Free Response to Motion - District Court of Arizona - Arizona

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T. Michael Daggett (#002784) Christian C.M. Beams (#019672) Brian J. Palmer (#023394) STINSON MORRISON HECKER LLP 1850 North Central Avenue, Suite 2100 Phoenix, Arizona 85004-4584 (602) 279-1600 Fax: (602) 240-6925 E-mail: [email protected] Attorneys for Plaintiff Alanco Technologies, Inc. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ALANCO TECHNOLOGIES, INC., an Arizona corporation; TECHNOLOGY SYSTEMS INTERNATIONAL, INC., f/k/a/ TSI ACQUISITION CORPORATION, an Arizona corporation; ROBERT R. KAUFFMAN and ELIZABETH KAUFFMAN, husband and wife; GREG E. OESTER and LINDA OESTER, husband and wife, Plaintiff(s), v. CAROLINA CASUALTY INSURANCE COMPANY, a Florida corporation Defendant(s). ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-04-0789-PHX-DGC RESPONSE TO DEFENDANT'S MOTION TO STRIKE PORTIONS OF PLAINTIFFS' STATEMENT OF FACTS AND ACCOMPANYING EXHIBITS IN SUPPORT OF PLAINTIFFS' RESPONSE TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (Assigned to the Honorable David G. Campbell) (Oral Argument Requested)

Plaintiffs hereby submit their Response to Defendant's Motion to Strike Portions of Plaintiffs' Statement of Facts and Accompanying Exhibits in Support of Plaintiffs' Response to Defendant's Motion for Summary Judgment ("Second MTS"). Because the exhibits and affidavits are proper evidence to support a response to a summary judgment motion, so are the statements of fact they support, Defendant's Second MTS must therefore be denied.

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This Response is supported by the following Memorandum of Points and

2 Authorities, as well as the arguments and legal authorities in Plaintiffs' Response to 3 Defendant's Motion to Strike Portions of Plaintiffs' Statement of Facts, filed on March 4 6, 2006 ("Plaintiffs' First Response"), which are expressly incorporated herein. 5 6 I. 7 MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION. Defendant has apparently abandoned all attempts to challenge the substance of

8 Plaintiffs' legal positions, once again hinging its case on a laundry list of hyper9 technical procedural objections to Plaintiffs' evidence. Just as in its first MTS,

10 Defendant here again disingenuously asserts that the following exhibits (hereinafter, the 11 "Exhibits"), should be stricken from Plaintiffs' Statement of Facts in Support of their 12 Response to Defendant's Motion for Summary Judgment ("Plaintiffs' Response SOF") 13 simply because they were not disclosed to Defendant: 14 15 16 17 18 Exhibit B D E Description 12-01-04 Order from TSIN Bankruptcy Proceeding 1-18-06 Minute Entry from underlying litigation 11-18-04 Minute Entry from underlying litigation

Second MTS, p.2:23-26. Yet once again, Defendant does not claim it is harmed in any way by the

19 Exhibits. Moreover, every single one of the Exhibits are court records from other 20 proceedings, and as such are proper exhibits in support of a statement of facts through 21 judicial notice. 22 Defendant also once again complains that paragraphs 2, 3, and 4 of the

23 supplemental affidavit of T. Michael Daggett ("Supplemental Affidavit") attached to 24 Plaintiff's Response SOF should be stricken because they are "argument," and expressly 25 incorporates its attack on Mr. Daggett's credibility from its first MTS. Second MTS, 26 p.2:12-16; p.3:20-22. These paragraphs are not inadmissible legal argument, but attest 2
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1 to the significance in this case of the TSIN bankruptcy proceeding (paragraph 2), the 2 Nevada litigation (paragraph 3), and that the underlying litigation involved extensive 3 discovery and that timely motions were filed in that litigation (paragraph 4). Defendant 4 blithely ignores the fact that the affiant, Mr. Daggett, is a qualified, competent 5 professional who made his attestations in the Supplemental Affidavit based upon his 6 own personal knowledge. 7 Because the Exhibits and the Supplemental Affidavit are proper evidence to

8 support a response to a summary judgment motion, no portions of Plaintiffs' Response 9 SOF should be stricken. 10 II. 11 12 13 ARGUMENT. A. THE EXHIBITS ARE ADMISSIBLE. 1. The Exhibits Document the Facts of this Case.

The Exhibits are court records from related proceedings that document obvious,

14 known facts. The Exhibits comprise an Order from TSIN's bankruptcy proceeding 15 (Exhibit B) documenting that TSIN waived the remedy of rescission in the underlying 16 litigation. Plaintiffs' Response SOF ¶7. Exhibit D is a Minute Entry from the underlying 17 litigation documenting that TSIN's motion to keep the underlying litigation on the 18 inactive calendar was denied. Plaintiffs' Response SOF ¶19. Exhibit E is a Minute 19 Entry from the underlying litigation documenting discovery and dispositive motion 20 deadlines. Plaintiffs' Response SOF ¶ 21. 21 22 2. The Exhibits Do Not Harm Defendant.

Defendant makes much ado about nothing when it complains that the Exhibits

23 were never given to them during disclosure or discovery.1 As noted in Plaintiffs' First 24 25 26 Defendant's complaint that exhibit D was not disclosed or produced before the discovery is particularly disingenuous: The Minute Entry was promulgated well after the discovery deadline of November 30, 2005, and after Defendant had already filed 3
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1 Response, the rule and legal authorities require Defendant to show harm before the 2 Exhibits can be stricken. See Fed. R. Civ. P. 37(c)(1); Cloud v. Pfizer Inc., 198 3 F.Supp.2d 1118, 1128 (D. Ariz. 2001); BFI Waste System of North America v. Dekalb, 4 Georgia, 303 F.Supp.2d 1335, 1346 (N.D. Ga. 2004); Missouri Public Entity Risk 5 Management Fund v. Investors Ins. Co. of America, 338 F.Supp.2d 1046, 1054-55 6 (W.D. Mo. 2004); Cash v. State Farm Fire & Cas. Co., 125 F.Supp.2d 474, 477 (M.D. 7 Ala. 2000).2 8 Undoubtedly, Defendant is well aware of its burden to show harm. But

9 Defendant was not harmed. That is why there is no mention of harm in either of 10 Defendant's motions to strike. On this basis alone, the Exhibits should not be stricken.3 11 12 13 14 its Motion for Summary Judgment on January 13, 2006. How then, is Defendant 15 prejudiced by Exhibit D? 2 See also King v. National Human Resource Committee, Inc., 218 F.3d 719, 16 724-25 (7th Cir..2000) (holding that district court was not arbitrary and capricious in 17 declining to strike expert affidavits submitted by employee benefits company in moving for summary judgment on employees' ERISA fiduciary duty claims, despite employees' 18 contention that documents on which one expert relied were never produced or disclosed 19 to plaintiffs, and that no information about second expert was disclosed prior to filing of the summary judgment motion); Lohrenz v. Donnelly, 223 F.Supp. 2d 25, 33 (D.D.C. 20 2002) (refusing to strike untimely disclosed evidence supporting a motion for summary judgment because defendants did not "aver that any prejudice resulted from the 21 plaintiff's failure to make the required disclosures...."). 22 3 As noted in Plaintiffs' First Response, the cases cited by Defendant also 23 recognize that a party must be harmed before evidence is excluded under Rule 37(c)(1) 24 or are otherwise inapposite. Furthermore, Defendant in its Second MTS once again cites Connolly v. Allstate Ins., Co., 1997 U.S. App. LEXIS 9369 (9th Cir. 1997), which 25 is an unpublished opinion and thus is not persuasive and has no binding effect upon this court. See Sorchini v. City of Covina, 250 F.3d 706, 708 (9th Cir. 2001) (citing Ninth 26 Circuit Court of Appeals Rule 36-3). 4
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3.

All of the Exhibits are Admissible.

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All the Exhibits comprise court records from proceedings closely related to this

2 case. Such materials are proper subjects for this Court to take judicial notice, and any 3 materials that can be judicially noticed can be used to support a motion for summary 4 judgment. See Clay v. Equifax, Inc., 762 F.2d 952, 956 (11th Cir. 1985); St. Louis 5 Baptist Temple v. FDIC, 605 F.2d 1169, 1172 (10th Cir. 1979) (noting that federal 6 courts may take notice of proceedings in other courts, both within and without the 7 federal judicial system).4 Because the Exhibits are admissible, they, and the portions of 8 Plaintiffs' Response SOF they support, should not be stricken. 9 10 11 B. THE SUPPLEMENTAL AFFIDAVIT IS PROPER. 1. The Supplemental Affidavit is Based on Personal Knowledge.

Defendant complains that paragraphs 2, 3, and 4 of the Supplemental Affidavit

12 should be stricken because they are legal arguments. Yet, as noted in Plaintiffs' First 13 Response, Mr. Daggett has personal knowledge to attest to the facts and circumstances 14 surrounding this case. Affidavits based on personal knowledge constitute appropriate 15 evidence to support a motion for summary judgment. See Fed. R. Civ. P. 56(e); 16 17 See also Gonzales v. North Tp. of Lake County, 800 F.Supp. 676, 681-82 (N.D. 18 Ind. 1992) (stating that in deciding motion for summary judgment, district court may 19 consider material in the record that is beyond the pleadings, which would otherwise be admissible at trial, and may, sua sponte, take judicial notice of adjudicative facts), 20 reversed on other grounds, 4 F.3d 1412 (7th Cir. 1993); Hill v. Goord, 63 F.Supp.2d 254, 256 (E.D.N.Y. 1999) (holding that it was proper to take judicial notice of orders 21 and documents related to inmate's state case and parole hearings because such 22 documents "were capable of determination by sources whose accuracy could not reasonably be questioned."); Assembly of State of Cal. v. U.S. Dept. of Commerce, 797 23 F. Supp. 1554, 1558-59 (E.D. Cal. 1992) (holding that it was proper to take judicial 24 notice of order in a case in a different district and order in another case requiring the Department to produce discovery to plaintiffs); U. S. v. Webber, 270 F.Supp. 286, 289 25 (D.C. Del. 1967) (stating that matter which is the subject of judicial notice may properly be used in the consideration of a motion for summary judgment and taking judicial 26 notice of court records in related case). 5
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1 Myrick v. U.S., 217 F.Supp.2d 979, 982 (D. Ariz. 2002).

Furthermore,

personal

2 knowledge as to facts contained in an affidavit offered to support a summary judgment 3 motion are also inferred from an affiant's position. See Barthelemy v. Air Lines Pilots 4 Ass'n, 897 F.2d 999, 1018 (9th Cir.1990). 5 Here, Mr. Daggett explicitly states in his affidavit attached to Plaintiffs'

6 Statement of Facts in Support of Motion for Summary Judgment ("Plaintiffs' SOF") 7 that he is "familiar with the work performed in this case and make this Affidavit based 8 on matters within [his] own personal knowledge...." Daggett Aff. at ¶2:14-16, attached 9 as Exhibit E to Plaintiffs' SOF. Furthermore, and as his affidavit attests, Mr. Daggett is 10 Plaintiffs' principal litigation attorney in the underlying action. Id. at ¶1:22-23. Finally, 11 he has served in the same capacity in the bankruptcy proceeding and in the Nevada 12 litigation. Id. at ¶1:7-10. Such a position makes him intimately familiar with all aspects 13 of the underlying litigation, the bankruptcy proceeding, and the Nevada litigation. 14 These attestations were expressly incorporated into the Supplemental Affidavit.

15 Daggett Supp. Aff. at ¶1:20-24, attached as Exhibit A to Plaintiffs' Response SOF. 16 Clearly, Mr. Daggett was privy to the statements to which he attests in his Supplemental 17 Affidavit concerning his role as Plaintiffs' attorney in the aforementioned actions, the 18 reasons and motivations underlying those actions. 19 20 21 2. Mr. Daggett is Competent to Attest to the Facts in the Supplemental Affidavit.

Mr. Daggett is also competent to attest to the facts in the Supplemental Affidavit:

22 Experienced and qualified attorneys are generally competent to attest to their 23 understanding of pertinent facts within their personal knowledge to support a motion for 24 summary judgment. See E.E.O.C. v. Peabody Coal Co. 214 F.R.D. 549, 562 (D. Ariz. 25 2002) reversed and remanded on other grounds, 400 F.3d 774 (9th Cir. 2005); 26 Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 84 (3d Cir. 1987); Fraser and Wise, 6
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1 P.C. v. Primarily Primates, Inc., 966 F.Supp. 63, 69 (D. Mass. 1996); U.S. v. Fennell, 2 381 F.Supp.2d 1312, 1315-16 (D. N.M. 2005). 3 As an experienced attorney, Mr. Daggett was competent to attest to paragraphs 2,

4 3, and 4. As noted in Plaintiffs' First Response, Mr. Daggett has been an Arizona 5 attorney for over 35 years, concentrating on commercial litigation at both the trial and 6 appellate levels. Daggett Aff. ¶2:11-12, attached as Exhibit E to Plaintiffs' SOF. Mr. 7 Daggett was the supervising attorney for Plaintiffs in the underlying litigation, TSIN's 8 bankruptcy proceeding, and the Nevada litigation, and coordinated all legal work 9 performed on these matters. Id. at ¶5:14-16. He is certainly qualified to attest to his 10 understanding of these matters. Accordingly, the Supplemental Affidavit should not be 11 stricken. 12 13 14 3. Attacks on Credibility Do Not Warrant Striking Any Portion of the Supplemental Affidavit.

Defendant's Second MTS expressly incorporates its attack on Mr. Daggett's

15 credibility found in its first MTS. But as noted in Plaintiffs' First Response, such 16 attacks are an inappropriate basis for a motion to strike. See Lohrenz, 223 F.Supp. 2d at 17 33 (motion to strike is not appropriate vehicle through which to contest credibility of a 18 witness or draw attention to contradictory evidence);5 U.S. v. Shumway, 199 F.3d 1093, 19 1104 (9th Cir. 1999); Chemical Bank v. Hartford Acc. & Indem. Co., 82 F.R.D. 376, 20 378 (D.C.N.Y., 1979). The appropriate forum for contradicting evidence used to support 21 22 23 24 25 26 The following comments from the Lohrenz case are particularly relevant to Defendant's motions to strike: "The parties have filed various motions to strike materials submitted in opposition to their motions. In ruling upon these motions to strike, the Court notes that both parties appear to be engaged in fairly transparent attempts to use motions to strike in order to control the merits of the case. A motion to strike is not an appropriate vehicle through which to contest the credibility of a witness or to draw further attention to the fact that one piece of evidence is contradicted by another." Lohrenz, 223 F.Supp. 2d at 33. 7
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1 a summary judgment motion is a response supported by a controverting statement of 2 facts, not a motion to strike. Lohrenz, 223 F.Supp. 2d at 33. Accordingly, no portion of 3 the Supplemental Affidavit, or the portions of Plaintiffs' Response SOF they support, 4 should be stricken on the basis of credibility or attempts by Defendant to introduce 5 contradictory evidence. 6 III. 7 8 NO PARAGRAPH OF PLAINTIFFS' RESPONSE SOF SHOULD BE STRICKEN. Defendant's Second MTS requests that the Court strike paragraphs 4-21 of

9 Plaintiffs' SOF Response. Second MTS, p.5-11. However, for the same reasons argued 10 in Plaintiffs' First Response, and incorporated expressly herein, and for the additional 11 reasons set forth below, these paragraphs have a proper evidentiary basis, and thus 12 should not be stricken. 13 14 15 1. Paragraphs Based on Exhibits Attached to Plaintiffs' Response SOF Should Not Be Stricken.

Defendant's Second MTS requests that the Court strike paragraphs 7, 19, and 21

16 of Plaintiffs' Response SOF in part because it alleges the Exhibits upon which these 17 paragraphs are based are inadmissible. Second MTS, p.8:11-26; p.9:19-10:4; p.10:1518 11:2. Indeed, this is Defendant's sole basis for objecting to paragraph 19 of Plaintiffs' 19 Response SOF. But, as argued above, the Exhibits are admissible and thus these 20 paragraphs should not be stricken on this basis. 21 22 23 2. Paragraphs Based on Exhibits Attached to Plaintiffs' SOF Should Not Be Stricken.

Defendant's only basis to strike paragraphs 5, 8, 10-12 is that the Exhibits upon

24 which they are based, attached to Plaintiffs' SOF, are inadmissible. Second MTS, 25 p.5:11-6:12. But, as discussed in Plaintiffs' First Response, the Exhibits attached to 26 Plaintiffs' SOF are admissible and thus these paragraphs should not be stricken on this 8
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1 basis.

Furthermore, Defendant erroneously includes paragraph 8 as based upon

2 inadmissible documentary evidence attached to Plaintiffs' SOF. Actually, paragraph 8 3 is based upon Mr. Daggett's affidavit attached to Plaintiffs' SOF, and upon the 4 Supplemental Affidavit. Plaintiffs' Response SOF, ¶ 8. As discussed in Plaintiffs' First 5 Response and above, these affidavits constitute a proper evidentiary basis to support a 6 statement of facts. Consequently, paragraph 8 should not be stricken. 7 8 9 3. Paragraphs Based on the Supplemental Affidavit Attached to Plaintiffs' Response SOF Should Not Be Stricken.

Defendant also requests that paragraphs 6, 13, and 20 be stricken because they

10 reference the Supplemental Affidavit, attached to Plaintiffs' Response SOF. Second 11 MTS, p.7:21-8:10;p.9:1-9;p.10:5-15. Here Defendant regurgitates its "legal

12 conclusions" arguments used in its first MTS. The paragraphs are stated as follows: 13 14 15 16 17 18 19 20 21 22 23 24 The underlying case involved extensive discovery, including hundreds of pages of deposition testimony. Daggett Supp. Aff., ¶4. As with the affidavits attached to Plaintiffs' SOF and discussed in Plaintiffs' Paragraph 6: Alanco had no involvement in these proceedings initially. However, as the proceedings moved forward, it became clear to Plaintiffs' litigation counsel that they presented an avenue with which Alanco could garner significant concessions in the underlying litigation. This was the predominant reason for Plaintiffs' involvement in these proceedings. Supplemental Affidavit of T. Michael Daggett ("Daggett Supp. Aff."), ¶ 2, attached hereto as Exhibit A. Paragraph 13: As with the work performed in the TSIN Bankrutpcy matter, the determination of this issue would have a controlling effect on the resolution of the underlying case, and this was the predominant reason for Plaintiffs' involvement in this matter. Daggett Supp. Aff., ¶ 3 (Exhibit A). Paragraph 20:

25 First Response, the Supplemental Affidavit is based on the personal knowledge, 26 9
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1 observations, and professional competence of Mr. Daggett. 2 paragraphs are properly supported and should not be stricken. 3 4 5 4.

Accordingly, these

Paragraphs Based on Affidavits Attached to Plaintiffs' SOF Should Not Be Stricken.

Defendant also requests that paragraphs 9 and 14-16 be stricken solely because

6 they reference the affidavits of Messrs. Daggett and Oman, attached to Plaintiffs' SOF, 7 which Defendant, in its first MTS, incorrectly construed as containing inappropriate 8 "legal arguments" and "legal conclusions." Second MTS, p.6:16-7:11. The paragraphs 9 are stated as follows: 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Paragraph 9: These costs were reasonable and necessary to the defense of the covered claim. See Affidavit of T. Michael Daggett, ¶ 21, attached to PSOF as Exhibit E. Paragraph 14: Like in the TSIN Bankruptcy proceedings, the costs incurred in connection with Plaintiffs' active involvement in the Nevada action were reasonable and necessary costs to that defense. See PSOF at ¶ 6 (and Daggett Affidavit, ¶ 21 (Exhibit E thereto)). Paragraph 15: Steven P. Oman, P.C. ("Oman") served, at all relevant times and through the present, as Alanco's outside general counsel. See PSOF at ¶ 7 (and Oman Affidavit, ¶ 3 (Exhibit L thereto)). Paragraph 16: The Oman billing records definitively show that he took a vital role in preparing pleadings and discovery, preparing for depositions, reviewing and analyzing relevant documents, and in developing litigation strategy. See Oman billing records, attached to PSOF as Exhibit L. As discussed in Plaintiffs' First Response, the affidavits of Messrs. Daggett and

25 Oman are based on the personal knowledge, observations, and professional competence 26 of affiants with decades of experience as Arizona attorneys and with commercial 10
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1 litigation in particular.

Furthermore, these paragraphs deal generally with the

2 reasonableness of attorneys' fees, a subject with which attorneys are more than 3 competent to attest. See Henry v. Gill Industries, Inc., 983 F.2d 943, 946 (9th Cir. 4 1993). 5 stricken. 6 7 8 5. The Remaining Paragraphs to Which Defendant Objects Should Not Be Stricken. Accordingly, these paragraphs are properly supported and should not be

Defendant objects to paragraphs 4, 7, and 21 by attempting to introduce

9 conflicting evidence or otherwise challenging the paragraphs' accuracy, and thus, their 10 credibility. Second MTS, p.7:7-20; p.8:11-26; p.10:15-11:2. These paragraphs are 11 stated as follows: 12 13 14 15 16 17 18 19 20 21 22 23 Paragraph 4: Stinson Morrison Hecker Invoice No. 9634529 (the December 16, 2004 invoice) reflects the increase in T. Michael Daggett's rate made in the ordinary course of Stinson Morrison Hecker's business. See Affidavit of T. Michael Daggett, ¶ 18, attached to PSOF as Exhibit E. Paragraph 7: TSIN ultimately agreed to voluntarily waive rescission as a possible remedy in the underlying case. December 1, 2004 Order of Bankruptcy Judge Eileen W. Hollowell, attached hereto as Exhibit B. Paragraph 21: The discovery and dispositive motions deadlines in the underlying case passed long ago, and numerous dispositive motions timely were filed. November 18, 2004 Minute Entry of the Honorable Robert L. Gottsfield, attached hereto as Exhibit E. Citing other evidence, Defendant contends that paragraph 4 is false, claiming

24 that there was no rate increase but instead that there was a billing mistake. Defendant 25 disputes paragraph 7 by arguing that the plain language of Judge Eileen's Order 26 possibly could mean other than what Plaintiffs attest. 11
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In much the same way,

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1 Defendant challenges the accuracy of paragraph 21 by disputing that Judge Gottsfield's 2 Minute Entry could mean other than what Plaintiffs' attest. But, as noted in Plaintiffs' 3 First Response, and as reiterated above, Defendant cannot introduce contradictory 4 evidence or attack the credibility of the evidence used to support a summary judgment 5 motion on a motion to strike. Accord Lohrenz, supra. Thus, these paragraphs should 6 not be stricken. 7 Defendant attempts to couch paragraphs 17 and 18 as legal arguments not

8 supported by any evidence, even though the paragraphs reference the Declaration Page 9 of Carolina's Casualty Insurance Policy and the Complaint in the underlying litigation. 10 Second MTS, p.9:10-18. These paragraphs are stated as follows: 11 12 13 14 15 16 Paragraph 17 and 18: The declaration page that the Court has already found to be applicable to this analysis sets a retention of $100,000, not $150,000, for claims other than securities claims. Declaration Page, attached hereto as Exhibit C. It is undisputed that the claims in the underlying litigation included both securities and non-securities claims. See Complaint, attached to PSOF as Exhibit A. Defendant's objection lacks merit: These paragraphs are clearly supported by the

17 documents they reference, notwithstanding Defendant's bald-faced conclusion to the 18 contrary. 19 IV. 20 CONCLUSION. For the foregoing reasons, Defendant's Motion to Strike Portions of Plaintiffs'

21 Statement of Facts in Support of Plaintiffs' Response to Defendant's Motion for 22 Summary Judgment must be denied. 23 / / / 24 / / / 25 / / / 26 / / / 12
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RESPECTFULLY SUBMITTED this 10th day of March, 2006. STINSON MORRISON HECKER LLP By: /s/ Christian C.M. Beams T. Michael Daggett Christian C. M. Beams Brian J. Palmer 1850 N. Central Avenue, Suite 2100 Phoenix, Arizona 85004-4584 Attorneys for Plaintiff Alanco Technologies, Inc.

ORIGINAL electronically filed this 10th day of March, 2006: Clerk of the Court Sandra Day O'Connor U.S. Courthouse 401 West Washington Street Phoenix, Arizona 85003 Copy of the foregoing hand-delivered this 10th day of March, 2006, to: Honorable David Campbell Sandra Day O'Connor U.S. Courthouse 401 W. Washington Street Phoenix, AZ 85003 /s/ Kris Jones

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