Free Response to Motion - District Court of Arizona - Arizona

Robert M. Frisbee #018779 FRISBEE & BOSTOCK, PLC 2 1747 Morten Ave. E. Suite 108 Phoenix, Arizona 85020 3 Phone: (602) 354-3689 [email protected] 4 Attorneys for Defendant Greg Hancock
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA MERITAGE CORPORATION, a Maryland corporation Plaintiff, vs. ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

NO. CIV 04-0384-PHX-ROS

GREG HANCOCK, an individual; RICK HANCOCK, an individual; and 12 RICK HANCOCK HOMES, L.L.C., an Arizona Corporation,
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RESPONSE TO MERITAGE MOTION IN LIMINE RE EILEEN CARLSON

Defendants.
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I. FACTS
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The Declaration of Eileen Carlson is attached hereto as Exhibit A. As she says, she
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went to the Meritage stockholders meeting on May 15, 2008 because her 800 shares of
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Meritage stock had lost ninety percent of their value. She also wanted to know why, in view
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of that decline, Meritage was spending seven figures of shareholder money for lawyers and
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experts on a lawsuit against her former boss, Greg Hancock. She had been unable to find
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any reference to the suit or any reasons for it in any Meritage public filings, press releases
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or corporate documents.
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After calling the lawsuit "a private matter" and giving vague answers to other
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questions, CEO Steven Hilton referred Ms. Carlson to Tim White, Vice President and
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General Counsel. Apart from gratuitously defaming Greg Hancock - "he's crazy, and he's
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Case 2:04-cv-00384-ROS

Document 566

Filed 06/16/2008

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a liar" - White told Carlson that Meritage "will probably get nothing" from this lawsuit; that Meritage wanted to get out of the lawsuit, but "Greg won't let us;" that the lawsuit is a private matter; and that Meritage had won all motions and hearings in the suit so far "because the judge hates Greg Hancock."1 II. ARGUMENT A. The Statements Made By White Are Admissions of A Party Under Rule 801(d)(2)(A) a statement of a party is defined as "not hearsay" and may be used against the party. As stated in pertinent part in 29A Am.Jur.2d Evidence, § 760, p124: Admissions by a party-opponent are admissible as substantive evidence * * * or for impeachment purposes. A party-opponent's declaration is admissible for any inference which the trial court can reasonably draw from the statement regarding any issues involved in the case. * * * A statement by a party may qualify as an admission regardless of -- the circumstances in which it was made. -- the concession of the party that he or she made it. -- general requirements applicable to exceptions to the hearsay rule, such as foundation, trustworthiness, or personal knowledge. -- the nature of the statement as being too conclusory, in the form of an opinion, or as not being a statement against interest. In Arizona an admission by a party opponent or its agent is admissible regardless of

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its reliability, Waller v. Arizona Department of Public Safety, 170 Ariz. 591, 826 P.2d 1217
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(App. 1991), citing Leone v. Precision Plumbing and Heating of Southern Arizona, Inc.,
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121 Ariz. 514, 591 P.2d 1002 (App. 1979).
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Without offering authority or rationale, Meritage baldly asserts that statements made
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in 2008 cannot be relevant to events occurring in 2001, 2004 or 2005. Why not? If a
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witness to a 2005 auto accident is discovered today, would her statement about it be
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irrelevant? Hardly.
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Although Eileen Carlson's testimony will be used "solely for impeachment," and need not have been disclosed [Rule 26(a)(3)], an election was made to disclose the material.
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Moreover, White's statements do address whether the facts alleged by Meritage in this case are more or less probable, and as admissions, are admissible "for any inference which the trail court can reasonably draw from the statement regarding any issues involved in the case." Just a few of the many inferences which could be drawn are as follows: 1. Admission: the lawsuit is a private matter. Inferences: ! The lawsuit is an improper vendetta by Hilton, Seay and White against Hancock unknowingly paid for shareholders. It is being kept secret from them by those executives because if its expense and lack of merit were known there would be dire consequences to the three. ! Meritage is hiding this lawsuit from the public and oversight agencies for reasons known only to it. Its 2007 SEC Form 10-K, and all 10-K's from 2004 forward, contain essentially the following statement:
Item 3. Legal Proceedings We are involved in various routine legal and regulatory proceedings, including claims or litigation alleging construction defects. In general, the proceedings are incidental to our business, and some are covered by insurance. With respect to the majority of pending litigation matters, our ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to these matters is not considered probable. At December 31, 2007, we had approximately $2.9 million in accrued legal expenses and settlement costs reserved for losses related to litigation and asserted claims where our ultimate exposure is considered probable and the potential loss can be reasonably estimated. Most of these matters relate to correction of home construction defects, foundation issues and general customer claims. We believe that none of these matters will have a material adverse impact upon our consolidated financial condition, results of operation or cash flows.

It is beyond silly for Meritage to suggest that this lawsuit is "routine" or "in general
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incidental to our business."
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! Hilton, Seay and White are hiding the details and lack of merit of this lawsuit from Meritage's Board of Directors. White prepares Quarterly Summaries of Legal Activities

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describing law suits, potential legal actions and other settlements involving "Legal Expenses
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of $25,000 and over." For example, on the September 30, 2005 report (Trial Exhibit 560)
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there are 10 such matters, but not this lawsuit. On the February 13, 2006 report (Trial Exhibit 561), described as "Material Litigation" report, there are 21 litigation or claim matters mentioned, but not this lawsuit. The same is true of all other company litigation summaries. ! The real motivation for this lawsuit ­ rather than any merit ­ was stated in Meritage lawyer/former Snell & Wilmer partner Steven Pidgeon's deposition in an allied case on November 6, 2007 (pp. 123,124): Q. But when you specifically said in [in your February 23, 2004 letter] that Mr. Titus wasn't going to like the alternative if he didn't get [Greg and Rick Hancock] to back down, what did you mean by that? That we were going to crush them in court.

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The Pidgeon letter is dated the day before this lawsuit was filed, a time when Rick Hancock owned no property on which to build, and hadn't even yet established an office. 2. Admission: Meritage will probably get nothing out of this lawsuit.2 Possible inference: Hancock is judgment proof. More likely inferences: ! See inferences regarding preceding admission. ! The case is so bereft of merit that Meritage "probably" will not prevail, and White has no expectation of prevailing unless Grant Woods weaves a silk purse out of a sow's ear. Meritage's entire case rests on innuendo, as there is not a single item of direct proof that Hancock failed to perform his duties, breached his employment contract, assisted Rick Hancock in any way, or otherwise breached any obligation to Meritage. ! Meritage's damage claims have been concocted from whole cloth with the assistance of the fertile imagination of a highly paid "expert," and since it cannot prove any damages, it will not get any.

This statement is equivalent to a person claiming to be injured in an accident admitting to a treating doctor that she's really not injured at all.

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B. Ms. Carlson's Testimony Is Both Relevant And Admissible Defendant has no quibble with Meritage's definition of relevancy - evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence. Meritage asserts that White's statement that Meritage wants to get out of the lawsuit, but "Greg won't let us," refers to settlement discussions and is therefore barred by Fed.R.Evid. 408(a). White never used the word "settlement," nor that an offer was made. The clear import of the statement is to indict Greg Hancock's supposed intransigence rather than telling Ms. Carlson the truth - that as plaintiff, Meritage could dismiss the case at any time. The statement, taken along with that stating that Meritage doesn't believe it'll get anything, is yet another admission that its suit has no merit. And such an admission, even if it had referred to settlement negotiations, is the type of admission that would be admissible. See, e.g., 15 A.L.R.3d 13, § 10[a]; State v. McLemore, 387 So.2d 827 (Ala. 1980). III. CONCLUSION Imperious demands from Mr. White to Hancock's counsel3 do not constitute settlement offers. Contrary to Meritage's assertion, statements against interest made by corporate counsel to an inquiring shareholder should be every bit as admissible as statements made by a disaffected spouse in connection with a hotly disputed divorce case.4 Ms. Carlson's testimony should be admitted, if offered, for impeachment purposes.

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Meritage's statement about "walk-away offers" and $15million demands is as baseless as this entire lawsuit. White demanded the right to "walk away" without consequence, coupled with the statement that if Hancock didn't comply then Meritage would "bury" Hancock. There followed immediately the warranty litigation and a malpractice claim by Meritage against Titus, Bruckner & Berry.
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See the Court's recent ruling regarding the deposition testimony of Linda Hancock.

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RESPECTFULLY SUBMITTED this 16th day of June, 2008.

FRISBEE & BOSTOCK, PLC /s/ Robert M. Frisbee Robert M. Frisbee Attorney for Greg Hancock

The foregoing Response to Motion in Limine was electronically filed and served this 16th day of June, 2008, and copy 9 thereof mailed to the Honorable Judge Silver.
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/s/ Robert M. Frisbee