Fraud Verdict in Divorce Case Overturned

A state appeals court has thrown out an unprecedented lower court ruling that had allowed a woman to sue her former husband for securities fraud for deceiving her in divorce court about the value of their stock holdings.

The three-judge Court of Appeal panel overturned a $10.2-million verdict that Sally d’Elia of Costa Mesa had won against her former husband, Serge d’Elia, a co-founder of sneaker maker Vans Inc.

But the court in Santa Ana upheld a $3.9-million judgment on three other claims.

The decision, however, may not affect the parties. They settled two weeks ago for about $8 million, according to Sally d’Elia’s attorney, Marc Dempsey Gross. He said his client has little economic incentive now to seek state Supreme Court review but may file anyway to try to erase a “bad decision.”

In their 1986 divorce agreement, Serge d’Elia paid his wife $525,000 to buy her community property interest in their stock in Vans, which was then a privately held company in Orange. The amount, which is supposed to be half the value, was based on what he said the stock was worth.

Yet he allegedly failed to tell her how the once-bankrupt company had rebounded, and he sold his stake a year later for what eventually was $22 million. Sally d’Elia filed suit, accusing Serge d’Elia of defrauding her out of her share. A lower court agreed.

But the unanimous appellate panel said in an opinion by Presiding Justice David G. Sills that the use of securities fraud allegations in divorce settlements is a bad idea and “legally incorrect” because the situation didn’t involve a buyer and seller of securities.

Instead of bringing a fraud lawsuit, he wrote in the opinion filed Tuesday, she should have asked the family law judge to set aside the divorce agreement and seek sanctions.

Gross criticized the appellate judges for slamming the courtroom door on spouses who are swindled out of their fair share of community property.

“They simply don’t want people filing lawsuits,” he said. “They don’t care about protecting someone who has been defrauded. I think their priorities are in the wrong place.”

He contends that securities law allows suits over the “disposition” of stocks and bonds for value, regardless of how they’re transferred.

Neither Serge d’Elia, who lives in Wyoming, nor his attorney could be reached for comment.

Vans, which moved its headquarters to Santa Fe Springs last spring, is now a public company.