Free Response to Objection to Report and Recommendation - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No: 01-cv-693-LTB-BNB TY REX, LLC. Plaintiff, v. MARK NEWMAN JAPHETH B. BOYCE, individually and dba RJB ROCK SHOP TRANS UNION GEM & MINERAL, INC. KAREN NEWMAN JOHN C. BOLAN ROBERT L. STODDARD GAIL L. STODDARD, Defendants MARK NEWMAN JAPHETH B. BOYCE Defendants and Third Party Plaintiffs v. JEFFREY S. MILLER, Third-Party Defendant. ______________________________________________________________________________ PLAINTIFF'S and THIRD-PARTY DEFENDANT'S REPLY REGARDING THEIR OBJECTIONS TO RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE (DOC 203 FILED 08/23/2005) ______________________________________________________________________________ COME NOW the Plaintiff Ty Rex LLC, and the Third-Party Defendant, Jeff Miller, (collectively "Plaintiff"), through their attorneys Reece & Baker, LLC and hereby make the following reply to the responses made to their objections to the Recommendation of the United States Magistrate Judge (Doc. 203, filed 08/23/05):

I.

THE PARTIES' RECOUNTING OF THE FACTS

Plaintiff takes strong exception to the factual account as framed by the Trans Union Defendants in their response. This variation in accounts is significant because the Trans Union 1

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Defendants are claiming that they bargained for a process that was adhered to by them, but ignored by Plaintiff and they suggest that one possible resolution of this current situation should lie in a result that rewards them and penalizes Plaintiff. But the post-Stipulation facts do not support or reflect the Trans Union Defendants' version of events: A. Plaintiff twice sought the assistance of the Magistrate Judge in enforcing the Stipulation according to its precise terms. The first time Plaintiff sought the Court's assistance was prior to the May 16, 2004 Butterfield auction, when Plaintiff filed its Motion to Reopen Action and Request for Forthwith Hearing Before Magistrate Regarding Stipulation of Settlement. (Doc. 158, filed 1/14/2004) As that Court record plainly shows, Plaintiff was concerned enough that the auction sale was not going to be carried out as provided for in the Stipulation that it sought the Court's assistance. The second time the Plaintiff sought help from the Court was when it filed its Motion for Enforcement of Terms of Stipulation of Settlement (Doc. 167 filed 6/25/2004) immediately after the auction sale. As that Court record reflects, Plaintiff learned only after the sale that the winning bidder was Defendant Japheth Boyce. Plaintiff believed, and still does, that none of the parties to the Stipulation was permitted to purchase the fossil themselves. This belief is based on language in the Stipulation of Settlement (Doc. 155 filed 6/11/2003, p.5, Section I.B.1.d) that prohibited the Defendants from selling the fossil to an entity with which they were involved. While that provision was located in the part of the Stipulation dealing with efforts by Defendants to sell the fossils privately, Plaintiff (mistakenly) believed the fact that the parties were jointly participating the selling the fossil at auction would preclude that possibility in the auction scenario.1

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For example, Plaintiff was entirely unaware that Mr. Ramey had counseled Mr. Boyce that he was free to bid at the auction. They only learned this after the fact, when Mr. Ramey admitted having done so. (Defendants and Third Party Plaintiffs' Response to Motion for Enforcement of Terms of Stipulation of Settlement, Doc. 169, filed 7/14/2004, page 5, FN 2)

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Clearly then, Plaintiff wanted nothing more than that the Stipulation play out according to its terms. Regrettably, the actions of Japheth Boyce and his counsel made that impossible.2 B. Whether Mr. Boyce bid on the fossil on his own behalf or on behalf of someone else, the damage to the Stipulation was the same. The day after the auction, national news services were reporting that the fossil had been purchased by a "consortium of South Dakota investors". Knowing that Mr. Boyce hails from South Dakota, the undersigned immediately contacted Mr. Ramey, who insisted vehemently that Mr. Boyce had nothing to do with the bidding. (Plaintiff's Reply Regarding its Verified Motion for Enforcement of Terms of Stipulation of Settlement. Doc. 173, filed 7/29/2004, page 2) That quickly turned out not to be the case. After receiving a call from Paul Swedlund, an attorney representing Christine Bolan in a South Dakota action against Mr. Boyce and Mr. Newman, who reported that Mr. Boyce had made the bid, Plaintiff contacted Butterfield's who confirmed Mr. Boyce's identity as bidder of record. Mr. Boyce then claimed that he had done so on behalf of another South Dakotan, businessman Bruce Lien, and that Boyce himself had no financial or other interest in the acquisition of the fossils. In response to Plaintiff's Motion for Enforcement, Defendants produced

correspondence purporting to be between Mr. Boyce and Mr. Lien, establishing the terms pursuant to which Mr. Boyce would be bidding for Mr. Lien. (Exhibits B, C, and D to Defendants and Third Party Plaintiffs' Response to Motion for Enforcement of Terms of Stipulation of Settlement, Doc. 169, filed 7/14/2004) While noting that the correspondence is all dated after the date of sale, and as such is highly suspect, the damage to the integrity of the Stipulation and the value of the fossils is equally serious whether Mr. Boyce bid on his own behalf and concocted a story later to make it appear that he had not - or whether Mr. Boyce, in an incredible conflict of interest, placed a bid for a third party for only $80,000 when he had apparently been authorized to bid up to $950,000. (Exhibit B, Doc. 169)
2

It appears to be the case that Mark Newman was also unaware of the fact that Mr. Boyce made the winning bid at

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As Plaintiff argued in its Reply re Motion for Enforcement, (Doc.173, filed 7/29/2004) Mr. Boyce was an agent of every signatory to the Stipulation (as was everyone else) with respect to accomplishing the auction according to the goals of the parties. As fiduciary, he breached his duty to all of the others by agreeing to act on behalf of a potential buyer - especially where he was authorized to bid up to $950,000 and bid only $80,000. Especially where he had, mere days before, given interviews to leading national newspapers claiming the value to between $400,000 and $900,000. Especially where he was the sole signatory to the Stipulation to be present at the auction in the days leading up to the sale and was in a position to answer the questions of interested lookers and potential buyers. So where the Trans Union Defendants now portray Mr. Boyce has having "saved" the auction by bringing in the only bidder, Plaintiff, unfortunately, sees only that Mr. Boyce's fingerprints are everywhere - having committed so many secretive and unanticipated maneuvers prior to and during the auction that it is impossible for anyone to know what the outcome would have been had he simply followed the plain language of the Stipulation like everyone else. The acid test, in Plaintiff's view, is the fact that Mr. Boyce and Mr. Ramey did not disclose to the other parties, even his co-defendant Mr. Newman, prior to the sale, what he was doing and intending to do. It is only by a most perverted twisting of facts that the Trans Union Defendants can now claim that they bargained for a process that Plaintiff undid by rescission. To the contrary, Mr. Boyce and Mr. Ramey paid lip service to the process set forth in the Stipulation, but the facts show that their commitment was in fact to an altogether different process not provided for the Stipulation and not disclosed to anyone else. C. All parties wanted and participated in seeking rescission. The Trans Union Defendants' response is also misleading in its characterization of the rescission efforts. To read this most recent response, one would believe that months went by, with
auction or that Mr. Ramey had counseled him that he was free to do so.

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the Defendants doing nothing and being completely in the dark, hearing only vague rumors of some plot between Plaintiff and Butterfield's to undo the sale. This is a complete fabrication. In fact, the first rescission efforts came from the

Defendants' camp. In Paragraph 27 of Plaintiff's Motion for Enforcement of Terms of Stipulation of Settlement (Doc. 167), Plaintiff wrote:
27. It is as yet unknown whether the sale of the fossil to the South Dakota purchasers will be completed or rescinded or the extent to which the value of the fossils has been damaged by Boyce's actions. The undersigned has been advised by counsel for the auction house that Ed Ramey is assisting them in drafting a "release" regarding the sale. It is not clear what this release is about, or why Mr. Ramey is doing the drafting, or who is expected to execute it. Mr. Ramey has a duty, under the Stipulation, to be forthcoming about his involvement.

Very shortly after the news broke that Mr. Boyce was the winning bidder, Mr. Ramey, perhaps recognizing the inherent conflict between his clients, took it upon himself to commence rescission discussions with Butterfield's. Far from being in the dark, it was Mr. Ramey who spent weeks negotiating a rescission. He specifically requested that the Plaintiff and its counsel refrain from contacting Butterfield's or Bruce Lien during that time, because of the sensitive nature of his efforts. He finally produced a draft rescission agreement. As the rescission agreement specifically included language that would release Japheth Boyce from any liability for his part in the auction fiasco, Plaintiff refused to sign this agreement. When it appeared that further rescission efforts were going nowhere, Plaintiff commenced its own rescission talks with Butterfield's, months later, finally entering into a short agreement, drafted by Butterfield's, that did nothing more than terminate the sale. Because Butterfield's requested confidentiality and the MCA contained a clause obligating Plaintiff to pay Butterfield's attorneys fees in the event of litigation, Plaintiff did not reveal the final agreement to the Defendants. However, Mike Grano, then acting manager of Plaintiff, who was in charge of negotiating the rescission, and who was also in frequent contact with Mark Newman, kept Mr. Newman advised of each step along the way. Mr. Newman was certainly free to share the information with Mr. Ramey and Mr. Boyce and it was frankly expected that he would.

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Plaintiff shouldered the entire cost of rescission in the amount of $15,500, which included payments to Butterfield's and Bruce Lien. Although the Trans Union Defendants had agreed, upon more than one occasion to share these costs, in the end they refused to do so. D. The Trans Union Defendants' two-headed position vis-à-vis the auction sale was a major contributing factor to its ultimate failure. It is the Plaintiff's belief that one very significant contributing factor to the ultimate failure of the auction sale was the contradictory positions taken by the Trans Union Defendants vis-à-vis their rights and obligations under the Stipulation and the Master Consignment Agreement. For instance, while they were not signatories on the Master Consignment Agreement ("MCA") entered into between Butterfield's and Plaintiff, they maintained at all times during the negotiation of the MCA that they reserved the right to approve its terms, even going so far as to acknowledge that they would be "bound" by its terms.3 (Plaintiff's Reply re Motion for Enforcement of Terms of Stipulation of Settlement, Doc. 173, filed 7/29/2004, p. 4, quoting letter from Mr. Ramey.) However, by counseling Mr. Boyce that he was free to bid at auction, Mr. Ramey either intentionally or innocently, took the contrary position that his clients were not involved with or bound by the MCA. When the auction sale was completed, Mr. Ramey assumed the role of negotiating on behalf of all parties to the MCA to rescind the sale. When asked to participate in paying for the costs of rescission, however, the Trans Union Defendants did not do so.

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Please note that the terms of the MCA, as well as California law, forbade an auction seller from bidding on his own item.

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Clearly, it has been to the benefit of the Defendants to take the contrary positions that they did at the times they did so.4 It was not, however, good at all for the health and success of the Stipulation which contemplated consistency on the part of its signatories.

II.

RESOLUTION

It would be easy to read the parties' positions in these briefs and conclude that there is no common ground between them and perhaps litigation is the only solution, after all. Clearly, there is rancor and blame. However, there is also no easy path back into litigation. For one thing, as part of the Stipulation, John Bolan was dismissed from the lawsuit. That was done only because Plaintiff believed it had reached a final agreement upon which it could rely for resolution. Additionally, several other fossil items, that were going to be part of the transaction, such as the cast of Stan, the jaw and teeth and five percent of aggregate material have been sold or otherwise disposed of and are no longer available to be part of the fossil package. Throwing out the Stipulation will not place Plaintiff back into the same position from which it started. It is also clear that, if the suit is revived, both sides will seek to add additional claims against the other, based upon post-Stipulation facts. It is likely that after additional legal expenses and maneuvering, both sides will once again attempt some type of mediation to resolve this case. Furthermore, the recommendation to throw out the Stipulation of Settlement is the solution posed by the Magistrate Judge, who stated his view that he did not have the power to enforce the Stipulation, and not by any of the parties to the agreement. The Trans Union Defendants state in their response that they "have never, with or without equivocation, given up their rights under the Stipulation of Settlement." The Plaintiff concurs.
4

One possible explanation for the Trans Union Defendants' ultimately allowing Plaintiff to sign the MCA alone was the fact that, upon information and belief, the settlement agreement that they entered into with Christine Bolan in her suit against them in South Dakota requires them to pay her additional amounts in the event that they sell the

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The Plaintiff has proposed various solutions to this dispute over the last year, including a final attempt to auction the fossil prior to December 31, 2004 (the Stipulation deadline) in an online Internet auction; a second proposal to have a local auction company auction the fossil (see below); proposals that one side or the other buy the other side out; an offer to let the Defendants attempt to find a buyer, as the Plaintiff had not located any; and the suggestion that, the Plaintiff keep the fossil and the parties walk away from the suit, suggested in the aftermath of the Defendants' proposal that the May 16 sale be reinstated, (a solution that would have netted the Defendants no money whatsoever). None of these suggestions were accepted or, excepting the latter, even taken seriously. The last suggestion would have been cleaner, with no damages remaining for any of the parties; the Defendants would be in the same position as they would if the sale had gone through (assuming Mr. Boyce is being truthful about having no interest in the auction sale); and the Plaintiff would have fossils that are now apparently worth $80,000, instead of having $80,000 in cash. As shown above, the Defendants, far from following the process set forth in the Stipulation, perverted it far beyond a reasonable good faith reading of its intentions, and are not entitled to use it to justify the arguments they now make. The Trans Union Defendants' response now proposes four alternatives for resolution. One, as stated above, is to attempt to reinstate the auction sale of May 16, 2004. For the reasons Plaintiff gave in Section I, that solution is not even-handed, as Defendants' suggest, since it was the manipulation and disruption of the auction process by Japheth Boyce that led the parties to seek to rescind. The Magistrate Judge's solution of returning to Court, as Defendants' deem their second alternative, is unpalatable to all parties who have responded, including the Stoddard Defendants. Furthermore, as stated above, this "solution", which cannot put the parties back into the same

fossil for a certain amount. Perhaps by not being the official sellers of the fossils, these defendants can avoid incurring liability for these additional amounts with Ms. Bolan.

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position in which they were previously, holds every promise of landing these parties back into a settlement posture further down the road, albeit with less money in their pockets. The Defendants' third alternative, to allow Defendants to pursue their counterclaims against Plaintiff while prohibiting Plaintiff from pursuing its claims against the Defendants, lacks any legal or equitable justification for all of the reasons set forth in Section I of this Reply: the underlying assertions made by the Defendants used to justify this alternative. Those assertions: that (1) rescission was a unilateral action by Plaintiff of which Defendants were unaware; and (2) the Defendants committed and adhered to a "process" that was unilaterally breached by the Plaintiff are blatantly false. The Defendants were very much involved with and informed of (and in favor of) the rescission efforts every step of the way. Furthermore, rescission was necessitated by the abuse of the auction process set forth in the Stipulation, i.e., the secretive and deceptive machinations of Mr. Boyce and Mr. Ramey prior to and during the auction that caused the sale to be hopelessly flawed. The fourth alternative set forth by the Trans Union Defendants, i.e. for the Court to exercise its equitable powers to designate an auction venue and re-sell the fossils, is, as previously alluded to, a solution that the Plaintiff was suggesting at the conference before Magistrate Judge Boland last March. It proposed that the parties submit the fossils to a local auction venue, such as Dickensheet & Associates, as a means of ending the dispute. (See copy of proposal from Dickensheet & Associates that Plaintiff offered at the March conference, attached as Exhibit A) For some reason, this suggestion was not met with any enthusiasm either by the Trans Union Defendants or the Magistrate Judge at that time. If the Defendants are now interested in renewing an examination of this, Plaintiff agrees that it would be the most equitable solution. In view of the history of these parties, it would also be the least painful. Clearly, however, the devil is in the details. The precise terms of the auction, for instance, must be addressed, such as whether there is to be a reserve price; whether the parties are free to bid themselves on the fossils and, if so, whether credit bids are allowed. Plaintiff also has concerns that 9

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the mishaps of the last auction not be repeated. Plaintiff would suggest that the Court select a local venue and direct both sides to submit a list of terms, with the Court having final determination over disputed terms. Another potential problem is that Magistrate Judge Boland has stated that he will not agree to preside over another settlement conference. He even suggested that the parties consider a private mediator (something to which the Plaintiff is not opposed). Plaintiff is left with the impression that Magistrate Judge Boland has no desire to preside over the result inherent in this alternative: i.e. the selection of an auction venue and the terms of sale. He previously stated that he did not believe he had the power to enforce the terms of the Stipulation, although the terms of the Stipulation state plainly that the parties consented to it.5 For those reasons, Plaintiff believes that, this alternative, while the most promising of those suggested by the Trans Union Defendants, would require that the Court (1) appoint another Magistrate Judge to handle the details and completion of the auction; (2) order the parties to seek private mediation; or (3) itself take over these duties and see this matter through to completion.

III.

CONCLUSION

The Court may conclude from the parties' comments to the Magistrate Judge's recommendation that the parties seek the Court's assistance in resolving this matter; that some type of extension of the Stipulation to accomplish an auction is preferred over a revival of litigation; and that the parties believe the Court has the power necessary to provide this assistance. DATED: November 5, 2005.

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In fact, the Magistrate Judge ordered the parties to submit briefs regarding his power to enforce the Stipulation, which Plaintiff did. (Brief, Doc. 164, filed 1/27/2004) Nonetheless, he ultimately concluded that he did not have that power.

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Respectfully submitted, REECE & BAKER, LLC

__ _____s/ Joe Reece_________________ Joe Reece Reece & Baker LLC P.O. Box 6670 Denver, CO 80206 Telephone: 303-321-2222 FAX: 303-321-1456 E-mail: [email protected] Attorney for Plaintiff Ty Rex LLC and Third Party Defendant Jeffery S. Miller

CERTIFICATE OF SERVICE The undersigned hereby certifies that on this 5th day of November, 2005, true and correct copies of the foregoing PLAINTIFF'S and THIRD-PARTY DEFENDANT'S REPLY REGARDING THEIR OBJECTIONS TO RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE (DOC 203 FILED 08/23/2005) were electronically served and/or placed in the United States mails, postage prepaid and addressed as follows: Edward T. Ramey, Esq. Isaacson & Rosenbaum, P.C. 633 17th Street, Suite 2200 Denver, CO 80202 Luis A. Toro, Esq. Frank W. Visciano, Esq. Senn Lewis & Visciano, P.C. 1801 California Street, Suite 4300 Denver, CO 80202 Justin D. Cumming, Esq. Lars Fuller, Esq. Rothgerber Johnson & Lyons LLP 1200 17th Street, Suite 3000 Denver, CO 80202 ______________/s________

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