2012 08 20 Stanton Decl ISO Mot for Judicial Determination by BayAreaNewsGroup


									                                                           1   EMMETT C. STANTON (CSB No. 83930)
                                                                                                                                   Aug 20, 2012 3:36 PM
                                                           2   JOSEPH BELICHICK (CSB No. 229371)                                       David H. Yamasaki
                                                               jbelichick@fenwick.com                                               Chief Executive Officer/Clerk
                                                               ELIZABETH J. WHITE (CSB No. 262073)                            Superior Court of CA, County of Santa Clara
                                                           3                                                                    Case #1-09-CV-139520 Filing #G-46208
                                                               bwhite@fenwick.com                                                    By G. Duarte, Deputy
                                                           4   FENWICK & WEST LLP
                                                               Silicon Valley Center, 801 California Street
                                                           5   Mountain View, CA 94041
                                                               Telephone: 650.988.8500
                                                           6   Facsimile: 650.938.5200

                                                           7   Attorneys for Defendants
                                                               Ronald (“Ronnie”) Lott, Harris Barton, Jeffrey Bloom,
                                                           8   HRJ Capital, LLC, HRJ Capital BD, LLC, and
                                                               HRJ Capital Management, LLC

                                                          10                      SUPERIOR COURT OF THE STATE OF CALIFORNIA

                                                          11                                   COUNTY OF SANTA CLARA

                                                          12   KOK-WAI (DARREN) WONG and                        Case No.: 1-09-CV139520 and
                                                               DURAN CURIS,                                     1-09-CV140349

                       ATTORNEYS AT LAW
                                          MOUNTAIN VIEW

                                                                                 Plaintiffs,                    DECLARATION OF EMMETT C.
                                                          14                                                    STANTON IN SUPPORT OF HARRIS
                                                                      v.                                        BARTON, RONALD “RONNIE” LOTT,
                                                               HRJ CAPITAL BD, LLC, a Delaware company,         JEFFREY BLOOM, HRJ CAPITAL LLC,
                                                          16   et al.,                                          HRJ CAPITAL BD, LLC AND HRJ
                                                                                                                CAPITAL MANAGEMENT LLC’S
                                                          17                     Defendants.                    MOTION FOR JUDICIAL
                                                                                                                DETERMINATION OF GOOD FAITH
                                                          18                                                    SETTLEMENT PURSUANT TO
                                                          19                                                    CALIFORNIA CODE OF CIVIL
                                                                                                                PROCEDURE SECTION 877.6(a)(1)
                                                               LANE AUTEN,                                      Date:       September 14, 2012
                                                          21                                                    Time:       9:00 a.m.
                                                                                 Plaintiff,                     Dept.:      1
                                                          22                                                    Judge:      Hon. James P. Kleinberg
                                                                      v.                                        Dept.:
                                                               HRJ CAPITAL BD, LLC, a Delaware company,
                                                          24   et al.,

                                                          25                     Defendants.



                                                               DECL. OF E. STANTON ISO MOTION                            CASE NOS. 1-09-CV139520 & 1-09-CV140349
                                                               FOR JUDICIAL DETERMINATION
                                                               OF GOOD FAITH SETTLEMENT
                                                          E-FILED: Aug 20, 2012 3:36 PM, Superior Court of CA, County of Santa Clara, Case #1-09-CV-139520 Filing #G-46208

                                                              1               I, EMMETT C. STANTON, declare as follows:

                                                              2               1.         I am an attorney duly licensed to practice law in the state of California and am a

                                                              3     partner at the law firm of Fenwick & West LLP, counsel for Defendants Harris Barton, Ronnie

                                                              4     Lott, Jeffrey Bloom (collectively, the “Individual Defendants”), HRJ Capital LLC, HRJ Capital

                                                              5     (BD) LLC, and HRJ Capital Management LLC (collectively, the “HRJ Defendants”). I have

                                                              6     personal knowledge of the matters set forth herein and, if called upon to do so, could and would

                                                              7     testify completely thereto.

                                                              8               2.         In May 2012, Plaintiffs, the HRJ Defendants, and the Individual Defendants

                                                              9     engaged a mediator, Mr. August Caimi, to help resolve their dispute. The Non-Settling

                                                            10      Defendants did not participate in this mediation. Mr. Caimi has not been formally terminated by

                                                            11      the parties as a mediator.

                                                            12                3.         In June 2012, I participated in a separate mediation with Plaintiffs and the Non-

                                                            13      Settling Defendants before JAMS mediator Charles Bakaly. With the imminent close of fact
                       ATTORNEYS AT LAW
                                          MOUNTAIN VIEW

                                                            14      discovery, it was the position of the Individual Defendants that discovery had adduced no

                                                            15      substantial evidence to support Plaintiffs’ theory that any of the Individual Defendants was an

                                                            16      alter ego of HRJ Capital LLC. In addition, Plaintiffs’ principal theory of the case against Capital

                                                            17      Dynamics was not consistent with a theory of recovery from the Individual Defendants. Indeed,

                                                            18      if Plaintiffs’ prevailed against Capital Dynamics on their agency theory, the Individual

                                                            19      Defendants would as a matter of law have no liability. Finally, none of the HRJ Defendants had

                                                            20      any assets and none was involved in any business activities, while the Individual Defendants

                                                            21      lacked the financial resources to satisfy any substantial judgment in favor of the Plaintiffs, and

                                                            22      lacked the liquidity to make any substantial settlement payment, particularly in light of their

                                                            23      likely success on Plaintiffs’ alter ego theory.

                                                            24                4.         Plaintiffs and the HRJ Defendants clients were able to reach an agreement during

                                                            25      the June mediation which resulted in a formal written Settlement Agreement, a true and correct

                                                            26      copy of which is attached hereto as Exhibit A. The HRJ Defendants and Individual Defendants

                                                            27      agreed to pay (or cause to be paid) a sum of $100,000 to Plaintiffs in exchange for a dismissal

                                                            28                                                                          -1-
                                                                    DECL. OF E. STANTON ISO MOTION                                                       CASE NOS. 1-09-CV139520 & 1-09-CV140349
                                                                    FOR JUDICIAL DETERMINATION
                                                                    OF GOOD FAITH SETTLEMENT
          E-FILED: Aug 20, 2012 3:36 PM, Superior Court of CA, County of Santa Clara, Case #1-09-CV-139520 Filing #G-46208

            I     with prejudice and full release of all claims against the HRJ Defendants and Individual

            2     Defendants. The employment practices insurance carrier for HRJ Capital LLC, Liberty

            3     Insurance, has agreed to pay half of the sum. The remaining $50,000 is being split among the

            4     Individual Defendants.

            5                S.          Convincing Liberty Insurance to pay $50,000 toward the settlement sum was a

            6     favorable result given HRJ Capital LLC's minimal insurance coverage with respect to Plaintiffs'

            7     claims. Liberty Insurance contended that only the wrongful discharge claims and defamation

            8     claims of Messrs. Wong and Curls triggered the policy. No coverage was available for any of

            9     Plaintiffs' management fee claims, which represented substantially all of the claimed damages of

          10      all three plaintiffs. The policy had a $1 million limit and a $125,000 retention. Liberty agreed to

          11      an 18% "allocation" of defense costs for the covered claims. This meant that the HRJ Defendants

          12      had to first absorb approximately $695,000 of defense costs, while Liberty would pay only 18%
o    ,    13      of defense costs thereafter and would pay a resulting judgment only in respect of the wrongful
" <
~    "
•"   "
.lJ 1:;   14      discharge and defamation claims of Messrs. Wong and Curis.
, ,
" <
v 0
"                            I declare under penalty ofpetjury under the laws of the State of Cali fomi a that the

          17      foregoing is true and correct.

                  Dated: August 20,2012
          19                                                                                        Emmett C. Stanton









          28                                                                          - 2-
                  DECL. OF E. STANTON ISO MOTION                                                       CASE Nos. }·09·CV139520 & 1·09·cvI40349
                  OF GOOD FAITH SETTLEMENT

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