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In re Alpha Media Resort Investment Cases

California Court of Appeals, First District, Third Division

September 16, 2019

In re ALPHA MEDIA RESORT INVESTMENT CASES.

          Superior Court of City and County of San Francisco CJJP No. CJC-12-004728; City & Nos. CGC-08-477832, CGC-10-495852 Mary E. Wiss, J. Trial Judge

          Law Offices of Todd B. Rhoads and Todd B. Rhoads for Defendant and Appellant Derek F. C. Elliott.

          Vereschagin Law Firm and Bryan W. Vereschagin for Plaintiffs and Respondents.

          WICK, J. [*]

         This is an appeal from judgment in two coordinated actions[1] in which defendant Derek F. C. Elliott challenges the trial court's rulings to deny his motion to dismiss for want of prosecution within the five-year statutory period and, alternatively, for a stay of proceedings pending resolution of his parallel criminal case. Elliott contends each of the challenged rulings was an abuse of discretion and asks that we remand to the trial court with instructions to vacate the judgments against him and to dismiss or, alternatively, enter the stay as requested. We affirm.

         FACTUAL AND PROCEDURAL BACKGROUND

         Elliott has been named as a defendant in six civil fraud actions, five of which were filed in the Superior Court of the City and County of San Francisco (including the two at hand).[2] These six actions involve the same basic allegations. Approximately 25 defendants, including Elliott, his father Frederick Elliott, and numerous Elliott-affiliated corporate entities (hereinafter, Elliott entities), pursued an international investment scheme through which they fraudulently induced hundreds of individuals and organizations to invest in two resort properties in the Dominican Republic. One of these resorts, the Sun Village Juan Dolio resort, was not renovated as promised despite defendants' collection of over $91 million in investor funds. The second resort-the Cofresi resort-was operational, yet, as one plaintiff alleged, the Elliotts had no intention of making the new investors “fee simple” owners as promised. Ultimately, this fraud scheme generated a net loss of about $170 million.

         Based upon these allegations, nearly 230 claims in total were brought against the 25 or so defendants, including fraud, conspiracy to defraud, deceit and unjust enrichment claims. General, special and punitive damages were sought, as well as various forms of equitable relief. Applications for approval of complex designation and single assignment were subsequently granted for the five actions filed in the Superior Court of the City and County of San Francisco, including these two matters.

         In June 2012, one of the other named defendants, Alpha Media Publishing, Inc. (fka Dennis Publishing, Inc.), filed a petition for coordination of actions. On November 29, 2012, San Francisco Judge Richard A. Kramer was designated the coordination trial judge and authorized “to exercise all the powers over each coordinated action of a judge of the court in which that action is pending.” Judge Kramer thereafter ordered that all six actions would be coordinated for purposes of discovery but would remain separate for trial absent agreement by the parties.

         Meanwhile, criminal charges for mail fraud and conspiracy were brought against Elliott and codefendant James Catledge in the United States District Court for the Northern District of California based essentially on the same facts alleged in our proceedings. Elliott subsequently reached a plea deal in his criminal case in which he admitted engaging in a conspiracy to commit mail fraud and agreed to the truth of numerous facts relating to his intentional efforts to defraud investors in the Sun Village Juan Dolio resort project. In addition, Elliott agreed, among other things, to forfeit his right to claim Fourth and Fifth Amendment protections and to cooperate with the government in codefendant Catledge's criminal trial in exchange for leniency. The parties represented in their appellate briefing that these parallel criminal proceedings involving Elliott and Catledge were ongoing.

         On February 3, 2014, based on a joint stipulation between plaintiff and defendants Alpha Media Group, Inc. and Alpha Media Publishing, Inc., the trial court ordered that the five-year statutory period to bring an action to trial set forth in Code of Civil Procedure section 583.310 would run no earlier than June 2, 2014, in the Spalding matter.[3] No such stipulation or order was reached with respect to the Elliotts because, despite being served with the summons and complaint, they had not answered at the time this order was entered.[4]

         Discovery subsequently yielded a wealth of documentary evidence of wrongdoing from various defendants, and plaintiffs were able to successfully reach multimillion-dollar settlements with two primary defendant groups (identified herein as the James Catledge/Impact, Inc. defendant group and the Dennis Publishing, Inc./Maxim defendant group). However, while most parties in the coordinated proceedings were focusing on settlement and judicial efficiency strategies during regular case management conferences with the trial court, Elliott, his father and the Elliott entities were for the most part absent. In fact, it was not until May 4, 2015, that Elliott filed an answer in the Spalding and Celovsky matters.

         In January 2016, the trial court set the Spalding and Celovsky matters for trial. The day after the trial court issued pretrial scheduling orders on March 28, 2016, the Elliott defendants (including Elliott) began filing substitution of counsel forms. In doing so, Elliott associated in to represent himself in a pro se capacity. Elliott's deposition was noticed for April 7, 2016, but he failed to appear. Plaintiffs therefore requested that the Spalding trial date be reset from June 20, 2016, to September 6, 2016, which was the date scheduled for the Celovsky trial, and proposed a bench trial rather than a jury trial should the Elliotts fail to appear. The court agreed to these requests and set a pretrial conference for July 8, 2016.[5] Meanwhile, plaintiffs reached settlements with all named defendants but the Elliotts, the Elliott entities, and one other defendant in the Aleo action.

         On August 10, 2016, about four weeks before trial was set to begin in the Spalding matter, Elliott and his father first raised the issue of dismissal under Code of Civil Procedure section 583.310. The Spalding trial date was thus continued to September 26, 2016, and the Elliotts' motion for dismissal or, in the alternative, a stay of proceedings was heard on September 6, 2016. Following the contested hearing, the court denied the motion in its entirety on September 16, 2016.

         A bench trial began in the Spalding matter shortly thereafter, with no appearance from the Elliotts. At its conclusion, the trial court found in favor of the plaintiff and against the Elliotts, jointly and severally, on the following causes of action: fraud (concealment), fraud (false representation and concealment) and civil conspiracy. In addition, the court found they acted with malice, oppression and fraud such that punitive damages were warranted. Accordingly, the court awarded the Spalding plaintiff $984, 575 in damages for the fraud causes of action, $1, 476, 862.50 in punitive damages, and $564, 957 in prejudgment interest.

         A bench trial in the Celovsky matter followed on November 7, 2016, again with no appearance from the Elliotts. At its conclusion, the trial court found the Elliotts jointly and severally liable for fraud (concealment) and fraud (fraud and conspiracy to defraud based upon concealment and misrepresentation). The court also found they acted with malice, oppression and fraud such that punitive damages were again warranted. Accordingly, the court awarded to plaintiffs Samuel Celovsky and John R. Young, cotrustees of The John and Dorothy Johnson Missionary Foundation, a total of $7, 715, 518.41 in damages, punitive damages, and prejudgment interest; to plaintiff Samuel Celovsky a total of $511, 192.65 in damages, punitive damages, and prejudgment interest; to ...


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