Free Objection - District Court of Arizona - Arizona

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FENNEMORE CRAIG, P.C. Janet Weinstein (No. 011910) Kevin J. Bonner (No. 017944) Sherida Colvin (No. 020064) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Attorneys for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Century 21 Real Estate Corporation, Plaintiff, v. Daryush B. Motlagh and Jane Doe Motlagh, husband and wife; Integrity Assurance, Inc. an Arizona corporation, Defendants. Daryush B. Motlagh and Jennifer Motlagh, husband and wife; Integrity Assurance, Inc., an Arizona corporation, Counterclaimants, v. Century 21 Real Estate Corporation, a Delaware corporation doing business in the State of Arizona, Does(s) 1 through 100, Counterdefendants. PLAINTIFF' RESPONSE TO S DEFENDANT' STATEMENT OF S FACTS AND OBJECTIONS TO DECLARATIONS No. CIV 03 2353-PHX-DGC

(Assigned to the Hon. David G. Campbell)

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Century 21 Real Estate Corporation ("CREC") responds to Defendants' statement of facts in support of their opposition to CREC' renewed motion for summary judgment s and motion for summary judgment on Defendants' counterclaims. Initially, CREC notes that the only facts in CREC' statement of facts that s Defendants objected to or disputed were SOF ¶¶ 2, 58, 60 ­ 64 and 69.1 Even as to these facts, Defendants have not proffered any admissible evidence: ? SOF 2 ­ Defendants dispute that Integrity operated the CREC franchise but provide no evidence to dispute this fact. CREC' s evidence to support this fact was Motlagh' own deposition s testimony, which Defendants have not disputed. SOF 58 ­ Defendants dispute they did not object to the motion to lift the stay in Motlagh' Chapter 7 bankruptcy. This dispute is s immaterial, although Defendants did concede that Motlagh withdrew his objection to the motion. SOF 60-64 - Defendants dispute the facts relating to the motion to lift the stay in the Integrity bankruptcy but do not provide any evidence to support the dispute. The record and Bankruptcy Court orders speak for themselves and in any event, the disputes are immaterial. CREC provided these facts as background of the parties' disputes. SOF 69 - Defendants dispute the amount due under the Agreement, claiming that the gross figure number was "cherry picked from" Integrity' Operating Reports filed in its bankruptcy proceeding. s Response at 6. But Defendants provide no evidence that the gross figure amount was incorrect and their dispute is not supported by any admissible evidence.

?

?

?

Defendants do not dispute any other facts, implicitly conceding that the Response has no merit and that the Court should grant CREC' motion. s CREC also provides specific responses (by reference to each paragraph number) to

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See Defendants' Response in Opposition to Century 21 Real Estate Corporation' Renewed s Motion for Summary Judgment at 5-6. -1Case 2:03-cv-02353-DGC Document 84 Filed 08/28/2006 Page 2 of 15

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Defendants' separate statement of facts: 1. 2. Not disputed for purposes of the motion. CREC disputes that Motlagh told Kim Link, in December 2001, that he was

going to be filing for bankruptcy or that he sought her advice in that regard.2 Defendants offer these alleged facts in an attempt to show that CREC had knowledge of the bankruptcy when it sent a termination notice in February 2002. This issue, however, is not relevant because it is undisputed that Defendants continued to operate as a CREC franchisee after the termination notice was sent and that CREC did not in fact terminate the franchise at that time. Instead, CREC filed motions to lift the automatic stay in Motlagh' and Integrity' bankruptcy proceedings to, among other things, terminate the s s Franchise Agreement. In any event, Defendants' suggestion that CREC violated the Determining a bankruptcy stay violation is within the

bankruptcy stay is improper.

exclusive jurisdiction of the Bankruptcy Court and Defendants have never raised this issue with the Bankruptcy Court. See, e.g., Halas v. Platek, 239 B.R. 784, 792 (N.D. III 1999). 3. CREC disputes that it had any knowledge of the bankruptcy filings when it

sent its termination notice to Motlagh in November of 2002. As noted above in paragraph 2, however, this issue is not relevant. 4. CREC disputes that the termination notice was "served" on defendants. It

was mailed. CREC disputes that Kim Link told Motlagh that she would "take care of the matter with CREC" or that Motlagh "was still franchising its standing." It is undisputed that Motlagh' branch was never in good standing as demonstrated by the numerous s payment plans Defendants entered into to cure their defaults. 5. CREC objects to the characterization of its sending a termination notice as

an illegal action. CREC has always conceded that the termination notice was void. It had no effect because of the automatic stay imposed by bankruptcy law. There has been no
2

See Link Declaration, attached as Exhibit 29 to CREC' Statement of Facts ("SOF' s ).
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determination that CREC violated the stay by sending the letter. CREC objects to the statements that it abandoned the Franchise Agreement, refused to acknowledge, and affirmatively denied Century 21 Assurance Realty' existence as a franchisee and s provided no support or help to Motlagh. The purported evidence referred to is

inadmissible because it is conclusory and lacks foundation. For example, there is no foundation for Motlagh' statements in paragraph 9 of his declaration that CREC refused s to acknowledge his existence to callers seeking his office location, that CREC blocked access to its invoice system, or rejected a tender of any royalty payments. Motlagh does not explain what support or help was denied to him or how CREC was obligated to provide such requested support. Nor does Motlagh explain what the consequence was of employees telling him his franchise was not "in their system." The other declarations offered by Defendants also either do not provide support for the statements or are inadmissible because they do not provide foundation for the statements made. 6. CREC objects to the statement in paragraph 6. There is no foundation for

the statement and it doesn' refer to any evidence in the record. The statement is also t contrary to Motlagh' own sworn deposition testimony in which he admitted that s defendants continued using Century 21' trademark and logo' petition and generated s s more than $700,000 in revenue doing so.3 7. CREC objects to the statements in paragraph 7 because the cited evidence

lacks foundation, contains hearsay and is thus inadmissible. 8. CREC objects to the statements in paragraph 8 because the cited evidence is

vague and lacks foundation. The statements are also irrelevant because Motlagh has not identified any impact from the alleged problems caused by the alleged absence from any CREC system. 9.
3

CREC disputes and objects to the statements in paragraph 9 as irrelevant

See Motlagh Deposition at 12:8-12, attached as Exhibit 2 to CREC' SOF. s
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because Defendants have not identified any impact or damages caused by the alleged failure to fulfill any alleged promises or remediate system issues. It is undisputed

Defendants were in continued breach of their obligations, which they acknowledged by entering into payment plans, and on which they defaulted. 10. CREC disputes and objects to the statements made in paragraph 10 to the

extent that they imply CREC violated the bankruptcy stay by sending Defendants a termination notice in February 2002 or that CREC had actual knowledge of the bankruptcy at this time. There has been no finding that CREC violated the bankruptcy stay such that its sending a termination notice was unlawful. CREC has always conceded that the termination notice was void and had no effect. The statements are also misleading because they omit a critical portion of the Bankruptcy Court' August 27, 2003 order s which provided that from that point forward, "Integrity has no further interest in the Franchise Agreement."4 11. CREC disputes and objects to the statements in paragraph 11 to the extent

that they imply that CREC violated the bankruptcy stay by sending a termination notice to Defendants in February 2002. The statements are also misleading by contending that CREC did not seek and enforce its rights and remedies in the Franchise Agreement until November 2003. It is undisputed that in mid-2003, Motlagh had taken the position in sworn testimony before the Bankruptcy Court that he had assigned his rights in the Franchise Agreement to Integrity.5 CREC therefore pursued its motion to lift the stay in Integrity' Chapter 11 proceeding which resulted in Bankruptcy Court' August 27, 2003 s s order terminating Integrity' rights in the Franchise Agreement.6 s Under these

circumstances, CREC did not have any reason to believe it needed to send Motlagh a

4 5

See Order, attached as Exhibit 39 to CREC' SOF. s See Motion, attached as Exhibit 37 to CREC' SOF. s 6 See Order, attached as Exhibit 39 to CREC' SOF. s
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termination notice following the entry of Judge Haines' March 25, 2003 order. 7 Indeed, Motlagh would have ignored such a notice claiming, as he did, that he had to assign the Franchise Agreement to Integrity. 12. CREC disputes and objects to the statement in paragraph 12 because the

cited evidence lacks foundation and does not support the statement. For example, the cited declarations do not identify any services that were refused by CREC and do not identify any services required by the Franchise Agreement that were denied or otherwise not provided. It is also undisputed that Defendants continue to use CREC' trademarks s and were otherwise allowed to act as a CREC franchisee. Accordingly, it is undisputed that CREC performed the most critical portion of the Franchise Agreement, namely providing Motlagh with the license to operate as a CREC franchisee. 13. CREC disputes and objects to the statements made in paragraph 13. No

evidence is cited in support of the statement and, again, Defendants do not identify any portion of the Franchise Agreement which CREC did not comply with. 14. CREC does not dispute that Motlagh left his original office on

approximately August 28, 1998, but objects to the remainder of the statements because they are irrelevant. It is true that some letters sent after August 1998 are addressed to Motlagh at his old address. It is also true that Motlagh admitted receiving some of these letters, such as the February 2002 termination notice, despite the incorrect address. Moreover, Defendants have not disputed that they have received the letters addressed incorrectly. Instead Motlagh' declaration carefully indicates that he has no recollection s of letters he did not sign, not that his office did not receive them.8 Interestingly, Motlagh separately admits receiving the termination letter, which was incorrectly addressed and not signed by Motlagh.
7

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8

See Order, attached as Exhibit 35 to CREC' SOF. s See Motlagh Declaration at ¶ 17.
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15.

CREC objects to the statements in paragraph 15. The statements imply that

Charles McLean improperly had knowledge of Motlagh' financial problems, but there is s no evidentiary support for this implication and certainly no evidentiary support for the implication that CREC provided confidential information about Defendants to Mr. McLean. The statements also conflicts with Motlagh' declaration. s In particular,

paragraph 15 indicates that Mr. McLean presented himself to Motlagh in April 1998 and said he knew about Motlagh' financial problems. However, Motlagh' declaration does s s not go so far. It states that McLean indicated in April 1998 "or in a later conversation, words to the effect that he had knowledge that I was in financial difficulty."9 If Motlagh' s financial troubles were not public on April 1998, they certainly were within a couple of months after Edmonds withdrew and Suncor locked Defendants out and evicted them from their building. There is also no foundation for the statement that Edmonds'

withdrawal of partnership financing was a close-held secret. Edmonds or others within Motlagh' own office could have shared this information with McLean or others without s Motlagh' knowledge. s information to McLean. 16. CREC objects to the statement in paragraph 16. First, the statement is There is certainly no evidence that CREC provided this

irrelevant because there is no evidence of a causal connection between Motlagh' failure s to realize expectations in anything that CREC did or failed to do. Secondly, Motlagh did not "buy" a franchise. Motlagh entered into a non-exclusive Franchise Agreement with CREC, pursuant to which CREC granted Motlagh a non-exclusive license to operate as a franchisee pursuant to the terms of the Franchise Agreement. It is undisputed that

Motlagh was in default of the Franchise Agreement virtually from its inception and that he struggled financially because of problems with his financial partner and landlord. To the extent that Motlagh did not realize his expectations, there is no causal connection to
9

Motlagh Declaration at ¶ 15.
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CREC' alleged acts or omissions. s 17. CREC disputes and objects to paragraph 17. Motlagh does not describe

what "system" he was allegedly kept out of and has not identified any business opportunities that were denied to him. OBJECTION TO DECLARATIONS OF DARYUSH MOTLAGH, TIMOTHY MOYNIHAN, SCOTT MARTIN, JAMES KILPATRICK, GENE DEVLIN AND ROSITA MARTINEZ CREC objects to the declarations of Daryush Motlagh, Timothy Moynihan, Scott Martin, James Kilpatrick, Gene Devlin and Rosita Martinez for the following reasons: 1. With the exception of Motlagh, Defendants did not disclose that these

witnesses would testify before the close of discovery and, thus, CREC has had no opportunity to take their depositions. Defendants served only one disclosure statement on CREC during discovery and it did not contain the names of these declarants, notwithstanding the fact that the declarants all work for Integrity. Defendants can claim no excuse for their failure to disclose these witnesses. The Court should exclude these declarations because of Defendants failure to disclose these individuals during discovery. See, e.g., Manorcare Health Services, Inc. v. Osmose Wood Preserving, Inc., 764 A.2d 475, 483-84 (N.J. Super. A.D. 2001). (court excluded evidence not disclosed); Almog v. Israel Travel Advisory Serv., Inc., 689 A.2d 158, 166 (N.J. Super. A.D. 1997) (testimony not disclosed during discovery excluded). 2. The declarations contain inadmissible hearsay, lack foundation and are

otherwise extremely vague. CREC addresses each declaration as follows: Scott Martin Declaration 3. Paragraph 8 of Mr. Martin' declaration indicates that, before he applied for s

a job with Assurance Realty, he looked up Motlagh' office on the internet, and there was s no phone number listed. There is no indication where Mr. Martin looked on the internet or what, if any, information there was about Defendants notwithstanding a phone number.
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The testimony is vague and lacks foundation. Further, there is no evidence CREC had any obligation to provide information about Defendants on the internet. Defendants certainly had the ability to maintain their own website or to provide information about themselves on certain on-line telephone directories. Defendants' apparent failure to do this does not mean CREC did anything wrong. The statements concerning Mr. Martin' s inability to get a phone number by calling the CREC main number and the direction from the CREC website to Metro Alliance is also vague and ambiguous. Mr. Martin does not indicate whether he spoke with anyone, what he asked for, what he was told or any other details of the alleged phone call. Mr. Martin also does not indicate how the CREC website directed him to Metro Alliance. 4. 5. Paragraph 9 of Mr. Martin' declaration contains inadmissible hearsay. s Paragraph 11 of Mr. Martin' declaration lacks foundation. It does not s

indicate how Defendants' business has improved or any indication what freedom Motlagh gave Mr. Martin to grow since becoming Brand 1 Realty, which Motlagh apparently did not give Mr. Martin before the disassociation with CREC. 6. Paragraph 12 of Mr. Martin' declaration is vague. Mr. Martin does not s

indicate what he means by CREC' service being poor, does not identify any service that s was denied Defendants and certainly does not identify any service required by the Franchise Agreement that was denied. James Kilpatrick Declaration 7. hearsay. Paragraph 8 of Mr. Kilpatrick' declaration lacks foundation and contains s There is no foundation for the statement that Defendants' office was not

recognized on the CREC website or that it lost new agents because a local, independent, CREC franchise office (but not CREC) made derogatory comments about Defendants' office standing. This statement is also inadmissible hearsay. There is also no foundation for the statement that Defendants were not recognized on the broker to broker or client
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referral systems, received no referrals and there is no foundation what systems Mr. Kilpatrick is referring to. 8. Paragraph 9 lacks foundation. There is no foundation for the statement that

Brand 1' opportunities became better or that anyone was making derogatory comments s about Defendants. The implication is that the opportunities became better because they were no longer affected by derogatory comments made by another franchisee. This has nothing to do with CREC. 9. There is no foundation for statements in paragraph 11, which are also vague

and ambiguous. Mr. Kilpatrick does not identify any services which were denied and does not otherwise describe what he means by saying that the service was "poor." 10. The statement in paragraph 12 lack foundation. Mr. Kilpatrick does not

identify the services and other items that he had no access to and there is no foundation CREC provided such services, that they were denied to Defendants or that they were required by the Franchise Agreement. Timothy Moynihan Declaration 11. The statements in paragraph 9 of Mr. Moynihan' declaration lack s

foundation and are vague. Mr. Moynihan does not identify how service was poor and there is no foundation for the statement that there were no referrals or support from CREC. Nor is there any indication that any such service or support was required by the Franchise Agreement. 12. There is no foundation for the statements in paragraph 10 that Mr.

Moynihan was denied access to any on-line services or products and the statements were also vague and ambiguous. Mr. Moynihan does not identify any services or products he was denied, with the exception of homeowner warranty policies, and as to that issue, there is no foundation that CREC provides homeowner warranty policies. 13. The statements in paragraph 11 are vague and irrelevant.
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There is no

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explanation of what standards were maintained and what he means by the statement that the image and standards were "good." Gene Devlin Declaration 14. declaration. There is no foundation for the statements in paragraph 13 of Mr. Devlin' s In particular, there is no foundation that Mr. Devlin lost opportunities

because of any problems with referral systems or that the office was "cut loose and discarded" by CREC. Nor is there any foundation that Defendants were eliminated from a CREC homes magazine. To the contrary, the undisputed evidence is that CREC is not involved in local advertising; rather it is the responsibility of the local Broker Council, which Motlagh admits is separate from CREC. Moreover, Motlagh admitted that the exclusion from the Homes Magazine was a decision made by the Broker Council, not CREC.10 Nor is there any foundation for the statement that agents lost the ability to use internet tools or that CREC allowed a larger franchisee to encroach on defendants' area. On this last point, Motlagh admitted that Metro Alliance has never operated within a quarter mile of defendants' office, which is the only area protected by a franchise agreement.11 15. There is no foundation for the statements in paragraph 14 that CREC gave

Defendants a black eye or inflicted any damaged upon defendants. Defendants have not disclosed any damages caused by CREC. 16. There is no foundation for the statements in paragraph 15, which are also

vague and ambiguous. Mr. Devlin does not identify any service or support which was denied and does not describe what he means when he says that support went from good to poor to nonexistent. Mr. Devlin concedes he does not recall specifics. 17.
10

There is no foundation for the statements in paragraph 17 that Mr. Devlin

See Motlagh Deposition at 215:6-16, attached as Exhibit 4 to CREC' SOF; see also s Link Declaration, attached as Exhibit 29 to CREC' SOF. s 11 See Motlagh Deposition at 308-310:14-13, attached as Exhibit 5 to CREC' SOF. s
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was denied access to any on-line services or products and the statements were also vague and ambiguous. Mr. Devlin does not identify any services or products he was denied, with the exception of homeowner warranty policies, and as to that issue, there is no foundation that CREC provides homeowner warranty policies. 18. The statement in paragraph 18 are vague and irrelevant. There is no

explanation of what standards were maintained and what he means by the statement that the image and standards were "good." Rosita Martinez Declaration 19. There is no foundation for the statement in paragraph 8 that Ms. Martinez' s

ability to compete was impaired because it was not on a CREC roster for referrals. There is no explanation for what this roster is, that it even exists or that it was maintained by CREC. Whether or not she received referrals from other franchisees is irrelevant because the other franchisees are independent of CREC.12 20. The statements in paragraph 9 are inadmissible hearsay. They are also

irrelevant because Metro Alliance is not CREC and there is no evidence remotely suggesting that CREC had anything to do with Metro Alliance' purported solicitation of s Defendants' agents. 21. The statement in paragraph 10 about Defendants' business growing lacks

foundation. It is also irrelevant whether any client ever told her that they found her through a referral system. There is no foundation as to what system she is referring to or that it was somehow required by the Franchise Agreement. 22. The statements in paragraph 11 about Motlagh' character are inadmissible s

under F.R.E. 404. 23. The statements in paragraph 12 about Defendants' image and standards are

irrelevant. There is no explanation of what standards were maintained and what he means
12

See Motlagh Deposition at 216:21-23, attached as Exhibit 4 to CREC' SOF. s
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by the statement that the image and standards were "good." Daryush Motlagh Declaration 24. There is no foundation for the statements in paragraph 4 of Motlagh' s

declaration that, other than not including Defendants' office in the 1999 Uniform Franchise Offering Circular, CREC failed to include Motlagh' franchise in any annual s published directory or worldwide referral system, excluded Defendants from CREC advertising and materials or disclosed any confidential information about Defendants to anyone. As for the advertising issue, Motlagh has admitted that CREC does not do local advertising and that the advertising issues he complained about were handled by the independent Broker Council, not CREC.13 25. The issue of Defendants failure to meet "minimum operating standards" is

irrelevant. Although CREC did send letters to Defendants about their poor performance and placed them on probation, CREC took no action based upon their poor performance and the franchise was not terminated because of the failure to meet any standards. Rather, CREC terminated the Franchise Agreement, after Court approval, for failing to pay franchise fees. The statements concerning deliberate actions taken by CREC are also vague, ambiguous and lack foundation. 26. The statements in paragraph 6 regarding problems with referral systems are

vague, ambiguous and lack foundation. There is also no foundation for what benefits Motlagh is referring to that were promised in the Franchise Agreement. The statement that he stopped making payments only after CREC failed to fix problems is also contradicted by the undisputed record, which demonstrates that Defendants were in continual default of their obligations beginning in April 1998, well before Motlagh even claims any problems began in mid-1999. 27.
13

The statements in paragraph 7 are vague, ambiguous and lack foundation.

See Motlagh Deposition at 215-16:6-4, attached as Exhibit 4 to CREC' SOF. s
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Motlagh does not identify what support he expected and there is no foundation that his franchise location, phone number and name were eliminated from any internet and telephone referral and locator systems. There is also no foundation for the statement that CREC routed inquiries away from Defendants to other franchisees. 28. The statements in paragraph 9 that CREC refused to acknowledge

Motlagh' existence as a franchise to callers seeking an office location lack foundation s and are inadmissible hearsay. There is also no foundation for the statement that CREC provided no support or help to Motlagh and this statement is vague and ambiguous. There is nothing in the record to suggest that, post-petition, Motlagh even asked for any support or help. There is no foundation for the statement that CREC rejected the tender of any royalty payments or that employees told him that his franchise was not in "their system." 29. The statement in paragraph 12 is irrelevant. It is undisputed that Defendants

generated more than $700,000 in revenue post-petition through November 2003 while operating as a CREC franchisee.14 Whether Motlagh is aware of any business he received specifically because of his use of CREC trademarks is irrelevant. 30. 31. The statements in paragraphs 13 and 14 lack foundation. The statement in paragraph 15 that Mr. McLean stated, at some point, he Defendants

had knowledge about Mr. Motlagh' financial difficulties is irrelevant. s

financial difficulties were a matter of public record and there is no evidence that CREC provided any information about Defendants' problems to Mr. McLean. 32. The implication in paragraph 16 that Defendants' alleged problems with

CREC were related to his refusal of Mr. McLean' offer is misleading and lacks s foundation. Motlagh claims that he declined Mr. McLean' offer in April 1998, but that s his problems with CREC did not begin until sometime in mid-1999. By this time,

Defendants had been evicted by their landlord, their financial troubles and claim of
14

See Motlagh Deposition at 12:8-12, attached as Exhibit 2 to CREC' SOF. s
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dispute were a matter of public record and Defendants had already agreed to and defaulted on several payment plans with CREC. The statement that any problems with CREC were related to Mr. McLean simply lack any foundation. 33. There is no foundation for the statements in paragraph 18 regarding alleged

problems with CREC. Other than omitting Motlagh' office from the 1999 Uniform s Franchise Offering Circular, there is no foundation that Defendants' office was excluded from any directories or website listings. Nor is there any foundation for the statement that AON, a separate company, or the local Broker Council concluded that Assurance Realty was not a franchisee. To the contrary, it is undisputed that the Broker Council was aware of Motlagh' status as a franchise that had failed to pay its dues to the Broker Council.15 s There is likewise no foundation that CREC misapplied any payments from Defendants. Nor were there any documents attached to the declaration as claimed. DATED this 28th day of August, 2006. FENNEMORE CRAIG, P.C.

By/s/Kevin J. Bonner Janet Weinstein Kevin J. Bonner Sherida Colvin Attorneys for Plaintiff Century 21 Real Estate Corporation COPY OF THE FOREGOING Mailed this 28th day of August, 2006, to: Don P. Williams Law Office of Don P. Williams P.O. Box 5308 Goodyear, AZ 85338 Attorney for defendants Motlagh and Integrity /s/Amberlyn S. Murray
1825623.6/20474.039

15

See Letter, attached as Exhibit 31 to CREC' SOF. s
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