Free Reply in Support of Motion - District Court of Arizona - Arizona

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Dan W. Goldfine (#018788) Richard G. Erickson (#019066) SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6000 Facsimile: (602) 382-6070 [email protected] [email protected] Attorneys for Plaintiffs and Grant Woods, Esq. (#006106) GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Telephone: (602) 258-2599 Facsimile: (602) 258-5070 [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants

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Snell & Wilmer L.L.P.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, et al., Case No. CV-04-0384-PHX-ROS Plaintiffs, v. Greg Hancock, et al., Defendants. AND RELATED COUNTERCLAIMS AND THIRD PARTY CLAIMS (Assigned to the Honorable Roslyn O. Silver) PLAINTIFFS' REPLY TO ITS MOTION IN LIMINE RE TESTIMONY OF EILEEN CARLSON

Defendant's Response to Meritage's Motion in Limine Regarding the Testimony of Eileen Carlson employs an unsigned declaration and a red-herring argument, ignores his burden under Federal Rule of Evidence 104(b), wrongfully discloses Meritage's attorneyclient privilege, and argues rank and erroneous speculation in a failed attempt to meet his burden under Federal Rule of Evidence 104(b). For these reasons, Meritage's Motion in
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Limine should be granted. . MS. CARLSON'S DECLARATION IS UNSIGNED Defendant attached to his Response an unsigned declaration from Ms. Carlson. Furthermore, the unsigned declaration on its face demonstrates that Defendant1 schemed with Ms. Carlson to manufacture this purported evidence. Unsigned declarations are inadmissible. Fed. R. Evid. 401, 402 and 801; see Cohen v. Timbers Co., 2006 U.S. Dist. LEXIS 5916 (N.D. Cal. Jan. 30, 2006) ("Exhibit J, the unsigned declaration of a witness, is hearsay and lacks an indicia of reliability."). The unsigned declaration and the entirety of the Response, which is based on the unsigned declaration, should be stricken. . DEFENDANT'S HEARSAY ARGUMENT IS A RED-HERRING Defendant primarily argues that Ms. Carlson's future testimony is not hearsay. Response at 2:6-20. However, Meritage never made such an argument in its Motion in Limine, making Defendant's primary argument a red-herring and demonstrating that the entire Response is groundless. . DEFENDANT IMPROPERLY USES ATTORNEY-CLIENT PRIVILEGE COMMUNICATION AND RANK AND ERRONEOUS SPECULATION TO ATTEMPT TO MEET HIS BURDEN UNDER RULE 104(B) Defendant does not meet his burden to establish the admissibility of the entirety of Ms. Carlson's testimony. See Fed. R. Evid. 104(b) (proponent has burden establishing admissibility); 402 (only relevant evidence is admissible). In gist, Defendant wrongfully employs two inadvertently disclosed and inapposite reports entitled "Material Litigation and Miscellaneous Legal Department Status Report as of February 13, 2006" and "Meritage Homes Phoenix Division Quarterly Summary of Legal Activities"2 and then engages in erroneous rank speculation about what might not be other similarly-privileged The purported declaration does not expressly implicate Defendant's counsel in the scheme to contact employees of a represented party in violation of governing Rules of Professional Conduct. See Local Rule 83.2 (incorporating Arizona Rule of Professional Conduct 4.2, which prohibits contact with represented parties about the subject of the representation). Fortunately, Defendant did not attach these two privileged documents to the Response. Meritage has moved to file them under seal and for in camera review by this Court.
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

and work product documents in a failed attempt to meet his burden as the proponent of Ms. Carlson's testimony. Response at 3:7 to 4:4. First, Defendant improperly used before this Court attorney-client privileged communications despite Defendant's counsel's actual knowledge of the privileged nature. This issue is addressed separately in Meritage's Motion in Limine to Bar Defendant's Use of Attorney-Client Privileged Communications filed contemporaneously herewith and incorporated herein. To the extent that Defendant expressly or impliedly references the two privileged documents in his Response, the references should be stricken. See Response at 3:22 to 4:4. Second, Defendant's characterization of the two Reports ­ even if the Court were to accept Defendant's improper use ­ is inapposite. These are two Division Reports and do not reflect Corporate litigation, which the Hancock litigation was. The two Division Reports necessarily do not address (nor even mention) any of management's discussions of the Hancock litigation with either the Board of Directors or the Audit Committee. Consequently, the absence of reference simply does not permit the inference that Defendant uses the two reports to establish.3 Fed. R. Evid. 104(b). Defendant's argument is like using second grade attendance records to prove that my third grade son was not at school on a particular day. Third, Defendant's argument about concealment from the Board and improper motives is rank speculation. Response at 3:1 to 4:10. Defendant has no idea and points to no evidence of what Meritage's management and its counsel discussed with the Board and the Audit Committee. Fed. R. Evid. 104(b). Rather, he makes-up suppositions about facts that simply did not happen. Likewise, Defendant's reliance on statements that Meritage will "crush" Defendant Hancock in Court is misplaced. Putting bravado aside, such statements reflect nothing Defendant seems to be attempting to goad Meritage into revealing other attorney-client privileged communications. Meritage will not do so. Should the Court seek review of additional Reports and other documents contradicting Defendant, however, Meritage is prepared to provide them to the Court under seal for in camera review.
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

more than that Meritage's attorneys' warning to Defendant Hancock: that he should consider settling the matter. Meritage's attorneys warned him because they believed strongly in the merits of their case and that a jury verdict exposes defendant Hancock to $50 million in damages. It does not mean under the Rules of Evidence that Meritage concealed anything from shareholders. For each of these reasons separately and combined, Defendant's argument that the entirety of Ms. Carlson's testimony is admissible because it somehow explains that Meritage's management concealed the Hancock litigation and why it was concealed is wrong. It is unfounded supposition built on flawed and unfounded supposition, which is inadmissible. inadmissible. IV. DEFENDANT'S RESPONSE IS AN IMPROPER MOTION FOR RECONSIDERATION Defendant reargues the shareholder disclosure issue, which amounts to an improper motion for reconsideration. Response at 3:11-22. On April 1, 2008, this Court entered an order barring Defendant from introducing testimony and making argument that Meritage failed to comply with its SEC disclosure obligations to shareholders. Order at 2:3-5 (April 1, 2008) (#548). Local Rule 7.2(g) requires motions for reconsideration to be filed no later than 10 days after the order for which reconsideration is sought, which in this instance required filing by no later than April 17, 2008 giving all credit for weekends. Defendant's June 16, 2008 Response is therefore two months too late. Local Rule 7.2(g). V. DEFENDANT IGNORES RULE 408 In the Motion, Meritage argued that Federal Rule of Evidence 408 barred Ms. Carlson's testimony with respect to Meritage's "attempt[s] to compromise the claim" and related arguments of counsel. Defendant ignored that argument in the entirety, and an Order in Limine barring Defendant from introducing any testimony or making argument Fed. R. Evid. 104(b). Accordingly, Ms. Carlson's testimony is

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

related to Meritage's attempts to compromise the claim should be entered.4 RESPECTFULLY SUBMITTED this 26th day of June, 2008. SNELL & WILMER L.L.P.

By s/ Dan W. Goldfine Dan W. Goldfine Richard G. Erickson Snell & Wilmer, L.L.P. One Arizona Center 400 E. Van Buren Street Phoenix, Arizona 85004-2202 Attorneys for Meritage and

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Snell & Wilmer L.L.P.

By s/ Grant Woods Grant Woods, Esq. GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Attorneys for Meritage

CERTIFICATE OF SERVICE I hereby certify that on June 26th, 2008, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to all CM/ECF registrants.

In this respect, Defendant states that Meritage is asserting that he is "judgment proof." Response at 4:14. It is unclear what this matters in the context of the Motion in Limine. Defendant nevertheless has not disclosed any such evidence and holds interest in tens of millions of dollars of land and currently owns and operates a homebuilding company selling out of four subdivisions.
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