[00:00:01] Speaker 02: Thank you. [00:00:01] Speaker 02: May it please the court. [00:00:02] Speaker 02: Good morning. [00:00:03] Speaker 02: I am Norman Reese. [00:00:04] Speaker 02: I represent the appellants in this matter, Christopher Hayes and Hayes Management Services. [00:00:13] Speaker 02: And I believe that maybe the best way to proceed this morning is to first talk about the issue that presents itself in this appeal about personal liability under Title VII. [00:00:24] Speaker 02: As we know in the Ninth Circuit, the Miller case from 1993, ever since that case was decided, there is no individual liability under Title VII. [00:00:36] Speaker 02: Ms. [00:00:36] Speaker 02: Carvajal claims that she never attempted to make a direct claim against Mr. Hayes under Title VII or under the Idaho Human Rights Act, but her own filings belied that contention. [00:00:48] Speaker 02: Let me share with you how that is so. [00:00:51] Speaker 02: In her very last pleading, it was a second amended complaint. [00:00:55] Speaker 02: You'll find that in the excerpts of record at pages 589 through 603. [00:01:01] Speaker 02: That clearly shows that she asserted a personal liability against Mr. Hayes without even resorting to an alter ego theory. [00:01:11] Speaker 02: Mr. Hayes was also identified as a separate party defendant. [00:01:15] Speaker 02: That's in the excerpts of record at 590. [00:01:18] Speaker 02: and the second Dominican Plain also identified all parties and then lumped them together, including Mr. Hayes individually, referring to them collectively as the defendants. [00:01:30] Speaker 02: And you'll see that at page 590 in the excerpts of record as well. [00:01:34] Speaker 02: She did so in her Title VII allegations. [00:01:37] Speaker 02: Now, clearly to us that shows she brought a Title VII action for direct liability against Mr. Hayes as an individual. [00:01:46] Speaker 02: And the only basis [00:01:48] Speaker 02: In her last pleading, her second amount of complaint for damages against Mr. Hayes were in the two counts that pertain to Cattle 7 and the corresponding Idaho Human Rights Act violation. [00:02:01] Speaker 02: None of the other counts of that pleading sought to impose direct liability they were Derivative liability causes of action for example well count three was only against a the other defendant Hayes tax count four did assert an alter ego claim against Mr.. Hayes and [00:02:20] Speaker 02: and Count 5 sought to impose a constructive trust. [00:02:25] Speaker 02: So again, the only source of damages in the Second Amendment complaint were the first two counts which pertained to Title VII. [00:02:34] Speaker 02: It's noteworthy to see that Ms. [00:02:37] Speaker 02: Carr-Roll could have sought damages under additional theories had she chose to do so. [00:02:41] Speaker 02: Wrongful termination, infliction of emotional distress, [00:02:45] Speaker 02: Civil assault civil battery, but she chose not to do so and so she presented her case She brought her case solely as a title seven and she presented a case to the jury solely as a title seven important to this issue likewise is ms. [00:03:00] Speaker 02: Carbohol's allegation that her employer was Hayes management services not mr. Hayes and that was the only proper basis for her allegations of the title seven liability and [00:03:12] Speaker 02: Now, even if individual liability were available under Title VII, which it is not, as we point out in our briefing, the complaint against Mr. Hayes was not brought until well after the 90 days following the right to sue letter. [00:03:28] Speaker 02: But I really do think it boils down to the fact that under Title VII, it's only the employer that can have direct liability. [00:03:35] Speaker 03: Can I ask a question that kind of stems from what you've been talking about? [00:03:40] Speaker 03: Can you cite us to any authority that would show that the district court's orders with respect to numerosity and the alter ego were terminating sanctions? [00:03:50] Speaker 02: Yes. [00:03:51] Speaker 03: What authority can you cite? [00:03:53] Speaker 02: Well, not so much authority, but we understand they were terminating sanctions because they decided the issue and took it from the jury. [00:04:00] Speaker 02: And I understand your position. [00:04:02] Speaker 03: I'm asking whether you have any case law or other authority that would back up what you're saying. [00:04:07] Speaker 02: I don't. [00:04:07] Speaker 02: OK. [00:04:08] Speaker 02: I don't. [00:04:16] Speaker 02: The problem with the Title VII, with the individual liability that they assert under Title VII is, again, there is no personal liability, and cases are very clear that you cannot use alter ego to assert personal liability under Title VII. [00:04:37] Speaker 02: We cited to this panel several cases from other federal circuits that clearly reject that approach. [00:04:45] Speaker 02: 11th, 10th, and the 8th circuits. [00:04:49] Speaker 02: And we also pointed out that the same district judge here, in another matter, reviewing the Miller case from the 9th circuit, indicated that he did not feel the 9th circuit would recognize the alter ego theory of Title VII liability. [00:05:05] Speaker 02: Ms. [00:05:07] Speaker 02: Carver-Hall cited to you in her briefing several cases to support her argument to the contrary, but in fact if you look at them carefully, many of them, most of them, support our position and in fact undercut Ms. [00:05:20] Speaker 02: Carver-Hall's position. [00:05:23] Speaker 02: The conduct and the key in this case is to bear in mind that the conduct for which the individual liability is being asserted had nothing to do [00:05:32] Speaker 02: with the factual basis of the Title VII claims. [00:05:35] Speaker 02: Again, the District Court so ruled, and it's clear in this case that Mr. Hayes did not use the corporate structure to perpetrate what Ms. [00:05:48] Speaker 02: Carver Hall alleged happened here, that formed the basis for Title VII allegations. [00:05:55] Speaker 02: In fact, she admits, you'll find this at her brief at page 44 of her appellate brief, she admits that individual liability was asserted against Mr. Hayes only because of what she calls bad acts. [00:06:08] Speaker 02: Committed in this litigation and that in our view is fatal to title seven liability under altered ego It was imposed for a discovery issue not the facts that underlie the title seven claims the district court Acknowledged as much we cited to you the case of North American Watch Corporation It's a 1986 case out of the Ninth Circuit We believe that with that discovery issue [00:06:34] Speaker 02: that it's a peripheral matter, certainly not warranting terminal sanctions. [00:06:39] Speaker 01: Can I ask you, though, wasn't the discovery issue that she was trying to factually discover what was happening with the corporate form and it was the failure of the defendant to comply with those discovery requests that led to the trial court's conclusion? [00:06:54] Speaker 02: Well, the thing to bear in mind on that is it was a two-page document that was discovered inadvertently, omitted from prior discovery, [00:07:03] Speaker 02: It was discovered several weeks prior to the trial. [00:07:10] Speaker 02: Ms. [00:07:11] Speaker 02: Carvajal's attorneys asked us to review once more and check for any documents that would relate to the numerosity issue, and we did. [00:07:20] Speaker 02: And we found a two-page document. [00:07:22] Speaker 01: I'm not talking about those documents. [00:07:24] Speaker 01: I'm talking about the discovery she sought with respect to the sale of the corporation. [00:07:28] Speaker 02: Oh, to the sale of the corporation, yes. [00:07:30] Speaker 02: Well, the thing to bear in mind on the sale of the corporation, Your Honor, is that first you have to look at what was asked versus what was not asked. [00:07:41] Speaker 02: Now, Ms. [00:07:41] Speaker 02: Carbajal asked for documents pertaining to the sale, any sale between Hayes Management Services [00:07:50] Speaker 02: and Hayes tax. [00:07:53] Speaker 02: Now, the only thing between those two entities was a sale of Hayes management's goodwill, its corporate goodwill, client lists, and some hard assets for the sum of $100,000. [00:08:07] Speaker 03: Did you respond in that way? [00:08:13] Speaker 03: when the discovery order was made? [00:08:16] Speaker 03: Or did you fail to respond? [00:08:18] Speaker 02: Well, when we responded to it, we provided everything that was within the call of the discovery request. [00:08:28] Speaker 02: It asked for any documents pertaining to a transaction between Hayes Management Services and Hayes Tax. [00:08:37] Speaker 02: Now, the discovery issue arose when Hayes Tax was added as a defendant. [00:08:44] Speaker 02: And then Ms. [00:08:45] Speaker 02: Carbajal did some discovery requests to Hayes' tax. [00:08:49] Speaker 02: At that time, she found a document whereby Chris Hayes had transferred or agreed to transfer his personal, professional goodwill to Hayes' tax, not to Hayes' management. [00:09:05] Speaker 02: His professional, personal goodwill was always his asset. [00:09:09] Speaker 02: It never belonged. [00:09:10] Speaker 02: It was never an asset of Hayes' management. [00:09:13] Speaker 02: And so the discovery request that we had answered asked for documents from Hayes Management to Hayes Tax. [00:09:20] Speaker 02: And we provided everything in the call that question. [00:09:22] Speaker 02: Now, when Ms. [00:09:24] Speaker 02: Carbajal found this other document that was not within the scope of that discovery request, she accused Hayes Management and Hayes of withholding discoverable documents. [00:09:34] Speaker 02: We pointed out to her that we answered everything within the call of the discovery request and invited her to submit revised discovery requests broadening the scope of the request and we would provide her with whatever that would entail. [00:09:51] Speaker 02: Rather than do so, her counsel chose to spend over 100 hours preparing a big motion for terminating sanctions, some 32 documents in relation to that motion, and then proceeded and convinced the court to apply terminating sanctions for that document. [00:10:12] Speaker 01: And again, you're using the term terminating to mean closure of an issue versus terminating the case. [00:10:17] Speaker 01: Correct. [00:10:18] Speaker 03: And you already agree you have no case law authority for your position, is that correct? [00:10:24] Speaker 02: No case law authority of which I'm aware that defines a terminating sanction. [00:10:27] Speaker 02: Right. [00:10:28] Speaker 02: Yes. [00:10:30] Speaker 02: Now, again, this transaction, there was no transfer in fraud of creditors here. [00:10:37] Speaker 02: And it's important to understand, because I'm not sure that the district court understood what happened here. [00:10:43] Speaker 02: Mr. Hayes' personal, professional goodwill was never an asset of Hayes' management. [00:10:52] Speaker 02: The U.S. [00:10:52] Speaker 02: tax court in several cases has held that that's the case. [00:10:57] Speaker 02: An individual's personal, professional goodwill remains his asset, and it's not the asset of the entity for which he or she works. [00:11:06] Speaker 02: that individual transferred to that entity, or there is a contract between the two that puts restrictions on that individual's use of his personal professional goodwill. [00:11:20] Speaker 03: Since your timing is running down, let me ask you, what authority can you cite that the 90-day filing requirement is jurisdictional? [00:11:29] Speaker 02: Sure. [00:11:30] Speaker 02: our authority that we cite on that. [00:11:31] Speaker 02: And again, this is the context of, you know, we really think that it comes down to alter ego. [00:11:38] Speaker 03: I get that. [00:11:39] Speaker 03: I want to know in what cases you feel that the 90-day filing requirement is jurisdictional, because that's what you assert. [00:11:45] Speaker 02: Yes, yes. [00:11:46] Speaker 02: It's sort of like arguing an alternative here. [00:11:49] Speaker 02: If we're going to say, okay, alter ego aside, if Carbohol is contending that she can assert direct liability, and we think she did, if you look at the pleading, if you look at the complaint, [00:11:59] Speaker 02: I think it's paragraph 60, she says, allegations common to all counts. [00:12:05] Speaker 02: And right there, she says alter ego, or she says, it hates to be held individually liable. [00:12:11] Speaker 02: Now, the authority that we cite for that is the Baldwin County Welcome Center case. [00:12:16] Speaker 02: That's a US Supreme Court case from 1984. [00:12:18] Speaker 03: Are you responding by 90-day filing requirement question, or are you going back to the alter ego? [00:12:24] Speaker 02: Yes. [00:12:24] Speaker 02: No, this is the 90-day filing. [00:12:25] Speaker 02: Okay. [00:12:26] Speaker 02: 90 filing, yes. [00:12:27] Speaker 02: And the key quote from Baldwin, Your Honor, is this. [00:12:31] Speaker 02: It says, procedural requirements established by Congress for gaining access to the federal courts. [00:12:37] Speaker 02: That's where he brings our 90-day phrase. [00:12:39] Speaker 02: are not to be disregarded by courts out of a vague sympathy for particular litigants. [00:12:44] Speaker 02: If you look at Fort Bend County, a Supreme Court decision from 2019, now to be sure, the issue in that case was whether the 180-day charge filing requirement was jurisdictional. [00:12:59] Speaker 02: And court says no, that's a processing rule, not a jurisdictional prescription. [00:13:05] Speaker 02: But when the court when the Supreme Court went through its analysis it it said that the 90-day filing rule is part of the quote? [00:13:14] Speaker 02: Jurisdictional provision of title 7 I think I'll say it for rebuttal and this is any other questions on these matters that All right, very good. [00:13:27] Speaker 03: Thank you. [00:13:29] Speaker 02: Thank you. [00:13:31] Speaker 03: All right, Ms. [00:13:31] Speaker 03: Ulrich, please I [00:13:40] Speaker 00: Good morning. [00:13:41] Speaker 00: Good morning. [00:13:42] Speaker 00: May it please the court? [00:13:43] Speaker 00: My name is Amanda Ulrich, and I am here today on behalf of appellee Angie Carbajal. [00:13:51] Speaker 00: And I think the first thing to remember as this court is examining this appeal is that the parties have lived with this case for years, and so did the district court. [00:14:02] Speaker 00: The district court is intimately familiar with what occurred, was able to make judgments about credibility, [00:14:08] Speaker 00: in discovery, at trial, because of that time the court spent with this case. [00:14:17] Speaker 00: And that's why it's important to consider that the standard of review on appeal here is, for the most part, an abuse of discretion standard. [00:14:27] Speaker 00: And the record is very clear that everything the district court did in this case was actually incredibly measured. [00:14:37] Speaker 00: During the course of this case, there were multiple instances of misconduct and discovery. [00:14:44] Speaker 00: And though we did ask for terminating sanctions on, I think, at least two occasions, the court went through the analysis that's required for a terminating sanction [00:14:57] Speaker 00: that requires a nexus between the acts that are at issue and the merits of the case. [00:15:08] Speaker 00: And the court determined that in the first instance, there was not enough of a nexus between the fraudulent transfer and the hiding of documents related to that transfer and sale of the business and the Title VII claims. [00:15:23] Speaker 00: So there, the court showed restraint [00:15:26] Speaker 00: did the proper analysis and went through the Anheuser-Busch factors as well, by the way. [00:15:31] Speaker 00: So when the appellants assert that the court did not consider lesser sanctions, that's exactly what the district court did. [00:15:41] Speaker 00: The district court noted that terminating sanctions had been requested and then [00:15:47] Speaker 00: Considered lesser sanctions in the case of the issue with the hiding of the documents and discovery and misrepresentations to the court and to Carbohol the court chose the lesser sanction of [00:16:01] Speaker 00: of the alter ego liability finding on behalf of Mr. Hayes as well as the constructive trust. [00:16:14] Speaker 00: And then later on in the case when it was discovered yet again that Hayes Management Services had withheld documents in discovery and was caught. [00:16:23] Speaker 00: The court again used restraint and instead of applying terminating sanctions, considered a nexus. [00:16:30] Speaker 00: And in that case, there was a nexus between the hiding of the document and one of the issues that went to the merits of the case, and that was the Title VII numerosity issue. [00:16:40] Speaker 00: But again, rather than apply terminating sanctions, which it could have done in that instance because of that nexus, [00:16:48] Speaker 00: The court exercised restraint and said, I'm only going to apply sanctions in the sense that the numerosity requirement is going to be deemed met. [00:16:58] Speaker 00: because we've had these issues with discovery, there are multiple issues, and we just don't know what else is out there at this point and what hasn't been disclosed. [00:17:08] Speaker 00: On top of the clear violation of the duty for the defendants to provide what was asked for in discovery and the fact that they had made false representations about whether that document existed. [00:17:22] Speaker 00: So again, in that instance, the court exercised restraint [00:17:26] Speaker 00: Looked at the specific situation and applied a sanction appropriate to that particular situation Going back to the alter ego liability. [00:17:35] Speaker 01: How do you respond to opposing counsels? [00:17:37] Speaker 01: argument that the scope of the discovery was limited to the to the entities versus Seeking it personally [00:17:48] Speaker 00: Sure, and that's just completely not true. [00:17:52] Speaker 00: If you look at the courts, I think it's a 51 page decision on that issue. [00:17:56] Speaker 00: The court goes through specific elements or I should say there's some particular interrogatories and requests for production the court mentions and it identifies specific documents that were absolutely responsive to the request. [00:18:12] Speaker 00: It wasn't just one request that said provide all information or documentation regarding the sale of HMS. [00:18:19] Speaker 00: There were specific targeted interrogatories and requests for production [00:18:23] Speaker 00: such as identify any discussion or communication regarding negotiation of possible sale of HMS, right? [00:18:33] Speaker 00: So those sorts of questions, which are much more targeted than that broad question council asserted was asked, and the problem with their position is it is obvious on the face of, for example, the intent to sell document, which we had to get from [00:18:50] Speaker 00: HTA, Hayes Tax and Accounting, because HMS and Hayes wouldn't give it to us and said it didn't exist, it's clear on the face of that document that that document was responsive and completely on point to what was asked. [00:19:05] Speaker 00: And there's multiple instances. [00:19:06] Speaker 00: It's not just that document. [00:19:07] Speaker 00: It's numerous other documents associated with the purchase and sale. [00:19:11] Speaker 03: So when your opposing counsel says that the discovery request was directed to X-Corp, [00:19:19] Speaker 03: in terms of what X-Corp did with Y-Corp, that's not the whole story. [00:19:23] Speaker 03: There's just a whole lot more. [00:19:24] Speaker 03: And then you think the record substantiates that, right? [00:19:28] Speaker 00: Correct. [00:19:28] Speaker 00: Yes. [00:19:28] Speaker 00: There is much more detail there. [00:19:31] Speaker 00: And the requests, undoubtedly, as the district court noted, sought the information that was withheld. [00:19:38] Speaker 00: And it became clear when we did obtain those documents that they were absolutely responsive and that there had been intentional. [00:19:45] Speaker 00: This wasn't one issue where they responded in discovery. [00:19:48] Speaker 00: It didn't exist. [00:19:49] Speaker 00: We repeatedly asked, are you sure? [00:19:51] Speaker 00: There has to be something else. [00:19:53] Speaker 00: This doesn't make sense. [00:19:55] Speaker 00: And we were not only repeatedly told, no, nothing else exists, we're in some cases told that, for example, at the hearing on that issue, defense counsel said, oh, Mr. Hayes forgot that that document existed. [00:20:11] Speaker 00: Well, it's a pretty significant document. [00:20:14] Speaker 00: And for him to say that he forgot it existed, especially when they provided it to the court in camera, it belies belief. [00:20:23] Speaker 00: So I think in that instance, the sanction on the alter ego was completely appropriate and completely on point to what the issue was. [00:20:32] Speaker 03: So I can get a sense of how long this has gone on. [00:20:36] Speaker 03: How long has this case actually been in litigation? [00:20:39] Speaker 00: So Ms. [00:20:40] Speaker 00: Carvajal was terminated in, I think it was late 2017, and of course the administrative process happened in between, and then this case was filed, I believe, in 2019. [00:20:52] Speaker 00: So we have been living with it for years and years. [00:20:56] Speaker 00: And it's been a lot of litigation, obviously. [00:21:02] Speaker 00: There's been many motions that were filed due to some of the actions by defendants in this case. [00:21:08] Speaker 00: And I have to say, quite frankly, many of them do not seem to be supported by the law or the facts. [00:21:16] Speaker 00: And they can represent whatever facts or law they want, obviously. [00:21:19] Speaker 00: But the bottom line is, when you look at the record and when you look at the cases, the support for what they're saying [00:21:26] Speaker 00: those facts are or what those cases say is simply not there. [00:21:31] Speaker 00: So I would invite the court, and I'm sure the court's well aware and has already reviewed the briefing, but there's multiple instances of that. [00:21:38] Speaker 00: For example, I believe on the IME issue, where defendants had sought a motion to compel Ms. [00:21:48] Speaker 00: Carbajal to undergo a psychosexual exam as an IME in this case, which is something that's reserved for convicted sex offenders. [00:21:58] Speaker 00: In that instance, [00:21:59] Speaker 00: The court obviously denied that request and said that it could not find any authority allowing a psychosexual exam in a civil case for sexual harassment and that it bordered on being harassing and abusive. [00:22:15] Speaker 00: Yet how it's presented in the briefing here to this court is that the court said they couldn't find any authority for IMEs in a Title VII sexual harassment case. [00:22:26] Speaker 00: That's simply not true. [00:22:27] Speaker 00: That's not what the court said. [00:22:29] Speaker 00: The court specifically drew a line between a psychosexual exam and an IME in a Title VII case involving more than garden variety emotional distress allegations. [00:22:41] Speaker 03: And in federal court, there's no bar to such an exam, is there? [00:22:45] Speaker 00: There's no bar to an exam for an IME on No, no and in fact there are cases where courts have ordered it under rule 35, but the problem [00:23:00] Speaker 00: with the type of exam that they had asked for is that they were trying to use it, I think number one, to harass plaintiff quite frankly, but also to try to assert that they were going to prove that the conduct was welcome [00:23:17] Speaker 00: through the exam somehow. [00:23:18] Speaker 00: And that's what the district court was saying was something that was not recognized and in fact not allowable under Title VII law, because the way that you prove welcomeness or unwelcomeness under Title VII law is by the conduct of the plaintiff, not by an IME or some kind of other exam. [00:23:39] Speaker 00: So I think it's important to recognize those distinctions and really kind of drill down on what the facts actually are versus what has been represented. [00:23:52] Speaker 00: I think I will briefly just address, since I think this kind of featured strongly in [00:24:01] Speaker 00: Appellant's argument is just the alter ego issue. [00:24:05] Speaker 00: I think it's clear that plaintiff did not bring a Title VII claim directly against Mr. Hayes, nor could she have. [00:24:17] Speaker 00: There's a reason for that. [00:24:19] Speaker 00: You cannot bring a Title VII claim or a claim under the Idaho Human Rights Act directly against an individual. [00:24:26] Speaker 00: It only applies to employers. [00:24:28] Speaker 00: And so that was intentional on our part and the only reason Mr. Hayes even became personally involved in all of this was because of his conduct during the litigation where he made an effort to basically zero out HMS and we figured it out. [00:24:47] Speaker 01: How did you figure it out? [00:24:49] Speaker 01: I'm just curious. [00:24:50] Speaker 01: How did you learn about that? [00:24:51] Speaker 00: Sure. [00:24:51] Speaker 00: So what happened was our client had been hearing rumors that this had gone on. [00:24:56] Speaker 00: And so we reached out to opposing counsel to ask, hey, we're hearing about this. [00:25:02] Speaker 00: What's going on with this? [00:25:04] Speaker 00: Was there a sale? [00:25:05] Speaker 00: And we're initially told, oh, I'm not sure. [00:25:08] Speaker 00: I don't really know much about it when, in fact, this particular legal counsel was intimately involved in it. [00:25:13] Speaker 00: We asked for a copy of the document that was the transaction and we were given only one document and it was that the purchase and sale agreement for the 100,000 versus the 400,000. [00:25:27] Speaker 00: which then caused us to kind of have to go down this route of, well, we need to get an expert to figure out really how much this business was worth, was it worth less than 100, or more than $100,000, all of those sorts of things. [00:25:41] Speaker 00: And of course, while we were doing that, we had to see what we could find about the negotiations that happened, what the intent was as far as the purchase and sale price, any other offers that were made, all of those sorts of things. [00:25:54] Speaker 00: And so, [00:25:56] Speaker 00: I guess suffice it to say the issue of the sale became a big issue in the end. [00:26:03] Speaker 00: And that's kind of what led to all the discovery and our motion. [00:26:08] Speaker 03: Is it fair to say that what you thought happened was a fraudulent conveyance, basically? [00:26:13] Speaker 00: Correct. [00:26:14] Speaker 00: Correct, yeah. [00:26:15] Speaker 00: Yes, exactly. [00:26:16] Speaker 00: And in fact, we had been concerned about the $100,000 even from the transaction being gone by the time we got to a judgment to be able to collect [00:26:26] Speaker 00: And essentially the representations that were made by a Defendants' Council to the court were, well, that money is for my fees and so we're using it for that. [00:26:37] Speaker 00: And then by the time we got a decision on the motion for sanctions, the monetary part of it over that particular issue, they've refused to pay those sanctions. [00:26:47] Speaker 00: They still haven't paid it to this day. [00:26:50] Speaker 00: We've attempted to collect on both that and the judgment. [00:26:53] Speaker 00: The bank account that we tried to collect on has been zeroed out. [00:26:57] Speaker 00: So it's been a long slog. [00:27:00] Speaker 00: It's been very frustrating, quite frankly. [00:27:03] Speaker 00: Yes, correct. [00:27:04] Speaker 00: Correct. [00:27:07] Speaker 00: Let's see. [00:27:08] Speaker 00: And I think as far as some of the other issues, [00:27:16] Speaker 00: One of the issues that they had raised in their briefing is that the court could not consider their prior conduct with the other sanctions when examining What the court would do with sanctions decisions later on and the case law is clear I think it's us v. Rodriguez. [00:27:34] Speaker 00: It's a Ninth Circuit case that states that [00:27:36] Speaker 00: that a court can absolutely consider the totality of the circumstances in a case when deciding whether or not to issue sanctions. [00:27:44] Speaker 00: And so that was entirely appropriate in this case, and I think necessary, because to understand what went on in this case, you have to have the context of the whole and everything that happened to that point. [00:27:56] Speaker 03: How much of the sanctions that have not been paid at this point? [00:28:00] Speaker 00: I think they were originally something like mid-30,000s, [00:28:05] Speaker 00: with the interest and penalty because they were found in contempt. [00:28:09] Speaker 00: Judge Windmill found them in contempt and issued a $100 a day penalty on top of that. [00:28:13] Speaker 00: So my guess is at this point there probably be between $60,000 and $70,000 at this point. [00:28:21] Speaker 03: Because none has been paid? [00:28:25] Speaker 00: No, not on that particular sanction. [00:28:27] Speaker 00: The only payment that has been made [00:28:29] Speaker 00: was on the sanctions or not sanctions but the attorney's fees over the IME issue. [00:28:35] Speaker 00: That was like $4,000 or so. [00:28:37] Speaker 00: So they did pay that. [00:28:38] Speaker 00: But aside from that, none of the other sanctions have been paid and there was no bond posted. [00:28:44] Speaker 00: We were basically told, go see if you can collect. [00:28:48] Speaker 00: So. [00:28:48] Speaker 00: OK. [00:28:48] Speaker 03: Your time is up. [00:28:49] Speaker 03: Let me ask my colleagues whether either has additional questions or counsel. [00:28:53] Speaker 03: I think not. [00:28:53] Speaker 03: Thank you, counsel. [00:28:54] Speaker 03: Thank you for your time. [00:28:56] Speaker 03: All right. [00:28:57] Speaker 03: Mr. Reed, you have some rebuttal time. [00:29:00] Speaker 03: Thank you. [00:29:04] Speaker 03: Can I just cut right to the chase from my perspective? [00:29:09] Speaker 03: Taking your point about the alter ego as sort of a given, what I'm understanding is what happened is or the claim of what happened is that your individual client took money from the corporation, which would be the defendant, [00:29:27] Speaker 03: and fraudulently conveyed it in a different way so they couldn't collect. [00:29:31] Speaker 03: What's your response to that? [00:29:34] Speaker 02: A couple of things. [00:29:36] Speaker 02: We get the basic property law. [00:29:37] Speaker 02: You can't convey what you don't own. [00:29:40] Speaker 02: And so Hayes management. [00:29:42] Speaker 03: A lot of people do. [00:29:44] Speaker 02: And then it becomes fraudulent. [00:29:46] Speaker 03: And we see it a lot. [00:29:47] Speaker 03: So what can I say? [00:29:48] Speaker 02: OK. [00:29:49] Speaker 02: All right. [00:29:50] Speaker 02: So Hayes management never, well, two components to this transaction, OK? [00:29:55] Speaker 02: There was the $100,000 that was the consideration for the hard assets, the goodwill of the corporation, Hayes management, to Hayes tax. [00:30:06] Speaker 02: All right. [00:30:07] Speaker 02: There was that one. [00:30:07] Speaker 02: I think the one that really got their attention was the former. [00:30:10] Speaker 03: That one is owned by your individual client, right? [00:30:15] Speaker 03: Your individual client, Chris Hayes, owns that other entity. [00:30:19] Speaker 02: He does. [00:30:20] Speaker 02: That's correct. [00:30:20] Speaker 03: He owns all these entities. [00:30:22] Speaker 02: He does. [00:30:23] Speaker 02: Okay. [00:30:23] Speaker 02: Well, not Hayes Tax. [00:30:24] Speaker 02: That's a different matter. [00:30:26] Speaker 02: Who owns that? [00:30:28] Speaker 02: A couple of former employees of Hayes Tax that decided to start up their corporation. [00:30:32] Speaker 03: He just gave it to them? [00:30:33] Speaker 02: No, there's a contract whereby they are paying it by the way in installments. [00:30:39] Speaker 02: There was no draining of assets to the tune of $400,000 here. [00:30:42] Speaker 03: Where is that money going? [00:30:44] Speaker 02: It's being repaid from Hayes tax to Hayes management. [00:30:50] Speaker 02: I'm sorry, from Hayes tax to Chris Hayes. [00:30:53] Speaker 03: That money is with Chris Hayes, but it originally came from one of the defendants, right? [00:31:01] Speaker 02: The $100,000 was for the consideration between Hayes Management and Hayes Tax, for what that entity sold Hayes Tax. [00:31:10] Speaker 01: How much of that has been paid? [00:31:12] Speaker 02: I don't know. [00:31:13] Speaker 02: I know that it's being paid in installments. [00:31:17] Speaker 02: The $400,000 for Chris Hayes' professional personal goodwill is being paid in installments as well, but the $400,000 was never part of Hayes' management. [00:31:27] Speaker 02: It was always Chris's. [00:31:29] Speaker 02: That's the consideration they came up with for Chris to transfer it to Hayes' tax, and there's some [00:31:38] Speaker 03: Conservation going between those two, but he didn't he didn't drain He didn't drain 400 great drain half a million from Hayes management You can't you can't you can understand you're a smart lawyer sure you can understand why this smells bad Yes, I can understand that I can understand that And you can understand why your opponent and Judge Windmill would say hey well wait a minute This doesn't smell good this looks like a fraudulent transfer [00:32:03] Speaker 02: And I think when you take a superficial look at it, I can understand where a person could have that perception. [00:32:10] Speaker 02: If you look at it more deeply and remember the basic property law principle of who owns what, then it makes sense. [00:32:17] Speaker 01: But in the end, with the sanctions order, it doesn't matter, does it? [00:32:20] Speaker 01: If the sanctions order stands, [00:32:22] Speaker 02: Well, if the sanctions order stands, it doesn't matter because all of these defendants are within the litigation. [00:32:29] Speaker 02: They have been pledged. [00:32:30] Speaker 02: So they'll be able to attach wherever those are if that's what stands. [00:32:36] Speaker 03: Your time is up. [00:32:37] Speaker 03: Let me ask my colleagues whether they have additional questions. [00:32:40] Speaker 03: We appreciate your briefs, your argument. [00:32:41] Speaker 03: I know you would have a lot more to say, but unfortunately, that's the nature of our process here. [00:32:45] Speaker 03: So thank you both for your argument. [00:32:47] Speaker 03: The case just argued is submitted. [00:32:50] Speaker 03: Thank you. [00:32:50] Speaker 03: Thank you very much.