Robert M. Frisbee #018779 FRISBEE & BOSTOCK, PLC 2 1747 Morten Ave. E. Suite 108 Phoenix, Arizona 85020 3 Phone: (602) 354-3689 [email protected] 4 Attorneys for Defendant Greg Hancock
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA MERITAGE CORPORATION, a Maryland corporation Plaintiff, vs. ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
NO. CIV 04-0384-PHX-ROS
GREG HANCOCK, an individual; RICK HANCOCK, an individual; and 12 RICK HANCOCK HOMES, L.L.C., an Arizona Corporation,
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DEFENDANT GREG HANCOCK'S UPDATED MOTION FOR SUMMARY JUDGMENT OR DISMISSAL (Oral Argument Requested)
Defendants.
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Pursuant to the Court's Scheduling Order of October 12, 2006, and Rule 56,
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Defendant Greg Hancock again respectfully moves the Court for Summary Judgment or a
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Judgment of Dismissal. Despite two years of sifting thousands of documents and taking
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almost twenty depositions, Meritage has not unearthed a genuine issue as to any material fact
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which could establish wrongdoing on the part of Greg Hancock or damages caused thereby.
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Meritage's case is even worse now than it was when the Court denied Greg Hancock's first
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motion for summary judgment without prejudice, and he is entitled to judgment in his favor
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as a matter of law. The Motion is based upon the attached Updated Statement of Facts1, Greg Hancock's earlier Motions for Summary Judgment and Dismissal, and the attached
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Memorandum of Points and Authorities.
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Cited herein as "S.F.II"
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT A. The Legal Standard
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The law regarding summary judgment was resolved in 1986 when the Supreme Court
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decided the "trilogy" of summary judgment cases: Matsushita Elec. Indus. Co. v. Zenith
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Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986); Anderson v. Liberty
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Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); and Celotex v. Catrett,
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477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Those cases encourage greater
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use of the motion, and give strong support to summary judgment for case management and
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resolution. See, e.g., California Architectural Bldg. Prods. v. Franciscan Ceramics, Inc.,
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818 F.2d 1466 (9th Cir. 1987): the trilogy "increased the utility of summary judgment," and "no longer can it be argued that any disagreement about a material issue of fact precludes the
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use of summary judgment."
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B. Argument
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The facts and law of this case have been thoroughly briefed as discovery and motion
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practice have continued. Numerous depositions have been taken, tens of thousands of
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documents produced, and the case still boils down to this: A multi-billion dollar corporation,
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using willing lawyers and shareholder money, decided to harass Rick and Greg Hancock in
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this Court, despite the absence of a single fact with which to support its claims of jurisdiction
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or wrongdoing, and not a single dollar of provable damages. Its reasons, if there are any
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aside from spite, are that Greg Hancock wasn't politic when Meritage forced him from its
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employ, and Rick Hancock wanted to use his own name to conduct a relatively minuscule
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home building business..
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(1) Meritage Breached The License Agreement As A Matter of Law, Greg Hancock Properly Cancelled It, And Meritage's Claims To Lanham Act Unfair Competition And Federal Jurisdiction Were Thereby Destroyed. On May 30, 2001, Meritage entities and Greg Hancock entered into a License
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Agreement (S.F. II, Exh. 1) with Greg Hancock whereby Meritage obtained the right to use the names "Hancock Homes" and "Hancock Communities" for 6 years "in strict compliance with this agreement" (Exh. 1, ¶¶ 1, 3.3, 5). The License provides (Exh. 1, ¶ 4): [Hancock] and [Meritage] each acknowledge that the Licensed Marks have acquired a valuable secondary meaning and goodwill with the public, with a reputation of highest quality and performance. Accordingly, [Meritage] 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. (Emphasis supplied.) Meritage's co-CEO, Steven Hilton2 testified that he reviewed the License Agreement during its drafting, believed it adequate as to form and content, agreed that it didn't cover
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"Rick Hancock Homes" even though it could have, and that Meritage would "live by the
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agreement as it stands" (S.F. I, Exh. 1, pp. 179-80).
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Nevertheless, on September 8, 2003, only 6 months after Greg Hancock left Meritage,
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and 4 ½ years before the License Agreement was due to expire, Hilton sent an Email to Co13
CEO John Landon re the "Hancock Name:"
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Deposition transcript pages which were attached to the original Statement of Facts will not again be attached, citation only to page numbers. New transcript pages or testimony will be attached.
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John: You may want to begin considering how we are going to transition the "Hancock Communities" name to "Meritage Homes." We have the rights to the name for 6 years. I think the name should be dark in the market for at least 1 year or maybe 2 prior to the expiration of our license so that we do not waste advertising dollars on a name that Greg may resurrect immediately following our license. Therefore we should consider a plan to phase out the name over the next 18 months. What do you think? (S.F. II, Exh. 2, emphasis supplied.)
Neither the Email nor its content were disclosed to Greg Hancock until the discovery phase of this case (S.F. II, ¶ 6, Hancock Dep.[S.F. II, Exh. 3], pp. 195,196). The message was acted on immediately. At the 2004 Meritage Xmas party Interim President Jim Arneson announced the name change, to the total surprise of Desiree Coats, Meritage's head of advertising (S.F. II, Exh. 4, p. 80). On December 9, 2003, new Hancock President Ron French Emailed Coats saying, "Please start the agency thinking about the [name] change * * *. John [Landon] wants to accomplish this ASAP"(S.F. II. Exh. 5).
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On January 12, 2004, Hilton reviewed a Meritage "Request for Re-Branding Proposal,"the Proposal mentioning the Hancock Communities' prior prominence and home building activity at the bottom of the first page (S.F. II, Exh. 6). On May 20, 2004, the Martz Agency's Barb Sorget issued a "Creative Brief" regarding the "Meritage Home Name Change Campaign", stating that Meritage "bought Hancock Communities about 3 years ago and are ready to change the name from Hancock Communities to Meritage Homes" (S.F. II, Exh. 7). On June 18, 2004, Meritage and the Martz Agency conferred regarding the campaign, about which Conference Report #1 (S.F. II, Exh. 8) said: "[Meritage] requested Agency to revise the release so that it focuses more on Meritage and less on Hancock," and "Client informed Agency that the Hancock name will be maintained as a community series at Sundial at Rancho Bella Vista and Sundial at Sundance." Rancho Bella Vista is on the far East edge of the Phoenix area, and Sundial at Sundance is across I-10 from where Rick Hancock planned to build homes (S.F. II, ¶ 11). On July 1, 2004, Meritage CFO Larry Seay Emailed everyone at Meritage, "that going forward they should [use] the new names and stop using the old Hancock names (except of course in a couple of marketing instances as we have discussed)"(S.F. II, Exh. 9). Meritage then changed the names of all but two "Hancock Communities" to "Meritage Homes," which Hilton testified made the Hancock Communities name "less visible" (S.F. I, Exh. 1, pp. 69, 70). On May 26, 2005, the Hancock name was also removed from Sundance (S.F. II, Exh. 10), the community at which Meritage alleges its project was being impacted by Rick Hancock Homes. The same Barb Sorget conducted an advertising analysis of the advertising and renaming campaign for defendants Hancock (S.F. II, Exh.11). Like Hilton's testimony, her unsurprising and unrefuted conclusion is that, "The decrease in exposure of the Hancock Communities name within newspaper advertising from January 2000 to June 2004 reduces
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its name awareness and market recognition and will have a diminished effect on its future marketability, value and degree of public recognition." Needless to say, Meritage did not seek or receive permission from Greg Hancock to make the name and advertising changes (S.F.I, Exh. 1, p.68). The License Agreement provides that Greg Hancock may terminate it by giving written notice (S.F. II, Exh. 1, ¶ 7.1) or " to immediately terminate this Agreement without prior notice if [Meritage], its employees or agents shall breach any provision of this Agreement or the Master Transaction Agreement" (S.F. II, Exh. 1, ¶ 7.3, emphasis added). Had Hancock had been informed of the name change facts he would have cancelled the license and sued for its breach (S.F. II, Exh.3, pp. 196-198). Although Hancock was unaware of Meritage's concerted campaign to trash his name, on February 13, 2004, he terminated the License Agreement by letter from his counsel (S.F. II, Exh. 12). As the letter states, Meritage failed to provide an accounting of Hancock's earn-out, as it was obligated to do under the MTA. Meritage's contention that Hancock was not actually entitled to an earn-out is irrelevant as to its obligation to provide him with an accounting. Moreover, that Hancock was entitled to expect an earn-out is demonstrated by CFO Seay's 12-8-03 letter, which states that even if Hancock "was not with the company" he would receive an earn-out of over $800,000 (S.F. II, Exh. 13). Despite the foregoing self-evident truths, on February 23, 2004, Meritage's counsel Steve Pidgeon nastily replied (S.F. II, Exh. 14). He said, in pertinent part: It amazes me the positions you are willing to posit on behalf of your client. And it's unfortunate. You used to be a find and balanced counselor. * * * Meritage views this as a clear attempt to interfere with its business, as an anticipatory breach of critical agreements, and as an attempt, quite frankly, at extortion, by your clients and you personally. Your clients have until the end of today, Monday at 5:00 p.m., to withdraw their threats, drop the use of the Hancock name * * * and agree that they will adhere to their agreements. This needs to be in writing, signed by them, not you, and faxed to Larry Seay at Meritage. They are not going to like the alternative. Neither are you.
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Even though a reasonable mind (or reasonable lawyer) could not argue other than that Meritage breached the License Agreement, it filed this suit the next day, claiming as its grounds for federal jurisdiction its right to the Hancock name under the License Agreement, subject matter jurisdiction under the Lanham Act, and unfair competition with regard to the Hancock name. Not only is there no factual basis for the claims, there is no legal basis. Disputes between licensees and licensors over intellectual property are not federal court matters. Rare Earth, Inc. v. Hoorelbeke, 401 F.Supp. 26, 37 n.20 (S.D.N.Y. 1975 (with extensive citations); In Re Houbigant, 914 F.Supp. 964, 990 (S.D.N.Y. 1995); and Silverstar Enterprises, Inc. v. Aday, 537 F.Supp. 241-242 (S.D.N.Y. 1982). If the pivotal issue is the interpretation of a contract, e.g. whether a party may cancel a license agreement, only a state law issue is presented. Jasper v. Bovina Music, Inc., 314 F.2d 42 (2d Cir. 2002); Homes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826, 122 S.Ct. 1889 (2002); 13B Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3582 at 313-14 (1984). (2) There Is Not A Scintilla Of Proof That Greg Hancock Has Violated Any Contractual or Common Law Duty To Meritage. (a) There Is No Evidence That Greg Hancock Has Invested In Or Otherwise Wrongfully Assisted Rick Hancock Homes. Not a single witness has testified that Greg Hancock invested in, counseled, advised or otherwise assisted Rick Hancock in his home building enterprise (S.F.II, ¶ 25). Some Meritage deposition questions imply that three checks drawn on Greg Hancock accounts payable to Rick Hancock Homes (Rick Hancock Bates Nos. RHH3878-83) are evidence that Greg Hancock invested in or loaned money to Rick Hancock Homes. However, the checks represented neither investments nor loans but, rather repayments for infrastructure improvements to the development made by Rick Hancock Homes on behalf of its land banker, Watson & I10. Watson & I10, of which Greg Hancock is a member, did not yet have a checking account when the payments were made (S.F. II, Exh.3, pp. 175,176).
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(b) There Is No Evidence That Greg Hancock Violated His Employment Agreement. (i) Greg Hancock's Job Performance
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Greg Hancock's Meritage employment duties and restrictive covenants are delineated
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in his Employment Agreement (S.F. II, Exh. 15). EXHIBIT A thereto describes his duties
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with regard to running Hancock Communities, and it gives Meritage, not Hancock, the right
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to control decisions regarding land acquisition and expansion into new product or market
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areas. EXHIBIT B to the Employment Agreement describes the calculations to be used to
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determine Greg Hancock's right to performance bonuses generally, and sets specific
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monetary goals for the first seven months of his employment. After the first seven month
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period, a business plan agreed upon between Hancock and Meritage governed the amount
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of the bonus that Hancock and his eligible employees could earn.
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It is undisputed, indeed admitted by Meritage in its Responses to Requests for
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Admission, that Hancock and all of his eligible employees earned 100% of their available
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bonuses during the entire time Hancock was employed with Meritage. In addition, it is
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undisputed that in all of Meritage's records, including Hancock's personnel file, and its
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board minutes, budget committee minutes, and publicly filed submissions, there is not a
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single negative word regarding Hancock's job performance (S.F. II, ¶ 34). Since neither its
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documents nor testimony from its officers could provide any evidence that Hancock's job
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performance was deficient, Meritage hired an "expert," Gregg Curry of Navigant Consulting,
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to attempt to establish its complaint allegations that Hancock did not perform his job
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adequately (S.F. II, Exh. 36, pp. 32,22).
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One of Curry's efforts compared the monetary performance of two other building
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companies, American Standard and Pulte, to that of Hancock Communities.
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Curry
conceded, however, that such a comparison was not the standard by which Hancock's performance was measured (S.F. II, Exh. 36, pp. 27-31). Greg Hancock's successor as the
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president of Hancock Communities, Ron French, agreed that Curry's company comparison approach would be unfair and not the measure of Hancock's job performance (S.F. II, Exh. 16, pp. 59,60). Curry next asserted that Hancock's performance in acquiring land for Meritage to build out was inadequate. His report states, "As of June 2001 [the date of Meritage's purchase of Hancock Communities], there were 934 lots available-for-sale as part of the Hancock communities that Meritage purchased. Fifteen (15) months later, the available lots Meritage had to sell had dropped in half, to 449." (S.F. II, Exh. 17) The statement is a complete fabrication, as proven by Meritage internal documents relating to its purchase of Hancock, by its lot development reports, and by its public filings: a. Meritage states in an offering circular touting the bonds Meritage sold to the public to support the Hancock purchase, "At March 31, 2001, Hancock had 4,647 lots on which homes could be built under its control" (S.F. II, Exh. 18). b. The Hancock Communities Project Lot Status Report dated 5/31/01 [the date Meritage purchased Hancock Communities](S.F. II, Exh. 19) shows a total inventory of 6,991 lots, including 4,674 remaining to sell, and 2,327 lots purchased under rolling options. c. One year later, on 5/31/02, there was a total inventory of 6,860 lots, including 3,926 remaining to sell and 2,934 controlled under rolling options (S.F. II, Exh. 20). d. On March 6, 2002, Meritage's Board of Directors were told, "Steve [Hilton] noted that although our business continues to be soft in our high-end Monterey/Scottsdale product [Hilton's division], business in our more moderately priced Hancock/Meritage [Greg Hancock's division] product remains good" (S.F. II, Exh. 21). e. On 7/31/02 there were not 449 lots available as claimed by Curry, but rather a total of 7,170, including 4,151 remaining to sell and 3,019 under rolling options (Exh.
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22,S.F. II). f. In its Form 10-K report to the SEC for the fiscal year ended 12/31/02 Meritage stated that it had over 10,000 home sites remaining to sell in its Arizona Hancock product (S.F. II, Exh.23). g. Finally, just eight days before Hancock's employment with Meritage was terminated, there were 8,814 lots, including 7,360 remaining to sell and 1,454 under rolling options (S.F. II, Exh. 24). On one occasion Meritage co-CEO John Landon vetoed a land purchase recommended by Hancock which would have added about 800 lots (S.F. II, Exh. 3, p. 181) and Hancock continually maintained an inventory of lots sufficient for three to five years' future sales at about 1,500 home sales per year (S.F. II, Exh. 3, pp. 136-38 ). And, despite his lengthy analysis of the performance of Hancock Communities and Greg Hancock, Curry conceded in his deposition that he was not even opining on the adequacy of Greg Hancock's job performance (S.F. II, Exh. 34, pp. 39,40). (ii) Meritage's Big Lie - Olympic/Westwind/Riata Greg Hancock's employment agreement with Meritage contained two restrictive covenants (S.F. II, Exh. 15, ¶¶ 8.A, B). The first covenant precluded him until June 2, 2006, from engaging in any homebuilding business with 100 miles of Meritage. Meritage has adduced no evidence that Hancock violated this covenant. The second restrictive covenant precluded him until June 2, 2004 (the expiration of his employment agreement) from home sales, land banking, or land development within 100 miles, with the carve-out that "Employee may be a passive investor, owning up to 25%, of any land banking or land development project." Meritage claims that Greg Hancock violated this covenant by becoming a member, with Dave Cornwall, of Olympic Properties, LLC, even though it is undisputed that Olympic never bought or developed any property, and that Hancock withdrew from Olympic before
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it was able to close the purchase of any property (S.F. II, Exh. 28, p. 110). Olympic Properties, LLC, was formed on 6/29/01, with David Cornwall owning 75% and Hancock owning 25%. Its stated purpose was "to invest in and hold real estate for investment." Attorney Kurt Brueckner drafted the formation documents to comport with the restrictions contained in Hancock's employment covenants (S.F. II, Exh. 25). Because Hancock footed more of the start-up expenses of Olympic than did Cornwall, he also got an option to increase his Olympic ownership after his Meritage employment (S.F. II, Exhs. 25, 26). Brueckner similarly carefully drafted the Option Agreement to comply with Hancock's restrictive covenant (S.F. II, Exh.27, pp. 80-86; Exh. 28, pp. 43,199). The option may be exercised after 6/2/04 - the expiration date of the covenant - but that "Prior to June 2, 2004, Hancock shall have no right to acquire any additional Units of Olympic, or any other rights whatsoever with respect to Olympic, by virtue of this Option Agreement." Over the summer of `01 Cornwall, not Hancock, negotiated options for Olympic on land which ultimately became known by the names Westwind and Riata (S.F. II, ¶ 49). Cornwall sought financing from Devon Properties, but because of 9-11the financing fell through (S.F. II, Exh. 3, p. 60; S.F. II, Exh. 29, Olympic letter to Devon of 11/16/01). Cornwall testified here and in Hancock's divorce case that soon after the 11/16/01 letter, Hancock was "out of Olympic and everything that had to do with it." (Exh. 28, pp. 110,177) Hancock's withdrawal was ultimately formalized, and by letter of 6/26/02 to Hancock Cornwall returned Hancock's investment money and said:
"As a result of the loss of our primary financial partner, Devon Properties, we were unable to proceed as planned with Olympic Properties. No property or assets of any 22 kind were even purchased. * * * I will be filing a final tax return for Olympic for the year 2001, and dissolving the LLC. As you know, Olympic has no debt, or assets of any 23 kind." (S.F. II, Exh. 30, emphasis added.)
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It is undisputed that the Olympic Properties and Olympic Development tax returns show no property owned and no income earned (S.F. II, ¶ 53). After Hancock left Olympic in November, 2001, Cornwall kept working on the
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Olympic projects, found financing through Taro Properties, and ultimately entered into partnership with Taro and Meritage (S.F. II, Exh. 28, pp. 83,84). The following facts are are taken from the Arizona Corporation Commission's records (remembering that Devon bowed out of Olympic financing on 11-16-01, Hancock left Olympic shortly thereafter, and Hancock didn't leave Meritage until March, 2003): a. 1-1802 Cornwall forms Cavdel, LLC and Cavalier Properties, LLC b. 1-28-02 Cornwall forms Riata West, LLC, whose members are Cavalier Properties, LLC and Taro Properties (later by amendment Sonterra Partners, LLC and MTH-Cavalier, LLC [Meritage] are added as members Cornwall forms Westwind Properties, LLC, including as members Cavalier Properties, LLC, and Taro Properties (later by amendment Sonterra Partners, LLC is added)
c. 3-27-02
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d. 12-09-02 Cornwall forms EP-The King, LLC
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e. 12-19-02 MTH-Cavalier, LLP, sole member Monterey Homes Construction, Inc. [Monterey formed on 3-14-97 by Meritage CEO Steven Hilton and Meritage CFO Larry Seay] formed by Meritage board member Tim White f. 12-30-02 MTH-Cavalier, LLC, Taro and Cavalier added by amendment to Riata West, LLC, and MTH-Cavalier, Taro and Cavalier added by amendment to Westwind Properties On 12-30-02 Meritage purchased an interest in Riata, Westwind and EP-The King from Cornwall and Taro (S.F. II, Exh. 31); its rationale for making the purchase is explained in a Steve Hilton MEMO dated 12-17-02 (S.F. II, Exh. 32). On 3-3-02 Greg Hancock left employment with Meritage. He was not informed by Meritage or Cornwall of the Westwind/Riata/EP-King transaction, properties which if purchased for build-out rather than investment would have been within his jurisdiction as president of Hancock Communities (S.F. II, Exh. 3, pp. 194,195). Soon after Cornwall formed Cavalier, and found financing through Taro, he assigned the property options held by Olympic to Cavalier, and from Cavalier to the Westwind and Riata entities, formed for the purpose. Hancock had no interest whatever in any of the new
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entities or their property (S.F. II, ¶ 58). The options were assigned from Cavalier to Westwind and Riata at the same price for which Olympic originally obtained them (S.F. II, Exh. 28, pp. 210-212, 223). S.F. II, Exhibit 31, the 12-30-02 letter of understanding from Cornwall to Cox, Hilton and Landon, describes Meritage's involvement in the projects three months before Hancock left Meritage. S.F. II, Exhibit 33 is the first balance sheet for Westwind, showing Meritage's capital investment of $2,108,433.51, at a land purchase cost of $9,945,390.15 (807 acres, or land cost of about $12,300 per acre). It is undisputed that the price to the Meritage/Cornwall/Cox partnership is virtually the same as Olympic's original option price per acre. S.F. II, Exhibit 34, is a Meritage "Acquisition Summary" describing the purchase of Westwind by what had been Hancock Communities from the Meritage/Cornall/Cox partnership for $35,100 per acre; i.e. the Meritage/Cornwall/Cox partnership sold it to Meritage/Hancock Communities for a partnership profit of about $23,000 per acre. Greg Curry incredibly reports that the foregoing difference in price per acre amounts to damages caused by Hancock to Meritage rather than profit to the Meritage/Cornwall/Cox partnership (S.F. II, Exh. 35). But then, neither Meritage nor its attorneys told Curry the truth about the transaction, which he learned from Hancocks' expert's report (S.F. II, Exh. 36, pp. 80-81, 85, 89-92). The Westwind/Riata/EP-King land was not the type of real estate purchase which Meritage usually made for home building because its goal usually was not to purchase land for long term development: "We typically option or purchase land only after the necessary entitlements have been obtained so that development or construction may begin as market conditions dictate"(S.F. II, Exh.22, p.2), and "the purpose of this [Cavalier] venture is to create a vehicle in which Meritage Corporation can generate access to a significant number of lots in the metropolitan Phoenix area on a wholesale basis, without assuming all the risks
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of ownership. (S.F. II, Exh. 32, emphasis supplied.) There is no Meritage corporate document which is critical of Greg Hancock regarding any element of its partnership with Cornwall and Cox in Westwind/Riata/EP-King (S.F. II, ¶ 65). Neither Meritage's original complaint or its first amended complaint make any mention of Westwind/Riata/EP-King; they are not mentioned until Meritage's Second Amended Complaint, filed on April 15, 2005. The only sinister aspect of Westwind/Riata/EP-King is Meritage's attempt to bootstrap an investment in which Hancock was not involved into damages supposedly caused by him. (3) Meritage Has No Claim Of Damages As A Matter of Law. As established by Rick Hancock (Declaration attached to Greg Hancock's Motion For Stay, etc., Doc. # 308), and unrefuted by any document or testimony adduced by Mertiage to date, the following are the facts regarding Rick Hancock Homes' development at Sundance: On 2-24-04, when Meritage filed this case, Rick Hancock owned no property at Sundance; Rick Hancock Homes did not place earnest money at Sundance until September, 2004, and it did not close escrow until December, 2004; Rick Hancock Homes did not receive a financing commitment until March, 2005, and no lots were taken down from the land banker until that month; Rick Hancock has never engaged in interstate commerce. Even though Meritage has taken at least sixteen depositions since its Rule 56(f) Declaration on 12-7-04, there are still no facts supporting its claims of unfair competition or damages. There is no testimony or other evidence that anything the Hancocks did or failed to do caused Meritage to lose a single sale. Instead, the testimony of Seay, Landon and Hilton, outlined exhaustively in Greg Hancock's first Motion for Summary Judgement, is unchanged in that regard. Indeed, the Hancock Communities' CFO, Roger Zetah, agreed that Meritage has sold every house it could build as quickly as it could build them in the Sundance subdivision (S.F. II, Exh. 37). It is undisputed that Meritage, like other builders at Sundance, had to conduct
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auctions since there were more buyers than homes available. Meritage knows of no act whereby Greg Hancock is assisting Rick Hancock to do anything whatever at Sundance (other than land banking, which he is entitled to do). There has been no disclosure of any claimed damages or loss to the SEC pursuant to Sarbanes-Oxley or to any other public oversight body, even though in Meritage's Disclosure Statement and in Verifications to its complaints, Larry Seay declared under oath the Meritage suffered over $44 million in damages. The following testimony of Ron French, who was trained about Sarbanes-Oxley (Exh. 16, pp. 53,53), precisely summarizes the state of Meritage's claim for damages (Exh. 16, pp. 56,58): Q. Would you agree that a claimed $44,000,000 loss to [the Hancock division] would be an event that would be required to be reported under Sarbanes-Oxley? A. It would be, yes.
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*
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*
*
Q. And if it's not reported by Meritage, then it didn't occur, did it? A. I'm assuming since it wasn't reported it didn't occur.
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Q. Because living up to the corporate responsibility of reporting and acting in compliance with all applicable laws, it should have been reported. True? A. True. Not only is there no proof of actual damage, a plaintiff cannot recover claimed lost profits based on speculation or conjecture. Rancho Pescado, Inc. v. Northwestern Mut. Life Ins. Co., 140 Ariz. 174, 186, 680 P.2d 1235, 1247 (App. 1984). (4) There Is No Federal Jurisdiction. As further reason why Greg Hancock is entitled to judgment as a matter of law, Meritage has failed to sustain its burden of proof that there is federal jurisdiction in this case. Meritage's invocation of the Lanham Act presupposes the viability of the License Agreement, which was inarguably terminated. Moreover, interstate commerce is not implicated, and it is another predicate to federal jurisdiction. By its very terms, the Lanham
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Act was intended to make actionable the deceptive and misleading use of marks used in interstate commerce. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 123 S.Ct. 2041, 2045 (2003); CCM Investors, Inc. v. Everst Development, Ltd., 840 F.Supp. 1304 (D. Minn. 1994). Finally, as already discussed, there is no claim of damages which can pass the "smell test." C. CONCLUSION Despite Mr. Goldfine's 56(f) Declaration, nothing has changed since the primary Meritage officers testified early on in this case. Steve Hilton was asked, "What do you hope to achieve by this lawsuit?" He answered, "Just to prevent infringement on our agreement. We don't expect, you know, the buying public to be confused by who they're buying a home from." Quite apart from the fact that Hilton was the architect of Meritage taking the Hancock name "dark in the market," thereby breaching the License Agreement, he could not then and cannot now name a person who is confused about the names. Nor could Landon or Seay. Hilton's deposition again: Q. "Tell me one home that you didn't sell because of anything Rick Hancock did?" A. "Don't know." Q. "Tell me one home that you didn't sell because of anything Greg Hancock did?" A. "Don't know." (S.F. I, Exh. 2, pp. 161-62) Landon's and Seay's answers were the same. Seay, who verified the complaints and a disclosure which claimed Meritage's damages to be $44 million, was asked in his deposition: Q. "How did Meritage come to that amount?" A. "And actually, I do not know how that number was derived. I would have to talk with my counsel about it. They no doubt have support." Seay went on to say that he would have to consult with the attorneys to see how they
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derived the number, that there must be "support for it someplace," but that he "can't comment whether [the number] is accurate or not." (Seay Dep. 141-42). Hilton's deposition contains the following: Q. "Is that statement [by Meritage counsel] correct, you don't have any idea what the loss might be?" A. "I don't." Q. "Okay. When we deposed Mr. Landon in Dallas, he had no idea what the loss might be, and when we deposed Mr. Seay, he had no idea what the loss might be. Can you tell me anybody who has any idea what the loss might be?" A. "Maybe the lawyers." (S.F. I, Exh.2, pp. 156-57) Well, the lawyers hired an "expert," Gregg Curry, to concoct damages, and he couldn't do it credibly. Then they decided to try to spin gold out of the straw of Westwind/Riata/EP-King. Finally, they decided to hire a prominent lawyer in the hope it would give their case at least some dignity. It did not, and the case is worse now than when it was filed. This Court should not devote further time or resources to it, and grant summary judgment to Greg Hancock. RESPECTFULLY SUBMITTED this 18th day of December, 2004.
FRISBEE & BOSTOCK, PLC /s/ Robert M. Frisbee Robert M. Frisbee Attorney for Greg Hancock
The foregoing Updated Statement of Facts was electronically filed and served this 18th day of December, 2006, and copy 24 thereof mailed to the Honorable Judge Silver.
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/s/ Robert M. Frisbee
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