Free Response to Motion - District Court of Arizona - Arizona

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Christopher R. Kaup, Esq. State Bar No. 014820 Jeffrey A. Sandell, Esq. State Bar No. 020658
THIRD FLOOR CAMELBACK ESPLANADE II 2525 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016B4237 TELEPHONE: (602) 255-6000 FACSIMILE: (602) 255-0103

Attorneys for Biltmore Associates, Trustee of the Visitalk.com Creditors' Trust

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA In re: Case No. CV 02-2405 PHX HRH BILTMORE ASSOCIATES, as Trustee for the Visitalk Creditors' Trust, Plaintiff, vs. RESPONSE TO MOTION TO EXCLUDE TESTIMONY OF MICHAEL WILLIAMS AND CERTAIN DOCUMENTS AND, IN THE ALTERNATIVE, MOTION TO ALLOW TESTIMONY OF MICHAEL WILLIAMS AND ADMISSION OF CERTAIN DOCUMENTS [Oral Argument Requested] Defendants.

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PETER THIMMESCH and CYNTIHIA THIMMESCH, husband and wife; MICHAEL O'DONNELL and MARSHA O'DONNELL, husband and wife, et al.,

Biltmore Associates, as Trustee for the Visitalk Creditors' Trust ("Plaintiff" or the "Trust"), hereby responds to the Motion to Exclude Testimony of Michael Williams and Nondisclosed Documents (the "Motion") filed by Snell & Wilmer, L.L.P. ("S&W"). The Court should deny the Motion and permit the Trust to use the documents at issue and call Mr. Michael Williams as a witness in the trial in this case. In the event the Court is not

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inclined to deny the Motion, at this time, without a motion from Plaintiff to allow the testimony of Mr. Williams and the admission of the documents at issue, the Plaintiff hereby moves for such relief. This Response and Motion is more fully supported by the attached Memorandum of Points & Authorities. RESPECTFULLY SUBMITTED this 19th day of December, 2007. TIFFANY & BOSCO, P.A. By: Christopher R. Kaup, No. 014820 Christopher R. Kaup, Esq. Jeffrey A. Sandell, Esq. Third Floor Camelback Esplanade II 2525 East Camelback Road Phoenix, Arizona 85016-4237 Attorneys for Plaintiff

MEMORANDUM OF POINTS & AUTHORITIES The documents at issue are certain agreements executed by certain investors in Visitalk (the "Documents") after all facts giving rise to Plaintiff's claims occurred. They are only relevant to the insolvency and deepening insolvency damages calculations. Mr. Williams' testimony is relevant to the authentication of the Documents and Visitalk's Second Amended Plan and other documents filed with the Bankruptcy Court and the

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terms of that Plan. Counsel for Plaintiff disclosed the Documents to S&W promptly after learning of their relevance and receiving them from a nonparty, Visitalk Capital Corporation. There was and can be no prejudice to S&W because they have had the Documents for almost six months and will have had them for close to nine months before the trial in this action is set to commence. Moreover, they have known about the

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testimony of Mr. Williams for almost five months and will have known about him for close to seven months as of the start of trial. S&W failed to disclose in their original Disclosure Statement, their Supplemental Disclosure Statement or any document filed with the Court prior to the report of its expert David Weekly that, under its new theory, certain claims should not be included in the calculation of insolvency and damages based upon Visitalk's deepened insolvency even

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though S&W had advised Visitalk about the existence of such claims and the Bankruptcy Court in Visitalk's Chapter 11 case had authorized the Trust to make payments to persons holding such claims. See S&W Disclosure Statement, dated June 11, 2004, attached hereto as Exhibit "1" & S&W Supplement to Disclosure Statement, dated March 15, 2005, attached hereto as Exhibit "2." S&W also failed to disclose any information regarding its new theory regarding the insolvency and damages calculations in its Answers to Plaintiff's Interrogatories. See S&W's Answer's to Interrogatories, dated

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April 5, 2005, attached hereto as Exhibit "3." It was not until Counsel undersigned received and reviewed the expert report of Mr. Weekly in March of 2007 and deposed Mr. Weekly on May 25, 2007, that S&W's new theory regarding the application of FASB 5 and its requirement that claims of investors must be "probable and measurable" (an accounting rule commonly used in the preparation of audited financial statements) to the insolvency and damages calculations

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was or could have been manifest to Plaintiff. Promptly thereafter Counsel undersigned attempted to locate materials bearing on S&W's newly disclosed theory of measuring insolvency and damages in this case. Mr. Williams, President of Visitalk Capital

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Corporation, informed Counsel for Plaintiff in mid-June, 2007 that the vast majority of Visitalk Series A, B and C investors had signed agreements relating to their claims. Mr. Williams then provided copies of those agreements ­ included as part of the Documents ­ to Counsel undersigned. As soon as the Documents were bates labeled (VT 022384 ­

023625), copied and scanned, Plaintiff disclosed the Documents through a "supplemental disclosure" in letter form to S&W's counsel, Tim Thomason, with a CD containing all

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such documents in electronic form.

See Letter from Christopher R. Kaup to Tim

Thomason, dated June 22, 2007, attached hereto as Exhibit "4." S&W's assertions that Plaintiff never identified the Documents as potential exhibits and never supplemented its responses to interrogatories to include the Documents are simply false. timely. The Scheduling Order, dated May 12, 2004, did not modify the dates for They were disclosed to S&W and that disclosure was

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disclosure and identification of documents provided by Rule 26(a)(3) & (e). Indeed, the Scheduling Order provides that "[d]iscovery shall be conducted in accordance with Rules 26 through 37 . . ." Nothing in the Scheduling Order or in Rule 26 set a bar date by which Plaintiff was required to obtain and disclose documents bearing on S&W's newly disclosed theory of damages identified in the Weekly expert report and Mr. Weekly's deposition testimony on May 25, 2007. Nothing in Rule 26 or the Scheduling Order bars

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the admissibility of the Documents because the Documents were disclosed to S&W through the Supplemental Disclosure Letter promptly after receiving, copying and

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scanning them and prior to the deadlines and within the time frames in Rule 26(a)(3) & (e). In addition, the disclosure of the Documents and the testimony of Mike Williams to authenticate the Documents and documents filed in the Bankruptcy Court and address the terms of the Second Amended Plan to support the expert report of Renee Jenkins in rebuttal to the expert testimony of David Weekly were clearly timely, pursuant to Rule

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26(a)(2)(C), because they were made more than 90 days prior to the trial date and the Documents were produced to S&W within 30 days after the testimony of Mr. Weekly at his deposition on May 25, 2007. S&W's allegation that Counsel undersigned "served as counsel for the debtor in the Visitalk Bankruptcy proceeding" in an attempt to assert knowledge of the Documents is grossly and knowingly misleading. It falsely implies Plaintiff's lawyer was the general bankruptcy counsel for Visitalk, as the Debtor and Debtor-in-Possession in the

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Bankruptcy Case, and charged with knowledge regarding all transactional matters of that case. The record reflects that Tiffany & Bosco, P.A., and Mr. Kaup served only as Court appointed Special Counsel to handle the litigation at issue in this case. S&W also attempts to falsely imply that Biltmore knew that Visitalk's investors had signed agreements in which they agreed they held claims against Visitalk by attaching one of the Documents, a "Warrant Acceptance and Effective Delivery

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Agreement" to the Motion, which is signed by the Trust. However, that agreement is not one of the "Section 5.9 Implementation Agreements" (the "Implementation Agreements") and "Execution, Warrant Acceptance And Effective Delivery Agreements" (the

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"Execution Agreements") containing provisions regarding the claims of the investors. Compare copies of examples of the Implementation Agreements and the Execution Agreements, attached hereto as Exhibit "5" and Exhibit "6", respectively, with Exhibit "A" to S&W's Motion. Plaintiff did not sign the Implementation Agreements or the Execution Agreements and has never had possession of copies of any such documents prior to June of 2007. See Declaration of Heather Litton, attached hereto as Exhibit "7."

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Ms. Jenkins identified and addressed these Implementation Agreements or the Execution Agreements in her Rebuttal and Supplemental Report, dated July 18, 2007. Rule 37(c) is not applicable because Plaintiff did seasonably disclose the Documents and supplement its prior discovery responses through the letter with the enclosed CD to Tim Thomason on June 22, 2007. Accordingly, the Motion, as to exclusion of the Documents, must be denied. In the event the Court is not inclined to deny the Motion, at this time, the Court should consider and grant Plaintiff's Motion to

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allow it to use the Implementation Agreements and the Execution Agreements at trial for the reasons set forth above. S&W never objected to the testimony of Mr. Williams or the disclosure of the Documents to Counsel for Plaintiff prior to the filing of the Motion except for one statement regarding the Documents during oral argument on the Motion for Summary Judgment. Plaintiff certainly would have agreed and remains agreeable to allowing the

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deposition of Mr. Williams even though the discovery cutoff date has passed. There certainly has not been and would not be any prejudice to S&W as the trial date is still almost three months away.

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The Ninth Circuit has articulated the elements which this Court must consider in deciding whether to permit a party "to call a witness who does not appear on the witness list." Those are: (1) the prejudice or surprise of the party against whom the excluded witness testifies; (2) the ability of that party to cure the prejudice; (3) the extent to which calling the witness would disrupt the orderly and efficient trial; and (4) bad faith or willfulness in failing to comply with the court's order. Price v. Seydel, 961 F.2d 1470, 1471 (9th Cir.1992) (citations omitted). Amarel v. Connell, 102 F.3d 1494, 1515 ­ 16 (9th 1997); Reno Racing Assoc., Inc., v. 1139 ­ 40 (9th Cir. 2006). Here, Mr. Williams will not testify regarding the facts relating to the substantive elements of the causes of action against S&W. Rather, his testimony will only serve to authenticate documents on record with the Bankruptcy Court in the Visitalk case in which S&W was a creditor and party and was served with all notices and documents as required by the Bankruptcy Rules and the Implementation Agreements and the Execution Agreements. Those documents provide support for the insolvency and damages

calculation for the expert testimony of Renee Jenkins. There is certainly no prejudice to S&W relating to testimony to authenticate documents on file with the Bankruptcy Court because S&W was a creditor and party to that case and was served with and charged with knowledge regarding those documents. There is no real surprise or prejudice to S&W from allowing Mr. Williams to testify regarding the authentication of the Implementation Agreements and the Execution Agreements. Any prejudice could easily be cured by S&W. As set forth more fully above, those documents were provided to Counsel for S&W as soon as possible after receiving them from nonparty Visitalk Capital

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Corporation. The production of the Documents was timely and consistent with the Federal Rules of Civil Procedure. S&W could have conducted a deposition of Mr. Williams at any time after the filing of his Declaration. Plaintiff would not have objected to any request to do so. S&W may still depose Mr. Williams on the authentication of the documents at issue. Plaintiff is agreeable to such a deposition. That deposition will be short and limited in nature and will not lead to any additional discovery because that testimony will only go to the authentication of certain documents considered by Plaintiff's expert Renee Jenkins. Therefore, it is clear that S&W will suffer little to no prejudice and any such prejudice will be easily cured if Mr. Williams is permitted to testify at trial. Calling Mr. Williams as a witness in this case will not disrupt an orderly and efficient trial. His testimony will be on limited topics and quite quick. There certainly was no bad faith or willfulness on the part of Plaintiff regarding the disclosure of Mr. Williams. The Implementation Agreement and the Execution Agreement were obtained by Plaintiff's Counsel and disclosed to S&W promptly after learning about and understanding S&W's new theory that the claims of Visitalk investors, according to the testimony of their expert David Weekly, should not be included in the insolvency and damages calculations based on GAAP. The testimony of Mr. Williams only became necessary at that point to authenticate those documents and certain documents filed with the Bankruptcy Court and to address the terms of Visitalk's Second Amended Chapter 11 Plan. Clearly, the standard articulated by the Ninth Circuit for allowing a witness not on a pretrial witness list is satisfied as to Mike Williams. Therefore, the Court should deny the Motion and permit Mr. Williams to testify on the limited matters set forth herein. In

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the alternative, the Court should grant Plaintiff's motion to allow the testimony of Mr. Williams. CONCLUSION There is no basis to preclude Plaintiff from using the Implementation Agreements and the Execution Agreements at trial. Plaintiff promptly located and disclosed those documents after the deposition of S&W's expert witness David Weekly on May 25, 2007 addressing S&W's theory regarding the insolvency and damages calculations. In

addition, allowing Mr. Williams to testify will not cause any cognizable prejudice to S&W which can not be easily cured. That testimony will not disrupt the trial and Plaintiff has not acted in bad faith. Accordingly, the Motion should be denied. In the event the Court believes it can not allow the testimony of Mr. Williams and the use of the Implementation Agreements and the Execution Agreements absent an affirmative motion, Plaintiff hereby moves and requests that the Court grant it leave to use the referenced documents and allow Mr. Williams to testify on the limited matters set forth herein. RESPECTFULLY SUBMITTED this 19th day of December, 2007. TIFFANY & BOSCO, P.A. By: Christopher R. Kaup, No. 014820 Christopher R. Kaup, Esq. Jeffrey A. Sandell, Esq. Third Floor Camelback Esplanade II 2525 East Camelback Road Phoenix, Arizona 85016-4237 Attorneys for Plaintiff

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CERTIFICATE OF SERVICE Biltmore Associates v. Peter Thimmesch, et al. Case No. CV-02-2405-PHX-HRH I hereby certify that on December 19, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Gary L. Birnbaum, Esq. Timothy J. Thomason, Esq. Scot L. Claus, Esq. Mariscal, Weeks, McIntyre & Friedlander, P.A. 2901 North Central Avenue, Suite 200 Phoenix, AZ 85012-2705 I hereby certify that on the same date, I caused the attached document to be served via U.S. Mail upon: The Honorable H. Russell Holland United States District Court 222 West 7th Avenue, No. 54 Anchorage, AK 88513

/s/ Lauri Andrisani

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