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GREGORY B. SCHER- State Bar No. 137228
WOOLLS & PEER
A Professional Corporation
One Wilshire Boulevard, 22" Floor
Los Angeles, California 90017
Telephone: (213) 629-1600
Facsimile: (213) 629-1660
APR29 pp~y
Attorneys for Defendants
FARMERS INSURANCE EXCHANGE and II"I ''ug
TRUCK INSURANCE EXCHANGE J
DEPUTY CL"-RK
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN MATEO, CENTRAL BRANCH
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MICHAELCHANG, an individual, Case No.: CIV 489065
Plaintiff, DECLARATIONOF ARTHUR
12 SCHWARTZ IN SUPPORT OF MOTION
TO ENFORCE THE
FARMERS INSIJRANCE COMPANY, INC.,
AGREEMENT
PARTIES'ETTLEMENT
FATHERS GROUP, INC., FARMERS
INSURANCE EXCHANGE AND TRUCK
g „$ $ INSURANCE EXCHANGE, reciprocal inter-
insurance exchanges; Does 1 to 99, Inclusive,
t-g 15 Trial Date: January 27, 2014
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Defendants.
mjm
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I, Arthur Schwartz, declare as follows:
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1. I am an attorney duly licensed to practice before the federal and state courts of the
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State of California and admitted to practice before the U.S. District Court for the Northern District of
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California. I am a partner in the law firm of Gordon and Rees LLP. I submit this declaration in
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support of Farmers Insurance Exchange and Truck Insurance Exchange (collectively referred to here
23 "Farmers" ) Motion to Enforce
as the Parties'ettlement Agreement. I have personal knowledge of
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the facts stated herein. Ifcalled and sworn as a witness, I could and would testify competently to the
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following.
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2. I am counsel for Farmers with respect to claims for insurance benefits that Michael
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Chang and Roxanne Chang (collectively, the "Changs") have submitted to Farmers relating to a
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388413.1
litigation entitled Bilal Kartal v.Michael Chang, et al., San Mateo County Superior Court, Case No.
2 CIV 458146 (the "Kartal Action").
3. The Changs had tendered claims to Farmers relating to the Kartal Action by 2009.
4 Farmers initially declined to defend the Changs with respect to the Kartal Action. By 2013, Farmers
had agreed to defend the Changs in the Kartal Action under a complete reservation of rights.
4. After the court ruled in Great American lns. Co. v. Michael Chang, et al. (U.S.D.C
for Northern District of California, Case 4 12-cv-00833 (the Great American action") that Great
8 American had no duty to defend and no duty to indemnify the Changs with respect to underlying
9 claims and lawsuits, and that the Changs must reimburse Great American for the defense expenses it
10 had advanced, the Changs asserted that Farmers owed a duty to pay Great American amounts that
Great American had advanced to the Changs for defense of the Kartal Action. Great American also
12 had asked Farmers to pay such amounts.
s 13 5. I have participated in several settlement conferences and settlement meetings in the
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g ply Kartal Action with the Special Master appointed in that case, William Nagel. Many of those
g ~~115 sessions also included negotiations concerning the Great American action and this lawsuit (Michael
0 P%g
16 Chang v. Farmers, et al.).
17 6. On January 27, 2014, the San Mateo County Superior Court held a settlement
18 conference in the Kartal Action and in this action in which Special Master Nagle participated. I
19 attended that settlement conference on behalf of Farmers.
20 7. Other participants present at the January 27, 2014 settlement conference included
21 Michael Chang; his counsel, Gregg Garrison and Herman Kalfen; the Changs'nvironmental
22 Project Coordinator and Agent, Brian Kelleher; counsel for other parties in the Kartal Action;
23 Gregory Scher, counsel for Farmers in this action, and William Baron, counsel for Great American.
24 Counsel for Fireman's Fund lns. Co. Mark Plevin was not present at the settlement conference, but
25 participated by telephone.
26 8. At the January 27, 2014 settlement conference, the parties in the Kartal Action
27 reached a settlement in principle as to the claims in that case.
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SCIIIVAR'I"I.I>KCLARATION
3884I3 I
9. In addition, on the day of the settlement conference, the Changs, Great American,
2 Farmers, and Fireman's Fund reached agreement on the material terms of a settlement among them,
3 which resolved claims and issues between the Changs and Farmers, among other claims. The
4 material terms negotiated between the Changs, Great American, Farmers and Fireman's Fund on the
5 day of the settlement conference included the settlement payments among the parties, the releases
6 among the parties, satisfaction of the judgment against the Changs in this case, and dismissal of the
7 appeal in this case, among other terms. Specifically, Farmers agreed to pay the Changs $1 million;
8 Farmers and Fireman's Fund each agreed to pay Great American part of the amount owed by the
9 Changs under the judgment in this case; Great American agreed to release its claims for the
10 remaining part of the judgment against the Changs, to provide other releases, to file a satisfaction of
judgment in this case, and to release its judgment lien in the Chang v. Farmers Action; the insurers
agreed to releases with each other; the Changs agreed to release Great American and Farmers from
13 any further claims involving the Baldwin Avenue Property, or pollution from the Baldwin Avenue
o
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j 14 Property; th'eChangs agreed they would bear responsibility for any further claims involving the
g ~4815 Property that would have been covered by Great American's policies ifthe settlement had not been
reached; and the Changs agreed to dismiss their appeal in this case and to dismiss the Chang v.
17 Farmers Action. The Changs, Great American, and Farmers reached agreement on the above terms
18 during the January 27th settlement conference. I subsequently learned that Fireman's Fund also had
19 approved the terms of the agreement later that day.
20 10. At the settlement conference, the parties also agreed that the terms of the settlement
would be incorporated into a written settlement document.
22 11. At the settlement conference, the Changs'ounsel asked Great American's counsel,
William Baron, to circulate the draft settlement agreement within two. days, so the settlement
24 reached at the conference could be formalized quickly. The Changs'ounsel stated that Roxanne
25 Chang was seeking a refinancing loan from Wells Fargo Bank, and that, in order to obtain the loan,
26 the Changs needed the signed settlement agreement to show Wells Fargo's loan officers that Great
27 American's judgment against the Changs in this case would be satisfied as part of the settlement.
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SCA WARTX DECLARATION
388413.1
12. On January 31, 2014, Mr. Baron sent a draft settlement agreement to the Changs'
counsel, Mr. Garrison and Mr. Kalfen; to Mr. Scher and me; to Fireman's Fund's counsel, Mr.
Plevin; and to Special Master Nagle. That draft settlement agreement included the material terms of
4 the settlement reached by the parties on January 27, 2014, the day of the settlement conference. I
later received a copy of that settlement document signed by Michael Chang and Roxanne Chang.
13. The draft settlement document that Mr. Baron sent contained blank spaces for certain
non-material information to be filled in, including the policy number of a Farmers policy and the
8 policy number of renewals of that policy. After the Changs had signed the draft document
9 containing those blank spaces, I provided information to fillin those blanks, and suggested a few
10 minor changes to wording contained in the draA agreement. I subsequently provided additional
suggestions regarding the wording of the settlement agreement so that the parties could finalize the
written agreement.
14. On March 12, 2014, the Changs'nvironmental Project Coordinator and Agent,
Brian Kelleher, sent me an email addressing the settlement document the Changs had signed. Mr.
Kelleher also sent that email to the Changs'ounsel Mr. Garrison and to Special Master Nagle. A
true and correct copy of the March 12, 2014 email I received from Mr. Kelleher is attached as
Exhibit 1 to this declaration. In that email, Mr. Kelleher stated that the Changs, by and through their
18 counsel, had presented the settlement agreement they signed to a loan officer, which allowed a
19 pending loan to fund.
20 15. After Mr. Kelleher sent his March 12, 2014 email, counsel for the Changs (Mr.
21 Kalfen) continued discussions with Special Master Nagle and counsel for Great American, Farmers
22 and Fireman's Fund concerning requests for changes in the wording of a finalized settlement
23 document, in conjunction with Special Master Nagle. Mr. Kalfen requested certain wording
24 changes, mostly in the recitals section of the agreement. The wording changes agreed to by the
25 parties did not materially change the terms of the settlement reached on the day of the January 27,
26 2014 settlement conference, which were set out in the draft settlement agreement the Changs had
27 signed.
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3884 I3.1
16. On March 28, 2014, Special Master Nagle indicated it appeared that agreement had
2 been reached among counsel for all the parties regarding the wording of a finalized settlement
3 document. After that session, however, Special Master Nagle lateradvised that the Changs now are
4 seeking to disclaim the settlement reached at the January 27, 2014 settlement conference, and have
declined to sign the finalized version of the settlement agreement negotiated by counsel.
17. Farmers has executed the version of the settlement agreement that the Changs signed
7 in February 2014.
I declare under penalty of perjury under the laws of the United States that the foregoing is
9 true and correct.
&v
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10 Executed this 25th day of April 2014, in San Fran o, California.
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SCMWARTL DKCLARATIO/4
388413.1
EXHIBIT 1
Arthur Schwartz
From: Brian Kelleher
Sent: Wednesday, March 12, 2014 4:07 PM
To: gsgarrisonigarrisonlawcorp.corn; winwilliamnagle.corn
Cc: Arthur Schwartz
Subject: Re: Kartal v Chang, et al
Gregg and Special Master Nagle
Based on what is said here, can we please finalize the Kartal v Chang settlement ASAP without a show cause hearing in
late April. We need the settlement funds to get the site remediation going and take care of the third party claims. Kartal
is going out of his mind.
Why is there a show cause hearing scheduled for Kartal v Chang in late April? What is the holdup7
Gregg, please confirm that GAIC was holding a gun to Michael Chang's head at the courthouse using their $ 1 million
Federal Court judgment lien during the duressed settlement negations. Gregg please confirm that you just recently
managed to salvage the loan and were able to avoid any additional penalties at leastfor the moment. Please confirm
that Michael and Roxanne both signed the firstdraft GAIC agreement without even reading itthe minute itarrived and
that you immediately provided the partially signed documents to a loan officer to prevent their respective financial ruin
and that this allowed the loan to fund. Please confirm that as soon as the loan funded Mr. Chang broke off settlement
negotiations with Great American and complaint
is filing a against Great American with the department of insurance and
has asked Special Master Nagle to advise the judge of these developments. Please confirm that in so doing Mr. Chang
advised Special Master Nagle of its desire to immediately resume good faith settlement negotiations with Farmers if
they are willing and that they want Farmers to treat them fairly and put an end to this.
Brian Kelleher
Environmental Project Coordinator and Agent
Brian Kelleher
Project coordinator
Preview
0,7, G„h'A,' GREGORY B. SCHER- State Bar No. 137228 WOOLLS & PEER A Professional Corporation One Wilshire Boulevard, 22" Floor Los Angeles, California 90017 Telephone: (213) 629-1600 Facsimile: (213) 629-1660 APR29 pp~y Attorneys for Defendants FARMERS INSURANCE EXCHANGE and II"I ''ug TRUCK INSURANCE EXCHANGE J DEPUTY CL"-RK SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN MATEO, CENTRAL BRANCH 10 MICHAELCHANG, an individual, Case No.: CIV 489065 Plaintiff, DECLARATIONOF ARTHUR 12 SCHWARTZ IN SUPPORT OF MOTION TO ENFORCE THE FARMERS INSIJRANCE COMPANY, INC., AGREEMENT PARTIES'ETTLEMENT FATHERS GROUP, INC., FARMERS INSURANCE EXCHANGE AND TRUCK g „$ $ INSURANCE EXCHANGE, reciprocal inter- insurance exchanges; Does 1 to 99, Inclusive, t-g 15 Trial Date: January 27, 2014 16 Defendants. mjm 18 I, Arthur Schwartz, declare as follows: 19 1. I am an attorney duly licensed to practice before the federal and state courts of the 20 State of California and admitted to practice before the U.S. District Court for the Northern District of 21 California. I am a partner in the law firm of Gordon and Rees LLP. I submit this declaration in 22 support of Farmers Insurance Exchange and Truck Insurance Exchange (collectively referred to here 23 "Farmers" ) Motion to Enforce as the Parties'ettlement Agreement. I have personal knowledge of 24 the facts stated herein. Ifcalled and sworn as a witness, I could and would testify competently to the 25 following. 26 2. I am counsel for Farmers with respect to claims for insurance benefits that Michael 27 Chang and Roxanne Chang (collectively, the "Changs") have submitted to Farmers relating to a 28 PRINTED ON RECYCLED PAPER 388413.1 litigation entitled Bilal Kartal v.Michael Chang, et al., San Mateo County Superior Court, Case No. 2 CIV 458146 (the "Kartal Action"). 3. The Changs had tendered claims to Farmers relating to the Kartal Action by 2009. 4 Farmers initially declined to defend the Changs with respect to the Kartal Action. By 2013, Farmers had agreed to defend the Changs in the Kartal Action under a complete reservation of rights. 4. After the court ruled in Great American lns. Co. v. Michael Chang, et al. (U.S.D.C for Northern District of California, Case 4 12-cv-00833 (the Great American action") that Great 8 American had no duty to defend and no duty to indemnify the Changs with respect to underlying 9 claims and lawsuits, and that the Changs must reimburse Great American for the defense expenses it 10 had advanced, the Changs asserted that Farmers owed a duty to pay Great American amounts that Great American had advanced to the Changs for defense of the Kartal Action. Great American also 12 had asked Farmers to pay such amounts. s 13 5. I have participated in several settlement conferences and settlement meetings in the y g ply Kartal Action with the Special Master appointed in that case, William Nagel. Many of those g ~~115 sessions also included negotiations concerning the Great American action and this lawsuit (Michael 0 P%g 16 Chang v. Farmers, et al.). 17 6. On January 27, 2014, the San Mateo County Superior Court held a settlement 18 conference in the Kartal Action and in this action in which Special Master Nagle participated. I 19 attended that settlement conference on behalf of Farmers. 20 7. Other participants present at the January 27, 2014 settlement conference included 21 Michael Chang; his counsel, Gregg Garrison and Herman Kalfen; the Changs'nvironmental 22 Project Coordinator and Agent, Brian Kelleher; counsel for other parties in the Kartal Action; 23 Gregory Scher, counsel for Farmers in this action, and William Baron, counsel for Great American. 24 Counsel for Fireman's Fund lns. Co. Mark Plevin was not present at the settlement conference, but 25 participated by telephone. 26 8. At the January 27, 2014 settlement conference, the parties in the Kartal Action 27 reached a settlement in principle as to the claims in that case. 28 PRINTED ON RECYCLED PAPER SCIIIVAR'I"I.I>KCLARATION 3884I3 I 9. In addition, on the day of the settlement conference, the Changs, Great American, 2 Farmers, and Fireman's Fund reached agreement on the material terms of a settlement among them, 3 which resolved claims and issues between the Changs and Farmers, among other claims. The 4 material terms negotiated between the Changs, Great American, Farmers and Fireman's Fund on the 5 day of the settlement conference included the settlement payments among the parties, the releases 6 among the parties, satisfaction of the judgment against the Changs in this case, and dismissal of the 7 appeal in this case, among other terms. Specifically, Farmers agreed to pay the Changs $1 million; 8 Farmers and Fireman's Fund each agreed to pay Great American part of the amount owed by the 9 Changs under the judgment in this case; Great American agreed to release its claims for the 10 remaining part of the judgment against the Changs, to provide other releases, to file a satisfaction of judgment in this case, and to release its judgment lien in the Chang v. Farmers Action; the insurers agreed to releases with each other; the Changs agreed to release Great American and Farmers from 13 any further claims involving the Baldwin Avenue Property, or pollution from the Baldwin Avenue o I j 14 Property; th'eChangs agreed they would bear responsibility for any further claims involving the g ~4815 Property that would have been covered by Great American's policies ifthe settlement had not been reached; and the Changs agreed to dismiss their appeal in this case and to dismiss the Chang v. 17 Farmers Action. The Changs, Great American, and Farmers reached agreement on the above terms 18 during the January 27th settlement conference. I subsequently learned that Fireman's Fund also had 19 approved the terms of the agreement later that day. 20 10. At the settlement conference, the parties also agreed that the terms of the settlement would be incorporated into a written settlement document. 22 11. At the settlement conference, the Changs'ounsel asked Great American's counsel, William Baron, to circulate the draft settlement agreement within two. days, so the settlement 24 reached at the conference could be formalized quickly. The Changs'ounsel stated that Roxanne 25 Chang was seeking a refinancing loan from Wells Fargo Bank, and that, in order to obtain the loan, 26 the Changs needed the signed settlement agreement to show Wells Fargo's loan officers that Great 27 American's judgment against the Changs in this case would be satisfied as part of the settlement. 28 PRINTED ON RECYCLED PAPER SCA WARTX DECLARATION 388413.1 12. On January 31, 2014, Mr. Baron sent a draft settlement agreement to the Changs' counsel, Mr. Garrison and Mr. Kalfen; to Mr. Scher and me; to Fireman's Fund's counsel, Mr. Plevin; and to Special Master Nagle. That draft settlement agreement included the material terms of 4 the settlement reached by the parties on January 27, 2014, the day of the settlement conference. I later received a copy of that settlement document signed by Michael Chang and Roxanne Chang. 13. The draft settlement document that Mr. Baron sent contained blank spaces for certain non-material information to be filled in, including the policy number of a Farmers policy and the 8 policy number of renewals of that policy. After the Changs had signed the draft document 9 containing those blank spaces, I provided information to fillin those blanks, and suggested a few 10 minor changes to wording contained in the draA agreement. I subsequently provided additional suggestions regarding the wording of the settlement agreement so that the parties could finalize the written agreement. 14. On March 12, 2014, the Changs'nvironmental Project Coordinator and Agent, Brian Kelleher, sent me an email addressing the settlement document the Changs had signed. Mr. Kelleher also sent that email to the Changs'ounsel Mr. Garrison and to Special Master Nagle. A true and correct copy of the March 12, 2014 email I received from Mr. Kelleher is attached as Exhibit 1 to this declaration. In that email, Mr. Kelleher stated that the Changs, by and through their 18 counsel, had presented the settlement agreement they signed to a loan officer, which allowed a 19 pending loan to fund. 20 15. After Mr. Kelleher sent his March 12, 2014 email, counsel for the Changs (Mr. 21 Kalfen) continued discussions with Special Master Nagle and counsel for Great American, Farmers 22 and Fireman's Fund concerning requests for changes in the wording of a finalized settlement 23 document, in conjunction with Special Master Nagle. Mr. Kalfen requested certain wording 24 changes, mostly in the recitals section of the agreement. The wording changes agreed to by the 25 parties did not materially change the terms of the settlement reached on the day of the January 27, 26 2014 settlement conference, which were set out in the draft settlement agreement the Changs had 27 signed. 28 PRINTED ON RECYCLED PAPER 3884 I3.1 16. On March 28, 2014, Special Master Nagle indicated it appeared that agreement had 2 been reached among counsel for all the parties regarding the wording of a finalized settlement 3 document. After that session, however, Special Master Nagle lateradvised that the Changs now are 4 seeking to disclaim the settlement reached at the January 27, 2014 settlement conference, and have declined to sign the finalized version of the settlement agreement negotiated by counsel. 17. Farmers has executed the version of the settlement agreement that the Changs signed 7 in February 2014. I declare under penalty of perjury under the laws of the United States that the foregoing is 9 true and correct. &v le 10 Executed this 25th day of April 2014, in San Fran o, California. 11 ) X 12 5o QO 13 /IrlihjrSchwartz „al 0 'g,' » .-: 16 5 17 Cl 19 28 21 22 23 24 25 26 27 28 I 042484/I 928839/rv. I PRINTED ON RECYCLED PAPER SCMWARTL DKCLARATIO/4 388413.1 EXHIBIT 1 Arthur Schwartz From: Brian Kelleher Sent: Wednesday, March 12, 2014 4:07 PM To: gsgarrisonigarrisonlawcorp.corn; winwilliamnagle.corn Cc: Arthur Schwartz Subject: Re: Kartal v Chang, et al Gregg and Special Master Nagle Based on what is said here, can we please finalize the Kartal v Chang settlement ASAP without a show cause hearing in late April. We need the settlement funds to get the site remediation going and take care of the third party claims. Kartal is going out of his mind. Why is there a show cause hearing scheduled for Kartal v Chang in late April? What is the holdup7 Gregg, please confirm that GAIC was holding a gun to Michael Chang's head at the courthouse using their $ 1 million Federal Court judgment lien during the duressed settlement negations. Gregg please confirm that you just recently managed to salvage the loan and were able to avoid any additional penalties at leastfor the moment. Please confirm that Michael and Roxanne both signed the firstdraft GAIC agreement without even reading itthe minute itarrived and that you immediately provided the partially signed documents to a loan officer to prevent their respective financial ruin and that this allowed the loan to fund. Please confirm that as soon as the loan funded Mr. Chang broke off settlement negotiations with Great American and complaint is filing a against Great American with the department of insurance and has asked Special Master Nagle to advise the judge of these developments. Please confirm that in so doing Mr. Chang advised Special Master Nagle of its desire to immediately resume good faith settlement negotiations with Farmers if they are willing and that they want Farmers to treat them fairly and put an end to this. Brian Kelleher Environmental Project Coordinator and Agent Brian Kelleher Project coordinator