Free Transcript - District Court of Arizona - Arizona

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA _________________ ) ) ) ) Plaintiff, ) ) vs. ) ) PETER THIMMESCH, et al., ) ) Defendants. ) _____________________________ ) BILTMORE ASSOCIATES, as Trustee for the Visitalk, Creditors' Trust,

No.

CV 02-2405-PHX-HRH Phoenix, Arizona March 3, 2008 1:01 p.m.

BEFORE:

THE HONORABLE H. RUSSEL HOLLAND, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS BENCH TRIAL VOLUME 1 P.M. Pages 92 to 138

Official Court Reporter: Candy L. Potter, RMR, CRR Sandra Day O'Connor U.S. Courthouse, Suite 312 401 West Washington Street, Spc 36 Phoenix, Arizona 85003-2151 (602) 322-7246 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription

Case 2:02-cv-02405-HRH

Document 484

Filed 03/17/2008

Page 1 of 47

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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 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 2 of 47 For the Defendants: Mariscal Weeks McIntyre & Friedlander By: Gary L. Birnbaum, Esq. Timothy J. Thomason, Esq. Scot L. Claus, Esq. 2901 North Central Avenue, Suite 200 Phoenix, Arizona 85012 For the Plaintiff: Tiffany & Bosco By: Christopher Reed Kaup, Esq. 2525 East Camelback Road, 3rd Floor Phoenix, Arizona 85016 A P P E A R A N C E S

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 381 16 17 383 18 388 19 20 21 22 23 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 3 of 47 522 566 508 Judgment against Michael and Marcia O'Donnell Unanimous Consent of the Board of Directors in Lieu of Special Meeting regarding the issuance of the Founder's Warrants, dated as of September 12, 1998 Visitalk.com advertising brochure December 13, 1999, Release of Claims of Mark Cardwell 100 Judgment re Cynthia Thimmesch 99 Order from Chambers re Stipulation for Entry of a Judgment against Mark Cardwell 98 EXHIBIT NO. 377 378 DESCRIPTION Judgment against Ray Gaston Stipulation for Entry of Judgment Against Mark Cardwell 97 98 INDEX OF EXHIBITS IDENT RECEIVED Rule 52 Motion 132 WITNESS: VERN SCHWEIGERT By Mr. Birnbaum By Mr. Kaup I N D E X DIRECT CROSS 96 124 REDIRECT RECROSS

119 122 122

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1 2 3 4 5 6 657 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 4 of 47 658 Disclosure Statement dated June 22, 2004, in support of the Proposed Second Joint Plan or Reorganization Order Clarifying Article XII of the Confirmed Plan EXHIBIT NO. 656 DESCRIPTION Second Joint Plan of Reorganization dated June 22, 2004 110 INDEX OF EXHIBITS IDENT RECEIVED

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THE COURT: MR, KAUP: Mr. Schweigert.

Are we ready to go? Your Honor, I have no further questions for

MR. BIRNBAUM:

Your Honor, may I approach the witness
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or the clerk with the exhibits I believe we will be using with Mr. Schweigert? THE COURT: Yes.

And will I find these in your exhibits, Mr. Birnbaum? MR. BIRNBAUM: They're in both, Your Honor. And I'll
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give you the number and I'll put it on the screen as well. CROSS-EXAMINATION BY MR. BIRNBAUM: Q. A. Q. Good afternoon, Mr. Schweigert. Good afternoon. Mr. Schweigert, the plaintiff Biltmore Associates in this How are you, sir?
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case has claimed that -- in its Complaint that a number of different parties are responsible for the losses you allege. Is that right, sir? A. Q. Yes, it is. And it is true, is it not, Mr. Schweigert, that you've
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settled with some of those parties? A. Q. That is true. And you provided -- you the plaintiff -- have provided
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covenants not to sue or to execute in return for the UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 5 of 47

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settlements with those parties; is that correct? A. Q. That is correct. And there have been stipulated judgments entered by

Judge Holland as a result of those settlements; is that correct? A. Q. That is correct. I'd like you just to take a look first at Exhibit 377. And that's a -- that's one of the plaintiff's exhibits, Your Honor. You have that before you, Mr. Schweigert? A. Yes, I do. MR. BIRNBAUM: stipulated in. BY MR. BIRNBAUM: Q. Mr. Schweigert, is that the settlement agreement between
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And 377 is in evidence, Your Honor,

Biltmore Associates as the plaintiff and Ray and Betty Gaston? A. Q. A. Q. Yes, I believe it is. And Mr. Gaston was an officer of Visitalk; is that correct? That is correct. And am I correct, sir, that as a consequence of this
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settlement, judgment was entered against Mr. Gaston for the total sum of $42 million? A. Q. Mr. Gaston and his wife, yes. Okay. Thank you. But 42 million was the correct number? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 6 of 47
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A. Q.

That is correct. Okay. And let me then ask you to turn to Exhibit 378. And do you agree with me, Mr. Schweigert, that that is

the stipulation for entry of the judgment against Mark Cardwell? A. Q. Yes, I do. Now, we do not have -- and the judgment was to be in the
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amount of $25 million; is that correct? A. Q. That is correct. And Mr. Cardwell was the chief technology officer of
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Visitalk; correct? A. Q. I believe that was his position, yes. And we don't have a copy of that judgment, sir. But if you

would go to Exhibit 381, which is the next one that I've given to you. That is, in fact, an order entered by Judge Holland, is it not, which references the entry of the judgment as clerk's docket number 265, in the very first sentence of the order? A. Q. I think it's 262, but -- oh, clerk's docket 265, yes. Yes. The Court has entered the judgment which those
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parties propose as to Defendant Cardwell, clerk's docket number 265. A. Q. That is correct. Okay. So we have 42 million against Mr. and Mrs. Gaston, UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 7 of 47
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25 million is the judgment against Mr. Cardwell; is that correct? A. Q. That is correct. Let me ask you to go to Exhibit 383, also in evidence. THE COURT: Before you go on, are 378 and 381 both
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admitted by stipulation? MR. BIRNBAUM: THE COURT: I believe so, Your Honor, yes.

Thank you. And I believe 383 and the next one
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MR. BIRNBAUM:

which is 388 are also in evidence. THE COURT: BY MR. BIRNBAUM: Q. Go to Exhibit 383 if you would, Mr. Schweigert. Tell me Thank you.

when you're there. A. Q. Yes, I'm there. Now, that's the judgment entered against Cindy Thimmesch;
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is that right? A. Q. That is correct. And Cindy Thimmesch was -- is the ex-wife of Peter
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Thimmesch, one of the founders of Visitalk; correct? A. Q. That's my understanding. And as you understand it she also worked for Visitalk, did

she not? A. Q. I believe she did, yes. Well, in fact, you entered into stipulations with each of UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 8 of 47
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these parties in which you had them recite their background as officers and directors and employees of Visitalk, didn't you? A. Q. Yes, I did. And you had them outline their alleged misconduct or
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wrongdoing while they were with Visitalk; right? A. Q. That's correct. And you asked them to stipulate to judgments against

themselves for the misconduct that they allegedly performed while at Visitalk? A. Q. That they admitted they performed, yes. Okay. Now, as to Mrs. Thimmesch or Miss Thimmesch, the
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judgment that you obtained was $55 million; is that correct? A. Q. That is correct. And then if you go to Exhibit 388, there are also claims
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asserted against Michael and Marcia O'Donnell; is that correct? A. Q. That is correct. You previously said, or Mr. Kaup said, and I think you The founder of Visitalk

agreed, that the name was McDonald. was O'Donnell; right? A. Q. A. Q. That is correct. Do you remember that now? Yes, I do. Okay.

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And your deal with the O'Donnells was the same

thing, they confirmed that they were founders and principals of Visitalk in the stipulation; right? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 9 of 47
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A. Q.

Yes, they did. Okay. And they agreed that they had either performed or

failed to perform certain activities while with Visitalk; correct? A. Q. That is correct. And those activities, you allege and they stipulated,
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resulted in damages to Visitalk; correct? A. Q. That is correct. In fact, all of these people agreed that their activities
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caused Visitalk to lose the amount of money that was alleged in the judgment, or stated in the judgment; isn't that right? A. Q. Yes; that is correct. And by the way, just so we're clear, you talked about the

review you had done and your knowledge of the various Visitalk offerings. What's the total amount of money, everything
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aggregated together, good, bad or indifferent, that Visitalk raised from any source whatsoever during its existence? A. Q. $43 million, approximately. Now, the judgment against the O'Donnells, that was also in
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the amount of 55 million; is that right? A. Q. 54,870,000. Okay. I'm sorry, I am rounding these numbers. So using rounded numbers, we have 42 million against Gaston, 25 against Cardwell, 55 against Cindy Thimmesch, 55 against Mike and Marcia O'Donnell; is that correct, sir? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 10 of 47

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A. Q.

That's correct. And in fact, your view is that there's still other people

like Ernst & Young that you believe you have claims against? A. Q. A. Q. And Snell & Wilmer, yes. And Snell & Wilmer? That's correct. Okay. Now, if we compare the total amount of money that
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Visitalk ever raised from any source, that's 43 million; correct? A. Q. That is correct. And the total amount of the judgments that you've now
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obtained in return for these covenants not to execute or covenants not to sue, that's approximately $176 million; is that correct? A. Q. Approximately. Have you as the -- as the plaintiff's representative in
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this case ever actually looked at Section 12-2504 of the Arizona Revised Statutes? A. Q. I don't -- I'm not a lawyer, so I didn't look at it, no. Well, my question isn't whether you were a lawyer. You
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testified about financial statements and you're not a CPA today either, are you? A. That's correct. I don't believe I testified about the financial statements, other than the fact they were audited. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 11 of 47
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Q. A. Q. A. Q.

By the way, was your CPA license suspended? I just didn't renew it, about 20 years ago. About 20 years ago? Yeah. Would you take a look at A.R.S. 12-2504, which we've placed
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in front of you? Your Honor, that one I can only put on the screen for you. But we already showed -- it's up there now, and that's

the one we referred to during opening statement. Now, Mr. Schweigert, I want -MR. KAUP: Objection, Your Honor, he certainly can't
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ask Mr. Schweigert for a legal opinion or for some type of conclusion about what the statute says or its meaning in this case. And if he's not going to do that, then there's no
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relevance to this line of questioning. THE COURT: so let's find out. MR. BIRNBAUM: pending. BY MR. BIRNBAUM: Q. Mr. Schweigert, I'd like to start at the top of the It says, if a release or covenant not to sue or not Thank you. There's no question I don't know what he's going to ask him,

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statute.

to enforce a judgment is given. Now, that's what was given to each of these parties in this case; right? You personally approved covenants not to sue
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or to enforce judgments against the personal assets of each of the individuals we've just gone through; is that correct? A. Q. I believe it says what it says. I'm not asking you what it says, Mr. Schweigert. I'm
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asking you about your personal knowledge and your personal actions as the representative of the plaintiff in this case. You approved covenants not to enforce judgments against the personal assets of each party that Biltmore Associates settled with; correct? A. Q. That is correct. Okay. Then it says, in good faith. I presume that when you brought those to the Court you brought them in good faith; correct? A. Q. That is correct. Okay. To one of two or more persons liable in tort for the

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same injury. Now, you claim that all of these people were liable for the demise of Visitalk, did you not? A. Q. Yes, I did. Okay. Then it goes on in Subsection 1 and says, if you do
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that, if you enter into such a release, okay, it does not discharge any of the other tortfeasors from liability. But,

now I'm picking up with the word "it," it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 13 of 47
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Now, the amount of the releases and covenants entered into by Biltmore Associates in this case is $176 million, is it not? A. Q. I believe that's the number we agreed on, yes. Okay. And by the way, with respect to that $176 million,
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and the application of this statute, do you agree, Mr. Schweigert, that the settlement figures that are in each of those settlements represent a fair and reasonable estimate of the amount of damage to Visitalk caused by each one of those settling defendants? A. Q. A. Q. Yes, I do, as joint and several. Just a couple other questions, Mr. Schweigert. Excuse me. With respect to the Founder's Warrants to the extent that
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you've testified about them, I just want to clear up two things. The Founder's Warrants that you've referred to, based on this investigation that you testified about, is it your understanding, sir, that they were never exercised at all; correct? A. Q. That is correct, it's my understanding. And it's also your understanding, isn't it, sir, that with

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respect to the Founder's Warrants, no Series A, Series B or Series C shareholder ever brought any lawsuit of any kind seeking to assert a claim based on the Founder's Warrants; UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 14 of 47
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isn't that true? A. Q. A. Q. I believe there was one claim brought. You're talking about a claim by Mr. Hubvee (ph)? That is correct. And Mr. Hubvee's claim related to the fact that he thought
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he had rights to buy stock under a Series C offering under certain terms as opposed to other terms. It didn't relate to

the Founder's Warrants at all, did it, sir? A. Q. I don't remember. All right. Set aside Mr. Hubvee. And if that becomes an
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issue, we'll look at Mr. Hubvee's pleading. Other than Mr. Hubvee, do you agree with me, sir, that no Series A, Series B, or Series C investor in Visitalk filed in sort of lawsuit or any type of written proof of claim against Visitalk? A. Q. They never had the real facts, they couldn't file a claim. Mr. Schweigert, do you want to listen to my question, Do you acknowledge, sir, no Series A, Series B or
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please?

Series C shareholder ever filed any type of claim or lawsuit against Visitalk? A. That is correct. MR. CLAUS: THE COURT: MR. CLAUS: entering the room. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 15 of 47 Your Honor? Yes. I'm sorry to interrupt, we have a witness
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MR. KAUP: Your Honor?

I apologize.

May I have a minute,

And while we're at a break, I didn't want to interrupt Mr. Birnbaum, there were a couple of the judgments that he brought in as exhibits which I believe now he doesn't have an objection to, but which we had noted that there was an objection to, namely the judgment against Cindy Thimmesch, the judgment against -- and the judgment against the O'Donnells, which we had noted were objected to. But I just want to
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clarify now they can be admitted into evidence. MR. BIRNBAUM: THE COURT: I apologize -- they're their exhibits. The exhibit

I'm confused at this point.

schedule that I got indicated that these 300 series exhibits were conceded to be authentic, but the report does not reflect that they were admitted by stipulation. MR. BIRNBAUM: they were. Well, I'm sorry, Your Honor, I thought
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But based Mr. Kaup's statement -You said that, and nothing was said, so I

THE COURT:

didn't realize there was any problem until I went and looked. Mr. Kaup, is there an objection to any of these 300 series exhibits? MR. KAUP: We don't have an objection, Your Honor. I
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was simply noting that based on our copy of the exhibit list, they had asserted an objection to it. And I just wanted to
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confirm that that objection is withdrawn and then these UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 16 of 47

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documents may be admitted into evidence. MR. BIRNBAUM: THE COURT: MR. KAUP: I see. They're all admitted.

Good.

Thank you, Your Honor. Thank you, Your Honor.
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MR. BIRNBAUM: BY MR. BIRNBAUM: Q.

Let me switch topics again if might, Mr. Schweigert. You gave some testimony about Bankruptcy Court

pleadings or orders and their significance.

I'd like to just
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briefly go over a few of the things that you touched upon. Do you have Exhibit 657 in front of you, sir? A. Q. A. Yes, I do. Yes, I do.

Can you identify 657 for the record? That's the disclosure statement that accompanied the plan
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of reorganization. MR. BIRNBAUM: Your Honor, 657 has not been admitted.

We move the admission of 657. THE COURT: MR. KAUP: THE COURT: BY MR. BIRNBAUM: Q. Now, this is the Disclosure Statement in bankruptcy of Is there an objection to 657? No, Your Honor. It's admitted.
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Visitalk; is that correct? A. Q. Yes, it is, for the second Amended Plan. The Second Amended Plan is the one that's ultimately UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 17 of 47
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approved by the Court; is that correct? A. Q. Yes, it was. Okay. I'd like you to turn to page 22 of the exhibit. And

on the top of page 22 you agree with me, I assume, Mr. Schweigert, that it says, quote, no shareholder of any class of equity will receive any distribution on account of their equity interest? A. Q. That's what it says. Now, I'd like you next to turn to page 57 of the
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disclosure. A. Q. I have it. And there's two things I want to go over with you there. You recognize that this is defining the various classes of claims, class -- in fact, if you go back to 55 this is entitled, Classifications and Treatment of Claims. Do you see that, sir? A. Q. Yes, I do. Okay. Now on page 57, the Class 8 Claimants, those are the

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Equity Security Holders, are they not? A. Q. Yes, they are. That is, for example, Class A, Class B, Class C
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stockholders; correct? A. Q. That is correct. And just so we're clear, at least on this page, sir, it
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shows that Class 8, the Equity Security Holders, have no UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 18 of 47

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participation in the plan; is that correct? A. Q. That's what it shows. And in fact, it even shows that they're more than

$40 million just as you testified; right? A. Q. That's correct. Now it also defines on this page a Class 7 Claimant. And
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those are certain types of Unsecured Creditors; correct? A. Q. That is correct. As distinguished from the Class 8 Equity Security Holders;
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right? A. Q. That is correct. Okay. Now, let me ask and you to turn to Exhibit 656. Just to save some time, Mr. Schweigert, you agree with me that is, in fact, the Second Joint Plan of Reorganization dated June 22, 2004? A. Q. I agree with you. Now, what I'd like you to do is jump all the way to the Appendix

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back of that exhibit into what is called Appendix A. A, Definitions. A. Q. I haven't found it, yet.

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It's after the mailing certificate, which ends on page 55,

then the next page says Appendix. A. Q. All right. Okay. I have it. And if you go to paragraph It
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Appendix A, Definitions.

6, it refers there to allowed claim or allowed interest. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008

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means a claim or interest having the following characteristics. Now, Mr. Schweigert, I don't want to go through this exhibit with you, let's see if we can shorten this. Do you

agree, sir, that an allowed claim is either one that was listed by the Debtor, Visitalk, on its Bankruptcy Schedules, or is a claim of someone who has filed a written proof of claim in accordance with the Bankruptcy Court's orders? MR. KAUP: conclusion. THE COURT: objection. MR. BIRNBAUM: Your Honor, I think it might be had he I think that's probably a decent
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Objection, Your Honor, it calls for a legal

not, on direct examination, been permitted to testify about who holds and who doesn't hold claims. to confirm that's what it says. THE COURT: time comes. I think I can read what this says when the So now I'm just asking him
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And that you'll point out to me the portions of it

I should read. MR. BIRNBAUM: it up together anyway. BY MR. BIRNBAUM: Q. All right. Mr. Schweigert, whatever it says, the I agree, Your Honor. I'll try to tie
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definition of an allowed claim appears here in paragraph 6 of the Appendix; correct? A. Well, it's all through the plan, is what the Judge -- what UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 20 of 47
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the Court approved. Q. A. I know. But the definition of the term "allowed claim" -That's one of the

That's one place -- one place it is.

reasons we asked the Judge to clarify it. Q. Well, all through the Plan it refers to allowed claims as And this is where the definition is;
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defined in the Appendix. isn't that right? A. Q.

It says Definitions, Appendix A. Okay. Mr. Schweigert, let's go on and let me ask you to
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turn to page 11 of the same exhibit. Now, here we are in Article 3 of the plan. begins on page 8. Article 3 Do

Classification of Claims and Interests.

you see that on page 8, sir? A. Q. On page 8 or page 11? Well, page 8 is where the Article begins. Then I'm going
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to take you to page 11. of Claims and Interests. A. Q. Yes, I see that. Okay.

Page 8 says, Article 3 Classifications

Now go to page 11.

And here we have a definition of
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the Class 7 claims in Section 3.8, Allowed Unsecured Claims of Creditors. A. Q. Do you see that, sir?

Yes, I do. Okay. Then go to the next page. And it says, in Section

3.9, Class 8 Preferred Stock Equity Interest Claims. Now, that's referring, among other things, to Classes UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 21 of 47
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A, B and C, again; is that right, Mr. Schweigert? understanding of this? A. Q. A. Q. A. Q. Of -The term "Preferred Stock Equity Interest."

Is that your

No, I think it would also -- it could also include E and F. Okay. It includes A, B and C, as you understand it?

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At least, yes. Okay. And it says that the Class 8 Preferred Stock Equity And that's
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Interest Claims consists of Allowed Interests. capitalized, capital A, capital I.

Allowed Interests of the

holders of the Debtor's Old Preferred Stock. Is that what it says, sir? A. Q. That's what it says. And I don't want to ask you for a legal conclusion,
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Mr. Schweigert, but as a party who is governed by this document, as you said, Allowed Interest in Section 3.9 you would agree is the Allowed Interest as defined in the Appendix, would you not? A. No, I would not. And that's why I asked the Bankruptcy

Court for clarification. Q. Okay. Would you agree, sir, that as of this time when the

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Judge enters his order, Allowed Interest in Section 3.9 has the definition that's set forth in the Appendix? A. I would agree that it was ambiguous enough that the
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Bankruptcy Court saw fit to amend it. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 22 of 47

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Q.

Okay.

Well, let's go on then to what the Bankruptcy Court

amended. First, we just referred to Section 3.9, which defines the Preferred Stock Equity Interest as Allowed Interest. we referred to the Appendix that defines Allowed Interest. Is there any order that ever amended either of those two things, Article 3.9 or Appendix A? A. There is the Judge's order clarifying the definitions of And
13:27:02

what he meant. Q. Is there any order clarifying or otherwise Section 3.9 or
13:27:16

Appendix A? A. Q. I don't believe there is. Now, this clarifying order that you're talking about, in

fact -Well, let me just put it in front of you. Exhibit 658, is it not? A. Q. Yes, it is. That was the exhibit you were referring to earlier but It's
13:27:31

didn't have. MR. BIRNBAUM: Your Honor, 657 and 58 are objected to.
13:27:42

We move their admission as well. MR. KAUP: may be admitted. THE COURT: Thank you.
13:27:56

Objection is withdrawn, Your Honor.

They

Are we talking two exhibits now, 657 and 658? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 23 of 47

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MR. BIRNBAUM:

It's actually three, Your Honor. 657 is the related And 658 is now a

656

is the Joint Plan of Reorganization. Disclosure Statement in Bankruptcy.

Clarifying Order entered by Judge Baum. THE COURT: 658 is admitted. Thank you, Your Honor.
13:28:19

MR. BIRNBAUM: BY MR. BIRNBAUM: Q.

Now, Mr. Schweigert, I appreciate your candor.

I'd like

you to take a look at Exhibit 658.

And in fact, 658 does not
13:28:32

purport to modify, amend, clarify, or otherwise impact at all either Articles 3, 4 or 5 of the Plan of Reorganization, which is Exhibit 656, isn't that right? A. Q. That is correct. Okay. So let's look at what this does do, since it does It says, clarifying Article XII

not impact Articles 3, 4 or 5. of the Plan.

13:28:53

And that relates to, you said, responsibilities of the trustee; is that right? A. Article XII is much more than responsibility, it's also who
13:29:17

I distribute the money to, to the extent that there is money to distribute. Q. 5. It's not the Classification of Claims, that's in 3, 4 and That's the provision that the Disclosure Statement

underlined in bold and said, Equity Interests do not participate. Those provisions are not being touched here at UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 24 of 47
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all; right? A. Q. That's right. Okay. Now, clarifying Article XII of the Confirmed Plan to

provide that the Creditors' Trustee. That's you; right? A. Q. That's me. May distribute proceeds of the causes of action which are
13:29:48

the corpus of the Creditors' Trust. So whatever claim you're holding as the claims of Visitalk, you may now distribute them in the manner that's outlined here; right? A. Q. That's what this says?
13:30:04

That's what it says. And you may distribute those claims to holders of unsecured That's Class 7 claims under the Plan we just looked
13:30:25

claims.

at; right? A. Q. That's correct. Okay. Subject to subordination, pursuant to 11 U.S.C. 510,

in the event he recovers funds in excess of the aggregate amount of the claims held by the active professionals. That means people like the lawyers; right? A. Q. That's correct. So if you get enough money in asserting the claims that
13:30:42

you're asserting to pay off all of the active professionals in full, you can then distribute money direct to the unsecured creditors; right? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 25 of 47
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A. Q.

That's correct. And the claims of creditors in Class 7 are not subject to And the

subordination under any provisions of applicable laws.

claims of the active professionals and unsecured creditors holding claims not subject to subordination are, in fact, paid in full by the Creditors' Trustee. Now, Mr. Schweigert, have we now reviewed completely the entire order actually entered by Judge Baum? A. Q. A. No. Well, is there another provision in the order, sir? Yes, because it says, may distribute proceeds to the causes
13:31:34 13:31:19

of action which are the corpus of the Creditors' Trust, however the unsecured claims subject to subordination. Q. A. Q. Yes. Those are the investors. Mr. Schweigert, is there any place in Judge Baum's order,
13:31:51

any place that it says that the equity holders who the Plan and the Disclosure Statement expressly said, hold no claims, do not participate in the recoveries under the Plan, is there any place where Judge Baum has vacated his prior order and modified Articles 3, 4 or 5 of the Plan of Reorganization? MR. KAUP: Objection, mischaracterizes the contents of The order speaks for
13:32:12

the Chapter XI Plan and this document. itself. THE COURT:

The objection is sustained.

I think we're

13:32:31

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getting into argument about what these documents mean. MR. BIRNBAUM: THE COURT: Very well, Your Honor.

With your help I will decide that. Thank you.
13:32:40

MR. BIRNBAUM: BY MR. BIRNBAUM: Q. All right.

Mr. Schweigert, last topic, a couple questions.

There was some reference made -- I know Mr. Kaup did it in opening statement, but I can't remember if he did it in questioning of you, but related to restating corporate history. You've heard that phrase before, have you not? A. Q. Yes, I have and I've seen it. From your work in your professional career, sir, are you
13:32:59

aware that corporate documentation is often created after a corporate action is taken, it's memorialized later? MR. KAUP: Objection, relevance, there's document
13:33:18

expert testimony on this topic. THE COURT: BY MR. BIRNBAUM: Q. All right. Mr. Schweigert, let me ask this differently.
13:33:30

Sustained.

You were asked earlier about your investigation and review of certain documents. A. Q. Yes, I do. And you were asked whether you had seen any documents that Do you recall that, sir?

suggested that the Founder's Warrants were issued on September 12, 1998. Do you recall that? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 27 of 47
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A. Q.

Yes, I do. And you said, in all of those documents you've looked

through, you didn't see anything that suggested that; right? A. Q. I believe that's true. All right. Let me ask you to take a look at Exhibit 508.
13:34:05

Now, Mr. Schweigert, my only question about 508, this purports to be a unanimous consent of the Board of Directors at a special meeting, and it is dated as of September 12, 1998. My only question, sir, is: Does this refresh your recollection
13:34:37

about the documents you saw and whether any of them reflected the September 12, 1998 meeting of Mr. Thimmesch and Mr. O'Donnell? A. I think this mischaracterizes what this says. It says in

lieu of a special meeting, first of all. Q. Does this document -- did you see this document when you
13:34:54

testified -- at the time you testified this morning that you had seen nothing supporting the notion that there was a September 12 Founder's Warrants issuance, did you know this document existed? A. Yes, I did. MR. KAUP: Objection, mischaracterizes his prior
13:35:08

testimony, Your Honor. THE COURT: Overruled.

You can answer. THE WITNESS: Yes. I've seen this document many, many
13:35:14

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times. BY MR. BIRNBAUM: Q. Yeah, but when you testified this morning about all these

documents you reviewed and found nothing, did you know that this document existed? A. Q. Yes, I did. Okay. Did you know this document was prepared by
13:35:23

Visitalk's corporate counsel before Snell & Wilmer was ever hired? A. Q. I know it was prepared in November of 1998. My question, sir, is, it was prepared by the Bryan Cave law
13:35:34

firm, wasn't it? A. Q. A. Q. A. Q. I don't think I testified otherwise. Was it prepared by the Bryan Cave firm? I believe it was. Before Snell & Wilmer ever arrived on the scene? That's my understanding, yes. And does it reflect the fact that as of September 12, 1998,
13:35:45

Mr. Thimmesch and Mr. O'Donnell as the only directors of Visitalk got together and agreed upon the Founder's Warrants that you said you could find nothing to support? A. No, it does not. MR. KAUP: document. Objection, Your Honor, it misstates the
13:35:58

Further mischaracterizes his testimony. THE COURT: Overruled.
13:36:12

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BY MR. BIRNBAUM: Q. A. Q. What do you think this shows, Mr. Schweigert? I think this shows a back dating of documents. I see. Now, we'll let the Judge decide whether something
13:36:24

was permissibly or impermissibly backdated. You agree, do you not, that this document, prepared by Visitalk's counsel prior to Snell & Wilmer's arrival, shows that on September 12, 1998, Mr. Thimmesch and Mr. O'Donnell got together and decided, as the sole directors, to approve Founder's Warrants for themselves? A. No, I do not agree. MR. KAUP: document. THE COURT: I will decide what this document means. Okay. Very good. Objection, Your Honor, mischaracterizes the

13:36:44

MR. BIRNBAUM: BY MR. BIRNBAUM: Q.

13:36:53

Last subject, Mr. Schweigert. Regarding -- Mr. Kaup asked you a great deal about the

significance of these documents.

Let me be very precise.

I
13:37:10

want to ask you a question that you were asked in your deposition. You agree, do you not, sir, as the plaintiff's representative in this case, you agree that if Mr. Cardwell did not become a shareholder until September 15th, 1998, and did not become a director until September 18th, '98, then Snell & UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 30 of 47

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Wilmer did nothing wrong with respect to the Founder's Warrants? MR. KAUP: Your Honor. THE COURT: BY MR. BIRNBAUM: Q. One last question then, Mr. Schweigert. If you would, turn I think it does. Sustained.
13:37:39

Objection, calls for a legal conclusion,

to an exhibit that I think we have in front of you, that is -- let me find the number. Sorry, Your Honor. Exhibit 522. Did you see this document, sir, when you were going through the boxes of exhibits that you told us about? A. Q. Yes, I did. Okay. And did this document evidence to you that there
13:38:35 13:38:13

had, in fact, been a meeting on September 12, 1998? A. Q. Certainly not. I see. And then let me ask you to take a look at Exhibit This is a Release of Claims, a document
13:39:06

566, Mr. Schweigert.

executed by Mark Cardwell. Did -- was this document in the pile of papers that you reviewed as well? A. Q. Yes, it was. And did this document indicate to you that Mr. Cardwell was

not an officer or director of the company on September 12th, UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 31 of 47

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1998? A. Q. On September the 12th, yes, but he was a stockholder. I see. Does this document, in fact, include Mr. Cardwell's

statement that he was not a stockholder on September 12, 1998, despite what you just said? MR. KAUP: for itself. MR. BIRNBAUM: THE COURT: Go ahead. MR. KAUP: Your Honor, also, Mr. Schweigert wasn't This is impeachment now, Your Honor. Objection, Your Honor, the document speaks
13:39:40

I suppose it may qualify in that regard.
13:39:54

allowed to testify about who the shareholders were, so this isn't impeachment. MR. BIRNBAUM: Mr. Schweigert was allowed to testify
13:40:05

about going through all these documents and allegedly finding nothing that supported the existence of a meeting on September 12th without Mark Cardwell there. MR. KAUP: His last question went to whether there's

anything in here showing that he was a shareholder. Mr. Schweigert didn't testify to that. THE COURT: it. MR. BIRNBAUM: Your Honor, I'll shorten it, I'll This is going to be a long trial, isn't
13:40:23

withdraw it and let the document speak for itself. That's all I have of Mr. Schweigert. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 32 of 47
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THE COURT: MR. KAUP:

Is there any redirect? Yes, Your Honor, briefly. REDIRECT EXAMINATION

BY MR. KAUP: Q. Mr. Schweigert, going back to Exhibit 658, just to clarify,
13:40:58

is this the order that you referred to earlier during your direct examination relating to clarifying a portion of the Second Chapter 11 -- Second Amended Chapter 11 Plan of Visitalk? A. Q. Yes, it is. And you testified in response to Mr. -- you started to
13:41:22

testify in response to Mr. Birnbaum's questions, and he kind of cut you off, regarding the third line in paragraph B, referring to holders of unsecured claims subject to subordination pursuant to Section 510(b). As the trustee, or as the principal of the trustee of the Creditors' Trust, do you have an understanding as to the persons that language makes reference to? MR. BIRNBAUM: Objection, Your Honor, it calls for And the Court has already
13:42:03 13:41:43

expert opinion as to relevance.

sustained the objection to my question regarding interpretation of this. It speaks for itself. MR. KAUP: And Your Honor, I'm just asking for his Mr. Birnbaum
13:42:20

understanding, as the Trustee of the Trust.

opened the door on this whole line of testimony, Your Honor. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 33 of 47

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THE COURT: going to help me. BY MR. KAUP: Q.

I think his understanding is really not

The objection is sustained.

Mr. Schweigert, could you look back at Exhibit 656.

That's
13:42:37

the Second Amended Chapter 11 Plan. Are you there, sir? Yes, I am. Could you turn to page 18? This is one of the pages that Mr. Birnbaum did not discuss with you. But could you read for the Court the

13:43:01

language at the top of this page beginning with "in settlement"? A. Q. A. Page 18? Correct. In settlement of any claims against the Debtor in the form
13:43:23

of an executed release to be provided thereto, the Class A Interest Holders may receive, only in exchange for a formal release against the Debtor and all the Co-Proponents of such parties potential claims as a creditor and not on account of their status as a shareholder. Q. That's enough. Now, do you understand that those -MR. BIRNBAUM: please, Your Honor? Q. BY MR. KAUP: That's fine. Go ahead and read the rest of
13:43:52 13:43:43

Could we have the rest of the sentence,

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the sentence. A. Two, VTEC Warrant Units for each $10 invested in the

Debtor's Preferred Stock, and one Operating Subsidiary Warrant Unit in each Operating Subsidiary for each $20 invested in the Debtor's Preferred Stock. Q. And is it your understanding, sir, that, in fact, the
13:44:10

persons holding those claims classified in Class A, in fact, tendered those releases in exchange for the property that was to be transferred to them pursuant to this section? MR. BIRNBAUM: No. Objection, Your Honor. Setting
13:44:41

aside whether it's an opinion and whether it's relevant and whether it relates to cross-exam, this is a reference to documents that were specifically ruled on in limine and excluded by the Court. existing ruling. MR. KAUP: understanding. Your Honor, I'm just asking for his This is impermissible under the Court's
13:44:59

And it goes to the issue of whether, in fact,

these persons were being treated under this section of the -- of the Chapter 11 Plan of Reorganization. purporting to show those documents. We're not
13:45:14

But Mr. Birnbaum asked a

lot of questions to Mr. Schweigert about whether there were equity interests in this class, and showed a lot of definitions trying to imply that persons in Class 8 didn't hold claims. And I think Mr. Schweigert is certainly entitled on redirect to address whether, in fact, these persons in Class 8 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 35 of 47
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held claims and then received the consideration they were supposed. He opened the door to this. MR. BIRNBAUM: THE COURT: Your Honor --

The objection is sustained.
13:45:45

His understanding of what these paragraphs mean I think will not help me. With counsel's assistance I will

decide what the Plan means. MR. KAUP: And Your Honor, just to clarify, I wasn't

asking for his understanding of what this meant, but rather whether the consideration contemplated by this document was, in fact, transferred on account of those claims. personal knowledge about that issue. this line of questioning. MR. BIRNBAUM: That is precisely the matter that we The testimony of a purported
13:46:17 13:46:01

And he does have

And he opened the door to

ruled in limine to exclude.

witness and the documents that they believe might show this alleged transfer. The Court excluded it.

And incidentally, Your Honor, to refresh your recollection, excluded it because it was never timely produced. It was never properly disclosed. This is not even a This is precluded
13:46:36

cute way to run around the Court's order. testimony. Thank you. THE COURT: answer.

I've already ruled on it.

He can't
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MR. KAUP:

Your Honor, what you ruled on, to be clear,

is the admissibility of the underlying documents themselves. And first, the issue that gave rise to the documents being raised didn't come up until after their first expert witness testified on his cross-examination or examination during the deposition. And Your Honor, he -- Your Honor did not rule on the issue of whether Mr. Schweigert could testify about his understanding regarding whether the Debtor, Visitalk, performed on the plan. And that's all I'm asking him is, did -I'm going to say it again, Mr. Kaup, I am
13:47:32 13:47:13

THE COURT:

not interested in his understanding of what this all meant. MR. KAUP: BY MR. KAUP: Q. Mr. Schweigert, Mr. Birnbaum asked you your understanding
13:47:49

Understood, Your Honor.

about whether the Founder's Warrants had never been exercised. Do you recall he asked you that question? A. Q. Yes, I do. Based upon your review of Visitalk's documents, books and
13:48:18

records, have you seen anything which would demonstrate that the Founder's Warrants were ever actually issued to Peter Thimmesch and Michael O'Donnell? MR. BIRNBAUM: foundation. Objection, relevance, hearsay,

It calls for a legal conclusion and asks an expert
13:48:43

opinion as to what out-of-court documents that should never UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 37 of 47

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have been identified may show. MR. KAUP: THE COURT: THE WITNESS: Your Honor, I -I'll take the answer. No, I've never seen any documents that
13:48:53

indicates they were authorized to issue. BY MR. KAUP: Q. Mr. Birnbaum asked you whether you understand -- whether

you have any understanding about whether any investors ever brought a lawsuit based on the Founder's Warrants. recall that question? A. Q. Yes, I do. Do you have an understanding as to whether the Visitalk Do you
13:49:17

investors agreed they had claims? MR. BIRNBAUM: THE COURT: Objection, Your Honor, not only -13:49:32

Counsel, I don't understand this concept

of asking a question to a witness, what is your understanding of something. What I -- what I expect to receive from

witnesses like the one we currently have is some factual information about the case. believe is not very helpful. MR. KAUP: THE COURT: Your Honor -Please, let's stop asking people what they What he thinks about the case I
13:49:57

understand, and find out if they have factual information based on some good foundation for offering some testimony. MR. KAUP: Very well, Your Honor.
13:50:14

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BY MR. KAUP: Q. Mr. Schweigert, after you became the responsible officer of

the trustee of the Creditors' Trust, did you come to have knowledge about whether investors in Visitalk agreed they held claims? MR. BIRNBAUM: Objection, relevance, hearsay. And
13:50:41

Your Honor, it is an attempt to introduce precisely the matters that the Court has already excluded under the motion in limine through this guise of asking him what he came to learn. MR. KAUP: he asked -THE COURT: point. I don't care about open doors at this Mr. Birnbaum opened the door directly when
13:50:59

This is a bench trial. If this witness has some factual information, if he's

gone to courthouses and has looked for suits and couldn't find any, I'll listen to him. But what he's been told by somebody

13:51:12

else, what he has come to believe about some of this stuff, I'm not going to listen to it. MR. KAUP: And Your Honor, my point is, and what I can
13:51:35

get out of Mr. Schweigert is, he does have personal knowledge that the investors at issue here did, in fact, agree that they held claims against Visitalk. THE COURT: How could he know that unless there's some Which

document to reflect it, or somebody told him that? presents a problem.

What's the foundation that underlies what

13:51:54

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you're asking? MR. KAUP: It's documents, Your Honor, and I can

elicit that foundation from him. THE COURT: papers. MR. BIRNBAUM: Your Honor, they've been excluded. Let's get the documents out if they're
13:52:07

That's why he can't put on the documents. THE COURT: Are there any documents that you've got

that you can offer that will go to what you're asking? MR. KAUP: THE COURT: BY MR. KAUP: Q. Mr. Schweigert, could you look back at Exhibit 508, please? No, Your Honor. Then let's move on.
13:52:19

Do you recall Mr. Birnbaum asked you questions about this exhibit? A. Q. Yes, I do. Could you read the first sentence under the caption,
13:52:59

Unanimous Consent of the Board of Directors in Lieu of Special Meeting? A. The undersigned, being all of the directors of
13:53:10

Visitalk.com, Inc., an Arizona corporation, paren, the corporation, close paren, hereby consent in writing to the following resolutions, adopted without a meeting as permitted by Section 10-821 of the Arizona Revised Statutes, as amended. Q. This document does not indicate there was a meeting of UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 40 of 47
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Visitalk's Board of Directors regarding this subject on September 12, 1998, does it? MR. BIRNBAUM: THE COURT: BY MR. KAUP: Q. Does this document indicate that there was a meeting Objection, leading.

Sustained.
13:53:43

regarding the Founder's Warrants on September 12, 1998? MR. BIRNBAUM: itself. THE COURT: time. But the document says what it says, Mr. Kaup. MR. KAUP: questions. THE COURT: THE WITNESS: THE COURT: Thank you, sir, you may step down. Thank you, Your Honor. You may call your next witness. Your Honor, may I approach just a
13:54:00

Same objection, and it speaks for

I think there's a different objection this

13:53:53

Thank you, Your Honor.

No further

MR. BIRNBAUM:

moment before the next witness? Your Honor, as the Court is aware, under Rule 52 motions for judgment as a matter of law may be made at any time during the course of the proceeding. They are not commonly,
13:54:11

but occasionally made at the close of the opening statements, if the evidence as alleged by counsel is sufficient to allow the Court to rule as a matter of law. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 41 of 47
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Here we waited for the principal of the plaintiff to testify so that we could bring this matter to your attention. A.R.S. 12-2504 is an unambiguous statute. It And it
13:54:57

essentially codifies vast portions of the common law. says that in a case where you have multiple alleged

tortfeasors, if you settle with one or more, it reduces your claim against the remaining tortfeasors. Here, we have a series of tortfeasors, alleged, who have entered into agreements with the plaintiff totaling $176 million. Indeed, while the statute is self operating, we
13:55:23

did ask Mr. Schweigert, both here and in his deposition, whether those settlements were, in fact, good faith reasonable estimates of the value of the claims based on the damages allegedly caused by each of those other party defendants. He confirmed candidly, both here and previously, that he thought they, in fact, were. And has made that
13:55:44

representation to the Court, which led you to enter the judgments against those people. Under 12-2504, if you have a company which at most had raised from all sources ever $43 million, the damage claim -that's Mr. Schweigert's testimony -- the damage claim is somewhere between 17 and $25 million -- that's Mr. Kaup's statement on opening -- and you have conceded settlements totaling $176 million, the operation of the statute eliminates any damages that can possibly be assessed against Snell & UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 42 of 47
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Wilmer, or anyone else for that matter, but Snell & Wilmer is the party we care about today. Now, Your Honor, as you are well aware, each and every element of the plaintiff's claims -- negligence, reckless representation, aiding and abetting, as we laid out in the trial brief -- each and every one of those torts requires the legal and proximate causation and damages as an essential element of the claim. Based on the evidence you have received, there cannot be any damage as a matter of law against Snell & Wilmer, and we move for entry of judgment under A.R.S. 12-2504 on that basis, Your Honor. And I think this is the appropriate time to do it.
13:57:10 13:56:50

So thank you for allowing me to address it at this moment. THE COURT: MR. KAUP: THE COURT: know this was coming? MR. KAUP: No, Your Honor. It's a complete surprise.
13:57:41

Mr. Kaup. Your Honor -First let me ask you something. Did you

13:57:27

Never been briefed, never been disclosed, never been raised as a defense in this case. surprised by it. So I cannot speak to the merits of it, and I certainly will brief it if Your Honor so chooses. which was not disclosed. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 43 of 47 But it's a defense So, Your Honor, I'm completely

13:57:59

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THE COURT:

We've got to deal with the merits of it,

and we've got to deal with them sooner rather than later. Even if I were to grant this motion, it doesn't end the case, because it does not resolve the -MR. BIRNBAUM: THE COURT: Preference.
13:58:17

-- preference claim.

Is there any way that we could move on with the preference claim today, or are the witnesses that you've got lined up don't know anything about that, don't have anything to do with it? MR. KAUP: Your Honor, they don't. And the next
13:58:36

witness would have nothing to do with it.

And the witness that

may come on the back end of it, depending how long the rest of it goes, really wouldn't be able to speak to it either. THE COURT: Okay. I think this is a sufficiently
13:58:49

serious matter that the best way to deal with it is to turn all of you loose right now and send you home to deal with it. I will see you all at 8:30 tomorrow morning. Is there a way that -- not being in my own bailiwick it's a little less convenient to deal with some things than if I were home. Let's suspend right now and turn you all loose. And
13:59:24

And

would you -- would you please do your best to get something filed by 4:30 this afternoon in writing? Now, I realize that's kind of a tall order. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 44 of 47 Do the
13:59:51

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best you can so that I have something to look at over the evening. morning. And then I will hear you some more at 8:30 tomorrow If you discover more over the evening, you know, I'm not going to cut you off on the But please
14:00:17

fine, I'll listen to it.

basis of what you got to me by 4:30 this afternoon. get me something by 4:30. MR. BIRNBAUM: one of those work? THE COURT: I'm sorry?

Judge, how about fax or e-mail, either

MR. BIRNBAUM: you this afternoon? THE COURT: MS. JOHNSON:

Can we fax or e-mail the pleading to

14:00:27

How can they do it best? They can fax it, but if you just file it

like you file anything else we can pull that up. THE COURT: The electronic filing as far as I know
14:00:40

will get the stuff to us instantly. MR. BIRNBAUM: it instantly. I do want to just take one moment so that -- because we're going to address the substance of this issue -- and refer to this claim that they didn't know anything about this. The issue of the application of the Uniform Contribution Among Tortfeasors Act is not only preserved going I think back to the Answer, it's not only in the pretrial, but you may remember, Your Honor, they moved -- they moved to try UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 45 of 47
14:01:12 14:00:53

Your Honor, we'll do that.

I will do

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to preclude this defense.

And the Court ruled, no, it's in,

not for nonparties, but for these very people who were parties in the case. THE COURT: I don't disagree with you, Mr. Birnbaum.
14:01:30

But you and I both recognize, because you've said it, these motions don't usually come up at this point in the trial. want an opportunity for counsel to think about it. MR. BIRNBAUM: with the procedure. Your Honor, I have no problem at all I

I just wanted to point out that the notion
14:01:48

of surprise, it may be surprising because they don't come often at this point in the case. But that's because the first

witness does not usually get up and concede all of the elements of the statute. And that's what happened here. It's either going to be a long trial or a
14:02:04

THE COURT: short trial.

MR. BIRNBAUM: THE COURT:

Yes, sir. And we'll

I will hear from you by 4:30.

see you all here at 8:30 tomorrow morning. MR. KAUP: Thank you, Your Honor. Thank you, Judge.
14:02:12

MR. BIRNBAUM:

(Proceedings concluded at 2:02 p.m.)

-oOo-

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 46 of 47

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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 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 484 Filed 03/17/2008 Page 47 of 47 s/Candy L. Potter________ Candy L. Potter, RMR, CRR 2008. I, CANDY L. POTTER, do hereby certify that I am duly appointed and qualified to act as Official Court Reporter for the United States District Court for the District of Arizona. I FURTHER CERTIFY that the foregoing pages 92 through 138 constitute a full, true, and accurate transcript of all of that portion of the proceedings contained herein, had in the above-entitled cause on the date specified therein, and that said transcript was prepared under my direction and control. DATED at Phoenix, Arizona, this 3rd day of March, C E R T I F I C A T E