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Bridgepoint Construction Services Inc. v. Lassetter

United States District Court, D. Arizona

September 21, 2018

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 ‚Äústill ...


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