Direct List Llc et al v. Vistage International, Inc. et al

MOTION for Summary Judgment

S.D. Cal.July 22, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VISTAGE INTERNATIONAL, INC.’S NOTICE OF MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA O WENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Judge: Hon. William Q. Hayes VISTAGE INTERNATIONAL, INC.’S NOTICE OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. Date: August 29, 2016 [NO ORAL ARGUMENT UNLESS REQUESTED BY THE COURT] Case 3:15-cv-02025-WQH-JLB Document 47 Filed 07/22/16 Page 1 of 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VISTAGE INTERNATIONAL, INC.’S NOTICE OF MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB TO ALL PARTIES AND TO THEIR COUNSEL OF RECORD: YOU ARE HEREBY NOTIFIED THAT on August 29, 2016, before this Court, located at 221 West Broadway, Fifth Floor, Suite 5140, San Diego, CA 92101, Defendant Vistage International, Inc. (“Vistage”), will move for an order of summary judgment, or in the alternative, dismissal, of plaintiffs’ first and fourth causes of action for, respectively, fraud and violation of Cal. Bus. & Prof. Code § 17200, et seq. (“Section 17200”). The motion is brought pursuant to Fed. R. Civ. P. 56 and Fed. R. Civ. P. 12(b)(1), on the grounds that (1) plaintiff Eran Salu lacks standing to assert a fraud claim against Vistage, and his fraud claim fails on the merits as well, because the undisputed facts show he has suffered no damages arising out of Vistage’s alleged conduct; and (2) plaintiffs lack standing to assert their Section 17200 claim against Vistage, and the claim fails as a matter of California law, because the undisputed facts show there is no remedy available under that statute that plaintiffs could seek from Vistage. The motion will be based upon this notice, the attached memorandum of points and authorities, Declaration of Paul F. Rafferty, Declaration of Pete Sciabarra, separate statement of undisputed material facts, the files and records in this action and any further evidence and argument that the Court may receive at or before the hearing. Dated: July 22, 2016 JONES DAY By: /s/ Paul F. Rafferty Paul F. Rafferty Attorneys for Defendant VISTAGE INTERNATIONAL, INC. Case 3:15-cv-02025-WQH-JLB Document 47 Filed 07/22/16 Page 2 of 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive, Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA OWENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Hon. Judge William Q. Hayes MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. [Fed. R. Civ. P. 56; Fed. R. Civ. P. 12(b)(1)] Hearing Date: August 29, 2016 [NO ORAL ARGUMENT UNLESS REQUESTED BY COURT] Complaint Filed: September 11, 2015 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 1 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page i VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB I. INTRODUCTION ........................................................................................... 1 II. FACTS ............................................................................................................. 3 A. THE UNDISPUTED EVIDENCE MANDATES DISMISSAL OF THE FRAUD CLAIM .................................................................... 5 B. THE UNDISPUTED EVIDENCE SHOWS THAT VISTAGE CANNOT PROVIDE THE INJUNCTIVE OR RESTITUTIONARY RELIEF PLAINTIFFS SEEK BY THEIR SECTION 17200 CLAIM ..................................................................... 7 III. PROCEDURAL HISTORY ............................................................................ 9 IV. LEGAL STANDARD ..................................................................................... 9 A. SUMMARY JUDGMENT ................................................................... 9 B. MOTION TO DISMISS ..................................................................... 10 V. ARGUMENT ................................................................................................ 11 A. SALU’S FRAUD CLAIM AGAINST VISTAGE FAILS AS A MATTER OF LAW BECAUSE HE SUFFERED NO DAMAGES ......................................................................................... 11 1. Summary Judgment Is Warranted On Salu’s Fraud Claim Because The Undisputed Facts Show Vistage Did Not Cause Salu Any Injury .............................................................. 11 2. In the Alternative, Salu’s Fraud Claim Should Be Dismissed Under Rule 12(b)(1) ................................................ 15 3. Salu’s Fraud Claim Also Fails As A Matter Of Substantive Law ........................................................................ 16 B. PLAINTIFFS’ SECTION 17200 CLAIM AGAINST VISTAGE FAILS AS A MATTER OF LAW ...................................................... 18 1. Summary Judgment Is Warranted On Plaintiffs’ Section 17200 Claim Because The Undisputed Facts Show Plaintiffs Lack Standing To Assert It ....................................... 19 2. In the Alternative, Plaintiffs’ Section 17200 Claim Should Be Dismissed Under Rule 12(b)(1) .......................................... 21 3. Plaintiffs’ Section 17200 Claim Also Fails As A Matter Of Substantive Law .................................................................. 22 VI. CONCLUSION ............................................................................................. 23 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 2 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page ii VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB CASES Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .............................................................................................. 9 Barger v. McCoy Hillard & Parks, 488 S.E.2d 215 (N.C. 1997) ................................................................................ 14 Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939 (S.D. Cal. 2007) ................................................................. 22 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................. 9, 10, 16 Dawson v. Atlanta Design Assocs., Inc., 551 S.E.2d 877 (N.C. Ct. App. 2001) ........................................................... 13, 14 Easter v. Am. West Fin., 381 F.3d 948 (9th Cir. 2004) … .......................................................................... 22 Energy Inv’rs Fund, L.P. v. Metric Constructors, Inc., 525 S.E.2d 441 (N.C. 2000) ................................................................................ 13 Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th 951 (1997) ......................................................................................... 16 Express, LLC v. Fetish Grp., Inc., 464 F. Supp. 2d 965 (C.D. Cal. 2006) ........................................................... 16, 23 Faust v. Travelers, 55 F.3d 471 (9th Cir. 1995) ................................................................................. 12 Green Tree Servicing LLC v. Locklear, 763 S.E.2d 523. (N.C. Ct. App. 2014) ................................................................ 13 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 3 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page iii VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB Hall v. FedEx Freight, Inc., No. 1:13-cv-01711-SKO, 2015 U.S. Dist. LEXIS 16824 (E.D. Cal. Feb. 10, 2015) ................................................................................................ 17, 18 Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998 (9th Cir. 2004) ............................................................................... 19 Harris v. BlueRay Techs. S’holders, Inc., 669 F. Supp. 2d 1225 (E.D. Wash. 2009) ........................................................... 21 Herring v. FDIC, 82 F.3d 282 (9th Cir. 1996) ................................................................................. 15 In re iPhone Application Litig., 6 F. Supp. 3d 1004, 1014 (N.D. Cal. 2013) ........................................................ 23 In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F. Supp. 2d 942 (S.D. Cal. 2012) ............................................................. 9, 21 J. Allen Ramey, M.D., Inc. v. Pac. Found. for Med. Care, 999 F. Supp. 1355 (S.D. Cal. 1998) .................................................................... 10 Janes v. Harris, No. CV-08-200-EFS, 2009 U.S. Dist. LEXIS 46165 (E.D. Wash. June 1, 2009) .................................................................................................... 9, 21 KB2S, Inc. v. City of San Diego, No. 04cv0441 BEN(AJB), 2007 U.S. Dist. LEXIS 3673 (S.D. Cal. Jan. 17, 2007) ................................................................................................. 12, 19 Lee’s Aquarium & Pet Prods., Inc. v. Python Pet Prods., Inc., 951 F. Supp. 1469 (S.D. Cal. 1997) .................................................................... 10 Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) ............................................................................................ 12 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 4 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page iv VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) ........................................................................................ 9, 10 McGlinchy v. Shell Chem. Co., 845 F.2d 802 (9th Cir. 1988) ......................................................................... 16, 17 Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928 (8th Cir. 2012) ............................................................................... 22 Patrick v. Alacer Corp., 167 Cal. App. 4th 995 (2008) ........................................................................ 16, 17 Pineda v. Bank of Am., N.A., 50 Cal. 4th 1389 (2010) ................................................................................. 19, 22 Schuster v. Gardner, 127 Cal. App. 4th 305 (2005) .............................................................................. 13 Stearns v. Select Comfort Retail Corp., 763 F. Supp. 2d 1128 (N.D. Cal. 2010)............................................................... 21 Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998) .............................................................................................. 11 Stock W. v. Confederated Tribes, 873 F.2d 1221 (9th Cir. 1989) ............................................................................. 11 Thornhill Pub. Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730 (9th Cir. 1979) ............................................................................... 10 White v. Lee, 227 F.3d 1214 (9th Cir. 2000) ................................................................. 11, 19, 20 Whitson v. Bumbo, No. C 07-05597 MHP, 2009 U.S. Dist. LEXIS 32282 (N.D. Cal. Apr. 15, 2009) ...................................................................................................... 15 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 5 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page v VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB STATUTES 42 U.S.C. § 1437f(c)(8) ............................................................................................ 21 Cal. Bus. & Prof. Code § 17200 ........................................................................ passim Cal. Bus. & Prof. Code § 17203 ......................................................................... 19, 23 Cal. Bus. & Prof. Code § 17204 ............................................................................... 22 N.C. Gen. Stat. Ann. § 1A-1 ..................................................................................... 13 OTHER AUTHORITIES U.S. Const., art. III ............................................................................................ passim Fed. R. Civ. P. 12 ............................................................................................... passim Fed. R. Civ. P. 12(b)(1) ................................................................................ 10, 15, 21 Fed. R. Civ. P. 12(b)(6) .............................................................................................. 3 Fed. R. Civ. P. 17(a) ................................................................................................. 13 Fed. R. Civ. P. 26 .............................................................................................. 5, 6, 12 Fed. R. Civ. P. 56 ............................................................................................ 9, 10, 16 Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 6 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT OR DISMISSAL Case No. 3:15-cv-02025-WQH-JLB I. INTRODUCTION Plaintiffs Eran Salu (“Salu”) and Direct List, LLC (“Direct List,” and collectively with Salu, “Plaintiffs”) sue defendant Vistage International, Inc. (“Vistage”) for fraud and for violation of Cal. Bus. & Prof. Code § 17200 (“Section 17200”).1 Salu alone brings the fraud claim against Vistage, but he has no personal damages, and even if he had such damages (supposedly arising from alleged harm to Direct List), he cannot legally claim them. Plaintiffs both bring the Section 17200 claim against Vistage, but the statute’s remedies—injunction and restitution—do not pertain to Vistage, nor can Plaintiffs plead or prove otherwise. As such, Plaintiffs lack standing to assert either claim against Vistage, and both claims fail otherwise as a matter of law because Plaintiffs cannot prove their essential elements. By way of background, Plaintiffs claim that Defendant Phil Kessler, along with his daughters Defendant Lauren Kessler and Defendant Diana Owens, and Edette Herron (the “Non-Vistage Defendants”), have improperly used Direct List’s trade secrets and confidential information (the “Confidential Information”) in the course of their formation and operation of a business called AVS Leads LLC (“AVS”). Inexplicably, Plaintiffs did not name AVS as a defendant in this lawsuit. Salu alleges that he provided the Confidential Information to Phil Kessler while Kessler chaired a Vistage round table group in which Salu participated. Vistage provides “round table” and “peer group” consulting services to businesses by connecting CEO’s with each other to facilitate their discussions. Plaintiffs thus allege that the Non-Vistage Defendants conspired to use the Confidential Information purportedly gleaned from Phil Kessler’s private and round table sessions with Salu to form and operate AVS, and to unfairly compete with Direct List. Plaintiffs then rope in Vistage as a deep pocket, claiming that its marketing 1 Plaintiffs’ second cause of action against Vistage for breach of fiduciary duty was previously dismissed by this Court. Plaintiffs did not name Vistage as a defendant with respect to their third cause of action for theft of trade secrets. Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 7 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB literature “promised” that anything Salu said during the Vistage sessions would remain confidential. Finally, Plaintiffs contend that Vistage should be responsible for the actions of independent contractor Phil Kessler under agency and ratification theories. However, Salu’s fraud claim against Vistage fails as a matter of law. Throughout the litigation, the only damages Salu alleges are associated with or incurred by Direct List. Critically, Direct List does not join in Salu’s fraud claim against Vistage; Salu alone sues Vistage for fraud. The fact that Salu has suffered no damages precludes the viability of his fraud claim against Vistage in two ways. First, because Salu has suffered no injury, he lacks standing under Article III of the U.S. Constitution (“Article III”) to plead a fraud claim against Vistage. Second, the claim fails as a matter of substantive California law, as damages are an indispensable element of any fraud claim. Salu and Direct List’s Section 17200 claim against Vistage is also fatally defective. The only remedies available to claimants under Section 17200 are injunctive relief and restitution (i.e., disgorgement of profits). Neither can be obtained from Vistage (and Plaintiffs do not plead otherwise). The injunctive relief Plaintiffs seek consists of enjoining the further misuse of the Confidential Information, but Plaintiffs never allege that Vistage (as distinct from the Non- Vistage Defendants) uses or even possesses it. Indeed, the undisputed facts show that only AVS or its owners can potentially be enjoined from using the Confidential Information. As for restitution, Plaintiffs seek to disgorge “all of [defendants’] profits obtained from the services offered in connection with the operation of a business (AVS) that uses Direct List’s Trade Secrets to directly compete with Direct List.” (ECF 1, Compl. ¶ 104 (emphasis added).) However, the undisputed facts show that Vistage does not own, operate or do business with AVS. Vistage does not compete with Direct List. Because no injunctive or restitutionary relief is available from Vistage in connection with Plaintiffs’ Section 17200 claim, the Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 8 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB claim necessarily fails both because Plaintiffs lack Article III standing to assert it against Vistage, and as a matter of substantive California law. Plaintiffs filed their Complaint on September 11, 2015. Despite significant discovery and the close scrutiny of this Court during the adjudication of Vistage’s Rule 12(b)(6) motion in the fall of 2015 (resulting in the dismissal of one cause of action pled against Vistage), Plaintiffs have never amended their Complaint to address these flaws. The undisputed facts now confirm that there is no factual basis for them to do so. Discovery closed on July 11, 2016, and the time to amend the pleadings or add parties has long since passed. For these reasons, Vistage moves for summary judgment (or in the alternative, dismissal) of the fraud and Section 17200 claims against Vistage. II. FACTS Direct List is a North Carolina limited liability company that operates in Orange County, California, and is in the business of selling lead generation services and customer lists. (ECF 1, Compl. ¶ 12.) Direct List’s sole owner is non-party JAL Equity Corporation (“JAL Equity”), a Nevada corporation. (ECF 1, Compl. ¶ 12.) Salu has never been an employee of Direct List. (Ex. 1 (Salu Dep. at 15:22– 25).)2 Direct List has never paid Salu any compensation. (Ex. 1 (Salu Dep. at 34:18–21).) Salu is not an owner of Direct List. (Ex. 1 (Salu Dep. at 12:22–23).) In fact, Salu’s only connection to Direct List is through his status as a stockholder of JAL Equity. (Ex. 1 (Salu Dep. at 15:10–12).) Direct List itself had been in business for over twenty years prior to JAL Equity’s acquisition of it in 2012. (Ex. 8 (Herron Dep. at 11:20–21.) Upon acquisition, JAL Equity thus also “acquired” its five member workforce, led by Herron. (Ex. 8 (Herron Dep. at 11:20–12:20, 21:8–16.) Following purchase, Salu 2 All citations to exhibits refer to the documents attached to the concurrently- filed Declaration of Paul Rafferty. While the transcript from the deposition of Eran Salu is marked confidential, Mr. Salu’s counsel has confirmed that the transcript was not intended to be so designated. Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 9 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB proved to be a ruthless absentee owner that the Direct List workers intensely disliked. (Ex. 8 (Herron Dep. at 20:1–21:1, 144:13–23, 145:9–147:3, 148:15– 149:12).) After cutting their pay and hours in early 2015, the Direct List workers collectively began looking elsewhere for employment. (Ex. 8 (Herron Dep. at 49:17–50:16, 63:12–64:18 ).) Vistage is a membership organization that provides a forum for Chief Executive Officers (“CEOs”) to engage in confidential business discussions with other CEOs (“Round Table Meetings”). (ECF 1, Compl. ¶ 24.) Vistage has more than 20,000 members in 16 countries, and has operated since 1957, bringing CEOs together at meetings led by over 800 independent chairs (“Chairs”). (ECF 1, Compl. ¶¶ 6, 24.) Vistage relies on independent contractors like Phil Kessler to serve as Chairs, and in that role facilitate and conduct monthly personal and group meetings. The Chairs provide peer advisory, business mentoring and coaching services. (ECF 1, Compl. ¶ 25.) Vistage supports Chairs in getting the peer groups off the ground, and in successfully conducting the Round Table Meetings. (ECF 1, Compl. ¶ 26.) Member confidentiality is important to Vistage. (ECF 1, Compl. ¶ 29.) Salu has enjoyed the benefits of being a Vistage member from January 2007 until May 2015. (ECF 1, Compl. ¶¶ 30, 34.) He indisputably recognized the value of Vistage’s services, because he “rejoined” a new Vistage peer group (in fact, two) after he moved from North Carolina to California. (Ex. 1 (Salu Dep. at 148:19– 149:15).) Salu also knew that Phil Kessler was himself a successful CEO of a company that was not related to Vistage. (Ex. 1 (Salu Dep. at 148:9–15).) In late 2014, Salu even hired Phil Kessler to run another of his companies, “Great Reunions,” where Phil Kessler then worked alongside Direct List’s workers and had lunch with them almost daily. (Ex. 5 (Kessler Dep. 66:1–67:19).) Phil Kessler’s regular interaction with Direct List’s workers, and the friendships he formed with them had nothing to do with Phil Kessler’s limited role as a Vistage Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 10 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB independent contractor. (Sciabarra Decl. ¶ 6.) In February 2015, Salu moved to Florida. (ECF 1, Compl. ¶ 52.) Shortly thereafter, Herron could no longer stand Salu’s verbal abuse, and filed a disability leave request from her duties at Direct List. (ECF 1, Compl. ¶ 54.) Salu’s other Direct List workers then quit. (ECF 1, Compl. ¶¶ 55–57.) Salu then discovered a competitor—AVS. (ECF 1, Compl. ¶ 58.) Salu learned that Direct List’s workers all went to AVS for employment. (ECF 1, Compl. ¶¶ 58, 59, 62–63.) This lawsuit followed. A. THE UNDISPUTED EVIDENCE MANDATES DISMISSAL OF THE FRAUD CLAIM. Salu claims that Vistage breached a promise of confidentiality to him, and that harmed Direct List. Salu alternatively claims that the Non-Vistage Defendants harmed Direct List, and Vistage should be responsible. In either case, only Direct List is damaged by the alleged actions of the Defendants. In his Complaint, Salu claims as his damages a “substantial loss of business and profits to his company, in the estimated amount of $3 million.” (UMF ¶ 24.)3 These are Direct List’s damages, not Salu’s damages (and Direct List is not “his” company). Salu then claimed in his initial Rule 26 disclosure that he suffered “compensatory damages, the fair market value of the portion of the business that was lost by Direct List LLC . . . [and] that defendants have either retained receivables from former customers of Direct List, or told them not to pay the receivables.” (UMF ¶ 29.) These again are Direct List’s damages. In defense of Vistage’s Rule 12 motion for dismissal, Salu then claimed his damages were “the ‘resulting’ damage, whereby Phil Kessler and others stole the Direct List business.” (UMF ¶ 28.) Again, Direct List’s damages. Salu also hired an expert, Dennis Mandell, to formulate Plaintiffs’ damages. 3 Citations to “UMF” refer to the concurrently-filed Separate Statement of Undisputed Fact. Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 11 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB (UMF ¶¶ 11, 12.) Mandell prepared a damages report representing the damages of Plaintiffs. (UMF ¶ 11.) Notably, Salu’s expert attributed no damages to Salu in his damages report, even though Mandell interviewed Salu twice before preparing the report. (UMF ¶¶ 11, 12, 13, 14, 16, 17, 19, 21, 23.) Mandell also confirmed on the last day of discovery that he did not need to amend his damages report, even after reading the transcript of Salu’s deposition. (UMF ¶ 16, 17.) At Salu’s own deposition, Salu claimed his damages to be the “substantial loss of business and profits” of Direct List. (UMF ¶ 36.) Salu was asked to read the Mandell Damages Report and he could not identify damages that were missing – including his own. (UMF ¶ 31.) Salu was then asked five times to identify any personal damages attributable to him, but he refused to supply any facts or testimony, claiming his only knowledge would be derived from attorney-client communications. (UMF ¶ 32.) Salu was then asked if he could identify any damages beyond the damages of Direct List he claimed in his lawsuit, and again, Salu refused to testify, claiming his only knowledge would be derived from attorney-client communications. (UMF ¶ 33.) Salu’s lawyer then asked for a break, and upon returning to deposition, Salu suddenly claimed he had “lost income.” (UMF ¶ 34.) However, Salu then refused five more times to testify in support of these newly found damages, claiming yet again that his only knowledge derived from attorney-client communications. (UMF ¶ 35.) Salu could not even provide an estimate of the amount of his “lost income.” (UMF ¶ 39.) On the last day discovery could be conducted, Plaintiffs updated their Rule 26 disclosure, but did not add Salu’s lost income to the damages section. (UMF ¶ 30.) While Salu’s updated Rule 26 disclosure did add the Mandell Damages Report—that Report still says nothing about damages Salu allegedly suffered. As a result, Defendants’ rebuttal expert will testify only on the damages presented by Plaintiffs: the alleged damages to the business and profits of Direct List. Even if Salu could prove he personally lost income, he didn’t lose it from Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 12 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Direct List. JAL Equity is the sole owner of Direct List. (UMF ¶ 2.) Salu has never been an employee of Direct List. (UMF ¶ 6.) He has never received personal income from Direct List. (UMF ¶ 7.) At best, JAL Equity might have claimed it lost income resulting from harm to Direct List, but it does not sue in the lawsuit. However, as discussed infra, given Direct List’s status as a North Carolina LLC, even JAL Equity cannot claim lost income damages as its sole owner because such damages are merely a subset of the same damages already claimed by Direct List. The totality of the record shows that no evidence exists to support Salu’s claim of lost income. B. THE UNDISPUTED EVIDENCE SHOWS THAT VISTAGE CANNOT PROVIDE THE INJUNCTIVE OR RESTITUTIONARY RELIEF PLAINTIFFS SEEK BY THEIR SECTION 17200 CLAIM. Plaintiffs’ Section 17200 claim alleges that the Non-Vistage Defendants stole Direct List’s employees, customers and Confidential Information, and then formed AVS to compete with Direct List. (ECF 1, Compl. ¶¶ 58–63; see also ECF 1, Compl. ¶¶ 91–99 (claim for misappropriation of trade secrets against the Non- Vistage Defendants).) Plaintiffs also allege that the Non-Vistage Defendants conspired to unfairly compete with Direct List by “poaching” all of its customers. (ECF 1, Compl. ¶ 69.) As such, Plaintiffs claim that AVS’s genesis and success was possible “solely” through the misappropriation of Direct List’s Confidential Information, which Plaintiffs claim Phil Kessler had learned from Salu. (ECF 1, Compl. ¶ 75.) Plaintiffs’ Section 17200 claim asserts that they are “entitled to injunctive relief and an order that Defendants disgorge all of their profits obtained from the services offered in connection with the operation of a business that uses [the Confidential Information] to directly compete with Direct List.” (ECF 1, Compl. ¶ 104.) However, it is AVS that allegedly uses the Confidential Information. (ECF 1, Compl. ¶¶ 8, 58–64, 70–74, 104.) Vistage does not own, operate, profit from, or Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 13 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB do business with AVS. (Sciabarra Decl. ¶ 2.) Vistage does not possess or use Direct List’s Confidential Information. (Sciabarra Decl. ¶ 5. ) It does not compete with Direct List. (Sciabarra Decl. ¶ 4.) Therefore, there is no relief from Vistage available to Plaintiffs under the Section 17200 claim: there is nothing to enjoin and no profits to disgorge. On June 29, 2016, Vistage took Direct List’s deposition. Vistage asked Direct List to explain the nature of the injunctive relief sought in connection with Plaintiffs’ Section 17200 claim. Just as Salu had done with respect to his personal damages, Direct List claimed that any testimony it could offer in connection with the injunctive relief Plaintiffs seek was protected by the attorney-client privilege, and therefore Direct List refused to answer questions on that topic. (UMF ¶ 44; Ex. 2 (Direct List Dep. at 192:7–11).) Therefore, there is no relief from Vistage available to Plaintiffs under the Section 17200 claim; there is nothing to enjoin and no profits to disgorge. This much is known—and it is the only evidence of the case. In their fourth cause of action for violation of Section 17200, Plaintiffs seek to enjoin the “operation of a business that uses Direct List’s Trade Secrets to directly compete with Direct List.” (UMF ¶ 42.) At deposition, Direct List admitted that the “business” to which it refers is AVS. (UMF ¶ 43.) In their Prayer for Relief, Plaintiffs seek to enjoin the “use of any Direct List Trade Secrets.” (UMF ¶ 26.) At best, the injunctive relief sought pertains to the Non-Vistage Defendants and non-party AVS. Similarly, Plaintiffs’ Section 17200 claim can only seek restitutionary relief from AVS, because the only profits alleged to have been made through use of Confidential Information was garnered by AVS. (ECF 1, Compl. ¶104; Ex. 2 (Direct List Dep. at 193:24–194:8).) To be clear, AVS is the only company that Plaintiffs allege to unfairly compete against Direct List. (Ex. 2 (Direct List Dep. at 193:24–194:5).) Indeed, there is no evidence that Vistage did so. As such, Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 14 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Plaintiffs do not and cannot allege that Vistage has any profits to disgorge associated with the use of the Confidential Information. (See Ex. 2 (Direct List Dep. at 193:24–194:5).) III. PROCEDURAL HISTORY Plaintiffs filed the Complaint on September 11, 2015. (ECF 1.) Plaintiffs served their Initial Disclosures on November 18, 2015. (Ex. 6.) The last possible date to amend the pleadings was January 16, 2016. On February 8, 2016, the Court granted Vistage’s motion to dismiss Plaintiffs’ claim against Vistage for breach of fiduciary duty. (ECF 20.) Plaintiffs made no effort to seek leave to amend the Complaint. On June 28, 2016, Vistage moved to compel documents that identify the facts or data relied upon in preparing the Mandell Damages Report. (ECF 41.) Plaintiffs served their Amended Initial Disclosures on July 11, 2016. (Ex. 7.) On same date, discovery closed. IV. LEGAL STANDARD There are two procedural avenues by which a defendant may challenge a plaintiff’s standing, “a motion to dismiss under Federal Rule of Civil Procedure 12, or a motion for summary judgment under Rule 56.” Janes v. Harris, No. CV-08- 200-EFS, 2009 U.S. Dist. LEXIS 46165, at *9 (E.D. Wash. June 1, 2009) (citing 15-101 Moore’s Federal Practice); see also In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F. Supp. 2d 942, 959 (S.D. Cal. 2012) (“the evidence required to support or oppose Article III standing will necessarily increase as the litigation progresses”). A. SUMMARY JUDGMENT Summary judgment under Fed. R. Civ. P. 56 (“Rule 56”) should be granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986) (“One of the principal purposes of the summary judgment rule is to isolate and dispose of Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 15 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB factually unsupported claims or defenses.”); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (there is no genuine issue of material fact where the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party”). “Although the moving party has the initial burden of demonstrating that summary judgment is proper, that burden may be discharged by pointing out to the court an absence of facts to support the nonmoving party’s case.” J. Allen Ramey, M.D., Inc. v. Pac. Found. for Med. Care, 999 F. Supp. 1355, 1359 (S.D. Cal. 1998). As the moving party, Vistage “is not required to produce evidence showing the absence of a genuine issue of material fact on such issues, nor must the moving party support its motion with evidence negating the nonmoving party’s claim.” Lee’s Aquarium & Pet Prods., Inc. v. Python Pet Prods., Inc., 951 F. Supp. 1469, 1472–73 (S.D. Cal. 1997). Once the moving party has carried its initial burden, the non-moving party is then required to go beyond the pleadings and use affidavits, depositions, discovery responses, and admissions on file, to present specific facts demonstrating that there remains a genuine issue for trial. Celotex Corp., 477 U.S. at 324. Plaintiffs, as the non-moving party, must do more than “simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586. B. MOTION TO DISMISS The standards for considering a motion for summary judgment under Rule 56 and a Fed. R. Civ. P. 12(b)(1) (“Rule 12(b)(1)”) motion to dismiss for lack of subject-matter jurisdiction “differ greatly[.]” Thornhill Pub. Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). Specifically, under Rule 12(b)(1) (but not Rule 56), the court is free to weigh the evidence. Id. Indeed, under Rule 12(b)(1), “the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Id. (citation omitted). In a Rule 12(b)(1) motion, a party may assert a lack of subject-matter Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 16 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB jurisdiction by reference to facts other than the allegations contained in the complaint, and may present the court with affidavits or other evidence in support of the jurisdictional arguments. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000) (in deciding a motion under 12(b)(1), the court “may look beyond the complaint” without converting the motion into one for summary judgment). V. ARGUMENT The only two surviving causes of action Plaintiffs’ claim against Vistage fail as a matter of law. Salu alone pleads the first cause of action against Vistage for fraud, yet the undisputed facts show he has suffered no damages arising out of the allegations relating to Vistage. This failure renders the claim fatally defective for two reasons: Salu lacks standing to assert it because he has suffered no injury, and the claim fails on a substantive level as well because he cannot prove damages, an essential element of any fraud claim. The remaining cause of action pled against Vistage, brought by both Plaintiffs under Section 17200, fails for similar reasons: the only remedies Plaintiffs may seek under that statute are injunctive relief and restitution, and they cannot and do not seek either against Vistage. As such, summary judgment (or in the alternative, dismissal) is warranted in Vistage’s favor on the fraud and Section 17200 claims. A. SALU’S FRAUD CLAIM AGAINST VISTAGE FAILS AS A MATTER OF LAW BECAUSE HE SUFFERED NO DAMAGES. 1. Summary Judgment Is Warranted On Salu’s Fraud Claim Because The Undisputed Facts Show Vistage Did Not Cause Salu Any Injury. The undisputed facts show that Salu lacks standing to pursue a fraud claim against Vistage, because he has suffered no damages, and therefore no injury, arising out of Vistage’s conduct. Federal courts assess jurisdiction “before reaching the merits of a case.” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94–95 (1998); see also Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 17 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Stock W. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989) (“A federal court is presumed to lack jurisdiction . . . unless the contrary affirmatively appears.”). Article III standing consists of three irreducible elements. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). First, the plaintiff must have suffered an injury in fact, which is concrete, particularized and actual or imminent. Id. Second, the injury must be traceable to the challenged conduct of the defendant. Id. Third, it must be likely that a favorable judicial decision will redress the injury. Id. at 561. At the summary judgment stage, Article III standing must be supported by evidence. KB2S, Inc. v. City of San Diego, No. 04cv0441 BEN(AJB), 2007 U.S. Dist. LEXIS 3673, at *3 (S.D. Cal. Jan. 17, 2007). This case does not present a close call. The undisputed facts show that Salu has suffered no injury in fact, which can be confirmed in three ways. First, Salu does not allege that he personally suffered any damages in connection with his fraud claim. Second, Salu’s own damages expert attributed no damages to him. Third, the totality of Salu’s remaining pleadings (two Rule 26 initial disclosures, and his opposition to Vistage’s Rule 12 motion) do not even hint of personal damages. As to the first and third points, Salu’s Complaint, Rule 26 initial disclosures, opposition to Vistage’s Rule 12 Motion and his deposition all admit that Direct List is the only entity that suffered damages on account of the alleged fraud. (ECF 1, Compl. ¶ 85; see Faust v. Travelers, 55 F.3d 471, 474 (9th Cir. 1995) (affirming district court’s grant of summary judgment based on allegations in complaint, because complaint’s allegations “constituted a judicial admission” that “conclusively established” the fact alleged).) Critically, the Complaint also admits that Salu has no ownership stake in Direct List; instead, Direct List’s “sole owner/member is JAL Equity Corporation,” a Nevada corporation that is not party to this lawsuit. (ECF 1, Compl. ¶ 12.) Salu nonetheless has no legal basis to claim damages suffered by Direct List Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 18 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB because he is not an owner or member of it, and therefore is not the real party in interest with standing to assert claims for damages suffered by it. N.C. Gen. Stat. Ann. §1A-1; (a claim must be prosecuted by the real party in interest); Green Tree Servicing LLC v. Locklear, 763 S.E.2d 523, 526. (N.C. Ct. App. 2014) (real party in interest “by substantive law has the legal right to enforce the claim in question”); Fed. R. Civ. P. 17(a) (“An action must be prosecuted in the name of the real party in interest.”). However, even if Salu were a member (i.e., owner) of Direct List, a North Carolina limited liability company, under North Carolina law, a member of an LLC cannot pursue a claim on an individual basis against a third party for injuries to the LLC that allegedly diminished the value of the individual’s interest. Dawson v. Atlanta Design Assocs., Inc., 551 S.E.2d 877, 879–80 (N.C. Ct. App. 2001); see also Schuster v. Gardner, 127 Cal. App. 4th 305 (2005) (under California law as well, a shareholder does not have standing to bring an individual action for damages if the damages were suffered by the corporation). There are two exceptions to the rule barring even an LLC’s member/owner from suing on behalf of the LLC to recover damages suffered by the LLC, neither of which could save Salu’s fraud claim (even leaving aside the fact that he is not a member or owner of Direct List). First, a member may allege an injury that is separate and distinct to itself. Energy Inv’rs Fund, L.P. v. Metric Constructors, Inc., 525 S.E.2d 441, 444 (N.C. 2000). Salu’s claim (or more properly, JAL Equity’s claim) does not fall within the scope of this exception because there is no “legal basis” for him to recover any individual loss that is separate and distinct from any damages suffered by Direct List. See id. (“That [plaintiff] invested an amount different from other limited partners hardly makes for an ‘individual injury.’”). Second, a member can sue to recover damages suffered from injuries arising out of a “special duty” between the defendant and the individual member. Id. A special duty is one owed to an Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 19 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB individual LLC member that is separate from any duty the defendant might owe the corporation. Barger v. McCoy Hillard & Parks, 488 S.E.2d 215, 219–20 (N.C. 1997); Dawson, 551 S.E.2d at 880. This Court has already ruled that Salu maintains no special relationship with Vistage in ruling on Vistage’s motion to dismiss. (ECF 20 at 12:16–13:8.) Vistage had no relationship with JAL Equity whatsoever. In sum, even were Salu a member/owner of Direct List (which he is not), he would still lack standing to pursue a fraud claim on its behalf. Salu may argue that he has suffered injury in fact sufficient to confer standing upon him because non-party JAL Equity is the owner of Direct List, and Salu is JAL Equity’s sole shareholder. Therefore, he may argue, he suffers damages whenever JAL Equity suffers damages, which in turn, suffers damages any time Direct List does. Salu may also seek to rest upon his conclusory statement at his deposition that he suffered “lost income” to sufficiently constitute an injury for Article III purposes. Neither strategy can save his fraud claim. Salu cannot claim he has standing by stepping into the shoes of JAL Equity. JAL Equity is a corporation in good standing, and Salu must respect that existence. JAL Equity is the sole member (owner) of Direct List (UMF ¶ 2), and therefore would hypothetically have standing to sue on an individual basis, but only if it were to fall into one of the two member exceptions set forth above. JAL Equity cannot show that it either suffered an individual injury separate from that alleged to have been suffered by Direct List, and there is no special relationship (much less any relationship) between Vistage and JAL Equity. Moreover, to the extent Salu might argue (incorrectly) that he suffered cognizable lost income damages because Direct List’s profits flow through to JAL Equity, which then passes its revenues through to Salu on a discretionary basis, JAL Equity also collects income from at least four other entities. (Ex. 1 (Salu Dep. at 21:1–20).) JAL Equity makes distributions to Salu only when it is able based on the operations of all five entities. (Ex. 1 (Salu Dep. at 207:19–208:2).) That JAL Equity also receives revenues from sources Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 20 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB other than Direct List makes any loss of income Salu may personally claim to have suffered on account of Direct List’s losses even more attenuated. Salu’s unexplained allusions to “lost income” during his deposition cannot suffice to confer standing upon him. The Complaint alleges no facts whatsoever to support the notion that Salu personally suffered damages. Salu’s own expert omitted any reference to personal damages Salu might have suffered in his Damages Report. Salu produced no personal financial documents evidencing any personal loss. At deposition, Salu refused five times to answer the question of whether he had any personal damages, and after coaching by his attorney, testified only that he had suffered “lost income” damages of an unspecified amount or nature. (UMF ¶ 33.) Indeed, Salu flatly refused to estimate or describe these supposed damages in any manner, testifying that his only knowledge about lost income was based on attorney-client privileged communications. (UMF ¶ 33.) The strategies of counsel do not constitute evidence. The undisputed facts available all show that there is no basis for Salu’s claim of lost income. Salu has personally suffered no damages arising out of alleged fraud. For that reason, summary judgment is warranted in Vistage’s favor as to his fraud claim, because he has suffered no injury and therefore lacks Article III standing. See Herring v. FDIC, 82 F.3d 282, 284 (9th Cir. 1996) (“Because the shareholders cannot recover funds on their underlying claim, they have no standing and we therefore affirm the district court’s summary judgment against their fraud on the court claim.”). 2. In the Alternative, Salu’s Fraud Claim Should Be Dismissed Under Rule 12(b)(1). The Court may dismiss Salu’s fraud claim under Rule 12(b)(1) for the same reasons summary judgment in Vistage’s favor is warranted: Salu lacks standing to assert it because he has alleged no injury caused by Vistage. See Whitson v. Bumbo, No. C 07-05597 MHP, 2009 U.S. Dist. LEXIS 32282, at *19 (N.D. Cal. Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 21 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Apr. 15, 2009) (dismissing claim for failure to “meet the standing requirements of Article III” because plaintiff “fails to allege any actual injury”). Under Rule 12, the Court may additionally “weigh” the evidence. Salu has none, and whatever he concocts in his opposition to this Motion should be weighed against the contrary pleadings and discovery record Salu has put forth. 3. Salu’s Fraud Claim Also Fails As A Matter Of Substantive Law. Salu’s fraud claim against Vistage also fails on the merits for the same reason he lacks standing: the undisputed facts show he has suffered no damages. Rule 56 mandates the entry of summary judgment against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial. Celotex Corp., 447 U.S. at 322–23. Damages are an “essential” element of any fraud claim. Patrick v. Alacer Corp., 167 Cal. App. 4th 995, 1017 (2008).4 For the reasons discussed above, the undisputed facts show that Salu has suffered no damages arising out of his allegations against Vistage. As such, Vistage is entitled to the entry of summary judgment in its favor with respect to Salu’s fraud claim. See Express, LLC v. Fetish Grp., Inc., 464 F. Supp. 2d 965, 971–79 (C.D. Cal. 2006) (granting summary judgment in defendant’s favor on fraud claim because plaintiff failed to show any evidence it had suffered damages arising out of the allegations of fraud). Salu’s testimony that he has suffered unspecified lost income damages cannot save the claim on the merits any more than it could confer standing upon him. The Ninth Circuit has explained that a cognizable claim for “damages” must include evidence with respect to the amount of damages. McGlinchy v. Shell Chem. 4 Under California law, the elements of fraud are: (1) misrepresentation — i.e., false representation, concealment, or nondisclosure; (2) knowledge of falsity, or scienter; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th 951, 974 (1997). Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 22 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Co., 845 F.2d 802, 808 (9th Cir. 1988). Summary judgment is warranted in the defendant’s favor unless a plaintiff “provide[s] evidence such that the jury is not left to ‘speculation or guesswork’ in determining the amount of damages to award.” Id. (emphasis added).5 In contrast, where, as here, the plaintiff “submitted no specific facts on which a finder of fact could reasonably conclude that [the plaintiff] actually suffered damages, caused by . . . defendants, in any quantifiable amount” then summary judgment in the defendant’s favor is “properly granted[.]” Id. at 809; see also Hall v. FedEx Freight, Inc., No. 1:13-cv-01711-SKO, 2015 U.S. Dist. LEXIS 16824 (E.D. Cal. Feb. 10, 2015). The record on this point could not be more clear: Q. And so the question I’m just trying to get clear enough for you is whether you can articulate for me, without divulging discussions that you’ve had with counsel, how much money you, Eran Salu, claim that you have lost as a result of the conduct of the defendants? A. I really don’t think I can articulate it without divulging the conversations that he [Salu’s lawyer] and I have had. Q. Okay. You believe that as the owner of Direct List, LLC, you’re entitled to claim loss of income damages? A. Again, I don’t know this. This is all stuff that I would ask Brandon. I don’t have independent thought of that other than the discussions I’ve had with him. Q. I don’t mean to badger you, honestly, but you did go to law school. A. I didn’t do that well in law school. MR. BAUM: That’s not what you told me. BY MR. RAFFE[R]TY: Q. You probably had things in torts and contracts and, of course, fraud is a tort. You took remedies classes. So you understand my question, but that notwithstanding, you do not feel you can give me any further information about damages that you personally sustained without divulging communications that you had with Mr. Baum; 5 To be sure, the issues of liability and the amount of damages necessary to compensate any injuries suffered if liability is found may be adjudicated separately. But here, the existence of some damages is an essential element of Salu’s fraud claim. See Patrick, 167 Cal. App. 4th at 1017. As such, here, the two issues converge insofar as there can be no liability found on Vistage’s part if Salu cannot show he has suffered any damages whatsoever . Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 23 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB is that correct? A. Correct. Yes. (Ex. 1 (Salu Dep. at 55:7–56:9).) The Hall case is directly on point. There, plaintiff employees pled a fraud claim against their employer, FedEx, based on representations purportedly made to them concerning the job details that would be available to them if they transferred locations. Id. at *5–8, 11–15. One of the plaintiffs testified at deposition that he had suffered unspecified “damage in relocating his family and incurred moving expenses, but he offers no evidence of the amount of those damages.” Id. at *58. Citing McGlinchy, the district court held that plaintiff’s “conclusory statement that he suffered these damages is insufficient to create a genuine dispute as to whether [plaintiff] suffered actual monetary loss.” Id. For that reason, the district court granted summary judgment in defendant FedEx’s favor. Id. (“Because Plaintiffs cannot establish their damage, which is an essential element of their fraud claims, FedEx is entitled to summary judgment on these claims.”).6 Here, Salu’s “conclusory statement” at deposition that he suffered lost income is “insufficient to create a genuine dispute” as to whether he suffered any damages. Id. The record shows that Vistage attempted repeatedly to obtain this evidence, had any existed, but Salu could not supply it. Therefore, the result should be the same here as the district court reached in Hall, namely that the fraud claim fails as a matter of law. B. PLAINTIFFS’ SECTION 17200 CLAIM AGAINST VISTAGE FAILS AS A MATTER OF LAW. The undisputed facts show that Plaintiffs have suffered no injury at Vistage’s hands that is cognizable for purposes of Section 17200. More specifically, the only remedies available to a Section 17200 are injunctive relief and restitution. Yet 6 As a matter of fairness alone, if neither Salu nor his expert articulate the personal damages of Salu, even assuming they were legally recoverable, how is Vistage supposed to defend against them at trial? Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 24 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Plaintiffs appropriately make no claim that Vistage has ever possessed or used Plaintiffs’ Confidential Information (as Vistage never has). Vistage is therefore not subject to the requested injunctive relief to stop using Confidential Information it has never possessed, and correspondingly has no profits to disgorge from such use. As such, Plaintiffs both lack standing to assert their Section 17200 claim, and fail to meet the statutory prerequisites for relief. 1. Summary Judgment Is Warranted On Plaintiffs’ Section 17200 Claim Because The Undisputed Facts Show Plaintiffs Lack Standing To Assert It. The remedies available for a Section 17200 claim are narrowly circumscribed by statute to injunctive relief and/or restitution (disgorgement of profits). Cal. Bus. & Prof. Code § 17203; Pineda v. Bank of Am., N.A., 50 Cal. 4th 1389, 1401 (2010). Plaintiffs do not allege any conduct of Vistage that must be enjoined, nor seek any Vistage profits to be disgorged, which means that Vistage is entitled to summary judgment on this claim. See KB2S, Inc., 2007 U.S. Dist. LEXIS 3673, at *18–24 (granting summary judgment in defendant’s favor on Federal Housing Act claim because no facts suggested Plaintiffs had suffered an injury-in-fact cognizable under that statute in particular). As for injunctive relief, Article III requires that a plaintiff demonstrate a real, immediate and ongoing threat of irreparable injury should the challenged behavior continue. Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1021–22 (9th Cir. 2004). Indeed, to obtain prospective injunctive relief, a plaintiff must establish that there is a “likelihood of future injury.” White, 227 F.3d at 1242. Plaintiffs cannot make such a showing with respect to their Section 17200 claim against Vistage, because they do not challenge any continued conduct of Vistage whatsoever. Plaintiffs seek to enjoin the “use of any Direct List Trade Secrets” (ECF 1, Compl. ¶ 104), but they allege only that the Non-Vistage Defendants stole Direct List’s Confidential Information and currently operate non-party AVS, which Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 25 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Plaintiffs claim unfairly competes with Direct List through its alleged (mis)use of it. (ECF 1, Comp. ¶ 104; Ex. 2 (Direct List Dep. at 193:24–194:5).) None of these allegations, nor anything else in the Complaint (or the factual record) suggests Vistage has used or will use Plaintiffs’ Confidential Information at all, let alone misuse it. As such, Plaintiffs lack standing to seek injunctive relief against Vistage. Plaintiffs may argue that they seek injunctive relief against Vistage to the same extent as they seek that remedy from Phil Kessler, because Phil Kessler was a Vistage Chair when he allegedly obtained the Confidential Information. However, that argument fails as a matter of both law and fact. To start, injunctive relief may only be awarded to remedy ongoing, continued conduct. See White, 227 F.3d at 1242. Vistage’s contract with Phil Kessler, setting forth the terms of his independent contractor relationship, terminated on September 9, 2015. (Ex. 5 (Kessler Dep. at 126:2–127:5).) Salu himself terminated his relationship with Vistage, effective May 2015, after moving to Florida. Vistage has no current relationship with Direct List whatsoever, and there is no contract in existence obligating Vistage to do business with Direct List ever again (that might somehow support a plea for an affirmative injunction forcing Vistage to again do business with Direct List.) (UMF ¶ 40.) On any basic level, Plaintiff does not allege that Vistage is engaged in any conduct that is causing either Plaintiff any harm. As such, enjoining Vistage from using the Confidential Information will not redress any potential injury Plaintiffs claim to have suffered. As for restitution, the undisputed facts show that Plaintiffs also lack standing to seek any disgorgement of profits from Vistage. Plaintiffs ask for “an Order requiring Defendants to account for and disgorge all gains, profits and advantages from the violations of statute and common law.” (ECF 1, Compl. at 18 ¶ 5.) But disgorgement of Vistage’s profits could not redress any injury Plaintiffs claim to have suffered in this lawsuit, because there is no evidence suggesting Vistage Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 26 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB profited from the alleged misuse of the Confidential Information. Even should Plaintiffs prove their claims against the Non-Vistage Defendants, Vistage would have no profits to disgorge in connection with those allegations. In sum, because the neither of the “two things” Plaintiffs seek to remedy their Section 17200 claim can be awarded from Vistage, Vistage is entitled to judgment as a matter of law on Plaintiffs’ Section 17200 claim. See Harris v. BlueRay Techs. S’holders, Inc., 669 F. Supp. 2d 1225, 1234 (E.D. Wash. 2009) (“The plaintiffs request two things under § 1437f(c)(8)(B): damages and an injunction. They are not entitled to damages, and . . . they will gain nothing tangible from an injunction . . . they cannot establish redressability. It follows they lack standing to maintain an action under 42 U.S.C. § 1437f(c)(8). The Court must dismiss their . . . causes of action to the extent they depend upon that statute.”); Janes, 2009 U.S. Dist. LEXIS 46165, at *28 (granting summary judgment to defendant, finding plaintiff lacked standing under Article III because “Plaintiffs’ requested relief . . . will not address their purported injuries-in-fact”). 2. In the Alternative, Plaintiffs’ Section 17200 Claim Should Be Dismissed Under Rule 12(b)(1). Because Plaintiffs have failed to allege facts sufficient to show that they have suffered an injury at Vistage’s hands that is cognizable under Section 17200, the claim is also subject to dismissal under Fed. Civ. P. 12. See Stearns v. Select Comfort Retail Corp., 763 F. Supp. 2d 1128, 1141 (N.D. Cal. 2010) (dismissing UCL claim under Rule 12 because “no legally cognizable injuries have been pled” and citing Cal. Bus. & Prof. Code §§ 17204, 17535 as identifying ‘injury in fact’ as a necessary element of a UCL claim). Indeed, where a plaintiff pleads facts sufficient to show that one defendant caused the complained-of injury, but fails to plead such facts with respect to another defendant, courts do not hesitate to dismiss the claim as brought against the defendant who the plaintiff does not even allege caused the injury. In re Sony Gaming Networks & Customer Data Sec. Breach Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 27 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB Litig., 903 F. Supp. 2d at 956; Easter v. Am. West Fin., 381 F.3d 948, 961–62 (9th Cir. 2004) (dismissing claims against certain defendants for lack of standing where plaintiffs failed to trace the alleged injury-in-fact to the conduct of those particular defendants); Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939, 944–46 (S.D. Cal. 2007) (plaintiffs lacked standing against one defendant where they alleged only injuries caused by other defendants). Taken in their best light, Plaintiffs allege that Vistage breached a promise (of confidentiality) to Salu. Plaintiffs further claim that Phil Kessler stole Confidential Information while he acted as a Vistage Chair, and that exposes Vistage to liability under agency and ratification theories. However, nowhere do Plaintiffs allege that Vistage did anything to cause the injuries. Plaintiffs allege that the Non-Vistage Defendants took the Confidential Information, misused it, formed a competitor called AVS, and operate that competitor to date. They, not Vistage, supposedly profit from that conduct. They supposedly cause the harm to Direct List. Vistage didn’t “cause” any of this to occur—it didn’t even know it was happening until Salu notified Vistage of what had already occurred. (UMF ¶ 40; Sciabarra Decl. ¶ 7.) 3. Plaintiffs’ Section 17200 Claim Also Fails As A Matter Of Substantive Law. Leaving aside constitutional concerns, Plaintiffs lack standing under the plain text of Section 17200. See Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928 (8th Cir. 2012) (“When a plaintiff alleges injury to rights conferred by statute, two separate standing-related inquiries are implicated: whether the plaintiff has Article III standing (constitutional standing) and whether the statute gives that plaintiff authority to sue (statutory standing).”). Only a “[a] person who has suffered injury in fact and has lost money or property as a result of unfair competition” may bring an action under Section 17200. Cal. Bus. & Prof. Code § 17204. Again, a Section 17200 plaintiff’s “remedies are generally limited to injunctive relief and restitution.” Pineda, 50 Cal. 4th at 1401 (citations and internal quotation marks Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 28 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 VISTAGE INT’L, INC.’S MEM. OF P’s &A’s ISO MOT. FOR SUMMARY JUDGMENT Case No. 3:15-cv-02025-WQH-JLB omitted); Cal. Bus. & Prof. Code § 17203. Restitution and disgorgement of profits will not redress any injury suffered by Plaintiffs because the undisputed facts show Vistage is not engaging in any conduct Plaintiffs seek to enjoin, and gained no profits “acquired by means of [the alleged] unfair competition.” Cal. Bus. & Prof. Code § 17203. Therefore, Plaintiffs’ Section 17200 claim fails under the plain text of the statute, and summary judgment is warranted on that basis as well. See Express, LLC, 464 F. Supp. 2d at 979 (granting summary judgment in defendant’s favor on Section 17200 claim because “[d]amages or harm are an element” of a Section 17200 claim); In re iPhone Application Litig., 6 F. Supp. 3d 1004, 1014 (N.D. Cal. 2013) (granting summary judgment on Section 17200 claim because “under either Article III or [Section 17200] Plaintiffs must demonstrate that they have suffered a concrete injury in fact”). VI. CONCLUSION For the forgoing reasons, Vistage respectfully moves for summary judgment in its favor as to Salu’s fraud claim and Plaintiffs’ Section 17200 claims, or in the alternative, dismissal of those claims as against Vistage. Dated: July 22, 2016 JONES DAY By: /s/ Paul F. Rafferty Paul F. Rafferty Attorneys for Defendant VISTAGE INTERNATIONAL, INC. Case 3:15-cv-02025-WQH-JLB Document 47-1 Filed 07/22/16 Page 29 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA OWENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Hon. William Q. Hayes VISTAGE INTERNATIONAL, INC.’S STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. Hearing Date: August 29, 2016 [NO ORAL ARGUMENT UNLESS REQUESTED BY THE COURT] Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 1 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH Pursuant to Fed. R. Civ. P. 56(c), Defendant Vistage International, Inc. submits this Statement of Undisputed Material Facts in support of its Motion For Summary Judgment, Or In The Alternative Dismissal, Of Plaintiffs’ Fraud And Cal. Bus. & Prof. Code § 17200 Claims As Against Vistage International, Inc., with citations to supporting evidence. UNDISPUTED FACT EVIDENCE 1. Direct List LLC was formed in 2013. Ex. 1 (Salu Dep. at 12:16-19).1 2. Since its inception, Direct List LLC’s only owner/member has been JAL Equity, Inc. Ex. 1 (Salu Dep. at 12:24-13:6); ECF 1, Compl. ¶ 12. 3. JAL Equity, Inc. is a Nevada “S” corporation. Ex. 1 (Salu Dep. at 15:1-2). 4. Eran Salu (“Salu”) is the only shareholder of JAL Equity, Inc. Ex. 1 (Salu Dep. at 15:10-12). 5. People who worked at Direct List LLC in 2015 were employed by JAL Consulting. Ex. 1 (Salu Dep. at 24:23-25:4). 6. Salu has never been an employee of Direct List LLC. Ex. 1 (Salu Dep. at 15:22-25). 7. Salu receives his personal income from JAL Equity, Inc., not Direct List LLC. Ex. 1 (Salu Dep. at 34:22-35:3). 1 All citations to exhibits refer to the documents attached to the concurrently- filed Declaration of Paul Rafferty. Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 2 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 8. Direct List LLC never paid Salu any form of income. Ex. 1 (Salu Dep. at 34:22-24 (Q: “Did Direct List, LLC, pay you directly any form of compensation?” A: “No.”)). 9. All revenue generated by Direct List is paid to JAL Equity. Ex. 1 (Salu Dep. at 94:6-13 (Q: “What I’m trying to understand is whether the JAL Equity profit and loss statement . . . is simply the summation of the profit and loss statements of these other entities.” A: “JAL Equity includes all of those businesses as well as any expenses JAL Equity may have.”)). 10. JAL Equity receives all of the revenue Direct List generates, and based on JAL Equity’s cash flow, Salu decides when vendors of Direct List are paid. Ex. 2 (Direct List 30(b)(6) Dep. at 161:6-10, 162:4-22). 11. Plaintiffs’ expert Dennis Mandell (“Mandell”) prepared an expert damages analysis and report (“Mandell Damages Report”) for the Plaintiffs, opining about the damages Plaintiffs suffered in this dispute. Ex. 4 (Mandell Dep. at 8:15-19, 27:10- 13); Ex. 3 (Mandell Damages Rep. at 1). 12. Mandell confirmed that the Mandell Damages Report represents all of the damages he concludes that all of the Plaintiffs have suffered. Ex. 4 (Mandell Dep. at 25:4-11 (Q: “As you sit here today, do you know if you’ve calculated all of the damages sustained by the plaintiffs in this lawsuit?” A: “Yes. Not including punitive.”)). Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 3 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 3 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 13. Mandell relied on all of the documents contained in Appendix B in forming his opinions in the Mandell Damages Report. Ex. 4 (Mandell Dep. at 15:21-16:1). 14. Appendix B, which Mandell used to form his opinions, includes no documents pertaining to Salu individually. Ex. 3 (Mandell Damages Rep., App’x B). 15. Mandell used JAL Equity banking statements to calculate Direct List damages because all of Direct List’s money was “flowing in” to JAL Equity. Ex. 4 (Mandell Dep. at 18:21-24, 19:4- 12). 16. At deposition, on the last day of discovery, Mandell testified that he had calculated “all” of the damages sustained by all of the plaintiffs in this lawsuit (with the exception of punitive damages), and no damages were attributed to Salu individually. Ex. 4 (Mandell Dep. at 25:4-11 (“My report is what I think the damages are.”)); see Ex. 3 (Mandell Damages Rep. at Table 6 (damages noted are earnings of Direct List only)). 17. Mandell testified that the Mandell Damages Report represents what he thinks the damages are in the case, and they do not include individual damages suffered by Salu. Ex. 4 (Mandell Dep. at 25:4-11 (My report is what I think the damages are.”)); Ex. 3 (See Mandell Damages Rep. at Table 6 (damages noted are earnings of Direct List only)). 18. Mandell made no effort to particularize his damages analysis to any cause of action or to any specific defendant. Ex. 4 (Mandell Dep. at 27:18-28:3). Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 4 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 19. At the time Mandell testified in deposition, he had interviewed Salu twice, and read his deposition, and still did not find any damages attributable to Salu. Ex. 4 (Mandell Dep. at 22:21-25, 23:14- 16, 32:3-11); Ex. 1 (Salu Dep. at 38:14- 21). 20. Salu reviewed portions of the Mandell Damages Report (Exhibit 102 to his deposition), prior to his deposition on June 28, 2016. Ex. 1 (Salu Dep. at 40:11-18). 21. Salu held two conference calls with Mandell, each separately lasting at least one half hour, prior to the creation of the Mandell Damages Report. Ex. 1 (Salu Dep. at 38:14-21); Ex. 4 (Mandell Dep. at 22:21-25, 23:14-16). 22. Salu believes the Mandell Damages Report evaluates the Direct List LLC business and the loss of capital from losing the business. Ex. 1 (Salu Dep. at 41:25-42:1). 23. The Mandell Damages Report concerns only damages suffered by Direct List LLC. There is no reference to individual damages suffered by Salu. Ex. 3 (Mandell Damages Rep. at Table 6). 24. As his damages for fraud, Salu claims only that he “has suffered damages in the form of substantial loss of business and profits to his company, in the estimated amount of $3 million.” ECF 1, Compl. ¶ 85. Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 5 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 5 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 25. As the relief sought for their fourth cause of action arising under Cal. Bus. & Prof. Code § 17200, Plaintiffs seek “injunctive relief and an order that defendants disgorge all of their profits obtained from the services offered in connection with the operation of a business that uses Direct Lists’ Trade Secrets to directly compete with Direct List.” ECF 1, Compl. ¶ 104. 26. In their Prayer for Relief, Plaintiffs seek an injunction “enjoining and prohibiting all Defendants and any of their officers, directors, employees, agents, subsidiaries, distributors, dealers, and all persons in active concert or participation with any of them, from making use of any Direct List Trade Secrets.” ECF 1, Compl. at Prayer ¶ 4. 27. In their Prayer for Relief, Plaintiffs also seek “an Order requiring Defendants to account for and disgorge all gains, profits and advantages from the violations of statute and common law.” ECF 1, Compl. at Prayer ¶ 5. 28. In opposing Vistage’s motion to dismiss, Plaintiffs claimed their damages to be the “resulting” damage, whereby Phil Kessler and others stole Direct List. ECF 12, Plaintiffs’ Opposition to Vistage’s Motion to Dismiss, at 6:16- 17. Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 6 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 6 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 29. At the outset of discovery, in their Initial Disclosures, Plaintiffs claimed as damages “based on, but not limited to, Civil Code section 3333, compensatory damages, the fair market value of the portion of the business that was lost by Direct List LLC, punitive and exemplary damages, costs of this action, and/or pre-judgment interest. Plaintiffs also believe that defendants have either retained receivables from former customers of Direct list, or told them not to pay the receivables.” Plaintiffs’ Initial Disclosures, dated November 18, 2015. 30. Following the conclusion of discovery, in their Amended Initial Disclosures, Plaintiffs claimed the identical damages: “based on, but not limited to, Civil Code section 3333, compensatory damages, the fair market value of the portion of the business that was lost by Direct List LLC, punitive and exemplary damages, costs of this action, and/or pre-judgment interest. Plaintiffs also believe that defendants have either retained receivables from former customers of Direct list, or told them not to pay the receivables.” Plaintiffs also included the Mandell Damages Report as well as the testimony of Salu and Direct List. Plaintiffs’ Amended Initial Disclosures, dated July 11, 2016. Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 7 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 7 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 31. After reading the Mandell Damages Report at his deposition, Salu could not identify any damages that Mandell had failed to include. Ex. 1 (Salu Dep. at 42:6-10 (Q: “[O]ther than the punitive damages that you mentioned, are there any other damages that you feel that Mr. Mandell did not put in his report?” A: “Just reading it, there is none that come to mind.”)). 32. Vistage asked Salu six times at deposition to supply facts supporting the existence of any damages he personally suffered that were absent from the Mandell Damages Report, but he refused to testify on that subject, claiming that it would invade his attorney-client privilege. Ex. 1 (Salu Dep. at 42:11-43:10, 43:25- 44:24). 33. Vistage asked Salu five times at his deposition to supply facts supporting the existence of any damages he personally suffered beyond those he described in paragraph 85 of the Complaint, but he refused to testify on that subject, claiming that it would invade his attorney-client privilege. Ex. 1 (Salu Dep. at 48:13-50:6). 34. After being unable to supply any evidence of personal damages after Vistage asked Salu for it eleven times, Salu’s lawyer asked for a break; upon return, Salu claimed he had suffered “lost income” damages. Ex. 1 (Salu Dep. at 50:7-51:12). Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 8 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 8 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 35. Vistage asked Salu five times to explain his lost income claim; Salu claimed he could not provide any testimony on that subject without waiving his attorney-client privilege. Ex. 1 (Salu Dep. at 51:11-55:21). 36. Salu claims his lost profits damages arise from “loss of business and profits” from Direct List. Ex. 1 (Salu Dep. at 48:7-12). 37. Salu claims that the “income” he lost is found in the Mandell Damages Report—but that report calculates damages pertaining to Direct List only. Ex. 1 (Salu Dep. at 51:4-12); Ex. 4 (Mandell Damages Rep. at Table 6). 38. Salu admitted that his claimed “lost income” damages are based solely on the claimed losses of Direct List’s business, revenue and income. Ex. 1 (Salu Dep. at 51:4-55:21). 39. Salu was unable to estimate the amount of “lost income”, which, again, he claims was “coming from Direct List[.]” Ex. 1 (Salu Dep. at 52:7-12, 53:14-16, 53:23-54:11). 40. Legally, Vistage is under no contractual obligation to do business with Direct List. Ex. 1 (Salu Dep. at 57:4-25). 41. Direct List refused to explain the relief it seeks under its fourth cause of action for violation of Cal. Bus. & Prof. Code § 17200, claiming any testimony it could offer in this regard is protected by the attorney-client privilege. Ex. 2 (Direct List, LLC 30(b)(6) Dep. at 191:16-193:11). Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 9 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 9 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH UNDISPUTED FACT EVIDENCE 42. Direct List refused to explain what was meant in the fourth cause of action whereby it seeks to enjoin the “operation of a business that uses Direct List’s Trade Secrets to directly compete with Direct List,” claiming that any testimony it could offer in this regard is protected by the attorney- client privilege. Ex. 2 (Direct List, LLC 30(b)(6) Dep. at 192:9-22, 193:12-22). 43. Direct List admits that the only “business” it seeks to enjoin is AVS Leads LLC. Ex. 2 (Direct List, LLC 30(b)(6) Dep. at 193:24-194:8 (Q: “In this lawsuit, does Direct List have a belief that there is a company out there that is competing directly with Direct List using Direct List’s trade secrets?” A: “Yes. We believe that [sic] AVS Leads.”)). 44. Direct List refused to explain the injunctive relief it seeks under its fourth cause of action for violation of Cal. Bus. & Prof. Code § 17200, claiming any testimony it could offer in this regard is protected by the attorney- client privilege. Ex. 2 (Direct List, LLC 30(b)(6) Dep. at 193:7-11). 45. Salu could not provide an estimate of how much his lost income claim was. Ex. 1 (Salu Dep. at 55:7-56:11). Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 10 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 - VISTAGE INT’L, INC.’S STATEMENT OF UNDISPUTED FACTS ISO MSJ Case No. 3:15-cv-02025-WQH Dated: July 22, 2016 JONES DAY By: /s/ Paul F. Rafferty Paul F. Rafferty Attorneys for Defendant VISTAGE INTERNATIONAL, INC. Case 3:15-cv-02025-WQH-JLB Document 47-2 Filed 07/22/16 Page 11 of 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECL. OF PETE SCIABARRA IN SUPPORT OF VISTAGE’S MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA O WENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Judge: Hon. William Q. Hayes DECLARATION OF PETE SCIABARRA IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. [Filed concurrently herewith: Notice of Motion and Motion; Memorandum of Points and Authorities] Date: August 29, 2016 Case 3:15-cv-02025-WQH-JLB Document 47-3 Filed 07/22/16 Page 1 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECL. OF PETE SCIABARRA IN SUPPORT OF VISTAGE’S MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB DECLARATION OF PETE SCIABARRA I, Pete Sciabarra, declare as follows: 1. I am a Vice President of Field Operations at Vistage International, Inc., (“Vistage”) a defendant in the above-captioned litigation. I have personal knowledge of the facts set forth below and if called upon as a witness, I could and would testify competently thereto. 2. Since the inception of AVS Leads LLC (“AVS”), which Vistage understands was created some time in May 2015, Vistage has never done business with AVS, it has no ownership interest in AVS, it does not profit directly or indirectly from AVS, it has no relationship with AVS, and it does not compete against AVS. Vistage shares no business interest(s) whatsoever with AVS. 3. Vistage does not possess, have custody or control of, or use any trade secrets, confidential or proprietary information of Direct List LLC. For sake of avoidance of doubt, Vistage has no interest in this information whatsoever. 4. Vistage does not compete with Direct List LLC in any manner. Vistage and Direct List operate entirely different businesses. 5. Vistage derives no profits whatsoever from AVS’ or Direct List’s trade secrets, confidential or proprietary information. 6. While Phil Kessler was a Vistage Chair, he could pursue other professional endeavors. For example, Phil Kessler was hired by Eran Salu to manage a company called Great Reunions in December 2014 through January 2015. Nothing Phil Kessler did in conjunction with that role had anything to do with his role as a Vistage Chair. 7. Vistage was not aware of any conduct alleged by the Plaintiffs pertaining to Phil Kessler prior to June of 2015. Vistage's first notice of the subject matter alleged in the lawsuit occurred on June 16, 2015, by which time the company AVS Leads was already formed and operating, and the Direct List workers had already left Direct List and accepted employment at AVS. Case 3:15-cv-02025-WQH-JLB Document 47-3 Filed 07/22/16 Page 2 of 3 Case 3:15-cv-02025-WQH-JLB Document 47-3 Filed 07/22/16 Page 3 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECL. OF PAUL F. RAFFERTY IN SUPPORT OF VISTAGE’S MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA O WENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Judge: Hon. William Q. Hayes DECLARATION OF PAUL F. RAFFERTY IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. Date: August 29, 2016 [NO ORAL ARGUMENT UNLESS REQUESTED BY THE COURT] Case 3:15-cv-02025-WQH-JLB Document 47-4 Filed 07/22/16 Page 1 of 3 1 DECLARATION OF PAUL F. RAFFERTY 2 I, Paul F. Rafferty, declare as follows: 3 1. I am a partner at the law firm of Jones Day, attorneys of record for 4 Defendant Vistage International, Inc. in the above-captioned litigation. I am 5 admitted to practice in this state and before this Court. I have personal knowledge 6 of the facts set forth below and if called upon as a witness, I could and would testify 7 competently thereto. 8 2. Attached hereto as Exhibit 1 are true and correct copies of pertinent 9 excerpts from the transcript of the June 28, 2016 deposition of Eran Salu. 10 3. Attached hereto as Exhibit 2 are true and correct copies of pertinent 11 excerpts from the transcript of the June 29, 2016 deposition of Direct List LLC. 12 4. Attached hereto as Exhibit 3 is a true and correct copy of the Damages 13 Report authored by Plaintiffs' expert Dennis Mandell. 14 5. Attached hereto as Exhibit 4 are true and correct copies of pertinent 15 excerpts from the transcript of the July 11, 2016 deposition of Dennis Mandell. 16 6. Attached hereto as Exhibit 5 are true and correct copies of pertinent 17 excerpts from the transcript of the May 12, 2016 deposition of Phil Kessler. 18 7. Attached hereto as Exhibit 6 is a true and correct copy of Plaintiffs' 19 Initial Disclosures, served on November 18, 2015. 20 8. Attached hereto as Exhibit 7 is a true and correct copy of Plaintiffs' 21 Amended Initial Disclosures, served on July 11, 2016. 22 9. Attached hereto as Exhibit 8 are true and correct copies of pertinent 23 excerpts from the transcript of the May 2, 2016 deposition of Edette Herron. 24 I swear under penalty of perjury under the laws of the United States that the _,.4, 25 foregoing is true and correct. Executed this'2V day of July, 2016 at Irvine, 26 California. 27 Ill 28 DECL. OF PAUL F. RAFFERTY IN SUPPORT OF VISTAGE'S MOTION FOR SUMMARY JUDGMENT 3:15-cv-02025-WQH-JLB Case 3:15-cv-02025-WQH-JLB Document 47-4 Filed 07/22/16 Page 2 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NAl-1501547706vl -2- DECL. OF PAUL F. RAFFERTY IN SUPPORT OF VISTAGE'S MOTION FOR STTMMARV nrnnM 1·1'i-~v-O?O?.'i-WOH- Case 3:15-cv-02025-WQH-JLB Document 47-4 Filed 07/22/16 Page 3 of 3 TABLE OF CONTENTS EXHIBIT DESCRIPTION PAGE NO. 1 Excerpts from transcript of June 28, 2016 deposition of Eran Salu 3 2 Excerpts from transcript of June 29, 2016 30(b)(6) deposition of Direct List, LLC 36 3 Expert Report of Dennis Mandell dated May 13, 2016 46 4 Excerpts from transcript of July 11, 2016 deposition of Dennis Mandell 74 5 Excerpts from transcript of May 12, 2016 deposition of Phillip Howard Kessler 87 6 Plaintiffs’ Initial Disclosures dated November 18, 2015 94 7 Plaintiffs’ Amended Initial Disclosures dated July 11, 2016 102 8 Excerpts from transcript of May 2, 2016 deposition of Edette Herron 109 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 1 of 133 EXHIBIT 1 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 2 of 133 UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina ) Limited Liability Company; and ) ERAN SALU, an individual, ) Plaintiffs, ) No. 3:15-cv-02025 vs. ) WQH-JLB VISTAGE INTERNATIONAL, INC., a ) Delaware Corporation; PHIL KESSLER; ) LAUREN KESSLER; DIANA OWENS; ) EDETTE HERRON; and DOES 1 through ) 10, inclusive, ) Defendants. ) ) CONFIDENTIAL TRANSCRIPT DEPOSITION OF ERAN SALU JUNE 28, 2016 SAN DIEGO, CALIFORNIA Reported by: Cynthia J. Vega, RMR, CSR 6640, CCRR 95 Exhibit 1 Page 3 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 3 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 6 1 SAN DIEGO, CALIFORNIA 2 TUESDAY, JUNE 28, 2016, 10:13 A.M. 3 4 MR. RAFFERTY: Let's go on the record. 5 6 EXAMINATION 7 BY MR. RAFFERTY: 8 Q. Could you state your full name for the record, 9 please. 10 A. Eran Salu, spelled E-r-a-n, last name S-a-l-u. 11 MR. RAFFERTY: Go ahead and swear in the 12 witness. 13 14 ERAN SALU, 15 Plaintiff herein, being first duly sworn, testifies as 16 follows: 17 18 BY MR. RAFFERTY: 19 Q. Now that you're under oath, is that still your 20 name? 21 A. Yes. Eran Salu. 22 Q. Very good. Have you had your deposition taken 23 before, Mr. Salu? 24 A. Yes. 25 Q. How many occasions? Exhibit 1 Page 4 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 4 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 12 1 BY MR. RAFFERTY: 2 Q. Can you tell me, is Direct List Technology, 3 Inc., the company that was acquired in 2012, did that 4 ultimately come to be Direct List, LLC, the plaintiff in 5 this case? 6 A. It's part of Direct List, LLC, includes the 7 assets that were purchased, the business that was 8 purchased in 2012, correct. 9 Q. Okay. And you clarify. Was the acquisition of 10 Direct List Technology an asset purchase? 11 A. It was stock purchase. 12 Q. Stock. Okay. Following the acquisition of 13 Direct List Technology, was Direct List, LLC, created? 14 A. Not immediately following, but later on it was, 15 yes. 16 Q. Can you give me your best estimate as to when 17 Direct List, LLC, was created? 18 A. I think it was created sometime in 2013, but 19 that's just my best recollection. 20 Q. Understood. And that was created by you or by 21 someone on your behalf? 22 A. Yes. It's a subsidiary or it's a wholly owned 23 LLC owned by JAL Equity. 24 Q. And at the time of creation of Direct List, 25 LLC, following up with your response, was JAL Equity at Exhibit 1 Page 5 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 5 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 13 1 the time of creation the sole member owner of Direct 2 List, LLC? 3 A. Yes. 4 Q. And do you understand that it continues to be 5 the sole owner member of Direct List, LLC? 6 A. That's my understanding. 7 Q. Okay. After Direct List Technology, Inc., was 8 acquired in 2012, can you tell me what happened to that 9 entity? 10 A. What happened to Direct List Acquisition, LLC? 11 Q. No. Sorry. Can you tell me what happened to 12 Direct List Technology, the entity that was purchased 13 from the private individuals in 2012? Did it continue 14 to operate? 15 A. I don't know. I didn't -- I mean, we didn't 16 continue to operate under that name, so I don't know 17 if -- I don't know what happened to it. 18 Q. Ultimately -- am I correct that the assets of 19 Direct List Technology ultimately found their way into 20 Direct List, LLC, as part of that business? 21 A. Direct List, LLC, the North Carolina 22 corporation? 23 Q. Yes. 24 A. Yes. 25 Q. Can I assume that after the acquisition of Exhibit 1 Page 6 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 6 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 15 1 Q. And JAL Equity is a corporation? 2 A. It's a Nevada S corp. 3 Q. I would only call it JAL, but I know there is 4 something called JAL Consulting. Is that a different 5 entity? 6 A. It is. 7 Q. It is. Okay. Then I'll continue to refer to 8 this as JAL Equity just to be safe. 9 A. Yes. 10 Q. Who is the stockholder of JAL Equity, the 11 Nevada S corp? 12 A. Just myself. 13 Q. Do you have any recollection of the officers of 14 JAL Equity, as you sit here today? 15 A. I don't have recollection. 16 Q. Do you have an officerial position? 17 A. I believe so. 18 Q. At any time since the creation of Direct List, 19 LLC, to the present, have you held any officerial 20 positions in Direct List? 21 A. I'm not sure. 22 Q. Did you ever consider yourself, from the date 23 of its formation to the present, to be an employee of 24 Direct List, LLC? 25 A. No. Exhibit 1 Page 7 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 7 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 21 1 A. In Touch Today, WS Radio, Business Leader 2 Magazine, Opportunity World Magazine. Those would be 3 all I recall at that time. 4 Q. And once Mr. Plotnik's shares were bought out 5 and JAL Equity was created, did any of these businesses 6 then find their way into the JAL Equity family? 7 A. Can you describe "family"? 8 Q. Well, I'm saying "family" generally because I 9 can't say whether these entities transferred, because 10 some may just be businesses and not entities. Let me 11 try and rephrase. 12 As I count them, you just identified six 13 businesses once JAL Equity was formed. Were these 14 businesses moved under the JAL Equity penumbra? 15 A. Three were for sure: Direct List, Inside 16 Tennis and In Touch Today. The other three, I'm not 17 sure, because in and around that time frame, we sold 18 one of them and we closed two of them down. 19 Q. Okay. And around that time, which was sold and 20 which two were closed? 21 A. WS Radio was sold and the other two were closed 22 down. 23 Q. So moving forward, looking at my notes, 24 JAL Equity was formed in 2013. Do you have any 25 recollection of a month? Exhibit 1 Page 8 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 8 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 24 1 Q. And can you tell me the relationship between 2 Direct List, LLC, owned by JAL Equity and an employee 3 handbook owned by JAL Consulting and how that relates to 4 Direct List? 5 A. Sure. All the employees of JAL Consulting are 6 people that work at JAL Equity businesses. 7 Q. Let me see if I can break that down. Let's say 8 the first four months of 2015 when the employees were 9 still at Direct List, LLC, who was their employer? 10 A. I don't recall if it was Prospect Marketing 11 Group or Direct List Acquisition. I would have to see 12 their paystubs. 13 Q. Okay. So it could be they were employees of 14 Direct List, LLC, or you said -- 15 A. Not Direct List, LLC. 16 Q. Okay. So again, taking, let's say, the first 17 four months of 2015, the people who worked at Direct 18 List, LLC, were employees of what company? 19 A. Well, there was no Direct List, LLC, at that 20 time. 21 Q. In 2015? 22 A. I'm sorry. I thought you said 2012. 23 Q. Maybe I misspoke. Let me try again. 24 The first four months of 2015 -- 25 A. Okay. Exhibit 1 Page 9 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 9 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 25 1 Q. -- the people who worked at Direct List, LLC -- 2 A. Yes. 3 Q. -- who were they employed by? 4 A. JAL Consulting, I believe. 5 Q. Am I correct in how you formed your different 6 companies that JAL Consulting was used by you to employ 7 employees in the different companies owned by 8 JAL Equity? 9 MR. BAUM: Objection. Vague and ambiguous. 10 THE WITNESS: Say it again. I'm sorry. 11 BY MR. RAFFERTY: 12 Q. Sure. No problem. We've established that 13 JAL Consulting employed the people working for Direct 14 List, LLC, in the first four months of 2015. With 15 respect to Great Reunions, if there were employees in 16 the first four months of 2015 at Great Reunions, would 17 they have been employed by JAL Consulting? 18 A. I believe so. 19 Q. So trying to just cut to the chase, the 20 question I'm asking is for your belief as to whether the 21 companies listed on this page of Exhibit 101, to the 22 extent they had employees, were the employees of these 23 entities all employed by JAL Consulting? 24 A. I believe so. 25 Q. Jumping a bit out of order, but to tie the loop Exhibit 1 Page 10 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 10 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 34 1 Direct List, LLC -- 2 A. Yes. 3 Q. -- in doing its business? 4 A. Yes. 5 Q. And it assisted Direct List, LLC, in the manner 6 you just described, sending e-mails and monitoring 7 results? 8 A. Yes. 9 Q. And also did you mention the formation of 10 lists? 11 A. Well, the cleaning of lists. 12 Q. Cleaning of lists? 13 A. Yes. 14 Q. What does cleaning of lists mean? 15 A. Well, oftentimes the lists need certain data 16 added to it, appended, and the India team would append 17 that data. 18 Q. I think you answered this earlier, but just in 19 case, between January 1 of 2013 and June of 2015, did 20 Direct List, LLC, pay you any salary? 21 A. No. 22 Q. Did Direct List, LLC, pay you directly any form 23 of compensation? 24 A. No. 25 Q. I assume, based on the construction that you've Exhibit 1 Page 11 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 11 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 35 1 given me, that compensation to you would generally come 2 from JAL Equity? 3 A. Yes. 4 Q. I can't spell it, but I think I can pronounce 5 it. Have you ever heard of a company called Equilibrix? 6 A. Yes. 7 Q. Is that a company you or one of your entity 8 currently owns? 9 A. It's not operational, so I'm not sure if the 10 entity still exists. 11 Q. Okay. Can you spell it? 12 A. This is my best guess. E-q-u-i-l-i-b-r-i-x. 13 Q. It is no longer operational. What was it when 14 it was operational? 15 A. It was an e-mail marketing company. 16 Q. If you know, was it an entity of itself? 17 A. I don't know. 18 Q. When did it cease to operate? 19 A. 2013 or '14. 20 Q. Why did it cease to operate? 21 A. In my opinion, there was just no way to make 22 money with it. 23 Q. Did you form this or did you acquire it? 24 A. We acquired it. 25 Q. And did you ultimately sell it or simply cease Exhibit 1 Page 12 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 12 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 38 1 A. Yes. 2 Q. And you further understand that Mr. Mandell was 3 hired to do a damages analysis for the plaintiffs 4 representing the damages allegedly caused by the 5 defendants? 6 A. Yes. 7 Q. Prior to the creation of the report that you 8 have in front of you marked as Exhibit 102, did 9 Mr. Mandell speak to you concerning the damages of the 10 case? 11 A. Prior to the report? 12 Q. Yes, sir. 13 A. Yes. 14 Q. And do you remember how many times he spoke 15 with you? 16 A. I think we had two conference calls and he 17 asked for information as well, which I provided. 18 Q. Can you tell me the length of both of those 19 conference calls? 20 A. Maybe half an hour, maybe longer. At least 21 half an hour. 22 Q. Fair enough. Your best estimate? 23 A. Yeah. 24 Q. As part of the two conference calls, did 25 Mr. Mandell ask you for your impression of what the Exhibit 1 Page 13 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 13 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 40 1 A. No. I never -- I don't think so. I think I 2 provided some of the facts for this, but I don't recall 3 reading this. 4 Q. Were you aware that prior to the delivery of 5 this report to the defendants, that Mr. Mandell 6 concluded that the damages that were allegedly caused by 7 the defendants were $5,300,000, rounded? 8 A. No. 9 Q. You did not know that? 10 A. I did not know that. 11 Q. Since the service of this report upon the 12 defendants, have you had an opportunity to review it? 13 A. Yes. I've not read every piece of it. I 14 skipped to the meat, but I did not -- but I have 15 reviewed it, yes. 16 Q. When you say "skipped to the meat," what is the 17 meat? 18 A. The number, the damages number. 19 Q. I take it you were satisfied with the damages 20 number? 21 MR. BAUM: Objection. Vague and ambiguous. 22 THE WITNESS: It was lower than I thought. 23 BY MR. RAFFERTY: 24 Q. It was lower than you thought? 25 A. It was. Exhibit 1 Page 14 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 14 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 41 1 Q. Have you looked through the information that 2 Mr. Mandell lists in the report to determine whether he 3 failed to account for any of the damages in the case? 4 A. Whether he failed to account. I haven't -- I 5 mean, I've looked at the number. I see the number. I 6 kind of understand how he got there. I understand how 7 he got there, but that's -- does that answer your 8 question? 9 Q. Yes. You understand how he got to the number? 10 A. Yes. 11 Q. And I assume you have a significant background 12 with numbers. I'm correct that you have your CPA? 13 A. Yeah. I don't know if it is current, but I 14 have been a CPA. 15 Q. Fair enough. I'd like you to look at the 16 report and I'd like you to tell me whether or not there 17 are other damages that Mr. Mandell missed in his report. 18 And the reason why I'm asking that is I need to know 19 whether I can rely on the report, and for good or for 20 bad, the $5,300,000 number or whether you think this 21 report is incomplete. 22 A. Sure. It doesn't look like he factored in any 23 punitive damages that could be awarded. 24 Q. Okay. Fair enough. 25 A. So what I think he did is value the business, Exhibit 1 Page 15 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 15 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 42 1 the loss of capital from losing the business. 2 What was your question again? 3 Q. Yeah. Thank you for taking the time to review 4 the report. 5 Now having reviewed it, I'm curious as to 6 whether -- other than the punitive damages that you 7 mentioned, are there any other damages that you feel 8 that Mr. Mandell did not put in his report? 9 A. Just reading it, there is none that come to 10 mind. 11 Q. Would the answer be the same if I asked you if 12 there is any other damages that you would like to add 13 that were sustained by the plaintiffs that are not found 14 in the report? 15 MR. BAUM: I'm going to object as lacking 16 foundation on the witness' expertise with regard to 17 recoverable damages. 18 THE WITNESS: I think that would encompass 19 conversations that I've had with Brandon. 20 BY MR. RAFFERTY: 21 Q. I don't want to know about that. 22 A. Okay. Then I can't answer it. 23 Q. Okay. Let me ask it this way: Do you have any 24 belief, as you sit here today, that plaintiffs have 25 suffered damages in excess of $5,300,000, excluding the Exhibit 1 Page 16 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 16 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 43 1 punitive damages? 2 A. I mean, those would be -- they would be part of 3 conversations I've had with Brandon. I've discussed 4 that topic with Brandon. 5 Q. That's fine. Other than your discussions with 6 counsel, you have no other independent view as to 7 whether or not the damages calculated by Mr. Mandell 8 omit any other damages that you can think of? 9 A. Just what I -- I mean, correct. I've spoken to 10 Brandon about that. 11 Q. That's fine. Don't tell me that. I'll ask the 12 same thing of Direct List tomorrow. We have two 13 plaintiffs. 14 A. Okay. 15 Q. I've got a damages report for $5,300,000. I 16 want to make sure that both of the plaintiffs are 17 satisfied with the report, at least to the extent -- 18 A. Okay. 19 Q. -- that they don't -- they don't say that 20 Mr. Mandell missed something. Because when I talk to 21 Mr. Mandell, Mr. Mandell is going to say, "I'm working 22 on assumptions here. I don't have any personal 23 knowledge." You have personal knowledge of what you 24 might think the damages are in this case. 25 So with that caveat in mind, as you sit here Exhibit 1 Page 17 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 17 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 44 1 today having reviewed the report, other than punitive 2 damages, you do not observe any other damages that 3 Mr. Mandell may have missed? 4 MR. BAUM: Object to the form of the question. 5 And move to strike the preamble. 6 THE WITNESS: I would still say the same thing, 7 that these are topics I've discussed with Brandon and 8 any views that I have are -- 9 BY MR. RAFFERTY: 10 Q. Understand. 11 A. Yeah. 12 Q. Let me ask it differently. You mentioned 13 before that it looks like Mr. Mandell did an evaluation 14 of the business, Direct List, LLC. Are there any 15 damages of which you were aware beyond an assessment of 16 the damages to the business of Direct List, LLC? 17 A. I mean, this is a topic that I've discussed 18 with Brandon, so I just don't know -- you know, I'm not 19 sure I can answer you without revealing stuff we 20 discussed. 21 Q. Fair enough. You're unable to provide any 22 response to that question absent potentially involving 23 your discussions with your counsel? 24 A. Yes. 25 MR. RAFFERTY: All right. Let me mark as the Exhibit 1 Page 18 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 18 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 48 1 above, so I've got to go back and read this. If you 2 want me to do that, I'm happy to do that. 3 BY MR. RAFFERTY: 4 Q. Well, the "as described above" pertains to the 5 conduct of the defendants. 6 A. Okay. 7 Q. But after the comma, it says, "Mr. Salu has 8 sustained damages in the form of substantial loss of 9 business and profits to his company." I'm wondering 10 whether that statement is still accurate. 11 A. I have suffered damages in terms of substantial 12 loss of business and profits of my company, yes. 13 Q. And I understand that the estimated amount is 14 now greater. Are there any other damages that you 15 suffered other than what is listed here in paragraph 85 16 without regard for the estimated amount having changed? 17 A. I mean, again, any -- these are discussions 18 I've had with Brandon. And I think it is along the 19 lines of what you asked me earlier. So there is nothing 20 here that I can say that wouldn't be from a conversation 21 with Brandon I've had. 22 Q. Outside of your discussions with counsel, do 23 you have any opinion as to whether or not this statement 24 excludes other damages that were sustained by you or the 25 plaintiffs in this case? Exhibit 1 Page 19 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 19 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 49 1 A. I mean, any opinions I have are -- is a result 2 of discussions I've had with Brandon, so... 3 Q. So then closing the loop, aside from 4 discussions that you've had with your counsel, you have 5 no opinion as to whether there are other damages that 6 you sustained in this case other than what's mentioned 7 in paragraph 85? 8 A. I would say any opinions that I have are as a 9 result of discussions I've had with Brandon. I would 10 say that's more accurate. 11 Q. All right. I'll ask this one last time. I 12 just want -- I'm just trying to understand the damages 13 of the case. 14 A. Sure. 15 Q. I'm happy if they are 3 million. I'm happy if 16 it is the statement in paragraph 85. I accept if it is 17 Mr. Mandell's damages. But one thing my client will 18 ultimately ask me is, what are the damages. And so let 19 me ask you this: Do you know -- setting aside any 20 discussions that you had with your counsel in this case, 21 do you know if there are other damages that you 22 sustained, other than the substantial loss of business 23 and profits to Direct List, LLC, as are calculated 24 within the Mandell damages report? 25 MR. BAUM: Objection. Misstates paragraph 85. Exhibit 1 Page 20 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 20 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 50 1 THE WITNESS: I mean, I really -- you know, 2 without going into discussions with Brandon, there is -- 3 there is nothing I can answer that -- 4 BY MR. RAFFERTY: 5 Q. You can't do it? 6 A. Yeah. 7 MR. BAUM: Maybe we can have a brief moment 8 of -- discuss privilege. I want to make sure he's able 9 to answer it and understands what's privileged and 10 what's not. 11 MR. RAFFERTY: That would be great. Please 12 take a moment. 13 MR. BAUM: Why don't we just step out for a 14 moment. 15 (Pause in proceedings.) 16 MR. RAFFERTY: Let's go back on the record. 17 BY MR. RAFFERTY: 18 Q. So when we broke, Mr. Salu, I was asking you 19 about whether you were aware whether there are other 20 damages, other than those articulated by the Mandell 21 damages report or as described in paragraph 85. And now 22 that you've returned, may I ask whether you can identify 23 other damages that have been sustained in the case that 24 are not listed in the Mandell damages report? 25 MR. BAUM: Mr. Salu, I'll caution you, don't Exhibit 1 Page 21 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 21 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 51 1 reveal the legal strategies that you've discussed with 2 me as your counsel, but if you know factual information, 3 you can reveal it. 4 THE WITNESS: I mean, factually I have 5 personally lost income from what's occurred in this 6 matter. 7 BY MR. RAFFERTY: 8 Q. How much? 9 A. I've lost the income generated from Direct List 10 that goes -- 11 Q. Can you give me an estimate of what that is? 12 A. It would be in Mr. Mandell's report. 13 Q. Well, let me -- I don't expect you to be the 14 scrivener of the report, but let me follow up with that 15 question. Perhaps make it a little easier. 16 Are the damages of lost income that you just 17 articulated, to your understanding, included in the 18 Mandell report? 19 A. The damages of my -- 20 MR. BAUM: Objection. Vague and ambiguous. 21 THE WITNESS: Yeah. Again, I've lost income 22 that I would receive from Direct List. I think he's 23 looked at the income of Direct List in making his 24 assessment. I don't know -- I have no idea in terms of 25 any legal -- you know, I can just tell you that I've Exhibit 1 Page 22 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 22 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 52 1 lost income from this. 2 BY MR. RAFFERTY: 3 Q. Is the income that you lost included in the 4 Mandell report? 5 A. Some of it is. I mean, certainly I've lost 6 income from Direct List. 7 Q. Have you ever calculated how much income you 8 personally lost as a result of the conduct of the 9 defendants in this case? 10 A. Like I haven't sat down and come to an exact 11 number, but I know that I've lost the income that was 12 coming in from Direct List. 13 Q. When you spoke to Mr. Mandell in those two 14 telephone discussions, did you advise Mr. Mandell that 15 you lost income as a result of the actions of the 16 defendants? 17 A. I don't think we discussed that topic. 18 Q. Then why do you assume it is included in the 19 Mandell report? 20 A. I'm not assuming it is included in here. I 21 would have to read -- you know, if it's -- I think the 22 report stands for itself. If it mentions that I've lost 23 income, you know, or not, I don't know. I haven't read 24 it fully, as I mentioned before, but I think it 25 encompasses the loss of the business that provided me Exhibit 1 Page 23 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 23 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 53 1 income. 2 Q. Do you -- are you claiming -- are you claiming 3 lost income damages in addition to the damages 4 articulated by Mr. Mandell that total $5,300,000, 5 rounded? 6 A. I mean, that's stuff that -- honestly, they 7 were discussions that I've had with Brandon. I don't 8 know the legal theories for what we can claim and what 9 we can't. I just know what I've lost. 10 Q. If you know what you've lost, then what have 11 you lost? 12 A. I've lost the income stream from Direct List 13 Technology, also from the work we did with Vistage. 14 Q. How much -- and tell me how much that income 15 stream is that should be attributed to Eran Salu. 16 A. Well, again, I haven't calculated it, so... 17 Q. Do you intend to claim it at trial? 18 A. That's something that I have no -- I mean, it 19 would be based on discussions I've had with Brandon. I 20 have -- 21 Q. Okay. 22 A. -- no idea. 23 Q. You cannot, as you sit here today, estimate for 24 me how much in lost income you sustained as a result of 25 this lawsuit? Exhibit 1 Page 24 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 24 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 54 1 A. Well, I've lost at least the income from Direct 2 List at this lawsuit. 3 Q. Understood. That's incorporated in the Mandell 4 report? 5 A. I'm not sure if he's attributed the lost income 6 to me as far -- there is two plaintiffs. 7 Q. Correct. 8 A. So the losses attributed to Direct List here 9 would also be losses that -- for me. I'm the one who is 10 the owner of Direct List, so I've lost the income coming 11 from this. 12 Q. My understanding is Mr. Mandell prepared his 13 report for both plaintiffs. Do you disagree with that? 14 MR. BAUM: Objection. Lacks foundation. 15 THE WITNESS: I don't know. I think the report 16 stands for itself in terms of I wouldn't want to guess. 17 I'm sure you'll have a chance to ask him that, but I 18 don't have a -- 19 BY MR. RAFFERTY: 20 Q. Well, my worry is that Mr. Mandell says, these 21 are damages associated with Direct List, LLC. I don't 22 know what Mr. Salu is claiming. Then I've already 23 deposed you and I still don't know what Mr. Salu is 24 claiming, if anything, over and above what Mr. Mandell 25 is claiming is damages. This is my one opportunity to Exhibit 1 Page 25 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 25 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 55 1 ask you. And so I am trying to determine whether, as an 2 example, at trial, Mr. Salu will show up and say, "Oh, 3 in addition to the $5,300,000, I'm owed another 4 $4 million in personal income damages." And I'd like to 5 know that now. 6 A. Sure. 7 Q. And so the question I'm just trying to get 8 clear enough for you is whether you can articulate for 9 me, without divulging discussions that you've had with 10 counsel, how much money you, Eran Salu, claim that you 11 have lost as a result of the conduct of the defendants? 12 A. I really don't think I can articulate it 13 without divulging the conversations that he and I have 14 had. 15 Q. Okay. You believe that as the owner of Direct 16 List, LLC, you're entitled to claim loss of income 17 damages? 18 A. Again, I don't know this. This is all stuff 19 that I would ask Brandon. I don't have independent 20 thought of that other than the discussions I've had with 21 him. 22 Q. I don't mean to badger you, honestly, but you 23 did go to law school. 24 A. I didn't do that well in law school. 25 MR. BAUM: That's not what you told me. Exhibit 1 Page 26 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 26 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 56 1 BY MR. RAFFERTY: 2 Q. You probably had things in torts and contracts 3 and, of course, fraud is a tort. You took remedies 4 classes. So you understand my question, but that 5 notwithstanding, you do not feel you can give me any 6 further information about damages that you personally 7 sustained without divulging communications that you had 8 with Mr. Baum; is that correct? 9 A. Correct. Yes. 10 Q. All right. You're aware that Vistage stopped 11 doing business with Direct List, LLC, in 2016? 12 A. Yes. 13 Q. And do you personally believe that the loss of 14 business associated with Vistage's decision also 15 constitutes damages in this case? 16 A. 100 percent. 17 Q. And why do you believe that? 18 A. Because it was done in retribution for this 19 litigation. 20 Q. How do you know that? 21 A. Well, for one, Vistage, in terminating us, they 22 said the litigation was part of the termination; for 23 two, the termination came two weeks after the marketing 24 department informed us we should expect a lot of big 25 orders and how much could we handle; and three, the Exhibit 1 Page 27 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 27 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 57 1 effectiveness of the campaign over a long period of time 2 would make no sense to ever terminate for any company, 3 unless it was done for some other reason. 4 Q. Is there any written contract in existence 5 between Direct List, LLC, and Vistage that obligated 6 Vistage to continue doing business with Direct List, 7 LLC? 8 A. There is a contract. I don't believe it 9 obligates it to continue doing business. 10 Q. If there is no obligation, then why do you 11 contend that it needed to continue to do business with 12 Direct List, LLC? 13 A. Well, it could at any time not do business with 14 Direct List, LLC. The reason it is not doing business 15 with Direct List, LLC, is retribution for filing a 16 lawsuit. If there was no lawsuit, I'm 100 percent 17 confident they would continue doing business with us. 18 Q. You would agree there was no obligation for it 19 to continue doing business with Direct List, LLC? 20 A. There was no contractual obligation, but again, 21 I would have to -- let me amend. Actually, I would have 22 to see the contract. I don't have a great recollection 23 of the contract. That's my assumption. But I would 24 have to look at the contract to tell you 100 percent 25 that that's something that I believe. Exhibit 1 Page 28 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 28 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 94 1 entities' financial performance listed beneath it, such 2 as, if you look at the next page, there's Direct List 3 profit and loss, and the next page is In Touch profit 4 and loss, and Inside Tennis profit and loss, and 5 Sarasota profit and loss, Great Reunions profit and 6 loss, WS profit and loss. What I'm trying to understand 7 is whether the JAL Equity profit and loss statement, 8 which is the first page of Exhibit 105, is simply the 9 summation of the profit and loss statements of these 10 other entities or businesses. Do you know the answer to 11 that? 12 A. The JAL Equity includes all of those businesses 13 as well as any expenses JAL Equity may have. 14 Q. Okay. That's a great response. That really 15 answers my question. 16 JAL doesn't independently create any revenue, 17 does it? 18 A. No. 19 Q. No. But it has its own expenses, of course? 20 A. It does, yes. 21 Q. So the numbers that we see on the first page of 22 105 would also necessarily include the financial 23 performance, in part, of Direct List, LLC? 24 A. Yes. 25 Q. Okay. Thank you for that clarification. Exhibit 1 Page 29 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 29 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 147 1 one-to-one versus one-on-one, but I could be wrong. 2 BY MR. CARLL: 3 Q. Is there a way they're referred to? 4 A. One-to-ones probably. 5 Q. One-to-one? 6 A. Yeah. 7 Q. You believe those began in May 2011? 8 A. Uh-huh. 9 Q. And why did you engage in one-to-ones with 10 Mr. Kessler? 11 A. Well, so, you know, the Vistage -- the reason 12 you sign for Vistage is for the group sessions and the 13 one-to-ones. And so the one-to-ones is two hours that 14 you get to spend with the former CEO, and they help you 15 work on your business. They provide, you know, advice 16 and counsel on your business. 17 Q. Generally, because we're talking about from 18 May 2011 until, I believe, February 2015, does that time 19 period sound accurate for the breadth of time that you 20 were having regular monthly one-to-ones with 21 Mr. Kessler? 22 A. I don't know. I think we had -- well, I'm not 23 sure if -- I can't remember for sure if we had one in 24 March, April or May, but generally that's correct. 25 Q. Did these meetings usually have the same Exhibit 1 Page 30 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 30 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 148 1 process to them? 2 A. The group meetings? 3 Q. No. I'm talking just one-to-ones. 4 A. The one-to-ones tended to be -- you know, when 5 you say "process," describe what you mean by "process." 6 Q. How about I have you describe to me just an 7 average typical one-to-one with Mr. Kessler. 8 A. Sure. I mean, when we had our one-to-ones, we 9 would go through topics relating to my business, and he 10 would ask questions. I would provide information. He 11 would give advice. He would ask me, "Have you thought 12 of this? Have you thought of that? Do you want to do 13 this? Do you want to do that? I recommend you do this. 14 I recommend you do that. Why don't you do this?" It 15 was a conversation back and forth with him providing 16 his -- like I said, his advice and counsel. 17 Q. Did you choose Mr. Kessler to be the individual 18 with whom you would have one-to-ones? 19 A. Well, what happened with Vistage, when I 20 initially came to San Diego, I was assigned another 21 chair, Richard Carr. And it just -- Richard was -- I 22 think he left Vistage, actually, to become CEO 23 somewhere. And so he was leaving, and I didn't want to 24 stick around with the remaining members waiting for a 25 new chair. I said, "I'd like to go to an existing Exhibit 1 Page 31 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 31 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 149 1 chair." I think Phil contacted me and we may have met, 2 and then I said "Okay. I'm willing to go to this 3 group." 4 Q. So did you choose Mr. Kessler's group for a 5 particular reason? 6 A. I mean -- 7 MR. BAUM: Objection. Assumes facts not in 8 evidence. 9 THE WITNESS: I liked the members he had. He 10 had, you know, an account -- a guy who was with an 11 accounting firm, and an ad agency. I thought the ad 12 agency was very relevant to what we were trying to do. 13 I liked Phil. I thought he seemed like a decent guy, 14 knowledgeable. So I would say I liked the members. I 15 liked Phil. 16 BY MR. CARLL: 17 Q. What do you mean when you say the ad agency was 18 very relevant? 19 A. I'm in the marketing business. That's a 20 marketing business. So it is good to have -- in the 21 groups it is good to have people in industries that are 22 not competitive with you, but very close in nature, so I 23 liked having, you know, that. And then it's always good 24 to have an accountant and a lawyer in your group because 25 you can run stuff by, you know, what I would call Exhibit 1 Page 32 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 32 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 207 1 acquisitions for me. So I would say that we've got 2 programmers, designers, accounting staff, data diggers, 3 and administrative staff and a manager. 4 Q. And are the expenses associated with those 5 Indian employees allocated to each of the five different 6 JAL Equity entities? 7 A. Yes. Absolutely. Like for Direct List, anyone 8 who did data digging for Direct List is in that number 9 in their financial statements. 10 MR. CARLL: Can we go off the record. I want 11 to take a break and see if we can call it quits. 12 THE WITNESS: Perfect timing. 13 (Recess taken, 5:02 p.m. to 5:07 p.m.) 14 MR. CARLL: Let's go back on the record. 15 BY MR. CARLL: 16 Q. As part of handling internal accounting for 17 JAL Equity, do you handle payments to yourself based on 18 the performance of the entities? 19 A. I mean, I'm the sole owner, so it's hard to say 20 "payments." You know, I don't really necessarily take 21 out a set amount of payments or anything like that. In 22 fact, I leave most of the money in the business. If I 23 have to take out something because I want to make a 24 large, you know, personal expenditure or something, then 25 I'll do that. Exhibit 1 Page 33 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 33 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 208 1 Q. And when you are, for lack of a better term, 2 paying yourself, are you paying from JAL Equity as 3 opposed to paying yourself from one of the divisions 4 within JAL Equity? 5 A. Yeah. I mean, if I'm -- you know, if I'm 6 paying myself, you know, it's often a distribution. So 7 it isn't a expense anyway. It's just a distribution. 8 So I'm not showing up in -- in the expenses of any of 9 the entities. 10 Q. How do you decide whether or not to make a 11 distribution to yourself from the JAL Equity? 12 A. I mean, I'm the only owner. So it's, you know, 13 dependent on if I want to take money out or not, if I'm 14 purchasing something. Like if I'm purchasing a home or 15 something, I might say, let me take the down payment out 16 of it. 17 Q. And is that -- are those decisions made on the 18 basis of performance of JAL Equity as a whole as opposed 19 to individual performance of the divisions? 20 A. I mean, the decisions like -- I know that -- I 21 mean, these are my businesses. I have to support them. 22 And so if I -- you know, I'm not typically taking money 23 out unless I have a personal reason why I would need to 24 take money out of the business. It isn't based on 25 business criteria. I'm fine to leave the money in the Exhibit 1 Page 34 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 34 of 133 Deposition of Eran Salu DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING CONFIDENTIAL Page: 223 1 2 REPORTER'S CERTIFICATE 3 4 I, Cynthia J. Vega, a Certified Shorthand 5 Reporter for the State of California, do hereby certify: 6 That the witness in the foregoing deposition 7 was by me duly sworn; that the deposition was then taken 8 before me at the time and place herein set forth; that 9 the testimony and proceedings were reported by me 10 stenographically and were transcribed through 11 computerized transcription under my direction; and the 12 foregoing is a true and correct record of the testimony 13 and proceedings taken at that time. 14 I further certify that I am not of counsel or 15 attorney for either or any of the parties in the 16 foregoing proceeding and caption named or in any way 17 interested in the outcome of the cause in said caption. 18 IN WITNESS WHEREOF, I have subscribed my name 19 this 5th day of July, 2016. 20 _____ Reading and Signing was requested. 21 _____ Reading and Signing was waived. 22 __X__ Reading and Signing was not requested. 23 24 ______________________________ 25 CYNTHIA J. VEGA, CSR NO. 6640 Exhibit 1 Page 35 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 35 of 133 EXHIBIT 2 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 36 of 133 UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina ) Limited Liability Company; and ) ERAN SALU, an individual, ) Plaintiffs, ) No. 3:15-cv-02025 vs. ) WQH-JLB VISTAGE INTERNATIONAL, INC., a ) Delaware Corporation; PHIL KESSLER; ) LAUREN KESSLER; DIANA OWENS; ) EDETTE HERRON; and DOES 1 through ) 10, inclusive, ) Defendants. ) ) 30(B)(6) DEPOSITION OF DIRECT LIST, LLC WITNESS: ERAN SALU JUNE 29, 2016 SAN DIEGO, CALIFORNIA Reported by: Cynthia J. Vega, RMR, CSR 6640, CCRR 95 Exhibit 2 Page 36 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 37 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 5 1 SAN DIEGO, CALIFORNIA 2 WEDNESDAY, JUNE 29, 2016, 9:32 A.M. 3 4 ELAN SALU, 5 Witness herein, being first duly sworn, testifies as 6 follows: 7 8 EXAMINATION 9 BY MR. CARLL: 10 Q. Good morning, Mr. Salu. 11 A. Good morning. 12 Q. Is there any reason that you think you could 13 not give your best testimony today? 14 A. No. 15 Q. Okay. Great. Let's start with Exhibit 118. 16 I'm going to hand it to you. It's titled "Amended 17 Notice of Taking Deposition of Direct List LLC." 18 (Exhibit 118 was marked for identification.) 19 BY MR. CARLL: 20 Q. Have you seen this document before today? 21 A. Yes. 22 Q. Do you understand what it means -- well, do you 23 understand that you are the 30(b)(6) representative of 24 Direct List, LLC? 25 A. Yes, I do. Exhibit 2 Page 37 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 38 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 6 1 Q. Do you understand what that means? 2 A. I believe so. 3 Q. Can you tell me what your understanding is? 4 A. That I'm here to testify on behalf of Direct 5 List. I'm Direct List's representative to answer 6 questions that you have for Direct List. 7 Q. You understand that your testimony binds Direct 8 List, LLC; correct? 9 A. If you say so. I understand that. 10 Q. Yesterday you were deposed as Eran Salu in an 11 individual capacity. You understand that; correct? 12 A. Yes. 13 Q. You understand that today's a different 14 deposition? 15 A. Yes. 16 Q. If you can turn to page 4 of Exhibit 118. 17 There is a list of topics that go from page 4 to 5 to 6, 18 numbers 1 through 32. Do you see those? 19 A. Yes. 20 Q. Have you seen that list before today? 21 A. Yes. 22 Q. Are you prepared today to testify on the topics 23 listed in paragraphs 1 through 32? 24 A. Yes. 25 Q. Have you done anything, other than Exhibit 2 Page 38 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 39 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 161 1 as to when a vendor like AccuData is paid. You, 2 Mr. Salu, makes a decision as to when a vendor is paid; 3 correct? 4 A. Well, I make a decision when a vendor is paid, 5 correct. 6 Q. Okay. You make a decision based on the cash 7 flow of Direct List at the time? 8 A. Well, again, in the -- it's not just the cash 9 flow of Direct List. It's the cash flow of JAL. So I'm 10 looking at the inflows and outflows of JAL. 11 But I will also say in the case of AccuData, we 12 would get these bills that were massive, and they had 13 line items for different data they claim we ordered. In 14 order for me to approve a payment for AccuData, I have 15 to be able to match up the order with an order that 16 we've sent to the customer. And I need the data to have 17 been paid for. 18 Because as I mentioned before, you know, the 19 process for buying data is such that we're a middleman 20 and our client's a middleman, typically. So when we buy 21 some data from AccuData, there is typically a client 22 that's buying from a printer that's buying from us. So 23 we have to make sure that that client -- that our client 24 is paying us. And our clients typically don't pay us 25 until they get paid by their client. Exhibit 2 Page 39 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 40 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 162 1 So I needed to make sure that we were not 2 paying for anything that, one, didn't match an order; 3 and two, hadn't been paid by a client. 4 Q. Did I understand you correctly that a payment 5 to a vendor such as AccuData providing service to Direct 6 List could be based somewhat on the cash flow of 7 JAL Equity? 8 A. Of course. 9 Q. Why would it be based on the cash flow of 10 JAL Equity and not on the cash flow of Direct List? 11 A. Because all of these businesses -- ultimately, 12 I'm responsible for all of my businesses. And so the 13 cash flow -- I'm a small business owner and the cash 14 flow of all of the entities -- it doesn't do anybody at 15 Direct List any good if JAL Equity doesn't have capital 16 to pay bills of anyone. 17 So from that perspective, we have the very 18 disciplined process of, you know, we get the bill. We 19 review it to make sure that it is something that we 20 agree is due and -- you know, and we understand what it 21 is and agree it's due. We look at the cash flows coming 22 in and we make a determination to pay it. 23 Q. Were there occasions where you would be 24 provided a bill from Edette for Direct List and you 25 agreed it was due, but because of cash flows at Exhibit 2 Page 40 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 41 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 191 1 questions today. 2 I'll simply ask you -- may I assume that where 3 I'd asked you about Direct List's knowledge of what this 4 complaint said prior to its filing, that it would 5 respond the same way as you did yesterday regardless of 6 how you responded yesterday? 7 A. Yes. 8 Q. That's what I figured. So let me address your 9 attention to paragraph 104, please. 10 A. Okay. 11 Q. Would you read that paragraph, please. 12 A. "As a consequence of Defendants'" -- 13 Q. You don't have to read it out loud. 14 A. I'm sorry. Okay. 15 Okay. 16 Q. If any of the defendants are found liable for 17 unfair competition under this cause of action, does 18 paragraph 104 state accurately the relief that Direct 19 List seeks in this lawsuit? 20 A. Well, again, I think Direct List's beliefs are 21 formed from the conversations it has with its lawyers 22 when it comes to, you know, what the consequences of the 23 defendants' actions would legally be. 24 Q. Independent of any beliefs Direct List has 25 formed as a result of its communications with its Exhibit 2 Page 41 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 42 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 192 1 lawyers, does it have any other belief under this cause 2 of action whether it is entitled to anything else other 3 than what is sought in paragraph 104? 4 A. Again, I would say that Direct List's 5 understanding of that would be based on its discussions 6 with its attorneys. 7 Q. Let me ask you in a different way, see if it 8 results in a different response. 9 In paragraph 104, Direct List and Mr. Salu seek 10 the disgorgement of all profits obtained from the 11 services offered in connection with the operation of a 12 business that uses Direct List's trade secrets to 13 directly compete with Direct List. Do you see that? 14 A. Yes. 15 Q. With respect to the words "operation of a 16 business," does Direct List refer to a particular 17 business when it uses the words "operation of a 18 business"? 19 A. I don't -- I don't -- yeah, I'm not sure. I'm 20 just reading this. And, again, my understanding of it 21 comes solely from discussions that I've had with my 22 attorney. 23 Q. Okay. 24 A. But I think what it says on its face is what I 25 would say. It says, "As a consequence of Defendants' Exhibit 2 Page 42 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 43 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 193 1 actions, Plaintiffs are also entitled to injunctive 2 relief and an order that Defendants disgorge all of 3 their profits obtained from the services offered in 4 connection with the operation of a business that uses 5 Direct List's Trade Secrets to directly compete with 6 Direct List." 7 Q. Can Direct List tell me, as it sits here today, 8 what injunctive relief it would like? 9 A. Again, that would be something that Direct List 10 would not have an independent view from its conversation 11 with its attorneys. 12 Q. Can Direct List tell me what is meant in this 13 paragraph by the "operation of a business that uses 14 Direct List's Trade Secrets to directly compete with 15 Direct List"? 16 MR. BAUM: Object to the extent the document 17 speaks for itself. 18 THE WITNESS: Again, I think, you know, I've 19 said -- I think that -- I don't have an independent view 20 from the text of the document. And any view I would 21 have is -- would come from discussions I've had with my 22 attorney. 23 BY MR. RAFFERTY: 24 Q. In this lawsuit, does Direct List have a belief 25 that there is a company out there that is competing Exhibit 2 Page 43 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 44 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 194 1 directly with Direct List using Direct List's trade 2 secrets? 3 A. Yes. 4 Q. Who is that company? 5 A. We believe that AVS Leads. 6 Q. Does Direct List know if AVS, between June of 7 2015 to date, has any profits to disgorge? 8 A. I believe they do have profits to disgorge. 9 Q. Why does Direct List believe that? 10 A. Well, because I think we've seen their 11 financial statements and their -- you know, I would say 12 that those financial statements show profit. 13 MR. RAFFERTY: Understood. 14 I have no further questions. And I thank you 15 for your time. 16 THE WITNESS: Thank you. 17 MR. CARLL: Nothing for me. 18 MR. BAUM: All right. 19 MR. RAFFERTY: Done. 20 THE WITNESS: Wow. 21 THE REPORTER: Off the record? 22 MR. CARLL: Yes. Off the record. 23 (Deposition adjourned at 4:16 p.m.) 24 * * * * * 25 Exhibit 2 Page 44 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 45 of 133 Deposition of Eran Salu, 30(b)(6) for Direct List, LLC DIRECT LIST LLC, et al. vs. VISTAGE INTERNATIONAL, INC., et al. KRAMM COURT REPORTING Page: 196 1 2 REPORTER'S CERTIFICATE 3 4 I, Cynthia J. Vega, a Certified Shorthand 5 Reporter for the State of California, do hereby certify: 6 That the witness in the foregoing deposition 7 was by me duly sworn; that the deposition was then taken 8 before me at the time and place herein set forth; that 9 the testimony and proceedings were reported by me 10 stenographically and were transcribed through 11 computerized transcription under my direction; and the 12 foregoing is a true and correct record of the testimony 13 and proceedings taken at that time. 14 I further certify that I am not of counsel or 15 attorney for either or any of the parties in the 16 foregoing proceeding and caption named or in any way 17 interested in the outcome of the cause in said caption. 18 IN WITNESS WHEREOF, I have subscribed my name 19 this 5th day of July, 2016. 20 _____ Reading and Signing was requested. 21 _____ Reading and Signing was waived. 22 __X__ Reading and Signing was not requested. 23 24 ______________________________ 25 CYNTHIA J. VEGA, CSR NO. 6640 Exhibit 2 Page 45 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 46 of 133 EXHIBIT 3 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 47 of 133 Direct List v. Vistage International Damages Report Prepared by IbisViews, Inc. May 13, 2016 Confidential Exhibit 3 Page 46 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 48 of 133 Table of Contents Appendices A. CV of DM Mandell B. Document List Tables 1. Direct List Pre-Acquisition Earnings 2. Direct List Earnings 3. AVS Leads Earnings 4. Summary Financial Ratios 5. Key Assumptions 6. Damages 7. Guideline Transactions 8. Damages v. Guideline Transactions SUMMARY 1.............................................................................................. BACKGROUND 2...................................................................................... DIRECT LIST & SALU 2.......................................................................................... KESSLER 4.............................................................................................................. VISTAGE 5................................................................................................................ ALLEGED MISAPPROPRIATION 5........................................................................ MITIGATION EFFORTS 8........................................................................................ ANALYSIS 9.............................................................................................. CONCLUDING COMMENTS 12................................................................ Confidential Exhibit 3 Page 47 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 49 of 133 Direct List v. Vistage International SUMMARY IbisViews, Inc. has been engaged by the Dhillon Law Group on behalf of Plaintiffs Direct List LLC (Direct List) and Eran Salu (sole owner of Direct List), to provide an opinion regarding the Plaintiffs’ damages resulting from the alleged fraud, breach of fiduciary duty, misappropriation, and unfair business practices by Vistage International, Inc.’s (Vistage), Phil Kessler, and Evette Herron (Defendants) and the actions of the Defendants (including Kessler’s daughters, Lauren Kessler and Diana Owens) as set forth in the Plaintiffs’ Complaint. Vistage is a fee based organization that provides CEOs, executives, business owners and key employees with confidential peer advisory groups guided by executive coaches, known as Vistage Chairs. Kessler was a Vistage Chair and Salu was a member of his business owner group. Herron was a member of Vistage’s key employee group. Herron had been a key employee of Direct List, which paid her Vistage fees. Damages have been determined based on Pre-Judgment and Post-Judgment time-frames. We have assumed, for the propose of this report, that liability is found on January 1, 2017. If and when the court finds liability, we reserve the right to amend our report based on the court’s findings as well as any new evidence or opinions set forth by other witnesses or experts. Because the expert disclosure date in this case precedes the close of fact discovery, it is anticipated that additional facts may become known. We have determined that Pre-Judgment damages are $900,000 and that Post-Judgment damages are $4,400,000 for a total of $5,300,000 rounded. DM Mandell’s CV can be found in Appendix A. Appendix B is a list of the documents which we relied upon. All financial numbers presented in this report are in thousands of dollars - there is rounding. IbisViews Confidential - Page 1 Exhibit 3 Page 48 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 50 of 133 Direct List v. Vistage International BACKGROUND DIRECT LIST & SALU Salu purchased Direct List in 2012 recognizing that the lead generation and data list sales businesses had a strong customer base but were not reaching their potential. Table 1 is the Pre- Acquisition Earnings for Direct List. Our observation of Direct List, Pre- Acquisition, is that Gross Profit / Revenue was above the Median Industry ratio, but it had higher than the Median Industry Sales, General and Administration expense (SG&A) / Revenue ratio and the Earnings / Revenue ratio was below the Median Industry ratio. The Median Industry numbers are based on Pratt’s Stats Advanced Search (Appendix B). We understand that Salu purchased Direct List in 2012 for $300 thousand. We note that in 2011 Direct List had a negative Earnings. Based on Table 1, Direct List, at the time of Salu’s acquisition, required significant financial and operational restructuring. IbisViews Confidential - Page 2 Table 1 - Direct List Pre-Acquisition Earnings 2009 2010 2011 Revenue $2,009.8 $1,855.5 $1,398.1 Cost of Service 860.6 767.8 578.5 Gross Profit 1,149.2 1,087.7 819.6 Gross Profit / Revenue 57% 59% 59% Median Industry 54% SG&A 1,223.4 962.8 863.3 SG&A / Revenue 61% 52% 62% Median Industry 46% Earnings -$74.2 $124.9 -$43.7 Earnings / Revenue -4% 7% -3% Median Industry 8% Exhibit 3 Page 49 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 51 of 133 Direct List v. Vistage International Salu made a number of changes to streamline Direct List’s lead generation business which resulted in an increase in Gross Profit / Revenue from 59 percent to 80 percent in 2014 and a decrease in SG&A / Revenue from 52 percent to 43 percent in 2014 resulting in an increase of Earning / Revenue from negative earnings - Table 1 & 2. Note that at the time Salu purchased Direct List, it had above Median Industry Gross Profit / Revenue, but had SG&A / Revenue higher than the Median Industry ratio - Tables 1. Direct List was able to successfully merge two business services; lead generation and data sales. Integrating these services enabled Direct List to exceed its competitors in profitability (Median Industry Earnings / Revenue of 8% v. Direct List of 37%) and is alleged to be the innovative way that Salu and Direct List went about targeting potential customer leads. Although Salu's deposition has yet to be taken, it is our understanding that Direct List clients pay for lists, either residential addresses or consumer specific data. Direct List offers to send emails directly to their clients’ potential consumers with professional, strategically worded emails that IbisViews Confidential - Page 3 Table 2 - Direct List 2012, Three Months 2013 2014 Revenue $340.5 $1,586.3 $1,288.2 Cost of Services Data Costs 100.3 280.8 251.6 Third Party Services 45.6 0.0 0.0 Subtotal 145.9 280.8 251.6 Gross Profit 194.6 1,305.5 1,036.6 Gross Profit / Revenue 57% 82% 80% Median Industry 54% SG&A Payroll 123.5 487.8 437.1 Rent & Utilities 17.0 68.9 68.9 Other 18.9 100.3 51.8 Total SG&A 159.4 657.0 557.8 SG&A / Revenue 47% 41% 43% Median Industry 46% Earnings $35.2 $648.5 $478.8 Earnings / Revenue 10% 41% 37% Median Industry 8% Exhibit 3 Page 50 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 52 of 133 Direct List v. Vistage International get a high response rate. Direct List sends responses from interested consumers back to their clients to be followed up on. Direct List charges per interested lead they are able to generate for their clients. Many customers aren’t able to monetize data lists effectively because they lack the ability to properly utilize data. When Salu purchased Direct List, he recognized that customers aren’t interested in just buying data - they are interested in new customers. Salu brought his many years of business acumen to Direct List’s existing data business to make the data more valuable by making it targeted. This resulted in a significant improvement in usefulness of the data being provided. Direct List clients (including Vistage) were highly satisfied because Direct List’s services produced highly interested consumers ready to commit/buy as evidenced by higher than industry margins. KESSLER It is my understanding that Kessler had been the CEO of Cross Point Industries in Encinas, California and became a Vistage Group Chair in 2011. It is my understanding that Vistage Chairs receive significant training and support from Vistage to ensure that they comport themselves in accordance with Vistage's policies and values. According to Salu, who had been a Vistage member since 2007, a Vistage group meeting in North Carolina operates in much the same way as a Vistage group meeting in San Diego because the Vistage Chairs are all trained in the same way, according to the same principles. This sort of consistency across geographic regions is important to an international entity such as Vistage. It is my understanding that Lauren Kessler and Diana Owens are Kessler's daughters. Further, it is my understanding that Kessler set up AVS Leads and selected Lauren to serve as the general manager. I also understand that Diana Owens has been identified as the owner of AVS Leads, though it is not clear what her role with the company is. IbisViews Confidential - Page 4 Exhibit 3 Page 51 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 53 of 133 Direct List v. Vistage International VISTAGE Vistage is a fee based organization that brings CEOs, executives and business owners into private confidential peer advisory groups guided by executive coaches, known as Vistage Chairs. According to Vistage, it has 500 Vistage Chairs with more than 20,000 members in 15 countries. I understand that Vistage had used Direct List’s proprietary lead generation techniques successfully. As the Vistage marketing group explained to Salu, Vistage was able to “close” about 5% of the targeted leads it purchased from Direct List. So, for example, if Vistage purchased 20 targeted leads from Direct List, it could expect to sign up one new member. Salu has been told that Vistage values each member at $31.0 thousand average lifetime value. Therefore, Vistage’s return on Direct List’s targeted leads was 12 times ($31.0 thousand lifetime value / $2.5 thousand acquisition cost). ALLEGED MISAPPROPRIATION It is my understanding that Salu disclosed many of the details about Direct List to Kessler in confidential Vistage meetings. I understand that these meetings occurred both in a group setting and in private "1 on 1" coaching sessions. I understand that Salu alleges that he considered those meetings to be confidential based on representations both by Vistage and Kessler, and that he would not have shared those confidences had he known that confidentiality would not be observed. Salu alleges that in mid-2015, Herron, Kessler, and Kessler's daughters agreed to form a new business, AVS Leads, to compete with and effectively steal the customers of Direct List. I understand that Kessler provided the capital and the leadership for the business, while Herron directed the employees on how to get started. It is unclear to me what roles daughters Lauren IbisViews Confidential - Page 5 Exhibit 3 Page 52 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 54 of 133 Direct List v. Vistage International and Diana had in the business at this point, as their depositions were taken one day prior to the submission of this report and no transcript is yet available. From Kessler's Rule 30(b)(6) deposition testimony, it appears that Kessler used proprietary information learned through Vistage meetings and taken from Direct List, started AVS Leads, hired away Direct List's employees and took its customers. I do not have personal knowledge of these factual allegations and only present them to provide context for my evaluation. They do not affect my calculations. According to Kessler’s Rule 30(b)(6) testimony, neither he nor his daughters had direct experience in running a lead provider service. I understand that Kessler testified at his personal deposition that he did no due diligence before deciding to fund AVS Leads. That would be consistent with Salu's allegation that Kessler already knew about the profitability of the business as a result of Salu's confidential disclosures. Table 3 (based on Exhibit 15 of Kessler’s Rule 30(b)(6) Deposition) is AVS Leads, financials. Note, while AVS Leads had higher Profit Margins than the Industry Median (63% v. 54%) it had an earnings loss due to high SG&A costs. This is not IbisViews Confidential - Page 6 Table 3 - AVS Leads 2015, Six Months 2016, One Month Exhibit 15 Revenue $451.5 $50.4 $501.9 Cost of Services Data Costs 175.0 12.1 Third Party Services 0.0 0.0 Subtotal 175.0 12.1 187.1 Gross Profit 276.5 38.3 314.8 Gross Profit / Revenue 61% 76% 63% Median Industry 54% SG&A Payroll 142.5 34.5 211.5 Rent & Utilities 16.4 2.0 20.4 Other 141.2 9.0 159.2 Total SG&A 300.1 45.5 391.1 SG&A / Revenue 66% 90% 78% Median Industry 46% Earnings -$23.6 -$7.2 -$76.3 Earnings / Revenue -5% -14% -15% Median Industry 8% Exhibit 3 Page 53 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 55 of 133 Direct List v. Vistage International surprising, however, given that the new owners and managers were not experienced in running the business. The higher Profit Margins than the Industry Median also provide evidence that the alleged misappropriation had value, given that Kessler and his daughters did not have the required experience, but were able, at start-up, to exceed the Median Industry Gross Profit / Revenue. Note that the AVS Lead’s revenue of $500 thousand approximately the same as Direct List lost sales of $545 thousand (2014 v. 2015). This parallelism is to be expected, and provides confirmation that the underlying numbers are reliable. 1 Table 4 is a summary of Direct List’s, AVS Lead’s and the Industry Median financial statements and ratios. 2015 Actual Revenue can be found in document: “DL Revenue by Customer (2012-2015).xlsx” 1 - Appendix B IbisViews Confidential - Page 7 Table 4 Summary Financials Direct List (Average 2013 & 2014) AVS (Exh. 15), Annualized Industry Median Revenue $1,440 $860 $1,525 Earnings $560 -$131 $65 Gross Profit / Revenue 81% 63% 54% SG&A / Revenue 42% 78% 46% Earnings / Revenue 39% -15% 8% Exhibit 3 Page 54 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 56 of 133 Direct List v. Vistage International MITIGATION EFFORTS According to the Plaintiffs’ Complaint, “when Salu became aware of the theft of his confidential information, he promptly contacted Vistage, only to be told that it was not their problem or concern”. We understand that Vistage used Direct List’s proprietary lead generation services successfully up until 2016. We understand in early 2016, Vistage, rather than seeking to mitigate the damages, discontinued using Direct List, allegedly in retaliation for the subject litigation. See Vistage Response to Interrogatory No. 5 (citing "Vistage' s disinclination to do business with persons and entities currently suing the company.") Salu alleges he had no choice but to bring this lawsuit in response to the defendants' actions, and, if so, the loss of the Vistage business in 2016 is a direct consequence of those actions. IbisViews Confidential - Page 8 Exhibit 3 Page 55 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 57 of 133 Direct List v. Vistage International ANALYSIS Damages have been determined based on Pre-Judgment and Post-Judgment time-frames. We have assumed for the proposes of this report that liability was found on January 1, 2017. We have made a number of Key Assumptions in our determination of damages - Table 5 has these assumptions. We have assumed that Direct List’s revenue for the determination of damages is $1,440 which is the average of 2013 and 2014 - see Table 4. We have assumed that Direct List’s Earnings Margin is 39 percent (Earnings / Revenue), the average of 2013 and 2014 - see Table 4. We have used a Pre-Judgment rate of 7 percent. 2 Table 5 provides our calculation of the Present Value (PV) factors for damage determination as of January 1, 2017. 3 In the determination of Post-Judgment damages we determined Direct List’s cost of capital using a bank rate of 6.0 percent based on the 2016 Pepperdine In cases where interest is awarded on tort and other non-contractual claims, the rate is 7% per 2 annum from the date the claim arose. See Cal. Const. Art. XV § 1. See Children's Hospital and Medical Center v. Bonta (2002) 97 Cal. App. 4th 740, 775 (Where claim "is not based on contract, the rate of prejudgment interest should be that fixed by article 15, section 1 of the California Constitution; namely, seven percent per annum.”) Present Value Factor formula: (1+ .10)^(time to 1/1/2017, 2015 - 1.5, 2016 - 0.5, using mid- 3 year convention) IbisViews Confidential - Page 9 Table 5 - Key Assumptions Revenue $1,440 Earnings Margin 39% Pre-Judgment Annual Interest Rate 7% 2015, PV Factor 1.11 2016, PV Factor 1.03 Median $1M CF loan rate (after tax) 3.6% Median $1M Mezz rate 22.0% Post-Judgment Capitalization Rate, assuming a 50 / 50 debt equity 12.8% 1/1/2017, Capitalization Factor 7.81 Exhibit 3 Page 56 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 58 of 133 Direct List v. Vistage International Private Capital Market Project survey (Appendix B) and adjusted this rate for tax at an assumed 40 percent rate or 3.6 percent to reflect Direct List’s cost of debt. We used an equity rate based on a Mezzanine rate of 22.0 percent (note equity would not be deductible for taxes). Assuming a 50 / 50 percent debt / equity cost of capital, we use as a cost of capital rate of 12.8 percent (3.6 % * .5 + 22.0% * .5). We have use a capitalization factor of 7.81 (1 / .128). Our determination, based on our Key Assumptions - Table 5, is provided in Table 6. In our determination of damages we used the 2013 and 2014 average revenue from Table 5. 2015 Actual Revenue can be found in document: “DL Revenue by Customer (2012-2015).xlsx” (Appendix B). We have determined that, but for AVS Leads direct competition using the allegedly misappropriated Direct List confidential information, lost sales in 2015 were $695 thousand. From Table 5, Key Assumptions the Lost Profits for 2015 would be $271 thousand ($695 * 39%). The PV of the 2015 Lost Profit would be $300 thousand ($271 * 1.11 - Table 4). In 2016, Direct List lost all sales, therefore, the PV of Lost Profits would be $581 thousand ($562 * 1.034 - Table 4) or a total (rounded) of $900 thousand - Pre-Judgment. Post-Judgment damages are $4,400 thousand, rounded) based on Lost Profits of $562 thousand capitalized at 12.8 percent from Table 5 - Key Assumptions. IbisViews Confidential - Page 10 Table 6 - Damages Revenue Lost Profits Present Value Revenue - Table 5 $1,440 Pre-Judgment 2015 Actual Revenue $745 2015 Revenue Loss $695 2015 Earnings Loss $271 $300 2016 Revenue $0 2016 Loss and forward annual losses $1,440 2016 Earnings Loss $562 $581 Total Pre- Judgment $881 Post-Judgment $4,388 Total Damages $5,269 Exhibit 3 Page 57 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 59 of 133 Direct List v. Vistage International In Tables 7 and 8, we compare our damages determination against Guideline Transactions to test our conclusions. We have used Pratt’s Stats Advanced Search (Appendix B) which we believe provides reasonable Guideline Transactions. We have used transactions with reported earnings in the range of $170 thousand - $2,080 and the reported average Price / Earnings ratio of 5.0. Note that Direct List had average Earnings for 2013 and 2014 of $560 thousand which is within our Guideline Transaction range. In Table 8 we calculated the After-Tax Value of our damages of $2,633 thousand assuming a 40 percent tax rate - which would be the approximate Fair Value Price that a willing buyer would purchase Direct List at January 1, 2017. Based on Direct List’s average earnings for 2013 and 2014 of $560 thousand (Table 4) divided by our Fair Value Price, the Price / Earnings ratio would be 4.7 which is in the reasonable range (actually below) of our Guideline Transactions average Price / Earning ratio of 5. IbisViews Confidential - Page 11 Table 7 - Guideline Transactions Business Description Transaction Date Earnings Price / Earnings as Reported Advertising Agency 2015 $170 8.9 Advertising and Promotion 2015 $670 3.0 Adverting Agency 2014 $2,079 4.5 Adverting Agency 2014 $1,222 3.6 Advertising Specialties 2011 $413 5.3 Average 5.0 Table 8 - Damages v. Guidelines Direct List Earnings - Table 4 $560 Pre-Tax Value - Table 6 $4,388 After-Tax Value, assuming 40% tax rate (Price) $2,633 Price / Earnings 4.7 Industry Guidelines Guideline Earnings Range - Table 7 $170 - $2,080 Price / Earnings - Table 7 5.0 Exhibit 3 Page 58 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 60 of 133 Direct List v. Vistage International CONCLUDING COMMENTS We considered, but did not include, an adjustment for Owner / Operator Compensation because we understand Salu was not needed as an on-site or hands-on manager. We understand that Herron, Direct List’s key employee, testified that Salu was only on-site 6-8 times over the preceding 2 years. Likewise, Lauren Kessler had no obvious experience as a manager, yet she was able to take over as general manager very quickly. It is my understanding that this is a business that, once up and running, does not require the owner to be present and running the business. For our work reviewing materials in the litigation record, research and preparing this report, we were compensated on a fixed fee of $5 thousand for our analysis and have no ownership interest in any of Salu’s companies or any stake in the outcome of the litigation. If and when the court finds liability, we reserve the right to amend our report based on the court’s findings as well as any new evidence as well as any new evidence or opinions set forth by other witnesses or experts. Because the expert disclosure date in this case precedes the close of fact discovery, it is anticipated that additional facts may become known. May 13, 2016 DM Mandell IbisViews Confidential - Page 12 Exhibit 3 Page 59 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 61 of 133 DM Mandell Experience: Mr. Mandell is Managing Director of IbisViews, Inc. He has provided financial services in North America and internationally for more than 30 years. Mr. Mandell routinely handles the following types of assignments: consulting services to counsel, including civil and criminal matters; corporate fraud investigations; business valuation services in support of federal tax and civil disputes; and financial advisory services for corporate transactions such as restructuring, debt consolidation, sell-off of subsidiaries, facility shut-down, and sale of tangible and intangible business assets. He has been an adjunct professor in the tax program at the Golden Gate University School of Law and has an inactive license with the NASD as a Registered General Securities Representative (Series 7, 63). Major accomplishments: ! $2 billion settlement of Alaska State and Federal tax and tariff disputes for ARCO; ! $500 million facility shut-down and sale of equipment and real estate for Matshita: ! $200 million damage rebuttal and settlement regarding alleged losses by pacific northwest labor unions for Chubb; ! $100 million revenue government contractor, corporate restructuring of work force, debt and sell-off of non-performing subsidiaries; and ! $50 million purchase of a refinery and marine distribution business. Prior employment: Before forming his own company, Mr. Mandell was a senior vice president with Houlihan Lokey Howard & Zukin. Prior to that, he was a principal with Willamette Management Associates; he was a managing director at Grant Thornton LLP; and he was a managing director for KPMG LLP. In addition, Mr. Mandell has 18 years of experience working with ARCO, where he managed the evaluation of oil & gas transactions, the company for federal tax purposes and dispute settlements. Education: Mr. Mandell earned a Bachelor of Arts in Accounting from California State University, Fullerton in 1977, a Master of Science in Taxation from the Golden Gate University, Los Angeles in 1990 and a Certificate in Private Capital Markets from Pepperdine’s Graziadio School of Business and Management in 2015. IbisViews Page 1 Exhibit 3 Page 60 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 62 of 133 DM Mandell Publications: “The Use of Corporate Acquisitions as a Strategy to Resolve Complex Commercial Litigation.” Willamette Management Associates Insights, Autumn 2004. “Intellectual Property Economic Damages Case Study,” Chapter 24 in The Handbook of Business Valuation and Economic Analysis, McGraw-Hill, 2004“Economic Damages Framework for Trademark Infringement.” Willamette Management Associates Insights, Summer 2004. “SOX Forensic Investigations of Potential/Alleged Financial Misconduct,” Willamette Management Associates Insights, 2003 Summer Issue. “Current Issues in the Valuation of Purchased IPR&D,” Willamette Management Associates Insights, 2003 Special Issue. IbisViews Page 2 Exhibit 3 Page 61 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 63 of 133 DM Mandell Written Opinions and Expert Testimony 1999 - 2016: VanHorn v. State of Nevada Provided a written damages report concerning alleged wrongful termination - Case pending. Attorney: Laura K. Granier (Davis Graham & Stubbs), 2016 Matheson Flight Extenders, Inc. United States Bankruptcy Court Court appointed to provide liquidation valuation. Attorneys for the Debtor: Sallie B. Armstrong (DowneyBrand), Jeff Hartman (Hartman & Hartman) and Cecilia Lee (Lee & High, LTD), 2015 Terence Limalima, Prime Rehab, Inc. v. Abiad Et al. Provided a written report and expert testimony of damages concerning alleged shareholder oppression, breach of fiduciary duty, and partnership litigation. Attorney: Harmeet K. Dhillon (Dhillon Law Group Inc.), 2015 Qian & Nemecek LLP v. Qian Court appointed to manage and liquidate the assets of Qian & Nemecek. Provided opinions concerning client trust account and partner distributions - Case pending. Attorney for Qian & Nemecek: Heather Flick (Flick Group), Attorney for Qian: Cathy Hongola-Baptista (Allen Matkens), 2015. Richard Smith v. The Sun Valley Rice Company, LLC Provided expert testimony on appropriate qualifications for the CFO and the materiality and legitimacy of accounting errors concerning alleged wrongful termination in a rice mill and products company. Attorney: Charles Louderback (Louderback Law Group), 2015. Physicians’ Advocates v. William McDevitt Provided expert testimony on fair value of contingent earnings, duty to provide an accounting and opinion of accounting provided. Attorney: Charles Louderback (Louderback Law Group), 2015. Airborne Media Group v. Capman, Lentvorksi Et al. Provided a written report and expert testimony concerning the fair value of Airborne Media Group. Attorney: Richard Campbell (Armstrong Teasdale LLP), 2015. IRS v. Capital Group Communications Provided a written report concerning the fair value of public stock for income tax purposes. Attorney: Richard A. Pelak, (Culp Elliott & Carpenter PLLC), 2014 Hanginout, Inc. v. Google Provided a written report of damages concerning alleged infringement of Hanginout's mark. Attorney: Andrew Skale (Mintz Levin PC), 2014 IbisViews, Inc. Page 1 Exhibit 3 Page 62 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 64 of 133 DM Mandell Jennifer Tan v. Nour El Houda Tanverakul, Et al. Provided a written report income loss resulting from alleged allegations. Attorney: Harmeet K. Dhillon (Dhillon Law Group Inc.), 2014 The Upper Deck Company v. Executive Trading Provided a written report and expert testimony of damages concerning breach of a confidentiality agreement. Attorney: Jim Smith (Smith & Hennessey PLLC), 2014 John K. Palladino v. John Palladino Jr. Et al. Provided a written report of damages concerning liquidation of 401K advisory company. Attorney: David P. Nemecek (Qian & Nemecek LLP) 2014. Enstar Natural Gas Co. v. Municipality of Anchorage Provided a written opinion for the Municipality of Anchorage concerning property tax valuation of a $100 million gas pipeline system and lead successful settlement negotiations. Municipality of Anchorage, CFO Lucinda Mahoney and ENSTAR Natural Gas, CFO Catherine Gardner, 2013. Regional Multiple Listing Service of Minnesota, Inc. v. American Home Realty Network, Inc. v. Edina Realty, Inc. and Homeservices of America, Inc. Provided a written report and expert testimony concerning valuation, solvency and damages. Attorney: Adam P. Gislason (Snyder Gislason Frasier, LLC), 2013 Marriage of McMillan Provided a written report and expert testimony concerning the valuation of Cypress Healthcare Partners LLC. Attorney: Billie French, 2013 Future Years, LLC v. MapXL Provided a written report and expert testimony of damages concerning MapXL’s sale of an internet site to Future Years, LLC. Attorney: Shirish Gupta (Flashpoint Law), 2013 James Russel Hegi v. Yunji Willa Qian Provided a written report and expert testimony on monthly available cash from the law firm Qian & Nemecek LLP. Attorney: John T. Bachmayer (Brandmeyer Gilligan & Dockstader, LLP), 2013. Aram v. Blyth Provided an independent written valuation of a health club. (by Order of the Deputy District Judge Sheldrake Principal Registry of the Family Division, London). Attorneys: Charmaine Hast (Wedlake Bell) and Peter Burgess (Burgess Mee), 2013. IbisViews, Inc. Page 2 Exhibit 3 Page 63 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 65 of 133 DM Mandell Twin Star Ventures, Inc. v. Universal Underwriters Provided a written report and expert testimony on the damages due to Universal’s failure to defend (Eight Midas franchises). Attorney: Tim Wilson (Aaron & Wilson, LLP), 2013. Robert Arnold, on behalf of Banana Corporation v. Mark Phillips, et al Provided a written rebuttal and expert testimony for allegations of Breach of Fiduciary Duty, Oppression of Minority Shareholder, Fraud, Negligence, Misrepresentation, Conversion and Accounting. Attorney: Mark D. Kimball (MDKLaw), 2013. Andrew Blount v. Sarah Bridge; RealFacts LLC Provided an independent written valuation and expert testimony of RealFacts a real estate publication company. Attorneys: David Nemecek (Qian & Nemecek LLP) and Larry Murray (Murray & Associates), 2013. Robert Austrain v. eHuman, Inc. et al Provided a written rebuttal and expert testimony concerning valuation and allegations of fraud and breach of fiduciary duty for a healthcare application software company. Attorney: Peter Smith (Dhillon & Smith LLP), 2013. Essociate, Inc. v. Blue Whaler Investments Provided a written report on lost profits analysis for this internet marketing company. Attorney: John Du Wors (Newman Du Wors LLP), 2012. RodeoH, LLC, Ms. Joelle Katcher v. Ms. Jennifer Weaver Provided a written independent valuation opinion of RodeoH, LLC and lead successful settlement negotiations for a internet retail company, 2012. Attorneys: Rachael D. Lamkin (Turner Boyd LLP) and Harmeet K. Dhillon (Dhillon & Smith LLP), 2012. Gurdip S. Hayer v. Tri Valley Associates Provided expert testimony related to lost profits and reasonable compensation. Attorney: Peter Smith (Dhillon & Smith LLP), 2012 United State of America v. Mark E. Phillips Provided rebuttal expert testimony related to investigations of Mark E. Phillips, Mod Systems, Inc. and Banana Corporation. Attorney: John Du Wors (Newman Du Wors LLP), 2011. Abbet/RDC v Southwest Gas Corp., et al. Provided a written rebuttal and expert testimony for this construction-related claim for lost profits. Attorney: Richard Campbell (Armstrong Teasdale LLP), 2010. IbisViews, Inc. Page 3 Exhibit 3 Page 64 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 66 of 133 DM Mandell Hurley v. Grant, Scott & Hurley, LLC Provided valuation, damage analysis and expert testimony regarding alleged wrongful termination in an advertising company. Attorney: Harmeet Dhillon (Dhillon & Smith), 2009 Employee Retirement Income Security Act (ERISA) plans and trusts Et. al. v. Federal Insurance Company Provided $200 million damage rebuttal regarding alleged losses by pacific northwest labor unions. Attorney: Kevin Kiely (Cable Huston), 2007 Quick-Tag, Inc. v. Stallman & Pollock, LLP Provided a report on reasonable royalty and lost profits for this manufacturing company. Attorney: Motherway & Napleton LLP, 2007. In Re Marriage of Frank Provided adult entertainment business valuation analysis and rebuttal report, in support of a marital dissolution case. Attorney: Fred Silberberg (Silberberg & Ross) 2007. Cal Southwest Construction, Inc. v. Evanston Insurance Company Provided a written rebuttal and expert testimony for this construction-related claim of business lost profits. Attorney: Craig & Winkelman LLP, 2006. Valero Refining Company v. Encompass Power Services, Inc. Provided report on damages and expert testimony for Valero’s Benicia refinery cogeneration facility. Attorney: Steve Rech (Schwartz, Junell, Greenberg & Oathout), 2006. Air Alliant, LLC and James L. Kochman versus New Piper Aircraft, Inc. Provided a written opinion and rebuttal and deposition testimony for this multimillion dollar claim involving a failed earn-out. Attorney: Harvey Elam (Kenney & Markowitz, LLP), 2006. Addison, Inc. v State of Nevada Provided a written rebuttal and expert testimony in arbitration for this construction-related claim of business interruption and associated loss. Attorney: Richard Campbell (Senn Muelemans, LLP), 2006. In Re Marriage of Stuart Provided professional engineering business valuation report, and expert testimony, in support of a marital dissolution case. Attorney: Larry Murray (Murray & Associates), 2005. IbisViews, Inc. Page 4 Exhibit 3 Page 65 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 67 of 133 DM Mandell Charles Turbak and Scott Corliss v. Hebert, Et Al Provided rebuttal report and expert testimony for a breach of fiduciary case involving the $15 million construction of a corporate park. Attorneys: Sam E. Baker, Jr. (Oles Morrison Brinker & Baker LLP) and Alex Baehr (Holland & Knight LLP) 2005. Bevco Limited; SABMiller plc v. Dole Food Company, Inc. et al. Provided valuation, damage analysis and expert testimony for Dole’s regarding the sale of its interests in Cerveceria Hondurena S.A. de C.V. Attorney: Andrew Frackman (O’Melveny & Myers LLP), 2005. Kendell (Chapter 7 Trustee) v. Freed Provided intangible valuation solvency report and expert testimony for a preference/fraudulent transfer case (Manasian & Rougeau), 2004. SoftwareOnline.com v. eUniverse Provided lost profits report for this internet trademark/trade dress misappropriation case. Attorney: Alexander Baher (Holland & Knight LLP), 2004. Milliken Floor Covering v. Mohawk Floor Covering Provided manufacturing intellectual property rebuttal report including valuation analysis and expert testimony for this patent infringement case. Attorney: Frank G. Smith III (Alston & Bird), 2004. Soft Computer Consultants, Inc. v. Hunter Laboratories, Inc. Provided a written rebuttal and expert testimony for this software-related claim of business lost profits. Attorney: Brown Raysman Millstein Felder & Steiner, 2004. Esterline v. H&L Accessory Provided damages report and expert testimony for this trademark infringement case. Attorney: Shannon McMinimee (Dorsey & Whitney LLP), 2004. Vectra v. Icon Provided report and expert testimony for a royalty and lost profits case. Attorney: Paul T. Meiklejohn (Dorsey & Whitney), 2003. IbisViews, Inc. Page 5 Exhibit 3 Page 66 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 68 of 133 DM Mandell Sonoma Falls v. Dry Creek Rancheria Band of Pomo Indians Provided report and expert testimony for a gaming damages and lost profits case. Attorney: James H. Rodio (Holland & Knight), 2003. Television Marketing Programs v. The Natural Foot Company, Inc. Provided copyright infringement and lost profit analysis. Attorney: Robert F. Helfing (Sedgwick Detert Moran & Arnold), 2003. Walton E. Powell, et al v. Charles R. Schwab Provided written rebuttal for this damages case. Attorney: Joseph Cotchett (Cotchett, Pitre, Simon & McCarthy), 2003. Keith Goodman v. The Olympic Club Provided rebuttal analysis for this damages and lost profits case and lead successful settlement negotiations Attorney: Micheal J. Kerins (Senn, Palumbo, Meulemanns), 2003. Carver v. Velodyne Acoustics, Inc. Provided valuation analysis, report, and expert testimony on lost profits for this patent infringement case. Attorneys: Brian Park (Dorsey & Whitney LLP), 2003. TZ Medical v. IFA Provided analysis for a royalty and lost profits case. Attorneys: Michael Garone (Schwabe, Williamson & Wyatt) and Stuart I. Teicher (Sussman Shank Wapnick Caplan & Stiles LLP), 2002. Voicestream Wireless Corporation v. Travelers Casualty & Surety Company of America Provided analysis for a $20 million insurance claim. Attorney: G. Kevin Kiely (Cable Huston Benedict Haagensen & Lloyd LLP), 2002. AT&T Wireless v. Fluor Provided analysis for a $100 million contract dispute case. Attorney: David Burman (Perkins Coie), 2002. Phillips Petroleum v. State of Alaska Provided analysis on crude oil royalty dispute case. Attorney: Steven Mahoney (Hughes Thorsness Powell), 2002. IbisViews, Inc. Page 6 Exhibit 3 Page 67 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 69 of 133 DM Mandell Wyland v. Pieter Arend Folkens Provided analysis, reports and expert testimony in lost profits case. Attorney: Robert F. Helfing (Sedgwick Detert Moran & Arnold), 2002. Mattel, Inc. v. Advanced Relational Technology, Inc. Provided analysis and reports for this software royalty dispute case. Attorney: Brian Irion (Capstone Law Group), 2002. Branson v. Port of Seattle Provided valuation analysis and report for a class action lawsuit. Attorney: Scott Zanzig (Hall Zanzig Widell, PLLC), 2002. Steven G. Clemons v. Trans Cosmos USA, Inc. Provided analysis, report, and expert testimony for an employment contract dispute case. Attorney: Scott Zanzig (Hall Zanzig Widell, PLLC), 2001. Frank Lynott v. Elie Makad & Affiliates Provided analysis and reports for this investigation, accounting and valuation resulting is sale of client’s holdings. Attorneys: Jim Smith (Smith & Leary, PLLC), Thomas Dulcich (Schwabe, Williamson & Wyatt), Ben Straughan (Perkins Coie LL), 2001. IRS v. MM MR RM Corporation Provided valuation analysis and report for this reasonable rent case. Attorney: Larry N. Johnson (Chicoine & Hallet), 2000. Denkmann Associates and Denmiss Corporation v. International Paper Provided valuation analysis and report on a settlement of 200,000 acres of timber. Attorney: Jim Smith (Smith & Leary, PLLC), 1999. IbisViews, Inc. Page 7 Exhibit 3 Page 68 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 70 of 133 DM Mandell Metropolitan Life Insurance Company v. Weyerhaeuser Company Arbitration Provided analysis and report for this $12 million contract dispute case. Attorneys: Laurie Lootens Chyz (Hillis Clark Martin & Peterson), representing Weyerhaeuser, and Chrys Martin (Bullivant Houser Bailey), representing Metropolitan Life, 1999. IRS v. Cascade Designs Inc. Provided valuation analysis, report, and expert testimony for this Federal tax court case on reasonable royalty. Attorneys: Darrel Hallet (Chicoine & Hallet) and Carmen SantaMaria (Davis Wright & Tremaine), 1999. IbisViews, Inc. Page 8 Exhibit 3 Page 69 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 71 of 133 Appendix B - Direct List v. Vistage Page 1 Document Name Type 2007-01-23 Eran Salu's membership Application VIS00009247-9255 .pdf 2011-03-30 P. Kessler's Vistage Contract VIS00009125-9181 .pdf 2015-00-00 Vistage Code of Ethics VIS00009349 .pdf 2015-02-23 24 Protective Order .pdf 2015-04-15 P. Kessler announcement with attached confidentiality pledge .pdf 2015-09-11 1 Vistage Complaint pdf 2015-09-11 1 Vistage Complaint .pdf 2016-05-06 Vistage Response to Pltf First Set of Rogs .pdf AR Aging for Direct List pdf AVS Leads P&L (Exh. 15) pdf Bank Statements .pdf Bizcomps pdf BVMarketData | Advanced Search Report pdf BVMarketData | Advanced Search Report .pdf Chase April 2014 SRF .pdf Chase April 2015 SRF .pdf Chase August 2014 SRF .pdf Chase August 2015 SRF .pdf Chase December 2014 SRF .pdf Chase December 2015 SRF .pdf Chase February 2014 SRF .pdf Chase February 2015 SRF .pdf Chase February 2016 SRF .pdf Chase January 2014 SRF .pdf Chase January 2015 SRF .pdf Chase January 2016 SRF .pdf Chase July 2014 SRF .pdf Chase July 2015 SRF .pdf Chase June 2014 SRF .pdf Chase June 2015 SRF .pdf Chase March 2014 SRF .pdf Chase March 2015 SRF .pdf Chase March 2016 SRF .pdf Chase May 2014 SRF .pdf Chase May 2015 SRF .pdf Chase November 2014 SRF .pdf Chase November 2015 SRF .pdf Exhibit 3 Page 70 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 72 of 133 Appendix B - Direct List v. Vistage Page 2 Document Name Type Chase October 2014 SRF .pdf Chase October 2015 SRF .pdf Chase September 2014 SRF .pdf Chase September 2015 SRF .pdf Direct List 028206-28232 pdf Direct List 028206-28232 .pdf Direct List 028553-28730 .pdf Direct List Income .pdf DL PreAcquisition Numbers .pdf DL Revenue by Customer (2012-2015) xlsx Docs produced by AVS re customers AVS000141- 000210 .pdf JAL Chase 11903 1401 1603 .pdf JAL Wells 1402 .pdf JAL Wells 1403 .pdf JAL Wells 1404 .pdf JAL Wells 1405 .pdf JAL Wells 1406 .pdf JAL Wells 1407 .pdf JAL Wells 1408 .pdf JAL Wells 1409 .pdf JAL Wells 1410 .pdf JAL Wells 1411 .pdf JAL Wells 1412 .pdf JAL Wells 1501 .pdf JAL Wells 1502 .pdf JAL Wells 1503 .pdf JAL Wells 1504 .pdf JAL Wells 1505 .pdf JAL Wells 1506 .pdf JAL Wells 1507 .pdf JAL Wells 1508 .pdf JAL Wells 1509 .pdf JAL Wells 1510 .pdf JAL Wells 1511 .pdf JAL Wells 1512 .pdf JAL Wells 1601 .pdf JAL Wells 1602 .pdf JAL Wells 1603 .pdf KESSLER-01-0001 .pdf KESSLER-02-0001 .pdf Exhibit 3 Page 71 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 73 of 133 Appendix B - Direct List v. Vistage Page 3 Document Name Type KESSLER-03-0001 .pdf KESSLER-04-0001 .pdf KESSLER-05-0001 .pdf KESSLER-06-0001 .pdf KESSLER-07-0001 .pdf KESSLER-08-0001 .pdf KESSLER-09-0001 .pdf KESSLER-10-0001 .pdf KESSLER-11-0001 .pdf KESSLER-12-0001 .pdf KESSLER-13-0001 .pdf KESSLER-14-0001 .pdf KESSLER-15-0001 .pdf KESSLER-16-0001 .pdf KESSLER-17-0001 .pdf Kessler, Phillip Howard PDF Full - Vol. I pdf Kessler, Phillip Howard PDF Mini - Vol. I pdf P. Kessler Errata and Signature Pages pdf P&L Costs by Vendor pdf Pepperdine Private Cost of Capital 2016 .pdf SRF Chase 1401 .pdf SRF Chase 1402 .pdf SRF Chase 1403 .pdf SRF Chase 1404 .pdf SRF Chase 1405 .pdf SRF Chase 1406 .pdf SRF Chase 1407 .pdf SRF Chase 1408 .pdf SRF Chase 1409 .pdf SRF Chase 1410 .pdf SRF Chase 1411 .pdf SRF Chase 1412 .pdf SRF Chase 1501 .pdf SRF Chase 1502 .pdf SRF Chase 1503 .pdf SRF Chase 1504 .pdf SRF Chase 1505 .pdf SRF Chase 1506 .pdf SRF Chase 1507 .pdf SRF Chase 1508 .pdf SRF Chase 1509 .pdf Exhibit 3 Page 72 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 74 of 133 Appendix B - Direct List v. Vistage Page 4 Document Name Type SRF Chase 1510 .pdf SRF Chase 1511 .pdf SRF Chase 1512 .pdf SRF Wells 1601 .pdf SRF Wells 1602 .pdf SRF Wells 1603 .pdf Vistage Confidentiality Pledge VIS00009346 .pdf Vistage engagement letter 160324 .pdf Vistage NDA and Terms of Use for Chairs VIS00009338 .pdf Vistage Retainer 160408 .pdf Wells April 2014 .pdf Wells April 2015 .pdf Wells August 2014 .pdf Wells August 2015 .pdf Wells December 2014 .pdf Wells December 2015 .pdf Wells December 2015 SRF .pdf Wells Feb 2014 .pdf Wells February 2015 .pdf Wells February 2016 .pdf Wells February 2016 SRF .pdf Wells January 2015 .pdf Wells January 2016 .pdf Wells January 2016 SRF .pdf Wells July 2014 .pdf Wells July 2015 .pdf Wells June 2014 .pdf Wells June 2015 .pdf Wells March 2014 .pdf Wells March 2015 .pdf Wells March 2016 .pdf Wells March 2016 SRF .pdf Wells May 2014 .pdf Wells May 2015 .pdf Wells November 2014 .pdf Wells November 2015 .pdf Wells October 2014 .pdf Wells October 2015 .pdf Wells September 2014 .pdf Wells September 2015 .pdf Exhibit 3 Page 73 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 75 of 133 EXHIBIT 4 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 76 of 133 Exhibit 4 Page74 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 77 of 133 ·1· · · · · · · · · · · IRVINE, CALIFORNIA ·2· · · · · · · · · · · · ·JULY 11, 2016 ·3 ·4· · · · · · · · · · · ·DENNIS MANDELL, ·5· · · · · · · ·HAVING BEEN DULY ADMINISTERED AN ·6· · · · · · · OATH BY THE REPORTER, WAS EXAMINED ·7· · · · · · · · · AND TESTIFIED AS FOLLOWS: ·8 ·9· · · · · · · · · · · · -EXAMINATION- 10 11· · · · BY MR. RAFFERTY: 12· · · · Q.· Can you state your name for the record, please. 13· · · · A.· Dennis Mandell. 14· · · · Q.· And, Mr. Mandell, with respect to IbisViews, 15· ·does IbisViews have a business address? 16· · · · A.· We have two business addresses.· One in San 17· ·Francisco.· It's 155 Samsone. 18· · · · · · And one in Reno.· And that's 333 Flint Street. 19· · · · Q.· How long has IbisViews been in business? 20· · · · A.· Two or three months.· Prior to that we were 21· ·Pacific Capital Transactions. 22· · · · Q.· Could you spell that first word? 23· · · · A.· Pacific Capital Transactions.· Actually, look 24· ·at -- the engagement letter was actually written in the 25· ·Pacific Capital title. Exhibit 4 Page75 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 78 of 133 ·1· ·while you were at ARCO? ·2· · · · A.· No.· I -- part of my job was to educate experts ·3· ·in -- for our litigation. ·4· · · · Q.· And while at ARCO, if part of your job was to ·5· ·educate experts, did you assist in educating experts ·6· ·with regard to the calculation of damages? ·7· · · · A.· Yes. ·8· · · · Q.· Let me introduce to you, what we'll mark next ·9· ·in line of defendants' exhibits, 125. 10· · · · · · (Defense Exhibit 125 was marked for 11· ·identification by the reporter.) 12· · · · MR. RAFFERTY: 13· · · · Q.· Have you seen this exhibit before today, 14· ·Mr. Mandell? 15· · · · A.· Yes. 16· · · · Q.· I understand it to be a damages report prepared 17· ·by you and IbisViews for the plaintiffs in this case. 18· · · · · · Would that be accurate? 19· · · · A.· Yes. 20· · · · Q.· Let me first turn your attention to Appendix A 21· ·to this report.· And I understand it to be your resume 22· ·or curriculum vitae. 23· · · · · · Do you see it? 24· · · · A.· Yes, I do. 25· · · · Q.· And as you sit here today, does it remain Exhibit 4 Page76 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 79 of 133 ·1· · · · A.· I do. ·2· · · · Q.· Now as between the defendants and plaintiffs ·3· ·there has been some issue with regard to Appendix B. ·4· ·That's briefed and it's before the court so I don't want ·5· ·to talk about that. ·6· · · · · · What I want to talk about is with regard to the ·7· ·Appendix B that is the proper Appendix B. ·8· · · · MR. BAUM:· B-1. ·9· · · · MR. RAFFERTY:· B-1.· Is that what you called it, 10· ·B-1? 11· · · · MR. BAUM:· It was called B-1.· We attempted to claw 12· ·back Appendix B, and we were told it was being kept in 13· ·segregation or something. 14· · · · MR. RAFFERTY:· Solitary confinement. 15· · · · MR. BAUM:· Whatever the word is.· The statute has a 16· ·word whenever there is a dispute as being clawed back. 17· · · · MR. RAFFERTY: 18· · · · Q.· I'm going to refer to Appendix B-1.· And 19· ·Appendix B-1 is substantially the same as this original 20· ·appendix that was marked in this original Exhibit 125. 21· · · · · · And I want to ask you with respect to the 22· ·Exhibit B-1, did you rely on all of the documents 23· ·contained in Exhibit B-1 in forming the opinions that 24· ·led to the creation of the damages report marked as 25· ·Exhibit 125? Exhibit 4 Page77 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 80 of 133 ·1· · · · A.· Yes. ·2· · · · Q.· Can -- Let's go back to Appendix B.· I'd like ·3· ·to ask you about a couple of the entries. ·4· · · · MR. RAFFERTY:· They're not going to be any of the ·5· ·entries that are subject to the dispute. ·6· · · · MR. BAUM:· You want to just print out the -- I mean ·7· ·I understand.· I just didn't want to waive the idea that ·8· ·that somehow, you know, there's this claw-back issue ·9· ·that's before the court. 10· · · · MR. RAFFERTY:· Put anything on the record that you 11· ·like.· I'm not trying to back-sneak you on any of the 12· ·issues. 13· · · · · · For example, my next question is going to be an 14· ·understanding of what the Chase April designation is. 15· ·And I'm assume he's going to say they're checking 16· ·account records.· I want to know what they are. 17· · · · MR. BAUM:· Okay.· If you want B-1 though, I have 18· ·it.· Maybe somebody can print it off, and then we 19· ·wouldn't have any questions. 20· · · · MR. RAFFERTY:· Again, I don't want to slow the 21· ·deposition down.· I'm going to ask about Chase, April. 22· · · · · · I'm going to ask about JAL Wells. 23· · · · · · And I'm going to ask about Kessler. 24· · · · MR. BAUM:· Okay. 25· · · · MR. RAFFERTY:· Page three.· And I really just want Exhibit 4 Page78 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 81 of 133 ·1· · · · Q.· There's also a JAL Consulting as an example, ·2· ·and there may be other JAL entities.· But are you ·3· ·testifying to your recollection it was JAL Equity? ·4· · · · A.· Yes. ·5· · · · · · But that was not the purpose of my relying on ·6· ·these documents. ·7· · · · Q.· Okay.· But the documents that you relied on in ·8· ·Appendix B in part were bank statements pertaining to ·9· ·JAL Equity? 10· · · · A.· I believe so. 11· · · · Q.· Do you recall what about the JAL Equity banking 12· ·statements that you found helpful in forming your 13· ·opinions? 14· · · · A.· Certainly.· Anytime you are engaged in an 15· ·assignment like this, the first thing to do is some type 16· ·of level of due diligence.· And in that due diligence, a 17· ·-- getting the bank statements, tax returns, whatever 18· ·third-party thing that you can acquire to give you some 19· ·kind of the level of due diligence is always the first 20· ·step in one of these types of assignments. 21· · · · Q.· Why are the banking statements of JAL Equity 22· ·relevant to the analysis of Direct List LLC? 23· · · · A.· That is where the money from the company was 24· ·flowing in and the money was flowing out. 25· · · · Q.· When you say money was flowing in and flowing Exhibit 4 Page79 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 82 of 133 ·1· ·out, you mean money was flowing in and flowing out of ·2· ·JAL Equity? ·3· · · · A.· I believe so. ·4· · · · Q.· Did you understand that money was flowing in ·5· ·and flowing out of JAL Equity from different businesses? ·6· · · · A.· Yes. ·7· · · · Q.· How did you segregate within JAL Equity's ·8· ·records the money flowing in and out pertaining to ·9· ·Direct List LLC? 10· · · · A.· I didn't.· I was simply looking to see if the 11· ·level of activity would at least support a due diligence 12· ·effort, and that's where I stopped. 13· · · · · · I did not do a -- I did not do a reconstruction 14· ·of the bank statements; nor did I do an audit of the 15· ·bank statements.· I used it simply as one of our -- one 16· ·of our components in our due diligence process. 17· · · · Q.· And what component was satisfied in your due 18· ·diligence process relevant to the JAL Equity's banking 19· ·records? 20· · · · A.· They showed a level of income that would give 21· ·me one point among a couple different points that there 22· ·was sufficient activity going through this thing. 23· · · · Q.· When you say "this thing," what are you 24· ·referring to? 25· · · · A.· Direct List. Exhibit 4 Page80 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 83 of 133 ·1· ·account reconstruction between the bank statements and ·2· ·the DL revenue. ·3· · · · Q.· Did you form any understanding as you were ·4· ·conducting your analysis why JAL Equity is receiving ·5· ·income from Direct List LLC? ·6· · · · A.· Well -- ·7· · · · MR. BAUM:· Objection.· Vague and ambiguous. ·8· · · · THE WITNESS:· General equity is just like -- so, ·9· ·the way I've done business is we set up one sweep 10· ·account that collects money from all my companies.· So 11· ·that's consistent with the way I've always done my 12· ·business.· It's consistent with the way a lot of people 13· ·who have a lot of small companies do it.· It's a sweep. 14· ·And they run it through one account because it's the 15· ·quickest and easiest way to do it.· It's pretty 16· ·standard. 17· · · · MR. RAFFERTY: 18· · · · Q.· Do you have an understanding as you sit here 19· ·today that is what Mr. Salu did as well? 20· · · · A.· Yes. 21· · · · Q.· Prior to preparing the report that we've marked 22· ·as Exhibit 125, did you have an occasion to speak with 23· ·Mr. Salu about anything prior to the creation of the 24· ·report? 25· · · · A.· Yes.· I -- I had two conversations with him. Exhibit 4 Page81 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 84 of 133 ·1· ·Phone conversations. ·2· · · · Q.· Do you keep any written notes of the phone ·3· ·conversations? ·4· · · · A.· Typically what I do is I prepare an agenda, a ·5· ·one-page an agenda.· And then that's something we work ·6· ·from, and then we -- it just becomes part of our report, ·7· ·and then it's -- typically it's flushed out through our ·8· ·system.· So it's sort of a pre-draft to a report. ·9· · · · · · And I actually think you got one of those.· But 10· ·we typically kind of do an outline, and because I want 11· ·people to be structured, I call them, and we go through 12· ·that, and that gets -- it's a pre-thing for writing the 13· ·report.· It's like a pre-draft kind of thing. 14· · · · Q.· Did you ask to speak to Mr. Salu as part of 15· ·your investigation and analysis? 16· · · · A.· Yes. 17· · · · Q.· And what were the reason or reasons why you 18· ·wanted to speak to Mr. Salu? 19· · · · A.· Well, the first meeting on April 15th was 20· ·fairly a standard document request meeting. 21· · · · · · And I request -- you can find it in a valuation 22· ·book.· It's just the standard, you know, financial 23· ·statements, bank statements, just -- just standard 24· ·document requests. 25· · · · Q.· Okay.· So the purpose of that call primarily Exhibit 4 Page82 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 85 of 133 ·1· ·like it, then they don't like it.· But I -- I don't -- ·2· ·as a rule do not.· As a rule a lot of times the client ·3· ·will tell you anyways; so it's like you don't listen. ·4· · · · Q.· As you sit here today, do you know if you've ·5· ·calculated all of the damages sustained by the ·6· ·plaintiffs in this lawsuit? ·7· · · · MR. BAUM:· Objection.· Lacks foundation. ·8· · · · THE WITNESS:· Yes.· Not including punitive. ·9· · · · MR. RAFFERTY: 10· · · · Q.· No. 11· · · · A.· My report is what I think the damages are. 12· · · · Q.· Understood. 13· · · · · · Can you turn to page three, please. 14· · · · · · This question is rather minor, but I was a 15· ·little confused. 16· · · · MR. BAUM:· Page three of the appendix? 17· · · · MR. RAFFERTY:· Yes, please. 18· · · · Q.· I'm back to page three of the appendix. 19· · · · · · Just a question for you, and I apologize.· If I 20· ·had reviewed the materials, I might have been able to 21· ·answer this. 22· · · · · · But the Kessler notations at the bottom. 23· · · · A.· Right. 24· · · · Q.· The numbering scheme is strange to me because 25· ·it doesn't seem to identify -- I assume that each Exhibit 4 Page83 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 86 of 133 ·1· ·sentence, IbisViews belief that it is engaged on behalf ·2· ·of plaintiffs Direct List and Mr. Salu to form an ·3· ·opinion regarding damages? ·4· · · · MR. BAUM:· Objection to the form.· Vague and ·5· ·ambiguous. ·6· · · · THE WITNESS:· You used the word "belief."· Is that ·7· ·what your -- ·8· · · · MR. RAFFERTY: ·9· · · · Q.· Yes.· I'll rephrase. 10· · · · · · Do you have an understanding that the Dhillon 11· ·Law Group engaged you on behalf of plaintiff's Direct 12· ·List and Mr. Salu to form an opinion concerning damages? 13· · · · A.· True. 14· · · · Q.· All right. 15· · · · · · In looking at the third and fourth lines they 16· ·are in bold and italicized.· Do you see that? 17· · · · A.· I do. 18· · · · Q.· Is there any reason why those are bolded and 19· ·italicized? 20· · · · A.· That's just our style. 21· · · · Q.· Did you make any effort in this case to 22· ·particularize any of the damages you found to exist to 23· ·any of these causes of action specifically? 24· · · · A.· No. 25· · · · Q.· Were you asked as part of the opinions you've Exhibit 4 Page84 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 87 of 133 ·1· ·provided on behalf of the plaintiffs to particularize ·2· ·the damages to any of the different defendants? ·3· · · · A.· No. ·4· · · · Q.· The second paragraph of the summary speaks ·5· ·about Vistage and others.· Do you see that? ·6· · · · A.· I do. ·7· · · · Q.· Is that merely informational, or is there ·8· ·anything in this paragraph that you relied upon in ·9· ·forming your opinions? 10· · · · A.· It's simply information. 11· · · · Q.· If you look at the last sentence in the third 12· ·paragraph in the summary, it begins with the word 13· ·"Because."· Do you see that? 14· · · · A.· I do. 15· · · · Q.· And since the creation of this report on or 16· ·about May 13th, 2016, have you been provided any 17· ·additional facts or information between May 13th and 18· ·today that would cause you to modify the report we have 19· ·before us marked as Exhibit 125? 20· · · · A.· No. 21· · · · · · But I still reserve the right if I would want 22· ·to as new information comes in. 23· · · · Q.· Understood. 24· · · · · · Could you turn to the next page, please, page 25· ·two. Exhibit 4 Page85 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 88 of 133 ·1· · · · MR. RAFFERTY:· Let's take a break. ·2· · · · · · (A recess is taken.) ·3· · · · MR. RAFFERTY:· Let's go back on the record. ·4· · · · Q.· Did you -- did you undertake any work to ·5· ·prepare for the deposition today? ·6· · · · A.· Yes. ·7· · · · Q.· And what did you do? ·8· · · · A.· I read the rebuttal report to my report. ·9· · · · Q.· Understood. 10· · · · A.· And I read Eran's deposition.· The personal 11· ·one. 12· · · · · · I kind of looked through the 30(b)(6), but... 13· · · · Q.· And give me your best estimate when you read 14· ·the rebuttal report. 15· · · · A.· I think when it was first issued I might have 16· ·taken a quick look at it.· And then probably really 17· ·sitting down to look at it was when you noticed this 18· ·deposition. 19· · · · Q.· And then you read it front to back after the 20· ·deposition was noticed? 21· · · · A.· Yes. 22· · · · Q.· Did you disagree with any of the conclusions 23· ·found in the rebuttal report? 24· · · · A.· Yes. 25· · · · Q.· And what did you disagree with? Exhibit 4 Page86 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 89 of 133 ·1· ·STATE OF CALIFORNIA ) ss ·2 ·3· · · · I, Lori S. Turner, CSR 9102, do hereby declare: ·4 ·5· · · · That, prior to being examined, the witness named in ·6· ·the foregoing deposition was by me duly sworn pursuant ·7· ·to Section 2093(b) and 2094 of the Code of Civil ·8· ·Procedure; ·9 10· · · · That said deposition was taken down by me in 11· ·shorthand at the time and place therein named and 12· ·thereafter reduced to text under my direction. 13 14· · · · I further declare that I have no interest in the 15· ·event of the action. 16 17· · · · I declare under penalty of perjury under the laws 18· ·of the State of California that the foregoing is true 19· ·and correct. 20 21· · · · WITNESS my hand this 12th day of 22· ·July, 2016. 23 · · ·______________________________________________ 24· ·Lori S. Turner, CSR 9102 25 Exhibit 4 Page87 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 90 of 133 EXHIBIT 5 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 91 of 133 Phillip Howard Kessler - May 12, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 1 1 IN THE UNITED STATES DISTRICT COURT FOR THE 2 SOUTHERN DISTRICT OF CALIFORNIA 3 ____________________________ 4 DIRECT LIST LLC, et al, ) 5 Plaintiff, ) 6 vs. ) Civil Action No. 7 ) 3:15-cv-02025-WHQ-LJB 8 VISTAGE INTERNATIONAL INC., ) 9 et al., ) 10 Defendant. ) 11 ____________________________) 12 13 14 15 DEPOSITION OF PHILLIP HOWARD KESSLER 16 San Diego, California 17 May 12, 2016 18 19 20 21 22 23 Reported by: 24 Audrey Ricks 25 CCR, RPR, CLR, CSR No. 12098 Exhibit 5 Page 88 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 92 of 133 Phillip Howard Kessler - May 12, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 9 1 San Diego, California 2 Thursday, May 12, 2016 3 12:42 p.m. - 4:06 p.m. 4 5 PHILLIP HOWARD KESSLER, 6 having been first administered the oath, was 7 examined and testified as follows: 8 9 EXAMINATION 10 BY MR. BAUM: 11 Q Good afternoon, Mr. Kessler. We were just 12 talking off the record, so let me put something on 13 the record. 14 You have already given testimony in this 15 case; is that right? 16 A Yes. 17 Q And in that circumstance, you were 18 testifying as a corporate designee on behalf of 19 AVS LLC. 20 Was that your understanding? 21 A Yes. 22 Q So this will be the first time that you 23 give testimony as an individual. 24 Is that your understanding? 25 A Yes. Exhibit 5 Page 89 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 93 of 133 Phillip Howard Kessler - February 5, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 66 1 Q I went through -- I can't say I know 2 every page -- I didn't see that. 3 Is that something that you gathered when 4 you were collecting documents? 5 MR. SCHREINER: Let's go off record for a 6 second. 7 Let me talk because I -- you may be right. 8 Let me talk to my client for a second. 9 (Recess) 10 BY MR. BAUM: 11 Q Mr. Kessler, who owns AVS LLC? 12 A It's in the name of Diana Owens. 13 Q It's registered with the Secretary of 14 State with the name. But it just simply says that 15 she's the registered agent for service of process. 16 Are there ownership documents for the 17 company? 18 A No. 19 Q One of the requests for production of 20 documents in Attachment B asks for all documents 21 that constitute or refer to articles of 22 organization, and it lists a number. 23 Are there articles of organization for the 24 LLC? 25 A Isn't that in here? Exhibit 5 Page 90 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 94 of 133 Phillip Howard Kessler - February 5, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 67 1 MR. SCHREINER: Let me try to clarify. 2 Cut me off if you think I'm testifying, but it's not 3 my intention. 4 AVS000001 is the summary sheet -- 5 MR. BAUM: Right. 6 MR. SCHREINER: -- from the California 7 Secretary of State. 8 I haven't seen -- and I asked my clients 9 to look for the actual articles themselves -- and 10 nobody seems to have that. So I'm sure the 11 Secretary of State has them, but I didn't go -- I 12 didn't go pull them. 13 BY MR. BAUM: 14 Q Did you, Mr. Kessler, hire a company to 15 assist you in forming the LLC? 16 A No. 17 Q Did you have formation documents already 18 in hand for creating an LLC in California? 19 A It's online. 20 Q And were those documents filled out? 21 A Were they filled out? 22 Q Yeah. Did you complete the forms -- 23 strike that. 24 Did AVS LLC complete the articles of 25 formation or organization for the LLC and submit Exhibit 5 Page 91 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 95 of 133 Phillip Howard Kessler - May 12, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 126 1 BY MR. BAUM: 2 Q It's described for the record as a 3 single-page letter from Vistage bearing Bates number 4 VIS 2465. 5 Do you recall receiving Exhibit 60 by 6 FedEx on or about October 13th of 2015? 7 A Yes. 8 Q And it says in the second full paragraph, 9 "As discussed, the September 9, 2015, meeting of 10 your Vistage group was the last Vistage meeting in 11 which you will serve as a chair." 12 It goes on from there. 13 But did you have a discussion with 14 Pete Sciabarra or Larry Hawks prior to receiving 15 this letter where they give you a heads up that it 16 was coming? 17 A Yes. 18 Q Tell me about that conversation. 19 A That there will be a termination. There 20 will be another individual that will be attending 21 that meeting to take over the group. 22 Q Who was this conversation with? 23 A Pete. 24 Q So Pete Sciabarra told you in -- was it a 25 telephone conversation -- Exhibit 5 Page 92 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 96 of 133 Phillip Howard Kessler - May 12, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 127 1 A Yeah. 2 Q -- that the September 9 meeting would be 3 your last and that somebody else would be attending 4 the meeting for a transition purpose? 5 A Yes. 6 Q Who was that person? 7 A Oh, I can't remember his name. 8 Q Do you know whether or not the group 9 continued on with that person as the new chair? 10 A They did not. 11 Q The group fell apart? 12 A It did not fall apart. 13 Q What happened? 14 A They are still conducting their own 15 meetings. 16 Q They just went without a chair? 17 A Yes. 18 Q Have you been to any of those meetings? 19 A No. 20 Q How did -- how did you become aware they 21 were continuing on? 22 A Probably a couple of the members told me. 23 Q Do you still communicate with any of the 24 members? 25 A Yes. Exhibit 5 Page 93 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 97 of 133 Phillip Howard Kessler - May 12, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 143 1 REPORTER'S CERTIFICATION 2 3 I, Audrey L. Ricks, Certified Shorthand 4 Reporter, Certified Shorthand Reporter Number 12098, 5 in and for the State of California, do hereby 6 certify: 7 That the foregoing witness was by me duly 8 sworn to testify to the truth, the whole truth, and 9 nothing but the truth in the within-entitled cause; 10 That said deposition was taken at the time 11 and place herein set forth; 12 That the deposition is a true record of the 13 witness's testimony as reported to the best of my 14 ability by me, a duly certified shorthand reporter 15 and a disinterested person, and was thereafter 16 transcribed under my direction into typewriting by 17 computer; 18 That request [ X ] was [ ] was not made to 19 read and correct said deposition. 20 IN WITNESS WHEREOF, I have subscribed my 21 name on this __26th__ day of __May__, 2016. 22 23 ____________________________ 24 Audrey L. Ricks, CSR 12098 25 CCR, RPR, CLR Exhibit 5 Page 94 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 98 of 133 EXHIBIT 6 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 99 of 133 1 BRANDON BAUM (SBN: 121318) brandon<@dhillonlaw.com 2 KRISTAL. BAUGHMAN (SBN: 264600) kbaughman@dhillonlaw.com 3 DHILLON tA W GROUP INC. 177 Post Street, Suite 700 4 San Francisco, California 94108 Telephone: ( 415) 433-1700 5 Facsimile: ( 415) 520-6593 6 Attorneys for Plaintiffs 7 Direct List LLC and Eran Salu 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, V. VIST AGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA OWENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. INITIAL DISCLOSURES Case No. 3: l 5-cv-02025-WQH-JLB Hon. Judge William Q. Hayes PLAINTIFFS' INITIAL DISCLOSURES Exhibit 6 Page 95 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 100 of 133 Plaintiffs Direct List LLC and Eran Salu ("Plaintiffs"), hereby submit the 2 following initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(l ). 3 Plaintiffs make these disclosures based on current knowledge following a 4 reasonable inquiry, and without the benefit of any discovery. Plaintiffs also make 5 these disclosures without waiver of any applicable privilege or immunity. 6 Plaintiffs reserve the right to modify, amend, or otherwise supplement these 7 disclosures pursuant to Federal Rule of Civil Procedure 26( e) as additional 8 information becomes available. Plaintiffs further reserve the right to object to the 9 production and/or introduction into evidence of any document, electronically IO stored information, or tangible thing described herein, or the testimony of any 11 witnesses identified herein, on the basis of privilege, relevance, undue burden, or 12 otherwise as appropriate. 13 A. Individuals [Federal Rule of Civil Procedure 26(a)(l)(A)(i)] 14 Based on the information currently available to Plaintiffs, the 15 following individuals are believed likely to have discoverable information which 16 may be used by Plaintiffs to support their claims or defenses, unless such use 17 would be solely for impeachment. An asterisk indicates that the individual is 18 employed by (or associated with) Plaintiffs, and that all communications with that 19 individual should be directed to counsel of record for Plaintiffs in this case. To the 20 extent persons associated with the Defendants are identified, it is assumed that 21 their contact information is known to counsel. 22 1. Eran Salu* is likely to have information concerning the claims set forth 23 in Plaintiffs' complaint. 24 2. Phil Kessler is likely to have information concerning Vistage's promises 25 to maintain confidentiality over its members' business information; Eran 26 Salu's disclosure of confidential information concerning Direct List LLC, 27 the formation and operation of A VS Leads LLC; the value of the 28 - 2 - Exhibit 6 Page 96 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 101 of 133 1 business of Direct List LLC and A VS Leads LLC; the roles of various 2 individuals in the formation and operation of A VS Leads LLC. 3 3. Teigue Thomas is likely to have information concerning the 4 investigation of Eran Salu' s complaint against Phil Kessler; the basis for 5 Phil Kessler's representation to his CEO Group that Vistage's VP and 6 legal counsel were "fine" with his actions. 7 4. Leon Shapiro is likely to have information concerning Vistage's 8 corporate structure; Vistage's confidentiality policy; Vistage's 9 representations to potential members and members regarding 10 confidentiality; and the factual basis for Vistage's assertion that it is not 11 responsible for maintaining the confidentiality of its members' 12 information. 13 5. Pete Sciabarra is likely to have information concerning the investigation 14 of Eran Salu's complaint against Phil Kessler; the basis for Phil Kessler's 15 representation to his CEO Group that Vistage' s VP and legal counsel 16 were "fine" with his actions. 17 6. Lauren Kessler is likely to have information about the formation and 18 operation of A VS Leads LLC; the value of the business of A VS Leads 19 LLC; the roles of various individuals in the formation and operation of 20 A VS Leads LLC. 21 7. Diana Owens is likely to have information about the formation and 22 operation of A VS Leads LLC; the value of the business of A VS Leads 23 LLC; the roles of various individuals in the formation and operation of 24 A VS Leads LLC. 25 8. Edette Herron is likely to have information about the formation and 26 operation of A VS Leads LLC; how A VS Leads LLC was able to secure 27 all of the customers of Direct List LLC; the value of the business of AVS 28 - 3 - Exhibit 6 Page 97 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 102 of 133 1 Leads LLC; the roles of various individuals in the formation and 2 operation of A VS Leads LLC. 3 9. Corine Redira, 150 El Camino Real #130, Tustin, CA 92780 (714) 617- 4 4589, is likely to have information about the formation and operation of 5 A VS Leads LLC; how A VS Leads LLC was able to secure all of the 6 customers of Direct List LLC; the value of the business of A VS Leads 7 LLC; the roles of various individuals in the formation and operation of 8 A VS Leads LLC. 9 10. Bob Dabic, Orange County Vistage Chair, is likely to have information 1 O about the confidentiality obligations owed to Vistage members, and his 11 communications with Edette Herron and Phil Kessler. 12 11. Members of Phil Kessler's CEO-group, Steve Cade, Kyle Williams, 13 Charlie Hoge, Mike Rodman, Dave Schnider, Kevin Conlon, Jason 14 Kendall, Ted Ricasa, Dave Brezniak, John Funderburg, Kent 15 Coykendall, and Renee Savage, are likely to have information about 16 Phil Kessler's actual and/or apparent authority to act on behalf of 17 Vistage, and Salu's sharing of confidential information with Kessler. 18 Their contact information is in the possession of Kessler and/or Vistage. 19 12. Moriah Farrell* is likely to have information concerning the confidential 20 and proprietary nature of the Direct List business. 21 B. Documents [Federal Rule of Civil Procedure 26(a)(l)(A)(ii)] 22 Plaintiffs list the following categories of documents, electronically stored 23 information, and tangible things (collectively "documents") that it currently has in 24 their possession, custody, and/or control and may use to support their claims and/or 25 defenses, unless the use would be solely for impeachment: 26 1. ESI constituting communications with Vistage principals Teigue 27 Thomas, Leon Shapiro, Phil Kessler, and Pete Sciabarra. 28 - 4 - Exhibit 6 Page 98 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 103 of 133 2. ESI constituting representations made by Vistage regarding 2 confidentiality. 3 3. Books and records of Direct List LLC, demonstrating customer 4 information, revenue, sales, employment agreements, and other financial 5 documents. 6 4. ESI concerning the formation and operation of A VS Leads LLC. 7 These documents may be obtained through undersigned counsel, and 8 Plaintiffs reserve the right to use documents from categories other than those listed 9 above, and to supplement their present disclosure with additional documents that 1 O they contemplate using. 11 C. Damages [Federal Rule of Civil Procedure 26(a)(t )(A)(iii)] 12 Plaintiffs are in the initial stages of their damages investigation. 13 Accordingly, no damage computation is provided herewith as Plaintiffs has not yet 14 determined the extent and full amount of damages caused by the conduct of 15 Defendants, since damages will be dependent upon documents and information in 16 the possession, custody, and/or control of the Defendants. Nevertheless, Plaintiffs 17 estimate that they are entitled to damages based on, but not limited to, Civil Code 18 section 3333, compensatory damages, the fair market value of the portion of the 19 business that was lost by Direct List LLC, punitive and exemplary damages, costs 20 of this action, and/or pre-judgment interest. Plaintiffs also believe that defendants 21 have either retained receivables from former customers of Direct List, or told them 22 not to pay the receivables. As noted above, documents in support of Plaintiffs' 23 damages include documents in the possession, custody, or control of the cross- 24 defendants and/or will be based on information in the possession, custody, or 25 control of the defendants. Plaintiffs therefore reserve the right to produce 26 supplemental documents or other evidentiary material, not privileged or otherwise 27 protected from disclosure, which becomes available and on which it will base their 28 computation of damages. - 5 - Exhibit 6 Page 99 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 104 of 133 1 D. Insurance [Federal Rule of Civil Procedure 26(a)(l)(A)(iv)] 2 Plaintiffs currently have no knowledge of any insurance agreement under 3 which an insurance business may be liable to satisfy all or part of a possible 4 judgment in this action or to indemnify or reimburse for payments made to satisfy 5 any such judgment. However, further investigation is continuing. 6 7 November 18, 2015 DHILLON LAW GROUP INC. 8 9 10 By:-=---.----,.=--------- Brandon Baum Krista L. Baughman Attorneys for Plaintiffs Direct List LLC and Eran Salu 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 6 - Exhibit 6 Page 100 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 105 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HlltoN LAW GROUP l'i~ BRANDON BAUM (SBN: 121318) brandon@dhillonlaw.com KRISTAL. BAUGHMAN (SBN: 264600) kbaughman@dhillonlaw.com DHILLON LAW GROUP INC. 1 77 Post Street, Suite 700 San Francisco, California 94108 Telephone: (415) 433-1700 Facsimile: (415) 520-6593 Attorneys for Plaintiffs Direct List LLC and Eran Salu, UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Case Number: 3:15-cv-02025-WQH-JLB Liability Company; and ERAN SALU, an individual, Hon. Judge William Q. Hayes Plaintiffs, V. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA OWENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. PROOF OF SERVICE OF PLAINTIFF'S INITIAL DISCLOSURES PROOF OF SERVICE OF PLAINTIFF'S INITIAL DISCLOSURES 3: 15-cv-02025-WQH-JLB Exhibit 6 Page 101 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 106 of 133 1 2 3 4 PROOF OF SERVICE 5 Code of Civil Procedure §§ 1013a, 2015.5 6 I declare that: 7 I am employed in the City and County of San Francisco, California. I am over the age of 8 eighteen years and not a party to the within entitled cause; my business address is 1 77 Post Street, 9 Suite 700, San Francisco, California 94108. On November 18, 2015, I served PLAINTIFF'S 10 INITIAL DISCLOSURES on the parties listed below, addressed as follows: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Paul F. Rafferty Jones Day 3161 Michelson Drive Suite 800 Irvine, CA 92612 949-851-3939 949-553-7539 (fax) pfrafferty@jonesday.com Stephen L. Schreiner Solomon, Ward, Seidenwurm & Smith, LLP 401 B Street Suite 1200 San Diego, CA 92101 (619) 231-0303 (619) 231-4755 sschreiner@swsslaw.com --=X-=--- By first class mail by depositing a sealed envelope in the United States Mail at San Francisco, California, with postage fully preaid. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration was executed on November 18, 2015, at San Francisco, California. 2 PROOF OF SERVICE OF PLAINTIFF'S INITIAL DISCLOSURES 3: l 5-cv-02025-WQH-JLB Exhibit 6 Page 102 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 107 of 133 EXHIBIT 7 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 108 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ____________________________________________________________________________________________________________________________________________________________ AMENDED INITIAL DISCLOSURES BRANDON BAUM (SBN: 121318) brandon@dhillonlaw.com KRISTA L. BAUGHMAN (SBN: 264600) kbaughman@dhillonlaw.com DHILLON LAW GROUP INC. 177 Post Street, Suite 700 San Francisco, California 94108 Telephone: (415) 433-1700 Facsimile: (415) 520-6593 Attorneys for Plaintiffs Direct List LLC and Eran Salu UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHIL KESSLER; LAUREN KESSLER; DIANA OWENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB Hon. Judge William Q. Hayes PLAINTIFFS’ AMENDED INITIAL DISCLOSURES Exhibit 7 Page 103 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 109 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - Plaintiffs Direct List LLC and Eran Salu (“Plaintiffs”), hereby submit the following initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1). Plaintiffs make these disclosures based on current knowledge following a reasonable inquiry, and without the benefit of any discovery. Plaintiffs also make these disclosures without waiver of any applicable privilege or immunity. Plaintiffs reserve the right to modify, amend, or otherwise supplement these disclosures pursuant to Federal Rule of Civil Procedure 26(e) as additional information becomes available. Plaintiffs further reserve the right to object to the production and/or introduction into evidence of any document, electronically stored information, or tangible thing described herein, or the testimony of any witnesses identified herein, on the basis of privilege, relevance, undue burden, or otherwise as appropriate. A. Individuals [Federal Rule of Civil Procedure 26(a)(1)(A)(i)] Based on the information currently available to Plaintiffs, the following individuals are believed likely to have discoverable information which may be used by Plaintiffs to support their claims or defenses, unless such use would be solely for impeachment. An asterisk indicates that the individual is employed by (or associated with) Plaintiffs, and that all communications with that individual should be directed to counsel of record for Plaintiffs in this case. To the extent persons associated with the Defendants are identified, it is assumed that their contact information is known to counsel. 1. Eran Salu* is likely to have information concerning the claims set forth in Plaintiffs’ complaint. 2. Phil Kessler is likely to have information concerning Vistage’s promises to maintain confidentiality over its members’ business information; Eran Salu’s disclosure of confidential information concerning Direct List LLC, the formation and operation of AVS Leads LLC; the value of the Exhibit 7 Page 104 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 110 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 3 - business of Direct List LLC and AVS Leads LLC; the roles of various individuals in the formation and operation of AVS Leads LLC. 3. Teigue Thomas is likely to have information concerning the investigation of Eran Salu’s complaint against Phil Kessler; the basis for Phil Kessler’s representation to his CEO Group that Vistage’s VP and legal counsel were “fine” with his actions. She will also have knowledge concerning the efforts that Salu made to mitigate Plaintiffs’ damages. 4. Leon Shapiro is likely to have information concerning Vistage’s corporate structure; Vistage’s confidentiality policy; Vistage’s representations to potential members and members regarding confidentiality; and the factual basis for Vistage’s assertion that it is not responsible for maintaining the confidentiality of its members’ information. 5. Pete Sciabarra is likely to have information concerning the investigation of Eran Salu’s complaint against Phil Kessler; the basis for Phil Kessler’s representation to his CEO Group that Vistage’s VP and legal counsel were “fine” with his actions. He will also have knowledge concerning Plaintiffs’ efforts to mitigate damages. 6. Lauren Kessler is likely to have information about the formation and operation of AVS Leads LLC; the value of the business of AVS Leads LLC; the roles of various individuals in the formation and operation of AVS Leads LLC. 7. Diana Owens is likely to have information about the formation and operation of AVS Leads LLC; the value of the business of AVS Leads LLC; the roles of various individuals in the formation and operation of AVS Leads LLC. 8. Edette Herron is likely to have information about the formation and operation of AVS Leads LLC; how AVS Leads LLC was able to secure Exhibit 7 Page 105 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 111 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - all of the customers of Direct List LLC; the value of the business of AVS Leads LLC; the roles of various individuals in the formation and operation of AVS Leads LLC. 9. Corine Redira, 150 El Camino Real #130, Tustin, CA 92780 (714) 617- 4589, is likely to have information about the formation and operation of AVS Leads LLC; how AVS Leads LLC was able to secure all of the customers of Direct List LLC; the value of the business of AVS Leads LLC; the roles of various individuals in the formation and operation of AVS Leads LLC. 10. Bob Dabic, Orange County Vistage Chair, is likely to have information about the confidentiality obligations owed to Vistage members, and his communications with Edette Herron and Phil Kessler. 11. Members of Phil Kessler’s CEO-group, Steve Cade, Kyle Williams, Charlie Hoge, Mike Rodman, Dave Schnider, Kevin Conlon, Jason Kendall, Ted Ricasa, Dave Brezniak, John Funderburg, Kent Coykendall, and Renee Savage, are likely to have information about Phil Kessler’s actual and/or apparent authority to act on behalf of Vistage, and Salu’s sharing of confidential information with Kessler. Their contact information is in the possession of Kessler and/or Vistage. 12. Moriah Farrell* is likely to have information concerning the confidential and proprietary nature of the Direct List business; Plaintiffs’ efforts to mitigate damages, 13. James Cliame is likely to have information concerning the events surrounding the creation of AVS Leads in the May-June 2015 timeframe, including email exchanges with Phil Kessler and Lauren Kessler, and telephone conversations with Edette Herron. Mr. Cliame’s address is 2837 Calle de Malibu, Escondido, CA. Exhibit 7 Page 106 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 112 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 5 - 14. Janine Drake and Alex Chrisman of Vistage are likely to have information concerning the effectiveness of the methodology that Plaintiffs used to obtain leads for Vistage chairs. 15. Michael Plotnik* is likely to have information concerning Plaintiffs’ due diligence and standard business practices relating thereto. 16. Dennis Mandell* is likely to have information concerning Plaintiffs’ damages. B. Documents [Federal Rule of Civil Procedure 26(a)(1)(A)(ii)] Plaintiffs list the following categories of documents, electronically stored information, and tangible things (collectively “documents”) that it currently has in their possession, custody, and/or control and may use to support their claims and/or defenses, unless the use would be solely for impeachment: 1. ESI constituting communications with Vistage principals Teigue Thomas, Leon Shapiro, Phil Kessler, and Pete Sciabarra. 2. ESI constituting representations made by Vistage regarding confidentiality. 3. Books and records of Direct List LLC, demonstrating customer information, revenue, sales, employment agreements, and other financial documents. 4. ESI concerning the formation and operation of AVS LLC. 5. All documents produced by the parties in this case, including Direct List 000001-069047, as well as IbisViews 00001-01615 6. All documents produced by third parties in this case, pursuant to Rule 45 subpoena. 7. Documents presently in the possession of the parties and third parties, that will be subpoenaed for trial. Such documents include original documents in the possession of James Cliame, financial documents relating to the net worth of Exhibit 7 Page 107 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 113 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 6 - Defendants Phil Kessler and Vistage, including disclosure documents from the SunTrust refinancing used to fund the TowerBrook Capital Partners dividend. By identifying these documents, however, Plaintiff does not concede that any such document is relevant, authentic, and/or admissible as evidence. Rather, Plaintiffs will address each document’s admissibility on a document-by-document basis C. Damages [Federal Rule of Civil Procedure 26(a)(1)(A)(iii)] Plaintiffs are in the initial stages of their damages investigation. Accordingly, no damage computation is provided herewith as Plaintiffs has not yet determined the extent and full amount of damages caused by the conduct of Defendants, since damages will be dependent upon documents and information in the possession, custody, and/or control of the Defendants. Nevertheless, Plaintiffs estimate that they are entitled to damages based on, but not limited to, Civil Code section 3333, compensatory damages, the fair market value of the business that was lost by Plaintiffs, punitive and exemplary damages, costs of this action, and/or pre-judgment interest. Plaintiffs also believe that defendants have either retained receivables from former customers of Direct List, or told them not to pay the receivables. As noted above, documents in support of Plaintiffs’ damages include documents in the possession, custody, or control of the defendants and/or will be based on information in the possession, custody, or control of the defendants. Plaintiffs therefore reserve the right to produce supplemental documents or other evidentiary material, not privileged or otherwise protected from disclosure, which becomes available and on which it will base their computation of damages. Plaintiffs also identify the expert report of Dennis Mandell, as well as the testimony and documents in support thereof. Plaintiffs further identify the testimony of Eran Salu and Direct List (via Rule 30(b)(6) in support of damages. Plaintiffs will quantify the appropriate amount of punitive damages at such time that Defendants provide information concerning their financial condition, which Exhibit 7 Page 108 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 114 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 7 - they have thus far refused to do. Plaintiffs contend that defendants, and each of them, are jointly and severally liable for the entire amount of damages suffered by the Plaintiffs, both individually and collectively. D. Insurance [Federal Rule of Civil Procedure 26(a)(1)(A)(iv)] Plaintiffs currently have no knowledge of any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in this action or to indemnify or reimburse for payments made to satisfy any such judgment. However, further investigation is continuing. July 11, 2016 DHILLON LAW GROUP INC. By:____________________________ Brandon Baum Attorneys for Plaintiffs Direct List LLC and Eran Salu Exhibit 7 Page 109 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 115 of 133 EXHIBIT 8 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 116 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 1 1 UNITED STATES DISTRICT COURT 2 SOUTHERN DISTRICT OF CALIFORNIA 3 ____________________________ 4 DIRECT LIST LLC, a North ) Carolina Limited Liability ) 5 Company; and ERAN SALU, an ) individual, ) 6 Plaintiffs, ) vs. ) Case No. 7 VISTAGE INTERNATIONAL, INC.,) 3:15-cv-02025-WQH-JLB a Delaware Corporation; PHIL) 8 KESSLER; LAUREN KESSLER; ) DIANA OWENS; EDETTE HERRON; ) 9 and DOES 1 through 10, ) inclusive, ) 10 Defendants. ) ____________________________) 11 12 13 14 15 DEPOSITION OF EDETTE HERRON 16 IRVINE, CALIFORNIA 17 MONDAY, MAY 2, 2016 18 19 20 21 22 23 24 25 DORIEN SAITO, CSR 12568, CLR Exhibit 8 Page 110 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 117 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 8 1 IRVINE, CALIFORNIA; MONDAY, MAY 2, 2016 2 1:26 P.M. 3 -0o0- 4 *** 5 EDETTE HERRON, 6 having been duly administered an oath 7 in accordance with CCP 2094, was 8 examined and testified as follows: 9 *** 10 EXAMINATION 11 BY MR. BAUM: 12 Q. Good afternoon, Ms. Herron. Thank you for 13 waiting for so long today. But now we're finally 14 here. 15 Have you had your deposition taken before? 16 A. Once. 17 Q. How long ago was that? 18 A. Twenty years. 19 Q. Okay. Is there anything that would prevent 20 you from giving full and complete testimony today 21 such as medication or a medical issue or anything 22 else? 23 A. I do have medical issues. And the -- my -- 24 it works with my heart and my blood pressure. 25 Q. First of all, if at any time you feel like Exhibit 8 Page 111 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 118 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 11 1 Q. And then there's something -- we also have 2 heard about it earlier today called PMG, Prospect -- 3 A. Correct. 4 Q. -- Marketing Group. 5 A. Uh-huh. We were Prospect Marketing Group 6 before we were JAL. 7 Q. So was -- was Direct List a subsidiary of 8 Prospect Marketing Group? 9 A. Correct. To my knowledge, yes. 10 Q. Okay. And did sometimes the naming kind 11 of -- 12 Like sometimes people would call it PMG, 13 and sometimes they would call it Direct List, but 14 they were referring to the same thing? 15 A. Yes. 16 Q. How long did you work in -- for Direct 17 List? 18 A. For Direct List? 19 Q. Yes. 20 A. I worked since 1987 for Direct List until 21 September 15 when PMG bought Direct List. 22 Q. September 15 of what -- 23 A. 2012, I think it was. I don't remember the 24 year for sure. It was '12 or '13. 25 Q. And then -- so PMG purchased Direct List? Exhibit 8 Page 112 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 119 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 12 1 A. Yes. 2 Q. And then did Direct List continue on as a 3 subsidiary? 4 A. Yes. 5 Q. And PMG was related to JAL? 6 A. JAL is related to PMG. 7 Q. In what way? 8 A. It was PMG first. 9 Q. I see. 10 And at the time that Direct List was 11 purchased by PMG, what was your role with Direct 12 List? What was your title? 13 A. My title was basically sales manager. 14 Q. What were your duties as sales manager 15 right at -- right when the company was acquired? 16 A. My duties were to maintain the sales staff, 17 maintain the customer service staff, to make sure 18 that sales were coming in and out, that customers 19 were happy with the performance of finding different 20 ways of doing business as Direct List. 21 Q. Did you report to anybody? 22 A. I reported to Andrew Pieter and Ken Cachat. 23 Q. Say the last name. Say the last name. 24 A. Andrew Pieter, P-i-e-t-e-r, and Ken Cachat, 25 C-a-c-h-a-t. Exhibit 8 Page 113 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 120 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 20 1 What -- what was -- 2 What changed at Direct List as a result of 3 Mr. Salu's desire to make money? 4 A. The changeover -- when we were DLT, there 5 was -- as I said, it catered to the employee. 6 When we became PMG Group, it catered to the 7 bottom line, and so the benefits, the -- were 8 changed for the employees. And the atmosphere of my 9 previous employers to my current employer changed. 10 So there was a learning curve. 11 Q. Uh-huh. Do you remember what the learning 12 curve entailed? 13 A. Yes. 14 Q. What? 15 A. To paraphrase it, I'm going to say that I 16 worked for bosses before. And I had to learn that 17 Mr. Salu was more of a bank. And I discussed this 18 with Mr. Salu. That was the learning curve. 19 Q. Was Mr. Salu an on-premises owner? 20 A. No. 21 Q. How often would he -- 22 Let's say in the 2013, 2014 time frame, how 23 often was he actually at the site, at Direct List? 24 A. I'm going to guesstimate six times. 25 Q. Over a two-year period? Exhibit 8 Page 114 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 121 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 21 1 A. Eight times, six times. I'm guesstimating. 2 Q. Who was the seniormost person at the 3 company when Mr. Salu was not there? 4 A. Myself. 5 Q. So were you responsible for the environment 6 on a day-to-day basis at Direct List? 7 A. Yes, I am -- was. 8 Q. And how many people reported to you? 9 A. Five -- four or five -- five -- 10 Q. I've heard the names. 11 A. -- four. 12 Q. But can you remind me. 13 A. There would be Corine Redira. And we have 14 a gentleman named Eddie Ratanadiloknaphuket, which 15 you know as Risit. We have Oscar Vasquez. 16 Cecille Aggabao [phonetic]. We're the main team. 17 Then we had Kelly Lovell [phonetic]. 18 And then another company was brought into 19 the building, and those people did not have a 20 manager. 21 Q. Was that Great Reunions [phonetic]? 22 A. Yes, it was. 23 Q. How about -- were there some contractors 24 brought on from India? 25 A. I had nothing do with the contractors from Exhibit 8 Page 115 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 122 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 49 1 was available to us. 2 Q. And what was that something? 3 A. And have a meeting of -- in Vistage. When 4 you are a CEO, you meet with your chairperson once a 5 month, and you usually have one to two hours of 6 face-to-face time with your chair. 7 And in this case, Mr. Dabic, because 8 Mr. Salu was not in his group, he did volunteer us 9 an hour to have a meeting. 10 And Eran, Mr. Salu, had let me know in 11 December that he was not happy with -- I think it 12 was December. He was not happy with how things were 13 proceeding, that we were going to have to cut staff, 14 cut salaries. 15 Q. So that was December of 2014? 16 A. Yes. 17 Q. Had there previously been a cut in 18 salaries? 19 A. There had been at the beginning of when PMG 20 bought Direct List. I had two employees that their 21 hours were cut, and they were using their accrued 22 vacation time that had been negotiated as part of 23 the sale, to my knowledge. 24 Q. Well, did -- and then were the salaries 25 restored after they had been cut? Exhibit 8 Page 116 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 123 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 50 1 A. After -- yes. In the following January, 2 the -- those two people were brought back to 3 full-time. And every employee got a -- I think it 4 was -- I'm going to -- I don't remember, but they 5 are going to get a raise. And then those were cut. 6 I don't know when, but they were then cut again. 7 Q. So somehow the raise was -- 8 A. Withdrawn. 9 Q. -- cut? 10 A. Yes. 11 Q. Withdrawn. 12 A. And we went back to the pre raise. And 13 then we moved on to 20 percent cut in salary. And 14 three people worked three days a week -- were paid 15 for three days a week. They worked more than that, 16 but they were paid for three. 17 Q. The -- okay. So you found out in December 18 of 2014 that -- that Mr. Salu was unhappy with 19 things proceeding. And it was arranged that there 20 would be a one-hour -- or a one-to-one with 21 Mr. Dabic -- 22 A. Moderating it. 23 Q. -- moderating it? 24 And these notes, it's your understanding, 25 reflect that one-on-one? Exhibit 8 Page 117 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 124 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 63 1 I don't know if I'm answering your 2 question. 3 But there's nothing more important to me 4 than the success -- 5 Q. Okay. 6 A. -- of that group. 7 Q. Now, at some point, the other employees of 8 JAL joined a different company called AVS Leads; is 9 that true? 10 A. I'm aware, yes. 11 Q. How did that come about? 12 A. When the salary cuts went into play and 13 when the other went into play, I had stated to Eran 14 at that time that these people are the sole 15 proprietors -- providers for their families and that 16 they would not be able to sustain their families on 17 a cut in salary and a cut in hours. 18 And Eran let me know that that was okay if 19 they had to leave. That was not -- he said good. 20 But that we could run the company with less people 21 and that it -- it was okay if they left. 22 Q. Okay. And so then what happened? 23 A. I don't understand the question. 24 Q. Well, you said -- 25 I was asking you, how did they end up -- Exhibit 8 Page 118 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 125 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 64 1 A. I -- 2 Q. -- with AVS? 3 A. Okay. Ask the question again. 4 Q. Eventually they ended up with AVS Leads. 5 A. They ended up at AVS because they were 6 looking for jobs. Oscar had already resigned once 7 fm the company. And Eran had got him to come back 8 into the company. 9 And there were -- there were things going 10 on at AVS at the time, that they believed that the 11 company was folding and that they were not going to 12 have jobs. And I -- I didn't know, to the 13 difference, either that the company wasn't going to 14 fold. 15 MR. SCHREINER: You said AVS. 16 Did you mean Direct List? 17 THE WITNESS: I'm sorry. Direct List. I 18 apologize. There were signs that JAL was closing. 19 And -- 20 BY MR. BAUM: 21 Q. So did you take any action? 22 A. I -- I let the team know that they could 23 leave. 24 Q. Okay. So you told the team that they could 25 leave. Exhibit 8 Page 119 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 126 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 144 1 Those are group members? 2 A. Yes. 3 Q. And also something on the team for the 4 hostile work environment you were asking for; is 5 that right? 6 A. Yes. I wanted to find out some 7 information. 8 Q. And are you referring to the hostile work 9 environment at Direct List? 10 A. Yes. 11 Q. And what was the hostility that you were 12 concerned about at that time? 13 A. There was a lot of anger. There was a lot 14 of frustration. There was yelling. There were 15 intimidation. Bills weren't being paid. It was -- 16 it was just a very hard time. And trying to bring 17 money in. 18 Q. Okay. Who was -- who was yelling? 19 A. Eran yelled. 20 Q. Was that ever -- 21 How often was he on site? 22 A. It's not when he's on site. Eran yells at 23 you when you're on the phone. 24 Q. Okay. And did you record that in some 25 manner -- Exhibit 8 Page 120 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 127 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 145 1 A. I would not. 2 Q. -- such that you wrote -- not record it. 3 But you wrote it down in a -- in a book, 4 like Eran yelled at me again, or you emailed to your 5 therapist "Hey, Eran is yelling at me"? 6 A. No. I don't do that. 7 Q. Did you tell your therapist that Eran 8 yelled at you? 9 A. Yes. And actually people have heard -- 10 Eran's employees heard Eran when he was really mad. 11 And Eran has yelled -- not just yelled at me. 12 Q. What has he done? 13 A. He has yelled at Cecille. When -- when he 14 gets very frustrated, he yells. 15 Q. On the phone? 16 A. Yes. 17 Q. And did anyone hang up on him? 18 A. Oh, no. No. 19 Q. Were you -- you said he intimidated you. 20 How did he do that? Was he in front of 21 you? I mean, was he standing over you and acting 22 intimidating? 23 A. The way to answer that question is I worked 24 very hard to make sure that no one ever gets 25 frustrated or angry. Exhibit 8 Page 121 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 128 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 146 1 Q. Okay. 2 A. And if I'm perceived that they are, I get 3 very upset. I try very hard to make sure the 4 company worked very well. 5 But Eran would get really upset with us if 6 it wasn't going the way that he thought it should. 7 And he yells. He says things that are hurtful. 8 Q. Such as? 9 A. Such as "If I find out that you didn't do 10 this work the way you should. A monkey's hand -- 11 the monkey's hand in India can do better than you." 12 He would tell me I was a nightmare that 13 he -- a reoccurring nightmare that he couldn't wake 14 up from. 15 There was other times and other things that 16 he said, that he has to come and do the job for us 17 because we were so incompetent, what was he paying 18 us for. 19 Q. So did you believe that that created a 20 hostile work environment? 21 A. I believe that adds to the hostile work 22 environment. I believe that trying to buy data that 23 you have to pay for that you can't buy to give to a 24 client causes frustration and hostility. 25 I believe that everybody in our environment Exhibit 8 Page 122 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 129 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 147 1 had issues and very, very nervous, very -- it was 2 very hard to do a job. It was very hard to do what 3 was supposed to be done. Very hard. 4 Q. And who was the seniormost person who was 5 on the scene at the job site every day? 6 A. Me. 7 Q. Did you create a hostile work environment? 8 A. Not to my knowledge. 9 Q. All right. And Eran was rarely on the 10 scene? 11 A. Eran was rarely on the scene. 12 Q. It's just that he was very demanding; isn't 13 that true? 14 MR. SCHLECTER: Objection. 15 Mischaracterizes her testimony. 16 MR. SCHREINER: Join. 17 BY MR. BAUM: 18 Q. Was Eran demanding? 19 A. Eran -- no, it's not that easy, sir. 20 Sorry. 21 MR. SCHLECTER: We're almost at the end. 22 BY MR. BAUM: 23 Q. Do you want to explain. 24 A. Eran is not always understanding. Eran has 25 expectations. But if those expectations aren't met, Exhibit 8 Page 123 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 130 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 148 1 there is no reason why those expectations shouldn't 2 have been met. And they're his expectations. 3 Q. Okay. So Eran has high expectations? 4 A. Eran has expectations. 5 Q. Eran has expectations? 6 A. That were not being met. 7 Q. Eran has expectations that were not being 8 met by the personnel at Direct List? 9 MR. SCHLECTER: She said high expectations, 10 but okay. 11 MR. BAUM: Oh, okay. I missed that word. 12 MR. SCHLECTER: We could read it back. 13 THE WITNESS: That's what I'm saying. 14 BY MR. BAUM: 15 Q. And you felt that was a hostile work 16 environment? 17 A. I feel that people being yelled at is a 18 hostile work environment. I feel that people 19 thinking their doors are going to be locked tomorrow 20 when you come in and all your personal belonging are 21 going -- are going to be gone -- 22 Q. Did you -- 23 A. -- that you're -- that is a problem. 24 Q. And -- and what did you do about that 25 problem? Exhibit 8 Page 124 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 131 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 149 1 A. I called to say "Are these going to be 2 paid? We've been red tagged, and I've been told I 3 don't know. I've been told to wait on the money 4 because I don't know why the money isn't there for 5 these things. I've had paychecks not being paid on 6 time. There was problems with getting data for 7 clients. And if you're not giving the clients the 8 data, you're not collecting the money." 9 Q. Okay. So it was a difficult job. And as 10 we saw in your employment agreement, you had the 11 right-- 12 A. Absolutely. 13 Q. -- to end it at any time. 14 A. Absolutely. You are so totally correct. 15 Q. But instead you went out on disability and 16 you helped AVS Leads get underway, didn't you? 17 MR. SCHREINER: Objection. 18 Mischaracterizes and harassing and argumentative. 19 MR. BAUM: It accurately characterizes the 20 pile of evidence that shows what she did. 21 Q. Isn't that what you did? 22 MR. SCHREINER: You can argue that pile of 23 evidence to the judge, but that's not a proper form 24 of question. 25 MR. BAUM: It is a proper form of question. Exhibit 8 Page 125 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 132 of 133 Edette Herron - May 2, 2016 GregoryEdwards.com | 866-4Team GE GregoryEdwards, LLC | Worldwide Court Reporting Page 159 1 CERTIFICATE OF REPORTER 2 I, DORIEN SAITO, CSR 12568, CLR, a certified 3 Shorthand reporter in and for the State of 4 California, County of Los Angeles, do hereby 5 certify; 6 That EDETTE HERRON, the witness named in the 7 foregoing deposition, was, before the commencement 8 of the deposition, duly administered an oath in 9 accordance with CCP 2094; 10 That said deposition was taken down in 11 stenograph writing by me and thereafter transcribed 12 Into typewriting under my direction. 13 That before completion of the deposition, 14 review of the transcript [ ] was [ ] was not 15 requested. If requested any changes made by the 16 deponent (and provided to the reporter) during the 17 period allowed are appended hereto. 18 I further certify that I am neither counsel 19 for nor related to any party to said action, nor in 20 any way interested in the outcome thereof. 21 Dated this 17th day of May, 2016. 22 _________________________________ 23 CERTIFIED SHORTHAND REPORTER 24 IN AND FOR THE COUNTY OF 25 LOS ANGELES, STATE OF CALIFORNIA Exhibit 8 Page 126 Case 3:15-cv-02025-WQH-JLB Document 47-5 Filed 07/22/16 Page 133 of 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE 3:15-cv-02025-WQH-JLB Paul F. Rafferty (State Bar No. 132266) pfrafferty@jonesday.com Charlotte S. Wasserstein (State Bar No. 279442) cswasserstein@jonesday.com Jack Williams, IV (State Bar No. 309154) jackwilliams@jonesday.com JONES DAY 3161 Michelson Drive Suite 800 Irvine, CA 92612.4408 Telephone: +1.949.851.3939 Facsimile: +1.949.553.7539 Attorneys for Defendant VISTAGE INTERNATIONAL, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA DIRECT LIST LLC, a North Carolina Limited Liability Company; and ERAN SALU, an individual, Plaintiffs, v. VISTAGE INTERNATIONAL, INC., a Delaware Corporation; PHILS KESSLER; LAUREN KESSLER; DIANA O WENS; EDETTE HERRON; and DOES 1 through 10, inclusive, Defendants. Case No. 3:15-cv-02025-WQH-JLB CERTIFICATE OF SERVICE Case 3:15-cv-02025-WQH-JLB Document 47-6 Filed 07/22/16 Page 1 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE 3:15-cv-02025-WQH-JLB I, Paul F. Rafferty, declare: I am a employed in Orange County, California. I am over the age of eighteen years and not a party to the within-entitled action. My business address is 3161 Michelson Drive, Suite 800, Irvine, California 92612.4408. On July 22, 2016, I served copies of the following documents by electronic transmission: 1. VISTAGE INTERNATIONAL, INC.’S NOTICE OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC.; 2. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC.; 3. VISTAGE INTERNATIONAL, INC.’S STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. 4. DECLARATION OF PAUL F. RAFFERTY IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. AND ACCOMPANYING EXHIBITS 5. DECLARATION OF PETE SCIABARRA IN SUPPORT OF VISTAGE INTERNATIONAL, INC.’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE DISMISSAL, OF PLAINTIFFS’ FRAUD AND CAL. BUS. & PROF. CODE § 17200 CLAIMS AS AGAINST VISTAGE INTERNATIONAL, INC. Case 3:15-cv-02025-WQH-JLB Document 47-6 Filed 07/22/16 Page 2 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - CERTIFICATE OF SERVICE 3:15-cv-02025-WQH-JLB I am familiar with the United States District Court, Southern District of California’s practice for collecting and processing electronic filings. Under that practice, documents are electronically filed with the court. The court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document. Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities. Under said practice, the following CM/ECF users were served: Brandon Baum Dhillon Law Group, Inc. 177 Post Street, Suite 700 San Francisco, CA 94108 Telephone: (415) 433-1700 Facsimile: (415) 520-6593 Counsel for Plaintiffs Direct List LLC and Eran Salu Stephen L. Schreiner Solomon Ward Seidenwurm & Smith LLP 401 B. Street, Suite 1200 San Diego, CA 92101 Telephone: (619) 231-0303 Facsimile: (619) 231-4755 Attorneys for Defendants Lauren Kessler, Phil Kessler, and Diana Owens Daren M. Schlecter LAW OFFICE OF DAREN M. SCHLECTER 1925 Century Park East, Ste 830 Los Angeles, CA 90067 Tel: 310.553.5747 Email: daren@schlecterlaw.com Attorneys for Defendant Edette Herron Executed on July 22 2016, at Irvine, California. /s/ Paul F. Rafferty Paul F. Rafferty NAI-1501552248v1 Case 3:15-cv-02025-WQH-JLB Document 47-6 Filed 07/22/16 Page 3 of 3