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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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Snell & Wilmer L.L.P.
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 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 TO DEFENDANT GREG HANCOCK'S UPDATED MOTION FOR SUMMARY JUDGMENT OR DISMISSAL
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Document 434
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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 Defendant Greg Hancock's ("Defendant's") Updated Motion for Summary Judgment or Dismissal ("Motion"). This Response is supported by the following Memorandum of Points and Authorities as well as Objections to Defendant's Statement of Facts ("Objections") and a Controverting Statement of Facts ("CSOF"), including exhibits attached thereto. Meritage also incorporates by reference the Statement of Facts in support of its Motion for Summary Judgment and its Objections and Controverting Statement of Facts in response to Rick Hancock's Motion for Summary Judgment. Two years ago, in another Motion for Summary Judgment, Defendant skewed the factual record to avoid facts implicating him in wrongful conduct and misstated the law a pattern of his with which this Court is now all too familiar. Once again, Defendant is up to the same bag of tricks. As set forth in Meritage's 64 pages of Objections and CSOF
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accompanying this Response, Defendant again skews the factual record, takes quotes and evidence out of context, ignores plain and obvious evidence of disputed facts, and simply makes up law when controlling precedent is to the contrary. MEMORANDUM OF POINTS AND AUTHORITIES I. STANDARD OF REVIEW In order to prevail on his Motion, Defendant bears the burden to show that "there is no genuine issue as to any material fact" and that he is "entitled to judgment as a matter of law" because no facts are in dispute. Fed. R. Civ. P 56(b) and (c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). A "genuine issue" exists if 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. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-52 (1986). II. ARGUMENT A. Defendant Miscites Case Law
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Defendant reveals how weak his Motion is by misstating the law. For example, as he did in his original 2004 Motion and in effort to alter the burden of proof with respect to the unfair competition claim, Defendant miscites Calif. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466 (9th Cir. 1987) as governing summary judgment with respect to the Lanham Act claim. (See Motion at 2:7-13.). California Architectural concerned fraud and racketeering claims that are not at issue here, and no claim in this case carries a clear and convincing burden like the claims that were summarily thrown out in California Architectural. 818 F.2d at 1467. With respect to the Lanham Act claim, the fact-finder is to decide whether the defendants' activities with respect to Rick Hancock Homes were likely to confuse consumers and amount to unfair competition. See, e.g., Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1140 (9th Cir. 2002) (reversing summary judgment ) (citing Interstellar Starship Servs., v. Epix, Inc., 184 F.3d 1107, 1109 (9th Cir. 1999)); Levi
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Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1356 n.5 (9th Cir. 1985). "The Lanham Act provides national protection of trademarks in order to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." Park N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 198 (1985). To achieve these goals, the Act allows for civil liability against "any person who, on or in connection with any goods or services, . . . uses in commerce any word, term, name, symbol, or device, or any combination thereof . . . which . . . is likely to cause confusion . . . as to the origin, sponsorship, or approval" of the goods or services. 15 U.S.C. § 1125(a)(1). The test is whether the use of Rick Hancock Homes to sell nearly identical homes right next to Hancock Communities in the same subdivision (i.e. Sundance in Buckeye, Arizona) was likely confusing to consumers. See, e.g., Entrepreneur Media, 279 F.3d at 1140. The Ninth Circuit applies an eight factor test to determine likelihood of confusion: (1) the strength of the name, (2) the similarity of the names, (3) the proximity of the competing products, (4) the intent of the party employing the similar name, (5) evidence of actual confusion, (6) whether similar marketing was used, (7) the likelihood of growth, and (8) the degree of care consumers are likely to use. See, e.g., id. (citing AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979)). The ultimate question of likelihood of confusion "is predominantly factual in nature," as is each factor within the Sleekcraft likelihood of confusion test. Id. The facts simply ignored by Defendant establish that actual and potential consumers looking to purchase a home from Hancock Communities, as well as vendors, were likely confused by Rick Hancock Homes. (See, e.g., Objections at ¶ 68; CSOF at ¶¶ 23, 98, 107 and 116-125.) B. Meritage Never Breached The License Agreement 1. Meritage Did Not Breach the License Agreement by Derogating or Detracting from the Hancock Mark's Repute, Value, Marketability, Degree of Public Recognition, or Popularity
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a.
As a Matter of Law, the Terms "Derogate" and "Detract" Mean a Defaming Use and Not the Mere Reduction or Change in Use
Defendant has repeatedly asserted, throughout the motion practice and elsewhere, that the terms "derogate" and "detract" in the License Agreement operate as a bar, preventing Meritage from reducing or changing its use of the name "Hancock" under the License Agreement. (See, e.g., Motion at 3:11-5:10; Hancock's Motion to Stay Entering of Judgment at 2:7-4:10, 5:19-26, and 8:23-9:3 (Apr. 27, 2006).) This Court has already rejected Defendant's "derogation" argument. (Compare Greg Hancock's Answer to
Plaintiff's Second Amended Complaint and Counterclaim and Third-Party Complaint of Greg Hancock at ¶¶ 32-48, 55-56, and 58-64 (May 11, 2005) with Order at 5 (Mar. 31, 2006); Greg Hancock's Motion to Stay Entering of Judgment at 2:7-4:10, 5:19-26, and 8:23-9:3 (Apr. 27, 2006) with Order at 10 (Aug. 22, 2006).) The License Agreement provides: "Licensee undertakes and agrees not to use the Licensed Marks in any manner whatsoever which, directly or indirectly, would derogate or detract from the Licensed Mark's repute, value, marketability, degree of public recognition or popularity." (See CSOF at ¶ 1) (emphasis added). First, the License Agreement could have required but does not do so Meritage to use the Hancock names. (See CSOF at ¶¶ 1-3.) The License Agreement could have required but does not do so Meritage to use the Hancock names with specific frequency or sales targets, such as 50% of homes offered for sale, or with respect to specific homes, such as all homes sold in Buckeye, Arizona. (See CSOF at ¶¶ 1-3.) See, e.g., Burma-Bibas, Inc. v. Excelled Sheepskin and Leather Coat Co., 1986 U.S. Dist. LEXIS 17650, *41-43 (S.D.N.Y. 1986) (the absence of sales targets means that general language should not be interpreted as imposing sales targets). On the issues of minimum requirements or sales targets, the Agreement is silent. (See CSOF at ¶¶ 1-3.) Second, in the trademark context, courts treat the two terms "derogate" and "detract" interchangeably and in reference to quality or context and not quantity. See, e.g., Burma-Bibas, 1986 U.S. Dist. LEXIS 17650 at *41-43 (interpreting the "derogate or
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detract" language, identical to the instant language, as interchangeable and related to the level of quality of the mark's use such as using a mark in the context of pornography). "Derogate" and "detract" involve the sale of inferior or different goods impugning the reputation of the mark or conflicting with the mark not the sale of fewer goods than a mark holder might desire the licensee to sell. See, e.g., Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 636 (1st Cir. 1992); Susser v. Carvel Corp., 332 F.2d 505, 519-20 (2d Cir. 1964); GE v. Alumpa Coal Co., 1979 U.S. Dist. LEXIS 9197, *3-4 (D. Mass. 1979) and cases cited therein. The strictly contextual use of "derogate" and "detract" is also consistent with their general use in tort law. See, e.g., Nat'l Bd. for Certification of Occupational Therapy v. Amer. Occupational Therapy Ass'n, 24 F. Supp. 2d 494, 511 (D. Md. 1998). Third, Defendant's assertion that the two terms create affirmative requirements of trademark use is also thoroughly inconsistent with the purposes underlying trademark law. The leading treatise on trademark law defines "[t]he four [trademark] functions that are deserving of protection in the courts: 1. 2. 3. 4. To identify one seller's goods and distinguish them from goods sold by others; To signify that all goods bearing the trademark come from or are controlled by a single, albeit anonymous, source; To signify that all goods bearing the trademark are of an equal level of quality; and As a prime instrument in advertising and selling the goods."
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1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION at § 3:2 (4th ed. 2006). None of these functions could support Defendant's claim that Meritage breached the License Agreement by modifying its use of the Hancock name. At best, the subject clause in Paragraph 1 of the License Agreements serves as a prohibition against active disparagement or belittlement that would undermine the significance of the trademark. (See CSOF at ¶ 1.) In no way does the phrase "derogate" and "detract" serve as an "uberbest efforts" clause requiring Meritage, as licensee, to fulfill Defendant's financial
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expectations or perceived entitlement to force Meritage to structure its company in such a manner so as to increase the sales of licensed products above some imaginary and never agreed-upon threshold. b. Even Assuming that the Terms "Derogate" and "Detract" Were to Relate to a Reduction in Use, It Is Undisputed that Meritage Sold More than $110 Million of Homes under the Name "Hancock," and Such Use Is Not "Derogatory" or "Detracting" as a Matter of Law
Even if the Court were to accept Defendant's unsupported argument that the terms "derogate" and "detract" prohibited Meritage from reducing its use of the Hancock name, the argument fails on the facts. Defendant erroneously argues that Meritage stopped using the "Hancock" name; Meritage, however, undisputedly has sold more than $117 million in homes under the name "Hancock" throughout metropolitan Phoenix since July 1, 2004. (See, e.g., Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶ 4.) Such use is right in line with the Hancocks' sales of homes under the name "Hancock" during the years before the sale of the Hancock Communities business to Meritage when the Hancock Communities only sold homes in the Buckeye area. (See Objection at ¶¶ 5, 15, and 16; CSOF at ¶ 5.) In fact, even Rick Hancock testified that Meritage continued to use the name "Hancock" in association with at least one of its product lines, the "Hancock Communities" new homes built at the Sundance community in Buckeye, and that Meritage intended to continue using the "Hancock" mark. (See CSOF at ¶ 7.) For more than a year after this lawsuit commenced, Meritage continued to use the Hancock name on all of the related paperwork for sales of homes at the Sundance community. (See Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶ 8.) Until late-May or early-June 2005, Meritage had signs for its "Hancock Communities Series at Sundance" all around it and in the near vicinity of the land in which the Defendants seek to use the "Hancock" mark to sell similar homes. (See Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶¶ 8 and 10.) Meritage extensively advertised and conducted sales of homes operating under the Hancock name at Sundance through that time. (See Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶¶ 11 and 117.) In fact, despite Defendant's assertion of abandonment, as of
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February 21, 2007, Meritage still had three remaining Hancock Communities Series homes available for sale at Rancho Bella Vista! (See Objections at ¶¶ 5, 7, and 15; CSOF at ¶ 9.) Lastly, even Defendant Rick Hancock conceded on December 20, 2006, that Meritage continued to use the "Hancock" name today. (See CSOF at ¶ 7.) c. Meritage's Transition of the Hancock Name to Meritage Does Not Violate the License Agreement
Defendant makes much of the September 8, 2003 email from Steve Hilton to John Landon, Meritage's co-CEOs at the time, and the events surrounding the transition of the Hancock name. (See Motion at 3:11-5-10 and 5:19-6:2.) Despite Defendant's efforts to establish that email and transition as proof of Meritage's breach of the License Agreement, the argument is simply a red-herring. 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 2007. (See Objections at ¶ 5; CSOF at ¶¶ 12-13.) As Hilton explained, "[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 Objections at ¶ 5; CSOF at ¶ 13) (emphasis added). As can be easily discerned from the email and testimony, 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. That cannot amount to a breach. In addition, Defendant's interpretation of the email is contrary to the law of the case. 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").)
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d.
Meritage Could Not Have Breached the License Agreement after Defendant Purportedly Terminated It
Defendant argues, as he has before, that Meritage's decision implemented in July 2004 to rebrand the Hancock Communities division to the Meritage division violated the License Agreement. (See, e.g., Greg Hancock Counterclaim at ¶¶ 43, 46, 48, and 61-63.) This Court has already rejected this argument. (Compare Greg Hancock's Answer to Plaintiff's Second Amended Complaint and Counterclaim and Third-Party Complaint of Greg Hancock at ¶¶ 32-48, 55-56, and 58-64 (May 11, 2005) with Order at 5 (Mar. 31, 2006); Greg Hancock's Motion to Stay Entering of Judgment at 2:7-4:10, 5:19-26, and 8:23-9:3 (Apr. 27, 2006) with Order at 10 (Aug. 22, 2006).) But even assuming that this Court had not so ruled, Defendant selectively ignores the fact that, even as part of the rebranding program, Meritage continued to use the "Hancock" name to sell homes more than $117 million in "Hancock" homes (see, e.g., Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶¶ 4) and advertised and sold Hancock Communities Series homes at Sundance through June 2005 and in Rancho Bella Vista through the date of this Response. (See Objections at ¶¶ 5, 7, 15, and 16; CSOF at ¶¶ 7-11 and 117.) Defendant's logic is flawed and akin to claiming that if Apple was acquired by Dell and stopped operating in the computer business under the Apple name but continued to sell Apple computers, the post-acquisition entity would lose the right to the Apple name. Moreover, the law is to the contrary: Abandonment, as defined by the Lanham Act, occurs when the "use has been discontinued with intent not to resume such use." 15 U.S.C. § 1127; see also 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). Defendant fails on both elements. But even assuming that Meritage had not continued to use the "Hancock" name, the reality is that the Defendant cannot support his assertion that the rebranding program amounted to abandonment or a "campaign to trash his name." (See Motion at 5:11.) The rebranding program was implemented in July 2004, and was compelled by Defendant's
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conduct. (See Greg Hancock Counterclaim at ¶¶ 43, 46, 48, and 61-63.) This is five months after Greg Hancock wrote Meritage purporting to immediately terminate the License Agreement and threatening to sue it if Meritage did not remove the "Hancock" name from its advertising. (See Objections at ¶¶ 18-19, 25, 43(a), 67(a), and 69; CSOF at ¶¶ 16, 37, and 126.) The rebranding program was also implemented after the defendants opened Rick Hancock Homes. (See CSOF at ¶ 17.) Defendant cannot (1) instruct Meritage to stop using the "Hancock" name (see Objections at ¶¶ 18-19, 25, 43(a), 67(a), and 69; CSOF at ¶¶ 16, 37, and 126); (2) license his brother to use the "Hancock" name to sell the identical homes across the street from Meritage (see Objections at ¶¶ 25, 43(a), 43(b), 67(b), and 69; CSOF at ¶¶ 19 and 38); (3) provide financial assistance in terms of capital contributions and discounted land to Rick Hancock Homes for the same impermissible purpose (see Objections at ¶¶ 25, 43(a), 43(b), 67(b), and 69; CSOF at ¶¶ 20 and 39); and (4) later complain when Meritage modifies its use of the "Hancock" name to address the confusion caused by this conduct. e. The License to Use "Hancock" Includes Derivative Terms Such as "Rick Hancock Homes"
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In his Motion, Defendant argues that the mark "Rick Hancock Homes" was not provided for in the License Agreement and its use by the Hancocks is not a breach of any agreement with or duty owed to Meritage. (See Motion at 3:7-10.) Such an argument is contrary to law. The License Agreement states that "`Licensed Marks' shall mean the word marks `Hancock Homes' and `Hancock Communities' . . ." (See CSOF at ¶ 1.) Under general trademark law, the reference to "Hancock Homes" is sufficient to include "Rick Hancock Homes." See, e.g., Apple Comp., Inc. v. Formula Int'l, Inc. 725 F.2d 521, 526-27 (9th Cir. 1984) (holding that the mark "Pineapple" and "Apple" describing computers were confusingly similar as they contained the same suffix and were used in the same industry); Malaytex USA Inc. v. Colonial Surgical Supply Inc., 44 U.S.P.Q.2d 1291, 1294 (N.D. Cal. 1997) (ruling that the terms "Cranberry" and "Blackberry" are confusingly similar names for latex gloves especially where the method of advertisement
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and sales of the product are the same); Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1213 (9th Cir. 2003) (the mark "Earthquake" was confusingly similar to the mark "Carquake" in the automobile audio equipment industry). Further, the Asset Sale and Purchase Agreement specifically amplified the scope of the license by stating that "Greg Hancock and Sellers hereby grant to [Meritage] an exclusive license to use the names `Hancock Homes' and `Hancock Communities,' and all variations of or derivations from such names. . ." (See Objections at ¶ 2) (emphasis added).1 f. Defendant "Reneged" on His Promise to this Court and Violated Its Order
On several occasions in March 2004, Defendant and his brother promised this Court that they would maintain the "status quo" and not use the name "Hancock" in a homebuilding business that competed against Hancock Communities, and, in express reliance on the Hancocks' promise, this Court entered an Order denying Meritage's Application for a Temporary Restraining Order. (See CSOF at ¶ 21.) In June 2004, in breach of that promise to this Court and while this Court was on a leave of absence, Rick Hancock Homes and its homebuilding business opened in the same subdivision as Meritage's Hancock Communities, thereby deliberately violating this Court's Order and creating the precise confusion in the marketplace the Court sought to prevent. (CSOF at ¶ 22.) Such conduct should not be countenanced. See Green v. Higgins, 217 Kan, 217, 221, 535 P.2d 446, 449 (1975) ("It should also be emphasized that in applying the clean hands maxim, courts are concerned primarily with their own integrity. The doctrine of unclean hands is derived from the unwillingness of a court to give its peculiar relief to a suitor who in the very controversy has so conducted himself as to shock the moral sensibilities of the judge. It has nothing to do with the rights or liabilities of the parties.")
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1
Defendant's reliance on Hilton's testimony is misplaced and taken out of context. Nowhere in Hilton's testimony or anywhere else in the record does Meritage (or its employees) "agree that the [License Agreement] didn't cover `Rick Hancock Homes.'" (See Motion at 3:7-10.)
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2.
The License Agreement Does Not Require Meritage to Obtain Defendant's Permission before Changing How It Uses the "Hancock" Name
Defendant has accused Meritage of violating the License Agreement by failing to obtain Defendant's permission before either considering or, in fact, changing how it uses the "Hancock" name. (See Motion at 5:2-4.) This accusation fails as a matter of law. The License Agreement and Asset Sale and Purchase Agreement simply do not require Meritage to seek out Defendant's permission to do anything with respect to its use of the name "Hancock." (See CSOF at ¶ 24; Objections at ¶ 16.) Quite to the contrary, Defendant gave Meritage an exclusive license and all rights of use belonging to it: "Licensor hereby grants Licensee a personal, exclusive, nontransferable, nonassignable license to use the Licensed Marks during term of this Agreement." (See CSOF at ¶ 5.) C. Since Meritage Did Not Breach the Earn-Out Provisions, Defendant Did Not Properly Cancel the License Agreement
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Defendant was only entitled to terminate the License Agreement if Meritage breached it or the Master Transaction Agreement. (See CSOF at ¶ 26; Objections at ¶ 18.) Defendant's allegations of breach lack merit. Defendant first asserts that Meritage failed to provide him with an accounting of his earn-out and therefore breached the Master Transaction Agreement. (See Motion 5:13-16.) An accounting was not due, however, until March 31, 2004, a month after Defendant purported to terminate the License Agreement. (See CSOF at ¶¶ 27 and 28; Objections at ¶ 18.) Meritage provided Defendant with an accounting prior to that date. (See CSOF at ¶ 29; Objections at ¶ 18.) Additionally, for the period at question, there was no positive earn-out amount, and therefore, no accounting or estimate was owed to Defendant. (See CSOF at ¶¶ 30 and 32; Objections at ¶ 18.) Defendant's own expert concedes that during the period of time that Defendant worked for the company, Meritage fully paid the earn-outs owed. (See CSOF at ¶ 31; Objections at ¶ 18.) Furthermore, the issue of whether Meritage breached any agreement or duty owed to Defendant has been raised in Defendant's counterclaims, actually litigated, and
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dismissed with prejudice by the Court against him. (Compare Greg Hancock's Answer to Plaintiff's Second Amended Complaint and Counterclaim and Third-Party Complaint of Greg Hancock at ¶¶ 32-48, 55-56, and 58-64 (May 11, 2005) with Order at 5 (Mar. 31, 2006); Greg Hancock's Motion to Stay Entering of Judgment at 2:7-4:10, 5:19-26, and 8:23-9:3 (Apr. 27, 2006) with Order at 10 (Aug. 22, 2006).) Defendants attempt to take one more bite at the apple in his Motion should be denied. D. For Once And For All, Federal Jurisdiction Is Present
For some reason, Defendant takes another stab at attacking the jurisdiction of this Court, asking the Court to yet again ignore previous rulings and controlling precedent to dismiss this matter for lack of subject matter jurisdiction. (See Motion at 6:1-14.) This is at least the eleventh separate time Defendant has raised this argument before this Court or the Ninth Circuit. (See Order at 8 n.6. (Aug. 22, 2006).) Defendant has failed each and every time. (See id. at 8:1-2.) The Court has clearly articulated its holding with respect to whether the Court has subject matter jurisdiction: "As stated previously, even if the Court ultimately dismiss the Lanham Act claim on the merits, it would retain supplemental jurisdiction over the state law claims. . . . Thus, as long as the court had original jurisdiction over the Lanham Act claim at the time it was filed, it makes no difference for purposes of subject matter jurisdiction whether the claim is ultimately successful." (See id. at 8:18-23.) E. Defendant Wrongfully Assisted Rick Hancock Homes.
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Defendant claims that there is not a single piece of evidence that shows that he invested in or otherwise assisted Rick Hancock in his home building enterprise. (See Motion at 6:18-20.) This is simply not true. First, 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 Objections at ¶¶ 18-19, 25, 43(a), 67(a), and 69; CSOF at ¶¶ 16, 37, and 126.) Second, 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
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Meritage in Sundance. (See Objections at ¶¶ 25, 43(a), 43(b), 67(b), and 69; CSOF at ¶ 38.) Third, Defendant then sold Rick Hancock the land (an undisputed fact), provided land banking services (an undisputed fact), and provided that land to Rick Hancock Homes at a discounted price. (See Objections at ¶¶ 25, 43(a), 43(b), and 69; CSOF at ¶ 39.) Fourth, despite his attempts to explain away, the fact remains that, in January 2005, Defendant provided substantial monies (more than $330,000) to his brother's homebuilding ventures. (See Objections at ¶¶ 25, 27, 43(a), 43(b), 67(b), and 69; CSOF at ¶¶ 20 and 40.) Fifth, Defendant was involved in the operations of Rick Hancock Homes and RLH Development. (See Objections at ¶¶ 25, 43(a), 43(b), 67(b), and 69; CSOF at ¶¶ 41 and 42.) F. Defendant Violated The Employment Agreement With Meritage 1. Defendant's Job Performance Argument Is a Red Herring
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Defendant spends nearly two-and-one-half pages in his Motion discussing his job performance. (See Motion at 7:1-9:14.) Whether Defendant received bonuses or complaints resulting from his job performance was never a basis for Meritage's complaint against Defendant. Accordingly, these issues bear no relevance to this matter. Fed. R. Evid. 401. Moreover, since Defendant hid his wrongful conduct from Meritage (see Objections at ¶¶ 33-35 and 44; CSOF at ¶¶ 48-53), whether Meritage provided Defendant with bonuses or complained about his conduct (which it did) is immaterial to all salient issues (except to the amount of Meritage's damages). Fed. R. Evid. 404. 2. The Record Proves that Defendant Violated Paragraph 1 of the Employment Agreement
Notwithstanding performance reviews and bonuses, Defendant breached his Employment Agreement and fiduciary duties by secretly commencing the Olympic business and by acquiring land and negotiating financing for it, while not acquiring sufficient land on which Meritage could market and sell homes. (See CSOF at ¶¶ 48-66, 68, and 69.) Paragraph 1 of the Employment Agreement between Defendant and Meritage provides in no uncertain terms the following:
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· · ·
"Employee agrees to diligently perform the duties associated with such position [President] . . . ." "Employee will devote substantially all of his business time, attention, and energies to the business of the Company. . . ." Employee was allowed to engage in a delineated list of "Outside Activities" "provided they do not interfere in any material respect with Employee's primary duties and responsibilities to the Company."
(See CSOF at ¶ 44.) Defendant's own Chief Financial Officer testified that among Defendant's primary duties at Meritage were the acquisition of land and ensuring adequate land that could be sold and marketed. (See Objections at ¶ 30; CSOF at ¶ 45.) Defendant's former Chief Operating Officer and current business partner also testified similarly. (See Objections at ¶ 30; CSOF at ¶ 46.) Further, Defendant has testified under oath and acknowledged to his employees and colleagues that, for a homebuilding business to be and remain successful, it must grow the available land in the "pipeline" to market and sell. (See Objections at ¶ 30; CSOF at ¶ 47.) Defendant breached his contractual and common law duties to Meritage 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; and (2) Defendant was eschewing other opportunities to acquire land for Meritage thereby weakening Meritage financially. (See Objections at ¶¶ 33-35, 44, and 47; CSOF at ¶¶ 48 and 49.) Pursuant to Olympic's Operating Agreement, Defendant directed Olympic and its manager to tie 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 Objections at ¶¶ 44 and 47; CSOF at ¶ 50.) Defendant personally met with Devon Properties and negotiated the financing to develop the Westwind project into a master-planned community with home sites, only a few miles from Meritage's Sundance development. (See Objections at ¶¶ 44, 46-47, 49, and 51; CSOF at ¶¶ 51 and 79-86.) 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
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and arrange for the financing. (See Objections at ¶¶ 44 and 47; CSOF at ¶ 52.) 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 Objections at ¶¶ 33-35; CSOF at ¶¶ 53 and 108-114.) Defendant's breaches harmed Meritage in many ways, including, but not limited to: (1) reducing its net profits by failing to maintain Meritage's supply of finished lots and stores (points of contact with customers), and (2) accelerating the sales of homes at reduced prices throughout 2003, 2004, 2005, and into 2006. (See, e.g., Objections at ¶¶ 63 and 73-74; CSOF at ¶¶ 54-57.) These harms caused Meritage damages in excess of $100 million (although some of these damages may be inclusive of each other). (See, e.g., Objections at ¶¶ 35-36, 38-39, 42, 54, 56, 63, 67(c), 68-69, and 73; CSOF at ¶¶ 58-69 and 126.) Defendant largely ignores this evidence, choosing instead to engage in credibility attacks and name-calling, arguing that witnesses (and undersigned counsel) were liars instead. (See Objections at ¶¶ 35-36, 38-39; CSOF at ¶¶ 63 and 68 (showing that Defendant's allegations of lying are baseless).) Since the issue of credibility is for the fact-finder and the current procedural posture requires the Court to view the evidence in the light most favorable to Meritage, there is no need to belabor the point here.2
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Defendant claims that Mr. Curry's statements regarding the available lots Meritage could sell at certain points of time were lies. (See Motion at 8:4-10.) Defendant simply misstates Mr. Curry's testimony, creates a false stalking horse, and then knocks it down. Mr. Curry analyzed data to determine how many lots are available and ready to sell to home buyers as opposed to raw land which would take years to develop. Curry was asked about this issue and testified clearly what he means by available lots: "to communities that have not been developed sufficiently to allow them to sell the lots. . . . "lots available for sale in the context that a lot is available on that date to sell. It's ready to be sold to the public. . . . It's not 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 Objections at ¶¶ 35-36, 38-39, and 63; CSOF at ¶ 68.)
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Questions Of Material Fact Exist Regarding Defendant's Involvement With Olympic, Westwind, And Riata West 1. Defendant Personally Participated in Olympic, Westwind, and Riata West
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Defendant seems to argue that it is undisputed that he was only a 25% owner of Olympic and was only a passive investor. (See Motion at 9:19-10:5.) But the evidentiary record shows factual disputes as to both. Defendant's 25% initial interest was not his entire ownership stake in Olympic; he owned another 35% for a total of 60%, in return for a mere nominal $3,500 payment. (See Objections at ¶¶ 44-47; CSOF at ¶¶ 72-74.) Keep in mind that the $3,500 was for an interest in Olympic that the Defendant personally and contemporaneously valued at $12 million. (See Objections at ¶ 53; CSOF at ¶¶ 74 and 114.) Likewise, Defendant controlled Olympic through the Operating Agreement drafted by his personal attorneys,3 provided nearly all of Olympic's seed money, spearheaded other financing efforts,4 agreed to purchase agreements and opened escrow on real property assets, permitted Olympic to transfer the $12 million in assets for no consideration, and personally acted on behalf of Olympic. (See Objections at ¶¶ 44-53; CSOF at ¶¶ 72-97, 99-102.) In this light, Defendant was not a passive investor. The most damning evidence, however, is Defendant's own testimony admitting as much. In his divorce lawsuit, Defendant admitted that he violated the Employment Agreement through his investment in Olympic. In particular, he testified: Q: A:
3
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What happened with there's been all this talk about Olympic. What happened with that potential investment? Olympic Properties. In looking back on it now, I probably would have been in clear violation of my employment agreement because it
Olympic's Operating Agreement expressly required Defendant's permission before it could buy, sell, entitle, finance or develop land as well as any other action of any significance. (See Objections at ¶¶ 44, 46-47, and 49; CSOF at ¶ 75.) Olympic's titular manager testified that Olympic complied with its Operating Agreement in this respect. (See Objections at ¶¶ 44, 46-47, and 49; CSOF at ¶¶ 76-77, 80, 85, and 86.) Defendant conveniently ignores Devon Properties' testimony on this issue and misleadingly points the Court to selective testimony. (Motion at 10:13-14). Devon Properties testified that Defendant personally negotiated the Olympic and Westwind financing deal with them. (See Objections at ¶¶ 44, 46-47, and 49; CSOF at ¶¶ 51, 79, and 81-84.)
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says I can't do anything outside the company unless it is a 25 percent passive interest. Olympic Properties was a company that Dave Cornwall and I were going to put together to buy land, plan it, zone it, maybe develop it, maybe not, and sell it to other builders." (See CSOF at ¶ 88.) Not surprisingly, now, when faced with a multi-million dollar lawsuit as a result of those breaches, he tries to take back that testimony. He cannot.5 2. Defendant Misreads His Employment Agreement
In trying to minimize his Olympic-related conduct,6 Defendant seems to argue that as long as he complied with his non-compete provision of his Employment Agreement he was free to breach his duties to Meritage. (Compare ¶ 1 with ¶ 8 of the Employment Agreement, Objections at ¶¶ 28-30 and 43-44; CSOF at ¶ 44.) The non-compete provision, however, cannot be read in isolation of Defendant's other contractual and common law duties and unambiguously does not trump these duties. As noted above, Defendant agreed that he would diligently perform all of the duties associated with his job as President of Meritage's Hancock Communities division, including ensuring that he would acquire adequate land to sell and market homes. (See Objections at ¶¶ 28-30 and 43-44; CSOF at ¶ 44.) He also owed Meritage common law fiduciary duties, including the duty not to usurp a corporate opportunity to acquire land assets. 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); Atkinson v. Marquart, 112 Ariz. 304, 30506; 541 P.2d 557-58 (1975); PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS § 5.05 (1994); (see Objections at ¶¶ 28-30; CSOF at ¶¶ 45-50 and Defendant had a back-up plan. Although Defendant may have been bought out from Olympic effective in March 2003 (see Objections at ¶ 52), Defendant's involvement simply did not end there. When Cornwall bought Defendant out of Olympic, they had a plan a side deal to allow Defendant back in after his dealings with Meritage ended. (See Objections at ¶¶ 51-52, 54-55, and 58-59; CSOF at ¶¶ 93-95.) This is quite likely because Defendant spent much of this case trying to conceal discovery of his Olympic-related conduct and telling this Court that there was nothing to Olympic.
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115.) These duties persist regardless of the non-compete language and regardless of whether Defendant complied with the terms of the non-compete. 2. Defendant's Inference that He Did Not Cause Damages As a Result of His Failure to Bring Riata West and Westwind to Meritage's Attention Lacks Merit
Defendant invested $79,500.00 for his 60% interest in Olympic, Riata West, and Westwind while he was an employee and officer of Meritage. (See Objections at ¶ 59; CSOF at ¶¶ 99 and 114.) Instead of providing that same opportunity to Meritage at such a minimal cost (see CSOF at ¶ 101), he took the opportunity for himself. He did not even transfer the rights in Olympic, Riata West, and Westwind to Meritage when he was eventually bought out by Cornwall, choosing, instead, to transfer it to Cavalier his future company for no consideration. (See Objections at ¶¶ 52 and 58-59; CSOF at ¶¶ 94-95, 100, and 112.) But for Defendant's usurpation of Meritage's corporate opportunities, Defendant concedes that Meritage would have purchased substantial interests in the Westwind, Riata West, and other properties back in 2001, as shown by its purchase in late December 2002 of the same properties. (See Motion at 11:17-19; CSOF at ¶ 101.) As a result, eighteen months later, Meritage was required to pay an additional buy-in fee of $1,000,000 and an additional capital contribution for only a 16% preferred return on its investment and 30% of profits rather than the 60% interest Defendant had the right to acquire for a nominal investment. (See Objections at ¶¶ 56, 59-60, and 63; CSOF at ¶ 105.) So, in other words, Meritage received half the amount of proceeds that Defendant was going to receive through Olympic but for many fold more money, causing Meritage to be damaged in the amount of $4.2 million.7 (See Objections at ¶ 56, 59-60, and 63; CSOF at ¶¶ 105-106 and 126.)
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Whether Meritage may have profited as a result of the deal is irrelevant. The fact that they had to incur $4.2 million in damages while Defendant got the same deal for $79,500 is the issue here.
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3.
Defendant Knew that his Conduct Was Wrong and that Is Why He Kept It Secret
Defendant instructed Cornwall to keep Olympic and its activities secret from Meritage for his own personal gain. Specifically, Cornwall testified: "There were there were times . . . in which Greg became there were times in which Greg suggested that we don't talk about Olympic business at Meritage. . . ." (See CSOF at ¶ 108.) Defendant also threatened one of his subordinates with a lawsuit for $12 million if the subordinate disclosed Defendant's Olympic activities to upper management at Meritage. (See CSOF at ¶ 109.) Defendant further hid his Olympic activities from his right hand man who was a Meritage employee at the time. (See CSOF at ¶ 110.) Similarly, while employed as President of Meritage's Hancock Communities' Division, Defendant ignored land deals that would have benefited Meritage because he would not personally profit from them like he would pursuant to the Olympic deals.8 (See CSOF at ¶¶ 110-13 and 115.) H. Damages 1. Unfair Competition
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Defendant argues that Meritage has provided no evidence of damages with respect to the unfair competition claim because, according to Defendant, there is no evidence tending to prove that the Defendants' misleading conduct caused the loss of a single sale. (See Motion at 13:18-21). This statement is puzzling on a couple of fronts. To begin with, Defendant presumes a legal requirement evidence of actual confusion causing a loss in 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 or that there was initial interest confusion;9 it does not need to
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In fact, Cornwall expressed to Defendant that he felt that the Defendant was cheating Meritage and "wasn't doing his job his duty as the president of the company, a well paid president of the company, that he should be looking at those deals regardless of whether he was going to be there or not in the future . . ." (See CSOF at ¶ 115.) The doctrine of initial interest confusion controls in the Ninth Circuit. See, e.g., Dr. Seuss Enter., L.P. v. Penguin Books USA Inc., 109 F.3d 1394, 1405 (9th Cir. 1997); Brookfield Comm., Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1063-64 (9th Cir.
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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)). The likelihood of confusion between "Rick Hancock Homes" and "Hancock Homes" or "Hancock Communities" is obvious. Defendant licensed 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) and for the same product (i.e., type of home) in which Meritage used the marks "Hancock Homes" and "Hancock Communities." (See Objections at ¶ 68; CSOF at ¶¶ 22-23 and 116-18.) Further, Rick Hancock Homes advertised its confusingly similar name in the same ways that Meritage advertises its marks. (See Objections at ¶ 68; CSOF at ¶ 117.) 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 Objections at ¶ 68; CSOF at ¶¶ 118.) Scott Keeffe, a former vice-president of Meritage and third-party defendant, testified that based on 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 ¶ 68; CSOF at ¶ 124.) Larry Seay, Meritage's Chief Financial Officer, agreed stating "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. And it appears that they are also registering the 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). Infringement 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, the defendants engage in precisely the type of effort to impact the "buying decisions of consumers in the market for the goods, effectively allowing [the 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 to determine liability. Id.
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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 ¶ 68; CSOF at ¶ 125.) Notwithstanding Defendant's assertion to the contrary, there is evidence of 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 home in the Sundance/Buckeye Area. (See Objections at ¶ 68; CSOF at ¶¶ 119.) While he was driving around the Sundance area, he 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. 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 Objections at ¶ 68; CSOF at ¶ 120.) 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 Objections at ¶ 68; CSOF at ¶ 121.) 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 home at Rick Hancock Homes in Buckeye. (See Objections at ¶ 68; CSOF at ¶ 122.)10 2. Defendant Ignores the Initial Interest Doctrine
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Defendant ignores the Ninth Circuit's initial interest confusion doctrine, which holds that sales are presumed to be lost at the time of the initial interest confusion. Nissan Also, a 2004 email communication shows that Defendants' domain name hancockhomesaz.com has actually caused confusion. On October 1, 2004, Don Kieffer, a builder who transacts business both with Meritage and apparently with Rick and/or Greg Hancock, received an email from Tamara MacDonald. (See Objections at ¶ 68; CSOF at ¶ 123.) MacDonald, an employee of both Rick and Greg Hancock, emailed Kieffer using the email address [email protected]. (See id.) In response to the email, Kieffer emailed Meritage employee Rachel Cantor because he confusingly believed that MacDonald's "hancockhomesaz.com" email was from Meritage. (See id.)
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Motor Co., 378 F.3d at 1019 ; see also Dorr-Oliver Inc. v. Fluid-Quip Inc., 94 F.3d 376, 382 (7th Cir. 1996) (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" causes the harm and damages). That confusion need not last long to be actionable; even initial interest confusion suffices to establish liability. See 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). Here, the confusion occurs before a prospective home buyer meets with Meritage's sales agents and Meritage loses the opportunity to make the sale either (1) because defendants made the sale, (2) because defendants failed to persuade the customer, or (3) because defendants acted in a manner that "put off" the customer. As a result and as a statutory acknowledgement of the difficulty of proving lost sales in this context, damages for an unfair competition claim not only may include lost sales but also may include the defendants' profits. 15 U.S.C. § 1117(a); Lindy Pen Co., Inc. v. Bic Pen Corp. 982 F.2d 1400, 1407 (9th Cir. 1994) (noting that damages for trademark infringement include lost profits); Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir. 2000) (where there is a showing of likelihood of confusion and willful infringement, lost profits are an appropriate remedy). Here, defendants gained gross profits of $45 million.11 (See Objections at ¶¶ 14, 67(c), and 68; CSOF at ¶ 126.) 3. Other Damages
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Defendant fails to point to a place in the factual record or case law that supports any of his arguments with respect to the United States Securities & Exchange Commission ("SEC"). (See Motion at 13:26 to 14:7) Accordingly, they should be stricken from the Motion pursuant to LRCiv. 56.1(a), and Meritage need not respond to them. Regardless, whether Meritage disclosed damages to the SEC is simply not relevant 11 Defendant "ha[s] the burden of proof as to the allowance of any deductions from his gross sales." 5 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 30:66 (4th ed. 2006); "Plaintiff need only prove gross sales and it is then the infringer's burden to prove (1) which, if any, of those sales were not attributable to the wrongful act, and (2) deductible costs and expenses to arrive at net profits." Id.; see also 15 U.S.C. § 1117(a). Defendant has failed to meet such burden.
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to the issue of whether Meritage in fact suffered damages. Fed. R. Evid. 401 and 404. It is nonsensical and ignores the difference between losses for SEC purposes and damages in a civil lawsuit. Nevertheless, in its 2003 10-K filed with the SEC and disclosed to the public, Meritage observed that the ability to acquire additional land impacts Meritage's profitability. (See Objections at ¶¶ 73-74.) The evidentiary record reveals that Defendant, either alone or in concert with the other defendants, caused Meritage to suffer damages in the following categories and amounts: 1. $44 million caused by Defendant's breach, half way through, of the 6-year License Agreement acquired by Meritage for $88 million. (See CSOF at ¶ 126). 2. $9.85 million of the $19.7 million is lost good will because Defendants wrongfully forced Meritage to reduce its use of the name "Hancock" half-way through the 6-year License Agreement (See id.) 3. Approximately $1.62 million in compensation paid to Defendant after his secret Olympic activities commenced. (See id.) 4. The summary of damages that are delineated in Gregg Curry's Expert Report, Supplemental Expert Report, and Rebuttal Report. Those reports provide: o $23.3 million of lost profits suffered as of June 2005 as a result of Greg Hancock's breach of his employment contract and his fiduciary duty to Meritage and damages related to other wrongful conduct that unjustly enriched the defendants. (See id.) o $45 million related to the Hancocks' trademark infringement and unfair competition of the Hancock name. (See id.)12 o $4.2 million in land acquisition costs resulting from lost opportunity damages on Westwind, Riata West, and Kings Ranch. (See id.) o $5.3 million in excess earn-out payments to Defendant as a result of his breaches of his contractual and common-law duties. (See id.) o $2.2 million from earn-outs paid caused despite Defendant's breach of the MTA. (See id.) III. CONCLUSION. For the reasons stated above, this Court should deny Defendant's motion for summary judgment in its entirety.
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The amount reported in Mr. Curry's report was updated by the disclosure of the defendants during the deposition of Mr. Cole. (See CSOF at ¶ 126.)
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000
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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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
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1936788.
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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