Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

 

This case arises from an allegedly usurious loan.  In or about November of 2022, Plaintiff Alex Nerush and his half-brother Neil Shekhter (“Shekhter”) each sought to purchase the property at 1925 Broadway, Santa Monica, California 90404 (the “Property”). They each submitted separate offers but ultimately elected to purchase the Property together.  

Initially, the terms of the purchase called for a simple transaction where the Property was to be acquired for a purchase price of $16,000,000, with an $8,000,000 down payment, and a seller financed first trust deed for another $8,000,000 at an interest rate of 4%.  

Shekhter, however (unbeknownst to Nerush), wanted to purchase the Property to use it as collateral to obtain money for his other real estate projects. Shekhter contacted Defendant Bryan Gortikov, an allegedly seasoned hard money lender whom Shekhter had a prior relationship with, to provide a cash-out loan to be used on other projects.  

In November and December of 2022, Gortikov and Shekhter allegedly manipulated and coerced Nerush to agree to the cash out loan from Gortikov. Among other things, Gortikov and Shekhter purportedly strong-armed Nerush and made various false representations that the money from Gortikov was needed to develop and entitle the Property, when in fact no additional money was needed.  

To evade California's usury laws and to otherwise impose unconscionable terms, Gortikov allegedly re-structured the entire purchase transaction so that the Property would be acquired by two separate Delaware limited liability companies subject to Delaware law and forum selection clauses, instead of using a California entity as was initially planned.  

This action ensued.  Plaintiffs Nerush and AN SM 1925 Broadway LLC (the “Company”) filed an original complaint and contend to have served it on Defendants Gortikov and his company, GC Broadway LLC (collectively “GC Defendants”) in early October.  On October 22, 2024, before the GC Defendants appeared, Plaintiffs filed a first amended complaint (“FAC”).   

The original Complaint asserted five causes of action: (1) Damages for Usurious Interest, (2) Declaratory Relief, (3) Money Had and Received, (4) Unfair Business Practices, and (5) Injunction of UCC Sale. The original Complaint seeks damages and declarations based upon the allegation that GCB’s preferred equity investment in the Company is a usurious loan. Specifically, the original Complaint sought the following declarations:  

For a judicial declaration that Plaintiffs are only obligated to pay GC Broadway, LLC the principal amounts actually advanced on the Loan less the amounts of usurious interest that has been paid within the last two years; that the interest rate specified in the Amended and Restated Operating Agreement for AN SM 1925 Broadway, LLC is usurious and should be declared null and void; that Defendants are further obligated to pay treble damages under the usuary law; and that there is no exception to the usury law that applies to the subject transaction. (Original Complaint at 9:17:23.)  

 

Plaintiffs claim the original Complaint was served by substituted service on Gortikov on October 7, 2024, and on GCB on October 10, 2024.  

On October 22, 2024, before the GC Defendants responded to the original Complaint, Plaintiffs filed their First Amended Complaint (“FAC”) against GCB, Gortikov, and a new defendant, 1925 Broadway, LLC. The FAC seeks vastly different and greater relief than the original Complaint.  In addition to the previous five causes of action, the FAC now also sought partition and quiet title of a property owned by the Company and 1925 Broadway, LLC. GCB has an indirect interest in the Property through its membership in the Company and 1925 Broadway, LLC. The FAC also seeks new declarations against the GC Defendants:  

For a judicial declaration that there is no default under the terms of the Amended and Restated Operating Agreement; that Plaintiffs are only obligated to pay GC Broadway, LLC the principal amounts actually advanced under the Loan less the amounts of usurious interest that has been paid within the last two years (not including treble damages and other penalties); . . . that the interest rate specified in the Amended and Restated Operating Agreement for AN SM 1925 Broadway, LLC is usurious and should be declared null and void; that Defendants are further obligated to pay treble damages under the usary law; and that there is no exception to the usury law that applies to the subject transaction. (FAC at 11:21-12:1.)  

 

This hearing is on the GC Defendants’ motion to quash service of summons.  The GC Defendants argue they were never served with the FAC, and to the extent Plaintiffs claim to have served it by mail, it was ineffective because under California law, an amended complaint must be personally served in the same manner as the summons and original complaint when the defendant has not appeared in the action.  There was no opposition filed as of the posting of this tentative ruling.      

LEGAL STANDARD 

“Service of process, under longstanding tradition in our system of justice, is fundamental to any procedural imposition on a named defendant.”¿ (AO Alfa-Bank v. Yakovlev (2018) 21¿Cal.App.5th 189, 202.)¿ “To establish personal jurisdiction, compliance with statutory procedures for service of process is essential.”¿ (Kremerman v. White (2021). 71 Cal.App.5th 358, 371.)¿  

But the statutory requirements are to be liberally construed to uphold jurisdiction, rather than defeat it.  (Pasadena Medi-Center Assocs. v. Sup.Ct. (Houts)¿(1973) 9 Cal.3d 773, 778 (“The provisions of this chapter should be liberally construed to effectuate service and uphold the jurisdiction of the court if actual notice has been received by the defendant,¿and in the last analysis the question of service should be resolved by considering each situation from a practical standpoint.”)  

Defendant’s knowledge of the action does not dispense with statutory requirements for service of summons.¿ (Kappel v. Bartlett (1988) 200 Cal.App.3d 1457, 1466.)  However, as long as the defendant receives actual notice of the lawsuit,¿substantial compliance¿with the Code provisions governing service of summons will generally be held sufficient.  (Summers v. McClanahan¿(2006) 140 Cal.App.4th 403, 410-411 (“It is well settled that strict compliance with statutes governing service of process is not required.  Rather, in deciding whether service was valid, the statutory provisions regarding service of¿process should be liberally construed to effectuate service and uphold the jurisdiction of the court if actual notice has been received by the defendant.”).) 

“A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow” may move “to quash service of summons on the ground of lack of jurisdiction of the court over him or her” that results from lack of proper service.¿ (Code of Civ. Proc. §418.10(a)(1).¿ A defendant has 30 days after the service of the summons to file a responsive pleading.¿ (Code Civ. Proc., §412.20(a)(3).)¿¿ 

“When a defendant challenges the court’s personal jurisdiction on the ground of improper service of process, ‘the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.’” (Summers, 140 Cal.App.4th at 413.)¿     

DISCUSSION 

GC Defendants contend the FAC was never served on them.  Based on the record, the Court agrees with the GC Defendants.  On December 26, 2024, Plaintiffs’ counsel left a voicemail to the GC Defendants’ counsel admitting that he had not served the GC Defendants.  (Hicks Decl., ¶ 2.)  In an about-face, on February 11, 2025, Plaintiffs’ counsel sent an e-mail claiming that the FAC was served on December 18, 2024 (a week prior to counsel’s December 26, 2024 voicemail admitting the FAC was not served on the GC Defendants) and threatened to take a default if an Answer was not filed within one day. (Hicks Decl., Ex. 2.)  The GC Defendants’ counsel requested that Plaintiffs’ counsel provide the proofs of service because the GC Defendants did not believe they were served, and proofs of service were not filed with the Court. (Id.)  Plaintiffs’ counsel refused to provide the proofs of service, stated his intention to take a default, and asserted that he served the FAC via mail. (Id.)    

While there is no evidence that the FAC was in fact served by mail, even if it was, such service is improper.  In Engebretson & Co. v. Harrison (1981) 125 Cal. App. 3d 436, 444 (1981), the Court explained: “Where the defendant has failed to appear in the action, service of an amended complaint in the manner provided for service of summons … is an essential prerequisite to a valid default judgment.”  This is because “if the complaint is amended in a way which would materially affect the defendant’s decision not to contest the action, this new circumstance should be brought home to the defendant with the same force as the notification of the original action.” (Id. at 442.)  Here, the GC Defendants had not appeared in the action at the time the FAC was filed. Thus, the GC Defendants must be served with the FAC in the same manner as a summons.   

Moreover, the FAC materially changes the scope and nature of the action. Unlike the original Complaint, the FAC asserts causes of action for partition and quiet title of a property that GCB has an indirect interest in and seeks additional declaratory relief (such as “there is no default under the terms of the Amended and Restated Operating Agreement”). As such, the FAC could not be served by mail– it was required to be served in the same manner as the summons and original Complaint.  (Id. at 442.) 

Plaintiffs have not opposed the motion to quash.  ¿It is axiomatic that the failure to challenge a contention in a brief results in the concession of that argument. (DuPont Merck Pharmaceutical Co. v. Sup. Ct. (2000) 78 Cal.App.4th 562, 566¿(“By failing to argue the contrary, plaintiffs concede this issue”);¿Westside Center Associates v. Safeway Stores 23, Inc.¿(1996) 42 Cal.App.4th 507, 529¿(“failure to address the threshold question effectively concedes that issue”);¿Glendale Redevelopment Agency v. Parks¿(1993) 18 Cal.App.4th 1409, 1424¿(issue is impliedly¿conceded¿by failing to address it).)  Accordingly, the Court grants the motion to quash. 

CONCLUSION 

Based on the foregoing, the Court GRANTS the GC Defendants’ motion to quash service of summons. 

 

DATED: March 12, 2025 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court