. Adam Lang (#022545)
2 SNELL & WILMER r.i..i·.
One Arizona Center
3 400 East Van Buren Street
Phoenix, AZ 85004-2202
4 Telephone: (602) 382-6000 _
Facsimile: (602) 382-6070
5 [email protected]
[email protected] _
6 Attorneys for Plaintrffand Counterdefendant
` Ivieritage Corporation and Third Party Defendants
7 Steve Hilton and John Landon
3 IN THE UNITED STATES DISTRICT COURT
9 FOR THE DISTRICT OF ARIZONA
[O Ivieritage Homes Corporation, a I\/laryland I
Corporation. formerly d/In/a Meritage Corporation, Case No. CV-O4-0384-PHX—ROS
ll llancock-MTI I Builders. Inc.. an Arizona
corporation, Hancock—IviTI-I Communities. Inc., an SECOND DECLARATION OF
I.) Arizona corporation. and currently d/b/a I\/leritage SCOTT KEEFFE
_ · ' Homes Construction. Inc., an Arizona eorporation.l
5 ·-; H and Meritage Ilomes ol`/\rizorra. Inc., air /\rizona ‘
LE ._ ‘ corporation. *
r Q-y,_¢1 I4 (Assigned to the
eg I’Iaintit`I`s. I Honorable Roslyn O. Silver)
` - 2; ij V. l ‘
T5 I I
C7:) t l0 Ricky I.ee Hancock and Brenda Hancock, l ’
` husband and wife; Gregory S. Hancock and _
IV Linda Hancock, husband and wife, Rick
_ Hancock Homes L.L.C., an Arizona limited I ,
I8 liability company; RLH Development, L.L.C., i
( an Arizona limited liability company; and J2H2, '
l ) L.l..C`., an Arizona limited liability company,
20 Defendants.
2l Scott Keeffe states as follows: ·
I
22 I. I am at least l8 years ofage, and I make this Declaration in the above-
23 captioned matter. This Declaration supplements my original Declaration and my
24 deposition testimony to address issues not specifically raised by the Hancocks` attorneys
25 during that deposition. I
26 2. The HancocI
8
28
ase 2:tD4—ev-00384-ROS Document 435-13 Filed 02/23/2007 Page 6 of 47 I
( Case 2:04—ev—00384—FtOS Document 515-11 Filed 08/20/2007 . Page 1 of 4
I its control during Greg Hancock’s tenure as the Division president was the accelerated
' 2 absorption of the limited supply of finished lots. Because ofthe lack of sufficient stores
3 and product to spread the impact ofthe high demand for Meritage homes in the Phoenix
4 metropolitan area in 2003, 2004 and 2005 and sales and closing goals given to the
. 5 Phoenix Division from the corporate office, l\/leritage was forced to sell a greater
6 percentage ofthe limited number offinished lots under its control as opposed to making
7 the same numberofsales over a larger supply of product and more stores. Meritage was
8 therefore unable to take advantage ofthe tremendous run-up in home prices during this
9 period, reducing net proHts substantially. The lack ofinventory and stores resulted in
IO lower overall net revenue per house sold as well as fewer overall sales than Meritage
I I should have been able to have made had it had adequate supply of finished lots under its
. I2 control. ln other words, Meritage sold fewer homes and the homes it did sellwere at
Q I3 lower prices than they shotrld have been, and Meritage therefore sustained lower profits.
F I4 _ 9. Basedlon my experience at Meritage and in the homebuilding industry
_ I5 generally. I\/leritage continues to feel the negative impact on its profits caused by Hancock
E --; ltr Communities Division's failure to maintain and increase its supply offinished lots under
I I7 its control during Greg Hancocl<’s tenure through at least parts of2000. I
I8 I0. Given market changes in the Phoenix Market that commenced in the fourth
I9 quarter of2005 and continued into 2006, it appears that the opportunities for profits in
20 2003, 2004 and 2005 that were lost due to Hancock Communities Division`s failure to
. 2l maintain and increase its supply of finished lots under its control during Greg Hancocl<’s
22 tenure will not be sub_iec`t to any recoupment from an increase ofsales in the future. The
/(/td? te-·#....- . . . .. »
. perl rncrcasesrn development costs alonc can never be rccouped.
24 I I. U ln addition, the Hancocks’ attorneys asked some questions about customer
25 confusion between "Rick Hancock Homes" and "Hancock Communities.“ Based on my
26 experience at Hancock Homes, Hancock Communities and the Hancock Communities
‘ 27 Division ofMeritage and in the homebuilding industry generally, I believe that a
28 significant percentage of customers seeking a "Hancock Communities" home or a
ase 2:04-ov-00384-ROS Document 435--13 Filed 02/23/2007 Page 7 of 47
Case 2:04-cv—00384-ROS Document 515-11 Filed 08/20/2007 Page 2 of 4
~ I Communities Division. My responsibilities, in 2002 and 2003, did not include evaluating
i 2 whether Greg Hancock, the president ofthe entire Hancock Communities Division, was
3 maintaining adequate capacity ofraw land and supply offinished lots under Meritage’s
4 control. i
5 3. In December 2003, Meritage promoted me to vice president of sales. My
6 duties then changed substantially as did my general scope of responsibility. In particular,
_ 7 for the first time while in the employ of Meritage, I had responsibilities that involved me
8 in tactical and operational decisions Division-wide.
9 [ 4. As part of my Division-wide responsibilities, I learned over the next year or
IO so that thc Hancock Communities Division (I) lacked sufficient finished lots under its
I I control as of2002 and 2003 and (2) lacked sufficient finished lots under its control
, I2 coming on line or the pipeline for years 2004 and 2005 to meet closing u_nit numbers for
jg gl I3 the Phoenix Division given as the goal from Meritage Corporate. Mb §&UiLOpM£-AT.
F I4 5. It typically takes two or more years for the entitlementyofraw land after its
_ I5 acquisition to ttrrn that land into finished lots suitable to start vertical (house) constructioni
g I6 ti. Based on discussions with Greg Hancock and my experience in the Hancock
it I7 Communities Division, my understanding is that one ofGreg Hancock`s primary
I8 responsibilities as Hancock Communities Division president for Meritage from May 3 I,
IO 200I to March 2, 2003, wottld incltide the acquisition ofraw land and/or finished lots for
20 the ptrrposc ofmaintaining and increasing Meritage’s Hancock Communities Division’s
2I sttpply of finished lots trnder its control in order to maintain and grow its market share. I
22 have never seen, however. Greg Hancock’s Employment Agreement.
23 7. Based on my experience at Mcritage and in the homebuilding industry
24 generally, the impact on Meritage and its net profits ofthe Hancock Communities
25 Division’s f`aiIure to maintain and increase its sttpply offinished lots ttnder its control
26 during Greg Hancock’s tenure as the Division president had multiple effects.
27 8. One way Meritage’s profits were negatively impacted by Hancock
28 Communities Division`s failure to maintain and increase its supply of finished lots under
ase 2:04-cv-00384-ROS Document 435--18 Filed 02/23/2007 Page 8 of 47 g
Case 2:04-cv—00384—FtOS Document 515-11 Filed 08/20/2007 Page 3 of 4
I "Hancock" home based on the reputation, advertising and/or goodwill of"l·lancoek
` l 2 Communities" or the "Hancock" name were likely confused by the similar—looking "Rick
3 Hancock Homes" sign near the entry into the Sundance Community and the similarity of
4 the two names and went to "Riek Hancock Homes" believing that it was "Hancock
5 Communities." Some ofthe customers confused would include new home buyers moving
6 from California and other states to the Phoenix metropolitan area. {M-ria;
7 I2. l fui1her believe that some ofthese potential customers/\would have
8 otherwise purchased from l\/leritage in the ftittl$0e¢·bttf will no longer do so because ofthe
9 confusion between "Rick Hancock Homes" and "Hancock Communities?
. IO U I3. Greg Hancock never informed me of his activities with respectlto Olympic
I I Properties. Olympic Development. West Wind, Riata West. Kings Ranch and Fox Hunt.
I2 ‘ Pursuant to the Rules ofCivil Procedure, l declare under the penalty ofpeijury and
E I3 under penalty of possible sanctions, that thc foregoing is true and correct. Executed on l
F I4 June I4, 2006. f ‘ Q
i5 __ fj A
gg IG Scott Keellc
I7
is I
I9
20 V
2I
22
23
24
25 ‘
26 I p
27
V 28
ase 2:04-cv-00384-ROS Document 435-131 - .Filed 02/23/2007 Page 9 of 47 .
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