consolidation is appropriate (quotation omitted)). “In exercising its discretion, a court should weigh ‘the interests of judicial economy against the potential for new delays, expense, confusion, or prejudice.’” Parlodel, 182 F.R.D. at 444 (quotation omitted); see also In re TMI Litig., 193 F.3d 613, 724 (3d Cir. 1999) (“The purpose of consolidation is ‘to streamline and

economize pretrial proceedings so as to avoid duplication of effort, and to prevent conflicting outcomes in cases involving similar legal and factual issues.’” (quotation omitted)). Accordingly, “[a] motion to consolidate may be denied if the common issue is not a principle one, if it will cause delay in one of the cases, or will lead to confusion or prejudice in the trial of a case.” Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., Civ. No. 02-4146 (ES), 2007 WL 9725164, at *2 (D.N.J. July 26, 2007) (citation omitted). Similarly, “[w]here the evidence in one case is not relevant to the

issues in the other, consolidation would create a likelihood of prejudice by confusing the issues,” and should be denied. Ford Mktg., 149 F.R.D. at 81. Finally, “a court may deny consolidation when one case is further into the discovery process” or are at “different stages of preparation for trial.” Ford Motor, 2007 WL 9725164, at *2 (citations omitted). III. DISCUSSION Upon review of the parties’ motion papers, the Court agrees with FNRP that consolidation is not appropriate at this time. The Court therefore denies, without

prejudice, the motion to consolidate the two cases. The May defendants and McGrath plaintiffs argue that consolidation is appropriate because “the factual and legal issues in the [cases] substantially overlap . . . such that consolidating the two matters would greatly serve the interests of both equity and judicial economy,” as “[c]onsolidation would eliminate unnecessary repetition[,] confusion[,] [and] the risk of inconsistent outcomes.” [Dkt. 66-2] at 5-6. They also argue that consolidation is

appropriate because “[n]o party will suffer any prejudice” if the matters are consolidated. Id. at 6. FNRP, on the other hand, argues that the Court should deny the motion on the following grounds: (1) the motion is procedurally improper because the McGrath defendants had not been properly served at the time it was filed2; (2) the two cases do not share substantially overlapping questions of law or fact sufficient to warrant consolidation; and (3) consolidation would unfairly prejudice

FNRP. [Dkt. 68] at 11-13. To warrant consolidation, the May defendants and McGrath plaintiffs, as the moving parties, must demonstrate that the two cases share common issues of law or fact. Parlodel, 182 F.R.D. at 444. The Court concludes that they have met their

2 On the Court’s review of the McGrath docket, it appears that all McGrath Defendants have now been served. The Court thus does not address this aspect of FNRP’s argument. burden here: Both the McGrath complaint and May counterclaims stem from the investors’ allegations that “they were defrauded by [FNRP] into investing in various [LLCs] that held commercial real estate, primarily shopping centers anchored by

big-box stores and grocery stores.” [Dkt. 66-1] ¶¶ 3, 5-7. More specifically, the complaint in McGrath and counterclaims in May contain many of the same general allegations. Compare [Dkt. 51] ¶¶ 1-14, 56-110 with McGrath, [Dkt. 1] ¶¶ 1-13, 72-138. Indeed, the “Nature of the Case” sections in the two pleadings differ only in that they can contain different investment amounts, and the May counterclaims add one additional paragraph of allegations.

[Dkt. 51] ¶¶ 7, 13; McGrath, [Dkt. 1] ¶ 12. The “Facts” sections are—with some degree of variation3—also largely and substantively the same. Compare [Dkt. 51] ¶¶ 56-110 with McGrath, [Dkt. 1] ¶¶ 72-138. In addition, the McGrath complaint and May counterclaims contain thirteen identical or virtually identical counts.4 Moreover, even if not identical, most of the causes of action in each case arise under the same laws and differ in only minor respects.5 The relief requested is also nearly the same. [Dkt. 51] ¶¶ 287-293; McGrath, [Dkt. 1] ¶¶ 338-344.

3 See [Dkt. 51] ¶¶ 72, 74, 76-78, 81, 83, 91-98; McGrath, [Dkt. 1] ¶¶ 78, 81-84, 92, 93, 95-96, 108-117, 119-126, 138. 4 See [Dkt. 51] ¶¶ 135-148, 179-183, 208-213, 225-230, 237-242, 260-286; McGrath, [Dkt. 1] ¶¶ 157-170, 186-190, 216-221, 229-234, 247-252, 311-337.

5 Compare [Dkt. 51] ¶¶ 118-134, 149-165, 172-178, 184-207, 214-219, 231-236, 243-259 with McGrath, [Dkt. 1] ¶¶ 140-156, 171-185, 191-215, 222-228, 235-240, 253-265, 288-295, 306-310. The Court thus agrees with the May defendants and McGrath plaintiffs that the underlying facts and law at issue in the two cases are substantially similar and substantially overlap. The fundamental factual and legal theory that the investors

pursue in each case is that FNRP defrauded them in connection with their investments in FNRP-sponsored commercial real estate investment opportunities. The Court has little trouble concluding that there is substantial commonality in fact and law in the two cases.6 Nonetheless, “the mere existence of common issues does not require consolidation.” Shire LLC v. Watson Lab’ys, Inc., Civ. No. 12-83 (MAS), 2012 WL

12902495, at *2 (D.N.J. June 20, 2012). As noted, the Court “should weigh the interests of judicial economy against the potential for new delays, expense, confusion or prejudice” before consolidating the cases. Id. (citing Parlodel, 182 F.R.D. at 444). Given the present procedural posture of the cases, the Court concludes that consolidation is not appropriate at this time. Specifically, the Court agrees with FNRP that consolidation at this point will unnecessarily delay things, or at a minimum, complicate them. It would likely

result in a consolidated pleading that could disrupt the pending motion to compel

6 The Court appreciates that the McGrath complaint and May counterclaims differ in some respects. For example, there are some funds at issue in McGrath that are not at issue in May (and vice versa), and the parties to each case are not identical. Additionally, there are some statutory causes of action in the May counterclaims that are not asserted in the McGrath complaint (and vice versa). On the whole, though, there are enough similarities between the two cases to satisfy the Court that the May defendants and McGrath plaintiffs have met “the threshold requirement” of demonstrating that common questions of law or fact permeate both cases. Ford Motor, 2007 WL 9725164, at *2. arbitration, potentially requiring new motion practice. On that note, given the motion, there is an open question whether these cases will remain in this Court at all. (To be clear, the Court here offers no view or prediction on the outcome of that motion.) In this posture and with the motion to compel arbitration pending, there is little reason to consolidate the cases now. The May defendants and McGrath plaintiffs will suffer no prejudice by awaiting the Court’s decision on the motion to compel arbitration, and the Court is open to potential consolidation, or at least coordination, if that motion is denied.” IV. CONCLUSION Exercising the Court’s broad discretion and for the foregoing reasons, the motion to consolidate the May and McGrath cases [Dkt. 66] is DENIED without prejudice. IT ISSO ORDERED this 26th day of March, 2026. SBDs_ J. BRENDAN DAY UNITED STATES MAGISTRATE JUDGE

7 Indeed, if the cases remain in this Court, pretrial coordination in some fashion would seem, at a minimum, to make good sense. 10