Free Reply to Response to Motion - District Court of Arizona - Arizona

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John E. Karow, SBN 014200 LAW OFFICE OF JOHN E. KAROW 11350 North 104th Place Scottsdale, Arizona 85259 (480) 391-2236 (480)-391-0132 [email protected] Attorneys for Defendants Carl Brown, Molly Brown IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA CATHLEEN CHANNEL; THERESA WHARRY; STACIE HANSON; MONIQUE NICHOLS; Plaintiffs, ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CIV 2003-0100 PHX ROS

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vs. HOME MORTGAGE, INC., an Arizona corporation conducting business in Arizona; CARL BROWN; MOLLY BROWN; GREG BROWN; JANE DOE BROWN; DOES 1-10; XYZ CORPORATIONS; BLACK PARTNERSHIPS; Defendants. _____________________________________

DEFENDANTS' REPLY TO PLAINTIFFS' RESPONSE TO DEFENDANTS' CROSS MOTION FOR SUMMARY JUDGMENT

(Assigned to the Hon. Roslyn O. Silver) (Oral Argument Requested)

Plaintiffs state in the document captioned as their "Reply to Response of Defendants Carl Brown and Molly Brown to Plaintiffs' Motion for Summary Judgment" (referred to as the "Response" for the purposes of this memorandum) that they do not intend to file a separate response to Defendants' Cross-motion and ask the Court to treat their reply as their response to the cross-motion for summary judgment. Defendants Carl Brown, and Molly Brown ("Defendants"), submit this Reply in opposition to Plaintiffs' Response to Defendants' Cross-Motion for Summary Judgment (the "Cross-Motion") for the reasons that the Response filed by Plaintiffs does not address the issues of fact and law addressed in Defendants' Response to Plaintiffs'

Case 2:03-cv-00100-ROS-MEA

Document 115

Filed 01/22/2007

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Motion for Summary Judgment and the Cross-Motion for Summary Judgment. This Reply is supported by the attached Memorandum of Points and Authorities the Defendants' separately filed Statement of Facts and the Exhibits thereto, and the record before the Court. MEMORANDUM OF POINTS AND AUTHORITIES I. Introduction. The Response fails to address the issues presented in the Cross-Motion. It fails to address the November 29, 2006 affidavit of Gregory L. Brown in any way. (Defendants' Separate Statement of Facts in Support of its Cross-Motion for Summary

11 12 13 14 15 16 17 18 19 20 21 22 23 II. 24 25 26 27 28 See, page 4, line 26 of Defendants' Controverting Statement of Facts and their Separate Statement of Facts in support of their reply to Plaintiffs' Response to Defendants' Cross-Motion for Summary Judgment: "The Separate Statement of Facts in Support of Defendants' Cross-Motion for Summary Judgment is sufficient to support the Reply to Plaintiffs' Response to the Cross-Motion. All references to the Separate Statement of Facts are to the that document." 2 Case 2:03-cv-00100-ROS-MEA Document 115 Filed 01/22/2007 Page 2 of 7
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Judgment [SOF] ¶¶ 2-6, 13-20 22-31; dated December 11, 20061) It fails to address the fact that the disclosed bank records demonstrate that all of the funds generated by the sale of HMI assets to McAfee were expended on behalf of HMI. (SOF ¶¶ 7, 8, Exhibit F) The Response does not present any evidence to contradict the fact that other than the McAfee Proceeds, no other HMI funds were deposited in the Account. (SOF ¶¶ 7, 8) The Response does not present any evidence to contradict the testimony of Molly Brown that she arranged payment to HMI for all expenses associated with all non-HMI related trips using the company aircraft. (SOF ¶ 33, Exhibit G) Argument.

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A.

Failure to respond to facts and issues raised in the Cross-Motion constitutes admission of the truth of those facts and issues.

Plaintiffs' failure to present evidence to controvert the facts asserted in the Cross-Motion means they are to be taken as true for the purpose of evaluating the Cross-Motion. This requirement to respond has been confirmed by the Arizona Courts on more than occasion: See, Sato v. Van Denburgh, 123 Ariz. 225, 599 P.2d 181 (Ariz. 1979): When defendant files a properly supported motion for summary judgment, the plaintiff is obligated to present, either by affidavit or some other evidence, facts controverting the defendant's affidavit. When he fails to do so, the facts alleged by the defendant may be considered true. Siner v. Stewart, 9 Ariz.App. 101, 449 P.2d 635 (1969). (599 P.2d 184.) (Emphasis added) See also, Choisser v. State ex rel. Herman, 12 Ariz.App. 259, 469 P.2d 493 (Ariz.App. Div. 1 1970): The admonition in Rule 56(e) means that an adverse party who fails to respond does so at his peril because uncontroverted evidence favorable to the movant, and from which only one inference can be drawn, will be presumed to be true. Pitzen's Wig Villa Pruitt, supra. If that uncontroverted evidence would as a matter of law entitle the movant to a judgment then the motion for summary judgment must be granted. (469 P.2d 495.) (Emphasis added) Plaintiffs' only response to the Cross-Motion is an attack on the credibility of one witness. Plaintiffs ignore the statements in Gregory Brown's November 29, 2006 affidavit in which he states that neither Carl Brown nor Molly Brown were not involved in the decisions about the closing of HMI's Las Vegas office. Gregory Brown was President of HMI at all relevant times during 2002. (SOF ¶¶ 13-18) Plaintiffs have not offered any evidence that controverts the entries in the Account statements which show that all of the Proceeds were expended for the benefit of HMI. B. Gregory Brown's November 29, 2006 Affidavit.

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Plaintiffs offered no evidence to controvert the statements of fact contained in the affidavit of Gregory Brown attached to the Cross-Motion. (SOF Exhibit A) Instead, Plaintiffs repeatedly refer to the March 6, 2006 affidavit of Gregory Brown

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The fact that Plaintiffs continually refer to the case as "Teams" raises questions about the thoroughness of their review of both the cases cited and the evidentiary record in this matter. 4 Case 2:03-cv-00100-ROS-MEA Document 115 Filed 01/22/2007 Page 4 of 7
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which addresses different facts. (SOF ¶ 4, Exhibit E) Specifically, the March affidavit contains statements about the finances of HMI and does not address the operational decisions made by Gregory Brown in his capacity of President of HMI. The December affidavit describes, the responsibilities, decisions, and actions taken by Gregory Brown in his capacity of President and CEO of HMI with descriptions of the decisions he made with regard to the claims made by Plaintiffs. This affidavit specifically states, in ¶5, that Defendants Carl and Molly Brown were not involved in the closing of the Las Vegas office. (SOF ¶¶ 14, 16, 17) Plaintiffs failure to present any evidence to controvert the statements in Gregory Brown's November 29, 2006 affidavit means the statements are to be considered as true for the purpose of the Cross-Motion. Consequently, the Cross-Motion should be granted. C. The cases. 1. Keams and Hammons.

Plaintiffs assert that the case of Keams v. Tempe Technical Institute, Inc., 993 F. Supp. 714 (1997) is distinguishable from this matter solely on the issue of commingling of funds. Plaintiffs are wrong.2 The decision in Keams is based on an analysis of multiple criteria applied by Arizona Courts when ruling on a request to

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pierce a corporate veil. Any contribution of funds in addition to the Proceeds for payment of HMI debts by Defendants during the last months of its existence is not a demonstration of commingling of funds. The record shows that the deposit of the Proceeds is the only instance of HMI funds being placed in the Account. Defendants cited the case of Pinal County v. Hammons, 30 Ariz. 36, 243 P. 919 (Ariz. 1926) to illustrate two principals: First, that there is a presumption that Defendants would fulfill their duty to apply the Proceeds to the obligations of HMI. Plaintiffs offer no evidence to controvert the fact that the Account records demonstrate

11 12 13 14 15 16 17 Plaintiffs' analysis of these cases are unpersuasive and demonstrates Plaintiffs' 18 19 20 21 22 23 24 25 26 27 28 5 Case 2:03-cv-00100-ROS-MEA Document 115 Filed 01/22/2007 Page 5 of 7 III. Conclusion. The arguments presented in the Response are not supported by Plaintiffs' interpretation of the record. The record does not support a conclusion that HMI was inability to meet their burden of proof on these issues. 2. The cases cited by Plaintiffs in their Response. that Defendants fulfilled that duty; and Second, the Proceeds were sufficiently identified as being used for the sole benefit of HMI and that none of the Proceeds were spent on personal expenses of the Defendants. It should be noted that the disclosed records are not general summaries, they include detailed entries and copies of the cancelled checks issued on behalf of HMI.

Plaintiffs offer no arguments in opposition to Defendants' analysis of the cases cited in the Response and therefore Defendants are entitled to the presumption that their analysis is correct and the cases do not apply.

Case 2:03-cv-00100-ROS-MEA

Document 115

Filed 01/22/2007

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Case 2:03-cv-00100-ROS-MEA

Document 115

Filed 01/22/2007

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