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Hiatt v. Shah

Court of Appeals of Arizona, First Division

December 24, 2015

KARL HIATT, Plaintiff/Appellee,
v.
HETAL SHAH, Intervenor/Appellant and MCA FINANCIAL GROUP, LTD, through its President, MORRIS C. AARON, the court-appointed receiver, Appellee,

Appeal from the Superior Court in Maricopa County. No. CV2010-003106, CV2010-006635, and CV2010-025559 (Consolidated). The Honorable J. Richard Gama, Judge.

For Karl Hiatt, Plaintiff/Appellee: Paul A. Conant, Melissa A. Emmel, Conant Law Firm PLC, Phoenix.

For MCA Financial Group, LTD and Morris C. Aaron, Appellee: Christopher H. Bayley, Benjamin W. Reeves, Snell & Wilmer, LLP, Phoenix.

For Intervenor/Appellant: Mark Deatherage, Gallagher & Kennedy, PA, Phoenix.

For Intervenor/Appellant: Timothy C. Lynch, Eric Pelletier, Offit Kurman, PA, Baltimore, MD.

Presiding Judge Donn Kessler delivered the opinion of the Court, in which Judge Andrew W. Gould and Judge Patricia K. Norris joined.

OPINION

Page 1139

KESSLER, Judge:

[¶1] Intervenor/Appellant Hetal Shah appeals the trial court's approval of a receiver's decision to honor a receivership certificate issued to Appellee Karl Hiatt and his wife Dianna Hiatt (collectively, the " Hiatts" ). For the reasons set forth below, we affirm.

Page 1140

FACTUAL AND PROCEDURAL HISTORY

[¶2] The Cheyenne Entities[1] were formed to develop video games based on the Stargate SG-1 and Stargate Atlantis television series, including an online game to be known as Stargate Worlds. Shortly before the scheduled release date, three investors filed a derivative action alleging misappropriation of various Cheyenne Entities' assets, which led to the appointment of a receiver (the " Receiver" ). Two other investor lawsuits were consolidated into the receivership case, one brought by Karl Hiatt and Keith Deering (the " Hiatt Case" ) and one brought by Hetal Shah, Sam Dalembert, and David Roberts (the " Shah Case" ).

[¶3] In October 2010, the Receiver and several parties reached a settlement in the Shah Case. As part of the settlement, two of the Cheyenne Entities (CME and CMG) would incur debts of $473,364.61 to Hiatt and $415,100.00 to Shah, Dalembert, and Roberts, representing expenses Hiatt, Shah, Dalembert, and Roberts incurred in preserving the Cheyenne Entities' assets. The parties agreed that this debt would be secured by lien rights on receivership assets equivalent to a Receiver's Certificate in the most senior position legally permissible.[2] The trial court formally approved the Shah Case settlement and authorized the Receiver to issue Receivership Certificate No. 1 to Shah, Dalembert, and Roberts, and Receivership Certificate No. 2 to the Hiatts.

[¶4] The Receiver then entered into negotiations to obtain a new license to complete Stargate Worlds. After some discussion, the owner of the Stargate intellectual property rights chose not to issue a new license. Because this decision foreclosed any chance of completing Stargate Worlds, the ...


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