United States District Court, D. Arizona
Bridgepoint Construction Services Incorporated, et al., Plaintiffs,
v.
James Lassetter, Defendant.
ORDER
HONORABLE JOHN J. TUCHI UNITED STATES DISTRICT JUDGE
At
issue are Plaintiff Norm Salter's Brief (Doc. 144, Br.),
Defendant James Lassetter's Response (Doc. 146, Resp.),
and Plaintiff's Reply (Doc. 147, Reply), all filed in
response to the Court's Order (Doc. 143) requiring
Plaintiff and Plaintiff's counsel to demonstrate why they
should not be sanctioned for misrepresenting material facts
to the Court.[1]
I.
BACKGROUND
Although
the Court laid out the salient background facts in its prior
Orders (Docs. 136, 143), the Court will repeat them here for
the sake of comprehensiveness. Vista Oceano La Mesa Venture
LLC (“Vista Oceano”) was formed to act as owner
and developer of a residential real estate project in Santa
Barbara, California. Its sole member was Tenacious Adventures
II, LLC, an entity controlled by Defendant, and its manager
was Point III Holdings, Inc., an entity controlled by Martin
Newton. Bridgepoint acted as the general contractor for the
project and all parties agree that Plaintiff was a
shareholder and director of Bridgepoint at all relevant
times.
Disputes
arose from the development, construction and sales of units
in the Santa Barbara project, and in July 2014, Plaintiff and
Bridgepoint brought an action in California state court
against Vista Oceano, Tenacious, Defendant, Point III and
Newton, among other defendants. The California court
dismissed Defendant, an Arizona resident, from that action
for lack of personal jurisdiction. Thereafter, Plaintiff and
Bridgepoint brought this action against Defendant, raising
claims similar to those in the California matter. So far as
this Court knows, the California matter remains pending and
is set for trial in September 2018.
On
August 8, 2017, Defendant filed a Motion to Quash
Plaintiff's Subpoena to Wells Fargo (Doc. 75), requesting
that the Court block Plaintiff's attempt to obtain Wells
Fargo Bank records pertaining to accounts owned by Vista
Oceano-the entity that was the owner and developer of the
real estate project at the center of this lawsuit. Relatedly,
on February 2, 2018, Defendant filed a Motion for Protective
Order (Doc. 124), requesting that the Court prohibit
Plaintiff from seeking the Wells Fargo bank records and other
discovery Defendant contended was duplicative, irrelevant,
overbroad and overly burdensome.
In the
brief that is the subject of the Court's present inquiry
(Doc. 128, “Brief in Question”), filed on
February 7, 2018, Plaintiff-acting through his counsel,
Robert G. Klein of the Law Office of Robert G. Klein in
Beverly Hills, California-argued that the information he
sought was relevant and discoverable and represented the
following to the Court:
In October 2010 Dilip Ram ([Plaintiff's] longtime real
estate development partner who is not a party to this action)
negotiated the purchase and a $9.45 million construction loan
from Preferred Bank on [real estate owned] beach view
property in Santa Barbara California. Dilip Ram and
[Plaintiff] needed to raise an additional $3 million from an
investor to share in the profits on this real estate
development opportunity. [Plaintiff] offered this opportunity
to his cousin Martin Newton who then introduced [Defendant]
to [Plaintiff] and Ram as an investor.
In March 2011 Newton, [Defendant], [Plaintiff] and Ram
agreed to be partners and share in the
profits of this project. Dilip Ram signed Articles of
Organization to form Vista Oceano La Mesa Venture LLC.
[Exhibit 1]
In March 2011 [Plaintiff] opened a bank account at
Wells Fargo bank for Vista Oceano La Mesa Venture LLC.
[Plaintiff] was, and still is listed as the co-owner and
co-signer on Vista Oceano La Mesa Venture LLC's bank
account at Wells Fargo. [Exhibit 2]
(Brief in Question at 2 (emphasis added).)
In
reply, Defendant pointed out that Plaintiff's Exhibit 1-a
March 2011 document signed by Ram-was not the authentic
Articles of Organization for Vista Oceano; rather, the
authentic Vista Oceano Articles of Organization were signed
by Newton, not Ram, and filed with the State of California in
October 2010. (Doc. 131 at 2-3.) Defendant also noted that
Plaintiff's Exhibit 2-a Wells Fargo account application
for Vista Oceano-was not stamped as received by Wells Fargo
and was redacted to hide the signatures of Plaintiff and
Newton, so its authenticity was unclear. (Doc. 131 at 3-4.)
About a
month later-on March 16, 2018-in response to a separate
motion, Plaintiff recited the same facts but, with regard to
Exhibit 1, added a footnote stating that “Ram forgot
that in October 2010 when he first thought they had a deal,
Dilip Ram had his attorney Rubin Turner prepare Articles of
Organization for Martin Newton's signature.” (Doc.
134 at 3 n.1.)
On
March 30, 2018, the Court granted Defendant's Motion to
Quash Plaintiff's Subpoena to Wells Fargo and denied as
moot Defendant's Motion for Protective Order. (Doc. 136
at 16-22.) In so doing, the Court noted that Plaintiff
improperly reviewed documents delivered in error by Wells
Fargo to Plaintiff while another motion to quash was still
pending, which motion the California state court ultimately
granted. (Doc. 136 at 18; Doc. 75 at 3 & Ex. 6 at 3-5;
Doc. 77 at 2-3.) To make matters worse, Plaintiff used
information from the errantly delivered documents to subpoena
records in this matter. For this and other reasons, the Court
quashed that portion of Plaintiff's subpoena.
Moreover,
concerned that Plaintiff made misrepresentations and
submitted inauthentic documents to this Court in support of
his arguments, the Court stayed all proceedings in this
matter and ordered Defendant to subpoena the State of
California and Wells Fargo to procure the authentic versions
of the documents Plaintiff had submitted to the Court as
Exhibits 1 and 2. (Doc. 136 at 23-24.) Defendant satisfied
the Court's requests by submitting the authentic
documents provided by the State of California and Wells
Fargo.[2] (Docs. 137, 139, 142.)
1.
Articles of Organization for Vista Oceano
In the
Brief in Question, Plaintiff submitted Exhibit 1-March 2011
Articles of Organization for Vista Oceano-to the Court as
evidence material to the question of whether and to what
extent Plaintiff, Ram, Defendant and Newton cooperated to
form Vista Oceano. In the Second Amended Complaint,
[3]
Plaintiff alleges that, while Defendant and Newton were the
only members and/or managers of Vista Oceano at any given
time, as indicated by the entity's Operating Agreements
(e.g., Doc. 65-7 at 16-36), all four individuals
“formed” Vista Oceano, Plaintiff and Ram had
“full access to the books and records of Vista Oceano,
” and all four individuals “held themselves out
as partners in the Santa Barbara project.” (Doc. 60,
SAC ¶¶ 19-21.)
To try
to demonstrate collaboration between the four in forming
Vista Oceano, Plaintiff explicitly represented to the Court
that Ram, Plaintiff's “longtime real estate
development partner, ” “signed Articles of
Organization to form Vista Oceano, ” attaching Exhibit
1 in support. (Doc. 128 at 2; Ex. 1.) This was a patent
misrepresentation, as demonstrated by the document produced
by the State of California showing that Newton alone signed
Articles of Organization to form Vista Oceano. (See
Doc. 139.) Indeed, all of the documents with any legal effect
before the Court show that Newton was the organizer of Vista
Oceano and that only Defendant and Newton were members and/or
managers of Vista Oceano (through their entities).
After
Defendant raised this issue in his Reply (Doc. 131),
Plaintiff sought to explain in a footnote to a subsequent
brief that Ram “forgot” that Newton had already
formed Vista Oceano in October 2010 (Doc. 134), meaning the
document Ram purportedly signed in March 2011 had no legal
effect.[4] The Court noted in its prior Order (Doc.
143) that, whether or not Ram “forgot” in 2011
that Newton had already formed Vista Oceano in 2010 was of no
moment to the question before the Court. Plaintiff knew-or
certainly should have known-when he filed a brief with this
Court in 2018 that the Articles of Organization document he
attached was not authentic, yet he not only submitted it to
the Court but represented that it meant something that he
must have known was untrue, namely, his assertion that Ram
was the organizer of Vista Oceano. This was material to the
question Plaintiff put before the Court: whether Plaintiff
and Ram were part of a partnership with Newton and Defendant
to form Vista Oceano such that Plaintiff should be allowed
access to the Vista Oceano account information at Wells
Fargo.
2.
Wells Fargo Bank Account Information for Vista
Oceano
In the
Brief in Question, Plaintiff also provided Exhibit 2 (Doc.
128-2) to the Court, a Wells Fargo Business Account
Application for Vista Oceano, arguing it was further evidence
of collaboration between the four individuals to form Vista
Oceano. Indeed, in his opposition to Defendant's Motion
for Protective Order, Plaintiff argued that Defendant
improperly “filed a motion to quash [Plaintiff's]
subpoena served on Wells Fargo bank even though [Plaintiff]
is listed as a co-owner and co-signatory on that
account.” (Brief in Question at 7.) In his brief,
Plaintiff stated that Exhibit 2 is a “March 2011”
Wells Fargo Business Account Application listing Plaintiff as
“co-owner” of Vista Oceano and that he
“was, and still is listed as the co-owner and
co-signer” on Vista Oceano's account at Wells
Fargo. (Brief in Question at 4).
In
reply, Defendant challenged the authenticity of the Business
Account Application that Plaintiff filed with the Court
because (1) it is not stamped or otherwise marked as received
by Wells Fargo, and (2) the signature lines are redacted, and
there is no evidence that the Business Account Application
was approved or agreed to by Newton-a proposition Defendant
found “particularly troubling given [Plaintiff's]
prior admissions that he has directed others to forge Martin
Newton's signature on multiple occasions.” (Doc.
131 at 3-4.)
In its
prior Order (Doc. 143), the Court first noted that the
document Plaintiff himself provided as Exhibit 2 (Doc. 128-2)
shows that the Application was dated June 15, 2013, not March
2011 as Plaintiff represented in the Brief in Question. A
review of the documents Wells Fargo provided reveals that the
bank did receive the Business Account Application for Account
-3742, dated June 15, 2013, and gave it a bar code and
identification number. (See Doc. 142.) The signature
lines on the Application are not redacted, but Newton did not
sign the Application.[5]
The
Court could not discern why Plaintiff apparently redacted the
signature lines in the Application he submitted to the Court
as Exhibit 2 when he did not redact, for example, his social
security number and address or those of Newton. The troubling
aspect of this redaction is that Plaintiff apparently
redacted both his and Newton's signature lines, when it
appears from the document Wells Fargo produced that Newton
never signed the Application. Newton's signature would
have indicated his assent to Plaintiff's
self-characterization as “co-owner” and to
Plaintiff's access to the account. Without the signature,
there is no such indication of assent by Newton.
With
the information before it, the Court was left to conclude
that, by redacting Newton's signature line when Newton
never signed the Application-in other words, by redacting a
blank space-Plaintiff represented to the Court that Newton
signed the Application when he did not. The redaction itself
was a misrepresentation. This is again material to the
questions before the Court of whether there was cooperation
between the four individuals-here, Newton and Plaintiff
specifically-in the operation of Vista Oceano and whether
Plaintiff had proper authorization to access the Wells Fargo
account.
Other
documents Wells Fargo provided in response to Defendant's
subpoena show that Newton deleted Plaintiff's
authorization to sign for Vista Oceano Account -3742 on June
16, 2014, a year after it was set up. (See Doc.
142.) Thus, not only did Plaintiff misrepresent in his brief
the date the account was set up-it was 2013, not 2011-but he
also misrepresented that he is “still ...