Free Statement - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 Plaintiff, 14 v. 15 PETER THIMMESCH, et al., 16 Defendants. 17 18 Defendant Snell & Wilmer, LLP ("Snell & Wilmer"), by and through undersigned 19 counsel, for its Statement of Undisputed Facts, hereby states as follows: 20 I. 21 1. 22 23 would allow computer users to place long distance telephone and video conference calls using 24 25 hereto, (7-19-06) at 286:5-287: 3.) 26 the internet. (Deposition of Michael O'Donnell, ("O'Donnell Depo.") Exhibit "A" attached VISITALK'S BACKGROUND. Visitalk.Com, Inc. ("Visitalk") was formed in 1998 by Peter Thimmesch and (Assigned to the Honorable H. Russell Holland) 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 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA BILTMORE ASSOCIATES, as Trustee for the Visitalk Creditors' Trust, CASE NO. CIV 02 2405 PHX HRH STATEMENT OF UNDISPUTED FACTS

Michael O'Donnell to provide a static internet directory. Among other things, such a directory

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2.

Visitalk provides those same products and services today. (Exhibit "B" attached

hereto, portion of Visitalk's current web page). II. VISITALK'S BANKRUPTCY: 3. Like hundreds of aspiring ".com" entities that were dependant on investor

funding in their early stages, Visitalk had financial problems when the .com "bubble" burst in April of 2000. (Deposition of Allan Kaplan, ("Kaplan Depo."), Exhibit "C" attached hereto, (11-23-05), at 191:24-193: 21.) In or around November of 2000, Visitalk filed a petition for bankruptcy protection in case No. 00-13035-PHX-RTB (the "Visitalk Bankruptcy"). (A copy of the petition is attached hereto as Exhibit "D"). 4. A trustee was never appointed in the Visitalk bankruptcy. Rather, Visitalk.Com,

Inc. remained a debtor in possession during the pendency of the Visitalk bankruptcy. 5. In November 2002, Visitalk initiated the present proceeding against Snell &

Wilmer, among others. 6. Biltmore Associates, as trustee for the Visitalk creditors' trust, has now asserted

claims against Snell & Wilmer, and others, as the purported assignee of Visitalk's claims against third parties. (See Bankruptcy Court Order filed August 27, 2004, attached hereto as Exhibit "E"). However, not a single Post-Petition Operating Report identified any shareholder "contingent claims" as constituting a pre-petition liability of Visitalk. See, e.g. Monthly Operating Reports attached hereto as Exhibit "V". 7. On June 22, 2004, Visitalk submitted a "Second Joint Plan of Reorganization"

(the "Plan") in the Visitalk bankruptcy. (Exhibit "F" attached hereto.) The Plan purported to select a "creditor's trust", to which all "causes of action" held by the debtor would be transferred to as of the effective date in the plan. On August 27, 2004, the bankruptcy court approved the Plan. (Bankruptcy Court Order, Exhibit "E".) 8. The Plan states: In his or her capacity as the representative of the estate, the creditor's Trustee will be the successor-in-interest to the
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Debtor with respect to the Causes of Action. The Creditor's Trustee will hold all right, title and interest in and to the Causes of Action on behalf of all beneficiaries of the Creditor's Trust and will pay from the Creditor's Trust all ordinary and necessary costs of protecting, preserving, investigating and pursuing the Causes of Action. (Exhibit "F" attached hereto at p. 36, ¶ (f).) The Plan further defines the "causes of action" as meaning: All claims and causes of action that are property of the estate or belong to the Debtor, including but not limited to . . . the pending district court litigation against former directors and officers, former counsel for Debtor (Snell & Wilmer), former accountants and the pending adversary proceedings in this case. (Exhibit "F" attached hereto, Appendix A, Definitions at ¶ 24.) 10. The creditors' trust chosen by the plan is the present plaintiff ­ Biltmore

Associates. The creditor's trust and Biltmore Associates are and always have been wholly unrelated to Visitalk. (Deposition of Vernon Schweigert, ("Schweigert Depo."), Exhibit "G" attached hereto, (6-26-06) at 79: 4-22.) 11. Biltmore Associates never had any attorney/client or other relationship with

Snell & Wilmer during its representation of Visitalk. Rather, Biltmore's sole role in the Visitalk bankruptcy was to act as a third party assignee of all causes of action held by Visitalk, including the present action. Biltmore Associates' principal, Verne Schweirgert, confirmed during deposition testimony that Biltmore Associates claims to be the real party in interest in this litigation as a result of the purported assignment of the causes of action. (Id. at 74:1475:11). III. FOUNDERS' WARRANTS: 12. The law firm of Bryan Cave, P.A. ("Bryan Cave") initially acted as primary

outside counsel for Visitalk. In particular, Bryan Cave represented Visitalk in connection with its offering of privately placed securities in 1998 and 1999. (Deposition of Joseph Richardson,

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("Richardson Depo."), Exhibit "H" attached hereto, (6-21-06) at 25:21-26: 2; Deposition of Steven Best, ("Best Depo.") Exhibit "I" attached hereto, (1-21-05), at 21: 15­17.) 13. Due to Visitalk's unhappiness with Bryan Cave's performance, Snell & Wilmer

was retained by Visitalk in June of 1999. (Deposition of Peter Thimmesch, ("Thimmesch Depo.) Exhibit "J" attached hereto, (4-18-06), at 386:16-19; Best Depo., Exhibit "I", (1-2105), at 20:10-25; Engagement letter to Stephen A. Best from Snell & Wilmer, dated June 29, 1999, Exhibit "K" attached hereto.) 14. Months before Snell & Wilmer was retained, Bryan Cave helped create a

document entitled "Unanimous Consent of the Board of Directors in Lieu of Special Meeting". That document reflects that as of September 12, 1998, Visitalk's Board of Directors authorized the issuance to Messrs. Thimmesch and O'Donnell of 7,650,000 warrants to purchase Visitalk common stock. Richardson Depo.", Exhibit "I", (8-28-06), at 59:7-60: 25. A copy of the Unanimous Consent of the Board of Directors in Lieu of Special Meeting is attached hereto as Exhibit "L", (Exhibit "9" to Richardson Depo.).) 15. Former Visitalk General Counsel Steve Best testified that, after Snell & Wilmer

was retained in mid-1999, he asked the firm to look at several securities issues. Snell & Wilmer discovered numerous problems with Visitalk's securities that arose while Bryan Cave was Visitalk's counsel. It was Snell & Wilmer that pointed out potential problems with stock warrants Visitalk previously issued Messrs. Thimmesch and O'Donnell. (Best Depo. Exhibit "I", (9-9-05), at 178:11-15.) 16. As of November 1999, Visitalk's Board of Directors consisted of Peter

Thimmesch, Michael O'Donnell, Mark Cardwell, Allen Kaplan and Jeffrey Hirschberg. All five members of the Board of Directors of Visitalk agreed on the resolutions of the potential problems with the Founders' Warrants at a board meeting on November 24, 1999 during an Executive Session. (Id., (1-21-05), at 33:3-6.).

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17.

No Snell & Wilmer lawyer attended the Executive Session during which the

resolution regarding the Founders' Warrants was reached. Instead, two other law firms ­ Gibson Dunn & Crutcher and Lynn Stodghill ­ were added via conference call to the Executive Session. A thorough discussion of the resolution of the Founders' Warrants

occurred during the Executive Session. (Id. at 33:7-10; Minutes of November 24 1999 Board Meeting, ("Baord Minutes"), Exhibit "M" attached hereto; Deposition of Peter Thimmesch, Exhibit "J" (4-18-06), at 407:6-18 and 410:4-7.) 18. Mr. Best testified that as a result of the decisions made during the November 24,

1999 Executive Session, Visitalk decided to send out a notice to Series A Shareholders, advising them of the previously undisclosed Founders' Warrant and requesting a release of claims as a result of the non-disclosure of the Warrants. (Best Depo., Exhibit "I", (9-9-05), at 31:1-11; 35:14-19.) It was not Snell & Wilmer that proposed this solution to Visitalk.

Rather, the minutes of the Executive Session reflect that "Mr. Griffiths [of Gibson Dunn & Crutcher] explained further the process of waivers, adding that waivers by the shareholders must be obtained by everyone." (Board Minutes, Exhibit "M".) 19. According to Mr. Best, Snell & Wilmer did not, in any way, assist Peter

Thimmesch and Michael O'Donnell in creating, developing or presenting an incomplete, misleading or false picture about the Founders' Warrants. (Best Depo., Exhibit "I", (1-21-05), at 41:3-8.) Snell & Wilmer did not, as alleged, fail to fully and properly advise Visitalk and the members of the Board of Directors of the Founders' Warrants. (Id. at 41:9-12.) 20. Similarly, former Visitalk President and CEO Peter Thimmesch testified that

Messers. O'Donnell and Mr. Thimmesch, who were then the sole members of the Board of Directors of Visitalk, did approve the issuance of the Founders' Warrants on September 12, 1998. Mr. Cardwell was not a member of the Board of Directors and was not a shareholder on September 12, 1998. (Thimmesch Depo., Exhibit "J" (4-18-06), at 397:21-398:8.) Both Cynthia Thimmesch and Marsha O'Donnell also confirmed that a meeting took place on

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September 12, 1998 (in the O'Donnells' garage) at which time Messers. Thimmesch and O'Donnell "voted" to authorize the issuance of Founders' Warrants to themselves. They further confirmed that Mark Cardwell was "absolutely not" either an employee or shareholder of Visitalk at that time (Deposition of Marsha O'Donnell, Exhibit "T" attached hereto (7/19/06), at 27:3-30:14; Deposition of Cynthia Thimmesch, Exhibit "U" attached hereto, (824-06), at 31:25-32:13.) 21. Mr. Thimmesch did acknowledge, however, that Visitalk did not properly

document the Board's authorization of the Warrants. (Thimmesch Depo., Exhibit "J" (4-1806), at 375:19-376:22.) He testified that Joe Richardson of Bryan Cave was responsible for

that failure. (Id. at 386:16-19.) Snell & Wilmer helped to resolve the "tangled mess" that existed with respect to the Founders' Warrants. (Id. at 388:4-11.) 22. Mr. Thimmesch confirmed that all of the Board Members agreed on the solution

to the Founders' Warrants issue. In addition to Snell & Wilmer, the Board received legal advice on this issue from Steve Best, general counsel, and two additional lawyers, Steven Stodghill and Sean Griffiths. Mr. Griffiths was the lawyer that the Board relied upon the most because he is a preeminent attorney in his field. (Id. at 407:6-18.) 23. Mr. Thimmesch testified that Mr. Griffiths was the lawyer that the Board relied

upon "in the end for the final solution we crafted." (Id. at 410:4-7.) The solution that the Board adopted was actually crafted by Board Member Allan Kaplan. (Id. at 408:15-19.) 24. Michael O'Donnell, the President of Visitalk, testified that Bryan Cave

documented the approval of the Founders' Warrants as a "Unanimous Consent of the Board of Directors in Lieu of Special Meetings". (O'Donnell Depo., Exhibit "A" hereto, (7-19-06), at 292:6-11.) Mr. O'Donnell also testified that when the Founders' Warrants were approved, Mark Cardwell was not a member of the Board and was not a principal in Visitalk. (Id. at 293: 22-294: 2.)

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25.

According to Mr. O'Donnell, if Bryan Cave had done its job correctly, none of

the ensuing issues would have arisen. (Id. at 307:22-25.) Snell & Wilmer was attempting to do nothing other than rectify the situation and document what actually happened. (Id. at 308:2-11.) 26. Mr. O'Donnell testified that Mr. Cardwell acknowledged in writing that he was,

in fact, not a shareholder or Board member at the time the Founders' Warrants were authorized. (Id. at 300:6-17.) Mr. Cardwell agreed, as part of the resolution of the Founders' Warrants "problem", that Mr. Thimmesch and Mr. O'Donnell held a meeting on September 12, 1998 and validly authorized the issuance of the Founders' Warrants. Cardwell was not a board member on September 12, 1998. Mr. Cardwell did not become an employee or shareholder of the company until September 15, 1998. (Id. at 301:18-302:11.) 27. Mr. Hirschberg testified that, as a board member, he obtained an accurate and

complete understanding of the "problem" with the Founders' Warrants. (Deposition of Jeffrey Hirschberg, ("Hirschberg Depo."), Exhibit "N" attached hereto (9-8-05) at 205:16-20.) The issue was fully discussed by the Board of Directors. (Id. at 205:21-206:1.) The full Board made a decision that was in the best interest of the company. (Id. at 206:3-6.) 28. Former director Mark Cardwell further confirmed the lack of factual support for

plaintiff's version of the Founder's Warrants chronology. He testified that he was not a shareholder, director, or employee before September 15, 1998. (Deposition of ark Cardwell, ("Cardwell Depo."), Exhibit "O" attached hereto, (12-16-05), at 192:12-18.) As part of the resolution of the Founder's Warrants issue, Mr. Cardwell confirmed in writing that he was not an employee or shareholder of the company until at least September 15, 1998 and he did not become a director of the company until September 18, 1998. (Id. at 197:19-25.) 29. Mr. Kaplan testified that he believed the solution to the Founder's Warrant issue

adopted by the Board to be in the best interest of Visitalk. (Kaplan Depo., Exhibit "C", (1123-05), at 226: 15­227: 5.)

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IV.

CARDWELL SETTLEMENT: 30. In January of 2000, Mark Cardwell, was terminated by Visitalk for "cause".

(Complaint, ¶ 72.) Mr. Cardwell threatened legal action. His dispute was settled as a result of a lengthy back and forth negotiation between the parties, with experienced counsel on both sides. The "Separation and Release Agreement" between Mr. Cardwell and Visitalk that was signed by the parties on May 10, 2000, provided that Visitalk would find purchasers for 500,000 shares of Mr. Cardwell stock at the price of $2.42 per share. Visitalk management thought this was a good way to work out the differences with Mr. Cardwell, since it created a "win-win" situation. (Complaint ¶ 79.) Indeed, Visitalk recovered significant funds when the stock was sold since the market value of Visitalk stock was far higher than $2.42 at the time. 31. All witnesses with personal knowledge testified that the settlement with its

former director Mr. Cardwell was in the best interests of Visitalk. Thus advising Visitalk regarding it could not have been malpractice. 32. Mr. Best confirmed that Mr. Cardwell's claims against Visitalk arising out of his

termination (essentially age discrimination claims) were potentially serious. The settlement with Mr. Cardwell was negotiated by Mr. Best and Allan Kaplan, an officer of Visitalk and a member of the Board of Directors, with Mr. Cardwell and his attorney. Snell & Wilmer did not negotiate the settlement. (Best Depo., Exhibit "I", (1-21-05), at 58:6-12.) 33. Snell & Wilmer played a role, albeit a small one, in documenting the settlement.

(Id. at 58:13-16.) Part of the agreement with Mr. Cardwell was that the company was to procure purchasers for 500,000,00 shares of Mr. Cardwell's stock at $2.42 per share. Mr. Best viewed this as a provision that was in the best interest of Visitalk. The transaction was approved by all of the Board members. (Id. at 59:14-60:14.) 34. According to Mr. O'Donnell, the settlement with Mr. Cardwell after his

termination was a "terrific idea" for Visitalk. (O'Donnell Depo., Exhibit "A" (7-19-06), at 320:3-321:1.) Mr. O'Donnell believed that Mr. Cardwell's dispute needed to be resolved. He

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believed that the terms of the settlement were in the best interest of the company were fair to Visitalk. He did not believe that a corporate opportunity was being usurped. (Id. at 320:3322:16.) 35. Mr. Kaplan stated that he played a major role in negotiating the settlement of Mr.

Cardwell's claims. (Kaplan Depo., Exhibit "C", (11-23-05), at 247:21-248:4.) He further testified that Visitalk relied mostly on its general counsel, Steve Best, in putting together the Cardwell settlement (Id. at 248:5-11); that the Board of Directors felt that it was important to resolve Cardwell's dispute (Id. at 248:18-23); that the settlement was in the best interests of the company (Id. at 249:2-8); that the settlement was fair to Visitalk (Id. at 249:9-10); and that there was no usurpation of any corporate opportunity. (249:11-13.) 36. Mr. Cardwell himself testified that the claims he had asserted against Visitalk as

a result of his termination, including a possible age discrimination claim, were serious claims. (Cardwell Depo. Exhibit "O" (12-16-05), at 200:8-15.) The settlement that Visitalk reached with Cardwell included a release of those claims. (Id. at 200:20-23.) Thus Visitalk received two significant benefits in the settlement, i.e. the margin on the resale of Mr. Cardwell's shares and the release of Mr. Cardwell's claims. (Id. at 201:5-10.) 37. In spring and summer of 2000, Visitalk discovered that Mr. Thimmesch had

incurred a large amount of personal expenses, which had been charged to Visitalk. (Complaint ¶ 84.). Mr. Thimmesch agreed in writing there were at least $235,000.00 in expenses for which there were inadequate business record support or which were for personal matters that had not been authorized. (Complaint ¶ 86.) V. THIMMESCH EXPENSES: 38. Mr. Best explained that Visitalk demanded that Mr. Thimmesch repay

approximately $285,000.00 in funds that were improperly utilized by Mr. Thimmesch. (Best Depo., Exhibit "I", (1-21-05), at 53:12-19.) Mr. Thimmesch never executed a promissory note, memorializing his obligation to repay the Company (Id. at 54:11-14.). Despite Snell &

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Wilmer's admonition to Visitalk to require Mr. and Mrs. Thimmesch to execute a security agreement and collateralize their debt. (E-mail between Todd Weiss and Stephen Best,

Exhibit "P" attached hereto (Exhibit 47 to Lemon Deposition).) The Board of Directors, with Mr. Best's advice, ultimately decided not to pursue Mr. Thimmesch at all. Snell & Wilmer played no role in that decision. (Best Depo., Exhibit "I", (1-21-05), at 55:13-21.) 39. Estate Planning Representation: Snell & Wilmer represented Messrs.

Thimmesch and O'Donnell in estate planning matters in 2000, after the Founders' Warrant issue was resolved. (Snell & Wilmer's Answers to Plaintiff's Interrogatories, Nos. 7 and 8, Exhibit "Q" hereto.) Visitalk's general counsel consented to that representation. (Best Depo., Exhibit "I" (9-9-05), at 179: 16­180: 12.) 40. Steven Best testified that he was involved in the decision to hire Snell & Wilmer.

(Id. at 153:1-4.) Snell & Wilmer was hired on it's merits, and the relationship was strictly a business relationship. (Id. at 157:1-158: 8.) 41. Plaintiff's "preference" expert, Stephen Scherf, testified that while control of

financial decisions could be an indicia of insider status (Deposition of Steven Scherf, Exhibit "R" attached hereto, (5-29-07), at 31:7-10), he had seen no document suggesting that Snell & Wilmer had the ability to cause Visitalk to issue checks. (Id. at 53:1-13.) Mr. Scherf also admitted that repeated requests for payment that were not successful tend to show a creditor's lack of control. (Id. at 31:17-22.) Exhibit B to the Scherf Rebuttal Report sows repeated, unsuccessful requests for payment by Snell & Wilmer. (Exhibit "B" to Sherf Rebuttal Report, Exhbit "S" attached hereto.)

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RESPECTFULLY SUBMITTED this 4th day of June, 2007. MARISCAL, WEEKS, McINTYRE & FRIEDLANDER, P.A.

By: s/ Thomthy J. Thomason Gary L. Birnbaum Timothy J. Thomason Charles S. Price Scot L. Claus Attorneys for Defendant Snell & Wilmer, LLP

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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 June 5th 2007, a copy of the foregoing will be sent via FedEx to: Judge H. Russel Holland UNITED STATES DISTRICT COURT 222 West 7th Avenue No. 54 Anchorage, AK 99513 907-677-6251 I hereby certify that on June 4th 2007, 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 June 4th 2007, 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

By: s/ Cheryl Lostracco

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