A clever attorney may try to paper over a dubious act with layers of legitimate-looking transactions. But if the court decides the real motivation was to commit fraud, the whole arrangement can topple like a house of cards.

That’s the lesson of a recent decision by the California Court of Appeal (Aghaian v Minassian.)

The case began with a 2013 lawsuit in Los Angeles Superior Court by two individuals against Shahen Minassian. Seda Galstian Aghaian and Aida Galstian Norhadian claimed that, beginning in 1996, Minassian had acted improperly in regard to property in Iran owned by their late parents. They asked for $105 million in damages.

In 2005 they amended the lawsuit to include Shahen’s wife, Alice, and his son, Arthur. It alleged that the three Minassians had “concocted” a “scheme ... to hinder, delay or defraud Shahen’s creditors” – i.e., them – by fraudulently transferring ownership of homes the Minassians owned.

In March of 2016, Arthur, an attorney, asked the court to appoint him as guardian ad litem, or surrogate decision maker, for Shahen.

Arthur claimed his father was “unable to comprehend” the nature of the lawsuit about the Iranian property, and could not assist in defending against it. The court granted Arthur’s request.

In September of 2016, Alice filed for divorce from Shahen, asking the court to end their marriage that began in 1964. Her petition claimed they had separated on April 1, 1991 – before the lawsuit about the Iranian assets had been filed.

Although they were in the midst of a dissolution proceeding and ostensibly were long separated, the couple continued to live in the Sherman Oaks home they had purchased in 2004. Arthur lived in a second home, across the street, that his parents had purchased in 2008.

Shahen and Alice had taken title to both homes as “Husband and Wife as Joint Tenants” after supposedly separating on April Fools Day many years earlier.

Early in 2017, the couple obtained a reverse mortgage on their home of nearly $1 million.

A few months later, acting as Shahen’s guardian ad litem, Arthur asked the family court handling his parents’ divorce proceeding to transfer the two Sherman Oaks homes to Alice. In return, Shahen would be solely liable for any judgment in the lawsuit about the Iranian properties.

The court agreed, and Arthur executed quitclaim deeds to Alice of Shahen’s interest in the properties.

The lawsuit went to trial in September of 2017, and Shahen testified for 12 days “without showing signs of diminished mental capacity,” according to the court.

In December of 2018, the trial judge issued a judgment in favor of the plaintiffs, ordering the Minassians to pay them $34.5 million.

The plaintiffs then filed a complaint against Shahen, Alice and Arthur. They alleged “fraudulent transfer” by Shahen and Alice in regard to their homes, and alleged Arthur had “concocted the entire scheme,” thereby aiding and abetting the actions of his parents.

The divorce between Shahen and Alice was a “complete sham,” they argued, devised by Arthur to shield the family’s homes from creditors.

The Minassians asked the trial judge to reject the new claims on procedural grounds.

They argued that a court had granted Alice’s divorce petition, so another court couldn’t rule that it was fraudulent.

Arthur said his appointment as guardian ad litem gave him judicial immunity for his acts. Even if his acts as guardian and the filing of the dissolution action “were a sham, those acts are protected by the litigation privilege,” he argued.

California’s litigation privilege is a legal principle that effectively immunizes conduct that is alleged to be fraudulent, perjurious, unethical, or even illegal, so long as it is reasonably related to litigation.

The trial court agreed, ruling in favor of the Minassians. The plaintiffs appealed.

The Court of Appeal reversed the lower court’s ruling.

To be covered by the litigation privilege, the appellate justices said, actions must be intended to “achieve the objects of the litigation” and “have some connection or logical relation to the action.”

In this case, they said, it was the transfer of the property that was at the core of the litigation, “not the sham judicial proceedings used to provide legal cover for the transfer,” so the litigation privilege did not apply.

Similarly, Arthur’s actions in “concocting and orchestrating” his parents' divorce actions and the transfers of their assets in order to stymie creditors were outside the scope of his authority as guardian ad litem for his father, they ruled, so he was not entitled to immunity for those actions.

His appointment as guardian ad litem “is not a get-out-of-jail-free card that provides blanket quasi-judicial immunity” for his conduct, they said.

The appellate justices reversed the trial court’s ruling, and awarded the plaintiffs their costs on appeal.

By Lynda I. Chung