filed - anybodylistening.net · 2018-01-11 · veris law group pllc seattle, washington 98101 ......
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
1 Veris Law Group PLLC 1809 Seventh Avenue, Suite 1400 Seattle, Washington 98101 tel 206.829.9590 fax 206.829.9245
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THE HONORABLE JULIA GARRATT Hearing: December 13, 2013 at 9:00 AM
With Oral Argument
IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON IN AND FOR THE COUNTY OF KING
GEOFF TATE and SUSAN TATE, a married couple,
Plaintiffs,
v.
EDDIE JACKSON and TERESA GOLDEN-JACKSON, a married couple; SCOTT ROCKENFIELD and MISTY ROCKENFIELD, a married couple; MICHAEL WILTON and KERRIE LYNN WILTON, a married couple; TRI-RYCHE CORPORATION, a Washington corporation; QUEENSRYCHE MERCHANDISING, INC., a Washington corporation; and, MELODISC LTD., a Washington corporation,
Defendants.
NO. 12-2-21829-3 SEA PLAINTIFFS’ REPLY IN SUPPORT OF THEIR MOTION FOR PARTIAL SUMMARY JUDGMENT – BREACH OF CONTRACT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION FOR SUMMARY JUDGMENT
I. INTRODUCTION/PROCEDURAL POSTURE
On October 21, 2013, the Tates filed a Motion for Partial Summary Judgment—
Breach of Contract asking the Court to find as a mater of law that Defendants breached Mr.
Tate’s valid, binding and enforceable 1994 Employment Agreement by firing him without the
requisite 80% vote. On November 14, 2013, Defendants filed a “Response and Cross-
Motion” for summary judgment (the “Response/Cross-Motion”) in which they admit Mr.
Tate’s Employment Agreement is a binding contract and admit firing Mr. Tate without the
FILED13 DEC 02 AM 11:38
KING COUNTYSUPERIOR COURT CLERK
E-FILEDCASE NUMBER: 12-2-21829-3 SEA
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
2 Veris Law Group PLLC 1809 Seventh Avenue, Suite 1400 Seattle, Washington 98101 tel 206.829.9590 fax 206.829.9245
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required 80% vote, yet ask the Court to dismiss the majority of the Tates’ claims based on the
factually and legally unsupported proposition that Mr. Tate’s Employment Agreement was
somehow miraculously “rewritten” to reduce the 80% Requirement to 75% 16 years ago when
Mr. DeGarmo left Queensryche. As all three Defendants admit, the 80% Requirement “was
never an issue until we had to fire Geoff Tate….”
The Tates file this Reply/Response to Defendants’ Response/Cross-Motion, asking the
Court to grant the Tates’ Motion for Partial Summary Judgment and deny Defendants’ Cross-
Motion. As explained below, the Tates are entitled to summary judgment as a matter of law
because there are no genuine issues of material fact that Mr. Tate’s Employment Agreement
requires an 80% vote to involuntarily terminate his employment, the Defendants fired him
without the 80% vote, and there is no basis in law to rewrite Mr. Tate’s Employment
Agreement as Defendants’ request. Defendants, on the other hand, are not entitled to
summary judgment because their Response/Cross-Motion dramatically oversimplifies the law
applicable to the Tates’ myriad claims and ignores multiple genuine issues of material of fact
related to those claims but unrelated to the Tates’ breach of contract claim.
II. THE TATES ARE ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW
To prevail on their Motion for Partial Summary Judgment—Breach of Contract, the
Tates need demonstrate that, as a matter of law: (1) Mr. Tate’s Employment Agreement is a
valid and enforceable contract with Tri-Ryche; (2) Defendants’ breached that contract; and (3)
Defendants’ breach caused harm to Mr. Tate. See St. John Med. Ctr. v. Dep’t of Soc. &
Health Servs., 110 Wn. App. 51, 64, 38 P.3d 383 (2002). As explained below, the Tates have
met their burden and the Defendants have failed to raise a genuine issue of material fact. As
such, the Tates are entitled to summary judgment as a matter of law. Sheehan v. Central
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
3 Veris Law Group PLLC 1809 Seventh Avenue, Suite 1400 Seattle, Washington 98101 tel 206.829.9590 fax 206.829.9245
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Puget Sound Reg’l Transit Auth., 155 Wn.2d 790, 797, 123 P.3d 88 (2005).
A. The Tates Established The Employment Agreement is a Valid, Enforceable Contract and that Mr. Tate Suffered Damages.
In their Response/Cross Motion, Defendants took no issue with the validity or
enforceability of the Employment Agreement. In fact, Defendants’ Cross-Motion for
summary judgment is premised entirely on the validity and enforceability of Mr. Tate’s
Employment Agreement. Defendants state Mr. Tate is “bound to an executed employment
agreement” and all three of them admit that they “never formally changed anything in
writing” because there was no “issue [with the Employment Agreement] until they had to fire
Geoff Tate….” See Response/Cross-Motion, 5:16-17 and 9:12-14; also Declarations of
Messrs. Rockenfield (“Rockenfield Decl.”), 6:13-14; Jackson (“Jackson Decl.”), 2:10-11; and
Wilton (“Wilton Decl.”), 2:10-11. Defendants also did not contradict the Tates’ showing that
Mr. Tate suffered significant harm due to Defendants’ breach. See Declaration of Geoff Tate
in Support of Plaintiffs’ Motion for Partial Summary Judgment (“Tate Decl.”), ¶ 11 (Mr. Tate
no longer deprives a significant part of his income from being the lead singer of Queensryche
through his Employment Agreement.). As such, the Tates satisfied the first and third
elements of their claim for breach of contract.
B. The Tates Established The Defendants Breached the Employment Agreement.
Defendants readily admit they fired Mr. Tate without the requisite 80% vote. See
Rockenfield Decl., 6:4-15, Jackson Decl., 2:3-12, and Wilton Decl., 2:3-12. They claim,
however, this does not constitute breach of his contract because: (1) “we simply presumed
that 75% replaced 80%”; and that (2) the Employment Agreement was somehow
“automatically rewritten.” Id.; also Response/Cross-Motion at 6:24-7:17. Defendants’
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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arguments fly in the face of Washington’s time-honored contract interpretation rules; are
unsupported by citation to any applicable law holding a court can reform a contract where one
of the parties “simply presumed” the terms had been “automatically rewritten”; are based on
self-serving statements insufficient to defeat the Tates’ Motion for Partial Summary
Judgment; and are far too late to undue Mr. Tate’s 18 years of performance under his
Employment Agreement.
1. Defendants’ Attempt to Re-interpret the Employment Agreement Violates Washington’s Contract Interpretation Rules.
Defendants’ are misreading and misapplying the Court’s holdings in Berg v.
Hudesman and Hearst Commc’ns, Inc. v. Seattle Times Co to argue that changed
circumstances can be used to rewrite an otherwise clear and integrated contract. See
Response/Cross-Motion, 7:1-9. Defendants assert that “the purpose of contract interpretation
is to determine the intent of the parties” and thus the Court can assume the 80% Requirement
in Mr. Tate’s Employment Agreement “was automatically rewritten to all but one
member/75%” after Mr. DeGarmo voluntarily left the band in 1997. Id. (emphasis in
original). As all three Defendants admit, “[w]e also never formally changed anything in
writing because the 80% or 75% threshold was never an issue until we had to fire Geoff
Tate….” Rockenfield Decl., 6:13-14; Wilton Decl., 2:10-11; and Jackson Decl., 2:10-11.
In Berg v. Hudesman, the Supreme Court explained the perils and pitfalls of contract
interpretation and adopted the “context rule” for doing so. 115 Wn.2d 657, 801 P.2d 222
(1990). As the Court stated:
Determination of the intent of the contracting parties is to be accomplished by viewing the contract as a whole, the subject matter and objective of the contract, all the circumstances surrounding the making of the contract, the subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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Id. at 667 (citations omitted). Quoting J.W. Seavey Hop Corp. v. Pollock, 20 Wn.2d 337,
349, 147 P.2d 310 (1944), the Berg Court explained, “[i]t is the duty of the court to declare
the meaning of what is written, and not what was intended to be written.” Berg, 115 Wn.2d
at 669 (emphasis added). Earlier this year, the Court clarified the role of “intent” in contract
interpretation, stating, “the subjective intent of the parties is generally irrelevant if the intent
can be determined from the actual words used.” Condon v. Condon, 177 Wn.2d 150, 162-63,
298 P.3d 86 (2013) (emphasis added). Importantly, the Court stated:
Courts will not revise a clear and unambiguous agreement or contract for parties or impose obligations that the parties did not assume for themselves.
Id. at 163 (emphasis added). In Condon, the Supreme Court reversed the trial court because
the lower court had changed and added terms into a settlement agreement that were not
explicitly contemplated by the parties. Id.
Here, this is exactly what Defendants would have this Court do by changing the 80%
Requirement to 75%. Defendants want this Court to ignore the original circumstances
surrounding the contract formation, ignore the subsequent acts of the parties, and accept
Defendants’ statements regarding their need to change Mr. Tate’s Employment Agreement.
In 1994, all three Defendants and Mr. Tate each signed identical Employment Agreements.
All of the agreements contain the same 80% involuntary termination provision. At that time
they could have inserted 75% as the termination threshold. They did not. In 1997 Mr.
DeGarmo voluntarily left the band. At that time, had they wanted to, the parties could have
revised their employment agreements to reduce the 80% Requirement to 75% or some other
amount. They did not. Instead, they choose to continue working together, touring and
producing albums as Queensryche and Mr. Tate gave another 15 years of his life to the band
and the Queensryche Companies knowing he had a valid, binding Employment Agreement
that required an 80% vote to involuntarily terminate him.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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It was not until 2012, when Defendants decided to “take control” of the band, that they
wanted to change the 80% Requirement. Simply because Defendants now express a
subjective intent for a 75% requirement does not mean they can change the objective intent
found in the clear language of Mr. Tate’s Employment Agreement, or each of theirs for that
matter. Condon, 177 Wn.2d at 163. Under Hearst Commc’ns, Inc. v. Seattle Times Co.,
extrinsic evidence such as Defendants’ self-serving declarations or Mr. DeGarmo’s departure
from Queensryche cannot be used to vary, contradict, or modify the written words of Mr.
Tate’s Employment Agreement. 154 Wn.2d 493, 503, 115 P.3d 262 (2005).1 If that were the
case, then a party to a contract could simply re-interpret it 18 years later to serve their own
needs, which would destroy stability or predictability in contracts and instead lead to an
immense increase in contract litigation. To avoid this, “[i]t is black letter law of contracts that
the parties to a contract shall be bound by its terms.” Adler v. Fred Lind Manor, 153 Wn.2d
331, 344, 103 P.3d 773 (2004).
2. Defendants’ Argument Renders The Employment Agreement Meaningless and Ineffective
To get around the plain language, Defendants argue that unless “80% means 75%” the
Employment Agreement would be unenforceable and meaningless in violation of Washington
law because they could never fire Mr. Tate. See Response/Cross-Motion, 7:10-23. That
argument, however, ignores and would render meaningless Section 8 of the Employment
Agreement in violation of Washington law. Wagner v. Wagner, 95 Wn.2d 94, 101, 621 P.2d
1279 (1980) (holding that courts should not adopt a contract interpretation that renders a term
ineffective or meaningless.). Section 8 of Mr. Tate’s Employment Agreement provides, in 1 “Since Berg, we have explained that surrounding circumstances and other extrinsic evidence are to be used “to determine the meaning of specific words and terms used” and not to “show an intention independent of the instrument” or to “vary, contradict or modify the written word.” (Emphasis added).
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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part:
This agreement may not be modified or amended or any term or provision hereof waived or discharged except in a writing signed by the party against whom such amendment, modification, waiver or discharge is sought to be enforced.
[and]
This agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof.
Exhibit 1 to Tate Decl. (emphasis added). Defendants do not even address this language in
their Response/Cross-Motion and instead simply state that the only “logical” interpretation of
the Employment Agreement is to make “80% into 75%”. Defendants’ request renders the
modification, amendment and integration clauses in Section 8 meaningless and ineffective.
Not only would doing so violate Washington law, but there are two simpler responses to
Defendants’ concerns: First, in 1994, when they drafted everyone’s Employment Agreement,
the parties could have set the involuntary termination threshold at 75%, which would have
allowed termination by a vote of four out of five shareholders (80%) or three out of four
(75%); or second, in 1997 when Mr. DeGarmo voluntarily left the band, the parties could
have used Section 8 to revise everyone’s Employment Agreement. They did neither.
Defendants cannot now just say, “We want it to be different, so it is.”
The shareholders had 15 years, from Mr. DeGarmo’s departure in 1997 to 2012, to
amend the 80% Requirement to 75%, but did not.2 Defendants excuse their lack of action to
amend the Employment Agreement because the 80% Requirement “was never an issue”
before they decided to gang up on Mr. Tate and oppressively expel him from the band and the
Queensryche Companies. See e.g., Rockenfield Decl. 6:13-15. It is an issue now and 2 The Defendants all executed a similar employment agreement, which provides the same protection to each of them. If one of the Defendants was in Mr. Tate’s position, he would undoubtedly ask the Court to find a breach of the 80% Requirement because that’s what the agreement says.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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adopting Defendants’ interpretation of the Employment Agreement would reward
Defendants’ lack of action. Worse, as discussed above, reforming the 80% Requirement
unilaterally would render Section 8 ineffective and meaningless.
3. Defendants’ Self-Serving Declarations are Insufficient to Defeat Summary Judgment
CR 56(e) provides: When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
As the Court stated in Vant Leven v. Kretzler, Once the moving party has sustained its burden, the nonmoving party... may not rely on speculation, argumentative assertions that unresolved factual issues remain, or in having its affidavits considered at face value [and] must set forth specific facts that sufficiently rebut the moving party's contentions and disclose that a genuine issue as to a material fact exists.
Vant Leven v. Kretzler, 56 Wn. App. 349, 355, 783 P.2d 611 (1989). Here, Defendants’
Declarations do not raise genuine issues of material fact regarding the language and terms of
the Employment Agreement sufficient to defeat the Tates’ Motion for Partial Summary
Judgment. In fact, they admit the Employment Agreement is valid and binding, requires an
80% vote to involuntarily terminate Mr. Tate, and that they fired him without an 80% vote.
Instead, the Declarations simply argue, without support save their own self-serving
statements, for a legally untenable interpretation of that contract by asking this Court to
fundamentally rewrite the Employment Agreement and strip Mr. Tate of the protections and
promises he has lived under for 18 years. Self-serving statements alone are insufficient to
defeat a motion for summary judgment. Id.
4. It is Too Late for Defendants to Claim a Different Interpretation of the Employment Agreement
Mr. Tate signed his Employment Agreement with Tri-Ryche in 1994 and faithfully
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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performed under it for 18 years until he was improperly fired in June 2012. For eighteen
years, Defendants reaped the benefit of Mr. Tate’s performance under his contract and since
June 2012, have reaped the benefit of the legacy of his work. Mr. DeGarmo voluntarily left
Queensryche in 1997. Had Defendants wanted to reform the Employment Agreement to
reduce or change the 80% Requirement, the time to do that was 1997, not now. Now, it is too
late for them to claim a different interpretation of Mr. Tate’s Employment Agreement because
he cannot recapture 18 years of his life and his work. Had the parties tried to change the 80%
Requirement in each of their Employment Agreements in 1997, they all might have made
different choices about staying together and continuing to pour their lives-work into
Queensryche. Now it is simply too late to surmise what they would have done and the
language in the Employment Agreement must be given its plain meaning; Defendants
breached the 80% Requirement and the Tates are entitled to summary judgment as a matter of
law. Condon, 177 Wn.2d at 162 (citing Hearst Commc’ns, 154 Wn.2d at 503) (In
Washington, courts must “determine the intent of the parties based on the objective
manifestations of the agreement.”). The Tates again request that the Court reserve the issue of
remedies for the damage caused by Defendants’ breach for trial.
III. DEFENDANTS ARE NOT ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW As explained above, Defendants filed a Cross-Motion for Summary Judgment, seeking
to dismiss nearly all of the Tates’ claims in this matter. The entire basis for Defendants’
motion is their strained and unsupported reading of Mr. Tate’s Employment Agreement.
Defendants claim they “justifiably” fired Mr. Tate and thus the Court should summarily
dismiss the Tates’ claims for minority shareholder oppression, dissolution, breach of contract,
waste, and breach of fiduciary duty. Defendants offer a declaration from Mr. Rockenfield to
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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support this proposition.3 Mr. Rockenfield’s declaration is rife with self-serving, conclusory
and argumentative statements intended to justify firing of Mr. Tate and are insufficient to
support summary judgment.
A. Defendants’ self-serving declarations must be read in a light most favorable to Plaintiffs.
Summary judgment is appropriate only “if the pleadings, affidavits, depositions, and
admissions on file demonstrate that there is no genuine issue as to any material fact and the
party bringing the motion is entitled to judgment as a matter of law.” Sheehan, 155 Wn.2d at
797 (citation omitted). As the Court stated in Guile v. Ballard Cmty. Hosp., 70 Wn. App. 18,
21-22, 851 P.2d 689 (1993),
A defendant can move for summary judgment in one of two ways. First, the defendant can set out its version of the facts and allege that there is no genuine issue as to the facts as set out. Alternatively, a party moving for summary judgment can meet its burden by pointing out to the trial court that the nonmoving party lacks sufficient evidence to support its case. In this latter situation, the moving party is not required to support its summary judgment motion with affidavits. However, the moving party must identify those portions of the record, together with the affidavits, if any, which he or she believes demonstrate the absence of a genuine issue of material fact.
Citations omitted; distinguished on other grounds, Morton v. McFall, 128 Wn. App. 245, 254,
115 P.3d 1023 (2005). In considering a motion for summary judgment, the Court views all
facts and reasonable inferences in light most favorable to the nonmoving party. Atherton
Condo Apartment-Owners Ass’n Bd. of Directors v. Blume Dev. Co., 115 Wn.2d 506, 516,
799 P.2d 250 (1990). Since they filed a cross-motion, the Court must view all facts and
reasonable inferences raised by Defendants’ cut-and-paste, self-serving declarations in the
3 The Wilton and Jackson Declarations simply parrot Mr. Rockenfield’s statements regarding the 80% Requirement and add nothing factually to support Defendants’ attempt to dismiss the Tates’ claims.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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light most favorable to the Tates.4
B. Defendants Created Genuine Issues of Material Fact Barring Their Cross-Motion
Defendants’ Cross-Motion relies entirely on their version of the incident in Brazil,
which is disputed. Based on their version of this event, they claim the incident justifies their
actions to form an Executive Committee, to exclude Mr. Tate from running the companies he
helped found, and to fire him. Mr. Tate disputes their claim and has posited a different set of
events showing a pattern of provocation used to justify Defendants oppressive behavior.
Tates’ Motion for Partial Summary Judgment at 11:22-12:11. Mr. Rockenfield disputes Mr.
Tate’s version, saying in his latest declaration, “let me be perfectly clear, as I have stated
many times, I NEVER said anything to Geoff Tate prior to the stage assault regarding ‘I’m
firing you next.’” Rockenfield Decl. at 5:2-6. Not only has this Court already opined that the
incident is “not dispositive” of the Tates’ claims, but Defendants’ own declarations raise
genuine issues of material fact regarding this incident. Since their entire motion is based upon
it, the Court cannot grant Defendants’ motion for summary judgment.
C. The Tates Will Prevail on Their Other Claims Against Defendants.
The Court should dismiss Defendants’ cross motion for summary judgment for the
simple reason that they have offered no evidence to support it. Defendants’ sole support for
summary judgment issue is a single sentence on page 10 of the Response/Cross-Motion:
Mr. Tate’s claims for Dissolution…, Breach of Contract…, Waste…, Derivative Suit, Breach of Fiduciary Duty…, and Permanent Injunction…, should be dismissed on the grounds of the employment agreement alone.
4 The declaration of Michael Wilton and Eddie Jackson just cut and paste the two full paragraphs from page six of the declaration of Scott Rockenfield. To make matters worse, the Defendants speak for Mr. Tate and Chris DeGarmo by using the word “we”, which is impermissible and inadmissible.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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Response/Cross-Motion, 10:16-23 (emphasis added). Not only is this insufficient to warrant
summary judgment, it ignores the facts surrounding the Tates’ claims for shareholder
oppression, dissolution, corporate waste, derivative suit, and breach of fiduciary duty.5
1. The Tates Will Prevail on Their Claim for Minority Shareholder Oppression, Warranting Dissolution.
Dissolution of a corporation is appropriate if majority shareholders “have acted, are
acting, or will act in a manner that is illegal, oppressive, or fraudulent” toward a minority
shareholder. RCW 23B.14.300(2)(b), (d). If the minority shareholder is a founder, one who
committed capital and resources to starting up the venture, courts apply the “reasonable
expectations” test to determine whether there is oppression. Scott v. Trans-Sys., Inc.,
148 Wn.2d 701, 711, 64 P.3d 1 (2003). That test defines oppression “as a violation by the
majority of the reasonable expectations of the minority.” Id. Reasonable expectations are
“those spoken and unspoken understandings on which the founders of a venture rely when
commencing the venture.” Id.
Once a minority shareholder has shown oppression, relief is warranted unless the
majority shareholders can prove there were legitimate business justifications for the conduct.
Id. at 709. Under the Business Judgment rule, the majority shareholders must establish,
among other things, that “there is a reasonable basis to indicate that the transaction was made
in good faith.” Id. “Such immunity from liability is absent where a corporate director or
officer is shown to have acted in bad faith and with a corrupt motive.” Interlake Porsche &
Audi, Inc. v. Bucholz, 45 Wn. App. 502, 509, 728 P.2d 597 (1987), rev. denied, 107 Wn.2d
1022 (1987). The majority shareholders must also establish that they acted “with such care as
5 Defendants did not move for summary judgment on the Tates’ claims for declaratory judgment and libel and slander. Therefore, the Tates will not address those claims.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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an ordinarily prudent person in a like position would use under similar circumstances.” Shinn
v. Thrust IV, Inc., 56 Wn. App. 827, 833-34, 786 P.2d 285 (1990).
Here, the reasonable expectations test will apply because Mr. Tate helped start the
band and is an original shareholder of Tri-Ryche, Melodisc Ltd., and Queensryche
Merchandising, Inc. Mr. Tate’s reasonable expectations as a founding member of
Queensryche, and as a founding shareholder of the Queensryche Companies, were to: (1)
remain lead singer of Queensryche and a shareholder in the Queensryche Companies until he
chose to retire and/or sell his shares in the Companies; (2) receive one-quarter of all profits
the band derived from its performances; (3) receive 100% of all net profits the Queensryche
Companies derive from exploiting Mr. Tate’s musical compositions; (4) receive a reasonable
return on his investment of 30 years of effort, time, intellectual property, and legacy; (5) have
the ability to participate in and effect the management of the Queensryche Companies; and (6)
be treated fairly. See Declaration of Geoff Tate in Opposition to Defendants’ Cross-Motion
for Summary Judgment, ¶ 6 (“Tate Response Decl.”). By engaging in a prolonged pattern of
oppressive behavior, cutting him out of management decisions, forming an executive
committee, and firing him, Defendants violated Mr. Tate’s reasonable expectations. See
Hayes v. Olmsted & Assoc., Inc., 173 Or.App. 259, 21 P.3d 178 (2001); rev denied 36 P.3d
974 (2001). In Hayes, the Oregon Court of Appeals found oppression where the majority
shareholders formed an executive committee, cut the plaintiff out of company management,
paid themselves bonuses, and, when Mr. Hayes complained and sought information, they
fired him. Id. at 274-276. As the court stated:
a breach of fiduciary duty occurs when “the majority shareholders of a closely held corporation use their control over the corporation to their own advantage and exclude the minority from the benefits of participating in the corporation, [in the absence of] a legitimate business purpose * * *.” A breach of fiduciary duty by those who control a
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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closely held corporation normally constitutes oppression.
Id. at 265.
Such is the case here. Mr. Tate devoted his entire adult life in furtherance of band and
the Queensryche Companies. After Mr. DeGarmo voluntarily left the band 16 years ago, Mr.
Tate assumed almost sole responsibility as the creative and promotional force behind the
band. Tate Decl., ¶ 7. During this same period, Defendants’ contributions steadily declined
to the point where people working with the band assumed that Mr. Tate was the band. See
Declaration of Jeff Albright, ¶¶ 3-12, filed in support of Tates’ Response in Opposition to
Defendants’ first Motion for Partial Summary Judgment (Docket No. 100), a copy of which is
attached for the Court’s convenience. Mr. Tate earned his living, contributed 30 years of
effort, time, intellectual property, and his professional legacy in furtherance of Queensryche
and it is these facts through which his reasonable expectations must be viewed. Defendants
oppressed Mr. Tate by forming an executive committee and excluding Mr. Tate. See Exhibit
4 to Tate Decl. They then passed resolutions firing Mr. Tate and taking for themselves all
control and benefit of the Queensryche Companies. Id.
The Business Judgment Rule does not give corporate directors carte blanch to oppress
a minority shareholder. As the Court stated in Interlake Porsche & Audi, Inc. v. Bucholz, 45
Wn. App. at 508-09:
Directors and officers stand in a fiduciary relation to the corporation they serve and are not permitted to retain any personal profit or advantage gleaned “on the side.” The “business judgment” rule immunizes management from liability in a corporate transaction undertaken within the corporation's power and management's authority where a reasonable basis exists to indicate that the transaction was made in good faith. Such immunity from liability is absent where a corporate director or officer is shown to have acted in bad faith and with a corrupt motive.
(citations omitted) (emphasis added). “Because many things can constitute oppressive
conduct or a breach of fiduciary duties, what matters is not so much matching the specific
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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facts of one case to those of another but examining the pattern and intent of the majority
and the effect on the minority of those specific facts.” Cooke v. Fresh Exp. Foods Corp.,
Inc., 169 Or.App. 101, 109, 7 P.3d 717, 722 (2000) (emphasis added). As the court continued
in Cooke, the “court must evaluate the majority's actions, keeping in mind that, even if some
actions may be individually justifiable, the actions in total may show a pattern of oppression
that requires the court to provide a remedy to the minority.” Id. at 110. In Cooke, the court
found oppression where the majority shareholders, a father and daughter, fired a 25%
shareholder, the former son-in-law, tried to force him to sell them his shares, and ran the
company to their own benefit and his detriment. Defendants’ reliance on Robblee v. Robblee,
68 Wn. App. 69, 841 P.2d 1289 (1992), is misplaced because the court found in that case that
the brother/shareholders were equally to blame for the disputes and bad behavior.
Here, Defendants acted and continue to act in bad faith, motivated by their desire to
seize Mr. Tate’s share of the Queensryche revenue. See Bucholz, 45 Wn. App. at 509. Their
argument that the Business Judgment rule immunizes them from any liability for oppressing
Mr. Tate belies the facts. Defendants began a scheme to remove Mr. Tate from the band more
than two years ago. They approached Jason Saunders in August and September of 2011 to
replace Mr. Tate as the lead singer. Declaration of Jason Ames Saunders (“Saunders Decl.”),
¶¶ 9-10; also Declaration of Maureen Fisher (“Fisher Decl.”), ¶¶ 6-8; copies of each
declaration filed in support of Tates’ Response in Opposition to Defendants’ first Motion for
Partial Summary Judgment are attached for the Court’s convenience. Defendants implied to
Mr. Saunders that Mr. Tate wanted to leave to pursue a solo career and asked him not to
mention the offer to Mr. Tate. Saunders Decl. at ¶¶ 11 and 14; Fisher Decl. at ¶ 9. When Mr.
Saunders subsequently learned that Mr. Tate did not intend to leave the band, he declined the
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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offer to become the next lead singer of Queensryche. Saunders Decl. at ¶¶ 16-19. When
Defendants offered Mr. Tate’s lead singer role to Jason Saunders, they offered him $600 per
week, which was half what he was then making as a backup vocalist on the tour. Saunders
Decl. ¶¶ 12 and 15-16. Offering the lead singer position and a cut in pay led Mr. Saunders to
believe that Defendants were trying to get rid of Mr. Tate so they could keep more money. Id.
at ¶ 16-17. Presumably, in order to cover their tracks, Defendants fired Mr. Saunders and his
girlfriend, Maureen Fisher who was Queensryche’s wardrobe manager, from their positions
on the tour. Saunders Decl. at ¶ 20; Fisher Decl. at ¶12.
These decisions were aimed personally at Mr. Tate. Defendants, at an improperly
called director’s meeting that Mr. Tate could not attend, fired Susan Tate and Miranda Tate.
It was not until four days later that they notified Susan, via an email sent on the Tates’
wedding anniversary, that they had fired her. Tate Response Decl., ¶ 2. In Brazil, before the
concert, Mr. Rockenfield told Mr. Tate that Defendants had just fired his wife, his daughter
and his son-in-law, and said “you’re next.” Tate Decl., ¶ 9. Having known Mr. Tate for 30
years and realizing that they were effectively dismantling both his livelihood and legacy,
Defendants provoked Mr. Tate into the Brazil incident, which they now say justifies all of
their decisions, and which this Court opined is “not dispositive” of a corporate dispute.
Forming an executive committee and excluding Mr. Tate is further evidence of
improper motives and oppression. With all corporate power ostensibly vested in an executive
committee, Mr. Tate has no ability to participate in the management of the Queensryche
Companies or determine where payments and proceeds are going and whether Defendants are
treating him reasonably. Mr. Sussman, the band’s long-time attorney and financial manager,
has expressed concern about how Defendants are managing the Queensryche Companies’
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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finances. Tate Response Decl. ¶ 3 and Exhibit 1 thereto. Mr. Tate recently received two
notices of penalties the IRS imposed on Melodisc Ltd., for the improper payment of employer
taxes. Tate Response Decl. ¶¶ 4 and 5 and Exhibit 2 and Exhibit 3 thereto. Defendants
appear to have: (1) mishandled Queensryche Company income by paying crew members off-
book; (2) failed to pay employment and employer taxes, thereby creating liability for Mr. Tate
as a shareholder; and (3) failed to properly account for merchandise revenue a portion of
which goes to Mr. Tate. Again, the Court must examine all of the Defendants’ motives and
actions-- not just the smokescreen of a provoked incident--before it can resolve the Tates’
minority shareholder oppression claim.
2. The Tates Will Prevail on Their Claim for Corporate Waste.
The Tates’ claims for corporate waste stem from Defendants’ mismanagement of the
Queensryche Companies, the damage to the fan base, and the damage to Queensryche’s value
and brand since his firing in June 2012. Resolution of these claims will be factually intensive
and cannot be summarily dismissed on the bald assertion that the Defendants “justifiably”
fired Mr. Tate and that the Business Judgment Rule insulates their actions.
Since last year, this Court has permitted two versions of Queensryche to perform, tour
and produce and sell albums. Mr. Tate remains a 25% shareholder in the Queensryche
Companies, including the version being run by the Defendants. Defendants, as majority
shareholders and the Directors on the Executive Committee, owe Mr. Tate a fiduciary duty of
good faith and fair dealing and are obligated to maximize the return to the Queensryche
Companies and the shareholders. See Bucholz, 45 Wn. App. at 508-09. To resolve the Tates’
waste claim, the Court must examine the financial success of the Queensryche Companies
with Mr. Tate as the lead singer and Mrs. Tate as the band’s manager compared to how these
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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companies have fared since Defendants fired Mr. and Mrs. Tate. Even a cursory review
shows the Defendants are damaging the Companies and driving the brand into the ground.
Without Mr. Tate, Defendants’ Queensryche is forced to play smaller venues for less
performance fees. During 2008 through June 5, 2012, the day Defendants fired Mr. Tate,
Queensryche averaged $31,257.72 per performance with a high of $100,000 and a low of
$7,500. See Tate Response Decl., ¶ 7. Since June 6, 2012, Defendants’ Queensryche
averaged $20,190.22 per performance, with a high of $40,000 and a low of $3,000. Id. The
table below shows how the Defendants are causing waste by negatively impacting the
Queensryche Companies’ income:
Company 2008-2011 Average
with Geoff Tate
20126 Without
Geoff Tate
2013 Without Geoff
Tate
Tri-Ryche $473,103.70 $313,850.84 $165,838.177
QR Merchandising $446,596.82 $86,485.38 $67,989.308
Melodisc $2,120,821.63 $492,624.43 $680,039.939
Total: $3,040,522.15 $892,960.65 $913,867.40
The numbers speak for themselves: In the year since expelling Mr. Tate, the Queensryche
Companies have earned less than one-third the amount the Companies averaged with Mr.
Tate as singer and Mrs. Tate as manager. There is no question that Defendants’ stewardship
of the Queensryche Companies caused the IRS to penalize Melodisc twice for the improper
payment of employer taxes. Exhibit 2 and Exhibit 3 to Tate Response Decl. Mr. Tate, while
6 Defendants expelled Mr. Tate on June 5, 2012, but, through improperly called directors meetings, had assumed control of the Queensryche Companies as early as April. 7 Through November 1, 2013. 8 Through mid-August 2013. 9 Through mid-August 2013.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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excluded from running the Queensryche Companies, is nonetheless responsible for payment
of one quarter of the penalties, which amounts to $818.32. While this is somewhat de
minimis damage, it is further proof of corporate waste because these penalties could easily
have been avoided. Each of the other management gaffes damaged the Queensryche
Companies in amount to be determined at trial. Viewed in the light most favorable to the
Tates, there is no question that Defendants are mishandling, misappropriating, and wasting
corporate assets.
3. The Tates Will Prevail on Their Derivative Claim.
The Tates’ derivative claim stems directly from their corporate waste claim; namely,
that Defendants are damaging the Queensryche Companies as explained above. It has long
been the case that shareholders have the power to assert a corporation’s rights on behalf of the
corporation if the directors or officers have failed to protect the corporation and are causing it
damage. In re F5 Networks, Inc., 166 Wn.2d 229, 236, 207 P.3d 433 (2009). To sustain a
derivative claim, shareholders must also demonstrate that a demand to the directors or officers
was either made or would be futile. Id. at 237 (citing RCW 23B.07.400(2)).
With the power of the Queensryche Companies in the hands of the executive
committee comprised of Defendants, any request by Mr. Tate for them to address the
corporate waste claim would be futile. Defendants completely fail to address or demonstrate
how they are entitled to summary judgment on this claim and the only evidence before the
court indicates Defendants are mishandling, misappropriating, and wasting corporate assets.
Again, viewed in the light most favorable to the Tates, Defendants’ request to dismiss this
claim is premature and should be denied.
4. The Tates Will Prevail on Their Breach of Fiduciary Duty Claim.
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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Courts have defined the fiduciary duties directors owe to shareholders as a duty of
good faith, utmost care, or against retaining profits owed to the corporation and shareholder.
McCormick v. Dunn & Black, P. S., 140 Wn. App. 873, 894-95, 167 P.3d 610 (2007) (citing
Zimmerman v. Bogoff, 402 Mass. 650, 660, 524 N.E.2d 849 (1998)). The nature of closely-
held corporations, with a small group of shareholders, creates a higher standard of integrity
and good faith dealing. Saviano v. Westport Amusements, Inc., 144 Wn. App. 72, 80, 180
P.3d 874 (2008) (citing Wenzel v. Mathies, 542 N.W.2d 634, 641 (Minn.App. 1996). One
court noted “that oppressive conduct by majority shareholders is closely related to the
fiduciary duty of good faith and fair dealing owed by them to the minority shareholders.”
Scott, 148 Wn.2d at 711 (citation omitted). In Scott, the court quoted the Oregon Supreme
Court’s decision in Baker v. Commercial Body Builders, 265 Or. 614, 507, P.2d 387 (1973):
[A]n abuse of corporate position for private gain at the expense of the stockholders is “oppressive” conduct. Or the plundering of a “close” corporation by the siphoning off of profits by excessive salaries or bonus payments and the operation of the business for the sole benefit of the majority of the stockholders, to the detriment of the minority stockholders, would constitute such “oppressive” conduct as to authorize a dissolution of the corporation....
Scott, 148 Wn.2d at 713-14.
Here, Defendants, as directors and shareholders in the Queensryche Companies, owe a
fiduciary duty to Mr. Tate as a shareholder. They breached this duty by engaging in a pattern
of behavior to remove Mr. Tate from Queensryche and the Queensryche Companies. As
discussed above, Defendants engaged in a year-long scheme to remove Mr. Tate from
Queensryche and to replace him with another lead singer, who they would pay significantly
less, thereby allowing them to keep more Queensryche revenue for themselves. Similarly,
Mr. Sussman’s email shows Defendants are siphoning off company revenue for their benefit
and Mr. Tate’s detriment. Defendants are doing this while failing to properly pay taxes,
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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which Mr. Tate has no control over since he is not on the executive committee but for which
he is still liable for one-quarter of the penalties. And last, the revenue figures show
Defendants are running the Queensryche Companies into the ground. As directors,
Defendants have a fiduciary duty to maximize returns, not reduce them. Viewing all
reasonable inferences and facts in a light most favorable to the Tates, Defendants breached
their fiduciary duties.
VI. CONCLUSION
For the reasons articulated above, Geoff and Susan Tate respectfully request the Court
enter an Order granting partial summary judgment against the Defendants on their claim for
breach of contract, reserving the issue of damages for trial, and denying Defendants’ Cross-
Motion on the Tates’ other claims.
DATED this 2nd day of December, 2013.
VERIS LAW GROUP PLLC By /s/ Joshua C. Allen Brower Joshua C. Allen Brower, WSBA No. 25092 Benjamin J. Stone, WSBA No. 33436 Denver R. Gant, WSBA No. 38552 Attorneys for Geoff and Susan Tate
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR PARTIAL SUMMARY JUDGMENT AND RESPONSE TO DEFENDANTS’ CROSS-MOTION
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DECLARATION OF SERVICE
I declare under penalty of perjury under the laws of the State of Washington that on
this date I caused the foregoing document to be served on the following persons via the
methods indicated:
Thomas T. Osinski, Jr., Esq. OSINSKI LAW OFFICES, PLLC 535 Dock Street, Suite 108 Tacoma, Washington 98402 [email protected] 253.383.4433 (phn) 253.572.2223 (fax)
Overnight Delivery via Fed Ex First Class Mail via USPS Hand-Delivered via ABC Legal Messenger Facsimile E-mail / King County E-Service
Dated at Seattle, Washington, this 2nd day of December, 2013.
s/ Alison Sepavich Alison Sepavich, Paralegal
4852-1039-2599, v. 4
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THE HONORABLE CAROL SCHAPIRA
IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON IN AND FOR THE COUNTY OF KING
GEOFF TATE and SUSAN TATE, a married couple. Case No. 12-2-21829-3 SEA
Plaintiffs, DECLARATION OF JEFF ALBRIGHT
V.
EDDIE JACKSON and TERESA GOLDEN-JACKSON, a married couple; SCOTT ROCKENFIELD and MISTY ROCKENFIELD, a married couple; MICHAEL WILTON and KERRIE LYNN WILTON, a married couple; TRI-RYCHE, CORPORATION, a Washington corporation; QUEENSRYCHE MERCHANDISING, INC., a Washington corporation; and MELODISC LTD., a Washington corporation.
Defendants.
I , Jeff Albright, declare as follows;
1. I'm not here to denounce the talents of any of the Queensryche band members
as all have been consummate professionals throughout, but simply to present the facts
regarding my experiences as the band's publicist over the past six years.
2. Geoff Tate eats, sleeps and breathes Queensryche.
3. Since my representation of the band in May, 2006, Geoff has easily done the
majority of the interviews (over 90%) and often accomplished more than half-a-dozen on any
Veris Law Group PLLC DECLARATION OF JEFF ALBRIGHT 1809 Seventh Avenue, Suite 1400
Seattle, Washington 98101 TEL 206.829.9590 FAX 206.829.9245
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given day during a campaign... this wasn't necessarily the result of presenting him as the only
member available for such, but simply a result of who the media wanted to talk to and saw as
the central figure.
4. Essentially, he is the face, the voice and the most well-known entity of
Queensryche.
5. I've now been doing this for almost thirty years and have represented nuinerous
bands and artists that have been inducted into the Rock & Roll Hall of Fame along with,
personally, being awarded over 20 gold and platinum albums.
6. Geoff Tate is one of the most articulate and creative musicians I've had the
chance to work with over the years.
7. It's been my observation that he is the creative and driving force behind
Queensryche.
8. He's constantly pushing the envelope and stretching the boundaries, while
always remaining true to his craft and making all efforts to keep the band relevant.
9. Not once did I ever experience anything other than a "Where do I need to be
and at what time?" attitude... always willing, always available.
10. Like most creative, talented and immensely passionate artists, Geoff Tate is in
"it" not only for the legacy (which he's worked so hard to build over the past 30+ years), but
for the art.
11. For me, it's always been exciting to see what his creative mind could conjure up
next...
12. In my opinion, when it comes to a band (despite their individual and
considerable talents), there can only be one "ringmaster"... without question, Geoff Tate was it
in Queensryche... front and center.
Veris Law Group PLLC DECLARATION OF JEFF ALBRIGHT 2 l^Og seventh Avenue, Suite 1400
Seattle, Washington 98101 TEL 206.829.9590 FAX 206.829.9245
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I declare under penalty of perjury of the laws of the State of Washington this day
of October 2012 that the foregoing is true and correct.
4845-1874-4081, V. 2
DECLARATION OF JEFF ALBRIGHT Veris Law Group PLLC 1809 Seventh Avenue, Suite 1400 Seattle, Washington 98101 TEL 206.829.9590 FAX 206.829.9245
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