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) Richard G. Erickson (#019066) 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] [email protected] Attorneys for Plaintiff and Counter defendant Meritage Corporation and Third Party Defendants Steve Hilton, John Landon, and Larry Seay 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 MERITAGE'S REPLY TO TITUS Arizona corporation, and currently d/b/a Meritage LETTER RESPONDING TO THE Homes Construction, Inc., an Arizona corporation, MOTION FOR AN ORDER TO and Meritage Homes of Arizona, Inc., an Arizona SHOW CAUSE corporation, (Assigned to the Plaintiffs, Honorable Roslyn O. Silver) v. 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. Greg Hancock, an individual, Defendant, Counter-Claimant, and Third Party Plaintiff, v. Steven J. Hilton, an individual; John R. Landon, an individual; Larry W. Seay, an individual; and Snell & Wilmer, L.L.P., an Arizona professional corporation, Third Party Defendants.

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Case 2:04-cv-00384-ROS

Document 292

Filed 03/22/2006

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

Plaintiffs/Counterdefendants/Third-Party Defendants (collectively "Meritage"1) hereby reply to Titus, Brueckner & Berry's ("Titus") Letter-Response to Meritage's Motion for Order to Show Cause ("Letter-Response"). Like its client, Greg Hancock ("Hancock"), Titus concedes that it has not made any reasonable efforts to comply with this Court's January 18, 2006 Order ("Order"). Because there is no justification for its contempt, Titus deflects attention away from the fact that the Order was simple and straightforward. Titus misstates who controls the documents, misstates Greg Hancock's role in some of the entities at issue, creates a "strawman" with respect to entities to which Greg Hancock had no ownership or involvement and, finally, offers a baseless relevancy objection that the Court rejected more than a year ago. I. THREE-CARD MONTY Apparently bothered by allusions that it and Hancock have engaged in a tiresome game of "Three-Card Monty," Titus takes offense to the accusations that it acted in bad faith and with malice. Letter-Response at 1. First, however, nowhere in any of the pleadings in this matter or in the state court matter filed by Hancock against Meritage has Meritage accused Titus of acting in bad faith and with malice. Second, as with Hancock's intentions behind defying the Court, it may similarly inquire into Titus' intent for refusing to comply with the Court's show cause Order. There is simply no way for Meritage to know Titus' intent in completely refusing to comply with the Court's Order. Meritage only knows that, as with Hancock, Titus refuses to comply and further confirms to Meritage that Titus simply will not acknowledge the Court's Order. Meritage simply provided the Court notice that that was the case. It is interesting to note, moreover, that Titus does not dispute joining in the same game of "Three-Card Monty" with respect to the documents. Indeed, as set forth below, Titus continues to play games with the documents by claiming that the documents at issue "are not under the exclusive control and possession of [Titus]." Letter-Response at 2.
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Third-party defendant Snell & Wilmer is excluded. Document 292 - 2 -Filed 03/22/2006 Page 2 of 10

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II.

TITUS MISSTATES DOCUMENTS.

WHO

CONTROLS

THE

RESPONSIVE

Again, speaking of documents in its possession, Titus states that "the documents are not in [sic] Hancock defendants' control." Id. Titus relies upon a simple misstatement of the law generally and also of the law of the case. It is patently clear that a litigant cannot take his documents, prevent his attorney of record from access to them, place them in the custody of another attorney, and then not produce the documents. See Poole v. Textron, Inc., 192 F.R.D. 494, 501(D. Md. 2000) (finding documents in the possession of a party's present or former attorney are within a party's "control" under Rule 34). Moreover, selective designation or production of responsive documents also violates the Federal Rules. See, e.g., id. Courts must examine the actual factors

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indicating "control" and evaluate whether there is an effort to "try to hide documents or make discovery of them difficult." See Uniden Am. Corp, v. Ericsson, Inc., 181 F.R.D. 302, 306 (M.D.N.C. 1998) (ordering defendant to comply with the request to produce documents in the possession of its sister company). In addition, it is well established that "control" under Rule 34 of the Federal Rules of Civil Procedure is to be broadly construed so that a party may be obligated to produce documents requested even though it may not actually possess the documents. See, e.g., In re Folding Carton Antitrust Litigation, 76 F.R.D. 420, 422-23 (N.D. Ill. 1977). Furthermore, the law of this case has already resolved this issue. On March 25, 2005, a year ago, this Court heard oral arguments relating to discovery disputes. Meritage complained about the lack of production and the fact that Greg Hancock took the position that he did not have to review and produce responsive documents in the control of his attorneys other than Mr. Frisbee. As an initial matter, this Court explained to Mr. Frisbee what his and his client's obligations were in terms of "possession, custody, and control." See Transcript of March 25, 2005 Hearing, at 5:1-7:23, a copy of which is attached as Exhibit A.
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On behalf of Greg Hancock, Mr. Frisbee took the position that documents in the possession of attorneys who represent Greg Hancock, are not in Greg Hancock's "possession, custody or control" because those attorneys are not before this Court. See id. at 28:19-29:23. This Court disagreed with Mr. Frisbee's position, stating "Let me tell you [Mr. Frisbee], and let me make this clear: If they are in the possession of any lawyer, they are to be turned over on Monday [March 28, 2005] by 5:00 o'clock."2 See id. at 29:19-21. Further, this Court ordered Greg Hancock and Mr. Frisbee to: ... certify that all of the documents, in accordance with the [discovery] request, have been provided, or they are not in your custody, possession, control, or your client's, and they have never existed, if they have not, or if they were stolen. See id. at 26:23-27:5. This Court then ordered that Mr. Frisbee and Greg Hancock provide the certification by the end of April 2005. See id. at 58:23. Titus has adopted the same semantics as Hancock to ignore the Court's unequivocal directives, and Titus cites no authority that supports such an unacceptable interpretation of the Rules. III. TITUS CREATES A "STRAWMAN" WITH RESPECT TO DOCUMENTS NOT BELONGING TO GREG HANCOCK. Titus creates a "strawman" by pointing to documents belonging to "entities in which Greg Hancock has no interest whatsoever." Letter-Response at 2. Obviously, if Greg Hancock has no ownership and has never had any ownership of an entity, documents belonging solely to that entity should not be produced. Otherwise, the documents should be produced. As to the entities that Titus claims that Greg Hancock only "has a limited interest or only a minority interest" (see Letter-Response at 3), Titus has not identified any such entity. Rather, this is a ruse. In Exhibit A to Exhibit 4 of the Titus Letter-Response, Titus states that "Greg Hancock had a minority interest in Olympic Properties LLC and Olympic Development LLC." (The only other "minority interest" entity is TASH, LLC.) In fact, through an option that he had the right to exercise at a nominal amount, Greg
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The March 28, 2005 date was later continued to April 29, 2005. Document 292 - 4 -Filed 03/22/2006 Page 4 of 10

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Hancock owned 60% or a majority interest of both Olympic ventures. (Deposition of Hancock's Olympic partner, David Cornwall, attached as Exhibit B, at 43:14-22; see also Olympic Option Agreements, attached as Exhibit C.) Moreover, the Operating

Agreements for both Olympic entities provided Greg Hancock complete control over virtually every decision and action the Olympic entities could take. (Exhibit B, at 49:2050:2; Olympic Operating Agreements, attached as Exhibit D.) Finally, Cornwall has consented to the production of the Olympic entities' documents, and both Cornwall and Greg Hancock have waived all privileges. (Exhibit B, at 12:12-24; 157:10-23.) Titus claims with respect to LH LLC and Patlin LLC that a "manager" of an entity does not control its documents. Titus cites no authority for its position, and Meritage has been unable to locate any such authority. Neither does Titus cite any provision of an operating agreement to support this proposition.3 IV. TITUS' "RELEVANCY" OBJECTIONS ARE NOT SUPPORTED BY THE FEDERAL RULES. In Exhibit A to Exhibit 4 of the Titus Letter-Response, Titus indicates that responsive documents, in Greg Hancock's control, but in its possession belonging to HC Builders, Inc.; Watson@Yuma, LLC; Buckeye Land, LLC; Watson & I-10, LLC; Apache & Yuma, LLC; Dean & Yuma, LLC; Dean & Yuma II, LLC; GSH Investments, Inc.; LH, LLC; Patlin, LLC; Praying Monk Real Estate, LLC; Aviara Real Estate, Inc.; GSH Housing, LLC; and GH Five Star, LLC are not relevant. It is Black Letter law that the scope of discovery is not controlled by relevancy. See Rule 26, Fed.R.Civ.P.; see also Exhibit A, at 48:24-49:4. Moreover, as this Court has already noted, Greg Hancock has waived his objections to the review of these documents. Greg Hancock needs to search these records for responsive documents and produce such documents regardless of Titus' views on their relevancy.
As to Cavalier Properties, LLC; CavDev, LLC; Riata West, LLC; and Westwind Properties, Meritage has never asserted that Greg Hancock controls these entities. Nevertheless, with respect to the other entities, documents related to Cavalier Properties, LLC; CavDev, LLC; Riata West, LLC; and Westwind Properties and the properties underlying these entities are discoverable. Case 2:04-cv-00384-ROS Document 292 - 5 -Filed 03/22/2006 Page 5 of 10
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

V.

TITUS' COST-SHIFTING ARGUMENT IS ALSO WITHOUT MERIT. Titus cost-shifting argument is without merit. Greg Hancock is a party to this

lawsuit. As noted above, he is under a year-old Court Order to produce the documents in the possession of his attorney. If Greg Hancock believes that the Meritage's request for production was unduly burdensome, he needed to raise that objection properly more than a year ago. This Court has already ruled that he has not properly raised that objection along with any other objection (see Exhibit A, at 36:20-37:11), and Titus' effort to bootstrap that objection at this late date is without merit. VI. TITUS' CLAIMS THAT THIS COURT IS WITHOUT AUTHORITY AS TO IT ARE WITHOUT MERIT Titus' continues to claim that this Court lacks any authority over Titus. Titus continues to be wrong. First, as set forth before in the Motion to Show Cause and conceded by Titus (see Letter-Response at 5), Hancock is before the Court, and the responsive documents in Titus' possession are in Hancock's control. The fact that some documents are purportedly not in Hancock's control does not render this Court's Order ineffectual at to Titus. The Order is entirely effective through Hancock personally, irrespective of who, what, or where Titus is. See, e.g., Poole, 192 F.R.D. at 501. As noted above, this proposition is similar to Hancock's now stale proposition that documents in the possession, custody or control of one's general attorney are not in the possession, custody or control of the litigant. Hancock argued this issue a year ago and now seeks to reargue it. As this Court held, the argument had no merit then, and any reargument now has even less merit. Second, like any restraining or protective order, this Court has the power antecedent to its supervisory and inherent powers to issue Orders against agents (such as attorneys) of a litigant before it. See, e.g., Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123 (1991); Aloe Vera of America, Inc. v. United States, 376 F.3d 960, 964-5 (9th Cir. 2004). It is also certain that if the Court reviewed the filings by Titus in federal
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

court, District of Arizona, the Court would find proposed and granted orders of injunctive relief with the following language: "For a temporary restraining order and preliminary and permanent injunction prohibiting [party's name] and the other defendants, their agents, employees, affiliates and all those acting in concert with them . . . ." Such orders clearly implicate and are enforceable against persons and entities related to parties before this Court. Titus does not dispute that this Court lacks this authority over Greg Hancock's attorney. Rather, Titus takes the unsupportable position that it is not and has not been Greg Hancock's attorney. See Letter-Response at 6. However, Greg Hancock has already represented to the Court that Titus is. See Exhibit A, at 5:1-7:23 and 28:19-29:23. Titus was attorney of record in this lawsuit. The record is more than sufficient for this Court to find that Titus is Greg Hancock's attorney and agent. (To the extent that the status of Titus as Greg Hancock's agent or attorney is material and in dispute, Meritage requests an evidentiary hearing.) Third and as undisputed by Titus, federal statutory law makes it clear that Judge Silver has authority over Titus. 18 U.S.C. 401(3) provides, in pertinent part: A court of the United States shall have power to punish by fine or imprisonment, at its discretion, such contempt of its authority, and none other, as-- (1) Misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice; [or] (3) Disobedience or resistance to lawful writ, process, order, rule, decree, or command. (Emphasis added.) The "or so near thereto" language applies to all acts of misbehavior whose "natural tendency and effect is to interfere with the administration of justice, wherever the acts may be committed." United States v. Huff, 206 F. 700, 705 (D.C. Ga. 1913). Fourth, Titus' position that it "has never been made subject to the jurisdiction of the Court" is simply wrong. As an initial matter, both Titus and its lead name partner were served with subpoenas and notices of deposition in the case. See copies of these
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

documents, attached as Exhibit E. It is of no matter to the enforceability of the Court's Order that these subpoenas covered a subset of the materials that are the subject of the Order. In addition, Titus thrust itself before the Court by objecting to the notice of deposition. See Response to Deposition Upon Written Questions, a copy of which is attached as Exhibit F. Lastly and most importantly, Titus appeared before this Court as Greg Hancock's attorney of record in this precise matter. See, e.g., March 2, 2005 Order regarding disqualification of Titus as counsel. Titus concedes that it was before this Court with respect to each of these items. Finally, Titus had a duty to object before the effective date of the Order. It did not and has already waived its right to object at this point in time. VII. TITUS' ARGUMENT THAT INDIVIDUAL OWNERS OF A CORPORATION CAN ASSERT INDEPENDENT ATTORNEY CLIENT PRIVILEGE OBJECTIONS IS WITHOUT MERIT. Titus strains to argue that individual owners of a corporation can interpose privilege objections when discovery is served on a corporation. See Letter-Response at 6. There is no support for this proposition. The cases cited by Titus do not support this proposition. Common sense belies this proposition. Can shareholders of General Motors, for example, interpose privilege objections when discovery is served on General Motors? Of course not. VIII. TITUS' ARGUMENT THAT THERE IS SOME FIDUCIARY DUTY BARRING GREG HANCOCK OR IT FROM PRODUCING DOCUMENTS IS WITHOUT MERIT. Again, without any authority or truly any explanation, Titus asserts that there is some fiduciary duty barring it and/or Greg Hancock from complying with this Court's Orders, from abiding by the Federal Rules of Civil Procedure and from producing responsive documents. Not surprisingly, Titus cites no authority for this

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propositionbecause there is no such authority.

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IX.

CONCLUSION Accordingly, Meritage requests that the Court enter the Order to Show Cause for

why Hancock, Mr. Frisbee and Titus should not be held in contempt for failing to abide by this Court's January 18, 2006 Order, attached to the Motion. DATED this 22nd day of March, 2006. SNELL & WILMER L.L.P.

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By s/ Richard G. Erickson Dan W. Goldfine Richard G. Erickson Adam Lang One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiff and Counter defendant Meritage Corporation and Third Party Defendants Steve Hilton, John Landon, and Larry Seay CERTIFICATE OF SERVICE I hereby certify that on March 22, 2006, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: 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

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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 A Copy of the foregoing served via facsimile to Kurt M. Zitzer Meagher & Geer, P.L.L.P. 8800 North Gainey Center Drive Suite 261 Scottsdale, Arizona 85258 Attorneys for Titus, Brueckner & Berry

s/ Richard G. Erickson
1805124

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