Windermere Coachella Valley, California, formerly operated real estate offices in Cathedral City, Garner Valley, Indian Wells, Indio, La Quinta, Palm Desert, Palm Springs and Rancho Mirage...
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF RIVERSIDE—CASE NO. RIC10006101
Federally Indicted Windermere Coachella Valley Indian Wells Agent Peggy Shambaugh, Windermere Coachella Valley and Owner Bob Deville, Charged by Spotlight 29 Casino Owner Indian Tribe with Breach of Conract, Breach of the Implied Covenant of Good Faith and Fair Dealing; Shambaugh, Deville, Windermere Coachella and Windermere Services, Charged with Breach of Fiduciary Duty, and Professional Negligence; Windermere Coachella, Bob Deville and Windermere Services Charged with Unfair Trade Practices in $30 Million-Plus Deal—Complaint Alleges Windermere Services is an Unlicensed Entity:
WINDERMERE TRIAL DELAY STRATEGY: MOTION OF DEFENDANTS PEGGY SHAMBAUGH, BENNION & DEVILLE FINE HOMES, INC. dba WINDERMERE REAL ESTATE COACHELLA VALLEY, WINDERMERE REAL ESTATE SERVICES COMPANY and JOSEPH R. DEVILLE TO STAY PROCEEDINGS, "This motion is made pursuant to the Court's authority to Stay civil proceedings where defendants are also the subject of criminal investigation and/or prosecution..." NOTICE OF RULING CASE UPDATE: "The Court exercises its discretion to grant the motion, and to stay the entire action until completion of the related criminal action...
SHAMBAUGH, BENNION & DEVILLE, WINDERMERE COACHELLA, WINDERMERE SERVICES and JOSEPH R. DEVILLE SETTLE: Notice of Ruing & Entry of Judgment— “PLEASE TAKE NOTICE that the Motion for Good Faith Determination filed by Moving Parties PEGGY SHAMBAUGH, BENNION & DEVILLE FINE HOMES, INC. dba WINDERMERE REAL ESTATE COACHELLA VALLEY, WINDERMERE REAL ESTATE SERVICES COMPANY and JOSEPH R DEVILLE ("SETTLING PARTIES") came on for hearing on January 14, 2013, at 9:00 a.m., in Department 07 of the above-reference court, located at 4050 Main Street, Riverside, California. Cheryl D. Davidson, Esq. appeared for SETTLING PARTIES. Gordon Bosserman, Esq (appearing telephonically) and Scott Spolin, Esq. appeared for Plaintiffs. Connie Anderson, Esq. appeared telephonically for David Alan Heslop and Diversification Resources. [¶] The Court, after considering the moving papers and the lack of opposition thereto, found that the proposed settlement was within the ball park of SETTLING PARTIES' proportionate share of liability and was reasonable and equitable pursuant to the terms of Tech-Bilt, Inc. vs. Woodward-Clyde and Associates (1989) 38 Cal.3d 488. The court found no evidence of collusion or conduct aimed to injure the interests of the non-settling parties. The Court granted the Motion for Good Faith Settlement…”
L to R: (1) Joseph R. "Bob" Deville and (2) Bob Bennion of Windermere Services Southern California, Bennion & Deville Fine Homes, Inc., and Windermere Real Estate Coachella Valley. (3) Peggy Shambaugh, Realtor at Windermere Real Estate Coachella Valley, Indian Wells office. (4) Current Windermere Services Company governing persons John W. Jacobi, (5) Geoffrey P. Wood, (6) Jill Jacobi-Wood, (7) John O'Brien "OB"Jacobi, (8) attorney Paul Stephen Drayna—WSBA# 26636
"Further, at all times relevant to the events alleged in this action, Windermere Coachella was and is licensed by the State of California as a real estate broker, doing business as a real estate broker and operating an unlawful franchise arrangement with defendant Windermere Real Estate Services Company ("Windermere Services") from which both Windermere Coachella and Windermere Services have unlawfully split over a million dollars in commissions from real estate transactions within the State of California." JUMP TO THIS ALLEGATION HERE
"...At the time of the increase in purchase price, with the knowledge and/or consent of Windermere Coachella, Windermere Services, Deville and Shambaugh, Kovall told the Tribe that the increase was the result of "some people from New York," who were supposedly interested in the property, and therefore constituted potential competitors for the property for the Tribe." JUMP TO THIS ALLEGATION HERE
READ THE ENTIRE COMPLAINT BELOW — DOWNLOAD A PDF COPY OF THE COMPLAINT HERE
READ THE ANSWER OF DEFENDANTS HERE
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF RIVERSIDE
TWENTY-NINE PALMS BAND OF MISSION INDIANS OF CALIFORNIA; TWENTY-NINE PALMS ENTERPRISES CORPORATION; and ECHO TRAIL HOLDINGS, LLC, a limited liability company,
Plaintiffs,
vs.
DAVID ALAN HESLOP, an individual, DIVERSIFICATION RESOURCES, LLC, a limited liability company, NATIONAL DEMOGRAPICS [sic], Inc., a corporation, PEGGY SHAMBAUGH, an individual, BENNION & DEVILLE FINE HOMES, INC., doing business as WINDERMERE REAL ESTATE COACHELLA VALLEY, a corporation, and Does I through 100,
Defendants.
Case No. RIC10006101
Honorable John Vineyard, Dept. 7
FOURTH AMENDED COMPLAINT FOR:
(1) BREACH OF CONTRACT;
(2) BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING;
(3) BREACH OF FIDUCIARY DUTY;
(4) BREACH OF CONTRACT;
(5) BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING;
(6) BREACH OF FIDUCIARY DUTY;
(7) PROFESSIONAL NEGLIGENCE; and
(8) UNFAIR TRADE PRACTICES
Plaintiffs Twenty-Nine Palms Band of Mission Indians of California, Twenty-Nine Palms Enterprises Corporation, and Echo Trail Holdings, LLC (sometimes collectively referred to herein as "Plaintiffs") allege, as follows:
GENERAL ALLEGATIONS
1. At all times relevant to the events alleged in this action, Plaintiff Twenty-Nine Palms Band of Mission Indians of California was and is a Sovereign Native American Nation duly recognized by the government of the United States of America. At all times relevant to the events alleged in this action, Plaintiff Twenty-Nine Palms Enterprises Corporation was and is a federally chartered corporation duly organized and existing under the laws of the government of the United States of America, and was and is wholly owned by Plaintiff Twenty-Nine Palms Band of Mission Indians of California. Together, these two entities are sometimes hereinafter collectively referred to as the "Tribe."
2. At some of the times relevant to the events alleged in this action, Plaintiff Echo Trail Holdings, LLC ("Echo Trail Holdings") was and is a limited liability company organized and existing under the laws of the State of California and was and is wholly owned by the Tribe.
3. At all times relevant to the events alleged in this action, defendant David Alan Heslop ("Heslop") was and is an individual and, on information and belief, a resident of the County of San Luis Obispo.
4. Plaintiffs are informed and believe that Defendant Diversification Resources, LLC, a Nevada limited liability company ("DRL-NV") is a limited liability company organized under the laws of the State of Nevada. Plaintiffs are informed and believe that in or about August 2006, Heslop formed DRL-NV. On information and belief, Heslop was, and is, the sole member and manager of DRL-NV; and its business affairs were, and are, controlled by Heslop. Plaintiffs are further informed and believe and thereon allege that in or about August 2007, a conversion was filed with the California Secretary of State, whereby Defendant DRL-NV was purportedly converted to Defendant Diversification Resources, LLC, a California limited liability company ("DRL-CA"). Assuming that the conversion was lawfully effected, all debts, liabilities and obligations of DRL-NV continue as debts, liabilities and obligations of DRL-CA, and all rights of creditors, including Plaintiffs, were preserved unimpaired against DRL-CA, as if the alleged conversion had not occurred.
5. As a result of Heslop's failure and refusal to respond to any discovery to date, Plaintiffs are currently unable to determine the precise legal status of DRL-NV or the legal effectiveness of the alleged conversion. Plaintiffs are informed and believe and thereon allege that DRL-CA and Heslop failed to notify creditors of DRL-NV of the alleged conversion. Plaintiffs are further informed and believe and thereon allege that DRL-NV failed to transfer its assets (including possible insurance coverage) to DRL-CA in connection with the alleged conversion, and instead, transferred such assets to Heslop, with the intent to defraud its creditors and to escape liability for its debts. Accordingly, the purported "conversion" has no effect on Plaintiffs' claims against DRL-NV
6. Plaintiffs are informed and believe and thereon alleged that DRL-NV and Heslop knowingly and willfully conspired and agreed among themselves, and with Paul P. Bardos, to defraud Plaintiffs out of hundreds of thousands of dollars by charging Plaintiffs spurious consulting fees for construction and construction management. Defendants Heslop and DRL-NV did the acts and things here and alleged pursuant to, and in furtherance of, the conspiracy and the above-alleged agreement.
7. In the alternative, since DRL-NV contends that it is a "dissolved" limited liability company, pursuant to California Corporations Code § 17355, this action may be maintained against DRL-NV to the extent of its undistributed assets, including, without limitation, any insurance assets held by DRL-NV that may be available to satisfy claims. (DRL-NV and DRL-CA are hereinafter collectively referred as "DRL.")
8. On information and belief, at all times relevant to the events alleged in this action defendant National Demographics, Inc. ("NDI") was and is a corporation doing business in the States of Nevada and/or California. Further, on information and belief, NDI was formed by Heslop on or about July 12, 1979; Heslop was and is one of the owners of stock in NDI; and, at various times referred to in this action, Heslop was an officer and director of NDI. On information and belief, NDI has its principal place of business in the County of Los Angeles, at 1217 Glenwood Road, Glendale, CA 91202.
9. On information and belief, in doing or failing to do the things alleged in this action, Heslop was acting in the course and scope of his responsibilities as the managing owner and agent of DRL and as a managing officer, director and agent of NDI.
10. On information and belief, at all times relevant to the events alleged in this action, defendant Peggy Shambaugh ("Shambaugh") was and is an individual and a resident of the County of Riverside. At all times relevant to the events alleged in this action, Shambaugh was and is a real estate licensee and a real estate agent with defendant Bennion & Deville Fine Homes, Inc., which does business as Windermere Real Estate Coachella Valley.
11. At all times relevant to the events alleged in this action, defendant Bennion & Deville Fine Homes, Inc., doing business as Windermere Real Estate Coachella Valley ["Windermere Coachella") was and is a corporation organized and existing under the laws of the State of California with various places of business, including one in Palm Desert, California. Further, at all times relevant to the events alleged in this action, Windermere Coachella was and is licensed by the State of California as a real estate broker, doing business as a real estate broker and operating an unlawful franchise arrangement with defendant Windermere Real Estate Services Company ("Windermere Services") from which both Windermere Coachella and Windermere Services have unlawfully split over a million dollars in commissions from real estate transactions within the State of California.
12. On information and belief, at all times relevant to the events alleged in this action, defendant Windermere Services was and is a corporation organized and existing under the laws of the State of Washington with its principal place of business in Seattle, Washington and offices in various states including, but not limited to, the offices of Windermere Coachella in California. On further information and belief, Windermere Services managed and controlled Windermere Coachella through defendant Bob Deville ("Deville") and others in, among other matters, the events alleged in this action, so as to render Windermere Services legally responsible in some manner for not only its own wrongful conduct but also the wrongful conduct of Windermere Coachella and certain others alleged below. On further information and belief, at all times relevant Windermere Services had an unlawful franchise arrangement with Windermere Coachella, operated as a real estate broker without a license and unlawfully split over a million dollars in commissions with Windermere Coachella from real estate transactions within the State of California.
13. On information and belief, at all times relevant to the events alleged in this action, defendant Deville was and is an individual residing in Southern California, an owner, operator, officer, manager and alter ego of Windermere Coachella, a member of Windermere Services' management team, and a supervisor of Windermere Services' franchise operation, including an unlawful franchise arrangement with Windermere Coachella.
14. Plaintiffs are unaware of the true names and capacities, whether individual, corporate, associate, or otherwise, of Defendants sued herein as Does 1 through 100, inclusive, and therefore sue said Defendants by such fictitious names. On information and belief, Plaintiffs allege that each fictitiously named Defendant is legally responsible in some manner for the wrongful conduct described below, and is therefore legally responsible for the injury and damage to Plaintiffs alleged in this action. Plaintiffs will amend this Complaint to allege the true names and capacities of these fictitiously named Defendants when the same have been ascertained.
15. On information and belief, Plaintiffs allege that the Defendants, and each of them, were the duly authorized and acting agents, employees, partners, joint venturers, coconspirators and/or the alter egos of each of the other Defendants, and in doing the things alleged in this action, each Defendant was acting within the course and scope of his, her or its employment and authority from the other Defendants and/or the other Defendants have approved and/or ratified all such conduct.
ALLEGATIONS COMMON TO ALL CAUSES OF ACTION
16. At some time before the events alleged in this Complaint, Heslop was associated with the Claremont McKenna College as a professor and/or an administrator. At all times relevant to the events alleged in this action, Heslop was associated with the Rose Institute ("Rose"), as an officer, director and/or sponsor of some sort. Rose holds itself out to the public as being capable of providing services, including survey research, fiscal analysis, and database development and as the author of studies of political and demographic trends.
17. While at Claremont McKenna College or through Rose, Heslop became acquainted with Gary E. Kovall ("Kovall").
18. From and after about 1997, Kovall represented the Tribe and its related entities, first as an attorney with his own office and subsequently through a series of law partnerships and/or affiliations. Beginning in or about 2002, Kovall continued to represent the Tribe and also to provide advice and counsel to the Plaintiffs of a type generally provided by an entity's general counsel pursuant to an oral agreement. However, Kovall submitted written invoices for all of his services and was paid for all of his services by the Tribe. In this capacity, Kovall became an integral part of the Tribe's management and the operations of the Tribe's business endeavors. Beginning in or about 2007, and continuing to in or about 2009, Heslop convinced representatives of the Tribe, including, Kovall and Gene Gambale, the predecessor of Kovall as the Tribe's legal advisor, that he had special knowledge, training and skill in business affairs, including the acquisition of business opportunities, the acquisition of real estate and the management of construction. In addition, Heslop knew of Kovall's relationship with the Tribe and took steps to endear himself to Kovall and the Tribe so as to be able to influence and control the business decisions made by the Tribe.
19. The Tribe hired Heslop and at his recommendation DRL and NDI to, among other things, advise the Tribe with respect to a variety of matters, including, without limitation, all phases of real estate investment (such as, for example, the acquisition and valuation of real property and the retention of real estate lawyers, appraisers, and brokers), all phases of construction matters involving the Tribe (such as the retention and oversight of consultants, owner-representatives, contractors, and sub-contractors), and in connection with the negotiation of agreements with each such type of construction person and entity in connection with construction work proposed or undertaken by the Tribe. During such times the Tribe also utilized the legal service of Kovall to advise it with respect to such matters, Kovall also represented the Tribe in mediations and litigation matters in which the Tribe was a party, including matters pertaining to the Tribe's business operations. Kovall also represented the Tribe with respect to political matters affecting the Tribe's business operations, and with respect to investments and other business transactions which were of potential benefit to the Tribe, including, without limitation, recyclables and solar product ventures. Heslop and his entities also advised the Tribe with respect to such matters. In the course of such representation, Kovall and Heslop gained considerable and intimate knowledge regarding the Tribe's assets and business operations, as well as its organizational and social structure, its chain of command, and its manner of doing things.
20. In or about 1998, the Plaintiffs retained Heslop, who thereafter, began to advise the Tribe on various business ventures, including those described below, for which Heslop was paid as the Tribe's trusted advisor. In addition, based on the recommendation of Heslop, the Tribe entered into special consulting arrangements with various persons and entities, including DRL, NDI and Paul P. Bardos and his related entities, and the Tribe paid Heslop and these other consultants hundreds of thousands of dollars for their services.
The Total Tire Venture
21. On information and belief, beginning in or about 1997 as a result of the recommendation of Heslop and Kovall, the Tribe invested over $5 million in a "recycling" venture in the Sacramento, California area, known as the "Total Tire" venture. The Tribe did not understand or appreciate that Heslop and Kovall arranged for the ownership of the Total Tire venture to be set up so that they each acquired an ownership interest in the venture without investing any money of their own. Thus, the Tribe took all of the financial risk, which resulted in a total financial loss to the Tribe of over $5 million. In or about 2001, Kovall and Heslop conspired together to convince the Tribe to invest more money in this venture when it was clear, or should have been clear, to them that any further investment by the Tribe would be lost. As a result, the Tribe lost additional sums in the Total Tire venture in excess of $1.5 million. Kovall submitted invoices for the legal work he did on the Total Tire venture and was paid for that work by the Tribe. Kovall and Heslop failed to properly disclose the ownership interest they took in the Total Tire venture and failed to obtain the informed consent of the Tribe to the taking of this interest. Kovall and Heslop conspired together to convince the Tribe to invest these additional funds in the Total Tire venture knowing those funds would probably be lost because Kovall and Heslop believed this was the only means available to them to protect their ownership interests in the deal. In so doing and despite the fiduciary relationship they each had with the Tribe, they sacrificed the interests of the Tribe in favor of protecting their own ownership interests.
Bardos and Kickbacks
22. While Heslop was advising the Tribe as described above, in connection with various business matters, including construction and remodeling issues, Heslop, acting individually and through DRL, purported to advise the Tribe on construction issues involving the Tribe. Heslop and DRL used Paul P. Bardos to provide these services. Later, Kovall and Heslop convinced the Tribe that it needed someone to manage or control its construction work and convinced the Tribe to retain Paul P. Bardos and his company to provide these services. Kovall and Heslop also recommended Paul P. Bardos, Bardos Construction, Inc., Bardos Construction Company and/or Cadmus Construction, Inc. ("Cadmus") (a Bardos company) (collectively "Bardos") for various positions and relationships with the Tribe without revealing (and, indeed, concealing) the nature and extent of their relationships with Bardos. In addition, on information and belief, Bardos compensated Heslop and Kovall, for their recommendation of Bardos to the Tribe, and Kovall and Heslop failed to disclose this benefit to the Tribe. Moreover, Heslop did not obtain the consent of the Tribe to his (Heslop's) receipt of these benefits from Bardos. In addition, Kovall and Heslop hired for the Tribe, or recommended for hire by the Tribe, Bardos in connection with construction work related to the Tribe's casino operations without recommending a competitive bid process for the selection of a contractor. Moreover, Heslop did so at a time when Heslop knew or should have known the agreements proposed for Bardos for the construction work were inadequate and insufficient to protect the interests of the Tribe in that they allowed Bardos to charge excessive and unreasonable fees to the Tribe. Heslop also knew or should have known that Cadmus, an entity Bardos used to provide services to the Tribe, lacked experience in construction of the types of projects for which it was hired by the Tribe, and was undercapitalized and unlicensed.
23. Between May 2007 and June 2008, Bardos paid Heslop approximately $683,000 from the millions of dollars he received from the Tribe as a kickback for contracts he was able to acquire from the Tribe due to the recommendation of Heslop and Kovall. On information and belief, Heslop, in turn, paid some portion of those funds to Kovall or to Shambaugh for Kovall's benefit, or to someone identified by Kovall. The Tribe did not know of the foregoing described payments of kickbacks and did not approve them. In addition, while Heslop purported to advise the Tribe in connection with its dealings with Bardos, Bardos was supplying work and materials to Kovall at little or no cost in connection with the construction or remodeling of property owned by Kovall in the Big Bear area, thereby creating a clear conflict of interest for Kovall. Heslop knew Bardos was providing his service to Kovall but never disclosed these facts to the Tribe. Heslop and Kovall concealed Kovall's receipt of these other benefits from Bardos from the Tribe. On information and belief, Bardos also provided similar undisclosed benefits to Heslop in connection with personal construction work done by Bardos for Heslop while Heslop purported to provide independent advice to the Tribe.
The Moskow Action
24. In August 2003, the Tribe sold certain real property located in the City of Laguna Beach, California to Dr. and Mrs. Lonnie Moskow (the "Moskows"). In June 2004, the Moskows filed a construction defect case in Orange County Superior Court against the Tribe and certain of its members, and Mrs. Moskow claimed injury (bodily injury) from exposure to mold.
25. In or about 2004, Kovall retained attorneys Nada L Edwards, Robert Rosette and Monteau & Peebles ("M & P") to represent the Tribe and others in the defense of the Moskow action. On information and belief, Rosette was, at the time, a partner in the firm of M & P. Later, while still representing the Tribe in the Moskow action, M & P reorganized itself and became Fredericks & Peebles ("F & P"), but continued to represent the Tribe in the Moskow action. In 2007, F & P reorganized itself into Fredericks Peebles & Morgan ("FP & M"), but continued to represent the Tribe in the Moskow action.
26. At the recommendation of Kovall and/or Heslop, the attorneys representing the Tribe in the Moskow action retained various consultants and/or experts in connection with the defense of the Moskow action, including Bardos and Peggy Shambaugh ("Shambaugh"). Shambaugh at the time was the girlfriend of Kovall. Later, in 2008, she became his wife. As described above, Bardos paid Kovall and/or Heslop for recommending him and his companies to the Tribe.
The 47 Acres
27. Beginning in about 2005 and continuing into 2008, Kovall represented the Tribe with respect to the acquisition of approximately 47 acres of real property known as the "Echo Trail" property (hereafter the "Echo Trail property" or "the 47 acres"), from its then owner Dillon Road Associates, LLC, and other matters related to the Tribe's acquisition of the property. The Echo Trail property is located in the City of Coachella, County of Riverside. The Tribe also used the services of Heslop and, at his recommendation, NDI, in connection with its evaluation of the transaction by which it acquired the 47 acres. Ultimately, Heslop, acting for himself and for DRL and NDL and Kovall persuaded the Tribe to purchase the 47 acres. In addition, Kovall persuaded the Tribe to utilize the services of Windermere Coachella as the buyer's broker in the transaction, with Shambaugh as the responsible individual salesperson. On information and belief, Windermere Coachella, Windermere Services, Deville and Shambaugh were brought into this transaction less than two months before it closed, at a point when negotiations between the Tribe and the then-owner of the land were at an end or near an end. Further, on information and belief, the services provided by Windermere Coachella, Windermere Services, Deville and Shambaugh in connection with the Plaintiffs' acquisition of the 47 acres were of little or no value to the Tribe.
28. Unbeknownst to the Tribe, at the time Kovall represented the Tribe in connection with the acquisition of the Echo Trail property, Kovall was in a romantic relationship with Shambaugh, in which the two, at the time of the purchase of the 47 acres, lived together and held themselves out as being husband and wife. In July 2008, following his divorce from his then-wife in 2007, Kovall and Shambaugh were formally married. On information and belief, Heslop, individually and on behalf of DRL and NDI, knew of the romantic relationship between Kovall and Shambaugh at the time Shambaugh and Windermere Coachella were hired by the Tribe to represent it in connection with the acquisition of the 47 acres and throughout the time Windermere Coachella, Windermere Services, Deville and Shambaugh represented the Tribe. At no time did Heslop or Kovall ever disclose to the Tribe Kovall's relationship to Shambaugh, or the conflict of interest created thereby. Instead, Heslop, Kovall and Shambaugh actively concealed this relationship, as a means of personally benefiting from the purchase of the 47 acres. For Kovall, he was able to secure a portion of the commission. For Heslop, he was able to, among other things, secure the position as the first manager of Echo Trail Holdings and fees for acting in that capacity and as the advisor to the Tribe in making its decision to purchase the 47 acres for himself as well as fees for DRL and NDI and fees he anticipated he would receive from the Tribe in the future for development of the 47 acres. Such concealment and relationship between Kovall and Shambaugh created a clear conflict of interest for Kovall and Heslop, who, as noted above, represented the Tribe and Echo Trail Holdings, an entity formed by the Tribe to take title to parcels of real property, including the Echo Trail property.
29. Kovall, ostensibly on behalf of the Tribe, negotiated a sales price of $29 million, which was to include a 3.5% commission to Windermere Coachella and their licensed salesperson, Shambaugh. On information and belief, Kovall, Heslop, Shambaugh, Deville, Windermere Coachella and Windermere Services knew or should have known the Echo Trail property had a market value of no more than $20 million. On information and belief, beginning in 2006 and continuing into 2008, Heslop directed NDI to make various payments to Kovall, totaling many thousands of dollars. On further information and belief, these payments by NDI to Kovall represent a portion of Kovall's share of the kickbacks Heslop received from Bardos, and/or kickbacks for recommending NDI to assist with the acquisition of the 47 acres and were never disclosed by Kovall, Heslop or NDI to the Tribe.
30. Later, as a result of negotiations conducted by Kovall, ostensibly on behalf of the Tribe, the commission for Windermere Coachella and Shambaugh was reduced from 3.5% to 3.0%, but the purchase price was raised to $31 million, apparently to compensate for the reduction in the percentage of the commission to Windermere Coachella, Shambaugh and Windermere Services. At the time of the increase in purchase price, with the knowledge and/or consent of Windermere Coachella, Windermere Services, Deville and Shambaugh, Kovall told the Tribe that the increase was the result of "some people from New York," who were supposedly interested in the property, and therefore constituted potential competitors for the property for the Tribe.
31. While acting on behalf of Windermere Coachella and Windermere Services, Deville was actively involved in the 47 acres transaction. Deville oversaw the 47 acres transaction and communicated with Windermere Coachella and its employees regarding the acquisition of the 47 acres. Windermere Coachella and Windermere Services, through their agent and/or alter ego Deville, knew or should have known that certain of the individuals assigned to act on behalf of Plaintiffs in connection with the 47 acres transaction were grossly lacking the commercial real estate experience and knowledge necessary to adequately represent Plaintiffs in this $30 million plus deal. As a manager of Windermere Coachella in the 47 acres transaction, Deville knew that the individuals assigned to represent Plaintiffs were incompetent and inexperienced but did nothing to rectify the situation, despite the fact that he was "supervising" and following the transaction with bated breath.
32. The negotiations resulted in a September 19, 2007 option agreement between the seller and the purchaser Echo Trail property. Ultimately, the property sold to Echo Trail Holdings for $31 million, which amount was paid by the Tribe. The escrow for the purchase of the property took place in or about November 2007. Shambaugh, Windermere Coachella and Windermere Services received a total commission of approximately $1 million on the sale and Heslop, as stated above, became the first Manager of Echo Trail Holdings, the entity taking title to the 47 acres. Naturally, as an owner, operator, officer, manager and alter ego of Windermere Coachella, a member of Windermere Services' management team, and a supervisor of Windermere Services' franchise operation, including an unlawful franchise arrangement with Windermere Coachella, Deville benefited from the unlawfully split commission.
33.. The Tribe hired and paid Heslop to review the proposed acquisition of the 47 acres and make a recommendation to the Tribe. As part of Heslop's review, and at Heslop's recommendation, the Tribe hired NDI and paid it tens of thousands of dollars in or about early 2006 and in 2007 to conduct valueless studies to justify Heslop's recommendations with respect to the acquisition of the 47 acres. Heslop reviewed the transaction and recommended to the Tribe that it acquire the 47 acres for a price that exceeded $30 million. On information and belief, the 47 acres was worth no more than $20 million at that time of Heslop's recommendation. Part of the reason for Heslop's recommendation was his relationship with Kovall and Bardos and the financial benefits he received from them. On information and belief, Heslop and Kovall recommended to the Tribe that Echo Trail Holdings be formed as a Limited Liability Company to take title to the Echo Trail property, and that Heslop be appointed as the sole manager of Echo Trail Holdings. As a result of the recommendations of Heslop and Kovall, the Tribe formed Echo Trail Holdings with Heslop as the only manager of the company and its business, and arranged for Echo Trail Holdings to take title to the 47 acres. In his capacity as advisor to the Tribe, Heslop occupied a special position of trust and confidence. On information and belief, Heslop knew of the relationship between Kovall, on the one hand, and Shambaugh, on the other, and deliberately did not disclose such information to the Tribe. In his June 24, 2008 letter of resignation, Heslop stated, "You will remember that the Tribe instructed me to keep all transactions strictly confidential: I have done this and believe that the Tribe's position has been effectively protected and its secrets maintained."
34. In his position of leadership in NDI, Heslop repeatedly stated knowledge of the importance of the confidentiality and secrecy of the Tribe's interests. For example, in a July 2007 document entitled, "Development of 47 acre site", Heslop stated, "In order to preserve the absolute secrecy of the Tribe's possible interest in the site and its plans, needed contacts have not been made with professionals in the entertainment field. Thus, the recommendations are based primarily on this consultant's past experience and knowledge of the entertainment industry." As a further example, NDI's 29 Palms Market Study Proposal, dated November 7, 2007 includes the following language: "First and foremost, all information, data, analysis and report will be treated in the strictest confidence. This report will be a vital resource for the tribe and the Spotlight 29 Casino in planning their future business strategy, and NDI will ensure that every aspect of this study is conducted with the utmost in secrecy and discretion." NDI made payments to Kovall after the preparation of this report. On 'information and belief, Heslop directed NDI to make these payments to Kovall.
35. The Tribe is further informed and believes that Kovall arranged for Shambaugh to provide other real property related services for the Tribe in connection with other matters, including litigation, in which the Tribe was involved and for which Shambaugh received payment from the Tribe. The value of these services by Shambaugh was worth little or nothing to the Tribe in that it could not rely on Shambaugh to provide independent expert advice on tribal matters.
FIRST CAUSE OF ACTION FOR BREACH OF CONTRACT
(By All Plaintiffs Against Heslop, DRL, NDL and Does 1-25)
36. Plaintiffs re-allege and incorporate here by this reference paragraphs 1 through 35, above, as though fully set forth at length.
37. Heslop agreed to provide expert consulting services to the Tribe, individually and through DRL and NDI, beginning in or about 1998 and continuing up to approximately June of 2008, for which the Tribe paid Heslop and these defendants hundreds of thousands of dollars. Heslop and the other defendants provided these services in connection with various transactions, including construction and construction management, the Total Tire venture, the Moskow action and the acquisition of the 47 acres. The agreements between Heslop, DRL and NDI, on the one hand, and the Tribe, on the other, were both verbal and in writing. Heslop, individually, and on behalf of DRL and NDI continued to represent the Plaintiffs in these matters up to at least June of 2008 when Heslop resigned as Manager of Plaintiff Echo Trail Holdings, and NDI's last known payment to Kovall was made in April, 2008.
38. Plaintiffs performed all of the things required of them under the various agreements described above, and there is no condition to their right to full performance of the agreements from the Defendants.
39. In doing or failing to do the things described, the defendants breached the agreements they had with the Plaintiffs, together with obligations imposed by law. As a direct and proximate breach by the Defendants, Plaintiffs have suffered damages in the form of overpayments of fees, payments for useless services, payments for advice tainted by kickbacks and undisclosed benefits from persons and/or entities with whom Plaintiffs dealt in matters in which Defendants provided services to Plaintiffs, erroneous advice and recommendations, and other errors and malfeasance in an amount which is presently unknown but which exceeds the jurisdictional minimum of this Court.
40. In addition, Heslop has received benefits and/or kickbacks as described above for business received by others from the Tribe and Heslop has been unjustly enriched by the receipt of such benefits and kickbacks. Heslop should be made to pay over those benefits to the Tribe and, where those funds or benefits have been invested in other property by Heslop, a constructive trust should be imposed on Kovall's interest in any such property.
SECOND CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENTANT OF GOOD FAITH AND FAIR DEALING
(By All Plaintiffs Against Heslop, DRL, NDL and Does 1-25)
41. Plaintiffs re-allege and incorporate here by this reference paragraphs 36 through 40, above, as though fully set forth at length.
42. In every contract entered into or to be performed in this State, there is an implied covenant of good faith and fair dealing which requires each of the parties to the contract to take no action to prevent the other party to the contract from realizing the benefit of same.
43. To the extent they do not represent breaches of the express contract, Defendants, in doing the things described above, breached the covenant of good faith and fair dealing and deprived the Tribe and Echo Trail Holdings of the benefits of their agreements with the Defendants in connection with each of the matters identified above and as to other matters as yet unidentified. As a direct and proximate result of the breach by the Defendants, Plaintiffs have suffered the damages described above in an amount which is presently unknown, but which exceeds the jurisdictional minimum of this Court.
THIRD CAUSE OF ACTION FOR BREACH OF FIDUCLARY DUTY
(By All Plaintiffs Against Heslop, DRL, NDL and Does 1-25)
44. Plaintiffs re-allege and incorporate here by this reference paragraphs 41 through 43 as though fully set forth at length.
45. At all times relevant to the events alleged above, Heslop, individually and on behalf of DRL and NDI, occupied a position of trust and confidence with the Plaintiffs. In that position Heslop was provided access to information about the Plaintiffs' business operations, inner workings and plans for the future. Indeed, Heslop was consulted for his advice, for which the Plaintiffs paid him, on various projects, ventures and strategies for the use of the Plaintiffs' property and property rights. For example, Heslop advised the Tribe to invest in the Total Tire venture and to continue to invest money in the Total Tire venture when he knew or should have known that the additional investment would result in additional loss to the Tribe. Heslop did so, in part, because he had a personal financial interest in this venture that was not properly disclosed. Heslop also advised the Tribe to use the services of Bardos, as described above, when he knew or should have known that Bardos was not qualified to provide these services to the Tribe. Part of the reason Heslop recommended Bardos to the Tribe was the kickbacks that Bardos was providing to Heslop. Heslop also advised the Tribe to hire DRL and NDI in connection with services that neither organization was qualified to provide, or under circumstances where the services were valueless, at least in part because Heslop owned or managed these entities. On information and belief, Heslop benefited financially from the services he arranged for DRL and NDI to provide to the Tribe. Heslop was also hired by the Tribe to provide a confidential analysis and recommendation with respect to whether the Plaintiffs should purchase the 47 acres, the correct price to pay for the 47 acres, and how the property might be developed beneficially by the Plaintiffs after it was acquired. In these positions Heslop, individually and on behalf of DRL and NDI, and the other Defendants acquired confidential information about the Tribe's business plans; indeed, they were responsible for many of the Tribe's business decisions and plans and arrangements. Given Heslop's position and given the nature of the services he, DRL and NDI provided to Plaintiffs, Heslop, DRL and NDI occupied a position as fiduciaries in their dealings with Plaintiffs.
46. In doing the things described above, including, without limitation, setting up or continuing to recommend ventures to profit themselves at the expense of the Plaintiffs, and taking undisclosed benefits from persons and entities with whom the Plaintiffs dealt, the Defendants breached their fiduciary duties to Plaintiffs. As a direct and proximate result of such breach by the Defendants, Plaintiffs have suffered the damages described above in an amount which is presently unknown but which exceeds the jurisdictional minimum of this Court.
47. In doing or failing to do the things described above, Defendants acted with malice, fraud or oppression as those terms are defined by California law by, among other things:
(a) Accepting kickbacks as described above from persons and entities with whom Plaintiffs dealt in exchange for causing the Plaintiffs to enter into agreements with these persons and entities;
(b) Taking ownership interests in business ventures with Plaintiffs without properly disclosing to Plaintiffs the ownership interest and inherent conflicts of interest involved with these ventures; and
(c) Concealing material information from the Plaintiffs about certain
business ventures in connection with which Defendants provided consulting and expert services, including, without limitation, the relationship between Kovall and Shambaugh and Windermere in connection with the Plaintiffs' acquisition of the 47 acres.
Accordingly, in addition to any other relief awarded to the Plaintiffs against the Defendants, Plaintiffs are entitled to the imposition of punitive damages.
FOURTH CAUSE OF ACTION FOR BREACH OF CONTRACT
(By All Plaintiffs Against Shambaugh, Deville Windermere Coachella and Does 28-50)
48. Plaintiffs re-allege and incorporate here by this reference paragraphs 1 through 35 [sic], above, as though fully set forth at length.
49. Shambaugh and Windermere Coachella provided real estate brokerage and/or expert or consulting services to the Plaintiffs for which the Tribe paid them over $1 million. The agreements between Plaintiffs, on the one hand, and Shambaugh and Windermere Coachella, on the other, were both verbal and in writing.
50. Attached hereto as Exhibit "A" is a true and correct copy of the written agreement between Echo Trail Holdings, on the one hand, and Windermere Coachella and Shambaugh, on the other, for broker services in connection with the acquisition of the Echo Trail property. Exhibit "A" relates to the Plaintiffs' purchase of the Echo Trail property, the escrow for which closed on November 7, 2007. The funds for the purchase of the Echo Trail property came from the Tribe.
51. Attached hereto as Exhibit "B" is a true and correct copy of the Disclosure Regarding Real Estate Agency Relationships form filled out and provided to Echo Trail Holdings by Defendants in connection with the Plaintiffs' acquisition of the Echo Trail property. In Exhibit "B," there is an acknowledgement by Defendants of the existence of a fiduciary relationship, and concomitant duty of honesty and full disclosure. Despite the recognition and acknowledgement of this relationship, neither Windermere Coachella nor Deville or Shambaugh ever disclosed the relationship between Kovall and Shambaugh as described above, or the fact that the Tribe was paying more than the market value of the Echo Trail property.
52. Plaintiffs performed all of the things required of them under the agreements described above, and there is no condition to their right to full performance of the agreements from Defendants.
53. In doing or failing to do the things described above, Windermere Coachella and Shambaugh, and Deville as an alter ego of Windermere Coachella, breached the agreements they had with Plaintiffs, together with obligations imposed by law, by among other things, failing to disclose the romantic relationship that existed between Shambaugh and Kovall, by failing to disclose the market value of the Echo Trail property, and by failing to disclose the fact that Defendants were providing little or no services to Plaintiffs in connection with the acquisition of the 47 acres. As a direct and proximate breach by Defendants, Plaintiffs have suffered the damages described above in an amount which is presently unknown, but which exceeds the jurisdictional minimum of this Court.
54. In addition, Shambaugh and Windermere Coachella (and Deville as an alter ego, owner, operator, officer and manager of Windermere Coachella) have received benefits and compensation as described above for which they did little or nothing under circumstances where their ability to provide such services was the direct result of the undisclosed romantic relationship between Shambaugh and Kovall. As a result, they have been unjustly enriched by the receipt of such benefits and compensation. Shambaugh, Deville and Windermere Coachella should be made to pay over those benefits to the Tribe and, where those funds or benefits have been invested in other property by them, a constructive trust should be imposed on their interest in any such property.
FIFTH CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENTANT OF GOOD FAITH AND FAIR DEALING
(By AR Plaintiffs Against Shambaugh, Deville, Windermere Coachella and Does 28-50)
55. Plaintiffs re-allege and incorporate here by this reference paragraphs 48 through 54, above, as though fully set forth at length.
56. In every contract entered into or to be performed in this State, there is an implied covenant of good faith and fair dealing which requires each of the parties to the contract to take no action to prevent the other party to the contract from realizing the benefit of same.
57. To the extent they do not represent breaches of the express contract, Defendants, in doing the things described above, breached the covenant of good faith and fair dealing, and as a direct and proximate result of the breaches by Shambaugh, Deville and Windermere Coachella, Plaintiffs have suffered the damages described above in an amount which is presently unknown but which exceeds the jurisdictional minimum of this Court.
SIXTH CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY
(By All Plaintiffs Against Shambaugh, Deville, Windermere Coachella, Windermere
Services and Does 28-50)
58. Plaintiffs re-allege and incorporate here by this reference paragraphs 10 through 15, 27 through 35 and 36 through 57, above, as though fully set forth at length.
59. Given their respective positions as either real estate brokers, licensees, experts and/or consultants, and given the positions they assumed vis a vis Plaintiffs in connection with the purchase of real property (including but not limited to the 47 acres transaction) and the giving of expert advice with respect to real estate related questions, and/or given their contract and acknowledgement of the fiduciary nature of that position, Shambaugh, Deville, Windermere Coachella and Windermere Services were fiduciaries in their dealings with Plaintiffs.
60. In doing the things described above, these Defendants breached their fiduciary duties to Plaintiffs. As a direct and proximate result of such breaches by these Defendants, Plaintiffs have suffered the damages described above in an amount which is presently unknown but which exceeds the jurisdictional minimum of the Superior Court.
61. In doing or failing to do the things described above, Defendants acted with malice, fraud or oppression as those terms are defined by California law by, among other things:
(a) Concealing the relationship between Shambaugh and Kovall;
(b) Accepting commissions for non-existent services;
(c) Placing their financial interests above those of Plaintiffs;
(d) Knowingly advising Plaintiffs to purchase the 47 acres despite Defendants' knowledge that the transaction would cause Plaintiffs to suffer significant financial loss so that Defendants would receive the benefit of a $1 million commission; and
(e) Entering into an unlawful agreement to share a commission of approximately $1 million among Windermere Coachella and Windermere Services (an unlicensed entity) and Kovall (an unlicensed individual).
Accordingly, in addition to any other relief awarded to Plaintiffs against Defendants, Plaintiffs are entitled to the imposition of punitive damages.
SEVENTH CAUSE OF ACTION FOR PROFESSIONAL NEGLIGENCE
(By All Plaintiffs Against Shambaugh, Deville, Windermere Coachella, Windermere
Services and Does 28-50)
62. Plaintiffs re-allege and incorporate here by this reference paragraphs paragraphs 10 through 15, 27 through 35 and 36 through 61, above, as though fully set forth at length.
63. Shambaugh, Deville, Windermere Coachella and Windermere Services negligently represented Plaintiffs in connection with the acquisition of the Echo Trail property, and/or negligently negotiated agreements for Plaintiffs, and/or negligently supervised agents, representatives and/or employees, as described above, in connection with the business affairs of Plaintiffs for which Defendants were paid by Plaintiffs to represent them.
64. While acting on behalf of Windermere Coachella and Windermere Services, Deville was actively involved in the 47 acres transaction. Deville oversaw the 47 acres transaction and communicated with Windermere Coachella and its employees regarding the acquisition of the 47 acres. Windermere Coachella and Windermere Services, through their agent and/or alter ego Deville, knew or should have known that certain of the individuals assigned to act on behalf of Plaintiffs in connection with the 47 acres transaction were grossly lacking the commercial real estate experience and knowledge necessary to adequately represent Plaintiffs in this $30 million plus deal. As a manager of Windermere Coachella in the 47 acres transaction, Deville knew that the individuals assigned to represent Plaintiffs were incompetent and inexperienced but did nothing to rectify the situation, despite the fact that he was "supervising" and following the transaction.
65. As a proximate result of the negligence of Defendants, Plaintiffs have sustained loss and injury, the precise amount of which is presently unknown, but which exceeds the jurisdictional minimum of this Court. Further, Defendants have profited from their wrongful conduct by among other things, collecting and/or benefiting from commissions and fees which they would not have received in the absence of such wrongful conduct. Accordingly, Defendants should disgorge to Plaintiffs the funds they have wrongfully acquired, together with interest thereon.
EIGHTH CAUSE OF ACTION FOR UNFAIR TRADE PRACTICES
(By All Plaintiffs Against Windermere Coachella, Windermere Services, Deville and
Does 28-50)
66. Plaintiffs re-allege and incorporate here by this reference paragraphs 62 through 65, above, as though fully set forth at length.
67. On information and belief, at all times relevant to the events alleged in this action, Windermere Services and Windermere Coachella have held themselves out to Plaintiffs and the general public as franchisor and franchisee, respectively; when, in fact, their relationship is that of licensor and licensee as defined in the only document produced by Windermere Coachella as to the relationship between the parties — a trademark licensing agreement. Also on information and belief, no valid and lawful franchise agreement has ever existed between Windermere Services and Windermere Coachella. On further information and belief, Windermere Services was not licensed as a real estate broker in the State of California.
68. At all times relevant to the events alleged in this action, Windermere Coachella (and its owner, operator, manager and alter ego Deville) and Windermere Services engaged in the following acts, each of which constitute unlawful, unfair and/or fraudulent business practices within the meaning of California Business and Professions Code Section 17200:
(a) Failing to disclose the fact that Heslop had a preexisting and ongoing financial arrangement with Windermere Coachella, through Shambaugh and her then boyfriend, now husband, Kovall, or the fact that Plaintiffs were paying substantially more than market value for the Echo Trail property;
(b) Concealing the fact that Heslop had a preexisting and ongoing financial arrangement with Windermere Coachella, through Shambaugh and Kovall, or the fact that Plaintiffs were paying substantially more than market value for the Echo Trail property;
(c) Accepting commissions for non-existent services, or for services performed without the requisite disclosures and/or due diligence, as hereinabove alleged; and
(d) Windermere Coachella's unlawfully sharing real estate commissions with Windermere Services, an unlicensed entity, on not only the Echo Trail property transaction but also, on information and belief, various other real estate transactions with consumers other than Plaintiffs throughout the State of California, all in violation of California law.
On information and belief, Windermere Coachella (and its owner, operator, manager and alter ego Deville) and Windermere Services engaged in the above-mentioned acts for the purpose of injuring Plaintiffs and other prospective purchasers of real property similarly situated. By virtue of the conduct alleged herein, there is a likelihood of actual and pernicious confusion and an unfair and inequitable advantage for any real estate broker employing the aforementioned business model or device, and based on the unlawful, unfair and fraudulent practices of these Defendants, a permanent injunction should issue to prevent these Defendants from engaging in such unlawful and fraudulent conduct and restitution should be ordered from these Defendants of all unlawful commissions derived from the real estate transactions involving Plaintiffs.
WHEREFORE, Plaintiffs pray for relief as follows:
On the First Cause of Action by All Plaintiffs for Breach of Contract against Heslop, DRL. NDL and Does 1-25:
1. For compensatory damages in an amount according to proof;
2. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
3. For an order imposing a constructive trust;
On the Second Cause of Action by All Plaintiffs for Breach of Implied Covenant of Good Faith and Fair Dealing against Heslop, DRL, NDL and Does 1-25:
4. For compensatory damages in an amount according to proof,
5. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
6. For an order imposing a constructive trust;
On the Third Cause of Action by All Plaintiffs for Breach of Fiduciary Duty against Heslop, DRL, NDL and Does 1-25:
7. For compensatory damages in an amount according to proof;
8. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
9. For an order imposing a constructive trust;
10. For punitive and exemplary damages in an amount according to proof;
On the Fourth Cause of Action by All Plaintiffs for Breach of Contract against Shambaugh, Deville, Windermere Coachella, and Does 28-50:
11. For compensatory damages in an amount according to proof;
12. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
13. For an order imposing a constructive trust;
On the Fifth Cause of Action by All Plaintiffs for Breach of Implied Covenant of Good Faith and Fair Dealing against Shambaugh, Deville. Windermere Coachella and Does 28-50:
14. For compensatory damages in an amount according to proof;
15. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
16. For an order imposing a constructive trust;
On the Sixth Cause of Action by All Plaintiffs for Breach of Fiduciary Duty against Shambaugh, Deville, Windermere Coachella, Windermere Services and Does 28-50:
17. For compensatory damages in an amount according to proof;
18. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
19. For an order imposing a constructive trust;
20. For punitive and exemplary damages according to proof;
On the Seventh Cause of Action by All Plaintiffs for Professional Negligence against Shambaugh. Deville, Windermere Coachella, Windermere Services and Does 28-50:
21. For compensatory damages in an amount according to proof;
22. For orders requiring restitution and a disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein;
23. For an order imposing a constructive trust;
On the Eighth Cause of Action for Unfair Trade Practices against Windermere Coachella, Windermere Services, Deville and Does 28-50:
24. For an order requiring restitution and disgorgement of all profits, benefits and other compensation obtained as a result of the conduct alleged herein in favor of Plaintiffs as to those real estate transactions involving Plaintiffs;
25. For a permanent injunction barring Defendants from engaging fraudulent and unfair practices as real estate brokers as alleged herein;
On All Causes of Action by All Plaintiffs Against All Defendants:
26. For costs of suit;
27. For interest at the maximum allowable by law;
28. For such other and further relief as the Court deems just and proper.
Dated: April 4, 2012 SPOLIN COHEN MAINZER & BOSSERMAN LLP
By:___________________________
GORDON E. BOSSERMAN
Attorneys for Plaintiffs
Defendants Respond with Twenty-Six Affirmative Defenses in the
ANSWER OF PEGGY SHAMBAUGH, BENNION & DEVILLE FINE HOMES, INC., dba WINDERMERE REAL ESTATE COACHELLA VALLEY, WINDERMERE REAL ESTATE SERVICES COMPANY, and JOSEPH R. DEVILLE TO PLAINTIFFS' SECOND AMENDED COMPLAINT
DOWNLOAD A COPY OF THE FULL ANSWER HERE
COMES NOW Defendants PEGGY SHAMBAUGH, BENNION & DEVILLE FINE HOMES, INC., dba WINDMRRE REAL ESTATE COACHELLA VALLEY, WINDERMERE REAL ESTATE SERVICES COMPANY, and JOSEPH R. DEVILLE ("Answering Defendants”), in answer to the unverified Second Amended Complaint filed by Plaintiffs TWENTY-NINE PALMS BAND OF MISSION INDIANS OF CALIFORNIA, TWENTY-NINE PALMS ENTERPRISES CORPORATION and ECHO TRAIL HOLDINGS, LLC ("Plaintiffs"), and allege as follows:
Pursuant to Section 431.30(d) of the Code of Civil Procedure these Answering Defendants deny generally and specifically each and every allegation contained in the unverified Second Amended Complaint, the whole thereof and each and every cause of action set forth therein. These Answering Defendants specifically deny that Plaintiffs have been damaged in the amounts alleged in the Complaint, or in any other amounts, or at all by reason of any act, breach or omission on the part of these Answering Defendants. As used herein, words including singular numbers shall include plural, words including the plural shall include the singular, and words importing the masculine gender shall include the feminine gender.
FIRST AFFIRMATIVE DEFENSE
(Failure to State a Cause Of Action)
1. These Answering Defendants are informed, believe and thereon allege that each and every allegation contained in the Second Amended Complaint fails to state facts sufficient to constitute a cause of action against these Answering Defendants.
SECOND AFFIRMATIVE DEFENSE
(Comparative Negligence)
2. These Answering Defendants are informed, believe and thereon allege that Plaintiffs are barred from any recovery or relief on the basis that their own negligence was the sole and proximate cause of any damages they may have sustained or will sustain. In the event that a determination is made that these Answering Defendants were negligent and/or otherwise responsible to Plaintiffs, and such negligence and/or responsibility proximately contributed to Plaintiffs’ damages, the amount of recovery, if any, shall be reduced on the basis of Plaintiffs’ own comparative negligence which contributed to the damages sought by them against these Answering Defendants.
THIRD AFFIRMATIVE DEFENSE
(Laches)
3. These Answering Defendants are informed, believes and thereon allege that each and every allegation and cause of action alleged in the Second Amended Complaint against these Answering Defendants is barred under the equitable doctrine of laches.
FOURTH AFFIRMATIVE DEFENSE
(Unclean Hands)
4. These Answering Defendants are informed, believes and thereon allege that each and every cause of action alleged in the Second Amended complaint against these Answering Defendants is barred by the doctrine of unclean hands in that Plaintiffs, by their own conduct, have acted in such a manner as to preclude any recovery against these Answering Defendants.
F1FTH AFFIRMATIVE DEFENSE
(Superseding Acts of Third Parties)
5. These Answering Defendants are informed, believe and thereon allege that the damages alleged in the Second Amended Complaint were exclusively caused or contributed to by the negligence or other acts or omissions of other defendants, persons, or entities, whether parties to this action or not. Said negligence or other acts or omissions were an intervening and superseding cause of injuries and damages, if any, and that such superseding forces are unforeseeable, independent, intervening actions breaking the chain of causation and barring recovery by Plaintiffs against these Answering Defendants.
SIXTH AFFIRMATIVE DEFENSE
(Failure to Mitigate Damages)
6. These Answering Defendants are informed, believe and thereon allege that Plaintiffs failed to take reasonable steps toward mitigating the losses alleged in the Second Amended Complaint; therefore, Plaintiffs' right to recover damages against these Answering Defendants must be barred or diminished accordingly.
SEVENTH AFFIRMATIVE DEFENSE
(Assumption of the Risk)
7. These Answering Defendants are informed, believe and thereon allege that Plaintiffs were of, perceived, appreciated, comprehended and understood the relevant terms, conditions and hazards, including the risk of pecuniary loss, associated with the purchase and investment in real property. Despite their appreciation of such risk, Plaintiffs unreasonably exposed himself to the risk of harm, thereby causing and/or contributing to their own damages, if any. Plaintiffs’ assumption of said risk bars any recovery herein, or diminishes their recovery to the extent the alleged damages are attributed to Plaintiffs’ assumption of the risk.
EIGHTH AFFIRMATIVE DEFENSE
(Estoppel)
8. These Answering Defendants are informed, believe and thereon allege that Plaintiffs are estopped from seeking relief requested in the Second Amended Complaint against these Answering Defendants due to Plaintiffs’ own acts or omissions with reference to the subject matter of the Second Amended Complaint.
NINTH AFFIRMATIVE DEFENSE
(Fault of others)
9. These Answering Defendants are informed, believe and thereon allege that at all times and places set forth in the Second Amended Complaint, certain parties defendant (s) / codefendant(s), other than these Answering Defendants, named or unnamed herein, whether served or unserved, failed to exercise ordinary care, caution or circumspection on their behalf, which negligence and carelessness was a proximate cause of some portion, up to and including the whole thereof, of the injuries and damages complained of by Plaintiffs in this action. The fault, if any, of these Answering Defendants should be compared with the fault or contributory negligence of other defendant (s) , and damages, if any, should be apportioned among the same in direct relation to each such defendant (s) , comparative fault. These Answering Defendants should be obligated to pay only such damages, if any, that are directly attributable to their percentage of comparative fault. To require these Answering Defendants to pay any more than their percentage of comparative fault violates the Equal Protection and Due Process Clauses of the Constitution of the United States and the Constitution of the State of California.
TENTH AFFIRMATIVE DEFENSE
(Not Responsible for Acts of Does)
10. These Answering Defendants are informed, believe and thereon allege that these Answering Defendants are not legally responsible for the acts and/or omissions of those defendant (s) named herein as DOES I through 100, inclusive.
ELEVENTH AFFIRMATIVE DEFENSE
(Waiver)
11. These Answering Defendants are informed, believe and thereon allege that Plaintiffs engaged in conduct and activities sufficient to constitute a waiver of any alleged breach, negligence, or any other conduct, if any, as set forth in the Second Amended Complaint.
TWELFTH AFFIRMATIVE DEFENSE
(Several Liability)
12. These Answering Defendants are informed, believe and thereon allege that its liability, if any, for non-economic general damages is several only and not joint pursuant to California Civil Code §1431.2.
THIRTEENTH AFFIRMATIVE DEFENSE
(Improper Prosecution of Action)
13. These Answering Defendants are informed, believe and thereon allege that Plaintiffs are prosecuting this litigation in bad faith and for an improper purpose. The claims of Plaintiffs are frivolous, and therefore, entitle these Answering Defendants to an award of reasonable expenses and attorneys' fees pursuant to Code of Civil Procedure §1038.
FOURTEENTH AFFIRMATIVE DEFENSE
(Absence of Probable Cause/Presence of Malicious Intent)
14. These Answering Defendants are informed, believe and thereon allege that Plaintiffs are prosecuting this litigation without probable cause against these Answering Defendants and with malicious intent.
FIFTEENTH AFFIRMATIVE DEFENSE
(Absence of Actual/Proximate Causation)
15. These Answering Defendants are informed, believe and thereon allege that any and all damages or injuries alleged by Plaintiffs were not, and are not, the result of acts or omissions by these Answering Defendants.
SIXTEENTH AFFIRMATIVE DEFENSE
(Apportionment of Fault)
16. These Answering Defendants are informed, believe and thereon allege that all of the acts and/or omissions alleged in the Second Amended Complaint were solely, entirely, and fully those of defendant (s) and/or parties named or unnamed therein, other than these Answering Defendants; and, therefore, such parties are fully and solely liable to Plaintiffs. As a result, these Answering Defendants are entitled to total indemnification from said parties including, but not limited to, any and all damages, costs, and attorneys, fees these Answering Defendants may sustain as a result of Plaintiffs’ claims. In the alternative, if it should be found that these Answering Defendants are in some manner legally responsible for injuries or damages allegedly sustained by Plaintiffs, if any, and it should be found that Plaintiffs’ injuries or damages were proximately caused or contributed to by other defendant (s) in this case, whether served or unserved, and/or other persons or entities not parties to this action, then these Answering Defendants are entitled to a finding that the negligence and fault of each of the aforesaid person and/or parties, whether parties to this action or not, shall be determined, apportioned and prorated, and that any judgment rendered against these Answering Defendants shall be reduced not only by the degree of comparative negligence of Plaintiffs, but also shall be reduced by the percentage of negligence and/or fault and/or unreasonable conduct attributed to the aforesaid other defendant (s) and/or third persons or entities, whether parties to this action or not. Under the doctrine of Li v. Yellow Cab (1975) 13 Cal. 3d 804, Plaintiffs' contributory negligence and/or fault shall reduce any and all damages allegedly sustained by Plaintiffs.
SEVENTEENTH AFFIRMATIVE DEFENSE
(Ratification)
17. These Answering Defendants are informed, believe and thereon allege that Plaintiffs are barred from asserting each and all of their causes of action by reason of Plaintiffs’ ratification of the conduct of these Answering Defendants.
EIGHTEENTH AFFIRMATIVE DEFENSE
(Prevention)
18. These Answering Defendants are informed, believe and thereon allege that Plaintiffs and/or other parties prevented and precluded these Answering Defendants from performing their obligations, if any were unperformed at all.
NINETEENTH AFFIRMATIVE DEFENSE
(No Basis for Punitive Damages)
19. These Answering Defendants at all times acted in a proper, lawful, and legally permitted fashion without malice or oppression. They exercised and possessed that degree of skill, care, and knowledge required of a real estate licensee and employer; and, therefore, there is not a basis upon which to base an award of punitive or exemplary damages against these Answering Defendants.
TWENTIETH AFFIRMATIVE DEFENSE
(Statute of Limitations)
20. These Answering Defendants are informed, believe and thereon allege that the Second Amended Complaint, and each and every cause of action contained therein, is barred by the statute of limitation provisions contained in, but not limited to Code of Civil Procedure §§337, 338, 339, 340, 343 and/or Civil Code §2079.4.
TWENTY-FIRST AFFIRMATIVE DEFENSE
(Second Amended Complaint Presented for an Improper Purpose)
21. These Answering Defendants are informed, believe and thereon allege that Code of Civil Procedure §128.7 provides that an attorney or party who presents a document to the Court certifies, to the best of his/her knowledge, that after a reasonable inquiry, that certain conditions have been met. Those conditions are as follows:
“1.That the document/pleading is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. 2. That the claim or other legal contention presented in the document/pleading is warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law. 3. That the allegations or other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. 4. The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief."
As such, sanctions under §128.7 of the Code of civil Procedure are appropriate in an amount sufficient to deter repetition, and further, the subject Court herein should award to these Answering Defendants, if they are prevailing parties, the reasonable expenses and attorneys’ fees incurred in presenting any such motion contemplated under said statute.
TWENTY-SECOND AFFIRMATIVE DEFENSE
(Lack of Jurisdiction)
22. These Answering Defendants are informed, believe and thereon allege that several of the real properties and/or property matters that are the subject of Plaintiffs' Second Amended Complaint are located outside the state of California. These Answering Defendants therefore asserts that this Court lacks jurisdiction to adjudicate matters as to these properties and/or matters.
TWENTY-THIRD AFFIRMATIVE DEFENSE
(Unasserted Defenses)
23. These Answering Defendants are informed, believe and thereon allege that they may have additional, as yet unasserted, defenses to the Second Amended Complaint or the purported causes of action contained therein. These Answering Defendants specifically reserve the right to assert additional affirmative defenses as deemed appropriate at a later time.
TWENTY-FOURTH AFFIRMATIVE DEFENSE
(Failure to Join Necessary/Indispensable Party)
24. These Answering Defendants are informed and believe and thereon allege that Plaintiffs have failed to join as parties to the action persons whose interests are such that complete relief cannot be accorded among the parties before the court and the absence of such persons will prejudice the abilities of the parties before the court to protect their interests and will leave the parties before the court exposed to risk of additional liability or inconsistent obligations,
TWENTY-FIFTH AFFIRMATIVE DEFENSE
(Lack of Subject Matter for Constructive Trust)
25. These Answering Defendants are informed and believe and thereon allege that Plaintiffs have not paid any monies or other consideration to these Answering Defendants that could serve as a subject for a Constructive Trust.
TWENTY-SIXTH AFFIRMATIVE DEFENSE
(Not Entitled to Damages)
26. These Answering Defendants are informed and believe and thereon allege that Plaintiffs are not entitled to any actual damages, permanent injunctive relief or punitive damages pursuant to Unfair Trade Practices cause of action.
STIPULATION FOR ORDER SETTING DEPOSITION OF DEFENDANT PEGGY SHAMBAUGH (left); ORDER THEREON
DOWNLOAD A COMPLETE PDF COPY OF THE STIPULATION AND ORDER HERE
The Stipulation and Order state in part:
TO THE COURT, AND TO ALL PARTIES IN INTEREST AND TO THEIR
ATTORNEYS OF RECORD:
The following Stipulation is made by and between Plaintiffs Twenty-Nine Palms Band of Mission Indians of California, Twenty-Nine Palms Enterprises Corporation and Echo Trail Holdings LLC on the one hand, and Defendant Peggy Shambaugh, by and through their respective attorneys of record, with reference to the following facts:
1. WHEREAS, Plaintiffs, by agreement of counsel, set the deposition of Defendant Peggy Shambaugh for February 14, 2012; and
2. WHEREAS, due to the unavailability of Ms. Shambaugh's criminal defense lawyer, the deposition did not proceed on February 14, 2012
.
3. WHEREAS, Mathew Horezcko, Ms. Shambaugh's criminal defense lawyer, has advised counsel for Ms. Shambaugh in this action that he is available for the deposition of Ms. Shambaugh on April 30,2012 and that he will not knowingly scheduled any matter that will conflict with the taking of Ms. Shambaugh's deposition on April 30,2012.
WHEREFORE, THE PARTIES HEREBY STIPULATE that, conditioned upon the presence at the deposition of Matthew Horezcko, criminal defense counsel for Ms. Shambaugh, the deposition of Peggy Shambaugh shall commence at 10:00 a.m. on April 30,2012, at IVAMS, INC., 8287 White Oak Ave., Rancho Cucamonga, California 91730, in the presence of Discovery Referee Retired Judge Sam Cianchetti, and shall continue from day to day, holidays and weekends excluded, or otherwise by agreement of counsel, until completed.
NOTICE OF MOTION AND MOTION FOR PROTECTIVE ORDER RE DEPOSITION OF DAVID ALAN HESLOP; MEMORANDUM OF POINTS AND AUTHORITIES, STATES:
"As widely published in this matter, a Grand Jury and FBI investigation have been instituted to discover whether any criminal wrongdoing arose out of Plaintiffs' allegations in this civil litigation...
...That stay had been instituted because the Court was informed a criminal investigation had begun concerning Plaintiffs' allegations in this lawsuit...
...Furthermore, the prejudice falls on Heslop if he is forced to appear at an August deposition, without his criminal defense attorney, when the questions to be asked relate directly to the investigation now pending against the many defendants in this action."
DOWNLOAD THE NOTICE OF MOTION AND MOTION FOR PROTECTIVE ORDER HERE
WINDERMERE TRIAL DELAY STRATEGY: MOTION OF DEFENDANTS PEGGY SHAMBAUGH, BENNION & DEVILLE FINE HOMES, INC. dba WINDERMERE REAL ESTATE COACHELLA VALLEY, WINDERMERE REAL ESTATE SERVICES COMPANY and JOSEPH R. DEVILLE TO STAY PROCEEDINGS, "This motion is made pursuant to the Court's authority to Stay civil proceedings where defendants are also the subject of criminal investigation and/or prosecution..." NOTICE OF RULING CASE UPDATE: "The Court exercises its discretion to grant the motion, and to stay the entire action until completion of the related criminal action...
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF RIVERSIDE
TWENTY-NINE PALMS BAND OF MISSION INDIANS OF CALIFORNIA; TWENTY-NINE PALMS ENTERPRISES CORPORATION; and ECHO TRAIL HOLDINGS, LLC, a limited liability company,
Plaintiffs,
vs.
DAVID ALAN HESLOP, an individual, DIVERSIFICATION RESOURCES, LLC, a limited liability company, NATIONAL DEMOGRAPICS, Inc., a corporation, PEGGY SHAMBAUGH, an individual, BENNION & DEVILLE FINE HOMES, INC., doing business as WINDERMERE REAL ESTATE COACHELLA VALLEY, a corporation, and Does I through 100,
Defendants.
Case No. RIC10006101
NOTICE OF MOTION AND MOTION FOR PROTECTIVE ORDER RE DEPOSITION OF DAVID ALAN HESLOP; MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION OF PHILIP W. VINEYARD IN SUPPORT THEREOF
[[PROPOSED] ORDER FILED CONCURRENTLY HEREWITH]
DATE: August 11, 2011
TIME: 8:30 a.m.
DEPT: 2
Judge: Honorable Jacqueline C. Jackson
Dept. 7 - Case Management Purposes
Dept. 2 - Law & Motion
Complaint Filed: November 7, 2009
Trial Date: None set
TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE that on August 11, 2011 at 8:30 am., or as soon thereafter as the matter may be heard by the Discovery Referee and/or the Court, Defendant David Alan Heslop (“Heslop”) will move the Discovery Referee and/or the Court, pursuant to California Code of Civil Procedure section 2025.420, for a Protective Order requiring Plaintiffs to reasonably accommodate Heslop's and his counsel's schedules for purposes of taking Heslop's deposition. This Motion is based on the following:
• Plaintiffs noticed Heslop's deposition for August 1, 2011, or anytime within a week thereof, but Heslop is unavailable due to family obligations, as is his criminal defense attorney, who plans on attending the deposition, but cannot do so within Plaintiffs' demanded time;
• Heslop provided the first week of September 2011 for his appearance at deposition, and his counsel communicated those dates to all other parties' counsel;
• As widely published in this matter, a Grand Jury and FBI investigation have been instituted to discover whether any criminal wrongdoing arose out of Plaintiffs' allegations in this civil litigation. Due to this contingency, and as explained on numerous occasions to all parties, Heslop currently intends to invoke his Fifth Amendment Right in response to any substantive discovery, including deposition, related to the matters asserted in this litigation.
• Notwithstanding Heslop's intention to invoke his Fifth Amendment rights at deposition and his offer to appear in September, Plaintiffs' counsel insists the deposition proceed on August 1, 2011; and
• No trial date has been set in this matter; therefore, Plaintiffs do not incur any prejudice in taking Heslop's deposition at a date and time convenient to him and his attorneys and only one month later than initially noticed.
Pursuant to California Code of Civil Procedure sections 2023.010, et seq., and 2025.420, Heslop also requests the Discovery Referee and/or the Court to impose upon Plaintiffs sanctions in the amount of $2,065 for failure to reasonably accommodate Heslop and his attorneys, as well as to compensate Heslop for the time and costs expended in the preparation of this Motion and in his good faith efforts to meet and confer on mutually agreeable deposition dates. Heslop also requests that Plaintiffs be deemed responsible for the Discovery Referee's time and expense in this matter.
This Motion is based upon this Notice of Motion and Motion, the attached Memorandum of Points and Authorities, and the Declaration of Philip W. Vineyard and all other papers filed in support of Heslop's Motion, and such further documentary evidence and oral argument that may be considered at the hearing of this Motion.
KLINEDINST PC
DATED: July 11, 2011 By: _________________________________
Connie M. Anderson
Philip W. Vineyard
Pouya B. Chami
Attorneys for Defendant
David Alan Heslop
MEMORANDUM OF P0INTS AND AUTHORITIES
I.
INTRODUCTION
Here we go again. And once again, it is Plaintiffs' continuing lack of reasonability that got us here. On June 10, the Court loosed Plaintiffs from the discovery stay theretofore in place as to David Alan Heslop. That stay had been instituted because the Court was informed a criminal investigation had begun concerning Plaintiffs' allegations in this lawsuit. However, because Department 71 of the Riverside Superior Court wanted to move toward a trial date, it had to lift the stay so that the case could be transferred to a trial department, which is responsible for scheduling trial. With the stay lifted, Plaintiffs noticed Heslop's deposition and wrote to his counsel that they were willing to move the deposition within a week on either side of August 1, but would budge no farther — this despite the fact that there is no trial date for this litigation. (See Vineyard Decl., Exhs. A and D.)
On July 7, 2011, Heslop's counsel notified all parties that Heslop was unavailable for deposition in the timeframe demanded by Plaintiffs. (See Vineyard Decl., Exh. B.) After a recitation of why an early deposition of Heslop would likely be fruitless and a waste of everyone's time and money (due to the impending invocation of Heslop's Fifth Amendment rights), Heslop nonetheless offered to appear for deposition in the first week of September. While true Heslop's counsel did not disclose why Heslop was unavailable (and need not given the reason), suffice it to say that Heslop, who is elderly, has familial obligations to which to attend. (Vineyard Decl., ¶5.) That is, however, immaterial. Heslop has offered to appear in September. (Exh. B, supra.) What prejudice Plaintiffs suffer by waiting one month to depose Heslop, especially in view that no trial date exists, is a mystery.
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1 Department 7 is charged with case management pending assignment of litigation to trial departments,
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II.
ARGUMENT
"A foundational purpose of the Civil Discovery Act is to avoid gamesmanship in litigation." Murillo v. Superior Court, 143 Cal. App. 4th 730, 739 (2006)(citing Emerson Electric Co. v. Superior Court, 16 Cal.4TH 1101, 1107 (1997)). Given Plaintiffs' history in both the pleadings and discovery stages, "gamesmanship" seems to be the only strategy they intend to employ. California Code of Civil Procedure section 2025.420 permits the Court, upon a showing of good cause, to issue a protective order to ensure a party deponent is not the subject of unwarranted annoyance or undue burden or expense. Subsection (b) to section 2025.420 enumerates the possible forms of the protective order, the first two of which including an order that the deposition not be taken at all and the deposition be taken at a different time. See Cal. Code Civ. Proc. § 2025.420(b)(1) and (2).
Heslop is not trying to avoid a deposition; indeed, he has offered the first week of September to appear. His request to the Discovery Referee and/or the Court is to require Plaintiffs to notice the deposition in the provided timeframe, and to assist in the process, Heslop offers September 1, 6, and 9 for purposes of taking his deposition. If Plaintiffs are unable to work out a deposition in the first week of September, Heslop stands ready to cooperate on future dates. Since the parties have yet to receive notice of which trial department they are to be assigned, there is no need to force a deposition date on any party when that date might conflict with other calendared events. Simply, with no trial date set, Plaintiffs can show no prejudice in permitting Heslop to attend to his familial obligations. Furthermore, the prejudice falls on Heslop if he is forced to appear at an August deposition, without his criminal defense attorney, when the questions to be asked relate directly to the investigation now pending against the many defendants in this action. (Vineyard Decl., 16.)
Heslop is informed and believes that Plaintiffs precipitated the FBI and Grand Jury investigation into the various allegations made in Plaintiffs’ complaint. Indeed, when Heslop attempted to confirm this fact through Requests for Admissions, Plaintiffs purposely did not respond, instead relying on the mysterious and meritless objection of "invades the province of law enforcement." Because there is an ongoing criminal investigation, Heslop has little choice but to invoke his Fifth Amendment rights to any form of substantive discovery that could be used against him in a criminal proceeding. Relevant to this Motion, Heslop's counsel has explained to all parties how wasteful it would be to proceed with Heslop's deposition while the criminal investigation continues, because an invocation of Heslop's Fifth Amendment rights would be forthcoming. (See Vineyard Decl., Exhibit C, p. 2.) Nonetheless, Plaintiffs continue to insist that Heslop appear on the August 1 deposition date. Plaintiffs' decision further highlights their lack of reasonability in prosecuting this matter.
Plaintiffs will try to argue that the case is nearly two years old and that they must be able to work up their case now that the discovery stay as to Heslop has been lifted. Again, this argument might have more teeth if a trial date were pending in the instant action, but it is not, so the delays of the past (e.g., Plaintiffs initially filing their lawsuit in the wrong venue, the aforementioned stay as to Heslop due to the pending Grand Jury investigation, and Plaintiffs' continuing efforts to avoid their own discovery responsibilities) are of no consequence in the instant Motion. What is truly at work, and which Plaintiffs will be quiet about, is that the related legal malpractice action2 is proceeding toward trial, and they would like to use Heslop's testimony for the matters being pursued in Orange County. Had Plaintiffs not so vigorously fought the Motion to Consolidate and Coordinate the Orange County action with the instant action, they would not be in the bind in which they find themselves currently. Nonetheless, any prejudice Plaintiffs might be facing in Orange County has no determinative value on the merits of Heslop's very reasonable request to move his deposition to the first week of September.
III.
CONCLUSION
For all of the forgoing reasons, Heslop respectfully requests the Discovery Referee and/or the Court to order Plaintiffs to accommodate Heslop's reasonable scheduling requests by
_________________________________
2 Twenty-Nine Palms Band of Mission Indians of California, et al., v. Nada L. Edwards, ei al., assigned case number 30-2009 00311045 by the Superior Court for the State of California, County of Orange. Very early in the Orange County proceeding, the parties attempted to consolidate the two actions, but those efforts were denied by the then-presiding judge.
_________________________________
noticing his deposition for the offered dates in September. If Plaintiffs are unable to appear on the offered dates, Heslop requests the Discovery Referee and/or the Court to order Plaintiffs to meet and confer with Heslop's counsel to arrive at a mutually agreeable deposition date. Finally, Heslop respectfully requests the Discovery Referee and/or the Court to impose sanctions against Plaintiffs and its counsel in the amount of $2,065, to be paid to Heslop by a date deemed suitable by this court. Plaintiffs should also be held responsible for the Discovery Referee's costs related to his efforts in this Motion, and Heslop specifically requests that they be ordered to do so.
KLINEDINST PC
DATED: July 11, 2011 By: _________________________________
Connie M. Anderson
Philip W. Vineyard
Pouya B. Chami
Attorneys for Defendant
David Alan Heslop
FOR IMMEDIATE RELEASE
Windermere Homes & Estates Opens its Twelfth
Southern California Office in Temecula
San Diego’s fourth largest residential real estate brokerage expands into Riverside County
San Diego – Feb. 29, 2016 – Windermere Homes & Estates (WHE) announces the opening of its newest office in Temecula, Calif., located at 27393 Ynez Road, Suite 261, near the area’s popular wine region. WHE now has 12 real estate offices throughout Southern California with plans to open a thirteenth office in the Plaza at Aviara next month.
Founded by Brian Gooding and Rich Johnson (left), WHE has opened nine offices in San Diego County in just two years, and has expanded into the Riverside and San Bernardino Counties in the past five months with new offices in Coachella Valley, Calif., Big Bear, Calif., and now Temecula, Calif. The company is the fourth largest residential real estate brokerage in San Diego based on sales volume and has more than 400 agents.
“Temecula is an incredible real estate market with its proximity to gorgeous vineyards, wine tasting rooms, and livable neighborhoods,” said Windermere Homes & Estates Co-owner Rich Johnson. “With some of Temecula’s best agents on our team, we’re looking forward to representing the Windermere brand in this exciting market.”
Gooding and Johnson have a long history in sales and management with Windermere, leading them to open their own franchise partnership in July 2013. After just two and a half years, they reached $1.2 billion in annual sales, based on data from Broker Metrics.
President of Windermere Real Estate, OB Jacobi, says Gooding and Johnson have incredible real estate business instincts, and Temecula is a Southern California market that is very desirable.
“Rich and Brian know Southern California real estate. They continue to grow offices and attract new agents because they put relationships first,” says Jacobi. “That, combined with countless hours of hard work, has helped them significantly grow Windermere Homes & Estates over the past two and a half years. Our continued partnership is going to have a positive impact in the Temecula area.”
Windermere Homes & Estates plans to add more agents. For more information, please contact Brian Gooding at briangooding@windermere.com or 760-585-8868, or Rich Johnson at richjohnson@windermere.com or 760-585-886
DOWNLOAD WINDERMERE’S PRESS RELEASE HERE
MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION OF DEFENDANTS PEGGY SHAMBAUGH AND BENNION & DEVILLE FINE HOMES, INC. dba WINDERMERE REAL ESTATE COACHELLA VALLEY TO TRANSFER ACTION TO STAY PROCEEDINGS:
L to R: Joseph R. "Bob" Deville and Bob Bennion of Windermere Services Southern California and Bennion & Deville Fine Homes, Inc., Coachella Valley, California; and Peggy Shambaugh,
Realtor at Windermere Real Estate Coachella Valley, Indian Wells office.
Editor's note: For reader continuity, the TABLE OF CONTENTS and TABLE OF AUTHORITIES originally preceding this document are not included. To review a complete copy of the document including those tables, DOWNLOAD IT HERE. Download a complete copy of the Complaint in this case HERE.
________________________________________________
SUPERIOR COURT OF CALIFORNIA
COUNTY OF RIVERSIDE
TWENTY-NINE PALMS BAND OF MISSION INDIANS OF CALIFORNIA; TWENTY-NINE PALMS ENTERPRISES CORPORATION; and ECHO TRAIL HOLDINGS, LLC, a limited liability company,
Plaintiffs,
vs.
DAVID ALAN HESLOP, an individual; DIVERSIFICATION RESOURCES, LLC , a limited liability company; NATIONAL DEMOGRAPHICS, INC., a corporation; PEGGY SHAMBAUGH, an individual; BENNION & DEVILLE FINE HOMES, INC., doing business as WINDERMERE REAL ESTATE COACHELLA VALLEY, a corporation, and DOES I through 100, inclusive
Defendants.
CASE NO.: RIC 10006101
MEMORANDUN OF POINTS & AUTHORITIES IN SUPPORT OF MOTION OF DEFENDANTS PEGGY SHAMBAUGH AND BENNION & DEVILLE FINE HOMES, INC. dba WINDERMERE REAL ESTATE COACHELLA VALLEY TO TRANSFER ACTION TO STAY PROCEEDINGS
DATE: 5/26/10
TIME: 8:30 a.m.
JUDGE: Hon. Bernard Schwartz
DEPT.: 08
Complaint Filed: 10/07/09
Trial Date: Not Yet Assigned
Defendants PEGGY SHAMBAUGH and BENNION & DEVILLE FINE HOMES, INC. doing business as WINDERMERE REAL ESTATE COACHELLA VALLEY, (collectively "Moving Parties") hereby submit the following Memorandum of Points and Authorities in support of their Motion to Stay Proceedings until the resolution of the investigation currently being conducted by the Federal Bureau of Investigation and the United States Attorney into the subject matter of this case.
BACKGROUND OF CASE AND PLAINTIFFS' ALLEGATIONS
This action arises out of Plaintiffs' purchase of 47 acres of real property adjacent to their Spotlight 29 Casino in the City of Coachella, County of Riverside in September, 2007 (hereinafter "Echo Trail Property"). Moving Parties served as the real estate broker/agent representing Plaintiffs for the purposes of this land transaction, (Complaint, p. 5, lines 6-11, lodged with the court as Exhibit A). Plaintiffs allege Defendant David Alan Heslop served as the manager of Echo Trail Holding, LLC, (an entity created by plaintiffs in which to hold title to the subject property) and as an advisor to the tribe for the purposes of this acquisition. Defendants Diversification Resources, LLC and National Demographics, Inc., allegedly provided advisory services related to the purchase. (Complaint, p. 4, line 25 to p. 5, line 5; p, 6, lines 18-20, lodged as Exhibit A.) Plaintiffs paid a total of $31 million for the Echo Trail Property. (Complaint, p, 6 lines 11-13, lodged as Exhibit A.)
The Complaint also contains allegations against the Tribe's own attorney, Gary Kovall1, who represented Plaintiffs during their negotiation and acquisition of the Echo Trail Property and allegedly made recommendations to plaintiffs with regard to the retention of other lawyers, brokers, consultants, advisors and contractors, including Moving Parties and other Defendants in this case. (Complaint, p. 4, line 16 to p, 5, line 11; p. 7, lines 1-4 and 7-11, lodged as Exhibit
_____________________________________
1 Gary Kovall was not named as a defendant in this case but rather was sued separately in a related case in Orange County, entitled Twenty-Nine Palms Band of Mission Indians v. Edwards et al., Case No. 30-2009-00311045, (lodged as Exhibit K.)
_____________________________________
A.) It is claimed plaintiffs had no knowledge of the "romantic relationship" between Kovall and Peggy Shambaugh. (Complaint, p. 5, lines 14-17, lodged as Exhibit A.)
Plaintiffs are now contending they overpaid for the Echo Trail Property and that its actual market value at the time of their purchase was no more than $20 million (Complaint, p. 6, lines 1-2, lodged as Exhibit A.). They accuse defendants of withholding and concealing information from them, including the true market value of the Echo Trail Property, the nature of the relationship between Defendant Peggy Shambaugh and attorney Gary Kovall, the details of the negotiations for the purchase of the subject property, Kovall's acquaintance with the contractor hired to work on the Spotlight 29 Casino, the quality of the contractor's work and his experience level and various other matters. (Complaint, p. 5 line 14 to p. 6, line 9; p. 6, lines 21 - 26; p. 7, lines 7-2 7; p. 8, lines 1- 15, lodged as Exhibit A.)
Plaintiffs are also alleging that Moving Parties and other Defendants provided business advice designed to benefit Defendants at Plaintiffs' expense and that Defendants received secret profits and other re-numeration as a result of their undisclosed relationships. It is also contended that Moving Parties and Defendants received large sums of money for services that were of little or no value. (Complaint, p. 4, line 25 to p. 5, line 5; p. 5, line 9 to p. 6, line 2; p. 7, lines 1-6, 11-27 and p. 8, lines 1-15, lodged as Exhibit A.)
II.
COURTS ARE AUTHORIZED TO STAY CIVIL PROCEEDINGS TO PROTECT A
DEFENDANT'S CONSTITUTION RIGHT AGAINST SELF-INCRIMINATION
California courts have long recognized that accommodation must be made for a party caught between the "Scylla and Charybdis" of trying to protect his constitutional right against self-incrimination while attempting to defend his interests in a civil action involving the same set of facts and circumstances. The United States Supreme Court has held that a party asserting the Fifth Amendment privilege against self-incrimination "should suffer no penalty for his silence." Spevack v. Klein (1967) 385 U.S. 511, 514-15. (All federal cases cited are lodged with the court as Exhibit L) The California Supreme Court has charged trial courts with assessing and balancing the nature and substantiality of the injustices claimed on both sides and arriving at an accommodation that takes the constitutional rights of the defendant into consideration. People v. Coleman (1975) 13 Cal.3d 867, 885-86. Thus, courts are obligated to weigh the competing interests of the defendant seeking to invoke his Fifth Amendment privilege, versus the plaintiff seeking redress for alleged civil wrongs, with a view toward protecting the interests of both parties. A solution that does not provide a remedy that accommodates defendant's dilemma is an abuse of discretion by the court. Pacers, Inc. v. Superior Court (1984) 162 Cal. App.3d 686, 688.
In Pacers, several agents from the Drug Enforcement Administration sued a nightclub and its employees for assault and battery as a result of a fight that broke out while the agents were working undercover at the club. Although the federal grand jury had refused to issue indictments against the club and its employees for the incident, the United States Attorney was maintaining an "open file" on the case. At their depositions in the civil action the club employees asserted their Fifth Amendment privilege against self-incrimination due to the threatened criminal proceedings. The trial court penalized the employees by prohibiting them from testifying at trial as to all matters forming the subject matter of the lawsuit. The Court of Appeal overturned the ruling, finding that the trial court abused its discretion in failing to fashion a remedy accommodating the interests of both sides. It also granted the request for a Stay of Proceedings until the statutes of limitation ran on the criminal prosecution. Pacers, supra., at pp. 687-88.
The Pacer's court held that the employees could not be penalized for exercising a fundamental constitutional right. Their inability to testify on their own behalf because they asserted their Fifth Amendment privilege made asserting that privilege "too costly". Further, because the agents had no right to information protected by the Fifth Amendment, Pacer's and the employees had not violated any discovery rules and the imposition of an order that protected only the agents was an abuse of discretion. Pacers, supra., at p. 689.
Citing to numerous federal cases, the court found that where a person's silence is constitutionally guaranteed, the court should weigh the competing interests and fashion a remedy that protects the rights involved while accommodating both parties. An order Staying the matter until expiration of the criminal statute of limitation is just such a remedy. Imposing a Stay is in accord with federal practice, "where it has been consistently held that when both civil and criminal proceedings arise out of the same or related transactions, an objecting party is entitled to a stay of discovery in the civil action until disposition of the criminal matter." Pacers, supra., at p. 690; United States v. Kordel (1970) 397 US. 1, 9; Campbell v. Eastland (1962) 307 F.2d 478, 492-93. The Pacers court found it to be in the best interests of all parties that the civil case be Stayed until the threat of criminal prosecution was resolved. Where delay and inconvenience to a civil plaintiff is weighed against the Fifth Amendment privilege, "a party's constitutional right is paramount." Pacers, supra., at p. 690. The trial court abused its discretion by failing to accommodate these rights. Pacers, supra., at p. 688.
Other courts have found it to be "in the exercise of sound discretion and in the interest of public policy" that civil proceedings be stayed "until the final disposition of the criminal proceedings." United States v. Bridges (1949) 86 F. Supp. 931, 933. "The noncriminal proceedings, if not deferred, might undermine the party's Fifth Amendment privilege against self-incrimination, expand rights of criminal discovery" beyond statutory limits, "expose the basis of the defense to the prosecution in advance of criminal trial", and otherwise prejudice the parties, Brock v. Tolkow (1985) 109 F.R.D. 116, 119. Requiring a party threatened with criminal prosecution to "participate in a civil action at the peril of being denied his worldly goods" violates concepts of elementary fairness and basic justice. Avant! Corporation V. Superior Court (2000) 79 Cal.App. 4th 876, 882.
Even in the absence of any indictments or actively filed charges, constitutional rights must prevail. To allow prosecutors to monitor civil proceedings hoping to obtain incriminating testimony through civil discovery would not only undermine the Fifth Amendment privilege but would also violate concepts of fundamental fairness and work a grave injustice on the defendant. Pacers, supra. at p. 690; United States v. Kordel, supra, at p. 5. As stated by the California Supreme Court, forcing a party under suspicion of a crime to choose between the privilege against self-incrimination and his opportunity to be heard in a civil proceeding subjects that party to a "cruel" and grossly unfair penalty. Requiring an individual to choose between such unpalatable alternatives "runs counter to our historic aversion to cruelty reflected in the privilege against self-incrimination." People v. Coleman (1975) 13 Cal.3d 867, 878. For this reason courts have discretion to remove this dilemma by Staying the civil matter until the criminal proceedings have run their course, or the statutes of limitation expire. Where the interests of law enforcement and redress for civil wrongs collide, the appropriate remedy is for the trial court to Stay the civil matter in the interests of justice. County of Orange v. The Superior Court of Orange County (2000) 79 Cal. App. 4th 759, 768.
A STAY OF PROCEEDINGS IN THIS CASE IS REQUIRED TO PROTECT MOVING PARTIES' CONSTITUTIONAL RIGHTS AGAINST THE INVESTIGATION BY THE FEDERAL BUREAU OF INVESTIGATION AND THE UNITED STATES ATTORNEY INTO THE FACTS ALLEGED IN PLAINTIFFS' COMPLAINT
A. Moving Parties Are Under Investigation by The Federal Bureau of Investigation And the United States Attorney As To The Allegations In Plaintiffs' Complaint
Moving Parties have been contacted by agents from the Federal Bureau of Investigation in regard to the allegations in Plaintiffs' Complaint. (Declaration of Cheryl D. Davidson, para. 3, filed herewith.) Special Agent George Krumpotich and Special Agent Mark C. Hunter, have contacted Peggy Shambaugh in regard to her involvement in plaintiffs' purchase of the Echo Trail Property. (Declaration of Cheryl D. Davidson, para. 3, filed herewith.) From the business cards these agents gave to Ms. Shambaugh, it appears they are based out of the FBI office at 601 E. Tahquitz Canyon Way, Palm Springs, CA 92262. (Business cards, lodged as Exhibit B). From information obtained from these agents, it appears they are investigating plaintiffs' purchase of the Echo Trail Property, including the price paid for it, the purpose of the acquisition, how it was acquired, and the role the Moving Parties and other Defendants and persons played in the transaction. The FBI is also investigating Moving Parties and Defendants' involvement in other transactions with the Tribe (as referred to in the Complaint, p. 7, lines 1-6; p. 7; p. 8, lines 1-15.) (Declarations of Matthew M. Horeczko, para,3 and 4, Edward M Robinson, para. 2-5 and Cheryl D. Davidson, para. 3, filed herewith.)
Counsel for Moving Parties and for Gary Kovall have also contacted the office of the United States Attorney, who confirmed that an investigation is being conducted into Moving Parties and Defendants' roles in the Tribe's acquisition of the Echo Trail Property and in various other business ventures and transactions. The United States Attorney has also indicated in indictment is under consideration. (Declaration of Edward Robinson, paras. 2-5 and Declaration of Matthew M Horeczko, para.. 3 and 4, filed herewith.)
In view of the information received from the FBI and the United States Attorney, there is a substantial threat of criminal proceedings being instituted by the FBI against the Moving Parties and Defendants in this action in regard to the same facts and circumstances alleged in plaintiffs' Complaint. Defendants in this case, including Moving Parties, have been forced to retain criminal defense attorneys to protect their interests in this matter and in any criminal action that may be brought by the U.S. Attorney or any other law enforcement agency. These criminal defense attorneys have instructed their clients to assert their rights to remain silent. (Declarations of Edward Robinson, paras. 2 and 3, and Matthew M Horeczko, para. 5, filed herewith.)
B. Discovery Disputes Have Already Arisen Due To Moving Parties' Assertion of The Fifth Amendment Privilege Against Self-Incrimination
Shortly after Moving Parties were served with the Summons and Complaint in this matter, Plaintiffs propounded discovery to them, consisting of Form Interrogatories and Requests for Production of Documents. The Form Interrogatories contained the appended definition of the term "INCIDENT" as follows: "The Purchase of the property identified in paragraph 13 of the Complaint in this action." (Form Interrogatories to Shambaugh, lodged as Exhibit C.)2 The Requests for Production of Documents demanded production of all documents "related in any way to the Echo Trail Property" and/or to communications with any other person
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2 Nearly identical discovery requests were propounded on Windermere, but for purposes of economy, are not lodged.
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or entity related to the Echo Trail Property. Plaintiffs also demanded production of Moving Parties computers, files, and other private documents, including Ms. Shambaugh's bank and credit card records, real property records, and "All Documents and Electronic Data that refer to You and Gary Kovall as being husband and wife." (Requests for Prod., lodged as Exhibit C.)
On December 16, 2009, Moving Parties served timely and verified Written Responses to this Discovery, lodging appropriate objections. (Discovery Responses, lodged as Exhibit D.)3 Responsive, non-privileged and non-objected to documents were Bates Stamped and prepared for Inspection by plaintiffs. However, prior to the production, Ms. Shambaugh was contacted by the FBI and Defendants became aware of the current investigation. To protect the rights of Moving Parties, production of these documents was withheld on the basis of the Fifth Amendment until such time as Moving Parties could seek legal advice from criminal defense attorneys as to their rights and alternatives in view of the circumstances. (Declaration of Cheryl D. Davidson, para. 5, filed herewith.)
On December 1, 2009, plaintiffs propounded a second set of Form Interrogatories and Requests for Production containing the same set of definitions as the first set. The Interrogatories asked Moving Parties to "State all facts upon which you base the denial or special or affirmative defense" in your Answer. It also requested the names of persons with knowledge of these facts and the identification of all documents upon which the denial or affirmative defense was based. The Requests for Production demanded production of these documents. (Discovery Requests, Set Two, lodged as Exhibit E.) Moving Parties asserted their Fifth Amendment rights against self-incrimination in response to this discovery. (Responses to Discovery, Set Two, lodged as Exhibit F.)4
Although counsel for Moving Parties attempted to explain the situation to plaintiffs' counsel and obtain an extension of time in which to address the Fifth Amendment issues, this request was continually denied. (Correspondence of Cheryl D. Davidson and Gordon
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3 For purposes of economy, Windermere's Responses have not been lodged.
4 For purposes of economy, only the discovery to and from Shambaugh have been lodged.
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Bosserman, lodged as Exhibit I.) Plaintiffs filed a Motion to Compel Responses to the Discovery, which was set by the court in San Luis Obispo for April 15, 2009. The motion was taken off calendar by the San Luis Obispo court when the Motion to Transfer was granted and this case was transferred to Riverside County. (Declaration of Cheryl D. Davidson, para. 4, filed herewith.)
For their part, Moving Parties served several sets of Discovery on Plaintiff on November 30, 2009, prior to discovering the FBI investigation. (Moving Parties Discovery Requests, Set One, lodged as Exhibit G,)5 In retaliation for the assertion of the Fifth Amendment, Plaintiffs served Objections to each and every request. In their responses Plaintiffs stated that they would "provide only objections in connection with this response", citing Moving Parties assertion of the Fifth Amendment as the reason why they would not respond to Moving Parties Discovery Requests. Although Moving Parties attempted to "meet and confer" in regard to this improper retaliatory response by plaintiffs, no response was elicited from Plaintiffs on this issue.6 (Plaintiffs' Responses to Moving Parties' Discovery, lodged as Exhibit H; Letter of Cheryl D. Davidson, lodged as Exhibit J.)
As underscored by the allegations in the Complaint, the questions propounded in their Discovery Requests (and attached "Definitions") and the Motion to Compel Responses to Discovery, plaintiffs are attempting to obtain facts, documents and witness names pertaining to the purchase of the Echo Trail Property and the involvement of Defendants therein. This is the identical subject matter currently being investigated by the FBI. Moving Parties are caught in the precarious situation of having to defend themselves in a multi-million dollar civil lawsuit while at the same time preserving their fundamental constitutional right against self-
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5 For purposes of economy, only the discovery propounded to the Tribe, and their responses have been lodged, although identical requests were went to all three plaintiffs and nearly identical responses received from them.
6 Moving Parties were unable to file a Motion to Compel Further Responses Due to the filing of the Motion to Transfer Proceedings to Riverside County and the court's lack of jurisdiction to bear other matters prior to that motion.
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incrimination. This is exactly the type of scenario for which courts have fashioned the remedy of a Stay of Proceedings.
C. Moving Parties Should Not Be Penalized For Protecting Their Constitutional Rights In This Case
The Fifth Amendment to the United States Constitution guarantees that no person shall be compelled "in any criminal case" to be a witness against himself. Article One of the California Constitution provides that persons may not be compelled "in a criminal cause" to be a witness against themselves. Cal.Const., art. I, Section 15. California courts have found that these protections extend even further, allowing a person not to answer questions in any proceeding, civil or criminal, formal or informal, administrative or judicial, investigatory or adjudicatory, where that person believes the answers might incriminate him in a criminal action. One cannot be forced to choose between forfeiting the privilege against self-incrimination on the one hand or asserting it and suffering a penalty for doing so on the other. Spielbauer v. County of Santa Clara (2009) 45 Cal. 4th 704, 714; Segretti v. State Bar (1976) 15 Cal. 3d. 878, 886
As embodied in the statutes, "A person has a privilege to refuse to disclose any matter that may tend to incriminate him," California Evidence Code Section 940. Privileged matters thus lie beyond the reach of discovery and trial courts may not compel individuals to make responses that they reasonably believe could be used in a criminal prosecution or which could, at the very least, lead to evidence that might be so used. A & M Records, Inc. v. Heilman (1977) 75 Cal. App. 3d 554, 566.
To invoke this privilege a witness need not be guilty of any offense. Rather the privilege is properly invoked whenever the witnesses' answers would furnish a link in the chain of evidence needed to prosecute the witness for a criminal offense. Sachs v. Sachs (2002) 95 Cal.App.4th 1144, 1151.
As the United States Supreme Court and California courts have held, a party to a civil suit should not be forced to suffer any sanction, penalty or other "costly" action for protecting their fundamental constitutional right against self-incrimination. People v. Coleman, supra., at p. 885; Spevack supra. at p. 515; Pacers, supra., at p. 689. However, without a Stay, Moving Parties and Defendants in this action would be precluded from testifying at trial as to all matters for which they have asserted the privilege, A & M Records, supra. at p. 566. Essentially, they would be unable to testify as to their role in the Tribe's purchase of the Echo Trail Property and in the other transaction of which plaintiffs complain. This "costly" penalty could "cost" Moving Parties millions of dollars, their excellent reputation among real estate professionals and clients and ultimately, their livelihood. Should Moving Parties be forced to litigate this matter without being able to respond to relevant discovery, produce their documents, or testify on their own behalf as to the issues in this case, their defense would be severely crippled, to the point of being nearly non-existent. In addition, their inability to fully participate in their defense by testifying and producing documents could cause them to lose their insurance coverage, exposing them to millions of dollars in civil liability and defense costs. Not being able to defend themselves in a court of law, or in the court of public opinion, while plaintiffs' allegations are freely pronounced, reported in the media and brandished to the public, would cause permanent harm to Moving Parties' ability to continue in their chosen fields. Especially in the real estate profession, where referrals and repeat business are essential, a one-sided trial with the attendant publicity would severely impact their business and personal lives. An award for plaintiffs, earned merely by taking advantage of Moving Parties' need to protect their constitutional rights, could bankrupt Moving Parties and significantly impact their own security and welfare and that of their families.
D. A Stay Is Necessary To Preserve All Parties' Rights, Efficiently Use Court Resources and Ensure a Fair and Meaningful Trial in Accordance with Public Policy
In determining whether to Stay the Proceedings until the completion of a criminal matter or the running of the statutes of limitation on the underlying actions, courts must attempt to protect the constitutional rights of the party asserting the privilege, while taking into consideration a litigants' interest in pursuing its lawsuit. Although issuing a Stay of Proceedings may cause some inconvenience to an adverse party, courts have usually deemed the prohibition against self-incrimination to be the more important consideration. United States v. Kordel, supra. at p. 9: Brock supra., at p. 119: County of Orange, supra., at p. 767. Protecting a party's constitution rights is paramount and overrides any inconvenience or delay it might cause to the complaining party. Pacer's, supra., at p. 690. In addition, Staying the Proceedings until all parties are free from the threat of criminal actions ensures that all the parties to the civil litigation can obtain a fair trial.
1. All Parties' Rights Are Protected by a Stay, Including Plaintiffs
California courts have held that Staying a civil action to await the outcome of a related criminal case can benefit all litigants to the civil action and does not create an undue burden upon the civil plaintiff. Fuller v. Superior Court (87 Cal.App.4th 299, 306. A Stay of Proceedings in this matter would preserve not only the constitutional rights of Moving Parties, but Plaintiffs' right of discovery against Moving Parties. As evidenced by their Discovery Requests, their counsel's refusal to allow an extension of time to respond to them, and by their Motion to Compel Responses, Plaintiffs are in need of Moving Parties' evidence, documents and testimony to prepare their case. Without discovery responses and deposition testimony from the Moving Parties and Defendants in this matter, Plaintiffs' ability to prepare their case and meet their burden of proof will be significantly prejudiced. Staying this matter until Moving Parties (and all Defendants) are free to respond to discovery and provide documents and testimony would ensure all parties to this action are able to fully prepare their case before trial and elicit testimony from all witnesses at trial.
In addition, a Stay would prevent all parties from expending significant time, effort and money in bringing and defending discovery motions. Plaintiffs have already incurred the time and expense of "meeting and conferring" and bringing a Motion to Compel as against Moving Parties. Plaintiffs also face these same types of expenses as to all the Defendants (and some witnesses) in this matter as long as the criminal action looms. Staying this case would obviate these issues.
Finally, Staying this matter would prevent the "unfairness" plaintiffs perceive in having to respond to discovery when they are unable to obtain it from Moving Parties. As evidenced by the retaliatory "Objections only" responses received by Moving Parties to their Form Interrogatories and basic contention interrogatories, Plaintiffs are unwilling to produce their evidence in this case without reciprocity. (Plaintiffs' Responses to Discovery, lodged as Exhibit H.) Staying this matter would resolve these issues.
2. Staying the Case Would Avoid Burdening the Court with Discovery Motions, Evidence Hearings, "In Camera" Proceedings and Other Adjudications and Promote Efficient Use of Court Resources
The alternative to imposing a Stay on this case is proceeding with the litigation and dealing with Moving Parties, Defendants and witnesses' assertions of their Fifth Amendment rights as to each discovery request that could impinge on their rights against self-incrimination. The court's time and resources would be taken up with motions and hearings into the numerous issues generated by the assertion of this privilege. The court would be required to continually balance the competing interests of the parties in an effort to keep this case on track. Already, Plaintiffs have filed one Motion to Compel Discovery Responses. More are sure to follow. Disagreements have already arisen in regard to a few of the issues that are sure to arise. As evidenced by the letters between counsel, these parties already disagree about issues such as the applicability of the Fifth Amendment to entities and to the production of documents, whether certain discovery requests pertain to evidence protected under the privilege, and the procedures that are followed in connection with the assertion of the privilege. (Correspondence between Plaintiffs' counsel and Cheryl D. Davidson, lodged as Exhibit 1.) Inevitably, the court will be brought in to adjudicate these disputes through motions to compel, motions for protective orders, "in camera" hearings, ex parte applications and other procedures.
Court intervention will also be required to prevent retaliatory refusals to participate in Discovery from Plaintiffs. In response to Moving Parties' assertion of their Fifth Amendment privilege, Plaintiffs have refused to serve any substantive responses to Moving Parties Discovery requests. As they indicated in their Responses to the Special Interrogatories served by Moving Parties, "Plaintiff will only provide objections in connection with this response", citing the Fifth Amendment issues that had arisen between the parties. As a result, Moving Parties must now bring a Motion to Compel, further clogging up the court's calendar.7 (Plaintiffs' Discovery Responses, lodged as Exhibit H.)
Unless this matter is Stayed until these issues are moot, the court will be dealing with these types of disputes not only between Moving Parties and Plaintiffs, but between Plaintiffs and the Defendants and witnesses named in the Complaint, such as Gary Kovall. (See Declaration of Edward Robinson, paras. 2 and 3.) These issues would no doubt also arise as to any person called to testify in this case who is a party or witness in the other lawsuits filed by Plaintiffs alleging the same facts alleged in the instant matter. (See Twenty-Nine Palms Band of Mission Indians v. Edwards, et. al, Orange County Case No. 30-2009-003110458; and Twenty-Nine Palms Enterprises v. Cadmus Construction, San Bernardino County Case No. CIVRS 908132, lodged with the court as Exhibit K.) Obviously, this would take up a significant amount of the court's time and resources and would still yield a trial in which none of the parties have the information it needs to conduct a fair and meaningful presentation of evidence. In addition, any verdict arrived at by the trier of fact would be based not upon the true evidence in the case, but rather an abridged and lop-sided rendering of the allegations by Plaintiffs.
3. A One-Sided Trial Against Defendants Asserting Their Fifth Amendment Protections Is Inherently Unfair and Against Public Policy
There is a strong public policy in California that favors trial on the merits of a case, where all sides have an opportunity to put forth their entire case and testify on their own behalf. Hamburg v, Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502. In fact, California promulgated its Discovery Act in an effort to make trial a fair contest with the basic issues and facts disclosed to the fullest possible extent. The fairness and efficiency of trials are of paramount importance to the court system and to the public. Rights long deemed essential to a
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7 Although Moving Parties sent a "Meet and Confer" letter to Plaintiffs' Counsel in regard to the refusal to comply with Discovery, no response was ever received to this letter. (See Cheryl D. Davidson letter, lodged as Exhibit J and Declaration of Cheryl D. Davidson, para. 6, filed herewith.)
8 This is the lawsuit in which Gary Kovall was named a defendant. The allegations in this Orange County Complaint mirror those in the instant case (See Orange County Complaint, lodged as Exhibit K and the instant Complaint, Exhibit A.)
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fair trial are the right to effective counsel, to summon, confront and cross-examine witnesses, and the right to testify on one's own behalf. Wilson v. Superior Court (2010) 2010 WL 1009962; Greyhound Corporation v. Superior Court (1961) 56 Cal. 2d 355, 376.
Without a Stay, the court and all parties to this action would labor significantly and expend excessive time, effort and resources to give birth to a verdict that is hollow, inherently unfair, one-sided and not reflective of the actual merits of the case. A civil trial in which all the defendants are forced to remain silent to protect their constitutional rights is unjust and punitive and would be more of a "prove-up" hearing than a trial. Public policy, California law, and Federal law dictate that all possible efforts must be made to avoid such a result. US. v. Bridges, supra., at p. 933; Pacers, supra., at p. 690.
IV.
CONCLUSION
Based upon the foregoing, the complete file, the moving papers, and the evidence presented, Moving Parties respectfully request that the court grant its Motion to Stay Proceedings until the resolution of the criminal matter being investigated by the Federal Bureau of Investigation and the United States Attorney's office, or the running of all applicable statutes of limitation.
DATED: April 8, 2010 SUNDERLANDI McCUTCHAN, LLP
By: ________________________________
Robert J. Sunderland
Cheryl D. Davidson
Attorneys for Defendants, PEGGY SHAMBAUGH,
an individual, BENNION & DEVILLE FINE
HOMES, INC., doing business as WINDERMERE
REAL ESTATE COACHELLA VALLEY, a
corporation