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JEFFREY F. RYAN (CA Bar No. 129079)
J eff@j effreyryanlawcom
LAW OFFICES OF JEFFREY F. RYAN
The Fitzgerald Building SAN
I
FMATEO L E D
COUNTY
2000 Broadway Street
Redwood City, California 94063 MAY 0 8 .2018
Phone: (650) 924—8343 _
Clerk of u no Court
JENNIFER J. HAGAN (CA Bar No.
Jhagan@haganlaw.com
157127)
BY
WMW. fi/é v
THE HAGAN LAW FIRM
535 Middlefield Road, Suite 190 {ii—clv—iiéeea
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2 MPAR
gig: 122§%)§92?g29‘85 ‘
1
Memorandum of Points and Authorities In Repl
1138112
Attorneys for Plaintiffs,
FRED H. GEISLER, NORMAN C. FLEMING, and GENA ZISCHKE
I
'1‘ Ill lllllll Ill"
10
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
11 FOR THE COUNTY OF SAN MATEO
12 CIVIL DIVISION-SOUTHERN BRANCH
13
FRED GEISLER, M.D., Ph.D.,an individual, ) Case No. 17CIV02888
14
NORMAN C. FLEMING, an individual,
2%
15
and GENA ZISCHKE, an individual, 3
directly, and derivatively on behalf of ) PLAINTIFF’S REPLY TO
16 RHAUSLER, INC., and ROES 1 to 25, ) JOHNSTON ’S OPPOSITION
Inclusive, ) TO MOTION FOR CON TEMPT
17 ) FOR FAILURE TO COMPLY WITH
v. ) DISCOVERY ORDER;
18 ) TOGETHER WITH
TERRY J. JOHNSTON, an individual; KATIE ) REQUEST FOR JUDICIAL NOTICE
19 SIMS, CPA, an individual; ROBERT JOHN ) AND DECLARATION OF JENNIFER
GLYNN, JR., an individual; 3COR MEDICAL, ) HAGAN IN SUPPORT OF REPLY
20 INC., a California Corporation; TEDAN )
SURGICAL INNOVATIONS, LLC, a Texas )
21 Limited Liability Company, & DOES to 25, Hearing Date:
1 ) May 15, 2018
Inclusive, ) Time: 9:00 a.m.
22
Defendants, ) Dept: Law & Motion
) Judge: Hon. Susan Greenberg
23
and RHAUSLER, INC., a California )
24
Corporation, ) Action Filed: June 28, 2017
) FAC Filed: Sept. 1, 2017
25 Nominal Defendant. 1 Trial Date: None Set
26
27
28
Page 1 of 18
GEISLER‘S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO CONIPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
COMES NOW, PLAINTIFF, FRED H. GEISLER, and submits his Reply to
Defendant, Terry Johnston’s (“Johnston”) Opposition to Geisler’s Motion for Civil Contempt
for willful defiance of this Court's Order made on February 16, 2018, and entered on March
5, 2018, whereby Johnston was ordered by this Court to “serve full and complete, verified
responses to Special Interrogatories 5-9, 15-18, 27-29, 36—37, 54 and 56 no later than
March 2, 2018.” (the “Discovery Order”).
Geisler contends in the Motion for Contempt that Johnston willfully violated the
Discovery Order because he failed to provide full and complete further responses to ten
(10) Geisler SP1# 6, 8. 9. 16. 28. 29, 36 and 37.
18., 27.,
10
11 I. INTRODUCTION
12 Johnston argues that Geisler “seeks to gain an unfair tactical advantage against (and
13 to punish) Johnston because Geisler did not like Johnston ’s supplemental interrogatory
14 responses.
” This is a preposterous defense to Johnston’s failure to comply with a Court order.
15 Not only does Plaintiff Geisler have every right to expect that Johnston will reasonably
16 of the associated with
comply with an order Court, but there is absolutely nothing punitive
17
that reasonable expectation.
18
Further, Johnston’s argument that Geisler seeks unfair tactical advantage where he has
19
legitimately propounded discovery and obtained a court order for the production of full and
20
complete responses is tantamount to asserting that the Discovery Act is unfair because it
21
obligates Johnston to disclose information that he would rather not. Simply ridiculous.
22
In addition, Johnston’s Opposition to this Motion for Contempt seems to have a serious
23
case of amnesia. As of the date of this pleading, Johnston has mprovided further
24
responses to Geisler’s SP1# 6 & 8 as ordered by the Court on February 16, 2018. This is
25
because the further responses delivered by Johnston on February 7, 2018, were insufficient
26
then, were before the Court on February 16, 2018, and the Discovery Order expressly ordered
27
Johnston to provide additional responses to those SPI. Geisler informed the Court in writing
28
in its Reply and Hagan’s Declaration ISO the Reply that Johnston had provided further
Page 2 of 18
GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888
responses on February 7, 2018, and that seven (7) of those further responses were still
inadequate. The Court understood that when itmade the Discovery Order. Johnston’s
attorney, Jimmy Jacobs was in court on February 16, 2018, to make oral argument and he
never sought clarification of the Discovery Order to protect his client.
A finding of contempt would not be an extreme remedy here as asserted because
Johnston’s own 21 page declaration filed in Opposition of this Motion for Contempt gives the
Court solid ground, and new and additional reasons to find for contempt against Johnston as
follows:
10 1. At Paragraphs 63-68 and 73 of his declaration, Johnston explains why he did
11 not provide any information about business expenses paid on behalf of 3COR
12 or Tedan by Rhausler. Johnston states that “I am not aware of money from
13 Rhausler ’5' account used to pay expenses for 3 COR or Tedan.” Then he argues
14 that the Motion for Contempt fails to establish that his further response was
15 incomplete. Frankly, it is remarkable that Johnston would allow himself
16 to be caught in such a bald faced lie. and for this reason alone, the Court
17
should hold Johnston in contempt for his utter lack of candor with this
18
%. Johnston signed a contract on June 27, 2016, entitled “Rhausler,
19
Inc., and 3COR, Inc. Partners Working Agreement 2” (the “Working
20
Agreement 2”) where Johnston agreed to the following language:
21
22 “Rhausler provides or covers for 3COR at no charge: 1) Rent, office
space, fumiture, office supplies, computers (including software
23
backup) office utilities, and communications (telephone, intemet etc).;
24 2) Personal salary with fringe and bonus; 3) accounting, and
25
documentation and preparation, and 3) (sic) Rhausler product support
(printed, electronic, and personal interactions). In fact, the exact same
26
individuals maintain the accounting, ship product, answer phone calls,
27 and write up the orders for Rhausler and 3COR.”
28 See Exhibit “B” to the Decl. of Dr. Fred H. Geisler ISO Geisler’s Reply.
Page 3 of18
GEISLER’S REPLY TO J OHNSTON’S OPPOSITION T0 MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO CONEPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
Johnston is the 100% owner of 3COR Medical, Inc., a California corporation
started in August of 2002. (See Deposition Transcript of Terry Johnston taken
in IRMO Kari Johnston v. Terry Johnston, Family Law Case F0122515,
April 20, 2018, pages 19—21, attached to the Decl. of Hagan IS this Reply as
Exhibit “A”. See also a true and correct copy of the Articles of Incorporation
for 3Cor Medical, Inc. filed with the Secretary of State of California attached
to the Decl. of Hagan as Exhibit “3-1” together with the most recent
Statement of Information for the corporation attached as Exhibit “B-2.”)
2. At Paragraphs 4-17 of the declaration, Johnston explains that he approached
10 Generational Equities (“Gen Eq.”) to explore the sale of Rhausler in 2013, or
ll alternatively, to seek new investors. Johnston never provided any information
12 about the Gen Eq. 2013 Valuation report in his further response to Geisler. It
l3 would have been nice if he had gone into the same kind of depth and detail in
14 his further responses, but he did not.
15 . At Paragraphs 20 through 25 of his declaration, Johnston goes into great detail
l6 and depth explaining the “compensation received” from Tedan since 2008. In
l7 his further responses, he gave only a one sentence response.
l8 At Paragraphs 26 through 33 of his declaration, Johnston provided a fiill and
19
complete in depth explanation of the total amount of compensation that he
20
received from other business entities. This proves that he could have
21
provided such information in his fiirther responses but simply chose not to.
22
S. At Paragraphs 34—50, Johnston provides pages and pages of content,
23
information, facts and commentary on the reason that he did not provide a
‘24 travel itinerary for 3COR. There is no reason why he could not have provided
25
even a distilled version of this part of his declaration in his further responses,
26
but he chose only to state that he did not travel on 3COR business.
27
28
Page 4 of 18
GEISLER’S REPLY TO JOIINSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO CONIPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888
6. At Paragraphs 51—59 of the declaration, Johnston provides a long and in—depth
analysis as to why he did not state his “projection of sales of all Rhausler
products for 2008 through the present.” He argues that Geisler and his lawyers
‘
do not understand how the business of Rhausler was managed. That may be
true — and that’s exactly why Geisler sent out specially prepared
interrogatories and needed more complete responses that Johnston provided.
Johnston then proceeds to split hairs by arguing that he did not forecast
product sales, but instead, he forecasted production. This is a distinction
without a difference, but Johnston does his best to confuse the Court.
10 At Paragraphs 60—62 of the declaration, Johnston reiterates that 3COR was a
11 "billing service company...and did not have its own products to sell. ” Geisler
12 is frankly amazed that Johnston would testify to this fact because at Para. 44
13 of the declaration, lines 8-9, Johnston states that “I have used 3COR to
14 cultivate entrepreneurial research and development
my ideas ands to seek
15 new entrepreneurial products, in hopes of bringing them to market.
” These
16 two statements in Johnston’s declaration are diametrically opposed. The
17
Court should take note of how Johnston speaks out of both sides of his mouth
18
when it suits his narrative.
19
At Paragraphs 69-73, Johnston argues that he did not understands the SP1
20 “how” money was used.
asking He did not interpret the word how to mean
21
“itemize. 31
This is semantic sophistry. If Johnston truly did not understand
22
Geisler’s SPI, then he should have sought clarification. He had five (5)
23
months to do so. In addition, Johnston once again states at Paragraph 73 of
24
his declaration that he did not “identify 3COR and TeDan in my response
25
because, as previously explained, I am unaware that Rhausler’s funds were
26
used to fund adjusthe (sic) expenses of these businesses.” Once again, it is
27
remarkable that Johnston would reiterate such a bald faced lie to the Court
28
where not less than two (2) year ago, Johnston signed the Partners Working
Page 5 of 18
GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
Agreement where he acknowledged that Rhausler was paying all the business
operational expenses Of 3COR, the company that Johnston owns 100%.
If Johnston had been more forthcoming in his further responses, Geisler would not have
been forced to make this motion. Further, Johnston’s demonstrated mendacity and
misrepresentations to the Court found in Paragraphs 63-68, and 73 Of his declaration alone
support a finding of civil contempt. If he is willing to so readily lie to this Court, what hope
does Geisler have that Johnston will be honest with him in this proceeding at all?
10 II. JOHNSTON HAS NOT FULLY COMPLIED WITH THE COURT’S
ll DISCOVERY ORDER.
l2
l3 A. Chronology of the Facts Clearlv Show that Johnston Onlv Partiallv
Complied with the Discoverv Order.
14
At issue in this Motion for Contempt is Johnston’s failure to provide fiill and complete
15
further responses to ten (10) Geisler SP1# 6, 8, 9, 16, 18, 27, 28, 29, 36 and 37.
l6
Since the date that Geisler filed his Motion to Compel Further Responses to Specially
17
Prepared Interrogatories (November 30, 2017), Johnston has had over five (5) months to
18
provide Geisler with full and complete responses. Instead, he waited eighty-one (81) days
19
until February 6, 2018, to deliver a meet & confer letterto Jeffrey Ryan, which came as a
20
complete surprise to Geisler’s counsel, because it arrived QM Johnston filed his Opposition
21
to the Motion to Compel.
22
In his Opposition to this Motion, Johnston has conveniently left out several important
23
facts.
24
1. On February 7, 2017, Johnston served further responses to Geisler’s Specially
25
Prepared Interrogatories (“SPI”) No. 5, 6, 7—13, 15-18, 24, 27-29, 36, 37, 46,
26
54, and 56. On the very same day, counsel for Geisler, Jennifer Hagan, wrote
27
an email to Johnston’s lawyer, J immy Jacobs, and informed him that only seven
28
Page 6 Of 18
GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888
of the fourteen further responses provided substantive good faith information,
and that seven (7) continued to have boilerplate responses. (See Request for
Judicial Notice filed contemporaneous herewith, Exhibit 1, Reply filed by
Geisler on February 9, 2018 to Motion to Compel together with Decl. of
Jennifer Hagan ISO the Reply, Exhibit “X-2”.)
2. On February 7, 2018, Jennifer Hagan replied to J immy Jacobs and informed
him that J ohnston’s further responses to SPI# 5, 6, 7, 8, 9, 54 & 56 remained at
issue under the pending Motion to Compel. Further, in the same email, Hagan
stated that further responses to SPI # 36 and 37 had not yet been received, and
10 the boilerplate refusal to provide responses to SP1# 5, 6, 7, 8, 9, 54, and 56 were
11 still subject to the Motion to Compel. Lastly, Hagan stated that “we will
12 continue to prosecute that motion to compel...”
13 3. On February 8, 2018, Johnston served on Geisler his further responses to SP1#
14 36 and 37.
15 4. These facts were recited for the Court in Geisler’s Reply to Johnston’s
16 Opposition to the Motion to Compel Further Responses (at Page 2, lines 5—19)
17 and these facts were before the Court when it made its ruling on February 16,
18
201 8.
19 Geisler’s
Thus, in considering original Motion to Compel 23 further responses, the
20
Court knew, understood and accepted that Geisler had received further responses from
21
Johnston on February 7 and 8, 2018, and that Geisler was satisfied with 7 of those further
22
responses leaving 16 SPI pending under the Motion to Compel.
23
On February 14, 2018, Johnston provided further verified responses to SP1# 18, 27, 28
24
and 29.
25
On February 16, 2018, Johnston’s counsel, J immy Jacobs, appeared in court to argue
26
against the imposition of sanctions in the amount of $4,600 and they were reduced by the
27
Court to $2,000. The Court then issued it’s ruling that directing Johnston to provide further
28
responses to sixteen (16) SP1# 5—9, 15-18, 27-29, 3, 37, 54, and 56 no later than March 2,
Page 7 of 18
GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
2018. This Discovery Order included several SPI which Johnston attempted to supplement
on February 7, 8, and 14, 2018, and which Geisler rejected as being incomplete and evasive.
Mr. Jacobs never advised the Court at oral argument on February 16, 2018, that
Johnston had provided further responses to SPI# 27, 28, 29, 37 and 37 on February 14,
2018, and he did not seek clarification from the Court as to whether Johnston’s
previously submitted further responses were sufficient to comply with the Court’s order.
After the date of the Discovery Order (February 16, 2018), Johnston did not provide
any further responses to SPI# 27, 28, 29, 36 and 37.
10 On March 1, 2018, Johnston served further responses to Interrogatories Nos. 15-17.
11 On March 2, Johnston also served further responses to Interrogatories No. 5-9, 54 and 56.
l2 When attorney Hagan asked why Johnston had not produced any further responses to
l3 SP1 No. 18, 27, 28, 29, 36 and 37, Johnston took the position that the responses provided by
14 him on February 2018, were sufficient and he refused to provide additional further
14, any
15 responses to those SPI. Johnston however did provide a new verification for those responses
16 on March 25, 2018.
1'7
Plaintiff, Geisler, was forced to file this motion for contempt because Johnston
18
and his attorney willfully chose not to provide further responses to SPI# 18, 27-29, and
19
36-37 (the “Six Interrogatories”) which are a subset of the 10 SPI which are the subject of
20
this motion.
21
22 B. Johnston Attempts to Imprmerly Blame Geisler for His Failure to
Comply with the Discovery Order and Resorts to Illogical Reasoning.
23
24
On March 22, 2018, Jennifer Hagan sent Jimmy [Jacobs an email letter asking about
25
the Six Interrogatories and why they had not been supplemented. Johnston’s counsel
26
responded that they had already been supplemented on February 14, 2018, two days before
27
the Court issued its Discovery Order on February 16, 2018.
28
Page 8 of 18
GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
In Johnston’s Opposition to this motion, Johnston argues that he complied with the
Discovery Order before it was issued. This assertion is simply not legally possible. A party
to litigation cannot comply with an order before the date that order is issued by the Court.
Assuming arguendo, that a party could be in compliance with discovery orders (which
includes sanctions of $2,000 for non—compliance with the Discovery Act) even before they
ever went into effect, it is simply not Geisler’s fault that Mr. Jacobs failed to confirm with the
Court, when appearing on February 16, 2018, that such prior compliance of an order not yet
issued was acceptable to the Court.
It is the absolute obligation of Johnston and his counsel to make sure that his conduct
10 complies with the Discovery Order and not the duty or responsibility of Geisler to interpret
11 the Court’s order for them.
12 It has been almost three (3) months since the Court issued the Discovery Order on
13 February 16, 2018, and since that time, Johnston has not sought any clarification from the
14 Court as to whether his supplemental responses of February 2018, were sufficient to
14,
15 comply with the Discovery Order. There is simply no excuse for Why Johnston failed to seek
16 and obtain such clarification from the Court rather than telling Geisler to go pound sand, and
17
forcing Geisler to make this motion for contempt.
18
Johnston also argues that Geisler’s motion for contempt is gamesmanship. Given that
19
Geisler has been attempting to obtain full and complete responses from Johnston since the
20
beginning of November, 2017, and Johnston has responded with boilerplate objections,
21
piecemeal responses lacking in substance, objections based on confidentiality based on a
22
stipulation that Mr. Jacobs failed to sign and submit to the Court, and evasive, incomplete and
23
inadequate responses, it is not Geisler who is engaged in gamesmanship.
24
25 C. Johnston Has Not Further Responded in Compliance with the Discovery
Order to the “Incomplete Eight.”
26
27
28
Page 9 of 18
GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO CONH’LY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
Johnston argues that he has fully responded to SPI# 6, 8, 9, 16, 27, 28, 36, and 37, (the
“Incomplete Eight”). To support his arguments, Johnston provides the declaration of J immy
Jacobs, the Declaration of Guido Zorzoli, the CEO of Sintea Plustek LLC, and his own
declaration. Johnston argues that Geisler has not provided the Court with sufficient
documentary evidence to prove that Johnston willfully failed to comply with the Discovery
Order.
In Reply, Geisler attaches to the Declaration of Jennifer Hagan ISO this Reply, two
agreements signed by Terry Johnson on April 25, 2016 and June 27, 2016, respectively. The
first Agreement is entitled “Rhausler, Inc. Partners Working Agreement.” (the “Partners
10 Agreement April 2016”). It is an agreement between Dr. Geisler and Terry Johnston as
ll individuals on how they will operate Rhausler, Inc., together in the future and which attempts
12 to settle various issues concerning the past. See Exhibit “A” to the Decl. of Dr. Fred H.
13 Geisler ISO Geisler’s Reply.
14 entitled “Rhausler, and Inc. Partners
The second agreement is Inc., 3COR,
15 Working Agreement 2” (the “Working Agreement 2”). See Exhibit “B” to the Decl. of
16 Dr. Fred H. Geisler ISO Geisler’s Reply. This agreement is between the two business entities
17
Rhausler, Inc. and 3COR Medical, Inc, and attempts to set forth the rules to govern and define
18
the financial relationship between the business entities.
19
Under Para 7 of the Partners Agreement April 2016, Johnston agreed that Geisler was
20
entitled to receive, on an equal basis with Johnston, the various financial ledgers (Quickbooks
21
and paper) and tax forms for Rhausler, Cabo, 3-COR and Microbeam.
22
m: Despite the contractual agreement to provide all such financial information,
23
Johnston has refiised to give Geisler access to Johnston’s compensation for tax years 2016,
24
and 2017.
25
In support of Geisler’s Motion for Contempt, Geisler was able to provide evidence
26
that demonstrated that in four (4) tax years from 2010 through 2013, Johnston received more
27
from Rhausler in those four years than he stated in his further responses for the total of nine
28
(9) years.
Page 10 of 18
GEISLER’S REPLY TO JOHNSTON’S OPPOSITION T0 MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
Johnston claims to have earned the sum of $1,140,554 for nine years 2008 through the
present. However, his returns for tax years 2010, 2011, 2012 and 2013 reflect that he received
the sum of $1,162,000 which exceeds his stated amount by $22,000 without taking into
account five (5) years of compensation. No matter what argument Johnston makes in his
Opposition, the tax returns and Johnston’s fither responses simply do not add up.
w: Johnston argues that he did provide an accurate response to SPI#8 in that he
provided the amount that he actually “received” from Tedan as opposed to amounts that were
booked in his name but not received in hand. This excuse is nothing more than evasive and
disingenuous. SPI #8 expressly sought from Johnston the following information “State the
10 total amount of all compensation YOU received from Tedan since 2008.” Johnston did
11
Manswer this SPI honestly.
12 Johnston under—reported the total amount of compensation he received from TEDAN
13 since 2008 through the present. Johnston stated that he received $934,000 from Tedan,
14 however, Geisler provided Tedan’s K-l statements for (5) tax years 2009, 2010, 2011, 2012
15 and 2013, which total the sum of $2,243,387. The Tedan K—l statements reflect that Johnston
16 received amounts that vastly exceeded the amount reported by him in his further response.
17
(Johnston’s K—l statements were provided to Geisler by Kari Johnston, the former Wife of
18
defendant Terry Johnston. She waived all privilege as to their contents. In addition, Terry
19
Johnston’s social security number was redacted from each statement before submitting to the
2‘0
Clerk for filing.)
21
Despite the fact that Johnston attempts to slide sideways out of a lie by asserting that
22
he thought he only needed to report the cash he actually received from Tedan, SP1# 8 was not
23
phrased in such a limited manner. It sought information for “all compensation received”
24
regardless if it was deferred, booked, or reinvested in the business. Johnston simply
25
intentionally under-reported the level of compensation that he made from his activities with
26
Tedan, and he did not seek any clarification from Geisler’s counsel on interpretation of the
27
SPI.
28
Page 1 1 of 18
GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888
$11192: Geisler acknowledges that the CEO of Sintea Plustek has testified that he
purchased a “Tedan surgical, retractor system” at an industry convention so that it could be
sent to a distributor in Sao Paolo, Brazil. However, the check submitted as evidence in support
of Johnston’s compensation from other sources was made out to “Terry Johnston” personally,
and not Tedan. Terry Johnston did M provide testimony in his lengthy declaration that he
did not personally cash that check or deliver it to Tedan. The Johnston declaration is
noticeably silent on who cashed the check to “Terry Johnston” intended for Tedan.
m: Johnston did not report any travel whatsoever on behalf of 3COR
10 Medical which he stated was only a “billing entity.” This is not accurate or true. Geisler has
11 obtained travel invoices from Alexander Travel in the name of Terry Johnston of 3COR
12 Medical reflecting significant travel. See a sampling of the Alexander Travel Invoices
l3 attached as Exhibit “C” to the Decl of Hagan ISO this Reply.
14 Johnston undertook extensive travel which was billed to “3COR Medical, Inc.” as
15 evidenced by the Alexander Travel Invoices.
l6 In addition, based on J Ohnston’s'own testimony at Paragraph 44 of his declaration, line
17 8-9, submitted ISO his Opposition, Johnston used 3 COR Medical, Inc., “to cultivate my
18 entrepreneurial research and development ideas ands to seek new entrepreneurial products,
19 in hopes of bringing them to market. ”
20 This statement contradicts his statement in the further responses that 3COR is only a
21 billing entity. This statement is also contradicted by Johnston’s own deposition testimony
22 given on April 20, 2018, that the stated purpose for 3COR Medical was to “develop products.”
23 See Page 20 of the deposition transcript of Terry Johnston, lines 9-12, attached as Exhibit
24 “A” to the Decl. of Hagan ISO this Reply.
25
26 m: SPI #27 reads “State YOUR projection of sales of all RHAUSLER
27 products for 2008 through the present.” Johnston did not report projection of sales of
28 Rhausler products because, he argued, that he did not make “sales projections” but instead he
Page 12 of 18
GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT
FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018
SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888
made production forecasts. That is: how many products Rhausler would need to have
manufactured. (See Johnston Opposition Decl. Page 15, lines 12-18). Johnston asserts that
“sales projections” are not the same as “production forecasts.” Johnston’s explanation rings
hollow and the Court should not be mislead by it.
Johnston did create “sales projections” and Geisler submitted a few in support of this
Motion for Contempt. Geisler submitted:
a) A March 31, 2013 Trabeculite Spinal Implant Forecast through 2020,
b) The Rhausler 2013 internal sales forecast of all products projected through
2014,and
10 0) Financial Analysis Forecast dated March 3, 2015 which forecasted both
ll Rhausler and 3COR Medical % (See Decl. of Jennifer Hagan ISO Motion
l2 for Contempt at Exh. “K”.)
l3
14 The three exhibits submitted in support of the Motion for Contempt were all created
15
by Johnston and all of them are “sales” and not “production forecasts.” They all say exactly
l6 what they are. They all use the language “Sales.”
17 Once again, Johnston has been caught failing to fully and completely respond, and
18
instead of admitting that he did not thoroughly review his paperwork, he has made up yet
19
another fabrication for the Court in order to evade responsibility for his failure to comply in
20
good faith with the Discovery Order.
21
22
23
m: Geisler acknowledges that 3COR Medical sold its extraction screw
business to Tedan in or about 2006, and than Tedan has been selling those distraction screws
24
under the name of “3CORE Surgical” a division of Tedan. Johnston responded to this SPI
25
that “3 COR does not have any of its own products. 3COR is a billing service company only.”
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a? JEFFREY F. RYAN (CA Bar No. 129079) J eff@j effreyryanlawcom LAW OFFICES OF JEFFREY F. RYAN The Fitzgerald Building SAN I FMATEO L E D COUNTY 2000 Broadway Street Redwood City, California 94063 MAY 0 8 .2018 Phone: (650) 924—8343 _ Clerk of u no Court JENNIFER J. HAGAN (CA Bar No. Jhagan@haganlaw.com 157127) BY WMW. fi/é v THE HAGAN LAW FIRM 535 Middlefield Road, Suite 190 {ii—clv—iiéeea ' " “ ‘ 2 MPAR gig: 122§%)§92?g29‘85 ‘ 1 Memorandum of Points and Authorities In Repl 1138112 Attorneys for Plaintiffs, FRED H. GEISLER, NORMAN C. FLEMING, and GENA ZISCHKE I '1‘ Ill lllllll Ill" 10 IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA 11 FOR THE COUNTY OF SAN MATEO 12 CIVIL DIVISION-SOUTHERN BRANCH 13 FRED GEISLER, M.D., Ph.D.,an individual, ) Case No. 17CIV02888 14 NORMAN C. FLEMING, an individual, 2% 15 and GENA ZISCHKE, an individual, 3 directly, and derivatively on behalf of ) PLAINTIFF’S REPLY TO 16 RHAUSLER, INC., and ROES 1 to 25, ) JOHNSTON ’S OPPOSITION Inclusive, ) TO MOTION FOR CON TEMPT 17 ) FOR FAILURE TO COMPLY WITH v. ) DISCOVERY ORDER; 18 ) TOGETHER WITH TERRY J. JOHNSTON, an individual; KATIE ) REQUEST FOR JUDICIAL NOTICE 19 SIMS, CPA, an individual; ROBERT JOHN ) AND DECLARATION OF JENNIFER GLYNN, JR., an individual; 3COR MEDICAL, ) HAGAN IN SUPPORT OF REPLY 20 INC., a California Corporation; TEDAN ) SURGICAL INNOVATIONS, LLC, a Texas ) 21 Limited Liability Company, & DOES to 25, Hearing Date: 1 ) May 15, 2018 Inclusive, ) Time: 9:00 a.m. 22 Defendants, ) Dept: Law & Motion ) Judge: Hon. Susan Greenberg 23 and RHAUSLER, INC., a California ) 24 Corporation, ) Action Filed: June 28, 2017 ) FAC Filed: Sept. 1, 2017 25 Nominal Defendant. 1 Trial Date: None Set 26 27 28 Page 1 of 18 GEISLER‘S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO CONIPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 COMES NOW, PLAINTIFF, FRED H. GEISLER, and submits his Reply to Defendant, Terry Johnston’s (“Johnston”) Opposition to Geisler’s Motion for Civil Contempt for willful defiance of this Court's Order made on February 16, 2018, and entered on March 5, 2018, whereby Johnston was ordered by this Court to “serve full and complete, verified responses to Special Interrogatories 5-9, 15-18, 27-29, 36—37, 54 and 56 no later than March 2, 2018.” (the “Discovery Order”). Geisler contends in the Motion for Contempt that Johnston willfully violated the Discovery Order because he failed to provide full and complete further responses to ten (10) Geisler SP1# 6, 8. 9. 16. 28. 29, 36 and 37. 18., 27., 10 11 I. INTRODUCTION 12 Johnston argues that Geisler “seeks to gain an unfair tactical advantage against (and 13 to punish) Johnston because Geisler did not like Johnston ’s supplemental interrogatory 14 responses. ” This is a preposterous defense to Johnston’s failure to comply with a Court order. 15 Not only does Plaintiff Geisler have every right to expect that Johnston will reasonably 16 of the associated with comply with an order Court, but there is absolutely nothing punitive 17 that reasonable expectation. 18 Further, Johnston’s argument that Geisler seeks unfair tactical advantage where he has 19 legitimately propounded discovery and obtained a court order for the production of full and 20 complete responses is tantamount to asserting that the Discovery Act is unfair because it 21 obligates Johnston to disclose information that he would rather not. Simply ridiculous. 22 In addition, Johnston’s Opposition to this Motion for Contempt seems to have a serious 23 case of amnesia. As of the date of this pleading, Johnston has mprovided further 24 responses to Geisler’s SP1# 6 & 8 as ordered by the Court on February 16, 2018. This is 25 because the further responses delivered by Johnston on February 7, 2018, were insufficient 26 then, were before the Court on February 16, 2018, and the Discovery Order expressly ordered 27 Johnston to provide additional responses to those SPI. Geisler informed the Court in writing 28 in its Reply and Hagan’s Declaration ISO the Reply that Johnston had provided further Page 2 of 18 GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888 responses on February 7, 2018, and that seven (7) of those further responses were still inadequate. The Court understood that when itmade the Discovery Order. Johnston’s attorney, Jimmy Jacobs was in court on February 16, 2018, to make oral argument and he never sought clarification of the Discovery Order to protect his client. A finding of contempt would not be an extreme remedy here as asserted because Johnston’s own 21 page declaration filed in Opposition of this Motion for Contempt gives the Court solid ground, and new and additional reasons to find for contempt against Johnston as follows: 10 1. At Paragraphs 63-68 and 73 of his declaration, Johnston explains why he did 11 not provide any information about business expenses paid on behalf of 3COR 12 or Tedan by Rhausler. Johnston states that “I am not aware of money from 13 Rhausler ’5' account used to pay expenses for 3 COR or Tedan.” Then he argues 14 that the Motion for Contempt fails to establish that his further response was 15 incomplete. Frankly, it is remarkable that Johnston would allow himself 16 to be caught in such a bald faced lie. and for this reason alone, the Court 17 should hold Johnston in contempt for his utter lack of candor with this 18 %. Johnston signed a contract on June 27, 2016, entitled “Rhausler, 19 Inc., and 3COR, Inc. Partners Working Agreement 2” (the “Working 20 Agreement 2”) where Johnston agreed to the following language: 21 22 “Rhausler provides or covers for 3COR at no charge: 1) Rent, office space, fumiture, office supplies, computers (including software 23 backup) office utilities, and communications (telephone, intemet etc).; 24 2) Personal salary with fringe and bonus; 3) accounting, and 25 documentation and preparation, and 3) (sic) Rhausler product support (printed, electronic, and personal interactions). In fact, the exact same 26 individuals maintain the accounting, ship product, answer phone calls, 27 and write up the orders for Rhausler and 3COR.” 28 See Exhibit “B” to the Decl. of Dr. Fred H. Geisler ISO Geisler’s Reply. Page 3 of18 GEISLER’S REPLY TO J OHNSTON’S OPPOSITION T0 MOTION FOR CIVIL CONTEMPT FOR FAILURE TO CONEPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 Johnston is the 100% owner of 3COR Medical, Inc., a California corporation started in August of 2002. (See Deposition Transcript of Terry Johnston taken in IRMO Kari Johnston v. Terry Johnston, Family Law Case F0122515, April 20, 2018, pages 19—21, attached to the Decl. of Hagan IS this Reply as Exhibit “A”. See also a true and correct copy of the Articles of Incorporation for 3Cor Medical, Inc. filed with the Secretary of State of California attached to the Decl. of Hagan as Exhibit “3-1” together with the most recent Statement of Information for the corporation attached as Exhibit “B-2.”) 2. At Paragraphs 4-17 of the declaration, Johnston explains that he approached 10 Generational Equities (“Gen Eq.”) to explore the sale of Rhausler in 2013, or ll alternatively, to seek new investors. Johnston never provided any information 12 about the Gen Eq. 2013 Valuation report in his further response to Geisler. It l3 would have been nice if he had gone into the same kind of depth and detail in 14 his further responses, but he did not. 15 . At Paragraphs 20 through 25 of his declaration, Johnston goes into great detail l6 and depth explaining the “compensation received” from Tedan since 2008. In l7 his further responses, he gave only a one sentence response. l8 At Paragraphs 26 through 33 of his declaration, Johnston provided a fiill and 19 complete in depth explanation of the total amount of compensation that he 20 received from other business entities. This proves that he could have 21 provided such information in his fiirther responses but simply chose not to. 22 S. At Paragraphs 34—50, Johnston provides pages and pages of content, 23 information, facts and commentary on the reason that he did not provide a ‘24 travel itinerary for 3COR. There is no reason why he could not have provided 25 even a distilled version of this part of his declaration in his further responses, 26 but he chose only to state that he did not travel on 3COR business. 27 28 Page 4 of 18 GEISLER’S REPLY TO JOIINSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO CONIPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888 6. At Paragraphs 51—59 of the declaration, Johnston provides a long and in—depth analysis as to why he did not state his “projection of sales of all Rhausler products for 2008 through the present.” He argues that Geisler and his lawyers ‘ do not understand how the business of Rhausler was managed. That may be true — and that’s exactly why Geisler sent out specially prepared interrogatories and needed more complete responses that Johnston provided. Johnston then proceeds to split hairs by arguing that he did not forecast product sales, but instead, he forecasted production. This is a distinction without a difference, but Johnston does his best to confuse the Court. 10 At Paragraphs 60—62 of the declaration, Johnston reiterates that 3COR was a 11 "billing service company...and did not have its own products to sell. ” Geisler 12 is frankly amazed that Johnston would testify to this fact because at Para. 44 13 of the declaration, lines 8-9, Johnston states that “I have used 3COR to 14 cultivate entrepreneurial research and development my ideas ands to seek 15 new entrepreneurial products, in hopes of bringing them to market. ” These 16 two statements in Johnston’s declaration are diametrically opposed. The 17 Court should take note of how Johnston speaks out of both sides of his mouth 18 when it suits his narrative. 19 At Paragraphs 69-73, Johnston argues that he did not understands the SP1 20 “how” money was used. asking He did not interpret the word how to mean 21 “itemize. 31 This is semantic sophistry. If Johnston truly did not understand 22 Geisler’s SPI, then he should have sought clarification. He had five (5) 23 months to do so. In addition, Johnston once again states at Paragraph 73 of 24 his declaration that he did not “identify 3COR and TeDan in my response 25 because, as previously explained, I am unaware that Rhausler’s funds were 26 used to fund adjusthe (sic) expenses of these businesses.” Once again, it is 27 remarkable that Johnston would reiterate such a bald faced lie to the Court 28 where not less than two (2) year ago, Johnston signed the Partners Working Page 5 of 18 GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 Agreement where he acknowledged that Rhausler was paying all the business operational expenses Of 3COR, the company that Johnston owns 100%. If Johnston had been more forthcoming in his further responses, Geisler would not have been forced to make this motion. Further, Johnston’s demonstrated mendacity and misrepresentations to the Court found in Paragraphs 63-68, and 73 Of his declaration alone support a finding of civil contempt. If he is willing to so readily lie to this Court, what hope does Geisler have that Johnston will be honest with him in this proceeding at all? 10 II. JOHNSTON HAS NOT FULLY COMPLIED WITH THE COURT’S ll DISCOVERY ORDER. l2 l3 A. Chronology of the Facts Clearlv Show that Johnston Onlv Partiallv Complied with the Discoverv Order. 14 At issue in this Motion for Contempt is Johnston’s failure to provide fiill and complete 15 further responses to ten (10) Geisler SP1# 6, 8, 9, 16, 18, 27, 28, 29, 36 and 37. l6 Since the date that Geisler filed his Motion to Compel Further Responses to Specially 17 Prepared Interrogatories (November 30, 2017), Johnston has had over five (5) months to 18 provide Geisler with full and complete responses. Instead, he waited eighty-one (81) days 19 until February 6, 2018, to deliver a meet & confer letterto Jeffrey Ryan, which came as a 20 complete surprise to Geisler’s counsel, because it arrived QM Johnston filed his Opposition 21 to the Motion to Compel. 22 In his Opposition to this Motion, Johnston has conveniently left out several important 23 facts. 24 1. On February 7, 2017, Johnston served further responses to Geisler’s Specially 25 Prepared Interrogatories (“SPI”) No. 5, 6, 7—13, 15-18, 24, 27-29, 36, 37, 46, 26 54, and 56. On the very same day, counsel for Geisler, Jennifer Hagan, wrote 27 an email to Johnston’s lawyer, J immy Jacobs, and informed him that only seven 28 Page 6 Of 18 GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888 of the fourteen further responses provided substantive good faith information, and that seven (7) continued to have boilerplate responses. (See Request for Judicial Notice filed contemporaneous herewith, Exhibit 1, Reply filed by Geisler on February 9, 2018 to Motion to Compel together with Decl. of Jennifer Hagan ISO the Reply, Exhibit “X-2”.) 2. On February 7, 2018, Jennifer Hagan replied to J immy Jacobs and informed him that J ohnston’s further responses to SPI# 5, 6, 7, 8, 9, 54 & 56 remained at issue under the pending Motion to Compel. Further, in the same email, Hagan stated that further responses to SPI # 36 and 37 had not yet been received, and 10 the boilerplate refusal to provide responses to SP1# 5, 6, 7, 8, 9, 54, and 56 were 11 still subject to the Motion to Compel. Lastly, Hagan stated that “we will 12 continue to prosecute that motion to compel...” 13 3. On February 8, 2018, Johnston served on Geisler his further responses to SP1# 14 36 and 37. 15 4. These facts were recited for the Court in Geisler’s Reply to Johnston’s 16 Opposition to the Motion to Compel Further Responses (at Page 2, lines 5—19) 17 and these facts were before the Court when it made its ruling on February 16, 18 201 8. 19 Geisler’s Thus, in considering original Motion to Compel 23 further responses, the 20 Court knew, understood and accepted that Geisler had received further responses from 21 Johnston on February 7 and 8, 2018, and that Geisler was satisfied with 7 of those further 22 responses leaving 16 SPI pending under the Motion to Compel. 23 On February 14, 2018, Johnston provided further verified responses to SP1# 18, 27, 28 24 and 29. 25 On February 16, 2018, Johnston’s counsel, J immy Jacobs, appeared in court to argue 26 against the imposition of sanctions in the amount of $4,600 and they were reduced by the 27 Court to $2,000. The Court then issued it’s ruling that directing Johnston to provide further 28 responses to sixteen (16) SP1# 5—9, 15-18, 27-29, 3, 37, 54, and 56 no later than March 2, Page 7 of 18 GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 2018. This Discovery Order included several SPI which Johnston attempted to supplement on February 7, 8, and 14, 2018, and which Geisler rejected as being incomplete and evasive. Mr. Jacobs never advised the Court at oral argument on February 16, 2018, that Johnston had provided further responses to SPI# 27, 28, 29, 37 and 37 on February 14, 2018, and he did not seek clarification from the Court as to whether Johnston’s previously submitted further responses were sufficient to comply with the Court’s order. After the date of the Discovery Order (February 16, 2018), Johnston did not provide any further responses to SPI# 27, 28, 29, 36 and 37. 10 On March 1, 2018, Johnston served further responses to Interrogatories Nos. 15-17. 11 On March 2, Johnston also served further responses to Interrogatories No. 5-9, 54 and 56. l2 When attorney Hagan asked why Johnston had not produced any further responses to l3 SP1 No. 18, 27, 28, 29, 36 and 37, Johnston took the position that the responses provided by 14 him on February 2018, were sufficient and he refused to provide additional further 14, any 15 responses to those SPI. Johnston however did provide a new verification for those responses 16 on March 25, 2018. 1'7 Plaintiff, Geisler, was forced to file this motion for contempt because Johnston 18 and his attorney willfully chose not to provide further responses to SPI# 18, 27-29, and 19 36-37 (the “Six Interrogatories”) which are a subset of the 10 SPI which are the subject of 20 this motion. 21 22 B. Johnston Attempts to Imprmerly Blame Geisler for His Failure to Comply with the Discovery Order and Resorts to Illogical Reasoning. 23 24 On March 22, 2018, Jennifer Hagan sent Jimmy [Jacobs an email letter asking about 25 the Six Interrogatories and why they had not been supplemented. Johnston’s counsel 26 responded that they had already been supplemented on February 14, 2018, two days before 27 the Court issued its Discovery Order on February 16, 2018. 28 Page 8 of 18 GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 In Johnston’s Opposition to this motion, Johnston argues that he complied with the Discovery Order before it was issued. This assertion is simply not legally possible. A party to litigation cannot comply with an order before the date that order is issued by the Court. Assuming arguendo, that a party could be in compliance with discovery orders (which includes sanctions of $2,000 for non—compliance with the Discovery Act) even before they ever went into effect, it is simply not Geisler’s fault that Mr. Jacobs failed to confirm with the Court, when appearing on February 16, 2018, that such prior compliance of an order not yet issued was acceptable to the Court. It is the absolute obligation of Johnston and his counsel to make sure that his conduct 10 complies with the Discovery Order and not the duty or responsibility of Geisler to interpret 11 the Court’s order for them. 12 It has been almost three (3) months since the Court issued the Discovery Order on 13 February 16, 2018, and since that time, Johnston has not sought any clarification from the 14 Court as to whether his supplemental responses of February 2018, were sufficient to 14, 15 comply with the Discovery Order. There is simply no excuse for Why Johnston failed to seek 16 and obtain such clarification from the Court rather than telling Geisler to go pound sand, and 17 forcing Geisler to make this motion for contempt. 18 Johnston also argues that Geisler’s motion for contempt is gamesmanship. Given that 19 Geisler has been attempting to obtain full and complete responses from Johnston since the 20 beginning of November, 2017, and Johnston has responded with boilerplate objections, 21 piecemeal responses lacking in substance, objections based on confidentiality based on a 22 stipulation that Mr. Jacobs failed to sign and submit to the Court, and evasive, incomplete and 23 inadequate responses, it is not Geisler who is engaged in gamesmanship. 24 25 C. Johnston Has Not Further Responded in Compliance with the Discovery Order to the “Incomplete Eight.” 26 27 28 Page 9 of 18 GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO CONH’LY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 Johnston argues that he has fully responded to SPI# 6, 8, 9, 16, 27, 28, 36, and 37, (the “Incomplete Eight”). To support his arguments, Johnston provides the declaration of J immy Jacobs, the Declaration of Guido Zorzoli, the CEO of Sintea Plustek LLC, and his own declaration. Johnston argues that Geisler has not provided the Court with sufficient documentary evidence to prove that Johnston willfully failed to comply with the Discovery Order. In Reply, Geisler attaches to the Declaration of Jennifer Hagan ISO this Reply, two agreements signed by Terry Johnson on April 25, 2016 and June 27, 2016, respectively. The first Agreement is entitled “Rhausler, Inc. Partners Working Agreement.” (the “Partners 10 Agreement April 2016”). It is an agreement between Dr. Geisler and Terry Johnston as ll individuals on how they will operate Rhausler, Inc., together in the future and which attempts 12 to settle various issues concerning the past. See Exhibit “A” to the Decl. of Dr. Fred H. 13 Geisler ISO Geisler’s Reply. 14 entitled “Rhausler, and Inc. Partners The second agreement is Inc., 3COR, 15 Working Agreement 2” (the “Working Agreement 2”). See Exhibit “B” to the Decl. of 16 Dr. Fred H. Geisler ISO Geisler’s Reply. This agreement is between the two business entities 17 Rhausler, Inc. and 3COR Medical, Inc, and attempts to set forth the rules to govern and define 18 the financial relationship between the business entities. 19 Under Para 7 of the Partners Agreement April 2016, Johnston agreed that Geisler was 20 entitled to receive, on an equal basis with Johnston, the various financial ledgers (Quickbooks 21 and paper) and tax forms for Rhausler, Cabo, 3-COR and Microbeam. 22 m: Despite the contractual agreement to provide all such financial information, 23 Johnston has refiised to give Geisler access to Johnston’s compensation for tax years 2016, 24 and 2017. 25 In support of Geisler’s Motion for Contempt, Geisler was able to provide evidence 26 that demonstrated that in four (4) tax years from 2010 through 2013, Johnston received more 27 from Rhausler in those four years than he stated in his further responses for the total of nine 28 (9) years. Page 10 of 18 GEISLER’S REPLY TO JOHNSTON’S OPPOSITION T0 MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 Johnston claims to have earned the sum of $1,140,554 for nine years 2008 through the present. However, his returns for tax years 2010, 2011, 2012 and 2013 reflect that he received the sum of $1,162,000 which exceeds his stated amount by $22,000 without taking into account five (5) years of compensation. No matter what argument Johnston makes in his Opposition, the tax returns and Johnston’s fither responses simply do not add up. w: Johnston argues that he did provide an accurate response to SPI#8 in that he provided the amount that he actually “received” from Tedan as opposed to amounts that were booked in his name but not received in hand. This excuse is nothing more than evasive and disingenuous. SPI #8 expressly sought from Johnston the following information “State the 10 total amount of all compensation YOU received from Tedan since 2008.” Johnston did 11 Manswer this SPI honestly. 12 Johnston under—reported the total amount of compensation he received from TEDAN 13 since 2008 through the present. Johnston stated that he received $934,000 from Tedan, 14 however, Geisler provided Tedan’s K-l statements for (5) tax years 2009, 2010, 2011, 2012 15 and 2013, which total the sum of $2,243,387. The Tedan K—l statements reflect that Johnston 16 received amounts that vastly exceeded the amount reported by him in his further response. 17 (Johnston’s K—l statements were provided to Geisler by Kari Johnston, the former Wife of 18 defendant Terry Johnston. She waived all privilege as to their contents. In addition, Terry 19 Johnston’s social security number was redacted from each statement before submitting to the 2‘0 Clerk for filing.) 21 Despite the fact that Johnston attempts to slide sideways out of a lie by asserting that 22 he thought he only needed to report the cash he actually received from Tedan, SP1# 8 was not 23 phrased in such a limited manner. It sought information for “all compensation received” 24 regardless if it was deferred, booked, or reinvested in the business. Johnston simply 25 intentionally under-reported the level of compensation that he made from his activities with 26 Tedan, and he did not seek any clarification from Geisler’s counsel on interpretation of the 27 SPI. 28 Page 1 1 of 18 GEISLER’S REPLY TO J OHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV 02888 $11192: Geisler acknowledges that the CEO of Sintea Plustek has testified that he purchased a “Tedan surgical, retractor system” at an industry convention so that it could be sent to a distributor in Sao Paolo, Brazil. However, the check submitted as evidence in support of Johnston’s compensation from other sources was made out to “Terry Johnston” personally, and not Tedan. Terry Johnston did M provide testimony in his lengthy declaration that he did not personally cash that check or deliver it to Tedan. The Johnston declaration is noticeably silent on who cashed the check to “Terry Johnston” intended for Tedan. m: Johnston did not report any travel whatsoever on behalf of 3COR 10 Medical which he stated was only a “billing entity.” This is not accurate or true. Geisler has 11 obtained travel invoices from Alexander Travel in the name of Terry Johnston of 3COR 12 Medical reflecting significant travel. See a sampling of the Alexander Travel Invoices l3 attached as Exhibit “C” to the Decl of Hagan ISO this Reply. 14 Johnston undertook extensive travel which was billed to “3COR Medical, Inc.” as 15 evidenced by the Alexander Travel Invoices. l6 In addition, based on J Ohnston’s'own testimony at Paragraph 44 of his declaration, line 17 8-9, submitted ISO his Opposition, Johnston used 3 COR Medical, Inc., “to cultivate my 18 entrepreneurial research and development ideas ands to seek new entrepreneurial products, 19 in hopes of bringing them to market. ” 20 This statement contradicts his statement in the further responses that 3COR is only a 21 billing entity. This statement is also contradicted by Johnston’s own deposition testimony 22 given on April 20, 2018, that the stated purpose for 3COR Medical was to “develop products.” 23 See Page 20 of the deposition transcript of Terry Johnston, lines 9-12, attached as Exhibit 24 “A” to the Decl. of Hagan ISO this Reply. 25 26 m: SPI #27 reads “State YOUR projection of sales of all RHAUSLER 27 products for 2008 through the present.” Johnston did not report projection of sales of 28 Rhausler products because, he argued, that he did not make “sales projections” but instead he Page 12 of 18 GEISLER’S REPLY TO JOHNSTON’S OPPOSITION TO MOTION FOR CIVIL CONTEMPT FOR FAILURE TO COMPLY WITH DISCOVERY ORDER OF FEBRUARY 16, 2018 SAN MATEO COUNTY SUPERIOR COURT CASE NO. 17CIV02888 made production forecasts. That is: how many products Rhausler would need to have manufactured. (See Johnston Opposition Decl. Page 15, lines 12-18). Johnston asserts that “sales projections” are not the same as “production forecasts.” Johnston’s explanation rings hollow and the Court should not be mislead by it. Johnston did create “sales projections” and Geisler submitted a few in support of this Motion for Contempt. Geisler submitted: a) A March 31, 2013 Trabeculite Spinal Implant Forecast through 2020, b) The Rhausler 2013 internal sales forecast of all products projected through 2014,and 10 0) Financial Analysis Forecast dated March 3, 2015 which forecasted both ll Rhausler and 3COR Medical % (See Decl. of Jennifer Hagan ISO Motion l2 for Contempt at Exh. “K”.) l3 14 The three exhibits submitted in support of the Motion for Contempt were all created 15 by Johnston and all of them are “sales” and not “production forecasts.” They all say exactly l6 what they are. They all use the language “Sales.” 17 Once again, Johnston has been caught failing to fully and completely respond, and 18 instead of admitting that he did not thoroughly review his paperwork, he has made up yet 19 another fabrication for the Court in order to evade responsibility for his failure to comply in 20 good faith with the Discovery Order. 21 22 23 m: Geisler acknowledges that 3COR Medical sold its extraction screw business to Tedan in or about 2006, and than Tedan has been selling those distraction screws 24 under the name of “3CORE Surgical” a division of Tedan. Johnston responded to this SPI 25 that “3 COR does not have any of its own products. 3COR is a billing service company only.” 26