Free Statement - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Case No. 04-cv-00438-PSF-OES TIMOTHY C. HOILES, Plaintiff and Counterclaim Defendant, v. JOSEPH M. ALIOTO Defendant and Counterclaim Plaintiff.

JOINT LIST OF ISSUES TO ADDRESS AT OCTOBER 25, 2006 STATUS CONFERENCE

Pursuant to the Court's Order Resetting Status/Scheduling Conference, Defendant and Counterclaim Plaintiff, Joseph M. Alioto ("Mr. Alioto"), and Plaintiff and Counterclaim Defendant, Timothy C. Hoiles ("Mr. Hoiles"), submit the following joint list of issues ("List of Issues") to be addressed at the October 25, 2006 status conference. FIRST ISSUE Will dispositive motions completely resolve all matters before the Court on remand? POSITION OF MR. ALIOTO: The decision by the United States Court of Appeals for the Tenth Circuit held that the validity of the August 17, 2001 letter agreement between Mr. Alioto and Mr. Hoiles (the "Retention Agreement") was governed by California law. Because of this ruling, three issues remain:

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1.

Does the Retention Agreement substantially comply with California's

requirements for contingency fee agreements between lawyers and clients, set forth in § 6147 of the California Business and Professional Code (the "California Issue")? 2. Did Mr. Alioto meet the conditions for payment of a contingent fee under the

terms of the Retention Agreement? 3. What is the amount of the contingent fee to which Mr. Alioto is entitled?

In Mr. Alioto's view, all of these issues can be resolved by dispositive motion, and no trial will be necessary. The California Issue is a question of law, to be decided by the Court. The issue of whether Mr. Alioto satisfied the requirements of the Retention Agreement, and thus is entitled to payment of a contingent fee under the Retention Agreement, presents a mixed question of law and fact. Because the relevant facts are not in dispute, however, the issue can be resolved by dispositive motion. And the amount of the contingent fee to which Mr. Alioto is entitled, although a factual question, can be resolved on summary judgment because the facts demonstrate as a matter of law that he is entitled to a contingent fee of $21,293,121.84, plus prejudgment interest. POSITION OF MR. HOILES: The Contingent Fee Agreement is a hybrid agreement under California law and is governed by California Business and Professional Code §§ 6147 and 6148, as well as by decisions of California Courts interpreting the applicable Rules of Professional Conduct. The Contingent Fee Agreement does not comply with California laws, contains fatal ambiguities, and is invalid. Furthermore, Alioto's claimed contingent fee is unreasonable and unconscionable under California law, as a matter of law. 2

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Whether or not the Contingent Fee Agreement is voided, Alioto is entitled to no fee (not even in quantum meruit) because he failed to obtain a settlement or judgment for Hoiles, unless the parties contracted otherwise. Hoiles and Alioto contracted under paragraph 5 that Alioto would receive $1,000 per hour under two, specified circumstances. A fact issue may remain as to whether Hoiles withdrew from the "case" as provided in paragraph 5, whether or not the Contingent Fee Agreement is invalidated. Paragraph 5 would cap any fee Alioto seeks, as a matter of law. The laws governing quantum meruit in Colorado and California are substantially similar, and the previous verdict should not be vacated. California law treats a quantum meruit fee as an unliquidated claim for which no prejudgment interest is available. Hoiles respectfully submits the following issues are for the Court to determine through dispositive motions or otherwise: 1. Is the Contingent Fee Agreement governed by both §§6147 and 6148, California

Business and Professional Code? 2. Is the Contingent Fee Agreement invalid as a matter of law under either or both

§§6147 and 1648? 3. Does the Contingent Fee Agreement contain ambiguities that are material to

enforceability of alleged fee claims that are to be construed against Alioto? 4. Did Alioto have a fiduciary obligation of full disclosure to his clients, including

Hoiles, that existed before Hoiles signed the Contingent Fee Agreement? See, e.g. CRPC 3-500. 5. Did Alioto charge an improper or unreasonable flat fee or retainer of $500,000

that is refundable to Hoiles? 3

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6.

Under California Rules of Professional Conduct 4-200 are the contingent fee

Alioto seeks and/or the $500,000 retainer so exorbitant and wholly disproportionate to the services performed as to shock the conscience and, therefore, unenforceable? 7. Should the $500,000 retainer paid by Hoiles be a credit against any fees claimed

by Alioto in this case? 8. Did Alioto have Hoiles' written consent to the fee-sharing arrangements he made

with his co-counsel that would satisfy California Rule of Professional Conduct 2-200(A)? 9. Is Alioto prohibited as a matter of law from seeking to recover fees for other

lawyers who were not members of his firm? 10. Has Alioto transferred all or a portion of his causes of action in this case to a third

party who is not before the Court?1 Is there a defect in necessary parties? 11. Can Alioto claim a 20 percent contingent fee based upon an alleged oral contract

or oral modification of the Contingent Fee Agreement under California law? 12. If Alioto has no enforceable written fee agreement, can he still assert tort claims

for fraud, negligent misrepresentation and intentional misrepresentation in connection with the making of the unenforceable contract? 13. Does paragraph 5 of the Contingent Fee Agreement, setting hourly rates for legal

services, survive if the agreement is invalidated?

May 26, 2006, Alioto sent Hoiles a letter providing notice Alioto had ". . .granted [LFG National Capital, LLC] an interest in any funds in the [escrow] account when distributable to The Alioto Law Firm or Joseph M. Alioto, as well as in any funds I receive from Mr. Hoiles or any of his trusts."
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14.

If the Contingent Fee Agreement is enforceable under California law, is Alioto

required to produce a settlement or judgment for Hoiles as a condition precedent to earning a contingent fee? 15. Is Alioto's claim that he is entitled to a contingent fee from the sale of Hoiles' and

the Davisons' shares however and whenever the shares are sold a permissible contingent fee contract under California conflict-of-interest rules; or, would such a contract constitute an impermissible ownership, possessory, pecuniary or security interest adverse to Hoiles in violation of CRPC 3-300? 16. Does the Contingent Fee Agreement violate the provisions of CRPC 3-300 and

unenforceable as unfair, unjust and not reasonably understandable to the client, Hoiles? 17. Was the sale of Freedom stock to a third-party investment group in an arms length

transaction with the corporation and all shareholders a recovery or a settlement contemplated by Hoiles and Alioto at the time the Contingent Fee Agreement was made? Stated another way, can the contingency contemplated by Hoiles and Alioto at the time he drafted the agreement be determined by the Court as a matter of law, and did it occur? 18. Whether California rules and policies governing contingent fee agreements would

support the conclusion in Fasing v. LaFond, 944 P.2d (Colo. Ct. App. 1997) that it is unreasonable as a matter of law for an attorney to rely on the client's alleged representations that a contingent fee agreement is valid? 19. Whether the application of California's Equal Dignities Rule, CAL. CIV. CODE

§1624 and CAL. CIV. CODE §2309, requiring an alleged agent's authority to enter into

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agreements subject to the statute of frauds must be in writing to be enforceable, voids Alioto's tort claims; 20. In light of later, new defenses set forth by Alioto hereafter, Hoiles maintains there

is no question of fact regarding whether Hoiles elected to void the Contingent Fee Agreement. SECOND ISSUE What schedule should apply to the briefing of dispositive motions? POSITION OF MR. ALIOTO: Because the remaining issues can be resolved by dispositive motion, Mr. Alioto requests that the Court set the following schedule for summary judgment motions: 1. On or before November 20, 2006, the parties shall file motions for summary

judgment or partial summary judgment. 2. On or before December 21, 2006, the parties shall file responses to motions for

summary judgment or partial summary judgment. 3. On or before January 12, 2007, the parties shall file replies in support of their

motions for summary judgment or partial summary judgment. POSITION OF MR. HOILES: Mr. Hoiles requests that the Court set the following schedule for dispositive motions: 1. 2007. 2. 3. Parties will file any response on February 28, 2007. Parties will file replies on March 15, 2007. Parties will file motions for summary judgment on all matters on January 31,

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THIRD ISSUE What fact issues will remain for trial? POSITION OF MR. ALIOTO: Mr. Alioto contends that no fact issues remain and that the case should end with the granting of his summary judgment. If the Court denies Mr. Alioto's summary judgment, in whole or in part, however, the following fact issues might remain: 1. Because under California law a contingent fee agreement that does not comply

with § 6147 of the California Business and Professional Code is voidable, not void, if the Court were to rule that the Retention Agreement does not substantially comply with California's requirements for a contingent fee agreement: a. in a timely manner? b. Agreement? c. Is Mr. Hoiles estopped from exercising, or did he waive, any right he may Did Mr. Hoiles either expressly or implicitly ratify the Retention Did Mr. Hoiles fail to exercise his right to void the Retention Agreement

have had to void the Retention Agreement? d. Does the doctrine of unclean hands preclude Mr. Hoiles from exercising

the equitable remedy of voiding the Retention Agreement? 2. If the Retention Agreement is void, is Mr. Alioto entitled to recover on his unjust

enrichment counterclaim? 3. Is Mr. Alioto's claim for unjust enrichment governed by California law?

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4.

Is evidence of the percentage of recovery contained in the Retention Agreement

relevant to the appropriate recovery by Mr. Alioto under an unjust enrichment claim, and therefore admissible. 5. Should Mr. Alioto's unjust enrichment recovery include compensation for work

performed by lawyers who assisted Mr. Alioto? 6. Because, Mr. Alioto submits, the undisputed facts demonstrate that his work was

performed for the benefit of 667,360 shares, is Mr. Alioto's recovery on his unjust enrichment claim based on 667,360 shares of Freedom stock? 7. If Mr. Alioto's unjust enrichment claim is based on the 511,210 shares owned by

Mr. Hoiles (or if it is a question of fact as to whether Mr. Alioto's unjust enrichment claim is based on the 511,210 shares owned by Mr. Hoiles or on the 677,360 shares owned by Mr. Hoiles and the Davisons), did Mr. Hoiles intentionally or negligently misrepresent the benefit Mr. Alioto would receive from his work? 8. If Mr. Hoiles intentionally or negligently misrepresented the benefit Mr. Alioto

would receive from his work, did Mr. Alioto reasonably rely on Mr. Hoiles' intentional or negligent misrepresentation? 9. If Mr. Hoiles intentionally or negligently misrepresented the benefit Mr. Alioto

would receive from his work, did Mr. Alioto suffer damages as a result of the misrepresentation? 10. If Mr. Alioto suffered damages as a result of Mr. Hoiles' intentional or negligent

misrepresentations, what is the amount of Mr. Alioto's damages? 11. If Mr. Hoiles' misrepresentations were intentional, is Mr. Alioto entitled to

recover punitive damages? 8

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POSITION OF MR. HOILES: Fact issues that were not before the Court under Colorado law, may be relevant under California law. For example, California Business & Professions Code §6148(b) requires: "Upon request by the client, the attorney shall provide a bill to the client no later than 10 days following the request...." Failure to do so renders the fee agreement voidable. §6148(c). Hoiles asked Alioto for a bill reflecting his hours and his fee January 20, 2004, and Alioto never replied. Now that California law applies, this is a material issue not before the court, previously. Is it a fact issue? Can it be determined as a matter of law, voiding the Contingent Fee Agreement? Hoiles maintains it could be decided by the Court as a matter of law. Fact issues that still exist may include: 1. 2. recoveries? 3. Did Hoiles and Alioto contemplate at the time that Alioto drafted the Contingent What damages, if any, did Alioto suffer under his tort claims? What a reasonable fee would be under California laws governing quantum meruit

Fee Agreement that the contingent fee would be based on the price offered for all of the Freedom shares owned by Hoiles and the Davisons and their interests in real estate partnerships regardless of whether these shares and assets were actually sold? 4. Under California law, what is an unconscionable legal fee under the

circumstances? 5. Whether Alioto complied with CAL. R. PROF. CONDUCT 2-200(A) regarding

obtaining a client's written consent to dividing a fee for legal services with another lawyer who is not a member of his firm. See also CAL. BUS. & PROF. CODE §6068(m); 9

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6.

Whether the theory of litigation against Freedom shareholders was "objectively

baseless" and failed to comply with CAL. R. PROF. CONDUCT 3-200 or ABA Model Rule 3-1, and would not support a claim for reasonable fees for lawful legal work. 7. Whether Alioto breached fiduciary duties to Hoiles, before and after the

Contingent Fee Agreement was signed by Hoiles? 8. 9. Whether Alioto was negligent in assuming that Hoiles was the Davison's agent? Whether Alioto was negligent in drafting the Contingent Fee Agreement and the

proximate cause of his own alleged damages? 10. 11. Whether Alioto performed under the Contingent Fee Agreement? Whether Alioto and Hoiles had a meeting of the minds sufficient to form an

enforceable contingent fee agreement? 12. Did Alioto fraudulently induce Hoiles to enter into the Contingent Fee Agreement

through misrepresentation or failure to disclose material facts? 13. Did Alioto forfeit his rights to demand any fee under the contract by making

unreasonable and unconscionable claims to fees to which he had no entitlement and by purporting to represent persons who were not his clients? FOURTH ISSUE Do the parties need to conduct additional discovery in this action? POSITION OF MR. ALIOTO: No additional discovery is necessary prior to the resolution of dispositive motions. If Alioto's dispositive motion is denied, it is possible that additional expert disclosures and additional discovery may be needed with respect to expert witnesses, and that additional 10

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discovery may be needed on any new issues that have arisen because of the application of California law. The issue of whether such additional expert disclosures and additional discovery is needed should be addressed by the Court after it rules on summary judgment motions. POSITION OF MR. HOILES: No additional discovery or additional witnesses, not used at the previous trial. The possible depositions that would be necessary are of the designated California experts already identified, and who produced reports. FIFTH ISSUE Should the Court set a trial at this time? POSITION OF MR. ALIOTO: The Court should not set a trial at this time. If triable issues remain following the Court's rulings on dispositive motions, either party may seek a trial setting. POSITION OF MR. HOILES: The Court should set a trial date at this time. Hoiles would like to suggest a trial date for the month of April 2007.

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Respectfully submitted this 23rd day of October, 2006. By: s/ Timothy R. Beyer___________ Timothy R. Beyer Mark J. Mathews Richard P. Barkley BROWNSTEIN HYATT & FARBER, P.C. Twenty-Second Floor 410 Seventeenth Street Denver, Colorado 80202-4437 303.223.1100 303.223.1111 (fax) [email protected] [email protected] [email protected] OF COUNSEL Ronald S. Rauchberg Elise A. Yablonski PROSKAUER ROSE LLP 1585 Broadway New York, NY 10036-8299 (212) 969-3000 [email protected] [email protected] Attorneys for Defendant and Counterclaim Plaintiff Joseph M. Alioto

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By: s/E. Glen Johnson E. Glen Johnson Bart A. Rue Frank Pierce Greenhaw IV KELLY HART & HALLMAN LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 [email protected] [email protected] [email protected] Kenneth B. Siegel Katherine Varholak SHERMAN & HOWARD L.L.C. 633 17th Street, Suite 3000 Denver, Colorado 80202 [email protected] [email protected] [email protected] Attorneys for Plaintiff and Counterclaim Defendant Timothy C. Hoiles

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CERTIFICATE OF SERVICE I hereby certify that on October 23, 2006, I electronically transmitted the attached document entitled JOINT LIST OF ISSUES TO ADDRESS AT OCTOBER 25, 2006 STATUS CONFERENCE to the Clerk of Court using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: E. Glen Johnson Bart A. Rue Frank Pierce Greenhaw IV KELLY HART & HALLMAN LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 [email protected] [email protected] [email protected] Ronald S. Rauchberg Elise A. Yablonski PROSKAUER ROSE LLP 1585 Broadway New York, NY 10036-8299 [email protected] [email protected] Kenneth B. Siegel Katherine Varholak SHERMAN & HOWARD L.L.C. 633 17th Street, Suite 3000 Denver, Colorado 80202 [email protected] [email protected] [email protected]

Timothy R. Beyer Mark J. Mathews Richard P. Barkley BROWNSTEIN HYATT & FARBER, P.C. Twenty-Second Floor 410 Seventeenth Street Denver, Colorado 80202-4437 [email protected] [email protected] [email protected]

s/ Paulette M. Chesson

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