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CA2DB241675-02
{29CA8F22-B7CD-4F5A-AFD5-3759F6E23BC9}
{137323}[309-130328:090241 ]{032713}
OTHER](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-1-2048.jpg)
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MOTION.
MS. WAKILI: CAN I MAKE ONE BRIEF POINT ON THIS?
HAD HE BRIEFED IT OR RAISED IT INHIS OPPOSITION,
MR. PRASKE HAS TESTIFIED UNDER-- IN.A DEBTOREXAM,
THESE ARE OFFSHORETRUSTS.
ARANZANOIS AN OFFSHORETRUST. THEY HAVE
NEVER BEEN FILED wITH ANY COURTIN CALIFORNIA OR THE
UNITED STATES, SO THESE ARE ESSENTIALLY VERY SECRET
DOCUMENTSTHAT ARE PRIVATE.
THEY HAvE INDEPENDENTCONFIDENTIALITY
PROVISIONS THAT BOUNDPRETTY MUCHTHE TRUSTORTHE
TRUSTEE, So THEY WON'T BE SOMETHINGYOU WILL FIND IN
A PROBATECOURTAND ACCORDINGTO MR. PRASKE -- THAT
IS SOMETHINGTHAT HE SAID HE NEVER FILED, AND AGAIN
HAD WE HAD ANY IDEA THIS WOULDBE AN ARGUMENTTHEY
WOULDRAISE WE WOULDHAVE PULLED EXCERPTS_FROMTHE
DEBTOREXAMINATION TO ADDRESSTHAT.
THE COURT: i DON'T DISAGREE, BUT DO I HAVE ANY
EVIDENCE? JUST A SECOND. DO I HAVE ANY EVIDENCE IN
J- ] ......................20 ......su P POR-T- 0F -T H-ESE ---FAC-T[JAL -AS S-_.R T ION S ?......................
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............. _ 5--
26
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MR. ESQUIBIAS: RAISED BY OPPOSING COUNSEL?
THE COURT: No, YOUR FACTUAL ASSERTIONS. YOU HAVE
CHARACTERIZED THESE AS IRREVOCABLE AND SUBJECT TO
_HIS THAT. AND THE OTHEK.. I DO_.'T..KNOW ....HOW DO I
--K-_OW--THAT-F.
WHERE ISTHE EVIDENCE TO SUPPORT IT?
MR.. ESQUIBIAS: "YOU WILL NOT FIND IT IN OUR
_8 PLEA_N_ T_AT WAS FILED.](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-12-2048.jpg)
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..................... 2-0 ._
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..... _-"2-5-
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TRANSFERRED OVER TO OPPOSING COUNSEL.
THE COURT: WHY WAS THIS. NOT BROUGHT OUT IN
ANYTHING UNTIL I ASKED YOU WHAT THE FACTUAL BASIS FOR
THE ORAL ASSERTIONS YOU WERE MAKING?
MR. ESQUIBIAS: ALL I CAN TELL YOU, YOUR HONOR, IS
THAT I HAVE BEEN PRACTICING PROBATE LAW FOR 20 YEARS.
ORAL ARGUMENTS ARE COMMON PLACE. IT IS A DIFFERENT
COURTROOM WITH DIFFERENT SETS OF RULES, AND I
APOLOGIZE THAT I AM NOT FAMILIAR WITH THE CIVIL
COURTS OR THE RULES OF THIS COURT.
BUT, THE FACT REMAINS THAT WE HAVE TO GIVE
NOTICE TO THESE VESTED PRINCIPAL AND INCOME
BENEFICIARIES, 30 DAYS.
THE COURT: I DON'T KNOW THAT THERE ARE VESTED
INCOME AND PRINCIPAL BENEFICIARIES. I HAVE BEEN
DENIED THAT INFORMATION AS DEFENSE COUNSEL HAS BEEN
DENIED THAT INFORMATION.
MR. ESQUIBIAS: I SEEK TODAY TO RIGHT THAT WRONG.
THE COURT: WHAT, IF ANYTHING ELsE ARE YOU
'OFFERIN_-IN-WAY'"OF-INFORNAT'rO__H_T-HAS'BEEN ...............................
PREVIOUSLY WITHHELD?"
MR_ :ESQUIBIAS: IT IS HARD FOR ME TO ANSWER THAT
QUESTION BECAUSE i DON'T KNOW WHAT HAS BEEN
PREVIOUSLY .W_T_HELD_. I .HAVE ONLY BEEN IN. THIS CASE _
THE COURT: I SUSPECT IT HAS BEEN A LITTLE LONGER
THAN TEATF BECaUSE-IT _TOOK SOME TIME-TO PREPARE THE •
28 DOCUMENT,_UNLESS YOUDIDN'T PREPARE IT] ......
i](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-17-2048.jpg)
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OF SHOWING THAT THE BUSINESS ENTITIES OR PRASKE WERE
GAGGERO ALTER EGOS. KPC PRESENTED NO EVIDENCE THAT
THE BUSINESS ENTITIES OR PRASKE'S CONTROLLED THE
LITIGATION OR WERE VIRTUALLY REPRESENTED IN THE
ACTION. IN FACT --
THE COURT: DOES THE FACT THAT THEY -- IT LET ME
START OUT WITH THIS PREDICATE, MR. CHATFIELD, I THINK
THAT THEY HAVE MADE A PRIMA FACIA CASE THAT THESE
ENTITIES ARE ALTER EGOS OF MR. GAGGERO. AND IF I DO
THAT, THERE IS NO DOUBT THAT MR. GAGGERO cONTROLLED
THE UNDERLYING LITIGATION. THESE ARE NOT INDEPENDENT
ENTITIES AS I SEE THEM. AND IF THEY ARE ALTER EGOS
OF MR; GAGGERO, AND MR. GAGGERO cONTRoLLED THE
LITIGATION WHICH HE uNDouBTEDLY DID, THEN WHAT?
MR. ESQUIBIAS: YOUR HONOR, IF I MAY RESPOND.
THE COURT: NO, MR. CHATFIELD CAN RESPOND TO THIS..
HE WAS ONE OF THE ATTORNEYS WHO REPRESENTED
MR. GAGGERO DURING THE TRIAL PROCEEDINGS OR IN POST
TRIAL.
...........MR]-- CHATF-I ELO i.....i,'- FfRS T -OF- A-LL/--FAiL ""TO .......................
UNDERSTAND HOW THE COURT HAS REACHED THE CONCLUSION
THAT ALL OF THEELEMENTSOF ALTER EGO HAVE BEEN
FULFILLED WITHOUT ANY EVIDENCE SUPPORTING IT WHEN WE
i .HAVE PROVIDED THE CO:UR_ .WITH.DECLARA_.ION$_. .AND. ALSQ .....
I---THE--DDFE;NOANTS--N_-_E--PROVq-D_D_I_HE--CO-_R-T--_ITH--_V-I-DDN-CE ---
......................... ] ...........................................
AS TO THE CORRECTNESS OF THE SETUP OF THE PARTICULAR
ENTITIES =a TRE STATUSOF THE ENTITIESAS BEING-IN-
28 GOOD S_AND_N-G ZN _HE STATE OF-CAL2FOR:NIA, THAT THE](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-23-2048.jpg)
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Ironically, KPC conceded at trial that each of these Entities was separate from Gaggero, and
therefore it is not surprising that it is unable to present evidence to support their new claim of lack
of separateness.
In addition, 511 OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe
LP; Blu House LLC; Boardwalk Sunset LLC; Pacific Coast Management; Joseph Praske, trustee, of
the Giganin Trust; Arenzano Trust; and Aquasante Foundation t were not made parties to this action
at any time after its filing in 2002, even though KPC represented Gaggero beginning in August of
2000 and became intimately familiar with Gaggero's estate planning activities that had taken place
some years earlier. KPC cannot claim that it was misled during the case, nor surprised, as it knew
all of tile facts beginning in 2000, which facts were the subject of testimony in the 2007 trial,
wherein KPC asserted and proved the separateuess to the satisfaction of the Court as demonstrated!
in the Requests for Judicial Notice by KPC and Gaggero.
KPC, having successfully used the separateness argument in defeating Gaggero's claims
against them at trial, is both judicially and collaterally estopped from now claiming the reverse.
Had KPC believed that they had evidence that these Entities were the "alter egos and real
parties in interest" in this litigation, they were required to have added the Entities as parties to the
litigation. This would have permitted the Entities their constitutional due process rights to notice
and a hearing to protect the property rights KPC now seeks to deprive them of summarily by this
Motion. For all of the above reasons, and based upon these points and authorities, the court should
deny this Motion.
II. STATEMENT OF FACTS BASED UPON EVIDENCE SUBMITTED IN SUPPORT
OF THE MOTION AND AUGMENTED BY THE DECLARATION OF JOSEPH
PRASKE.
The Entities sought to be added to this judgment were not parties to this litigation. The
Entities therefore provide this factual summary from the evidence submitted in support of the
Motion, augmented by the evidence contained in the attached declaration of Joseph Praske. 2
According to this Court's Statement of Decision, "Between 1995 and 1998 he [Gaggero]
t K.PC re.is-named this mast in its Motion.
2 The Entities also adopt the Statement of Facts set forth in the Opposition to the Motion filed by Gaggero.
2
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-42-2048.jpg)
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did extensive 'estate planning'.., resulting in all of his [Gaggero's] personal assets being
transferred to various corporations, trusts and foundations...he retained absolutely no ownership
interest in and no control over these assets." (Statement of Decision, Exhibit A pg 18 footnote 17.)
The attached declaration of Joseph Praske confirms these facts. (See the Praske Decl.)
Gaggero retained Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and
Andre Jardini (collectively "KPC") in August 2000 to represent him individually in several
lawsuits that were the subject of this litigation, wherein he was a nmned party. (Statement of
Decision 1-2; 16.) None of these lawsuits involved the Entities that KPC now seeks to add to the
judgment. (Statement of Decision, Exhibit A pp. 14 footnote 13; 18 footnote 17; also see the
Pmske Deck) In December 2002, Gaggero filed the complaint in this action against KPC for legal
malpractice and for breach of the retainer agreement between himself and KPC. This case finally
went to trial in July 2007, [Statement of Decision, Exhibit A pp. 1.]
This Court's statement of decision stated, "First, the only plaintiff in this action is Mr.
Gaggero in his personal capacity. No other person or entity has joined in this action as plaintiff,
and there is no credible evidence that Mr. Gaggero has authority to represent any other person or
entity (whether by assignment or otherwise) in asserting these damage claims." [Statement of
Decision, p. 26.] "Neither Pacific Coast Management nor Avalon, nor any of the various other
entities was a party to the underlying litigation, nor were they ever a party to this suit." [Statement
of Decision p. 14.] "There was no evidence that Mr. Gaggero was represented in a capacity as
officer, director or employee of any of these entities,..."[Statement of Decision, p. 27.] The
ultimate ruling in the case found separateness, preventing Gaggero any recovery, "Since he paid
nothing, he can recover nothing." [Statement of Decision, p. 28.]
The court entered judgment in favor of KPC and against Gaggero in his personal capacity
In Februm'y 2008, K.PC thereafter sought recovery against Oaggero only for its attorney fees and
costs from Gaggero in his personal capacity based on the contractual fee provisions contained
written retainer agreements between KPC and Gaggero. This Court awarded these costs against
Gaggero personally. [Exhibit B to the Motion.]
No evidence is presented to the Court by KPC in support of its Motion to displace the above
3
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-43-2048.jpg)
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findingsof the Court.
III. CALIFORNIA LAW PROHIBITS TIlE ADDITION OF THE ENT1TIES TO THE
JUDGMENT AGAINST GAGGERO.
KPC seeks, by way of this motion to amend the judgment entered singly and individually
against Gaggero in his personal capacity, and add the Entities as judgment debtors. This outside
reverse piercing application of the alter ego doctrine is unanimously prohibited by California law)
Even if outside reverse piercing were legally permissible, which it is not, KPC presents no
evidence to support its alter ego claim. The trial court ruled Gaggero and the Entities were
separate, that Gaggero had no ownership of or authority over the entities, and that Gaggero alone
was the real party in interest.
A. The Motion Must Be Denied Because California Law Expressly Prohibits
Reverse Piercing to Hold an Entity Liable For the Personsal Debts of an
Individual.
Under California Law, the alter ego doctrine may not be applied in reverse, as requested
here by KPC, to hold an entity liable for the debt of an individual. It is only the standard alter ego
doctrine that may be used under vary narrow circumstances to pierce the corporate veil and hold
an individual liable for claims made against the entity. Here, the claims and judgment are not
against the LLC's, LP's, trusts, or corporation. This debt is owed by an individual, and here,
contrary to seeking standard alter ego, KPC seeks the reverse, to add the Entities as new judgment
debtors.
In California, a trial court is not authorized to amend a judgment to add ma entity as a
judgment debtor under a reverse alter ego theory. "[A] third party creditor may not pierce the
corporate veil to reach corporate assets to satisfy a shareholder's personal liability." (Postal
Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512-13.) (See, a/so: (Wegner,
Fairbank, & Epstein, Cal. Practice Guide." Civil Trials and Evidence, (The Rutter Group 2007) §
3 It is hornbook law that the law of the forum state applies to issues of substantive law, which includes the
determination of whether alter ego liability applies. Contrary to KPC's claim, California law applies to this Motion
(Erie Railroad Co. v. Tompkin_ (1938) 304 U.S 64, 79-80; Towe Antique Ford Foundation v. LR.S. (gth Cir. 1993)
999 F.2d 1387, I391.)
OPPOSITION TO MOTION TO AMEND IUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-44-2048.jpg)
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with the usual scenario where the interests of the corporate defendant and its alter ego are similar
so that the trial strategy of the corporate defendant effectively represents the interests of the alter
ego." ([d. at 780.) Here, it is undisputed the Entities were not parties to the litigation, did not
control the litigation, and had no ability to litigate their differing interests. (See Praske Decl.)
Subjecting the Entities to judgment enforcement after this litigation has been concluded, under
any theory, would violate their due process rights.
B. The Motion Should Be Denied Because the Entitles Are Not the Alter Egos of
Ga ero.
KPC asserts in their Motion that the Entities should be liable for the judgment entered
against Gaggero in his personal capacity. As discussed above, California law does not permit such
reverse application of the alter ego doctrine in order to hold an Entity liable for the personal debts
of an individual. Even assuming that reverse piercing was permissible, which it clearly is not,
KPC's motion contains no evidence to establish an alter ego claim. The facts and evidence, which
was already presented at trial and is included in the Praske Declaration, unequivocally
demonstrate that Gaggero and the Entities are separate, and that the Entities were not represented
at all stages in this litigation. This court has already ruled in both its findings of fact, and its entry
of judgment against Gaggero individually.
A party seeking to invoke the alter ego doctrine must show "such a unity of interest and
ownership between the corporation and its equitable owner that the separate personalities of the
corporation and the shareholder do not in reality exist," and also "an inequitable result if the acts
in question are treated as those of the corporation alone." (Sonora Diamond Corp. v. Sup. Ct.
(2000) 83 Cal.App.4tli 523, 538 [citations omitted].) As noted above and in the Praske
Declaration, Gaggero is not a shareholder, partner, member or trustee of any of the entities, and
does not control any of the Entities.
Courts have traditionally looked at certain factors that include: "the holding out by one
entity that it is liable for the debts of the other...use of one as a mere shell or conduit for the affairs
of the other," also "inadequate capitalization, disregard of corporate formalities, lack of
segregation of corporate records, and identical directors and officers." ([d. at 538-39.) The analysis
7
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-47-2048.jpg)
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shareholders have abused the corporate form to evade individual liability, circumvent a statute, or
accomplish a wrongful purpose." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300-
01.) KPC has failed to meet its burden to present such evidence.
KPC's motion makes the bare accusation that Gaggero transferred ownership of property
to separate legal entities. Gaggero responds he did so for legitimate estate planning purposes 15
/ears ago.
KPC concludes without cvidentiary support that Gaggem's estate planning decisions were
done to defraud creditors. In fact, the only two creditor claims mentioned in the Statement of
Decision were noted by the Court to have either been "resolved in 2002 by full payment" or
"withdrawn or dismissed in May or June of 2002" [Statement of Decision, Exhibit A, 25 footnote
27.] It is a stretch of the imagination to now contend that Gaggero's 1997 estate planning was a
fraudulent conveyance done in anticipation of the 2008 judgment in this case.
KPC would have the court believe that, if a person or company conveys ownership of
property to an entity, the court must infer that the conveyance was made to defraud any creditor
that the person or company may ever have at any time during the rest of their life. The argument is
unreasonable. Such a conclusion would defeat the purpose for the legitimate existence of
corporations, limited liability companies, limited partnerships, and estate planning in general. Ill
the absence of specific and probative evidence of fraud, there is no abuse of the corporate form.
The evidence here does not support that Entities are the alter ego of Gaggero. This court
has already ruled on the issues of control and separateness. There is no evidence that Gaggero's
estate planning decisions were in m_y way motivated by any intent to defraud anyone, violate any
statute, or accomplish any wrongful purpose: There is thus no basis for a finding of alter ego.
IV. CONCLUSION
Based on the foregoing, it is clear that California law expressly prohibits adding 511 OFW
LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; Blu House LLC;
Boardwalk Snnset LLC; Pacific Coast Management; Joseph Praske, trustee, of the Giganin Trust;
Arenzano Tnast; and Aqua Sante Foundation as judgment debtors under application of reverse
alter ego, there is no evidence to even support a finding of alter ego in this case, and KPC is
9
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-49-2048.jpg)
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estopped from requesting the relief it seeks in this motion. This court should deny KPC's motion
to amend the judgment.
DATED: May 15, 2012 LAW OFFICE OF DAVID A. ESQUI]BIAS
By:
Atief-neys _br/Spes, i_tly Appearing Parties
10
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-50-2048.jpg)
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for=going is lrue and corrccl.
,_ .//](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-53-2048.jpg)
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David Blake Chatfield, State Bar No. 88991
WESTLAKE LAW GROUP
2625 Townsgate Road, Suite 330
Westlake Village, California 91361
Telephone: 805-267-1220
Facsimile: 805-267-1211
Attorneys for Plaintiff
Stephen M. Gaggero
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
;TEPHEN M. GAGGERO,
Plaintiff,
V°
(.NAY'P, PETERSEN & CLARKE; STEVEN
RAY GARCLA; STEPHEN M. HARR/S;
ANDRE ]'ARDINI; and DOES 1 through 50,
inclusive,
Defendants.
CASE NO.: BC286925
Filed: December 12, 2002
Assigned For All Purposes To:
Hon. Robert L. Hess
Dept. 24
NOTICE OF OPPOSITION AND
OPPOSITION TO DEFENDANTS'
MOTION TO AMEND JUDGMENT;
DECLARATION OF STEPHEN
GAGGERO
(Filed Concurrently With Plaintiff's Request
For Judicial Notice)
Date: May 29, 2012
Time: 8:30 a.m.
Dept: 24
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-56-2048.jpg)
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I, INTRODUCTION
This is an action for legal malpractice. In December 2002, plaintiff Stephen M. Gaggero
sued Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini
collectively "KPC") the lawyers he had retained in August 2000. This court found that he
etained K_C to represent him personally. [Statement of Decision, Exhibit A to KPC's motion, p.
6.] Court trial commenced in July 2007. In February 2008 this court entered judgment in favor of
K.PC against Gaggero personally, and in May 2008 the judgment was amended to award KPC
attorney fees and costs. In May 2010, the judgment was affirmed on appeal, in December 2010 the
iudgment was amended to award KPC its fees and costs on appeal.
KPC has now brought an undeniably belated and unfounded motion to amend the
udgment to add as judgment debtors several entities this court previously found were separate
From Gaggero. The entities are a corporation in which Gaggero is not a shareholder, officer, or
director; four limited partnerships in which Gaggero is not a general or limited partner; two
limited liability companies in which Gaggero is not a member or manager; and two irrevocable
trusts and a foundation of wlfich Gaggero is not the trustee. The sole ground KPC ,asserts for this
motion is that the entities are supposedly the alter egos of Gaggero, and fifteen years ago he
supposedly created these entities to defraud creditors who did not yet even exist. In support of this
motion, KPC's counsel intentionally misrepresents the law and facts in flagrant violation of
counsel's duty of candor owed to this court, apparently believing the court will ignore such
misrepresentations. Such conduct is sanctionable, and subjects counsel to disciplinary action.
In order to add the entities to the judgment against Gaggero, this court must engage in
outside reverse piercing. Contrary to the statements of KPC's counsel, California law expressly
prohibits the reverse piercing of the corporate or entity veil that KPC requests. Even if California
law did permit reverse application of the alter ego doctrine, which it does not, there is no basis for
a finding of alter ego. KPC presents not one shred of evidence to support its repeated allegation
that Gaggero's estate planning was done to defraud any creditor, not one that existed fifteen years
ago let alone one that exists today.
In addition, KPC omits the fact that it produced evidence at trial to prove Gaggem and
1
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-60-2048.jpg)
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these entities were completely separate, and this court ruled in KPC's favor on that issue: "First,
the only plaintiff in this action is Mr. Gaggero in his personal capacity. No other person or entity
has joined in this action as plaintiff, and there is no credible evidence that Mr. Gaggero has
authority to represent any other person or entity (whether by assignment or otherwise) in asserting
these damage claims." [Statement of Decision, p. 26.] "Neither Pacific Coast Management nor
Avalon, nor any of the various other entities was a party to the mlderlying litigation, nor were they
ever a party to this suit." [Statement of Decision p. 14.] "There was no evidence that Mr. Gaggero
was represented in a capacity as officer, director or employee of any of these
entities,..."[Statement of Decision, p. 27.] "Between 1995 and 1998 he [Gaggero] did extensive
'estate planning'...resulting in all of his [Gaggero's] assets being transferred to various
corporations, trusts and foundations...he retained absolutely no ownership interest in and no
control over those assets." [Statement of Decision, Exhibit A, pg. 18 footnote 17.] The argument
by KPC and the ruling by this court regarding separateness eliminated Gaggero's right to recover
the fee damages he was suing over, "Since he paid nothing, he can recover nothing." [Statement of
Decision, p. 28.]
In addition, KPC omits the fact that it has known of these entities and Gaggero's legitimate
estate planning since 2000 when Gaggero retained K.PC, but not until nowin 2012 does KPC
claim these entities are the real parties in interest in this action that was filed in 2002 and tried in
2007.
The true holdings of the eases KPC cites and misrepresents state that this court is not
authorized to amend the judgment based on outside reverse piercing in order to hold an entity
liable for the personal debts of an individual. The true facts K.PC misstates or omits show no
impropriety or fi'audulent intent by Gaggero when conveying the ownership of assets to entities
for estate planning purposes fifteen years ago. Indeed, the true facts show this court has already
ruled on the separateness of Gaggero and the entities, and show KPC argued for that separateness
with full knowledge of the facts regarding these entities for seven years. Thus, not only does the
law not authorize the specific relief sought by this motion, but KPC is estopped fi'om bringing the
motion. The motion must be denied.
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-61-2048.jpg)
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H. STATEMENT OF RELEVANT FACTS
In 1997, fifteen years ago, Gaggero transferred ownership of certain property to various
entities. "My estate was - had grown rather large, and I had just weathered the early 1990's and
mid-'90's, which was a pretty rough time for anybody in real estate. And I decided that it would
be a prudent idea to get a lawyer to look at my portfolio and develop an estate plan so that my
estate would survive me and be for the benefit of my children and not be something that is
exposed. [Transcript in Gaggero v. Yura, Exhibit C to KPC's Motion 95:3-9.] This was a
legitimate estate planning decision. Nothing more, nothing less. K.PC presents no evidence to
prove it was anything else, because no such evidence exists. Gaggero did not make the transfers
with the intent to defraud creditors. He certainly did not naake the transfers with the intent to
defraud KPC, as he did not even know who they were in 1997. Gaggero's decision to transfer
ownership of property to various entities was, and continues to be, a generally accepted estate
planning choice.
In August 2000, Gaggero retained K.PC to represent him in a variety of legal matters,
including but not limited to, representing him at depositions and had intimate knowledge of
Gaggero's prior estate planning decisions in 1997 as well as knowledge of all the entities mad their
organization. KPC knew the full extent of the separateness of Gaggero from the entities, ha late
2001, a dispute arose between Gaggero and KPC over K.PC's handling of Gaggero's legal affairs,
and related billing practices. In December 2002, Gaggero filed this action against K.PC for legal
malpractice and breach of the retainer agreement between him and KPC. The case was pending for
several years, during which time extensive discovery was conducted. This discovery included
i
imforrnataon relating to the entities to whom Gaggero had previously conveyed ownership of
property.
This case went to trial in July 2007. During the trial, K.PC specifically argued Gaggero and
the entities were separate, and produced evidence to prove Gaggero was the only real party in
interest. KPC's counsel stated: "He testified at his deposition, and he testified at trial, that he is
merely a consultant to PCM. He has no ownership interest...I have all of the corporate documents
for PCM. He is not listed as a director. He is not an officer. He is nothing. He has expressly, by
3
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-62-2048.jpg)
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design, disavowed any relationship with that company. Your honor hit the nail on the head
when...you said you can't have it both ways." [Trial Transcript, Exhibit A to Request for Judicial
Notice, 3629: 8:21.] This court expressly stated: "Either it is his alter ego, because it is all his
money and he controls it, and he has absolute control...or they are separate entities." [Trial
Transcript 3632:2-4.]
It is undisputed that this court ruled in KPC's favor on the issue of separateness. The court
found that Gaggero in his personal capacity, was the only plaintiff in this action, that no other
person or entity had been joined as a plaintiff, and that there was no credible evidence to establish
that Gaggero had the authority to represent any other person or entity in connection with the
claims asserted in this case. [Statement of Decision, p. 26.]
In February 2008, the court entered judgment in favor of KPC and against Gaggero in his
personal capacity. Based on the retainer agreements between KPC and Gaggero, K.PC sought
irecovery for its attorney fees and costs from Gaggero in his personal capacity. In May 2008, the
iudgment against Gaggero in his personal capacity was amended to include an award of attorneys
fees and costs. In May 2010, the Court of Appeal affirmed the judgment. Thereafter, KPC brought
:a motion to recover their appellate fees and costs from Gaggero in his personal capacity. In
December 2010 this court awarded KPC their fees and costs on appeal, and amended the judgment
against Gaggero in his personal capacity.
Now, in April 2012, K.PC has brought a motion to add as judgment debtors the very
entities KPC successfully argued at trial that Gaggero had no ownership interest in or control over.
In this motion, KPC claims - in direct contrast to the position it took at trial and contrary to the
findings of this court - that these entities are Gaggero's alter egos, that he and the entities are one
and the same, and that the entities are actually the real parties in interest in this action. As set forth
below, this motion must fail not only as unpermitted outside reverse piercing, but KPC's motion is
also barred by both judicial and collateral estoppel.
III. KPC'S MOTION MUST BE DENIED BECAUSE IT IS PROHIBITED UNDER
CALIFORNIA LAW 1 IT LACKS ANY EVIDENTIARY SUPPORT_ AND KPC IS
ESTOPPED FROM MAKING THE ARGUMENTS CONTAINED THEREIN
KPC's motion asks this court to amend the judgment entered against Gaggero in his
4
OPPOSITION TO MOTIONTO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-63-2048.jpg)
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personalcapacityby addingentitiesasjudgmentdebtors.Californialawexpresslyprohibitsthis
outside reverse piercing application of the alter ego doctrine, and KPC's blatant misrepresentation
of the law should be sanctioned) Even if the relief sought were legally permissible, which it is
not, KPC's motion contains no evidence to support its alter ego claim. Moreover, the evidence
K.PC presented at trial established that Gaggero and the entities were not only separate, but also
that Gaggero had no ownership, authority, or control whatsoever with respect to the entities and
that Gaggero alone was the only real party in interest. Finally, KPC's motion should be denied on
estoppel grounds based on its argument and the court ruling at trial, and on the fact that [(PC has
know all the relevant facts since 2000.
A. California Law Expressly Prohibits Reverse Piercing To Hold An Entity
Liable For Personal Debts Of An Individual
Code of Civil Procedure section 187 "has never been construed to allow imposition of
liability on an entity which was never a party to the action." (Triplett v. Farmers Ins. Exchange
(1994) 24 Cal.App.4th 1415, 1420.) Cases using "section 187 to add new parties as additional
udgment debtors have always been rooted in the "alter ego" concept that the original party and
:he new party were one and the same." (Id.) However, this "requires both (1) that the new party be
die alter ego of the old party and (2) that the new party had controlled the litigation, thereby
having had the opportunity to litigate, in order to satisfy due process concerns. The due process
considerations are in addition to, not in lieu of the threshold alter ego issues. (Id. at 142I
[citations omitted].) In this case, KPC's motion fails on both prongs.
First and most important, the alter ego doctrine may not be applied in reverse, as requested
here, to hold an entity liable for the debt of an individual. It is only the standard alter ego doctrine
that may be used in appropriate circumstances to pierce the corporate veil and hold an individual
liable for claims made against the entity. In this case, the claim and judgment are not against any
of the entities that KPC seeks to add as judgment debtors. This is a debt that is undisputedly owed
I It is hornbook law that the law of the forum state applies to issues of substantive law, which includes the
determination of whether alter ego liability applies. Therefore, California law must be applied to this Motion. (Erie
Railroad Co. v. Tompkins (1938) 304 U.S 64, 79-80; Towe Antique Ford Foundation v, LR.S, (gth Cir. 1993) 999
F.2d 1387, 1391.)
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-64-2048.jpg)
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by an individual. Yet, KPC is seeking to hold these entities liable for that debt under a reverse
alter ego theory. This request must be denied.
The law in California is crystal clear that a trial court is not authorized to amend a
judgment to add an entity as a judgment debtor under a reverse alter ego theory. "[A] third party
creditor may not pierce the corporate veil to reach corporate assets to satisfy a shareholder's
_ersonal liability." (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512-
3.) (See, also: (Wegner, Fairbank, & Epstein, Cal. Practice Guide: Civil Trials and Evidence,
(The Rutter Group 2007) § 18:522.1, citing Postal Instant Press, lnc. v. Kaswa Corp.)
"In Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 77
Cal.Rptr.3d 96, the Court of Appeal held that "outside reverse" piercing of the
corporate veil is not permitted in California, that is, the corporate veil will not be
pierced to satisfy the debt of an individual shareholder. Rather, the court explained,
the alter ego doctrine will only be applied to hold an individual shareholder liable
for a corporate debt where the individual has disregarded the corporate fonrl."
(Greenspan v, LADT, LLC (2010) 191 CaI.App.4th 486, 513-14.)
Incredulously, K_PC's counsel cites to Postal Instant Press, Inc. and Greenspan and falsely
J
represents to this Court that these cases ill fact support application of reverse piercing. This
misrepresentation of the law was clearly intentional, as it is repeated throughout K.PC's motion,
md K.PC's counsel should be sanctioned for violating its duty of candor to the court. (See: (Bus.
Prof. Code § 6068(d).)
This was a legal malpractice action brought by an individual client against the lawyers,
whom he alone hired to represent him personally in the underlying matters. The only parties to the
retainer agreements were Gaggero and KPC, and the only parties to this litigation were Gaggero
and KPC. This court expressly ruIed, based on K.PC's own argument and evidence at trial, that
Gaggero was the only real party in interest and that Gaggero had no authofty to represent any
other person or entity in connection with the claims asserted in this case. The judgment in this
case was thus entered against Gaggero in his personal capacity. KPC's subsequent motions for
attorney fees and costs were based on the retainer agreements between Gaggero personally and
K.PC, and the award of fees and costs was made against Gaggero in his personal capacity.
KPC's motion now asks this court to amend the judgment to add entities as judgment
debtors, who this court has already determined not to be real parties in interest in this action. The
6
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-65-2048.jpg)
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assuming that reverse piercing was permissible, which it clearly is not, K.PC's motion contains no
evidence to establish their alter ego claim. The facts and evidence already presented at trial
unequivocally show Gaggero and the entities are separate, and Gaggero is the only real party in
interest in this case. Indeed, this court has already so ruled in both its findings of fact, and its entry
of judgment against Oaggero individually.
It is well settled that in order to invoke the alter ego doctrine, a plaintiffmust show "such a
unity of interest and ownership between the corporation and its equitable owner that the separate
personalities of the corporation and the shareholder do not in reality exist," and also "an
inequitable result if the acts in question are treated as those of the corporation alone." (Sonora
Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523,538 [citations omitted].) As noted above,
Gaggero is not a shareholder, partner, member, or trustee of any of the entities. The usual
circumstances involve a situation where the creditor had been misled. In contrast, K.PC has always
known of the separateness of the entities mad Gaggero. KPC has not been misled.
In determining whether or not the appropriate separateness exits, courts have traditionally
looked at certain factors that include: "the holding out by one entity that it is liable for the debts of
the other .... use of one as a mere shell or conduit for the affairs of the other," also "inadequate
capitalization, disregard of corporate formalities, lack of segregation of corporate records, and
identical directors and officers." (Id, at 538-39.) The analysis is fact specific, and no one factor is
more important than the others. (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 812.) Here,
K_PC has not presented any admissible evidence of any of the factors required to support its alter
ego allegations.
The issue of Gaggero's separateness from the entities was litigated at trial. KPC argued it
was Gaggero in his personal capacity who was the only plaintiffand real party in interest, i.e., that
he was separate from and did not own, control, or represent the entities. This court agreed with
KPC and determined Gaggero personally paid nothing to KPC and therefore could recover
nothing. Thus, this court has already ruled on the issue of ownership between Gaggero and the
entities, and specifically found there was no evidence to establish Gaggero had the authority to
represent any other person or entity in conneetionwith the claims asserted in this case.
8
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the purpose for the legitimate existence of corporations, limited liability companies, limited
partnerships, and estate planning in general. In the absence of real admissible evidence that the
transfer of property to entities was done with the intent to defraud an existing creditor, or a
creditor reasonably expected to exist, there is no abuse of the corporate form.
The evidence here shows that Gaggero and the entities are separate, as this court has
already ruled. There is no evidence that Gaggero's estate planning decisions were in any way
motivated by any intent to defi'aud, violate any statute, or accomplish any wrongful purpose.
There is thus no basis for a finding of alter ego.
C. KPC Is Estopped From Making The Arguments In Their Motion Based On
The Contrary Rulings They Sought And Obtained At Trial, And The Fact
They Have Waited Ten Years To Raise This Issue
KPC argued at trial that Gaggero was the only real party in interest in this ease, and that
this court should rule that Gaggero was separate from the entities. This court agreed with KPC and
expressly ruled that Gaggero in his personal capacity was the only real party interest, and that
here was no evidence to establish Gaggero had any authority to represent any other person or
entity in connection with the claims asserted in this case. On the basis of this ruling alone KPC is
estopped from now arguing otherwise.
"Judicial estoppel prevents a party from asserting a position in a legal proceeding that is
contrary to a position previously taken in the same or some earlier proceeding." (Jackson v.
County of Los Angeles (1997) 60 Cal.App.4th 171,181 [citations omitted].) This fotra of estoppel,
which is "sometimes referred to as the doctrine ofpreclusiort of inconsistent positions, is invoked
to prevent a party from changing its position over the course of judicial proceedings when such
positional changes have an adverse impact on the judicial process." (Id.)
The doctrine of judicial estoppel applies where: "(1) the same party has taken two
positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3)
the party was successful in asserting the first position (i.e., the tribunal adopted the position or
accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not
aken as a result of ignorance, fraud, or mistake." (Id. at 183 [citations omitted].) All elements of
judicial estoppel are satisfied here.
10
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-69-2048.jpg)
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K.PC armed at trial that Gaggero alone was the real party in interest, and that he and the
entities were separate and he had no ownership, control or authority over the entities. This court
ruled in KPC's favor on this issue. K-PC now asserts the opposite argument that Gaggero and the
entities are one and the same and the entities are the real parties in interest, which is totally
inconsistent with its position at trial. The opposite position that KPC adopted and won at trial was
based on evidence obtained in their representation of Gaggero, including privileged attorney client
information, and in discovery in this case, and was thus not taken as a result of any ignorance,
fraud, or mistake. KPC is thus judicially estopped from asserting its new inconsistent position that
the entities are Gaggero's alter egos.
"Collateral estoppel bars a party from relitigating an issue of ultimate fact that a court
already has adjudicated." (Id. at 182 [citations omitted],) This form of estoppel "deals with the
finality of judgment on factual matters that were fully considered and decided" and "deprives a
_arty of the right to relitigate an issue." (Id.) "The rationale is to conserve judicial resources by
_reventing repetitive litigation." (Id.)
The doctrine of collateral estoppel will be applied where the following requirements are
neet: "First, the issue sought to be precluded fi'om relitigation must be identical to that decided in
fonaaer proceeding. Second, this issue must have been actually litigated in the former
9roceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the
decision in the former proceeding must be final and on the merits. Finally, the party against whom
3reclusion is sought must be the s_a-ne as, or in privity with, the party to the former proceeding."
(Hernandez v. City of Pomona (2009) 46 Cal.4th 501,513 [citations omitted].) All elements of
collateral estoppel are satisfied here.
A full court trial was held in this case, both KPC and Gaggero appeared. One of the
specific factual matters that KPC and Gaggero presented for decision was the relationship between
Gaggero and the entities, and the issue of who was the real party in interest. It was necessary for
the court to decide the issue as it bore directly on the damages alleged. Extensive evidence was
presented, which this court fully considered. After doing so, this court ultimately ruled that
Gaggero was the only real party in interest, that he and the entities were separate, that he had no
ll
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-70-2048.jpg)
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controlor authorityoverthem,andthattherewasnoalteregoestablished.KPCis collaterally
estoppedfromrelitigatingthisalteregoissuein itsmotion.
Finally,"[a]mendmentof ajudgmentto addanalteregoisanequitableprocedure."(Cart
v. Barnabey's Hotel Corp, (1994) 23 Cal.App.4th 14, 21.) Here, KPC has known for twelve years
all relevant facts relating to Gaggero and the estate planning decisions he made in 1997, three
years prior to when he retained K.PC in 2000. This action was filed in 2002. Trial commenced in
2007. Judgment was entered in 2008. Appeal was taken. Judgment was amended in 2010 after
appeal. At no time during the eight years the case was pending did KPC seek to add the entities as
real parties ill interest. To the contrary, K.PC at all times daring those eight years asserted the
argument that Gaggero was the only real party interest, and that he was separate and not acting by
or for any entity. Ten years after this case began, KPC brings a motion to amend the judgment to
add entities who it has now decided to claim are the real parties in interest. KPC offers no
explanation for why it waited so long to bring these parties into the case when it had all the facts
in its possession, or for why KPC made the opposite argument at all times during the eight years
the case was pending. The equitable doctrine of laches clearly applies to bar the motion.
The record is clear that K.PC has previously sought and obtained a contrary ruling at trial
on the issue of separateness, and has had full knowledge of the relevant facts since before the
complaint was filed. K.PC's motion should be denied on the grounds that they are estopped from
seeking any such amendment.
IV. CONCLUSION
Based on the foregoing, it is clear that California law expressly prohibits adding entities as
judgment debtors under application of reverse alter ego, there is no evidence to even support a
finding of alter ego in this case, and KPC is estopped fi'ora requesting the relief it seeks in this
notion. This court should deny KPC's motion to amend the judgment.
3ATED: May5, 2012 WESTLAKE LAW GROUP
By: David Blake Cl_t_ld
Attorneys for P'Nintiff, Stephen M. Gaggero
12
OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-71-2048.jpg)
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DECLARATION OF STEPh'-'EN GAGGERO
I, Stephen Gaggero, declare as follows:
I. ! am the plaintiff in the above-entitled action. I have personal knowledge of the
fact_ set forth in this Deolarafion and, if called as a witness, could amd would testify, competently
t.h_reIO.
2. This Declaration is submitted in support of plainti_' Opposition zo the Morion to
Amend Judgment fil.ed by defendants Kaapp, Petersea & Claxke, Sleven Ray Garcia, Stephen M.
l--Iarrls, and Andre ]'ardini.
3. In 1997, I decided to retain the services of an _tate planning attorney to review my
asset portfolio and develop _ estate plan for me, so that my e_taie would survive me, be legalty
protected, arid would provide a benefit for my family and children. I ultimav'ly retained Joseph
Praske to provide this estate planning advice and services. Based on Mr. Praske's
recommendations, I therea.f'_r transferred ownersbJ? of c_ain proper_ to various entities. This
was a legitimate estate planning decision.
4. l: did not make these Iranafers with any inlent to defraud, violate any statute, or
accomplish any wrongful purpose. I certainly did not mak_ these transfers wilh the intent to
defraud KPC, as ] had no intention of hiring them 1997.
5. I am not a shareholder, officer, or director of'Pacific Management Corporation. I
amnot a general or limited panner of Malibu Broad Beach LP, Marina Gleneo¢ LP, 5 ! 10FW I.,P,
or Ging¢rbread Court LP. I am not a member or manager of Blu House LLC or Boardwalk Suaset
LLC. I am not the trustee ofthe Giganin Trust the Arenzaao Trust, orfl_ Aquasante Fotmdation.
I declare under penalty of perjury uader the laws of the State of California that the
foregoing is true and correct.
Executed on May 14, 201.2_ in Los Angeles, __ (..,....._._.___
St_,;_n M. Gaggero
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OPPOSITION TO MOTION TO AMEND JUDGMENT](https://image.slidesharecdn.com/ca2db241675-02-160920062358/75/Ca2-db241675-02-72-2048.jpg)
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Ca2 db241675 02
- 1.
- 2. QLC_SE B2 4J_67_ (Related Appellate Matters B207567, B209522, B236610, B236834) IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOR THE SECOND APPELLATE DISTRICT DIVISION EIGHT STEPHEN M. GAGGERO, and individual, et al, Plaintiff and Appellants VS. KNAPP, PETERSEN & CLARKE, STEVEN RAY GARCIA, STEPHEN M. HARRIS and ANDRE JARDINI, Defendants and Respondent On Appeal from Los Angeles Superior Court, Honorable Robert L. Hess, (213) 974-5625 Department 24, Case No BC286925 DECLARATION OF AUSTA WAKILY IN SUPPORT OF RESPONDENTS' OPPOSITION TO APPELLANTS APPLICATION FOR EXTENSION OF TIME TO FILE BRIEF MILLER LLP RANDALL A. MILLER (SBN 116036) randy@millerllp.com AUSTA WAKILY (SBN 257424) austa@millerllp.com 515 South Flower Street, Suite 2150 Los Angeles, CA 90071-2201 Telephone: 800.720.2126 Facsimile: 888.749.5812 Attorneys for Respondents
- 3. DECLARATION OF AUSTAWAKILY I, Austa Wakily, declare as follows: I. I am an associate at Miller LLP and counsel of record for Respondents Knapp, Petersen and Clarke, Stephen M. Harris, Steven Ray Garcia, and Andre Jardini in this case. ! am licensed to practice law in the State of California and before this Court. I have personal knowledge of the facts set forth in this declaration and, if called as a witness, I could and would competently testify as to these facts. I submit this declaration in support of Respondents Opposition to the Application for Extension of Time to File Brief. 2. Attached as Exhibit A to this response is a true and correct copy of the reporter's expedited transcript of proceeding for the May 29, 2012 hearing on the motion to amend the judgment. I attended the motion on behalf of the respondents and have reviewed the transcript. The transcript accurately reflects the content of testimony on that day. 3. Attached as Exhibit B to this response it a true and correct copy of the Appellants' opposition to the motion to amend the judgment. 4. Attached as Exhibit C to this response it a true and correct copy of the Appellant, Stephen M. Gaggero's opposition to the motion to amend the judgment. 5. In addition to the opposition filed to the motion to amend the judgment the appellants filed a Petition for Writ of Supersedeas on July 19, 2012 and their Reply brief on August 22, 2012. The arguments at issue on the appeal of the motion to amend the judgment were briefed by appellants as part of the Petition for Writ of Supersedeas. 6. The appellants also filed a Reconsideration of the Petition for Writ of Supersedeas on October 3, 2012. The arguments at issue on the appeal of the
- 4. motion to amendthe judgment were briefed by appellantsas part the Reconsiderationof thePetitionfor Writ of Supersedeas.ThisPetitionwasfiledby Mr.Hoffman. 7. Asof thedateof thisresponsetheappellantshaverefusedto producethe trustdocuments. I declareunderpenaltyof perjurythattheforegoingis trueandcorrect. ExecutedonMarch____2013in Los Angeles California. &Au_'sta W aki)ly_
- 5.
- 6. SUPERIOR COURT OFTHE STATE OF CALIFORNIA. FOR THE COUNTY OF LOS ANGELES DEPARTMENT LA 24 HON. ROBERT L. HESS, JUDGE STEPHEN GAGGERO, AN INDIVIDUAL; ET AL., ) PLAINTIFF, ) )CASE NO. -VS- )BC286925 ) KNAPP, PETERSEN & CLARKE, ) STEPHEN RAY GARCIA, STEPHEN M. HARRIS ) AND ANDRE JA-RDINI, ) DEFENDANTS. ) ) REPORTER'S EXPEDITED TRANSCRIPT OF PROCEEDINGS TUESDAY, MAY 29, 2012 APPEARANCES: FOR THE PLAINTIFF: FOR THE DEFENDANTS: DAVID CHATFIELD ATTORNEY AT LAW 2625 TOWNSGATE RD SUITE 330 WESTLAKE VILLAGE, CA 91361 MILLER LLP BY: RANDALL A. MILLER BY: AUSTA WARILY vOLUME 1 OF 1 [ CAROL L. .CRAWLEY, CSR #7518- ...................................•......................................................5Z5--gOUT-H-FLOWERSTREET ................ SUITE 2150 LOSANGELES, CA 90071 FOR NEW JUDGMENT DEBTORS: DAVID ESQUIBIAS 2625 TOWNSGATE ROAD SUITE 330 WESTLAKE VILLAGE, CA 91301
- 7. 1 2 3 4 5 6 7 8 9 I0 ii 12 13 14 15 16 17 18 19 20 21 i 22 LOS ANGELES,CALIFORNIA; TUESDAY _ MAY 29, 2012 DEPARTMENT 24 HONORABLE ROBERT L. HESS JUDGE 11:50 A.M. APPEARANCES: (AS NOTED ON TITLE PAGE) (CAROL L. CRAWLEY, OFFICIAL REPORTER. MR. CHATFIELD: DAVID CHATFIELD ON BEHALF OF THE PLAINTIFF. MR. ESQUIBIAS: GOOD MORNING, YOUR HONOR. DAVID ESQUIBIAS ESPECIALLY APPEARING FOR JOSEPH PRASKE TRUSTEE OF THE GIGANIN TRUST, TRUSTEE OF THE ARANZANO TRUST, AND THE AQUASANTE FOUNDATION AND VARIOUS LLC'S AND LP'S THAT ARE NOTED IN OUR PLEADING AS A GENERAL PARTNER AND/oR MANAGING MEMBER. I WOULD LIKE TO NOTE FOR THE RECORD THAT JOSEPH PRASKE IS NOT A PARTY TO THIS ACTION. ......MS_WAKILI} ....G00D-MORNING/-AUSTAWAKILI-FOR ........................ DEFENDANT, KNAPP, PETERSEN & CLARKE. THE COURT} THIS IS A MOTION TO AMEND .THE JUDGMENT . 23 TO ADD JUDGMENT DEBTORS ON THE THEORY THAT VARIOUS ........ 24 .... TRUSTS _FOUNDATIONS, _AND..OTHER BUSINE$S...ENT_.TIE$ ........... 25----TNCL-U-DTN-G---L-L-C-,_--AR-E---A_--M_--@_GG_O-,-S--_TDR-D@@_,--_N-D -- 26 THEY SHOULDBE LIABLE FOR OR THEIR ASSETS -- SHOULD ' 28 HiM .... " .....:.... - ".................
- 8. E 1 2 3 4 5 6 7 8 9 I0 Ii 12 13 14 15 16 17 18 19 .........................20 21 22 23 24 _5-- 26 27 28 I HAVE AVERY SUBSTANTIAL AMOUNT OF EVIDENCE ON THE NATURE OF THESE RELATIONSHIPS THAT HAS BEEN SUBMITTED TO ME IN CONNECTION WITH THIS MOTION, AND FRANKLY IT LOOKS TO ME LIKE THESE ARE APPROPRIATE MOTIONS. I SEEM TO HAVE QUITE A SHOWING HERE THAT IN FACT, MR. GAGGERO CONTROLS THESE -- DIRECTS THE MONIES AND WILL. AND SINCE wE HAVE, You KNOW, IT SEEMS TO ME THAT THE MOTION HAS SOME MERIT, SO LETME START WITH MR. GAGGERO'S COUNSEL, AND SEE WHAT YOU WOULD LIKE TO SAY ON THIS POINT, SIR. MR. CHATFIELD: YOUR HONOR, IF I MAY START AS -- REALLY THE PARTY IN INTEREST -- I REPRESENT THE TRUSTEE WHO CONTROLS THESE ASSETS WITHIN THESE TRUSTS. IF I MAY RESPOND TO THE COURT FIRST, I WOULD APPRECIATE THAT. THE COURT: WEL'L, THE TRUSTEE HAS TO BE -- THE 9RUSTEZ GETS N_AMZD, BUT IT-IS-REALLY THE ITRUST THAT .......... HIS ASSETS ARE BEING SOUGHT. ' MR. ESQUIBIAS: THE CORPUS OF THE TRUST -- THE COURT: I DON'T UNDERSTAND THAT THEY ARE SEEKING TQ_ ADD YOU IN ANY OTHE_ CAPACITy PERHAPS THAN .......... ----AS_R-[TSTgE. -........ THERE IS CERTAINLY NO INDIVIDUAL CAPACITY. MR. ESQUIBIAS: CORRECT. WE DON'T BELIEVE THAT ANYONE IS SEEKING MR. BRABKE.
- 9. 1 2 3 4 5 7 8 9 10 Ii 12 13 14 15 16 17 18 19 ..................... 20 21 22 23 24 26 27 [................ WE DON'TBELIEVE THAT KPS IS TRYING TO SAY THAT MR. PRASKE AS PERSONAL LIABILITY, THAT WE DON'T BELIEVE. THE COURT: AND I DIDN'T GET THAT OUT OF THEIR PAPERS. MR. ESQUIBIAS: WHAT WE DO BELIEVE, IS'THAT THE ASSETS, WHICH MR. PRASKE CONTROLS ARE ASSETS THAT ARE BEING SOUGHT, AND BECAUSE THESE ASSETS ARE CONTAINED WITHIN IRREVOCABLE TRUSTS -- OR EVEN IF THEY WERE REVOCABLE, THE FACT IS THAT THESE ARE IRREVOCABLE TRUSTS THAT THERE ARE CERTAIN PROCEDURES THAT NEED TO BE FOLLOWED WHEN YOU ARE TRYING TO OBTAIN OR CONTROL LEVY OR GARNISH THE ASSETS'OF TRUSTS. AND I WOULD NOTE FOR THE. RECORD; THAT THE PROBATE COURT HAS THE EXCLUSIVE JURISDICTION OF TRUST MATTERS UNDER PROBATE CODE 17000, WHICH SPECIFICALLY STATES THAT ACTIONS AND PROCEEDINGS BY OR AGAINST A CREDITOR ARE VESTED IN THAT COURT AND MORE IMPORTANTLY, BECAUSE THE ASSETS IN THIS PARTICULAR NOTICE UNDER THE PROBATE CODE NEEDS TO BE PROVIDED OF THIS MOTION TO THE VESTED CURRENT INCOME AND PRINCIPAL AND REMAINDER BENEFICIARIES OF THESE • RUSTS ...................................... • ......... NO _S-UCH---NO_C_--W_S-_RO_I-D_D_O--A-N_ ........ BENEFICIARY NOR WAS NOTICE PROVIDED TO THE TRUSTEE OF THESE TRUSTS, AND} "NOTICE' WOULD BE REQUIRED UNDER PROBAT£ CODE 17203 : ........
- 10. 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 ..................... 2 O_ 21 22 23 ..... 24 _5-- 26 27 AND LAST, PROBATE CODE 18200 sPEcIFICALLY STATES THAT THE ASSETS OF AN IRREVOCABLE TRUST ARE NO.T AVAILABLE TO THE SETTLERS CREDITORS, WHICH IS THE CASE HERE. TO THE EXTENT THAT THERE WAS FRAUDULENT CONVEYANCE, THEN IT WOULD BE MADE POTENTIALLY • AVAILABLE. BUT, AS THE MOVING PARTY HAS CONCEDED IN THEIR OWN DOCUMENTS THAT THE FRAUDULENT CONVEYANCE CAUSE OF ACT!ONIS UNAVAILABLE TO THEM DUE TO THE STATUTE OF LIMITATIONS, FRAUDULENT CONVEYANCE IS THE ONLY EXCEPTION TO PROBATE CODE SECTION 18200 AND PROBATE CODE SECTION 15403. I SEE THE COURT .IS LOOKING AT THE PROBATE CODE .... THE COURT: JUST A MINUTE. MR. ESQUIBIAS: -- I WOULD LIKE TO POINT OUT JUST ONE CASE. THE COURT: MAY I ASK WHERE THIS ARGUMENT APPEARS IN-YOUR-OPPOSITIDN_SIR? ....................................................:...... MR. ESQUIBIAS: IT DOES NOT APPEAR. THE SUBSTANCE OF THE.ARGUMENT WAS FILED. THE COURT: IS THERE A REASON, IS THERE A REASON YOU. ARE MAKING AN 5RGUM_NT NOW THAT .AP.PARENTLY 90ES ............... --TS--J-H-R_DI_L_T-I-@N-? IS THERE A REASON wHY, IF THIS IS A MERITORIOUS ARGUMENT, .-IT-WAS NOT INCLUDED IN•THE ......................... .--i......................................................................................................................... 28 OPPOSITION? •
- 11. 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 MR. CHATFIELD: ICAN TELL THE COURTTHAT I AM SPECIALLY APPEARING FOR THE PURPOSEOF ARGUING JURISDICTION AND NOTICE. I HAVE NO EXPLANATION AS TO WHY IT WASN'T IN THE OPPOSITION. I AM LATE TO THIS PARTY. THE COURT: THE NOTICE OF SPECIAL APPEARANCE TO OPPOSE AN OPPOSITION WAS FILED MAY 15TH. MOVING PAPERS WERE FILED APRIL 10TH, AND AS I LOOK AT YOUR PAPERS HERE, I DON'T EVEN GET A SNIFF OF THESE ARGUMENTS, QUITE FRANKLY. MR. ESQUIBIAS: I WOULD AGREE. BUT I DON'T BELIEVE THE FACT THAT THEY WERE NOT RAISED IN THAT DOCUMENT DOES NOT PRECLUDE THE ARGUMENT TODAY. THE COURT: WELL, WHY? SO MY QUESTION IS, IF THESE ARE ESSENTIAL ARGUMENTS, WHY DID YOU HOLD THEM BACK SO THAT THEY COULD NOT REsPoND TO THEM? MR. ESQUIBIAS: IT WAS NOT DESIGNED TO AMBUSH THE MOVING PARTY. THE couRT: IS ITANYTHING OTHER THAN AMBUSH 21 MR. ESQUIBIAS: I CAN SEE HOW IT IS PERCEIVED AS 22 THAT BY THIS COURT, AND PERHAPS MOVING PARTIES XXXJD 23 THIS MATTER CAN BE CONTINUED TO BRIEF IT AND TO ALLOW ........ 24 . _HEM TO. RESPOND. TO THES.E. ARGUM_NTS .................... -----95 ....... TH-E--COU-Rq_._L-L_'<>U--_A-V-E_-'-T-f-E_k_N--BR-I-_PE-D---I_. 26 MR. ESQUIBIAS: I AM PREPARED TO DO SO. 27 THE COURT: SO THAT, AGAIN, RAISES THEQUESTION -- 28 TH_S YS THE TIME A.ND PLACE FOR THE HEARING DN THIS
- 12. 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 MOTION. MS. WAKILI: CANI MAKE ONE BRIEF POINT ON THIS? HAD HE BRIEFED IT OR RAISED IT INHIS OPPOSITION, MR. PRASKE HAS TESTIFIED UNDER-- IN.A DEBTOREXAM, THESE ARE OFFSHORETRUSTS. ARANZANOIS AN OFFSHORETRUST. THEY HAVE NEVER BEEN FILED wITH ANY COURTIN CALIFORNIA OR THE UNITED STATES, SO THESE ARE ESSENTIALLY VERY SECRET DOCUMENTSTHAT ARE PRIVATE. THEY HAvE INDEPENDENTCONFIDENTIALITY PROVISIONS THAT BOUNDPRETTY MUCHTHE TRUSTORTHE TRUSTEE, So THEY WON'T BE SOMETHINGYOU WILL FIND IN A PROBATECOURTAND ACCORDINGTO MR. PRASKE -- THAT IS SOMETHINGTHAT HE SAID HE NEVER FILED, AND AGAIN HAD WE HAD ANY IDEA THIS WOULDBE AN ARGUMENTTHEY WOULDRAISE WE WOULDHAVE PULLED EXCERPTS_FROMTHE DEBTOREXAMINATION TO ADDRESSTHAT. THE COURT: i DON'T DISAGREE, BUT DO I HAVE ANY EVIDENCE? JUST A SECOND. DO I HAVE ANY EVIDENCE IN J- ] ......................20 ......su P POR-T- 0F -T H-ESE ---FAC-T[JAL -AS S-_.R T ION S ?...................... I i 21 I ! 22 i 23 i i ..... 24. ............. _ 5-- 26 27 MR. ESQUIBIAS: RAISED BY OPPOSING COUNSEL? THE COURT: No, YOUR FACTUAL ASSERTIONS. YOU HAVE CHARACTERIZED THESE AS IRREVOCABLE AND SUBJECT TO _HIS THAT. AND THE OTHEK.. I DO_.'T..KNOW ....HOW DO I --K-_OW--THAT-F. WHERE ISTHE EVIDENCE TO SUPPORT IT? MR.. ESQUIBIAS: "YOU WILL NOT FIND IT IN OUR _8 PLEA_N_ T_AT WAS FILED.
- 13. 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 THE COURT: ISTHERE ANYTHING IN THEIRS, THAT WILL DO IT? MR. ESQUIBIAS: I HAvE THE PLEADINGS THAT I HAVE REVIEWED IN PREPARATIONFOR TODAY'S HEARING, DID NOT SHOWOTHER THAN THEIR OWNSTATEMENTSIN THEIR PLEADINGS WHICHARE CONSIDEREDADMISSIONS THAT THE TRUSTS ARE IRREVOCABLE. THE COURT: HAS THERE -- HAS MR. PRASKETAKEN THE POSITION, THAT THE TRUSTS THEMSELVESARE CONFIDENTIAL? MR. CHATFIELD: I HAD NOT PARTICIPATED IN THAT PRIOR DISCOVERY THAT COUNSELTALKS ABOUT, BUT I WILL SAY THIS, ON BEHALF OF MR. PRASKE -- THE COURT: AND THAT THE TERMSOF THE-TRUST -- THE TRUST DOCuMENTs OUGHT NOT TO BE PRODUCED? MR. ESQUIBIAS: I WILL SAY THIS ON BEHALF OF MR. PRASKE, .THAT IF NOTICE IS.PROVIDED TO THE ALL THE VESTED CURRENT INCOME AND PRINCIPAL BENEFICIARIES -- THE COURT: HAS MR. -- AND HOWWOULD THEY DO THAT? 21 TRUST DOCUMENTS TO COUNSEL UPON NOTICE TO THE 22 BENEFICIARIES. 23 THE.COURT: HOW WOULD THEY KNOW WHO THE 24 .....BENEEICIARIES ARE? .............................. 2_ [---A_--TA-K-I-N-G__ OU-R--R-D_P O-N_E --A-S--TH E_I_R-UST 26 DOCUMENTS THEMSELVES HAVE NOT BEEN PRODUCED UNDER A 27 CLAIM OF CONFIDENTIALITY. _8 SO AT .TH_IS POINT, YOU ARE ASSERTING A SERIES ....
- 14. 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 ..........................2_ 21 22 23 24 26 OF THINGS WHICHFIND NO EVIDENTIARY SUPPORT AND THE REASON THEY HAVE NO EVIDENTIARY SUPPORT, AND YOUR OBJECTIONS ARE VERY INTERESTING, IS THAT YOU HAVE, AS I UNDERSTAND IT, YOU OR MR. GAGGERO HAVE PRECLUDED THE OTHER SIDE FROM ACCESS TO THE VERY INFORMATION THAT YOU CLAIM IS NECESSARY FOR THEM TO GIVE NOTICE. THAT IS NOT A SITUATION THAT IS REASONABLY CALCULATED TO GIVE RISE TO A SYMPATHETIC HEARING. FOR YOU TO SAY, WELL YOU CAN'T GO FORWARD WITHOUT GIVING NOTICE TO ALL THESE PEOPLE, AND BY THE WAY WE WON'T TELL • YOU WHO IS ENTITLED TO GET NOTICE. HOW DO I RESOLVE THAT? MR. !ESQUI•BIAS: YOU HONOR, I HAVE A RESPONSE. I HAVE A RESOLUTION. I AM NEW TO THIS CASE. I• WILL MAKE•SURE •THAT OPPOSING COUNSEL HAS A COPY OF THE TRUST DOCUMENTS, SO THAT SHE CAN APPRISE THE SITUATION HERSELF. SHE CAN GIVE NOTICE. THE COURT: WELL, APPARENTLY, WAS MR. PRASKE MS. WAKILI: i BELIEVE•HE WAS REPRESENTED BY MR. CHATFIELD. THE COURT: • OKAY. •WHAT DO I DO WITH• THAT? •IF HE WAS R_PRESENTED BY MR. CHATFIELD AT THE/DEP0$ITIONS, .... -A-ND_I_HI_--_S_gHE_-po_3:I_I_-I-_--TH-A_I_--W-A_I_A-K-DN_----WHAT--DO--I----- DO WITH THAT? 27 MR. • ESQUIBIAS: _ I DON'T KNOW ANYTHING ABOUT ANY • 28..DEgOSiTION<S ..I.WASNOTPRESENT, BUT IWILL.TELLTHE
- 15. 9 10 ii 12 13 14 15 16 17 18 19 21 22 23 ...... 2.4 26 27 COURT NOW,AND OPPOSING COUNSEL, I NOW REPRESENT MR. PRASKE IN HIS CAPACITY AS TRUSTEE OF THESE TRUSTS, AND WE INTEND TO COMPLETELY AND FULLY COOPERATE WITH THE REQUESTS FORTHE DOCUMENTATION. THERE IS NO REASON WHY IT SHOULD NOT BE DISCLOSED. THE COURT: IS THERE A REASON WHY YOU DON'T HAVE THEM TODAY? MR. ESQUIBIAS: I DO HAVE THEM TODAY BUT THEY ARE MY VERSIONS WITH MY MARKINGS ON THEM. I AM NOT AWARE OF THE REASON WHY THEY WERE NOT PROVIDED IMMEDIATELY TO COUNSEL, BECAUSE I THINK ONCE COUNSEL DOES SEE THEM -- NOTES THAT THEY ARE IRREVOCABLE NOTES, THE ASSETS WERE TRANSFERRED TO THESE TRUSTS MANY, MANY YEARs AGO. READ PROBATE CODE SECTION 18200. I JUST THINK THAT WE CAN RESOLVE THIS ISSUE FAIRLY QUICKLY. MS. WAKILI: YOUR HONOR, COULD I GET SOME CLARIFICATION ON COUNSELS RESPONSE RIGHT Now? THE COURT: JUST A SECOND. ........ :-MR.ESQOIBIAS_ ...... ITISNOTMY-PRACTICEC-_RAT_HER_ ............ LET ME RESTATE THAT IT IS MY PRACTICE TO BE OPEN WITH THIS couRT AND WITH OPPOS'ING COUNSEL, TO BE FAIR AND CLEAR'AND TRANSPARENT -- TO THE BEST THAT I CAN BE. ........ I .INTEND. TD DO .THAT. GOING._FORWAR_, I WQULD _ --A_LIC-_-H-_T--T_E_O-U-RT--I-S-S-U-E--_A-N---I-N_DR-I-M-_RD-DR--I-N _D_A_I_I-©N ..... TO DISCLOSURE OF THESE TRUST DOCUMENTS, THAT THEY BE USED BY OPPOSINGCOUNSELFORPURPOSES ONLY FOR THIS 28. MO_%0NA_. F0_ G%V-i-NG NOTZCE, .ANDTHAIT IT IS INOT TO ......
- 16. i0 1 2 3 4 5 6 7 8 9 I0 ii 12 13 14 15 16 17 18 19 BE MADE. THE DOCUMENTSARE NOT TO BE MADE PUBLIC OR USED FORANY OTHER REASON. THE COURT: YOU COULD HAVE APPLIED FOR A PROTECTIVE ORDER TO THAT EFFECT IN A TIMELY FASHION. YOU SEE, MR. PRASKE HAS PREVIOUSLY BEEN REPRESENTED BY COUNSEL FOR MR. GAGGERO. SORTOF LOOKS LIKE THEY ARE JOINED AT THE HIP. MR. ESQUIBIAS: I VIEW THAT AS PROBLEMATIC, YOUR HONOR, AND THAT IS WHY -- THE COURT: IN CONNECTION WITH THIS MOTION, THIS IS NOT A SITUATION WHERE MR. PRASKE, DURING THESE PRECEDING TIMES, HAS HAD INDEPENDENT COUNSEL. HE HAS USED MR. GAGGERO AS.coUNSEL, WHICH SUGGESTS TO ME -- CERTAINLY LEADS TO AN INFERENCE, THAT THE POSITIONS TAKEN wERE COORDINATED POSITIONS. AND, WHATI HAVE HERE SUGGESTS, COMING INAT THIS POINT IN TIME, RAISING ARGUMENTS ORALLY, THAT WERE NOT IN THE PAPERS, ASSERTING EVIDENCE THAT HAS - " -_............ _2 0........... PREVIO0SLT BZ_-R_FVSE'D-T0"BE -PRODUCE_ -AND TIYEN ................................. 21 SAYING, WELL YOU HAVE GOT TO DELAY IT JUDGE, THIS 22 THAT AND THE OTHER THING. 23 I WANT TO DO ALL THE THINGS THAT MR. PRASKE .. 24 .... HAS_ NOT_DONE,. WHEN HE. W.AS REPRESENTED BY MR .... I --2-5----@A-@G-_R_ -S--C-_UN_L_MI_L-L-S_-L--I-KE--MQ-_E---D E-L-A_ . 26 MR. ESQUIBIAS: I AM NOT SEEKING AN EXTRAORDINARY 27 AMOUNT OF-TIME TO CONTINUES--THIS'_ I THINK-IT COULD 28 BE JUST DAYS IN ORDER FOR THE DOCUMENTS TO BE
- 17. ii 1 2 3 4 5 6 8 9 10 Zl 12 14 15 16 17 18 19 ..................... 2-0 ._ 21 22 23 24 ....._-"2-5- 26 27 TRANSFERRED OVER TO OPPOSING COUNSEL. THE COURT: WHY WAS THIS. NOT BROUGHT OUT IN ANYTHING UNTIL I ASKED YOU WHAT THE FACTUAL BASIS FOR THE ORAL ASSERTIONS YOU WERE MAKING? MR. ESQUIBIAS: ALL I CAN TELL YOU, YOUR HONOR, IS THAT I HAVE BEEN PRACTICING PROBATE LAW FOR 20 YEARS. ORAL ARGUMENTS ARE COMMON PLACE. IT IS A DIFFERENT COURTROOM WITH DIFFERENT SETS OF RULES, AND I APOLOGIZE THAT I AM NOT FAMILIAR WITH THE CIVIL COURTS OR THE RULES OF THIS COURT. BUT, THE FACT REMAINS THAT WE HAVE TO GIVE NOTICE TO THESE VESTED PRINCIPAL AND INCOME BENEFICIARIES, 30 DAYS. THE COURT: I DON'T KNOW THAT THERE ARE VESTED INCOME AND PRINCIPAL BENEFICIARIES. I HAVE BEEN DENIED THAT INFORMATION AS DEFENSE COUNSEL HAS BEEN DENIED THAT INFORMATION. MR. ESQUIBIAS: I SEEK TODAY TO RIGHT THAT WRONG. THE COURT: WHAT, IF ANYTHING ELsE ARE YOU 'OFFERIN_-IN-WAY'"OF-INFORNAT'rO__H_T-HAS'BEEN ............................... PREVIOUSLY WITHHELD?" MR_ :ESQUIBIAS: IT IS HARD FOR ME TO ANSWER THAT QUESTION BECAUSE i DON'T KNOW WHAT HAS BEEN PREVIOUSLY .W_T_HELD_. I .HAVE ONLY BEEN IN. THIS CASE _ THE COURT: I SUSPECT IT HAS BEEN A LITTLE LONGER THAN TEATF BECaUSE-IT _TOOK SOME TIME-TO PREPARE THE • 28 DOCUMENT,_UNLESS YOUDIDN'T PREPARE IT] ...... i
- 18. 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 2O 21 22 23 .... 24 ..... 25--- 26 27 12 MR.ESQUIBIAS: I BELIEVE ALL THE INFORMATION CONTAINED IN THE TRUST INSTRUMENTS AND PERHAPS FUNDING DATES OF THE ASSETS IN THOSE TRUSTS WOULD BE SUFFICIENT. I DON'T KNOW OF ANY OTHER INFORMATION THAT WOULD BE REQUIRED FOR THIS COURT OR OPPOSING COUNSEL TO MAKE THE CONCLUSION THAT THE ASSETS ARE UNREACHABLE. THE COURT: SO, YOU WISH TO PROVIDE NOT THE ENTIRETY OF THE INFORMATION BUT ONLY A PART OF THAT? MR. ESQUIBIAS: WE WOULD ONLY WANT TO PROVIDE INFORMATION THAT IS EITHER AGREED UPON BETWEEN MYSELF AND OPPOSING COUNSEL OR IF WE COULD NOT COME _ TO SOME TYPE OF AGREEMENT, WHATEVER THIS COURT WOULD DETERMINE TO BE RELEVANT. . • THE _cOURT: HOW WOULD I KNOW WITHOUT YOU PROVIDING EVERYTHING? I HEAR AT BEST A CONTINGENT OFFER. MR. ESQUIBIAS: I PLAN TO HAVE A MEET AND CONFER WITH OPPOSING COUNSEL TO FIND OUT WHAT IN PARTICULAR THEY ARE INTERESTED IN KNOWING ABOUT THESE TRUSTS, THE DOCUMENTS THEMSELVES, I KNOW IN MY MIND WHAT INFORMATION THEY NEED. I REMAIN OPEN TO PERSUASION FROM OPPOSING . .COUNSEL AS TO ADDITIONAL INFORMATION ..... --M_-._CH-A?F_I-_L-D -- MR. CHATFIELD: WELL, YOUR HONOR, AN ISSUE THAT LOOMS OVER THISIS THAT, WHAT-THE DE_END_NTS-SEEK TO 28 D0 H_E IS iMP E-RMISSIBLE OUTS_IDE REVERSE PIERCING.
- 19. 13 1 2 3 4 5 6 7 8 9 i0 ii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r 41 CAL APP. 4TH, 1551. AND THERE IS A BUNCH OF OTHER CASES THAT APPLY ON THIS. .................. 2.() .............. M-Rq-C-_t/_TF-I_.SD-: ..... WE-LL-_ Y0*UR-H-ONOR, -_ A_S Y-0-U I4-N_W FROi_/ 21 22 23 . . 24. Z5-- 26 • 27 HAVING ENTERED THE AWARD APPROVING THEARBITRATION IN THAT GREENSPAN CASE, THAT THE COURT ON PAGES 513 THROUGH 514 OF GREENSPAN STATED THAT IN POSTAL INSTAk4T_PRESS VERSUS KAZQ CORP ITHE C O.URT QF APPEAL .. --HDL-D--T-H-_T--OUTS-I-D-E--R-DVE_E_-_IE-R_X-N_,--OF--_H-E--CO-R-POR-A_E---- VEIL IS NOT PERMITTED IN CALIFORNIA. ......... THATIS, THE CORPORATE VEIL-WILL NOT BE *
- 20. 14 6 7 8 9 i0 11 12 1i 14 15 16 17 18 19 SHAREHOLDER -- THE COURT:RATHER THIS COURT EXPLAINED THE ALTER EGO DOCTRINE WILL ONLY BE APPLIED TO AN INDIVIDUAL SHAREHOLDER LIABLE FOR A CORPORATE DEBT WHERE THE INDIVIDUAL IS HAS DISREGARDED THE CORPORATE FORM BUT THAT IS NOT -- MR. CHATFIELD: AT THE VERY NEXT SENTENCE, YOUR HONOR, IT SAYS THIS CASE DOES NOT INVOLVE OUTSIDE REVERSE PIERCING. AND WHY IS THAT? BECAUSE THE JUDGMENT WAS AGAINST TWO ENTITIES, AND THEY WERE SEEKING TO BRING INDIVIDUALS IN AS ADDITIONAL JUDGMENT DEBTORS. NOT --THIS WAS NOT A CASE WHERE THERE WAS A JUDGMENT AGAINST AN INDIVIDUAL, AND THEY WERETRYING TO GO AFTER THE TRUST. "'" THE. CouRT: THIS I-S A SITUATION WHERE, KPC .IS SEEKING TO HOLD THE SPECIALLYAPPEARING PARTIES LIABLE-FOR GAGGERo'S DEBT WHERE THEY ARE ALLEGED TO BE THE ALTER EGOS OF GAGGERO. MR. CHATFIELD: THAT IS TYPICAL OUTSIDE REVERSE .........................20 .... P-IE RC IN G: ........THER-E -IS "NO '_THER-TERM "_- THaT [....._N D- IT ...................... 2i IS NOT RECOGNIZED IN THE STATE OF CALIFORNIA. I HAVE 22 PROVIDED YOU WITH AUTHORITYON THAT, PLUS THERE ARE 23 AT MY LAST VIEW, 24 OTHER UNPUBLISHED DECISIONS WHICH .... 2_4 .._STATE EXACTLY THE_SAME _THING...YOU .CANN.QT .IMPOSE 25--_-B_/I-TY--_ND--B-_I-_G--I-N-_N-TTTTE_--TO--SgfI_ISi_Y--A-N ........... [ - . 26 INDIVIDUAL'S DEBT. AND EVEN IF THE STATE RECOGNIZED 27 OUTSIDEREVERSE PIERCING;WHICH ITDOESN-'T, YOU'WOULD 2_8 HAVETO GO .gHKOUGZ;AN A_DI_ZONAL ANALYSIS WHICH THIS
- 21. 5 6 7 8 9 I0 ii 12 13 14 15 16 17 18 19 2O 21 22 23 24 2-5-- 26 27 15 COURT DISP'OSEDOF INITS OWNSTATEMENTOF DECISION. THE COURT: I KNOWWHEREYOU ARE GOING ON THAT. GO AHEAD AND SAY IT. YOU ARE WRONG,BUT I KNOWWHERE YOU ARE GOING. BECAUSE I READ IT IN YOUR PAPERS. YOU ARE SUGGESTINGTHAT THE FACT THAT AT TRIAL MR. GAGGEROPUT ON NO EVIDENCE THAT HE WAS SUING ON BEHALF OF PCM TO RECOVERTHE ATTORNEY'S FEES, IS SOMEHOWDISPOSITIVE. IT IS NOT. THAT WASA COMMENT ON THE FAILURE OF MR. GAGGEROTO PRODUCECERTAIN EVIDENCE IN THE TRIAL WHENIT WASDIRECTED TO THE ISSUE OF DAMAGES, HIS DAMAGESTHAT HE WAS CLAIMING AGAINST KNAPP PETERSEN & CLARKE SO, You KNow. I SAW WHATYOU SAID IN YOUR PAPERS, AND I AM SORRYIT IS NOT -- MR. CHATFIELD: WHATI AM SAYING IS SOMETHINGA LITTLE DIFFERENT. I AM GOING BY YOUR FINDINGS OF FACT, AND YOU STATED ON PAGE 16 OF YOUR STATEMENTOF DECISION THAT UNLESS OTHERWISESPECIFICALLY STATED, THE FACTS SET ....F0-RTH-BELbW-_-REEYTHER-U-N-DISPOTE0"OR_EPRESENg-THOSE........ WHICH THE COURTFINDS TO BE TRUE BY THE PREPONDERANCE OF THE CREDIBLE EVIDENCE, AND THEN IN THE FINDINGS OF FACT ON PAGE 18, THE COURTSTATED THAT IN 1995 AND .1996 GAGGER0...DIDEXTENSIVE ESTATE.PLANNING WHICH. --_U-_T_-D--I-N--A-_-L--_F--H_-_--FDR-SO-N-AL--A-S-S-ETS--B-_I_G- TRANSFERREDTO VARIOUS CORPORATIONS,TRUSTS FOUNDAT-IONS. ................................................
- 22. 16 5 6 7 8 .9 io ii 12 13 14 15 16 17 18 19 AND NO CONTROL. THECOURT: IS THERE A DOT DOT DOT IN THERE? DID YOU OMIT SOME OF THE WORDS THAT I PUT IN THERE? MR. CHATFIELD, DID YOU OMIT SOME OF THE WORDS THAT WERE IN THE ORIGINAL, IN THE STATEMENT OF DECISION? MR. CHATFIELD: I AM SUMMARIZING THAT. THE COURT: YES, BECAUSE YOU ARE OMITTING FOR THE PURPOSE -- THERE IS SOMEWHERE IN THERE FOR THE PURPOSE OF TRYING TO SHIELD THEM FROM CREDITORS. MR. CHATFIELD: ACTUALLY, WHAT THE COURT SAID RELATING TO CREDITORS WAS, THAT ALTHOUGH GAGGERO USED THREATS, BLUSTERS AND ULTIMATUMS TO. ATTEMPT TO DISCHARGE THE KNBC CREDITORS -- THE COURT: I SAID OTHER THINGS. I SAID OTHER THINGS. MR; CHATFIELD: "YOU ALSO SAID THAT KNBC'S' CLAIM WAS PAIDEARLY IN 2002 BY FULL PAYMENT PLUS INTEREST AND AWARDED ATTORNEYS FEES, AND YOU ALSO STATED THAT THE'SLOCOM CLAIM WAS WITHDRAWN AND DISMISSED. .................... 20 ................ TH:E--COUR_r i .... NOW,- S rR,- T-H_T--HAS-_O_rH_G -TO--DO-WITH ..... 21 THIS CASE THAT HAS NOTHING TO DO WITH THE ISSUES 22 23 2_4. 2-5-- 26 ....27 i " 28 MR. CHATFIELD: YES. :.KPC HAS NOT MET ITS BURDEN BEFORE THE COURT" THE STATEMENT OF DECISION THE COURT ENTERED, WHICH HAS BEEN AFFIRMED BY THE'COURT .0_ .APPEALS.,. IS NOT DISPOSIT!.VE OF ANY ISSUE .BEF.0RE ............. _H-E--t-_D_-Rq_ODA_. --. IF -- IS THERE ANYTHING ELSE YOU WOULD LIKE TO SAY. ................................
- 23. 17 1 2 3 4 5 6 7 8 9 i0 II 12 13 14 _5 16 17 18 19 2O 21 22 23 24 26 27 OF SHOWING THATTHE BUSINESS ENTITIES OR PRASKE WERE GAGGERO ALTER EGOS. KPC PRESENTED NO EVIDENCE THAT THE BUSINESS ENTITIES OR PRASKE'S CONTROLLED THE LITIGATION OR WERE VIRTUALLY REPRESENTED IN THE ACTION. IN FACT -- THE COURT: DOES THE FACT THAT THEY -- IT LET ME START OUT WITH THIS PREDICATE, MR. CHATFIELD, I THINK THAT THEY HAVE MADE A PRIMA FACIA CASE THAT THESE ENTITIES ARE ALTER EGOS OF MR. GAGGERO. AND IF I DO THAT, THERE IS NO DOUBT THAT MR. GAGGERO cONTROLLED THE UNDERLYING LITIGATION. THESE ARE NOT INDEPENDENT ENTITIES AS I SEE THEM. AND IF THEY ARE ALTER EGOS OF MR; GAGGERO, AND MR. GAGGERO cONTRoLLED THE LITIGATION WHICH HE uNDouBTEDLY DID, THEN WHAT? MR. ESQUIBIAS: YOUR HONOR, IF I MAY RESPOND. THE COURT: NO, MR. CHATFIELD CAN RESPOND TO THIS.. HE WAS ONE OF THE ATTORNEYS WHO REPRESENTED MR. GAGGERO DURING THE TRIAL PROCEEDINGS OR IN POST TRIAL. ...........MR]-- CHATF-I ELO i.....i,'- FfRS T -OF- A-LL/--FAiL ""TO ....................... UNDERSTAND HOW THE COURT HAS REACHED THE CONCLUSION THAT ALL OF THEELEMENTSOF ALTER EGO HAVE BEEN FULFILLED WITHOUT ANY EVIDENCE SUPPORTING IT WHEN WE i .HAVE PROVIDED THE CO:UR_ .WITH.DECLARA_.ION$_. .AND. ALSQ ..... I---THE--DDFE;NOANTS--N_-_E--PROVq-D_D_I_HE--CO-_R-T--_ITH--_V-I-DDN-CE --- ......................... ] ........................................... AS TO THE CORRECTNESS OF THE SETUP OF THE PARTICULAR ENTITIES =a TRE STATUSOF THE ENTITIESAS BEING-IN- 28 GOOD S_AND_N-G ZN _HE STATE OF-CAL2FOR:NIA, THAT THE
- 24. 18 1 2 3 4 5 6 7 8 9 i0 Ii 12 13 14 15 16 17 18 19 2O 21 22 23 _24 ....... 2-5- 26 27 ENTITIES HAVE-- IT IS IN THE DECLARATIONOF MR. PRASKE THAT IS IN MR. ESQUIBIAS'S BRIEF, THAT THE COMPANIESARE SEPARATEAND DISTINCT FROMMR. GAGGERO, AND THAT THERE IS NO EVIDENCE TO SUPPORTTHE CONCLUSIONOTHERWISE. AND AGAIN, EVEN IF THEY WERETO BE FOUNDTO BE THE ALTER EGO, YOU CANNOT TAKE A JUDGMENT AGAINST AN INDIVIDUAL AND DO OUTSIDE REVERSE PIERCING TO ADD ENTITIESAS NEW JUDGMENT DEBTORS. THE COURT: WELL, YOU KNOW, THE EXHIBITS ATTACHED TO THE MOTION CONTAIN TESTIMONY OF BOTH MR. GAGGERO AND MR. PRASKE SHOWING THAT THE ONLY INTEREST OF THE SPECIALLY APPEARING PARTIES IS TO PROTECT i00 PERCENT OF MR. GAGGERO'S ASSETS, BOTH PERSONAL AND BUSINESS. PRASKE IS THE ONLY TRUSTEE OF THE TRUST AND FOUNDATION INVOLVED IN THE MOTION. HE IS ONE OF ONLY TWO OFFICERS IN PCM_ PCM PAYS EVERYTHING AT GAGGERO'S WISHES WITHOUT RESISTANCE OR HESITANCE. PRASKE IS ALS0 THE REGISTERED AGENT FOR SERVICE'OF -PR b C-ES S- AT _EACH-0F -T HE _B USI N E S S -E-NTI TiE_ _.....K PC' _.......................... EVIDENCE SHOWS THAT MR. GAGGERO'S OWN ACCOUNTANT. TESTIFIED UNDER PENALTY OF PERJURY THAT THE GAINS AND LOSSES FOR THE ASSETS AND THE ESTATE PLAN, ULTIMATELY FLOW T_HROUGH_MR ....GAGGERO'S TAX RETURNS, W_IC__ _S M_OR_. --E-V_-D-DNCE--O_F--A-_T_E-R--E-GO--S_f-_T_S-" GAGGERO CONTROLLED THE LITIGATION. HE DID SO BY THE WAY OF THE-FINANCIALASsETs OF THE SPECIALLY ..... 28 APPEARING PARTIES. THEIR INTERESTS ARE AL_-G_EO WITH
- 25. i0 ii 12 13 14 15 16 17 18 19 2O 21 22 23 24- 2-5- 26 27 28 19 MR. GAGGERO. WITHOUTTHEM --.WITHOUT MR. GAGGERO THEY WOULDN'T EVEN EXIST. MR. PRASKE TESTIFIED THAT THE SOLE PURPOSE OF THE EXISTENCE OF THE SPECIALLY APPEARING PARTIES IS TO HOLD MR. GAGGERO'S ASSETS. THEY ARE ONE IN THE SAME. THAT IS THE BOTTOM LINE. MR. CHATFIELD: WELL, YOUR HONOR, I DON'T KNOW WHERE YOU ARE GETTING THIS. THE COURT: YOU MEAN OTHER THAN THE EXHIBITS, YOU KNOW, IF I WERE INCLINED, WHICH I AM NOT, I COULD GO DOWN AND SITE THE PAGE AND LINE NUMBERS OR PAGE NUMBERS IN THE EXHIBITS WHERE THE DIFFERENT COMPONENTS OF THAT FLOW FROM, BUT, YOU KNOW, I AM NOT INCLINED TO DO THAT. MR. CHATFIELD: WELL, YOUR HONOR, I HAVE LOOKED AT THE PAGE AND LINE NUMBERS AND THE TESTIMONY WHICH IS ATTACHED TO THE MOTION, AND I HAVE SEEN THAT THE QUOTATIONS IN THE MOTION AND IN THE REPLY BRIEF ARE NOT WHAT THE PEOPLE ACTUALLY SAID. FOR EXAMPLE, A QUESTION WAS ASKED -- ............._'_-" _b _R_-i .......f- _- _E-/_R R_N_ _ THE-EXH IB_'¢_ ..................................... THEMSELVES. I READ THE EXHIBITS. MR. CHATFIELD: AS I.SAID, THE MOTION TAKES MR. PRASKE'S TESTIMONY OUT OF CONTEXT. ....THE COURT: .WHAT ASPECT OF MR. PRASKE'S T_$T_QNY ...... _A-KEN--OUT_F--CONT£X.TCZ--GTV_M-5_'f_E--EXIiq-_D PAGE AND LINE NUMBERS YOU THINK ARE TAKEN OUT OF 'CONTEXT. " • ............................ .......... ......... •_. _ ............................................................................ •............. ' " -MRs ESQUiBIAS: YOUR HONOR, IF ._ -MAY INTER_RUPT.
- 26. 2O 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 ..................... "- --2-0-.L 21 22 23 _24 26 .... 27 w- ............... 28 THE COURT: THIS IS MR. CHATFIELD'S ARGUMENT. MR. ESQUIBIAS: HE IS ARGUING ABOUT SOMETHING ABOUT MY CLIENT WHO I REPRESENT. THE COURT: HE IS ARGUING ABOUT SOMETHING FROM WHEN HE REPRESENTED YOUR CLIENT. ARE YOU TALKING •ABOUT THE TESTIMONY IN THE JUDGMENT DEBTOR EXAM? MR. CHATFIELD: NO, YOUR HONOR. THE COURT: WHICH TESTIMONY ARE YOU TALKING ABOUT IN THE URA CASE? MR. CHATFIELD: YES, YOUR HONOR, AND TELL ME -- I DID NOT REPRESENT HIM IN THE URA CASE, YOUR HONOR. THE COURT: wHOM DID YOU REPRESENT, MR. GAGGERO? MR. CHATFIELD: NO, I WAS NOT. I WITHDREW AS ATTORNEZ OF RECORD IN THAT CASE PRIOR TO TRIAL. MR. BOSWICK REPRESENTED MR. GAGGERO. THE COURT: WHAT IS THE• PORTION OF THE TESTIMONY THAT YOU THINK WAS TAKEN OUT OF CONTEXT, SIR? MR. CHATFIELD: WELL -- .................._HE-COURT{ ......I--HAVE!THEEXHIBITS-R_HTHE_. ....................,.... MR. CHATFIELD: IN EXHIBIT G. THE COURT: THE PRASKE CROSS-EXAMINATION JUNE 13TH, 2005. . . .MR. CHAT FIELO: ---1-0131. THE COURT JUST A MINUTE. I AM TRYING TO FIND THIS. ............ M_. _A_F_LD: ALL RIGHT. THE .QUEST.ION WAS_ ASK__D..QN [_AGE ...........
- 27. ,'3 _ '_ 21 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 21 22 THECOURT: I HAVE PAGE i001. • MR. CHATFIELD: WELL, STARTING ON PAGE 1000 GOING THROUGH I001. MR. PRASKE TESTIFIED THAT MR. GAGGERO MAKES RECOMMENDATIONS TO HIM, BUT THAT MR. PRASKE •IS THE ONLY ONE THAT CAN MAKE THE DECISIONS. AND IF YOU GO -- THE COURT: BUT MR. -- PAGE i000 HE SAYS THAT MR. GAGGERO, HE HAS GOT THE TRUST AND THE LLC'S THESE ENTITIES WANT TO BUY A PIECE OF PROPERTY. MR. PRASKE IS THE TRUSTEE, BUT MR. GAGGERO IS THE MANAGER, AND HE TELLS MR. PRASKE WHAT HE WANTS TO DO. MR. CHATFIELD: THAT IS NOT THEWAY I READ THE TESTIMONY. I READ THE TESTIMONY TO SAY THAT MR. GAGGERO IS ONE OF• THE PEOPLE WHO WORKS AT THE MANAGEMENT COMPANY AND MAKES RECOMMENDATION TO MR. PRASKE, AND MR. PRASKE MAKES THE DECISION AS TO WHAT TO DO. THE COURT: QUESTION: PAGE 1,000, LINE 22. ..................... _OWMR:---G_GGE_O-CbN-E_TO-Y___NO_NYS_"HEYI .................. WANT TO BUY THIS GREAT PIECE OF PROPERTY. WHAT SHOWING MUST MR. GAGGERO MAKE TO YOU IN 23 24 ............ 26 ORDER TO SATISFY YOU AS THE TRUSTEE WITH FIDUCIARY D_TIES,_THAT ! AM G0_NG_TQ RELEASE FU-N-D-_--FO-_H-_T--PTE_C-E_OI_-pR_9_R_y_ ANSWER: .SUCCESSFUL HISTORY OF 27 - MAKI'NG "POSITIVE} SUCCESSFUL .......... 28 TRANSACTIONS_
- 28. 22 1 2 3 4 5 6 7 8 9 I0 ii •12 13 14 15 16 17 18 19 21 22 .23 24... i 25 26 27 QUESTION: THAT ISIT? ANSWER: THAT IS THE MOST IMPORTANT THING. QUESTION: SO, MR. GAGGEROSAYS I WANTMONEYAND YOU SAY, HOWMUCH? ANSWER: WELL, NO. QUESTION: SO wHAT IS THE PROCESS? ANSWER: IF IT IS WITH REGARDTO MAKING INVESTMENTSFOR THE BENEFIT OF THE TRUST, HE MAKES A RECOMMENDATIONON A PROPERTY INVESTMENT. I WILL FOLLOW_THAT RECOMMENDATION. WHAT IS OUT•OF CONTEXT?• MR. CH•ATFIELD: WHATIS OUT OF CONTEXTIS THAT MR. GAGGEROIS NOT•THE DECISION MAKER. THE TRUSTEE IS THE DECISION MAKER. THE COURT: MR. PRASKE IS FORALL INTENTS AND PURPOSESA RUBBERSTAMP.• AND THE TESTIMONY THAT YOU ....D_-RZCT_D--_ME--TO-C-O._.Fy_MS--T_T:IF-HE--MAKES_-THE....................................... RECOMMENDATION,MR. PRASKE DOES IT. IT.IS A LITTLE HARD TO INTERPRET THAT LANGUAGE ANY OTHER WAY. MR. cHATFIELD: WELL, HE GOES ON TO SAY ON THAT PAGE _HAT QN-LINE 14.LINE !5 IT SAYS 7.- ........... Q-_-T_ONz--I--A-M--q_Y-hN_S_-I-N_M-y--Q_N ........ MIND TO DISTINGUISH THAT DIFFERENT ........ FROM-M_:'"GA@OERO SAYIN@ I WANTMONEY ...... 28 . AND YOU .SAYING ;HOW-MUCH, BECAHSE -_- . .... i.
- 29. 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 2O 21 22 23 .......... 24. -2-5-- 26 27 .z 23 AND THENANSWER IS BECAUSE AND THEN -- QUESTION: WHY ARE YOU DRAWING A DISTINCTION BETWEEN THOSE TWO? ANSWER: BECAUSE IF HE CAME TO ME AND sAID I WANT $2,000,000 TO SPEND IN LAS VEGAS. I MIGHT SAY NO. IN OTHER woRDs IT HAS TO BE FOR THE BENEFIT OF THE TRUST? ANSWER: YES. QUESTION: YES? ANSWER: YES. THE COURT: OKAY. SO, I WANT THE -- GAGGERO SAYS I WANT THE TRUST TO BUY THIS PROPERTY AND MR. PRASKE SAYS YES,'SIR, YES, 'SIR, THREE BAGS FULL AND SIGNS THE CHECK. MR. CHATFIELD: THAT IS NOT NECESSARILY SO, YOUR HONOR, ALTHOUGH -- THE COURT': WHAT ABOUT MR. PRASKE'S TESTIMONY MR_ CHATFIELD: HIS TESTIMONY IS THAT MR. GAGGERO MAKES THE RECOMMENDATION, AND HE MAKES THE DECISION IT IS NOTHING IN THEiE THAT SAYS THAT. . THE COURT: ...._HA_ DO YOU DO THEN, SIR, WITH THE ......... _-yRE_X_-A-N-S-WE_? - QUESTION: SO WHAT IS THE PROCESS? ...... _NSWER_ iF IT IS REGARD TOMAKING .................................... ............................................. =...................... z................... -28 INVESTME.NTS -FOR ..THE. BENE.FIT0F. THE . . "
- 30. 24 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 21 22 23 ....... 2.4 ---- 2-5-- 26 2? TRUST,AND HE MAKESA RECOMMENDATION ON A PROPERTYINVESTMENT, I WILL FOLLOWTHAT RECOMMENDATION. SOUNDS LIKE NO EXERCISE OF DISCRETION BY MR. PRASKE. HE SAYS DO IT, YOU KNOW, IT IS LIKE, YOU KNOW-- MR. ESQUIBIAS: .I COMPLETELYDISAGREE, YOURHONOR. THE COURT:. WHENMR. GAGGEROSAYS JUMP, MR. PRASKE SAYS HOWHIGH ON HIS WAY UP. MR. ESQUIBIAS: AS A PERSONSITTING HERE LISTENING TO THE STATEMENTSNOT INVOLVED IN THE DEPOSITION -- THE COURT: THAT IS TRIAL TESTIMONY, SIR. THIS IS TRIAL TESTIMONY. MR. ESQUIBIAS: AS A PERSONLISTENING TO TRIAL TESTIMONY, I CAN TELL YOU IT SOUNDSLIKE HE DOES EXERCISE DISCRETION THAT HE DETERMINESWHETHERIT IS FOR THE BENEFIT OF THE TRUST. THE COURT: DO YOU HAVE ANY DIFFERENT POINTS YOU WISH TO MAKE, MR. CHATFIELD? THE ONLY.REASONWE YOU POINTED ME TO. THERE ARE OTHER -- THEREARE PLENTY OF OTHERSTUFF. MR. CHATFIELD: WELL, YOUR HONOR, I DISAGREETHAT THE. EV!DENCE.SHDWS.ALTEREGO.,AND..AGAIN,: IIS_ATE THAT --DV-EN--I-F--IT--DTD_OW--kL_-DR---DGOT-?H-E--O_L-Y-_A-Y--YO-U--CA-N.... PIERCE IN TO THE ENTITIES IS THROUGHOUTSIDE REVERSE ALTER EGO WHICH IS-NOT- PERMITTED IN THE-STaTE OF............. .... d
- 31. 25 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 20 21 22 23 .. .24 _Z5-- 26 27- THIS ISA JUDGMENT AGAINST AN IND'IVIDUAL, "AND YOU ARE TRYING TO MAKE AN ENTITIES AND THEIR ASSETS SUBJECT TO JUDGMENT AGAINST AN INDIVIDUAL. THE COURT: IF I AM JOHN JONES, AND I SET UP A JOHN JONES TRUST, AND I DUMP ALL MY ASSETS IN TO IT, AND I RUN IT AS MY PIGGYBANK, ARE YOU SUGGESTING THAT JOHN JONES TRUST CAN'T BEREACHED? MR. ESQUIBIAS: ACTUALLY, YOUR HONOR -- THE COURT: I DON'T THINK SO. MR. ESQUIBIAS: I WOULD ACTUALLY SAY, YES, THAT'S CORRECT. THE COURT: I DON'T THINK SO. MR. ESQUIBIAS: THAT IS THE LAW UNDER 141 CAL APP. 4TH, 25 A 2006-CASE, DIVISION ONE OF THE FOURTH DISTRICT. THE COURT: AND THEN THAT SEEMS TO RUN COUNTER TO GREENSPAN, BECAUSEGREENSPAN SAYS THAT YOU CAN GO IN TOTHE TRUST THE ALTER EGO DOCTRINE, MAY APPLY TO THE TRUSTEE -- THE TRUST THROUGH THE TRUSTEE, AND 'MUi _ __y= _ "VE_US- _= _=_u_=_0 -_97 - _L -__ 7"_T H 106 5,........." CITES GREENSPAN. MR. ESQUIBIAS: I WILL TELL YOU WHAT -- SAYS IN THAT REGARD, YOUR HONOR, .IT. SAYS THAT -- THE_COURT: _L WILL .TAKE THE.2QI0=CASE..Q_T. OF OUR. --DTSTRq'CT_EC_US_--T_I-NK_Hg[T--I-S--T_E--C©-NT_Q-_L--I-M6 _-- AUTHORITY. .......... IAM PERSUADED BY THE--SHOWTNG-THAT- TH_SE ...... ................................ i
- 32. 26 1 2 3 4 5 6 7 8 9 i0 Ii 12 13 14 15 16 17 18 19 ......................... 2_ 0_... 21 22 23 ........24 AND CLEARLY, CLEARLY, IT WOULD BE INEQUITABLE NOT TO PIERCE THE VEIL -- NOT TO GET OUT THESE ENTITIES WHICH ARE HIS ALTER EGO. SINCE HE HAS THIS SUBSTANTIAL JUDGMENT AGAINST HIM, AND HE HAS ATTEMPTED TO USE THESE DEVICES TO PUT HIS ASSETS BEYOND THE REACH OF LEGITIMATE CREDITORS, AND WE HAVE HAD A FULL AND FAIR OPPORTUNITY TO LITIGATE THIS. I AM NOT RESPONSIBLE FOR.WHEN MR. PRASKE GETS NEW COUNSEL. I AM NOT RESPONSIBLE FOR WHAT ARGUMENTS NEW COUNSEL MAKES OR DOESN'T MAKE IN HIS OPPOSITION. I KNOW AT THE MOMENT THERE IS ZERO EVIDENCE TO SUPPORT, ZERO EVIDENCE IN THE RECORD TO SUPPORT THE POSITION THAT THERE IS A PLETHORA OF -- I DON'T KNOW WHO THESE PEOPLE ARE. AND IN FACT, I DO KNOW THAT MR. PRASKE WAS EXTRAORDINARILY VAGUE WHENHE WAS QUEsTIONED AT TRIAL ABOUT THE IDENTITIESOF THESE BENEFICIARIES-SUPPOSED BENEFICIARIES. YOU KNOW, THE DECISION WAS MADE LONG AGO TO ..... _p-.--TH_--TRU_--DOCUMENT_--_UT-._F.-TH_E-H_ND_.-OF-THE .............................. DEFENSE, AND NOW TO TRY AND INVOKE THE TERMS OF IT, YOU KNOW, WITHOUT GIVING IT TO THE OTHER SIDE. HAVE IT, YOU KNOW -- THERE IS.A LITTLE BIT OF AN ANALOGY, ..Hg_$.,_ TO TH_ A$$ERTI.ON OF_.THE ATTORNEY-CLIENT .............. ---P-R-_V_L-_ @_E-- @EN-_A_--_H-L-E_S---TH-AT--TH-E ATTORNEY-CLIENT PRIVILEGE CANNOT BE ASSERTED AS BOTH '-k'SWORD'AND A-SHIELD-,-AND--I'F "YOU-"IN-PRETRTAL ........ 28 DISCOVERY ASSERT- THE ATTORNEY_CLIENT/PP_IVILEGE, TO
- 33. 27 l 2 3 4 5 6 7 8 9 I0 Ii 12 13 14 15 16 17 18 19 ......................... 20 .... 21 22 23 ....24. -25-- 26 27 --_-E--CO-U-R_:--_NIg--MR_A_@ER-C_--I-_H_E--ON_E--W_H-Q_ET--H_ - THIS SYSTEM, AND MR. GAGGERO IS THE GUY WHO IS -- YOU KNOW,--TEIS -IS W_AT HE-DID._ _NDHE-DID IT FOR-THESE - " 28"" .[PO_P'OS_.'.....H'E TOLO-ME SO,_ IN-THE TRIAL,.T0:.SHIELD HIS ". PROTECT CERTAIN THINGS AGAINST DISCLOSURE, ORDINARILY YOU ARE NOT GOING TO BE ALLOWED TO ALL OF A SUDDEN AT THE LAST MINUTE, DROP IT AND SAY BOY OH BOY, NOW WE HAVE GOT ALL THIS STUFF, WE KNOW WE HAVEN'T TOLD YOU ABOUT IT BUT WEARE NOW MAKING THE DECISION.TO WAIVE IT. THAT IS ONLY AN ANALOGY, I HAVE GOT TO TELL YOU THE -- THIS IS A SITUATION WHERE THESE ISSUES HAVE BEEN PERCOLATING FOR A LONG TIME, AND THERE IS A FUNDAMENTAL UNFAIRNESS.TO MAKING KPC JUMP THROUGH ALL THESE HOOPS TO COLLECT THE JUDGMENT AND SAYING NO, NO YOU CAN'T HAVE X, Y, AND Z, AND THEN COMING IN AT THE LAST'MINUTE MAKING ARGUMENTS NOT SET FORTH IN THE PLEADINGS WEIGHS ON EVIDENCE, NOT BEFORE THE COURT AND SAYING JUDGE GIVE US A DO OVER. THERE IS A FUNDAMENTAL UNFAIRNESS TO THAT. MR. cHATFIELD: WELL, YOUR HONOR, i WOULD RESPECTFULLY WOULD SAY THAT THE REASONING BEHIND IS THERE IS A FUNDAMENTAL UNFAIRNESS FOR BRINGING IN OTHER PEOPLE WITH OTHER INTERESTS WHO DIDN'T ATTEND A THE COURT: MR. GAGGERO CONTROLS THESE ENTITIES. THEY ARE HIS ALTER EGO, THE EVIDENCE FIRMLY PERSUADES THE COURT OF THAT. . MR ....ESQUIBIAS: _OUR HONQR,.'_.WO_L_ T_NK THAT._ ..........
- 34. 28 1 2 3 4 5 6 7 8 9 i0 ii 12 13 14 15 16 17 18 19 21 22 23 ...... 24 2-5- ASSETS FROMCREDITORS.I BELIEVE THAT WASHIS TESTIMONY ON CROSSEXAMINATION AT THE TRIAL IN THIS CASE. MR. CHATFIELD: I BELIEVE THAT IS INCORRECT, YOUR; HONOR. THAT WAS YOURCONCLUSION, BUT WHAT I DON!T UNDERSTANDIS HOWWITHOUTANY EXAMINATION OF THESE ENTITIES PACIFIC COASTMANAGEMENT,511 OCEANFRONT WALK LP, GINGERBREAD COURT LP, MALIBU BROAD BEACH LP, MARINO GLENCO LP, BLU HOUSE LLC AND BOARDWALK SUNSET LLC, HOW YOU CAN DETERMINE THAT THEY ARE ALL HIS ALTER EGO. THE COURT: THE MOTION IS GRANTED. THE ORDER .HAS BEEN SIGNED. DEFENSE TO GIVE NOTICE. THANK YOU. / 26 - 27 28
- 35. / SUPERIOR COURT OFTHE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES DEPT. LA 24 HONORABLE ROBERT L HESS, JUDGE STEPHEN GAGGERO, AN INDIVIDUAL; PLAINTIFF, CASE NO. -VS- BC286925 REPORTER 'S KNAPP, PETERSEN & CLARKE, CERTIFICATE DEFENDANTS. STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, CAROL L. CRAWLEY, OFFICIAL REPORTER OF THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, FOR THE COUNTY OF LOS ANGELES, DO HEREBY CERTIFY THAT THE FOREGOING •PAGES, 1-28 COMPRISE A FULL, TRUE, AND CORRECT TRANSCRIPT OF THE PROCEEDINGS HELD ON MAY• 29, 2012, IN DEPARTMENT 24 OF THE LOS "ANGELES COURT IN THE MATTER OF THE ABOVE-ENTITLED CAUSE. DATED THIS 10TH DAY OF JULY, 2012
- 36.
- 37. 6 7 8 9 10 11 12 13 14 I5 16 17 18 19 20 21 22 23 24 25 26 27 28 DAVID A. ESQUIBIAS,SBN 171327 TRACY H. KITZMAN, SBN 217224 LAW OFFICE OF DAVID A. ESQUIBrAS 2625 Townsgate Road, Suite 330 Westlake Village, California 91361 Telephone: (805) 267-1141 Facsimile: (805) 267-1140 Attorneys for Specially Appearing Parties SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES STEPHEN M. GAGGERO, Plaintiff, KNA_PP, PETERSEN & CLARKE; STEVEN RAY GARCIA; STEPHEN M. HARRIS; ANDRE JARDINI; and DOES I through 50, inclusive, Defendants. CASE NO.: BC286925 Filed: December 12, 2002 Assigned For All Purposes To: Hon. Robert L. Hess Dept. 24 NOTICE OF SPECIAL APPEARANCE TO OPPOSE AND OPPOSITION TO DEFENDANTS' MOTION TO AMEND JUDGMENT; DECLARATION OF JOSEPH PRASKE Date: May 29, 2012 Time: 8:30 a.m. Dept: 24 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 38. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 TO ALL PARTIESAND TO THEIR ATTORNEYS OF RECORD: NOTICE IS HEREBY GIVEN THAT 511 OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Sunset LLC; Pacific Coast Management; Joseph Praske, trustee, of the Giganin Trust; Arenzano Trust; and Aquasante Foundation are making a special appearance in this matter to oppose the Motion to Amend Judgment filed by defendants K.napp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini ("KPC") on the following grounds: 1. The Court does not have the authority to add the Entities to the judgment against Stephen Gaggero in this matter because California law does not permit outside reverse piercing; 2. Even if California law permitted a judgment creditor to add third party entities to a judgment against an individual defendant through outside reverse piercing, which it does not, the Entities are not the alter egos of Stephen Gaggero; The Entities and Stephen Gaggero are not identical entities, but rather separate and. distinct; 4. 5. The Entities did not control the litigation between Stephen Gaggero and K.PC; Stephen Gaggero did not represent the interests of the Entities during any stage of the litigation; and, 6. It is inequitable to add the Entities to the Judgment, subjecting the assets of the Entities to judgment enforcement, without having been given the requisite notice and opportunity to be heard to protect their interests at any stage in the litigation. Consequently, the Court should deny this motion. This Opposition is based on this Notice and Opposition, on the attached Memorandum of Points and Authorities and Declaration of Joseph Praske, on the Opposition and Request for Judicial Notice filed by plaintiff, on the complete court files and records in this action, and on any such other oral or documentary evidence and argument as may be presented at the hearing. DATED: May 15, 2012 By: Da' _ecially Appearing Parties i OPPOSITION TO MOTION TO AMEND JUDGMENT
- 39. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 I. 3 LI. 4 5III. IV. TABLE OF CONTENTS SUMMARY OF ARGUMENT ............................................................................................. 1 STATEMENT OF FACTS BASED UPON EVISDENCE SUBMITTED IN SUPPORT OF THE MOTION AND AUGMENTED BY THE DECLARATION OF JOSEPH PRASKE .......................................................................................................... 2 CALIFORNIA LAW PROHIBITS THE ADDITION OF THE ENTITIES TO THE JUDGMENT AGAINST GAGGERO .................................................................................. 4 A. The Motion Must Be Denied Because California Law Does Not Allow Imposition of Liability on An Entity That Was Not A Party To The Action ................ 4 B. The Motion Should Be Denied Because the Entities Are Not the Alter Egos of Gaggero .......................................................................................................................... 7 CONCLUSION ........................................................................................................................ 9 OPPOSI.TION TO MOTION TO AMEND IUDGMENT
- 40. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 I5 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases ErieRailroad Co. v. Tompkins (1938) 304 U.S 64 ........................................................................... 4 Greenspan v. LADT, LLC (2010) t91 Cal.App.4th 486 ................................................................ 1, 5 Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290 ................................................................. 9 NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772 ............................................................ 6, 7 Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510 ................................. 1, 4, 5 Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523 ........................................................ 7 Towe Antique Ford Foundation v. I.R.S. (9th Cir. 1993) 999 F.2d 1387 .......................................... 4 Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 14t5 .................................................. 5, 6 Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799 ............................................................................ 8 Statutes Code of Civil Procedure § 187 .......................................................................................................... 4 Rules Wegner, Fairbank, & Epstein, Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2007) § 17:164 ................................................................................................ 5 iii OPPOSITION TO MOTION TO AMEND JUDGMENT
- 41. 6 7 8 9 10 1l 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. SUMMARY OFARGUMENT Defendants Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini ("KPC") seeks to amend its judgment against Stephen Gaggero to add non-parties 5tl OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Sunset LLC; Pacific Coast Management; Joseph Praske, trustee, of the Giganin Trust; Arel_zano Trust; and Aqua Sante Foundation (the "En_ties") as new defendants and judgment debtors (the "Motion") on the grounds that Entities are the alter egos of Gaggero, that they are the real parties in interest in the litigation, and that KPC should be permitted to execute on the assets of the Entities, because K.PC claims to not be able to collect its judgment against Gaggero. The only way to add the Entities to the judgment is through the use of outside reverse piercing of the corporate veil. For various, solid reasons, including violation of due process, California courts have unanimously disallowed the adding of entities as judgment debtors to a judgment against an individual. (Postal Instant Press. Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512-13; Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 513-14.) Even if outside reverse piercing were available to add entities to a judgment, which it is not, KPC has not proven through admissible evidence the requisite elements of alter ego. In fact, this Court determined the opposite at trial---that the Entities were separate and apart from Gaggem. The facts are as follows: 1. Gaggero is not a shareholder, officer, or director of Pacific Coast Management, one of the entities sought to be added here as a judgment debtor; 2. The LLC's and LP's, to whom Gaggero had irrevocably transferred ownership of property 15 years ago, are similarly separate and distinct from Gaggero; 3. Gaggero is not a general or limited partner of any of the LP's sought to be added and is not a member or manager of the LLC's sought to be added; 4. Gaggero is not the named or defaeto trustee of the trusts sought to be added; 5. Gaggero is not the beneficiary of the trusts; and 6. Gaggero has no authority to compel distribution from these trusts. (See the Praske Decl.). OPPOSITION TO MOTION TO AMEND ,IUDGMENT
- 42. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 I7 18 19 20 21 22 23 24 25 26 27 28 Ironically, KPC concededat trial that each of these Entities was separate from Gaggero, and therefore it is not surprising that it is unable to present evidence to support their new claim of lack of separateness. In addition, 511 OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Sunset LLC; Pacific Coast Management; Joseph Praske, trustee, of the Giganin Trust; Arenzano Trust; and Aquasante Foundation t were not made parties to this action at any time after its filing in 2002, even though KPC represented Gaggero beginning in August of 2000 and became intimately familiar with Gaggero's estate planning activities that had taken place some years earlier. KPC cannot claim that it was misled during the case, nor surprised, as it knew all of tile facts beginning in 2000, which facts were the subject of testimony in the 2007 trial, wherein KPC asserted and proved the separateuess to the satisfaction of the Court as demonstrated! in the Requests for Judicial Notice by KPC and Gaggero. KPC, having successfully used the separateness argument in defeating Gaggero's claims against them at trial, is both judicially and collaterally estopped from now claiming the reverse. Had KPC believed that they had evidence that these Entities were the "alter egos and real parties in interest" in this litigation, they were required to have added the Entities as parties to the litigation. This would have permitted the Entities their constitutional due process rights to notice and a hearing to protect the property rights KPC now seeks to deprive them of summarily by this Motion. For all of the above reasons, and based upon these points and authorities, the court should deny this Motion. II. STATEMENT OF FACTS BASED UPON EVIDENCE SUBMITTED IN SUPPORT OF THE MOTION AND AUGMENTED BY THE DECLARATION OF JOSEPH PRASKE. The Entities sought to be added to this judgment were not parties to this litigation. The Entities therefore provide this factual summary from the evidence submitted in support of the Motion, augmented by the evidence contained in the attached declaration of Joseph Praske. 2 According to this Court's Statement of Decision, "Between 1995 and 1998 he [Gaggero] t K.PC re.is-named this mast in its Motion. 2 The Entities also adopt the Statement of Facts set forth in the Opposition to the Motion filed by Gaggero. 2 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 43. 6 7 8 9 10 1l 12 t3 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 did extensive 'estateplanning'.., resulting in all of his [Gaggero's] personal assets being transferred to various corporations, trusts and foundations...he retained absolutely no ownership interest in and no control over these assets." (Statement of Decision, Exhibit A pg 18 footnote 17.) The attached declaration of Joseph Praske confirms these facts. (See the Praske Decl.) Gaggero retained Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini (collectively "KPC") in August 2000 to represent him individually in several lawsuits that were the subject of this litigation, wherein he was a nmned party. (Statement of Decision 1-2; 16.) None of these lawsuits involved the Entities that KPC now seeks to add to the judgment. (Statement of Decision, Exhibit A pp. 14 footnote 13; 18 footnote 17; also see the Pmske Deck) In December 2002, Gaggero filed the complaint in this action against KPC for legal malpractice and for breach of the retainer agreement between himself and KPC. This case finally went to trial in July 2007, [Statement of Decision, Exhibit A pp. 1.] This Court's statement of decision stated, "First, the only plaintiff in this action is Mr. Gaggero in his personal capacity. No other person or entity has joined in this action as plaintiff, and there is no credible evidence that Mr. Gaggero has authority to represent any other person or entity (whether by assignment or otherwise) in asserting these damage claims." [Statement of Decision, p. 26.] "Neither Pacific Coast Management nor Avalon, nor any of the various other entities was a party to the underlying litigation, nor were they ever a party to this suit." [Statement of Decision p. 14.] "There was no evidence that Mr. Gaggero was represented in a capacity as officer, director or employee of any of these entities,..."[Statement of Decision, p. 27.] The ultimate ruling in the case found separateness, preventing Gaggero any recovery, "Since he paid nothing, he can recover nothing." [Statement of Decision, p. 28.] The court entered judgment in favor of KPC and against Gaggero in his personal capacity In Februm'y 2008, K.PC thereafter sought recovery against Oaggero only for its attorney fees and costs from Gaggero in his personal capacity based on the contractual fee provisions contained written retainer agreements between KPC and Gaggero. This Court awarded these costs against Gaggero personally. [Exhibit B to the Motion.] No evidence is presented to the Court by KPC in support of its Motion to displace the above 3 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 44. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 findingsof the Court. III.CALIFORNIA LAW PROHIBITS TIlE ADDITION OF THE ENT1TIES TO THE JUDGMENT AGAINST GAGGERO. KPC seeks, by way of this motion to amend the judgment entered singly and individually against Gaggero in his personal capacity, and add the Entities as judgment debtors. This outside reverse piercing application of the alter ego doctrine is unanimously prohibited by California law) Even if outside reverse piercing were legally permissible, which it is not, KPC presents no evidence to support its alter ego claim. The trial court ruled Gaggero and the Entities were separate, that Gaggero had no ownership of or authority over the entities, and that Gaggero alone was the real party in interest. A. The Motion Must Be Denied Because California Law Expressly Prohibits Reverse Piercing to Hold an Entity Liable For the Personsal Debts of an Individual. Under California Law, the alter ego doctrine may not be applied in reverse, as requested here by KPC, to hold an entity liable for the debt of an individual. It is only the standard alter ego doctrine that may be used under vary narrow circumstances to pierce the corporate veil and hold an individual liable for claims made against the entity. Here, the claims and judgment are not against the LLC's, LP's, trusts, or corporation. This debt is owed by an individual, and here, contrary to seeking standard alter ego, KPC seeks the reverse, to add the Entities as new judgment debtors. In California, a trial court is not authorized to amend a judgment to add ma entity as a judgment debtor under a reverse alter ego theory. "[A] third party creditor may not pierce the corporate veil to reach corporate assets to satisfy a shareholder's personal liability." (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512-13.) (See, a/so: (Wegner, Fairbank, & Epstein, Cal. Practice Guide." Civil Trials and Evidence, (The Rutter Group 2007) § 3 It is hornbook law that the law of the forum state applies to issues of substantive law, which includes the determination of whether alter ego liability applies. Contrary to KPC's claim, California law applies to this Motion (Erie Railroad Co. v. Tompkin_ (1938) 304 U.S 64, 79-80; Towe Antique Ford Foundation v. LR.S. (gth Cir. 1993) 999 F.2d 1387, I391.) OPPOSITION TO MOTION TO AMEND IUDGMENT
- 45. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18:522.1,citingPostal Instant Press',Inc. v. Kaswa Corp.) "In Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 77 Cal.Rptr.3d 96, the Court of Appeal held that "outside reverse" piercing of the corporate veil is not permitted in California, that is, the corporate veil will not be pierced to satisfy the debt of an individual shareholder. Rather, the court explained, the alter ego doctrine will only be applied to hold an individual shareholder liable for a corporate debt where the individual has disregarded the corporate form." (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 513-14.) Here, the only parties to the retainer agreements were Gaggero and KPC, and the only parties to this litigation were Gaggero and KPC. Appropriately the only parties to the legal malpractice action were Gaggero and KPC. This court expressly ruled, based on KPC's own argument and evidence at trial, that Gaggero was the only real party in interest and Gaggero had no authority to represent any other person or entity in connection with the claims asserted in this case. The judgment in this case was entered against Gaggero in his personal capacity. KPC's motions for attorney fees and costs were based the personal retainer agreements between Gaggero and KPC, and the award of fees and costs was made against Gaggero in his personal capacity. Four years later, the court is being asked to amend the jud_gnent to add the Entities, who did not participate in this case, as judgment debtors. In fact, this court has already determined that the Entities are not to be real parties in interest in this action. The motion is based solely on an unrecognized legal theory and asks for this court to apply prohibited outside reverse piercing. Code of Civil Procedure section 187 "has never been construed to allow imposition of liability on an entity which was never a party to the action." (Triplett v. Farmers h_s. Exchange (1994) 24 Cal.App.4th 1415, 1420.) Under a very narrow set of circumstances, none of which exist here, the court may (using the standard alter ego theory) exercise its equitable powers to lmend a judgment to add a new party to the judgment. Cases using "section 187 to add new _arties as additional judgment debtors have always been rooted in the standard "alter ego" concept :hat the original party and the new patty were one and the same." (Id.) However, the ability under section 187 to amend a judgment to add a defendant, thereby imposing liability on the new defendant without trial, requires both (1) that the new party be the alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns. The due process considerations are in addition to, not in 5 OPPOSrrION TO MOTION TO AMEND JUDGMENT
- 46. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 lieu of, thethreshold alter ego issues. (ld. at 1421.) In order to protect the constitutional due process rights of this new party, the court must find that during the underlying litigation there was virtually no distinction between the defendant and the new party. Since this court ruled the entities are separate and distinct from Gaggero, it cannot add the proposed new parties to the judgment. ([d, at 1421.) Thus, KPC's Motion must fail. Even if California law recognized outside reverse piercing to amend a judgment, which it does not, KPC would then be required to establish, by a preponderance of admissible evidence, (1) all of these Entities were the alter egos of Gaggero during the course of the underlying litigation, and (2) each of the Entities exercised control of the underlying litigation, and (3) each of the Entities' interests were represented at each stage of the underlying litigation. (Triplett v. Farmers Ins. Exchange, supra, 24 Cal.App.4th at 1421.) KPC has produced no evidence to establish the Entities were the alter egos of Gaggero during the course of the litigation. In additional, KPC has failed to provide admissible evidence to establish that each of the Entities exercised any control over the litigation, let alone had the ability to represent their interests at each stage of the proceeding, including trial. In addition to the undisputed evidence provided in the Praske Declaration, KPC's motion claims it is Gaggcro who controls the Entities and the Entities had no control over the litigation. All three of the above factors must be fully satisfied in order in insure that all of the Entities' interests were, in fact, represented during the underlying litigation. If the court finds that KPC cannot establish all three factors, the motion must be denied. (NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772.) Even where alter ego is proven, it is improper to add a new party who was never afforded the due process right to litigate their interests in the underlying action. (Triplett, Supra.) Clearly, KPC has failed to meet its burdens here and the Motion must be denied. The Entities that KPC seeks to add to the judgment all have shareholders, members, ?artners, and trustees whose interests were clearly not the same as Gaggero's interests in this litigation or the underlying litigations. As demonstrated herein, it is improper to add a new alter ego party when the new party's interests are not the same as those of the original party. (NEC Electronics lnc, v. Hurt, Supra, 208 Cal.App.3d at 780-81 ,) This case, like that in NEC, "contrasts 6 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 47. 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 with the usualscenario where the interests of the corporate defendant and its alter ego are similar so that the trial strategy of the corporate defendant effectively represents the interests of the alter ego." ([d. at 780.) Here, it is undisputed the Entities were not parties to the litigation, did not control the litigation, and had no ability to litigate their differing interests. (See Praske Decl.) Subjecting the Entities to judgment enforcement after this litigation has been concluded, under any theory, would violate their due process rights. B. The Motion Should Be Denied Because the Entitles Are Not the Alter Egos of Ga ero. KPC asserts in their Motion that the Entities should be liable for the judgment entered against Gaggero in his personal capacity. As discussed above, California law does not permit such reverse application of the alter ego doctrine in order to hold an Entity liable for the personal debts of an individual. Even assuming that reverse piercing was permissible, which it clearly is not, KPC's motion contains no evidence to establish an alter ego claim. The facts and evidence, which was already presented at trial and is included in the Praske Declaration, unequivocally demonstrate that Gaggero and the Entities are separate, and that the Entities were not represented at all stages in this litigation. This court has already ruled in both its findings of fact, and its entry of judgment against Gaggero individually. A party seeking to invoke the alter ego doctrine must show "such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist," and also "an inequitable result if the acts in question are treated as those of the corporation alone." (Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4tli 523, 538 [citations omitted].) As noted above and in the Praske Declaration, Gaggero is not a shareholder, partner, member or trustee of any of the entities, and does not control any of the Entities. Courts have traditionally looked at certain factors that include: "the holding out by one entity that it is liable for the debts of the other...use of one as a mere shell or conduit for the affairs of the other," also "inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers." ([d. at 538-39.) The analysis 7 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 48. 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 is factspecific,andnoonefactoris moreimportantthantheothers,(ZoranCorp.v. Chen (2010) 185 Cal.App.4th 799, 812.) The Praske declaration proves that the Entities were properly formed and maintained, do not commingle their funds, keep separate records, do not hold themselves out as liable for the debts of Gaggero, Gaggero does not own or control any of the entities, and each entity owns separate property at different addresses. (See Praske Decl.) This evidence defeats KPC's argument. KPC argued at trial that it was Gaggero in his personal capacity who was the only plaintiff and real party in interest, i.e., that he was separate from and did not represent the Entities. This court agreed with KPC when determining that Gaggero paid nothing to KPC and could recover nothing. Thus, this court has already ruled on the issue of alleged unity and ownership between Gaggero and the Entities, and specifically found insufficient evidence to establish that Gaggero had authority to represent any other person or entity in connection with the claims asserted in this case. The Praske Declaration shows that the formation and operation of the Entities complied with all legal formalities, there is no commingling of funds, and in fact Gaggero has no interest or control in any of the Entities. The lone fact that Praske acts as a representative for some of the entities does not establish that the entities are Gaggero's alter egos. This is precisely why this court ruled that Gaggero and the Entities were separate and that he had no authority to represent them, as KPC argued at trial. No new evidence has been presented to support KPC's change in position, because no such facts exist. As the evidence presented at trial established, and as set forth in the attached declaration of Joseph Praske, Gaggero had no authority, interest, or control over these Entities, and Gaggero did not represent them at trial in any way. Even if this court were inclined to reverse its prior ruling and somehow find that the Entities were Gaggero's alter egos, which they are not, and that he fully controlled and represented them at trial (which the Praske Declaration shows he did not), that would only satisfy the first prong of KPC's new alter ego claim. KPC must also prove an improper intent. "Traditional piercing of the corporate veiI is justified as an equitable remedy when the 8 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 49. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 shareholders have abusedthe corporate form to evade individual liability, circumvent a statute, or accomplish a wrongful purpose." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300- 01.) KPC has failed to meet its burden to present such evidence. KPC's motion makes the bare accusation that Gaggero transferred ownership of property to separate legal entities. Gaggero responds he did so for legitimate estate planning purposes 15 /ears ago. KPC concludes without cvidentiary support that Gaggem's estate planning decisions were done to defraud creditors. In fact, the only two creditor claims mentioned in the Statement of Decision were noted by the Court to have either been "resolved in 2002 by full payment" or "withdrawn or dismissed in May or June of 2002" [Statement of Decision, Exhibit A, 25 footnote 27.] It is a stretch of the imagination to now contend that Gaggero's 1997 estate planning was a fraudulent conveyance done in anticipation of the 2008 judgment in this case. KPC would have the court believe that, if a person or company conveys ownership of property to an entity, the court must infer that the conveyance was made to defraud any creditor that the person or company may ever have at any time during the rest of their life. The argument is unreasonable. Such a conclusion would defeat the purpose for the legitimate existence of corporations, limited liability companies, limited partnerships, and estate planning in general. Ill the absence of specific and probative evidence of fraud, there is no abuse of the corporate form. The evidence here does not support that Entities are the alter ego of Gaggero. This court has already ruled on the issues of control and separateness. There is no evidence that Gaggero's estate planning decisions were in m_y way motivated by any intent to defraud anyone, violate any statute, or accomplish any wrongful purpose: There is thus no basis for a finding of alter ego. IV. CONCLUSION Based on the foregoing, it is clear that California law expressly prohibits adding 511 OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Snnset LLC; Pacific Coast Management; Joseph Praske, trustee, of the Giganin Trust; Arenzano Tnast; and Aqua Sante Foundation as judgment debtors under application of reverse alter ego, there is no evidence to even support a finding of alter ego in this case, and KPC is 9 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 50. 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 estopped from requestingthe relief it seeks in this motion. This court should deny KPC's motion to amend the judgment. DATED: May 15, 2012 LAW OFFICE OF DAVID A. ESQUI]BIAS By: Atief-neys _br/Spes, i_tly Appearing Parties 10 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 51. 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF JOSEPHPRASKE I, Joseph Praske, declare as follows: [. 1 have personal knowledge ofthe facts set forth in this Declar4tion and, if called as a witness, could and would testify competently thereto. 2. This Declaration is submitted in support of51l OFW LP; Gingerbread Court LP; Malibu Broadbeach LP; Marina Glencoe LP; B[u House LLC; Boardwalk Sunset LLC; Pacific Coast Management; Joseph Praske. trustee, of the Giganin Tmsl; Arenzano Trust; and Aqua Santo Fourtdation (the "Entities")' Opposition to the Motion to Amend Judgment liled by defendants K.napp, Petersen & Clarke, Stevcn Ray Garcia, Stephen M. Harris, and Andre Jardini. 3. In 1997, I was an estate planning attorney. I was contacted by Stephen Gaggero to review his portfolio and develop an estate plan for him that would allow his estate tu survive him, be legally protected, and would provide a benefit for his family. Based on my recommendations, Mr. Gaggero thereafter transferred ownership of eert,in property to various entities. This was a legitimate es'tare planning decision. 4. Mr. Gaggero made these transfers based upon my recommendations, such recommendations that [ made for no other purposes than legitimate estate planning. I certainly would not have advised Mr. Gaggero to make transfers to defraud anyone. 5. I set up, and maintain in good standing, 'all of the Entities which K.PCseeks to add as judgment dehtors in this case. 1 know who all of the shareholders, officers, and directors arc of Pacific Coasl Management Corporation, and Mr. Gaggero is not one of them, and was not one of hem at any stage of the underlying litigation. I set up the limited partnerships which KPC seeks to add to the judgment. Mr. Gaggero is not a general or limited partner of Malibu Broad Beach LP, and was not one oft.hem at any stage of the underlying litigation. Mr. Gaggero is not a general or limited partner of Marina GIeneoe LP, and was not one of them at any stage of the underlying litigation. Mr. Gaggero is not a general or limited partner of"511 OFW LP. In addition, Mr. Gaggero is not a general or limited partner of Gingerbread Court LP, Each o1"the Limited Partnerships has its own separate assets, none of which are owned by Mr, Gaggero. Each of the OPPOSITION TO MOTION TO AMEND JUDG.'vLENT
- 52. I 2 3 4 5 6 7 8 9 10 I! 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LimitedPartnershipshas a separategeneralpml.ncr,noneofwhichisMr. Gaggcro.Each ofthc Limited Partnerships maintains its own separate bank accounts, none to which Mr. Gaggero is a signatory. 6. I set up, and maintain in good standing, the limited liability companies tl_at KPC seeks to add as judgment debtors. Mr. Gaggero is not a member or manager of Blu House LLC, and was not one of them at any stage of the underlying litigation. Mr. Gaggero is nol a member or manager of Boardwalk Sunset LLC, and was not one of them al any stage of the underlying litigation. Each of the limited liability companies has its own separate assets, none of which are owned by Mr. Gaggcro. Each of the limited liability companies has a separate manager, none of which is Mr, Gaggero. Each of the limited liability companies maintains its own separate bank accounts, none to which. Mr. Gaggcro is a signatory. 7. I am the trustee of the Giganin Trust, the Arenzano Trust, and the Aquasante Foundation. I control those entities as the trustee and Mr. Gaggero has no power or authority to control them. Mr. Gaggero has no power to command a distributLon to him by any of the above cntities. 8. 9. 10. Each of tim 'above entities keeps separate records. Each of the entities maintain their own bank accounts. None of the above entities were parties to, or wore represented in, or controlled the underlying litigation. 11. All of the above Entities have shareholders, members, partners, trustees and/or "_otential beneficiaries whose interests were clearly not the same as Gaggero's interests in this litigation or the underlying litigations. All of the required corporate formalities of the above stated entities have been12. followed. 13. My legal specialty over the past two decades has been creating estate planning for individuals and I have created a multitude of estate plans for a multitude of clients. I declare under penalty of perjury under the laws or"the State of California that the foregoing is true and correct. OPPOSITION TO MOTION TO AMEND JUDGMENT
- 53.
- 54. 1 2 3 4 5 6 7 8 9 i0 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE Iam a resident of the State of California, over the age of eighteen years, and not a party to the within action. My business address is 2625 Townsgate Road, Suite 330, Westlake Village, California 91361. On May 15, 2012, I served the foregoing document(s) described as: NOTICE OF SPECIAL APPEARANCE TO OPPOSE AND OPPOSITION TO DEFENDANTS' MOTION TO AMEND JUDGMENT; DECLARATION OF JOSEPH PRASKE BY MAIL I placed the above document(s) in a sealed envelope with postage thereon fully prepaid, in the United States mail at Westlake Village, California, addressed as set forth below. I am readily familiar with the firm's practice for collection and processing of documents for mailing, Under that practice it would be deposited with U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. xK_ BY FEDERAL EXPRESS I placed the above document(s) in a sealed envelope and placed it for deposit with Federal Express, prepaid for next day delivery, addressed as set forth below. BY FACSIMILE I transmitted the above document(s) by facsimile transmission to the fax number(s) set forth below on this date before 5:00 p.m., and received confirmed transmission reports indicating that the document(s) were successfully transmitted. BY PERSONAL DELIVERY I placed the above document(s) in a sealed envelope and caused them to be personally delivered by hand to the person(s) set forth below. Randall A. Miller Miller LLP 515 South Flower Street, Suite 2150 Los Angeles, CA 90071 Facsimile: 888-749-5812 I declare under penalty of perjury under the laws of the State of Califomia that the above is rue and correct. Executed on May 15, 2012, at Westlake Village, California. 14 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 55.
- 56. I0 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 David Blake Chatfield,State Bar No. 88991 WESTLAKE LAW GROUP 2625 Townsgate Road, Suite 330 Westlake Village, California 91361 Telephone: 805-267-1220 Facsimile: 805-267-1211 Attorneys for Plaintiff Stephen M. Gaggero SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES ;TEPHEN M. GAGGERO, Plaintiff, V° (.NAY'P, PETERSEN & CLARKE; STEVEN RAY GARCLA; STEPHEN M. HARR/S; ANDRE ]'ARDINI; and DOES 1 through 50, inclusive, Defendants. CASE NO.: BC286925 Filed: December 12, 2002 Assigned For All Purposes To: Hon. Robert L. Hess Dept. 24 NOTICE OF OPPOSITION AND OPPOSITION TO DEFENDANTS' MOTION TO AMEND JUDGMENT; DECLARATION OF STEPHEN GAGGERO (Filed Concurrently With Plaintiff's Request For Judicial Notice) Date: May 29, 2012 Time: 8:30 a.m. Dept: 24 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 57. 6 7 8 9 10 11 12 13 14 15 16 17 t8 19 2O 21 22 23 24 25 26 27 28 TO ALL PARTIESAND TO THEIR ATTORNEYS OF RECORD: NOTICE IS HEREBY GIVEN THAT plaintiff Stephen M. Gaggero opposes the Motion to Amend the Judgment filed by defendants Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini on the following grounds: 1. California law expressly does not permit outside reverse piercing, and thus court thus does not have the authority to add non-party entities to the judgment against Stephen Gaggero as defendants request in the Motion; 2. Even if California law did permit outside reverse piercing, which it does not, the Motion must be denied because defendants have presented no evidence to prove an alter ego claim; and, 3. Defendants' Motion is barred by judicial estoppel and collateral estoppel. Consequently, the court should deny defendants' Motion. This Opposition is based on this Notice and Opposition, on the attached Memorandum of Points and Authorities and Declaration of Stephen M. Gaggero, on the Request for Judicial Notice filed concurrently herewith, on the complete court files and records in this action, and on any such other oral or documentary evidence and argument as may be presented at the hearing. DATED: May 15, 2012 WESTLAKE LAW OROUP Stephen M. Gaggero OPPOSITION TO MOTION TO AMEND JUDGMENT
- 58. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I, II. III. IV. TABLE OF CONTENTS INTRODUCTION................................................................................................................. 1 STATEMENT OF RELEVANT FACTS .............................................................................. 3 KPC'S MOTION MUST BE DENIED BECAUSE IT IS PROHIBITED UNDER CALIFORNIA LAW, IT LACKS ANY EVIDENT1ARY SUPPORT, AND KPC IS ESTOPPED FROM MAKING THE ARGUMENTS CONTAINED THEREIN' ............ 4 A. California Law Expressly Prohibits Reverse Piercing To Hold An Entity Liable For Personal Debts Of An Individual ................................................................. 5 B. KPC Has Produced No Evidence To Establish Their Claim That The Entities Are the Alter Egos of Gaggero, And The True Facts Refute Such A Finding .............. 7 C. KPC Is Estopped From Making The Arguments in Their Motion Based On The Contrary Rulings They Sought And Obtained At Trial, And The Fact They Have Waited Ten Years To Raise This Issue ..................................................... 10 CONCLUSION ................................................................................................................... 12 ii OPPOSITION TO MOTION TO AMEND JUDGMENT
- 59. 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 Cases Cartv. Barnabey's Hotel Corp. (1994) 23 Cal,App,4th 14 ............................................................ 12 Erie Railroad Co. v. Tompkins (1938) 304 U.S 64 ........................................................................... 5 Greenspan v, LADT, LLC (2010) l 91 Cal.App.4th 486 .................................................................... 6 Hernandez v. City of Pomona (2009) 46 Cal.4th 501 ..................................................................... 11 Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171 ................................................. 10, 11 Mesler v. Bragg Management Co. (1985) 39 Cal.3 d 290 ................................................................. 9 NEC Electronics Inc. v. Hurt (1989) 208 Cal.App,3d 772 ................................................................ 7 Postal lnstant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510 ......................................... 6 Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523 ........................................................ 8 Towe Antique Ford Foundation v. LR.S. (9th Cir. 1993) 999 F.2d 1387 .......................................... 5 Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415 ................................................... 5, 7 Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799 ............................................................................ 8 Statutes Business and Professions Code § 6068(d) ......................................................................................... 6 Code of Civil Procedure § 197 .......................................................................................................... 5 Rules Wegner, Fairbank, & Epstein, Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2007) § 17:164 ............................................................................................... 6 iii OPPOSITION TO MOTION TO AMEND JUDGMENT
- 60. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2l 22 23 24 25 26 27 28 I, INTRODUCTION This isan action for legal malpractice. In December 2002, plaintiff Stephen M. Gaggero sued Knapp, Petersen & Clarke, Steven Ray Garcia, Stephen M. Harris, and Andre Jardini collectively "KPC") the lawyers he had retained in August 2000. This court found that he etained K_C to represent him personally. [Statement of Decision, Exhibit A to KPC's motion, p. 6.] Court trial commenced in July 2007. In February 2008 this court entered judgment in favor of K.PC against Gaggero personally, and in May 2008 the judgment was amended to award KPC attorney fees and costs. In May 2010, the judgment was affirmed on appeal, in December 2010 the iudgment was amended to award KPC its fees and costs on appeal. KPC has now brought an undeniably belated and unfounded motion to amend the udgment to add as judgment debtors several entities this court previously found were separate From Gaggero. The entities are a corporation in which Gaggero is not a shareholder, officer, or director; four limited partnerships in which Gaggero is not a general or limited partner; two limited liability companies in which Gaggero is not a member or manager; and two irrevocable trusts and a foundation of wlfich Gaggero is not the trustee. The sole ground KPC ,asserts for this motion is that the entities are supposedly the alter egos of Gaggero, and fifteen years ago he supposedly created these entities to defraud creditors who did not yet even exist. In support of this motion, KPC's counsel intentionally misrepresents the law and facts in flagrant violation of counsel's duty of candor owed to this court, apparently believing the court will ignore such misrepresentations. Such conduct is sanctionable, and subjects counsel to disciplinary action. In order to add the entities to the judgment against Gaggero, this court must engage in outside reverse piercing. Contrary to the statements of KPC's counsel, California law expressly prohibits the reverse piercing of the corporate or entity veil that KPC requests. Even if California law did permit reverse application of the alter ego doctrine, which it does not, there is no basis for a finding of alter ego. KPC presents not one shred of evidence to support its repeated allegation that Gaggero's estate planning was done to defraud any creditor, not one that existed fifteen years ago let alone one that exists today. In addition, KPC omits the fact that it produced evidence at trial to prove Gaggem and 1 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 61. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 these entities werecompletely separate, and this court ruled in KPC's favor on that issue: "First, the only plaintiff in this action is Mr. Gaggero in his personal capacity. No other person or entity has joined in this action as plaintiff, and there is no credible evidence that Mr. Gaggero has authority to represent any other person or entity (whether by assignment or otherwise) in asserting these damage claims." [Statement of Decision, p. 26.] "Neither Pacific Coast Management nor Avalon, nor any of the various other entities was a party to the mlderlying litigation, nor were they ever a party to this suit." [Statement of Decision p. 14.] "There was no evidence that Mr. Gaggero was represented in a capacity as officer, director or employee of any of these entities,..."[Statement of Decision, p. 27.] "Between 1995 and 1998 he [Gaggero] did extensive 'estate planning'...resulting in all of his [Gaggero's] assets being transferred to various corporations, trusts and foundations...he retained absolutely no ownership interest in and no control over those assets." [Statement of Decision, Exhibit A, pg. 18 footnote 17.] The argument by KPC and the ruling by this court regarding separateness eliminated Gaggero's right to recover the fee damages he was suing over, "Since he paid nothing, he can recover nothing." [Statement of Decision, p. 28.] In addition, KPC omits the fact that it has known of these entities and Gaggero's legitimate estate planning since 2000 when Gaggero retained K.PC, but not until nowin 2012 does KPC claim these entities are the real parties in interest in this action that was filed in 2002 and tried in 2007. The true holdings of the eases KPC cites and misrepresents state that this court is not authorized to amend the judgment based on outside reverse piercing in order to hold an entity liable for the personal debts of an individual. The true facts K.PC misstates or omits show no impropriety or fi'audulent intent by Gaggero when conveying the ownership of assets to entities for estate planning purposes fifteen years ago. Indeed, the true facts show this court has already ruled on the separateness of Gaggero and the entities, and show KPC argued for that separateness with full knowledge of the facts regarding these entities for seven years. Thus, not only does the law not authorize the specific relief sought by this motion, but KPC is estopped fi'om bringing the motion. The motion must be denied. OPPOSITION TO MOTION TO AMEND JUDGMENT
- 62. 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 H. STATEMENT OFRELEVANT FACTS In 1997, fifteen years ago, Gaggero transferred ownership of certain property to various entities. "My estate was - had grown rather large, and I had just weathered the early 1990's and mid-'90's, which was a pretty rough time for anybody in real estate. And I decided that it would be a prudent idea to get a lawyer to look at my portfolio and develop an estate plan so that my estate would survive me and be for the benefit of my children and not be something that is exposed. [Transcript in Gaggero v. Yura, Exhibit C to KPC's Motion 95:3-9.] This was a legitimate estate planning decision. Nothing more, nothing less. K.PC presents no evidence to prove it was anything else, because no such evidence exists. Gaggero did not make the transfers with the intent to defraud creditors. He certainly did not naake the transfers with the intent to defraud KPC, as he did not even know who they were in 1997. Gaggero's decision to transfer ownership of property to various entities was, and continues to be, a generally accepted estate planning choice. In August 2000, Gaggero retained K.PC to represent him in a variety of legal matters, including but not limited to, representing him at depositions and had intimate knowledge of Gaggero's prior estate planning decisions in 1997 as well as knowledge of all the entities mad their organization. KPC knew the full extent of the separateness of Gaggero from the entities, ha late 2001, a dispute arose between Gaggero and KPC over K.PC's handling of Gaggero's legal affairs, and related billing practices. In December 2002, Gaggero filed this action against K.PC for legal malpractice and breach of the retainer agreement between him and KPC. The case was pending for several years, during which time extensive discovery was conducted. This discovery included i imforrnataon relating to the entities to whom Gaggero had previously conveyed ownership of property. This case went to trial in July 2007. During the trial, K.PC specifically argued Gaggero and the entities were separate, and produced evidence to prove Gaggero was the only real party in interest. KPC's counsel stated: "He testified at his deposition, and he testified at trial, that he is merely a consultant to PCM. He has no ownership interest...I have all of the corporate documents for PCM. He is not listed as a director. He is not an officer. He is nothing. He has expressly, by 3 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 63. 1 2 3 4 5 6 7 8 9 IO ii 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 design, disavowed anyrelationship with that company. Your honor hit the nail on the head when...you said you can't have it both ways." [Trial Transcript, Exhibit A to Request for Judicial Notice, 3629: 8:21.] This court expressly stated: "Either it is his alter ego, because it is all his money and he controls it, and he has absolute control...or they are separate entities." [Trial Transcript 3632:2-4.] It is undisputed that this court ruled in KPC's favor on the issue of separateness. The court found that Gaggero in his personal capacity, was the only plaintiff in this action, that no other person or entity had been joined as a plaintiff, and that there was no credible evidence to establish that Gaggero had the authority to represent any other person or entity in connection with the claims asserted in this case. [Statement of Decision, p. 26.] In February 2008, the court entered judgment in favor of KPC and against Gaggero in his personal capacity. Based on the retainer agreements between KPC and Gaggero, K.PC sought irecovery for its attorney fees and costs from Gaggero in his personal capacity. In May 2008, the iudgment against Gaggero in his personal capacity was amended to include an award of attorneys fees and costs. In May 2010, the Court of Appeal affirmed the judgment. Thereafter, KPC brought :a motion to recover their appellate fees and costs from Gaggero in his personal capacity. In December 2010 this court awarded KPC their fees and costs on appeal, and amended the judgment against Gaggero in his personal capacity. Now, in April 2012, K.PC has brought a motion to add as judgment debtors the very entities KPC successfully argued at trial that Gaggero had no ownership interest in or control over. In this motion, KPC claims - in direct contrast to the position it took at trial and contrary to the findings of this court - that these entities are Gaggero's alter egos, that he and the entities are one and the same, and that the entities are actually the real parties in interest in this action. As set forth below, this motion must fail not only as unpermitted outside reverse piercing, but KPC's motion is also barred by both judicial and collateral estoppel. III. KPC'S MOTION MUST BE DENIED BECAUSE IT IS PROHIBITED UNDER CALIFORNIA LAW 1 IT LACKS ANY EVIDENTIARY SUPPORT_ AND KPC IS ESTOPPED FROM MAKING THE ARGUMENTS CONTAINED THEREIN KPC's motion asks this court to amend the judgment entered against Gaggero in his 4 OPPOSITION TO MOTIONTO AMEND JUDGMENT
- 64. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 i9 20 21 22 23 24 25 26 27 28 personalcapacityby addingentitiesasjudgmentdebtors.Californialawexpresslyprohibitsthis outside reversepiercing application of the alter ego doctrine, and KPC's blatant misrepresentation of the law should be sanctioned) Even if the relief sought were legally permissible, which it is not, KPC's motion contains no evidence to support its alter ego claim. Moreover, the evidence K.PC presented at trial established that Gaggero and the entities were not only separate, but also that Gaggero had no ownership, authority, or control whatsoever with respect to the entities and that Gaggero alone was the only real party in interest. Finally, KPC's motion should be denied on estoppel grounds based on its argument and the court ruling at trial, and on the fact that [(PC has know all the relevant facts since 2000. A. California Law Expressly Prohibits Reverse Piercing To Hold An Entity Liable For Personal Debts Of An Individual Code of Civil Procedure section 187 "has never been construed to allow imposition of liability on an entity which was never a party to the action." (Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1420.) Cases using "section 187 to add new parties as additional udgment debtors have always been rooted in the "alter ego" concept that the original party and :he new party were one and the same." (Id.) However, this "requires both (1) that the new party be die alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns. The due process considerations are in addition to, not in lieu of the threshold alter ego issues. (Id. at 142I [citations omitted].) In this case, KPC's motion fails on both prongs. First and most important, the alter ego doctrine may not be applied in reverse, as requested here, to hold an entity liable for the debt of an individual. It is only the standard alter ego doctrine that may be used in appropriate circumstances to pierce the corporate veil and hold an individual liable for claims made against the entity. In this case, the claim and judgment are not against any of the entities that KPC seeks to add as judgment debtors. This is a debt that is undisputedly owed I It is hornbook law that the law of the forum state applies to issues of substantive law, which includes the determination of whether alter ego liability applies. Therefore, California law must be applied to this Motion. (Erie Railroad Co. v. Tompkins (1938) 304 U.S 64, 79-80; Towe Antique Ford Foundation v, LR.S, (gth Cir. 1993) 999 F.2d 1387, 1391.) OPPOSITION TO MOTION TO AMEND JUDGMENT
- 65. 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 by an individual.Yet, KPC is seeking to hold these entities liable for that debt under a reverse alter ego theory. This request must be denied. The law in California is crystal clear that a trial court is not authorized to amend a judgment to add an entity as a judgment debtor under a reverse alter ego theory. "[A] third party creditor may not pierce the corporate veil to reach corporate assets to satisfy a shareholder's _ersonal liability." (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512- 3.) (See, also: (Wegner, Fairbank, & Epstein, Cal. Practice Guide: Civil Trials and Evidence, (The Rutter Group 2007) § 18:522.1, citing Postal Instant Press, lnc. v. Kaswa Corp.) "In Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 77 Cal.Rptr.3d 96, the Court of Appeal held that "outside reverse" piercing of the corporate veil is not permitted in California, that is, the corporate veil will not be pierced to satisfy the debt of an individual shareholder. Rather, the court explained, the alter ego doctrine will only be applied to hold an individual shareholder liable for a corporate debt where the individual has disregarded the corporate fonrl." (Greenspan v, LADT, LLC (2010) 191 CaI.App.4th 486, 513-14.) Incredulously, K_PC's counsel cites to Postal Instant Press, Inc. and Greenspan and falsely J represents to this Court that these cases ill fact support application of reverse piercing. This misrepresentation of the law was clearly intentional, as it is repeated throughout K.PC's motion, md K.PC's counsel should be sanctioned for violating its duty of candor to the court. (See: (Bus. Prof. Code § 6068(d).) This was a legal malpractice action brought by an individual client against the lawyers, whom he alone hired to represent him personally in the underlying matters. The only parties to the retainer agreements were Gaggero and KPC, and the only parties to this litigation were Gaggero and KPC. This court expressly ruIed, based on K.PC's own argument and evidence at trial, that Gaggero was the only real party in interest and that Gaggero had no authofty to represent any other person or entity in connection with the claims asserted in this case. The judgment in this case was thus entered against Gaggero in his personal capacity. KPC's subsequent motions for attorney fees and costs were based on the retainer agreements between Gaggero personally and K.PC, and the award of fees and costs was made against Gaggero in his personal capacity. KPC's motion now asks this court to amend the judgment to add entities as judgment debtors, who this court has already determined not to be real parties in interest in this action. The 6 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 66. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 motion is basedon an improper request for this court to apply outside reverse piercing, which this court is not authorized to do. Contrary to the misrepresentations of KPC's counsel, California law _rohibits reverse application of the alter ego doctrine in order to hold an entity liable for the _ersonal debts of an individual. KPC's motion must be denied on this basis alone. Even if reverse alter ego could be used to amend a judgment, which it undisputedly cannot, KPC then still must prove it was the entities who controlled the underlying litigation. (Triplett v. Farmers Ins. Exchange, supra, 24 Cal.App.4th at 1421.) KPC has produced no evidence to establish the entities exercised any control over the litigation, let alone had the abitity to represent their interests at trial or at any other proceeding. To the contrary, KPC now argues it is Gaggero who controls the entities, thereby conceding the entities had no control over the litigation. Even where alter ego is proven, it is improper to add a new party who was never afforded the due process right to litigate their interests in the underlying action. (ILl.) Finally, these entities all have shareholders, members, partners, and trustees whose interests were clearly not the same as Gaggero s interests in this litigation or otherwise. It is again nnproper to add a new alter ego party when the new party's interests are not the same as those of the original party. (NEC Electronics Inc. v. Hun (1989) 208 Cal.App.3d 772, 780-81.) This case, like that in NEC, "contrasts with the usual scenario where the interests of the corporate defendant and its alter ego are similar so that the trial strategy of the corporate defendant effectively represents the interests of the alter ego." (Id. at 780.) Here, it is undisputed that the entities had no control over the litigation, and no ability to litigate their differing interests, thus adding them as judgment debtors under any theory would violate their due process rights. B. KFC Has Produced No Evidence To Establish Their Claim That The Entities Are the Alter Egos of Gaggero_ And The True Facts Refute Such A Finding. KI'C has alleged that the entities are the alter egos of Gaggero, and that it is the entities and not Gaggero who are the real parties in interest in this case. Based on these allegations, KPC asserts the entities should be liable for the judgment entered against Gaggero in his personal capacity. As discussed supra, California law does not permit such reverse application of the alter ego doctrine in order to hold an entity liable for the personal debts of an individual. Even OPPOSITION TO MOTION TO AMEND JUDGMENT
- 67. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 assuming that reversepiercing was permissible, which it clearly is not, K.PC's motion contains no evidence to establish their alter ego claim. The facts and evidence already presented at trial unequivocally show Gaggero and the entities are separate, and Gaggero is the only real party in interest in this case. Indeed, this court has already so ruled in both its findings of fact, and its entry of judgment against Oaggero individually. It is well settled that in order to invoke the alter ego doctrine, a plaintiffmust show "such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist," and also "an inequitable result if the acts in question are treated as those of the corporation alone." (Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523,538 [citations omitted].) As noted above, Gaggero is not a shareholder, partner, member, or trustee of any of the entities. The usual circumstances involve a situation where the creditor had been misled. In contrast, K.PC has always known of the separateness of the entities mad Gaggero. KPC has not been misled. In determining whether or not the appropriate separateness exits, courts have traditionally looked at certain factors that include: "the holding out by one entity that it is liable for the debts of the other .... use of one as a mere shell or conduit for the affairs of the other," also "inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers." (Id, at 538-39.) The analysis is fact specific, and no one factor is more important than the others. (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 812.) Here, K_PC has not presented any admissible evidence of any of the factors required to support its alter ego allegations. The issue of Gaggero's separateness from the entities was litigated at trial. KPC argued it was Gaggero in his personal capacity who was the only plaintiffand real party in interest, i.e., that he was separate from and did not own, control, or represent the entities. This court agreed with KPC and determined Gaggero personally paid nothing to KPC and therefore could recover nothing. Thus, this court has already ruled on the issue of ownership between Gaggero and the entities, and specifically found there was no evidence to establish Gaggero had the authority to represent any other person or entity in conneetionwith the claims asserted in this case. 8 •
- 68. 3 4 5 6 7 8 9 I0 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 KPC now attemptsto argue to the contrary. The only facts K_PC points to is that Gaggem's estate planning attorney Joseph Praske created the entities, and that ownership to property was transferred to separate legal entities. This was not sufficient to establish a lack of separateness at trial, and it is not sufficient now. The evidence at trial and now shows the formation and operation of the entities complied with all legal formalities, there is no commingling of funds, and that Gaggero has no interest or control in any of the entities. The lone fact that Praske, an attorney, acts as a representative for some of the entities does not establish the entities are Gaggero's alter egos. This is precisely why this court ruled that Gaggero and the entities were separate and that he had no authority to represent them, as KPC argued at trial. KPC presents no new facts to support its 180 degree change in position, because no such facts exist. As the evidence presented at trial established, Gaggero has no ownership interest or control over these entities, and did not represent them in any way in this litigation. Assuming KPC did provide sufficient evidence to show a unity between Gaggero and the entities, which it has not, and cannot, that would only satisfy the first prong of KPC's new alter ego claim. KPC must also _rove an improper intent. "Traditional piercing of the corporate veil is justified as an equitable remedy when the shareholders have abused the corporate form to evade individual liability, circurnvent a statute, or accomplish a wrongful purpose." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300-01.) No such evidence is presented. KPC's motion states simply that Gaggero transferred ownership to property to separate legal entities. Millions of people and companies in this country do exactly the same thing in their estate planning. Yet, KPC concludes with no evidentiary support that, unlike the similar decisions made by millions of Americans, Gaggem's estate planning decisions were done with the intent to defraud creditors. KPC cites to no evidence to support this allegation. KPC also fails to explain how Gaggero's estate planning decisions in 1997 could possibly have been done to avoid payment of the judgment in this case, which was first entered in 2008. KPC is essentially arguing in this motion that if a person transfers ownership of property to an entity that this decision is being made to defTaud any creditor that the person may ever have at any time during the rest of their life. The argument is ludicrous. Such a conclusion would defeat 9 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 69. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the purpose forthe legitimate existence of corporations, limited liability companies, limited partnerships, and estate planning in general. In the absence of real admissible evidence that the transfer of property to entities was done with the intent to defraud an existing creditor, or a creditor reasonably expected to exist, there is no abuse of the corporate form. The evidence here shows that Gaggero and the entities are separate, as this court has already ruled. There is no evidence that Gaggero's estate planning decisions were in any way motivated by any intent to defi'aud, violate any statute, or accomplish any wrongful purpose. There is thus no basis for a finding of alter ego. C. KPC Is Estopped From Making The Arguments In Their Motion Based On The Contrary Rulings They Sought And Obtained At Trial, And The Fact They Have Waited Ten Years To Raise This Issue KPC argued at trial that Gaggero was the only real party in interest in this ease, and that this court should rule that Gaggero was separate from the entities. This court agreed with KPC and expressly ruled that Gaggero in his personal capacity was the only real party interest, and that here was no evidence to establish Gaggero had any authority to represent any other person or entity in connection with the claims asserted in this case. On the basis of this ruling alone KPC is estopped from now arguing otherwise. "Judicial estoppel prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding." (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171,181 [citations omitted].) This fotra of estoppel, which is "sometimes referred to as the doctrine ofpreclusiort of inconsistent positions, is invoked to prevent a party from changing its position over the course of judicial proceedings when such positional changes have an adverse impact on the judicial process." (Id.) The doctrine of judicial estoppel applies where: "(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not aken as a result of ignorance, fraud, or mistake." (Id. at 183 [citations omitted].) All elements of judicial estoppel are satisfied here. 10 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 70. 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 K.PC armed attrial that Gaggero alone was the real party in interest, and that he and the entities were separate and he had no ownership, control or authority over the entities. This court ruled in KPC's favor on this issue. K-PC now asserts the opposite argument that Gaggero and the entities are one and the same and the entities are the real parties in interest, which is totally inconsistent with its position at trial. The opposite position that KPC adopted and won at trial was based on evidence obtained in their representation of Gaggero, including privileged attorney client information, and in discovery in this case, and was thus not taken as a result of any ignorance, fraud, or mistake. KPC is thus judicially estopped from asserting its new inconsistent position that the entities are Gaggero's alter egos. "Collateral estoppel bars a party from relitigating an issue of ultimate fact that a court already has adjudicated." (Id. at 182 [citations omitted],) This form of estoppel "deals with the finality of judgment on factual matters that were fully considered and decided" and "deprives a _arty of the right to relitigate an issue." (Id.) "The rationale is to conserve judicial resources by _reventing repetitive litigation." (Id.) The doctrine of collateral estoppel will be applied where the following requirements are neet: "First, the issue sought to be precluded fi'om relitigation must be identical to that decided in fonaaer proceeding. Second, this issue must have been actually litigated in the former 9roceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom 3reclusion is sought must be the s_a-ne as, or in privity with, the party to the former proceeding." (Hernandez v. City of Pomona (2009) 46 Cal.4th 501,513 [citations omitted].) All elements of collateral estoppel are satisfied here. A full court trial was held in this case, both KPC and Gaggero appeared. One of the specific factual matters that KPC and Gaggero presented for decision was the relationship between Gaggero and the entities, and the issue of who was the real party in interest. It was necessary for the court to decide the issue as it bore directly on the damages alleged. Extensive evidence was presented, which this court fully considered. After doing so, this court ultimately ruled that Gaggero was the only real party in interest, that he and the entities were separate, that he had no ll OPPOSITION TO MOTION TO AMEND JUDGMENT
- 71. 1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 controlor authorityoverthem,andthattherewasnoalteregoestablished.KPCis collaterally estoppedfromrelitigatingthisalteregoissueinitsmotion. Finally,"[a]mendmentof ajudgmentto addanalteregoisanequitableprocedure."(Cart v. Barnabey's Hotel Corp, (1994) 23 Cal.App.4th 14, 21.) Here, KPC has known for twelve years all relevant facts relating to Gaggero and the estate planning decisions he made in 1997, three years prior to when he retained K.PC in 2000. This action was filed in 2002. Trial commenced in 2007. Judgment was entered in 2008. Appeal was taken. Judgment was amended in 2010 after appeal. At no time during the eight years the case was pending did KPC seek to add the entities as real parties ill interest. To the contrary, K.PC at all times daring those eight years asserted the argument that Gaggero was the only real party interest, and that he was separate and not acting by or for any entity. Ten years after this case began, KPC brings a motion to amend the judgment to add entities who it has now decided to claim are the real parties in interest. KPC offers no explanation for why it waited so long to bring these parties into the case when it had all the facts in its possession, or for why KPC made the opposite argument at all times during the eight years the case was pending. The equitable doctrine of laches clearly applies to bar the motion. The record is clear that K.PC has previously sought and obtained a contrary ruling at trial on the issue of separateness, and has had full knowledge of the relevant facts since before the complaint was filed. K.PC's motion should be denied on the grounds that they are estopped from seeking any such amendment. IV. CONCLUSION Based on the foregoing, it is clear that California law expressly prohibits adding entities as judgment debtors under application of reverse alter ego, there is no evidence to even support a finding of alter ego in this case, and KPC is estopped fi'ora requesting the relief it seeks in this notion. This court should deny KPC's motion to amend the judgment. 3ATED: May5, 2012 WESTLAKE LAW GROUP By: David Blake Cl_t_ld Attorneys for P'Nintiff, Stephen M. Gaggero 12 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 72. l 2 3 4 5 6 7 8 9 10 1l 12 13 14 t5 16 17 18 19 2O 2t 22 23 24 25 26 27 28 DECLARATION OF STEPh'-'ENGAGGERO I, Stephen Gaggero, declare as follows: I. ! am the plaintiff in the above-entitled action. I have personal knowledge of the fact_ set forth in this Deolarafion and, if called as a witness, could amd would testify, competently t.h_reIO. 2. This Declaration is submitted in support of plainti_' Opposition zo the Morion to Amend Judgment fil.ed by defendants Kaapp, Petersea & Claxke, Sleven Ray Garcia, Stephen M. l--Iarrls, and Andre ]'ardini. 3. In 1997, I decided to retain the services of an _tate planning attorney to review my asset portfolio and develop _ estate plan for me, so that my e_taie would survive me, be legalty protected, arid would provide a benefit for my family and children. I ultimav'ly retained Joseph Praske to provide this estate planning advice and services. Based on Mr. Praske's recommendations, I therea.f'_r transferred ownersbJ? of c_ain proper_ to various entities. This was a legitimate estate planning decision. 4. l: did not make these Iranafers with any inlent to defraud, violate any statute, or accomplish any wrongful purpose. I certainly did not mak_ these transfers wilh the intent to defraud KPC, as ] had no intention of hiring them 1997. 5. I am not a shareholder, officer, or director of'Pacific Management Corporation. I amnot a general or limited panner of Malibu Broad Beach LP, Marina Gleneo¢ LP, 5 ! 10FW I.,P, or Ging¢rbread Court LP. I am not a member or manager of Blu House LLC or Boardwalk Suaset LLC. I am not the trustee ofthe Giganin Trust the Arenzaao Trust, orfl_ Aquasante Fotmdation. I declare under penalty of perjury uader the laws of the State of California that the foregoing is true and correct. Executed on May 14, 201.2_ in Los Angeles, __ (..,....._._.___ St_,;_n M. Gaggero 13 OPPOSITION TO MOTION TO AMEND JUDGMENT
- 73. 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE Iam a resident of the State of California, over the age of eighteen years, and not a party to the within action. My business address is 2625 Townsgate Road, Suite 330, Westlake Village, California 91361. On May 15, 2012, I served the foregoing document(s) described as: NOTICE OF OPPOSITION AND OPPOSITION TO DEFENDANTS' MOTION TO AMEND JUDGMENT; DECLARATION OF STEPHEN GAGGERO BY MAIL I placed the above document(s) in a sealed envelope with postage thereon ffdly prepaid, in the United States mail at Westlake Village, California, addressed as set forth below. I am readily familiar with the firm's pracdce for collection and processing of documents for mailing. Under that practice it would be deposited with U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. x_N__ BY FEDERAL EXPRESS I placed the above document(s) in a sealed envelope and placed it for deposit with Federal Express, prepaid for next day delivery, addressed as set forth below. BY FACSIMILE I transmitted the above document(s) by facsimile transmission to the fax number(s) set forth below on this date before 5:00 p.m., and received confirmed transmission reports indicating that the document(s) were successfully transmitted. BY PERSONAL DELIVERY I placed the above document(s) in a sealed envelope and caused them to be personally delivered by hand to the person(s) set forth below. Randall A. Miller Miller LLP 515 South Flower Street, Suite 2150 Los Angeles, CA 90071 Facsimile: 888-749-5812 I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on May 15, 2012, at Westlake Village, California. 14 OPPOSITION TO MOTION TO AMEND JUDGMENT