St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OW 0 1 O N Wn kA WLW N = N O N N N N N N N N N NN = m o m mm m m a e d 0 0 ~ ~ O N L h BA W N O R O VL N Y Y N R W N = OO MARY ANN SMITH Deputy Commissioner SEAN M. ROONEY Assistant Chief Counsel MARIOU de LUNA (State Bar No. 162259) Senior Counsel DANIELLE A. STOUMBOS (State Bar No. 264784) Senior Counsel KELLY SUK (State Bar No. 301757) Counsel Department of Business Oversight 320 West Fourth Street, Suite 750 Los Angeles, California 90013 Telephone: (213) 576-7591 Facsimile: (213) 576-7181 Attorneys for the People of the State of California ELECTRONICALLY FILED Superior Court of California, County of San Francisco 08/23/2017 Clerk of the Court BY:GARY FELICIAND Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN FRANCISCO THE PEOPLE OF THE STATE OF CALIFORNIA, by and through the Commissioner of Business Oversight, Plaintiff, Vv. INVESTCO MANAGEMENT & DEVELOPMENT, LLC, a California Limited Liability Company; CHRISTOPHER P. EPSHA; STEVEN G. THOMPSON; BARRY D. LEBENDIG; DOUGLAS R. HANSON; INVESTCO AV7 LLC; INVESTCO AVS LLC; INVESTCO AVY LLC; INVESTCO AV10 LLC; INVESTCO AV11 LLC; INVESTCO AVI2 LLC; INVESTCO AV14 LLC; INVESTCO AV15 LLC; INVESTCO AV16 LLC; INVESTCO AV17 LLC; INVESTCO AV18 LLC; INVESTCO AV19 LLC; INVESTCO AV20 LLC; INVESTCO AV21 LLC; INVESTCO AV22 LLC, Defendants. N a r Na se r” N ee r? ” e e ” Na sr ? N e t ” N a t ? N s ” Ne er a t sa an t e t “e st “ a “v as t a t ss a s e t ? s a ? s t sc pt t st “ s t “s es ?” ac es ?’ “ s t “a me t” CASE NO. CGC-11-507316 DISCOVERY SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES TO DEPOSITION SUBPOENA FOR PERSONAL APPEARANCE AND PRODUCTION OF DOCUMENTS AND THINGS Filed Concurrently Herewith: 1. 2. 3. 4. Date: Time: Dept.: Judge: Notice of Motion to Compel Further Responses Motion to Compel Further Responses Declaration of Danielle A. Stoumbos [Proposed] Order September 20, 2017 9:00 a.m. 302 The Honorable Harold Kahn DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t WwW 0 ~~ O N Wn he W N NN == = m m e e e d ES I B R R B V B I V I R B E L S I a c a 5 2 6 0 2 3 Plaintiff, the People of the State of California, by and through the Commissioner of Business Oversight (Plaintiff) submits this Separate Statement in Support of Motion to Compel Further Responses to Deposition Subpoena for Personal Appearance and Productions of Documents and Things under the California Rules of Court 3.1345. L PLAINTIFE’S DEPOSITION SUBPOENA FOR PERSONAL APPERANCE AND PRODUCTION OF DOCUMENTS AND THINGS TO THE SPARER LAW GROUP List of Documents to be Produced Request Nos. 1-4 1. All DOCUMENTS including emails, letters, and correspondence to HANSON regarding the AMENDED ORDERS. 2. All DOCUMENTS including emails, letters, and correspondence from HANSON regarding the AMENDED ORDERS. 3. AI DOCUMENTS including emails, letters, and correspondence to THOMPSON regarding the AMENDED ORDERS. 4. All DOCUMENTS including emails, letters, and correspondence from THOMPSON regarding the AMENDED ORDERS. The Sparer Law Group’s Response to Requests 1-4 The Sparer Law Group (“SLG”) objects to the Subpoena, and to each item of the “List of Documents to be Produced,” to the extent it seeks documents protected from discovery by any applicable privilege, protection, immunity, or other exemption from discovery under the California or United States Constitutions, statutes, or case law, including, without limitation, the attorney-client privilege and attorney work-product doctrine. For example, Items 1-4 seek communications between the SLG, on the one hand, and Doug Hanson and Steve Thompson, on the other hand, that occurred during the period in which Hanson and Thompson were clients of SLG. Hanson and Thompson, who are holders of the attorney-client privilege, have stated to counsel for SLG and counsel for the State of California, that they do not waive their attorney-client privilege. Because 1 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t NO 0 N I N vn B A R W O N = N N N = = = E e e e a ES I B R R B V B B I R B E B O E x T a a 2 6 8 = 3 attorneys owe their clients the duty to “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets” of the clients (Bus. & Prof. Code § 6068(e); see also Rule Prof. Conduct 3-100), no attorney-client privileged document will be produced. Any production of privileged material is mistaken or inadvertent, and is not intended to, and shall not, waive the privilege. Reason to Compel Further Response to Nos. 1-4 Defendants Douglas R. Hanson (Hanson) and Steven G. Thompson (Thompson) have expressly and impliedly waived the attorney-client privilege. Plaintiff does not seek to compel the production of documents protected by the attorney work product doctrine. Hanson and Thompson Impliedly Waived the Attorney Client Privilege Hanson and Thompson placed their knowledge and consent to the July 9, 2014 Amended Interlocutory Judgment and Amended Order Appointing James H. Donell Special Master (collectively, Amended Orders) directly at issue in arguing that the Amended Orders materially modified the Guarantee provision in the 2012 settlement agreement-requiring Hanson and Thompson to provide investors with up to 77.5% of their initial investment (the Guarantee) -without their knowledge and consent, rendering it invalid and unenforceable. By placing their knowledge and consent to the Amended Orders at issue, Hanson and Thompson have impliedly waived the attorney client privilege. (S. Cal. Gas Co. v. Public Utils. Com. (1990) 50 Cal.3d 31, 40 (citing Mitchell v. Superior Court (1984) 37 Cal. 3d 591, 609; see also Merritt v. Superior Court (1970) 9 Cal.App.3d 721, 731 (the party seeking discovery of the “privileged information can show waiver by demonstrating that the client has put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.”) Hanson and Thompson first placed their knowledge and consent at issue during a conference call with Plaintiff and the Special Master in October of 2016, when they claimed that the Guarantee was no longer enforceable because the Amended Orders materially modified the Guarantee without their knowledge or consent. Hanson and Thompson repeatedly raised the issue in November of 2016 (in their Response to the Special Master’s Petition), again in March 2017 (petitioning this Court for an Order placing Hanson and Thompson in management of the LLCs and requiring the parties to 2 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t LO 0 J O&O wn pb W N No [ N C I T E a L E a a ee 2 I B R E R E V R N V R E B E B E x 5 3 2 6 2 6 8 0 2 5 renegotiate the Guarantee), and as recently as July of 2017 (seeking a judicial determination that the Guarantee is not enforceable). Plaintiff will be unjustly prejudiced if discovery from the Sparer Law Group is denied because Hanson and Thompson’s former counsel at the Sparer Law Group are the only other known persons who have knowledge of Hanson and Thompson’s knowledge of and consent to the Amended Orders. Hanson and Thompson Expressly Waived the Attorney Client Privilege Hanson and Thompson voluntarily disclosed a significant part of their communications and alleged non-communications with the Sparer Law Group, and have thus expressly waived the attorney client privilege under Evidence Code section 912. See Julrik Prods. v. Chester (1974) 38 Cal. App.3d 807, 811 (client waived attorney client privilege by testifying on cross-examination at trial regarding the existence and contents of a letter he had previously written to his attorney.) Similarly, here, Hanson and Thompson voluntarily disclosed the contents of communications with their counsel regarding the Amended Orders in statements made to third parties and in petitions and declarations filed publicly in this case, and therefore expressly waived the right to rely on the attorney client privilege. For example, Hanson’s March 2017 petition repeatedly states that Hanson and Thompson were not aware of, and did not consent to the Amended Orders. (“Hanson and Thompson had no knowledge of the changes to the Settlement Agreement that were being discussed. They had not agreed to the changes . . .” p. 6:23-24; “The defendants did not consent and were not aware of the complete control of the Special Master until the Transcript was furnished in November 2016.” p. 10:23-24.) Hanson further claims that he had not seen the Amended Orders before the Special Master’s counsel brought it to his attention in 2016 and that Sparer did not have authority to sign for the Defendants. (Jd. at p. 11:16-19.) Thompson similarly waived the attorney-client privilege by voluntarily disclosing communications with his former counsel. For example, Thompson’s statement in an email to the Special Master one month after the Amended Orders were entered, on August 20, 2014, with Hanson copied, that “As you know, it is to our benefit in the short term and long term to assist you in any 3 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of Ca li fo rn ia - De pa rt me nt of B us in es s Ov er si gh t OW © ~ 1 O N Lh pb W N N N N N RN MN N N = e d m d pe e d p d e d e d e d way that we can, and to see these properties sold at the highest price possible, and to preserve what money there is in each LLC bank account,” shows that Thompson understood that the Special Master had full management and control of the LLCs and that the Guarantee remained enforceable under the Amended Orders. (Stoumbos Decl. § 7, Exh. 3 at p. 61.) Furthermore, in a subsequent email to the Special Master the following day, Thompson admits that he freely disclosed the contents of confidential communications with his counsel regarding the Amended Orders to an investor, “I did not tell [the investor] that Doug and I . . . were off the hook for a deficiency judgement sometime in the future. When [the investor] asked me how these changes might affect the settlement, I simply told him that I do not know. [The investor] then asked me what my attorney thought might happen. I told him that none of us know how this may play out. Itold him that the goal has not changed. The goal is to get investor their money back if that can be done.” (Id. at p 67.) Thompson again voluntarily disclosed a significant part of his communications with his attorneys at the Sparer Law Group in his declaration filed on December 1, 2016 stating that “The statements made by Allen Sparer in the transcript are very misleading and do not reflect what was said in my discussions with him. Only a few of the proposed modifications were discussed with me by Mr. Sparer. There was never any indication that the total Agreement was to be changed.” (Thompson December 1, 2016 Decl. at p. 2:22-25.) Thus, Thompson claims that he did not have knowledge of his and Hanson’s removal from management of the LLCs prior to the Amended Orders being entered, because his attorney did not discuss it with him. Now that Thompson has raised this issue, and recounted the substance of his conversations with his counsel, Plaintiff has the right to investigate the facts behind the assertion. Plaintiff does not seek to compel documents protected by the attorney work product doctrine Plaintiff does not move to compel any documents protected under the work product doctrine, including but not limited to Haber or the Sparer Law Group’s impressions, conclusions, opinions, or legal research. (Cal. Code. Civ. Proc. section 2018.030, subdivision (a).) 4 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OO 0 I S N h h A W N E r ® I B R V I R E B T « 8 a a R E L = 5 Request Nos. 5-6 5. All DOCUMENTS including emails, letters, and correspondence to anyone other than HANSON or THOMPSON regarding the AMENDED ORDERS. 6. All DOCUMENTS including emails, letters, and correspondence from anyone other than HANSON or THOMPSON regarding the AMENDED ORDERS. The Sparer Law Group’s Response to Requests 5-6 The “List of Documents to be Produced” also seeks documents that are protected from disclosure by the attorney work-product doctrine. For example, Items 4-5 [sic] seek communications to or from anyone other than Hanson and Thompson concerning the “AMENDED ORDERS.” Such communications would include communications between the lawyers at the SLG that reflect the | lawyer’s impressions, conclusions, opinions, or legal research or theories, or is otherwise protected by the work-product doctrine. Accordingly, SLG will not produce any documents protected from disclosure by the attorney work-product doctrine. Any production of material protected by the attorney work-product doctrine is mistaken or inadvertent, and is not intended to, and shall not, waive the protections of the doctrine. Reason to Compel Further Response to Nos. 5-6 Hanson and Thompson have expressly and impliedly waived the aiforiey-clisnt privilege. Plaintiff does not seek to compel the production of documents protected by the attorney work product doctrine. Hanson and Thompson Impliedly Waived the Attorney Client Privilege Hanson and Thompson placed their knowledge and consent to the Amended Orders directly at issue in arguing that the Amended Orders materially modified the Guarantee without their knowledge and consent, invalidating the Guarantee. By placing their knowledge and consent to the Amended Orders at issue, Hanson and Thompson have impliedly waived the attorney client privilege. (S. Cal. Gas Co. v. Public Utils. Com. (1990) 50 Cal.3d 31, 40 (citing Mitchell v. Superior Court (1984) 37 Cal. 3d 591, 609; see also Merritt v. Superior Court (1970) 9 Cal. App.3d 721, 731 (the party seeking discovery of the “privileged information can show waiver by demonstrating that 5 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t Ow 0 ~ 1 O N hn Bh W N = N O N O N = mm a p a e s e m the client has put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.) Hanson and Thompson first placed their Yrudedye and consent at issue during a conference call with Plaintiff and the Special Master in October of 2016, when they claimed that the Guarantee was no longer enforceable because the Amended Orders materially modified the Guarantee without their knowledge or consent. Hanson and Thompson repeatedly raised the issue in November of 2016 (in their Response to the Special Master’s Petition), again in March 2017 (petitioning this Court for an Order placing Hanson and Thompson in management of the LLCs and requiring the parties to renegotiate the Guarantee), and as recently as July of 2017 (seeking a judicial determination that the Guarantee is not enforceable). Plaintiff will be unjustly prejudiced if discovery from the Sparer Law Group is denied because Hanson and Thompson’s former counsel at the Sparer Law Group are the only other known persons who have knowledge of Hanson and Thompson’s knowledge of and consent to the Amended Orders. Hanson and Thompson Expressly Waived the Attorney Client Privilege Hanson and Thompson voluntarily disclosed a significant part of their communications and alleged non-communications the Sparer Law Group, and have thus expressly waived the attorney client privilege under Evidence Code section 912. See Julrik Prods. v. Chester (1974) 38 Cal.App.3d 807, 811 (client waived attorney client privilege by testifying on cross-examination at trial regarding the existence and contents of a letter he had previously written to his attorney.) Similarly, here, Hanson and Thompson voluntarily disclosed the contents of communications with their counsel regarding the Amended Orders in statements made to third parties and in petitions and declarations filed publicly in this case, and therefore expressly waived the right to rely on the attorney client privilege. For example, Hanson’s March 2017 petition repeatedly states that Hanson and Thompson were not aware of, and did not consent to the Amended Orders. (“Hanson and Thompson had no knowledge of the changes to the Settlement Agreement that were being discussed. They had not agreed to the changes . . .” p. 6:23-24; “The defendants did not consent and were not aware of the 6 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OO © 0 1 O N hh bh W N N Y DN ) = ml p m e d p m p d pe d p d B Y R E E R V I V R B E L E = a a 8 6 0 2 s complete control of the Special Master until the Transcript was furnished in November 2016.” p. 10:23-24.) Hanson further claims that he had not seen the Amended Orders before the Special Master’s counsel brought it to his attention in 2016 and that Sparer did not have authority to sign for the Defendants. (Id. atp. 11:16-19.) Thompson similarly waived the attorney-client privilege by voluntarily disclosing communications with his former counsel. For example, Thompson’s statement in an email to the Special Master one month after the Amended Orders were entered, on August 20, 2014, with Hanson copied, that “As you know, it is to our benefit in the short term and long term to assist you in any way that we can, and to see these properties sold at the highest price possible, and to preserve what money there is in each LLC bank account,” shows that Thompson understood that the Special Master had full management and control of the LLCs and that the Guarantee remained enforceable under the Amended Orders. (Stoumbos Decl. § 7, Exh. 3 at p. 61.) Furthermore, in a subsequent email to the Special Master the following day, Thompson admits that he freely disclosed the contents of confidential communications with his counsel regarding the Amended Orders to an investor, “I did not tell [the investor] that Doug and I . . . were off the hook for a deficiency judgement sometime in the future. When [the investor] asked me how these changes might affect the settlement, I simply told him that I do not know. [The investor] then asked me what my attorney thought might happen. I told him that none of us know how this may play out. I told him that the goal has not changed. The goal is to get investor their money back if that can be done.” (Id. at p 67.) Thompson again voluntarily disclosed a significant part of his communications with his attorneys at the Sparer Law Group in his declaration filed on December 1, 2016 stating that “The statements made by Allen Sparer in the transcript are very misleading and do not reflect what was said in my discussions with him. Only a few of the proposed modifications were discussed with me by Mr. Sparer. There was never any indication that the total Agreement was to be changed.” (Thompson December 1, 2016 Decl. at p. 2:22-25.) Thus, Thompson claims that he did not have knowledge of his and Hanson’s removal from management of the LLCs prior to the Amended Orders being entered, because his attorney did not discuss it with him. Now that Thompson has 7 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OO 0 N1 1 YY Wh bh W N N O N O N N N N N N N O N H m em e m a pe e e e d 0 N N O N Un RA W N R E O YW N N N E E L s O raised this issue, and recounted the substance of his conversations with his counsel, Plaintiff has the right to investigate the facts behind the assertion. Plaintiff does not seek to compel documents protected by the attorney work product doctrine Plaintiff does not move to compel any documents protected under the work product doctrine, including but not limited to Haber or the Sparer Law Group’s impressions, conclusions, opinions, or legal research. (Cal. Code. Civ. Proc. section 2018.030, subdivision (a).) IL. PLAINTIFE’S DEPOSITION SUBPOENA FOR PERSONAL APPERANCE AND PRODUCTION OF DOCUMENTS AND THINGS TO MARC HABER List of Documents to be Produced ‘Requests Nos. 1-4 1. All DOCUMENTS including emails, letters, and correspondence to HANSON regarding the AMENDED ORDERS. 2. All DOCUMENTS including emails, letters, and correspondence from HANSON regarding the AMENDED ORDERS. 3. All DOCUMENTS including emails, letters, and correspondence to THOMPSON regarding the AMENDED ORDERS. 4. All DOCUMENTS including emails, letters, and correspondence from THOMPSON regarding the AMENDED ORDERS. Haber’s Response to Requests Nos. 1-4 Haber objects to the Subpoena, and to each item of the “List of Documents to-be Produced,” to the extent it seeks documents protected from discovery by any applicable privilege, protection, immunity, or other exemption from discovery under the California or United States Constitutions, statutes, or case law, including, without limitation, the attorney-client privilege and attorney work- product doctrine. For example, Items 1-4 seek communications between the Sparer Law Group (the “Firm”) on the one hand, and Doug Hanson and Steve Thompson, on the other hand, that occurred during the period in which Hanson and Thompson were clients of the Firm and of Haber. Hanson and Thompson, who are holders of the attorney-client privilege, have stated to counsel for Haber and counsel for the State of California, that they do not waive their attorney-client privilege. Because 8 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OW 66 1 O&A UL N W N = N O N N N = e m t e m md p e d am l e d e d mt ed attorneys owe their clients the duty to “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets” of the clients (Bus. & Prof. Code § 6068(e); see also Rule Prof. Conduct 3-100), no attorney-client privileged document will be produced. Any production of privileged material is mistaken or inadvertent, and is not intended to, and shall not, waive the privilege. Reason to Compel Further Response to Nos. 1-4 Hanson and Thompson have expressly and impliedly waived the attorney-client privilege. Plaintiff does not seck to compel the production of documents protected by the attorney work product doctrine. Hanson and Thompson Impliedly Waived the Attorney Client Privilege Hanson and Thompson placed their knowledge and consent to the Amended Orders directly at issue in arguing that the Amended Orders materially modified the Guarantee without their knowledge and consent, invalidating the Guarantee. By placing their knowledge and consent to the Amended Orders at issue, Hanson and Thompson have impliedly waived the attorney client privilege. (S. Cal. Gas Co. v. Public Utils. Com. (1990) 50 Cal.3d 31, 40 (citing Mitchell v. Superior Court (1984) 37 Cal. 3d 591, 609; see also Merritt v. Superior Court (1970) 9 Cal. App.3d 721,731 (the party seeking discovery of the “privileged information can show waiver by demonstrating that the client has put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.) Hanson and Thompson first placed their knowledge and consent at issue during a conference call with Plaintiff and the Special Master in October of 2016, when they claimed that the Guarantee was no longer enforceable because the Amended Orders materially modified the Guarantee without their knowledge or consent. Hanson and Thompson repeatedly raised the issue in November of 2016 (in their Response to the Special Master’s Petition), again in March 2017 (petitioning this Court for an Order placing Hanson and Thompson in management of the LLCs and requiring the parties to renegotiate the Guarantee), and as recently as July of 2017 (seeking a judicial determination that the Guarantee is not enforceable). § DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t © 0 NN oN WL BA W R N ) N N = = e m e m e e e d e d ee E R I E R E N Y I E E L E S L a n R E E = Plaintiff will be unjustly prejudiced if discovery from the Sparer Law Group is denied because Hanson and Thompson's former counsel at the Sparer Law Group are the only other known persons who have knowledge of Hanson and Thompson’s knowledge of and consent to the Amended Orders. Hanson and Thompson Expressly Waived the Attorney Client Privilege Hanson and Thompson voluntarily disclosed a significant part of their communications and alleged non-communications the Sparer Law Group, and have thus expressly waived the attorney client privilege under Evidence Code section 912. See Julrik Prods. v. Chester (1974) 38 Cal.App.3d 807, 811 (client waived attorney client privilege by testifying on cross-examination at trial regarding the existence and contents of a letter he had previously sutifien to his attorney.) Similarly, here, Hanson and Thompson voluntarily disclosed the contents of communications with their counsel regarding the Amended Orders in statements made to third parties and in petitions and declarations filed publicly in this case, and therefore expressly waived the right to rely on the attorney client privilege. For example, Hanson’s March 2017 petition repeatedly states that Hanson and Thompson were not aware of, and did not consent to the Amended Orders. (“Hanson and Thompson had no knowledge of the changes to the Settlement Agreement that were being discussed. They had not agreed to the changes . . .” p. 6:23-24; “The defendants did not consent and were not aware of the complete control of the Special Master until the Transcript was furnished in November 2016.” p. 10:23-24.) Hanson further claims that he had not seen the Amended Orders before the Special Master’s counsel brought it to his attention in 2016 and that Sparer did not have authority to sign for the Defendants. (/d. at p. 11:16-19.) Thompson similarly waived the attorney-client privilege by voluntarily disclosing communications with his former counsel. For example, Thompson’s statement in an email to the Special Master one month after the Amended Orders were entered, on August 20, 2014, with Hanson copied, that “As you know, it is to our benefit in the short term and long term to assist you in any way that we can, and to see these properties sold at the highest price possible, and to preserve what money there is in each LLC bank account,” shows that Thompson understood that the Special 10 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OO 0 0 3 O&O Wn» B W M N N N N mM m m em e d md R m ea d Master had full management and control of the LLCs and that the Guarantee remained enforceable under the Amended Orders. (Stoumbos Decl. § 7, Exh. 3 at p. 61.) Furthermore, in a subsequent email to the Special Master the following day, Thompson admits that he freely disclosed the contents of confidential communications with his counsel regarding the Amended Orders to an investor, “I did not tell [the investor] that Doug and I... . were off the hook for a deficiency judgement sometime in the future. When [the investor] asked me how these changes might affect the settlement, I simply told him that I do not know. [The investor] then asked me what my attorney thought might happen. I told him that none of us know how this may play out. Itold him that the goal has not changed. The goal is to get investor their money back if that can be done.” (Id. at p 67.) Thompson again voluntarily disclosed a significant part of his communications with his attorneys at the Sparer Law Group in his declaration filed on December 1, 2016 stating that “The statements made by Allen Sparer in the transcript are very misleading and do not reflect what was said in my discussions with him. Only a few of the proposed modifications were discussed with me by Mr. Sparer. There was never any indication that the total Agreement was to be changed.” (Thompson December 1, 2016 Decl. at p. 2:22-25.) Thus, Thompson claims that he did not have knowledge of his and Hanson’s removal from management of the LLCs prior to the Amended Orders being entered, because his attorney did not discuss it with him. Now that Thompson has raised this issue, and recounted the substance of his conversations with his counsel, Plaintiff has the right to investigate the facts behind the assertion. Plaintiff does not seek to compel documents protected by the attorney work product doctrine Plaintiff does not move to compel any documents protected under the work product doctrine, including but not limited to Haber or the Sparer Law Group’s impressions, conclusions, opinions, or legal research. (Cal. Code. Civ. Proc. section 2018.030, subdivision (a).) Requests Nos. 5-6 5. All DOCUMENTS including emails, letters, and correspondence to anyone other than HANSON or THOMPSON regarding the AMENDED ORDERS. 11 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t Oo 0 ~~ O N un Bk W N = N O N N N H e p m e d ml md e d e d je md ed 6. All DOCUMENTS including emails, letters, and correspondence from anyone other than HANSON or THOMPSON regarding the AMENDED ORDERS. Haber’s Response to Request Nos. 5-6 The “List of Documents to be Produced” also seeks documents that are protected from disclosure by the attorney work-product doctrine. For example, Items 4-5 [sic] seek communications to or from anyone other than Hanson and Thompson concerning the “AMENDED ORDERS.” Such communications would include communications between the lawyers at the Firm that reflect the lawyer’s impressions, conclusions, opinions, or legal research or theories, or is otherwise protected by the work-product doctrine. Accordingly, Haber will not produce any documents protected from disclosure by the attorney work-product doctrine. Any production of material protected by the attorney work-product doctrine is mistaken or inadvertent, and is not intended to, and shall not, waive the protections of the doctrine. Reason to Compel Further Response to Request Nos. 5-6 Hanson and Thompson have expressly and impliedly waived the attorney-client privilege. Plaintiff does not seek to compel the production of documents protected by the attorney work product doctrine. Hanson and Thompson Impliedly Waived the Attorney Client Privilege Hanson and Thompson placed their knowledge and consent to the Amended Orders directly at issue in arguing that the Amended Orders materially modified the Guarantee without their knowledge and consent, invalidating the Guarantee. By placing their knowledge and consent to the Amended Orders at issue, Hanson and Thompson have impliedly waived the attorney client privilege. (S. Cal. Gas Co. v. Public Utils. Com. (1990) 50 Cal.3d 31, 40 (citing Mitchell v. Superior Court (1984) 37 Cal. 3d 591, 609; see also Merritt v. Superior Court (1970) 9 Cal.App.3d 721, 731 (the party seeking discovery of the “privileged information can show waiver by demonstrating that the client has put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.”) 12 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t WwW © 39 O Y Wh Bh w D N o [N S I E E a E e e E E e e E e T E T E S Y Hanson and Thompson first placed their knowledge and consent at issue during a conference call with Plaintiff and the Special Master in October of 2016, when they claimed that the Guarantee was no longer enforceable because the Amended Orders materially modified the Guarantee without their knowledge or consent. Hanson and Thompson repeatedly raised the issue in November of 2016 (in their Response to the Special Master’s Petition), again in March 2017 (petitioning this Court for an Order placing Hanson and Thompson in management of the LLCs and requiring the parties to renegotiate the Guarantee), and as recently as July of 2017 (seeking a judicial determination that the Guarantee is not enforceable). Plaintiff will be unjustly prejudiced if discovery from the Sparer Law Group is denied because Hanson and Thompson’s former counsel at the Sparer Law Group are the only other known persons who have knowledge of Hanson and Thompson’s knowledge of and consent to the Amended Orders. Hanson and Thompson Expressly Waived the Attorney Client Privilege Hanson and Thompson voluntarily disclosed a significant part of their communications and alleged non-communications the Sparer Law Group, and have thus expressly waived the attorney client privilege under Evidence Code section 912. See Julrik Prods. v. Chester (1974) 38 Cal.App.3d 807, 811 (client waived attorney client privilege by testifying on cross-examination at trial regarding the existence and contents of a letter he had previously written to his attorney.) Similarly, here, Hanson and Thompson voluntarily disclosed the contents of communications with their counsel regarding the Amended Orders in statements made to third parties and in petitions and declarations filed publicly in this case, and therefore expressly waived the right to rely on the attorney client privilege. For example, Hanson’s March 2017 petition repeatedly states that Hanson and Thompson were not aware of, and did not consent to the Amended Orders. (“Hanson and Thompson had no knowledge of the changes to the Settlement Agreement that were being discussed. They had not agreed to the changes . . .” p. 6:23-24; “The defendants did not consent and were not aware of the complete control of the Special Master until the Transcript was furnished in November 2016.” p. 10:23-24.) Hanson further claims that he had not seen the Amended Orders before the Special 13 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t OO 0 I O&O nv H A W N N N N O N = m e e e e d e m e d e d p d Master’s counsel brought it to his attention in 2016 and that Sparer did not have authority to sign for the Defendants. (Id. atp. 11:16-19.) Thompson similarly waived the attorney-client privilege by voluntarily disclosing communications with his former counsel. For example, Thompson’s statement in an email to the Special Master one month after the Amended Orders were entered, on August 20, 2014, with Hanson copied, that “As you know, it is to our benefit in the short term and long term to assist you in any way that we can, and to see these properties sold at the highest price possible, and to preserve what money there is in each LLC bank account,” shows that Thompson understood that the Special Master had full management and control of the LLCs and that the Guarantee remained enforceable under the Amended Orders. (Stoumbos Decl. § 7, Exh. 3 at p. 61.) Furthermore, in a subsequent email to the Special Master the following day, Thompson admits that he freely disclosed the contents of confidential communications with his counsel regarding the Amended Orders to an investor, “I did not tell [the investor] that Doug and I... . were off the hook for a deficiency judgement sometime in the future. When [the investor] asked me how these changes might affect the settlement, I simply told him that I do not know. [The investor] then asked me what my attorney thought might happen. I told him that none of us know how this may play out. I told him that the goal has not changed. The goal is to get investor their money back if that can be done.” (Id. at p 67.) Thompson again voluntarily disclosed a significant part of his communications with his attorneys at the Sparer Law Group in his declaration filed on December 1, 2016 stating that “The statements made by Allen Sparer in the transcript are very misleading and do not reflect what was said in my discussions with him. Only a few of the proposed modifications were discussed with me by Mr. Sparer. There was never any indication that the total Agreement was to be changed.” (Thompson December 1, 2016 Decl. at p. 2:22-25.) Thus, Thompson claims that he did not have knowledge of his and Hanson’s removal from management of the LLCs prior to the Amended Orders being entered, because his attorney did not discuss it with him. Now that Thompson has raised this issue, and recounted the substance of his conversations with his counsel, Plaintiff has the right to investigate the facts behind the assertion. Plaintiff does not seek to compel documents protected by the attorney work product doctrine 14 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES St at e of C al if or ni a - De pa rt me nt of B us in es s Ov er si gh t N O R O Y b e B W N e B O R N RN Y R S B I m m b e pe ed pe ed pe ek pe ek ee d de ed ee d pe es Plaintiff does not move to compel any documents protected under the work product doctrine, including but not limited to Haber or the Sparer Law Group’s impressions, conclusions, opinions, or legal research. (Cal. Code. Civ. Proc. section 2018.030, subdivision (a).) Dated: August 23, 2017 Respectfully submitted, JAN LYNN OWEN Commissioner of Business Oversight By: Or pilh A Jamo, DANIELLE A. STOUMBOS Attorney for the People of California 15 DISCOVERY - SEPARATE STATEMENT IN SUPPORT OF MOTION TO COMPEL FURTHER RESPONSES 10 11 12 13 14 15 16 17 18 1° 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES The undersigned declares: Iam a citizen of the United States and I am employed in the County of Los Angeles, State of California. Iam over the age of 18 and not a party to the within action; my business address is Department of Business Oversight, 320 W. 4™ Street, Suite 750, Los Angeles, California 90013-2344. On August 23,2017 I served the within: (1) Notice of Motion; (2) Motion to Compel Further Responses to Deposition Subpoena For Personal Appearance and Production of Documents and Things; (3) Declaration of Danielle A. Stoumbos in Support of Motion to Compel Further Responses to Deposition Subpoena For Personal Appearance and Production of Documents and Things with Exhibits 1-5; (4) Separate Statement in Support of Motion to Compel Further Responses to Deposition Subpoena For Personal Appearance and Production of Documents and Things; (5) Proposed Order; on: Barry LeBendig 1131 Compass Lane #212 PO Box 8133 Foster City, CA 94404 Jin Kim Attorney SPARER LAW GROUP 100 Pine Street, 33rd Floor San Francisco, CA 94111-5128 [X] By United States mail, by addressing an envelope to the above-named person(s) as indicated above, and placed in the envelope a true copy of each of said documents, and by then sealing and depositing said envelope on that same day with postage thereon fully prepaid, in the United States mail at Los Angeles, California, where is located the office of the person by and for whom said service is made. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date of postage meter date is more than one day after the date of deposit for mailing in affidavit. '[ 1 By an Express Service Carrier, (a guaranteed next day delivery service), a true copy of the above-stated document(s) in an envelope or package designated by said carrier and addressed to the person(s) on whom it is to be served, the envelope or package was mailed on that same day with shipment costs thereon fully prepaid in the ordinary course of business. [ 1] By Facsimile Transmission, of said document(s) from fax telephone number 213-576-7181 to the above-named person(s) at the fax number(s) as indicated above. This transmission was reported as complete and without error. PROOF OF SERVICE 10 11 12 13 14 15 16 17 18 1s 20 21 22 23 24 25 26 27 28 [X] [X] By Personal Service, I delivered said document(s) by hand to the above-named person(s) as indicated above in the manner provide in FRCivP 5(b) or CCP §1011. By Electronic Service, based on an agreement of the parties to accept service by electronic transmission, I caused the documents to be sent to the person(s) listed below at the following electronic address. Idid not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. Douglas Hanson, Defendant dougbayside@yahoo.com Steven Thompson, Defendant stevebayside@@ yahoo.com Jin Kim ikim@sparerlaw.com By Electronic Service using One Legal on August 23, 2017 to the persons listed below at their electronic address: Barry D. LeBendig bdlebendig@comcast.net Byron Maldo, attorney for Special Master Jim Donell bmoldo@ECIJLAW.COM Jim Donell, Special Master james. donelli@fedreceiver.com Douglas Hanson, Defendant dougbayside@yahoo.com Steven Thompson, Defendant stevebayside(@yahoo.com Val Hornstein, Counsel for Interested Parties valwhomsteinlaw.com Christopher P. Epsha c.epsha@sbeglobal net Tim Perry Timperry01{@comcast.net PROOF OF SERVICE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [X] (STATE) declare under penalty of perjury under the laws of the State of California that the above is true and correct. rr, Executed on August 23, 2017 at Los Angeles, California. Ericka Pofras PROOF OF SERVICE
