Free Motion for Attorney Fees - District Court of Arizona - Arizona

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Michael Simes (Arizona Bar No. 016021) MICHAEL SIMES, LLC 903 South Rural Road Suite 101--323 Tempe, Arizona 85281 Telephone: 480-699-3636 Facsimile: 480-659-2943 Email: [email protected] Website: www.MichaelSimes.com Attorney for Solinvest Group, Ltd.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

) ) In re: ) ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC. , a Nevada ) Corporation; ) ) Debtor. ______________________________________ ) ) SOLINVEST GROUP, LTD., a British Virgin ) ) Islands entity; ) ) Plaintiff, ) ) v. ) ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC., a Nevada ) Corporation; TSI ACQUISITION ) CORPORATION, formerly known as ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC., an Arizona ) Corporation; ALANCO TECHNOLOGIES, ) INC., an Arizona Corporation; ) GREG OESTER and LYNDA OESTER, Case 2:02-cv-02641-ROS
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United States District Court For the District of Arizona Case No. 2:02--CV--02641--ROS United States Bankruptcy Court For the District of Arizona Case No. 2:03--BK--21187--EWH United States Bankruptcy Court For the District of Arizona Case No. 2:04--AP--00019--EWH United States Bankruptcy Court Fort the District of Arizona Case No. 2:05--BK--07799--EWH

COMPREHENSIVE SUPPLEMENT TO THE MOTION FOR AWARD OF ATTORNEYS' FEES AND COSTS (Related to Docket # 45)

Filed 09/07/2005

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) ) ) ) ) ) Defendants. ) ) ______________________________________ ) ) ) ) GREG OESTER and LYNDA OESTER, ) husband and wife; ) ) Third-Party Plaintiffs, ) ) v. ) ) EVERT EGGINK, ) ) Third-Party Defendant. ______________________________________ ) husband and wife; JOHN DOE I-X; JANE DOE I-X; ABC PARTNERSHIP I-X; and XYZ CORPORATION I-X;

Plaintiff Solinvest Group, Ltd., hereby respectfully files this Comprehensive
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Supplement to its Motion for the Award of Attorneys' Fees and Costs, filed January 12, 2005. The
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award of attorneys' fees and costs is the final issue remaining in this matter. Plaintiff Solinvest Group, Ltd., hereby respectfully renews its requests for an award of all of the attorneys' fees and costs it has occurred in this matter. It seeks this award pursuant to the Judgment by Default Against Technology Systems International, Inc., entered on May 27, 2003. In the alternative, it seeks this award as a compensatory civil contempt sanction against Defendant Technology Systems International, Inc.

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This Comprehensive Supplement is necessary because of the extensive proceedings that have occurred in this matter since the filing of the Motion for the Award of Attorneys' Fees and Costs.

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This Comprehensive Supplement is also necessary because of the additional attorneys' fees and costs incurred by Plaintiff Solinvest Group, Ltd., since January 2005. In total, Plaintiff Solinvest Group, Ltd., respectfully requests an award of its attorneys' fees in the amount of two hundred sixty--nine thousand seven hundred two dollars and fifty cents

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($269,702.50). Plaintiff Solinvest Group, Ltd., also respectfully requests an award of its taxable costs in the amount of one thousand three hundred seventy--seven dollars and twenty--six cents ($1,377.26). This Comprehensive Supplement is supported by the following Memorandum of Points and Authorities and the supporting documents referenced in the Memorandum which are all incorporated herein by this reference.

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RESPECTFULLY SUBMITTED this 7th day of September, 2005.

MICHAEL SIMES, LLC
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/s/ Michael Simes . Michael Simes Attorney for Solinvest Group, Ltd. ///

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/// /// /// /// ///

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MEMORANDUM OF POINTS AND AUTHORITIES Plaintiff Solinvest Group, Ltd. ("Solinvest") hereby respectfully moves this Court to award it all of the attorneys' fees and costs it has incurred in this matter as follows: 1. On December 31, 2002, Solinvest filed its Complaint against Defendant Technology

Systems International, Inc., a Nevada corporation ("TSI"). See Complaint, filed December 31, 2002 ("Complaint")(Docket # 1). 2. After filing the Complaint, TSI refused to settle this matter and, therefore, forced

Solinvest to incur additional attorneys' fees. See Motion for Default Judgment Against Technology
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Systems International, Inc., filed April 9, 2003 (Docket # 10); at ¶¶ 13, 15. 3. On May 23, 2003, this Court entered Judgment in favor of Solinvest and against TSI.

See Judgment by Default Against Technology Systems International, Inc., filed May 29, 2003 ("Judgment")(Docket # 12). 4. The Judgment was in the Principal Amount of two hundred fifty-six thousand eight

hundred dollars and no cents ($256,800.00) with post-judgment interest accruing thereon at the rate
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of twenty percent (20.0%) per annum. See Judgment, at ¶ 6.
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5.

The Judgment also provides that Solinvest is entitled to an award of its attorneys' fees

and costs against TSI. See Judgment, at ¶ 7. 6. After entry of the Judgment, TSI continued to refuse to settle this matter and,

therefore, forced Solinvest to incur additional attorneys' fees. See Expedited Motion for Turnover Order, filed September 9, 2003 (Docket # 23), at ¶ 4. 7. On November 19, 2003, Solinvest moved this Court to hold TSI in contempt because

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it intentionally refused to comply with an Order of this Court. See Motion for Order of Contempt, filed November 19, 2003 ("Motion for Contempt")(Docket #36).

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8.

On December 3, 2003, TSI filed for bankruptcy protection with the United States

Bankruptcy Court for the District of Arizona ("Bankruptcy Court"), Case No. 2:03--BK--21187-- EWH ("First Bankruptcy"). See Voluntary Petition, filed December 3, 2005 (First Bankruptcy Docket # 1).1 9. On January 5, 2004, Solinvest moved this Court to withdraw this matter from the

Bankruptcy Court. Moving to withdraw was the only procedural remedy available to Solinvest. More specifically, TSI had filed a Voluntary Petition for bankruptcy protection which was the incorrect procedural mechanism because it automatically transferred this matter to the Bankruptcy Court thereby preventing this Court from resolving the Motion for Contempt. The correct procedural mechanism for TSI to have obtained bankruptcy protection would have been to move this Court to refer this matter to the Bankruptcy Court. Nonetheless, because withdrawal is an adversarial process

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that had to be filed with the Bankruptcy Court even though the issue would be decided by this Court, the Clerk of the Bankruptcy Court assigned this matter Case No. 2:04--AP--00019--EWH ("Adversarial Litigation"). See Motion to Withdraw Reference in Whole, filed January 5, 2004 ("Motion to Withdraw")(Adversarial Litigation Docket #1), at ¶¶ 14, 23. 10. On January 7, 2004, this Court in part stayed this matter in response to the Motion to

Withdraw. This Court also remained active in this matter by requiring semi-annual status reports
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regarding the First Bankruptcy. Finally, this Court warned Solinvest that if it "fails to prosecute this action," then this Court would dismiss this matter. See Order, entered January 7, 2004 ("Stay Order")(Docket # 38), at 2:12.

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Solinvest hereby respectfully gives notice that it has not attached hereto any documents filed with the Bankruptcy Court that are referenced herein. Solinvest has elected not to do so because these documents are available online through the Public Access to Court Electronic Records ("PACER") System. Case 2:02-cv-02641-ROS
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11.

On January 12, 2004, TSI responded in opposition to the Motion to Withdraw even

though this Court had entered its Stay Order. Nonetheless, in its response TSI made two relevant admissions. First, TSI admitted that it had no "available defenses" to the Complaint and, therefore, allowed this Court to enter the Judgment in favor of Solinvest. Second, TSI admitted that the issue of

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the award of attorneys' fees and costs was still pending before this Court. See Technology Systems International, Inc.'s, Response and Opposition to Motion to Withdraw Reference in Whole and/or Application for Removal, dated January 22, 2004 (Adversarial Litigation Docket # 4), at 3:22, 7:5-- 7:9. 12. In the First Bankruptcy, Solinvest did not move the Bankruptcy Court to dismiss the

First Bankruptcy even though there were more than adequate grounds to do so. Instead, Solinvest sought to have the Bankruptcy Court convert the First Bankruptcy from a reorganization under

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Chapter 11 to a liquidation under Chapter 7. Solinvest intentionally did not seek dismissal because if the Bankruptcy Court dismissed the First Bankruptcy then this matter would have been transferred back to this Court (i.e. a "reverse remand") rather than being resolved by the Bankruptcy Court. See Motion to Convert Bankruptcy from Chapter 11 to Chapter 7, filed March 29, 2004 ("Motion to Convert")(First Bankruptcy Docket # 18), at ¶ 17. 13. Also in the First Bankruptcy, Solinvest objected in part to the initial Plan of

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Reorganization proposed by TSI for numerous reasons including that it failed to provide for the timely payment of the full amount of the Judgment to Solinvest. See Objection to Debtor's Disclosure Statement, filed May 24, 2004 (First Bankruptcy Docket # 37), at ¶ 10. 14. After numerous proceedings in the First Bankruptcy, TSI eventually proposed a Plan

of Reorganization that in part provided for the timely payment of the full amount of the Judgment to Solinvest. In response thereto, Solinvest promptly withdrew its objections to the resolution of the

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First Bankruptcy by the Bankruptcy Court. See Notice of No Objection, filed August 14, 2004 (First Bankruptcy Docket # 63). 15. On December 1, 2004, the Bankruptcy Court resolved the First Bankruptcy when it

confirmed a Plan of Reorganization for TSI. See Order Confirming Debtor's Third Amended Plan of
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Reorganization as Modified, entered December 1, 2004 ("Plan Order")(First Bankruptcy Docket # 84); see also Debtor's Third Amended Plan of Reorganization as Modified, filed November 30, 2004 ("Plan of Reorganization")(First Bankruptcy Docket # 82). 16. The Plan of Reorganization for TSI provided in part for the timely payment of the

"full amount of the claim" of Solinvest. See Plan of Reorganization, at 6:14. 17. In summary, the First Bankruptcy was resolved in less than one (1) year and with an

outcome favorable to Solinvest.
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18.

On December 20, 2004, this Court lifted its stay of this action because of the

resolution of the First Bankruptcy. See Order, filed December 21, 2004 (Docket # 42). 19. On January 12, 2005, Solinvest moved this Court to award it all of the attorneys' fees

and costs it had incurred in this matter. See Motion for the Award of Attorneys' Fees and Costs, filed January 12, 2005 ("Motion for Fees")(Docket # 45). 20. When the Motion for Fees was filed, the only issue remaining in this matter was the

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award of attorneys' fees and costs. See Motion for Fees, at ¶¶ 20--22. 21. In the Motion for Fees, Solinvest sought an award of attorneys' fees in the amount of

one hundred ninety-four thousand nine hundred thirty-five dollars and no cents ($194,935.00), and costs in the amount of three thousand seven hundred three dollars and sixteen cents ($3,703.16). See Motion for Fees, at ¶¶ 32, 35. 22. Also in the Motion for Fees, Solinvest intentionally sought the award of attorneys'

fees only pursuant to the Judgment. This was in contrast to seeking the award pursuant to the
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Judgment and, in the alternative, as a compensatory civil contempt sanction against TSI. Solinvest made the election to seek the award pursuant only to the Judgment to accelerate the resolution of this matter, promote judicial economy, and to avoid incurring additional attorneys' fees. See Motion for Fees, at ¶¶ 10, 23; Motion for Leave of Court to Withdraw the Motion for Order of Contempt, filed

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December 20, 2004 (Docket # 43), at 2:21--3:12; Motion for Contempt, at ¶¶ 9--11. 23. On January 31, 2005, TSI filed its response in opposition to the Motion. See

Response and Objection to Solinvest Group, Ltd.'s Motion for the Award of Attorney's Fees and Costs and Request for Evidentiary Hearing, filed January 31, 2005 ("Response for Fees")(Docket # 48). 24. In the Response for Fees, TSI raised a preemptory defense to the award of attorneys'

fees and costs as a compensatory civil contempt sanction. See Reply in Support of Motion for the
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Award of Attorneys' Fees and Costs, filed February 9, 2005 ("Reply for Fees")("Docket # 49), at ¶ 9. 25. On February 9, 2005, Solinvest filed its reply in support of the Motion for Fees. See

Reply for Fees. 26. Throughout February 2005, TSI was amassing a substantial amount of money from

implementing its Plan of Reorganization. More specifically, as of February 9, 2005, TSI had collected five hundred eighty-six thousand three hundred seventy-six dollars and ninety-seven cents

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($586,376.97). As of February 28, 2005, TSI had collected seven hundred thirty-five thousand one hundred ninety-one dollars and seven cents ($735,191.07). TSI had collected this substantial sum by selling a fraction of the six million (6,000,000) shares of Alanco Technologies, Inc., common stock ("Alanco Stock") it owned. See Plan Order, at 2:20--2:27; Debtor's Post-Confirmation Accounting, filed March 16, 2005 (First Bankruptcy Docket # 140). 27. The Alanco Stock that TSI was selling pursuant to its Plan of Reorganization is the

same Alanco Stock that TSI had denied owning before this Court. See Order, dated October 14,
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2003, filed October 22, 2003 (Docket # 35); Response to Expedited Motion for Turnover of Funds, filed October 3, 2003 (Docket # 30), at 3:3, 3:23; Reply in Support of the Motion for Turnover Order, filed October 20, 2003 (Docket # 35), ¶ 14. 28. Also in February 2005, a majority of the shareholders in TSI became dissatisfied with

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management of TSI and set out to change it. More specifically, A. Since early 2003 TSI had been managed by a Board of Directors comprised of

the following individuals: Richard C. Jones, Kevin L. Jones, Perry D. Logan, Ted Marek and Dennis Nielsen (together, the "Old Board of TSI"). See Statement of Financial Affairs, filed December 18, 2003 (First Bankruptcy Docket # 7), at ¶ 21. B. The Old Board of TSI had been consistently represented thought this matter

and the First Bankruptcy by Attorney Jeffery M. Proper ("Attorney Proper"). See Notice of
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Appearance of Behalf of Defendant Technology System International, Inc., a Nevada Corporation, dated January 20, 2004 (Docket # 39); Application to Approve Employment of Attorney, filed December 31, 2003 (First Bankruptcy Docket # 9). C. The shareholders of TSI scheduled a meeting for February 28, 2005, to elect a

new Board of Directors of TSI ("New Board of TSI"). See Reorganized Debtor's Omnibus Conditional Objection to Proofs of Claim, filed March 2, 2005 ("Omnibus Objection")(First

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Bankruptcy Docket # 108), at ¶ 7. 29. Solinvest had been arguing that the Old Board of TSI was not competent to manage

TSI since March 2004. See Motion to Convert, at ¶ 11. 30. The Old Board of TSI and Attorney Proper did not want to loose control of TSI. To

prevent this loss, the Old Board of TSI and Attorney Proper did as follows: A. First, on or about February 11, 2005, the Old Board of TSI issued a substantial

amount of new TSI common stock ("New TSI Stock"). The Old Board of TSI then sold this New
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TSI Stock only to Attorney Proper and members of the Old Board of TSI for far below its fair market value. As a result of this New TSI Stock transaction allegedly diluting the ownership interest of all the other the shareholders in TSI, the Old Board of TSI would later claim that they have the right to continue to control TSI. See Motion for Emergency Relief and Orders Regarding Engelman Berger,

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P.C., Ted Nicholson, Ted Haller and Dan Cassey, filed March 4, 2005 ("Motion for Relief")(First Bankruptcy Docket # 110), at ¶ 7; Notice of Filing of Special Advisor's Report Regarding Insider Transactions, filed April 28, 2005 ("Special Advisor's Report")(First Bankruptcy Docket # 168), at pp. 13--14. B. Second, on February 22, 2005, the Old Board of TSI and Attorney Proper

commenced a new lawsuit in Nevada seeking in part to prevent the shareholders of TSI from meeting and voting for the New Board of TSI on February 28, 2005. After a hearing before the United States

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District Court for the District of Nevada, Case No. CV--S--05--0248--RLH--LRL ("Nevada Litigation"), the Nevada Litigation Court refused to enjoin the shareholders in TSI from meeting and voting. See Minutes of the Court, filed February 25, 2005 (Nevada Litigation Docket # 2).2 31. On February 28, 2005, the shareholders of TSI met and elected the New Board of TSI.

See Omnibus Objection, at ¶ 7. 32. As part of the process of electing the New Board of TSI, Solinvest structured a

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settlement agreement ("Settlement Agreement") which the New Board of TSI would (i) withdraw any opposition to the Motion for Fees, and (ii) not interfere with or delay Solinvest in collecting on the Judgment, and (iii) not appeal the final decision of this Court. See Supplement to Motion for Award

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The Nevada Litigation is captioned Technology Systems International, Inc., v. Alanco Technologies, Inc, et. al. Solinvest hereby respectfully gives notice that it has not attached hereto this document because it is available online through the PACER System. Case 2:02-cv-02641-ROS
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of Attorneys' Fees and Costs, filed February 28, 2005 ("Supplement Motion for Fees")(Docket # 50), at 3:1--3:7. 33. Also on February 28, 2005, Solinvest promptly gave notice to this Court of the

Settlement Agreement and the election of the New Board of TSI. See Supplement Motion for Fees.
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34.

On March 3, 2005, the Old Board of TSI and Attorney Proper sought in part to prevent

this Court from considering the Settlement Agreement by moving to strike it from the record. See Response to Supplement to Motion for Award of Attorneys' Fees and Costs and Motion to Strike Motion, dated March 3, 2005 ("Motion to Strike")(Docket # 51). 35. On March 18, 2005, Solinvest responded in support of this Court considering the

Settlement Agreement and detailed the ongoing dispute over the control of the TSI. See Consolidated (1) Reply in Support of Supplement to Motion for Award of Attorneys' Fees and Costs

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and (2) Response in Opposition to Motion to Strike, filed March 18, 2005 (Docket # 52). 36. Also on March 18, 2005, the Bankruptcy Court reopened the First Bankruptcy. This

reopening was in response to the numerous allegations of wrongful conduct by the Old Board of TSI and Attorney Proper. In response to these allegations, the Bankruptcy Court appointed a Special Advisor to investigate the following: (i) possible insider dealings by the Old Board of TSI and Attorney Proper, (ii) allegations of the misappropriation of funds by the Old Board of TSI and

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Attorney Proper, and (iii) allegations of the improper payment of claims to corporate insiders by the Old Board of TSI and Attorney Proper. See Interim Order, filed March 11, 2005 ("Interim Order")(First Bankruptcy Docket # 134), at 1:18--2:2; Final Order Appointing Special Advisor, filed March 18, 2005 (First Bankruptcy Docket # 148). 37. On March 21, 2005, the Old Board of TSI and Attorney Proper filed with the

Bankruptcy Court an objection to the payment of the Judgment to Solinvest under the Plan of Reorganization. This objection was filed even though the Response for Fees filed by them was

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pending before this Court. Furthermore, this objection was the first time ever in the First Bankruptcy that the Old Board of TSI and Attorney Proper formally opposed payment of the Judgment to Solinvest. See Interim Order, at 3:1; Objection to Claim of Solinvest Group, Ltd., filed March 21, 2005 ("Objection")(First Bankruptcy Docket # 149); Consolidated Response in Opposition to

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Objection to Claim of Solinvest Group, Ltd., and Reply in Support of Proposed Form of Order Regarding Claim of Solinvest Group, Ltd., filed April 11, 2005 ("Response to Objection")(First Bankruptcy Docket # 155), at ¶ 13. 38. On April 6, 2005, the Old Board of TSI and Attorney Proper filed with this Court its

reply in support of striking the Settlement Agreement from the record. In this reply, Attorney Proper stated as follows: "The undersigned counsel assures this Court that the issues for which the Bankruptcy Court requested the Special Advisor to investigate will not lead to any findings of either

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misappropriation or improper payment of claims by the Debtor." See Reply to Response to Opposition to Motion to Strike, dated April 6, 2005 (Docket # 53), at 2:25--2:27. 39. On April 11, 2005, Solinvest filed its response in opposition to the Objection with the

Bankruptcy Court. See Response to Objection. 40. Throughout April 2005, the Special Advisor to the Bankruptcy Court investigated

Attorney Proper and the Old Board of TSI. See Special Advisor's Report, at pp. 1--2.
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41.

In late April 2005, the Old Board of TSI and Attorney Proper retained a new lawyer to

represent the Old Board of TSI before the Bankruptcy Court. It is more likely than not that they retained this new lawyer because they knew from the course of the investigation of the Special Advisor to the Bankruptcy Court that their numerous and substantial acts of wrongful conduct had been discovered and that Attorney Proper would no longer be allowed to represent the Old Board of TSI before the Bankruptcy Court. See Verified Bankruptcy Rule 2014(a) and 2016(b) Statement of Brian Sirower with Respect to Technology Systems International, Inc.'s, Application for Order

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Authorizing the Employment of Quarles & Brady Steich Lang LLP as Counsel for Technology Systems International, Inc., including Statement of Disinterestedness, filed April 29, 2005 (First Bankruptcy Docket # 170); Initial Response In Opposition to Unauthorized Motion for Emergency Relief and Orders Regarding Engelman Berger, P.C., Ted Nicholson, Ted Haller and Dan Cassey,

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dated March 10, 2005 (First Bankruptcy Docket # 125), at 3:19. 42. On April 28, 2005, the Special Advisor to the Bankruptcy Court issued its Report.

The Special Advisor's Report detailed so many numerous and substantial acts of wrongful conduct by the Old Board of TSI and Attorney Proper that it is not appropriate to recite them all herein. See Special Advisor's Report. 43. One example of wrongful conduct detailed in the Special Advisor's Report was the

wrongful taking by Attorney Proper of seventy-four thousand three hundred and seventy-seven
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dollars and ninety-eight cents ($74,377.98) from the bankrupt estate. See Special Advisor's Report, at p. 11; Amended Declaration Pursuant to Rule 2014 of Jeffery M. Proper, dated March 16, 2005 ("Proper Declaration")(First Bankruptcy Docket # 141), at ¶ 13. 44. Another example of wrongful conduct identified in the Special Advisor's Report was

the participation of Attorney Proper and the Old Board of TSI in the New TSI Stock scheme. In short, Attorney Proper and the Old Board of TSI conspired together to defraud the shareholders of

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TSI and defeat the administration of justice. The mechanics of this conspiracy included the sale of the New TSI Stock on an exclusive basis only to the Old Board of TSI and Attorney Proper. In addition, the mechanics included the sale of the New TSI Stock for far below its fair market value. For example and in terms of the fair market value issue, the Old Board of TSI sold and Attorney Proper purchased two million (2,000,000) shares of New TSI Stock for ten thousand dollars

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($10,000.00)3 when the approximate fair market value of 2,000,000 shares of New TSI Stock was two hundred sixty thousand dollars ($260,000.00).4 See Special Advisor's Report, at pp. 4, 6--7, 13--14; Proper Declaration, at ¶ 11. 45. On May 3, 2005, the Old Board of TSI and Attorney Proper caused TSI to again file

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for bankruptcy protection with the Bankruptcy Court, Case No. 2:05--BK--07799--EWH ("Second Bankruptcy"). See Voluntary Petition, filed March 3, 2005 (Second Bankruptcy Docket # 1). 46. The conspiracy between the Old Board of TSI and Attorney Proper continued after the

commencement of the Second Bankruptcy but outside of judicial oversight. More specifically, while the Old Board of TSI was represented in the First Bankruptcy and Second Bankruptcy by the new lawyer, Attorney Proper continued his relationship with the Old Board of TSI in the capacity as "special counsel." See Unanimous Written Consent to Action of the Board of Directors of

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Technology Systems International, Inc., dated April 14, 2005, filed May 3, 2005 (Second Bankruptcy Docket # 3). 47. It appears that the Second Bankruptcy was not commenced in good faith by the Old

Board of TSI. More specifically, the Second Bankruptcy was commenced three (3) business days after issuance of the Special Advisor's Report thereby preventing any action to be taken in response to it. Furthermore, the Second Bankruptcy was commenced while the Motion for Fees was pending

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before this Court. Finally, the Second Bankruptcy was commenced while a substantial number of pleadings were pending before the Bankruptcy Court in the First Bankruptcy. However, whether the Second Bankruptcy was commenced in good faith will never be known because the Old Board of TSI and Attorney Proper wrongfully failed to file any of the required financial disclosure documents. See

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$10,000 = 2,000,000 x $0.005 $260,000.00 = 2,000,000 x $0.13
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Order Granting Extension of Time to File Statement of Financial Affairs and Schedules A Through H, dated June 1, 2005 (Second Bankruptcy Docket # 14); Proceedings & Minutes For the Continued §341a First Meeting of Creditors, dated June 30, 2005 (Second Bankruptcy Docket # 17); Motion to Withdraw, at ¶ 24.

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48.

On May 17, 2005, Solinvest gave this Court notice of the Second Bankruptcy of TSI.

Solinvest gave this Court this notice because the Old Board of TSI and Attorney Proper had failed to do so. See Notice of Second Voluntary Petition for Bankruptcy Protection Filed by Defendant Technology Systems International, Inc., filed May 17, 2005 (Docket # 56). 49. On a related note, the Old Board of TSI and Attorney Proper in the Second

Bankruptcy again used the incorrect procedural mechanism to obtain bankruptcy protection thereby having this matter automatically transferred from this Court to the Bankruptcy Court. See Motion to

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Withdraw, at ¶ 23. 50. On June 15, 2005, this Court again stayed this matter now pending resolution of the

Second Bankruptcy. Again this Court remained active in this matter by requiring semi-annual status reports. See Order, dated June 15, 2005 (Docket # 57). 51. On June 21, 2005, Solinvest secured an Order from the Bankruptcy Court in part

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judgment interest of the Judgment. This Order was secured by Solinvest after both numerous and extensive proceedings before the Bankruptcy Court and substantial informal efforts to secure a stipulation. See Stipulated Order Approving Partial Payment of Claim of Solinvest Group, Ltd., dated June 21, 2005 ("Order for Payment")(First Bankruptcy Docket # 199). 52. On or about July 21, 2005, the Old Board of TSI complied with Order for Payment by

delivering to Solinvest three hundred ninety-five thousand seven hundred twenty-eight dollars and twenty cents ($395,728.20).

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53.

On August 4, 2005, the Bankruptcy Court converted the First Bankruptcy from a

reorganization under Chapter 11 to a liquidation under Chapter 7. Attorney Proper was required to agree to this conversion not in his capacity as the lawyer for the Old Board of TSI but as an individual because of his participation in the New TSI Stock conspiracy. See Order Approving

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Stipulation to Convert Case to Chapter 7 and Resolve Other Issues, dated August 4, 2005 ("Conversion Order")(First Bankruptcy Docket # 208); Stipulation to Convert Case to Chapter 7 and Resolve Other Issues, filed July 7, 2005 ("Stipulation to Convert")(First Bankruptcy Docket # 202). 54. This conversion of the First Bankruptcy from a reorganization under Chapter 11 to a

liquidation under Chapter 7 is the exact same remedy Solinvest sought from the Bankruptcy Court in March 2004. See Motion to Convert. 55. As part of the conversion of the First Bankruptcy, the Second Bankruptcy was

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dismissed. See Order of Dismissal, dated August 24, 2005 (Second Bankruptcy Court Docket # 21); see also Conversion Order, at 2:10--2:12. 56. The Bankruptcy Court did not address the wrongful conduct of either Attorney Proper More specifically, first, the Bankruptcy Court did not address the

or the Old Board of TSI.

conspiracy between Attorney Proper and the Old Board of TSI in the New TSI Stock transaction. It avoided this issue by rescinding all the New TSI Stock and having the remaining assets of TSI

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distributed directly to the shareholders in TSI after payment of all claims. Second, the Bankruptcy Court did not address the wrongful conduct of Attorney Proper and in fact approved the payment of an additional thirteen thousand one hundred fifty four dollars ($13,154.00) in compensation to him. See Conversion Order, at 2:21, 2:24--3:1, 3:15--3:21; Order Approving First Application for Attorney's Fees of Debtor's Counsel, entered February 8, 2005 (First Bankruptcy Docket # 104).

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57.

Plaintiff hereby respectfully gives notice that it has contemporaneously filed herewith

a separate notice of resolution of the Second Bankruptcy of TSI. See Notice of Resolution of Bankruptcy of Defendant Technology Systems International, Inc., filed September 7, 2005. 58. In this matter, the only issue remaining is the award of attorneys' fees and costs in

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favor of Solinvest under the Motion for Fees. 59. The Motion to Strike filed by the Old Board of TSI and Attorney Proper is moot

because they have had their control over TSI ended by the Conversion Order. 60. 61. The award of attorneys' fees to Solinvest is mandatory. See Motion for Fees, at ¶ 23. In the alternative, Solinvest may be awarded its attorneys' fees as a compensatory civil

contempt sanction against TSI for the wrongful conduct of the Old Board of TSI and Attorney Proper. See Reply for Fees, at ¶ 9; Motion for Contempt, at ¶¶ 9--11; Pacific Harbor Capital, Inc., v.

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Carnival Air Lines, Inc., 210 F.3d 1112, 1117--18 (9th Cri. 2000); Perry v. O'Donnell, 759 F.2d 702, 705--6 (9th Cir. 1985); Terran v. Kaplan, 989 F. Supp. 1025, 1026 (D. Ariz. 1997)(Opinion by Judge Carroll). 62. Solinvest is entitled to an award of all its out-of-pocket expenses. See Reply for Fees,

at ¶ 6; Marsh v. Digital Equipment Corp., 699 F. Supp. 1411, 1416 (D. Ariz. 1988)(Opinion by Judge Hardy).

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63. 64.

Solinvest is entitled to an award of all its taxable costs. See 28 U.S.C. § 1920. Through January 12, 2005, Solinvest incurred $194,935.00 in attorneys' fees. See

Motion for Fees, at ¶ 32. 65. From January 13, 2005, through the present Solinvest has incurred attorneys' fees in

the amount of seventy--one thousand seven hundred fifty dollars ($71,750.00). See Affidavit of Michael Simes in Support of Comprehensive Supplement to the Motion for the Award of Attorneys' Fees and Costs, filed September 7, 2005 ("Simes Affidavit"), at ¶ 19.

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66.

Through January 12, 2005, Solinvest incurred expenses in the amount of two thousand

three hundred twenty--five dollars and ninety cents ($2,325.90).5 See Motion for Fees, at ¶ 35. 67. From January 13, 2005, through the present Solinvest has incurred expenses in the

amount of six hundred ninety--one dollars and sixty cents ($691.60). See Simes Affidavit, at ¶ 20.
5 6 7 8 9 10 11 12

68.

The amount of attorneys' fees and expenses Solinvest has incurred in this matter are

reasonable. See Motion for Fees, at ¶¶ 24--34; Reply for Fees, at ¶ 2; Simes Affidavit, at ¶ 23. 69. Solinvest has incurred taxable costs in the amount of one thousand three hundred

seventy--seven dollars and twenty--six cents ($1,377.26). See Bill of Costs, filed September 7, 2005. 70. In conclusion, Solinvest respectfully requests the following: A. An award of its attorneys' fees and expenses in the total amount of two

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5

hundred sixty--nine thousand seven hundred two dollars and fifty cents ($269,702.50). B. An award of its taxable costs in the amount of one thousand three hundred

seventy--seven dollars and twenty--six cents ($1,377.26). DATED this 7th day of September, 2005.

MICHAEL SIMES, LLC /s/ Michael Simes . Michael Simes Attorney for Solinvest Group, Ltd.

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In the Motion for Fees, Solinvest listed its "costs" as three thousand seven hundred three dollars and sixteen cents ($3,703.16). However, this amount was a blend of taxable costs and out-of-pocket expenses. Herein Solinvest has allocated the costs listed in the Motion for Fees between taxable costs of one thousand three hundred seventy--seven dollars and twenty--six cents ($1,377.26) and expenses of two thousand three hundred twenty--five dollars and ninety cents ($2,325.90). Case 2:02-cv-02641-ROS
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ORIGINAL ELECTRONICALLY FILED this 7th day of September 2005 with: Clerk of the Court United States District Court District of Arizona Sandra Day O'Connor Court House 401 West Washington Street Phoenix, Arizona 85003 COPY mailed this 7th day of September 2005 to: Jeffrey M. Proper Jeffery M. Proper, PLLC 3550 North Central Avenue; Suite 1200 Phoenix, Arizona 85012 Telephone: 602-235-9555 Facsimile: 602-235-9223 Jill H. Ford Chapter 7 Bankruptcy Trustee P.O. Box 5845 Carefree, Arizona 85377 Telephone: 480-575-8250 COURTESY COPY hand-delivered this 7th day of September 2005 to: Clerk of the Court United States District Court District of Arizona Sandra Day O'Connor Court House 401 West Washington Street Phoenix, Arizona 85003 The Honorable Roslyn O. Silver United States District Court District of Arizona Sandra Day O'Connor Court House 401 West Washington Street Phoenix, Arizona 85003 Telephone: 602-322-7520 Facsimile: 602-322-7529

COURTESY COPY mailed this 7th day of September 2005 to: The Honorable Eileen W. Hollowell United State Bankruptcy Court District of Arizona 110 South Church Avenue Tucson, Arizona 85701 Telephone: 520-620-7500 x 262 Facsimile: 520-620-7467

/s/ Michael Simes

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