Free Response in Opposition 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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DEFENDANT GREG HANCOCK'S RESPONSE TO PLAINTIFFS' MOTION IN LIMINE TO EXCLUDE TESTIMONY AND ARGUMENT RE ROBERT SARVER

Defendants.
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Meritage asserts that an appearance by Robert Sarver should be precluded because
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of late disclosure, that he "does not have any knowledge relevant to the facts of the dispute
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between the parties," and that it is defendant's desire to "harass" Mr. Sarver and "create a
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side show to distract from the facts at issue."
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By way of background, the Court should be aware that Mr. Sarver has been a
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Meritage Director since 1996, is the Chairman and CEO of Western Alliance
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Bancorporation, a director of Skywest Airlines, and managing partner of the Phoenix Suns.
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He is an accountant by background, was Chairman and CEO of California Bank & Trust
23

from 1998 to 2001, and founded the National Bank of Arizona. In 1990 Mr. Sarver co24

founded and currently serves as the executive director of Southwest Value Partners and
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Affiliates, a real estate investment company.
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Case 2:04-cv-00384-ROS

Document 529

Filed 09/04/2007

Page 1 of 8

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1. Late Disclosure Defendant did not intend to call Mr. Sarver until Meritage and Mr. Sarver made various filings with the SEC in August, 2007. Obviously, neither the activity reflected in the documents nor the filings occurred until after the close of discovery. 2. Pertinent Facts Prior to August 29, 2007, Mr. Sarver beneficially owned 741,900 shares of Meritage stock, which he'd acquired at various prices much higher than the price for which it is now trading ($16.84 at this writing). On August 30, 2007, Meritage filed SEC Form 4, STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES, which reveals that on August 29, 2007, Mr. Sarver obtained another 15,100 shares at prices ranging from $15.97 to $15.99. Just a few weeks earlier, on August 7, 2007, Southwest Value Partners Fund XIV, LP-MTH (controlled by Mr. Sarver) filed SEC Form SC 13D. The SEC document pertains to Meritage stock owned or controlled by Mr. Sarver, including 735,000 shares held by Southwest Value Partners XIV, LP; 470,000 shares held by the Robert Sarver Trust, Robert Sarver sole trustee; 4,400 shares held by the Eva Lauren Hilton Trust, Robert Sarver Trustee; 4,400 shares held by the Shari Rachel Hilton Trust, Robert Sarver sole trustee; various holdings by Sarver's wife and child; and 13,500 share options held by Mr. Sarver. The filing was made by Mr. Sarver, entities controlled by him, and entities from which Southwest Value Partners has borrowed ("Reporting Persons"), together owning 2,235,300 shares, approximately 8.5% of the outstanding common stock shares of Meritage. The "Purpose of Transaction" disclosed on the form is the following: The Reporting Persons intend to monitor the business and affairs of [Meritage] closely and to periodically review their investment in the Common Stock. Depending upon the results of such activities and such other facts and circumstances then existing, including evaluation of the business and prospects of [Meritage] * * * If any one of the Reporting Persons subsequently makes any additional investments or acquisitions of Common Stock or other [Meritage] securities, such investments or acquisitions may be undertaken with a view to acquiring a greater or
2 Case 2:04-cv-00384-ROS Document 529 Filed 09/04/2007 Page 2 of 8

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controlling interest (possibly even a majority interest) in [Meritage] and a commensurately greater influence with respect to the business activities and affairs of [Meritage].1 The form also states: "Mr. Sarver currently holds fully vested options to acquire 13,500 shares of Common Stock at various prices between $31 per share and $54 per share; however, Mr. Sarver has no current intention to exercise these options, which expire at various times beginning in 2009." 3. Relevancy Since no reference whatever to this lawsuit can be found in any of the Meritage corporate documents, nor anywhere disclosed in SEC filings, publicity releases or annual reports, defendant believes the inference to be drawn is that the lawsuit is a vendetta against the Hancock brothers conducted by Steve Hilton and his lawyers at Meritage shareholders' considerable expense, including nearly $200,000 in "expert" expense, and over $1 million in attorneys' fees. Similarly, since Meritage has never revealed its damage claims (either the original $44 million or the new variations) in its corporate documents or public filings, it either suffered no loss at all or violated the Sarbanes-Oxley law. In either case, it is unworthy of belief.2 Mr. Sarver's testimony could put the matter to rest. As a pivotal and prominent member of Meritage's Board of Directors, and the beneficial owner of its second largest stock holding, he should be aware of this litigation and the amount of loss purportedly suffered. Clearly, such knowledge could affect the investment decisions of both he and his "Reporting Persons" group. Because of his background, Mr. Sarver is surely familiar with

Perhaps in response, on August 21, 2007, Meritage filed SEC Form 8-K, reporting corporate changes in its bylaws, whereby Meritage, inter alia, opted out of a Maryland law which could give insurgent shareholders the ability to force a shareholders' meeting under circumstances not contemplated by the Bylaws. In fact, all of Meritage's 10-K's from 2004 through 2006 have disclosed only "routine legal proceedings incidental to our business," and "any potential losses related to these matters are not considered probable.
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the reporting requirements of Sarbanes-Oxley. Yet, Meritage's lawyers state, Mr. Sarver "does not have any knowledge relevant to the facts of the dispute between the parties." If not, why not? Alternatively, and unlikely in view of Mr. Sarver's background and reputation, he has been a participant in Meritage's public cover-up. In either event, his testimony would be extremely persuasive to the jury. The jury should also know whether or not Mr. Sarver's approximately quarter million dollar stock purchase in August, 2007, the virtual eve of trial, was made despite or without knowledge of this lawsuit. Either way, the answer is extremely relevant. RESPECTFULLY SUBMITTED this 4th day of September, 2007.

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 4th day of September, 2007, and copy 18 thereof mailed to the Honorable Judge Silver.
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/s/ Robert M. Frisbee

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
1 5 6 7 8 9 10 11

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,
13

DEFENDANT GREG HANCOCK'S RESPONSE TO PLAINTIFFS' MOTION IN LIMINE TO EXCLUDE TESTIMONY AND ARGUMENT RE ROBERT SARVER

Defendants.
14 15

Meritage asserts that an appearance by Robert Sarver should be precluded because
16

of late disclosure, that he "does not have any knowledge relevant to the facts of the dispute
17

between the parties," and that it is defendant's desire to "harass" Mr. Sarver and "create a
18

side show to distract from the facts at issue."
19

By way of background, the Court should be aware that Mr. Sarver has been a
20

Meritage Director since 1996, is the Chairman and CEO of Western Alliance
21

Bancorporation, a director of Skywest Airlines, and managing partner of the Phoenix Suns.
22

He is an accountant by background, was Chairman and CEO of California Bank & Trust
23

from 1998 to 2001, and founded the National Bank of Arizona. In 1990 Mr. Sarver co24

founded and currently serves as the executive director of Southwest Value Partners and
25

Affiliates, a real estate investment company.
26

Case 2:04-cv-00384-ROS

Document 529

Filed 09/04/2007

Page 5 of 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

1. Late Disclosure Defendant did not intend to call Mr. Sarver until Meritage and Mr. Sarver made various filings with the SEC in August, 2007. Obviously, neither the activity reflected in the documents nor the filings occurred until after the close of discovery. 2. Pertinent Facts Prior to August 29, 2007, Mr. Sarver beneficially owned 741,900 shares of Meritage stock, which he'd acquired at various prices much higher than the price for which it is now trading ($16.84 at this writing). On August 30, 2007, Meritage filed SEC Form 4, STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES, which reveals that on August 29, 2007, Mr. Sarver obtained another 15,100 shares at prices ranging from $15.97 to $15.99. Just a few weeks earlier, on August 7, 2007, Southwest Value Partners Fund XIV, LP-MTH (controlled by Mr. Sarver) filed SEC Form SC 13D. The SEC document pertains to Meritage stock owned or controlled by Mr. Sarver, including 735,000 shares held by Southwest Value Partners XIV, LP; 470,000 shares held by the Robert Sarver Trust, Robert Sarver sole trustee; 4,400 shares held by the Eva Lauren Hilton Trust, Robert Sarver Trustee; 4,400 shares held by the Shari Rachel Hilton Trust, Robert Sarver sole trustee; various holdings by Sarver's wife and child; and 13,500 share options held by Mr. Sarver. The filing was made by Mr. Sarver, entities controlled by him, and entities from which Southwest Value Partners has borrowed ("Reporting Persons"), together owning 2,235,300 shares, approximately 8.5% of the outstanding common stock shares of Meritage. The "Purpose of Transaction" disclosed on the form is the following: The Reporting Persons intend to monitor the business and affairs of [Meritage] closely and to periodically review their investment in the Common Stock. Depending upon the results of such activities and such other facts and circumstances then existing, including evaluation of the business and prospects of [Meritage] * * * If any one of the Reporting Persons subsequently makes any additional investments or acquisitions of Common Stock or other [Meritage] securities, such investments or acquisitions may be undertaken with a view to acquiring a greater or
2 Case 2:04-cv-00384-ROS Document 529 Filed 09/04/2007 Page 6 of 8

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controlling interest (possibly even a majority interest) in [Meritage] and a commensurately greater influence with respect to the business activities and affairs of [Meritage].1 The form also states: "Mr. Sarver currently holds fully vested options to acquire 13,500 shares of Common Stock at various prices between $31 per share and $54 per share; however, Mr. Sarver has no current intention to exercise these options, which expire at various times beginning in 2009." 3. Relevancy Since no reference whatever to this lawsuit can be found in any of the Meritage corporate documents, nor anywhere disclosed in SEC filings, publicity releases or annual reports, defendant believes the inference to be drawn is that the lawsuit is a vendetta against the Hancock brothers conducted by Steve Hilton and his lawyers at Meritage shareholders' considerable expense, including nearly $200,000 in "expert" expense, and over $1 million in attorneys' fees. Similarly, since Meritage has never revealed its damage claims (either the original $44 million or the new variations) in its corporate documents or public filings, it either suffered no loss at all or violated the Sarbanes-Oxley law. In either case, it is unworthy of belief.2 Mr. Sarver's testimony could put the matter to rest. As a pivotal and prominent member of Meritage's Board of Directors, and the beneficial owner of its second largest stock holding, he should be aware of this litigation and the amount of loss purportedly suffered. Clearly, such knowledge could affect the investment decisions of both he and his "Reporting Persons" group. Because of his background, Mr. Sarver is surely familiar with

Perhaps in response, on August 21, 2007, Meritage filed SEC Form 8-K, reporting corporate changes in its bylaws, whereby Meritage, inter alia, opted out of a Maryland law which could give insurgent shareholders the ability to force a shareholders' meeting under circumstances not contemplated by the Bylaws. In fact, all of Meritage's 10-K's from 2004 through 2006 have disclosed only "routine legal proceedings incidental to our business," and "any potential losses related to these matters are not considered probable.
2

1

3 Case 2:04-cv-00384-ROS Document 529 Filed 09/04/2007 Page 7 of 8

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the reporting requirements of Sarbanes-Oxley. Yet, Meritage's lawyers state, Mr. Sarver "does not have any knowledge relevant to the facts of the dispute between the parties." If not, why not? Alternatively, and unlikely in view of Mr. Sarver's background and reputation, he has been a participant in Meritage's public cover-up. In either event, his testimony would be extremely persuasive to the jury. The jury should also know whether or not Mr. Sarver's approximately quarter million dollar stock purchase in August, 2007, the virtual eve of trial, was made despite or without knowledge of this lawsuit. Either way, the answer is extremely relevant. RESPECTFULLY SUBMITTED this 4th day of September, 2007.

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 4th day of September, 2007, and copy 18 thereof mailed to the Honorable Judge Silver.
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/s/ Robert M. Frisbee