Judge Lisa Schall II

Transcription

Verified Complaint for 1. Violations of The Civil Rights Act of 1964
(42 U.S.C. §§ 1983, 1985, 1986); 2. Racketeering and Corrupt
Organizations Act of 1970 (18 U.S.C. § 1962); 3. Delaratory
Judgment (28 U.S.C. § 2201); 3. False Advertising (15 U.S.C. 1125);
4. Motion for Harassment Protective Order (18 U.S.C. § 1514(b))
CALIFORNIA COALITION FOR FAMILIES AND CHILDREN., a Delaware Corporation, Lexevia, PC, a
California Professional Corporation, and Colbern C. Stuart, an individual, Plaintiffs, v. SAN DIEGO COUNTY BAR
ASSOCIATION, a California Corporation; San Diego County Sheriff’s Department, a municipal entity; William D.
Gore, an individual, County of San Diego, a municipal entity; Superior Court of San Diego County, a municipal
entity; Robert J. Trentacostsa, an | United States District Court, S.D. California.
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Lisa Schall Trial Court Documents
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
CALIFORNIA COALITION FOR FAMILIES AND..., 2013 WL 4479840...
2013 WL 4479840 (S.D.Cal.) (Trial Pleading)
United States District Court, S.D. California.
CALIFORNIA COALITION FOR FAMILIES AND CHILDREN., a Delaware Corporation, Lexevia, PC, a
California Professional Corporation, and Colbern C. Stuart, an individual, Plaintiffs,
v.
SAN DIEGO COUNTY BAR ASSOCIATION, a California Corporation; San Diego County Sheriff’s Department, a
municipal entity; William D. Gore, an individual, County of San Diego, a municipal entity; Superior Court of
San Diego County, a municipal entity; Robert J. Trentacostsa, an individual; Michael Roddy, an individual;
Judicial Council, a municipal entity; Administrative Office of the Courts, a municipal entity; Tani G.
Cantil-Sakauye an individual; Commission on Judicial Performance, a municipal entity; Lawrence J. Simi, an
individual; Brad Batson, an individual; National Family Justice Center Alliance, a California Corporation; Lisa
Schall, an individual; Lorna Alksne, an individual; Off Duty Officers, Inc., a business entity of unknown form;
Christine Goldsmith, an individual; Jeannie Lowe, an individual; William McAdam, an individual; Edlene
McKenzie, an individual; Joel Wohlfeil, an individual; Carole Baldwin, an individual; Laury Baldwin, an
individual; Baldwin and Baldiwn, a California professional corporation; Larry Corrigan, an individual; William
Hargraeves, an individual; Hargraeves & Taylor, PC, a California Professional Corporation; Terry Chucas, an
individual; Meridith Levin, an individual; Allen Slattery, Inc., a California Corporation, a Corporation; Janis
Stocks, an individual; Stocks & Colburn, a California professional corporation; Dr. Stephen Doyne, an
individual; Dr. Stephen Doyne, Inc., a professional corporation; Susan Griffin, an individual; Dr. Lori Love, an
individual; Love and Alvarez Psychology, Inc., a California corporation; Robert A. Simon, Ph.D, an individual;
American College of Forensic Examiners Institute, a business entity of unknown form; Robert O’Block, an
individual; Lori Clark Viviano, an individual; Law Offices of Lori Clark Viviano a business entity of unknown
form; Sharon Blanchet, an individual; Ashworth, Blanchet, Kristensen, & Kalemenkarian, a California
Professional Corporation; Marilyn Bierer, an individual; Bierer and Associates, a California Professional
Corporation; Jeffrey Fritz, an individual; Basie and Fritz, a professional corporation, Defendants.
No. 13CV1944 DMS BLM.
August 20, 2013.
Demand for Jury Trial
Verified Complaint for 1. Violations of The Civil Rights Act of 1964 (42 U.S.C. §§ 1983, 1985, 1986); 2. Racketeering
and Corrupt Organizations Act of 1970 (18 U.S.C. § 1962); 3. Delaratory Judgment (28 U.S.C. § 2201); 3. False
Advertising (15 U.S.C. 1125); 4. Motion for Harassment Protective Order (18 U.S.C. § 1514(b))
Colbern C. Stuart III, E-Mail: Cole.Stuart@Lexevia.com, 4891 Pacific Highway Ste. 102, San Diego, CA 92110, Telephone:
858-504-0171, Facsimile: 619-231-9143, Dean Browning Webb (pro hac vice pending), Email: ricoman1968@aol.com, Law
Offices of Dean Browning Webb, 515 E 39th St., Vancouver, WA 98663-2240, Telephone: 503-629-2176, Attorney for
Plaintiffs California Coalition for Families and Children, Inc. and Lexevia, PC.
Plaintiffs, California Coalition for Families and Children, Inc., Lexevia, PC, and Colbern C. Stuart allege as follows:
I. JURISDICTION
1. This Court has jurisdiction pursuant to the following statutes:
A. Federal Question Jurisdiction: Title 28 United States Code § 1331;
B. Federal Regulation of Commerce Jurisdiction: Title 28 United States Code § 1337;
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C. Federal Supplemental Jurisdiction: Title 28 U.S.C. 1367(a);
D. Federal Declaratory Judgment Act of 1946: Title 28 United States Code §§ 2201-2202;
E. Federal Supplemental Jurisdiction: Title 28 United States Code §§ 1367(a)-(b);
F. Section 1964(a) of the Racketeer Influenced and Corrupt Organizations Act of 1970 (“RICO”) Title 18 United States Code
§§ 1964(a), (b), (c), and (d);
G. RICO 18 U.S.C. § 1965(a), (b), and (d); and
H. Rules 57 and 65 of the Federal Rules of Civil Procedure; and
I. The general legal and equitable powers of this Court.
2. Venue is proper under 28 U.S.C. § 1391(b) as one or more Defendants are located or reside in this District, and a
substantial part of the events and omissions giving rise to Plaintiffs’ claims occurred in this District.
II. PARTIES
3. Plaintiff Colbern C. Stuart III (STUART) is a citizen of the United States and at all times relevant hereto a citizen of the
state of California, an attorney at law licensed and admitted to practice in the states of California, Arizona, and Nevada, and
certain United States District Courts therein, President and CEO of Plaintiffs CCFC and LEXEVIA, and residing and doing
business in this District.
4. Defendant San Diego County Bar Association (SDCBA) is a corporation organized and existing under the laws of the State
of California, doing business in this District as an association to support, facilitate, and coordinate the San Diego County
legal industry. “The SDCBA is the region’s oldest and largest law-related organization. The voice for San Diego’s diverse
legal community, the SDCBA aims to support and inform the county’s lawyers, but also the public and the community.
Programs help clients find qualified lawyers, resolve disputes and educate San Diegans on their legal rights and
responsibilities. The SDCBA, which encompasses 50 unique sections, committees and divisions, strives to provide members
with knowledge and tools to expand and enrich their practices. From over 300 hours of quality continuing legal education
each year, award winning publications, mentor programs and networking opportunities, to discounted pricing on insurance,
office supplies and more, the SDCBA is dedicated to serving San Diego’s lawyers.”
5. Defendant San Diego County Sherriffs Department (SDSD) is a division of the municipality, the County of San Diego.
“The San Diego County Sheriffs Department is the chief law enforcement agency in San Diego County. The department is
comprised of approximately 4,000 employees, both sworn officers and professional support staff. The department provides
general law enforcement, detention and court services for the people of San Diego County in a service area of approximately
4,200 square miles. In addition, the department provides specialized regional services to the entire county, including the
incorporated cities and the unincorporated areas of the county.” The SDSD provides “court security and related services for
the San Diego Superior Court at several locations throughout the county.”
6. Defendant William D. Gore (GORE) is the Sherriff of San Diego County. GORE is “elected by the residents of San Diego
County, is the chief executive of the department. He manages seven major detention facilities as well as eight major patrol
stations, four patrol substations, a crime laboratory and an array of support operations necessary to provide full law
enforcement coverage for the County of San Diego.” GORE is sued in his individual and official capacities.
7. In such capacities GORE oversees, administers, prepares, and implements all policies, practices, procedures, and
operations of all SDSD facilities, including policies and procedures regarding “court security and related services,” including
judicial staff and facilities security policies, practices, procedures and operations complained of herein.
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8. Defendant County of San Diego is a municipal entity existing within and doing business as the County of San Diego
within this District. The County operates the facilities and certain services at nine San Diego County courthouses; creates and
implements policies, customs, and practices administered by County judicial officers, administrators, and staff; provides
professional legal services and advice to the citizens of San Diego County, including services related to the practice of
‘family law”-divorce and paternity, custody and visitation, child support, domestic violence, restraining orders, self-help
services, frequently asked questions, form selection and advice, and public information regarding court fees, rules, locations,
calendars, and proceedings.
9. Defendant Superior Court San Diego County (SCSDC) is municipal entity chartered under and doing business in the
County of San Diego. In conjunction with the County, SCSDC operates facilities and judicial services at nine San Diego
County courthouses; creates and implements judicial policies, customs, and practices administered by judicial officers,
administrators, and staff; and provides professional legal services and advice to the citizens of San Diego County, including
services related to the practice of ‘family law”-divorce and paternity, custody and visitation, child support, domestic violence,
restraining orders, self-help services, frequently asked questions, form selection and advice, and public information regarding
court fees, rules, locations, calendars, and proceedings.
10. SCSDC is part of a network of county courts governed by a 27-member Judicial Council led by Ms. Tani Cantil-Sakauye,
Chief Justice, California Supreme Court. The Judicial Council is the policy-making body of the California Courts and is
responsible for ensuring the consistent, independent, impartial and accessible administration of justice. The Administrative
Office of the Courts (AOC) is the support staff of the Judicial Council.
11.Defendant Hon. Robert J. Trentacosta (TRENTACOSTA) is the chief executive officer and Presiding Judge of SDCSC
residing at 5790 Caminito Pulsera, La Jolla, CA 92037. He oversees, administers, prepares, and implements all policies,
practices, procedures, and operations of all SCSDC facilities and operations, including court security, judicial staff and
facilities security, and the policies, practices, procedures and operations of SCSDC complained of herein. In performing each
of his duties, TRENTACOSTA “receives policy advice from an Executive Committee of Judges” He is elected by the
citizens of San Diego County, receives all compensation from San Diego County, oversees jurisdiction only in San Diego
County, and is elected to the position of Presiding Judge by other county judges. He exercises direct oversight of “day-to-day
oversight and administrative management” provided by the SCSDC Court Executive Officer Mr. Michael Roddy. He is sued
in his individual and official capacities.
12.Defendant Michael Roddy (RODDY) is the Court Executive Officer for the SCSDC. He administers and manages the
“day to day” operation of the SCSDC, including its family law division, SDSD security, the family law facilitators offices,
operations, services, personnel, and paperwork therein. He is sued in his individual and official capacities.
13.Defendant Judicial Council (CJC) is an entity overseeing the administrative functions of the California courts, chartered to
“survey judicial business and make recommendations to the courts, make recommendations annually to the Governor and
Legislature, adopt rules for court administration, practice and procedure, and perform other functions prescribed by statute.”
CA Const. Art. VI, Sec. 6(d). It is not a subcommittee of the California State Legislature and has no authority to make or
enact state law. Its rulemaking jurisdiction is limited to administrative “judicial business” and “court administration, practice,
and procedure.” It has no jurisdiction to make rules inconsistent with state or federal law, as any “rules adopted shall not be
inconsistent with statute.” Id. It has no authority to perform any “judicial acts” as that term is defined in Butz v. Economou,
438 U.S. 478 (1978) and Pierson v. Ray, 386 U.S. 547 (1967).
14.The CJC operates “under the leadership of the Chief Justice and in accordance with the California Constitution.” It’s
operations arm, the Administrative Office of the Courts (AOC) implements the council’s rules.
15.Defendant Administrative Office of the Courts (AOC) is the “staff agency” of the CJC, from which it derives authority. Its
officers, including its Administrative Director, are elected by the CJC. The Administrative Director of the Courts is
accountable to the council and the Chief Justice for the performance of the Administrative Office of the Courts. The
Administrative Director’s authority is limited to accomplishing the council’s goals and priorities. A chart depicting the
relationship between the AOC, CJC, and other related defendants herein is attached at Exhibit 39.
16.The AOC operates the “Judicial Branch of California”, which claims to be “Committed to providing fair and equal access
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to justice for all Californians.” The Judicial Branch of California operates and oversees the family law facilitator offices
throughout the state of California, providing services and advice for family law subject matter.
17.Defendant Tani G. Cantil-Sakauye (CANTIL-SAKAUYE) is the Chief Justice of the California Supreme Court and head
executive of Defendants AOC, CJC, and CJP, residing at 813 W. Cove Way, Sacramento, CA, 95831. CANTIL-SAKAUYE
chairs and oversees all functions of the CJC, including the preparation, administration, and implementation of all rules,
forms, policies, practices, procedures, and operations of the CJC. Her authority includes oversight and control of the
operation of the family law facilitators offices, operations, services, personnel, and paperwork therein. In such capacity she
operates under the same charter, constitution, jurisdiction, authority, and restrictions as the CJC. She is sued in her individual
and official capacities.
18.Defendant Commission on Judicial Performance (CJP) is an entity with jurisdiction pursuant to Article VI, § 18 of the
California Constitution “responsible for investigating complaints of judicial misconduct and judicial incapacity and for
disciplining judges.... The commission’s mandate is to protect the public, enforce rigorous standards of judicial conduct and
maintain public confidence in the integrity and independence of the judicial system”, including in this District.
19. Defendant Lawrence J. Simi (SIMI) is the Chairperson for the CJP residing at 357 Irving Street, San Francisco,
California, doing business in this this District as the Chairperson for the CJP. In that capacity he is authorized and restricted
pursuant to the same laws authorizing and restricting the CJP. He is sued herein his individual and official capacities.
20. Defendant Brad Batson (BATSON) is an individual employed as an investigator for DEFENDANT CJP. BATSON at all
times herein mentioned was the representative, agent, and employee of the CJP in addressing the DDIJO COMPLAINTS I
and II and performing the duties of his office in this District. He is sued herein his individual and official capacities.
21.Defendant National Family Justice Center Alliance (ALLIANCE) is a California Corporation doing business in this
District at 707 Broadway, Suite 700, San Diego, CA.
22. Defendant Hon. Lisa Schall (SCHALL) is a judge of the SCSDC residing at 622 E. Solana Circle, Solana Beach, CA
92075, and at all times relevant herein exercised jurisdiction within the Family Law Division of the SCSDC in this District.
She is an elected official by the citizens of San Diego County, receives all compensation from San Diego County, and
oversees jurisdiction only in San Diego County. She is sued in her individual and official capacities.
23. Defendant Hon. Lorna Alksne (ALKSNE) is a judge of the SCSDC residing at 2890 Moonridge Dr., La Jolla, CA 92037,
and at all times relevant herein was the supervision judge for the Family Division of the SCSDC doing business in this
District. In such capacity ALKSNE oversees, administers, prepares, and implements all policies, practices, procedures, and
operations of all SCSDC Family Law Division operations, including oversight and control of the operation of the family law
facilitators’ offices, procedures, policies, forms, and personnel. She is an elected official by the citizens of San Diego County,
receives all compensation from San Diego County, oversees jurisdiction only in San Diego County, and is elected or
appointed to the position of Supervising Judge, Family Division by other county judges. Along with TRENTACOSTA and
RODDY, at all times relevant herein she exercised “day-to-day oversight and administrative management” of the family law
facilitators offices, operations, services, personnel, and paperwork therein. She is sued in her individual and official
capacities.
24.Defendant Off Duty Officers Inc. is a business organization of unknown form doing business at all relevant times within
this District. Defendants ODO DOES 1 and 2 are employees of ODO (collectively “ODO”). At all relevant times herein,
ODO acted under contract with one or more other defendants, including SDCBA and SCSDC to provide security services at
the April 15, 2010 SDCBA SEMINAR.
25.Defendant Hon. Christine Goldsmith (C. GOLDSMITH) is a judge of the SCSDC, and at all times relevant herein
exercised jurisdiction within the Family Law Division. She is an elected official by the citizens of San Diego County,
receives all compensation from San Diego County, and oversees jurisdiction only in San Diego County. She was an organizer
and panel member of the SDCBA SEMINAR working for or on behalf of the SDCBA and at all times relevant herein acted
as an agent of Defendants SDCBA and SCSDC. She is sued in her individual and official capacities.
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26.Defendant Hon. Jeannie Lowe (LOWE) is a judge of the SCSDC, and at all times relevant herein exercised jurisdiction
within the Family Law Division. She is an elected official by the citizens of San Diego County, receives all compensation
from San Diego County, and oversees jurisdiction only in San Diego County. She was an organizer and panel member of the
SDCBA SEMINAR working for or on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants
SDCBA and SCSDC. She is sued in her individual and official capacities.
27.Defendant Hon. William McAdam (McADAM) is ajudge of the SCSDC, and at all times relevant herein exercised
jurisdiction within the Family Law Division. He is an elected official by the citizens of San Diego County, receives all
compensation from San Diego County, and oversees jurisdiction only in San Diego County. He was an organizer and panel
member of the SDCBA SEMINAR working for or on behalf of the SDCBA and at all times relevant herein acted as an agent
of Defendants SDCBA and SCSDC. He is sued in his individual and official capacities.
28.Defendant Hon. Edlene McKenzie (McKENZIE) is a judge of the SCSDC, and at all times relevant herein exercised
jurisdiction within the Family Law Division. She is an elected official by the citizens of San Diego County, receives all
compensation from San Diego County, and oversees jurisdiction only in San Diego County. She was an organizer and panel
member of the SDCBA SEMINAR working for or on behalf of the SDCBA and at all times relevant herein acted as an agent
of Defendants SDCBA and SCSDC. She is sued in her individual and official capacities.
29. Defendant Hon. Joel Wohlfeil (WOHLFEIL) is a judge of the SCSDC residing at 5851 Highplace Dr., San Diego, CA,
and at all times relevant herein exercised jurisdiction within the Family Law Division of the SCSDC within this District. He
is an elected official by the citizens of San Diego County, receives all compensation from San Diego County, and oversees
jurisdiction only in San Diego County. He was an organizer and panel member of the SDCBA SEMINAR working for or on
behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants SDCBA and SCSDC. He is sued in his
individual and official capacities.
30.Defendant Carole Baldwin (C. BALDWIN) is an attorney at law licensed to practice within the State of California
residing and doing business in this District. She was an organizer and panel member of the SDCBA SEMINAR working for
or on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants SDCBA and Baldwin & Baldwin.
31.Defendant Laury Baldwin, CLS-F (L. BALDWIN) is an attorney at law licensed to practice within the State of California
residing and doing business in this District. He was an organizer and panel member of the SDCBA SEMINAR working for or
on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants SDCBA and Baldwin & Baldwin.
32.Defendant Baldwin & Baldwin is a professional law corporation licensed to conduct business as a law firm within this
District.
33.Defendant Larry Corrigan, M.S.W. (CORRIGAN) is a family law professional licensed to practice within the State of
California residing and doing business in this District. He was an organizer and panel member of the SDCBA SEMINAR
working for or on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendant SDCBA.
34.Defendant William Hargreaves, CLS-F (HARGRAEVES) is an attorney at law licensed to practice within the State of
California residing and doing business in this District. He was an organizer and panel member of the SDCBA SEMINAR
working for or on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants SDCBA and
Hargraeves & Taylor, PC.
35.Defendant Harfraeves & Taylor, PC is a professional law corporation licensed to conduct business as a law firm within
this District.
36.Defendant Terry Chucas, Esq. (CHUCAS) is an attorney at law licensed to practice within the State of California residing
and doing business in this District. He was an organizer and panel member of the SDCBA SEMINAR working for or on
behalf of the SDCBA and at all times relevant herein acted as an agent of Defendant SDCBA.
37. Defendant Meredith Levin, CLS-F (LEVIN) is an attorney at law licensed to practice within the State of California
residing and doing business in this District. She was an organizer and panel member of the SDCBA SEMINAR working for
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or on behalf of the SDCBA and at all times relevant herein acted as an agent of Defendants SDCBA and Allen, Slattery, Inc.
38.Defendant Allen, Slattery, Inc. is a professional law corporation licensed to conduct business as a law firm within this
District.
39.Defendant Janis Stocks, CLS-F (STOCKS) is an attorney at law licensed to practice within the State of California residing
and doing business providing forensic psychology and child custody evaluation/mediation services in this District. She was
an organizer and panel member of the SDCBA SEMINAR working for or on behalf of the SDCBA and at all times relevant
herein acted as an agent of Defendants SDCBA and Defendant Stocks & Colburn.
40.Defendant Stocks & Colburn is a professional law corporation licensed to conduct business as a law firm within this
District.
41.Defendant Dr. Stephen Doyne, Ph.D. (DOYNE) is a psychologist licensed to practice within the State of California,
residing and doing business providing forensic psychology and child custody evaluation/mediation services in this District.
He is regularly referred business by Defendant SCSDC and performs work in conjunction with, on behalf of, at the request
of, or on referral from other Defendants, including Defendants SCSDC, ABC&K, FRITZ, BIERER, VIVIANO, and LOVE.
In such capacities he operates as an agent thereof. He was an organizer and panel member of the SDCBA SEMINAR
DOYNE, INC. He is sued in his individual and official capacities.
42.Defendant Stephen M. Doyne, a business entity of unknown form, (DOYNE, INC.) is at all times relevant herein a
professional corporation licensed to do business providing forensic psychology and child custody evaluation/mediation
services within this District. Defendants Doyne and DOYNE INC. shall collectively be referred to hereafter as DOYNE,
INC.
43.Defendant Susan Griffin, M.S. (GRIFFIN) is a family law community professional licensed to practice within the State of
California, residing and doing business providing forensic psychology and child custody evaluation/mediation services in this
District. She was an organizer and panel member of the SDCBA SEMINAR working for or on behalf of the SDCBA and at
all times relevant herein acted as an agent of Defendants SDCBA.
44.Defendant Lori Love, Ph.D. (LOVE) is a psychologist licensed to practice within the State of California, providing
forensic psychology and child custody evaluation/mediation services and residing and doing business in this District. She is
regularly referred business by Defendant SCSDC and performs work in conjunction with, on behalf of, at the request of, or
on referral from other Defendants, including Defendants SCSDC, ABC&K, FRITZ, BIERER, VIVIANO, and DOYNE INC.
In such capacities she operates as an agent thereof. She was an organizer and panel member of the SDCBA SEMINAR
defendant Love & Alvarez Psychology, Inc. She is sued in her individual and official capacities.
45.Defendant Love & Alvarez Psychology, Inc. (LOVE INC) is a professional corporation providing forensic psychology
and child custody evaluation/mediation services within this district.
46.Defendant Robert A. Simon, Ph.D. (SIMON) is a psychologist licensed to practice within the State of California, residing
and doing business providing forensic psychology and child custody evaluation/mediation services in this District. At all
times relevant herein he acted as an agent of SDCBA.
47.Defendants American College of Forensic Examiners, American College of Forensic Examiners International (ACFEI) is
a Missouri corporation with a principle place of business of at 2750 E. Sunshine St., Springfield, MO. ACEFI advertises and
promotes itself as “the largest forensic science membership association, forensics education, credentials, courses, training and
membership for forensics examiners” and conducts such business in this District, including conspiring with other
DEFENDANTS hereinto commit a substantial portion of the acts complained of herein in this District.
48.Defendant Robert O’Block is the founder, President, and CEO of ACEFI and Publisher of The Forensic Examiner. He is a
resident of the State of Missouri and at all times relevant herein was doing business selling the above products and services in
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this district. Defendants O’Block and ACEFI shall collectively be referred to as “ACEFI, INC.”
49.Defendant Lori Clark Viviano, CFLS-F (VIVIANO) is an attorney at law licensed to practice within the State of
California residing and doing business in this District. At all times relevant herein, she acted as an agent of Defendant The
Law Office of Lori Clark Viviano.
50.Defendant The Law Office of Lori Clark Viviano is a professional law corporation licensed to conduct business as a law
firm within this District, VIVIANO and The Law Offices of Lori Clark Viviano will be hereafter referred to as VIVIANO,
INC.
51.Defendant Sharon Blanchet, CLS-F (BLANCHET) is an attorney at law licensed to practice within the State of California
residing and doing business in this District. At all times relevant herein, she acted as an agent of Defendant ABC&K.
52.Defendant ABC&K is a professional law corporation licensed to conduct business as a law firm within this District.
Defendants AB&K and BLANCHET will hereinafter be collectively referred to as BLANCHET.
53.Defendant Marilyn Bierer, CLS-F (BIERER) is an attorney at law licensed to practice within the State of California
residing and doing business in this District. At all times relevant herein, she acted as an agent of Defendant Bierer and
Associates.
54.Defendant Bierer & Associates is a professional law corporation licensed to conduct business as a law firm within this
District. Defendants Bierer & Associates and BIERER will hereinafter be collectively referred to as BIERER.
55.Defendant Jeffrey Fritz, CLS-F (FRITZ) is an attorney at law licensed to practice within the State of California residing
and doing business in this District. At all times relevant herein, he acted as an agent of Defendant Basie & Fritz.
56.Defendant Basie & Fritz is a professional law corporation licensed to conduct business as a law firm within this District.
57.Defendants SDCBA, SDSO, ODO, C. GOLDSMITH, ALKSNE, SCHALL, LOWE, McADAM, McKENZIE,
WOHLFEIL, L. BALDWIN, C. BALDWN, CHUCAS, CORRIGAN, DOYNE, DOYNE INC., GRIFFIN, HARGRAEVES,
LEVIN, LOVE, SIMON, STOCKS and BIERER shall hereinafter be collectively referred to as STUART ASSAULT
COORDINATORS (SAC).
58.Defendants GORE, TRENTACOSTS, RODDY, CANTIL-SAKAUYE, BATSON, ALKSNE, C. GOLDSMITH, LOWE,
MCADAM, MCKENZIE, WOHLFEIL are employees authorized by statute to perform certain duties under color of state
law, and shall hereinafter be collectively referred to as COLOR OF LAW DEFNDANTS (COLD).
59.Defendants acting in concert with COLD at times acted as agents of and therefore are at times named as color of law
defendants by virtue of their relationships with COLD as agents, affiliates, co-conspirators, or superiors of COLD, as more
specifically described below.
60.Collectively, the above-referenced defendants, operating full or part time as part of a broader “Family Law Community”
of professionals, institutions, entities, practices, methods, products and services and its ancillary arms shall hereafter be
referred to as the Domestic Dispute Industry (DDI). Litigants within the DDI, including STUART and those similarly
situated, are hereafter referred to as Domestic Dispute Industry Litigants (DDIL).
DOE Defendants:
61.DOE Defendants’ identities are unknown to Plaintiffs and are named by fictitious names as follows.
62. Enterprise DOES: DDICE DOES 1-50: Plaintiffs assert civil racketeering counts under 18 U.S.C. § 1962(c), (d) based
upon DEFENDANTS participation in, ownership or, or affiliation with one or more criminal enterprises as that term is
defined under 1964(c). Plaintiffs have identified four enterprises, which together are referred to as the “Domestic Dispute
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Industry Criminal Enterprise” (“DDICE”). For purposes of DOE allegations herein, DOES shall be identified according to
the enterprise or segment of the enterprise to which they are related.
63.DDIJO DOES: Judges, Commissioners, and other appointed or elected judicial officials of the Family Law Division of the
Superior Court of the State of California, in and for the respective counties of which they are members, are herein
denominated Domestic Dispute Industry Judicial Officers (“DDIJO”). Unknown DOES which fall into the DDIJO category
shall be denominated DDIJO DOES.
64.DDIA DOES: Attorneys at law licensed by the California Bar confining substantially or all of their practice to Family
Law shall be denominated as “Domestic Dispute Industry Advocates” (“DDIA”).
65.DDIPS DOES: Professional service providers, including psychologists, psychiatrists, family-law oriented social workers,
“advocates’, child care professionals, and other professional-level industry workers not falling into the category of a licensed
attorney shall be denominated as “Domestic Dispute Industry Professional Services” (“DDIPS”).
66.DDISO DOES: Professional law enforcement, police, sheriffs, sheriffs deputies, security, or other law enforcement
professionals shall be denominated “Domestic Dispute Industry Security Officers” or (“DDISO”).
67.DDISW DOES: Professional social workers engaged in the practice of family law shall be denominated the “Domestic
Dispute Industry Social Workers” and includes employees and agents of Defendants ALLIANCE, AOC, CJC, and SCSDC
(“DDISW”).
68.Upon learning the true names and capacities of the DOE defendants, Plaintiffs will amend this Complaint as appropriate.
69.Plaintiffs are informed, believe, and allege that in doing all of the things alleged, COLD, and each of them, acted under
color of statutes, regulations, customs and usages of the State of California, County of San Diego, and/or City of San Diego,
and pursuant to the official policies thereof, except as otherwise alleged.
70.Plaintiffs are informed, believe and allege that at all times mentioned each Defendant was the agent, associate, affiliate,
co-conspirator, superior and/or employee of each other defendant and was acting within the course, scope and purpose of
such relationship in each act ascribed to them herein, except as otherwise alleged.
III. BACKGROUND
Plaintiff’s Social and Political Reform, Exercise, Activism, and Support and Advocacy for Federal Laws, Institutions,
Political Candidates
71.California Coalition for Families and Children’s (CCFC) organizers, officers, and affiliates are professionals dedicated to
improving social, governmental, and justice system process concerning domestic relations, child rearing, parenting,
constitutional law, child custody, and domestic violence. Many of CCFC’s members are mothers, fathers, and children who
have withstood abundant hardship resulting from the current practices of what is generally described as the “Family Law
Community.” These injuries and insults include fraudulent, inefficient, harmful, and even dangerous services; an
institutionalized culture of indifference to “clearly-established” liberties; insults to the autonomy and dignity of parents and
children; extortion, robbery, abuse, and more, delivered at the hands of eager operators within the family law community.
72.CCFC’s has expressed its perception that the present-day suffering of so many parents and children has and is being
wrought within a larger system characterized by a widespread institutional failure of-indeed contempt for-the rule of law.
CCFC has endeavored to deliver the message that the present family law system increasingly ignores the supremacy of the
Constitution and the laws of the United States in depriving U.S. Citizens within California of their rights, privileges, and
immunities under U.S. law. California legal institutions such as family courts and the legal community, professional
institutions such as the state bar and psychology boards, and criminal justice institutions have in the recent decade gradually
combined to cultivate a joint enterprise forum in which widespread “family practice” exceptions to the rule of law are not
only tolerated, but increasingly encouraged. Professional behavior that would only a few years ago be recognized as
9
unethical, illegal, or otherwise intolerable by American legal, psychological, law enforcement, or social work professionals
has increasingly achieved acceptance-indeed applause-from institutional interests which benefit from ajoint enterprise
enforcing the wisdom of “who you know is more important than what you know.”i In this lawless behavior’s most crass
infestation, California Superior Court Family Division judges are regularly heard to announce, in open court, “I am the law”
and proceed to act accordingly with impunity, indifference, and without shame.
i
American Fascists: The Christian Right and the War on America, Hedges, C (Free Press 2006) ISBN-10 978-0-7342-8443-1.
73.The effect on parents and children seeking social support within this coalescing “family law” forum has not been as
advertised by courts and professionals-a new healing-but instead a new affliction: an “imposed disability”ii of de rigueur
deprivation of fundamental rights in the name of “therapeutic jurisprudence” funded by converting college funds into a
bloated ministry of the bariii leaving families and their children with mere crumbs of their own success.
ii
United States v. Windsor, 570 U.S. ___ (2013) (Docket No. 12-307)
iii
Coercing Virtue: The Worldwide Rule of Judges, Bork, Robert H., (American Enterprise Institute 2002), ISBN 0-8447-4162-0
74.Plaintiffs have organized to confront the State of California’s dispossession of law and reason by engaging those within
the Domestic Dispute Industry who administer the decay-family court judges. An astonishingly vast judicial administrative
bureaucracy, domestic dispute industry attorneys, psychologists, and other professionals whose nearly imperceptible
deliberate indifference to the creeping deprivations of parental rights is leaving the family cupboard nearly bare.
75.PLAINTIFFS’ efforts on behalf of parents and children have included increasing public and governmental awareness of
family rights, representing and supporting parents and children in exercising and enforcing such rights, lobbying state and
federal policymakers to improve protections for federal rights under state law, and undertaking litigation, complaints, or other
formal and informal engagements with state and federal authorities to assert, exercise, communicate regarding, educate,
inform, establish and defend such rights with the goal of enabling parental autonomy and empowerment through reform state
of California domestic dispute laws, practices, and institutions. (“ENGAGEMENT”)
Constitution and Laws of the United States: The Family Federal Rights
76.Well-established United States law securing parents’ and children’s civil and other rights (Federal Family Rights or
“FFR”) which PLAINTIFFS’ exercise, enforce, support and advocate for includes:
Table 1.0 Federal Family Civil Rights
Federal Family civil and other
Rights(“FFR”)
Parent-child autonomy, privacy, freedom of association,
belief, thought, and expression are fundamental 584, 602;
Constitutional rights: “There is perhaps no more delicate
Citations
Troxel v. Granville, 530 U.S. 57 (2000); Parham v. J. R., 442
U.S. Reno v. Flores, 507 U.S. 292, 304; Jensen v. Wagner,
603 F. 3d 1182 (2010)
10
constitutional barrier protecting individual freedom from
governmental interference than that which protects against
state interference with parental autonomy.” Presumption of
Parental Fitness; Parental Autonomy to determine best
interests.
Parenting rights are a liberty interest protected by due
process and equal protection: “[t]he fundamental liberty
interest of natural parents in the care, custody, and
management of their child”)
Santosky v. Kramer, 455 U.S. 745, 753 (1982)
Facial invalidity of any state law interfering with a parent’s
fundamental rights to parental autonomy. Heightened
protection against government interference with certain
fundamental rights and liberty interests, including parents’
fundamental right to make decisions concerning the care,
custody, and control of their children
Washington v. Glucksberg, 521 U.S. 702, 720; Stanley v.
Illinois, 405 U.S. 645, 651. Pp. 5-8; Meyer v. Nebraska, 262
U.S. 390, 399, 401 (1923); Pierce v. Society of Sisters, 268
U.S. 510, 535 (1925); Stanley v. Illinois, 405 U.S. 645, 651
(1972); Wisconsin v. Yoder, 406 U.S. 205, 232 (1972);
Quilloin v. Walcott, 434 U.S. 246, 255 (1978); Parham v. J.
R., 442 U.S. 584, 602 (1979); Santosky v. Kramer, 455 U.S.
745, 753 (1982)
“We have recognized on numerous occasions that the
relationship between parent and child is constitutionally
protected”
Quilloin v. Walcott, 434 U.S. 246, 255 (1978)
Any state attempt-statutes, laws, rules, acts, policies,
procedures, or formwork-to deprive parents of their
fundamental parent-child rights is presumed invalid, and
must overcome strict scrutiny to be enforceable: “parents
have a fundamental constitutional right to rear their children,
including the right to determine who shall educate and
socialize them. The opinions of the plurality, Justice
Kennedy, and Justice Souter recognize such a right, but
curiously none of them articulates the appropriate standard
of review. I would apply strict scrutiny to infringements of
fundamental rights.”
“To say the least (and as the Court implied in Pierce),
Troxel, supra (Thomas, J., concurring)
parental choice in such matters is not merely a default rule in
the absence of either governmental choice or the
government’s designation of an official with the power to
choose for whatever reason and in whatever circumstances.”
“Meyer’s repeatedly recognized right of upbringing would
Troxel, supra, (Souter, J., concurring
be a sham if it failed to encompass the right to be free of
judicially compelled visitation by “any party” at “any time” a
judge believed he “could make a ‘better’ decision” than the
objecting parent had done. The strength of a parent’s interest
in controlling a child’s associates is as obvious as the
11
influence of personal associations on the development of the
child’s social and moral character. Whether for good or for
ill, adults not only influence but may indoctrinate children,
and a choice about a child’s social companions is not
essentially different from the designation of the adults who
will influence the child in school. Even a State’s considered
judgment about the preferable political and religious
character of schoolteachers is not entitled to prevail over a
parent’s choice of private school.”
Parental Autonomy Prohibits State Interference in the home, Meyer v. Nebraska, 262 U.S. 390, 399, 401 (1923)
values, education, direction, guidance of children absent
parental consent: “The “liberty” protected by the Due
Process Clause includes the right of parents to “establish a
home and bring up children” and “to control the education of
their own.”
The rights to be free from state action is one of the “family
Parham v. J R., 442 U.S. 584, 602 (1979)
unit”-i.e., both parents equally, including the rights of
children: “Our jurisprudence historically has reflected
Western civilization concepts of the family as a unit with
broad parental authority over minor children. Our cases have
consistently followed that course”
Pierce v. Society of Sisters, 268 U.S. 510, 534-535 (1925),
“The fundamental theory of liberty upon which all
governments in this Union repose excludes any general
power of the State to standardize its children by forcing them
to accept instruction from public teachers only. The child is
not the mere creature of the State; those who nurture him and
direct his destiny have the right, coupled with the high duty,
to recognize and prepare him for additional obligations”. “It
would be anomalous, then, to subject a parent to any
individual judge’s choice of a child’s associates from out of
the general population merely because the judge might think
himself more enlightened than the child’s parent.” The
“liberty of parents and guardians” includes the right “to
direct the upbringing and education of children under their
control.” “The child is not the mere creature of the State;
those who nurture him and direct his destiny have the right,
coupled with the high duty, to recognize and prepare him for
additional obligations.”
There is a constitutional dimension to the right of parents to
direct the upbringing of their children. “It is cardinal with us
that the custody, care and nurture of the child reside first in
the parents, whose primary function and freedom include
preparation for obligations the state can neither supply nor
hinder.”
Prince v. Massachusetts, 321 U.S. 158 (1944)
12
Any state interest in directing decision-making for the care, Toxel, supra, quoting Stanley v. Illinois, 405 U.S. 645, 651
custody, and control of a child is subordinate to those of the (1972)
parents: In subsequent cases also, we have recognized the
fundamental right of parents to make decisions concerning
the care, custody, and control of their children. (“It is plain
that the interest of a parent in the companionship, care,
custody, and management of his or her children ‘come[s] to
this Court with a momentum for respect lacking when appeal
is made to liberties which derive merely from shifting
economic arrangements’ “(citation omitted))
Wisconsin v. Yoder, 406 U.S. 205, 232 (1972)
“The history and culture of Western civilization reflect a
strong tradition of parental concern for the nurture and
upbringing of their children. This primary role of the parents
in the upbringing of their children is now established beyond
debate as an enduring American tradition”
“In a long line of cases, we have held that, in addition to the Washington v. Glucksberg, 521 U.S. 702, 720 (1997).
specific freedoms protected by the Bill of Rights, the
‘liberty’ specially protected by the Due Process Clause
includes the righ[t] ... to direct the education and upbringing
of one’s children” (citing Meyer and Pierce)). In light of this
extensive precedent, it cannot now be doubted that the Due
Process Clause of the Fourteenth Amendment protects the
fundamental right of parents to make decisions concerning
the care, custody, and control of their children.”
Free Expression is a fundamental right; state laws infringing
free expression are presumed invalid; to overcome the
presumption of invalidity the state must prove the
interference falls within one of the limited “historic and
traditional categories long familiar to the bar”:
“[A]s a general matter, the First Amendment means that
government has no power to restrict expression because of
its message, its ideas, its subject matter, or its content.” As a
result, the Constitution “demands that content-based
restrictions on speech be presumed invalid ... and that the
Government bear the burden of showing their
constitutionality.”
United States v. Alvarez, 567 U.S. ___ (2012); Ashcroft v.
American Civil Liberties Union, 535 U. S. 564, 573 (2002);
United States v. Stevens, 559 U. S. ___ (2010) (slip op., at 7).
Strict Scrutiny Supremacy of Constitution and laws of the
United States, invalidates “free floating” standards hindering
Free Expression “In light of the substantial and expansive
threats to free expression posed by content-based
restrictions, this Court has rejected as “startling and
dangerous” a “free-floating test for First Amendment
coverage ... [based on] an ad hoc balancing of relative social
costs and benefits.”
13
“content-based restrictions on speech have been permitted,
Id., at ___ (slip op., at 5) (quoting Simon & Schuster, Inc. v.
as a general matter, only when confined to the few “ ‘historic Members of N. Y. State Crime Victims Bd., 502 U. S. 105,
and traditional categories [of expression] long familiar to the 127 (1991) (Kennedy, J., concurring in judgment)).
bar,’ ”
The limited “historical and traditional categories” of
permissive restrictions on free speech include only:
1. Advocacy intended, and likely, to incite imminent lawless
action, see Brandenburg v. Ohio, 395 U. S. 444 (1969) (per
curiam);
2. Obscenity, see, e.g., Miller v. California, 413 U. S. 15
(1973); Defamation, see, e.g., New York Times Co. v.
Sullivan, 376 U. S. 254 (1964) (providing substantial
protection for speech about public figures); Gertz v. Robert
Welch, Inc., 418 U. S. 323 (1974) (imposing some limits on
liability for defaming a private figure);
3. Speech integral to criminal conduct, see, e.g., Giboney v.
Empire Storage & Ice Co., 336 U. S. 490 (1949); so-called
“fighting words,” see Chaplinsky v. New Hampshire, 315 U.
S. 568 (1942);
4. Child pornography, see New York v. Ferber, 458 U. S. 747
(1982);
5. Fraud, see Virginia Bd of Pharmacy v. Virginia Citizens
Consumer Council, Inc., 425 U. S. 748, 771 (1976);
6. True threats, see Watts v. United States, 394 U. S. 705
(1969) (per curiam);
7. Speech presenting some grave and imminent threat the
Alvarez, supra
government has the power to prevent, see Near v. Minnesota
ex rel. Olson, 283 U. S. 697, 716 (1931), although a
restriction under the last category is most difficult to sustain,
see New York Times Co. v. United States, 403 U. S. 713
(1971) (per curiam).
Content-based restrictions on speech in electronic
communications are presumed invalid unless the state can
prove that technological means for regulating speech are
Ashcroft v. American Civil Liberties Union, 535 U. S. 564,
666 (2002); Alvarez, supra.
14
impossible: In addition, when the Government seeks to
regulate protected speech, the restriction must be the “least
restrictive means among available, effective alternatives.”
Plaintiffs’ Support and Advocacy for FFR
77.PLAINTIFFS have been active in supporting and advocating for the FFR, including the institutions, laws, and entities of
the United States that protect, uphold, and defend them against state intrusion. Though the FFR are well-recognized under
federal (and state) laws, it has been PLAINTIFFS’ collective experience that within the state of California the FFR are
frequently ignored in the hands of those exercising jurisdiction over parents and families, including DEFENDANTS and the
entities of which they are associates and members. Notwithstanding that such state actors may legally exercise their
enormous powers only when according to law, and notwithstanding that such actors enjoy limited immunities only when they
exercise such powers legally, state of California color of law actors regularly wander far off the reservation to inflict unjust,
irrational, and often heinous crimes against civil liberty.
78.PLAINTIFFS have acted to end these trespasses and redress the grievances of those offended. These efforts have included
support and advocacy for the supremacy of the Constitution and laws of the United States vis-à-vis relevant sections of
California Family and Penal codes, including the Domestic Violence Intervention Legislative Scheme (“DVILS”) discussed
below and in Ex. 1. PLAINTIFFS have advocated for, supported, sought to educate, exercise, and enforce the FFR and for
the institutions and processes of the United States upholding, protecting, and defending the same. PLAINITIFFS’ reform
efforts have specifically directed to bringing California’s domestic relations law and practice into compliance with the
protections afforded to all United States citizens under federal institutions, laws, and practice. PLAINTIFFS’ FFR reform,
exercise, support, and advocacy activity has included:
1. Open exercise of FFR and other civil liberties putatively extinguished by California state domestic relations law (see
DVILS infra); engagement with DEFENDANTS’ threats, harassment, obstruction, retaliation, intimidation, and injury for
such exercise (Exs. 5-7, 27-30);
2. Public education and awareness campaigns regarding worldwide FFR exercise and government abuse, and encouragement
and facilitation toward broader public exercise of the same (Ex. 10);
3. Sponsoring public events, interviews, and meetings with reform leaders such as Up To Parents, Support, System Down, the
National Coalition for Men, state assembly candidates, local board of supervisors candidate John Van Doorn, to educate,
motivate, and organize to protect the FFR from state deprivation (Exs. 7, 8, 11);
4. The SDSBCA ENGAGEMENT (below and Ex. 5);
5. Direct ENGAGEMENTS in Family Court facilities (Ex. 6);
6. Public education and awareness of family courts’ disregard for FFR through editorial series on high-profile cases such as
Bonnie Holt, Eric Moelter, Evan Nash, Morse v. Morse, Cindy Dumas, Cynthia Sommer, Chris Nobel, Emad Tadros, Cole
Stuart, with CCFC editorial perspectives (Ex. 7);
7. Appearance on various public interest “video blog” shows and series such as “Face Up To Fred,” with Fred Sotilie,
“Progress in San Diego” with Walter Davis, San Diego’s ABC affiliate, and more; (See “Internet Links to Plaintiffs’
Exhibits” incorporated herein by reference);
8. Raising awareness and direct ENGAGEMENT of DDIJO DEFENDANTS ALKSNE, ALLARD, DOYNE, INC.,
SCHALL, WOHLFEIL, TRENTACOSTA, and Judges Lewis, Bloom, So, Hallahan, Trapp, Salcido, of the schemes,
artifices, and devices to defraud such as the SCSDC’S systematic failure to observe the laws requiring Child Custody
Evaluators to be properly licensed, educated, trained, and overseen by the Superior Courts (Exs. 1, 2, 4);
15
9. Revealing descriptions of the schemes, artifices and devices to defraud of the DDI, including government abuse and
private schemes to defraud, to the general public, including those of Defendants DOYNE, FRITZ and BIERER (Exs. 7, 10,
12, 18);
10.Co-Promotion and awareness campaigns with leading “family civil rights” writers and thinkers such as Dr. Stephen
Baskerville, Ned Holstein, Charles Asher, Walter Davis, and others (Exs. 8, 11, 13);
11.Litigation and other confrontational reform efforts adverse to Defendants DOYNE, INC. (Ex. 2, 3, 4, 20), ALLIANCE,
(Ex. 1), BLANCHET (Ex. 14).
79. Formal Advocacy: Plaintiffs have undertaken projects asserting FFR civil rights under federal law throughout California.
These include:
12.Civil Rights Fraud matter filed in the name of CCFC member Dr. Emad Tadros adverse to the chairman of the family law
committee of the San Diego County Bar Association, Mr. Robert Lesh and the State Bar of California, presently-pending in a
Petition for Certiorari before the United States Supreme Court, entitled Tadros v. Lesh, The State Bar of California, case No.
12-1438. (Exs. 2, 20);
13.A parent’s federal law, civil rights, and state law matter filed in the in the name of CCFC member Dr. Emad Tadros
adverse to defendant herein DOYNE INC asserting civil rights violations, Defamation, HIPPA violations, and state law
commercial fraud, unfair business practices, malpractice, and defamation, entitled Tadros v. Doyne, San Diego Superior
Court Case No. ____________________ (Exs. 3, 4, 20);
14.An Amicus Curie Brief in favor of Plaintiff in the above referenced case (Ex. 3);
15.A cease and desist letter to the City of San Diego, County of San Diego, Superior Court of San Diego County, San Diego
Sheriff’s Department, San Diego Police Department, and numerous judges on the family law division bench, including
several defendants herein;
16. Hosting numerous online informational, support, educational, and organizing
www.facebook.com/ccfconline, www.thepubticcourt.com, and www.carpedicta.com (Ex. 15);
sites,
including
17. Organizing support for state reform such as judicial immunity reform proposed in California Assembly Bill AB 2475
which would have clarified that custody evaluators are not entitled to judicial immunity, including publications, public
appearances, and directly appearances at California State Assembly Judiciary Council meetings in Sacramento to advocate
for imposing conformity on California law, lobbying for stronger oversight by state legislatures over administrative and
judicial bodies such as DEFENDANTS, Child Protective Services, Department of Child Support Services (Exs. 10, 16);
18. Organizing public support for redress of the constitutional wrongs committed against attorney former federal prosecutor
and judicial reformer Richard Fine by Judge David Yaffe in Los Angeles County (Ex. 17);
19. Sponsoring public forums in which issues with DDI operatives, including judges, attorneys, and evaluators, may be heard
and publicized at www.carpedicta.com (Ex. 18);
20.Collaborating with professional local and national media to raise awareness of all of these issues and efforts, including
“PBS Frontline’s” “Pro Publica” series exposing credential fraud of ACFEI “No Forensic Background? No Problem”, ABC
Channel 10’s series on a local “forensic psychologist’s” credentials fraud (Ex. 19);
80.PLAINTIFFS’ protected legal, social, political, and commercial activities toward reform, support and advocacy described
above shall hereafter be referred to as FEDERAL FAMILY RIGHTS REFORM, EXERCISE, SUPPORT, AND
ADVOCACY, or “FFRRESA”.
16
FFRESSA Engagement in Support and Advocacy for United States Representatives
81.PLAINTIFFS have actively engaged the institutional representatives of the United States in their FFRRESA. This activity
includes federal election support, lobbying, and coordination with Senator Barbara Boxer’s Office in San Diego and
Washington, DC, Senator Diane Feinstein’s Offices in Washington, D.C., Senator Harkin’s Offices in Washington, DC,
United States Representatives Darrell Isa, Duncan Hunter, Juan Vargas, Scott Peters, and Susan Davis. PLAINTIFFS have
ENGAGED on these issues with the United States Department of Justice, the Ninth Circuit Court of Appeals. See Ex. 1.
PLAINTIFFS have undertaken similar reform ENGAGEMENT with California state representatives Gov. Arnold
Schwarzenegger, Gov. (and attorney general) Jerry Brown, Assemblywomen Karen Bass, Fiona Ma, Assemblyman Nathan
Fletcher, Lynn Daucher, Tim Donnelley, State Assembly reform candidate Peter Thotham, county supervisor candidate John
Van Doom, opposing Defendant GORE’s and WHOLFEIL’S election campaigns and supporting that of opponents of
DEFENDANTS herein; ENGAGED Bonnie Dumanis, Attorney General Kamala Harris, Chief Justices Tani Cantil-Sakauye
and Ronald M. George, Dennis Hollingsworth, Diane Jacobs, Bill Lockyear, Jerry Sanders, Bob Filner, as well as direct
communications with all DEFENDANTS herein. Ex. 1, 2, 20.
82. FFRRESA Engagement in Reform of State Color of Law Actors: Plaintiffs’ FFRRESA has included numerous
ENGAGEMENTS with state and federal authorities to attempt to enforce FFRRESA reforms on California laws and
institutions, including identification, publication, accusation, formal and informal complaints, ENGAGEMENT, litigation,
and collaborative remedy of the illegal activities of the Domestic Dispute Industry. These efforts include:
83. DIJO COMPLAINTI: In November, 2009, STUART contacted the United States Attorneys Office for the Southern
District of California to report violations of the FFR, specifically identifying numerous provisions of federal law, including
18 U.S.C. §§ 2(a)-(b), 241, 242, 371, 666, 1341, 1343, 1346, 1503, 1505, 1510, 1581-1595, 1951, 1961-1964; and 42 U.S.C.
§§ 1981-86 (these statutory provisions shall hereafter be referred to as the Civil Rights Civil and Criminal Statutes, or
“CRCCS”) by SCHALL, DOYNE, and WOHLFEIL detailing allegations consistent with those asserted herein. STUART
detailed numerous violations of the CRCCS on the part of SCHALL, including deprivation of rights, abuse of process,
abusive behavior and remarks from the bench, a long history of three prior admonishments by Defendant CJP including a
2008 conviction for drunken driving, a persistent pattern of refusals to adhere to state and federal minimum due process
standards in STUART’S case and several others known publically, illegal, unnoticed, and without probable cause searches
and seizure of STUART and STUART’s property inside the a civil (family law) courtroom, and generally extreme and
outrageous unprofessional demeanor.
84.The U.S. Attorney’s Office advised STUART as follows:
A. That the DDIJO COMPLAINT I allegations could be violations of federal law, but that because the matters were “not all
that serious” STUART should proceed instead with the California Commission on Judicial Performance (CJP), the California
State body with jurisdiction to investigate, and enforce standards, rules, and laws, including violations of federal law,
regarding state actor’s judicial behavior;
B. That the CJP had jurisdiction to impose address, investigate, and discipline or otherwise dispose of STUART’s complaints
under both state and federal law, and was obligated to report any violations of federal criminal law to the appropriate federal
authorities;
C. That if Stuart filed a complaint with both the U.S. Attorney’s Office and the CJP, the U.S. Attorney’s Office would not
take action until the complaint to the CJP’s Office was “exhausted.”;
D. That the CJP was the “first step in the process.” The U.S. Attorney’s Office advised Stuart that he could, if he wished, file
a complaint with the U.S. Attorney and the Grand Jury, but that because the facts did not indicate “anything serious”, the
U.S. Attorney would likely not act;
E. That if STUART was unsatisfied with the CJP’s response, he could pursue the same complaint directly with the U.S.
Attorney or F.B.I. and rely on the documentation, evidence, facts, and testimony provided to the CJP.
85.Though STUART disagreed that the behavior he described was “not serious,” he obeyed the instructions of the U.S.
Attorney’s Office, contacting the CJP to continue prosecution of the DDIJO COMPLAINT I in the CJP Offices. The CJP
17
representative advised STUART that because DOYNE was not an elected or appointed judicial official, the CJP had no
jurisdiction to hear Complaints regarding him. The CJP further advised that since STUART’s Complaint regarding
WOHLFEIL was related to his appointment of DOYNE, and because SCHALL was the party primarily involved in the
allegations of civil rights deprivations concerning DOYNE, that a complaint regarding WOHLFEIL would not be
appropriate. The CJP advised STUART to deliver a written description of his complaint regarding only SCHALL.
86.STUART did so, detailing violations of the CRCCS by SCHALL. Stuart also detailed facts relating to DOYNE and
WOHLFEIL’s potential involvement in violations of the FFR and CRCCS. STUART submitted the complaint to the CJP and
copies thereof to the United States Attorney’s Office, the Grand Jury of the United States District Court for the Southern
District of California, the Internal Revenue Service, all of California’s representatives in the United States House of
Representatives and the United States Senate, the Federal Bureau of Investigation, and the California Commission on Judicial
Performance (hereafter be referred to as the “FEDERAL LAW ENFORCEMENT OFFICERS”).
87. STUART also provided a copy of the DDIJO COMPLAINT (I) to numerous DDIJO DEFENDANTS including all
then-sitting DDIJO on the San Diego County Superior Court, Family Law Division, San Diego County Superior Court
supervising Judge Kenneth So, the San Diego Daily Transcript, the San Diego Union Tribune, a number of state and federal
media outlets, parenting groups, and related entities. A true and correct copy of Stuart’s letter to the FEDERAL LAW
ENFORCEMENT OFFICERS is unavailable and as such is referenced as if attached (Ex. 22).
88.During the investigation of DDIJO COMPLAINT I, STUART continued to interact with the FEDERAL LAW
ENFORCEMENT OFFICERS, including at or around the time of the STUART ASSAULT, and continues today.
89. DDIJO COMPLAINT II: In October, 2012, STUART supplemented his prior DDIJO COMPLAINT I with more
extensive detail regarding SCHALL, WOHLFEIL, AND DOYNE, INC., and asserting additional allegations against
DEFENDANTS SCHALL, ALKSNE, C. GOLDSMITH, and GROCH. STUART submitted the DDIJO COMPLAINT II to
the FEDERAL LAW ENFORCEMENT OFFICERS regarding substantially the same allegations as asserted herein. A true
and correct copy of the DDIJO COMPLAINT II is attached hereto as Exhibit 21. STUART delivered a copy of DDIJO
COMPLAINT II other DDIJO, the FEDERAL LAW ENFORCEMENT OFFICERS, the public and various media outlets.
90. STUART has continued to interact with the FEDERAL LAW ENFORCEMENT OFFICERS regarding the DDIJO
COMPLAINTS through the present day.
91. DOYNE INC. COMPLAINT I: In May, 2008, and June, 2013, STUART filed complaints with the California Board of
Psychology regarding DOYNE, INC detailing substantially the same allegations herein. The entire body of correspondence
relating the DOYNE INC. COMPLAINT is in the possession of the California Board of Pscyhology and as such is referenced
as exhibit 22 to be produced once obtained from the Board. A true and correct copy of the June, 2013 correspondence is
attached hereto as Exhibit 23.
92. DOYNE, INC. COMPLAINTS II-IV: PLAINTIFFS have filed, assisted, coordinated, advocated for, and supported others
further complaints and lawsuits regarding DOYNE, INC. (Ex. 2, 4, 7, 20, 22, 23)
93. FFRRESA Engagement with National Non-Profits: CCFC has also undertaken FFRRESA ENGAGEMENT with regard
to the City of San Diego and the National Family Justice Center Alliance (ALLIANCE) in a Notice and Demand to Cease
and Desist (Ex. 1) from actions in violation of the FFR. CCFC has delivered the Notice and Demand package, including
abundant evidence of violations of the CRCCS, to FEDERAL LAW ENFORCEMENT OFFICERS, including The United
States Attorney for this District, the Grand Jury, the United States Department of Justice, including Ms. Bea Hanson and Mr.
Eric Holder, the Federal Bureau of Investigation, the Ninth Circuit Court of Appeals, as well as state color of law
administrative defendants with jurisdiction over such matters, including Defendants AOC, CJC, CANTIL- SAKAUYE,
ALKSNE, C. GOLDSMITH, WOHLFEIL, TRENTACOSTA, SCSDC, SDSD, and COUNTY OF SAN DIEGO. Ex. 1.
94. Other CCFC Federal Engagement: CCFC organizers and affiliates have become involved as witnesses and potential
parties in reporting violations of the CRCCS to several FEDERAL LAW ENFORCEMENT OFFICERS. In August, 2011,
Dr. Tadros spoke with Ms. Laura O’Farrell of the Federal Bureau of Investigations to report possible deprivations of the FFR
described more fully in the attached exhibits. “In 2007 Ms. Eileen Lasher began interacting with Assistant United States
18
Attorneys Mssrs. Jason Forge and Michael Wheat of the U.S. Attorneys’ Office for the Southern District of California
regarding allegations of racketeering operation of the Superior Court of the County of San Diego, specifically including
RODDY, ALKSNE, and other Family Division judges, for intentionally abusing process and extorting funds from families in
state family court proceedings in violation of the CRCCS. Ms. Lasher has provided detailed information to these LAW
ENFORCEMENT OFFICERS regarding bribery, extortion, fraud, abuse of process, peonage, and deprivation of civil rights
pursuant to the CRCCS and California State bribery and extortion statutes. In 2004 Ms. Lasher provided similar details to
Officer John McCahal of the NYPD Federal Task Force in three separate meetings. Officer McCahal referred the matter to
the Federal Bureau of Investigation, whereupon Ms. Lasher personally and through her attorney provided details to the
United States Attorney for the Southern District of New York regarding similar crimes. Dr. Tadros has also met with the
Federal Bureau of Investigation’s Ms. Laura O’Farrell regarding similar issues.
95.Ms. Lasher has met with Deputy District Attorney for the County of San Diego, Mr. Damon Mosler and Mr. Brian Ahearn
of the San Diego Police Department Internal Affairs Office to provide similar information regarding the violation of the
CRCCS criminal activity described above. PLAINTIFFS have assisted, represented, advised, and advocated on behalf of
CCFC affiliates in these and many similar FFRRESA Engagements.
96.At the time of the STUART ASSAULT, STUART, CCFC member Dr. Emad Tadros and Eileen Lasher and other CCFC
members were in ongoing DUE ADMINISTRATION OF JUSTICE with the FEDERAL LAW ENFORCEMENT
OFFICERS, UNITED STATES REPRESENTATIVES, including Senator Barbara Boxer, and Defendants AOC internal
affairs representatives Eric Pulido and John Judnich, SCSDC, RODDY, CJP, to provide information, documents, assistance,
testimony, and evidence of violation of the CRCCS.
97.CCFC affiliate Emad Tadros has become involved in interstate consumer fraud litigation in District Copurts in this state
and in Missouri with Defendants ACEFI. Ex. 43.
98.On information and belief, state and FEDERAL LAW ENFORCEMENT OFFICERS have and continue to investigate
PLAINTIFFS’ allegations under the CRCCS toward presentment to a grand jury, indictment, and prosecution under federal
law.
99.The above-described activities of PLAINTIFFS’ and their affiliates in interaction and cooperation with FEDERAL LAW
ENFORCEMENT OFFICERS, constitutes attendance as a witness or party at proceedings, giving of evidence, documents,
records, objects, or other testimony given or any record, document, any information relating to the commission or possible
commission of a CRCCS violation or otherwise regarding PLAINTIFFS’ FFRRESA and related matters to the FEDERAL
LAW ENFORCEMENT OFFICERS in pursuit of investigation, presentation, indictment, prosecution, redress, reform, and
punishment of DEFENDANTS shall hereafter be referred to as the DUE ADMINISTRATION OF JUSTICE.
Commercial Purposes of Plaintiffs (“COMMERCIAL PURPOSES”)
100. CCFC: California Coalition for families and Children is a public benefit corporation educating, supporting, protecting,
and promoting parents’ and children’s rights and interests which are presently under- or misrepresented by existing
marketplace or government institutions, particularly in domestic dispute and child custody matters. Since 2008 CCFC has
assisted mothers, fathers, and children in defending and supporting family autonomy in relations with one another and
government interests with related jurisdiction. CCFC is active in protecting, empowering, and promoting parents and children
through education, community support, lobbying, litigation, and public and private entity awareness.
101. Recognizing the widespread deprecation to tens of thousands of victim parents and children wrought by California’s
unchecked operation of its uniquely pernicious Domestic Dispute Industry in violation of the FFR, CCFC’s commercial
activities have been directed toward educating, empowering, supporting, and representing parents and children to withstand
and eventually reverse this well-armed invidious bureaucratic tide eroding parents’ and children’s welfare. CCFC has
advanced public and governmental awareness of the underserved needs of the “Domestic Relations Class” including
defending parents against numerous alarming deprivations of parents’ and children’s financial interests by the steamroller
public-private enterprise Domestic Dispute Industry. CCFC works closely with national parenting organizations such the
National Parents Organization, ACFC, and Up To Parents to provide healthy, safe, and legal counseling, resources,
19
representation, services, and support alternatives to traditional domestic dispute services.
STUART’s Position Under the United States
102. STUART has been admitted to practice before the United States District Courts for the Southern Northern, and Central
Districts of the State of California, the District of Nevada, the District of Arizona, and the Eastern District of Texas. He has
appeared on briefs before the Ninth Circuit Court of Appeals, the Court of Appeals for the Federal Circuit, and in predecessor
litigation to the United States Supreme Court. On behalf of CCFC member Dr. Emad Tadros, STUART and CCFC assisted in
preparing briefing in a matter currently on Petition for Certiorari before the United States Supreme Court, entitled Tadros v.
Lesh, The State Bar of California, Case No. 12-1438. (Ex.2).
103. STUART has represented parties in cases involving federal subject matter in federal district courts and courts of appeal,
including civil rights, patent, copyright, trademark laws, antitrust, interstate commerce, racketeering, insurance, and
supplemental state law claims. These engagements include litigation matters now or previously pending within this District
as well as the Central and Northern Districts of California, the District of Arizona, District of Nevada, the Eastern District of
Texas, Northern District of Virginia, District of Delaware, and Southern District of New York. As such, STUART is an
officer of the courts, sworn to numerous oaths to “protect, uphold, and defend the Constitution and the laws of the United
States.” He has been similarly so bound having been admitted to the bar of three states.
104. STUART’S practice has been focused on federal engagements, including an Internship with the United States
Attorney’s Office under Assistant United States Attorney Ronald Dixon (Hon. Ronald M. Dixon, Judge Supreme Court of the
District of Columbia) prosecuting felony crimes within the District of Columbia. STUART’S private practice has been
focused on federal Commerce and Trade and Intellectual Property matters under Titles 15, 17, 28, 35 United States Code and
related state law. He has tried, arbitrated, or mediated dozens of cases in district and state courts in several districts, and
represented clients before foreign and international bodies relating to international intellectual property, commerce, and law.
STUART’S practice shall hereinafter be referred to as STUART’S POSITION UNDER THE U.S.
105. He is a co-founder, President, and Chief Executive Officer of the California Coalition for Families and Children.
106. Details of STUART’S employment history with the United States Attorney for the District of Columbia, legal
engagements in federal-law matters and litigation appear on his resume at Exhibit 24.
LEXEVIA
107. At all times relevant hereto Plaintiff LEXEVIA was a professional law corporation founded by STUART in 2008. As of
April 15, 2010 it included STUART and three members. LEXEVIA’S primary practice areas include intellectual property,
licensing, consumer fraud counseling and litigation, child protection regulation, privacy laws, technology, life science,
software, Internet and new media matters, and digital copyright and e-mail “spam” regulation. LEXEVIA lawyers have
spoken to numerous industry groups and written on related topics.
108. LEXEIVA’S public interest or pro bono engagements have included numerous Civil Rights and Constitutional Law
matters, including representation of CCFC and numerous parents affiliated therewith. STUART founded LEXEVIA in 2008
after practicing for thirteen years as a partner or associate at international firms. Ex. 24; www.lexevia.com.
Business Development Activities of PLAINTIFFS
109. In furtherance of PLAINTIFFS’ FFRRESA and COMMERCIAL PURPOSES, in 2008 PLAINTIFFS established and
began growing independent parent-child-oriented private support networks and services to share resources, improve
awareness, advance joint social, political, and legal goals, protect and promote the independent interests of families and
children in domestic dispute matters, develop superior, more efficient, safer, and legal alternatives to traditional family law
20
practices, and to improve the visibility of parent-child interests to legal institutions including policymakers, law enforcement,
and courts. Recognizing abundant opportunity to fill a demand for more efficient, safe, and legal services within the family
law community, CCFC’s early business development efforts focused on gaining intelligence about the Domestic Dispute
Industry to better understand the existing business structures and thereon reform and/or influence and build more efficient,
effective, safe, and legal services for parents and children who have no effective advocates in the present industry. These
goals include improving professional standards of care for DDI professionals-including DDIA, DDIPS, DDIJO, DDISW,
DDISO, and others, providing more consumer-oriented legal and government services, inform and improve industry
governance, improve licensing, certification, discipline, oversight standards, from consumer (parents’ and children’s)
perspectives, and develop or assist in developing superior service products to compete in that healthier environment.
110. In furtherance of the COMMERCIAL PURPOSES, PLAINTIFFS have undertaken the following business development
activities:
A. Studies of the “closed society” of the multi-billion dollar Domestic Dispute Industry (DDI) both from “outside” and
“inside” to observe and understand the DDI “money flow” from DDIL to DDIA, DDIP, DDIJO, DDISW, and DDISO;
B. Identification of existing industry-wide fraud schemes and artifices, including consumer fraud, Lanham Act violations,
bribery, “kickbacks”, invidious discrimination, unchecked abuse of power, nepotism, illegal conduct, and general
inefficiency;
C. Identification of the Domestic Dispute Industry “dealmakers”; the structure of its commercial relationships and networks
between DDIAS, DDIPS, DDIJOs, and other DDI agents and affiliates;
D. Contribute to the ongoing analysis of the DDI to prepare legal actions to restrain the DDI operatives from violations of
law providing it with unfair competitive advantages;
E. Contribute to preparation of competitive business models to better serve DDI clients with more efficient, less expensive,
less disruptive, ethical and legal services, including law, social/governmental parenting support and dispute resolution
services;
F. Development of personal and professional networks at events such as the SDCBA SEMINAR to convert “traditional”
Domestic Dispute Industry agents to CCFC’s healthier, safer, more efficient, and legal alternative business models;
G. Promote parent/child (consumer) awareness of rights and options in holding existing “black hat” DDI affiliates to their
PROFESSIONAL DUTIES, and developing strategies for development and promotion of competitive services and increased
self-regulation of professionals to level the playing field for “white hat” competitors such as CCFC, LEXEVIA, Up To
Parents, and other “white hat” FLC members which chose to adopt safer, healthier, more efficient, and legal business models
(Ex. 25);
H. Develop understanding and awareness of existing “free” resources presently discouraged by DDICE affiliates such as
court-sponsored mediation, expert services, and ordinary adjudication; to understand the causes of the common perception
that divorce is “inevitably” brutalizing, unfair, and expensive (Ex. 25).
I. Obtain awareness useful to state and federal authorities in discipline and reform of the DDI operatives, through the DUE
ADMINISTRATION OF JUSTICE; (Ex. 4.);
J. Obtain awareness useful to CCFC in its activism, social justice, and justice system FFRRESA (Ex. 10);
K. Advance Lexevia’s marketable legal expertise in representing CCFC, parents, and DDI victims through potential
individual actions, class actions, civil rights, racketeering, or other lawsuits under the CRCCS adverse to the DDI (Ex. 1);
L. Advance CCFC’s and LEXEVIA’s knowledge and divisibility within the DDI as part of a foundation for building
improved domestic dispute service models for citizens in domestic disputes, including social, financial, psychological,
faith-based, and criminal justice system capabilities such as those presently operated by CCFC affiliate “Up To Parents” (Ex.
25).
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111. PLAINTIFFS’ FFRRESA, COMMERCIAL PURPOSES, and BUSINESS DEVELOPMENT ACTIVITIES shall
hereinafter be collectively referred to as PLAINTIFFS’ PUBLIC BENEFIT ACTIVITY
IV. COMMON ALLEGATIONS
112. This matter arises out of DEFENDANTS’ criminal and tortious interference with and retaliation for PLAINTIFFS
PUBLIC BENEFIT ACTIVITY. DEFENDANTS are owners, associates, participants, collaborators, affiliates, benefactors,
associates of entities providing “traditional” professional, legal, social, and government services as part of the DDI. They
have acted aggressively and illegally against PLAINTIFFS to commit criminal and civil violations of PLAINTIFFS’ state
and FFR civil rights, obstruct justice, abuse process, interfere with existing and prospective business relations, and commit
civil and criminal violations federal law prohibiting RACKETEERING ACTIVITY under 18 U.S.C. 1961 (b). These and
other civil and criminal statutes set forth herein are collective referred to as the Civil Rights Criminal and Civil Statutes, or
“CRCCS.” The details of DEFENDANTS’ activities in violation of the FFR and actionable under the CRCCS have been
described in publications attached hereto as Exs. 1-10.
The SDCBA ENGAGEMENT
113. As part of PLAINTIFFS’ PUBLIC BENEFIT ACTIVITY, PLAINTIFFS have sought opportunities to ENGAGE FLC
professionals and clients to raise awareness of the ongoing unsafe, inefficient, and illegal activity and harm to clients being
caused by the FLC, and to influence DEFENDANTS toward adoption of safer, more efficient, and legal “white hat”
alternatives to FLC practices such as those advanced by PLATINTIFFS. In furtherance of those goals PLAINTIFFS have
initiated and/or coordinated numerous ENGAGEMENTS with FLC members, including DEFENDANTS.
114. One such ENGAGEMENT occurring on April 15, 2010 at the San Diego County Bar Association building at 1333 7th
Avenue, San Diego, California is the central subject of this litigation. In February, 2010, CCFC learned of a seminar to be
hosted in April, 2010 by SDCBA for various San Diego FLC professionals. The seminar was advertised to thousands of FLC
professionals and was to feature a panel of speakers including:
115. Family Court Division judicial officials (“DDIJO”) ALKSNE, C. GOLDSMITH, WOHLFEIL, LOWE, McADAM,
McKENZIE, FLC legal industry professionals (“DDIA”) C. BALDWIN, L. BALDWIN, CHUCAS, FLC behavioral sciences
professionals (“DDIPS”) CORRIGAN, DOYNE, GRIFFIN, HARGRAEVES, LEVIN, LOVE, and STOCKS, as well as
numerous other domestic dispute industry professionals, attorneys, and clients at a meeting hosted by Defendant SDCBA at
the SDCBA building (“SDCBA SEMINAR”).
116. The advertising brochure announcing the seminar and soliciting attendees identified the seminar theme as “Litigants
Behaving Badly-Do Professional Services Really Work?” is attached hereto as Ex. 26.
117. Though startled by the DDI’s attack on its own client base, CCFC thought they had some answers to the FLC’S
question, and viewed the seminar as an opportunity to ENGAGE key members of the FLC and their clients to offer answers.
CCFC saw the SDCMA SEMINAR as an excellent opportunity to raise awareness of the CCFC FFRRESA, the FFR, and
ongoing violations of the FFR and rights of action under the CRCCS, promote CCFC alternatives to illegal, harmful business
practices of the FLC, and continue CCFC’s PUBLIC BENEFIT ACTIVITIES.
118. PLAINTIFFS determined to use the SDCBA SEMINAR to engage the FLC to advance CCFC’s PUBLIC BENEFIT
ACTIVITIES. PLAINTIFFS and their affiliates sought to communicate one of CCFC’s central messages that the FLC,
including judges, blame “Litigants Behaving Badly” (their own clients) for harms enabled-indeed largely manufactured-by
the Domestic Dispute Industry’s own longstanding predatory commercial practices. CCFC saw the “Litigants Behaving
Badly” theme as part of the self-delusional propoganda engaged in by so many FLC members who, rather than recognizing
the harm their industry enables and “healing themselvess, instead blame their own clients, who, quite true, do regularly abuse
process, their loved ones, and even themselves-in perfect compliance with DDI instructions.
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119. To communicate an answer to the DDI’s question “Do Professional Services Really Work?”, CCFC adopted a
counter-theme to “LITIGANTS BEHAVING BADLY”: “JUDGES BEHAVING BADLY-IF YOU DON’T FOLLOW THE
LAW, WHY WOULD WE?” CCFC created promotional pamphlets and exhibits to distribute and large “poster”-sized
signage to display, and organized volunteers to participate in the ENGAGEMENT (hereinafter the SDCBA
ENGAGEMENT). True and correct copies of the signage is attached as Ex. 28.
120. In the “JUDGES BEHAVING BADLY” brochure, CCFC described CCFC’s PUBLIC BENEFIT ACTIVITIES and
suggested alternatives to the FLC’s diagnosis of the “LITIGANTS BEHAVING BADLY” problem:
San Diego Family Courts and Professionals are trained and paid to resolve family disputes efficiently. They rarely do. Why?
Courts, attorneys, and service providers are ineffective at assisting families in transition. In fact, they encourage conflict and
expense that harms litigants, their children, and your community.
Reducing conflict may seem impossible, but with a few available and free alternatives, you can make a difference. Here’s the
truth you won’t hear from tonight’s panel by the litigants whom you failed to invite.
You were hired to assist litigants in efficiently transitioning through a family dissolution. Litigants come to you hurt, angry
and fearful about an uncertain future for the most important things in their lives: their children, family, and financial
security. Unmanaged, that uncertainty leads to conflict.
Your duty to your clients and your community is to end conflict, end fear, and let them move on.
Yet family courts presently offer few tools to calm emotions, while providing abundant tools to make them even more
destructive. Courts and evaluators sit in passive judgment, yet rarely render guidance. Evaluators are scientifically
incapable of identifying the “better” parent, yet earn millions from desperate parents by pretending they can. Attorneys
rarely end conflict, but regularly use courts to encourage litigation, absorb resources, and harm their clients, children, and
community.”
121. The brochure offered suggestions to supplement their answer to the SDCBA’s “Do Professional Services Really
Work?” question:
1. Change your Attitude: You don’t work in a sterile court of appeals. You work in people’s lives. Divorce hurtss. Families in
transition need healing and support-not sharp advocacy, endless services, and harsh judgment. Give compassion in their
crisis.
2. Change your Procedures: Easy OSCs and unpredictable outcomes encourage litigation, drive costs, increase conflict, and
facilitate abuse. Give restraint and predictability.
3. Change your Resources: Books in a waiting room are useless. Free, easy resources like UpToParents. org focus parents
on working together to promote their child’s best interests independently. Give education and direction to establish long term
peace.
4. Change People’s Lives: Years after divorce both parents will say “It’s a cesspool benefiting attorneys, evaluators, and
courts but immeasurably harmed me and my children.” In other words, you’re not doing your job.
At the end of your career, will you be able to say “I helped to prevent that harm and to achieve peace and prosperity for my
community, clients, and their families.”?
We will. Join us.
Ex. 28.iv
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iv
“Discourage litigation. Persuade your neighbors to compromise whenever you can. As a peacemaker the lawyer has superior
opportunity of being a good man. There will still be business enough.” - Abraham Lincoln
122. The messages and themes of the CCFC Brochure, poster signs, and CCFC representatives communicated to the FLC at
the CCFC Engagement shall hereafter be referred to as the “JUDGES BEHAVING BADLY” MESSAGE.
123. The brochure referenced CCFC’s website presently located at www.facebook.com/ccfconline where FLC members
could learn more about CCFC’s PUBLIC BENEFIT ACTIVITIES. CCFC scheduled the ENGAGEMENT to coincide with
the SDCBA SEMINAR in front of the SDCBA Bar Building to enable maximum impact for the MESSAGE, and continue
developing knowledge, networks, contacts, and intelligence to advance CCFC’s FFRRESA and BUSINESS
DEVELOPMENT with key FLC members, including DDIJO, DDIA, DDIPS, and DDIL. Ex.28.
The STUART ASSAULT
124. DEFENDANTS received CCFC’s press releases announcing the ENGAGEMENT ahead of the Seminar. True and
correct copy of articles identifying a “spike” in downloads of the CCFC Press Release by DEFENDANTS is attached at
Exhibit 29 and incorporated herein as if set forth in full. DEFENDANTS also knew or had reason to know of the CCFC
FFRRESA by virtue of CCFC’s past ENGAGEMENT, and FFRRESA.
125. CCFC members arrived early to the Engagement with signs and brochures. (Exs. 28-30) As attendees arrived, including
family court judges, attorneys, industry professionals, and clients, they could easily see CCFC members peacefully carrying
signs, walking on the sidewalks in front of the SDCBA building and through the crosswalks intersecting 7th and B. Streets.
126. The ENGAGEMENT was peaceful. Pamphlets were distributed as attendees entered the building, establishing
professional relationships valuable to CCFC and LEXEVIA’s commercial interests. Numerous contacts were added to
CCFC’s network, ideas and business contact information exchanged. No conflict, disruption, obstruction, or breach of the
peace occurred.
127. STUART did not participate in the ENGAGEMENT, but did attend SDCBA SEMINAR. His intent on attending the
SEMINAR was to focus on gaining knowledge in order to advance PLAINTIFF’S PUBLIC BENEFIT ACTIVITY.
STUART was then a member of SDCBA and regular attendee at SDCBA events. A week prior to the SEMINAR he
purchased admission through SDCBA’S online store as an SDCBA member in the way he has numerous times before
(STUART-SDCBA CONTRACT).
128. STUART entered the seminar as a normal attendee, signed in to the “pre-registration” table at the front door, received a
name badge, chose a seand awaited quietly for the seminar to begin. He maintained a normal professional demeanor-he was
not seeking and did not exercise FFRRESA at the seminar, but only to gather information about how the judges, attorneys,
and professional service providers conducted their affairs, marketed services, formed and maintained relationships, and made
money. He was dressed professionally, spoke to no one, and attended the seminar like any other attendee.
129. In attendance at the seminar were approximately 100 legal professionals, presumably members of the FLC, as well as
approximately fifteen uniformed armed Sheriffs Deputies spread in a uniformly-spaced perimeter along the walls of the
room. After STUART selected his seat, the Sheriff’s Deputies changed their perimeter to positions nearer to STUART along
the walls, effectively surrounding STUART. Each deputy was watching STUART closely.
130. The seminar began with introductory remarks by Family Law Division supervising judge ALKSNE. However, after
only about two minutes of speaking, ALKSNE announced an abrupt break, apologizing that she needed a break “so we can
straighten something out.” One or more of the SDCBA Defendants had signaled or otherwise drew the attention of Defendant
ALKSNE to alert her of STUART’s presence and that the plan to eject STUART (described below) was underway.
131. ALKSNE left the podium, walked to the back of the conference room, and began speaking in a huddle of several other
24
defendants, including several Sheriffs Deputies, two security guards, and two or three other persons who appeared to be
SDCBA agents or seminar attendees.
132. The group conferred for several minutes, looking in STUARTS’ direction and referencing his presence with nods,
glances, and gestures. It was apparent that the group was discussing STUART. STUART remained seated quietly during the
unscheduled break.
133. After consulting with ALKSNE and others, two employees of defendant ODO and two Sheriff’s Deputies approached
STUART where he was seated. The men asked STUART if he was “Colbern Stuart.” STUART acknowledged his identity.
The men then asked STUART to accompany them to leave the seminar. STUART declined and inquired why he was being
asked to leave. The men reiterated that the SDCBA wanted him to leave. STUART again refused, stating that he had
purchased a ticket and was intent on attending the entire seminar. STUART asked if he was breaking any laws or interfering
with the seminar in any way. The men replied “no.” STUART politely again expressed his desire and intent to remain
attending the entire seminar.
134. The men then informed STUART that if he did not leave voluntarily that they would forcibly eject him. STUART
objected, again stating that he intended to remain. The men then returned to where the others were “huddled” several feet
away. The group again conferred with similar references and gestures toward STUART.
135. Within moments, the same two security guards and two Sheriffs deputies approached STUART, who continued to sit
quietly awaiting the resumption of the seminar. The men again asked STUART to leave. STUART again refused. The men
then forced STUART to stand, grabbed his arms, forced his hands behind his back, and handcuffed him. They searched his
person, emptied his pockets, and eized his property, consisting of a notebook, reading glasses, a mobile phone, pen, spare
change, CCFC and LEXEVIA business cards, and a wallet. They forcibly led STUART out of the SEMINAR in front of
dozens of STUART’s professional colleagues including one of his law partners, fellow bar members, lawyers, judges,
professional service providers, clients, employees, and law enforcement officers.
136. The officers released STUART outside of the SDCBA building and informed him he was not free to return. The seminar
re-convened immediately after STUART’S removal. According PLAINTIFFS’ witnesses present at the SEMINAR, several
SDCBA panel speakers joked during the seminar “I guess he got what he asked for” and “let’s see if that gets them any
publicity.” They made puns about CCFC as “THE Litigants Behaving Badly”, calling CCFC a “bunch of borderlines” “crazy
parents” and stating “that’s why we have to do what we do.”
DEFENDANTS’ Conspiracy to Retaliate and Obstruct Justice in the STUART ASSAULT
137. Subsequent to the formation of the STUART-SDCBA CONTRACT and prior to the STUART ASSAULT,
DEFENDANTS, and each of them, were or became aware of the STUART-SDCBA CONTRACT, the planned
ENGAGEMENT, STUART’S planned attendance at the SEMINAR and ENGAGEMENT, his affiliation with PLAINTIFFS,
and PLAINTIFFS’ PUBLIC BENEFIT ACTIVITIES. DEFENDANTS considered PLAINTIFFS PUBLIC BENEFIT
ACTIVITIES to be a threat to traditional FLC persons, institutions, businesses, and enterprises, including those identified in
the ENTERPRISE ALLEGATIONS below.
138. Upon learning of the Engagement, DEFENDANTS and each of them affiliated, came to a meeting of the minds, and
agreed to support the STUART ASSAULT in retaliation, abuse of process, and obstruction of justice as described herein. In
doing so, DEFENDANTS and each of them CULPABLY (to be defined as “unreasonably, unlawfully, willfully,
intentionally, maliciously, without probable cause, recklessly, knowingly, unjustified, brutal, and offensive to human dignity,
fraudulently, oppressively, wantonly, in premeditation, in deliberate indifference, with the intent to deprive rights, privileges
and immunities of others including plaintiffs and retaliate for exercising same, criminally, wrongfully, in bad faith, in
furtherance of on or more alleged criminal or civil CONSPIRACY, with deliberate indifference, in a manner that was
extreme, outrageous, unjustified, and in reckless disregard for the possibility of causing harm, damage, loss and constitutional
injury as elsewhere alleged”) altered their planned behavior for the seminar to respond to PLAINTIFFS’ presence and the
ENGAGEMENT, including failing to exercise their duty to prevent or aid in preventing the acts of other DEFENDANTS as
alleged herein, to support, permit, facilitate, encourage, affiliate with, coordinate, collaborate, with one another in joint
25
purpose, efforts, enterprise and conspiracy, to CUPLAPLY retaliate for, obstruct, deter, hinder delay, oppress, obstruct,
unfairly compete with, and deprive PLAINTIFFS PUBLICL BENEFIT ACTIVITIES by committing the STUART
ASSAULT in defiance of the rule of law (the “CRIMINAL CONSPIRACY”).
139. DEFENDANTS’ acts in furtherance of conspiracy included alerting all other DEFENDANTS of PLAINTIFFS’
PUBLIC BENEFIT ACTIVITIES, and the ENGAGEMENT, the STUART-SDCBA CONTRACT, STUART’s planned
attendance at the SDCBA SEMINAR, and the activities of others, including other DEFENDANTS in the CONSPIRACY TO
ASSAULT STUART.
140. One or more of DEFENDANTS communicated with DDISO DOES, and GORE, to coordinate an increased presence of
DDISO Defendants at the seminar, hired, altered, communicated with, or coordinated with ODO Defendants, communicated
with SDCBA, SDSD DOES 16-20, GORE, COUNTY OF SAN DIEGO, TRENTACOSTSA, RODDY, CJC, ALKSNE,
DOYNE, INC., DDIJO DOES 1-10 regarding of the ENGAGEMENT, researched PLAINTIFFS and their PUBLIC
BENEFIT ACTIVITIES, DUE ADMINISTRATION OF JUSTICE, the DDICE and other CRIMINAL and civil
CONSPIRACIES, facilitating ENTERPRISE affiliation, coordination, and cohesion, in defiance of the rule of law.
V. CHARGING ALLEGATIONS: CIVIL RIGHTS
141. For each Count, PLAINTIFFS reallege and incorporate all prior paragraphs as if set forth in full.
Count 1
Illegal Search, Seizure, Assault, Battery, Arrest, and Imprisonment Deprivation of Constitutional Rights Under Color
of State Law 42 U.S.C. 1983
U.S. Const. 1st, 4th, 5th, 6th, 7th, 8th, 14th Amend.
Supplemental State Claims
Against Defendants
SDCBA, ODO, DDISO DOES 1-15, GORE, DDIJO DOES 1-50, SAC, SIMI, BATSON
142. Each act of DEFENDANTS alleged in the STUART ASSAULT was done under color of state law.
143. DEFENDANTS in the STUART ASSAULT have:
Used, attempted, and threatened use of force CULPABLY and UNREASONBLY (to be defined as “without due care, in
breach of duty, without provocation, justification, defense, privilege or immunity, and in an unjustified and excessive
manner”);
Terrorized, seized, detained, restrained, arrested, imprisoned, assaulted, searched, injured, cruelly and unusually punished,
harassed, intimidated, and annoyed STUART, CCFC, LEXEVIA, and their clients, colleagues, partners, and affiliates in
violation of their and
Deprived STUART of and retaliated for his FFRRESA and PUBLIC BEEFIT ACTIVITIES.
These and other terroristic threats, abuse, assaults, and illegal activity described herein shall be denominated
HARRASSEMENT AND ABUSE.
26
144. At all times relevant hereto, STUART behaved REASONABLY (to be defined as “lawfully, with due care, dutifully,
with probable cause”), was unarmed, calm, and did not pose a disturbance or threat of death or grievous bodily injury to
defendants or others.
145. Prior to the STUART ASSAULT, no Defendant possessed a search or arrest warrant for STUART.
146. Prior to the STUART ASSAULT, STUART had violated no laws in any DEFENDANT’S presence, and no
DEFENDANT had any knowledge of STUART’S having violated any law in or out of their presence.
147. No act alleged against any defendant in the STUART ASSAULT is a judicial act, an act intimately associated with the
criminal judicial process, or, with the potential exception of DDISO DOES, pursuant to any authority, charter, constitution,
regulation, or law.
148. As an actual and proximate result, PLAINTIFFS have been HARMED.
Count 2
Intentional Infliction of Emotional Distress Extreme and Outrageous Breach of Duty Deprivation of Constitutional
Rights Under Color of State Law 42 U.S.C. 1983
Against Defendants
SDCBA, ODO, DDISO DOES 1-15, GORE, DDIJO DOES 1-50, SAC, SIMI, BATSON
149. In performing the acts ascribed to them, DEFENDANTS knew or should have known that STUART was an attorney,
and assaulting him as described in front of dozens of his professional colleagues, clients, and judges would cause him severe
mental distress and resulting business injury. Specifically, DEFENDANTS knew or should have known:
A. PLAINTIFF maintained dozens of business, personal, and professional relationships in San Diego such that the STUART
ASSAULT in the presence of dozens of PLAINTIFF’s business, personal, and professional colleagues would cause severe
emotional distress;
B. PLAINTIFF was an attorney at law licensed to practice in three states including California such that the STUART
ASSAULT would jeopardize STUART’S law practice and license, causing emotional severe distress therefrom;
C. PLAINTIFF was a founding member and office of LEXEVIA and CCFC such that assaulting STUART in front of CCFC
members and LEXEVIA partners, business colleagues, and clients would intimidate, threaten, harass, annoy, and terrorize
PLAINTFFS and their affiliates, furthering HARASSMENT AND ABUSE, and causing cause PLAINTIFFS and their
affiliates to:
(i) withhold testimony, or withhold a record, document, or other object, from an official proceeding;
(ii) alter, destroy, mutilate, or conceal an object with intent to impair the integrity or availability of the object for use in an
official proceeding;
(iii) evade legal process summoning that person to appear as a witness, or to produce a record, document, or other object, in
an official proceeding;
27
(iv) be absent from an official proceeding to which that person has been summoned by legal process; and
(v) be otherwise hindered, deterred, delayed, or wrongfully influenced thereby.
(collectively hereinafter referred to as “CHILL”) from further DUE ADMINISTRATION OF JUSTICE, FFRRESA, and
PUBLIC BENEFIT ACTIVITY.
D. That CHILLING PLAINTIFFS and their affiliates would further injure PLAINTIFFS’ affiliates’ PUBLIC BENEFIT
ACTIVITIES further causing PLAINTIFFS’ HARM.
E. STUART, was the founder and lead partner of the law firm LEXEVIA, with offices in San Diego and Los Angeles, such
that the STUART ASSAULT and resulting impact on LEXEVIA would cause loss of business assets, income, and good will,
causing further emotional distress to STUART.
Count 3
Culpable Breach of Duty under California Government Code § 820 Deprivation of Constitutional Rights 42 U.S.C.
1983
U.S. Const. 1st, 4th, 5th, 6th, 7th, 8th, 14th Amend
All Defendants as Indicated
151. At all times pertinent hereto, DEFENDANTS, and each of them, owed one or more PROFESSIONAL DUTIES to
PLAINTIFFS with respect to their status as citizens, professionals, attorneys, law enforcement officers, fiduciaries, color of
state law actors, judicial officers, employers/employees, and their agents, officers, affiliates, and collaborators.
152. Said PROFESSIONAL DUTIES include:
A. All DEFENDANTS: Duty of ordinary reasonable care: The duty to act REASONABLY, and to avoid acting
UNREASONABLY and CULPABLY.
B. COLD: Exercise color of law powers only in the presence of jurisdiction: those provided under enabling legislation, rules,
charters, or constitutions; protect, uphold, and defend the laws and the Constitution of the United States; act only in the
public interest; provides only honest government services; avoid all conflict, undue influence, bribery, self-dealing, bias,
nepotism; commit no deprivations of clearly established civil rights; create or inflict no HARM unless specifically authorized
after due process of law;
C. DDIPS: Professional duties to observe all professional standards relevant to their respective professional licensure, best
practices, and specialty standards, do no harm (Ex. 36);
D. Fiduciaries (DDIA, DDIPS): Duties of trust and loyalty trustee of treating pecuniary interests of named or foreseeable
beneficiaries equal to own;
E. DDIJO: Protect rights of those in courtroom; “ensure rights”; all duties enumerated in Canons 1-6 (Ex. 39) and related
codes;
F. DDIAS: Professional competence, loyalty, zealous advocacy and those specifically articulated in the Model Code of
28
Professional Conduct (Ex. 40);
G. Supervisors: train, enforce law, implement, create, monitor policy, background checks, discipline, terminate, exercise
power to prevent or aid in preventing breaches of others with power to influence or control;
H. Contractual: Specific duties under contract, and duty of good faith and fair dealing;
I. Municipal: Enact no policies, rules, laws, customs, behaviors or procedures which are intended to or deliberately
indifferent to constitutional injury;
J. Therapeutic: When acting in any “therapeutic” capacity-as a DDIJO (“therapeutic” jurisprudence), DDISW (“public
service”), DDIPS (psychology, even as a “forensic psychologist”), or DDIA, observe the ancient rule of genuine healers:
“above all else, do no harm.”
Exhibits 36, 39, 40 are incorporated herein as if set forth in full.
153. Pursuant to California Govt. Code § 820, “a public employee is liable for injury caused by his act or omission to the
same extent as a private person.” This special “ordinary care” duty of California state public employees extends not only to
avoid harm by the public employee’s direct actions, but to avoid harm to all those who are foreseeably injured by virtue of
the public employee’s actions which “set in motion” acts that result in constitutional injury.v
v
“California law expressly imposes liability on a public employee for his own act or omission. (Cal.Gov’t.Code § 820 (a public
employee is “liable for injury caused by his act or omission to the same extent as a private person,” except as otherwise provided
by statute).) In the same statute that relieves a public employee of liability for an injury caused by the act or omission of another
person, the Legislature declared: “Nothing in this section exonerates a public employee from liability for injury proximately caused
by his own negligent or wrongful act or omission.” (Cal.Gov’t.Code § 820.8.)” Johnson v. Duffy, 588 F.2d 740 (9th Cir.1978). “A
person deprives another of “a constitutional right, within the meaning of section 1983, if he does an affirmative act, [or]
participates in another’s affirmative acts ... that causes the deprivation of which [the] complaint is made.” Johnson v. Duffy, 588
F.2d 740, 743 (9th Cir. 1978). However, personal participation is not necessary to establish Section 1983 liability. Id. “Anyone
who ‘causes’ any citizen to be subjected to a constitutional deprivation is also liable.” Id. The requisite causal connection can be
established “by setting in motion a series of acts ... the actor knows or reasonably should know would cause others to inflict the
constitutional injury.” Vierria v. California Hwy Patrol, 644 F.2d 1219 (ED Ca 2009).
154. By virtue of the State of California’s special statutory duties imposed on COLD, PLAIINTIFFS possess reciprocal rights
under state and federal due process to the observance of those duties. (CALIFORNIA FUNDAMENTAL RIGHTS) (CFR).
155. Said PROFESSIONAL DUTIES extend to PLAINTIFFS.vi
vi
“To state such a claim under Section 1983, a plaintiff must allege that (1) she was deprived of a right secured by the Constitution
or laws of the United States, and (2) the alleged deprivation was committed under color of state law. American Mfrs. Mut. Ins. Co.,
526 U.S. at 50, 119 S.Ct. 977. A person deprives another of “a constitutional right, within the meaning of section 1983, if he does
an affirmative act, [or] participates in another’s affirmative acts ... that causes the deprivation of which [the] complaint is made.”
Johnson v. Duffy, 588 F.2d 740, 743 (9th Cir. 1978). However, personal participation is not necessary to establish Section 1983
liability. Id. “Anyone who ‘causes’ any citizen to be subjected to a constitutional deprivation is also liable.” Id. The requisite causal
connection can be established “by setting in motion a series of acts ... the actor knows or reasonably should know would cause
others to inflict the constitutional injury.” Johnson, 588 F.2d at 743-44.” Vierria v. California Highway Patrol, 644 F. Supp. 2d
1219 (E.D. Cal. 2009)
156. In performing the acts ascribed to them, DEFENDANTS, and each of them UNREASONABLY and CULPABLY
breached one or more PROFESSIONAL DUTIES, depriving one or more of PLAINTIFFS of their CALIFONRIA
FUNDAMETNAL RIGHTS, PRIVILEGES AND IMMUNITIES.
29
157. As an actual and proximate result, PLAINTIFFS have been HARMED
Count 4
Trespass Under Color of Law 42 U.S.C. 1983
Against All COLD
158. Each Defendant acting under color of state law is empowered and restrained from acting by virtue of the respective
constitutions, charters, articles of incorporation, appointments, or other entity formation documents describing the
Defendant’s jurisdiction.
159. In proceeding as described in the STUART ASSAULT Defendants, and each of them acted in the complete absence of
jurisdiction, causing “off the reservation” injury.vii
vii
Butz v. Economou, 438 U.S. 478, 519 (1978) (Rhenquist, J., concurring).
160. In exceeding the limits of their authority, DEFENDANTS, and each of them, committed a trespass onto the property,
persons, rights, privileges, and immunities of PLAINTIFFS and are strictly liable for all HARM resulting therefrom.
Count 5
Supervisory Liability Deprivation of Rights under Color of State Law 42 U.S.C. 1983
Against SUPERVISING DEFENDANTS: SDCBA, SDSD DOES 16-20, GORE, COUNTY OF SAN DIEGO,
TRENTACOSTSA, RODDY, CJC, AOC, CANTIL-SAKAUYE, ALKSNE, DOYNE, INC., DDIJO DOES 1-20
162. SUPERVISING DEFENDANTS, and each of them, at all times had the power to oversee, supervise, train, discipline
one or more other DEFENDANTS herein so as to prevent or aid in preventing the commission of acts of each other
DEFENDANTS as alleged herein, including the DDIJO COMPLAINTS, the DOYNE COMPLAINTS, the FEDERAL
ENGAGEMENT, the RACKETEERING ACTIVITY, and the STUART ASSAULT.
163. SUPERVISING DEFENDANTS knew or should have known of:
A. PLAINTIFFS’ FFRRESA;
B. The widespread violations of the FFR and CFR, CULPABLE breach of PROFESSIONAL DUTIES, and other illegal
activities of other defendants as alleged herein;
30
C. The DDIJO and DOYNE COMPLAINTS; and
D. The ENGAGEMENTS and DUE ADMINISTRATION OF JUSTICE of PLAINTIFFS and others regarding
DEFENDANTS, the DDIJO, DDIA, DDIPS, SAC, ENTERPRISE and CRIMINAL CONSPIRACY operators and affiliates.
164. After learning of PLAINTIFFS’ FFRRESA, DEFENDANTS had a duty to investigate, oversee, re-train, discipline,
and/or terminate those over whom they had the power to influence or control. Supervising Defendants failed to implement
remedial measures such as reassignment, removal or other disciplinary actions to prevent further constitutional injuries to
PLAINTIFFS and those similarly situated.
165. Having this knowledge, SUPERVISING DEFENDANTS neglected or refused to prevent or aid in preventing the same.
166. SUPERVISING DEFENDANTS UNREASONABLY and CULPABLY failed to implement appropriate training,
supervision, hiring, discipline, programs to assure persons over whom they had the ability to influence or control would not
commit the acts complained of, including the acts alleged in the DDIJO and DOYNE COMPLAINTS and the STUART
ASSAULT.
167. In performing their supervising duties, SUPERVISING DEFENDANTS implemented customs, policies, or practices
that created unreasonable risks that subordinates would perpetrate the constitutional injuries complained of by PLAINTIFF,
including:
A. Directing, rewarding, encouraging, or acting with deliberate indifference to the actions of subordinates which led to
PLAINTIFF’s constitutional injuries; and
B. Failing to change the customs, practices, or policies, or employ corrective practices for subordinates, after having
knowledge of actual or threatened constitutional injury.
C. Facilitating, acquiescing to, endorsing, or ratifying HARRASMENT AND ABUSE
168. Each Supervising Defendant played a role in forming and/or implementing the customs, policies, and/or practices
causing PLAINTIFF’s constitutional injury.
169. Each Supervising Defendant had prior knowledge of acts of their subordinates, supervisors and/or trainees which cause
constitutional injury similar to that complained of by PLAINTIFF.
170. Despite the knowledge of past/prior acts causing or likely to cause constitutional injury, Supervising Defendants took no
and/or inadequate corrective action, and in fact encouraged and/or covered up for the past/prior acts that caused or were
likely to cause constitutional injury.
Count 6
Municipal Liability Deprivation of Rights under Color of State Law 42 U.S.C. 1983
U.S. Const. 1st, 4th, 5th, 14th Amend.
Against Defendants County of San Diego, SCSDC, CJC, AOC, CJP, SDSD
172. DEFENDANTS in this Count are “governments beneath the state level” within the definition of that term in Board of
Comm’rs v. Brown, 520 U.S. 397 (1997). (MUNICIPAL DEFENDANTS).
31
173. DEFENDANTS maintained rules, policies, customs, procedures, traditions, practices and permitted behaviors by
policymakers themselves which perpetrated an intentional, reckless, and deliberate indifference to the likelihood of
constitutional injury of the type caused to PLAINTIFFS in the DDIJO, DOYNE, INC., COMPLAINTS, and STUART
ASSAULT, including customs and policies in violation of FFR and CALIFORNIA FUNDAMENTAL RIGHTS, and
permitting HARASSMENT AND ABUSE against those exercising FFRRESA.
174. DEFENDANTS were acting pursuant to such custom and policy in committing the acts ascribed to them herein.
Count 7
Respondeat Superior Liability
Against Defendants SDCBA, SDSD, GORE, County of San Diego, ALKSNE, DOYNE, INC., DDIJO DOES 1-10
176. At all times pertinent hereto, each SAC Defendant was acting as an agent or employee of each RESPONDEAT
SUPERIOR DEFENDANT herein. As a result, each of the wrongs or acts alleged against each Defendant herein is
attributable to each Respondeat Superior Defendant.
Count 8
Breach of Contract, Covenant of Good Faith and Fair Dealing
Against SDCBA
177. In committing the STUART ASSAULT, Defendant SDCBA UNREASONABLY and CULPABLY deprived STUART
of his rights under the STAURT-SDCBA CONTRACT without cause, notice, justification, or abatement, thereby breaching
the contract.
178. Based on Defendant SDCBA’s participation in the CRIMINAL COSPIRACY, STUART ASSAULT, ENTERPRISES,
and other CULPABLE acts alleged herein, this breach of contract was, in bad faith, malicious, fraudulent, and oppressive in
breach of the covenant of good faith and fair dealing.
Count 9
Wrongful Inducement To Breach of Contract, Covenant of Good Faith and Fair Dealing; Wrongful Interference with
Prospective Contractual Relations; Defamation
Deprivation of Constitutional Rights Under Color of Law U.S.C. 1983
32
Against SAC Defendants
180. DEFENDANTS and each of them were aware of PLAINTIFFS and their affiliates, PLAITNIFFFS’ PUBLIC
BENEFFIT ACTIVIES and the STUART-SDCBA CONTRACT prior to the STUART ASSAULT.
181. DEFENDANTS, and each of them, CULPABLY planned, coordinated, communicated, and cooperated with SDCBA to
induce and affect the STUART ASSAULT knowing and intending the same to be a breach of the SDCBA CONTRACT and
covenants thereto.
182. DEFENDANTS’ actions were undertaken willfully, maliciously, and fraudulently with the intent to wrongfully and
illegally, arrest, imprison, intimidate, assault, humiliate, embarrass, and defame and wrongfully HARM PLAINTIFF causing
interference with existing and prospective contractual relations as alleged above.
Count 10
Deprivation of and Retaliation for FFRRESA Under Color of Law 42 U.S.C. 1983
U.S. Const. 1st, 5th, 14th Amend.
Against COLD, DOYNE, INC.
184. DEFENDANTS were aware of the CCFC FFRRESA, BUSINESS DEVELOPMENT and ENGAGEMENT before the
SDCBA SEMINAR.
185. DEFENDANTS disfavored PLAINTIFFS’ PUBLIC BENEFIT ACTIVITIES; Specifically PLAINTIFFS’ “JUDGES
BEHAVING BADLY” MESSAGE, and PLAINTIFFS’ ongoing FFRRESA.
186. DEFENDANTS’ affected the STUART ASSAULT to cause PLAINTIFS, their members and affiliates, HARM, injury,
embarrassment, intimidation, and humiliation, to their person and property CULPABLY and in retaliation for and with the
intent to suppress, deprive, interfere with, and obstruct PLAINTIFFS’ FFRRESA.
187. DEFENDANTS’ actions were CULPABLE in violation of PLAINTIFF’s rights under the First, Fourth, Fifth, and
Fourteenth Amendments to the United States Constitution.
188. By the STUART ASSAULT DEFENDANTS intended, attempted, and did CHILL PLAINTIFFS and their affiliates
from further FFRRESA as PLAINTIFFS, their affiliates, including the DDIA, DDIPS, DDIJO, DDIL, and others at or aware
of the STUART ASSAULT were frightened, worried, demoralized, and emotionally and psychologically traumatized.
PLAITNIFFS and their affiliates have since abandoned further PUBLIC BENEFIT ACTIVITY, dissembled, disassociated,
avoided interactions with other PLAINTIFFS, causing personal and property HARM to PLAINTIFFS. After the STUART
ASSAULT, PLAINTIFFS were inundated with business contacts, queries, and requests for direction which PLAINTIFFS,
compromised, terrorized, and debilitated by the affect of the HARRASSMENT AND ABUSE, could not adequately respond
to, further exacerbating damages to PLAINTIFFS’ CCFC FFRRESA, and PUBLIC BENEFIT ACTIVITY.
189. Further, PLAINTIFFS’ clients, professional colleagues, and affiliates at or aware of the STUART ASSAULT who
previously had high opinions of PLAINTIFFS and referred them significant business stopped referring business to
33
PLAINTIFFS and their affiliates out of fear of reprisal by DEFENDANTS.
Count 11
Preventing Officer from Performing Duties 42 U.S.C. 1985(1)
Against SAC Defendants
191. In committing the acts alleged above, Defendants CONSPIRED:
A. To prevent, by force, intimidation, or threat, STUART (1) from accepting or holding a POSITION UNDER THE U.S.; (2)
from discharging his PROFESSIONAL DUTIES; and
B. to induce by like means STUART to leave the State of California, the City of San Diego, the County of San Diego, the
SDCBA SEMINAR where STUART’s PROFESSIONAL DUTIES were and are required to be performed;
C. to injure STUART in his person or property on account of his lawful discharge of his PROFESSIONAL DUTIES under
the United States, while engaged in the lawful discharge thereof; and
D. to injure STUART’s property so as to molest, interrupt, hinder, or impede him in the discharge of his PROFESSIONAL
DUTIES under the United States.
Count 12
Obstructing justice; intimidating party, witness, or juror 42 U.S.C. 1985(2)
Against all Defendants
193. PLAINTIFFS are members of and/or advocates for each of the following three classes subject to historic de facto and de
jure invidious discrimination in violation of the 5th and 14th Amendment rights to Equal Protection of the Laws (collectively
“EQUAL PROTECTION CLASSES”):
A. Parent-Child Class
194. Parents and Children have been identified as a special class entitled to unique fundamental parental constitutional rights,
including special status under the rights to equal protection of the laws. See Troxel v. Granville, 530 U.S. 57 (2000); FFR
supra.
B. Domestic Relations Class
34
195. Similarly, state and federal authorities in California have identified a special “domestic relations” class as entitled to
heightened protection under the Equal Protection Clause. The state of California has identified the “Domestic Relations
Class” as:
... an adult or a minor who is a spouse, former spouse, cohabitant, former cohabitant, or person with
whom the suspect has had a child or is having or has had a dating or ENGAGEMENT relationship. For
purposes of this subdivision, “cohabitant” means two unrelated adult persons living together for a
substantial period of time, resulting in some permanency of relationship. Factors that may determine
whether persons are cohabiting include, but are not limited to, (1) sexual relations between the parties
while sharing the same living quarters, (2) sharing of income or expenses, (3) joint use or ownership of
property, (4) whether the parties hold themselves out as husband and wife, (5) the continuity of the
relationship, and (6) the length of the relationship.
Cal. Fam. C. § 6211, Pen. C. § 13700.
196. Like marital status, the DOMESTIC RELATION Class is defined by a “relational” characteristic: persons in a current or
former identified relationship, but only to interaction between others in the same Class. For example, a husband and wife are
within the DOMESTIC RELATIONS Class with respect to one another, but not the rest of the world.
197. The DOMETIC RELATIONS CLASS is also entitled to special protection because of a lengthy history of invidious
discrimination against its members. This history and a complete explanation of the DOMESTIC RELATIONS CLASS status,
jeopardy, invidious discrimination, and rationale for special status under 42 U.S.C. § 1985(2) and (3) are discussed in detail
in the July 24, 2013 letter from CCFC to the City of San Diego, and the San Diego Family Justice Center and the Tadros v.
Lesh Petition for Certiorari, Exhibits 1 and 2 incorporated herein by reference.
198. Discrimination against the DOMESTIC RELATIONS CLASS is invidious social, economic, and legal discrimination
similar to racial, ethnic, gender, or legitimacy. In addition to the inevitable and debilitating economic, social, and
psychological impact of divorce, children and parents within the DOMESTIC RELATIONS CLASS are the historical targets
of ridicule, prejudice, and scorn amounting to invidious discrimination. Domestic Relations Class members are stamped with
stereotypes as “broken family,” “latch-key kids”, “damaged goods,” “gold diggers”, “divorcees”, “sugar daddies”, “first
wives”, “wife beater”, “histrionics”, “single moms”, “broken homers”-and the list goes on.
C. Gender Class
199. PLAINTIFF STUART a male within the recognized equal protection class of gender. The invidious discrimination
against males by DEFENDANTS has been described in detail in a publication by Dr. Stephen Baskerville entitled Taken Into
Custody, The War Against Fathers, Marriage, and the Family, Cleveland House Publishing, Inc., 2007 and in Exhibit 1
hereto. Dr. Baskerville has extended permission to reprint portions, but not all of his publication herein. The publication is
therefore referenced and incorporated herein as if set forth in full as Exhibit 13; the entirety is available at ISBN-10:
1581825943, ISBN-13: 978-1581825947.
D. Class of One
200. STUART, CCFC, LEXEVIA each comprise a class of one for purposes of PLAINTIFFS’ FFRRESA on behalf of
themselves and other equal protection classes.
201. No COLD may legally act with discretion in the absence of jurisdiction established by the constitution, statutes, laws,
contract, or regulation.viii
viii
Butz, supra at ; Stump v. Sparkman, 435 U.S. 349 (1978).
35
202. PLAINTIFFS’ membership in and advocacy for the EQUAL PROTECTION CLASSES was known to and targeted by
DEFENDANTS prior to the SDCBA SEMINAR. DEFENDANTS CULPABLY undertook each of the acts ascribed to them
with the intent affect the STUART ASSAULT and HARRASSMENT AND ABUSE with the intent to deprive PLAINTIFFS,
and each of them, of equal protections, privileges, and immunities, including rights related to FFRRESA, rights as advocates
for and on behalf of the EQUAL PROTECTION CLASSES.
203. In performing the acts alleged above, DEFENDANTS conspired:
A. to deter, PLAINTIFFS, by the STUART ASSAULT and HARRASSMENT AND ABUSE, from attending or testifying
freely, fully, and truthfully as a party or witness in PLAINTIFFS’ FFRRESA, or from testifying to any matter, freely, fully,
and truthfully;
B. to injure PLAINTIFFS, by the STUART ASSAULT and HARRASSMENT AND ABUSE, in their person or property on
account of having participated in FFRRESA or testified in conjunction with the FFRRESA and the DUE
ADMINISTRATION OF JUSTICE;
C. to influence, by the STUART ASSAULT and HARRASSMENT AND ABUSE, the verdict, presentment, or indictment of
any grand or petit juror in connection with PLAINTIFF’S FFRRESA and the DUE ADMINISTRATION OF JUSTICE;
D. committed the STUART ASSAULT and HARRASSMENT AND ABUSE for the purpose of impeding, hindering,
obstructing, or defeating, the DUE ADMINISTRATION OF JUSTICE and PLAINTIFFS’ FFRRESA with intent to deny to
PLAINTIFFS as members and advocates for the EQUAL PROTECITON CLASSES the equal protection of the laws and to
E. by STUART ASSAULT and HARRASSMENT AND ABUSE, injure PLAINTIFFS in their property for lawfully
enforcing, or attempting to enforce, the right of PLAINTIFFS and THE EQUAL PROTECTION CLASSES, to the equal
protection of the laws.
204. Hereinafter collectedly referred to as the CIVIL CONSPIRACY.
As an actual an proximate result, PLAINTIFFS have been HARMED.
Count 13
Conspiracy to Deprive Rights and Privileges 42 U.S.C. 1985(3)(a)
205. In committing the STUART ASSAULT, DEFENDANTS CULPABLY acted in CIVIL CONSPIRACY for the purpose
of depriving PLAINTIFFS individually as members of and advocates for the EQUAL PROTECTON CLASSES, of the equal
protection of the laws and equal privileges and immunities under the laws, including but not limited to their FFRRESA, the
DUE ADMINISTRATION OF JUSTICE, and retaliating for exercise thereof, causing PLAINTIFFS deprivation and injury
therefrom.
Count 14
Conspiracy to Deprive of Constitutional Rights 42 U.S.C. 1985(3)(b)
36
207. In committing the STUART ASSAULT, DEFENDANTS CULPABLY CONSPIRED to cause the STUART ASSAULT
for the purpose of preventing or hindering the FEDERAL LAW ENFORCEMENT OFFICERS and color of state law actors
identified herein from giving or securing to all persons within the state of California, including the EQUAL PROTECTION
CLASSES and PLAINTIFFS individually as members of and advocates for the EQUAL PROTECTON CLASSES.
Count 15
Conspiracy to Deprive of Constitutional Rights 42 U.S.C. 1985(3)(c)
209. In committing the STUART ASSAULT, Defendants CULPABLY and UNREASONABLY acted and CONSPIRED to
prevent by force, intimidation, or threat, PLAINTIFFS’S FFRRESA as a member or on behalf of each EQUAL
PROTECTION CLASS, in a legal manner, and to injure PLAINTIFFS in person and property on account thereof.
210. PLAINTIFFS’ FFRRESA included support and advocacy toward and in favor of federal processes and institutions,
including the election of lawfully qualified persons as electors for President or Vice President, or as a Member of Congress of
the United States.
Count 16
Failure to Prevent or Aid in Preventing Deprivation of Constitutional Rights 42 U.S.C. 1986
Against all COLD
211. DEFENDANTS, and each of them, had knowledge of all facts alleged herein, including that the acts CONSPIRED to be
done, and committed as alleged in Counts 11-15 were about to be committed.
212. DEFENDANTS, and each of them, by virtue of their relationships with each other defendant, their authority under color
of law, and PROFESSIONAL DUTIES, had power to prevent or aid in preventing the commission of the same.
213. DEFENDANTS, and each of them, neglected or refused to exercise their powers to prevent or aid in preventing the
commission of the same.
214. The acts as alleged herein were in fact committed as alleged.
Count 17
Breach of Contract, Fraud, Abuse of Process, CULPABLE Breach of Duty 42 U.S.C. 1983
37
U.S. Const. 4th, 5th, 14th Amend.
Against DOYNE, INC., ABC&K, WOHLFEIL, SCHALL
216. On or about September 12, 2008, STUART and DOYNE, INC. entered into written and oral contracts with PLAINTIFF
(STUART- DOYNE CONTRACT). A true and correct copy of which is in DOYNE INC’s possession and as such is
referenced as Exhibit 31 as if attached hereto.
217. DOYNE, INC. made further representations and warranties to STUART as follows:
A. That DOYNE was only authorized and would only act to “mediate”, and could not perform a custody evaluation, therapy,
“forensic investigation” analysis” or “evaluation” or act as a witness in court;
B. That DOYNE would not permit ex parte contact, and would take no action or recommendation except as authorized by the
court or the parties;
C. That DOYNE would base his reasoning and actions on actual evidence and law;
D. That all parties would be afforded notice and opportunity to be heard before DOYNE took any action or made any
recommendations regarding the matter;
E. That DOYNE INC. was an alternative to court and governmental intervention, safer, more private, and less expensive than
court, but with the same procedural safeguards;
F. That DOYNE would “quickly” work toward 50/50 custody, that it would only take “a few sessions”, and that his fees and
expenses would not exceed the initial $5,000 retainer;
G. That the DOYNE INC. mediation process would be completed in “a month or two”;
H. That DOYNE’s contact with the court would be in the form of a written report which both parties would have an
opportunity to review, comment on, contest, supplement, and collaborate over before submission to the court;
I. That DOYNE’S had no authority to take actions or make judgments, but only to work toward cooperative solutions;
J. That DOYNE would not recommend any solution that would harm, burden, or obstruct any party, and that he was “honest,
fair, and completely competent” to perform mediation services.
218. These representations were false when made.
219. As described more fully in Exhibits 22 and 23, during the course of performance, on or about June, 2009, DOYNE INC
breached the contracts and representations by failing to abide by each of the above reference promises, his PROFESSIONAL
DUTIES, including duties of disclosure, loyalty, honesty, and good faith, as well as breaching one or more provision of the
written contract.
220. Specifically:
A. DOYNE extended the mediation for over a year, insisting on weekly sessions for months on end to address issues he had
not been authorized to mediate;
B. DOYNE was not only unable to resolve even minor issues successfully, he welcomed and encouraged both parties to bring
up new issues unrelated to child custody, effectively attempting to insert himself as an arbiter for all disputes-real or
imagined-between the parties; and by otherwise extended the mediation for over a year to increase his fees;
C DOYNE refused to investigate STUART’s claims and evidence that MS. STUART was abusing their son, Croix Stuart, in
violation of his professional duties to report child abuse (Ex. 12);
38
D. DOYNE exceeded his authority in filing false and misleading reports with San Diego County child protective services
alleging that PLAINTIFF had “held his son upside down over a balcony” when DOYNE in fact knew and later admitted, that
claim was untrue;
E. That San Diego County Child Protective Services had performed an investigation of DOYNE’s allegations against
PLAINTIFF and found DOYNE’s allegation to be false;
F. Because of DOYNE’s false and misleading letters and report to San Diego Child Protective Services, DOYNE caused the
removal of PLAINTIFF’s son Croix Stuart from PLAINTIFF’S shared custody and awarded sole custody to Petitioner Ms.
Stuart;
G. The DOYNE repeatedly ignored or failed to follow up on PLAINTIFF’s concerns that Croix Stuart was being abused,
manipulated, and alienated by Petitioner Ms. Stuart;
H. That DOYNE was forcing PLAINTIFF to pay for services of DOYNE which PLAINTIFF objected to, did not request,
and were wasteful and unnecessary; and
I. That DOYNE effectively held Stuart’s son hostage, dangling his custody decisions between the couple, increasing
adversarial hostilities, strife, and conflict, in order solely to run up his fees in the case;
J. That DOYNE was in fact unauthorized to perform any work on the matter as he was ineligible, unqualified, and had failed
to establish his eligibility by appropriate procedure; and
K. Further breaches of each representation identified herein and in Exs. 2, 3, 4, 7, 10, 14, 18, 19, 20, 22, and 23 hereto.
DOYNE INC.’S Retaliation
221. In response to these breaches, on or about March 1, 2009, STUART terminated DOYNE’S services.
222. In addition to complaining to and firing DOYNE, PLAINTIFF also filed formal complaints with DOYNE’s landlord,
Scripps Memorial Hospital, the State of California Board of Psychology, the LAW ENFORCEMENT OFFICERS as part of
his FFRRESA. Doyne knew of these complaints.
223. A true and correct copy letters to and concerning DOYNE relating to these allegations are attached as Exhibits 22-23.
224. In response to PLAINTIFF’s objections and reports detailed above DOYNE INC. retaliated against STUART as
described above relating to the STUART ASSAULT and by committing one or more of the following acts against STUART:
A. Committing perjury in a hearing relating to the PLAINTIFF Stuart’s son, Croix Stuart;
B. Continuing to file false reports and encourage the (false) investigation of his initial report against PLAINTIFF Stuart;
C. Attempting to terrorize, intimidate, distress, harm, defraud, extort, and rob Stuart; and
D. Requesting a bribe.
DOYNE INC’S Terrorist Threats to extort, defraud, HARM STUART and his son, Croix Stuart
225. In May, 2009, DOYNE telephoned STUART at home requesting that STUART pay DOYNE for services he falsely
39
claimed to have provided.
226. DOYNE advised STUART that he had sent STUART several invoices which STUART had advised DOYNE he would
not pay.
227. DOYNE advised STUART that he “should come current” and that if he did so, DOYNE would “work with you” to “get
more time with your son.”
228. Given DOYNE’S pattern and history of professional incompetence, fraud, breach of contract, HARRASSMENT AND
ABUSE, deprivation of rights, false CPS report, overbilling, and other CULPABLE conduct as alleged herein, STUART was
horrified at what he regarded as predatory behavior and an apparent threat to commit further acts of perjury, abuse of process,
and manipulation regarding custody of STUART’s son if STUART did not “come current.”
229. He was further extremely distressed that DOYNE then maintained a relationship with his Croix Stuart and Lynn Stuart
as a therapist, and would inflict further harm or commit further facilitation of Ms. Stuart’s child abuse if STUART did not
comply with DOYNE’s demand for a bribe. Ex. 4, 22
230. STUART refused to pay DOYNE any more money, but was horrified, traumatized, and severely distressed as a result of
DOYNE’S behavior.
231. As an actual and proximate result, STUART has been HARMED.
BLANCHET’S Agency, Representations, Warranties for DOYNE INC:
232. STUART hired DOYNE INC. pursuant to various material representations and warranties by BLANCHET. These
representations and warranties are set forth in Exhibit 14 and incorporated herein by reference.
233. STUART’S reliance on these representations was reasonable.
234. Said representations and warranties were in fact false when made.
Count 18
CULPABLE Breach of Duty Deprivation of Rights Under Color of Law 42 U.S.C. 1983
Against DOYNE INC Supervising Defendants
WOHLFEIL, SCHALL, ALKSNE, TRENTACOSTA, SCSDC
236. DOYNE SUPERVISING DEFENDANTS, and each of them, at all times had the power to oversee, supervise, train,
discipline DOYNE and DOYNE INC. so as to prevent or aid in preventing the commission of DOYNE and DOYNE INC.’s
acts as alleged herein.
237. On or about April 10, 2008, Defendant WOHFEIL recommended to oversee Defendant DOYNE to “mediate” custody
in the Stuart Dissolution.
40
238. From the date WOHFEIL recommended Defendant DOYNE until the Stuart dissolution was re-assigned to Defendant
SCHALL, Defendant WOHFEIL acted, inter alia, in an administrative capacity in supervising Defendants DOYNE as a
professional “Forensic Psychologist” and Defendant DOYNE INC’s as commercial psychology enterprise and in the Stuart
Dissolution.
239. DOYNE INC. was hired by STUART pursuant to representations and assurances from WOLFEIL and BLANCHET that
DOYNE INC. was a trustworthy, competent mediator. WOHLFEIL retained administrative supervisory authority, oversight,
and ability to prevent or aid in preventing the breaches of duty, fraud, extortion, and abuse of DOYNE INC. described herein.
240. In or about December, 2008, SCHALL took over WOHLFEIL’S courtroom, including the STUART v STUART matter.
As such, SCHALL undertook WOHLFEIL’S responsibilities for supervision and oversight of DOYNE and DOYNE INC.
241. From the date the Stuart Dissolution was re-assigned from Defendant WOHFEIL to Defendant SCHALL, until on or
about November, 2009, Defendant SCHALL acted, inter alia, in the same administrative capacity in supervising Defendants
DOYNE and DOYNE INC.
242. Defendants WOHLFEIL and SCHALL had independent and/or joint and several Supervising Authority over Defendants
DOYNE and DOYNE, INC.
243. SCHALL and WOHLFEIL CULPABLY AND UNREASONABLY permitted DOYNE to commit the fraud, abuse of
process, extortion, and terror against STUART.
244. DOYNE SUPERVISING DEFENDANTS knew or should have known:
A. DOYNE’S history of fraud, abuse, and illegal conduct described herein;
B. The pattern of illegal activities of the CONSPIRACIES and CRIMINAL ENTERPRISES herein;
C. DDIJO and DOYNE COMPLAINTS; and
D. The FEDERAL ENGAGEMENT of PLAINTIFFS and others regarding EFENDANTS, the DDIJO, DDIA, DDIPS, SAC,
ENTERPRISE and CRIMINAL CONSPIRACY operators and affiliates.
245. After learning of DOYNE”S history of illegal conduct, fraud, and abuse, DOYNE SUPERVISING DEFENDANTS had
a duty to investigate, oversee, re-train, discipline, and/or terminate those over which they had the power to influence or
control including DOYNE and DOYNE, INC. Supervising Defendants failed to implement remedial measures such as
reassignment, removal or other disciplinary actions to prevent further constitutional injuries to PLAINTIFFS and those
similarly situated.
246. Having this knowledge, DOYNE SUPERVISING DEFENDANTS neglected or refused to prevent or aid in preventing
the same.
247. SUPERVISING DEFENDANTS UNREASONABLY and CULPABLY failed to implement appropriate training,
supervision, hiring, discipline, programs to assure persons over whom they had the ability to influence or control would not
commit the acts complained of, including the acts alleged in the DDIJO and DOYNE COMPLAINTS and the STUART
ASSAULT.
248. In performing their supervising authorities, DOYNE SUPERVISING DEFENDANTS implemented customs, policies,
or practices that created unreasonable risks that subordinates would perpetrate the constitutional injuries complained of by
PLAINTIFF, including:
A. Directing, rewarding, encouraging, or acting with deliberate indifference to the actions of subordinates which led to
PLAINTIFF’s constitutional injuries; and
B. Failing to change customs and policies, or employ corrective practices for subordinates causing PLAINTIFFS’
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constitutional HARM.
249. Each DOYNE SUPERVISING DEFENDANT played a role in forming and/or implementing the customs, policies,
and/or practices causing PLAINTIFF’s HARM.
250. Each DOYNE SUPERVISING DEFENDANT had prior knowledge of acts of their subordinates, supervises and/or
trainees which cause constitutional injury similar to that complained of by PLAINTIFF.
251. Despite the knowledge of past/prior acts causing or likely to cause constitutional injury, DOYNE SUPERVISING
DEFENDANTS took no and/or inadequate corrective action, and in fact encouraged the acts that caused or were likely to
cause constitutional injury.
252. As an actual and proximate result, PLAINTIFF has been HARMED.
Count 19
Fraud, Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing Deprivation of Rights Under Color of
Law 42 U.S.C. 1983
U.S. Const. 4th, 5th, and 14th Amend.
AGAINST DOYNE INC, WOELFEIL, SCHALL, BLANCHET
253. At all times herein mentioned, Defendants DOYNE INC., BLANCHET, WOHLFEIL, and SCHALL were agents,
officers, directors, employee/employers, of one another.
254. DOYNE, INC., acting under color of state law, made representations with the intent to induce PLAINTIFF into
engaging the services of DOYNE, INC. and entering into the written and oral CONTRACTS with DOYNE, INC.
255. DOYNE INC.’S behavior was a CULPABLE, extreme and outrageous, malicious, oppressive, and fraudulent breach of
one or more PROFESSIONAL DUTIES and deprivation of STUART’S FFR, CRF, and EQUAL PROTECTION CLASS
rights.
256. Each DEFENDANT facilitated, encouraged, was deliberately indifferent to, was aware of and acquiesced to DOYNE
INC’S behaviors, actions, representations, inducement, and PLAINTIFF’S likely and actual reasonable reliance thereon.
257. As an actual and proximate result, PLAINTIFF has been HARMED.
Count 20
Unjust Enrichment
Against DOYNE, DOYNE INC. ABC&K, BLANCHET
258. In reliance on DEFENDANTS’ acts and omissions, PLAINTIFF has been wrongfully induced to retain DEFENDANTS,
and as a result has paid in excess of $350,000 to Defendants.
259. As an actual and proximate result of Defendant DEFENDANTS’ misfeasance and malfeasance described herein,
42
DEFENDANTS have been unjustly enriched in an amount paid by PLAINTIFF and Ms. Stuart, the exact amount to be
proven at trial
Count 21
False designation of origin, false description Lanham Act 15 U.S.C. § 1125
Against All Defendants
260. DEFENDANTS, in connection with their businesses, professions, PROFESSIONAL DUTIES, CONSPIRACIES and
ENTERPRISE OPERATIONS, use in their advertisements, promotions, sale and offer for sale of their legal services words,
terms, names, symbols, and devices, and combinations thereof, (COMMERCIAL SPEECH) which are false and misleading.
261. In their COMMERCIAL SPEECH DEFENANTS represent that their services abide by ordinary and professional
standards of care, are legal, efficient, safe, and effective exercise of governmental powers and public licenses provided under
law as follows per defendant:
Entity/ies
A. All Defendants
Misrepresentation/Reference
See below; public and private services are legal, safe,
efficient, obedient to PROFESSIONAL DUTIES and
standards of care.
......................................................................................................................................................................................................................................................
B. DOYNE, INC
See below; child custody evaluations/mediations are safe,
therapeutic, “caring” and effective, cause no harm to parents
or children ; prices for services are reasonable; services
provider is authorized according to court processes and law;
service provider is and will observe legal, professional, and
moral restraint in his duties; will not abuse power or process;
In collusion with Defendant ACFEI, that DOYNE’S
certifications, “Diplomat/e” status, resume are accurate, true,
and authentic.
......................................................................................................................................................................................................................................................
C. ACFEI
See below, Ex. 43; Independently and in collusion with
DOYNE, Defendant offers “Certified” “Diplomat” and
“Fellow” titles and certifications as authentic reflections of
common understanding of such titles; the organizations is a
“College” institution of higher learning, has a “campus” on
Sunshine Street in Springfield MO;
......................................................................................................................................................................................................................................................
43
D. ALLIANCE
See below; Ex. 1, 41
......................................................................................................................................................................................................................................................
E. CJC/AOC/SCSDC, ALLIANCE
ALLIANCE and Family Court Facilitator Officers are legal
advisors authorized to provide legal representation and
advice; DV Forms are legal; “abuse” is a crime; Judges can
legally issue DVILS Orders; the FFR and CFR are not
available to California Citizens; there is no right to jury trial
in liberty or property deprivation hearings; the DVILS are
valid and enforceable.; all Defendants exercise their
authority according to constitutional authority
PROFESSIONAL DUTIES and law. Ex. 42.
......................................................................................................................................................................................................................................................
The CJP protects the rights of litigants from judicial abuse,
transgression, and civil rights violations of the FFR and
CFR; CJP has authority to and does enforce the CRCCS on
behalf of litigants; the CJP is the “first stop” in proceeding in
federal court for enforcement of civil rights; DDIL need not
proceed to federal court; The CJP is a neutral finder of fact;
The CJP is loyal to PROFESSIONAL DUTIES to serve the
interests of litigants equally as to government lawyers
F. CJP
......................................................................................................................................................................................................................................................
G. FRITZ
Ex. 46
......................................................................................................................................................................................................................................................
H. BIERER
Ex. 47
......................................................................................................................................................................................................................................................
I. BLANCHET
Ex. 48
262. With Respect to Defendant ALLIANCE, it further advertises and promotes:
A. The ALLIANCE legally operates the lead “technical assistance” center for development of Family Justice Centers across
the United States. The Alliance claims it “has been expanding and broadening its services since its inception in response to
the increasing demand for technical assistance (consulting, training, planning, and support services) from existing and
44
developing Family Justice Centers in the United States and around the world. The Alliance serves as the clearinghouse,
research center, and national membership organization for all Family Justice Centers and similar multi-agency,
multi-disciplinary service delivery models serving victims of domestic violence and other forms of abuse and oppression.”
B. The ALLIANCE claims it legally “serves as the clearinghouse, research center, and national membership organization for
all Family Justice Centers and similar multi-agency, multi-disciplinary service delivery models serving victims of domestic
violence and other forms of abuse and oppression;” “serves as the comprehensive technical assistance and training provider
for the United States Department of Justice for federally funded Centers;” “works with Centers outside the federal initiative
in the U.S. and abroad.”
C. The ALLIANCE claims “there are currently more than 80 operational Centers in the United States with ten international
Centers (Canada, Mexico, England, Jordan, and Sweden). There are over 140 Centers currently developing in the United
States, Europe, the Middle East, Africa, and Central America. The Alliance is currently partnered with the Mexican
government, Management Systems International, and USAID to help open more than twenty Women’s Justice Centers in
Mexico.”
D. “The ALLIANCE hosts an annual international conference, provides shared learning opportunities such as staff exchange
programs, internships, web-based education programs, and training in many areas related to family violence, elder abuse,
child abuse, sexual assault, and human trafficking. At present, the Alliance has over 11,000 members and over 10,000
attendees per year in its online training courses. Over 60,000 unique users per year access the Alliance’s online resources.”
E. “The ALLIANCE is the coordinator of the current California Family Justice Initiative, funded by the Blue Shield of
California Foundation, which has helped start ten new Family Justice Centers in California in the last three years. The $2
million Blue Shield of California Foundation California Family Justice Initiative is funding development of a statewide
network of Centers made up of core criminal justice system professionals and a host of community-based non-profit and
government agencies. Today, the Alliance is assisting with the start up of fifteen additional Centers in California.”
F. The ALLIANCE “staffs the FJC Legal Network, the Client Services Program, Camp HOPE, and the Teen Relationship
Violence Program in the San Diego Family Justice Center. The FJC Legal Network, founded in 2009, is housed at the San
Diego Family Justice Center and provides civil legal assistance to domestic violence victims. The Client Services Program
manages client screenings, intakes, and delivery of services to victims and their children. Camp HOPE is a specialized
camping and mentoring initiative for children exposed to domestic violence, physically and sexually abused children, and
at-risk youth.
G. The ALLIANCE advertises and represents that it is “creating a future where: ALL the needs of victims are met; children
are protected; Batterers are held accountable; Violence fades; Economic justice increases; Families heal and thrive; Hope is
realized; and we ALL work together.” The Alliance seeks “to create a network of national and international Family Justice
Centers and similar co-located service models with close working relationships, shared training and technical assistance,
collaborative learning processes, coordinated funding assistance, and transformational leadership.” Exs. 1, 41.
263. With respect to Defendant CJP, it advertises and promotes:
A. “The commission’s jurisdiction includes oversight, supervision, training, supervision, and discipline over judges of
California’s superior courts and the justices of the Court of Appeal and Supreme Court. The commission also has jurisdiction
over former judges for conduct prior to retirement or resignation. Additionally, the commission shares authority with the
superior courts for the oversight of court commissioners and referees. The Director-Chief Counsel of the commission is
designated as the Supreme Court’s investigator for complaints involving the judges of the State Bar Court. The commission
does not have authority over federal judges, judges pro tem or private judges. In addition to its disciplinary function, the
commission is responsible for handling judges’ applications for disability retirement.”
B. “The commission’s authority is limited to investigating allegations of judicial misconduct and, if warranted, imposing
discipline. Judicial misconduct usually involves conduct in conflict with the standards set forth in the Code of Judicial Ethics.
After investigation, and in some cases a public hearing, the commission may impose sanctions ranging from confidential
discipline to removal from office.”
45
264. With respect to Defendant ACEFI:
A. ACEFI advertises and promotes itself as “the largest forensic science membership association, forensics education,
credentials, courses, training and membership for forensics examiners.” ACEFI sells memberships, certifications,
accreditations, training materials and products, career services, and professional referral networking. It publishes and
circulates a subscription magazine entitled “The Forensic Examiner” to members and other Subscribers.
B. ACEFI sells certifications in areas such as “Certified Forensic Examiner,” “Certified Forensic Accountant, Cr.FA®,”
“Certified Forensic Nurse, CFN®,” “Certified Criminal Investigator, CCI®,” “Certified Forensic Physician CFP®,”
“Certified Medical Investigator CMI®,” “Certified Master Forensic Social Worker CMF SW®,” “Certified Forensic
Consultant CFC®,” “Certified Survival Mindset CSM®,” and “Certified Instructor CI.”
C. ACEFI operates no campus. It sells its certifications nationwide online at a website located at www.acefi.com and at
www.facebook.com/acefi. At its online website it offers the “advanced” certifications of “Diplomat” and “Fellow” to
consumers who want to “Become a Diplomat Now!” Ex. ___. From its website and its Sunshine Street offices in Springfield,
MO, it offers the following “Diplomate” “Board Certifications:” and “Accreditations;”
1) Diplomate of the American Board of Forensic Accounting-DABFA; Accredited bachelor’s degree or higher; current and
active CPA or international equivalent;
2) Diplomate of the American Board of Forensic Counselors-DABFC; Minimum of an accredited master’s degree; current
and valid license in counseling or mental health field;
3) Diplomate of the American Board of Forensic Dentistry-DABFD, DDS or DMD from an ADA-accredited school or
equivalent non-US academic institution; current, valid license to practice dentistry;
4) Diplomate of the American Board of Forensic Examiners-DABFE; Accredited bachelor’s degree or higher;
5) Diplomate of the American Board of Forensic Engineering and Technology-DABFET; Accredited bachelor’s degree or
higher in an engineering or technological discipline;
6) Diplomate of the American Board of Forensic Medicine-DABFM; MD/DO degree in medicine from an accredited medical
school; current, valid medical license;
7) Diplomate of the American Board of Forensic Nursing-DABFN; Minimum of a BSN from an accredited nursing school;
possession of a current, valid RN license;
8) Diplomate of the American Board of Forensic Social Workers-DABFSW; Minimum of an MSW from an accredited
university or college; current, valid social work license (if applicable);
9) Diplomate of the American Board of Recorded Evidence-DABRE;
D. The single requirement for “Fellow” advanced certifications are available to anyone who has been a “Diplomate” for three
years, and pay $250.
E. To anyone who can answer “No” to the questions “Have you been convicted of a felony?” and “Are you under
investigation for fraud?”, and pay $250, ACEFI also offers the following Credentials:
10) Certified Master Forensic Social Worker, CMFSW®
11) Certified Forensic Accountant, Cr.FA
12) Certified Forensic Consultant, CFC®
46
13) Certified in Survival Mindset, CSM®
14) Certified Forensic Nurse, CFN®
15) Certified Forensic Physician®, CFP
16) Certified Medical Investigator®, CMI
17) Certified Criminal Investigator, CCI®
F. ACEFI describes the “Fellow” certification as “the highest honor ACFEI can bestow upon a member. This designation is
reserved for members with outstanding achievements and excellence as well as participating actively in ACFEI programs.”
This Honor is achieved by filling out an online form requiring a name, address and telephone number, and answering the
questions “Have you ever been convicted of a felony?*” and “Have you ever been disciplined, or are you currently under
investigation, by any legal or licensing board? *” The “Fellow” and “Diplomat” advanced certifications are available online
for $250.
G. ACEFI offers online courses for “Behavioral Science,” “Forensics,” “Psychotherapy,” “Integrative Medicine,” and
“Missouri Sheriffs.”
H. The “Certifications,” “Boards,” “College,” “school,” and “classes” offered by ACFEI described in paragraphs 1)-24) do
not exist.
265. The claims of all Defendants described in this count and elsewhere are false and misleading.
266. With respect to each Defendant:
A. In their activates described herein, DEFENDANTS operate CRIMINAL ENTERPRISES which defraud, abuse, oppress,
and deprive PLAINTIFFS and the general public of their property and liberty.
B. In their COMMERCIAL SPEECH promotion for such ENTERPRISES, including websites, literature, public appearances,
statements and representations, DEFENDANTS misrepresent theirs and others’ legal and professional services as legal, fair,
honest, and beneficial, when in fact they are fraudulent, harmful, inefficient, oppressive, and illegal.
C. Further, in their advertising and promotion DEFENDANTS fail to warn consumers of the illegality of their services, the
constitutional deprivations they cause and form the basis of liability for, and the many disastrous pitfalls which occur
regularly from use of such professional services. As such, DEFENDANTS mislead as to the nature, characteristics, qualities,
of their and their ENTERPRISE affiliates’ services, including the nature of the ENTERPRISE and purposes of the SAD,
D. Defendants mislead consumers by misdirection from superior, legitimate, legal services by one ore more SAD, and by
advising “that’s how it is” in family court, and by failing to advise of the full options consumers have toward legal, healthy,
and safe alternatives to avoid the abundant harm likely to befall those who engage in such activities.
E. DDICE DEFENDANTS operate SAD and “black hat” operations under the guise of “white hat” legality and professional
responsibility, thereby deceiving consumers of legal services into engaging such services with the expectations that such is as
safe, lawful, and healthy as “standard” legal and psychological services. They are not.
267. PLAINTIFFS have been damaged and reasonably believe they are likely to be damaged again by such acts.
VI. RICO ALLEGATIONS:
47
RICO DEFENDANTS
268. In addition to the allegations regarding each Defendant above, certain defendants are each engaged in activities which
constitute a RICO Enterprise, and that each such defendant is a “person,” as that term is defined pursuant to Section 1961(3)
of the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO). Such Defendants are:
A. SAN DIEGO COUNTY BAR ASSOCIATION, a California Corporation
B. SAN DIEGO COUNTY SHERIFF’S DEPARTMENT, a municipal entity
C. WILLIAM D. GORE, an individual
D. COUNTY OF SAN DIEGO, a municipal entity
E. SUPERIOR COURT OF SAN DIEGO COUNTY, a municipal entity
F. ROBERT J. TRENTACOSTSA, an individual
G. MICHAEL RODDY, an individual
H. JUDICIAL COUNCIL, a municipal entity
I. ADMINISTRATIVE OFFICE OF THE COURTS, a municipal entity
J. TANI G. CANTIL-SAKAUYE, an individual
K. COMMISSION JUDICIAL PERFORMANCE, a municipal entity
L. LAWRENCE J. SIMI, an individual
M. BRAD BATSON, an individual
N. NATIONAL FAMILY JUSTICE CENTER ALLIANCE, a California Corporation
O. LISA SCHALL, an individual
P. LORNA ALKSNE, an individual
Q. OFF DUTY OFFICERS, INC., a business entity of unknown form
R. CHRISTINE GOLDSMITH, an individual
S. JEANNIE LOWE, an individual
T. WILLIAM MCADAM, an individual
U. EDLENE MCKENZIE, an individual
V. JOEL WOHLFEIL, an individual
W. CAROLE BALDWIN, an individual
X. LAURY BALDWIN, an individual
Y. BALDWIN AND BALDIWN, a California professional corporation
48
Z. LARRY CORRIGAN, an individual
AA. WILLIAM HARGRAEVES, an individual
BB. HARGRAEVES & TAYLOR, PC, a California Professional Corporation
CC. TERRY CHUCAS, an individual
DD. MERIDITH LEVIN, an individual
EE. ALLEN SLATTERY, INC., a California Corporation, a Corporation
FF. JANIS STOCKS, an individual
GG. STOCKS & COLBURN, a California professional corporation
HH. DR. STEPHEN DOYNE, an individual
II. DR. STEPHEN DOYNE, INC., a professional corporation
JJ. SUSAN GRIFFIN, an individual
KK. DR. LORI LOVE, an individual
LL. LOVE AND ALVAREZ PSYCHOLOGY, INC., a California corporation
MM. ROBERT A. SIMON, PH.D, an individual
NN. AMERICAN COLLEGE OF FORENSIC EXAMINERS INSTITUTE, a business entity of unknown form
OO. ROBERT O’BLOCK, an individual
PP. LORI CLARK VIVIANO, an individual
QQ. LAW OFFICES OF LORI CLARK VIVIANO, a business entity of unknown form
RR. SHARON BLANCHET, an individual
SS. ASHWORTH, BLANCHET, KRISTENSEN, & KALEMENKARIAN, a California Professional Corporation
TT. MARILYN BIERER, an individual
UU. BIERER AND ASSOCIATES, a California Professional Corporation
VV. JEFFREY FRITZ, an individual
WW. BASIE AND FRITZ, a professional corporation
269. By virtue of their affiliations, conspiracy, associations, and collaboration as alleged herein, RICO DEFENDANTS
function collectively as alter ego vehicles of one another facilitate and further the commercial purposes of the
ENTERPRISES alleged herein.
270. Specifically, in addition to the conspiracy allegations detailed above, each defendant is liable as a principal pursuant to
49
18 U.S.C. § 2(a)-(b), and that each and every RICO person that is a RICO defendant is liable as a co-conspirator pursuant to
18 U.S.C. § 371.
271. DEFENDANTS, and each of them, while affiliated with one or more ENTERPRISES, have operated, affiliated with,
and participated directly and indirectly in the conduct of ENTERPRISE affairs through a pattern of racketeering activity, in
violation of 18 U.S.C. § 1964 (b), (c), and (d) as follows:
RICO ENTERPRISES
272. Each of the following configurations, for purposes of plaintiff RICO § 1962(c) claims for relief, constitute an enterprise
engaged in, or the activities of which affect, interstate or international commerce as those term is defined pursuant to 3Title
18 United States Code § 1961(4) of the Racketeer Influenced and Corrupt Organizations Act of 1970 (“RICO”) and Odom v.
Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) (collectively “RICO ENTERPRISES”)
RICO Enterprise 1
The California Domestic Dispute Industry Criminal Enterprise (DDICE)
273. The California Domestic Dispute Industry Criminal Enterprise (DDICE) consists of individual private and public
professionals, professional corporations, professional membership organizations, and governmental entities engaged in that
portion of “family law” practice in which two or more parties’ have competing interests, or compete with the government for
such interests, and is described herein as “Domestic Dispute Law.” Domestic Dispute Law includes marital dissolution,
parentage, child custody, child support, domestic violence, and related areas.
274. All RICO DEFENDANTS including DDICE DOES 1-500 and the entities with which they are associated, including
every other ENTERRISE, civil and criminal CONSPIRACY constitute the DDICE. These entities, acting concert with one
another, are organized and maintained by and through a consensual hierarchy of agents, partners, managers, directors,
officers, supervisors, agents, deputies, and/or representatives that formulate and implement policies, practices, relationships,
rules, and procedures related to Domestic Dispute Law.
RICO Enterprise 2
San Diego Family Law Community Domestic Dispute Industry Criminal Enterprise (SD-DDICE)
275. In San Diego, the relationships among DDICE operators and affiliates are created and supported through what has been
denominated by members of the DDICE as the San Diego “family law community” Ex. 2, 26. The SD-DDICE is comprised
of individual family law attorneys and law firms, professional “service providers”, domestic dispute judges, the Family Law
Subsection of the San Diego County Bar Association and SDCBA staff, officers, and employees, specifically including:
SDCBA, SDSD, GORE, SCSDC, TRENTACOSTA, RODDY, CJC, CANTIL-SAKAUYE, ALLIANCE,
SCHALL, ALKSNE, WOHLFEIL, C. GOLDSMITH, LOWE, McADAM, McKENZIE, C. BALDWIN,
L. BALDWIN, CORRIGAN, HARGRAEVES, CHUCAS, LEVIN, STOCKS, ALLEN, SLATTERY,
INC., STOCKS & COLBURN, ACFEI, O’BLOCK, DOYNE, DOYNE, INC., GRIFFIN, LOVE, LOVE,
INC., SIMON, VIVIANO, BLANCHET, ABC&K, BIERER, BIERER & ASSOCIATES, FRITZ,
BASIE & FRITZ, DDICE DOES 21-30, and the entities with which they are associated, including
DDICE DOES 501-1000.
276. SD-DDICE utilize and share private and SDCBA, SCSDC, SAC, DDIPS and others’ communications systems, offices,
50
fixtures and equipment, professional and personal networks, campaign and lobbying vehicles and personnel, and political
organizations and networks. The DDICE and SD-DDICE also conspires to promote DEFENDANTS’ CIVIL
CONSPIRACIES, HARRASSMENT AND ABUSE, agenda detailed above for the benefit of the enterprise and detriment of
the DDIL.
277. The DDICE and SD-DDICE have been in existence for as long as the FLC has been organized-dating back far longer
than ten years. The DDICE and SD-DDICE have gained influence in recent years since the passage of the Domestic Dispute
Intervention Legislative Scheme (DVILS) in 1993-1997. Since passage of the DVILS, DDICE members have been
empowered and increasingly skilled at utilizing one or more of the schemes and artifices to defraud (SAD) described below
to further the purposes of the ENTERPRISES and commit racketeering activity.
278. These entities, acting concert with one another, are organized and maintained by and through a consensual hierarchy of
agents, partners, managers, directors, officers, supervisors, agents, deputies, and/or representatives that formulate and
implement policies relative to business development coordination, education, social networking, informational services to the
public about various areas and practices of lawyers practicing law, including, but not restricted to, aspects of family law,
child custody, and domestic relations in the San Diego area.
279. The SD-DDICE acting in concert with San Diego DDIJO, SCSDC, SDCBA, DDISO, and the SAC engage in a course
of conduct and a pattern of practice to illegally compete in the DDIL marketplace by illegal antitrust affiliations, barriers to
entry, fraudulent “certifications”, and predatory tactics such as the STUART ASSAULT and ongoing HARRASSMENT
AND ABUSE.
280. Through mutual anticompetitive pacts, fraudulent licensing, certification, specialization, excluding or deterring fair
competition from the market, the DDICE compete illegally in the DDIL marketplace, sharing access only those attorneys and
law firms that share and promote the interests of the ENTERPRISES, and committing HARRASSMENT AND ABUSE
against entities such as PLAINTIFFS which they view as competition in the DDIL marketplace.
RICO Enterprise 3
Domestic Dispute Industry Intervention Advocate Criminal Enterprise (DDI-IACE)
281. The DDI-IACE consists of Defendants AOC, CJC, CANTIL-SAKAUYE, ALLIANCE, TRENTACOSTA, RODDY,
ALKSNE, SCSDC, SDSD, and DDICE DOES 1001-1500. DDI-IACE constitutes a RICO criminal enterprise, organized and
maintained by and through a consensual hierarchy of, managers, directors, officers, supervisors, agents, deputies, and/or
representatives that formulate and implement policies relative to family law, child custody, and domestic relations.
282. The DDI-IACE ENTERPRISE, acting in concert with AOC, CJC, DDISW, DDIJO, and DDISO Defendants engage in a
course of conduct designed and intended to deprive and conspire to commit one or more SAD, deprive DDIL of FFR and
CFR, and commit HARASSEMENT AND ABUSE as described herein through the illegal practice of law, abuse of process,
illegal advice, guidance, form selection, individual litigant support, advocacy, and services through the ALLIANCE and
county court locations across the state. The DDI-IACE’s activities focus on topics such as divorce, restraining orders,
constitutional law, child custody, parents’ and children’s rights, guardianship, adoption, domestic violence, “abuse” and
“harassment.”
283. The DDI-IACE commercial purpose is to generate revenue and income within this District by expanding the
ENTERPRISE and the criminal activities of the DDIJO, DDISW, DDISO, and others associated with it, by committing fraud
on the United States, and state and local charities. Funding for statewide DDI-IACE entities is obtained from billions of
dollars in Violence Against Women Act grants and awards, and private foundations. Ex. I.
Rico Enterprise 4
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The Domestic Dispute Industry Forensic Investigator Criminal Enterprise (DDI-FICE)
284. The DDI-FICE consists of behavioral science “professional custody evaluators,” mediators, and the organizations which
certify, oversee, discipline, appoint, refer, conspire, associate, or affiliate with them, and includes Defendants ACFEI,
DOYNE, DOYNE, INC., LOVE, LOVE INC. BLANCHET, BIERER, FRITZ, SCSDC and DDICE DOES 1501-2000.
These RICO DEFENDANTS constitute a criminal enterprise, organized and maintained by and through a consensual
hierarchy of, managers, directors, officers, supervisors, agents, deputies, and/or representatives that formulate and implement
policies relative to providing the rendition of “forensic psychology” services to the public, including, but not restricted to,
DDIL, their lawyers, judges, and others in the field of family law, child custody, and domestic relations.
285. The DDI-IACE ENTERPRISE Defendants engage in a course of conduct designed and intended to conspire to commit
one or more SAD, deprive of FFR and CFR, and commit HARASSEMENT AND ABUSE as described herein through the
illegal practice of law, abuse of process, illegal advice, guidance, form selection, individual litigant support, advocacy, and
services through the ALLIANCE and county court “facilitator offices” locations across the state. The DDI-IACE’s activities
focus on topics such as parental/domestic dispute mediation, civil rights, child custody, domestic violence, and harassment.
286. The DDI-IACE commercial purpose is to generate revenue and income within this District committing one or more
SAD, false COMMERCIAL SPEECH, including HARASSMENT AND ABUSE.
Rico Enterprise 5
The DDIA/DDIPS Ad Hoc Criminal Enterprise (AHCE)
287. The AHCE is a well-established enterprise formation which is formed when two or more DDIL enter the DDIL
marketplace and hire one or more DDIA. The enterprise affiliates-ordinarily one DDIA attorney for a Petitioner, and one for
Respondent-engage with their clients, make fraudulent COMMERCIAL SPEECH misrepresentations to them regarding their
FFR, the family court laws and processes, and begin exploiting them by use of one or more SAD. Depending on how
malicious the DDIA conduct their fraud, DDIL may be induced into engaging in “Poser Advocacy” and one or more SAD,
either as initiator or forced responder, thereby generating revenue for both DDIA. The process by which the AHCE enterprise
is ordinarily formed is described in detail in a publication entitled A Promise To Ourselves: A Promise to Ourselves: A
Journey Through Fatherhood and Divorce, Baldwin, A., ISBN-10: 0312586019. PLAINTIFFS have not received permission
to reproduce this publication and therefore reference it as Exhibit 32 as if set forth herein in full.
288. In the present matter, the STUART AHCE consists of Defendants BLANCHET, BIERER, FRITZ, VIVIANO, DOYNE
INC., and DDICE DOES 2001-2010 (collectively STUART AHCE). By execution of various frauds and SAD, the STUART
AHCE introduced additional DEFENDANTS DOYNE, INC. WOHLFEIL, and eventually SCHALL, CJP, BATSON,
SDCBA, STUART ASSAULT COORDINATORS to commit one or more CIVIL and CRIMINAL CONSPIRACIES.
289. The STUART AHCE is organized and maintained by and through a consensual hierarchy of, managers, directors,
officers, supervisors, agents, deputies, and/or representatives that formulate and implement policies relative to the dispensing
and providing the rendition of judicial services to the public, including, but not restricted to, lawyers practicing before,
networking with, funding, and collaborating with this enterprise, including, but not restricted to, aspects of family law, child
custody, and domestic relations. The STUART AHCE enterprise, acting in concert with one and others unknown to
PLAINTIFFS, engaged in a course of conduct and a pattern of practice formulated, designed, intended, implemented, and
executed to as part of one or more SAD.
GENERAL ENTERPRISE ALLEGATIONS
With respect to each ENTERPRISE:
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Commercial Purpose
290. The constituent members comprising each ENTERPRISE are engaged in a concerted campaign to extort, defraud, trick,
deceive, corruptly persuade, victims, including primarily family court litigants and their children and extended families
(Domestic Dispute Industry Litigants “DDIL”) to exercise control over, and extract maximum value from, the target
community estate (“TCE”). The TCE includes all assets of the DDIL, the labor value of the DDIL going forward, and the
“custody award” value of any children of the DDIL.
291. Further, in unfairly protecting their commercial purposes, each ENTERPRISE harasses, threatens, assaults, abuses,
denigrates, impugn, and/or otherwise harm, or threaten and attempt to harm, competitors, critics, reformers, and others.
292. The ENTERPRISES operate as a “cabal,” a semi private, sometimes secret, informal affiliation of entities with public
presence and identity that is wholly or partially inaccurate and misleading as to the true goals, affiliations, and processes of
the cabal. The ENTERPRISES achieve their respective purposes by fraudulent collusion among DDICE operators and
affiliates, who in their COMMERCIAL SPEECH represent to their DDIL clients that the relationships among the DDICE
members are in compliance with legal and ethical PROFESSIONAL DUTIES when they in fact are not. See “False Flag” and
“Pose Advocacy” SAD below. (COMMERCIAL PURPOSES).
293. The ENTERPRISES also compete unfairly through their COMMERCIAL SPEECH by misrepresenting the legitimacy
of the ENTERPRISES, by representing to DDIL that their illegal behavior is “how it is” in a “take it or leave it” breach of
one or more PROFESSIONAL DUTIES.
294. The ENTERPRISES also compete unfairly within the DDI marketplace by creating the impression
ENTERPRISE entities are incapable of representing the interests of family law clients. In the present
ENTERPRISES operated as alleged to suppress and retaliate for PLAINTIFFS FFRRESA and PUBLIC
ACTIVITIES by HARRASSMENT AND ABUSE to restrict the family law marketplace access, knowledge, and
to only ENTERPRISE operators and affiliates.
that noncase, the
BENEFIT
awareness
295. Funded by fraudulent exploitation of the DDIL TCE, ENTERPRISE operators and affiliates engage in bribery,
exchanging value, emoluments, patronage, nepotism, and/or kickback schemes within their networks to assure system-wide
“cash flow” and continued viability and vitality of the ENTERPRISES. ENTERPRISES refuse such cooperation with
non-affiliates, thereby baring potential competitors. These bars include fraudulently manipulated referrals, representations,
certifications, nepotism, illegal antitrust tactics, and manufactured pitfalls to support the pervasive “who you know” cabal in
defiance of the rule of law.
296. When necessary, illegal marketplace protections are perpetrated by illegal criminal justice system sanctions by DDIJO
and DDISO, direct attacks such as the STUART ASSAULT DDISO, and HARASSMENT AND ABUSE. This predatory
competitive behavior targets any entity, association, or organization that supports and advocates for DDIL that appears as a
potential or probable threat to these DDICE purposes, including PLAINTIFFS (ENTERPRISE UNFAIR COMPETITION).
Domestic Dispute Industry Legal Services Marketplace
297. The ENTERPRISES are successful due to manipulation of unique factors characterizing the marketplace for Domestic
Dispute Industry legal services. DDIL are ordinarily families in crisis seeking to resolve their personal difficulties by altering
relationships. In doing so they must often seek the involvement of the state. For contested or unusually complex matters,
DDIL enlist experts to help navigate the market. Hence, a market for family law experts to assist in navigating the complexity
and/or maximizing outcome exists. (DDI MARKET).
298. The DDL view the DDI either as a necessary evil to be treated as a toll, or in some cases a nefarious tool of oppression
to illegally obtain wealth, power, and control at the expense of a former loved one. The DDI can deal with either. However,
for purposes of the civil and criminal enterprises alleged herein, the later represent an exploitation opportunity for DDICE
operatives, and as such special attention is paid to them.
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299. ENTERPRISE affiliates who serve or cultivate the illegal purposes of the enterprise-“black hat” operatives-view DDIL
as a “raw material:” a resource from which to extract net profit. While each case may present different circumstances, and
while DDICE associates market their services as “specialized”, in fact the DDICE operate in conspiracy with common SAD
applied to each DDIL in the DDI MARKET; providing “white hat” services to those seeking simple, healthy solutions, while
still preserving, promoting, misrepresenting, and protecting the ability to deliver illegal, unhealthy, yet far more profitable
“black hat” services.
300. However, to maintain long-term vitality, DDICE operatives must govern themselves to avoid exposure of their illegal
SAD, or “overfising”-extracting so much value from one or more DDIL that they “sour” to the DDIL marketplace or reveal
the ENTERPRISE and SAD, thereby inducing reform such as FFRRESA, and DUE COURSE OF JUSTICE.
301. Yet the balance necessary to achieve maximum TCE extraction without fair competition, revelation, or overfishing
cannot be achieved without cooperation between the petitioner’s and respondent’s counsel-hence “False Flag” and other
fraudulent SAD by which DDIA, DDIJO, and DDIPS exercise “client control” by refraining from zealous advocacy or honest
services in hopes of lowering extraction costs for Petitioner’s counsel, maximizing TCE extraction, and leaving at least one
“unburned” DDIL to perpetuate future SAD on future DDIL market entrants.
302. Petitioner and Respondent counsel (seeking to maximize wealth transfer) evaluate each case early through compelled
disclosures known as “Income and Expense Declarations.” These forced sworn statements require both parties to reveal
extensive details regarding income, assets, and expenses. The putative goal is for the determination of support levels.
However ENTERPRISE operators and affiliates also use the declarations to plan how to maximize extraction of value from
the TCE. This collaboration is evidenced by the common observation that DDICE operators and affiliate follow the business
rule to “bill until the client runs out of money or patience, then quit.” (or, in the case of even “white hat” operatives, finish for
free). DDIJO fully comply by allowing DDIA withdrawals for nonpayment with unusual ease, in further violation of the
equal protection of the laws.
303. Unfortunately, unlike commercial legal markets populated by business clients and in-house counsel, many DDIL lack
the sophistication, intelligence, market awareness, or general psychological stability in a time of crisis to recognize the SAD
until it is too late-if then. As such, educating the DDIL marketplace to improve awareness and thereby eliminate the
competitive advantage of illegal “black hat” operators has been a central theme both in PLAINTIFFS FFRRESA and
BUSINESS DEVELOPMENT.
304. For the DDICE operatives, the market for perpetrating the SAD on unwary DDIL has become almost too easy-the main
goal is no longer to facilitate the illegal extraction but to avoid “overfishing.” DDICE operatives must seek to maximize the
value extracted from the TCE in the short term without achieving a “burned DDIL” rate that deters potential future market
entrants from seeking services, or becoming “too aware” of the market dynamics enabling crime. This balance can only be
achieved through coordination among DDIA, DDIPS, and DDIJO Enterprise operatives who must defy their
PROFESSIONAL DUTIES to coordinate the cabal.
305. They do so by the False Flag SAD described below, including “Poser Advocacy” “paperwads” and “kite bombs” to
achieve maximum TCE extraction with as little risk for deterrence and exposure. Hence the tendency of the DDICE to utilize
irrational motivating tactics such as The PIT “fear or anger” or DDI-FICE (selfishness, greed), with “balancing” tactics such
as illegal conspiracy through SAD, drives illegal market collusion.
Interstate and International Commerce of the ENTERPRISES
306. The activities of the DDICE affect interstate and international commerce as follows:
A. The DVILS are authorized and enforceable under federal law and entitled to full faith and credit under the multiple state
laws (18 U.S.C. § 2261(a)(1), 2265)(Ex.33);
B. Child Support awards may be enforced in foreign countries through bilaterail international treaty including by revoking
passports of U.S. citizens (Ex. 33);
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C. State child support awards are enforceable in all U.S. Military Courts (Ex. 33);
D. The affairs of families is a worldwide industry generating tens of billions of dollars acquired by the DDICE
ENTERPRISES each year.
Longevity
307. In conducting the affairs of the ENTERPRISES, and in committing the acts, omissions, misrepresentations, and
breaches referred to herein beginning as far back as 1997 and continuing up through initiation of these proceedings, RICO
DEFENDANTS engaged in a pattern of racketeering activity in contravention of Title 18 United States Code § 1962(c)
inasmuch as the defendant was employed by, or associated with, one or more ENTERPRISE engaged in activities that affect
federal interstate and/or foreign commerce, and conducted such multiple criminal enterprise affairs by and through a pattern
of racketeering activity.
ENTERPRISE Schemes and Artifice to Defraud Scheme and Artifice to Defraud 1 Illegal Invocation of DVILS
ORDERS: Abuse of Process:
Abuse of Process: The Pit
308. The central tool of the DDICE is the widespread illegal exercise of the enormous equitable powers of state DDI courts.
DDI courts exercise such powers putatively under a set of laws enacted to extend state police powers to “intervene” in intense
domestic interpersonal conflict to address domestic violence. These laws are ensconced in Family Code §§ 6211 et seq,
including §§ 6200-6219, 6389, 3031, 14325, 6301, 6228, 6300-6306, 6404, 6380, 6384, 3044, 4320, 4007.5, 3190, 6203,
6209, 6205, 2040, 6253, 6306 et seq.; Civil Code §§ 3295 et seq., and Penal Code §§ 13700 et seq., §§ 136.2, 273.6, 273.75,
166, 836, 11161,679.05, 273.83, 868.8, 1203.3, 273.75, 1203.097, 646.91, et seq. These laws shall hereafter be collectively
referred to as the “DOMESTIC VIOLENCE INTERVENTION LEGISTLATIVE SCHEME” or “DVILS”. (Ex. 35)
DVILS Orders
309. Collectively, the DVILS create a set of practices and procedures whereby a party asserting that another within the
DOMESTIC RELATIONS CLASS may quickly obtain an injunction imposing severe and onerous deprivations, restrictions,
penalties, pains, and expense on another suspected of undesirable activity. A party seeking a protective order using a state
form DV 110 is requested only to “describe the abuse.” (Ex. 34) Though committing “Abuse” can form the basis of highly
invasive property and liberty deprivations, it is nowhere defined in the form, and under California law, is not a crime.
310. Upon overcoming the procedural safeguard of “showing of good cause” for the existence of “abuse”, a DDI court may
grant an order imposing the following “Personal Conduct,” “Move Out,” “Stay Away,” “Property Control” and “Child
Custody and Visitation”:
“Personal Conduct: The person in must not do the following things to the protected people listed...
a. Harass, attack, strike, threaten, assault (sexually or otherwise), hit, follow, stalk, molest, destroy personal property,
disturb the peace, keep under surveillance, or block movements;
Contact (either directly or indirectly), or telephone, or send messages or mail or e-mail or other electronic means”;
Take any action either directly or through others to obtain the address or locations of the person ...”
“Peaceful written contact through a lawyer or process server as needed to serve Form DV-120 (Response to Request for
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Domestic Violence Restraining Order) or other legal papers is allowed and does not violate this order ....
“Stay Away Order:
The person in must stay at yards away from:
The children’s school or child care
a. The person listed in d.
b. The people listed in e. Other (specify):
c. Home Vehicle of person in Job”
“Move-Out Order
The person in must take only personal clothing and belongings needed until the hearing and move out immediately from
(address).
“Child Custody and Visitation Order
a. You and the other parent must make an appointment for court mediation (address and phone number):
b. Follow the orders listed in Form DV-140, which is attached.
No Guns or Other Firearms or Ammunition
The person ... cannot own, possess, have, buy or try to buy, receive or try to receive, or in any other way get guns, firearms,
or ammunition.
Turn in or sell guns or firearms...
Must sell to a licensed gun dealer or turn in to police any guns or firearms that he or she has or controls. This must be done
within 24 hours of being served with this order.
Must bring a receipt to the court within 48 hours of being served with this order, to prove that guns and firearms have been
turned in or sold.
Property Control
Until the hearing, only the person in can use, control, and possess the following property and things:”
Cal. Pen. Code §§ 136.2, 1203.097(a), 273.5(i), 646.9(k); forms DV-110, CR-160 (collectively “DVILS ORDERS”) (Ex.
35).
311. The DVILS, DVIL ORDERS, and jeopardy of the “imposed disability” they represent will be referred to as “THE PIT.”
312. Together, the DVILS, DVILS ORDERS constitute the central foundation of conspiracy to violate civil rights actionable
under at least 18 U.S.C. 241, 242, 42 U.S.C. PLAINTIFFS shall borrow the term used by the DDICE itself to refer to the
device hereafter as “THE PIT.” By threatening, offering, or processing its (illegal) invocation, DEFENDANTS defraud the
DDIL, perpetrating one or more frauds and swindles, abuse of process, or deprivations of FFR and CFR described herein.
313. In December, 2007 STUART confronted DEFENDANT ABC&K about the legality of the DVILS ORDERS which he
56
had been illegally and without notice subjected to. AC&K’s BLANCHET explained the scheme:
Of course they’re unconstitutional-they ‘re illegal as Hell, but they know it’s expensive to fight it, so they strike first, throw
you in The Pit and make you pay or work to climb your way out.
BLANCHET advised
You can either pay her to get out of it orjump through the hoops and pray you make it.
314. BLANCHET was quite accurate. She kindly offered her firm’s assistance toward either end.
315. THE PIT is the embodiment of the pervasive disregard for the rule of law pervading the DDI ENTERPRISES. The
DVILS are illegal, unconstitutional, and criminal to seek and enforce, yet their use in practice has become
unremarkable-largely because those who use them benefit, and those against whom they are used are unaware of their
illegality because they are mislead.
316. The DVILS ORDERS and all acts relating to soliciting, advising, obtaining, adjudicating, issuing, and enforcing are an
illegal abuse of process. First, the laws on which they are based are unconstitutional. See Ex. 1, 2. In addition, the “DV” and
“CR” “mandatory use” Forms on which the orders are inconsistent with extend beyond the statutory authorization articulated
in the DVILS. Third, the terms used, even if statutorily enabled, are fatally and unconstitutionally vague and overbroad. Ex.
35.
317. DDICE operators and affiliates, in soliciting, threatening, offering, advertising, directing, granting, issuing, and
enforcing DVILS ORDERS are violating at least sections 241 and 242 of Title 18. The construction of a non profit or public
enterprise funded by United States grants and fraudulent grant applications is a violation of section 371 of that Title.
Scheme and Artifice to Defraud 2
Abuse of Process: Conspiracy to Obtain DVILS Orders through illegal formwork, “technical assistance” and
unauthorized practice of law
318. The process of obtaining DVILS ORDERS is further illegal. In most counties, “domestic violence” courts have
established “family law facilitator” offices, websites, forms libraries, and “self help” workers to guide and assist citizens in
obtaining orders operated by Defendants ALLIANCE, AOC, SCSDC, TRENTACOSTA and RODDY. These materials and
workers provide detailed, case specific advice, instructions, guidance, direction, advocacy, oversight, and monitoring of the
process by which the DVILS ORDERS are issued. Exs. 1, 36. Such practice constitutes the illegal practice of law under
California state and federal law. People v. Landlords Professional Services, Inc., 178 Cal.App.3d 68 (1986); People v.
Sipper, 61 Cal.App.Supp.844, 846 (1943); In re Glad. 98 B.R. 976, 977 (9th Cir.BAP 1989); In re Anderson, 79 B.R. 482,
484 (Bkrtcy.S.D.Cal.1987). Ex. 1.
319. The solicitation, enablement, facilitation, advocacy for, issuance, and enforcement is also illegal-a violation of numerous
constitutional rights and criminal laws. Plaintiff CCFC’s July 24, 2013 Cease and Desist/Notice to the City of San Diego
describes the illegality of this practice. It is referenced at Exhibit 1 and incorporated herein as if set forth in full.
Scheme or Artifice To Defraud 3
Forensic Child Custody Evaluations
320. DDICE members’ recommendation, appointment, use, and payment of private child custody constitutes a scheme to
defraud and extort DDIL. Denominated by DDICE as “Forensic Psychologists”, child custody evaluators in family law
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disputes have been a longstanding concern for hundreds of thousands of southern California state courts, political
representatives, and the FLC, including PLAINTIFFS. Hotly-contested, or “high conflict” family law cases frequently center
on disputes over child custody. Unfortunately, the experience of thousands of Southern California parents and children
suggests that the professionals recommended by DDIA, appointed, endorsed, and overseen by DDIJO, and paid for by DDIL
and their children are a sham. Ex. 3.
321. A publication by Dr. Margaret Hagen describes the fraud:
The abuses and excesses of so many child welfare specialists should not be allowed to obscure the indisputable fact that there
are many decent, caring, hardworking professionals who do their absolute best with huge caseloads to help the children as
well as they can be helped with the psychological tools available. It would be cruel and ungrateful and stupid to say
otherwise. The problem for them and for us is that the psychological tools just do not exist for them to do their jobs, and no
one can or is willing to admit that. It is just too difficult to deal with the awful reality that in the three million annual cases of
alleged abuse, our already overworked police forces would be called on to investigate and make determinations essentially
without any evidence at all of where, with whom, and by whom abuse has occurred.
Who can blame the police and the prosecutors’ offices-along with our courts-for wanting the assistance of professionals who
know what they are doing? It is just too bad that there are none available.
Both in custody cases involving allegations of grave risk to children in the home, and in cases arising where parents cannot
agree on custody for reasons both profoundly serious and dismayingly foolish, our judges-our whole family legal
system-desperately seeks guidance about where to find and where to place the best interests of the children involved.
Agencies, parents, and judges alike turn to psychological professionals to help them find the truth or make their case.
Our common desperation seems to have produced the common delusion that experts actually exist who really can determine
with the unerring instinct of a homing pigeon exactly where the best interests of a child lie, where a child should live,
whether and how a child has been hurt, how a child should be protected, who will be the superior parent, and who is unfit to
be a parent at all, who should have the right and the duty to care for a child, who should see the child only under restricted
conditions, and who should be kept away from the child altogether. Acceptance of their expertise has led us to trust
professionals to make these decisions for the family court system. That means ultimately that we also grant them the power to
make these decisions for our own families. The abstract need of society to protect its children becomes inevitably the rape of
the rights of the real parents of individual children.
Once again, the institutionalization of society’s desire to “do good” results in terrible harm for those in the path of the
dogooders.
The marriage of law and psychology has reached the heights of disproportionate power for the psychologists not just in
family courts but in all legal disputes in which a psychological matter is at issue. Judges buy the validity of the expertise of
the confident psychological practitioner and no doubt welcome the opportunity to make their own decisions on some
foundation other than personal opinion and bias.
322. A true and correct copy of Dr. Hagen’s publication entitled “Whores of the Court: The Fraud of Psychiatric Testimony
and the Rape of American Justice” is attached hereto as Ex. 37 and incorporated herein as if set forth in full.
323. PLAINTIFFS have identified the existence and practice of this scheme among the ENTERPRISES, reported the same to
DEFENDANTS SDCBA, brought suit to enjoin the fraud, and are presently pursuing the matter on appeal to the United
States Supreme Court. Tadros v. Lesh, et al., Exhibit 2, incorporated herein in its entirety as if set forth in full. A complete
analysis of the numerous schemes, devices, schemes, and artifices used by Child Custody Evaluators is described in a
publication entitled Equivocal Child Abuse by Sandra B. McPherson and Farshid Afsarifard, ISBN No. ISBN-10:
1439847762 | ISBN-13: 978-1439847763 (CRC Press, 2011) (Ex. 38). The authors have declined permission to reprint the
entire publication with this pleading. As such the publication is referenced and incorporated herein as if set forth in full.
Scheme or Artifice To Defraud 4
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Custody Evaluator Abuse of Process
324. Petitioners have identified a pattern of deception among DDIPS and DDIA to avoid detection and oversight by refusing
to obtain required authorization to operate as court-appointed agents. Without necessary paperwork, DDIPS are susceptible to
little or no judicial, professional, governmental, or parental oversight. This practice of unauthorized “Dark Appointment”
creates an environment in which the racketeering activity can exist “under the radar” of DDIJO, DDIA, and even
unsuspecting DDIL. Exhibit, 2, 3, and 4 include PLAINTIFF CCFC’S Amicus Curie Brief Tadros v. Doyne, matter,
explaining this matter are incorporated herein by reference as if set forth in full.
325. Perpetrating one or more of the SAD disclosed herein, evaluators defraud parents and children of millions of dollars
fraudulently claiming that they can determine the “best interests of the child” by scientific means. The claim is a
demonstrable fraud. Ex. 37.
326. The custody evaluator fraud generates tens of millions of dollars per year from families and children similarly situated.
Based on on DDICE operative’s misrepresentations, DDIL are lulled into a false sense of security by the DDIA, the DDIJO,
and other DDIPS who “cross-refer” one another, and impose threats of severe repercussions for a DDIL failure to obey the
professional referral. See, STUART ASSAULT, HARASSEMENT AND ABUSE, Ex. 2 (Tadros v. Lesh Petition, Statement
of the Case, Section B, pp. 8-12, incorporated herein by reference as if set forth in full).
327. DDIA and DDIJO participate in the SAD by recommending retaining professionals like DOYNE, INC, failing to warn
parents and children for the dangers, expense, and jeopardy of the dangers thereof.
Scheme and Artifice to Defraud 5
False Flag breach of PROFESSIONAL DUTIES
328. DDICE operators regularly breach one or more of their PROFESSIONAL DUTIES of loyalty, zealous advocacy,
fiduciary responsibility, and professional competence through one or more “false flag” frauds to induce, deprive, or deceive
DDIL. Ex. 32. These “False Flag” maneuvers involve one or more COMMERCIAL SPEECH misrepresentations to
unsophisticated DDIL, thereby depriving them of the benefits of legal professional services, and perpetrating fraud. “False
Flag” schemes and artifices include:
329. Poser Advocacy, Paperwads, Kite Bombs: “Poser Advocacy” is the practice and sale of what appears to be the practice
of law to unsophisticated DDIL. Attorneys engaging in poser advocacy act to appeal to their client’s emotions, greed, or other
untoward ends to generate fees with no beneficial legal work performed. Poser advocates write angry letters (“paperwads”),
exchange worthless formwork discovery, or repeatedly file baseless motions with no hope of success (“kite bombs”), to
generate what looks like legitimate legal to an unsophisticated DDIL acclimated to a daytime TV diet of Judge Judy drama
and CSI suspense.
330. In the more sophisticated commercial legal marketplace, poser advocacy is not tolerated as clients insist, and attorneys
abide by, legitimate practice and ethical standards. Because of the unique nature of the clients and market, DDICE members
are able to pass off Poser Advocacy as real legal work. It is not.
331. Yet given the nature of the marketplace and absence of DDIL awareness of the fraud, there is little incentive to eradicate
its existence. Because it is highly profitable, even if illegal, it is therefore quietly encouraged. Because it can only exist in a
market place where all players-the attorneys, professional service providers, and even judges-play along, it requires a “cabal”
enterprise to be successful. Outsiders such as PLAINTIFFS who offer legal, safe, and far more efficient services are market
spoilers, and as such are illegally targeted as described herein.
Scheme and Artifice To Defraud 6
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DDIA and DDIJO FFR/CFR Abstention
332. DDIAs for both petitioners and respondents conspire to ignore their oaths to protect, uphold and defend the U.S.
Constitution and laws of the United States, thereby providing ineffective, fraudulent, incompetent, and harmful advice to
their clients and community. Both petitioner and respondent counsels ignore the illegality of the DVILs and withhold
objections to increase job security and the “billable activity” provided by The Pit-either seeking to throw a litigant in it, or
working to dig one out. They fail to advise their clients’ rights to object to the constitutionality of such orders as doing so
would deprive the DDI of a highly profitable tool. Their failure to do so establishes an industry standard of private abstention
from exercise of constitutional rights, suiting DDIA, DDISW, DDISO, and DDIJO alike.
333. In abstention, DDIAs violate their PROFESSIONAL DUTIES, oaths of office, as well as their duties to individual
clients, and in so doing also commit invidious discrimination against the EQUAL PROTECTON CLASSES.
334. To the extent that DDILs raise objections or observations relating to the illegal acts, DDIA and DDISW CULPABLY
advise that the U.S. Constitution does not prohibit such acts, and that there is “nothing you can do” to prevent judges from
issuing illegal orders, or otherwise WRONGFULLY DISSUADE DDILs from their own FFRRESA. The representation is
false.
DDIJO Acquiescence
335. These SAD cannot go unnoticed by any competent legal professional, or unacted upon by any ethical one. And yet they
are prolific among Defendants, indicating that the DDIJO themselves are at best deliberately indifferent to the SAD and
ENTERPRISES that run them, further facilitating this pernicious fraud on DDIL in violation of Judicial Canon 2 to “ensure
rights”, PROFESSIONAL DUTIES, of all parties, and in defiance of the rule of law.
RICO §1961(5) PATTERN OF RACKETEERING ACTIVITY ALLEGATIONS
18 U.S.C. § 1961(5)
COMMISSION OF RICO §1961(1)(B) RACKETEERING ACTIVITY:
336. RICO DEFENDANTS engage in the following “racketeering activity,” as that term is defined pursuant to 18 U.S.C. §
1961(c) (“RACKETEERING ACTIVITY”). RICO DEFENDANTS’ RACKETEERING ACTIVITY as committing, aiding
and abetting, or conspiring to commit, tens of thousands of violations of the following laws within the past ten years,
including:
A. Fraud and related activity in connection with identification documents, authentication features, and information: 18 U.S.C.
§ 1028;
B. Mail Fraud: 18 U.S.C. § 1341
C. Wire Fraud: 18 U.S.C. § 1343
D. Bank Fraud: 18 U.S.C. § 1344
E. Intangible Personal Property Right Deprivation: Title 18 U.S.C. § 1346.
F. Influencing or injuring officer or juror generally: 18 U.S.C. § 1503;
G. Obstruction of proceedings before departments, agencies, and committees: 18 USC § 1505;
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H. Obstruction of Criminal Investigations: 18 U.S.C. § 1510;
I. Tampering with a witness, victim, or an informant: 18 U.S.C. § 1512;
K. Retaliating against a witness, victim, or an informant: 18 U.S.C. § 1513;
L, Peonage; obstructing enforcement: 18 U.S.C. § 1581,
M. Enticement into slavery; 18 U.S.C. § 1583;
N. Sale into involuntary servitude: 18 U.S.C. § 1584;
O. Seizure, detention, transportation or sale of slaves: 18 U.S.C. § 1585;
P. Service on vessels in slave trade: 18 U.S.C. § 1586;
Q. Possession of slaves aboard vessel: 18 U.S.C. § 1587;
R. Forced labor: 18 U.S.C. § 1589;
S. Trafficking with respect to peonage, slavery, involuntary servitude, or forced labor: 18 U.S.C. § 1590;
T. Unlawful conduct with respect to documents in furtherance of trafficking, peonage, slavery, involuntary servitude, or
forced labor: 18 U.S.C. 1592;
U. Benefitting financially from peonage, slavery, and trafficking in persons: 18 U.S.C. § 1593A;
V. Conspiracy, attempt to commit acts of peonage, slavery, proscribed: 18 U.S.C. § 1594;
W. Interference with commerce by threats or violence: 18 USC § 1951;
X. Interstate and foreign travel or transportation in aid of racketeering enterprises: 18 U.S.C. § 1952;
Y. Violent crimes in aid of racketeering activity: 18 U.S.C. § 1959 Z. Principal and Aider and Abettor, Attempt, Conspiracy Liability: Title 18 U.S.C. § 2(a) and (b).
Racketeering Claim for Relief 1 18 U.S.C. §§ 1962(c), (d)
Frauds and Swindles 18 U.S.C. § 1341
Against Defendants DOYNE INC, BLANCHET, VIVIANO, FRITZ
337. DEFENDANTS, having affiliated with one or more ENTERPRISE and devising or intending to devise one or more
SAD for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, delivered
invoices, accountings, billing statements, letters, reports, and other correspondence into the U.S. mails, email, telephone
facsimile to STUART.
338. Such use of U.S. mails, emails, facsimile, and wire occurred as follows:
A. VIVIANO:
339. Beginning on or about July, 2007 and every month thereafter through an including December, 2007 having committed
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or while committing one or more SAD, fraudulently communicated with STUART regarding, SAD misrepresentations,
billing, accountings, filings, and other false statements in furtherance thereof, requesting to be paid therefore in the
approximate amount of $45,000;
B. BLANCHETS and ABC&K
340. Beginning in or about December, 2007 and every month thereafter through and including November, 2008 having
committed or while committing one or more SAD, fraudulently communicated with STUART regarding, SAD
misrepresentations, billing, accountings, filings, and other false statements in furtherance thereof, requesting to be paid
therefore in the approximate amount of $250,000;
C. FRITZ
341. Beginning in or about May, 2008 and every month thereafter through and including March, 2011, for invoices
fraudulently billed and charged in furtherance of one or more SAD requesting to be paid therefore in the approximate amount
of $190,000;
D. DOYNE INC.
342. Beginning in or about May, 2008, and every month thereafter through and including March, 2010, having committed or
while committing one or more SAD, ABUSE OF PROCESS, BREACH OF CONTRACT, FRAUD,
EXTORTION,ROBBERY, and INTENTIONAL INFLICTION OF EMOITNAL DISTRESS, fraudulently communicated
with STUART regarding the same, including delivering SAD misrepresentations, billing, accountings, filings, and other false
statements in furtherance thereof requesting to be paid therefore in the approximate amount of $17,500.
343. DEFENDANTS and each of them further committed fraud by virtue of use of the Internet, describing, advocating, and
supporting their SAD and ENTERPRISES as legitimate and healthy practices, and failing to advise PLAINTIFFS and the
general public of the true nature of their ENTERPRISES and SAD.
Honest Services Fraud 18 U.S.C. § 1346
Against All RICO DEFENDANTS
345. DEFENDANTS engaged in one or more SAD by, through, and in conjunction with the ENTERPRISES to deprive
PLAINTIFFS of the intangible right of honest services.
346. DEFENDANTS, and each of them, supported and promoted one another in perpetrating each SAD actionable fraud,
bribery and/or kickbacks, wherein a quid pro quo (monetary, preferential referral, business referral, and/or some other form
of benefit) was provided by the RICO defendants to persons unknown to plaintiffs to assure that PLAINTIFFS in their
PUBLIC BENEFIT ACTIVITIES would be effectively punished, silenced, discredited, and rendered ineffective as an
effectively competing alternative vehicle offering reasonable and realistic forms of professional quality services to counsel
and advise individual parents and guardians addressing family law, child custody, and domestic relations issues. Plaintiff
alleges that such conduct constitutes the deprivation of the intangible personal property right to receive ‘honest-services’ for
purposes of 18 U.S.C. §§ 1341, 1343, and 1346.
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Influencing or injuring officer or juror generally 18 U.S.C. § 1503
Against Defendants Simi, Batson, SDCBA, ODO, SAC
348. DEFENDANTS, by the STUART ASSAULT, corruptly, or by threats or force, or by any threatening letter or
communication, endeavored to influence, intimidate, or impede STUART in performance of his FFRRESA, or corruptly or
by threats or force, or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to
influence, obstruct, or impede, PLAINTIFFS from continuing in their cooperation with the FEDERAL LAW
ENFORCEMENT OFFICERS in pursuing the due administration of justice.
Obstruction of proceedings before departments, agencies, and committees: 18 U.S.C. § 1505, 1959
350. DEFENDANTS corruptly and by force or threat of force in the STUART ASSAULT endeavored to and did influence,
obstruct, or impede PLAINTIFFS FFRRESA and the DUE ADMINISTRATION OF JUSTICE before the FEDERAL LAW
ENFORCEMENT OFFICERS, and the due and proper exercise of the power of inquiry under which any inquiry or
investigation is being had by either House, or any committee of either House or any joint committee of the Congress of the
United States pursuant to PLAINIFFS’S FFRRESA before the Representatives of the United States.
351. In so doing, DEFENDANTS SDCBA, ODO, SDSO, and SAC kidnaped, assaulted with a dangerous weapon, committed
assault resulting in serious bodily injury upon, or threatens to commit a crime of violence to PLAINTIFFS in violation of the
laws of any State or the United States, or attempted or CONSPIRED so to do-in exchange for (i) consideration, a promise or
agreement to pay, pecuniary value, from the ENTERPRISES, or (ii) the purpose of gaining entrance to or maintaining or
increasing position in the ENTERPRISES.
Tampering with a witness, victim, or informant 18 U.S.C. § 1512(a)(2)(A)
353. DEFENDANTS, by the STUART ASSAULT, CULPABLY used physical force, including confinement and physical
action, against STUART, and the threat of physical force against PLAINTIFFS and their affiliates, at the SDCBA
SEMINAR, and attempted to do so, with intent to influence, delay, or prevent the testimony of PLAINTIFFS and their
affiliates, in their FFRRESA in THE DUE COURSE OF JUSTICE.
Tampering with a witness, victim, or informant 18 U.S.C. § 1512(a)(2)(B), (C)
355. DEFENDANTS, by the STUART ASSAULT, CULPABLY caused or induced PLAINTIFFS and their affiliates to
CHILL, and hindered, delayed, and prevent PLAINTIFFS’ and their affiliates’ FFRRESA to a FEDERAL LAW
ENFORCEMENT OFFICER.
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Witness Tampering 18 U.S.C. § 1512(b)
357. DEFENDANTS, by the STUART ASSAULT, CULPABLY used and attempted to use intimidation, threatened, and
corruptly persuaded PLAINTIFFS and their affiliates, to
(1) influence, delay, or prevent PLAINTIFFS’ FFRRESA in the DUE COURSE OF JUSTICE;
(2) cause or induce PLAINTIFFS and their affiliates to CHIILL, and
(3) hinder, delay, or prevent PLAINTIFFS FFRRESA communications to FEDERAL LAW ENFORCEMENT OFFICERS,
the Grand Jury, or a Judge of the United States District Court for the Southern District of California the DDIJO Complaints,
Doyne Complaints, and other violations of the CRCCS.
Racketeering Count 8
Witness Tampering 18 U.S.C. § 1512(c)
359. DEFENDANTS, by the STUART ASSAULT, CULPABLY corruptly obstructed, influenced, or impeded the DUE
COURSE OF JUSTICE and attempted to do so.
Tampering with a witness, victim, or informant 18 U.S.C. § 1512(c)
361. DEFENDANTS corruptly and CULPABLY obstructed, influenced, or impeded the DUE COURSE OF JUSTICE and
attempted to do so.
362. DEFENDANTS acted corruptly in making the fraudulent statements attributed to them above, thereby acting with an
improper purpose to obstruct, thwart or mislead STUART into diverting his contact with the U.S. Attorney’s Office, F.B.I,
and other FFRRESA would be handled appropriately, fully, and competently by the CJP, thereby causing STUART to
continue ENGAGEMENT primarily with the CJP rather than primarily pursuing the matter in federal district court, thereby
obstructing, influencing, or impeding the DUE COURSE OF JUSTICE and attempting to do so.
363. DEFENDANTS’ false, misleading, deceptive, concealing, or destroying behavior included;
A. That the DDIJO COMPLAINT allegations would be fully and fairly investigated;
B. That the CJP has no jurisdiction over DEFENDANT DOYNE INC. because he is not an elected or appointed judicial
official;
C. That the DDIJO COMPLAINTS would be maintained in confidence and not disclosed to DDIJO DEFENDANTS;
D. That STUART need not pursue the ‘DDIJO COMPLAINT I in federal court as the CJP process was the “first step” in the
chain of obtaining relief from a federal court.
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364. In fact, the CJP is not an unbiased organization as it largely ignores complaints by litigants when compared with
attention paid to complaints by prosecutors and judges. The CJP takes action in less than 2% of all complaints by the public,
allowing tens of thousands to go without response. A true and correct copy of CJP’s 2011 Annual Report is attached at
Exhibit 39; a chart corroborating these allegations is in DEFENDANTS’ possession and is referenced as part of Exhibit 39 as
if set forth at length herein.
365. As such, the CJP largely misrepresents itself as a legitimate supervisor of judicial misconduct, creating a false sense of
public confidence in the CJP investigative an disciplinary process, tying up litigants who would otherwise seek relief in
federal court, placing them in a years-long maze of investigation until the time for filing a complaint in a legitimate forum
has expired. As such, the CJP misrepresents itself as a legitimate dispute resolution body when in fact it operates as a dead
letter office to hinder, delay, thwart, obstruct, and mislead STUART and other citizens, effectively depriving STUART of
rights to due process, access to courts, right to trial by jury, and other rights, privileges and immunities.
Tampering with a witness, victim, or informant 18 U.S.C. § 1512(d)
367. DEFENDANTS CULPABLY by the STUART ASSAULT harassed PLAINTIFFS and their affiliates thereby hindering,
delaying, preventing, dissuading PLAINTIFFS and their affiliates from FFRRESA, and THE DUE COURSE OF JUSTICE,
seeking further FFRRESA with the intent to arrest or seek the arrest of DOYNE INC., ALKSNE, SCHALL, WOHLFEIL,
and other DDIJO entities identified herein.
Retaliating against a witness, victim, or an informant 18 U.S.C. § 1513(b)
369. DEFENDANTS CULPABLY threatened, attempted to, engaged in the STUART ASSAULT thereby causing bodily
injury with intent to retaliate against PLAINITFFS for PLAINTIFF’S role in FFRRESA and the DUE COURSE OF
JUSTICE.
Retaliating against a witness, victim, or an informant-other harm 18 U.S.C. § 1513(e)
371. DEFENDANTS CULPABLY, with the intent to retaliate, committed the acts ascribed to them in the STUART
ASSAULT, thereby causing DAMAGES to PLAINTIFFS and their affiliates, their lawful employment, PUBLIC BENEFIT
EFFORTS, for FFRRESA and the DUE COURSE OF JUSTICE.
Conspiracy to Retaliate against a witness, victim, or an informant 18 U.S.C. § 1513(f)
373. DEFENDANTS, and each of them, CULPABLY conspired with each other DEFENANT to commit each act described
above.
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VII. PROSPECTIVE RELIEF
375. For each count seeking prospective relief below, PLAINTIFFS allege:
FICRO COUNTS 1-34:
Fraud; Deprivation of Rights, Privileges and Immunities Pursuant to 42 U.S.C. Sections 241, 242, 371
Against COLD
376. This is an allegation that Defendants in committing the acts alleged in Counts 1-21 and RICO Claims for Relief 1-13,
above, concurrently committed one ore move deprivations of PLAINTIFFS’ rights, privileges, and immunities in violation of
18 U.S.C. §§ 242, 241, and 371. These allegations are relevant to DEFENDANTS’ ENTERPRISE, conspiracy, and
racketeering activity, and are the basis for PLAINTIFFS’ claims for prospective relief under 28 U.S.C. § 2201. As such
violations are indictable federal offenses, and shall hereinafter be referred to as FEDERAL INDICTABLE CIVIL RIGHTS
OFFENESES (FICRO).
377. As part of their ongoing CIVIL and CRIMINAL CONSPIRACIES to deprive PLAINTIFFS and others similarly
situated of FFR, CFC, FFRRESA, and other civil rights, DEFENDANTS have CULPABLY committed each count and claim
for relief alleged herein in furtherance of the conspiracies alleged hereinabove, establishing the existence of the crimes,
conspiracies, and enterprises alleged herein.
378. DEFENDANTS’ activities described herein constitute a conspiracy to commit one or more violations of the FFR, CFR,
actionable under the CRCCS (FICRO CONSPIRACY). The purpose of the FICRO CONSPIRACIES is to deprive
PLAINTIFFS and those similarly situated of their rights, privilege, and immunities under the Constitution of United States by
committing, causing, or contributing to, or ratifying each of the acts alleged against each DEFENANT.
379. DEFENDANTS, and each of them, acted with specific knowledge of PLAINTIFFS FFRRESA and PUBLIC BENEFIT
ACTIVITIES.
380. On information and belief, upon learning of each fact relating to PLAINTIFFS’ PUBLIC BENEFIT ACTIVITIES,
DEFENDANTS coordinated efforts, shared knowledge, and shared a common purpose with one or more of the other
DEFENDANTS so as to be the agents of on another in FICRO CONSPIRACY to retaliate against, disparage, harm, injure,
PLAINTIFFS because of the same.
381. In carrying out the FICRO CONSPIRACY, DEFENANTS committed, were aware of, acquiesced to, intended, and
ratified each act and/or the acts and/or omissions of each and every other DEFENDANT.
382. DEFENDANTS are or were co-workers, collaborators, co-owners, co-operators, affiliates, colleagues, members of one
another’s personal and professional networks of one or more other of DEFENDANTS.
383. Defendants C. GOLDSMITH and unnamed entity Mr. Jan Goldsmith all times identified herein, were husband and wife,
common parents of children, former co-workers / Judges of the Superior Court of the State of California, cohabitants, friends,
collaborators, and formerly common parties to a martial dissolution proceeding.
384. DEFENDANTS, and each of them, in committing or conspiring to commit the acts ascribed to them CULPABLY acted
in furtherance of the CRIMINAL CONSPIRACY, including the ENTERPRISES, entities, color of law, misfeasance and
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malfeasance ascribed to them herein.
Prospective Relief Count 1
Motion for Harassment Protective Order 18 U.S.C. § 1514(b)
386. PLAINTIFFS hereby move and request that the Court issue “temporary restraining order prohibiting harassment of a
victim or witness in a Federal criminal case” pursuant to 18 U.S.C. § 1514(b).
387. PLAINTIFFS are victims and witness to FICRO Counts 1-34, and numerous civil rights offenses committed by
DEFENDANTS as described herein. PLAINTIFFS continue to interact with FEDERAL LAW ENFORCEMENT AGENTS
in the DUE ADMINISTRATON OF JUSTICE, including in ongoing criminal investigations involving DEFENDANTS
herein and exercise FFRRESA.
388. DEFENDANTS have undertaken a course of conduct to harass, interfere with, intimidate, harm, and retaliate for
PLAINTIFFS protected activities, and continue to do so.
389. PLAINTIFFS have experienced and are in fear of further harassment, threats, and intimidation, and submit that from the
allegations set forth in this Verified Complaint.
390. Pursuant to 18 U.S.C. § 1514(b), PLAINTIFFS respectfully submit that there are reasonable grounds for the court, on its
own motion, to (1) believe that such harassment exists, and (2) an Order is necessary to prevent and restrain DEFENDANTS
from further and ongoing offenses under section 1512 of this title, other than an offense consisting of misleading conduct, or
under section 1513 of this title.
391. PLAINTIFFS respectfully request that the Court issue, on its own motion, an Order:
A. Restraining and enjoining DEFEDANTS and each of them from further acts of HARRASSMENT AND ABUSE in
connection with this matter and any ongoing DUE ADMINISTRATION OF JUSTICE and FFRRESA in which
PLAINTIFFS are involved;
B. That the Order shall be in effect when made;
C. That PLAINTIFFS shall give notice to DEFENDANTS within three business days;
D. That the Order shall expire within 14 days from issuance
E. That PLAINTIFFS may Petition the Court that good cause exists to extend the Order as provided in subsection (c) of this
section (18 U.S.C. § 1514(c));
F. That a motion for a protective order shall be set down for hearing at the earliest possible time;
G. That the temporary restraining Order is based on:
i. The DEFENDANTS’ past harassment, obstruction, tampering, and retaliation as set forth herein,
ii. The civil rights HARASSMENT AND ABUSE described STUART Assault and the DDIJO COMPLAINTS; and
iii. PLAINTIFFS’ ongoing FFRRESA and the DUE ADMINISTRATION OF JUSTICE,
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Prospective Relief Count 2
Declaratory Judgment Pursuant to 28 U.S.C. § 2201
Against All Defendants
392. A case of actual controversy between DEFENDANTS and PLAINTIFFS exists with regard to PLAINTIFFS’ free
exercise, reform and support and advocacy of Family Federal Rights, laws, and Constitution of the Unites States, and the
validity of state law conflicting therewith.
393. Specifically, PLAINTIFFS, by virtue of their FFRRESA detailed herein, have asserted, and DEFENDANTS, by virtue
of their acts the acts and operations CRIMINAL CONSPIRACIES and ENTERPRISES with which they are affiliated,
including their illegal, abusive, retaliatory, depriving, and obstructive behavior toward PLAINTIFFS and others described
herein have contested and denied, the following FFRRESA rights:
A. FFR Rights detailed at Table 1.0;
B. CALIFORNIA FUNDAMENTAL RIGHTS; and
C. The Supremacy of the constitution and laws of the United States to the laws of the State of California.
394. Further, by similar means, DEFENANTS have asserted, and PLAINTIFFS have denied, that certain laws of the State of
California which have or pose a clear and present danger of injuring, inhibiting, depriving, interfered with, PLAINTFFS
FFRRESA are valid and enforceable:
A. The DVILS;
B. The DVILS ORDERS;
C. The processes, procedures, rules, customs, and practices of the FL-IACE and their offices statewide;
D. The processes, procedures, rules, customs, and practices of Child Custody Evaluations and Evaluators.
395. PLAINTIFFS respectfully request an Order declaring PLAINTIFFS’ rights and other legal relations vis-à-vis
DEFENDANTS’ HARRASSMENT AND ABUSE and other deprivation of FFR and CFR, as follows:
A. That the FFR, and CFR are
a. valid and enforceable rights of U.S. Citizens residing or located in the State of California and their advocates in all State
Courts within the State of California; and
b. superior to any state laws which conflict, hinder, or deprive PLAINTFFS of the same;
B. That no COLD is entitled to deprive any U.S. Citizen residing or present in the State of California of either the CFR or
FFR by reliance on conflicting state law, even in good faith;
C. That COLD are not entitled to immunity under federal law for acts not specifically authorized by their constitutions,
charters, or other foundational documents;
D. That all laws, rules, policies, regulations, and forms based thereon which conflict, hinder, or deprive PLAINTFFS of their
FFR and CFR, including those specified herein, are unconstitutional;
E. That the EQUAL PROTECTION CLASSES are valid classes of persons entitled to heightened protection under the 5th and
14th Amendments to the United States Constitution with regard to all DEFENDANTS;
F. That DEFENDANTS have violated each of the FICRO COUNTS as alleged against each of them herein; and
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G. That SUPERVISING DEFENANTS and MUNICIPAL ENTITIES behaviors, policies, and procedures depriving of or
infringing on FFR and CFR are illegal, unconstitutional, and deliberately indifferent to the likelihood of Constitutional injury
to PLAINTIFFS, and that SUPERVISING DEFENDANTS have a duty to prevent or aid in preventing further deprivations of
the FFR by those within their to influence or control pursuant to each of the EQUAL PROTECTION CLASSES of which
PLAINTFFS are members or advocates.
396. Plaintiff further requests that the court exercise its equitable powers pursuant to the CRCCS and F.R.C.P. Rules 57 and
65 to enjoin defendants from:
A. Further violations of the FFR, CFR, CRCCS;
B. Further HARRASSMENT AND ABUSE;
C. Further commission of any FICRO;
D. Further actions to solicit, prepare, file, petition for, issue, grant, or enforce the DVILS an DVILS ORDERS, forms, rules,
advice, practices related thereto; and
E. Further interference with any PLAINTIFFS’ and any United States Citizen’s exercise and enjoyment of FFRRESA.
WHEREFORE PLAINTIFFS pray for judgment as follows:
1. An award of compensatory damages and interest thereon according to proof at trial;
2. An award of reasonable costs and expenses incurred in this action, including counsel fees and expert fees as allowable
under the Title 18, 28, and 42 sections asserted;
3. Declaratory, Injunctive, and Prospective Relief as requested including injunctive remedies provided under 42 U.S.C. §§
1983, 1988, and 18 U.S.C. §§ 1964 (a), (c), and (d);
4. That The Court exercised its initiative to Order DEFENDANTS be restrained as requested in Prospective Relief Count 1
forthwith, and set hearing for extending such Order during the pendency of this litigation;
5. That a preliminary and permanent injunction be issued enjoining Defendants, and any employees, agents, servants,
officers, representatives, directors, attorneys, successors, affiliates, assigns, and entities owned or controlled by Defendants,
and all those in active concert or participation with Defendants, and each of them who receives notice directly or otherwise of
such injunction from making any further misrepresentations in COMMERCIAL SPEECH as described above; and
6. Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiffs hereby demand a trial by jury.
DATED: August 20, 2013
By: /s/ Colbern C. Stuart
Colbern C. Stuart, III President,
California Coalition for Families and Children
69
in Pro Se
Dean Browning Webb
Attorney for Plaintiffs California
Coalition for Families and Children, Inc. and Lexevia, PC
End of Document
70
Defendant Marilyn Kriebel, Successor Trustee of the Roger J. Keily
Trust’s Post Trial Memorandum of Points and Authorities
Oscar PEREYRA, Sr. and Linda Pereyra, Plaintiffs, v. Aaron Fabian JIMENEZ, Juan Reyes, Vanessa Reyes, Tahje
Jahari Hargrove, Kayla D. Rains, as Trustee of the Roger J. Keily Trust and Does 1 to 100, Defendants. | Superior
Court of California.
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Oscar PEREYRA, Sr. and Linda Pereyra, Plaintiffs, v...., 2012 WL 5056568...
2012 WL 5056568 (Cal.Super.) (Trial Motion, Memorandum and Affidavit)
Superior Court of California.
San Diego County
Oscar PEREYRA, Sr. and Linda Pereyra, Plaintiffs,
v.
Aaron Fabian JIMENEZ, Juan Reyes, Vanessa Reyes, Tahje Jahari Hargrove, Kayla D. Rains, as Trustee of the
Roger J. Keily Trust and Does 1 to 100, Defendants.
No. 37-2011-00087407-CU-PO-CTL.
April 4, 2012.
Defendant Marilyn Kriebel, Successor Trustee of the Roger J. Keily Trust’s Post Trial Memorandum of Points and
Authorities
Kenneth H. Stone, Esq., Bar #84836, Rebecca L. Reed, Esq., Bar#275833, The Stone Law Group, The Fletcher Building, 624
Broadway Suite 303, San Diego, CA 92101, (619) 233-1818, (619) 233-3256 Facsimile, Attorney for Defendant, Marilyn
Kriebel, as Successor Trustee of the Roger J. Keily Trust.
Judge: Hon. Lisa Schall.
DATE: April 4, 2012
TIME: 9:00 a.m.
DEPT: C-46
COMPLAINT FILED: March 10, 2011
TRIAL DATE: March 26, 2012
I. LANDLORD’S DUTY
A. The Evidence Does Not Establish That The Trust Had Actual Knowledge of A Dangerous Condition And the Right
and Ability to Cure The Condition.
The landlord cannot be liable for a third party’s injury unless the landlord has actual knowledge of a dangerous condition and
the right and ability to cure the condition. See CACI, No. 1006; See also, Salinas v. Martin (2008) 166 Cal.App.4th 404, 412
“(w)here a landlord has relinquished control of property to a tenant, a ‘bright line’ rule has developed to moderate the
landlord’s duty of care owed to a third party injured on the property as compared with the tenant who enjoys possession and
control ... before liability may be thrust on a landlord for a third party’s injury due to a dangerous condition on the land, the
plaintiff must show that the landlord had actual knowledge of the dangerous condition in question, plus the right and ability
to cure the condition.” (Salinas v. Martin (2008) 166 Cal.App.4th 404, 412 [82 Cal.Rptr.3d 735], internal citations omitted.)
“Only where the circumstances are such that the defendant ‘must have known’ and not ‘should have known’ will an inference
of actual knowledge be permitted.” Uccello v. Laudenslayer (1975) 44 Cal. App. 3d 504, 514.
Further, “(l)andlord liability cannot rest solely on the fact that activity is dangerous in the abstract. Evidence must show the
landlord had reason to know the tenant’s activity posed a foreseeable risk of harm to third persons.” See California Practice
72
Guide: Landlord-Tenant (The Rutter Group 2011) ¶ 6:87.1, p. 6-105; See also, Sturgeon v. Curnutt (1994) 29 CA 4th 301,
307-308 (wherein landlord rented property to a tenant and a third person was shot and injured by the tenant while visiting the
property. At trial, the evidence showed that the landlord knew the tenant had a problem with alcohol; that he was convicted
of driving under the influence and attended a rehabilitation program. The landlord also knew the tenant had firearms. After
presentation of the Plaintiff’s case, Defendant moved for nonsuit, which the trial court granted. The Court of Appeals
affirmed, explaining that despite the foregoing evidence, the Plaintiff had offered no evidence that the tenant ever harmed
anyone due to either his problem with alcohol or his possession of firearms or that he handled firearms in an unsafe manner
while drunk).
B. The Trust Did Not Have A Non-Delegable Duty.
A landlord does not have a nondelegable duty, unless the landlord hires an independent contractor to perform work on the
premises. Vicarious liability for a non-delegable duty only applies where there is harm arising from the acts of the
independent contractor in the maintenance of the premises. See California Practice Guide: Landlord-Tenant (The Rutter
Group 2011) ¶ 6:9.1-6:9.2, pp. 6-3 through 6-4. See also, Koepnick v. Fashiwa Fudosan America, Inc. (2009) 173 CA4th 32,
36-37; Aceves v. Regal Pale Brewing Co. (1979) 24 CA3d 502, 509.
II. AGENCY
A. There is No Evidence of Agency Between The Trust and Cheryl Johnson and/or Juan Reyes.
“The existence of an agency is a factual question within the province of the trier of fact whose determination may not be
disturbed on appeal if supported by substantial evidence.” L. Byron Culver & Associates v. Jaoudi Industrial & Trading
Corp. (1991) 1 Cal.App.4th 300, 305. “The burden of proving the existence of an agency rests on the one affirming its
existence. Burbank v. National Casualty Co. (1941) 43 Cal.App.2d 773. An agency must rest upon an agreement. D’Acquisto
v. Evola (1949) 90 Cal.App.2d 210, 213. An agency does not exist where on ‘performs a mere favor for another, without
being subject to any legal duty of service and without assenting to any right of control...’ ” Hanks v. Carter & Higgins of
Cal., Inc. (1967) 250 Cal.App.2d 156, 161. Instead, the “principal must in some manner indicate that the agent is to act for
him, and the agent must act or agree to act on his behalf and subject to his control.” Hanks, supra, 250 Cal.App.2d at 161.
“Control may not be inferred merely from the fact that one person’s act benefits another. Id. Van’t Rood v. County of Santa
Clara (2003) 113 Cal.App.4th 549, 572. Further, “(t)he fact that parties had a preexisting relationship is not sufficient to
make one party the agent for the other....” Id.
The authority of an agent is only relevant if the Court finds that there is indeed an agency. “An actual agent may have either
actual or ostensible authority to act for the principal.” (emph. added). (See Civ. Code, § 2315; 2 Witkin, Summary of Cal.
Law, supra, Agency & Employment, §75, p. 79.)
III. RECREATIONAL IMMUNITY
Civil Code §846 states in pertinent part that “riding, including animal riding, snowmobiling, and all other types of vehicular
riding” is considered a “recreational purpose.” Once it is established that the defendant was the owner of the property and that
the injured party was using the property for a recreational purpose, the statutory immunity applies. Shipman v. Boething
Treeland Farms, Inc. (2000) 77 Cal.App.4th 1424, 1428-1429; and Parish v. Lloyd (1978) 82 Cal.App.3d 785, 787
A. Plaintiffs have not demonstrated that there was a willful or malicious failure to warn.
In order to satisfy the willful and malicious conduct exception to §846 immunity, a Plaintiff must demonstrate: (1) “Actual or
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constructive knowledge of the peril to be apprehended, (2) Actual or constructive knowledge that injury is a probable, as
opposed to a possible, result of the danger, and (3) Conscious failure to act to avoid the peril.” Charpentier v. Von Geldern
(1997) 191 Cal.App.3d 101, 113. In Charpentier, the Plaintiff claimed that a Defendant, who owned 51 acres of property
along the river, “willfully and maliciously failed to guard or warn against the dangerous conditions of the Feather River in
that it was too shallow for swimming and diving and had submerged objects.” Id. at 106. There, the court found that Plaintiff
had failed to establish the Defendant’s conduct rose to a level of willfulness conduct.
B. There was no consideration paid for use of Defendant’s property.
This exception does not apply because the property owner was neither aware that the property was being used by decedent,
nor was there any consideration paid in connection with the recreational vehicle operation that resulted in the fatal accident.
Civ. Code § 846 provides that it does not limit liability which otherwise exists “for injury suffered in any case where
permission to enter for the above purpose (referring to ‘recreational purpose’) was granted for a consideration other than the
consideration, if any, paid to said landowner by the state, or where consideration has been received from others for the same
purpose.”
The trial court must construe this exception narrowly. Johnson, supra, 21 Cal. App. 4th at 315. “(A)t minimum, consideration
received must consist of a present, actual ‘benefit bestowed or a detriment suffered.’ ” Id. at 316.
The Fourth District Court of Appeals in Miller v. Weitzen (2005) 133 Cal. App. 4th 732 (Miller) pronounced the type of
“consideration” necessary to invoke the exception set forth in Civ. Code § 846, explaining that “... for the exception to apply,
consideration must generally be paid ‘in the form of an entrance fee...” Miller, supra, 133 Cal. App. 4th at 739.
In this case, Plaintiffs attempted to prove that OSCAR PEYERA SR. performed various tasks on the property over the course
of a year and that he and Cheryl Johnson agreed that his children would always be welcome on the property.
To satisfy the “consideration” exception to Civ. Code § 846, Plaintiffs needed to show that consideration was paid to the
landowner, ROGER J. KEILY TRUST. Plaintiffs’ attempt to create an agency chain between ROGER J. KEILY TRUST and
Cheryl Johnson and then from Ms. Johnson to JUAN REYES was not supported by any credible evidence.
Furthermore, Plaintiffs’ alleged “consideration” from OSCAR PEREYRA SR. to “Cheryl” does not constitutes consideration
within the meaning of Civ. Code § 846 because no one paid an entrance fee to enter the property to ride the Yamaha (Miller
supra, 133 Cal. App. 4th at 739), nor did OSCAR PEREYRA perform any work presently and directly in exchange for Oscar
Pereyra Jr. to enter the property to ride his Yamaha at any time, including the date of the incident. See Civ. Code § 846. See
also, Johnson, supra, 21 Cal. App. 4th at 316 (“(A)t minimum, consideration received must consist of a present, actual
‘benefit bestowed or a detriment suffered.’ ” (emphasis added).
C. There was no Express Invitation.
Case law has established that conventional premises user labels of “invitee” and “licensee” are inapplicable to Civil Code
§846. Courts have held that the meaning of “express invitation” encompasses persons who are “personally selected to come
on to the property by the land owner” as opposed to “merely permitted”. Calhoon v. Lewis (2000) 96 Cal.App.4th 108,
113-115.
[The] “express invitation” exception requires a direct personal request from the land owner to the invitee
to enter the property, although the invitation need not be for the specific purpose of engaging in
recreation.” Jackson v. Pacific Gas & Electric Co. (2001) 94 Cal.App.4th 1110, 1116.
Even if Decedent had been invited onto Defendant’s property by a tenant or occupant thereof or unless there is a direct
request by the owner, such an invitation will not suffice to avoid Civil Code §846 immunity. Shipman v. Boething Treeland
74
Farms, Inc., Supra at 1431. Our Courts hold that “express invitation” within the meaning of the statute requires a direct
personal request from the landowner to the invitee to enter the property.” Jackson v. Pacific Gas & Electric Co. (2001) 94
Cal. App. 4th 1110, 1116. The “Legislature intended the phrase ‘expressly invited’ to mean those persons who were
personally selected to come onto the property by the landowner.” Calhoon v. Lewis (2000) 81 Cal. App. 4th 108, 113.
(internal citations omitted).
The purpose of section 846 is to encourage landowners to permit people to use their property for
recreational use without fear of reprisal in the form of lawsuits. The trial court should therefore construe
the exceptions for consideration and express invitees narrowly. (emphasis added). Johnson v. Unocal
Corp. (1993) 21 Cal. App. 4th 310, 315 (Johnson).
Plaintiffs introduced evidence that Cheryl Johnson asked Plaintiff OSCAR PEREYRA SR. to perform work on the property
and that he and Ms. Johnson discussed that his children would always be welcome on the Property to see the animals, to play
on tree swings, etc. and for his son to ride his Yamaha “Pee Wee” model mini-bike. The foregoing facts, even if true, are
insufficient. It is well-settled that an indirect request to come onto property and/or mere permission to come onto property
does not give rise to an “express invitation” within the meaning of Civ. Code § 846. See Johnson, supra, 21 Cal. App. 4th at
317. See also, Civ. Code § 846.
In Johnson, the Defendant and landowner, Unocal, granted Abex Corporation permission to use Unocal’s picnic grounds for
a company picnic for Abex’s employees. The Plaintiff, an Abex employee, purchased a ticket and attended the picnic.
Plaintiff was injured during a game of horseshoes, while leaning against a railing which collapsed and caused him to fall.
Plaintiff brought suit against the landowner for Premises Liability. The Defendant moved for summary judgment on the basis
of Civ. Code § 846. Plaintiff argued that he was an “express invitee” within the meaning of the statute because his employer,
Abex, executed a permission agreement with the landowner. However, the Court of Appeals, cautioning that the “express
invitee” exception should be construed narrowly, held that the execution of the Permission Agreement between Abex and
Unocal was not a direct, personal request from the landowner to the Plaintiff to attend the picnic. Therefore, Plaintiff was not
an express invitee of the landowner. Johnson, supra, 21 Cal. App. 4th at 317.
IV. AS A MATTER OF LAW, PLAINTIFFS’ WRONGFUL DEATH CLAIM IS BARRED BY THE DOCTRINE OF
PRIMARY ASSUMPTION OF RISK.
Even if Defendant was not entitled to the protection of Civil Code §846 recreational immunity, Plaintiffs’ wrongful death
claim would still be barred by the doctrine of primary assumption of risk.
Primary assumption of risk arises where Plaintiff voluntarily participates in an activity or sport involving
certain apparent risks; primary assumption of risk does bar recovery because no duty of care is owed to
such risk. Connelly v. Mammoth Mountain Ski Area (1995) 39 Cal.App.4th 8, 11.
Riding recreational vehicles off road has been deemed the type of activity where primary assumption of the risk is applicable.
In Distefano v. Forester (2001) 85 Cal.App.4th 1249, the court ruled that “The sport of off-roading involves inherent risks
that the participants in this recreational activity may be involved in inadvertent vehicle collisions and may suffer serious
injury or death.” Distefano, at 1264. There, the Plaintiff was riding a motorcycle in an off road desert area when he was
struck, head on, by the Defendant, who was driving a dune buggy. The court determined that primary assumption of the risk
applied and that in the absence of evidence that the Defendant “intentionally injured [Plaintiff] or engaged in conduct that
was so reckless as to be totally outside the range of the ordinary activity involved in the sport of off-roading” that primary
assumption of the risk barred any recovery. Distefano, Supra at 1264. In this case, Defendant simply owned the property
where the accident occurred; there was neither intentional injury to the decedent, nor any reckless conduct by the Defendant.
Consequently, Plaintiff’s claim is barred as a matter of law under the doctrine of primary assumption of the risk. Amezcua v.
Los Angeles Harley Davidson, (2011) CAAPP2, B224748 (decided October 27, 2011).
“As a general rule, each person has a duty to use ordinary care and ‘is liable for injuries caused by his (or her) failure to
exercise reasonable care in the circumstances...” Calhoon v. Lewis, (2000) 81 Cal. App. 4th at 115. The scope of this duty of
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care, however, is limited in the context of active sports. Id. Under the primary assumption of risk doctrine, there is no duty to
eliminate or protect a plaintiff against risks that are inherent in a sport or activity. Id. It is well-established that defendants
generally do have a duty to use due care not to increase the risks to a participant over and above those inherent in the sport.
Id. “(T)he nature of the applicable duty or standard of care...varies with the role of the defendant whose conduct is at issue in
a given case.” Id. at 117. Where a residential property owner does not hold out his property for the activity, an owner does
not have a duty to refrain from increasing the risks to the recreational user. See Calhoon, supra, 81 Cal. App. 4th at 117-118.
ROGER J. KEILY TRUST did not owe a duty to Oscar Pereyra, Jr. while he rode his Yamaha motorcycle on the subject
property. However, even assuming ROGER J. KEILY TRUST owed a duty to the decedent, the facts show that the trust did
not increase the risk of Oscar Pereyra Jr. being injured given that the decedent voluntarily engaged in racing with an
unaffiliated third party who was operating the Utility Cart, which was not owned by the trust.
DATE: March 28, 2012
<<signature>>
KENNETH H. STONE, ESQ.
Attorney for Defendant
MARILYN KRIEBEL, as Successor Trustee of the ROGER J. KEILY TRUST
End of Document
76
Complaint to Determine that Debt is not Dischargeable
In re: Nicolas MARSCH, III, Debtor. Lennar Corporation, a Delaware corporation, Lennar Homes of California, Inc.,
a California corporation, Lennar Land Partners II, a Florida general Partnership, LLP II HCC Holdings, LLC, a
Delaware Limited Liability Company, Lennar San Jose Holdings, Inc., a California corporation; individually and
derivatively on behalf of HCC Investors, LLC and Lennar Bridges, LLC Plaintiffs, v. Nicolas Marsch, III, an
individual | United States Bankruptcy Court, S.D. California.
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1111
Comment:
In re: Nicolas MARSCH, III, Debtor. Lennar Corporation, a..., 2010 WL 3157874...
2010 WL 3157874 (Bkrtcy.S.D.Cal.) (Trial Pleading)
United States Bankruptcy Court, S.D. California.
In re: Nicolas MARSCH, III, Debtor.
Lennar Corporation, a Delaware corporation, Lennar Homes of California, Inc., a California corporation,
Lennar Land Partners II, a Florida general Partnership, LLP II HCC Holdings, LLC, a Delaware Limited
Liability Company, Lennar San Jose Holdings, Inc., a California corporation; individually and derivatively on
behalf of HCC Investors, LLC and Lennar Bridges, LLC Plaintiffs,
v.
Nicolas Marsch, III, an individual, Defendant.
No. 10-02939-PB11.
May 24, 2010.
Complaint to Determine that Debt is not Dischargeable
Ben H. Logan (S.B. # 071711), O’Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California 90071,
Telephone: (213) 430-6000, Facsimile: (213) 430-6407; Daniel M. Petrocelli (S.B. # 97802), David Marroso (S.B. #
211655), O’Melveny & Myers LLP, 1999 Avenue of the Stars, 7th Floor, Los Angeles, California 90067, Telephone: (310)
246-6850, Facsimile: (310) 246-6679; Christopher Celentino (S.B. # 131688), Duane Morris LLP, 101 West Broadway, Suite
900, San Diego, California 92101-8285, Telephone: (619) 744-2246, Facsimile: (619) 744-2201; Counsel for Lennar
Corporation, Lennar Homes of, California, Inc., Lennar Land Partners II, LLP II HCC, Holdings, LLC, Lennar San Jose
Holdings, Inc.; individually and derivatively on behalf of HCC Investors, LLC and Lennar Bridges, LLC.
Chapter 11
Plaintiffs Lennar Corporation, Lennar Homes of California, Inc. (“Lennar Homes” or “Lennar DLA-1 Plaintiff” and, together
with Lennar Corp. “Lennar-Florida Plaintiff”), Lennar Land Partners II (“LLP II”), LLP II HCC Holdings, LLC (“HCC
Holdings”), Lennar San Jose Holdings (“LSJH” and, together with Lennar Homes, LLP II, and HCC Holdings, “Lennar-DLA
2 Plaintiff” and, together with LLP II, and HCC Holdings, “Lennar-Bridges Cross-Plaintiff”), individually and derivatively
on behalf of HCC Investors, LLC (“HCC”) and Lennar Bridges, LLC (“Lennar Bridges”) allege as follows:1
1
On May 24, 2010, the Lennar Entities and Mr. Marsch entered into a Stipulation to extend the time within which to file this
complaint for 120 days, terminable on 14 days’ notice by Mr. Marsch. As of the filing of this Complaint, the proposed court order
submitted with the stipulation has not been signed or entered on the docket. Therefore, the Lennar Entities file this complaint, in an
abundance of caution, to protect its rights, and to avoid any claim of waiver. If the Court grants the stipulation and proposed order,
Lennar will coordinate with Mr. Marsch and the Court to determine the appropriate course of action to be consistent with the intent
and language of the stipulation.
JURISDICTION AND VENUE
1. On or about February 25, 2010 (the “Petition Date”) Nicolas Marsch III (“Marsch” or the “Debtor”) filed a voluntary
petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States
Bankruptcy Court for the Southern District of California (the “Bankruptcy Court”).
2. This is an adversary proceeding arising under the Bankruptcy Code to establish that the claims against the Debtor in the
DLA1 Action, DLA2 Action, Bridges Action and Florida Action (each as defined below) are not dischargeable debts
pursuant to Bankruptcy Code §§ 523(a)(2)(A), 523(a)(4), 523(a)(6), and 523(a)(19).
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3. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334.
4. This matter constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
5. Venue is proper in this district pursuant to 28 U.S.C. § 1409(a).
THE PARTIES
6. Plaintiff Lennar Corporation is a Delaware corporation.
7. Plaintiff Lennar Homes of California, Inc. is a California corporation.
8. Plaintiff Lennar Land Partners II is a Florida general partnership.
9. Plaintiff LLP II HCC Holdings, LLC is a Delaware limited liability company.
10. Plaintiff Lennar San Jose Holdings is a California corporation.
11. Plaintiff HCC Investors, LLC is a Delaware limited liability company.
12. Plaintiff Lennar Bridges is a California limited liability company.
13. Plaintiffs are informed and believes and thereon allege that defendant Nicolas Marsch III is a San Diego, California
resident, and is the debtor in the chapter 11 case entitled In re Nicolas Marsch III, Case No. 10-02939-PB11 (the
“Bankruptcy Case”).
GENERAL ALLEGATIONS
I. FACTUAL ALLEGATIONS -DLA 1 ACTION
14. In January 28, 2008 Lennar-DLA 1 Plaintiff filed a lawsuit--Lennar Homes of California, Inc. v. DLA Piper US LLP, et
al., San Diego Superior Court Case No. 37-2008-00076811-CU-PN-CTL (the “DLA1 Action”)--against DLA Piper US LLP
(“DLA Piper”), Brian Foster (“Foster”), and Marsch in state court in San Diego County, California. (A true and correct copy
of Lennar-DLA 1 Plaintiff’s complaint in the DLA1 Action is attached hereto as Exhibit 1 and incorporated herein by this
reference.) DLA Piper and Foster owed Lennar-DLA 1 Plaintiff the unflagging obligations to represent Lennar-DLA 1
Plaintiff zealously with the utmost loyalty and the full protections of all professional and ethical duties mandated by law.
DLA Piper and Foster failed to discharge these obligations by placing the interests of their client Marsch above Lennar-DLA
1 Plaintiff’s interests and engaging in actions to benefit Marsch to Lennar-DLA 1 Plaintiff’s detriment. As a consequence,
Lennar-DLA 1 Plaintiff has lost millions of dollars.
15. Marsch brought to Lennar-DLA 1 Plaintiff’s attention a property known as McCrink Ranch in San Diego County,
California. Marsch sought to induce Lennar-DLA 1 Plaintiff to acquire the property, but the owners of the property instead
entered into an exclusive negotiating agreement with another purchaser, Davidson Homebuilders, LLC (“Davidson”).
16. Thereafter, the McCrink Ranch owners determined that Davidson would not be able to develop the property on its own.
As a result, they asked Davidson and Lennar-DLA 1 Plaintiff to consider making a joint purchase offer. Davidson and
Lennar-DLA 1 Plaintiff agreed to discuss the matter but, after several more weeks, their negotiations reached an impasse. A
joint offer appeared unlikely.
17. Unbeknownst to Lennar-DLA 1 Plaintiff, Marsch intended to obtain a 50% interest in McCrink Ranch--a project
exceeding $100 million to acquire and develop--without investing any money of his own, and to induce Lennar-DLA 1
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Plaintiff to pay 100% of the cost of acquiring and developing the property. To accomplish these objectives, Marsch turned to
his friend and lawyer, Foster.
18. In addition, Marsch enlisted the services of a lawyer named Michael Riney (“Riney”) to assist DLA Piper and Foster in
advising Lennar-DLA 1 Plaintiff regarding McCrink Ranch. Although Foster proceeded to work with Riney in representing
Lennar-DLA 1 Plaintiff regarding McCrink, Foster never disclosed this fact to Lennar-DLA 1 Plaintiff. Nor did Riney. Nor
did Marsch.
19. With the assistance of Riney and Marsch, Foster provided legal advice to Lennar-DLA 1 Plaintiff that was designed to
further Marsch’s personal interests. For example, Foster advised Lennar-DLA 1 Plaintiff to terminate its relationship with
Davidson, file suit against Davidson, and acquire the McCrink property exclusive of Davidson. This advice was given to
advance Marsch’s objectives that Lennar-DLA 1 Plaintiff disassociate Davidson from the McCrink transaction, acquire the
property on its own, pay for the property with all of its own money, and take title to the property in the name of HCC
Investors LLC, an entity in which Marsch had an ownership interest. In this manner, Marsch sought to position and enable
himself to assert an ownership interest in McCrink Ranch. Marsch’s objectives were known to Foster, but he willfully failed
to disclose them to Lennar-DLA 1 Plaintiff. Furthermore, DLA Piper and Foster actively sought to conceal their actions on
Marsch’s behalf by omitting from their legal bills to Lennar-DLA 1 Plaintiff any reference to Foster’s secret dealings with
Riney.
20. In representing Lennar-DLA 1 Plaintiff, Foster led Lennar-DLA 1 Plaintiff to believe that his advice and actions were
based on the discharge of his professional duties as a lawyer whose sole allegiance was to Lennar-DLA 1 Plaintiff and whose
sole duty was to protect and serve the interests of Lennar-DLA 1 Plaintiff. These representations were false, because Foster’s
advice and actions--purportedly on Lennar-DLA 1 Plaintiff’s behalf--were, in fact, intended to carry out the undisclosed
objectives of Marsch. Under the common law, California Business and Professions Code section 6068, and California Rule of
Professional Conduct 3-310(C), Foster and DLA Piper owed a duty of undivided loyalty to Lennar-DLA 1 Plaintiff, which
they breached by undertaking the concurrent and conflicting representation of Marsch without disclosure to or consent by
Lennar-DLA 1 Plaintiff. In violation of his duty of loyalty and fiduciary obligations to Lennar-DLA 1 Plaintiff, Foster
concealed from Lennar-DLA 1 Plaintiff his support of Marsch’s objectives and interests, including his secret collaboration
with Riney. Lennar-DLA 1 Plaintiff did not discover the material facts giving rise to any of the causes of action alleged in
DLA1 Action until less than one year before the filing of DLA1 Action.
21. As a result of the foregoing and other conduct alleged herein, Lennar-DLA 1 Plaintiff was induced to purchase the
McCrink Ranch property without knowledge that Marsch intended to assert a 50% ownership interest therein. Foster and
DLA Piper possessed such knowledge, but concealed it from Lennar-DLA 1 Plaintiff. Thereafter, Marsch filed suit against
Lennar-DLA 1 Plaintiff claiming that Lennar-DLA 1 Plaintiff violated his alleged partnership interest in McCrink and
seeking substantial damages. That case is entitled Briarwood Capital, LLC v. Lennar-DLA 1 Plaintiff Land Partners II, et al.,
Case No. GIC 875457 (the “McCrink Action”). The Honorable William J. Nevitt, Jr., dismissed the case with prejudice and
the dismissal is currently under appeal.
II. FACTUAL ALLEGATIONS - DLA 2 ACTION
22. On or about September 30, 2008, Lennar-DLA 2 Plaintiff filed the lawsuit, Lennar Homes of California, Inc., et al. v.
DLA Piper US LLP, et al., Case No. 37-2008-00092842-CU-PN-CTL, (the “DLA2 Action”), against Marsch and others in
the San Diego Superior Court. Lennar-DLA 2 Plaintiff asserts that Marsch conspired with attorneys from DLA Piper to
breach their fiduciary duties to Lennar-DLA 2 Plaintiff with respect to the HCC Investors joint venture and the Bridges
project. (A true and correct copy of Lennar-DLA 2 Plaintiff’s operative complaint in DLA2 Action (the “DLA2 Complaint”)
is attached hereto as Exhibit 2 and incorporated herein by this reference)
23. The DLA2 Action alleges that Marsch aided and abetted DLA and Mr. Foster’s breaches of their fiduciary and
professional duties to Lennar-DLA 2 Plaintiff entities in a manner that was “willful, oppressive, and malicious.” (Ex. A, ¶
136 (Seventh Cause of Action, DLA2).). It further allege that Marsch interfered with Lennar-DLA 2 Plaintiff entities’
contractual and business relationships in a manner that was “willful, oppressive, and malicious.” (Id., ¶ 141 (Eighth Cause of
Action, DLA2).)
80
24. The DLA 2 Action seeks damages and disgorgement of legal fees from DLA and its partner Brian Foster for malpractice,
fraud, and breaches of their duties of trust and loyalty owed to Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges.
Throughout their representation of Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges, Foster and DLA repeatedly breached
their professional duties to benefit Foster’s personal friend and longtime client, Marsch, to the detriment of Lennar-DLA 2
Plaintiff, HCC, and Lennar Bridges. DLA and Foster owed Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges the unflagging
obligation to represent such clients zealously with the utmost loyalty and the protection of all professional and ethical duties
mandated by law. Foster and DLA failed to discharge their duties to Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges by,
without limitation, undertaking the concurrent and conflicting representation of Marsch without disclosure to or consent by
Lennar-DLA 2 Plaintiff or HCC in order to advance Marsch’s individual interests.
25. In representing Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges, Foster led his clients to believe that his advice and
actions were based on the discharge of his professional duties as a lawyer whose sole allegiance was to Lennar-DLA 2
Plaintiff, HCC, and Lennar Bridges and whose duty was to protect and serve the interests of Lennar-DLA 2 Plaintiff, HCC,
and Lennar Bridges. These representations were false, because Foster’s advice and actions-- purportedly on Lennar-DLA 2
Plaintiff’s and HCC’s behalf--were, in fact, intended to advance and did advance the undisclosed objectives of Marsch.
THE BRIDGES
26. Prior to the formation of HCC in 1997, Marsch was a partner with Ronald Williams (“Williams”) in a partnership known
as Horizon Properties. Marsch and Williams entered into the partnership to develop real property in Rancho Santa Fe,
California, which later became known as the “Bridges” property.
27. The relationship between Marsch and Williams ended in protracted litigation. Thereafter, Marsch sought and obtained
funds from Lennar-DLA 2 Plaintiff to finance his ongoing litigation against Williams.
28. In April 1997, Marsch obtained a judgment against Williams (the “La Jolla Judgment”). Williams declared bankruptcy,
and the Bridges property became part of the Williams bankruptcy estate.
29. On or about June 17, 1997, Marsch and LSJH entered into an Amended and Restated Formation Agreement (the “HCC
Formation Agreement”). On or about August 27, 1997, Marsch and LSJH entered into the Limited Liability Company
Agreement of HCC Investors, LLC (the “HCC Operating Agreement”). Among other things, the HCC Operating Agreement
generally provides that profits (if any) are to be distributed to HCC’s members only after Lennar-DLA 2 Plaintiff receives its
invested capital and a preferred return.
30. On or about January 28, 1998, HCC entered into a Purchase and Sale Agreement with Williams and one of his affiliates
pursuant to which HCC purchased the Bridges property for $52 million.
31. In November 1998, with Marsch’s knowledge and support, LSJH and Lennar Southland I, Inc. (“Lennar Southland”)
formed Lennar Bridges to acquire and develop real property adjacent to the Bridges property known as the Santa Fe Creek
property. On or about November 19, 1998, Lennar Bridges purchased the Santa Fe Creek property for $10 million. The
properties developed by HCC and Lennar Bridges are now commonly known collectively as the “The Bridges at Rancho
Santa Fe” or “The Bridges.”
32. On or about July 29, 1999, Lennar Southland and LSJH assigned their entire interests in HCC and Lennar Bridges to LLP
II and LLP II’s wholly-owned subsidiary LL Partners, Inc. (“LL Partners”).
33. Foster and DLA’s predecessor-in-interest Gray Cary Ware & Freidenrich LLP began representing HCC in 1997 in
connection with the Williams estates’ bankruptcy. Thereafter, on Marsch’s recommendation, LSJH engaged Foster and
DLA’s predecessor-in-interest to be HCC’s primary outside counsel.
34. On or about July 7, 1999, Lennar Homes replaced LSJH as Project Manager of HCC and Lennar Bridges. On or about
July 29, 1999 LLP II and LL Partners became members of HCC and succeeded to the rights of LSJH and Lennar Southland
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as members of HCC.
35. In representing HCC, Foster and DLA undertook to represent and did jointly represent Lennar-DLA 2 Plaintiff and
Marsch together with HCC. Foster and DLA conducted this joint representation from at least 1997 through at least 2007. In
the course of such representation Foster and DLA did in fact advise LSJH, Lennar Southland, LLP II, LL Partners, Lennar
Homes, HCC and Lennar Bridges on matters related to HCC, the Bridges and Lennar Bridges.
36. Foster and DLA’s representation of Lennar-DLA 2 Plaintiff, HCC and Lennar Bridges continued through at least October
2, 2007, when Foster and DLA purported to withdraw from representing Lennar-DLA 2 Plaintiff in all matters except
“situations where Lennar is a constituent member of another entity which the Firm may represent, such as a partnership or
limited liability company.” At all material times, Foster owed fiduciary duties to HCC, Lennar Bridges, and Lennar-DLA 2
Plaintiff.
MISREPRESENTATION REGARDING “PRIOR INVESTORS” FUND
37. On or about January 27, 1998, Marsch and LSJH executed an amendment to the HCC Formation Agreement (the “First
Formation Agreement Amendment”) under which Marsch assumed liability for certain obligations in exchange for LSJH’s
agreement to make a $6 million fund available to Marsch to repay certain preexisting obligations (the “Prior Investors
Fund”). Among other things, the First Formation Agreement Amendment provided that amounts not drawn on that fund
would be adjusted upward each month at a monthly rate “equal to the monthly rate of interest paid on 1-year U.S. Treasury
bills on the last day of such month.”
38. Despite the express language of the First Formation Agreement Amendment, in 1999 and 2000 Foster advised and
represented to HCC and Lennar-DLA 2 Plaintiff that Marsch was entitled under the operative agreements to earn a 25%
preferential rate of return on amounts not drawn on that fund. For example, in an August 2, 1999 letter to Brian Bilzin,
another attorney representing Lennar-DLA 2 Plaintiff, Foster claimed that “Section 3.01(b) of the operating agreement
provides that Nick [Marsch] will accrue a preference on that portion of the [Prior Investors Fund] that he has not drawn
upon.”
39. Foster’s representations were false, without any reasonable basis, and contrary to the provisions of the HCC Operating
Agreement, the HCC Formation Agreement, and the First Formation Agreement. At no time did Foster advise HCC or
Lennar-DLA 2 Plaintiff that Marsch had no right under the applicable agreements to a 25% preferential rate of return with
respect to the Prior Investors Fund.
40. Foster’s advice and representations to HCC and Lennar-DLA 2 Plaintiff concerning the Prior Investors Fund were
intended to advance Marsch’s interests over those of HCC and Lennar-DLA 2 Plaintiff by inflating the amounts payable to
Marsch under operative provisions by millions of dollars. As a result of Foster’s conflicted advice and representations, as
well as Marsch’s false representations regarding amounts required to satisfy prior obligations, HCC and LLP II agreed in
2001 to increase the amount of funds available to Marsch by $1.5 million to $7.5 million.
41. Under the common law, California Business and Professions Code section 6068, and the California Rules of Professional
Conduct, Foster and DLA owed duties to HCC and Lennar-DLA 2 Plaintiff, including but not limited to the duties of
competency, loyalty, communication and candor. Foster’s advice and representations to HCC and Lennar-DLA 2 Plaintiff
regarding the Prior Investors Fund were a violation of his and DLA’s fiduciary duties to HCC and Lennar-DLA 2 Plaintiff, as
well as their duties of loyalty, competence, and candor. Foster and DLA also breached such duties by undertaking the
concurrent and conflicting representation of Marsch without full disclosure to or consent by HCC or Lennar-DLA 2 Plaintiff.
LA JOLLA JUDGMENT AND OVERRIDE FEES
42. Section 6.05(b) of the HCC Operating Agreement provided that HCC would pay an “override fee” equal to 3.5% of
HCC’s gross revenue to both Marsch and Lennar-DLA 2 Plaintiff. On or about January 27, 1998, Marsch and Lennar-DLA 2
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Plaintiff executed an amendment to the HCC Operating Agreement (the “First Operating Agreement Amendment”). Under
that amendment, Marsch and Lennar-DLA 2 Plaintiff agreed that HCC would begin paying override fees only after
“Lennar-DLA 2 Plaintiff has earned an internal rate of return on its Capital Contributions equal to 25%....”
43. In June 1999, HCC received $37.5 million in proceeds from the payment of the La Jolla Judgment, which had been
assigned to HCC. HCC, in accordance with the provisions of the HCC Operating and Formation Agreements, distributed
those proceeds to Lennar-DLA 2 Plaintiff to return a portion of Lennar-DLA 2 Plaintiff’s invested capital and return on that
capital.
44. Although the proceeds from the La Jolla Judgment returned part of Lennar-DLA 2 Plaintiff’s invested capital, at no time
in 1999 or thereafter did Lennar-DLA 2 Plaintiff receive its invested capital or “an internal rate of return on its Capital
Contributions equal to 25%” as required under the First Operating Agreement Amendment to trigger payment of override
fees.
45. In 1999 Foster knew or should have known that Lennar-DLA 2 Plaintiff had not received its invested capital in HCC plus
a 25% internal rate of return and that override fees were not payable under the First Operating Agreement Amendment.
Nevertheless, Foster advised that HCC and Lennar-DLA 2 Plaintiff commence payment of the override fees to Marsch,
representing that the fees appeared payable under the applicable amendment and equitably should be paid in any event. In
reliance on Foster’s advice and representations, HCC began paying override fees to Marsch beginning in 1999. From 1999
through 2008, HCC paid Marsch in excess of $13 million in override fees.
46. Foster’s advice was false and without any reasonable basis. HCC and Lennar-DLA 2 Plaintiff in fact were under no
obligation to begin paying override fees under the terms of the First Operating Agreement Amendment because the
conditions for payment of override fees had not been met. To this date, the obligation to pay override fees has not been
triggered under the terms of the First Operating Agreement Amendment.
47. Despite having received more than $13 million in override fees, Marsch now asserts that HCC and Lennar-DLA 2
Plaintiff were not authorized or entitled to distribute the proceeds from the La Jolla Judgment to Lennar-DLA 2 Plaintiff and
claims that the accounting treatment of the proceeds was improper. Foster and DLA knew or should have known that Marsch
intended to dispute the propriety of the distribution and accounting of the proceeds.
48. Under the common law, California Business and Professions Code section 6068, and the California Rules of Professional
Conduct, Foster and DLA Piper owed duties to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff including but not limited
to the duties of competency, loyalty, communication and candor. Had HCC, Lennar Bridges or Lennar-DLA 2 Plaintiff
known or been advised that Marsch intended to challenge, or retained the ability to challenge, distribution of the La Jolla
Judgment proceeds to Lennar-DLA 2 Plaintiff or the accounting for those proceeds, Lennar-DLA 2 Plaintiff, HCC, and
Lennar Bridges would not have agreed to pay override fees to Marsch. Foster and DLA failed to advise Lennar-DLA 2
Plaintiff, HCC, and Lennar Bridges of Marsch’s intent and alleged ability to challenge the accounting and distribution, failed
to advise Lennar-DLA 2 Plaintiff or HCC of the risk that Marsch might dispute the distribution of the judgment proceeds to
Lennar-DLA 2 Plaintiff or the accounting for those proceeds, and failed to protect HCC, Lennar Bridges, and Lennar-DLA 2
Plaintiff against such intentions and actions by Marsch.
FOSTER MANUFACTURES “ACCOUNTING” PROBLEMS
49. At various times, Foster and DLA advised and represented to Lennar-DLA 2 Plaintiff that certain financial information
reported by HCC was inaccurate and unreliable. Foster’s advice and representations were false, without any reasonable basis,
and made solely to advance Marsch’s interests.
50. Foster and DLA sought both to induce Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges into erroneously increasing
HCC’s payments to Marsch to Lennar-DLA 2 Plaintiff’s detriment and position Marsch to erroneously claim greater
payments than required under the applicable agreements.
51. In undertaking to advance Marsch’s personal interests to the detriment of HCC, Lennar Bridges, and Lennar-DLA 2
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Plaintiff, Foster and DLA owed a duty of undivided loyalty to Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges that they
breached by falsely and unreasonably advising HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff about alleged inaccuracies
in their financial reports and accountings for the Bridges.
LENNAR BRIDGES
52. At various times after the acquisition of the Santa Fe Creek property by Lennar Bridges, Foster advised HCC, Lennar
Bridges, and Lennar-DLA 2 Plaintiff concerning Lennar Bridges and the development of the Santa Fe Creek property.
However, Foster did not fully or adequately advise Lennar-DLA 2 Plaintiff or HCC of the risks of acquiring and developing
the Santa Fe Creek property without clarifying and documenting Marsch’s purported interest in Lennar Bridges.
53. Instead, Foster advised and repeatedly represented to LLP II, LL Partners and Lennar Homes that if and when Marsch (or
his wholly-owned company, Briarwood Capital, LLC) were to be admitted as a member of Lennar Bridges, such admission
would be on the same terms as existing agreements governing HCC. For example, in an August 2, 1999 letter to Bilzin and to
Marsch, Foster advised that “There are a few items Nick would like to address that fall under the category of ‘clean-up,’ as
follows:... We should prepare an operating agreement for the Santa Fe Creek parcel that parallels the HCC agreement...” One
month later, on September 9, 1999, Foster advised Bilzin and Marsch that “[y]ou suggested that we prepare an operating
agreement for the Santa Fe Creek parcel that parallels the HCC agreement.... We will prepare an agreement which parallels
the HCC agreement to the extent possible.” On July 28, 2004, Foster sent an email to personnel acting on behalf of LLP II,
LL Partners and Lennar Homes (including Gary Agatstein, Graham Jones, Mark Shea, Susy Chu and Ron George) and to
Marsch that described Marsch’s economic interest in Lennar Bridges as “identical” to Marsch’s interest in HCC. On August
1, 2005, Foster forwarded an email memorandum to Jones and Trudie Wilson summarizing a proposed merger between HCC
and Lennar Bridges that stated: “In both HCC and Bridges, Lennar and Marsch each hold a 50% profits interest. These profits
are distributed after Lennar receives a return of its capital and a preferred return.” In a February 28, 2006 memorandum to
Jones, Mike Levesque and to Marsch, Foster stated that “Nick [Marsch] has always been entitled to own an interest in Lennar
Bridges identical to his interest in HCC.”
54. The HCC Operating Agreement provides, among other things, that profit distributions will be made to Marsch only after
Lennar-DLA 2 Plaintiff has obtained a return of its invested capital and a 25% return on that capital. Since the formation of
Lennar Bridges in 1998, LLP II and LL Partners have invested more than $35 million to acquire and develop the Santa Fe
Creek property. Marsch has never made any capital or other contributions to Lennar Bridges.
55. From its inception through 2006, Marsch was not a member in Lennar Bridges. In 2006, Foster advised LLP II, LL
Partners and Lennar Homes to execute a purported Membership Admission Agreement for Lennar Bridges (the “Admission
Agreement”) admitting Briarwood as a member of Lennar Bridges.
56. Foster advised LLP II, LL Partners and Lennar Homes that it was in their interests to execute the Admission Agreement
and that the parties could and would thereafter document an operating agreement to memorialize that their respective
economic interests in Lennar Bridges would be the same as their interests in HCC.
57. In providing this advice, Foster and DLA knew, but did not disclose to Lennar-DLA 2 Plaintiff, including LLP II, LL
Partners and Lennar Homes, that Marsch would refuse to execute an operating agreement for Lennar Bridges on the same
terms as the HCC Operating Agreement, including terms providing for distributions of profits from Lennar Bridges to
Marsch only after a return of Lennar-DLA 2 Plaintiff’s invested capital and a 25% return on that capital. Foster and DLA also
knew that Marsch intended to assert a 50% membership interest in Lennar Bridges without contribution of any capital and
without acknowledging Lennar-DLA 2 Plaintiff’s entitlement to a 25% preferred return on invested capital.
58. In June 2006, in reliance on advice and representations by Foster, LLP II, LL Partners and Lennar Homes signed the
Admission Agreement. The Admission Agreement does not identify Marsch’s economic interest in Lennar Bridges or the
material terms of his admission. Although the Admission Agreement expressly recited the parties’ agreement to enter into an
operating agreement for Lennar Bridges, Marsch has failed and refused to do so. At the time LLP II, LL Partners and Lennar
Homes signed the Admission Agreement, Foster knew but did not disclose that Marsch did not intend to comply with that
condition, but intended to assert a 50% membership interest while claiming Lennar-DLA 2 Plaintiff was not entitled to a 25%
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preferred return on its invested capital.
59. In representing LLP II, LL Partners and Lennar Homes, Foster led LLP II, LL Partners and Lennar Homes to believe that
his advice and actions were based on the discharge of his professional duties as a lawyer, including his duty to protect and
serve the interests of Lennar-DLA 2 Plaintiff. These representations were false, because Foster’s advice was, in fact, intended
to benefit Marsch at Lennar-DLA 2 Plaintiff’s expense. Foster and DLA Piper breached their duties by advising LLP II, LL
Partners and Lennar Homes to enter into a transaction that benefited and was intended to benefit Marsch to Lennar-DLA 2
Plaintiff’s detriment, and by undertaking the concurrent and conflicting representation of Marsch without full disclosure to or
informed consent by Lennar-DLA 2 Plaintiff, including LLP II, LL Partners or Lennar Homes.
TOLLING AGREEMENTS
60. In 2002 and 2005, Foster, at the direction of and on behalf of Marsch, requested that LLP II and LL Partners, among
others, enter into two tolling agreements (the “Tolling Agreements”).
61. The 2002 tolling agreement purported to toll the statute of limitations for claims regarding “potential financial accounting
disputes... between the Parties with regard to the development of [The Bridges] and the operation of HCC....” The term of the
agreement was purported to be through August 2006.
62. Foster represented to Lennar-DLA 2 Plaintiff in a July 18, 2002 email that the 2002 tolling agreement would “preserve
the status quo” between Marsch and Lennar-DLA 2 Plaintiff. That statement was false. The 2002 tolling agreement was “one
way,” purporting only to preserve Marsch’s claims against Lennar-DLA 2 Plaintiff and not any claims by Lennar-DLA 2
Plaintiff against Marsch.
63. In December 2005, while the 2002 tolling agreement was still in effect, Foster presented to LLP II and LL Partners a
purported “Renewed Statute of Limitations Tolling Agreement” to extend the statute of limitations to December 31, 2006.
Foster advised his clients LLP II and LL Partners that the agreement was in the “best interests of both LLC Members,” that
the agreement was just a “loose end” that needed “cleaning up,” that the agreement was “virtually identical” to the 2002
tolling agreement, and that it was “designed merely to preserve the status quo.” For example, in a December 21, 2005 email
to personnel acting on behalf of LLP II, LL Partners and Lennar Homes (including Jon Jaffe and Mike Levesque) and
Marsch, Foster wrote: “I would recommend that the LLC members execute the renewal agreement.... The form of the renewal
agreement that I have attached is virtually identical to the 2002 agreement, as it is designed to merely preserve the status quo.
As before, it would preserve all parties rights, claims and defenses relating to the subject matter of HCC finances and
accounting. This seems to be in the best interests of both LLC members
64. Foster’s statements were false. The 2005 tolling agreement was not “virtually identical” to the 2002 tolling agreement
that had been signed four years earlier, it was not “designed merely to preserve the status quo,” and it was not in the “best
interests” of LLP II, LL Partners, or Lennar Homes. The 2005 tolling agreement was also “one way,” purporting only to
preserve Marsch’s claims against Lennar-DLA 2 Plaintiff and not any claims by Lennar-DLA 2 Plaintiff against Marsch. The
two agreements also differed in material ways, including:
• The 2005 tolling agreement added a new party, Lennar Southland, which was not a party to the 2002 agreement.
• Although the 2002 tolling agreement contained no mention of Lennar Bridges, the 2005 tolling agreement injected a new
recital, stating: “On or about November 12, 1998, Lennar San Jose Holdings and Lennar Southland entered into that certain
Limited Liability Company Agreement of Lennar Bridges, LLC, to acquire a parcel of land adjacent to the Project for
development and incorporation into the Project. The Parties agree that Marsch is entitled to own a 50% interest in Lennar
Bridges, LLC and documentation is currently being prepared to memorialize Marsch’s interests.”
65. In addition, Foster failed to disclose material facts about the purported Admission Agreement and the admission of
Marsch as a member of Lennar Bridges, including that Marsch intended to assert a 50% membership interest without
agreeing to an operating agreement for Lennar Bridges that provided for a return of Lennar-DLA 2 Plaintiff’s contributed
capital and a 25% return on that capital before profit distributions to the members.
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66. Foster and DLA also knew or should have known that, unbeknownst to Lennar-DLA 2 Plaintiff, Marsch intended to
claim that HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff had failed to comply with the HCC Operating and Formation
Agreements by, among other things, purportedly failing to issue operating deficit notices and by retaining companies
affiliated with Lennar-DLA 2 Plaintiff to perform services for the Bridges. Foster and DLA failed to disclose Marsch’s
intentions to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff and failed to advise Lennar-DLA 2 Plaintiff, Lennar Bridges
or HCC of Marsch’s intent or ability to assert such claims or to protect themselves from such claims. Foster and DLA also
failed to disclose that Marsch intended to assert mismanagement claims against Lennar-DLA 2 Plaintiff, including decisions
to build homes at the Bridges and that Marsch intended to claim that all capital contributions made by Lennar-DLA 2
Plaintiff to HCC and Lennar Bridges from 1998 through the present were in violation of the HCC Operating and Formation
Agreements.
67. Foster and DLA prepared the 2005 tolling agreement at Marsch’s direction to benefit Marsch to Lennar-DLA 2 Plaintiff’s
detriment. Under the common law, California Business and Professions Code section 6068, and the California Rules of
Professional Conduct, Foster and DLA Piper owed duties to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff including but
not limited to the duties of competency, loyalty, communication and candor. Foster’s advice that executing the 2005 tolling
agreement was the best interests of LLP II or LL Partners and his false representations including that the agreement was
“virtually identical to the 2002 agreement” were breaches of Foster’s fiduciary and professional duties to Lennar-DLA 2
Plaintiff, HCC, and Lennar Bridges.
JUDGMENTS AGAINST MARSCH
68. At the direction of and for the benefit of Marsch, Foster and DLA advised HCC and Lennar-DLA 2 Plaintiff that HCC
was required to pay over $15 million to satisfy two of Marsch’s personal obligations to Williams.
69. Prior to the formation of HCC, Marsch was a 50 percent partner with Williams in a partnership known as Horizon
Properties. As a result of litigation between Marsch and Williams, on June 18, 1992 an arbitration panel ordered the
dissolution of the Horizon Properties partnership and placed the partnership into receivership.
70. The panel also ordered Marsch to pay $888,190 to the partnership in satisfaction of an outstanding obligation. In 1994,
the arbitration award was confirmed as a judgment, and on June 23, 1999 the receiver for the Horizon Properties partnership
assigned that judgment, which had grown with interest to $1,641,326, to Williams (the “Arbitration Judgment”).
71. The receiver for the Horizon Properties partnership issued a final accounting of the dissolved partnership on June 19,
2000. In that final accounting, the receiver determined that the dissolved partnership’s liabilities exceeded assets by
$26,987,369 and ordered that Marsch pay one-half of that shortfall. On February 2, 2001, the Hon. Lisa Guy-Schall of the
San Diego County Superior Court approved an assignment of Marsch’s obligation to Williams and ordered that “Nicolas
Marsch, III owes and shall pay” $13,568,121 to Williams (the “Contribution Judgment”).
72. Both the Arbitration Judgment and the Contribution Judgment (collectively, the “Marsch Judgments”) were obligations of
Marsch, not HCC or Lennar-DLA 2 Plaintiff. However, Foster advised and represented to HCC and Lennar-DLA 2 Plaintiff
that HCC’s governing documents required HCC to pay and/or indemnify Marsch for the Marsch Judgments. HCC, funded by
LLP II and LL Partners, paid millions of dollars to satisfy those obligations in reliance on Foster’s advice and his
representations that HCC was required to pay those judgments on Marsch’s behalf.
73. On April 13, 2000, in reliance on advice and representations by Foster, HCC transferred $1.5 million to an account
controlled by DLA’s predecessor to be used to satisfy the Arbitration Judgment.
74. By the end of 2003, the Contribution Judgment had grown, with accrued interest, to over $17 million. On January 15,
2004, in reliance on advice and representations of Foster, HCC and Lennar-DLA 2 Plaintiff entered into a settlement
agreement with Williams (the “Williams Settlement”) by which HCC agreed to pay $13 million to satisfy the Contribution
Judgment, as well as a contingent interest Williams retained in certain distributions from exploitation of the Bridges property.
Lennar Corporation and LNR Property Corporation, each of which owned interests in LLP II, agreed to and did guarantee
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HCC’s obligation to pay this amount.
75. The HCC Formation Agreement and the HCC Operating Agreement did not require that HCC pay the Arbitration
Judgment or the Contribution Judgment or otherwise indemnify Marsch for such obligations. Despite his fiduciary duties to
HCC and Lennar-DLA 2 Plaintiff, at no time did Foster advise HCC or Lennar-DLA 2 Plaintiff that the HCC Formation and
Operating Agreements did not require HCC to pay the Marsch Judgments. Instead, Foster advised HCC, LLP II, LL Partners
and Lennar Homes that it was HCC’s obligation to pay those judgments against Marsch. Foster’s advice was false, without
any reasonable basis, and intended solely to benefit and did benefit Marsch to HCC’s detriment. Absent Foster’s advice and
representations, HCC would not have paid over $15 million to satisfy Marsch’s obligations to Williams.
76. When Foster advised HCC and Lennar-DLA 2 Plaintiff concerning the Marsch Judgments, he did so under a disabling
conflict because his advice benefited and was intended to benefit Marsch to the detriment of HCC and Lennar-DLA 2
Plaintiff. Under the common law, California Business and Professions Code section 6068, and the California Rules of
Professional Conduct, Foster and DLA owed duties to HCC and Lennar-DLA 2 Plaintiff including but not limited to the
duties of competency, loyalty, communication and candor. Foster and DLA breached these duties by advising HCC, LLP II,
LL Partners and Lennar Homes to enter into transactions that benefited and were intended to benefit Marsch at HCC and
Lennar-DLA 2 Plaintiff’s expense, and by undertaking the concurrent and conflicting representation of HCC and
Lennar-DLA 2 Plaintiff without full disclosure to or informed consent by HCC or Lennar-DLA 2 Plaintiff.
DLA AND FOSTER ASSIST MARSCH REGARDING LITIGATION AGAINST LENNAR-DLA 2 PLAINTIFF
77. Despite his fiduciary duties to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff and his duties of loyalty and candor
under the common law, California Business and Professions Code Section 6068, and the Rules of Professional Conduct, in
2005 and 2006 Foster secretly worked to assist and advise Marsch and his various litigation counsel regarding Marsch’s
preparation of two lawsuits against Lennar-DLA 2 Plaintiff.
78. While purporting to serve as counsel to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff, unbeknownst to any of them,
Foster provided Marsch and his litigation counsel with documents and information, corresponded with them, met with them,
and strategized with them. Foster disclosed none of these activities to HCC, Lennar Bridges or Lennar-DLA 2 Plaintiff.
79. At the time he was assisting Marsch in preparing litigation adverse to HCC, Lennar Bridges and Lennar-DLA 2 Plaintiff,
Foster repeatedly advised such clients to provide Marsch with information and documents. Foster did so to support Marsch’s
litigation efforts. At no time did Foster advise Lennar-DLA 2 Plaintiff, Lennar Bridges or HCC to obtain advice and counsel
to protect against litigation by Marsch.
80. In violation of his duties of loyalty and candor, at no time did Foster disclose his activities to HCC, Lennar Bridges or
Lennar-DLA 2 Plaintiff, advise them that he was providing documents, information and advice to Marsch and his litigation
counsel, or that he was assisting with Marsch’s preparation of claims against Lennar-DLA 2 Plaintiff. Foster and DLA
actively concealed their activities from Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges.
REFUSAL TO RETURN CLIENT FILES
81. HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff first requested a return of their client files from DLA in 2007. Foster
and DLA sought to conceal their misconduct by refusing and failing to turn over these client files. Despite various requests
and subpoenas from Lennar-DLA 2 Plaintiff, and despite their knowledge that such files are relevant to the defense and rights
of HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff in Marsch’s pending litigation and trial against Lennar-DLA 2
Plaintiff, DLA and Foster have to date failed to produce a complete set of the files and documents to HCC, Lennar Bridges,
and Lennar-DLA 2 Plaintiff.
82. Among other files and documents, DLA and Foster withheld email communications between Foster and Marsch’s
litigation counsel revealing that Foster and DLA were actively assisting Marsch’s litigation counsel in their preparation of
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claims against Lennar-DLA 2 Plaintiff leading to both the Bridges lawsuit and the separate McCrink lawsuit. Recently in the
course of the Bridges trial, Lennar-DLA 2 Plaintiff became aware such documents might exist and specifically demanded
their production. Only then did DLA produce certain of the documents, but not all the files and documents to which HCC,
Lennar Bridges, and Lennar-DLA 2 Plaintiff are entitled. Lennar-DLA 2 Plaintiff has been and continues to be significantly
prejudiced by the wrongful withholding of such files and documents.
83. Until June and July 2009, HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff were reasonably and justifiably unaware of
Foster and DLA’s misconduct related to the Marsch Judgments, the La Jolla Judgment and override fees, manufacture of
accounting issues, the Prior Investors Fund, and advice to Marsch and his litigation counsel regarding suits against
Lennar-DLA 2 Plaintiff. Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges still do not know all the facts relevant to DLA
and Foster’s representation of HCC, Lennar Bridges, Lennar-DLA 2 Plaintiff and Marsch in that Foster and DLA have
actively concealed their actions and wrongfully withheld documents and files. Foster and DLA’s representation of HCC,
Lennar Bridges, and Lennar-DLA 2 Plaintiff continued for more than a decade and involved numerous matters, transactions,
facts and issues. Throughout that representation, Foster and DLA concealed and withheld material facts, files, and documents
evidencing that they were advising and representing HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff under a disabling
conflict and that their advice was intended to benefit Marsch to the detriment of HCC, Lennar Bridges, and Lennar-DLA 2
Plaintiff.
III. FACTUAL ALLEGATIONS - BRIDGES CROSS-COMPLAINT
84. Briarwood Capital, LLC (“Briarwood” and, together with Marsch, “The Marsch Parties”) filed Briarwood Capital, LLC
v. HCC Investors LLC, et al., Case No. GIC-877446 (the “Bridges Action”) in December 2006 in San Diego Superior Court.
In the Bridges Action, debtor Briarwood asserts that Lennar-Bridges Cross-Plaintiff has mismanaged a large real estate
project and failed to provide appropriate accountings. Briarwood asserts that it is entitled to $200 million of damages even
though it has already received more than $50 million and even though Lennar-Bridges Cross-Plaintiff funded the project on a
senior basis. Lennar-Bridges Cross-Plaintiff and HCC--a joint venture between Lennar and Briarwood--asserts substantial
counter-claims against Briarwood and Marsch, including multi-million dollar claims for Briarwood’s failure to repay loans
provided to it by HCC. (A true and correct copy of Lennar-Bridges Cross-Plaintiff’s cross-complaint in the Bridges Action
(the “Cross-Complaint”) (with exhibits) is attached hereto as Exhibit 3 and incorporated herein by this reference.).
85. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff and HCC assert that in violation of his contractual and other
duties, cross-defendant Marsch has, both personally and through two of his wholly-owned companies, diverted assets of
nominal defendant HCC to his personal use, and acted in a manner calculated to substantially diminish the value of HCC,
Lennar Bridges, and the residential and golf community known as The Bridges at Rancho Santa Fe (“The Bridges”). Marsch
has done so both to advance his personal and financial interests, and as part of a continuing effort to wring undeserved
financial concessions from the other members of HCC and Lennar Bridges.
86. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff seeks damages, rescission of certain agreements, and other relief
from Briarwood and its sole member and purported assignor, Marsch, based on their dishonest and deceptive conduct and
repeated breaches of contract and other duties, including breaches of fiduciary duties by Brian Foster, a partner in the law
firm DLA Piper US, LLP (successor to Gray Cary Ware & Friedenrich, LLP) (collectively, “Foster”) an attorney representing
HCC, Lennar Bridges, Marsch and Lennar-Bridges Cross-Plaintiff.
87. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff also brings claims derivatively on behalf of HCC to recover over
$6 million in principal and interest due and owing on loans to Briarwood, Marsch, and/or Colony Properties, LLC (“Colony,”
and collectively with Briarwood and Marsch, the “Marsch Parties”), as well as for recovery of other amounts of money and
property appropriated from HCC by The Marsch Parties, declarations of the parties’ respective rights under various contracts
and that the Marsch Parties are alter egos of one another, and contractual attorneys’ fees and expenses.
LITIGATION WITH WILLIAMS AND THE “MARSCH RESTRICTIONS”
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88. Prior to the formation of HCC, Marsch was a partner with an individual named Ronald Williams in a partnership known
as Horizon Properties. On information and belief, Marsch and Williams entered into the partnership to develop and market
the “Horizon Property.” Also on information and belief, Marsch and Williams were partners, co-joint venturers, and or
co-members in other various projects not related to The Bridges, including a venture involving commercial real estate in La
Jolla (the “La Jolla Venture”).
89. The relationship between Marsch and Williams fell apart and substantial and protracted litigation between the two
ensued. Because of disputes between the two partners, development of the Horizon Property effectively came to a standstill.
Needing money to fund his litigation efforts against Williams, Marsch formed a relationship with Lennar-Bridges
Cross-Plaintiff pursuant to which Lennar-Bridges Cross-Plaintiff provided funds for attorneys’ fees and related expenses in
exchange for receiving a one-half interest in any recovery.
90. In April 1997, Marsch obtained a judgment against Williams relating to the La Jolla Venture (the “La Jolla Judgment”).
Williams, in turn, obtained a judgment on cross-claims against Marsch. Williams declared bankruptcy, and the Horizon
Property became part of the Williams bankruptcy estate.
91. Marsch and LSJH formed HCC in or about June 1997 for the purpose of acquiring, developing, and marketing the
Horizon Property and its golf course, and to pursue related activities. In the Amended and Restated Formation Agreement of
HCC dated June 17, 1997 (“Formation Agreement”), LSJH and Marsch acknowledged that acquisition of the Horizon
Property would require substantial expenditures relating to the Williams litigation. The parties further agreed that each would
contribute its one-half interest in any recoveries from the litigation with Williams, including the La Jolla Judgment, to HCC.
92. On or about January 28, 1998, HCC entered into a Purchase and Sale Agreement with Williams and one of his affiliates
pursuant to which HCC purchased the Horizon Property for $52 million. Because of the personal enmity between Williams
and Marsch, however, Williams and the bankruptcy court required, as part of the purchase, that Marsch divest himself of any
ownership interest in HCC and any other entity having an ownership interest in the Horizon Property (the “Marsch
Restrictions”). The Marsch Restrictions permitted Marsch to retain only an economic relationship with LSJH. Marsch,
Williams and Lennar-Bridges Cross-Plaintiff all acknowledged the Marsch Restrictions in a stipulation filed with the
bankruptcy court on or about January 27, 1998. Pursuant to the stipulation, payments for the purchase of the Horizon
Property funded a trust to pay claims against the Williams bankruptcy estate.
93. The Marsch Restrictions were implemented through an Agreement Assigning Membership Interest (“Marsch
Assignment”) that was executed as of January 28, 1998. Pursuant to the assignment, Marsch assigned his “entire Membership
Interest in [HCC], including his Economic Interest” to Lennar Southland I, Inc. (“Lennar Southland”).
94. The Marsch Restrictions remained in place until on or about March 2004, when, following a settlement with Williams’
estate, Marsch personally was assigned a membership interest in HCC in a document entitled “Agreement Assigning
Membership Interest (Lennar to Marsch)” (the “Membership Reassignment”).
CONDUCT RELATING TO AGREEMENT TO COMMENCE OVERRIDE FEES
95. On or about August 27, 1997, Marsch and LSJH entered into an operating agreement for HCC called the Limited
Liability Company Agreement of HCC Investors, LLC (the “HCC Operating Agreement”). The HCC Operating Agreement
provides at Section 6.05(b) that LSJH and Marsch would each receive “an override fee equal to 3½% of gross sales of all
products, including but not limited to, lots, builder participation, and memberships, excluding monthly dues, within or related
to the Project” (the “Override Fees”).
96. In a subsequent written amendment effective January 1, 1998 (the “Override Amendment”), Marsch and LSJH agreed
that the Override Fees “shall accumulate and not be paid to Marsch or Lennar until Lennar has earned an internal rate of
return on its Capital Contributions equal to 25%, at which time the entire accrued Override shall be paid in full.”
97. In or about July 1999, HCC received approximately $37.5 million from the Williams bankruptcy estate for the La Jolla
Judgment. With Marsch’s knowledge and consent, HCC thereafter made a distribution in that amount to Lennar-Bridges
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Cross-Plaintiff that repaid a portion of Lennar-Bridges Cross-Plaintiff’s capital contributions to HCC and agreed-upon
preference return.
98. Although Marsch was no longer a Member of HCC, he was entitled to receive certain payments pursuant to the Marsch
Assignment. Shortly after HCC received payment on the La Jolla Judgment, Marsch requested that Lennar-Bridges
Cross-Plaintiff agree to modify the Override Amendment so that HCC would start paying Override Fees even though they
were not yet payable under Section 6.05.
99. Lennar-Bridges Cross-Plaintiff agreed to the requested modification (the “Override Payment Agreement”), but did so in
reliance on Marsch’s representations regarding the parties’ mutual understanding that:
a. At the time of the original Formation Agreement, recoveries from litigation involving Williams, including the La Jolla
Judgment, became jointly and equally owned by LSJH and Marsch in 1995 or 1996;
b. LSJH and Marsch had each contributed its and his respective 50% interest in the La Jolla Judgment to HCC at HCC’s
formation in 1997;
c. The parties had agreed at the time of contribution in 1997 that neither would receive a capital account or “preference
account” balance for contributing the La Jolla Judgment; and
d. In July 1999, Marsch did not object to HCC distributing the cash received from the La Jolla Judgment to partially repay
Lennar-Bridges Cross-Plaintiff’s capital contributions and agreed-upon 25% return.
100. Marsch’s foregoing representations were false when made, and Marsch has since repudiated the foregoing
understandings. Had Marsch disclosed in 1999 that he intended to renege on the foregoing matters in whole or in part,
Lennar-Bridges Cross-Plaintiff would not have agreed to modify the timing restriction set forth in the Override Amendment.
MARSCH / BRIARWOOD’S MISUSE OF HCC’S MONEY AND PROPERTY
101. During the course of this litigation, Lennar-Bridges Cross-Plaintiff also has discovered that The Marsch Parties misused
HCC’s money and property, as described herein.
A. $7.5 Million Facility for Litigation Expenses
102. Pursuant to Section 2.1 of the Formation Agreement, LSJH agreed to provide “Strategic Funding” to finance HCC’s
efforts to purchase the Horizon Property. In addition, Strategic Funding was to be used to fund Marsch’s pursuit of the
“Claims” against Williams, including but not limited to paying the attorneys’ fees and related costs incurred by Marsch.
103. Under Section 4 of the Formation Agreement, Marsch was obligated to use Strategic Funding payments only for the
specific purposes described in Section 2.1 of the Formation Agreement. Section 4.1 of the Formation Agreement provides
that, “[u]nless otherwise agreed by Lennar-Bridges Cross-Plaintiff, Marsch shall use any amounts advanced as part of the
Strategic Funding pursuant to Section 2.1 only as specified in this Agreement or as specified in writing by Lennar.”
104. As a further term of the Override Amendment described above, Marsch agreed to “assume all liability and
responsibility” for certain liabilities and obligations under Section 2.1 of the Formation Agreement. In exchange for Marsch
doing so, and based on representations from Marsch as to the anticipated value of the liabilities and obligations at issue,
Lennar-Bridges Cross-Plaintiff agreed to provide Marsch with a $6 million account from which he could pay legitimate
expenses. Marsch could draw on the $6 million until December 31, 2002. Beginning on January 1, 2000, the Override
Amendment applied an interest rate to any undrawn portion of the $6 million.
105. In or about late 1999, Marsch represented to Lennar-Bridges Cross-Plaintiff that $6 million would not be sufficient to
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satisfy the liabilities and obligations he had assumed. Based on Marsch’s representations, Lennar-Bridges Cross-Plaintiff
agreed in or about January 2000 to fund an additional $1.5 million to bring the account total to $7.5 million (hereinafter, the
“Facility”).
106. By the end of 1999, Marsch had drawn $5.54 million on the Facility. Further draws in varying amounts were made over
the ensuing years. In or about October 2006, Marsch drew down the last of the funds in the Facility.
107. On information and belief, The Marsch Parties improperly used funds from the Facility to pay personal or business
expenses not pertaining to the “Claims” or HCC’s operations. Details about the use of the Facility’s funds are solely in The
Marsch Parties’ knowledge.
B. The Marsch Parties’ Continued Acceptance of Contractual Benefits
108. While engaged in their own breaches, The Marsch Parties freely and voluntarily reaped the monetary and other rewards
from their relationship with Lennar-Bridges Cross-Plaintiff and HCC. Through June 30, 2007, Marsch and Briarwood have
received over $16 million in payments pursuant to the HCC Operating Agreement and/or the Override Payment Agreement,
and Marsch individually has received over $6 million in tax distributions from HCC. In addition, Marsch and Briarwood
were given access to the Facility that, as described above, they used in part to pay personal or business expenses unrelated to
HCC.
109. Apart from the substantial cash payments Marsch and Briarwood have received, Marsch also has used his relationship
with Lennar-Bridges Cross-Plaintiff to obtain other benefits from HCC including, but not limited to, reimbursement of meal
and entertainment expenses, membership in the exclusive Bridges club, and marketing of his non-HCC business ventures.
110. While accepting these benefits, Marsch and Briarwood have continued to breach obligations they owed under the HCC
Operating Agreement and/or Override Payment Agreement in a manner designed to lull Lennar-Bridges Cross-Plaintiff into
continuing its funding of HCC’s operations and, in turn, advancing Marsch and Briarwood’s personal interests.
C. The Marsch Parties’ Profiting by Use of The Bridges Name and Logo
111. Lennar-Bridges Cross-Plaintiff is informed and believes, and based thereon alleges, that The Marsch Parties, by,
through, or in concert with an affiliated entity called Colony Properties International, have reaped personal gains by
promoting a vacation home rental business to members of The Bridges Club.
112. Specifically, The Marsch Parties have offered and promoted their vacation rentals on letterhead that prominently
displays the name “The Bridges at Rancho Santa Fe,” a “watermark” photograph of The Bridges clubhouse, and/or a stylized
logo with the words “The Bridges at Rancho Santa Fe” (the “The Bridges Logo” and, collectively with the other matters
described in this sentence, the “Bridges Intellectual Property”). The name “The Bridges at Rancho Santa Fe” and The Bridges
Logo have been used by HCC in commerce since 1999 to distinguish The Bridges as an exclusive residential community and
golf course, and are intellectual property owned by HCC.
113. The Marsch Parties have paid no royalties to HCC, and neither Lennar-Bridges Cross-Plaintiff nor HCC is a participant
in The Marsch Parties’ vacation home rental business.
ALLEGATIONS RELATING TO 1999 LOAN AND MISCONDUCT WITH RESPECT TO HOMESITES 8 AND 9
114. The Marsch Parties also have exploited their relationship with HCC for personal gain by, among other things, obtaining
and then defaulting on loans from HCC and by acquiring two homesites at The Bridges but thereafter violating covenants to
build residences thereon.
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A. 1999 Loan for Purchase of Homesites 8 and 9
115. On September 29, 1999, Marsch sent a letter on Briarwood letterhead to HCC outlining the terms “with regard to
acquisition of [H]omesites 8 & 9.” Legal descriptions of Homesites 8 and 9 are included as Exhibits A and B, respectively, to
the Cross-Complaint and are incorporated by reference as though included herein.
116. In the letter, Marsch set forth a purchase price for Homesite 8 of $1,050,000 and for Homesite 9 of $1,250,000. The
proposed terms also included a 3% discount on the price and a 10% down payment.
117. The balance of the purchase price, including accrued interest, was to be due in 24 months. No interest would accrue for
90 days from the close of escrow and would accrue at 9% simple interest until payment of the balance in full.
118. Marsch also pledged as security “Marsch (or assignee’s) right to distributions from HCC Investors LLC as per section
5.02 of the HCC Investors LLC Agreement dated August 27, 1997, and as amended from time to time.”
119. On October 28, 1999, Marsch and HCC executed a written letter agreement on Briarwood letterhead “regarding
payment of the balance due upon close of residential [H]omesites 8 and 9 at the Bridges development.” At the time of
execution of the letter agreement, contracts for the homes had been signed, deposit checks had been tendered and escrow
documents were in preparation.
120. The terms of the October 28, 1999 letter agreement incorporated the terms of Marsch’s proposed terms in his letter of
September 29, 1999. Specifically: the principal and accrued interest would be payable within 24 months from the close of
escrow; no interest would accrue for a ninety-day period from close of escrow and would accrue at 9% simple interest
thereafter until final payment; and Marsch’s (or assignee’s) rights to distributions from HCC would be pledged as security for
the loan balance. The parties subsequently modified and extended the date of repayment to a date within four years of the
filing of the original cross-complaint in this action. The loan evidenced in this letter agreement is hereinafter referred to as the
“1999 Loan.”
121. Purchase and sale agreements were entered into between HCC and Marsch regarding the purchase of Homesites 8 and 9.
Durign escrow, Marsch assigned the purchase agreements to Colony. On November 30, 1999, escrow on the purchase of
Homesites 8 and 9 closed. The purchase price for Homesite 8 was $1,018,500 and the purchase price for Homesite 9 was
$1,212,500. As of November 30, 1999, and after discounts and down payments, the balance of the 1999 Loan for the
purchase of the two homesites was $2,007,900, which loan balance was owed to the seller, HCC.
122. Although the letter was on Briarwood letterhead, the purchase and sale agreements were between HCC and Marsch, and
the 1999 Loan was used to purchase homesites that, on information and belief, are for Marsch’s personal use, the deeds to
Homesites 8 and 9 granted title to Colony (the “Grant Deeds”).
123. The Marsch Parties have failed to make any payments on the 1999 Loan, thereby harming HCC.
124. As of September 30, 2008, the principal owed on the 1999 Loan was $2,007,900 and accrued interest totaled $
1,560,055.78. Interest continues to accrue on the principal.
B. The Marsch Parties’ Violation of Covenants to Build Residences on Homesites 8 and 9
125. In conjunction with the 1999 Loan, The Marsch Parties executed several agreements spelling out obligations that they,
like all other homeowners within The Bridges community, were required to complete.
126. For both Homesites 8 and 9, The Marsch Parties executed an Agreement of Sale, Deposit Receipt and Escrow
Instructions (“Homesite Agreement”) that referenced the provisions of a Master Declaration of Covenants, Conditions and
Restrictions (“Master Declaration”) and an Option to Repurchase Agreement (“Repurchase Agreement”). In addition, the
Grant Deeds for both Homesites 8 and 9 provide that they are “specifically and expressly conditioned upon [The Marsch
Parties’] performance of all of the covenants and provisions of,” among other things, the Master Declaration and the
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Repurchase Agreement.
127. Section 10.19 of the Master Declaration describes The Marsch Parties’ “Construction Obligation,” which requires The
Marsch Parties to “commence and complete construction of a Residence and landscaping” on both Homesites 8 and 9.
128. The Repurchase Agreement also sets forth several covenants with which The Marsch Parties agreed to comply and that
were intended to “establish a viable and active residential environment as soon as reasonably possible.” One such covenant
requires The Marsch Parties to cause both Homesites 8 and 9 to be developed with single-family residences. The Marsch
Parties covenanted further that construction of the residences would commence no later than thirty months after the date on
which the grant deeds conveying title to Homesites 8 and 9 were recorded in Official Records of San Diego County.
129. The Grant Deeds for Homesites 8 and 9 were recorded on or about November 30, 1999, but, as of this date, The Marsch
Parties have not made any effort to comply with the conditions of those deeds, including their obligations under the Master
Declaration and Repurchase Agreement. Indeed, Homesites 8 and 9 are nothing but vacant lots and undercut the perception
of The Bridges as an exclusive residential and golf community.
130. Pursuant to the Repurchase Agreements, Master Declaration and Grant Deeds, HCC has the right to repurchase
Homesites 8 and 9 for their original purchase price less HCC’s costs of sale and costs to return the Homesites to their original
condition.
ALLEGATIONS RELATING TO 2003 LOAN AGREEMENT
131. On March 10, 2003, Briarwood entered into a written loan agreement with HCC (“2003 Loan”).
132. On March 10, 2003, Briarwood executed a written promissory note evidencing the obligations incurred under the 2003
Loan. Marsch signed the promissory note as Managing Member of Briarwood.
133. On information and belief, the proceeds of the 2003 Loan were to be used by Marsch to replace a personal line of credit.
134. Under the terms of the 2003 Loan, HCC agreed to make a revolving loan to Briarwood in a principal amount not to
exceed $2,000,000. Briarwood was allowed to draw amounts under the 2003 Loan and, as of this date, has drawn the full
amount of $2,000,000.
135. Under the terms of the 2003 Loan, amounts drawn under the 2003 Loan bear interest at a per annum rate equal to the
lesser of: (i) the floating commercial rate of interest announced by Bank of America N.A. as its reference rate plus 1%; and
(ii) 10%.
136. Under the terms of the 2003 Loan, accrued but unpaid interest is to be paid to HCC annually on each annual anniversary
of the original loan date (March 10, 2003).
137. Under the terms of the 2003 Loan, the maturity date of the 2003 Loan was to occur on the earlier of (i) the date which is
six months after the date that the obligation of Briarwood described on page 3, lines 12 through 16 of “that certain Order
entered by the Superior Court of the State of California for the County of San Diego, North County Branch in Case No.
N48177 on February 2, 2001, is satisfied, reversed or otherwise extinguished;” or (ii) the date which is three years after
March 10, 2003. The maturity date of the 2003 Loan was March 10, 2006.
138. All accrued and unpaid interest and unpaid principal was to be paid in full on the maturity date. As of this date, the
Marsch Parties have failed to make any payments on the 2003 Loan, thereby harming HCC.
139. As of September 30, 2008, the principal owed on the 2003 Loan was $2,000,000 and accrued interest totaled
$834,698.63. Interest continues to accrue on the principal.
140. Paragraph 4 of the 2003 Loan agreement provides that “[i]f an action is commenced by a party hereto resulting from a
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dispute arising out of this agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs
from the other party in such action.”
141. Paragraph 6 of the promissory note for the 2003 Loan provides that “[i]f this Note is not paid when due,” Briarwood
“promises to pay all costs” incurred by HCC in collecting the amount due, including “all costs, reasonable attorneys’ fees and
expenses.”
ALLEGATIONS RELATING TO LENNAR BRIDGES
142. In 1998, an opportunity arose to purchase a parcel of real property known as Santa Fe Creek that was adjacent to the
property being developed by HCC. On or about November 12, 1998, Lennar Southland and LSJH formed Lennar Bridges,
LLC to acquire and develop the Santa Fe Creek property and entered into a written operating agreement. On or about
November 19, 1998, Lennar Bridges purchased the Santa Fe Creek property. The properties developed by HCC (the Horizon
Property) and Lennar Bridges (the Santa Fe Creek property) are now commonly known collectively as the “The Bridges.”
143. In the 1990’s, Marsch introduced Lennar-Bridges Cross-Plaintiff to his attorney, Foster. In 1998, on Marsch’s
recommendation, Foster was retained to represent HCC and thereafter Lennar Bridges. Foster has also represented
Lennar-Bridges Cross-Plaintiff on a number of matters over the years, and has jointly represented Lennar-Bridges
Cross-Plaintiff and Marsch. At all material times, Foster owed fiduciary duties to Lennar-Bridges Cross-Plaintiff. In breach
of those duties and unbeknownst to Lennar-Bridges Cross-Plaintiff, Foster provided advice to Lennar-Bridges Cross-Plaintiff
in connection with Lennar Bridges and HCC that was adverse to the interests of Lennar-Bridges Cross-Plaintiff and for the
benefit of Marsch. At all material times, and without disclosing the circumstances to Lennar-Bridges Cross-Plaintiff or
obtaining its waiver, Foster had a conflict of interest in representing Marsch’s interests adverse to Lennar-Bridges
Cross-Plaintiff. As a matter of law and fact, the improper conduct of Foster is attributable to Marsch.
144. Over the years, Lennar-Bridges Cross-Plaintiff had discussions with Marsch about becoming a member of Lennar
Bridges. At all relevant times, Marsch represented and agreed that, if and when he became a member, it would be on the
same or substantially identical terms and conditions as the HCC Operating Agreement. For example, in 1999, Marsch, acting
through Foster, represented and agreed that any interest in Lennar Bridges would be subject to the same terms as the HCC
Operating Agreement (“There are a few items Nick would like to address that fall under the category of ‘clean-up,’ as
follows:... We should prepare an operating agreement for the Santa Fe Creek parcel that parallels the HCC agreement...”).
Also in 1999, Marsch, acting through Foster, again represented and agreed that “We will prepare an agreement which
parallels the HCC agreement to the extent possible.” In 2004, Marsch, again acting through Foster, represented and agreed
that Marsch’s economic interest in Lennar Bridges would be “identical” to Marsch’s interest in HCC. In 2005, Marsch, again
acting through Foster, represented and agreed that any admission of Marsch was subject to an agreement that profits were
only to be distributed after Lennar-Bridges Cross-Plaintiff receives a return of its capital and a preferred return. And in a
2006 memorandum to Lennar-Bridges Cross-Plaintiff and Marsch, Foster confirmed Marsch’s prior representations and
agreements that any interest Marsch would have in Lennar Bridges would be “identical to his interest in HCC.”
145. Lennar-Bridges Cross-Plaintiff has invested tens of millions of dollars in Lennar Bridges in reliance on Marsch’s and
Foster’s assurances that, should Marsch become a member of Lennar Bridges, Lennar-Bridges Cross-Plaintiff’s and Marsch’s
economic interests in Lennar Bridges would be governed by the terms and conditions of the HCC Operating Agreement.
Marsch has never invested any capital or made any other investment in Lennar Bridges.
146. In 2006, Marsch, with the aid and assistance of Foster, demanded that he be admitted as a member of Lennar Bridges
and that Lennar-Bridges Cross-Plaintiff execute a Membership Admission Agreement for Lennar Bridges, LLC (the
“Admission Agreement”) with the express understanding that the parties’ interests in Lennar Bridges would be governed by
the terms of the HCC Operating Agreement, and that, as a condition of the Admission Agreement, an operating agreement
would be documented to reflect those terms and conditions.
147. The foregoing representations were false when made and made with the intent to deceive and to induce reliance. When
making the foregoing representations and agreements, Marsch never intended to comply with them. Marsch has now
repudiated his representations and agreement that, should Marsch be admitted as a member, Lennar Bridges shall be
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governed by the same or substantially identical terms and conditions as the HCC Operating Agreement.
148. In actual and justifiable reliance on Marsch’s representation and agreement that any interest he had in Lennar Bridges
would be on the same or substantially identical terms as his interest in HCC, in June of 2006, Lennar-Bridges Cross-Plaintiff
signed the Admission Agreement. The Admission Agreement does not set forth Marsch’s percentage interest in Lennar
Bridges or the parties’ respective interests. Instead, it expressly states that “[a]s soon as practicable after the execution of this
Agreement, Lennar and Briarwood shall prepare and execute an amended and restated operating agreement for the Company
for the purpose of describing their respective interests in the Company.”
ALLEGATIONS RELATING TO THE TOLLING AGREEMENT
149. In 2002, Foster, at the direction of and on behalf of Marsch, advised Lennar-Bridges Cross-Plaintiff that it was in
Lennar-Bridges Cross-Plaintiffs best interests to enter into a tolling agreement that purported to toll the statute of limitations
for claims regarding “potential financial accounting disputes... between the Parties with regard to the development of [The
Bridges] and the operation of HCC...” The term of the agreement was purported to be through August 2006. Lennar-Bridges
Cross-Plaintiff agreed to enter into the 2002 tolling agreement in reliance on Marsch’s misrepresentations and
non-disclosures of material facts, including, but not limited to his and Foster’s conflicts of interest with respect to Foster’s
knowingly false advice and with respect to the La Jolla Judgment, as alleged more fully above in paragraphs 21-26.
150. In December 2005, Foster, at the direction of Marsch, advised Lennar-Bridges Cross-Plaintiff to sign a purported
“Renewed Statute of Limitations Tolling Agreement” to extend the agreement to toll the statute of limitations to December
31, 2006. Foster advised Lennar-Bridges Cross-Plaintiff that this 2005 extension was in the “best interests” of
Lennar-Bridges Cross-Plaintiff, that the extension was just a “loose end” that needed “cleaning up”, that the extension was
“virtually identical” to the 2002 tolling agreement and that it was “designed merely to preserve the status quo.” The 2002
tolling agreement and the 2005 extension are collectively referred to herein as the “Tolling Agreement.”
151. The foregoing statements were false when made and made with the intent to deceive and induce reliance. For example,
the 2002 tolling agreement was not in Lennar-Bridges Cross-Plaintiffs best interests and only tolled claims by Marsch against
Lennar-Bridges Cross-Plaintiff, not claims by Lennar-Bridges Cross-Plaintiff against Marsch. The 2005 extension was not
“virtually identical” to the 2002 tolling agreement, was not “designed merely to preserve the status quo,” and was not in
Lennar-Bridges Cross-Plaintiffs “best interests.” The two documents differed in a number of ways, including:
• The 2005 extension added a new party -- Lennar Southland -- that was not a party to the 2002 tolling agreement.
• While the 2002 tolling agreement contained no mention of Lennar Bridges, the 2005 extension injected a new recital,
stating: “On or about November 12, 1998, Lennar San Jose Holdings and Lennar Southland entered into that certain Limited
Liability Company Agreement of Lennar Bridges, LLC, to acquire a parcel of land adjacent to the Project for development
and incorporation into the Project. The Parties agree that Marsch is entitled to own a 50% interest in Lennar Bridges, LLC
and documentation is currently being prepared to memorialize Marsch’s interests.”
152. Lennar-Bridges Cross-Plaintiff actually and reasonably relied on the foregoing representations when signing the 2002
tolling agreement and 2005 extension.
DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS
153. Lennar-Bridges Cross-Plaintiff brings the derivative claims set forth herein in the name and for the benefit of HCC to
redress the injuries suffered and recover the amounts owed by The Marsch Parties’ failure to pay amounts validly and legally
owed to HCC. Lennar-Bridges Cross-Plaintiff will adequately and fairly represent the interests of HCC in enforcing and
prosecuting its rights.
154. At all times relevant to the derivative claims asserted herein, cross-complainants Lennar San Jose or LLP II were
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members of HCC.
155. Lennar-Bridges Cross-Plaintiff has not made any demand of HCC to institute this action because such demand would be
a futile, wasteful, and useless act. Marsch currently is a member of HCC’s Executive Committee with the ability to veto any
action that could be taken with regard to his and the other The Marsch Parties’ failure to pay amounts owing to HCC. Thus,
Marsch cannot exercise independent, objective judgment in deciding whether to bring an action or whether to vigorously
prosecute an action because Marsch and the other The Marsch Parties are interested personally in the outcome, thereby
excusing demand.
IV. FACTUAL ALLEGATIONS - FLORIDA ACTION
156. In September 2008, Lennar-Florida Plaintiff filed a lawsuit-- Lennar Corporation, a Delaware corporation, et. al. v.
Briarwood Capital, LLC, a Delaware limited liability company, et. al, Case No. 08-55740 CA 40 (the “Florida
Action”)-against Briarwood Capital, LLC and Mr. Marsch (collectively, the “Marsch Parties”) in state court in Miami-Dade
County, Florida after the Marsch Parties published a highly defamatory and extortionate letter threatening to “expose”
supposed crimes of Lennar-Florida Plaintiff management to the Securities and Exchange Commission if Lennar-Florida
Plaintiff did not pay them millions of dollars.
157. In January 2009, Lennar-Florida Plaintiff amended its complaint to add as Defendants Barry Minkow and the Fraud
Discovery Institute, Inc. (the “Minkow Parties” and, together with Marsch and Briarwood, the “Defendants”), after the
Minkow Parties, on behalf of the Marsh Parties, publicly and falsely accused Lennar-Florida Plaintiff and its management of
operating their joint ventures “exactly like a ponzi scheme,” giving its Chief Operating Officer a $5 million “disguised
kickback,” and being a “financial crime in progress.” These attacks caused Lennar-Florida Plaintiff catastrophic damage,
including nearly $400 million in shareholder value in one day, and nearly a half-billion more after successive blasts. (A true
and correct copy of Lennar-Florida Plaintiff’s Fourth Amended Complaint, with exhibits, filed on February 17, 2010 (the
“FAC”), is attached hereto as Exhibit 4 and is incorporated herein by this reference.)
158. The Marsch Parties have threatened, extorted, and defamed Lennar-Florida Plaintiff in connection with two real estate
developments in Southern California known as the “Lakes at Rancho Santa Fe” and the “Bridges.”
159. In February 2006, Lennar-Florida Plaintiff acquired the Lakes at Rancho Santa Fe in a joint venture with a Miami,
Florida investment company called Quadrant San Diego LLC (“Quadrant”). The purchase price was approximately $130
million. Pursuant to Lennar-Florida Plaintiff’s February 2006 agreement with Quadrant, Quadrant contributed 75% of the
original purchase price and assumed a significant portion of the project risk. In addition to contributing 25% of the original
purchase price, Lennar-Florida Plaintiff contributed significant amounts of capital for the development of the property. The
combined total purchase price and invested development capital has exceeded $200 million to date.
160. After the acquisition of the property, the Marsch Parties began a campaign of letter-writing and other misconduct
designed to force Lennar-Florida Plaintiff to pay millions of dollars to the Marsch Parties. On May 19, 2006, the Marsch
Parties sent a letter to Lennar-Florida Plaintiff’s counsel in Miami, Florida threatening to tie up and place a cloud on the title
of the Lakes at Rancho Santa Fe unless Lennar-Florida Plaintiff paid them money. (A copy of the May 19, 2006 letter is
attached to the FAC as Exhibit A.)
161. After Lennar-Florida Plaintiff did not accede to the Marsch Parties’ extortionate demands, the Marsch Parties threatened
to wrongfully interfere and did wrongfully interfere with Lennar-Florida Plaintiff’s business and contractual relationship with
Quadrant. On June 13, 2006, the Marsch Parties sent a letter to Quadrant in Florida intended to disrupt and interfere with
Lennar-Florida Plaintiff’s business relationship with Quadrant. (A copy of the June 13, 2006 letter is attached to the FAC as
Exhibit B.)
162. Even then, Lennar-Florida Plaintiff refused to accede to the Marsch Parties’ extortionate demands. At that point, the
Marsch Parties wrongfully and maliciously recorded a lis pendens against the Lakes at Rancho Santa Fe property. The lis
pendens was wrongful because, among other reasons, the Marsch Parties did not have, and indeed subsequently admitted in
sworn testimony that they did not have, any ownership interest in the real property itself. Although Lennar-Florida Plaintiff
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ultimately was able to have the lis pendens expunged, the damage had already been done. Faced with the Marsch Parties’
threats, interference and extortionate demands, Quadrant refused to invest further capital into the project and insisted that
Lennar-Florida Plaintiff buy its interest back.
163. In February 2007, Lennar-Florida Plaintiff purchased Quadrant’s interest in the Lakes at Rancho Santa Fe. As a
consequence, Lennar-Florida Plaintiff has been forced to bear 100% of the cost and risk of the project. After Lennar-Florida
Plaintiff’s purchase of Quadrant’s interest in the venture, the real estate market continued a dramatic decline to historic lows,
causing Lennar-Florida Plaintiff to incur substantial losses. Had the Marsch Parties not interfered with Lennar-Florida
Plaintiff’s business relationship with Quadrant, Lennar-Florida Plaintiff would not have been exposed to 100% of these
losses. As a result of the Marsch Parties’ wrongful acts, Lennar-Florida Plaintiff has suffered direct and immediate losses in
connection with the Lakes at Rancho Santa Fe of more than $50 million above and beyond what it would have suffered had
the Marsch Parties not wrongfully interfered with Lennar-Florida Plaintiff’s relationship with Quadrant.
164. Still, Lennar-Florida Plaintiff refused to capitulate to the Marsch Parties’ extortionate demands. On July 11, 2008, the
Marsch Parties sent seven separate, but identical, harassing and threatening letters (the “Letters”) to each of Lennar
Corporation’s outside independent members of its Board of Directors. The Letters made defamatory statements and constitute
libel per se, as well as a violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201, et seq. (A
copy of one of the July 11, 2008 Letters is attached to the FAC as Exhibit C.)
165. Specifically, but without limitation, the Letters included malicious, false, and libelous statements about Lennar-Florida
Plaintiff and its management, charging them with self-dealing, malfeasance, incompetence, and misappropriation of funds,
among other false accusations. After pages of knowingly false and malicious assertions, the Marsch Parties threatened to “air
[Lennar-Florida Plaintiff’s] dirty little secrets” if Lennar-Florida Plaintiff did not make an immediate payment of $39 million
to the Marsch Parties. The Letters also threatened that Lennar-Florida Plaintiff must take certain action in order to “avoid the
embarrassment of having these, and other issues, brought to light....” The Letters threatened that, unless Lennar-Florida
Plaintiff capitulated to the Marsch Parties’ extortionate demands, they would report Lennar-Florida Plaintiff to the Securities
and Exchange Commission and the company’s auditors.
166. The Marsch Parties sent the Letters to each of the following seven outside directors of Lennar Corporation c/o Lennar
Corporation at 700 NW 107th Avenue, Miami, Florida:
A. Jeffrey Sonnenfeld -- Senior Associate Dean for Executive programs, Lester Crown Professor-in-the-Practice of
Management for the Yale School of Management, and Founder and President of the Chief Executive Leadership Institute of
Yale University.
B. Steven Gerard -- Chief Executive Officer of Century Business Services, Inc. (“CBIZ”). In the past, Mr. Gerard served as
the Chairman and CEO of both Triangle Wire & Cable, Inc and Great Point Capital, Inc.; Senior Managing Director for
Citibank; and Vice President of AMEX’s Securities Division.
C. Sherrill Hudson -- Chairman and Chief Executive Officer of TECO Energy, Inc “TECO”). Prior to joining TECO in July
2004, Mr. Hudson spent 37 years with Deloitte & Touche LLP until he retired in 2002, including 19 years in Miami as
Managing Partner for its South Florida offices.
D. Sidney Lapidus -- Retired partner of Warburg Pincus LLC, where he served from 1967 until 2007. Mr. Lapidus presently
serves as a director of Lennar Corporation, Knoll, Inc. and The Nieman Marcus Group, Inc, as well as many nonprofit
organizations, including New York University School of Medicine, and is president of the American Jewish Historical
Society.
E. Irving Bolotin -- served as the Vice President of Lennar from 1972 until his retirement in 1998 and served as a Director of
Lennar Corporation from 1974 until his retirement. Mr. Bolotin also serves on the Board of Directors of Rechtien
International Trucks, Inc.
F. R. Kirk Landon -- served as a Director of Lennar Corporation since January 1999. Since 1996, Mr. Landon has served as
the President of The Kirk Foundation and President of The Kirk A. and Dorothy P. Landon Foundation. Prior to that, Mr.
Landon served as Chairman of Orange Clothing Company and as Chairman of Innovative Surveillance Technology. Mr.
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Landon also served on the Board of Trustees of Barry University and currently serves on the Board of Trustees of Florida
International University.
G. Donna Shalala -- President of the University of Miami. Ms. Shalala has a long history of leadership and service, including
holding such posts as: Secretary of the U.S. Department of Health and Human Services, Chancellor of the University of
Wisconsin-Madison, and President of Hunter College of the City University of New York.
167. The Marsch Parties also published the Letters to Richard Mager, a member of the California business community,
among others.
168. When Lennar-Florida Plaintiff still refused to pay the Marsch Parties money, the Marsch Parties turned to Barry
Minkow--an admitted perpetrator of financial frauds who served 7 years of a 25-year prison sentence--his company the Fraud
Discovery Institute
169. In or around November 2008, the Minkow Parties conspired and entered into an agreement with the Marsch Parties to
use fraud, identity theft, and manipulation of the public securities markets, among other things, to harm Lennar-Florida
Plaintiff’s business and reputation in an effort to force Lennar-Florida Plaintiff to pay millions of dollars to all Defendants.
The Minkow Parties knew about, approved of, and ratified the Marsch Parties’ prior illegal conduct and agreed to continue
the scheme. The Marsch Parties agreed to pay the Minkow Parties to help further the illegal scheme. The Marsch Parties and
Minkow Parties agreed to use a “full flurry of attacks” and “potential unveiling” of alleged wrongdoing by Lennar-Florida
Plaintiff and its executives to create “pressure from the outside auditors, . . . stock analysts, and even the outside media.” The
ultimate goal of this “blitzkrieg approach” was to extort Lennar-Florida Plaintiff into paying millions of dollars to the Marsch
Parties who, in turn, would pay money to the Minkow Parties.
170. Among other things, with the knowledge, consent, and ratification of the Marsch Parties, and as agents of the Marsch
Parties, the Minkow Parties have disseminated knowingly false and fraudulent statements about Lennar-Florida Plaintiff and
its senior executives in order to damage Lennar-Florida Plaintiff’s reputation, stock price, and business. In pursuing these
illicit objectives, the Minkow Parties have committed numerous illegal, malicious, and harmful acts as agents of the Marsch
Parties.
171. For example, without limitation, in or about November 2008, the Minkow Parties contacted Michael Morgan, a resident
of Stuart, Florida, in order to defame Florida resident Lennar-Florida Plaintiff and its executives, including Chief Executive
Officer Stuart Miller, a Florida resident, Chief Operating Officer Jonathan Jaffe. On several occasions throughout November
and December 2008, the Minkow Parties emailed documents to Mr. Morgan and called him in Florida to speak on the
telephone. In the emails and on the phone, the Minkow Parties made false statements about, among other things, (a) Mr.
Jaffe’s personal residence in Laguna Beach, California; (b) a $5 million loan to Mr. Jaffe by Mr. Robert Venneri of Canyon
Finance, Inc. in August 2007 secured by an interest in Mr. Jaffe’s personal residence; (c) a connection between Mr. Jaffe’s $5
million loan and a real estate transaction in which one of Mr. Venneri’s companies had been involved; (d) a connection
between Mr. Jaffe’s $5 million loan and a another company called SunCal; and (e) Lennar-Florida Plaintiff’s failure to report
these alleged connections as “related party transactions” in financial statements required by the SEC. These statements
constitute defamation per se, as well as a violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §
501.201, et seq.
172. The Minkow Parties encouraged Mr. Morgan to notify Lennar-Florida Plaintiff that the Marsch and Minkow Parties
possess powerful connections in the media and government and they intended to go public with inflammatory allegations
about Lennar-Florida Plaintiff and its management unless Lennar-Florida Plaintiff agreed to pay off the Marsch Parties. Mr.
Morgan contacted Lennar-Florida Plaintiff’s General Counsel in Miami, Florida and conveyed this information.
173. On or about December 12, 2008, and before Lennar-Florida Plaintiff had any knowledge or information about the
Minkow Parties or any of their above-described activities and plans, an unknown individual--who on information and belief
was one of the Defendants or working for them--falsely, fraudulently, and illegally misrepresented himself to be Mr. Jaffe’s
loan broker Robert Venneri to Wells Fargo Bank, a federally insured bank, in an effort to illegally obtain private and
confidential financial information. The imposter’s call was directed to Oscar Diaz, a Wells Fargo relationship manager
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responsible for Mr. Venneri’s business accounts. The imposter, claiming to have a “cold” that he caught from “Cheryl,” the
first name of Mr. Venneri’s spouse, pretended to be Mr. Venneri, offered to provide private account information to
substantiate his identity, and asked Mr. Diaz to tell him the “source of funds” in a particular account in August 2007, the
approximate time of the Canyon Finance loan to Mr. Jaffe.
174. This illegal pretexting failed when Mr. Diaz, who suspected the caller was not Mr. Venneri, contacted the real Mr.
Venneri and determined the inquiry was fraudulent. Upon being informed that the caller was falsely representing himself to
be Mr. Venneri, Mr. Diaz terminated the call.
175. After the foregoing events occurred, Lennar-Florida Plaintiff met with Mr. Morgan and, for the first time, learned of all
Defendants’ interest in the August 2007 loan to Mr. Jaffe and extortionate threats to “go public” if the Marsch Parties were
not paid off. Lennar-Florida Plaintiff sought to contact Mr. Venneri to apprise him of all Defendants’ allegations. In the
process, Lennar-Florida Plaintiff then learned of the December 12 illegal pretexting attempt to obtain confidential bank
account information from Wells Fargo. Lennar-Florida Plaintiff immediately commenced an investigation and served
subpoenas for the depositions of Mr. Diaz in California and Mr. Morgan in Florida.
176. At Mr. Diaz’s deposition on January 6, 2009, the Marsch Parties’ counsel was present, heard a complete account of the
illegal pretexting, and cross-examined the witness.
177. Because of the subpoena to Mr. Morgan, the Marsch Parties also knew Lennar-Florida Plaintiff was about to take Mr.
Morgan’s deposition on January 9 to obtain his testimony about the Minkow Parties’ communications regarding the loan Mr.
Venneri arranged for Mr. Jaffe. Anticipating this incriminating disclosure about the target of the illegal pretexting scheme,
just hours before the deposition of Mr. Morgan commenced, the Minkow Parties, acting to further the wrongful interests of
the Marsch Parties, made good on their threat to “go public” and launched a vicious, malicious, and false public attack on
Lennar-Florida Plaintiff throughout the country, including directing defamatory materials into Florida.
178. Before the New York Stock Exchange opened on January 9, 2009, the Minkow Parties, on behalf of the Marsch Parties,
issued a widespread press release stating that FDI had “launched” the “Top 10 Red Flags for Fraud at Lennar Corporation.”
The press release, which had been reviewed and approved by the Marsch Parties, directed members of the business
community and public throughout the U.S. to a new website created and maintained by the Minkow Parties called
“www.lenn-ron.com” in an express effort to associate Lennar-Florida Plaintiff with Enron Corporation, a company famously
accused of illegal accounting. On this website and their home website, “www.frauddiscovery.net,” the Minkow Parties posted
links to other false content about Lennar-Florida Plaintiff.
179.
The
“lenn-ron”
website
includes
a
link
to
a
video
hosted
by
YouTube.com
(http://www.youtube.com/watch?v=B-GvyWJOCYM). In the linked video, Minkow repeatedly and falsely accuses
Lennar-Florida Plaintiff of being a “financial crime in progress,” of being a “fraud,” of “conceal[ing] debt” and “misallocat
[ing] or misappropriat[ing] funds between joint ventures,” and of being plagued by “an environment of fraud at the highest
levels”--as supposedly evidenced by “a third trust deed Five Million Dollar loan” as a “disguised kickback using the sale of
his primary residence.” (A transcript of the content of the Minkow video is attached to the FAC as Exhibit D.)
180. Further examples of the false and libelous material on the “lenn-ron” site come from a 30-page “report” written in the
form of a letter to agents of the Securities and Exchange Commission, Federal Bureau of Investigations, and Internal
Revenue Service. In this “report,” a copy of which is attached to the FAC as Exhibit E, the Minkow Parties confirm that
their “clients” are the Marsch Parties on whose behalf the Minkow Parties were acting. The Minkow Parties thereafter made
numerous false and malicious statements including, without limitation, accusing Lennar-Florida Plaintiff of:
a. Being like accused Ponzi-scheme operator Bernie Madoff and “treat[ing] their joint ventures exactly like a Ponzi scheme”;
b. Taking money to which Lennar-Florida Plaintiff was not entitled or bilking its business partners out of their investments;
c. Failing to account to its business partners;
d. Engaging in “RICO type of intentional bullying behavior”;
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e. Being “the ‘bully of the prison yard’ ” by “knowingly and willfully abusing the legal system to gain an unfair advantage
over the less capitalized, smaller entities”;
f. Failing to comply with securities laws by not disclosing the $5 million loan to Mr. Jaffe, which is likened to an illegal
“kickback,” as a “related party transaction”;
g. Committing accounting or securities reporting violations in connection with disclosures relating to Lennar-Florida
Plaintiff’s joint ventures;
h. Overstating its income and “conceal[ing]” debt for the purpose of hiding a “true financial condition border[ing] on
insolvent”; and
i. Inventing the December 12 incident wherein the imposter tried to obtain private and confidential financial information from
Wells Fargo Bank.
181. The press release, the “lenn-ron” website, and the content accessible by the links thereon make multiple false, malicious,
and defamatory statements and constitute libel per se, as well as a violation of the Florida Deceptive and Unfair Trade
Practices Act, Fla. Stat. § 501.201, et seq.
182. The Minkow and Marsch Parties’ press release, the Minkow Parties’ websites, and the youtube video were published
nationally and in the State of Florida. Florida resident Morgan viewed the press release and websites in Florida on January 9
and later. Several Lennar-Florida Plaintiff officers in Florida also viewed the press release, websites, and youtube video in
Florida on January 9 and later. Minkow contacted a reporter from the Miami Herald in connection with the launch of the
press releases, repeating his libelous statements about Lennar-Florida Plaintiff and its management.
183. Minkow Parties’ actions, at the direction of the Marsch Parties, to further the wrongful objectives and tactics of the
Marsch Parties were designed to severely and fraudulently manipulate and did manipulate the public market for
Lennar-Florida Plaintiff’s securities, in addition to damaging Lennar-Florida Plaintiff’s business operations and reputation.
184. As a direct and immediate consequence of the Minkow Parties’ broad public dissemination of the January 9, 2009 press
release and the content of the “lenn-ron” website, together with the Minkow Parties’ continuing other statements to the media
and investment community, Lennar Corporation’s stock plunged more than 20%, falling from $11.42 at the previous day’s
close to a low of $8.23. By the end of trading on January 9, the stock had recovered slightly to $9.15--but more than $364
million in market capitalization had been lost in an unprecedented trading of more than 58 million shares of Lennar
Corporation. In addition to reputational harm, the artificial decrease in Lennar Corporation’s stock price negatively impacted
Lennar-Florida Plaintiff’s credit rating, ability to borrow capital, subsequent equity offerings, and day-to-day, long-term, and
strategic operations, among other things.
185. Since the January 9 “report” and press release, the Minkow Parties, on behalf of the Marsch Parties, have disseminated
throughout the country and into Florida additional false, misleading, and malicious information about Lennar-Florida
Plaintiff, including:
a. On January 12, 2009, the Minkow Parties disseminated additional false, misleading, and malicious information about
Lennar-Florida Plaintiff, including a new press release accusing Lennar Corporation’s Chief Executive Officer of “lying.”
(The January 12, 2009 press release is attached to the FAC as Exhibit F.)
b. On January 13, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a press release entitled “FDI Releases
Top 5 LIE-NNAR Lies With New Web Site and New Evidence on Lennar Corporation,” and issued a “report” entitled “Top
5 Lies from LIE-NNAR.com (Lennar Corporation NYSE:LEN)”, and launched a new website, entitled: www.lie-nnar.com.
The release included additional false accusations of fraud, concealment of debt and malfeasance in every area Lennar-Florida
Plaintiff does business. (The January 13, 2009 press release and report are attached to the FAC as Exhibits G and H.)
c. On January 23, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a press release entitled: “[FDI] releases
rebuttal to Lennar (NYSE:LEN) responses through new You Tube video and new evidence including a certified appraisal
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review;” posted a report on their website by G. Hatch and entitled “Review of J. Jaffe Appraisal Report dated 9/07/07;” and
posted a You Tube video featuring Minkow making additional false statements about Lennar-Florida Plaintiff and its
executives. The release once again falsely compared Lennar-Florida Plaintiff’s joint ventures to Ponzi schemes and accused
Lennar-Florida Plaintiff of fraudulent accounting. (The press release, Hatch Report, and youtube transcript are attached to the
FAC as Exhibits I, J, and K.)
d. On January 30, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release
entitled “Californians for Renewable Energy, Inc. (CARE), and [FDI] join forces in action against Lennar Corporation
(NYSE:LEN) through potential civil racketeering case.” (The January 30, 2009 press release is attached to the FAC as
Exhibit L.)
e. On February 4, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a press release entitled “Fiduciary
Analyst Chris McConnell Expands Scope of Lennar Concerns With New Report, Says [FDI], and posted a “report” by Chris
McConnell on the FDI website. The report falsely accused Lennar-Florida Plaintiff and its executives of breaches of fiduciary
duty and once again compared Lennar-Florida Plaintiff to Enron. (The February 4, 2009 press release and McConnell Report
are attached to the FAC as Exhibits M and N.)
f. On February 19, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release
entitled “New analyst report: Lennar (NYSE:LEN) has 72% chance of bankruptcy within 2 years;” and posted a “report” by
Reggie Middleton on their websites. (The February 19, 2009 press release and Middleton Report are attached to the FAC as
Exhibits O and P.)
186. When Lennar-Florida Plaintiff still refused to be extorted, the Minkow Parties, on behalf the Marsch Parties, called
Florida resident Morgan again in mid-March 2009. In these telephone conversations, the Minkow Parties falsely stated that
two senior Lennar-Florida Plaintiff officers maintain bank accounts in the Cayman Islands and/or Switzerland; the officers
illegally diverted funds from Lennar-Florida Plaintiff and/or its joint ventures into these secret bank accounts; and the
officers did not declare these alleged accounts on their tax returns. The Minkow Parties falsely told Mr. Morgan they
possessed signature cards and other private information to prove the existence of the alleged Cayman Islands and Swiss bank
accounts. The Minkow Parties threatened to disclose this information publicly and encouraged Mr. Morgan to convey this
information to Lennar-Florida Plaintiff’s General Counsel in Miami. These false statements constitute defamation per se, as
well as a violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201, et seq.
187. Lennar-Florida Plaintiff continued refused to pay money, so the Minkow Parties, on behalf of the Marsch Parties, sent
an email to Lennar-Florida Plaintiff outside director R. Kirk Landon in Miami, Florida on April 14, 2009. The April 14, 2009
email attached what the Minkow Parties claimed was an internal memorandum from an anonymous Lennar-Florida Plaintiff
“insider.” On information and belief, the internal memorandum is a fraudulent document created by the Marsch Parties, the
Minkow Parties and/or someone working in concert with them. (A copy of the April 14, 2009 Email is attached to the FAC as
Exhibit Q.)
188. Lennar-Florida Plaintiff director Sidney Lapidus notified the Minkow Parties that Lennar-Florida Plaintiff’s Board of
Directors had investigated their claims and determined that they lacked merit.
189. Within hours of receiving Mr. Lapidus’s response, the Minkow Parties sent an email to Lennar-Florida Plaintiff’s
General Counsel in Miami threatening to continue the Marsch Parties’ and Minkow Parties’ extortionate, defamatory, and
fraudulent scheme:
[W]hat I will say is if you guys did not like the first report, you will not like the sequel: “Lennar, the Sequel -- Coming to
an FDI web site near you.” It’s really cool because we’ve got that Don Lafontaine thing going to introduce the
documentary/report with the movie preview voice over with the deep, recognizable voice that begins the documentary: “In a
world where fraud is king there is one company that stands out....” well, you can figure out the rest.
(Bold in original April 16, 2009 Minkow/FDI Email) (A copy of the April 16, 2009 Email is attached to the FAC as Exhibit
R.)
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190. Thereafter, the Minkow Parties, on behalf of the Marsch Parties, continued their extortionate scheme. They have
disseminated throughout the country and into Florida additional false, misleading, and malicious information about
Lennar-Florida Plaintiff, including:
a. On May 13, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release entitled
“Lennar (NYSE:LEN) CEO Stuart Miller and COO Jon Jaffe have bank accounts in the Caymans, Switzerland” and a
youtube video, in which Mr. Minkow falsely stated that Mr. Miller and Mr. Jaffe maintain accounts at banks in the Cayman
Islands and Switzerland. (A copy of the May 13, 2009 Press Release and transcript of the May 13, 2009 youtube video are
attached to the FAC as Exhibits S, T.)
b. On May 27, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release stating
that Lennar’s CEO and COO “conspired” with third-parties to “defraud its joint venture partner.” (A copy of the May 27,
2009 Press Release is attached to the FAC as Exhibit U.)
c. On October 7, 2009, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release
stating that “Lennar Corporation does not generate ‘profits’ as a home-builder and hasn’t for years” and the company “really
generates income through the victimization of local, entrepreneurial builders and developers who enter into these ‘joint
venture projects’ involving land and development but whose end is demise.” (A copy of the October 7, 2009 Press Release is
attached to the FAC as Exhibit V.)
d. On January 14, 2010, on behalf of the Marsch Parties, the Minkow Parties issued a false and misleading press release
stating that Lennar-Florida Plaintiff mislead the investing public about its business operations: “Wall Street expected a loss
and shares rose on the news of the profit. But was it really a profit? Not really.” The press release also made false statements
regarding compensation and bonuses for senior Lennar-Florida Plaintiff management. (A copy of the January 14, 2010 Press
Release is attached to the FAC as Exhibit W.)
191. Each of the foregoing communications, press releases, reports, and youtube videos contain false and defamatory
statements about Lennar-Florida Plaintiff, were published maliciously and in furtherance of the Marsch Parties’ and Minkow
Parties’ extortionate, defamatory, and fraudulent objectives and tactics, and were disseminated within the State of Florida
with the specific intention of causing massive financial harm to Lennar-Florida Plaintiff in Florida, which they succeeded in
doing. The continuing barrage of knowingly false statements by the Minkow Parties, made on behalf of the Marsch Parties, to
the investing public further drove down the share price of Lennar Corporation stock causing hundreds of millions of dollars
in damage. In addition to reputational harm, the artificial decrease in Lennar-Florida Plaintiff’s stock price negatively
impacted Lennar-Florida Plaintiff’s credit rating, ability to borrow capital, subsequent equity offerings, and day-to-day,
long-term, and strategic operations, among other things. These subsequent press releases, reports, and youtube videos
constitute libel per se, as well as violations of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201, et
seq.
V. STATE LAW CLAIMS IN THE DLA1 ACTION
192. Plaintiff incorporates by reference paragraphs 1 through 191 above, inclusive, and each and every such paragraph by
reference as if set forth in full herein.
A. Conspiracy to Breach Fiduciary Duty - (Fifth Cause of Action in the DLA1 Action)
193. Beginning shortly after Lennar-DLA 1 Plaintiff retained DLA Piper and Foster for the McCrink property matter, the
Marsch Parties knowingly and willfully conspired and agreed among themselves to secretly deceive Lennar-DLA 1 Plaintiff
and induce it to take actions with respect to the McCrink property that advanced Marsch’s interests at Lennar-DLA 1
Plaintiff’s expense. As alleged above, such acts constitute breaches of the fiduciary duties owed by DLA Piper and Foster to
Lennar-DLA 1 Plaintiff.
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194. To advance the wrongful purposes of that conspiracy, the Marsch Parties (a) employed the services of Foster to provide
advice and representation to Lennar-DLA 1 Plaintiff that would serve the interests of Marsch to Lennar-DLA 1 Plaintiff’s
detriment; (b) undertook the concurrent and conflicting representation of Marsch without disclosure to and consent from
Lennar-DLA 1 Plaintiff; (c) disclosed Lennar-DLA 1 Plaintiff’s confidential and privileged information to Riney without
Lennar-DLA 1 Plaintiff’s knowledge or authorization; (d) concealed from Lennar-DLA 1 Plaintiff the disclosure of
confidential and privileged information to Riney and Riney’s role in advising Lennar-DLA 1 Plaintiff; and (e) concealed
from Lennar-DLA 1 Plaintiff Marsch’s intentions and actions to assert an interest in McCrink Ranch.
195. The Marsch Parties’ conspiracy continued through at least November 2006, if not later.
196. As a direct and proximate result of the Marsch Parties’ conspiracy (a) Lennar-DLA 1 Plaintiff entered into a transaction
to purchase the McCrink property without knowledge of Marsch’s intent and plan to assert an ownership interest in the
property, which facts were known to DLA Piper and Foster; (b) Lennar-DLA 1 Plaintiff acquired the McCrink property on
terms it would not have otherwise accepted; (c) Lennar-DLA 1 Plaintiff incurred expenses and made payments to third
parties in the course of acquiring the McCrink property necessitated by DLA Piper and Foster’s breach of their fiduciary
duties; (d) Lennar-DLA 1 Plaintiff paid legal fees to DLA Piper and Foster during the period they were in breach of their
duties; (e) Lennar-DLA 1 Plaintiff incurred substantial legal fees to defend against Marsch’s claims (brought through
Briarwood) relating to McCrink; and (g) Lennar-DLA 1 Plaintiff suffered exposure to expenses, losses, or risks associated
with the development of the McCrink property. As a result, Lennar-DLA 1 Plaintiff has suffered millions of dollars of
monetary damages in an amount to be proven at trial.
197. The Marsch Parties’ conspiracy to breach a fiduciary duty was willful, oppressive, and malicious. Consequently,
Lennar-DLA 1 Plaintiff is entitled to recover punitive damages.
B. Aiding and Abetting Breaches of Fiduciary Duties (Sixth Cause of Action in the DLA1 Action)
198. Marsch willfully and maliciously aided and abetted DLA Piper and Foster’s breaches of their fiduciary and professional
duties to Lennar-DLA 1 Plaintiff.
199. As a direct and proximate result of Marsch’s aiding and abetting of the breaches of fiduciary and professional duties by
DLA Piper and Foster (a) Lennar-DLA 1 Plaintiff entered into a transaction to purchase the McCrink property without
knowledge of Marsch’s intent and plan to assert an ownership interest in the property, which facts were known to DLA Piper
and Foster; (b) Lennar-DLA 1 Plaintiff acquired the McCrink property on terms it would not have otherwise accepted; (c)
Lennar-DLA 1 Plaintiff incurred expenses and made payments to third parties in the course of acquiring the McCrink
property necessitated by DLA Piper and Foster’s breach of their fiduciary duties; (d) Lennar-DLA 1 Plaintiff paid legal fees
to DLA Piper and Foster during the period they were in breach of their duties; (e) Lennar-DLA 1 Plaintiff incurred
substantial legal fees to defend against Marsch’s claims (brought through Briarwood) relating to McCrink; and (f)
Lennar-DLA 1 Plaintiff suffered exposure to expenses, losses, or risks associated with the development of the McCrink
property. As a result, Lennar-DLA 1 Plaintiff has suffered millions of dollars of monetary damages in an amount to be
proven at trial in the DLA1 Action.
200. Marsch’s aiding and abetting of DLA Piper and Foster’s breaches of fiduciary and professional duties was willful,
oppressive, and malicious. Consequently, Lennar-DLA 1 Plaintiff is entitled to punitive damages in the DLA1 Action.
C. Interference with Contractual Relationship (Seventh Cause of Action in the DLA1 Action)
201. Marsch knew of the contractual relationship between Lennar-DLA 1 Plaintiff, on the one hand, and DLA Piper and
Foster, on the other, for the provision of legal services in connection with the McCrink property.
202. Marsch willfully and maliciously intentionally interfered with this contract by inducing Foster to disregard his
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contractual and fiduciary obligations to Lennar-DLA 1 Plaintiff and instead seek to advance Marsch’s interests to
Lennar-DLA 1 Plaintiff’s detriment. Lennar-DLA 1 Plaintiff is informed and believes, and on that basis alleges, that Marsch
engaged in this conduct with the knowledge that disruption of the attorney-client relationship between Lennar-DLA 1
Plaintiff and DLA Piper and Foster was substantially certain to occur, and with the wrongful intent and purpose to cause
financial harm to Lennar-DLA 1 Plaintiff and to induce DLA Piper and Foster to breach their fiduciary duties to Lennar-DLA
1 Plaintiff.
203. Marsch in fact induced DLA Piper and Foster to breach their contractual and fiduciary obligations to Lennar-DLA 1
Plaintiff.
204. As a direct and proximate result of Marsch’s interference with Lennar-DLA 1 Plaintiff’s contractual relationship with
DLA Piper and Foster (a) Lennar-DLA 1 Plaintiff entered into a transaction to purchase the McCrink property without
knowledge of Marsch’s intent and plan to assert an ownership interest in the property, which facts were known to DLA Piper
and Foster; (b) Lennar-DLA 1 Plaintiff acquired the McCrink property on terms it would not have otherwise accepted; (c)
Lennar-DLA 1 Plaintiff incurred expenses and made payments to third parties in the course of acquiring the McCrink
property necessitated by DLA Piper and Foster’s breach of their fiduciary duties; (d) Lennar-DLA 1 Plaintiff paid legal fees
to DLA Piper and Foster during the period they were in breach of their duties; (e) Lennar-DLA 1 Plaintiff incurred
substantial legal fees to defend against Marsch’s claims (brought through Briarwood) relating to McCrink; and (f)
Lennar-DLA 1 Plaintiff suffered exposure to expenses, losses, or risks associated with the development of the McCrink
property. As a result, Lennar-DLA 1 Plaintiff has suffered millions of dollars of monetary damages in an amount to be
proven at trial in the DLA1 Action.
205. Marsch’s interference with Lennar-DLA 1 Plaintiff’s contract with DLA Piper and Foster was willful, oppressive, and
malicious. Consequently, Lennar-DLA 1 Plaintiff is entitled to punitive damages in the DLA1 Action.
VI. DLA 2 STATE LAW CLAIMS
206. HCC, Lennar Bridges, Lennar-DLA 2 Plaintiff and HCC Holdings re-allege and incorporate by this reference
paragraphs 1-205, above, as though set forth in full.
A. Aiding and Abetting Breaches of Fiduciary Duties (Seventh Cause of Action in DL2 Action)
207. By virtue of the attorney-client relationship, DLA and Foster owed LLP II, LL Partners, LSJH, HCC, Lennar Bridges
and Lennar Homes fiduciary duties under the common law, California Business and Professions Code section 6068, and the
California Rules of Professional Conduct, including but not limited to the duties of competency, loyalty, communication and
candor.
208. Marsch willfully and maliciously aided and abetted DLA and Foster’s breaches of their fiduciary and professional duties
to LLP II, LL Partners, LSJH, HCC, Lennar Bridges and Lennar Homes.
209. As a direct and proximate result of Marsch’s aiding and abetting of those breaches of fiduciary and professional duties
by DLA and Foster, Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges: (1) entered into a purported transaction to admit
Marsch as a member of Lennar Bridges under which Marsch claims greater rights than his rights related to HCC; (2)
executed the 2005 tolling agreement, which, if not rescinded, may expose Lennar-DLA 2 Plaintiff to claims; (3) expended
significant funds to prepare revised financial and accounting information to Marsch and defend against claims brought by
Marsch with Foster’s assistance; (4) paid over $1.5 million in additional Prior Investors Fund monies; (5) paid over $15
million to satisfy the Marsch Judgments; (6) paid Marsch over $13 million in override fees; (7) paid legal fees to DLA and
Foster during the period they were in breach of their duties; (8) invested millions of dollars in the development of HCC and
Lennar Bridges; and (9) incurred and will continue incur substantial legal fees in litigation with Marsch. As a result,
Lennar-DLA 2 Plaintiff, HCC, Lennar Bridges and HCC Holdings have suffered monetary damages in an amount to be
proven at trial in the DLA 2 Action.
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210. Marsch’s aiding and abetting of DLA and Foster’s breaches of fiduciary and professional duties was willful, oppressive,
and malicious. Consequently, Lennar-DLA 2 Plaintiff, HCC Holdings, Lennar Bridges and HCC are entitled to punitive
damages in the DLA2 Action.
B. Interference with Contractual and Business Relationship (Eighth Cause of Action in DLA2 Action)
211. Valid and enforceable contracts existed between LSJH, LLP II, LL Partners, Lennar Bridges, Lennar Homes, and HCC,
on the one hand, and DLA and Foster, on the other, for the provision of legal services. At all relevant times, LSJH, LLP II,
LL Partners, Lennar Bridges, Lennar Homes, and HCC fully performed its or their obligations under the contracts. At all
relevant times, Marsch was aware of those contractual relationships.
212. Marsch willfully and maliciously interfered with these contracts and business relationships by inducing Foster to
disregard his contractual and fiduciary obligations to HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff and instead seek to
advance Marsch’s interests to the detriment of HCC, Lennar Bridges, and Lennar-DLA 2 Plaintiff. Marsch engaged in this
conduct with the knowledge that disruption of the attorney-client relationship between Lennar-DLA 2 Plaintiff, HCC, and
Lennar Bridges and DLA and Foster was substantially certain to occur, and with the wrongful intent and purpose to cause
financial harm to Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges and to induce DLA and Foster to breach their fiduciary
duties to Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges.
213. Marsch in fact induced DLA and Foster to breach their contractual and fiduciary obligations to Lennar-DLA 2 Plaintiff,
HCC, and Lennar Bridges as discussed above.
214. As a direct and proximate result of Marsch’s interference with Lennar-DLA 2 Plaintiff’s, Lennar Bridges’ and HCC’s
contractual relationship with DLA and Foster, Lennar-DLA 2 Plaintiff, HCC, and Lennar Bridges: (1) entered into a
purported transaction to admit Marsch as a member of Lennar Bridges under which Marsch claims greater rights than his
rights related to HCC; (2) executed the 2005 tolling agreement, which, if not rescinded, may expose Lennar-DLA 2 Plaintiff
to claims; (3) expended significant funds to prepare revised financial and accounting information to Marsch and defend
against claims brought by Marsch with Foster’s assistance; (4) paid over $1.5 million in additional Prior Investors Fund
monies; (5) paid over $15 million to satisfy the Marsch Judgments; (6) paid Marsch over $13 million in override fees; (7)
paid legal fees to DLA and Foster during the period they were in breach of their duties; (8) invested millions of dollars in the
development of HCC and Lennar Bridges; and (9) incurred and will continue incur substantial legal fees in litigation with
Marsch. As a result, Lennar-DLA 2 Plaintiff, Lennar Bridges, HCC Holdings, and HCC have suffered monetary damages in
an amount to be proven at trial in the DLA2 Action.
215. Marsch’s interference with Lennar-DLA 2 Plaintiff’s, Lennar Bridges’ and HCC’s contracts with DLA and Foster was
willful, oppressive, and malicious. Consequently, Lennar-DLA 2 Plaintiff, HCC Holdings, and HCC are entitled to punitive
damages in the DLA2 Action.
VII. STATE LAW CLAIMS IN THE CROSS-COMPLAINT IN THE BRIDGES ACTION
216. Plaintiffs incorporate by reference paragraphs 1 through 80 above, inclusive, and each and every such paragraph by
reference as if set forth in full herein
A. Breach of Contract -- 1999 Loan (Cross-Complaint, First Cause of Action)
217. On October 28, 1999, The Marsch Parties entered into a written, valid and enforceable contract--the 1999 Loan.
218. HCC has performed each and all of the conditions, covenants, and promises required of it to be performed under the
1999 Loan.
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219. The Marsch Parties have failed to pay, and continue to fail to pay, to HCC amounts owing on the 1999 Loan.
220. As a direct and proximate result of The Marsch Parties’ breach of the 1999 Loan, HCC has been damaged, and there is
now due, owing and unpaid from The Marsch Parties the outstanding amount of $2,007,900 in principal and $1,560,055.78 in
accrued interest, plus such additional interest, costs and fees as permitted by law. Interest continues to accrue as alleged
herein.
B. Money Lent and Paid -- 1999 Loan (Cross-Complaint - Second Cause of Action)
221. The Marsch Parties became indebted to HCC in the amount of $2,007,900 for money laid out and expended for The
Marsch Parties at their instance and request.
222. No part of this amount has been paid and there is now due, owing and unpaid from The Marsch Parties to HCC the
amount of $2,007,900 in principal under the 1999 Loan, plus interest allowed by law, for money lent and paid by HCC for
The Marsch Parties’ use and benefit. Interest continues to accrue on such amounts as alleged herein.
C. Breach of Express Conditions to Grant Deeds (Cross-Complaint - Third Cause of Action)
223. HCC has performed all of its obligations under the Master Declaration, Repurchase Agreement and all related
agreements, including but not limited to the 1999 Loan.
224. The Marsch Parties are in continuing breach of the Master Declaration, Grant Deeds and Repurchase Agreements by
failing to construct residences on Homesites 8 and 9.
225. By failing to perform according to the terms of the Master Declaration and the covenants therein, The Marsch Parties are
in continuing breach of the Master Declaration including, but not limited to, Section 10.19 of the Master Declaration.
226. By failing to perform according to the terms of the Repurchase Agreements and the covenants therein, The Marsch
Parties breached the Repurchase Agreement including, but not limited to, Sections 1.1 and 1.2 of the Repurchase Agreement.
227. As a direct and proximate result of The Marsch Parties’ material breaches of the Master Declaration, Repurchase
Agreement and Grant Deeds, The Marsch Parties’ have failed to comply with express conditions stated in the Grant Deeds
for Homesites 8 and 9.
228. Consequently, HCC is entitled to reconveyance of Homesites 8 and 9 pursuant to Civil Code section 1109 based on The
Marsch Parties’ failure to comply with conditions stated in the Grant Deeds.
229. As an alternative remedy to reconveyance, pursuant to the terms of the Repurchase Agreements, in the Cross-Complaint,
HCC seeks to repurchase Homesites 8 and 9 for their original purchase price, less HCC’s costs of sale and costs to return the
Homesites to their original condition. Lennar-Bridges Cross-Plaintiff also seeks damages in an amount to be proven at trial.
D. Breach of Contract -- 2003 Loan and Promissory Note (Cross-Complaint - Fourth Cause of Action)
230. On March 10, 2003, The Marsch Parties entered into a written, valid and enforceable contract--the 2003 Loan.
231. HCC has performed each and all of the conditions, covenants, and promises required of it to be performed under the
2003 Loan.
232. The Marsch Parties have failed to pay, and continue to fail to pay, to HCC the amount owed under the promissory note
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executed in connection with the 2003 Loan.
233. As a direct and proximate result of The Marsch Parties’ breach of the 2003 Loan, HCC has been damaged, and there is
now due, owing and unpaid from The Marsch Parties’ outstanding principal of $2,000,000, plus accrued interest of
$834,698.63. Interest continues to accrue as alleged herein.
234. Pursuant to paragraph 4 of the 2003 Loan, HCC is entitled to recover its attorneys’ fees if it prevails on an action arising
from the 2003 Loan.
235. Pursuant to paragraph 6 of the promissory note, HCC is entitled to reasonable attorneys’ fees, costs and expenses in
connection with collecting amounts due under the 2003 Loan.
E. Money Lent and Paid -- 2003 Loan (Cross-Complaint, Fifth Cause of Action)
236. The Marsch Parties became indebted to HCC in the amount of $2,000,000 for money laid out and expended for The
Marsch Parties at their instance and request.
237. No part of this amount has been paid and there is now due, owing and unpaid from The Marsch Parties to HCC the
amount of $2,000,000 in principal under the 2003 Loan, plus interest allowed by law, for money lent and paid by HCC for
The Marsch Parties’ use and benefit. Interest continues to accrue on such amounts as alleged herein.
F. Breach of Contract (By Lennar-Bridges Cross-Plaintiff Against Briarwood and Marsch: Formation Agreement, HCC
Operating Agreement, Override Agreement) (Cross-Complaint - Sixth Cause of Action)
238. Lennar-Bridges Cross-Plaintiff has performed all of its obligations under the Formation Agreement, HCC Operating
Agreement and Override Amendment.
239. Briarwood and Marsch breached the Formation Agreement, the HCC Operating Agreement and the Override
Amendment by, among other things, using funds from the Facility for personal expenses and expenses unrelated to the
Claims; and putting their individual interests ahead of those of HCC and Lennar Bridges.
240. By failing to perform according to the terms of the Formation Agreement, HCC Operating Agreement, and Override
Amendment, Marsch and Briarwood breached each such agreement, including, but not limited to, Sections 2.1.3.a, 2.1.3.b
and 4.1 of the Formation Agreement, Sections 3.02, 6.02(a) and 6.02(c) of the HCC Operating Agreement, and Section 3 of
the Override Amendment.
241. Pursuant to Section 5.04 of the HCC Operating Agreement, Marsch is to receive a “Special Distribution” of fee title to a
Real Estate Sales Facility on a lot appurtenant to Fitness Center at The Bridges, and to receive “the sole and exclusive right to
provide resale services from a site located within the Project.” Section 5.04 is a severable obligation under the HCC
Operating Agreement.
242. Marsch and Briarwood have harmed lot sales and homesite resales at The Bridges through the above-described breaches,
as well as by failing to comply with covenants applicable to Homesites 8 and 9 that are intended to enhance the overall value
of The Bridges residences, and by other misconduct alleged herein. As a result, Marsch and Briarwood have demonstrated
themselves to be unfit to be exclusive resales agents for The Bridges. Marsch and Briarwood’s breaches go to the heart of
Section 5.04 and excuse HCC’s obligation to make any such distribution and HCC is entitled to a judicial declaration thereof.
243. As a direct and proximate result of Marsch and Briarwood’s material breaches of the Formation Agreement, HCC
Operating Agreement and Override Amendment, Lennar-Bridges Cross-Plaintiff has been damaged in an amount to be
proven at trial.
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244. Section 8.9 of the Formation Agreement and Section 12.07 of the HCC Operating Agreement expressly provide that
Lennar-Bridges Cross-Plaintiff is entitled to recover its attorneys’ fees in any action arising from Marsch and Briarwood’s
breach of such agreements. Accordingly, Lennar-Bridges Cross-Plaintiff is further entitled to recover its attorneys’ fees
incurred herein, according to proof.
G. Rescission -- Override Payment Agreement (Cross-Complaint - Seventh Cause of Action)
245. In or about 1996 or 1997, Marsch represented to Lennar-Bridges Cross-Plaintiff, and understood that Lennar-Bridges
Cross-Plaintiff believed, that (a) Lennar-Bridges Cross-Plaintiff owned a one-half half interest in the La Jolla Judgment prior
to the formation of HCC; (b) each party’s one-half interest in the La Jolla Judgment was valued at zero dollars when
contributed to HCC; and (c) neither party would receive a capital account or “preference account” balance for contributing an
interest in the La Jolla Judgment. In or about July 1999, Marsch further represented, and understood that Lennar-Bridges
Cross-Plaintiff believed, that he had no objection to HCC distributing cash received from the La Jolla Judgment to partially
repay Lennar-Bridges Cross-Plaintiff’s capital contributions through July 1999 and agreed-upon 25% return.
246. Marsch’s foregoing representations were false when made and made with an intent to deceive and induce
Lennar-Bridges Cross-Plaintiff to rely on them. Lennar-Bridges Cross-Plaintiff actually and reasonably relied on such
representations. Marsch has now repudiated the foregoing facts. Had Lennar-Bridges Cross-Plaintiff known the true facts and
that Marsch would repudiate his representations, it would never have agreed to the Override Payment Agreement.
247. Lennar-Bridges Cross-Plaintiff and HCC have suffered and will continue to suffer substantial harm and injury if the
Override Payment Agreement is not rescinded.
248. Lennar-Bridges Cross-Plaintiff intended that service of summons of the Cross-Complaint serve as notice of rescission of
the Override Payment Agreement.
249. In addition, Marsch and Briarwood’s fraudulent conduct was willful, oppressive, and malicious. Consequently,
Lennar-Bridges Cross-Plaintiff is entitled to punitive damages.
H. Conversion (Cross-Complaint - Eighth Cause of Action)
250. HCC is, and at all times herein mentioned was, the rightful and lawful owner of the specific and identifiable funds in the
Facility and that were remitted to Marsch and Briarwood as Override Fees.
251. Marsch and Briarwood have wrongfully dispossessed HCC of its property by (a) wrongfully withdrawing and retaining
proceeds from the Facility for expenses unrelated to the Claims; and (b) wrongfully obtaining and retaining Override Fees.
Demand for return of the converted property is excused because such a demand would be futile.
252. As a direct and proximate result of Briarwood and Marsch’s wrongful dispossession of HCC’s property, HCC has been
damaged in an amount to be proven at trial because it has received neither the property it had a legal right to possess nor the
market value thereof.
253. Marsch and Briarwood’s conversion of HCC’s property was done with malice, oppression, fraud and in bad faith, in
conscious disregard of HCC’s and Lennar-Bridges Cross-Plaintiff’s rights, and performed with the intention of depriving
HCC and Lennar-Bridges Cross-Plaintiff of their respective rights. Accordingly, their conduct merits, and HCC and
Lennar-Bridges Cross-Plaintiff seek, an award of punitive damages in the Bridges Action in an amount sufficient to punish
Marsch and Briarwood and to deter such conduct in the future.
I. Declaratory Relief -- Title to Homesites 8 and 9 (Cross-Complaint - Ninth Cause of Action)
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254. An actual controversy has arisen and now exists between HCC and The Marsch Parties concerning the parties’ rights,
duties and obligations under the Grant Deeds, Master Declaration, and Repurchase Agreements as a result of The Marsch
Parties’ violation of express conditions in such documents by, among other things, failing to construct residences on
Homesites 8 and 9. This controversy affects the parties’ legal rights concerning title and possession to Homesites 8 and 9, and
requires adjudication by the Court in order for the parties to ascertain their respective rights and obligations.
255. Accordingly, in the Cross-Complaint, HCC seeks a declaration in the Bridges Action that it is entitled to reconveyance
of Homesites 8 and 9 pursuant to Civil Code section 1109 based on The Marsch Parties’ failure to comply with conditions
stated in the Grant Deeds.
J. Declaratory Relief -- Tolling Agreement (Cross-Complaint - Tenth Cause of Action)
256. A controversy between the parties exists over the parties’ legal rights and duties, if any, regarding the Tolling
Agreement.
257. Marsch and Briarwood are the putative beneficiaries of the Tolling Agreement. The Tolling Agreement must be declared
null and void on the grounds of Marsch’s misrepresentations and non-disclosures of material facts, as alleged above, and The
Marsch Parties contend to the contrary.
258. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff seeks a judicial declaration in the Bridges Action that the
Tolling Agreement is null and void and that the Tolling Agreement does not tolls any applicable statute of limitations for
claims asserted by Briarwood or Marsch.
K. Rescission -- Tolling Agreement (Cross-Complaint - Eleventh Cause of Action)
259. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that the Tolling Agreement must be rescinded on the
grounds of Marsch’s misrepresentations and nondisclosures of material facts as alleged above.
260. Lennar-Bridges Cross-Plaintiff justifiably relied on Marsch’s and Foster’s representations in entering into the Tolling
Agreement.
261. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that the Tolling Agreement should be rescinded on the
grounds of fraud, non-disclosure, breach of Foster’s fiduciary duties, breach of contract and mistake.
262. In addition, as a result of Marsch’s conduct, Lennar-Bridges Cross-Plaintiff has suffered damages in an amount to be
proven at trial.
263. Marsch and Briarwood’s fraudulent conduct was willful, oppressive, and malicious. Consequently, Lennar-Bridges
Cross-Plaintiff is entitled to punitive damages.
L. Declaratory Relief -- Lennar Bridges Admission Agreement (Cross-Complaint - Twelfth Cause of Action)
264. Lennar-Bridges Cross-Plaintiff invested in Lennar Bridges and executed the Admission Agreement in justifiable
reliance on Marsch’s representations that, should Marsch become a member of Lennar Bridges, Lennar-Bridges
Cross-Plaintiff’s interests in Lennar Bridges would be governed by the same or substantially identical terms as those
contained in the HCC Operating Agreement. The Admission Agreement is expressly conditioned on execution of an
operating agreement incorporating the same or substantially identical terms of the HCC Operating Agreement. Marsch and
Foster also misrepresented and failed to disclose material facts as alleged above.
265. A controversy between the parties exists over the parties’ legal rights and duties, if any, regarding the Admission
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Agreement and Lennar Bridges.
266. The parties’ economic rights and obligations in Lennar Bridges are essential terms, without which the Admission
Agreement is unenforceable or an unenforceable agreement to agree. The Admission Agreement is further unenforceable as a
result of the failure of a material condition, failure of consideration, fraud, breach of Foster’s fiduciary duties, nondisclosure,
mistake and/or breach of contract.
267. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff seeks a judicial declaration in the Bridges-Action that the
Admission Agreement is null and void and that neither Briarwood nor Marsch is a member of Lennar Bridges.
M. Rescission -- Lennar Bridges Admission Agreement (Cross-Complaint - Thirteenth Cause of Action)
268. As alleged above, Lennar-Bridges Cross-Plaintiff invested in Lennar Bridges and executed the Admission Agreement in
actual and justifiable reliance on Foster and Marsch’s assurances that, should Marsch become a member of Lennar Bridges,
Lennar-Bridges Cross-Plaintiff’s economic interests in Lennar Bridges would be governed by the same or substantially
identical terms as those contained in the HCC Operating Agreement. The Admission Agreement is expressly conditioned on
execution of an operating agreement to memorialize Marsch and Briarwood’s agreement that Lennar Bridges would be
governed by the same or substantially identical provisions as contained in the HCC Operating Agreement. Also, as alleged
above, Marsch, Briarwood and Foster failed to disclose and withheld material facts regarding Foster’s conflicts of interest.
269. Marsch has repudiated his assurances and no operating agreement has been signed. If the Admission Agreement is
determined to be a valid agreement, it must be rescinded for, inter alia, failure of a material condition, failure of
consideration, fraud, breach of Foster’s fiduciary duties, non-disclosure, mistake and/or breach of contract.
270. In addition, as a result of The Marsch Parties’ conduct, Lennar-Bridges Cross-Plaintiff has suffered damages in an
amount to be proven at trial.
271. The Marsch Parties’ fraudulent conduct was willful, oppressive, and malicious. Consequently, Lennar-Bridges
Cross-Plaintiff is entitled to punitive damages.
N. Reformation -- Lennar Bridges Admission Agreement (Cross-Complaint - Fourteenth Cause of Action)
272. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that at a minimum and without waiving its demands for
rescission or for declaratory relief above, if the Admission Agreement is not rescinded or declared null and void,
Lennar-Bridges Cross-Plaintiff is entitled to reformation of that agreement to reflect that the parties’ rights in Lennar Bridges
are to be governed by the terms of the HCC Operating Agreement.
O. Breach of Contract -- Lennar Bridges Admission Agreement (Cross-Complaint - Fifteenth Cause of Action)
273. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that at a minimum and without waiving Lennar-Bridges
Cross-Plaintiff’s demands for rescission, reformation or declaratory relief above, Marsch and Briarwood are in breach of their
oral, written and implied agreement with Lennar-Bridges Cross-Plaintiff that Marsch’s admission as a member in Lennar
Bridges is to be governed by the same or substantially identical terms as the HCC Operating Agreement and that he would
prepare and execute an amended and restated operating agreement so providing.
274. Marsch has breached his agreement and has failed to execute the necessary operating agreement for Lennar Bridges.
275. As a direct and proximate result of Marsch and Briarwood’s breaches, Lennar-Bridges Cross-Plaintiff has been damaged
in an amount to be proven at trial.
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P. Breach of Implied Covenant of Good Faith and Fair Dealing (By Lennar-Bridges Cross-Plaintiff Against Briarwood
and Marsch: Formation Agreement, HCC Operating Agreement, Override Amendment, Real Estate Sales Facility,
Tolling Agreement, Admission Agreement) (Cross-Complaint - Sixteenth Cause of Action)
276. There is implied into every contract in California a covenant of good faith and fair dealing, which requires at a minimum
that the parties to the Formation Agreement, HCC Operating Agreement, Override Amendment, Tolling Agreement and
Admission Agreement (collectively “Agreements”) act in a manner of good faith and deal with one another fairly.
277. The implied covenant of good faith and fair dealing required Marsch and Briarwood, among other things, to: (a) refrain
from taking action to deprive Lennar-Bridges Cross-Plaintiff of its benefits under the Agreements; (b) refrain from actions
detrimental to the value of HCC’s and Lennar Bridges’ assets; (c) refrain from accepting fees and other payments from HCC
while knowingly and intentionally acting against the interests of HCC; and (d) refrain from failing to disclose material facts
which, if known, would have caused Lennar-Bridges Cross-Plaintiff not to enter into the Agreements.
278. Marsch and Briarwood breached the implied covenant of good faith and fair dealing by the conduct alleged herein.
279. As a direct and proximate result of Marsch and Briarwood’s breaches, Lennar-Bridges Cross-Plaintiff has been damaged
in an amount to be proven at trial.
280. Marsch and Briarwood’s breaches of the implied covenant further justify severance of the obligations under Section
5.04 to distribute the Real Estate Sales Facility and grant exclusive rights to provide resale services within The Bridges, and
excuse HCC from any obligation to comply with Section 5.04; and further excuse performance under the Tolling Agreement
and Admission Agreement.
Q. Unfair Competition (Cal. Bus. & Prof. Code § 17200) (Cross-Complaint - Seventeenth Cause of Action)
281. The actions of Marsch and Briarwood as alleged herein constitute unlawful, unfair or fraudulent business practices in
violation of California Business and Professions Code §§ 17200 et seq., and acts of unfair competition in violation of the
common law.
282. Based on Marsch and Briarwood’s conduct in connection with, among other things, the Override Payment Agreement,
the funding and draws upon the Facility, the Tolling Agreement and the Admission Agreement, The Marsch Parties must
disgorge money previously and improperly paid to them.
R. Constructive Trust (Cross-Complaint- Eighteenth Cause of Action)
283. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that as a result of The Marsch Parties’ wrongful actions
as alleged herein, The Marsch Parties have been unjustly enriched and hold funds and property to which they are not lawfully
entitled (the precise amount of which cannot be determined without an accounting) as a constructive trustee for the benefit of
HCC and/or Lennar-Bridges Cross-Plaintiff, the true owner of such funds.
284. In the Cross-Complaint, Lennar-Bridges Cross-Plaintiff asserts that as a result of The Marsch Parties’ failure to comply
with the conditions stated in the Grant Deeds for Homesites 8 and 9, Lennar-Bridges Cross-Plaintiff requests a finding and
order that these properties are held by The Marsch Parties in constructive trust for HCC.
285. As a direct and proximate result of the wrongful actions as alleged herein, in the Cross-Complaint, Lennar-Bridges
Cross-Plaintiff requests that a constructive trust in an amount sufficient to protect its and HCC’s interests be imposed upon
all funds, salaries, assets, property, revenues, and profits which have been derived from draws on the Facility, Override Fees,
real estate transfer fees, and other distributions or payments previously made to The Marsch Parties.
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S. Fraud by Misrepresentation and Nondisclosure (Cross-Complaint - Nineteenth Cause of Action)
286. With respect to the La Jolla Judgment and the Override Payment Agreement, Marsch and Briarwood committed fraud as
alleged above.
287. With respect to the Facility, prior to the establishment of the Facility, Marsch and Briarwood represented to
Lennar-Bridges Cross-Plaintiff that $7.5 million would be necessary to pay for expenses related to the “Claims” under the
Formation Agreement and HCC Operating Agreement. Furthermore, Marsch and Briarwood represented at various times that
funds from the Facility were being used to pay for expenses related to such Claims.
288. The foregoing representations were false when made and made with an intent to deceive and induce Lennar-Bridges
Cross-Plaintiff to rely on them. At or about the time such representations were made, Marsch and Briarwood knew that the
Claims were worth less than $7.5 million and that they were using funds from the Facility to pay for personal expenses.
289. With respect to the Admission Agreement, Marsch and Briarwood committed fraud as alleged above.
290. With respect to the Tolling Agreement, Marsch and Briarwood committed fraud as alleged above.
291. The above representations by Marsch, Briarwood and Foster were false as alleged above. Lennar-Bridges Cross-Plaintiff
actually and justifiably relied on the representations and omissions described herein as alleged above.
292. As alleged above, Marsch and Briarwood made such false representations and failed to disclose Marsch’s true state of
mind with intent to deceive and in order to induce Lennar-Bridges Cross-Plaintiff to, among other things, modify the
Override Amendment and immediately commence paying Override Fees, fund the Facility, permit HCC to make the 1999
and 2003 Loans, continue to fund HCC’s operations and execute the Tolling Agreement and Admission Agreement. In
addition, Foster was under a duty to disclose the true facts to Lennar-Bridges Cross-Plaintiff, but, at Marsch and Briarwood’s
direction, willfully failed and refused to do so and concealed those facts from Lennar-Bridges Cross-Plaintiff in breach of his
fiduciary duties to Lennar-Bridges Cross-Plaintiff.
293. As a direct and proximate result of Marsch and Briarwood’s conduct, Lennar-Bridges Cross-Plaintiff, HCC and/or
Lennar Bridges have been damaged by, among other things, the following: they made substantial payments of Override Fees
that they would not otherwise have paid; they expended considerable sums to fund Marsch and Briarwood’s personal and
non-HCC related expenses; they continued to fund the operations of HCC; they invested millions of dollars in Lennar
Bridges; and they executed the Tolling Agreement and Admission Agreement. Moreover, as a direct and proximate result of
Marsch and Briarwood’s conduct, the value of HCC and Lennar Bridges has been damaged. As a result, Lennar-Bridges
Cross-Plaintiff has suffered damages in an amount to be proven at trial.
294. The Marsch Parties’ fraudulent conduct and breaches of their duties were willful, oppressive, and malicious.
Consequently, Lennar-Bridges Cross-Plaintiff is entitled to punitive damages.
T. Declaratory Relief -- Alter Ego (Cross-Complaint - Twentieth Cause of Action)
295. Lennar-Bridges Cross-Plaintiff is informed and believed and based thereon alleges that Marsch dominated, influenced
and controlled the business, property and affairs of Briarwood and Colony.
296. Lennar-Bridges Cross-Plaintiff is informed and believes and based thereon alleges that, at all times mentioned herein,
there existed and now exists such a unity of interest and ownership between The Marsch Parties that the claimed individuality
and separateness does not exist. Adherence of the fiction that Marsch, Briarwood and Colony are separate with legally
distinct identities would sanction a fraud and promote injustice.
297. Lennar-Bridges Cross-Plaintiff is informed and believes, and based thereon alleges, that, at all times mentioned herein,
Briarwood and Colony are mere shells which Marsch has used, in bad faith, as a conduit for his business, property, and
affairs.
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298. Lennar-Bridges Cross-Plaintiff is informed and believes, and based thereon alleges, that at all times mentioned herein,
Colony and Briarwood have been used by Marsch as obligors for the assumptions of obligations and liabilities which were
the obligations and liabilities of Marsch.
299. If the acts, obligations, and liabilities of Briarwood and Colony are treated as obligations and liabilities separate from
Marsch’s, an inequitable result will occur.
300. Lennar-Bridges Cross-Plaintiff is informed and believes, and based thereon alleges, that Briarwood and Colony deny
that they are alter egos of Marsch and contend that recognizing their purported separate existences would not sanction a fraud
and promote injustice and that they therefore should be recognized as legally separate entities in a court of law. Accordingly,
a dispute presently exists among the parties that affects their legal rights and for which they require an adjudication by the
court.
U. Trade Name Infringement (Bus. & Prof. Code §14402) (Cross-Complaint - Twenty-First Cause of Action)
301. Lennar-Bridges Cross-Plaintiff is informed and believes that The Marsch Parties, by, through, or in concert with an
affiliated entity called Colony Properties International, have offered and promoted their vacation home rental business using
the Bridges Intellectual Property.
302. The Bridges Intellectual Property has been used by HCC in commerce since 1999 to distinguish The Bridges as an
exclusive residential community and golf course.
303. Neither Lennar-Bridges Cross-Plaintiff nor HCC is a participant in The Marsch Parties’ vacation home rental business,
and The Marsch Parties’ use of the Bridges Intellectual Property is false and misleading. The Marsch Parties’ use of the
Bridges Intellectual Property is likely to cause confusion as to the sponsorship or approval of The Marsch Parties’ vacation
home rental business.
304. Accordingly, Lennar-Bridges Cross-Plaintiff, on behalf of HCC, seeks damages for past violations and an injunction
restraining The Marsch Parties from using the Bridges Intellectual Property to promote the vacation home rental business of
Colony Properties International, or otherwise.
VIII. STATE LAW CLAIMS IN THE FLORIDA ACTION
A. Civil Remedies Against Criminal Practices Act (Fla. Stat. § 772.101, et seq.) (Florida Action, Count I)
306. By the acts described above, defendants Marsch and Minkow have willfully and maliciously engaged in a pattern of
wrongful activity intended to cause harm to Lennar-Florida Plaintiff in violation of the Civil Remedies Against Criminal
Practices Act, Fla. Stat. § 772.101, et seq. Marsch and Minkow, along with other separate and independent entities and
individuals, have acted with criminal intent and have associated together in a continuing unit for the common purpose of
profiting from their illegal activity.
307. In particular, Marsch and Minkow (a) have, with criminal intent, received proceeds derived from a pattern of criminal
activity and used the proceeds for the operation of the enterprise, in violation of Fla. Stat. § 772.103(1); (b) maintain an
interest in the control and operation of an enterprise, in violation of Fla. Stat. § 772.103(2); (c) associated with others to
conduct and participate in the criminal activity of an enterprise, in violation of Fla. Stat. § 772.103(3); and (d) conspired with
others and endeavored to violate Fla. Stat. § 772.103(1),(2), and (3), in violation of Fla. Stat. § 772.103(4).
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308. The objectives of the illegal enterprise are and were: (a) to extort money and property from Lennar-Florida Plaintiff and
its management by transmitting threatening letters; (b) to extort money from Lennar-Florida Plaintiff and its management by
making knowingly false statements in these threatening letters; (c) to extort money and property from Lennar-Florida
Plaintiff and its management by transmitting threatening letters that were intended to, and did in fact, interfere with
Lennar-Florida Plaintiff’s business relationship with Quadrant; (d) to extort money and property from Lennar-Florida
Plaintiff and its management by threatening to disclose and in fact disclosing false negative statements about Lennar-Florida
Plaintiff and its executives; (e) to extort money and property from Lennar-Florida Plaintiff by manipulating the public
markets for Lennar-Florida Plaintiff’s securities and undermining confidence in Lennar-Florida Plaintiff; and (f) to defame
Lennar-Florida Plaintiff to Florida residents and publicly in an effort to damage Lennar-Florida Plaintiff.
309. Lennar-Florida Plaintiff has been injured by the willful and malicious extortion scheme and other fraudulent and
wrongful conduct in an amount that is presently unknown but is in excess of $100 million, including but not limited to the
substantial loss of market capitalization of Lennar Corporation, reputational harm, damaged credit rating, compromised
ability to borrow capital, devalued equity offerings, and impaired the day-to-day, long-term, and strategic operations of the
company, among other things.
310. Lennar-Florida Plaintiff has been injured by reason of violations of Fla. Stat. § 772.103(1), (2), (3) and (4), and therefore
is entitled to actual damages in excess of $100 million, threefold the actual damages for an amount in excess of $300 million,
and costs and reasonable attorneys’ fees, pursuant to Fla. Stat. § 772.104(1).
B. Intentional Interference with Contractual and Economic Relations (Florida Action, Count II)
311. The Defendants’ conduct as described above constitutes intentional interference with contractual and economic
relations. By the acts described above, the Marsch Parties willfully and maliciously intended to, and did in fact, cause harm to
Lennar-Florida Plaintiff by disrupting and interfering with the economic and contractual relationship between Lennar-Florida
Plaintiff and Quadrant. As a direct and proximate cause of the acts described above, Lennar-Florida Plaintiff suffered
significant economic harm, including but not limited to more than $50 million in losses in connection with the project. The
Marsch Parties committed such acts maliciously, oppressively and fraudulently, with ill will and an evil intent to damage
Lennar-Florida Plaintiff.
C. Defamation Per Se (Florida Action, Count III)
312. The Defendants’ conduct as described above constitutes defamation per se under Florida law. Defendants willfully and
maliciously made false, defamatory, and unprivileged statements, knew their statements were false and acted with disregard
of their falsity, intended to cause Lennar-Florida Plaintiff severe damage, and, in fact, caused Lennar-Florida Plaintiff
millions of dollars in harm to its reputation, stock price, operations, and ability to raise capital
313. Lennar-Florida Plaintiff suffered damages proximately caused by the Marsch Parties’ and Minkow Parties’ libelous
actions, including but not limited to the substantial loss of market capitalization of Lennar Corporation, reputational harm,
damaged credit rating, compromised ability to borrow capital, devalued equity offerings, and impaired the day-to-day,
long-term, and strategic operations of the company (among other things)--an amount that is currently unknown but in excess
of $100 million. Nonetheless, the Marsch Parties and Minkow Parties published such false statements recklessly and in
conscious disregard of the truth. Further, the Marsch Parties and Minkow Parties committed such acts maliciously,
oppressively, and fraudulently, with ill will and an evil intent to defame and injure Lennar-Florida Plaintiff.
D. Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. § 501.204) (Florida Action, Count IV)
314. By the acts described above, the Marsch Parties and Minkow Parties have engaged in unfair, deceptive and
unconscionable acts or practices in violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201, et
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seq.
315. The Marsch Parties and Minkow Parties acted willfully and maliciously in conducting their unconscionable and
deceptive acts and practices that were designed to inflict injury and harm upon Lennar-Florida Plaintiff (and, in fact, did
cause injury and harm to Lennar-Florida Plaintiff) and to gain an unfair business advantage. The Marsch Parties and Minkow
Parties have maliciously and malevolently impugned Lennar-Florida Plaintiff’s business operations and reputation in order to
secure an improper business advantage. The Marsch Parties have also maliciously and malevolently interfered with
Lennar-Florida Plaintiff’s business relationship with Quadrant.
316. Lennar-Florida Plaintiff has been injured by virtue of the Marsch Parties’ and Minkow Parties’ deceptive and unfair
trade practices as contemplated by Fla. Stat. § 501.204 in an amount that is currently unknown but in excess of $100 million,
including but not limited to the substantial loss of market capitalization of Lennar Corporation, reputational harm, damaged
credit rating, compromised ability to borrow capital, devalued equity offerings, and impaired the day-to-day, long-term, and
strategic operations of the company, among other things. Additionally, Lennar-Florida Plaintiff is entitled to recover its
attorneys’ fees and court costs pursuant to Fla. Stat. §§ 501.2105 and 501.211.
E. Civil Conspiracy (Florida Action, Count V)
317. By the acts described above, the Marsch Parties and the Minkow Parties have willfully and maliciously committed civil
conspiracy under Florida law. The Marsch Parties and Minkow Parties wrongfully conspired (a) to extort money and property
from Lennar-Florida Plaintiff and its management by transmitting threatening letters; (b) to extort money from
Lennar-Florida Plaintiff and its management by making knowingly false statements in these threatening letters; (c) to extort
money and property from Lennar-Florida Plaintiff and its management by transmitting threatening letters that were intended
to, and did in fact, interfere with Lennar-Florida Plaintiff’s business relationship with Quadrant; (d) to extort money and
property from Lennar-Florida Plaintiff and its management by threatening to disclose and in fact disclosing false negative
statements about Lennar-Florida Plaintiff and its executives; (e) to extort money and property from Lennar-Florida Plaintiff
by manipulating the public markets for Lennar-Florida Plaintiff’s securities and undermining confidence in Lennar-Florida
Plaintiff; and (f) to defame Lennar-Florida Plaintiff to Florida residents and publicly in an effort to damage Lennar-Florida
Plaintiff.
318. Lennar-Florida Plaintiff has been injured by the Marsch Parties’ and Minkow Parties’ extortion scheme and the
fraudulent and wrongful conduct described above in an amount that is presently unknown but is in excess of $100 million,
including but not limited to the substantial loss of market capitalization of Lennar Corporation, reputational harm, damaged
credit rating, compromised ability to borrow capital, devalued equity offerings, and impaired the day-today, long-term, and
strategic operations of the company, among other things.
IX. NON-DISCHARGEABILITY - DLA 1 CLAIMS
COUNT ONE
(Determination Regarding Non-Dischargeability of Lennar-DLA 1 Plaintiff’s Claims in the DLA1 Action Pursuant to
Bankruptcy Code Section 523(a)(6))
319. Plaintiff incorporates by reference paragraphs 1 through 318 above, inclusive, and each and every such paragraph by
320. Marsch’s conduct when he conspired to breach fiduciary duties (Fifth Cause of Action in the DLA1 Action) was (a)
willful, in that Marsch intended to cause harm to Lennar-DLA 1 Plaintiff, (b) malicious, in that it was wrongful, done
intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury
to Lennar-DLA 1 Plaintiff. Therefore, Marsch’s liability to Lennar-DLA 1 Plaintiff for such conduct should be determined to
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be non-dischargeable under 11 U.S.C. § 523(a)(6).
321. Marsch’s conduct when he aided and abetted breaches of fiduciary duties (Sixth Cause of Action in DLA1 Action) was
(a) willful, in that Marsch intended to cause harm to Lennar-DLA 1 Plaintiff, (b) malicious, in that it was wrongful, done
322. Marsch’s conduct when he interfered with a contractual relationship (Seventh Cause of Action in DLA1 Action) was (a)
willful, in that Marsch intended to cause harm to Lennar-DLA 1 Plaintiff, (b) malicious, in that it was wrongful, done
X. NON-DISCHARGEABLITITY - DLA 2 CLAIMS
COUNT TWO
(Determination Regarding Non-Dischargeability of Claims in the DLA2 Action Pursuant to Bankruptcy Code Section
523(a)(6))
324. Marsch’s conduct described above in adding and abetting DLA and Foster’s breaches of fiduciary duty (Seventh Cause
of Action in the DLA 2 Action) was (a) willful, in that Marsch intended to cause harm to Lennar-DLA 2 Plaintiff, HCC and
Lennar Bridges, (b) malicious, in that it was wrongful, done intentionally, necessarily caused injury, and was committed
without cause or excuse, and (c) in fact, caused substantial injury to Lennar-DLA 2 Plaintiff, HCC and Lennar Bridges.
Therefore, Marsch’s liability for such conduct should be declared non-dischargeable under 11 U.S.C. § 523(a)(6).
325. Marsch’s conduct when he intentionally interfered with Lennar-DLA 2 Plaintiff, HCC and Lennar Bridges’ contracts
with DLA and Foster (Eighth Cause of Action in the DLA2 Action) was (a) willful, in that Marsch intended to cause harm to
Lennar-DLA 2 Plaintiff, HCC and Lennar Bridges, (b) malicious, in that it was wrongful, done intentionally, necessarily
caused injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury to Lennar-DLA 2
Plaintiff, HCC and Lennar Bridges. Therefore, Marsch’s liability to Lennar-DLA 2 Plaintiff for such conduct should be
declared non-dischargeable under 11 U.S.C. § 523(a)(6).
XI. NON-DISCHARGEABILITY - THE BRIDGES COUNTER-CLAIM
COUNT THREE
(Determination that Cross-Claims in the Bridges Action are Not Dischargeable Pursuant to Bankruptcy Code Section
523(a)(2)(A))
327. Marsch, as described above, borrowed funds under the 1999 Loan from HCC (a) using misrepresentation, fraudulent
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omission or deceptive conduct, (b) with knowledge of the falsity or deceptiveness of his statement or conduct, and (c) with an
intent to deceive Lennar-Bridges Cross-Plaintiff and HCC. Lennar-Bridges Cross-Plaintiff and HCC justifiably relied on
Marsch’s statements and/or conduct and have incurred substantial damages proximately caused by their reliance on Marsch’s
statements or conduct. Marsch entered into the 1999 Loan with Lennar-Bridges Cross-Plaintiff under the pretense that the
money would be used by Marsch to purchase Homesites 8 and 9 on which Marsch agreed to develop single-family residences
within a specified amount of time. Marsch promised to repay the loan on the terms set forth in the 1999 Loan Agreement. At
the time Marsch obtained the 1999 Loan from HCC, Marsch did not intend to comply with his obligation to construct
residences on the Homesites 8 and 9, did not intend to repay HCC, and intended to deceive Lennar-Bridges Cross-Plaintiff
and HCC into making the 1999 Loan. By virtue of the actions alleged above and described herein, any liability of Marsch to
HCC or Lennar-Bridges Cross-Plaintiff for breach of the 1999 Loan (CounterClaim, First Cause of Action) or for failure to
re-pay the 1999 Loan (Counter-Claim, Second Cause of Action) should be determined to be non-dischargeable pursuant to
Bankruptcy Code Section 523(a)(2)(A).
328. Marsch, as described above, received the benefit of the purchase of Homesites 8 and 9 (a) using misrepresentation,
fraudulent omission or deceptive conduct, (b) with knowledge of the falsity or deceptiveness of his statement or conduct, and
(c) with an intent to deceive Lennar-Bridges Cross-Plaintiff and HCC. Lennar-Bridges Cross-Plaintiff and HCC justifiably
relied on Marsch’s statements and/or conduct and have incurred substantial damages proximately caused by their reliance on
Marsch’s statements or conduct. In connection with the purchase of Homesites 8 and 9, Marsch entered into the Master
Declaration, Repurchase Agreement, Grant Deeds and other related agreements, including but not limited to the 1999 Loan
under the pretense that Marsch would comply with the conditions set forth therein. Marsch promised to comply with the
express conditions set forth in the Master Declaration, Repurchase Agreement and Grant Deeds. At the time Marsch entered
into these agreements, Marsch did not intend to comply with the conditions set forth therein. By virtue of the actions alleged
above and described herein, any liability of Marsch to HCC or Lennar-Bridges Cross-Plaintiff as a result of Marsch’s failure
to comply with the Master Declaration, Repurchase Agreement, Grant Deeds and all related agreements, including but not
limited to the 1999 Loan (Counter-Claim, Third Cause of Action), should be determined to be non-dischargeable pursuant to
329. Marsch, as described above, borrowed funds under the 2003 Loan from HCC (a) using misrepresentation, fraudulent
statements or conduct. Marsch entered into the 2003 Loan with HCC after making false representations to HCC and
Lennar-Bridges Cross-Plaintiff and failing to disclose his true state of mind in his business relationship with HCC and
Lennar-Bridges Cross-Plaintiff. Marsch promised to repay the loan on the maturity date set forth in the 2003 Loan
Agreement. At the time Marsch obtained the 2003 Loan from HCC, Mr. Marsch did not intend to repay HCC, and intended
to deceive HCC and Lennar-Bridges Cross-Plaintiff into making the 2003 Loan. By virtue of the actions alleged above and
described herein, any liability to HCC or Lennar-Bridges Cross-Plaintiff for breach of the 2003 Loan (Counter-Claim, Fourth
Cause of Action) or for failure to re-pay the 2003 Loan (Counter-Claim, Fifth Cause of Action) should be determined to be
non-dischargeable pursuant to Bankruptcy Code Section 523(a)(2)(A).
330. Marsch, as described above, received the benefit of the Formation Agreement, HCC Operating Agreement, and the
Override Amendment (a) using misrepresentation, fraudulent omission or deceptive conduct, (b) with knowledge of the
falsity or deceptiveness of his statement or conduct, and (c) with an intent to deceive Lennar-Bridges Cross-Plaintiff and
HCC. Lennar-Bridges Cross-Plaintiff and HCC justifiably relied on Marsch’s statements and/or conduct in entering into the
Formation Agreement, HCC Operating Agreement, Override Amendment and have incurred substantial damages proximately
caused by their reliance on Marsch’s statements or conduct. By virtue of the actions alleged above, any liability of Marsch to
Lennar-Bridges Cross-Plaintiff as a result of Marsch’s breaches of the Formation Agreement, HCC Operating Agreement and
Override Amendment (Counter-Claim, Sixth Cause of Action) should be determined to be non-dischargeable, pursuant to
331. Marsch, as described above, received the benefit of the Admission Agreement (a) using misrepresentation, fraudulent
intent to deceive Lennar-Bridges Cross-Plaintiff and HCC. Lennar-Bridges Cross-Plaintiff and HCC’s justifiably relied on
Marsch’s statements and/or conduct in entering into the Admission Agreement and have incurred substantial damages
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proximately caused by their reliance on Marsch’s statements and/or conduct. By virtue of the actions alleged above, any
liability of Marsch to Lennar-Bridges Cross-Plaintiff as a result of Mr. Marsch’s breach of the Admissions Agreement
(Counter-Claim, Fifteenth Cause of Action) should be determined to be non-dischargeable pursuant to Bankruptcy Code
Section 523(a)(2)(A).
332. Marsch, as described above, received the benefits of the Formation Agreement, HCC Operating Agreement, Override
Amendment, Tolling Agreement and Admission Agreement (a) using misrepresentation, fraudulent omission or deceptive
conduct, (b) with knowledge of the falsity or deceptiveness of his statement or conduct, and (c) with an intent to deceive
Lennar-Bridges Cross-Plaintiff and HCC. Lennar-Bridges Cross-Plaintiff and HCC justifiably relied on Marsch’s statements
and/or conduct in entering into the Formation Agreement, HCC Operating Agreement, Override Amendment, Tolling
Agreement and Admissions Agreement and have incurred substantial damages proximately caused by their reliance on
Marsch’s statements and/or conduct. By virtue of the actions alleged above, any liability of Marsch to Lennar-Bridges
Cross-Plaintiff as a result of Marsch’s breach of the implied covenant of good faith and fair dealing in the Formation
Agreement, HCC Operating Agreement, Override Amendment, Tolling Agreement and Admission Agreement
(Cross-Complaint, Sixteenth Cause of Action) should be determined to be non-dischargeable pursuant to Bankruptcy Code
333. Marsch, as described above, received the benefit of, among other things, the Formation Agreement, the Facility, the
HCC Operating Agreement, the Override Payment Agreement, the Override Amendment, Tolling Agreement and Admission
Agreement (a) using misrepresentation, fraudulent omission or deceptive conduct, (b) with knowledge of the falsity or
deceptiveness of his statement or conduct, and (c) with an intent to deceive Lennar-Bridges Cross-Plaintiff and HCC.
Lennar-Bridges Cross-Plaintiff and HCC justifiably relied on Marsch’s statements and/or conduct and have incurred
substantial damages proximately caused by their reliance on Marsch’s statements and/or conduct. By virtue of the actions
alleged above, any liability of Marsch to Lennar-Bridges Cross-Plaintiff or HCC as a result of Marsch’s violation of the
California Business and Professions Code, §§17200 et seq., and acts of unfair competition in violation of common law
(Cross-Complaint, Seventeenth Cause of Action) should be determined to be non-dischargeable pursuant to Bankruptcy Code
334. Marsch, as described above, has been unjustly enriched and holds funds and property and funds to which he his not
lawfully entitled that he obtained (a) using misrepresentation, fraudulent omission or deceptive conduct, (b) with knowledge
of the falsity or deceptiveness of his statement or conduct, and (c) with an intent to deceive Lennar-Bridges Cross-Plaintiff
and HCC. Lennar-Bridges Cross-Plaintiff and HCC justifiably relied on Marsch’s statements and/or conduct and have
incurred substantial damages proximately caused by their reliance on Marsch’s statements and/or conduct. By virtue of the
actions alleged above, any liability of Marsch to Lennar-Bridges Cross-Plaintiff or HCC as a result of Marsch’s wrongful
actions as alleged herein (Cross-Complaint, Eighteenth Cause of Action) should be determined to be non-dischargeable
pursuant to Bankruptcy Code Section 523(a)(2)(A).
335. Marsch, as described above, received the benefit of the funds in the Facility, the Formation Agreement, the Facility, the
Override Payment Agreement, Tolling Agreement and Admission Agreement (a) using misrepresentation, fraudulent
statements and/or conduct. By virtue of the actions alleged above, any liability of Marsch to Lennar-Bridges Cross-Plaintiff
or HCC as a result of Marsch’s fraudulent misrepresentations and non-disclosures (Cross-Complaint, Nineteenth Cause of
Action) should be determined to be non-dischargeable pursuant to Bankruptcy Code Section 523(a)(2)(A).
COUNT FOUR
(Determination that Cross-Claims in the Bridges Action Are Not Dischargeable Pursuant to Bankruptcy Code Section
523(a)(4))
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337. Marsch’s conduct described above (Cross-Complaint, Eighth Cause of Action) with respect the Facility and the Override
Fees constitutes embezzlement and/or larceny. Mr. Marsch was entrusted with the funds in the Facility for the payment of
Claims and Mr. Marsch fraudulently used funds from the Facility to pay personal or business expenses not related to the
Claims. Moreover, Mr. Marsch wrongfully dispossessed HCC of its property by wrongfully withdrawing and retaining
proceeds from the Facility for expenses unrelated to the Claims and wrongfully obtaining and retaining Override Fees.
Therefore, Mr. Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be
non-dischargeable under 11 U.S.C. § 523(a)(4).
338. Marsch’s conduct described above (Twenty-First Cause of Action, Bridges Counter-Claim) with respect the Bridges
Intellectual Property constitutes embezzlement or larceny. Marsch was entrusted with the Bridges Intellectual Property to
promote and distinguish The Bridges as an exclusive residential community and golf course and Marsch wrongfully offered
and promoted his vacation home rental business using the Bridges Intellectual Property. Moreover, Marsch wrongfully
dispossessed HCC of the Bridges Intellectual Property when he used the Bridges Intellectual Property for his vacation home
rental business. Therefore, Mr. Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff for such conduct should be
determined to be non-dischargeable under 11 U.S.C. § 523(a)(4)
COUNT FIVE
(Determination that Cross-Claims in the Bridges Action Are Not Dischargeable Pursuant to Bankruptcy Code Section
523(a)(6))
340. Marsch’s conduct, as described above, with respect to the breach of the 1999 Loan (Counter-Claim, First Cause of
Action) was (a) willful, in that Mr. Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious,
in that it was wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in
fact, caused substantial injury to HCC and Lennar-Bridges Cross-Plaintiff. Therefore, Marsch’s liability to HCC or
Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
341. Marsch’s conduct, as described above, with respect to the failure to pay the 1999 Loan (Counter-Claim, Second Cause
of Action) was (a) willful, in that Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious,
342. Marsch’s conduct, as described above, with respect to the breach of the Master Declaration, Repurchase Agreement and
Grant Deeds (Counter-Claim, Third Cause of Action) was (a) willful, in that Marsch intended to cause harm to
Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily caused injury, and was
committed without cause or excuse, and (c) in fact, caused substantial injury to Lennar-Bridges Cross-Plaintiff. Therefore,
Marsch’s liability to Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be non-dischargeable under 11
U.S.C. § 523(a)(6).
343. Marsch’s conduct, as described above, with respect to the failure to the breach of the Master Declaration, Repurchase
Agreement and Grant Deeds (Counter-Claim, Third Cause of Action) was (a) willful, in that Marsch intended to cause harm
to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily caused
injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury to HCC and Lennar-Bridges
Cross-Plaintiff. Therefore, Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff for such conduct should be
determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
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344. Marsch’s conduct, as described above, with respect to the breach of the 2003 Loan (Counter-Claim, Fourth Cause of
Action) was (a) willful, in that Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious, in
that it was wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in
345. Marsch’s conduct, as described above, with respect to the failure to pay the 2003 Loan (Counter-Claim, Fifth Cause of
Action) was (a) willful, in that Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious, in
that it was wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in
346. Marsch’s conduct, as described above, with respect to the breach of the Formation Agreement, HCC Operating
Agreement and Override Amendment (Counter-Claim, Sixth Cause of Action) was (a) willful, in that Marsch intended to
cause harm to Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily caused
injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury to Lennar-Bridges
Cross-Plaintiff. Therefore, Marsch’s liability to Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be
347. Marsch’s conduct, as described above, with respect to the conversion related to the Facility and the Override Fees
(Counter-Claim, Eighth Cause of Action) was (a) willful, in that Marsch intended to cause harm to HCC and Lennar-Bridges
Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily caused injury, and was committed
without cause or excuse, and (c) in fact, caused substantial injury to HCC and Lennar-Bridges Cross-Plaintiff. Therefore,
Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be non-dischargeable
under 11 U.S.C. § 523(a)(6).
348. Marsch’s conduct, as described above, with respect to the breach of the Admissions Agreement (Counter-Claim,
Fifteenth Cause of Action) was (a) willful, in that Marsch intended to cause harm to Lennar-Bridges Cross-Plaintiff, (b)
malicious, in that it was wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse,
and (c) in fact, caused substantial injury to Lennar-Bridges Cross-Plaintiff. Therefore, Marsch’s liability to Lennar-Bridges
Cross-Plaintiff for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
349. Marsch’s conduct, as described above, with respect to the breach of the implied covenant of good faith and fair dealing
in the Formation Agreement, HCC Operating Agreement, Override Amendment, Tolling Agreement and Admission
Agreement (CounterClaim, Sixteenth Cause of Action) was (a) willful, in that Marsch intended to cause harm to
Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily caused injury, and was
committed without cause or excuse, and (c) in fact, caused substantial injury to Lennar-Bridges Cross-Plaintiff. Therefore,
Marsch’s liability to Lennar-Bridges Cross-Plaintiff for such conduct should be determined to be non-dischargeable under 11
U.S.C. § 523(a)(6).
350. Marsch’s conduct, as described above, in violation of California Business and Professional Code §§17200 et seq., and
acts of unfair competition in violation of the common law (Counter-Claim, Seventeenth Cause of Action) was (a) willful, in
that Mr. Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful,
done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in fact, caused substantial
injury to HCC and Lennar-Bridges Cross-Plaintiff. Therefore, Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff
for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
351. Marsch’s conduct, as described above, committing wrongful actions for which he has been unjustly enriched and holds
property to which he is not lawfully entitled (Counter-Claim, Eighteenth Cause of Action) was (a) willful, in that Marsch
intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious, in that it was wrongful, done intentionally,
necessarily caused injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury to HCC and
Lennar-Bridges Cross-Plaintiff. Therefore, Marsch’s liability to HCC or Lennar-Bridges Cross-Plaintiff for such conduct
should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
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352. Marsch’s conduct, as described above, committing fraudulent nondisclosures and misrepresentations (Counter-Claim,
Nineteenth Cause of Action) was (a) willful, in that Marsch intended to cause harm to Lennar-Bridges Cross-Plaintiff, (b)
and (c) in fact, caused substantial injury to Lennar-Bridges Cross-Plaintiff. Therefore, Marsch’s liability to Lennar-Bridges
Cross-Plaintiff for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
353. Marsch’s conduct, as described above, infringing the Bridges Intellectual Property (Counter-Claim, Tweny-First Cause
of Action) was (a) willful, in that Marsch intended to cause harm to HCC and Lennar-Bridges Cross-Plaintiff, (b) malicious,
XII. NON-DISCHARGEABILITY - FLORIDA ACTION
COUNT SIX
(Determination Regarding Non-Dischargeability of Lennar-Florida Plaintiff’s Claims in the Florida Action Pursuant
to Bankruptcy Code Section 523(a)(6))
355. Marsch’s conduct, and that of the Minkow Parties acting at Marsch’s direction, described above in violation of the
Florida Civil Remedies Against Criminal Practice Act (Fla. Stat. § 772.101, et seq.) (Count I in the Florida Action) was (a)
willful, in that Marsch intended to cause harm to Lennar-Florida Plaintiff, (b) malicious, in that it was wrongful, done
to Lennar-Florida Plaintiff. Therefore, Marsch’s liability to Lennar-Florida Plaintiff for such conduct should be declared
356. Marsch’s conduct, and that of the Minkow Parties acting at Marsch’s direction, when they intentionally interfered with
the economic and contractual relationship with between Lennar-Florida Plaintiff and Quadrant (Count II in the Florida
Action) was (a) willful, in that Mr. Marsch intended to cause harm to Lennar-Florida Plaintiff, (b) malicious, in that it was
wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in fact, caused
substantial injury to Lennar-Florida Plaintiff. Therefore, Marsch’s liability to Lennar-Florida Plaintiff for such conduct
should be declared non-dischargeable under 11 U.S.C. § 523(a)(6).
357. Marsch’s defamatory conduct, and that of the Minkow Parties acting at Marsch’s direction, described above (Count III
in the Florida Action) was (a) willful, in that Marsch intended to cause harm to Lennar-Florida Plaintiff, (b) malicious, in that
it was wrongful, done intentionally, necessarily caused injury, and was committed without cause or excuse, and (c) in fact,
caused substantial injury to Lennar-Florida Plaintiff. Therefore, Marsch’s liability to Lennar-Florida Plaintiff for such
conduct should be declared non-dischargeable under 11 U.S.C. § 523(a)(6).
358. Marsch’s conduct, and that of the Minkow Parties acting at Marsch’s direction, in violation of the Florida Deceptive and
Unfair Trade Practices Act, Fla. Stat. § 501.201, et seq., (Count IV in the Florida Action) was (a) willful, in that Marsch
intended to cause harm to Lennar-Florida Plaintiff, (b) malicious, in that it was wrongful, done intentionally, necessarily
caused injury, and was committed without cause or excuse, and (c) in fact, caused substantial injury to Lennar-Florida
Plaintiff. Therefore, Marsch’s liability to Lennar-Florida Plaintiff for such conduct should be declared non-dischargeable
under 11 U.S.C. § 523(a)(6).
359. Marsch’s conduct, and that of the Minkow Parties acting at Marsch’s direction, in violation of Florida’s civil conspiracy
law (Count V in the Florida Action) was (a) willful, in that Marsch intended to cause harm to Lennar-Florida Plaintiff, (b)
121
and (c) in fact, caused substantial injury to Lennar-Florida Plaintiff. Therefore, Marsch’s liability to Lennar-Florida Plaintiff
for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(6).
COUNT SEVEN
(Determination Regarding Non-Dischargeability of Lennar-Florida Plaintiff’s Claims in the Florida Action Pursuant
to Bankruptcy Code Section 523(a)(19))
360. Marsch’s conduct, and that of the Minkow Parties acting at Marsch’s direction, described above in violation of the
Florida Civil Remedies Against Criminal Practice Act (Fla. Stat. § 772.101, et seq.) (Count I in the Florida Action) included
acting with an illegal enterprise to extort money and property from Lennar-Florida Plaintiff by manipulating the public
markets for Lennar-Florida Plaintiff’s securities and undermining confidence in Lennar-Florida Plaintiff. On information and
belief, Lennar-Florida Plaintiff alleges that the Minkow Parties, acting at the direction of the Marsch, among other things, (a)
publicly disseminated false, fraudulent, and deceitful information intended to affect the price of Lennar’s publicly-traded
securities and that their false, fraudulent, and deceitful information affected people making decisions in connection with the
purchase or sale of Lennar’s publicly-traded securities; and (b) took “short” positions on Lennar Corporation’s stock. Such
actions were done to harm Lennar-Florida Plaintiff, did in fact harm Lennar-Florida Plaintiff, and amounted to fraud, deceit
and manipulation in connection with the purchase or sale of securities. Therefore, Marsch’s liability to Lennar-Florida
Plaintiff for such conduct should be determined to be non-dischargeable under 11 U.S.C. § 523(a)(19).
PRAYER FOR RELIF
WHEREFORE, Plaintiffs pray for judgment against Marsch as follows:
1. That the Court enter an Order determining that any liability of Marsch with respect to the Fifth, Sixth, and/or Seventh
Causes of Action in the DLA1 Action may not be discharged in the Bankruptcy Case, pursuant to 11 U.S.C. § 523(a)(6); and
2. That the Court enter an Order determining that any liability of Marsch with respect to the Seventh or Eighth Causes of
Action in the DLA 2 Action may not be discharged in the Bankruptcy Case pursuant to 11 U.S.C. § 523(a)(6); and
3. That the Court enter an Order stating that any liability of Marsch with respect to the First Cause of Action, Second Cause
of Action, Third Cause of Action, Fourth Cause of Action, Fifth Cause of Action, Sixth Cause of Action, Eighth Cause of
Action, Fifteenth Cause of Action, Sixteenth Cause of Action, Seventeenth Cause of Action, Eighteenth Cause of Action,
Nineteenth Cause of Action and/or Twenty-First Cause of Action in Lennar-Bridges Cross-Plaintiff’s Cross-Complaint in the
Bridges Action may not be discharged in the Bankruptcy Case, pursuant to 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4), and/or
523(a)(6); and
4. That the Court enter an Order determining that any liability of Marsch with respect to Counts I, II, III, IV, and/or V in the
Florida Action may not be discharged in the Bankruptcy Case, pursuant to 11 U.S.C. §§ 523(a)(6) and 523(a)(19); and
5. For such other and further relief as the Court deems just and proper.
DATED: May 24, 2010
BEN H. LOGAN
DANIEL PETROCELLI
DAVID MARROSO
122
O’MELVENY & MYERS LLP
By /s/ Ben H. Logan
Ben H. Logan
Counsel for Lennar Corporation, Lennar
Homes of California, Inc., Lennar Land
Partners II, LLP II HCC Holdings, LLC,
Lennar San Jose Holdings, Inc.; individually
and derivatively on behalf of HCC Investors,
LLC and Lennar Bridges, LLC
End of Document
123
Notice of Motion and Motion for Summary Judgment or,
Altenatively, Summary, Adjudication
Sallie A. DURHAM, an individual on behalf of herself and all others similarly situated, Plaintiff, v. CONTINENTAL
CENTRAL CREDIT, INC., a California Corporation; San Clemente Cove Vacation Owners Association, a California
Corporation; and Vacation Resorts International, Inc., a California Corporation, and Does 1 through 10, Inclusive.,
Defendants. | United States District Court, S.D. California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
Sallie A. DURHAM, an individual on behalf of herself and..., 2009 WL 3601716...
2009 WL 3601716 (S.D.Cal.) (Trial Motion, Memorandum and Affidavit)
Sallie A. DURHAM, an individual on behalf of herself and all others similarly situated, Plaintiff,
v.
CONTINENTAL CENTRAL CREDIT, INC., a California Corporation; San Clemente Cove Vacation Owners
Association, a California Corporation; and Vacation Resorts International, Inc., a California Corporation, and
Does 1 through 10, Inclusive., Defendants.
No. 307CV01763.
May 22, 2009.
Date: June 19, 2009
Time: 11:00 a.m.
Room: 15
per Chambers No Oral Argument unless Requested By the Court
Notice of Motion and Motion for Summary Judgment or, Altenatively, Summary, Adjudication
Michael E. Williams (SB: 095594), Attorney at Law, 5611 Palmer Way, Suite G2, Carlsbad, CA 92010, (760) 931-1748,
(760) 931-0755 (fax), Attorney for Defendants Continental Central Credit, Inc., a California Corporation, San, Clemente
Cove Vacation Owners Association, a California Corporation, and, Vacation Resorts International, Inc. A California
Corporation.
Judge: Barry Ted Moskowitz.
TABLE OF CONTENTS
I. INTRODUCTION .........................................................................................................................................................................
1
II. SUMMARY OF UNCONTROVERTED FACTS ............................................................................................................
2
III. THE LEGAL STANDARDS FOR SUMMARY JUDGMENT IS SATISFIED ..................................................
3
IV. ARGUMENT AND AUTHORITY ......................................................................................................................................
4
FIRST CAUSE OF ACITON: PLAINTIFF’S FIRST FDCPA THEORY FAILS AS A MATTER OF LAW,
FOR SEVERAL REASONS ..........................................................................................................................................................
4
A. ISSUE ONE: 15 USC § 1692f(1) Provides CCC With a Complete Defense to the Actions Complained
of, As a Matter of Law ......................................................................................................................................................................
4
B. ISSUE TWO: Defendant CCC is Entitled to Make a Profit and Is Not Limited to Recovering Its Actual
Costs of Collection as Fees, Thus Plaintiff Cannot Prevail on Her 15 USC § 1692f(1) Action, As a as a
Matter of Law ......................................................................................................................................................................................
8
C. ISSUE THREE: What is a Reasonable Collection Fee is Determined by Market Forces, As A Matter of
Law ..........................................................................................................................................................................................................
10
D. ISSUE FOUR: Plaintiff Cannot Rely on Inapposite Authority Governing Liquidated Damages, Which
Are Not Involved Here, to Try and Create an Alleged Violation of Law-Or a Triable Issue of Fact-Where
None Exist .............................................................................................................................................................................................
11
125
PLAINTIFF’S OTHER FDCPA THEORIES FAIL AS A MATTER OF LAW .........................................................
13
E. ISSUE FIVE: CCC’s Notices Did Not Violate 15 USC § 1692e .................................................................................
13
F. ISSUE SIX: CCC’s Collection Notices Did Not Violate 15 USC §§ 1692g ............................................................
14
G. ISSUE SEVEN: CCC Made No False Representations to Plaintiff. ..........................................................................
18
SECOND CAUSE OF ACTION: PLAINTIFF’S CALIFORNIA ROSENTHAL ACT CLAIM FAILS AS
A MATTER OF LAW, FOR SEVERAL REASONS ...........................................................................................................
19
H. ISSUE EIGHT: Plaintiff’s Case Falls Outside the Scope of the Rosenthal Act Because it Does Not
Involve the Extension of Credit .....................................................................................................................................................
19
I. ISSUE NINE: Defendants Made No False Representations ...........................................................................................
20
J. ISSUE TEN: The Rosenthal Act Does Not Apply to the Association, As a Matter of Law ................................
20
K. ISSUE ELEVEN: An Absolute Defense Exists Under the Rosenthal Act’s “Safe Harbor” Provision ..........
21
V. CONCLUSION .............................................................................................................................................................................
23
TABLE OF AUTHORITIES
FEDERAL CASES
Anderson v. Credit Collection Services (S. D. Cal. 2004) 322
F. Supp. 2d 1094 ........................................................................................
16
AT&T Wireless Svc. of Cal. LLC v. City of Carlsbad (S.D.
Cal. 2003) 308 F. Supp. 2d 1148 .........................................................
3
Ballard v. Equifax (N. D. Cal. 1998) 27 F. Supp. 2d 1201 .........
5, 17
Celotex Corp. v. Catrett, 477 U.S. 317 ..............................................
3
Duffy v. Leading Edge Productions (5th Cir. 1995) 44 F.3d
308 ..................................................................................................................
4
Garneau v. City of Seattle (9th Cir. 1998) 147 F.3d 802, 807 ...
3
Hernandez v. Carmona (9th Cir. 1988) 138 F.3d 393 ..................
7
Hunt v. Check Recovery Systems, Inc. (2007) 178 F. Supp.2d
1157 ..............................................................................................................
5
Luna v. Tomridge (S. D. Cal. 2006) 436 F. Supp. 2d 1163 ........
3
Renick v. Dun & Bradstreet Receivable Management
Services (9th Cir. 2002) 290 F. 3d 1055 ............................................
16
Sambor v. Omnia Credit Services (D. Hawaii 2002) 183 F.
Supp. 2d 1234 .............................................................................................
18
126
Smith v. Computer Credit, Inc. (6th Cir. 1999), 167 F.3d
1052 ................................................................................................................
15, 16
Terran v. Kaplan (9th Cir. 1997) 109 F.3d 1428............................
15, 16
Wilkins v. Ramirez (S. D. Cal. 2006) 455 F. Supp. 2d 1080.......
3
FEDERAL STATUTES:
15 U.S.C. § 1692 et. seq ........................................................................
1, 8
15 U.S.C. 1692e .......................................................................................
13
15 USC § 1692e(2)(A) ...........................................................................
13, 14
15 UC § 1692e(2)(B) ..............................................................................
13, 14
15 USC § 1692f(1) ..................................................................................
4, 6, 7, 8, 9
15 USC § 1692g .......................................................................................
14, 15, 16
15 USC § 1692g(a) .................................................................................
14, 18
15 UCS § 1692g(b) .................................................................................
14, 15, 16, 17, 18
15 USC § 1692k(c) .................................................................................
16
FEDERAL RULES OF CIVIL PROCEDURE:
Fed. R. Civ. P. 23(b)(3) .........................................................................
17
Fed. R. Civ. P. 56 ....................................................................................
3
Fed. R. Civ. P. 56(a) ...............................................................................
3
Fed. R. Civ. P. 56(c) ...............................................................................
3
CALIFORNIA CASES
Berryman v. Merit Property Management, Inc., (2007) 152
Cal. App. 4th 1544 ....................................................................................
5, 7, 8, 9, 10, 11, 18, 21, 23
Bondanza v. Peninsula Hospital and Medical Center (1979)
23 Cal. 3d 260 .............................................................................................
11, 12, 13
Brown v. Professional Community Management, Inc. (2005)
127 Cal. App. 4th 532 ..............................................................................
5, 6, 7, 8, 9, 11, 13, 21, 22, 23
Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.
App. 4th 1134 .............................................................................................
10
Dey v. Continental Central Credit (2008) 170 Cal. App. 4th
721 ..................................................................................................................
4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 19, 20, 21, 22, 23
127
In re Episcopal Church Cases (2009) 45 Cal. 4th 467 .................
12
Park Place Estates Homeowners Assoc. Inc. v. Naber (1994)
29 Cal. App. 4th 427 ................................................................................
5, 13
Valerio v. Andrew Youngquist Construction (2002) 103 Cal.
App. 4th 1264 .............................................................................................
6
CALIFORNIA STATUTES:
California Business and Professions Code § 11210 et. seq ......
12
§ 11265.1(a) ...............................................................................................
5, 9, 12, 21
§ 17200 et. seq ..........................................................................................
8, 10
California Civil Code § 1350 et. seq .................................................
12
§ 1351(a) .....................................................................................................
6
§ 1366(e) .....................................................................................................
5, 9, 19, 21
§ 1366.1 ......................................................................................................
6, 12, 13, 22
§1368 ...........................................................................................................
7
§ 1671 ..........................................................................................................
11,12
§ 1788 ..........................................................................................................
1
§ 1788.2(b) .................................................................................................
21
§ 1788.2(c) .................................................................................................
21
§ 1788.2(e) .................................................................................................
19, 21
§ 1788.2(f) ..................................................................................................
21
§ 1788.13(e) ...............................................................................................
20
§ 1788.13(f) ...............................................................................................
21
§ 1788.14(b) ..............................................................................................
20
§ 1788.17 ....................................................................................................
20
California Corporations Code § 9142 ...............................................
12
Other Authorities:
4 Witkin, California Procedure (4th Ed. 1997) Pleading, §
413, pp. 510-511 ......................................................................................
6
128
TO: DEBORAH L. RAYMOND and O. RANDOLPH BRAGG, attorney’s for Plaintiff SALLIE A. DURHAM
O. Randolph Bragg, Esq. Horwitz, Horwitz & Associates, LTD 25 East Washington St, Ste. 900 Chicago, IL 60602
Deborah L. Raymond, Esq. 445 Marine View Avenue, Suite 305 Del Mar, CA 92014
Please take notice that on 19th, June 2009, at 11:00 o’clock a.m., or as soon thereafter as counsel can be heard, in Room 15,
United States District Court House, 880 Front Street, Suite 4290, San Diego, California 92101, Defendants respectfully move
this Court for a Summary Judgment or, in the Alternative, Summary Adjudication against the Plaintiff. This Motion is made
pursuant to Federal Rules of Civil Procedures Rule 56 (a) and (c) in that there is no genuine issue of material fact that exists
as to Plaintiff’s claim. The Motion will be made on this Notice of Motion; Points and Authorities in Support of the Motion;
the Declaration of Michael E. Williams; the Request for Judicial Notice; the Statement of Uncontroverted Facts; and the files
and papers pertaining to this matter.
Defendants CONTINENTAL CENTRAL CREDIT, INC. (“CCC”) and SAN CLEMENTE COVE VACATION OWNERS
ASSOCIATION (“Association”) submit the following Points and Authorities in support of their Motion for Summary
Judgment or, in the alternative, Summary Adjudication.
I. INTRODUCTION
Plaintiff SALLIE DURHAM, purportedly on behalf of a putative class, seeks damages under a First Amended Complaint
(“FAC”) against Defendants CONTINENTAL CENTRAL CREDIT, INC. (“CCC”) and SAN CLEMENTE COVE
VACATION OWNERS ASSOCIATION (“Association”). The gravamen of Plaintiff’s FAC is her allegation that a collection
fee added to charges for unpaid homeowners’ association (HOA) assessments was “arbitrary” and “unreasonable” because it
was assessed without regard to the actual costs of collection (See Defendants’ Separate Statement of Uncontroverted Material
Facts [“UF”] # 51). Durham alleges that Defendant CCC violated various provisions of the Federal Fair Debt Collection
Practices Act (FDCPA), 15 USC § 1692 et. seq.; and that both Defendants violated California’s Rosenthal Fair Debt
Collection Practices Act (“Rosenthal Act,” Civil Code § 1788 et. seq.)
Under the uncontroverted facts of record and controlling legal authority, Plaintiff’s claims fail as a matter of law. Applicable
California law establishes that a homeowners’ associations may hire a for-profit entity like CCC to collect unpaid
assessments, and that such entities may charge reasonable collection fees, with what is “reasonable” to be determined by
what the market will bear. Thus, the acts complained of fall squarely within the “safe harbor” provisions of both the FDCPA
and the Rosenthal Act, because they are expressly authorized by law. Moreover, even absent this absolute defense, the facts
demonstrate that Plaintiff cannot prove the elements required to show any violation of law. Finally, this is not a case
involving liquidated damages, so the law regulating the imposition of such damages has no application to this case.
Accordingly, summary judgment should be granted.
II. SUMMARY OF UNCONTROVERTED FACTS
In 2002, Plaintiff became the owner of a time-share interest in “San Clemente Cove,” which she allegedly acquired pursuant
to a written contract (although neither a copy of any contract, nor any description of contractual terms, has ever been
produced or provided) (UF # 1, 2). This interest was eventually foreclosed upon by “a yet unknown third party,” which
remains unidentified. (UF # 3). Defendant San Clemente Cove Vacation Owners Association (the “Association”), which in
the normal course of its business assesses and receives association fees from members, billed Plaintiff for such fees, under
the authority of its written rules and by-laws (UF # 6). Plaintiff does not claim that such fees were improperly or wrongfully
assessed, or that she did not in fact owe the association such fees (UF # 7).
The Association’s billing and service agent, Advanced Financial Company, made efforts to collect the sums Plaintiff owed
the Association for delinquent fees, but ultimately referred the account to defendant CCC for collection.(UF # 24). Plaintiff
129
received two notices from Defendant CCC by mail, pursuant to its collection efforts(UF # 33). The first was allegedly
received on or about September 11, 2006, seeking payment in the total amount of $1,890.55, $535.78 of which was identified
in the notice as a collection fee (UF # 34). An incomplete copy of this notice was attached to Plaintiffs FAC as Exhibit A,
which Plaintiff characterized as a “redacted” copy of the notice she received (UF # 34, 37). Exhibit A does not show the
reverse side of the notice, which sets forth the debtor’s right to dispute the debt and other information required by the FDCPA
(UF # 34, 37). This information is included on all such notices sent out by CCC (UF # 35).
Plaintiff alleges she received a second notice on or about October 9, 2006, seeking payment of $1,900.55, again including
$535.78 as a collection fee (UF # 39). After receiving this second notice, Plaintiff wrote a letter to CCC dated October 17,
2006 in which she disputed the debt, stated that the timeshare had been foreclosed upon, and demanded verification (UF #
44). Upon receiving this letter on or about October 23, 2006, CCC immediately ceased all collection efforts and requested
verification documents on the account from the Association (UF # 45, 46). On or about October 26, 2006, CCC mailed a
letter to Plaintiff with the information it had available in its office at that time, and offering settlement in full (UF # 47).
When CCC had received the requested verification information from the Association, it followed up with a second letter and
itemized statement (UF # 48). CCC collected nothing on the account, and eventually cancelled it as uncollectible (UF # 24).
Plaintiff has never claimed nor produced any evidence indicating that she paid any sum on this account to CCC or to anyone
else (UF # 8). Other pertinent facts are discussed below, in conjunction with the argument on the issue to which they relate.
II. THE LEGAL STANDARD FOR SUMMARY JUDGMENT IS SATISFIED
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S.
Ct. 2548 (1986). Additionally, summary adjudication is appropriate on discrete claims where no genuine issues of material
fact exist as to that claim. Fed. R. Civ. P. 56(a); AT&T Wireless Svc. of Cal. LLC v. City of Carlsbad (S.D. Cal. 2003) 308 F.
Supp. 2d 1148, 1155.
“One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses.” Wilkins v. Ramirez (S.
D. Cal. 2006) 455 F. Supp. 2d 1080, 1087-1088, citing Celotex Corp., supra, 477 U.S. at 323-24. As stated in Luna v.
Tomridge (S. D. Cal. 2006) 436 F. Supp. 2d 1163, “Federal Rule of Civil Procedure (“Rule”) 56(c) empowers the court to
enter summary judgment on factually unsupported claims or defenses, and thereby ‘secure the just, speedy and inexpensive
determination of every action.’ Id at 1168, quoting Celotex, supra, 477 U.S. 327. Summary judgment is appropriate here
because the evidence of record demonstrates that the Plaintiff cannot prove the elements of any cause of action asserted in her
FAC. “Where the plaintiff bears the burden of proof at trial, summary judgment for the defendant is appropriate if the
defendant shows that there is an absence of evidence to support the plaintiffs claims.” Id at 1168, citing Celotex, supra, 477
U.S. at 325; Garneau v. City of Seattle (9th Cir. 1998) 147 F.3d 802, 807. Thus, summary judgment may be entered when an
essential element of a legal theory is shown to lack evidentiary support, irrespective of factual disputes over other aspects of
the claim. See Celotex, supra, 477 U.S. at 323.
Additionally, while the movant is not required to produce evidence negating the non-movant’s claims, summary judgment is
also proper where, as here, a defendant demonstrates that a complete defense exists to the causes of actions asserted under the
uncontroverted facts. See Duffy v. Leading Edge Productions (5th Cir. 1995) 44 F.3d 308, 312.
In this case, both of these criteria for summary judgment are satisfied. The uncontroverted material facts demonstrate beyond
question that the evidence required to support one or more essential elements of each claim advanced has not been, and
cannot be produced; and further, that an absolute defense to each cause of action exists, precluding each and every claim
advanced. Accordingly, summary judgment should be entered in favor of Defendants, as a matter of law.
IV. ARGUMENT AND AUTHORITY
130
FIRST CAUSE OF ACTION: PLAINTIFF’S FIRST FDCPA THEORY FAILS AS A MATTER OF LAW, FOR
SEVERAL REASONS
Plaintiff’ first cause of action alleging various violations of the FDCPA was initially brought against Defendants CCC and
Vacation Resorts International (“VRI”) (UF # 52). VRI has been dismissed from the action by stipulation, and CCC is
therefore the only remaining party to the FDCPA claims (UF # 53).
A. ISSUE ONE: 15 USC § 1692f(1) Provides CCC With a Complete Defense, As a Matter of Law.
Governing law, as applied to the uncontroverted facts, establishes that (1) Plaintiff cannot prove a violation of 15 United
States Code section 1692f(1) by CCC; and further (2) an absolute defense exists to any claim she might otherwise have under
this FDCPA provision, because the acts complained of were permitted by law.
15 USC § 1692f(1) prohibits the “collection of any amount (including any interest, fee, charge, or expense incidental to the
principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” In
order to succeed in proving a violation of this provision, the burden is on the plaintiff to demonstrate why the collection fee is
illegal, rather than defendants’ burden to justify that it is legal for it to charge a fee for the service. Dey v. Continental Central
Credit (2008) 170 Cal. App. 4th 721, 727, citing Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th
1544, 1560.
However, where, as here, defendants are able to show that the fee complained of is authorized by law, section 1692f(1)
provides an absolute defense to the action, because the disjunctive language of this statute provides a “safe harbor” for
collection of amounts permitted by law, even if they are not authorized by contract. The analysis of whether such a “safe
harbor” exists turns on state law. Ballard v. Equifax (N. D. Cal. 1998) 27 F. Supp. 2d 1201, 1205; see also Dey, supra, 170
Cal. App. 4th at 727 (“In the absence of an express agreement, whether charges are permissible within the meaning of the
FDCPA turns on California law” [citing Hunt v. Check Recovery Systems, Inc. (2007) 178 F. Supp.2d 1157, 1161]). A
defendant can establish compliance with 15 U.S.C. § 1692f(1) by identifying “some state statute which permits; i.e.
authorizes or allows, in however general a fashion, the fee or charges in question.” Ballard, supra, 27 F. Supp. 2d at 1205
The right of HOAs such as the Defendant Association, to collect general and special assessments plus reasonable collection
costs is codified at CC § 1366(e) (part of the Davis-Stirling Common Interest Development Act, the general Act governing
homeowners’ associations), and B&PC § 11265.1(a) (a provision of the Vacation Ownership and Time Share Act of 2004,
which establishes that the identical provision applies to time-share developments). Even Plaintiff acknowledges that “...the
written rules of the Association provide that the association is entitled to recover costs incurred by it in the collection of
delinquent assessments” (UF # 25). The Acts create a statutory framework to permit HOAs to regularly collect the
assessments they need in order to function, and to hire outside entities as needed to facilitate this process. See Park Place
Estates HOA, Inc. v. Nader (1994) 29 Cal. App. 4th 427, 432 (“Because homeowner associations would cease to exist
without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently
seek relief against a non-paying owner”). They also set the legal standards governing HOAs, as well as their relationship
with the entities they employ, such as CCC. See Brown v. Prof. Community Mgt., Inc. (4th App. Dist. 2005) 127 Cal. App.
4th 532, 538. The Acts contemplate that officers and directors of HOAs will be volunteer homeowners, who are not expected
to perform all of the required services personally, at no cost-rather, the association must hire employees or contract with
others to provide services, including collection services to pursue fees and assessments owed to the association. Dey, supra,
170 Cal. App. 4th at 728-729, citing Brown, supra, 127 Cal. App. 4th at 539. Such service vendors may be (and generally
are) for-profit commercial enterprises such as CCC. “While section 1366.1 prohibits an association from marking up the
incurred charge to generate a profit for itself, the vendor is not similarly restricted.” Dey, supra at 729, quoting Brown, supra
at 539. As the Brown court succinctly stated, “Plaintiff would have it that no vendor selling its services to a non-profit
association could charge a fee, or, indeed, continue in business as a profit-making enterprise. That cannot be the law.” Id
at 539. Plaintiff tries to sidestep the impact of this governing law by declaring that she “DOES NOT seek to apply standards
governing homeowners’ associations, as set forth in Cal. Civ. Code § 1366.1, to any defendant that is not an “association”
within the meaning of Cal. Civ. Code § 1351(a)” (UF # 66). Despite her representations to the contrary, Plaintiff is
plainly--and erroneously-- attempting to impose the legal standard applicable to nonprofit HOAs (which may not lawfully
make a profit and may recover only their actual costs incurred in the collection of delinquent accounts) upon CCC-a for-profit
company lawfully employed by the Association which is legally entitled to function as a profit-earning entity. This is
illustrated by Plaintiff’s own admission, in pleadings filed of record herein, that the gravamen of her complaint “is that the
131
adding of an arbitrary 40% collection fee, which bears no relationship to the actual costs of collection, is unreasonable, and
therefore, violates the FDCPA and the Rosenthal Act” (UF # 51)1. She again asserts this fundamentally erroneous theory
when she alleges Defendants violated the FDCPA section 1692f(1) “By collecting or attempting to collect amounts, including
a collection fee that bears no relation to the actual cost of collection, not expressly authorized by the agreement creating the
debt or permitted by law...” (UF # 58).
1
The admission of a fact in a pleading is a judicial admission, which may be relied on as part of the case. Such an admission
constitutes a waiver of proof of the fact by conceding its truth, and has the effect of removing the matter from the issues. Valerio v.
Andrew Youngquist Construction (2002) 103 Cal. App. 4th 1264, 1271, citing 4 Witkin, California Procedure (4th Ed. 1997)
Pleading, § 413, pp. 510-511.
In Dey, supra, 170 Cal. App. 4th at 730, an identical argument was unsuccessfully advanced by the same attorney
representing the Plaintiff in this case, on behalf of a similarly situated plaintiff, in a case arising under very similar facts.2 Dey
claimed that he “has NEVER sought to apply standards governing [homeowners associations] to [defendants].” Id. Affirming
the demurrer, the Court of Appeal explained that the trial court “...properly relied on [Brown, supra, 127 Cal. App. 4th 532
and Berryman, supra, 152 Cal.App.4th 1544] since they set forth California law on the fees vendors may charge homeowners
associations, and California law controls whether the collection fee here was permitted by law within the meaning of title 15
United States Code section 1692f(1)... the court is not required to ignore controlling law merely because the plaintiff does
not rely on it.” Id.
2
Dey was brought by attorney Deborah Raymond, who also represents the Plaintiff in this case (see Id at 724); as was at least one
other cases naming CCC as a defendant and advancing very similar claims. See Dalton v. Tahoe Beach and Ski Club Owners’
Association, Continental Central Credit, et. al. (San Diego County Superior Court Case No. IN030789 (subsequent demurrer
dismissing all claims asserted in plaintiffs’ Third Amended Complaint affirmed by the Fourth Appellate District (Div. One), Case
No. D046505, in an unpublished opinion filed March 17, 2006). Defendant has requested the Court to take judicial notice of the
trial and appellate courts’ rulings (submitted herewith as Exhibits 7 and 8), in the accompanying Request for Judicial Notice).
Plaintiff’s counsel’s repeated insistence on bringing these unsupportable cases, asserting causes of action that have been
determined meritless; and especially her continued pursuit of this action in the Federal forum following the California Court of
Appeal’s decision in Dey, suggests impermissible forum shopping, or “judge-shopping.” Such efforts have been recognized as an
inappropriate attempt to escape adverse rulings, which waste the time and resources of all parties and is disruptive of the judicial
process; and for which a court may impose sanctions under its inherent powers. See Hernandez v. Carmona (9th Cir. 1988) 138
F.3d 393, 398.
As outlined above, controlling California law establishes that the very acts complained of here have been held lawful by at
least three decisions of California’s Fourth Appellate District, applying the clear language of two governing statutes. Again,
as the Brown court explained, while a nonprofit HOA cannot charge fees exceeding its costs, this restriction does not apply to
managing agent or other service vendors (like CCC), which are not required to be nonprofit, and are generally for-profit
entities. In Berryman, supra, 152 Cal. App. 4th at 1552, relying on Brown, the court held that although CC § 13683 prevents
HOAs from charging inflated fees for documents and for transfer of title when a unit is bought or sold, the statute does not
constrain the amount that a HOA’s agent could charge. Id.
3
CC sec. 1368 is a different section of the Davis-Stirling Act, subject to the same reasoning, definitions and general principles as
sec. 1366 and 1366.1, at issue here and in Brown, supra. See Berryman, Id at 1552.
Most importantly, this rule has now been held to specificially encompass vendors of collection services, in a case involving
the same collection agency charging the same fee at issue here. The court In Dey, supra, 170 Cal. App. 4th at 731, expressly
found lawful the exact same action alleged to violate 15 UCS § 1692f(1) in this case--charging an allegedly “arbitrary and
unreasonable collection fee” of 40%, against timeshare owners whose accounts were referred for collection. In Dey, the
plaintiff claimed CCC violated 15 USC § 1692 et. seq.by “[d]emanding a collection fee that does not reasonably reflect the
actual cost of collection,” and “us[ing] unfair or unconscionable means to collect or attempt to collect a debt by collecting a
fee, charge, or expense not expressly authorized by the agreement creating the debt or permitted by law.” Dey, supra, 170
132
Cal. App. 4th at 7254. Virtually identical allegations are advanced in the FAC at issue here (UF # 58). The Dey court’s
analysis focused on whether the plaintiff could show that the collection fee was not “permitted by law.” Id at 727. It held that
the plaintiff could not make such a showing. Affirming the demurrer, it stated, “We conclude that under Brown and
Berryman, the trial court correctly determined that ‘the allegation that [defendants’] collection fee were greater than the
actual costs incurred to collect the debt does not support a cause of action. Id at 730. The Court of Appeal also pointed out
that “In finding the collection fee here legal, the court relied on [Brown] and [Berryman]...” Id at 728 (emphasis added). It
further stressed, “Dey made no showing the collection fee was illegal.” Id at 731. Thus, the collection fee the plaintiff attacks
is specifically authorized by law, and the safe harbor defense of 15 USC §1692f(1) squarely applies to establish an absolute
defense to Plaintiffs action, as a matter of law.
4
In Dey, the plaintiff framed his single cause of action for violation of California’s Unfair Practices Act (Bus. & Prof. Code §
17200) as predicated on alleged violations of FDCPA section 1692f(1), based on charges by CCC identical to those at issue here,
as outlined above. See Id at 725
B. ISSUE TWO: Defendant CCC is Entitled to Make a Profit and Is Not Limited to Recovering Its Actual Costs of
Collection as Fees, Thus Plaintiff Cannot Prevail on Her 15 USC § 1692f(1) Action, As a Matter of Law
The same arguments that support Defendants’ defense under the “safe harbor” provision of § 1692f(1) also demonstrate why
the Plaintiff cannot succeed on her burden of proving the merits of this claim, as a matter of law: The FDCPA is not violated
and no cause of action may be stated when the action complained of is authorized by contract or by law. The controlling law
makes it very clear that CCC may legally function as a for-profit entity in providing collection services to the Association (in
this case, with the very fee at issue here, charged by the very same defendant, having been expressly held lawful). Thus, the
Plaintiff cannot demonstrate a 15 USC § 1692f(1) violation.
Under the authority discussed above, the various service providers hired by HOA’s (whether painters, landscapers, mortgage
brokers, or collection agencies) are legally entitled to earn a profit in performing their work. Again, as the Brown court
emphasized, “Plaintiff would have it that no vendor selling its services to a non-profit association could charge a fee, or,
indeed, continue in business as a profit-making enterprise. That cannot be the law.” Brown, supra, 127 Cal. App. 4th at 539.
Likewise, the Berryman court explained, “The implication...that a for-profit business must have statutory or contractual
authorization for providing a service to a third party and charging a fee for that service is fundamentally flawed. Indeed, it is
up to plaintiffs to demonstrate why a statute or contract prohibits [the business] from doing so.” Berryman, supra, 152 Cal.
App. 4th at 1552. Plaintiff cannot satisfy this burden. On the contrary, the Association is expressly empowered by law to hire
third party vendors to do both collections and the other types of work; and such entitles may lawfully earn profits from such
work. See CC § 1366(e), B&PC § 11265.1(a), Berryman, supra, 152 Cal. App. 4th at 1552; Brown, supra, 127 Cal. App. 4th
at 539; and especially Dey, supra, 170 Cal. App. 4th at 728. Confronted with exactly the same issue presented here, the Dey
court expressly held that CCC’s collection fee was legal, and did not violate 15 USC § 1692f(1). Id. Accordingly, the
Plaintiff cannot meet her burden of showing that the collection fee at issue was in any manner unlawful, as a matter of law.
For this reason, and because 15 UCS § 1692f(1)’s “safe harbor” defense applies to shield the defendants from liability, her
claim alleging violation of § 1692f(1) fails as a matter of law.
C. ISSUE THREE: What is a Reasonable Collection Fee is Determined by Market Forces, As A Matter of Law
California law addressing collection fees, including cases arising under facts analogous to those presented here, holds that
when a legitimately for-profit vendor’s fees are challenged as “unreasonable,” what is reasonable is to be determined by
market forces. In Berryman, supra, 152 Cal. App. 4th at 1552, 1560, the court stated that “Competitive forces, not the statute,
will constrain the vendors’ fees and charges.” It observed that those who believe that a HOA’s vendor’s fees are out of line
with market forces have the remedy of persuading the association’s board to find a vendor that offers the services for less,
since a vendor that realizes it is losing business with fees that are “out of line with the marketplace” will likely adjust them
accordingly. Id.
Likewise, in Dey, supra, 170 Cal. App. 4th at 729-730 the court, quoting Berryman, also emphasized that the competitive
133
forces of the market will determine whether a vendor such as CCC charges fees that are “reasonable”-and that if a
homeowner feels that such fees are excessive, his or her remedy lies with the HOA: “Dey does not meet his burden of
showing a contract or statute prohibits defendants’ collection fee, and to the extent he believes the vendor services the
Shores’ homeowners association contracts for are noncompetitive, he may pursue the matter with the association.” Id. See
also Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal. App. 4th 1143, 1148 (no claim for violation of California’s
Unfair Competition Law [Bus. & Prof Code § 17200] could be stated where a mortgage broker’s charge was lawful, and
plaintiff presented no evidence that the amount was unreasonable in light of sums normally charged for similar transactions
in his market area). Thus, it is up to market forces-including pressure brought to bear on homeowners’ associations by
owners who deem vendor charges excessive-to impose appropriate constraints on what collection fees an agency like CCC
may charge, where, as here, such fees are lawfully imposed. See Dey, supra, 170 Cal. App. 4th at 729-730. As stated by Hon.
Thomas P. Nugent in an order entered in Dey v. Continental Central Credit (San Diego County Superior Court Case
No.37-2007-00050054-CU-BT-NC5 (affirmed by the Fourth Appellate District Court at Dey v. Continental Central Credit
(2008) 170 Cal. App. 4th 721), “According to Brown and Berryman...the fees a managing agent such as defendants may
charge are limited only by competitive forces. Defendants are not required to charge a fee that has, as Plaintiff alleges, an
‘ascertainable relationship to the amount of costs actually incurred in effecting collection of a particular debt.’ A cause of
action cannot be based on such an allegation” (UF # 67).
5
Defendants have requested the Court take judicial notice of this order in its concurrently filed Request (See RJN # 3).
D. ISSUE FOUR: Plaintiff Cannot Rely on Inapposite Authority Governing Liquidated Damages, Which Are Not
Involved Here, to Try and Create an Alleged Violation of Law-Or a Triable Issue of Fact-Where None Exist.
In the present case, exactly as in Dey, the Plaintiff has tried to concoct a violation of law by arguing for the application of
legal authority wholly inapposite to the issues before the court. In opposing Defendants’ Motion to Dismiss, she relied on
Bondanza v. Peninsula Hospital and Medical Center (1979) 23 Cal. 3d 260 to argue that the collection fee at issue here
should be analyzed in the same manner as the fee found unlawful in that case.(UF # 3). Yet Bondanza is both factually
distinguishable and legally inapposite to the case at hand. Bondanza was a contract case, based on a liquidated damages
clause that was held illegal under California Civil Code (CC) § 1671. It involved the collection of fees on a hospital bill,
imposed under an adhesion contract that the plaintiff-patient had been required to sign as a condition of admission; which
contained a collection clause that the court found to be an illegal penalty under the statute governing liquidated
damages--thus the collection fees at issue were expressly prohibited by law.
In the present case, Plaintiff has never alleged nor produced any evidence suggesting that a liquidated damages clause, in any
contract, ever existed or was ever at issue (UF # 3). Nor does she plead any violation of CC § 1671 (UF # 3). Thus, neither§
1671 nor Bondanza, supra, 23 Cal. 3d 260, have any application whatsoever to this case-because it simply does not involve
liquidated damages.
In Dey, supra, 170 Cal. App. 4th at 727-728, the court rejected an identical argument arising under identical facts (and, as
noted above, advanced by the same attorney). At the trial level, Hon. Thomas Nugent explained, “Bondanza was based on an
interpretation of Civil Code § 1671, which addresses the validity of a liquidated-damages provision in a contract... Plaintiff
has not alleged the existence of a contract here that includes an objectionable liquidated-damages provision. As such,
Plaintiff cannot rely on Bondanza” (UF # 67; RJN # 3). Affirming this ruling on appeal, the Fourth Appellate District Court
pointed out that the plaintiff’s original complaint had alleged a violation of CC § 1671, but that the claim had been dismissed
on demurrer because the plaintiff failed to attach a contract or to describe any liquidated damages provision in any contract.
There, as here, Plaintiff’s FAC did not allege any violation of § 1671, nor did it allege any contract term pertaining to
liquidated damages. “Thus, Bondanza is not on point. A decision is authority only for the point actually passed on by the
court and directly involved in the case. General expressions in opinions that go beyond the facts of the case will not
necessarily control the outcome in a subsequent suit involving different facts.” Dey, supra, 170 Cal. App. 4th at 728 (citations
omitted).
Additionally, it is worth briefly noting that even if a contract with a liquidated damages provision were at issue here, which it
134
is not, this case arises under a specific statutory scheme addressing the matter at issue, namely the rights of HOAs to hire
third party, for-profit collection agencies to recover unpaid assessments. See CC § 1366.1; Bus. & Prof. Code §§ 11265.1(a).
Thus, the Legislature has carved out a legal niche, in which particular statutes-rather than general common law--governs the
relevant area of law. In doing so, the Legislature preempted the application of common law principles that might otherwise
apply to the parties/entities/subject matter at issue; and instead enacting statutes that prescribe specific rules for the specific
parties/entities belonging to the regulated group. See, e.g. In re Episcopal Church Cases (2009) 45 Cal. 4th 467, 488-489
(Corporations Code § 9142 governs trust ownership of church property, displacing common law trust principles that might
otherwise impact determination of disputes over such property). The same principle has been repeatedly recognized in case
law interpreting the statutes governing common interest and timeshare communities through the Davis-Stirling Common
Interest Development Act (CC § 1350 et. seq) and B&PC § 11210 et. seq, the Vacation Ownership and Time Share Act of
2004). See Park Place, supra, at 539 (“The legislature has enacted very specific procedural rules governing condominium
assessments”); Dey, supra, 170 Cal. App. 4th at 728-730 (discussing the Brown court’s analysis of the pertinent provision of
the Davis-Stirling Act [§1366.1], and citing Brown, supra, 127 Cal. App. 4th at 539). Thus, specific legislative enactments,
plus a well-developed body of case law interpreting these statutes, governs the case at hand-not cases like Bondanza,
espousing general common law principles and applying unrelated statutes.
PLAINTIFFS OTHER FDCPA THEORIES FAIL AS A MATTER OF LAW
E. ISSUE FIVE: CCC’s Notices Did Not Violate 15 USC § 1692e
Plaintiff’s claim that Defendants violated 15 USC § 1692e, like her others, fails on the uncontroverted facts and applicable
law. Plaintiff’s central theory underpinning this claim apparently rests on her erroneous conclusion that CCC’s collection fee
was unlawfulthus, she reasons, charging the fee “misrepresented” the amount lawfully due. This is illustrated at FAC 29.1,
where she claims that CCC violated section 1692e(2)(A) “By using false, deceptive, and misleading means in connection
with the attempt to collect a debt by adding an unlawful collection fee to the alleged debt and thereby making a false
representation of the amount of the alleged debt” (UF # 54). Likewise, at ¶29.2, she claims defendants violated section
1692e(2)(B) “By using false, deceptive, and misleading means in connection with the attempt to collect a debt by the false
representation of services rendered or compensation which may be lawfully received by any debt collector for the collection
of a debt” (UF # 55). As explained above, the collection fee at issue was unlawfully charged, thus, CCC made no
misrepresentation in seeking its recovery. See Dey, supra, 170 Cal. App. 4th at 728-730.
Nor does Plaintiff claim-nor could she-that the notices at issue misrepresented the amount of the debt in any other manner.
As her own allegations at FAC ¶¶ 16 - 17 and Exhibits A and B (even in their incomplete form as attached) make clear, the
two communications at issue clearly set forth on the face of each exactly how much of the payment sought was for principle,
how much was for interest, and how much was for the collection fee (UF # 40).
Rejecting virtually identical arguments advanced in Dey, that court explained:
The FAC also alleged defendants violated title 15 United States Code section 1692e(2)(A), which prohibits a debt collector
from falsely representing “the character, amount, or legal status of any debt.” The FAC, however, alleged no supporting
facts...Continental’s notices to Dey clearly stated the principal amount of the debt, the amount of interest and the amount of
the collection fee. Accordingly, there was no false representation. Dey cites no authority for a different conclusion.
Further, the FAC alleged defendants violated title 15 United States Code section 1692e(2)(B), which prohibits a debt
collector from falsely representing “any services rendered or compensation which may be lawfully received by any
debt collector for the commission of a debt.” Again, the FAC alleged no supporting facts, and Dey cites no supporting
authority. As discussed, Dey made no showing the collection fee was illegal.
Dey, supra, 170 Cal. App. 4th at 730-731. This language applies with equal force here. Under the undisputed facts of record,
Plaintiff cannot show any violation of these FDCPA sections by CCC.
F. ISSUE SIX: CCC’s Collection Notices Did Not Violate 15 USC § 1692g
Plaintiff further claims that CCC violated 15 USC §§ 1692g “By failing to effectively provide a “Notice of Debt” (UF #
135
59). Section 1692g(a) requires a debt collector to send a written notice within five days of its initial communication
with the consumer, stating specific information about the debt and notifying the consumer of his or her right to
dispute the debt and request verification within 30 days of receiving the notice. The copy of the Notice attached as Ex.
A to Plaintiff’s FAC, which was the initial Notice she received from CCC, is “redacted” and incomplete, showing only
one side of the document; however, it is undisputed that all of the consumer rights information required by the 15
USC § 1692g(a) was provided on the reverse side of this Notice (UF #34, 35, 37). CCC sends such initial notices to
debtors using a preprinted form supplied by the American Collectors’ Association (ACA), which it has used for many
years, and all such notices contain the requisite FDCPA language giving the debtor the opportunity to dispute the
account in writing within 30 days of receipt (UF #35, 36).
Plaintiff’s complaint under this section presumably focuses on the second communication from CCC, a letter dated October
9, 2006 and attached to her FAC as Ex. B; which she allegedly received approximately 28 days after the initial Notice (UF #
39). This letter stated in pertinent part (following a breakdown of the components of the sum claimed due), “The
above-referenced claim has been assigned to our firm. Because you have failed to comply with our request for payment, we
may refer this account to our attorney for legal action, should he deem it appropriate, To prevent further collection efforts,
payment in full is required immediately.” (UMF # 42). It is undisputed that Plaintiff sent CCC a letter disputing the debt and
requesting verification on October 17, 2006, only after receiving this second communication (UF # 44).
Section 1692g(b) provides in relevant part:
Collection activities and communications that do not otherwise violate this title may continue during the
30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing
that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of
the original creditor. Any collection activities and communication during the 30-day period may not
overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request
the name and address of the original creditor.
Neither the timing of CCC’s second letter nor the language at issue can support a violation of this law, for several reasons.
First, Plaintiff’s own FAC illustrates that she did not contact CCC to dispute the debt or request verification until after
receiving the second notice (UF # 44). In such a case, 15 USC § 1692g(b) gives the collector the legal right to continue its
collection efforts during the statutory 30-day period. See Smith v. Computer Credit, Inc. (6th Cir. 1999), 167 F.3d 1052,
1054-1055 (“A collection agency does not have to stop its collection efforts to comply with the Act”).
Second, Plaintiff can point to nothing in CCC’s notice that could be reasonably interpreted as likely to confuse a hypothetical
“least sophisticated debtor” by overshadowing or contradicting a prior or concurrent disclosure of the consumer’s rights.
“The question whether language in a collection letter overshadows or contradicts the prior or concurrent disclosure of the
consumer’s rights so as to confuse a least sophisticated debtor is a question of law.” Terran v. Kaplan (9th Cir. 1997) 109
F.3d 1428, 1432. In Terran, a debt collection attorney sent a letter which contained the required notice, but also advised the
debtor that unless he made an immediate phone call to the attorney’s office, he “may find it necessary to recommend to [his]
client that they proceed with legal action.” Id at 1430. The Ninth Circuit rejected the plaintiff’s claim the letter violated §
1692g, finding that it did not “threaten or encourage the least sophisticated debtor to waive his statutory right to challenge the
validity of the debt,” even though it suggested that legal action may ensue if Terran did not call the debt collection
attorney’s office immediately. Id. In the present case, CCC’s letter, like the one in Terran, only suggested that legal action
could follow if immediate action was not taken. Plaintiff admits that the only consequence “threatened” if Plaintiff did not
pay immediately was “further collection efforts” (UF # 43 ).
Numerous courts have held that such language is not tantamount to a threat of immediate legal action sufficient to
overshadow the required statement of rights. See Id; Anderson v. Credit Collection Services (S.D.Cal. 2004) 322 F. Supp. 2d
1094). In Anderson, the plaintiff claimed that a letter she received from a collector which quoted the FDCPA and displayed a
Western Union logo falsely implied that legal action would soon commence, and mimicked a telegram to imply a false sense
of urgency. This district found dismissal to be warranted for several reasons, first among them, “Defendant’s collection letter
makes no overt threat of impending litigation.” Id at 1097. The court found that as a matter of law, the text at issue would not
mislead the “least sophisticated” debtor, nor did it threaten imminent legal action; thus, Plaintiffs FDCPA claim failed. Id at
1099. See also Smith, supra, 167 F.3d at 1054-1055 (following the Ninth Circuit’s decision in Terran, supra, 109 F.3d at
136
1432, the court held that a letter sent during the 30-day period, stating that if the debt was not paid by a stated date it would
“advise you of our final position regarding the status of your account” did not violate section 1692g because the least
sophisticated debtor would not have believed the letter threatened his statutory right to dispute the validity of the debt);
Renick v. Dun & Bradstreet Receivable Management Services (9th Cir. 2002) 290 F. 3d 1055 (affirming summary judgment
for defendant, court held that collection notice mailed 20 days after the first, which included a request for “prompt payment”
and “payment today” did not violation Section 1692g because it did not overshadow the previous message stating the
debtor’s rights to contest the debt). The same result should be reached here.
Furthermore, even if the letter had threatened immediate litigation or contained other language arguably sufficient to
overshadow the prior statement of rights, it would only violate 15 UCS § 1692g(b) if it were intentionally sent before the
running of the prescribed 30 day period, rather than erroneously sent out early. 15 USC § 1692(c) provides, “A debt collector
may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence
that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.” Richard Spielman, CCC’s president and CEO, testified that numerous steps are
taken to assure that his employees strictly comply with all provisions of the FDCPA and other applicable law (UF # 49, 50).
Additionally, the computer system that generates the NOI notices in the form of Exhibit “B” indicates that the Notices are
sent when generated; however, not all such notices are actually sent on the date they are generated are sent on a later date.
Those NOI letters that were sent within 30 days of sending the notice designated Exhibit “A” were not intentionally sent
within this time frame, and corrective procedures have been put into place to avoid such errors in the future (UF # 68, 69).
Thus, even if the letter could be deemed to contain “overshadowing” language, and Plaintiff could prove it arrived 2 days shy
of the 30-day cutoff period, CCC would be protected by the “bona fide error” defense6. The undisputed evidence of record
would strongly support application of this defense, if the analysis reached this point (UF # 49, 50, 68, 69).
6
Where a case is styled as a putative class action, but not yet certified, a summary judgment action is brought against the named
plaintiff/putative class representative. See Ballard v. Equifax (C. D. Cal. 2001) 158 F. Supp. 2d 1163, 1170. However, it is worth
briefly noting that this issue would not be amenable to resolution on a classwide basis, since there would almost certainly be a vast
disparity among members of the putative class as to when such communications were received, such that individual analysis would
be required and individual issues would therefore predominate. See F. R. Civ. P. 23(b)(3).
Additionally, when Durham invoked her right to challenge the debt and demand verification after receiving this letter,
everything she requested was subsequently provided (UF # 46, 47, 48). When CCC received Plaintiffs letter, all collection
efforts ceased--and within approximately one week of receiving the letter, CCC had responded (UF # 45, 46, 47). It followed
with additional information, including itemized details regarding the debt, as soon as it acquired the requested verification
information from the Association (UF # 48). These actions not only satisfy the requisites of the FDCPA, but exceed what it
requires. See 15 USC § 1692g(b) (giving debt collectors two options upon receipt of a request for validation of the debt: they
may provide the requested validation and continue debt collection efforts, or they may cease all collection activities); Sambor
v. Omnia Credit Services (D. Hawaii 2002) 183 F. Supp. 2d 1234, 1242-1243 (rejecting an argument that verification must be
provided regardless of whether collection efforts continue, since the statute “...does not require both cessation of collection
efforts and verification of a debt;” thus because the defendant “ceased” collecting the alleged debt, it did not violate the
FDCPA by failing to verify). Accordingly, under the undisputed facts and applicable law, Plaintiff cannot establish any
violation of 15 USC § 1692g(b) by CCC, as a matter of law.
G. ISSUE SEVEN: CCC Made No False Representations to Plaintiff
15 USC § 1692g(a) provides that the initial communication sent to a consumer must contain: (1) the amount of the debt, (2)
the creditor’s name, (3) a statement that unless the consumer disputes the validity of the debt within thirty days of receipt of
the notice, the debt collector will assume the debt to be valid, (4) a statement that if the consumer does dispute the debt in
writing within thirty days, the debt collector will obtain verification of the debt or a copy of the judgment, and (5) a statement
that, upon the consumer’s written request, the debt collector will provide the consumer with the name and address of the
original creditor, if different from that of the current creditor. It is undisputed that the initial notice Plaintiff received from
CCC contained all of this information; nor has Plaintiff ever alleged that any of the information set forth was false or
incorrect (UF # 34, 35, 37). Plaintiff neither denies owing the underlying debt, nor specifies a single specific act which could
137
accurately be characterized as false, deceptive, or misleading the contrary, it is CCC’s straightforward billing of a sum
including a collection fee which she deems excessive that underlies her complaint (UF # 32, 33, 40, 51).
As discussed above, Plaintiffs sole basis for alleging “false representation” is her claim that CCC allegedly sought to recover
an amount she deemed “unauthorized by law.” Simply alleging that fees are “unauthorized” is a legal conclusion, and one
which, in this case, is patently erroneous. See Berryman, supra, 152 Cal. App. 4th at 1552. Moreover, as the authority
discussed above makes clear; Plaintiff cannot point to any law rendering the fees at issue unlawful; and controlling California
authority has expressly held the very fee at issue to be lawful. Dey, supra, 170 Cal. App. 4th at 728. Thus, this argument-like
Plaintiffs other argument grounded in the same faulty theory-- fails as a matter of law, because Plaintiff can make no showing
that the collection fee was illegal. Id at 731.
SECOND CAUSE OF ACTION: PLAINTIFF’S CALIFORNIA ROSENTHAL ACT CLAIM FAILS AS A MATTER
OF LAW, FOR SEVERAL REASONS
H. ISSUE EIGHT: Plaintiff’s Case Falls Outside the Scope of the Rosenthal Act Because it Does Not Involve the
Extension of Credit
By its terms, the Rosenthal Act applies only to actions based upon the extension of credit in the course of consumer credit
transactions. CC § 1788.2(e) defines a “consumer credit transaction” as “a transaction between a natural person and
another person in which property, services or money is acquired on credit by that natural person from such other person
primarily for personal, family or household purposes” (emphasis added).
It is undisputed that Plaintiffs underlying debt was incurred as the result of regularly billed HOA assessments arising from
her purchase of a timeshare property interest (UF # 1, 6, 13, 14, 16 17). As stated by Hon. Lisa Guy-Schall in ruling on
defendants’ demurrers to the plaintiffs’ Second Amended Complaint in Dalton v. Tahoe Beach and Ski Club Owners’
Association, Continental Central Credit, et. al. (San Diego County superior Court Case No. IN030789)7, “homeowner’s
association dues are not a consumer credit transaction falling under the provisions of the Rosenthal Act...An obligation to pay
a homeowners’ assessment is not an obligation ‘acquired on credit.’ It arises from a purchase of real estate interest that is
subject to Conditions, Covenants and & Restrictions (CC&R) running with the property sold as well as from statutory
authorization found at CC Section 1366(e)” (UF # 64).
7
See Ex. 6, for which Defendants have concurrently requested judicial notice (RJN # 1); affirmed by the Fourth Appellate District
of the California Court of Appeal (Div. One), Case No. D046505, in an opinion filed March 17, 2006 affirming an order sustaining
demurrer and dismissing all claims asserted in plaintiffs’ Third Amended Complaint (Ex. 7, RJN # 2).
This distinction is well established in California law. As the courts have recognized, HOAs regularly bill and collect
assessments as they come due, as they are required by law to do in order to maintain the subject property, under specific
procedures created by the Legislature, which exist separate and apart from the law governing consumer debt. See Park Place,
supra, 29 Cal. App. 4th at 432. Obligations to pay regular HOA assessments are thus not “acquired on credit” for services
previously rendered; but rather assessed, billed, and and collected on a regular basis to fund the ongoing maintenance and
management of the development. Id. Marc Hubbard, accounts manager for the Association’s billing agent, testified that
Plaintiff’s debt arose from maintenance fees, and Plaintiff has produced no evidence to challenge this fact (UF # 13, 16, 17,
24).
The undisputed facts therefore make it very clear that neither CCC nor the Association ever extended credit to the Plaintiffs
at any time. Thus, Plaintiff was not involved in a “consumer credit transaction” with any Defendant. Her circumstances
therefore place her outside the scope of the Rosenthal Act, and for this reason alone, her Rosenthal Act claim fails as a matter
of law.
I. ISSUE NINE: Defendants Made No False Representatios
138
Plaintiff also vaguely claims that the Defendants violated the Rosenthal Act, CC § 1788.17, by violating various provisions
of the FDCPA (which, as explained above, fails as a matter of law because Plaintiff cannot prove any FDCPA violation and
the absolute defense provided by 15 USC 1692f(1) precludes liability); and further, that they violated CC § 1788.13(e) by
“falsely representing that the alleged debt may be increased by the addition of fees or charges, when in fact such fees or
charges may not legally be added to the existing obligation” (FAC ¶ 33.2). Again, under Dey, supra, 170 Cal. App. 4th at
728-730 and other applicable law, as set forth above, the acts of the Defendants herein have been expressly recognized as
lawful. Thus, Plaintiff’s claim under this section of the Rosenthal Act fails as a matter of law.
J. ISSUE TEN: An Absolute Defense Exists Under the Rosenthal Act’s “Safe Harbor” Provision
Even if the Rosenthal Act applied to the circumstances presented, Defendants would be shielded from liability because their
actions were authorized by statutory law (and case law applying the pertinent statutes under analogous circumstances). Like
the FDCPA, California’s Rosenthal Act includes a “safe harbor” provision stating that no violation may be found where the
acts complained of are specifically authorized by a state statute. See CC § 1788.14(b) (providing an exception to the general
prohibition against attempting to “collect from the debtor the whole or any part of the debt collector’s fee or charge for
services rendered, or other expense incurred by the debt collector in the collection of the consumer debt, except as permitted
by law”) (emphasis added). Here, as explained above, the law expressly gives defendants the right to collect the fees at
issue-both under the HOA statutes ( CC § 1366(e) and B&PC § 11265.1(a)); and through an established body of common law
including Brown, supra, 127 Cal. App. 4th 532; Berryman, supra, 152 Cal. App. 4th 1544; and now Dey, supra, 170 Cal.
App. 4th 721.
K. ISSUE ELEVEN: The Rosenthal Act Does Not Apply to the Association, As a Matter of Law
Defendants submit that even if the Court should find that one or more issues of material fact precludes summary judgment on
certain claims brought against CCC, the undisputed facts and applicable law make it very clear that no cause of action may
lie against the Association, for several reasons. First, the only cause of action asserted against the Association is for alleged
violation of the Rosenthal Act. The Association is excluded from the scope of the Rosenthal Act because it is not a “debt
collector” as defined in the Act. CC §§ 1788.2 (b), (c), and (f) define a debt collector as a person who engaged in “debt
collection,” defined as the collection of “consumer debts,” which are limited to those owing by reason of a “consumer credit
transaction.” See § 1788.13(f). As explained above, CC § 1788.2(e) defines a “consumer credit transaction” as one in which a
person acquires property, services or money on credit. CC § 1788.2(e). Again, Plaintiff’s debt to the Association was based
on regular HOA assessments levied by authority of CC&Rs, Association by-laws, and the statutes governing such
assessments (UF # 1,6, 13, 16, 24); Bus & Prof. Code §§ 11265.1(a)(1). It is undisputed that the Association never extended
credit to the Plaintiff so as to come within the scope of the Act (UF # 16, 17).
Second, the Rosenthal Act is inapplicable to the Association because it applies only to those individuals or entities “who, in
the ordinary course of business, regularly...engages in debt collection” (CC § 1788.2(c)). Not only is this nonprofit HOA not
in the business of regularly engaging in debt collection; it in fact does no collections rather, it hires Advanced Financial
Company (“Advanced”), an entity of Grand Pacific Resorts, Inc., to serve as its billing and service agent, which includes the
handling of all delinquent homeowner accounts (UF # 9, 10, 11, 13, 23). Advanced pursues payment of such accounts for the
Association according to guidelines set forth in a “Homeowner Association Maintenance Fees and Billing Options,” which
the Association refers to as its billing policy (“Policy”), and which is distributed to all homeowners (UF # 18, 19, 20). The
Policy describes the Association’s maintenance fees and payment options, as well as outlining a series of steps that may be
taken if payments become delinquent (UF # 19,20, 21). Advanced follows these steps in attempting to collect delinquent
accounts, including sending at least three letters to the non-paying homeowner, and determines when and whether accounts
are eventually turned over to CCC for additional collection efforts (UF # 19, 20, 21, 22, 23). As the court recognized in
Brown, supra, 127 Cal. App. 4th at 539, the operative statutes contemplate that HOAs will hire or contract with others to
provide services, including collection services to pursue fees and assessments owed the association, rather than engaging in
such efforts themselves. Id, see also Dey, supra, 170 Cal. App. 4th at 728-729. As the evidence of record makes clear in this
case, exactly as in Brown, supra, it is exactly what the Association regularly did thus it cannot be deemed a “debt collector”
as defined in the Rosenthal Act (UF # 6, 10, 13, 16, 17, 23, 24, 26).
139
Moreover, as explained above, even if the Rosenthal Act applied, its safe harbor provision would shield the Association from
liability. As discussed, a nonprofit Association is expressly empowered by law to hire for-profit entities to perform collection
services, and to recover its reasonable costs incurred in doing so (UF # 25); see Dey, supra, 170 Cal. App. 4th at 729, citing
CC § 1366.1 (e); Brown, supra, 127 Cal. App. 4th at 539. While Plaintiff made various claims in her FAC, on information
and belief, vaguely alluding to some alleged “conspiracy” between the Defendants, she has never produced a scintilla of
evidence of any unlawful agreement between any of the Defendants, and cannot in good faith dispute the testimony of record
herein establishing that no such agreements have ever existed (UF # 27, 28, 30, 31). The evidence makes it very clear that the
Association receives no part of the collection fees acquired from the debtor by either of its service vendors; that it does no
collections, and that its does not fall within the definition of a “debt collector” set forth in the Rosenthal Act (UF # 30, 31).
For this, and other reasons set forth herein, Plaintiff’s allegations against the Association fail in their entirety, as a matter of
law.
V. CONCLUSION:
The central theory underlying both causes of action asserted in Plaintiff’s FAC is based on a faulty premise: that a collection
fee which bears no relationship to the actual costs of collection violates the FDCPA and the Rosenthal Act. As the authority
cited above, including Brown, supra, 127 Cal. App. 4th 532, 539, Berryman, supra, 152 Cal. App. 4th 1544, 1552, and
especially Dey, supra, 170 Cal. App. 4th 721 makes clear, this theory is fundamentally erroneous, as a matter of law. Nor can
Plaintiff point to facts supporting her other FDCPA theories; and the undisputed facts of this case place it outside the scope of
the Rosenthal Act, because the Plaintiff was never extended credit by either Defendant, and the Association is not within the
Act’s defined scope. Additionally, as both the undisputed facts of record and applicable law demonstrate, each and every act
of the Defendants complained of herein was authorized by law, and therefore subject to an absolute defense under both the
FDCPA and the Rosenthal Act. In short, the undisputed facts of record demonstrate that the Plaintiff cannot prove the
elements of any claim asserted against either Defendant; and that even if she could, her action would be barred by one or
more absolute defenses. As set forth above and in the Separate Statement of Undisputed Material Facts and other pleadings
filed herewith, no triable issue of fact exists as to any cause of action alleged, and summary judgment (or, in the alternative,
summary adjudication of specific issues, particularly those involving the Defendant Association) should be granted in favor
of the Defendants, as a matter of law. Additionally, Defendants should be awarded their attorney fees and costs, and other
relief as the Court may deem just and proper.
DATED: May 21, 2009
End of Document
140
Reply in Support of Motion to Dismiss Plaintiffs’ Verified First
Amended Complaint
Tommy DESOTO, as an Individual and on Behalf of Trago Lp; George Kosty, as an Individual and on Behalf of
Trago Lp; Antoinette Cardenas, as an Individual and on Behalf of Trago Lp; and Douglas Lovison, an Individual,
Plaintiffs, v. Michael MEDIANO, an Individual; John Adsit, an Individual; Christopher Condon, an Individual;
Richard Condon, an Individual; Trago LP, a British Virgin Islands Limited Partnership; FX Holdings International
Ltd, a British | United States District Court, C.D. California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
Tommy DESOTO, as an Individual and on Behalf of Trago..., 2009 WL 1471686...
2009 WL 1471686 (C.D.Cal.) (Trial Motion, Memorandum and Affidavit)
United States District Court, C.D. California.
Western Division
Tommy DESOTO, as an Individual and on Behalf of Trago Lp; George Kosty, as an Individual and on Behalf of
Trago Lp; Antoinette Cardenas, as an Individual and on Behalf of Trago Lp; and Douglas Lovison, an
Individual, Plaintiffs,
v.
Michael MEDIANO, an Individual; John Adsit, an Individual; Christopher Condon, an Individual; Richard
Condon, an Individual; Trago LP, a British Virgin Islands Limited Partnership; FX Holdings International Ltd,
a British Virgin Islands Corporation; Trago USA, Inc., a California Corporation; Trago International, Inc., a
Delaware Corporation; CT Holdings International, Inc., a Delaware Corporation; Pulse Entertainment Group,
L.L.C., a Nevada Limited Liability Company; Ruva International, Inc., a Nevada Corporation; and Does 1
through 50, Defendants.
No. 209CV01121.
April 2, 2009.
(Filed concurrently with Evidentiary Objections)
Date: April 13, 2009
Time: 9:30 a.m.
Crtrm: 650
Reply in Support of Motion to Dismiss Plaintiffs’ Verified First Amended Complaint
John M. Adsit (SNB 134121), jmadsit@gmail.com, 15755 Enadia Way, Lake Balboa, California 91406-4003, Telephone:
(310) 913-3105, Facsimile: (310) 388-5812, Attorney for Defendant Michael Mediano.
Assigned to the Honorable George H. King.
Magistrate Judge: Hon. Andrew J. Wistrich.
TABLE OF CONTENTS
I. IF PLAINTIFFS’ AND MR. LUCAL’S FILING, RE-FILING AND RE-FILING AGAIN OF CLAIMS,
ALL BASED UPON THE SAME EVENTS AND TRANSACTIONS, IS NOT FORUM/JUDGE
SHOPPING; THEN THERE IS NO SUCH ANIMAL; AND LOCAL RULE 83-1.2.1 IS SUPERFLUOUS.
.....................................................................................................................................................................................................................
1
II. IF NINE SEPARATE MOTIONS FOR APPOINTMENT OF RECEIVER OVER THE COURSE OF
TWO YEARS, ALL BASED UPON THE SAME INADMISSIBLE EVIDENCE, BROUGHT BEFORE
SIX DIFFERENT JUDGES IN FOUR DIFFERENT ACTIONS DOES NOT CONSTITUTE
VEXATIOUS LITIGATION - THEN THERE IS NOT SUCH THING .......................................................................
7
III. DEFENDANT LOVISON AND KOSTY ARE BARRED BY THE COMPULSORY
COUNTERCLAIM RULE AS TO ANY DEFENDANT THAT THEY COULD OR SHOULD HAVE
SUED ......................................................................................................................................................................................................
8
IV. DEFENDANT LOVISON RELEASED ALL CLAIMS, KNOWN AND UNKNOWN, AGAINST
DEFENDANT CONDON AND CONDON’S ASSOCIATES AND REPRESENTATIVES ................................
10
V. PLAINTIFFS FAIL TO PLEAD FRAUD WITH PARTICULARITY ....................................................................
10
VI. CONCLUSION ...........................................................................................................................................................................
13
142
Federal Case
Hernandez v. City of El Monte, 138 F3d 393, 398 (9th Cir. 1998) ..................................................................
1
Other
L.R. 83-1.2.1 .......................................................................................................................................................................
1, 7
MEMORANDUM OF POINTS AND AUTHORITIES IN REPLY
I.
IF PLAINTIFFS’ AND MR. LUCAL’S FILING, RE-FILING AND RE-FILING AGAIN OF CLAIMS, ALL BASED
UPON THE SAME EVENTS AND TRANSACTIONS, IS NOT FORUM/JUDGE SHOPPING; THEN THERE IS NO
SUCH ANIMAL; AND LOCAL RULE 83-1.2.1 IS SUPERFLUOUS.
“It is not permissible to dismiss and thereafter refile an action for the purpose of obtaining a different judge.”
Local Rule 83-1.2.1; Hernandez v. City of El Monte, 138 F3d 393, 398 (9th Cir. 1998).
When Judge Guy-Schall denied Plaintiff Lovison’s first ex parte application for appointment of receiver in early 2007; Mr.
Lucal decided to re-filed Plaintiff Lovison’s claims in federal court:
“15. In March 2007 and based on substantial evidence obtained from a number of sources, I filed an ex parte application for
the appointment of a receiver before the Honorable Lisa Guy-Schall in the San Diego Superior Court action. During the ex
parte hearing, Judge Guy-Schall stated that she does not appoint a receiver on an ex parte basis, did not consider the merits of
the application and set the receiver motion for a hearing to take place after the motion to change venue. After the hearing, I
realized that I could not seek any interim relief until the motion to change venue was decided, and, if the case was transferred,
could not seek any equitable relief while the case was in transit to Orange County.
“16. After the ex parte hearing, I reviewed the facts and the law and determined that it was not advisable to oppose the
motion to change venue and determined that the action should go forward in Orange County. I elected to file the case in U.S.
District Court because the complaint did allege federal claims under the Lanham Act claims for trademark violation and for
alleged misappropriation of a U.S. patent and trademark.
Declaration of Richard A. Lucal in Opposition to Defendant Mediano’s Motion to Dismiss dated March 19, 2009 (“Lucal
Decl”), p 11, In 141/2 - p 12, In 161/2.
When Judge Stotler denied Plaintiffs first federal court ex parte application and motion for appointment of receiver and
dismissed Plaintiffs’ claims sua sponte, Plaintiff Lovison and Mr. Lucal returned their focus to the Orange County Superior
Court:
“19. In May 2007, I filed a motion for the appointment of a receiver and for a preliminary injunction in the initial Lovison
District Court action.
“20. At the July 2, 2007, hearing on the motion for the appointment of a receiver and for preliminary injunction which I
attended, Judge Stotler began the hearing by asking me to dismiss the case due to the predominance of the State Court causes
of action and the pendency of the State Court action. When I asked to be able to confer with my client and counsel for several
143
intervenors, Judge Stotler would not allow me to discuss a possible dismissal with interested counsel and/or my client and
eventually dismissed the case on the stated grounds that there was no substantial federal question...
“21. After the initial Lovison District Court case was dismissed, Lovison’s claims proceeded forward in Orange County
Superior Court.”
Lucal Decl, p 14, In 4 - p 16, In 61/2.
When Plaintiff Lovison and Mr. Lucal disagreed with the Orange County Superior Court judge’ pre-trial rulings, they
dismissed their state court action and, on the very same day, re-filed their allegations as RICO claims in federal court.
“25. From the orders issued by Judge Andler, I determined that Lovison could not obtain a fair trial, and
that pursuit of his state court claims would be prohibitive. Lovison would not be allowed reasonable
discovery and was being forced to try the same issues many times - some to the bench and some to a jury.
Despite the merit to Lovison’s claims, it appeared that he would not be allowed to present them. With the
option available of joining other plaintiffs in pursuing a RICO action against Condon and other
defendants, Lovison elected to pursue RICO and to dismiss his state court action, without prejudice.”
Lucal Decl, p 19, ln 19 - p 20, ln 1.
Mr. Lucal was decidedly less circumspect in voicing his opinion of Judge Andler in his June 27, 2008 declaration:
“10. With regard to the Orange County Superior Court action filed by Lovison against Condon, et.al, and the dismissal of that
action, defendants misrepresent the nature of the proceedings. First, I am informed and believe that there was substantial
judicial bias taking place in that action which is identified, in part, in LOVISON’s Verified Statement of Disqualification.
Judge Andler’s order striking LOVISON’s verified statement of disqualification is absolutely inaccurate when it claims that
LOVISON objected to certain rulings made by the Court. The allegations of misconduct and bias go much further than
simple disagreements with rulings made by the Court. Since the filing of that Statement, Judge Andler made a number of
rulings and took other actions which clearly demonstrated bias. My primary concerns regarding Judge Andler involved:
“(a) concerns of a relationship between Judge Andler and attorney Thomas Malcolm (hired to be co-counsel for Trago
International after the time to file a 170.6 challenge had expired); The conduct of Judge Andler and deference given to
Malcolm, combined with their relationship as former officers/directors of the Orange County Association of Business Trial
Lawyers was concerning;
“(b) Judge Andler granting an ex parte stay of discovery on relevancy grounds; Judge Andler bifurcated LOVISON’ s claim
for rescission of a February, 2005 Settlement Agreement and refused to allow discovery as to any issue not ‘relevant’ to
rescission; Judge Andler set an expedited trial- despite stated concerns that defendants had systematically obstructed
discovery and were claiming nothing was relevant;
“(c) When presented with overwhelming and conclusive evidence that Condon had committed perjury and that defense
counsel had suborned perjury and perpetrated fraud on the Court, Judge Andler stated, on the record, that perhaps this
conduct was ‘his client’s best strategic position.’1
1
Mr. Lucal’s presentation of Judge Andler’s position, of course, was as ludicrous as it was false. Judge Andler inferred no such
thing; and demonstrated extraordinary patience with Mr. Lucal.
“(d) When faced with efforts by two additional Trago LP limited partners to consolidate their cases with or to intervene in the
Lovison action, Judge Andler denied the efforts and stated, on the record, that her goal was to ‘divide and conquer.’ While it
is understandable that defendants would want to divide and conquer a number of limited partner victims of Condon’s
misconduct, it was surprising for the Court to adopt this position and clearly demonstrated bias at an early point;
“(e) While granting a number of LOVISON’s motions to compel discovery in early February, 2008, Judge Andler sanctioned
144
me for attempting to obtain competent financial records from Bank of America which I am informed and believe would have
conclusively demonstrated Condon’s illegal and fraudulent conduct; The motion to quash granted by Judge Andler was
supported by systematic perjured testimony and fraud on the Court; In response to a separate motion, Judge Andler did order
defendants to produce these financial records directly;
“(f) While granting the motions to compel in early February, 2008, it was clear that Judge Andler would not continue the
April 1, 2008 trial and would not allow LOVISON to obtain the discovery ordered by the Court; At that point, I had no
choice but to file a Verified Statement of Disqualification; Only after I filed the Verified Statement of Disqualification, did
the Court entertain motions for sanctions and eventually continue the bifurcated rescission trial;
“(g) I filed motions for terminating and other sanctions in early March, 2008 as a result of defendants systematical refusal to
produce documents and provide discovery ordered by the Court in its February, 2008 discovery orders; In response to these
motions, Judge Andler ordered defendants to provide further discovery; In her order and without defendants filing a motion
for reconsideration or other relief, Judge Andler granted defendants relief from the order to produce financial records on the
grounds stated by defendants that the order was a ‘typo:’ Never in my experience have I seen a Court grant ‘typo’ relief in the
manner done by Judge Andler;
“(h) After the defendants systematically refused to produce documents ordered by the Court in two discovery orders, I filed a
further motion for terminating sanctions to be heard on May 1, 2008; The motion for terminating sanctions was supported by
substantial evidence and was opposed by clearly perjured declarations by defendants and counsel (this perjury is
demonstrated by a number of documents filed in support of the RICO motion for the appointment of a receiver); The Court’s
tentative for the May 1, 2008 hearing invited counsel to submit on the papers; I was notified by defense counsel that they
would not appear at the hearing; In my experience, it is inconceivable for three defense firms (two of which were located
within 10 miles of the Court) to choose not to attend a hearing on a motion for terminating sanctions unless they had
foreknowledge that the motion would be denied; In the Court’s ruling on May 2, 2008, Judge Andler determined that the
motions for terminating sanctions were untimely and should have been filed so as to have been heard prior to the order which
the defendants violated- a clear impossibility.
11. ... As a result of Judge Andler’s unwillingness to allow LOVISON discovery even discovery ordered by the Court,
LOVISON further had no reason to believe that he would be allowed discovery on critical issues prior to any of the trials.
LOVISON simply elected to walk away from substantial claims in light of the hurdles having been placed before him by
defendants and the Court. LOVISON did elect to pursue some of his claims in the context of a RICO action.
Request for Judicial Notice (“RFJN”) in Support of Motion for Sanctions dated February, 2009 (“M4Sanctions“), p 5, lns
10-15, Exh 12, pp 000280-000288 [attaching the Declaration of Richard Lucal in Opposition to Defendants’ Ex Parte
Application for Dismissal of Plaintiffs’ Motion for Appointment of Receiver dated June 27, 2008, p 5, ln 21 - p 8, ln 23]; see
also RFJN in Support of Motion to Dismiss Complaint dated February 22, 2009 (“M2Dismiss“), p 6, lns 20-23, Exh 22, pp
000589-000626.
The pattern that emerges is that whenever Plaintiffs or Mr. Lucal fail to get what they want, it is always due to someone
else’s “systematic criminal fraud, subornation of perjury, or bias.” Loosing over 30 or 40 motions before multiple judges in
multiple actions has failed to compel Plaintiffs or Mr. Lucal to consider the alternative and more likely explanation: Plaintiffs
do NOT have “overwhelming evidence” of anything, much less the sort of evidence and emergency required for the
extraordinary relief of appointment of a receiver.
The truth is that if Plaintiffs and Mr. Lucal sincerely believed that there was judicial bias, their remedy would have been to
seek appellate review. It was NOT proper to simply dismiss their case and seek a different judge. Local Rule 83.1.2.1
expressly prohibits such conduct.
Plaintiffs’ bad faith is further evidenced by Plaintiffs’ prior counsel, Mr. Cabanday, with whom Mr. Lucal testifies that he
worked closely, representation to this federal court under penalty of perjury that there were NO related actions. To this day,
even as Mr. Lucal files notices of related cases in some, but not every court, Mr. Lucal continues to promote this falsehood:
“This first RICO action was not a related case and was substantially different from any case previously
145
filed by Lovison.”
Lucal Decl, p 21, Ins 61/2-8. Needless to say, Judge Carter and Judge Stotler disagreed.
Two motions to dismiss and another motion for appointment of receiver later, Judge Stotler dismissed Plaintiffs’ RICO
claims with prejudice, and state claims without prejudice. That, however, did not stop Plaintiffs and Mr. Lucal from re-filing
their same federal RICO claims in the Los Angeles Superior Court, only this time “in the derivative”.
Even after remove and Defendant Mediano’s motion to dismiss Plaintiffs’ complaint, Mr. Lucal continues to pretend that he
is the only one actually following the law:
“29. After MEDIANO filed his motion to dismiss, I amended the complaint to remove the derivative
RICO cause of action. I did this to simplify the issues going forward and to focus this case on necessary
relief. I intend to raise the derivative RICO claim after prevailing on the appeal from case number
SACV08-514. The only remaining claims consist of 10 state law claims - none of which have been even
partially adjudicated in any forum or have been the subject of any substantial discovery.”
Lucal Decl, p 22 Ins 4-12 [for the substantial discovery Mr. Lucal did take, see Declaration of Richard Lucal in Support of
Plaintiffs’ Motion for Appointment of Receiver and for Preliminary Injunction dated June 17, 2008, p 2, Ins 9-16 and Lucal
Decl, Exhs 9 & 10].
The point is that Plaintiffs and Mr. Lucal should not have re-filed Plaintiffs’ federal RICO claims in state court in the first
place. Plaintiffs’ remedy, if deserving, will be realized on appeal. The fact remains, however, that even before Plaintiffs’
most recent judge/forum shopping, Judge Stotler pointed out in footnote 2 of her October 6, 2008 Order dismissing Plaintiffs’
federal RICO suit:
“ ... defendants’ other arguments’ that plaintiff Lovison is forum shopping may be meritorious, ...
M2Dismiss RFJN, p 9, Ins 15-19, Exh 35, p 000981, Ins 26-28.
Plaintiffs and Mr. Lucal knew better. They just didn’t expect to get caught.
II.
IF NINE SEPARATE MOTIONS FOR APPOINTMENT OF RECEIVER OVER THE COURSE OF TWO YEARS,
ALL BASED UPON THE SAME INADMISSIBLE EVIDENCE, BROUGHT BEFORE SIX DIFFERENT JUDGES
IN FOUR DIFFERENT ACTIONS DOES NOT CONSTITUTE VEXATIOUS LITIGATION - THEN THERE IS
NOT SUCH THING
III.
DEFENDANT LOVISON AND KOSTY ARE BARRED BY THE COMPULSORY COUNTERCLAIM RULE AS
TO ANY DEFENDANT THAT THEY COULD OR SHOULD HAVE SUED
Defendant Mediano quoted footnote 2 from Judge Stotler’s October 6, 2008 Order in his Motion to Dismiss, and the
arguments made by prior counsel for other defendants in Plaintiffs’ preceding federal RICO case because the claims Plaintiffs
make in this action are the same. Plaintiffs knew of Defendant Mediano and of Defendant Mediano’s February 2005 email
when Plaintiff Lovison and Mr. Lucal brought their first lawsuit in late 2006. They knew of Defendant Mediano and of
Defendant Mediano’s February 2005 email before they brought each lawsuit thereafter.
146
It was only after Defendant Mediano refused to sign an untrue declaration that Plaintiff decide to serve him. It was only after
Defendant Mediano had the audacity to defend himself that he became a “target defendant.” See Declaration of Richard A.
Lucal in Opposition to Defendant Mediano’s Motion for Sanctions dated March 19, 1009, p 17, In 1. Turning a third-party
witness into a defendant because he did not have the information Mr. Lucal wanted him to have, and would not sign a
declaration under oath Plaintiffs’ counsel wanted him to sign, is absolutely unacceptable. If Mr. Boren or Mr. Balestra
believes they have viable claims against Mr. Mediano then they may pursue them. Using hearsay emails to justify fabrication
of claims by vexatious litigants, however, should not be tolerated.
Finally, just because Plaintiffs failed to name Defendant Mediano in their prior actions, does not make them any less guilty of
judge and forum shopping; nor less subject to the compulsory counterclaim rule. The law abhors piece-meal litigation.
Plaintiffs’ action should be dismissed with prejudice.
IV.
DEFENDANT LOVISON RELEASED ALL CLAIMS, KNOWN AND UNKNOWN, AGAINST DEFENDANT
CONDON AND CONDON’S ASSOCIATES AND REPRESENTATIVES
If, arguendo, defendant Mediano was acting as Christopher Condon’s associate or representative in recommending to
Douglas Lovison that Mr. Lovison enter the February 12, 2005 Settlement Agreement and Mutual Release; then Mr.
Lovison’s release of any and all claims, known or unknown, of “CONDON . and [his] present and past officers, directors,
shareholders, partners, associates, employees, executors, administrators, representatives and successors and predecessors in
interest”, set forth in Sections 4.2, and waiver of unknown claims in Section 4.3, also operated to release Defendant
Mediano.2 See Plaintiffs’ Verified First Amended Complaint, Exh 49, p 3; or M2Dismiss RFJN, p 2, Ins 6-10, Exh 1 000014
2
Plaintiffs’ allegations are pure fabrication.
It is not a matter of standing; it is a matter of waiver and release.
V.
PLAINTIFFS FAIL TO PLEAD FRAUD WITH PARTICULARITY
Plaintiffs make no real attempt to oppose Defendant Mediano’s arguments regarding lack of particularity except to claim that
their FAC does not lack particularity. Plaintiffs’ FAC first mentions Defendant Mediano on page 11, Ins 6-14:
“15... Between 2002 and August, 2005, MEDIANO was the money manager for plaintiff DOUGLAS
LOVISON. MEDIANO conspired with the other defendants and participated in the misappropriation of
the TRAGO LP assets, the efforts to cover up the misappropriation of the assets and efforts to generate
revenue/investment from the of [sic] assets. For this, MEDIANO has been paid substantial sums of
money and has received ownership interests in TRAGO INTERNATIONAL.”
On page 27, Ins 31/2-18 Plaintiffs mention that Defendant Mediano had written two emails in 2004. On page 49, In 21-p 50,
In 22, Plaintiffs next describe how Defendant Adsit “extorted” Mr. Lovison’s signature by threatening to file litigation,
including against Defendant Mediano. Mr. Adsit’s communications, of course, were privileged under CCP 47(b).
Notwithstanding, Plaintiffs next turn the story on it head at p 53, In 22-p 55, In 25 by claiming that Defendant Mediano’s
February 2005 email stating that everyone would end up suing everyone unless Lovison settled was somehow part of
Defendant Mediano’s “conspiracy” with Defendants Condon and Adsit to “extorted” Mr. Lovison’s signature on the
147
settlement agreement. See Plaintiffs FAC, Exh 48. What Defendant wrote back in February 2005, however, does not
constitute “extortion” by any stretch of the imagination. See Plaintiffs’ FAC, Exh 48.
On page 56, Ins 11-15, Plaintiffs allege:
“83. Since that time, MEDIANO has engaged in other acts to support the conspiracy of defendants to
misappropriate the assets of TRAGO LP, to misappropriate monies generated from the assets, to cover up
the misappropriation of the assets, and to prevent other current and former TRAGO LP limited partners
from cooperating with those seeking recovery of the assets. To preclude other victims of the defendants’
fraudulent and illegal conduct from cooperating with those engaged in litigation with CONDON,
MEDIANO has made systematic and blatantly false representations about LOVISON to other
current/former TRAGO LP limited partners. MEDIANO has claimed that LOVISON was a drug addict
or had otherwise engaged in wrongful conduct. MEDIANO knew these claims to be false at the time that
they were made. Plaintiffs are informed and believe that defendants have compensated MEDIANO for
this conduct with either cash, commissions on investment obtained, or additional stock in TRAGO
INTERNATIONAL (or other comanies owned b CONDON).
Plaintiffs’ allegations do not get much better. On page 83, ln 18-p 84, ln 12, Plaintiffs do list a number of purported securities
violations by Defendant Mediano in August 2006; however, they fail set forth any cause of action for securities fraud and
make no attempt to include those events in their one stand-along count against Defendant Mediano for alleged “breach of
fiduciary duty”. See Plaintiffs’ FAC, p 105, ln 7 - p 106, ln 191/2.
For all Plaintiffs’ supposed specificity, there is little or no detail. Plaintiffs go so far as to “create” a civil cause of action
called “Aiding and Abetting Breach of Fiduciary Duty”. Plaintiffs’ FAC, p 110. It is difficult to know what Plaintiffs are
claiming, much less the when, where, who or how’s.
As for the claims by Plaintiffs Cardenas (Lovison’s girlfriend), DeSoto & Kosty (Lovison’s long-time friends), Plaintiffs’
FAC utterly fails to disclose any relationship between these Plaintiffs and Defendant Mediano after 2004. To top it off,
Plaintiff Kosty “verifies” Plaintiffs FAC with the following:
“I, George Kosty, am a plaintiff in this action. I have read the First Amended Complaint filed in this
action. I do not have personal knowledge of all of the information contained in the complaint. As to that
factual information based on my personal knowledge, it is true and correct. Other information contained
in the First Amended Complaint was compiled from the documents attached, discovery conducted in
litigation, other referenced documents, my agents, and employees/ consultants/managers of TRAGO LP.
As to the information obtained from those sources, I am informed and believe that information to be true
and correct.”
Plaintiffs’ FAC, p 120; see pp 118-120 generally.
As Judge Stotler ruled in the prior case, Plaintiffs’ allegations are fail, on numerous grounds, including for lack of
particularity.
V.
CONCLUSION
Plaintiffs and Mr. Lucal are very adept at making accusations; but they have been unable to plead sufficient facts or offer
admissible evidence to prove their charges. Plaintiffs and Mr. Lucal have been every opportunity. Their problem is that their
claims simply lack merit. Mr. Lucal’s “overwhelming evidence” boils down to rumor, speculation and smoke screens.
148
Any claims Plaintiff Lovison had he released long ago; and he does not now sue for rescission.
Any claims Plaintiff Kosty had he forfeited when he failed to cross- complain in Trago International’s original LASC case
against him.
While Mr. Lucal claims that plaintiffs Cardenas and DeSoto are “new” plaintiffs who have not had the opportunity to litigate
their claims; his own filing belie that claim. See Plaintiffs’ RFJN in Opposition to M4Sanctions filed by Defendant Mediano
dated March 19, 2009, Exh 19 (attaching the July 2, 2008 Declaration of Lee Durst, Esq. - Plaintiff DeSoto’s prior counsel
with regard to DeSoto’s prior Complaint in Intervention]. Both Cardenas and DeSoto have been filing declarations in support
of Lovison’s actions for years. Even if Cardenas and DeSoto still had claims, their complicity with Plaintiff Lovison and Mr.
Lucal in judge/forum shopping and in attempting to mislead this and the underlying LASC Court; as well as their failure to
bring their actions sooner, bars any recovery. It is no oversight that neither is mentioned in connection with any of the claims
against Defendant Mediano. Their participation, according to Plaintiffs’ own Verified FAC rest entirely on Plaintiff
Lovison’s allegations.
Defendant Mediano asks the Court to end Plaintiffs’ and Mr. Lucal’s abuse of the judicial process, waste of judicial
resources, and bad faith.
DATED: April 2, 2009
End of Document
149
Plaintiff’s Opposition to Defendant’s Motion in Limine No. 9
Tori FERRARI, Plaintiff, v. Jose Maria BETANCOURT, and Does 1 through 25, Defendants. | Superior Court of
California.
Search Details
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Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
Tori FERRARI, Plaintiff, v. Jose Maria BETANCOURT, and..., 2008 WL 6855204...
2008 WL 6855204 (Cal.Superior) (Trial Motion, Memorandum and Affidavit)
San Diego County
Tori FERRARI, Plaintiff,
v.
Jose Maria BETANCOURT, and Does 1 through 25, Defendants.
No. GIC879385.
October 29, 2008.
Plaintiff’s Opposition to Defendant’s Motion in Limine No. 9
Rocky K. Copley, Esq.; SBN 101628, Law Office of Rocky K. Copley, 550 West C Street, Suite 1150, San Diego, California
92101, Telephone (619) 232-3131, Facsimile (619) 232-1690, Attorney for Plaintiff Tori Ferrari.
Judge: Hon. Ronald L. Styn.
Dept.: C-62
Filed: 2/01/07
Trial: 10/31/08
TABLE OF CONTENTS
Table of Authorities ...........................................................................................................................................................................
ii
I. INTRODUCTION .........................................................................................................................................................................
1
II. EVIDENCE OF BENEFITS PAID TO PLAINTIFF’S HEALTH CARE PROVIDERS ARE BARRED
BY THE COLLATERAL SOURCE RULE AND SHOULD BE PROPERLY EXCLUDED ...............................
2
III. PLAINTIFF IS ENTITLED TO RECOVER THE REASONABLE COST/VALUE OF THE
MEDICAL EXPENSES INCURRED NOT ONLY WHAT PRIVATE INSURANCE PAID IN CASH TO
THE HEALTH CARE PROVIDERS .........................................................................................................................................
5
A. Government Defendants and Medi-Cal Payments - the Hanif and Olszewski Decisions Do Not Alter the
Collateral Source Rule ......................................................................................................................................................................
5
B. Governmental Defendants and Private Health Insurance Payments - The Nishihama Decision Does Not
Compel Any Additional Exception to the Collateral Source Rule ....................................................................................
8
IV. SAN DIEGO SUPERIOR COURTS AGREE WITH PLAINTIFF’S POSITION AND HAVE
REJECTED SIMILAR DEFENSE MOTIONS .......................................................................................................................
10
V. THE LEGISLATURE HAS RECOGNIZED THE COLLATERAL SOURCE RULE AND CREATED
EXCEPTIONS FOR DISCREET CLASSES OF DEFENDANTS, NONE OF WHICH DEFENDANT IN
THIS CASE IS A MEMBER .........................................................................................................................................................
11
A. The Legislature Has Recognized the Collateral Source Rule and Created Exceptions for Discreet Classes
of Defendants, None of Which Defendant in This Case is a Member .............................................................................
11
151
B. Nishihama Did Not Address the Collateral Source Rule ................................................................................................
12
VII. CONCLUSION ..........................................................................................................................................................................
15
State Cases
Arambula v. Wells (1999) 72 Cal.App.4th 1006.............................
2, 3, 15
Ginns v. Savage (1964) 61 Cal. 2d 520 .............................................
13
Grauberger v. St.Francis Hospital (N.D. Cal. 2001) 149
F.Supp.2d 1186 ..........................................................................................
8
Greer v. Buzgheia (2006) 141 Cal.App.4th 1150...........................
7, 9
Hanif v. Housing Authority of Yolo County (1988) 200
Cal.App.3d 635 ..........................................................................................
1, 2, 5-9, 12
Harris v. Capital Growth Investors XIV(1991) 52 Cal 3d
1142 ................................................................................................................
13
Helfend. v. Southern Cal.Rapid Transit Dist. (1970) 2 Cal.3d
1 .......................................................................................................................
2, 3, 6, S, 11, 12, 15
Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d ........................................
3
Katinuzhinsky v. Perry (2007) 152 Cal.App.4th 1288 ..................
9
Lund v. San Joaquin Valley Railroad (2003) 31 Cal.4th 1 .........
2
Martin White v. Mary Ann (1856) 6 Cal. 462 ..................................
4
McKinney v. California Portland Cement Co., (2002) 96
Cal.App.4th 1214.......................................................................................
3, 4, 15
Nishihama v. City and County of San Francisco (2001) 93
Cal.App.4th 238 .......................................................................................
1, 2, 9, 13-15
Olszewski v. Scripps Health (2003) 30 Cal.4th 798 ......................
5-8, 12
Pacific Gas & Elec. Co. v. Sup. Ct. (1994) 28 Cal.App.4th
174 ..................................................................................................................
4
Parnell v. Adventist Health System/West (2005) 35 Cal.4th
595 ..................................................................................................................
6-8
People v. Banks (1959)53 Cal. 2d 370 ...............................................
13
Peri v. Los Angeles Junction Ry. Co. (1943) 22 Cal.2d 111 ......
2
152
Peterson v. Lamb Rubber Co. (1960) 54 Cal. 2d 339 ...................
13
Scott v. County of Los Angeles (1994) 27 Cal.App.4th 125 .......
3
Security Pacific National Bank v. Wozab (1990) 51Cal. 3d
991 ................................................................................................................
13
Smock v. State of California, (2006) 138 Cal.App.4th 883.........
2, 4, 11
Southern Cal. Enterprises v. D.N. &E. Walter & Co. (1947)
78 Cal. App. 2d 750 ..................................................................................
13
Swanson v. St. John’s Regional Medical Center (2002) 97
Cal.App.4th 245 .........................................................................................
8
Tremeroli v. Austin Trailer Equip. Co. (1951) 102 Cal.App.
2d 464 ............................................................................................................
13
Out of State Cases
Acuar v. Letourneau (VA Supreme Court, 2000) 531 S.E. 2d
316 ..................................................................................................................
5
Statutes
42 C.F.R. 447.15 ......................................................................................
6
Business & Professions Code section 657 ......................................
5, 12
California Civil Code section 3045.1 ...............................................
7, 14
4, 11, 12
California Civil Code section 3521 ...................................................
12
Government Code section 985 ............................................................
3-5, 7-9, 11, 13
Other Authorities
CACI 3903A .............................................................................................
5
9 Witkin, Cal. Proc. (4th Ed. 1997) Appeal, § 946 .....................
13
Out of State Cases
Acuar v. Letourneau (VA Supreme Court, 2000) 531 S.E. 2d
316 ..................................................................................................................
5
Statutes
C.F.R. 447.15 ............................................................................................
6
Business & Professions Code section 657 ......................................
5, 12
153
7, 14
4, 11, 12
California Civil Code section 3521 ...................................................
12
Government Code section 985 ............................................................
3-5 7-9, 11, 13
Other Authorities
CACI 3903A .............................................................................................
5
9 Witkin, Cal. Proc. (4th Ed. 1997) Appeal, § 946 .....................
13
Plaintiff hereby submits the following opposition to defendant’s motion in limine no. 3:
I.
INTRODUCTION
Plaintiff suffered personal injuries as a result of being struck in the face by the defendant. Plaintiff had personal dental
insurance that covered some of her dental bills. In addition, plaintiff had workers’ compensation benefits and health
insurance that paid for some o the bills. And finally, plaintiff paid some of the bills herself.
The defendant is attempting to argue that under the decisions of Hanif v Housing Authority of Yolo County (1988) 200
Cal.App.3d 635, and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 238, that plaintiff is not entitled
to recover as damages any more than what was actually paid for her health care services by her collateral sources (health
insurance, rental insurance, and workers’ compensation). The defendant misreads the holdings of Nishihama and Hanif.
The defendant is attempting to circumvent the longstanding law of the collateral source rule. The defendant’s position is not
supported by the law in California.
II.
EVIDENCE OF BENEFITS PAID TO PLAINTIFF’S HEALTH CARE PROVIDERS ARE BARRED BY THE
COLLATERAL SOURCE RULE AND SHOULD BE PROPERLY EXCLUDED
California has long adhered to the Collateral Source Rule. (See Helfend v. Southern Cal.Rapid Transit Dist. (1970) 2 Cal.3d
1; Peri v. Los Angeles Junction Ry. Co. (1943) 22 Cal.2d 111, 131; Lund v. San Joaquin Valley Railroad (2003) 31 Cal.4th 1,
8-10.) The do??rine is best described as follows, “[I]f an injured party receives some compensation for his injuries from a
source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff
would otherwise collect from the tortfeasor.” (Helfend, supra, at 6.) The rationale behind this rule is that, “tortfeasors should
not recover a windfall from the thrift and foresight of persons who have actually or constructively secured insurance, pension
or disability benefits to provide for themselves and their families. A contrary rule, it is feared, would misallocate liability for
tort-caused losses and discourage people from obtaining benefits from independent collateral sources.” (Arambula v. Wells
(1999) 72 Cal.App.4th 1006, 1009.) In Helfend, the California Supreme Court expressly held that the Collateral Source Rule
applies to benefits pa d under a medical insurance policy. Where a plaintiff has received benefits from his medical insurance
coverage, such collateral payment or indemnity “should not be deducted from the damages which the plaintiff would
154
otherwise collect from the tortfeasor.” (Helfend, supra, at 6; see Arambula, supra, at 1012.)
Helfend not only remains good law and binding authority on all trial courts and appellate courts in the State of California, its
continuing accuracy and vitality is acknowledged by appellate decisions. Helfend is described as the “most modern
articulation” of the Collateral Source Rule. (See Lund, supra, at 8-10; Smock v. State of California, (2006) 138 Cal.App.4th
883, 888; Arambula, supra, at 1009; McKinney v. California Portland Cement Co., (2002) 96 Cal.App.4th 1214, 1222.
In 1999, in Arambula. the Fourth Appellate District, Division There, described 4 Helfend as the “leading case,” and observed
that, “the Supreme Court allowed the motor??st to receive the advantage of his investment of ‘years of insurance premiums to
assure his medical care.’ ” It stated, “the tortfeasor should not gamer the benefits of his victim’s providence.” (2 Cal 3d at pp.
9-10.)” (Arambula, supra, at 1009.) The Arambula court explained that, “[t]he collatera source rule operates both as a
substantive rule of damages and as a rule of evidence.” (Id. at 1015.) As a substantive rule, Arambula relied on Helfend for
the proposition that a plaintiff’s recovery can not be reduced by virtue of payment or indemnity from collateral sources. As
an evidentiary rule, “it precludes the introduction of evidence of the plaintiff being compensated by a collateral source unless
there is a ‘persuasive showing’ that such evidence is of ‘substantial probative value’ for purposes other than reducing
damages. (Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 733.)” (Arambula at 1015.)
The key to the operation of the collateral source rule/doctrine is the independence of the payment or indemnity source from
the tortfeasor. For instance, in Scott v. County of Los Angeles (1994) 27 Cal.App.4th 125, the Second Appellate District,
Division Three, permitted evidence of, and an offset for, insurance payments made to the tort victim by insurance carried by
the county, but precluded evidence of payments and benefits provided to the victim by Aid to Families with Dependent
Children (AFDC), Medi-Cal, and a private charity hospital. The Scott court referred to Government Code section 985 as the
proper procedural approach to dealing with such collateral source benefits in a case against a public entity defendant. (Id. at
154.)
In 2002, Division One of the First Appellate District considered a request to reconstruct the collateral source doctrine and
permit evidence of, or an offset of, future economic losses for pension survivor benefits that wrongful death plaintiffs were
receiving. In McKinney v. California Portland Cement Co. (2002) 96 Cal.App.4th 1214, the court approvingly cited
Arambula, “[t]he idea is that tortfeasors should not recover a windfall from the thrift and foresight of persons who have
actually or constructively secured insurance ... benefits to provide for themselves and their families. (McKinney, supra, at
1222.) The McKinney court also held that the Collateral Source Rule operates to prevent a defendant from reducing a
plaintiffs damages with evidence that the plaintiff received compensation form a source independent of the defendant (citing
Pacific Gas & Elec. Co. v. Sup. Ct. (1994) 28 Cal.App.4th 174, 176).
As recently as April 2006, the First Appellate District, Division Three, in Smock v. State (2006) 138 Cal.App.4th 883, once
again strongly upheld the collateral source doctrine against yet, “another challenge to the application of the collateral source
rule to exclude from evidence and the computation of damages the payments a plaintiff receives from a source independent of
the wrongdoer. Though oft maligned, a form of the rule has been a part of our jurispr??dence since California’s earliest days
in the union. (See Martin White v. Mary Ann (1856) 6 Cal. 462,470-471.)” (Smock, supra, 138 Cal.App.4th at 858.)
Time and time again, in cases that focus on both the evidentiary and substantive aspects of the collateral source doctrine,
there is no question as to the evidentiary or substantive measure of damages- the full charges come into evidence and are
recoverable. At present, there are only two exceptions to the collateral source rule: (1) California Government Code section
985 (relating to actions against government entities - providing for discovery of plaintiff’s financial arrangements with
collateral payors, and also providing for a post verdict hearing to determine whether a public entity will pay damages for
which a collateral payor has paid or indemnified the plaintiff); and (2) California Civil Code section 3333.1 (providing for
introduction of collateral insurance information into evidence in actions against healthcare providers for Professional
negligence). Neither of these exceptions are applicable to this case.
Whether or not a plaintiff later owes reimbursement to a collateral insurer is not a proper consideration for determining the
value of healthcare services, just as it does not matter that a wrongful death claimant received life insurance benefits, or
whether disability payments an injured plaintiff receives are “free and clear” or subject to reimbursement in whole or in part.
The terms of the relationship between a plaintiff and his/her collateral insurers are legally indeterminate of the measure of
their damages (except under certain legislatively proscribed circumstances, such as the medical malpractice MICRA statutes
155
and Cal. Gov’t. Code section 985, affecting governmental entity cases).
That the contractual reductions/write-downs/write-offs are or are not part of what a plaintiff may owe in contractual or
statutory reimbursement to a collateral insurer is a benefit of his/her coverage. Any, “[a]mounts written off are as much of a
benefit for which [a plaintiff] paid consideration as are the actual cash payments made by his health insurance carrier to the
health care providers. The portions of medical expenses that health care providers write off constitute compensation or
indemnity received by a tort victim from a source collateral to the tortfeasor.” (Acuar v. Letourneau (VA Supreme Court,
2000) 531 S.E. 2d 316, 322-323.) (See Lodgment of Foreign Authorities, filed and served concurrently herewith.)
In California, Business & Professions Code section 657 specifically calls for healthcare providers to give patients who have
no insurance and are not eligible for public assistance cash discounts, while making clear that the discounted rates are not to
be construed as the “usual, customary or reasonable rates” for the services provided. The statute also mandates that the
discounted rates may not be used “for any other purpose.” (Cal. Bus. & Prof Code § 657(c).) If a cash reduction negotiated
directly by a patient is inadmissible, why should a cash discount negotiated by a patient health insurer be treated differently?
It should not.
III.
PLAINTIFF IS ENTITLED TO RECOVER THE REASONABLE COST/VALUE OF THE MEDICAL EXPENSES
INCURRED NOT ONLY WHAT PRIVATE INSURANCE PAID IN CASH TO THE HEALTH CARE PROVIDERS
A. Government Defendants and Medi-Cal Payments - the Hanif and Olszewski Decisions Do Not Alter the Collateral
Source Rule
A plaintiff in a personal injury case is entitled to recover the “reasonable cost” of the medical services provided to them as
the result of a tortfeasor’s negligence. (CACI 3903A.) Where a plaintiff’s medical bills have been paid by Medi-Cal, there is
authority to limit the amount recoverable to the Medi-Cal payment. Hanif, supra, at 639; Olszewski v. Scripps Health (2003)
30 Cal.4th 798, 827. As opposed to private or public healthcare insurance patients who incur liability for the full hospital
charges (Parnell v. Adventist Health Svstem/West (2005) 35 Cal. 4th 595), Medi-Cal patients only incur liability in the event
of a third party recovery, and only to the extent of, “MediCal’s subrogation and judgment lien rights (Welf. & Inst. Code §
14124.70, et seq.).” (Hanif, supra, at 640.) A qualified Medi-Cal patient bears no financial liability, debt or responsibility for
the medical services they receive. (42 C.F.R. 447.15.) Since the plaintiff in Hanif was only “deemed to have personally paid
or incurred liability” to the extent of “Medi-Cal’s subrogation and judgment lien rights,” the court modified the judgment to
reduce plaintiffs medical special damages to the amount paid by Medi-Cal. (Hanif, supra, at 644.)
Hanif did not call into question any aspect of the holding of Helfend. In Hanif, the defendant was a public entity, and the
injured plaintiffs medical bills were not wholly or partly indemnified for his loss by collateral insurance affected by him.
Rather, in Hanif, the plaintiff incurred liability only in the event of a third party recovery, and only to the extent of
“Medi-Cal’s subrogation and judgment lien rights (Welf.& Inst. Code, §§ 14124.70 et seq.)” (Hanif, supra, at 640; See also,
42 C.F.R.447.15.) To the contrary, the Hanif court and every other court that has looked at this issue has said the measure of
recovery is the reasonable costs paid or incurred by the plaintiff. “Fundamental principles underlying recovery of
compensatory damages in tort actions’ require that “an injured plaintiff” not “recover from the tortfeasor more than the actual
amount he paid or for which he incurred liability for past medical care and services.” (Hanif at 641; Emphasis added).
When the Supreme Court touched again upon this issue in the context of medically indigent patient-litigants in Olszewski, the
court upheld the Hanif limitation on recovers of damages as to Medi-Cal/Medicaid recipients, extending the holding to
include private party defendants. Even so, the Supreme Court only did so reluctantly when it invalidated California Welfare
and Institutions Code section 14124.791 provider liens by which the State of California sought to allow medical providers to
first pay back Medi-Cal, and then assert liens for their full charges against an injured plaintiff’s third-party tort damages
recovery. “By invalidating liens filed pursuant to section 14124.791, we give the third party tortfeasor a windfall at the
expense of the innocent health care provider. Because the provider may no longer assert a lien for the full cost of its services,
156
the Medicaid beneficiary may only recover the amount payable under Medicaid as his or her medical expenses in an action
against a third party tortfeasor.” (Olszewski at 827.)
The amounts Plaintiff “actually paid or incurred” are the proper measure of damages, not the amounts plaintiffs healthcare
indemnity insurer paid. The key here is to under stand that in the context of collateral insurance, the amounts “incurred” are
the full billed charges. In the collateral insurance circumstance, the patient has incurred debt for the entire charge rate. In
Parnell, the Supreme Court reviewed hospital liens under California Civil Code section 3045.1, also known as the Hospital
Lien Act (“HLA”). In doing so, the Court closely examined the basis of an HLA lien under California Civil Code section
3045.1, and held that “the HLA ... is premised on a creditor-debtor relationship between the hospital and the patient. (Id. at
607.) Pursuant to he contract negotiated between the hospital and healthcare insurer in Parnell, the hospital agreed to accept
the contractual payment rates from the health care insurer (along with the contractual benefits of its relationship with the
health plan and co-payments from the patient) as “payment in full.” (Id. at 609.) The effect of this arrangement was that the
patient’s “entire debt to the hospital” was “extinguished.” (Id.) The debt that was extinguished was for “the amount of the
reasonable and necessary charges of the hospital.” (See Cal. Civil Code §3045.1.)
Since Plaintiff incurred the full charges (the debt that was recognized by the Parnell court), this amount determines
admissibility as well as recoverability of damages. There is no published authority holding that evidence of the “reasonable
cost/value” of the past medical specials is restricted to what was paid in cash by plaintiffs insurer. To the contrary, the entire
amount of the debt incurred is admissible. (Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 1157.)
It is also worth noting that in Hanif, the defendant was a government entity and this fits within the California Government
Code section 985 exception to the collateral source rule. The Hanif opinion has also been subject to substantial criticism in
foreign jurisdictions for relying on the wrong section of the Restatement (Second) of Torts. Here, the defendant is not a
governmental entity nor is/was plaintiff eligible for Medi-Cal, making the Hanif/Olszewski limitations on recovery
inapplicable.
B. Governmental Defendants and Private Health Insurance Payments- The Nishihama Decision Does Not Compel Any
Additional Exception to the Collateral Source Rule
The only published decision in which a plaintiffs recovery was reduced, post verdict, by way of appellate remittitur to limit
the recovery to the amount paid in cash by a plain tiffs private health care insurer is Nishihama. Importantly, the Court of
Appeal in Nishihama relied extensively upon the decision in Grauberger v. St.Francis Hospital (N.D. Cal. 2001) 149 F.Supp.
2d 1186; yet that decision was vacated and the case was dismissed by a subsequent decision of the District Court in
Grauberger v. St.Francis Hospital (N.D. Cal. 2001) 169 F.Supp.2d 1172.
In Swanson v. St. John’s Regional Medical Center (2002) 97 Cal.App 4th 245, the Second Appellate District held that
statutory law is clear that a hospital (as opposed to an HMO) may assert a lien against a judgment or settlement in a personal
injury action for the usual charges (reasonable value) for its services, even if the injured plaintiff is not liable for that full
amount due to a reduced rate negotiated by the plaintiff’s insurance carrier. The Court of Appeal in Swanson specifically
discussed that the language in Nishihama was dicta, and that the government defendant in Nishihama was entitled to reduce
damages to the actual amount paid, pursuant to California Government Code section 985(b). (Swanson at 248, fn. 2.) Further,
the Court of Appeal noted that the Grauberger decision had been vacated, and indeed declined to follow its prior holding.
(Swanson at 251, 252.)
The question of whether the recovery of medical special damage may be restricted to the amounts paid to indemnify
healthcare charges by a collateral insurer was not re ached by the California Supreme Court in Parnell, supra. Footnote 16 in
Parnell states, “Because our holding relies solely on the absence of a debt underlying the lien, we do not reach, and express s
no opinion on, the following issues: (1) whether Olszewski v. Scripps Health, (2003) 30 Cal.4th 798, and Hanif v. Housing
Authority (1988) 200 Cal.App.3d 635, apply outside the Medicaid context and limit a patient’s tort recovery for medical
expenses to the amount actually paid by the patient notwithstanding the collateral source rule.” (Id. at fn. 16.)
Since it did not reach that issue, the Supreme Court had no occasion to review the law in this regard, and had no occasion to
note that it had already expressed an opinion on that very question - namely that collateral payment or indemnity, “should not
157
be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.” (Helfend, supra, 2 Cal.3d at
6.) Helfend remains good law, and binding authority on all trial courts and appellate courts in the State of California. If
collateral indemnity should not be deducted from the damages as a tortfeasor owes a plaintiff (Helfend), the Nishihama
decision, to the extent that it holds otherwise, is inconsistent with the existing binding Surepme Court authority. That this
shortcoming of the Nishihama decision has not drawn more attention is at least excusable by virtue of the fact that like the
Hanif decision, Nishihama involved a public entity defendant, and the post verdict reduction of plaintiff’s recovery of
medical special damages is consistent with the statutory procedures and results provided for by California Government Code
section 985. In other words, the fact that the Nislrihama court reached the right decision, but for the wrong reason, does not
make the wrong reason sound precedent.
In Greer, supra, the Court described Hanif and Nishihama as “cases which hold that an injured plaintiff in a tort action
cannot recover more than the amount of medical expenses actually paid or incurred, even if the market value of the services
is a greater sum.” (Greer supra, 141 Cal.App.4th at 1157.) Stated in this manner, the holdings of Hanif and Nishihama
neither offend the collateral source rule nor the objective legal measure of medical special damages. The objective measure of
medical special damages which is the evidentiary or procedural aspect of the collateral source rule is not involved since the
holdings do not speak to restricting or excluding relevant, competent and admissible evidence of the reasonable cost or value
of past healthcare services. The substantive aspect of the rule - the measure of recovery - is not offended since the measure of
recovery is not solely the amounts paid, but also encompasses the amounts incurred, whether paid or not.
Most recently in Katinuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, the Third Appellate District, reversed a trial court’s
ruling preventing the plaintiff from putting into evidence the full amount of medical charges incurred and thus limiting the
recovery to a “discounted” amount paid to settle plaintiffs medical expense debt by a financial services company which had
purchased patient accounts from the hospital. (Id. at 1298.) The court properly focused on established precedent that a
plaintiffs recovery is limited to “the actual amount paid or for which he incurred liability for past medical care....” (Id. at
1296; Emphasis in original.) The court noted:
Under the trial court’s ruling, plaintiffs are placed in a worse position than had the tort not been committed. Despite the fact
that plaintiffs are liable for the full amount of the medical bills, the tortfeasor is answerable only for a discounted rate paid by
a bill collector who bought the lien from a health care provider. The result is that plaintiffs are under compensated and the
tortfeasor receives a windfall. (Id. at 1296.)
Whether sold to MedFin or not, the charges billed to plaintiffs reflected on the reasonable value of the services they received.
A subsequent assignment of the bill to a third party cannot result in a decrease in the value of services that have already been
rendered. Yet that is exactly the effect of the trial court’s ruling. (Id. at 1297.)
The fact that a hospital or doctor, for administrative or economic convenience, decides to sell a debt to a third party at a
discount does not reduce the value of the services provided in the first place. (Id. at 1298.)
While not a case involving private healthcare insurance, the analysis concerning the debt incurred by the patient/plaintiff at
the time the service is rendered is equally applicable.
While there is no reported appellate authority binding any trial court to reduce a jury verdict against a private defendant to the
amount paid in cash by a plaintiffs private health insurer, numerous trial courts have and are addressing this issue.
Evidence of what was “paid” to healthcare providers to satisfy the debts for care incurred by plaintiff are not relevant to any
issue in this case. Such evidence is plainly inadmissible. Plaintiff should be allowed to recover the full amount of $28,294.30
for her past medical expenses.
IV.
158
SAN DIEGO SUPERIOR COURTS AGREE WITH PLAINTIFF’S POSITION AND HAVE REJECTED SIMILAR
DEFENSE MOTIONS
Attached to this opposition are rulings by various trial judges in San Diego who addressed this issue. Plaintiff has attached a
ruling by Judge Lisa Guy-Schall, Judge of the Superior Court in San Diego County, in the case of Downs v. Coast Waste
Management, Inc., Case No. GIN049407. Judge Guy-Schall rejected a similar argument by a defendant. Also attached is an
order that was issued earlier this year by Judge Joan M. Lewis in Department 65 in the case of Smith v. San Diego Unified
School District, San Diego Superior Court Case No. GIC874128, which also rejected defendant’s argument.
V.
THE LEGISLATURE HAS RECOGNIZED THE COLLATERAL SOURCE RULE AND CREATED EXCEPTIONS
FOR DISCREET CLASSES OF DEFENDANTS, NONE OF WHICH DEFENDANT IN THIS CASE IS A MEMBER
A. The Legislature Has Recognized the Collateral Source Rule and Created Exceptions for Discreet Classes of
Defendants, None of Which Defendant in This Case is a Member
Although the collateral source rule developed at common law in California, it has since been recognized and adopted by the
Legislature. (See Gov. Code § 985; Civ. Code § 3333.1.) (Collateral Source Rule is partially abrogated as to medical
insurance benefits in actions against government entities and health care providers). To the extent that exceptions to the
collateral source rule are appropriate, the courts must defer to the legislature, which has taken upon itself to carve out
exceptions for certain discreet classes of defendants (of which defendant herein is not a member). (See Smock, supra, 138
Cal. App. 4th at 888 (“If other modifications or limitations to [the Collateral Source Rule] are warranted, their creation is best
left to the Legislature”); see also He?? fend, supra, 2 Cal. 3d at 13 (“the proposed changes, if desirable, would be more
effectively accomplished through legislative reform”).)
At present, there are only two such exceptions to the collateral source rule - Government Code section 985 (actions against
government entities - providing for discovery of collateral, sources and payments, and also providing for a post-verdict
hearing to determine whether a public entity will pay damages for which a collateral payor has paid or indemnified the
plaintiff), and Civil Code section 3333.1 (providing for introduction of collateral insurance information into evidence in
actions against health care providers for professional negligence).
In Helfend, supra, 2 Cal. 3d at 6, n. 2, the California Supreme Court held that the collateral source rule precludes a defendant
from reducing the plaintiffs damages through plaintiff’s collateral contractual benefits. The Helfend court reserved the very
issue that confront d the Hanif court, where a plaintiff neither paid nor incurred responsibility for their medical services,
which were instead dealt with through independent public benefits: “The question of gratuitous public benefits is not at issue
here and invokes a host of other concerns, which must be considered in light of their specific factual contexts.” (Helfend,
supra, 2 Cal. 3d at 9.)
The resolution of the “host of other concerns” in California - as it affects plaintiff’s recovery of damages - is that in addition
to independence from the tortfeasor, the operation of the collateral source rule in California requires that the plaintiff first pay
or incur those damages. (See Hanif, supra, 200 Cal. App. 3d 635; Olszewski, supra, 30 Cal. 4th 798.) The Olszewski court
was so disturbed that this rule shortchanged medical providers and relieved tortfeasors of liability for the full value of
medical services they caused, that the Supreme Court expressly asked that the legislature undertake to remedy the situation.
(Olszewski, supra, 30 Cal. 4th at 827.)
In both Government Code section 985 and Civil Code section 3333.1, the legislature also applied the maxim “he who takes
the benefit must bear the burden” (Civ. Code § 3521) to tortfeasors by permitting the defendant to potentially reap a
plaintiff’s collateral source benefits but offsetting that benefit by the cost of obtaining those benefits. Under Civ. Code
section 3333.1(a), if the defendant elects to introduce evidence of collateral insurance benefits, “the plaintiff may introduce
evidence of any amount which the plaintiff has paid or contributed to secure his right to any insurance benefits concerning
which the defendant has introduced evidence.” Under Government Code section 985(f)(3)(B), “[t]he court shall deduct from
159
the reimbursement or reduction the amount of premiums the court determines were paid by or on behalf of the plaintiff to the
provider of a collateral source payment.”
Here, defendant wants more than what the legislature was willing to give Public entity and medical malpractice defendants.
Defendant wants a free lunch - the benefit of plaintiff’s health insurance without bearing any of the cost of acquiring that
benefit.
B. Nishihama Did Not Address the Collateral Source Rule
Hanif cited Helfend and considered how Medi-Cal’s statutory lien right; fit with the collateral source rule. (Hanif, supra, 200
Cal. App. 3d at 639-40 (“we note there is no question here that Medi-Cal’s payment for all injury-related medical care and
services does not preclude plaintiff’s recovery from defendant, as special damages, of the amount [Medi-Cal] paid. This
follows from the collateral source rule. [citing Helfend, supra, 2 Cal. 3d at 6-16]”).) That earned collateral financial benefits
(such as private health insurance) and unearned, publicly-funded benefits (such as Medi-Cal) deserve distinct treatment as
collateral sources is demonstrated by the separate treatment of these two categories of collateral benefits for purposes of
posttrial motions under Government Code section 985. (See Gov. Code §985(f), subsections (1) and (2).) Nishihama, on the
other hind, did not address, consider or analyze the collateral source rule, nor did it discuss whether the extension of Hanif to
the private health insurance context would violate the Supreme Court’s decision in Helfend.
“Cases are not authority for propositions not considered.” (People v. tanks (1959) 53 Cal. 2d 370, 389; Peterson v.Lamb
Rubber Co. (1960) 54 Cal. 2d 339, 343; Ginns v. Savage (1964) 61 Cal. 2d 520, 524, n. 2 (“[A] case does not stand for a
proposition neither discussed nor analyzed”).) In Peterson v. Lamb Rubber Co., supra, 54 Cal. 2d at 343, the defendant cited
a case, Tremeroli v. Austin Trailer Equip. Co. (1951) 102 Cal. App. 2d 464, 477, which had proceeded on the theory that
privity is required between a consumer and manufacturer in order to recover on an implied warranty claim. However, the
Supreme Court refused to award the case any precedential value on that point because the theory had simply gone
unchallenged in the trial court and the appellate court and did not appear to have been disputed or argued at any point in the
case. (Peterson v. Lamb Rubber Co., supra, 54 Cal. 2d at 343.)
The language of an opinion must be construed with reference to tie facts and evidence presented in the case, and the
precedential value of the case is coextensive only with such facts. (Security Pacific National Bank v. Wozab (1990) 51Cal. 3d
991, 1003-04; 9 Witkin, Cal. Proc. (4th Ed. 1997) Appeal, § 946, p. 988.) “A litigant cannot find shelter under a rule
announced in a decision that is inapplicable to a different factual situation in his own case, nor may a decision of a court be
rested on quotations from previous opinions that are not pertinent by reason of dissimilarity of facts in the cited cases and in
those in the case under consideration.” (Harris v. Capital Growth Investors XIV(1991) 52 Cal 3d 1142, 1157; Southern Cal.
Enterprises v. D.N. &E. Walter & Co. (1947) 78 Cal. App. 2d 750, 757.)
Nishihama, supra, 93 Cal. App. 4th 298, may not be accorded precedential value for propositions that were not raised by the
parties therein, nor considered or analyzed by the Court. In Nishihama, the defendant was a public entity. As such, it was
statutorily entitled to discovery of the identity of plaintiff’s health insurer - Blue Cross -and that “at the time of plaintiffs care,
Blue Cross had a contract with CPMC [plaintiffs hospital, California Pacific Medical Center] under which CPMC agreed that
Blue Cross would pay reduced rates for specified services rendered to members.” (Id. at 306.)
The Nishihama Court was informed that although the jury had awarded $17,168 for CPMC’s hospital charges, the hospital
had been “actually” paid only $3,600 (“Plaintiff did not and does not contest the assertion that CPMC accepted $ 3,600 as
payment in full for the services provided”) and that CMPC had “filed a lien against the judgment reflecting its normal rates,”
under “California’s Hospital Lien Act (HLA), Civil Code sections 3045.1-3045.6.” (Id. at 307 (emphasis added).
The defendant in Nishihama did not want to pay the HLA lien, and the plaintiff did not want to be “put in the position of
having to accept the lesser amount in this action while risking the possibility that she win then have to pay a greater amount
to CPMC because of its lien.” (Id. at 307.)
The Court found that “CPMC has no lien rights in the damages awarded to plaintiff.” (Id., at 306.) Since it was uncontested
that $3,600 was all that had been actually paid, the Nishihama Court found that the trial court “erred in permitting the jury.to
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award” plaintiff any amount in excess of that “for the services provided by CPMC.” (Id.) The Nishihama Court’s finding
“that the jury improperly awarded plaintiff certain medical costs that she did not incur” (Id. at 301; emphasis added) must be
placed in the context that the plaintiff did not claim or contest that she had incurred any other amount, that the hospital had
been paid any other amount, or that the collateral source rule precluded the defendant from reaping the benefits of plaintiff’s
contract with her health insurer, Blue Cross. The Nishihama decision does not even mention the collateral source rule. It
simply is not considered, analyzed or discussed in the opinion.
Within five months of the Nishihama decision, the same three justice panel (Justices Stein, Swager and Marchiano of
Division One of the First District Court of Appeal) issued its decision in McKinney v. California Portland Cement Co. (2002)
96 Cal.App.4th 1214. Unlike Nishihama, in McKinney, the collateral source rule was analyzed and discussed by the court,
which declined to permit the tortfeasor “ ‘to recover a windfall from the thrift and foresight of persons who have actually or
constructively secured insurance’ ” and recognized the rule that “ ‘in a case in which a tort victim has received partial
compensation from medical insurance coverage entirely independent of the tortfeasor ... the collateral source rule []
foreclosed defendant from mitigating damages by means of the collateral payments.’ ” (Id. at 1222, citing Arambula, supra,
72 Cal. App. 4th at 1009, and Helfend, supra, 2 Cat 3d at 13-14; see Montgomery Ward, supra, 334 Ark. 561, cited by
Arambula, supra, 72 Cal. App. 4th at 1012 (Collateral Source Rule precludes defendant from benefitting from discount
plaintiff had negotiated with her medical provider).)
VII.
CONCLUSION
In conclusion, there is no legal authority presented by the defendant that precludes the plaintiff from introducing the full
amount of the bills that she was billed for health care services. The defendant is not entitled to circumvent the collateral
source rule. Therefore, this mot: on should be denied.
DATED: October 29, 2008
LAW OFFICE OF ROCKY K. COPLEY
By <<signature>>
Rocky K. Copley, Attorney for Plaintiff
TORI FERRARI
End of Document
161
Declaration of Richard Lucal in Opposition to Defendants’ Motion to
Dismiss
Tommy DESOTO, an individual; George Kosty, an individual; Steve Terrill, an individual; Antoinette Cardenas, an
individual; Fred Hood, an individual; and Douglas Lovison, an individual, and John Schumacher, as trustee of the
Schumacher Family Trust, Plaintiffs, v. Christopher CONDON, an individual; Richard Condon, an individual;
Michael Mediano, an individual; John Adsit, an individual; Trago LP, a British Virgin Islands limited partnership; FX
Holdings International | United States District Court, C.D. California.
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Comment:
Tommy DESOTO, an individual; George Kosty, an..., 2008 WL 4225011...
2008 WL 4225011 (C.D.Cal.) (Trial Motion, Memorandum and Affidavit)
United States District Court, C.D. California.
Southern Division
Tommy DESOTO, an individual; George Kosty, an individual; Steve Terrill, an individual; Antoinette Cardenas,
an individual; Fred Hood, an individual; and Douglas Lovison, an individual, and John Schumacher, as trustee
of the Schumacher Family Trust, Plaintiffs,
v.
Christopher CONDON, an individual; Richard Condon, an individual; Michael Mediano, an individual; John
Adsit, an individual; Trago LP, a British Virgin Islands limited partnership; FX Holdings International Ltd, a
British Virgin Islands corporation; Trago USA, Inc., a California corporation; Trago International, Inc., a
Delaware corporation; Ct Holdings International, Inc., a Delaware corporation; Pulse Entertainment Group,
L.L.C., a Nevada limited liability company, Defendants.
No. 808CV00514.
July 7, 2008.
Date: July 21, 2008
Time: 8:30 a.m.
Courtroom: 9D
Action Filed: May 8, 2008
Declaration of Richard Lucal in Opposition to Defendants’ Motion to Dismiss
Orlando F. Cabanday (SBN 168131), Laura Ramos (SBN 186326), Hennelly & Grossfeld LLP, 4640 Admiralty Way, Suite
850, Marina Del Rey, CA 90292, Telephone: (310) 305-2100, Facsimile: (310) 305-2116, ocabanday@hgla.com,
lramos@hgla.com, Attorneys for Plaintiffs, Tommy Desoto, George Kosty, Steve Terrill, Antoinette Cardenas, Fred Hood,
Douglas Lovison, and John Schumacher, as trustee of the Schumacher Family Trust.
Assigned to: Hon. David O. Carter.
I, RICHARD LUCAL, declare as follows:
1. I am a licensed California attorney authorized to practice law in the Courts of the State of California and in the United
States District Court for the Central District of California. I was the attorney of record for Douglas Lovison in an action
previously filed in the United States District Court for the Central District of California entitled Lovison v. Condon, et.al.,
case number SACV07-408 AHS (hereinafter “the District Court action”). I have personal knowledge of the information
contained in this declaration and could provide competent testimony at a hearing or trial.
2. I was retained by Douglas Lovison to defend him in an action filed in Orange County Superior Court by CHRISTOPHER
CONDON and TRAGO INTERNATIONAL, INC. against Lovison and four other Trago LP limited partners (Montgomery,
Castillo, Kosty and Soto-Mares). This action was later re-filed in Los Angeles Superior Court. After I determined the lawsuit
to be frivolous and based on false allegations in the complaint (e.g. that Trago International had properly purchased the assets
of Trago LP for $500,000 cash in June, 2005), I filed a special motion to strike under California Code of Civil Procedure
section 425.16 in January, 2007. The initial motion to strike was taken off calendar in February 2007 when the Court granted
defendants leave to file an amended complaint. According to the March, 2007 First Amended Complaint served on me by
CONDON/TRAGO INTERNATIONAL, the allegations against Lovison and others related to an email “campaign”, and, in
opposition to LOVISON’s anti-SLAPP motion, defendants identified only one email sent by LOVISON - an email
forwarding a cease-and-desist email to an individual identified in LOVISON’s declaration as a creditor of TRAGO LP.
3. In April 2007, I filed a special motion to strike the First Amended Complaint which was denied on May 14, 2007. The
defendants opposed the motion with no substantial, competent evidence, misstated applicable California law and relied
163
heavily on objections to LOVISON’s substantial supporting declarations. I filed a notice of appeal from the denial of the
special motion to strike on July 14, 2007, and two other defendants, including plaintiff Kosty, filed similar notices of appeal.
The Los Angeles Superior Court case has been stayed since that time as to Lovison, Kosty and the other appellant. Attached
as Exhibits 1 and 2 are the notices of appeal filed by Lovison and Kosty in the Los Angeles Superior Court action.
Defendants’ opposition brief for the appeal was to be filed on June 13, 2008, and has, to date, not been served on my office.
4. Since the Los Angeles Superior Court related only to an alleged email campaign in November 2006, involved only Condon
and Trago International and was filed in an inconvenient venue (the litigation was filed in Los Angeles because one
defendant, Castillo, lived there), I filed litigation on behalf of Lovison, individually and as a Trago LP limited partner, against
Condon, TRAGO INTERNATIONAL, TRAGO LP, CT HOLDINGS, TRAGO USA, and FX HOLDINGS
INTERNATIONAL in a separate San Diego County Superior Court action. The lawsuit did seek the return of the assets of
TRAGO LP. I determined that the lawsuit was not a mandatory counterclaim in the Los Angeles action for a number of
reasons. First, it did not relate to the alleged email campaign. Second, it involved a substantial number of parties not involved
in Los Angeles. Third, it involved derivative claims on behalf of Trago LP.
5. None of the defense counsel involved with the initial San Diego County litigation claimed that the lawsuit should have
been filed as a mandatory counterclaim in Los Angeles Superior Court. Instead, they filed a motion to change venue to
Orange County -keeping the two lawsuits separate. Attached as Exhibit 3 is a copy of the motion to change venue.
6. In March 2007 and based on substantial evidence obtained from a number of sources, I filed an ex parte application for the
appointment of a receiver before the Honorable Lisa Guy-Schall in the San Diego Superior Court action. During the ex parte
hearing, Judge Guy-Schall stated that she does not appoint a receiver on an ex parte basis, did not consider the merits of the
application and set the receiver motion for a hearing to take place after the motion to change venue. After the hearing, I
realized that I could not seek any interim relief until the motion to change venue was decided, and, if the case was transferred,
could not seek any equitable relief while the case was in transit to Orange County.
7. After the ex parte hearing, I reviewed the facts and the law and determined that it was not advisable to oppose the motion
to change venue and determined that the action should go forward in Orange County. I elected to file the case in U.S. District
Court because the complaint did allege Lanham Act claims for trademark violation and alleged misappropriation of a U.S.
patent and trademark. I filed the District Court action in April 2007 with Douglas Lovison as the only plaintiff and the first
cause of action being one for out-of-court rescission of a February 2005 Settlement Agreement. In addition to Lanham Act
claims for trademark infringement, LOVISON alleged a variety of causes of action under California law, including: (1)
partnership dissolution and accounting, (2) fraud, (3) breach of contract, (4) breach of fiduciary duty, (5) unfair business
practices, (6) false advertising, (7) misappropriation of trade secrets, (7) conversion, (8) fraudulent conveyance, and (9)
declaratory relief. A copy of the caption page to Lovison’s First Amended Complaint which identifies the causes of actions
alleged is attached as Exhibit 4.
8. After filing the District Court action, I attempted to obtain a stipulation from defense counsel to dismiss the state court
action pending before Judge Guy-Schall. Defense counsel refused to stipulate to a dismissal of the State Court action unless
the dismissal was with prejudice. In my opposition papers to the motion to change venue, I asked the Court to dismiss the
state court action, without prejudice, in light of the filing of the District Court action in Orange County. At the hearing on the
motion to change venue, the State Court judge refused to dismiss the State Court action but ordered the action transferred to
Orange County Superior Court.
9. In the District Court action, defendants did not raise a claim that the case should have been filed in Los Angeles Superior
Court. By the time that Lovison’s answer was due in the Los Angeles Superior Court case, the District Court action filed by
Lovison was pending, and Lovison could not properly raise any of the claims in Los Angeles Superior Court. A copy of the
answer filed by Condon to the First Amended Complaint in the Lovison District Court action is attached as Exhibit 5. Since
defendants had caused the Orange County Superior Court case to remain pending by not stipulating to a dismissal and since
the answer challenged Federal Court jurisdiction, I decided not to dismiss the Orange County Superior Court case until the
District Court decided any jurisdictional challenges.
10. In May 2007, I filed a motion for the appointment of a receiver and for a preliminary injunction in the Lovison District
Court action. At that time, I had only been able to take one deposition in the Los Angeles Superior Court action (Douglas
164
Denhart -former President of Trago International) between Lovison and Condon and had been unable to obtain any other
deposition or formal written discovery from Condon’s counsel. Defendants took the position that discovery was stayed
through the pendency of the Los Angeles Superior Court action either because (1) a special motion to strike had been filed, or
(2) there were other actions pending. A copy of the notice of motion and motion is attached as Exhibit 6. A copy of the
memorandum of points and authorities is attached as Exhibit 7. The supporting proposed order and reply memorandum of
points and authorities are attached as Exhibits 8 and 9.
11. At the July 2, 2007, hearing on the motion for the appointment of a receiver and for preliminary injunction which I
attended, Judge Stotler began the hearing by asking me to dismiss the case due to the predominance of the State Court causes
of action and the pendency of the State Court action. When I asked to be able to confer with my client and counsel for several
intervenors, Judge Stotler dismissed the case on the stated grounds that there was no substantial federal question. Judge
Stotler’s three stated concerns were (1) a state court action was already pending and the state law claims predominated, (2) a
state court should resolve Lovison’s rescission claim, and (3) a state court should decide the proper ownership of the
trademark to sell tequila using the trade name “Trago.” Because Judge Stotler was dismissing the case, without prejudice, she
stated, on the record, that she would be denying the motion for the appointment of a receiver without prejudice. NO
SUBSTANTIVE ISSUES WERE RESOLVED BY JUDGE STOTTLER AT THIS JULY 2, 2007 HEARING, and there was
absolutely no discussion of the merits of the receiver motion at this hearing. A copy of the transcript is attached hereto as
Exhibit 10. A copy of the order denying Lovison’s receiver motion, without prejudice, is attached as Exhibit 11. A copy of
Judge Stotler’s order dismissing the case, without prejudice is attached as Exhibit 12. A copy of Judge Stotler’s order
denying defendants’ motion for attorneys’ fees is attached as Exhibit 13. In denying defendants’ motion for attorneys’ fees, in
particular, Judge Stotler order states: “Neither of the parties’ litigation objectives with respect to the contract claim have been
substantially furthered by the judgment entered in this action. Rather, the Court found that the parties should pursue the
contract claim in state court where an action is already pending for that purpose.” Judge Stotler never made a ruling on the
merits of any of Lovison’s claims at any point during the short pendency of the District Court action, no discovery was
conducted and no substantive issues decided.
12. After the July 2, 2007, hearing, I did file a notice of appeal to the Ninth Circuit but abandoned the appeal in January
2008. Case number SACV07-408 AHS is no longer pending in any Court.
13. After the Lovison District Court case was dismissed, Lovison’s claims proceeded forward in Orange County Superior
Court. While defendants had earlier agreed to consolidate pending actions filed by Montgomery and Lovison regarding Trago
LP, they took a new tact in August 2007 and opposed any consolidation of cases. They claimed that Lovison’s rescission
claim should be bifurcated, and discovery severely limited to what defense counsel considered relevant to Lovison’s
rescission claim. At the time the Orange County Superior Court case was going forward, the Los Angeles Superior Court
case was on appeal and stayed. Defendants made no effort to seek judicial consolidation of the Los Angeles and Orange
County Superior Court cases and did not seek to have Lovison’s Orange County Superior Court case dismissed.
14. On October 1, 2007, defendants obtained an ex parte stay of discovery in Lovison’s Orange County Superior Court case
on relevancy grounds. On November 8, 2007, defendants successfully opposed efforts by Trago LP limited partner, Ty
Montgomery, to consolidate and by Trago LP limited partner, Phillip Soto-Mares, to intervene. Defendants obtained an order
bifurcating Lovison’s rescission claim and staying discovery on all issues not related to rescission. It was clear that these
efforts by defendants were specifically intended to prevent Lovison from obtaining discovery of suspected criminal and
tortuous acts by Condon and the other defendants. Because of substantial disputes over what was relevant to rescission,
discovery disputes were protracted, and I was forced to file or oppose over 15 discovery related motions. Attached as Exhibit
14 is a February 6, 2008, order relating to a number of discovery motions. Of note, the Court granted Lovison’s motion to
compel the production of financial records from Trago International but also granted defendants’ motion to quash a subpoena
to Bank of America seeking the same records.
15. Without filing a motion for reconsideration, defendants took the position that there was a “typo” in the February 6, 2008,
order and refused to produce any Trago International financial records unrelating to alleged payments for the Trago LP
assets. In March, 2008 and after defendants’ systematically refused to comply with the February 6, 2008, order, I filed
motions for terminating or other sanctions. Defendants raised the “typo” issue in opposition to Lovison’s motion and as to the
Trago International financial records. In the order attached as Exhibit 15, Judge Andler granted the requested “typo” relief
and would not order the production of financial records.
165
16. At a March 2008 status conference, Judge Andler decided to trifurcate the trial in the case. She determined that there
would be a declaratory relief trial on May 12, 2008. regarding the issue of whether Lovison’s ownership interests in Trago
LP, Trago USA and FX Holdings International were ever transferred and whether the failure to transfer rendered the releases
in the February 12, 2005, Settlement Agreement invalid. A copy of Judge Andler’s minute order is attached as Exhibit 16.
While this trial was initially scheduled for one day, it appeared that the trial might involve substantially more sub-issues than
contemplated. After this trial was completed and if Lovison prevailed, discovery would be opened and Lovison could move
forward with the remainder of his claims. If Lovison lost the first trial, there would be a second, potentially jury, trial on
Lovison’s rescission claim. If Lovison prevailed on the rescission claim, there would be a third trial involving many of the
same issues, documents and witnesses presented to a jury on the balance of Lovison’s claims. I estimated that the trials on the
rescission claim and Lovison’s remaining claims would each take approximately 3 weeks and involve as many as 20
witnesses. This trifurcation of the trial would have cost Lovison an estimated $300,000 to $500,000 in legal fees and costs
and would have required the presentation of duplicative evidence to a judge or jury on potentially three separate occasions.
17. When the defendants systematically refused to produce information and documents responsive to the Court’s March 2008
order granting discovery sanctions (exhibit 15), I filed a motion for terminating sanctions to be heard on May 1, 2008. The
motion for sanctions was supported by substantial evidence of defendants’ willful failure to produce critical information. The
Court’s tentative invited counsel to submit on the pleadings. I received a call from defense counsel Malcolm that defendants
would submit on the pleadings. Despite the severity of the relief sought and the substantial nature of the evidence presented,
no defense counsel appeared at the hearing on the motion. The next day, Judge Andler issued an order denying my motions
for sanctions - stating that the motions for sanctions should have been filed no later than one week before the order was
issued which defendants violated. A copy of this order is attached as Exhibit 17. I made an ex parte application to have the
motions heard in conjunction with the May 12, 2008, trial, and the application was denied.
18. From the orders issued by Judge Andler, I determined that Lovison could not obtain a fair trial, and that pursuit of his
state court claims would be prohibitive. He would not be allowed reasonable discovery and was being forced to try the same
issues many times. Despite the merit to Lovison’s claims, it appeared that he would not be allowed to present them. With the
option available of joining other plaintiffs in pursuing a RICO action against Condon and other defendants, Lovison elected
to pursue RICO and to dismiss his state court action, without prejudice. To date and as a result of the conduct of defendants,
Lovison has been prohibited from obtaining any substantive ruling on any key issue relating to the misconduct of Condon,
has been prohibited from obtaining key financial records and has been unable to have a single court evaluate the critical need
to appoint a receiver. With regard to the RICO action, I understand that Lovison’s rescission claim is unnecessary. Lovison is
contending that the February 12, 2005, Settlement Agreement was obtained through extortion, is a RICO predicate act and is
void. Lovison is further contending that the releases in the Settlement Agreement are invalid and ineffective for a number of
reasons - including the failure of defendants to transfer Lovison’s Trago LP ownership interest. I am unaware of any issue
that needed to be litigated or tried in state court to give Lovison standing to pursue any of his claims in the RICO action.
19. Defense counsel find fault with my decision to file a verified statement of disqualification challenging Judge Andler for
bias. In addition to the above, the verified statement identifies a number of critical concerns about the fairness of Judge
Andler and Lovison’s ability to obtain a fair trial. Judge Andler’s order striking LOVISON’s verified statement of
disqualification is inaccurate when it claims that LOVISON only objected to certain rulings made by the Court and claimed
that Judge Andler was a member of an organization with one of the defense counsel. The allegations of misconduct and bias
go much further than simple disagreements with rulings made by the Court. My primary concerns regarding Judge Andler
involved:
(a) concerns of a relationship between Judge Andler and attorney Thomas Malcolm (hired to be co-counsel for Trago
International after the time to file a 170.6 challenge had expired); The conduct of Judge Andler and deference given to
Malcolm, combined with their relationship as former officers/directors of the Orange County Association of Business Trial
Lawyers was concerning; Of note, attorney Malcolm was NOT retained by Trago International to represent it in this action
despite his familiarity with the evidence.
(b) When presented with overwhelming and conclusive evidence that Condon had committed perjury and that defense
counsel had suborned perjury and perpetrated fraud on the Court, Judge Andler stated, on the record, that perhaps this
conduct was “his client’s best strategic position;” (Ex. 18, pp. 19:9-15, 21-25 and 20:14-22) Excerpts from the November 8,
2007, hearing transcript are attached hereto as Exhibit 18;
166
(c) When faced with efforts by two additional Trago LP limited partners to consolidate their cases with or to intervene in the
Lovison action, Judge Andler denied the efforts and stated, on the record, that her goal was to “divide and conquer.” (See,
Ex. 18, p. 24:4-8); While it is understandable that defendants would want to divide and conquer a number of limited partner
victims of Condon’s misconduct, it was surprising for the Court to adopt this position and was an indication of bias;
(d) While granting the motions to compel in early February 2008, it was clear that Judge Andler would not continue the April
1, 2008, trial and would not allow LOVISON to obtain the discovery ordered by the Court; at that point, I had no choice but
to file a Verified Statement of Disqualification in late February, 2008; Only after I filed the Verified Statement of
Disqualification, did the Court entertain motions for sanctions and eventually continue the bifurcated rescission trial;
20. The pending RICO action is substantially different from LOVISON’s prior District Court case before Judge Stotler.
There are a number of additional plaintiffs – including TRAGO LP limited partners and an investor in TRAGO
INTERNATIONAL. There is no derivative action alleged. There is no claim for rescission asserted by LOVISON, no
Lanham Act alleged, no state law claims for breach of contract, conversion, misappropriation of trade secrets, partnership
dissolution and accounting, etc. There is no pending State Court action. There are a number of defendants not named in the
Lovison action. There are substantial RICO claims and minority shareholder claims for breach of fiduciary duty in the
context of the RICO claims. This action is not a related case and is substantially different from any case previously filed by
Lovison.
21. Despite the length of the RICO amended complaint and the number of exhibits attached, defendants were only able to
find a handful of claimed inaccuracies in the First Amended Complaint. As to the claim that the Agemian action did not
involve allegations as to fraud regarding Condon, this issue is clarified in a letter produced by defendants in the Orange
County Superior Court action which identifies that the Agemian case did include allegations of fraud by Condon. A copy of a
letter from Agemian’s counsel to Condon’s counsel and produced by defendants in the Orange County Superior Court case is
attached as Exhibit 19.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct, and that this
Declaration is made and dated this 7th day of July, 2008 at Vista, California.
End of Document
167
Unopposed Application for Final Approval of Class Action
Settlement; Memorandum of Points And Authorities in Support of
Approval; Declaration of Judge Edward A. Infante (Ret.); Exhibits
Catherine PETERMAN, on behalf of herself and all others similarly situated, Plaintiff, v. LINENS’N THINGS, INC.,
and Does 1 through 20, Defendants. | Superior Court of California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
Catherine PETERMAN, on behalf of herself and all others..., 2007 WL 5879549...
San Diego County
Catherine PETERMAN, on behalf of herself and all others similarly situated, Plaintiff,
v.
LINENS’N THINGS, INC., and Does 1 through 20, Defendants.
No. GIC 869224.
June 15, 2007.
Unopposed Application for Final Approval of Class Action Settlement; Memorandum of Points And Authorities in
Support of Approval; Declaration of Judge Edward A. Infante (Ret.); Exhibits
Neil B. Fineman, Esq. - SBN 177915, James D. Norris, Esq. - SBN 188078, Fineman & Associates, 50 Civic Center Drive
West, Santa Ana, California 92701-4001, (714) 543-2200/Fax (714) 543-0054, Attorneys for Plaintiff, Catherine Peterman.
Judge: Steven R. Denton.
Dept.: 73
Dale: June 29, 2007
Time: 10:30 am.
TO THE HONORABLE STEVEN R. DENTON, JUDGE OF THE SUPERIOR COURT:
On March 29, 2007, this Court granted preliminary approval of the class action settlement in matter and Defendant provided
notice to the class of the pendency of the action and the pendency of the preliminarily approved settlement. The class
members had ample time to review the proposed settlement and file any objections to the approved settlement, Not a single
class member objected to the preliminarily approved settlement.
Accordingly, without objections to he settlement by the settlement class - and without opposition by Defendant - the
representative Plaintiff, Catherine Peterman, on behalf of herself and the settlement class, now submits this memorandum of
points and authorities in support of the parties’ request that the settlement be given final approval pursuant to California Code
of Civil Procedure section 382 and California Rule of Court rule 3769 on the grounds that the settlement remains fair,
reasonable, adequate, and in the best interests of the class.
Dated: June 14, 2007
FINEMAN & ASSOCIATES
By: <<signature>>
Neil B. Fineman
Class Counsel for Plaintiff, Catherine Peterman and the Class
TABLE OF CONTENTS
I. INTRODUCTION .........................................................................................................................................................................
1
169
II. LEGAL CONTENTIONS .........................................................................................................................................................
1
III. THIS COURT HAS ALREADY GRANTED PRELIMINARY APPROVAL OF THE SETTLEMENT
AGREEMENT ....................................................................................................................................................................................
2
IV. THE TRIAL COURT’S ROLE IN REVIEWING THE SETTLEMENT AGREEMENT AT THE
FAIRNESS HEARING ....................................................................................................................................................................
3
V. THE PRELIMINARILY APPROVED SETTLEMENT AGREEMENT SUBSTANTIALLY BENEFITS
THE CLASS AND REMAINS FAIR, ADEQUATE, AND REASONABLE .............................................................
3
A. Certification of the Settlement Class .....................................................................................................................................
3
B. Primary Relief Defendant’s Compliance With Civil Code Section 1747.08 ...........................................................
4
C. Discount Voucher Awarded To The Class Members .......................................................................................................
4
D. Class Notice and Claims Administration Costs Paid By Defendant - Not By The Cass .....................................
4
E. Incentive Award to Plaintiff Paid By Defendant- Not By The Class ..........................................................................
5
F. Attorneys Fees and Costs Paid By Defendant - Not By The Class ..............................................................................
5
1. The Amount Of Fees Accurately Reflects Class Counsel’s Lodestar With A Modest Multiplier .......................
5
a. The Lodestar ....................................................................................................................................................................................
5
b. The Multiplier .................................................................................................................................................................................
6
i. The Novelty and Difficulty of the Questions Involved .....................................................................................................
7
ii. The Skills Displayed By Class Counsel And The Exceptional Results Obtained By Class Counsel ..............
7
iii. The Contingent Nature of the Fee Award Warrants an Enhanced Multiplier .........................................................
8
iv. Additional Factors Justifying A Positive Multiplier ........................................................................................................
9
2. The Modest Multiplier Of 1.9 Is Below the Average Range of acceptable Multipliers in Class Action
Litigation ...............................................................................................................................................................................................
9
VI. THE SETTLEMENT REMAINS FAIR, ADEQUATE, AND REASONABLE .................................................
9
A. The Settlement Was The Result Of Arms-Length Bargaining .....................................................................................
10
B. The Parties Engaged In Extensive Discovery .....................................................................................................................
10
C. Class Counsel Is Very Experienced In Similar Litigation ..............................................................................................
10
D. Not A Single Class Member Objected To The Proposed Settlement .........................................................................
11
VIII. CONCLUSION ........................................................................................................................................................................
11
DECLARATION OF NEIL B. FINEMAN ...............................................................................................................................
12
170
EXHIBIT 1 -DECLARATION OF HON. EDWARD A. INFANTE IN SUPPORT OF SETTLEMENT
EXHIBIT 2 -PRELIMINARY APPROVAL ORDER
Cases
7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135 ...........
4, 5
Chemical Bank v. City of Seattle (9th Cir., 1994) 19 F.3d 1291 .........................................................
9
Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695 ..........................................................................................
5
Downey Cares v. Downey Community Dev. Comm’n. (1987) 196 Cal.App.3d 983 ..................
11
Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794 ............................................................................
4
Florez v. Linens ‘N Things, Inc. (2003) 108 Cal.App.4th 447 .............................................................
4, 13
Ketchum v. Moses (2001) 24 Cal.4th 1122 .................................................................................................
8-11
Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19 ..........................................................
10, 12
Officers for Justice v. Civil Service Com’n, etc. (9th Cir.1982) 688 F.2d 615 ..............................
5
Press v. Lucky Stores, Inc. (1983) 34 Cal.3d 311 .....................................................................................
9
Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470 ..............................................................
5
San Bernardino Valley Audubon Society v. County of San Bernardino (1984) 155
Cal.App.3d 738 .....................................................................................................................................................
9
Serrano v Priest (1977) 20 Cal.3d 25.............................................................................................................
8, 11
Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224 ............................................................
9, 12
Statutes
Civil Code section 1747.08 .............................................................................................................................
passim
Code of Civil Procedure section 382 ...........................................................................................................
5
Secondary Authority
Assem. Floor Analysis, 3d reading of Assem Bill No. 2533 (1995-1996 Reg. Seas.) May 15,
1996, pp. 1-2 ........................................................................................................................................................
4
Dept. Consumer Affairs, Analysis of Assem. Bill No. 1316 (1995-1996 Reg. Sess.) p. l ...........
4
171
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF FINAL APPROVAL OF CLASS ACTION
SETTLEMENT
I. INTRODUCTION
This action arose from Defendant’s policy and practice of utilizing particular credit card transaction forms in its California
stores from at least July 2005 until August 2006. The subject forms contained preprinted spaces designated for filling in a
credit card customer’s address and telephone number.
The subject forms were used when a customer, including a credit card paying customer, returned merchandise to one of
Defendant’s stores. During a return of merchandise, Defendant’s cashiers would ask the customer for his or her original sales
receipt and, if the customer used a credit card to make the purchase, the cashier asked for the customer’s credit card that was
used to make the purchase. During the return transaction, the cashier printed out a return credit card transaction slip which
included the name of the item returned, the refund amount, portions of the customer’s credit card number, and several blank
lines designated for the customer to fill in his or her name, address, and telephone number. Plaintiff alleged the use of these
forms violated Civil Code action 1747.08(a)(3).1 Defendant denies all liability.
1
Civil Code section 1747.08(a)(3) generally slates that it is unlawful for any person, firm, partnership, association, or corporation
which accepts credit cards in utilize in any credit card transaction a credit card form which contains preprinted spaces specifically
designed for filling in personal information of the cardholder.
II. LEGAL CONTENTIONS
Civil Code section 1747.08 is part of the Song-Beverly Credit Card Act and was designed to promote consumer protection.
(Florez v. Linens ‘N Tings, Inc. (2003) 108 Cal.App.4th 447, 450.) Section 1747.08 was originally enacted as a response to
two principal privacy concerns: first, that with increased use of computer technology, very specific and personal information
about a consumer’s spending habits was being made available to anyone willing to pay for it; and second, that acts of
harassment and violence were being committed by store clerks who obtained customers’ phone numbers and addresses (Id. at
452.)
Additionally, the statute was intended to keep the customer’s credit card number separated from his or her personal
information such as address, telephone number, birth date, etc., in order to prevent thieves from obtaining both at the same
time (i.e. ‘dumpster diving’) and engaging in credit card fraud, usually over the telephone. (Assem. Floor Analysis, 3d
Reading of Assem. Bill No. 2533 (1995-1996 Reg Seas.) May 15, 1996, pp, 1-2.) When drafting 1747,08, the Legislature was
well aware that anyone with access to a consumer’s credit card number and address could access their credit history, open
credit in their name, or charge something in their name. (Dept. Consumer Affairs, Analysis of Assem. Bill No. 1316
(1995-1996 Reg. Sess.) p. 1.)
III. THIS COURT HAS ALREADY GRANTED PRELIMINARY APPROVAL OF THE SETTLEMENT
AGREEMENT
After extensive discovery and independent investigations by class counsel, the parties agreed to participate in a full-day
mediation with the Honorable Edward A, Infane (Ret.), a mediator with JAMS with over twenty five years experience in
mediating complex class actions. (Declaration of Judge Infante, attached as Exhibit 1.) At the conclusion of the mediation,
the parties reached a proposed settlement The settlement agreement was subsequently presented to this Court for preliminary
approval.
On March 29, 2007, this Court found that the settlement was fair, reasonable, and adequate. (Preliminary Approval Order
(“PAO”), attached as Exhibit 2.) The Court also approved of the methods and manner of disseminating the notice of
172
preliminary approval to the class. The class notice explained the basis of the action, the benefits to the class from the
proposed settlement, the amount of attorneys’ fees and cost to be paid by Defendant, and specific information describing how
a class member may opt-out or object to the settlement, At the completion of the notice period, not a single class member
objected to the fairness of the proposed settlement. Accordingly, without objection by any class member affected by the
preliminary approved settlement, the parties believe the settlement agreement should be given final approval and the action
dismissed with prejudice.
IV. THE TRIAL COURT’S ROLE IN REVIEWING THE SETTLEMENT AGREEMENT AT THE FAIRNESS
HEARING
Discussing the criteria under which class action settlements should be reviewed, the court in Dunk v. Ford Motor Co. (1996)
48 Cal.App.4th 1794, wrote: Due regard, should be given to what is otherwise a private consensual agreement between the
parties. The inquiry ‘must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the
product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is
fair, reasonable and adequate to all concerned.’ [Citation]” (Id. at 1801.)
“Neither the trial court nor this court (of appeal] is to reach any ultimate conclusions on the contested issues of fact and law
which underlie the merits of the dispute, for it is the very uncertainty of outcome in litigation and avoidance of wasteful and
expensive litigation that induce consensual settlements. In other words, the settlement or fairness hearing is not to be turned
into a trial or rehearsal for trial on the merits.” (7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85
Cal.App.4th 1135, 1 45, citing with approval, Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d
615,625.)
V. THE PRELIMINARILY APPROVED SETTLEMENT AGREEMENT SUBSTANTIALLY BENEFITS THE
CLASS AND REMAINS FAIR ADEQUATE, AND REASONABLE
The terms and conditions of the settlement preliminarily approved by this Court, are as follows:
A. Certification Of The Settlement Class
For the purposes of settlement only, the parties agreed that this action meets the requirements of a class action pursuant to
Code of Civil Procedure section 382 and well-established California case law, i.e., the exist e of an ascertainable class; a
well-defined community of interest; predominant common questions of law or fact; representatives’ claims or defenses are
typical of the class; and the class representatives and their counsel can adequately represent the interests of the class. (Daar v.
Yellow Cab Co. (1967) 67 Cal.2d 695, 704; Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)
The Class was defined as:
All persons who, between July 18, 2005 and August 30, 2006, returned merchandise to a Linens ‘N Thing store located in the
State of California, used a credit card to receive a refund, and were given a credit card transaction form that contained
preprinted spaces specifically designated for filling in the cardholder’s personal Identification information.2
2
The class does not include any persons who were employed by Linens ‘N Things between July 18, 2005 and August 30, 2006, and
does not include any persons who timely submitted valid request for exclusion.
B. Primary Reli?? Defendant’s Compliance with California Civil Code Section 1748.08
173
The primary relief sought by Plaintiff was Defendant’s discontinuance of the use of the forms seeking customers’ personal
information. Under the proposed settlement, Defendant agreed not to provide customers who use a credit card to receive a
refund at a California Linens ‘N Things store a credit card transaction form containing preprinted spaces specifically
designated for filling in a customer’s personal identification. Accordingly, as a result of this lawsuit, Defendant has changed
its practice and will no longer use the offending form in any of its stores throughout California.
C. Discount Voucher waded to the Class Members
While there were no pecuniary damages sustained by class members, Civil Code section 1747.08(e) allows the Court to
impose a statutory pena??ry against any party that utilizes the subject form. Defendant vigorously argued that it did not
violate section 1747.08 and therefore no penalty should be imposed. However, as part of the settlement, Defendant has
agreed to provide each class member who submits a timely and property completed claim form to an independent claims
administrator a 45% off discount voucher redeemable at any of its stores in California. The voucher has a maximum value of
$45.
D. Class Notice and Claims Administration Costs Paid By Defendant - Not By The Class
Defendant also agreed to bear all costs in providing formal notice to the class of the proposed settlement and all costs
associated with the claims administration process. Class notice was provided in statewide newspaper publications, in-sore
postings at all Linens ‘N Things stores in California, and by posting notice on the internet.
F. Incentive A ward To Plaintiff Paid by Defendant - Not By The Class
Defendant also agreed to award the Plaintiff/Class Representative with an incentive award of $1,000. The award is made in
recognition of the substantial risk taken by Plaintiff in representing the class and the benefits conferred on class members.
The award is also made to compensate Plaintiff for her active involvement in the case, and the potential financial risks to
which she was exposed had she been unsuccessful in the action.
G. Attorneys’ Fees and Costs Paid by Defendant - Not By The Class
At the conclusion of the mediation with Judge Infante, Judge Infante opined that based upon the work involved in the
investigation and successful prosecution of the case and the results achieved for the benefit of California consumers weighed
against the risk involved to Ms. Peterman and the class in further litigation class counsel was entitled to a fee and cots award
of 140,000. Judge Infante believed this fee and coats award represent a fair and commensurate amount in view of the nature
of the suit, the amount of effort involved, the skill shown by experienced class counsel, the work involved in prosecuting this
matter, and the excellent results obtained by class counsel. (Infante Decl., Exhibit 1.) Linens ‘N Thins concurred with the
mediator’s findings and agreed to pay this amount separate and apart from the benefits awarded to the class.
The fee and costs award preliminarily approved by this Court is reasonable and appropriate, especially in light of the fact that
class counsel negotiated a class wide settlement that requires Defendants to stop the statewide practice challenged in the
action and provides a potential benefit to the Class of up to $36,000,000.
1. The Amount Of Fees Accurately Reflects Class Counsel’s Lodestar With A Modest Multiplier
a. The Lodestar
In assessing fees, the Court begins with a “lodestar” figure based on the compilation of the time spent and reasonable hourly
174
compensation of each attorney involved in the presentation of the case. (Ketchum v. Moses (200 ) 24 Cal.4th 1122, 1131-32;
Serrano v. Priest (1977) 20 Cal.3d 25, 48.)
Pursuant to the contemporaneous time records maintained by class counsel, Neil B. Fineman of Fineman & Associates, Mr.
Fineman will have expended 196 hours on the investigation and prosecution of this action by the lime Defendant’s
compliance with the settlement has been finally determined. (Fineman Decl., ¶ 9, attached as Exhibit 2.) Mr. Fineman’s rate
for complex class action litigation is $375 per hour.3 (Fineman Decl., ¶ 12, Exhibit 2.)
3
Mr. Fineman’s 2007 hourly rate was recently approved by Judge Michael M. Anello (Department 29) of the San Diego Superior
Court, North County. Mr. Fineman’s 2005 hourly rate of $345 was approved in various complex consumer actions in San Diego
Superior Court by Judge Patricia A. Y. Cowen (Department 67); Judge Luis R. Vargas (Department 63); and Judge Lisa
Guy-Schall (Department 31).
b. The Multiplier
Once the lodestar is calculated, it may be enhanced with a multiplier. (Wershba v. Apple Computer, Inc. (2001) 91
Cal.App.4th 224, 254.) The objective of any multiplier is to provide lawyers involved in public interest litigation with a
financial incentive. (Ketchum, supra, 24 Cal.4th at 1123; see also, Press v. Lucky Sores, Inc. (1983) 34 Cal.3d 311, 322
[Purpose of multiplier is to “reflect the broad impact of the results obtained and to compensate for the high quality of work
performed and the contingencies involved in undertaking this litigation”].) “If this ‘bonus’ methodology did not exist, very
few lawyers could cake on the presentation of a class client given the investment of substantial time, effort, and money,
especially in light of the risks of recovering nothing.” (Chemical Bank v. City f Seattle (9th Cir., 1994) 19 F.3d 1291, 1300).
Only when courts properly compensate experienced and able counsel for successful results, such as the settlement obtained
here, can they assure the continuing effectiveness of the remedies available through class actions. To accomplish this
objective, the fee award must be large enough “to entice counsel to undertake difficult public interest cases.” (San
Bernardino Valley Audubon Society v. County of San Bernardino (1984) 155 Cal.App.3d 738, 755.)
A positive multiplier is applied to the lodestar to take into account a variety of factors, including (1) the novelty and difficulty
of the questions involved; (2) the skill displayed and the results achieved; and (3) the contingent nature of the fee award.
(Ketchum, supra, 24 Cal.4th at 1132.)
i. The Novelty and Difficulty of the Questions Involved
Many of the issues involved in this action were highly technical in nature (e.g., the method and process of recording, storing,
and integrating customer information). Class counsel researched and reviewed numerous articles and “white papers”
discussing current information technology to better understand how customer information was being warehoused and
utilized. Further, class counsel retained expert consultants in marketing, consumer behavior, and consumer privacy interests
to assist in the investigation and successful prosecution of this action.
More significantly, the parties recognized that whether the subject forms violate Civil Code section 1747.08(a)(3) is a legal
issue that has never been determined by any of the California Courts of Appeal, thereby making the claims in this action very
novel.
ii. The Skills Displayed By Class Counsel And The Exceptional Results Obtained By Class Counsel
“California courts often use the amount at stake, and the result obtained by counsel as relevant factors justifying
enhancement of a lodestar fee through use of a multiplier.” (Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19,
45, emphasis added.)
175
As a direct result of class counsel’s efforts, counsel was able to obtain certification of a class of approximately 800,000
members, an enforceable agreement ending Defendant’s previous policies and practices of collecting personal identification
from class members, and an award of a discount voucher worth up to $45 to each class member.
iii. The Contingent Nature of the Fee Award Warrants an Enhanced Multiplier
Class counsel agreed to represent Plaintiff and the class on a contingency fee basis. Accordingly, class counsel bore all of the
risk, not only for the time in investigating and prosecuting this matter, but also the costs incurred. Given that there was
absolutely no guarantee of success, the contingent nature of this action indicates a positive multiplier is appropriate. in
Ketchum, supra, our Supreme Court ratified the application of positive multiplier to a lodestar to reflect the contingent nature
of cases such as the one at bar:
“Under our precedents, the unadorned lodestar reflects the general local hourly rate for a fee-bearing case; it does not include
any compensation for contingent risk, extraordinary skill, or any other factors a trial court may consider under Serrano III.
The adjustment to the lodestar figure, e.g., to provide a fee enhancement reflecting the risk chat the attorney will not receive
payment if the suit does not succeed, constitutes earned compensation; unlike a windfall, it is neither unexpected nor
fortuitous Rather, it is intended to approximate market. level compensation for such services, which typically includes a
premium for the risk of nonpayment or delay in payment of attorney fees. In this case, for example, the lodestar was
expressly based on the general local rate for legal services in a noncon??ingent matter, where a payment is certain regardless
of outcome.” (Ketchum, supra, 24 Cal.4th at 1138, original italics.)
Additionally, a multiplier is appropriate because counsel essentially “loaned” their legal services to Plaintiff and the class
from the time counsel began investigating and litigating the claims until counsel actually gets paid. This “loan of services” is
properly rewarded with a positive multiplier;
“ ‘The contingent fee compensates the lawyer not only for the legal services he renders but also for the loan of those services.
The implicit interest rate on such a loan is higher because the risk of default (the loss of the case, which cancels the debt of
the client to the lawyer) is much high than that of conventional loans.’ [Citation].” (Ketchum, supra, 24 Cal.4th at 1132-33.)
(See also, Serrano, supra, 20 Cal.3d at 49; and Downey Cares v. Downey Community Dev. Comm’n. (1987) 196 Cal.App.3d
983, 997 [Enhanced fees in contingent fee case recognize the delay in receipt of full payment of fees].)
iv. Additional Factors Justify Applying A Positive Multiplier
Class counsel secured a settlement of this action instead of engaging in additional years of protracted litigation through trial
and certain appeal. Accordingly, a positive multiplier is warranted. “Considering that our Supreme Court has placed an
extraordinarily high value on settlement, it would seem counsel should be rewarded, not punished, for helping to achieve that
goal.” (Lealao, supra, 82 Cal.App.4th at 52, citing Merola v. Atlantic Richfield Company (3d Cir. 1975) 515 F.2d 165, 168
[reward attorney who secures a substantial benefit for his clients with a minimum of time invested]; lowing v Pfizer, Inc.,
supra, 922 F.Supp. 1261, 1282-1283 [reward attorney in case settled ‘in swift and efficient fashion]; Arenson v. Board of
Trade of City of Chicago (N.D.Ill. 1974) 372 F.Supp. 1349, 1358 [awarding a fee four times the normal hourly rate on
ground that, if the case had not settled and gone to verdict, ‘there is no doubt that the number of hours of lawyers time
expended would be more than quadruple the number of hours expended to date’].)
2. The Modest Multiplier Of 1.9 Is Below the Average Range of Acceptable Multipliers in Class Action Litigation
The preliminarily approved amount of fees and costs to be paid by Defendant reflects class counsel’s lodestar and a
multiplier of 1.9. This multiplier is below the range of many other acceptable multipliers in California litigation. (See,
Wershba, supra, 91 Cal.App.4th at 255 [“Multipliers can range from 2 to 4 or even higher”].)
176
VI. THE SETTLEMENT REMAINS FAIR, ADEQUATE, AND REASONABLE
This Court has already determined that the settlement in this action is fair. reasonable, and adequate - and the class, having
had a sufficient opportunity to review the settlement - has agreed. The Court’s previous determination was supported by
ample case law identifying the factors necessary for a presumption of fairness: (1) the settlement was reached through
arm’s-length bargaining; (2) investigation and discovery were sufficient to allow counsel and the court to act intelligently; (3)
counsel is experienced in similar litigation; and (4) the percentage of objectors is small. (Wershba, supra. 91 Cal.App.4th at
245).
A. The Settlement Was The Resu?? of Arms-Length Bargaining
The parties negotiated each settlement tern that eventually formed the basis of the settlement agreement in good faith. Aside
from significant time spent on discovery, investigations, and research, a large bulk of the time incurred by class counsel in
litigating this case was spent on negotiating fair and reasonable settlement terms with defense counsel before, during, and
after the mediation of the case. All of the final settlement terms set forth in the settlement agreement were the byproduct of
those arm’s-length negotiations.
B. The Parties Engaged In Direct, Fact-Specific Discovery
Early in the litigation, the parties engaged in direct, fact-specific discovery in order to obtain essential facts and
documentation to evaluate liability and damages. Class counsel also performed their own independent research consisting of
exhaustive reviews of trade literature, web-based mailing list resellers civil dockets, and Defendant’s filings state and federal
authorities. Counsel also consulted with identity theft expert, third-party information brokers, and direct and target marketing
firms.
Class counsel reviewed documents in response to discovery requests and independently produced documents. Through both
formal and informal discovery, research in relevant electronic databases, review of trade literature, expert consultations and
evaluation, and the able assistance of Judge Infante, the settling parties were sufficiently informed of the nature of the claims
and defenses to be in an ideal position to evaluate the proposed settlement for its fairness, adequacy, and reasonableness.
C. Class Counsel Is Very Experienced In Similar Litigation.
Class counsel, Neil B. Fineman of Fineman & Associates, is considered by many to be an expert on California’s
Song-Beverly Credit Card Act. Mr. Fineman was lead class counsel in the seminal credit card/privacy rights case, Florez v.
Linens ‘N Things, Inc. (2003) 108 Cal.App.4th 447, and he is the author of Protecting Consumer Privacy During Credit Card
Purchases, published in the Business Law News, a publication of the State Bar of California. Mr. Fineman exclusively
represents plaintiffs in consumer class actions asserting violations of many of California’s consumer protection statutes,
including the Consumers Legal Remedies Act and California’s Unfair Competition Law. He has served as sole class counsel
or as lead class counsel in approximately fifty certified class actions within the last twelve years most involving hundreds of
thousands of class members.
D. Not A Single Class Member Objected To The Proposed Settlement
Defendants fully complied with the Court’s Order requiring them to provide adequate notice of the proposed settlement of the
class action. The Defendants employed an experienced settlement administrator to carry out the task. The class notice in this
177
matter described this action and the proposed settlement, identified the benefits provided to the class pursuant to the
settlement, identified the amount of attorneys’ fees and costs that would be paid by Defendants under the settlement, and
provided detailed information on how a class member may object to the settlement or be excluded from the settlement.
After providing significant notice of the proposed settlement and giving the class sufficient opportunity to review the Court’s
file and all of the terms of the settlement agreement not a sing class member objected to the settlement.
VII. CONCLUSION
Based upon the foregoing, the parties believe the Court should grant final approval to the settlement of this class action. The
settlement is highly beneficial to the class and will efficiently, economically, and favorably resolve what would otherwise be
protected and expensive litigation. Further, not a single class member objected to the terms of the settlement or the negotiated
attorneys’ fees and costs award. Accordingly, the parties jointly request that the settlement be given final approval and a
Final Order and Judgment be entered by the Court.
Respectfully submitted,
Dated: June 14, 2007
FINEMAN & ASSOCIATES
By: <<signature>>
Neil B. Fineman
Class Counsel for Plaintiff, Catherine Peterman and the Class
DECLARATION OF NEIL B. FINEMAN
I, Neil B. Fineman, declare as follows:
1. I am an attorney duly licensed and admitted to the Bar of the State of California; the United States District Court for the
Central District of California; the United States Court of Appeals for the Ninth Circuit; and the Supreme Court of the United
States.
2. I am the attorney of record for Plaintiff and the class in this action. 1 have personal knowledge of the facts stated in this
declaration except as to those stated on information and belief, and if called as a witness I could and would testify
competently thereto.
THE SETTLEMENT IS FAIR ADEQUATE AND REASONABLE AND RECEIVED NO OBJECTIONS
3. I have been appointed class counsel in numerous complex class actions and I have been asked to review class action
settlements in cases in which I have not been involved as counsel.
4. It is my belief based upon my experience and skills that the settlement reached in this matter is fair, adequate and
reasonable to the class and the litigants. The settlement firs and foremost puts an end to Defendant’s practice of collecting
personal identification information from its customers, which will decrease the chances of identity theft, fraud, and
harassment, as identified by the Legislature when it drafted Civil Code section 1747.08. Additionally, the settlement offers up
to $36 million in saving to the approximately 800,000 class members trough a simple claims-made process.
178
5. The fairness of the settlement is also reflected by the fact that after the Court initially found the settlement to be fair,
reasonable, and adequate, not a single class member objected to the proposed settlement.
6. in addition to the fairness of the class benefits provided under the settlement to the settlement class, I believe my firm
provided efficient and skillful representation in the action, and helped to achieve a result that is fair, reasonable and adequate.
Therefore, I believe the fees and costs award preliminarily approved by this Court, are also fair and reasonable. Further, none
of the fees and costs incurred in the investigation and prosecution of this litigation were borne by the class; the fees and costs
are to be paid by Defendant separate and apart from settlement benefits available to the class.
GENERAL EXPERIENCE AND QUALIFICATIONS
7. in my practice I exclusively represent plaintiffs in consumer actions asserting violations of many of California’s consumer
protection statues, including the Consumers Legal
Remedies Act the Song-Beverly Credit Card Act; and the Unfair Competition Law. I have served as the sole class counsel or
as lead class counsel in approximately 50 certified class actions within the last twelve years, including the seminal 1747.08
case, Florez v. Linens ‘N Things Inc. (2003) 108 Cal.App.4th 447. I am also the author of Protecting Consumer Privacy
During Credit Card Purchases, published in the State Bar of California publication, Business Law News, volume 22, issue 3
(2003).
8. In the course of my career, I have been actively involved in a number of organizations seeking to promote the interests of
consumers and the general public, including: the National Association of Consumer Advocates (www.naca.net), a non-profit
corporation whose mission is to promote justice for all consumers and to serve as a voice for its members as well as
consumers in the ongoing struggle to curb unfair and abusive business practices; Consumer Attorneys of California
(www.caoc.net), a professional association for attorneys who represent plaintiffs/consumers who seek responsibility from
wrongdoers; and The Privacy Rights Clearinghouse in San Diego, California, (www.privacyrights.org), which has asked me
to render expert opinions on privacy rights matters of concern to their members and the general public, which I provide pro
bono. The Privacy Rights Clearinghouse is a nonprofit consumer organization with a two-part mission -- consumer
information and consumer advocacy.
ATTORNEYS’ FEES AND COSTS
9. My law office’s time and expense computations are as follows: 176 billable hours expended on the case from inception,
and I expect to spend another 20 hours to conclude the action by (1) monitoring Defendant’s compliance with the settlement
over the following six to twelve months; (2) monitoring the claims administrator’s compliance over the following six months;
(3) resolving any disputes between the class and the Defendant or claims administrator and (4) addressing any other concerns
of he class members.
10. Below is a summary of the current billable hours incurred in my investigation and prosecution of this action:
Conferences, Meetings, Negotiations
33 hours
Legal Research and Review
35 hours
Draft/Review Memos, Briefs, Agreements
46 hours
Discovery, Investigations; Leg. Review
34 hours
179
Hearings Settlement Review, Travel, Prep
13 hours
Necessary Miscellaneous
15 hours
Conclusion (Estimate)
20 hours
11. I record my time into an electronic timekeeping system on a daily basis in six minute increments. [have reviewed all of
the time charges, exercised billing judgment and have concluded hat all of the remaining entries are reasonable and
appropriate, While I understand that “[i]n California, an attorney need not submit contemporaneous time records in order to
recover attorneys fees,” and “[t]estimony of an attorney as to the number of hours worked on a particular case is sufficient,
(Martino v. Denevi (1986) 182 Cal.App.3d 553, 559), should the Court request it, I will submit to the Court printouts of my
detailed time records for in camera review.
12. While I believe that each of my time entries accurately reflects the reasonable time spent on each particular matter, in
exercising my “billing judgment” I reduced my time entries depending upon the task performed, the expertise necessary to
complete the task, and duplications in effort and work, and omitted those hours from the lodestar calculation.
13. At present, my professional rate for consumer class action litigation is $375.00 per hour. This hourly rate is based upon a
review of the current market rate for experienced Southern California attorneys practicing in the specialized field of complex
consumer class action litigation. This rate is within the range of those charged by attorneys of similar experience and skill in
this field of law and locality. My hourly rate was most recently approved in March of this year by Judge Michael M. Anello,
Department 29 of the San Diego Superior Court. My 2005 hourly rate of $345 was approved in various complex consumer
actions filed in San Diego Superior Court by Judge Patricia A. Y. Cowen (Department 67); Judge Luis R. Vargas
(Department 63); and Judge Lisa Guy-Schall (Department 31).
14. There are very few attorneys in California who exclusively concentrate in representing plaintiffs in consumer class
actions. This is due in part to the specialized and complex nature of the statutory law applicable to such claims and partly due
to the fact that consumers are rarely able to afford to pay counsel to perform those services. Given the contingent nature of
the practice, few lawyers are attracted to consumer cases, and even fewer succeed in this type of practice. Consumer class
actions are not “simple,” and the potential for loss is substantial given the extraordinary resources of state and local
governme??s, corporations, and trade organizations and the efforts that they undertake to avoid liability in these types of
actions.
15. Pursuant to the agreement with my client, payment of services and costs were completely contingent upon the outcome of
this litigation - if Plaintiff and the Class prevailed, our firm would negotiate the payment of foes with the opposing party or
seek a judicial determination of the fees plus any multiplier or percentage of a fund the Court may award. We would also
seek the costs Plaintiff and the Class have incurred in the investigation and prosecution this action.
16. Pursuant to the preliminarily approved settlement agreement, Defendant agreed to compensate Plaintiff and the Class for
their fees and costs in the amount of $140,000. The amount of attorneys’ fees and costs will be paid by Defendants separate
and apart from the class relief and will not reduce the class relief in any respect. The amount of attorneys’ fees reflects class
counsel’s lodestar incurred in the investigation and successful prosecution of the two actions and a very modest multiplier of
approximately 1.9.
I declare under penalty of perjury under the law of the State of California that the foregoing is true and correct.
Executed on June 4, 2007, at Santa Ana, California.
180
<<signature>>
Neil B. Fineman
End of Document
181
Defendants’ Memorandum of Points and Authorities in Support of
Their Federal Rule of Civil Procedure 12(b)(6) Motion to Dismiss
First Amended Complaint
Wallace LUMBER and Hardware, Inc., a California corporation, Plaintiff, v. COUNTY OF SAN DIEGO; Nancy
Boyce, and Does 1 through 100, inclusive, Defendants. | United States District Court, S.D. California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
Wallace LUMBER and Hardware, Inc., a California..., 2006 WL 4016085...
2006 WL 4016085 (S.D.Cal.) (Trial Motion, Memorandum and Affidavit)
Wallace LUMBER and Hardware, Inc., a California corporation, Plaintiff,
v.
COUNTY OF SAN DIEGO; Nancy Boyce, and Does 1 through 100, inclusive, Defendants.
No. 06 CV 2067 LAB POR.
December 7, 2006.
Defendants’ Memorandum of Points and Authorities in Support of Their Federal Rule of Civil Procedure 12(b)(6)
Motion to Dismiss First Amended Complaint
John J. Sansone, County Counsel, County of San Diego, By Thomas D. Bunton, Senior Deputy (State Bar No. 193560), 1600
Pacific Highway, Room 355, San Diego, California 92101, Telephone: (619) 531-6456, Attorneys for Defendants County of
San Diego and Nancy Boyce.
The Honorable Larry A. Bums.
Date: March 5, 2007
Time: 10:30 a.m.
Courtroom: 9 Second Floor
TOPICAL INDEX
TABLE OF AUTHORITIES ..........................................................................................................................................................
ii
I INTRODUCTION ...........................................................................................................................................................................
1
II FACTS/PROCEDURAL HISTORY ......................................................................................................................................
2
III PLAINTIFF’S CLAIMS CANNOT BE HEARD IN THIS COURT BECAUSE PLAINTIFF HAS NOT
BEEN DENIED “JUST COMPENSATION” IN STATE COURT .................................................................................
3
A. Plaintiff’s Due Process Claim Also Fails .............................................................................................................................
5
IV PLAINTIFF’S SECTION 1983 CLAIMS CANNOT BE BASED ON A VIOLATION OF STATE
LAW .......................................................................................................................................................................................................
7
V PUNITIVE DAMAGES CANNOT BE AWARDED AGAINST THE COUNTY FOR VIOLATING
SECTION 1983 ...................................................................................................................................................................................
8
VI CONCLUSION .............................................................................................................................................................................
8
CASES
Anderson v. Warner, 451 F.3d 1063 (9th Cir. 2006) ........................................................................
4
183
Armendariz v. Penman, 75 F.3d 1311 (9th Cir. 1995) .....................................................................
6
Gillette v. Delmore, 979 F. 2d 1342 (9th Cir. 1992) ........................................................................
5-6
Hacienda Valley Mobile Estates v. City of Morgan Hill, 353 F. 3d 651 (9th Cir. 2 003 ) ..
4
Macri v. King County, 126 F.3d 1125 (9th Cir. 1997) ....................................................................
4, 5, 6
Monell v. New York City Dept. of Social Services, 436 U.S. 658 (1978) ..................................
5
Newport v. Facts Concerts, Inc., 453 U.S. 247 (1981) ....................................................................
8
San Remo Hotel v. City & County of San Francisco, 145 F.3d 1095 (9th Cir. 1998) ..........
4
Squaw Valley Development Co. v. Goldberg, 375 F.3d 936 (9th Cir. 2004) ...........................
6
Williamson Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985) ...........................
3, 4, 5
Ybarra v. Bastian, 647 F.2d 891 (9th Cir. 1981) ...............................................................................
8
STATUTES
California Code of Civil Procedure
section 1255.010 ...........................................................................................................................................
2
section 1255.030(a) ......................................................................................................................................
7
section 1255.410 ...........................................................................................................................................
2
section 1255.420 ...........................................................................................................................................
7
section 1255.430 ...........................................................................................................................................
7
section 1255.450 ...........................................................................................................................................
7
California Constitution
article I, section 19 .......................................................................................................................................
2
Federal Rule of Civil Procedure 12(b)(6) ............................................................................................
1
United States Code title 42, section 1983 ............................................................................................
passim
United States Constitution Fifth Amendment .....................................................................................
2
Defendants County of San Diego and Nancy Boyce (collectively the “County”) submit the following memorandum of points
and authorities in support of their Federal Rule of Civil Procedure 12(b)(6) motion to dismiss plaintiff Wallace Lumber &
Hardware, Inc.’s First Amended Complaint for failure to state a claim upon which relief may be granted.
I.
184
INTRODUCTION
Plaintiff’s First Amended Complaint is frivolous. Plaintiff’s 42 U.S.C. section 1983 claims are based on its contention that it
has been denied “just compensation” for the taking of its property in violation of the Takings Clause of the Fifth Amendment.
However, plaintiff does not allege -- because it cannot -- that it has sought and been denied just compensation in California
state court. Under controlling Supreme Court and Ninth Circuit precedent, plaintiff’s failure to have first sought and been
denied just compensation in state court is fatal to its federal law claims.
Moreover, to the extent plaintiff alleges that the County violated plaintiff’s substantive due process rights, that claim is also
fatally defective. The Ninth Circuit has held that a plaintiff cannot escape the exhaustion of state court remedies requirement
by alleging a substantive due process claim. Since plaintiff’s claim arises out of its right to just compensation for the taking
of its property, that claim is governed by the Takings Clause of the Fifth Amendment.
Plaintiff’s Section 1983 claims are also based on alleged violations of the California Constitution and California statutes. It is
well-established, however, that violations of state law cannot be the basis for a Section 1983 claim. Plaintiff’s First Amended
Complaint should be dismissed for this additional reason.
Plaintiff also requests punitive damages against the County for allegedly violating Section 1983. However, the Supreme
Court has held that punitive damages may not be awarded against municipalities for Section 1983 violations.
II.
FACTS/PROCEDURAL HISTORY
Erwin O. Jones and Walter E. Wallace own property, as tenants in common, in unincorporated San Diego County. (First
Amended Complaint (“FAC”), at ¶ 6.) The property is located at 27455 Valley Center Road, Valley Center, California (the
“Property”). (Id.) Plaintiff Wallace Lumber & Hardware, Inc. leases the Property from Messrs. Jones and Wallace. (Id. at ¶
8.) Plaintiff operates a lumber yard and hardware store on the Property. (Id.)
The County has commenced eminent domain proceedings in San Diego County Superior Court to acquire a portion of the
Property for the widening of Valley Center Road. (Id. at ¶ 10.) The County filed an eminent domain lawsuit against Messrs.
Jones and Wallace in San Diego County Superior Court on January 13, 2005. (Id.) The County did not name Wallace Lumber
& Hardware, Inc. as a defendant in the Superior Court lawsuit. (Id.)
On November 16, 2004, the County deposited with the Superior Court $83,700 as probable compensation for the Property.
(Id. at ¶ 10.) A public entity is authorized by California’s Eminent Domain Law to deposit probable compensation with the
court. Cal. Code Civ. Proc § 1255.010. On January 19, 2005, the County filed an Application for an Order of Possession of
the Property in the San Diego County Superior Court. (Id. at ¶ 11.) Under California law, a public entity may apply to the
Superior Court for an order giving that entity possession of property prior to the entry of judgment. Cal. Code Civ. Proc §
1255.410. On January 20, 2005, San Diego County Superior Court Judge Lisa Guy-Schall issued an order giving the County
possession of the portion of the Property needed for the County’s road widening project. (Complaint, at ¶ 12.)
On September 22, 2006, plaintiff filed this action against the County, alleging causes of action for (1) violation of the Fifth
Amendment to the United States Constitution, (2) violation of 42 U.S.C. § 1983, (3) violation of 42 U.S.C. § 1983 (Monell),
(4) violation of article I, section 19 of the California Constitution, (5) inverse condemnation and (6) trespass.
On October 13, 2006, the County filed a Motion to Dismiss plaintiff’s complaint. Also on October 13, 2006, the County
served a Motion for Sanctions on Donald W. Detisch, attorney for the plaintiff, requesting sanctions for the filing of a
frivolous complaint. On November 7, 2006, the County filed the Motion for Sanctions with this Court. The hearing on these
motions was scheduled for December 11, 2006.
185
Plaintiff’s opposition to the County’s Motion to Dismiss and Mr. Detisch’s opposition to the Motion for Sanctions were due
on November 27, 2006. No oppositions were filed to those motions. Instead, on November 27, 2006, plaintiff filed a First
Amended Complaint.
The First Amended Complaint alleges two causes of action: (1) violation of 42 U.S.C. § 1983, and (2) violation of 42 U.S.C.
§ 1983 (Monell).
III.
PLAINTIFF’S CLAIMS CANNOT BE HEARD IN THIS COURT BECAUSE PLAINTIFF HAS NOT BEEN
DENIED “JUST COMPENSATION” IN STATE COURT
Plaintiff’s causes of action seek “just compensation” for the County’s taking of its “property” under the Fifth Amendment to
the United States Constitution. However, under binding United States Supreme Court precedent, a takings claim cannot be
heard in federal court unless a plaintiff has first sought just compensation in state court and been denied that compensation.
Since plaintiff does not allege that it has sought and been denied just compensation in California state court, plaintiff’s First
Amended Complaint should be dismissed.
In Williamson Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court held that if a state allows a
takings claim or inverse condemnation claim to be brought in state court, the plaintiff must pursue his takings claim in the
state forum, rather than federal court:
[I]f a State provides an adequate procedure for seeking just compensation,1 the property owner cannot claim a violation of the
Just Compensation Clause until it has used the procedure and been denied just compensation.
1
California provides an adequate procedure for seeking just compensation. San Remo Hotel v. City & County of San Francisco, 145
F.3d 1095, 1102 (9th Cir.1998) (“California’s inverse condemnation procedures are adequate to address a ... takings claim.”)
(citation omitted).
Under Tennessee Law, a property owner may bring an inverse condemnation action to obtain just compensation for an
alleged taking of property under certain circumstances.... Respondent has not shown that the inverse condemnation procedure
is unavailable or inadequate, and until it has utilized that procedure, its taking claim is premature.
473 U.S. at 195-96. Macri v. King County, 126 F. 3d 1125, 1129 (9th Cir. 1997) (“The Fifth Amendment is not offended by
the government taking property, but only by the government taking property without just compensation. Thus, a Fifth
Amendment takings claim is not ripe until the plaintiff has been denied compensation by the state. If a state has an adequate
procedure for compensation, until this procedure has been exhausted and the plaintiff denied compensation, no taking has
occurred.”) (citation omitted) (emphasis added).
Plaintiff’s Fifth Amendment takings claims are brought pursuant to 42 U.S.C. section 1983, as they must be. Hacienda Valley
Mobile Estates v. City of Morgan Hill, 353 F. 3d 651, 655 (9th Cir. 2003) (“Taking claims must be brought under § 1983.”)
(citation omitted) “Section 1983 does not create any substantive rights, but is instead a vehicle by which plaintiffs can bring
federal constitutional and statutory challenges to actions by state and local officials.” Anderson v. Warner, 451 F.3d 1063,
1067 (9th Cir. 2006) (citation omitted). Both of the Section 1983 claims contained in First Amended Complaint are
predicated upon alleged violations of the Fifth Amendment’s Takings Clause. (First Amended Complaint, at ¶ 26, 31.)
Since Fifth Amendment takings claims can only be heard in federal court through Section 1983, Williamson County’s
ripeness requirement applies to Section 1983 claims that are predicated upon a violation of the Fifth Amendment’s Takings
Clause. Williamson County, 473 U.S. at 194 n.13 (“[B]ecause the Fifth Amendment proscribes takings without just
compensation, no constitutional violation occurs until just compensation has been denied. The nature of the constitutional
right therefore requires that a property owner utilize procedures for obtaining compensation before bringing a § 1983
186
action.”) (emphasis in original).
Further, the reference to Monell v. New York City Dept. of Social Services, 436 U.S. 658 (1978) in the second cause of action
does not eliminate the Williamson County ripeness requirement. “In Monell, the Supreme Court held that municipalities are
‘persons’ subject to damages liability under section 1983 where ‘action pursuant to official municipal policy of some nature
causes a constitutional tort.’ ” Gillette v. Delmore, 979 F. 2d 1342, 1346 (9th Cir. 1992) (quoting Monell, 436 U.S. at 691).
The predicate constitutional claim that is the basis of the second cause of action is an alleged violation of the Fifth
Amendment’s Takings Clause. (First Amended Complaint, at ¶ 29.) Thus, Williamson County’s ripeness requirement is
applicable.
Plaintiff does not allege in either of its causes of action -- because it cannot -- that it has sought just compensation in
California state court and been denied that compensation. Therefore, the First Amended Complaint should be dismissed,
without leave to amend.
A. Plaintiff’s Due Process Claim Also Fails.
Plaintiff asserts in its first cause of action that the County took “plaintiff’s property interest without just compensation and
without due process.” (Complaint, at ¶ 27.) Plaintiff has apparently attempted to state a claim for violation of its substantive
due process rights. Macri, 126 F. 3d at 1128 (“Appellants’ claims invoked the substantive protections of the Fourteenth
Amendment’s Due Process Clause (‘nor shall any State deprive any person of life, liberty, or property, without due process of
law’) ....”
In Macri, the Ninth Circuit held that a plaintiff cannot escape Williamson County’s exhaustion requirement by attempting to
state a claim under the Fifth Amendment’s substantive Due Process Clause. The Ninth Circuit held that “[w]hen an explicit
textual provision of the Constitution protects against the challenged government action, the claim must be analyzed under
that specific provision alone and not under the more general guarantee of substantive due process.” 126 F. 3d at 1128
(citation omitted). The court noted that the appellants’ complaint “alleges that King County violated their right to due process
and took their property without just compensation contrary to the Fourteenth and Fifth Amendments.” Id. at 1129. The Ninth
Circuit held that “[s]ince the Takings Clause provides an explicit source of constitutional protection against the challenged
governmental conduct, substantive due process has no place in this context.” Id. (citations and internal quotation marks
omitted). Accord Squaw Valley Dev. Co. v. Coldberg, 375 F.3d 936, 949 (9th Cir. 2004) (“[W]e have consistently precluded
substantive due process claims based on a deprivation of property addressed by the Takings Clause. The blanket prohibition
applies even to a disguised takings claim.”) (citation and internal quotation marks omitted); Armendariz v. Penman, 75 F.3d
1311, 1325-26 (9th Cir. 1995) (“Substantive due process analysis has no place in contexts already addressed by explicit
textual provisions of constitutional protection, regardless of whether the plaintiff’s potential claims under those amendments
have merit.”).
Because plaintiff’s substantive due process claim is based on a deprivation of property addressed by the Takings Clause,
plaintiff’s substantive due process claim should be dismissed.
Plaintiff does not allege that its procedural due process rights have been violated in the San Diego County Superior Court
eminent domain action filed by the County. Indeed, plaintiff admits that it is not yet a party to that action.2 (FAC, at ¶ 10.) To
the extent that plaintiff complains that the County improperly obtained an order of possession of the Property from the San
Diego Superior Court, there are several methods available under California’s Eminent Domain Law to obtain relief from an
order of possession. (Id., at ¶¶ 11, 26.) The property owner or the occupant of the property may seek relief from the order of
possession based upon substantial hardship. Cal. Code of Civ. Proc. § 1255.420. Further, if the property owner objects to the
government entity’s right to take the property, the court may stay the order of possession if the property owner has shown a
reasonable probability that it will prevail on its objection. Id. at § 1255.430. The court is also authorized to vacate an order of
possession if the order was obtained without satisfaction of all of the requirements of California law. Id. at § 1255.450.
2
The County has filed a motion to amend its complaint to add Wallace Lumber &
187
Hardware, Inc. as a defendant in the San Diego Superior Court eminent domain action it filed against Messrs. Jones and
Wallace. The hearing on the County’s motion is currently scheduled for December 15, 2006.
Plaintiff does not allege, because it cannot, that either it or Messrs. Wallace and
Jones utilized any of these procedural safeguards that protect against the erroneous issuance of an order of possession.
Having failed to avail themselves of these procedural safeguards, plaintiff cannot maintain a procedural due process claim in
this Court.
Plaintiff also complains that the amount initially deposited by the County into the
Superior Court as probable just compensation for the Property was too low. (Complaint, at ¶¶ 12, 14, 29.) However,
California’s Eminent Domain Law provides procedural safeguards available to property owners if they believe that the
government entity’s deposit is too low. Under California law, a property owner or “any party having an interest in the
property for which the deposit was made” may bring a motion seeking an increase in the amount of the deposit. Cal. Code
Civ. Proc § 1255.030(a). Plaintiff does not allege -- because it cannot -- that it brought a motion in the San Diego County
Superior Court seeking an increase in the amount deposited by the County. Having failed to avail itself of the procedural
protections available under California law, plaintiff has no viable claim that its procedural due process rights have been
violated by the County.
For these reasons, plaintiffs First Amended Complaint should be dismissed, without leave to amend.
IV.
PLAINTIFF’S SECTION 1983 CLAIMS CANNOT BE BASED ON A VIOLATION OF STATE LAW
Plaintiff’s section 1983 claims appear to be based on alleged violations of the California Constitution and California state
law. (FAC, at ¶ 18, 20, 21, 22, 26). This is clearly improper. It is well established that “Section 1983 protects against the
‘deprivation of any rights, privileges, or immunities secured by the Constitution and laws.’ Only federal rights, privileges, or
immunities are protected by the section. Violations of state law alone are insufficient.” Ybarra v. Bastian, 647 F.2d 891, 892
(9th Cir. 1981) (emphasis added). Therefore, alleged violations of the California Constitution or California state law cannot
be the basis for plaintiff’s Section 1983 claims and those claims should be dismissed for this additional reason.
V.
PUNITIVE DAMAGES CANNOT BE AWARDED AGAINST THE COUNTY FOR VIOLATING SECTION 1983
Plaintiff has requested punitive damages against the County under Section 1983. (Payer For Relief, Second Cause of Action,
at ¶ 4). The Supreme Court has held that punitive damages cannot be imposed against municipalities under Section 1983.
Newport v. Facts Concerts, Inc., 453 U.S. 247, 271 (1981) ( “we hold that a municipality is immune from punitive
damages”). Therefore, this requested relief should be dismissed for this additional reason.
VI.
CONCLUSION
For all of the foregoing reasons, the County’s Motion to Dismiss should be granted in its entirety, without leave to amend.
188
DATED:
JOHN J. SANSONE, County Counsel
By
THOMAS D. BUNTON, Senior Deputy
Attorneys for Defendants County of San Diego and Nancy Boyce
End of Document
189
First Amended Complaint Request for Jury
WALLACE LUMBER AND HARDWARE, INC., a California corporation, Plaintiff, v. COUNTY OF SAN DIEGO,
Nancy Boyce, and Does 1 through 100, inclusive, Defendants. | United States District Court, S.D. California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
WALLACE LUMBER AND HARDWARE, INC., a California..., 2006 WL 4805865...
2006 WL 4805865 (S.D.Cal.) (Trial Pleading)
WALLACE LUMBER AND HARDWARE, INC., a California corporation, Plaintiff,
v.
COUNTY OF SAN DIEGO, Nancy Boyce, and Does 1 through 100, inclusive, Defendants.
No. 06CV 2067 LAB POR.
November 27, 2006.
First Amended Complaint Request for Jury
Donald W. Detisch, Esq. (Bar No. 47675), Law Offices of Don Detisch, 110 West “A” Street, Suite 750, San Diego,
California 92101, Telephone (619) 515-1140, Facsimile (619) 235-9100, Attorneys for Plaintiff Wallace Lumber and
Hardware, Inc.
Plaintiff, WALLACE LUMBER AND HARDWARD, INC., alleges as follows:
I.
GENERAL ALLEGATIONS
1. Plaintiff, WALLACE LUMBER AND HARDWARE, INC., (“PLAINTIFF”) is, and at all relevant times mentioned
herein, was a California corporation duly organized and operating under the laws of the State of California.
2. PLAINTIFF is informed and believes and thereon alleges that Defendant, COUNTY OF SAN DIEGO (“COUNTY”) is,
and, at all relevant times mentioned herein, was a political subdivision of the State of California, created and existing under
the laws of California.
3. PLAINTIFF is informed and believes and thereon alleges that Defendant, NANCY BOYCE (“BOYCE”) is, and, at all
relevant times mentioned herein, was a Real Property Agent for the County of San Diego, Department of General Services,
Real Estate Services Division, and was A COUNTY real property agent charged with acquiring the Property for
improvement and construction of the Valley Center Road Improvement Project.
4. PLAINTIFF is unaware of the true names and capacities of DEFENDANTS DOES 1 through 100, inclusive. PLAINTIFF
is informed and believes and thereon alleges that each fictitiously named DEFENDANT was in some way responsible for the
matters and things complained of herein. When the exact nature and identity of each fictitious DEFENDANT’s responsibility
for matters and things herein alleged is ascertained by PLAINTIFF, PLAINTIFF will seek leave to amend this Complaint and
all proceedings herein to set forth the same.
5. Jurisdiction is proper in this Court pursuant to the United States Constitution, Article III, Section 2 and pursuant to 28
U.S.C. section 1331.
II. STATEMENT OF CASE
6. Walter E. Wallace and Erwin O. Jones, as tenants in common, own certain property in unincorporated San Diego County,
California, that is identified by a physical address of 27455 Valley Center Road, Valley Center, California (hereafter referred
to as the “Property”). The Property includes two parcels of land identified as Parcel Numbers 2000-089-A and 2000-089-B.
191
7. PLAINTIFF is owned and controlled by Erwin O. Jones and Walter E. Wallace, each of whom own fifty percent of
PLAINTIFF’s stock. Erwin O. Jones is the President of PLAINTIFF and the paid manager of PLAINTIFF’s retail business
on the Property. Walter E. Wallace is the Vice-President of PLAINTIFF.
8. PLAINTIFF’s sole business is a retail lumber and hardware store that has a contractual relationship with ACE Hardware.
PLAINTIFF and/or its predecessors in interest has continuously been located on and fully occupying the Property as sole
tenant for over fifty years. PLAINTIFF currently occupies the Property as a hold-over tenant pursuant a one-year commercial
lease the original term of which was from February 1, 2001, to February 1, 2002. PLAINTIFF has every reasonable
expectation that it will continue to occupy the Property as a legal business tenant for the foreseeable future.
9. Until the actions by Defendants COUNTY, BOYCE, and Does 1 through 100, inclusive, that are the subject of this
Complaint, PLAINTIFF had on the Property a 2,892 square foot retail lumber and hardware store fronted on Valley Center
Road, a primary arterial road in the northern portion of San Diego County; a 1,107 square foot Manager’s Office and Shop;
two enclosed Product Storage Structure totaling 3,808 square feet; four Lumber Storage Structures covering 2,904 square
feet; open yard storage covering 30,029 square feet, approximately 16 parking spaces parallel to Valley Center Road that
accommodated the pick-up trucks of contractor customers; and perimeter concrete block and chain link fencing.
10. In 2004, COUNTY commenced action to take, by its power of eminent domain, 300 lineal feet of the Property for the
widening of Valley Center Road and for a roadway easement (4,180 square feet). On October 27, 2004, at a regularly
scheduled meeting of the San Diego County Board of Supervisors, the Board of Supervisors passed and adopted a Resolution
declaring that the public interests and necessity required the acquisition and taking of the interest in and of certain real
properties for the acquisition and construction of the COUNTY’s Valley Center Road Improvement Project (“Resolution of
Necessity”). On November 16, 2004, COUNTY deposited $83,700 as supposed probable compensation for the COUNTY’s
eminent domain action against the Property. On January 13, 2005 (approximately two months later), COUNTY, in the
furtherance of the Resolution of Necessity, filed a Complaint in Eminent Domain in San Diego County Superior Court, Case
Number GIN041748, against the Property (“Complaint”). COUNTY’s Complaint named as defendants Walter E. Wallace;
Erwin O. Jones; Valley Center Municipal Water District; and Does 1 through 100, inclusive, but did not name PLAINTIFF as
a Defendant.
11. On January 19, 2005, COUNTY filed with the California Superior Court an Application for Order of Possession of the
Property identified in its Complaint. COUNTY’s Memorandum of Points and Authorities in Support of Application for Order
of Possession was supported by the sworn Declaration of Defendant BOYCE. Paragraph 7 of the BOYCE declaration stated:
“That Plaintiff requires the immediate possession and use of said Property in order to timely improve and construct the
Valley Center Road Improvement Project, and possession by Plaintiff will not displace or unreasonably affect any person in
actual or lawful possession of the [p]roperty” (“Declaration”)(underlining added).
12. At no time did COUNTY deposit any monies for the anticipated damage or loss to Plaintiff’s business and/or real
property interests.
13. On January 20, 2005, California Superior Court Judge Lisa Guy-Schall, in reliance on the BOYCE Declaration, signed
the Order For Possession of the Property with a Date of Possession To Be Taken of April 20, 2005.
14. On numerous occasions prior to January 19, 2005, Erwin O. Jones, as PLAINTIFF’S President and manager of
PLAINTIFF’s retail lumber and hardware business, advised various COUNTY agents, including Defendant BOYCE, that the
eminent domain action against the Property would have a significant, adverse impact on PLAINTIFF’s business and would
require expenditures well in excess of one hundred thousand dollars to cure the damages to PLAINTIFF’s leasehold property
interest and to PLAINTIFF’S business that would result from COUNTY’s condemnation action against the Property.
15. As a result of eminent domain actions by COUNTY, BOYCE, and Defendants Does 1 through 100, inclusive,
PLAINTIFF has had to reorient the store ninety degrees, replace parking, demolish certain storage structures, replace lost
lumber storage, and replace lost product storage at a cost that far exceeded the COUNTY’s $83,700 deposit that the
COUNTY used to persuade the Court to order an immediate taking of the property.
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16. In order to meet the unbudgeted expenses required to reorient the store, replace parking, demolish and storage structures,
PLAINTIFF for the first time in its corporate life was forced to take out loans and establish lines of credit in amounts that
now exceed $100,000.
17. The United States Constitution, Amendment 5, prohibits government from taking private property without just
compensation.
18. The United States Constitution, Amendment 14, prohibits state and local government action that deprives individuals of
property rights without due process.
19. The California Constitution, Article 1, section 19, prohibits the taking of private property without just compensation.
20. Under California law, leaseholders of property taken by eminent domain have a right to just compensation for severance
damages to the remainder property.
21. Under California law, owners of businesses on property subject to eminent domain actions are entitled to compensation
for damages to goodwill and can maintain inverse condemnation actions against the Government. (CHHOUR v. Community
Redev. Agency (1996) 46 Cal.App.4th 273.)
22. Defendant BOYCE and Defendants Does 1 through 100, inclusive, aided and assisted COUNTY’s taking of the Property.
COUNTY’s taking of the Property, damaged the value of the Wallace/Jones’ remainder property, required PLAINTIFF to
expend monies to mitigate the damage to the remainder of its Property, and damaged PLAINTIFF’s long-standing leasehold
rights, and reduced the value of PLAINTIFF’s business and business goodwill, in violation of the Fifth and Fourteenth
Amendments of the United States Constitution; and California Constitution Art. I, Section 19.
23. Actions by COUNTY, Defendant BOYCE, and Defendants Does 1 through 100, inclusive, have deprived PLAINTIFF of
property interests in a manner contrary to the California Constitution and without due process, in violation of the Fifth and
Fourteenth Amendments to the United States Constitution.
III.
FIRST CAUSE OF ACTION 42 U.S.C. §1983 AGAINST DEFENDANT BOYCE AND DOES 1 THROUGH 100
24. PLAINTIFF incorporates and realleges paragraphs 1 through 23 as though fully set forth herein.
25. At all times relevant to this Complaint, PLAINTIFF was in actual and lawful possession of the Property including its
business and business goodwill.
26. The Declaration by Defendant BOYCE that “possession by Plaintiff will not displace or unreasonably affect any person
in actual or lawful possession of the [p]roperty” was made under the color of authority in BOYCE’s capacity as a COUNTY
real estate agent. The Declaration was false, was made by BOYCE with the knowledge that the declaration was false, and/or
was made in reckless disregard of the truth, and resulted in the taking of PLAINTIFF’s property interests without just
compensation. Said taking was in violation of the United States Constitution, the California Constitution, and California law.
27. The actions by Defendants BOYCE and Does 1 through 100, inclusive, were a taking of PLAINTIFF’s property interest
without just compensation and without due process. Said taking violated PLAINTIFF’s civil rights under the Fifth and
Fourteenth Amendments of the United States Constitution.
IV.
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SECOND CAUSE OF ACTION 42 U.S.C. §1983 (MONELL) AGAINST DEFENDANT COUNTY
28. PLAINTIFF incorporates and realleges paragraphs 1 through 27 as though fully set forth herein.
29. On information and belief, PLAINTIFF alleges that COUNTY in eminent domain proceedings involving private
properties for the Valley Center Road Improvement Project, and operating through its employees or agents, has a habit and/or
pattern of practice of depositing as just compensation pursuant to California Code of Civil Procedure sections 1255.010 1255.080 an amount significantly below the actual just compensation for the property being condemned. Making the deposit
provides the COUNTY with two significant advantages under California law. The deposit freezes the date of valuation and
allows the COUNTY to secure a Court order allowing COUNTY to take immediate possession. When the property owner
contests the eminent domain action, the COUNTY’s practice is to, on the eve of trial and with the knowledge that
COUNTY’s low-ball initial deposit will not be introduced as evidence at trial, increases its deposit to an arguably reasonable
measure of just compensation. Taking immediate possession in the absence of a deposit that bears a reasonable relationship
to the actual just compensation associated with the taking is a violation of the Fifth and Fourteenth Amendments of the
United States Constitution.
30. In addition thereto, PLAINTIFF is informed and believes and thereon alleges that COUNTY has a habit and/or practice
of not depositing any monies for loss of business goodwill and/or damage to businesses it seeks to acquire through
condemnation.
31. On information and belief, PLAINTIFF alleges that COUNTY, through its employees and agents, has adopted the
practices specified in the preceding paragraph as a means of gaining bargaining advantage over property and business owners
by putting them in a position of financial hardship and requiring them to incur legal and expert services in order to obtain the
just compensation to which they have a Constitutional entitlement.
31. In regards to the Property, COUNTY, on the eve of the scheduled trial date and after PLAINTIFF incurred construction,
legal and expert expenses, increased its initial deposit from $83,700 to $217,785, an increase of 260 percent.
WHEREFORE, PLAINTIFF prays for judgment against DEFENDANTS, and each of them, as follows on each cause of
action:
ON THE FIRST CAUSE OF ACTION
1. For damages in an amount to be determined at trial according to the proof;
2. For recoverable engineering, appraisal, attorney, and other fees according to proof;
3. For costs of suit incurred in this action;
4. For attorney fees pursuant to California Code of Civil Procedure section 1021.5; and 42 U.S.C. § 1988;
5. For punitive damages;
6. For such other and further relief as the Court deems fit and proper.
ON THE SECOND CAUSE OF ACTION
1. For damages in an amount to be determined at trial according to the proof;
2. For costs of suit incurred in this action;
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3. For attorney fees pursuant to 42 U.S.C. section 1988 and/or California Code of Civil Procedure section 1021.5;
4. For punitive damages in an amount sufficient to deter similar conduct by Defendants or similarly situated individuals.
5. For such other and further relief as the Court deems fit and proper.
Dated: Nov. 27, 2006
LAW OFFICES OF DON DETISCH
By: <<signature>>
DONALD W. DETISCH,
Attorney for Plaintiff Wallace Lumber and Hardware, Inc.
End of Document
195
Defendant Coats Enterprise Inc.’s Answer to Plaintiffs’ Second
Amended Complaint
Martha UMMEL, an individual, and Vernon Ummel, an individual, Plaintiffs, v. LAST DANCE, INC.; Coats
Enterprise, Inc.; Michael Little, an individual: Re/Max Inc.; John Contento, SRO, a sole proprietor; and Does 1
through 50, Defendants. | Superior Court of California.
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Martha UMMEL, an individual, and Vernon Ummel, an..., 2006 WL 5358968...
2006 WL 5358968 (Cal.Superior) (Trial Pleading)
North County Division
San Diego County
Martha UMMEL, an individual, and Vernon Ummel, an individual, Plaintiffs,
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little, an individual: Re/Max Inc.; John Contento, SRO, a
sole proprietor; and Does 1 through 50, Defendants.
No. GIN 054088.
November 16, 2006.
Defendant Coats Enterprise Inc.’s Answer to Plaintiffs’ Second Amended Complaint
Joseph L. Stine, Attorney at Law. CA Bar No. 86544, Law Office of Joseph L. Stine, 380 South Melrose Drive, #306, Vista,
CA 92081, (760) 643-4150 Fax: (760) 643-4160, Attorney for Defendant Coats Enterprise Inc.
Judge: Hon. Lisa Guy-Schall.
Action Filed: July 19, 2006
Dept.: 31
Defendant COATS ENTERPRISE, INC. answers Plaintiffs’ Second Amended Complaint as follows:
1. Pursuant to Code of Civ. Proc. §431.30(d), this answering Defendant generally and specifically denies each and every
allegation in Plaintiffs’ unverified Second Amended Complaint and further denies that Plaintiffs have been damaged in the
amount alleged or in any amount.
AFFIRMATIVE DEFENSES
FIRST AFFIRMATIVE DEFENSE
2. The Second Amended Complaint, and each and every purported cause of action alleged therein, fails to state facts
sufficient to constitute a cause of action against this answering Defendant.
SECOND AFFIRMATIVE DEFENSE
3. The representations allegedly made by Defendant MICHAEL LITTLE, if they were made in fact as alleged in the Second
Amended Complaint, were not made in his capacity as an agent or representative of this answering Defendant and,
accordingly, can not be the basis for any liability as against this answering Defendant.
THIRD AFFIRMATIVE DEFENSE
4. Plaintiffs fail to adequately differentiate and distinguish between the alleged actions, representations, or omissions of
197
Defendant MICHAEL LITTLE as a real estate agent working for Defendant LAST DANCE INC. aka RE/MAX Associates
and his alleged actions, representations, and omissions as a mortgage loan agent working for this answering Defendant aka
Horizon Pacific Financial so as to permit this answering Defendant to determine each and every defense this it may have as
the Second Amended Complaint and otherwise respond to the pleading. Accordingly, this answering Defendant reserves its
right to assert additional defenses which it may discover or become relevant when Plaintiffs’ claims are further refined and
clarified in the course of this litigation.
FOURTH AFFIRMATIVE DEFENSE
5. Plaintiffs fail to allege facts sufficient to satisfy the conditions precedent to be entitled to a copy of the appraisal that is the
subject 15 their pleadings and, accordingly, this answering Defendant had no duty to provide Plaintiffs with such a copy and
can suffer no liability for any alleged delay in responding to Plaintiffs’ verbal requests for the document.
FIFTH AFFIRMATIVE DEFENSE
6. Cal Bus. & Prof. Code §11423(b) establishes the legal timetable for any obligation of this answering Defendant to supply
Plaintiffs with a copy of an appraisal report on request. Plaintiffs have failed to allege facts that, if proven, establish that this
answering Defendant had a duty to provide Plaintiffs with a copy of the subject appraisal on or before the alleged date in
which Plaintiffs consummated the purchase of the property at 1657 Amante Court, Carlsbad, California.
SIXTH AFFIRMATIVE DEFENSE
7. Plaintiffs, in agreeing to consummate the purchase of the property at 1657 Amante Court, Carlsbad, California, voluntarily
and independently assumed the risk of any alleged overpayment of the purchase price and, as such, can not impose liability
on this answering Defendant as a mortgage broker having no role in the negotiation of such price and providing no advice to
Plaintiffs in their decision to consummate the purchase at that price.
SEVENTH AFFIRMATIVE DEFENSE
8. Assuming arguendo the truth of allege d actions and omissions of Defendant MICHAEL LITTLE, such actions and
omissions were not expressly authorized or approved by this answering Defendant so as to make it vicariously liable as a
mortgage broker with no involvement in negotiating the purchase price or conducting an appraisal of the fair market value of
the property purchased at 1657 Amante Court, Carlsbad, California.
EIGHTH AFFIRMATIVE DEFENSE
9. The answering Defendant, as a mortgage broker, had no duty toward Plaintiffs in connection with the purchase price that
Plaintiffs agreed to pay for the property purchased at 1657 Amante Court, Carlsbad, California.
NINTH AFFIRMATIVE DEFENSE
10. Plaintiffs could not and did not reasonably rely on any alleged representations made by any agent of answering
Defendant, as a mortgage broker, in agreeing to pay the purchase price for the property purchased at 1657 Amante Court,
Carlsbad, California.
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TENTH AFFIRMATIVE DEFENSE
11. This answering Defendant is informed and believes and thereon alleges that any and all events and happenings alleged in
the Seconded Amended Complaint and any damages suffered thereby were proximately caused by the independent,
intervening, negligent, and unlawful conduct of independent third parties and/or their agents so as to bar Plaintiffs from
recovering any damages as against it.
ELEVENTH AFFIRMATIVE DEFENSE
12. This answering Defendant is informed and believes and thereon alleges that any and all events and happenings alleged in
the Second Amended Complaint and any damages suffered thereby were proximately caused by the negligence or actions of
third parties, named or unnamed, such that it is entitled to an apportionment in liability among such parties according to their
responsibility for any and all damages if any have been suffered by Plaintiffs.
TWELFTH AFFIRMATIVE DEFENSE
This answering Defendant is unable to fully respond to Plaintiffs’ Second Amended Complaint because Plaintiffs fail to
attach a copy of their Exhibit “A” as referenced in Paragraph 27 of their pleading.
THIRTEENTH AFFIRMATIVE DEFENSE
This answering Defendant’s actions and omissions, as alleged, were not the actual or proximate cause of any of damages
alleged by Plaintiffs.
FOURTEENTH AFFIRMATIVE DEFENSE
This answering Defendant is informed and believes and thereon alleges that Plaintiffs, and each of them, failed to exercise
reasonable efforts to avoid the alleged overpayment in the purchase of the property at 1657 Amante Court, Carlsbad,
California, and that such failure was the actual and proximate cause of the damages alleged in the Second Amended
Complaint so as to bar any recovery by Plaintiffs.
FIFTEENTH AFFIRMATIVE DEFENSE
Any loss, injury, or damages suffered by Plaintiffs were the direct and proximate result of the negligence, fraud, or other
tortious acts or omissions of Plaintiffs, and each of them, or their agents and representatives other than this answering
Defendant and the total amount of damages to which Plaintiffs are otherwise entitled should be reduced in direct proportion
to such tortious acts or omissions.
SIXTEENTH AFFIRMATIVE DEFENSE
This answering Defendant is informed and believes and thereon alleges that Plaintiffs, and each of them, inexcusably and
unreasonably delayed the commencement of this action to its prejudice so as to preclude any recovery by Plaintiffs pursuant
to the doctrine of laches.
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SEVENTEENTH AFFIRMATIVE DEFENSE
This answering Defendant is informed and believes and thereon alleges that Plaintiffs authorized and ratified its acts and
conduct by consummating the purchase of the property at 1657 Amante Court, Carlsbad, California at a purchase price
deemed acceptable to them.
EIGHTEENTH AFFIRMATIVE DEFENSE
Plaintiffs, and each of them, as buyers of residential real estate, breached their duty under Civil Code §2079.5 to exercise
reasonable care to protect themselves against payment of an alleged excessive price for the property at 1657 Amante Court,
Carlsbad, California, and such breach is the proximate cause of any loss, injury, or damages suffered by Plaintiffs.
WHEREFORE, this answering Defendant prays judgment as follows:
1. That Plaintiffs take nothing by virtue of their Second Amended Complaint as against this answering Defendant.
2. That Plaintiffs’ action be dismissed with prejudice as against this answering Defendant.
3. That any liability adjudged by this Court as against this answering Defendant be limited in proportion to the degree of fault
attributable to it.
3. That this answering Defendant be awarded costs of suit and attorney fees reasonably incurred in the defense of Plaintiffs’
action.
4. For such other and further relief as the Court may deem just and proper.
Dated: 11-16-06
LAW OFFICE OF JOSEPH L. STINE
<<signature>>
By Joseph L. Stine
Attorney for Defendant COATS ENTERPRISE INC.
End of Document
200
Answer (General Denial) of Defendants Last Dance, Inc. dba Re/Max
Associates and Michael Little to Plaintiffs’ Second Amended
Complaint
Enterprise, Inc.; Michael Little, an individual; Re/Max, Inc.; John Contento, SRO, a sole proprietor; and Does 1
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Client ID:
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Comment:
San Diego County
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little, an individual; Re/Max, Inc.; John Contento, SRO, a
No. GIN054088.
November 13, 2006.
Answer (General Denial) of Defendants Last Dance, Inc. dba Re/Max Associates and Michael Little to Plaintiffs’
Second Amended Complaint
Jacqueline A. Oliver, Esq. (SBN 201656), Jodi A. Konorti, Esq. (SBN 238734), Re/Max Associates, 5005 Texas Street, Suite
400, San Diego, CA 92108, Tel: (619) 542-2490, Fax:(619) 299-0468, Attorneys for Defendants Last Dance, Inc. dba
Re/Max Associates (erroneously sued and served as Last Dance, Inc. and Re/Max, Inc.) and Michael Little.
Dept. No.: 31
Defendant LAST DANCE, Inc., dba RE/MAX Associates (erroneously sued and served as Last Dance, Inc. and RE/MAX,
Inc.), and MICHAEL LITTLE, (collectively referred to as “RE/MAX”), for themselves and no other party, answer the
unverified Second Amended Complaint (“Complaint”) of plaintiffs MARTHA AND VERNON UMMEL (“UMMELS”) as
follows:
GENERAL DENIAL
1. Pursuant to section 431.30(d) of the Code of Civil Procedure, RE/MAX generally denies each and every allegation
contained in the Complaint, and the whole thereof. RE/MAX further denies that Plaintiff has been damaged in the amounts
alleged or in any other amount or amounts, or in any form, or at all, and further deny that Plaintiff is entitled to any relief
against RE/MAX and specifically denies that Plaintiff is entitled to any damages in any sum or sums whatsoever or at all.
(Failure To State A Cause of Action)
2. Plaintiff’s Complaint, and each and every cause of action set forth therein, fails to state facts sufficient to constitute a cause
or causes of action against RE/MAX.
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(Failure To Mitigate)
3. These answering Defendants are informed and believe and thereon allege that Plaintiff has failed to exercise reasonable
efforts and/or expense to avoid the consequences of any and all damages alleged in the Complaint, and that Plaintiff should
be barred from recovery on the Complaint.
(Comparative Negligence)
4. If Plaintiff has suffered or sustained any loss, damage, or injury, such alleged damages were the direct and proximate result
of the negligent, fraudulent, careless, reckless, fault and unlawful conduct of the Plaintiff and/or his employees, agents and
other persons whose conduct is chargeable to Plaintiff, other than these answering Defendants, If Plaintiff suffered or
sustained any loss, damage, or injury, the total amount of damages to which Plaintiff would otherwise be entitled is reduced
in direct proportion to the amount of negligence and/or fault attributable to Plaintiff.
(Negligence of Third Persons)
5. These answering Defendants are informed and believe and thereon allege that Plaintiffs alleged damages were either in
whole or in part negligently caused by persons, firms, corporations, or entities other than these answering Defendants, and
that said negligence is either imputed to Plaintiff by reason of the relationship of said parties to Plaintiff and/or said
negligence comparatively reduced the percentage of alleged negligence of these answering Defendants.
(Comparative Fault of Co-Defendants)
6. At all times and places set forth in the Complaint, party defendants, other than these answering Defendants, failed to
exercise ordinary care on their own behalf, which negligence and carelessness was a substantial factor of some portion, up to
and including the whole thereof, of the injuries and damages complaint of by Plaintiff in this action. The fault, if any, of these
answering Defendants should be compared with the fault of the other defendants and damages, if any, should be apportioned
among the defendants in direct relation to each defendant’s comparative fault. These answering Defendants should be
obligated to pay only such damages, if any, which are directly attributable to their percentage of the comparative fault. To
require these answering Defendants to pay any more than his percentage of the comparative fault violations the equal
protection and due process clauses of the Constitution of the United States and the Constitution of the State of California.
(Contribution)
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7. The damages suffered by Plaintiff, if any, were the direct and proximate result of the negligence of parties, persons,
corporations and/or entities other than these answering Defendants, and the liability of these answering Defendants, if any, is
limited in direct proportion to the percentage of fault actually attributable to these answering Defendants.
(No Actual or Proximate Causation)
8. These answering Defendants were not the actual or proximate cause of any of Plaintiff’s alleged damages.
(Assumption of the Risk)
9. These answering Defendants are informed and believe and thereon allege that Plaintiff had full knowledge of all facts
alleged in his Complaint and knowingly and voluntarily assumed all risks involved in the subject transactions, and his
assumption of these risks is the sole and proximate cause of any injuries or damages he allegedly suffered.
(Estoppel)
10. These answering Defendants are informed and believe and thereon allege that Plaintiff engaged in conduct and activities
with respect to the contracts, transactions, occurrences and incidents which are the subject of the Complaint, and by reason of
said activities and conduct are estopped from asserting any claims for damages or seeking any other relief against these
answering Defendants.
(Waiver)
11. These answering Defendants are informed and believe and thereon allege that Plaintiff engaged in conduct and activities
sufficient to constitute a waiver of any alleged breach of duty, negligence, act, omission, or any other conduct, if any, as set
forth in the Complaint.
(Intervening Causes)
12. These answering Defendants are informed and believe and thereon allege that the alleged damages Plaintiff claims, were
proximately caused by or contributed to by the acts of Plaintiff, or other parties, and constitutes an intervening and
superseding cause of the damages, if any, of which Plaintiff complains, thus barring Plaintiff from any recovery from these
answering Defendants.
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(Laches)
13. These answering Defendants are informed and believe and thereon allege that Plaintiff has inexcusably and unreasonably
delayed the commencement of the action to the prejudice of these answering Defendants.
(Authorization/Ratification)
14. These answering Defendants are informed and believe and thereon allege that Plaintiff authorized and/or ratified the acts
and conduct of these answering Defendants.
(Unclean Hands)
15. These answering Defendants are informed and believe and thereon allege that Plaintiff’s conduct with regard to the
matters alleged in the Complaint were such that Plaintiff is barred by the equitable doctrine of unclean hands from recovery
against these answering Defendants.
(Statute of Limitations)
16. These answering Defendants are informed and believe and thereon allege that Plaintiffs Complaint is wholly and/or
partially barred by the applicable statutes of limitations, including, but not limited to Code of Civil Procedure sections 337,
338, 339, and 343.
(No Breach of Duty)
17. These answering Defendants are informed and believe and thereon allege that Plaintiff is barred from any recovery or
relief because these answering Defendants breached no duties to Plaintiff.
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(Costs)
18. The Complaint filed by Plaintiff against these answering Defendants was brought without reasonable cause and without a
good faith belief that there was a justifiable controversy under the facts or the law which warranted the filing of the
Complaint against these answering Defendants. Plaintiff should therefore be responsible for all of these answering
Defendants’ necessary and reasonable defense costs, as more particularity set forth in California Code of Civil Procedure
section 1038.
(Conduct was Justified)
19. The conduct of these answering Defendants in regard to the matters alleged in the Complaint was justified, and by reason
of the foregoing, Plaintiff is barred from any recovery against these answering Defendants.
NINETEENTH AFFIRMATIVE DEFENSE
(Complete Performance)
20. These answering Defendants have appropriately, completely, and fully performed and discharged any and all obligations
and legal duties arising out of the matters alleged in the Complaint.
TWENTIETH AFFIRMATIVE DEFENSE
(Innocent Misrepresentation)
21. If these answering Defendants made any misrepresentations, which are expressly denied, such misrepresentations were
not intentional or negligent, but were innocently made.
TWENTY-FIRST AFFIRMATIVE DEFENSE
(Arbitration)
22. These answering Defendants hereby reserve the right to demand that Plaintiff submits to mediation and/or binding
arbitration of all matters raised in Plaintiff’s Complaint.
TWENTY-SECOND AFFIRMATIVE DEFENSE
(Expression of Good Faith Opinion)
23. Any and all representations made by these answering Defendants, if there were any, were true and/or were expressions of
opinion which were made in good faith and reasonably believed to be true and were based upon information that these
answering Defendants reasonably believed to be true and reliable. As a result, Plaintiff cannot recover from these answering
206
Defendants.
TWENTY-THIRD AFFIRMATIVE DEFENSE
(Lack of Enforceability of Contract)
24. These answering Defendants are informed and believe, and thereon assert, that Plaintiff cannot enforce any contract, if
any such contract even exists, against Defendants on the ground of failure of consideration, excuse, material breach by
Plaintiff, failure of condition concurrent, precedent and/or subsequent, mistake, lack of consent, or statute of frauds.
TWENTY-FOURTH AFFIRMATIVE DEFENSE
(Absence of Intent to Defraud)
25. These answering Defendants allege that Plaintiffs allegations that the answering Defendant misled Plaintiff never
occurred; but, if so, such information was not made with the intent to defraud or to deceive the Plaintiff.
TWENTY-FIFTH AFFIRMATIVE DEFENSE
(Absence of Intent to Induce Reliance)
26. These answering Defendants allege that Plaintiff’s allegations that these answering Defendants misled Plaintiff never
occurred; but if so, such information was not made with the intent to induce reliance by the Plaintiff’s as alleged in his
Complaint.
TWENTY-SIXTH AFFIRMATIVE DEFENSE
(Absence of Actual and/or Justifiable Reliance)
27. These answering Defendants allege that Plaintiff’s allegations that these answering Defendants misled Plaintiff never
occurred; but, if so Plaintiff did not actually or justifiably rely, nor was Plaintiff entitled to rely on the allegedly concealed
information, whether subjectively or objectively.
TWENTY-SEVENTH AFFIRMATIVE DEFENSE
(Non-Awareness of Suppressed Fact)
28. These answering Defendants did not know and in the exercise of reasonable care could not have known of the alleged
facts which Plaintiff now contends were suppressed from his during the subject transaction.
TWENTY-EIGHTH AFFIRMATIVE DEFENSE
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(Civil Code §1102.4 Non-Liability for Errors or Omissions Not Within Personal Knowledge of Transferor or Agent)
29. These answering Defendants are not liable for any alleged error, inaccuracy, or omission of any information delivered
pursuant to Title IV, Chapter 2, Article 1.5 of the Civil Code, because said alleged error, inaccuracy, or omission was not
within the personal knowledge of these answering Defendants and was based on information timely provided by public
agencies and/or by other persons providing information as specified in Civil Code section 1102.4(c), and ordinary care was
exercised in obtaining and transmitting it.
TWENTY-NINTH AFFIRMATIVE DEFENSE
(Civil Code §2079.5 Buyer’s Duty to Exercise Reasonable Care)
30. These answering Defendants are not liable for the Plaintiffs failure to exercise reasonable care to protect itself. California
Civil Code section 2079.5 provides that nothing relieves a buyer or prospective purchaser of the duty to exercise reasonable
care to protect himself or herself, including those facts which are known to or within the diligent attention and observation of
the buyer or prospective buyer.
THIRTIETH AFFIRMATIVE DEFENSE
(Not Responsible for Acts of Doe Defendants)
31. These answering Defendants are not legally responsible for the acts and omissions of those Defendants named herein as
Does 1 through 30.
THIRTY-FIRST AFFIRMATIVE DEFENSE
(Prevention)
32. Upon information and belief, the acts of Plaintiff and/or other parties prevented and precluded these answering
Defendants from performing their obligations, if any were unperformed at all.
THIRTY-SECOND AFFIRMATIVE DEFENSE
(Consent)
33. At all times mentioned in the Complaint, Plaintiff consented to each and every act of these answering Defendants and as a
result suffered no wrong from any act performed.
THIRTY-THIRD AFFIRMATIVE DEFENSE
(Unconstitutionality of Exemplary Damages)
34. Any claims for punitive and/or exemplary damages are unconstitutional in that they violate the Fourteenth Amendment of
208
the United States Constitution guaranteeing due process of aw, the Eighth Amendment of the United States Constitution
prohibiting excessive fines, and Article I, Section 17 of the California Constitution.
THIRTY-FOURTH AFFIRMATIVE DEFENSE
(Reservation of Defenses)
35. These answering Defendants hereby reserve the right to assert any additional defenses as may be applicable to this action
as may be warranted after discovery commences.
THIRTY-FIFTH AFFIRMATIVE DEFENSE
(Knowledge and Waiver of Property Condition)
36. These answering Defendants are informed and believe, and based thereon allege, that Plaintiffs investigated the condition
and value of the subject property before they purchased it and through such investigation, discovered, or should have
discovered, its true value and condition. Notwithstanding such inspection/investigation, Plaintiffs purchased the property. As
a result of such knowledge, Plaintiffs waived the alleged failures to disclose and misrepresentation allegedly attributable to
these answering Defendants.
THIRTY-SIXTH AFFIRMATIVE DEFENSE
(No False Statement)
37. As to each and every cause of action alleged in Plaintiffs’ Complain, these answering Defendants made no false
statements to Plaintiff or any other person, entity or organization.
THIRTY-SEVENTH AFFIRMATIVE DEFENSE
(Absence of False Statement as to Premises)
38. Any and all alleged representations made by these answering Defendants, or their agents, regarding the subject premises
and purchase agreement, which is the subject of this litigation, contained no false statements.
THIRTY-EIGHTH AFFIRMATIVE DEFENSE
(No Basis for Punitive Damages)
39. These answering Defendants at all times acted in a proper, lawful and legally permitted fashion without malice, fraud or
oppression, and, therefore, there is no a basis upon which an award of punitive or exemplary damages can be made against
these answering Defendants.
WHEREFORE, RE/MAX prays for judgment as follows:
209
1. That Plaintiffs take nothing by way of their Complaint;
2. That the Complaint be dismissed with prejudice as to the answering Defendants;
3. That the sole liability of these answering Defendants, if any, be limited in proportion to the degree of fault attributable to
these answering Defendants;
4. For attorney’s fees and costs of suit incurred herein; and
5. For such other and further relief as the Court deems just and proper.
DATED: November 9, 2006
<<signature>>
By: Jacqueline A. Oliver, Esq.
Attorney for Defendants Last Dance, Inc., dba RE/MAX Associates and Michael Little.
End of Document
210
Defendant John Contento’s Answer to Plaintiffs’ Second Amended
Complaint
Martha UMMEL, individually; and Vernon Ummel, individually, Plaintiffs, v. LAST DANCE, INC.; Coats
Enterprise, Inc.; Michael Little; individually; John Contento, SRO, a sole proprietor; Does 1 through 50, Defendants. |
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San Diego County
Martha UMMEL, individually; and Vernon Ummel, individually, Plaintiffs,
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little; individually; John Contento, SRO, a sole proprietor;
Does 1 through 50, Defendants.
No. GIN 054 088.
November 9, 2006.
Defendant John Contento’s Answer to Plaintiffs’ Second Amended Complaint
Robert T. Dolan (State Bar No. 110494), Lindsay MC Menamin (State Bar No. 210269), Gaglione & Dolan, 20750 Ventura
Boulevard, Suite 238, Woodland Hills, California 91364, Telephone: (818) 704-1464, Facsimile: (818) 704-1564, Attorneys
for Defendant, John Contento.
Assigned to The Honorable Lisa Guy-Schall, Department 31.
Complaint Filed: July 19, 2005
1st Am. Complaint: August 18, 2006
COMES NOW defendant John Contento (hereinafter “defendant”) and answering the second amended complaint
(“complaint”) of Matha Ummel and Vernon Ummel (hereinafter “plaintiffs”) alleges as follows:
1. Pursuant to Code of Civil Procedure (“CCP”) § 431.30, this answering defendant generally and specifically denies each
and every allegation and each and every part of each and every allegation contained in the complaint and the whole thereof
and further denies that the plaintiffs have been damaged in the sum or sums alleged or in any other sum or sums at all.
2. This answering defendant is informed and believes and upon such information and belief alleges that the allegations of the
complaint herein, whether considered independently or as a whole, fail to state facts sufficient to constitute a cause of action
against this answering defendant.
3. This answering defendant is informed and believes and upon such information and belief alleges that at all times herein,
this answering defendant exercised and possessed that degree of skill and knowledge reasonably expected of a real estate
appraiser.
212
4. This answering defendant believes and based upon such information and belief alleges that plaintiffs waived their right to
seek the relief herein, due to their own acts and/or omissions with reference to the subject matter of the complaint.
5. This answering defendant believes and based upon such information and belief alleges that plaintiffs are estopped from
seeking the relief herein due to their own acts, and/or omissions with reference to the subject matter of the complaint.
6. This answering defendant is informed and believes and upon such information and belief alleges that at all times herein,
plaintiffs are negligent with respect to the facts and circumstances as alleged in the complaint herein. Plaintiffs failed to
exercise reasonable care in protecting their interests during the period alleged in the complaint and the loss and damages
purportedly sustained by the plaintiffs were proximately caused by their contributory negligence. Any damages suffered by
the plaintiffs, which are specifically denied to exist, must be, therefore, reduced in proportion to the amount of negligence
attributable to the plaintiffs.
7. This answering defendant is informed and believes and upon such information and belief alleges that any and all events
and happenings in connection with the matters alleged in the complaint, and the resulting injuries and damages, if any,
purportedly suffered by the plaintiffs, were proximately caused and contributed to by the independent, intervening, negligent
and unlawful conduct of independent third parties and/or their agents which, therefore, bars plaintiffs from recovering the
relief sought within the complaint.
8. This answering defendant is informed and believes and based upon such information and belief alleges that any and all
events and happenings in connection with the allegations set forth in plaintiffs’ complaint and the alleged resulting injuries or
damages, if any, were proximately caused and contributed to by the negligence or actions of third parties either named or
unnamed and that this answering defendant is entitled to an apportionment among all such parties according to their
responsibility for the alleged injuries, if any, sustained by plaintiffs.
9. This answering defendant is informed and believes and upon such information and belief alleges that the causes of action
in the plaintiffs’ complaint are barred by the applicable statute of limitations including, but not limited to, California CCP §§
337, 338, 339 and 340.
10. Any and all representations made by this answering defendant, his employees, or agents, regarding the subject of this
litigation contained no false statements.
213
11. At all times herein, this answering defendant alleges that each and every act done or statement made by said answering
defendant, his employees, or agents, with reference to some or all of the purported claims as set forth in the complaint herein,
were made reasonably and in good faith and without any knowledge that the statements might be false or inaccurate.
12. Any and all alleged false representations made by this answering defendant, his employees, or agents regarding the
subject of this litigation were not stated with the intent to induce plaintiffs to rely to their detriment on those representations.
13. At all times herein, this answering defendant alleges that plaintiffs’ alleged reliance on the statements and representations
allegedly made by this answering defendant, his employees, or agents, was not justified.
14. This answering defendant alleges that plaintiffs have not suffered or sustained any damages as a consequence of any
alleged representation of this answering defendant or any alleged reliance by plaintiffs.
15. This answering defendant alleges that plaintiffs have failed to take reasonable and necessary steps to mitigate their
damages.
16. This answering defendant alleges that plaintiffs are barred from any recovery against this answering defendant because
their damages are speculative.
17. This answering defendant alleges that he did not owe plaintiffs a duty for preparation of the appraisal of the property
located at 1668 Amante Court, Carlsbad, California (“the property”) since plaintiffs did not contract for, or engage, this
answering defendant’s services to prepare the appraisal.
18. This answering defendant did not enter into any written contract with plaintiffs to appraise the property in which plaintiffs
agreed to purchase.
214
19. This answering defendant did not enter into any written contract with the other defendants in which defendants agreed to
sell plaintiffs the subject property.
NINETEENTH AFFIRMATIVE DEFENSE
20. This answering defendant did not fraudulently provide information in the appraisal report on the property to plaintiffs.
TWENTIETH AFFIRMATIVE DEFENSE
21. This answering defendant alleges that at all times relevant herein, this answering defendant did not cooperate with, aid,
encourage, ratify or adopt any allegedly wrongful acts as set forth in the within complaint.
TWENTY-FIRST AFFIRMATIVE DEFENSE
22. This answering defendant is informed and believes and, upon that basis, alleges that plaintiffs do not describe the claims
made against defendant with sufficient particularity to enable defendant to determine each and every defense he may have
against plaintiffs. Defendant therefore reserves the right to assert all defenses, including affirmative defenses, which may be
discovered or become relevant to plaintiffs’ claims once the precise nature of those claims is ascertained.
WHEREFORE, this answering defendant prays judgment as follows:
1. That plaintiffs take nothing by virtue of their complaint on file herein from this answering defendant;
2. That plaintiffs’ complaint on file herein be dismissed with prejudice as to this answering defendant;
3. That this answering defendant be awarded his costs of suit and attorneys’ fees reasonably incurred in the defense of
plaintiffs’ action; and
4. For such other and further relief as the court may deem just and proper.
DATED: November 6, 2006
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
Attorneys for Defendant
JOHN CONTENTO
End of Document
215
216
Reply Brief of Defendants Re/Max and Little to Plaintiffs’
Opposition Defendants’ Demurrer
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San Diego County
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No. GIN054088.
October 16, 2006.
Reply Brief of Defendants Re/Max and Little to Plaintiffs’ Opposition Defendants’ Demurrer
400, San Diego, CA 92108, Tel: (619) 542-2490, Fax: (619) 299-0468, Attorneys for Defendants Last Dance, Inc. dba
Dept. No.: 31
Hearing Date: October 20, 2006
Time: 1:30 p.m.
Defendants LAST DANCE, INC. dba RE/MAX ASSOCIATES (hereinafter “RE/MAX”) (erroneously sued and served as
LAST DANCE, INC. and RE/MAX, INC.) and MICHAEL LITTLE (hereinafter “Little”), hereby submit the following reply
brief to Plaintiffs’ Opposition to Defendant’s Demurrer to Plaintiffs’ First Amended Complaint (“Complaint”).
I. RE/MAX AND LITTLE’S DEMURRER IS PROPERLY BEFORE THE COURT AND IN THE INTERESTS OF
JUSTICE MUST BE HEARD.
In Berg v. Darden, plaintiff’s counsel sent a Section 998 letter to Defendant’s counsel via facsimile. Post-trial, Defendant’s
counsel argued service of the statutory offer of compromise via facsimile was defective. The trial court agreed, but the Court
of Appeal abruptly reversed holding service of the statutory offer of compromise was not fatally defective primarily because
there was no dispute defendant’s counsel actually received and read the letter and understood it to be a Section 998 letter.
((2004) 120 Cal.App.4th 721, 732.)
Similarly here, Plaintiffs’ counsel evidently received and read RE/MAX and Little’s Demurrer, as evidenced by the filing and
service of their Opposition to the Demurrer. Thus, Plaintiffs clearly understood the documents to be a Demurrer. A party
cannot legitimately oppose or intelligently respond directly to a paper, and the arguments and case law within that paper, if
that party has not received, read, and understood that document.
On September 15, 2006, the Demurrer was faxed with a confidential facsimile cover sheet to “Susan,” a dispatch officer at
Knox Attorney Service. Although the documents were intended to be sent to Susan at Knox Attorney Service (“Knox”) for
proper personal service on Plaintiffs’ counsel, the documents were inadvertently directly faxed to Plaintiffs’ counsel’s
218
facsimile number used at its regular place of business since the start of this litigation. (See Berg v. Darden, supra, 120
Cal.App.4th at 733.) The confidential facsimile cover sheet clearly states,
“Please serve the attached Demurrer & Motion to Strike and Notice of Lodgment today on:
William M. Aron, Esq.
Jeffrey L. Hogue, Esq.
Aron & Hogue
525 B Street, Suite 1500
San Diego, CA 92101.
Please file the proof of service with the SD Superior Court, North County (Vista).” (See Declaration of Jodi A. Konorti).
At Plaintiffs’ counsel’s first reading of this confidential facsimile cover sheet, they should have immediately noticed it was
not intended for them, but instead intended for “Susan” to serve on them. On October 13, 2006, William Aron confirmed his
office does not have a “Susan” working in his office. (See Declaration of Jodi A. Konorti). On the facsimile cover sheet, it
clearly states, “if the reader of this message is not the intended recipient ... if you have received this communication in error,
please notify us immediately by telephone....” (emphasis added). The direct telephone number for the sender is printed at the
top of the cover sheet. RE/MAX and Little never received a telephone call from Plaintiffs’ counsel informing of the
misdirected facsimile on that day or any day thereafter. (See Declaration of Jodi A. Konorti.) The only communication
RE/MAX and Little received was an email on September 25, 2006 asking for a copy of the Proof of Service. (See Decl. Of
Jodi A. Konorti.) At this point, RE/MAX and Little honestly believed the facsimile was properly sent to the delivery service
to be served on Plaintiffs by the delivery service; there was no reason to believe otherwise as they did not hear from
Plaintiffs’ counsel or the delivery service. RE/MAX and Little’s counsel, Jodi A. Konorti, continuously called Susan at Knox
regarding the status of the proof of service. To date, RE/MAX has not received one in the mail from Knox, and until the
drafting of this Demurrer thought Knox served the documents on Plaintiffs’ counsel.
Promptly upon receiving Plaintiffs’ request for a copy of the Proof of Service (“POS”), RE/MAX and Little responded, in
writing, they would forward the POS immediately upon receipt of a copy from the delivery service because RE/MAX and
Little still though Knox served the documents. Although on numerous occasions RE/MAX and Little requested the delivery
service to immediately send the POS, RE/MAX and Little have yet to receive it. To date, RE/MAX and Little have asked at
least three times and have left at least two additional messages demanding the POS. The delivery service has never confirmed
either way whether they received the documents or served the documents. On Monday, October 9, 2006, RE/MAX and Little
spoke with the delivery service; she confirmed she would send it over the POS. At the time of filing this Reply Brief,
RE/MAX and Little have still not received the POS from the delivery service.
RE/MAX and Little intended to fax the Demurrer to “Susan” at Knox Attorney Service for personal service on Plaintiffs’
counsel. Rather, the Demurrer went straight to Plaintiffs’ counsel’s office via facsimile in clear error since their office does
not have a “Susan” and it requested Susan to serve and file the Demurrer and POS. RE/MAX and Little had no reason to
believe the Demurrer was not sent to Knox because Plaintiffs* counsel failed to notify RE/MAX of the error. Plaintiffs
subsequently served their Opposition to the Demurrer, evidencing that they received, read, and understood the paper to be a
Demurrer. Thus, under the case law and because Plaintiffs’ failed to inform RE/MAX and Little of the transmission error,
RE/MAX and Little respectfully request the Court hear and consider RE/MAX and Little’s Demurrer and sustain the same.
II. PLAINTIFFS’ FAIL TO PROPERLY PLEAD FRAUD AND FRAUDULENT CONCEALMENT; THEREFORE
DEFENDANTS’ DEMURRER MUST BE SUSTAINED WITHOUT LEAVE TO AMEND.
Plaintiffs’ Opposition states Plaintiffs plead the elements of reliance and damages for the first and second causes of action for
fraud and fraudulent concealment, respectively. Assuming arguendo Plaintiffs did plead the elements of reliance and damage
219
for fraud and fraudulent concealment, contrary to the law, Plaintiffs have not plead with these elements with particularity. As
previously stated, every element of the cause of action for fraud must be alleged in full, factually, and specifically. The
“particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means
the representations where tendered.’ ” (Lazar v. Sup. Ct., supra, 12 Cal.4th at 645; Stansfield v. Starkey (1990) 220
Cal.App.3d 59, 73.) Plaintiffs state in their Opposition “a court should not look suspiciously at the complaint or seek to
absolve the defendant from liability on the highly technical requirements of form in pleadings.” (See Plaintiffs’ Opposition to
Demurrer, p.6, Ins. 8-10.) Given the specificity requirements, the technicality argument proffered by Plaintiffs is insignificant
to the extent they alleged fraudulent causes of action against Demurring Defendants. Non-particular, non-specific fraud and
fraudulent concealment causes of action must be dismissed to protect the character of the defendant.
Plaintiffs restate in their Opposition the non-specific, non-particularized allegations for the elements of fraud. However, they
fail to plead the specifics for their allegations admittedly because “Complaints must be kept to a reasonable length.” (See
Plaintiffs’ Opposition to Demurrer, p.6, ln. 13.) However, the law is clear that allegations of fraud “involve a serious attack
on character, and fairness to the defendant demands that he should receive the fullest possible details of the charge in order
to prepare his defense.’ ” (Stansfield, supra, 220 Cal.App.3d at 73, citing Committee on Children’s Television, Inc. v.
General Foods Corp., supra, 35 Cal.3d at 216 (emphasis added).)
Plaintiffs’ complaint is internally inconsistent because they allege they relied on the appraisal to arrive at their purchase price.
However, they inconsistently allege they didn’t receive the appraisal until after the close of escrow. Thus, where Plaintiffs are
unspecific in how they relied on alleged representations the Little opined $1,200,000 was a good deal for the property when
they had not even seen the appraisal does not satisfy the specificity requirements of fraud.
It is insufficient for Plaintiffs to simply plead the evidence they hope to prove at trial. (Careau & Co. v. Security Pacific
Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1390.) Legal conclusions alone will not support a cause of action for
fraud. Plaintiffs clearly do not plead facts specifying how, when, where, to whom and by what means the allegedly fraudulent
statements were made because, as they admit in the Opposition, “Complaints must be kept to a reasonable length.” Because
of the serious nature of fraud allegations, the particularity requirement trumps a fear of a long, specific complaint. Therefore,
Plaintiffs failed to show a prima facie basis for fraud causes of action and Defendants’ Demurrer must be sustained without
leave to amend.
III. PLAINTIFFS FAIL TO PROPERLY PLEAD NEGLIGENT MISREPRESENTATION; THEREFORE.
DEFENDANTS’ DEMURRER MUST BE SUSTAINED WITHOUT LEAVE TO AMEND.
There is no liability for an innocent misrepresentation where the agent acted reasonably and had reasonable grounds to
believe what he said was true. (Robinson v. Grossman (1997) 57 Cal.App.4th 634, 642-43.) Under Padgett v. Phariss,
((1997) 54 Cal. App. 4th 1270, 1284) when an agent communicates what the fair market value of the property is he provides
his opinion, such opinions are just that: opinions, not representations of fact, and are not actionable misrepresentations. (See
also Kahn v. Lischner (1954) 128 Cal. App. 2d 480,487 (emphasis added).) In Wilhelm v. Pray, Price, Williams & Russell,
the court concluded such an omission was fatally defective to a claim of negligent misrepresentation. ((1986) 186 Cal.App.3d
1324, 1332-1333 (sustaining a demurrer without leave to amend as to an action for negligent misrepresentation when the
complaint did not allege that false representations were made honestly believing they were true, but having no reasonable
ground for such belief, and when the misrepresentations were not the proximate cause of any harm).)
Therefore, under Padgett and Wilhelm, the statement by Little that Plaintiffs were getting a good deal on the house is clearly
his opinion and is not actionable. Plaintiffs admit it was only his opinion because they allege he merely “believed” the price
was a good deal. Thus, Plaintiffs’ Complaint omits an essential element of a cause of action for negligent misrepresentation
and the demurrer must sustained without leave to amend.
IV. PLAINTIFFS FAIL TO PROPERLY PLEAD BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR
DEALING. NEGLIGENCE, AND BREACH OF FIDUCIARY DUTY; THEREFORE. DEFENDANTS’ DEMURRER
MUST BE SUSTAINED.
220
Plaintiffs’ Complaint fails to plead facts sufficient to state a cause of action for the Third, Fourth, and Sixth causes of action
because “it is insufficient for Plaintiffs to simply plead the evidence they hope to prove at trial.” (Careau & Co. v. Security
Pacific Business Credit, Inc., supra, 222 Cal.App.3d at 1390.) Plaintiffs entirely fail to plead damages, a crucial and essential
element of the above causes of actions. As stated previously, Plaintiffs plead they relied on the appraisal report for their
purchase price, but inconsistently allege Little did not provide the report until after the close of escrow. Furthermore,
Plaintiffs have failed to plead any damages because they paid exactly what the property was appraised -- $1,200,000.00. (See
Exhibit “A” attached to Demurrer.) Where the face of the Complaint clearly shows there are no damages because Plaintiffs
paid the appraised value, Plaintiffs have failed to show damages and, therefore, fail to state facts sufficient to support the
Third, Fourth, and Seventh causes of action.
V. PLAINTIFFS SIXTH CAUSE OF ACTION FAILS TO STATE FACTS SUFFICIENT TO SUPPORT A
CONSTRUCTIVE FRAUD CAUSE OF ACTION.
Plaintiffs plead constructive trust. Plaintiffs cannot allege facts sufficient to constitute a cause of action for constructive trust.
Therefore, the sixth cause of action must be dismissed with prejudice. Assuming the court allows Plaintiffs leave to amend
the sixth cause of action to allege constructive fraud, Plaintiffs will not and cannot legitimately allege facts supporting such
cause of action. To establish constructive fraud one must prove the following: 1) a fiduciary relationship; 2) a material
non-disclosure; 3) an intent to deceive; 4) reliance and 5) resulting injury. (Younan v. Equifax, Inc. (1980) 111 Cal.App.3d
498, 516.) As stated in section IV, supra, Plaintiffs cannot show damages, an essential element of constructive fraud. Nor can
Plaintiffs show a material non-disclosure because as previously stated, an opinion on the price of real property is just that, an
opinion, and is not tantamount to a material non-disclosure. Additionally, Plaintiffs plead reliance for the basis of the
purchase price on the appraisal by John Contento of $1.2 million - an appraisal they allege they did not receive until after the
close of escrow.
Thus, Plaintiffs cannot legitimately plead facts supporting a cause of action for constructive fraud and should not be allowed
leave to amend their First Amended Complaint,
CONCLUSION
The burden of proving a reasonable possibility of amending the complaint to state a cause of action “is squarely on the
plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The First and Second causes of action are not plead fully,
specifically and particularly and must be dismissed. Under Wilhelm, Plaintiffs made a fatal error wherein Little’s opinion is
not actionable negligent misrepresentation, and the negligent misrepresentation cause of action must be dismissed. Finally,
where Plaintiffs cannot plead or show damages because they paid the appraised price, the Third, Fourth, and Sixth causes of
action must be dismissed. Plaintiffs did not and cannot show they can meet their burden and legitimately amend the
complaint; therefore, Demurring Defendants’ demurrer must be sustained without leave to amend and Plaintiffs’ First
Amended Complaint must be entirely dismissed with prejudice.
For the reasons stated above, Demurring Defendants’ Demurrer should be sustained without leave to amend and Plaintiffs’
Complaint should be entirely dismissed with prejudice.
<<signature>>
Jodi A. Konorti, Esq.
Attorneys for Defendants LAST DANCE, INC. dba RE/MAX ASSOCIATES (erroneously sued and served as Distinctive
Properties Real Estate, Inc., and RE/MAX Associates) and LITTLE.
221
End of Document
222
Reply to Opposition to Defendant John Contento’s Demurrer to
Plaintiffs’ First Amended Complaint; Memorandum of Points and
Authorities in Support Thereof
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Comment:
San Diego County
v.
No. GIN 054 088.
October 16, 2006.
Reply to Opposition to Defendant John Contento’s Demurrer to Plaintiffs’ First Amended Complaint; Memorandum
of Points and Authorities in Support Thereof
Robert T. Dolan (State Bar No. 110494), Lindsay Mc Menamin (State Bar No. 210269), Gaglione & Dolan, 20750 Ventura
Date: October 20, 2006
Time: 1.:30 p.m.
Place: Department 31
Complaint Filed: 7/19/05
1st Am. Complaint Filed: 8/18/06
Defendant JOHN CONTENTO hereby submits his memorandum of points and authorities in reply to plaintiffs’ opposition to
JOHN CONTENTO’s demurrer.
MEMORANDUM OF POINTS AND AUTHORITIES
DEFENDANT’S REPLIES TO PLAINTIFFS’ ARGUMENTS
I. PLAINTIFFS’ ARGUMENT AS TO PLAINTIFFS HAVING PLED FACTS SUPPORTING ALLEGED FRAUD
LACKS MERIT.
Plaintiffs cannot change the facts of their own complaint: plaintiffs never received the appraisal report for their review prior
to close of escrow. (First Amended Complaint “FAC”), ¶¶27-32.) Therefore, by their own contentions in plaintiffs’ First
Amended Complaint, they could not have possibly relied on or been induced by any representations in the JOHN
CONTENTO appraisal report. Plaintiffs cannot change this fact of when they received the appraisal. Nor can they now claim
with any validity that they communicated with JOHN CONTENTO prior to close of escrow. Rather, plaintiffs can only admit
that they repeatedly asked their agent, Michael Little, to provide them the appraisal report and that they failed to receive it
before close of escrow. (FAC, ¶¶27-32.) The plaintiffs argument therefore lacks any merit.
224
II. PLAINTIFFS’ ARGUMENT AS HAVING RELIED ON JOHN CONTENTO’S APPRAISAL TO PURCHASE
THE PROPERTY IS WITHOUT MERIT.
Plaintiffs admitted they closed escrow on the Amante property on July 29, 2005 before anyone provided the appraisal to
them, on or after August 18, 2005. (FAC, ¶¶1-32.) Plaintiffs admit that Agent Michael Little did not provide the appraisal
until after close of escrow. (FAC, ¶32.) JOHN CONTENTO was never an agent of, nor owed any duty to, plaintiffs. His
appraisal report clearly indicates his client as the lender. Plaintiffs also never state in their First Amended Complaint having
communicated with JOHN CONTENTO, ever, regarding the appraisal.
Moreover, because plaintiffs never communicated with JOHN CONTENTO, he never represented himself as an agent for the
plaintiffs. Nor does the complaint state that plaintiffs’ real estate agent, Michael Little, represented to plaintiffs that JOHN
CONTENTO was an agent for plaintiffs. Finally, plaintiffs have produced no contract to show any contractual duty to
plaintiffs by JOHN CONTENTO.
JOHN CONTENTO is a real estate appraiser retained not by a real estate agent, but by the lending institution by statutory law
in a mortgage loan transaction, to appraise the property for his client, the lender. His only duty is to that client.
Therefore, plaintiffs’ argument that they relied on JOHN CONTENTO’s appraisal lacks merit.
III. PLAINTIFFS’ ARGUMENT THAT THEY PROPERLY ALLEGED NEGLIGENT MISREPRESENTATION
LACKS MERIT.
The same arguments cited above can be repeated herein. Plaintiffs admitted to never reviewing the appraisal report nor being
provided with information within it prior to close of escrow. By their own facts as set forth in the First Amended Complaint,
this argument lacks merit.
IV. PLAINTIFFS’ ARGUMENT THAT JOHN CONTENTO OWED ANY DUTY AS THEIR AGENT LACKS
MERIT.
Plaintiffs admit they never communicated with JOHN CONTENTO; JOHN CONTENTO never communicated to plaintiffs
he was acting as their agent. This is plain in the facts of the First Amended Complaint. JOHN CONTENTO never undertook
to act on plaintiffs’ behalf. His only duty was to his client, the lender, as stated on the appraisal report. Finally, plaintiffs
admit to never receiving information from the appraisal report until after close of escrow. Therefore, no misrepresentations
could possibly have been made to plaintiffs.
V. PLAINTIFFS’ ARGUMENT THAT THEY PROPERLY ALLEGED NEGLIGENCE IS WITHOUT MERIT.
JOHN CONTENTO owes no duty to plaintiffs who were not his client. Even if JOHN CONTENTO owed a duty to plaintiffs,
they already admitted in their own complaint that they never even were provided the information in the appraisal report prior
to the close of escrow. Therefore, the information in that appraisal report could not have caused them any damages since they
could not have possibly relied on the information in the appraisal report to purchase the property. As plaintiffs admit, the
appraisal report was provided to them after close of escrow. (FAC, ¶¶27-332.) Therefore, they failed to support negligence
against JOHN CONTENTO.
CONCLUSION
225
Plaintiff’s First Amended Complaint fails to state facts sufficient to support Causes of Action for Fraud, Negligent
Misrepresentation and Negligence against JOHN CONTENTO. In addition, the First Amended Complaint does not contain
facts with sufficient particularity to support the Fraud and Negligent Misrepresentation claims. Therefore, JOHN
CONTENTO requests that the Court sustain his Demurrer to the First, Fourth and Fifth Causes of Action. Finally, because as
a matter of law JOHN CONTENTO has no liability under the facts of this case for the First, Fourth and Fifth Causes of
Action, JOHN CONTENTO requests that the Court deny plaintiffs’ leave to amend as to those causes of action against JOHN
CONTENTO.
GAGLIONE & DOLAN
A Professional Corporation
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
Attorneys for Defendant, JOHN CONTENTO
End of Document
226
Reply Brief of Defendants Re/Max and Little to Plaintiffs’
Opposition to Motion to Strike Claim for Attorney’s Fees and
Exemplary and Punitive Damages
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San Diego County
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No. GIN054088.
October 16, 2006.
Reply Brief of Defendants Re/Max and Little to Plaintiffs’ Opposition to Motion to Strike Claim for Attorney’s Fees
and Exemplary and Punitive Damages
Dept No.: 31
Time: 1:30 p.m.
LAST DANCE, INC. and RE/MAX, INC.) and MICHAEL LITTLE (hereinafter “LITTLE”), hereby submit the following
reply brief to Plaintiffs’ Opposition to motion to strike Plaintiffs’ claim for attorney’s fees and exemplary and punitive
damages as set forth in Plaintiffs’ First Amended Complaint (“Complaint”).
I. RE/MAX AND LITTLE’S MOTION TO STRIKE IS PROPERLY BEFORE THE COURT AND IN THE INTEREST
OF JUSTICE SHOULD BE HEARD.
In Berg v. Darden, plaintiff’s counsel sent a Section 998 letter to Defendant’s counsel via facsimile. Post-trial, Defendant’s
counsel argued service of the statutory offer of compromise via facsimile was defective. The trial court agreed, but the Court
of Appeal abruptly reversed holding service of the statutory offer of compromise was not fatally defective primarily because
there was no dispute defendant’s counsel actually received and read the letter and understood it to be a Section 998 letter.
((2004) 120 Cal.App.4th 721, 732.)
Similarly here, Plaintiffs’ counsel evidently received and read RE/MAX and Little’s Motion to Strike, as evidenced by the
filing and service of their Opposition to the Motion to Strike. Thus, Plaintiffs clearly understood the documents to be a
Motion to Strike. A party cannot legitimately oppose or intelligently respond directly to a paper, and the arguments and case
law within that paper, if that party has not received, read, and understood that document.
On September 15, 2006, the Motion to Strike was faxed with a confidential facsimile cover sheet to “Susan,” a dispatch
228
officer at Knox Attorney Service. Although the documents were intended to be sent to Susan at Knox Attorney Service
(“Knox”) for proper personal service on Plaintiffs’ counsel, the documents were inadvertently directly faxed to Plaintiffs’
counsel’s facsimile number used at its regular place of business since the start of this litigation. (See Berg v. Darden, supra,
120 Cal.App.4th at 733.) The confidential facsimile cover sheet clearly states,
“Please serve the attached Demurrer & Motion to Strike and Notice of Lodgment today on:
William M. Aron, Esq.
Jeffrey L. Hogue, Esq.
Aron & Hogue
525 B Street, Suite 1500
San Diego, CA 92101.
Please file the proof of service with the SD Superior Court, North County (Vista).” (See Declaration of Jodi A. Konorti),
At Plaintiffs’ counsel’s first reading of this confidential facsimile cover sheet, they should have immediately noticed it was
not intended for them, but instead intended for “Susan” to serve on them. On October 13, 2006, William Aron confirmed his
office does not have a “Susan” working it requested Susan to serve and file the Motion to Strike and POS. RE/MAX and
Little had no reason to believe the Motion to Strike was not sent to Knox because Plaintiffs’ counsel failed to notify
RE/MAX of the error. Plaintiffs subsequently served their Opposition to the Motion to Strike, evidencing that they received,
read, and understood the paper to be a Motion to Strike. Thus, under the case law and because Plaintiffs’ failed to inform
RE/MAX and Little of the transmission error, RE/MAX and Little respectfully request the Court hear and consider RE/MAX
and Little’s Motion to Strike and grant the same.
II. THE COURT MUST STRIKE PLAINTIFFS’ PRAYER FOR ATTORNEY’S FEES.
The basic rule in American Jurisprudence is that regardless of which party in an action prevails, each party bears their own
attorney’s fees. (Alyeska Pipeline Service Co. v. Wilderness Soc’y (1975) 421 U.S. 240.) Plaintiffs bear the burden of proving
their entitlement to the attorney’s fees they seek in this matter. Under California law, attorney’s fees can only be obtained in a
contract or statute. (Code of Civ. Proc. § 1021.)
a. No Contractual Authority Exists Allowing a Recovery of Attorney’s Fees
Plaintiffs are not entitled to attorney’s fees from RE/MAX and Little because there is no contract permitting such an award.
RE/MAX and Little, as the agents and brokers in the transaction, are not parties to the Residential Purchase Agreement
(“RPA”) which Plaintiffs base their claims on, as a matter of law. (See Super 7 Motel Assoc. v. Wang (1993) 16 Cal.App.4th
541.) The RPA clearly states, “Real estate brokers are not parties to the Agreement between Buyer and Seller.” (NOL,
Exhibit “C,” p.8 (emphasis added).) RE/MAX is a real estate broker; therefore, RE/MAX and Little are not parties to the
contract involved in the instant case.
Plaintiffs’ claim that attorney’s fees may be awarded under an implied contract pursuant to California Code of Civil
Procedure section 1 021 is completely unsubstantiated. Attorney’s fees may be recovered when there is an express provision
in the contract that provides for the recovery of fees, and the parties to the litigation are parties to the contract containing the
attorney fee provision. (Code of Civ. Proc. §1033.5(a)(10)(A).) First, there is no contract between RE/MAX and Plaintiffs.
Second, assuming arguendo there was an implied contract, there is no express attorney’s fees provision permitting Plaintiffs
recovery of such an award. Further, even if there was an implied contract, which there is not, Plaintiffs provide absolutely no
evidence showing an intent or agreement that attorney’s fees would be a part of that contract. An attorney’s fees provision,
229
nor where any specific attorney’s fees terms ever even remotely mentioned, discussed, or negotiated between Little and
Plaintiffs. Attorney’s fees are awarded if based on contract. There is no contract here permitting an award of attorney’s fees.
Contrary to Plaintiffs’ argument there is an alleged implied contract, there is still no express provision for attorney’s fees.
There is absolutely no contractual basis for Plaintiffs’ claim for attorney’s fees. Accordingly, the court must strike Plaintiffs’
demand for attorney’s fees.
III. THE COURT MUST STRIKE PLAINTIFFS’ PRAYER FOR EXEMPLARY AND PUNITIVE DAMAGES.
Plaintiffs allege they are entitled to exemplary and punitive damages for the First, Second, Third, Sixth, and Seventh causes
of action. (NOL, Exhibit A, p.22:1-5.) However, Plaintiffs have no basis for an exemplary and punitive damages award
because the Complaint fails to allege sufficient facts necessary to support a fraud claim.
Although PLAINTIFFS allege a Fraud, Fraudulent Concealment, Breach of Implied Covenant of Good Faith and Fair
Dealing, Constructive Trust, and Breach of Fiduciary Duties, an alleged breach of fiduciary duty without malice, fraud or
oppression does not permit an award of punitive damages. (Delos v. Farmers Group (1979) 93 Cal.App.3d 642, 656-657;
Flyer’s Body Shop v. Ticor Title, (1986) 185 Cal.App.3d 1149, 1154.) The mere alleged carelessness or ignorance of the
defendant does not justify the imposition of punitive damages. What is necessary for the award of punitive damages is
conduct that displays extreme indifference that decent citizens should not tolerate it. (Hughes v. Blue Cross (1989) 215
Cal.App.3d 832, 847 (emphasis added).)
Plaintiffs’ entire Complaint is devoid of any allegations of malice, oppression, or fraud, and there is no evidence, of conduct
of any indifference, let alone such extreme indifference in this case, as is evidenced by Plaintiffs’ allegation that LITTLE
merely “believed that the [Plaintiffs] were getting a good deal by purchasing the Amante Property for $1,200,000.00.” (NOL,
Exhibit A, p. 9:24-26.) A belief that a property is a “good deal” or fair value does not equate to maliciousness, in his office.
(See Declaration of Jodi A. Konorti). On the facsimile cover sheet, it clearly states, “if the reader of this message is not the
intended recipient ... if you have received this communication in error, please notify us immediately by telephone....”
(emphasis added). The direct telephone number for the sender is printed at the top of the cover sheet. RE/MAX and Little
never received a telephone call from Plaintiffs’ counsel informing of the misdirected facsimile on that day or any day
thereafter. (See Declaration of Jodi A. Konorti.) The only communication RE/MAX and Little received was an email on
September 25, 2006 asking for a copy of the Proof of Service. (See Decl. Of Jodi A. Konorti.) At this point, RE/MAX and
Little honestly believed the facsimile was properly sent to the delivery service to be served on Plaintiffs by the delivery
service; there was no reason to believe otherwise as they did not hear from Plaintiffs’ counsel or the delivery service.
RE/MAX and Little’s counsel, Jodi A. Konorti, continuously called Susan at Knox regarding the status of the proof of
service. To date, RE/MAX has not received one in the mail from Knox, and until the drafting of this Motion to Strike thought
Knox served the documents on Plaintiffs’ counsel.
Promptly upon receiving Plaintiffs’ request for a copy of the Proof of Service (“POS”), RE/MAX and Little responded, in
writing, they would forward the POS immediately upon receipt of a copy from the delivery service because RE/MAX and
Little still though Knox served the documents. Although on numerous occasions RE/MAX and Little requested the delivery
service to immediately send the POS, RE/MAX and Little have yet to receive it. To date, RE/MAX and Little nave asked at
least three times and have left at least two additional messages demanding the POS. (See Declaration of Jodi A. Konorti). The
delivery service has never confirmed either way whether they received the documents or served the documents. On Monday,
October 9, 2006, RE/MAX and Little spoke with the delivery service; she confirmed she would send it over the POS. At the
time of filing this Reply Brief, RE/MAX and Little have still not received the POS from the delivery service.
RE/MAX and Little intended to fax the Motion to Strike to “Susan” at Knox Attorney Service for personal service on
Plaintiffs’ counsel. Rather, the Motion to Strike went straight to Plaintiffs’ counsel’s office via facsimile in clear error since
their office does not have a “Susan” and but is merely an opinion. Because exemplary and punitive damages are not
recoverable without a showing of malice, fraud or oppression, RE/MAX and Little’s Motion to Strike must be granted and
Plaintiffs’ exemplary and punitive damages claims must be stricken from the Complaint.
230
CONCLUSION
There is no contract supporting a claim for attorney’s fees and Plaintiffs’ fail to show a any malice, oppression, or fraud by
RE/MAX and Little supporting an award of punitive and exemplary damages. For the foregoing reasons the Court should
grant this motion and strike the attorney’s fees and exemplary and punitive damages prayers in Plaintiffs’ Complaint.
<<signature>>
Attorneys for Defendants LAST DANCE, INC. dba RE/MAX ASSOCIATES (erroneously sued and served as Distinctive
End of Document
231
Memorandum of Points & Authorities in Reply to Plaintiffs’
Opposition to Defendant Coats Enterprise’s Demurrer to Plaintiffs’
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San Diego County
v.
No. GIN 054088.
October 13, 2006.
Memorandum of Points & Authorities in Reply to Plaintiffs’ Opposition to Defendant Coats Enterprise’s Demurrer to
Plaintiffs’ First Amended Complaint
Joseph L. Stine, Attorney at Law, CA Bar No. 86544, Law Office of Joseph L. Stine, 380 South Melrose Drive, #306, Vista,
COMPLAINT FILED: July 19, 2006
FIRST AMENDED COMPLAINT
FILED: August 18, 2006
Dept.: 31
Time: 1:30 p.m.
Defendant COATS ENTERPRISE (“COATS”) submits its Reply Memorandum of Points and Authorities in support of its
demurrer to the First Amended Complaint filed in the instant action.
I.
PLAINTIFFS SEEK TO HOLD DEFENDANT COATS LIABLE FOR LOAN AGENT LITTLE’S ALLEGED
DELAY IN DELIVERING TO THEM A COPY OF THE LOAN APPRAISAL UPON PLAINTIFFS’ VERBAL
REQUEST AND BEFORE THE CONSUMMATION OF THE PURCHASE. THIS THEORY OF LIABILITY IS
UNSUPPORATABLE AT LAW.
On review of their Opposing Argument, it is apparent that the gravamen of Plaintiffs’ claims against Defendant COATS is
based on the timing of loan agent LITTLE’S compliance with their requests for a copy of the loan appraisal. They bemoan
the substance of the appraisal but do not suggest that this Defendant is somehow responsible for the allegedly faulty analysis
offered in it. The thrust of the complaint under all alleged causes of action focuses on the alleged withholding of the appraisal
until after close of escrow despite prior verbal requests for a copy of it. They argue that this Defendant is responsible “to
make sure that the appraisal on the Amanate Property was timely delivered to the Ummels.” (Plaintiffs’ Points & Authorities
233
p.3, 1. 5-6.)
Accordingly, Plaintiffs seem to imply that loan agent Little had a duty to provide them for a copy of the appraisal before the
close of escrow upon Plaintiffs’ prior verbal request and the breach of that duty makes Defendant COATS, as the principal
mortgage lender, liable when they allegedly overpaid for the purchase before reviewing the appraisal. The appraisal itself
concluded that the house was worth the very $1.2 million that the Plaintiffs paid for it. Plaintiffs suggest that had they viewed
the appraisal prior to closing escrow they would have realized that it was in error and refused to conclude the purchase at that
price.
Plaintiffs offer absolutely no legal authority supporting this wholly convoluted theory of liability against a loan broker. By
what legal authority do we measure the timeliness of a loan broker’s actions in providing a copy of an appraisal to his
borrower client? Plaintiffs offer nothing! By what legal authority is a loan broker held liable to his borrower client for their
overpayment on the purchase of the property securing the loan? Plaintiffs offer nothing! By what legal authority can a delay
in providing a copy a loan appraisal prepared by an independent appraiser subject the loan agent to liability for an ill-advised
purchase as opposed to an ill-advised loan? Once again, Plaintiffs offer nothing!
By contrast, this Defendant has identified an appropriate legal standard for defining the applicable duties of a loan broker. A
mortgage broker is a real estate licensee whose conduct is regulated by the Department of Real Estate. (See Cal Bus. & Prof.
Code §10131.) A mortgage broker may be authorized to act as the lender or, in the alternative, to make commitments on
behalf of the lender. (See Cal. Bus. & Prof Code §10176(k).)
Moreover, a mortgage broker, as the lender or operating on behalf of the lender, is subject to a very specific legal protocol in
responding to borrower requests for a copy of an appraisal. Cal Bus. & Prof. Code §11423(b) requires that such requests be
made in writing. Plaintiffs allege having made verbal requests. In responding to such requests, Section 11423(c) says that the
lender has a duty to provide a copy of the appraisal by the fifteenth (15th) day after receiving the appraisal. Plaintiffs allege
that the appraisal was completed by July 20 (First Amended Complaint 120) and concede that they closed the sale a mere
nine (9) days later on July 29. (First Amended Complaint ¶31). - As such, the legal deadline for delivering a copy of the
appraisal had not yet expired.
Plaintiffs argue mat this Defendant “overreads” the significance of Cal Bus. & Prof. Code §11423 and that a mortgage broker
is not a “lender” for the purpose of that statute. Under this argument, there would be imposed on mortgage broker Little, and
his principal Defendant COATS, a more rigorous duty of care to his client borrower than the lending entity itself would have
in sharing a loan appraisal with a prospective borrower. Under this scenario, loan agents throughout the state would be put in
untenable situations with conflicting duties to their borrower and lender clients, respectively. For example, they could be
compelled to comply with a borrower’s oral request for a copy of an appraisal in less than fifteen (15) days when its lender
client, in reliance on Section 11423, declines to provide the appraisal without a written request and until just before the
expiration of the fifteenth (15th) day. Plaintiffs offer no legal authority in support of the proposition that a loan broker must
promptly comply with his borrower client’s verbal request for a copy of an appraisal and, if he fails to do so, he runs the risk
of being liable to a client who proceeds to purchase property for an inflated price without first seeing the appraisal itself.
Plaintiffs’ argument defies law, logic, and common sense. A loan broker is tasked with finding money for clients and not
with guiding them in locating property to purchase for a fair price. The loan broker’s duties and consequent liability are based
on the loan transaction itself (See, e.g., Wyatt v. Union Mortgage Co. (1978) 24 Cal. 3d 773.) He is not responsible for the
terms and conditions of the underlying purchase. Plaintiffs muddy the legal waters between the duties of a purchase agent and
those of a loan agent. They offer no legal support for loan agent liability to a borrower client who allegedly overspends not in
the loan transaction itself but in the purchase of the underlying property securing the loan.
II.
PLAINTIFFS FAIL TO MAKE ANY FACTUAL ALLEGATIONS THAT WOULD SUPPORT LIABILITY
AGAINST DEFENDANT COATS FOR ANY AFFIRMATIVE REPRESENTATIONS MADE BY HIS AGENT
LITTLE ACTING AS A LOAN AGENT.
234
In Section IV of their argument, Plaintiffs would have this Court believe that they have stated facts supporting liability for
representations made by Agent Little on behalf of Horizon Pacific Financial aka Defendant COATS.
A reading of the First Amended Complaint reveals conclusionary references without essential factual allegations suggesting
that the representations supporting potential liability were made by Agent Little as a loan agent working for Defendant
COATS. Paragraph 35, as referenced in the argument, attempts to cast a large net over all representations made by Agent
Little. Plaintiffs suggest that everything he stated was in his dual capacity as purchasing agent working for Defendant
REMAX as well as loan agent working for Defendant COATS.
However, a close look at the representations themselves shows that they were made about the value of the home itself as
priced for purchase rather than anything to do with the loan needed to complete the purchase. These representations are found
in Paragraph 37. They deal with negotiations to get the best price for the property rather than any terms, conditions, or
requirements for financing the purchase thru a loan facilitated by Agent Little serving Plaintiffs as their loan agent.
Moreover, Plaintiffs, in general allegations incorporated in all of their causes of action, expressly recognize the distinction
between Agent Little’s role as a purchasing agent on behalf of Defendant REMAX and his subsequent, distinct role as a loan
agent on behalf of Defendant COATS. In Paragraph 14, it is alleged that on or about April 2, 2005, Agent Little was retained
to represent them as “in the capacity of a real estate broker and agent in the Ummels’ prospective purchase of a property in
San Diego County”. (The clear reference here is to Agent Little working on behalf of Defendant REMAX.) The paragraph
goes on to allege that “[s]ometime later, Agent Little, on behalf of Horizon, came to a verbal agreement with the Ummels to
represent the Ummels in the capacity of a real estate broker and agent in the arrangement of the Ummels’ loan for the
purchase of a property in San Diego County”.
Accordingly, by the Plaintiffs’ own allegations, there is a clear distinction both in time and capacity in Agent Little’s role as
an agent in finding suitable property to purchase (i.e., working for Defendant REMAX) and his ancillary role, after
negotiating the purchase of that property, in securing a loan to finance the purchase (i.e., working for Defendant COATS).
Representations about the purchase would have been made in his capacity as a REMAX agent notwithstanding Paragraph
35’s scattergun, inconsistent references to the contrary. Representations about the financing for the purchase would have been
in his capacity as a HORIZON aka COATS’ agent. Any offhand remarks about the purchase itself made by Little as a loan
agent would have been purely gratuitous comments made after Plaintiffs had executed a contract to purchase the property for
an allegedly inflated $1.2 million.
In sum, the pleading of facts speak louder than pleading of empty conclusions inconsistent with the alleged facts. None of the
alleged representations deal with issues that were within the scope of Agent Little’s duties as a loan broker on behalf of
Defendant COATS.
III.
PLAINTIFFS DO NOT ALLEGE FACTS SUPPORTING A BREACH OF THE IMPLIED WARRANTY OF GOOD
FAITH AND FAIR DEALING AS IT REALTES TO THE LOAN TRANSACTION ITSELF.
In Section VI, Plaintiffs misstate the argument made in this Defendant’s opening brief. Defendant acknowledges that
Plaintiffs have pled the existence of a verbal agreement with Defendant COATS as a loan broker, working thru his Agent
Little, to secure a loan to facilitate the underlying purchase.
The point made in the opening brief was that Plaintiffs have failed to allege facts dealing with the agreement to facilitate
the loan that would support liability based on any breach of the implied warranty of good faith and fair dealing with respect
to that agreement. Plaintiffs attempt to throw mud against the wall in the vain hope that liability will stick against some
Defendant based on alleged fraud in connection with their acceptance of an inflated purchase price. They allege nothing
whatsoever suggesting that Agent Little, on behalf of Defendant COATS, did or failed to do anything that a trier of fact could
find to be a breach of the implied covenant on the loan facilitation as opposed to the purchase agreement.
Plaintiff misses the argument, sets up a straw man, and then knocks him down.
235
IV.
CONCLUSION
Plaintiffs offer nothing to salvage a wholly specious claim against a loan broker for conduct and omissions directed at Agent
Little as a purchase agent on behalf of Defendant REMAX and Defendant CONTENTO as the appraiser. Plaintiffs have no
conceivable action against a loan agent for allegedly being defrauded into overpaying on a purchase agreement for which that
agent played no role. No amount of tinkering with the allegations in the complaint would be sufficient to buttress a claim that
is fatally flawed at its core.
For these reasons, the moving Defendant respectfully requests that its demurrer be granted and that further amendment he
denied as an exercise in futility.
Dated: 10-13-06
LAW OFFICE OF JOSEPHL. STINE
<<signature>>
By Joseph L. Stine
Attorney for Defendant COATS ENTERPRISE
End of Document
236
Opposition of Plaintiffs to Defendant Remax’s and Defendant Agent
Little’s Jointly Filed Demurrer to Plaintiff’s First Amended
Complaint
Enterprise, Inc.; Michael Little; individually; John Ontento, SRO, a sole proprietor; Does 2 through 50, Defendants. |
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California
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1111
Comment:
San Diego County
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little; individually; John Ontento, SRO, a sole proprietor;
No. GIN 054 088.
October 5, 2006.
Opposition of Plaintiffs to Defendant Remax’s and Defendant Agent Little’s Jointly Filed Demurrer to Plaintiff’s
William M. Aron, Esq., SBN 234408, Jeffrey L. Hogue, Esq., SBN 234557, Aron & Hogue, 525 B. Street, Suite 1500, San
Diego, CA 92101, Telephone: (619) 858-4748, Attorneys for Plaintiffs Martha and Vernon Ummel.
Assigned to the Honorable Lisa Guy-Schall.
Time: 1:30 p.m.
Dept: 31
Plaintiffs, Martha Ummel and Vemon Ummel (collectively, the “Ummels”) submit the following Memorandum of Points and
Authorities in support of their Opposition to Defendant Last Dance, Inc.’s aka RE/MAX (“Defendant Remax”) and Michael
Little’s (“Defendant Agent Little”) jointly filed demurrer to Plaintiffs’ First Amended Complaint (“FAC.”)
I.
MATERIAL FACTUAL ALLEGATIONS.
The Ummels were an elderly out-of-town couple, looking for residential property to purchase in the San Diego County area,
(FAC, ¶8.) Unfamiliar with the San Diego County, they engaged the services of various real estate professionals to assist
them. (FAC, ¶¶8-17.) The Ummels employed Defendant Agent Little, an employee of real estate broker Defendant Remax.
(FAC, ¶¶ 4, 14.) Agent Little was also an employee of mortgage broker Coats Enterprise, Inc. aka Horizon Pacific Financial.
(“Horizon.”) (FAC, ¶4.)
During the course of his relationship with the Ummels, Defendant Agent Little acted as both an authorized agent for
Defendant Remax and for Horizon, and Defendant Remax took no action to prevent Defendant Agent Little’s dual role.
(FAC, ¶35.) Through Defendant Remax, Defendant Agent Little was to perform real estate services on behalf of the
Ummels foil their prospective San Diego home purchase, and Defendant Agent Little and the Ummels came to an
agreement in this regard. (FAC, ¶14.)
On or about May 29, 2005, the Ummels entered escrow for 1657 Amante Court Carlsbad, CA (“Amante Property.”) (FAC,
238
¶24.) During the escrow period, the Ummels requested Defendant Agent Little, the authorized agent of Defendant Remax,
to arrange the appraisal of the Amante Property. (FAC, ¶27.) Defendant Agent Little, acting as agent of the Ummels,
retained the services of appraiser John Contento, SRO, on behalf of the Ummels. (FAC, ¶28.) On or about July 21, before the
close of escrow, Defendant Agent Little, the authorized agent of Defendant Remax, informed the Ummels that the
appraisal had been completed. (FAC, ¶29.) However, unbeknownst to the Ummels, the appraisal misrepresented that the
Amante Property was worth $1,200,000 when the true appraised value of the Amante Property was only $1,050,000. (FAC,
¶¶41-44.) Also, unbeknownst to the Ummels, Defendan Agent Little, the authorized agent of Defendant Remax, failed to
disclose very materia information concerning recent home sales in the immediate area of the Amante Property that would
have alerted the Ummels to their eventual overpayment. (FAC, ¶38.) In reliance on the aforementioned misrepresentations
made by Defendant Agent Little by and on behalf of Defendant Remax, the Ummels were induced to and did close escrow
and purchase the Amante Property for the inflated price of $1,200,000. (FAC, ¶31, 45.) Had the Ummels known the actual
facts, they would not have taken such action. (FAC, ¶45.)
To compound their liability, Defendant Agent Little, as authorized agent of Defendant Remax, withheld the copy of the
appraisal report from the Ummels until after the close of escrow. (FAC, ¶¶ 27-32.) The appraisal was withheld from the
Ummels, despite their repeatec requests to Defendant Agent Little, the authorized agent of Defendant Remax, to deliver a
copy of the appraisal to them. (FAC, ¶¶ 27-32.)
As shown below, this Court should overrule Defendant Remax’s and Defendant Agent Little’s demurrer because the
Ummels have adequately pled facts sufficient to support all of the causes of action discussed herein. The defendants have not
advanced any relevant legal authority that would preclude the Ummels from pursuing any (and certainly not all) of the causes
of action alleged in the FAC. Additionally, most of defendants’ arguments in their demurrer represent oppositions to the
material allegations (i.e., facts and evidence) made in the FAC, rather than challenging the sufficiency of the claims raised
therein. As such, the appropriate forum for many of the arguments made in defendants’ demurrer would be in their Answer
where they can contest or deny the allegations made in the FAC, rather than in a demurrer where only the sufficiency of the
pleadings should be called into question.
In the alternative, should this Court grant Defendant Remax’s and Defendant Little’s demurrer, in whole or part, it should
grant Ummels leave to amend in the interests of justice. The Ummels should have an opportunity to present their claims and
such leave to amend would not prejudice either Defendant Remax or Defendant Agent Little.
II.
THE COURT SHOULD NOT CONSIDER DEFENDANTS’ DEMURRER BECAUSE ITS SERVICE ON THE
UMMELS WAS DEFECTIVE.
Cal. Civ. Proc. §1013(e) provides, “[s]ervice by facsimile transmission is permitted only where the parties agree and a written
confirmation of that agreement is made.” (Emphasis Added.) Defendant Remax and Defendant Agent Little served their
demurrer via a facsimile dated September 15, 2006. The Ummels never received any other copy of the defendants’ demurrer.
The Ummels have requested a copy of the defendants’ proof of service, but have not received one to date.
The Ummels never agreed with Defendant Remax, nor Defendant Agent Little, to accept facsimile service. The Ummels
were not even asked. Additionally, the Ummels never received any written confirmation demonstrating that said defendants
thought it was acceptable to serve the Ummels via facsimile. Accordingly, defendants’ demurer is not properly before the
Court; therefore, it should not be heard, nor considered by this Court.
Without waiving the foregoing, if the Court is inclined to consider Defendant Remax’s and Defendant Little’s demurrer, the
Ummels present the following arguments in opposition.
III.
239
THE UMMELS HAVE PROPERLY ALLEGED FRAUD (1st COA) AND FRAUDULENT CONCEALMENT (2nd
COA).
Defendant Remax and Defendant Agent Little argue that the Ummels have not stated a cause of action for fraud (1st COA)
and fraudulent concealment (2nd COA). (Demurrer, p. 4.) In support of this position, defendants argue that the Ummels
cannot prove either reliance or damages as to these causes of action, and that the Ummels’ claims lack specificity. As shown
below, defendants’ argument fails.
A. The Ummels have pled the reliance and damage elements of fraud (1st COA) and fraudulent concealment (2nd COA).
A demurrer can be used only to challenge defects that appear on the face of the pleading or for matters outside the pleading
provided that they are judicially noticeable. (Blank v. Kirwan (1985) 39 C3d 311, 318; Dowbedian v. Mercury Ins. Co.
(2004) 116 CA 4th 968, 994. (Emphasis Added.).) No other extrinsic evidence may be considered (i.e., no “speaking
demurrers”). (Ion Equip. Corp. v. Nelson (1980) 110 CA3d 859, 862.) No matter how unlikely or improbable the causes of
action plead in a plaintiff’s complaint, a plaintiff’s allegations must be accepted as true for the purposes of ruling on the
demurer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 CA3d 593, 604.) Problems of proof are irrelevant. The
question of whether plaintiff can prove any of his allegations, or possible difficulties in making such proof, is of no concern
in ruling on a demurer. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 C3d 197, 213-214.)
A plain reading of ¶¶45-47 and ¶¶55-58 of the FAC make clear that the Ummels have pled reliance and damages as to fraud
(1st COA) and fraudulent concealment (2nd COA). In the demurrer, Defendant Remax and Defendant Agent Little attempt to
disprove the Ummels’ reliance and damage allegations with extrinsic evidence. (Demurrer, pp. 6-7.) Specifically, the
defendants claim (1) the “[Ummels] were looking for property up to the cost of $1,400,000.00” (Demurrer, p. 6); (2) the
“[Ummels] did not present a counter-offer to Sellers counter of $1,200,000.00 for the [Amante] Property” (Demurrer, p. 6);
(3) the “[Ummels] made an offer on another property for $1,200,000.00, prior to the [Amante] Property” (Demurrer, p. 6);
and (4) “[a]ny damages claimed by [the Ummels are] the result of the fluctuating real estate market.” (Demurrer, p. 7.)
Statements (1) - (4) above were never alleged in the FAC. Rather, they represent extrinsic evidence presented by the
defendants. As such, Defendant Remax and Defendant Agent Little should be precluded from using extrinsic evidence to
disprove any of the causes of action in the FAC.
B. The Ummels have pled fraud (1st COA) and fraudulent concealment (2nd COA) with sufficient particularity.
Defendant Remax and Defendant Little claim that the Ummels’ fraud (1st COA) and fraudulent concealment (2nd COA)
claims fail to plead facts with sufficient particularity. (Demurrer, pp. 4, 7.) While it is true that one who pleads fraud needs to
allege facts rather than general conclusions, a court should not look suspiciously at the complaint or seek to absolve the
defendant from liability on the highly technical requirements of form in pleadings. (5 Witkin, California Procedure §670 (4th
ed. 1997).) Pleading facts in ordinary and concise language is permissible in fraud cases as in any other, and liberal
constriction of the pleading is much a duty of the court in these as in other cases. (Id.) Also, the requirement of “particularity”
in pleading fraud should not be overdone. Complaints must be kept to a reasonable length. If they are too detailed (e.g.
setting forth each statement verbatim, specifying the time, place and medium by which made), they may provide less
effective notice and be less useful in framing the issues, than would a shorter, more generalized version. (Comm. on
Children’s Television Inc. v. Gen. Foods Corp., 35 Cal.3d 197, 213-214 (1983).)
The elements of fraud are: (1) a false representation or concealed material fact, (2) that the defendant knew was false or did
not have sufficient knowledge to warrant the representation. (3) with the intent to induce the Plaintiffs to act on the false
representation or concealed material fact, (4) that plaintiff relied upon, (5) to plaintiff’s damage. (Reed v. King (1983) 145
Cal.App.3d 261, 26*4.) As defendants allege, a cause of action for fraudulent concealment contains the same elements of
fraud, except that fraudulent concealment includes the element of duty to disclose. (Demurrer, p. 4.)
Turning to the allegations, the the FAC specifically outlines what the false representations were (that the Amante Property
was worth $ 1,200,000 when the true appraised value was only $1,050,000 (FAC, ¶44), that other homes in the immediate
240
neighborhood of the Amante Property were all selling for over $1.2 million when they were not (FAC, ¶¶37-38), and a home
across the street from the Amante Property was selling for the same price as the Amante Property when it was not (FAC,
¶¶37-38));1 who they were made by (Defendant Agent Little and Defendant Remax (FAC, ¶¶37, 39)); the circumstances
surrounding the representations (preceding the offer and during the escrow period for the Amante Property (FAC, ¶¶24,
27-31)), the alleged purposes for which the misrepresentations were made (in order to induce the Ummels to purchase the
Amante Property (FAC, ¶45), and the damages caused (purchasing the Amante Property for far in excess of the fair market
value and selling the San Rafael Property for far less than fair market value (FAC, ¶¶26, 46.).)
1
The FAC also alleges several other misrepresentations by Defendant Agent Little and Defendant Remax in ¶¶37-44.
Concerning the additional pleading requirement to state a fraudulent concealment cause of action, paragraph 55 of the FAC
clearly alleges that Defendant Agent Little and Defendant Remax “owed a duty to the Ummels to disclose facts materially
affecting the value or desirability of the Amante Property.”
As shown the FAC provides more than adequate detail and specificity, and has been pled correctly. Consequently, Defendant
Remax’s and Defendant Little’s demurrer on this issue should be overruled.
IV.
THE UMMELS PROPERLY ALLEGED NEGLIGENT MISREPRESENTATION (5th COA).
Unlike fraud, negligent misrepresentation does not require allegations of actual knowledge of the falsity of the alleged
fraudulent representation, but merely facts showing the representation was made without reasonable grounds for believing it
to be true. (5 Witkin, California Procedure §683 (4th ed. 1997).) Those facts were pled. Paragraph 70 of the FAC clearly
states that “[Defendant Remax and Defendant Agent Little] made said representations without any reasonable ground for
believing it to be true and in a manner not warranted by each defendant’s information.” Further, the FAC incorporates by
reference the specific allegations made hi the cause of action for fraud against Defendant Remax and Defendant Agent Little.
(FAC, ¶68.) It follows that the Ummels have sufficiently stated facts to constitute a cause of action for negligent
misrepresentation, in addition to fraud.
V.
THE UMMELS PROPERLY ALLEGED BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR
PEALING (3rd COA), NEGLIGENCE (4th COAL AND BREACH OF FIDUCIARY DUTY (6th COA).
Defendant Remax and Defendant Agent Little argue that the Ummels have not properly alleged breach of the implied
covenant of good faith and fair dealing (3rd CO A), negligence (4th COA), and breach of fiduciary duty (6th COA).
Defendants argue that the Ummels’ causes of action are defective because the Ummels suffered no damage. (Demurrer, p. 9.)
Defendant Remax and Defendant Agent Little attempt to support this position by claiming that the appraisal (which the
Ummels allege is fraudulent) supports the $1,200,000 purchase price the Ummels paid for the Amante Property. (Demurrer,
pp. 9-10.) Defendants’ argument is misguided two reasons.
First, a material allegation in the FAC is the fact that the appraisal is fraudulent (FAC, ¶¶41-44.) Specifically, the Ummels
allege that the true appraised value of the Amante Property is $1,050,000, which is $150,000 less than what the Ummels
purchased the Amante Property -- implying the Ummels suffered no less than $150,000 in damages. (FAC, 44.) Defendant
Remax and Defendant Little advance no legal authority to support its position that the public is precluded from suing a
perpetrator in tort for any malfeasance in connection with the purchase price of residential real estate so long as an appraisal2
coincides with the purchase price.
241
2
And, in the instant action the plaintiffs allege the appraisal is fraudulant.
Second, the Ummels allege damages elsewhere in the FAC. Setting aside the defective appraisal, the Ummels further allege
damages in that they (1) substantially overpaid for the Amante Property (FAC, ¶38), (2) suffered “substantial damage” as a
result of the negligence of Defendant Remax and Defendant Agent Little (FAC, ¶67), and (3) “purchased the Amante
Property for a greatly exorbitant price, far in excess of the fair market value,” (FAC, ¶¶46, 73, 78, 82.) Further, Defendant
Agent Little’s and Defendant Remax;s false representations caused the Umraels to suffer additional damage as a result of
accepting a below market price for their prior home that they needed to sell to purchase the Amante Property. (FAC, ¶26.)
The Ummels properly allege breach of the implied covenant of food faith and fair dealing (3rd COA), negligence (4th COA),
and breach of fiduciary duty (7th COA). Consequently, Defendant Remax’s and Defendant Agent Little’s demurrer on mis
issue should be overruled.
VI.
THE UMMELS PLEADED A CONSTRUCTIVE “FRAUD” AS OPPOSED TO A CONTRUCTTVE “TRUST”
CAUSE OF ACTION (6th COA) AND RESPECTFULLY REQUEST LEAVE TO AMEND.
The Ummels inadvertently misalleged a constructive trust cause of action as opposed to a constructive fraud cause of action.
This can be corrected by amendment. (Cal. Code of Civ. Proc. §473.) The essential elements in a constructive fraud cause of
action are as follows: (1) fiduciary or confidential relationship, (2) breach of that duty, (3) advantage gained, (4) justifiable
reliance, (5) causation, and (6) damages. (Gold v. Los Angeles Democratic League, 49 Cal. App. 3d 365, 373 (1975);
Salahutdin v. Valley of Cal., Inc. 24 Cal, App. 4th 555, 562 (1994); Demetris v. Demetris, 125 Cal. App. 2d 440, 444 (1954);
Odorizzi v. Bloomfield Sch. Dist., 246 Cal. App. 2d 123, 129 (1966); Tyler v. Children’s Home Soc’y of Cal., 29 App. 4th
511, 549.) In the FAC, the Ummels properly allege each of the aforementioned elements for a constructive fraud cause of
action. (FAC, ¶¶ 75-79.)
Denying leave to amend is an abuse of discretion where there is any reasonable possibility that the plaintiff can state a valid
cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The Ummels can state a valid cause of action by
replacing “trust” with “fraud.” Accordingly, this Court should grant the Ummels leave to amend the FAC accordingly.
VII.
IN THE ALTERNATIVE. LEAVE TO AMEND SHOULD BE GRANTED TO THE UMMELS IN THE INTEREST
OF JUSTICE.
There is a policy of great liberality in allowing amendments at any stage of the proceeding so as to dispose of cases upon
their substantial merits where such authorization does not prejudice the substantial rights of others. (Douglas v. Sup. Ct.
(1989) 215 Cal.App.3d 155, 158.) Moreover, it is a rare case in which a court will be justified in refusing a party leave to
amend his pleading so that he may properly present his case. (Id.)
Although Defendant Remax’s and Defendant Agent Little’s demurrer routinely makes blanket arguments that the demurrer
should be sustained and the Ummels should not be provided leave to amend, defendants fail to assert any justification for
denying the Ummels such right. Both defendants likewise fail to assert any justification that granting the Ummels leave to
amend would prejudice Defendant Remax or Defendant Agent Little in any way. If this Court determines that the Ummels’
pleadings are in some manner deficient, then it is respectfully requested that this Court grant the Ummels leave to amend
accordingly in order to preserve its causes of actions against Defendant Remax and Defendant Agent Little.
242
VIII.
CONCLUSION
For the foregoing reasons, the Ummels respectfully request that this Honorable Court overrule the demurer in its entirety,
except as to the Sixth Cause of Action, whereby the Ummels respectfully request this Court for leave to amend. In the event
that this Court sustains some or all of the demurer, the Ummels respectfully request that this Court grant the Ummels leave to
amend the FAC accordingly.
ARON & HOGUE
By: <<signature>>
WILLIAM M. ARON, ESQ.
JEFFKEJ L. HOGUE, ESQ.
Attorneys for Plaintiffs,
MARTHA UMMEL, VERNON UMMEL
End of Document
243
Plaintiffs’ Opposition to Defendant Horizon’s Demurrer to Plaintiffs’
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
October 5, 2006.
Plaintiffs’ Opposition to Defendant Horizon’s Demurrer to Plaintiffs’ First Amended Complaint
Complaint Filed: July 19; 2006
Time: 1:30 p.m.
Dept: 31
Plaintiffs, Martha Ummel and Vernon Ummel (collectively, the “Ummels”) submit the following Memorandum of Points and
Authorities in support of their Opposition to Defendant Coats Enterprise, Inc.’s aka Horizon Pacific Financial (“Defendant
Horizon”) demurrer to Plaintiffs’ First Amended Complaint (“FAC”).
I.
The Ummels were an elderly out-of-town couple, looking for residential property to purchase in the San Diego County area.
them. (FAC, ¶¶18-17.) The Ummels employed Michael Little (“Agent Little”), an employee of mortgage broker Defendant
Horizon. (FAC, ¶¶ 4, 14.) Agent Little was also an employee of real estate broker Last Dance Inc. aka REMAX (“Remax.”)
(FAC ¶9.)
During the course of his relationship with the Ummels, Agent Little acted as both an authorized agent for Defendant
Horizon and for Last Dance, Inc. aka REMAX (“Remax”), and Defendant Horizon took no action to prevent Agent Little’s
dual role. (FAC, ¶35.) Through Defendant Horizon, Agent Little was to arrange a loan for the purchase of the Ummels
prospective San Diego home purchase, and Agent Little and the Ummels came to an agreement in this regard. (FAC ¶14.)
On or about May 29, 2005, the Ummels entered escrow for 1657 Amante Court, Carlsbad, CA (“Amante Property.”) (FAC,
¶24.) During the escrow period, the Ummels requested Agent Little, the authorized agent of Defendant Horizon, to arrange
the appraisal of the Amante Property. (FAC, ¶27.) Agent Little, the authorized agent of Defendant Horizon, acting as agent
245
of the Ummels, retained the services of appraiser John Contento, SRO, on behal of the Ummels. (FAC, ¶28.) On or about
July 21, before the close of escrow, Agent Little, the authorized agent of Defendant Horizon, informed the Ummels that the
appraisal had been completed. (FAC, ¶29.) However, unbeknownst to the Ummels, the appraisal misrepresentec that the
Amante Property was worth $1,200,000 when the true appraised value of the Amante Property was only $1,050,000.00.
(FAC, ¶¶41-44.) In reliance on the misrepresentations in the appraisal, made individually and in concert with Agent Little by
and on behalf of Defendant Horizon and Remax, the Ummels were induced to and did close escrow and purchase the
Amante Property for the inflated price of $1,200,000. (FAC 131, 35, 45.)
To compound Defendant Horizon’s liability, Agent Little, as authorized agent of Defendant Horizon, withheld the copy of
the appraisal report from the Ummels until after the close of escrow. (FAC, ¶¶ 27-32.) The appraisal was withheld from the
Ummels, despite their repeated requests to Agent Little, the authorized agent of Defendant Horizon, to deliver a copy of the
appraisal to them. (FAC, ¶¶ 27-32.) As stated, Defendant Horizon was responsible for arranging the loan for the Ummels to
purchase the Amante Property. (FAC, ¶14.) Incumbent in Defendant Horizon’s responsibility was, among other tilings, to
make sure that the appraisal on the Amante Property was timely delivered to the Ummels. (See FAC generally.)
As shown below, this Court should overrule Defendant Horizon’s demurrer because the Ummels have adequately pled facts
sufficient to support all of the causes of action discussed herein. Defendant Horizon has not advanced any relevant legal
authority that would preclude the Ummels from pursuing any (and certainly not all) of the causes of action alleged in the
FAC. In the alternative, should this Court grant Defendant Horizon’s demurrer, in whole or part, it should grant the Ummels
leave to amend in the interests of justice. The Ummels should have an opportunity to present their claims and such leave to
amend would not prejudice Defendant Horizon.
II.
DEFENDANT HORIZON OVERHEADS THE APPLICABILITY OF CALIFORNIA BUSINESS & PROFESSION
§11423.
Defendant Horizon relies heavily on Cal. Bus. & Prof. §11423, claiming that the Ummels fail to state any of the causes of
action asserted in the FAC against Defendant Horizon. (Demurrer, p.3.) Defendant’s analysis is fundamentally flawed for
three main reasons: (1) the Ummels did not attempt to allege breach of § 114231 as a cause of action in the FAC; (2) § 11423
does not apply because Defendant Horizon is not a lender; and (3) if this Court should find otherwise, then strict compliance
with §11423 does not absolve Defendant Horizon from all conceived forms of liability such as the tort causes of action
alleged in the FAC.
1
All statutory references are to the Business and Professions Code unless indicated otherwise.
Initially, the Ummels have not alleged the breach of §11423 as a cause of action against Defendant Horizon. If they did, then
perhaps Defendant Horizon’s discussion of §11423 may be germane. However, the Ummels have not made any such
allegations. As such, §11423 has no bearing in the instant tort action against Defendant Horizon.
Second, §11423 speaks to affirmative duties imposed on lenders, not mortgage brokers. Defendant Horizon is a mortgage
broker, and the Ummels are suing Defendant Horizon in its capacity as a mortgage broker. A mortgage broker is a person or
entity that arranges financing between borrowers and lenders. A “lender” is a person or entity from which something is
borrowed.2 There is a fundamental difference between the two. Defendant Horizon apparently over-reads §11423 and equates
a mortgage broker with a lender, or misreads the FAC assuming the Ummels are suing Defendant Horizon in the capacity of
lender. Section §11423(b) and (c state:
2
Blacks Law Dictionary 7th ed.
246
(b) A lender in a loan transaction secured by real property shall provide notice as described in this section to a loan applicant
of the applicant’s right to receive a copy of the appraisal, provided he or she has paid for the appraisal. An applicant’s written
request for a copy of an appraisal must be received by the lender no later than 90 days after (1) the lender has provided notice
of the action taken on the application, including a notice of incompleteness, or (2) the application has been withdrawn.
(Emphasis Added.)
(c) The lender shall mail or deliver a copy of an appraisal within 15 days after receiving a written request from the applicant,
or within 15 days after receiving the appraisal, whichever occurs later. (Emphasis Added.)
Defendant Horizon is not a lender and is not being sued as such. Section 11423 is no bar to this tort action against Defendant
Horizon.
Lastly, even if §11423 did apply to Defendant Horizon, then whether or not there was strict statutory compliance with
§11423 is irrelevant as to the tort causes of action alleged in the FAC. As such, whether a written request was made or not is
irrelevant to this action. The FAC alleges fraud (1st COA), fraudulent concealment (2nd COA), breach of the covenant of
good faith and fair dealing (3rd COA), negligence (4th COA), negligent misrepresentation (5th COA) constructive trust (6th
COA), and breach of fiduciary duty (7th COA) against Defendant Horizon All of the elements of these causes of action were
alleged, and Defendant Horizon advances no legal authority to support its position that compliance with one statute could
preclude the public from suing it in tort for any malfeasance in connection with a real estate appraisal.
The Ummels’ allegations make it clear that Defendant Horizon’s conduct was a substantial factor in causing the damage the
Ummels suffered. Its coincidental compliance with a statute does not render it immune for all other torts committed in
connection with an appraisal.
III.
THE APPRAISAL WAS COMPLETED PRIOR TO THE CLOSE OF ESCROW AND WAS WITHIN THE
CUSTODY AND CONTROL OF DEFENDANT HORIZON.
Defendant Horizon contends that it can bear no liability because the Ummels relied on Agent Little (working as a real estate
agent for Remax) in deciding to purchase the Amante Property and because the appraisal was completed after the Ummels
“obligated themselves to purchase the properly at that price.” (Demurrer, p. 4.) The allegations contradict this.
As pled, the appraisal was completed before the close of escrow on the Amante Property. (FAC, ¶29.) As such, the Ummels
could not possibly have “obligated” themselves to purchase the Amante Property at $1,200,000 before the appraisal was
completed because they still could have cancelled escrow at this point. The fact of the matter is that Defendant Horizon had
possession of the appraisal, and it refused to deliver the appraisal to the Ummels despite several requests from the Ummels
for the appraisal, and despite the fact mat the Ummels specifically requested that they wanted to see the appraisal to confirm
the value of the Amante Property. (FAC, ¶¶27-32.)
IV.
THE FAC ALLEGES THAT AGENT LITTLE MADE ALL THE REPRESENTATIONS WHILE ACTING
WITHIN THE COURSE OF HIS AGENCY AND AUTHORITY FOR DEFENDANT HORIZON.
Defendant Horizon appears to argue the FAC does not identify whether Agent Little was working within the scope of his
agency with Remax or with Horizon at the time that the Ummels were requesting a copy of the appraisal. (Demurrer, p.6.)
This is also not accurate. The FAC clearly states that Agent Little “is the authorized agent of defendants Remax and Horizon,
and at the time of making the representations herein alleged and at all times herein mentioned, was acting within the course
and the scope of his respective agency and authority for defendants Remax and Horizon.” (Emphasis Added.) (FAC, ¶35.)
247
Further, the FAC alleges that the Ummels and Agent Little, on behalf of Defendant Horizon, came to a verbal agreement to
represent the Ummels shortly after the Ummels and Agent Little, on behalf of Remax, came to a verbal agreement on April 2,
2005. (FAC ¶14.) Agent Little served in a dual capacity during the course of his relationship with the Ummels, and the
Ummels alleged it as such.
V.
DEFENDANT HORIZON CANNOT CHALLENGE THE PLEADINGS BECAUSE OF AMBIGUITY IN A
GENERAL DEMURRER.
Although not entirely clear from its demurrer, Defendant Horizon also appears to claim the Ummels’ allegations are
ambiguous. (Demurrer, p. 6.) To the extent mat Defendant Horizon makes this claim, it is not well taken in a general
demurrer, which is what Defendant Horizon has filed with this Court. As stated by the court in Johnson v. Mead (1987) 191
CA3d 156, 160, “[o]bjections that a complaint is ambiguous or uncertain, or that essential facts only appear inferentialiy, or
as conclusions of law, or by way of recitals, must be raised by special demurrer, and cannot be reached by general demurrer.”
Accordingly, since Defendant Horizon has filed a general demurrer with the Court, any claim that the FAC’s causes of action
should tail because of ambiguity must be overruled.
VI.
DEFENDANT HORIZON CANNOT “SUPPLEMENT” HIS DEMURRER BY INCORPORATING THE
ARGUMENTS MADE BY THE OTHER DEFENDANTS IN ITS DEMURRER.
Defendant Horizon requests that the memorandum of points and authorities in support of the demurrers filed by the other
defendants be incorporated as “supplemental argument in support of [Defendant Horizon’s] demurrer.” (Demurrer, p. 7.) The
Court should not consider these “supplemental” arguments for two reasons.
First, there is no legal mechanism to incorporate arguments made in other litigants’ demurrers by reference. A timely joinder
is required, and must be filed as served with the same statutory notice required for the underlying demurrer. (See Lerma v.
County of Orange (2004) 120 Cal.App.4th 709, 718-719, citing Frazee v. Seely (2002) 95 Cal.App.4th 627 at pp. 636-63.)
Defendant Horizon never filed a timely joinder.
Second, even if Defendant Horizon had filed a timely joinder filed, it still would have been improper because the net effect of
incorporating the other two defendants’ memorandum of points and authorities would have been to make the Defendant
Horizon’s memorandum of points and authorities far in excess of the maximum 15 page limit. CRC 313(d), (e).
If for some reason the Court does allow Defendant Horizon to incorporate and supplement its arguments in the demurrer,
then the Ummels ask that this Opposition also be supplemented with the opposing arguments set forth in the respective
oppositions against the other defendants to this action.
VI.
THE UMMELS PROPERLY ALLEGE BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR
DEALING (3rd COA).
Defendant Horizon claims that the Ummels have not properly alleged a breach of the implied covenant of good faith and fair
dealing cause of action because, according to Defendant Horizon, the Ummels failed to allege “a breach of any duty arising
248
under any contract with Defendant LITTLE as a mortgage loan broker working for Defendant [Horizon), his superior, in
brokering the loan.” (Demurrer, pp. 7-8.) Secondly, although somewhat convoluted, Defendant Horizon seems to argue that
the Ummels did not have an agreement with Defendant Horizon. (Demurrer, p.8.)
A plain reading of the FAC can dispose of both arguments, so Defendant Horizon may have simply overlooked these
allegations in the FAC. First, ¶62 of the FAC clearly alleges that “Defendants...Horizon...breached said implied covenant of
good faith and fair dealing...” of the agreement between the Ummels and Defendant Horizon. Secondly, the FAC
unequivocally alleges an agreement between Defendant Horizon and the Ummels on two occasions. (FAC, ¶¶ 14, 61).
Specifically, ¶14 of the FAC provides, “Agent Little, on behalf of Horizon came to a verbal agreement with the Ummels to
represent the Ummels in the capacity of a real estate broker and agent in the arrangement of the Ummels’ loan for the
purchase of a property in San Diego.” (Emphasis Added.) Additionally, ¶61 of the FAC alludes to an “aforementioned
agreement” between Defendant Horizon and the Ummels.
VII.
THE UMMELS PLED A CONSTRUCTIVE “FRAUD” AS OPPOSED TO A CQNTRUCTIVE “TRUST” CAUSE OF
ACTION (6th COA) AND RESPECTFULLY REQUEST LEAVE TO AMEND.
The Ununels inadvertently misalleged a constructive trust cause of action as opposed to a constractive fraud cause of action.
This can be corrected by amendment. (Cal. Code Civ. Proc. §473.) The essential elements in a constructive fraud cause of
action are as follows: (1) fiduciary or confidential relationship, (2) breach of that duty, (3) advantage gained, (4) justifiable
reliance, (5) causation, and (6) damages. (Gold v. Los Angeles Democratic League, 49 Cal. App. 3d 365, 373 (1975);
Salahutdin v. Valley of Cal., Inc. 24 Cal. App. 4th 555, 562 (1994); Demetris v. Demetris, 125 Cal. App. 2d 440, 444 (1954);
Odorizzi v. Bloomfield Sch. Dist., 246 Cal. App. 2d 123, 129 (1966); Tyler v. Children’s Home Soc’y of Cal., 29 App. 4th
511, 549.) In the FAC, the Ummels properly allege each of the aforementioned elements for a constructive fraud cause of
action. (FAC, ¶¶ 75-79.)
Denying leave to amend is an abuse of discretion where there is any reasonable possibility mat the plaintiff can state a valid
cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The Ummels can state a valid cause of action by
replacing “trust” with “fraud.” Accordingly, this Court should grant the Ummels leave to amend the FAC accordingly.
III.
IN THE ALTERNATIVE. LEAVE TO AMEND SHOULD BE GRANTED TO THE UMMELS IN THE INTEREST
OF JUSTICE.
amend his pleading so that he may properly present his case. (Id.)
Although Defendant Horizon’s demurrer routinely makes blanket arguments that the demurrer should be sustained and the
Ummels should not be provided leave to amend, Defendan Horizon fails to assert any justification for denying the Ummels
such right. Defendant Horizon likewise fails to assert any justification that granting the Ummels leave to amend would
prejudice Defendant Horizon in any way. If this Court determines that the Ummels’ pleadings are in some manner deficient,
then it is respectfully requested that this Court grant the Ummels leave to amend accordingly in order to preserve its causes of
actions against Defendant Horizon.
249
IX.
CONCLUSION
For the foregoing reasons, the Ummels respectfully request that this Honorable Court overrule Defendant Horizon’s
demurrer, except as to the Sixth Cause of Action, whereby the Ummels respectfully request this Court for leave to amend. In
the event that this Court is inclined to sustain any portion of Defendant Horizon’s demurrer, the Ummels respectfully request
that this Court grant the Ummels leave to amend the FAC accordingly.
ARON & HOGUE
By: <<signature>>
JEFFREY L. HOGUE, ESQ.
End of Document
250
Plaintiffs’ Opposition to Defendant Contento’s Demurrer to
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
October 5, 2006.
Plaintiffs’ Opposition to Defendant Contento’s Demurrer to Plaintiffs’ First Amended Complaint
Time: 1:30 p.m.
Dept: 31
Authorities in support of their Opposition to Defendant John Contento SRO’s (“Defendant Contento”) demurrer to Plaintiffs’
First Amended Complaint (“FAC”).
I.
The Ummels were an elderly out-of-town couple, looking for residential property to purchase in the San Diego County area.
them. (FAC, ¶¶8-17.) The Ummels employed Michael Little (“Agent Little”), an employee of mortgage broker Coats
Enterprises, Inc. aka Horizon Pacific Financial (“Horizon.”) (FAC, ¶¶ 4, 14.) Agent Little was also an employee of real estate
broker Last Dance, Inc. aka REMAX (“Remax.”) (FAC, ¶9.) During the course of his relationship with the Ummels, Agent
Little acted as both an authorized agent for Horizon and for Remax. (FAC, ¶35.)
On or about May 29, 2005, the Ummels entered escrow for 1657 Amante Court, Carlsbad, CA (“Amante Property.”) (FAC,
¶24.) During the escrow period, the Ummels requested Agent Little to arrange the appraisal of the Amante Property. (FAC,
¶27.) Agent Little, acting as agent of the Ummels, retained the services of appraiser, Defendant Contento, on behalf of the
Ummels. (FAC, ¶28.) Defendant Contento understood that the Ummels wanted to review the appraisal for purposes of
confirming the value of the Amante Property. (FAC, ¶28.) On or about July 21, before the close of escrow, Agent Little
informed the Ummels that Defendant Contento’s appraisal had been completed. (FAC, ¶29.) However, unbeknownst to the
Ummels, Defendant Contento misrepresented that the Amante Property was worth $1,200,000 when he knew or should
252
have known the true appraised value of the Amante Property was only $1,050,000. (FAC, ¶¶41-44.) In reliance on
Defendant Contento’s misrepresentations in the appraisal, made individually and in concert with Agent Little by and on
behalf of Horizon and Remax, the Ummels were induced to and did close escrow and purchase the Amante Property for the
inflated price of $1,200,000. (FAC, ¶31.)
As shown below, this Court should overrule Defendant Contento’s demurrer because plaintiffs have pled facts sufficient to
support fraud (1st COA), negligent misrepresentation (5th COA), and negligence (4th COA) against him in their FAC. In the
alternative, should this Court grant Defendant Contento’s demurrer, in whole or part, it should grant the Ummels leave to
amend in the interests of justice. The Ummels should have an opportunity to present their claims and such leave to amend
would not prejudice Defendant Contento.
II.
THE UMMELS HAVE ADEQUATELY ALLEGED FRAUD (1st COA).
Defendant Contento claims that the Ummels’ First Cause of Action for Fraud and the Fifth Cause of Action for Negligent
Misrepresentation fail to plead facts with sufficient particularity, (Demurrer, p.5.) While it is true that one who pleads fraud
needs to allege facts rather than general conclusions, a court should not look suspiciously at the complaint or seek to absolve
the defendant from liability on the highly technical requirements of form in pleadings. (5 Witkin, California Procedure §670
(4th ed. 1997).) Pleading facts in ordinary and concise language is permissible in fraud cases as in any other, and liberal
constriction of the pleading is much a duty of the court in these as in other cases. (Id.) Also, the requirement of “particularity”
in pleading fraud should not be overdone. Complaints must be kept to a reasonable length. If they are too detailed (e.g.
setting forth each statement verbatim, specifying the time, place and medium by which made), they may provide less
effective notice and be less useful in framing the issues, man would a shorter, more generalized version. (Comm. on
Children’s Television Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 213-214.)
As Defendant Contento alleges, the elements of fraud are: (1) a false representation 01 concealed material fact, (2) that the
defendant knew was false or did not have sufficient knowledge to warrant the representation, (3) with the intent to induce the
Plaintiffs to act on the false representation or concealed material fact, (4) that plaintiff relied upon, (5) to plaintiff’s damage.
(Reed v. King (1983) 145 Cal.App.3d 261, 264.)
Turning to the allegations, the Ummels’ FAC specifically outlines what the representations were (that the Amante Property
was worth $1,050,000 when the appraisal claimed it was worth $1,200,000 (FAC, ¶44)), who they were made by (Defendant
Contento (FAC, ¶41)), the circumstances surrounding the representations (during the escrow period for the Amante Property
(FAC, ¶¶27-28)), and the alleged purposes for which the misrepresentations were made (in order to induce the Ummels to
purchase the Amante Property (FAC, ¶45).) The FAC provides adequate more than adequate detail and specificity.
Consequently, Defendant Contento’s demurrer on this issue should be overruled.
III.
THE UMMELS RELIED ON DEFENDANT CONTENTO’S APPRAISAL.
Defendant Contento argues that because the Ummels did not directly communicate with him or see the paper appraisal they
“could not have relied on any of the information in that report to purchase the [Amante] property.” (Demurrer, p. 4.)
Defendant Contento acting through Agent Little knowingly communicated the fraudulent contents of the appraisal to the
Ummels. (FAC, 129.) Both were agents of and owed a duty to the Ummels. Thus, it is immaterial whether the Ummels
received a copy of the appraisal or spoke to Defendant Contento personally because they relied on his appraisal nevertheless.
As alleged in the FAC, the Ummels and Agent Little had a discussion concerning Defendant Contento’s appraisal well before
the close of escrow on or about July 21. (FAC, ¶29.)
253
A plain reading of the FAC clearly shows that the Plaintiffs have properly alleged that they relied on the misrepresentations
by Defendant Contento. Paragraph 45 of the FAC specifically states “[i]n reliance on [Contento’s] representations, plaintiffs
were induced to, and did, pay $1,200,000.00 for the Amante Property.” The allegations established the Ummels’ reliance on
Defendant Contento’s misrepresentations; that there was no face-to-face meeting is irrelevant. Consequently, the Ummels
have alleged facts sufficient to state a cause of action for fraud. It follows that Defendant Contento’s demurrer should be
overruled.
IV.
THE UMMELS PROPERLY ALLEGED NEGLIGENT MISREPRESENTATION (5th COA).
Unlike fraud, negligent misrepresentation does not require allegations of actual knowledge of the falsity of the alleged
fraudulent representation, but merely facts showing the representation was made without reasonable grounds for believing it
to be true. (5 Witkin, California Procedure §683 (4th ed. 1997).) Those facts were pled. Paragraph 70 of the FAC clearly
states that “[Contento] made said representations without any reasonable ground for believing it to be true and in a manner
not warranted by each defendant’s information.” Further, the FAC incorporates by reference the specific allegations made in
the cause of action for fraud against Defendant Contento. (FAC, ¶68.) It follows that the Ummels have sufficiently stated
facts to constitute a cause of action for negligent misrepresentation (5th COA), in addition to fraud (1st COA).
V.
DEFENDANT CONTENTO OWED A DUTY TO THE UMMELS AS THEIR AGENT TO CONDUCT THE
APPRAISAL IN A NON-TORTIOUS MANNER.
Defendant Contento argues that without a contract, he has no liability to the Ummels. (Demurrer, p. 4.) Defendant Contento
was an agent of the Ummels, specifically hired by Agent Little to conduct an appraisal on the Ummels’ behalves. (FAC,
128.) That Defendant Contento did not directly “contract” with the Ummels does not destroy their ability to sue him in tort
for his malfeasance. Once Defendant Contento undertook to act on the Ummels’ behalves, he owed them a duty to do so in a
non-tortious manner -- whether he contracted with them or not.
Plaintiffs have pled fraud (1st COA), negligence (4th COA), and negligent misrepresentation (5th COA) causes of action
against Defendant Contento - not one of which requires a contract to give rise to a duty in tort. It should be noted that
Defendant Contento offers no legal authority supporting his claim to the contrary.
VI.
THE UMMELS PROPERLY ALLEGED NEGLIGENCE (4TH COA.)
A cause of action for negligence requires the following elements to be alleged: (1) duty to Plaintiffs; (2) breach; (3)
causation; and (4) damages. (Freidman v. Merce & Co. (2003) 131 Cal.Rptr.2d 885, 890.) Negligence can be pleaded
generally, without specifying the particular breach or the particular manner in which the injury occurred. There is no need to
require specificity in the pleadings “because modern discovery procedures necessarily affect the amount of detail that should
be required in a pleading.” (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.4th 592, 608.)
The FAC specifically states that Defendant Contento owed the Ummels a duty to exercise skill ordinary exercised by
reputable members of the profession practicing in the same or similar circumstances in the performance of their respective
duties so as to prevent injury to the Ummels. (FAC, ¶65.) In his demurrer, Defendant Contento contends that the Ummels
254
cannot prove mat Defendant Contento owed any duty to the Ummels. (Demurrer, p.8.) What Defendant Contento apparently
fails to recognize is that the question of the Ummels’ ability to prove their allegations, or possible difficulties in making such
proof, is of no concern in ruling on a demurrer. (Comm. on Children’s Television, Inc. (1983) 35 Cal.3d 1987, 213-214
(Emphasis Added.).) It follows that the FAC has properly pled a cause of action for negligence (4th COA); therefore,
Defendant’s Contento’s demurrer on these grounds must be overruled.
VII.
IF THE COURT SUSTAINS ANY PART OF DEFENDANT CONTENTO’S DEMURRER LEAVE TO AMEND
SHOULD BE GRANTED TO THE UMMELS.
amend bis pleading so that he may properly present his case. (Id.) Although Defendant Contento’s demurrer routinely makes
blanket arguments that the demurrer should be sustained and the Ummels should not be provided leave to amend, Defendant
Contento fails to assert any justification for denying the Ummels such right. Defendant Contento further fails to assert any
justification that supports the notion that granting the Ummels leave to amend would prejudice Defendant Contento in any
way. If this Court determines that the Ummels’ pleadings against Defendant Contento are in some manner deficient, then it is
respectfully requested that this Court grant the Ummels leave to amend in order to preserve their causes of actions against
Defendant Contento.
VIII.
CONCLUSION
For the foregoing reasons, the Ummels respectfully request that this Honorable Court overrule Defendant Contento’s
demurrer. In the event that this Court is inclined to sustain any portion of Defendant Contento’s demurrer, the Ummels
respectfully request that this Court grant plaintiffs leave to amend the FAC accordingly.
ARON & HOGUE
By: <<signature>>
End of Document
255
Plaintiffs’ Opposition to Defendant Remax’s and Defendant Agent
Little’s Jointly Filed Motion to Strike Punitive Damages in Plaintiffs’
Search Details
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Jurisdiction:
California
Delivery Details
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Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
October 5, 2006.
Plaintiffs’ Opposition to Defendant Remax’s and Defendant Agent Little’s Jointly Filed Motion to Strike Punitive
Damages in Plaintiffs’ First Amended Complaint
Time: 1:30 p.m.
Dept: 31
Authorities in support of their Opposition to Defendant Last Dance, Inc.’s aka RE/MAX (“Defendant Remax”) and Michael
Little’s (“Defendant Agent Little”) jointly filed Motion to Strike Plaintiffs’ Claim For Attorney’s Fees and Exemplary and
Punitive Damages to Plaintiffs’ First Amended Complaint (“FAC.”)
I.
The FAC is replete with allegations of fraud as against Defendant Remax and Defendan Agent Little. The FAC alleges fraud
(1st COA), fraudulent concealment (2nd COA), breach of the implied covenant of good faith and fair dealing (3rd COA),
negligence (4th COA), negligent misrepresentation (5th COA), constructive trust (6th COA), and breach of fiduciary duty
(7th COA). The FAC requests an award of exemplary and punitive damages from the defendants as to all of the causes of
action, except negligence (4th COA) and negligent misrepresentation (5th COA).
The Ummels entered into an agreement directly with Defendant Agent Little by on behalf of Defendant Remax. (FAC, ¶14.)
As such, the Ummels have also requested attorneys fees as to all causes of action.
Defendant Remax and Defendant Agent Little demand the Court to strike the Ummels’ punitive damage requests from the
prayer in each and every one of the causes of action alleged in the FAC. (Motion to Strike, p. 2.) Defendant Remax and
Defendant Agent Little likewise demand the Court to strike the Ummels’ request for attorney’s fees in every one of the
257
causes of action alleged in the FAC. (Motion to Strike, p. 2.) Notwithstanding the defendants’ demands, the Ummels have
properly alleged punitive damages and attorney’s fees as against both Defendant Remax and Defendant Agent Little for the
reasons set forth below.
II.
THE COURT SHOULD NOT CONSIDER DEFENDANTS’ DEMURRER BECAUSE ITS SERVICE ON THE
UMMELS WAS DEFECTIVE.
Cal. Civ. Proc. § 1013(e) provides, “[s]ervice by facsimile transmission is permitted only where the parties agree and a
written confirmation of that agreement is made.” (Emphasis Added.) Defendant Remax and Defendant Agent Little served
their motion to strike via a facsimile dated September 15, 2006. The Ummels never received any other copy of the
defendants’ motion to strike. The Ummels have requested a copy of the defendants’ proof of service, but have not received
one to date.
The Ummels never agreed with Defendant Remax, nor Defendant Agent Little, to accept facsimile service. The Ummels
were never asked. Additionally, the Ummels never received any written confirmation demonstrating that said defendants
thought it was acceptable to serve the Ummels via facsimile. Accordingly, defendants* motion to strike is not properly before
the Court; therefore, it should not be heard, nor considered by this Court.
Without waiving the foregoing, if the Court is inclined to consider Defendant Remax’s and Defendant Little’s motion to
strike, the Ummels present the following arguments in opposition.
III.
POLICY TO CONSTRUE PLEADINGS LIBERALLY.
Motions to strike are disfavored. “The policy of the law is to construe the pleadings ‘liberally...with a view to substantial
justice.’ ” (WEIL & BROWN, 7:197 citing Cat. Civ. Proc. §451.) In ruling on a motion to strike, judges should assume the
truth of allegations in the pleadings, (Clauson v. Sup. Ct. (Pedus Services, Inc.) (1998) 67 CA4th 1253, 1255.)
III.
THE UMMELS’ PUNITIVE DAMAGE CLAIMS SHOULD NOT BE STRICKEN.
“In an action for breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that
the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover
damages for the sake of example and by way of punishment.” (Cal. Civ. Code §3294 (a) (Emphasis Added.).) Under this
statute, the words “oppression, fraud, or malice” are used in the disjunctive. Thus, fraud alone is an Consequently, the
Ummels have properly requested punitive damages as to their breach of the implied covenant of good faith and fair dealing.
D. The Ummels’ claim for punitive damages as to constructive fraud (6th COA) should not be stricken.
The Ummels inadvertently titled their “constructive fraud” cause of action, “constructive trust.” As such, the Ummels will
show why punitive damages are appropriate for a constructive fraud cause of action as opposed to a constructive trust cause
of action.
258
The Ummels properly alleged a constructive fraud cause of action against Defendant Remax and Defendant Agent Little.
(FAC, ¶¶ 75-79.) A constructive fraud cause of action supports an award of punitive damages. (Stokes v. Henson (1990) 217
Cal. App. 3d 187, 197-198.) Consequently, the Ummels have properly requested punitive damages as to their constructive
fraud cause of action.
E. The Ummels’ claim for punitive damages as to breach of fiduciary duty (7th COA) should not be stricken.
The Ummels properly allege a breach of fiduciary duty cause of action against Defendant Remax and Defendant Agent Little.
(FAC, ¶80-83.) The FAC incorporates by reference both the fraud and the fraudulent concealment causes of action. (FAC,
¶80.) As such, defendants breached their fiduciary duty by, among other ways, fraudulently misrepresenting and concealing
material facts from the Ummels. Consequently, the Ummels have properly requested punitive damages as to their breach of
fiduciary duty cause of action.
IV.
THE UMMELS’ REQUEST FOR ATTORNEYS FEES SHOULD NOT BE STRICKEN.
Defendants argue that the Ummels’ request for attorneys fees should be stricken because the only contract referenced is that
agreement between the Ummels and the original owners of 1657 Amante Court. (Motion to Strike, p.2.) Defendant Remax
and Defendant Agent Little further argue that because they are not parlies to the contract involved in the instant case that
there can be no contractual basis for the Ummels to claim attorney’s fees from them. (Motion to Strike, p. 3.)
Contrary to the defendants’ claim, there are actually three contracts alleged in the FAC -- not one. One of these agreements is
between the Ummels and Defendant Remax and Defendant Agent Little. (FAC, ¶14.) The FAC clearly alleges “[o]n or about
April 2, 2005, on behalf of Remax, Agent Little came to a verbal agreement with the Ummels to represent the Ummels in the
capacity of a real estate broker and agent...” (Emphasis Added.) (FAC, ¶14.) Implied in that agreement was that the
prevailing party would be entitled to attorneys fees for any action arising out of that agreement.
Parties may recover attorneys fees from an implied contract pursuant to Cal. Civ. Proc. §1021. Section 1021 sets forth:
Expept as attorney’s fees are specifically provided for by statute, the measure and mode of Compensation
of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties
to actions or proceedings are entitled to their costs, as heiteinafter provided. (Emphasis Added.)
Accordingly, the Ummels’ claims for attorneys fees should not be stricken.
V.
CONCLUSION.
For the foregoing reasons, the Ummels respectfully request that this Honorable Court overrule Defendant Remax’s and
Defendant Agent Little’s jointly filed Motion to Strike. In the event that this Court is inclined to sustain defendants’ Motion
to Strike, the Ummels respectfully request that this Court grant the Ummels leave to amend the FAC accordingly.
ARON & HOGUE
259
By: <<signature>>
End of Document
260
Plaintiffs’ Opposition to Defendant Horizon’s Motion to Strike
Punitive Damages in Plaintiffs’ First Amended Complaint
Search Details
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Jurisdiction:
California
Delivery Details
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Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
October 5, 2006.
Plaintiffs’ Opposition to Defendant Horizon’s Motion to Strike Punitive Damages in Plaintiffs’ First Amended
Complaint
Time: 1:30 p.m.
Authorities in support of their Opposition to Defendant Coats Enterprise, Inc.’s aka Horizon Pacific Financial (“Defendant
Horizon”) Motion to Strike Plaintiffs’ Claims For Attorney’s Fees and Exemplary Damages in Plaintiffs’ First Amended
Complaint (“FAC”)
I.
The FAC is replete with allegations of fraud as against Defendant Horizon. The FAC alleges fraud (1st COA), fraudulent
concealment (2nd COA), breach of the implied covenant of good faith and fear dealing (3rd COA), negligence (4th COA),
negligent misrepresentation (5th COA), constructive trust (6th COA), and breach of fiduciary duty (7th COA). The FAC
requests an award of exemplary and punitive damages from Defendant Horizon as to all of the causes of action, except
negligence (4th COA) and negligent misrepresentation (5th COA).
The Ummels entered into an agreement directly with Defendant Horizon. (FAC, ¶ 14.) As such, the Ummels have also
requested attorneys fees as to all causes of action.
Defendant Horizon demands the Court to strike the Ummels’ punitive damage requests from the prayer in each and every one
of the causes of action alleged in the FAC. (Motion to Strike, p. 2.) Defendant Horizon likewise demands the Court to strike
the Ummels’ request for attorneys fees in every one of the causes of action alleged in the FAC. (Motion to Strike, p. 2.)
262
Notwithstanding the Defendant Horizon’s demand, the Ummels have properly alleged punitive damages and attorneys fees as
against Defendant Horizon for the reasons set forth below.
II.
justice.’ ” (WEIL & BROWN, 7:197 citing Cal. Civ. Proc. §451.) In ruling on a motion to strike, judges should assume the
truth of allegations in the pleadings. (Clauson v. Sup.Ct. (Pedus Services, Inc.) (1998) 67 CA4th 1253, 1255.)
III.
THE UMMELS’ PUNITIVE DAMAGE CLAIMS SHOULD NOT BE STRICKEN.
statute, the words “oppression, fraud, or malice” are used in the disjunctive. Thus, fraud alone is an adequate basis for
awarding punitive damages. (Oakes v. McCarthy Co. (1968) 267 Cal.App.2d 231.)
Courts are increasingly liberal as to what constitutes sufficient “fact-pleading” on a claim for punitive damages. The
complaint will be read as a whole so that even conclusory allegations may suffice when read in context with facts alleged as
to the defendant’s wrongful conduct (Perkins v. Super. Ct. (1981) 117 Cal.App.3d 1, 6-7.)
A. The Ummels’ claim for punitive damages as to fraud (1st COA) should not be stricken.
The Ummels properly allege a fraud cause of action as against Defendant Horizon. (FAC, ¶¶ 34-48.) As such, the Ummels
properly request punitive damages as to their fraud cause of action.
B. The Ummels’ claim for punitive damages as to the fraudulent concealment (2nd COA) should not be stricken.
The Ummels properly allege a fraudulent concealment cause of action against Defendant Horizon. (FAC, ¶¶ 49-59.)
Intentional concealment of material fact provides an evidentiary basis upon which punitive damages may be awarded. (Cal.
Civ. Code §3294(b)(3).) As such, the Ummels properly request punitive damages as to their fraudulent concealment cause of
action.
C. The Ummels’ claim for punitive damages as to breach of the implied covenant of good faith and fair dealing (3rd COA)
should not be stricken.
The Ummels properly alleged a breach of the implied covenant of good faith and fair dealing cause of action against
Defendant Horizon. (FAC, ¶¶ 60-63.) The FAC incorporates by reference both the fraud and fraudulent concealment causes
of action into the breach of the implied covenant of good faith and fair dealing cause of action. (FAC, ¶60.) As such,
Defendant Horizon breached the implied covenant of good faith and fair dealing by, among other ways, fraudulently
misrepresenting and concealing material facts from the Ummels. Consequently, the Ummels properly request punitive
263
damages as to their breach of the implied covenant of good faith and fair dealing cause of action.
D. The Ummels’ claim for punitive damages as to constructive fraud (6th COA) should not be stricken.
The Ummels inadvertently titled their “constructive fraud” cause of action, “constructive trust.” As such, the Ummels will
show why punitive damages are appropriate for a constructive fraud cause of action as opposed to a constructive trust cause
of action.
The Ummels properly alleged a constructive fraud cause of action against Defendant Horizon. (FAC, ¶¶ 75-79.) A
constructive fraud cause of action supports an award of punitive damages. (Stokes v. Henson (1990) 217 Cal. App. 3d 187,
197-198.) Consequently, the Ummels properly request punitive damages as to their constructive fraud cause of action.
E. The Ummels’ claim for punitive damages as to breach of fiduciary duty (7th COA) should not be stricken.
The Ummels properly allege a breach of fiduciary duty cause of action against Defendant Horizon. (FAC, ¶80-83.) The FAC
incorporates by reference both the fraud and the fraudulent concealment causes of action. (FAC, ¶80.) As such, Defendant
Horizon breached its fiduciary duty by, among other ways, fraudulently misrepresenting and concealing material facts from
the Ummels. Consequently, the Ummels properly request punitive damages as to their breach of fiduciary duty cause of
action.
IV.
THE UMMELS’ REQUEST FOR ATTORNEYS FEES SHOULD NOT BE STRICKEN.
Defendant argues that the Ummels should not be able to claim attorney’s fees because the Ummels failed to allege the
existence of a contract. (Motion to Strike, p.2.) The basis of Defendant Horizon’s argument is wholly erroneous. Contrary to
the defendant’s claim, there are actually three contracts alleged in the FAC - not one. One of these agreements is between the
Ummels and Defendant Horizon. (FAC, ¶14.) The FAC clearly alleges “Agent Little, on behalf of Horizon, came to a verbal
agreement with the Ummels to represent the Ummels as a real estate broker and agent...” (Emphasis Added.) (FAC, ¶14.)
Implied in that agreement was that the prevailing party would be entitled to attorneys fees for any legal proceeding arising
out of the agreement.
Parties may recover attorneys fees from an implied contract pursuant to Cal Civ. Proc. §1021. Section 1021 sets forth:
Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation
of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties
to actions or proceedings are entitled to their costs, as hereinafter provided. (Emphasis Added.)
Accordingly, the Ummels’ claims for attorney’s fees should not be stricken.
V.
CONCLUSION.
For the foregoing reasons, Plaintiffs respectfully request that this Honorable Court overrule Defendant Horizon’s Motion to
Strike. In the event that this Court is inclined to sustain defendants’ Motion to Strike, the Ummels respectfully request that
264
this Court grant the Ummels leave to amend the FAC accordingly.
ARON & HOGUE
By: <<signature>>
End of Document
265
Plaintiffs’ Opposition to Defendant Contento’s Motion to Strike
Punitive Damages in Plaintiffs’ First Amended Complaint
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
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Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
October 5, 2006.
Plaintiffs’ Opposition to Defendant Contento’s Motion to Strike Punitive Damages in Plaintiffs’ First Amended
Complaint
Complaint Filed: July 19; 2006
Time: 1:30 p.m.
Dept: 31
Authorities in support of their Opposition to Defendant John Contento, SRO’s (“Defendant Contento”) Motion to Strike
Punitive Damages to Plaintiffs’ First Amended Complaint (“FAC.”)
I.
The FAC is replete with allegations of fraud as against Defendant Contento. The FAC alleges fraud (1st COA), negligence
(4th COA), and negligent misrepresentation (5th COA). The FAC requests an award of exemplary and punitive damages
from Defendant Contento as to the fraud cause of action.
Defendant Contento demands this Court to strike the Ummels’ punitive damage request from the fraud cause of action.
(Motion to Strike, pp. 4-5.) Notwithstanding defendant’s demand, the Ummels properly allege punitive damages as against
Defendant Contento for the reasons set form below.
II.
267
justice.’ ” (WEIL & BROWN, 7:197 citing Cal. Civ. Proc. §451.) In ruling on a motion to strike, judges should assume the
truth of allegations in the pleadings. (Clauson v. Sup.Ct. (Pedus Services, Inc.) (1998) 67 CA4th 1253, 1255.)
III.
THE UMMELS’ CLAIM FOR PUNITIVE DAMAGES AS TO FRAUD (1st COA) SHOULD NOT BE STRICKEN.
statute, the words “oppression, fraud, or malice” are used in the disjunctive. Thus, fraud alone is an adequate basis for
awarding punitive damages. (Oakes v. McCarthy Co. (1968) 267 Cal.App.2d 231.)
Courts are increasingly liberal as to what constitutes sufficient “fact-pleading” on a claim for punitive damages. The
complaint will be read as a whole so that even conclusory allegations may suffice when read in context with facts alleged as
to the defendant’s wrongful conduct. (Perkins v. Super. Ct. (1981) 117 Cal.App.3d 1, 6-7.)
The Ummels properly allege a fraud cause of action against Defendant Contento. (FAC, ¶¶ 34-48.) As such, the Ummels
have properly requested punitive damages as to their fraud cause of action.
III.
CONCLUSION
For the foregoing reasons, the Ummels respectfully request that this Honorable Court overrule Defendant Contento’s Motion
to Strike. In the event that the Court is inclined to sustain Defendant Contento’s Motion to Strike, the Ummels respectfully
request that this Court grant the Ummels leave to amend the FAC accordingly.
ARON & HOGUE
By: <<signature>>
End of Document
268
Memorandum of Points and Authorities in Support of Demurrer by
Defendant Coats Enterprise to Plaintiffs’ First Amended Complaint
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California
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Comment:
San Diego County
v.
No. GIN 054088.
September 25, 2006.
Memorandum of Points and Authorities in Support of Demurrer by Defendant Coats Enterprise to Plaintiffs’ First
Amended Complaint
Joseph L. Stine, Attorney at Law, CA Bar No. 86544, Law Office of Joseph L. Stine, 380 South Melrose Drive, #306, Vista,
FILED: August 18, 2006
Dept.: 31
Time: 1:30 p.m.
Defendant COATS ENTERPRISE, INC. (“COATS”) submits this Memorandum of Points and Authorities in support of its
demurrer to the First Amended Complaint filed in the instant action.
I.
INTRODUCTION
Plaintiffs are the disgruntled buyers of a Carlsbad house purchased for $1.2 million last year during a heated real estate
market. Each of the defendants facilitated the purchase as either as a real estate agent, mortgage broker, or appraiser.
Plaintiffs would have this Court hold all of the defendants liable for Plaintiffs’ decision to accept an counteroffer and
complete the purchase at that price.
As to mortgage broker Defendant COATS, Plaintiffs’ focus on Defendant LITTLE’S alleged delay in providing Plaintiffs
with a copy of the Defendant CONTENTO’S appraisal. This appraisal, attached to the complaint as Exhibit “A”, actually
supports the $1.2 million purchase price by concluding that $1.2 million was the property’s fair market value at that time.
Plaintiffs allege the appraisal as negligently and fraudulently prepared but do not suggest that Defendant COATS had any
involvement in its preparation or responsibility for its contents. Instead they suggest that Defendants COATS’ failure to have
the appraisal available for their review prior to close of escrow somehow caused them to make an ill advised purchase. These
270
allegations defy basic common sense and, for reasons to be shown, fail to meet the legal requirements for any potential
mortgage broker liability in responding to requests to examine property appraisals prepared for mortgage lenders.
Defendant MICHAEL LITTLE is alleged to have two separate and distinct roles in the transaction. He served as Plaintiffs’
real estate agent working for Defendant LAST DANCE to assist in finding the house and negotiating its purchase. He served
as Plaintiffs’ mortgage broker securing a loan for the purchase working for moving Horizon Pacific Financial dba Defendant
COATS. (See First Amended Complaint, ¶¶ 2, 3, and 14.) Any potential liability of Defendant COATS would need to be
predicated on allegations that Defendant LITTLE took some action or was responsible from some omission while serving as
a loan broker and not as the agent in the agreement to purchase of the house,
Defendant COATS submits that it does not have liability for an alleged overpayment of the purchase price under any of the
seven causes of action as pled and that, as a matter of law, it can not be held liable under any conceivable amendment to these
causes of action. Accordingly, this moving defendant requests that the First Amended Complaint be dismissed without leave
to amend.
II.
DEFENDANT COATS CAN NOT BE HELD LIABLE BASED ON ITS LOAN AGENT’S ALLEGED DELAY IN
PROVIDING PLAINTIFFS WITH A COPY OF AN APPRAISAL SUPPORTING THE PURCHASE PRICE OF THE
HOUSE.
A loan agent has certain statutorily defined duties in responding to requests from loan applicants to receive a copy of
appraisals prepared for use by lenders in connection with prospective home loans. Cal Bus. & Prof. Code §11423(b) provides
that the loan applicant is entitled to a copy of the loan on “written request ... received by the lender...” (emphasis added)
Subsection (c) sets forth the requisite deadline for lender responses to such written requests: “The lender shall mail or deliver
a copy of an appraisal within 15 days after receiving the written request from the applicant, or within 15 days after receiving
the appraisal, whichever occurs later.” (emphasis added)
A mortgage loan broker typically owes fiduciary duties to both the lender and borrower. (See, e.g., Barry v. Raskov (1991)
232 Cal. App. 3d 447, 455; Wyatt v. Union Mortgage Company (1983) 24 Cal. 3d 773, 782-783.)
Plaintiffs have pled a series of allegations, incorporated into all of their causes of actions, suggesting their frustration over the
timing of their receipt of a copy of the appraisal. They allegedly asked Defendant LITTLE for a copy of the appraisal on July
21 (First Amended Complaint ¶29), asked him again for it on July 25 (First Amended Complaint ¶30), and asked him a third
time for it on August 18 (First Amended Complaint ¶32.) Plaintiffs further allege that the appraisal was completed on July 20
(First Amended Complaint ¶29) and later admit that they allowed the escrow to close on the purchase of the property on July
29 (First Amended Complaint ¶31) before receiving a copy of the appraisal.
These allegations fail to match the statutory standards for production of a copy of a residential appraisal. There is nothing in
the pleading to suggest that the Plaintiffs made a written request for a copy of the appraisal so as to trigger the lender’s duty
to deliver it to them. The pleading merely suggests that Plaintiffs made repeated verbal requests to receive a copy of it. (See
First Amended Complaint ¶¶29, 30, and 32) Under Subsection (c) of the statute, the lender’s obligation to provide the
appraisal occurs at the later of 15 days after the lender’s receipt of a written request for a copy of the appraisal or 15 days
after its actual receipt of appraisal. Here there is no allegation identifying the lender, indicating when it received the
appraisal, or that it received a written request from Plaintiffs for a copy of it. As such, even assuming that Defendant
COATS, acting through Defendant LITTLE as loan agent, received a copy of the completed appraisal on July 20 and is
considered the “lender” for the purposes of this statute, there can be liability for failing to provide Plaintiffs with a copy of it
without Plaintiffs written request and a delay thereafter exceeding the statutory deadline of 15 days.
Moreover, even if a copy of the appraisal had been delivered prior to the close of escrow, there can be no liability to
Defendant CONTENTO, as the appraiser, or derivatively to Defendant COATS, through his agent Defendant LITTLE, for
271
the appraisal itself. The appraisal, attached as Exhibit “A” to the First Amended Complaint, supports rather than calls into
question the payment of $1.2 million for the property as reflective of the property’s fair market value at that time. This
appraisal, unlike one setting the value at less than the purchase price, could not have been relied as a pre-closure “red flag”
warning of a prospective overpayment for the property.
Finally, even assuming arguendo that the appraisal was palpably flawed in its analysis as alleged, Plaintiffs could not have
reasonably relied on the appraisal in settling on the purchase price. Plaintiffs allege that they agreed on May 29 to accept the
seller’s counter offer of $1.2 million and decided to complete the escrow shortly thereafter based on their reliance on
Defendant LITTLE’S representation as a real estate agent (i.e., working for Defendant LAST DANCE) that it was a good
value at that price. (First Amended Complaint ¶¶ 23, 24) The appraisal itself was presumably prepared weeks after Plaintiffs,
by their own allegations, had agreed and obligated themselves to purchase the property at that price. (As such, the facts, as
pled, strongly suggest that the appraisal was prepared at the behest of the lender to facilitate the loan application rather than
as a tool for Plaintiffs in deciding whether to pay $1.2 million for the property.)
For these reasons, neither the quality of the appraisal itself nor any delay in providing a copy of it to Plaintiffs can expose
Defendant COATS, as a principal for loan agent Defendant LITTLE, to any liability to Plaintiffs for allegedly paying too
much for the property.
III.
NONE OF THE SEVEN CAUSES OF ACTION IN THE FIRST AMENDED COMPLAINT SET FORTH
ESSENTIAL FACTS THAT WOULD SUPPORT LIABILITY AGAINST DEFENDANT COATS. AS A LOAN
BROKER, EVEN IF PLAINTIFFS PAID TOO MUCH FOR THE PROPERTY.
Looking at the causes of action individually, it is apparent that Plaintiffs have failed to allege facts from which this Court
could hold Defendant COATS, as a mortgage loan broker, liable for Plaintiffs’ decision to purchase the property for $1.2
million. Plaintiffs’ actions on are based on the following: 1) Defendant LITTLE’S alleged representations regarding the value
of the property while he was acting as real estate agent rather than as a loan broker; and 2) the alleged lack of quality of the
appraisal prepared by Defendant CONTENTO.
Plaintiffs distinguish Defendant LITTLE’s role as a real estate agent from his role a loan agent. They allege that “Agent
Little” began soliciting their business in February 2005. (First Amended Complaint ¶9) They also allege that “Agent Little”
represented that he had “superior expertise and sophistication in the San Diego County real estate market” to that of another
real estate agent that they previously contacted. (First Amended Complaint ¶11) They further allege as follows:
“On or about April 2, 2005, on behalf of Remax, Agent Little came to a verbal agreement with the Ummels to represent the
Ummels in the capacity of a real estate broker and agent in the Ummels’ prospective purchase of a property in San Diego
County. Sometime later, Agent Little, on behalf of Horizon, came to a verbal agreement with the Ummels to represent the
Ummels in the capacity of a real estate broker and agent in the arrangement of Ummels’ loan for the purchase of a property
in San Diego County.” (emphasis added) (First Amended Complaint ¶14)
Plaintiffs proceed in their pleading with a series of allegations regarding Defendant LITTLE’s service as a real estate agent
in helping them to find potentially suitable property and evaluate property values; these services culminated on May 29 in
their decision to accept a counteroffer of $1.2 million on the subject properly in reliance on their agent’s assessment of the
property’s market value. (First Amended Complaint ¶¶18-26). In all of these allegations, it is apparent that Plaintiffs are
making allegations against Defendant LITTLE in his capacity as a traditional real estate agent finding property for a
prospective purchaser. He did not assume his ancillary role as a loan agent until sometime after May 29 when an agreement
to purchase had been mutually executed and the sale was in escrow.
The common allegations pled by Plaintiffs strongly suggest, but do not clearly state, that Plaintiffs did not even begin to use
Defendant LITTLE’s services as a loan agent until at least July 1. Paragraphs 27 through 32 contain a series of allegations
about the appraisal and Plaintiffs’ efforts to secure it through Defendant LITTLE. (Plaintiffs fail to identify whether
272
Defendant LITTLE was operating a real estate broker for Defendant REMAX or as a loan broker for Defendant COATS.)
Assuming arguendo that Defendant LITTLE was functioning as a loan agent in securing an appraisal to enable Plaintiffs to
obtain a purchase loan, his actions or inactions as a loan agent with regard to securing a copy of the appraisal had nothing
whatsoever to do with Plaintiffs* prior decision to accept a counteroffer of $1.2 million for the property. A deal had been
struck to pay the purchase price and was being implemented through escrow by the time Plaintiff began asking Defendant
LITTLE for copy of the appraisal.
These common allegations are incorporated as the underlying facts into all seven of Plaintiffs* causes of actions. They serve
as the factual foundation for the entire action yet are sometimes inconsistent with subsequent allegations contained in
separate causes of action themselves. For example, Paragraphs 37 through 39 contain a series of allegations about
representations that Defendant LITTLE made “on behalf of defendants Remax and Horizon” concerning the value of the
property. Yet the common allegations themselves make clear that his role as a loan agent (i.e., on behalf of HORIZON dba
COATS) did not occur until after he was retained as real estate agent (i.e., on behalf of ReMax) and presumably not until
Plaintiffs had agreed to the $1.2 million purchase price.
In sum, Defendant COATS, as a mortgage broker, can have no liability for anything that Defendant LITTLE may have
represented to the Plaintiffs as an agent working through Defendant LAST DANCE dba ReMAX retained to find a suitable
house for them nor for any issues arising out of the alleged culpability or negligence of Defendant CONTENTO, as an
independent appraiser, in the preparation of an appraisal for Plaintiffs’ lender.
IV.
PLAINTIFFS HAVE FAILED TO PLEAD THE REQUISITE ELEMENTS OF ANY OF THE ALLEGED CAUSES
OF ACTION.
This moving Defendant has reviewed the respective memorandum of points and authorities in support of demurrers filed by
the other defendants, finds them to be well taken, and requests their incorporation as supplemental argument in support of
this demurrer.
Rather than reiterate points and legal authorities made in those arguments, Defendant COATS raises an additional defense to
the Third Cause of Action. There Plaintiffs suggest that Defendant LITTLE, on behalf of both Defendants Remax and
Horizon, breached an implied covenant of good faith and fair dealing.
Witkin defines this covenant as follows: “If the cooperation of the other party is necessary for successful performance of an
obligation, a promise to give that cooperation and not to do anything that prevents the realization of the fruits of performance
will often be implied.” (1 Witkin, Summary of California Law, (10th ed., 2005) Contracts §798, p. 892)
Breaches of the covenant typically arise where one party to a contract violates a fiduciary duty or other confidence inherent in
that contractual relationship. (See, e.g., Foley v. U.S. Paving Co. (1968) 262 Cal. App. 2d 499; Matsen v. Horwitz (1951) 102
Cal App. 2d 884)
Here Plaintiffs have alleged nothing suggesting a breach of any duty arising under any contract with Defendant LITTLE as a
mortgage loan broker working for Defendant COATS, as his superior, in brokering the loan. The entire thrust of the action is
based on duties arising in connection with the negotiations over the purchase price for the subject property rather than
covenants, express or implied, arising out of the securing of the loan. In fact, Plaintiff makes no allegations whatsoever
complaining about the procurement or terms of the mortgage loan itself.
Once again, Plaintiffs confuse Defendant LITTLE’s services under an alleged contract to act as a real estate agent in finding
suitable property for purchase from an alleged wholly separate and distinct contact to secure financing for the purchase. They
have mixed apples and oranges. There is nothing alleged in the pleading to suggest Defendant COATS’ liability through
Defendant LITTLE’s ancillary contractual relationship serving Plaintiffs as a loan broker in securing the financing after they
had agreed to the purchase.
273
V.
CONCLUSION
The First Amended Complaint can not stand. It reflects the frustrations of buyers who purchased a house at or close to the
peak in the local real estate market who now seek to hold defendants liable for facilitating the purchase. It is Monday
morning quarterbacking at its worst. In particular, mere is no legal basis as pled of which could be pled for holding
Defendant COATS, in its limited role as loan broker, liable for Plaintiffs’ decision to accept a $1.2 million counteroffer to
purchase the subject property.
The moving defendant respectfully requests that the Court put this ill-conceived, fatally flawed lawsuit out of its misery by
granting its demurrer without leave to amend.
Dated: 9-23-06
LAW OFFICE OF JOSEPH L. STINE
<<signature>>
By Joseph L. Stine
Attorney for Defendant COATS ENTERPRISE
End of Document
274
Memorandum of Points and Authorities in Support of Re/Max And
Little’s Demurrer to Plaintiffs’ First Amended Complaint
Martha UMMEL, an individual, and Vernon Ummel, an individual, Plaintiffs, v. LAST DANCE, INC.; Coats’
Enterprise, Inc.; Michael Little, an Individual; Re/max, Inc.; John Contento, SRO, a sole proprietor; and Does 1
Search Details
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Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
LAST DANCE, INC.; Coats’ Enterprise, Inc.; Michael Little, an Individual; Re/max, Inc.; John Contento, SRO, a
No. GIN054088.
September 15, 2006.
Memorandum of Points and Authorities in Support of Re/Max And Little’s Demurrer to Plaintiffs’ First Amended
Complaint
Re/Max Associates (erroneously sued and served as Last Dance, Inc. and Re/Max, Inc.) and ichael Little.
Dept. No.: 31
Time: 1:30 p.m.
LAST DANCE, INC. dba RE/MAX Associates (erroneously sued and served as LAST DANCE, INC. and RE/MAX, Inc.)
(hereinafter “RE/MAX”) and MICHAEL LITTLE (hereinafter “LITTLE”) (sometimes collectively referred to as
“DEMURRING PARTIES”), hereby submit this Memorandum of Points and Authorities in support of their Demurrer to
Plaintiffs MARTHA UMMEL and VERNON UMMEL’S (collectively referred to as the “PLAINTIFFS”) First Amended
Complaint for Damages (hereinafter the “Complaint”).
INTRODUCTION
On July 19, 2006, PLAINTIFFS filed a complaint seeking damages for alleged Fraud, Fraudulent Concealment, Breach of
Covenant of Good Faith and Fair Dealing, Negligence, Negligent Misrepresentation, Constructive Trust, and Breach of
Fiduciary Duty. The Complaint names as defendants: (1) MICHAEL LITTLE (“LITTLE”), individually, as the
PLAINTIFFS’ real estate agent; (2) COATS ENTERPRISE, INC. dba HORIZON PACIFIC FINANCIAL (“COATS”), the
mortgage broker; (3) LAST DANCE, INC. dba RE/MAX ASSOCIATES, the real estate broker; and (4) JOHN CONTENTO
(“CONTENTO”), the California licensed real estate appraiser. On August 15, 2006, PLAINTIFFS filed a First Amended
Complaint for Damages.
PLAINTIFFS’ Complaint is insufficient in numerous respects. The First, Second, Third, Fourth, Fifth, Sixth, and Seventh
causes of action fail to state facts sufficient to constitute a cause of action against DEMURRING PARTIES and that no cause
of action is stated where a third party may be responsible for alleged indivisible harm. Therefore, DEMURRING PARTIES’
request this Court sustain their Demurrer as to the First, Second, Third, Fourth, Fifth, Sixth, and Seventh causes of action and
dismiss PLAINTIFFS’ entire Complaint with prejudice.
276
II.
FACTS AS ALLEGED BY PLAINTIFFS
PLAINTIFFS moved from San Rafael, California to San Diego, California. (See Complaint, 3:23-27, attached to Notice of
Lodgment (“NOL”) as Exhibit “A”.) Although they had an agent in San Diego, they personally decided to leave their initial
agent and use LITTLE as their real estate agent in the purchase of property in San Diego. They did this based on LITTLE’S
extensive experience in and knowledge of the San Diego real estate market. (NOL, Exhibit “A,” 4:24-26.) On or about May
28, 2005, after viewing an abundance of properties, LITTLE showed PLAINTIFFS the 1657 Amante Court, Carlsbad,
California 92009 (the “Subject Property”). LITTLE showed them this property because it matched perfectly their preferences
and fell well within their broad price range of $950,000 to $1,400,000. The listing price of the Subject Property ranged from
$1,175,000.00 to $1,245,000.00. (NOL, Exhibit “A,” 6:6-9.) On or about May 28, 2005, the very same day PLAINTIFFS
first viewed the Subject Property, PLAINTIFFS decided to make an offer of $1,175,000.00. (NOL, Exhibit “A,” 6:18-21.)
The Seller countered at $1,200,000.00, well below the high end of the listing price range. (NOL, Exhibit “A,” 6:22-23.)
Satisfied with the counter offer, as it was still well below the listing price range for the Subject Property and it was also
$200,000.00 bolow PLAINTIFFS’ top price range, PLAINTIFFS voluntarily and willingly accepted Seller’s counter-offer
and entered into a California Residential Purchase Agreement (“RPA”) with Seller for the purchase of the Subject Property.
Notably, the Appraisal Report establishes the appraised fair market value as exactly what Seller counter-offered at, and what
PLAINTIFFS ended up paying for the Subject Property. (See Appraisal Report, attached to NOL as Exhibit “B.”) Escrow
opened on May 29, 2005. (NOL, Exhibit “A,” 7:8.)
In or around the same time PLAINTIFFS intended to purchase the Subject Property in San Diego, they were selling their
property in San Rafael, California. On or about June 7, 2005, the prospective purchasers of PLAINTIFFS’ San Rafael
property canceled escrow. (NOL, Exhibit “A,” 7:9-13.) PLAINTIFFS thought they would have to cancel then purchase of the
Subject Property even though they loved the home, but fortunately, LITTLE negotiated with the Seller and successfully got
an extension of the deadline for PLAINTIFFS to obtain a new buyer for their property to June 29, 2005. (NOL, Exhibit “A,”
7:13-16.) On or about June 21, 2005, PLAINTIFFS received another offer on their San Rafael property. (NOL, Exhibit “A,”
7:17-18.) They accepted the offer and escrow opened on their San Rafael property. (NOL, Exhibit “A,” 7:24.) At this point,
PLAINTIFFS could continue with the purchase of the Subject Property. On or about July 29, 2005, escrow closed on the
Subject Property. (NOL, Exhibit “A,” 8:18-19.)
On July 19, 2006, one year after the close of escrow, PLAINTIFFS filed the instant Complaint for damages.
III.
LEGAL AUTHORITY FOR DEMURRER
The purpose of a demurrer is to test the legal sufficiency of the pleadings. (Code Civ. Proc. § 422 12, 589.) A demurrer is
used to challenge defects appearing on the face of the complaint, or from matters outside the complaint that are judicially
noticeable. (Code Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Judicial Council form pleadings are
not immune from demurrer and must state facts essential to a cause of action. (People ex rel. Dept. of Transp. V. Superior Ct.
(1992) 5 Cal.App.4th 1480, 1484.)
Code of Civil Procedure section 430.10 provides in relevant part:
The party against whom a complaint. . . has been filed may object, by demurrer . . . to the pleading on
any one or more of the following grounds ... (d) there is a defect or misjoinder of parties[,] (e) [t]he
pleading does not state facts sufficient to constitute a cause of action [and] (f) [t]he pleading is uncertain.
As used in this subdivision, “uncertain” includes ambiguous and unintelligible.
277
Additionally, Code of Civil Procedure section 430.50 provides in relevant part:
(a) A demurrer to a complaint... may be taken to the whole complaint ... or to any of the causes of action
stated therein.
IV.
ARGUMENTS
1. Plaintiffs’ First. Second, and Fifth Causes of Action Fail To State Facts Sufficient To Constitute A Cause Of Action
For Fraud. Fraudulent Concealment and Negligent Misrepresentation Against DEMURRING PARTIES.
DEMURRING PARTIES’ Demurrer to the First, Second, and Fifth causes of action for fraud, fraudulent concealment, and
negligent misrepresentation must be sustained because PLAINTIFFS’ Complaint fails to state facts sufficient to constitute a
cause of action for these claims in that PLAINTIFFS fail to allege the necessary elements for a cause of action for fraud.1 The
essential elements of fraud are: (1) a misrepresentation, which includes a concealment or nondisclosure; (2) knowledge of
falsity of the misrepresentation; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance; and (5)
resulting damage. (Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 638; Universal By-Products, Inc. v.
City of Modesto (1974) 43 Cal.App.3d 145, 151.) The same elements comprise a cause of action for negligent
misrepresentation, except there is no requirement of intent to induce reliance. (Small v. Fritz Companies, Inc. (2003) 30
Cal.4th 167, 173.) In all three causes of action, the plaintiff must plead that they actually relied on the alleged
misrepresentation. (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1088-1089 & fn. 2.)
1
Fraudulent concealment contains the same elements as fraud, except that fraudulent concealment includes the element of duty to
disclose. Thus, where PLAINTIFF fails to properly plead facts supporting a fraud cause of action, they correspondingly fail to state
facts sufficient to support a fraudulent concealment cause of action, regardless of whether or not they plead a duty to disclose.
a. First And Second Causes Of Action For Fraud And Fraudulent Concealment.
Each element in the fraud cause of action must be pled with specificity in order to give notice to the defendant and to furnish
him with definite charges. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)
Additionally, when pleading fraud, PLAINTIFFS have an even greater burden. In that situation, fairness requires the
allegations of fraud be plead with particularity so the court can weed out non-meritorious actions. (Committee on Children’s
Television, Inc. et al. v. General Foods Corp. et al., supra, 35 Cal.3d at 216.) Every element of the cause of action for
fraud must be alleged in full, factually, and specifically. The “particularity requirement necessitates pleading facts
which ‘show how, when, where, to whom, and by what means the representations where tendered.’ ” (Lazar v. Sup. Ct.,
supra, 12 Cal.4th at 645; Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) The rationale for this ‘ “strict requirement [] of
pleading’ ” is not merely notice to the defendant. “The idea seems to be that allegations of fraud involve a serious attack on
character, and fairness to the defendant demands that he should receive the fullest possible details of the charge in order to
prepare his defense.’ ” (Stansfield, supra, 220 Cal.App.3d at 73, citing Committee on Children’s Television, Inc. v. General
Foods Corp., supra, 35 Cal.3d at 216.) The policy of liberal construction of pleadings will not be invoked to sustain a
pleading defective in any material respect. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.).
PLAINTIFFS in this case failed to state with specificity how, to whom, when and by what means the alleged representations
were made. Rather, they simply claim that “LITTLE . . . made the following fraudulent representations.. . .” (NOL, Exhibit
“A,” p.9:18-10:9.) Here, PLAINTIFFS simply make conclusory and general allegations that defendants “knew [the
statements] to be false” (NOL, Exhibit “A,” p. 14:6) and had the “intention to deceive.” (NOL, Exhibit “A,” p.14:7.) It is
insufficient for PLAINTIFFS to simply plead the evidence they hope to prove at trial. (Careau & Co, v. Security Pacific
278
Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1390.)
Furthermore, PLAINTIFFS failed to specifically plead reliance on LITTLE’S alleged statements. The mere assertion of
‘reliance’ is insufficient. The plaintiff must allege the specifics of his or her reliance on the misrepresentation to show a bona
fide claim of actual reliance. (Small, supra, 30 Cal.4th at 184.) In Engalla v. Permanente Medical Group, Inc. (1997) 15
Cal.4th 951, 976, the court stated, “[a]ctual reliance occurs when the defendant’s misrepresentation is an immediate cause of
the plaintiff’s conduct, altering his legal relations, and when, absent such representation, the plaintiff would not, in all
reasonable probability, have entered into the transaction.
Here, under Engalla, PLAINTIFFS have failed to properly allege actual reliance on the alleged misrepresentation because
their behavior was not altered, and absent such representation, they would have, in all likelihood, purchased the Subject
Property anyway. P LAINTIFFS were looking for properly up to the cost of $1,400,000.00 with LITTLE. CONTENTO, the
appraiser, is an experienced, well-qualified appraiser who appraised the Subject Property at precisely what PLAINTIFFS
paid for it, PLAINTIFFS did not present a counter-offer to Sellers counter of $1,200,000.00 for the Subject Property, and
they made an offer on another property for $1,200,000.00, prior to the S ubject Property. C learly, PLAINTIFFS c an neither
legitimately, nor honestly plead facts showing they would not have entered this transaction but for their reliance on
defendants alleged misrepresentations. As such, the fourth element of reliance for fraud is not sufficiently plead.
Lastly, damage is an essential element of a cause of action for fraud. (Committee on Children’s Television, Inc. v. General
Foods Corp., supra, 35 Cal.3d at 219.) “Misrepresentation, even maliciously committed, does not support a cause of action
unless the plaintiff suffered consequential damages.” (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 159.)
Here, PLAINTIFFS allege they incurred damages because they overpaid for the Subject Property. However, PLAINTIFFS
fail to plead such damages with specificity. Instead, they simply allege they purchased the Subject Property for “a greatly
exorbitant price.” (NOL, Exhibit A, p.l4:23.) Notably, PLAINTIFFS fail to realize they paid the exact value that
CONTENTO, a licensed, experienced, knowledgeable appraiser, appraised the Subject Property at. (NOL, Exhibit B.) Even
assuming arguendo, the Subject Property was valued slightly higher than its market value, PLAINTIFFS still: (1) paid
well-below the high end of the listing price range; (2) voluntarily decided and agreed to purchase the Subject Property for
$1,200,000.00; and (3) did not even consider submitting a counter-offer to Seller’s counter-offer of $1,200,000.00.
Any damages claimed by PLAINTIFFS are not a result of any alleged statements or concealment by DEMURRING
PARTIES, but rather as a result of the fluctuating real estate market. PLAINTIFFS in this case paid exactly the appraised
market value for the Subject Property and now, as a result of the market change, feel they overpaid for it. This is a clear case
of buyer’s remorse, In short, PLAINTIFFS did not sustain any damages and cannot honestly and legitimately plead facts
supporting any damages because a licensed, experienced California appraiser valued the Subject Property at PLAINTIFFS’
agreed on purchase price.
Additionally, PLAINTIFFS fail to specify against which Defendants the First Cause of action for fraud is against. Rather, the
Complaint generally labels the cause of action as “Fraud as against all defendants.” (NOL, Exhibit A, p.8:28.) Contrary to the
specific requirements for allegations of fraud, PLAINTIFFS’ Complaint is uncertain and unspecific as to what Defendants
said what and to whom they made such statements. As described above, PLAINTIFFS must clearly and specifically identify
each representation, identify the particular defendant that made the alleged representation, how they made it and to whom the
made it. PLAINTIFFS’ general statement that the fraud cause of action is against all defendants fails to meet the specificity
requirements demanded by a fraud claim.
PLAINTIFFS fail to properly and specifically plead, and cannot legitimately plead, the elements for fraud and fraudulent
concealment because there are no facts supporting intent to induce reliance and actual reliance by PLAINTIFFS. Further,
PLAINTIFFS have not identified how the alleged act resulted in damage to PLAINTIFFS because they paid exactly the
appraised price. Therefore, this Demurrer must be sustained and the First and Second causes of action must be dismissed
with prejudice.
b. Fifth Cause Of Action For Negligent Misrepresentation.
In addition to the elements of fraud stated in Section 1 above,2 for negligent misrepresentation, the element of
279
misrepresentation must be plead as a false statement of material fact, where the defendant honestly believes it to be true, but
made it without reasonable grounds for reliance. Thus, there is no liability for an innocent misrepresentation where the agent
acted reasonably and had reasonable grounds to believe what he said was true. (Robinson v. Grossman (1997) 57 Cal.App.4th
634, 642-43.) Under Padgett v. Phariss, ((1997) 54 Cal. App. 4th 1270, 1284) when an agent communicates what the fair
market value of the property is he provides his opinion, such opinions are just that: opinions, not representations of fact, and
are not actionable misrepresentations. (See also Kahn v. Lischner (1954) 128 Cal. App. 2d 480, 487 (emphasis added).)
2
The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of intent to induce
reliance. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173.)
Here, PLAINTIFFS fail to allege DEMURRING PARTIES made a false statement of material fact, honestly believing it to
be true, but without reasonable grounds for such belief. Instead, they simply allege LITTLE “believed that the Ummels were
getting a good deal by purchasing the Amante Property for $1,200,000.00.” (NOL, Exhibit A, p. 9:24-26.) Under Padgett,
such a statement by LITTLE is clearly his opinion on the value of the house and is not actionable. PLAINTIFFS admit it was
only LITTLE’S opinion because they allege he merely “believed” the price was a good deal. Thus, the PLAINTIFFS’
Complaint omits an essential element of a cause of action for negligent misrepresentation.
In Wilhelm v. Pray, Price, Williams & Russell, the court concluded such an omission was fatally defective to a claim of
negligent misrepresentation. ((1986) 186 Cal.App.3d 1324, 1332-1333 (sustaining a demurrer without leave to amend as to
an action for negligent misrepresentation when the complaint did not allege that false representations were made honestly
believing they were true, but having no reasonable ground for such belief, and when the misrepresentations were not the
proximate cause of any harm).) Thus, here, as in Wilhelm, the court must sustain this demurrer without leave to amend as the
omission of the allegation that DEMURRING PARTIES made a false statement of material fact, honestly believing it to be
true, but without reasonable grounds for such belief, is a fatal one.
Given the foregoing authorities, it is evident PLAINTIFFS failed to allege sufficient specific facts to support the First,
Second, and Fifth causes of action. The burden of proving a reasonable possibility of amending the complaint to state a cause
of action “is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) PLAINTIFFS cannot meet this burden
because no facts exist to support the claim for damages because PLAINTIFFS paid the appraised fair market value. Further,
under Wilhelm, PLAINTIFFS made a fatal error in the negligent misrepresentation claim and LITTLE’S statement was a
mere opinion and is not actionable; therefore, DEMURRING PARTIES’ Demurrer to the First, Second and Fifth causes of
action must be sustained and the causes of action dismissed with prejudice.
2. The Third. Fourth. And Seventh Causes Of Action Fail To State Facts Sufficient To State A Cause Of Action Against
DEMURRING PARTIES.
PLAINTIFFS’ Third, Fourth, and Seventh causes of action for breach of the covenant of good faith and fair dealing,
negligence, and breach of fiduciary duties fail to state facts sufficient to constitute causes of action against DEMURRING
PARTIES. PLAINTIFFS’ own Complaint is inconsistent on its face. PLAINTIFFS allege DEMURRING PARTIES breached
the implied covenant by failing to provide comparables of “nearby home sales to the [Subject] Property that gave clear
indication that the [Subject] Property was substantially overvalued.” (NOL, Exhibit “A,” p.17:17-23.) Additionally,
PLAINTIFFS fail to allege DEMURRING PARTIES were the proximate cause of PLAINTIFFS’ damages. Here, all
PLAINTIFFS’ Complaint alleges is that DEMURRING PARTIES breached this implied covenant because they allegedly did
not advise PLAINTIFFS of nearby home sales and did not provide the appraisal until after the close of escrow.
However, PLAINTIFFS attached as Exhibit “A” to their Complaint the Appraisal Report completed by CONTENTO, which
clearly states the Subject Property is valued at $1,200,000.00 - precisely what PLAINTIFFS paid for it. Clearly,
PLAINTIFFS bought this property for fair market value and now have buyers’ remorse because the market is changing and
property values are decreasing. PLAINTIFFS allege DEMURRING PARTIES breached this covenant by not providing the
appraisal report until after the close of escrow. (NOL, Exhibit “A,” p. 17:21-23.) Regardless of when PLAINTIFFS saw the
appraisal report, they paid fair market value for the Subject Property and have no damages. Thus, the Complaint fails to state
280
fact sufficient to state a claim against DEMURRING PARTIES and the Demurrer must be sustained without leave to amend.
To show negligence, Plaintiffs must allege a duty, breach of that duty, actual cause, proximate cause and damages. (Wise v.
Superior Court (1990) 222 Cal. App. 3d 1008, 1013.) Breach of fiduciary duties is a species of fraud. Both causes of action
require damages. As discussed in Section 1, Subsection (a), infra, PLAINTIFFS fail to particularly and specifically allege
facts to support a claim for fraud. There is no fraudulent actions by DEMURRING PARTIES stated on the face of
PLAINTIFFS’ Complaint because PLAINTIFFS paid the exact price the Subject Property was appraised at. If they paid the
market value, there are no damages, and PLAINTIFFS cannot legitimately state a claim. PLAINTIFFS merely allege a
“breach caused injury” to them. (NOL, Exhibit “A,” p.21:14.) On the contrary, they suffered no injury as is shown by the fact
of their Complaint: they paid $1,200,000.00 for the Subject Property and the Subject Property appraised at $1,200,000.00.
(Compare NOL, Exhibit “A,” p.7:8 and Exhibit B.) If they claim their damages are the difference between what they paid for
the Subject Property and the amount the Subject Property was overvalued, PLAINTIFFS must allege this amount. It is
insufficient for PLAINTIFFS to simply plead the evidence they hope to prove at trial. (Careau & Co. v. Security Pacific
Business Credit, Inc., supra, 222 Cal.App.3d at 1390.) Where the face of the Complaint clearly shows there are no damages
because they paid the appraised value, PLAINTIFFS have failed to show damages and, therefore, fail to state facts sufficient
to support the Third, Fourth, and Seventh causes of action.
Therefore, to the extent PLAINTIFFS Complaint fails to show facts sufficient to support a cause of action in that it shows no
damages, and they cannot honestly amend the Complaint to show damages because they paid market value, PLAINTIFFS*
Third, Fourth, and Seventh Causes of action must be dismissed with prejudice.
3. The Sixth Cause Of Action For Constructive Trust Fails To State Facts Sufficient To Constitute A Cause Of Action
Against DEMURRING PARTIES.
“A constructive trust is a remedy used by a court of equity to compel a person who has property to which he is not justly
entitled to transfer it to the person entitled thereto. (Burger v. Superior Court (1984) 151 Cal.App.3d 1013, 1018.) The
elements of constructive trust are: (1) that defendant has title to specifically identified property; (2) acquisition of such title is
traceable to defendant’s wrongdoing (i.e., fraud, violation of trust, undue influence, accident, mistake); (3) unjust enrichment;
and (4) no remedy at law. (Code of Civ. Proc. § 2224.) PLAINTIFFS have neither plead, nor demonstrated the elements of a
constructive trust. Assuming arguendo PLAINTIFFS’ allegations are true and they overpaid for the Subject Property, their
remedy at law would be monetary damages in the amount of the difference between the price paid and the fair market value
at the time of the sale.3 As stated above, the burden of proving a reasonable possibility of amending the complaint to state a
cause of action “is squarely on the plaintiff.” (Blank v. Kirwan, supra, 39 Cal.3d at 318.) Constructive trust is an equitable
remedy; therefore, if plaintiffs claim they overpaid for their house, their damages are clearly monetary, there is a remedy at
law, and it will be impossible for PLAINTIFFS to amend the Complaint to state a cause of action for such an equitable
remedy. As such, DEMURRING PARTIES’ Demurrer must be sustained without leave to amend.
3
However, the appraisal stated the fair market value as $1,200,000.00 - exactly what PLAINTIFFS paid for it, so there are no
damages available at law. Because PLAINTIFFS paid the fair market value, there is no conceivable way they can amend the
Complaint to sufficiently plead damages.
CONCLUSION
For the reasons stated above, DEMURRING PARTIES respectfully request this court sustain its Demurrer to PLAINTIFFS’
Complaint without leave to amend.
DATED: September 15, 2006
Respectfully submitted,
<<signature>>
281
Attorney for LAST DANCE, INC. dba RE/MAX Associates (erroneously sued and served as LAST DANCE, INC. and
RE/MAX, Inc.) and LITTLE
End of Document
282
Memorandum of Points & Authorities in Support of Defendants’
Motion to Strike Plaintiffs’ Claim for Attorney’s Fees And
Exemplary and Punitive Damages
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
No. GIN054088.
September 15, 2006.
Memorandum of Points & Authorities in Support of Defendants’ Motion to Strike Plaintiffs’ Claim for Attorney’s
Fees And Exemplary and Punitive Damages
400, San Diego, CA 92108, Tel: (619) 542-2490, Fax: (619) 299-0468, Attorneys for Defendants Last Dance, Inc. dba
Dept. No.: 31
Time: 1:30 p.m.
LAST DANCE, INC. and RE/MAX, INC.) and MICHAEL LITTLE (hereinafter “LITTLE”), hereby submit the following
points and authorities in support of their motion to strike Plaintiffs’ claim for attorney’s fees and exemplary and punitive
damages as set forth in Plaintiffs’ First Amended Complaint (“Complaint”).
INTRODUCTION
This action is based on the purchase of property, located at 1657 Amante Court (the “Subject Property”) by Plaintiffs
MARTHA and VERNON UMMEL (collectively referred to as the “PLAINTIFFS”). On July 19, 2006, PLAINTIFFS filed a
complaint seeking damages for alleged Fraud, Fraudulent Concealment; Breach of the Covenant of Good Faith and Fair
Dealing; Negligence; Negligent Misrepresentation; Constructive Trust, and Breach of Fiduciary Duty. PLAINTIFFS demand
attorney’s fees and punitive damages in their Complaint. However, the only contract referenced, and for which PLAINTIFFS
base their claims on is between PLAINTIFFS and Seller. RE/MAX, as a real estate broker, are not parties to this contract.
Therefore, PLAINTIFFS are not entitled to attorney’s fees under the contract at issue. Furthermore, PLAINTIFFS are not
entitled to exemplary and punitive damages because the conduct in question does not meet the threshold requirement of
egregiousness. As such, RE/MAX’S Motion to Strike must be granted.
I. STATUTORY AUTHORITY FOR MOTION TO STRIKE
California Civil Code of Procedure Section 436 states:
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[T]he court may, upon a motion made pursuant to Section 435 or at any time in its discretion, and upon terms it deems
proper:
(a) strike out any irrelevant, false, or improper matter inserted in any pleading;
(b) strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or any
order of the court.
II. THE COURT MUST STRIKE PLAINTIFFS’ PRAYER FOR ATTORNEY’S FEES.
The basic rule in American Jurisprudence is that regardless of which party in an action prevails, each party bears their own
attorney’s fees. (Alyeska Pipeline Service Co. v. Wilderness Soc’y (1975) 421 U.S. 240.) PLAINTIFFS bear the burden of
proving their entitlement to the attorney’s fees they seek in this matter. Under California law, attorney’s fees can only be
obtained in a contract or statute. (Code of Civ. Proc. § 1021.)
da. No Contractual Authority Exists Allowing a Recovery of Attorney’s Fees
PLAINTIFFS are not entitled to attorney’s fees from RE/MAX and LITTLE because there is no contract permitting such an
award. The only contract referenced, and for which PLAINTIFFS base their claims on, is the Residential Purchase
Agreement (“RPA”). However, RE/MAX and LITTLE, as the agents and brokers in the transaction, are not parties to the
RPA, as a matter of law. (See Super 7 Motel Assoc. v. Wang (1993) 16 Cal.App.4th 541.) Moreover, the RPA clearly states,
“Real estate brokers are not parties to the Agreement between Buyer and Seller.” (NOL, Exhibit “C,” p.8.) RE/MAX is a real
estate broker; therefore, RE/MAX and LITTLE are not parties to the contract involved in the instant case.
As such, there is no contractual basis for PLAINTIFFS’ claim for attorney’s fees. Accordingly, the court must strike
PLAINTIFFS’ demand for attorney’s fees.
III. THE COURT MUST STRIKE PLAINTIFFS’ PRAYER FOR EXEMPLARY AND PUNITIVE DAMAGES.
PLAINTIFFS allege they are entitled to exemplary and punitive damages for the First, Second, Third, Sixth, and Seventh
causes of action. (NOL, Exhibit A, p.22:l-5.) However, PLAINTIFFS have no basis for an exemplary and punitive damages
award because the Complaint fails to allege sufficient facts demonstrating “malice, oppression, and fraud.” (Civ. Code
§3294.)
Civil Code section 3294 provides:
a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence
that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover
damages for the sake of example and by way of punishing the defendant.
...
(c) As used in this section, the following definitions shall apply:
(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is
carried on by the defendant with a willful and conscious disregard of the rights or safety of others.
(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that
person’s rights.
(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the
intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.
Although PLAINTIFFS allege a Fraud, Fraudulent Concealment, Breach of Implied Covenant of Good Faith and Fair
285
Dealing, Constructive Trust, and Breach of Fiduciary Duties, an alleged breach of fiduciary duty without malice, fraud or
oppression does not permit an award of punitive damages. (Delos v. Farmers Group (1979) 93 Cal.App.3d 642, 656-657;
Flyer’s Body Shop v. Ticor Title, (1986) 185 Cal.App.3d 1149, 1154.) The mere alleged carelessness or ignorance of the
defendant does not justify the imposition of punitive damages. What is necessary for the award of punitive damages is
conduct that displays extreme indifference that decent citizens should not tolerate it. (Hughes v. Blue Cross (1989) 215
Cal.App.3d 832, 847 (emphasis added).) To justify an award of punitive damages proof of negligence, or even gross
negligence, or recklessness is insufficient to warrant such an award. (Dawes v. Superior Court (1980) 111 Cal.App.3d 82,
88.)
Here, PLAINTIFFS’ entire Complaint is devoid of any allegations of malice, oppression, or fraud, and there is no evidence,
of conduct of any indifference, let alone such extreme indifference in this case. In fact, PLAINTIFFS admit in their
allegations that LITTLE merely “believed that the [PLAINTIFFS] were getting a good deal by purchasing the Amante
Property for $1,200,000.00.” (NOL, Exhibit A, p. 9:24-26.) A belief that a property is a “good deal” or fair value does not
equate to maliciousness, but is merely an opinion. The facts alleged, at most, an opinion or a belief by LITTLE, which is
insufficient to sustain an award of punitive and exemplary damages. The breach of good faith and fair dealing, constructive
trust and breach of fiduciary duties causes of action do not support a claim for exemplary and punitive damages either
because they, as with the fraud and fraudulent concealment claims, do not express extreme indifference by RE/MAX and
LITTLE, an agent for RE/MAX. Because exemplary and punitive damages are not recoverable without a showing of malice,
fraud or oppression, RE/MAX and LITTLE’S Motion to Strike must be granted and PLAINTIFFS’ exemplary and punitive
damages claims must be stricken from the Complaint.
CONCLUSION
Since there is no contract allowing for attorney’s fees, and since exemplary and punitive damages are recoverable only where
malice, oppression, or fraud is shown, RE/MAX and LITTLE’S Motion to Strike the prayer for attorney’s fees and
exemplary and punitive damages from PLAINTIFFS’ Complaint must be granted without leave to amend. For the foregoing
reasons the Court should grant this motion and strike the attorney’s fees and exemplary and punitive damages prayers in
PLAINTIFFS’ Complaint.
<<signature>>
Attorney for Defendants LAST DANCE, INC. dba RE/MAX ASSOCIATES (erroneously sued and served as Distinctive
End of Document
286
Notice of Demurrer and Demurrer to Plaintiffs’ First Amended
Complaint; Memorandum of Points And Authorities in Support
Thereof
Search Details
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Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
September 8, 2006.
Notice of Demurrer and Demurrer to Plaintiffs’ First Amended Complaint; Memorandum of Points And Authorities
in Support Thereof
Time: 1:30 p.m.
TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE, that on October 20, 2006, at 1:30 p.m., or as soon thereafter as counsel may be heard, in
Department 31 of the above-entitled Court, located at 325 South Melrose Drive, Vista, California 92083, defendant JOHN
CONTENTO will and hereby does demur to the following causes of action in Plaintiffs’ First Amended Complaint, on the
following grounds:
DEMURRER TO THE FIRST CAUSE OF ACTION FOR FRAUD
1. The First Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
California Code of Civil Procedure §430.10(e).
2. The First Cause of Action fails to state facts with sufficient particularity to support a cause of action based on fraud.
DEMURRER TO THE FOURTH CAUSE OF ACTION FOR NEGLIGENCE
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3. The Fourth Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
DEMURRER TO THE FIFTH CAUSE OF ACTION FOR NEGLIGENT MISREPRESENTATION
4. The Fifth Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
5. The Fifth Cause of Action fails to state facts With sufficient particularity to support a cause of action based on fraud.
JOHN CONTENTO will also request that the Court deny Plaintiffs’ leave to amend the First, Fourth and Fifth Causes of
Action as JOHN CONTENTO can have no liability under those claims as a matter of law.
The Demurrer is based upon this Notice of Demurrer, the Memorandum of Points and Authorities, upon all papers and
pleadings on file herein, and upon such other oral and/or further material and argument as may be presented at the hearing on
the demurrer.
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
I.
INTRODUCTION
According to the First Amended Complaint, Plaintiffs entered into a written agreement on or about May 29, 2005 to purchase
the real property located at 1657 Amante Court, Carlsbad, California (hereinafter “Amante property”) for $1.2 million. (See
First Amended Complaint, ¶¶18-24.) JOHN CONTENTO, a real estate appraiser, was retained to prepare an appraisal of the
Amante property for a purchase money loan. Plaintiffs admit they did not arrange for JOHN CONTENTO to appraise the
Amante property. (First Amended Complaint, ¶28.)
Plaintiffs allege defendant JOHN CONTENTO represented the Amante property value was $1.2 million in his appraisal
signed July 20, 2005. (First Amended Complaint, ¶41.) Plaintiffs contend that the true value of the Amante property was
$1,050,000. (First Amended Complaint, ¶44(b).) Plaintiffs also contend that other misrepresentations were made in the
appraisal report relating to adjustments and comparable sales chosen. (First Amended Complaint, ¶42a-g.) Finally, Plaintiffs
allege that JOHN CONTENTO fraudulently withheld from his appraisal another comparable sale across the street from the
Amante property that had a ‘pending’ sales price of between $999,000 and $1.1 million. (First Amended Complaint, ¶44(a).)
289
Plaintiffs contend that in reliance on these representations, they purchased the Amante property. (First Amended Complaint,
¶45.)
However, Plaintiffs also state in their First Amended Complaint that they never received the appraisal report prepared by
JOHN CONTENTO prior to close of escrow on July 29, 2005. (First Amended Complaint, ¶¶27-32.) Therefore, they
could not have relied on any information in it to purchase the property nor could they have been intentionally induced
to rely on the information.
Thus, Plaintiffs seek to recover under theories of liability that are not available to them against JOHN CONTENTO. Each
cause of action discussed herein fails to state a claim against JOHN CONTENTO. Based thereon, JOHN CONTENTO
demurs to each of the stated causes of action. JOHN CONTENTO will also request that this Court deny Plaintiffs’ leave to
amend the First, Fourth and Fifth Causes of Action against JOHN CONTENTO as Plaintiffs cannot assert those claims
against JOHN CONTENTO as a matter of law.
II.
THE COURT HAS THE DISCRETION TO DISMISS A CAUSE OF ACTION WHERE THE FIRST AMENDED
COMPLAINT FAILS TO STATE SUFFICIENT FACTS TO SUPPORT IT.
Where a Complaint or cause of action fails to state sufficient facts to constitute a cause of action, a defendant may object by
way of demurrer. California Code of Civil Procedure §430.10(e).
III.
THE COURT MAY SUSTAIN A DEMURRER WITHOUT LEAVE TO AMEND.
Although leave to amend is liberally granted, it is not appropriate where the demurring party can have no liability as a matter
of law. See, Lawrence v. Bank of America (1985) 163 Cal.App.3d 431, 436. Furthermore, the burden is on the plaintiff to
show he or she can cure the deficiencies in the Complaint by amendment. See weil, civil practice guide: civil procedure
before trial, 7:130 (citing Goodman v. Kennedy (1976) 18 Cal.3d 335, 349).
The facts of this case clearly show that JOHN CONTENTO has no liability to Plaintiffs as a matter of law under the First,
Fourth and Fifth Causes of Action. Plaintiffs will be unable to show any contract between Plaintiffs and JOHN CONTENTO
to prepare an appraisal of the Amante property. Furthermore, Plaintiffs have already admitted to not speaking or otherwise
communicating with JOHN CONTENTO or even having the appraisal to review prior to close of escrow. (First Amended
Complaint, ¶¶27-32.) Therefore, Plaintiffs could not have relied on any of the information in that report to purchase the
property.
As set out below, Plaintiffs will not be able to carry the burden of showing they can cure the deficiencies therein. If they try
to amend their First Amended Complaint to eliminate that Plaintiffs admitted to not receiving any information from the
appraisal report prior to close of escrow, they will be changing a material fact in their own original First Amended
Complaint. JOHN CONTENTO, therefore, respectfully submits that Plaintiffs should be denied leave to amend those causes
of action.
IV.
THE FIRST AMENDED COMPLAINT DOES NOT ALLEGE FACTS WITH SUFFICIENT PARTICULARITY TO
SUPPORT THE FRAUD CLAIMS AGAINST JOHN CONTENTO.
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The First Amended Complaint contains two causes of action based on fraud: the First Cause of Action for Fraud and the Fifth
Cause of Action for Negligent Misrepresentation. Each of these claims are subject to demurrer because the First Amended
Complaint does not contain particular facts to support those claims.
Fraud must be plead with particularity. Comm. on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216. Every element must be alleged factually and specifically. Id. That is “when it comes to alleging fraud, California law
requires more than mere notice to the defendant because fraud constitutes a serious attack on character, and fairness to the
defendant demands that he should receive the fullest possible details of the charge in order to prepare his defense. Legal
conclusions alone will not support a cause of action for fraud. Thus, the policy of liberal construction of the pleadings ... will
not ordinarily be invoked to sustain a pleading defective in any material respect.” Stansfield v. Starkey (1990) 220
Cal.App.3d 59, 73 (internal quotations omitted); Comm. on Children’s Television, Inc. v. General Foods, supra at 216 (citing
3 Witkin Cal. Procedure 2d ed. 1971 Pleading, §574). in order to plead sufficient facts to support the fraud claims, Plaintiffs
must plead “facts which show how, when, where, to whom, and by what means the representations were tendered.”
Stansfield, supra at 73.
“The specificity requirement serves two purposes. The first is notice to the defendant to ‘furnish the defendant with certain
definite charges which can be intelligently met’ [and the second 1] ‘to enable the court to determine whether, on the facts
pleaded, there is any foundation, prima facie at least, for the charge of fraud.’ ” Comm. on Children’s Television Inc., supra
at 716-17 (citations omitted). Plaintiffs have failed to allege facts with sufficient particularity so that JOHN CONTENTO can
intelligently meet the allegations. Moreover, Plaintiffs have failed to show there is a prima facie foundation for the charge of
fraud.
A. Plaintiffs Have Not Alleged Facts With Sufficient Particularity to Support the First Cause of Action for Fraud.
not have sufficient knowledge to warrant the representation, (3) with the intent to induce the Plaintiffs to act on the false
representation or concealed material fact, (4) that plaintiff relied upon, (5) to plaintiff’s damage. Reed v. King (1983) 145
Cal.App.3d 261, 264. [Emphasis added.]
Plaintiffs have failed to allege who, when, where and how misrepresentations or omissions were made in their consideration
to purchase the Amante property. To support the fraud claim, Plaintiffs allege that JOHN CONTENTO made the
representations to them that the Amante property was worth $1.2 million in the appraisal signed July 20, 2005 by JOHN
CONTENTO prepared. (First Amended Complaint, ¶ 41.) Plaintiffs allege that JOHN CONTENTO made numerous
misrepresentations in his appraisal about the property with the “intention to deceive and defraud the Plaintiffs and induce the
Plaintiffs to act in reliance on these representations in the manner hereinafter, or with the expectation that Plaintiffs would so
act.” (First Amended Complaint, ¶42.) Furthermore, Plaintiffs contend that in “reliance on these representations, Plaintiffs
were induced to, and did, pay $1,200,000 for the Amante property.” (First Amended Complaint, ¶¶ 45, 72.)
However, earlier in their First Amended Complaint, Plaintiffs admit they never received the appraisal prepared by JOHN
CONTENTO until after close of escrow. (See First Amended Complaint, ¶¶27-32.) Therefore, by their own contentions in
Plaintiffs’ First Amended Complaint, they could not have possibly relied on or been induced by any representations in the
JOHN CONTENTO appraisal report to purchase the property since they admit in their own First Amended Complaint that
they never received information from the appraisal report from anyone prior to close of escrow. (First Amended Complaint,
¶¶ 27-32.)
B. Plaintiffs Have Not Alleged Facts With Sufficient Particularity to Support the Fifth Cause of Action for Negligent
Misrepresentation.
Negligence misrepresentation is a species of fraud. Loken v. Prudential-Award Properties (1995) 36 Cal.App.4th 263, 272;
Wilson v. Prudential Great Western Realty (1993) 15 Cal.App.4th 298, 306. Consequently, Plaintiffs must allege this cause
of action with particularity. Plaintiffs have failed to allege how, when, where, to whom and by what means the
291
representations in the appraisal report were tendered in making their decision to purchase the Amante property. Plaintiffs
admitted they closed escrow on the Amante property on July 29, 2005 before anyone provided the appraisal to them, on or
after August 18, 2005. (First Amended Complaint, ¶¶ 31-32.)
Plaintiffs admit that Agent Little did not provide the appraisal until after close of escrow. (First Amended Complaint, ¶ 32.)
Plaintiffs allege that the Plaintiffs “were induced to, and did, pay $1,200,000 for the Amante property.” (First Amended
Complaint, ¶ 32.) But Plaintiffs also contended earlier that they never received the JOHN CONTENTO appraisal prior to
close of escrow. Plaintiffs never allege who, if anyone, told them that the appraisal report estimated a value of the Amante
property of $1.2 million nor when the statement was made, if ever, prior to close of escrow. Furthermore, nowhere in their
First Amended Complaint do Plaintiffs state that anyone at any time before close of escrow told them about any information
in the JOHN CONTENTO appraisal report that they could have been induced to rely on to buy the Amante property.
Therefore, the Fifth Cause of Action does not show a prima facie foundation for the claim.
C. Plaintiffs Should be Denied Leave to Amend The First & Fifth Causes of Action.
Plaintiffs could not have relied on JOHN CONTENTO’s appraisal or its estimated opinion of value to purchase the Amante
property since they admit in their own First Amended Complaint they received the appraisal report on or about August 18,
2005, after close of escrow on July 29, 2005. Furthermore, Plaintiffs never stated who relayed any information about the
JOHN CONTENTO appraisal report regarding the purchase of the Amante property prior to close of escrow, nor the
information relayed. JOHN CONTENTO submits that Plaintiffs will be unable to meet the burden of supporting their Causes
of Action for Fraud and Negligent Misrepresentation against JOHN CONTENTO. Any leave to amend should, therefore, be
denied.
V.
THE FIRST AMENDED COMPLAINT DOES NOT ALLEGE FACTS TO SUPPORT PLAINTIFFS’ FOURTH
CAUSE OF ACTION FOR NEGLIGENCE AGAINST JOHN CONTENTO.
Plaintiffs allege in their First Amended Complaint that JOHN CONTENTO “owed the Plaintiffs a duty to exercise skill
ordinarily exercised by reputable members of the profession practicing in the same or similar circumstances in the
performance of their respective duties so as to prevent injury to plaintiff.” (First Amended Complaint, ¶ 65.) To plead a cause
of action based on negligence, the Plaintiffs must establish the following elements: (1) duty to Plaintiffs; (2) breach; (3)
causation; and (4) damages. Freidman v. Merck & Co. (2003) 131 Cal.Rptr.2d 885, 890, 107 Cal.App.4th 454, rev. den.).
Plaintiffs cannot prove JOHN CONTENTO owed any duty to Plaintiffs. “The absence of duty ends the analysis of liability.”
Martinez v. Bank of America Nat. Trust & Sav. Assn. (2000) 98 Cal.Rptr.2d 576, 586, 82 Cal.App.4th 883. Plaintiffs admit
that they did not retain JOHN CONTENTO to conduct an appraisal of the Amante property. First Amended Complaint, ¶ 28.)
Plaintiffs never contend they spoke with or met JOHN CONTENTO. Plaintiffs never contend they entered into any contract
with JOHN CONTENTO to appraise the property. Instead, they contend in their First Amended Complaint that they asked
Agent Little if the appraisal had been completed and asked Agent Little repeatedly prior to close of escrow on the Amante
property that they wanted to see the appraisal and did not. (First Amended Complaint, ¶¶29-32.) Escrow closed on July 29,
2005. (First Amended Complaint, ¶31.) Plaintiffs admit that it was not until on or about August 18, 2005 that Plaintiffs
received the JOHN CONTENTO appraisal from Agent Little. (First Amended Complaint, ¶ 32.) Plaintiffs did not establish
that JOHN CONTENTO owed Plaintiffs any duty.
A. Plaintiffs Should be Denied Leave to Amend the Fourth Cause of Action.
Plaintiffs will be unable to allege that JOHN CONTENTO had any duty to Plaintiffs nor will they be able to allege that the
appraisal report caused them damages. Plaintiffs admit they already purchased and closed escrow on the Amante property
after they received the appraisal report prepared by JOHN CONTENTO. Consequently, Plaintiffs will not be able to meet
292
the burden of showing that they can cure the deficiencies in the Fourth Cause of Action. Therefore, JOHN CONTENTO
requests that this Court sustain the demurrer to the Fifth Cause of Action without leave to amend.
VI.
CONCLUSION
Plaintiff’s First Amended Complaint fails to state facts sufficient to support Causes of Action for Fraud, Negligent
Misrepresentation and Negligence against JOHN CONTENTO. In addition, the First Amended Complaint does not contain
facts with sufficient particularity to support the Fraud and Negligent Misrepresentation claims. Therefore, JOHN
CONTENTO requests that the Court sustain his Demurrer to the First, Fourth and Fifth Causes of Action. Finally, because as
a matter of law JOHN CONTENTO has no liability under the facts of this case for the First, Fourth and Fifth Causes of
Action, JOHN CONTENTO requests that the Court deny Plaintiffs’ leave to amend as to those causes of action against
JOHN CONTENTO.
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
End of Document
293
Notice of Motion and Motion to Strike Punitive Damages in
Plaintiffs’ First Amended Complaint; Memorandum of Points and
Authorities
Enterprise, Inc.; Michael Little; Individually; John Contento, SRO, a sole proprietor; Does 1 through 50, Defendants. |
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little; Individually; John Contento, SRO, a sole proprietor;
No. GIN 054 088.
September 8, 2006.
Notice of Motion and Motion to Strike Punitive Damages in Plaintiffs’ First Amended Complaint; Memorandum of
Points and Authorities
Robert T. Dolan (state Bar No. 110494), Lindsay Mc Menamin (State Bar No. 210269), Gaglione & Dolan, 20750 Ventura
Time: 1:30 p.m.
TO ALL PARTIES HEREIN AND TO THEIR ATTORNEYS OF RECORD HEREIN:
PLEASE TAKE NOTICE that on October 20, 2006, at 1:30 p.m., or as soon thereafter as counsel may be heard in
Department 31 of the above-entitled Court, located at 325 South Melrose Drive, Vista, California 92083, the Motion to Strike
portions of the First Amended Complaint of Plaintiffs MARTHA UMMEL and VERNON UMMEL Defendant, JOHN
CONTENTO will be heard.
Filed and served herewith are the Motion to Strike and Memorandum of Points and Authorities in support of the Motion to
Strike.
JOHN CONTENTO hereby moves to strike portions of the First Amended Complaint on the following grounds:
1. Paragraph 48 (“punitive damages”) is improper and not drawn in conformity with the laws of this State.
This Motion to Strike is based upon this Notice of Hearing of Motion to Strike, the Memorandum of Points and Authorities in
support of the Motion to Strike, and upon such further written and oral evidence as may be presented before and at the
hearing of the Motion to Strike.
GAGLIONE & DOLAN
295
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
I.
INTRODUCTION
This claim arises from the purchase by the Plaintiffs of a single family residence located at 1657 Amante Court, Carlsbad,
California (hereinafter referred to as the “Amante property”). The purchase price was $1.2 million. (First Amended
Complaint, ¶24.) John Contento, a licensed real estate appraiser, was retained by the lender to prepare an appraisal for its
consideration in issuing a purchase money loan to Plaintiffs. This appraisal is dated July 20, 2005. Escrow on this purchase
closed July 29, 2005. (First Amended Complaint, ¶31.) Plaintiffs admit in their First Amended Complaint that they did not
obtain information from the appraisal report until on or about August 18, 2005. (First Amended Complaint, ¶32.) However,
in their First Amended Complaint, they contend that JOHN CONTENTO intentionally and fraudulently misrepresented the
value of the property to them. Plaintiffs contend that the true value of the Amante property was $1,050,000. (First Amended
Complaint, ¶44(b).) Plaintiffs also contend that other fraudulent misrepresentations were made in the appraisal report relating
to adjustments and the comparable sales chosen by JOHN CONTENTO. (First Amended Complaint, ¶¶42, 44(a).) Plaintiffs
contend they relied on these representations to purchase the property for $1.2 million. (First Amended Complaint, ¶45.)
Plaintiffs filed causes of action for fraud, negligence and negligent misrepresentation against JOHN CONTENTO. Under the
First Cause of Action for Fraud, Plaintiffs have also requested punitive damages.
II.
LEGAL AUTHORITY FOR MOTION TO STRIKE
California Code of Civil Procedure Section 435(b)(1) provides:
“Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to
strike the whole or any part thereof.”
The statutory grounds for this Motion to Strike are stated in California Code of Civil Procedure §436, which provides:
“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems
proper:
(a) Strike out any irrelevant, false, or improper matter inserted in any pleading.
296
(b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an
order of the court.”
III.
ALL REFERENCES TO PUNITIVE DAMAGES AGAINST JOHN CONTENTO SHOULD BE STRICKEN
Under California Civil Code §3294(a), exemplary damages are allowable, as follows:
“In an action for the breach of an obligation not arising from contract, where it is proven by clear and
convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in
addition to the actual damages, may recover damages for the sake of example and by way of punishing
the defendant.”
Also under Civil Code §3294(c)(3). Fraud means “an intentional misrepresentation, deceit or concealment of a material fact
known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal
rights or otherwise causing injury.”
In Plaintiffs’ First Amended Complaint, Plaintiffs make a claim for punitive damages against JOHN CONTENTO. (First
Amended Complaint, ¶45.) However, Plaintiffs have failed to plead the particular facts necessary to support a fraud claim.
Comm. on Children’s Television Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Furthermore, Plaintiffs will be
unable to provide sufficient facts to support the fraud claims that relate to JOHN CONTENTO’s appraisal report and their
contention that information in that appraisal was made to intentionally deceive and defraud the Plaintiffs and induce them to
act in reliance on these representations. (First Amended Complaint, ¶45.)
This is based on Plaintiffs admitting in their own First Amended Complaint that, despite numerous requests to their real
estate agent, Little, they never received the appraisal report or information in it until after close of escrow. (First Amended
Complaint, ¶¶28-32.) Without receiving the appraisal report prior to close of escrow, and without the transmission of any
information to them in the appraisal report before close of escrow, they could not possibly have been deceived or induced to
any act. Furthermore, in Plaintiffs’ First Amended Complaint, Plaintiffs clearly state that defendant “Agent Little, on behalf
of defendants Remax and Horizon, intentionally and fraudulently withheld the Appraisal from the Plaintiffs until after
escrow closed on the Amante property.” (First Amended Complaint, ¶40.) Nowhere in the First Amended Complaint is it
contended that JOHN CONTENTO withheld the appraisal from Plaintiffs.
When there is no support for fraud, there can be no request for punitive damages under California statutory law.
IV.
CONCLUSION
The First Amended Complaint contains allegations that are improper and not drawn in conformity with the laws of this State.
Accordingly, it is requested that this Motion to Strike be granted as discussed above, without leave to amend.
GAGLIONE & DOLAN
297
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMlN
Attorneys for Defendant,
JOHN CONTENTO
End of Document
298
Notice of Demurrer and Demurrer to Plaintiffs’ Complaint;
Memorandum of Points and Authorities in Support Thereof
Enterprise, Inc.; Michael Little, individually; Remax, Inc.; John Contento, SRO, a sole proprietor; and Does 1 through
50, Defendants. | Superior Court of California.
Search Details
Search Query:
Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
LAST DANCE, INC.; Coats Enterprise, Inc.; Michael Little, individually; Remax, Inc.; John Contento, SRO, a
No. GIN 054 088.
August 18, 2006.
Notice of Demurrer and Demurrer to Plaintiffs’ Complaint; Memorandum of Points and Authorities in Support
Thereof
Time: 1:30 p.m.
TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE, that on October 20, 2006, at 1:30 p.m., or as soon thereafter as counsel may be heard, in
Department 31 of the above-entitled Court, located at 325 South Melrose Drive, Vista, California 92083, defendant JOHN
CONTENTO will and hereby does demur to the following causes of action in Plaintiffs’ Complaint, on the following
grounds:
DEMURRER TO THE FIRST CAUSE OF ACTION FOR FRAUD
1. The First Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
2. The First Cause of Action fails to state facts with sufficient particularity to support a cause of action based on fraud.
DEMURRER TO THE FOURTH CAUSE OF ACTION FOR NEGLIGENCE
3. The Fourth Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
300
DEMURRER TO THE FIFTH CAUSE OF ACTION FOR NEGLIGENT MISREPRESENTATION
4. The Fifth Cause of Action fails to state facts sufficient to constitute a cause of action against JOHN CONTENTO.
5. The Fifth Cause of Action fails to state facts with sufficient particularity to support a cause of action based on fraud.
JOHN CONTENTO will also request that the Court deny Plaintiffs’ leave to amend the First, Fourth and Fifth Causes of
Action as JOHN CONTENTO can have no liability under those claims as a matter of law.
The Demurrer is based upon this Notice and Demurrer, the Memorandum of Points and Authorities, upon all papers and
pleadings on file herein, and upon such other oral and/or further material and argument as may be presented at the hearing on
the demurrer.
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
I.
INTRODUCTION
According to the Complaint, Plaintiffs entered into a written agreement on or about May 29, 2005 to purchase the real
property located at 1657 Amante Court, Carlsbad, California (hereinafter “Amante property”) for $1.2 million. (See
Complaint, ¶¶17-22.) JOHN CONTENTO, a real estate appraiser, was retained to prepare an appraisal of the Amante
property for a purchase money loan. He was not retained by Plaintiffs.
Plaintiffs allege defendant JOHN CONTENTO represented the Amante property value was $1.2 million in his appraisal
signed July 20, 2005. (Complaint, ¶¶21-23.) Plaintiffs contend that the true value of the Amante property was $1,050,000.
(Complaint, ¶ 37(b).) Plaintiffs also contend that other misrepresentations were made in the appraisal report relating to
adjustments and comparable sales chosen. (Complaint, ¶¶35a-g.) Finally, Plaintiffs allege that JOHN CONTENTO
fraudulently withheld from his appraisal another comparable sale across the street from the Amante property that had a
‘pending’ sales price of between $999,000 and $1.1 million. (Complaint, ¶37(a).) Plaintiffs contend that in reliance on these
representations, they purchased the Amante property. (Complaint, ¶38.)
However, Plaintiffs also state in their Complaint that they never received the appraisal report prepared by JOHN
CONTENTO prior to close of escrow on July 29, 2005. (Complaint, ¶ 26-29.) Therefore, they could not have relied on
301
any information in it to purchase the property nor could they have been intentionally induced to rely on the
information.
Thus, Plaintiffs seek to recover under theories of liability that are not available to them against JOHN CONTENTO. Each
cause of action discussed herein fails to state a claim against JOHN CONTENTO. Based thereon, JOHN CONTENTO
demurs to each of the stated causes of action. JOHN CONTENTO will also request that this Court deny Plaintiffs’ leave to
amend the First, Fourth and Fifth Causes of Action against JOHN CONTENTO as Plaintiffs cannot assert those claims
against JOHN CONTENTO as a matter of law.
II.
THE COURT HAS THE DISCRETION TO DISMISS A CAUSE OF ACTION WHERE THE COMPLAINT FAILS TO
STATE SUFFICIENT FACTS TO SUPPORT IT.
Where a Complaint or cause of action fails to state sufficient facts to constitute a cause of action, a defendant may object by
way of demurrer. California Code of Civil Procedure $430.10(e)
III.
THE COURT MAY SUSTAIN A DEMURRER WITHOUT LEAVE TO AMEND.
Although leave to amend is liberally granted, it is not appropriate where the demurring party can have no liability as a matter
of law. See, Lawrence v. Bank of America (1985) 163 Cal.App.3d 431, 436. Furthermore, the burden is on the plaintiff to
show he or she can cure the deficiencies in the Complaint by amendment. See weil, civil practice guide: civil procedure
before trial, 7:130 (citing Goodman v. Kennedy (1976) 18 Cal.3d 335, 349).
The facts of this case clearly show that JOHN CONTENTO has no liability to Plaintiffs as a matter of law under the First,
Fourth and Fifth Causes of Action. Plaintiffs will be unable to show any contract between Plaintiffs and JOHN CONTENTO
to prepare an appraisal of the Amante property. Furthermore, Plaintiffs have already admitted to not speaking or otherwise
communicating with JOHN CONTENTO or even having the appraisal to review prior to close of escrow. (Complaint,
¶¶25-28.) Therefore, Plaintiffs could not have relied on any of the information in that report to purchase the property.
As set out below, Plaintiffs will not be able to carry the burden of showing they can cure the deficiencies therein. If they try
to amend their Complaint to eliminate that Plaintiffs admitted to not receiving any information from the appraisal report prior
to close of escrow, they will be changing a material fact in their own original Complaint. JOHN CONTENTO, therefore,
respectfully submits that Plaintiffs should be denied leave to amend those causes of action.
IV.
THE COMPLAINT DOES NOT ALLEGE FACTS WITH SUFFICIENT PARTICULARITY TO SUPPORT THE
FRAUD CLAIMS AGAINST JOHN CONTENTO.
The Complaint contains two causes of action based on fraud: the First Cause of Action for Fraud and the Fifth Cause of
Action for Negligent Misrepresentation. Each of these claims are subject to demurrer because the Complaint does not contain
particular facts to support those claims.
Fraud must be plead with particularity. Comm. on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216. Every element must be alleged factually and specifically. Id. That is “when it comes to alleging fraud, California law
requires more than mere notice to the defendant because fraud constitutes a serious attack on character, and fairness to the
302
defendant demands that he should receive the fullest possible details of the charge in order to prepare his defense. Legal
conclusions alone will not support a cause of action for fraud. Thus, the policy of liberal construction of the pleadings ... will
not ordinarily be invoked to sustain a pleading defective in any material respect.” Stansfield v. Starkey (1990) 220
Cal.App.3d 59, 73 (internal quotations omitted); Comm. on Children’s Television, Inc. v. General Foods, supra at 216 (citing
3 Witkin Cal. Procedure 2d ed. 1971 Pleading, §574). In order to plead sufficient facts to support the fraud claims, Plaintiffs
must plead “facts which show how, when, where, to whom, and by what means the representations were tendered.”
Stansfield, supra at 73.
“The specificity requirement serves two purposes. The first is notice to the defendant to ‘furnish the defendant with certain
definite charges which can be intelligently met’ [and the second 1] ‘to enable the court to determine whether, on the facts
pleaded, there is any foundation, prima facie at least, for the charge of fraud.’ ” Comm. on Children’s Television Inc. supra at
716-17 (citations omitted). Plaintiffs have failed to allege facts with sufficient particularity so that JOHN CONTENTO can
intelligently meet the allegations. Moreover, Plaintiffs have failed to show there is a prima facie foundation for the charge of
fraud.
A. Plaintiffs Have Not Alleged Facts With Sufficient Particularity to Support the First Cause of Action for Fraud.
not have sufficient knowledge to warrant the representation, (3) with the intent to induce the Plaintiffs to act on the false
representation or concealed material fact, (4) that plaintiff relied upon, (5) to plaintiff’s damage. Reed v. King (1983) 145
Cal.App.3d 261, 264. [Emphasis added.]
Plaintiffs have failed to allege who, when, where and how misrepresentations or omissions were made in their consideration
to purchase the Amante property. To support the fraud claim, Plaintiffs allege that JOHN CONTENTO made the
representations to them that the Amante property was worth $1.2 million in the appraisal signed July 20, 2005 by JOHN
CONTENTO prepared. (Complaint, ¶ 21-23.) Plaintiffs allege that JOHN CONTENTO made numerous misrepresentations
in his appraisal about the property with the “intention to deceive and defraud the Plaintiffs and induce the Plaintiffs to act in
reliance on these representations in the manner hereinafter, or with the expectation that Plaintiffs would so act.” (Complaint,
¶ 38.) Furthermore, Plaintiffs contend that in “reliance on these representations, Plaintiffs were induced to, and did, pay
$1,200,000 for the Amante property.” (Complaint, ¶ 38.)
However, earlier in their Complaint, Plaintiffs admit they never received the appraisal prepared by JOHN CONTENTO
until after close of escrow. (See Complaint, ¶¶24-28.) Therefore, by their own contentions in Plaintiffs’ Complaint, they
could not have possibly relied on or been induced by any representations in the JOHN CONTENTO appraisal report to
purchase the property since they admit in their own Complaint that they never received information from the appraisal report
from anyone prior to close of escrow. (Complaint, ¶¶25-28.)
B. Plaintiffs Have Not Alleged Facts With Sufficient Particularity to Support the Fifth Cause of Action for Negligent
Misrepresentation.
Negligence misrepresentation is a species of fraud, Loken v. Prudential-Award Properties (1995) 36 Cal.App.4th 263, 272;
Wilson v. Prudential Great Western Realty (1993) 15 Cal.App.4th 298, 306. Consequently, Plaintiffs must allege this cause
of action with particularity. Plaintiffs have failed to allege how, when, where, to whom and by what means the
representations in the appraisal report were tendered in making their decision to purchase the Amante property. Plaintiffs
admitted they closed escrow on the Amante property on July 29, 2005 before anyone provided the appraisal to them, on or
after August 18, 2005.
Plaintiffs admit that Agent Little did not provide the appraisal until after close of escrow. (Complaint, ¶24-25.) Plaintiffs
allege that the Plaintiffs “were induced to, and did, pay $1,200,000 for the Amante property.” (Complaint, ¶65.) But Plaintiffs
also contended earlier that they never received the JOHN CONTENTO appraisal prior to close of escrow. Plaintiffs never
allege who, if anyone, told them that the appraisal report estimated a value of the Amante property of $1.2 million nor when
303
the statement was made, if ever, before close of escrow. Furthermore, nowhere in their Complaint do Plaintiffs state that
anyone at any time before close of escrow told them about any information in the JOHN CONTENTO appraisal report that
they could have been induced to rely on to buy the Amante property. Therefore, the Fifth Cause of Action does not show a
prima facie foundation for the claim.
C. Plaintiffs Should be Denied Leave to Amend Those Causes of Action.
Plaintiffs could not have relied on JOHN CONTENTO’s appraisal or its estimated opinion of value to purchase the Amante
property since they admit in their own Complaint they received the appraisal report on or about August 18, 2005, after close
of escrow on July 29, 2005. Furthermore, Plaintiffs never stated who relayed any information about the JOHN CONTENTO
appraisal report regarding the purchase of the Amante property prior to close of escrow, nor the information relayed. JOHN
CONTENTO submits that Plaintiffs will be unable to meet the burden of supporting their Causes of Action for Fraud and
Negligent Misrepresentation against JOHN CONTENTO. Any leave to amend should, therefore, be denied.
V.
THE COMPLAINT DOES NOT ALLEGE FACTS TO SUPPORT PLAINTIFFS’ FOURTH CAUSE OF ACTION FOR
NEGLIGENCE AGAINST JOHN CONTENTO.
Plaintiffs allege in their Complaint that JOHN CONTENTO “owed the Plaintiffs a duty to exercise skill ordinarily exercised
by reputable members of the profession practicing in the same or similar circumstances in the performance of their respective
duties so as to prevent injury to plaintiff.” (Complaint, ¶58.) To plead a cause of action based on negligence, the Plaintiffs
must establish the following elements: (1) duty to Plaintiffs; (2) breach; (3) causation; and (4) damages. Freidman v. Merck
& Co. (2003) 131 Cal.Rptr.2d 885, 890, 107 Cal.App.4th 454, rev. den.).
Plaintiffs cannot prove JOHN CONTENTO owed any duty to Plaintiffs. “The absence of duty ends the analysis of liability.”
Martinez v. Bank of America Nat. Trust & Sav. Assn. (2000) 98 Cal.Rptr.2d 576, 586, 82 Cal.App.4th 883. Plaintiffs never
stated that they retained JOHN CONTENTO to conduct an appraisal of the Amante property. Plaintiffs never contend they
spoke with or met JOHN CONTENTO. Plaintiffs never contended they entered into any contract with JOHN CONTENTO to
appraise the property. Instead, they contend in their Complaint that they asked Agent Little if the appraisal had been
completed and asked Agent Little repeatedly prior to close of escrow on the Amante property that they wanted to see the
appraisal and did not. (Complaint, ¶25-26.) Escrow closed on July 29, 2005. (Complaint, ¶26.) Plaintiffs admit that it was not
until on or about August 18, 2005 that Plaintiffs received the JOHN CONTENTO appraisal from Agent Little. (Complaint,
¶28.) Plaintiffs did not establish that JOHN CONTENTO owed Plaintiffs any duty.
A. Plaintiffs Should be Denied Leave to Amend the Fourth Cause of Action.
Plaintiffs will be unable to allege that JOHN CONTENTO had any duty to Plaintiffs nor will they be able to allege that the
appraisal report caused them damages. Plaintiffs admit they already purchased and closed escrow on the Amante property
after they received the appraisal report prepared by JOHN CONTENTO. Consequently, Plaintiffs wilt not be able to meet
the burden of showing that they can cure the deficiencies in the Fourth Cause of Action. Therefore, JOHN CONTENTO
requests that this Court sustain the demurrer to the Fifth Cause of Action without leave to amend.
VI.
CONCLUSION
304
Plaintiff’s Complaint fails to state facts sufficient to support Causes of Action for Fraud, Negligent Misrepresentation and
Negligence. In addition, the Complaint does not contain facts with sufficient particularity to support the Fraud and Negligent
Misrepresentation claims. Therefore, JOHN CONTENTO requests that the Court sustain his Demurrer to the First, Fourth
and Fifth Causes of Action. Finally, because as a matter of law JOHN CONTENTO can have no liability under the facts of
this case for the First, Fourth and Fifth Causes of Action, JOHN CONTENTO requests that the Court deny Plaintiffs’ leave to
amend as to those causes of action against JOHN CONTENTO.
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
End of Document
305
Notice of Motion and Motion to Strike; Memorandum of Points and
Authorities
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Jurisdiction:
California
Delivery Details
Date:
Delivered By:
Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054 088.
August 18, 2006.
Notice of Motion and Motion to Strike; Memorandum of Points and Authorities
Boulevard, Suite 238, Woodland Hills, California 91364, Telephone: (818) 704-1464, Facsimile; (818) 704-1564, Attorneys
Time: 1:30 p.m.
TO ALL PARTIES HEREIN AND TO THEIR ATTORNEYS OF RECORD HEREIN:
PLEASE TAKE NOTICE that on October 20, 2006, at 1:30 p.m., or as soon thereafter as counsel may be heard in
Department 17 of the above-entitled Court, located at 325 South Melrose Drive, Vista, California 92083, the Motion to Strike
portions of the Complaint of Plaintiffs MARTHA UMMEL and VERNON UMMEL Defendant, JOHN CONTENTO will be
heard.
Filed and served herewith are the Motion to Strike and Memorandum of Points and Authorities in support of the Motion to
Strike.
JOHN CONTENTO hereby moves to strike portions of the Complaint on the following grounds:
1. Paragraph 41 (“punitive damages”) is improper and not drawn in conformity with the laws of this State.
This Motion to Strike is based upon this Notice of Hearing of Motion to Strike, the Memorandum of Points and Authorities in
support of the Motion to Strike, and upon such further written and oral evidence as may be presented before and at the
hearing of the Motion to Strike.
GAGLIONE & DOLAN
307
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
I.
INTRODUCTION
This claim arises from the purchase by the Plaintiffs of a single family residence located at 1657 Amante Court, Carlsbad,
California (hereinafter referred to as the “Amante property”). The purchase price was $1.2 million. (Complaint, ¶22.) John
Contento, a licensed real estate appraiser, was retained by the lender to prepare an appraisal for its consideration in issuing a
purchase money loan to Plaintiffs. This appraisal is dated July 20, 2005. Escrow on this purchase closed July 29, 2005.
(Complaint, ¶26.) Plaintiffs admit in their Complaint that they did not obtain information from the appraisal report until on or
about August 18, 2005. (Complaint, ¶28.) However, in their Complaint, they contend that John Contento misrepresented the
value of the property to them. Plaintiffs contend that the true value of the Amante property was $1,050,000, (Complaint,
¶37(b).) Plaintiffs also contend that other misrepresentations were made in the appraisal report relating to adjustments and the
comparable sales chosen by John Contento. (Complaint, ¶¶35-37.) Plaintiffs contend they relied on these representations to
purchase the property for $1.2 million. (Complaint, ¶ 38.)
Plaintiffs filed causes of action of fraud, negligence and negligent misrepresentation against John Contento. Under the First
Cause of Action for Fraud, Plaintiffs have also requested punitive damages.
II.
LEGAL AUTHORITY FOR MOTION TO STRIKE
California Code of Civil Procedure Section 435(b)(1) provides:
“Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to
strike the whole or any part thereof.”
The statutory grounds for this Motion to Strike are stated in California Code of Civil Procedure §436, which provides:
“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems
proper:
(a) Strike out any irrelevant, false, or improper matter inserted in any pleading.
(b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an
order of the court.”
308
III.
ALL REFERENCES TO PUNITIVE DAMAGES AGAINST JOHN CONTENTO SHOULD BE STRICKEN
Under California Civil Code §3294(a), exemplary damages are allowable, as follows:
“In an action for the breach of an obligation not arising from contract, where it is proven by clear and
convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in
addition to the actual damages, may recover damages for the sake of example and by way of punishing
the defendant.”
Also under Civil Code §3294(c)(3). Fraud means “an intentional misrepresentation, deceit or concealment of a material fact
known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal
rights or otherwise causing injury.”
In Plaintiffs’ Complaint, Plaintiffs make a claim for punitive damages against John Contento. (Complaint, ¶41.) However,
Plaintiffs have failed to plead the particular facts necessary to support a fraud claim. Comm. on Children’s Television Inc. v
General Foods Corp. (1983) 35 Cal.3d 197,216. Furthermore, Plaintiffs will be unable to provide sufficient facts to support
the fraud claims that relate to John Contento’s appraisal report and their contention that information in that appraisal was
made to intentionally deceive and defraud the Plaintiffs and induce them to act in reliance on these representations.
(Complaint, ¶38.)
This is based on Plaintiffs admitting in their own Complaint that, despite numerous requests to their real estate agent, Little,
they never received the appraisal report or information in it until after close of escrow. (Complaint, ¶¶25, 24-26 [sic].)
Without receiving the appraisal report prior to close of escrow, and without the transmission of any information to them in
the appraisal report before close of escrow, they could not possibly have been deceived or induced to any act. Furthermore, in
Plaintiffs’ Complaint, Plaintiffs clearly state that defendant “Agent Little, on behalf of defendants Remax and Horizon,
intentionally and fraudulently withheld the Appraisal from the Plaintiffs until after escrow closed on the Amante
property.” No where in the Complaint is it contended that John Contento withheld the appraisal from Plaintiffs. There could
be no intentional misrepresentations made to Plaintiffs by John Contento.
When there is no support for fraud, there can be no request for punitive damages under California statutory law.
IV.
CONCLUSION
The Complaint contains allegations that are improper and are not drawn in conformity with the laws of this State.
Accordingly, it is requested that this Motion to Strike be granted as discussed above, without leave to amend.
GAGLIONE & DOLAN
By: <<signature>>
ROBERT T. DOLAN
LINDSAY MC MENAMIN
309
Attorneys for Defendant,
JOHN CONTENTO
End of Document
310
Memorandum of Points & Authorities in Reply to Plaintiffs’
Opposition to Defendant Coats Enterprise’s Motion to Strike
Plaintiffs’ Claims for Attorney’s Fees and Exemplary Damages in
Search Details
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Jurisdiction:
California
Delivery Details
Date:
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Client ID:
1111
Comment:
San Diego County
v.
No. GIN 054088.
August 18, 2006.
Memorandum of Points & Authorities in Reply to Plaintiffs’ Opposition to Defendant Coats Enterprise’s Motion to
Strike Plaintiffs’ Claims for Attorney’s Fees and Exemplary Damages in Plaintiffs’ First Amended Complaint
Joseph L. Stine, Attorney at Law, CA Bar No. 86544, Law Otfice of Joseph L. Sttne, 380 South Melrose Drive, #306, Vista,
Dept.: 31
Time: 1:30 p.m.
Defendant COATS ENTERPRISE INC. (“COATS”) submits it Reply Memorandum of Points and Authorities in support of
its motion to strike allegations regarding attorney’s fees and exemplary damages in Plaintiffs’ First Amended Complaint filed
in the instant action.
I.
PLAINTIFFS OFFER NO AUTHORITY THAT WOULD SUPPORT AN AWARD OF ATTORNEY’S FEES IF
THEY PREVAIL IN THIS ACTION.
In Section IV of their memorandum of points and authorities, Plaintiffs argue that they have alleged the existence of a verbal
agreement between themselves and this Defendant. They go on to make a remarkable claim: “Implied in that agreement was
that the prevailing party would be entitled to attorneys fees for any legal proceeding arising out of the agreement.” (Plaintiffs’
Points & Authorities p. 5,1.11-13)
This claim is pure smoke and mirrors. To allow Plaintiffs attorney fees by implication would emasculate the well-established
general rule in civil litigation that each party bears its own attorney fees and costs. There is absolutely no legal authority
suggesting that such an award can be conferred by implication in a verbal agreement.
312
In weak defense of their argument, Plaintiffs offer a wholly convoluted construction of Cal. Code of Civ. Proc. §1021 as
supporting an attorney’s fee award if implied by an agreement between the parties litigant. A close reading of the Section
reveals that the “agreement, express or implied, of the parties” references agreements between attorneys and their clients to
pay for legal services. The Section provides that attorneys are compensated pursuant to agreements with their clients
“[e]xcept as attorney’s fees are specifically provided for by statute...”
Plaintiffs’ construction of the statute runs afoul with well --established authority and precedent. For example, Witkin notes
that in civil litigation there is a “presumption against fee shifting”. (See 7 Witkin, Cal. Proc. 4th ed., §145, p. 659.) Cal. Code
of Civ. Proc. §1021 is the California version of the American rule under which each party must pay it own legal fees.
(Covenant Mutual Insurance Co. v. Young (1986) 179 Cal. App. 3d 318, 321) Attorney fees also are not recoverable in an
action for fraud. (Bezaire v. Fidelity & Deposit Co. (1970) 12 Cal. App. 3d 888, 892)
Plaintiffs have alleged no factual basis for recovering attorney fees by contract or statute.
II.
PLAINTIFFS CAN NOT RECOVER EXEMPLARY DAMAGES BASED ON THE FACTS AS PLED IN ANY OF
THEIR CAUSES OF ACTION.
In Section III of their Points and Authorities, Plaintiffs cite two cases in support of their argument that exemplary damages
are supported in their fraud based causes of actions (i.e., Causes of Actions 1,2, and 6) and further suggest that a breach of
implied covenant of good faith and fair dealing (i.e., Cause of Action 3) is so similar to a fraud as to support fraud-based
exemplary damages. They first cite as authority Oakes v. McCarthy Co, (1968) 267 Cal App. 2d 231, a case involving a
builder’s fraudulent concealment of unstable soil beneath a home sold to the plaintiffs. They further cite Stokes v. Henson
(1990) 217 Cal App. 3d 187, a case about an investment adviser liable for constructive fraud by taking the money from
investors without advising them of the highly speculative nature of their investments.
These cases do not help Plaintiffs as against Defendant COATS in this action. Nowhere dp Plaintiffs allege facts with respect
to the loan transaction which would support the perpetration of a fraud by Agent Little in that undertaking. In Oakes and
Stokes, the plaintiffs could recover in fraud and be awarded exemplary damages based on duties that the defendants had in
transactions involving them. Here Plaintiffs do not allege that Agent Little did anything improper in connection with the
mortgage loan, the only transaction for which Defendant COATS, as Agent Little’s principal, has any potential liability in
law.
Once again, Plaintiffs bark up the wrong tree. There is no allegation of fraud supporting exemplary damages for any act or
omission of Agent Little in facilitating the loan. Plaintiff has not and can not state a case for a fraud-based award of
exemplary damages against Defendant COATS based on the facts as alleged in this action.
III.
CONCLUSION
For the reasons stated above, there is no basis in law for any award of either attorney’s fees or exemplary damages against
Defendant COATS and, accordingly, all allegations referencing either recovery should be stricken for the First Amended
Complaint.
Dated: 10-13-06
LAW OFFICE OFLOSEPH L. STINE
<<signature>>
313
By Joseph L. Stine
Attorney for Defendant COATS ENTERPRISES
End of Document
314
Memorandum of Points and Authorities in Support of Defendant,
Ronald Salzetti, M.D.’S Motion for Sanctions
Francisco LUA, a minor, by and through his Guardian ad litem, Claudia Camarillo, Plaintiff, v. Ronald SALZETTI,
M.D., and Does 1 through 20, inclusive, Defendant. | Superior Court of California
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Delivery Details
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Comment:
Francisco LUA, a minor, by and through his Guardian ad..., 2005 WL 4556871...
Superior Court of California,
Central Division.
San Diego County
Francisco LUA, a minor, by and through his Guardian ad litem, Claudia Camarillo, Plaintiff,
v.
Ronald SALZETTI, M.D., and Does 1 through 20, inclusive, Defendant.
Case No.: GIC 833829.
August 19, 2005.
Memorandum of Points and Authorities in Support of Defendant, Ronald Salzetti, M.D.’S Motion for Sanctions
I/C Judge: Ronald S. Prager.
Defendant Ronald Salzetti, M.D., by and through his attorneys, submits this Memorandum of Points and Authorities in
Support of his Motion for Sanctions against Plaintiff Francisco Lua and its attorney of record, Donald Loftus.
I.
STATEMENT OF FACTS
Trial was scheduled for July 27, 2005. On June 17, 2005, plaintiff filed a motion to disqualify the defense firm of Neil,
Dymott, for substitution of expert witness (Dr. Frumovitz), to preclude defense use of tainted expert, and for sanctions per
CCP § 2023. (See Declaration of Bonny Hsu at ¶2). The Court found that Neil Dymott had not engaged in any improper
conduct with plaintiff’s expert, Dr. William Frumovitz, and denied plaintiffs motion to substitute Dr. Frumovitz for another
expert. (See Court Ruling after Oral Argument attached as Exhibit A).
On July 22, 2005 plaintiff appeared ex parte and indicated for the first time that none of his experts were available for trial
during the first two weeks of August. (See Declaration of Bonny Hsu at ¶3). The Court continued the trial to August 19,
2005. (See Declaration of Bonny Hsu at ¶ 3). On August 2, 2005 plaintiff appeared ex parte for leave to augment his expert
witness list with a new standard of care obstetrician/gynecology expert, Dr. William Hinderstein. (See Declaration of Bonny
Hsu at ¶ 4; See Plaintiff’s ex parte application to substitute ob/gyn expert and Declaration of Don Loftus attached as Exhibit
B). Plaintiff represented to the Court that his standard of care expert, Dr. William Frumovitz, refused to testify for the
plaintiff at trial. (See Plaintiffs ex parte application to substitute ob/gyn expert and Declaration of Don Loftus attached as
Exhibit B). Plaintiff was permitted to substitute Dr. Frumovitz with Dr. Hinderstein as his standard of care expert. (See
Declaration of Bonny Hsu at ¶ 4).
Defense counsel has since learned from Dr. Frumovitz’ counsel, Moses Lebovits, that the deterioration in Loftus’ and Dr.
Frumovitz’ relationship was not of Dr. Frumovitz’ making. (See Declaration of Bonny Hsu ¶ 5). In fact, Dr. Frumovitz was
prepared to testify on behalf of Francisco Lua at the time of trial. (See Declaration of Bonny Hsu ¶ 5). Mr. Loftus made
unsubstantiated written accusations and threats against Dr. Frumovitz, including threats of legal action. (See Declaration of
Bonny Hsu ¶ 5). Mr. Loftus’ written threats and accusations made it impossible for Dr. Frumovitz to testify on behalf of
Francisco Lua at the time of trial. (See Declaration of Bonny Hsu ¶ 5). A declaration signed by Moses Lebovits will be filed
with the Court prior to the September 16, 2005 hearing date. (See Declaration of Bonny Hsu ¶ 5).
Loftus should not be rewarded for his erratic and abusive behavior. Loftus routinely makes unsubstantiated accusations about
316
defense counsel and this Court. Loftus’ recent accusations against Dr. Frumovitz were likewise unsubstantiated. Loftus’
intentional and irrational behavior ensured Dr. Frumovitz would refuse to testify on behalf of the plaintiff on the eve of trial.
Loftus’ aberrant litigation tactics are intended to unnecessarily delay trial and increase litigation costs. These actions do not
justify grounds for relief.
II.
LEGAL ARGUMENT
A. The Legal Standard for a Motion for Sanctions
Code of Civil Procedure section 128.6(a) provides in part, “Every trial court may order a party, the party’s attorney, or both
to pay reasonable expenses as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary
delay.” Code of Civil Procedure section 128.7 requires every pleading, petition, motion, or other similar paper to be signed.
Code Civ. Proc. § 128.7, subd. (a). The signature certifies: (1) the pleading “is not being presented primarily for an improper
purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation”, (2) “[t]he claims...are
warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the
establishment of new law”, and (3) “[t]he allegations and other factual contentions have evidentiary support.” Code Civ.
Proc. § 128.7, subd. (b). “[S]ection 128.7... requires only that the conduct be objectively unreasonable.” In re Marriage of
Reese & Guy (1999) 73 Cal.App.4th 1214, 1221. “If, after notice and a reasonable opportunity to respond, the court
determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an
appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the
violation.” Code Civ. Proc. § 128.7, subd. (c).
Loftus’ unusual litigation tactics are illogical, without merit, and intended for the sole purpose of harassing the defense and
increasing litigation costs. Plaintiff and his counsel must be sanctioned for filing motions in bad faith, engaging in frivolous
allegations and abusive litigation tactics. Loftus must be sanctioned because of his persistent bad-faith contentions that are
brought for the sole purpose of requiring defendant and his attorneys to needlessly waste time and money defending those
allegations.
B. Defendant Complied With the Procedural Requirements for a Motion for Sanctions
A motion for sanctions under Code of Civil Procedure section 128.7 must be made separately from any other motion. Also,
the party subject to the sanction must be given 21 days to withdraw or correct the offending document before such a motion
can even be filed with the Court. Pacific Trends Lamp & Lighting Products, Inc. v. J. White, Inc. (1998) 65 Cal.App.4th
1131, 1136. The procedural requirements are strictly complied or the Court cannot hear the motion. Goodstone v. Southwest
Airlines (1998) 63 Cal.App.4th 406, 418-419.
The procedural requirements are satisfied. The motion for sanctions was served on August 19, 2005. The hearing date is
scheduled for twenty-one (21) days after service of this motion. Therefore, the Court may hear the merits of the motion.
C. Plaintiff’s request for leave to augment his expert witness list and subsequent ex parte application to substitute Dr.
Hinderstein violate Code of Civil Procedure Section 128.7(b)
Making unsubstantiated accusations and threats against an expert so he will not testify for the plaintiff is not a grounds for
relief Accordingly, plaintiffs motion to augment his expert witness list violates Code of Civil Procedure section 128.7(b). The
Court found defendant had not engaged in improper conduct with plaintiffs expert, Dr. Frumovitz. Plaintiff failed to establish
any justifiable rationale for disqualifying Neil Dymott or substituting Dr. Frumovitz. Loftus refused to accept the Court’s
determination and judicial authority. Loftus made uncorroborated threats and accusations against Dr. Frumovitz ensuring he
would refuse to testify for the plaintiff. Loftus manipulation of the judicial system and judicial process made certain he would
be permitted to substitute Dr. Frumovitz for Dr. Hinderstein.
317
The Court must consider any tactical abuse underlying plaintiffs motions. Loftus has been attempting to designate Dr.
Hinderstein for several months. This is the same expert plaintiffs counsel wanted to add when he learned Dr. Salzetti would
comment on his own care and treatment. Mr. Loftus’ litigation tactics, including threatening his own expert on the eve of trial
to guarantee he would not testify for the plaintiff, are inappropriate and should not be rewarded.
D. Loftus should not be rewarded for his repetitive bad faith litigation tactics
Loftus’ current allegations against his own expert are only another example of his repetitive bad faith tactics used in an
attempt to improperly delay and increase litigations costs for all involved. Loftus’ unsubstantiated and abusive accusations
are a continuing practice protocol of his bizarre litigation tactics. Throughout this litigation, Loftus habitually attacked the
trustworthiness and character of defense counsel. Loftus has also attacked the impartiality of the Court and routinely accused
this Court of being “an advocate for the defense.”
Loftus’ paranoia and belligerent conduct extends far beyond accusing Neil Dymott, Dr. Frumovitz, and this Court of
inappropriate behavior. Loftus has made the same or similar allegations against other local attorneys, experts, and judges in
San Diego. In another lawsuit, Loftus objected to Judge Lisa Guy-Schall presiding at trial, also accusing her of being biased.
(See Objection to Judge Lisa Guy-Schall Presiding at Trial attached as Exhibit C). In a second objection to Judge Guy-Schall
presiding at trial, Loftus went so far as suggesting Judge Guy-Schall granted a continuance of the trial date “in hopes that
plaintiff would die from her injuries and thereby free up the judge’s calendar and reduce the defendants’ exposure for
damages.” (See Objection to Judge Lisa Guy-Schall Presiding at Trial attached as Exhibit D). Loftus’ numerous accusations
are unsubstantiated and devoid of reason.
Loftus’ present conduct is not unique to this case or the individuals involved. This is not the first time Loftus has made
unsubstantiated accusations or threats against defense attorneys, judges, or his own experts. This unprofessional behavior is
characteristic of Loftus’ custom and practice, and he should not be rewarded for his conduct.
E. Under Code of Civil Procedure 128.7, plaintiff and His Counsel Should Pay the Reasonable Attorney’s Fees
Incurred for the Defense of Dr. Salzetti
Monetary sanctions issued under Code of Civil Procedure section 128.7 can be awarded against both the party and his
attorney. Laborde v. Aronson (2001) 92 Cal.App.4th 459, 467. When sanctions are imposed via noticed motion, the court
may order the payment of “some or all of the reasonable attorney’s fees and other expenses incurred as a direct result of the
violation.” Code Civ. Proc. § 128.7, subd. (d). “A sanction imposed for violation of subdivision (b) shall be limited to what is
sufficient to deter repetition of this conduct or comparable conduct by others similarly situated.” Ibid. Plaintiff and his
counsel have violated Code of Civil Procedure section 128.7, subdivisions (b)(1), (b)(2), and (b)(3). Accordingly, the Court
may impose sanctions against plaintiff, his attorney or both.
Defendant has been severely prejudiced by Loftus’ delay tactics and bad faith accusations. The original trial date was
scheduled for July 27, 2005. Despite knowledge of the trial date for several months, plaintiff waited until July 22, 2005 to
inform defendant and the Court that his experts were not available during the first two weeks of August. Plaintiff
subsequently represented to the Court on August 2, 2005 that Dr. Frumovitz refused to testify for plaintiff. Loftus accusations
and threats to Dr. Frumovitz following the Court’s ruling denying his motion to substitute Dr. Frumovitz were intended to
ensure Dr. Frumovitz would refuse to testify for plaintiff at the time of trial.
Defendant has incurred substantial expense in preparing for the deposition of Dr. Frumovitz, traveling to Los Angeles to take
the deposition of Dr. Frumovitz, compensating Dr. Frumovitz for his time during deposition, paying court reporter fees,
purchasing a copy of his deposition transcript, and preparing for trial. (See Declaration of Bonny Hsu at ¶ 6). Upon review of
billing records, defendant believes he has incurred $2,442.00 in attorney’s fees for preparing for, traveling to Los Angeles,
and taking the deposition of Dr. Frumovitz. (See Declaration of Bonny Hsu at ¶ 6). This amount does not take into
consideration the amount of attorneys’ fees defendant has expended in preparing for trial. (See
318
Declaration of Bonny Hsu at ¶ 6). Defendant incurred $1,554.30 for Dr. Frumovitz’ fees and court reporter fees associated
with Dr. Frumovitz’ deposition. (See Declaration of Bonny Hsu at ¶ 6; See copies of checks paid to Dr. Frumovitz and billing
statement from Peterson & Associates attached as Exhibit E).
Defendant also incurred significant expense in having defense expert, Dr. Thomas Moore, review the two depositions
transcripts of Dr. William Frumovitz and rendering opinion regarding issues posed by Dr. Frumovitz. (See Declaration of
Bonny Hsu at ¶ 7). Upon review of billing statements, defendant believes he has incurred $1,200.00 in compensating Dr.
Moore for reviewing the deposition transcripts of Dr. Frumovitz and rendering opinions on his testimony. (See Declaration of
Bonny Hsu at ¶ 7).
Defendant attempted to make a reasonable estimate as to the expected length of the deposition of Dr. Hinderstein. (See
Declaration of Bonny Hsu at ¶ 8). The Court ordered Loftus pay for merely two hours of Dr. Hinderstein’s fees for
deposition. (See Declaration of Bonny Hsu at ¶ 8). Defendant was not aware Dr. Hinderstein had ten opinions regarding Dr.
Salzetti’s care and treatment (compared to the one opinion of Dr. Frumovitz). (See Declaration of Bonny Hsu at ¶ 9). Dr.
Hinderstein’s deposition lasted six hours, and defendant was forced to compensate Dr. Hinderstein for four hours of
deposition testimony, resulting in $2,400.00 of additional fees. (See Declaration of Bonny Hsu at ¶ 9; See copies of checks
paid to Dr. Hinderstein attached as Exhibit F). Upon review of the billing, defendant believes he has incurred trial. (See
Declaration of Bonny Hsu at ¶ 10). Defendant anticipates he will incur at least $1,000.00 in additional expenses for Dr.
Moore to review and comment on the opinions of Dr. Hinderstein. (See Declaration of Bonny Hsu at ¶ 10).
Dr. Salzetti seeks sanctions for the attorney’s fees and expenses incurred from plaintiff’s filing of the motion to augment his
expert witness. Currently, these fees total $10,604.30. (See Declaration of Bonny Hsu at ¶ 10). Dr. Salzetti requests plaintiff
and his counsel pay this amount, jointly and severally, for their violations of Code of Civil Procedure sections 128.7.
III.
CONCLUSION
Based upon the foregoing reasons, Dr. Salzetti respectfully requests the Court grant his motion and sanction plaintiff and his
counsel for their violation of Code of Civil Procedure 128.6 and 128.7.
End of Document
319
Cross Complaint for Indemnity, Equitable Comparative Indemnity;
Declaratory Relief; Violation of Business and Professions Code
Section 17200 et seq.; Declaratory Relief and Preliminary and
Permanent Injunctions
Shirley PRESKITT and Jim Ristas, Plaintiff, v. W.E. BEDDING CORP., DBA Ortho Mattress, aka Ortho Mattress;
John Grasson Jr.; and Does 1-80; Inclusive, Defendants. W.E. Bedding Corp., aka Ortho Mattress Co.,
Cross-Complainant, v. Galley Corp., DBA Mattress Gallery; Shirley Preskitt; Jim Ristas; Roe Corporation; and Roes
1-25; Inclusive, Cross-Defendants. | Superior Court of California.
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Jurisdiction:
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Delivery Details
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Comment:
Shirley PRESKITT and Jim Ristas, Plaintiff, v. W.E...., 2005 WL 5712687...
San Diego County
Shirley PRESKITT and Jim Ristas, Plaintiff,
v.
W.E. BEDDING CORP., DBA Ortho Mattress, aka Ortho Mattress; John Grasson Jr.; and Does 1-80; Inclusive,
Defendants.
W.E. Bedding Corp., aka Ortho Mattress Co., Cross-Complainant,
v.
Galley Corp., DBA Mattress Gallery; Shirley Preskitt; Jim Ristas; Roe Corporation; and Roes 1-25; Inclusive,
Cross-Defendants.
No. GIN 034288.
June 23, 2005.
Cross Complaint for Indemnity, Equitable Comparative Indemnity; Declaratory Relief; Violation of Business and
Professions Code Section 17200 et seq.; Declaratory Relief and Preliminary and Permanent Injunctions
Christopher J. Irvin, State Bar No. 81962, Attorney at Law, 1541 Ocean Avenue, Suite 200, Santa Monica, CA 90401,
Telephone: (310) 451-7857, Attorneys for Defendant, And Cross-Complainant, W.E. Bedding Corp., aka Ortho Mattress
Corp.
Hon. Lisa Guy-Schall.
(FILED CONCURRENTLY WITH ANSWER TO SECOND AMENDED COMPLAINT)
COMES NOW, the Cross-Complainant, W.E. BEDDING CORP., aka ORTHO MATTRESS, and for a cause of action
against Cross-Defendants, and each of them, complains and alleges as follows:
FIRST CAUSE OF ACTION
(For Indemnity and Declaratory Relief against Cross-Defendants Gallery Corp. and ROES 1 through 25, inclusive)
1. Cross-Complainant, W.E. BEDDING CORP. is a corporation that has changed its name to ORTHO MATTRESS CO. and
is doing business in Encinitas, California.
2. Cross-Defendant, Gallery Corp. is a business incorporated under the laws of the one of the States of the United States and
is doing business in Encinitas, California under the name Mattress Gallery.
3. Cross-Defendant, Shirley Preskitt is an individual residing in the county of San Diego, California.
4. Cross-Defendant, Jim Ristas is an individual residing in the State of California.
5. Cross-Complainant is not aware of the true names and capacities, whether individual, corporate, associate or otherwise of
the Cross-Defendants named herein as ROE 1 through 15, and Roe Corporation, inclusive, and therefore sues said
Cross-Defendants by such fictitious names. Cross Complainant will amend the Cross-Complaint to allege their true names
321
and capacities when ascertained. Cross-Complainant is informed and believes and thereon alleges, that each of the
Cross-Defendants designated herein as ROE were negligent in some manner or are legally, lawfully or otherwise responsible
in some manner for the occurrences or happenings herein alleged, and that Plaintiff’s injuries were thereby proximately
caused or contributed to.
6. Cross-Complainant is informed and believes, and thereon alleges that all of the Cross-Defendants, and each of them,
including the ROE Cross-Defendants, at all times herein mentioned were the agents, employees and servants of each of the
other Cross-Defendants, and each of them, and at all times pertinent hereto, were acting within the course and scope of said
employment and agency.
7. On or about June 10, 2005, Plaintiffs filed their Second Corrected Amended Complaint against Cross-Complainant seeking
damages for personal injuries and other damages Plaintiffs allegedly sustained as a result of interference with their business,
unfair business competition, age and gender harassment, infliction of emotion distress, defamation and negligence.
Cross-Complainant hereby refers to and incorporates herein by this reference, without admitting any of the allegations
thereof, the Second Corrected Amended Complaint filed by Plaintiffs Shirley Preskitt and Jim Ristas.
8. If Plaintiffs sustained damages as alleged in their amended complaint, these damages were caused, entirely or in part, by
Cross-Defendants, and each of their lack of due care in the management of their own affairs, their failure to investigate or
otherwise resolve their employees complaints of discrimination, harassment and intimidation, their failure to communicate
with and/or resolve issues with tenants in the building of their lease and by failing to follow reasonable conduct to resolve
business disputes of mutual interest.
9. Cross-Complainant has filed an Answer to the Second Corrected Amended Complaint denying each and every allegation
set forth in said complaint and continues to deny that it was in any way negligent or otherwise at fault for injury or damage to
Plaintiffs, whether as alleged in the Complaint or otherwise.
10. That, as between Cross-Complainant and Cross-Defendants, responsibility, if any, for the damages claimed by Plaintiffs
rests entirely on Cross-Defendants and as a result Cross-Defendants, and each of them, are obligated to indemnify
Cross-Complainant for any sums that Cross-Complainant may be compelled to pay as the result of any damages, judgments,
settlements or other awards recovered by Plaintiffs against Cross-Complainant.
SECOND CAUSE OF ACTION
(For Equitable Comparative Indemnity Against Cross-Defendants Gallery Corp. and ROES 1 through 25)
11. Cross-Complainant repeats and re-alleges each and every allegation contained in paragraphs 1 through 10, of this
Cross-Complaint and incorporates same herein by this reference as though set forth verbatim.
12. If it should be found that Cross-Complainant was in some manner responsible for the injuries being claimed by-Plaintiffs
and the damages found to have been sustained by Plaintiffs were partially caused or contributed to by the negligence, lack of
care, or otherwise unlawful conduct of Cross-Defendants, it is necessary that a pro rata degree of fault be apportioned to the
actions of Cross-Defendants so that Cross-Complainant can recover from Cross-Defendants’ partial indemnity in amounts
consistent with their degree of negligence and/or fault.
THIRD CAUSE OF ACTION
(For Declaratory Relief Against Cross-Defendants, Gallery Corp. and ROES 1 through 25)
13. Cross-Complainant repeats and re-alleges each and every allegation contained in paragraphs 1 through 12 of their
322
14. An actual controversy now exists between Cross-Complainant and Cross-Defendants, and each of them, concerning their
rights and liabilities vis-a-vis themselves and Plaintiffs, with regard to the ultimate responsibility for Plaintiffs’ alleged
damages, if any, and with regard to the right to receive and give indemnification.
15. Cross-Complainant desires a judicial determination of the respective rights and duties of Cross-Defendants and
Cross-Complainant with respect to the alleged damages claimed in the complaint. In particular, Cross-Complainant desires a
declaration of the comparative liability of Cross-Complainant and Cross-Defendants for those damages, and a declaration of
Cross-Defendants’ responsibility for indemnity and/or comparative indemnity for any sums that Cross-Complainant may be
compelled to pay and for which Cross-Defendant is determined responsible, entirely or in part.
16. Such a declaration is necessary and appropriate at this time in order that Cross-Complainant may ascertain its rights and
duties with respect to Plaintiffs’ claim for damages. Furthermore, the claims of Plaintiffs and the claim of Cross-Complainant
arise out of the same transaction and determination of both in one proceeding is necessary and appropriate in order to avoid
the multiplicity of actions that would result if Cross-Complainant is required now to defend against the claims of Plaintiffs
and then bring a separate action against Cross-Defendants for indemnification.
FOURTH CAUSE OF ACTION
(Violation of Section 17200 of the Business and Professions Code against Cross-Defendants, Gallery Corp., Shirley
Preskitt, Jim Ristas and ROES 1 7 through 25)
17. Cross-Complainant repeats and re-alleges each and every allegation contained in paragraphs 1 through 7 of this
18. Cross-Complainant and Cross-Defendants are business competitors. They operate their businesses from 1092 El Camino
Real, Encinitas, California, selling mattress and related bedding items.
19. Business and Professions Code Section 17200 et seq. prohibits the use of unfair and unlawful business practices.
20. Cross-Defendants, individually and through their officers, partners, agents and employees have violated Business and
Professions Code 17200 et seq. by claiming they have a contract with Cross-Complainant whereby Cross-Complainant is to
share customers with Cross-Defendants. Such a contract, to share customers between business competitors, if it existed,
would violate the public policy of both the State of California and the United States.
21. Cross-Complainant has denied the existence of said contract and has told Cross-Defendants that it did not want to share
customers. Cross-Defendants, however, continue to insist that Cross-Complainant share customers and has engaged in a
campaign of harassment and intimidation against Cross-Complainant and its employees so as to enforce Cross-Defendants’
illegal demands.
22. Cross-Defendants have called Cross-Complainant’s employees as being fat, lazy, and to the female employees as bitches
in their effort to cause Cross-Complainant to share customers, in addition, Cross-Defendants use intimidation to prevent
Cross-Complainant from its exercise of its first amendment rights of. free speech so as divert customers away from
Cross-Defendants.
23. As a proximate result of Cross-Defendants’ illegal demands and intimidation, Cross-Complainant has lost sales and
customers and continues to lose sales and customers.
24. Business and Professions Code Section 17203 specifically provides for injunctive relief against this illegal conduct.
323
FIFTH CAUSE OF ACTION
(For Declaratory Relief and Preliminary and Permanent Injunctions)
25. Cross-Complainant repeats and re-alleges each and every allegation contained in paragraphs 1 through 7 of the first cause
of action and paragraph 18 through 24 of the fourth cause of action of this Cross-Complaint and incorporates same herein by
this reference as though set forth verbatim.
26. In the last few years and continuing to the present time, Cross-Defendants, and each of them, wrongfully and unlawfully
are demanding that Cross-Complainant share its customers with Cross-Defendants.
27. Cross-Complainant has on numerous occasions told Cross-Defendants that it did not want to share customers.
Furthermore, such an agreement would be illegal and against public policy as Cross-Complainant and Cross-Defendants are
business competitors.
28. Cross-Complainant has no adequate remedy at law for the injuries it is incurring in that Cross-Complainant has no way of
determining if it has lost customers because of Cross-Defendants’ illegal conduct. Further, Cross-Defendants continue to
make demands on Cross-Complainant to share customers.
29. Code of Civil Procedure Sections 526 and 527 authorize the granting of an injunction when it appears that a court order is
needed to restrain the commission or continuance of an act and to prevent unlawful conduct.
WHEREFORE, Cross-Complainant prays for judgment against Cross-Defendants and each of them as follows:
1. For a judicial declaration of the Cross-Defendants’ responsibilities and liabilities for the damages claimed by the Plaintiffs,
if any, is found to exits;
2. For a declaration of the amount for which Cross-Defendants are obligated to indemnify Cross-Complainant;
3. For an order requiring Cross-Defendants to show cause, if any they have, why they should not be enjoined from claiming a
contract to share customers with Cross-Complainant, during the pendency of this action;
4. For a preliminary injunction, and a permanent injunction, enjoining Cross-Defendants and each of them, and their agents
and employees, and all persons acting under or in concert with, or for them:
a. From claiming that there is a contract to share customers with Cross-Complainant; and
b. From approaching and/or making demands on Cross-Complainants’ employees to share customers with them.
5. Restitution of losses caused to Cross-Complainant by Cross-Defendants’ conduct;
6. For attorney fees pursuant to Business and Professions Code;
7. For cost of suit incurred herein; and
8. For such other and further relief as the Court may deem just and proper.
DATED: June 23, 2005
LAW OFFICES OF CHRISTOPHER J. IRVIN
By <<signature>>
CHRISTOPHER J. IRVIN
324
Attorney for Cross-Complainant,
W.E. BEDDING CORP., aka ORTHO MATTRESS
End of Document
325
Memorandum of Points and Authorities in Support of Plaintiff’s
Motion for Attorney’s Fees
Ozzie MANCINELLI, an individual, Plaintiff, v. Kathleen SIEWAK, an individual; Ferdinand Barlow, an individual,
Rustie’s Unique Designs, Inc., a Florida corporation, Defendants. | Superior Court of California
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Jurisdiction:
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Delivery Details
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Comment:
Ozzie MANCINELLI, an individual, Plaintiff, v. Kathleen..., 2004 WL 5351882...
Superior Court of California,
Central Division (Hall of Justice).
San Diego County
Ozzie MANCINELLI, an individual, Plaintiff,
v.
Kathleen SIEWAK, an individual; Ferdinand Barlow, an individual, Rustie’s Unique Designs, Inc., a Florida
corporation, Defendants.
No. GIC 805629.
July 23, 2004.
Memorandum of Points and Authorities in Support of Plaintiff’s Motion for Attorney’s Fees
Scott A. McMillan, CBN 212506, Michelle D. Volk, CBN 217151, the Mcmillan Law Firm, APC, 4670 Nebo Drive, Suite
200, La Mesa, CA 91941-5230, Tel (619)464-1500 // Fax (206) 600-5095, e-mail: sam0661@sbcglobal.net, Attorney for
plaintiff, Ozzie Mancinelli.
I/C Judge: Hon. Thomas O. LaVoy.
Hearing Date: August 20, 2004
Time: 8:30 a.m.
Dept. 53
TABLE OF CONTENTS
TABLE OF AUTHORITIES ..........................................................................................................................................................
4
I. INTRODUCTION .........................................................................................................................................................................
1
II. LABOR CODE SECTION 218.5 REQUIRES THAT THE COURT SHALL AWARD ATTORNEY’S
FEES TO THE PREVAILING PARTY IN AN ACTION FOR THE NON-PAYMENT OF WAGES .............
2
III. DEFENDANTS REQUESTED ATTORNEY’S FEES AT THE INITIATION OF THIS CASE .................
4
IV. UNDER CALIFORNIA LAW, THE COURT SHOULD USE THE “LODESTAR” METHOD TO
DETERMINE PLAINTIFF’S AWARD FOR ATTORNEY FEES .................................................................................
5
A. Plaintiff is entitled to attorney’s fees for 1286.2 hours, the amount of hours reasonably worked. .................
6
B. Plaintiff is entitled to a reasonable rate for attorneys fees ............................................................................................
8
1. The Prevailing Rates Charged By Attorneys of Similar Skill and Experience for Comparable Legal
Services In the San Diego Community. .......................................................................................................................................
9
2. Nature of the Work Performed ..................................................................................................................................................
9
3. The Attorney’s Customary killing Rates ................................................................................................................................
10
327
C. The Court may enhance the lodestar amount to determine an appropriate fee award .........................................
12
VI. CONCLUSION ...........................................................................................................................................................................
14
California Decisional Authority
California Common Cause v. Duffy (1987) 200 Cal. App. 3d 730, 753 ...................................................
7
Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181...........................................................
3, 4
Municipal Court v. Bloodgood (1982) 137 Cal. App. 3d 29, 47 ..................................................................
9
Press v. Lucky Stores, Inc. (1983) 34 Cal. 3d 311, 321...................................................................................
6, 12
Rebney v. Wells Fargo Bank (1991) 232 Cal. App. 3d 1344, 1349 ............................................................
6
Serrano v. Priest (1977) 20 Cal. 3d 25, 48-49 ...................................................................................................
6
Serrano v. Unruh (1982) 32 Cal. 3d 621, 639 ....................................................................................................
7, 9
California Statutory Authority
Labor Code § 200 .......................................................................................................................................................
3
Labor Code § 218.5 ...................................................................................................................................................
2, 5
Federal Decisional Authority Davis v. City & County of San Francisco (9th Cir. 1992) 976
F2d 1536, 1544..............................................................................................................................................................
7
Gates v. Deukmejian (9th Cir. 1993) 987 F2d 1392, 1406 ............................................................................
9
Missouri v. Jenkins (1989) 491 U.S. 274 .............................................................................................................
7
Plaintiff Ozzie Mancinelli requests an award of attorneys fees, as follows:
Name of Provider
Rate Requested
Hours Expended
Value of Services
Scott A. McMillan
$250
864.85
$ 216,212.50
Michelle D. Volk
$185
340.48
$ 62,988.80
Thomas McKinney
$185
2.00
$ 370.00
Kenneth Hamilton
$185
42.60
$ 7,881.00
328
Alvin Kalmanson
$350
2.22
$ 777.00
Law Clerks
$75
34.05
$ 2,553.75
1286.20
$ 290,783.05
SubTotal
Fee enhancement
2x
$ 290,783.05
Total Fee Request
$ 581,566.10
I. INTRODUCTION
Plaintiff and defendants had a verbal agreement employing Mr. Mancinelli as CEO of Rustie’s Unique Designs, Inc., under
the following terms: an annual salary of $50,000 per year; a signing bonus of $10,000; a per-doll commission on all dolls
sold; and a 30% ownership interest in defendant Rustie’s.
Defendants verbally accepted a contract containing the above terms, sent by Mr. Mancinelli via e-mail to defendants. Based
on this agreement, plaintiff terminated his current employment of ten years, sacrificing an annual salary of $110,000.
Immediately, defendants sent Mr. Mancinelli work to perform from his home in California on behalf of Rustie’s.
Defendants orally represented their intent to perform the initial contract terms, and continually assured Mr. Mancinelli they
would “make good” on their promises. Based on this representation, plaintiff worked for defendants for approximately five
months. Ultimately, however, defendants failed Mr. Mancinelli both in tendering a 30% interest in the company.
On June 9, 2002, defendants sent a letter of termination that arrived the day plaintiff left for a ten-day business trip to Asia.
Upon plaintiff’s return, defendants refused to pay wages and expenses beyond June 9, 2002, although the trip was at
defendants’ request.
On February 14, 2003, plaintiff filed a lawsuit against defendants alleging the following causes of action: breach of contract;
breach of implied covenant of good faith and fair dealing; intentional misrepresentation; wrongful interference with contract;
wrongful interference with prospective economic advantage; and unfair business practices.
Defendants argued plaintiff was merely an at-will employee and maintained they only offered a $50,000 per year salary with
a signing bonus. Defendants further claimed that none of the contracts contemplated by the parties were executed, evidencing
no “meeting of the minds.” Defendants admitted plaintiff went to Asia on behalf of the business, but were unsure when Mr.
Mancinelli left or returned, and were unaware they owed him wages.
In an attempt to settle, plaintiff sent defendants a Code of Civil Procedure Section 998 offer for $149,999, including
attorney’s fees and costs. Defendants refused the offer and continued to deny liability (See McMillan Dec., ¶4.) Immediately
prior to trial, defendants offered Mr. Mancinelli a 998 offer for $20,000. Plaintiff refused this offer.
After a jury trial, plaintiff received a judgment totaling $962,029.31, consisting of: $370,000 for breach of contract against
Rustie’s Unique Designs, Inc.; $230,031 against all defendants for intentional misrepresentation (past and future lost wages);
$6229.31 against Rustie’s Unique Designs, Inc. for non-payment of wages; $5769.00 against Rustie’s Unique Designs, Inc.
for waiting time penalties on wages owed; $175,000 for unitive damages against Ferdinand Barlow relating to intentional
329
misrepresentation; and $175,000 for punitive damages against Rustie’s relating to intentional misrepresentation (See
McMillan Dec., ¶5.)
At trial, defendants argued that plaintiff was only an at-will employee and had been paid for all wages owed. The jury
disagreed, finding plaintiff was entitled to compensation for past wages and awarding Mr. Mancinelli waiting-time penalties
under Labor Code Section 203 (See McMillan Dec. ¶5.)
Just recently, plaintiff’s attorney, Scott A. McMillan learned that defendants have stopped operating their business known as
Rustie’s Unique Designs, Inc. but instead are operating under Rustie’s International, Inc. On June 27, 2004, Attorney
McMillan visited Rustie’s business website which now bears the title “Rustie’s International, Inc.” (See McMillan Dec. ¶13.)
Defendants’ operation of Rustie’s International, Inc. is consistent with Mr. Mancinelli’s testimony at trial. Pat Dezinski told
Mr. Mancinelli that Kathleen Siewak told her that she was going to start operating another business known as “Rustie’s
International” to prevent Mr. Mancinelli from collecting any judgment obtained as a result of the lawsuit. (See McMillan
Dec. ¶14.)
Labor Code Section 218.5 provides that a prevailing party to a wage dispute is entitled to attorneys fees if any party to the
action requests attorneys fees at the initiation of the action. Defendants requested attorneys fees in their Answer to plaintiff’s
Complaint, and Mr. Mancinelli subsequently prevailed in his wage dispute. Accordingly, plaintiff is entitled to attorneys fees
for prosecution of this action.
II.
THE LABOR CODE ENTITLES PLAINTIFF TO ATTORNEY’S FEES AS THE PREVAILING PARTY IN AN
ACTION FOR THE NON-PAYMENT OF WAGES.
California Labor Code § 218.5 reads in relevant part:
In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund
contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any
party to the action requests attorney’s fees and costs upon the initiation of the action. This section shall
not apply to an action brought by the Labor Commissioner.
(Labor Code § 218.5 (Emphasis added.))
Under California Law, wages are broadly construed:
(a) “Wages” includes all amounts for labor performed by employees of every description, whether the amount is fixed or
ascertained by the standard of time, task, piece, commission basis, or other method of calculation.
(b) “Labor” includes labor, work, or service whether rendered or performed under contract, subcontract, partnership, station
plan, or other agreement if the labor to be paid for is performed personally by the person demanding payment.
(Labor Code § 200.)
The jury determined that defendants owed wages to Mr. Mancinelli; therefore, this action falls under Labor Code § 218.5.
III.
330
DEFENDANTS REQUESTED ATTORNEY’S FEES AT THE INITIATION OF THIS CASE
A prevailing party shall recover attorney’s fees in an action for the non-payment of wages if any party requests them at the
initiation of the action (Labor Code § 218.5; emphasis added.)
Defendants prayed for attorney’s fees in the Answer to plaintiff’s Complaint. Defendants’ Answer stated: “For Defendants’
attorney’s fees...” (See McMillan Dec. ¶3.) Because defendants sought attorney’s fees in this action, plaintiff can recover
these fees as the prevailing party (Labor Code § 218.5.)
Had plaintiff lost in this action, defense counsel declared she would seek substantial attorney’s fees from plaintiff, evidenced
by a telephone call between plaintiff’s counsel, Scott McMillan, and defense counsel, Ellen Hunter. Ms. Hunter informed Mr.
McMillan that if Mr. Mancinelli did not prevail, defendants would “take [Mr. Mancinelli] for everything he had” (See
McMillan Dec. ¶12.)
IV.
UNDER CALIFORNIA LAW, THE “LODESTAR” METHOD IS APPROPRIATE IN DETERMINING PLAINTIFF’S
AWARD FOR ATTORNEY FEES.
The “lodestar” method is the most widely accepted method for determining the amount of a fee award (Rebney v. Wells
Fargo Bank (1991) 232 Cal. App. 3d 1344, 1349.) To determine attorneys fees under the lodestar method, the lodestar figure
must first be determined by multiplying the hours reasonably worked by a reasonable hourly rate (Press v. Lucky Stores, Inc.
(1983) 34 Cal. 3d 311, 321.) After calculating the lodestar figure, the court may enhance or diminish the figure by
considering several factors. The trial court has the discretion to determine the proper amount of an award, but if there is no
reasonable connection between the lodestar figure and the fee ultimately awarded, the fee does not conform to the objectives
of the doctrine and may not be upheld (Id. at 324.)1
1
In Press v. Lucky Stores, Inc. 34 Cal. 3d 311, the Supreme Court of California reversed the trial court’s determination of attorneys
fees because it was not calculated according to the lodestar method.
A. Plaintiff is entitled to attorney’s fees for 1286.2 hours, the amount of hours reasonably worked.
The number of hours reasonably worked is determined by looking at the time “reasonably spent” on a matter, including time
spent drafting and revising pleadings, meetings with clients, preparing the case for trial, and handling an appeal (See Serrano
v. Priest (1977) 20 Cal. 3d 25, 48-49.)
Further, reasonable hours may also include time spent by more than one attorney on a particular issue or task, provided there
is no duplication of effort (California Common Cause v. Duffy (1987) 200 Cal. App. 3d 730, 753.)2 Also, time spent by law
clerks and paralegals may be included in the determination of attorneys fees (Davis v. City & County of San Francisco (9th
Cir. 1992) 976 F2d 1536, 1544.) [See also Missouri v. Jenkins (1989) 491 U.S. 274, where the U.S. Supreme Court held that
in setting a reasonable attorney’s fee under 28 U.S.C. 1988, a legal fee may include a charge for legal assistant services at
market rates rather than actual cost to the attorneys.] Reasonable hours may also include fee-related services, such as time
spent preparing and litigating the fee application (Serrano v. Unruh (1982) 32 Cal. 3d 621, 639.)
2
The court in California Common Cause v. Duffy 200 Cal. App. 3d 730, allowed an award of attorneys fees that included the work
of three attorneys.
Attorneys Scott A. McMillan, Michelle D. Volk, Alvin Kalmanson, Thomas McKinney and Kenneth Hamilton performed
work on plaintiff’s case (See Declarations of Scott McMillan, (McMillan Dec.), Michelle D. Volk (Volk Dec.), Thomas
331
McKinney (McKinney Dec.), Alvin Kalmanson (Kalmanson Dec.), and Kenneth Hamilton (Hamilton Dec.).) In addition, two
law clerks assisted with the prosecution of Mr. Mancinelli’s case (See McMillan Dec., ¶22.) The combined hours of all
attorneys and law clerks should be considered by the court in determining the amount of attorneys fees awarded to plaintiff.
1286.2 hours were spent working on plaintiff’s case. This figure includes the time spent preparing this fee motion.
Attorney McMillan spent a total of 864.85 hours on plaintiff’s case (See McMillan Dec., ¶23.) The court file in this action
reflects that Attorney McMillan was lead counsel in plaintiff’s case and invested the most time in preparing and litigating the
case. Attorney McMillan wrote numerous motions, met with both plaintiff and opposing counsel, conducted all discovery
(including traveling to Florida to take depositions of defendants), conducted the trial, appeared in court prior to trial, and
participated and completed numerous other tasks relating to Mr. Mancinelli’s case.
Attorney Volk spent a total of 340.48 hours in relation to plaintiff’s case (See Volk Dec., ¶ 9.) Attorney Volk attended
pre-trial hearings, prepared for trial, drafted and revised numerous jury instructions and pleadings, second-chaired the trial,
contacted clients and opposing counsel, and performed other various tasks.
Attorney Kalmanson spent a total of 2 hours on plaintiff’s case (See McMillan Dec., ¶23.) Attorney Kalmanson met with Mr.
Mancinelli regarding his case.
Attorney McKinney spent a total of 42.60 hours on plaintiff’s case (See McKinney Dec., ¶3 and McMillan Dec., ¶ 23.)
Attorney McKinney drafted and revised both the Complaint and the Opposition to Motion to Quash Service of Original
Complaint. He also conferred with Attorney McMillan regarding aspects of the case.
Attorney Hamilton spent a total of 2.22 hours on plaintiff’s case (See McMillan Dec., ¶ 23.) Attorney Hamilton drafted and
revised discovery requests.
Two law clerks, Sarah Crowley and Shelby Atkinson, also participated in plaintiff’s case. Both clerks rendered a total of
34.05 hours (See McMillan Dec., ¶ 23.)
1286.20 total hours were spent by all attorneys and law clerks prosecuting this case.
B. Plaintiff is entitled to a reasonable rate for attorney’s fees.
In determining a reasonable rate for an attorney’s services, courts usually consider:
• The prevailing rate charged by attorneys of similar skill and experience for comparable legal services in the community;
• The nature of the work performed; and
• The attorney’s customary billing rates (See Serrano v. Unruh (1982) 32 Cal. 3d 621,643.)
In addition, most courts look to rates at the time of the prevailing party’s fee application rather than rates charged at the time
the litigation began (Gates v. Deukmejian (9th Cir. 1993) 987 F2d 1392, 1406.)
Finally, where several attorneys file a joint petition for fees, the court may use different rates for the different attorneys
(Municipal Court v. Bloodgood (1982) 137 Cal. App. 3d 29, 47.) Several attorneys and law clerks participated in the
prosecution of plaintiff’s case, and their rates vary based on each participant’s knowledge and experience.
1. The Prevailing Rates Charged By Attorneys of Similar Skill and Experience for Comparable Legal Services In the San
Diego Community.
332
Attorneys in the community who specialize in or otherwise practice employment litigation charge a prevailing rate between
$225 to $350 an hour (See Declaration of Karen Backstrum, ¶4.)
Attorneys in the San Diego community who are of similar skill and experience as Attorney Kalmanson have a prevailing rate
of $225 to $350 an hour (See McMillan Dec.¶ 15.)
Attorneys in the San Diego community who are of similar skill and experience as Attorney Volk, Attorney McKinney and
Attorney Hamilton have a prevailing rate of $175 to $200 an hour (See McMillan Dec., 115.)
2. Nature of the Work Performed
Attorney McMillan was in charge of plaintiff’s case and put in the most time preparing and trying the case. Attorney
McMillan wrote numerous motions, met with both Mr. Mancinelli and opposing counsel, drafted most of the discovery,
conducted the trial, appeared in court prior to trial, and participated and completed numerous other tasks regarding plaintiff’s
case (See McMillan Dec. ¶6.)
Attorney Volk attended several pre-trial hearings, prepared for trial, drafted and revised numerous jury instructions and
pleadings, second-chaired the trial, worked with the client and opposing counsel, and completed various other tasks (See Id.)
Attorney McKinney drafted and revised the Complaint and the Opposition to Motion to Quash Service of Original
Complaint. In addition, he conferred with Attorney McMillan regarding the case (See Id.) Attorney Hamilton drafted and
revised discovery requests (See Id.)
The law clerks participated in several activities, including preparing motions, drafting the cost memo, and various other tasks
(See Id.)
3. The Attorneys’ Customary Billing Rates
Attorney McMillan’s customary billing rate is $185 per hour for services paid hourly, involving non-contingency, general
civil litigation (See McMillan Dec., ¶16.) As set forth in his declaration, $250 per hour is the customary billing rate for
matters involving employment and advertising law. In addition, Attorney McMillan has vast experience that should be
considered in determining the reasonable fee for services in this case (See McMillan Dec., ¶¶ 7-10.) Finally, Attorney
McMillan was awarded attorney’s fees at the rate of $250 per hour by the Honorable Lisa Guy Schall in a separate
employment law and unfair competition case litigated in North County (See McMillan Dec., ¶18.) Considering the prevailing
rate, the nature of the work performed, the customary billing rates and Attorney McMillan’s experience, the reasonable value
of Attorney McMillan’s services in this case is $250 per hour (See McMillan Dec., ¶19.)
Attorney Volk’s customary billing rate is $185 per hour for services involving general civil litigation. The Firm has been
charging this rate for at least six months preceding this motion; therefore, Attorney Volk’s rate is market tested (See Volk
Dec., ¶6.) Considering the prevailing rate, the nature of the work performed, the customary billing rates and Attorney Volk’s
experience, the reasonable value of her services is $185 per hour (See Volk Dec., ¶8.)
Attorney McKinney has been practicing law for over two years and has a customary billing rate $150 per hour (See
McKinne

Judge Lisa Schall II

Transcription

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