1

1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA

2 CHARLESTON DIVISION

3 CATHERINE POWELL REGAN : :

4 vs. : :

5 PALMETTO PRINCE GEORGE : OPERATING, LLC, d/b/a PRINCE :

6 GEORGE HEALTHCARE CENTER, : and MILLENNIUM MANAGEMENT, LLC : 2:10 CV 1810

7

8

9 Telephone Conference in the above matter held on

10 Friday, March 16, 2012, commencing at 2:05 p.m., before

11 the Hon. Richard Gergel, in chambers, United States

12 Courthouse, 83 Meeting St., Charleston, South Carolina,

13 29401.

14

15 APPEARANCES:

16 ALICE F. PAYLOR, ESQ., P.O Box 893, Charleston,

17 SC, appeared for plaintiff.

18 JOHN K. BLINCOW, JR., ESQ., P.O. Box 22129, Charleston, SC, appeared for Millenium.

19 MICHAEL I. BERNSTEIN, ESQ., 1688 Meridian Ave.,

20 Miami, FL, appeared for Millenium.

21

22

23 RECORDED BY DIGITAL RECORDING TRANSCRIBED DEBRA POTOCKI, RMR, RDR, CRR

24 P.O. Box 835 Charleston, SC 29402

25 843/723-2208

2

1 THE COURT: Good afternoon. This is Judge Gergel.

2 First, for the record, this is the matter of Regan versus

3 Palmetto Prince George Operating, LLC and others.

4 Could counsel identify themselves for the record,

5 beginning with plaintiff's counsel.

6 MS. PAYLOR: Alice Paylor representing the

7 plaintiffs. Plaintiff.

8 MR. BLINCOW: This is John Blincow representing the

9 defendant Millennium Management.

10 MR. BERNSTEIN: This is Michael Bernstein, also

11 representing defendant Millennium Management.

12 THE COURT: Okay. Do we have anyone on the line on

13 behalf of defendant Palmetto Prince George Operating, LLC?

14 MR. BLINCOW: Judge Gergel, this is John Blincow. I

15 spoke to Kevin Sturm, who represents the nursing home,

16 Palmetto Prince George. He told me he was either in West

17 Virginia or southern Ohio, and may or may not be able to get

18 on the phone because of the cell coverage.

19 THE COURT: And I had some word that one or both of

20 you were going to represent Palmetto Prince George if that

21 occurred; is that correct? Mr. Bernstein, do you have

22 information on that?

23 MR. BERNSTEIN: I heard something similar, Your

24 Honor. I myself was in a mediation; I did not speak

25 Mr. Sturm, but if he represented that, I -- and his interests

3

1 coincide with ours, I do not have a problem with that.

2 THE COURT: Okay. Let me -- we had several matters

3 that I wanted to go ahead and address, because I had a motion

4 to reopen discovery from the plaintiff, and it was to take the

5 depositions of Avi Klein and Abraham Shaulson.

6 Miss Paylor, have those individuals previously been

7 deposed?

8 MS. PAYLOR: No, sir, they have not. And I didn't

9 realize -- During the normal discovery, Millennium was in

10 default, so I was not that -- it wasn't crucial for me to

11 establish anything, because they were already in default.

12 So when it reopened, my understanding was that

13 Mr. Shaulson, through testimony of all the witnesses, did not

14 have any ownership interest in the nursing home. But when --

15 after Millennium filed its motion for summary judgment, it

16 filed an affidavit saying he had no ownership interest, and

17 then I think two days later they filed a corrected affidavit.

18 And that was the first time that I learned that he had an

19 ownership interest in the nursing home.

20 And we have since found an employee of Millennium -- or an

21 ex-employee of Millennium who will provide testimony that

22 Mr. Shaulson basically calls all the shots at all of these

23 nursing homes in South Carolina. And Millennium (inaudible)

24 Charleston.

25 So I do want to add him as a witness, and I do want to

4

1 take those two depositions, just so I can find out exactly

2 what the ownership interest -- ownership relationship is, and

3 who does what.

4 THE COURT: Miss Paylor, I was looking over, I had

5 sort of a vague recollection that there had been -- this issue

6 had come up earlier, and my memory was correct. I remember

7 there had been a motion to set aside the default judgment by

8 Millennium, in which it had been represented to the Court at

9 that time that there was -- denying there was any corporate

10 connection between Millennium -- defendant Millennium and

11 defendant Palmetto Prince George Operating. That was actually

12 filed with the Court in June of 2011. And then I found, you

13 know, that again was filed by way of affidavit by the same

14 gentleman, Mr. Fruhman, he had done it earlier, stating

15 something essentially the same in March of 2012. And then as

16 you have just observed, subsequent to that, Mr. Fruhman stated

17 to the contrary, that there were connections between

18 Millennium and Prince George by way of the -- by way of the

19 common ownership of Mr. Shaulson.

20 You took Mr. Shaulson's deposition -- I mean Fruhman's

21 deposition, did you not?

22 MS. PAYLOR: I took a 30(b)(6) deposition and

23 Mr. Fruhman was the deponent. And he -- well, they wouldn't

24 let him answers questions about -- I guess I didn't put enough

25 topics in there when I did it, so I'm not finding fault with

5

1 that. They wouldn't let him answer questions about his

2 relationship with Mr. Klein, or Mr. Shaulson's relationship

3 with Mr. Klein and what corporations they owned together. And

4 based on the earlier affidavits and statements made, I

5 believed that Mr. Shaulson did not have any ownership interest

6 in this nursing home. And so when I learned about it last

7 week, I was shocked. And, you know --

8 THE COURT: Well, let me ask, in terms of -- Who

9 wishes to speak? Mr. Blincow, do you want to speak, Mr.

10 Bernstein, about -- in response to this motion to take the

11 depositions of Mr. Klein and Mr. Shaulson.

12 MR. BERNSTEIN: This is Mr. Bernstein, Your Honor,

13 I'll respond.

14 THE COURT: Okay.

15 MR. BERNSTEIN: Judge, I'll address some of the

16 points brought up by Miss Paylor. The first is, she's correct

17 that Millennium was initially in default in this matter. We

18 did, during that period, you know, especially even after the

19 magistrate issued the order representing that the order

20 should -- the default should be vacated, Mrs. Paylor still

21 refused to allow us to engage in discovery when there was

22 depositions taking place. So I don't think that she can sit

23 on her laurels now and say, well, I didn't really care at that

24 point; I wanted to extend it now because I could have engaged

25 in discovery then, but I didn't want to, because that was her

6

1 personal choice.

2 Secondly, the affidavits, there's -- there is some

3 confusion because there was some different corporate

4 documents. And there's no intent in this case or anywhere

5 else to try to make statements, because it might confuse the

6 Court. This is specifically -- Mr. Shaulson has a small

7 percentage of a subcompany. There's nothing wrong with it,

8 it's perfectly legal, it's in accordance with the general

9 corporate law in the United States of America. The plaintiff

10 is trying to make it seem that if you own a corporation

11 interest, it's somehow subterfuge and you should be subject to

12 alter ego liability in her papers. I have not seen that yet

13 in any court in the United States of America that says that by

14 ownership interest a corporation that you don't need to have

15 an individual interest, it automatically makes you some sort

16 of criminal, which is --

17 THE COURT: Well, you're of course right,

18 Mr. Bernstein. It's also improper to make false statements

19 and filings with the Court. And it's very clear that at a

20 minimum, Mr. Fruhman's filings are false. You say not

21 intentionally so. I'm concerned that I had a filing that was

22 submitted today, I believe, or yesterday, that suggested the

23 very same false information was provided a year earlier in a

24 State Court in South Carolina.

25 So I've got to tell you, whether it's intentional or not,

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1 if Miss Paylor tells me she was misled, and the information

2 submitted by Millennium was false, that causes me a lot of

3 pause in terms of giving her a chance to take these

4 depositions. And I'm very concerned, from what I've seen, I

5 want to know more about whether that was intentional or not.

6 That would be of great concern to me, very frankly.

7 So at this point, whether it was an honest mistake or

8 intentional activity is really beside the point. The

9 plaintiff says that she was lulled into a belief that there

10 was no connection, and that she believed -- and now with the

11 filing, after discovery's closed, indicating that those prior

12 statements were inaccurate.

13 And, Mr. Blincow, do you want to have anything to say

14 about this, sir?

15 MR. BLINCOW: A couple of things. We had already had

16 a discussion about the deposition of Mr. Klein, and agreed to

17 make him available for a deposition. He lives in Florida.

18 And so then the idea -- the issue was, are we going to take

19 this by telephone or by video conference, or is he going to be

20 required to come to Charleston, and if he's going to be

21 required to come to Charleston, who's going to pay for it.

22 And I think the same would apply to Mr. Shaulson.

23 THE COURT: Well, let me make it very clear. I think

24 what we have now with these inaccurate, at best, inaccurate

25 statements, I'm going to require both of them to come to

8

1 Charleston. I think we've had -- I'm very concerned.

2 The next issue I'm going to move to is this motion,

3 regarding this motion for sanctions, regarding not showing up

4 for the mediation, which is an express violation of our local

5 rules. I've sanctioned people before for that. And I'm very

6 concerned about that.

7 You know, just because this company's in Florida, doesn't

8 mean they don't have to obey rules of this Court.

9 So how soon can these depositions be set? Because this

10 case is on my trial term for May.

11 MR. BERNSTEIN: Your Honor, this is Michael

12 Bernstein. May I say something?

13 THE COURT: Yes, sir.

14 MR. BERNSTEIN: Thank you. And I wasn't finished

15 before, but Your Honor went to Mr. --

16 THE COURT: I'm sorry, I thought you had finished.

17 MR. BERNSTEIN: No, no, I didn't want to cut him off,

18 or Your Honor off. No, what I was saying is notwithstanding

19 everything I said, we -- if we were trying to bring any

20 subterfuge to the Court, which we are not, we certainly

21 wouldn't have filed a corrected affidavit.

22 The idea is we're not trying to hide anything. And we

23 have no problem producing the -- what I was trying to finish

24 up by saying is we have no problem producing the people. But

25 this Court, or the Court in the United States District Court

9

1 for the Southern District of South Carolina, Columbia

2 Division, in the case of Connell versus -- I wanted to cite

3 this case to Your Honor -- Biltmore Security Life, the Court

4 clearly says that, "The plaintiff and the defendant shall bear

5 and pay the travel expenses of bringing any deponent to South

6 Carolina, and his return in equal shares. And the plaintiff

7 shall bear and pay a reasonable living expenses for the

8 deponent on the day or days that he is called to testify."

9 And it cites the case of Banana Distributors, Inc. versus

10 United Fruit Company.

11 In this case we surely have no opposition in Miss Paylor

12 taking their depositions; there's nothing to hide.

13 The witness that she refers to, Your Honor, the affidavit

14 that she submitted, has already been incarcerated by Judge

15 Olson in the United States Bankruptcy Court for the Southern

16 District of Florida. He's currently in a criminal proceeding

17 for violating two court orders in front of Judge Marc Gold in

18 the Broward County Circuit Court. He threatened to -- I

19 believe the record shows he threatened to kill Judge Olson.

20 So if that's his credibility --

21 THE COURT: I'm sorry, I don't even know who -- Who

22 are you talking about?

23 MR. BERNSTEIN: This is Mr. Timothy Reardon, who she

24 submitted his affidavit as proof of various allegations as to

25 the alleged companies, I believe she's asking Your Honor to

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1 rely on.

2 THE COURT: I haven't even addressed that affidavit.

3 I'm concerned -- Here's what I'm concerned about,

4 Mr. Bernstein, is that there were representations -- all we're

5 getting to -- whether intention or not is another issue. What

6 we're dealing with here is there were representations made at

7 the time, beginning with the Millennium representations to be

8 relieved from default, that inaccurately represented the

9 relationship of these companies.

10 And the question now is, number one, should discovery be

11 reopened, and number two, who should bear the cost. It's my

12 discretion. I say, number one, I find good cause. I'm

13 reopening it for the purpose of the taking those two

14 depositions. And number two, I'm directing these defendants

15 who did business in South Carolina, who operated in South

16 Carolina, to appear in this -- and are litigating in this

17 Court, to appear in Charleston for their depositions.

18 Now let's talk about this -- And I'll issue a written

19 order on this.

20 How about the motion for sanctions relating to failure to

21 appear at mediation.

22 Mr. Bernstein, explain to me why nobody from millennium

23 appeared at the mediation, without Court permission.

24 MR. BERNSTEIN: And I apologize for that, Your Honor,

25 I -- When we spoke to Miss Paylor and we e-mailed her that

11

1 we'll be appearing by telephone, and I have those e-mails

2 exchanged that we were going to upload, she -- and I apologize

3 again, I didn't know we had to get Court permission. But she

4 sent back an e-mail without any indication whatsoever that she

5 had any objection to it (inaudible.)

6 Had she made mention of it at the time, we certainly would

7 have made sure -- I know Mr. Blincow was there -- but I

8 certainly would have made sure that a representative was there

9 from the company.

10 THE COURT: Well, first, you know, also the --

11 Miss Paylor, what's your response to that?

12 MS. PAYLOR: I got an e-mail on the Friday before we

13 were having the mediation on Monday, which we had a very

14 difficult time scheduling, and had been scheduled around

15 Mr. Bernstein's ability to be there. It was set up, and he --

16 I got an e-mail Friday afternoon from his secretary saying

17 that he was not going to be there. I do not have the e-mail

18 threads with me; I am in Chicago. My recollection, which, you

19 know, could be corrected if I'm wrong, my recollection was

20 that I wrote back and said I hope someone will be available

21 who has sufficient authority to settle the case.

22 And I wanted to go forward. We already had my -- we were

23 outside of the time that Your Honor had ordered us to have

24 everything completed. And they were also taking my client's

25 deposition on Monday. So --

12

1 MR. BERNSTEIN: That morning.

2 MS. PAYLOR: Correct.

3 THE COURT: Well, here's what I'm going to do.

4 MR. BERNSTEIN: Your Honor --

5 THE COURT: I'm going to --

6 MR. BERNSTEIN: -- e-mail --

7 THE COURT: Yeah, I'm going to shorten the time for

8 the defendants to respond to this motion till to March 23rd.

9 I'll issue an order today on that. And any response to --

10 We'll also shorten response time.

11 I just take very seriously the duty to mediate. If

12 somebody wants to tell me they're not going to -- they don't

13 wish to mediate and it's a futile act, I don't make them do

14 it. But I expect if they're going to mediate, that they

15 comply with my rules of this Court, and those rules say

16 explicitly that both counsel should be present, and a

17 representative with authority to be present. And it violates

18 the rules not to do it. And I, you know, I pretty vigorously

19 enforce that local rule. So I want to hear a response on

20 that.

21 And if y'all -- if it's the view of the defendants that

22 they don't wish to settle the case, I'm not going to make

23 anybody mediate. But it seems to me that what's going on in

24 this case, that y'all probably ought to sit down and have a

25 meaningful discussion about it. But that's your call. That's

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1 not -- I'm not going to make you do it.

2 MR. BLINCOW: I know that Mr. Sturm, who represents

3 the nursing home, would want to be heard on whether sanctions

4 are appropriate for failure to participate in a mediation.

5 THE COURT: Oh, I would not impose anything without

6 hearing from everybody, Mr. Blincow.

7 MR. BLINCOW: Sure.

8 THE COURT: I'm just saying I have a concern about

9 the failure of having the parties present. And I am a very

10 reasonable guy. If the mediation's a waste of time, if it's

11 waste of time to have the officers there, but someone else is

12 there with authority, but to have, you know, this done by

13 telephone is not consistent with our rules. It violated our

14 rules.

15 And I received a filing from plaintiff's counsel as to the

16 costs incurred; they were not insignificant. And I just

17 simply want to have a better explanation of this, and then I'm

18 going to make a decision then about sanctions.

19 Let me just go to the question, do the parties think it is

20 a waste of time? You've not yet mediated, in my view. So the

21 question is, is it worthwhile to mediate?

22 MS. PAYLOR: Well, for the plaintiff, Your Honor,

23 it's not worthwhile unless they're going to come with

24 sufficient authority, which is what I asked before I agreed to

25 have the mediation. We have significant attorneys' fees due

14

1 to all of the stuff that's gone on in this case. And I told

2 you, I made them well aware of that fact before we went, and I

3 told them what it was going to take to settle the case. And

4 they showed up with not anywhere near what I'd ask for. So

5 my --

6 THE COURT: They're not obligated, Miss Paylor, to

7 meet your demands to come. I don't like preconditions for

8 mediation. But if there's not a desire to mediate, and you

9 don't think it is ripe in the interests of their clients, then

10 I think that's fine, I don't make people mediate.

11 But the question is, you have not mediated yet. So the

12 question is, do I order you to mediate, or do I relieve you of

13 the obligation to mediate?

14 MR. BERNSTEIN: This is Michael Bernstein, Your

15 Honor. I would think that at this point it does not -- based

16 on Mrs. Paylor's position, I don't think that there would

17 be -- at least from Millennium's point of view, and Mr. Sturm

18 would have to speak for himself, I don't think that there's a

19 basis to mediate in opposition.

20 And I would just like to add one thing, with request and

21 permission of the Court, is that I'm -- and we certainly,

22 again, state that there must have been a misunderstanding.

23 Because when I sent Miss Paylor the e-mail, which I'm looking

24 at, and her statement was, "Will there be someone available

25 that has authority to settle the case? If not, I would like

15

1 to let Judge Gergel know and request a waiver." Which is

2 certainly fine. And I wrote yes, I would -- then I will be

3 available by phone on behalf of Millennium with Mr. Blincow in

4 person. And I had spoken and said I'd have the client

5 available with me. And she wrote, "Thank you. What about

6 with regard to Palmetto Prince George?" Now, if at that time

7 she had said, with nobody there, I'm not interested at this

8 point, I could have said, in that case let's just get a waiver

9 and we would not have wasted anyone's time.

10 But I agree with Your Honor, we don't have to come with a

11 precondition. But the understanding was, with her thank you,

12 that she had no opposition to us appearing by telephone with

13 the client in that regard.

14 So I don't want the Court to think that we just blatantly

15 tried to -- we lied to Miss Paylor as to what our intention

16 was with regard to appearing at the mediation.

17 THE COURT: Well, I'll look forward to your response,

18 and I'm glad to review all that. I just -- there is a way you

19 mediate, you sit at a table, that's the way we do it here in

20 the District of South Carolina. And if you need -- you're

21 going to -- and I think that the -- there's a well established

22 history in litigation that when you do mediation in other

23 ways, it's not nearly as effective.

24 So you're telling me, Mr. Bernstein, your client does not

25 wish to mediate, is that correct?

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1 MR. BERNSTEIN: I would love to mediate, Your Honor,

2 it's always my idea to try to settle a case. But if we're

3 going to mediate under the same preconditions as last time,

4 then I think it would be futile. If there are no

5 preconditions, as Miss Paylor tried to establish last time,

6 then it may be effective. So that's what I'm saying to the

7 Court.

8 THE COURT: So here's what I used to say to people

9 when I was a litigator. I would say to them, do you have a

10 genuine interest to try to resolve the case, in that you're

11 going to come and make serious offers. And I would have, you

12 know, counsel say to me, no, we don't really see our

13 liability. And I would then request of the Court to be

14 relieved. But if people said to me, I have a sincere desire,

15 I understand it's not going to be pennies on the dollar, I'm

16 interested in doing this, I think not trying to set a

17 precondition is fine.

18 But if you are convinced that where she is and where you

19 think she's going to be, you'll never get anywhere remotely

20 close to it and it's an act of futility, then I respect

21 counsel enough to simply say, so be it; don't cry later if the

22 jury hits you with a big verdict. That's the risk your client

23 runs.

24 MR. BERNSTEIN: I agree, Your Honor.

25 THE COURT: So you're telling me that in light of

17

1 what she has said before, you don't wish to mediate, Mr.

2 Bernstein.

3 MR. BERNSTEIN: Correct. Using those parameters,

4 correct.

5 THE COURT: Very good. I'm going to issue an order

6 relieving you from mediation.

7 MR. BERNSTEIN: Thank you.

8 THE COURT: How long do you think this case is going

9 to take to try?

10 MR. BERNSTEIN: I'll defer that to Miss Paylor and

11 Mr. Blincow.

12 MS. PAYLOR: Maybe -- I've just got my client and

13 possibly another witness, and then two experts. It's not, you

14 know, it's not a lengthy trial. Day and a half?

15 THE COURT: Mr. Blincow, what are you thinking?

16 MR. BLINCOW: Two, three days. I mean, we've got the

17 nursing home, and then Millennium, which is, you know, the

18 company that did the payroll and so forth, so we've got two

19 defendants, and they're sort of separate -- some separate

20 issues that are -- and we filed a motion for summary judgment

21 as to Millennium, that we'll need to get heard beforehand.

22 But I'd say two to three days.

23 THE COURT: We're in the middle of working on that

24 now, on that motion.

25 Any other matters I need to address at this point?

18

1 MR. BERNSTEIN: Not that I'm aware of, Your Honor.

2 This is Michael Bernstein.

3 THE COURT: Let's try to get a parameter when we're

4 going to produce these witnesses. I don't want that issue

5 coming up, and people claim they couldn't get them -- couldn't

6 get it done.

7 Mr. Bernstein, you're probably not connected to these

8 gentlemen. Can we get it done within 15 days?

9 MR. BERNSTEIN: Let me just see, Your Honor. I would

10 say that because of the holiday of Passover that runs from the

11 6th through the 13th, which is problematic in my schedule -- I

12 don't know Mr. Blincow's schedule next week -- I would say it

13 would have to either potentially be the week of the 26th or

14 the week of the 16th of April. I would have to check with

15 both gentlemen, because they probably each have different

16 schedules.

17 THE COURT: How about next week?

18 MR. BERNSTEIN: Next week I have -- I mean, I could

19 check with them, Your Honor, but I think they would want me to

20 be there as their counsel. And I have federal depositions and

21 mediations in other matters that next week is completely

22 unavailable to me.

23 THE COURT: And --

24 MR. BERNSTEIN: The following week --

25 THE COURT: Passover's not till -- Is it this Friday?

19

1 Friday week?

2 MR. BERNSTEIN: No, no, no, it's in April. That's

3 why I said the week of the 26th, Your Honor, may work.

4 THE COURT: Well, I'm saying it's not the first day

5 of April though. It's like April 7th, isn't it?

6 MR. BERNSTEIN: The 6th.

7 THE COURT: The evening of the 6th, right?

8 MR. BERNSTEIN: Correct, but during the day of the

9 6th it's also preparation.

10 THE COURT: So we've got several weeks between now

11 and April 6th; why can't we get it done between now and

12 April 6?

13 MR. BERNSTEIN: Sure, that would be fine, Your Honor.

14 MR. BLINCOW: Week of the 26th.

15 MR. BERNSTEIN: Week of the 26th or the week of the

16 2nd, either one of those would work.

17 THE COURT: So that's what I'm saying, the next 15

18 days.

19 MR. BERNSTEIN: I don't know if that's more than 15

20 days. I guess if we have till April 5th, that should work,

21 Your Honor.

22 THE COURT: By April 5th.

23 MR. BLINCOW: The bar meeting, I'm just looking at my

24 calendar, the bar meeting is Wednesday the 28th.

25 THE COURT: Correct. And, you know, we'll draw a

20

1 jury on May 1. So I'm just trying -- Mr. Blincow, I'm trying

2 to get this done as early as possible, so everybody's not

3 jammed up right before trial.

4 MR. BLINCOW: Right.

5 THE COURT: That's when I'm trying to get this done.

6 Very good. Any other matters to come? Miss Paylor?

7 MS. PAYLOR: Nothing from me, Your Honor, thank you

8 very much.

9 THE COURT: Mr. Blincow?

10 MR. BLINCOW: No, sir.

11 THE COURT: Mr. Bernstein?

12 MR. BERNSTEIN: No, sir.

13 THE COURT: Very good. Thank you very much.

14

15 (Conference concluded at 2:32 p.m.)

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1 REPORTER'S CERTIFICATION

2

3 I, Debra L. Potocki, RMR, RDR, CRR, Official Court

4 Reporter for the United States District Court for the District

5 of South Carolina, hereby certify that the foregoing is a true

6 and correct transcript of the electronically recorded above

7 proceedings, to the best of my ability.

8

9

10 S/Debra L. Potocki

11 _______________________________

12 Debra L. Potocki, RMR, RDR, CRR

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