Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Shepard Johnson v. Chester Mitchell

May 14, 2013


The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge


Introduction and Summary

Real estate law can be complex indeed even when applicable in familiar environs. Add to this complexity that the locus of the dispute herein originated with real estate on an "island paradise" development in Panama, and it is no wonder that the parties are at such loggerheads. Either defendants are persons who saw their island paradise home dreams disappear through the acts of what may be likened to a Ponzi scheme orchestrated by plaintiff Shepard Johnson, or plaintiff was victimized by impatient, unrealistic real estate investors who ultimately sought to have plaintiff criminally convicted for nothing more than reasonable delays in the completion of development infrastructure and conveyance of title to paid-for-properties.

Although the court will not finally decide here which of the above two scenarios is true, for the reasons given herein, defendants' summary judgment motion on plaintiff's malicious prosecution claim should be granted on the "favorable termination issue," but should be denied on the "probable cause" issue. However, because judgment on one issue was all that was required for complete judgment, judgment should be entered on behalf of all defendants in this action. Plaintiff's counter-motion for summary judgment should be denied.

Factual Setting

Plaintiff Johnson and corporate entities created by him (Groupo Islas Tropicales (GIT) and Groupo Cayo Nancy S.A. (GCN)) were able to acquire, for purposes of real estate development, a substantial real estate holding on the Island of Solarte within the country of Panama (Finca 302 and Finca 5409 within 302*fn1 ). Johnson developed and activated a plan where investors would acquire lots within the larger development. While some of the actual investors (defendants herein) were to acquire lots within the to-be-developed real estate holdings in what we understand in this country as fee title, or close to it, others were only able to purchase "rights of possession," (ROP) much like a long-term leasehold or license. The original contracts for the most part did provide that the appropriate title under Panamanian law would be conveyed to the purchasers upon complete payment of the lot purchase price. Also promised were infrastructure improvements, although the precise improvements and when they would be completed are disputed by the parties.

Years went by and neither the appropriate titles were conveyed, nor were the infrastructure improvements completely, or perhaps even minimally, realized according to the investor defendants herein. Some of the investors grew to be angry with Johnson, accusing him of a Ponzi scheme type action in which the monies derived from the purchase of lots, which were to be earmarked for improvements, were diverted to Johnson's personal use in California. Also, the investors' conveyance of titles became enmeshed in further Johnson imposed CC&R requirements and modified contracts. Indeed, those investors who had bargained for "rights of possession" were given assertedly worthless non-voting or very diluted "preferred" shares in one of Johnson's corporations which held the rights to develop the property. The investors' accusations seem reminiscent of the proverbial carrot on a stick being dangled in front of the hard working cart mule.

Johnson, on the other hand, asserts that his plans of conveyance of titles and completion of the infrastructure were bedeviled by a cumbersome, if not corrupt, Panamanian bureaucracy -- problems of which had been communicated to the investors and of which they were well aware from the outset. Environmental concerns also impeded progress. The investors, he claimed, were unrealistic and impatient in terms of their expectations of immediate problem resolution.

After abortive resolution attempts between Johnson and the defendants herein, in which each side accused the other of dishonoring, the defendants herein acquired Panamanian counsel who advised them to file complaints ("denuncios") which alleged criminal fraud on the part of Johnson. The precise history of these criminal complaints are detailed infra, but suffice it to say that these criminal complaints, which had been initially adopted by local Panamanian prosecutors, were later "provisionally" dismissed by Panamanian courts. The reasons for dismissal, and especially whether the dismissals were related to the merits of the accusations, are issues to be resolved herein.

Johnson, whose personal stake in the development succumbed to bankruptcy, filed a number of lawsuits, including the instant federal litigation, alleging malicious prosecution as a result of the criminal prosecution. He also filed state court actions alleging defamation. Whether Johnson has alleged defamation in this lawsuit is an issue which the undersigned will discuss infra.

After numerous motions in this case resolving subject matter (diversity) and personal jurisdiction for some named defendants, the remaining defendants brought summary judgment motions arguing that Panama, whose law controlled herein, did not recognize a claim for malicious prosecution. In the alternative, even if California law applied, Johnson could not satisfy the requirements for a malicious prosecution action as a matter of law. Defendants also argue that the Panamanian criminal proceedings were never dismissed on the merits. Belatedly raised in the reply is defendant's contention that Johnson's malicious prosecution claim is barred by the Panamanian statute of limitations. Johnson brought a counter-motion for summary judgment, which when read in its entirety is simply not an affirmative request for judgment, but rather is an opposition to entry of any judgment for defendants.

Remaining Defendants In This Action and Status of Other Defendants

The remaining defendants in this action who move for summary judgment are: The Miner Defendants -- David and Sarah -- fee title purchasers in 1999 The Mitchell Defendants -- Chester and Catherine -- ROP purchasers in 2002 Sondra Tornga -- ROP purchaser in 1998 Anne-Michelle Wand -- purchaser of two lots -- type of purchase unclear for October 1998 purchase, but ROP for the July 1998 lot Viki Kiman -- fee title and ROP purchaser in 2003 Todd Johnson -- fee title purchaser in 2002 The Shargorodsky Defendants -- Efim and Elena -- ROP purchasers in 2003

All other previously named defendants in this action have been dismissed, or are pending dismissal, or for some other reason have not participated in this litigation. Those non-moving (summary judgment) defendants whose status remains pending are: Arosemena -- F & Rs recommending dismissal for lack of personal jurisdiction;

Berrocal -- F & Rs recommending dismissal for lack of personal jurisdiction;

Solarte Inn Corp -- F & Rs pending for lack of service;

Reinhold -- declaration regarding service filed (Dkt 241) -- no response by this defendant; Kahler -- served; responded that she cannot afford an attorney and asks for leniency (Dkt. 244); Lynch -- did not respond to the undersigned's order to show cause.

The court is faced with the problem of what to do with the two defendants who have not responded (Reinhold), or not responded to the to the court's orders (Lynch answered the Second Amended Complaint, Dkt. 117, but apparently is living in Panama City), or has simply pled for leniency (Kahler). Reasons exist to have them adjudged as the moving defendants because the rationale of judgment herein would apply equally to any claim for malicious prosecution brought by Johnson. See Abagninin v. AMVAC Chemical Corp., 545 F.3d 733, 742-43 (9th Cir. 2008). On the other hand, parties who seemingly, wilfully do not participate, even when told to do so, do not deserve a windfall judgment in their favor.

In light of the large expenditure of court resources to adjudicate this case thus far, the undersigned believes that the court's discretion should be exercised to have this case entirely closed. Cases need to be resolved, and it does not appear to the undersigned that a miscarriage of justice will occur if the non-responding defendants are lumped in with the moving defendants. Issues

1. Whether defendants' motion is one for partial or complete summary judgment, i.e., has Plaintiff Johnson set forth a claim for defamation;

2. Whether defendants may belatedly raise in this motion a defense based on the statute of limitations;

3. Whether Panamanian or California law applies in respect to a claim for malicious prosecution;

4. Whether the criminal proceedings in Panama were determined on the merits in favor of Johnson.

5. Whether defendants had probable cause for causing a criminal prosecution to be initiated.

6. Whether the civil conspiracy claim should be dismissed as well.

Summary Judgment Standards

It will not do to set forth boilerplate law regarding summary judgment in that, as fully discussed herein, the two substantive issues on which judgment is analyzed (favorable termination and probable cause) are questions of law for the court regardless of potential, subsidiary factual controversies.

The undersigned has looked in vain for a discussion of summary judgment standards utilizing California law for malicious prosecution (the substantive law to be applied for this case (see below)). However, there are parallel actions where issues of law are reviewed on summary judgment in federal court*fn2 -- the most analogous being that of qualified immunity.

In Peng v Mei Chin Penghu, 335 F.3d 970 (9th Cir. 2003), the allegation involved a lack of probable cause for arrest. The Ninth Circuit held that where the operative historical facts were not at issue, even if incidental facts were disputed, or the inferences from historical facts could be disputed, summary judgment was appropriate because qualified immunity was ultimately a matter of law for the court. Id. At 979-80. The Peng standard will be applied here. Thus, it will not matter if the parties dispute a number of subsidiary facts, e.g., who engaged in pre-Panamanian criminal complaint settlement in good faith, if this fact is not material to the historical, undisputed, or indisputable, facts relied upon by the court.


I. Malicious Prosecution Is The Only Claim In This Litigation

The Third Amended Complaint (TAC) provides in its caption:


1.MALICIOUS PROSECUTION [as to 8 defendants with a conspiracy claim as to all named defendants] \\\\\

Page 4 of the TAC sets forth:

Plaintiff sues for malicious prosecution for defendants....

Plaintiff sues all defendants for conspiracy to commit malicious prosecution and punitive damages.

Starting on page 41 of the TAC, plaintiff alleges express claims for malicious prosecution against each of the eight defendants, and on page 64 alleges the conspiracy to commit malicious prosecution against all defendants. Plaintiff never alleges a claim (cause of action) for defamation.

Yet plaintiff alleges in various, previous factual paragraphs that he was defamed by plaintiffs herein. See paragraphs 45, 51-59, 83-110.

Defendants moved in their motion for summary judgment only on the expressly stated claim of malicious prosecution, and plaintiff opposed/moved for summary judgment only on that specific claim. Although the parties do not raise the issue, due to the presumptive "liberal reading of pro se complaints,"*fn3 the court must determine whether a latent claim for defamation survives the summary judgment motions.

However, the undersigned finds that plaintiff Johnson herein is not your typical pro se plaintiff -- generally, completely unschooled in the law, and perhaps generally under-educated in all respects. By virtue of the briefs filed in this case, and his court appearances, the undersigned concludes that either plaintiff has had legal training himself, or has a lawyer ghost writer assistant. At some point fairness to defendants must enter the equation, and the court will not apply a presumption of legal inability in favor of plaintiff when it is not warranted by the facts.

The above discussion leads to the conclusion that the court will not add a defamation or other claim to the Third Amended Complaint when plaintiff has so assiduously refrained from expressly stating one. Plaintiff has had more than ample opportunity to state an express claim for defamation, yet he has not done so.

II. Whether Defendants May Seek to Have the Action Dismissed Based on the Statute of Limitations

Nowhere in their motions for summary judgment did defendants seek to have any contention regarding the statute of limitations decided in their favor. It was not until the defendants' reply brief that such a contention surfaced. The undersigned will not recognize a contention raised for the first time in the reply brief. See Tim Ryan Const.v. Burlington Ins., 2013 WL 1774627 *5 (W.D. Wash. (2013) citing Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007).*fn4

III. Choice of Law -- California or Panama

It would seem to be an easy question -- the real estate in question lies in Panama; the contracts at issue were directed to that real estate; defendants sought the assistance of Panamanian counsel; Panamanian authorities and courts dealt with the accusations of violation of Panama's criminal law; plaintiff claims that there was no probable cause for the accusations and that the Panamanian courts absolved him of any wrongdoing. But many things in the law are not easy, and for the reasons set forth below, California law shall be applied.

In this diversity action, the substantive law of California, which includes the choice of law rules to be applied herein, govern. While federal jurisdiction provides an alternative forum for the adjudication of state-created rights, it does not carry with it the generation of rules of substantive law. Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996). The law is clear that federal courts sitting in diversity apply state substantive law and federal procedural law, along with that state's choice of law rules. See e.g., Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), Gasperini, 518 U.S. at 42, Coufal Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000). Thus, the forum state is free to determine whether a given matter is to be governed by the law of the forum or some other law. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496-97 (1941).

Choice of law questions in California are subject to the "governmental interest analysis." [footnote omitted] Offshore Rental Co. v. Continental Oil Co., 22 Cal.3d 157, 148 Cal.Rptr. 867, 869, 583 P.2d 721, 723 (1978) (In Bank). Under this approach, the forum court must "search to find the proper law to apply based upon the interests of the litigants in the involved states." Reich v. Purcell, 67 Cal.2d 551, 63 Cal.Rptr. 31, 33, 432 P.2d 727, 729 (1967) (In Bank). This analysis begins with an examination of the laws of the states involved in the action in order to determine whether there is a "true conflict." Denham v. Farmers Ins. Co., 213 Cal.App.3d 1061, 262 Cal.Rptr. 146, 147-48 (1989). As discussed above, in this action for malicious prosecution, the New York special injury requirement creates a true conflict.

Where there is a "true conflict," California law, the applicable law of the forum, requires that the court conduct a "comparative impairment" analysis. Paulo v. Bepex Corp., 792 F.2d 894, 895 (9th Cir.1986). The district court referred to this approach, but did not expressly analyze the respective state interests. Under the comparative impairment approach, the court examines "which state's interest would be more impaired if its policy were subordinated to the policy of the other state." Denham, 262 Cal.Rptr. at 148. The balancing of impairment is slightly weighted by California's general preference for applying its own law. Fleury v. Harper & Row Publishers Inc., 698 F.2d 1022, 1025 (9th Cir.), cert. denied, 464 U.S. 846, 104 S.Ct. 149, 78 L.Ed.2d 139 (1983).

Engel v. CBS, 981 F. 2d 1076, 1080-81 (9th Cir 1993).

The fact that two states (or a state and a foreign country) are involved does not in itself indicate that there is a choice of law problem. See Hurtado, 11 Cal.3d 574, 580, 114 Cal.Rptr. 106 (1974). There is obviously no problem where the laws of the two states are identical. Id. Thus, if there is not a true conflict, the law of the forum (here ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.