Preview
1 SHAND S. STEPHENS (Bar No. 67694)
shand.stephens@dlapiper.com
2 DLA PIPER LLP (US)
555 Mission Street, Suite 2400
3
San Francisco, CA 94105-2933
4 Tel.: 415.836.2500
Fax: 415.836.2501
5
ANTHONY P. COLES (admitted pro hac vice)
6 anthony.coles@dlapiper.com
DLA PIPER LLP (US)
7
1251 Avenue of the Americas, 27th Floor
8 New York, NY 10020
Tel.: 212.335.4500
9 Fax: 212.335.4501
10 Attorneys for Respondent
11 California Insurance Company, Inc., a California corporation
12
13 SUPERIOR COURT OF THE STATE OF CALIFORNIA
14 FOR THE COUNTY OF SAN MATEO – UNLIMITED JURISDICTION
15
16 INSURANCE COMMISSIONER OF THE CASE NO. 19CIV06531
STATE OF CALIFORNIA,
17 RESPONSE TO EVIDENTIARY
Applicant, OBJECTIONS TO DECLARATION OF
18
v. SHAND S. STEPHENS IN SUPPORT OF
19 RESPONDENT CIC’S MOTION TO
CALIFORNIA INSURANCE COMPANY, COMPEL FURTHER RESPONSES AND
20 INC., a California corporation, PRODUCTION
21 Respondent. Department: 22
22 Judge: Hon. Danny Y. Chou
23
24
25
26
27
28
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RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS
CASE NO. 19CIV06531
1 Respondent California Insurance Company (“CIC”), through its pre-conservation
2 management, hereby submits its response to The Insurance Commissioner of the State of
3 California’s Evidentiary Objections to Declaration of Shand S. Stephens in Support of Respondent
4 CIC’s Motion to Compel Further Responses and Production (dated Feb. 17. 2022).
5 Responses to Objections to the Declaration of Shand S. Stephens
6 Objection Number 1
7 Material objected to: “According to other declarations submitted by the Commissioner,
8 Lichtenegger also advised and provided input on the Plan’s terms. For those reasons, CIC moves
9 to compel production of all communications between the Commissioner and Lichtenegger, which
10 are not subject to any applicable privilege.” (Stephens Decl., ¶ 7.)
11 Grounds for Objection No. 1: Relevance (Evid. Code, § 210). Lacks foundation (Evid.
12 Code, §§ 403, 405). Mr. Stephens’s statements lack relevance because they have no tendency in
13 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. Mr.
14 Stephens’s statements also lack foundation, as he fails to cite any “other declarations submitted
15 by the Commissioner” that Mr. Stephens asserts show that Mr. Lichtenegger “advised” the
16 Commissioner on the Rehabilitation Plan’s terms, and misstates evidence since no declarations
17 submitted by the Commissioner stated that Mr. Lichtenegger “advised” the Commissioner on the
18 Plan’s terms.
19 CIC’s Response to CDI Objection No. 1: The Commissioner’s objections are frivolous
20 because there is no basis for excluding testimony about Mr. Lichtenegger’s role in the
21 Commissioner’s design of the Rehabilitation Plan (the “Plan”). Relevance: The material
22 objected to helps demonstrate why the documents being withheld by the Commissioner concern
23 the unreasonable and arbitrary basis for the Plan and therefore why they should be produced.
24 The Commissioner has relied extensively on Mr. Lichtenegger and requested that Mr.
25 Lichtenegger provide testimony to this Court in his October 19, 2020 Declaration filed with this
26 Court, in which Mr. Lichtenegger attests that he made his declaration “at the request of the
27 Conservator” to recount his “litigation experience with CIC and its affiliates.” (10/19/2020
28 Lichtenegger Decl. at 2.) Before the Commissioner decided on the Plan’s provisions, the
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1 Commissioner discussed strategies with policyholder attorneys such as Lichtenegger and, in turn,
2 “received cogent technical questions, comments and suggestions which we used to adjust the
3 [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19; see also 10/22/21
4 Schnoll Decl. ⁋ 36.) Lichtenegger’s reliability, and the credibility of the Commissioner in relying
5 on him, are at issue. Lichtenegger has a proven track record of misleading courts and counsel,
6 including in one instance resulting in a $250,000 federal contempt judgment against him for
7 violating a TRO by deliberately misleading the court and giving “entirely implausible” sworn
8 testimony. In re: SK Foods, L.P. v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9,
9 *10, passim (Bankr. E.D. Cal., Feb. 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal,
10 Civ. No. 2:18-390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of
11 Lichtenegger’s statements is critical to evaluating the veracity of his sworn testimony and the
12 weight this Court should give it in evaluating the Plan and whether the Plan is reasonable or an
13 abuse of the Commissioner’s discretion and authority. Foundation: as noted above, the
14 Commissioner has repeatedly told this Court that Lichtenegger and other policyholder attorneys
15 advised and provided information to the Commissioner on the Plan. (10/22/21 Strumwasser
16 Decl. ⁋⁋ 10, 15, 19; 10/22/21 Schnoll Decl. ⁋ 36; 10/22/21 Holloway ⁋ 15; 10/19/20 Lichtenegger
17 Decl.)
18 Ruling on Objection No. 1: Sustained: _________________ Overruled: __________
19
20 Objection Number 2
21 Material Objected to: “In 2018, U.S. Bankruptcy Judge Robert Bardwil entered a $250,000
22 contempt judgment against Lichtenegger. Judge Bardwil had “observed [Lichtenegger’s] demeanor
23 and assessed his credibility” at a full evidentiary hearing. He found that Lichtenegger “ignore[d]”
24 and thus violated a TRO issued by the Bankruptcy Court and then attempted to mislead the Court
25 as to his conduct. Attached hereto as Exhibit 7 is a true and correct copy of the that court’s ruling,
26 In re: SK Foods, L.P. v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim
27 (Bankr. E.D. Cal. Feb. 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ. No. 2:18-
28 390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018).” (Stephens Decl., ¶ 8 & Ex. 7.)
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1 Grounds for Objection No. 2: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code §
2 352). Mr. Stephens’s statements and Exhibit 7 lack relevance because they have no tendency in
3 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes
4 of this narrow MTC, the statements should be stricken as irrelevant and because their probative
5 value, if any, is substantially outweighed by the probability that the statements will create substantial
6 danger of undue prejudice or of confusing the issues.
7 CIC’s Response to CDI Objection No. 2: The Commissioner’s objections are frivolous
8 because there is no basis for excluding court decisions finding that the principal witness on whom
9 the Commissioner relies for his Plan has a history of misleading courts, lacking credibility, and
10 violating court orders. Relevance: The material objected to helps demonstrate why the
11 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for
12 the Plan and therefore why they should be produced. The Commissioner has relied extensively
13 on Mr. Lichtenegger and requested that Mr. Lichtenegger provide testimony to this Court in his
14 October 19, 2020 Declaration filed with this Court, in which Mr. Lichtenegger attests that he
15 made his declaration “at the request of the Conservator” to recount his “litigation experience with
16 CIC and its affiliates.” (10/19/2020 Lichtenegger Decl. at 2.) Before the Commissioner decided
17 on the Plan’s provisions, the Commissioner discussed strategies with policyholder attorneys such
18 as Lichtenegger and, in turn, “received cogent technical questions, comments and suggestions
19 which we used to adjust the [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-
20 12, 15, 19; see also 10/22/21 Schnoll Decl. ⁋ 36.) Lichtenegger’s reliability, and the credibility
21 of the Commissioner in relying on him, are clearly at issue. It is therefore relevant for the Court
22 to consider Lichtenegger’s proven track record of misleading courts and counsel as demonstrated
23 by the $250,000 federal contempt judgment against him for violating a TRO by deliberately
24 misleading the court and giving “entirely implausible” sworn testimony. In re: SK Foods, L.P.
25 v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim (Bankr. E.D. Cal., Feb.
26 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ. No. 2:18-390 WBS, 2018 WL
27 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of Lichtenegger’s statements is critical to
28 evaluating the veracity of his sworn testimony and the weight, if any, this Court should give it in
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1 evaluating the Plan and whether the Plan is reasonable or an abuse of the Commissioner’s
2 discretion and authority. Prejudice: Mr. Stephens’ testimony cannot be excluded as prejudicial
3 under Evid. Code 352 because it does not create any “substantial danger of undue prejudice,” it
4 is not misleading or confusing, and it will not be materially misleading “to a jury.” (Evid. Code
5 352.) There is no need for this Court to protect itself from prejudice and confusion by excluding
6 relevant court decisions.
7 Ruling on Objection No. 2: Sustained: _______________ Overruled: _________
8
9 Objection Number 3
10 Material Objected to: “Phil Neal Walker is another policyholder attorney with whom the
11 Commissioner evidently has been in communication, as the electronic search terms indicate. Walker
12 has been sanctioned for misconduct in connection with the very RPA Litigation at issue. In July
13 2019, the CDI’s Chief Administrative Judge Kristin Rosi found that Walker violated the California
14 Rules of Professional Conduct and the Government Code by making improper ex parte
15 communications to the CDI Administrative Hearing Bureau (“AHB”). Walker threatened to
16 communicate negative stories to the media if Judge Rosi and her colleagues did not immediately
17 recuse themselves en masse from RPA-related administrative appeals they were overseeing.
18 According to Judge Rosi, “Mr. Walker indicated he was communicating with a San Diego Union-
19 Tribune reporter and concluded by stating ‘I will be advising him of your response/non-response by
20 this Friday, July 19, 2019.’” Judge Rossi found that Walker’s conduct was a prima facie violation
21 of the ethical rules including Government Code section 11430.10 and Rule 3.5(b) of the State Bar
22 Rules of Professional Conduct. A true and correct copy of the July 19, 2019 Notice of Ex Parte
23 Communications is attached hereto as Exhibit 8.” (Stephens Decl., ¶ 9 & Ex. 8.)
24 Grounds for Objection No. 3: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code
25 § 352). Mr. Stephens’s statements and Exhibit 8 lack relevance because they have no tendency in
26 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes
27 of this narrow MTC, the statements should be stricken as irrelevant and because their probative
28 value, if any, is substantially outweighed by the probability that the statements will create
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1 substantial danger of undue prejudice or of confusing the issues.
2 CIC’s Response to CDI Objection No. 3: The Commissioner’s objections are frivolous
3 because there is no basis for excluding testimony about judicial decisions about Mr. Walker’s
4 lack of credibility and professional responsibility in connection with CIC litigation, including
5 Judge Rosi’s finding that Walker’s conduct was a prima facie violation of the ethical rules
6 including Government Code section 11430.10 and Rule 3.5(b) of the State Bar Rules of
7 Professional Conduct. Relevance: The material objected to helps demonstrate why the
8 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for
9 the Plan and therefore why they should be produced. Before the Commissioner decided on the
10 Plan’s provisions, the Commissioner discussed strategies with policyholder attorneys such as
11 Walker and, in turn, “received cogent technical questions, comments and suggestions which we
12 used to adjust the [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19;
13 see also 10/22/21 Schnoll Decl. ⁋ 36.) Walker’s reliability, and the credibility of the
14 Commissioner in relying on him, are clearly at issue. Walker has a proven track record of
15 unprofessional conduct in connection with CIC litigation. Prejudice: Mr. Stephens’ testimony
16 cannot be excluded as prejudicial under Evid. Code 352 because it does not create any
17 “substantial danger of undue prejudice,” it is not misleading or confusing, and it will not be
18 materially misleading “to a jury.” (Evid. Code 352.) There is no need for this Court to protect
19 itself from prejudice and confusion by excluding court decisions.
20 Ruling on Objection No. 3: Sustained: _______________ Overruled: _________
21
22 Objection No. 4
23 Material Objected to: “Upon approving the merger between CIC and its New Mexico
24 affiliate, CIC II, the New Mexico Superintendent of Insurance (the “NMSI”) put in place protections
25 to ensure that the merged entity would “assume and be liable” for any CIC liabilities and would
26 maintain adequate reserves with CDI. A true and correct copy of the October 9, 2019 NMSI order
27 (the “NMSI Order”) is attached hereto as Exhibit 9.” (Stephens Decl., ¶ 10 & Ex. 9.)
28 Grounds for Objection No. 4: Relevance (Evid. Code, § 210). Inadmissible hearsay (Evid.
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1 Code, § 1200). Mr. Stephens’s statements and Exhibit 9 lack relevance because they have no
2 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC.
3 CIC’s Response to CDI Objection No. 4: The Commissioner’s objections are frivolous
4 because there is no basis for excluding testimony about documents concerning the lack of
5 reasonableness in the Plan. Relevance: The material objected to helps demonstrate why the
6 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for
7 the Plan and therefore why they should be produced. The Commissioner’s motion to confirm
8 the Rehabilitation Plan requires the Court to evaluate the basis and alleged reasons for the Plan,
9 including the potential liability of CIC to policyholders. The material objected to directly
10 concerns the potential liability of CIC to policyholders and the problematic and unreasonable
11 basis for the Plan and its provisions requiring settlement of CIC litigations and depriving CIC of
12 its defenses against policyholder claims when not included in the application seeking the
13 Conservation or the Conservation Order itself. The Court previously decided that discovery into
14 the grounds of the conservatorship was proper “because the Plan is supposed ‘to resolve the
15 issues requiring the Conservation Proceeding.’” (Order April 26, 2021, at 4:20-21.) Hearsay:
16 Mr. Stephens’ testimony cannot be excluded under the hearsay rule (Evid. Code 1200) because
17 courts routinely consider agency decisions, which are government records, without regard to
18 hearsay. Further, this statement mentions, quotes from, and attaches an order from New Mexico’s
19 Superintendent of Insurance, which comes within the official records exception to the hearsay
20 rule. (Evid. Code., § 1280.)
21 Ruling on Objection No. 4: Sustained: _________________ Overruled: __________
22
23 Objection No. 5
24 Material Objected to: “The Commissioner’s proposed Plan requires CIC to settle all
25 remaining RPA Litigation claims on terms that are highly favorable to plaintiffs and imposes
26 remedies in favor of plaintiffs that California courts have expressly rejected. As one example, the
27 Plan would reverse a pending $349,419.00 judgment in favor of CIC, which CIC obtained after a
28 full bench trial before the Honorable Henry Walsh and against one of Lichtenegger’s clients,
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1 Roadrunner Management Services, Inc., into a judgment in Roadrunner’s favor in the amount of
2 $607,138,00.00—a near $1,000,000 swing. Attached hereto as Exhibit 10 is a true and correct copy
3 of the Statement of Intended Decision filed in Roadrunner Management Services, Inc. v. Applied
4 Underwriters, Inc. No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12,
5 2019).” (Stephens Decl., ¶ 11, Ex. 10.)
6 Grounds for Objection No. 5: Relevance (Evid. Code, § 210). Lacks foundation (Evid.
7 Code, §§ 403, 405). Mr. Stephens’s statements and Exhibit 10 lack relevance because they have no
8 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC.
9 Mr. Stephens’s statements as to the impact of proposed Rehabilitation Plan lack foundation and
10 assume facts not in evidence, as does his representation of Exhibit 10 (apparently a “Statement of
11 Intended Decision”) as a “judgment in favor of CIC.”
12 CIC’s Response to CDI Objection No. 5: The Commissioner’s objections are frivolous
13 because there is no basis for excluding court decisions finding that CIC has viable and successful
14 defenses against claims made by policyholders against CIC. Relevance: The material objected to
15 helps demonstrate why the documents being withheld by the Commissioner concern the
16 unreasonable and arbitrary basis for the Plan and therefore why they should be produced. The
17 Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to evaluate the basis
18 and alleged reasons for the Plan, including the reasonableness of requiring CIC to settle litigations
19 with policyholders on terms that bar CIC from asserting defenses that it has successfully used in
20 litigations such as Roadrunner Management Services, Inc. v. Applied Underwriters, Inc. No. 56-
21 2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019), when not included in the
22 application seeking the Conservation or the Conservation Order itself. Foundation: CIC’s
23 successful assertion of defenses in the Roadrunner case is in a public court document, the November
24 12, 2019 court decision in Roadrunner Management Services, Inc. v. Applied Underwriters, Inc.
25 No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019).
26 Ruling on Objection No. 5: Sustained: _________________ Overruled: __________
27 Objection No. 6
28 Material Objected to: ““In awarding judgment in CIC’s favor, the Roadrunner court
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1 rejected an alternative remedy proposed by Roadrunner, which was supported by a supposed
2 expert witness, Ronald Groden. That same remedy that the Roadrunner court rejected is one of
3 the three RPA Litigation settlement options the Plan seeks to impose on CIC. The Roxborough
4 law firm, one of the policyholder attorney firms with whom the Commissioner communicated,
5 filed papers in support of the RPA Litigation remedies proposed by the Plan, which include an
6 affidavit by Ronald Groden.” (Stephens Decl., ¶ 12.)
7 Grounds for Objection No. 6: Relevance (Evid. Code, § 210). Mr. Stephens’s
8 statements and Exhibit 10 lack relevance because they have no tendency in reason to prove or
9 disprove any disputed fact of consequence to Respondent’s MTC.
10 CIC’s Response to CDI Objection No. 6: The Commissioner’s objection is frivolous
11 because there is no basis for excluding court decisions finding that CIC has viable and successful
12 defenses against claims made by policyholders against CIC, and that Mr. Groden’s approach to
13 damages in policyholder litigation has been soundly rejected by a court. The material objected to is
14 relevant because it helps demonstrate why the documents being withheld by the Commissioner
15 concern the unreasonable and arbitrary basis for the Plan and therefore why they should be
16 produced. The Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to
17 evaluate the basis and alleged reasons for the Plan, including the reasonableness of requiring CIC
18 to settle litigations with policyholders on terms that bar CIC from asserting defenses that it has
19 successfully asserted in litigations such as Roadrunner Management Services, Inc. v. Applied
20 Underwriters, Inc. No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019),
21 when not included in the application seeking the Conservation or the Conservation Order itself. The
22 Roadrunner litigation included testimony on behalf of the policyholder from Mr. Groden, which the
23 Roadrunner court found unreasonable. The Roxborough law firm, one of the policyholder attorney
24 firms with whom the Commissioner communicated, filed papers in support of the RPA Litigation
25 remedies proposed by the Plan, which include an affidavit by Ronald Groden. The material object
26 to is directly relevant to the credibility and weight to be given Mr. Groden and the papers filed by
27 the Roxborough firm.
28 Ruling on Objection No. 6: Sustained: _________________ Overruled: __________
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1 Objection No. 7
2 Material Objection to: “I represented CIC and its affiliates in connection with multiple
3 putative class actions that sought to obtain classwide remedies to resolve the RPA Litigation in
4 California, New York, and Nebraska. Federal courts in all three states denied class certification and
5 found that classwide resolution of the RPA Litigation was not appropriate. The Plan proposes the
6 same type of classwide remedies that these courts rejected. These courts also rejected policyholder
claims that CIC engaged in fraud or that the RPA is per se unlawful. See Memorandum and Order
7
Re: Defendants’ Motion to Dismiss in Shasta Linen Supply, Inc. v. Applied Underwriters, Inc., Nos.
8
16-cv-00158-WBS & 16-cv-01211-WBS (E.D. Cal. Oct. 10, 2017); Memorandum and Order
9
denying plaintiffs’ motion for class certification in Shasta Linen Supply, Inc. v. Applied
10
Underwriters, Inc., Nos. 16-cv-00158- WBS & 16-cv-01211-WBS (E.D. Cal. Jan. 29, 2019);
11
Memorandum and Order Re: Cross-Motions for Summary Judgment in Shasta Linen Supply, Inc.
12
v. Applied Underwriters, Inc., Nos. 16-cv-00158-WBS & 16-cv-01211-WBS (E.D. Cal. Sept. 12,
13
2019); Finding, Recommendation and Order denying defendant’s motion for class certification in
14
Applied Underwriters, Inc. v. Top’s Personnel, Inc., No. 8:15CV90 (D. Neb. Feb. 6, 2019); and
15
Memorandum Opinion and Order in National Convention Services, LLC v. Applied Underwriters
16 Captive Risk Assurance Co., Inc., No. 15cv7063 (S.D.N.Y. July 27, 2019).” (Stephens Decl., ¶ 13.)
17 Grounds for Objection No. 7: Relevance (Evid. Code, § 210). Inadmissible hearsay (Evid.
18 Code, § 1200). Mr. Stephens’s statements and Exhibit 10 lack relevance because they have no
19 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC.
20 CIC’s Response to CDI Objection No. 7: The Commissioner’s objections are frivolous
21 because there is no basis for excluding court decisions finding that classwide treatment is improper
22 for claims asserted by policyholders against CIC, and that these litigations must be decided by courts
23 on an individualized basis. Relevance: The material objected to helps demonstrate why the
24 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for
25 the Plan and therefore why they should be produced. The Commissioner’s motion to confirm the
26 Rehabilitation Plan requires the Court to evaluate the basis and alleged reasons for the Plan,
27 including the reasonableness of requiring CIC to settle litigations with policyholders on a classwide
28 basis of the kind the courts have repeatedly rejected. Those court decisions cited in the material
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1 objected to are directly relevant to the lack of reasonableness and lack of basis for the Plan. Hearsay:
2 Mr. Stephens’ testimony cannot be excluded under the hearsay rule (Evid. Code 1200) because the
3 court decisions referenced are official records excepted from the hearsay rule. (Evid. Code., § 1280.)
4 Ruling on Objection No. 7: Sustained: _________________ Overruled: __________
5
6 Objection No. 8
7 Material Objection to: ““In Lichtenegger’s October 19, 2020 declaration, he accuses CIC
8 and its counsel (my firm) of committing numerous litigation and discovery abuses. The declaration
9 omits that Lichtenegger himself has been sanctioned multiple times for discovery abuses in the RPA
10 Litigation for failing to timely produce discovery. In Roadrunner, he failed to timely produce
11 discovery to CIC and was sanctioned by Judge Walsh. (8/13/2019 Minute Order.) In another action.
12 involving his client, PE Facility Solutions, Lichtenegger was sanctioned by the Hon. Gregory Pollack
13 for again failing to produce timely discovery. (6/14/2019 Minute Order at 3.) True and correct copies
14 of those orders are attached hereto as Exhibits 11-12.” (Stephens Decl., ¶ 14 & Exs. 11-12.)
15 Grounds for Objection No. 8: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code §
16 352). Mr. Stephens’s statements and Exhibits 11-12 lack relevance because they have no tendency
17 in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes
18 of this narrow MTC, the statements should be stricken as irrelevant and because their probative
19 value, if any, is substantially outweighed by the probability that the statements will create substantial
20 danger of undue prejudice or of confusing the issues.
21 CIC’s Response to CDI Objection No. 8: The Commissioner’s objections are frivolous
22 because there is no basis for excluding court decisions finding that the principal witness supporting
23 the Commissioner’s Plan has a history of being sanctioned for discovery abuses. Relevance: The
24 material objected to helps demonstrate why the documents being withheld by the Commissioner
25 concern the unreasonable and arbitrary basis for the Plan and therefore why they should be
26 produced. The Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to
27 evaluate the basis and alleged reasons for the Plan, including the credibility of testimony offered by
28 the Commissioner to support the Plan. The material objected to directly concerns the problematic
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1 and unreasonable basis for the Commissioner’s reliance on Mr. Lichtenegger. The Commissioner
2 specifically requested that Mr. Lichtenegger provide sworn testimony to this Court in his October
3 19, 2020 Declaration filed with this Court, in which Mr. Lichtenegger attests that he made his
4 declaration “at the request of the Conservator” to recount his “litigation experience with CIC and its
5 affiliates.” (10/19/2020 Lichtenegger Decl. at 2.) Before the Commissioner decided on the Plan’s
6 provisions, the Commissioner discussed strategies with policyholder attorneys and, in turn,
7 “received cogent technical questions, comments and suggestions which we used to adjust the [Plan]
8 schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19; see also 10/22/21 Schnoll
9 Decl. ⁋ 36.) The material objected to demonstrates that Lichtenegger has a proven track record of
10 discovery abuse, which undermines Mr. Lichtenegger’s credibility and the Commissioner’s reliance
11 on Lichtenegger. In addition to being sanctioned for discovery abuse, see also In re: SK Foods, L.P.
12 v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim (Bankr. E.D. Cal., Feb.
13 6, 2018) (sanctions against Lichtenegger), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ.
14 No. 2:18-390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of Lichtenegger’s
15 statements is critical to evaluating the veracity of his sworn testimony and the weight, if any, this
16 Court should give it in evaluating the Plan and whether the Plan is reasonable or an abuse of the
17 Commissioner’s discretion and authority. Prejudice: Mr. Stephens’ testimony cannot be excluded
18 as prejudicial under Evid. Code 352 because it does not create any “substantial danger of undue
19 prejudice,” it is not misleading or confusing, and it will not be materially misleading “to a jury.”
20 (Evid. Code 352.) There is no need for this Court to protect itself from prejudice and confusion by
21 excluding court decisions.
22 Ruling on Objection No. 8: Sustained: _________________ Overruled: __________
23
24 Objection No. 9
25 Material Objection to: “Attached as Exhibit 13 is a true and correct copy of a November
26 6, 2019 email from Kenneth Schnoll (General Counsel/Deputy Commissioner) to Robert De Rose,
27 Senior Director of A.M. Best Company, Subject: Re: California Insurance Company (CIC)
28 Conservation Order, produced by the Commissioner in this proceeding and Bates labeled
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RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS
CASE NO. 19CIV06531
1 CNSR003925. The email reflects that shortly after the conservation was entered, Schnoll explained
2 to AM Best that the conservation was not “typical” due to CIC’s “financial strength,” and that its
3 purpose was to “have CIC cure certain regulatory deficiencies.” In the same email chain, David
4 Wilson (CEO, Conservation and Liquidation Office) confirmed Schnoll’s representations, stating
5 that “[t]he goal here is not to destroy the company but to correct some unacceptable behaviors.” ”
6 (Stephens Decl., ¶ 15.)
7 Grounds for Objection No. 9: Relevance (Evid. Code, § 210). Mr. Stephens’s statements
8 and Exhibit 13 lack relevance because they have no tendency in reason to prove or disprove any
9 disputed fact of consequence to Respondent’s MTC and confuse the issues by inserting material
10 that are not germane to the MTC.
11 CIC’s Response to CDI Objection No. 9: The Commissioner’s objection is frivolous
12 because there is no basis for excluding testimony about matters directly relevant to the lack of
13 reasonableness in the Plan. Relevance: The material objected to helps demonstrate why the
14 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for
15 the Plan and therefore why they should be produced. Mr. Schnoll’s admissions on the untypical
16 nature of the CIC conservatorship, CIC’s financial strength, and the original limited purpose of the
17 conservatorship, support the unreasonableness of the Plan. The Court previously decided that
18 discovery into the grounds of the conservatorship was proper “because the Plan is supposed ‘to
19 resolve the issues requiring the Conservation Proceeding.’” (Order April 26, 2021, at 4:20-21.)
20 Ruling on Objection No. 9: Sustained: _________________ Overruled: __________
21
22 Dated: February 24, 2022 DLA PIPER LLP (US)
23
By:
24
Shand S. Stephens
25 Attorneys for Respondent California Insurance
Company
26
27
28
DLA P I PER LLP (US)
WW W.DLAPI PE R.CO M -13-
RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS
CASE NO. 19CIV06531
Preview
1 SHAND S. STEPHENS (Bar No. 67694) shand.stephens@dlapiper.com 2 DLA PIPER LLP (US) 555 Mission Street, Suite 2400 3 San Francisco, CA 94105-2933 4 Tel.: 415.836.2500 Fax: 415.836.2501 5 ANTHONY P. COLES (admitted pro hac vice) 6 anthony.coles@dlapiper.com DLA PIPER LLP (US) 7 1251 Avenue of the Americas, 27th Floor 8 New York, NY 10020 Tel.: 212.335.4500 9 Fax: 212.335.4501 10 Attorneys for Respondent 11 California Insurance Company, Inc., a California corporation 12 13 SUPERIOR COURT OF THE STATE OF CALIFORNIA 14 FOR THE COUNTY OF SAN MATEO – UNLIMITED JURISDICTION 15 16 INSURANCE COMMISSIONER OF THE CASE NO. 19CIV06531 STATE OF CALIFORNIA, 17 RESPONSE TO EVIDENTIARY Applicant, OBJECTIONS TO DECLARATION OF 18 v. SHAND S. STEPHENS IN SUPPORT OF 19 RESPONDENT CIC’S MOTION TO CALIFORNIA INSURANCE COMPANY, COMPEL FURTHER RESPONSES AND 20 INC., a California corporation, PRODUCTION 21 Respondent. Department: 22 22 Judge: Hon. Danny Y. Chou 23 24 25 26 27 28 DLA P I PER LLP (US) WW W.DLAPI PE R.CO M RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Respondent California Insurance Company (“CIC”), through its pre-conservation 2 management, hereby submits its response to The Insurance Commissioner of the State of 3 California’s Evidentiary Objections to Declaration of Shand S. Stephens in Support of Respondent 4 CIC’s Motion to Compel Further Responses and Production (dated Feb. 17. 2022). 5 Responses to Objections to the Declaration of Shand S. Stephens 6 Objection Number 1 7 Material objected to: “According to other declarations submitted by the Commissioner, 8 Lichtenegger also advised and provided input on the Plan’s terms. For those reasons, CIC moves 9 to compel production of all communications between the Commissioner and Lichtenegger, which 10 are not subject to any applicable privilege.” (Stephens Decl., ¶ 7.) 11 Grounds for Objection No. 1: Relevance (Evid. Code, § 210). Lacks foundation (Evid. 12 Code, §§ 403, 405). Mr. Stephens’s statements lack relevance because they have no tendency in 13 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. Mr. 14 Stephens’s statements also lack foundation, as he fails to cite any “other declarations submitted 15 by the Commissioner” that Mr. Stephens asserts show that Mr. Lichtenegger “advised” the 16 Commissioner on the Rehabilitation Plan’s terms, and misstates evidence since no declarations 17 submitted by the Commissioner stated that Mr. Lichtenegger “advised” the Commissioner on the 18 Plan’s terms. 19 CIC’s Response to CDI Objection No. 1: The Commissioner’s objections are frivolous 20 because there is no basis for excluding testimony about Mr. Lichtenegger’s role in the 21 Commissioner’s design of the Rehabilitation Plan (the “Plan”). Relevance: The material 22 objected to helps demonstrate why the documents being withheld by the Commissioner concern 23 the unreasonable and arbitrary basis for the Plan and therefore why they should be produced. 24 The Commissioner has relied extensively on Mr. Lichtenegger and requested that Mr. 25 Lichtenegger provide testimony to this Court in his October 19, 2020 Declaration filed with this 26 Court, in which Mr. Lichtenegger attests that he made his declaration “at the request of the 27 Conservator” to recount his “litigation experience with CIC and its affiliates.” (10/19/2020 28 Lichtenegger Decl. at 2.) Before the Commissioner decided on the Plan’s provisions, the DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -2- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Commissioner discussed strategies with policyholder attorneys such as Lichtenegger and, in turn, 2 “received cogent technical questions, comments and suggestions which we used to adjust the 3 [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19; see also 10/22/21 4 Schnoll Decl. ⁋ 36.) Lichtenegger’s reliability, and the credibility of the Commissioner in relying 5 on him, are at issue. Lichtenegger has a proven track record of misleading courts and counsel, 6 including in one instance resulting in a $250,000 federal contempt judgment against him for 7 violating a TRO by deliberately misleading the court and giving “entirely implausible” sworn 8 testimony. In re: SK Foods, L.P. v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, 9 *10, passim (Bankr. E.D. Cal., Feb. 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal, 10 Civ. No. 2:18-390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of 11 Lichtenegger’s statements is critical to evaluating the veracity of his sworn testimony and the 12 weight this Court should give it in evaluating the Plan and whether the Plan is reasonable or an 13 abuse of the Commissioner’s discretion and authority. Foundation: as noted above, the 14 Commissioner has repeatedly told this Court that Lichtenegger and other policyholder attorneys 15 advised and provided information to the Commissioner on the Plan. (10/22/21 Strumwasser 16 Decl. ⁋⁋ 10, 15, 19; 10/22/21 Schnoll Decl. ⁋ 36; 10/22/21 Holloway ⁋ 15; 10/19/20 Lichtenegger 17 Decl.) 18 Ruling on Objection No. 1: Sustained: _________________ Overruled: __________ 19 20 Objection Number 2 21 Material Objected to: “In 2018, U.S. Bankruptcy Judge Robert Bardwil entered a $250,000 22 contempt judgment against Lichtenegger. Judge Bardwil had “observed [Lichtenegger’s] demeanor 23 and assessed his credibility” at a full evidentiary hearing. He found that Lichtenegger “ignore[d]” 24 and thus violated a TRO issued by the Bankruptcy Court and then attempted to mislead the Court 25 as to his conduct. Attached hereto as Exhibit 7 is a true and correct copy of the that court’s ruling, 26 In re: SK Foods, L.P. v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim 27 (Bankr. E.D. Cal. Feb. 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ. No. 2:18- 28 390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018).” (Stephens Decl., ¶ 8 & Ex. 7.) DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -3- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Grounds for Objection No. 2: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code § 2 352). Mr. Stephens’s statements and Exhibit 7 lack relevance because they have no tendency in 3 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes 4 of this narrow MTC, the statements should be stricken as irrelevant and because their probative 5 value, if any, is substantially outweighed by the probability that the statements will create substantial 6 danger of undue prejudice or of confusing the issues. 7 CIC’s Response to CDI Objection No. 2: The Commissioner’s objections are frivolous 8 because there is no basis for excluding court decisions finding that the principal witness on whom 9 the Commissioner relies for his Plan has a history of misleading courts, lacking credibility, and 10 violating court orders. Relevance: The material objected to helps demonstrate why the 11 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for 12 the Plan and therefore why they should be produced. The Commissioner has relied extensively 13 on Mr. Lichtenegger and requested that Mr. Lichtenegger provide testimony to this Court in his 14 October 19, 2020 Declaration filed with this Court, in which Mr. Lichtenegger attests that he 15 made his declaration “at the request of the Conservator” to recount his “litigation experience with 16 CIC and its affiliates.” (10/19/2020 Lichtenegger Decl. at 2.) Before the Commissioner decided 17 on the Plan’s provisions, the Commissioner discussed strategies with policyholder attorneys such 18 as Lichtenegger and, in turn, “received cogent technical questions, comments and suggestions 19 which we used to adjust the [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10- 20 12, 15, 19; see also 10/22/21 Schnoll Decl. ⁋ 36.) Lichtenegger’s reliability, and the credibility 21 of the Commissioner in relying on him, are clearly at issue. It is therefore relevant for the Court 22 to consider Lichtenegger’s proven track record of misleading courts and counsel as demonstrated 23 by the $250,000 federal contempt judgment against him for violating a TRO by deliberately 24 misleading the court and giving “entirely implausible” sworn testimony. In re: SK Foods, L.P. 25 v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim (Bankr. E.D. Cal., Feb. 26 6, 2018), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ. No. 2:18-390 WBS, 2018 WL 27 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of Lichtenegger’s statements is critical to 28 evaluating the veracity of his sworn testimony and the weight, if any, this Court should give it in DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -4- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 evaluating the Plan and whether the Plan is reasonable or an abuse of the Commissioner’s 2 discretion and authority. Prejudice: Mr. Stephens’ testimony cannot be excluded as prejudicial 3 under Evid. Code 352 because it does not create any “substantial danger of undue prejudice,” it 4 is not misleading or confusing, and it will not be materially misleading “to a jury.” (Evid. Code 5 352.) There is no need for this Court to protect itself from prejudice and confusion by excluding 6 relevant court decisions. 7 Ruling on Objection No. 2: Sustained: _______________ Overruled: _________ 8 9 Objection Number 3 10 Material Objected to: “Phil Neal Walker is another policyholder attorney with whom the 11 Commissioner evidently has been in communication, as the electronic search terms indicate. Walker 12 has been sanctioned for misconduct in connection with the very RPA Litigation at issue. In July 13 2019, the CDI’s Chief Administrative Judge Kristin Rosi found that Walker violated the California 14 Rules of Professional Conduct and the Government Code by making improper ex parte 15 communications to the CDI Administrative Hearing Bureau (“AHB”). Walker threatened to 16 communicate negative stories to the media if Judge Rosi and her colleagues did not immediately 17 recuse themselves en masse from RPA-related administrative appeals they were overseeing. 18 According to Judge Rosi, “Mr. Walker indicated he was communicating with a San Diego Union- 19 Tribune reporter and concluded by stating ‘I will be advising him of your response/non-response by 20 this Friday, July 19, 2019.’” Judge Rossi found that Walker’s conduct was a prima facie violation 21 of the ethical rules including Government Code section 11430.10 and Rule 3.5(b) of the State Bar 22 Rules of Professional Conduct. A true and correct copy of the July 19, 2019 Notice of Ex Parte 23 Communications is attached hereto as Exhibit 8.” (Stephens Decl., ¶ 9 & Ex. 8.) 24 Grounds for Objection No. 3: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code 25 § 352). Mr. Stephens’s statements and Exhibit 8 lack relevance because they have no tendency in 26 reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes 27 of this narrow MTC, the statements should be stricken as irrelevant and because their probative 28 value, if any, is substantially outweighed by the probability that the statements will create DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -5- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 substantial danger of undue prejudice or of confusing the issues. 2 CIC’s Response to CDI Objection No. 3: The Commissioner’s objections are frivolous 3 because there is no basis for excluding testimony about judicial decisions about Mr. Walker’s 4 lack of credibility and professional responsibility in connection with CIC litigation, including 5 Judge Rosi’s finding that Walker’s conduct was a prima facie violation of the ethical rules 6 including Government Code section 11430.10 and Rule 3.5(b) of the State Bar Rules of 7 Professional Conduct. Relevance: The material objected to helps demonstrate why the 8 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for 9 the Plan and therefore why they should be produced. Before the Commissioner decided on the 10 Plan’s provisions, the Commissioner discussed strategies with policyholder attorneys such as 11 Walker and, in turn, “received cogent technical questions, comments and suggestions which we 12 used to adjust the [Plan] schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19; 13 see also 10/22/21 Schnoll Decl. ⁋ 36.) Walker’s reliability, and the credibility of the 14 Commissioner in relying on him, are clearly at issue. Walker has a proven track record of 15 unprofessional conduct in connection with CIC litigation. Prejudice: Mr. Stephens’ testimony 16 cannot be excluded as prejudicial under Evid. Code 352 because it does not create any 17 “substantial danger of undue prejudice,” it is not misleading or confusing, and it will not be 18 materially misleading “to a jury.” (Evid. Code 352.) There is no need for this Court to protect 19 itself from prejudice and confusion by excluding court decisions. 20 Ruling on Objection No. 3: Sustained: _______________ Overruled: _________ 21 22 Objection No. 4 23 Material Objected to: “Upon approving the merger between CIC and its New Mexico 24 affiliate, CIC II, the New Mexico Superintendent of Insurance (the “NMSI”) put in place protections 25 to ensure that the merged entity would “assume and be liable” for any CIC liabilities and would 26 maintain adequate reserves with CDI. A true and correct copy of the October 9, 2019 NMSI order 27 (the “NMSI Order”) is attached hereto as Exhibit 9.” (Stephens Decl., ¶ 10 & Ex. 9.) 28 Grounds for Objection No. 4: Relevance (Evid. Code, § 210). Inadmissible hearsay (Evid. DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -6- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Code, § 1200). Mr. Stephens’s statements and Exhibit 9 lack relevance because they have no 2 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. 3 CIC’s Response to CDI Objection No. 4: The Commissioner’s objections are frivolous 4 because there is no basis for excluding testimony about documents concerning the lack of 5 reasonableness in the Plan. Relevance: The material objected to helps demonstrate why the 6 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for 7 the Plan and therefore why they should be produced. The Commissioner’s motion to confirm 8 the Rehabilitation Plan requires the Court to evaluate the basis and alleged reasons for the Plan, 9 including the potential liability of CIC to policyholders. The material objected to directly 10 concerns the potential liability of CIC to policyholders and the problematic and unreasonable 11 basis for the Plan and its provisions requiring settlement of CIC litigations and depriving CIC of 12 its defenses against policyholder claims when not included in the application seeking the 13 Conservation or the Conservation Order itself. The Court previously decided that discovery into 14 the grounds of the conservatorship was proper “because the Plan is supposed ‘to resolve the 15 issues requiring the Conservation Proceeding.’” (Order April 26, 2021, at 4:20-21.) Hearsay: 16 Mr. Stephens’ testimony cannot be excluded under the hearsay rule (Evid. Code 1200) because 17 courts routinely consider agency decisions, which are government records, without regard to 18 hearsay. Further, this statement mentions, quotes from, and attaches an order from New Mexico’s 19 Superintendent of Insurance, which comes within the official records exception to the hearsay 20 rule. (Evid. Code., § 1280.) 21 Ruling on Objection No. 4: Sustained: _________________ Overruled: __________ 22 23 Objection No. 5 24 Material Objected to: “The Commissioner’s proposed Plan requires CIC to settle all 25 remaining RPA Litigation claims on terms that are highly favorable to plaintiffs and imposes 26 remedies in favor of plaintiffs that California courts have expressly rejected. As one example, the 27 Plan would reverse a pending $349,419.00 judgment in favor of CIC, which CIC obtained after a 28 full bench trial before the Honorable Henry Walsh and against one of Lichtenegger’s clients, DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -7- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Roadrunner Management Services, Inc., into a judgment in Roadrunner’s favor in the amount of 2 $607,138,00.00—a near $1,000,000 swing. Attached hereto as Exhibit 10 is a true and correct copy 3 of the Statement of Intended Decision filed in Roadrunner Management Services, Inc. v. Applied 4 Underwriters, Inc. No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 5 2019).” (Stephens Decl., ¶ 11, Ex. 10.) 6 Grounds for Objection No. 5: Relevance (Evid. Code, § 210). Lacks foundation (Evid. 7 Code, §§ 403, 405). Mr. Stephens’s statements and Exhibit 10 lack relevance because they have no 8 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. 9 Mr. Stephens’s statements as to the impact of proposed Rehabilitation Plan lack foundation and 10 assume facts not in evidence, as does his representation of Exhibit 10 (apparently a “Statement of 11 Intended Decision”) as a “judgment in favor of CIC.” 12 CIC’s Response to CDI Objection No. 5: The Commissioner’s objections are frivolous 13 because there is no basis for excluding court decisions finding that CIC has viable and successful 14 defenses against claims made by policyholders against CIC. Relevance: The material objected to 15 helps demonstrate why the documents being withheld by the Commissioner concern the 16 unreasonable and arbitrary basis for the Plan and therefore why they should be produced. The 17 Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to evaluate the basis 18 and alleged reasons for the Plan, including the reasonableness of requiring CIC to settle litigations 19 with policyholders on terms that bar CIC from asserting defenses that it has successfully used in 20 litigations such as Roadrunner Management Services, Inc. v. Applied Underwriters, Inc. No. 56- 21 2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019), when not included in the 22 application seeking the Conservation or the Conservation Order itself. Foundation: CIC’s 23 successful assertion of defenses in the Roadrunner case is in a public court document, the November 24 12, 2019 court decision in Roadrunner Management Services, Inc. v. Applied Underwriters, Inc. 25 No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019). 26 Ruling on Objection No. 5: Sustained: _________________ Overruled: __________ 27 Objection No. 6 28 Material Objected to: ““In awarding judgment in CIC’s favor, the Roadrunner court DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -8- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 rejected an alternative remedy proposed by Roadrunner, which was supported by a supposed 2 expert witness, Ronald Groden. That same remedy that the Roadrunner court rejected is one of 3 the three RPA Litigation settlement options the Plan seeks to impose on CIC. The Roxborough 4 law firm, one of the policyholder attorney firms with whom the Commissioner communicated, 5 filed papers in support of the RPA Litigation remedies proposed by the Plan, which include an 6 affidavit by Ronald Groden.” (Stephens Decl., ¶ 12.) 7 Grounds for Objection No. 6: Relevance (Evid. Code, § 210). Mr. Stephens’s 8 statements and Exhibit 10 lack relevance because they have no tendency in reason to prove or 9 disprove any disputed fact of consequence to Respondent’s MTC. 10 CIC’s Response to CDI Objection No. 6: The Commissioner’s objection is frivolous 11 because there is no basis for excluding court decisions finding that CIC has viable and successful 12 defenses against claims made by policyholders against CIC, and that Mr. Groden’s approach to 13 damages in policyholder litigation has been soundly rejected by a court. The material objected to is 14 relevant because it helps demonstrate why the documents being withheld by the Commissioner 15 concern the unreasonable and arbitrary basis for the Plan and therefore why they should be 16 produced. The Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to 17 evaluate the basis and alleged reasons for the Plan, including the reasonableness of requiring CIC 18 to settle litigations with policyholders on terms that bar CIC from asserting defenses that it has 19 successfully asserted in litigations such as Roadrunner Management Services, Inc. v. Applied 20 Underwriters, Inc. No. 56-2017-00493391-CU-CO-VTA (Ventura Cnty. Super. Ct. Nov. 12, 2019), 21 when not included in the application seeking the Conservation or the Conservation Order itself. The 22 Roadrunner litigation included testimony on behalf of the policyholder from Mr. Groden, which the 23 Roadrunner court found unreasonable. The Roxborough law firm, one of the policyholder attorney 24 firms with whom the Commissioner communicated, filed papers in support of the RPA Litigation 25 remedies proposed by the Plan, which include an affidavit by Ronald Groden. The material object 26 to is directly relevant to the credibility and weight to be given Mr. Groden and the papers filed by 27 the Roxborough firm. 28 Ruling on Objection No. 6: Sustained: _________________ Overruled: __________ DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -9- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 Objection No. 7 2 Material Objection to: “I represented CIC and its affiliates in connection with multiple 3 putative class actions that sought to obtain classwide remedies to resolve the RPA Litigation in 4 California, New York, and Nebraska. Federal courts in all three states denied class certification and 5 found that classwide resolution of the RPA Litigation was not appropriate. The Plan proposes the 6 same type of classwide remedies that these courts rejected. These courts also rejected policyholder claims that CIC engaged in fraud or that the RPA is per se unlawful. See Memorandum and Order 7 Re: Defendants’ Motion to Dismiss in Shasta Linen Supply, Inc. v. Applied Underwriters, Inc., Nos. 8 16-cv-00158-WBS & 16-cv-01211-WBS (E.D. Cal. Oct. 10, 2017); Memorandum and Order 9 denying plaintiffs’ motion for class certification in Shasta Linen Supply, Inc. v. Applied 10 Underwriters, Inc., Nos. 16-cv-00158- WBS & 16-cv-01211-WBS (E.D. Cal. Jan. 29, 2019); 11 Memorandum and Order Re: Cross-Motions for Summary Judgment in Shasta Linen Supply, Inc. 12 v. Applied Underwriters, Inc., Nos. 16-cv-00158-WBS & 16-cv-01211-WBS (E.D. Cal. Sept. 12, 13 2019); Finding, Recommendation and Order denying defendant’s motion for class certification in 14 Applied Underwriters, Inc. v. Top’s Personnel, Inc., No. 8:15CV90 (D. Neb. Feb. 6, 2019); and 15 Memorandum Opinion and Order in National Convention Services, LLC v. Applied Underwriters 16 Captive Risk Assurance Co., Inc., No. 15cv7063 (S.D.N.Y. July 27, 2019).” (Stephens Decl., ¶ 13.) 17 Grounds for Objection No. 7: Relevance (Evid. Code, § 210). Inadmissible hearsay (Evid. 18 Code, § 1200). Mr. Stephens’s statements and Exhibit 10 lack relevance because they have no 19 tendency in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. 20 CIC’s Response to CDI Objection No. 7: The Commissioner’s objections are frivolous 21 because there is no basis for excluding court decisions finding that classwide treatment is improper 22 for claims asserted by policyholders against CIC, and that these litigations must be decided by courts 23 on an individualized basis. Relevance: The material objected to helps demonstrate why the 24 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for 25 the Plan and therefore why they should be produced. The Commissioner’s motion to confirm the 26 Rehabilitation Plan requires the Court to evaluate the basis and alleged reasons for the Plan, 27 including the reasonableness of requiring CIC to settle litigations with policyholders on a classwide 28 basis of the kind the courts have repeatedly rejected. Those court decisions cited in the material DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -10- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 objected to are directly relevant to the lack of reasonableness and lack of basis for the Plan. Hearsay: 2 Mr. Stephens’ testimony cannot be excluded under the hearsay rule (Evid. Code 1200) because the 3 court decisions referenced are official records excepted from the hearsay rule. (Evid. Code., § 1280.) 4 Ruling on Objection No. 7: Sustained: _________________ Overruled: __________ 5 6 Objection No. 8 7 Material Objection to: ““In Lichtenegger’s October 19, 2020 declaration, he accuses CIC 8 and its counsel (my firm) of committing numerous litigation and discovery abuses. The declaration 9 omits that Lichtenegger himself has been sanctioned multiple times for discovery abuses in the RPA 10 Litigation for failing to timely produce discovery. In Roadrunner, he failed to timely produce 11 discovery to CIC and was sanctioned by Judge Walsh. (8/13/2019 Minute Order.) In another action. 12 involving his client, PE Facility Solutions, Lichtenegger was sanctioned by the Hon. Gregory Pollack 13 for again failing to produce timely discovery. (6/14/2019 Minute Order at 3.) True and correct copies 14 of those orders are attached hereto as Exhibits 11-12.” (Stephens Decl., ¶ 14 & Exs. 11-12.) 15 Grounds for Objection No. 8: Relevance (Evid. Code, § 210). Prejudicial (Evid. Code § 16 352). Mr. Stephens’s statements and Exhibits 11-12 lack relevance because they have no tendency 17 in reason to prove or disprove any disputed fact of consequence to Respondent’s MTC. For purposes 18 of this narrow MTC, the statements should be stricken as irrelevant and because their probative 19 value, if any, is substantially outweighed by the probability that the statements will create substantial 20 danger of undue prejudice or of confusing the issues. 21 CIC’s Response to CDI Objection No. 8: The Commissioner’s objections are frivolous 22 because there is no basis for excluding court decisions finding that the principal witness supporting 23 the Commissioner’s Plan has a history of being sanctioned for discovery abuses. Relevance: The 24 material objected to helps demonstrate why the documents being withheld by the Commissioner 25 concern the unreasonable and arbitrary basis for the Plan and therefore why they should be 26 produced. The Commissioner’s motion to confirm the Rehabilitation Plan requires the Court to 27 evaluate the basis and alleged reasons for the Plan, including the credibility of testimony offered by 28 the Commissioner to support the Plan. The material objected to directly concerns the problematic DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -11- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 and unreasonable basis for the Commissioner’s reliance on Mr. Lichtenegger. The Commissioner 2 specifically requested that Mr. Lichtenegger provide sworn testimony to this Court in his October 3 19, 2020 Declaration filed with this Court, in which Mr. Lichtenegger attests that he made his 4 declaration “at the request of the Conservator” to recount his “litigation experience with CIC and its 5 affiliates.” (10/19/2020 Lichtenegger Decl. at 2.) Before the Commissioner decided on the Plan’s 6 provisions, the Commissioner discussed strategies with policyholder attorneys and, in turn, 7 “received cogent technical questions, comments and suggestions which we used to adjust the [Plan] 8 schedule’s provisions.” (10/22/21 Strumwasser Decl. ⁋⁋ 10-12, 15, 19; see also 10/22/21 Schnoll 9 Decl. ⁋ 36.) The material objected to demonstrates that Lichtenegger has a proven track record of 10 discovery abuse, which undermines Mr. Lichtenegger’s credibility and the Commissioner’s reliance 11 on Lichtenegger. In addition to being sanctioned for discovery abuse, see also In re: SK Foods, L.P. 12 v. CSSS, LP, No. 09–29162–D–11, 2018 WL 784451, *2, *9, *10, passim (Bankr. E.D. Cal., Feb. 13 6, 2018) (sanctions against Lichtenegger), aff’d sub. nom. Lichtenegger v. Bank of Montreal, Civ. 14 No. 2:18-390 WBS, 2018 WL 4372986 (E.D. Cal. Sept. 12, 2018). Close scrutiny of Lichtenegger’s 15 statements is critical to evaluating the veracity of his sworn testimony and the weight, if any, this 16 Court should give it in evaluating the Plan and whether the Plan is reasonable or an abuse of the 17 Commissioner’s discretion and authority. Prejudice: Mr. Stephens’ testimony cannot be excluded 18 as prejudicial under Evid. Code 352 because it does not create any “substantial danger of undue 19 prejudice,” it is not misleading or confusing, and it will not be materially misleading “to a jury.” 20 (Evid. Code 352.) There is no need for this Court to protect itself from prejudice and confusion by 21 excluding court decisions. 22 Ruling on Objection No. 8: Sustained: _________________ Overruled: __________ 23 24 Objection No. 9 25 Material Objection to: “Attached as Exhibit 13 is a true and correct copy of a November 26 6, 2019 email from Kenneth Schnoll (General Counsel/Deputy Commissioner) to Robert De Rose, 27 Senior Director of A.M. Best Company, Subject: Re: California Insurance Company (CIC) 28 Conservation Order, produced by the Commissioner in this proceeding and Bates labeled DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -12- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531 1 CNSR003925. The email reflects that shortly after the conservation was entered, Schnoll explained 2 to AM Best that the conservation was not “typical” due to CIC’s “financial strength,” and that its 3 purpose was to “have CIC cure certain regulatory deficiencies.” In the same email chain, David 4 Wilson (CEO, Conservation and Liquidation Office) confirmed Schnoll’s representations, stating 5 that “[t]he goal here is not to destroy the company but to correct some unacceptable behaviors.” ” 6 (Stephens Decl., ¶ 15.) 7 Grounds for Objection No. 9: Relevance (Evid. Code, § 210). Mr. Stephens’s statements 8 and Exhibit 13 lack relevance because they have no tendency in reason to prove or disprove any 9 disputed fact of consequence to Respondent’s MTC and confuse the issues by inserting material 10 that are not germane to the MTC. 11 CIC’s Response to CDI Objection No. 9: The Commissioner’s objection is frivolous 12 because there is no basis for excluding testimony about matters directly relevant to the lack of 13 reasonableness in the Plan. Relevance: The material objected to helps demonstrate why the 14 documents being withheld by the Commissioner concern the unreasonable and arbitrary basis for 15 the Plan and therefore why they should be produced. Mr. Schnoll’s admissions on the untypical 16 nature of the CIC conservatorship, CIC’s financial strength, and the original limited purpose of the 17 conservatorship, support the unreasonableness of the Plan. The Court previously decided that 18 discovery into the grounds of the conservatorship was proper “because the Plan is supposed ‘to 19 resolve the issues requiring the Conservation Proceeding.’” (Order April 26, 2021, at 4:20-21.) 20 Ruling on Objection No. 9: Sustained: _________________ Overruled: __________ 21 22 Dated: February 24, 2022 DLA PIPER LLP (US) 23 By: 24 Shand S. Stephens 25 Attorneys for Respondent California Insurance Company 26 27 28 DLA P I PER LLP (US) WW W.DLAPI PE R.CO M -13- RESPONSE TO EVIDENTIARY OBJECTIONS TO DECLARATION OF SHAND S. STEPHENS CASE NO. 19CIV06531