It was anyone’s guess how the jury would rule. Would they sympathize more with Ami Shinitzky — an elderly, wealthy developer trying to keep control over his multi-million dollar investment property after struggling to get through the recession — or would they side with a group of “outsiders” who spent big money to own pristine land right on the Nantahala River?
After deliberating for about three days, the jury ruled in the plaintiffs’ favor on every issue — and the issues they were presented with weren’t simple.
“The jury got it right,” said Adam Peoples, an Asheville lawyer who represented Mystic Lands homeowner Fred Yates. “This is a victory across the board for the homeowners.”
Shinitzky’s attorney Craig Justus said he appreciated the jury’s civic commitment to this issue, but added that a motion to appeal could be filed.
“Although we are disappointed with the verdict, we believe that there were legal issues surrounding the jury instructions and what questions that they were asked to answer,” he said in an emailed statement. “Ultimately, as to my client’s belief that the Mystic Lands developer had been harmed by the actions of the plaintiffs, the jury did not agree. Appealing these legal issues is one option that my client is considering; all options are being weighed.”
While the issues between Shinitzky and the property owners are complex and have a lot of moving parts at the moment, plaintiffs were seeking to force the developer to meet his contractual obligations with this particular lawsuit. The individual plaintiffs also had to defend themselves against Shinitzky’s countersuit for defamation. His defamation suit stems from the property owners accusing Shinitzky of misappropriating Mystic Lands Property Owners’ Association funds.
The plaintiffs do believe Shinitzky misappropriated the POA funds for his own personal development business and did make statements to that effect in the last several years, but that’s not the allegation the jury was specifically tasked with deciding.
Since Shinitzky was countersuing for defamation, his legal team had the burden of proving the plaintiffs defamed him by making unfair or deceptive statements that were false and that financially harmed his business.
The jury found that the plaintiffs did not defame Shinitzky, but because of how the question was posed and the multi-part test to proving defamation, it’s unknown whether the jury found the statements to be true or if the jury determined that statements were false but didn’t rise to the level of harming his business.
“The jury told us that we didn’t defame Shinitzky by accusing him of misappropriation, but they were not specifically asked whether the allegations of misappropriation were true,” Peoples said.
Shinitzky also accused the plaintiffs of unfair and deceptive trade practices and sought $1.2 million in damages claiming the defamatory statements against him kept him from selling Mystic Lands lots. The jury did not award him any damages either.
The jury also found that Shinitzky breached his contract with plaintiff and homeowner Tom Schreiber by not paving the road up the ridge to his home. Schreiber and other plaintiffs didn’t seek any damages in this case but instead asked for “specific performance,” meaning the court can order Shinitzky to complete the road projects. Those details have yet to be laid out by the judge.
“The next step is going to be the enforcement of the judgment and working out the details for paving of the road — hopefully that goes smoothly,” Peoples said.
On the stand
The trial began in a Bryson City courtroom Nov. 6, took a long recess for the Christmas holiday, resumed Jan. 3 and finally wrapped up Jan. 9. It had been a grueling process for the jurors — you could see their patience wearing thin.
“The length of this trial was highly unusual for Bryson City,” Peoples said.
It would have dragged on for another week or two had the plaintiffs’ lawyers not changed their minds about introducing more evidence or witnesses. The 400 exhibits belonged solely to Shinitzky’s defense attorneys who began laying out their case Nov. 4 and didn’t rest until Jan. 4.
“We talked about it and decided this jury has had enough,” Peoples said. “Craig Justus (Shinitzky’s lawyer) told the judge he thought it would take two to three weeks to present his case, but six weeks later he was still putting up more evidence. Every week they went over, we cut another witness from our case. We (the homeowners’ attorneys) felt like the jury had seen enough evidence and we didn’t need to go any further.”
During his time on the stand, Shinitzky made it pretty clear he believes Greg Diehl was the main source of contention at Mystic Lands. Diehl was hired in 2012 to be the director of the POA, but he was also working for Shinitzky’s development at the same time and received commissions for helping sell lots at Mystic Lands.
While plaintiffs painted Diehl as the “whistleblower” for alerting property owners that Shinitzky was using POA funds for development purposes, Shinitzky and his defense painted Diehl as the instigator of the entire mess.
Shinitzky testified that Diehl was the one either making financial mistakes or misallocating POA funds. He said he wasn’t aware of the misappropriation until 2014 at which time the board was planning not to renew Diehl’s contract as director.
Shinitzky said Diehl was not a whistleblower — he was only trying to save his job by telling property owners Shinitzky was misappropriating funds from the POA.
However, the jury never got to hear from Diehl personally as the defense did not call him as a witness during the trial. Shinitzky’s lawyers did work to discredit Diehl by showing the jurors emails between him and property owners plotting against Shinitzky, including an email Diehl sent to The Smoky Mountain News under the fake name Stan Roberts. Roberts claimed to be a Mystic Lands property owner upset about Shinitzky clear cutting trees along the river.
Much of the last few days of the trial were spent discussing Mystic Lands finances and the events leading up to Yates and other plaintiffs having cause to be concerned with how money was being spent.
Alex Cury, an attorney for one of the plaintiffs, questioned Shinitzky about many of his financial practices when managing the POA account. During one of his depositions, he said it was common for him to take the QuickBooks file home for a few days and make changes in the system before payroll was due.
Cury also pointed out that several employees had access to the QuickBooks files and none of them used a specific password to get into the file, which means it’s impossible to know who made what changes.
As Cury tried to show that Shinitzky used POA funds to clear his lots for a sale event in 2013, Shinitzky placed the blame on Diehl for hiring a company to spread gravel on the driveways and paying the bill from the POA account.
When Cury asked what account that bill was paid out of — the POA or developer account — Shinitzky said he had a large credit in the POA account at the time.
The conflict between property owners and Shinitzky came to a head in the summer of 2014 when Shinitzky told the property owners they owed him $280,000. In addition to the suspicions of misappropriations, property owners were already unhappy about their POA dues increasing every year. Property owner dues went from $700 a year in 2005 to $2,200 a year by 2015 — and they still didn’t have all the amenities they were promised. With all that money going into the POA account, property owners couldn’t understand how they owed the developer $280,000.
At this point, Diehl’s claims about Shinitzky misusing their annual dues for development purposes seemed to be the only answer.
Yates sent multiple emails to Shinitzky asking for an explanation to the financial questions, and though Shinitzky at first offered to go over the books with him and other property owners in detail, he wouldn’t hand over the books to them for review.
Shinitzky said during his testimony that he felt Diehl and the group of property owners were conspiring against him and building a case to get him removed as declarant, which is why he wouldn’t hand over the books to anyone other than financial experts.
“Why would I let him look at the developer’s books if he’s trying to undo me?” he said on the stand. “He (Yates) doesn’t know the difference between a balance sheet and a profit and loss statement — he’s not an expert.”
Shinitzky did agree to an independent audit of the books by a professional CPA and her report showed no proof of misappropriation. The plaintiffs’ lawyers claimed the investigation done was not independent and that the auditor did her report based solely on Shinitzky’s “curated” records.
Again, many allegations were thrown around during the trial, but the jury was reminded that they were to focus on the issue at hand — did Shinitzky breach a contract with the plaintiffs and did the plaintiffs defame Shinitzky with their claims of misappropriations?
Far from over
While this verdict was a victory for the group of property owners in Mystic Lands, it’s definitely not the last time they will be in a courtroom facing Shinitzky.
There is still an appeal pending in regard to Shinitzky’s current powers as declarant of Mystic Lands, which are clearly laid out in the covenant that he wrote for the POA.
“Shinitzky has control over everything — he’s president of the POA, he holds enough votes to overcome the votes of the homeowners, and he can appoint and remove members of the board,” People said. “There’s no checks and balances to ensure he’s looking out for the property owners’ best interest.”
The property owners want to strip him of the stronghold he has over the POA so they can have board elections and prevent Shinitzky from simply appointing the people he likes and removing the people who disagree with him. In order to do that, the plaintiffs will have to go to court again.
In the Mystic Lands covenants, the declarant doesn’t have to give up control to the Mystic Lands POA until he sells 95 percent of the lots, which plaintiffs claim has been a moving target. They allege that 95 percent of the original lots have been sold, but Shinitzky keeps dividing lots to keep himself below the 95 percent threshold.
“The big deal for the plaintiffs is whether his control has ended. The court of appeals has to decide whether the period of declarant control has expired. If declarant control has expired, and we believe it has, the property owners will finally get a democratic governance for their POA, which is all they’ve ever wanted,” Peoples said.
This was actually the first lawsuit the property owners filed against Shinitzky. Under the state’s preclusion law, plaintiffs were able to file a derivative action — meaning the group of property owners filed the complaint against him and his development businesses on behalf of the entire POA.
But because Shinitzky has the power to appoint and remove anyone he chooses from the board, Peoples said he removed two of the plaintiffs from the board — Fred Yates and Tom Schreiber — and appointed property owners who supported him. Then the board took a vote to dismiss the complaint against Shinitzky and his development businesses on the POA’s behalf. Even if the POA board was independent of Shinitzky, Yates testified in court that Shinitzky’s vote could override everyone else’s because his vote carries more weight and he owns multiple lots.
“They want to have a say in how their neighborhood is run and he has complete control over everything,” Peoples said.
The issue of whether Shinitzky has reached the 95 percent in sold lots is currently being appealed. If the plaintiffs’ and their legal team can show that Shinitzky’s powers have expired, the POA can take over control of Mystic Lands.