Free Reply - District Court of Arizona - Arizona

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

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 Steve Hilton and John Landon and 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 Steve Hilton and John Landon

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Snell & Wilmer L.L.P.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Case No. CV-04-0384-PHX-ROS Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an REPLY TO GREG HANCOCK'S Arizona corporation, and currently d/b/a Meritage OPPOSITION TO ORDER Homes Construction, Inc., an Arizona corporation, MANDATING ROBERT FRISBEE and Meritage Homes of Arizona, Inc., an Arizona TO REIMBURSE MERITAGE AS A corporation, RESULT OF THE COSTS INCURRED IN PURSUING GREG Plaintiffs, HANCOCK'S COMPLIANCE WITH THIS COURT'S DISMISSAL v. ORDER 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.

(Assigned to the Honorable Roslyn O. Silver)

Case 2:04-cv-00384-ROS

Document 365

Filed 09/28/2006

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

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 hereby reply to Greg Hancock's Opposition to the Court's Order Mandating Robert Frisbee to Reimburse Meritage as a Result of the Costs Incurred in Pursuing Greg Hancock's Compliance with this Court's Dismissal Order ("Mr. Frisbee's Opposition to Court-Ordered Sanctions"). Mr. Frisbee's Opposition to Court-Ordered Sanctions and his suggestion that he is entitled to disregard any Order of this Court is devoid of merit and intolerable. Likewise, and his unsupported accusation that

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undersigned counsel is unethical speaks volumes. I. MR. FRISBEE MISCHARACTERIZES THE COURT'S ORDER Mr. Frisbee asserts that this Court sanctioned him for failing to assert the right reason for his failure to comply with the Court's Dismissal Order. That is not true. This Court sanctioned Mr. Frisbee because he instructed his client not to comply with the Order and because he refused to challenge the Order directly; instead, he sought to circumvent the Court's Order in, to say the least, a duplicitous manner. Mr. Frisbee conceded in earlier motion practice that he instructed his client not to move for a stay before acting in contempt of this Court's April 26, 2005 Order. Greg

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Hancock's Response to Meritage's Motion for an Order to Show Cause at 2. Instead of seeking a stay, he mocked the Federal Rules of Appellate Procedure ("Appellate Rules"), ignoring and defying its clear and unambiguous language and common sense. See

McDaniel v. United States Dist. Court, 127 F.3d 886, 889 (9th Cir. 1997) (the Appellate Rules governing stays under Appellate Rule 8 and case law apply to extraordinary writs); Artukuvic v. Rison, 784 F.2d 1354, 1355 (9th Cir. 1986) (analyzing an emergency appeal of a denial of a writ of habeas corpus and applying Appellate Rule 8 and Federal Rule of Civil Procedure 62). Appellate Rule 8(a) clearly and unambiguously states that "a party must ordinarily move first in the district court for . . . a stay of . . . [an] order of a district court pending appeal." That did not take place. As if the Appellate Rules were not clear, the Federal Rules of Civil Procedure ("Rules") state that a party challenging injunctive relief like this Court's April 26, 2005 Order must obtain an order, and there is no automatic stay provision. Rule 62(a). "Unless otherwise ordered by the court, an interlocutory judgment in an action for an injunction . . . shall not be stayed during the period after its entry and until an appeal is taken or during the pendency of an appeal." Id. (emphasis added). Hancock, at Mr. Frisbee's direction, sought no such order, and no such order was entered. Accordingly, it is Mr. Frisbee's intentional disregard of the Court's authority and not the merits of the Court's Order that justifies the sanction. II. MR. FRISBEE'S CLEAR AND NOTORIOUS INTENT TO DISOBEY THIS COURT'S ORDERS IS REASON ENOUGH FOR THE SANCTION Mr. Frisbee continues to state that he was right and should not have ever had to

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obey this Court's Order. See Mr. Frisbee's Opposition to Court-Ordered Sanctions at 23 3:11-16. Amazingly, he also states that because he believes this Court continues to the 24 be wrong with respect to its repeated decisions that it has subject matter jurisdiction 25 over the case, Mr. Frisbee is free to violate any Order of this Court he pleases. Id. at 1826 20. That is not the law and should not be countenanced and encouraged. 27 28
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

III.

THE COURT'S ORDER WAS NOT WITHOUT BASIS A. This Court Had the Authority to Enter the Dismissal Order

Undoubtedly, the Court initially concluded twice that its dismissal order fell into one of the exceptions to the Anti-Injunction Act. The Court was also free to change its initial conclusions, and this is why a direct challenge should have been made. The fact that this Court changed its mind ­ after the State Court had already dismissed Hancock's claims ­ does not mean that its original Orders were invalid or illegal under the law or that it never existed. It certainly does not mean that Mr. Frisbee's sixteen months of contempt never existed nor should his contempt be ignored. Mr. Frisbee is mistaken that this Court was not empowered to enter the Order it did. The Anti-Injunction Act, in tandem with the All Writs Act and this Court's power to supervise and manage cases before it, permit federal courts to enjoin state court litigation or parties to a state court action when the injunction is intended to prevent a party's vexatious and harassing conduct from interfering with the federal courts' ability to control litigation before it and enforce its discovery orders. See, e.g., Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1202-03 (7th Cir. 1996) (federal courts are entitled under the All Writs Act, Anti-Injunction Act and the courts' inherent powers to enjoin state courts or parties to a state court action when the injunction is intended to prevent a party's vexatious and harassing conduct from interfering with the federal courts' ability to control litigation before it and enforce its discovery orders). B. Hancock's Conduct of the State Litigation Clearly Fell Within the Vexatious Litigation Exception to the Anti-Injunction Act

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Regardless of the Court's Order after the State court had dismissed Hancock's claims, Hancock's filing of identical claims in State court during the midst of a discovery dispute in this Court clearly falls with an exception to the Anti-Injunction Act. The AntiInjunction Act allows this Court to stay or enjoin state proceedings: (1) where an injunction is expressly authorized by Act of Congress, (2) where an injunction is necessary in aid of jurisdiction and (3) where the injunction is necessary to protect or

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

effectuate the Federal Court's judgments. 28 U.S.C. § 2283. In a number of contexts, federal courts have interpreted these exceptions to permit the enjoining of state court litigation when a party was using state court litigation in an harassing or vexatious manner that had the purpose or effect of interfering with the federal court's management of pretrial discovery. See, e.g., Winkler, 101 F.3d at 1202-03;1 Sperry Rand Corp. v.

Rothlein, 288 F.2d 245, 248-9 (2d Cir. 1961); American Optometric Assoc. v. Ritholz, 101 F.2d 883 (7th Cir.), cert. denied., 307 U.S. 647 (1939); Newby v. Enron Corp., 2002 U.S. Dist. LEXIS 3949, *18-24 (S.D. Tex. 2002); In re Columbia/HCA Healthcare Corp., 93 F.Supp.2d 876, 879-81 (M.D. Tenn. 2000); OMBAN Corp. v. Holtzman, 1997 U.S. Dist. LEXIS 9502, *22 (N.D.N.Y.), aff'd on the same grounds 1997 U.S. LEXIS 28543 (2d Cir. 1997); 600 Calif. Corp. v. Harjean Co., 284 F.Supp. 843 (N.D. Tex. 1968). Here, this Court found after two hearings and an additional briefing that Hancock's state court litigation was harassing and vexatious in a manner that interfered with this Court's management of pretrial discovery, see Transcript of Proceedings on December 7, 2005, at 8:20-10:24, and, therefore, the Court's May 31, 2005 Order is authorized by the All Writs Act and falls within this well-recognized exception to the Anti-Injunction Act. See, e.g., Winkler, 101 F.3d at 1202-03. As to harassing and vexatious litigation directed at disrupting a federal litigation, "the principles of federalism and comity which the Anti-Injunction Act is meant to protect include a strong and long established policy against forum-shopping." Winkler, 101 F.3d at 1202-03. That is, the Anti-Injunction Act cannot be used as a sword by litigants to take advantage of the dual court system in order to evade the authority of a federal court. Otherwise, the Anti-Injunction Act would have the potential "to seriously impair the federal court's flexibility and authority to decide that case." Atlantic Coastline R.R. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 295 (1970).
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The Ninth Circuit has acknowledged the holding in Winkler. Sandpiper Vill. Condo. Ass'n v. Louisiana-Pacific Corp., 428 F.3d 831, 843-45 and n.20 (9th Cir. 2005); see also On Command Video Corp. v. Lodgenet Entertainment Corp., 976 F.Supp. 917, 922 (N.D. Cal. 1997).
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Where a "defendant has endeavored to delay proceedings or to forestall decision on issues pending in the federal court... [his initiation of state proceedings] may represent an attempt to obtain a more favorable forum." M. Barancik et al v. Investors Funding Corp. of New York, 489 F.2d 933, 936 (7th cir. 1973). Not only does the initiation of state proceedings tend to fragment litigation that could otherwise be decided in one suit, it "may evidence disrespect for the federal tribunal." Id. C. Waiver

In addition, Hancock and Mr. Frisbee waived their Anti-Injunction Act argument. Failure to raise arguments in a timely matter consistent with the Federal Rules of Civil Procedure amounts to a waiver. See Novosteel SA v. United States, 284 F.3d 1261, 1274 (Fed. Cir. 2002) (holding that a party waives an argument when it does not present its argument to the court at the time assigned by the Federal Rules of Civil Procedure because the failure to do so fails to give the court "a fair opportunity to rule on an issue"). Mr. Frisbee simply did not comply with the procedures set forth in the Rules. Hancock should have filed a Rule 59(e) Motion on his own and raised therein, if he believed it had merit, the "Anti-Injunction Act" argument within ten days after the May 31, 2005 Order. In addition to what he should have filed, Hancock had two separate chances to raise the "Anti-Injunction Act" argument but failed to do so: (1) in his Response to Meritage's Motion to Show Cause on May 23, 2005; and (2) in his Response to Meritage's Renewed Motion to Show Cause on August 22, 2005. Allowing this argument to proceed at this juncture would not only disturb court proceedings, but would contravene previously established waiver law. Because Hancock and Mr. Frisbee did not raise the "Anti-Injunction Act" argument when it was ripe, plaintiffs have spent tens of thousands of dollars pursuing an order to show cause in an effort to aid in the enforcement of this Court's Order. In this light, there is simply nothing "unjust" with the sanction, and there is no basis for Mr. Frisbee's assumption that the Court of Appeals is ignorant of the law. Indeed, the failure to sanction Mr. Frisbee for his contempt will reward and encourage his contemptuous
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behavior and simply penalize its victim. IV. MR. FRISBEE'S ACCUSATIONS AGAINST SNELL & WILMER ARE BASELESS Not satisfied with his own unethical conduct, he wrongfully accuses the undersigned counsel of breaching his ethical duties to the Court without addressing the

5 holding in Wikler or providing any support. See Mr. Frisbee's Opposition to Court6 Ordered Sanctions at 4:10-17. As discussed above, this Court's Order fits within an 7 exception of the Anti-Injunction Act, and the undersigned counsel's argument that this 8 Court should so rule is not unethical. 9 CONCLUSION 10 For the above reasons, the Court's Order of August 21, 2006 should not be vacated, 11 and the proposed Order setting the amount of the sanction should be signed.
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

12 DATED this 28th day of September, 2006. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 September 28, 2006, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and
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Snell & Wilmer L.L.P.

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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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Ivan K. Mathew Mathew & Mathew, P.C. 1850 N. Central Avenue, Suite 1910 Phoenix, Arizona 85004 Attorneys for Defendant Rick Hancock Robert M. Frisbee Frisbee & Bostock, PLC 1747 East Morton Avenue Suite 108 Phoenix AZ 85020 Attorneys for Defendant Greg Hancock Mark I. Harrison Sarah Porter Osborn Maledon, P.A. 2929 North Central Avenue Suite 2100 Phoenix, Arizona 85012-2794 Attorneys for Defendant Greg and Linda Hancock and Counsel of Record Robert Frisbee 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/ Adam E. Lang
29323.0078\GOLDFID\PHX\1891403

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Case 2:04-cv-00384-ROS

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