ARNOLD AND ELIZABETH MCMAHON, THE OWNERS AND THE OPERATORS OF THE AHRC WEBSITE WERE JUDGED TO HAVE COMMITTED FRAUD. COURT AWARDS COMPENSATORY AND PUNITIVE DAMAGES OF OVER $820,000.00.
Most everyone who works with community associations in the Southern California area are probably aware of the “American Homeowners Resource Center - WWW.AHRC.COM. The AHRC website is owned and operated by Arnold and Elizabeth McMahon. This website is devoted to lambasting homeowners associations, CAI, legislators, businesses, managers, attorneys, judges, etc., who may support, vote or rule in favor of homeowners associations.
Unfortunately, for all of us who support or service homeowners associations, this website receives 3 million hits a month. The McMahons have used the sheer amount of communication volume to obtain the attention of legislatures throughout the United States, including and especially the California Legislature. Their function has been to promote anti homeowners association legislation. To that end, they have appeared before key legislation committees on many occasions. By most accounts due to the number of voters they purportedly represent, they have been considered a “force.”
On September 11, 2007, the McMahons were found to have committed fraud transferring assets in an effort to defraud Palacio Del Mar Homeowners Association (“Palacio”). Specifically, the court found that the McMahons acted with fraud, oppression and malice toward the association and awarded the association over $820,000.00 in compensatory and punitive damages. Not surprisingly, and even though the AHRC website claims to be “interactive” and a “grass roots” forum for discussion about all matters related to homeowners associations, the AHRC website makes no mention of this judgment, nor do we expect any mention of this judgment in the future.
Arnold and Elizabeth McMahon formerly resided in Palacio located in San Clemente. Palacio was represented by David M. Peters, Esq. and Michael G. Kim, Esq. of Peters and Freedman, L.L.P. Palacio filed its lawsuit against the McMahons in November 2001. Why did it take so long, almost 6 years, for this case to be tried? The answer is the McMahons doggedly resisted legal procedures and, given the result, for good reasons. These efforts even resulted in a contempt finding against Elizabeth McMahon and required Palacio to obtain court orders for the McMahons to submit to depositions and production of documents. By way of example, Arnold McMahon’s deposition had to be monitored by a retired judge appointed by the court with the judge ordering him to answer questions. The McMahons also filed motion after motion with the court, some of which were found to be frivolous. The McMahons then would appeal the court’s decision. The McMahons even claimed that because they published articles on their AHRC website critical of Palacio and its lawyers during the case that the case “morphed” into an attempt by Palacio to squelch their First Amendment rights of free speech. The McMahon’s motion making this interesting claim called an “anti-SLAPP motion to strike” was denied by the trial court as frivolous. On appeal, the court of appeal also found the motion to be frivolous, as well as the appeal and ordered sanctions against the McMahons. $41,301.22 in sanctions, which the McMahon’s have appealed. The Association is currently in the process of attempting to garnish Mr. McMahon’s salary to recover these sanctions.
Another noteworthy motion that both Arnold and Elizabeth filed separately and at different points in time in an attempt to delay trial, was a Motion To Transfer the case from Orange County to Los Angeles County claiming that the entire Orange County Bench was biased against them. Obviously, these motions were denied. Mr. McMahon is a Professor of Ethics at Los Angeles Community College. Mr. McMahon, attended USC law school represents himself. Elizabeth McMahon employs separate legal counsel. It is not uncommon for Arnold and Elizabeth to file the same motion at different times to cause delay and increase the expense to their opponent. You may also note that Mr. McMahon engaged Phillip Putnam, an attorney whom you will note is featured in the AHRC website. It appears apparent that AHRC website is a source of business for Mr. Putnam.
The court awarded Palacio $570,883.00 in compensatory damages, and $250,000.00 in punitive damages against the McMahons, finding that Palacio had established by a “very high standard” its entitlement to a punitive damage award against the McMahons because they acted with “fraud, oppression and malice.” Please note that the Association has already collected $227,337.75 from the McMahons in a prior lawsuit. This does not include other sanctions that are not discussed in this article.
If the past is indicative of the future, it is almost a virtual certainty that the McMahons will appeal. If the past is indicative of the future, the McMahons’ appeal will be denied.