Free Motion to Compel - District Court of Arizona - Arizona

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Law Office of James Burr Shields 382 East Palm Lane Phoenix, Arizona 85004-1531 (602) 307-0780 (Office) (602) 307-0784 (Facsimile)
James Burr Shields II, State Bar #011711 John A. Conley, State Bar #016429 Blake Simms, State Bar #021595 Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT IN AND FOR THE STATE OF ARIZONA

1. 2. 3. 4.

) ) ) ) ) Plaintiffs, ) ) vs. ) ) 5. Home Mortgage, Inc., an ) Arizona corporation conducting ) business in Arizona, ) 6. Carl Brown; ) 7. Molly Brown; ) ) Defendants. ) _________________________________)

Cathleen Channel, Theresa Wharry, Stacie Hanson, Monique Nichols,

Case No. CIV 2003-0100 PHX ROS MOTION FOR: 1) ORDER COMPELLING DISCOVERY; 2) DISCOVERY SANCTIONS; 3) PERMISSION TO SUBMIT SUPPLEMENTAL BRIEF RE PENDING MOTIONS FOR SUMMARY JUDGMENT

Plaintiffs, by and through counsel undersigned, hereby move the Court for (1) an order compelling discovery, (2) related sanctions and (3) permission from the Court to submit a supplemental brief regarding the parties' pending motions for summary judgment. Undersigned counsel is fully aware of the Court's desire to resolve discovery disputes via a joint conference call with the Court. However, as fully explained below, undersigned counsel has attempted to obtain cooperation from Defendants' counsel to place this call, but has received no cooperation whatsoever. I. INTRODUCTION In order for the Court to understand Plaintiffs' reasons for bringing the above motions, it will be helpful to explain to the Court the current posture of this case and to describe what has transpired during the past approximate eight (8) months.
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By way of background, presently, Plaintiffs possess a judgment against Defendant, Home Mortgage, Inc., for approximately $240,000, excluding interest and attorneys' fees which have accrued since the imposition of that judgment. As the Court may recall, this judgment is for actual wages Plaintiffs earned during their employment with Home Mortgage, Inc. (Plaintiffs were commissioned sales employees and Defendants actually profited as a result of Plaintiffs' efforts in connection with earning these wages.) This judgment was entered by the Court on June 20, 2003. Immediately after discovering that Home Mortgage, Inc. ("HMI"), was insolvent, Plaintiffs filed a motion to amend their complaint to add as individual defendants Carl and Molly Brown. This motion was filed on August 26, 2003 and was granted. The basis for this motion and the Court's granting thereof was that, inter alia, Defendant Carl Brown owned 99% of HMI and, at all times, acted as the President, CEO, Secretary, Treasurer and Director. In other words, Carl Brown exerted over the Company complete control, at all times. Plaintiffs are currently seeking to pierce the corporate veil between HMI and Carl Brown and his wife, Molly Brown. Plaintiffs' motion for summary judgment in regards to this issue was filed November 9, 2006. Plaintiffs filed a reply brief on January 12, 2007. The Court has yet to rule on these motions because, as explained below, this matter was recently referred to Judge Aspey for a settlement conference. In connection with Plaintiffs' motion for summary judgment, Plaintiffs deposed Carl Brown on October 4, 2006. Mr. Brown's testimony during this deposition was evasive and disingenuous. Some of the highlights were as follows:

!

During the summer of 2002, Carl Brown, on behalf of HMI, orchestrated a transaction with a company called "McAfee." The bottom line in regards to this transaction was that, in exchange for $700,000, HMI sold to McAfee certain fixtures, furniture and equipment. When this $700,000 payment was made to HMI, Carl Brown placed the payment in his personal bank account. This occurred on or about September 17, 2002. These facts were verified in
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documents subpoenaed by Plaintiffs from McAfee as well as Bank One. Previously, as the Court may recall, Carl Brown, despite discovery requests and an initial disclosure obligation, produced absolutely no business records of HMI contending that a former disgruntled landlord destroyed all of them.

!

When confronted with the records confirming the placement of $700,000 of HMI funds in his personal account, Defendant, Carl Brown, stated that he had never, in his life, reviewed a bank statement. (See Exhibit "A", deposition of Carl Brown, page 22, line 25; page 23, lines 1-3.) Carl Brown stated that he did not know whether he or his wife possessed any personal bank accounts. (Exhibit "A", page 27, lines 22-25; page 28, lines 1-13.) Carl Brown stated that he did not remember anything about the McAfee transaction nor receiving $700,000 and placing the money in his personal account. (Exhibit "A", page 33, lines 10-22.) Despite the fact that Mr. Brown held all of the upper-management titles with HMI and 99% of its stock, he claimed, during his deposition, that he had "no involvement" with HMI. (Exhibit "A", page 56, lines 23-24.) Mr. Brown denied receiving a salary, despite the fact that it had been previously confirmed that he received monthly salary of at least $15,000. Mr. Brown stated, amazingly, that he had no idea of what kind of business HMI conducted! (Exhibit "A", page 67, lines 3-5.)

After Mr. Brown's deposition concluded, Mr. Brown's then lawyer asserted that all of the HMI funds which were placed in Mr. Brown's personal bank account were actually utilized to pay HMI debts. Initially, Mr. Brown's then lawyer contended that he had turned over bank records to support this contention prior to Mr. Brown's deposition. However, afterwards, it was conceded by Defendants that some sort of miscommunication had occurred. As a result, Mr. Brown's then lawyer agreed to make Mr. and Mrs. Brown available for follow-up depositions once these records were turned over. This agreement is reflected in the parties' joint statement filed with the Court on October 25, 2006 in which the parties agreed that the Browns would be available for follow-up questioning in regards
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to these records. (See page 2 of the parties' October 13, 2006 joint statement, lines 2-3.) Additionally, in recognition of this agreement to make the Browns available for depositions concerning the bank records issue, Defendants filed their own status report and request for the continuance of discovery on November 1, 2006. In that document, the basis for the Browns' request for the continuance of discovery was that Mr. Brown would be undergoing medical treatment which might interfere with his ability to participate as a witness in upcoming depositions. (See page 1 of Defendants' status report and request to extend discovery, paragraph 2.) On October 10, 2006, your Honor set a status conference with the parties. This conference occurred on November 3, 2006 at 8:30 a.m. During this status conference, your Honor asked the attorneys for the parties whether a settlement conference would be beneficial. Both attorneys answered in the affirmative and, for that reason, your Honor referred this matter to Judge Aspey for a settlement conference. On March 23, 2007, Judge Aspey conducted the settlement conference, for the first time. On this occasion, Mr. and Mrs. Brown showed up without counsel and declined to even discuss the possibility of resolution without their lawyer present. Judge Aspey, as a result, scheduled a follow-up conference so as to enable the Browns to appear with their apparently newly retained lawyer. Judge Aspey conducted the second settlement conference on May 1, 2007. Prior to this settlement conference, undersigned counsel transmitted to the Browns' new counsel, James McGee, all of the information in support of Plaintiffs' position in this lawsuit. On May 1st, however, the Browns declined to make any settlement offer whatsoever. Thus, despite the representation of the Browns that a settlement conference would be productive and the Court's scheduling a settlement conference, based upon that representation, the entire last eight (8) months have been a complete waste of time. Plaintiffs reside in Las Vegas and have traveled to Flagstaff, twice, to attend the settlement conferences and have incurred significant costs and attorneys' fees in connection with doing so. As the parties were leaving the settlement conference on May 1st, undersigned
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counsel informed Mr. McGee that he wished to take the depositions of Carl and Molly Brown within the next two weeks. Undersigned counsel explained to Mr. McGee that the Browns' previous counsel had agreed to these follow-up depositions in regards to, solely, the "bank records issue." Undersigned counsel explained to Mr. McGee that the questioning would be limited to that topic. Mr. McGee refused to agree to produce the Browns. On May 2, 2007, undersigned counsel wrote to Mr. McGee urging him to make the Browns available and explaining, in great detail, the basis for the Browns' obligation to participate in their depositions. A copy of undersigned counsel's correspondence to Mr. McGee is attached as Exhibit "B". As the Court will note, on page 3, undersigned counsel requested that Mr. McGee let him know, one way or the other, by Friday, May 4th, as to whether he was willing to produce the Browns. Mr. McGee did not respond, at all, to undersigned counsel's May 2, 2007 letter. Obviously, at this point, the parties are involved in a discovery dispute concerning the Browns' refusal to attend their depositions concerning the bank records issue. In the Court's Order of March 16, 2006, under Section J, the Court directs the parties to jointly arrange with the Court a conference call to resolve discovery disputes orally in lieu of filing formal motions. For this reason, on May 7, 2007, undersigned counsel faxed and mailed to the Browns' counsel a letter requesting times which would be convenient for the Browns' lawyer, Mr. McGee, to place a joint call to the Court. Undersigned counsel suggested various times to contact the Court. A copy of this correspondence is attached as

Exhibit "C". As set forth in Exhibit "C", undersigned counsel expressed his sincere desire to fully adhere to the Court's Order and to initiate the participation of Mr. McGee, in that regard. However, Mr. McGee has failed and refused to respond to undersigned counsel's May 7th letter so as to enable the lawyers to jointly contact the Court. Therefore, at this point, it is impossible for undersigned counsel to unilaterally comply with the Court's March 16th Order. *** ***
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II. SPECIFIC BASES FOR MOTIONS A. Discovery Motion and Request for Sanctions Plaintiffs, first, request that the Court enter an order requiring the Browns to attend depositions, solely, in regards to the "bank records issue." This motion is brought pursuant to Federal Rule of Civil Procedure 37(a)(2)(B) which permits the Court to order parties to participate in depositions and to answer all non-objectionable questions. Plaintiffs also request sanctions in having to bring this motion pursuant to Federal Rule of Civil Procedure 37(a)(4)(A). This rule provides, in pertinent part, that if a discovery motion is granted "the Court shall, after affording an opportunity to be heard, require the party or deponent whose conduct necessitated the motion . . . to pay the moving party the reasonable expenses incurred in making the motion, including attorneys' fees, unless the Court finds that the motion was filed without the movant's first making good faith effort to obtain disclosure or discovery without Court action." In this situation, an order compelling discovery as well as an order of sanctions could not be more appropriate. Again, this discovery is only necessary because the Browns failed to turn over documents which had specifically been requested by Plaintiffs prior to Carl Brown's deposition. In admission of this fact, the Browns' prior attorney agreed and even avowed to the Court that he would make the Browns available for depositions concerning this issue. The current conduct of the Browns and their present attorney could not be more flagrant. Not only are the Browns refusing to make themselves available for the depositions but their attorney is refusing to even communicate with undersigned counsel for the purpose of placing a joint call to the Court to resolve this matter. In summary, the conduct of the Browns and their present attorney, Mr. McGee, has left Plaintiffs and their attorney with no option other than to seek an order compelling discovery and related sanctions. B. Request to Submit Supplemental Brief after The Depositions of the Browns Are Taken Federal Rule of Civil Procedure 56(f) permits Plaintiffs to request from the Court additional time to submit a brief in regards to the pending motions for summary judgment
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if evidence is "unavailable." It has already been conveyed to the Court, in connection with piercing the corporate veil between the Browns and HMI, that Mr. Brown placed $700,000 of funds belonging to HMI in his personal account. It has also been conveyed that the Browns used HMI's jet primarily for their own personal trips around the Country and that Carl Brown's excuse for being able to produce absolutely no HMI business records whatsoever is specious. In direct response to the uncontradictable proof that Carl Brown ran $700,000 of HMI funds through his personal account, Carl Brown's former attorney "counterpunched" with the contention that, even though the money was placed in Carl Brown's personal account, the money eventually was all utilized to pay HMI's creditors. It is Plaintiffs' position that the Browns will be unable to prove this assertion. Indeed, Carl Brown has testified that he did not even recall any involvement with HMI, whether or not any funds belonging to HMI were placed in his personal account, etc. Plaintiffs deserve the right to query Mr. Brown as to his ability to competently testify that the $700,000 he placed in his personal account was truly used to pay HMI creditors. Plaintiffs, then, are entitled to inform the Court of the Browns' testimony in this regard in order to invalidate yet another ridiculous position taken by the Browns. For the above reasons, Plaintiffs respectfully request that the Court permit them thirty (30) days from the date in which the Browns' depositions are taken to submit a supplemental brief in regards to their pending motion for summary judgment to pierce the HMI/Brown corporate veil. CONCLUSION Attached as Exhibit "D" is the affidavit of undersigned counsel attesting to the fact that he has attempted to resolve the subject matter of this motion, informally, prior to bringing it to the Court's attention. At the risk of redundancy, the Browns' conduct during the last eight (8) months or so has accomplished nothing but to delay these proceedings and cause Plaintiffs to incur substantial and unnecessary attorneys' fees and costs. The Browns' conduct in currently refusing to provide deposition testimony, despite their prior commitments to do so, and to even communicate with undersigned counsel in order to place
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a joint call to the Court, is outrageous and sanctionable. RESPECTFULLY SUBMITTED this 11th day of May, 2007. LAW OFFICE OF JAMES BURR SHIELDS

____s/ James Burr Shields _______________ James Burr Shields Blake Simms Attorneys for Plaintiffs CERTIFICATE OF SERVICE I hereby certify that on the 11th day of May, 2007, I electronically submitted the attached 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: James M. McGee, Esq. P.O. Box 460 Cottonwood, Arizona 86326 [email protected] Attorney for Defendants ____s/ Gail Ivey___________________

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