Investor in dropped Newport Center project sues partners, alleging fraud

Kimberly Moffatt Jones, who says she invested millions in a now-withdrawn proposal for a residential development known as 150 Newport Center, has filed a lawsuit against her three partners in the project, alleging they defrauded her into investing.

Jones, ex-wife of auto dealership magnate Fletcher "Ted" Jones Jr., filed the suit Oct. 19 in Orange County Superior Court accusing Ron Soderling, Tod Ridgeway and Michael Lutton of fraud, negligent misrepresentation, gross negligence and breach of fiduciary duty.

Jones is seeking damages of at least several hundred thousand dollars, according to court papers.

In September, the Newport Beach Planning Commission recommended that the City Council deny the 35-unit project, citing concerns about the landscape plan and calling the project too bulky for the 1.26-acre site at 150 Newport Center Drive, which is currently occupied by a car wash.

For the development to move forward, the council would have needed to vote to change the land-use designation for the property from regional commercial office to multi-unit residential.

The council was set to make a final decision on the project Sept. 27, but city staff announced during the meeting that the developers had withdrawn their application.

Jones' lawsuit claims she was not privy to and did not sign off on the decision to withdraw.

Lutton, Soderling and Ridgeway, a former Newport Beach mayor, could not be reached for comment Thursday.

The lawsuit says Jones got involved in the project in November 2013 after Lutton asked whether she would be interested in investing in a hotel development in Newport Beach. The two met for lunch at the Red O Restaurant in Newport to discuss details.

According to the lawsuit, Lutton said that he, Soderling and Ridgeway planned to buy the Newport Center Drive property, demolish the existing Beacon Bay Auto Wash and build a luxury hotel.

Jones expressed interest in the hotel concept and Lutton asked her to invest $12.5 million in exchange for 26% interest in the project. After negotiations, they agreed that Jones would invest $6.25 million in exchange for a 47.5% share.

Jones paid $750,000 and obtained a $5.5 million loan at 9% interest to fund her investment. The loan terms require monthly payments of more than $40,000, court papers state.

Before she invested, the lawsuit states, Lutton assured Jones that funding for the hotel project was lined up and that Jones would "more than double her money" in the first year.

The lawsuit claims that Lutton told Jones that income from the car wash would be used to service her loan so she would have no additional out-of-pocket expenses before the cityapproved the hotel. But, Jones said, that didn't happen.

According to the lawsuit, Lutton also said an environmental impact study on the project had been completed, an additional study was set to be finished within three months and Soderling and Ridgeway had "all the connections" to get the entitlements for the hotel from the city and break ground by 2014.

Despite that, the lawsuit states, "no application for entitlements to develop the property was even submitted until December 2014."

Jones said she was taken by surprise when Lutton showed her plans for a new condominium and townhome project for the site in fall 2014. When she asked about the hotel plan, Lutton told her that he, Soderling and Ridgeway had decided to pursue a residential development instead because it would be more profitable for investors, potentially earning $120 million, the lawsuit states.

Jones alleges in court documents that Lutton, Soderling and Ridgeway intended to use her to "fund an investment in the property at an early stage and then to push her out."

Lutton said in a statement to the Daily Pilot last month that his firm had a good project that was supported by adjacent businesses, would reduce traffic in the Newport Center area by 80%, reduce water use on the site by 2,000 gallons a day and not block other residents' ocean views. Yet, he said, it was plagued by an "obvious political agenda."

"We will be back," he said at the time, "and ask citizens this time to understand the facts."

Jones' lawsuit states that Lutton, Soderling and Ridgeway have not advised her of their plans for the land.

hannah.fry@latimes.com

Twitter: @HannahFryTCN

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