Free Motion for Attorney Fees - District Court of Arizona - Arizona

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Michael Simes (Arizona Bar No. 016021) MICHAEL SIMES, LLC 903 South Rural Road Suite 101--323 Tempe, Arizona 85281 Telephone: 480-699-3636 Facsimile: 480-659-2943 Email: [email protected] Website: www.MichaelSimes.com Attorney for Solinvest Group, Ltd.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

) ) ) ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC. , a Nevada ) Corporation; ) ) Debtor. ______________________________________ ) ) SOLINVEST GROUP, LTD., a British Virgin ) ) Islands entity; ) ) Plaintiff, ) ) v. ) ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC., a Nevada ) Corporation; TSI ACQUISITION ) CORPORATION, formerly known as ) TECHNOLOGY SYSTEMS ) INTERNATIONAL, INC., an Arizona ) Corporation; ALANCO TECHNOLOGIES, ) INC., an Arizona Corporation; In re: Case 2:02-cv-02641-ROS Page 1 of 67 Document 35

United States District Court For the District of Arizona Case No. CV--02--2641--PHX--ROS United States Bankruptcy Court For the District of Arizona Case No. 2--03--21187--PHX--EWH United States Bankruptcy Court For the District of Arizona Case No. 2--04--00019--PHX--EWH United States Bankruptcy Court Fort the District of Arizona Case No. 2--05--07799--PHX--EWH

AMENDED MOTION FOR THE AWARD OF ATTORNEYS' FEES AND COSTS

(Oral Arguments Requested)

Filed 11/04/2005

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) ) ) ) ) ) ) Defendants. ) ) ______________________________________ ) ) ) ) GREG OESTER and LYNDA OESTER, husband and wife; ) ) ) Third-Party Plaintiffs, ) ) v. ) ) EVERT EGGINK, ) ) Third-Party Defendant. ______________________________________ ) GREG OESTER and LYNDA OESTER, husband and wife; JOHN DOE I-X; JANE DOE I-X; ABC PARTNERSHIP I-X; and XYZ CORPORATION I-X;

Plaintiff Solinvest Group, Ltd., hereby respectfully moves this Court for an award of its attorneys' fees and costs. This Motion is made pursuant to the Order of this Court, dated October 18, 2005. This Motion is supported by the following Memorandum of Points and Authorities and the supporting documents referenced in the Memorandum which are all incorporated herein by this

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reference. Plaintiff Solinvest Group, Ltd., respectfully requests an award of all its attorneys' fees against Defendant Technology Systems International, Inc. This requests is made pursuant to (i) the Judgment by Default Against Technology Systems International, Inc., entered on May 27, 2003, and (ii) as a compensatory civil contempt sanction against Defendant Technology Systems International, Inc. In terms of the compensatory civil contempt sanction, this request is made pursuant to (a) Rule 11 of the Federal Rules of Civil Procedure, and (b) 28 U.S.C. § 1927, and (c) the inherent powers of

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this Court as identified in Rule 83.1(e)(4) of the Rules of Practice of the United States District Court for the District of Arizona. In total, Plaintiff Solinvest Group, Ltd., incurred attorneys' fees in this matter in the total amount of two hundred ninety-nine thousand six hundred twenty-five dollars and thirty cents

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($299,625.30). Pursuant to the Order of this Court, dated October 18, 2005, Plaintiff Solinvest Group, Ltd., has allocated the total amount of attorneys' fees and out--of--pocket expenses it has incurred in this matter between the services provided in connection with matters related to this Court and the services provided in connection with the proceedings in connection with matters related to the United States Bankruptcy Court for the District of Arizona. Of the total amount of attorneys' fees incurred in this matter by Plaintiff Solinvest Group, Ltd., it has incurred attorneys' fees in connection with

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matters related to this Court in the amount of two hundred thirteen thousand five hundred thirty-seven dollars and eighty--two cents ($213,537.82). Also, of the total amount of attorneys' fees incurred in this matter by Plaintiff Solinvest Group, Ltd., it has incurred attorneys' fees in connection with matters related to the United States Bankruptcy Court for the District of Arizona in the amount of eighty-six thousand eighty-seven dollars and forty-eight cents ($86,087.48). Plaintiff Solinvest Group, Ltd., also respectfully requests an award of its taxable costs

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in the amount of one thousand three hundred seventy-seven dollars and twenty--six cents ($1,377.26). See Bill of Costs, filed September 7, 2005 (Docket # 61). RESPECTFULLY SUBMITTED this 4th day of November, 2005. MICHAEL SIMES, LLC /Michael Simes/ . Michael Simes Attorney for Solinvest Group, Ltd.

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MEMORANDUM OF POINTS AND AUTHORITIES Plaintiff Solinvest Group, Ltd. ("Solinvest"), in support of its Amended Motion for the Award of Attorneys' Fees and Costs, states as follows:

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1.

On October 31, 2001, Defendant Technology Systems International, Inc., a Nevada

corporation ("TSI"), as Borrower, executed a Promissory Note in favor of Solinvest, as Holder. See First Amended Complaint, filed January 3, 2003 (Docket # 2), at ¶ 18. 2. The Promissory Note provided in part that: "The Borrower agrees to pay all costs and

expenses, including without limitation reasonable attorney's fees, which may be incurred by the Holder in collecting any amount due under this Note . . . ." See First Amended Complaint, at ¶ 29. 3. TSI breached the Promissory Note by failing to pay it when it became due and

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payable. See First Amended Complaint, at ¶¶ 24, 26, 51. 4. Prior to commencing this action, Solinvest tried to settle this matter with TSI.

However, TSI refused to settle this matter. Therefore, TSI forced Solinvest to incur all the attorneys' fees and costs in this matter. See First Amended Complaint, at ¶¶ 43, 44. 5. On December 31, 2002, Solinvest commenced this action against TSI. See Complaint,

filed December 31, 2002 (Docket # 1).
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6.

In this matter Solinvest sought to enforce its rights under the Promissory Note against

TSI. These rights included recovery of its attorneys' fees and costs. See First Amended Complaint, at ¶¶ 52--57. 7. After filing the Complaint, Solinvest again tried to settle this matter with TSI. Again,

TSI refused to settle this matter. Therefore, TSI continued to force Solinvest to incur all the attorneys' fees and costs in this matter. See Motion for Default Judgment Against Technology Systems International, Inc., filed April 9, 2003 ("Motion for Default")(Docket # 10), at ¶¶ 13, 15.

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8.

TSI intentionally refused to appear and defend itself in this matter. See Motion for

Default, at ¶ 16. 9. The intentional refusal of TSI to appear and defend itself in this matter caused

Solinvest to incur additional attorneys' fees and costs.
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10.

On April 9, 2003, Solinvest moved this Court to enter a Default Judgment against TSI.

See Motion for Default. 11. On May 23, 2003, this Court granted the Motion for Default and entered judgment

against TSI. See Judgment by Default Against Technology Systems International, Inc., dated May 23, 2003 ("Judgment")(Docket # 12). 12. The Judgment was in the Principal Amount of two hundred fifty-six thousand eight

hundred dollars and no cents ($256,800.00) with post-judgment interest accruing thereon at the rate
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of twenty percent (20.0%) per annum. See Judgment, at ¶ 6. 13. The Judgment provides that Solinvest is entitled to an award of all its attorneys' fees

and costs against TSI. See Judgment, at ¶ 7. 14. The Judgment also provides that this Court retains jurisdiction over TSI and this

matter pending payments of all amounts due and owing. See Judgment, at ¶ 8. 15. After entry of the Judgment, Solinvest again tried to settle this matter with TSI.

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Again, TSI refused to settle this matter. Therefore, TSI continued to force Solinvest to incur additional attorneys' fees and costs. See Consolidated and Expedited (1) Motion for Leave of Court to File Write of Execution and (2) Motion for Continuation of Time for Scheduling Conference, filed July 21, 2003 (Docket # 17), at ¶¶ 7, 8. 16. In July 2003, Solinvest commenced ordinary collection efforts to enforce the

Judgment against TSI. These efforts resulted in Writs of General Execution being executed on TSI

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by the United States Marshall on August 19, 2003. See Expedited Motion for Turnover Order, filed September 9, 2003 ("Motion to Turnover")(Docket # 23), at ¶¶ 5--7. 17. Attorney Jeffery M. Proper ("Attorney Proper"), the attorney for TSI, intentionally

interfered with the execution of the Writs of General Execution by the United States Marshall. This
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intentional interference resulted in the Writs being returned unsatisfied. See Motion to Turnover, at ¶¶ 8--10. 18. On September 9, 2003, Solinvest commenced extraordinary collection efforts to

enforce the Judgment against TSI. See Motion to Turnover, at ¶¶ 11--15. 19. On October 3, 2003, the extraordinary collection efforts of Solinvest resulted in this

Court ordering TSI to turnover six million (6,000,000) shares of Alanco Technologies, Inc., common stock ("Alanco Stock") to Solinvest. See Turnover Order, dated October 3, 2003 (Docket # 28).

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20.

Also on October 3, 2003, TSI untimely filed a response in opposition to the Motion

for Turnover. See Response to Expedited Motion for Turnover of Funds, dated October 3, 2003 ("Response to Turnover")(Docket # 30). 21. 22. The Response to Turnover was the first appearance by TSI in this matter. The Response to Turnover was supported by an affidavit of Attorney Proper. In this

affidavit Attorney Proper stated that in his "opinion" the Alanco Stock "only nominally belongs" to
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TSI and, therefore, is "not available for execution and sale" to satisfy the Judgment. See Affidavit of Jeffery M. Proper, dated September 30, 2003 ("Proper Affidavit")(Docket # 31), at ¶ 14; see also Response to Turnover, at 3:3--3:24. 23. On October 14, 2003, this Court ordered Solinvest to file a reply in support of the

Motion for Turnover because the Response to Turnover and the Proper Affidavit "cast doubt" on the ability of TSI to comply with the Turnover Order. See Order, dated October 14, 2003 (Docket # 33), at 1:26--2:2.

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24.

On October 20, 2003, Solinvest filed its reply in support of the Motion for Turnover.

This voluminous brief (i.e. 292 pages with exhibits) demonstrated that TSI owned the Alanco Stock. See Reply in Support of the Motion for Turnover Order, filed October 20, 2003 ("Reply to Turnover")(Docket # 34).

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25.

The Reply to Turnover proved that the opinions expressed by Attorney Proper in the

Proper Affidavit were false. 26. On October 22, 2003, this Court issued a Revised Turnover Order which superceded

the Turnover Order. The Revised Turnover Order held in part as follows: "Defendant Technology Systems International, Inc., a Nevada corporation, shall turnover six million (6,000,00) shares of Class A Common Stock in Alanco Technologies, Inc., to Attorney Michael Simes, attorney for Plaintiff Solinvest Group, Ltd., by no later than 5:00 p.m. Arizona time on November 5, 2003." See

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Revised Turnover Order, entered October 22, 2003 (Docket # 35), at 2:13--2:16 (Emphasis in original). 27. In the Revised Turnover Order, this Court warned Attorney Proper to comply with the

Arizona Rules of Professional Conduct, Rule 42 of the Rules of the Supreme Court of Arizona. See Revised Turnover Order, at 1:24--2:10. 28. TSI failed to comply with the Revised Turnover Order. See Motion for Order of

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Contempt, filed November 19, 2003 ("Motion for Contempt")(Docket #36),at ¶ 4. 29. As will be discussed below, TSI's failure to comply with the Revised Turnover Order

was intentional. 30. On November 19, 2003, Solinvest moved this Court to hold TSI in contempt for its

failure to comply with the Revised Turnover Order. See Motion for Contempt. 31. On December 3, 2003, rather than comply (admittedly untimely) with the Revised

Turnover Order, TSI filed a Voluntary Petition for bankruptcy protection with the United States
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Bankruptcy Court for the District of Arizona ("Bankruptcy Court"). The Clerk of the Bankruptcy Court assigned this matter Case Number 2--03--21187--PHX--EWH ("First Bankruptcy"). See Voluntary Petition, filed December 3, 2005 (First Bankruptcy Docket # 1).1 32. On January 5, 2004, Solinvest moved this Court to withdraw the entire First

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Bankruptcy, which included this matter, from the Bankruptcy Court. Even though it was for this Court to decide whether or not to withdraw the First Bankruptcy, withdrawal is an adversarial process that had to be filed with the Bankruptcy Court. The Clerk of the Bankruptcy Court assigned this matter Case Number 2--04--00019--PHX--EWH ("Adversarial Proceeding"). See Motion to Withdraw Reference in Whole, filed January 5, 2004 ("Motion to Withdraw")(Adversarial Proceeding Docket #1); see also Rule 5011--1 of the Local Rules of Bankruptcy Procedure for the District of Arizona.

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33.

Solinvest had no option other than to file the Motion to Withdraw. More specifically,

as a result of TSI filing the Voluntary Petition in the First Bankruptcy this matter was automatically transferred from this Court to the Bankruptcy Court. This transfer occurred even though the filing of a Voluntary Petition was the incorrect procedural mechanism by which TSI should have sought bankruptcy protection. See Motion to Withdraw, at ¶ 23. 34. By using the incorrect procedural mechanism by which to obtain bankruptcy

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protection, TSI prevented this Court from deciding the Motion for Contempt. See Motion to Withdraw, at ¶ 23. 35. In the Motion to Withdraw, Solinvest sought to have this Court withdraw this matter

and the First Bankruptcy from the Bankruptcy Court for a long list of reasons. One reason was that

Solinvest hereby respectfully gives notice that it has not attached hereto any documents filed with the Bankruptcy Court that are referenced herein. Solinvest has elected not to do so because these documents are available online through the Public Access to Court Electronic Records ("PACER") System. Case 2:02-cv-02641-ROS Page 8 of 67 Document 35 Filed 11/04/2005 Page 8 of 35

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TSI had sought bankruptcy protection without the necessary requirement of good faith. An example of this includes TSI seeking bankruptcy protection only to avoid being found in contempt for its intentional failure to comply with the Revised Turnover Order. Another example is that TSI was not bankrupt: TSI claimed to had five million six hundred fifty thousand dollars ($5,650,000.00) in total

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assets but only six hundred fifty-nine thousand dollars ($659,000.00) in total liabilities. See Motion to Withdraw, at ¶¶ 12--20, 24. 36. The actions taken by TSI immediately prior to commencing the First Bankruptcy

demonstrate that its violation of the Revised Turnover Order was intentional. More specifically, TSI threatened Solinvest that it would seek bankruptcy protection if Solinvest did not settle this matter. Furthermore, TSI moved for summary judgment in a case2 in the Superior Court of the State of Arizona in and for the County of Maricopa rather than comply with the Revised Turnover Matter. See

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Motion to Withdraw, at ¶¶ 15(c), 18. 37. On January 7, 2004, this Court declined to withdraw this matter from the Bankruptcy

Court. Instead this Court stayed this matter pending resolution of the First Bankruptcy. See Order, entered January 7, 2004 ("First Stay Order")(Docket # 38), at 2:20--2:21. 38. Also in the First Stay Order this Court elected to retain its jurisdiction over this matter

and the First Bankruptcy by requiring Solinvest and TSI to file with it joint semi-annual status reports
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2

on the progress of the First Bankruptcy. See First Stay Order, at 2:24--2:26. 39. Also in the First Stay Order this Court ordered Solinvest to seek to have the

Bankruptcy Court resolve as much of this matter as possible. See First Stay Order, at 2:12--2:18.

This action is captioned Technology Systems International, Inc. v. Alanco Technologies, Inc., sub nom., Jones v. Alanco Technologies, Inc., Case Number CV2003--001937. Case 2:02-cv-02641-ROS Page 9 of 67 Document 35 Filed 11/04/2005 Page 9 of 35

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40.

In the First Stay Order, this Court established twin-goals for Solinvest in the First

Bankruptcy. First, resolve as much of this matter as possible before the Bankruptcy Court. Second, resolve this matter as quickly as possible before the Bankruptcy Court. 41. On January 12, 2004, TSI responded in opposition to the Motion to Withdraw. This

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response was unnecessary because this Court had already resolved the Motion to Withdraw with entry of the First Stay Order. See Technology Systems International, Inc.'s, Response and Opposition to Motion to Withdraw Reference in Whole and/or Application for Removal, dated January 22, 2004 ("Response to Withdraw")(Adversarial Proceeding Docket # 4). 42. In the Response to Withdraw, TSI admitted in part that it had allowed the Judgment to

be entered against itself because it had no "available defenses" in this matter. See Response to Withdraw, at 3:22.

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43.

The admission by TSI in the Response to Withdraw that it had no available defenses in

this matter proves that TSI unreasonably and vexatiously multiplied these proceedings by refusing to timely settle this matter. 44. In the First Bankruptcy, Solinvest sought to resolve as much of this matter as possible

as quickly as possible. To achieve these twin-goals Solinvest sought to have the Bankruptcy Court takeover the bankrupt estate of TSI by converting the First Bankruptcy from a reorganization under

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Chapter 11 to a liquidation under Chapter 7. See Motion to Convert Bankruptcy from Chapter 11 to Chapter 7, filed March 29, 2004 ("Motion to Convert")(First Bankruptcy Docket # 18), at ¶ 21. 45. The twin-goals for Solinvest established by this Court in the First Stay Order greatly

limited its strategic and tactical options in the First Bankruptcy. More specifically, Solinvest did not seek to have the Bankruptcy Court dismiss the First Bankruptcy even though there were more than adequate grounds to do so. In fact, Solinvest argued against dismissal of the First Bankruptcy because it would have simply transferred this matter back to this Court without resolution (i.e.

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"reverse remand"). See Motion to Convert, at ¶ 17; cf. Joinder of Alanco in Motion to Convert of Solinvest, or, in the alternative, Motion to Dismiss, filed May 7, 2004 ("Alanco Motion to Convert")(First Bankruptcy Docket # 28), at 11:16. 46. TSI opposed conversion of the First Bankruptcy from a reorganization under Chapter

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11 to a liquidation under Chapter 7. See Response and Opposition to Motion to Convert from Chapter 11 to Chapter 7, filed April 20, 2004 (First Bankruptcy Docket #23). 47. In the First Bankruptcy, TSI was quickly faced with overwhelming opposition from

Solinvest and the shareholders of TSI to its retention of the bankrupt estate under a Chapter 11 reorganization. See Motion to Convert; see also Alanco Motion to Convert; see also Position Statement of EMS Technologies as to Motion to Convert Bankruptcy, filed April 28, 2004 (First Bankruptcy Docket # 27), at 3:24.

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48.

In the First Bankurptcy, TSI did not want to lose control over the multi--million

dollar bankrupt estate. To prevent this, TSI sought to strip Solinvest of its standing to seek conversion of the First Bankruptcy. More specifically, prior to Solinvest moving to convert the First Bankruptcy, TSI proposed a Plan of Reorganization that in part did NOT provide for the timely or full payment of the Judgment to Solinvest. Then, after overwhelming opposition to its reorganization was voiced, TSI changed its position and proposed a Plan of Reorganization that provided for the

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timely and full payment of the Judgment to Solinvest. As a result of this change in position by TSI, Solinvest had to withdraw its opposition to the reorganization of TSI under Chapter 11. See Notice of No Objection, filed August 14, 2004 (First Bankruptcy Docket # 63); see also Motion to Convert, at ¶ 21(d). 49. On December 1, 2004, the Bankruptcy Court resolved the First Bankruptcy by

confirming a Plan of Reorganization for TSI. See Order Confirming Debtor's Third Amended Plan of Reorganization as Modified, entered December 1, 2004 ("Plan Order")(First Bankruptcy Docket #

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84); see also Debtor's Third Amended Plan of Reorganization as Modified, filed November 30, 2004 ("TSI Plan of Reorganization")(First Bankruptcy Docket # 82). 50. The TSI Plan of Reorganization provided in part for the timely payment of the "full

amount" of the Judgment to Solinvest. See TSI Plan of Reorganization, at 6:14.
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51.

In summary, in the First Bankruptcy, Solinvest successfully accomplished the twin-

goals established for it by this Court in the First Stay Order. More specifically, the matter was resolved in less than one (1) year and without diminution or delay for the Judgment. 52. On December 20, 2004, this Court lifted the First Stay Order in response to the

resolution of the First Bankruptcy. See Order, entered December 21, 2004 (Docket # 42). 53. Also on December 20, 2004, Solinvest moved this Court to withdraw from

consideration the Motion for Contempt. Solinvest sought this to conserve judicial economy, to avoid
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incurring additional attorneys' fees, and to accelerate the final resolution of this matter. See Motion for Order of Leave of Court to Withdraw Motion for Order of Contempt, filed December 20, 2004 (Docket # 43). 54. On December 21, 2004, this Court withdrew from consideration the Motion for

Contempt. See Order, dated December 21, 2004 (Docket # 44). 55. On January 12, 2005, Solinvest moved this Court to award it all the attorneys' fees and

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costs it had incurred in this matter. See Motion for the Award of Attorneys' Fees and Costs, filed January 12, 2005 ("Motion for Fees")(Docket # 45). 56. When the Motion for Fees was filed, the only issue remaining in this matter was the

award of attorneys' fees and costs. See Motion for Fees, at ¶ 22. 57. On January 31, 2005, TSI filed its response in opposition to the Motion for Fees. See

Response and Objection to Solinvest Group, Ltd.'s Motion for the Award of Attorney's Fees and

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Costs and Request for Evidentiary Hearing, filed January 31, 2005 ("Response for Fees")(Docket # 48). 58. In the Response for Fees, TSI argued in part that this Court should split the issue of

the award of the attorneys' fees and costs incurred by Solinvest between itself and the Bankruptcy
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Court. More specifically, TSI argued that the Bankruptcy Court, not this Court, should determine whether to award Solinvest the attorneys' fees and costs it incurred in the First Bankruptcy. See Response for Fees, at 4:2--6:21. 59. On February 9, 2005, Solinvest filed its reply in support of the Motion for Fees. See

Reply in Support of Motion for the Award of Attorneys' Fees and Costs, filed February 9, 2005 ("Reply for Fees")("Docket # 49). 60. In the Reply for Fees, Solinvest argued in part that this Court should not split the

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decision to award it all of its attorneys' fees in this matter. More specifically, Solinvest argued that TSI had failed to support its split-argument with any legitimate or relevant legal analysis. Because this was a reply brief, Solinvest could not make a detailed argument in support of this Court awarding it all of its attorneys' fees and costs. See Reply for Fees, at ¶¶ 7, 8. 61. Throughout January and February 2005, TSI was amassing a substantial amount of

money from selling a fraction of the Alanco Stock under the TSI Plan of Reorganization. More
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specifically, as of February 9, 2005, TSI had in its financial accounts five hundred eighty-six thousand three hundred seventy-six dollars and ninety-seven cents ($586,376.97). As of February 28, 2005, TSI had in its financial accounts seven hundred thirty-five thousand one hundred ninety-one dollars and seven cents ($735,191.07). See Plan Order, at 2:20--2:27; Debtor's Post-Confirmation Accounting, filed March 16, 2005 (First Bankruptcy Docket # 140).

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62.

The Alanco Stock that TSI was selling pursuant to the TSI Plan of Reorganization was

the same Alanco Stock that TSI had previously denied owning in its Response to Turnover. See Response to Turnover, at 3:3--3:24; see also Proper Affidavit, at ¶ 14. 63. Also in February 2005, a majority of the shareholders of TSI became dissatisfied with

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management of TSI and set out to change it. More specifically, A. Since early 2003, TSI had been managed by a Board of Directors comprised of

the following individuals: Richard C. Jones, Kevin L. Jones, Perry D. Logan, Ted Marek and Dennis Nielsen (together, the "Old Board of TSI"). See Statement of Financial Affairs, filed December 18, 2003 (First Bankruptcy Docket # 7), at ¶ 21. B. The Old Board of TSI had been consistently represented thought this matter

and the First Bankruptcy by Attorney Proper. See Notice of Appearance of Behalf of Defendant
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Technology System International, Inc., a Nevada Corporation, dated January 20, 2004 (Docket # 39); Application to Approve Employment of Attorney, filed December 31, 2003 (First Bankruptcy Docket # 9). C. To elect a new Board of Directors of TSI ("New Board of TSI"), the TSI

shareholders scheduled a meeting to vote for February 28, 2005. See Reorganized Debtor's Omnibus Conditional Objection to Proofs of Claim, filed March 2, 2005 ("Omnibus Objection")(First

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Bankruptcy Docket # 108), at ¶ 7. 64. As in the First Bankruptcy, the Old Board of TSI and Attorney Proper did not want to

lose control over TSI. To prevent this, the Old Board of TSI and Attorney Proper did as follows: A. First, on or about February 11, 2005, the Old Board of TSI and Attorney

Proper caused TSI to issue a substantial amount of new TSI common stock ("New TSI Stock"). The Old Board of TSI and Attorney Proper then sold this New TSI Stock only themselves (and as will be discussed below, at a price substantially below fair market value). As a result of this New TSI Stock

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scheme, the Old Board of TSI and Attorney Proper claimed that they could reelect themselves to the Board of Directors of TSI. See Motion for Emergency Relief and Orders Regarding Engelman Berger, P.C., Ted Nicholson, Ted Haller and Dan Cassey, filed March 4, 2005 ("Motion for Relief")(First Bankruptcy Docket # 110), at ¶ 7.

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B.

Second, on February 22, 2005, the Old Board of TSI and Attorney Proper

commenced a new lawsuit in Nevada seeking to prevent the shareholders of TSI from meeting and voting for the New Board of TSI on February 28, 2005. After a hearing before the United States District Court for the District of Nevada, Case3 Number CV--S--05--0248--RLH--LRL, that Court refused to enjoin the shareholders of TSI from meeting and voting for the New Board of TSI. See Minutes of the Court, filed February 25, 2005 (Nevada Litigation Docket # 2). 65. On February 28, 2005, the shareholders of TSI met and elected the New Board of TSI.

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See Omnibus Objection, at ¶ 7. 66. As part of the process of electing the New Board of TSI, Solinvest structured a

settlement agreement ("Settlement Agreement") between various shareholders of TSI. Under the Settlement Agreement, TSI (i.e. the New Board of TSI) would (i) withdraw any opposition to the Motion for Fees, and (ii) not interfere with or delay Solinvest in collecting on the Judgment, and (iii) not appeal the final decision of this Court. See Supplement to Motion for Award of Attorneys' Fees

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3

and Costs, filed February 28, 2005 ("Supplement Motion for Fees")(Docket # 50), at 3:1--3:7. 67. Also on February 28, 2005, Solinvest promptly gave notice to this Court of the

Settlement Agreement and the change in corporate management of TSI from the Old Board of TSI to the New Board of TSI. See Supplement Motion for Fees.

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The Nevada Litigation is captioned Technology Systems International, Inc., v. Alanco Technologies, Inc, et. al. Solinvest hereby respectfully gives notice that it has not attached hereto this document because it is available online through the PACER System. Case 2:02-cv-02641-ROS Page 15 of 35 Document 67 Filed 11/04/2005 Page 15 of 35

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68.

On March 3, 2005, the Old Board of TSI and Attorney Proper sought to have this

Court strike the Settlement Agreement from the record. See Response to Supplement to Motion for Award of Attorneys' Fees and Costs and Motion to Strike Motion, dated March 3, 2005 ("Motion to Strike")(Docket # 51).

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69.

On March 10, 2005, the Bankruptcy Court reopened the First Bankruptcy to hear oral

arguments regarding the dispute between the New Board of TSI and the Old Board of TSI (and Attorney Proper) for control of TSI. See Interim Order, filed March 11, 2005 ("Interim Order")(First Bankruptcy Docket # 134). 70. Solinvest did not appear at the March 11th hearing before the Bankruptcy Court

because Solinvest had nothing to do with the dispute over control of TSI. However, at this hearing Attorney Proper raised a "verbal objection" to the payment of the Judgment to Solinvest. In response

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to this verbal objection, the Bankruptcy Court ordered Attorney Proper to file a formal objection to the payment of the Judgment to Solinvest. See Interim Order, at 3:1--3:2. 71. On March 18, 2005, Solinvest responded in opposition to the Motion to Strike. See

Consolidated (1) Reply in Support of Supplement to Motion for Award of Attorneys' Fees and Costs and (2) Response in Opposition to Motion to Strike, filed March 18, 2005 ("Response to Strike")(Docket # 52).

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72.

In the Response to Strike, Solinvest detailed at length the unfolding dispute between

the New Board of TSI and the Old Board of TSI (and Attorney Proper) for control of TSI. Also, Solinvest identified Attorney Proper as a major cause of this dispute. Finally, Solinvest reported that the Bankruptcy Court was in the process of reopening the First Bankruptcy due to numerous allegations of wrongful conduct by the Old Board of TSI and Attorney Proper in their execution of the TSI Plan of Reorganization. See Response to Strike, at 3:14--4:14.

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73.

Also on March 18, 2005, the Bankruptcy Court reopened the First Bankruptcy. This

reopening was in response to the numerous allegations of wrongful conduct by the Old Board of TSI and Attorney Proper. In response to these allegations, the Bankruptcy Court appointed a Special Advisor to investigate the following: (i) possible insider dealings by the Old Board of TSI and

5 6 7 8 9 10 11 12

Attorney Proper, (ii) allegations of the misappropriation of funds by the Old Board of TSI and Attorney Proper, and (iii) allegations of the improper payment of claims to corporate insiders by the Old Board of TSI and Attorney Proper. See Interim Order, at 1:18--2:2; see also Final Order Appointing Special Advisor, filed March 18, 2005 (First Bankruptcy Docket # 148). 74. On March 21, 2005, the Old Board of TSI and Attorney Proper filed with the

Bankruptcy Court its formal objection to the payment of the Judgment to Solinvest under the TSI Plan of Reorganization. See Objection to Claim of Solinvest Group, Ltd., filed March 21, 2005

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("Objection")(First Bankruptcy Docket # 149). 75. In the Objection, the Old Board of TSI and Attorney Proper opposed payment of the

Judgment to Solinvest under the TSI Plan of Reorganization even though it was they who proposed it. See Consolidated Response in Opposition to Objection to Claim of Solinvest Group, Ltd., and Reply in Support of Proposed Form of Order Regarding Claim of Solinvest Group, Ltd., filed April 11, 2005 ("Response to Objection")(First Bankruptcy Docket # 155), at ¶ 13.

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76.

The Old Board of TSI and Attorney Proper opposed payment of the Judgment to

Solinvest in the First Bankruptcy even though this Court had reassumed jurisdiction over this matter. See Response to Objection, at ¶ 9. 77. As a result of the Objection filed by the Old Board of TSI and Attorney Proper with

the Bankruptcy Court, Solinvest was compelled to file a response in opposition thereto. See Response to Objection.

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78.

On April 6, 2005, the Old Board of TSI and Attorney Proper filed with this Court its

reply in support of its Motion to Strike. See Reply to Response to Opposition to Motion to Strike, dated April 6, 2005 ("Reply to Strike")(Docket # 53). 79. In the Reply to Strike, Attorney Proper again mislead this Court. More specifically,

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Attorney Proper sought to assure this Court that he and the Old Board of TSI were not guilty of any wrongful conduct by stating as follows: "The undersigned counsel assures this Court that the issues for which the Bankruptcy Court requested the Special Advisor to investigate will not lead to any findings of either misappropriation or improper payment of claims by the Debtor." See Reply to Strike, at 2:25--2:27. 80. On April 11, 2005, Solinvest filed its response in opposition to the Objection with the

Bankruptcy Court. See Response to Objection.
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81.

On April 14, 2005, the Bankruptcy Court decided the Objection. The Bankruptcy

Court held as follows: "IT IS ORDERED that the Honorable Rosalyn O. Silver shall determine which court shall hear and determine which portions of the attorney's fee application filed by Solinvest Group, Ltd." See Order Regarding Attorneys' Fees Claim of Solinvest Group, Ltd., dated April 14, 2005 ("Bankruptcy Fee Order")(Bankruptcy Court Docket # 159). 82. Throughout April 2005, the Special Advisor to the Bankruptcy Court investigated the

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alleged wrongful conduct of Attorney Proper and the Old Board of TSI. See Notice of Filing of Special Advisor's Report Regarding Insider Transactions, filed April 28, 2005 ("Special Advisor's Report")(First Bankruptcy Docket # 168), at pp. 1--2. 83. In late April 2005, the Old Board of TSI and Attorney Proper retained a new lawyer

("TSI Lawyer") to represent the Old Board of TSI in the First Bankruptcy. See Verified Bankruptcy Rule 2014(a) and 2016(b) Statement of Brian Sirower with Respect to Technology Systems International, Inc.'s, Application for Order Authorizing the Employment of Quarles & Brady Streich

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Lang LLP as Counsel for Technology Systems International, Inc., including Statement of Disinterestedness, filed April 29, 2005 (First Bankruptcy Docket # 170). 84. It is more likely than not that the Old Board of TSI hired the TSI Lawyer because it

and Attorney Proper knew from the course of the investigation of the Special Advisor in April 2005
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that their numerous and substantial acts of wrongful conduct had been discovered and that Attorney Proper would no longer be allowed to represent the Old Board of TSI before the Bankruptcy Court. See Motion for Relief, at ¶ 15. 85. On April 28, 2005, the Special Advisor to the Bankruptcy Court issued its Report.

See Special Advisor's Report. 86. The Special Advisor's Report detailed so many numerous and substantial acts of

wrongful conduct by the Old Board of TSI and Attorney Proper that it is not appropriate to recite
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them all herein. 87. One example of wrongful conduct detailed in the Special Advisor's Report was the

wrongful taking by Attorney Proper of seventy-four thousand three hundred and seventy-seven dollars and ninety-eight cents ($74,377.98) from the bankrupt estate. See Special Advisor's Report, at p. 11; see also Amended Declaration Pursuant to Rule 2014 of Jeffery M. Proper, dated March 16, 2005 ("Proper Declaration")(First Bankruptcy Docket # 141), at ¶ 13.

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88.

Another example of wrongful conduct identified in the Special Advisor's Report was

the conspiracy between Attorney Proper and the Old Board of TSI in the New TSI Stock scheme. In short, Attorney Proper and the Old Board of TSI conspired together to defraud the shareholders of TSI and defeat the administration of justice through the New TSI Stock scheme. The mechanics of this conspiracy included the sale of the New TSI Stock on an exclusive basis only to the Old Board of TSI and Attorney Proper. Furthermore, its mechanics included the sale of the New TSI Stock for far below its fair market value. In terms of the fair market value issue, the Old Board of TSI caused TSI

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to sell two million (2,000,000) shares of New TSI Stock to Attorney Proper for ten thousand dollars ($10,000.00)4 when the approximate fair market value these shares was two hundred sixty thousand dollars ($260,000.00).5 See Special Advisor's Report, at pp. 4, 6--7, 13--14, fn. 6; see also Proper Declaration, at ¶ 11.

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89.

On May 3, 2005, the Old Board of TSI and Attorney Proper caused TSI to again file

for bankruptcy protection by filing a Voluntary Petition with the Bankruptcy Court. This new bankruptcy action was eventually assigned Case Number 2--05--07799--PHX--EWH ("Second Bankruptcy"). See Voluntary Petition, filed March 3, 2005 (Second Bankruptcy Docket # 1); see also Order Approving Motion to Reassign Case Pursuant to Local Bankruptcy Rule 1072--1(d), dated May 19, 2005 (Second Bankruptcy Docket # 13). 90. As in the First Bankruptcy, TSI used the incorrect procedural mechanism to obtain

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bankruptcy protection in the Second Bankruptcy. More specifically, TSI filed a Voluntary Petition with the Bankruptcy Court to commence the Second Bankruptcy which automatically transferred this matter from this Court to the Bankruptcy Court. See Motion to Withdraw, at ¶ 23. 91. On May 17, 2005, Solinvest gave this Court notice of the Second Bankruptcy of TSI.

Solinvest gave this Court this notice because TSI (i.e. the Old Board of TSI and Attorney Proper) failed to do so. See Notice of Second Voluntary Petition for Bankruptcy Protection Filed by

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4

Defendant Technology Systems International, Inc., filed May 17, 2005 ("Notice of Second Bankruptcy")(Docket # 56).

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92.

Solinvest elected to give this Court notice of the Second Bankruptcy rather than seek

to have this Court withdraw this matter from the Bankruptcy Court in light of the holding of this Court in the First Stay Order. See Notice of Second Bankruptcy, at 3:1--3:7. 93. On June 15, 2005, this Court stayed this matter pending resolution of the Second

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Bankruptcy. Again this Court both retained its jurisdiction over this matter (and the First Bankruptcy and the Second Bankruptcy) and remained active in this matter by requiring semi-annual joint status reports from Solinvest and TSI. See Order, dated June 15, 2005 ("Second Stay Order")(Docket # 57). 94. Circumstantial evidence demonstrates that the Second Bankruptcy was not

commenced in good faith. For example, the Second Bankruptcy was commenced three (3) business days after issuance of the Special Advisor's Report. The result of the Second Bankruptcy was to

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further multiply and delay the First Bankruptcy and this matter, thereby preventing either the Bankruptcy Court or this Court from taking any immediate remedial actions in response to the Special Advisor's Report. However, whether the Second Bankruptcy was in fact commenced in bad faith will never be known because TSI wrongfully failed to file any of the required financial disclosure documents. See Order Granting Extension of Time to File Statement of Financial Affairs and Schedules A Through H, dated June 1, 2005 (Second Bankruptcy Docket # 14); see also

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Proceedings & Minutes For the Continued §341a First Meeting of Creditors, dated June 30, 2005 (Second Bankruptcy Docket # 17). 95. In addition the Second Bankruptcy not being commenced in good faith, the conspiracy

between the Old Board of TSI and Attorney Proper did not end with either the retention of the TSI Lawyer or the commencement of the Second Bankruptcy. In fact it continued outside of judicial oversight with Attorney Proper becoming "special counsel" to the Old Board of TSI. The meaning of this "special counsel" designation is unknown. See Unanimous Written Consent to Action of the

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Board of Directors of Technology Systems International, Inc., dated April 14, 2005, filed May 3, 2005 (Second Bankruptcy Docket # 3). 96. On June 21, 2005, Solinvest secured an Order from the Bankruptcy Court in part

compelling the bankrupt estate of TSI to pay both the Principal Amount of the Judgment and the
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post-judgment interest of the Judgment. See Stipulated Order Approving Partial Payment of Claim of Solinvest Group, Ltd., dated June 21, 2005 ("Order for Payment")(First Bankruptcy Docket # 199). 97. On or about July 21, 2005, the Old Board of TSI complied with Order for Payment by

delivering to Solinvest three hundred ninety-five thousand seven hundred twenty-eight dollars and twenty cents ($395,728.20). 98. On August 4, 2005, the Bankruptcy Court entered an order converting the First

Bankruptcy from a reorganization under Chapter 11 to a liquidation under Chapter 7. See Order
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Approving Stipulation to Convert Case to Chapter 7 and Resolve Other Issues, dated August 4, 2005 ("Conversion Order")(First Bankruptcy Docket # 208). 99. The Bankruptcy Court has placed the bankrupt estate of TSI under the control and

supervision of Trustee Jill H. Ford, Chapter 7 Bankruptcy Trustee. Trustee Ford is represented by Attorney Paul Sala. See Order Approving Employment of Counsel for the Trustee, dated August 29, 2005 (First Bankruptcy Docket # 219).

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100.

The Conversion Order was entered pursuant to a stipulation in which Solinvest did not

participate. See Stipulation to Convert Case to Chapter 7 and Resolve Other Issues, filed July 7, 2005 ("Stipulation to Convert")(First Bankruptcy Docket # 202). 101. this matter. The Stipulation to Convert demonstrates that Attorney Proper crossed--the--line in More specifically, Attorney Proper had stepped out of his capacity as a legal

representative and became an active participant in a conspiracy with the Old Board of TSI. This

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crossover is demonstrated by Attorney Proper having to execute the Stipulation to Convert not in his capacity as a legal representative but as an individual. See Stipulation to Convert. 102. The conversion of the First Bankruptcy from a reorganization under Chapter 11 to a

liquidation under Chapter 7 in Conversion Order is the same remedy Solinvest sought in its Motion to
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Convert filed in March 2004. 103. As part of the conversion of the First Bankruptcy, the Second Bankruptcy was

dismissed. See Order of Dismissal, dated August 24, 2005 (Second Bankruptcy Court Docket # 21); see also Conversion Order, at 2:10--2:12. 104. The Bankruptcy Court has not addressed the wrongful conduct of either Attorney

Proper or the Old Board of TSI. In fact, the Bankruptcy Court approved the payment of an additional thirteen thousand one hundred fifty four dollars ($13,154.00) in compensation to Attorney Proper.

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See Conversion Order, at 2:21, 2:24--3:1. 105. On August 7, 2005, Solinvest gave this Court notice of the resolution of the Second

Bankruptcy. See Notice of Resolution of Second Bankruptcy, filed September 7, 2005 (Docket # 58). 106. Also on August 7, 2005, Solinvest filed a comprehensive supplement to the Motion

for Fees. This comprehensive supplement sought an award of the attorneys' fees and costs incurred by Solinvest in this matter from January 2005 through its date. See Comprehensive Supplement in

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Support of the Motion for the Award of Attorneys' Fees and Costs, filed August 7, 2005 ("Comprehensive Supplement") (Docket # 59). 107. On August 9, 2005, this Court lifted its Second Stay Order because of the resolution of

the Second Bankruptcy. See Order, dated September 9, 2005 (Docket # 63). 108. Also on August 9, 2005, this Court denied the Motion for Fees. This Court held that

the Solinvest had not timely sought the award of its attorneys' fees and costs. See Order, dated August 9, 2005 ("Fee Denial Order")(Docket # 62).

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109.

On August 19, 2005, Solinvest moved this Court to reconsider its Fee Denial Order.

See Motion for Reconsideration, filed August 19, 2005 (Docket # 64). 110. On October 18, 2005, this Court granted the Motion for Reconsideration and reversed

its Fee Denial Order. See Order, dated October 18, 2005 ("Reconsideration Order")(Docket # 65).
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111.

In the Reconsideration Order, this Court ordered Solinvest to file this Amended

Motion for the Award of Attorneys' Fees and Costs. In this amended motion Solinvest was to distinguish the attorneys' fees and costs it incurred in connection with this matter and the attorneys' fees and costs it incurred in connection with the First Bankruptcy and the Second Bankruptcy. See Reconsideration Order, at 3:11--3:21. 112. As the prevailing party, Solinvest is entitled to an award of all its taxable costs. See

28 U.S.C. § 1920.
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113.

Solinvest has incurred taxable costs in the amount of one thousand three hundred

seventy-seven dollars and twenty--six cents ($1,377.26). See Bill of Costs, filed September 7, 2005 (Docket # 61); see also Affidavit of Michael Simes in Support of Comprehensive Supplement to the Motion for the Award of Attorneys' Fees and Costs, filed September 7, 2005 (Docket # 60), ¶ 22. 114. As the prevailing party, Solinvest seeks this Court to award it all of the attorneys' fees

it has incurred in this matter.
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115.

Solinvest seeks the award of all its attorneys' fees on two distinct grounds. First,

Solinvest seeks this award pursuant to the terms and conditions of the Promissory Note as it was adopted in the Judgment. Second, Solinvest seeks this award as a compensatory civil contempt sanction against TSI under (a) Rule 11 of the Federal Rules of Civil Procedure ("FRCP"), and (b) under 28 U.S.C. § 1927, and (c) the inherent powers of this Court as identified in Rule 83.1(e)(4) of the Rules of Practice of the United States District Court for the District of Arizona ("Local")..

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116.

Solinvest has been represented by two (2) attorneys in this matter. They were

Attorney Michael Simes and Attorney Dennis Brovarone. See Affidavit of Attorney Michael Simes in Support of the Amended Motion for Award of Attorneys' Fees and Costs, dated November 4, 2005 ("Simes Affidavit"), filed contemporaneously herewith; see also Affidavit of Attorney Dennis

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Brovraone in Support of the Amended Motion for the Award of Attorneys' Fees, dated November 3, 2005 ("Brovarone Affidavit"), filed contemporaneously herewith. 117. The representation of Solinvest by two (2) attorneys is reasonable. S & R Properties

v. Maricopa County, 178 Ariz. 491, 875 P.2d 150, 164 (App. 1993)(Recognizing the "synergistic effect" when attorneys work together is both reasonable and beneficial.). 118. This Court need not hold a separate hearing on the award of attorneys' fees pursuant to

either the Judgment or as a compensatory civil contempt sanction against TSI; briefs are adequate.
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Pacific Harbor Capital, Inc., v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th Cir. 2000); Sablan v. Dept. of Finance, 856 F.2d 1317, 1322 (9th Cir. 1988). 119. Solinvest respectfully requests that this Court award it the attorneys' fees it has

incurred both in connection with proceedings related to this Court and in connection with the proceedings related to the Bankruptcy Court. Solinvest does NOT seek this Court to award it the attorneys' fees it has incurred in connection with the First Bankruptcy and the Second Bankruptcy

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under 11 U.S.C. § 503(b)(3)(D). contempt sanction against TSI. 120.

Instead, Solinvest seeks this award as a compensatory civil

This Court should award Solinvest the attorneys' fees it has incurred both in

connection with proceedings related to this Court and in connection with the proceedings related to the Bankruptcy Court for the following reasons:

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A.

First, on a jurisdictional basis, the Bankruptcy Court is not separate and

distinct from this Court. More specifically, the Bankruptcy Court is a unit or division of this Court. United States v. Yochum (In re: Yochum), 89 F.3d 661, 669 (9th Cir. 1996). B. Second, also on a jurisdictional basis, this Court never surrendered its

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jurisdiction over this matter to the Bankruptcy Court. There are numerous examples of this, such as this Court retaining its jurisdiction over this matter and remaining active throughout both the First Bankruptcy and the Second Bankruptcy by requiring Solinvest and TSI to file with it joint semi-- annual status reports irrespective of the automatic stay of 11 U.S.C. § 362. Another example is this Court determining that this matter was not stayed by the automatic stay of 11 U.S.C. § 362 of the First Bankruptcy; rather this matter was stayed only by the First Stay Order of this Court. See First Stay Order; see also Second Stay Order; see also Reconsideration Order, at 2:12--2:13.

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C.

Third, on a procedural basis, only this Court can award Solinvest its attorneys'

fees pursuant to 28 U.S.C. § 1927. The Bankruptcy Court does not the authority to award attorneys' fees under this provision. Miller v. Cardinale (In re: DeVille), 361 F.3d 539, 546 (9th Cir. 2004). D. Fourth, also on a procedural basis, only this Court can award Solinvest its

attorneys' fees pursuant to FRCP Rule 11. Again, the Bankruptcy Court does not the authority to award attorneys' fees under this provision. In re Arkos Installations, 834 F.2d 1526, 1531 (9th Cir. 1987); FRCP Rule 81(a)(1). F. Sixth, on an equitable basis, only this Court has the global perspective in this For

matter that is necessary to accurately determine the issue of the award of attorneys' fees.

example, only this Court has the knowledge that the First Bankruptcy was commenced by TSI only to avoid the Revised Turnover Order. For another example, only this Court has the knowledge of the materially false statements by Attorney Proper in the Response to Turnover and in the Reply to Strike. For a final example, only this Court has the knowledge that the wrongful conduct of TSI (i.e.

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the Old Board of TSI and Attorney Proper) resulted in the unreasonably and vexatiously multiplication of these proceedings and the delay in payment to Solinvest. G. Seventh, also on an equitable basis, it is difficult to accurately segment the

attorneys' fees Solinvest incurred in connection with proceedings related to this Court from the
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attorney's fees incurred in connection with the proceedings related to the Bankruptcy Court. For example, during the effect of the Second Stay Order of this Court, Solinvest obtained the Order for Payment from the Bankruptcy Court which allowed the bankrupt estate to pay the Judgment. In this instance, Solinvest allocated the attorneys' fees incurred in obtaining the Order for Payment to the proceedings related to the Bankruptcy Court because of the Second Stay Order. 121. Solinvest should be awarded of all its attorneys' fees and costs under the terms and In the

conditions of the Promissory Note as it was adopted by this Court in the Judgment.
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Promissory Note, TSI agreed to pay all "costs and expenses, including without limitation reasonable attorneys' fees" of Solinvest in "collecting any amount due." 122. The award of attorneys' fees under the Judgment is mandatory because the Judgment

makes the award of attorneys' fees pursuant to contract (i.e. the Promissory Note) and not statute (i.e. A.R.S. § 12.341.01(A)). Bennett v. Appaloosa Horse Club, 201 Ariz. 372, 378, ¶ 26, 35 P.3d 426, 432 (App. 2001).

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123.

Because the award of attorneys' fees pursuant to the Judgment is mandatory, the only

issue before this Court is the award of a reasonable amount of attorneys' fees. Schweiger v. China Doll Restaurant, Inc., 138 Ariz. 183, 187, 673 P.2d 927, 931 (App. 1983). 124. Even when the amount of attorneys' fees are in excess of the amount in dispute, it

does not automatically mean that the amount of fees is unreasonable. Wagner v. Casteel, 136 Ariz. 29, 32, 663 P.2d 1020, 1023 (App. 1983).

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125.

The following four (4) factors are to be considered by this Court in determining the

reasonableness of the amount of attorneys' fees to be awarded under the Judgment: a. The qualities of the advocate: his ability, his training, education, experience, professional standing, and skill; and

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b. The character of the work to be done: its difficulty, its intricacy, its importance, time and skill required, the responsibility imposed and the prominence and character where they affect the importance of the litigation; and c. The work actually performed by the lawyer: the skill, time and attention given to the work; and d. The result: whether the attorney was successful and what benefits were derived. Schweiger, supra at 187, 673 P.2d 931; quoting Schwartz v. Schwerin, 85 Ariz. 242, 245--6, 336

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P.2d 144, 146 (1959); see Local Rule 54.2(c)(3). No one of these factors should "predominate or be given undue weight." Schweiger, supra at 187, 673 P.2d 931. 126. The qualities of the advocates for Solinvest in this matter are high. Attorney Michael

Simes is both a Juris Doctor and a Master of Business Administration. Furthermore, Attorney Michael Simes is a published author and a recognized expert in the field electronic services. Finally, Attorney Michael Simes has been engaged in the private practice of law for over ten years and is

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admitted to practice law in both the State of Arizona and the State of Colorado. Attorney Dennis Brovarone is also admitted to practice law in the State of Colorado and has also been engaged in private practice of law for over ten years. See Simes Affidavit ¶¶ 3--12; see also Brovarone Affidavit, ¶¶ 3--9. 127. The character of the work in this matter is complex. This matter has directly involved

two separate actions before this Court (i.e. this matter and the Adversarial Litigation) and two separate actions before the Bankruptcy Court (i.e. the First Bankruptcy and the Second Bankruptcy).

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Furthermore, this matter indirectly involved proceedings before the Superior Court of the State of Arizona and proceedings before the United States District Court for the District of Nevada. Finally, this matter has involved the systemic wrongful conduct of TSI (i.e. Attorney Proper and the Old Board of TSI).

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128.

The results obtained by Solinvest in this matter were successful. Solinvest

commenced this matter when TSI refused to honor its agreement under the Promissory Note. Solinvest repeatedly tried to settle this matter with TSI both prior to and after commencing this action to avoid incurring additional attorneys' fees and costs; however, TSI refused to settle. Nonetheless, Solinvest successfully obtained PAYMENT of the Principal Amount of the Judgment and PAYMENT of the post-judgment interest of the Judgment. In short, Solinvest has thus far successfully obtained recovery of all liquidated amounts due and owing.

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129.

In the alternative to awarding Solinvest all of its attorneys' fees pursuant to the

Judgment, this Court should award Solinvest all of its attorneys' fees as a compensatory civil contempt sanction against TSI. Solinvest seeks imposition of this sanction under (i) FRCP Rule 11, and (ii) 28 U.S.C. § 1927, and (iii) the inherent powers of this Court. ADO Fin., AG, v. McDonnell Douglas Corp., 938 F. Supp. 590, 595 (C.D. Cal. 1996). 130. Compensatory civil contempt sanctions in this matter are mandatory because this

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Court can not allow "public confidence in the legal profession" to be further eroded by condoning the "egregious and pervasive" misconduct of TSI (i.e. Attorney Proper and the Old Board of TSI). Trulis v. Barton, 107 F.3d 685, 696 (9th Cir. 1995). 131. Solinvest should be awarded all the attorneys' fees it incurred in seeking the

imposition of compensatory civil contempt sanctions against TSI. ADO Fin., AG, supra at 599. 132. This Court should impose a compensatory civil contempt sanction against TSI under

FRCP Rule 11. More specifically:
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A.

"The central purpose of Rule 11 is to deter baseless filings in District Court."

Refac Int'l, Ltd. v. Hitachi, Ltd., 141 F.R.D. 281, 287 (C.D. Cal. 1991). B. at 695. FRCP Rule 11 is not designed to sanction attorney misconduct. Trulis, supra

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C.

FRCP Rule 11 imposes an affirmative duty on a party to investigate the law

and the facts before submitting a pleading. Smith v. Ricks, 31 F.3d 1478, 1488 (9th Cir. 1994). D. To determine whether FRCP Rule 11 has been violated, a court makes an

objective determination whether a pleading either has been filed with an improper purpose or is frivolous. Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1991). E. Sanctions must be imposed when it is determined that FRCP Rule 11 has been

violated. Townsend, supra at 1362.
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F.

The award of attorneys' fees and costs is an appropriate sanction for violation

of FRCP Rule 11. Terran v. Kaplan, 989 F. Supp. 1025, 1026 (D. Ariz. 1997)(Opinion by Judge Carroll). 133. TSI has submitted various pleadings to this Court in violation of FRCP Rule 11.

These pleadings include the Response to Turnover (for falsely denying ownership of the Alanco Stock) and the Reply to Strike (for falsely denying wrongdoing in the First Bankruptcy).

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134.

This Court should impose a compensatory civil contempt sanction against TSI under

28 U.S.C. § 1927. More specifically: A. When an attorney "multiplies the proceedings in any case unreasonably and

vexatiously" a Court may impose sanctions for the "excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. B. Sanctions under 28 U.S.C. § 1927 are imposed directly against the attorney.

Premier Commercial Corp. v. FMC Corp., 139 F.R.D. 670, 674 (N.D. Cal. 1991).
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C.

Sanctions under 28 U.S.C. § 1927 are available even if there is "some merit" to

an attorney's actions. In re Arkos Installations, supra at 1532. E. To impose sanctions under 28 U.S.C. § 1927 a court must make a subjective

determination that the attorney acted recklessly or in bad faith. Pacific Harbor Capital, supra at 1118.
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135.

This Court should sanction Attorney Proper for his reckless and bad faith conduct

throughout this matter. While a detailed listing of these reckless and bad faith acts here would be redundant and excessive, some examples are appropriate. Attorney Proper improperly interfered with the execution of the Writs of General Execution. Attorney Proper commenced the First Bankruptcy to prevent this Court from holding TSI in contempt for intentionally violating the Revised Turnover Order. Attorney Proper crossed--the--line when he participated in the New TSI Stock scheme with the Old Board of TSI to defraud the shareholders of TSI. Attorney Proper, as "special counsel" to the

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Old Board, commenced the Second Bankruptcy to prevent this Court (or the Bankruptcy Court) from taking any remedial action in response the Special Advisor's Report. 136. This Court should impose a compensatory civil contempt sanction against TSI under

its inherent authority as identified in Local Rule 83.1(e)(4). This Court has the power to "award attorney's fees for one party against another (and in exaggerated cases directly against counsel) where an unfounded action or defense is brought or maintained in bad faith, vexatiously, wantonly, or

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for oppressive reasons." Arkos Installations, supra at 1532 (citations and quotations omitted). The "abusive litigation tactics" that this Court has the broad equitable powers to remedy include, for example, delaying the action, making frivolous arguments, and misstating the law. Id.; Premier Commercial, supra at 674. 137. If this Court does not impose compensatory civil contempt sanctions against TSI

under its inherent authority, then "some attorneys will see no incentive to maintain honesty and candor before this Court." Premier Commercial, supra at 674.

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138.

Also, if this Court does not impose compensatory civil contempt sanctions against TSI

under its inherent authority, then anyone who is not bankrupt will be encouraged to seek bankruptcy protection as a litigation tactic to delay or avoid paying their lawful obligations. 139. The attorneys' fees Solinvest has incurred in connection with this matter, and the

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attorneys' fees it incurred in connection with the First Bankruptcy and the Second Bankruptcy, include out-of-pocket expenses. Marsh v. Digital Equipment Corp., 699 F. Supp. 1411, 1416 (D. Ariz. 1988)(Opinion by Judge Hardy). 140. The total amount of attorneys' fees that should be awarded to Solinvest is two hundred

ninety-nine thousand six hundred twenty-five dollars and thirty cents ($299,625.30). This amount is based upon the sum of the following: a. The attorneys' fees incurred by Solinvest from Attorney Michael Simes is two

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hundred seventy-six thousand two hundred five dollars and thirty cents ($276,205.30). See Simes Affidavit, at ¶ 21. b. The attorneys' fees incurred by Solinvest from Dennis Brovarone is twenty-three thousand four hundred twenty dollars and no cents ($23,420.00). See Brovarone Affidavit, at ¶ 19. 141. Pursuant to the Reconsideration Order, Solinvest will also allocate the total attorneys'

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fees it has incurred in this matter between the services provided in connection with matters related to this Court and the services provided in connection with matters re