Free Response in Opposition to 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) Adam Lang (#022545) 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 Counterdefendants and Third Party Defendants 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, a Maryland Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation, Plaintiffs, v. Ricky Lee Hancock and Brenda Hancock, husband and wife; Gregory S. Hancock and Linda Hancock, husband and wife, Rick Hancock Homes L.L.C., an Arizona limited liability company; RLH Development, L.L.C., an Arizona limited liability company; and J2H2, L.L.C., an Arizona limited liability company, Defendants.

Case No. CV-04-0384-PHX-ROS PLAINTIFFS' RESPONSE IN OPPOSITION TO DEFENDANTS RICK AND BRENDA HANCOCK, RICK HANCOCK HOMES, INC., AND RLH DEVELOPMENT, INC.'S RENEWED MOTION FOR SUMMARY JUDGMENT

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Document 436

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Rick and Brenda Hancock, Defendants, Counter-Claimants, and Third Party Plaintiffs, v. Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona Corporation, Hancock-MTH Communities, Inc., an Arizona Corporation, an Arizona Corporation; and currently d/b/a Meritage Homes Construction, Inc., an Arizona Corporation, and Meritage Homes of Arizona, Inc., an Arizona Corporation; Steven J. Hilton and Suzanne Hilton, husband and wife; John R. Landon and Debi Landon, husband and wife; Scott Keeffe and Vicky Keeffe, husband and wife; Roger Zetah and Jane Doe Zetah, husband and wife; and James Arneson and Zane Arneson, husband and wife, Third Party Defendants. Plaintiffs Meritage Homes Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., Hancock-MTH Communities, Inc., currently d/b/a Meritage Homes Construction, Inc., and Meritage Homes of Arizona, Inc. (collectively, "Meritage") hereby respond to defendants Rick and Brenda Hancock, Rick Hancock Homes, Inc., and RLH Development, Inc.'s (collectively "Defendants'") Renewed Motion for Summary Judgment ("Motion"). This Response is supported by the following Memorandum of Points and Authorities, Objections to Defendants' Statement of Facts ("Objections"), and a Controverting Statement of Facts ("CSOF"), including exhibits attached thereto. Meritage also incorporates by reference to the Statement of Facts in support of its Motion for Summary Judgment and its Objections and Controverting Statement of Facts in response to Greg Hancock's Motion for Summary Judgment. A review of the Defendants' two-year old motion for summary judgment with their instant Motion reveals that Defendants simply cut and paste from the earlier Motion. The instant Motion contains the same flaws, misstatements of law, and inaccurate statements of evidentiary record. Defendants make no effort to address these arguments and obvious

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flaws. Instead, Defendants have filed a Motion, in which many arguments are seriously lacking in a well-founded factual and/or legal basis. Defendants' Motion wastes both the parties' and this Court's time and resources. MEMORANDUM OF POINTS AND AUTHORITIES I. STANDARD OF REVIEW In order to prevail on their Motion, Defendants must show both that "there is no genuine issue as to any material fact" and that the Defendants are "entitled to judgment as a matter of law" based on such undisputed facts. Fed. R. Civ. P. 56(b) and (c). A "genuine issue" exists simply where the evidence before the court, taken in the light most favorable to Meritage, is of such a nature that a reasonable fact-finder could return a verdict in favor of Meritage. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-52 (1986). In moving for summary judgment, Defendants bear the burden of demonstrating the absence of a genuine issue of fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). II. ARGUMENT A. Meritage Has Not Abandoned "Hancock" Name

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Snell & Wilmer L.L.P.

Defendants argue that abandonment occurs when a party expresses the intent to abandon the name in the future. (See Motion at 3:17-20.) That is not the law. Abandonment, as defined by the Lanham Act, occurs when "use has been discontinued with intent not to resume such use." 15 U.S.C. § 1127 (emphasis added). Thus, to prove abandonment, Defendants must establish that there is no question of fact that both Meritage discontinued its use of the "Hancock" name and Meritage freely expressed intent not to use the "Hancock" name in the future. Id.; see Money Store v. Harriscorp Fin., Inc., 689 F.2d 666, 675-76 (7th Cir. 1982) (abandonment requires proof of both elements, and evidence of expressions of intent to abandon are insufficient as a matter of law). Defendants fail on both elements.

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1.

Since the Lawsuit Commenced, Meritage Has Sold More than $100 Million of "Hancock" Homes

Meritage continues to use the "Hancock" name today ­ even Defendant Rick Hancock conceded on December 20, 2006. (See Rick Hancock Statement of Facts ("RH SOF"), at ¶ 17) (detailing Meritage's continued use of the "Hancock" name throughout this lawsuit and the fact that it still has "Hancock Communities series" homes for sale in the Phoenix area). Since July 2004 about when defendants commenced operations at Rick Hancock Homes, Meritage has sold more than $117 million in homes under the name "Hancock" throughout metropolitan Phoenix. (See Objections at ¶¶ 27 and 28; CSOF at ¶ 7.) Such use is right in line with the Hancocks' sales of homes under the name "Hancock" during the years before their sale of the Hancock Communities business to Meritage when the Hancock Communities only sold homes in the Buckeye area. (See Objections at ¶¶ 27 and 28.) Further, Meritage is still selling the Hancock Communities Series Homes at Rancho Bella Vista today. (See Objections at ¶ 97; CSOF at ¶¶ 2, 4, and 5.) 2. Meritage Has Never Stated that It Was Abandoning the "Hancock" Name

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Meritage's Press Release that announced the rebranding program expressly stated that Meritage intends to continue the use of the "Hancock" name. (See Objections at ¶¶ 23, 83, and 88; CSOF at ¶¶ 6 and 9.) There is a material difference between expressing the intent to rebrand a corporation's business unit's identity and expressing the intent to abandon the use of the name in its entirety with no intent to continue to use the name or resume its use in the future. See 15 U.S.C. § 1127 (making it clear that the cease of use has to be with the intent not to resume use); Money Store, 689 F.2d at 675-76 (statements of intent to stop using in the future are not material). Here, but for isolated emails discussing what to do in the future, there is simply no evidence that Meritage expressed the intent to abandon the "Hancock" name. Indeed, the evidence is clearly to the contrary. (See, e.g., CSOF at ¶¶ 2, 4, 5, 6 and 7.)

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3.

Defendants' Reliance on IntraWest and Exxon Is Misplaced

Defendants' reliance on IntraWest Finan. Corp. v. W. Nat'l Bank, 610 F. Supp. 950, 958 (D. Colo. 1985) and Exxon Corp. v. Humble Exploration Co., Inc., 695 F.2d 96, 102 (5th Cir. 1983) is misplaced. IntraWest involved a situation, unlike here, where none of the bank's advertisements announcing its name change "apprised the public of any continued use of the mark" that they formerly used ­ "First National." 610 F. Supp. at 958. Further, IntraWest's only continued use of the name "First National" began belatedly after it stopped using "First National," which has never happened here. Id. at 958. The Exxon holding is also not helpful to the Defendants on the instant facts. Exxon's use of the mark, HUMBLE, was limited to sales of only "$9.28 in 1973, $.0 in 1974, $140.12 in 1975 and $42.05 in 1976." Exxon, 695 F.2d at 96. Exxon's only other use of the HUMBLE mark during that same time was limited to the placement of the mark on a few invoices. See id. In contrast, Meritage used the "Hancock" name on its most popular homes in two separate neighborhoods, in advertisements, and has sold $117 million dollars worth of sales under the Hancock mark since the beginning of the License Agreement period. (See Objections at ¶ 27; CSOF at ¶¶ 3-6.) Meritage's extensive use of the Hancock mark is wholly distinguishable from Exxon's ten dollars of use of the HUMBLE mark. Indeed, it is distinguishable by a magnitude of 10 million. 4. The September 8, 2003 Email Does Not Prove Abandonment

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Defendants argue that a September 8, 2003 email establishes abandonment. (See Motion at 3:16-19.) This Court has already ruled that the email does not have the meaning the Hancocks seek to ascribe to it. See Order at 8:13 (Aug. 22, 2006) ("(aside from two e-mails dated September 8, 2003 and December 9, 2003), which cannot by themselves establish a breach, Greg Hancock presents no evidence that Meritage breached the licensing agreement prior to the time the action was filed"). The September 8, 2003 email is nothing more than one corporate officer suggesting to another corporate officer a way in which to use a license that would terminate in May
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2007. (See Objections at ¶ 82.) Steve Hilton, the author of the email, testified that "[Meritage] only [has] the license to the name for six years, so we need to create a smooth transition from the Hancock Communities name to the Meritage Homes name. . . . [we] [c]an't just flip the switch." (See id.) (emphasis added)). As can be easily discerned from the email, Hilton was simply concerned with what to do in the future when the license for the Hancock name ended and how to avoid wasting advertising dollars. Accordingly, to make their argument that this email amounts to abandonment as a matter of law, Defendants ignore (1) the law that requires as an element of abandonment that the licensee, in fact, stops using the name, see e.g., 15 U.S.C. § 1127; (2) the evidentiary record that Meritage continued to use the "Hancock" name; (3) the law that requires an expression of immediate cessation with the intent not to resume the use, id.; and (4) the evidentiary record that Meritage expressed its intent to continue to use the "Hancock" name.1 5. Meritage's Rebranding Program Did Not Amount to Abandonment

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Snell & Wilmer L.L.P.

Defendants argue that the rebranding program amounts to abandonment. (See Motion at 3:17-20.) Again, Defendants selectively ignore the fact that, even as part of the rebranding program, Meritage clearly expressed that it planned on continuing and, in fact, continued to use the "Hancock" name to sell homes. (See Objections at ¶¶ 17, 27 and 97; CSOF at ¶¶ 1-7.) Even assuming that Meritage had not continued to use the "Hancock" name, the rebranding program is immaterial. It is undisputed that the rebranding program was implemented in July 2004. (See Greg Hancock Counterclaim at ¶¶ 43, 46, 48, 61-63; see also CSOF at ¶ 9.) This is six months after Greg Hancock wrote Meritage purporting The same analysis applies to Arneson's statement at the Christmas party. (See Motion at 3:20-23.) It should be noted that Defendants simply misstate what Arneson stated because, according to their own employee Diane Haas, Arneson simply stated that Meritage "intended to phase out its use `Hancock' name." (See Objections at ¶ 27.) Defendants also make misleading factual assertions with respect to vendors and subcontractors because their opinions are formed based on statements made months after Greg Hancock wrote purporting to terminate the license agreement and Rick Hancock Homes went into business. (See, e.g., Objections at ¶ 28.) Even if the factual assertions were not misleading, not a single one of them supports the proposition that Meritage expressed the intent to abandon the use of the "Hancock" name with no intent to resume its use.
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to immediately terminate the License Agreement and threatening to sue Meritage if it did not remove the "Hancock" name from its advertising. (See CSOF at ¶ 10.) B. Disclaimers 1. The Use of Disclaimers Is Not a Defense to a Lanham Act Violation

Defendants argue that their use of disclaimers is the "preferred remedy" and precludes a finding of a Lanham Act violation. (See Motion at 4:16 to 6:13.) This argument fails for several reasons. First, Defendants' argument is circular. Use of an agreed-upon disclaimer is a "remedy" ­ even according to the Defendants (see Motion at 4:16-17) ­ only after there is a finding of liability. Defendants' use of disclaimers amounts, therefore, to a tacit admission of liability ­ that the name Rick Hancock Homes is confusingly similar to Hancock Communities. Second, courts only employ a disclaimer as a remedy when the products at issue differ from each other and when the defendant can establish as a matter of law that the disclaimer removes the risk of confusion. See, e.g., E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1289 (9th Cir. 1992). This is because the use of a disclaimer is only meaningful when the junior user's products ("Rick Hancock Homes") are unrelated to the senior user' products ("Hancock Communities" homes or "Hancock Homes"). E. & J. Gallo, 967 F.2d at 1289. In E. & J. Gallo, the junior user's wholesale cheese market differed greatly from the senior user's retail wine market. As a result, the junior user (Joseph Gallo) could only use his name/mark on wholesale packages of cheese, and the court prohibited Joseph Gallo from using the words "Gallo" or "Joseph Gallo" as a trademark for retail cheese or in audible advertisements ­ despite the presence of disclaimers. Id. Here, Defendants used a confusingly similar name, Rick Hancock Homes, in the same market for the same product in which Meritage is using the marks "Hancock Homes" and "Hancock Communities." (See CSOF at ¶ 5.) Defendants advertised its confusingly similar name in the same ways that Meritage advertises its Hancock marks.
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

(See id.) In other words, Defendants and Meritage are both marketing the same type of goods and services--namely single family homes, to the same consumers--single family homebuyers. (See id.) In this light, a disclaimer is meaningless and not an appropriate remedy. See, e.g., E. & J. Gallo, 967 F.2d at 1289. 2. Defendants' Disclaimers Did Not Prevent Confusion

The disclaimers did not prevent actual confusion. For example, Mario Atkins, a sergeant for the United States Marine Corps, testified that in 2004, he was interested in purchasing a Hancock Communities Series home in the Sundance/Buckeye Area. (See Objections at ¶¶ 77 and 101; CSOF at ¶¶ 11-15.) While he was driving around the Sundance area, Sgt. Atkins noted a billboard for Rick Hancock Homes and believed it was affiliated "with the Meritage/Hancock subdivision at Sundance and to be a Hancock Home in a Hancock Community built by Meritage. The billboard was just across the I-10 from a Hancock Communities development and on the way to Hancock Communities for any potential buyer coming from Phoenix. The `Hancock' name was emphasized on the Rick Hancock Homes billboard in a large font. I do not remember anything on the billboard that told me that Rick Hancock Homes was not affiliated with Meritage/Hancock." (See id.) Additionally, Sgt. Atkins noted that the "coloring and lettering on the `Rick Hancock Homes' billboard was very similar to that of the "Hancock Communities" billboards" and that he "thought that the Rick Hancock Homes development was related to Hancock Communities." (See id.) As a result, Sgt. Atkins set up an appointment with Rick Hancock Homes and entered into a lot hold guaranteeing him the option to purchase a Rick Hancock Home in Buckeye. (See id.; see also CSOF at ¶ 19 (similar actual confusion by a subcontractor).) 3. Defendants Frequently Did Not Use a Disclaimer

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Defendant Rick Hancock conceded that defendants' employees do not use the disclaimer on all uses of the "Hancock" mark with respect to marketing new homes in the Sundance community. (See CSOF at ¶ 21.) Moreover, despite orchestrated and contrived shenanigans at a deposition, Defendants do not use disclaimers when their employees
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answer their main phone number. (See Objections at ¶ 33; CSOF at ¶¶ 21 and 22.) Even in the few circumstances it is used, the so-called "disclaimer" only disclaims an affiliation with "Meritage Homes/Hancock Communities;" it is silent as to any affiliation with "Hancock Homes," a mark for which Meritage is also an exclusive licensee. (See CSOF at ¶ 23.) In fact, by failing to disclaim the association with "Hancock Homes," the nature of the disclaimer misleads the reader into believing that "Hancock Homes" or a Hancock home by Meritage is the same as Rick Hancock Homes ­ a tactic and a strategy that are plainly intentional on Defendants' part. (See CSOF at ¶ 53 (Defendants' goal is to capitalize on the goodwill associated with the "Hancock" mark with respect to new homes in the Phoenix market.).) 4. The Name "Rick Hancock Homes" is Confusingly Similar to "Hancock Communities" and "Hancock Homes"

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants' assertion (see Motion at 8:3-14) that there is no evidence of consumer confusion under the Lanham Act is without basis. As set forth above, II.B.2, there is evidence of actual confusion. Moreover, Defendants presume a legal requirement ­ evidence of actual confusion causing loss sales ­ that does not exist for an unfair competition claim under the Lanham Act. To sustain a claim for unfair competition, Meritage needs only to prove that there is a likelihood of confusion; it does not need to prove that there is already actual confusion. E. & J. Gallo, 967 F.2d 1280, 1290-92 (9th Cir. 1992) (citing Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1360 n.10 (9th Cir. 1985)). That confusion need not last long to be actionable; even initial interest confusion (that is, confusion as the consumer commences her search for homebuilders) suffices to establish liability. See, e.g., Brookfield Comm'ns v. West Coast Ent't Corp., 174 F.3d 1036, 1062 (9th Cir. 1999); Grotrian, Helfferich, Schulz, Th. Steinweg Nachf v. Steinway & Sons, 523 F.2d 1331, 1342 (2d Cir. 1975). First, in addition to the evidence of actual confusion (see Response at Sections II.B.2, supra), the likelihood of confusion between "Rick Hancock Homes" and "Hancock
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Homes" or "Hancock Communities" is obvious. Defendant Rick Hancock obtained a license from his brother to use, and assisted him in doing so, a confusingly similar name, Rick Hancock Homes, in the same market (indeed, across the street) for the same product (i.e., type of home) in which Meritage is using the marks "Hancock Homes" and "Hancock Communities." (See CSOF at ¶¶ 89-91 and 93-96.) Rick Hancock Homes advertised its confusingly similar name in the same ways that Meritage advertises its marks. (See CSOF at ¶¶89-91.) In other words, Rick Hancock Homes and Meritage are both marketing the same type of goods and services--namely single family homes, to the same consumers--single family homebuyers. (See id.) Defendant Rick Hancock acknowledged that the builder's name and reputation are key to making sales in subdivisions like Sundance, testifying that "it takes years to earn the reputation, and in the snap of a finger, you can lose the reputation." (See CSOF at ¶¶ 93-96.) Second, Defendant Rick Hancock's goal was to take advantage of the Hancock name and its reputation, as built by his father, brother, and Meritage and purchased by Meritage to use for six years. (See id.) He conceded that the purpose of Meritage continuing to advertise the Hancock name following its $80+ million purchase of the Hancock Communities was to maintain the name's presence as being associated with a high quality builder in the "Valley." (See CSOF at ¶ 94.) He also testified that he wanted to use the Hancock name because of its prominence and reputation as a homebuilder for 50 years in the Valley ­ the exact same reason Meritage paid tens of millions (including $800,000 to Rick Hancock personally) for the right to use the name exclusively for six years. (See CSOF at ¶¶ 93-95.) Finally, he conceded that Meritage did nothing to block him from building homes under any name other than the Hancock name. (See CSOF at ¶ 96.) Third, experienced homebuilders testified that, in their experience, the Defendants' use of "Rick Hancock Homes" was confusing to consumers. (See Objections at ¶ 101; CSOF at ¶ 25.) Defendants' own witness conceded that Rick Hancock Homes is using the "Hancock" mark to sell identical homes as Meritage sells in the Sundance community
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under the name "Hancock Communities" and to piggy back off of the goodwill and reputation of the Hancock name. (See CSOF at ¶¶ 24 and 26.) Scott Keeffe, Greg Hancock's college roommate, is currently the Vice-President of Sales & Marketing for D.R. Horton but was Meritage's Vice-President of Sales during the relevant period. He testified that in his "20 years in the home selling business I believe some home buyers/subcontractors were likely confused between `Rick Hancock Homes' and `Hancock Communities[.]'" (See Objections at ¶¶ 64, 77, and 101; CSOF at ¶ 16.) Larry Seay, Meritage's Chief Financial Officer agreed that in many different settings Defendants' conduct was confusing to consumers and specifically stated: "They [Rick Hancock and Greg Hancock] also are using the Hancock Homes name in e-mail addresses that could be confused with the Hancock Communities name or Hancock Homes name that we have license agreements to. [They registered] the www.hancockhomesaz.com website in order to start a website. So those -- the use of those two names we believe would be -- could be very confusing to consumers in shopping for homes." (See Objections at ¶¶ 55-57 and 101; CSOF at ¶¶ 5, 17, 20, 23, 25, 27-31, 52, 54, and 69) Defendants' illegal conduct and the resulting confusion caused harm to Meritage and millions in damages. (See CSOF at ¶¶ 74-88.) The views of experience builders make particular sense since much of the harm is at the initial impression stage. The doctrine of initial interest confusion controls in the Ninth Circuit. See, e.g., Dr. Seuss Enterprises, L.P. v. Penguin Books USA Inc., 109 F.3d 1394, 1405 (9th Cir. 1997); Brookfield Comm., Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1063-64 (9th Cir. 1999); Nissan Motor Co. v. Nissan Comp. Corp., 378 F.3d 1002 (9th Cir. 2004). "Infringement can be based upon confusion that creates initial customer interest, even though no actual sale is finally completed as a result of the confusion." 4 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION at § 23:26 (4th ed. 2006). Confusion has been found to occur where a junior mark user attempts to capitalize on the consumers' initial interest confusion in thinking that the junior mark user is related to the senior mark user. Nissan Motor Co., 378 F.3d at 1019. Here, Defendants
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engage in precisely the type of "bait" and "switch" in an attempt to impact the "buying decisions of consumers in the market for the goods, effectively allowing [defendants] to get [their] foot in the door by confusing consumers." Dorr-Oliver Inc. v. Fluid-Quip Inc., 94 F.3d 376, 382 (7th Cir. 1996.) Whether consumers actually purchase Rick Hancock Homes over Meritage's products is irrelevant for liability. Id. 5. The Other Uses of the "Hancock" Name Are Immaterial

Despite Defendants' assertion to the contrary (see Motion at 7:1-11), the nature and extent of the use of similar marks by third-parties (including third-parties in Canada and Europe) is not one of the Sleekcraft factors used for determining likelihood of confusion in an unfair competition case in the Ninth Circuit. See, e.g., AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979). Accordingly, Defendants' evidence of third party use of the "Hancock" name is irrelevant and immaterial.2 Neither Meritage, defendant Greg Hancock when he owned the Hancock Communities mark or when he was President of Meritage's Hancock Communities division, nor defendant Rick Hancock when he was the President of one of the licensors of the Hancock name or Vice President of Meritage's Hancock Communities division have precluded any of the third-parties identified by Defendants from using the "Hancock" name ­ because they are not likely to cause the confusion Rick Hancock Homes has. (See RH SOF at ¶¶ 15, 16, 21, and 22; Objections at ¶¶ 37-48.) For example, unlike Rick Hancock Homes, the third-party users do not involve prior owners and management of Hancock Homes or Hancock Communities.3 (See CSOF at ¶ 28.) Unlike Rick Hancock At this point in their brief, Defendants rely on a number of trademark dilution cases, which is not alleged here. Defendants also mysteriously cite Power Beverages, Inc. v. Perrier Group of Amer., 269 F.3d 114, 124 (2nd Cir. 2001) for an admissibility issue with respect to an unidentified email. This is odd given the evidence of actual confusion and the likelihood of confusion set forth above, II.B.2 & B.3, and not persuasive on any salient issue. In addition, Defendants' reliance on Columbia Univ. v. Columbia/HCA Healthcare, 964 F.Supp. 733, 746 (S.D.N.Y. 1977) is misplaced, since in that case there was no evidence from any customer or person with knowledge of actual confusion and the two services at issue did not overlap. Meritage recognizes that there could be confusion with the Mark Hancock Development Corporation if this corporation was not doing business as Camelot Homes. (See CSOF at ¶ 28.)
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Homes, the third-party goods and services are not in close proximity or related to those of Meritage. (See CSOF at ¶ 29.) Unlike Rick Hancock Homes, the third-party marks are dissimilar in sight, sound, and meaning. (See CSOF at ¶ 30) Unlike Rick Hancock Homes, the third-parties use different marketing channels for their goods and services. (See CSOF at ¶ 31.) Unlike Defendants' intent in choosing the mark Rick Hancock Homes, the third parties lacked intent to confuse and free-ride on Meritage's goodwill and reputation in selecting their similar marks. (See CSOF at ¶¶ 24-26.) Defendants, on the other hand, have used the "Hancock" name to sell $45 million of virtually identical homes to what Hancock Communities was selling right across the street. (See CSOF at ¶¶ 32 and 88.) 6. The Anti-Cyber Squatting Act Does Not Render the Lanham Act a Nullity

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At one point, Defendants essentially argue that the Anti-Cyber Squatting Act renders the Lanham Act a nullity. (See Motion at 11:10 to 12:20.) The Defendants miscite a number of cases. One example explains how so. Defendants cite an arbitration decision in Springsteen v. Burgar, WIPO Case No. D2000-1532 (2000), for the proposition that the good faith use of his name is allowed by law. In Springsteen, the arbitrator, however, ruled that "it is hard to infer from the conduct of [Burgar (not Springsteen)] in this case an intent for commercial gain, to misleadingly divert consumers." It then ruled that Burgar was entitled to use the Springsteen name despite the fact that it was not his name, and was the plaintiff's surname. Here, the roles are reversed. More importantly, unlike Burgar, there is evidence that Defendants acted in bad faith and that Defendant Rick Hancock's intent was and remains to steal 50 years of goodwill for which Meritage paid tens of millions. (See Objections at ¶ 80; CSOF at ¶¶ 24, 53, 88, 89, and 93-95.) See Nissan Motor Co. v. Nissan Comp. Co., 378 F.3d 1002, 1018-19 (9th Cir. 2004) (there is no special internet protection to surnames). 7. The Hancock Name Still Has Public Awareness

Snell & Wilmer L.L.P.

Defendants' argument that there is no public awareness of the "Hancock" name in homebuilding is perplexing and contrary to Defendant Rick Hancock's own testimony and
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other evidence including Defendant Greg Hancock's recent actions. (See Motion at 7:1216.) Rick Hancock testified that he wanted to use the Hancock name because of fifty years of goodwill in homebuilding in the Phoenix area that the name represents. (See CSOF at ¶¶ 24, 93 and 95.) Meritage continued to use the name "Hancock" name in more $117 million in sales of homes. (See CSOF at ¶ 7.) Likewise, Defendants have used the "Hancock" name in selling $45 million in sales of similar homes right across the street from Meritage. (See CSOF at ¶¶ 32 and 88.) In fact, defendant Greg Hancock has recently stated ­ to no one's surprise who has been involved in the litigation ­ that he is commencing operations of Hancock Communities in June 2007. (See CSOF at ¶ 92.) C. The Rebranding Effort Did Not Breach the License Agreement

Defendants argue that because the transition to rebrand Hancock Communities to Meritage began in July 2004, Meritage violated the License Agreement, and its claims therefore fail as a matter of law. (See Motion at 7:17-8:2.) As set forth in Plaintiffs' Motion for Summary Judgment at 5:25 to 9:11 (Dec. 15, 2006), Defendants have made this argument many times in the past, and this Court should now rule to dispose of Defendants baseless argument. Defendants' argument fails as a matter of law for the following reasons that are detailed in the Plaintiffs' Motion for Summary Judgment (5:25 to 9:11): · The License Agreement does not require Meritage to use the Hancock name or to use a certain amount; · The terms "derogate" and "detract," in the context of trademarks do not require a certain quantum of use of the Hancock name; · Even if the terms "derogate" and "detract" were to require a certain quantum of use of the Hancock name, Meritage sold more than $110 million of Hancock homes; such use is not "derogatory" or "detracting;" and · Meritage could not have breached the License Agreement after Greg Hancock's February 13, 2004 purported termination letter or after Defendants commenced using the name "Rick Hancock Homes."

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D.

Unfair Competition Under the Lanham Act 1. The Fact that Rick Hancock Wants to Use His Surname Is Immaterial

Defendants misstate Ninth Circuit law for the proposition that there is an absolute right of a person to use his or her surname in connection with a business and that that purported right trumps senior uses of that name. (See Motion at 9:3-5.) Ninth Circuit law bars the use of a person's name when that person seeks to use it on similar products, or on dissimilar products in the same chain of commerce. See E. & J. Gallo, 967 F.2d at 128889 (barring Joseph Gallo from using the "Gallo" mark on retail cheese or in audible advertisements). Defendants' reliance on Avery Dennison v. Sumpton, 189 F.3d 868, 877 (9th Cir. 1999), is misplaced. Avery Dennison holds that special protections to surnames exist only when there are "non-competing" uses unlike the use here.4 "[A] man has no absolute right to use his own name, even honestly, as the name of his merchandise or his business." John R. Thompson Co. v. Holloway, 366 F.2d 108 (5th Cir. 1966). "One must use his own name honestly and not as a means of pirating the goodwill and reputation of a business rival; and where he cannot use his own name without inevitably representing his goods as those of another he may be enjoined from using his name in connection with his business." Hoyt Heater Co. v. Hoyt, 68 Cal. App. 2d 523, 527 (1945). In addition, where the Ninth Circuit has found that there has been an attempt to confuse the public or bad faith, it has enjoined the junior user regardless of who the user was. See, e.g., E. & J. Gallo, 967 F.2d 1288; Robi v. Five Platters, Inc., 918 F.2d 1439, 1445 (9th Cir. 1990); Friend v. H. A. Friend & Co., 416 F.2d 526, 531 (9th Cir. 1969), cert. denied, 397 U.S. 914 (1970). Here, Defendants attempt to confuse the public and act in bad faith. First, defendant Rick Hancock testified that his goal was to usurp the Furthermore, defendant Rick Hancock admitted that he needed to obtain his brother's permission to use "Rick Hancock Homes," which effectively means that his right to use his surname is not absolute and that the argument is nothing more than a red herring. (See CSOF at ¶ 72.) If the law permitted defendant Rick Hancock to use his name, why did defendant Greg Hancock have to assign his rights to "Hancock Communities" and "Hancock Homes" to his brother?
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goodwill that Meritage purchased as part of its $88 million acquisition of the "Hancock Communities" and "Hancock Homes" business and trademarks. (See CSOF at ¶¶ 24, 53, 89, and 93-95.) That goal is only achieved if consumers confuse "Rick Hancock Homes" with "Hancock Communities" or "Hancock Homes" and the Defendants thereby free-ride on goodwill owned by Meritage. Defendants' bad faith can also be inferred from Defendants' conduct in violation of promises to this Court. On March 10, 2004, this Court issued an Order to maintain the status quo, referring to "Defendant Rick Hancock's statement in his Response that he has only registered the name `Hancock Family Builders' and has not held himself out as Hancock Family Builders to customers or creditors." (See CSOF at ¶¶ 97 and 98.) Despite this Order and defendant Rick Hancock's promises to the Court otherwise, he intentionally took further actions to mislead the public by registering an even more confusingly similar name, Rick Hancock Homes, and conducting business under that name. (See CSOF at ¶¶ 35, 97 and 98.) Lastly, the fact that Defendants intend to go into business as "Hancock Communities" in a few months is further evidence of bad faith. (See CSOF at ¶ 92.) 2. No Special Internet Protection to Surnames

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Snell & Wilmer L.L.P.

There is also no special or absolute protection for internet uses of confusingly similar names, even surnames. See, e.g., Nissan Motor, 378 F.3d at 1018-19. The Ninth Circuit has held that, with regard to the likelihood of confusion in the internet context, "the three most important [Sleekcraft] factors are the similarity of the marks, the relatedness of the goods or services, and the parties' simultaneous use of the internet in marketing." Id.. Here, those factors as noted in Sections II.B.1-4, supra, clearly establish a strong likelihood of confusion in this instance. 3. Defendants Misstate the Federal Claim; It is an Unfair Competition Claim

For at least the tenth time in this lawsuit, Defendants misconstrue Meritage's claim under the Lanham Act as trademark infringement rather than unfair competition and then
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argue that Meritage as a licensee has no standing. (See Motion at 12:23-27.) This Court has already rejected this argument as part of its ruling with respect to subject matter jurisdiction. (See Order at 8: n. 6, 8:1-2, and 8: 18-23 (Aug. 22, 2006).) Meritage will therefore not belabor this point here. 4. Meritage Is the Licensee and Has Standing a. There Was No Breach

Defendants offer no evidence that the License Agreement was in fact terminated. For example, the cited evidence of Greg Hancock's own affidavit submitted in support of this Motion does not even assert that he revoked the License Agreement. (See Declaration of Greg Hancock, Exhibit 2 to RH SOF, generally.) Instead, the evidence suggests that the License Agreement is still in effect. The license agreement permits termination only upon certain breaches of the license agreement or the MTA ­ none of which Defendants have asserted; let alone, supported by evidence as required by Rule 56. (See Objections at ¶¶ 12 and 13; CSOF at ¶¶ 38 and 99.) The only breach ever suggested in this lawsuit is the purported failure of Meritage to pay Greg Hancock the earn-out. (See Statement of Facts in Support of Greg Hancock's Motion for Summary Judgment ("GH SOF") at ¶¶ 19 and 20; Objections at ¶¶ 102; CSOF at ¶¶ 39, 40, and 99.) Notwithstanding this suggestion, Larry Seay testified that under the terms of the MTA and Greg Hancock's employment and management agreements, Meritage did not owe Greg Hancock any earn-out monies. (See CSOF at ¶¶ 39, 40 and 99.) Similarly, Greg Hancock's own expert concedes that during the period of time that Greg Hancock worked for the company, Meritage fully paid the earn-outs he was owed. (See Objections at ¶ 102; CSOF at ¶¶ 42 and 99.) Most importantly, this Court has dismissed Greg Hancock's claims based on the failure to pay earn-outs. (See Order at 5 (Mar. 31, 2006); Order at 10 (Aug. 22, 2006).) b. All Meritage Plaintiffs Have Standing

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Snell & Wilmer L.L.P.

The evidence points favorably towards all plaintiffs having the right to sue. Both Hancock-MTH Builders, Inc. and Hancock-MTH Communities, Inc. ­ the expressed
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licensees ­ have subsequently merged into Meritage Homes. (See CSOF at ¶¶ 41, 43, and 44) Accordingly, after the merger, Meritage Homes became the expressed licensee by operation of law.5 Even without the merger, Meritage Homes has standing to sue. Throughout the documents, Meritage Homes is referred to as an intended beneficiary pursuant to the License Agreement or "all related Agreements." (See CSOF at ¶ 45.) For example, the Agreement of Purchase and Sale of Assets ("Assets Agreement") that the MTA incorporates specifically states: Greg Hancock and Sellers [HC Builders, L.L.C. and Hancock Communities, L.L.C.] hereby grant to Buyers [Meritage, Hancock-MTH Builders, Inc. and Hancock-MTH Communities, Inc.] an exclusive license to use the names "Hancock Homes" and "Hancock Communities," and all variations of or derivations from such names and any and all logos used in connection therewith for a period of six years from the date of the Closing. (See CSOF at ¶ 46.) Further, the License Agreement specifically provides standing. It states: "[t]he parties to this transaction intend that any and all subsidiaries of Licensee or affiliated business entities which are involved with Licensee . . . are to be bound by this Agreement. Licensee agrees that any such entities shall execute such documentation as Licensor shall require in order to evidence the fact that they are bound by this Agreement." (See CSOF at ¶ 41) The MTA, as well as the other agreements incorporated into the MTA, evidence that Meritage Homes is an additional party to the License Agreement. (See CSOF at ¶ 46) c. Defendants Impliedly Licensed Meritage

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Snell & Wilmer L.L.P.

Even if Meritage Homes was not expressly an intended licensee, the Defendants actually directed Meritage as officers for Meritage's Hancock Communities division (president and vice-president) to use the licensed name. (See CSOF at ¶¶ 47-51.) "An Although Meritage Homes has standing by itself to sue Defendants in this matter, the complaint was amended long ago to include the other plaintiffs in this matter and the original expressed licensees thereby curing any possible defect in standing. Defendants are aware of this amendment, did not oppose it, and Defendants' counsel's failure to abandon this argument in the Motion is perplexing to say the least.
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implied license in fact `arises out of the objective conduct of the parties, which a reasonable person would regard as indicating that an agreement has been reached.'" Villanova Univ. v. Villanova Alumni Found., 123 F. Supp. 2d 293, 307 (E.D. Pa. 2000) (quoting Birthright v. Birthright, Inc., 827 F. Supp. 1114, 1134 (D.N.J. 1993)). In terms of implied licenses for trademarks, "permission to use the trademarks coupled with the exercise of reasonable control over such use can lead to the conclusion that an implied license existed between the parties, even where no contract was made." Villanova, 123 F. Supp. 2d at 307; see also United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134 (3rd Cir. 1981) (affirming finding that a license existed when state and local chapters affiliated with the United States Jaycees were permitted during the term of affiliation to use the Jaycees trade and service marks). E. State Common Law Claims for Unfair Competition and Trademark Infringement

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Snell & Wilmer L.L.P.

Defendants make a series of arguments (one sentence in length) that misstate the law with respect to Meritage's common law claims for unfair competition and trademark infringement. 1. Defendants' Conduct with Respect to Rick Hancock Homes Amounts to Palming Off

The purpose of the common law doctrine of unfair competition is to "prevent business conduct that is `contrary to honest practice in industrial or commercial matters.'" Fairway Constr. Inc. v. Ahern, 193 Ariz. 122, 124, 970 P.2d 954, 956 (1998), quoting American Life Insur. Co. v. Heritage Life Insur. Col, 494 F.2d 3, 14 (5th Cir. 1974). Defendants' use of the Hancock mark, for which Meritage has expended $88 million as a result of both its acquisition of the Hancock businesses and its exclusive use of the Hancock mark, in a confusingly similar manner for the sale of similar homes right across the street from Meritage gives Defendants an unfair competitive advantage. (See CSOF at ¶¶ 16, 17, 24, 53, 88-91, and 93-95); see also, Fairway Constr., 193 Ariz. at 124, 970 P.2d at 956. Even one of Defendants' own witnesses concedes that Rick Hancock Homes is using the "Hancock" mark to sell identical homes as Meritage sells in the Sundance
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community under the name "Hancock Communities." (See CSOF at ¶ 26.) This is precisely the type of palming-off that Arizona law prohibits. See, e.g., Fairway Constr., 193 Ariz. at 124, 970 P.2d at 956. 2. Defendants Misconstrue Larry Seay's Testimony

In a pattern that they repeat several times over the last three years, Defendants misconstrue Seay's testimony in response to a completely conclusory question taken at the outset of the complaint. (See Motion at 13:4-9.) Notwithstanding these efforts, Seay testified that that the Defendants were employing a confusingly similar mark in the sale of similar homes in the same location ­ an element of both causes of action. (See CSOF at ¶¶ 5, 17, 18.) Defendants cannot select one witness, misstate his testimony, ignore all the evidence in the record to the contrary (see Objections at ¶¶ 55-57, 63-69, 77-79, and 102; CSOF at ¶¶ 5, 16-31, 35, 53-56, 69-77, 89-91, and 93-96), and then argue in good faith that there is no question of fact. 3. Defendants' Federal Preemption Argument Is Baseless

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Snell & Wilmer L.L.P.

Citing the Supremacy Clause and Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995), Defendants also argue that Meritage's common law unfair competition and trademark infringement claims are preempted by federal law. (See Motion at 13:9-16.) Freightliner, a case dealing with rules and regulations established by the National Highway Traffic Safety Administration, simply restates that preemption occurs when Congress intended to occupy the entire field or when state law is in conflict with federal law. Freightliner, 514 U.S. at 287. Defendants make neither showing. Indeed, current Arizona case law is to the contrary. See, e.g., Fairway Construction, 193 Ariz. at 124, 970 P.2d at 956. F. The Defendants Breached Their Fiduciary Duties

Defendants again abuse the testimony of a single witness taken out of context to make a conclusory argument not supported by Arizona law. (See Motion at 13:18-27.) Arizona law recognizes that corporate officers owe fiduciary duties to their companies. See, e.g., Nordin v. Kaldenbaugh, 7 Ariz. App. 9, 435 P.2d 740 (1967). These fiduciary
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duties extend to former officers. See, e.g., E. J. McKernan Co. v. Gregory, 252 Ill. App. 3d 514, 531, 623 N.E.2d 981 (1993). As an officer to Meritage, defendant Rick Hancock owed Meritage the duty of protecting Meritage's goodwill and trademarks. Defendant Rick Hancock nevertheless breached his fiduciary duty by tortiously interfering with Meritage's License Agreement and usurping a Meritage corporate asset by using a confusingly similar name ­ Rick Hancock Homes. (See CSOF at ¶¶ 89-91 and 93-96.) Defendant Rick Hancock's use of the name Rick Hancock Homes for its business constitutes self-dealing and usurpation of Meritage's business opportunities. As set forth above, defendant Rick Hancock has testified that he desired to capitalize on the goodwill and reputation associated with the Hancock name, for Defendants' own benefit. (See CSOF at ¶¶ 24-26, 53, 88, 89, and 93-95.) A corporate officer violates his fiduciary duties whenever he places his own interest ahead of that of the corporation. See, e.g., Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993). G. Meritage Has Trade Secrets that Arizona Law Protects

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Snell & Wilmer L.L.P.

Again twisting Seay's testimony and ignoring controverting facts, Defendants argue that Meritage does not have any trade secrets to protect because "[t]here is nothing inherently secret about building a home." (See Motion at 14:9-11.) That is simply not correct under Arizona law. Meritage's pricing strategies, market strategies relating to its marks and services, land development strategies, house plans, advertising strategies, customer lists and files, employee compensation, as well as other confidential and proprietary information compiled and maintained by Meritage constitute trade secrets within the meaning of A.R.S. § 44-401(4). (See CSOF at ¶ 56.) "[A] trade secret may consist of a compilation of information that is continuously used or has the potential to be used in one's business and that gives one an opportunity to obtain an advantage over competitors who do not know of or use it." Enter. Leasing Co. v. Ehmke, 191 Ariz. 141, 148, 3 P.3d 1064, 1068 (App. 1999). Defendant Rick Hancock agreed to protect, not disclose, and not use Meritage's proprietary, confidential or trade secret information. (See CSOF at ¶¶ 57-59.) Further,
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because the competition between Rick Hancock Homes and Meritage's "Hancock Communities" at Sundance was direct, the use and disclosure of Meritage's trade secrets was and continues to be inevitable and violate Arizona law. (See CSOF at ¶¶ 89-91 and 93-96); see, e.g., PepsiCo v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995); see also Bed Mart, Inc. v. Kelley, 202 Ariz. 370, 373, 45 P.3d 1219, 1222 (App. 2002) (exploring the applicability of the inevitable disclosure doctrine). In fact, in acknowledging that he would learn confidential and proprietary information while employed at Meritage, defendant Rick Hancock agreed as a term of his employment that he would not "accept any employment . . . that would involve the use or disclosure of Proprietary Information." (See CSOF at ¶ 58.) H. Defendants' Arguments With Respect To Intentionally Interfering With Prospective Contractual Advantage Claims Are Without Merit 1. Defendants Are Not Privileged to Commit Torts in the Name of the Free Market

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Snell & Wilmer L.L.P.

Despite Defendants' assertions to the contrary, there is nothing in American jurisprudence that allows businesses and individuals to engage in unlawful tactics to compete with their competitors. Claims for unfair competition, misappropriation of trade secrets, and interference with prospective contractual advantage are all causes of action that limit the actions a competitor may take. Here, Defendants claim that they have an absolute right to compete in any fashion and cannot intentionally interfere with a contract as a matter of law. (See Motion at 14:22 to 15:2.) There is not a single case that supports that assertion. 2. No Special Surname Privilege

Further, as noted multiple times above, Rick Hancock's use of his own surname in connection with business is not absolutely privileged and instead is barred under the Lanham Act when the person seeks to use it on similar products in the same chain of commerce. E. & J. Gallo Winery, 967 F.2d 1280, 1288-89 (9th Cir. 1992).

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3.

Defendants' Misconstrue the Evidence

Defendants seemingly make the argument that there can be no interference because Seay, a single witness who testified on September 7, 2004 before Rick Hancock Homes had closed on a single home, was unaware of any homebuilding contracts Defendants have usurped from Meritage. (See Motion at 15:15-18.) The argument is hogwash and ignores evidence to the contrary in the record detailed above. (See Objections at ¶¶ 55-57 64, 77, and 101; CSOF at ¶ 5, 16, 17, 19, 20, 23, 25, 27-31, 52-54, 69, and 74-88.) The heart of the tortious interference claim is that Defendants have intentionally used the Hancock mark thereby interfering with Meritage's exclusive use of it and otherwise blocking Meritage from growing its business. (See CSOF at ¶¶ 78-87.) Defendants were well aware of the business dealings and prospective contracts of Meritage, for Rick Hancock served as an officer, vice-president, and sales manager for Meritage. (See CSOF at ¶ 59.) In other words, by tortiously interfering with the License Agreement and other agreements, Defendants usurped business opportunities and goodwill belonging to Meritage with current and prospective customers and business expectancies. See, e.g., Hill v. Peterson, 201 Ariz. 363, 366-67, 35 P.3d 417, 420-21 (App. 2001) (tortious interference occurs when the Defendants' improper conduct interferes with prospective customers or prospective business expectancies)6. I. Defendants Were Unjustly Enriched

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Snell & Wilmer L.L.P.

Again taking Seay's testimony out of context, Defendants make two arguments with respect to the unjust enrichment claim. (See Motion at 15:19-16:12.) First, they argue that they are not enriched by using the Hancock mark belonging to Meritage. This is contrary to Defendant Rick Hancock's own testimony in which he concedes that he is seeking to take advantage of the fifty years goodwill and reputation for quality that Meritage has paid tens of millions to purchase and further develop. (See CSOF at ¶¶ 2426, 32, 88, 93 and 95.) As discussed above with respect to other common law claims, Defendants' preemption argument is without merit. See, e.g., Fairway Constr., 193 Ariz. at 124, 970 P.2d at 956.
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Second, without citing a case or explanation, Defendants appear to argue that unjust enrichment is not a valid claim under Arizona law. This argument is without basis. See, e.g., In re Krohn, 203 Ariz. 205, 213, 52 P.3d 774, 782 (2002); see also RESTATEMENT (Third) of Unfair Competition, §§ 2, 3, and 9(C) (1995) (stating that unjust enrichment is a valid claim and remedy for conduct otherwise amounting to unfair competition or trademark infringement). J. The Defendants Have Converted Meritage's Assets

In Arizona, conversion is the intentional act of wrongful dominion over another's property in denial of or inconsistent with that person's rights in that property. See, e.g., Focal Point, Inc. v. U-Haul Co. of Ariz., Inc., 155 Ariz. 318, 319, 746 P.2d 488, 489 (App. 1986); RESTATEMENT (Second) of Torts § 222A (1965). Defendants' arguments with respect to the conversion claim boil down to its argument that Meritage has no right to use the Hancock mark, which Meritage addressed at Section II.A, supra, and to its argument that Meritage has no trade secrets to protect, which Meritage addressed at Section II.G. Meritage will not repeat these arguments here. K. There Are Genuine Issues As To Whether Defendant Rick Hancock Has Breached His Contract With Meritage

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Snell & Wilmer L.L.P.

Defendant Rick Hancock entered into an Employment Agreement with Meritage that contained obligations that extended beyond the term of employment. (See CSOF at ¶¶ 59-66.) As part of this agreement, defendant Rick Hancock agreed for an unlimited term not to "directly or indirectly: (a) induce or encourage or solicit any employee of [Meritage] to become employed by any competitor or potential competitor of [Meritage]." (See CSOF at ¶ 62.) He also agreed for an unlimited term not to "divulge or use Proprietary Information . . . [and] not accept any employment . . . that would involve the use or disclosure of Proprietary Information." (See CSOF at ¶ 63.) The record reveals that defendant Rick Hancock has solicited and engaged at least nine former Meritage employees working for Rick Hancock Homes, a competitor of Meritage, in violation of the non-solicitation provision. (See CSOF at ¶ 64.) It further reveals that his employment
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necessarily will result in the use and/or disclosure of Meritage's proprietary information, which also violates his employment agreement. (See CSOF at ¶ 65; see, e.g., PepsiCo, 54 F.3d at 1269.) L. There Are Genuine Issues As To Whether Defendant Rick Hancock Has Breached The Implied Covenant of Good Faith and Fair Dealing

By bootstrapping a flawed assertion that there is no breach of contract as a matter of law, Defendants argue that the implied covenant of good faith and fair dealing fails as well because there is no valid contract between defendant Rick Hancock and Meritage and no breach of that contract. (See Motion at 17:8-17.) As noted above in Section II.K, supra, however, there is such a contract and the contract has been breached. Surely, the type of contact involved in defendant Rick Hancock's breach and free-riding on goodwill for which Meritage paid tens of millions also amounts to a breach of the implied covenant of good faith and fair dealing. (See CSOF at ¶¶ 24, 53, 88, 89, and 93-95.) M. There Are Genuine Issues Of Material Fact As To Whether Defendants Have Intentionally Interfered With The License Agreement

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Defendants ­ without explanation or case law support ­ argue that it cannot interfere with the license agreement because defendant Rick Hancock is using his own surname, because he used a disclaimer, and because Greg Hancock purportedly terminated the License Agreement. (See Motion at 17:19-25.) These arguments are addressed at length above, supra, and will not be repeated here. III. CONCLUSION Defendants do nothing more than cut and paste their motion for summary judgment they filed more than two years ago. It fails now as it did then. The record is ripe with genuine issues of material fact. The Motion is equally ripe with misstatements of law. Therefore, Defendants' Motion should be denied.

...
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DATED this 23rd day of February, 2007. SNELL & WILMER L.L.P.

By s/ Dan W. Goldfine Dan W. Goldfine Adam Lang One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiffs and Third Party Defendants and

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Case 2:04-cv-00384-ROS

Snell & Wilmer L.L.P.

By s/ Grant Woods Grant Woods GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, AZ 85006 Attorneys for Plaintiffs and Third Party Defendants CERTIFICATE OF SERVICE I hereby certify that on February 23, 2007, 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 the following CM/ECF registrants: Ivan K. Mathew Mathew & Mathew, P.C. 3300 North Central Avenue, Suite 1730 Phoenix, Arizona 85012 Attorneys for Defendants Rick Hancock, Brenda Hancock, Rick Hancock Homes, L.L.C., and RLH Development, L.L.C. Robert M. Frisbee Frisbee & Bostock, PLC 1747 East Morton Avenue Suite 108 Phoenix AZ 85020 Attorneys for Defendant Greg Hancock

Document 436- 26 Filed 02/23/2007 -

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1933257.

Kenneth J. Sherk Timothy J. Burke Fennemore Craig, P.C. 3003 N. Central Ave. Suite 2600 Phoenix, AZ 85012-2913 Attorneys for Defendant Snell & Wilmer, L.L.P. in State Court Action s/ Becky Kinningham

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

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Case 2:04-cv-00384-ROS Document 436- 27 Filed 02/23/2007 Page 27 of 27

Snell & Wilmer L.L.P.