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 (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 ("MTS"). Because the Exhibits and Affidavits are proper evidence to support a summary judgment motion, the MTS must be denied. This Response is supported by the following Memorandum of Points and Authorities.

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MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION. Unable to mount a substantive challenge to Plaintiff's Motion for Summary

4 Judgment ("Plaintiff's MSJ"), Defendant instead has resorted to disingenuous 5 procedural sophistry: In its MTS, Defendant contends that the following exhibits

6 (hereinafter, the "Exhibits") supporting facts they do not dispute be stricken from 7 Plaintiffs' Statement of Facts in Support of their Motion for Summary Judgment: 8 9 10 11 12 13 14 15 Exhibit B C D F G H Description Majority Written Consent of Shareholders of TSIN TSIN Board Meeting Minutes dated 2-28-05 Complaint (Nevada litigation) Bankruptcy Petition Minute Entry in Technology Systems International, Inc. v. Alanco Technologies, Inc., et al. 11-8-02 letter to Carolina

MTS, p.3:22-24. Defendant does not claim, nor can it without misrepresenting to this Court, that it

16 is harmed in any way by these Exhibits. Indeed, as is shown below, some of the 17 questioned documents had been produced to Defendant; others are otherwise admissible 18 because they can be judicially noticed as evidence to support a summary judgment 19 motion. 20 Defendant further desperately contends that portions of the affidavits of T.

21 Michael Daggett and Steven P. Oman (which observe that the TSIN bankruptcy 22 proceeding and the Nevada litigation were necessary and reasonable costs incurred in 23 defending the claims made in the underlying litigation) constitute "argument" or "legal 24 conclusions." MTS, 6:15-17.1 Defendant also attacks the credibility of the Affidavits 25 26
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Both affidavits are referred to collectively as the "Affidavits." 2
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1 and intimates that portions of the Affidavits are false. However, Defendant blatantly 2 ignores the fact that the Affidavits are based on the personal knowledge, observations, 3 and professional competence of individuals intimately familiar with the aspects of these 4 proceedings and qualified to testify as to all statements made. Based therefore in fact, 5 they must not be stricken. Moreover, Defendant's critique of the credibility of the 6 Affidavits is an inappropriate basis to strike them in any event. 7 Simply put, Carolina is not able to raise any factual issue as to the statements They can

8 made by Plaintiffs in support of their Motion for Summary Judgment.

9 articulate no prejudice or harm resulting from any lack of prior disclosure, and cannot 10 (and do not) explain how the foundational documents at issue are relevant to the 11 substantive defenses that they raise in this case. Without any true defense to Plaintiffs' 12 Motion of Summary Judgment, Carolina resorts to attributing sinister motives to 13 Plaintiffs in connection with not producing irrelevant documents that, again, support 14 background foundational assertions. The Court must reject this attempt to "muddy the 15 waters" and deny Carolina's Motion. 16 II. 17 18 19 ARGUMENT. A. THE EXHIBITS ARE ADMISSIBLE. 1. The Exhibits Document the Facts of this Case.

The Exhibits document obvious, known facts that Defendant does not attempt to

20 dispute, either in its MTS or its Response to Plaintiffs' MSJ. The Exhibits comprise a 21 complaint filed in Clark County District Court (Nevada) (Exhibit D). This complaint 22 documents the simple fact that an action was filed by TSIN's former Board of Directors 23 against the newly elected Board. Plaintiffs' SOF ¶ 5. Exhibit F is a Bankruptcy Petition 24 filed in the Bankruptcy Court for the District of Arizona, and documents the fact that 25 TSIN had initiated Chapter 11 bankruptcy proceedings (Plaintiffs' SOF ¶ 7), and was 26 used by Defendant to support Defendant's own motion for summary judgment! (See 3
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1 Exhibit 9 to Defendant's Statement of Facts in Support of its Motion for Summary 2 Judgment.) Exhibit G is a Minute Entry from the Maricopa County Superior Court that 3 documents Judge Robert Gottsfield's order suspending litigation in Technology Systems 4 International, Inc. v. Alanco Technologies, Inc., et al. Plaintiffs' SOF ¶¶ 8-9. 5 Exhibit H, a letter that documents the fact that Plaintiffs put Defendant on notice

6 that it would make a claim under the costs of defense provision of Defendant's 7 insurance policy (Plaintiffs' SOF ¶ 12), has already twice been produced to Defendant: 8 It was sent to Defendant in 2002 and used as an exhibit (clearly marked as Exhibit 4) in 9 the deposition of Ronald Estabrook, on July 15, 2004.2 Exhibits B (Majority Written 10 Consent of Shareholders of TSIN) and C (TSIN Board Meeting Minutes) are TSIN 11 corporate documents used to document the special shareholder meeting at TSIN that 12 resulted in election of a new Board at TSIN. Plaintiffs' SOF ¶ 2-3, 4. 13 14 2. The Exhibits Do Not Harm Defendant.

Defendant does not claim, nor could it claim truthfully, that it is harmed by the

15 Exhibits. The Rules provide for exclusion of evidence only where non-disclosure is 16 harmful: Parties that fail to produce evidence during disclosure or discovery are not, 17 "unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or 18 on a motion any witnesses or information not so disclosed." Fed. R. Civ. P. 37(c)(1). 19 See, e.g., Cloud v. Pfizer Inc., 198 F.Supp.2d 1118, 1128 (D. Ariz. 2001) (refusing to 20 strike evidence that was untimely disclosed because such disclosure was harmless). 21 It has also been specifically held that exhibits attached to a motion for summary

22 judgment that were not produced during disclosure or discovery were admissible when 23 such late disclosure was harmless. BFI Waste System of North America v. Dekalb, 24 25 It is disingenuous for Defendant to assert that the first time it saw this Exhibit 26 "was in Alanco's Motion for Summary Judgment filed on January 13, 2006." MTS, 5:18-21. Mr. Tranen, Carolina's current counsel of record, appeared on behalf of Carolina at the Estabrook deposition! See Exhibit A. 4
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1 Georgia, 303 F.Supp.2d 1335, 1346 (N.D. Ga. 2004). In BFI, plaintiff moved to strike 2 exhibits to defendant's motion for summary judgment, solely on the technical basis that 3 the exhibits were not disclosed to plaintiffs until well after the close of discovery. Id. 4 The Court, in denying the motion to strike the exhibits, noted that the documents did not 5 prejudice or harm plaintiff in any way. Id.; see also Missouri Public Entity Risk 6 Management Fund v. Investors Ins. Co. of America, 338 F.Supp.2d 1046, 1054-55 7 (W.D. Mo. 2004) (holding that evidence of county employee's administrative charge 8 against county not disclosed during discovery would not be stricken from support of its 9 partial motion for summary judgment because defendant did not show any real 10 prejudice from not getting evidence of administrative charge sooner) Cash v. State 11 Farm Fire & Cas. Co., 125 F.Supp.2d 474, 477 (M.D. Ala. 2000) (holding that insurer's 12 failure to disclose to purchasers the vendors homeowners' policy, upon which 13 purchasers' claims against insurer for failure to pay were based, was harmless and did 14 not warrant striking of policy). 15 The cases cited by Defendant also recognize that a party must be harmed before

16 evidence is excluded under Rule 37(c)(1) or are otherwise inapposite. See Pac-Fab, Inc. 17 v. Sunline Int'l USA, U.S. Dist. LEXIS 26479, * 5 (D. Ariz. 2002) (noting that "to the 18 extent that . . . failure to make rule 26 disclosures may not have caused harm . . . those 19 witnesses or information are not precluded"); Fallar v. Compuware Corp., 202 20 F.Supp.2d 1067, 1079 (D. Ariz. 2002) (exhibit excluded was material to the substantive 21 issues of the case); Connolly v. Allstate Ins. Co., 1997 U.S. App. LEXIS 9369 (9th Cir. 22 1997) (actually sanctioned for failure to identify a "crucial witness")3; Dedvukaj v. 23 Equilon Enterprises, Inc., 301 F.Supp.2d 644, 688 (E.D. Mich. 2004) (evidence was 24 25 26 Connolly is an unpublished 9th Circuit opinion, and consequently cannot be cited as binding, or even persuasive authority. See Sorchini v. City of Covina, 250 F.3d 706, 708 (9th Cir. 2001) (citing Ninth Circuit Court of Appeals Rule 36-3). 5
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1 precluded as sanction pursuant to Fed. R. Civ. Pro. 37(d) for failing to previously appear 2 at a deposition). 3 Here, at least one of the Exhibits has already been produced to Defendant, and

4 Defendant has used another exhibit to support its own summary judgment motion in this 5 case. Moreover, it strains credulity that Defendant was unaware, and therefore 6 presumably harmed, of the facts documented by the Exhibits. Indeed, Defendant does 7 not dispute the simple facts documented by the Exhibits. See BFI, 303 F.Supp.2d at 8 1346 (holding that because party did not dispute facts documented by untimely 9 disclosed evidence, it was not prejudiced thereby). It is not surprising that Defendant 10 does not claim it is prejudiced by the Exhibits, because it is not. Tellingly, Carolina does 11 not state it would have done anything different had these documents been produced 12 before the discovery deadline. Consequently, the Exhibits, and the portions of Plaintiff's 13 SOF they support, must not be stricken. 14 15 3. Almost all of the Exhibits are Otherwise Admissible.

Exhibit H has been produced to Defendant twice: once in 2002 and once in 2004

16 as an exhibit to a deposition in this case. Furthermore, Exhibits D, F (attached as 17 Exhibit 9 to Defendant's own summary judgment motion), and G comprise court 18 records from proceedings closely related to this case. Such materials are proper subjects 19 for this Court to take judicial notice, and any materials that can be judicially noticed can 20 be used to support a motion for summary judgment. See Clay v. Equifax, Inc., 762 F.2d 21 952, 956 (11th Cir. 1985) (holding on motion for summary judgment, court can consider 22 record of prior proceedings in case subject to judicial notice and may draw reasonable 23 conclusions thereon); St. Louis Baptist Temple v. FDIC, 605 F.2d 1169, 1172 (10th Cir. 24 1979) (holding that it was expeditious for court to consider rulings in similar litigation 25 26 6
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1 in assessing materiality of controversy to resolve summary judgment motion).4 Because 2 Exhibits D, F, G, and H, are admissible, the portions of Plaintiff's SOF upon which they 3 are based should not be stricken. 4 5 6 7 C. THE AFFIDAVITS ARE PROPER. 1. The Affidavits are Based on the Personal Knowledge of the Affiants.

Messrs. Daggett and Oman have personal knowledge to attest to the facts in the

8 Affidavits. Affidavits based on personal knowledge constitute appropriate evidence to 9 support a motion for summary judgment. See Fed. R. Civ. P. 56(e); Myrick v. U.S.,

10 217 F.Supp.2d 979, 982 (D. Ariz. 2002). Personal knowledge as to facts contained in 11 an affidavit offered to support a summary judgment motion are also inferred from an 12 affiant's position. See Barthelemy v. Air Lines Pilots Ass'n, 897 F.2d 999, 1018 (9th 13 Cir.1990) (holding that on motion for summary judgment, district court properly relied 14 on union's executive council chairman's affidavit as evidence of the council's fears of 15 potential purchaser of airline and its search for potential buyers of airline, as district 16 court could infer chairman's personal knowledge and competence to testify about such 17 matters from his position and nature of his participation in such matters).5 18 Here, Mr. Daggett explicitly states in his affidavit that he is "familiar with the

19 work performed in this case and make this Affidavit based on matters within [his] own 20 personal knowledge...." Daggett Aff. at ¶2:14-16. Furthermore, and as his affidavit 21 Nor are certified copies of the court records required for judicial notice. See Insurance Co. of North America v. Hilton Hotels U.S.A., Inc., 908 F.Supp. 809, 813 n.1 23 (D. Nev. 1995). 22 In Barthelemy, the Ninth Circuit also held that the District Court properly relied on the affidavit of investment banker who had represented the union in its negotiations 25 with the financier as evidence of circumstances of negotiations and intent of parties with respect to the agreements between the union and investment banker and union and 26 financier, as district court could reasonably infer that investment banker had personal knowledge and competence to testify based on the banker's position and nature of participation in such matters. Id. 7 24
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1 attests, Mr. Daggett is Plaintiffs' principal litigation attorney in the underlying action. 2 Id. at ¶1:22-23. Finally, he has served in the same capacity in the bankruptcy proceeding 3 and in the Nevada litigation. Id. at ¶1:7-10. Clearly, Mr. Daggett was privy to the 4 statements to which he attests in his affidavit concerning his role as Plaintiffs' attorney 5 in the aforementioned actions, the reasons and motivations underlying those actions, 6 and the fees incurred as a result of those actions. 7 Of course, as principal attorneys in the underlying litigation, the bankruptcy

8 proceeding, and the Nevada litigation, the affidavits of Messrs. Daggett and Oman are 9 particularly potent evidence of the attorneys' fees generated as result of Defendant's 10 breach. See Henry v. Gill Industries, Inc., 983 F.2d 943, 946 (9th Cir. 1993) (holding 11 that defense counsel's declarations and affidavits, even without additional evidence, 12 were sufficiently detailed to support award of attorney fees as discovery sanction; 13 documents disclosed nature of services rendered in connection with unsuccessful efforts 14 to obtain discovery, amount of attorney time consumed, and rates at which time was 15 billed to client) (emphasis added). 16 Like Mr. Daggett, Mr. Oman explicitly states in his affidavit that he has "full

17 knowledge of all statements made herein" and that he is "familiar with the work 18 performed in defense of the claims made in the TSIN lawsuit and make this Affidavit 19 based on matters within my own personal knowledge...." Oman Aff. ¶1:21-23, ¶3:1020 13. Furthermore, and as his affidavit attests, Mr. Oman served as general counsel to 21 Plaintiff Alanco Technologies, Inc. during this litigation and in the underlying litigation, 22 and Alanco is "a significant shareholder of TSIN." Id. at ¶12:9-10. Clearly, Mr. Oman 23 was privy to the statements to which he attests in his affidavit concerning his role as 24 Plaintiffs' attorney in the aforementioned actions, the reasons and motivations 25 underlying those actions, and the fees incurred as a result of those actions. 26 /// 8
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2.

The Affiants are Competent to Attest to the Facts in the Affidavits.

Messrs. Daggett and Oman are also competent to attest to the facts in the 3 Affidavits. Experienced and qualified attorneys are generally competent to attest to their 4 understanding of pertinent facts within their personal knowledge to support a motion for 5 summary judgment. See E.E.O.C. v. Peabody Coal Co. 214 F.R.D. 549, 562 (D. Ariz. 6 2002) reversed and remanded on other grounds, 400 F.3d 774 (9th Cir. 2005). 7 In Peabody, Peabody brought a summary judgment motion against the EEOC's 8 Title VII complaint. Id.. at 556. Defendant attached affidavits of its former and present 9 in-house counsel attesting, among other things, to certain reviewed documents' origin, 10 development, and meaning, and to counsel's understanding that the Secretary of the 11 Interior required the Navajo Employment Preference as a condition for certain leases. 12 Id. at 555-56. 13 Just as Carolina in this case, the EEOC in Peabody offered no evidence to 14 dispute the evidence offered by Defendant's attorneys, nor did the EEOC suggest that 15 the testimony offered by defendant's attorneys was false or that the attorneys were 16 somehow wrong in their sworn testimony. Id. Rather, the EEOC, like Carolina, moved 17 to strike the attorneys' affidavits. Id. After noting that the attorneys possessed the 18 requisite personal knowledge, the District Court of Arizona denied the EEOC's motion 19 to strike, holding that the attorneys' experience and capacity as defendant's in-house 20 counsel endowed them with the appropriate competency to attest to the origin, 21 development and meaning of the reviewed documents, as well as the understanding of 22 23 24 Other Courts have routinely found experienced and qualified attorneys 25 competent to attest to their understanding of pertinent facts within their personal knowledge. See Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 84 (3d Cir. 1987) 26 (holding that motion for summary judgment was properly supported by affidavits of attorneys who, after reviewing pertinent trial exhibits and interrogatories, attested that appellants had not introduced sufficient evidence to support their claims for intentional 9
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the Secretary of the Interior's practices with regard to employment preferences. Id. 6

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As experienced attorneys, Messrs. Daggett and Oman were also competent to

2 document the fact that the Matters were necessary to the defense of the underlying 3 litigation. Mr. Daggett has been an Arizona attorney for over 35 years, concentrating on 4 commercial litigation at both the trial and appellate levels. Daggett Aff. ¶2:11-12. Mr. 5 Daggett was the supervising attorney for Plaintiffs in the Matters, and coordinated all 6 legal work performed on the matters. Id. at ¶5:14-16. He is certainly qualified to attest 7 to his understanding of the underlying litigation in this case and the related Matters 8 necessary for the defense of his clients. He is also competent to attest to the nature and 9 necessity of the fees generated as a result of the underlying litigation and the Matters. 10 Similarly, Mr. Oman has been an Arizona attorney for over twenty years,

11 concentrating on general business law. Oman Aff. at ¶3:8-11. As general counsel to 12 Alanco, Mr. Oman was intimately familiar with the defense of the claims in the TSIN 13 lawsuit, and the attorneys' fees generated thereby. Id. at ¶3:10-12. Like Mr. Daggett, 14 Mr. Oman is in a unique position to attest that the bankruptcy proceeding and the 15 Nevada litigation (and the fees generated thereby) were necessary for the defense of the 16 claims in the underlying litigation. 17 18 19 as discreditable, self-serving, and biased, couching their affidavits as "transparent 20 efforts" for lawyers to argue legal conclusions to the Court, and labeling them as 21 "individuals who are not objective" because they "are advocates for Alanco." MTS, p. 22 23 24 infliction of emotional distress); Fraser and Wise, P.C. v. Primarily Primates, Inc., 966 F.Supp. 63, 69 (D. Mass. 1996) (holding that affidavit submitted by attorney testifying 25 about fair and reasonable value of services rendered by law firm was proper evidence to support motion for summary judgment); ; U.S. v. Fennell, 381 F.Supp.2d 1312, 1315-16 26 (D.N.M. 2005) (allowing real estate attorney's summary judgment affidavit attesting to status of ownership of property within national forest). 10
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3.

Attacks on Credibility Do Not Warrant Striking Any Portion of the Affidavits or Plaintiff's SOF.

In its MTS, Defendant desperately attempts to couch Messrs. Daggett and Oman

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1 7:4-5, p.8: 6-7, 16-17. The MTS also inappropriately attempts to couch the Affiants' 2 testimony as false, stating at various points that it is contradicted by legal pleadings, or 3 that the affiants' testimony is not supported by evidence in the record. MTS, p.13:4-6, 4 p.16:17-19.7 5 Defendant's broad-based attacks on the credibility of Messrs. Daggett and Oman

6 and the accuracy of their testimony are not appropriate bases for striking those 7 affidavits. See Lohrenz v. Donnelly, 223 F.Supp. 2d 25, 33 (D.D.C. 2002) (motion to 8 strike is not appropriate vehicle through which to contest credibility of a witness or 9 draw attention to contradictory evidence); U.S. v. Shumway, 199 F.3d 1093, 1104 (9th 10 Cir. 1999) ("That an affidavit is self-serving bears on its credibility, not on its 11 cognizability for purposes of establishing a genuine issue of material fact that would 12 preclude summary judgment); Chemical Bank v. Hartford Acc. & Indem. Co., 82 F.R.D. 13 376, 378 (D.C.N.Y., 1979) (holding that a naked attack upon the affidavits of a party 14 moving for summary judgment is, without more, insufficient to place credibility of 15 affiant in issue; rather, opposing party must set forth specific facts demonstrating that 16 there is a genuine triable issue concerning the credibility of affiant). Accordingly, no 17 portion of the Affidavits should be stricken on the basis of credibility. 18 III. 19 NO PARAGRAPH OF PLAINTIFF'S SOF SHOULD BE STRICKEN. Defendant's MTS requests that the Court strike paragraphs 1-12, 15, 17, 19-20,

20 24-25, and 27-28 of Plaintiffs' SOF. Defendant's only basis to strike paragraphs 3-5 and 21 22 Defendant's lone 45-year old case cited in support of its "all lawyers are 23 biased" argument is inapposite to the facts of this case because it concerned an 24 inappropriate attempt by an attorney to serve as a surrogate expert witness on patent infringement issues (See Inglett & Co. v. Everglades Fertilizer Co., 255 F.2d 342, 34825 49 (5th Cir. 1958). The Affidavits in this case contain statements regarding attorney's fees, where parties' attorneys almost always in the best position, by virtue of their 26 personal knowledge and professional competence, to attest to the purpose of the attorneys' fees and their reasonableness. 11
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1 7 is that the Exhibits upon which they are based are inadmissible. But the Exhibits are 2 admissible and thus these paragraphs should not be stricken. For the same reason, to the 3 extent Defendant's objections to paragraphs 2 and 8-9 are based on the fact that these 4 paragraphs are supported by the Exhibits, these paragraphs should not be stricken. 5 As for the rest of the paragraphs, the Court should not have them stricken for the

6 following reasons discussed above and noted below. 7 Defendant objects to paragraphs 1, 6, 9, 11, 24, 25, and 28, supported by the

8 Affidavits, solely by couching them as lacking of lack of factual basis, construing them 9 as "legal conclusion," "arguments," or "impermissible hearsay." MTS, p.8:23-26; 10 p.11:4-9; p.12:14-25; p.13:15-20; p.16:6-13; p.17:19-23. These paragraphs state as 11 follows: 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Defending this action was necessary to efficiently defending, and would not have occurred but for, the claims made in the underlying litigation. See Affidavit of T. Michael Daggett, ¶ 21, attached hereto as Exhibit E. Paragraph 9: Under this stay, the parties were required to go to bankruptcy court to litigate some of the issues, including the control issue. See Minute Entry (Exhibit G). Paragraph 11: Indeed, the numerous hours of lawyer time expended in this matter would not have occurred, again, but for the claims made by TSIN in the underlying litigation. See Daggett Affidavit, ¶ 21 (Exhibit E). 12
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Paragraph 1: The Complaint in the underlying case stated nine causes of action, including common law fraud, securities fraud, negligent misrepresentation, and breach of contract. Of the 118 total paragraphs therein, 56 were specific factual allegations that TSIN believed formed the basis of their fraud claims. It sought damages in excess of $18 million. Second Amended Complaint in Technology Systems International, Inc. v. Alanco Technologies, Inc., et al., Maricopa County Superior Court cause no. CV2003-001937, attached hereto as Exhibit A. Paragraph 6:

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Paragraph 24 and 25: The undersigned law firm was substituted for GT as litigation counsel in connection with defending the claims in the underlying case. As noted above, the efficient defense of these claims went beyond holding the mere title of "counsel of record" under that caption. It involved representation in the superseding TSIN bankruptcy matter (in which concessions were negotiated that significantly impacted the underlying litigation), and in the efforts to take over the TSIN Board of Directors (resulting in an effective stay of the underlying litigation). See Daggett Affidavit, at ¶ 1 (Exhibit E). These Stinson Morrison Hecker LLP expenses would not have been incurred but for the claims made in the underlying case, and were reasonable and necessary to the defense of those claims. See Daggett Affidavit, at ¶ 21 (Exhibit E). Paragraph 28: In connection therewith, he performed numerous tasks that would not have been necessary but for the claims made by TSIN in the underlying case, and indeed, were reasonably and necessarily incurred in defense of those claims. See Oman Affidavit, ¶ 9. Defendant's claims of "legal conclusions," "legal arguments," and speculation

14 with respect to these paragraphs are meritless : Paragraphs 1, 6, 9, 11, 24, 25, and 28 15 are supported by valid conclusions stated in the Affidavits, and based on the personal 16 knowledge, observations, and professional competence of affiants with decades of 17 experience as an Arizona attorneys and with commercial litigation in particular. 18 Accordingly, these paragraphs properly supported and should not be stricken. 19 20 21 22 23 Paragraph 2: By the spring of 2004, the majority of TSIN shareholders concluded that the TSIN litigation amounted to little more than a dissipation of company assets. Majority Written Consent of Shareholders of Technology Systems International, Inc., a Nevada corporation ("Written Consent"), attached hereto as Exhibit B. In part, Defendant objects to paragraph 2 for lack of Foundation. MTS, p.9:17-

24 26. This objection is meritless: In his affidavit, Mr. Oman attests that he drafted the 25 document, and he attests that the document was signed by a majority of TSIN 26 13
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1 shareholders.

Oman Aff. ¶11:3-8. These facts, like the entirety of Mr. Oman's

2 affidavit, are based upon his personal knowledge.8 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Paragraph 8: Once the Nevada action was filed, Maricopa County Superior Court Judge Robert Gottsfield, probably seeing that a question of control would dictate events going forward in the underlying litigation but also noting the Order of Bankruptcy Judge Hollowell staying action in the underlying litigation, suspended that litigation until the control issue was decided. March 14, 2005 Minute Entry in Technology Systems International, Inc. v. Alanco Technologies, Inc., et al. (wrongfully captioned Jones v. Alanco Technologies, Inc., et al.), attached hereto as Exhibit G. Defendant objects in part to paragraph 8, couching it as "Plaintiffs' speculation" and not fact. MTS, p.12:1-9. But Exhibit G, upon which paragraph 8 is based, clearly documents that Judge Robert Gottsfield, noting the Order of Bankruptcy Judge Hollowell had stayed the underlying litigation, suspended litigation in Technology Systems International, Inc. v. Alanco Technologies, Inc., et al. See Exhibit G,

Plaintiffs' SOF. Furthermore, Paragraph 8 is not speculation, but a valid conclusion based on the personal knowledge, observations, and professional competence of Mr. Daggett, an affiant with over 35 years of experience as an Arizona attorney. Paragraph 10: No part of this process involved Alanco pursuing a claim against TSIN, as there were no counterclaims in the underlying litigation. See Daggett Affidavit, ¶ 22 (Exhibit E). Defendant asserts that other evidence contradicts the facts documented in

21 paragraph 10, supported by Mr. Daggett's affidavit. MTS, p.13:4-11. Defendant's 22 assertion is an inappropriate attack the credibility of the Affidavits, and is irrelevant in 23 determining whether paragraph 10 should be stricken. Accord Lohrenz, supra. 24 Defendant's authority cited in support of its objection to paragraph 2 is inapposite. See Cox v. Amerigas Propane, Inc., 2005 U.S. Dist. LEXIS 26344 at *29 26 (D. Ariz. October 28, 2005). In this case, paragraph of a statement of fact was struck because party failed to provide the document upon which the excerpt was based. Here, as Defendant acknowledges, Exhibit B is attached as evidence supporting paragraph 2. 14 25
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Paragraph 12: In November 2002, Plaintiffs put Carolina on notice that if the TSIN shareholders decide to bring suit against them, they would make a claim under the costs of defense provision of the insurance policy it purchased from Defendant Carolina Casualty Insurance Company ("Carolina"). November 8, 2002 letter from Adele MacIntosh to Carolina's agent, attached hereto as Exhibit H. Defendant objects to paragraph 12 for lack of foundation, stating that "Alanco

7 has submitted absolutely no evidence that (i) "New Century" was "Carolina's `agent'; 8 and (ii) that Carolina ever received a copy of this letter." MTS, p. 14:1-15.

9 Defendant's objection borders on the absurd: The letter itself is addressed to New 10 Century as "Agent for Carolina Casualty Insurance Company." Exhibit H, Plaintiff's 11 SOF. Defendant further attempts to inappropriately attack the credibility of paragraph 12 12 with conflicting evidence. Drawing attention to contradictory evidence is an 13 inappropriate basis to support a motion to strike. Accord Lohrenz, supra. 14 Similarly, Defendant objects to paragraphs 15, 17, 19, and 20 by simply denying

15 their validity or accuracy. MTS, p.14:21-22; p.15:1-3; p. 15:7-8; p.15:18-21. These 16 paragraphs state as follows: 17 18 19 20 21 22 23 24 25 26 Paragraph 15: The Court, in a September 20, 2004 Order, denied the Motion to Dismiss because the record was unclear as to what constituted a "claim" under the policy, and denied Plaintiffs' Motion on the ground that it could not, at that time, be shown that as a matter of law, the IVI exclusion did not apply. See Docket, Document No. 37. Paragraph 17: In answering this amended Complaint, Carolina alleged not only the applicability of the IVI exclusion, but some nineteen other defenses, none of which were pursued at any point throughout the history of this case. See Docket, Document No. 44. Paragraph 19: On May 19, 2005, the Court granted this Motion in part, finding that the IVI exclusion did not allow Carolina to deny coverage in this case. See Docket, Document No. 58. 15
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Paragraph 20: Prior to the Court's ruling, Carolina provided no facts or law to support any of the "other defenses." As a consequence, after this ruling, Plaintiffs propounded very specific interrogatories which asked for all factual and legal support Carolina had for each and every defense it had raised in its Answer, including the nineteen that it had ignored in this litigation to that point. In fact, the final interrogatory specifically provided Carolina with an avenue to allege yet more defenses. Although required to do so under Rule 33, Carolina's responses to this discovery provided no factual or legal bases for any of these defenses, and raised no additional defenses. Defendant's Answers and Objections to Plaintiffs' First Set of Interrogatories, dated August 4, 2005, attached hereto as Exhibit I. But as noted above, a conclusory denial does not support a motion to strike. Accord Lohrenz, supra. Accordingly, these paragraphs properly supported and should not be stricken. Paragraph 27: Steven P. Oman, P.C. represented the Plaintiffs' interests in all stages of the underlying action, including the parallel bankruptcy matter and the TSIN takeover. Affidavit of Steven P. Oman, ¶¶ 9 and 10, attached hereto as Exhibit L. Defendant objects to paragraphs 27 for its lack of foundation. MTS, p. 16:17-

16 19. Defendant's objection is meritless: Paragraph 27 is supported by the personal 17 knowledge of Mr. Oman, and it is attested to in his affidavit. Therefore, paragraph 27 18 should not be stricken. 19 IV. 20 CONCLUSION. For the foregoing reasons, Defendant's Motion to Strike Portions of Plaintiffs'

21 Statement of Facts must be denied. 22 23 24 25 26 /// /// /// /// /// 16
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RESPECTFULLY SUBMITTED this 6th 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 6th 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 7th day of March, 2006, to: Honorable David Campbell Sandra Day O'Connor U.S. Courthouse 401 W. Washington Street Phoenix, AZ 85003 /s/ Julie Greenwood

17
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