No Value: ARNTSEN FAMILY PARTNERSHIP, LP, et al vs. GREGORY J DAVIS, et al

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                                Collin J. Vierra (State Bar No. 322720)
 1   EIMER STAHL LLP
     99 Almaden Blvd., Suite 600
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     San Jose, CA 95113-1605
 3   Telephone: (408) 889-1668
     Email: cvierra@eimerstahl.com
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     Attorney for Plaintiffs Robert Arntsen,
 5   Mary Lee. Arntsen Family Partnership, LP,
 6   Brian Christopher Dunn Custodianship,
     John Ho, and Jacky Huang
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 8                    SUPERIOR COURT OF THE STATE OF CALIFORNIA

 9                                    COUNTY OF SAN MATEO

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      Robert Arntsen; Mary Lee; Arntsen Family    Lead Case No. 22-CIV-01148
11    Partnership, LP; Brian Christopher Dunn     Consolidated with Case No. 23-CIV-01099
      Custodianship, John Ho, and Quanyu Huang;
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                                                  Date: December 8, 2023
13                  Plaintiffs,                   Time: 9:00am
      v.                                          Dept. 24
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      David M. Bragg; Silicon Valley Real Ventures Hon. Jeffrey R. Finigan
15    LLC; SVRV 385 Moore, LLC; SVRV 387
16    Moore, LLC; Gregory J. Davis; Kevin Wolfe; PLAINTIFFS’ REPLY IN SUPPORT OF
      Jason Justesen; Paramont Woodside, LLC;       MOTION FOR PREFERENCE
17    Paramont Capital, LLC; Monks Family Trust;
      TEH Capital LLC; Caproc III, LLC; WZ
18    Partners, LLC; McClan Trust; Wild Rose
      Irrevocable Trust; Black Horse Holdings,
19    LLC; Phil Stoker; Diane Stoker; Scott O’Neil;
20    Dale Huish; and DOES 1–20,

21                  Defendants.

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                      REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
                                              INTRODUCTION
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            The Paramont Defendants’ opposition to Plaintiffs’ motion for preference both belittles the
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     serious, and in some cases near-fatal, health events that the Arntsens have experienced during the
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     pendency of this litigation, and misleads the Court as to the Paramont Defendants’ deliberate and
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     ongoing obstruction to delay a final judgment in this action.
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            Contrary to the Paramont Defendants’ assertion, the Arntsens—especially Bob and
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     Mary—are at serious risk of another sudden health event that could prevent them from appearing
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     at trial and otherwise prejudice their interests in the litigation. Even now, Mary is already almost
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     entirely homebound.
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            Moreover, independent of Plaintiffs’ motion for preference, Plaintiffs’ claims should
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     plainly be resolved at a single trial. The Paramont Defendants do not—and cannot—contest that
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     bifurcating the trials would impose enormous and unnecessary costs on all parties, their counsel,
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     and the Court, as well as create a substantial risk of inconsistent adjudications on material issues
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     of law and fact. Their proposal to bifurcate the trials is nothing more than another attempt to delay
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     and impose burdensome costs on Plaintiffs. The “interests of justice” plainly dictate that a single
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     trial should be scheduled promptly.
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            Indeed, this case is ready for trial. Even if Plaintiffs’ motion for preference is granted, two
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     full years will have elapsed between the filing of their initial complaint and trial. “The goal of each
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     trial court should be to process general civil cases so that all cases are disposed of” before that
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     time. (Rule of Court Standard 2.2(d).) Indeed, California’s case management form requires parties
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     to explain themselves if a case will not be ready for trial within 12 months of filing the complaint.
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     (See CM-110, No. 6.) Plaintiffs have acted diligently to accelerate this case for the past two years,
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     but the Paramont Defendants have repeatedly engaged in bad-faith delay tactics.
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            The Paramont Defendants are also wrong on the law. While the Arntsens are entitled to
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     preference under CCP § 36(a), John and Jacky should receive preference under CCP § 36(e). In
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     any case, this Court has discretion to, and should, set a single, joint trial date even if it finds that
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     only certain Plaintiffs, but not others, are entitled to mandatory preference. Trial should be set for
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     no later than April 1, 2024, and preferably earlier.
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
                                                    ARGUMENT
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       I.      The Arntsens Have Suffered Serious and in Some Cases Near-Fatal Medical Incidents
 2             During This Litigation, and There is a Serious Risk That They Will Suffer Another
               Major Medical Incident That Could Further Prejudice Them in This Litigation.
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               The Paramont Defendants do not contest that each of the Arntsens is over 70 years of age
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     or that they have each suffered major health events during the pendency of this litigation. Nor can
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     they reasonably dispute that the Arntsens are at serious risk of suffering other medical incidents
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     that could seriously prejudice their interest in this litigation.1 While the Arntsens and their loved
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     ones obviously hope they will each have full recoveries and suffer no further heath issues, the
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     available medical evidence—none of which was rebutted by the Paramont Defendants—indicates
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     that the Arntsens are at increased risk of suffering another major health event. (See, e.g., MPA 6
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     n.2 [citing numerous medical sources].) In fact, studies have estimated that the risk of death within
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     1 year of suffering a stroke—let alone lesser conditions that could prejudice a person in litigation—
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     is between approximately 41% and 47%. (See, e.g., Henrik Bronnum-Hansen, Michael Davidsen,
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     & Per Thorvaldsen, Long-Term Survival and Causes of Death After Stroke, 32 J. Am. Heart Ass’n
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     2131, available at https://tinyurl.com/ytvcfwnj; Yang Peng, Linh Ngo, Karen Hay, Alaa
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     Algharmy, Kathryn Colebourne, & Isuru Ranasinghe, Long-Term Survival, Stroke Recurrence,
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     and Life Expectancy After and Acute Stroke in Austraila and New Zealand From 2008–2017: A
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     Population-Wide Cohort Study, https://tinyurl.com/yo8yszb7.)
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               Bob, who is 73 years old, suffered a near-fatal stroke, which led to a roll-over car crash, in
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     May 2023. (Bob Reply Decl. ¶ 2.) Had the crash not occurred within close proximity to one of the
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     few stroke centers able to perform emergency neural surgery, he likely would have been
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     permanently impaired or died. (Id.) Although the surgeons were able to remove much of the clot,
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     they were unable to remove the entire clot. (MPA 3) Bob is still under the regular supervision of
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     multiple medical professionals, including his cardiologist and neurologist. (Bob Reply Decl. ¶ 3.)
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             The Paramont Defendants incorrectly suggest that a physician’s declaration is necessary to support a
26 motion for preference. Opp. 3. Not so. In fact, CCP § 36.5 says that the moving party does not even need
     to submit a declaration to satisfy section 36(a); their attorney may submit a declaration about the moving
27   party’s “medical diagnosis and prognosis” merely “based upon information and belief.” Plaintiffs here went
     well beyond that standard. They submitted their own declarations and their attorney’s declaration.
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                          REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   Bob wears a Smart Watch at all times to monitor his heart in case he suffers another stroke. (Id.)

 2          That Bob has returned to work does not mean he is not at risk of suffering another major

 3   medical incident. (See Opp. 5.) The Paramont Defendants seem to argue that unless Bob is

 4   permanently hospitalized, his medical condition is not serious. But that is false as a matter of both

 5   law and fact. Despite having returned to work, Bob is still under close medical supervision, and

 6   the health risks Plaintiffs have identified are very real. (Bob Reply Decl. ¶ 3.)

 7          The Paramont Defendants also falsely assert that Bob “has previously taken the position

 8   that his health conditions necessitate a further delay of a trial.” (Opp. 6.) To the contrary, Bob’s

 9   doctors told him it would take at minimum 6 months to a year to fully recover from his stroke, but

10 that does not mean that he will undergo a full recovery by that time. (Bob Reply Decl. ¶ 4.) In fact,

11 as Plaintiffs cited in their motion, and as the Paramont Defendants did not contest, Bob’s age and

12 medical history put him at increased risk of suffering another stroke or major medical incident.

13 (MPA 6 n.2.) That Bob will not fully recover for at least 6 months to a year does not mean that he

14 will recover by then. Indeed, more than 6 months have passed since Bob’s stroke, yet he still has

15 trouble with his memory and in making certain verbal connections. (Bob Reply Decl. ¶ 4.)

16          Mary, who is 75 years old, also suffered a stroke in August 2022. (MPA 2.) Since filing

17   this motion, she underwent an ablation for her heart condition, but her condition is still being

18   closely monitored. (Mary Reply Decl. ¶ 2.) Mary also continues to wear a Smart Watch at all times

19   to monitor her heart in case she suffers another stroke. (Id.) Mary has been almost entirely

20   homebound throughout this entire litigation, and common sense indicates that her risk of being

21   unable to travel or testify at trial will only increase with further delay. (Id. ¶ 3.) The Paramont

22   Defendants know this, as they took Mary’s deposition remotely in August 2023 because of her

23   inability to travel due to her health. (Vierra Reply Decl. ¶ 2.) The Paramont Defendants’ suggestion

24   that Mary’s health will suddenly improve because of the ablation has no medical basis.

25          As with Bob, the Paramont Defendants seem to be arguing that if Mary is capable of any

26   tasks—even ones that she can perform while mostly homebound—her medical condition is not

27   serious. That is once again false. That Mary’s husband of more than 50 years is suffering from

28   dementia, and Mary, who used to work as a nurse, cares for him at their home, does not mean that
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   Mary is risk-free. (Mary Reply Decl. ¶ 4.) Nor does it mean that delay will not prejudice her. To

 2   the contrary, her medical history indicates she is at high risk of another major medical incident.

 3   (Id. ¶ 2; see, e.g., MPA 6 n.2 [citing numerous medical sources].) In addition to having suffered a

 4   stroke just over a year ago, Mary also has Graves’ disease. (Mary Reply Decl. ¶ 4.)

 5           Martha, who is 71 years old, underwent emergency hospitalization after experiencing chest

 6   pain at her home immediately after her deposition in this case in August 2023, and her physicians

 7   have told her she is also susceptible to suffering a stroke. (MPA 3.) Indeed, the Paramont

 8   Defendants’ counsel observed Martha suffering medical distress during her deposition, and even

 9   sought to postpone her deposition because of it, but Martha persisted and finished her deposition

10   on the day for which it was noticed (after it had previously been postponed by the Paramont

11   Defendants at the last minute). (Vierra Reply Decl. ¶ 3.) Because the Paramont Defendants have

12   no basis on which to counter Martha’s declaration—and, in fact, their counsel is a partial witness

13   to Martha’s recent medical distress—they instead try to misdirect by stating that Martha took

14   “month-long vacations in 2023.” (Chong Decl., Ex. 1.) But the correspondence they reference

15   demonstrates that Martha took vacations before she underwent emergency hospitalization.

16   Moreover, as the Paramont Defendants also do not dispute, family history is highly medically

17   relevant, and given the Bob’s and Mary’s recent health episodes, Martha is at heightened risk of

18   suffering a major medical incident. (See Martha Reply Decl. ¶ 2.)

19    II.    John and Jacky Are Also Entitled to Preference.
20           Code of Civil Procedure section 36(e) provides that “[n]otwithstanding any other provision

21   of law, the court may . . . grant a motion for preference that is supported by a showing that satisfies

22   the court that the interests of justice will be served by granting this preference.” [emphasis added].

23   There is no limitation in that language other than that “the interests of justice will be served.” (Id.) 2

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           Contrary to the Paramont Defendants’ insinuation, neither section 36(e) nor even section 36(a)
25   requires a party to be on his or her deathbed to be granted preference. Rather, section 36(d) has a specific
     carveout for such cases. Moreover, section 36 does not require the moving party to make any showing about
26   the relative prejudice from a trial occurring in 120 days vs. some greater number of days. Rather, if the
     “preference” standard is satisfied under section 36(a) or 36(d), then as a collateral consequence, the Court
27   is required to set a trial within 120 days pursuant to section 36(f).
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                        REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1           Here, the interests of justice would plainly be served by setting a single, consolidated trial

 2   date for all Plaintiffs and would be disserved by bifurcating the trials. Plaintiffs are operating under

 3   a single, consolidated complaint, which all Defendants have already answered. (See, e.g., Answer

 4   (Oct. 10, 2023.) Plaintiffs are jointly sharing in the costs of litigation and in all recoveries,

 5   including in a settlement already had with another Defendant. (Vierra Reply Decl. ¶ 4.) Plaintiffs

 6   are jointly represented by the same counsel. (Id.) Plaintiffs assert the same claims against the same

 7   set of Defendants, who are also represented by the same out-of-state attorneys. (Id.) The same

 8   issues of law and fact are at issue across all Plaintiffs’ claims. (Id.) And all Plaintiffs would be

 9   called as witnesses in each other’s trials. (Id.)

10           The Paramont Defendants’ assertion that “there is no justification for the trials to occur

11   together other than for the greater convenience of Plaintiffs’ counsel” is risible. (Opp. 9.) Although

12   a single trial would obviously be most efficient from counsel’s perspective, it would also be more

13   convenient for everyone else involved, including: the three senior-citizen Plaintiffs; the two

14   working, immigrant Plaintiffs; over a dozen out-of-state Defendants (and one working in-state

15   Defendant); five Defendants’ attorneys; third-party witnesses; this Court and its staff; and a dozen

16   extra jurors.

17           In addition to the matter of convenience, a single trial would avoid the risk of conflicting

18   rulings on common issues of law or fact. Indeed, the only plausible reason the Paramont

19   Defendants wish to separate the trials—even though it will cost them substantially more to have

20   two trials (the Paramont Defendants and their counsel would have to travel twice to California

21   from Texas, Arizona, and elsewhere around the country)—is to drive up Plaintiffs’ costs in the

22   hope of forcing them to settle on favorable terms.

23           Lastly, although the Paramont Defendants acknowledge that “Plaintiffs’ claims involve the

24   same property,” they seek to mislead the Court by arguing that Plaintiffs’ “rely on entirely separate

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         The Paramont Defendants’ solitary citation to Looney v. Superior Ct., 16 Cal. App. 4th 521, 532, 20
26   Cal. Rptr. 2d 182, 187–88 (1993) is inapposite. (Opp. 7–8.) That case does not say anything about Code of
     Civil Procedure section 36(e). To the contrary, it rejected the opposing party’s argument that an ill plaintiff
27   was not entitled to preference under section 36(a). If anything, Looney counsels against attempts to impose
     a restrictive reading on section 36.
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                         REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   contracts.” (Opp. 9.) To the contrary, Plaintiffs allege that the Arntsens and John invested in the

 2   Moore Road Project pursuant to “materially identical” operating agreements. (See, e.g., SAC

 3   ¶¶ 11, 87, 104, 288.) And the fact that they were presented with materially identical operating

 4 agreements is substantial evidence that those operating agreements did, in fact, govern the Moore

 5 Road LLCs, as Plaintiffs allege—which is one of the central issues, if not the central issue, in this

 6 case. (Id.) Plaintiffs further allege that because these were the “Effective Operating Agreements,”

 7 they governed all Plaintiffs’ and Defendants’ investments in the Moore Road LLCs. (See, e.g.,

 8 SAC ¶¶ 8, 96, 118.) Put simply, this is a single dispute that, in “the interests of justice,” should be
 9 resolved by a single trial.

10   III.   Plaintiffs Have Consistently Sought to Accelerate These Proceedings, but Defendants
            Have Deliberately Caused Delays.
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            The Paramont Defendants assert that “none of the Arntsen Plaintiffs’ actions in this
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     litigation are consistent with their health making a preferential setting necessary.” (Opp. 8.) That
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     is nonsense. Plaintiffs have consistently sought to accelerate these proceedings, but Defendants—
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     including the Paramont Defendants—have deliberately caused delays.
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            First, in September 2022, after John and Jacky gave Defendants notice of their intent to
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     join the Arntsens as Plaintiffs in this case under a single, consolidated complaint (which the
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     Paramont Defendants previously said they would not oppose), Plaintiffs stipulated in good faith
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     that Defendants would not need to answer the then-operative complaint, which would be
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     superseded within a month. (Stip. (Sept. 21, 2022); Vierra Reply Decl. ¶ 6.) Nothing about
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     Plaintiffs’ good-faith offer to Defendants indicated a desire to delay the case; to the contrary, it is
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     evidence of Plaintiffs’ consistent willingness to proceed expeditiously without forcing Defendants
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     to submit needless filings.
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             Second, as the Paramont Defendants know, Plaintiffs were precluded from taking any
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     meaningful action (including amending their claims as intended) between October 2022 and
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     February 2023 because Defendant Bragg—the primary Defendant in this case—filed for
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     bankruptcy, triggering an automatic stay of proceedings under 11 U.S.C. § 362(a). The Paramont
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     Defendants were served with notice of that stay. (Notice of Bankr. Stay (Oct. 24, 2023.) Had
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   Plaintiffs breached that stay, they could have faced federal sanctions, including costs, attorneys’

 2   fees, and punitive damages. (11 U.S.C. § 362(k)(1).) The Paramont Defendants even wrote to

 3   Plaintiffs in January 2023 to confirm the applicability of the stay. (Vierra Reply Decl. ¶ 5.)

 4          Third, when the bankruptcy court finally lifted the stay, Plaintiffs promptly moved for

 5   entries of default against the Paramont Defendants for their failure to answer the then-operative

 6   pleading. (Id. ¶ 6) Once again acting in good faith, Plaintiffs agreed to withdraw their request for

 7   entry of default against the Paramont Defendants because the Paramont Defendants’ counsel

 8   asserted that they would and did not oppose a consolidated complaint, even though they had

 9   previously refused to put that in writing. (Id.) The Paramont Defendants, however, took advantage

10   of Plaintiffs’ good-faith gesture and subsequently shirked their agreement not to oppose a

11   consolidated complaint. (Id.) This Court then rejected the Paramont Defendants’ efforts to strike

12   the consolidated complaint and overruled their demurrer to the consolidated complaint in full. (Id.

13   ¶ 7.) Despite this, Plaintiffs continued to act in good faith, stipulating that the Paramont Defendants

14   would not have to pay thousands of dollars in additional filing fees that would have been required

15   absent Plaintiffs’ stipulation regarding consolidation. (Id.) Thus, all Paramont Defendants have

16   only paid appearance fees in the consolidated action for which a single trial should occur by

17   default, and they have declined to move for trial bifurcation.

18          In short, none of Plaintiffs’ litigation conduct indicates that Plaintiffs have dragged their

19   feet. To the contrary, it demonstrates that the Paramont Defendants have engaged in purposeful

20   obstruction and delay.

21   IV.    The Paramont Defendants’ Prejudice is Immaterial to Plaintiffs’ Motion, and Any
            Prejudice the Paramont Defendants Would Suffer is Due to Their Own Misconduct.
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            The Paramont Defendants correctly concede that “the existence (or not) of prejudice to the
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     opposing party is not a consideration” in evaluating a motion for preference. (Opp. 7.) Therefore,
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     the Court should not even consider the Paramont Defendants’ arguments that a later trial date
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     would be more convenient for them or that they need more time to file a summary judgment
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     motion. They are not entitled to their preferred trial date or to file a summary judgment motion.
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            To the extent the Court does consider these factors, however, it should be aware that the
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   Paramont Defendants have deliberately delayed bringing a summary judgment motion and

 2   engaged in other delay tactics as part of a deliberate strategy to prevent a timely trial.

 3          Plaintiffs first sought to begin taking depositions in August 2022. However, counsel for

 4   the Paramont Defendants told Plaintiffs they would have to be patient in scheduling depositions

 5   for “the next half year or so” because the Paramont Defendants’ Texas attorneys were busy with

 6   other, out-of-state trials. (Vierra Reply Decl. ¶ 8.) Moreover, the Paramont Defendants’ Texas

 7 attorneys have not permitted their two California co-counsel to participate in any party depositions

 8   or oral argument. (Id. ¶ 10.) Seven months later, after the bankruptcy stay was lifted, the Paramont

 9 Defendants’ counsel said they were still too busy with other trials to be reasonably available for

10 depositions. (Id. ¶ 8.) Thus, Plaintiffs were not able to take their first depositions until May 2023.

11          When it came to taking Plaintiffs’ depositions, the Paramont Defendants engaged in

12 further, bad-faith delays. Most egregiously, the Paramont Defendants unliterally cancelled John’s

13 and Jacky’s depositions three separate times at the last minute, imposing substantial costs on John,

14 Jacky, and Plaintiffs’ counsel, who had to rearrange their work and travel plans (including for the

15 Thanksgiving holiday) in response to the Paramont Defendants’ notices. (Vierra Decl. ¶ 9.)

16          The Paramont Defendants first scheduled John’s and Jacky’s depositions for August 1 and

17   2, 2023. (Id., Ex. A.) The Paramont Defendants unilaterally cancelled those depositions on July

18   20, 2023. (Id., Ex. B.)

19          The Paramont Defendants then rescheduled John’s and Jacky’s depositions for September

20   25 and 26, 2023. (Id., Ex. A.) They again unliterally cancelled those depositions on September 20,

21   2023. (Id., Ex. B.)

22          The Paramont Defendants then rescheduled John’s and Jacky’s depositions for November

23   27 and 28, 2023. (Id., Ex. A.) They again unliterally cancelled those depositions on November 12,

24   2023. (Id., Ex. B.)

25          They have not scheduled new depositions. (Id. ¶ 13.)

26          The Paramont Defendants had previously cancelled Plaintiffs’ other depositions at the last

27   minute, as well. (Vierra Reply Decl. ¶ 14.) The Paramont Defendants also never sought to depose

28   any other Defendant or third party in this action; every other deposition to date was noticed by
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE
 1   Plaintiffs. (Id. ¶ 15.) Nor have the Paramont Defendants served any discovery requests on any

 2   other Defendant or third party for the past 20 months. (Id.) And they did not even bother serving

 3   John and Jacky with any discovery until August 4, 2023. (Id. ¶ 16.) The Paramont Defendants have

 4   no outstanding discovery requests to any Plaintiff, Defendant, or third party, nor they have they

 5   indicated any intent to propound further discovery. (Id. ¶ 17.)

 6          Thus, any delay in obtaining discovery and filing a summary judgment motion has been

 7   entirely of the Paramont Defendants’ own making. That should provide no basis to delay trial,

 8   which at its earliest, will still occur more than two years after this litigation began.

 9                                             CONCLUSION
10          The Court should grant Plaintiffs’ motion for preference and set a single, consolidated trial

11   to begin no later than April 1, 2023, though preferably sooner.

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     Dated: December 1, 2023                                By: ______________________
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                                                                 Collin J. Vierra
16                                                               EIMER STAHL, LLP
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                                                                 Attorney for Plaintiffs
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                       REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR PREFERENCE