Free Declaration in Support - District Court of California - California

Case 3:08-cv-02314-BZ

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MARK D. BYRNE, ESQ. SBN#109268 LAW OFFICES OF TRIANO & BYRNE 25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Telephone: (415) 371-8000 Facsimile: (415) 371-8001 [email protected] Attorney for Plaintiffs Ernest Lahti, Linda Lahti and Applied Reserve Analysis, LLC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION ERNEST LAHTI, LINDA LAHTI AND APPLIED RESERVE ANALYSIS, LLC, a California corporation, Plaintiffs, v. DAN BLOOMQUIST, REBECCA BLOOMQUIST, HIGHLANDS ELECTRONICS LLC, an Arizona corporation, and DOES 1 through 50 inclusive, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No: CV-08-2341 BZ DECLARATION OF DON THOMAS IN SUPPORT OF TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE FOR PRELIMINARY INJUNCTION

I, Don Thomas, declare: 1. I am personally and professionally familiar with Applied Reserve Analysis, LLC

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TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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("ARA"), the company of Ernest Lahti ("Ernie") and Linda Lahti ("Linda") (collectively, the "Lahtis"), as I have worked with the Lahtis and their company for a period of at least 14 years. 2. My experience with Reserves Study companies covers a period of 22 years, and 5 different reserve study companies. These properties included personal ownership positions, consultant advisory positions, and service as an elected officer of several homeowners condominium townhouse/timeshare resort boards of directors. 3. I first started to use the services of ARA, LLC in 1994, at the Club Donatello Owners Association, which is a nonprofit mutual benefit corporation, structured as a timeshare resort condominium association. The Club Donatello reserves study profile was not in good shape when I became involved, as there was only $26,000 in Reserves. From the very beginning in 1994, the quality of the services provided by the ARA, LLC company enabled us to get the property back up on its financial feet. 4. An essential factor influencing the effectiveness of a reserves study company is the effective use of technology to digitally capture information for each property so that a comprehensive inventory and aging profile can be established annually. This includes the use of a software platform that can effectively utilize all of this information for purposes of quickly generating quality reports and recommendations for the board of directors or management company to utilize in their financial planning models. 5. Additional important primary factors influencing the effectiveness of a reserve study company are as follows: (a) The experience and knowledge of the persons performing the reserve study as

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TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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it relates to the reserves study legal requirements for each state, and the ability to recognize all of the different types of common interest development properties to be evaluated, and the financial projection formulas applicable for each property. This includes knowing all of the details for the ongoing schedules for capital assets repairs, replacements and upgrades for improvement of energy efficiency, and the overall cost of property operations. (b) The knowledge and database resources of different building and property codes, quality of different capital assets components, materials aging cycles, environmental factors associated with internal/external wear and tear, quality of different management and maintenance companies, and effective relationships with contractors and building-related specialists is a key factor. That knowledge and information resource becomes an integral part of what goes into the reserves study report and recommendations to the organizational entity. (c) The working relationships of the Reserves Study team with the organizational leadership for each property can result in an expedited, inexpensive and qualified outcome that facilitates the financial management and planning process from year-to-year for the ultimate benefit of the property owners/residents. 6. It is my personal and professional assessment, based on all of these experiences at multiple properties and with different Reserves Study companies, that the ARA, LLC total package of people, knowledge and skill, information resources, and software platform capability is one of the best in the marketplace. That is why we have been pleased to use their services at multiple common interest development properties, and to refer them to many others, for which they have now provided

Law Offices

TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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their services. We have consistently received positive feedback on the working relationships, and the bottom-line quality of their work and Reserves Study advice/projections. A. Prejudice from Termination of Licensing Agreement 7. If the Lahtis' software platform does not continue to support the timing, costs and content deliverables which their Customers have come to expect from the past, they will suffer a serious loss in customers. This is true even if they maintain and continue to develop all of their people resources, their information database resources, and their personal relationships with their Customers. 8. The reason the quality of the reserve analysis software company is essential is that Customers will vote with their pocketbooks, if the quality starts to slip in anyway, they will find a new reserve analysis company. Therefore, the capability of the underlying software platform for the reserves study process is a very critical component. It can make or break a company's ability to survive over time even when strong, long-term personal relationships have been established over years. 9. Part of this issue is the fiduciary responsibility carried by each board of directors and management company involved in the oversight of common interest development properties. That is a factor influencing the content of their regulatory documents which require multiple bidding processes for most contracts for services, assuming the pricing and quality of services is relatively comparable, and then the decision is often based on relationships and performance. B. Terms of the Licensing Agreement 10. I have served as the Lahtis' business consultant. On or about February 13, 2006,

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TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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when the Lahtis had been unsuccessful in negotiating a licensing agreement for the Reserve Analyst Software ("Software"), I stepped in to assist them. I worked with the Lahtis to negotiate the licensing agreement they ultimately entered into on March 8, 2008 ("Licensing Agreement") with Dan Bloomquist ("Dan") and Rebecca Bloomquist ("Rebecca") (collectively, the "Bloomquists"). 11. The Lahtis and I bargained with the Bloomquists for a transferable five-year license for exclusive use of the Software in Northern California. It was clear that the Lahtis desired the transferable five-year exclusive license so that they could sell their business due to their advanced age and poor health. 12. Eventually, the Lahtis and the Bloomquists agreed upon the following terms: (a) The Lahtis would no longer be used to beta test the Software; (b) The license would be for a five (5) year term and would automatically renew for an additional five (5) years unless sixty (60) days prior notice was provided; (c) The Lahtis would have exclusive use of the Software in Northern California; (d) The exclusive license would be transferable to any purchaser of our business; and (e) Any errors that the Lahtis encountered would be promptly remedied. (f) The contract may be terminated for cause upon a material breach being uncured for 30 days. 13. In order to receive the five (5) year term, the Lahtis agreed to pay a license fee of $10,000 annually to the Bloomquists well as a periodic increase in the license fee to account for inflation, and they assigned their development rights to the Bloomquists.

Law Offices

TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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14. Additionally, because the Lahtis were anticipating the sale of their business, I negotiated a clause allowing for possible termination after two years in the event that the new purchaser no longer wished to be bound by the Licensing Agreement. The Bloomquists insisted that they also be able to terminate after two years in the event of a sale. As a result, I understood that the Licensing Agreement would be a five-year agreement for a transferable exclusive license to use the Software in Northern California, which allowed for possible discretionary termination after two years of the five-year term if the business had been sold. 15. I cautioned the Lahtis to seek the advice of an attorney before signing the agreement, but as I understood, the Lahtis were pressed for time by the Bloomquists who demanded an immediate response. 16. Unknown to the Lahtis or I, the Bloomquists included a clause, without any mention of a possible sale that allowed for termination upon sixty (60) days prior written notice after the second year of the Licensing Agreement. 17. I declare under penalty of perjury under the laws of the State of California and the laws of the United States of America that the foregoing is true and correct and was executed in Sunnyvale, California on May 16, 2008.

By: _/s/ Don R. Thomas________________ DON R. THOMAS

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TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

DECLARATION OF DON THOMAS IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER

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Case 3:08-cv-02314-BZ

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Law Offices

MARK D. BYRNE, ESQ. SBN#109268 LAW OFFICES OF TRIANO & BYRNE 25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Telephone: (415) 371-8000 Facsimile: (415) 371-8001 [email protected] Attorney for Plaintiffs Ernest Lahti, Linda Lahti and Applied Reserve Analysis, LLC UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION ERNEST LAHTI, LINDA LAHTI AND APPLIED RESERVE ANALYSIS, LLC, a California corporation, Plaintiffs, ) ) ) ) ) ) v. ) ) DAN BLOOMQUIST, REBECCA BLOOMQUIST, HIGHLANDS ELECTRONICS LLC, an Arizona corporation, and DOES 1 through 50 inclusive, Defendants. ) ) ) ) ) ) ) ) ) Case No: C08-2314 BZ

CERTIFICATE OF SERVICE

TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

CERTIFICATE OF SERVICE 1

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Law Offices

I declare: I am employed in the County of San Francisco, State of California. My business address is 25 Jessie Street, 16th Floor, San Francisco, CA 94105. I am over the age of eighteen years, and I am not a party to the within action. On May 16, 2008 I served the following documents: · · DECLARATION OF DON THOMAS IN SUPPORT OF TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE FOR PRELIMINARY INJUNCTION; AND CERTIFICATE OF SERVICE. Dan Bloomquist P.O. Box 797 Vernon, Arizona 85940 [email protected]

Upon the party listed below, addressed as follows: Rebecca Bloomquist P.O. Box 797 Vernon, Arizona 85940 [email protected] Highlands Electronics P.O. Box 797 Vernon, Arizona 85940 [email protected] envelope XXX First Class Mail: By depositing a sealedprepaid. in the United States mail at San Francisco, California, with postage fully Facsimile: By transmitted a true and correct copy via facsimile electronic equipment transmission (fax) to the office(s) of the addressee(s) at the fax number(s) listed above. Personal Delivery: By personally delivering the document(s) listed above to the person(s) at the address(es) on the date set forth above. Electronic Mail: On May 16, 2008 at 4:45 pm I transmitted a true and correct copy via XXX electronic mail to the office(s) of the addressee(s) at the electronic mail address(es) listed above. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on May 16, 2008 at San Francisco, California.

By:

/s/ Rithy Keo Rithy Keo Legal Assistant

TRIANO & BYRNE
25 Jessie Street, 16th Floor San Francisco, CA 94105-2749 Tel. (415) 371-8000 Fax (415) 371-8001

CERTIFICATE OF SERVICE 2