Free Statement - District Court of Arizona - Arizona


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MATHEW & MATHEW, P.C. IVAN K. MATHEW (SBN: 011610) 3300 N. Central Avenue, Suite 1730 Phoenix, Arizona 85012 Tel: (602) 254-8088 Fax: (602) 254-2204 Attorneys for Defendants RICK AND BRENDA HANCOCK, RICK HANCOCK HOMES, INC. AND RLH DEVELOPMENT, INC.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, et al. Plaintiffs, v. Ricky Lee Hancock and Brenda Hancock, husband and wife; et al. Defendants. CASE NO. CV 04 0384 PHX ROS 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 (Oral Argument Requested) Assigned to the Honorable Roslyn O. Silver

1.

Rick Hancock Homes is the new homebuilding company of which Rick

Hancock and Brenda Hancock are shareholders. (Declaration of Rick Hancock ¶ 1, Exhibit "1".) 2. Rick Hancock has been in the homebuilding business for 20 years. (Declaration

of Rick Hancock, ¶ 2, Exhibit "1".) 3. Rick Hancock's father was a homebuilder. His brother, Gregory Hancock, was a

homebuilder. (Declaration of Rick Hancock, ¶¶ 3 and 4, Exhibit "1".) 4. "Hancock Homes" is a federally registered trademark. (Declaration of Greg

Hancock, ¶ 2, Exhibit "2".)

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5.

The name Hancock Homes is registered to Gregory Hancock; not Meritage; not

its subsidiaries, Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc. (Declaration of Greg Hancock, ¶ 3, Exhibit "2".) 6. On or about May 7, 2001, Gregory Hancock sold his companies, HC Builders

and Hancock Communities, LLC to Meritage. (Master Transaction Agreement, Exhibit "3".) 7. On May 30, 2001, Gregory Hancock entered into a License Agreement with

Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc. for the use of the "Hancock Communities" name. (License Agreement, Exhibit "4".) 8. Greg Hancock retained the exclusive right, title and interest to the Hancock

Communities name. (License Agreement, ¶ 3.4, Exhibit "4".) 9. Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc., have

limited permissive use of the Hancock Communities name. (License Agreement, ¶ 3.5, Exhibit "4".) 10. Meritage is not and never has been an owner of the Hancock Communities

trademark. (License Agreement, ¶ 3.4, Exhibit "4".) 11. The License Agreement provides that the license is not transferable. (License

Agreement, ¶ 2, Exhibit "4".) 12. The License Agreement by its own terms expires in May, 2007 or upon

termination. (License Agreement, ¶ ¶ 5 and 8.1, Exhibit "4".) 13. The License Agreement allows Greg Hancock, as licensor, to terminate the

License Agreement without notice for a breach of the Agreement. (License Agreement, ¶ 7.3. Exhibit "4".) 14. The License Agreement was terminated on February 13, 2004. (Letter dated

2/13/04, Exhibit "5".) 15. After the acquisition of assets of the Hancock Communities on May 10, 2001,

Greg Hancock joined the new company as President of Hancock-MTH Communities, Inc. and Rick Hancock became Vice-President of the Hancock-MTH Communities, Inc. (Declaration of Rick Hancock, ¶ 5, Exhibit "1".)
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16.

The relationship deteriorated in March 2003. Greg Hancock left Hancock-MTH

Homes as the relationship had deteriorated. (Declaration of Rick Hancock, ¶ 6, Exhibit "1".) 17. Although the License Agreement has been revoked, the licensee still continues

to utilize the Hancock Communities name. (Declaration of Rick Hancock, ¶ 7, Exhibit "1".) 18. Rick Hancock and Greg Hancock entered into agreements with Meritage on May

30, 2001. (Agreements dated 5/30/01, attached as Exhibit "1" to the Declaration of Rick Hancock and Exhibit "1" to the Declaration of Greg Hancock, Exhibits "1" and "2".) 19. Greg Hancock's agreement with Hancock-MTH communities specifically allows

him to perform real estate development activities at Sundance in Maricopa County, Arizona. (Deposition of Larry Seay p.33, ln. 17-19, Exhibit "6".) 20. Land banking involves an investor who owns land and releases land to the

homebuilder on a rolling option basis to finance the development of the subsidiaries. (Declaration of Rick Hancock, ¶ 9, Exhibit "1".) 21. In 2003, Rick Hancock continued to work at Meritage. (Declaration of Rick

Hancock, ¶ 10, Exhibit "1".) 22. On December 2, 2003, when Rick Hancock and his wife were expecting a child,

he was terminated by Steve Hilton, Co-CEO of the Meritage companies. (Declaration of Rick Hancock, ¶ 11, Exhibit "1".) 23. Meritage implemented, without Greg Hancock's permission, a re-branding

program of the Hancock Communities as Meritage, effective in 2004. (Declaration of Greg Hancock, ¶ 5, Exhibit "2".) 24. MTH Hancock Communities specifically undertook and agreed not to use the

License Marks in any manner whatsoever which, directly or indirectly, would derogate or detract from the Licensed Marks repute, value, marketability, degree of public recognition or popularity. (License Agreement ¶ 4, Exhibit "4".) 25. The purpose of the name change was so that people would recognize that

Meritage Homes are being built by a large national homebuilder. (Deposition of Larry Seay Hancock, pp.83-84, Exhibit "1".)
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26.

Meritage does not want their potential customers in Buckeye, Arizona, which

coincidentally happens to be the place where Rick Hancock wants to build homes, to know that their homes are being built by a large national company. (Deposition of Rick Hancock, when it becomes available.) 27. During December 2003, at the Meritage Christmas party, Jim Arneson, Chief

Executive Officer of the Hancock Communities, announced to all employees that Meritage planned to abandon the use of the Hancock Communities name. (Declaration of Diane Haas, ¶¶ 1-3, Exhibit "7".) 28. Meritage informed its vendors/trade subcontractors that the "Hancock

Communities" name would be changed to the Meritage brand name. (Declaration of Thomas Wing, ¶¶ 4 and 5, Exhibit "8".) 29. During 2004, Meritage ran and continues to run full page ads on a regular basis

in the Arizona Republic announcing the name change from the Hancock Communities to Meritage. (Declaration of Rick Hancock, ¶ 12, Exhibit "1".) 30. On or about June 25, 2004, Meritage informed its customers that they were

changing the name of the Hancock Communities to Meritage. (Letter from Ron French, President, dated 6/25/04, Exhibit "9".) 31. The disclaimer states: "Not affiliated with `Meritage Homes/Hancock

Communities.'" (Deposition of Larry Seay, pp. 133-134, Exhibit "6".) 32. Meritage acknowledges that Rick Hancock has disclaimers on his billboard.

(Deposition of Larry Seay, pp. 133-134, Exhibit "6".) 33. Meritage acknowledges that Rick Hancock has disclaimers on phone recordings

used to receive customer inquiries from the billboard. (Deposition of Larry Seay, p. 134, Exhibit "6".) 34. According to the U.S. Census Bureau, the name Hancock is the 546th most

common surname in America. (Attached to the Declaration of Ivan K. Mathew as Exhibit "5", Exhibit "10".)

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35.

The number of companies using the Hancock name in Arizona is numerous.

(List of businesses using "Hancock" in their name maintained by the Arizona Corporation Commission attached to the Declaration of Ivan K. Mathew as Exhibit "4", ¶ 6, Exhibit "10".) 36. Many companies in Arizona use the Hancock name in conjunction with real

estate or development ventures. (List of businesses using "Hancock" in their name maintained by the Arizona Corporation Commission attached to the Declaration of Ivan K. Mathew as Exhibit "4", Exhibit "10".) 37. Meritage has not done anything to enforce the Hancock trademark against Mark

Hancock Development Corporation. (Deposition of Larry Seay, pp.142-143, Exhibit "6".) 38. Meritage has not done anything to enforce the Hancock trademark against

Hancock Building Company, Inc. (Deposition of Larry Seay, p.143, Exhibit "6".) 39. Meritage has not done anything to enforce the Hancock trademark against

Trevor Hancock Realty, Inc. (Deposition of Larry Seay, pp.143-144, Exhibit "6".) 40. Meritage has not done anything to enforce the Hancock trademark against

Hancock Contracting, Inc. (Deposition of Larry Seay, p.144, Exhibit "6".) 41. Meritage has not done anything to enforce the Hancock trademark against

Hancock Materials, Inc. (Deposition of Larry Seay, p.144, Exhibit "6".) 42. Meritage has not done anything to enforce the Hancock trademark against

Charlie Hancock Building, Inc. (Deposition of Larry Seay, p.144, Exhibit "6".) 43. Meritage has not done anything to enforce the Hancock trademark against John

Hancock Real Estate Finance, Inc. (Deposition of Larry Seay, p.145, Exhibit "6".) 44. Meritage has not done anything to enforce the Hancock trademark against John

Hancock Realty Equities, Inc. (Deposition of Larry Seay, p.145, Exhibit "6".) 45. Meritage has not done anything to enforce the Hancock trademark against John

Hancock Leasing Corporation. (Deposition of Larry Seay, p.145, Exhibit "6".) 46. Meritage has not done anything to enforce the Hancock trademark against R.J.

Hancock Construction, LLC. (Deposition of Larry Seay, p.145, Exhibit "6".)

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47.

Meritage has not done anything to enforce the Hancock trademark against

Hancock High Country Homes, LLC. (Deposition of Larry Seay, p.145, Exhibit "6".) 48. Meritage has not done anything to enforce the Hancock trademark against

Trevor Hancock Construction. (Deposition of Larry Seay, p.144-145, Exhibit "6".) 49. Hancock Building Associates uses the internet domain name

www.HancockBuilders.com. (Declaration Ivan K. Mathew, ¶ 2, Exhibit "10".) 50. Hancock Homes of Utah uses the internet domain name

www.HancockHomesInc.com. (Declaration of Ivan K. Mathew, ¶ 3, Exhibit "10".) 51. Hancock Enterprises, LLC uses the internet domain name www.Hancock1.com.

(Declaration Ivan K. Mathew, ¶ 4, Exhibit "10".) 52. The internet domain name Hancock1.com is utilized by an Arizona builder.

(Declaration of Ivan K. Mathew, ¶ 4, Exhibit "10".) 53. Construction work at the Hancock ­ MTH Communities was performed under

Rick Hancock's license as a general contractor. (Declaration of Rick Hancock ¶ 13, Exhibit "1".) 54. Larry Seay, CFO for Meritage, was asked at his deposition what concerns that

Meritage had with Rick Hancock using the Hancock name. (Deposition of Larry Seay, pp. 3536, Exhibit "6".) 55. Meritage put forth concerns that people would buy homes and think they were

getting a Meritage warranty, causing Meritage to have liability for homes built by Rick Hancock Homes, Inc. (Deposition of Larry Seay, pp. 35-36, Exhibit "6".) 56. Meritage conceded they were not really a concern, because Meritage would

never perform warranty work on a home that they did not build. (Deposition of Larry Seay, pp. 35-36, Exhibit "6".) 57. If Meritage were to get a call from a consumer complaining of a home repair

problem, all Meritage need do is say that they did not build the home. (Deposition of Larry Seay, pp. 35-36, Exhibit "6".)

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58.

New homeowners at Rick Hancock Homes will be given a homeowners packet.

(Declaration of Rick Hancock ¶ 14, Exhibit "1".) 59. Inside that packet, there are detailed instructions on what homeowners must do

to receive the benefits of the warranty, including a phone number that they should call. (Declaration of Rick Hancock ¶ 15, Exhibit "1".) 60. Rick Hancock has not, and will not, be giving Meritage's phone number to his

customers. (Declaration of Rick Hancock, ¶ 16, Exhibit "1".) 61. People buy homes based upon location, floor plans, amenities and price.

(Declaration of Kevin O'Donnell, ¶ 6, Exhibit "11".) 62. 63. 64. Meritage admits that no consumer s have been confused. (Deposition of Larry Seay, p.36, Exhibit "6".) Meritage admits that no lenders were confused. (Deposition of Larry Seay,

pp.37, Exhibit "6".) 65. Meritage admits that no subcontractors were confused. (Deposition of Larry

Seay, pp. 36-37, Exhibit "6".) 66. Thomas Wing, a subcontractor, stated that he knows Rick Hancock Homes is

different than Meritage and the Hancock Communities. (Declaration of Thomas Wing, ¶¶ 710, Exhibit "8".) 67. John Ahern, a lender, knows the difference between Meritage/the Hancock

Communities and Rick Hancock Homes. (Declaration of John Ahern, ¶1-4, Exhibit "12".) 68. Kevin O'Donnell, a mortgage lender, knows the difference between the (Declaration of Kevin

Meritage/Hancock Communities and Rick Hancock Homes. O'Donnell, ¶ 5, Exhibit "11".) 69.

Title companies know the difference between Hancock Communities and Rick

Hancock Homes. (Declaration of Michael D. Frakes, ¶ 7, Exhibit "13".) 70. Meritage informed current customers by a letter that "as part of a company wide

branding program", Hancock Communities will now be known as "Meritage." (Letter from Ron French, President, dated June 25, 2004, Exhibit "9".)
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71.

There is nothing inherently secret about building a home. (Declaration of Rick

Hancock ¶ 17, Exhibit "1".) 72. Building a home must be done to local business codes. (Declaration of Rick

Hancock, ¶ 18, Exhibit "1".) 73. At his deposition, Larry Seay was asked, "Do you have any personal knowledge

that Rick Hancock has made any misrepresentations of facts to intentionally and unfairly compete with Meritage's trademark?." His answer was, "Today I can't think of any."

(Deposition of Larry Seay, pp.99-100, Exhibit "6".) 74. At his deposition, Larry Seay was asked, "So, which fiduciary duty he breach?

How did he breach a fiduciary duty." His answer was, "I can't tell you for certain he was breaching any specific fiduciary duty." (Deposition of Larry Seay, p.110, Exhibit "6".) 75. At his deposition, Larry Seay was asked, "Okay, what trade secrets were

misappropriated by Rick Hancock?" His answer was, "I don't know." (Deposition of Larry Seay, p.112, Exhibit "6".) 76. At his deposition, Larry Seay was asked, "Would you agree with me that Rick

Hancock can engage in the homebuilding business without having to appropriate trade secrets from Meritage?" His answer was, "Yes, he could." (Deposition of Larry Seay, p.113, Exhibit "6".) 77. At his deposition, Larry Seay was asked, "Are you aware of any contracts that

Rick Hancock has usurped between Meritage and a potential consumer of Meritage?" His answer was, "No." (Deposition of Larry Seay, pp.113-114, Exhibit "6".) 78. At his deposition, Larry Seay was asked, "What facts can you tell me that you

have that would support an allegation that Rick Hancock has been unjustly enriched?" His answer was, "I don't know." (Deposition of Larry Seay, pp.114-116, Exhibit "6".) 79. At his deposition, Larry Seay was asked, "What confidential information do you

believe that Rick Hancock has taken so as to constitute conversion?" His answer was, "I don't know." (Deposition of Larry Seay, p.121, Exhibit "6".)

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80.

At his deposition, Larry Seay was asked, "Recapture some of my thoughts here

and maybe your testimony, but you're not saying here today that Rick Hancock has breached any contracts, are you?" His answer was, "I'm trying to recollect. I don't believe he has breached any contracts with us, no." (Deposition of Larry Seay, p.130, Exhibit "6".) 81. At his deposition, Larry Seay was asked, "'Us'" meaning Meritage?" His

answer was, "With Meritage or its subsidiaries." (Deposition of Larry Seay, p.130, Exhibit "6".) 82. On September 8, 2003, Steve Hilton and John Landon agreed that they would

take steps to stop using the Hancock name, three months prior to the termination of the License Agreement. (E-mail from Steven Hilton to John Landon dated September 8, 2003, Exhibit "15"). 83. After changing all of the communities from Hancock to Meritage, a decision was

made to change back the Eastern most and Western subdivisions back to Hancock. 84. 85. This diminished the name recognition. Michael Frakes testified that he saw the Rick Hancock Homes billboard and

knew there was a disclaimer. (Deposition of Michael Frakes, 17:3-25; 18:1-25; 19:1-25; 20:19; 22:2-9; 50: 19-25 and 51:1, Exhibit "19", Declaration of Michael Frakes, Exhibit "13".) 86. Indeed, it is so effective that Meritage has gone out of its way to hide the

disclaimer so that people who were testifying in this case were not shown the disclaimer. (Deposition of Michael Frakes, 56:2-25; 57:1-23, Exhibit "19".) 87. In 2003 and earlier, the name "Hancock" was previously used in connection with

the marketing of the Hancock Communities. (Various internal Meritage e-mails regarding name change, Exhibit "16".) 88. On July 1, 2004, "Hancock Communities" changed to Meritage. (Various

internal Meritage e-mails regarding name change, Exhibit "16".) 89. Missy Vallirie testified there was no legitimate marketing reason for this and it

was merely to preclude the Hancocks from using their name. (Deposition of Missy Vallirie, pp. 91 and 101, Exhibit "17".)
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90.

The License Agreement provides that the use of the Hancock names shall not be

diminished in any capacity. (License Agreement, Exhibit "4".) 91. At the deposition of Steve Hilton, Co-Chief Executive Officer of the Meritage

Corporation, Mr. Hilton admitted that Meritage stopped using the Hancock name without the permission of Greg Hancock. (Steve Hilton Deposition Transcript, p. 68, l. 16-25; p. 69, l. 14, Exhibit "14".) 92. He also admitted the cessation of the use of the Hancock Communities name

resulted in diminution of the public recognition of the name of Hancock Communities. Id. at pg. 70, ll.15-19. (Steve Hilton Deposition Transcript, p. 70, Exhibit "14"). 93. The letter terminating the License Agreement stated, "Further, in view of your

client's repeated breaches of the Master Transaction Agreement, pursuant to Section 7.3 of the License Agreement dated May 30, 2001, your client's license to use the "Licensed Marks," "Hancock Homes" and "Hancock Communities" is hereby terminated immediately. Demand is further made, pursuant to Section 8.1 of the License Agreement, that your client transfer and assign to my client any right, title and interest to the Licensed Marks which your client may have acquired as a result of its activities under the License Agreement." 94. Meritage placed numerous full-page newspaper advertisements in the Arizona

Republic which announced the re-branding of Hancock communities to Meritage. They did so weekly over many weeks. 95. 96. 97. Not used. Not used. At the deposition of Ronald French, the President of Meritage in Arizona, he

admitted that the Hancock Community name had been dropped. 98. Subsequently, after his deposition, after he realized that the name had been

abandoned he started to use the name Hancock again. 99. In an attempt to cubbie-hole the name, the Hancock name was used in

advertising in the Eastern most subdivision and the Western most subdivision. (Deposition of Missy Vallirie, p. 90, Exhibit "17".)
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100.

Purchasers must sign and acknowledge a disclaimer which states "Buyer hereby

acknowledges and understands that Seller, Rick Hancock Homes, is not affiliated with Meritage and/or Hancock Communities." 101. One would have to be an "idiot" to not know the difference between Rick

Hancock Homes and Meritage Homes. (Deposition of Michael Frakes, 15:14-25; 16:1-9; 22:2-9; 23:19-25; 24:1; 42:9-14; 48:19-25; 49:1-8; 50:1-25; 51:1, 14-25, Exhibit "19" and Deposition of Kevin O'Donnell, 50:3-25; 51:1-14, Exhibit "20".) 102. On December 8, 2004, Greg Hancock terminated the License Agreement thereby

precluding Meritage from using the Hancock Communities name. 103. When asked at her deposition under oath, about the appropriateness, Missy

Vallirie stated "my personal opinion, no, I didn't think that was the right thing to do." (Deposition of Missy Vallirie, p. 91, Exhibit "17".) 104. Hancock is using a disclaimer in marketing channels and telephone contacts. A

home is a high-dollar purchase and the degree of care likely to be exercised by reasonably prudent consumer is very high. It is not an impulse purchase. Hancock's intent in selecting mark is that it is his own name and that of his family. (Deposition of Rick Hancock, p. 177, ll. 12-19, Exhibit "18".) RESPECTFULLY SUBMITTED this 20th day of December, 2006. MATHEW & MATHEW, P.C By: /s/Ivan K. Mathew Ivan K. Mathew, Attorneys for Ricky Lee Hancock, Brenda Hancock, Rick Hancock Homes, L.L.C. and RLH Development, Inc.

CERTIFICATE OF SERVICE
Meritage v. Hancock, et al. Case No. CV 04 00384 ROS I hereby certify that on December 20, 2006, I electronically transmitted the attached 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:
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Dan W. Goldfine Richard G. Erickson Snell & Wilmer, LLP One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon Timothy J. Burke Fennemore & Craig, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012 e-mail: [email protected] Attorneys for Third Party Defendant, Snell & Wilmer, LLP

Robert M. Frisbee Frisbee & Bostock 1747 E. Morten Avenue, Suite 108 Phoenix, AZ 85020 e-mail: [email protected] Attorneys for Defendant Gregory Hancock

Grant Woods Grant Woods, P.C. 1726 N. Seventh Street Phoenix, AZ 85006 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon

s/Karen Gawel