aslan H. Abregov vs. Bio-Nutritional Research Group, Inc.

Reply Other

Cal. Super. - 4th Dist.March 19, 2013

LI ~ ~N O N W n 10 11 12 14 15 16 17 18 19 20 21 22 24 25 26 27 28 CADDEN & FULLER LLP Thomas H. Cadden, Bar No. 122299 John B. Taylor, Bar No. 126400 Nathaniel M. Carle, Bar No. 304846 114 Pacifica, Suite 450 Irvine, CA 92618 Telephone: (949) 788-0827 Facsimile: (949) 450-0650 Attorneys for Plaintiffs ELECTRONICALLY FILED © Superior Court of California, County of Orange 06/25/2018 at 02:00:00 PM Clerk of the Superior Court By Olga Lopez, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE - CENTRAL JUSTICE CENTER ASLAN H. ABREGOV, an individual in his own name and on behalf of BIO- NUTRITIONAL RESEARCH GROUP, INC., a California corporation, et al.; Plaintiffs, VS. BIO-NUTRITIONAL RESEARCH GROUP, INC., a California corporation, et al., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 30-2013-00638650-CU-BC-CJC ASSIGNED FOR ALL PURPOSES TO THE HON. RONALD L. BAUER DEPARTMENT CX103 REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS [Code Civ. Proc. § 1032(a)(4); Cal. Rules of Court, Rule 3.1700] DATE: July 2,2018 TIME: 9:00 a.m. DEPT: CX103 Complaint Filed: March 19, 2013 Trial Date: October 23, 2017 REPLY IN SUPPORT OF PLAINTIFFS® MOTION TO STRIKE AND TAX COSTS 10 11 12 14 15 16 17 18 19 20 21 22 24 25 26 27 28 1. INTRODUCTION Defendants wish to have their cake and eat it, too. On the one hand, the Defendants claim that the 2014 Share Cancellation Agreements gave Plaintiffs all of the relief they could possibly hope for. By reducing the total number of outstanding shares to only 1,000,000, the Plaintiffs’ dilution has been limited to the exact amount they could have expected when they first invested in BNRG. According to the Defendants, by “voluntarily” giving this benefit to Plaintiffs, there was no reason for Plaintiffs to continue with this lawsuit. On the other hand, the Defendants also claim that the 2014 Share Cancellation Agreements were virtually meaningless gestures. While they temporarily reduced the total number of shares outstanding, Defendants retain both the right and the desire to issue more shares and increase the total number of outstanding shares beyond 1,000,000. They claim that, despite the best efforts of Plaintiffs, no ruling after the 2014 Share Cancellation Agreements has done anything to impact the Defendants’ unfettered right to issue those additional shares and again dilute the Plaintiffs below 2.689%. They cannot have it both ways. The 2014 Share Cancellation Agreements were not both a magnanimous gesture giving great undeserved benefits to Plaintiffs while also being ephemeral actions having no lasting impact. As would be expected, the truth lies in between. The 2014 Share Cancellation Agreements, which were a direct result of this lawsuit, did provide a substantial benefit to Plaintiffs. This reduced the Plaintiffs’ share dilution significantly and raised their percentage ownership of BNRG from 0.36% to 2.689% each. On this specific issue, the balance of the case has not resulted in any greater increase in share percentage. However, the 2014 Share Cancellation Agreements did not address the issue of whether the Plaintiffs could be diluted again. Instead, the Plaintiffs had to continue with the lawsuit to obtain that result. Defendants’ protests to the contrary notwithstanding, Plaintiffs have now obtained rulings which appear to state that 1,000,000 shares is the limit and no further shares may be issued without the Plaintiffs’ consent. -2. REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS OO 0 0 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 That additional effort by Plaintiffs was necessary and, now that the Plaintiffs have obtained those additional rulings, the Defendants are not the prevailing parties. They should not be awarded any costs or, at least, those costs should be reduced due to their minimal level of success. Alternatively, the costs included by Plaintiffs in the memorandum of costs should be taxed because they are either not permitted by law or excessive. 2. PLAINTIFFS HAVE OBTAINED SIGNIFICANT NON-MONETARY RELIEF Code of Civil Procedure Section 1032(a)(4)’s definition of “prevailing party” states: “When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties ... .” Here, Plaintiffs obtained significant non-monetary relief. Accordingly, the Court has discretion in determining which side, if any, prevailed and the Court has discretion to apportion the costs claimed. A. Plaintiffs Obtained Significant Relief in Phase I Defendants tout the Court’s Phase I finding the parties did not agree that BNRG should be a close corporation. Defendants claim that this ruling, standing alone, means that they prevailed in Phase I. However, as Defendants admit, even prior to the conclusion of the Phase I trial, Plaintiffs had already confirmed that they did not care about the “close corporation” issue. Opp. 8:13-14. Instead, the “close corporation” issue was only important if it was needed to protect the main issue - the validity of the unanimous consent provision in Section 3.03(a). Plaintiffs did prevail on this main issue. In particular, the Court specifically ruled: “They [Defendants] have suggested that many terms of this Agreement - which themselves make no reference to a close corporation - are unenforceable. The court disagrees.” Phase I SOD, 3. Lest there be any confusion as to whether the Court found the remaining provisions, including the unanimous consent provision, to be valid, the Court confirmed: “a -3- REPLY IN SUPPORT OF PLAINTIFFS® MOTION TO STRIKE AND TAX COSTS 0 3 AD o O 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 “There is nothing inherently illegal or contrary to public policy in the governance provision of these parties’ Agreement. ... If one or more of the signatories now wishes that he had not entered into this contract or would like to be free to breach it, this court will be of no assistance. It would prefer to enforce their agreement. ... The substantive operative provisions should all survive.” That is, the Court agreed with the Plaintiffs that the unanimous consent provision in the Shareholder Agreement was valid and, despite the “close corporation” ruling, the unanimous consent provision remained in force. This ruling was a significant non-monetary recovery for the Plaintiffs. B. Plaintiffs Appear to Have Obtained Significant Relief in Phase II With regard to Phase II, the Court’s ruling is not so clear. It appears from the Phase II ruling, that the Court recognizes that the unanimous consent provision limits BNRG’s authorized shares to 1,000,000. In fact, the Court specifically states: “One million shares are authorized.” Phase IT SOD, 4. However, because the Court did not state, “only one million shares are authorized,” the Defendants conclude that they still have an argument that they may dilute the Plaintiffs below their current 2.689% percentage interest in BNRG. On this issue, the Defendants claim that the Court has not clearly confirmed “that Plaintiffs’ ownership could never again fall below 2.689% without their consent.” Opp. 12:11. That is, despite the fact that the Court held that the “substantive operative provisions” of the Shareholder Agreement should survive and despite the fact that the unanimous consent provision is a “substantive operative provision” and despite the fact that the Plaintiffs have not given consent to amend the articles of incorporation to authorize the issuance of more than 1,000,000 shares, the Defendants contend that they may still issue more than 1,000,000 shares. As noted in the Plaintiffs” motions for new trial and to vacate the judgment, the Court should amend the judgment to disabuse the Defendants of this notion that they may issue more than 1,000,000 shares. The Court should require the Defendants to file a further amendment to BNRG’s articles of incorporation returning the authorized share limit to the 1,000,000 allowed in i REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS UY Sn ~N O N W n 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 the original articles of incorporation instead of the 15,000,000 share limit stated in the unauthorized amendment. Even without this, though, the Court’s pronouncement that “One million shares are authorized” makes it clear that this is the limit and Plaintiffs cannot be diluted further without their consent." This relief was also significant non-monetary relief. C. The Court Should Deny Defendants’ Request for Costs or Should, at a Minimum, Apportion Them Plaintiffs received significant non-monetary relief. As such, the Court may exercise its discretion to deny any party the right to recover costs or may apportion those costs. Code of Civil Procedure §1032(a)(4). Defendants argue that, because Plaintiffs did not submit a memorandum of costs, the Court has somehow lost its right to exercise discretion under Section 1032. Opp. 13:6-9. However, at present, the judgment entered by the Court has a blank line for costs to be awarded to Defendants and no line for costs to be awarded to Plaintiffs. Accordingly, unless and until the Court determines that Plaintiffs are prevailing (or partially prevailing) parties, they have no right to submit a memorandum of costs.” As it presently stands, the Court may elect to award Defendants no costs at all. Alternatively, the Court may exercise its discretion and award Defendants only a portion of their costs, such as only 25% or 50%. Because of the substantial relief awarded to Plaintiffs, Defendants should not be allowed the entirety of their otherwise allowable costs. ! The Plaintiffs are not abandoning their request that the Defendants be required to file an amendment to BNRG’s articles of incorporation to return the authorized limit to only 1,000,000 shares. First, that would make it absolutely clear to the Defendants that they are prohibited from issuing more than 1,000,000 shares without the Plaintiffs’ consent. Second, that would prevent a third party (such as an employee claiming a stock option) from claiming a right to be issued BNRG shares. ? In both the Plaintiffs’ motion for new trial and their motion to vacate the judgment, they seek to have the Court confirm that they are, in fact, the prevailing parties. Because those motions have not been ruled upon, it would be presumptuous for Plaintiffs’ to have filed a memorandum of costs. -5- REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS 0 3 AN \O 10 11 12 14 15 16 17 18 19 20 21 22 24 25 26 27 28 3. THE COURT SHOULD STRIKE AND/OR REDUCE THE COSTS REQUESTED In determining what costs, if any, to award, the Court should only consider properly allowable costs. Even if Defendants had been the only party to obtain any relief, many of the costs they have requested are excessive and/or not allowable at all. 1. Filing and motion fees. Defendants acknowledge that their request for appellate costs is inappropriate. As such, they should be taxed the $775 requested for filing their notice of appeal from the Court’s order denying their petition to compel arbitration. With regard to the Defendants’ motion for sanctions, the Defendants claim that they did not ask for the recovery of the motion filing fee in conjunction with that motion. However, they could have made that request. They did not. The Court has already determined the total amount the Plaintiffs should have to pay relating to the fact that, due to a procedural mix-up, neither the Plaintiffs nor their counsel appeared for a mandatory settlement conference. The Plaintiffs have paid that amount. The Defendants should not be allowed multiple bites at that apple. The $60 filing fee should be taxed. 8. Expert fees. Defendants argue that they should be awarded all of the amounts billed by Mr. Jackson. As noted in the moving papers, the Court found that Mr. Jackson’s testimony “was probably unnecessary.” Phase II SOD, 5. It also appears that this testimony was unreasonably expensive. At the Phase II trial, Mr. Jackson testified that he had been paid “a little bit less than $200,000.” Tr. 11/9/17 21:24-25. He also noted that he might have another $100,000 in charges outstanding. Tr. 11/9/17 21:26-22:4. In its statement of decision, the Court noted that this $300,000 charge “rung the bell [as] the highest expert fees ever reported in this court - by far.” Phase II SOD 5. That $300,000 charge has now been dwarfed by Mr. Jackson's total bill of $472,380.81. This charge, which is more than 50% more than reported by Mr. Jackson in court, not only rings the bell - it cracks it. This charge is simply unreasonable. “6 - REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS Ud I ~N O N W n 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 pg 28 First, the rate charged by Mr. Jackson is not supported. The Defendants have offered nothing to indicate that a charge of $1,000 per hour is appropriate. Mr. Jackson, who does not have a consulting practice, does not have a regular “consulting fee.” He did not testify as to the rates generally charged in the industry for such work. Dr. Luna, who does have a consulting practice, testified that her rate, which is less than one half of Mr. Jackson's, is toward the high end of the field. As such, the only evidence before the Court on this issue is that Mr. Jackson’s rate is double the prevailing rate.’ Furthermore, the amount of hours charged by Mr. Jackson is suspect. Mr. Jackson's billing records contain only four entries describing the time he spent on this case. Lam Dec., Ex. 10. Those entries are the following: o “Thirty (30) Hours of Document Review, Research, Analysis, Teleconferences, and Meetings.” eo “Forty-Two (41) [sic] Hours of Document Review, Preparation Meetings and Drafting.” e “Forty-Seven (47) Hours of Deposition Review, Preparation Meetings, and Analysis.” Two Hundred Sixty-Two (262) Hours of Rebuttal Analysis, Deposition and Related Preparation, Preparation for Trial and Cross-Examination and Trial Proceedings.” This minimal level of description of 410 hours of time and $410,000 in charges makes it extremely difficult to determine which specific portion of these charges relates to which activity. However, what is known is that Mr. Jackson prepared two very simple PowerPoints and testified for only a part of a single morning. Suggesting that this justifiably took him 410 hours is simple not reasonable. Mr. Jackson’s claim for $62,380.81 in costs is similarly vague. His six cost entries are the following: eo “Airfare, Ground Transportation and Lodging for Meetings at Gibson Dunn’s Orange County Office ... $4,992.77.” e “Purchase of Data Extraction from Equilar, Inc. Public-Company Executive-Pay Database ... $3,000.00.” Purchase of Private-Company Executive Compensation Report ... $2,495.00.” Airfare, Ground Transportation and Lodging for Meetings at Gibson, Dunn; Data Extraction ... $11,660.63.” > In her declaration, Linda Lam testifies that, in another case, her clients hired “an executive compensation expert at a rate of $750 per hour.” Lam Dec., §13. While this single data point is hardly indicative of the reasonable rates customarily charged in the industry, it is only 75% of the amount charged by Mr. Jackson. oT REPLY IN SUPPORT OF PLAINTIFFS” MOTION TO STRIKE AND TAX COSTS Sn ~N O Y W n 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 o Airfare, Ground Transportation and Lodging for Deposition at Gibson, Dunn; Data Extraction ... $6,617.47.” e Airfare, Ground Transportation and Lodging for Preparation and Deposition at Gibson, Dunn; Data Extraction ... $33,613.94.” Again, this level of detail makes it hard to actually analyze Mr. Jackson’s cost claim. However, some of the request makes it suspect. For example, after Mr. Jackson had prepared his initial report, what additional “data extraction” cost was needed? Why would he still be paying for “data extraction” on his final bill, when his only time entry suggests he was merely reviewing Dr. Luna’s report and preparing for trial. The cost request is more than what would be reasonable for the expert fee itself. This request cannot stand. Finally, it appears that the Defendants did not incur the majority of Mr. Jackson’s cost. Mr. Jackson’s first two bills, totaling $93,148.40, were directed to Ropers Majeski, Defendants’ insurance counsel for whom fees have not been requested. Mr. Jackson’s final two bills, totaling $349,232.41 were directed to BNRG. Lam Dec., Ex. 10. Despite the fact that the judgment has declared BNRG to be a “prevailing party” in this litigation," BNRG did not file a memorandum of costs. As such, BNRG cannot be awarded any of the $349,232.41 it paid to Mr. Jackson. Because this was not paid by the Defendants, they cannot be awarded this amount, either. 12. Court reporter fees. The Plaintiffs have reviewed the documentary support provided by the Defendants in their opposition relating to the court reporter fees. The Plaintiffs withdraw their request to tax this item. 16.A Other Costs - Trial Technology - Total $83,032.51 This case was not designated “complex.” The exhibits entered at trial fit into a single banker’s box. Those exhibits could be easily and effectively displayed on the Court’s ELMO system. There was no jury which needed a simpler presentation. * BNRG’s status as a prevailing party is suspect. Several of the claims in this action were brought as derivative claims for the benefit of BNRG. The Court has found: “The plaintiffs have proven none of their ... derivative claims.” Phase II SOD 6. Because BNRG was not a party to any other claims and the rulings which benefitted Plaintiffs individually (upholding the Shareholder Agreement and limiting the dilution) do not benefit BNRG, it is hard to understand how BNRG could be a prevailing party. _8- REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS Ba N O Dn 10 11 12 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The use of additional technology was simply not needed. Code Civ. Pro. § 1033.5(c)(2). As such, it should not be an allowed cost. 16.B Other Costs - Messenger Fees - $2,281.86. Defendants have withdrawn $618.18 of the messenger fees requested. The balance should be taxed as well. With regard to the $417.07 in messenger fees to parties, there is no reasonable basis given for these costs. For example, Defendants suggest that they needed to personally serve objections to the depositions of Defendants Narendra Parson and Carlos Prietto. Opp. 18, n. 3. However, because written objections to the notice of a deposition are waived if the party then attends the deposition and both Parson and Prietto attended their depositions as noticed, these did not need to be served at all, much less by messenger. Code of Civil Procedure §2025.410(b).” Furthermore, to the extent that Defendants felt obliged to serve something immediately, they could have requested that counsel agree to treat electronic service as personal service, an option the parties utilized on multiple occasions in this litigation. With regard to the messengers to the Court, there was similarly no need. Presumably, a firm the size of Gibson Dunn has a contract with an attorney service to pick up documents daily from their offices and deliver them to the Orange County Superior Court. As such, if prepared in time for that pickup, there would be no cost to deliver documents to the Court. Alternatively, if Gibson Dunn does not have such a relationship with an attorney service, the cost of more than $100 to deliver certain items is excessive. The total cost of $1,246.61 to make 22 deliveries is simply unreasonable. Many of the deliveries were in the range of $20. If all of the deliveries had been at a similar cost, the total would have been $440, not nearly three times that amount. The excessive cost should be taxed. * Only objections claiming an “error or irregularity” in a deposition notice need be served in advance of the deposition. Code of Civil Procedure §2025.410(a). Objections to the categories of documents requested are not “errors or irregularities” and can be made at the time of the deposition to explain which documents have been produced and which withheld. -9. REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS U2 oN ~N O N W n 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 16.C Other Costs - Attorney Parking and Mileage to Attend Hearings/Trial - $2,781.93 Defendants rely on Code of Civil Procedure Section 1033.5(a)(3)(C) as justification for their request for parking and mileage expenses. Opp. 19:18-19. However, as admitted by the Defendants, that section relates to travel to and from depositions. As noted in Ladas v. California State Auto. Assn. 19 Cal.App.4th 761, 775-776, a case Defendants attempt to distinguish (Opp. 19:10-14): “The only travel expenses authorized by section 1033.5 are those to attend depositions.” As such, the fact that deposition travel is an allowed cost cannot be extrapolated to justify claiming the cost of other travel. Those costs are simply not allowed. These costs must be stricken. 4. CONCLUSION. Based on the foregoing and the moving papers, Plaintiffs respectfully request that the Court enter an order striking the costs claimed by Claimants in their entirety, apportioning costs consistent with the relative success of the parties, as permitted by CCP section 1032(a)(4), or, in the alternative, striking and taxing those costs as requested. DATED: June 2 2018 CADDEN ¢& FULLER LLP omds H. Cadden John B. Taylor Nathaniel M. Carle Attorneys for Plaintiffs -10- REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS OO 0 3 OO nn B W N e RN Y N N N N N O N N N H m m e m e m e m em pe 0 NN O N nn bh W N = O 0 0 N D W D D PROOF OF SERVICE Aslan H. Abregov, et al. v. Bio-Nutritional research Group, Inc., et al. (Case No. 30-2013-00638650-CU-BC-CJC) I am a resident of the State of California, employed in the County of Orange; I am over the age of eighteen years and not a party to the within action; my business address is 114 Pacifica, Suite 450, Irvine, California 92618. On June 25, 2018, I served on the interested parties in this action the within document(s) entitled: REPLY IN SUPPORT OF PLAINTIFFS’ MOTION TO STRIKE AND TAX COSTS [ ] BY MAIL: By placing the document(s) listed above in a sealed envelope with postage thereon fully prepaid, in the United States mail at Irvine, California addressed as set forth below. I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [1] BY OVERNIGHT MAIL: By FEDERAL EXPRESS, following ordinary | business practices for collection and processing of correspondence with said overnight mail service, and said envelope(s) will be deposited with said overnight mail service on said date in the ordinary course of business. [X] BY ELECTRONIC SERVICE: By transmitting a true and correct copy electronically to the attorney(s) of record for at the email addresses referenced in the service list. The transmission was completed before 5:00 p.m. and was reported complete and without error. [1] BY E-FILE: I electronically transmitted the document(s) listed above to the Clerk’s Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: SEE ATTACHED SERVICE LIST [X] STATE: I declare under penalty of perjury, under the laws of the State of California, that the above is true and correct. FEDERAL: I declare that I am employed in the office of a member of the Bar of this Court at whose direction this service was made. Executed on June 25, 2018, at Irvine, California. /s/ Mary Coates 1 PROOF OF SERVICE OO 0 3 OO Un BA W W ND = N D ND N N N N N ND - = m m e es es ea 00 3 ON nn RR W N , O V N Y R W ND + O SERVICE LIST Jeffrey H. Reeves, Esq. Theodora Oringher PC 535 Anton Blvd. Ninth Floor Costa Mesa, CA 92626 Tel.: 714.549.6200 E-mail: jreeves{@tocounsel.com Attorneys for METAPHYSIQUE, INC,, STEINHAUS & ASSOCIATES, INC, KEVIN LAWRENCE, KAREN STENSBY, CURTIS M. STEINHAUS, CARLOS A. PRIETTO, M.D., NARENDRA L. PARSON, M.D., and MICHAEL QUIGLEY Lauren Friedman General Counsel BioNutritional Research Group, Inc. 6 Morgan, Suite 100 Irvine, CA 92618 Tel: 714.427.6990, Ex. 303 Fax: 714.247.6998 E-mail: Ifriedman@powercrunch.com Attorneys for BIO-NUTRITIONAL RESEARCH GROUP, INC. Linda D. Lam, Esq. AVISO LEGAL GROUP, LLP 4000 Barranca Parkway, Suite 250 Irvine, CA 92612 Tel: 949.262.3272 E-mail: llam@avisolegalgroup.com Attorneys for METAPHYSIQUE, INC., STEINHAUS & ASSOCIATES, INC, KEVIN LAWRENCE, KAREN STENSBY, CURTIS M. STEINHAUS, CARLOS A. PRIETTO, M.D., NARENDRA L. PARSON, M.D., and MICHAEL QUIGLEY 2 PROOF OF SERVICE