Free Memorandum - District Court of Arizona - Arizona

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Gary L. Birnbaum (#004386) [email protected] Charles S. Price (#006197) [email protected] Timothy J. Thomason (#009869) [email protected] Scot L. Claus (#14999) [email protected] MARISCAL, WEEKS, MCINTYRE & FRIEDLANDER, P.A. 2901 North Central Avenue, Suite 200 Phoenix, Arizona 85012-2705 Phone: (602) 285-5000 Fax: (602) 285-5100 Attorneys for Defendant Snell & Wilmer, LLP

9 IN THE UNITED STATES DISTRICT COURT 10 FOR THE DISTRICT OF ARIZONA 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 In a trial without a jury, the Court may at any time find against a party on a particular issue and enter judgment as a matter of law against that party. See Rule 52(c), Fed.R.Civ.P. In connection with Rule 52, the Advisory Committee has noted that the Rule "authorizes the Court to enter judgment at any time that it can appropriately make a dispositive finding of fact on the evidence." Advisory Committee Note to the 1991 Amendment to Rule 52. For example, in one recent case, the district court granted judgment as a matter of law to the plaintiff under Rule 52(c) after the pretrial conference when it became clear that the no material facts concerning the relevant issue were in dispute. See Greater Los Angeles v. Jones,
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BILTMORE ASSOCIATES, as Trustee for the Visitalk Creditors' Trust, Plaintiff, v. PETER THIMMESCH, et al., Defendants.

CASE NO. CIV 02 2405 PHX HRH MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SNELL & WILMER'S MOTION FOR JUDGMENT AS A MATTER OF LAW (ON ALL NON-PREFERENCE CLAIMS)

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213 F.Supp. 2d 1110 (C.D. Cal. 2002) in which the court cited the Ninth Circuit's holding in Portsmouth Square, Inc. v. Shareholders Protective Committee, 770 F. 2d 866, 869 (9th Cir. 1985) ("if the pretrial conference disclosed that no material facts are in dispute and that the undisputed facts entitle one of the parties to judgment as a matter of law, a summary disposition of the case conserves scarce judicial resources"). In this case, the testimony of Plaintiff's representative Vernon Schweigert (as well as the comments of Plaintiff's counsel during opening statement) establish as a matter of law that Plaintiff's claims against Snell & Wilmer cannot be sustained. A.R.S. § 12-2504 is casedeterminative. I. A.R.S. § 12-2504 The principles of comparative negligence applicable in Arizona are codified in Arizona's version of the Uniform Contribution Among Tortfeasors Act ("UCATA"). Among the key provisions of the Act is A.R.S. 12-2504 which establishes the "credit" that must be applied to the claims against a tortfeasor upon settlement of the claims of the same plaintiff against other alleged tortfeasors. A.R.S. § 12-2504 provides: If a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death both of the following apply: 1. It does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide, but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant or in the amount of the consideration paid for it, whichever is the greater. 2. It discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor. (emphasis supplied). In this case, the statute is applicable and controlling.1
The suggestion by Plaintiff's counsel that the application of UCATA to this case comes as a surprise (if that was the intent of counsel's comment) is baseless. Comparative negligence is properly preserved as a defense in the Joint Pretrial Statement. Further, UCATA issues have been raised by motion and ruled upon by the Court. Indeed, the Court specifically confirmed the application of comparative negligence with respect to the claims against various parties who were previously named as Defendants in this case. The settlements referred to in
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II.

THE JUDGMENTS DEFENDANTS.

PREVIOUSLY

ENTERED

AGAINST

OTHER

Mr. Schweigert, the Plaintiff's representative in this case, testified on the first day of trial to a series of settlements entered into by the Plaintiff (under his direction) with various individuals initially named as defendants in this case. Specifically, Mr. Schweigert confirmed the existence of the following settlements involving the entry of a stipulated judgment in consideration for a covenant not to execute on the personal assets of the settling defendants: Ray Gaston: Mark Cardwell: Cynthia Thimmesch: $42 million $25 million $55 million

Michael and Marsha O'Donnell: $55 million The judgments appear (or are reflected in) Exhibits 377, 378, 381, 383, and 388, all of which are in evidence. The settlement figures are approximate. Nevertheless, they total approximately $177 million. Mr. Schweigert further confirmed that the settlements were in fact "fair and

reasonable" reflections of the amount of damage caused by each settling defendant to Visitalk. While a transcript of the first day of trial is not yet available, Mr. Schweigert's testimony paralleled that of his deposition. Q. And in each of those cases, in your view, the number that is reflected in the settlement is a fair and reasonable estimate of the amount of damage caused by the settling defendant to Visitalk. That is correct. It's a number they've agreed to. And you believe that that number is a fair and reasonable reflection of the amount of damage that they caused to Visitalk? Yes, I do.

A. Q.

A. 24 25 26

(Deposition of Vernon S. Schweigert, June 26, 2006 at 97:25-98:9.)
Section II, infra, all relate to individuals who were previously named as defendants and who, as Mr. Schweigert confirmed, were directors, officers, and/or employees of Visitalk.

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The Plaintiff also acknowledged in opening statement that the total damages claimed in connection with the failure of Visitalk is between approximately $17-$25 million. Further, Mr. Schweigert confirmed that the total funding of Visitalk, including all contributions from all sources and all series of investments, was approximately $43 million. III. THE APPLICATION OF THE LAW TO THE FACTS REQUIRES ENTRY OF JUDGMENT AS A MATTER OF LAW. The application of the controlling statute to the undisputed facts of this case is not complex. Mr. Schweigert, during his testimony, candidly conceded the following dispositive facts: The Plaintiff, Biltmore Associates, is asserting or has asserted claims against various parties (alleged joint tortfeasors) for the same injury; Settlements with various of those alleged joint tortfeasors total more than $176 million; The total capital raised by Visitalk from any source is approximately $42 million; According to Plaintiff's counsel, the total damages alleged against Snell & Wilmer are $17-$25 million; The settlements entered into by Visitalk are precisely the type of settlement contemplated by the set-off/credit provision of A.R.S. § 122504. In sum, Mr. Schweigert admitted all of the facts necessary to establish the applicability of A.R.S. § 12-2504 and the fact that no cognizable damage claim can be asserted against Snell & Wilmer. Stated simply, the Plaintiff has already obtained statutory "recoveries" equal to more than $100 million in excess of the damages allegedly caused by Snell & Wilmer.

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1 2 3 Aside from the preference claims that remain, Plaintiff's claims in this case are based 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Even before the statute, the common law was that a settlement by one of several tort-feasors entitled the non-settling defendant to have the settlement reduce the plaintiff's damages even if the jury later exonerated the settlement defendant [internal citations omitted]. The reason is rather obvious. A plaintiff is entitled to made whole in damages, and that is all. Nor should a plaintiff be allowed to be compensated for damages which exceed the injuries suffered.
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IV.

DAMAGES ARE AN ESSENTIAL ELEMENT OF ALL OF PLAINTIFF'S NONPREFERENCE CLAIMS.

upon negligence, negligent misrepresentation, and aiding and abetting breaches of fiduciary duty. It is axiomatic that each of these claims requires both causation and damages. Absent legally cognizable damages, the Plaintiff's claims fail as a matter of law. A.R.S. § 12-2504 unambiguously confirms the absence of a cognizable damage claim against Snell & Wilmer in this case. V. ARIZONA CASE LAW PROVIDES GUIDANCE APPLICABILITY OF UCATA TO THIS CASE. REGARDING THE

While A.R.S.. § 12-2504 is clear in its purpose and operation, there is interpretive case law that supports the application of the statute in circumstances such as those presented here. In construing the application of A.R.S. § 12-2504, the Arizona Court of Appeals recently recognized: When a defendant who is jointly liable for damages to a plaintiff enters into a settlement agreement with that plaintiff, the amount of that settlement is subtracted from the remaining joint tortfeasors' award. Dawson v. Withycombe, 215 Ariz. 399, 163 P.3d 1034, 1064 (Ct. App. 2007). The rationale behind the application of the statute is not difficult to comprehend. Indeed, as the Arizona Court of Appeals recognized in Hall v. Schulte, 172 Ariz. 279, 836 P.2d 989 (Ct. App. 1992):

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Id. at 284, 836 P.2d at 994.2 VI. CONCLUSION. For the foregoing reasons, Defendant Snell & Wilmer is entitled to judgment as a matter of law on all of Plaintiff's non-preference claims. "Damages" are an essential element of each of Plaintiff's claims. UCATA establishes that the Plaintiff in this case can only assert damage claims against Snell & Wilmer to the extent that any damage claim remains after reduction for settlements previously achieved. Here, the entire claim is $17-$25 million, the entire capitalization of Visitalk was approximately $43 million, and the settlements to date total approximately $176 million. In short, no cognizable damage claim remains. RESPECTFULLY SUBMITTED this 3rd day of March, 2008. MARISCAL, WEEKS, McINTYRE & FRIEDLANDER, P.A.

By: s/ Gary L. Birnbaum Gary L. Birnbaum Timothy J. Thomason Charles S. Price Scot L. Claus 2901 N. Central Avenue Suite 200 Phoenix, Arizona 85012-2705 Attorneys for Defendant Snell & Wilmer, LLP

Other courts, in other contexts, and applying the law of other states, have differed on whether credit/set-off provisions like A.R.S. § 12-2504 are ambiguous. The Alaska Supreme Court has found the analogous Alaska statute to be unambiguous in its application to consent judgments. See Tommy's Elbow Room, Inc. v. Kavorkian, 754 P.2d 243 (Alaska 1988). Applying California law, the Ninth Circuit reached a different conclusion in a case where the "good faith" nature of the settlement was in issue. See FSLIC v. Butler, 904 F.2d 505 (9th Cir. 1990) (applying California law). In this case, the "good faith" of the settlement is not in issue. Mr. Schweigert confirmed this fact in his testimony and confirmed the reasonableness of the amount of each stipulated judgment. Furthermore, each judgment was approved by the district court, in at least one case (Cynthia Thimmesch) after the court had expressly required the Plaintiff to provide a basis for the computation of the judgment amount. In these circumstances, application of A.R.S. § 12-2504 should not be subject to serious debate.

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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 26 By: s/ Lori Mandell

CERTIFICATE OF SERVICE Biltmore Associates v. Peter Thimmesch, et al. (Case No. CV '02-2405-PHX-HRH) I hereby certify that on March 3, 2008, I electronically transmitted the attached document(s) to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Christopher R. Kaup [email protected] Robert Royal [email protected] Gregory W. Seibt [email protected] Tracy C. Morehouse [email protected] Tiffany & Bosco, P.A. Third Floor Camelback Esplanade II 2525 East Camelback Road Phoenix, Arizona 85016-4237 Special Counsel for the Plaintiff I hereby certify that on March 3, 2008, I caused the attached document to be served by first class mail on the following, who are not registered participants of the CM/ECF System: Peter Thimmesch 11329 Stonehouse Place Potomac Falls, Virginia 20165-5123 Defendant Pro Se

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