1 david siegel - fedreceiver
TRANSCRIPT
PRINTED ON RECYCLED PAPER EX PARTE APPLICATION TO STAY PORTIONS OF ORDER APPOINTING A RECEIVER
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DAVID SIEGEL (State Bar No. 101355) CRAIG VARNEN (State Bar No. 170263) IRELL & MANELLA LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, CA 90067-4276 Telephone: (310)-277-1010 Facsimile: (310) 203-7199 Attorneys for John Spahi EDWARD A. KLEIN (State Bar No. 145736) PAUL D. MURPHY (State Bar No. 159556) DAVID E. ROSEN (State Bar No. 155385) MURPHY ROSEN LLP 100 Wilshire Boulevard, Suite 1300 Santa Monica, California 90401-1142 Telephone: (310) 899-3300 Facsimile: (310) 399-7201 Attorneys for John Spahi and Joseph Orlando
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES – WEST DISTRICT MICHAEL REACH, a derivatively on behalf of Ocean Towers Housing Corporation, Plaintiffs, vs. JOHN SPAHI; JOSEPH ORLANDO; JOSEPH INCAUDO; OMAR SPAHI; DOROTHEA SCHIRO; JANET FULADIAN; SEIF ASCAR, individually and as Trustee of the Ascar Family Trust, dated July 5, 2012; APEX INVESTMENTS GROUP LTD., d/b/a APEX INVESTMENTS, INC.; CAVOUR PARTNERS LIMITED LLC; ENENSTEIN RIBAKOFF LA VINA & PHAM, A PROFESSIONAL CORPORATION; PATRICK AMBROSE; SHELDON STEIN; KAZOU "KAY" YOSHIKAWA; PETER ALEVIZOS; and DOES 5 to 100, inclusive,. Defendants. -and -
OCEAN TOWERS HOUSING CORPORATION, California corporation Nominal Defendant
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CASE NO. SC124263 [Hon. Lisa Hart Cole] EX PARTE APPLICATION OF JOHN SPAHI TO STAY PORTIONS OF THE JULY 9, 2018 ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION PENDING APPEAL Date: August 7, 2018 Time: 10:45 a.m. Dept: 9 Complaint Filed: June 3, 2015
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TO ALL PARTIES AND THEIR COUNSEL OF RECORD:
PLEASE TAKE NOTICE THAT on August 7, 2018, at 10:45 a.m., or as soon
thereafter as the matter may be heard in Department 9 of the above-entitled Court,
located at 312 N. Spring St., California, defendant John Spahi will, and hereby does,
apply ex parte for an Order staying the following portions of the Court’s July 9, 2018
Order Appointing Receiver After Hearing and Preliminary Injunction (“the Order”)
pending resolution of the appeal of the Order filed by Mr. Spahi:
1. Paragraph 1 of the Order to the extent it provides that the Receiver shall
“remov[e] the current Ocean Towers Board of Directors”;
2. Paragraph 20(d)(3) of the Order to the extent it provides that Defendants
shall refrain from “using any voting shares attributable to any Defendant or affiliate of
any Defendant to block proposals submitted to shareholders by the Receiver”; and
3. Paragraph 22 of the Order, which provides that “immediately upon filing
of the Receiver’s Oath and Bond, the Receiver shall notice and hold an election for new
OTHC board members to replace the current board at the earliest possible date under
and in conformity with applicable California law and the OTHC bylaws. The Receiver
shall hold this election within four months of his appointment.”
This application is made pursuant to California Code of Civil Procedure section
918 and California Rules of Court 3.1200, et seq., and is made on the grounds that good
cause exists to stay these provisions of the Order pending appellate review of the Order
because (1) the appeal presents substantial and important issues, and (2) failure to issue
a stay is more likely to injure Defendant than issuance of a stay is likely to injure
Plaintiff. Good cause exists to grant this relief on an ex parte basis because, given the
Court’s directive that an election occur within four months, and the apparent directive
that the receiver “shall immediately” remove the current Ocean Towers board of
directors, there is insufficient time to have this matter heard on a noticed motion.
This application is based on this notice, the attached memorandum of points and
authorities, the attached declaration of David E. Rosen, the pleadings and papers on file
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in this action, and on such other and further evidence as this Court may consider at the
hearing on this matter.
Respectfully submitted,
DATED: August 6, 2018 MURPHY ROSEN LLP
By: Edward A. Klein
Paul D.Murphy David E. Rosen Attorneys for Defendants John Spahi and Joseph Orlando
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MEMORANDUM OF POINTS AND AUTHORITIES
I.
PRELIMINARY STATEMENT
On June 26, 2017, Plaintiff filed a motion for the appointment of a receiver (“the
Motion”). On July 9, 2018 this Court entered an Order Appointing Receiver After
Hearing and Preliminary Injunction (“the Order”). The Order not only appoints a
receiver, but also grants additional relief that was not sought in the Motion, and on
which Defendant was never provided a fair opportunity to brief or be heard.
First, the Court authorized the receiver to remove the entire OTHC Board of
Directors and expressly ordered the receiver, immediately upon filing the receiver’s
bond, to “notice and hold an election for new OTHC board members to replace the
current board.” (Order, Ex. A, ¶1, 22.) This relief was not even sought in the
underlying action, let alone the Motion. And on numerous occasions prior to entry of
the Order this Court made clear it did not believe it had the authority to grant such
relief on the Motion: “I don’t know that I have the authority to change the constitution
of the Board” (Ex. C, p. 20:24-28); “I don’t even know how I could do it on a noticed
motion, frankly” (Ex. F, p. 22:22-23:12); “I don’t think it is something I’m prepared to
do sua sponte” (Ex. G, p. 43:9-44:24).
Second, the Court enjoined Defendants “or affiliate of any Defendant” from
voting their shares against any proposal the receiver brings to the shareholders for a
vote. (Order, ¶20(d)(3).) This is disenfranchisement. If the receiver takes action on
behalf of OTHC, so be it. But if the receiver decides he wants to put something up for
a vote of the OTHC shareholders, each shareholder is entitled to participate in that vote.
Defendant should not have been denied his right to vote, particularly when such relief
was not sought in the Motion, and Defendant was not provided an opportunity to be
heard or present evidence on the issue.
On July 23, 2018, Defendant filed a writ of mandamus seeking to overturn the
Order or, alternatively, to overturn certain provisions of the Order. The writ was
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denied on the grounds that the Order was immediately appealable. Thereafter, on
August 2, 2018, Defendant filed a notice of appeal of the Order. By this application, in
order to effectuate the automatic stay of California Code of Civil Procedure (“C.C.P.”)
section 916(a), Defendant seeks to stay the following portions of the Order pending
resolution of that appeal (collectively referred to as the (“Sua Sponte Rulings”):
1. Paragraph 1 of the Order to the extent it provides that the Receiver
(whether with or without Court approval) may “remov[e] the current Ocean Towers
Board of Directors”;
2. Paragraph 20(d)(3) of the Order to the extent it provides that Defendants
shall refrain from “using any voting shares attributable to any Defendant or affiliate of
any Defendant to block proposals submitted to shareholders by the Receiver”; and
3. Paragraph 22 of the Order, which provides that “immediately upon filing
of the Receiver’s Oath and Bond, the Receiver shall notice and hold an election for new
OTHC board members to replace the current board at the earliest possible date under
and in conformity with applicable California law and the OTHC bylaws. The Receiver
shall hold this election within four months of his appointment.”
California Code of Civil Procedure section 918 grants this Court the discretion
to “stay the enforcement of any judgment or order.” Good cause exists for this Court to
exercise that discretion. First, the appeal presented substantial and important issues of
(a) the Court’s authority to grant sua sponte relief without providing a meaningful
opportunity to present evidence or be heard, (b) the Court’s authority to remove a board
of directors as a provisional remedy, (c) the Court’s authority to rely on a special
litigation committee report in appointing a receiver, and (d) the circumstances under
which the Court may disenfranchise a shareholder as a provisional remedy. Second,
failure to issue a stay is more likely to injure Defendant than issuance of a stay is likely
to injure Plaintiff. Specifically, the Order grants very broad powers to the Receiver that
all but eliminate the power of the current board of directors. Because the current Board
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is effectively powerless to make decisions for OTHC, no harm will come from staying
the Sua Sponte Rulings until such time as Defendant’s appeal can be heard.
II.
GOOD CAUSE EXISTS TO STAY THE SUA SPONTE RULINGS PENDING
RESOLUTION OF THE APPEAL
A. A Stay is Necessary to Enforce the Automatic Stay of C.C.P. §916(a).
The filing of the notice of appeal of the Order automatically stayed the Sua
Sponte Rulings pursuant to C.C.P. §916. Although Code of Civil Procedure section
917.5 provides that an appeal generally does not stay an order that “appoints a
receiver,” Defendant is not seeking to stay the receivership. Instead, Defendant seeks
to stay the orders removing him from the OTHC board (both affirmatively and through
a mandatory election of a new board) and directing him to vote in accordance with the
Receiver. These are mandatory injunctions under C.C.P. §916 and thus are stayed
pending the appeal. See Paramount Pictures Corp. v. Davis (1964) 228 Cal.App.2d
827, 836 (“[i]f an injunction compels a party to surrender a position he holds and which
upon the facts alleged by him he is entitled to hold, it is mandatory”). This rule has
been enunciated in at least a dozen published cases. See, e.g., Byington v. Superior
Court of Stanislaus County (1939) 14 Cal.2d 68, 71; Clute v. Superior Court in and for
City and County of San Francisco (1908) 155 Cal. 15, 19-20.
In order to effectuate this automatic stay, and to resolve any dispute about the
automatic stay, this Court should affirmative stay the Sua Sponte Rulings. Even if an
automatic stay does not apply, this Court should issue a discretionary stay of the Sua
Sponte Rulings pursuant to C.C.P. §918 pending resolution of the appeal. The purpose
of a discretionary stay is to preserve the status quo pending appeal. People ex rel. San
Francisco Bay Conservation & Development Com. v. Emeryville (1968) 69 Cal.2d 533,
537. A discretionary stay is appropriate where (1) the appeal presents substantial
issues, and (2) failure to issue a stay is more likely to injure the appellant than issuance
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of a stay is likely to injure the respondent. Davis v. Custom Component Switches, Inc.
(1970) 13 Cal.App.3d 21, 27-28. Both factors are present here.
B. The Appeal Presents Substantial and Important Issues that Ought to be
Resolved by the Appellate Court Before the Order is Implemented.
The appeal presented substantial and important issues that go to the heart of
Defendant’s constitutional rights.
First, the Sua Sponte Rulings violate Defendant’s due process rights. “[T]he
United States Supreme Court has confirmed consistently that prejudgment orders
affecting a party's rights in property entered without notice and an opportunity to be
heard violate due process requirements.” Koshak v. Malek (2011) 200 Cal.App.4th
1540, 1548. See also, Kelly v. New West Federal Savings (1996) 49 Cal.App.4th 659,
677 (“where the error results in denial of a fair hearing, the error is reversible per se.
Denying a party the right to testify or to offer evidence is reversible per se”) (citations
omitted); Menefee & Son v. Dep't of Food & Agric. (1988) 199 Cal.App.3d 774, 781
(“at a minimum, due process requires notice and an opportunity for a hearing.
Normally notice and an opportunity for a hearing must precede even a temporary
deprivation of a property interest”) (citations omitted).
Here, the inclusion of the Sua Sponte Rulings in the Order violated Petitioner’s
due process rights. None of the Sua Sponte Rulings were requested in the Motion.
Furthermore, each of the Sua Sponte Rulings involve a fundamental right in
Petitioner’s property – the right to sit on the Board that oversees his property and the
right to vote his shares in his property. The due process violation is particularly
egregious given that this Court acknowledged on several occasions that it could make
no new orders in connection with the Motion without providing the parties an
opportunity to present evidence and be heard: “I don’t have that motion in front of me”
(Ex. B, p. 63:6-21); “I can’t do these things without proper notice to the other side, and
there was no proper notice to the other side” (Ex. D, p. 32:16-33:8); “even if I had the
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authority to interfere with an election, which I would . . . certainly have it briefed, I
don’t really feel it would be appropriate at this juncture” (Ex. E, p. 29:17-23).
Second, the Order requires the removal of the entire board of directors and the
election of a new board. There is no basis in law to support such provisional relief. In
fact, this Court repeatedly acknowledged that (a) it did not have the authority to remove
Board members, and (b) that issue was not before the Court: “I don’t know that I have
the authority to change the constitution of the Board” (Ex. C, p. 20:24-28); “I don’t
even know how I could do it on a noticed motion, frankly” (Ex. F, p. 22:22-23:12); “I
don’t think it is something I’m prepared to do sua sponte” (Ex. G, p. 43:9-44:24);
“we’re not at that point yet” (Ex. H, p. 21:6-12).
Defendant Alevizos (the party submitting the proposed order adopted by the
Court) argued that the trial court had the equitable power to remove Board members.
While it is true that under certain circumstances the trial court has equitable discretion
to remove a board member, as the cases cited by Defendant Alevizos make clear, such
an order requires specific factual findings, which in turn, requires that there have been
some form of trial. See, e.g., Brown v. N. Ventura Rd. Dev. Co. (1963) 216 Cal. App.
2d 227, 232 and American Center for Education, Inc. v. Cavnar (1978) 80 Cal.App.3d
476, 499. In fact, even Defendant Alevizos admits that “[n]eedless to say, the Court
should only remove board members after affording them an opportunity to be heard.”
(Ex. I, fn. 6.)
Third, the Court impermissibly relied on the SLC Report in appointing the
receiver, essentially delegating its fact finding duty to the SLC and accepted the
Report’s opinions and conclusions in place of admissible evidence. A report by a
special litigation committee is an internal corporate document used by the corporation’s
board of directors in deciding whether pursing claims are in the best interests of the
corporation. See, e.g. Berzirdjian v. O’Reilly (2010) 183 Cal.App.4th 316, 328. Unlike
a court of law charged with considering admissible evidence upon which to base a legal
conclusion, the committee works solely on behalf of the corporation to determine
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whether, considering all the factors (whether admissible or not), it is in the
corporation’s best interest to pursue, settle, or dismiss the claims. The SLC is not an
independent adjudicatory body. The SLC’s Report is intended to document the
corporation’s decision regarding how to respond to the derivative action. Nothing
more. The Court should not have referenced it, much less relied upon it, in granting the
Motion.
Fourth, “the right to vote is considered fundamental, preservative of other basic
political rights, and, speaking generally, any alleged restriction that impinges on it
demands careful or strict scrutiny.” Hoffman v. State Bar of California (2003) 113
Cal.App.4th 630, 640. Here, the first time the issue of denying Petitioner the right to
vote against a receiver’s proposal made to the shareholders was raised was the day the
trial court signed the Order. In the more than one year that the Motion was pending,
nobody ever raised the notion that Petitioner should be disenfranchised on issues raised
by the Receiver, let alone gave it the careful scrutiny it deserves. Instead, the provision
appeared out of nowhere the day of the final hearing in an alternate proposed order.
And it appeared with no analysis whatsoever. No briefing or evidence of any kind was
presented to explain the need for this provision. Even more concerning, the comments
made by the Court during the July 9, 2018 hearing suggest that this punishment against
Defendant for votes he cast as a director of OTHC:
THE COURT: Do you know that the fact that your clients voted
for an amendment to the bylaws to allow the SLC to go forward,
then after the SLC Report came back as negative to your clients,
that your clients then tried to withdraw the amendment to the
bylaws? Do you think that might have anything to do with that
section?” (Ex. H, p. 29-30) (emphasis added).
The fact that the Court does not like how Defendant voted on matters presented
to the board (issues not even before the trial court on the Motion) does not give the
Court the authority to take away Defendant’s fundamental voting rights as a
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shareholder of OTHC. If fact, even Defendant Alevizos’ counsel – the drafter of the
offending language – stated at the hearing that “I think we can live without the voting
shares provision.” (Id. at p. 40.)
C. Failure to Issue a Stay is More Likely to Injure Defendant than Issuance of
a Stay is Likely to Injure Plaintiff.
Failure to issue a stay will cause substantial injury to Defendant as it will result
in his being ousted from the OTHC board of directors and potentially compel him to
vote in accordance with the wishes of the Receiver. These actions pertain to
Defendant’s fundamental property rights as well as his most basic Constitutional due
process rights. Though purportedly cast as a provisional remedy, the Order
permanently alters the status quo at OTHC. Moreover, Defendant cannot be adequately
compensated for the infringement of his fundamental rights.
In contrast, neither Plaintiff nor the Receiver will suffer any harm if the Sua
Sponte Rulings are stayed pending appeal. The Order grants the Receiver wide ranging
authority regarding the operation and management of OTHC. He has been granted “the
full powers of an equity receiver” and complete power to operate and manage OTHC.
(Order, ¶¶1, 4.) The Order effectively replaces the current board of directors with the
receiver, and renders the board powerless. Thus, there is nothing the existing board can
do while the appeal is pending to damage Plaintiff. Under these circumstances, staying
the Sua Sponte orders will in no way cause any injury to Plaintiff.
III.
GOOD CAUSE EXISTS TO GRANT THE REQUESTED RELIEF ON AN EX
PARTE BASIS
Good cause exists to grant this application on an ex parte basis because, given
the Court’s directive that an election must be completed within four months, there is
insufficient time to have this matter heard on a noticed motion. Furthermore, in
discussions with the receiver, he indicated his belief that section 1 of the Order could
be interpreted to mean that his is directed to “immediately” remove the current Ocean
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Towers board of directors. If correct, there is insufficient time to have the matter heard
on a noticed motion prior to the time the receiver implements that directive.
III.
CONCLUSION
For the foregoing reasons, Defendants respectfully request that this Court stay
the Sua Sponte Rulings pending resolution of Defendant’s appeal of the Order.
Respectfully submitted,
DATED: August 6, 2018 MURPHY ROSEN LLP
By: Edward A. Klein
Paul D.Murphy David E. Rosen Attorneys for Defendants John Spahi and Joseph Orlando
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DECLARATION OF DAVID E. ROSEN
I David E. Rosen, hereby declare as follows:
1. I am an attorney duly licensed to practice law in this Court, and am a
partner at Murphy Rosen LLP, counsel of record for Defendant John Spahi. The facts
set forth herein are personally known by me to be true and correct, and if called upon as
a witness, I would so testify.
2. Attached hereto as Exhibit A is a true and correct copy of this Court’s
July 9, 2018 Order Appointing Receiver After Hearing and Preliminary Injunction
(“the Order”).
3. Attached hereto as Exhibit B is a true and correct copy of the relevant
portions of the transcript of the September 6, 2017 hearing before this Court.
4. Attached hereto as Exhibit C is a true and correct copy of the relevant
portions of the transcript of the September 20, 2017 hearing before this Court.
5. Attached hereto as Exhibit D is a true and correct copy of the relevant
portions of the transcript of the March 9, 2018 hearing before this Court.
6. Attached hereto as Exhibit E is a true and correct copy of the relevant
portions of the transcript of the March 23, 2018 hearing before this Court.
7. Attached hereto as Exhibit F is a true and correct copy of the relevant
portions of the transcript of the June 6, 2018 hearing before this Court.
8. Attached hereto as Exhibit G is a true and correct copy of the relevant
portions of the transcript of the June 12, 2018 hearing before this Court.
9. Attached hereto as Exhibit H is a true and correct copy of the relevant
portions of the transcript of the July 9, 2018 hearing before this Court.
10. Attached hereto as Exhibit I is a true and correct copy of the relevant
portions of the June 11, 2018 Response of OTHC Director Peter Alevizos to Nominal
Plaintiff’s Renewed Motion for Appointment of a Receiver.
11. On July 23, 2018, Mr. Spahi filed a Petition for Writ of Mandate related
to the Order. On July 26, 2018, the Court of Appeal denied the writ on the grounds that
-13- PRINTED ON RECYCLED PAPER EX PARTE APPLICATION TO STAY PORTIONS OF ORDER APPOINTING A RECEIVER
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the Order is an appealable order. On August 2, 2018, Mr. Spahi filed a notice of appeal
of the Order.
12. Good cause exists to grant the relief requested in this application on an ex
parte basis because given the Court’s directive that an election must be completed
within four months, there is insufficient time to have this matter heard on a noticed
motion. Furthermore, on July 30, 2018, I met with the Stephen Donell and his counsel,
Robert Heller. During the meeting, there was some discussion about the meaning of
section 1 of the Order providing that:
“The Receiver shall immediately take exclusive possession and
control of OTHC and is ordered to care for and preserve OTHC
pending disposition of the litigation and/or until further ORDER
of the Court, including removing the current Ocean Towers
Board of Directors.”
Mr. Donell indicated that the provision could be read that the Receiver “shall
immediately” remove the current board. I explained that during the hearing the Court
expressed the view the Receiver would only remove the Board upon further order of
the Court. To the extent the Receiver ultimately interprets the section to provide him a
mandate to immediately remove the current board, this provides further good cause to
have this matter resolved on an ex parte basis.
13. On August 6, 2018, at approximately 9:45 a.m., I gave notice of this ex
parte application by email to all parties and their counsel. I true and correct copy of my
email is attached hereto as Exhibit J.
I declare under penalty of perjury under the laws of the State of California that
the foregoing is true and correct.
Executed this 6th day of August, 2018, at Santa Monica, California. _______________________________ DAVID E. ROSEN
EXHIBIT A
l JONA THAN E. ALTMAN (State Bar No. 170607) [email protected]
FILED 2 STEPHEN T. MA YER (State Bar No. 298713) [email protected]
3 MUNGER, TOLLES & OLSON LLP 350 South Grand Avenue
4 Fiftieth Floor Los Angeles, California 90071-3426
5 Telephone : (213) 683-9100 Facsimile: (213) 687-3702
6 Attorneys for Defendants PETER ALEVIZOS
7 and SHELDON STElN
Superior Court of California county of I,.,os Angeles
JUL qg 2018 ShcrflR, Cap,r, Exocuttve, Officer/Clerk
By~ , J;), ~ ' Deputy T. BJv11s
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
MICHAEL REACH, DERIVATIVELY ON 11 BEHALF OF OCEAN TOWE RS HOUSING
CORPORATION, 12
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Plaintiff,
vs.
JOHN SPAHI; JOSEPH ORLANDO; 15 JOSEPH INCAUDO; OMAR SPAHI;
DOROTHEA SCHIRO; JANET FULADIAN; 16 SEIF ASCAR, individually and as Trustee of
the Ascar Family Trust, dated July 5, 2012; 17 APEX INVESTMENTS GROUP LTD., d/b/a/
APEX INVESTMENTS INC.; CAVOUR 18 PARTNERS LIMITED LLC; ENENSTEIN
RIBAKOFF LAVINA & PHAM, A 19 PROFESSIONAL CORPORA TJON;
PATRICK AMBROSE; SHELDON STEIN; 20 KAZUO "KAY" YOSHIKAWA; PETER
ALEVIZOS; and DOES 1 to 100, inclusive, 21
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Defendants.
-and-
OCEAN TOWERS HOUSfNG 24 CORPORATION, a California corporation
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Nominal Defendant.
Case No. SC 124263
ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
[ Assigned for All Purposes]
Judge: Dept.: Hearing Date: Time:
Action Filed: Trial Date:
Hon. Lisa Hart Cole 0 July 9, 2018 2:00 PM
June 3, 2015 Not Set
ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
Pending before the Court is Nominal Plaintiffs Motion to Appoint a Receiver (the
2 "Motion"). The Court has read and considered the briefing submitted in connection with the
3 motion, and based on the authorities identified therein and on the arguments made by the parties at
4 hearings held on September 6, 201 7, September 20, 2017, at an informal working session held on
5 October 6, 2017, at a telephonic conference on June 6, 2018, and after oral argument at a hearings
6 held on June 12 and June 27, 2018, the Couit finds in this action between shareholders jointly
7 owning property, on the application of the Nominal Plajntiff, that such property is in danger of
8 being lost, removed, or materially injured under Code of Civil Procedure section 564(b)(l), and
9 further finds a necessity to preserve the property or rights of the parties under Code of Civil
10 Procedure section 564(b)(9), and for good cause shown, ORDERS as fol lows:
11 1. Appointment and Qualification of the Receiver. Stephen J. Don ell is appointed
12 receiver (the "Receiver") for Ocean Towers Housing Corporation ("OTHC") immediately
13 effective upon fi ling a bond in accordance with Code of Civil Procedure section 567(b) in the sum
14 of $10,000 to secure the faithful performance of his duties as the Receiver~ and subject to the
15 OTHC Special Litigation Committee ("SLC") retaining its authority to manage the disposition of
16 this and related litigation, or to transfer the management of the litigation to the Receiver, as set
17 forth in the OTHC Board Resolutions authorizing and empowering the SLC. The Receiver' s Oath
18 and Bond shal l be filed with this Court on or before July 23, 2018.
19 The Receiver shall immediately take exclusive possession and contro l of OTHC and is
20 ordered to care for and preserve OTHC pending disposition of the litigation and/or until further
21 ORDER of the Court, including removing the current Ocean Towers Board of Directors (the
22 "Board"). The Receiver shall have the fu ll powers of an equity receiver and shall solely be the
23 agent ofthjs Court, and as such:
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a. Is neutral;
b. Acts for the benefit of all who may have an interest in the receivership
property, including without limitation secured lenders and OTHC's
shareholders;
C. Holds assets for the Court and not for the plaintiff or the defendant.
-2-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMrNARY INJUNCTION
2. No Impairment of Secured Lenders' Rights and Collateral. Nothing in this
2 Order shall be interpreted to permit the Receiver to impair the collateral or otherwise interfere
3 with the rights of the OTHC's secured lendlers under OTHC' s loan agreements. The Receiver is
4 ORDERED to manage the OTHC's finances in a way that ensures secured lenders are paid timely
5 while simultaneously protecting the interests of OTHC's shareholders.
6 3. Receiver's Fees. The Receiver may charge OTHC for the Receiver' s services at
7 his usual hourly rate and/or the usual rates of the Receiver's staff as stated in the Receiver's
8 earlier-filed declaration.
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4. General Duties. After qual ifying, the Receiver:
a. Shall take possession of and manage ( 1) OTHC and OTHC' s real property
11 located at 201 Ocean Ave., Santa Monica, CA 90402; (2) all assets, including, but not limited to,
12 Defendants' chattel paper, all collateral accounts, all contracts, all deposit accounts, au real
13 property, all documents, all equipment, all fixtures, all general intangibles, all instruments, all
14 intellectual property, all inventory, all investment property (including without limitation
15 securities), all letter-of-credit rights, all liquid assets, all receivables, all records, all causes of
16 action (subject to the condition that OTHC's SLC retains its authority to manage the disposition of
1 7 this litigation and related litigation, or to transfer the management of the litigation to the Receiver,
18 as set fo1th in the OTHC Board Resolutions authorizing and empowering the SLC), and all
19 supporting obligations and all proceeds from any of the foregoing (collectively "Assets"), and all
20 of Defendants' books and records relating thereto, wherever located, as the Receiver deems
21 necessary for OTHC's proper administration; and (3) debts and liabilities of OTHC.
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C.
Shall collect income from the Assets.
Shall preserve and protect the Assets wherever located and incur and pay
24 the expenses necessary and proper to preserve and protect OTHC and its shareholders.
25 d. Shall take possession of OTHC' s bank accounts, wherever located, and
26 receive possession of any money on deposit in said bank accounts, and the receipt by the Receiver
27 for said funds shall discharge said bank from further responsibility for accounting to said account
28 holder for funds for which the Receiver shall give his receipt.
-3-ORDER APPOINTING RECEIVER AFTER HEARING AND PRE LIMINARY INJUNCTION
e. May, with Court approval following noticed motion, bring or prosecute all
2 proper actions, before any court, board, or other tribunal, to collect monies owed to OTHC, subject
3 to the limitation that OTHC's SLC retains its authority to manage the disposition of this litigation
4 and related litigation, or to transfer the management of the litigation to the Receiver, as set forth in
5 the Board Resolutions authorizing and empowering the SLC.
6 f. May execute and prepare all documents and perform all acts, either in the
7 name of OTHC, as it is applicable, or in the Receiver's own name, which are necessary or
8 incidental to preserving, protecting, managing, and controlling the Assets, although the Receiver
9 must obtain Court approval prior to obtaining any loans or refinancing OTHC's debt.
10 g. May contact each of the accounts receivable debtors of OTHC or third party
11 collection agents of OTHC (together, the "Accounts Receivable Debtors") in order to advise them
12 not to send further accounts receivable payments to OTHC and to instruct the Accounts
13 Receivable Debtors to send any and all payments directly to the Receiver.
14 h. May employ servants, agents, employees, appraisers, guards, clerks,
15 accountants, attorneys, and management consultants to administer OTHC and to protect the
16 Assets, subject to the requirement that any third party property manager hired by the Receiver
17 must be approved by OTHC's secured lenders as set forth in OTHC's loan agreements; to
18 purchase materials, suppl ies and services and to pay therefore at the usual rate and prices out of
19 funds that shall come into his possession; to pay the reasonable value of said services out of the
20 proceeds of OTHC and its Assets; and that no risk or obligation incurred by said Receiver shall be
21 at personal risk or obligation of the Receiver, but shall be the risk or obligation of the OTHC;
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23 5.
1. May change the locks at OTHC and its real property's common areas;
Prohibited Agreements. The Receiver shall not enter into an agreement with any
24 party to this action about the administration of the receivership or about any post-receivership
25 matter.
26 6. Inventory. Within 30 days after qualifying, the Receiver shall file an inventory of
27 all property possessed under this order. The Receiver shall provide a copy of this inventory to
28 OTHC's lenders, Deutsche Bank Trust Company Americas, as Trustee for the Multifamily
-4-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
1 Mortgage Pass-Through Certificates Series 2017-KJI 5, and U.S. Bank National Association, as
2 Trustee for the Multifamily Mortgage Pass-Through Certificates Series 2011-Kl 4, by and through
3 their servicers (collectively, "OTHC's lenders"), currently represented by the Allen Matkins and
4 Polsinelli law firms.
5 7. Expenditures. The Receiver shall expend money coming into his or her possession
6 to operate and preserve the property and onJy for the purposes authorized in this order. Unless the
7 court orders otherwise, the Receiver shall tQ the extent practical hold the balance in interest-
s bearing accounts in accordance with Code of Civil Procedure section 569.
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8. Monthly Accounting of Receiver's Income, Expenses, and Fees.
a. The Receiver shall each month prepare and serve on the parties and
11 OTHC's lenders, but not file , an accounting of the income and expenses incurred in the
12 administration of the receivership property, including the Receiver's fees and expenses.
13 b. The Receiver may pay the receiver's own fees and expenses only by the
14 following procedures:
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9.
(1)
(2)
(3)
(4)
(5)
Management.
By serving on all parties a notice of intent to pay to which no objection is served on the Receiver within 20 days of the date the notice is served.
By serving and filing a request for interim payment, which the court then approves.
By obtaining and filing an agreement among all the parties approving the payment, which the court then approves.
By filing the Receiver's final accounting and report, which the court then approves.
The Receiver shall not reimburse the Receiver for the Receiver's general office administration expenses or overhead without court approval. These expenses include, for example, office supplies and employee payroll, benefits, and taxes.
a. The Receiver shall operate the property and take possession of all accounts
26 relating to the property.
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b. The Receiver may:
-5-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
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employ agents, employees, clerks, accountants, and property managers to administer the receivership property subject to the rights of the secured lenders, and subject to the requirement that any third party property manager hired by the Receiver must be approved by OTHC's secured lenders as set forth in OTHC's loan agreements, and
purchase materials, supplies, and services reasonably necessary to administer the receivership property.
The Receiver may do all the things, and incur the risks and obligations,
7 ordinarily done or incurred by owners of businesses and property similar to that possessed by the
8 Receiver; except the Receiver shall not make any capital improvements to the property without
9 prior Court approval.
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10. Bank Accounts. The Receiver:
a. May establish accounts at any financial institutions insured by an agency of
l2 the United States government that are not parties to this proceeding;
13 b. Shall deposit in those accounts funds received in connection with the
14 receivership property; and
15 C. Shall deposit in interest-bearing accounts money not expended for
16 receivership purposes.
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d. May use OTHC's Taxpayer Identification Number ('T IN" or "EIN").
Court Instructions. The Receiver and the parties may at any time apply to this
19 court for further instructions and orders and for additional powers necessary to enable the Receiver
20 to perfom1 the Receiver's duties properly.
21 12. Insurance.
22 a. The Receiver shall determine upon taking possession of the property
23 whether there is sufficient insurance coverage.
24 b. The Receiver shall notify the insurer that the Receiver is to be named as an
25 additional insured on each insurance policy on OTHC and its prope.rty.
26 C. If the Receiver determines that OTHC does not have sufficient insurance
27 coverage, the Receiver shall immediately notify the parties and shall procure sufficient all-risk and
28 liability insurance on OTHC' s property (excluding earthquake and flood insurance).
-6-ORDER APPOINTING RECEIVER AFTER HE ARING AND PRELIMINARY INJUNCTION
1 d. If the Receiver does not have sufficient funds to obtain insurance, the
2 Receiver shall seek instructions from the court on whether to obtain insurance and how it is to be
3 paid for.
4 13. Employment of Attorneys.
5 a. The Receiver may employ w1lawful detainer attorneys and eviction services
6 without a court order.
7 b. Before employing counsel not identified in Section 13(a) above, the
8 Receiver shall apply to the court for an order.
9 c. Nothing in this Section 13 should be read to conflict with or invalidate the
l O Court's ORDER that the OTHC SLC retains its authority to manage the disposition of this
11 litigation and related litigation, or to transfer the management of the litigation to the Receiver, as
12 set forth in the OTHC Board Resolutions authorizing and empowering the SLC.
13 14. Taxpayer ID Numbers. The Receiver may use any federal and state taxpayer
14 identification numbers relating to the property for any lawful purpose.
15 15. Duty To Turn Over Possession. Upon receipt of a copy of a recorded trustee's
16 deed upon foreclosure, the Receiver shall, without further order of the court, turn over possession
17 of the property to the party that successfully recorded the deed.
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16. Receiver's Final Report and Account and Discharge.
a. Motion required. Discharge of the Receiver shall require a Court order upon
20 noticed motion for approval of the Receiver's final report and account and exoneration of the
21 Receiver's bond.
22 b. Time. Not later than 60 days after the receivership terminates, the Receiver
23 shall file, serve, and obtain a hearing date on a motion for discharge and approval of the final
24 report and account.
25 C. Notice. The Receiver shall give notice to all persons of whom the Receiver
26 is aware who have potential claims against the receivership property.
27 d. Contents of motion. The motion to approve the final report and account and
28 for discharge of the Receiver shall contain the following:
-7-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
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(])
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Declaration or declarations. A declaration or declarations: (i) stating what was done during the receivership, (ii) certifying the accuracy of the final accounting, (iii) stating the basis for the termination of the receivership (such as foreclosure or reinstatement), and (iv) stating the basis for an order for the distribution of any surplus or payment of any deficit.
Accounting summary. A summary of the receivership accounting, which shall include (i) the total revenues received, (ii) the total expenditures identified and enwnerated by major categories, (iii) the net amount of any surplus or deficit, and (iv) evidence of necessary supporting facts.
Bankruptcy-Nominal Plaintiff's Duty to Gi"e Notice. The Recei ver must obtain
9 court approval prior to :filing for bankruptcy. If any party files an involuntary bankruptcy case
IO against OTHC during the receivership, the Nominal Plaintiff shall give notice of the bankruptcy
11 case to the Receiver, to the Court, and to all pa11ics three (3) business days after the day on which
12 Nominal Plaintiff receives notice of the bankruptcy.
13 18. Bankruptcy-Recei\'er's Duties. If the Receiver receives notice that an
14 involuntary bankruptcy has been filed and part of the bankruptcy estate includes property that is
15 the subject of this order, the Receiver shall have the following duties:
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a.
b.
Turn over property if no relief from stay will be sought. The Receiver shall
immediately contact the Nominal Plaintiff and SLC to determine whether
either party intends to move in the bankruptcy court for an order for (I)
relief from the automatic stay, and (2) relief from the Receiver's obligation
to turn over the property ( 11 U.S.C., § 543). If neither party intends to make
such a motion, the Receiver shall immediately turn over the property to the
appropriate entity either to the trustee in bankruptcy if one has been
appointed or, if not, to the debtor in possession and otherwise comply with
11 United States Code section 543.
Remain in possession pending resolution. If either the ominal Plaintiff or
the SLC intends to seek relief immediately from both the automatic stay and
the Receiver's obligation to tum over the property, the Receiver may remain
in possession and preserve the properly pending the ruling on those motions
-8-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
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(1 1 U.S.C., § 543(a)) . The Receiver's authority to preserve the property
shall be limited as fo1lows:
(1)
(2)
(3)
(4)
The Receiver may continue to collect rents and other income;
The Receiver may make only those disbursements necessary to preserve and protect the property;
The Receiver shal l not execute any new leases or other long-term contracts; and
The Receiver shall do nothing that would effect a material change in the circumstances of the property.
c. Turn over property if no motion for relief is filed within IO days after notice
of the bankruptcy. If either the Nominal Plaintiff or the SLC fai ls to fi le a motion within l O court
days after his or her receipt of notice of the bankruptcy filing, the Receiver shall immediately turn
over the property to the appropriate entity--either to the trustee in bankruptcy if one has been
appointed or, if not, to the debtor in possession-and otherwise comply with 11 United States
Code section 543.
d. Retain bankruptcy counsel. The Receiver may petition the court to retain
legal counsel to assist the Receiver with issues arising out of the bankruptcy proceedings that
affect the receivership.
19. Failure to T urn Over Property. A Receiver who fails to turn over the property in
accordance with this order shall not be paid for time and expenses after the date the Receiver
should have turned the property over.
20. Preliminary Injunction. The Court ORDERS Defendants to do the following:
a.
b.
Turn over property. Immediately turn over possession of OTHC and its Assets as described above to the Receiver when the appointment becomes effective, including any security deposits, prepaid rent, other rental or lease payments, and funds in property management bank accounts for the property.
Turn over related items. Immediately tum over to the Receiver all keys, books, documents, and records relating to the property and advise the Receiver of federal taxpayer identification numbers relating to the property.
c. Insurance.
(1) Immediately advise the Receiver about the nature and extent of insurance coverage on the property;
-9-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELI MIN ARY INJUNCTION
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(2) Immediately name the Receiver as an additional insured on each insurance policy on the property; and
(3) DO NOT cancel, reduce, or modify the insurance coverage.
d. Restraints. The Court ORDERS Defendants to refrain from:
(1)
(2)
(3)
(4)
(5)
(6)
committing or permitting any waste on the property or any act on the property in violation of law or removing, encumbering, or otherwise disposing of any of the fixtures on the property;
demanding, collecting, or in any other way diverting or using any of the rents from the property attributable to OTHC;
interfering in any manner with the discharge of the Receiver's duties under this order, including by using any voting shares attributable to any Defendant or affiliate of any Defendant to block proposals submitted to the shareholders by the Receiver;
filing any petition or declaration of bankruptcy on behalf of OTHC without prior approval from the Court;
selling, transferring, disposing, encumbering, or concealing the property without a prior court order; and
doing any act that will impair the preservation of the property or plaintiffs interest in the property.
THE COURT FURTHER ORDERS PLAINTIFF to immediately file a
16 preliminary injunction bond under Code of Civil Procedure section 529 in the amount of: $2,500.
17 22. THE COURT FURTHER ORDERS that, immediately upon filing of the
18 Receiver's Oath and Bond, the Receiver shall notice and hold an election for new OTHC board
19 members to replace the current board at the earliest possible date under and in conformity with
20 appl icable California law and the OTHC bylaws. The Receiver shall hold this election within four
2 1 months of his appointment. Tf tbe Receiver requires more time to notice and hold the election for
22 any reason, the Receiver may inform the Court of the reason for the delay and request additional
23 time. The Receiver may disqualify candidates in this election as well as current Board members
24 from service based on any failure to comply with the OTHC bylaws, including without limitation
25 failure to meet the requirements of a "Qua[ified Director" as set forth in those bylaws. The
26 Receiver shall notify the Court immediately after the completion of this election, and shall attempt
27 to arrange a conference with the Court at the earliest possible date to consider, in light of the
28 election, whether the Receiver should be terminated and the operation and management of OTHC
-10-ORDER APPOINTING RECETVER AFTER HEARING AND PRELIMINARY INJUNCTION
returned to OTHC 's Board. An order to show cause as to why the receivership should not be
2 terminated is hereby scheduled for November 6, 2018, I 0:00 a.m. in Dept. 0 of the Santa Monica
3 Courthouse.
4 23. THE COURT FURTHER ORDERS that lhere shall be a 120-day stay on this
5 matter.
6
7 IT IS SO ORDERED.
8 DATED: July 9 2018
9
10 Hon.LilaHartcoie
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-I 1-ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION
EXHIBIT B
866-299-5127Veritext Legal Solutions
1 SUPERIOR COURT OF THE STATE OF CALIFORNIA
2 FOR THE COUNTY OF LOS ANGELES
3 DEPARTMENT WE-O HON. LISA HART COLE, JUDGE
4
5
6 MICHAEL REACH, DERIVATIVELY ON BEHALF)
7 OF OCEAN TOWERS HOUSING CORPORATION, )
8 )
9 PLAINTIFF, )
10 )
11 VS. ) CASE NO. SC 124263
12 )
13 JOHN SPAHI, ET AL., AND DOES 1 )
14 THROUGH 100, INCLUSIVE, )
15 )
16 DEFENDANTS. )
17 ____________________________________)
18
19 REPORTER'S TRANSCRIPT OF PROCEEDINGS
20 WEDNESDAY, SEPTEMBER 6, 2017
21 10:10 A.M.
22
23
24 NANCY K. BRINK, C.S.R. #6501
25 OFFICIAL REPORTER PRO TEMPORE
26
27 JOB NO. 2691760
28
866-299-5127Veritext Legal Solutions
63
1 WHAT'S THE CODE SECTION FOR THAT?
2 MR. WITTENBERG: WELL, YOU HAVE THE -- AGAIN, YOU'RE
3 EMPOWERED TO APPOINT SOMEBODY TO WATCH OVER THEM.
4 THE COURT: NO, I DON'T. THAT'S WHAT A RECEIVER IS
5 FOR. IT'S JUST A DIFFERENT WORD.
6 MR. WITTENBERG: WELL, YOU CAN APPOINT -- WELL, SO TO
7 APPOINT A MONITOR, YOU CAN DO IT -- CAN'T YOU APPOINT A
8 COURT MONITOR JUST TO OR CAN YOU ORDER THEM THROUGH AN
9 INJUNCTION YOU HAVE TO HAVE TRANSACTIONS BE APPROVED BY THE
10 COURT, SETTLEMENTS OF U.S. BANK LAWSUITS --
11 THE COURT: I DON'T HAVE THAT MOTION IN FRONT OF ME.
12 YOU WELL KNOW THAT I CAN'T ORDER A MANDATORY INJUNCTION IN
13 THE ABSENCE OF COURT TRIAL.
14 MR. WITTENBERG: YOUR HONOR, I'VE GIVEN YOU AN ORDER
15 WITH AN INJUNCTION. I DO THINK YOU HAVE THE INHERENT POWER
16 TO ACT IN THE INTEREST OF JUSTICE.
17 THE COURT: WELL, I APPRECIATE YOUR CONFIDENCE IN THE
18 POWERS THAT I HAVE.
19 MR. WITTENBERG: YOU DO.
20 THE COURT: BUT I DON'T BELIEVE THAT I HAVE THOSE
21 POWERS AND I DON'T INTEND TO OVERREACH MY POWERS. AND I
22 APPRECIATE YOUR CONCERN AND YOUR FRUSTRATION. BUT YOUR
23 FRUSTRATION IS BETTER FOCUSED AT SOMEONE OTHER THAN ME. I
24 WILL TELL YOU THAT QUITE HONESTLY. AND I WOULD THINK THAT
25 WOULD BE A MORE PROFESSIONAL WAY FOR YOU TO CONDUCT
26 YOURSELF. I'VE CLEARLY EXPRESSED MY SUSPICIONS ABOUT THAT.
27 I THINK YOUR FRUSTRATION SHOULD NOT BE FOCUSED ON ME.
28 MR. WITTENBERG: YOUR HONOR, I THINK THAT TRULY LAY
I DON'T HAVE THAT MOTION IN FRONT OF ME.
12 YOU WELL KNOW THAT I CAN'T ORDER A MANDATORY INJUNCTION IN
13 THE ABSENCE OF COURT TRIAL.
BUT I DON'T BELIEVE THAT I HAVE THOSE
21 POWERS AND I DON'T INTEND TO OVERREACH MY POWERS.
EXHIBIT C
TRANSCRIPT OF PROCEEDINGS - 09/20/2017
CASE NUMBER:
CASE NAME:
SC124263
REACH V. SPAHI
SEPTEMBER 20, 2017
Page 1
1
2
3
4
5
6
SANTA MONICA, CALIFORNIA
DEPARTMENT 0
REPORTER:
TIME:
HON. LISA HART COLE, JUDGE
CYNTHIA E. LAMB, CSR 8349
10:10 A.M.
7 APPEARANCES:
8 (As heretofore noted.)
9
10 THE COURT: All right. Good morning. Call the
11 matter of Reach versus Spahi, SC124263. Would Counsel
12 please state their appearances, starting with Counsel on
13 my left and every time you speak, please identify
14 yourself for our court reporter.
15 MR. TAITELMAN: Good morning, Your Honor.
16 Mike Taitelman representing the Nominal Plaintiff,
17 Michael Reach.
18 MR. WITTENBERG: Good morning, Your Honor.
19 Jeffrey Wittenberg also representing Plaintiff,
20 Michael Reach.
21 MR. ARONSON: Good morning, Your Honor.
22 Seth Aronson, O'Melveny & Myers, on behalf of the Special
23 Litigation Committee.
24 MR. GOLDBERG: Good morning, Your Honor.
25 Steven Goldberg, Manatt, Phelps & Phillips representing
26 the Nominal Defendant, Ocean Towers.
27 MR. ALTMAN: Good morning, Your Honor.
28 Jonathan Altman of Munger, Tolles & Olson for Defendants,
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TRANSCRIPT OF PROCEEDINGS - 09/20/2017 Page 19
1 have seen -- they have, you know, resigned and appointed
2 and resigned and appointed many different Directors.
3 So we could, perhaps, gets a court Order
4 appointing somebody that -- perhaps Mr. Altman who is
5 somebody who is a strong advocate for his client but I
6 found reasonable to deal with and he and I could perhaps
7 jointly work to select that person.
8
9
10
THE COURT: High praise, indeed, Mr. Altman.
MR. ALTMAN: I am flattered, Your Honor.
THE COURT: Let's let him finish, then.
11 MR. WITTENBERG: Yeah. So just to select somebody
12 to become a Board member, if we find one willing who will
13 work for the interests without conflict and be a Board
14 Member and still have the injunction, of course, but that
15 would be part of the Board.
16 THE COURT: Well -- I am sorry, Mr. Altman?
17 MR. ALTMAN: I was just going to say we have to --
18 that power to appoint a Board Member, I am not sure about
19 whether that exists.
20 It sounds to me like we would -- both
21 Mr. Wittenberg and the Defendants would have their hands
22 full and have some work to do to come to an agreement.
23 But I think we can probably come pretty close
24 and present the Court with a -- if there is a dispute
25 a fairly narrowly-tailored dispute that the Court can say
26 that or that. And that is what I think makes the most
27 sense as I am listening to the Court today.
28 THE COURT: Well, some of the points that
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TRANSCRIPT OF PROCEEDINGS - 09/20/2017 Page 20
1 Mr. Brunsten made, which I thought were good points with
2 regard to the injunction, would be something along the
3 lines of -- and I don't remember it specifically -- but
4 something along the lines of severing of actions need to
5 be reviewed by the Court or someone
6 MR. ALTMAN: We propose that.
7 THE COURT: Yeah, and also that the Board Members
8 and the Defendants in this case not participate in the
9 buying or selling of any property during the period.
10 Those were two that stood out to me as being
11 most profound. And then, you know, an ancillary issue --
12 and I have mentioned this to you, Mr. Wittenberg, today
13 earlier and I think we have discussed it before, I
14 apologize if we haven't -- is at some point down the
15 line, if you want to call it for a special election, I
16 think that that would be the only way that the Board
17 Members who are of concern and if your analysis is
18 correct and the allegations you have made in previous
19 documents, not in the ones filed today is true, and the
20 allegation you made specifically is that the homeowners
21 are afraid of these people and they are afraid to cross
22 them, you know, maybe a special election with new,
23 independent Board Members world be successful.
24 I agree with Mr . Altman and I nodded my head
25 when he said it, I don't know that I have the authority
26 to change the Constitution of the Board at this juncture
27 but that is something that I would leave to you to
28 consider as a group .
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EXHIBIT D
Transcript of Proceedings Reach vs. Spahi, et al. Page1 Page2
1 SUPERIOR COURT OF THE STATE OF CALIFORNIA 1 APPEARANCES - CONTINUED: 2 FOR THE COUNTY OF LOS ANGELES 2 FOR DEFENDANT ORLANDO: 3 DEPARTMENT O HON. LISA HART COLE, JUDGE 3 LAW OFFICES OF WILLIAM S. BRUNSTEN, PC 4 5 MICHAEL REACH, DERIVATIVELY ON ) SC124263
BEHALF OF OCEAN TOWERS HOUSING ) 6 CORPORATION, ) AND RELATED CASE
7
8
' 10
11
12
13
14 15 16 17 18
) SC125026 NOMINAL PLAINTIFF, )
) vs. )
) JOHN SP.AH!, ET AL., )
)
DEFENDANTS, )
) ·AND· )
) OCEAN TOWERS HOUSING CORPORATION, )
A CALIFORNIA CORPORATION, ) )
NOMINAL DEFENDANT. ) )
REPORTER'S TRANSCRIPT OF PROCEEDINGS FRIDAY, MARCH 9, 2018
19 APPEARANCES: 20 FOR PLAINTIFF: WITTENBERG LAW, APC
BY: JEFFREY WITTENBERG 21 401 WILSHIRE BOULEVARD, 12TH FLOOR
SANTA MONICA, CALIFORNIA 90401 22 (310) 295-2010 23 MILLER BARONDESS, LLP
BY: JAMES GOLDMAN 24 1999 AVENUE OF THE STARS, SUITE 1000
LOS ANGELES, CALIFORNIA 90067 25 (310) 552-7569 26 (APPEARANCES CONTINUE ON FOLLOWING PAGE) 27 REPORTED BY: JOSIANE B. GOLDMAN, CSR 13132
OFFICIAL REPORTER PRO TEMPORE 28 Job No. 10041082
1 CASE NUMBER:
2 CASENAME:
SC124263
REACH VS. SPAHI
3 SANTA MONICA, CALIFORNIA FRIDAY, MARCH 9. 2018
4 DEPARTMENT O HON. LISA HART COLE. JUDGE
5 REPORTER: JOSIANE GOLDMAN, CSR NO. 13132
6 TIME: 9:52 A.M.
7 APPEARANCES: AS HERETOFORE NOTED
8
9
10
11 THE COURT: GOOD MORNING. I'll CALL THE MATTER
Page3
12 OF REACH VERSUS SPAHI. SC124263 AND 125026. IF COUNSEL
BY: WILLIAMS. BRUNSTEN 4 11355 OLYMPIC BOULEVARD, SUITE 300
LOS ANGELES, CALIFORNIA 90064 5 (310) 478-3200 6 FOR DEFENDANTS YOSHIKAWA, INCAUDO, AND AMBROSE: 7 LAW OFFICES OF RODNEY T. LEWIN
BY: RODNEY T. LEWIN 8 8665 WILSHIRE BOULEVARD, SUITE 210
BEVERLY HILLS, CALIFORNIA 90211 9 (310) 659-6771
10 FOR DEFENDANTS ALEVIZOS AND STEIN: 11 MUNGER, TOLLES & OLSON, LLP
BY: JONATHAN E. ALTMAN 12 350 SOUTH GRAND AVENUE, 50TH FLOOR
LOS ANGELES, CALIFORNIA 90071 13 (213) 683-9569 14 FOR DEFENDANT JOHN SPAHI: 15 !RELL & MAN'ELLA, LLP
BY: DAVID SIEGEL 16 CRAIG VARNEN
17 1800 AVENUE OF THE STARS, SUITE 900 LOS ANGELES, CALIFORNIA 90067 310-277-1010
18
" 20
FOR THE SPECIAL LITIGATION COMMITTEE:
O'MELVENY & MYERS, LLP BY: SETH ARONSON
MICHELLE C. LEU 21 400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071 22 213-430-6000 23 FOR NOMINAL DEFENDANT OCEAN TOWERS: 24 MANATT, PHELPS & PHILLIPS, LLP
BY: STEVEN M. GOLDBERG 25 11355 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064 26 310-312-4138 27 28
1 ALEVIZOS AND SHELDON STEIN.
2 MR. VARNEN: GOOD MORNING. YOUR HONOR. CRAJG
Page4
3 VARNEN OF IRELL & MANELLA ON BEHALF OF DEFENDANT JOHN
4 SPAHI.
5 THE COURT: REALLY?
6 MR. SIEGEL: GOOD MORNING, YOUR HONOR. DAVID
7 SIEGEL OF IRELL & MANELLA FOR JOHN SPAHI.
8
9
THE COURT: REALLY?
MR. LEWIN: GOOD MORNING. RODNEY LEWIN APPEARING
10 FOR DEFENDANTS YOSHIKAWA, AMBROSE, AND INCAUDO.
11 MR. BRUNSTEN: GOOD MORNING, YOUR HONOR. WILLIAM
12 BRUNSTEN APPEARING FOR DEFENDANT JOSEPH ORLANDO.
13 WOULD BE KIND ENOUGH TO STAND IN A ROW SO THAT THE COURT 13 MR. GOLDBERG: GOOD MORNING, YOUR HONOR. STEVEN
14 REPORTER FROM CAN IDENTIFY WHO YOU ARE. AND IF YOU
15 MENTION YOUR NAME BEFORE YOU SPEAK, THAT WOULD BE VERY
16 HELPFUL TO HER. ALL RIGHT. DON'T BE SHY.
17 MR. WITTENBERG: GOOD MORNING. YOUR HONOR.
18 JEFFREY WITTENBERG FOR NOMINAL PLAINTIFF MICHAEL REACH.
19 MR. GOLDMAN: GOOD MORNING, YOUR HONOR. JAMES
20 GOLDMAN FOR MR. REACH.
21 MS. LEU: GOOD MORNING, YOUR HONOR. MICHELLE
22 LEU, O'MELVENY & MYERS, FOR OCEAN TOWERS SPECIAL
23 LITIGATION COMMITTEE.
24 MR. ARONSON: GOOD MORNING. YOUR HONOR. SETH
25 ARONSON OF O'MELVENY & MYERS FOR THE SPECIAL LITIGATION
26 COMMITTEE.
27 MR. ALTMAN: GOOD MORNING, YOUR HONOR. JONATHAN
14 GOLDBERG, MANATT, PHELPS & PHILLIPS, FOR OCEAN TOWERS AS
15 NOMINAL DEFENDANT IN THE DERIVATIVE ACTION.
16 THE COURT: MR. SIEGEL, l'M ACTUALLY A LITTLE
17 SURPRISED TO SEE YOU HERE, BASED ON lHE REPORT THAT I
18 RECEIVED FROM MR. BRUNSTEN, BUT -
19
20
MR. SIEGEL: GOOD MORNING. WE HOPE TO -
THE COURT: I DIDN'T KNOW YOU WERE DOING PRO BONO
21 WORKNOW.
22 MR. SIEGEL: WE HOPE NOT TO. I DON'T PLAN TO,
23 YOUR HONOR.
24 THE COURT: WELL, I GUESS THAT REMAINS TO BE
25 SEEN, DOESN'T IT?
26 MR. SIEGEL: YES. AND WE HOPE TO HELP BRING THIS
27 TO AN EFFICIENT AND REASONABLE CONCLUSION. IT SEEMS TO
28 ALTMAN OF MUNGER, TOLLES & OLSON FOR DEFENDANTS PETER 28 HAVE GONE ON A LONG TIME.
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Transcript of Proceedings Reach vs. Spahi, et al. Page29 Page30
1 NAIVETE IN TiiESE AREAS IS A LITTLE EXTREME. TELL ME WHY 1 INFORMATION FROM THE BOARD MEMBERS ONL Y7
2 YOU DON'T KNOW ANYTHING ABOUT ANYTHING WITH REGARD TO 2 MR. GOLDBERG: I -AS FOR MR. ORLANDO, THERE IS
3 OCEAN TOWERS. CAN YOU EXPLAIN THAT TO ME? 3 NO PL.ACE ELSE I CAN GET THE INFORMATION. THERE IS NO
4 MR. GOLDBERG: I DO KNOW CERTAIN THINGS, BUT 4 INDEPENDENT PERSON WHO'S GOING TO PROVIDE. AND, YES,
5 EVERYTHING COMES FUNNELED VIA THE PARTIES. MY MANDATE 5 YOU DID ORDER THE REPORT, AND MR. BRUNSTEN ASSUMED THE
6 IS TO REPRESENT THE CORPORATION AND THE BEST INTEREST OF 6 RESPONSIBILITY OF GETTING THAT INFORMATION FROM
7 THE SHAREHOLDERS, BUT ALL OF MY INFORMATION COMES FROM 7 MR. ORLANDO AND PRESENTING IT. I HAVE NO REASON TO
8 PARTIES WHO ARE REPRESENTED ALREADY WHO HAVE THEIR OWN 8 BELIEVE THAT INFORMATION IS CORRECT.
9 ATTORNEY. 9 THE COURT: WELL, I APPRECIATED TiiATYOU HAVE A
10 THE COURT: WELL, HAVE YOU SOUGHT INFORMATION? 10 MOTION TO BE RELIEVED AS COUNSEL SET NEXT MONTH. SO
11 MR. GOLDBERG: BASICALLY, WHAT I KNOW BY 11 MAYBE YOU FEEL THAT YOU'RE ON YOUR WAY OUT AND YOU DON'T
12 DEFINITION, IS FROM THE PEOPLE WHO ARE ALREADY TiiERE. 12 WANT THE DOOR TO HIT YOU AS YOU LEAVE, BUT l'M A LITTLE
13 THE COURT: HAVE YOU SOUGHT INFORMATION FROM 13 DISAPPOINTED, TO BE QUITE HONEST. I MEAN, JUST BECAUSE
14 ANYBODY ELSE? 14 MR. BRUNSTEN -
15 MR. GOLDBERG: l'VE GOT INFORMATION FROM ALL 15 MR. GOLDBERG: YEAH, I UNDERSTAND THAT, YOUR
16 COUNSEL. SOME OF IT - BUT ANYTHING THAT l'M AUTHORIZED 16 HONOR, AND I HAVE ETHICAL PROHIBITIONS AGAINST SAYING
17 TO DISCLOSE HAS BEEN DISCLOSED BY COUNSEL ALREADY. 17 FURTHER.
18 MR. SIEGEL: YOUR HONOR - 18 MR. ARONSON: YOUR HONOR, MAY I BE HEARD?
19 THE COURT: HOLD ON A SECOND. l'M NOT ACTUALLY 19 THE COURT: YES.
20 NOT QUITE THROUGH WITH MR GOLDBERG. 20 MR. ARONSON: SETH ARONSON. I SAW THE PAPERS
21 SO YOUR OBLIGATION IS TO THE CORPORATION AND TO 21 THAT MANATT FILED TO BE RELIEVED AS COUNSEL. WE HAVE
22 THE SHAREHOLDERS. I SPECIFICALLY ASKED THE FEMALE 22 NOTHING TO DO WITH THAT, BUT I QUESTION HOW A
23 PARTNER WHO WAS ON LAST TIME FOR A REPORT, AND I DIDN'T 23 CORPORATION CAN GO WITHOUT COUNSEL. I DID NOT SEE ANY
24 GET ONE. WHAT I GOT WAS SOMETHING THROUGH MR. ORLANDO. 24 RECOMMENDATION OR SUGGESTION THAT NEW COUNSEL BE PUT IN.
25 DO YOU FEEL THAT THERE'S AN INDEPENDENT 25 A CORPORATION CANNOT BE IN PRO PER. 1rs NOT A PER, NOT
26 OBLIGATION ON BEHALF OF COUNSEL FOR THE CORPORATION, THE 26 A PERSON. SO--AND 1rs BEEN AWHILE SINCE l'VE LOOKED
27 SHAREHOLDERS, TO LOOK OUT FOR THE BEST INTEREST OF THE 27 AT THIS STATE LAW ISSUE, BUT I THOUGHT IT WOULD RESULT
28 CORPORATION AND THE SHAREHOLDERS AND RELY EXCLUSIVELY ON 28 IN A DEFAULT IF THE CORPORATION WENT UNREPRESENTED BY
1 COUNSEL. SO I RAISE THAT ISSUE NOW. Page31
1 Page32
THESE PEOPLE WERE ELECTED INITIALLY, KNOWING THEY WERE
2 MR. GOLDBERG: IF MY MOTION IS GRANTED, OF COURSE 2 ELECTED-
3 THE CORPORATION HAS TO HIRE NEW COUNSEL. 3 (SIMULTANEOUS SPEAKERS)
4 MR. WITTENBERG: WHICH GIVES US MORE COST. AND 4 MR. WITTENBERG: THEY WEREN'T ELECTED. FROM --
5 THERE WOULDN'T BE A DEFAULT. THEY'RE THE REAL PLAINTIFF 5 THAT'S WHAT l'M TELLING YOU, THERE'S EVIDENCE TO THAT.
6 IN TiilS CASE, YOUR HONOR. TiiERE'S NO DEFAULT. BUT THEY 6 THE COURT: THEY'RE BUDDIES. HOLD ON A SECOND.
7 DO NEED INDEPENDENT COUNSEL, WHICH THEY'VE NEVER HAD, 7 EXCUSE ME. EXCUSE ME. EXCUSE ME. I APPRECIATE YOUR
B NOW ADMITTED, AND WE NEED TO FIGURE IT OUT. WHY DOES IT 8 ENTHUSIASM. THANK YOU VERY MUCH FOR IT. LET'S MAINTAIN
9 COME BACK TO THERE'S NO DISINTERESTED BOARD MEMBERS? WE 9 SOME DECORUM, IF WE COULD.
10 NEED SOMEBODY IN CHARGE - 10 MR. WITTENBERG: YOU HAVE AUTHORITY IN
11 THE COURT: COUNSEL, I AGREE WITH YOU. 11 MR. ALTMAN, IN MR. BRUNSTEN. THEY'VE ALL SAID SO.
12 MR. WITTENBERG: SO CAN WE DO THIS? LET ME 12 MR. LEWIN. IT'S CALLED THE LESSER REMEDY OF THE
13 PROPOSE THIS. I KNOW YOU'RE HESITANT TO DO A RECEIVER. 13 RECEIVER. YOU CAN DO IT.
14 EVEN THOUGH NOW THAT THEY'RE INSOLVENT ON THIS PUBLIC 14 THE COURT: WELL, YOU DO - I DON'T UNDERSTAND
15 RECORD, EVEN IF THEY PAY 250, THEY OWE ANOTHER 500 TO 15 WHAT A LESSER REMEDY OF A RECEIVER IS.
16 THESE OTHER GENTLEMEN. TiiE BANK CAN COME IN AT ANY 16 MR. WITTENBERG: IT IS - THIS IS THE LAW ON A
17 TIME, BECAUSE THEY'RE ALREADY IN BREACH OF THAT LOAN 17 RECEIVER: THE COURTS SAY IT IS A DRASTIC REMEDY, BUT IN
18 AGREEMENT BECAUSE THEY'RE INSOLVENT. WHAT ARE THEY 18 CERTAIN CIRCUMSTANCES, IT IS NOT. HOWEVER. IF THERE'S
19 TELLING THE LENDER? ARE THEY BEING HONEST, OR ARE THEY 19 SOMETHING LESS THAN A RECEIVER, ANYTHING, AN INJUNCTION,
20 DECEIVING THE LENDER, GIVING RISE TO MORE ADVERSE ACTION 20 ANYTHING LESS THAN A RECEIVER THAT YOU CAN DO, YOU
21 AGAINST THE H.O.A 21 SHOULD DO IT. THIS IS CALLED A MANDATORY INJUNCTION TO
22 THE THING TO DO IS GET AHEAD OF THE ISSUE, AND IF 22 DO AN ELECTION. IT IS LESS THAN A RECEIVER.
23 YOU DON'T WANT TO APPOINT A RECEIVER, OKAY. WHY DON'T 23 THE COURT: WHY DON'T WE DO THIS, WHY DON'T WE
24 WE GO Willi OUR SECOND PROPOSAL. LErs ORDER AN ELECTION 24 NOTICE THAT FOR A COUPLE OF WEEKS, AND -
25 IMMEDIATELY WHERE THE CURRENT BOARD MEMBERS CANNOT RUN 25 MR. WITTENBERG: LErS DO IT.
26 OR VOTE THEIR SHARES. WHY IS THAT LAUGHABLE? 28 THE COURT: COUNSEL CAN NOTICE A LESSER REMEDY -
27 THE COURT: WELL, BECAUSE l'M NOT SURE I CAN SAY 27 MR. SIEGEL: A MOTION TO CALL AN ELECTION?
28 THAT PEOPLE CAN'T RUN. IF THEY'RE NOMINATED - I MEAN, 28 THE COURT: - THAN A RECEIVER. WHATEVER HE'S
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Transcript of Proceedings Reach vs. Spahi, et al. Page33 Page34
1 GOING TO DO, EITHER- HE HAD ANOTHER ISSUE THAT WAS 1 MR. SIEGEL: WELL, I THINK EVERYONE SHOULD BE
2 RAISED IN HIS PAPERWORK. WHICH WAS THE APPOINTMENT OF A 2 CONCERNED ABOUT THE PEOPLE'S MONEY.
3 MANAGER. 3 THE COURT: I THINK WE ALWAYS HAVE BEEN.
4 MR. WITTENBERG: CORRECT. 4 MR. SIEGEL: I APPRECIATE THE COURT CERTAINLY HAS
5 THE COURT: AND - TO MANAGE THE FINANCES. AND 5 MADE THAT CLEAR TODAY IN YOUR HONOR'S APPROACH. THE
6 THAT WAS NOT A BAD IDEA EITHER, BUT I CAN'T DO THESE 8 BOARD WILL HAVE TO HAVE AN ELECTION SHORTLY. ITS DUE.
7 THINGS WITHOUT PROPER NOTICE TO THE OTHER SIDE, AND 7 I UNDERSTAND THAT. I BELIEVE THAT THE BOARD UNDERSTANDS
8 THERE WAS NO PROPER NOTICE TO THE OTHER SIDE. 8 THAT AND THAT, IN COMPLIANCE WITH THE INJUNCTION, ANY
9 MR. SIEGEL: YOUR HONOR, THIS IS EXACTLY HOW WE 9 NOTICE HAS TO BE APPROVED BY THE S.L.C.
10 FIND OURSELVES, I THINK, IN THIS SITUATION WHERE THERE'S 10 THE COURT: I THINK THEY WOULD APPROVE THAT.
11 LOTS OF MONEY BEING SPENT AGAIN ON MORE LAWYERS, MORE 11 MR. SIEGEL: BUT IT HAS TO BE WRITTEN AND SHARED
12 MOTIONS. I APPRECIATE THERE NEEDS TO BE AN ELECTION OF 12 WITH THEM.
13 THE BOARD. 13 THE COURT: WELL, SOMEBODY HAS TO DO IT, BECAUSE
14 THE COURT: WELL, THERE IS ANOTHER OPTION THAT 14 IF 1rs 15 MONTHS-AND MY MATH ISN'T GREAT, BUT 15
15 YOUR CLIENT COULD ACTUALLY, DO AND OTHER PEOPLE WHO 15 MONTHS IS THIS MONTH.
18 MIGHT BE ASSOCIATED WITH YOUR CLIENT, AND THAT IS TO 16 MR. SIEGEL: CORRECT. IT'S GOING -
17 WITHDRAW. 17 THE COURT: THE NOTICE SHOULD HAVE COME OUT LAST
18 MR. SIEGEL: WE UNDERSTAND. 18 MONTH.
19 THE COURT: AND IF THAT IS DONE, THEN THAT WOULD 19 MR. SIEGEL: CORRECT. I DID WANT··
20 BE A VERY INEXPENSIVE RESOLUTION. SO I APPRECIATE YOU 20 THE COURT: BUT THE BOARD DIDN'T DO THAT.
21 BEING CONCERNED ABOUT THE FEES. IF YOU'RE TRULY 21 MR. SIEGEL: AND THIS WILL MAKE ME CERTAINLY
22 CONCERNED ABOUT THE FEES, MR. SPAHI AND THOSE ASSOCIATED 22 UNPOPULAR AMONG THE FEW OWNERS HERE, BUT I DO NEED TO
23 WITH MR. SPAHI CAN RESIGN, AND I THINK THAT WOULD 23 NOTE ON THE RECORD THAT THERE HAVE BEEN ELECTIONS FOR
24 RESOLVE MANY, MANY ISSUES THAT THIS BOARD HAS. 24 MANY YEARS. ALL HAVE BEEN CHALLENGED.
25 MR. SIEGEL: I UNDERSTAND AND APPRECIATE THAT 25 THE COURT: l'M AWARE OF THAT.
26 THATS AN ALTERNATIVE AS WELL, YOUR HONOR. 26 MR. SIEGEL: ALL HAVE BEEN CHALLENGED, AND ALL -
27 THE COURT: WELL, IF YOU'RE CONCERNED ABOUT 27 AS A RESULT OF THE THOSE CHALLENGES, AND AT EXPENSE TO
28 MONEY, THATS WHAT I WAS ADDRESSING. 28 THE HOMEOWNERS, HAVE BEEN SUPERVISED BY STATE SUPERIOR
1 COURT JUDGES -Page35
1 Page36
WOULD RESIGN AND AGREE NOT TO RUN AGAIN, THEN I WOULD BE
2 THE COURT: I APPRECIATE THAT. 2 VERY HAPPY TO REVISIT THIS ISSUE.
3 MR. SIEGEL: - WHO HAVE CERTIFIED THE ELECTION 3 MR. BRUNSTEN: YOUR HONOR, ALONG THE LINES OF
4 RESULT. FIRST JUDGE-- 4 MR. ALTMAN'S STATEMENT, PERHAPS COUNSEL CAN TALK AND
5 THE COURT: COUNSEL, WE'VE BEEN THERE. YOU'RE 5 COME BACK, BECAUSE WE COULD SAVE A LOT OF MONEY AVOIDING
6 NEW, BUT WE ALL KNOW THAT, AND THATS WHY I SAID THAT 6 A COMPLEX MOTION FOR A MANDATORY INJUNCTION IF AT LEAST
7 THEY WERE ELECTED. SO I DON'T DISAGREE WITH YOU. BUT 7 ALL THE PARTIES WOULD STIPULATE WE'RE GOING TO HAVE AN
8 IF YOU REALLY DO WANT TO SAVE MONEY, RESIGNATIONS WOULD 8 ELECTION.
9 BE VERY HELPFUL. 9 THE COURT: THAT'S WHAT I JUST - WELL, l'M NOT
10 COUNSEL? MR. ALTMAN. 10 SURE l'M HAPPY WITH THAT. TELL YOU WHAT, WHY DON'T YOU
11 MR. ALTMAN: JONATHAN ALTMAN. YOUR HONOR, 1-- 11 LET ME TAKE MY VERDICT, AND WHY DON'T YOU ALL GO - IF
12 MR. ALEVIZOS AND MR. STEIN AGREE WITH YOU ON THE 12 YOU HAVE A FEW MINUTES, WE CAN GO BACK INTO THE JURY
13 RESIGNATION ISSUE. MR. ALEVIZOS HAS, IN FACT, ASKED 13 ROOM AND CHAT ABOUT THIS AND SEE IF WE CAN BROKER A DEAL
14 MR. SPAHI TO STEP DOWN. I THINK THAT IS THE BEST WAY TO 14 ON THAT.
15 SAVE MONEY. 15 MR. SIEGEL: YOUR HONOR, WE'RE NOT GOING TO BE
16 THE ONE THING l'M WONDERING ABOUT IS, I THINK 16 ABLE TODAY TO STIPULATE THAT OWNERS IN THE CORPORATION
17 MR. WITTENBERG HAS DONE A LOT OF GOOD IN THIS CASE, I 17 CAN'T RUN OR PROMOTE A CANDIDATE, AND I DON'T THINK- I
18 THINK THERE'S NO QUESTION, BUT HE'S A VERY AGGRESSIVE 18 THINK THE COURT HAD IT RIGHT. I DON'T THINK THE COURT
19 LAWYER, WHICH IS GOOD, BUT IT DOES END UP COSTING A LOT 19 IS GOING TO INTERFERE WITH THAT FUNDAMENTAL RIGHT IN ANY
20 OF MONEY, BECAUSE EVERY TIME HE MOVES, FOR INSTANCE, 20 CORPORATION. THEY MAY -
21 WITH THE RECEIVER, THERE WAS A STRONG FEELING WITH THE 21 THE COURT: COUNSEL, I - HOLD ON A SECOND.
22 BOARD THAT A RECEIVER WOULD BE CATASTROPHIC AND COST A 22 MR. SIEGEL: -- ULTIMATELY AGREE, BUT I CAN'T
23 HUGE AMOUNT OF MONEY TO OPPOSE. NOW HE'S GOT ANOTHER- 23 REPRESENT THAT.
24 l'M WONDERING IF WE MIGHT COME BACK FOR A STATUS 24 THE COURT: I AGREE WITH YOU. YOU WERE THE ONE
25 CONFERENCE IN TWO OR THREE WEEKS ON THIS ELECTION ISSUE. 25 THAT WAS CONCERNED, AND YOU RAISED THE ISSUE OF MONEY
26 THE COURT: IF THERE'S A POSSIBILITY - IF 26 BEING SPENT ON LEGAL FEES PURSUANT TO MR. WITTENBERG'S
27 THERE'S A POSSIBILITY AND IF YOU'RE TELLING ME THAT 27 SUGGESTION, AND I WAS GIVING YOU A VERY CHEAP
28 THERE IS THE POSSIBILITY THAT CERTAIN BOARD MEMBERS 28 ALTERNATIVE TO THAT SUGGESTION.
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EXHIBIT E
1 CASE NUMBER:
2 CASE NAME:
Transcript of Proceedings March 23, 2018
SC124263
REACH VS. SPAHI
3 SANTA MONICA, CALIFORNIA FRIDAY, MARCH 23, 2018
4 DEPARTMENT 0 HON. LISA HART COLE, JUDGE
5 REPORTER: HEATHER PITVOREC, CSR NO. 10551
6 TIME: 1:46 P.M.
7 APPEARANCES: AS HERETOFORE NOTED
8
9 *** 10
11 THE COURT: LET'S GO ON THE RECORD IN THE CASE
12 OF REACH VS. SPAHI, SC124263.
13 COUNSEL, PLEASE STATE THEIR APPEARANCES.
14 MR. WITTENBERG: GOOD AFTERNOON. JEFFREY
15 WITTENBERG FOR NOMINAL PLAINTIFF MICHAEL REACH.
16 MR. GOLDMAN: GOOD AFTERNOON, YOUR HONOR.
17 JAMES GOLDMAN OF MILLER BARONDESS FOR PLAINTIFF MICHAEL
18 REACH, NOMINAL PLAINTIFF.
19 MS. LEU: GOOD AFTERNOON, YOUR HONOR.
20 MICHELLE LEU FROM O'MELVENY & MYERS FOR SPECIAL
21 LITIGATION COMMITTEE OF OCEAN TOWERS.
22 MR. LAVAEE: GOOD AFTERNOON, YOUR HONOR.
23 MICHAEL LAVAEE FOR DIRECTORS YOSHIKAWA, INCAUDO, AND
24 AMBROSE.
25 MR. VARNEN: GOOD AFTERNOON, YOUR HONOR.
26 CRAIG VARNEN OF IRELL & MANELLA ON BEHALF OF DEFENDANT
27 JOHN SPAHI.
28 MR. ALTMAN: GOOD AFTERNOON, YOUR HONOR.
U.S. Legal Support I www.uslegalsupport.com 1
Transcript of Proceedings March 23, 2018
1 NOTICED OPEN MEETING OF THE BOARD. TABULATION RESULTS
2 OF THE ELECTION SHALL PROMPTLY BE REPORTED AND SHALL BE
3 RECORDED IN THE MINUTES OF THE NEXT BOARD MEETING.
4 SO WE CAN'T JUST SAY BY ACCLAMATION IT'S OKAY.
5 THIS FIAT --
6 THE COURT: THANK YOU.
7 MR. WITTENBERG: AND LASTLY -- SORRY. THEIR
8 ELECTION PROCEDURES SAY THERE'S THREE UP FOR ELECTION
9 IN EVERY ODD-NUMBERED YEAR, AND FOUR UP FOR ELECTION IN
10 EVERY EVEN-NUMBERED YEAR.
11 WE'VE HEARD FROM COUNSEL THERE IS THREE UP
12 THIS YEAR, AND THERE WERE THREE UP LAST YEAR. THAT'S
13 SIX. WHERE IS THE SEVENTH? NONE OF THIS MAKES SENSE,
14 AND I KNOW IT 1 S HARD FOR YOU BECAUSE YOU DON'T HAVE ALL
15 OF THIS IN FRONT OF YOU, BUT I KEEP TELLING YOU, AND I
16 JUST LAY IT OUT THERE. AND I'M TRYING MY BEST.
17 THE COURT : I APPRECIATE YOU TELLING ME. I
18 LIKE KNOWING WHAT'S GOING ON. I DO NOT FEEL THAT IT
19 IS , EVEN IF I HAD THE JURISDICTION TO INTERFERE WITH AN
20 ELECTION, WHICH I WOULD PERSONALLY HAVE TO RESEARCH AND
21 CERTAINLY HAVE IT BRIEFED , I DON ' T REALLY FEEL IT WOULD
22 BE APPROPRIATE AT THIS JUNCTURE, AND I MEAN TODAY, FOR
23 ME TO INTERFERE.
24 MR. WITTENBERG, YOU NEED TO BEHAVE
25 PROFESSIONALLY. IF YOU'RE THAT UPSET WITH ME, YOU
26 SHOULD STEP OUTSIDE.
27 MR. WITTENBERG: I JUST FEEL LIKE YOU'RE GOING
28 TO SAY YOU'RE GOING TO LEAVE THINGS AS IS. BUT CAN'T
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EXHIBIT F
Transcript of Proceedings Reach vs. Spahi, et al.
1 SUPERIOR COURT OF THE STATE OF CALIFORNIA
2 FOR THE COUNTY OF LOS ANGELES - SPRING STREET COURTHOUSE
3 DEPARTMENT NO. 9 HON. LISA HART COLE, JUDGE
4
5 MICHAEL REACH, DERIVATIVELY ON BEHALF OF OCEAN TOWERS
6 HOUSING CORPORATION,
7 Plaintiff,
8 vs. CASE NO. SC124263 (Related to SS027262)
9 JOSEPH SPAHI, ET AL.,
10 Defendants.
11 OCEAN TOWERS HOUSING
12 CORPORATION, a California Corporation,
13 Nominal Defendant.
14
15
16 REPORTER'S TRANSCRIPT OF PROCEEDINGS
17 TELEPHONIC HEARING
18 Wednesday, June 6, 2018
19
20 (ALL APPEARANCES VIA CONFERENCE CALL)
21
22
23
24
HON. LISA HART COLE, JUDGE 312 South Spring Street Department No. 9 Los Angeles, California 90012
25 (APPEARANCES CONTINUED ON NEXT PAGE.)
26 Reported By:
27 DEBORAH L. STOUGH, CSR NO. 8925 OFFICIAL PRO TEM COURT REPORTER
28 Job No. 10043968
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Transcript of Proceedings Reach vs. Spahi, et al.
1 have an impact on what kind of relief you were going to
2 give and in which case you were going to give it.
3 And so when we pointed that out, that's when
4 you said, your Honor, well, if you think you need that
5 injunctive relief that you're asking for or any other
6 provisional relief, just contact me and we'll set a
7 hearing to talk about that.
8 So the short answer to your question is it was
9 raised in the ex parte application last week, and based
10 on the fact that the SLC report was issued and given its
11 contents and let me just -- in that regard, what I'm
12 going to say now relates to both cases.
13 One of the recommendations of the SLC was that
14 Spahi and Orlando be removed immediately, immediately.
15 They said that word multiple times, and I think
16 they -- the reason why they said that was because -- and
17 Mr. Aronson will obviously correct me if he disagrees,
18 but the SL -- the judges were concerned, given the past
19 conduct of these guys, every day that they're in control
20 of the HOA involves a threat of additional irreparable
21 injury and
22 THE COURT: Under what legal authority can I
23 remove them? ,~
24 MR. GOLDMAN : Well, you don ' t have to remove
25 them if you grant a receiver .
26 THE COURT : Right . I understand that , but you
27 said that the recommendation was that they be removed
28 immediately . So I'm not aware of any legal mechanism by
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Transcript of Proceedings Reach vs. Spahi, et al.
1 which I could go ahead and do that .
2 I am aware that I could enjoin them and issue
3 an injunction ancillary to the appointment of a
4 receiver.
5 MR. GOLDMAN : Your Honor, my point wasn't to
6 ask you to remove them. I agree with you that to remove
7 them on a telephonic conference call would not be
8 appropriate.
9 THE COURT: I don't even know how I could do it
10 on a noticed motion, frankly .
11 MR. GOLDMAN : Well, you don't have that in
12 front of you, but let me just finish.
13 The point was that the SLC made that -- the
14 point was let's think about the reason why the SLC made
15 that recommendation. They made the recommendation
16 because they can't -- these guys cannot be permitted to
17 maintain control through an election process, through
18 their current positions, whatever they are. That's why
19 we need a receiver, and that's why we need to stop the
20 election.
21 (Multiple parties speaking at the same time.)
22 THE COURT: Counsel, please do not speak at the
23 same time.
24 MR. VARNEN: Plaintiff has gone on for a while.
25 It's Craig Varnen of Irell & Manella. Is it
26 appropriate -- is it my turn, your Honor?
27 THE COURT: Yes. I think that would be
28 appropriate. Go ahead.
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EXHIBIT G
Transcript of Proceedings Reach vs. Spahi, et al.
1 SUPERIOR COURT OF THE STATE OF CALIFORNIA
2 COUNTY OF LOS ANGELES, WEST DISTRICT
3 DEPARTMENT WE-0 HON. LISA HART COLE, JUDGE
4
5
6 MICHAEL REACH, DERIVATIVELY ON BEHALF) OF OCEAN TOWERS HOUSING CORPORATION, )
7 ) PLAINTIFF, )
8 ) VS. ) CASE NO. SC 124263
9 ) RELATED TO: SS027262 JOSEPH SPAHI, ET AL. , )
10 ) DEFENDANTS. )
11 ) OCEAN TOWERS HOUSING CORPORATION, A )
12 CALIFORNIA CORPORATION, ) )
13 NOMINAL DEFENDANT. )
14
15 REPORTER'S TRANSCRIPT OF PROCEEDINGS
16 SANTA MONICA, CALIFORNIA
17 JUNE 12, 2018
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24
25 Reported By:
26 NANCY K. BRINK, C.S.R. #6501
27 OFFICIAL REPORTER PRO TEMPORE
28 JOB NO. 10044194
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Transcript of Proceedings Reach vs. Spahi, et al.
1 YOU COULD DO A PRELIMINARY INiTIJNCTION HEARING ANY NUMBER OF
2 WAYS. YOU COULD DO IT ON THE PAPERS. THERE MAY BE ENOUGH
3 DOCUMENTATION TO GET TO LIKELIHOOD OF SUCCESS ON THE MERITS.
4 THE COURT HAS ALREADY COME VERY CLOSE TO FINDING IRREPARABLE
5 HARM. I'M NOT PROPOSING TO PREJUDGE SUCH A PRELIMINARY
6 INiTIJNCTION MOTION; I'M JUST SAYING IT WOULD BE WITHIN THE
7 S.L.C. 'S AUTHORITY AS HANDLING THE DERIVATIVE CLAIM TO MAKE
8 IT.
9 IF ONE COULD IN A MONTH OR 6 WEEKS HAVE SUCH A
10 HEARING, PUT EVERYONE TO THEIR PROOF , THEN THIS COURT COULD
11 DECIDE WHETHER THEY SHOULD BE REMOVED OR NOT . THAT COULD
12 AVOID THE RECEIVER AND THE PROBLEMS OF A RECEIVER.
13 NOW, I'M NOT GOING TO PRETEND THAT IT'S A
14 PERFECT SOLUTION. WHO KNOWS WHAT CAN OF WORMS YOU OPEN BY
15 DOING SOMETHING LIKE THIS? I DON'T KNOW. I HAVE SOME
16 CONCERNS ABOUT I'M REALLY SPEAKING FOR MY CLIENT,
17 MR. ALEVIZOS. HE HAS SOME CONCERNS ABOUT WHO WOULD BE LEFT
18 ON THE BOARD. BUT IT DOES APPEAR THAT THE BOARD MEMBERS
19 THEN WOULD BE FREE FROM MR. SPAHI'S INFLUENCE. MR. ORLANDO
20 WOULD BE GONE. AND YOU COULD HAVE AN OPERATIONAL BOARD THAT
21 MIGHT BE ABLE TO MANAGE THE BUILDING AND THEN HAVE AN
22 ELECTION.
23 YOU WOULD ALSO BE ENTITLED, I BELIEVE, TO BAR
24 MR. SPAHI FROM RUNNING AGAIN IF YOU ARE SO INCLINED AND IF
25 THE EVIDENCE SHOWED THAT. NOW -- OR SUSPEND HIM FROM
26 RUNNING AGAIN.
27 I THINK YOU COULDN'T REALLY REMOVE HIM UNTIL THE
28 CASE WAS OVER, UNTIL THE DERIVATIVE CLAIM IS OVER AND WE HAD
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1 A DECISION. BUT A SUSPENSION, I THINK, IS WITHIN THE
2 COURT'S ABILITY AND POWER.
3 SO IT SEEMS TO ME THAT'S A -- IF WE'RE WORRIED
4 ABOUT A RECEIVER I'LL BE CANDID. MY CLIENT IS VERY
5 WORRIED FOR SOME OF THE REASONS YOU HEARD. BY THE WAY, HE'S
6 NOT RUNNING AGAIN. HE'S HAD, AS YOU CAN IMAGINE, THE NO
7 PAYING JOB OF BEING ON THIS BOARD OF DIRECTORS IS NOT THE
8 GLORY AND EXCITEMENT THAT HE'D HOPED FOR.
9 WITH THAT BEING SAID. HE'S WORRIED ABOUT THIS.
10 THIS IS ONE POSSIBILITY. I PUT IT BEFORE THE
11 COURT.
12 I KNOW MR. ARONSON AND -- NOBODY IS HERE FROM
13 THE S.L.C. SO I DON'T KNOW IF THEY'RE WILLING TO DO IT.
14 THEY'RE NOT BEING PAID. I MEAN, THERE ARE A LOT OF
15 PROBLEMS. BUT THIS IS A REAL WAY TO GIVE MR. SPAHI HIS
16 MOMENT IN COURT AND, IF IT'S APPROPRIATE, IF THE S.L.C. IS
17 RIGHT, TO GET HIM OFF THE BOARD.
18 THAT'S A SUGGESTION, YOUR HONOR.
19 THE COURT: ALL RIGHT. WELL, THANK YOU. I APPRECIATE
20 THAT. I DID READ YOUR FOOTNOTE 6.
21 MR. ALTMAN: IT'S A VERY LONG VERSION.
22 THE COURT: NO. IT'S GOOD. AND I APPRECIATE THAT.
23 AND I WAS INTRIGUED BY IT. BUT I DON'T THINK IT'S SOMETHING
24 I'M PREPARED TO DO SUA SPONTE. AND YOU'RE SUGGESTING THAT
25 IT'S SOMETHING THAT THE S.L.C. WOULD BE REQUIRED TO
26 INITIATE. I'M NOT SURE THAT THE S.L.C. IS IN A POSITION TO
27 DO MUCH MORE, GIVEN THE CIRCUMSTANCES AND THREATS THAT
28 TRUTHFULLY HAVE BEEN MADE TO THEM AND MANATT, ET CETERA.
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EXHIBIT H
Transcript of Proceedings Reach vs. Spahi, et al.
1 SUPERIOR COURT OF THE STATE OF CALIFORNIA
2 FOR THE COUNTY OF LOS ANGELES
3
4 DEPARTMENT NO. 9 HON. LISA HART COLE, JUDGE
5
6 MICHAEL REACH, DERIVATIVELY ON BEHALF OF OCEAN TOWERS HOUSING
7 CORPORATION,
8 PLAINTIFF,
9 vs.
10 JOHN SPAHI; JOSEPH ORLANDO; JOSEPH INCAUDO; OMAR SPAHI;
11 DOROTHEA SCHIRO; JANET FULADIAN; SEIF ASCAR, INDIVIDUALLY AND AS
12 TRUSTEE OF THE ASCAR FAMILY TRUST, DATED JULY 5, 2012; APEX
13 INVESTMENTS GROUP LTD., D/B/A APEX INVESTMENTS, INC.; CAVOUR
14 PARTNERS LIMITED LLC; ENENSTEIN RIBAKOFF LAVINA & PHAM, A
15 PROFESSIONAL CORPORATION; PATRICK AMBROSE; SHELDON STEIN;
16 KAZOU "KAY" YOSHIKAWA; PETER ALEVIZOS; AND DOES 5 TO 100,
17 INCLUSIVE,
18 DEFENDANTS.
19 AND
20 OCEAN TOWERS HOUSING CORPORATION, A CALIFORNIA
21 CORPORATION.
22 NOMINAL DEFENDANT.
23
24
CASE NO. SC124263
25 REPORTER'S TRANSCRIPT OF PROCEEDINGS
LOS ANGELES, CA JULY 9, 2018
26
27 REPORTED BY: CESAR RODRIGUEZ, CSR NO. 13269
28 Job No. 10045019
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Transcript of Proceedings Reach vs. Spahi, et al.
1 TO SAY WAS I UNDERSTAND MY E-MAIL RAISED YOUR EYEBROWS. BUT
2 WHAT REALLY SHOULD HAVE RAISED YOUR EYEBROWS -- THIS WOULD
3 HAVE BEEN A MUCH BETTER WAY TO SAY IT. WHAT REALLY SHOULD
4 HAVE RAISED YOUR EYEBROW WAS PLAINTIFF'S SUBMISSION ON FRIDAY
5 -- OR ON THURSDAY, THEIR THURSDAY NIGHT SUBMISSION. BECAUSE
6 WHAT THEIR BRIEF SAYS IN ABSOLUTELY NO UNCERTAIN TERMS IS
7 THAT THE REASON THEY WANT A RECEIVER APPOINTED IS TO GET RID
8 OF THE BOARD AND ELECT A NEW BOARD.
9 THE COURT: COUNSEL, THAT'S REALLY -- I THINK THAT WHAT
10 THEY SAID IN THEIR BRIEF WAS THAT THERE WAS NO METHOD BY
11 WHICH THIS COURT COULD DO THAT. AND THERE ISN'T. AND WE'RE
12 NOT AT THAT POINT YET. THE REAL ISSUE IS BASED ON THIS SLC
13 REPORT, WHICH WAS HIGHLY NEGATIVE TO YOUR CLIENTS, WITH
14 REGARD TO BREACH OF THEIR FIDUCIARY DUTY AS DIRECTORS OF THIS
15 VERY SUBSTANTIAL ASSET . THERE WERE CONSEQUENCES TO THAT. IN
16 RESPONSE TO THAT, WHAT I HEARD FROM YOU IS HOW UNFAIR THE
17 PROCESS WAS . AND I APPRECIATE THAT YOU BELIEVE THAT AND I
18 APPRECIATE THAT MR. ARONSON AND THE SLC CHOSE TO REBUT THE
19 STATEMENTS AND CLARIFY.
20 I'M NOT HERE TO DECIDE WHETHER THE SLC REPORT HAS
21 FLAWS IN IT OR WHETHER IT'S THE PERFECT -- THE PERFECT
22 ANALYSIS OF THE SITUATION. BUT IT IS A PROCESS THAT YOUR
23 CLIENTS, PRIOR TO YOUR ARRIVAL IN THIS ACTION, CHOSE TO
24 PARTICIPATE IN. AND ALTHOUGH THE NOMINAL PLAINTIFF ASKED ME
25 NOT TO STAY THE LITIGATION, IT WAS YOUR SIDE OF THE TABLE AND
26 YOUR CLIENTS WHO REQUESTED THE STAY.
27 SO I'M FOLLOWING PROCEDURE. I'M NOT BIASED FOR
28 OR AGAINST EITHER SIDE. I'M FOLLOWING A PROCEDURE THAT,
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Transcript of Proceedings Reach vs. Spahi, et al.
1 ALL OF THIS IS IT DOESN'T DEFINE WHAT THE PROPERTY MEANS.
2 DOES THIS PREVENT THE DEFENDANTS FROM REMODELING THEIR UNITS?
3 DOES IT PREVENT DEFENDANTS FROM SELLING THEIR UNITS? IF
4 MR. SPAHI DRIVES TOO FAST IN THE PARKING LOT, IS HE IN
5 VIOLATION OF THIS INJUNCTION? AGAIN, THIS IS EXTREMELY
6 OVERBROAD INJUNCTION THAT BORDERS ON AN AFFIRMATIVE
7 INJUNCTION.
8 (D) (3), IF I'M READING IT CORRECTLY -- I'M GOING
9 TO SAY THAT FOR ALL OF THESE. I'M HAVING TROUBLE DECIPHERING
10 A LOT OF THESE. (D) (3), WHICH IS LINES 13 TO -- 12 TO 14 ON
11 PAGE 10, SEEMS TO PROHIBIT THE DEFENDANTS FROM USING ANY
12 VOTING SHARES ATTRIBUTABLE TO ANY DEFENDANT OR AFFILIATE OR
13 ANY DEFENDANT TO BLOCK PROPOSALS SUBMITTED TO THE
14 SHAREHOLDERS BY THE RECEIVER. IF I ' M READING THAT CORRECTLY,
15 THIS BARS THE DEFENDANTS FROM VOTING AGAINST ANY PROPOSAL
16 SUBMITTED BY THE RECEIVER . THAT SEEMS TO BE A VIOLATION OF
17 THE FIRST AMENDMENT RIGHTS, IT SEEMS TO BE DISENFRANCHISEMENT
18 OF THEIR RIGHT TO SHAREHOLDERS AND PROBABLY OTHER
19 CONSTITUTIONAL VIOLATIONS OF DUE PROCESS.
20 THE COURT : WHY DO YOU THINK THAT MIGHT BE IN THERE?
21 DO YOU HAVE ANY IDEA WHY THAT MIGHT BY IN THERE?
22 MR. ROSEN: YEAH, I DO. BECAUSE MY CLIENTS ARE BEING
23 TREATED AS BEING GUILTY BEFORE THEY'VE HAD A CHANCE TO
24 PRESENT EVIDENCE, YOUR HONOR. THAT'S TRULY HOW I BELIEVE. I
25 BELIEVE IT'S IN THERE. BECAUSE EVERYONE IS ASSUMING THE
26 TRUTH OF THE SLC REPORT, WHICH I PERSONALLY BELIEVE IS AN
27 INADMISSIBLE DOCUMENT. BUT I THINK THAT'S WHY IT'S THERE.
28 THE COURT : DO YOU KNOW THAT THE FACT THAT YOUR CLIENTS
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Transcript of Proceedings Reach vs. Spahi, et al.
1 VOTED FOR AN AMENDMENT TO THE BYLAWS TO ALLOW THE SLC TO GO
2 FORWARD, THEN AFTER THE SLC REPORT CAME BACK AS NEGATIVE TO
3 YOUR CLIENTS, THAT YOUR CLIENTS THEN TRIED TO WITHDRAW THE
4 AMENDMENT TO THE BYLAWS? DO YOU THINK THAT MIGHT HAVE
5 ANYTHING TO DO WITH THAT SECTION?
6 MR. ROSEN: IF IT DOES, THEN IT'S TOTALLY WRONG AND
7 UNFAIR. LOOK, I'M NOT A CRIMINAL LAWYER, BUT I'M PRETTY SURE
8 THAT A CRIMINAL DEFENDANT ON TRIAL FOR MASS MURDER HAS THE
9 RIGHT TO VOTE UNTIL HE'S FOUND GUILTY. THIS IS A CIVIL CASE.
10 THE COURT: COUNSEL, LET'S TRY TO AVOID A HYPERBOLE. I
11 UNDERSTAND YOUR OBJECTION. I JUST ASKED IF YOU THOUGHT THAT
12 THAT PARTICULAR ISSUE HAD ANYTHING TO DO WITH THAT PARAGRAPH.
13 MR. ROSEN: AND MY ANSWER IS YES. BUT I THINK IT'S NOT
14 FAIR THAT WE'RE BEING -- THAT THE SLC IS BEING TREATED AS
15 TRUE AND BINDING AND DISPOSITIVE.
16 THE COURT: THANK YOU. I APPRECIATE IT. ANYTHING
17 ELSE?
18 MR. ROSEN: YES. (D) (4), STILL ON PAGE 10, LINES 15
19 THROUGH 16. "RESTRAINS DEFENDANTS FROM FILING ANY PETITION
20 OR DECLARATION OF BANKRUPTCY ON BEHALF OF OTHC."
21 NOW, I'M NOT SURE IF THIS IS REFERRING TO FILING
22 A VOLUNTARY BANKRUPTCY PETITION OR AN INVOLUNTARY BANKRUPTCY
23 PETITION. IF IT'S VOLUNTARY, THAT'S FINE. IF IT'S
24 INVOLUNTARY, I THINK THE CREDITORS OF A CORPORATION HAVE THE
25 RIGHT AT SOME POINT TO PUT A COMPANY IN BANKRUPTCY.
26 THE COURT: WHAT DOES THIS HAVE TO DO WITH YOUR CLIENT?
27 IT'S SAYING YOUR CLIENTS CAN'T, ON BEHALF OF OTHC PUT OTHC
28 INTO BANKRUPTCY. THAT'S WHAT IT SAYS. YOU THINK THAT'S
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1 RECEIVER FORM APPROVED BY THE JUDICIAL COUNCIL. ALMOST
2 EVERYTHING MR. SPAHI'S COUNSEL WAS CONCERNED ABOUT IS IN THE
3 JUDICIAL COUNCIL FORM.
4 SO I DON'T THINK THOSE OBJECTIONS ARE GOING TO BE
5 WELL TAKEN. I'M TALKING ABOUT PARAGRAPH 4, SUBSECTION A, ON
6 PAGE 3. CHATTEL PAPER AND ALL THE -- I BELIEVE IT'S TALKING
7 ABOUT ALL THE DEFENDANT'S BOOKS AND RECORDS RELATING THERETO,
8 WHEREVER LOCATED, AS THE RECEIVER DEEMS NECESSARY."
9 THIS IS FORM LANGUAGE RIGHT FROM THE JUDICIAL
10 COUNCIL FORM. THAT'S WHERE WE GOT IT. I THINK IT'S PRIMA
11 FACIE. I ALSO DON'T THINK IT'S VERY UNCLEAR. I MEAN,
12 CHATTEL PAPERS, MORTGAGES, TITLES TO THINGS, I DON'T KNOW
13 THAT THAT'S A VERY UNCLEAR STATEMENT.
14 AGAIN, THE COMPLAINT ABOUT RESTRAINTS, THAT WAS
15 PAGE 10, SUBSECTION D OF PARAGRAPH 20. AGAIN, NUMBER --
16 LITTLE SUBSECTION ONE, THAT'S FROM THE JUDICIAL COUNCIL FORM.
17 SIX IS FROM THE JUDICIAL COUNCIL FORM. THE BANKRUPTCY
18 PETITION IS NOT. I DON'T THINK IT'S UNCLEAR THAT'S A
19 VOLUNTARY BANKRUPTCY. AND AS FOR THE COMPLAINT ABOUT THE
20 VOTING SHARES ATTRIBUTABLE TO ANY DEFENDANT, THAT'S NOT IN
21 THE FORM. THE FIRST PART OF PARAGRAPH 3 IS IN THE JUDICIAL
22 COUNCIL FORM. INTERFERING IN ANY MANNER WITH THE DISCHARGE
23 OF THE RECEIVERS DUTIES UNDER THIS ORDER.
24 THE COURT DISCERNED WHAT THE CONCERN HERE WAS.
25 BASICALLY WHAT WE'RE TRYING TO DO IN THE ORDER IS TO PREVENT
26 ANY INTERFERENCE WITH THE RECEIVER. WE CAN'T HAVE A BOARD AT
27 WAR WITH THE RECEIVER. SO WE'RE -- WE WERE ATTEMPTING TO
28 GIVE THE RECEIVER ALL SUCH POWERS NECESSARY TO THWART ANY
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1 INTERFERENCE WITH HIM. I THINK WE CAN LIVE WITHOUT THE
2 VOTING SHARES PROVISION, IF THAT'S SOMETHING THAT THE COURT
3 FEELS STRONGLY ABOUT. I DON'T THINK THERE'S A PROBLEM WITH
4 IT, IF THE COURT LIKES TO KEEP IT IN.
5 AND WE DO HAVE SOMEONE HERE, MR. SPAHI, WHO IS BY
6 FAR THE MAJORITY SHAREHOLDER IN A COOPERATIVE. SO HE HAS
7 DISPROPORTION VOTING POWER IF YOU WERE TO CHOOSE TO USE IT TO
8 TRY TO THWART THE RECEIVER, TO THE EXTENT THAT'S EVEN
9 POSSIBLE, WHICH FRANKLY WE'RE NOT EVEN SURE IT IS. BUT
10 THAT'S WHY IT'S IN THERE.
11 THE COURT: THERE IS THE QUESTION ABOUT REMOVAL OF THE
12 BOARD MEMBERS. AND I THINK I MIGHT HAVE MISREAD THAT. I
13 THINK COUNSEL MAY HAVE READ THAT CORRECTLY.
14 MR. ALTMAN: THE CASES MAKE FAIRLY CLEAR THAT WE READ
15 THAT A BOARD CAN NEVER BE AT WAR WITH THE RECEIVER. AND
16 YOU DO SEE --
17 THE COURT: A BOARD WHAT?
18 MR. ALTMAN: MAY NOT BE AT WAR WITH THE RECEIVER. AND
19 YOU DO SEE CASES WHERE THE RECEIVER HAS ESSENTIALLY SUSPENDED
20 THE BOARD'S AUTHORITY AND REPLACED IT. IN FACT, THAT'S THE
21 NORM FOR AN EQUITY RECEIVER AS WE HAVE HERE.
22
23
THE COURT: THAT'S WHAT I ASSUMED WE WERE DOING.
MR. ALTMAN: AND THAT IS WHAT WE -- WELL, LET ME MAKE
24 IT CLEAR, BECAUSE MY CLIENT WILL INSIST I MAKE IT CLEAR. HE
25 LIKE MR. SPAHI -- AND BY THAT I MEAN MR. OMAR SPAHI-- IS VERY
26 CONCERNED ABOUT A RECEIVER. THE COURT HAS HEARD THAT ENOUGH.
27 BUT HE IS CONCERNED ABOUT IT. BUT LET'S SAY THAT THAT SHIP
28 HAS SAILED. THEN IT DOES SEEM TO US AND TO MR. ALEVIZOS THAT
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EXHIBIT I
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JONATHAN E. ALTMAN (State Bar No. 170607)[email protected] STEPHEN T. MAYER (State Bar No. 298713) [email protected] MUNGER, TOLLES & OLSON LLP 350 South Grand Avenue Fiftieth Floor Los Angeles, California 90071-3426 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 Attorneys for PETER ALEVIZOS and SHELDON STEIN
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
MICHAEL REACH, DERIVATIVELY ON BEHALF OF OCEAN TOWERS HOUSING CORPORATION,
Plaintiff,
vs. JOHN SPAHI; JOSEPH ORLANDO; JOSEPH INCAUDO; OMAR SPAHI; DOROTHEA SCHIRO; JANET FULADIAN; SEIF ASCAR, individually and as Trustee of the Ascar Family Trust, dated July 5, 2012; APEX INVESTMENTS GROUP LTD., d/b/a/ APEX INVESTMENTS INC.; CAVOUR PARTNERS LIMITED LLC; ENENSTEIN RIBAKOFF LAVINA & PHAM, A PROFESSIONAL CORPORATION; PATRICK AMBROSE; SHELDON STEIN;
ALEVIZOS; and DOES 1 to 100, inclusive,
Defendants. -and- OCEAN TOWERS HOUSING CORPORATION, a California corporation
Nominal Defendant.
Case No. SC124263 RESPONSE OF OTHC DIRECTOR PETER ALEVIZOS TO NOMINAL
MOTION FOR APPOINTMENT OF A RECEIVER AND RESPONSES OF MR. SPAHI AND OTHC Judge: Hon. Lisa Hart Cole Dept.: O Action Filed: June 3, 2015 Trial Date: Not Set
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That said, Mr. Alevizos recognizes that the Court wishes to act quickly to prevent the
current majority board members from acting against the interests of OTHC or its shareholders.6
Additionally, once the Board perceives that appointment of a receiver is inevitable, it may attempt
to forestall or delay such an appointment through a declaration of bankruptcy to achieve a tactical
advantage in litigation, which could also do substantial harm to the shareholders. Mr. Alevizos
thus suggests a two-part solution, giving corporate counsel time to meet and confer with the
lenders and Barings while simultaneously preventing the OTHC Board from taking any actions
outside the usual course of business without obtaining leave of the Court during that time.
Specifically, the Court could enter an order stating that (1) the Court has elected to appoint
a receiver; (2) the identification of the receiver will be held in abeyance for two weeks on the
s for the receiver position, to explore the possibility of a
workout mitigating any adverse consequences that appointment of a receiver might have under
receiver; and (3) the Court will immediately enter a two-week interim management order requiring
leave of the Court for any declaration of bankruptcy, refinancing of corporate debt, or other action
7
6 During the June 6, 2018 telephonic conference with counsel, the Court inquired of the parties whether it has authority to remove members of the OTHC Board of Directors. (Transcript, 6/6/18 Conference Call, at 22:22-
pursuant to its equitable powers and independent of statute. (Brown v. N. Ventura Rd. Dev. Co. (1963) 216 Cal. App. 2d 227, 232; see American Center for Education, Inc. v. Cavnar (1978) 80 Cal.App.3d 476, 499 [ It is true that our courts possess the equitable power to remove directors
the Court should only remove board members after affording them an opportunity to be heard. 7 The Court has legal authority to enter such an interim management order to protect OTHC and
the appointment of a receiver. California law empowers a trial court to adopt injunctions as a lesser alternative remedy to the appointment of a receiver, and the Court has already entered similar injunctions in this very case. (See Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 Cal.App.2d 869, 873.) Furthermore, in an analogous case addressing the effect of a receiv
the Court should only remove board members after affording them an opportunity to be heard.
EXHIBIT J
1
David Rosen
From: David RosenSent: Monday, August 6, 2018 10:43 AMTo: Eddy Klein; Robert M. Heller; Todd M. Lander; Penny M. Costa; [email protected];
[email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; Mayer, Stephen ([email protected])
Subject: RE: Reach v. Spahi -- NOTICE OF EX PARTE APPLICATION
Please be advised that Defendant John Spahi’s ex parte application will now be heard on August 7, 2018, at 10:45 a.m. in Department 9 of the Los Angeles Superior Court, located at 312 N. Spring St., Los Angeles, California.
David E. Rosen
Murphy Rosen LLP 100 Wilshire Boulevard, Suite 1300 Santa Monica, California 90401-1142 T 310.899.3300 F 310.399.7201 E [email protected] www.MurphyRosen.com
From: Judge Lisa Hart Cole [mailto:[email protected]] Sent: Monday, August 6, 2018 10:31 AM To: David Rosen Cc: Eddy Klein; Robert M. Heller; Todd M. Lander; Penny M. Costa; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; Mayer, Stephen ([email protected]) Subject: RE: Reach v. Spahi -- NOTICE OF EX PARTE APPLICATION I could schedule the ex parte at 10:45 tomorrow morning in Department 9 of the Spring Street Courthouse. Please let me know if this is agreeable.
From: David Rosen [mailto:[email protected]] Sent: Monday, August 6, 2018 10:18 AM To: Judge Lisa Hart Cole <[email protected]> Cc: Eddy Klein <[email protected]>; Robert M. Heller <[email protected]>; Todd M. Lander <[email protected]>; Penny M. Costa <[email protected]>; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; Mayer, Stephen ([email protected]) <[email protected]> Subject: RE: Reach v. Spahi ‐‐ NOTICE OF EX PARTE APPLICATION
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Your Honor, On behalf of Defendant John Spahi, we gave notice this morning of an ex parte application to stay certain portions of your July 9, 2018 Order Appointing Receiver After Hearing and Preliminary Injunction. I gave notice for the hearing to occur tomorrow at 8:30 a.m. in Department 9, but your Clerk advised that we should email you directly to determine in which Department the matter should be heard. Please let us know whether you would prefer the application to be heard in Department 9 or Department O. I intend to have the papers completed this afternoon and will have them filed and served today. I assume you would also like a set emailed to you. If I am incorrect, please let me know.
David E. Rosen
Murphy Rosen LLP 100 Wilshire Boulevard, Suite 1300 Santa Monica, California 90401-1142 T 310.899.3300 F 310.399.7201 E [email protected] www.MurphyRosen.com
From: David Rosen Sent: Monday, August 6, 2018 9:59 AM To: Robert M. Heller; Todd M. Lander; Penny M. Costa; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; Mayer, Stephen ([email protected]) Cc: Eddy Klein Subject: Reach v. Spahi -- NOTICE OF EX PARTE APPLICATION Please take notice that on August 7, 2018, at 8:30 a.m., or as soon thereafter as this matter may be heard in Department 9 of the Los Angeles Superior Court, located at 312 N. Spring St., Los Angeles, California, Defendant John Spahi will present an ex parte application seeking an order staying the following portions of the Court’s July 9, 2018 Order Appointing Receiver After Hearing and Preliminary Injunction (“the Order”) pending resolution of the appeal of the Order filed by Mr. Spahi: 1. Paragraph 1 of the Order to the extent it provides that the Receiver shall “remov[e] the current Ocean Towers Board of Directors”; 2. Paragraph 20(d)(3) of the Order to the extent it provides that Defendants shall refrain from “using any voting shares attributable to any Defendant or affiliate of any Defendant to block proposals submitted to shareholders by the Receiver”; and 3. Paragraph 22 of the Order, which provides that “immediately upon filing of the Receiver’s Oath and Bond, the Receiver shall notice and hold an election for new OTHC board members to replace the current board at the earliest possible date under and in conformity with applicable California law and the OTHC bylaws. The Receiver shall hold this election within four months of his appointment.” The application will be made pursuant to California Code of Civil Procedure section 918 and California Rules of Court 3.1200, et seq., and will be made on the grounds that good cause exists to stay these provisions of the Order pending
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appellate review of the Order because (1) the appeal presents substantial and important issues, and (2) failure to issue a stay is more likely to injure Defendant than issuance of a stay is likely to injure Plaintiff. Please let me know whether you intend to oppose the application.
David E. Rosen
Murphy Rosen LLP 100 Wilshire Boulevard, Suite 1300 Santa Monica, California 90401-1142 T 310.899.3300 F 310.399.7201 E [email protected] www.MurphyRosen.com
-14- PRINTED ON RECYCLED PAPER EX PARTE APPLICATION TO STAY PORTIONS OF ORDER APPOINTING A RECEIVER
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PROOF OF SERVICE I, ALLISON D. CASTILLO, declare: I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to this action. My business address is 100 Wilshire Boulevard, Suite 1300, Santa Monica, California 90401-1142, (310) 899-3300. On August 6, 2018, I served the document(s) described as EX PARTE APPLICATION OF JOHN SPAHI TO STAY PORTIONS OF THE JULY 9, 2018 ORDER APPOINTING RECEIVER AFTER HEARING AND PRELIMINARY INJUNCTION PENDING APPEAL on the interested parties in this action:
PLEASE SEE ATTACHED SERVICE LIST
BY E-MAIL: Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, I caused the documents to be sent to the persons at the email addresses listed above or on the attached service list. I did not receive within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful.
[State] I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on August 6, 2018, at Santa Monica, California. ALLISON D. CASTILLO
-15- PRINTED ON RECYCLED PAPER EX PARTE APPLICATION TO STAY PORTIONS OF ORDER APPOINTING A RECEIVER
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SERVICE LIST
Jeffrey Wittenberg, Esq. Wittenberg Law, APC 401 Wilshire Blvd., 12th Floor Santa Monica, CA 90401 Attorney for Nominal Plaintiff Michael Reach, derivatively on behalf of Real Plaintiff Ocean Towers Housing Corporation
James Goldman, Esq. Miller Barondess, LLP 1999 Avenue of the Stars, Suite I 000 Los Angeles, CA 90067 Attorneys for Plaintiff Michael Reach
Edward Nassirzadeh, Esq. Nass Law Firm 9454 Wilshire Blvd., Suite 700 Beverly Hills, CA 90212 Attorney for Defendants Dorothea Schiro and Apex Investments Group Ltd.
Julie Kimball, Esq. Elkins Kalt Weintraub Reuben Gartside LLP 2049 Century Park East, Suite 2700 Los Angeles, CA 90067 Attorneys for Nominal Defendant Ocean Towers Housing Corporation
Omar Spahi 12510 West Fielding Circle, Apartment 6 Los Angeles, CA 90094 Defendant Omar Spahi, in pro per
Rodney T. Lewin Michael Lavaee Law Offices of Rodney T. Lewin, APC 8665 Wilshire Blvd., Suite 210 Beverly Hills, CA 90211-2931 Attorney for Defendants Joseph Incaudo and Kazou Yoshikawa
Jonathan E. Altman Stephen T. Mayer Munger, Tolles & Olson LLP 350 South Grand Avenue, 50th Floor Los Angeles, CA 90071-3426 Attorneys for Defendants Peter Alevizos and Sheldon Stein
David Siegel, Esq. Craig Varnen, Esq. Michael D. Harbour Irell & Manella LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, CA 90067-4276 Co-counsel for Defendant John Spahi
Brent Parker C B Parker Law, PC 1230 Rosecrans Ave Ste 600 Manhattan Beach, CA 90266-2436 Attorneys for Defendant Patrick Ambrose
Seth Aronson OMELVENY & MYERS LLP 400 Soyth Hope Street Los Angeles, Ca 90071 Attorneys for Special Litigation Committee of the Board of Ocean Towers Housing Corporation
-16- PRINTED ON RECYCLED PAPER EX PARTE APPLICATION TO STAY PORTIONS OF ORDER APPOINTING A RECEIVER
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Robert M. Heller Todd M. Lander Freeman, Freeman & Smiley LLP 1888 Century Park East, Suite 1900 Los Angeles. CA 90067 Attorneys for Receiver Stephen J. Donell