Madison - St. Clair Record

Monday, September 23, 2019

Company accused of fraud can compel arbitration with plaintiff for some matters, appellate court says

By Tabitha Fleming | May 13, 2017

An investment gone awry and whether or not defendants could compel arbitration for various disputes were at issue in a Fifth District Appellate Court ruling which ordered parts of the dispute back to the lower court. 

In Lakho v. Nisar, the court found that a St. Clair court erred by granting the defendants arbitration for several counts in the case.

The case follows the investments made by Mazhar Lakho in two separate companies: Pyramid Investment Management I LLC and Pyramid Investment Management II LLC. Both companies are operated by Abid Nisar, Arif Pyarali, Mahendra Gunapooti, Rashid Dalal and Shabbir Shaikh who are all listed as managing members.

According to the complaint filed by Lakho, Nisar approached him in 2010 and asked him to invest $100,000 in Pyramid I. “When the plaintiff voiced concerns about tying up his funds in a long-term land investment, Nisar represented that the plaintiff could quit at any time, and receive his initial investment, plus annual interest of 8% on the investment,” read the analysis by the court. Lakho invested twice with Nasir, once in February 2010 and again with Pyramid II in April 2010. He invested $100,000 the first time and $55,000 the second time.

Lakho was not able to withdraw the funds, however; when he sought to withdraw the money and receive the 8 percent interest on his investment, Nisar and the others refused the request. Lakho filed the complaint in court alleging fraud and false representations by the company.

At the trial court, the defendants filed motions to compel arbitration and noted arbitration clauses in their agreements which they asserted that Lakho knew about prior to his investment. The facts of the case were considered de novo by the court, which reviewed copies of the contracts and the allegations made by both the plaintiff and the defendants.

The conclusion drawn by the court was that the defendants failed to prove that the agreement signed for the $100,000 investment in Pyramid I included a binding arbitration clause, and that the initial trial court made a mistake in compelling arbitration for three counts concerning that investment. However, the court found that the defendants had sufficiently notified and proven that the investments made in Pyramid II were compelled to arbitration by the court in accordance with the original agreement between the two parties.

The case was remanded to the lower court concerning the arbitration issues for Pyramid I, while the lower court's order granting arbitration for Pyramid II was confirmed. Lakho will have to enter into arbitration for the investments made in Pyramid II unless another motion is filed and another decision made by the court.

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Illinois Fifth District Appellate Court