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1 SPERTUS, LANDES & UMHOFER, LLP
Matthew Donald Umhofer (SBN 206607)
2 Diane H. Bang (SBN 271939)
1990 South Bundy Dr., Suite 705
3 Los Angeles, California 90025
Telephone: (310) 826-4700
4 Facsimile: (310) 826-4711
matthew@spertuslaw.com
5 diane@spertuslaw.com
6 Attorneys for Mark Schaub and TLG Ltd.
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
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FOR THE COUNTY OF SANTA BARBARA
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10 MARK SCHAUB, an individual; Case No.: 20CV02113
TLG LTD., a Hong Kong limited
TELEPHONE 310-826-4700; FACSIMILE 310-826-4711
11 liability company,
Spertus, Landes & Umhofer, LLP
Hon. Donna D. Geck
1990 SOUTH BUNDY DR., SUITE 705
12 Plaintiffs,
LOS ANGELES, CA 90025
13 PLAINTIFFS’ NOTICE OF MOTION
v. AND MOTION FOR TERMINATING
14 SANCTIONS; MEMORANDUM OF
ANDREW WYLES WATERS, an POINTS AND AUTHORITIES IN
individual; FCP CORPORATE (HK) SUPPORT; DECLARATION OF
15 LTD., a Hong Kong limited liability DIANE H. BANG IN SUPPORT
company; FCP PRIVATE, LLC, a
16 California limited liability
corporation; and DOES 1 through 10 [Filed concurrently with Request for
17 inclusive, Judicial Notice and [Proposed] Orders]
18 Defendants.
Hearing Date: January 6, 2023
19 Hearing Time: 10:00 a.m.
Dept.: 4
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SAC filed: June 14, 2021
21 Trial: Not set
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PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 TO ALL PARTIES AND THEIR COUNSEL OF RECORD:
2 PLEASE TAKE NOTICE that on January 6, 2023 at 10:00 a.m., in
3 Department 4 of the above-entitled Court, located at 1100 Anacapa Street, Santa
4 Barbara, California 93101, Plaintiffs Mark Schaub (“Mr. Schaub”) and TLG Ltd.
5 (collectively, “Plaintiffs”) will, and hereby do, move this Court for an order for
6 terminating sanctions against Defendants Andrew Waters, FCP Corporate (HK)
7 Ltd., and FCP Private LLC (collectively, “Defendants”), striking Defendants’
8 Answer to Plaintiffs’ Second Amended Complaint, and entering judgment in favor
9 of Plaintiffs in the amount of $1,590,000, plus interest.
10 This Motion for Terminating Sanctions (“Motion”) and the accompanying
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11 request for terminating sanctions are based on California Code of Civil Procedure
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12 § 2023.010 et seq. This Motion is also based on this Notice of Motion, the
LOS ANGELES, CA 90025
13 Memorandum of Points and Authorities, the Declaration of Diane H. Bang and
14 exhibits attached thereto, the Request for Judicial Notice, the pleadings and papers
15 on file herein, and such other oral and documentary evidence and argument as may
16 be presented to the Court at or prior to the hearing of this matter. To the extent the
17 Court intends to deny any portion of Plaintiffs’ Motion, Plaintiffs request oral
18 argument.
19 The parties met and conferred regarding this Motion on September 13, 2022,
20 and were unable to resolve the issues raised.
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22 Dated: September 20, 2022 SPERTUS, LANDES & UMHOFER, LLP
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24 By:
Matthew Donald Umhofer
25 Diane H. Bang
26 Attorneys for Plaintiffs
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1.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 MEMORANDUM OF POINTS & AUTHORITIES
2 I. INTRODUCTION
3 Defendant Waters is a fraudster and Defendants FCP Corporate and FCP
4 Private are sham companies. Using his sham companies, Waters has defrauded
5 dozens of people out of millions of dollars, including Plaintiffs.
6 Defendants have no intention of litigating this case in good faith, in
7 compliance with both the statutory requirements and this Court’s orders.1 This
8 Court ordered all three Defendants to serve discovery responses without objection
9 and pay sanctions, but none of the Defendants have complied. Defendants’ non-
10 compliance strikes at the very heart of the discovery rules, which is “to ‘enhance
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11 the truth-seeking function of the litigation process and eliminate trial strategies that
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1990 SOUTH BUNDY DR., SUITE 705
12 focus on gamesmanship and surprise.’” Juarez v. Boy Scouts of Am., Inc. (2000)
LOS ANGELES, CA 90025
13 81 Cal. App. 4th 377, 389 disapproved of on other grounds by Brown v. USA
14 Taekwondo (2021) 11 Cal. 5th 204 (quoting Williams v. Volkswagenwerk
15 Aktiengesellschaft (1986) 180 Cal. App. 3d 1244, 1254). This Court should “not
16 tolerate such interference.” In re Marriage of Chakko (2004) 115 Cal. App. 4th
17 104, 110. Accordingly, Plaintiffs’ Motion for Terminating Sanctions (the
18 “Motion”) should be granted—Defendants’ Answer, filed in this Action on
19 October 25, 2021 (Bang Decl. ¶ 11, Ex. C), should be stricken and judgment
20 should be awarded on behalf of Plaintiffs.
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Counsel for Defendants filed a motion to be relieved as counsel, which was
26 granted in January 2022. (Decl. of Diane Bang (“Bang Decl.”) ¶ 12, Ex. D.) Even
though California law requires corporate entities to be represented by counsel,
27 Thomas G. Ferruzzo, Inc. v. Superior Court (1980) 104 Cal. App. 3d 501, 503 (“The
rule is clear in this state that, with the sole exception of small claims court, a
28 corporation cannot act in propria persona in a California state court.”), no counsel
has appeared on behalf of Defendants FCP Corporate Ltd. and FCP Private, LLC.
(Decl. of Diane Bang (“Bang Decl.”) ¶ 5.)
1.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 II. FACTUAL BACKGROUND
2 A. Overview of Plaintiffs’ Allegations
3 Through his companies, Defendants FCP Corporate Ltd. and FCP Private,
4 LLC, Defendant Waters has essentially been operating a shell factory enterprise by
5 creating various startup companies and misleading potential investors to believe
6 each company would be operating and profitable. Plaintiff Mark Schaub is an
7 individual who, while living in Hong Kong, was befriended and then ultimately
8 defrauded by Defendant Waters. He believed Defendant Waters to be a successful
9 businessman and that he was running real businesses with real potential for growth
10 and profitability. (Bang Decl. ¶ 10, Ex. B (Second Am. Compl. (“SAC”)) ¶¶ 17-
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11 18.)
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12 In 2019, Mr. Schaub was informed that HSBC was planning to close his
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13 company account, TLG Ltd. Defendant Waters convinced Mr. Schaub that HSBC
14 was closing the account because the bank believed it to contain tainted funds. Mr.
15 Schaub was unfamiliar with Hong Kong banking regulations and believed
16 Defendant Waters’ representations. Defendant Waters induced Mr. Schaub to have
17 approximately $50,000 transferred to the FCP Corporate account controlled by
18 Waters, promising that this was a client account and that the funds would be held
19 in trust. (SAC ¶ 27.)
20 In July 2019, instead of the planned $50,000, approximately $2 million was
21 mistakenly transferred from TLG to FCP Corporate’s account. (SAC ¶ 32.) When
22 Mr. Schaub inquired about the money, rather than returning the funds to Mr.
23 Schaub, Defendant Waters proceeded to drain FCP Corporate’s account of the
24 entire $2 million. (SAC ¶ 41.) Meanwhile, Defendant Waters falsely told Mr.
25 Schaub that the bank had frozen the accounts where Plaintiffs’ funds were
26 transferred to, that the bank believed the funds were from an illegitimate source,
27 and that he would have to go to Hong Kong to resolve the situation with the frozen
28 accounts. For months, Defendant Waters proceeded to string Mr. Schaub along
2.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 with these lies. (SAC ¶¶ 42-43.) Mr. Schaub demanded the immediate return of
2 his funds, Defendant Waters refused, and he continues to refuse to this day.
3 B. Defendants’ Failure to Comply with the Court’s Orders
4 On October 29, 2021, Plaintiff Mark Schaub propounded a set of discovery
5 requests (form interrogatories, request for production of documents, and request
6 for admissions) relating to the allegations of the SAC on all three Defendants.
7 (Bang Decl. ¶ 2.) Plaintiffs agreed to extend the deadline for all Defendants to
8 respond to Plaintiffs’ discovery requests to December 28, 2021, permitting
9 Defendants an additional four weeks from their statutory deadline to respond.
10 (Ibid. ¶ 3.) However, on the agreed upon deadline, Defendants served boilerplate,
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11 evasive objections and did not produce a single document. (Ibid. ¶ 4.)
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12 On February 15, 2022, Mr. Schaub filed a motion to compel further
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13 discovery responses against Defendant FCP Corporate. (Bang Decl. ¶ 13 Ex. E.)
14 No opposition was filed. (Ibid.) On May 27, 2022, the Court granted Mr.
15 Schaub’s motion, finding that Defendant FCP Corporate failed to justify its
16 responses to the discovery requests. (Ibid.) The Court ordered Defendant FCP
17 Corporate to “serve written responses to plaintiff’s first sets of form
18 interrogatories, requests for production of documents, and requests for admissions,
19 without objection except as to privilege, on or before June 13, 2022.” (Ibid.) The
20 Court also awarded “monetary sanctions in the amount of $6,500.00 in favor of
21 plaintiff Mark Schaub and against defendant FCP Corporate Ltd., to be paid to
22 counsel for plaintiff on or before June 13, 2022.” (Ibid.) In spite of the Court’s
23 order, Defendant FCP Corporate did not serve written discovery responses and pay
24 the sanctions amount by June 13, 2022. (Bang Decl. ¶ 6.)
25 On May 13, 2022, Mr. Schaub filed similar motions to compel further
26 discovery responses against Defendants Waters and FCP Private. (Bang Decl. ¶
27 14, Ex. F.) Again, no opposition was filed. (Ibid.) On August 12, 2022, the Court
28 granted the discovery motions. (Ibid.) Defendants Waters and FCP Private were
3.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 ordered to serve discovery responses without objection and pay $2,500 in
2 monetary sanctions by August 29, 2022. (Ibid.) Defendants Waters and FCP
3 Private also failed to comply with the court-ordered deadline. (Bang Decl. ¶ 7.)
4 Plaintiffs sent Defendants a letter on August 30, 2022, regarding
5 Defendants’ failure to comply with the Court’s deadlines. (Bang Decl. ¶ 8.) The
6 parties met and conferred on September 13, 2022 regarding Defendants’ failure to
7 comply, and Defendant Waters represented that Defendants have no intention of
8 complying with the Court’s orders. (Ibid. ¶ 9.)
9 Based on this conduct, which amounts to a misuse of the discovery process,
10 Plaintiffs seek terminating sanctions and a judgment in the amount $1,590,000,
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11 plus interest.2
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1990 SOUTH BUNDY DR., SUITE 705
12 III. ARGUMENT
LOS ANGELES, CA 90025
13 A. Terminating Sanctions Are Permitted By Statute
14 “The purpose of the discovery rules is to ‘enhance the truth-seeking function
15 of the litigation process and eliminate trial strategies that focus on gamesmanship
16 and surprise.’” Juarez v. Boy Scouts of Am., Inc. (2000) 81 Cal. App. 4th 377,
17 389 disapproved of on other grounds by Brown v. USA Taekwondo (2021) 11 Cal.
18 5th 204 (quoting Williams v. Volkswagenwerk Aktiengesellschaft (1986) 180 Cal.
19 App. 3d 1244, 1254). “In other words, the discovery process is designed to ‘make
20 a trial less a game of blindman’s bluff and more a fair contest with the basic issues
21 and facts disclosed to the fullest practicable extent.’” Ibid. (quoting Greyhound
22 Corp. v. Superior Court (1961) 56 Cal. 2d 355, 376). “Those who interfere with
23 the truth-seeking function of the trial court strike at the very heart of the justice
24 system. The courts will not tolerate such interference.” In re Marriage of Chakko
25 (2004) 115 Cal. App. 4th 104, 110.
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This amount represents the total amount of breach of contract damages
28 alleged in the Fourth and Fifth Causes of Action of the SAC ($1,940,000 +
$400,000) minus the $750,000 that was returned to Mr. Schaub (see SAC ¶ 2).
4.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 Misuses of the discovery process include the following: failing to respond or
2 to submit to an authorized method of discovery; making, without substantial
3 justification, an unmeritorious objection to discovery; making an evasive response
4 to discovery; and disobeying a court order to provide discovery. Code Civ. Proc.,
5 § 2023.010(d)-(g). Pursuant to California Code of Civil Procedure section
6 2023.030, “[t]he court may impose a terminating sanction by . . . [a]n order striking
7 out the pleadings or parts of the pleadings of any party engaging in the misuse of
8 the discovery process.” Code Civ. Proc., § 2023.030(d)(1).
9 B. Terminating Sanctions Are Appropriate Here
10 Defendants have clearly engaged in numerous misuses of the discovery
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11 process. First, Defendants made meritless objections and evasive responses to the
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12 form interrogatories and requests for admission served by Plaintiff. (Bang Decl. ¶
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13 4.) Second, Defendants refused to produce a single document in response to
14 Plaintiff’s requests for documents without a valid objection. (Ibid.) Third, despite
15 being ordered to respond to discovery without objections, Defendants have refused
16 to do so with no justification. (Bang Decl. ¶¶ 6-7.) Fourth, Defendants disobeyed
17 the Court’s order to pay sanctions to Plaintiff. (Ibid.) And finally, Defendants
18 have given no indication that they intend to comply with the Court’s orders or
19 participate in this litigation in a meaningful way, as the corporate defendants have
20 been unrepresented by counsel since January 2022, and during the parties’ meet
21 and confer call, Defendant Waters made no mention that any discovery responses
22 or documents would be served. (Bang Decl. ¶¶ 5-9.)
23 Defendants’ conduct is on all fours with conduct that results in terminating
24 sanctions. Defendants have made it impossible for Plaintiff to prepare for trial and
25 defend against the affirmative defenses asserted in their Answer. Because it is
26 clear that Defendants have no intention of participating in this litigation, their
27 Answer should be stricken, and judgment should be awarded to Plaintiff in the full
28 amount set forth in the Second Amended Complaint, plus prejudgment interest.
5.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 See Collisson & Kaplan v. Hartunian (1994) 21 Cal. App. 4th 1611 (rejecting the
2 argument that striking the defendants’ answer for failure to properly respond to
3 discovery requests, which were ignored or objected to, was too drastic a sanction).
4 IV. CONCLUSION
5 For the foregoing reasons, Plaintiffs respectfully request that the Court enter
6 an order granting Plaintiffs’ Motion for Terminating Sanctions by striking
7 Defendants’ Answer and entering default judgment against Defendants in the
8 amount of $1,590,000, plus prejudgment interest.
9
10 Dated: September 20, 2022 SPERTUS, LANDES & UMHOFER, LLP
TELEPHONE 310-826-4700; FACSIMILE 310-826-4711
11
Spertus, Landes & Umhofer, LLP
By:
1990 SOUTH BUNDY DR., SUITE 705
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Matthew Donald Umhofer
LOS ANGELES, CA 90025
13 Diane H. Bang
14 Attorneys for Plaintiffs
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6.
PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS
1 DECLARATION OF DIANE H. BANG
2 I, Diane H. Bang, declare as follows:
3 1. I am an attorney duly licensed to practice before this Court, and I
4 represent Plaintiffs Mark Schaub and TLG Ltd. (“Plaintiffs”). I submit this
5 declaration in support of Plaintiffs’ for Terminating Sanctions (the “Motion”). I
6 have personal knowledge of the facts set forth herein and, if called upon to do so,
7 can testify competently to the facts in this declaration.
8 2. On October 29, 2021, Mr. Schaub served his first set of form
9 interrogatories, requests for production of documents (“RFPs”), and requests for
10 admissions (“RFAs”) on all three defendants, Andrew Waters, FCP Corporate
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11 (HK) Ltd., and FCP Private, LLC.
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1990 SOUTH BUNDY DR., SUITE 705
12 3. The deadline for Defendants to respond to Mr. Schaub’s discovery
LOS ANGELES, CA 90025
13 was extended to December 28, 2021, by stipulation. This permitted Defendants a
14 full four-week extension to respond to discovery.
15 4. Defendants did not serve substantive responses and documents on
16 December 28, 2021, as agreed. Rather, Defendants served only meritless,
17 boilerplate objections to Mr. Schaub’s written discovery and did not produce a
18 single document in response to Plaintiff’s requests for documents.
19 5. On January 7, 2022, the Court granted Mr. Kevin Nimmons’ request
20 to be relieved as counsel for Defendants in this matter. No other counsel has
21 appeared on behalf of Defendants.
22 6. Defendant FCP Corporate has not served written discovery responses
23 without objection to Plaintiffs or paid monetary sanctions in the amount of
24 $6,500.00, even though it has been ordered to do so by this Court.
25 7. Defendants Waters and FCP Private similarly have not served written
26 discovery responses without objection to Plaintiffs or paid monetary sanctions in
27 the amount of $2,500.00, even though they were ordered to do so by this Court.
28 8. On August 30, 2022, I sent Defendants a letter regarding Defendants’
1
DECLARATION OF DIANE H. BANG
1 failure to comply with the Court’s orders granting Plaintiffs’ motions to compel
2 further responses and that Plaintiffs would be seeking terminating sanctions. A
3 true and correct copy of the letter dated August 30, 2022 is attached hereto as
4 Exhibit A.
5 9. Defendant Waters and I participated in the meet and confer on
6 September 13, 2022, regarding Plaintiffs’ anticipated motion. During the meet and
7 confer call, Defendant Waters gave no indication that any of the Defendants
8 intended to comply with the Court’s orders or participate in this litigation.
9 Defendant Waters told me that the companies do not exist and that Plaintiffs “can
10 go through all the motions you want in the world” to get court orders. Defendant
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11 Waters also told me he has no documents responsive to Plaintiffs’ discovery
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12 requests.
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13 10. Attached hereto as Exhibit B is a true and correct copy of Plaintiffs’
14 Second Amended Complaint, filed on June 14, 2021.
15 11. Attached hereto as Exhibit C is a true and correct copy of Defendants’
16 Answer, filed on October 25, 2021.
17 12. Attached hereto as Exhibit D is a true and correct copy of the Court’s
18 January 7, 2022 Order, Granting Defendants’ former counsel’s Motion to be
19 Relieved as Counsel.
20 13. Attached hereto as Exhibit E is a true and correct copy of the Court’s
21 May 27, 2022 Order, Granting Plaintiff’s Motion to Compel Further Responses
22 against Defendant FCP Corporate (HK).
23 //
24 //
25 //
26 //
27 //
28 //
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DECLARATION OF DIANE H. BANG
1 14. Attached hereto as Exhibit F is a true and correct copy of the Court’s
2 August 12, 2022 Order, Granting Plaintiff’s Motion to Compel Further Responses
3 against Defendants Andrew Waters and FCP Private.
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5 I declare under penalty of perjury under the laws of the State of California
6 that the foregoing is true and correct.
7 Executed this 20th day of September 2022, in Los Angeles, California.
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Diane H. Bang
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TELEPHONE 310-826-4700; FACSIMILE 310-826-4711
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Spertus, Landes & Umhofer, LLP
1990 SOUTH BUNDY DR., SUITE 705
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LOS ANGELES, CA 90025
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DECLARATION OF DIANE H. BANG
EXHIBIT A
EXHIBIT A
VIA U.S. MAIL AND EMAIL
August 30, 2022
Andrew Waters
FCP Corporate (HK) Ltd.
FCP Private, LLC
P.O. Box 10542
Tampa, FL 33786
Email: andrew.waters@firstcp.com
Re: Schaub, et al. v. Waters, et al., Case No. 20CV02113
Dear Mr. Waters:
The purpose of this letter is to meet and confer with you regarding Plaintiffs’ anticipated
motion for terminating sanctions. Specifically, Plaintiffs will request that the court enter an order
striking Defendants Andrew Waters, FCP Corporate (HK) Ltd., and FCP Private, LLC’s Answer to
the Second Amended Complaint, as well as an entry of judgment in the amount of $2,340,000, plus
prejudgment interest.
Pursuant to California Code of Civil Procedure section 2023.030, “[t]he court may impose a
terminating sanction by . . . [a]n order striking out the pleadings or parts of the pleadings of any
party engaging in the misuse of the discovery process.” Code Civ. Proc., § 2023.030(d)(1).
Misuses of the discovery process include the following: failing to respond or to submit to an
authorized method of discovery; making, without substantial justification, an unmeritorious
objection to discovery; making an evasive response to discovery; and disobeying a court order to
provide discovery. Code Civ. Proc., § 2023.010(d)-(g).
On October 29, 2021, Plaintiff Mark Schaub propounded a set of discovery requests (form
interrogatories, request for production of documents, and request for admissions) on all three
Defendants. By agreement of the parties, Defendants’ discovery responses were due on December
28, 2021. However, on that day, Defendants served only unmeritorious objections and evasive
responses.
On February 15, 2022, we filed a motion to compel further discovery responses against
Defendant FCP Corporate. No opposition was filed. On May 27, 2022, the court granted our
motion, finding that Defendant FCP Corporate failed to justify its responses to the discovery
requests. The court ordered Defendant FCP Corporate to “serve written responses to plaintiff’s first
sets of form interrogatories, requests for production of documents, and requests for admissions,
without objection except as to privilege, on or before June 13, 2022.” The court also awarded
August 30, 2022
Page 2 of 2
“monetary sanctions in the amount of $6,500.00 in favor of plaintiff Mark Schaub and against
defendant FCP Corporate Ltd., to be paid to counsel for plaintiff on or before June 13, 2022.” In
spite of the court’s order, Defendant FCP Corporate did not serve written discovery responses and
pay the sanctions amount by June 13, 2022.
On May 13, 2022, we filed similar motions to compel further discovery responses against
Defendants Waters and FCP Private. Again, no opposition was filed. On August 12, 2022, the
court granted our motions. Defendants Waters and FCP Private were ordered to serve discovery
responses without objection and pay $2,500 in monetary sanctions by August 29, 2022. Defendants
Waters and FCP Private also failed to comply with the court-ordered deadline.
Based on this conduct, which amounts to a misuse of the discovery process, Plaintiffs intend
to seek terminating sanctions and a judgment in the amount $2,340,000, plus interest. Please
provide me with your availability for a time this week to meet and confer regarding Plaintiffs’
motion.
Sincerely,
Diane Bang
Cc: Andrew Waters
FCP Private, LLC
FCP Corporation, LTD
5325 County Road 100
Carbondale, CO 81623
FCP Private, LLC
Attn: Andrew Waters, Manager
100 Second Avenue, Suite 903-S
Saint Petersburg, FL 33701
FCP Private, LLC
555 Montgomery Street, Suite 500
San Francisco, CA 94111
Andrew Waters
211 Juniper Court
Basalt, CO 81621
EXHIBIT B
EXHIBIT B
1 SPERTUS, LANDES & UMHOFER, LLP ELECTRONICALLY FILED
Matthew Donald Umhofer (SBN 206607) Superior Court of California
2 Diane H. Bang (SBN 271939) County of Santa Barbara
1990 South Bundy Dr., Suite 705 Darrel E. Parker, Executive Officer
3 Los Angeles, California 90025 6/14/2021 2:09 PM
Telephone: (310) 826-4700 By: Elizabeth Spann, Deputy
4 Facsimile: (310) 826-4711
matthew@spertuslaw.com
5 diane@spertuslaw.com
6 Attorneys for Mark Schaub and TLG Ltd.
7
SUPERIOR COURT OF THE STATE OF CALIFORNIA
8
FOR THE COUNTY OF SANTA BARBARA
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10 MARK SCHAUB, an individual; Case No.: 20CV02113
TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711
Spertus, Landes & Umhofer, LLP
TLG LTD., a Hong Kong limited
11 liability company,
VERIFIED SECOND AMENDED
1990 SOUTH BUNDY DR., SUITE 705
12 COMPLAINT FOR DAMAGES:
LOS ANGELES, CA 90025
Plaintiffs,
13 v. (1) CONVERSION;
(2) INTENTIONAL
14 ANDREW WYLES WATERS, an MISREPRESENTATION—FRAUD;
individual; FCP CORPORATE (HK) (3) CONCEALMENT;
15 LTD., a Hong Kong limited liability (4) BREACH OF CONTRACT—
company; FCP PRIVATE, LLC, a $1,940,000;
16 California limited liability company; (5) BREACH OF CONTRACT—
and DOES 1 through 10 inclusive, $400,000; and
17 (6) UNJUST ENRICHMENT.
Defendants.
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JURY TRIAL DEMANDED
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SECOND AMENDED COMPLAINT
1 Plaintiffs Mark Schaub and TLG Ltd. (“Plaintiffs”) allege as follows:
2 INTRODUCTION
3 1. Defendant Andrew Waters is a fraud. Through his companies,
4 Defendants FCP Corporate Ltd. and FCP Private, LLC, as well as other
5 companies or businesses, including but not limited to Food Box Network, Co-
6 Brands USA, Co-Brands Australia, Co-Brands UK, and International Brands
7 Direct, Defendant Waters has been operating a fraudulent Ponzi scheme, luring
8 wealthy investors into sending him hundreds of thousands of dollars, and
9 misappropriating those funds for his own personal use. Defendant Waters has
10 essentially been creating various shell companies to mislead potential investors
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11 into believing each company would be operating and profitable.
1990 SOUTH BUNDY DR., SUITE 705
12 2. Defendants have also committed theft. Plaintiffs’ funds were stolen
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13 by Defendants, who now refuse to return it in full. Plaintiffs acknowledge that
14 the Defendant Waters returned $750,000 to Plaintiffs in order to avoid Mr.
15 Schaub uncovering the fraud. However, Defendant Waters claimed that these
16 were his own funds and not Plaintiffs’ funds, as he claimed Plaintiff’s funds were
17 frozen in a Hong Kong bank account.
18 3. In July 2019, through a series of unforeseen events, approximately
19 US$1.9 million was transferred from Plaintiffs to two different accounts under
20 Defendants’ control.
21 4. Despite his pleas to Defendants to return the funds that rightfully
22 belong to him, Mr. Schaub’s long-time supposed friend and business associate,
23 Defendant Waters, lied about the following: (a) that the bank had frozen the
24 accounts where the funds had been transferred to; (b) that the bank believed the
25 funds were from an illegitimate source; and (c) that he would have to go to Hong
26 Kong to resolve the situation with the frozen accounts.
27 5. On January 22, 2020, Mr. Schaub discovered Defendant Waters had
28 been lying to him all along when he came into possession of FCP Corporate
1.
SECOND AMENDED COMPLAINT
1 (HK)’s Citibank records that clearly showed fraud had been committed and that
2 Defendant Waters had immediately withdrawn all the funds from the allegedly
3 frozen accounts until nothing remained. All monies transferred from the Hong
4 Kong account to Waters’ U.S. account should be treated as money laundering, as
5 the funds were acquired by fraud.
6 6. Prior to Plaintiffs’ transfer of funds, the balance of FCP Corporate
7 (HK)’s USD account was $38.99, and the balance of its HKD account was
8 HK$2,784.29 (or US$360).1 After Plaintiffs’ funds were transferred, no further
9 payments from any sources were received into FCP Corporate (HK)’s Citibank
10 accounts. This shows that at the time Plaintiffs’ funds were transferred, the FCP
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11 Corporate (HK) bank account could not be used for real business.
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12 7. Mr. Schaub confronted Defendant Waters with the truth, but
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13 Defendant Waters refuses to acknowledge the theft, refuses to return the money
14 (except for the $750,000 that was returned in order to maintain the fraud), and
15 claims the funds are still frozen in the Citibank accounts that he controls.
16 8. As part of his scheme, and in an effort to cover up his fraud,
17 Defendant Waters has threatened litigation against Mr. Schaub for failed business
18 transactions, including an alleged transaction with Hearst Communications. Mr.
19 Schaub has not communicated with Hearst Communications or any other third
20 parties regarding Defendant Waters’ alleged transaction. Upon information and
21 belief, no transaction between Defendant Waters, or the companies he represents,
22 and Hearst Communications was ever executed.
23 THE PARTIES
24 9. Plaintiff Mark Schaub is an individual residing in the United
25 Kingdom.
26
27
28
1
All future references to dollar amounts are in USD unless otherwise noted.
2.
SECOND AMENDED COMPLAINT
1 10. Plaintiff TLG Ltd., is a Hong Kong limited liability company,
2 owned by Mr. Schaub.
3 11. Defendant Andrew Wyles Waters, is a natural person who is, and at
4 all times relevant hereto, was a resident of the County of Santa Barbara, State of
5 California, and was conducting substantial business in the State of California,
6 including the County of Santa Barbara.
7 12. Defendant FCP Corporate (HK) Ltd., upon information and belief, is
8 a Hong Kong limited liability company. For all intents and purposes, FCP
9 Corporate (HK) is controlled by Defendant Waters.
10 13. Defendant FCP Private, LLC is a California limited liability
TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711
Spertus, Landes & Umhofer, LLP
11 company, conducting substantial business in the State of California, including the
1990 SOUTH BUNDY DR., SUITE 705
12 County of Santa Barbara, and its principal place of business located at 555
LOS ANGELES, CA 90025
13 Montgomery St., Suite 500, San Francisco, California 94111. For all intents and
14 purposes, upon information and belief, FCP Private is controlled by Defendant
15 Waters.
16 14.
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1 SPERTUS, LANDES & UMHOFER, LLP Matthew Donald Umhofer (SBN 206607) 2 Diane H. Bang (SBN 271939) 1990 South Bundy Dr., Suite 705 3 Los Angeles, California 90025 Telephone: (310) 826-4700 4 Facsimile: (310) 826-4711 matthew@spertuslaw.com 5 diane@spertuslaw.com 6 Attorneys for Mark Schaub and TLG Ltd. 7 SUPERIOR COURT OF THE STATE OF CALIFORNIA 8 FOR THE COUNTY OF SANTA BARBARA 9 10 MARK SCHAUB, an individual; Case No.: 20CV02113 TLG LTD., a Hong Kong limited TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 liability company, Spertus, Landes & Umhofer, LLP Hon. Donna D. Geck 1990 SOUTH BUNDY DR., SUITE 705 12 Plaintiffs, LOS ANGELES, CA 90025 13 PLAINTIFFS’ NOTICE OF MOTION v. AND MOTION FOR TERMINATING 14 SANCTIONS; MEMORANDUM OF ANDREW WYLES WATERS, an POINTS AND AUTHORITIES IN individual; FCP CORPORATE (HK) SUPPORT; DECLARATION OF 15 LTD., a Hong Kong limited liability DIANE H. BANG IN SUPPORT company; FCP PRIVATE, LLC, a 16 California limited liability corporation; and DOES 1 through 10 [Filed concurrently with Request for 17 inclusive, Judicial Notice and [Proposed] Orders] 18 Defendants. Hearing Date: January 6, 2023 19 Hearing Time: 10:00 a.m. Dept.: 4 20 SAC filed: June 14, 2021 21 Trial: Not set 22 23 24 25 26 27 28 PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 TO ALL PARTIES AND THEIR COUNSEL OF RECORD: 2 PLEASE TAKE NOTICE that on January 6, 2023 at 10:00 a.m., in 3 Department 4 of the above-entitled Court, located at 1100 Anacapa Street, Santa 4 Barbara, California 93101, Plaintiffs Mark Schaub (“Mr. Schaub”) and TLG Ltd. 5 (collectively, “Plaintiffs”) will, and hereby do, move this Court for an order for 6 terminating sanctions against Defendants Andrew Waters, FCP Corporate (HK) 7 Ltd., and FCP Private LLC (collectively, “Defendants”), striking Defendants’ 8 Answer to Plaintiffs’ Second Amended Complaint, and entering judgment in favor 9 of Plaintiffs in the amount of $1,590,000, plus interest. 10 This Motion for Terminating Sanctions (“Motion”) and the accompanying TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 request for terminating sanctions are based on California Code of Civil Procedure Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 § 2023.010 et seq. This Motion is also based on this Notice of Motion, the LOS ANGELES, CA 90025 13 Memorandum of Points and Authorities, the Declaration of Diane H. Bang and 14 exhibits attached thereto, the Request for Judicial Notice, the pleadings and papers 15 on file herein, and such other oral and documentary evidence and argument as may 16 be presented to the Court at or prior to the hearing of this matter. To the extent the 17 Court intends to deny any portion of Plaintiffs’ Motion, Plaintiffs request oral 18 argument. 19 The parties met and conferred regarding this Motion on September 13, 2022, 20 and were unable to resolve the issues raised. 21 22 Dated: September 20, 2022 SPERTUS, LANDES & UMHOFER, LLP 23 24 By: Matthew Donald Umhofer 25 Diane H. Bang 26 Attorneys for Plaintiffs 27 28 1. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 MEMORANDUM OF POINTS & AUTHORITIES 2 I. INTRODUCTION 3 Defendant Waters is a fraudster and Defendants FCP Corporate and FCP 4 Private are sham companies. Using his sham companies, Waters has defrauded 5 dozens of people out of millions of dollars, including Plaintiffs. 6 Defendants have no intention of litigating this case in good faith, in 7 compliance with both the statutory requirements and this Court’s orders.1 This 8 Court ordered all three Defendants to serve discovery responses without objection 9 and pay sanctions, but none of the Defendants have complied. Defendants’ non- 10 compliance strikes at the very heart of the discovery rules, which is “to ‘enhance TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 the truth-seeking function of the litigation process and eliminate trial strategies that Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 focus on gamesmanship and surprise.’” Juarez v. Boy Scouts of Am., Inc. (2000) LOS ANGELES, CA 90025 13 81 Cal. App. 4th 377, 389 disapproved of on other grounds by Brown v. USA 14 Taekwondo (2021) 11 Cal. 5th 204 (quoting Williams v. Volkswagenwerk 15 Aktiengesellschaft (1986) 180 Cal. App. 3d 1244, 1254). This Court should “not 16 tolerate such interference.” In re Marriage of Chakko (2004) 115 Cal. App. 4th 17 104, 110. Accordingly, Plaintiffs’ Motion for Terminating Sanctions (the 18 “Motion”) should be granted—Defendants’ Answer, filed in this Action on 19 October 25, 2021 (Bang Decl. ¶ 11, Ex. C), should be stricken and judgment 20 should be awarded on behalf of Plaintiffs. 21 22 23 24 25 1 Counsel for Defendants filed a motion to be relieved as counsel, which was 26 granted in January 2022. (Decl. of Diane Bang (“Bang Decl.”) ¶ 12, Ex. D.) Even though California law requires corporate entities to be represented by counsel, 27 Thomas G. Ferruzzo, Inc. v. Superior Court (1980) 104 Cal. App. 3d 501, 503 (“The rule is clear in this state that, with the sole exception of small claims court, a 28 corporation cannot act in propria persona in a California state court.”), no counsel has appeared on behalf of Defendants FCP Corporate Ltd. and FCP Private, LLC. (Decl. of Diane Bang (“Bang Decl.”) ¶ 5.) 1. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 II. FACTUAL BACKGROUND 2 A. Overview of Plaintiffs’ Allegations 3 Through his companies, Defendants FCP Corporate Ltd. and FCP Private, 4 LLC, Defendant Waters has essentially been operating a shell factory enterprise by 5 creating various startup companies and misleading potential investors to believe 6 each company would be operating and profitable. Plaintiff Mark Schaub is an 7 individual who, while living in Hong Kong, was befriended and then ultimately 8 defrauded by Defendant Waters. He believed Defendant Waters to be a successful 9 businessman and that he was running real businesses with real potential for growth 10 and profitability. (Bang Decl. ¶ 10, Ex. B (Second Am. Compl. (“SAC”)) ¶¶ 17- TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 18.) Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 In 2019, Mr. Schaub was informed that HSBC was planning to close his LOS ANGELES, CA 90025 13 company account, TLG Ltd. Defendant Waters convinced Mr. Schaub that HSBC 14 was closing the account because the bank believed it to contain tainted funds. Mr. 15 Schaub was unfamiliar with Hong Kong banking regulations and believed 16 Defendant Waters’ representations. Defendant Waters induced Mr. Schaub to have 17 approximately $50,000 transferred to the FCP Corporate account controlled by 18 Waters, promising that this was a client account and that the funds would be held 19 in trust. (SAC ¶ 27.) 20 In July 2019, instead of the planned $50,000, approximately $2 million was 21 mistakenly transferred from TLG to FCP Corporate’s account. (SAC ¶ 32.) When 22 Mr. Schaub inquired about the money, rather than returning the funds to Mr. 23 Schaub, Defendant Waters proceeded to drain FCP Corporate’s account of the 24 entire $2 million. (SAC ¶ 41.) Meanwhile, Defendant Waters falsely told Mr. 25 Schaub that the bank had frozen the accounts where Plaintiffs’ funds were 26 transferred to, that the bank believed the funds were from an illegitimate source, 27 and that he would have to go to Hong Kong to resolve the situation with the frozen 28 accounts. For months, Defendant Waters proceeded to string Mr. Schaub along 2. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 with these lies. (SAC ¶¶ 42-43.) Mr. Schaub demanded the immediate return of 2 his funds, Defendant Waters refused, and he continues to refuse to this day. 3 B. Defendants’ Failure to Comply with the Court’s Orders 4 On October 29, 2021, Plaintiff Mark Schaub propounded a set of discovery 5 requests (form interrogatories, request for production of documents, and request 6 for admissions) relating to the allegations of the SAC on all three Defendants. 7 (Bang Decl. ¶ 2.) Plaintiffs agreed to extend the deadline for all Defendants to 8 respond to Plaintiffs’ discovery requests to December 28, 2021, permitting 9 Defendants an additional four weeks from their statutory deadline to respond. 10 (Ibid. ¶ 3.) However, on the agreed upon deadline, Defendants served boilerplate, TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 evasive objections and did not produce a single document. (Ibid. ¶ 4.) Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 On February 15, 2022, Mr. Schaub filed a motion to compel further LOS ANGELES, CA 90025 13 discovery responses against Defendant FCP Corporate. (Bang Decl. ¶ 13 Ex. E.) 14 No opposition was filed. (Ibid.) On May 27, 2022, the Court granted Mr. 15 Schaub’s motion, finding that Defendant FCP Corporate failed to justify its 16 responses to the discovery requests. (Ibid.) The Court ordered Defendant FCP 17 Corporate to “serve written responses to plaintiff’s first sets of form 18 interrogatories, requests for production of documents, and requests for admissions, 19 without objection except as to privilege, on or before June 13, 2022.” (Ibid.) The 20 Court also awarded “monetary sanctions in the amount of $6,500.00 in favor of 21 plaintiff Mark Schaub and against defendant FCP Corporate Ltd., to be paid to 22 counsel for plaintiff on or before June 13, 2022.” (Ibid.) In spite of the Court’s 23 order, Defendant FCP Corporate did not serve written discovery responses and pay 24 the sanctions amount by June 13, 2022. (Bang Decl. ¶ 6.) 25 On May 13, 2022, Mr. Schaub filed similar motions to compel further 26 discovery responses against Defendants Waters and FCP Private. (Bang Decl. ¶ 27 14, Ex. F.) Again, no opposition was filed. (Ibid.) On August 12, 2022, the Court 28 granted the discovery motions. (Ibid.) Defendants Waters and FCP Private were 3. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 ordered to serve discovery responses without objection and pay $2,500 in 2 monetary sanctions by August 29, 2022. (Ibid.) Defendants Waters and FCP 3 Private also failed to comply with the court-ordered deadline. (Bang Decl. ¶ 7.) 4 Plaintiffs sent Defendants a letter on August 30, 2022, regarding 5 Defendants’ failure to comply with the Court’s deadlines. (Bang Decl. ¶ 8.) The 6 parties met and conferred on September 13, 2022 regarding Defendants’ failure to 7 comply, and Defendant Waters represented that Defendants have no intention of 8 complying with the Court’s orders. (Ibid. ¶ 9.) 9 Based on this conduct, which amounts to a misuse of the discovery process, 10 Plaintiffs seek terminating sanctions and a judgment in the amount $1,590,000, TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 plus interest.2 Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 III. ARGUMENT LOS ANGELES, CA 90025 13 A. Terminating Sanctions Are Permitted By Statute 14 “The purpose of the discovery rules is to ‘enhance the truth-seeking function 15 of the litigation process and eliminate trial strategies that focus on gamesmanship 16 and surprise.’” Juarez v. Boy Scouts of Am., Inc. (2000) 81 Cal. App. 4th 377, 17 389 disapproved of on other grounds by Brown v. USA Taekwondo (2021) 11 Cal. 18 5th 204 (quoting Williams v. Volkswagenwerk Aktiengesellschaft (1986) 180 Cal. 19 App. 3d 1244, 1254). “In other words, the discovery process is designed to ‘make 20 a trial less a game of blindman’s bluff and more a fair contest with the basic issues 21 and facts disclosed to the fullest practicable extent.’” Ibid. (quoting Greyhound 22 Corp. v. Superior Court (1961) 56 Cal. 2d 355, 376). “Those who interfere with 23 the truth-seeking function of the trial court strike at the very heart of the justice 24 system. The courts will not tolerate such interference.” In re Marriage of Chakko 25 (2004) 115 Cal. App. 4th 104, 110. 26 27 2 This amount represents the total amount of breach of contract damages 28 alleged in the Fourth and Fifth Causes of Action of the SAC ($1,940,000 + $400,000) minus the $750,000 that was returned to Mr. Schaub (see SAC ¶ 2). 4. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 Misuses of the discovery process include the following: failing to respond or 2 to submit to an authorized method of discovery; making, without substantial 3 justification, an unmeritorious objection to discovery; making an evasive response 4 to discovery; and disobeying a court order to provide discovery. Code Civ. Proc., 5 § 2023.010(d)-(g). Pursuant to California Code of Civil Procedure section 6 2023.030, “[t]he court may impose a terminating sanction by . . . [a]n order striking 7 out the pleadings or parts of the pleadings of any party engaging in the misuse of 8 the discovery process.” Code Civ. Proc., § 2023.030(d)(1). 9 B. Terminating Sanctions Are Appropriate Here 10 Defendants have clearly engaged in numerous misuses of the discovery TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 process. First, Defendants made meritless objections and evasive responses to the Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 form interrogatories and requests for admission served by Plaintiff. (Bang Decl. ¶ LOS ANGELES, CA 90025 13 4.) Second, Defendants refused to produce a single document in response to 14 Plaintiff’s requests for documents without a valid objection. (Ibid.) Third, despite 15 being ordered to respond to discovery without objections, Defendants have refused 16 to do so with no justification. (Bang Decl. ¶¶ 6-7.) Fourth, Defendants disobeyed 17 the Court’s order to pay sanctions to Plaintiff. (Ibid.) And finally, Defendants 18 have given no indication that they intend to comply with the Court’s orders or 19 participate in this litigation in a meaningful way, as the corporate defendants have 20 been unrepresented by counsel since January 2022, and during the parties’ meet 21 and confer call, Defendant Waters made no mention that any discovery responses 22 or documents would be served. (Bang Decl. ¶¶ 5-9.) 23 Defendants’ conduct is on all fours with conduct that results in terminating 24 sanctions. Defendants have made it impossible for Plaintiff to prepare for trial and 25 defend against the affirmative defenses asserted in their Answer. Because it is 26 clear that Defendants have no intention of participating in this litigation, their 27 Answer should be stricken, and judgment should be awarded to Plaintiff in the full 28 amount set forth in the Second Amended Complaint, plus prejudgment interest. 5. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 See Collisson & Kaplan v. Hartunian (1994) 21 Cal. App. 4th 1611 (rejecting the 2 argument that striking the defendants’ answer for failure to properly respond to 3 discovery requests, which were ignored or objected to, was too drastic a sanction). 4 IV. CONCLUSION 5 For the foregoing reasons, Plaintiffs respectfully request that the Court enter 6 an order granting Plaintiffs’ Motion for Terminating Sanctions by striking 7 Defendants’ Answer and entering default judgment against Defendants in the 8 amount of $1,590,000, plus prejudgment interest. 9 10 Dated: September 20, 2022 SPERTUS, LANDES & UMHOFER, LLP TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 Spertus, Landes & Umhofer, LLP By: 1990 SOUTH BUNDY DR., SUITE 705 12 Matthew Donald Umhofer LOS ANGELES, CA 90025 13 Diane H. Bang 14 Attorneys for Plaintiffs 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6. PLAINTIFFS’ MOTION FOR TERMINATING SANCTIONS 1 DECLARATION OF DIANE H. BANG 2 I, Diane H. Bang, declare as follows: 3 1. I am an attorney duly licensed to practice before this Court, and I 4 represent Plaintiffs Mark Schaub and TLG Ltd. (“Plaintiffs”). I submit this 5 declaration in support of Plaintiffs’ for Terminating Sanctions (the “Motion”). I 6 have personal knowledge of the facts set forth herein and, if called upon to do so, 7 can testify competently to the facts in this declaration. 8 2. On October 29, 2021, Mr. Schaub served his first set of form 9 interrogatories, requests for production of documents (“RFPs”), and requests for 10 admissions (“RFAs”) on all three defendants, Andrew Waters, FCP Corporate TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 (HK) Ltd., and FCP Private, LLC. Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 3. The deadline for Defendants to respond to Mr. Schaub’s discovery LOS ANGELES, CA 90025 13 was extended to December 28, 2021, by stipulation. This permitted Defendants a 14 full four-week extension to respond to discovery. 15 4. Defendants did not serve substantive responses and documents on 16 December 28, 2021, as agreed. Rather, Defendants served only meritless, 17 boilerplate objections to Mr. Schaub’s written discovery and did not produce a 18 single document in response to Plaintiff’s requests for documents. 19 5. On January 7, 2022, the Court granted Mr. Kevin Nimmons’ request 20 to be relieved as counsel for Defendants in this matter. No other counsel has 21 appeared on behalf of Defendants. 22 6. Defendant FCP Corporate has not served written discovery responses 23 without objection to Plaintiffs or paid monetary sanctions in the amount of 24 $6,500.00, even though it has been ordered to do so by this Court. 25 7. Defendants Waters and FCP Private similarly have not served written 26 discovery responses without objection to Plaintiffs or paid monetary sanctions in 27 the amount of $2,500.00, even though they were ordered to do so by this Court. 28 8. On August 30, 2022, I sent Defendants a letter regarding Defendants’ 1 DECLARATION OF DIANE H. BANG 1 failure to comply with the Court’s orders granting Plaintiffs’ motions to compel 2 further responses and that Plaintiffs would be seeking terminating sanctions. A 3 true and correct copy of the letter dated August 30, 2022 is attached hereto as 4 Exhibit A. 5 9. Defendant Waters and I participated in the meet and confer on 6 September 13, 2022, regarding Plaintiffs’ anticipated motion. During the meet and 7 confer call, Defendant Waters gave no indication that any of the Defendants 8 intended to comply with the Court’s orders or participate in this litigation. 9 Defendant Waters told me that the companies do not exist and that Plaintiffs “can 10 go through all the motions you want in the world” to get court orders. Defendant TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 Waters also told me he has no documents responsive to Plaintiffs’ discovery Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 requests. LOS ANGELES, CA 90025 13 10. Attached hereto as Exhibit B is a true and correct copy of Plaintiffs’ 14 Second Amended Complaint, filed on June 14, 2021. 15 11. Attached hereto as Exhibit C is a true and correct copy of Defendants’ 16 Answer, filed on October 25, 2021. 17 12. Attached hereto as Exhibit D is a true and correct copy of the Court’s 18 January 7, 2022 Order, Granting Defendants’ former counsel’s Motion to be 19 Relieved as Counsel. 20 13. Attached hereto as Exhibit E is a true and correct copy of the Court’s 21 May 27, 2022 Order, Granting Plaintiff’s Motion to Compel Further Responses 22 against Defendant FCP Corporate (HK). 23 // 24 // 25 // 26 // 27 // 28 // 2 DECLARATION OF DIANE H. BANG 1 14. Attached hereto as Exhibit F is a true and correct copy of the Court’s 2 August 12, 2022 Order, Granting Plaintiff’s Motion to Compel Further Responses 3 against Defendants Andrew Waters and FCP Private. 4 5 I declare under penalty of perjury under the laws of the State of California 6 that the foregoing is true and correct. 7 Executed this 20th day of September 2022, in Los Angeles, California. 8 9 Diane H. Bang 10 TELEPHONE 310-826-4700; FACSIMILE 310-826-4711 11 Spertus, Landes & Umhofer, LLP 1990 SOUTH BUNDY DR., SUITE 705 12 LOS ANGELES, CA 90025 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 DECLARATION OF DIANE H. BANG EXHIBIT A EXHIBIT A VIA U.S. MAIL AND EMAIL August 30, 2022 Andrew Waters FCP Corporate (HK) Ltd. FCP Private, LLC P.O. Box 10542 Tampa, FL 33786 Email: andrew.waters@firstcp.com Re: Schaub, et al. v. Waters, et al., Case No. 20CV02113 Dear Mr. Waters: The purpose of this letter is to meet and confer with you regarding Plaintiffs’ anticipated motion for terminating sanctions. Specifically, Plaintiffs will request that the court enter an order striking Defendants Andrew Waters, FCP Corporate (HK) Ltd., and FCP Private, LLC’s Answer to the Second Amended Complaint, as well as an entry of judgment in the amount of $2,340,000, plus prejudgment interest. Pursuant to California Code of Civil Procedure section 2023.030, “[t]he court may impose a terminating sanction by . . . [a]n order striking out the pleadings or parts of the pleadings of any party engaging in the misuse of the discovery process.” Code Civ. Proc., § 2023.030(d)(1). Misuses of the discovery process include the following: failing to respond or to submit to an authorized method of discovery; making, without substantial justification, an unmeritorious objection to discovery; making an evasive response to discovery; and disobeying a court order to provide discovery. Code Civ. Proc., § 2023.010(d)-(g). On October 29, 2021, Plaintiff Mark Schaub propounded a set of discovery requests (form interrogatories, request for production of documents, and request for admissions) on all three Defendants. By agreement of the parties, Defendants’ discovery responses were due on December 28, 2021. However, on that day, Defendants served only unmeritorious objections and evasive responses. On February 15, 2022, we filed a motion to compel further discovery responses against Defendant FCP Corporate. No opposition was filed. On May 27, 2022, the court granted our motion, finding that Defendant FCP Corporate failed to justify its responses to the discovery requests. The court ordered Defendant FCP Corporate to “serve written responses to plaintiff’s first sets of form interrogatories, requests for production of documents, and requests for admissions, without objection except as to privilege, on or before June 13, 2022.” The court also awarded August 30, 2022 Page 2 of 2 “monetary sanctions in the amount of $6,500.00 in favor of plaintiff Mark Schaub and against defendant FCP Corporate Ltd., to be paid to counsel for plaintiff on or before June 13, 2022.” In spite of the court’s order, Defendant FCP Corporate did not serve written discovery responses and pay the sanctions amount by June 13, 2022. On May 13, 2022, we filed similar motions to compel further discovery responses against Defendants Waters and FCP Private. Again, no opposition was filed. On August 12, 2022, the court granted our motions. Defendants Waters and FCP Private were ordered to serve discovery responses without objection and pay $2,500 in monetary sanctions by August 29, 2022. Defendants Waters and FCP Private also failed to comply with the court-ordered deadline. Based on this conduct, which amounts to a misuse of the discovery process, Plaintiffs intend to seek terminating sanctions and a judgment in the amount $2,340,000, plus interest. Please provide me with your availability for a time this week to meet and confer regarding Plaintiffs’ motion. Sincerely, Diane Bang Cc: Andrew Waters FCP Private, LLC FCP Corporation, LTD 5325 County Road 100 Carbondale, CO 81623 FCP Private, LLC Attn: Andrew Waters, Manager 100 Second Avenue, Suite 903-S Saint Petersburg, FL 33701 FCP Private, LLC 555 Montgomery Street, Suite 500 San Francisco, CA 94111 Andrew Waters 211 Juniper Court Basalt, CO 81621 EXHIBIT B EXHIBIT B 1 SPERTUS, LANDES & UMHOFER, LLP ELECTRONICALLY FILED Matthew Donald Umhofer (SBN 206607) Superior Court of California 2 Diane H. Bang (SBN 271939) County of Santa Barbara 1990 South Bundy Dr., Suite 705 Darrel E. Parker, Executive Officer 3 Los Angeles, California 90025 6/14/2021 2:09 PM Telephone: (310) 826-4700 By: Elizabeth Spann, Deputy 4 Facsimile: (310) 826-4711 matthew@spertuslaw.com 5 diane@spertuslaw.com 6 Attorneys for Mark Schaub and TLG Ltd. 7 SUPERIOR COURT OF THE STATE OF CALIFORNIA 8 FOR THE COUNTY OF SANTA BARBARA 9 10 MARK SCHAUB, an individual; Case No.: 20CV02113 TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711 Spertus, Landes & Umhofer, LLP TLG LTD., a Hong Kong limited 11 liability company, VERIFIED SECOND AMENDED 1990 SOUTH BUNDY DR., SUITE 705 12 COMPLAINT FOR DAMAGES: LOS ANGELES, CA 90025 Plaintiffs, 13 v. (1) CONVERSION; (2) INTENTIONAL 14 ANDREW WYLES WATERS, an MISREPRESENTATION—FRAUD; individual; FCP CORPORATE (HK) (3) CONCEALMENT; 15 LTD., a Hong Kong limited liability (4) BREACH OF CONTRACT— company; FCP PRIVATE, LLC, a $1,940,000; 16 California limited liability company; (5) BREACH OF CONTRACT— and DOES 1 through 10 inclusive, $400,000; and 17 (6) UNJUST ENRICHMENT. Defendants. 18 JURY TRIAL DEMANDED 19 20 21 22 23 24 25 26 27 28 SECOND AMENDED COMPLAINT 1 Plaintiffs Mark Schaub and TLG Ltd. (“Plaintiffs”) allege as follows: 2 INTRODUCTION 3 1. Defendant Andrew Waters is a fraud. Through his companies, 4 Defendants FCP Corporate Ltd. and FCP Private, LLC, as well as other 5 companies or businesses, including but not limited to Food Box Network, Co- 6 Brands USA, Co-Brands Australia, Co-Brands UK, and International Brands 7 Direct, Defendant Waters has been operating a fraudulent Ponzi scheme, luring 8 wealthy investors into sending him hundreds of thousands of dollars, and 9 misappropriating those funds for his own personal use. Defendant Waters has 10 essentially been creating various shell companies to mislead potential investors TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711 Spertus, Landes & Umhofer, LLP 11 into believing each company would be operating and profitable. 1990 SOUTH BUNDY DR., SUITE 705 12 2. Defendants have also committed theft. Plaintiffs’ funds were stolen LOS ANGELES, CA 90025 13 by Defendants, who now refuse to return it in full. Plaintiffs acknowledge that 14 the Defendant Waters returned $750,000 to Plaintiffs in order to avoid Mr. 15 Schaub uncovering the fraud. However, Defendant Waters claimed that these 16 were his own funds and not Plaintiffs’ funds, as he claimed Plaintiff’s funds were 17 frozen in a Hong Kong bank account. 18 3. In July 2019, through a series of unforeseen events, approximately 19 US$1.9 million was transferred from Plaintiffs to two different accounts under 20 Defendants’ control. 21 4. Despite his pleas to Defendants to return the funds that rightfully 22 belong to him, Mr. Schaub’s long-time supposed friend and business associate, 23 Defendant Waters, lied about the following: (a) that the bank had frozen the 24 accounts where the funds had been transferred to; (b) that the bank believed the 25 funds were from an illegitimate source; and (c) that he would have to go to Hong 26 Kong to resolve the situation with the frozen accounts. 27 5. On January 22, 2020, Mr. Schaub discovered Defendant Waters had 28 been lying to him all along when he came into possession of FCP Corporate 1. SECOND AMENDED COMPLAINT 1 (HK)’s Citibank records that clearly showed fraud had been committed and that 2 Defendant Waters had immediately withdrawn all the funds from the allegedly 3 frozen accounts until nothing remained. All monies transferred from the Hong 4 Kong account to Waters’ U.S. account should be treated as money laundering, as 5 the funds were acquired by fraud. 6 6. Prior to Plaintiffs’ transfer of funds, the balance of FCP Corporate 7 (HK)’s USD account was $38.99, and the balance of its HKD account was 8 HK$2,784.29 (or US$360).1 After Plaintiffs’ funds were transferred, no further 9 payments from any sources were received into FCP Corporate (HK)’s Citibank 10 accounts. This shows that at the time Plaintiffs’ funds were transferred, the FCP TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711 Spertus, Landes & Umhofer, LLP 11 Corporate (HK) bank account could not be used for real business. 1990 SOUTH BUNDY DR., SUITE 705 12 7. Mr. Schaub confronted Defendant Waters with the truth, but LOS ANGELES, CA 90025 13 Defendant Waters refuses to acknowledge the theft, refuses to return the money 14 (except for the $750,000 that was returned in order to maintain the fraud), and 15 claims the funds are still frozen in the Citibank accounts that he controls. 16 8. As part of his scheme, and in an effort to cover up his fraud, 17 Defendant Waters has threatened litigation against Mr. Schaub for failed business 18 transactions, including an alleged transaction with Hearst Communications. Mr. 19 Schaub has not communicated with Hearst Communications or any other third 20 parties regarding Defendant Waters’ alleged transaction. Upon information and 21 belief, no transaction between Defendant Waters, or the companies he represents, 22 and Hearst Communications was ever executed. 23 THE PARTIES 24 9. Plaintiff Mark Schaub is an individual residing in the United 25 Kingdom. 26 27 28 1 All future references to dollar amounts are in USD unless otherwise noted. 2. SECOND AMENDED COMPLAINT 1 10. Plaintiff TLG Ltd., is a Hong Kong limited liability company, 2 owned by Mr. Schaub. 3 11. Defendant Andrew Wyles Waters, is a natural person who is, and at 4 all times relevant hereto, was a resident of the County of Santa Barbara, State of 5 California, and was conducting substantial business in the State of California, 6 including the County of Santa Barbara. 7 12. Defendant FCP Corporate (HK) Ltd., upon information and belief, is 8 a Hong Kong limited liability company. For all intents and purposes, FCP 9 Corporate (HK) is controlled by Defendant Waters. 10 13. Defendant FCP Private, LLC is a California limited liability TELEPHONE 310‐826‐4700; FACSIMILE 310‐826‐4711 Spertus, Landes & Umhofer, LLP 11 company, conducting substantial business in the State of California, including the 1990 SOUTH BUNDY DR., SUITE 705 12 County of Santa Barbara, and its principal place of business located at 555 LOS ANGELES, CA 90025 13 Montgomery St., Suite 500, San Francisco, California 94111. For all intents and 14 purposes, upon information and belief, FCP Private is controlled by Defendant 15 Waters. 16 14.