omnimgt.com · objections and responses to trustees’ separate statement of supplemental...

OBJECTIONS AND RESPONSES TO TRUSTEES’ SEPARATE STATEMENT OF SUPPLEMENTAL UNDISPUTED FACTS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

KEVIN S. ROSEN (SBN 133304) [email protected] BRADLEY J. HAMBURGER (SBN 266916) [email protected] MICHAEL H. DORE (SBN 227442) [email protected] GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, CA 90071-3197 Telephone: (213) 229-7000 Facsimile: (213) 229-6635

Attorneys for Defendant Bryan Cave LLP

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

NORTHERN DIVISION

In re

ESTATE FINANCIAL, INC.,

Debtor.

Chapter 11 Case Nos. 9:08-bk-11457-DS, 9:08-bk-11535-DS Adv. Nos. 9:11-ap-01147-DS, 9:11-ap-01146-DS Assigned to The Hon. Deborah J. Saltzman DEFENDANT BRYAN CAVE LLP’S RESPONSE TO PLAINTIFF TRUSTEES’ SEPARATE STATEMENT OF SUPPLEMENTAL UNDISPUTED FACTS IN SUPPORT OF JOINT OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT BY DEFENDANT BRYAN CAVE LLP ON GROUNDS OF UNCLEAN HANDS AND/OR IN PARI DELICTO

Hearing: Date: July 25, 2018 Time: 3:00 p.m. Place: Courtroom 201

1415 State Street Santa Barbara, CA 93101

THOMAS P. JEREMIASSEN, Chapter 11 trustee,

Plaintiff, v.

BRYAN CAVE LLP, a professional limited liability partnership, and KATHERINE M. WINDLER, an individual,

Defendants.

[JOINT CAPTION CONTINUED ON NEXT PAGE]

REDACTED

Case 9:11-ap-01147-DS Doc 277 Filed 06/12/18 Entered 06/12/18 23:27:37 Desc Main Document of 376

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ii

In re ESTATE FINANCIAL MORTGAGE FUND, LLC, Debtor.

BRADLEY D. SHARP, CHAPTER 11 TRUSTEE, Plaintiff, v. BRYAN CAVE LLP, a professional limited liability partnership, and KATHERINE M. WINDLER, an individual, Defendants.


1 OBJECTIONS AND RESPONSES TO TRUSTEES’ SEPARATE STATEMENT

OF SUPPLEMENTAL UNDISPUTED FACTS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I. THE TRUSTEES’ SUPPLEMENTAL FACTS DO NOT AFFECT THE TRUSTEES’ ADMISSION OF BRYAN CAVE’S STATEMENTS OF UNCONTROVERTED FACT

Pursuant to Local Bankruptcy Rule 7056-1(c)(2)(A), Defendant Bryan Cave, LLP

(“Bryan Cave”) submits the following response to the Plaintiff Trustees’ Separate Statement of

Supplemental Undisputed Facts In Support Of Joint Opposition To Motion For Partial Summary

Judgment By Defendant Bryan Cave LLP On Grounds Of Unclean Hands and/or In Pari Delicto.1

A. THE TRUSTEES FAILED TO OFFER ANY EVIDENCE TO SHOW ANY DISPUTE REGARDING BRYAN CAVE’S STATEMENTS OF UNCONTROVERTED FACT IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT BASED ON THE IN PARI DELICTO DOCTRINE AND UNCLEAN HANDS DEFENSE

The Trustees dispute almost none of the facts that support Bryan Cave’s motion for summary

judgment, and they ignore Bryan Cave’s proposed undisputed conclusions of law altogether

(resulting in a waiver as to those conclusions). See 9:11-ap-01147, Dkt. 207; 9:11-ap-01146, Dkt.

133; see also Bryan Cave’s concurrently filed “Response to Plaintiff Trustees’ Statement of

Disputed Facts; Response to Objections to Defendants’ Statement of Undisputed Facts” (filed

June 12, 2018) (describing how the Trustees have admitted Bryan Cave’s statements of

uncontroverted fact and conclusions of law).

Regarding the handful of facts that they do purport to dispute, the Trustees’ responses are

inadequate under the Federal Rules of Civil Procedure and this Court’s Local Rules, leaving those

facts undisputed for purposes of this motion. Indeed, the Trustees offer no evidence to show there is

any disputed issue of fact regarding Bryan Cave’s statements of uncontroverted fact. Pursuant to

Local Bankruptcy Rule 7056-1(f), the Court should rule that Bryan Cave’s material facts in support

of its motion for summary judgment are “admitted to exist without controversy” because the Trustees

have not “[a]dequately controverted” those facts “by declaration or other evidence filed in opposition

1 Bryan Cave’s Motion for Partial Summary Judgment On Grounds Of Unclean Hands And/Or In Pari Delicto is referred to herein as the “Bryan Cave Motion.” The Declaration of Michael Dore filed on May 14, 2018 in 9:11-ap-01147-DS (Dkt. 209) and 9:11-ap-01146-DS (Dkt. 135) is referred to as the “Dore Decl.” The Statements of Uncontroverted Fact identified in Bryan Cave’s [Proposed] Statement Of Uncontroverted Facts And Conclusions Of Law In Support Of Bryan Cave LLP’s Motion For Partial Summary Judgment On Grounds Of Unclean Hands And/Or In Pari Delicto 9:11-ap-01147-DS (Dkt. 207) and 9:11-ap-01146-DS (Dkt. 133) are referred to herein as “SUFs.”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

to the motion.” Accord C.D. Cal. L.R. 56-3. These undisputed facts alone are sufficient for this

Court to grant Bryan Cave’s motion.

B. THE TRUSTEES’ “SUPPLEMENTAL” FACTS ARE IMMATERIAL TO BRYAN CAVE’S MOTION AND THE APPLICATION OF THE IN PARI DELICTO DOCTRINE AND UNCLEAN HANDS DEFENSE

Unable to meaningfully dispute that Guth and Yaguda engaged in a years-long pattern of

obviously wrongful conduct involving EFI and EFMF—conduct that ultimately led to both

companies’ downfall—the Trustees seek to avoid summary judgment by asserting that there are

factual disputes regarding whether “Bryan Cave and Windler … failed to fix” the issues, and whether

Windler had adequate experience to handle the EFI matter. Opp. at 24–30. These arguments are

completely irrelevant to in pari delicto and unclean hands, which focus on the conduct of the

claimant (here, Guth’s and Yaguda’s conduct that is undisputedly imputed to EFI and EFMF), and

which apply regardless of whether the defendant failed to meet a particular standard of conduct.

Indeed, they apply even when the defendant is “a participant in illegal, fraudulent, or inequitable

conduct.” In re Mortgage Fund ’08 LLC, 527 B.R. 351, 366 (N.D. Cal. 2015); see also, e.g., Uecker

v. Zentil, 244 Cal. App. 4th 789, 792 n.1 (2016) (in pari delicto applies where “a participant in illegal,

fraudulent, or inequitable conduct seeks to recover from another participant in that conduct”)

(quotation marks omitted); Casey v. U.S. Bank Nat’l Ass’n, 127 Cal. App. 4th 1138, 1143 n.1 (2005)

(same); In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting

argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful

conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party

with unclean hands” that “participated in the wrongdoing”).

Thus, the question of whether Bryan Cave or Windler acted with or without some fault is

immaterial for purposes of the in pari delicto and unclean hands doctrines at issue here. In other

words, judgment in Bryan Cave’s and Windler’s favor would be appropriate even if they had

participated directly in Guth’s and Yaguda’s scheme (which they, of course, did not). See, e.g.,

Kendall-Jackson Winery, 76 Cal. App. 4th at 985 (in pari delicto and unclean hands apply

“regardless of the merits of [the] claim” against the defendants).




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The Trustees also seek to gin up irrelevant factual disputes by arguing that not all of EFI’s

business was fraudulent. But Guth’s and Yaguda’s undisputed conduct was obviously wrongful

regardless of whether they engaged in misconduct with respect to every loan in EFI’s portfolio or any

other aspect of EFI’s/EFMF’s business operations. In fact, the Trustees have offered no evidence to

dispute that EFI had hundreds of loans in default at the same time that it represented to Defendants,

and investors, that few, if any, EFI loans were non-performing. See, e.g., Dore Decl. Exh. 83, 87

(EFI/EFMF misrepresentations that the number of non-performing loans was “small” and only one

loan out of 589 in which EFMF had invested had gone into default as of Dec. 31, 2006); Gabriel

Decl. Exh. 7 at 61 (Windler testimony that Guth told her that EFI did not have loans going into

default); Dore Decl. Exh. 85 (showing hundreds of EFI loans in default as of Dec. 31, 2006).

The four loans cited by the Trustees are no different than these hundreds of other defaulted

loans cited by Bryan Cave in its Motion that EFI/EFMF misrepresented. And beyond those hundreds

of defaulted loans evidencing wrongful, there are almost 50 more loans that the Trustees concede

were operated in a “Ponzi-like manner” and involved an “inappropriate use of investor funds.” (Opp.

at 20.) Nevertheless, even ignoring all of the foregoing and the fact that even the four loans (among

more than 500 malfeasant loans) were also in default and part of the scheme to misrepresent the

condition of those loans to investors/creditors, the Trustees’ supplemental facts about those loans do

not in any way controvert Bryan Cave’s statements of uncontroverted fact. Those facts establish

conclusively and undisputedly that EFI’s and EFMF’s principals engaged in wrongful self-dealing

and misrepresented the condition of hundreds of loans to investors to facilitate their raising more

funds, and that EFI and EFMF used money invested in certain loans to pay interest to investors in

other loans. This glaring misconduct requires the application of the in pari delicto doctrine and

unclean hands defense. See Bryan Cave Motion at 21-32; Reply in Support of Bryan Cave Motion at

13-20.

In short, every Supplemental Fact offered by the Trustees is immaterial and thus does not

create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s

favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts

that might affect the outcome of the suit under the governing law will properly preclude the entry of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at

247–48 (noting that “the mere existence of some alleged factual dispute between the parties will not

defeat an otherwise properly supported motion for summary judgment; the requirement is that there

be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d

408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not

entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not

raise an issue for the jury.”). The Trustees’ Supplemental Facts have no bearing on EFI’s and

EFMF’s wrongful conduct or the application of the in pari delicto doctrine and unclean hands

defense to bar the Trustees’ state-law claims. They create no genuine disputed issue of material

fact in any event. The Trustees’ Supplemental Facts thus should be disregarded.

NO. TRUSTEES’ SUPPLEMENTAL

UNDISPUTED FACTS

TRUSTEES’ EVIDENCE

BRYAN CAVE RESPONSE

1. Estate Financial, Inc. (“EFI”) was a mortgage brokerage company engaged in the business of funding, servicing and managing real estate construction loans.

Plaintiff Trustees’ Request For Judicial Notice In SUPPORT OF OPPOSITIONS TO (I) MOTION FOR PARTIAL SUMMARY JUDGMENT BY DEFENDANT BRYAN CAVE LLP ON GROUNDS OF UNCLEAN HANDS AND/OR IN PARI DELICTO, AND (II) MOTION FOR PARTIAL SUMMARY JUDGMENT BY DEFENDANT KATHERINE WINDLER FOR LACK OF DAMAGES (“RJN”) at, Ex. 2.

Undisputed2; duplicative of Bryan Cave’s SUF 1 [ECF Dkt. # 207].

2. Karen Guth (“Guth”) and her former husband, Charles

RJN at Ex. 3. Objection

2 When stating that a fact is “Undisputed,” Bryan Cave is stating that the fact is undisputed for purposes of this summary adjudication motion only.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Applebaum (“Applebaum”), incorporated EFI in 1991.

Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). EFI’s 1991 incorporation has no bearing on that obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

3. As of January 2005, EFI was owned by Guth (85%), her son Joshua Yaguda (“Yaguda”) (10%), and Yaguda’s minor child, Isabella W. Yaguda (5%).

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 16 (EFI’s Corporate Resolution Specifying Ownership and Authorizing Signatures for Estate Financial, Inc., bates no. BryanCave0014594)

Undisputed; duplicative of Bryan Cave’s SUF 9 [ECF Dkt. # 207].

4. Guth was EFI’s President and Yaguda served as EFI’s Vice President.

RJN at Ex. 11. Undisputed; duplicative of Bryan Cave’s SUF 11 [ECF Dkt. # 207].

5. In 2002, Guth and Yaguda formed a limited liability company known as Estate Financial Mortgage Fund LLC (“EFMF”) as a vehicle to raise money to fund

Declaration Of Thomas P. Jeremiassen, Liquidating Trustee, In Support Oppositions To (I) Motion For Partial Summary Judgment By Defendant





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

construction loans generated by EFI.

Bryan Cave LLP On Grounds Of Unclean Hands And/Or In Pari Delicto, And (Ii) Motion For Partial Summary Judgment By Defendant Katherine Windler For Lack Of Damages (“Jeremiassen EFI/EFMF Declaration”), at ¶ 6. The Trustees request that the Court take judicial notice of this document pursuant to Fed. R. Evid. 201.

6. Membership interests were sold pursuant to and subject to California Corporations Code Sections 25113 et seq

Jeremiassen EFI/EFMF Declaration, at ¶ 6.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). EFI’s sale of membership interests has no bearing on that obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Improper legal conclusion. This is an improper legal conclusion couched as a fact. Dillon v. Cont'l Cas. Co., 278 F. Supp. 3d 1132, 1137 (N.D. Cal. 2017) (Statements that are legal conclusions “are not facts and can only be considered as arguments.”) Hearsay. Fed. R. Evid. §§ 801, 802 (Hearsay). Vague and ambiguous – interests and time period not specified

7. EFI was the corporate manager of EFMF.



8. EFI funded its loans from money obtained from individual investors or from EFMF.



9. EFI solicited investors for its loans and for EFMF through offering circulars and placement memoranda pursuant to permits issued by the California Department of Corporations.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). This fact does




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

not in any way controvert Defendants’ showing of EFI’s/EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Vague and ambiguous – the time period of EFI’s use of offering circulars and private placement memoranda is not specified.

10. EFI loaned money to real estate developers and contractors at high interest rates.

RJN at Ex. 4.

Objection Insufficient evidence. The Trustees’ improperly cite to EFI’s 80-page Offering Circular without identifying any page, section, or paragraph number supporting these purported facts. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”). Vague and ambiguous – the Trustees do not state what constitutes a “high” interest rate.

11. EFI investors’ investments were evidenced by a promissory note secured by first deeds of trust and that with the investors having a fractionalized interest in the promissory note and deed of trust.

RJN at Ex. 4.

Objection Insufficient evidence. The Trustees’ improperly cite to EFI’s 80-page Offering Circular without identifying any page, section, or paragraph number supporting these purported facts. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003)




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(“General references [to facts] without page or line numbers are not sufficiently specific.”).

12. In or around 2005-2006, a dispute arose between EFI and one of its borrowers, Mathew Locati, in relation to a $9.949 million loan EFI made to finance Locati’s purchase and development of an 18 lot subdivision known as Creekside Estates and the dispute was referred to arbitration (the “Locati Arbitration”).

RJN at Ex. 5. Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Locati Arbitration does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence, Hearsay (FRE 802). The Trustees’ improperly cite to an arbitration complaint without identifying any page, section, or paragraph number supporting these purported facts. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

numbers are not sufficiently specific.”). That complaint does not establish the truth of the matters asserted.

13. Stein & Lubin represented EFI in the Locati Arbitration until August 2006.

Declaration Of Larry W. Gabriel In Support Of Oppositions To Motions For Partial Summary Judgment (“Gabriel Declaration”), p. 6, ¶ 15 and Exhibit 17 (October 2 and 3, 2006 emails, bates nos. BryanCave0011102-1107).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). EFI’s representation in the Locati Arbitration does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. sufficiently specific.”). Hearsay (FRE 802). The Trustees rely on a third party’s email to support the fact without any explanation as to how and whether the evidence would be admissible at trial.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

14. At that time, Stein & Lubin disclosed to EFI a potential conflict of interest and requested that EFI waive the conflict.

Gabriel Declaration. p. 6, ¶ 15 and Exhibit 18 (September 6, 2006, letter from Michael F. Donner to Joshua Yaguda, bates nos. BryanCave6082-6085).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The timing of Stein & Lubin’s conflict disclosure does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading: This fact improperly suggests Exhibit 18 to the Gabriel Declaration shows that Stein & Lubin disclosed a potential conflict of interest “at [the same] time” it represented EFI in the Locati Arbitration; however Exhibit 18 to the Gabriel Declaration is a letter dated after Stein & Lubin purportedly ceased its representation in August 2006




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

according to Plaintiffs (see Fact 13 above).

15. After EFI declined to do so, on or about October 13, 2006, EFI retained Bryan Cave as its counsel in the Locati Arbitration.

Gabriel Declaration, p. 5, ¶¶ 13 and 14, and Exhibits 14-15 to the Gabriel Declaration, Requests for Admission and Response thereto to re October 13, 2006 engagement agreement, bates no. BryanCave0006245 - 6249).


16. As part of its representation of EFI and EFMF, Bryan Cave retained the services of Guy Puccio, a former DRE commissioner, as a consultant and expert.

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/2017), p. 134, liens 4-18, p. 136, liens 1-21, and p. 151, lines 14-21; and Exhibit 84 thereto (October 13, 2006 engagement agreement, bates no. BryanCave0006245 - 6249).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The retention of Guy Puccio does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

discussion, supra, Section I.

17. The primary attorneys involved in the representation at Bryan Cave were Windler and John W. Amberg (“Amberg”), a partner at Bryan Cave.

Gabriel Declaration. p. 5, ¶¶ 13 and 14 and Exhibit 12 and 13 (October 13, 2006 engagement agreement, bates no. BryanCave0006245 - 6249) (“The rate for our professionals likely to be involved in rendering services in connection with this matter are as follows: Kathareine Windler/$425.00 and John Amberg/$520.00”). Gabriel Declaration, p. 3, ¶ 5 and Exhibit 2 to the Gabriel Declaration, transcript from the deposition of John Amberg (3/15/17), p. 21, lines 22-25: “Q. Was the first matter that you worked with Mrs. Windler on the EFI matter? A. We worked on the Locati matter, what I think of as the Locati matter, for EFI.”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Locati Arbitration does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful behavior. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Mischaracterizes the evidence; no matter specification in the purported fact, however the evidence is limited to Locati matter.

18. On November 2, 2006, Bryan Cave and EFI entered into a second engagement agreement whereby Bryan Cave was retained to conduct a compliance review and audit of EFI’s business operations and its securities

Gabriel Declaration, p. 6, ¶ 15, and Exhibit 20 (November 2, 2006 engagement agreement, bates no. BryanCave0010044 - 10048)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

offerings. favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). A purported compliance review does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading: Exhibit 20 is simply an engagement letter “to perform a compliance review and audit” which does not contain any reference to “securities offerings.” Insufficient evidence. The letter cited by Trustees in support of the fact is not signed by any EFI representative. See Gabriel Decl. at 216.

19. On November 2, 2006, Windler wrote to Therese Pritchard, a partner in Bryan Cave’s Washington, D.C. office, asking for a securities lawyer to work on the project. Pritchard recommended a lawyer in

Gabriel Declaration, p. 4, ¶ 8 and Exhibit 12 to the Gabriel Declaration, transcript from the deposition of Robert Miller (3/28/18), p. 280, lines 13-21, p. 282, lines 6-25; and, Exhibit 154 thereto (email





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Bryan Cave’s St. Louis office, Jim Levey.

chain between Katherine Windler and Therese Pritchard dated Nevember 2, 2006): “Q. Okay. Thank you. I'll just clean this up. The next document I'm going to show you is what we will identify as Exhibit 154.(Exhibit 154 was marked for identification.) BY MR. GABRIEL: Q. And this purports to be an e-mail string between Katherine Windler and Therese Pritchard. Just for the record, who is Therese Pritchard? A. The current Chair of my law firm. … Q. Let's look at this document, and I believe the first e-mail is from Katherine Windler to -- is it Therese? Is that how she pronounces it? A. She goes generically by Terri. Q. Terri Pritchard, dated November 2, 2006, and it says securities work, new business, and she says, "I have accepted an engagement to do a compliance review and audit for an existing client named Estate Financial, Inc." It goes on and describes what's going on. The next paragraph she says, "I would like to have a securities lawyer join me

favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

on this project." And then goes on and asks if there is a person that Ms. Pritchard could recommend. I believe that's the sum and substance of what she said. And my first -- and Ms. Pritchard's response, "Try Jim Levey in St. Louis." I guess that's St. Louis, STL. Is that your understanding of what that document represents? MR. DORE: Objection to form. THE WITNESS: No.”

136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Ms. Windler’s purported email to Ms. Pritchard in November 2006 does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence, Hearsay (FRE 802). The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration.

20. Jim Levy did not participate in the engagement. Nor Windler did not engage any other securities lawyer to assist her with the compliance review and audit or with the preparation of offering materials until March 2007, when she involved Randolf (Randy) Katz for the limited purpose of him engaging in a last-

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 185-186, lines 17-25, and 1-12: Q Did any -- you said you talked to partners in the firm about securities offerings in connection

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

minute review of the offering circular she prepared, with the review taking place just days before the deadline.

with EFI or EFMF. And I know you talked to Mr. Miller. I assume you talked to -- maybe you didn't -- Ms. Pritchard; correct? MR. DORE: Objection; lacks foundation, assumes facts not in evidence. MR. REITMAN: It's a question. THE DEPONENT: I don't specifically recall. I think I did. Q BY MR. REITMAN: Did you talk to Mr. Levey? MR. SANDERS: Is this limited to securities offerings? MR. REITMAN: Yeah. THE DEPONENT: I believe I did talk to Jim at some point, yes. Q BY MR. REITMAN: Did you talk to Mr. Katz in connection with the EFMF offering? A I recall talking to Mr. Katz. Yes. Gabriel Declaration, p. 6, ¶ 15 and Exhibit 21 (March 25, 2007, email from Katherine Windler to Randolf Katz, bates no. BryanCave0020738).

suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Bryan Cave’s staffing of its EFI representation does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): 1) Compound because it purports to combine separate facts. 2) With respect to the alleged compliance review and audit, the purported supporting evidence does not demonstrate that any compliance review ever took place; no compliance review of EFI’s business practices was completed or performed because EFI/EFMF’s principals determined not to go forward with the compliance review following a meeting with Windler and Puccio. See Supplemental Declaration of Michael Dore (“Dore Supp. Decl.”), Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

lines 3-22. 3) With respect to the preparation of the offering documents, this purported fact mischaracterizes the email attached to the Gabriel Declaration as Exhibit 21, the contents of which speak for itself. The Trustees offer no evidence that Katz’s review was “last-minute” or insufficient in any way.

21. On November 2, 2006, Windler wrote to Guth and Yaguda that she and Puccio would be at EFI’s offices on November 14, 2006 to commence the compliance review and audit and requested that Guth and Yaguda provide certain documents and information for review. Her request included, but was not limited to, sample files of refinances, purchase loans, loan files secured by income producing properties, land loans, construction loans, copies of the wholesale lending agreement with funding lenders or investors, copies of offering memoranda, whether issued in the context of private placements or permitted or qualified and registered offerings, copies of loan origination and loan servicing documents, copies of trust fund records for loan funding, escrow and loan servicing trust accounts and copies of reports filed with the DRE, DOC, or to any

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 9 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/19/17), p. 191, lines 4-15, pp. 217-226, lines 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-14; and, Exhibit 83 thereto (email from Katherine Windler to Karen Guth and Joshua Yaguda, attaching file named “Memo to client re compliance review checklist_v1.DOC”).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”).




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

other federal or state agency The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). A purported compliance review does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Hearsay. Best Evidence Rule. The deposition testimony offered as purported evidence also refers to,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and summarizes, documents (deposition exhibits) that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

22. By no later than November 13, 2006, Bryan Cave knew that EFI’s business operations and operative documents were in violation of California securities and real estate laws.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 9 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/19/17), pp. 209-213, lines 6-25, 1-25, 1-25, 1-25, and 1-21; and, Exhibit 2 thereto (email from John Amberg to Katherine Windler re: EFI strategy considerations, dated November 13, 2006). Gabriel Declaration, p. 3, ¶ 5 and Exhibit 2 to the Gabriel Declaration, transcript from the deposition of John Amberg (3/15/17), pp. 52-55, lines 20-25, 1-25, 1-25, 1-13; and, Exhibit 2 thereto (email from John Amberg to Katherine Windler re: EFI strategy considerations, dated November 13, 2006).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even accepting the fact as true, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported supporting evidence relates to the Locati Arbitration and the 18 lot Creekside subdivision that was




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

purportedly developed under the multi-lender rule. See Dore Supp. Decl., Exhibit 11 (May 18, 2017 transcript of Windler Deposition), at pp. 176, lines 15-25; pp. 176, line 1-12. It in no way supports knowledge that other EFI business operations and operative documents were in violation of California securities and real estate laws. Dore Supp. Decl., Exhibit 11 (May 18, 2017 transcript of Windler Deposition), at pp. 176, lines 14-25; pp. 177, lines 1-25; pp. 178, lines 1-3.

Hearsay (FRE 802). Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration.

23. On November 14, 2006, Windler and Puccio met with Guth and Yaguda at EFI’s offices and commenced the Firm’s compliance review.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 92-93, lines 20-25, and 1-23.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). A purported compliance review does not in any way controvert Defendants’ showing of EFI’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22.

24. Windler spent 6.4 hours reviewing EFI’s business model, files and offering documents.

Gabriel Declaration, p. 4, ¶ 8 and Exhibit 12 to the Gabriel Declaration, transcript from the deposition of Robert Miller (3/28/18), p. 234, lines 4-6, and 236-237, lines 23-25, and 1; and Exhibit 153 thereto (Bryan Cave’s relevant EFI billing records).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

through an “inappropriate use of investor funds” (Opp. at 20). Ms. Windler’s time reviewing files does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): Fact 23 above deals with a purported compliance review in November 2006. The supporting evidence for Fact 24, refers to testimony and time records. The cited testimony does not deal with November 2006, but instead relating relates to the preparation of an offering document in March 2007 (see Deposition Transcripts of Robert Miller cited in support of Fact 24.) The cited time records, Exhibit 153, do contain time entries for Windler’s work on November 15, 2016, but show a different time (4.4 hours vs the 6.4 cited by the Trustees) and show a different work description (“Review loan documents, employment files, and securities offerings” vs. the Trustees’ description in Fact 24 “reviewing EFI’s business model, files and offering documents”). To the extent Fact 24 implied that Windler spent 6.4 hours in November working as described by the Trustees, it is misleading and contradicted by the purported




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

supporting evidence. This Fact is also misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22. Hearsay. Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration. Fed. R. Evid. §§ 801, 802 (Hearsay).

25. Windler then spent additional time on November 15, 2006 reviewing the EFI materials and documents she previously requested.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Ms. Windler’s unspecified time




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

reviewing documents does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): to the extent Fact 25 implies that Ms. Windler spend “additional time” on November 15, 2006, i.e. time in addition to Fact 24, it is misleading for reasons cited in Fact 24. This Fact is also misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22.

Hearsay (FRE 802). Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration.

26. Windler, Guth, Yaguda and Puccio also met in December 2006, as part of Windler’s Compliance Review

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Windler (5/17/17), p. 153, lines 5-18; and Exhibit 14 thereto (email from Katherine Windler to Joshua Yaguda and Karen Guth, dated March 25, 2007, re: EFI – documents for securities offering, with the following attachments: (1) EFI -- Offering Circular 2007 Pool_v2.DOC, (2) Administration Agreement for EFI 2007 Pool_v1.DOC, (3) Subscription Agreement and Questionnaires for 2007 Pool_v1.DOC)

not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). A purported compliance review does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The document referenced simply refers to a meeting “before Christmas,” it does not provide further information about the purported meeting. The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22.

Hearsay. Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents (deposition exhibits) that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay).

27. As a result of this meeting and her document review, Windler determined that most of EFI’s business operations violated California securities laws and disclosure requirements

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), p. 153, lines 5-18; and Exhibit 14 thereto (email from Katherine Windler to Joshua Yaguda and Karen Guth, dated March 25, 2007, re: EFI – documents for securities offering, with the following attachments: (1) EFI -- Offering Circular 2007 Pool_v2.DOC, (2) Administration Agreement for EFI 2007 Pool_v1.DOC, (3) Subscription Agreement and Questionnaires for 2007 Pool_v1.DOC)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even in Ms. Windler reached the alleged conclusions about EFI’s compliance with regulations and statutes, that does not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): Misleading and incomplete to the extent it implies Ms. Windler had this knowledge in December 2006. Dore Supp. Decl., Exhibit 11 (May 18, 2017 transcript of Windler Deposition), at pp. 176, lines 1-25; pp. 177, lines 1-25; pp. 178, lines 1-3. The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22.

Hearsay. Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration. Fed. R. Evid. §§ 801, 802 (Hearsay).

28. On December 13, 2006, Windler sent an email to Guth responding to her request for advice on how to proceed with EFI’s business operations: If you don’t have any investors right now who are

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 134-142, 14-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25,





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

complaining, or you don’t have any loans that are in default that you are having to roll over because of defaults, this is not yet urgent for you. I’d prefer that we file the CFL and business plan together. . . The entire process . . . takes about 4 months, and during this time I am expecting that you will continue conducting business as you have in the past . . .we are fairly confident right now that the DOC or DRE won’t look at you while you are in the process of fixing things up – even if you conduct business as usual until then.

1-25 and 1-3; and Exhibit 8 thereto (email from Katherine Windler to Karen Guth re: CFL license application, referring to attachment “DOC – CFL license application.pdf”).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even accepting the statement of Ms. Windler’s email as true, EFI and EFMF in fact did have hundreds of loans they had to rollover because of defaults while misrepresenting to Bryan Cave that they did not. See Declaration of Ray Strong at Exh. 5, p. 31; Dore Decl. Exh. 85; Gabriel Decl. Exh. 7 at 61 (Windler: “Karen at this time was representing to me that none of those were true and none of those were likely to become true.”). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported “fact” stated mischaracterizes the alleged “supporting evidence.” There is no support in the evidence cited for the lead in characterization that Windler was responding to a “request for advice on how to proceed with EFI’s business operations.” Hearsay. Best Evidence Rule. The deposition testimony offered as




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

29. In a memorandum dated January 23, 2007 from Puccio to Guth and Yaguda and copied on Windler, Puccio wrote: I am confident we can accomplish a business plan and model that will suit your objectives while at the same time bring you into substantial compliance with the statutory and regulatory scheme we discussed when KW [Katherine Windler] and I were at your office on November 14 and 15

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 4 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (4/5/17), p. 184, lines 3-22, and p. 190, lines 11-19; and Exhibit 63 thereto (memorandum from Guy Puccio to Karen Guth with a copy to Katherine Windler dated January 23, 2007).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Defendants’ representation of EFI has no bearing on EFI’s and EFMF’s obviously wrongful conduct dating back at least four years before that representation even started. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported “fact” stated does not include the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

entire communication or its context. Hearsay. Best Evidence Rule. The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). In addition, Exhibit 4 to the Gabriel Declaration does not include “p. 190” which is listed as evidence in support of this fact.

30. Bryan Cave’s advice to EFI that it should not change its business practices, notwithstanding knowledge of EFI’s significant regulatory violations, was bolstered by Guy Puccio’s opinion that the DRE and DOC were waiting for EFI, Bryan Cave and Puccio to correct the outstanding issues: Please be informed that I believe, in response to my discussions along with KW discussions with them, neither the DRE nor the DOC are moving aggressively to knock on EFI’s door. Each are waiting for EFI, its counsel, and consultant to correct the outstanding issues, structure and implement our mitigation plan, refine EFI’s business plan/model, and submit an application for a new offering to be permitted

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/17), pp. 282-284, lines 21-25, 1-25, and 1-25; and Exhibit 94 thereto (memorandum from Guy Puccio to Karen Guth and Joshua Yaguda with a copy to Katherine Windler dated February 9, 2007).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

by the DOC. would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence that any referenced “business practices” of which Defendants were aware included EFI’s and EFMF’s obviously wrongful conduct in refusing to foreclose on hundreds of defaulted loans and taking new investor money to make interest payments to other investors.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The cited testimony in Exhibit 6 to the Gabriel Declaration refers to a statement about a document that was cut off and incomplete, and seemingly seeks to cite to Gabriel deposition questions as “evidence” but fails to include the deponent’s response. There is no actual evidentiary support for the argument and characterizations supplied by counsel that: “Bryan Cave’s advice to EFI that it should not change its business practices, notwithstanding knowledge of EFI’s significant regulatory violations, was bolstered by . . .” Hearsay. Best Evidence Rule. The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

31. EFMF’s permit for selling membership interests for the year 2006 expired on March 29, 2007.

RJN at Ex. 8.

Undisputed.

32. On March 12, 2007 Windler sent an email to Guth and Yaguda stating: “Guy Puccio and I have been

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

working on revising your offering and your loan documents for the securities permit for Estate Financial Mortgage Fund, LLC. The current permit expires on 3/29/07. Guy has opened discussions with the DOC regarding an extension of that permit until the new documentation can be completed. We are waiting (and hoping) for confirmation that EFI can extend its permit for 90 days, without modifications, while the new forms of loan agreement and offering circular are completed. The DOC is fully aware of our work with you to revise and amend the offering. In order to get the new permit issued, you will need to be prepared to disclose the following information: [number of nonperforming loans and actions taken to pursue].”

deposition of Katherine Windler (5/17/17), p. 104, lines 1-16; and Exhibit 68 thereto (email from Katherine Windler to Karen Guth and Joshua Yaguda, dated 3/12/2007, re: EFI -- compliance project).

33. In her transmittal e-mail to Guth and Yaguda dated March 25, 2007, Windler acknowledged that EFI’s prior business practices were contrary to applicable rules: With the knowledge we gained from you in our meeting in Paso Robles before Christmas [December 2006], we learned some things about your business and those ideas are reflected here, but the majority of the changes reflect my view on

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), p. 153, lines 5-18; and Exhibit 14 thereto (email from Katherine Windler to Joshua Yaguda and Karen Guth, dated March 25, 2007, re: EFI – documents for securities offering, with the following attachments: (1) EFI -- Offering Circular

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

what the DOC will allow in the current market and what the law requires. This draft offering describes practices that are substantially different than your past business practices, so we have to schedule some time to discuss the changes and what you can live with and how far you want me to push the DOC. I will send you a redline so you can see the changes we made from your last pool offering. It might not be very helpful, because most of what you were doing wasn’t legal and violated the disclosure rules.

2007 Pool_v2.DOC, (2) Administration Agreement for EFI 2007 Pool_v1.DOC, (3) Subscription Agreement and Questionnaires for 2007 Pool_v1.DOC)

unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): There is no specificity in the cited evidence regarding what “what you were doing” refers to, including what specific past business practices it might reference. Hearsay. Best Evidence Rule. The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

34. On March 25, 2007, Windler sent an email to a Bryan Cave securities law attorney, Randolph Katz, requesting that he review the draft offering circular that Windler had prepared.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 107-111, lines 15-25, 1-25, 1-25, 1-25, and 1-24; and Exhibit 69 thereto (email from Katherine Windler to Randolf Katz, re: EFI -- Offering Circular --





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

securities counsel review, attached file: EFI -- Offering Circular_v1.DOC”)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Hearsay. Insufficient Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration. Fed. R. Evid. §§ 801, 802 (Hearsay).

35. In her e-mail, Windler stated that EFI’s 2006 offering circular and operations violated applicable securities laws: The client is . . . EFI who is the Managing Member and licensed real estate broker acting as a mortgage loan broker for a qualified and registered offering by Estate Financial Mortgage Fund LLC. I have drafted a revised Offering Circular [for EFMF], which is substantially different from what was submitted for last year’s permit. . . . last year

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 107-111, lines 15-25, 1-25, 1-25, 1-25, and 1-24; and Exhibit 69 thereto (email from Katherine Windler to Randolf Katz, re: EFI -- Offering Circular -- securities counsel review, attached file: EFI -- Offering Circular_v1.DOC”)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the Commissioner didn’t notice that there were 1,064 investors – way beyond the rule of 500 max before SEC compliance. . . . . [T]heir business in the past hasn’t been based on strict compliance with the law and this newly revised version of the Offering attempts to put them closer to compliance without hoping that the DOC Commissioner will again omit to read it.

dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

investor funds” (Opp. at 20). Whether or not EFI violated securities laws, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in its business operations with respect to hundreds of EFI loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported lead in “fact” statement, that “Windler stated that EFI’s 2006 offering circular and operations violated applicable securities laws” mischaracterizes the alleged “supporting evidence.” Hearsay. Best Evidence Rule. The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

36. The new permit for EFMF was not issued until May 21, 2007.

RJN at Ex. 7.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whenever a permit was issued, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

37. At or about the same time, Windler, as part of the compliance review and audit, started to revise EFI’s business forms and loan documents, which she stated in an e-mail dated March 29, 2017 are “are sorely lacking and do not provide for consistent terms.”

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 234-235, lines 3-25, and 1-6; and Exhibit 185 thereto (email from Katherine Windler to Bryan D. Turner, dated March 29, 2007, re: EFI -- loan documents, attached files: (1) EFI -- Offering Circular 2007 Pool_v2.DOC; (2) EFI Commitment Letter_v1.DOC; (3) Construction Loan Agreement_v1.DOC; (4) EFI -- Promissory note secured by construction deed of trust_v1.DOC)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees do not show how the documents allegedly were lacking or inconsistent, and offer no evidence to controvert Defendants’




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

showing of EFI’s and EFMF’s obviously wrongful conduct with respect to hundreds of EFI loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition PM session), at pp. 254, lines 3-22. Hearsay. Best Evidence. The deposition testimony offered as purported evidence is incomplete and fails to include the deponent’s full wording and explanation of the quoted statement; the testimony also refers to documents (such as an email) that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

38. Turner agreed to participate in the task of modifying EFI’s construction loan

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 21 (April 2007 emails between

Objection Immaterial:




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

documents, with the caveat that he was not a California lawyer and was not going to check state-specific requirements.

Katherine Windler and Bryan Turner, bates no. BryanCave0021533-21537).

The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; hearsay; best evidence: The purported supporting evidence misidentifies the document referenced. Exhibit 21 to the Gabriel Declaration is bates labeled BryanCave0020738 and does not contain any statement from Turner. To the extent the Trustees intended to cite to Exhibit 22 of the Gabriel Declaration, that document also does not support this purported “fact” because it does not state any fact about the scope of Turner’s review of the Offering Documents for EFI and the “fact” misrepresents Turner’s statement about not being a California lawyer; the documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Evidence Rule).

39. On April 4, 2007, Windler, on behalf of EFI as the manager of EFMF, submitted an application (the “2007 Application”) and proposed Offering Circular (the “2007 Offering Circular”)

RJN at Ex. 10.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whenever EFI submitted materials (the fact does not specify who they were sent to), the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

40. As presented in her cover letter to the DOC, Windler did not disclose that the 2007 Offering Circular was incomplete, misleading, and contained material omissions of fact.

RJN at Ex. 10.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct or show that EFI/EFMF disclosed its misuse of funds and failure to foreclose on hundreds of loans to either Defendants or investors. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Improper legal conclusion: This is an improper legal conclusion couched as a fact. Dillon v. Cont'l Cas. Co., 278 F. Supp. 3d 1132, 1137 (N.D. Cal. 2017) (statements that are legal conclusions “are not facts and can only be considered as arguments.”) Rule of Completeness (Fed. R. Evid. 106): Ms. Windler testified that she did not believe the offering documents contained any misstatement or omission. Dore Supp. Decl., Exhibit 12 (May 19, 2017 transcript of Windler Deposition, AM session), at pp. 329, lines 20-25; pp. 330, lines 1-25; pp. 331, lines 1-2. Insufficient evidence. The Trustees’ improperly cite to a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

voluminous offering application and circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”). Nothing in the cited evidence supports that the document is incomplete, misleading, or contained material omissions of fact.

41. Windler’s letter to the DOC states in relevant part: . . . ¶ . . . . The principal change in this Qualification from the Qualification that was filed last year, and for which a permit was issued, has been the revision of the Offering Circular to incorporate the past year’s operating results and to respond to the current real estate market. In that regard, the Fund has elected to make disclosures to investors that reflect the risk of investments in the current market environment. . . . ¶ Please note that the Fund’s current Permit was scheduled to expire on March 29, 2007.

RJN at Ex. 10.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

42. The 2007 Permit to EFMF was issued on May 21, 2007, based upon the submissions made by Bryan Cave.

RJN at Ex. 7

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whenever a permit was issued, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

43. After obtaining the 2007 Offering Permit, Bryan Cave and Windler turned their attention to developing a malpractice claim against EFI’s former securities attorneys, Stein & Lubin. In a memorandum dated May 23, 2007 to Windler, Puccio wrote: You have asked that I prepare a brief summary of some of the issues which I

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/17), pp. 219-220, lines 17-25, and 1-20, pp. 222-224, lines 20-25, 1-25, and, 1-9; and Exhibit 90 thereto (memorandum from Guy Puccio to Katherine Windler dated May 23, 2007)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

believe represent alleged malpractice of EFI’s prior counsel . . . . [The preparation of] offering circulars/prospectuses upon which EFI relied to issue securities to investors in the form of fractionalized note offerings and in the form of LLC Mortgage Funds. . . . ¶ . . . .¶ The proper due diligence of the activities of EFI would not have allowed EFI to proceed with the application for securities permits without correcting the violations of existing law and to the extent required, without making a repurchase offer to their investors in accordance with Corporations Code Section 25507 et seq.

properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported supporting evidence does not demonstrate that Bryan Cave or Windler “turned their attention to developing a malpractice claim against . . . Stein & Lubin”; the testimony simply states that Puccio drafted a memo with the subject “Draft of Alleged Malpractice Issues” without any discussion or testimony about its contents. In addition, the Trustees omit page 221. Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to, and quotes documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

44. The “issues” set forth in this RJN at Ex. 10. Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

memorandum are not disclosed in the 2007 Application, the 2007 Offering Circular, or in the other documents prepared by Bryan Cave and Windler and sent to the DOC on April 4, 2007.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct or to demonstrate that Defendants or anyone else knew that EFI and EFMF were misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The memorandum to which this fact refers is not identified. To the extent the Trustees are referring to the memorandum described in the previous fact, No. 43, the testimony simply states that Puccio drafted a memo with the subject “Draft of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Alleged Malpractice Issues” without any discussion or testimony about its contents. In addition, the Trustees omit page 221. Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). Insufficient evidence. The Trustees’ improperly cite to an application/offering circular without identifying and page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”)

45. Windler then prepared a draft of the claims she believed could be appropriately brought against Stein & Lubin regarding the prior offering circulars and advice and counsel and stated in her e-mail that she obtained the information from the first compliance review meeting with EFI on November 14, 2006.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 165-168, lines 3-25, 1-25, 1-25, 1-11; and Exhibit 19 thereto (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct or to demonstrate that Defendants or anyone else knew that EFI and EFMF were misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported supporting evidence does not support this fact. In particular, the Trustees improperly attempt to rely on their questions to the deponent as supporting evidence because the deponent’s testimony does not support this purported “fact.” See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 166, lines 14-25; pp, 167, lines 1-25, where Ms. Windler testified that she did not gain all the information in November 2006. The cited testimony does not contain the deponent’s complete explanation of the document referenced. Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to documents (deposition exhibit) that have not been attached to the Gabriel declaration; such documents are the best evidence of their




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

46. None of the issues presented in this memorandum are disclosed in the 2007 Application, the 2007 Offering Circular or in the other documents Windler sent to the DOC on April 4, 2007.

RJN at Ex. 10.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whatever the unspecified “issues” cited in the fact, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct or to demonstrate that Defendants or anyone else knew that EFI and EFMF were misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): This fact does not identify the memorandum to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

which it refers. To the extent the Trustees are referring to the memorandum described in the preceding fact, No. 45, the purported supporting evidence does not support that fact. Insufficient evidence. The Trustees’ improperly cite to an application/offering circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”)

47. Windler did not send the draft of claims to EFI and EFMF until more than six months after her November 14, 2006 review of their documents and only after the 2007 Permit had been issued.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 165-168, lines 3-25, 1-25, 1-25, 1-11; and Exhibit 19 thereto (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982)




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whatever potential claims EFI had against its other lawyers, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported supporting evidence does not support this fact. Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

48. On August 3, 2007, Guth wrote to EFI Investors about the current real estate market and specifically the condition of EFI’s investment portfolio.

9:11-ap-01147-DS, Docket No. 1, at Exhibit 31.

Undisputed.

49. On October 5, 2007, Windler submitted to the DOC a renewal Application for Qualification of Securities for EFI and Offering Circular on Fractionalized Interests, prepared by Bryan Cave.

RJN at Ex. 11.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

50. On October 11, 2007, the DOC issued its Permit for the Fractionalized Note Offerings based upon the Application and Offering Circular prepared by the Firm (the “October Offering”).

RJN at Ex. 9.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whenever a permit was issued, the Trustees offer no evidence to controvert Defendants’ showing of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

51. On November 19, 2007, EFI wrote to EFMF investors specifically disclosing that: “There are projects in the portfolio which are either in forbearance or foreclosure but additionally there are development projects for which interest impounds are exhausted.”

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 24 (Letter from Karen Guth and Joshua Yaguda, dated 11/19/2007, bates no. BryanCave0000684)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Any disclosure to investors about foreclosures and forbearance itself misled investors into believing that projects were on the cusp of completion (rather than patches of weeds and dirt) and were made after EFI stopped making interest payments and investors started to complain. Dore Decl. Exh. 230 [Department of Corporations Case Summary re Estate Financial Mortgage Fund LLC: “In about




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

September and [O]ctober of 2007 investors stopped receing [sic] their monthly payments and began to get suspicious.”]. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading: Exhibit 24 to the Gabriel Declaration is a copy of an unsigned and undated letter to the Department of Corporations, not the exhibit described in the parenthetical).

52. On or about April 28, 2008, the California Corporations Commissioner notified EFI of its intent to revoke the company’s October 11, 2007 permit to offer and sell securities.

Undisputed.

53. Windler continued to attempt to obtain a new offering permit for EFI from the DOC after April 28, 2008.

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 24 (Letter from Katherine Windler to Mary Ann Smith (undated copy), bates no. BryanCave0000684-685)

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; best evidence; misleading: Exhibit 24 to the Gabriel Declaration is a copy of an unsigned and undated letter to the Department of Corporations. The words used in the unsigned letter do not match Trustee’s characterization.

54. On May 21, 2008, Windler sent a letter to Mary Ann Smith, Senior Corporations Counsel for the DOC, stating that she was “heartened to learn that the Commissioner is willing to leave open the door to a new permit application by EFI, particularly since we felt the

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 24 (Letter from Katherine Windler to Mary Ann Smith (undated copy), bates no. BryanCave0000684-685)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

2007 offerings were well written to protect investors….”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading: Exhibit 24 to the Gabriel Declaration is a copy of an unsigned and undated letter to the Department of Corporations.

55. On or about May 28, 2008 the DOC revoked EFI’s permit to offer and sell securities for EFI and EFMF due to, what the DOC stated were material misrepresentations about the investment and not conducting business as disclosed in the offering circular.

Undisputed.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

56. On June 25, 2008, certain creditors of EFI filed an involuntary bankruptcy petition against EFI, which was followed on July 1, 2008 by EFMF’s voluntary bankruptcy filing.

9:08-bk-11457-DS, Docket No. 1

Undisputed.

57. Meanwhile, on or about June 27, 2008, the DRE sent a “Statement” to EFI, Guth and Yaguda notifying them that an accusation was filed against them by the DRE.

Undisputed.

58. On April 28, 2011, the Trustees filed adversary complaints against Bryan Cave and Windler. The complaints assert claims for professional negligence, breach of contract, breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, equitable subordination of claims, disallowance of proof of claim and avoidance and recovery of preferential transfers.

9:11-ap-01146-DS, Docket No. 1 9:11-ap-01147-DS, Docket No. 1

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees’ claims do not controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

material fact, and should be disregarded. See detailed discussion, supra, Section I.

59. On May 20, 2011, Bryan Cave and Windler filed motions to withdraw the reference (the “Withdrawal of Reference Motions”) of the EFI and EFMF adversary proceedings.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following documents: Case 2:11-cv-04213-SJO, United States District Court of California [Docket Nos. 1, and 6] (Motions to Withdraw Reference).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

60. On September 9, 2011, the District Court entered minute orders denying the Withdrawal of Reference

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice

Objection Immaterial: The Supplemental Fact offered by




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Motions, stating that “[t]he Court will divest jurisdiction from the bankruptcy court when this action is ready for trial and no sooner.”

of the following document: Case 2:11-cv-04213-SJO, United States District Court of California [Docket No. 27] (Order Denying Motions to Withdraw Reference).

the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

61. On May 31, 2011, Bryan Cave and Windler filed motions to dismiss the adversary complaints in the EFI and EFMF adversary proceedings pursuant to Rule 7012 of the Federal Rules of Bankruptcy Procedure.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

62. On October 11, 2011, this Court entered orders granting the motions to dismiss without leave to amend.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

63. On March 23, 2012 the orders granting the motions to dismiss were referred to the District Court for de novo review.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following documents: United States District Court, Central District of California, Case No. 2:12-cv-02511-SJO, Docket No. 1. United States District Court, Central District of California, Case No. 2:12-cv-02495-SJO, Docket No. 1.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE


64. On May 7, 2012, the District Court entered orders (the “Dismissal Orders”) accepting this Court’s recommendations and dismissing the adversary proceedings without leave to amend.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following documents: United States District Court, Central District of California, Case No. 2:12-cv-02511-SJO, Docket No. 9. United States District Court, Central District of California, Case No. 2:12-cv-02495-SJO, Docket No. 11.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

65. On May 31, 2012, and June 1, 2012, the Trustees filed notices of appeal of the Dismissal Orders to the Ninth Circuit.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following documents:

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

United States District Court, Central District of California, Case No. 2:12-cv-02511-SJO, Docket No. 11. United States District Court, Central District of California, Case No. 2:12-cv-02495-SJO, Docket Nos. 13, and 15.

summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

66. The Ninth Circuit issued an unpublished Memorandum reversing the Dismissal Orders and remanding the EFI and EFMF adversary proceedings to this Court.

In re Estate Financial Mortg. Fund, LLC, 565 Fed.Appx. 628 (9th Cir. 2014)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

67. Thereafter, on May 21, 2014, the Ninth Circuit denied Bryan Cave and Windler’s petition for panel rehearing and suggestion for rehearing en banc.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following document: United States Court of Appeals for the Ninth Circuit, Case No. 12-5009, Docket Nos. 59, and 60.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

68. On July 1, 2014, the District Court entered its order reinstating the reference to this Court and remanding the adversary proceedings.

The Trustees’ request that, pursuant to Federal Evidence Rule 201 that the Court take judicial notice of the following documents: United States District Court, Central District of California, Case No. 2:12-cv-02511-SJO, Docket No. 19. United States District Court, Central District of California, Case No. 2:12-cv-02495-SJO, Docket Nos. 25, and 26.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

69. The deposition of Windler in this action took place on May 17, 18, and 19, 2017, and continued on April 19, 2018.

Gabriel Declaration, p. 4, ¶ 7.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

70. The Trustees also conducted the depositions of non-party witnesses John Amberg on March 15 and 16, 2017, Randolph (Randy) Katz on March 28, 2017, and Guy Puccio on April 5, May 10, and June 22, 2017.

Gabriel Declaration, p. 3, ¶ 5; p. 2, ¶ 4; p. 2, ¶ 6.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The cited depositions include no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

71. The deposition of one of Bryan Cave’s designated persons most knowledgeable, Robert Miller, took place on March 27 and 28, 2018.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

investor funds” (Opp. at 20). The Trustees offer no evidence regarding Mr. Miller’s deposition to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

72. The deposition of Bryan Cave’s other designated person most knowledgeable, John Amberg (Amberg previously testified as a percipient witness but not as a designated person most knowledgeable), was scheduled to take place on May 4, 2018, but was rescheduled by the parties due to the daughter of one of the Trustees’ counsel going into labor, and the deposition has not yet been rescheduled by the parties.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees make no showing whatsoever about how the testimony of Mr. Amberg on behalf of Bryan Cave would (or even could) controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence: There is no evidence that counsel for Trustees, who noticed the deposition, have sought to reschedule it after it was canceled.

73. The Trustees’ counsel also notified Bryan Cave and Windler’s counsel to schedule the deposition of Jeffrey Modisset, the managing partner at Bryan Cave’s Santa Monica office while Windler worked at Bryan Cave, but, due to Modisset’s travel schedule, Bryan Cave’s counsel has not yet provided available dates for the deposition.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees make no showing whatsoever about how Mr. Modisett’s testimony would (or even could) controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE


74. The depositions of Guth and Yaguda in the adversary proceeding took place on February 1 and 5, 2018.


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees did not respond to Bryan Cave’s judicial estoppel argument in its Motion for Partial Summary Judgment, and thus they waived any opposition on that ground. The Trustees’ past admissions to the California Court that Guth and Yaguda engaged in “fraud” thus are dispositive and themselves warrant judgment in Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

75. Guth and Yaguda asserted the Fifth Amendment as to each of the substantive questions regarding Bryan Cave and Windler’s representation of EFI and EFMF and all other substantive inquiries.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees did not respond to Bryan Cave’s judicial estoppel argument in its Motion for Partial Summary Judgment, and thus they waived any opposition on that ground. The Trustees’ past admissions to the California Court that Guth and Yaguda engaged in “fraud” thus are dispositive and themselves warrant judgment in Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterization of evidence, Insufficient evidence. Hearsay. Best evidence rule. Trustees have not presented admissible evidence of the contents of the deposition testimony, to show what questions were and weren’t answered by Guth




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

or Yaguda at deposition. The testimony of the depositions referenced are the best evidence of the deposition contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

76. The Trustees have concurrently filed a motion to compel Guth and Yaguda to testify without assertions of the Fifth Amendment, with the motions set for hearing on June 26, 2018

9:11-ap-01146-DS, Docket No. 170 9:11-ap-01147-DS, Docket No. 248 The Trustees request that the Court take judicial notice of these filings, pursuant to Fed. R. Evid. 201.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees did not respond to Bryan Cave’s judicial estoppel argument in its Motion for Partial Summary Judgment, and thus they waived any opposition on that ground. The Trustees’ past admissions to the California Court that Guth and Yaguda engaged in “fraud” thus are dispositive and themselves warrant judgment in Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

77. The Trustees alleged in their adversary complaints against Bryan Cave and Windler that EFI and EFMF had numerous issues where they were not in compliance with applicable securities laws and real estate laws, including that interest was not always used for its intended purpose, and that offering materials were defective and misleading.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). ). The Trustees’ allegations, which are not assumed to be true at this stage of the proceedings, do not in any way controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. In addition, the documents referenced are the best evidence of their contents. Fed. R. Evid. §§ 1001-1004 (Best Evidence Rule).

78. EFI and EFMF had received a complaint that they had violated securities and real estate laws, hired Bryan

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 17 (October 2 and 3, 2006 emails, bates nos.

Objection Immaterial: The Supplemental Fact offered by




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Cave to identify and fix issues with compliance, to conduct a compliance review and audit, and to file new securities offerings with the DOC.

BryanCave0011102-1107). Gabriel Declaration, p. 5, ¶¶ 13 and 14, and Exhibits 14-15 to the Gabriel Declaration, Requests for Admission and Response thereto to re October 13, 2006 engagement agreement, bates no. BryanCave0006245 - 6249). Gabriel Declaration, p. 4, ¶ 7 and Exhibit 9 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/19/17), p. 191, lines 4-15, pp. 217-226, lines 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-14; and, Exhibit 83 thereto (email from Katherine Windler to Karen Guth and Joshua Yaguda, attaching file named “Memo to client re compliance review checklist_v1.DOC”).

the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). ). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Misrepresents the evidence; Rule of Completeness (Fed. R. Evid. 106): 1) The purported supporting evidence refers to hiring Bryan Cave for the Locati Arbitration, it does not appear to refer to “a complaint that [both EFI and EFMF] had violated securities and real estate laws,” and the context or scope of such purported violations were they to be supported are not in any event specified.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

2) The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition, PM session), at pp. 254, lines 3-22;. 3) Nor is there evidence cited that all the events described happened around the same time. Hearsay. Insufficient Evidence. The documents referenced are the best evidence of their contents. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay).

79. EFI and EFMF did not retain and pay Bryan Cave to perpetrate a fraud, but rather to identify and correct outstanding securities and real estate compliance issues.

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 17 (October 2 and 3, 2006 emails, bates nos. BryanCave0011102-1107). Gabriel Declaration, p. 5, ¶¶ 13 and 14, and Exhibits 14-15 to the Gabriel Declaration, Requests for Admission and Response thereto to re October 13, 2006 engagement agreement, bates no. BryanCave0006245 -

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

6249). Gabriel Declaration, p. 6, ¶ 15, and Exhibit 13 (November 2, 2006 engagement agreement, bates no. BryanCave0010044 - 10048) Gabriel Declaration, p. 4, ¶ 7 and Exhibit 9 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/19/17), p. 191, lines 4-15, pp. 217-226, lines 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-14; and, Exhibit 83 thereto (email from Katherine Windler to Karen Guth and Joshua Yaguda, attaching file named “Memo to client re compliance review checklist_v1.DOC”).

disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. This is not a “securities and real estate compliance issues”; it is a blatant crime that Guth and Yaguda perpetrated while misleading investors and Defendants. See, e.g., Dore Decl. Exh. 83, 87 (EFI/EFMF misrepresentations that the number of non-performing loans was “small” and only one loan out of 589 in which EFMF had invested had gone into default as of Dec. 31, 2006); Gabriel Decl. Exh. 7 at 61 (Windler testimony that Guth told her that EFI did not have loans going into default); Dore Decl. Exh. 85 (showing hundreds of EFI loans in default as of Dec. 31, 2006). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; argumentative; misrepresents the evidence; Rule of Completeness (Fed. R. Evid. 106): The purported supporting evidence refers to hiring Bryan Cave for the Locati Arbitration. The portion of the transcript included is misleading and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254, lines 3-22. Nor is there reference in any documents cited to Bryan Cave being hired to “identify and correct outstanding securities and real estate compliance issues.” In addition, the documents referenced are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to documents (deposition exhibits) that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

80. While EFI/EFMF was a flawed business that was poorly conceived, managed and operated, it was a legitimate business built upon a then widely recognized concept used by subprime mortgage brokers: that loans could be “partially

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 5 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (5/10/17, vol. 2.), pp. 214-219, lines 11-25, 1-25, 1-25, 1-25, 1-25, and 1-3.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

funded” at the outset with the balance funded by future investors. Defendants’ own expert, Puccio, explained the business model during his deposition.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees’ argument that EFI/EFMF was a “legitimate” business includes no evidence that controverts Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Misrepresents the evidence: The purported supporting evidence refers to Puccio’s opinion of Stein & Lubin, EFI and EFMF’s former legal counsel, and his testimony about limited specific issues regarding compliance with real estate laws. It is not evidence of EFI/EFMF’s business, how it was managed and operated, whether it was a “legitimate business,” or whether it was “built on a widely recognized concept used by subprime brokers.” Improper legal conclusion. This is an improper legal conclusion couched as a fact. Dillon v. Cont'l




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Cas. Co., 278 F. Supp. 3d 1132, 1137 (N.D. Cal. 2017) (statements that are legal conclusions “are not facts and can only be considered as arguments.”)

81. The EFI Parties did not hide their business practices from Defendants, or anyone else. For example, in the Locati Action, Yaguda testified in detail about EFI’s operations and funding of its loans. Amberg, a senior litigation partner at Bryan Cave who defended EFI in the Locati Action, reviewed the transcript of that deposition on October 16, 2006, just days after Bryan Cave was retained.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Yaguda did not testify that EFI/EFMF was engaging in self-dealing with investor money (which the Trustees have admitted) (Dore Decl. Exhs. 130-132). Nor did he testify that EFI was engaging in what the Trustees have called a “Ponzi-like manner,” or that EFI had hundreds of loans in default. In fact, Guth and Yaguda actively misled both investors and Defendants. See, e.g., Dore Decl. Exh. 83, 87 (EFI/EFMF misrepresentations that the number of non-performing loans was “small” and only one loan out of 589 in which EFMF had invested had gone into default as of Dec. 31,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

2006); Gabriel Decl. Exh. 7 at 61 (Windler testimony that Guth told her that EFI did not have loans going into default); Dore Decl. Exh. 85 (showing hundreds of EFI loans in default as of Dec. 31, 2006). In any event, for the reasons discussed above in Section I, supra, even if Defendants participated in the wrongdoing (which they did not do), in pari delicto and unclean hands still would apply to bar the Trustees’ state-law claims. See, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence: Misrepresents the evidence; Rule of completeness (Fed. R. Evid. 106): The purported supporting evidence does not support this alleged “fact.” The Trustees cite to the deposition testimony of Mr. Miller – i.e. not Mr. Amberg – about what Mr. Amberg reviewed and Mr. Miller’s testimony neither discusses nor confirms that Yaguda testified about EFI’s operations during the Locati Arbitration or that Mr. Amberg reviewed Yaguda’s deposition transcript. Nor is the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

sweeping purported fact statement that “The EFI Parties did not hide their business practices from Defendants, or anyone else” supported by the evidence presented in support of this fact, nor could it be. Hearsay. Best Evidence Rule. In addition, the deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

82. During their representation of EFI/EFMF, Defendants never asserted that the clients ran a Ponzi scheme. Rather, Windler testified that she only concluded that all EFI’s business activities were unlawful when “I read the summary judgment motion” filed by Bryan Cave in these cases.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), p. 132, lines 6-17: “Q BY MR. REITMAN: At some point in time, did you come to believe that virtually all of EFI's business activities were unlawful? MR. SANDERS: Objection to the form of the question; vague, lacks foundation, asked and answered. THE DEPONENT: Yes. BY MR. REITMAN: When? A When I read the summary judgment motion. Q Which summary judgment motion? A The ones that were filed

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982)




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

by the defense in this case.”

(“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

loans. As discussed above, supra, Section I, the in pari delicto doctrine and unclean hands defense would apply even if Ms. Windler participated in EFI’s and EFMF’s fraud (which she did not do). See, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). But the Trustees’ own fact shows that she did not know about EFI’s and EFMF’s massive wrongdoing. See Gabriel Decl. Exh. 7 at 61. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Misstates the evidence. The wording of the transcript is the best evidence of Ms. Windler’s testimony.

83. In fact, during Defendants’ representation of EFI/EFMF, Windler stated that she would do anything to help EFI and EFMF, even if it meant working for free.

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 25 (August 2, 2017 e-mail exchange between John Amberg and Katherine Winder, subject RE: EFI v. Stein & Lubin, bates no. BryanCave0021889)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Misrepresents the evidence: The Trustees’ reliance on Exhibit 25 to the Gabriel Declaration is not accurate and it is referenced out of context; Exhibit 25 is about the Locati Arbitration.

84. In August 2007, when Windler’s colleague Amberg sent an e-mail to her, asking that she testify in the arbitration where EFI was suing its former counsel, Amberg wrote: . . . I suddenly realized that the best way to explain the Locati case and S&L’s failings is to have you be the witness. Katherine, you have to do this - you will be even better than Guy [Puccio] because you can explain the case from a


Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”);




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

lawyer’s perspective. It will make all the difference to EFI.

id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Misrepresents the evidence: The Trustees’ reliance on Exhibit 25 to the Gabriel Declaration is not accurate and it is referenced out of context; Exhibit 25 is about the Locati Arbitration.

85. Windler responded: “I would do anything to help Karen and Josh. I want them to get these guys badly enough that I’d even do it for cost reimbursement only. So, my answer is yes.”






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Misrepresents the evidence: The Trustees’ reliance on Exhibit 25 to the Gabriel Declaration is not accurate and it is referenced out of context; Exhibit 25 is about the Locati Arbitration.

86. Later in the representation, during 2008, and after regulators were seeking to rescind permits, Windler stated that there was no evidence of wrongdoing by EFI/EFMF.

Gabriel Declaration. p. 6, ¶ 15 and Exhibit 26 (memorandum from Katherine Winder to Karen Guth and Joshua Yaguda, discussing June 13, 2008 hearing, bates no. BryanCave0000679 - 683)(“There is not a scintilla of evidence that EFI has ever taken a fee in excess of the contractual allowance. Investors agreed to the 1% fee, and if another servicer comes into EFI' s shoes, they will charge the investors an equal or greater fee. It is not inappropriate for EFI to earn a sufficient amount to pay its operating expenses and make a profit…. Appointment of a receiver would be prejudicial to both Guth and Yaguda.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Without any real evidence of wrongdoing, they should not be stripped of their livelihood. The contractual documents set forth the minimum number of investors who had to vote to remove EFI and that contractual obligation binding these Plaintiffs cannot be overridden by their attempt to end-run around it using this Court as a sword.”)

Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to show that Ms. Windler was aware of this wrongdoing, and the in pari delicto doctrine and unclean hands defense would apply even if she did.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

See, supra, Section I. In any event, Guth and Yaguda actively misled investors as well as the Defendants. See, e.g., Dore Decl. Exh. 83, 87 (EFI/EFMF misrepresentations that the number of non-performing loans was “small” and only one loan out of 589 in which EFMF had invested had gone into default as of Dec. 31, 2006); Gabriel Decl. Exh. 7 at 61 (Windler testimony that Guth told her that EFI did not have loans going into default); Dore Decl. Exh. 85 (showing hundreds of EFI loans in default as of Dec. 31, 2006). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

87. The chart attached hereto as Exhibit 1 sets forth the information that the Trustees have provided in their status reports to the Court as to properties sold, gross proceeds from the sales, properties in escrow and properties listed for sale.

With respect to the below, “EFI bankruptcy case” means and refers to Case No. 9:08-bk-11457 7/9/09 (EFI bankruptcy case Docket No. 595) 9/8/09 (EFI bankruptcy case Docket No. 702) 10/2/09 (EFI bankruptcy case Docket No. 731) 11/6/09 (EFI bankruptcy case Docket No. 776) 12/30/09 (EFI bankruptcy case Docket No. 879) 1/29/10 (EFI bankruptcy case Docket No. 972) 4/16/10 (EFI bankruptcy case Docket No. 1115) 9/10/10 (EFI bankruptcy

Objection Hearsay (FRE 802). There is no chart attached to the “Plaintiff Trustees’ Separate Statement Of Supplemental Undisputed Facts In Support Of Motion For Partial Summary Judgment By Defendant Bryan Cave LLP On Grounds Of Unclean Hands And/Or In Pari Delicto.” This supplemental fact thus fails on its face. To the extent, the Trustees seek to rely upon the information in their own filings in 9:08-bk-11457 to establish some unstated proposition, the Trustees fail to cite any evidence (whether a declaration or anything else) to provide any foundation or explanation for the information in those documents or their




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

case Docket No. 1393) 10/15/10 (EFI bankruptcy case Docket No. 1439) 12/10/10 (EFI bankruptcy case Docket No. 1502) 1/3/11 (EFI bankruptcy case Docket No. 1532) 2/4/11 (EFI bankruptcy case Docket No. 1562) 4/1/11 (EFI bankruptcy case Docket No. 1616) 6/17/11 (EFI bankruptcy case Docket No. 1715) 7/8/11 (EFI bankruptcy case Docket No. 1763) 9/16/11 and 9/22/11 (EFI bankruptcy case Docket Nos. 1857 and 1860) 9/22/11 (EFI bankruptcy case Docket No. 1860) 1/27/12 (EFI bankruptcy case Docket No. 1971) 4/27/12 (EFI bankruptcy case Docket No. 2033) 7/27/12 (EFI bankruptcy case Docket No. 2153) 10/26/12 (EFI bankruptcy case Docket No. 2245)

admissibility at trial.

88. As of the EFI petition date, EFI had 544 outstanding loans with outstanding principal balances totaling approximately $318 million secured by real estate funded by direct investors and through investments by EFMF (EFMF itself had

EFI Disclosure Statement (Case No. 9:08-bk-11457, Docket No. 3640), p. 38 of 277, lines 3-10.

Objection Hearsay (FRE 802). To the extent, the Trustees seek to rely upon the information in their own filings in 9:08-bk-11457, the Trustees fail to cite any evidence (whether a declaration or anything else) to provide any foundation or explanation for the information in




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

investors).

those documents or their admissibility at trial. The Trustees merely re-state what they wrote in their Disclosure Statement in April 2016 and offer no evidence showing the truth of that regurgitated statement.

89. As of the effective date of EFI’s plan, the real estate sold by the Trustee resulted in gross proceeds of approximately $93 million.

EFI Disclosure Statement (Case No. 9:08-bk-11457, Docket No. 3640), p. 8 of 277, lines 5-6.

Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The gross proceeds derived by the Trustees from selling the real estate securing EFI’s loans (which was a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

small fraction of the loan amounts), has no bearing on EFI’s and EFMF’s wrongful conduct and the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). To the extent, the Trustees seek to rely upon the information in their own filings in 9:08-bk-11457, the Trustees fail to cite any evidence (whether a declaration or anything else) to provide foundation or explanation for the information in those documents or their admissibility at trial. The Trustees merely re-state what they wrote in their Disclosure Statement in April 2016 and offer no evidence showing the truth of that regurgitated statement.

90. Through the sales of real properties, over $39 million was paid to investor-creditors, including $25.74 million to direct investors and $14.08 million to EFMF, pursuant to settlement agreements

Declaration Of Thomas P. Jeremiassen In Support Of Opposition By Plaintiff Thomas P. Jeremiassen, Liquidating Trustee, To Motion For Partial Summary Judgment By Defendant Katherine Windler For Lack Of Damages (“Jeremiassen Damages Declaration”), at ¶ 9.

Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The distributions in bankruptcy to investors in EFI loans (which were a small fraction of the money invested in those loans), has no bearing on EFI’s and EFMF’s wrongful conduct and the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The filed declaration of Thomas Jeremiassen (9:11-ap-01146-DS, Dkt. 178; 9:11-ap-01147-DS, Dkt. 252) contains none of the information contained in the Supplemental Fact. The statement thus is unsupported by any evidence and should be rejected.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

91. Between 1982 and 2008, EFI originated and closed 3,680 loans with loan amounts totaling over $655 million funded by over $633 million in funding by investors.


Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans closed by EFI—particularly during the 20 years preceding Guth’s and Yaguda’s admitted fraudulent scheme—have no bearing on EFI’s and EFMF’s wrongful conduct as to the hundreds of loans that did not close. As the Trustees evidence submitted with their Declaration of Ray Strong shows (e.g.¸ Exh. 5 at 31), even the loans that closed may have been




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

infected with money improperly moved from other loans on the brink of defaulting. This Supplemental Fact is completely unrelated to the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, it should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). Paragraph 8 of the Jeremiassen Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 6 of the Jeremiassen Declaration, the Trustees claim to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

92. Between 2005 and 2008, EFI originated and closed over $100 million in loans with over $92 million in funding.


Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”);




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans closed by EFI have no bearing on EFI’s and EFMF’s wrongful conduct as to the hundreds of loans that did not close. As the Trustees evidence submitted with their Declaration of Ray Strong shows (e.g., Exh. 5 at 31), even the loans that closed may have been infected with money improperly moved from other loans on the brink of defaulting. Moreover, that same evidence (Strong Decl., Exh. 1) indicates that from 2005 through 2008 EFI originated and did not close over $284 million in loans with over $234 million in funding. This Supplemental Fact is completely unrelated to the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, it should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). Paragraph 8 of the Jeremiassen




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 6 of the Jeremiassen Declaration, the Trustees claim to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

93. Those loans referred to above (in nos. 91, and 92) were all closed and investors in those loans were paid off.


Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

not raise an issue for the jury.”). The loans closed by EFI have no bearing on EFI’s and EFMF’s wrongful conduct as to the hundreds of loans that did not close. As the Trustees evidence submitted with their Declaration of Ray Strong indicates (e.g., Exh. 5 at 31), even the loans that closed may have been infected with money improperly moved from other loans on the brink of defaulting. Moreover, that same evidence (Strong Decl., Exh. 1) indicates that during the 2002 to 2008 time period of Guth’s and Yaguda’s admitted fraud, EFI did not close approximately $374 million in loans. This Supplemental Fact is completely unrelated to the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, it should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). Paragraph 8 of the Jeremiassen Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 6 of the Jeremiassen Declaration, the Trustees claim to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

94. As of the petition date, 544 loans remained outstanding,

Jeremiassen EFI/EFMF Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

with loan amounts of over $374 million with over $318 million in funding by investors

Declaration, at ¶ 9.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). Paragraph 9 of the Jeremiassen Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 7 of the Jeremiassen Declaration, the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

95. That equates to over 87% of EFI’s loans (3,680 out of 4,224) closing between 1982 and the petition date.


Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans closed by EFI have no bearing on EFI’s and EFMF’s wrongful conduct as to the hundreds of loans that did not close. As the Trustees evidence submitted with their Declaration of Ray Strong indicates (e.g., Exh. 5 at 31), even the loans that closed may have been infected with money improperly moved from other loans on the brink of defaulting. Moreover, that same evidence (Strong Decl., Exh. 1) indicates that during the 2002 to 2008 time period of Guth’s and Yaguda’s admitted fraud, EFI did not close approximately 26% of its loans (544 of 2072). In fact, the Trustees’ own evidence indicates that in each of 2006, 2007, and 2008, EFI failed to close more loans than it closed. This Supplemental Fact is completely unrelated to the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, it should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). Paragraph 9 of the Jeremiassen Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 7 of the Jeremiassen Declaration, the Trustees appear to rely in part on documents produced by third party




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

96. As to the $374 million in open loans outstanding at the petition date (with over $318 million in funding by investors), the Trustees recovered gross proceeds of approximately $99 million ($93.5 million of which are from liquidation of properties subject to the loans) by selling the properties subject to those loans.


Objection Immaterial The Supplemental Fact is immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The gross proceeds derived by the Trustees from selling the real estate securing EFI’s loans (which was a small fraction of the loan amounts), has no bearing on EFI’s and EFMF’s wrongful conduct and the application of the in pari delicto




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c) Paragraph 9 of the Jeremiassen Declaration contains none of the information in the Supplemental Fact. To the extent the Trustees intended to cite paragraph 7 of the Jeremiassen Declaration, the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6).

97. The reason for Bryan Cave’s selective discussion of the Three Projects is that consideration of other projects would belie its assertion that EFI/ EFMF operated as a Ponzi scheme.


Objection Immaterial The Supplemental Fact is unsupported and immaterial in any event and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10. The Supplemental Fact is unsupported and controverted. Consideration of other projects does not belie Bryan Cave’s assertion that EFI/EFMF operated as a Ponzi scheme; it confirms it. The Trustees have admitted that:

• In at least some instances EFI continued to advance funds to pay interest to investors after the interest reserve for that loan was depleted, despite the absence of any borrower payments. (Bryan Cave SUF 85.)

• If EFI did not advance investor money intended for other loans




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

to make interest payments to the investors in the loan being benefitted, the investors in the benefitted loan in multiple instances would not have continued to receive interest payments. (Bryan Cave SUF 88.)

• EFI used “unintended loans,” whereby “investment proceeds intended to fund a particular loan were used for other loans and collateral, or for EFI and its operations.” Dore Decl. Exh. 176 at 21 of 56.

Even a cursory glance at other EFI projects is consistent with the projects that the Trustees admit in their opposition to Bryan Cave’s motion were operated by EFI in a “Ponzi-like manner” (p. 20) with an “inappropriate use of investor funds” (id.). For example, the EFI Trustee has admitted that EFI loans B604-05 through B636-05 (that is, 33 loans) were nothing more than “raw land” as late as 2013. Supplemental Declaration of Michael Dore (“Supp. Dore Decl.”) Exh. 4 at 175. Karen Guth was the guarantor on these loans, but even though they had defaulted on March 1, 2007, EFI kept them open all the way through its bankruptcy more than 15 months later. Dore Decl. Exh. 69 at 2070-71. When the Trustee finally sold the raw land securing those 33 loans, $5,335,750.15 in loan funding had evaporated, leaving property that garnered a mere $225,000 purchase price in bankruptcy.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Karen Guth was the guarantor for another 22 loans in Dinuba, California, the property securing which the EFI Trustee has described as “42 Residential Dirt Lots.” Supp. Dore Decl. Exh. 6 at 275. These loans (B533-04 through B552-04, B955-02, B630-03) all defaulted between June 1, 2003 and March 1, 2006, but EFI again failed to foreclose all the way through its June 2008 bankruptcy. Dore Dec. Exh. 69 at 2070-71; Dore Decl. Exh. 85. The loan principal for those 22 loans was $4,138,767.24. In fact, according to the EFI Trustee, “Funds totaling $1,576.959.32 in excess of the original loan amount were advanced prior to the bankruptcy petition filings” to “make interest payments and pay construction related vouchers.” Supp. Dore Decl. Exh. 6 at 276. But after all those years, and after all that money, Karen Guth’s 22 loans were secured by nothing but “dirt.” Exh. 6 at 275. More than $4,000,000 in loan funding before the bankruptcy resulted in a meager $350,000 sale price. Id. EFI loans B125-05, B129-05 through B134-05, and B136-05 through B140-05 were another 12 EFI loans to a borrower controlled by Karen Guth. Supp. Dore Decl. Exh. 3 at 113 (Dkt. 2405, Mar. 11, 2013). Those loans defaulted on April 1, 2006, but EFI kept making interest payments through September 1, 2007. Supp. Dore Decl. Exh. 3 at 116 (Dkt. 2405, Mar. 11, 2013); Dore Decl. Exh. 85. In the process of doing so, as the EFI Trustee admitted, “Funds




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

totaling $660,463.84 in excess of the original loan amount were advanced prior to the bankruptcy petition filings” which were “used to pay construction related vouchers and investor interest payments.” Supp. Dore Decl. Exh. 3 at 114. Even after interest payments stopped, the loans remained open through EFI’s bankruptcy in June 2008, more than two years after they had defaulted. EFI loan B671-04 was yet another loan to a Karen Guth-controlled company. The loan had defaulted on April 1, 2006. But EFI continued making interest payments through September 1, 2007. In doing so, according to the EFI Trustee, “Funds in excess of the original loan amount were advanced prior to the bankruptcy petition filings,” with $155,366.86 of those advances being “used to pay investor interest payments.” Supp. Dore Decl. Exh. 1 at 21. The loan remained open through EFI’s bankruptcy. Dore Decl. Exh. 69 at 2069-2071. The four loans identified by the Trustees in their opposition do nothing to “belie [this] assertion.” Opp. at 19. Each one of those loans was open as of EFI’s bankruptcy in June 2008, even though (1) Loan B516-05 defaulted on March 1, 2007; (2) Loan B502-05 defaulted on November 1, 2007; (3) Loan B367-05 defaulted on August 1, 2006; and (4) Loan B649-05 defaulted on December 1, 2007. Strong Decl. Exh. 3 at 5. Even a cursory analysis of the funding information provided by the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees shows that EFI and EFMF were propping up some loans with construction funds from others. Id. Exh. 4 at 8. Often, this involved taking money from a different loan to funnel it into one of the Trustees’ examples of “good” loans. But this money often was falsely labeled a “Rollover” even though the source loan had not closed. For example, on November 2, 2005, EFI moved $150,000 from Loan B542-05 to Loan B516-05. Id. But Loan B542-05 was open in November 2005, and would remain open through EFI’s bankruptcy. Dore Decl. Exh. 69 at 2070. In fact, Loan B542-05 would default less than one month after EFI funneled the $150,000 from it to Loan B516-05. Dore Decl. Exh. 85 at 2298. Similarly, EFI moved $75,000 from Loan 501-04 to another one of the Trustees’ purported “good” loans (Loan B649-05) on January 5, 2006, less than one month before Loan B501-04 defaulted on February 1, 2006. Strong Decl. Exh. 6 at 92; Dore Decl. Exh. 85 at 2240. Nevertheless, EFI kept that dead source loan—Loan B501-04—open through EFI’s bankruptcy more than two years later in June 2008. Dore Decl. Exh. 69 at 2070. These were not isolated occurrences, even as reflected in the Trustees’ own funding documents. Regarding Loan B502-05, another loan cited by the Trustees, EFI moved $10,000 or more from 15 different loans into Loan B502-05 on the same day. Though styled as “Rollovers,” many of these loans were not paid off; rather, they




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

remained open all the way through EFI’s June 2008 bankruptcy. In fact, several of the source loans were about to default when EFI transferred tens of thousands of dollars from each of them to a different loan. For example, on that one day, February 22, 2006, EFI moved $95,000 from Loan B583-04; $50,000 from Loan B557-04; and $60,000 from Loan B577-04 (all three of which were set to default about one week later on March 1, 2006) into Loan B502-05. EFI took another $85,000 from Loan B363-05 (set to default on May 1, 2006), and $80,000 from Loan B366-06 (also set to default on May 1, 2006) and put it in Loan B502-05 that same day. Strong Decl. Exh. 5 at 31; Dore Decl. Exh. 85 at 2264. EFI kept all of these source loans open for another two years after they defaulted. But those defaults are not surprising in light of the fact that EFI was bleeding their construction funds dry in order to fund a different loan (i.e., Loan B502-05). In fact, the Trustees’ own evidence shows that EFI collected $228,794.94 in loan fees (along with more than $18,000 in loan servicer fees) from Loan B502-05 even after it had defaulted. Strong Decl. Exh. 5 at 43-44.

98. The Trustees’ four examples of projects that are contrary to Bryan Cave’s Ponzi assertions are loans made by EFI to: (1) Steven James Homes LLC; (2) Oakshores LLC; (3) Buelton Industrial


Objection Immaterial Even if there were no wrongdoing at all with these four loans, the Supplemental Fact is immaterial and does not create a disputed issue of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Partners, LLC; and (4) Pannon Design and Development, Inc.

material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10 and the Trustees’ other evidence (which he does not cite) contradicts many of his baseless statements about




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

those loans. The four loans identified by the Trustees are not contrary to Bryan Cave’s “Ponzi assertions.” Rather, even a cursory review of the Trustees’ evidence shows that EFI operated them consistent with the projects that the Trustees admit were operated by EFI in a “Ponzi-like manner” (Opp. at 20) with an “inappropriate use of investor funds” (id.). Each one of the four loans cited by the Trustees was open as of EFI’s bankruptcy in June 2008, even though (1) Loan B516-05 defaulted on March 1, 2007; (2) Loan B502-05 defaulted on November 1, 2007; (3) Loan B367-05 defaulted on August 1, 2006; and (4) Loan B649-05 defaulted on December 1, 2007. Strong Decl. Exh. 3 at 5. (1) As to Loan B516-05 (Steven James Homes), the EFI Trustee claims that EFI’s recordation of a deed in lieu of foreclosure on January 4, 2008 is “an example of EFI taking action upon default of the loan.” Jeremiassen Decl. ¶ 8(i). But it is instead another example of EFI waiting months to take action on a loan that had defaulted, and EFI only did so after investors started to get suspicious about EFI because it had stopped making interest payments on numerous loans. See Dore Decl. Exh. 230. The Trustee also claims that “there were no transfers [from Loan B516-05] to other loans.” Jeremiassen Decl. ¶ 8(i). But the Trustees evidence includes a January 5, 2005 entry showing that $25,000 was




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

“Move[d]” from Loan B516-05 to Loan B649-05. Strong Decl. Exh. 4 at 8. In addition, on November 2, 2005, EFI moved $150,000 from Loan B542-05 to Loan B516-05. Id. EFI labeled this a “Rollover,” but the source loan (B542-05) had not closed. That loan was open in November 2005, and would remain open through EFI’s bankruptcy in June 2008. Dore Decl. Exh. 69 at 2070. In fact, Loan B542-05 would default less than one month after EFI funneled the $150,000 from it to Loan B516-05. Dore Decl. Exh. 85 at 2298. (2) As to Loan B502-05 (Oakshores), the EFI Trustee claims that EFI “initiated a foreclosure process on May 19, 2008 and recorded a notice of default on May 21, 2008, another example of EFI taking action upon default of the loan.” Jeremiassen Decl. ¶ 8(ii). But the loan had passed its maturity date and thus been in default since November 1, 2007 (i.e., for almost 7 months). Again, EFI only took action after investors became suspicious. Dore Decl. Exh. 230. The Trustees admit that 19% of investors in the loan did not receive a recorded assignment of a construction deed of trust. Jeremiassen Decl. ¶ 8(ii). And while the EFI Trustee claims that “there were no transfers to other loans” (id.), the Trustees’ own evidence shows a $25,000 transfer from Loan B502-05 to Loan B407-05 on December 12, 2005; a $1,629,136.39 transfer from Loan




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

B502-05 to Loan B649-05 on January 6, 2006; and a $400,000 transfer from Loan B502-05 to Loan B105-06 on March 3, 2006. Strong Decl. Exh. 5 at 31. In fact, that same evidence shows that EFI moved $10,000 or more from 15 different loans into Loan B502-05 on the same day. Though styled as “Rollovers,” many of these loans were not paid off; rather, they remained open all the way through EFI’s June 2008 bankruptcy. In fact, several of the source loans were about to default when EFI transferred tens of thousands of dollars from each of them to a different loan. For example, on that one day, February 22, 2006, EFI moved $95,000 from Loan B583-04; $50,000 from Loan B557-04; and $60,000 from Loan B577-04 (all three of which were set to default about one week later on March 1, 2006) into Loan B502-05. EFI took another $85,000 from Loan B363-05 (set to default on May 1, 2006), and $80,000 from Loan B366-06 (also set to default on May 1, 2006) and put it in Loan B502-05 that same day. Strong Decl. Exh. 5 at 31; Dore Decl. Exh. 85 at 2264. EFI kept all of these source loans open for another two years after they defaulted. But those defaults are not surprising in light of the fact that EFI was bleeding their construction funds dry in order to fund a different loan (i.e., Loan B502-05). In fact, the Trustees’ own evidence shows that EFI collected $228,794.94 in loan fees (along with more than $18,000 in




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

loan servicer fees) from Loan B502-05 even after it had defaulted. Strong Decl. Exh. 5 at 43-44. (3) As to Loan B367-05 (Buellton), the Trustees admit that several investors never received a recorded assignment of a construction deed of trust. Jeremiassen Decl. ¶ 8(iii). They further admit that the loan was for “15-months,” meaning that EFI left it open and took no action the almost 2 years between its default and EFI’s bankruptcy. See Exh. 85 at 2281. In fact, EFI kept making interest payments on Loan B367-05 through December 1, 2007, a full 16 months after the loan defaulted. Supp. Dore Decl. Exh. 5 at 228. EFI even accepted new investments after the loan had defaulted. Strong Decl. Exh. 7 at 136, 137. Again contrary to the EFI Trustee’s claim that Loan B367-05 had “no transfers to other loans,” Jeremiassen Decl. ¶ 8(iii), the Trustees’ other evidence shows multiple transfers (with the parenthetical explanation “move”) both to and from that loan. Strong Decl. Exh. 7 at 134. (4) As to Loan B649-05 (Pannon), the EFI Trustee admits that “there was a small amount of transfers from other Pannon loans ($37,987.60), but those amounts resulted from excess construction trust fund balances in the other loans after payoff of the loans, so the remaining balances after loan payoffs were transferred to this loan.” Jeremiassen Decl. ¶ 8(iv). But the EFI Trustee does not explain why that money was




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

transferred to B649-05 instead of being paid back to investors. Indeed, the EFI Trustee admitted in a publicly filed document regarding Loan B649-05 that: “Prior to the petition date, advances were made for the benefit of the property (including construction costs) and the investors in the loan (for interest payments to the investors). The source of the advances were from net transfers from other EFI loans ($37,987.60). … Since the source of funds for the advances ultimately was monies of other investors not designated to the particular loan being benefitted, these funds need to be recouped by the EFI estate to provide a source of recovery for those investors.” Supp. Dore Decl. Exh. 7 at 313.

99. The first example of a project overlooked by Bryan Cave is the loan to Steven James Homes LLC.

Jeremiassen EFI/EFMF Declaration, at ¶ 10.i.

Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental “Fact,” which is nothing but argument, should be disregarded. See detailed discussion, supra, Section I.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10 and this purported “fact” is argumentative, immaterial, and controverted. EFI operated the loan to Steven James Homes LLC (Loan B516-05) consistent with the projects that the Trustees admit were operated by EFI in a “Ponzi-like manner” (Opp. at 20) with an “inappropriate use of investor funds” (id.). Loan B516-05 was open as of EFI’s bankruptcy in June 2008, even though it had defaulted 15 months earlier on March 1, 2007. Strong Decl. Exh. 3 at 5. Thus, while the EFI Trustee claims that EFI’s recordation of a deed in lieu of foreclosure on January 4,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

2008 is “an example of EFI taking action upon default of the loan,” Jeremiassen Decl. ¶ 8(i), it really is yet another example of EFI failing to take action in order to prevent investors from complaining and bringing EFI’s and EFMF’s fraudulent scheme to a halt. Indeed, EFI finally acted only after investors started to get suspicious about EFI because it had stopped making interest payments on numerous loans. See Dore Decl. Exh. 230. The EFI Trustee claims that “there were no transfers [from Loan B516-05] to other loans.” Jeremiassen Decl. ¶ 8(i). But the Trustees evidence includes a January 5, 2005 entry showing that $25,000 was “Move[d]” from Loan B516-05 to Loan B649-05. Strong Decl. Exh. 4 at 8. In addition, on November 2, 2005, EFI moved $150,000 from Loan B542-05 to Loan B516-05. Id. EFI labeled this a “Rollover,” but the source loan (B542-05) had not closed. That loan was open in November 2005, and would remain open through EFI’s bankruptcy in June 2008. Dore Decl. Exh. 69 at 2070. In fact, Loan B542-05 would default less than one month after EFI funneled the $150,000 from it to Loan B516-05. Dore Decl. Exh. 85 at 2298. Thus, EFI was bleeding some loans dry in order to prop up others (most of which, like Loan B516-05, would later default anyway).

100. The loan was a $1,327,471 Jeremiassen EFI/EFMF Undisputed to the extent “this loan”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

loan for new construction, with a 18-month term.

Declaration, at ¶ 10.i.

refers to EFI Loan B516-05 and the Trustees’ intended to refer to paragraph 8(i) of the Jeremiassen Declaration. Otherwise, Bryan Cave objects to the fact as unsupported pursuant to Fed. R. Civ. Proc. 56(c).

101. Notably, on this loan: (1) interest was only paid to investors after the loan funded; (2) once interest reserves were depleted, the borrower made a payment to cover the remaining interest payments made by EFI; (3) EFI recorded a deed in lieu of foreclosure on January 4, 2008, an example of EFI taking action upon default of the loan; (4) all investors on the loan eventually received a recorded assignment of construction deed of trust, including EFMF; (5) there were no transfers to other loans; and (6) there were significant construction costs incurred to build a home, and the real estate purchase and loan draws/construction costs represent approximately 87% of the total loan funding.

Jeremiassen EFI/EFMF Declaration, at ¶ 10.i.

Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental “Fact,” which is nothing but argument, should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The Jeremiassen Declaration has no Paragraph 10. To the extent the Trustees are relying on Paragraph 8 of the Jeremiassen Declaration, and “this loan” refers to Loan B516-05, the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6). See also Strong Decl. ¶ 3(iii). EFI operated the loan to Steven James Homes LLC (Loan B516-05) consistent with the projects that the Trustees admit were operated by EFI in a “Ponzi-like manner” (Opp. at 20) with an “inappropriate use of investor funds” (id.). Loan B516-05 was open as of EFI’s bankruptcy in June 2008, even though it had defaulted 15 months earlier on March 1, 2007. Strong Decl. Exh. 3 at 5. Thus, while the EFI Trustee claims that EFI’s recordation of a deed in lieu of foreclosure on January 4, 2008 is “an example of EFI taking action upon default of the loan,” Jeremiassen Decl. ¶ 8(i), it really is yet another example of EFI failing to take action in order to prevent investors from complaining and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

bringing EFI’s and EFMF’s fraudulent scheme to a halt. Indeed, EFI finally acted only after investors started to get suspicious about EFI because it had stopped making interest payments on numerous loans. See Dore Decl. Exh. 230. The EFI Trustee claims that “there were no transfers [from Loan B516-05] to other loans.” Jeremiassen Decl. ¶ 8(i). But the Trustees evidence includes a January 5, 2005 entry showing that $25,000 was “Move[d]” from Loan B516-05 to Loan B649-05. Strong Decl. Exh. 4 at 8. In addition, on November 2, 2005, EFI moved $150,000 from Loan B542-05 to Loan B516-05. Id. EFI labeled this a “Rollover,” but the source loan (B542-05) had not closed. That loan was open in November 2005, and would remain open through EFI’s bankruptcy in June 2008. Dore Decl. Exh. 69 at 2070. In fact, Loan B542-05 would default less than one month after EFI funneled the $150,000 from it to Loan B516-05. Dore Decl. Exh. 85 at 2298. Thus, EFI was bleeding some loans dry in order to prop up others (most of which, like Loan B516-05, would later default anyway).

102. The second example of projects not discussed by Bryan Cave is Oakshores LLC.

Jeremiassen EFI/EFMF Declaration, at ¶ 10.ii.

Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental “Fact,” which is nothing but argument, should be disregarded. See detailed discussion, supra, Section I.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10 and the purported “fact” is argumentative and immaterial. Bryan Cave’s SUF 65 states that




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

“[a]s of June 25, 2008, all 544 out of 544 loans managed by EFI were in default.” See also Dore Decl. Exh. 11, 12, 69. This included Loan B502-05 to Oakshores LLC, which was in default as of its maturity date on November 1, 2007. That loan nevertheless remained open through EFI’s bankruptcy, notwithstanding EFI’s last minute initiation of foreclosure just 37 days before it entered bankruptcy. See Strong Decl. Exh. 3 at 5; Dore Decl. Exh. 85 at 86.

103. EFI made a 24-month, $13,665,000 loan for acquisition and development to Oakshores LLC.


Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982)




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The Jeremiassen Declaration has no Paragraph 10. To the extent the Trustees are relying on Paragraph 8 of the Jeremiassen Declaration, and “this loan” refers to Loan B502-05, the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6). See also Strong Decl. ¶ 3(iii). Other Trustee filings indicate contrary information regarding Loan B502-05. See, e.g., 9:08-bk-11457-DS, Dkt. 3089 (“Notice of EFI Trustee’s Proposed Entry Into Agreement to Modify Secured Note and Deed of Trust Regarding Previous Sale of Interests In Real Property (Track 2162, Phases 2-6, Lakeview Drive, Paso Robles, CA 93446 (Loan B502-05) at 17 of 41 (noting a 25-month loan term); see




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

generally Fed. R. Evid. 201; Bryan Cave’s Request for Judicial Notice, 9:11-ap-01147, Dkt. 208.

104. On this loan: (1) interest was only paid to investors after the loans funded, and the total interest payments were approximately $1.5 million less than the contracted interest reserves for the project; (2) EFI initiated a foreclosure process on May 19, 2008 and recorded a notice of default on May 21, 2008, another example of EFI taking action upon default of the loan; (3) there were no transfers to other loans; (4) 54 of 67 (81%) of the investors eventually received a recorded assignment of construction deed of trust; and (5) there were significant construction costs incurred by the borrower, and the real estate purchases and loan draws/construction costs represent approximately 79% of the total loan funding.


Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Thus, the Supplemental Fact should be disregarded. See detailed discussion, supra, Section I.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The Jeremiassen Declaration has no Paragraph 10. To the extent the Trustees are relying on Paragraph 8 of the Jeremiassen Declaration, and “this loan” refers to Loan B502-05, the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6). See also Strong Decl. ¶ 3(iii). The EFI Trustee claims that EFI “initiated a foreclosure process on May 19, 2008 and recorded a notice of default on May 21, 2008, another example of EFI taking action upon default of the loan.” Jeremiassen Decl. ¶ 8(ii). But the loan had passed its maturity date and thus been in default since November 1, 2007 (i.e., for almost 7 months). Dore Decl. Exh. 85. Again, EFI only took action after investors became suspicious. Dore Decl. Exh. 230. While the EFI Trustee claims that “there were no transfers to other loans” (id.), the Trustees’ own evidence shows a $25,000 transfer from Loan B502-05 to Loan B407-05 on December 12, 2005; a $1,629,136.39 transfer from Loan B502-05 to Loan B649-05 on January 6, 2006; and a $400,000 transfer from Loan B502-05 to Loan B105-06 on March 3, 2006. Strong




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Decl. Exh. 5 at 31. In fact, that same evidence shows that EFI moved $10,000 or more from 15 different loans into Loan B502-05 on the same day. Strong Decl. Exh. 5 at 31. Though styled as “Rollovers,” many of these loans were not paid off; rather, they remained open all the way through EFI’s June 2008 bankruptcy. In fact, several of the source loans were about to default when EFI transferred tens of thousands of dollars from each of them to a different loan. For example, on that one day, February 22, 2006, EFI moved $95,000 from Loan B583-04; $50,000 from Loan B557-04; and $60,000 from Loan B577-04 (all three of which were set to default about one week later on March 1, 2006) into Loan B502-05. EFI took another $85,000 from Loan B363-05 (set to default on May 1, 2006), and $80,000 from Loan B366-06 (also set to default on May 1, 2006) and put it in Loan B502-05 that same day. Strong Decl. Exh. 5 at 31; Dore Decl. 85 at 2245, 2247, 2248, 2264. EFI kept all of these source loans open for another two years after they defaulted. Dore Decl. Exh. 69 at 2070. But those defaults are not surprising in light of the fact that EFI was bleeding their construction funds dry in order to fund a different loan (i.e., Loan B502-05). In fact, the Trustees’ own evidence shows that EFI collected $228,794.94 in loan fees (along with more than $18,000 in loan




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

servicer fees) from Loan B502-05 even after it had defaulted. Strong Decl. Exh. 5 at 43-44.

105. The third example of projects not discussed by Bryan Cave is Buellton Industrial Partners, LLC.

Jeremiassen EFI/EFMF Declaration, at ¶ 10.iii.

Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Thus, the Supplemental “Fact,” which is nothing but argument, should be disregarded. See detailed discussion, supra, Section I.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10 and the purported “fact” is argumentative and immaterial. Bryan Cave’s SUF 65 states that “[a]s of June 25, 2008, all 544 out of 544 loans managed by EFI were in default.” See also Dore Decl. Exh. 11, 12, 69. This included Loan B367-05 to Buellton Industrial Partners, LLC, which was in default as of its maturity date on August 1, 2006. That loan nevertheless remained open through EFI’s bankruptcy almost two years later. See Strong Decl. Exh. 3 at 5; Dore Decl. Exh. 85 at 58.

106. EFI made a 15-month, $3,251,760 loan for new construction.


Undisputed to the extent the Trustees are referring to EFI Loan B367-05 and the Trustees’ intended to refer to paragraph 8(iii) of the Jeremiassen Declaration. Otherwise, Bryan Cave objects to the fact as unsupported pursuant to Fed. R. Civ. Proc. 56(c). In any event, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

107. On this loan: (1) interest was only paid to investors after the loan funded; (2) the borrower made $122,230 in interest payments and approximately $3.2 million in loan payoffs, which allowed for the repayment of principal to investors; (3) there were no transfers to other loans; (4) 51 of 54 investors received a recorded assignment of construction deed of trust; and (5) there


Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

were significant construction costs incurred by the borrower, and the real estate purchases and loan draws/construction costs represent approximately 76% of the total loan funding.

preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The Jeremiassen Declaration has no Paragraph 10. To the extent the Trustees are relying on Paragraph 8 of the Jeremiassen Declaration, and “this loan” refers to Loan B367-05 (Buellton), the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6). See also Strong Decl. ¶ 3(iii).




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

As to Loan B367-05, the Trustees admit that several investors never received a recorded assignment of a construction deed of trust. Jeremiassen Decl. ¶ 8(iii). They further admit that the loan was for “15-months,” meaning that EFI left it open and took no action the almost 2 years between its default and EFI’s bankruptcy. See Dore Decl. Exh. 85 at 58. In fact, EFI kept making interest payments on Loan B367-05 through December 1, 2007, a full 16 months after the loan defaulted. Supp. Dore Decl. Exh. 5 at 228; Dore Decl. 85 at 2281. EFI even accepted new investments after the loan had defaulted. Strong Decl. Exh. 7 at 136, 137. Contrary to the EFI Trustee’s claim that Loan B367-05 had “no transfers to other loans,” Jeremiassen Decl. ¶ 8(iii), the Trustees’ other evidence shows multiple transfers (with the parenthetical explanation “move”) both to and from that loan. Strong Decl. Exh. 7 at 134.

108. The fourth example of projects not discussed by Bryan Cave is Pannon Design and Development, Inc.

Jeremiassen EFI/EFMF Declaration, at ¶ 10.iv.

Objection Immaterial Even if there were no wrongdoing at all with this loan, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental “Fact,” which is nothing but argument, should be disregarded.

Fed. R. Civ. Proc. 56(c) The Jeremiassen Declaration does not even have a paragraph 10 and the purported “fact” is argumentative and immaterial. Bryan Cave’s SUF 65 states that “[a]s of June 25, 2008, all 544 out of 544 loans managed by EFI were in default.” See also Dore Decl. Exh. 11, 12, 69. This included Loan B649-05 to Pannon Design and Development, Inc., which was in default as of its maturity date on December 1, 2007. That loan nevertheless remained




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

open through EFI’s bankruptcy almost 7 months later. See Strong Decl. Exh. 3 at 5; Dore Decl. Exh. 85 at 111.

109. EFI made a 24-month, $5,172,000 loan for land acquisition and development.


Undisputed to the extent the Trustees are referring to EFI Loan B649-05 and the Trustees’ intended to refer to paragraph 8(iv) of the Jeremiassen Declaration. Otherwise, Bryan Cave objects to the fact as unsupported pursuant to Fed. R. Civ. Proc. 56(c). In any event, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

110. On this loan: (1) interest was only paid to investors after the loan funded, with the borrower making $336,601 in interest payments, which covered the interest payments to investors after the interest reserves were depleted; (2) 51 of 54 (94%) of investors eventually received a recorded assignment of construction deed of trust; (3) there was a small amount of transfers from other Pannon loans ($37,987.60), but those amounts resulted from excess construction trust fund balances in the other loans after payoff of the loans, so the remaining balances after loan payoffs were transferred to this loan; (4) there were significant construction costs incurred by the borrower, and the real estate purchases and loan draws/construction costs represent approximately 78% of the total loan funding.


Objection Immaterial Even if there were no wrongdoing at all with these four loans, the Supplemental Fact is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

Hearsay (FRE 802)/Fed. R. Civ. Proc. 56(c). The Jeremiassen Declaration has no Paragraph 10. To the extent the Trustees are relying on Paragraph 8 of the Jeremiassen Declaration, and “this loan” refers to Loan B649-05 (Pannon), the Trustees appear to rely in part on documents produced by third party Heritage Oaks Bank without any evidence that the Heritage Oaks Bank materials are business records subject to FRE 803(6). See also Strong Decl. ¶ 3(iii). As to Loan B649-05, the EFI Trustee admits that “there was a small amount of transfers from other Pannon loans ($37,987.60), but those amounts resulted from excess construction trust fund balances in the other loans after payoff of the loans, so the remaining balances after loan payoffs were transferred to this loan.” Jeremiassen Decl. ¶ 8(iv). But the EFI Trustee does not explain why that money was transferred to B649-05 instead of being paid back to investors. Indeed, the EFI Trustee admitted in a publicly filed document regarding Loan B649-05 that: “Prior to the petition date, advances were made for the benefit of the property (including construction costs) and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the investors in the loan (for interest payments to the investors). The source of the advances were from net transfers from other EFI loans ($37,987.60). … Since the source of funds for the advances ultimately was monies of other investors not designated to the particular loan being benefitted, these funds need to be recouped by the EFI estate to provide a source of recovery for those investors.” Supp. Dore Decl. Exh. 7 at 313.

111. Intentionally left blank.

112. Intentionally left blank.

113. EFI also did not promise investors risk-free returns; rather, it warned investors that investments were long-term and illiquid, and would be repaid only when the loans reached maturity.

RJN at Ex. 4.

Objection Immaterial The Supplemental Fact is immaterial. It does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982)




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The loans that the Trustees concede to reflect obvious wrongdoing are sufficient themselves to warrant application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. Thus, the Supplemental Fact should be disregarded.

Fed. R. Civ. Proc. 56(c) The Trustees cite only an EFI Offering Circular dated October 10, 2007. They offer no evidence that any investor actually saw that document. Indeed, Joshua Yaguda filed a July 2008 declaration in the EFMF Bankruptcy Proceeding stating that the “most recent” Offering Circular that EFMF used to solicit investments was the 2006 document created by Stein & Lubin (rather than the 2007 document that Bryan Cave and Katherine Windler were involved in preparing). Dore Decl. Exh. 19 (EFMF Bankruptcy Proceeding, Signed Declaration of J. Yaguda (Dkt. 18) ¶ 4 (“The Fund solicited investments through various Offering Circulars approved by the California Department of Corporations….”)). Even if EFI actually used the October 10, 2007 Offering Circular, to solicit new investors, the Trustees evidence indicates that only 18 out of 4,224 EFI loans were originated in 2017 or 2018. Strong Decl. Exh.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

1 at 3. In any event, EFI strongly implied (based on false information) that investors’ money was safe. See, e.g., Dore Decl. Exh. 80 (EFI 2006 Offering Circular, EFIOFFICE0009787 at 9821) (“Since 2000, EFI has recorded (or caused to be recorded) a total of 9 notices of default, all of which were brought current or paid off. During this time, no investor of EFI has lost any of his or her principal investment.”); Dore Decl. Exh. 78 (EFI0117344 [December 22, 2006 email from Karen Guth to Dan Esposito, stating that “I can say unequivocally that no investor has ever lost any principal with Estate Financial”]); EFI Trustee Adversary Proceeding, Complaint (Dkt. 1) Ex. 26 at 379 [p. 55 of 65 of Offering Circular] (“As of December 31, 2006, the Fund had invested in 589 mortgage loans in an aggregate amount of $152,575,024. As of December 31, 2006, the Fund had one (1) loan which had gone into default.”); EFMF Trustee Adversary Proceeding, Complaint (Dkt. 1) Ex. 26 at 196 [p. 55 of 65 of Offering Circular] (same). The only portion of this Supplemental Fact that is remotely material is the Trustees’ admission that EFI told investors they would be repaid when the loans “reached maturity.” As the evidence shows, EFI did not repay investors when their loans reached maturity; instead, EFI continued to pay interest payments long after the loans defaulted, even when they secured property that after years




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was nothing but dirt. See, e.g., Supp. Dore Decl. Exh. 2 at 67, Exh. 3 at 116; Dore Decl. Exh. 85 at 2253, 2261.

114. EFI investors invested in undivided fractional interests in loans evidenced by undivided fractional interests in secured notes and secured by undivided fractional interests in deeds of trust on real property.

RJN at Ex. 4.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. The Trustees’ improperly cite to a purported offering circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”). Moreover, Trustees offer no evidence about which of any investors received this offering document. Moreover, the cited supporting offering circular is dated in October 2007, and does not prove any facts with respect to offering circulars or representations to investors that pre-date that date.

115. Investors also were not told that they would share in the profits of EFI’s business; instead, EFI’s offering circulars disclosed that they were making investments in long-term loans on real property, with payments to investors to come from interest reserves and payments from borrowers on the loans.

RJN at Ex. 4.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. EFI/EFMF may have told investors that payments would come from interest reserves and payments from borrowers; they did not tell




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

investors that payments would come from other investors. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. The Trustees’ improperly cite to a purported offering circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”). Moreover, Trustees offer no evidence about which of any investors received this offering document. Moreover, the cited supporting offering circular is dated in October 2007, and does not prove any facts with respect to offering circulars or representations to investors that pre-date that date.

116. Bryan Cave states that “EFI engaged Bryan Cave to review certain EFI securities filings and to commence a review of EFI’s compliance with legal and regulatory requirements” and asserts that “EFI never provided Windler with access to the information necessary to conduct that review, but that fact is not a component of this Motion.” Bryan Cave’s assertion is contradicted by an e-mail from Puccio to Windler on December 11,

Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/17), pp. 313-314, lines 5-25, and 1-3; and Exhibit 101 thereto (email from Guy Puccio to Katherine Windler, dates December 11, 2007, subject: 12.11.07 REVISED DRAFT - Issues to be discussed with EFI, attachments: (1) KW.KG.EFI.Foreclosure.pdf; (2)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

2007: These are the issues that I believe should be addressed with Karen Guth, most of which you already know [, one of which was] “[a] list of funds obtained from subsequent investors to pay interest to previous investors identified by loan and project to the extent possible for the purpose of maintaining in a current status the interest payments to all investors

KW.KG.EFIOfferingfrom102607.pdf, (3) KW.KG.EFI.Offeringto102507.pdf.”)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. In any event, the cited email is dated after EFI stopped making interest payments, when investors were suspicious of wrongdoing and regulators began to investigate EFI. See Dore Decl. Exh. 230 [Department of Corporations Case Summary re Estate Financial Mortgage Fund LLC: “In about September and [O]ctober of 2007 investors stopped receing [sic] their monthly payments and began to get suspicious.”]. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; insufficient evidence; misleading: The purported supporting evidence does not support this alleged “fact” that “Bryan Cave’s assertion is contradicted.” Mr. Puccio does not offer any testimony about the contents of a December 11, 2007 email. Hearsay. Best evidence rule. The deposition testimony offered as purported evidence also refers to, and quotes, documents that have not been attached to the Gabriel




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

117. Defendants were aware of the applicable issues, and nonetheless failed to fix them and failed to make required disclosures in filings with the DOC.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 165-168, lines 3-25, 1-25, 1-25, 1-11; and Exhibit 19 thereto (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC). Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/17), pp. 282-284, lines 21-25, 1-25, and 1-25; and Exhibit 94 thereto (memorandum from Guy Puccio to Karen Guth and Joshua Yaguda with a copy to Katherine Windler dated February 9, 2007). Gabriel Declaration, p. 3, ¶ 6 and Exhibit 4 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (4/5/17), p. 184, lines 3-22, and p. 190, lines 11-19; and Exhibit 63 thereto (memorandum from Guy Puccio to Karen Guth with





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

a copy to Katherine Windler dated January 23, 2007).

(SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees do not specify the referenced “issues,” but they offer no evidence to show that Defendants were aware of EFI’s and EFMF’s fraud. See, e.g., Dore Decl. Exh. 83, 87 (EFI/EFMF misrepresentations that the number of non-performing loans was “small” and only one loan out of 589 in which EFMF had invested had gone into default as of Dec. 31, 2006); Gabriel Decl. Exh. 7 at 61 (Windler testimony that Guth told her that EFI did not have loans going into default); Dore Decl. Exh. 85 (showing hundreds of EFI loans in default as of Dec. 31, 2006). In any event, for the reasons discussed above in Section I, supra,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

even if Defendants participated in the wrongdoing (which they did not do), in pari delicto and unclean hands still would apply to bar the Trustees’ state-law claims. See, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Purported fact unduly vague in its use of the phrase “applicable issues”

Mischaracterizes the evidence; insufficient evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The purported “fact” stated mischaracterizes the alleged “supporting evidence”. First, the deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Second, the cited testimony in Exhibit 6 to the Gabriel Declaration refers to a statement about Locati that was cut off and incomplete, and seemingly seeks to cite to Gabriel deposition questions as “evidence” but fails to include the deponent’s response. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). Third, The deposition testimony offered as purported evidence following the citation to Exhibit 4 also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). In addition, Exhibit 4 to the Gabriel Declaration does not include “p. 190” which is listed as evidence in support of this fact. Improper legal conclusion. The Trustees’ self-serving statement about what should or should have not been disclosed to EFI/EFMF is an improper legal conclusion couched as a fact. Dillon v. Cont'l Cas. Co., 278 F. Supp. 3d 1132, 1137 (N.D. Cal. 2017) (statements that are legal conclusions “are not facts and can only be considered as arguments.”)

118. EFI’s offering circular that Defendants prepared and filed with the DOC on or about October 10, 2007 cites

RJN at Ex. 4.

Undisputed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

to 18 notices of defaults: Since the year 2000, EFI through its prior broker and current broker has originated approximately 2,702 loans for an aggregate principal balance of approximately $1,011,113,566.00. Since 2000, EFI has recorded a total of 18 notices of default, and has foreclosed on 3 loans. During this time, no investor of EFI has lost any of his or her principal investment. As of the date of this Offering Circular, EFI has approximately 632 active loans for a total principal amount of $344,684,050.00.

119. That offering circular further states that “EFI has retained Bryan Cave LLP of Santa Monica and Irvine, California to advise it in connection with the preparation of this Offering Circular and the Administration Agreement, as well as the offer and sale of the Fractional Interests offered hereby.”

RJN at Ex. 4.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whoever represented EFI, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

wrongful conduct or to demonstrate that Defendants or anyone else knew that EFI and EFMF were misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. The Trustees improperly cite to an offering circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”)

120. In addition, Guth specifically disclosed to investors that there were a number of projects for which forbearance agreements had been issued, a number of projects in foreclosure, and that those numbers were likely to increase: “In some cases, where builders have completed houses and put them on the market we have issued forbearance agreements for a limited period of time to allow for the suspension of interest payments until the house is sold. There are a number of projects currently in foreclosures and it is

9:11-ap-01147-DS, Docket No. 1, at Exhibit 31.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

likely that this number will increase.”

supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees’ cited ambiguous




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

statement came in August 2007, when Guth’s and Yaguda’s years of lies to investors finally caught up to them, and when EFI was about to miss interest payments for the first time. Dore Decl. Exh. 230 [Department of Corporations Case Summary re Estate Financial Mortgage Fund LLC: “In about September and [O]ctober of 2007 investors stopped receing [sic] their monthly payments and began to get suspicious.”]. Moreover, it was couched in false language designed to mislead investors into continuing to think EFI’s loans were healthy. The full sentence states, “In some cases, where builders have completed houses and put them on the market we have issued forbearance agreements for a limited period of time to allow for the suspension of interest payments until the house is sold.” Id. (emphasis added). That certainly does not create any genuine issue of material fact as to whether Guth and Yaguda lied regarding the status of the loans and construction projects in previous years, which generally were patches of dirt and not “completed houses.” Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Fact statement unduly vague. No date information or other information supplied. No evidence supplied. The document referenced is the best evidence of its contents. Fed. R.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

121. On June 18, 2008, Windler wrote to Guth and Yaguda re “Repurchase” stating that: First, a circular is not a contract between you and the investors. It is a disclosure of material facts. There is no binding contractual provisions by which you became obligated to repurchase the loans. There may have been a disclosed intent to do so, but that is not a contract. So no one can assert that you are in breach of contract. This is also why the issues of how, when, in what manner and under what terms you would repurchase loan are not set forth. Because it is not a contractual obligation.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The cited statement in no way controverts Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. No evidence offered: The Trustees failed to cite any evidence in support of this alleged “fact”. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule). Rule of Completeness (Fed. R. Evid. §106). The quote from the unidentified document is potentially




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

misleading without information about the reasons for the document and access to the complete text.

122. Bryan Cave recognized that EFI’s operating documents were inconsistent and needed to be fixed. For instance, as part of the compliance review and audit, Windler stated in an e-mail dated March 29, 2017 that EFI’s documents are “are sorely lacking and do not provide for consistent terms.”

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 234-235, lines 3-25, and 1-6; and Exhibit 185 thereto (email from Katherine Windler to Bryan D. Turner, dated March 29, 2007, re: EFI -- loan documents, attached files: (1) EFI -- Offering Circular 2007 Pool_v2.DOC; (2) EFI Commitment Letter_v1.DOC; (3) Construction Loan Agreement_v1.DOC; (4) EFI -- Promissory note secured by construction deed of trust_v1.DOC)





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whatever the format of the loan documents, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Rule of Completeness (Fed. R. Evid. 106): The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254, lines 3-22.

Mischaracterizes the evidence; misleading: This purported fact is inconsistent with the evidence presented (“needed to be fixed” vs. “sorely lacking and do not provide for consistent terms”) and cherry picks a statement out of context. Hearsay. Best Evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

123. The fractional interests were undivided fractional interests in secured notes evidencing the loans, and a concurrent undivided fractional interest in a deed of trust that secures the repayment of the secured note.

RJN at Ex. 4.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. The Trustees improperly cite to a purported offering circular without identifying any page, section, or paragraph number. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (“General references [to facts] without page or line numbers are not sufficiently specific.”). Moreover, Trustees offer no evidence of what fractionalized interests are being referred to.

124. Although there were many violations of securities and real estate laws by EFI and EFMF, which issues Bryan Cave and Windler were retained to identify and fix, all of the foregoing is inconsistent with the argument that EFI and EFMF operated as a Ponzi scheme.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), pp. 165-168, lines 3-25, 1-25, 1-25, 1-11; and Exhibit 19 thereto (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial (and controverted) and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC). Gabriel Declaration, p. 3, ¶ 6 and Exhibit 6 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (6/22/17), pp. 282-284, lines 21-25, 1-25, and 1-25; and Exhibit 94 thereto (memorandum from Guy Puccio to Karen Guth and Joshua Yaguda with a copy to Katherine Windler dated February 9, 2007). Gabriel Declaration, p. 3, ¶ 6 and Exhibit 4 to the Gabriel Declaration, transcript from the deposition of Guy Puccio (4/5/17), p. 184, lines 3-22, and p. 190, lines 11-19; and Exhibit 63 thereto (memorandum from Guy Puccio to Karen Guth with a copy to Katherine Windler dated January 23, 2007). Gabriel Declaration, p. 6, ¶ 15 and Exhibit 26 (memorandum from Katherine Winder to Karen Guth and Joshua Yaguda, discussing June 13, 2008 hearing, bates no. BryanCave0000679 - 683)(“There is not a scintilla of evidence that EFI has ever taken a fee in excess of the contractual allowance. Investors agreed to the 1% fee, and if

governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

another servicer comes into EFI' s shoes, they will charge the investors an equal or greater fee. It is not inappropriate for EFI to earn a sufficient amount to pay its operating expenses and make a profit…. Appointment of a receiver would be prejudicial to both Guth and Yaguda. Without any real evidence of wrongdoing, they should not be stripped of their livelihood. The contractual documents set forth the minimum number of investors who had to vote to remove EFI and that contractual obligation binding these Plaintiffs cannot be overridden by their attempt to end-run around it using this Court as a sword.”) Gabriel Declaration, p. 6, ¶ 15 and Exhibit 17 (October 2 and 3, 2006 emails, bates nos. BryanCave0011102-1107). Gabriel Declaration, p. 5, ¶¶ 13 and 14, and Exhibits 14-15 to the Gabriel Declaration, Requests for Admission and Response thereto to re October 13, 2006 engagement agreement, bates no. BryanCave0006245 - 6249). Gabriel Declaration, p. 4, ¶ 7 and Exhibit 9 to the Gabriel Declaration,

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact, as well as the “foregoing” Supplemental Facts, creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The purported supporting evidence does not support this fact. In particular, the Trustees improperly attempt to rely on their questions to the deponent as supporting evidence because the deponent’s testimony does not support this purported “fact.” The cited testimony does not contain the deponent’s complete explanation of the document referenced; the portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

transcript from the deposition of Katherine Windler (5/19/17), p. 191, lines 4-15, pp. 217-226, lines 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-25, 1-14; and, Exhibit 83 thereto (email from Katherine Windler to Karen Guth and Joshua Yaguda, attaching file named “Memo to client re compliance review checklist_v1.DOC”).

2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254, lines 3-22. The evidence does not support that Bryan Cave and Windler were retained to identify and fix violations of securities and real estate laws by EFI and EFMF. Hearsay. Best evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration (including deposition exhibits); such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

125. That the argument that EFI and EFMF operated as a Ponzi scheme is an argument of convenience in defending the adversary proceedings is demonstrated by an e-mail from Windler to Guth and Yaguda on May 22, 2008, after Bryan Cave and Windler were aware of the various securities and real estate issues, and where Windler stated that there was no evidence of wrongdoing by EFI or EFMF. In that e-mail, Windler wrote that “[a]ppointment of a receiver would be prejudicial to both Guth and Yaguda. Without any real evidence of wrongdoing, they should not be stripped of their livelihood…” and that

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 26 (memorandum from Katherine Winder to Karen Guth and Joshua Yaguda, discussing June 13, 2008 hearing, bates no. BryanCave0000679 - 683)(“There is not a scintilla of evidence that EFI has ever taken a fee in excess of the contractual allowance. Investors agreed to the 1% fee, and if another servicer comes into EFI' s shoes, they will charge the investors an equal or greater fee. It is not inappropriate for EFI to earn a sufficient amount to pay its operating expenses and make a profit…. Appointment of a receiver





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

“[t]here is not a scintilla of evidence that EFI has ever taken a fee in excess of the contractual allowance. Investors agreed to the 1% fee, and if another servicer comes into EFI’s shoes, they will charge the investors an equal or greater fee. It is not inappropriate for EFI to earn a sufficient amount to pay its operating expenses and make a profit.” Windler wrote that there was no “real evidence of wrongdoing” at the same time that she pointed out “[p]ossible attack” at a hearing on June 13, 2008 that “Plaintiffs will point to facts that show delay in calling loans into default, partial funding, use of broker opinions, loans to affiliates, over-advances to borrowers. Mere fact that 600 loans are non-performing is a risk

would be prejudicial to both Guth and Yaguda. Without any real evidence of wrongdoing, they should not be stripped of their livelihood. The contractual documents set forth the minimum number of investors who had to vote to remove EFI and that contractual obligation binding these Plaintiffs cannot be overridden by their attempt to end-run around it using this Court as a sword.”)

there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Windler’s statement came long before she was aware of the scope of EFI’s and EFMF’s




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

wrongdoing. Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), p. 132, lines 6-17. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Misrepresents the evidence; Best Evidence (Fed. R. Evid. §§ 1001-1004; Rule of completeness (Fed. R. Evid. 106): The Trustees’ characterization of Exhibit 26 to the Gabriel Declaration is not accurate and it cherry-picks statements out of context; the document appears to be written in the context of an “Ex Parte Application for TRO” by 8 investors. Hearsay. Best evidence. Exhibit 26 to the Gabriel Declaration is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

126. Windler recognized that there were securities issues during her first call with EFI: “I may not be able to recall all of the ways, but in the very first conversation that I had with EFI was when Karen Guth called me to explain the nature of the Locati litigation, and I immediately reviewed what I saw as securities issues with her.”

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 112-113, lines 20-25 and 1.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which Defendants did not), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

127. Windler also recognized that some of EFI’s actions did not comply with applicable laws during that first call with EFI: Q. All right. Let me rephrase it then. You came

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), p. 133, lines 3-16.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

to the conclusion that—when did you come to the conclusion. Rephrase it. Did you ever come to believe that EFI’s business activities, prior to its engagement of Bryan Cave, were unlawful? MR. SANDERS: Objection; vague, lacks foundation. THE DEPONENT: I learned that some of the activities of EFI were, in my opinion, unlawful at various points in tine, Q. BY MR. REITMAN: When did you first come to the conclusion that the activities were unlawful? A. At the very first call I received.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which Defendants did not), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Misleading; Rule of Completeness (Fed. R. Evid. 106); Vague: There are no specifics as to what EFI actions were being referenced in the cited evidence. Misleading and incomplete because it implies that Ms. Windler had total knowledge when her testimony shows partial knowledge. Dore Supp. Decl., Exhibit 10_ (May 17, 2017 transcript of Windler Deposition) at pp. 43, lines 1-25; pp. 44, lines 1-21; pp. 66, lines 14-25; pp. 67 ,lines 1-25; Exhibit 14 (April 19, 2018 transcript of Windler Deposition), at pp. 133, lines 14-25; pp. 134, lines 1-11.

128. In an e-mail on October 2, 2006, prior to EFI retaining Bryan Cave, Windler wrote that “[m]y gut reaction and experience in these kind of cases is that EFI is going to have some exposure, because most lenders like them cut a few regulatory, licensing and securities type issues when making and selling these loans.”

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 187-189, lines 8-25, 1-25, and 1-7; and Exhibit 179 thereto (email from Katherine Windler to Guy Puccio, dated October 2, 2006, subject: FW: Case review).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc.,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which Defendants did not), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Hearsay. Best evidence. The deposition testimony offered as purported evidence also refers to documents that have not been attached to the Gabriel declaration; such documents are the best evidence of their contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

129. Windler wrote in May 2008 that “[w]hen I started working with this client on these issues coming out of the subprime mess, my thought was to do a bankruptcy type wind down plan, but outside of bankruptcy, and present it to the regulators so she could

Gabriel Declaration, p. 6, ¶ 15 (May 8, 2008 email between Katherine Windler and Cassandra L. Writz, subject EFI -- Notes for wind down plan, bates no. BryanCave0020987).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

have securities approval.” (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which Defendants did not), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. No exhibit is referenced. The email referenced is the best evidence of its contents.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

130. Windler’s lack of competence in securities law issues is shown in Bryan Cave’s retention to conduct a compliance review and audit, but for which Windler testified she did not have any specific notion of what that compliance review and audit entailed: Q. What did you mean by “compliance review and audit”? A. There was no specific meaning in my head at the time this was written.” *** Q. So, “compliance review” is a rather specific term. Do you have a recollection of what you meant by that? MR. SANDERS: Objection to the form of the question. THE WITNESS: I don’t agree with the predicate you stated, which is that a compliance review is a specific term. So I cannot answer the question as phrased. Q. Well, you don’t have to agree. You can just answer the question—agree whether or not it is, but what did you mean by “compliance review”? Do you— A. As the words sit on this

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/17/17), p. 85, lines 15-18, pp. 86-87, lines 1-25 and 1-3.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

page and at the time it was written, I have no specific recollection of what was going through my head. I have a general recollection of the client communications we had with the client and the recommendation that the client permit a real estate compliance review. And oftentimes. That involves including a CPA or an auditor or some type who will look at financial records at the same time. Q. So your letter says “compliance review and audit.” What did you mean by the term “audit” in the context of EFI? A. Again, I don’t have a specific recollection of what I meant in—on November 2, 2006.

in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The testimony is not evidence that Ms. Windler had no specific notice of what a compliance review and audit entailed. The Trustee attempts to impose his self-serving questions during the deposition that the phrase “compliance review” means the same thing to every person. Ms. Windler testified that she disagreed with that statement. See Exhibit 7 to the Gabriel Declaration, p. 86:1-87:3. Nor does the testimony quoted show a “lack of competence.” The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

lines 3-22.

131. Before Windler prepared and filed the offering circulars for EFI, Windler had never filed securities permit applications with the DOC or DRE: Q. Well, did you ever, on behalf of any of the clients, file with the Department of Real Estate, and application for a permit? A. Other than the work I did for EFI, no. Q. Okay. And did you ever file, either with the Department of Corporations or Department of Real Estate, private placement memorandum? A. In a public capacity, other than the work I did for EFI, no.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; rule of completeness (Fed. R. Evid. 106): The purported supporting evidence is misleading because the Trustees failed to acknowledge testimony in which Ms. Windler qualified her testimony by answering only as to “[i]n a public capacity” and did not answer as to other privileged or private work.

132. In Windler’s business plan to Bryan Cave dated October 7, 2005, before she started working at Bryan Cave, Windler stated that her background was in bankruptcy law (not securities law): “I am writing this plan in anticipation that I will become part of the bankruptcy, restructuring and creditors’ rights group in your firm, and would be based in Bryan Cave’s Santa Monica office” and that “[m]y area of expertise focuses on insolvency and reorganization involving secured debt either under the UCC or in mortgage transactions. I have been a bankruptcy lawyer since

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 28 (Memorandum from Katherine Windler to Bob Miller, dated October 7, 2005, re Business Plan, bates no. BryanCaveSupp 000606 - 000610).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

graduation from UCLA in 1991, first practicing with a boutique firm representing debtors and trustees, and thereafter for a large NY firm representing primarily landlords, mortgage lenders and asset-based lenders.”

judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. Evidence on this limited point does not bear on Bryan Cave/Windler’s performance, which in any event is immaterial to their motions.

133. The partner in charge of Bryan Cave’s restructuring group, and designated person most knowledgeable, testified that Windler never mentioned any securities law experience while interviewing with Bryan

Gabriel Declaration, p. 4, ¶ 8 and Exhibit 11 to the Gabriel Declaration, transcript from the deposition of Robert Miller (3/27/18), p. 107, lines 2-12.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Cave: “Q. Okay. In your discussions with Katherine Windler, did she ever mention that she had experience with securities laws? A. What time frame? Q. At the time you were interviewing her. A. So when you say securities law, are you talking about federal securities law, state securities law? Q. Federal and state securities laws? A. Either essentially. Q. Either one. A. Okay. No.”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

discussion, supra, Section I. Insufficient evidence. Evidence on this limited point does not bear on Bryan Cave/Windler’s performance, which in any event is immaterial to their motions.

134. Windler recognized that she was not a securities lawyer, and relied on Bryan Cave partner Randy Katz as the securities lawyer: Q. And when you were doing this work creating an offering circular and seeking a permit for the offer and sale of interest in EFMF, you knew you were operating as a securities lawyer on behalf of EFI, at the very least. Correct? MR. SANDERS: Objection to the form of the question. Assumes fact. THE WITNESS: I don’t know that I ever would have called myself a securities lawyer. But I routinely advised clients in the area of California real estate law as it applied to mortgage brokers and the issuance of securities, so I was familiar with that area of law. BY MR. REITMAN: Q. See the last sentence in paragraph 1: “Securities laws impose direct and primary liability on attorneys for securities violations, so all securities issues must be reviewed by them.” Who

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 8 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/18/17), pp. 99-100, lines 16-25 and 1-19.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

are you referring to? A. The word “them”? Someone in the—someone in the Bryan Cave practice of securities. Q. You weren’t referring to yourself? A. No. No, that’s—I would—that would have been referring to another lawyer at Bryan Cave who practiced in the area of securities. Q. Who is that? A. Randy Katz in this circumstance.

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported evidence does not support this alleged fact; Ms. Windler testified that she consulted Mr. Katz about the EFI/EFMF offering documents and that she “routinely advised clients in the area of California real estate laws.” See Exhibit 8 to Gabriel Declaration, p. 99:16-100:3. The purported fact improperly cherry picks a narrow statement made in a limited context.

135. However, Katz was not actively involved in the representation of EFI and EFMF, and only took part in a last-minute review of an offering circular days before the deadline, and without Windler having disclosed to him all of the securities and real estate issues that she had determined existed.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 185-186, lines 17-25, and 1-12: Q Did any -- you said you talked to partners in the firm about securities offerings in connection with EFI or EFMF. And I

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

know you talked to Mr. Miller. I assume you talked to -- maybe you didn't -- Ms. Pritchard; correct? MR. DORE: Objection; lacks foundation, assumes facts not in evidence. MR. REITMAN: It's a question. THE DEPONENT: I don't specifically recall. I think I did. Q BY MR. REITMAN: Did you talk to Mr. Levey? MR. SANDERS: Is this limited to securities offerings? MR. REITMAN: Yeah. THE DEPONENT: I believe I did talk to Jim at some point, yes. Q BY MR. REITMAN: Did you talk to Mr. Katz in connection with the EFMF offering? A I recall talking to Mr. Katz. Yes.

summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading: The purported evidence cited does not support this alleged fact; it is inapposite as shown by the quoted language.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

There is no evidence that Katz’s review was “last-minute” or insufficient in any way, or that there was a “deadline,” for instance one after which a permit application could not be submitted.

136. Notwithstanding that Windler drafted the offering circulars for EFI and EFMF, Katz did not ask Windler whether she had any experience drafting securities offerings before, and testified “[t]hat’s not my call. I was just a partner there. I was not—I was not in management, therefore, that would have been, in my view, overstepping my charge.”

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (afternoon session), pp. 50-51, lines 21-25 and 1.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported evidence does not support this alleged fact; Ms. Windler testified that she “routinely advised clients in the area of California real estate laws.” See Exhibit 8 to Gabriel Declaration, p. 99:16-100:3. Moreover, in the immediately subsequent fact Katz states that Windler “was not a novice” regarding California securities laws.

137. As to Windler’s sophistication with regard to securities law issues, Katz testified that “[s]he was not a wizard with respect to California securities laws, but she was not a novice.”

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (morning session), p. 38, lines 2-4.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of competence regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Insufficient evidence. Evidence on this limited point without further context does not bear on Bryan Cave/Windler’s performance, which in any event is immaterial to their motions.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

138. Emblematic of that lack of sophistication was Windler identifying an issue of a maximum of 500 investors before a requirement of SEC compliance. Katz testified that “[t]here’s no rule that says 500 max before SEC compliance. I don’t want to get technical with you, but I’m not certain what you’d like me to answer.”

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (morning session), p. 45, lines 6-17





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone has a lack of sophistication regarding a legal topic (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The purported evidence does not support this alleged fact; the quoted testimony is Mr. Katz’s response to the Trustee’s question and use of the phrase “500 investors before a requirement of SEC complaint”, not any statement from Ms. Windler. See Exhibit 1 to Gabriel Declaration, p. 45:12-45:25.

139. Bryan Cave also never completed the compliance review and audit: “Q. Okay. Do you recall when you conducted the compliance review? MR. SANDERS: Objection to the form of the question. Vague as to “compliance review.” THE WITNESS: That was the whole question? BY MR. GABRIEL: Q. Yeah. A. To the best of my knowledge, Bryan Cave and Guy Puccio never completed a compliance review, which normally would culminate in a form of written report to






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the client outlining key issues and recommendation strategies, or whatever the conclusions were. I don’t recall that happening.”

there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whether or not a compliance review was conducted and completed, the Trustees offer no evidence to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The portion of the transcript included is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254, lines 3-22.

140. Bryan Cave was securities counsel to EFI and EFMF. As Katz testified: Q. All right. You were securities counsel—or one of the securities counsel for EFI and EFMF in connection with the offering of membership interest in EFMF, correct? A. Bryan Cave was counsel, yes.

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (morning session), pp. 97-98, lines 25 and 1-3.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whether or not Bryan Cave acted as EFI’s securities counsel, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. F. Evid. 106): While irrelevant to the pending motion, there is additional evidence that has been generated in this matter regarding which entity was Bryan Cave’s client. Bryan Cave contends that EFI was the client.

141. Windler represented EFI and EFMF that, prior to filing the securities offerings, they would be reviewed by Puccio, and by securities lawyers at Bryan Cave, who had “direct and primary liability” in regard to the offerings: Q. Okay. In this communication, you state that: “Puccio has reviewed

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz, pp. 153-154, lines 19-25 and 1-19.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

these once, and they have now gone to our corporate securities counsel at Bryan Cave. Securities laws impose direct and primary liability on attorneys for securities violations, so all securities issues must be reviewed by them.” Who is the securities lawyers that reviewed this document? A. Who is the security lawyers, plural? Q. Who are the secur—who were the security lawyers that reviewed these documents? MR. SANDERS: I’m going to object to the form of the question, ‘cause it misstates the wording of the memo which refers to “counsel” amd is not of necessity plural. THE WITNESS: I think the word “them” refers to the CSG. BY MR. GABRIEL: Q. Okay. Who was the security lawyer or lawyers? A. Randy Katz.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whoever reviewed EFI’s securities offerings, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

No evidence; misstates purported evidence; Rule of Completeness (Fed. R. Evid. 106): There is no page 153-154 included in Exhibit 1 to the Gabriel Declaration. The testimony only appears to refer to one offering. While also irrelevant to the pending motion, there is additional evidence that has been generated in this matter regarding which entity was Bryan Cave’s client. Bryan Cave contends that EFI was the client. Hearsay. Best Evidence Rule. This purported fact also appears to refer to a document that is the best evidence of its contents but does not refer to or present the document as supporting evidence. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

1004 (Best Evidence Rule).

142. Windler sent an e-mail to Katz on March 25, 2007 at 12:31 a.m. stating that “I have drafted a revised Offering Circular, which is substantially different from what was submitted for last year’s permit.”

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 29 (March 25, 2007 email from Windler to Randolf Katz, bates number BryanCave0020887).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whatever the content of EFI’s offering documents, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; Misleading; Rule of Completeness (Fed. R. Evid. 106): The quoted language is part of a longer email, and the Trustees quote language out of context. Hearsay. Best evidence rule. This




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

purported fact also refers to a document that is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

143. The e-mail further states that “I have tried to incorporate new terms that will address the concerns of regulators in light of the issues facing the entire mortgage industry. The document is on the Santa Monica server at 632366 if you would rather make changes directly to the document in a new version. I am not sure many of these changes will be acceptable to the client, because their business in the past hasn’t been based on strict compliance with the law and this newly revised version of the Offering attempts to put them closer to compliance without hoping that the DOC Commissioner will again omit to read it.”

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 29 (March 25, 2007 email from Windler to Randolf Katz, bates number BryanCave0020887).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. They show no link between any securities compliance issues and EFI’s and EFMF’s longstanding and admitted “fraud.” Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; Misleading; Rule of Completeness (Fed. R. Evid. 106): The quoted language is part of a longer email, and the Trustees quote language out of context. Hearsay. Best evidence rule. This purported fact also refers to a document that is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

144. Windler sent Katz the draft offering circular on March 25, 2007 at 10:44 p.m.

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 21 (March 25, 2007, email from Katherine Windler to Randolf Katz, bates no. BryanCave0020738).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). However EFI’s/EFMF’s securities offering documents were prepared, the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Hearsay. Best evidence rule. This purported fact also refers to a document that is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

145. Her e-mail states “[t]hank you again for all your help in getting these reviewed. The current offering expires on March 29, 2007. That is the deadline I’m trying to beat. I will send these drafts to the client, Josh Yaguda, as well, to not delay in getting his comments.”

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 21 (March 25, 2007, email from Katherine Windler to Randolf Katz, bates no. BryanCave0020738).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Nothing about the preparation of EFI’s/EFMF’s securities documents controverts Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Hearsay. Best evidence rule. This purported fact also refers to a document that is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

146. EFI and EFMF’s permit for selling membership interests for the year 2006 expired on July12, 2007, and March 29, 2007, respectively. Randy Katz and EFI were thereby provided less than four days to review the offering circular before the permit expired.

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 21 (March 25, 2007, email from Katherine Windler to Randolf Katz, bates no. BryanCave0020738). RJN at Exs. 6 and 8.

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone fails to spend what the client believes to be the necessary time to complete a project (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

147. When Windler sent the offering circular to Guth and Yaguda on March 26, 2007, she stated that “Guy Puccio has reviewed these once, and they have now gone to our corporate securities counsel at Bryan Cave. Securities

Gabriel Declaration, p. 6, ¶ 15 and Exhibit 30 (March 25, 2007, email from Katherine Windler to Joshua Yaguda and Karen Guth -- documents for securities offering, bates





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

laws impose direct and primary liability on attorneys for securities violations, so all securities issues must be reviewed by them.”

no. BryanCave0009793).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone fails to spend what the client believes to be the necessary time to complete a project (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

discussion, supra, Section I. This purported fact also refers to a document that is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

148. Windler also did not disclose to Katz that the offering was to fix issues in EFMF’s business practices. Katz testified that “I don’t think we discussed that. We discussed what the offering circular should have in it and it should accurately reflect what the client was doing and was going to do on a prospective basis. What the investors were going to put money in for, what the investors were going to get.”

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (morning session), pp. 68-69, lines 20-25 and 1-10





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone fails to perform legal work in a way the client would like (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I. Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): There is additional evidence about communications between Ms. Windler and Mr. Katz that is not cited here. For instance, Exhibit 29 to the Gabriel declaration is an email from Windler to Katz which states in part, “I am not sure many of these changes will be acceptable to the client, because their business in the past hasn’t been based on strict compliance with the law and this newly revised version of the Offering attempts to put them closer to compliance without hoping that the DOC commissioner will again omit to read it.”

149. However, Katz took the position that if there was no finding or proceeding against EFI or EFMF, that they did not need to disclose issues with potential violations of laws or disclosure items in the offering circular, testifying that “[w]e’ve also

Gabriel Declaration, p. 2, ¶ 4 and Exhibit 1 to the Gabriel Declaration, transcript from the deposition of Randolf Katz (morning session), pp. 124-125, lines 11-25 and 1-8





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

talked about the fact that unless there is a finding or even a proceeding opened, then there need not be a disclosure. So I’m not sure what the issue is for you.”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

150. At the time that Windler revised EFI’s securities

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 8 to the

Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

offering circular, she had come to the conclusion that EFI was not in compliance with applicable law: Q. Well, by then, you knew that most of what EFI and EFMF were doing was illegal. MR. SANDERS: Objection to the form of the question. BY MR. REITMAN: Q. Correct? A. The term “most” seems a little overbroad, but I knew the real estate law. I knew that there were—EFI was engaged in and wanted to continue to engage in deviations from the real estate law. I thought they needed to get those approved. I don’t remember how many of them were already in the offering that Stein & Lubin had prepared. But I thought it was better to call attention to those deviations when communicating with the DOC. Q. In fact, you knew that most of what EFI was doing—and it was operating EFMF—wasn’t legal. MR. SANDERS: Objection to the form of the question. Vague. Lacks foundation. Q. Is that correct? MR. SANDERS: Assumes facts.

Gabriel Declaration, transcript from the deposition of Katherine Windler (5/18/17), pp. 90-91, lines 15-25 and 1-15





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

THE WITNESS: As applies to the real estate law, I think there were many things that EFI was doing that did not comply with the real estate law, that is correct, at that time.

and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone concludes that a client is not in compliance with some unstated rule or regulation (neither of which have been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

151. Windler understood that Bryan Cave was not permitted to make misrepresentations or omissions in the securities offerings:

Q.· Well, let's start with the general principle of law and let me restate it. As a general principle of law, on March 25, 2007, you understood that, under California law, the omission of a material fact that should be considered by an investor in making a potential investment might give rise to both civil and criminal liability? MR. SANDERS:· Objection to the form of the question. THE WITNESS:· I'm not sure that's a precise statement of the statute.· I'd have to read it.· But the concept of, that you should not have misleading statements to the extent they are material is correct. BY MR. REITMAN: Q.· And what about omissions? A.· Of course, as it -- as it --

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 8 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/18/17), pp. 94-95, lines 12-25 and 1-6





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

we're talking generally, as a general principle, you wouldn't have any material items omitted.· But there was no intent ·to conceal or omit material items, so.

the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): The purported supporting evidence is misleading because it seeks to use a statement of general securities principals not linked specifically to EFI. See Exhibit 8 to Gabriel Declaration, p. 94:1-96:10. Moreover, the statement of fact omits the word “material,” which was referenced in the evidence.

152. Windler testified that the securities offering prepared by Bryan Cave set forth specific disclosures with EFI’s deviations from applicable laws: Q. Well, if you believed that most of what EFI was doing was illegal and it also violated disclosure requirements, don’t you believe that that’s something you should have disclosed? MR. SANDERS: Objection to the form of the question. Calls for speculation.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Vague. And assumes facts. THE WITNESS: What EFI was doing that could be called illegal related to the real estate law and the Locati situation. We—addressed the issues under the real estate law with specific disclosures setting forth exactly what those deviations were intended to be, and I—my best recollection is, it didn’t vary very much from the Stein & Lubin offering except in terms of the scope of the—of—we made it more specific. It was already—much of it was already there. It was kind of generic. We clarified it. With respect to Locati, the Locati loan was not originated under the offerings. It was originated under the multi-lender rule. So there would be no reason to put Locati in—a disclosure of Locati into those offerings. Moreover, it wasn’t material. It was one loan out of, I don’t know, hundreds. It—it—it didn’t appear to have any significant impact on the company’s ability to continue with the efforts that we were undertaking. I’m not even sure Locati at that time was complete.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

153. Windler testified that Bryan Cave’s advice and counsel centered around advising as to “best practices” and “substantial compliance” with applicable laws: Q. BY MR. REITMAN: At that time, were you also working on regulatory issues






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

relating to EFI or EFMF? A. I would say yes. Q. What were the regulatory issues that you recall working on? A. I was explaining to EFI that they needed to be in substantial compliance with the real estate law and the securities law and that they could take steps to achieve substantial compliance which my experience taught me the regulators would accept and desired. And I was—I don’t know the exact dates of meetings that I had in Sacramento, but periodically I would meet with the regulators and inquire as to steps they would like to see undertaken to have the client in substantial compliance.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

154. Windler testified that she Gabriel Declaration, p. 4, Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

drafted the offering circular, along with Guy Puccio, and with input from Randy Katz and the client, and “I was relying on conversations that we were having with the people I’ve previously identified in guidance in what we thought would be appropriate, what would be the best practices, and what was likely to get approved.”

¶ 7 and Exhibit 8 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (5/18/17), p. 88, lines 3-20





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). And the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

155. Winder testified that: The term “best business practices” comes up in this industry because there was a wide divergence of opinion between the lawyers who were actively involved in it as to what a company is required to do and what they simply ought to do to be proactive in protecting their company and operating it at the highest level. And there is a divergence of opinion even among the regulators as to what is required. And, therefore, people in the industry talk about what might be a better business practice or the best kind of business practice even when it’s not necessarily legally required. So it’s not my term. It’s something that you would hear from lawyers who work in the field.






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Supplemental Fact shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

156. Notwithstanding that Windler was not qualified to act as securities counsel for EFI and EFMF, Windler drafted claims against EFI

Gabriel Declaration, p. 6, ¶ 15 (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein &

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and EFMF’s prior securities counsel, Stein & Lubin, relating to its securities law advice and counsel.

Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC., bates no. BryanCave0022648-22652).

not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The evidence citation, to a one line paragraph in Mr. Gabriel’s declaration, does not support the fact asserted in any respect. Likewise, there is no support provided for the fact assertions that: 1) “Windler was not qualified to act as securities counsel:” (indeed in support of other facts and elsewhere there is specific evidence about Windler’s experience) and 2) that EFMF was a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

firm client (as opposed to EFI).

157. Windler’s e-mail attaching the claims stated that she obtained the information for the claims from her compliance review: “I believe this is factually accurate based on what I understood from our first compliance review in your office.”

Gabriel Declaration, p. 6, ¶ 15 (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC., bates no. BryanCave0022648-22652).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The fact is misleading and incomplete because it implies that a compliance review was conducted. As made clear in other portions of Ms. Windler’s




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

deposition, EFI decided not to have a compliance review conducted and so instructed Ms. Windler. See Dore Supp. Decl., Exhibit 10 (May 17, 2017 transcript of Windler Deposition), at pp. 88, lines 4-25; pp. 89, lines 1-22; Exhibit 13 (May 19, 2017 transcript of Windler Deposition), at pp. 254, lines 3-22.

158. The attached draft of claims include securities issues that Windler argued were improperly handled by Stein & Lubin, but where Bryan Cave and Windler then proceeded to have the same failings as securities counsel. Among the claims listed by Windler are that: • “S&L failed to tell EFI

that the offering circulars it prepared were inadequate. S&L failed to tell EFI that its standard form transactional documents and borrower disclosures were internally inconsistent and insufficient to meet the minimum standards that EFI was required to comply with in order to issue securities. S&L failed to properly advise EFI of legal requirements for handling of trust funds…”

• “S&L ignored the fact that in its role as securities counsel to EFI, it had an affirmative obligation to inform EFI

Gabriel Declaration, p. 6, ¶ (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC., bates no. BryanCave0022648-22652).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

of various rules and regulations affecting its operation.”

• “S&L failed to undertake adequate due diligence of the preexisting operations of EFI, including its portfolio of loans being serviced at the time the first offering circular was prepared. Had it done so, S&L necessarily would have realized that EFI did not have adequate controls and measures in place, the absence of which made it easier for Locati to capitalize in the arbitration. For example, Locati accused EFI of failing to properly handle trust funds and to account for the interest reserves and undisbursed construction funds. S&L had previously failed to counsel EFI on the proper handling of trust funds, placing S&L in the untenable position where the giving of proper and thorough advice with respect to the Locati Litigation would expose S&L’s own prior shortcomings.”

• “EFI’s woefully inadequate transactional documents and disclosures, which were inconsistent with applicable existing law and the form and intent of the transaction,

has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

particularly for disbursements during the course of land development or construction of residential building and site improvements, see, among others Fin. Code § 17005.1, became a focal point of the Locati arbitration. Locati repeatedly attacked EFI for its lack of compliance with its own documents, a fact that could have easily been avoided had S&L properly advised EFI on transactional document requirements, trust fund handling practices and loan advances under a note. These issues should have been identified by S&L as counsel, brought to the attention of EFI, and should have been corrected prior to proceeding with the preparation of the offering circulars to qualify and register the future offerings of EFI and to obtain securities permits in connection therewith from the DOC. The proper due diligence of the activities of EFI would not have allowed EFI to proceed with the application for securities permits without correcting possible violations of existing

pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

law.” Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The evidence citation, to a one line paragraph in Mr. Gabriel’s declaration, does not support the fact asserted in any respect. Nor is there any evidentiary support provided for the assertion that “Bryan Cave and Windler then proceeded to have the same failings as securities counsel.” The fact also misstates the document, as there are several typographical errors in the supplemental fact as compared to the original document.

159. In an e-mail on June 20, 2007, Windler wrote to Amberg that “[i]n Stein & Lubin’s response, they pretend that when acting as securities counsel, they don’t have to do a complete job. My position is that by undertaking the role as securities counsel, they had to advise on all aspects, not just those they elected to tell their client.”

Gabriel Declaration, p. 6, ¶ 15 (June 20, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: EFI -- my version of the S&L errors, attachment: Insert for Amberg re Stein & Lubin_v3.DOC., bates no. BryanCave0022078-22082).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The evidence citation, to a one line paragraph in Mr. Gabriel’s declaration, does not support the fact asserted in any respect.

160. Notwithstanding all of those issues identified by Windler, Windler downplayed the securities offering issues in her deposition testimony: Q. BY MR. REITMAN: When you prepared the offering circular for EFMF, did you disclose in that offering circular that you believed prior offering circulars prepared by Stein & Lubin were materially misleading? MR. SANDERS: Objection to the form of the question; assumes facts, lacks foundation. MR. DORE: Vague and best evidence rule. The document speaks for itself. Q. BY MR. REITMAN: Materially misleading is, as

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 239-240, lines 8-25 and 1-9





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

you understand, California corporate securities laws? MR. DORE: Same objections. THE DEPONENT: I don’t think that I ever came to the conclusion that a case could be made with any certainty and positivity that there were material misleading statements. I think as of that time frame, I was operating under the impression that the documents could have been clearer. They could have been better organized. They could have provided for more consistency across all the operations that the client didn’t really understand what was allowed and wasn’t allowed. And so it was a process of moving the client back towards substantial compliance. That’s how I saw it.

Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The testimony referenced is not evidence that Ms. Windler “downplayed” anything. Moreover, it is unclear what “securities offering issues” are being referred to and whether they related to offerings prepared by Stein & Lubin or to other offerings.

161. As to whether Bryan Cave articulated to EFI what Bryan Cave thought was incorrect in Stein & Lubin’s offering circulars, and what should have been included in the offering circular that was not included, Windler testified “I don’t remember if that was done in writing.”

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), p. 240, lines 241, lines 1-8





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). It is noteworthy, though, that the Trustees’ own Supplemental Fact 155 shows that there is no conclusive view in the field about what is or is not a violation of law in the securities and real estate regulatory realm. Thus, Windler’s views about what may or may not have been in compliance with the law are not themselves conclusive on what the law is; indeed, as she testified (and as the Trustees have adopted), Ms. Windler took a more conservative view about what a client could do consistent with securities and real estate rules and regulations. Whatever the proper interpretation of those securities and real estate laws, however, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading: Rule of Completeness (Fed. R. Evid. 106). This fact purports to establish a fact by a failure of recollection. The fact misstates and mischaracterizes the cited testimony to try to establish that Windler never provided certain information to EFI when the underlying question only asked if she did it in writing. Windler was asked whether “In March 2007 did you articulate your beliefs in writing to the client and identify specifically what you thought was wrong and what you thought should have been included that wasn’t included in the offering documents?”

162. On July 27, 2007, Puccio sent an e-mail to Windler “How did we get here?!! My thoughts and comments for what they are worth which may not be much: Transactional documents and disclosures used at the time of the Locati et al. transaction(s) were defective. Business model/plan, including loan servicing and management/handling of

Gabriel Declaration, p. 6, ¶ 15 (July 27, 2007 e-mail from Guy Puccio to Katherine Winder, bates number BryanCave0010055-10056).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

trust funds (particularly disbursements subsequent to the close of the loan(s) escrow) were inadequate and inappropriate.”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Whatever legal advice could have been or should have been provided, EFI and EFMF (and any reasonably person) would have known that they could not steal investor funds or engage in “Ponzi-like” behavior. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

163. Windler advised EFI to file a suit against EFI’s prior securities counsel, Stein & Lubin, for engaging in the same inadequate advice and counsel that Bryan Cave proceeded to provide to EFI.

Gabriel Declaration, p. 6, ¶ (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC., bates no. BryanCave0022648-22652). Gabriel Declaration, p. 4, ¶ 7 and Exhibit 7 to the Gabriel Declaration, transcript from the





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

deposition of Katherine Windler (5/17/17), pp. 165-168, lines 3-25, 1-25, 1-25, 1-11; and Exhibit 19 thereto (May 23, 2007, email from Katherine Windler to Joshua Yaguda, John Amberg, Subject: Stein & Lubin -- draft insert, attachment: Insert for Amberg re Stein & Lubin_v3.DOC).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). Whatever the proper interpretation of the securities and real estate laws, they have no bearing on EFI’s and EFMF’s wrongdoing that underlies the motion to apply the in pari delicto doctrine and unclean hands defense to the Trustees’ state-law claims. The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE


Insufficient evidence: Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): None of the exhibits or cited testimony support the stated fact that Bryan Cave was engaging in the “same inadequate advice and counsel” that formed the basis for the recommended suit against Stein & Lubin. The evidence citation in the first paragraph – Gabriel Declaration, p. 6, ¶ (sic) – does not refer to any exhibit and Exhibit 19 (referenced in the second paragraph as Exhibit 19 to Exhibit 7 to the Gabriel Declaration) is not as it is described in the parenthetical. The language of the fact “advised EFI to file a suit” does not match the language in any document Trustees purport to reference. Hearsay; Best evidence rule: To the extent a document is referenced, the document is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

164. Bryan Cave and Windler also made false representations to EFI and EFMF that Windler and Puccio were engaged in active discussions with the DOC, that the DOC was aware of the issues facing EFI and EFMF, and that Bryan Cave was working on fixing the issues.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 203-205, lines 1-25, 8-25, and 1-22.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The purported evidence does not support that Bryan Cave or Ms. Windler




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

misrepresented their communications with the DOC and the DRE. On its face, it does not support Trustees’ factual assertion that Bryan Cave and Windler made false representations. See Exhibit 10 to the Gabriel Declaration, pp. 203:6-205:22.

165. On March 12, 2007, Windler sent an e-mail to EFI stating, among other things, that, as to the EFMF securities permit, “[t]he DOC is fully aware of our work with you to revise and amend the offering.”

Gabriel Declaration, p. 6, ¶ 15 (March 12, 2007 email from John Amberg to Katherine Windler, bates no. BryanCave 0017484).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

166. Again, on March 25, 2007, in sending EFI the draft offering circular, Windler wrote that “Guy Puccio has opened up a discussion with the DOC assistant commissioner who approved your permit the last time. We aren’t sure yet how much that might help, but it certainly can’t hurt.

Gabriel Declaration, p. 6, ¶ 15 (March 25, 2007 email from Katherine Windler to Joshua Yaguda and Karen Guth, bates no. BryanCave0017270).

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc.,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

167. Another instance of representing the active discussions with the DOC and DRE is that, on May 20, 2007, Puccio sent an e-mail to Windler stating “[p]lease make sure that Karen and Josh understand the DRE did not agree to “stand down” permanently. Rather, it is my understanding we have received a delay in further inquiry to allow you and me the opportunity to bring EFI into full compliance. Once you have completed the preparation and filing of

Gabriel Declaration, p. 6, ¶ 15 (May 20, 2007 email from Guy Puccio to Katherine Windler, bates no. BryanCave0011040-11041).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

their second offering circular/prospectus we should return to their office for a final review to ensure that full compliance has been achieved…”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; Rule of Completeness (Fed. R. Evid. 106): The quoted language does not refer to the DOC.

168. Despite the continuous representations by Bryan Cave and Windler that the

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration,

Objection Immaterial:




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

DOC was aware of the securities issues and Bryan Cave’s work to fix such issues, Windler testified at her deposition, that she and Puccio did not even disclose that EFI or EFMF were her clients, and did not identify the securities issues they were facing including non-compliance with securities laws: Q. So my question is in that time frame March, were you talking -- or before March, were you talking to the DOC about regulatory matters? I think you said, "Yes" to that. My question is did you identify the client to the regulators? MR. DORE: Objection; misstates the testimony. THE DEPONENT: I did identify the client to regulators in certain circumstances. Yes. Q BY MR. REITMAN: My question is in asking questions about regulatory compliance as it related to EFI, did you specifically identify EFI? A In certain circumstances, yes. Q Did you tell any regulators that in your view, EFI was not in compliance with DOC requirements? MR. DORE: Objection; vague as to time.

transcript from the deposition of Katherine Windler (4/19/18), pp. 203-205, lines 1-25, 8-25, and 1-22.

The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

MR. SANDERS: Assumes -- MR. REITMAN: In the March or before time period. MR. SANDERS: Objection; assumes facts, lacks foundation. THE DEPONENT: Did I tell them in connection with identifying them? MR. REITMAN: Yes. THE DEPONENT: To the DOC, the answer is "No." Q BY MR. REITMAN: Did you also talk to DRE -- DRE regulators about compliance matters as it related to EFI in or before the end of March 2007? A I don't know the time frame, but if the time frame is correct, then the answer is "Yes." Q Okay. Did you identify or EFMF as the client? A I did identify EFI as the client. I did not identify the fund as a client. Q Did you tell the DRE that you believed EFI was not in compliance with the DRE's requirements? MR. DORE: Objection to the form. THE DEPONENT: I don't think I had to use those words. Q BY MR. REITMAN: What were the words you

and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

used? MR. SANDERS: Objection; lacks foundation. THE DEPONENT: I don't remember them specifically, but we were talking to the DRE about the securities violations in Locati, and it would have been somewhat obvious to them that both sides had some level of exposure.


Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of Completeness (Fed. R. Evid. 106): The testimony referenced simply does not support the compound facts asserted by Trustee here. There is no particular reference to securities issues here. Ms. Windler testified about communications with the DOC and the DRE. Much of the testimony cited related to the extent of disclosures of the client’s identity. There is no citation to evidence supporting that Bryan Cave or Windler represented EFMF, as opposed to EFI the manager of the Fund.

169. Meanwhile, Winder told EFI and EFMF that they could conduct business as usual while Bryan Cave was working through the issues with the DOC and DRE: The entire process for getting the business plan written and approved takes about 4 months, and during that time, I am expecting that you will continue conducting business as you have in the past. There may be ways to try to use Guy Puccio to expedite that process, but we are fairly confident right now that the DOC or DRE won’t look at you while you are in the process of fixing

Gabriel Declaration, p. 6, ¶ (December 13, 2006 email from Katherine Windler to Karen Guth, Subject: CFL license application, bates no. BryanCave0017537).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

things up—even if you conduct business as usual until then.

defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20).




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Unduly vague fact statement; Rule of Completeness (Fed. R. Evid. 106): The reference to “continue conducting business as you have in the past” must be read in the context of the time period in which it was written and the topic – a potential CFL license application.

170. Because the advice provided by Bryan Cave to EFI and

Gabriel Declaration, p. 6, ¶ 15 and (May 15-22,

Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF included misrepresentations regarding discussions with regulators, Windler lacked expertise in securities laws, and the advice was not accurate or consistent, it is understandable that on May 22, 2008, Guth sent an e-mail to Windler stating “I hope you understand how confusing this has been for us to try and manage when we go home thinking one thing and come to work the next morning after you have talked to Guy and we are now being told something else. At this point I have little confidence in anything anyone says.”

2008, emails between Karen Guth, Joshua Yaguda, and Katherine Windler, Subject: RE: Call to discuss developments at EFI, bates no. BryanCave0015857-15860).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Whatever confusion EFI/EFMF




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

may have had about regulatory issues, there was no question, and could be no question, about the wrongfulness of Guth’s and Yaguda’s fraud. That ends the issue and warrants judgment in the Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence: Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): No evidence is cited to support the fact description preceding the words “May 22, 2008 . . .” The Trustees also fail to cite an Exhibit number.

171. Bryan Cave and Windler failed to disclose to EFI and EFMF that






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees),




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Insufficient evidence; Mischaracterizes the evidence; misleading: The purported supporting evidence does not support the facts stated.

172. During her deposition testimony, Windler

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition o f Katherine Windler (4/19/18), pp. 38-41, lines 4-25, 1-25, 1-25 and 1-17

Objection Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

:

pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): Trustees’ characterization of the evidence is inaccurate. Among other things there are not references in the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

testimony to a guilty plea.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

.

173.

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), pp. 92-93, lines 21-25 and 1.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence; Mischaracterizes the evidence; misleading; Rule of completeness (Fed. R. Evid. 106): Trustees’ characterization of the evidence is inaccurate.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Hearsay. Best Evidence. To the extent a document is referenced in the testimony, it is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

174. The partner in charge of Bryan Cave’s restructuring group, and Bryan Cave’s designated person most knowledgeable, Robert Miller, testified that,






1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

invoked by a party with unclean hands” that “participated in the wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

175. However, Miller testified

Gabriel Declaration, p. 4, ¶ 8 and Exhibit 11 to the Gabriel Declaration, transcript from the deposition of Robert Miller (3/27/18), p. 166, lines 20-24 and pp. 167-168, lines





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

25 and 1-7 and p. 169, lines 8-18.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

material fact, and should be disregarded. See detailed discussion, supra, Section I.

Insufficient evidence: mischaracterizes the evidence; Rule of completeness (Fed. R. Evid. 106):

176.

Gabriel Declaration, p. 6, ¶ 15 and (November 21, 2006 email from Katherine Windler to John Amberg, bates no. BryanCave0026574-26575).





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

This is demonstrated in e-mails that Windler sent to Amberg in regard to Windler’s belated disclosure to EFI and EFMF that she was being represented by EFI’s prior counsel, Stein & Lubin, in a malpractice case. The e-mail from Windler to Amberg states “John—my only comment is that Karen asked me to confirm that I told BC about the malpractice litigation BEFORE BC hired me and that BC made the decision to hire me knowingly…” and “[t]hat was her primary point of concern—did I tell BC and did they think I was worth hiring.”





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud, let alone is not sophisticated in a particular area of the law (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). This Supplemental Fact is wholly disconnected from the matter at issue and a mere attempt to distract from the fact that the Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

disregarded. See detailed discussion, supra, Section I.

Insufficient evidence: mischaracterizes the evidence; Rule of completeness (Fed. R. Evid. 106): The document cited refers to a November 2006 communication about a malpractice litigation involving Windler’s former firm.

Improper legal conclusion. The Trustees’ self-serving statement

is an improper

legal conclusion couched as a fact. Dillon v. Cont'l Cas. Co., 278 F. Supp. 3d 1132, 1137 (N.D. Cal. 2017) (statements that are legal conclusions “are not facts and can only be considered as arguments.”)

177. On February 1 and 5, 2018, respectively, Guth and Yaguda appeared at the


Objection




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

depositions in the above-captioned adversary proceedings.

Duplicative of Supplemental Fact 74 Immaterial: The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud” and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees did not respond to Bryan Cave’s judicial estoppel argument in its Motion for Partial Summary Judgment, and thus they waived any opposition on that ground. The Trustees’ past admissions to the California Court that Guth and Yaguda engaged in “fraud” thus are dispositive and themselves warrant judgment in Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

178. Both Guth and Yagyda asserted the privilege against self-incrimination as to every single substantive question the Trustees’ attorneys posed


Objection Duplicative of Supplemental Fact 75 Immaterial:




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

to them. The Supplemental Fact offered by the Trustees is immaterial and does not create a disputed issue of material fact sufficient to preclude summary judgment in Bryan Cave’s favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”); id. at 247-48 (noting that “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact”); Houston North Hosp. Props. v. Telco Leasing, Inc., 688 F.2d 408, 410 (5th Cir. 1982) (“[E]ven accepting Houston’s version of the facts, its arguments would not entitle it to prevail. The factual dispute was not in the legal sense material, and, therefore, did not raise an issue for the jury.”). The Trustees’ Supplemental Fact has no bearing on EFI’s and EFMF’s wrongful conduct during the 2002 through 2008 period covered by Karen Guth’s and Joshua Yaguda’s felony guilty pleas (SUF 14), or the application of the in pari delicto doctrine and unclean hands defense to bar the Trustees’ state-law claims. See ECF Dkt. 207, Bryan Cave’s SUFs 1-162. The Trustees have admitted in publicly filed documents that Guth and Yaguda engaged in a “fraud”




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

and that EFI transferred investor money from certain loans in order to make interest payments to investors in different loans being benefitted. See, e.g., Dore Decl. Exhs. 135, 136; SUF 85, 88. EFI’s and EFMF’s undisputed conduct thus was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). The Trustees did not respond to Bryan Cave’s judicial estoppel argument in its Motion for Partial Summary Judgment, and thus they waived any opposition on that ground. The Trustees’ past admissions to the California Court that Guth and Yaguda engaged in “fraud” thus are dispositive and themselves warrant judgment in Defendants’ favor. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

179. Windler testified at her deposition she did not know whether these risks were disclosed in the EFI’s 2007 Offering Circular or whether she sent any writing to the EFI Parties warning them that the security interests should be recorded in the name of the actual investors

Gabriel Declaration, p. 4, ¶ 7 and Exhibit 10 to the Gabriel Declaration, transcript from the deposition of Katherine Windler (4/19/18), p. 227-228, lines 14-25, and 1-7.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

(including EFMF): Q. BY MR. REITMAN: But you also knew that they might be recorded in the name of EFI and not EFMF. And my question to you is did you put in the offering document that EFI’s doing that created a risk to EFMF investors?

MR. DORE: And best evidence rule. Document speaks for itself. . . . . THE DEPONENT: I don’t know if the risks—that—I don’t know if—how that document describes the risks. Q. BY MR. REITMAN: Did you ever send a writing to EFI stating that all security interests in favor of EFMF should be recorded in EFMF’s name? . . . . THE DEPONENT: I don’t know.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

was obviously wrongful regardless of whether they engaged in misconduct with respect to every single loan in EFI’s portfolio or any other aspect of EFI’s/EFMF’s business operations. Even the Trustees concede that EFI operated 47 loans in a “Ponzi-like manner” through an “inappropriate use of investor funds” (Opp. at 20). Even where a defendant actually participates in a fraud (which has not been shown by the Trustees), the in pari delicto doctrine and unclean hands defense still apply to bar a plaintiff’s claims. See detailed discussion, supra, Section I; see, e.g., In re Roussos, 2016 WL 5349717, at *17 (Bankr. C.D. Cal. Sept. 22, 2016) (rejecting argument that in pari delicto did not apply where the defendant allegedly took part in the wrongful conduct and explaining that “by definition, the in pari delicto defense is always invoked by a party with unclean hands” that “participated in the wrongdoing”). The Trustees offer no evidence to controvert Defendants’ showing of EFI’s and EFMF’s obviously wrongful conduct in intentionally misusing investor money on a massive scale and refusing to foreclose on hundreds of defaulted loans. Accordingly, this Supplemental Fact creates no genuine disputed issue of material fact, and should be disregarded. See detailed discussion, supra, Section I.

Mischaracterizes the evidence; misleading; Rule of completeness (Fed R. Evid. 106):. Ms. Windler




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

testified in response to the question immediately preceding the quoted text that “at no time did EFI ever ask me to prepare a document that had borrowers getting loans on an unsecured basis. There were recordings. These were secured loans, as far as I knew, every single one.” See Exhibit 10 to Gabriel Declaration, p. 227:4-227:13. In addition, this fact purports to establish a fact by a failure of recollection

Hearsay. Best Evidence. To the extent a document is referenced in the testimony, it is the best evidence of its contents. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule).

180. In his capacity as Trustee, and on or about November 25, 2009, he filed a “Statement of Loss” form, which is a standardized form for the Probation Department of the San Louis Obispo County Government Center, in Karen Guth and Joshua Yaguda’s criminal restitution proceeding. The Statement of Loss form does refer to “fraud,” but it is in regard to “Nature of Offense(s)”—the guilty pleas by Guth and Yaguda relating to securities violations.

Jeremiassen EFI/EFMF Declaration.

Objection Vague: The Supplemental Fact does not identify the referenced Trustee. Because the EFMF Trustee did not file any declaration (let alone address his statement of loss form), it is assumed that the reference is to the EFI Trustee. Hearsay. Best Evidence. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule): The EFI Trustee submitted a “Statement of Loss” to the San Luis Obispo Superior Court on November 24, 2009 stating that Guth and Yaguda “committed fraud.” The Statement of Loss form does include an entry for “Nature of Offense(s),” with the EFI Trustee (or his representative) typing in “Fraud in Offering and Sale of




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Securities.” Dore Decl. Exh. 135. But he also prepared an attachment, to that document, and typed out a response under the entry: “1) Describe your losses here. PROPERTY LIST.” That typewritten response stated: “Defendants arranged and serviced loans from January 1, 2000 through June 25, 2008. In that capacity, Defendants committed fraud which has resulted in claims by and against Claimant with damages equal to amounts invested in those loans as of June 25, 2008 (approximately $340,000,000) less the estimated recovery on those investments as of November 24, 2009 (approximately $105,000,000). This amount may duplicate claims filed by individual investors in loans arranged and serviced by Defendants as well as claims filed by Estate Financial Mortgage Fund, LLC or investors in that entity.” Id. (emphasis added). This was not a form response, and it was not in response to the prompt for “Nature of Offense.” Indeed, the EFMF Trustee’s Attachment to his Statement of Loss form admitted that Guth and Yaguda “committed fraud and conversion.” Dore Decl. Exh. 136 (emphasis added). Neither Guth nor Yaguda were charged with conversion (Dore Decl. Exh. 10 at Exh. 52), showing that the Trustees’ entries in the “Property List” section of the attachment was not simply a recitation of Guth’s and Yaguda’s charges. Even if it were, the Trustees sought relief from the court on the basis of Guth and Yaguda




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

having committed fraud. Their failure to offer any response to Defendants’ judicial estoppel argument in Bryan Cave’s motion for summary judgment represents a waiver and itself warrants judgment against the Trustees. In any event, while the Trustees originally filed their Statements of Loss almost 18 months into their work as Trustees, they repeated those statements about Guth’s and Yaguda’s fraud in documents filed in December 2010, almost 30 months after the beginning of the bankruptcies. See Dore Decl. Exhs. 9, 143. In fact, the Trustee filed those documents and admitted Guth’s and Yaguda’s “fraud” almost six months after the Trustees had notified Defendants of the Trustees’ intent to file suit against them. See Supp. Dore Decl. Exh. 15. See also ECF Dkt. 207, Bryan Cave’s SUFs 13, 17, 19, 20, 21; ECF Dkt. 209 (Dore Declaration), ¶ 147. The Trustees’ self-serving declaration, submitted in opposition to this Motion, contradicts prior statements submitted to this court, and it is not evidence. See Fed. R. Civ. Proc. R. 56(e); Nigro v. Sears, Roebuck & Co., 784 F.3d 495, 497 (9th Cir. 2015) (“The district court can disregard a self-serving declaration that states only conclusions and not facts that would be admissible evidence.”); F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997) (“A conclusory, self-serving affidavit,




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

lacking detailed facts and any supporting evidence, is insufficient to create a genuine issue of material fact.”).

181. The Trustee accepted his appointment as Trustee on July 30, 2008. When he submitted the Statement of Loss form, he had been the Trustee for less than a year and a half. As such, he was still in the process of investigating the pre-petition financial affairs of EFI. All references to “fraud” in the Statement of Loss form are referencing the guilty pleas by Guth and Yaguda in the criminal case against them, and do not reference the outcome of his investigation as Trustee.

Jeremiassen EFI/EFMF Declaration.

Objection Vague: The Supplemental Fact does not identify the referenced Trustee. Because the EFMF Trustee did not file any declaration (let alone address his statement of loss form), it is assumed that the reference is to the EFI Trustee. Hearsay. Best Evidence. Fed. R. Evid. §§ 801, 802 (Hearsay); §§ 1001-1004 (Best Evidence Rule): The EFI Trustee submitted a “Statement of Loss” to the San Luis Obispo Superior Court on November 24, 2009 stating that Guth and Yaguda “committed fraud.” The Statement of Loss form does include an entry for “Nature of Offense(s),” with the EFI Trustee (or his representative) typing in “Fraud in Offering and Sale of Securities.” Dore Decl. Exh. 135. But he also prepared an attachment, to that document, and typed out a response under the entry: “1) Describe your losses here. PROPERTY LIST.” That typewritten response stated: “Defendants arranged and serviced loans from January 1, 2000 through June 25, 2008. In that capacity, Defendants committed fraud which has resulted in claims by and against Claimant with damages equal to




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

amounts invested in those loans as of June 25, 2008 (approximately $340,000,000) less the estimated recovery on those investments as of November 24, 2009 (approximately $105,000,000). This amount may duplicate claims filed by individual investors in loans arranged and serviced by Defendants as well as claims filed by Estate Financial Mortgage Fund, LLC or investors in that entity.” Id. (emphasis added). This was not a form response, and it was not in response to the prompt for “Nature of Offense.” Indeed, the EFMF Trustee’s Attachment to his Statement of Loss form admitted that Guth and Yaguda “committed fraud and conversion.” Dore Decl. Exh. 136 (emphasis added). Neither Guth nor Yaguda were charged with conversion (Dore Decl. Exh. 10 at Exh. 52), showing that the Trustees’ entries in the “Property List” section of the attachment was not simply a recitation of Guth’s and Yaguda’s charges. Even if it were, the Trustees sought relief from the court on the basis of Guth and Yaguda having committed fraud. Their failure to offer any response to Defendants’ judicial estoppel argument in Bryan Cave’s motion for summary judgment represents a waiver and itself warrants judgment against the Trustees. In any event, while the Trustees originally filed their Statements of Loss almost 18 months into their work as Trustees, they repeated those statements about Guth’s and




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

Yaguda’s fraud in documents filed in December 2010, almost 30 months after the beginning of the bankruptcies. See Dore Decl. Exhs. 9, 143. In fact, the Trustee filed those documents and admitted Guth’s and Yaguda’s “fraud” almost six months after the Trustees had notified Defendants of the Trustees’ intent to file suit against them. See Supp. Dore Decl. Exh. 15. See also ECF Dkt. 207, Bryan Cave’s SUFs 13, 17, 19, 20, 21; ECF Dkt. 209 (Dore Declaration), ¶ 147. The Trustees’ self-serving declaration, submitted in opposition to this Motion, contradicts prior statements submitted to this court, and it is not evidence. See Fed. R. Civ. Proc. R. 56(e); Nigro v. Sears, Roebuck & Co., 784 F.3d 495, 497 (9th Cir. 2015) (“The district court can disregard a self-serving declaration that states only conclusions and not facts that would be admissible evidence.”); F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997) (“A conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is insufficient to create a genuine issue of material fact.”).

182. Although the three properties described in the Jeremiassen Declaration at ¶ 8 were “undeveloped” at the time of bankruptcy, more than $5 million of the funded amount for the Three Projects was paid in connection with the early-phase work on those

Jeremiassen EFI/EFMF Declaration, at ¶ 5, Exhibits 1-3.





1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


UNDISPUTED FACTS


BRYAN CAVE RESPONSE

projects (including geotechnical surveys and studies, site inspection and planning, conceptual design, entitlement analysis, landscape work etc.)



[Unredacted version served via email]
