Free Motion to Stay - District Court of Arizona - Arizona

Robert M. Frisbee #018779 FRISBEE & BOSTOCK, PLC 2 1747 East Morten Avenue, Suite 108 Phoenix, Arizona 85020 3 Phone: (602) 354-3689 Fax: (602) 266-7744 4 [email protected] Attorneys for Greg and Linda Hancock
1 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation; Hancock-MTH Builders, Inc., an Arizona corporation; Hancock-MTH Communities, Inc., an Arizona corporation d/b/a/ Meritage Homes Construction, Inc.; and Meritage Homes of Arizona, Inc., an Arizona Corporation, Plaintiffs, vs. ) ) ) ) ) ) ) ) ) ) ) Ricky Lee Hancock and Brenda ) Hancock, husband and wife; Gregory ) S. Hancock and Linda Hancock, ) husband and wife; Rick Hancock Homes ) LLC, an Arizona limited liability ) company; RLH Development, LLC, an ) Arizona limited liability company; and ) J2H2, LLC, an Arizona limited ) liability company, ) Defendants, ) and ) ) Greg Hancock, an individual, ) ) Defendant, Counter) Claimant and Third) Party Plaintiff, ) vs. ) ) Steven J. Hilton, an individual; John R. ) Landon, in individual; Larry W. Seay, ) an individual; and Snell & Wilmer, LLP, ) an Arizona professional ) corporation, ) Third-Party Defendants. ) )
Document 308

Case No. CV-04-0384-PHX-ROS

GREG HANCOCK'S MOTION FOR STAY AND REQUEST FOR RELIEF FROM OPERATION OF ORDER

Case 2:04-cv-00384-ROS

Filed 04/27/2006

Page 1 of 9

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

Defendant Greg Hancock, pursuant to Rules 1, 62(b), and 59(e) of the Rules of Civil Procedure, respectfully moves the Court for its Order staying entry of judgment pursuant to its Order of March 31, 2006, and for the Court's relief from the operation of that Order. The Motion is based upon the attached Memorandum of Points and Authorities, the Exhibits attached thereto, and all the files, records and proceedings herein. MEMORANDUM OF POINTS AND AUTHORITIES I. Introduction. The Court has criticized the writer for failing to seek a stay prior to bringing an appeal1 so that the Court could correct the inadvertent use of the words "with prejudice" to "without prejudice," and for failing to cite the Anti-Injunction statute when objecting to the Court's Order affecting state proceedings (Doc. #157). These motions are brought in small part to allay potential criticism or any contention that counsel is not thorough. Mostly, however, Greg Hancock believes that these motions are necessary to prevent injustice. Rule 1 instructs that the rules "be construed and administered to secure the just, speedy, and inexpensive determination of every action. Further, the Supreme Court has said:

"The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose 17 of pleading is to facilitate a proper decision on the merits." Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227 (1962), quoting Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80 18 (1957).
19 20 21 22 23 24 25 26
Albeit the appeal was interlocutory, and no party concerned with this dispute has cited any authority that a request for stay was mandated prior to such an appeal.
1

As the Hancocks have contended all along, recently disclosed evidence irrefutably shows that, far from attempting to facilitate a proper decision, Meritage and its counsel have been working a fraud on this Court since the day this action was filed. Meritage's own documents and witnesses prove that assertion and provide evidence of the "overt act" required in an abuse of process case (Order, 3-31-06, Sect. A.1.) That evidence should also undermine any impression the Court might have that Meritage and its counsel are the "good

2 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 2 of 9

1 2 3 4 5 6

guys" in this case. In the interests of justice the Court should stay implementation of its Order until it can be reconsidered in light of what follows. II Concealed Facts Ascertained Through Discovery Deprive the Court of Jurisdiction. A. Prior to This Lawsuit Meritage Intentionally Breached the License Agreement And Concealed The Fact From Both Greg Hancock And The Court. The viability of the License Agreement between Meritage and Hancock is the

7 8

cornerstone of Meritage's claim of federal jurisdiction.2 It is undisputed that at 3.4 of the agreement Meritage acknowledged Hancock's "exclusive right, title and interest in and to

9

the Licensed Marks;" at 3.5 Meritage stipulated that the agreement could not be construed
10

as conveying to it anything other than "permissive use" of the Licensed Marks; and at 4.
11

agreed as follows:
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
2 3

[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.) Nevertheless, on September 8, 2003, six months after Greg Hancock parted with Meritage, and more than five months before this case was first filed, Co-CEO Steve Hilton sent the following Email (attached as EXHIBIT 1)3to 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? (Emphasis supplied.)

Second Amended Complaint, ¶¶ 16-19, 72, 75-78.

Note that this Email was printed on 2/13/06, more than 18 months after Hancock's request for the production of such documents, and produced by Meritage in March, 2006.

3 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 3 of 9

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

Greg Hancock was never informed of the e-mail. No reply from Landon has been produced, but it is clear that the plan was embarked upon. At the 2004 Meritage Christmas party Interim President Jim Arneson announced to the partygoers the fact of the name change, and the abandoning of the Hancock name proceeded apace thereafter (EXHIBIT 2, Meritage Emails re same4). No reasonable mind can conclude other than that Meritage purposely entered into a course of conduct which derogated and detracted from the licensed mark' repute, value, marketability, degree of public recognition and popularity. It is Greg Hancock, not Meritage, who has been damaged be reason of breach of the License Agreement. Accordingly, paragraphs 75-79 of Meritage's Second Amended Complaint are utter tripe. B. Meritage's Contrivance of Federal Jurisdiction Through the Breached License Agreement Destroys the Court's Jurisdiction.5 Lack of subject matter jurisdiction may be raised at any time. Indeed, it is the duty

13

of the court at any level of the proceedings to address the issue sua sponte whenever it is
14

perceived. Fed.R.Civ.P. 12(h)(3); Things Remembered, Inc. v. Petrarca, 516 U.S. 124,
15

132 n.1, 116 S. Ct. 494, 133 L. Ed. 2d 461 (1995) (Ginsburg, J., concurring) ("[of] course,
16

every federal court, whether trial or appellate, is obliged to notice want of subject matter
17 18

jurisdiction on its own motion "; Rosales v. United States, 842 F.2d 799m 803 n.4 (9th Cir. 1987).

19

The court may and should dismiss a patently frivolous suit or one alleging facts
20

simply for the purpose of asserting jurisdiction. Hagans v. Lavine, 415 U.S. 528, 536-37,
21

94 S.Ct. 1372, 39 L.Ed.2d 577 (1974)(commenting that a court may dismiss a patently
22

frivolous claim for lack of subject matter jurisdiction); Bell v. Hood, 327 U.S. 678, 682-83,
23 24 25 26
4 5

Dozens more documents proving the same thing could also be attached.

This is quite apart from the fact that discovery for two years has adduced no proof whatever that either Greg or Rick Hancock have ever engaged in interstate competition

4 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 4 of 9

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

66 S.Ct. 773, 90 L.Ed. 939 (1946) (observing that dismissal for lack of jurisdiction may result if the federal claim "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction * * *"); Bender v. Williamsport Area School District, 475 U.S. 534, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986)(a party with no stake in the controversy and thus no cognizable injury lacks standing to invoke the court's jurisdiction). Put slightly differently, "jurisdiction cannot be established by colorable or feigned allegations solely for the [the purpose of jurisdiction]," Emland Builders, Inc. v. Shea, 359 F.2d 927,929 (10th Cir. 1966). A case analogous to this one is Thornhill Pub. v. General Telephone & Electronics, 594 F.2d 730 (9th Cir. 1979), where the Court of Appeals affirmed the dismissal of a Sherman Act/Clayton Act case on the grounds that undisputedly no interstate commerce was involved and therefore the district court had no jurisdiction. In making that determination the trial court was entitled to look at the evidence presented with respect to the jurisdictional issue only, even resolving factual disputes if necessary. The Court cited Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d at 891: "the trial court may proceed as it never could under Rule 12(b)(6) or Fed.R.Civ.P. 56. * * * [N]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist." This Court should conclude that Meritage breached the License Agreement as a matter of law, there being no evidence to refute Meritage's evisceration of Hancock's name and prominence. Moreover, despite "discovering" thousands of documents and taking ten depositions, Meritage has not produced one whit of evidence that Greg Hancock breached any contractual or common law duty toward Meritage, or that it suffered a nickle of damages. The court has no choice but to dismiss Meritage's claims for lack of jurisdiction now that its calculated breach of the License Agreement, the only link to the Lanham Act or federal jurisdiction, has been laid bare.
5 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 5 of 9

1 2

C. Meritage's Damage Claim Is As Contrived As Its Contention That The License Agreement Was In Force, And Similarly Destroys Jurisdiction. The Court will recall the testimony of Meritage's executives, Landon, Hilton and

3

Seay, attached to numerous prior filings, that they could not quantify any claimed damages
4

in any way, and that they could not claim that a single house Meritage built went unsold
5

because of the activities of the Hancocks. When pressed, they all said, "see our lawyers."
6

Well, the lawyers could do no better. First, they hired an "expert," Greg Curry, to
7

quantify damages in one way or another. He attempted to do so, first by comparing Hancock
8

Communities' performance to two other, vastly larger builders. He conceded, however, that
9

such was not the measure of Greg Hancock's performance, which was meeting business
10

plans approved by Meritage (which he always did). He further conceded that Greg had
11

received 100% of his potential bonuses, demonstrating achievement of the business plans.
12

Then, at the prompting of the lawyers, he concocted a damages claim based on the
13

claimed failure of Greg Hancock to turn over an opportunity which the lawyers have called
14

"Olympic Properties"(or Westwind/Riata West) to Meritage. However, Curry learned from
15

Greg Hancock's expert's report that Hancock withdrew from Olympic before it had ever
16

purchased anything, that Olympic's successor then went into partnership with Meritage
17

months before Hancock was forced from Meritage, and that Meritage suffered no loss of
18

opportunity or any loss at all.
19

David Cornwall, Meritage's equity partner in Olympic's successors, Westwind and
20

Riata West, testified that Hancock was effectively out of Olympic by 11/16/01, that he got
21

out because there was a risk he might violate his employment agreement, and that he
22

"walked away from $12 million rather than violate his agreement with Meritage," ant that
23

he was "out of the loop" with regard to both projects. (EXHIBIT 3)
24

As defendants have told this Court from the beginning, there is no wrongdoing and
25

there are not damages, and the Court should sua sponte dismiss the case for lack of
26 6 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 6 of 9

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

jurisdiction before it gets even further out of hand. III. THE COURT SHOULD NOT HAVE DISMISSED GREG HANCOCK'S AMENDED CLAIMS ASSERTED SUBSEQUENT TO MERITAGE'S SECOND AMENDED COMPLAINT. An amended complaint under the Federal Rules supercedes the original complaint. See Fritz v. Standard Security Life Ins. Co. of New York, 676 F.2d 1356, 1358 (11th Cir. 1982); Wright & Miller, Federal Practice and Procedure, § 1476, at 389-90. When a plaintiff files an amended complaint which changes the scope of the case, the defendant is allowed to plead anew as though it were the original complaint filed by the plaintiff. See Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons Co., 50 F.R.D. 415 (D.Del. 1970) (defendant permitted to file a new counterclaim in response to amended complaint); Archie and Allan Spiers, Inc. v. United States, 296 F.2d 757, 766 (Ct.Cl. 1961) ("when the plaintiff amended, changing its theory, it was well within defendant's right to file a new or amended answer changing its defense"). It cannot be denied that Meritage changed the scope of the case and its theories. The First Amended Complaint, filed in October, 2004, was 23 pages long. The Second Amended Complaint is almost a third longer, 30 pages. The First Amended Complaint has ten causes of action, the Second has twelve. The Second Amended Complaint substantially enlarged the factual allegations and added two entirely new counts against Greg Hancock, Fraud in The Concealment (Tenth Cause) and Usurpation of Corporate Opportunties (Twelfth Cause). The Second Amended Complaint was filed by Meritage on April 15, 2005; Hancock filed his Amended Counterclaims and Third-Party Complaint on May 12, 2005. He would not have done so had he intended to consent to the dismissal of those claims. As the history of the pleadings demonstrates, Hancock met every pleading with a responsive one. And as is said at 35A C.J.S. Federal Civil Procedure § 422, citing Massey v. Helman, 196 F.3d 727 (7th Cir. 1999), cert.denied, 532 U.S. 1056, 121 S.Ct. 2214, 150
7 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 7 of 9

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

L.Ed.2d 208 (2001): "When a plaintiff files an amended complaint, the new complaint supersedes all previous complaints and controls the case from that point forward, and, because a plaintiff's new complaint wipes away prior pleadings, the amended complaint opens the door for defendants to raise new and previously unmentioned affirmative defenses." As a matter of common sense, if a defendant can raise affirmative defenses which otherwise would have been waived by an answer to an amended complaint, there is no reason that he cannot again raise counterclaims and third-party claims. Similarly, any pending motions regarding the prior pleadings also become moot. In fact, in Tralon Corp. v. Cedarapids, Inc., 966 F. Supp. 812 (N.D. Iowa 1997), an oft-cited case, the court considered whether the defendant had the right to assert new counterclaims to an amended complaint without permission of the court. The court held that defendant had that right, quoting Brown v. E.F. Hutton & Co., 610 F.Supp. 76, 78 (S.D. Fla. 1985)[citing Bancroft, supra]: " * * * In Brown, the court held that `when plaintiff files an amended complaint which changes the theory or scope of the case, the defendant is allowed to plead anew as though it were the original complaint filed by the plaintiff.' * * * Because the Second Amended Complaint here greatly expands both the factual allegations made by plaintiffs as well as the scope of those claims, the court finds that under the circumstances present here, [defendant] was entitled to a `fresh start' in answering Plaintiff's Second Amended Complaint. Indeed, it would be inequitable to entertain the Plaintiffs' Second Amended Complaint without permitting [defendant] to completely plead anew. * * * " The foregoing language applies to this situation, and Meritage's motions made prior to the Second Amended Complaint are quite simply irrelevant. IV. CONCLUSION. The Court should grant a stay of its March 31, 2006 Order until it can consider the points made by movant with regard to Meritage's lack of standing, and the court's consequent lack of jurisdiction, caused by Meritage's conscious breach of its obligations to Greg Hancock in the License Agreement, its total lack of any damages, and the law
8 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 8 of 9

1 2 3 4 5 6 7 8 9

regarding an amended complaint starting the case anew.

After such consideration,

Meritage's Second Amended Complaint should be dismissed for lack of jurisdiction, or the Court should rescind its striking of Greg Hancock's claims. RESPECTFULLY SUBMITTED this 26th day of April, 2006.

/s/ Robert M. Frisbee Robert M. Frisbee Attorneys for Greg Hancock

The foregoing Motion for Stay of Order was electronically filed and served this 26th day of April, 2006, and copy thereof 11 mailed to the Honorable Judge Silver.
10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 9 Case 2:04-cv-00384-ROS Document 308 Filed 04/27/2006 Page 9 of 9

/s/ Robert M. Frisbee