Free Statement - District Court of Arizona - Arizona

1 T. Michael Daggett (#002784) Christian C.M. Beams (#019672) 2 STINSON MORRISON HECKER LLP 1850 North Central Avenue, Suite 2100 3 Phoenix, Arizona 85004-4584 4 (602) 279-1600 Fax: (602) 240-6925 5 E-mail: [email protected] 6 Attorneys for Plaintiff Alanco Technologies, Inc. 7 8 9 10 11 12 13 14 15 16 v. 17 CAROLINA CASUALTY INSURANCE COMPANY, a Florida 18 corporation 19 20 21 22 23 24 25 26
Plaintiffs hereby incorporate by reference the Statement of Facts filed on January 13, 2006 in connection with their Motion for Summary Judgment filed the same day. Where the Statements are the same, for the Court's convenience, this document will cite to that Statement of Facts ("PSOF") and Exhibit number.
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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), ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-04-0789-PHX-DGC STATEMENT OF FACTS IN SUPPORT OF PLAINTIFF'S RESPONSE TO CAROLINA'S MOTION FOR SUMMARY (Assigned to the Honorable David G. Campbell)

Defendant(s).

Pursuant to Rule 56, FED. R. CIV. P., Plaintiffs hereby submit their Statement of Facts in Support of their Response to Defendant Carolina Casualty Insurance Company's Motion for Summary Judgment.1

Case 2:04-cv-00789-DGC

Document 85

Filed 02/02/2006

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Section I of the Directors and Officers Policy that Plaintiffs purchased

2 from Carolina ("the Policy") requires Carolina to pay the "Loss" arising from any 3 4 5 6 7 8 disposition." See Plaintiffs' Statement of Facts filed January 13, 2006 ("PSOF") at ¶ 21 (and Exhibit J thereto). 2. Section III(I) of the Policy includes in the definition of "Loss": 1) the securities claim against Alanco or claim made against the officers and directors. It also requires that these costs of defense be advanced "prior to [the underlying case's] final

9 costs of defense, and 2) any resultant judgment. See Carolina Policy, attached to PSOF 10 as Exhibit J. 11 12 13 14 15 16 adjustment, defense and appeal of a Claim against the Insureds. . . ." See PSOF at ¶ 22 (and Exhibit J thereto). 4. Stinson Morrison Hecker Invoice No. 9634529 (the December 16, 2004 3. Section III(D) of the Policy defines "Costs of Defense" as "reasonable and

necessary fees, costs and expenses . . . resulting solely from the investigation,

17 invoice) reflects the increase in T. Michael Daggett's rate made in the ordinary course 18 of Stinson Morrison Hecker's business. See Affidavit of T. Michael Daggett, ¶ 18, 19 20 21 22 23 F thereto). 6. Alanco had no involvement in these proceedings initially. However, as attached to PSOF as Exhibit E. 5. TSIN filed Chapter 11 proceedings in 2003. See PSOF at ¶ 7 (and Exhibit

24 the proceedings moved forward, it became clear to Plaintiffs' litigation counsel that they 25 presented an avenue with which Alanco could garner significant concessions in the 26
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1 underlying litigation. This was the predominant reason for Plaintiffs' involvement in 2 these proceedings. Supplemental Affidavit of T. Michael Daggett ("Daggett Supp. 3 4 5 6 7 8 remedy in the underlying case. December 1, 2004 Order of Bankruptcy Judge Eileen W. Hollowell, attached hereto as Exhibit B. 8. There was no other reason why Plaintiffs' litigation counsel was involved Aff."), ¶ 2, attached hereto as Exhibit A. 7. TSIN ultimately agreed to voluntarily waive rescission as a possible

9 in these proceedings. See PSOF at ¶ 11 (and Exhibit E thereto); Daggett Supp. Aff., ¶ 2 10 (Exhibit A hereto). 11 12 13 14 15 16 10. In February, 2005, the TSIN shareholders called an annual meeting for the 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.

purpose of electing a new Board of Directors. See PSOF at ¶ 3 (and Exhibit B thereto). 11. On the day this new Board was elected, it was charged with conducting an

17 analysis as to whether the prosecution of the underlying litigation should continue. See 18 PSOF at ¶ 4 (and Exhibit C thereto). 19 20 21 22 23 24 which Board controlled the company and the underlying litigation. See PSOF at ¶ 5 (and Exhibit D thereto). 13. As with the work performed in the TSIN Bankrutpcy matter, the 12. Once this occurred, the former Board (which had been a strong proponent

of the prosecution of the underlying case), sought a determination in Nevada as to

25 determination of this issue would have a controlling effect on the resolution of the 26
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1 underlying case, and this was the predominant reason for Plaintiffs' involvement in this 2 matter. Daggett Supp. Aff., ¶ 3 (Exhibit A). 3 4 5 6 7 8 and necessary costs to that defense. See PSOF at ¶ 6 (and Daggett Affidavit, ¶ 21 (Exhibit E thereto)). 15. Steven P. Oman, P.C. ("Oman") served, at all relevant times and through 14. Like in the TSIN Bankruptcy proceedings, the costs incurred in

connection with Plaintiffs' active involvement in the Nevada action were reasonable

9 the present, as Alanco's outside general counsel. See PSOF at ¶ 7 (and Oman Affidavit, 10 ¶ 3 (Exhibit L thereto)). 11 12 13 14 15 16 relevant documents, and in developing litigation strategy. See Oman billing records, attached to PSOF as Exhibit L. 17. The declaration page that the Court has already found to be applicable to 16. The Oman billing records definitively show that he took a vital role in

preparing pleadings and discovery, preparing for depositions, reviewing and analyzing

17 this analysis sets a retention of $100,000, not $150,000, for claims other than securities 18 claims. Declaration Page, attached hereto as Exhibit C. 19 20 21 22 23 19. On January 18, 2006, the newly-assigned Judge in the underlying case 18. 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.

denied TSIN's motion to keep the case on the inactive calendar. January 18, 2006

24 Minute Entry of the Honorable Peter Swann, attached hereto as Exhibit D. 25 26
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20.

The underlying case involved extensive discovery, including hundreds of

2 pages of deposition testimony. Daggett Supp. Aff., ¶ 4. 3 4 5 6 7 8 9 10 11 12 13 14 15 ORIGINAL electronically filed this 2nd 16 day of February, 2006: 17 Clerk of the Court Sandra Day O'Connor U.S. Courthouse 18 401 West Washington Street Phoenix, Arizona 85003 19 20 Copy of the foregoing hand-delivered this 2nd day of February, 2006, to: 21 Honorable David Campbell 22 Sandra Day O'Connor U.S. Courthouse 401 W. Washington Street 23 Phoenix, AZ 85003 24 /s/ Anne Finch 25 26
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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. RESPECTFULLY SUBMITTED this 2nd day of February, 2006. STINSON MORRISON HECKER LLP

By: /s/ Christian C.M. Beams T. Michael Daggett Christian C. M. Beams 1850 N. Central Avenue, Suite 2100 Phoenix, Arizona 85004-4584 Attorneys for Plaintiff Alanco Technologies, Inc.

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