Motion for Change of Venue in GOLDEN PACIFIC BANK, N.A. VS. BILLFLOAT, INC. ET AL| Trellis.Law

On January 11, 2016 a Motion-Secondary was filed involving a dispute between Billfloat, Inc., Gilbert, Ryan, O'Malley, Sean, Golden Pacific Bank, N.A., and Billfloat, Inc., Does 1 To 50, Inclusive, Gilbert, Ryan, O'Malley, Sean, for civil in the District Court of San Francisco County.

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1 |} BRUCE A. SCHEIDT, State Bar No. 155088 ELECTRONICALLY
bscheidt@kmtg.com

2 || CHRISTOPHER ONSTOTT, State Bar No. 225968 FILED
constott(@kmtg.com Superior Court of Californ!

3 | ERROL C. DAUIS, State Bar No. 279313 County of Ran leactoco—
edauis@kmig.com

4 || KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD 06/08/2016
A Professional Corporation Clerk of the Court

5 |] 400 Capitol Mall, 27" Floor BY:EDNALEEN ALEGRE
Sacramento, California 95814 Deputy Clerk

6 |] Telephone: (916) 321-4500
Facsimile: (916) 321-4555

Attorneys for Plaintiff and Cross-Defendant
8 || GOLDEN PACIFIC BANK, N.A.

9 SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF SAN FRANCISCO
11 | GOLDEN PACIFIC BANK,N.A., Case No. CGC-16-549804
12 Plaintiff, DECLARATION OF CHRISTOPHER
ONSTOTT IN SUPPORT OF GOLDEN
13 v. PACIFIC BANK'S SUPPLEME L

i BRIEF IN SUPPORT OF MOTION TO
14 | BILLFLOAT, INC., RYAN GILBERT, SEAN | CHANGE VENUE
O'MALLEY, and DOES 1-50, inclusive,

15
Defendants.
16 |]
Judge: Hon. Harold E. Kahn
17 | BILLFLOAT, INC. Date: June 22, 2016
Time: 9:30 a.m.
18 Cross-Complainant, Dept.: 302

is] v.

20 || GOLDEN PACIFIC BANK, N.A.. and ROES Case Transferred
1-50, from Sacramento County: — January 11, 2016

21
Cross-Defendants, Trial Date: None Set
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1462652.1 14023-004

DECLARATION OF CHRISTOPHER ONSTOTT IN SUPPORT OF GOLDEN PACIFIC BANK'S
SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO CHANGE VENUEiv)

Hn bs

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I, Christopher Onstott, declare as follows:

1. I am an attorney duly admitted to practice before this Court. [am a shareholder
with Kronick, Moskovitz, Tiedemann & Girard, attorneys of record for Plaintiff and Cross-
Defendant GOLDEN PACIFIC BANK, N.A.. [have personal knowledge of the facts set forth
herein, and if called as a witness, I could and would competently testify thereto. I make this
declaration in support of Golden Pacific Bank's Supplemental Brief in Support of Motion to
Change Venue.

2. Attached hereto as Exhibit A is a true and correct copy of the Reporter's Transcript
of Proceedings for the hearing on May 11, 2016 (Golden Pacific Bank's Motion to Change
Venue).

I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.

Executed June 8, 2016, at Sacramento, California.

Christopher Onstott

1462652.1. 14023-004 1

DECLARATION OF CHRISTOPHER ONSTOTT IN SUPPORT OF GOLDEN PACIFIC BANK'S
SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO CHANGE VENUEEXHIBIT A10

SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
BEFORE THE HONORABLE HAROLD E. KAHN, JUDGE PRESIDING
DEPARTMENT NUMBER 302
GOLDEN PACIFIC BANK, N.A.,
Plaintiff, Case No. CGC-16-549804
vs.
Pages 1 - 40
BILLFLOAT, INC., RYAN GILBERT,
SEAN O'MALLEY, DOES 1-50,

Defendants.

AND RELATED CROSS~ACTION.

Reporter's Transcript of Proceedings
Wednesday, May 11, 2016
APPEARANCES OF COUNSEL:
For Plaintiff/Cross-Defendant Golden Pacific Bank:

Kronick, Moskovitz, Tiedemann & Girard
400 Capitol Mall

27th Floor

Sacramento, California 95814

By: CHRISTOPHER ONSTOTT, Attorney at Law

For Defendants Ryan Gilbert and Sean O'Malley:

Hinshaw & Culbertson

One California Street

18th Floor

San Francisco, California 94111

By: PETER L. OSOLA, Attorney at Law

For Defendants/Cross-—Complainants Billfloat, Inc., Ryan Gilbert
Sean O'Malley:

Webb Legal Group

155 Montgomery Street

Suite 1200

San Francisco, California 94104
By: WILLIAM WEBB, Attorney at Law

Sherry Sawyer, CSR No. 5976, CRR, RMRi)

San Francisco, California; Wednesday, May 11, 2016;A.M.
Department No. 302 The Hon. Harold E. Kahn, Judge
(Sherry Sawyer, Official Reporter)

THE COURT: Line seven, Golden Pacific Bank versus

Billfloat. Good morning.

MR. WEBB: Good morning, Your Honor. William Webb on behalf
of the Defendants Billfloat, Sean O'Malley, and Ryan Gilbert.

MR. ISOLA: Good morning, Your Honor. Peter Isola for the
Defendants Sean O'Malley and Ryan Gilbert.

MR. ONSTOFF: Good morning, Your Honor. Chris Onstott for
Plaintiff and Cross-Defendant, Golden Pacific Bank.

THE COURT: I have been participating or serving litigation
for 35 years or so. I don't remember ever seeing a case with so
many motions to change venue. This, I think, is an award
winner.

MR. WEBB: Do we get a plack?

THE COURT: I don't know what you get.

I agree with the Contra Costa judge, whose name I can't
remember now, that there has been some gamesmanship on both
sides.

I also agree with the Contra Costa judge that the earlier
culing from, I think it was, Judge Goldsmith necessitates
sending at least the cross-complaint to Sacramento. It makes no
sense at this point to have the complaint here and the
cross-complaint -- and the claim against the individual Golden
Pacific Bank parties in one county and the complaint here in
another county.

MR. WEBB: Your Honor10

THE COURT: I would hope that the parties would have been
able to resolve this somehow, but apparently not. I have given
it my best shot. It's a befuddling set of facts.

Mr. Webb --

MR. WEBB: Thank you, sir.

THE COURT: - do you want to tell me why you think my
tentative is wrong?

MR. WEBB: Yes, sir.

THE COURT: I'll be happy to hear from you.

MR. WEBB: Thank you. I've made notes of the questions that
you've just had, and the presentation that I've prepared
addresses all of them.

THE COURT: Great.

MR. WEBB: And more.

THE COURT: Great.

MR. WEBB: First of all, from a personal standpoint, you
don't see me here that often because I usually submit on the
tentative. This case, however, is so important to my clients
and to Mr. Isola's clients, Sean O'Malley and Ryan Gilbert, that
it's really important to us that we're heard on all of these
issues.

It is a befuddling set of facts, and, unfortunately, we're
way into the area where there isn't a lot of settled case law
that we can look at. We're basically back on the statutory
language. And I think when we take a look at the statutory
language, there's some fundamental things that the tentative
ruling doesn't account for.

So that's why we're here. I've got a fair amount to say on10
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the issue. I appreciate --

THE COURT: I've got until 11:00, not that we necessarily
will need it, but I'm here. I've read all the papers, I
understand the issues, and I'm happy to hear what you want to
tell me.

MR. WEBB: I appreciate that. Thank you, sir.

Also, I'm going to do something that I haven't done in 13
years, and that's walk into Department 302 with a visual aid.

THE COURT: I see them all the time. I like visual aids, as
long as I can read them.

MR. WEBB: Great. Well, I hope. We made it as big as we
could. Can you see that?

THE COURT: No. Do you have an 8 1/2-by-11?

MR. WEBB: No.

THE COURT: You're going to have to bring it much closer.

MR. WEBB: All right. Peter.

ISOLA: Sure.

THE BAILIFF: How close do you want those, Your Honor?

THE COURT: I want it in a way that Mr. Onstott can see as
well.

Can you see it?

MR. ONSTOFF: No.

THE COURT: Get a stand.

Okay. Great.

MR. WEBB: Last night at Kinkos, I was explaining to the
clerk who was helping me that this is how I used to try cases
back when I started my career.

THE COURT: Yes. I remember that era. I can we still10

see it from time to time.

That's great. Perfect. Okay. I'm with you.

MR. WEBB: All right.

THE COURT: I'll tell you, though, Mr. Webb, the fact that
your client cares deeply about this case isn't what we're here
for. We're here about the location of where the case is going
to be tried.

MR. WEBB: Understood.

THE COURT: That's it.

MR. WEBB: And it's not that my clients care about their --
all of my clients care about their cases. Mr. O'Malley and Mr.
Gilbert care very deeply about having the case heard down here,
and that explains in part why it is that we've spent -- the
parties have spent so much time not agreeing about this issue.

So the tentative ruling contradicts some --

I see we're bringing in a stand here. So I'll wait until
we're all set.

THE COURT: That's okay. You can go ahead, unless it's
distracting.

MR. WEBB: Well, it may be because -—

THE COURT: Okay. No problem.

MR. WEBB: -- I'm going to be talking about this.

THE COURT: Here is my thought, and maybe you're going to
address this as well. If I remember correctly, this is the
sixth motion to change venue in these collective cases.

MR. WEBB: That sounds a little high, but it's in that
neighborhood.

THE COURT: When you have so many, you're almost certainly10

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going to have contradictions.

MR. WEBB: It's -- and it's true, and we tried to head this
off at the pass. We tried to head this off and met with
resistance from GPB and from this Court, from Judge Goldsmith.

So in any event, one of our big issues with the tentative is
that it contradicts both what GPB has argued in prior cases, as
well as prior orders of this Court and the Sacramento Court.

Last year Better Finance moved to transfer and consolidate
GPB, the Sacramento case, and Better Finance, San Francisco
case, and in response GPB argued -- and this is a direct quote,
and it's on the chart up here. I'm going from the upper
right-hand -- the upper left-hand across the top, and then down
and across and down and across.

GPB argued, "The San Francisco action simply does not
present common questions of fact and law that are predominating
and significant to the Sacramento action."

In response to our motion, this Court, Judge Goldsmith
ruled, "Plaintiff has not established that common questions of
law and fact predominate in both of the actions."

This Court's tentative is different. It says both actions
were based on the same general set of facts.

THE COURT: How is that possibly in dispute, that the same
set of general facts? Of course the complaint and the
cross-complaint are based on the same set of general facts.

MR. WEBB: Right. But the problem is that -- it wasn't
Mr. Onstott at the time, it was Mr. Scheidt, his partner, who
came here and argued -- they argued in their papers, and I don't

know if Mr. Onstott was involved in the papers or not. Ito

doesn't matter -- but they argued that the two cases were
entirely separate. There's no reason why this Court should
reach up to Sacramento and transfer that case, and consolidate
it with the case that was already down here.

THE COURT: So remind me, what case was sought to be reached
out and to be brought here at that time?

MR. WEBB: This is the San Francisco case.

THE COURT: So you have to tell me what case that is.

MR. WEBB: It's the case that we filed initially asking for
declaratory relief and for a judicial referee, and the
defendant -- and then the defendants demurred. I'm sorry. Yes,
the defendants demurred.

THE COURT: That was the first complaint --

MR. WEBB: Correct.

THE COURT: ~-- of Billfloat? You call it Better Finance. I
don't know why, but I'm using the name Billfloat.

MR. WEBB: We'll use Billfloat today.

THE COURT: Okay.

MR. WEBB: So that's correct.

So that case, and then -- by the time this came on for
hearing, we had already amended our first amended -- we had
filed our first amended complaint so that the cases -- that
first amended complaint, and the Court has already -- has just

said in its tentative that they were very similar.

They've argued that it's not.

THE COURT: But weren't they talking about the initial
complaint rather than the first amended complaint?

MR. WEBB: They may have been. But when we were standing10
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here in front of Judge Goldsmith, we were talking about the
entire case. I've got a transcript of that hearing. In fact, I
think we made it an exhibit.

We were -- I said, look, this is going to be a nightmare
because these two cases are essentially the same. They're on
the -- they involve the same allegations of breach of contract.
They allege we breached a contract. We're asking for a
declaratory relief saying -- telling us what we're supposed to
do so we know whether or not we're in breach of contract.

THE COURT: So I agree with you. I agree with you. I don't
know if they're basically the same, but they are certainly based
on the same common set of facts. I don't know how anybody could
dispute that.

MR. WEBB: Well, they did, and the Judge was hoodwinked into
believing that.

THE COURT: Well, if the Judge was hoodwinked and if they
did, to me that is something that in the great majority of
instances I'd have to give credence to under judicial estoppel
or similar principles.

But this is an outlier of a case, given that there's so many
procedural motions that have occurred. And in my view it's time
to get all of these claims in one forum, and in my view the most
appropriate forum is Sacramento.

If the First District wants to tell me otherwise, they are
free to do that. I don't know if you have or will seek a writ
on the Contra Costa order. I don't know if you have or will --
well, you obviously haven't. But if I confirm my tentative, I

don't know if you will seek a writ on my order.
Y10
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ito)

I have no problem with those things. If the First District
thinks that the case should be split up, great. If they think
everything should be in San Francisco, great. If they think
everything should be in Contra Costa, which seems unlikely to
me, that's fine, too.

But I think it's now time to put it all together, and
fidelity toward prior rulings, as far as I could tell, favors
Sacramento, as well as the taking a fresh look at everything
favors Sacramento. But I should shut up, and you continue with
your presentation.

MR. WEBB: Thank you, sir.

Because that brings us to the real heart of this motion and
prior rulings that we feel are binding. If we're talking about
res judicata, then in —-

THE COURT: We're talking about res judicata only in the
sense used by 50-year-old precedents in this multiple
change-of-venue area. It's correct that we're not using res
judicata in its formal, traditional sense.

MR. WEBB: Well, whatever it is that we're looking at, there
are more rulings numerically and better rulings that require the
Court to keep the case down here, and I want to talk about
these.

THE COURT: I'm only aware of the Sacramento Superior Court
unopposed ruling that would favor that. What ruling -- and I
guess possibly Judge Goldsmith's first ruling denying the motion
to change venue.

MR. WEBB: Correct.

And in both of those while there is those two, but10

then -- but I'm talking about another motion here in another
hearing as my next point.

Last year Billfloat moved to have this case transferred from
Sacramento. GPB didn't oppose it. Plaintiff's cause -- in
fact, they said, defendants' cause of action for fraud is
triable where all or some of the defendants reside.

This Court's tentative, however, ignores this law, and
allows Mr. Gilbert and Mr. Ryan to be tried in Sacramento, when
they live down here in the Bay Area and Mr. O'Malley lives here.

THE COURT: This was Judge Goldsmith's first ruling.

MR. WEBB: The very first ruling.

THE COURT: Right. That was superseded, in my view, by his
second ruling. The gentlemen were still in the case as of the
second ruling, and he made a directly opposite ruling.

MR. WEBB: No, no, no. I'm sorry. What I'm talking about
is in the -- and we're getting to this third rule that's on the
chart.

The first ruling that he made says that as between -- the
only parties to the case at that point in time that were subject
to that motion were Billfloat and -- excuse me -~- Billfloat and
GPB.

THE COURT: Which motion are you talking about?

MR. WEBB: The very first -- the first one that you said was
superseded.

THE COURT: The first one in San Francisco --

MR. WEBB: That you say was superseded.

THE COURT: -- based on what was then a complaint that was

filed by Billfloat.10
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MR. WEBB: Correct.

THE COURT: Right. Which was superseded by a first amended
complaint filed by Billfloat.

MR. WEBB: Right.

THE COURT: Okay.

MR. WEBB: Now, having said that, the time for -- well,
strike that. We'll get to that in a little bit about the timing
of motions or the attachment of a venue.

But in terms of that first ruling, the first ruling, the
only issue in the case, it had nothing to do with where any
individual defendant lived. So that's a whole different body of
law. So that doesn't apply to the second ruling. That part of
it wasn't superseded by the second ruling.

THE COURT: How would it not be?

MR. WEBB: Because the second ruling had everything to do
with where Virginia Varela lived. We thought that she lived in
San Francisco because she lists her address in San Francisco, et
cetera, et cetera. So we thought, okay, great. We'll just
file -- we'll bring her into the San Francisco action.

They then say no, no, no. She lives in Sacramento, and
here's proof. And they did that in their reply papers.

THE COURT: Of course all that is right.

MR. WEBB: Right.

THE COURT: But that misses the point of this -- I can't

MR. WEBB: Right.

THE COURT: The Karst line of cases, as applied to your

splitting of your first amended -- of your client's firstNy

amended complaint between a Contra Costa action and a
cross-complaint to GPB's San Francisco action I think was
intended to evade Goldsmith's ruling.

MR. WEBB: Your Honor, I've -~ I'm prepared to address that.
I'm happy to address it right now. It may be more efficient if
we take it up as we go along.

THE COURT: I'll be quiet. It's hard for me to be quiet
when I've spent so much time with the papers, but I'll be quiet.
MR. WEBB: I understand and I appreciate that. It's not
usually my position to interrupt or not answer a question, but I
guarantee you that question will be answered. Because the Karst
line of cases actually favors our position in a way that I don't

think the Court has appreciated.

THE COURT: Why don't you tell me right now how the Karst
line of cases favors your position.

MR. WEBB: The Karst line of cases ~~ I have to find the
language.

Now, Judge Spanos is the judge in Contra Costa that we were
talking about, correct?

THE COURT: Correct.

MR. WEBB: So he recognized the Karst line of cases, and
said, look, if we file a case that's in the wrong county, and
then they move to change venue and we dismiss it, and then file
a new case -~ which is not at issue in this motion -- if we file
an entirely new case in a different county that would be proper
venue, that we can't do that because that would allow the
plaintiff to choose the right -- the place of venue, whereas the

law says that if the plaintiff files in the wrong county, then10
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the defendants have the right under CCP 398 to move the case to
the county of the defendant's choice.

THE COURT: Everything you said is correct.

MR. WEBB: Exactly.

Now, what Judge Spanos -- but he adopted that based on
language that was in GPB -- not GPB's, but the defendants' brief
written by Mr. Onstott, and let me quote directly from that.

THE COURT: JI understand your position is those cases, the
Contra Costa case and this case, were procedurally in different
postures. Contra Costa, it was a complaint that was sought to
be transferred, and here it's the compulsory cross-complaint
from your point of view, which is the tail that is wagging the
venue dog.

MR. WEBB: And I appreciate that, Your Honor, but our
argument is more nuanced than that.

THE COURT: Okay.

MR. WEBB: So let me tell you what Judge Spanos was seizing
on, and that's this argument that Mr. Onstott put in his brief
of the defendants in their motion.

Mr. Onstott says Code of Civil Procedure section 398(b)
provides that when a plaintiff files in the improper court, "the
action or proceeding shall be transferred to a proper court in a
proper county designated by the defendant." And then he
emphasized designated by the defendant.

The brief goes on, allowing Billfloat to escape an adverse
venue ruling by dismissing its complaint without prejudice, and

refiling in another county of plaintiff's choosing, would

effectively make this provision a nullity.ND

So what Karst does then -- and he's talking about this Karst
line of cases in his brief when he talks about this -- is that
Karst says that, look, if the case is filed in the wrong county,
then the defendants get to choose which county it's going to be
tried in. That's how this card game is played.

So in this case, the plaintiff, GPB, filed in the wrong
county. They filed this case in Sacramento.

We filed a motion under 396(b), which says this case was
filed in the wrong county. The right counties would have been
San Francisco or Alameda. The defendants choose San Francisco,
period. At that point the issue has been decided.

THE COURT: Correct.

MR. WEBB: And that's because -- so if that's the case, then
here we are, and the case should stay here. The defendants have
chosen San Francisco as the proper venue. That's how the game
is played. They don't get a second bite at the apple based on
things that transpire later.

THE COURT: You messed up the works. You had the ability to
keep this complaint in San Francisco under all the rulings, the
complaint that was filed by GPB. But you wanted to avoid the
adverse ruling by Judge Goldsmith sending the first amended
complaint in the case that Billfloat filed to Sacramento. You
wanted to avoid that. So what you did is, you attached it to
the case that the Sacramento Court sent here.

MR. WEBB: Your Honor, that's not true.

THE COURT: How is it not true?

MR. WEBB: We didn't dismiss the case to avoid it. Let's go

back and put yourselves in our shoes for a moment. And I10
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realize that's the golden rule, and we don't do that -- I don't
say that to juries, but this is the situation that we're in.

We filed the San Francisco action.

THE COURT: First.

MR. WEBB: Right.

THE COURT: I understand.

MR. WEBB: They had a duty, if they had any cross-complaint,
if they had any affirmative claims they wanted aired, they had a
duty under the compulsory cross-complaint statute to file it as
a cross-complaint in San Francisco.

THE COURT: I understand. In your view, that's the original
sin.

MR. WEBB: Right.

THE COURT: That was the -- that's the problem from which
all other problems stem. That GPB took it upon itself to ignore
the case that was filed in this county, and filed its own action
improperly in Sacramento.

MR. WEBB: Right. But there's more to the point, though.
That only acknowledges part of it.

The rest of the point is this. That once we had the -- we
thought, all right. We'll oppose the motion by saying, hey,
Judge, look at this. Virginia Varela lives down here.

And Judge Goldsmith -- and then they came back on reply.
They're really good at coming back with reply with new
information, which is frustrating because we don't have an
opportunity to reply to their reply.

But in any event, they came back with new information that

shows that she actually lives up in Sacramento. And Judge10

Goldsmith looked at it and said, well, she lives in Sacramento.
So he sent the case up to Sacramento.

This meant at that moment that we had -- we were still going
to have to ultimately file a cross-complaint in this case. In
other words, we didn't file the cross-complaint in this case to
avoid a ruling. We filed a cross-complaint in this case because
we didn't want them filing -- if we didn't do that -- think
about this -- we would have -- the San Francisco case would be
up in Sacramento. This case would be down here. They then at
some point could say up in Sacramento, hey, you should dismiss
this entire case because they didn't file it as a
cross-complaint in San Francisco.

THE COURT: On that point judicial estoppel would have
barred them from doing that.

MR. WEBB: Well, and it may have, but the problem is that --
and history shows that -- and I don't mean to disparage counsel.
I'm not here to do any of that. But there are a lot of
arguments and positions that have been taken from the other side
that we don't feel are well taken, including most of their
complaint.

So that aside, history shows us that we couldn't rely on
their goodwill or good graces or whatever to do that. There was
a substantial risk that that was going to happen, and my duty to
my clients says I can't take that risk. I know about it. I
can't not do it. We had to file a cross-complaint in this case.

Since we were going to be doing that anyway, and in order to
avoid --

THE COURT: I don't understand that.10
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MR. WEBB: Why?

THE COURT: Why when this -- well, first off, as a matter of
timing, when Sacramento -- when the case that GPB filed in
Sacramento came here, which is the case that we now have before
us today, was the first amended complaint in the case initiated
in this county by Billfloat, had that been filed?

MR. WEBB: Yes.

THE COURT: At that point, couldn't Billfloat have said, do
you want to consolidate the two cases or do you want to dismiss
your first amended complaint and make it a cross-claim here?

MR. WEBB: In other words, working that out between counsel?

THE COURT: Or just -- working it out between counsel
probably would have been -- a better idea would have been to
seek a single assignment judge. But in lieu of that, you bring
a motion in this courtroom to say, okay, now we got what we
wanted, which was the GPB action is here. Let's put it all
together. But you didn't.

MR. WEBB: Well, we didn't have time to do that.

They filed -- right after all of this happened -- I mean
there was a period of a couple weeks, and things were happening
fast. That was something that we had hoped to do, but we didn't
want to file -- actually, no, I don't think we could have done
that from a timing standpoint because -- and I don't want to
make any misrepresentations. I honestly don't recall exactly
when the

THE COURT: Don't worry about it.

MR. WEBB: -- this case ended up here, what date that was,

but that did not occur to us as being a viable option for10

whatever reason.

THE COURT: Here's a concern of mine. The Contra Costa
Judge has effectively relied upon Judge Goldsmith's order saying
that your first amended complaint needs to be in Sacramento.

Having done that, now it just seems like San Francisco has
to adhere to the logic of that position.

MR. WEBB: Actually, that's not what he held.

The first amended complaint was not in Contra Costa County.

THE COURT: It was the portion of the first amended
complaint that applied to the individual GPB defendants.

MR. WEBB: Correct.

THE COURT: Right.

MR. WEBB: But that part of the case is separate and apart
from the part that's here.

THE COURT: How? It's all based on the same set of facts.

MR. WEBB: Well, yes. So all of these cases have been based
on the same set of facts.

THE COURT: True, except possibly the writ procedure, the
writ case in Sacramento.

MR. WEBB: Right. Right. Exactly.

But the -- and, actually, I don't even want to take that --
that statement that I just made as being a judicial admission
because I don't even know -- I'm not familiar with the issues in
the case.

THE COURT: And I'm not as familiar as I should be. So I
join you.

MR. WEBB: All right. But in any event, what the judge in

Contra Costa County was looking at, he was solely looking at the10

issues of the case against the individual defendants. Those
individual defendants are not now, nor have they ever been,
parties in this case.

THE COURT: Correct. Those individual defendants were not
parties to this case, but they were parties to the first amended
complaint in the case that Billfloat filed in this courthouse.

MR. WEBB: Yes.

THE COURT: All right.

MR. WEBB: Correct.

So the issue that concerned the Judge in Contra Costa County
was whether or not the case -- it was fair for us to dismiss the
very same allegations in the San Francisco case, and then refile
those allegations in a brand new lawsuit in Contra Costa County.

THE COURT: Right.

MR. WEBB: And that's what motivated the Court. The Court
looked at it and said, no, that's not appropriate.

He did, if you recall from reading his opinion, he did say
that there's justification for our position because of the state
of affairs and those types of things. So he didn't award
sanctions.

THE COURT: He did say that, and he said there was
gamesmanship on both sides.

MR. WEBB: Right. So the point of it being that that was
the issue that confronted that judge, was whether or not that
was something that was proper to do.

Judge Spanos thought differently than we do. We still feel
very strongly that it was appropriate. They had -- the

individual defendants said, look, we want to be sued in a place~

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where one of us lives. We filed this lawsuit in a place where
one of them lives.

THE COURT: So let's step back from all of this.

The logic of your position is that two cases based on the
same set of facts should be pending at the same time in
Sacramento County and in San Francisco County. That's the logic
of your position.

MR. WEBB: Well, unfortunately, given the state of affairs,
and we've tried desperately to avoid that set of affairs, but
given them, that's where we are today. And the reason is
because the defendant Virginia Varela has insisted on being sued
in a county where she lives, as is her right to do. She's got
that right to insist upon that in general.

Whether or not she's entitled to that right in this set of
facts or the set of facts confronting the Contra Costa County
Judge is open to debate. I'm not admitting that, but the point
is that she's asserted that. That same fundamental right
applies to defendants Mr. O'Malley and Mr. Gilbert.

THE COURT: So why don't you -- this case is sent -- if I
confirm my tentative, and you're still unhappy about all of
this, and you've chosen not to take a writ of either the Contra
Costa decision or my order confirming the tentative, then make a
motion to change venue on convenience of the witnesses in
Sacramento.

MR. WEBB: Well, and that's something that we may very well

THE COURT: Of course that's what you're going to do.

That's going to be motion seven. But that, at least, will be in10

the context of having everything all together in one court.

Today, the logic of what you're saying is, we're going to
split it. That makes no sense. That's contrary to positions
that you've taken in several of these prior motions.

MR. WEBB: The issue here is the fundamental right of the
defendants O'Malley and Gilbert to be tried where they live.
The convenience of witnesses has nothing to do with that. That
assumes that that right has then been disregarded or trampled
upon.

Okay. Now we're up in Sacramento arguing against a firm
that's been around for decades in the courts where they're very
familiar with all of the judges and --

THE COURT: That's not going to get you anywhere. I'm not
going to assume that Sacramento judges are going to favor local
lawyers, just like I don't assume that San Francisco judges
favor local lawyers. We don't.

MR. WEBB: And I understand that and I appreciate that, and
my clients do, too. That's why we want to be down here. That's
why it's so important to Mr. O'Malley and Mr. Gilbert. It may
be an unfounded fear on their part, but it's a very real fear,
and that's why we're here arguing about these issues.

And the thing that we've gotten off of the point, but
the issue is this. The issue is whether or not Mr. Gilbert and
Mr. O'Malley have the right to be tried where they've chosen
once the case has been filed in the wrong county.

Ms. Varela says that she enjoys that right, and so that case
is up there. Why are Ms. Varela's rights more important than

Mr. Gilbert's and Mr. O'Malley's and Billfloat's?x

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THE COURT: They're not. But they're trumped by the Karst
line of cases as applied to this situation, which occurred when,
in my view, you sought to avoid the first amended complaint
being sent to Sacramento, and so you split it and took one
portion and applied it as a -- what you say is a compulsory
cross-complaint.

MR. WEBB: But, again, the Karst line of cases --

THE COURT: I don't like my decision. I'm going to tell you
this. I just don't -- I like even worse the opposite decision.

I think I'm faced with two lousy decisions because I agree
with the Contra Costa judge that there's been gamesmanship on
both sides. I agree that, at least from this perspective, GPB
shouldn't have filed their lawsuit in Sacramento first -- excuse
me -- after Billfloat filed the case here. I agree with that,
but I can't deal with what's happened up to now. I've got to
deal with the facts and the law as I see it today, and to me
it's very stark.

Am I going to have two cases based on the same facts in two
different counties or am I going to have them sent to one
county?

And I believe that on the way this motion has been framed, I
have the authority, either under the Karst line of cases or
improper venue rules or under convenience of the witnesses, to
put it all together, and then allow you, if you wish, in
Sacramento to try to send it all back here or to say it's time
for you now to seek appellate review through a writ of either
the Contra Costa and/or this Court's decision.

I think the worst result is splitting up these cases, which10

is exactly what animated several of your prior motions. Right?
And now you're asking for the very thing that you were
arguing against earlier. And I don't blame you because you
want —- now you'd rather have half here rather than nothing.
Earlier it was you wanted the whole shooting match.
How am I -- am I misanalyzing this? I know you think I'm

legally analyzing

incorrectly, but from a step back, a
practical 30,000-foot perspective, am I misanalyzing it?

MR. WEBB: I think that's the -- I think so, Your Honor.

THE COURT: Okay.

MR. WEBB: And I guess the real frustration is this. That
this issue is, as I've mentioned a couple times, is extremely
important to Mr. O'Malley and Mr. Gilbert to the point where it
may be that -- I don't know how strongly they feel or Billfloat
feels about pursuing the Sacramento case.

It may be that if they were provided a choice between having
the case against them go up to Sacramento or having the case --
this case as it stands stay down here and dismissing the
Sacramento case altogether so that there's only one case, I
don't know what their answer to that would be.

It may be that it would be appropriate, after I go
through -- and I really would like to get to my argument --

THE COURT: So are you asking me, if I'm going to confirm my
tentative ruling, to give you some time, maybe put the matter
over for a week to determine whether you're going to dismiss the
Sacramento case, the case that's now venued in Sacramento --
whether it's been previously called the Sacramento case is

probably not right. It probably hasn't been. The case that was10

initially filed in Contra Costa and has been transferred by
Judge Spanos to Sacramento, that's the case I am referring to.
Do you now want to have some time to determine whether you would
dismiss that case so that we would be in a factually very
different posture?

MR. WEBB: [I think that that would be -- that's something
that I would like to explore with my clients. I don't know what
their answer would be to be honest with you.

THE COURT: And so I'm inclined to give you that time.

I'm also inclined to confirm my tentative, but my tentative
is based, a very large portion of, on the grounds that there is
the Contra Costa case transferred to Sacramento.

MR. WEBB: Understood.

THE COURT: And I've been very clear about my thinking about
that.

So if you want to play the game further and agree that those
claims will never be tried, then I'm happy to look at it anew.

MR. WEBB: All right. And mechanically how would that look?

THE COURT: Well, it could look any way you all agree, but
there's really only two ways to do it. One is to set up a
control date.

Off the record for a second.

(Discussion held off the record.)

THE COURT: So the way this would look could be that we put
it over for a control date to determine whether or not you wish
to -- your clients wish to dismiss the case that is now pending
in Sacramento, or you can -- or we could pick a date by which

you would notify counsel for the bank of your position. And if10

that's true, then you could send us an e-mail saying we would
like to have a further hearing on such and such a date with a
further briefing schedule. Do either one.

MR. ONSTOFF: Your Honor, if I may be heard.

THE COURT: And there's probably variations on that theme,
too.

And I know, sir, you're not going to want me to even
consider any of that, but I will. Because to me that would be a
seriously material change in circumstances.

MR. WEBB: Your Honor, I think we would be interested in a
control date. It may be if we're going to have further briefing
and that type of thing, it may be -- we may need to do it with a
longer time span than a week.

THE COURT: No, no, no. The control date would simply be
for a decision, and then you would come here, or we could do it
by e-mail, to determine what happens based on your decision.

MR. WEBB: Oh, I see. I see.

In other words, not for a decision by the Court, but a
decision by our clients as to whether or not they want to
dismiss the Contra Costa case?

THE COURT: So I'm not being as clear as I should be.

I am right now prepared to confirm my tentative ruling.

You are saying, Judge, you're making a mistake, but I can't
prevent you from making that mistake. But instead, I understand
that your mistake is based on the current posture that there's a
case pending in Sacramento. We may choose not to pursue that
case, and so I would like you to reconsider your mistake based

on new circumstances. That's what you're doing.10
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Instead of having you file a motion for reconsideration, I
would just continue the hearing and have a briefing schedule.
But the problem about doing that now is, I don't know whether
you're going to decide to dismiss the case in Sacramento, and
there's good reason to believe that you might not.

MR. WEBB: Understood.

THE COURT: So I don't care how this goes. We could go off
the record and you could discuss amongst yourselves what your
preference is. But in the absence of that, I'm going to set a
control date, which would be at any timeframe that you feel you
need to fully vet the issue with your client.

MR. WEBB: And that control date would just be for our
communication to you and counsel of our decision as to whether
or not to continue to pursue the Contra Costa case?

THE COURT: And if you decide not to, to set further
proceedings on this motion.

Do you follow me?

MR. WEBB: Yes. That's fine. And I think my sense is that
we could probably do that within two weeks.

THE COURT: So two weeks from today is May 25th.

So you haven't had a chance to speak, so I'm going to give
you the opportunity now.

MR. ONSTOFF: With respect to the Court's suggested
solution, there's a couple of problems with this solution. One
is under Karst itself.

The Judge in the Contra Costa case rightfully pointed to the
freezing of the facts rule.

THE COURT: So but what you're doing now, sir, is you're10

arguing change of circumstances, that there are no change of
circumstances.

MR. ONSTOFF: Uh-huh.

THE COURT: When we don't even know if they're going to
proceed in Contra Costa County --

MR. ONSTOFF: Exactly.

THE COURT: -~ in Sacramento. And so I'm not going to
address that right now. That, to me, is premature. They may
choose to remain their case in Sacramento, and I may confirm my
tentative -- and I'll confirm my tentative ruling and I don't
need to get into this.

But I think that their point is sufficiently important that
I'm going to allow them to brief it, and what you're doing now
is telling me what your opposition papers would be.

MR. ONSTOFF: And, in effect, to also argue that it, again,
violates the freezing of the facts rule. If this were to he
allowed in every case, then we could always mix up the parties
and figure out -- the whole point of the Karst line of cases is
to prevent this kind of relitigation of the issues.

Here, the actions of the parties are in stark contrast in
several respects.

THE COURT: So I'm going to go against you on this. There
have been so many venue motions in these cases. I want to get
it right under the right circumstances. And if that means
allowing further briefing in light of dismissal of the case
pending in Sacramento, I'm going to do that.

So now I'm going to just cut this short and say, does

May 25th work for you as a control date?10
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MR. ONSTOFF: I'll check.

MR. WEBB: While he's checking, by a control date, that's an
e-mail or something? That's not an actual appearance?

THE COURT: So what I would do on May 24th, I would issue a
tentative ruling which says that unless the Sacramento case has
been dismissed --

MR. ONSTOFF: With prejudice?

THE COURT: Yes. [I think it has to be dismissed with
prejudice. I think it has to be dismissed with prejudice.
Otherwise, we're just walking into the same gamesmanship.

Unless the Sacramento case is dismissed with prejudice by
tomorrow, May 25th, this action will be transferred to
Sacramento County.

If the Sacramento case has been dismissed with prejudice,
then the parties should meet and confer and agree, if they can
on a briefing schedule and a new hearing date for this motion,
and if they can't, they must appear in court on the 25th.

That's what it would look like.

MR. ONSTOFF: One of the other issues that is impacted by if
the Court goes along with this idea, is the fact that the cases
continue to move forward, there's motions to quash, there's
other things, there's motions to compel.

Our argument is, pursuant to the line of cases, the
cross-complaint, at the least, should be transferred back
pursuant to Karst and pursuant to the binding effect of the
order that they did not appeal.

THE COURT: Again, you're arguing the circumstance that I --

MR. ONSTOFF: But I'm arguing, also, the logistics ofwo

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there's -- right now there's a pending motion to quash. There's
going to have to be motions to compel and discovery if we can't
work things out.

THE COURT: Everything's on hold. According to the portion
of the Weil & Brown book that I cited in the discovery motion,
everything's on hold. There's a pending motion to change venue.

So you guys can do as you wish in terms of discovery, but
the Court is not going to make it -- this Court's not going to
make any orders until the motion to change venue is decided.

And if the decision is to send this case to Sacramento, I'm
not going to make any orders at all. That's going to be the
only order. Then all other orders are going to have to be made
by Sacramento.

MR. WEBB: Does that mean that the Court feels that it
doesn't have jurisdiction to entertain cases? In other words,
deadlines for filing motions to compel are going to be coming up
and that type of thing. Does that mean that those deadlines are
stayed?

THE COURT: That's my understanding unless you give me
authority otherwise.

MR. WEBB: That's fine.

THE COURT: That's my understanding.

MR. WEBB: I just wanted to make sure so that we weren't
unnecessarily preparing motions that were going to be mooted at
some point.

THE COURT: Well, you could file any -- prepare any motions
you want because eventually they're going to be heard in some

county.10

MR. ISOLA: Right, Your Honor. Whether it's a discovery
motion or another procedural-type device, like a motion to sever
Mr. O'Malley and Mr. Gilbert from GPB's complaint, what you're
stating is that any type of motion, you do not want that filed
in your court. Is that what you're stating?

THE COURT: I don't say that you can't file it. I'm saying
I'm not going to rule on it.

MR. WEBB: Okay.

THE COURT: I can't remember what the Weil & Brown book said
about filing, but it certainly says I can't rule.

MR. WEBB: Understood.

THE COURT: Okay. Anything more?

MR. WEBB: Yes, sir.

And that is that while my clients are making decisions,
they've also got decisions to do -- as to what to do about the
Contra Costa County case from a writ standpoint, as well as this
case.

Unfortunately, that means that I've got the onerous task of
at least reading into the record my arguments so that we're not
facing any waiver of argument later.

THE COURT: I'll be quiet. You finish.

MR. WEBB: I appreciate that, and I guess I would offer the
class, they're welcome to stay for it. It may or may not be
terribly interesting. I'm happy to pause if they want to leave
or if they want to stay. It makes no matter to me.

THE COURT: They'll make their own decision.

MR. WEBB: All right. Very good.

All right. Your Honor, before we were talking I wantedwo

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to talk about things that this motion is not about.

It's not about the case against Virginia Varela. The
San Francisco Court's prior order had everything to do with
where Virginia Varela lived. The Contra Costa Court ruling
dealt with where she lives.

This motion is not about her or where she lives. She's not
a party in this case and never has been. The Court doesn't need
to be concerned with her. Her case has been ordered to
Sacramento because she claims she lives there, and claims a
right to have the case against her tried there.

THE COURT: Off the record.

(Discussion held off the record.)

MR. WEBB: So her case has been ordered to Sacramento
because she claims she lives there and claims a right to have
the case against her tried there. This is an important and
fundamental right guaranteed by California statute.

She's not the only person entitled to this right. The
defendants in this case are entitled to the same right. The
tentative denies them this same right that Virginia Varela
enjoys.

It's also not about where Better Finances or Billfloat's
affirmative causes of action are to be tried.

It's about the defendants' statutory rights to be tried in
the county of their choosing once the plaintiff sued them in the
wrong county. Everything else is subterfuge designed to
distract the Court from this important and unassailable fact.

Now I want to talk about the law.

CCP 395(a) reads as follows. The first sentence reads in10
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part, "The Superior Court in the county where the defendants, or
some of them, reside at the commencement of the action is the
proper court for the trial of the action. Venue is measured at
the time the complaint is filed."

This lawsuit was commenced on October 2nd, 2015. On that
date, Ryan Gilbert and Sean O'Malley were sued for fraud and
theft of alleged trade secrets, allegations they vehemently
deny.

Mr. Gilbert works here in San Francisco. Mr. O'Malley lives
here. He lived here on October 2nd, 2005.

Since GPB filed in the wrong court, under California law, he
has the right to trial in the county where he resides. That
right has been guaranteed by statute since 1872. This right is
a fundamental right because it allows defendants to clear their
name in front of a jury of their peers. Also, once their name
is cleared, it helps them rebuild their sullied reputation where
local media is present.

What the statute doesn't address. The statute does not say
anything about cross—defendant's rights, only defendants. In
fact, a cross-complaint has no affect on venue because at the
time of commencement a cross-complaint has not been filed.

And I refer the Court to the K.R.L. Partnership case cited
in our brief.

This case was originally filed in Sacramento. Since neither
defendant resided in Sacramento, it was not the proper place for
trial as of October 2, 2015, the commencement of this case.

Defendants moved for a change of venue. The law is so clear

that plaintiff didn't even oppose it. All the plaintiff said in10

its non-opposition was, and this is an exact quote from the
non-opposition, "The same authority mandates that the Court
consider only the residence of the defendants, and does not
allow the Court to consider the convenience of the witnesses
under CCP section 397(c) in a motion to change venue until all
defendants have answered."

The Sacramento Court granted the motion, as i

Case Info

Judge

Andrew Y.S. Cheng Track Judge’s New Case

Case No.

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Document Filed Date

June 08, 2016

Case Filing Date

January 11, 2016

County

Parties

BILLFLOAT, INC. Cross Complainant
BILLFLOAT, INC. Defendant
DOES 1 TO 50, INCLUSIVE Defendant
GILBERT, RYAN Cross Complainant
GILBERT, RYAN Defendant
GOLDEN PACIFIC BANK, N.A. Cross Defendant
GOLDEN PACIFIC BANK, N.A. Plaintiff
GOLDEN PACIFIC, N.A., A NATIONAL BANK Cross Defendant
ISOLA, PETER LINDSEY Attorneys for Defendants
ISOLA, PETER LINDSEY Attorney for the Defendant
O'MALLEY, SEAN Cross Complainant
O'MALLEY, SEAN Defendant
ROES 1-50 Cross Defendant
SCHEIDT, BRUCE A Attorneys for Plaintiffs
SCHEIDT, BRUCE A Attorney for the Plaintiff
WEBB, WILLIAM T Attorneys for Defendants
WEBB, WILLIAM T Attorney for the Defendant
Jennifer Yu Attorneys for Defendants
Christopher Onstott Attorneys for Plaintiffs
Errol Dauis Attorneys for Plaintiffs
Jennifer Su Attorney
Ilene Block Attorneys for Plaintiffs
Gabriel Herrera Attorneys for Plaintiffs
Tyler Carle Attorneys for Defendants
Robert Lockwood Attorneys for Defendants
Nicolas Morgan Attorneys for Plaintiffs
Peter Brejcha Attorneys for Plaintiffs
Robert Hale Attorney
Neil Peretz Attorney
James Meister Attorney
BRUCE ARMSTRONG Attorney
Peter Lee Attorney

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Motion-Secondary: GOLDEN PACIFIC BANK, N.A. VS. BILLFLOAT, INC. ET AL

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