Free Motion for Summary Judgment - District Court of Arizona - Arizona

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
1 5 6 7 8 9 10 11

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,
13

DEFENDANT GREG HANCOCK'S UPDATED STATEMENT OF FACTS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR DISMISSAL

Defendants.
14 15 16 17

I. 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. 1. On May 30, 2001, Meritage subsidiaries Hancock-MTH Builders, Inc., and

18

Hancock-MTH Communities, Inc. entered into a License Agreement (Exh. 1) with Greg
19

Hancock whereby Meritage obtained the right to use the names "Hancock Homes" and
20

"Hancock Communities" for 6 years "in strict compliance with this agreement" (Exh. 1, ¶¶
21

1, 3.3, 5).
22

2. "Hancock Homes" is a trademark registered to Greg Hancock; the License
23

Agreement preserves to him the exclusive right, title and interest to both it and the name
24

"Hancock Communities" (Exh. 1, ¶ 3.4).
25

3. The License provides (Exh. 1, ¶ 4):
26

Case 2:04-cv-00384-ROS

Document 413

Filed 12/18/2006

Page 1 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14

[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.) 4. Meritage's co-CEO, Steven Hilton, on November 18, 2004,1 testified that he reviewed the License Agreement during its drafting, believed it adequate as to form and content, and would "live by the agreement as it stands" (Dep. I, pp. 179-80). 5. On September 8, 2003, six months after Greg Hancock left employment with Meritage, and four and a half years before the License Agreement was due to expire, Hilton sent an Email to Co-CEO John Landon re the "Hancock Name:"
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? (Exh. 2, emphasis supplied.)

6. Neither Hilton's suggestion nor the Email itself were disclosed to Greg Hancock
15

until the discovery phase of this case (Hancock Dep.[Exh. 3], pp. 195,196).
16

7. Both the suggestion and the Email were acted upon immediately - at the 2004
17

Meritage Christmas party Interim President Jim Arneson announced to the partygoers the
18

fact of the name change, to the total surprise of Desiree Coats, Meritage's head of
19

advertising (Exh. 4, p. 80).
20

8. On December 9, 2003, new Hancock President Ron French sent an Email to Coats
21

which in part said, "Please start the agency thinking about the change of Hancock to
22

Meritage. John [Landon] wants to accomplish this ASAP"(Exh. 5).
23

9. On January 12, 2004, Hilton reviewed a "Request for Re-Branding Proposal"
24 25 26
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.
1

Case 2:04-cv-00384-ROS

Document 413

2 Filed 12/18/2006

Page 2 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

authored by Jane Hays; the Proposal mentioned the Hancock Communities' prior prominence and home building activity at the bottom of the first page (Exh. 6). 10. On May 20, 2004, the Martz Agency, through 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" (Exh. 7). 11. On June 18, 2004, Meritage and the Martz Agency conferred regarding the campaign, about which Conference Report #1 (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. 12. On July 1, 2004, Meritage CFO Larry Seay sent an Email to virtually everyone at Meritage stating "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)." (Exh. 9) 13. Meritage then changed the names of all but two "Hancock Communities" to "Meritage Homes;" which Hilton testified resulted in making the Hancock Communities name "less visible" (Dep. I, pp. 69, 70). 14. On May 26, 2005, the Hancock name was also removed from Sundance (Exh. 10), the development which Meritage alleges was being impacted by Rick Hancock Homes. 15. Barb Sorget conducted an advertising analysis of the advertising and re-naming campaign for defendants (Exh.11). Her unrefuted conclusion is that, "The decrease in exposure of the Hancock Communities name within newspaper advertising from January 2000 to June 2004 reduces its name awareness and market recognition and will have a
3 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 3 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

diminished effect on its future marketability, value and degree of public recognition." 16. Meritage did not seek or receive permission from Greg Hancock to make the name and advertising changes (Hilton Dep. I, p.68). 17. Under the License Agreement, the Licensor (Greg Hancock) may terminate the agreement by giving written notice (¶ 7.1) or " to immediately terminate this Agreement without prior notice if Licensee, its employees or agents shall breach any provision of this Agreement or the Master Transaction Agreement" (¶ 7.3, emphasis added). 18. On February 13, 2004, by letter from his counsel (Exh. 12), Greg Hancock terminated the License Agreement. 19. The stated grounds for termination were Meritage's failure to provide an accounting of Hancock's earn-out, as it was obligated to do under the MTA. 20. That Hancock was entitled to expect an earn-out is demonstrated by Meritage CFO Larry Seay's letter of January 8, 2003, where he said that even if Hancock "was not with the company" he would have received an earn-out of over $800,000 (Exh. 13). 21. Had Hancock had been informed of the facts recited at 5 through 12 above, he would have cancelled the license earlier and sued for breach of the Licence Agreement (Exh.3, pp. 196-198). 22. On February 23, 2004, Meritage's counsel replied in writing (Exh. 14); the letter 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. 23. Meritage filed this suit on February 24, 2004, claiming as its grounds for federal

26 4 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 4 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

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. 24. There is no testimony controverting Hancock's contention that Meritage's phasing out and discontinuing of the use of the Hancock name violated the License Agreement. II. 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. 25. Not a single witness has testified that Greg Hancock invested in, counseled, advised or otherwise assisted Rick Hancock in his home building enterprise. 26. Meritage's 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. 27. In fact, 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 its checking account established (Exh.3, pp. 175,176 ) B. There Is No Evidence That Greg Hancock Violated His Employment Agreement With Meritage. (1) Greg Hancock's Job Performance

20

28. Greg Hancock's employment duties and restrictive covenants with Meritage are
21

spelled out in his Employment Agreement with Meritage (Exh. 15).
22

29. EXHIBIT A to the Employment Agreement specifically describes his duties with
23

regard to running Hancock Communities.
24

30. EXHIBIT A gives Meritage, not Hancock, the right to control decisions regarding
25

land acquisition and expansion into new product or market areas.
26 5 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 5 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

31. EXHIBIT B to the Employment Agreement describes the calculations to be used to determine Greg Hancock's right to performance bonuses generally, and sets specific monetary goals for the first seven months of his employment. 32. It is undisputed that subsequent to the first seven month period, a business plan agreed upon between Hancock and Meritage governed the amount of the bonus that Hancock and his eligible employees could earn. 33. It is undisputed that Hancock and all of Hancock's eligible employees earned 100% of their available bonuses during the entire time Hancock was employed with Meritage. 34. It is undisputed that in the entirety of Meritage's records, including Hancock's personnel file, and Meritage's board minutes, budget committee minutes, and publicly filed submissions, there is not a single negative word regarding Hancock's job performance. 35. Since neither its documents nor testimony from its co-CEOs and CFO could provide any evidence that Hancock's job performance was deficient, Meritage hired an "expert," Greg Curry of Navigant Consulting, to attempt to establish the allegations in its complaint that Hancock did not perform his job adequately (Exh. 36, pp. 32,22). 36. In one effort to establish monetary damage supposedly caused by Greg Hancock, Curry compared the monetary performance of two other building companies, American Standard and Pulte, to that of Hancock Communities; Curry conceded, however, that such a comparison was not the standard by which Hancock's performance was measured (Exh. 36, pp. 27-31). 37. Greg Hancock's successor as the 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 (Exh. 16, French Dep., pp. 59,60). 38. Curry also asserts that Hancock's performance in acquiring land for Meritage's homebuilding was inadequate; for example, his report states, "As of June 2001 [the date of
6 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 6 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

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." (Exh. 17) 39. The statement is a complete fabrication, as proven by Meritage internal documents relating to its purchase of Hancock, 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" (Exh. 18). b. The Hancock Communities Project Lot Status Report dated 5/31/01 [the date Meritage purchased Hancock Communities](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 (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" (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. 22). 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 (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 (Exh. 24).
7 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 7 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

40. On one occasion Meritage co-CEO John Landon vetoed a land purchase recommended by Hancock which would have added about 800 lots (Exh. 3, p. 181). 41. Hancock continually maintained an inventory of lots sufficient for three to five years' future sales at about 1,500 home sales per year (Exh. 3, pp. 136-38 ). 42. 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 (Exh. 34, pp. 39,40). (2) Meritage's Big Lie - Olympic/Westwind/Riata 43. Greg Hancock's employment agreement with Meritage contained two restrictive covenants (Exh. 15, ¶¶ 8.A, B): (a) The first restrictive covenant precluded him until June 2, 2006, from engaging in any homebuilding business with 100 miles of Meritage; Meritage has adduced no evidence that he violated this covenant. (b) The second restrictive covenant precluded him until June 2, 2004 (the period 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." 44. 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 it was able to close the purchase of any property (Exh. 28, Cornwall Dep., p. 110). 45. It is undisputed that 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." 46. Attorney Kurt Brueckner drafted the formation documents to comport with the restrictions contained in Hancock's employment covenants (Exh. 25).
8 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 8 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

47. Because 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 (Exhs. 25, 26). 48. Attorney Kurt Brueckner carefully drafted the Option Agreement to comply with Hancock's restrictive covenant (Exh.27, pp. 80-86; Exh. 28, pp. 43,199); the option states that Hancock could exercise the option 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." 49. It is undisputed that over the summer of `01 Cornwall, not Hancock, negotiated options for Olympic on land, which after Hancock withdrew from Olympic, became known by the names Westwind and Riata. 50. Olympic sought financing with Devon Properties, but because of 9-11the financing fell through (Exh. 3, p. 60; Exh. 29, Olympic letter to Devon of 11/16/01). 51. Cornwall testified in his depositions in this case and in Hancock's divorce case that shortly after the 11/16/01 letter to Devon, Hancock was "out of Olympic and everything that had to do with it." (Exh. 28, pp. 110,177) 52. Hancock's withdrawal was ultimately formalized in an Olympic manager's meeting and by letter of 6/26/02 to Hancock whereby 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." (Exh. 30, emphasis added.)
24 25 26

53. It is undisputed that the Olympic Properties and Olympic Development tax returns show no property owned and no income earned. 54. After Hancock left Olympic in November, 2001, Cornwall kept working on the
9 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 9 of 15

1 2 3 4 5 6 7 8 9 10

Westwind and Riata projects, found financing through Taro Properties, and ultimately entered into partnership with Taro and Meritage (Exh. 28, pp. 83,84). 55. The following facts are undisputed and are taken from filings at the Arizona Corporation Commission (remembering that Devon bowed out of Olympic financing on 1116-01, Hancock left Olympic shortly thereafter, and Hancock was employed at 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
11 12

d. 12-09-02 Cornwall forms EP-The King, LLC
13 14 15 16 17 18 19 20 21 22 23 24 25 26

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 56. On 12-30-02 Meritage purchased its interest in Riata, Westwind and EP-The King from Cornwall and Taro (Exh. 31); its rationale for making the purchase is explained in a Steve Hilton MEMO dated 12-17-02 (Exh. 32). 57. On 3-3-02 Greg Hancock left employment with Meritage; prior thereto he had not been informed by Meritage or Cornwall of the Westwind/Riata/EP-King transaction, properties which if purchased for building rather than investment would have been within his jurisdiction as president of Hancock Communities (Exh. 3, pp. 194,195). 58. It is undisputed that soon after Cornwall formed Cavalier, and found financing through Taro, he assigned the property options held by Olympic to Cavalier, and from
10 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 10 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Cavalier to the Westwind and Riata entities, formed for the purpose; Hancock had no interest whatever in any of the new entities or their property. 59. It is undisputed that the options were assigned to Westwind and Riata at the same price for which Olympic originally obtained them (Exh. 28, pp. 210-212, 223). 60. Exhibit 31, the 12-30-02 letter of understanding from Cornwall to Cox, Hilton and Landon, describes the venture and demonstrates Meritage's involvement in the projects three months before Hancock left Meritage. 61. 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. 62. Exhibit 34 is a Meritage "Acquisition Summary" that describes 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. 63. Meritage's "expert," Greg Curry, incredibly claims in his report 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 (Exh. 35); but then, neither Meritage nor its attorneys told Curry the truth about the transaction, which he learned from Hancocks' expert's report (Exh. 36, pp. 80-81, 85, 89-92). 64. The Westwind/Riata/EP-King land was not the type of real estate purchase which Meritage usually made for home building; it is undisputed that its goal usually was not to purchase land for long term development: (a) "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." (Exh.22, p.2, LAND ACQUISITION AND DEVELOPMENT)
11 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 11 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

(b) "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 of ownership. (Exh. 32, emphasis supplied.) 65. 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. 66. 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. III. Meritage Has No Claim Of Damages As A Matter of Law. 67. As established by the Declaration of Rick Hancock (attached as Exhibit 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: a. As of 2-24-04, when Meritage first filed this case, Rick Hancock owned no property at Sundance and had not yet pounded a nail. b. Rick Hancock did not place earnest money on Parcel 7 at Sundance until September, 2004, and it did not close escrow on the parcel until December, 2004. c. Rick Hancock did not receive a financing commitment for the project until March, 2005, and no lots on which to build houses were taken down from the land banker until that month. c. Rick Hancock has never engaged in interstate commerce in any way. 68. There is no evidence of either unfair competition or damages to date, and even though Meritage has taken at least sixteen depositions since its Rule 56(f) Declaration on 127-04, there are still no facts supporting its claims. 69. There is no testimony or other evidence that anything the Hancocks did or failed
12 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 12 of 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

to do has caused Meritage to lose a single sale; instead, the testimony of Seay, Landon and Hilton is unchanged in that regard, and confirmed by the testimony of Roger Zetah, the Hancock Communities' CFO, who agreed that Meritage has sold every house it could build as quickly as it could build them in the Sundance subdivision (Exh. 37). 70. It is undisputed that Meritage, and all other builders at Sundance, had to conduct auctions since there were more buyers than homes available 71. Meritage has produced no proof and 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). 72. There is no evidence of confusion in the marketplace. 73. 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. 74. 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.

20

*
21 22

*

*

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.
23 24 25 26

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. IV. Meritage Counsel's Rule 56(f) Declaration Was Devoid of Merit - Subsequent
13 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 13 of 15

1 2

Discovery Has Failed To Reveal Any Documents or Testimony Supporting Meritage's Claims As A Matter of Law. 75. On December 7, 2004, in his Rule 56(f) Declaration, Dan Goldfine proffered to

3

this Court that further discovery would establish facts which would overcome Greg
4

Hancock's Motion for Summary Judgment.
5

76. The following is the evidence which Goldfine declared would be discovered,
6

juxtaposed with what was actually discovered:
7

(a) Greg Hancock was involved in the use of the name "Rick Hancock Homes"
8

- no such evidence was discovered.
9

(b) Greg Hancock was involved with the formation and operation of Rick
10

Hancock's home building enterprise - no such evidence was discovered.
11

(c) Greg Hancock's involvement with Rick Hancock Homes violated his
12

restrictive covenants and breached his fiduciary duties to Meritage - no such evidence was
13

discovered.
14

(d) Greg Hancock was involved in a business enterprise that was intended to
15

interfere with Meritage's prospective customers at Sundance - no such evidence was
16

discovered.
17

(e) Greg Hancock "usurped" Meritage's exclusive license for the Hancock
18

name - instead, discovery revealed that Meritage violated the License Agreement as a matter
19

of law by the "go dark" Email and the subsequent destruction of the Hancock name, all of
20

which Goldfine knew or should have known about.
21

(f) There is confusion in the marketplace between "Hancock Communities"
22

and "Rick Hancock Homes" - no such evidence could be found except a declaration by a
23

Marine who did not purchase a Rick Hancock home and who signed disclaimers negating
24

his claim of confusion; the Marine is a subordinate of Meritage lawyer Rick Erickson.
25

(g) By implication, that Rick Hancock's home building operation unlawfully
26 14 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 14 of 15

1 2 3 4 5 6 7 8 9 10 11

competed with Meritage at Sundance - no such evidence was produced, and moreover, the testimony continued to be unanimous that Meritage was sold out of every house it could build at Sundance, and nothing done by the Hancocks impeded a single sale. 78. Not one of the numerious witnesses deposed by Meritage subsequent to Goldfine's Declaration, including its own officers and employees, offered a whit of testimony substantiating Meritage's claims in this lawsuit - to the contrary, it was learned, inter alia, that Meritage breached the License Agreement, defrauded Rick and Brenda Hancock in their home purchase, defrauded Rick Hancock in his termination negotiations, suffered no provable damages whatever, and hired an expert who could not support its claims. SUBMITTED this 18th day of December, 2006.

12 13 14 15 16

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 18 thereof mailed to the Honorable Judge Silver.
17 19

/s/ Robert M. Frisbee
20 21 22 23 24 25 26 15 Filed 12/18/2006

Case 2:04-cv-00384-ROS

Document 413

Page 15 of 15