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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
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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 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Case No. CV-04-0384-PHX-ROS Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, HancockPLAINTIFFS' (1) OBJECTIONS TO MTH Communities, Inc., an Arizona DEFENDANT GREG HANCOCK'S corporation, and currently d/b/a Meritage UPDATED STATEMENT OF FACTS AND Homes Construction, Inc., an Arizona (2) CONTROVERTING STATEMENT OF corporation, and Meritage Homes of FACTS 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.
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Document 435
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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.1
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Plaintiffs (collectively, "Meritage") submit their Objections to Defendant Greg Hancock's ("Defendant") Updated Statement of Facts ("GH SOF") in Support of Motion for Summary Judgment or Dismissal ("Motion") and their Local Rule 56.1(b) Controverting Statement of Facts ("CSOF")2: MERITAGES' OBJECTIONS TO DEFENDANT'S UPDATED STATEMENT OF FACTS3 1. Meritage controverts this paragraph. By the License Agreement's express
terms, the license agreement is with Gregory Hancock, HC Builders, Inc., and Hancock Communities, L.L.C. not Gregory Hancock alone. (See License Agreement, attached as Defendant miscaptions his motion and accompanying Statement of Facts by omitting several parties. For the convenience of the Court and parties, Meritage uses one master set of exhibits for the Responses to Defendants' Motions for Summary Judgment. Defendant includes a number of headings that are conclusory and argumentative. For the Court's ease, Meritage only addresses the numbered paragraphs purported to be statements of fact.
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Exhibit 1 to GH SOF GH SOF, at p. 1.) The license is also not just Meritage's use but for its "exclusive use." (See id., at ¶ 2.) Further, Meritage obtained a license for the exclusive use of the "Hancock Homes" and "Hancock Communities" marks, and "all variations of or derivations from such names. . . ." (See Agreement of Purchase and Sale of Assets ("Assets Agreement"), attached as Exhibit A hereto, at ¶ E.) Finally, Defendant omits key portions of Paragraph 3.3 of the License Agreement which reads in its entirety: "Subject to Sections 3.1 and 3.2 above, Licensee shall have the right to use the Licensed Marks in connection with promotion of Licensee's services and business operation in strict compliance with this Agreement." 2. Meritage controverts this paragraph. By the License Agreement's express
terms, the licensors were Gregory Hancock, HC Builders, Inc., and Hancock Communities, L.L.C. not Gregory Hancock alone. (See License Agreement, Ex. 1 to GH SOF, at p. 1.) By its express terms, the License Agreement only states that the "Licensee acknowledges Licensor's exclusive right, title and interest in and to the Licensed Marks." (See id., at ¶ 3.4) (emphasis added). That section does not provide or preserve any rights to Defendant. Additionally, Meritage objects to the portion of this paragraph stating that "`Hancock Homes' is a trademark registered to Greg Hancock" because Defendant provides no support for the assertion as required by LRCiv 56.1(a). Further, to the extent that Defendant attempts to mischaracterize the breadth of Meritage's license, it is noted that Meritage obtained a license for the exclusive use of the "Hancock Homes" and "Hancock Communities" marks, and "all variations of or derivations from such names. . . ." (See License Agreement, Ex. 1 to GH SOF, at ¶ 2; Assets Agreement, Ex. A, at ¶ E.) 3. For purposes of this Motion, Meritage does not object to Defendant's
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statement of fact in this paragraph. 4. Meritage controverts this paragraph. The purported support for the factual
assertion does not, in fact, support the assertion. Hilton does not testify that he reviewed the License Agreement during its drafting. (See November 18, 2004 Deposition of Steve
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Hilton ("Hilton Depo."), attached as Exhibit B hereto, at 179:14 to 180:25.) Instead, he testifies that he reviewed the License Agreement before it was signed. (See id.) Further, the question quoted by Defendant was objected to on form grounds because the question impliedly assumes a conclusion of law as to the meaning and breadth of the License Agreement and impliedly assumes the exclusion of the Asset and Purchase Agreement. (See id.; see also Objections to Paragraph 1, supra (regarding breadth of Meritage's right to use the name Hancock).) 5. For purposes of this Motion, Meritage does not object to Defendant's
statement of facts in this paragraph. The September 8, 2003 e-mail speaks for itself. Meritage does wish to point out that the un-emphasized portions within this paragraph provide the necessary context required to understand the meaning of the e-mail message. (See September 8, 2003 Email, Exhibit 2 to GH SOF.) The 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 2007. (See id.) Steve Hilton testified consistently 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 Hilton Depo., Ex. B, at 178:11-16) (emphasis added). As can be easily discerned from the email, Steve Hilton was simply concerned with what to do when the license for the Hancock name and how to avoid wasting advertising dollars. Hilton testified that Meritage decided to add the Meritage name with the Hancock Community name in the spring of 2004. (See Hilton Depo., Ex. B, at 29:10 to 30:19.) Further, to the extent that Defendant implies that the emphasized portions of the September 8, 2003 email suggest that Defendant began to abandon the Hancock marks, Meritage objects. Meritage continued to use the "Hancock" name and sold homes over $117 million since July 1, 2004, under the Hancock name throughout metropolitan Phoenix consistent with the level they sold in the years previous to the License Agreement (see Declaration of Roger Zetah in Support of Meritage's Opposition to Greg Hancock's Motion for Stay and Request for Relief from Operation of Order ("Zetah Decl."), attached
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as Exhibit C hereto, at ¶ 3; Various Income Statements ("Income Statements"), attached as Exhibit D hereto, at MER003209, MER003448, MER003776, MER005340, and MER005373) and continued to use the Hancock mark and extensively advertised and conducted sales of homes operating under the Hancock name. (See October 25, 2004 Deposition of Rick Hancock ("Rick Hancock Depo."), attached as Exhibit E hereto, at 118:10 to 120:13 and 161:15 to 162:4; Declaration of Larry Seay in Support of Meritage's Renewed Application for Temporary Restraining Order ("Seay Decl."), attached as Exhibit F hereto, at ¶¶ 7 and 9.) Further, in Buckeye alone, until halfway through 2005, all of the paperwork and advertisement related to sales of homes by Meritage contained the name "Hancock Communities Series at Sundance." (See id., at ¶¶ 7 and 9; Declaration of Scott Abel ("Abel Decl."), attached as Exhibit G hereto, at ¶¶ 5 and 6.) Also, prior to mid-October 2006, all of the related paperwork and advertisement out at Meritage's subdivision in Rancho Bella Vista contained the name and were for the sales of homes described as "Hancock Communities Series at Rancho Bella Vista." (See Abel Decl., Ex. G, at ¶ 10.) In fact, there are still three homes available for purchase at Rancho Bella Vista, all of which are described as "Hancock Communities Series at Rancho Bella Vista." (See id., at ¶ 11.) Lastly, Rick Hancock conceded that Meritage has continued to use the Hancock Communities name. (See Statement of Facts in Support of Defendants Rick and Brenda Hancock, Rick Hancock Homes, Inc., and RLH Development, Inc.'s Renewed Motion for Summary Judgment ("RH SOF"), at ¶ 16; Declaration of Rick Hancock ("RH Decl."), attached as Exhibit 1 to RH SOF, at ¶ 17.) 6. Meritage controverts this paragraph. Defendant misleads the court
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regarding the obligations Meritage owes to Defendant under the Licensing Agreement. Specifically, the License Agreement does not require disclosure of e-mail communications between Meritage employees. (See License Agreement, Exhibit 1 to GH SOF.) Further, Meritage objects to this paragraph because Defendant provides no support for the assertions made therein as required by LRCiv 56.1(a).
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7.
Meritage controverts this paragraph. Meritage did not abandon or stop
using the Hancock name at the Christmas party. (See Rick Hancock Depo., Ex. E, at 161:15 to 162:4.) Meritage has sold over $117 million in homes using the Hancock name since July 1, 2004. (See Zetah Decl., Exhibit C, at ¶ 3.) This is consistent with the level they sold in the years prior to the License Agreement. (See Income Statements, Ex. D, at MER003209, MER003448, MER003776, MER005340, and MER005373.) Meritage continued to use the Hancock mark and extensively advertise and conduct sales of homes operating under the Hancock name. (See Rick Hancock Depo., Ex. E, at 118:10 to 120:13; Seay Decl., Ex. F, at ¶¶ 7 and 9.) Further, in Buckeye alone, until halfway through 2005, all of the paperwork and advertisement related to sales of homes by Meritage contained the name "Hancock Communities Series at Sundance." (See Seay Decl., Ex. F, at ¶¶ 7 and 9; Abel Decl., Ex. G, at ¶¶ 5 and 6.) Also, prior to mid-October 2006, all of the related paperwork and advertisement out at Meritage's subdivision in Rancho Bella Vista contained the name and were for the sales of homes described as "Hancock Communities Series at Rancho Bella Vista." (See Abel Decl., Ex. G, at ¶ 10.) In fact, there are still three homes available for purchase at Rancho Bella Vista, all of which are described as "Hancock Communities Series at Rancho Bella Vista." (See id., at ¶ 11.). Lastly, Rick Hancock conceded that Meritage has continued to use the Hancock Communities name. (See RH SOF, at ¶ 16; RH Decl., Ex. 1 to RH SOF, at ¶ 17.) 8. Meritage controverts this paragraph. Defendant omits the second sentence
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of the email which states that Meritage intended to continue to use the Hancock name. It reads: "I am thinking we try to do something that ties in with our present direction of advertising, and am not looking to mount any huge campaign, although I am open to suggestion." (See December 9, 2003 Email, attached as Exhibit 5 to GH SOF.) Again, the email is nothing more than one corporate officer asking an employee, who now works for the Hancocks, to strategize about marketing. (See id.) To the extent that this paragraph implies that Meritage has abandoned the Hancock name, Meritage controverts.
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Meritage continued using the Hancock name. See Objections to Paragraphs 5 and 7, supra (discussing Meritage's continued use of the Hancock name). 9. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. 10. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. This paragraph, however, is misleading in that Meritage continued to use the Hancock name. See Objections to Paragraphs 5 and 7, supra (discussing Meritage's continued use of the Hancock name). 11. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. 12. Meritage controverts this paragraph. The purported support for the factual
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assertion does not, in fact, support the assertion. Defendant's Exhibit 9 is an e-mail from Larry Seay to Ron French and Roger Zetah--not an e-mail to "virtually everyone at Meritage" as asserted by Defendant. (See July 1, 2004 Email, attached as Exhibit 9 to GH SOF.) Thus, this paragraph does not have the support required by LRCiv 56.1(a). Further, to the extent that Defendant uses this paragraph to imply that Meritage has abandoned the Hancock mark or name or Hancock Communities, Meritage controverts. Meritage continued using the Hancock name. See Objections to Paragraphs 5 and 7, supra. 13. Meritage controverts this paragraph. Defendant takes Hilton's testimony
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out of context and simply ignores Hilton's testimony that "[i]t's no less marketable whether we use [Hancock Communities] on two communities or eight communities[,]" that the degree of public recognition of the Hancock Communities has not decreased, and that Meritage was not in breach of the License Agreement. (See Hilton Depo., Ex. B, at 69:5 to 72:11.) Further, the evidence shows that the Hancock mark is not "less visible" and has not been abandoned. See ¶ 5 and 7, supra (discussing Meritage's continued use of the Hancock name).
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14.
Meritage objects to this paragraph to the extent that it implies that Meritage
was not damaged by the defendants' conduct with respect to Rick Hancock Homes. See Meritage's CSOF at Paragraph 126, infra (Meritage's damages on the unfair competition claim equals $45 million); see also Objections to Paragraphs 67(c) and 68, infra (Defendants illegal and unfair competition harmed Meritage and caused a loss of revenues.). 15. Meritage controverts this paragraph. First, Defendant has never disclosed
Barbara Sorget as an expert pursuant to Fed. R. Civ. P. 26. Further, Meritage has not abandoned the Hancock mark nor derogated or detracted from its marketability, value, degree of public recognition, or popularity. Hilton testified that the Hancock name is "no less marketable whether we use [Hancock Communities] on two communities or eight communities[,]" that the degree of public recognition of the Hancock Communities has not decreased, and that Meritage was not in breach of the License Agreement. (See Hilton Depo., Ex. B, at 69:5 to 72:11.) Meritage has sold over $117 million in homes using the Hancock name since July 1, 2004. (See Zetah Decl., Exhibit C, at ¶ 3.) This is consistent with the level they sold in the years prior to the License Agreement. (See Income Statements, Ex. D, at MER003209, MER003448, MER003776, MER005340, and MER005373.) Meritage continued to use the Hancock mark and extensively advertise and conduct sales of homes operating under the Hancock name. (See Rick Hancock Depo., Ex. E, at 118:10 to 120:13; Seay Decl., Ex. F, at ¶¶ 7 and 9.) Further, in Buckeye alone, until halfway through 2005, all of the paperwork and advertisement related to sales of homes by Meritage contained the name "Hancock Communities Series at Sundance." (See Seay Decl., Ex. F, at ¶¶ 7 and 9; Abel Decl., Ex. G, at ¶¶ 5 and 6.) Also, prior to mid-October 2006, all of the related paperwork and advertisement out at Meritage's subdivision in Rancho Bella Vista contained the name and were for the sales of homes described as "Hancock Communities Series at Rancho Bella Vista." (See Abel Decl., Ex. G, at ¶ 10.) In fact, there are still three homes available for purchase at Rancho Bella Vista, all of which are described as "Hancock Communities Series at Rancho Bella
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Vista." (See id., at ¶ 11.). Lastly, Rick Hancock conceded that Meritage has continued to use the Hancock Communities name. (See RH SOF, at ¶ 16; RH Decl., Ex. 1 to RH SOF, at ¶ 17.) 16. Meritage controverts this paragraph. The purported support for the factual
assertion does not, in fact, support the assertion. First, the testimony does not address advertising in any way. (See Hilton Depo., Ex. B, at 68:7 to 69:4.) Secondly, Meritage objects to this paragraph to the extent that Defendant implies that Meritage was required to ask for permission for name and advertising changes. Nothing in the License Agreement obligates Meritage to seek or obtain the permission of Greg Hancock to alter its name or advertising. (See License Agreement, Ex. 1 to GH SOF, generally.) Further, Meritage objects to the extent that Defendant is asserting that Meritage abandoned the Hancock name. Meritage has sold over $117 million in homes using the Hancock name since July 1, 2004. (See Zetah Decl., Exhibit C, at ¶ 3.) This is consistent with the level they sold in the years previous to the License Agreement. (See Income Statements, Ex. D, at MER003209, MER003448, MER003776, MER005340, and MER005373.) Meritage continued to use the Hancock mark and extensively advertise and conduct sales of homes operating under the Hancock name. (See Rick Hancock Depo., Ex. E, at 118:10 to 120:13; Seay Decl., Ex. F, at ¶¶ 7 and 9.) Further, in Buckeye alone, until halfway through 2005, all of the paperwork and advertisement related to sales of homes by Meritage contained the name "Hancock Communities Series at Sundance." (See Seay Decl., Ex. F, at ¶¶ 7 and 9; Abel Decl., Ex. G, at ¶¶ 5 and 6.) Also, prior to mid-October 2006, all of the related paperwork and advertisement out at Meritage's subdivision in Rancho Bella Vista contained the name and were for the sales of homes described as "Hancock Communities Series at Rancho Bella Vista." (See Abel Decl., Ex. G, at ¶ 10.) In fact, there are still three homes available for purchase at Rancho Bella Vista, all of which are described as "Hancock Communities Series at Rancho Bella Vista." (See id., at ¶ 11.). Lastly, Rick Hancock conceded that Meritage has continued to use the Hancock Communities name. (See RH SOF, at ¶ 16; RH Decl., Ex. 1 to RH SOF, at ¶ 17.)
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17.
Meritage controverts this paragraph. The License Agreement prescribes
only two instances whereby Defendant could terminate the agreement. First, Defendant could terminate the agreement with notice "[i]n the event that all or a controlling interest in Licensee . . . is acquired by an unrelated third party. . ." (See License Agreement, Ex. 1 to GH SOF, at ¶ 7.2.) Second, Defendant could terminate the agreement without notice if Meritage breaches it or the Master Transaction Agreement. (See id., at ¶ 7.3.) This Court has already dismissed with prejudice Defendant's claims that Meritage breached either the License Agreement or the Master Transaction Agreement. (Order at 5 (Mar. 31, 2006); Order at 10 (Aug. 22, 2006).) The License Agreement does not provide Defendant with other alternatives for termination. (See License Agreement, Ex. 1 to GH SOF, generally.) 18. Meritage controverts this paragraph. On February 13, 2004, counsel for
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Defendant, Jon Titus, wrote counsel for Meritage, Steve Pidgeon, purportedly terminating the License Agreement. (See February 13, 2004 Letter from J. Titus to S. Pidgeon, attached as Exhibit 12 to GH SOF.) This Court has already dismissed with prejudice Greg Hancock's claims that Meritage breached either the License Agreement or the Master Transaction Agreement. (Order at 5 (Mar. 31, 2006); Order at 10 (Aug. 22, 2006).) Since Meritage did not breach the License Agreement or Master Transaction Agreement, Defendant was not entitled to terminate the agreement. (See License Agreement, Ex. 1 to GH SOF at ¶¶ 7.1 and 7.3.) Moreover, an accounting was not due to Defendant, until March 31, 2004, a month after Defendant purported to terminate the License Agreement. (See Master Transaction Agreement ("MTA")4, attached as Exhibit H hereto, at § 2.5(A)(4)(b).) Further, Meritage provided Defendant with an accounting prior to March 31, 2004. (See, e.g., Meritage Corporation Calculation of Hancock Earnout, December, 2003, provided to Defendant on February 27, 2004, attached as Exhibit I hereto; September 7, 2004 Deposition of Larry Seay ("Seay Depo."), attached as Exhibit J hereto, at 38:9-23.) Additionally, for the period at question, there was no positive earn-out 4 Due to the multitude of exhibits attached to the MTA, Meritage does not include them as exhibits hereto.
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amount, and therefore, no accounting or estimate was owed to Defendant. (See Seay Depo., Ex. J, at 63:10 to 64:7.) Meritage simply does not owe Defendant earn-outs. (See Expert Report of Eugene Cole on Greg Hancock Earn-Out Calculations ("Cole Report"), attached as Exhibit K hereto, at 2; September 20, 2006 Deposition of Eugene Cole ("Cole Depo."), attached as Exhibit L hereto, at 126:18 to 128:19; Seay Depo., Ex. J, at 63:10 to 64:22.) 19. For the purposes of this Motion, Meritage does not object to what the stated
grounds for termination were in the February 13, 2004 letter. (See February 13, 2004 Letter, Ex. 12 to GH SOF.) To the extent that Defendant implies in this paragraph that the License Agreement was in fact terminated or that Meritage breached it by failing to provide an accounting pursuant to the MTA, Meritage controverts. See Objections to Paragraph 18, supra. 20. Meritage controverts this paragraph. Defendant provides no support for the
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assertion as required by LRCiv 56.1(a). Further, Defendant was not entitled to an earnout or an accounting of an earn-out. See Objections to Paragraph 18, supra. 21. Meritage controverts this paragraph. Although Meritage cannot possibly
know whether Defendant would have terminated the License Agreement and sued for an alleged breach of it based on the facts stated in Paragraphs 5 through 12 of his statement of facts, those facts simply do not constitute a breach on Meritage's part. See Objections to Paragraphs 5-12, supra. Indeed, this Court has dismissed these claims with prejudice. (See Order at 5 (Mar. 31, 2006); Order at 10 (Aug. 22, 2006).) 22. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. Nevertheless, Meritage preserves all objections under the Federal Rules of Civil Procedure and the Federal Rules of Evidence, including Federal Rule of Evidence 408 regarding settlement negotiations. 23. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. Nevertheless, Meritage preserves all objections under
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the Federal Rules of Civil Procedure and the Federal Rules of Evidence, including Federal Rule of Evidence 408 regarding settlement negotiations. 24. Meritage controverts this paragraph. Defendant provides no support for the
assertion as required by LRCiv 56.1(a). First, this Court dismissed with prejudice Greg Hancock's claims that Meritage breached either the License Agreement or the Master Transaction Agreement. (See Order at 5 (Mar. 31, 2006); Order at 10 (Aug. 22, 2006).) Secondly, this purported statement of fact is merely a conclusion of law. Third, Meritage has not abandoned nor detracted from or derogated the repute, value, marketability, degree of public recognition, or popularity of the Hancock name. (See Objections to Paragraphs 5, 7, 15, and 16, supra (Meritage continued using the Hancock name and its value was not diminished).) 25. Meritage controverts this paragraph. Defendant fails to provide support for
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the assertion as required by LRCiv 56.1(a). Regardless, ample evidence exists to show that Defendant invested in, counseled, or otherwise assisted Rick Hancock in his home building enterprise. In February 2004, Defendant wrote Meritage purporting to unilaterally (and wrongfully) terminate Meritage's license to the Hancock name and threatened to sue Meritage if it did not remove the name from all advertising and stop using it so to give the Defendants a competitive advantage. (See February 13, 2004 Letter, Ex. 12 to GH SOF; see also Rick Hancock Depo, Ex. E, at 181:20 to 181:22 (Rick Hancock's testified that he wanted to use the name "Rick Hancock Homes" to take advantage of the reputation of the Hancock name.).) Later that spring, Defendant licensed the Hancock name to Rick Hancock so he could use it in selling identical homes rights across the street from Meritage in Sundance. (See November 9, 2004 Deposition of John Ahern ("Ahern Depo."), attached as Exhibit M hereto, at 18:21 to 19:17; Rick Hancock Depo., Ex. E, at 118:10 to 120:13, 165:21 to 167:1) Defendant then sold Rick Hancock the land, provided land banking services, and provided that land to Rick Hancock Homes at a discounted price. (See February 23, 2006 Deposition of David Cornwall ("Cornwall Depo."), attached as Exhibit N hereto, at 19:10 to 20:18, 22:13 to 23:19; November 8,
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2004 Deposition of James Arneson (Vol. 1) ("Arneson I Depo."), attached as Exhibit O hereto, at 154:11 to 155:20; September 26, 2006 Deposition of Ken Krause ("Krause Depo."), attached as Exhibit P hereto, at 109:1-4.) In January 2005, Defendant provided substantial monies (more than $330,000) to Rick Hancock Homes. (See Checks, attached as Exhibit Q hereto, at RHH 13880; Krause Depo., Ex. P., at 130:6 to 135:5.) Defendant was involved in the operations of Rick Hancock Homes. One such example is assistance that Defendant provided Rick Hancock Homes at Sundance builders' meetings. (See Rick Hancock Depo., Ex. E, at 283:1 to 284:14.) Likewise, there is evidence that Defendant officed at Rick Hancock Homes and attended Rick Hancock Homes sales meetings during which competition with Meritage was discussed after meetings. (See Krause Depo., Ex. P, at 115:4 to 119:2, 102:13-19.) 26. For the purposes of this Motion, Meritage does not object to Defendant's
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statement of fact in this paragraph. Meritage notes that Defendant's CFO acknowledges that Greg Hancock lent money to Rick Hancock Homes. (See Krause Depo., Ex. P, at 132:24 to 134:19.) There is no evidence in the record that Rick Hancock Homes ever repaid Greg Hancock. 27. Meritage controverts this paragraph. The three checks written by Defendant
and his entities to Rick Hancock and his entities, totaling more than $330,000, speak for themselves. (See Checks, Ex. Q., at RHH 13880.) Further, Defendant's CFO acknowledges that Greg Hancock lent money to Rick Hancock Homes. (See Krause Depo., Ex. P, at 132:24 to 134:19.) There is no evidence in the record that Rick Hancock Homes ever repaid Greg Hancock. Greg Hancock's self-serving, after-the-fact testimony does not cure the fact that Greg Hancock made $330,000 of capital contributions to Rick Hancock Homes or RLH Development. 28. Meritage controverts this paragraph. While some of Defendant's duties and
responsibilities are laid out in his Employment Agreement with Meritage, those duties and responsibilities are not exhaustive. (See Employment Agreement, attached as Exhibit 15 to GH SOF.) Specifically, Paragraph 1 of the Employment Agreement provides that
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Defendant "agrees to diligently perform the duties associated with such position [President], including, but not limited to the duties and responsibilities listed on Exhibit A attached hereto." (See id., at ¶ 1) (emphasis added). Ken Krause, Greg Hancock's right hand man, testified that Greg Hancock's foremost duties were to acquire new land and ensure an adequate supply of land to sell and market. (See Krause Depo., Ex. P, at 139:17 to 140:15; November 21, 2006 Deposition of Greg Hancock ("Greg Hancock Depo."), attached as Exhibit R hereto, at 206:13 to 207:11; June 14, 2006 Declaration of James Arneson ("Arneson Decl."), attached as Exhibit S hereto, at ¶¶ 4-9; Cornwall Depo., Ex. N, at 103:12 to 104:10.) Lastly, Greg Hancock owed Meritage common law fiduciary duties, including a duty not to usurp corporate opportunities. See Tovrea Land & Cattle Co. v. Linsenneyer, 100 Ariz. 107, 123, 412 P.2d 47, 58 (1966) (an officer is duty bound to purchase property for the company or to refrain from purchasing for himself when a purchase by the officer would hinder or defeat the plans and purposes of the corporation in carrying on its usual business); see also PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS § 5.05 (1994); Atkinson v. Marquart, 112 Ariz. 304, 305-06; 541 P.2d 557-58 (1975). 29. Meritage controverts this paragraph. Defendant mistakenly suggests that
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Exhibit A to the Employment Agreement "specifically describes [all of] his duties with regard to running Hancock Communities." (emphasis added). Instead, Exhibit A merely provides "certain obligations and duties." (See id., at p. 10.) Defendant's statement of fact is nonsensical when the Employment Agreement itself says that Greg Hancock's duties are "not limited to the duties and responsibilities listed on Exhibit A . . ." . (See Employment Agreement, attached as Exhibit 15 to GH SOF, at ¶ 1.) For a description of Greg Hancock's duties, see Objections to Paragraph 28, supra. 30. Meritage controverts this paragraph. Meritage agrees that the Employment
Agreement requires Defendant to obtain approval from Meritage when making major business decisions including land acquisition. (See id., at p. 10.) To the extent that Defendant implies that Exhibit A does not require Defendant to acquire sufficient land on
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which Meritage could market and sell homes, Meritage objects. The acquisition of land and ensuring an adequate supply of land to sell and market were Greg Hancock's primary duties while working for Meritage. (See Krause Depo., Ex. P, at 139:17 to 140:15; Arneson I Depo., Ex. O, at 55:11-15; Greg Hancock Depo., Ex. R, at 206:13 to 207:11; Arneson Decl., Ex. S, at ¶¶ 4-9; Cornwall Depo., Ex. N, at 103:12 to 104:10.) 31. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. 32. Meritage controverts this paragraph. The business plans were developed by
Greg Hancock and presented to Meritage. (See Greg Hancock Depo., Ex. R, at 123:1123.) 33. Meritage controverts this paragraph. Defendant provides no support for the
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assertion as required by LRCiv 56.1(a). Further, to the extent that Defendant receiving his bonuses implied that he did a good job as Meritage's President, Meritage objects. Meritage had no knowledge that (1) Defendant was acquiring land (e.g., Westwind, Riata West, and Fox Hunt) for his own account for his own company - Olympic, usurping Meritage's corporate opportunities to acquire that same land on the same terms offered to Defendant (see Cornwall Depo., Ex. N, at 46:3-6, 43:18 to 54:2), and (2) Defendant was eschewing other opportunities to acquire land for Meritage thereby weakening Meritage financially. (See id. at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) These activities were done in secret while he was telling his management staff and others not to acquire land for Meritage because he would not stay with Meritage long enough to benefit personally from the acquisition of the land." (See Cornwall Depo., Ex. N, at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) It speaks volumes about Greg Hancock's conduct that he describes the Meritage employees under his supervision as his own personal employees. 34. Meritage controverts this paragraph. Defendant provides no support for the
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assertion as required by LRCiv 56.1(a). Further, simply because Defendant may not have received a written negative job review does not mean he did a good job for Meritage.
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Meritage simply had no knowledge that (1) Defendant was acquiring land (e.g., Westwind, Riata West, and Fox Hunt) for his own account for his own company Olympic, (2) usurping Meritage's corporate opportunities to acquire that same land on the same terms offered to Defendant (see Cornwall Depo., Ex. N, at 46:3-6, 43:18 to 54:2), and (3) Defendant was eschewing other opportunities to acquire land for Meritage thereby weakening Meritage financially. (See id. at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) These activities were done in secret while he was telling his management staff and others not to acquire land for Meritage because he would not stay with Meritage long enough to benefit personally from the acquisition of the land. (See Cornwall Depo., Ex. N, at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) Lastly, Meritage's CEO expressed concerns to Greg Hancock about his work. (See Hilton Depo., Ex. B, at 151:714.) 35. Meritage controverts this paragraph. Defendant provides no support for the
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assertion as required by LRCiv 56.1(a). Also, Curry offered opinions with respect to damages and not employment performance. Meritage also listed as a factor detrimentally affecting Meritage's performance the "ability to acquire additional land or options for additional land on acceptable terms" the very role Greg Hancock was hired to accomplish. (See December 31, 2003 10-K of Meritage, attached as Exhibit T hereto, at p. 25; Krause Depo., Ex. P, at 139:17 to 140:15; Arneson I Depo., Ex. O, at 55:11-15; Greg Hancock Depo., Ex. R, at 206:13 to 207:11; Arneson Decl., Ex. S, at ¶¶ 4-9; Cornwall Depo., Ex. N, at 103:12 to 104:10.) Further, Meritage simply had no knowledge that (1) Defendant was acquiring land (e.g., Westwind, Riata West, and Fox Hunt) for his own account for his own company - Olympic, (2) usurping Meritage's corporate opportunities to acquire that same land on the same terms offered to Defendant (see Cornwall Depo., Ex. N, at 46:3-6, 43:18 to 54:2), and (3) Defendant was eschewing other opportunities to acquire land for Meritage thereby weakening Meritage financially. (See id. at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) These activities were done in secret while he was telling his management staff and others not to acquire land for
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Meritage because he would not stay with Meritage long enough to benefit personally from the acquisition of the land." (See Cornwall Depo., Ex. N, at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) Lastly, Curry was hired to do a damage analysis based on Meritage's performance by comparing it to the market industry and Meritage's prior performance, not to opine on Defendant's job performance. (See Expert Report of Gregg Curry ("Report of Gregg Curry"), attached as Exhibit U hereto, at pp. 1, 4-10; February 1, 2006 Deposition of P. Gregg Curry ("Curry Depo.), attached as Exhibit V hereto, at 27:2 to 31:14, 39:18 to 40:4.) Lastly, Meritage's CEO expressed concerns to Greg Hancock about his work. (See Hilton Depo., Ex. B, at 151:7-14.) 36. Meritage controverts this paragraph. Curry was hired to do a damage
analysis which is, in part, based on Meritage's performance by comparing it to the market industry and Meritage's prior performance, not to opine on Defendant's job performance. (See Report of Gregg Curry, Ex. U, at pp. 1, 4-10; Curry Depo., Ex. V, at 27:24 to 31:14.) The damages analysis is supported by comparison to the experience of Standard Pacific and Pulte. (See id., generally.) 37. 38. Meritage controverts this paragraph. See ¶ 36, supra. Meritage controverts this paragraph. See ¶ 36, supra. Curry simply opines
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on the performance of Meritage under Hancock's leadership; not on Defendant's job performance or whether he is liable. (See Report of Gregg Curry, Ex. U, generally; Curry Depo., Ex. V, at 27:2 to 31:14, 39:18 to 40:4.) Further, to the extent that Defendant implies that Curry was wrong in determining his calculation, Meritage objects. Curry's opinion is based on the number of lots available for sale lots that were already developed and open for sale. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) The terminology "lots available-for-sale" does not include any lot that is "a piece of raw land sitting out in the desert that an individual is not able to go out and buy a lot from." (See id.)
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39.
Meritage controverts this paragraph.5 Curry's opinion is based on the
number of lots available for sale lots that were already developed and open for sale. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) The terminology "lots available-for-sale" does not include any lot that is "a piece of raw land sitting out in the desert that an individual is not able to go out and buy a lot from." (See id.) a. Meritage controverts this paragraph. First, the quote is not complete.
The full quote in the offering memorandum is: "At March 31, 2001, Hancock had 4,647 lots on which homes could be built under its control for development as compared to 1,049 lots at March 31, 2000." (See The Hancock Acquisition, attached as Exhibit 18 to GH SOF) (emphasis added). These lots are lots that could be "built" for "development." (See id.) This number does not represent the number of lots available for sale lots that were already developed and open for sale. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Instead, it refers to land for long-term development, more akin to "a piece of raw land sitting out in the desert that an individual is not able to go out and buy a lot from." (See id.) Lastly, this refers to a position of land prior to Meritage's acquisition of Hancock and has nothing to do with Greg Hancock's acquisition of land after he becomes a Meritage employee. (See Employment Agreement, Ex. 15 to GH SOF, at p. 1.) b. Meritage controverts this paragraph. First, the total inventory of lots
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is actually 7,001 and not 6,991. (See May 31, 2001 Lot Status Report, attached as Exhibit 19 to GH SOF.) Further, Defendant argues that the total inventory of lots includes those remaining to sell and the lots purchased under rolling options. But that number is overinclusive. The lots remaining to be sold could and likely do include rolling options. As he is apt to do, Defendant engages in name-calling, asserting that Curry is a liar. Not only is name-calling simply not proper or supported by the evidence, such name-calling in a statement of facts where the facts are viewed in the light most favorable to Meritage speaks volumes about how weak Defendant's motion is. Credibility of witnesses is not resolved on summary judgment. See State v. Moyer, 151 Ariz. 253, 255, 727 P.2d 31, 34 (App. 1986) (weight and credibility to be given expert testimony are to be decided by the factfinder).
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(See id.) Also, it is possible that a portion of the lots considered to be rolling options are already sold and therefore not remaining. (See id.) For example, the Bel Fleur project shows that of the 104 total lots all 104 have been purchased (as can be shown by the 83 closed properties and the 21 sold started.) (See id.) So in essence, there are zero lots available for sale from the Bel Fleur project. The same analysis can be done for the remaining projects shown on the May 31, 2001 Lot Status Report. The lots available for sale are those that were already developed, open for sale, and obviously, not yet sold. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Just a reading of the Lot Status Report clearly shows that there are less than 6,991 total lots available for sale. (See May 31, 2001 Lot Status Report, Ex. 19 to GH SOF; Report of Gregg Curry, Ex. U, at pp. 6-7; Krause Depo., Ex. P, at 160:1-165:5.) To the extent that Defendant is suggesting credit for lots under Meritage control on his first day at work, there is no support in the evidentiary record. c. Meritage controverts this paragraph. Defendant argues that the total
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inventory of lots includes those remaining to sell and the lots purchased under rolling options, but that number is overinclusive. (See May 31, 2002 Lot Status Report, attached as Exhibit 20 to GH SOF.) The lots remaining to be sold could and likely do include rolling options, but a portion of the lots considered to be rolling options are already sold and therefore not remaining to be sold. (See id.) For example, the Cobblefield project shows that of the 216 total lots only 10 of them are available for sale (as can be shown by the 190 closed properties, 14 sold started, and 2 sold not started) (See id.) So in essence, there are 10, not 216, lots available for sale from the Cobblefield project. The same analysis could be done for the remaining projects shown on the May 31, 2002 Lot Status Report. (See id.) Moreover, the total in the Lot Status Report includes lots under control but not entitled yet, and therefore, not ready to be sold and marketed. (See id.) The lots available for sale are those that were already developed, open for sale, and obviously, not yet sold. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Just a reading of the Lot Status Report clearly shows that there are far less
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than 6,860 total lots available for sale. (See May 31, 2002 Lot Status Report, Ex. 20 to GH SOF; Report of Gregg Curry, Ex. U, at pp. 6-7; Krause Depo., Ex. P, at 160:1-165:5.) d. Meritage controverts this paragraph. To the extent that Defendant
implies that this quote proves that Meritage had more lots available for sale than Curry states in his report, Meritage objects. (See March 6, 2002 Minutes, attached as Exhibit 21 to GH SOF; Report of Gregg Curry, Ex. U, at p. 7.) Further, the statement that the "Hancock/Meritage product remains good" does not mean that Defendant acquired adequate land for Meritage to sell and market. See Objections to Paragraphs 28-30 and 33-36, supra. Meritage lost market share and revenue under Defendant's direction and as the result of the lack of an adequate supply of land to sell and market. (See Report of Gregg Curry, Ex. U, at 6 to 10.) e. Meritage controverts this paragraph. Defendant argues that the total
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inventory of lots includes those remaining to sell and the lots purchased under rolling options, but that number is overinclusive. (See July 31, 2002 Lot Status Report, attached as Exhibit 22 to GH SOF.) The lots remaining to be sold could and likely do include rolling options, but a portion of the lots considered to be rolling options are already sold and therefore are not remaining to be sold. (See id.) For example, the Grande Mirage project shows that of the 225 total lots only 2 of them are available for sale (as can be shown by the only 2 lots remaining for sale and the 225 rolling options.) (See id.) So in essence, there are 2, not 225, lots available for sale from the Grande Mirage project. The same analysis could be done for the remaining projects shown on the July 31, 2002 Lot Status Report. Moreover, the total in the Lot Status Report includes lots under control but not entitled yet, and therefore, not ready to be sold and marketed. (See id.) The lots available for sale are those that were already developed, open for sale, and obviously, not yet sold. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Just a reading of the July 31, 2002 Lot Status Report clearly shows that there are far less than 7,170 total lots available for sale. (See July 31, 2002, Lot Status Report, Ex. 22 to GH SOF; Report of Gregg Curry, Ex. U, at pp. 6-7; Krause Depo., Ex. P, at 160:1-165:5.)
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f.
Meritage controverts this paragraph. Meritage's 10-K report to the
SEC for the fiscal year ending December 31, 2002, does not say that Meritage had over 10,000 lots available for sale of its Arizona Hancock product. (See December 31, 2002 10-K Form, attached as Exhibit 23 to GH SOF, at NAV000141). First, the total "home sites remaining" for Meritage not just the Hancock Communities and in all of Arizona not just metropolitan Phoenix equaled 11,701 home sites remaining. (See id.) Further, a footnote to this calculation clearly defines "home sites remaining" as "the estimated number of homes that could be built on the remaining lots available for sale and land to be developed into lots." (See id.) (emphasis added). This number, therefore, does not only take into account the number of lots available for sale lots that were already developed and open for sale but not yet sold as did Curry. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Instead, these refer to land for long-term development, more akin to "a piece of raw land sitting out in the desert that an individual is not able to go out and buy a lot from." (See id.) Defendant provides no factual support as required under LRCiv. 56.1(a) to detail the amount of "lots available for sale." g. Meritage controverts this paragraph. First, Greg Hancock concedes
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that he quit. (See Greg Hancock Depo., Ex. R, at 130:13-17.) Second, Defendant argues that the total inventory of lots includes those remaining to sell and the lots purchased under rolling options, but that number is overinclusive. (See February 23, 2003 Lot Status Report, attached as Exhibit 23 to GH SOF.) The lots remaining to be sold could and likely do include rolling options, but a portion of the lots considered to be rolling options are already sold and are therefore not remaining to be sold. (See id.) For example, the Symphony II project shows that of the 153 total lots only 37 of them are available for sale (as can be shown by the 84 closed lots, the 27 sold started lots, and the 5 sold not started lots). (See id.) So in essence, there are 37, not 117, lots available for sale from the Symphony II project. The same analysis could be done for the remaining projects shown on the February 23, 2003 Lot Status Report. Moreover, the total in the Lot Status Report includes lots under control, but not entitled yet, and therefore, not ready to be sold and
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marketed. (See id.) The lots available for sale are those that were already developed, open for sale, and obviously, not yet sold. (See Report of Gregg Curry, Ex. U, at p. 6; Curry Depo., Ex. V, at 44:1-23.) Just a reading of the Lot Status Report clearly shows that there are far less than 8,814 total lots available for sale. (See February 23, 2003 Lot Status Report, Ex. 24 to GH SOF; Report of Gregg Curry, Ex. U, at pp. 6-7; Krause Depo., Ex. P, at 160:1-165:5.) 40. For purposes of this Motion, Meritage does not object to Defendant's
statement of fact in this paragraph. 41. Meritage controverts this paragraph. Defendant's self-serving, after-the-fact
testimony is squarely contradicted by the Exhibits Defendant relies on earlier. See Objections to Paragraphs 39(a), (b), (c), (e), (f), and (g), supra. 42. Meritage controverts this paragraph. Defendant's job performance was
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outside of the scope and purpose of Curry's testimony and report. Curry simply opines on the performance of Meritage compared to the market and its prior performance under Hancock's leadership; not on Defendant's job performance or whether he is liable. (See Report of Gregg Curry, Ex. U, generally; Curry Depo., Ex. V, at 27:24 to 31:14, 39:18 to 40:4.) Further, the purported support for the factual assertion does not, in fact, support the assertion. Here, Defendant cites to his Exhibit 34 which is not the deposition testimony of Mr. Curry. (See Acquisition Summary, attached as Exhibit 34 to GH SOF, at MER030190.) Thus, Defendant fails to provide proper support for the assertion as required by LRCiv 56.1(a). 43. Meritage controverts this paragraph. Defendant ignores that his
Employment Agreement contained affirmative duties that are not trumped or eliminated by his non-competes or exclusions thereto. (See Employment Agreement, Ex. 15 to GH SOF, at ¶¶ 1 and 8; see also Objections to Paragraphs 28-30, supra.) a. Meritage controverts this paragraph. First, Paragraph 8(A) of the
Employment Agreement does more than just prevent Defendant from engaging in any homebuilding business within 100 miles of Meritage. (See id. at ¶ 8(A).) It also prevents
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the recruiting, hiring or discussing of employment with any person "who is, or within the six month period preceding the date of such activity was, any employee" of Meritage. (See id. at ¶ 8(A)(2).) Further, it prevents any solicitation of any customer or supplier of Meritage. (See id.) Moreover, there is ample evidence that Defendant engaged in a homebuilding business Rick Hancock Homes prior to the ending of the restrictive covenant. In February 2004, Defendant wrote Meritage purporting to unilaterally (and wrongfully) terminate Meritage's license to the Hancock name and threatened to sue Meritage if it did not remove the name from all advertising and stop using it. (See February 13, 2004 Letter, Ex. 12 to GH SOF.) Later that spring, Defendant licensed the Hancock name to Rick Hancock so he could use it in selling identical homes rights across the street from Meritage in Sundance. (See Ahern Depo., Ex. M, at 18:21 to 19:17; Rick Hancock Depo., Ex. E, at 118:10 to 120:13 and 165:21 to 167:1) Defendant then sold Rick Hancock the land, provided land banking services, and provided that land to Rick Hancock Homes at a discounted price. (See Cornwall Depo., Ex. N, at 19:10 to 20:18 and 22:13 to 23:19; Arneson I Depo., Ex. O, at 154:11 to 155:20; Krause Depo., Ex. P, at 109:1-4.) In January 2005, Defendant provided substantial monies (more than $330,000) to Rick Hancock Homes. (See Checks, Ex. Q, at RHH 13880; Krause Depo., Ex. P, at 130:6 to 135:5.) Defendant was involved in the operations of Rick Hancock Homes. One such example is assistance that Defendant provided Rick Hancock Homes at Sundance builders' meetings. (See Rick Hancock Depo., Ex. E, at 283:1 to 284:14.) Likewise, there is evidence that Defendant officed at Rick Hancock Homes and attended Rick Hancock Homes sales meetings. (See Krause Depo., Ex. P, at 115:4 to 119:2 and 102:13 to 102:19.) Defendant ignores that his Employment Agreement contained affirmative duties that are not trumped or eliminated by his non-competes or exclusions thereto. (See Employment Agreement, Ex. 15 to GH SOF, at ¶¶ 1 and 8; see also Objections to Paragraphs 28-30, supra.) b. For the purposes of this Motion, Meritage does not object to
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Defendant's statement of fact in this paragraph.
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44.
Meritage controverts this paragraph. Meritage does not object to the
assertion that Meritage believes Greg Hancock violated his Employment Agreement. Meritage, however, does object to the portions of this paragraph that assert that Defendant was not in violation of his restrictive covenants. First, Paragraph 1 of the Employment Agreement provided in no uncertain terms that Defendant would diligently perform his duties, devote substantially all of his attention to the Company, and not engage in activities that would interfere with his duties to the Company. (See Employment Agreement, Ex. 15 to GH SOF, at ¶ 1.) Among Defendant's primary duties at Meritage were the acquisition of land and ensuring adequate land that could be sold and marketed. (See Krause Depo., Ex. P, at 139:17 to 140:15; Arneson I Depo., Ex. O, at 55:11-15; Greg Hancock Depo., Ex. R, at 206:13 to 207:11.) Defendant breached this duty by failing to acquire adequate land and did so for two reasons: (1) Defendant was acquiring land (e.g., Westwind, Riata West, and Fox Hunt) for his own account through Olympic, usurping Meritage's corporate opportunities to acquire that same land on the same terms offered to Defendant (see Cornwall Depo., Ex. N, at 46:3-6, 43:18 to 54:2), and (2) Defendant was eschewing other opportunities to acquire land for Meritage thereby weakening Meritage financially. (See id., at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) Olympic and Defendant tied up valuable land in the very markets in which Meritage did business with the intent that that land would be developed by homebuilders to compete against Meritage. (See Cornwall Depo., Ex. N, at 46:3-6, 43:18 to 54:2, and 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9; Olympic Development, L.L.C. Operating Agreement, attached as Exhibit W hereto, at ¶¶ 1.5, 7.4, and 7.5; Olympic Properties, L.L.C. Operating Agreement, attached Exhibit X hereto, at ¶¶ 1.5, 7.4, and 7.5.) Defendant met with Devon Properties and negotiated the financing to develop the Westwind project into homesites, a few miles from Meritage's Sundance development. (See June 13, 2006 Deposition of Robert Rodgers ("Rodgers Depo."), attached as Exhibit Y hereto, at 11:17 to 16:18, 20:16 to 21:8, and 21:24 to 22:21; Cornwall Depo., Ex. N, at 59:7 to 60:19; Draft of Property Development Agreement for West Wind Properties, LLC, attached as
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Exhibit Z hereto, at Recitals and ¶ 1; Draft of Limited Liability Company Agreement of West Wind Properties, LLC, attached as Exhibit AA hereto, at ¶ 2.6.) He arranged for his lawyers the same lawyers he hired to work for Meritage to draft and/or revise the legal documents to acquire this land and arrange for the financing. (See, e.g., Cornwall Depo., Ex. N, at 63:1-12, 64:17-25, 67:14-24, 85:7 to 86:1, 142:8-10, and 144:6 to 145:9; September 27, 2006 Deposition of Kurt Brueckner, ("Brueckner Depo."), attached as Exhibit BB hereto, at 10:9 to 13:4, 15:15 to 16:12, 21:10-20, 22:4 to 24:2, 24:6-11, 66:1519, 68:11-16, 80:2-24, 116:10 to 117:1, and 195:24 to 196:21.) All this was done in secret while he was telling his management staff and others not to acquire land for Meritage because he would not stay with the company long enough to benefit personally from the acquisition of land. (See Cornwall Depo., Ex. N, at 103:12 to 104:10; Arneson Decl., Ex. S, at ¶¶ 4-9.) Further, Defendant did not simply own a 25% passive interest in Olympic; he also owned an option to purchase up to a 60% interest in Olympic for a nominal amount. (See June 14, 2001 Letter from K. Brueckner, attached as Exhibit 25 to GH SOF, at DC000166; Option Agreement, attached as Exhibit 26 to GH SOF, at ¶¶ 1 and 3.) Additionally, he actively participated in Olympic, by among other things, agreeing to major decisions, footing the majority of the start-up expenses, spearheading the negotiations for financing, providing input regarding purchasing land, using his own personal attorney as the attorney representing Olympic and as its statutory agent, negotiating the Limited Liability Company Agreement of Westwind Properties, LLC with Devon Properties, and touring properties. (See Olympic Development, L.L.C. Operating Agreement, Ex. W, at ¶¶ 1.8 and 7.5; Olympic Properties, L.L.C. Operating Agreement, Ex. X, at ¶¶ 1.8 and 7.5; Cornwall Depo., Ex. N, at 52:22 to 53:1, 55:7 to 57:1; Rodgers Depo., Ex. Y, at 12:10 to 15:12, 17:5 to 19, 21:24 to 22:8, 34:10 to 35:15, 44:20 to 45:9, 62:7 to 17, and 65:20 to 25; Arizona Corporation Commission Public Access System Website ("ACC Website"), attached as Exhibit CC hereto; June 14, 2001 letter from K. Brueckner, Ex. 25 to GH SOF, at DC000166-167; Greg Hancock Depo., Ex. R, at 54:24
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000
to 55:3 and 57:19 to 58:10; Draft of Limited Liability Company Agreement of West Wind Properties, LLC, Ex. AA, at GRHAN001346-GRHAN-001372.) 45. Meritage controverts this paragraph. First, Defendant provides no support
for the statement of fact in this paragraph as required by LRCiv 56.1(a). Further, the operating agreement of the first Olympic Properties entity was executed on June 26, 2001. (See Olympic Properties, L.L.C. Operating Agreement, Ex. X, at p. 32.) Meritage objects to the implication that Defendant only had a 25% passive interest in Olympic. Defendant also owned an option to purchase up to a 60% interest in Olympic for a nominal amount. (See June 14, 2001 Letter from K. Brueckner, attached as Exhibit 25 to GH SOF, at DC000166; Option Agreement, attached as Exhibit 26 to GH SOF, at ¶¶ 1 and 3.) Additionally, Defendant testified that the purpose of Olympic was to find investment properties and that Olympic was "trying to find and secure land that might be sold in some form late to a homebuilder." (See Greg Hancock Depo., Ex. R, at 58:23 to 59:8.) Drafts of the Westwind start-up agreements state that Defendant was developing Westwind into a masterplan residential community. (See Draft of Property Development Agreement for West Wind Properties, LLC, Ex. Z, at Recitals and ¶ 1; Draft of Limited Liability Company Agreement of West Wind Properties, LLC, Ex. AA, at ¶ 2.6.) 46. Meritage controverts this paragraph. Defendant's assertion in this paragraph
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attempts to make a legal conclusion that Kurt Brueckner's formation documents successfully comported with the restrictions in the Defendant's Employment Agreement. (See Employment Agreement, Ex. 15 to GH SOF, at ¶ 8(B)(1).) The formation documents, however, breached the Employment Agreement. Defendant did not simply own a 25% passive interest in Olympic; he also owned an option to purchase up to a 60% interest in Olympic for a nominal amount as set forth in the Option Agreement drafted by Defendant's attorney. (See June 14, 2001 Letter from K. Brueckner, attached as Exhibit 25 to GH SOF, at DC000166; Option Agreement, attached as Exhibit 26 to GH SOF, at ¶¶ 1 and 3.) Additionally, as required by the Operating Agreement drafted by Defendant's attorney, he actively participated in Olympic, by among other things, agreeing to major
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decisions, footing the majority of the start-up expenses, spearheading the negotiations for financing, providing input regarding purchasing land, using his own personal attorney as the attorney representing Olympic and as its statutory agent, negotiating the Limited Liability Company Agreement of Westwind Properties, LLC with Devon Properties, and touring properties. (See Olympic Development, L.L.C. Operating Agreement, Ex. W, at ¶¶ 1.8 and 7.5; Olympic Properties, L.L.C. Operating Agreement, Ex. X, at ¶¶ 1.8 and 7.5; Cornwall Depo., Ex. N, at 52:22 to 53:1 and 55:7 to 57:1; Rodgers Depo., Ex. Y, at 12:10 to 15:12, 17:5 to 19, 21:24 to 22:8, 34:10 to 35:15, 44:20 to 45:9, 62:7 to 17, and 65:20 to 25; ACC Website, Ex. CC; June 14, 2001 letter from K. Brueckner, Ex. 25 to GH SOF, at DC000166-167; Greg Hancock Depo., Ex. R, at 54:24