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                  UNITED STATES BANKRUPTCY COURT

    

             FOR THE NORTHERN DISTRICT OF CALIFORNIA

    

         BEFORE THE HONORABLE ARTHUR S. WEISSBRODT, JUDGE

    

    

     In Re:                             ) Case No. 98-51326-ASW

                                        ) Chapter 13

                                        )

     HOWARD KEITH HENSON,               )

                                        ) TRIAL

                                        ) Volume I

                         Debtor.        ) Pages 1 to 179

                                        )

                                        )

                                        ) Friday, September 27, 2002

                                        ) San Jose, California

    

     Appearances:

    

     For the Debtor:          Law Offices of Stanley A. Zlotoff

                              By:  Stanley A. Zlotoff, Attorney at Law

                              300 South First Street, Suite 215

                              San Jose, California  95113

    

     For Creditor Religious   Moxon & Kobrin

     Technology Center:       By:  Helena K. Kobrin, Attorney at Law

                              3055 Wilshire Boulevard, Suite 900

                              Los Angeles, California  90010

    

                              McPharlin, Sprinkles & Thomas

                              By:  Elaine M. Seid, Attorney at Law

                              10 Almaden Boulevard, Suite 1460

                              San Jose, California  95113

    

                              Paul, Hastings, Janofsky & Walker LLP

                              By:  Samuel D. Rosen, Attorney at Law

                              75 East 55th Street

                              New York, New York  10022-4597

    

     Electronic Court         United States Bankruptcy Court

     Recorder:                Clerk of the Court 

                              Liz Armendariz

                              280 South First Street, Room 3035

                              San Jose, California  95113

                              (408) 535-5003

    

     Certified Electronic     Palmer Reporting Services

     Transcriber:             P. O. Box 30727

                              Stockton, California  95213-0727

    

            Proceedings recorded by digital recording;

          transcript produced by federally-approved transcription

service.                             I N D E X

    

    

    

     Creditor's Motions:                                  page   3

    

          Opening Statement on behalf of the Creditor:    page  32

    

          Creditor's List of Exhibits:                    page  58

    

          Debtor's Response to Creditor's Exhibits:       page  92

    

          Opening Statement on behalf of the Debtor:      page 126

    

    

    

    

     Witnesses:

                              Direct   Cross   Redirect   Recross

         

     Victoria Arel Lucas

      By Mr. Zlotoff:          153

    

    

    

    

     Exhibits:                               Received in Evidence

    

     None.

    

    

    

    

    

    

                                                                     3

 

 1        Friday, September 27, 2002                 9:09 o'clock a.m.

 

 2                    P R O C E E D I N G S

 

 3             THE COURT:  Thank you, ladies and gentlemen.  Please

 

 4   be seated.

 

 5             Ms. Seid, I understand that there's some concern, that

 

 6   you want to have use of some court equipment?

 

 7             You need to be at a microphone, please.

 

 8             MS. SEID:  That's correct, Your Honor.  We were

 

 9   interested in having a television and a VCR made available this

 

10   morning.

 

11             THE COURT:  First of all, those have to be ordered in

 

12   advance and set up.  Nobody shows up the day of trial and asks

 

13   for them.  And, secondly, is that on your exhibit list?

 

14             MR. ROSEN:  The video -

 

15             THE COURT:  You need the microphone, please.

 

16             MR. ROSEN:  The videotape that we -

 

17             THE COURT:  Oh, I'm sorry.  Let me call the case and

 

18   get your appearances.  I got into the technical problem first.

 

19             Keith Henson.

 

20             May I have appearances?

 

21             MR. ZLOTOFF:  Stan Zlotoff for debtor.

 

22             MR. ROSEN:  For creditor Religious Technology Center

 

23   Samuel D. Rosen, Paul, Hastings, Janofsky and Walker.

 

24             MS. KOBRIN:  Helena Kobrin, Moxon and Kobrin, also for

 

25   the debtor.

 

                                                           4

 

 1             THE COURT:  What exactly is this - Ms. - Ms. Seid,

 

 2   would you come forward to the microphone, please - what exactly

 

 3   is the exhibit?

 

 4             MS. SEID:  First of all, I'll state my appearance.

 

 5             Elaine Seid of McPharlin, Sprinkles and Thomas

 

 6   appearing on behalf of the creditor.

 

 7             I'm going to ask Mr. Rosen to respond to the Court,

 

 8   Your Honor.

 

 9             MR. ROSEN:  The exhibit which is marked -

 

10             THE COURT:  You don't have the microphone.  You need

 

11   the microphone every time, or we won't get on the record -

 

12             MR. ROSEN:  You know I'll tell you something.  Many

 

13   years ago Judge Feinberg in the Second Circuit told me, "Mr.

 

14   Rosen, you're one of the few attorneys who appear here who do

 

15   not need the microphone."

 

16             THE COURT:  Yeah.  I was a law -

 

17             MR. ROSEN:  My voice tends to carry.

 

18             THE COURT:  I was a law clerk in that courthouse.  I

 

19   know that court.

 

20             MR. ROSEN:  In the Second Circuit?

 

21             THE COURT:  I was a law clerk on the District Court -

 

22             MR. ROSEN:  Oh.

 

23             THE COURT:  - for Judge Demmick.

 

24             MR. ROSEN:  In answer to your question we have marked

 

25   as an exhibit a video - and it's been in the exhibits since the

 

                                                           5

 

 1   first joint pretrial order, a year and a half ago, - a videotape

 

 2   of excerpts of deposition taken of Mr. Henson in the copyright

 

 3   case.  We want to play the videotape excerpts for this Court.

 

 4   They relate to the issue - the videotape relates to the issue of

 

 5   bad faith.

 

 6             THE COURT:  It's my understanding, and it hasn't been

 

 7   briefed, and I had wanted any issue that might be of concern,

 

 8   that that's a matter of discretion.  There's certainly a

 

 9   transcript available, but I don't know whether you object.  If

 

10   you object, then I'd like to know about it.

 

11             MR. ZLOTOFF:  Well, can coun- -

 

12             THE COURT:  To the video, rather.  I'm not talking

 

13   about the transcript.  I'm just - I'm not talking about the

 

14   transcript yet.  I'm just talking about the video.

 

15             MR. ROSEN:  The video is the official record of the

 

16   deposition, not the transcript.  And it was - and for that

 

17   reason at trial before Judge Whyte it was the video that was

 

18   shown to the jury, not the transcript.

 

19             And it's - by the way, it's a highlight reel.  It's

 

20   certain sections of his deposition given over, I think, two or

 

21   three days.  They were - it was approved by Judge Whyte as

 

22   appropriate excerpts to be shown to the jury.  And, as I say,

 

23   because the video was the official record under the Federal

 

24   Rules, I think it's Rule 30, that the video was shown, not the

 

25   transcript read.

 

                                                           6

 

 1             THE COURT:  Was a copy of it provided to Mr. Zlotoff

 

 2   in advance - of the video?

 

 3             MS. KOBRIN:  On August 1st, Your Honor.

 

 4             MR. ROSEN:  Yeah.  And it's been listed since

 

 5   September of 2001.

 

 6             MR. ZLOTOFF:  I don't remember getting a videotape.  I

 

 7   reviewed the - your exhibit list last night, and I noticed one

 

 8   videotape that was designated.  And I looked in - in the - to

 

 9   the exhibit, and all I saw was like two pages of mostly, I won't

 

10   say redacted, but certainly not a complete excerpt of what - of

 

11   what the videotape purported to be.

 

12             MR. ROSEN:  I don't have to put in an entire

 

13   videotape.  I can put excerpts.

 

14             THE COURT:  But you have to provide it to him.

 

15             MR. ROSEN:  Yeah.

 

16             THE COURT:  You have to provide him the full

 

17   videotape.

 

18             MS. KOBRIN:  There were three separate -

 

19             THE COURT:  Ms. Kobrin, I need to ask you to use the

 

20   mic.  Even if Mr. Rosen has a big barrel voice, you don't.

 

21             MS. KOBRIN:  I don't, I know.

 

22             There were actually three separate videotapes that

 

23   were included in the - in the exhibits that were given to him on

 

24   August 1st.  There was a sleeve -

 

25             THE COURT:  Two months ago.

 

                                                           7

 

 1             MS. KOBRIN:  - just - just like in your set, Your

 

 2   Honor, or in here - whoops, sorry.  There were sleeves, you

 

 3   know, with the videotapes in them.

 

 4             MR. ZLOTOFF:  Oh.

 

 5             MS. KOBRIN:  In the set that was sent to Mr. Zlotoff.

 

 6             MR. ZLOTOFF:  All right.  I - I may have overlooked

 

 7   it.  It's possible.

 

 8             THE COURT:  And where are they in the Judge's copy?

 

 9             MR. ROSEN:  Volume IV.

 

10             MS. KOBRIN:  Volume IV, Exhibits 213, 214, and 2- -

 

11   no, I'm sorry - let's see.  2- - 213, 214, 215, I believe.

 

12             THE COURT:  I don't see any sleeve in mine.  Would you

 

13   look in the official?

 

14             MS. KOBRIN:  Oh, we put it in one set, we didn't put

 

15   them in both on the Court copies.

 

16             THE COURT:  Okay.  Mr. Zlotoff, can you come up and

 

17   look at this because it would - it's fairly pronounced.  Would

 

18   you have gotten this?

 

19             MR. ZLOTOFF:  You know, Your Honor, I - I've probably

 

20   overlooked it.  I'm not - I'm not going to state that I either

 

21   saw it or didn't see it, that I probably overlooked it.

 

22             THE COURT:  Is your office close enough that if we

 

23   break for lunch you can go look?

 

24             MR. ZLOTOFF:  Yes.

 

25             THE COURT:  All right.  So that's what we'll do.

 

                                                           8

 

 1   We'll use it after lunch.

 

 2             MR. ZLOTOFF:  Well, -

 

 3             THE COURT:  And we'll have it set it up.  That will

 

 4   give us a chance to -

 

 5             MR. ZLOTOFF:  Well, Your Honor, could I - maybe I

 

 6   should just address a threshold issue.  It purports to be a 1996

 

 7   deposition.  And I don't understand what possible relevance that

 

 8   would have.

 

 9             THE COURT:  When was this case filed?

 

10             MR. ZLOTOFF:  '98.

 

11             THE COURT:  What possible relevance could a 1996

 

12   deposition have to whether this case was filed in good faith?

 

13             MR. ROSEN:  The standard of good faith is not limited

 

14   to the instant this case is filed, as Your Honor knows.  There

 

15   has been a long pattern of misconduct by Mr. Henson, including

 

16   the misuse of the - of the Bankruptcy Court in the filing of the

 

17   petition in this case as part of his ongoing enterprise to

 

18   attack the Scientology religion.

 

19             This videotape shows his state of mind, his mens rea,

 

20   his intention to just for amusement and stature to attack RTC.

 

21   That carries forward in the - in the good faith-bad faith

 

22   argument and it's going to come forward under 1307 to his

 

23   conduct in the filing of this petition at a time when there was

 

24   only one creditor and there was no claim that had been - that

 

25   had been liquidated against him.  And it's going to continue on

 

                                                           9

 

 1   in terms of his misconduct during this case, the false

 

 2   statements in his schedules and the like.

 

 3             We also have - to the extent there's any question

 

 4   about it, it's a totality-of-circumstances test, which I'm sure

 

 5   Your Honor is aware of, and we have caselaw for that very

 

 6   proposition.

 

 7             We also have caselaw for the proposition that although

 

 8   the filing of a bankruptcy petition for the purpose of derailing

 

 9   a state court litigation -

 

10             THE COURT:  Was there state court litigation that

 

11   was -

 

12             MR. ROSEN:  No, no.  This is a federal court.  I'm

 

13   saying that there isn't - we found no case of - on the

 

14   proposition of - of filing a bankruptcy petition when you're not

 

15   in reality in financial need, for the purpose of derailing a

 

16   state court litigation.  And we've got cases, controlling

 

17   authority from the Ninth Circuit and the Ninth Circuit BAP and

 

18   from the - another District Court in California for the

 

19   proposition that while that alone per se is not cause for

 

20   dismissal under 1307, it is certainly one of the elements that

 

21   the Court needs to look at in terms of determining cause and bad

 

22   faith.

 

23             So to get back to Mr. Zlotoff's contentions or his

 

24   question, the bad faith begins in 1996 with Mr. Henson stating,

 

25   admitting that the whole purpose of this exercise for his

 

                                                           10

 

 1   amusement, the cost of litigation comes out of his, quote,

 

 2   recreation budget.  And his sole purpose - he's never been a

 

 3   Scientologist - his sole purpose is to taunt Scientology.

 

 4             And this is - I will tell you, I've been litigating

 

 5   now in the federal courts 34 years.  I have seen copyright cases

 

 6   where the infringer's motive is to make money, you know, a

 

 7   Napster type case.  I've seen cases where infringements are

 

 8   accidental, where somebody didn't know somebody had written

 

 9   something, or whatever.

 

10             I have never seen, and there is no case I'm aware of

 

11   ever reported in any federal court where the copyright infringer

 

12   says, 'The reason I infringed was to taunt the - the copyright

 

13   owner.'  This is one of a kind.  I think the Judge, Judge Whyte,

 

14   fairly well found that himself and - and the jury certainly

 

15   found it.  And, Your Honor, can -

 

16             THE COURT:  Well, excuse me, Mr. Rosen, can I

 

17   interrupt for a second.  The pl- - Mr. Zlotoff is going to go

 

18   first because he has to prove good faith, so I assume you're

 

19   going to go first on your plan.

 

20             MR. ROSEN:  I'm not sure that's right, if I can

 

21   address it.  If you'll bear with me for 30 seconds, I have a

 

22   couple of other issues to address.

 

23             Number one, I wanted to hand up to the Court on this

 

24   very issue of good faith-bad faith, the decision of Justice

 

25   Whyte entered on September 26th yesterday.  Judge Whyte has put

 

                                                           11

 

 1   this decision under file - under seal.  And - and it cannot be

 

 2   published outside the court obviously.  I am not making it an

 

 3   exhibit unless Your Honor will file it under seal because I

 

 4   don't want to violate Judge Whyte's order.  But I would like to

 

 5   hand it up, and I think what Your Honor - it will show Your

 

 6   Honor what I'm talking about.

 

 7             There's only - it's a determination on a contempt

 

 8   motion.  There is one part of which is absolutely critical and

 

 9   that is a footnote which appears on the bottom of page 5.  Your

 

10   Honor's welcome to see the whole thing.

 

11             THE COURT:  I'll take it.  I'll look at it.

 

12             MR. ROSEN:  And, Mr. Zlotoff, you have a copy, right?

 

13             MR. ZLOTOFF:  This was the one Judge Whyte -

 

14             MR. ROSEN:  Yesterday.  Yesterday.

 

15             MR. ZLOTOFF:  - from yesterday?  Yes, that's fine.  I

 

16   don't have any problem with that.

 

17             THE COURT:  I've read the footnote.  I haven't read

 

18   the whole decision, but I'm not going to take -

 

19             MR. ROSEN:  Your Honor's welcome to.  I think the

 

20   footnote -

 

21             THE COURT:  That's fine.

 

22             MR. ROSEN:  I rose also because of the question of who

 

23   goes first.  While it - Your Honor set this as a trial on our

 

24   motion to dismiss for bad faith and indicated in the original

 

25   decision back two years ago that it would then be combined with

 

                                                           12

 

 1   the objections to the plan.

 

 2             As I analyze it, it's one combined trial.  And I'm not

 

 3   sure it makes a great deal of difference except in the following

 

 4   respect.  Under 1307, as I have now been educated by my

 

 5   bankruptcy co-counsel, to - since you know I'm not a bankruptcy

 

 6   attorney - under 1307 if you find bad faith you must do one of

 

 7   two things.  You must either dismiss the petition or convert it

 

 8   to a 7.

 

 9             It strikes me that that is a threshold issue, because

 

10   if you find bad faith and then proceed to do one or the other of

 

11   the two options available, obviously the option that's not

 

12   available is to even hear a motion to confirm a 13 plan, then

 

13   the second part of the trial, which is the debtor's application

 

14   for confirmation of the 13 plan and our objections to it, truly

 

15   becomes moot.  The -

 

16             THE COURT:  How long will your trial go if you go

 

17   first?

 

18             MR. ROSEN:  It's all - it's all exhibits.  We have no

 

19   witnesses.  I'm just going to walk you through the exhibits and

 

20   show you, you know, what the basis of the good faith-bad faith

 

21   argument is under 1307.  In accordance with your order limiting

 

22   the amount of time, I can assure you it will not take me 20

 

23   hours to do that.  I -

 

24             THE COURT:  How long will it take?

 

25             MR. ROSEN:  Oh, I expect probably an hour to an hour

 

                                                           13

 

 1   and a half.  Plus part of our presentation is this videotape,

 

 2   which I think is 19 minutes.  That - that is part of our case.

 

 3             We would then rest on our motion for cause - to

 

 4   dismiss for cause, if you will.  I guess the statutory language

 

 5   under 1307 is cause, but the caselaw says bad faith is cause.

 

 6   We would then rest.

 

 7             And if Your Honor wants to make a decision at that

 

 8   point, that's fine, and we wouldn't have to deal with the motion

 

 9   to - to confirm the 13.  If you wanted - Your Honor doesn't want

 

10   to and wants to proceed with the rest of the trial, that's fine,

 

11   too.  But I think that at least Your Honor should have the

 

12   option because the motion-to-confirm hearing is going to take

 

13   considerably longer.

 

14             I understand from Mr. Zlotoff, and he can correct me

 

15   if I'm wrong, but he intends to call a witness, Ms. Lucas, the -

 

16   from my conversations with Mr. Zlotoff, and we've been kind of

 

17   candid with each other, he's telling me what he's going to try

 

18   and prove.  I've told him that he has major evidentiary

 

19   objections to overcome.  This will take some amount of time.  I

 

20   can't tell you how long because it's not my witness.  I can tell

 

21   you the cross-examination will take three or four hours

 

22   probably.  And we've got some battles over exhibits.

 

23             So, you know, I'll do whatever Your Honor wants.  It's

 

24   a combined trial, so I'm not sure it makes all of that

 

25   difference, but if Your Honor of a mind to appreciate that, a

 

                                                           14

 

 1   dismissal - a determination of bad faith or cause under 1307

 

 2   moots the 13.  Whereas the opposite is not true.  The opposite

 

 3   is not true because even if you deny the 13 you still have to

 

 4   deal with the bad faith because under 1307 the - the remedy is

 

 5   either dismissal or conversion.  So denial of the 13 would not

 

 6   moot our motion to dismiss, but the reverse is true.

 

 7             One other thing I wanted to raise to Your Honor on a

 

 8   preliminary basis is this.  You issued a trial order - and this

 

 9   is the last item I have to - to raise.  You issued a trial order

 

10   on July 12th, I believe it was, that set forth in several

 

11   paragraphs things that had to be filed.  And I think it was

 

12   paragraph 5 that said, "Failure to comply with the time limits

 

13   in this and the following requirements under this will result in

 

14   sanctions, including" -

 

15             THE COURT:  Probably says "may result."

 

16             MR. ROSEN:  - "may" - "may" - I'm sorry.  You're right

 

17   - "may result in sanctions."

 

18             One of the requirements was the filing of a pretrial

 

19   brief on the 13th of September.  We filed our pretrial brief.

 

20   Mr. Zlotoff filed none.  In fact, he had no intention of filing

 

21   any until on September 20th we argued before Judge Whyte, came

 

22   up indirectly in terms of whether this trial's going to go

 

23   forward or not.

 

24             We said, "How is it going to go forward?  The debtor

 

25   hasn't even complied.  He hasn't even filed a pretrial brief."

 

                                                           15

 

 1   And I think one of the specific sanctions in your order that -

 

 2   for noncompliance is postponing the trial.  Well, that's not a

 

 3   sanction because that hurts us.

 

 4             But, in any event, it's at that point that Mr. Zlotoff

 

 5   said, "Okay, I'll file a pretrial brief."

 

 6             As your own calendar for today notes, Mr. Zlotoff's

 

 7   brief was not filed until the 23rd of September.  And that's 10

 

 8   days after your order and only after the prompting before Judge

 

 9   Whyte, like - and Judge Whyte asked him the question, "Why

 

10   haven't you complied?"

 

11             So I would as a - and this is as a threshold matter,

 

12   Your Honor.  I would ask you to do what your order says.  I

 

13   think that is appropriate, to strike the brief.  I think it is

 

14   appropriate to impose sanctions for counsel's failure to comply

 

15   with your order.

 

16             And I would hope that, you know, the - that Your

 

17   Honor's order meant what it said and that there is a balance in

 

18   this proceeding that Your Honor intends to hold the debtor and

 

19   his counsel to compliance, as Your Honor has held us.

 

20             And that's the last preliminary matter I have, Your

 

21   Honor.

 

22             MR. ZLOTOFF:  Can I respond, Your Honor?

 

23             THE COURT:  Mr. Zlotoff.

 

24             MR. ZLOTOFF:  First of all, as to the brief, RTC

 

25   didn't file a quote-unquote brief either.  They filed a two-page

 

                                                           16

 

 1   statement which was nothing like a brief.  It bas- - it didn't

 

 2   have anything regarding facts.  It didn't have anything

 

 3   regarding issues.  It didn't have anything regarding legal

 

 4   argument.  It basically was a list of items that it wanted Your

 

 5   Honor to take notice of that had been filed previously.  That's

 

 6   not a brief.  That's not responsive to the trial court's order

 

 7   either.

 

 8             In fact we were both of the same mind apparently, at

 

 9   having just prepared voluminous documents just a few days

 

10   earlier with regard to motions in limine, motions for summary

 

11   judgment that we had papered this proceeding to death, and no

 

12   more need be done.  That's exactly the course you took.  So my

 

13   brief was as deficient as yours, even though your deficient

 

14   brief was filed on time.  And that's what I told Judge Whyte.

 

15             MR. ROSEN:  And Judge Whyte rejected that, Your Honor.

 

16             MR. ZLOTOFF:  He didn't say a thing.

 

17             MR. ROSEN:  Excuse me.  Judge Whyte said -

 

18             THE COURT:  Look, Mr. Rosen, one counsel is talking.

 

19             MR. ROSEN:  Sorry.

 

20             THE COURT:  He let you finish your argument.  Now you

 

21   let him finish.

 

22             MR. ROSEN:  I will, Your Honor.  I apologize.

 

23             MR. ZLOTOFF:  With regard to the argument as to

 

24   ordering of which side goes first, I don't know that it makes a

 

25   difference.  I don't understand the argument, to be honest with

 

                                                           17

 

 1   you.  If I go first and I can't prove pick - I can't prove the

 

 2   best-interests-of-creditors test, I lose.  If I lose

 

 3   confirmation -

 

 4             THE COURT:  Well, do you - do you lose if he's

 

 5   unsecured - if he's not unsecured?

 

 6             MR. ZLOTOFF:  If my plan -

 

 7             THE COURT:  Does he have standing to raise that if

 

 8   he's not - if he's a secured creditor?

 

 9             MR. ZLOTOFF:  Right.  Well, pick another issue then.

 

10   Pick anything you want -

 

11             THE COURT:  Well, you pick another issue.

 

12             MR. ZLOTOFF:  Pick feas- -

 

13             THE COURT:  It doesn't matter.  But, anyway, if you

 

14   can't -

 

15             MR. ZLOTOFF:  Pick feasibility -

 

16             THE COURT:  If you can't make your case, -

 

17             MR. ZLOTOFF:  If I can't prove my case in chief, then

 

18   I don't get a plan confirmed and it follows that you are either

 

19   going to say I can amend it or I can't amend it or it should be

 

20   dismissed or converted.  I'm not sure we end up any - at a

 

21   different place regardless of who comes first.  I mean bad faith

 

22   is one element -

 

23             THE COURT:  Well, the way that works, as I understand

 

24   it logically, Mr. Zlotoff, is that you tried to confirm this

 

25   plan.  And you asked for time to put forward another plan.  And

 

                                                           18

 

 1   Mr. Rosen says, "No, I want to go forward with my motion."

 

 2             MR. ZLOTOFF:  Right.

 

 3             THE COURT:  And so he would then, assuming that I was

 

 4   going to let you go forward would another plan, -

 

 5             MR. ZLOTOFF:  Right.

 

 6             THE COURT:  - want to present his motion.

 

 7             MR. ZLOTOFF:  Yeah, but -

 

 8             THE COURT:  And that wouldn't necessarily be mooted by

 

 9   your failure to prove your case in the first instance.

 

10             MR. ZLOTOFF:  Right.  But I take his issue with his

 

11   pronouncement that if you find bad faith you must necessarily

 

12   dismiss the case.  I don't think that's true -

 

13             THE COURT:  I don't have to necessarily dismiss the

 

14   case.

 

15             MR. ZLOTOFF:  No.  I've - I've been involved in cases

 

16   where bad faith has been fined - found on the basis that, for

 

17   example, two low of a percentage plan, so a judge would say -

 

18             THE COURT:  But here's the problem with this, all of

 

19   this, and - when you're coming in.  You come in the minute of

 

20   trial and say, "We want court equipment."  Somebody else comes

 

21   in - or one of you is coming in and saying, "I want to go

 

22   first."

 

23             We met specifically a short time ago to iron out all

 

24   the pretrial problems.  And none - nobody asked for equipment,

 

25   nobody said, "I want to go first."  Nobody said, "If you decide

 

                                                           19

 

 1   this, then you must do that."  Nobody said any of that.  So it's

 

 2   all new, it's all on the morning of the trial, and here we are.

 

 3             Do you want to go first?

 

 4             MR. ZLOTOFF:  Your Honor, I really don't care.  It

 

 5   doesn't matter to me except with regard to the tape.  My only

 

 6   concern about the tape is whether it's a complete tape or

 

 7   whether it's been doctored, whether there have been excerpts.  I

 

 8   haven't seen it.

 

 9             THE COURT:  Well, okay, but -

 

10             MR. ZLOTOFF:  And, quite frankly, I don't have a

 

11   machine in my office to look at it, in any event.

 

12             THE COURT:  I'm not saying, but I at least want to

 

13   know that you received it.  If you didn't receive it, then

 

14   they're not going to be able to present it.  If you did receive

 

15   it, then I have a different question.  I have the relevancy

 

16   question.

 

17             MR. ZLOTOFF:  Right.

 

18             THE COURT:  And I have - whether he has an absolute

 

19   right - see, you didn't brief that either - whether he has an

 

20   absolute right to play it because it's the, quote, official

 

21   record.  If he does, that's one issue.  If he doesn't, that's

 

22   another issue.  None - none of this is briefed.  So it's a

 

23   problem.

 

24             Now do you want to go first or not?  If you say you

 

25   don't care and you want to have this document case presented

 

                                                           20

 

 1   first, then I will adjourn for a couple of minutes to let you go

 

 2   back to the office to make sure that you received this.  And in

 

 3   the meantime it would be nice if somebody gave me some authority

 

 4   as to whether he has an absolute right to - to present it or

 

 5   whether I have any discretion in the matter.

 

 6             MR. ROSEN:  I'm not in - I will be happy to do that,

 

 7   except I don't understand the question.  The - the tape is being

 

 8   presented as -

 

 9             THE COURT:  Or is there an objection to the tape?

 

10   See, other than -

 

11             MR. ROSEN:  Then one -

 

12             THE COURT:  Wait, wait.

 

13             Is there an objection to the tape other than they may

 

14   not have given it to you?  If there is none, then it's not an

 

15   issue.

 

16             MR. ZLOTOFF:  Well, yeah, I had stated that I

 

17   questioned its relevancy.

 

18             THE COURT:  Oh, I understand.  But it -

 

19             MR. ROSEN:  You just stated that now.

 

20             THE COURT:  Please.  No, he didn't.  He discussed this

 

21   before.

 

22             Sit down, please, Mr. Rosen.

 

23             MR. ZLOTOFF:  That's when we got into the discussion.

 

24             THE COURT:  To save time, because I can't order briefs

 

25   at this point, I want to get this done.  To save time I would

 

                                                           21

 

 1   let him, if you have no objection, if you actually got it, I

 

 2   would let him present the tape, but I wouldn't rule on its

 

 3   admissibility until after the trial.  And I will order briefs on

 

 4   the admissibility of that document.

 

 5             It can - I will hold the ruling on admissibility, but

 

 6   to save time and to allow it to proceed, I will take it subject

 

 7   to a ruling subsequently on admissibility.  So that's what I

 

 8   will do.

 

 9             If you didn't get it, I won't let it in.  And I'll let

 

10   him present the written transcript.

 

11             MR. ROSEN:  Your Honor, can I just have 30 seconds?

 

12   Two things.

 

13             Number one, with respect to the filing of the brief,

 

14   your order doesn't require - doesn't specify what is required in

 

15   a pretrial brief.  We filed a pretrial brief which said we

 

16   incorporate and we identified the documents.  We've addressed

 

17   these issues to a fair-thee-well, to a redundancy.  We have

 

18   killed I don't know how many trees starting in July of 2000 with

 

19   the first motion to dismiss and the summary judgment and the

 

20   supplemental brief, et cetera.  We - it is a perfectly

 

21   appropriate thing, but that's not the issue.

 

22             Before Judge Whyte Mr. Zlotoff's answer was the same,

 

23   "Look what they filed."  The Judge says, "No, you don't

 

24   understand.  The question is not the sufficiency of what they

 

25   filed.  You filed nothing.  Why is that?"  That was the

 

                                                           22

 

 1   commentary.

 

 2             We have - we have ordered the transcript -

 

 3             THE COURT:  Mr. Rosen, I've already heard you.  Please

 

 4   sit down.

 

 5             MR. ROSEN:  The second - the second, so I do press the

 

 6   point on the request that Your Honor do what your order says you

 

 7   would do, and impose sanctions on -

 

 8             THE COURT:  I didn't say what I would do.  That's what

 

 9   you keep - you - I think you've misled me the first time.  You

 

10   said I will impose sanctions -

 

11             MR. ROSEN:  No.  I'm sorry, may -

 

12             THE COURT:  The order says I may.

 

13             MR. ROSEN:  Okay.

 

14             THE COURT:  I didn't commit to doing anything.

 

15             MR. ROSEN:  I ask you to do that.

 

16             And the second point is Your Honor made a misstatement

 

17   and I want to correct it now because it's going to permeate this

 

18   proceeding.  You described us as a, quote, secured creditor.

 

19             THE COURT:  Well, I think you may be.  And I'll

 

20   explain to you why in a few -

 

21             MR. ROSEN:  We are both secured and unsecured.

 

22             THE COURT:  It depends upon the value of the house.

 

23             MR. ROSEN:  No.

 

24             THE COURT:  Well, we'll talk about in a minute.

 

25             MR. ROSEN:  Our notice of -

 

                                                           23

 

 1             THE COURT:  Mr. Rosen, I have my papers on that issue

 

 2   in my chambers, so I'll talk to you about that -

 

 3             MR. ROSEN:  Okay.

 

 4             THE COURT:  - issue in a couple of moments.

 

 5             I had just come in to try to understand what was going

 

 6   on with the request for equipment.

 

 7             Now how far are you from here?

 

 8             MR. ZLOTOFF:  Across the street.

 

 9             THE COURT:  All right.  So you'll go to your office,

 

10   you'll see whether you received this thing.  And then you'll

 

11   tell me whether there's any objection - whether you want to go

 

12   first or you have no objection.  If you have no objection, Mr.

 

13   Rosen gets to go first, and he's promised me an hour and a half

 

14   or so of taking me through exhibits.

 

15             And if you want to go first, you'll let me know that

 

16   when you come back.  And I'll see you in about 15 minutes.

 

17             MR. ZLOTOFF:  All right, Your Honor.  Thank you.

 

18             MR. ROSEN:  Thank you.

 

19        (Recess taken from 9:33 a.m. to 10:09 a.m.)

 

20             THE COURT:  On the record, please.  Let's resume.

 

21             Did you receive the tapes?

 

22             MR. ZLOTOFF:  I have something that purports to be a

 

23   videotape, Your Honor, yes.

 

24             THE COURT:  And, Ms. Kobrin, you make an offer of

 

25   proof if called to testify you would testify that you served all

 

                                                           24

 

 1   of the videotape exhibits that are in the Court's official file

 

 2   or the Court's official exhibits on Mr. Zlotoff?

 

 3             MS. KOBRIN:  Yes, on August 1st along with a list that

 

 4   listed what they were as videotapes.

 

 5             THE COURT:  Thank you.  That issue is resolved.

 

 6             If you want to show the tape - I mean the video I'll

 

 7   let you do it subject to what I said.

 

 8             MR. ROSEN:  Well, is there an objection now to the

 

 9   video by counsel?

 

10             MR. ZLOTOFF:  I -

 

11             THE COURT:  You made a relevancy objection.

 

12             MR. ZLOTOFF:  You know, I've - I've just, as were

 

13   taking a break, I read the transcript.  I don't even have an

 

14   objection, yeah.

 

15             THE COURT:  That's fine.

 

16             MR. ROSEN:  Well, if, Your Honor, if I'm going first,

 

17   I will proceed to my opening statement on the motion to dismiss

 

18   and walk you through the exhibits.

 

19             THE COURT:  That'll be fine.

 

20             MR. ROSEN:  Your Honor, would it - may I have

 

21   permission to do it from here?

 

22             THE COURT:  Yes, of course.

 

23             MR. ROSEN:  Because I'm handling these volumes of

 

24   exhibits.

 

25             THE COURT:  It's standard in my court.  It's no

 

                                                           25

 

 1   problem.

 

 2             MR. ROSEN:  Okay.  Let me begin by - by

 

 3             THE COURT:  Let me interrupt you one second.

 

 4             MR. ROSEN:  Sure.

 

 5             THE COURT:  Whenever you want to talk about that

 

 6   secured, unsecured issue, both of you, I can talk to you a

 

 7   little bit about it.  But we can do that after you're finished.

 

 8             MR. ROSEN:  I was going to address it in my - in the

 

 9   presentation, but I'd certainly be interested in hearing Your

 

10   Honor's comments on it now.

 

11             THE COURT:  The Court's Docket demonstrates that the

 

12   case was dismissed on April 28th, 1998, but the dismissal was

 

13   vacated by the Court's order of July 25th, 1998.  My

 

14   understanding is that Creditor's Abstract of Judgment was

 

15   recorded in the middle of those two dates, on June 9th, 1998.

 

16             At that point Mr. Henson's case had been dismissed for

 

17   several weeks, but dismissal was later set aside.  So there's a

 

18   legal issue as to whether the automatic stay was reimposed

 

19   retroactively when the dismissal order was vacated, in which

 

20   case the recondition violated the stay and is void under the

 

21   Schwartz case; or whether vacating the dismissal order did no

 

22   more than reimpose the automatic stay for the future, in which

 

23   the case the recondition did not violate the stay and is not

 

24   void.

 

25             The order vacating the dismissal says that it's done

 

                                                           26

 

 1   prospectively.  Also In re Kruger, 88 BR 238, Ninth Circuit BAP

 

 2   1988, held that the automatic stay was in effect between

 

 3   dismissal and an order vacating dismissal, but that holding was

 

 4   based on the dismissal order being void as a violation of due

 

 5   process.

 

 6             In re Slyman (phonetic), 234 F.3d 1081, Ninth Circuit

 

 7   2000, relied on Kruger to hold the same where the dismissal

 

 8   order was based on failure to attend a hearing, and was vacated

 

 9   upon debtor's claim that he received no notice of the hearing.

 

10   Here the Docket shows that the dismissal order was on the

 

11   trustee's request after debtor had failed to appear at the 341

 

12   meeting.  But I don't - I don't believe there was an argument by

 

13   the debtor that he had no notice of the meeting.

 

14             I think, if I recall, he thought the case had already

 

15   been dismissed on his request that he made without legal advice,

 

16   but then realized that he did have to be in Chapter 13.  So it

 

17   doesn't sound to me at this point as if the dismissal order was

 

18   void as having been issued for lack of due process.  And that's

 

19   what both Kruger and Slyman rely on to find that the stay

 

20   continued in effect despite the dismissal order.  Neither of

 

21   those cases holds that the effect of vacating a dismissal order

 

22   is to resurrect the stay retroactively.  And, in fact, they

 

23   don't address that issue.

 

24             362(c)(2) provides that the stay expires as to the

 

25   debtor upon the earlier of the time the case is closed or

 

                                                           27

 

 1   dismissed or discharge is granted or denied, while 362(c)(1)

 

 2   provides that the stay expires as to estate property when the

 

 3   property ceases to be estate property under 349(b)(3) - I'm

 

 4   sorry - property.  And 349(b)(3) provides that dismissal vests

 

 5   all estate property in whomever owned it prepetition.

 

 6             So a dismissal order that isn't void and is merely

 

 7   voidable does terminate the stay for all purposes.

 

 8             Accordingly, it appears as if the creditor's lien is

 

 9   not void as a stay violation.  And that means depending on what

 

10   the value of the house is, the creditor may be fully secured and

 

11   thus lack standing to object on the basis of the Chapter 7 test

 

12   or the disposable income requirement.  Or the creditor may be

 

13   partly or wholly unsecured, thus not lack standing.

 

14             That's my - my preliminary remarks, and you can do

 

15   them with whatever you whose.

 

16             MR. ROSEN:  Well, let me respond to them because I

 

17   agree with everything except the last sentence, and I'll tell

 

18   you why.

 

19             We have filed a notice of claim which - which I think

 

20   amounts to about two hundred - a little less than a quarter of a

 

21   million dollars.  We've also - we also have additional claims

 

22   which some of these are postbankruptcy, including the judgment

 

23   that I just handed up to you of yesterday of Judge Whyte on the

 

24   latest contempt proceeding against Mr. Henson.

 

25             The point is that the - the Abstract of Judgment we

 

                                                           28

 

 1   filed against the house, against the debtor's house is only in

 

 2   the amount of $75,000, being the amount of the judgment that was

 

 3   entered upon the jury verdict.  The statement that you made that

 

 4   if there was - let's say there's 200,000 or a half a million

 

 5   dollars available from the sale of the house, available to the

 

 6   creditor, and we have a stipulation there is only one creditor,

 

 7   us, that we are, quote, secured is incorrect.  Because since our

 

 8   security filing, our Abstract of Judgment filing only is the

 

 9   amount of the judgment that we were able to file at that time,

 

10   which was $75,000, we have additional claims and judgments

 

11   against the creditor [sic] which are - which are part of the

 

12   bankruptcy proceeding in that they arise from claims which -

 

13   which existed prior to the filing of the petition.  For example,

 

14   the award of attorney's fees.  We could not file those as an

 

15   abstract of judgment against the house because there was an

 

16   intervening order of this Court that you just mentioned

 

17   reinstating the bankruptcy petition.

 

18             So it is correct to say that if there is at least

 

19   $75,000 from the proceeds of the sale of the house available to

 

20   pay us, that we are a secured creditor for that 75,- or any part

 

21   of it.  I don't believe it is correct to say that we are a

 

22   secured creditor for all of our claims.  Because in the best of

 

23   circumstances we could only enforce our security to the amount

 

24   of $75,000.  That's the amount of the lien.  So we will always

 

25   be in this proceeding both as a secured creditor and an

 

                                                           29

 

 1   unsecured creditor.

 

 2             THE COURT:  Do you agree, Mr. Zlotoff?

 

 3             MR. ZLOTOFF:  Not entirely, because what they've done

 

 4   in their claim - I've talked to Ms. Seid.  And Ms. Seid concedes

 

 5   that a good chunk of the claim is for postpetition debt.

 

 6             So the question is - for example, the contempt, I

 

 7   don't know why that would be prepetition debt and subject to the

 

 8   claim.  And there are similar other contempt judgments or orders

 

 9   that form part of the - whether the attorney's fee part is part

 

10   of the judgment is an interesting question.  I suppose it

 

11   probably is -

 

12             THE COURT:  I didn't mean to get into this because

 

13   we'll - we could spend a lot of time.  I wanted to give you my

 

14   preliminary remarks.  You've now given me your preliminary

 

15   remarks.  I don't need to resolve this at this moment.

 

16             MR. ROSEN:  Okay.

 

17             MR. ZLOTOFF:  Could I just make one other comment,

 

18   Your Honor?  Because I - I was - I was aware of the situation.

 

19   And actually there is a transcript of the hearing in which the

 

20   Court heard the debtor's request to reimpose the stay - or

 

21   reopen the case, I think is what it was - set aside the

 

22   dismissal.

 

23             And I think on page 51 and 52 - I faxed this to Ms.

 

24   Seid - the Court stated in connection with reopening the case

 

25   that it intended, as I recall, that the case be in the posture

 

                                                           30

 

 1   that it was at the time of dismissal.  So that the order is not

 

 2   completely - is not completely in sync with the pronouncement,

 

 3   the rendering that the Court made -

 

 4             THE COURT:  Who wrote the order?

 

 5             MR. ZLOTOFF:  Pardon me?

 

 6             THE COURT:  Who wrote the order?

 

 7             MR. ZLOTOFF:  I wrote the order.

 

 8             MR. ROSEN:  Your Honor, just so the record is complete

 

 9   on this.  Mr. Zlotoff faxed to us a sound bite of 51 and 52.  He

 

10   has the transcript, by his own admission.  He knows that in that

 

11   transcript at least two times, I think one of them is on page

 

12   53, Your Honor made it clear that the order that was not the

 

13   intention of the Court to retroactively criticize or set aside

 

14   anything that was done.  And, in fact, Your Honor was aware at

 

15   the time of the hearing that there had been an Abstract of

 

16   Judgment filed.

 

17             Mr. Zlotoff unfortunately is giving the Court a sound

 

18   bite out of context, and he has the transcript and he knows that

 

19   that's what Your Honor said.

 

20             More importantly, whatever -

 

21             THE COURT:  Mr. Rosen, let's stop.  I don't want to go

 

22   on any further.  You asked for my preliminary remarks.  I didn't

 

23   want to turn this into an oral argument.

 

24             MR. ROSEN:  Okay.

 

25             THE COURT:  Let's proceed with the evidence, please.

 

                                                           31

 

 1             MR. ROSEN:  Okay.  Your Honor, I might just address

 

 2   your attention out of order to Exhibit 195.  And I will not

 

 3   argue your preliminary remarks further.  I just ask you to note

 

 4   that this is the amended proof of claim, and we have identified

 

 5   the portions that are, we believe, are postpetition.  So that

 

 6   when Your Honor considers it further in a nonpreliminary manner,

 

 7   if Your Honor would just make a note that Exhibit 195 is what

 

 8   Your Honor needs to be addressing and in terms of certainly my

 

 9   comments as to why we're both secured and unsecured.

 

10             With that, let me - what I would like to do, with the

 

11   Court's permission, is as follows.  I will make my opening

 

12   statement now on our motion to dismiss the petition.  And in the

 

13   course of it I think the best assistance I can give the Court is

 

14   to walk the Court through the exhibits so that the Court doesn't

 

15   have to guess, if you will, as to what exhibits relate to what

 

16   issue.

 

17             I should also -

 

18             THE COURT:  As long as you do it in about an hour and

 

19   a half, that'll be fine.

 

20             MR. ROSEN:  Yeah, I think I could do it.

 

21             I would also point out the following.  We have not -

 

22   since this is one combined trial, we have not segregated

 

23   exhibits for the motion-to-dismiss part versus the Chapter 13

 

24   part.  And, in fact, there is a substantial overlap.

 

25             So I'm - I'm putting all the exhibits in, but, for

 

                                                           32

 

 1   example, exhibits on bad faith in the Chapter 13 proceeding,

 

 2   discovery misconduct, et cetera, in our view are going to be

 

 3   relevant to both.  So I'm doing double duty here.

 

 4             When I'm done with these I've put in indirectly, if

 

 5   you will, my exhibits on both sides of the case.

 

 6             THE COURT:  It may be helpful for me if you then go

 

 7   through it on your own when we recess and just tell me exhibits

 

 8   you think apply to which issue.

 

 9         OPENING STATEMENT ON BEHALF OF THE CREDITOR

 

10             MR. ROSEN:  Okay.  Let me give you - let me give you

 

11   the larger picture.  The larger picture of our case and our

 

12   theory of the case is as follows.

 

13             Mr. Henson formed a plan in 19- - or late '95, early

 

14   '96.  The plan was to taunt and to abuse the Scientology

 

15   religion and the various churches within it.  Not for profit.

 

16   He's not an infringer who, like in Napster, who's trying to make

 

17   economic gain, but for his, as the evidence will show, for his

 

18   amusement, for just the fun of taunting a religion.  And for,

 

19   most importantly, his stature.

 

20             And you're going to hear evidence about Mr. Henson's

 

21   little club that gives out awards for who can cause the church -

 

22   the Scientology religion the most pain or the most discomfort.

 

23             You will also hear Mr. Henson testifying and admitting

 

24   about how the copyright infringement part, which was the

 

25   beginning of his - of his ongoing scheme of harassment of

 

                                                           33

 

 1   Scientology for no reason other than amusement, was to see how

 

 2   much money he could cause the church to spend.  And you will

 

 3   hear and see deposition testimony of, "It's great.  I mean I'm

 

 4   pro se.  All it will cost me is I've got to go out and buy a

 

 5   ream of paper every once in a while and I can cause them to

 

 6   spend million dollars of dollars.  Isn't that wonderful."

 

 7             The reason I say this is because one has to put in

 

 8   context in a totality of circumstances what this is about.  This

 

 9   - this kind of bizarre motivation, if you will, one of pure

 

10   malice to hurt the Scientology religion is the is the

 

11   underpinning of the entire proceedings that have been going on

 

12   now for almost seven years.

 

13             They start with the copyright infringement case.  They

 

14   proceed then in the filing of this bankruptcy petition for the

 

15   purpose of - the stated purpose by Mr. Henson, admitted, of

 

16   derailing the trial of the federal - of the copyright case in

 

17   this very court before Judge Whyte.

 

18             Mr. Henson's overall scheme and enterprise of - of

 

19   hurting the Scientology religion continues with picketing, with

 

20   his activity of threats that resulted in his criminal conviction

 

21   in Riverside County for violation of the California Hate Crime

 

22   Statute, and then his fugitive status.  And from his lair in -

 

23   in - outside this country, he continues to revel in the idea of

 

24   causing all kinds of discomfort to - and then costs to the

 

25   Scientology religion.

 

                                                           34

 

 1             That has permeated this entire proceeding and, in

 

 2   fact, continues right up to now.  The September 26th order of

 

 3   Judge Whyte, which I handed up at the beginning of this,

 

 4   exemplifies it.

 

 5             The - Mr. Henson's contempt and his willingness to do

 

 6   things to - to injure the Scientology religion continues.  It

 

 7   has never abated.  It is the one abiding motivation.  Malicious

 

 8   but abiding motivation that has permeated this entire

 

 9   proceeding.  That is our theory of the case, if you will, in

 

10   terms of the bad faith.

 

11             Now is that all that there is?  No.  Let's look at the

 

12   bankruptcy proceeding - proceeding itself.

 

13             Mr. Henson originally prepared the petition in

 

14   December of '97 to - to derail what was then the trial date set

 

15   by Judge Whyte for the copyright case.  In February of - he

 

16   didn't file it because Judge Whyte put it off.  In February of

 

17   '98 he did file it.

 

18             I want Your Honor to understand the circumstances that

 

19   existed in February of '98.  Mr. Henson is making, according to

 

20   his schedule, $130,000 a year.  He is - he has money in the

 

21   bank.  He has no debts other than debts in the ordinary course.

 

22   He is current on his mortgage.  He's current on his credit

 

23   cards.  Okay.

 

24             What is he facing?  He's facing a trial on statutory

 

25   damages in the copyright case.  The statutory damages are - that

 

                                                           35

 

 1   the jury could award - are anywhere from $500 for nonwillful

 

 2   infringement to a maximum of $100,000.  Mr. Henson certainly,

 

 3   and he - and of course the maximum for - for without a finding

 

 4   of willfulness is only $10,000, so it's $500 to 10,000 for

 

 5   nonwillful.  Could Mr. Henson have paid a judgment of that

 

 6   amount?  Of course.

 

 7             Mr. Henson, as we have now stipulated, had equity in

 

 8   his house over and above the mortgage, or what you call in

 

 9   California I think the first deed of trust at that time of

 

10   approximately $160,000.  So there was no impending claim, if you

 

11   will.  There was unliquidated claim.

 

12             But the key part is the liquidate - the amount itself

 

13   of the potential claim, because a jury cannot award more than

 

14   10,000 for nonwillful and more than a hundred thousand for

 

15   willful under the Copyright Act, there was no need to file a

 

16   bankruptcy petition other than for the sole purpose of derailing

 

17   the trial.

 

18             Well, he filed it.  And after Your Honor lifted the

 

19   stay to allow the bankruptcy petition - excuse me - the

 

20   copyright proceeding to go forward, Mr. Henson withdrew it and

 

21   he has admitted that the reason he filed his notice of

 

22   withdrawal in March of 1998 of his bankruptcy petition was

 

23   because it no longer served any purpose, because the stay had

 

24   been lifted.  That was the only purpose for filing it in the

 

25   first place.  Once that purpose was no longer available because

 

                                                           36

 

 1   Your Honor lifted the automatic stay, he didn't have any need

 

 2   for the bankruptcy petition anymore.

 

 3             He knew ever at that time what he was facing was a

 

 4   judgment which in the best of circumstances, willful

 

 5   infringement maximum - and there has never been a case, there

 

 6   has never been a case of a hundred thousand dollars maximum ever

 

 7   awarded reported in the history of the United States.  In fact,

 

 8   the 75,000 that the jury ultimately awarded in this case itself

 

 9   is a record.  There has never been a copyright case in the

 

10   United - ever reported in the United States in which a single

 

11   infringed work gave rise to a judgment of $75,000 in statutory

 

12   damages.

 

13             And I think you'll see why when we show the tape as to

 

14   what motivated the jury to give what was an extraordinary award.

 

15   But the point is and the point that I don't want to miss is, in

 

16   the financial status, in the sense of need, in the sense of I

 

17   know an archaic notion, and it's not bankruptcy statute standard

 

18   of are his assets more than his liabilities.  Could he not

 

19   afford to pay a judgment.  The answer is clearly none.  And that

 

20   only reinforces that his use of the bankruptcy proceeding was

 

21   solely for - was an abuse and was solely for purposes of - of

 

22   derailing the - the infringement trial.

 

23             Mr. Henson's bad faith then continues in the following

 

24   way.  False statements in the bankruptcy petition and his

 

25   schedules.  And we have detailed these before you and we will

 

                                                           37

 

 1   present them as part of the Exhibits, Number 1, valuation of his

 

 2   house.  He knowingly valued - listed the value of his house as

 

 3   the amount he paid for it.  And he admits that he made no

 

 4   inquiry as to whether there was a - any increase in value since

 

 5   the time he paid.  Nor did he make any - and not $1 allowance

 

 6   for the amount of the - of the mortgage he had paid down.  He

 

 7   listed the mortgage in full as it was on the date that he got

 

 8   the mortgage.

 

 9             Everybody knows that even no matter what the

 

10   amortization table, you've - when you make a monthly payment,

 

11   might be 95 or 97 percent interest, but there is some portion of

 

12   every mortgage which is amortizing the debt.  No attempt to even

 

13   compute this.

 

14             His position was, "Here's what I paid for the house."

 

15             What else?  Life insurance.  Mr. Henson not only

 

16   listed no life insurance policies in his bankruptcy petition,

 

17   but repeatedly denied it, repeatedly denied that he had any life

 

18   insurance policies.

 

19             In fact, and I don't fault my brother Mr. Zlotoff for

 

20   this because I'm sure he was relying only on what Mr. Henson

 

21   told him, based on what Mr. Henson told Mr. Zlotoff, you're

 

22   going to see three exhibits, 47, 56, and 67, in every one of

 

23   which, and this is well into the discovery, the representation

 

24   is made that Mr. Henson doesn't have any life insurance policy

 

25   other than a term policy.

 

                                                           38

 

 1             Okay.  Well, we found out that that was false, that he

 

 2   has a whole life policy.  That whole life policy had a cash

 

 3   surrender value.

 

 4             THE COURT:  Of?

 

 5             MR. ROSEN:  It was approximately $7200 at the time.

 

 6   It was not disclosed.  And we had to ferret this out.

 

 7             Nowhere in his - it's not just that he didn't put it

 

 8   in his bankruptcy filing, it said he swore under oath he didn't

 

 9   have any.  And he has his counsel do his work for him and have

 

10   his counsel represent to us in three exhibits that there's no

 

11   such policy.

 

12             The next major riff on his - and I'm not going to go

 

13   over all of them because we have briefed you already on the

 

14   deficiencies in his filings, but the next one is stock.  He

 

15   lists zero stock as - no stock as an asset.  What do we find out

 

16   when we finally do get his records?  We go through the records

 

17   and we see a check.  He - I forget, some corporation, I don't

 

18   know what the name of it was, maybe Xanadu or something like

 

19   that.  We ask him, "What is this?"

 

20             "Well, we bought stock in the company."

 

21             This was a private company that he was involved in.  I

 

22   don't - I think it was only about $5,000, but the key is this

 

23   was within, I think, three months or four months.  It was $7500,

 

24   I'm reminded.  Within four months before he filed that

 

25   bankruptcy petition.

 

                                                           39

 

 1             Now I would understand that perhaps over a period of

 

 2   time he might say that, 'Well, I paid $7500 for the stock and it

 

 3   went the way of the dot-coms and after a period of time it

 

 4   became worthless,' but there isn't even a disclosure of it.  And

 

 5   he has no evidence that he was able to present that the stock

 

 6   was worth was as of the time of the petition.  So we have

 

 7   another omission, a substantial omission from his schedules.

 

 8             The next is the artwork.  How do we find out about

 

 9   artwork?  Nothing - none of which is listed in his bankruptcy

 

10   schedule.  We find out about it through an examination of - of

 

11   his wife.  We find out about it from a home - home owner's

 

12   insurance policy which insures - which is in the name of Mr.

 

13   Henson and his wife which insures artwork.

 

14             THE COURT:  For how much?

 

15             MR. ROSEN:  What's the amount of the policy?  I mean

 

16   what's the valuation?

 

17             I have it here.  If you'll just give me a second I'll

 

18   tell you how much it is.  It's in your brief.

 

19             Nine thousand two hundred and fifty dollars as of

 

20   1995.  What was produced was an insurance policy that covered

 

21   1995, a home owner's with an art endors- - art insurance

 

22   endorsement.

 

23             So, again, I mean even apart from the fact that there

 

24   is no - that we don't know what the enhancement of any, and the

 

25   value was as of the time of the petition, the fact is this asset

 

                                                           40

 

 1   is not even disclosed in his petition.

 

 2             Okay.  We go on.  We find, we understand I guess, when

 

 3   we get to the other side of it, the expenses, these numbers are

 

 4   crazy, and Mr. Henson concedes when we ask him in deposition or

 

 5   - I call it deposition.  I know I'm not using the right

 

 6   terminology, maybe 2004 exam, but I deal in depositions.  To me

 

 7   it's the same, although I know it's not to the Court.

 

 8             We ask him about his expenses, and his testimony is

 

 9   wild-ass guesses.  He didn't sit down and go over records in

 

10   dealing with listing out his expenses.  He took the short cut.

 

11   He said, "I'll just list my wild-ass guesses."

 

12             Now let's look at the rest of his bankruptcy petition.

 

13   What happens then?  He intentionally omits any disclosure of

 

14   other debts.  He had credit card debts that were in the ordinary

 

15   course.  They weren't in default, but he was carrying credit

 

16   card balances.  He didn't even disclose this in bankruptcy

 

17   petition.

 

18             THE COURT:  But he had been paying them off every

 

19   month?

 

20             MR. ROSEN:  Yes.  He was current in the sense that

 

21   whatever the minimum amount - he was paying at least the minimum

 

22   amount each month, so he wasn't in default -

 

23             THE COURT:  He wasn't paying the full amount each

 

24   amount?

 

25             MR. ROSEN:  Correct.  He was paying a portion.  And he

 

                                                           41

 

 1   explained, I think, and Your Honor I think heard this before,

 

 2   that what he does is this is - use this for business and he has

 

 3   to advance funds.  Then he gets paid by his clients, or whatever

 

 4   it is, so he can make up the - he's got to carry the float, if

 

 5   you will, of paying the credit card company for expenditures

 

 6   made in his business before he get reimbursed by his client.

 

 7             He never disclosed any of that.  There isn't a single

 

 8   credit card debt disclosed in his - in his application.

 

 9             THE COURT:  How many were there?

 

10             MR. ROSEN:  Thousands.

 

11             THE COURT:  No.  How many - he doesn't have thousands

 

12   of credit cards.  How many credit cards are we talking about?

 

13             MR. ROSEN:  In his own name or ones - including the

 

14   ones in his wife's name?

 

15             THE COURT:  His own name.

 

16             MR. ROSEN:  Or the ones in joint name?  There are

 

17   three kinds -

 

18             THE COURT:  Well, I guess but not his wife only.

 

19             MR. ROSEN:  I believe there were four.

 

20             THE COURT:  Four credit cards?

 

21             MR. ROSEN:  Yeah.  There were some in his name.  There

 

22   were, I believe, one or two in joint name, and the rest were -

 

23   and then there were additional ones that were just in his wife's

 

24   name.  None of this is disclosed in this petition.

 

25             Next - next comes the discovery.  And I really ought

 

                                                           42

 

 1   not have to spend a lot on this issue because Your Honor was

 

 2   painfully aware of it.  The work that we had to go through to

 

 3   get discovery, Mr. Henson's obstruction of it.  The number - the

 

 4   Docket speaks volumes as to the number of motions, which I've -

 

 5   unless I'm miss - I misrecollect, every single one was granted

 

 6   by this Court.  The number of motions we had to make to compel

 

 7   discovery because Mr. Henson just stonewalled it.

 

 8             Next we come to his admission in deposition:

 

 9   Destruction of documents.  It was a big joke.  "Well, we had

 

10   this fireplace."  Where's the underlying records for - it came

 

11   up in the context of a tax return.  "Where are the underlying

 

12   records to support these expenditures?"

 

13             And it was a big joke.  "Ah, we had a fireplace.  It

 

14   was - you know, we needed some warmth.  We threw in the

 

15   fireplace."  That's his testimony.

 

16             THE COURT:  This was after the subpoena was served, he

 

17   threw documents, or before?

 

18             MR. ROSEN:  I don't know.  I -

 

19             THE COURT:  I'd like to know that -

 

20             MR. ROSEN:  Yeah.

 

21             THE COURT:  - at least at some point in your

 

22   presentation.

 

23             MR. ROSEN:  Correct.  I don't know what the answer is,

 

24   but I do know that the documents - we were dealing with a

 

25   current tax return.  I think it was for 1997.  Under the law

 

                                                           43

 

 1   while Your Honor is addressing a spoilation issue, you know,

 

 2   "Did you have notice when you threw it away"; under the law he's

 

 3   required to keep it.  The Internal Revenue Code requires -

 

 4   requires that you retain copies of all documents which support

 

 5   any claim for three years after filing date.

 

 6             THE COURT:  Yeah.  With all due respect, the inference

 

 7   vis-a-vis good faith or bad faith may - may be the distinction

 

 8   between whether it was before or after the subpoena might be

 

 9   relevant.

 

10             MR. ROSEN:  Well, I - I don't -

 

11             THE COURT:  So I'd like to know.  I want to ask - I

 

12   don't want to argue.  I just want to know if you know.

 

13             MR. ROSEN:  I was going to say I don't disagree with

 

14   you.  And I will - we will get that information as to when the

 

15   destruction occurred, according to Mr. Henson.

 

16             Next we have the remarkable proposition of Mr. Henson

 

17   saying to us on the record in the 2004 exam a demand for

 

18   extortion:  "You want me to leave you alone.  Give me $5

 

19   million."  That's there in black and white.  It's part of our

 

20   exhibits.

 

21             Next is we have Chapter 13 plan proposal, which

 

22   proposes to pay us nothing.  And again I'm dealing in a context

 

23   of a secured, unsecured creditor, because we weren't at that

 

24   point talking about selling the house.  We're talking about the

 

25   plan as originally proposed.

 

                                                           44

 

 1             The plan on its face proposes four percent payment to

 

 2   us gross, but it's a payment to the estate and it is subject to

 

 3   the priority of the other claims of administration.  The very

 

 4   first fee application Your Honor approved for my brother at the

 

 5   other table exceeded and wiped out the entirety.  So as a - you

 

 6   know one can say, 'Well, the plan provided a four-percent

 

 7   payment to an unsecured creditor,' but that's nonsense.  That's

 

 8   form over substance.  The plan provided zero.

 

 9             The very first order I believe Your Honor entered, and

 

10   I don't think we even opposed it, for Mr. Zlotoff's fees, was

 

11   more than the $9,000 aggregate payments proposed under the plan.

 

12   The original plan that Mr. Henson filed was something like $75 a

 

13   month.  And then there was another one.  But the one that is -

 

14   was before you that he ultimately filed with Mr. Zlotoff's

 

15   assistance was $150 a month for 60 months.  That's $9,000.

 

16             If he were not paying Mr. Zlotoff out of that money,

 

17   if he had made separate arrangements to pay Mr. Zlotoff on his

 

18   credit card, as he did with other people who he didn't put on

 

19   his bankruptcy petition, -

 

20             THE COURT:  Yeah.  Ms. Seid will tell you he can't do

 

21   that.

 

22             MR. ROSEN:  He did it.

 

23             THE COURT:  Paid Mr. Zlotoff separately from -

 

24             MR. ROSEN:  No, no.  He paid other attorneys

 

25   separately, oh, yeah.

 

                                                           45

 

 1             THE COURT:  During the bankruptcy?

 

 2             MR. ROSEN:  During the bankruptcy.  Oh, sure.  Put it

 

 3   on his credit card.

 

 4             That's how he paid his - Mr. Harr, a criminal attorney

 

 5   who represented him in California, -

 

 6             THE COURT:  I see.

 

 7             MR. ROSEN:  - in Riverside County.  Okay.

 

 8             THE COURT:  But he didn't pay Mr. Zlotoff that way?

 

 9             MR. ROSEN:  No, no, no.  I don't suggest he did.

 

10             But the point I was making is knowing that he cannot

 

11   make a payment to Mr. Zlotoff while in bankruptcy other than

 

12   through the process of Mr. Zlotoff's application to the Court

 

13   for approval of his fees, from the get-go, it was even before

 

14   Your Honor issued the first order approving, it was a

 

15   zero-payment plan.  There was no way in the world that one could

 

16   ever contemplate that the course of administration would leave

 

17   one nickel left.  That's what he proposed:  To pay us zero.

 

18             And, by the way, to the extent it is relevant and we

 

19   believe it is, that is exacerbated by the fact that this is not

 

20   a claim which is dischargeable in a 7.  This is a claim for

 

21   willful infringement that is statutory punitive damages under a

 

22   federal statute for malicious conduct.  So that makes it even

 

23   worse, to propose a payment of zero to a creditor who has a

 

24   claim of nature, which is exhibited in a federal court judgment

 

25   makes it even more offensive.

 

                                                           46

 

 1             Okay.  We go through the additional elements of bad

 

 2   faith.  And, again, I don't mean to cast aspirations across the

 

 3   aisle.  Even right now, before this Court, the debtor has put

 

 4   in, and just - and put in also before Judge Whyte, the opinion

 

 5   of Judge March, Bankruptcy Judge in Los Angeles, respecting the

 

 6   dispute, the subpoenaed dispute, over the deposition of Henson's

 

 7   daughter.

 

 8             In both proceedings, both before this Court and before

 

 9   Judge Whyte, we argued that is sanctionable conduct, to put in a

 

10   decision of a Bankruptcy Judge - of any judge - that was

 

11   reversed and you know it was reversed.  We told you it was

 

12   reversed.

 

13             If Your Honor has not yet seen - I won't hand it up,

 

14   but if Your Honor has not yet seen Judge Whyte's decision of

 

15   February - excuse me - of September - what's the date on that?

 

16        (Creditor's counsel confer off record.)

 

17             MR. ROSEN:  - September 24th on the motion for Mrs.

 

18   Kobrin to intervene and to withdraw the reference, there is a

 

19   discussion of this very issue by Judge Whyte.  I'm not going to

 

20   quote it.  You can read it yourself.  But that's part of overall

 

21   egregious conduct and bad faith.

 

22             The final element - and I'm speaking only in broad

 

23   brushes, Your Honor, obviously.  This is a highlight reel.  The

 

24   final element is - oh, and what went with that is the

 

25   representation of Judge Whyte's order, an initial order on

 

                                                           47

 

 1   attorney's fees, which everybody knew was reversed.  And here

 

 2   again you put in an order of a district court judge and you

 

 3   don't disclose that the Ninth Circuit has reversed it.  And I

 

 4   just - you know, I won't say anything about my personal views on

 

 5   - on that, but that certainly is part of it.

 

 6             Before I get to the exhibits themselves, my last

 

 7   comment, again this is a highlight reel, and the exhibits in our

 

 8   briefs address some more issues, but I've given you what I think

 

 9   are the highlights, if you will, as to what makes up the bad

 

10   faith claim for dismissal under - under the statute.

 

11             I want to just identify for you, Your Honor, what we

 

12   view is the legal framework in which this motion comes before

 

13   you.  And I should say with all due respect, we are proceeding

 

14   to this trial under a reservation of rights obviously.  We're

 

15   not waiving our appellate rights -

 

16             THE COURT:  Well, nobody waives their appellate rights

 

17   when they go to a trial.

 

18             MR. ROSEN:  I understand that.

 

19             THE COURT:  Why would you tell a judge that?

 

20             MR. ROSEN:  No, no.  I just say I want the record to

 

21   be clear that -

 

22             THE COURT:  The record is always clear.  Mr. Rosen, -

 

23             MR. ROSEN:  - that, you know, -

 

24             THE COURT:  - you and I are experienced.  We graduated

 

25   from law school at about the same time.  And you don't need to

 

                                                           48

 

 1   say that.

 

 2             MR. ROSEN:  Well, I don't know the rules in

 

 3   bankruptcy.  And I know the rules in bankruptcy when you appeal

 

 4   a bankruptcy order are entirely different than the rules I'm

 

 5   familiar with under 1291 and 1292, when you appeal from a

 

 6   district court to a circuit court of appeals.

 

 7             THE COURT:  You don't have to warn any judge that you

 

 8   could appeal them, Mr. Rosen.

 

 9             MR. ROSEN:  I wasn't warning.  I was just saying we're

 

10   preserving.

 

11             THE COURT:  Sure, I know.  But you've already appealed

 

12   me two or three times.  I know you know how to appeal, Mr.

 

13   Rosen.  It's a - it's a bullying tactic.

 

14             MR. ROSEN:  Well, I'm sorry, Your Honor, if you view

 

15   that as a bullying tactic.  My comment was simply to state for

 

16   the record that we preserve our position respecting the summary

 

17   judgment motion that we had filed and why - and our view that we

 

18   thought it should have been granted.  But that's okay.  If you

 

19   consider that bullying, I - you know, that's in your perception,

 

20   not mine.  I don't bully judges.

 

21             In any event, getting back to the proposition, the

 

22   legal framework in which we - we address this issue is as

 

23   follows.  And I'm going to give you only three cases.  I'd give

 

24   you many cases, but I'll give you the top line.

 

25             THE COURT:  What are these cases supposed to show?

 

                                                           49

 

 1             MR. ROSEN:  This is the legal framework in which this

 

 2   issue is being decided, the 1307 issue.

 

 3             Number one is the Jennifer Ho, H-o, case.  It's a

 

 4   decision of the BAP of the Ninth Circuit.  It is reported at 274

 

 5   BR 867.  The case stands for the unremarkable proposition - and

 

 6   it's one of many cases I could cite to you for this, but just to

 

 7   give you, you know, one case - stands for the proposition that

 

 8   bad faith in filing a Chapter 13 petition is, quote, cause under

 

 9   1307, even though cause, bad faith is not listed as a specific

 

10   statutory definition under the cause definition in that.

 

11             Secondly, it is again unremarkable in the - in setting

 

12   forth that a Court in determining whether under 1307 whether a

 

13   Chapter 13 petition was filed in bad faith should consider the

 

14   following.  And I don't believe the list is exclusive, but it's

 

15   certainly illustrative.  Number one, whether the debtor

 

16   misrepresented facts in petition or plan; or unfairly

 

17   manipulated Bankruptcy Code -

 

18             THE COURT:  Mr. Rosen, this should have been in a

 

19   brief.  Why are you doing this now?

 

20             MR. ROSEN:  It is in our brief.

 

21             THE COURT:  So why are you doing - why are you

 

22   repeating this?

 

23             MR. ROSEN:  Well, it's part of my opening statement as

 

24   to what - as to the framework in which we're looking at this

 

25   evidence.  And if Your Honor will bear with me, it's very short.

 

                                                           50

 

 1             Number two, the debtor's history of filings and

 

 2   dismissals, which depending on your view this is the second

 

 3   versus the revitalized first one.

 

 4             Number three, whether the debtor's purpose in filing

 

 5   for Chapter 13 was to defeat state court litigation.  Here again

 

 6   it's not - the case makes it clear that that in and of itself is

 

 7   not bad faith.  However, it's a factor to be considered.  And

 

 8   here it's exacerbated by the fact that it is not state court

 

 9   litigation.  It is litigation in this district in the federal

 

10   court.

 

11             And number three [sic], other egregious behavior is

 

12   present.  And that's really a kind of a catch-all thing.  And

 

13   the Ninth Circuit says, and it's said several times, that the

 

14   Court's task is to look at the totality of the circumstances.

 

15             The case also stands for the proposition, again not

 

16   unremarkable, that if the Court finds bad faith under 1307 it

 

17   can do one of two things.  It can either convert the 13 to a 7

 

18   or it can dismiss.  And it sets forth the standard:  The best

 

19   interest - the Court is - is directed to exercise its discretion

 

20   - its discretion on the following ground:  What is in the best

 

21   interests of the creditors and the estate.  And I'm reading from

 

22   page 9 of that decision.

 

23             This is critical because it is not what's in the best

 

24   interests of the debtor.  It's what's in the best interests of

 

25   the creditors and the estate as to whether it should be

 

                                                           51

 

 1   dismissal or conversion.  In fact, the option that is given to

 

 2   the Court under 1307 is to be exercised in favor of the

 

 3   creditors and the estate against the debtor.  This is there to

 

 4   protect the creditors and, in fact, in a case which later

 

 5   displays the issue, where, for example, the creditors might be

 

 6   better off with a conversion because they would have rights to

 

 7   set aside preferences and transfers that they would not have

 

 8   with the bankruptcy petition dismissed.

 

 9             In any event, the proposition is the Court's

 

10   discretion is to be exercised under 1307 in favor of the

 

11   creditors.

 

12             We also have here, as I said earlier, the proposition

 

13   - the stipulation that there is only one creditor, and that's in

 

14   the stipulated pretrial order that we submitted.

 

15             The second of three cases I'm going to bring to your

 

16   attention is the Leavitt case.  The Leavitt case is cited in our

 

17   brief.  And again it has an explication of bad faith, et cetera,

 

18   and cause for dismissal under 1307.  And I certainly commend

 

19   that to Your Honor because that is the Ninth Circuit itself.

 

20   And that's the case that the BAP cites to in the Ho decision.

 

21             The Ho decision, by the way, I brought to your

 

22   attention because it is February 13th of this year.  It's a very

 

23   current decision.

 

24             And the last of the three cases I want to bring to

 

25   your attention, which I think states the obvious as well, is a

 

                                                           52

 

 1   decision of - of Judge Klein in the Eastern District of

 

 2   California in a case called In re Staff Investment Co.  And that

 

 3   is cited at 146 BR 256.

 

 4             THE COURT:  Is that in your brief?

 

 5             MR. ROSEN:  No, this one's not.  We just found this

 

 6   one.

 

 7             THE COURT:  Give me the number again then, the -

 

 8             MR. ROSEN:  146 BR 256.

 

 9             THE COURT:  Date?

 

10             MR. ROSEN:  January 5, 1993.

 

11             MR. ZLOTOFF:  What's the name of the case?

 

12             MR. ROSEN:  In re Staff Investment Co.

 

13             The reason this case is interesting because it is

 

14   similar to our case in the sense that there was really only one

 

15   creditor, and the question of what the Court should do under

 

16   1307, dismiss versus convert to a - to a 7, the case is the only

 

17   one in this district, in the - California that we have found,

 

18   many others - there are cases in other districts, but I know

 

19   Your Honor's preference is for cases either in the Ninth Circuit

 

20   or in the courts of California -

 

21             THE COURT:  Sort of.  For cases that are binding on

 

22   me, I'm concerned about the Ninth Circuit.  For cases that are

 

23   just persuasive or not persuasive on their merits, -

 

24             MR. ROSEN:  Yeah.

 

25             THE COURT:  - then a bankruptcy judge here versus a

 

                                                           53

 

 1   bankruptcy judge somewhere else is probably pretty equal.

 

 2             MR. ROSEN:  Okay.  Well, in any event, this is a

 

 3   bankruptcy Judge sitting in the Eastern District of California,

 

 4   and he -

 

 5             THE COURT:  Judge Klein, -

 

 6             MR. ROSEN:  Right, Judge Klein.

 

 7             THE COURT:  - whom I know.

 

 8             MR. ROSEN:  And I know from seeing the decisions, I

 

 9   believe Judge Klein sits with some frequency in the BAP panels

 

10   as well.  I think I've seen decisions of his from the BAP

 

11   panels.  He addresses this very issue that I've just made, and

 

12   that is the standard for dismissal versus conversion, the best

 

13   interests of creditors and the estate.  And he has an

 

14   extraordinarily good analysis of confirming what we all know and

 

15   what the courts have said, in that the estate does not include

 

16   the debtor.

 

17             And this issue - in this analysis and his balancing of

 

18   interests, the debtor's interests are not part of this equation.

 

19   It's the estate and the creditors.

 

20             So I give that to you only because I think it perhaps

 

21   states the obvious and it states a proposition which is not

 

22   remarkable, but it is the only case within the bankruptcy courts

 

23   in California we're aware that does make that explicit finding.

 

24             With that, Your Honor, I'm going to turn to the

 

25   exhibit books.  And I've just - in the front of each exhibit

 

                                                           54

 

 1   book -

 

 2             THE COURT:  I'm sorry, what?

 

 3             MR. ROSEN:  I say in the front of each volume there is

 

 4   an index -

 

 5             MS. KOBRIN:  He has - the Judge has a separate index.

 

 6             MR. ROSEN:  You also have a separate index for - that

 

 7   has them all.

 

 8             THE COURT:  I'm not aware of that.

 

 9        (Creditor's counsel confer off record.)

 

10             THE COURT:  Where would that be, Ms. Kobrin?

 

11             MS. KOBRIN:  You -

 

12             THE COURT:  The separate one?

 

13             MS. KOBRIN:  No.  The separate one is the exhibit list

 

14   that we sent over that was in the format that the Court asked

 

15   for.

 

16             THE COURT:  You would have that, not me.

 

17             MS. KOBRIN:  There were two copies of that sent over.

 

18             THE COURT:  No, my Deputy keeps that so she -

 

19             MS. KOBRIN:  Yes.

 

20             THE COURT:  - can keep track of the exhibits.  I don't

 

21   have that.

 

22             MR. ROSEN:  Do we have another copy to give to the

 

23   Judge?

 

24             THE COURT:  Oh, yes, I got it.

 

25             Ms. Kobrin, we found it.  It was in the pocket of the

 

                                                           55

 

 1   first exhibit book.

 

 2             MS. KOBRIN:  Okay.

 

 3             MR. ROSEN:  And, Judge, let me - as we walk through

 

 4   this, let me just indicate what we've done here today and

 

 5   hopefully make your job easier.

 

 6             THE COURT:  Do you have the list, Mr. Zlotoff, so you

 

 7   can follow along?

 

 8             MR. ZLOTOFF:  The exhibit list?  I do.

 

 9             THE COURT:  Thank you.

 

10             MR. ROSEN:  Let me just explain what we've done so

 

11   we'll assist the Court in understanding this.

 

12             We have a description and an exhibit number of all of

 

13   the exhibits that are in the volumes.  I will as we go through

 

14   them to the extent that they are being offered only for one case

 

15   versus the other, I think most of them are an overlap, but I

 

16   will tell you that because Your Honor did ask to distinguish if

 

17   they relate just to the 13 as opposed -

 

18             THE COURT:  It all relates to the 13.

 

19             MR. ROSEN:  These all relate - most of these relate to

 

20   the motion to dismiss as opposed -

 

21             THE COURT:  The 13?

 

22             MR. ROSEN:  Yeah.  I meant the confirmation of the 13.

 

23             What we've done in addition is as follows.  In front

 

24   of each exhibit that is being offered for only limited purposes

 

25   we have put in a page.  If you could turn, Your Honor, just as

 

                                                           56

 

 1   an example to Exhibit 20 you'll see that -

 

 2             THE COURT:  Do you want me to look at the exhibit or

 

 3   the list?

 

 4             MR. ROSEN:  I want you to look at the tab in the book

 

 5   of Exhibit 20.

 

 6             THE COURT:  Not offered for the TOMA, which is the -

 

 7             MR. ROSEN:  Truth of the matter asserted.

 

 8             THE COURT:  - truth of the matter asserted, offered -

 

 9             MR. ROSEN:  So every -

 

10             THE COURT:  - only - offered only to show that video

 

11   excerpts were identified and shown to jury.

 

12             MR. ROSEN:  Yeah.  Every place - and this occurs

 

13   frequently.  Every place where there is any question about the

 

14   offering of the exhibit, whether it's for all purposes or just

 

15   for limited purposes, not for TOMA, whether it's offered as an

 

16   admission only by Mr. Henson, we've tried to do that so Your

 

17   Honor has - we don't have to walk through it orally, and Your

 

18   Honor has an understanding of the purposes for which it's

 

19   admitted.

 

20             This also - what we have not done redundantly is to

 

21   reiterate Your Honor's rulings in the in limine.  For example,

 

22   the - we don't have to say in here that the bankruptcy petition

 

23   of Mr. Henson and his schedules are offered not for TOMA, Your

 

24   Honor's already ruled on that.  But we have done this wherever

 

25   an exhibit requires an explanation.

 

                                                           57

 

 1             THE COURT:  But for the appellate court, if this goes

 

 2   to an appellate court, it's important to me to make a decent

 

 3   record.  So you should articulate when you introduce the exhibit

 

 4   what you're introducing it for.  Or if I've already ruled on it,

 

 5   we ought to identify those so they don't have to go back and try

 

 6   to figure out what you're talking about if this ends up.

 

 7             MR. ROSEN:  This is part of the record on appeal.

 

 8   That's why we put in the exhibit books that we filed.

 

 9             THE COURT:  I don't know that your statement, typed

 

10   statement here is part of the record on appeal unless -

 

11             MR. ROSEN:  It is.  Because if I - if I stood up and

 

12   did it orally, if instead of doing it an efficient way, by

 

13   giving you the documents and offering them, in another way that

 

14   a case is tried, I would stand up and say, 'Your Honor, I offer

 

15   Exhibit 20.  I offer it just for the limited purpose of x.'  And

 

16   you would hear any objection, et cetera.  And you would say,

 

17   "Okay, received into evidence."

 

18             The statement on the transcript, which shows the

 

19   limitation of what the exhibit is offered, is clearly part of

 

20   the record on appeal.  What we're doing is instead of my

 

21   standing here and saying that to you, we've made it part of the

 

22   exhibits themselves, which we have filed.  So there will be a

 

23   record in the appeal court that - as to whether at they were

 

24   offered for.

 

25             And have you written that you're relying on a motion I

 

                                                           58

 

 1   made at a particular hearing on a particular date in these

 

 2   little typed statements?

 

 3             MR. ROSEN:  No.

 

 4             THE COURT:  Well, how are they going to know that?

 

 5             MR. ROSEN:  The - the decision you made is always part

 

 6   of the record.  You have a transcript.  You've made rulings on

 

 7   the in limine motions.

 

 8             THE COURT:  Yeah, but I don't think that that's

 

 9   sufficient.  If I - if you're relying on a ruling I made, I

 

10   would prefer to keep the record straight here.  And if you're

 

11   relying for a particular exhibit on a ruling I made, I want you

 

12   to do it orally since it's not written here.  Tell me when I

 

13   made the order and what - what the date was and on what motion.

 

14             MR. ROSEN:  Okay.  Okay.  Exhibit Number 1 - I'll now

 

15   start -

 

16             THE COURT:  Are we now going through the exhibits?  I

 

17   should start with Exhibit 1?

 

18             MR. ROSEN:  Yeah, I'm going to go through them now.

 

19             THE COURT:  Okay.  Well, you were taking me through

 

20   this exercise with -

 

21             MR. ROSEN:  Right.

 

22             THE COURT:  - the list, and we're finished with that.

 

23             MR. ROSEN:  Exhibit 1 is a cease-and-desist letter

 

24   from Ms. Kobrin to Mr. Henson that is being offered to show the

 

25   - we have to think of a shorthand way for me to describe the -

 

                                                           59

 

 1   what I said earlier is the overarching enterprise, the entire

 

 2   malicious intent of Mr. Henson from 1996.  So I don't want to

 

 3   have to keep repeating -

 

 4             THE COURT:  I think the overarching -

 

 5             MR. ROSEN:  Enterprise of - of -

 

 6             THE COURT:  - enterprise is a pretty good way to -

 

 7             MR. ROSEN:  - malice against the church.

 

 8             THE COURT:  Pardon me?

 

 9             MR. ROSEN:  Of intention - of intention to harm the

 

10   Church of Scientology.

 

11             THE COURT:  That's fine.

 

12             MR. ROSEN:  Okay.  So Exhibit 1 is under that

 

13   category.  Exhibit 2 is under that category.  Exhibit 3 is under

 

14   that category.

 

15             Exhibit 4 is under that category of bad faith.  This

 

16   is the - the - relates to the activities of Mr. Henson preparing

 

17   a bankruptcy petition in December to - of 1997 to - to derail a

 

18   trial that was then set at that time before Judge Whyte.

 

19             Number 5 is the minutes of the hearing on the

 

20   injunction in which Mr. Henson was enjoined from physical

 

21   assault against Reverend Barton.  Again just another piece of

 

22   the ongoing misconduct and greater overall scheme, if you will,

 

23   common denominator - denominator of Mr. Henson's conduct.

 

24             Number 6 is the motion to continue the trial dates.

 

25   Again I've indicated what that applies to.

 

                                                           60

 

 1             Number 7 is the transcript of the proceedings before

 

 2   Judge Whyte in February of 1998.

 

 3             Number 8 is the - Mr. Henson's - 7 and 8 both relate

 

 4   to Mr. Henson's attempt to delay the trial.  He made one

 

 5   application after another to delay the trial.  And when Judge

 

 6   Whyte would not hear it any longer, that was when he used the

 

 7   Bankruptcy Court to delay the trial.

 

 8             Exhibit 9 is the voluntary petition filed by Henson.

 

 9   The petition in bankruptcy, and that is one is pursuant to Your

 

10   Honor's ruling in the in limine motions on September 11th.  That

 

11   comes in only to show what he told the Court and doesn't come in

 

12   for TOMA.

 

13             Exhibit 10 is a posting by Mr. Henson of February 25.

 

14             Exhibit 11 is again bad faith, et cetera.  Exhibit 11,

 

15   the order on RTC's motion to modify the preliminary injunction

 

16   that had been entered against Mr. Henson.

 

17             And the reason for that is because even after, as

 

18   shown in the exhibit - I'm not testifying to this - as shown in

 

19   the exhibit, the reason this was necessitated was because Mr.

 

20   Henson in Exhibit 10 threatened to commit contempt, threatened

 

21   to violate Judge Whyte's preliminary injunction.  We were

 

22   required to get another order from Judge Whyte on that.  And

 

23   that's Exhibit 11.

 

24             Exhibit 12 is the - is the ex-parte application for

 

25   additional relief against Mr. Henson.  This is yet an additional

 

                                                           61

 

 1   threat to violate - to commit contempt.

 

 2             Exhibit 13 is the order originally entered in this

 

 3   Court compelling Mr. Henson to attend a 2004 exam.  And as to

 

 4   that, by the way, the same issue of delay, delay that Mr. Henson

 

 5   exhibited in connection with the copyright trial before Judge

 

 6   Whyte, was also in ready attendance here before Your Honor.

 

 7             MR. ZLOTOFF:  Can I - can I butt in here right now?

 

 8   Because I don't - it sounds like we're halfway dealing with

 

 9   exhibits and halfway dealing with argument.  And so I'm a little

 

10   confused as to whether I'm supposed to be saying - I don't know

 

11   what we're doing, to be honest with you.  Are we - are we

 

12   going -

 

13             THE COURT:  Well, he's just saying this exhibit is

 

14   introduced on this issue and this exhibit is introduced on that

 

15   issue.  And he's trying to say what he thinks each exhibit shows

 

16   to identify the issue.

 

17             Now there is a little argument in it, but it also

 

18   clarifies which issue the exhibit goes to.

 

19             MR. ZLOTOFF:  And then when he gets to the end of 280,

 

20   then I go back over from 1 and I say -

 

21             THE COURT:  If you want to do that as part of your

 

22   argument - your closing argument, I have no objection to your

 

23   doing that.

 

24             MR. ZLOTOFF:  Okay.

 

25             MR. ROSEN:  Number 14, I believe then, is the - yet a

 

                                                           62

 

 1   further attempt to delay the proceedings from the Bankruptcy

 

 2   Court.

 

 3             THE COURT:  Is there a 15?

 

 4             MR. ROSEN:  Number 15 is omitted.  Your Honor, there

 

 5   are some - and, if you can believe it, we actually trimmed this

 

 6   back from our original exhibit list.

 

 7             THE COURT:  Okay.  Just tell me when it's - again,

 

 8   it's for the purpose of the record.  So if you go - if you go

 

 9   from 14 to 16, you should just tell me or give me a list - maybe

 

10   on the exhibit list it's clear that they're omitted.

 

11             MR. ROSEN:  Yes.

 

12             THE COURT:  That's fine.  That's enough.

 

13             MR. ROSEN:  You should have - you should not have a 15

 

14   on your exhibit list.

 

15             THE COURT:  No, I don't.  Okay.  That's fine.

 

16             MR. ROSEN:  Exhibit 15, the bankruptcy schedules filed

 

17   by Mr. Henson.  This is per with the limitation of your in

 

18   limine ruling on this 11th of September.

 

19             Exhibit 17 is the same thing, on the in limine.

 

20             Exhibit 18, we've given you the special verdict form

 

21   from the trial.  Again the purpose is to show that the jury

 

22   found willful infringement.  And that - and the totality of the

 

23   circumstances we believe is a factor under 1307, and bad faith.

 

24             Number 20 is a transcript of certain of the

 

25   proceedings at trial.  20 and 21.  These constitute admissions

 

                                                           63

 

 1   by Mr. Henson of things like his purpose, his malicious purpose

 

 2   in infringing.  He didn't infringe because he wanted to make

 

 3   money.  He didn't infringe because -

 

 4             THE COURT:  That's a little much, Mr. Rosen.  It's his

 

 5   purpose in infringing.

 

 6             MR. ROSEN:  Yeah, okay.

 

 7             THE COURT:  You don't need to go into an argument on

 

 8   each one -

 

 9             MR. ROSEN:  Yeah.  I'm sorry.  And I apologize.  I'm

 

10   trying to help Your Honor as much as I can so you understand

 

11   what the exhibits refer to.

 

12             21 includes the statement from - by Mr. Henson from

 

13   the witness stand in response to his own attorney's question,

 

14   "Now that this has happened, would you do it again, would you

 

15   infringe again?"

 

16             And his answer was, "Well, I wouldn't do it out in the

 

17   open" and, you know, kind of wear a mask the next time I stick

 

18   up the 7-Eleven is the way we - has kind of characterized it.

 

19   And -

 

20             THE COURT:  Come on.  Come on.  This is - I don't want

 

21   any of this, -

 

22             MR. ROSEN:  Yeah, I understand.

 

23             THE COURT:  - Mr. Rosen.  None.

 

24             MR. ROSEN:  Okay.

 

25             THE COURT:  Okay.  So -

 

                                                           64

 

 1             MR. ROSEN:  Got you.

 

 2             THE COURT:  - hold yourself in.

 

 3             MR. ROSEN:  I will try.  It's -

 

 4             THE COURT:  And just -

 

 5             MR. ROSEN:  - just I get so - I get -

 

 6             THE COURT:  I'm sure you get very emotional, Mr.

 

 7   Rosen, but be like a lawyer and hold yourself in and just tell

 

 8   me the issue it goes to.

 

 9             MR. ROSEN:  Okay.

 

10             THE COURT:  Don't describe the exhibit.

 

11             MR. ROSEN:  Okay.  Exhibit 22 is a judgment - first

 

12   judgment of contempt against Mr. Henson.  And that goes to his

 

13   ongoing unitary plan of injuring - of attacking Scientology.

 

14             20- -

 

15             THE COURT:  Okay.  Let's just - let's call that

 

16   "unitary plan."

 

17             MR. ROSEN:  That's what I asked you before.

 

18             THE COURT:  No.  Let's give it one word.

 

19             MR. ROSEN:  Come up with a short -

 

20             THE COURT:  Right.  Let's give it one word.

 

21             MR. ROSEN:  Okay.  "Unitary plan."

 

22             THE COURT:  Okay, fine.

 

23             MR. ROSEN:  Two words.  Okay, that's fine.

 

24             25 is the - self-explanatory.  It's the Court of

 

25   Appeals affirmance.

 

                                                           65

 

 1             27, these are the amendments to the schedules in

 

 2   bankruptcy.  Again this is important in the in limine.  Not

 

 3   offered for TOMA.  Just offered to show this is what he told the

 

 4   Court.

 

 5             28 is the same thing.  That's his Chapter 13 plan.

 

 6   The same limitation.

 

 7             29 is correspondence to Mr. Zlotoff.  Let me just look

 

 8   at this one for a moment, make sure I get this right.

 

 9             This relates to our demands for discovery and the fact

 

10   that discovery was not forthcoming from Mr. Henson.  The - the

 

11   letters are being offered for the purpose - and there's a whole

 

12   series of them - for the purpose of demonstrating that we had -

 

13   we had made demands, we had made remainders.

 

14             THE COURT:  So they're offered for the truth?  That's

 

15   problematic -

 

16             MR. ROSEN:  Offered for the truth that we had made -

 

17   no.  They're offered for the statement that here is our

 

18   demanding that you produce a certain document.  The truth is -

 

19   and we asked for it before and you haven't given it to us.

 

20             THE COURT:  But that's offering this hearsay document

 

21   for the truth.

 

22             MR. ROSEN:  It's not hearsay.

 

23             THE COURT:  Why isn't it hearsay?

 

24             MR. ROSEN:  Ms. Seid is available to testify.

 

25             THE COURT:  So it's an offer of proof?

 

                                                           66

 

 1             MR. ROSEN:  Well, it's also part of the record on -

 

 2             THE COURT:  Either she testifies or it's hearsay.  Why

 

 3   not?

 

 4             MR. ROSEN:  Okay.  I - you know something, on

 

 5   reflection I think Your Honor is right.  I'll offer it not for

 

 6   truth, but to show that we made demands for discovery.

 

 7             THE COURT:  Okay.  Now which ones are these?

 

 8             MR. ROSEN:  There were going to be several of them.

 

 9   The first one we came to was number 29.

 

10             THE COURT:  Okay.  Mr. Zlotoff, if you have agreed to

 

11   all of these, then I'm not going to say anything, so -

 

12             MR. ZLOTOFF:  I understand.

 

13             THE COURT:  I - I - hearsay can be admissible if

 

14   there's no objection.

 

15             MR. ZLOTOFF:  I understand.

 

16             THE COURT:  So if you don't object, I'll -

 

17             MR. ZLOTOFF:  I'm biding my time because - that's why

 

18   I butted in earlier, so I'm going to let -

 

19             THE COURT:  Why are you biding your time?  You have to

 

20   make objections to any exhibits that you think are

 

21   objectionable.  You can make your comments later, but then they

 

22   either come in or they don't come in.

 

23             MR. ZLOTOFF:  I understand.  He hasn't offered

 

24   anything into evidence yet -

 

25             MR. ROSEN:  I'm going to offer them all when I'm done

 

                                                           67

 

 1   with them, so you can hear -

 

 2             THE COURT:  Oh, I see.  I misunderstood.

 

 3             MR. ROSEN:  - the - the objections all at once.  I

 

 4   think it makes for a more orderly presentation to the Court.

 

 5             THE COURT:  I see.  I understand now.  That's the

 

 6   context in which this is -

 

 7             MR. ROSEN:  Okay.  30 -

 

 8             THE COURT:  - all occurring.

 

 9             MR. ROSEN:  Okay.  30 and 31 are - relate to the

 

10   discovery misconduct of Mr. Henson.

 

11             THE COURT:  And not to the truth.  30 and 31 said not

 

12   offered for TOMA.

 

13             MR. ROSEN:  Right.

 

14             32 is a transcript of the proceedings before the

 

15   Court, again to show that the admissions, that the discovery has

 

16   not been made, as well as Your Honor's rulings.

 

17             33 is an order of the Court compelling discovery.

 

18             34 is another order of the Court.

 

19             35 is a response by Mr. Henson to an - to the Court's

 

20   order on discovery, being offered to show again that - not for

 

21   the truth, but to show that he hasn't produced, hasn't complied

 

22   with the order, didn't produce documents.

 

23             36, the jury instruction in the copyright infringement

 

24   case.  Before we had the jury verdict.  This is the jury

 

25   instruction.  Just so Your Honor understands, what the jury had

 

                                                           68

 

 1   to find under the law, to find willful infringement.

 

 2             37, this is a statement not being offered for the

 

 3   truth again, but a statement by the debtor's wife respecting

 

 4   documents that she had produced.  Again more discovery

 

 5   obstruction.

 

 6             39 is a letter, not offered for the truth, to

 

 7   demonstrate that further discovery demands - I should just

 

 8   shortcut this and say discovery obstruction, or whatever,

 

 9   because a lot of these refer to the same thing.  That's true

 

10   with respect to 40, 41, 42, 43, 44, 46, 47, 48, 53, 54, 55, 56,

 

11   57, 58, 59.

 

12             60 is the transcript of the proceeding that occurred

 

13   before Your Honor on September 1, 1999.

 

14             61 is an order on a motion to compel, an order of the

 

15   Court.

 

16             62, again discovery.  65, discovery.  65, discovery.

 

17   66, discovery.  67, response to an order.  Again it's a

 

18   discovery issue.

 

19             68, this is a separate category.  68 and 69, these are

 

20   applications by the debtor and his wife to the IRS for

 

21   extensions of time beyond the automatic extension to August for

 

22   additional extensions of time to file their tax returns on the

 

23   grounds that they don't want Scientology to find out about their

 

24   expenses and what's in their tax returns.

 

25             I would respectfully submit to you that the other

 

                                                           69

 

 1   thing they didn't want the Scientology or the Court to find out

 

 2   about in those tax returns -

 

 3             THE COURT:  This is going into argument or this is in

 

 4   the exhibit?  You are describing exhibits and telling me what

 

 5   category they go into, -

 

 6             MR. ROSEN:  Okay.

 

 7             THE COURT:  - not giving me argument.

 

 8             MR. ROSEN:  Okay, fine.  I thought I was giving you

 

 9   argument as part of my opening statement, but -

 

10             THE COURT:  Yes, and I took that as opening statement.

 

11             MR. ROSEN:  This is part of it.  This is my opening

 

12   statement.

 

13             THE COURT:  No - well, no, I don't think so.  This is

 

14   describing the exhibits to be admitted.

 

15             MR. ROSEN:  Okay.

 

16             THE COURT:  You - you - if you want to do an opening

 

17   statement and talk more about the opening statement, that's

 

18   fine.

 

19             MR. ROSEN:  Okay.

 

20             THE COURT:  But that would be improper use of an

 

21   opening statement.

 

22             MR. ROSEN:  Okay.  That takes us through 69 and that

 

23   brings us to Volume II.  The first exhibit in Volume II is 76.

 

24   70- - excuse me - 72.  I apologize.

 

25             72 is discovery.  73 is discovery.  75, 76, 77, -

 

                                                           70

 

 1             THE COURT:  I'm sorry.  Yeah, I'm with you now.

 

 2             MR. ROSEN:  Yeah.  I should say that the - some of

 

 3   these may also contain admissions by Mr. Henson.  Like, for

 

 4   example, his letter, 76 is a letter to Mr. Hogan, but - you

 

 5   know, which obviously comes in as an admission.

 

 6             By saying it's discovery I don't mean to exclude an

 

 7   admission by Mr. Henson that may be in addition to it.  Any

 

 8   doc- -

 

 9             THE COURT:  Confused -

 

10             MR. ROSEN:  Huh?

 

11             THE COURT:  How am I supposed to deal with this?  If

 

12   you're - if you have something here that says not offered for

 

13   TOMA, and you intended as an admission, then put that in your

 

14   closing argument, so that - unless it says for -

 

15             MR. ROSEN:  It says it in front of the exhibit.

 

16             THE COURT:  For 76?

 

17             MR. ROSEN:  Yeah.

 

18             THE COURT:  I'm sorry.  I didn't see that.  Are we

 

19   talking about -

 

20             MR. ROSEN:  76.

 

21             THE COURT:  Where it says, "Offered only to show

 

22   Henson's intentional underemployment."

 

23             MR. ROSEN:  Right.

 

24             THE COURT:  Okay.  It doesn't say "admission."  I

 

25   understand what you're saying at this point regarding this

 

                                                           71

 

 1   exhibit.

 

 2             MR. ROSEN:  Well, anything - by definition under 801

 

 3   anything Mr. Henson says is an admission.

 

 4             Okay.  78, the transcript of the proceedings before

 

 5   this Court.

 

 6             80, 81, 82, 83 are all Henson postings which are

 

 7   offered to show misconduct, bad faith, destruction of documents.

 

 8   They're all marked on here in the front of each one as to the

 

 9   particular purpose.  None of them are offered for TOMA.  They're

 

10   offered to show Mr. Henson's admissions with respect to certain

 

11   limited areas, as I've just indicated.

 

12             84 is Mr. Henson's résumé.  This I think really

 

13   relates to the motion to confirm the plan, not to the bad faith;

 

14   because this goes to the issue of whether - primarily, whether

 

15   he was underemployed, what he was - the plan represents what he

 

16   was capable of earning.

 

17             86 is a declaration by Mr. Henson offered only to show

 

18   - this is only discovery.

 

19             87 is the - Mr. Henson's - is the log of Mr. Henson's

 

20   pickets of the church, which again goes to the fact that he's

 

21   spending all this time picketing.  I think it probably goes more

 

22   to the motion to confirm the 13 plan, but it could have some

 

23   significance on the bad faith as well.  Probably does, actually.

 

24             Okay.  89.  89 - 89 relates to the artwork that I told

 

25   you about and the amount that they - Mr. Henson paid for framing

 

                                                           72

 

 1   of the - of the lithographs.  It's about $1600 I think.  This is

 

 2   separate and apart from the value of the documents themselves -

 

 3   excuse me - the value - value of the artwork itself, which is a

 

 4   separate exhibit.

 

 5             90 and 91 are the two appraisals that Your Honor's

 

 6   already aware of.  They've been stipulated in.  The 410,- as of

 

 7   the date of the petition and the 608,- as of July of 2000, of

 

 8   the Henson home.

 

 9             92 is Mr. Henson's amended Chapter 13 plan.  Again

 

10   this is per your - part of your in limine ruling of September

 

11   11th, being offered not for TOMA.

 

12             93, posting by Mr. Henson.  Offered to show

 

13   misconduct.  These are - 94 goes as well on the misconduct.

 

14             95 is document production by Henson.  This goes to

 

15   discovery misconduct.

 

16             96 - 96, I'm sorry, is a posting by Mr. Henson in

 

17   March of 1998.  And this is an admission where he has picketing

 

18   activities.

 

19             97, a transcript of proceedings before this Court.

 

20             98 is a - Mr. Henson's telephone statement - telephone

 

21   bill of September 19th, 1999.  This is a category we haven't

 

22   spoken about before, and I should address this.

 

23             Mr. Henson had in his schedule or in his plan a

 

24   certain allocation of projected expenses for telephone charges.

 

25   This is $534 for one month, by an order of magnitude greater

 

                                                           73

 

 1   than what he had projected.  It shows, A, that the - that the

 

 2   expenses that were listed in the plan are - were way off.

 

 3             It also goes to an issue of - I think of bad faith and

 

 4   under Chapter 13 confirmation as follows.  The bulk of this

 

 5   bill, and you'll see it from - later on, when we get to the

 

 6   depositions.  The bulk of this is long-distance telephone calls

 

 7   having nothing to do with his business.

 

 8             If he wants to go to Florida and picket a Church of

 

 9   Scientology, if he wants to go to Los Angeles and do that, and

 

10   if he wants to make telephone calls in connection -

 

11             THE COURT:  This is argument.

 

12             MR. ZLOTOFF:  Your Honor, you know, -

 

13             MR. ROSEN:  It's argument, okay.

 

14             THE COURT:  I don't want any argument.

 

15             MR. ZLOTOFF:  You know, from a little - from a little

 

16   Pacific Telephone bill, it's amazing what he can get out of it.

 

17   I - I don't see any of that on there.

 

18             THE COURT:  Right.  It's - I'm going to - look, I want

 

19   to tell you, Mr. Rosen.  If you do it more, I'm going to

 

20   sanction you.  I want you not to make argument during this

 

21   portion of the evidence presentation.

 

22             MR. ROSEN:  But this is part of my opening statement.

 

23             THE COURT:  I told you it is inappropriate and I don't

 

24   want you to do it.

 

25             MR. ROSEN:  Okay.

 

                                                           74

 

 1             THE COURT:  Your opening statement ended.  And if you

 

 2   want - if you want to leave and take a five-minute break, we'll

 

 3   take a five-minute break.  This is presentation of evidence.  If

 

 4   you want to make an opening statement, then it's not going to -

 

 5   it's not going to be describing each of the exhibits and then

 

 6   turn around and say, "I want to admit them."  That's - we're

 

 7   separating it out.

 

 8             MR. ROSEN:  What was the next one?  We're up to 98.

 

 9             99 is an order of Judge Whyte in the copyright case.

 

10             100 is an order of the Ninth Circuit.

 

11             104 is the deed of trust or mortgage on the Henson

 

12   property.

 

13             107 is a posting from Mr. Henson.  It's offered simply

 

14   to show that he threatened to violate the injunction.

 

15             109, an order of Judge Whyte, which is

 

16   self-explanatory from the order.

 

17             110, an order from Judge Whyte granting attorney's

 

18   fees in connection with the - the copyright case, I believe.

 

19   Let me just check that to make sure.  Yes, these are the

 

20   attorney's fees granted in the copyright case.

 

21             THE COURT:  Excuse me, Mr. Rosen.  I just realized

 

22   something.  To make perfectly clear that opening statements are

 

23   over, I could have allowed you to make your opening statement

 

24   right after his opening statement, but we didn't do that.  So

 

25   there's this - that's the way it's proceeded.

 

                                                           75

 

 1             MR. ZLOTOFF:  I was aware of that.

 

 2             THE COURT:  Yeah, well, you didn't say anything.

 

 3             MR. ZLOTOFF:  I'm content to postpone my opening

 

 4   statement till - till later.  At this point I don't think it

 

 5   would serve any purpose for me to -

 

 6             THE COURT:  Okay.

 

 7             MR. ROSEN:  111 are the findings and conclusions of

 

 8   Judge Whyte in the contempt proceeding.

 

 9             112 and 113 are postings.  Unitary plan, I think is

 

10   the buzzword.

 

11             114 is an order of Judge Ware, I believe it is,

 

12   dismissing the case against the - the IRS.  I think it's Judge

 

13   Ware.  Yeah.

 

14             Okay.  115 -

 

15             THE COURT:  It's -

 

16             MR. ROSEN:  - is a decision of the Ninth Circuit.

 

17             THE COURT:  Wait a second.  1- -

 

18             MR. ROSEN:  115.

 

19             THE COURT:  114 is granting the motion of the IRS,

 

20   right?

 

21             MR. ROSEN:  Yeah.  It's Judge Ware's decision

 

22   dismissing Henson's suit against the IRS.

 

23             THE COURT:  Yes, okay.  Thank you.

 

24             MR. ROSEN:  And the order itself - if Your Honor's not

 

25   aware of it, the order itself tells you what the relevance is.

 

                                                           76

 

 1   It's, quote, unitary plan.

 

 2             115 is the Ninth Circuit order of affirmance in the

 

 3   copyright case, one of them.

 

 4             116 is a posting by Mr. Henson.  Unitary plan.

 

 5             121 is a posting - give me a second, Your Honor,

 

 6   please.

 

 7        (Creditor's counsel confer off record.)

 

 8             MR. ROSEN:  I have to explain this.  121 is the

 

 9   document which is referred to on the tape we're going to show of

 

10   the deposition.  It's identified in the videotape of the

 

11   deposition that Mr. Henson is authenticating and reading from in

 

12   it.  So since the document's not on camera, this is the one that

 

13   - this is the document that goes with it.

 

14             THE COURT:  121 or 122?

 

15             MR. ROSEN:  121.

 

16             THE COURT:  Thank you.

 

17             MR. ROSEN:  122 is a proceeding before this Court of

 

18   September 13th, 2000 - a transcript, rather.

 

19             124 is the posting by Mr. - is a posting by Mr.

 

20   Henson.  Unitary plan.

 

21             125 - I'm not sure that we really have to make this an

 

22   exhibit, but for the convenience of the Court we did.  We had

 

23   separately submitted the model plans of other districts on the

 

24   issue of valuation date.  And we made them part of the record

 

25   here in the exhibit.  I think that they're a matter of public

 

                                                           77

 

 1   record, anyway, but this was just for convenience to make them

 

 2   an exhibit, to collect them in one place.

 

 3             126, let me just - this is the - this goes with it.

 

 4   This is the email showing the - that relates to these plans.

 

 5             THE COURT:  I didn't hear what you said.  What did you

 

 6   just -

 

 7             MR. ROSEN:  Huh?

 

 8             THE COURT:  I missed what you said.

 

 9             MR. ROSEN:  126 is the - is the email from EZ Filing

 

10   that relates to these plans.

 

11             THE COURT:  Okay.

 

12             MR. ROSEN:  So Exhibit 125, -

 

13             THE COURT:  Thank you.

 

14             MR. ROSEN:  - the model plans of other districts.

 

15             127 is the objection we filed originally, preliminary

 

16   objection to confirmation back in '98.

 

17             128 is an order of this Court which speaks for itself.

 

18             129 is the docket sheet from the criminal proceeding.

 

19   People of the State of California against Keith Henson.  That is

 

20   the court docket sheet.

 

21             The next one - that's unitary plan, to use the

 

22   shorthand.

 

23             133 -

 

24             THE COURT:  You're in another volume, and I need a

 

25   minute.

 

                                                           78

 

 1             MR. ROSEN:  Say again?

 

 2             THE COURT:  You're in another volume.  I need a

 

 3   minute.

 

 4             MR. ROSEN:  Yup, we're up to Volume III.  Correct.

 

 5             THE COURT:  I'm ready.

 

 6        (Creditor's counsel confer off record.)

 

 7             MR. ROSEN:  Oh, I'm sorry.  I am corrected in

 

 8   something.  The Exhibit 110 was supposed to be removed from

 

 9   this, so I withdraw the exhibit.  It was the original order by

 

10   Judge Whyte on the fees, which was then reversed and substituted

 

11   with another one.  So -

 

12        (The Court confers with the Clerk.)

 

13             MR. ROSEN:  - I misspoke and I - it should have been -

 

14   it should not have been included in the exhibits, Your Honor.  I

 

15   apologize.

 

16             THE COURT:  110 is withdrawn.

 

17             MR. ROSEN:  Okay.  133 and 134, these go together.

 

18   133 is a posting by somebody, a stranger.  It's only there to

 

19   show that it was posted, not for TOMA, because 134 is a response

 

20   to it.  So if I give you 134 without 133, it makes no sense.

 

21             135, posting by Henson.  Again general category of

 

22   unitary plan.

 

23             140, all the way down from 140 through 159, that's all

 

24   the same category of Mr. Henson's misconduct, unitary plan.

 

25             160, this is the appraisal of the etching for

 

                                                           79

 

 1   insurance that Your Honor asked me about before, how much was

 

 2   it.  And this is 1985.  This is for insurance purposes.

 

 3             164, '65, '66, '67, more postings by Henson.  Unitary

 

 4   plan, misconduct, attacking the Scientology, et cetera.

 

 5             168 is under the same category.  It's an order of the

 

 6   Court in the copyright case on respecting a protective order on

 

 7   a deposition.

 

 8             171 is the errata sheet that Mr. Henson purported to

 

 9   make with respect to the transcript of this February 18th 2004

 

10   examination.  Let me just check that a second, if I could.

 

11             This is not offered for the truth nor is it offered

 

12   for an admission.  It's offered solely for the purpose of

 

13   showing under the category of bad faith that Mr. Henson

 

14   attempted to change his testimony from yes to no, or whatever it

 

15   may be.

 

16             173 is the final judgment in the copyright case.

 

17             174 is Mr. Henson's application -

 

18             THE COURT:  Wait.

 

19             MR. ROSEN:  I'm sorry?

 

20             THE COURT:  Okay.  That's fine.  Go ahead.

 

21             MR. ROSEN:  '73 is the final -

 

22             THE COURT:  I was - I was missing something for a

 

23   moment.  I thought I was missing an exhibit, but I wasn't.

 

24             MR. ROSEN:  Okay.  '73 - 173 is the final judgment in

 

25   the copyright case.

 

                                                           80

 

 1             174 is Mr. Henson's application to proceed informa

 

 2   pauperis.  That has an admission in it as to his income.  And I

 

 3   believe - well, I'm just going to say that.  I - I won't argue

 

 4   from it.

 

 5             177 is - this is the transfer of the Whole Life policy

 

 6   that Mr. Henson owned.  The one that we talked about before that

 

 7   has a cash surrender value.

 

 8             178 relates to the same thing.  It's his ability -

 

 9   shows his ability to get the policy back after signing it for

 

10   the payment of $25.

 

11             179 is a declaration of Mr. Henson in connection with

 

12   the dispute over the deposition of his daughter.  It is only

 

13   offered to show - not for TOMA.  It's only offered to show the

 

14   representations Mr. Henson made in that respecting his expenses

 

15   as compared to those that are in his - in his bankruptcy filings

 

16   with this Court.

 

17             180 is a history of the loan statement from the

 

18   mortgagee, World Savings for 1998, which shows, again as I

 

19   mentioned earlier in my opening, some amount of the original

 

20   mortgage as paid down as of the date of the petition.

 

21             182 is a schedule of personal property endorsement on

 

22   the home owner's policy.  And this is the one I believe I

 

23   referred to earlier that has the identification of the artwork

 

24   in it.

 

25             183 is the charging documentation in the criminal

 

                                                           81

 

 1   proceeding against Mr. Henson.

 

 2             184 is a response - okay.  Well, it's a response to

 

 3   summary judgment - a summary judgment motion by RTC in the

 

 4   copyright case.  It's being offered to show - well, excuse me -

 

 5   unitary plan.

 

 6             185 is - this is an exhibit which we've just added.

 

 7   We added a couple of exhibits yesterday and gave Mr. Zlotoff not

 

 8   only the copies but we gave them the letter identifying what

 

 9   they were.  You have two stipulated appraisals, for the petition

 

10   date and June of 2000.  This is the appraisal - as of June of

 

11   2000 for the house.

 

12             This is a current appraisal which was attached to our

 

13   opposition papers on the motion to sell the house.  We think it

 

14   - to the extent it's important or may be relevant to determine

 

15   what it is today.  Like, for example, for conversion purposes,

 

16   what the value of the house is today, we would ask that this be

 

17   included.  Obviously we couldn't include it before.  It just -

 

18   it just came up.  So I wanted to indicate to Your Honor that

 

19   as -

 

20             THE COURT:  Now we're getting about the admissibility

 

21   of this.  And Mr. Zlotoff hasn't told us what his position is.

 

22             MR. ROSEN:  I understand.  And I'm telling - I -

 

23             MR. ZLOTOFF:  Well, I'll tell you - I'll tell you

 

24   right now I object because it's hearsay.

 

25             THE COURT:  Okay, that's fine.

 

                                                           82

 

 1             MR. ZLOTOFF:  It's as simple as that.

 

 2             MR. ROSEN:  Okay.

 

 3             THE COURT:  But I don't need to deal with that now.

 

 4             MR. ZLOTOFF:  No.

 

 5             THE COURT:  I assume Mr. Zlotoff is going to review

 

 6   the exhibit.

 

 7             MR. ROSEN:  I - I was d- -

 

 8             THE COURT:  I don't want to do them piecemeal.

 

 9             MR. ROSEN:  I was doing it for another reason.  I

 

10   wanted to tell you what we had told Mr. Zlotoff in a letter

 

11   yesterday.  I didn't want you to get the impression that we had

 

12   done something improper, because I'm identifying for you

 

13   exhibits that were not on our original exhibit list, -

 

14             THE COURT:  That's perfectly appropriate.

 

15             MR. ROSEN:  - but which have come up since then and

 

16   we've included.

 

17             THE COURT:  It's perfectly appropriate to call them to

 

18   my attention.

 

19             MR. ROSEN:  Okay.  186, portions of the transcript of

 

20   July 10th.  That's another one that comes under that same

 

21   category, as is 187, 188, and 189.  These all deal with the

 

22   sale-of-the-house issue and the motions that were before you.

 

23   189 - I'm sorry.  That should have been to 188.

 

24             189 is a posting which relates to money being received

 

25   by Mr. Henson from some contributors.

 

                                                           83

 

 1             191, these are the documents respecting the insurance

 

 2   policy that we spoke about earlier, the Whole Life policy.  And

 

 3   it shows the - this is a document that answers Your Honor's

 

 4   question as to what the cash surrender value was at the time of

 

 5   the petition.

 

 6             194 is a proof of claim we filed originally.

 

 7             195, I've indicated that's your earlier - that's the

 

 8   amended proof of claim which was both pre- and postpetition

 

 9   debts.

 

10             196 is Your Honor's earlier order.  That was referred

 

11   to before granting the trustee's motion to dismiss.

 

12             197 is an order - is the order of actual dismissal, I

 

13   guess, from Your Honor.

 

14             198 is the trustee's final report, and that was part

 

15   of that earlier proceeding that was terminated.

 

16             199 is the - the one Your Honor referred to earlier, I

 

17   guess, final decree of dismissal of May of 1998.

 

18             2000 is the closing - Exhibit 200, rather, is a

 

19   closing bankruptcy report on file in this Court.

 

20             2001 is a transcript of proceeding of July 13th -

 

21             THE COURT:  Not 2001.

 

22             MR. ROSEN:  201.  I'm getting bleary-eyed from reading

 

23   these.  2- - Exhibit 201 is a transcript of the proceedings of

 

24   July 13th.  That, I believe, is the one we were referring to

 

25   earlier when Your Honor - yeah.  That's the transcript that

 

                                                           84

 

 1   we're referring to earlier that Your Honor explained what you

 

 2   were doing in issuing the order to reinstate the bankruptcy.

 

 3             2002 is Your Honor's order on that.

 

 4             2003, trustee's objection - excuse me.  Did I say

 

 5   "2003"?  203.  I'm sorry, Judge.  I'm getting a little punch

 

 6   drunk on these.

 

 7             204 is the - I think that's a redundancy.  It looks to

 

 8   be the same -

 

 9             THE COURT:  Wait a second.  I don't have a 204.

 

10        (Creditor's counsel confer off record.)

 

11             MR. ROSEN:  Good.  You shouldn't have it.  It's

 

12   redundant of 194.

 

13             205, a transcript of the proceedings before this Court

 

14   on November 12th, '88 [sic].  I just want to check something on

 

15   that, Your Honor.  Yeah, this goes - this is related to

 

16   discovery misconduct.

 

17             THE COURT:  Really on the official - we need to mark

 

18   that there is no 204.

 

19             THE CLERK:  I'll fix that.

 

20             THE COURT:  Go ahead.

 

21             MR. ROSEN:  206 is the trustee's objection to the -

 

22   second objection, I think, to the confirm plan filed by the - by

 

23   the debtor.

 

24             207, a transcript of the proceedings before this Court

 

25   of July 6th.

 

                                                           85

 

 1             And I should say, Your Honor, if I may just

 

 2   parenthetically add something, as you can see, we have put in by

 

 3   way of exhibits materials that are always before the Court.

 

 4   It's the Court's own orders, it's the transcripts, et cetera.

 

 5   We've done it solely to make it convenient so Your Honor doesn't

 

 6   have to go through the files and say, "Where is that transcript

 

 7   from this date."

 

 8             THE COURT:  I appreciate that.  That's helpful.

 

 9             MR. ROSEN:  Okay.  But I should also say that within

 

10   the context of transcripts, obviously they're not being offered

 

11   for the truth of - if - if one of our side or Mr. Zlotoff makes

 

12   a representation of fact that's not being offered.  They're

 

13   being offered to show either admissions or to show Your Honor's

 

14   rulings or Your Honor's comments.  And then of course all the

 

15   transcripts of the court hearings.  209 - or admissions by Mr.

 

16   Henson, I guess.

 

17             209 is the - is Your Honor's order lifting the

 

18   automatic stay to allow the copyright trial to go forward.  210

 

19   relates to that same thing.

 

20             And 211 is Mr. Henson's notice of voluntary withdrawal

 

21   of the petition in March of 1998.

 

22             We go to Volume IV.  Volume IV -

 

23             THE COURT:  Can you help him with that mic, so - you

 

24   keep hitting into it.

 

25             MR. ROSEN:  Yeah.  We go to Volume IV.  Volume IV

 

                                                           86

 

 1   contains three videotapes.  We're going to - that we've

 

 2   discussed earlier today.  We're going to show one of them.

 

 3   We're only going to offer one of them.  We're going to offer 213

 

 4   - is that the right one?

 

 5        (Creditor's counsel confer off record.)

 

 6             MR. ROSEN:  To make it easy, and we will withdraw 212

 

 7   and 214 as proposed exhibits.  And we will show that immediately

 

 8   after we move these in with Your Honor's permission.  This

 

 9   videotape runs 15 and a half minutes.

 

10             Exhibit 215 and 216, these are postings by Mr. Henson.

 

11   Unitary plan, discovery obstruction.

 

12             Exhibit 221.  What is this?

 

13        (Creditor's counsel confer off record.)

 

14             MR. ROSEN:  Your Honor may recall in my opening

 

15   statement I addressed a stock purchase that Mr. Henson made that

 

16   was not listed as an asset on his bankruptcy filings.  221 is

 

17   that document.  There is a deposition transcript that goes with

 

18   it, but this is a document dated October - check date, October

 

19   7th, 1997 in the amount of $7500.

 

20             222, this goes - this is discovery obstruction.  224,

 

21   the same thing.  225, the same thing.

 

22             226, 229 to 232, postings by Mr. Henson.  These all go

 

23   to unitary plan and intent to injure the Church of Scientology.

 

24             THE COURT:  Okay.  Mr. Rosen, my Deputy says that you

 

25   said 232, but she thinks you mean 230.

 

                                                           87

 

 1             MR. ROSEN:  229 through 232.

 

 2             THE CLERK:  Okay.  Sorry.

 

 3             MR. ROSEN:  There are four of them.

 

 4             233 is a decision of the Ninth Circuit.  That was in a

 

 5   Judge Ware case against the IRS, that we referred to earlier.

 

 6             234 is a document relating to the artwork.

 

 7             236 is a posting by Mr. Henson relating to the - this

 

 8   comes -

 

 9             MS. KOBRIN:  That's 238.  You said -

 

10             MR. ROSEN:  I'm sorry.  238.  I misread it.  238 is a

 

11   posting by Mr. Henson relating to his criminal conviction and

 

12   his fugitive status.

 

13             244 is the transcript, portions of the trial

 

14   transcript in the copyright case.

 

15             And that brings me to the last volume, Volume V of the

 

16   exhibits.  249 through - through 251 are the records of the

 

17   criminal proceedings in Riverside County.  253 and 254 are

 

18   exhibits identified in that - in those - in that trial.

 

19             255 is an article from the Toronto Star, which - which

 

20   we do offer solely for the purpose of showing, confirming that

 

21   Mr. Henson was a fugitive and he was arrested for entering the

 

22   country illegally.

 

23             256 is the notice that Mr. Henson provided to Judge

 

24   Whyte, I believe it was, that he had filed a bankruptcy petition

 

25   in connection with the invocation of the stay of the then

 

                                                           88

 

 1   scheduled bankruptcy trial - I mean for the copyright trial.

 

 2             257, posting by Mr. Henson.  This relates to - I'm

 

 3   sorry.  Contempt, refers to contempt or demonstrates contempt of

 

 4   the injunction.

 

 5             258 is another injunction issued against Mr. Henson,

 

 6   temporary injunction.  Again under the category of unitary plan.

 

 7             260.  260 are pages of the trial in the criminal case

 

 8   in Riverside County against Mr. Henson.  They're before offered

 

 9   solely for the purpose of showing the evidence upon which the

 

10   jury - that the jury heard and upon which the jury convicted

 

11   him.

 

12             261 -

 

13             THE COURT:  260- - we're going back to 261?  I thought

 

14   you were -

 

15             MR. ROSEN:  The last one was 260, I think.

 

16             THE COURT:  Okay.

 

17             MR. ROSEN:  I'm sorry if I misspoke.  The one I was

 

18   referring to in the trial transcript in Riverside County, the

 

19   excerpts, is 260.

 

20             THE COURT:  Okay.  I may have misheard you.

 

21             MR. ROSEN:  So I now go to - huh?

 

22             THE COURT:  I may have misheard you.  I -

 

23             MR. ROSEN:  Okay.  261 and 262, unitary plan, to use

 

24   our shorthand.  264, the same thing.  265, the same thing.  And

 

25   also shows his fugitive status.

 

                                                           89

 

 1             266 is unitary plan.

 

 2             267 through 272, 267 through 272, I should - let me

 

 3   withdraw that.  I'll say it again.

 

 4             267 through 270 and 272, because there is no 271.  The

 

 5   same thing, postings by Mr. Henson.

 

 6             273.  This is the order of the superior court,

 

 7   criminal court in Riverside County.

 

 8             274, posting by Mr. Henson.  This posting is offered

 

 9   as his admission that he committed contempt of the federal court

 

10   injunction.  That's the purpose of it.

 

11             275, 276, 277, 278, and 279 are all excerpts, page and

 

12   line, of testimony by Mr. Henson given in deposition either in

 

13   the - the copyright case, which is 275, or the depositions, or

 

14   2004 exams before Your Honor.

 

15             I will not take the time to go through and identify

 

16   for you what each excerpt relates to.  And, in fact, most of

 

17   these excerpts have already been identified for you in our

 

18   summary judgment brief as to what they relate to.  Suffice to

 

19   say, they all relate to one or the other of destruction of

 

20   documents, the $5 million, unitary plan to hurt Scientology,

 

21   discovery misconduct, or admissions.  All of the - any one of

 

22   those.

 

23             I don't believe, as I went through these, that there's

 

24   anything different, if you will, than what I've already said.

 

25             And that brings us to 286, the last exhibit, which is

 

                                                           90

 

 1   - this is the deposition of transcript of - deposition of Mrs.

 

 2   Chamberlain.  This relates to the insurance policy.  And that is

 

 3   being offered for the truth.  Mrs. Chamberlain is in Arizona.

 

 4   It's a deposition taken in this case.  And she is an unavailable

 

 5   witness under Rule 32.

 

 6             240- - oh, I'm being told that...

 

 7        (Creditor's counsel confer off record.)

 

 8             MR. ROSEN:  ...that we might have a redundancy as to

 

 9   one exhibit.  Rather than take your time, during a break we'll -

 

10   we'll look at it and see.  If it is, we'll withdraw it.  We're

 

11   not - our intention is not to put in more than one copy of any

 

12   particular exhibit.

 

13             Your Honor, I - based on the - on the presentation

 

14   just made, I move into evidence and will ask after that only for

 

15   permission to play one videotape, Exhibit 213.  I move into

 

16   evidence all of the trial exhibits I've now identified in here.

 

17   Obviously except for the ones that we've withdrawn during this

 

18   presentation.

 

19             THE COURT:  How much time do you need to start

 

20   responding to the introduction of all the exhibits?  Are you

 

21   ready?  I would think we'd see the movie first, the little -

 

22   whatever it is.

 

23             MR. ZLOTOFF:  All right.

 

24             THE COURT:  The videotape.  And then I will need a

 

25   little bit of break, so -

 

                                                           91

 

 1             MR. ROSEN:  Okay.

 

 2             THE COURT:  But we could break for lunch just as well,

 

 3   because it's now 12:10, and we're going to sit through the

 

 4   movie.  So I would think that we'll be finished about 12:30.

 

 5             MR. ROSEN:  Good.

 

 6             THE COURT:  And it may make sense at that time to

 

 7   break for lunch.

 

 8             MR. ROSEN:  Okay.  We'll drop it in the mail -

 

 9             THE COURT:  Well, it needs to be moved.

 

10             MR. ROSEN:  Yeah.

 

11             THE COURT:  Right.

 

12             MR. ROSEN:  Just take a second.

 

13        (Comments off the record regarding the VCR.)

 

14             THE COURT:  Go off the record, please.

 

15        (Videotape played from 12:12 p.m. to 12:51 p.m.)

 

16             THE COURT:  We're in recess until 2:05.  That's an

 

17   hour and 15 minutes.

 

18             MR. ROSEN:  Your Honor, I did check with Ms. Kobrin

 

19   and confirmed that we do have a duplication.  I would like to

 

20   move to withdraw Exhibit 244.  It is redundant of Exhibit 21.

 

21             THE COURT:  And for - if you have time to do a little

 

22   legal research during the break, although it may have well been

 

23   cited to me, you might take a look at Eisen, 14 F.3d 469, a

 

24   Ninth Circuit opinion.

 

25             MR. ROSEN:  Okay.

 

                                                           92

 

 1             THE COURT:  Thank you.

 

 2        (Luncheon recess taken from 12:52 p.m. to 2:22 p.m.)

 

 3             THE CLERK:  All rise.

 

 4             THE COURT:  Thank you.  You may be seated.

 

 5             I thought we were going to start at 2:05, but I guess

 

 6   you may have misunderstood.

 

 7             Mr. Zlotoff, do you have any position with respect to

 

 8   any of the exhibits that have been sought to be introduced?  If

 

 9   you want to do that first or if you want to do your opening

 

10   statement first, that's fine.

 

11             MR. ZLOTOFF:  All right, Your Honor.

 

12             Let me - is it okay if I don't go in order with

 

13   respect to the exhibits?

 

14             THE COURT:  Sure.

 

15             MR. ZLOTOFF:  Okay.  Let me start with the tape and

 

16   the last binder.

 

17             THE COURT:  Is that the one we saw just a few minutes

 

18   ago?

 

19             MR. ZLOTOFF:  The binder's actually -

 

20             THE COURT:  For the record, can you help me, Ms.

 

21   Kobrin, what tape did we just see?

 

22             MR. ROSEN:  Exhibit 213.

 

23             MR. ZLOTOFF:  213.

 

24             THE COURT:  Thank you.

 

25             MR. ZLOTOFF:  Because it together with - let me just

 

                                                           93

 

 1   lump some things together.  This would be - lots of the

 

 2   postings, for example, 261 and 262 -

 

 3             THE COURT:  There are lots of postings, Mr. Zlotoff.

 

 4             MR. ZLOTOFF:  I know.

 

 5             THE COURT:  So you have to organize it for us.  If you

 

 6   want to deal with 20 exhibits at once, that's fine, or you march

 

 7   through one by one -

 

 8             MR. ZLOTOFF:  I'm -

 

 9             THE COURT:  - and decide what your position is.

 

10             MR. ZLOTOFF:  Yeah.  I'm going to just take a - I'm

 

11   going to clump some together right here -

 

12             THE COURT:  That's fine.

 

13             MR. ZLOTOFF:  - out of the last binder.

 

14             So 261 and 262 are postings with absolutely no

 

15   context.  And so to anybody but an insider they mean absolutely

 

16   nothing.  They're not focused towards RTC or Scientologist, that

 

17   I can see at all.  And so to me they're utterly irrelevant.

 

18   That's 261 and 262.

 

19             So whereas they may have been written by Mr. Henson, I

 

20   - to me they - they don't pertain to anything that's relevant.

 

21             THE COURT:  I started with the second one first, 262.

 

22   It means nothing to me.  Unless there's somebody who can present

 

23   - a witness who can present a context, it has no context.  It

 

24   doesn't say anything about Scientology.  I don't know what it

 

25   is.

 

                                                           94

 

 1             MR. ROSEN:  Okay.  Can I tell you?

 

 2             THE COURT:  I guess, but you need a witness to tell

 

 3   me.

 

 4             MR. ROSEN:  I don't think so.  I'll tell you why.

 

 5             THE COURT:  Without facts.  I mean I can only take

 

 6   your argument.  I can't take facts.  Sure.

 

 7             MR. ROSEN:  Okay.  Here's my argument.  The evidence

 

 8   that relates to these two exhibits -

 

 9             THE COURT:  Um-hum.

 

10             MR. ROSEN:  - is one of the exhibits we have offered.

 

11   It is the trial testimony in Riverside County criminal court

 

12   that Mr. Henson harassed Scientologists by, number one, making

 

13   postings about aiming missiles at the Scientology facility.  And

 

14   - and, number two, made threats about - about bombing, how to

 

15   make a bomb to blow up the Scientology facility.

 

16             So when you say - when counsel says it's out of

 

17   context, the context is supplied by the exhibit which is the

 

18   trial transcript of the testimony which identifies these things

 

19   - which identifies these postings -

 

20             THE COURT:  Okay.  But I won't be able to make those

 

21   connections by myself.  So what I'll do probably is have you do

 

22   a posttrial brief that relates these documents that have no

 

23   context rather than having me do it and try to figure it out.

 

24             MR. ROSEN:  Okay.  Well, -

 

25             THE COURT:  And then we'll take the - the objection

 

                                                           95

 

 1   under submission pending a brief by the other side and an

 

 2   opportunity for Mr. Zlotoff to respond connecting these to

 

 3   something that seems relevant.  But on their face there's no

 

 4   apparent relevancy.

 

 5             MR. ZLOTOFF:  And that brings -

 

 6             THE COURT:  So I will - for the - I think it's easier

 

 7   to do it this way.  They're not admitted, but they can be - I

 

 8   will consider a brief afterwards as to whether they should be

 

 9   admitted.  But at this -

 

10             MR. ROSEN:  And this issue is relevance, right?

 

11             MR. ZLOTOFF:  Yes.

 

12             THE COURT:  Well, I don't know what they stand for so

 

13   I don't know what they're submitted for.

 

14             MR. ROSEN:  Well, you said context.  Does "context"

 

15   mean - context is not a grounds for objection.  I assume -

 

16             THE COURT:  Right.

 

17             MR. ROSEN:  - it means relevance.

 

18             MR. ZLOTOFF:  Right.  I said relevance.  Relevance.

 

19             MR. ROSEN:  No.  I was asking the Judge -

 

20             MR. ZLOTOFF:  Oh.

 

21             MR. ROSEN:  - what his view was.  I heard what you

 

22   said.  I just want to make sure I satisfy Your Honor in his

 

23   posttrial brief.  What you're - what you're asking is relevance

 

24   when you say context, right?

 

25             THE COURT:  I don't see any other possible objection

 

                                                           96

 

 1   to them.

 

 2             MR. ROSEN:  Okay.

 

 3             THE COURT:  And Mr. Zlotoff has raised relevance, so

 

 4   that's the only objection I have before me.

 

 5             MR. ROSEN:  Okay.  I just want to make sure that you

 

 6   were using "context" as a synonym for "relevance."  Okay.

 

 7             MR. ZLOTOFF:  All right.  And that -

 

 8             MR. ROSEN:  No problem.

 

 9             MR. ZLOTOFF:  That brings me into the next clumping of

 

10   objections that I have, and that would be Exhibits 249 to 255.

 

11             THE COURT:  Wait a minute.  You've got to go slowly.

 

12   249 to 255?

 

13             MR. ZLOTOFF:  Yeah.  And then let me just - two other

 

14   - 260 and 264 to 265.  And these all relate to the criminal

 

15   trial, and messages, newspaper articles, and the like with

 

16   respect to his fugitive - with respect to debtor's fugitive

 

17   status.

 

18             THE COURT:  Okay.  But you've got to give me the

 

19   objection -

 

20             MR. ZLOTOFF:  Yeah, the objection is -

 

21             THE COURT:  - to each one.

 

22             MR. ZLOTOFF:  - the objection is relevance, Your

 

23   Honor.  And -

 

24             THE COURT:  Okay.  Let's go through them.

 

25             MR. ZLOTOFF:  If I could, Your Honor, at this point

 

                                                           97

 

 1   I'd like to also, for the same reason, object to - can I go

 

 2   through some more?  Because I have just a general argument I'd

 

 3   like to make with respect to several of these different types of

 

 4   exhibits.

 

 5             MR. ROSEN:  Your Honor, -

 

 6             MR. ZLOTOFF:  It's all going - it's all going to be

 

 7   based on relevance.

 

 8             MR. ROSEN:  Your Honor, I missed something.

 

 9             MR. ZLOTOFF:  All the grounds are relevance.

 

10             MR. ROSEN:  Counsel started with 213, the videotape,

 

11   but I didn't hear his - did I miss something or what is the

 

12   objection to that -

 

13             THE COURT:  I don't think he's objected to 213.

 

14             MR. ZLOTOFF:  Yes, I did.  That's relevance as well.

 

15             THE COURT:  You mentioned that now?

 

16             MR. ZLOTOFF:  Yes.

 

17             THE COURT:  I remember you said it before.

 

18             MR. ZLOTOFF:  Right.

 

19             THE COURT:  Okay.

 

20             MR. ZLOTOFF:  Here's the problem I have with these,

 

21   and I'll just state it now and then I'll go over some of the

 

22   other groups -

 

23             THE COURT:  249 and 255, 260, 264, 265, -

 

24             MR. ZLOTOFF:  Right.

 

25             THE COURT:  And - the tape which was -

 

                                                           98

 

 1             MR. ZLOTOFF:  213.

 

 2             MR. ROSEN:  213.  I'm a little at a loss because

 

 3   counsel stipulated before we played the tape that he had no

 

 4   objection to it.  So I don't understand how you can say, "I have

 

 5   no objection" and now say, "I object on relevance grounds."

 

 6             MR. ZLOTOFF:  Did I waive relevance when I -

 

 7             THE COURT:  That's my recollection.

 

 8             MR. ZLOTOFF:  Is that true?

 

 9             THE COURT:  My recollection is -

 

10             MR. ZLOTOFF:  All right.

 

11             THE COURT:  - that you said you have no objection to

 

12   it.

 

13             MR. ZLOTOFF:  That's - that's fine, because here's the

 

14   situation, Your Honor, that I - I mean these people have

 

15   obviously been on this case too long.  To me, I looked at the

 

16   tape and it meant absolutely nothing, which is - and part of me

 

17   said, well, why even bother objecting.  This means nothing.  I

 

18   don't care about Scientology one way or the other.  To me it's

 

19   somebody exercising free speech.  What difference does it make?

 

20             They may not like it.  I may not like the disrespect

 

21   he shows to someone's beliefs, but so what?  You know, and

 

22   they're trying to make these grand conspiratorial arguments and

 

23   the - and everything like that.  And to me, you know, it seems

 

24   like just - like in the 1960s there were protesters.  And I

 

25   remember the Chicago 8 trial in -

 

                                                           99

 

 1             MR. ROSEN:  Chicago 7.

 

 2             MR. ZLOTOFF:  Well, at one point it was Chicago 8.

 

 3             THE COURT:  He's right.

 

 4             MR. ZLOTOFF:  Chicago 7.

 

 5             THE COURT:  I don't remember about Chicago 8, -

 

 6             MR. ZLOTOFF:  But - we both remember, but the point

 

 7   is -

 

 8             THE COURT:  - but I remember the Chicago 7.

 

 9             MR. ZLOTOFF:  The point is we remember and we remember

 

10   that -

 

11             THE COURT:  Not exactly do we remember.

 

12             MR. ZLOTOFF:  Not exactly.

 

13             MR. ROSEN:  It was tried right after the Indianapolis

 

14   500.

 

15             MR. ZLOTOFF:  But the point I'm trying to make, Your

 

16   Honor, is that there too you had people who -

 

17             THE COURT:  Mr. Zlotoff, here's the problem with

 

18   this -

 

19             MR. ZLOTOFF:  Right.

 

20             THE COURT:  - you've - you're going through these and

 

21   it sounds to me like if I try to deal with this, you know, you

 

22   object to a 50-page document.  I have never read that document.

 

23   So I can't really do this very effectively.

 

24             MR. ZLOTOFF:  Okay.

 

25             THE COURT:  I think maybe what we should do - and

 

                                                           100

 

 1   you're going to go through - do you have a lot of objections?

 

 2   If you do, then what we should do is I give you a chance to file

 

 3   a brief explaining each of your objections, or you put them on

 

 4   the record and he responds and we do it orally, but that could

 

 5   take days at this -

 

 6             MR. ROSEN:  It's not going to take days, Judge.

 

 7             THE COURT:  Good.

 

 8             MR. ZLOTOFF:  Yeah, because my grounds -

 

 9             MR. ROSEN:  Because, with all due respect, we had

 

10   discussed some of this.  And, as Mr. Zlotoff says, he throws a

 

11   blanket over a whole bunch of exhibits that he says are

 

12   relevant, are relevance objection, as he's just done.  I can

 

13   respond to that in two minutes, -

 

14             THE COURT:  Okay.

 

15             MR. ROSEN:  - but if you don't see the relevance, i.e.

 

16   the context, then as to any of these that you don't see it, you

 

17   would say presumably the same thing to me, "Mr. Rosen, the

 

18   relevance doesn't jump out at me, so why don't you explain in

 

19   your brief why it's relevant."

 

20             So I mean I think we can do this because Mr. Zlotoff

 

21   has indicated he's got basically a relevance objection.  He's

 

22   going to throw blanket over many of these.

 

23             MR. ZLOTOFF:  Right.

 

24             THE COURT:  But I'm not able to respond -

 

25             MR. ZLOTOFF:  Okay.

 

                                                           101

 

 1             THE COURT:  - to whether a 50-page transcript in a

 

 2   criminal trial is or isn't relevant, having not read it and not

 

 3   knowing anything about the specific context other than what

 

 4   you've told me throughout the course of the trial at various

 

 5   times, that it would be too hard for me to do it that way, -

 

 6             MR. ZLOTOFF:  I see - all right.

 

 7             THE COURT:  - without going through -

 

 8             MR. ZLOTOFF:  All right.

 

 9             THE COURT:  - and looking - you've read these

 

10   documents.

 

11             MR. ZLOTOFF:  No, I haven't.  I -

 

12             MR. ROSEN:  Oh.

 

13             MR. ZLOTOFF:  Not - not seriously, because to me it

 

14   doesn't matter.  None of this matters.

 

15             THE COURT:  That's fine.  Then make - if you both want

 

16   to do it orally, I'm here to serve.

 

17             MR. ZLOTOFF:  Well, only if - only if I - if I could

 

18   just paint a broad brush and just - to simply say that -

 

19             THE COURT:  Well, you can paint whatever kind of brush

 

20   you -

 

21             MR. ZLOTOFF:  Uh-huh.

 

22             THE COURT:  - make in terms of your record, but I - I

 

23   will then have that record -

 

24             MR. ZLOTOFF:  Right.

 

25             THE COURT:  - and Mr. Rosen's remarks.  And that will

 

                                                           102

 

 1   be my record on which I'm going to have to make a ruling.

 

 2             MR. ZLOTOFF:  All right.  Well, you know, I don't want

 

 3   to - I'd like to get done with this today really is my main

 

 4   interest.

 

 5             THE COURT:  That would be wonderful if that were

 

 6   possible.

 

 7             MR. ZLOTOFF:  I think I would rather just defer this

 

 8   part then.  I mean if we have to do it by brief, sobeit.  I'd

 

 9   rather not waste time on this issue.

 

10             THE COURT:  Okay.

 

11             MR. ROSEN:  Now wait a minute.  If you have a

 

12   relevance objection and that's more easily disposed of in a

 

13   brief, I don't have any problem with that.  But I want to know

 

14   any other objection that counsel has -

 

15             THE COURT:  Why?  You'll have an opportunity to

 

16   respond.  Why do you need to take our trial time now to arguing

 

17   about whether something is or isn't relevant if you're given a

 

18   full opportunity to respond?

 

19             MR. ROSEN:  I don't think, Judge - maybe I misspoke

 

20   and maybe you didn't hear me.  Let me say it again.

 

21             THE COURT:  Okay.

 

22             MR. ROSEN:  If the only objection is relevance, Your

 

23   Honor's view that I can explain the relevance of an exhibit, of

 

24   a posting in a brief is fine with me.

 

25             THE COURT:  Okay.

 

                                                           103

 

 1             MR. ROSEN:  I want to know if there are any other

 

 2   objections other than relevance, because if there are I may be

 

 3   able to cure them by putting a witness on.  So discussing them

 

 4   in a posttrial brief doesn't do me any good.  I would never put

 

 5   a witness on to explain relevance, okay?  But if there's

 

 6   anything else that he objects - any other grounds for objection,

 

 7   I want to know about it so I can deal with it.

 

 8             You know, some of these - some objections I could -

 

 9   are curable instantaneously.

 

10             MR. ZLOTOFF:  Okay.

 

11             MR. ROSEN:  But I - I need to know what the grounds

 

12   are for these objections other - if there's any other than

 

13   relevance.

 

14             MR. ZLOTOFF:  All right.  As to the ones we've just

 

15   discussed it's just relevance.

 

16             MR. ROSEN:  Okay, fine.

 

17             MR. ZLOTOFF:  Now let me - let me pick some other ones

 

18   quickly, if I can.

 

19             THE COURT:  Mr. Rosen, you're starting to respond to

 

20   him, not to me.

 

21             MR. ROSEN:  I apologize, Judge.

 

22             MR. ZLOTOFF:  Let me pick some other exhibits and see

 

23   if we have the same problem.

 

24             Exhibit - there's a series of exhibits starting at 30-

 

25   - 37.  Can I - once again what I'd like to do is just number

 

                                                           104

 

 1   them, because they all have the same problem, I think.  It's 37,

 

 2   39, 41, 42 -

 

 3             THE COURT:  Wait.  You're going a little fast.

 

 4             MR. ZLOTOFF:  Okay.

 

 5             MR. ROSEN:  37.

 

 6             THE COURT:  It's 37, 39, 41?

 

 7             MR. ZLOTOFF:  Yeah.  42, 46, 48, and 54.

 

 8             And the -

 

 9             THE COURT:  Mr. Zlotoff, is this a relevance

 

10   objection?

 

11             MR. ZLOTOFF:  No.  This is -

 

12             THE COURT:  Okay.

 

13             MR. ZLOTOFF:  This is hearsay, because they all deal

 

14   with Arel Lucas.  They all deal with either Arel Lucas or her

 

15   attorney.  They are letters either to or from Arel Lucas or her

 

16   attorney.  And I just don't know why they should be admitted as,

 

17   for example, -

 

18             THE COURT:  For the truth.

 

19             MR. ZLOTOFF:  Right.  Because I mean I can distinguish

 

20   between letters from Henson.

 

21             THE COURT:  Sure.

 

22             MR. ZLOTOFF:  Or from myself, as his attorney, but I

 

23   don't know why -

 

24             MR. ROSEN:  I could deal with this very simply.  I

 

25   think counsel misunderstands her and did not here my comments.

 

                                                           105

 

 1             37 is a - Ms. Lucas' preamble to documents she

 

 2   produced on December 16th.  It's being offered not for the truth

 

 3   of the matter.  It's being offered solely for what she says in

 

 4   the preamble, including that she's not producing any

 

 5   jointly-owned documents because Mr. Henson instructed her not

 

 6   to.

 

 7             39 -

 

 8             THE COURT:  That's for the truth.

 

 9             MR. ROSEN:  That's the for the truth, yeah.  That's an

 

10   admission.

 

11             THE COURT:  It's not an admission by Mr. Henson.

 

12             MR. ZLOTOFF:  Why is it an admission?

 

13             MR. ROSEN:  It's - oh, it's a declaration against

 

14   interest.

 

15             THE COURT:  By Ms. Lucas, not by Mr. Henson.

 

16             MR. ROSEN:  It's a declaration against interest by a

 

17   witness.

 

18             MR. ZLOTOFF:  Who's here.

 

19             THE COURT:  Right.

 

20             MR. ROSEN:  It doesn't make any difference.  It's

 

21   under - unavailability doesn't matter.  It's - it's 803.

 

22             MR. ZLOTOFF:  I thought that's why I lost on one of

 

23   the motions in limine.

 

24             MR. ROSEN:  Let's go to - let's go to the videotape.

 

25   804, I'm sorry.  803 is regardless of unavailability.  803

 

                                                           106

 

 1   allows for exceptions -

 

 2             THE COURT:  Wait.  There's many sections of 803.

 

 3             MR. ROSEN:  Yeah.

 

 4             THE COURT:  So take me to - 803. what?

 

 5             MR. ROSEN:  Okay.

 

 6        (Creditor's counsel confer off record.)

 

 7             THE COURT:  This proves my point, gentlemen, that it's

 

 8   going to be very hard to do this and do research on it, you

 

 9   know, on the spot.

 

10             MR. ROSEN:  Okay.  Well, let me - let me - let me see

 

11   if I could just eliminate some of them.

 

12             39 is a letter from Ms. Kobrin to Mr. Greene.  We

 

13   already - I said when I offered it, it's not being offered for

 

14   the truth.  It's being offered to show that we are making

 

15   demands for discovery, that - and for compliance with Your

 

16   Honor's order.  So that issue of hearsay, that contention for

 

17   hearsay doesn't apply.

 

18             41 is a letter from Mr. Greene -

 

19             THE COURT:  Wait a second, please.

 

20             MR. ROSEN:  The first volume, Judge.

 

21             THE COURT:  The first volume is 1 through 71, okay.

 

22   Thank you.  Give me one minute.

 

23             MR. ROSEN:  Sure.

 

24             THE COURT:  What number are you up to?

 

25             MR. ROSEN:  39 is the one I just addressed.  It's a

 

                                                           107

 

 1   letter from Ms. Kobrin.

 

 2             THE COURT:  Solely to - for the purpose of showing

 

 3   that RTC demanded responses to discovery?

 

 4             MR. ROSEN:  Correct.

 

 5             THE COURT:  Okay.  Now that doesn't seem objectionable

 

 6   if that's the only reason it's offered for.  Does it say that on

 

 7   this?  No, it doesn't say it on the first page, as you provide

 

 8   on some.

 

 9             MR. ROSEN:  Right.  I said - I believe I said it when

 

10   I offered it, Judge.

 

11             THE COURT:  You may have.  I don't - I would have to

 

12   go back and listen to the tape.

 

13             MR. ROSEN:  If not I'll correct the statement now.

 

14             THE COURT:  Yeah.  This doesn't - this is not offered,

 

15   as I understand it, for the proof that discovery hadn't been

 

16   provided, because it's only offered for the - for the purpose

 

17   of, according to what I understand Mr. Rosen to have just said,

 

18   it's only offered for the purpose of showing that RTC demanded

 

19   certain kind of discovery, but not that discovery was provided

 

20   or wasn't provided or whether - whether what she was demanding

 

21   reasonable or totally unreasonable.  It's merely being offered

 

22   that a lawyer is asking for discovery.

 

23             Is that fair?

 

24             MR. ROSEN:  That's correct.  No hearsay.

 

25             MR. ZLOTOFF:  And the fact - and the fact that we

 

                                                           108

 

 1   have, I'm sure in here, documents that required Ms. Lucas to

 

 2   produce documents isn't sufficient?  I mean this isn't a

 

 3   redundancy or the Court doesn't see that as making this

 

 4   document -

 

 5             THE COURT:  Well, that gets into relevance again, -

 

 6             MR. ZLOTOFF:  All right.

 

 7             THE COURT:  - and you've reserved that.

 

 8             MR. ZLOTOFF:  All right.  I withdraw my objection on

 

 9   that point then, for the -

 

10             THE COURT:  You - the relevance, we're not dealing

 

11   with, right?

 

12             MR. ZLOTOFF:  No, not - no, we're not.

 

13             THE COURT:  We're just - because it's getting

 

14   confusing.

 

15             MR. ZLOTOFF:  Right.

 

16             THE COURT:  You were only talking about nonrelevance

 

17   objections.

 

18             MR. ROSEN:  41 is the letter from Mr. Greene to Helena

 

19   Kobrin on discovery.  And the -

 

20             THE COURT:  And it specifically says not offered for

 

21   truth, so -

 

22             MR. ROSEN:  Right.  Only to show discovery obstruction

 

23   on the face of it.  That's all.

 

24             MR. ZLOTOFF:  But why isn't that offered for the

 

25   truth, though?  The whole -

 

                                                           109

 

 1             MR. ROSEN:  It's not.

 

 2             THE COURT:  It is.

 

 3             MR. ZLOTOFF:  But the whole issue, the only reason

 

 4   that's relevant is to show his bad faith, I thought.

 

 5             THE COURT:  It's hearsay.  If it's offered to show

 

 6   obstruction, it's hearsay.  It's not hearsay if there was

 

 7   relevance to show that he sent the letter, but it -

 

 8             MR. ROSEN:  Judge, it's offered to show the response.

 

 9   Whether the response by Mr. Greene is true or not, the offer is

 

10   not - the letter is not being offered for that.

 

11             It is not being offered for the truth of whether when

 

12   Mr. Greene says, "I put it into the mail to you last week,"

 

13   whether that's true or not.  That's -

 

14             THE COURT:  Then it's not relevant -

 

15             MR. ROSEN:  That would be hearsay.  It's offered to

 

16   show the response that was provided.  On its face, without Your

 

17   Honor having to decide whether or not there is any truth in the

 

18   response.

 

19             THE COURT:  I have to - I have to ask you a question,

 

20   and this - this gets into the problem with doing it this way,

 

21   trying to limit - exclude all relevance objections, but not

 

22   other objections.

 

23             Looking at this it appears to me to be hearsay, but if

 

24   it's not hearsay it may be irrelevant.  So it's a little - they

 

25   overlap.  A lot of documents could be hearsay, but if not

 

                                                           110

 

 1   offered for the truth then you get into the relevance.  And

 

 2   you're saying it's not hearsay, therefore - I'm sorry - it isn't

 

 3   hearsay, but if it's not hearsay, then I don't understand -

 

 4             MR. ROSEN:  Let me give you an example.  If -

 

 5             THE COURT:  Well, why don't you give me this example.

 

 6             MR. ROSEN:  Okay.  And, by the way, I wanted to

 

 7   preface it by saying under your order in July, these kinds of

 

 8   things, where you have objections to a class, were supposed to

 

 9   be presented in limine.  We weren't supposed to be here doing

 

10   this over a whole series of exhibits that Mr. Zlotoff has a

 

11   blanket objection to relevance.

 

12             He had these in August.  If he didn't read them and

 

13   decided not to make an in limine - Your Honor made a specific

 

14   comment about it, "I don't want to have to do exactly what's

 

15   happening in this trial.  I want you to put them in limine

 

16   motions."

 

17             Okay.  Let's go with Exhibit 41 and -

 

18             THE COURT:  I, by the way, remember the general

 

19   context of those remarks, I don't remember whether they ever

 

20   rose to an order of the Court.  But I do remember the general

 

21   tenor of the remarks.

 

22             MR. ROSEN:  When you say it's an order by definition,

 

23   even if it's a lower case "o."

 

24             All right.  Let me give you an example from this

 

25   letter.  The response to the question at page 54 is "Union

 

                                                           111

 

 1   Bank."  Okay.  If it were offered to show that the answer to the

 

 2   question in a deposition is "Union Bank" it would be hearsay.

 

 3             If it was offered to show that the response that we

 

 4   received was "Union Bank," it's not hearsay, because you're not

 

 5   being asked to decide whether the response is true or not.  It's

 

 6   that simple.

 

 7             THE COURT:  Okay.  You received that response to a

 

 8   particular question.

 

 9             MR. ROSEN:  Right.

 

10             THE COURT:  I think that's probably not hearsay, that

 

11   that's - the response you received - but then that flops us over

 

12   to whether it's relevance, and we're reserving that.

 

13             MR. ROSEN:  Okay.

 

14             THE COURT:  So that may be correct.

 

15             Do you agree with that analysis, Mr. Zlotoff?

 

16             MR. ZLOTOFF:  Not really, but I really don't want to

 

17   belabor it, Your Honor.

 

18             MR. ROSEN:  The next one is 42 which is a letter from

 

19   Ms. Kobrin.  Again it's the same as the last one:  Not being

 

20   offered for the truth, being offered to show -

 

21             THE COURT:  Wait a second.

 

22             MR. ROSEN:  - that we were making a demand.  42.

 

23             THE COURT:  I know.

 

24             I think it's not hearsay if the only purpose is to

 

25   show that a demand was made, not to whether the demand was

 

                                                           112

 

 1   reasonable or valid or appropriate, but just that a demand was

 

 2   made, it's not hearsay.

 

 3             MR. ZLOTOFF:  All right.  If -

 

 4             MR. ROSEN:  The same with 46.

 

 5             THE COURT:  Let - let Mr. Zlotoff respond.

 

 6             MR. ROSEN:  I'm sorry.

 

 7             MR. ZLOTOFF:  Okay.  Well, then I will presume that if

 

 8   that's the case then we will not have Mr. Rosen commenting

 

 9   about...

 

10             THE COURT:  The merits.

 

11             MR. ZLOTOFF:  ...the merits of this response.

 

12             THE COURT:  That's right.

 

13             MR. ZLOTOFF:  In other words, -

 

14             THE COURT:  That's right.  Only that "This is the

 

15   response we got."  He could say, "Here's the question we asked.

 

16   This is the response we got."

 

17             MR. ROSEN:  Right.

 

18             THE COURT:  That's - then he'd have to stop.

 

19             MR. ROSEN:  Okay.

 

20             THE COURT:  He wouldn't be able to go further and say

 

21   that the response was true or not true, just, "This is the

 

22   response we got."

 

23             MR. ZLOTOFF:  Right.

 

24             MR. ROSEN:  Which I've conceded from the beginning.

 

25             THE COURT:  Okay.

 

                                                           113

 

 1             MR. ROSEN:  40- -

 

 2             MR. ZLOTOFF:  All right.

 

 3             MR. ROSEN:  46 is the same thing.  It's a letter from

 

 4   Ms. Kobrin to Mr. Greene.  As is 54, it's a letter from Ms.

 

 5   Kobrin to Mr. Greene.  The same thing.

 

 6             MR. ZLOTOFF:  All right.  Well, with the same

 

 7   understanding, Your Honor, that it is limited in that respect

 

 8   and that -

 

 9             THE COURT:  Now wait a second.  Let's go back a

 

10   second.

 

11             MR. ZLOTOFF:  Uh-huh.

 

12             THE COURT:  Let's say he was able to prove through

 

13   other evidence that the answer "Union Bank" through other

 

14   evidence is a total lie, then I think he could do that.  So he

 

15   would say, "This is the response we got."

 

16             MR. ZLOTOFF:  Right.

 

17             THE COURT:  "And I can prove to you by documents 1

 

18   through 20 that that's an incorrect answer" or "that's an

 

19   incomplete answer."  He could do that.

 

20             MR. ROSEN:  Right.

 

21             THE COURT:  He can't - he can use other evidence to

 

22   prove that.

 

23             MR. ZLOTOFF:  Yeah.  But - but if - right.  He can use

 

24   other evidence.  That's right.

 

25             THE COURT:  To prove that it was a lie, -

 

                                                           114

 

 1             MR. ZLOTOFF:  But - but if -

 

 2             THE COURT:  - that the response was a lie or the

 

 3   response was incomplete.

 

 4             MR. ZLOTOFF:  But if Ms. Lucas gets on the stand and

 

 5   it turns out that something in this letter is not right, I don't

 

 6   think he's got the right to say, "Well, look what's in this

 

 7   letter," -

 

 8             THE COURT:  Why?

 

 9             MR. ZLOTOFF:  - "it's contradicting what you're saying

 

10   here."

 

11             THE COURT:  Why can't he cross-examine her based on a

 

12   response to show that she's not credible?  That she gave a

 

13   response, x, and 'I can prove through documents 1 through 20

 

14   that the response was incorrect and that she had reason to know

 

15   it was incorrect and therefore she's not credible'; why wouldn't

 

16   he be able to do that?

 

17             MR. ZLOTOFF:  Well, with the - with the other

 

18   evidence.  But with this letter, then we're allowing it -

 

19   allowing it to come in for the truth, aren't we?

 

20             THE COURT:  No.

 

21             MR. ROSEN:  No.

 

22             THE COURT:  We're only -

 

23             MR. ZLOTOFF:  We're not.

 

24             THE COURT:  - allowing it to come it in for that - for

 

25   the evidence that that was her response.  That's all.

 

                                                           115

 

 1             In the if you had 25 documents or five witnesses, he's

 

 2   presenting no witnesses, so that's not a risk, but 25 documents

 

 3   that show that it wasn't Union Bank, it was the Bank of America

 

 4   or it was a credit union, then she may lose credibility by cause

 

 5   - she called it Union Bank.

 

 6             MR. ZLOTOFF:  Fine.

 

 7             THE COURT:  I think he's right.

 

 8             MR. ZLOTOFF:  Okay.  So if I have other - well, let me

 

 9   - let me just - I've said before Exhibit 90, that's the

 

10   appraisal -

 

11             THE COURT:  Do you want to move to that?

 

12             MR. ZLOTOFF:  I'm sorry.  No, that appraisal's okay.

 

13   It was the -

 

14             THE COURT:  Well, you've reserved - you haven't

 

15   reserved hearsay.  You've reserved relevance, so which number is

 

16   - which number is -

 

17             MR. ROSEN:  No, no.  Judge, I want to know what

 

18   objection - what exhibits he objects to on relevance grounds so

 

19   I can address them.

 

20             THE COURT:  No, we're -

 

21             MR. ROSEN:  So far -

 

22             THE COURT:  - are not doing that.  We're not doing

 

23   that.  We're reserving all relevance and he's going to put them

 

24   in brief.  You don't need to know everyone he's going to object

 

25   to on relevance because you yourself said, "I'm not putting a

 

                                                           116

 

 1   witness on on relevance.  I only want to know the ones other

 

 2   than relevance," so you'll get that in a brief and you'll

 

 3   respond to it in a brief.

 

 4             MR. ROSEN:  So we're dealing with relevance objections

 

 5   and posttrial briefs.  I thought you said before -

 

 6             THE COURT:  We're dealing with nonrelevance - we're

 

 7   dealing only with relevance objections.  Isn't that we said, Mr.

 

 8   Rosen?

 

 9             MR. ROSEN:  A moment ago -

 

10             THE COURT:  You and I were talking -

 

11             MR. ROSEN:  A moment ago you said, if I can spin the

 

12   clock back five minutes, when he identified the exhibits

 

13   respecting the trial and he said relevance, he identified them.

 

14   You said to me, "Okay, put them in a brief."  He's identified

 

15   them, now I know what to address in a brief.  I don't have to

 

16   wait for his brief.  I give you my brief on Tuesday.  Say,

 

17   "Here's the" - but I can't do that if he doesn't -

 

18             THE COURT:  I don't want that piecemeal.  I - he's

 

19   going to go back and give me a list of all the ones he objects

 

20   to on relevance and he's going to say why they're irrelevant.

 

21   That's what I need.  On an individual basis.  It's not going to

 

22   work this way, I've determined that.

 

23             MR. ROSEN:  Okay.

 

24             THE COURT:  It's just not.

 

25             To the extent that we're going to - you said, "Look,

 

                                                           117

 

 1   Judge, I think I can deal with all the nonrelevance objections

 

 2   because those would be prejudice to put that in a brief because

 

 3   I might put on a witness."

 

 4             So I said, "Okay, let's go through the nonrelevance

 

 5   objections."

 

 6             MR. ROSEN:  Okay.

 

 7             THE COURT:  That's where we were and I thought that

 

 8   was your idea.

 

 9             But, Mr. Zlotoff, we're dealing with all your

 

10   nonrelevance objections.

 

11             MR. ZLOTOFF:  All right.  I think I just have a

 

12   couple.

 

13             THE COURT:  Okay.  Which one is the appraisal, Mrs.

 

14   Kobrin or Mr. Rosen?  Can you help us?

 

15             MR. ZLOTOFF:  Yeah, I just had it.

 

16             THE COURT:  The newest appraisal.

 

17             MR. ROSEN:  We're looking.

 

18             THE COURT:  Thank you.

 

19             MR. ROSEN:  Is that it at the bottom?

 

20             MS. KOBRIN:  185.

 

21             THE COURT:  1-8-5?  Thank you.

 

22             MR. ZLOTOFF:  Yeah, that's a hearsay objection, Your

 

23   Honor.

 

24             THE COURT:  So we have to deal with that.  What - let

 

25   me get it.

 

                                                           118

 

 1             Okay.  This is an appraisal - I'm sorry - an invoice

 

 2   dated September 19, 2002, and an appraisal of 302 College

 

 3   Avenue, Palo Alto, as of September 18, 2002.  It's prepared by

 

 4   Brown and Brown.  And there is no Mr. Brown here, I take it.

 

 5   There is no witness here.

 

 6             So what is your objection?

 

 7             MR. ZLOTOFF:  Hearsay, Your Honor.

 

 8             THE COURT:  Why is this not hearsay?

 

 9             MR. ROSEN:  We could have a witness, we identified a

 

10   witness in a pretrial order that testify on appraisals.

 

11             THE COURT:  Fine.

 

12             MR. ROSEN:  I mean if - if -

 

13             THE COURT:  Otherwise it's hearsay.

 

14             MR. ROSEN:  I don't dispute that.

 

15             THE COURT:  Okay.

 

16             MR. ROSEN:  I'm saying if Mr. Zlotoff says he wants to

 

17   finish today, we have Mr. Brown, who gave us the affidavit.  Mr.

 

18   Brown is - we first found out about this today, Mr. Zlotoff's

 

19   objection.  We filed these, by the way, a week ago.  Mr. Brown's

 

20   declaration or affidavit was part of the papers we filed a week

 

21   ago today in opposition to the motion to sell the house.  Mr.

 

22   Zlotoff never said a word about it until today, until this - we

 

23   offered this.

 

24             If that's the case, -

 

25             THE COURT:  But there was no mechanism, there was no

 

                                                           119

 

 1   order pursuant to which you were going to be bringing documents

 

 2   at the last minute and he was supposed to object by a certain

 

 3   point.  There was nothing in place to deal with the situation.

 

 4             MR. ROSEN:  I understand that.  All I want to say is

 

 5   this.  Mr. Brown is local.  He can come in and testify.  We did

 

 6   have an appraiser identified and Mr. Brown was a substitute

 

 7   appraiser for Mr. Grossman in the - in the pretrial order,

 

 8   except Mr. Brown's not available until Tuesday at the earliest.

 

 9   We called him during the luncheon recess.

 

10             Now if - if you're serious - if Mr. Zlotoff seriously

 

11   disputes this and wants to put Mr. Brown on the stand to

 

12   cross-examine and say, "Is this really true, this appraisal,"

 

13   well, that's the circumstance.  I mean he's - Mr. Brown's not

 

14   going to be on the stand today.  It's that simple.

 

15             So do we want to fight about this?  I mean Mr. Zlotoff

 

16   has a good faith basis to believe that this affidavit is untrue

 

17   and that he can - he can cross-examine Mr. Brown on it, then I

 

18   would - you know, then I would understand his position.  But -

 

19             THE COURT:  There's a little problem with this.  I

 

20   mean there was - what was the deadline for submitting these

 

21   documents to each other?  They're submitting exhibits to each

 

22   other.

 

23             MR. ROSEN:  The exhibit didn't exist until -

 

24             THE COURT:  That may be, but you've presented in a

 

25   trial this.  Does he get a right to get a counter appraisal if

 

                                                           120

 

 1   he wants it?

 

 2             MR. ROSEN:  He has one.

 

 3             THE COURT:  Not to - as of this date, in September of

 

 4   2002.

 

 5             MR. ROSEN:  Yes, he does.

 

 6             THE COURT:  He has a counter - you have an appraisal?

 

 7             MR. ZLOTOFF:  No, not that I sought to put in

 

 8   evidence, because I knew I wouldn't have the opportunity to do

 

 9   that.

 

10             MR. ROSEN:  He has an appraisal.  It's part of his

 

11   motion to sell the house.

 

12             MR. ZLOTOFF:  But it's not an issue here today.

 

13   That's an issue on October 10th.

 

14             MR. ROSEN:  Well, okay.

 

15             You know something, I don't want to fight about it.

 

16   You want - if Mr. Zlotoff seriously believes that this affidavit

 

17   is untrue, you know, then he has a right to - it's an absolute

 

18   right to have the witness on the stand and cross-examine him.

 

19   Okay.  Next.

 

20             If that's what you want.

 

21             THE COURT:  So this is hearsay and it's not admitted.

 

22             MR. ZLOTOFF:  Number 87, Henson's picket list.

 

23             THE COURT:  87 now.

 

24             MR. ZLOTOFF:  Right.

 

25             THE COURT:  We're not...

 

                                                           121

 

 1             Who generated this document?  Who generated this

 

 2   document?

 

 3             MR. ROSEN:  Is the objection hearsay?

 

 4             MR. ZLOTOFF:  Yes.

 

 5             MR. ROSEN:  Okay.  Let me give you the history of

 

 6   this, Judge.  This is a doc- -

 

 7             THE COURT:  Can I start, please, by answering my

 

 8   question?

 

 9             MR. ROSEN:  I was about to.  You cut me off -

 

10             THE COURT:  Okay.  You were going to give me the

 

11   history.  I was just hoping to get a name first.

 

12             MR. ROSEN:  Well, no.

 

13             THE COURT:  I have to listen to the whole story?

 

14             MR. ROSEN:  No, there isn't a whole story.  There's

 

15   not a whole McGill (phonetic).  Just give me a chance.  Okay.

 

16   Sometimes I speak in commas and semi-colons rather than periods.

 

17             This list was prepared by RTC from records kept of Mr.

 

18   Henson's activities, comma, Mr. Henson was then confronted in

 

19   deposition and asked whether or not what this list shows is

 

20   accurate, i.e. "Is it accurate that you have picketed for 200

 

21   days Scientology facilities during the period of time covered by

 

22   this list?"

 

23             Mr. Henson said, "Yes."  He adopts the statement:  The

 

24   list is - standing alone, if we didn't have Mr. Henson's

 

25   deposition admission that, yes, the number sounds right, 200

 

                                                           122

 

 1   days or whatever it is; and the deposition testimony is an

 

 2   exhibit.

 

 3             THE COURT:  Okay.  This I can't do because I don't

 

 4   have the deposition to compare to each of these dates unless you

 

 5   put it through.  I'm not going to try to do this and compare a

 

 6   long deposition with a list.

 

 7             Now you know, you want to put on a witness to do this

 

 8   or not?

 

 9             MR. ROSEN:  No, no.

 

10             THE COURT:  Because you know it's at issue.

 

11             MR. ROSEN:  You don't have to compare a long

 

12   deposition.

 

13             THE COURT:  Well, give me the page.  Tell me where it

 

14   is in the exhibits.

 

15             MR. ROSEN:  Okay.  We'll tell you.  I would suspect

 

16   that Mr. Zlotoff, since he was at the deposition, might take the

 

17   burden of - excuse me - might tell us whether or not he

 

18   disagrees, or we wait - is this going to be a waste of time.

 

19             But if you want the page number and the exhibit, I'll

 

20   give it to you.

 

21             THE COURT:  He's raised a hearsay objection.  I'm the

 

22   Judge.  I've not read the exhibit - the deposition.

 

23             MR. ROSEN:  Okay.  Okay.

 

24             THE COURT:  I'm asking you to tie it up for me.

 

25             MR. ROSEN:  I will.  And I just question, I don't

 

                                                           123

 

 1   object to - and I respect your opinion.  I'll tie it up for you.

 

 2   I just raise the question allowed as to whether or not Mr.

 

 3   Zlotoff has a good faith basis to disagree with what we just

 

 4   said.  He was at the deposition.

 

 5             MR. ZLOTOFF:  I do.  The - I'll tell you my good faith

 

 6   problem with it is that I got responses to interrogatories in

 

 7   which I specifically asked about the dates during the Chapter 13

 

 8   when Henson was picketing.

 

 9             And, you know what, the dates don't match up in the

 

10   list in my discovery responses.

 

11             MR. ROSEN:  Okay.

 

12             MR. ZLOTOFF:  If you want, I'll just submit the

 

13   discovery responses as a rebuttal.  And that I think may be good

 

14   enough, because that will -

 

15             THE COURT:  Then it called into question and he has to

 

16   know whether he has to bring a witness.

 

17             And I don't know whether you have to bring a witness

 

18   or whether you have a witness to bring.

 

19             MR. ROSEN:  Okay.  No.  It's all right.  I understand.

 

20   We will deal with this by identifying for you the excerpts of

 

21   the deposition testimony of Mr. Henson given in this case in

 

22   which he concedes the proposition of picketing, I think, 200

 

23   times -

 

24             THE COURT:  As of now the exhibit is excluded.

 

25             MR. ROSEN:  Okay.

 

                                                           124

 

 1             THE COURT:  On the grounds that it's hearsay.

 

 2             MR. ZLOTOFF:  All right.  Your Honor, I think that was

 

 3   - I think that was it in terms of hearsay -

 

 4             THE COURT:  Okay.  So other than relevance, to tie

 

 5   this up, and the few - the documents we've specifically

 

 6   discussed, are there any other objections that you have, Mr.

 

 7   Zlotoff, to Exhibits 1 through - Ms. Kobrin, what's the last

 

 8   one?

 

 9             MS. KOBRIN:  286.

 

10             THE COURT:  - 1 through 286?

 

11             MR. ZLOTOFF:  No, just relevance, Your Honor.

 

12             THE COURT:  Okay.  And that will be done by posttrial

 

13   briefs, and we'll figure out the timing for that when we're

 

14   finished.

 

15             MR. ZLOTOFF:  All right.  Perhaps I should just call

 

16   Arel Lucas as - is it my - my turn to go at this point?

 

17             THE COURT:  Well, if you're completed, your case on

 

18   your motions, then you should rest.

 

19             MR. ROSEN:  I think it's customary to hear an opening

 

20   statement before he rests, but other than that I don't - my

 

21   intention would be to rest on my motion to dismiss the petition.

 

22   I do not - nothing I've heard so far causes me to call any of my

 

23   witnesses.

 

24             THE COURT:  Okay.  Do you want to present your opening

 

25   statement on his motion - motions?

 

                                                           125

 

 1             MR. ZLOTOFF:  Yes.  Actually - is that what we're

 

 2   doing, we're limiting it to his motion, we're not covering

 

 3   the...

 

 4             THE COURT:  I asked you whether you wanted to go

 

 5   first -

 

 6             MR. ZLOTOFF:  Okay.

 

 7             THE COURT:  You will go first on the plan, you know,

 

 8   to present witnesses of good faith, et cetera.

 

 9             MR. ZLOTOFF:  All right.

 

10             THE COURT:  But I asked you whether you wanted him to

 

11   go first on his motions.

 

12             MR. ZLOTOFF:  Right.

 

13             THE COURT:  That's what we started today, with -

 

14             MR. ZLOTOFF:  Okay.  Actually -

 

15             THE COURT:  - a discussion of who -

 

16             MR. ZLOTOFF:  Okay, that's fine.

 

17             THE COURT:  - who's things - who's going to go first,

 

18   Mr. Rosen's motions or your request that I confirm the plan.

 

19             MR. ZLOTOFF:  Right.

 

20             THE COURT:  We started with your agreement that we

 

21   should have Mr. Rosen's motions, which is what he asked for.

 

22   And that's where we are.  He has completed his motions.  He's

 

23   ready to rest.  He'd like to hear your opening argument -

 

24             MR. ZLOTOFF:  Okay.  I -

 

25             THE COURT:  - on the motions.

 

                                                           126

 

 1             MR. ZLOTOFF:  I apologize, Your Honor.  It's just that

 

 2   the arguments are pretty similar.  And it's similar because of

 

 3   the fact that, first and foremost, the way you judge good

 

 4   faith -

 

 5             THE COURT:  I'm not into good faith yet - oh, I see.

 

 6   You're explaining why they're similar.  I'm just on his -

 

 7             MR. ZLOTOFF:  I thought it was a motion to dismiss

 

 8   based on bad faith.

 

 9             THE COURT:  Oh, yeah, that's right.  Okay.  That's

 

10   fair.  That's fair.  That issue overlaps the two.

 

11             MR. ZLOTOFF:  That's what I say, it overlaps.  Right.

 

12             THE COURT:  Right.

 

13             MR. ZLOTOFF:  Yeah.

 

14          OPENING STATEMENT ON BEHALF OF THE DEBTOR

 

15             MR. ZLOTOFF:  In other words, the - the core decision

 

16   you have to make is whether this debtor was attempting to

 

17   manipulate the Code and whether he had a good faith desire to

 

18   accomplish what the law says is there, what Chapter 13 is there

 

19   for.

 

20             And I believe that through Arel Lucas and probably I'm

 

21   sure Your Honor could take judicial notice of what's happened in

 

22   this case, but the fact of the matter is that at the time when

 

23   this case was filed or shortly thereafter he suffered a severe

 

24   judgment against him.

 

25             I don't need to tell Your Honor that if bankruptcy

 

                                                           127

 

 1   were limited to only people, only debtors who didn't have

 

 2   lawsuits against them there'd be a lot of people needing

 

 3   bankruptcy that wouldn't file it.  In fact, I will oftentimes

 

 4   not handle a case or file a case until the very last minute,

 

 5   because most debtors are desirous of staying out of bankruptcy

 

 6   and are interested in other alternatives.

 

 7             So the fact that there was a $75,000 judgment to me

 

 8   more than adequately establishes the fact that there was a debt,

 

 9   that he was in need of some sort of debt relief.  The fact that

 

10   he was solvent, and let's assume he was solvent, although at the

 

11   time of the filing of the case I think it was debatable because

 

12   I believe the stipulation we entered into with regard to value

 

13   established, if I'm not mistaken, that the value of the house

 

14   was 410,- versus a debt of 2- - I don't know - 220,-, 230,-.

 

15   And that it was on a joint tenancy subject to Mr. Henson's

 

16   $75,000 homestead.

 

17             And so Mr. - Mr. Rosen's argument is that every debtor

 

18   should have to dip into his homestead in order to satisfy a

 

19   judgment, otherwise the filing is not in good faith.  Well, -

 

20             THE COURT:  Go ahead.

 

21             MR. ZLOTOFF:  Well, that's not true.  I mean that

 

22   doesn't - that isn't even a prong of bad faith.  In fact,

 

23   there's plenty of laws on 727 that would argue that a debt - a

 

24   debtor could shift assets into an exempt - in an exempt asset

 

25   and protect it and file bankruptcy.  So it's quite the contrary.

 

                                                           128

 

 1   There's no - no requirement under the rubric of good faith that

 

 2   a debtor dip into exempt assets in order to stay out of

 

 3   bankruptcy.

 

 4             But even if you want to say that he should have, still

 

 5   there is nothing in the law that I'm aware of that says that a

 

 6   solvent debtor has no right to go into bankruptcy.  That's what

 

 7   Chapter 13 is for, in fact.  That's one of the reasons why it

 

 8   was made so easy back in 1978, because it was set up as an

 

 9   alternative to Chapter 7, to promote its use for repayment of

 

10   debt so that debtors could maintain their assets.

 

11             So the way it was first set up, debtors could keep

 

12   their house, they could keep everything, rental houses, you name

 

13   it, they could keep it.  And - and propose a plan of repayment,

 

14   and that was one of the incentives.

 

15             Mr. - Mr. Rosen takes the position that - seemingly

 

16   that unless there is virtual mathematical certainty with respect

 

17   to the schedules that there's bad faith.  Well, I disagree.  I -

 

18   I think the law is clear - in fact, the schedules are clear.  If

 

19   you look on Schedule I, it doesn't say, "State with mathematical

 

20   certainty what your income is."  It says, "Give your estimate of

 

21   income."

 

22             And - and similarly with respect to expenses, I think

 

23   the caselaw is going to say that we want the debtor's estimate

 

24   of his expenses.  We don't need mathematical certainty.  If a

 

25   debtor is off by some amount, we're not going to - we're not

 

                                                           129

 

 1   going to consider that that's bad faith.

 

 2             If - if there are omissions in a schedule, and there

 

 3   were apparently, from what I can determine there were.  There

 

 4   was a life insurance that he didn't really own.  He had a right

 

 5   to buy it back, but that's an asset and it should have been

 

 6   listed.  But it was exempt because you - according to Section

 

 7   704.100 of the CCP, which he could have claimed, $8,000 per

 

 8   spouse is exempt.  And Mr. - Ms. Lucas will testify she had the

 

 9   same type of life insurance, so she - as - as he did, so she

 

10   would have known the circumstances regarding that life insurance

 

11   policy.

 

12             And we didn't claim it.  Obviously he didn't mention

 

13   it.  He didn't claim the exemption.  But there is authority in

 

14   the Ninth Circuit that exemptions under Chapter 13 are really

 

15   for the purposes of establishing the best-interest-of-creditors

 

16   test.  They're not - they're not absolutely necessary to claim

 

17   or they don't have the same sort of importance in a Chapter 13

 

18   as they do in a Chapter 7.

 

19             So I think the fact - and, furthermore, exemptions are

 

20   amendable at any time.  So when you add all that together, I

 

21   don't - I think it's an omission, but it was a harmless

 

22   omission.

 

23             With regard to artwork, you'll have to hear from Ms.

 

24   Lucas.  She will deny that there was any ownership.  She will

 

25   testify, I think, that - and I've heard the depositions enough

 

                                                           130

 

 1   to know that it was the daughter's artwork and it was insured on

 

 2   the parents' policies.  Kind of like the way that parents, most

 

 3   parents insure their kid's car.  It doesn't necessarily mean

 

 4   it's the parents' car.  It's done as a convenience, done for the

 

 5   facility of obtaining a cheaper insurance rate.

 

 6             Similarly with respect to - Ms. Lucas will testify

 

 7   with respect to this so-called $7500 stock purchase and explain

 

 8   why that wasn't an asset.  Although I might point out to the

 

 9   Court that Mr. Henson on his Schedule B indicate stocks, but

 

10   gave them a zero value.  And so I'm not sure that - I'm not sure

 

11   that it's been proven or can be proven that that wasn't correct.

 

12             THE COURT:  Let me just interrupt.  Do I have any

 

13   evidence as to what the value of the stock was at that time?

 

14             MR. ROSEN:  Yes.

 

15             THE COURT:  Okay.  You'll show me then.  I just want

 

16   to know - I don't want to hear about it -

 

17             MR. ROSEN:  At - what does "at that time" mean?  I'm

 

18   sorry.

 

19             THE COURT:  When the petition was filed.  The value of

 

20   the stock as -

 

21             MR. ROSEN:  No.  No, what you have is the value of the

 

22   stock three months before the petition was filed by the purchase

 

23   price.

 

24             THE COURT:  That doesn't mean anything.  In this

 

25   internet market, that meant nothing.  But I understand.  I don't

 

                                                           131

 

 1   think it means much, but I understand.  I'll listen to you when

 

 2   you response at some point.

 

 3             MR. ROSEN:  Okay.

 

 4             MR. ZLOTOFF:  Your Honor, the - I'm going to repeat

 

 5   again what I started to say earlier about Mr. - Mr. Henson - Mr.

 

 6   Henson's engagement in free speech.  To me that's all it is.

 

 7   That's why to me the allegations of his conduct both before the

 

 8   trial, the trial before Judge Whyte, and his conduct after, even

 

 9   including the criminal trial, to me it's utterly irrelevant.

 

10   He's exercising free speech.  Enough said.

 

11             And I don't see any common web.  I don't see anything

 

12   other than disparate, unconnected circumstances, much as if, to

 

13   use the analogy I used before, as if you had a lot of people

 

14   discussing antiwar protesting.  Does the fact that somebody

 

15   blows up a building, does that mean that somehow you're going to

 

16   drag a net over everybody?  Or to me it's just - it's utterly

 

17   dissimilar.

 

18             And each act has to be judged on its own, except for

 

19   the fact that none of these are relevant to the Chapter 13.  So

 

20   he can - they can go to Judge Whyte as much as they want, but I

 

21   just don't understand why that impinges at all on - on the

 

22   Chapter 13, whether or not it was filed in good faith.

 

23             I hope that Ms. Lucas will be able to testify, that we

 

24   can get her evidence in, that the statements made in the

 

25   petition were roughly accurate.  And I think that's the

 

                                                           132

 

 1   cornerstone of good faith.

 

 2             It's true about the discovery.  It certainly lasted

 

 3   longer.  Henson certainly should have acted more appropriately,

 

 4   but did it rise to the magnitude of bad faith?  Given what -

 

 5             THE COURT:  Is that even the issue?  Is the issue

 

 6   whether how he dealt with discovery was good faith or bad faith,

 

 7   or whether how he dealt with discovery shows that as of the

 

 8   petition date he was filing the case in bad faith?  That's what

 

 9   the issue is, as I see it.  Not whether three months later, a

 

10   year later, two years later he acted in bad faith.  It's whether

 

11   that shows that he acted in bad faith as of the petition date.

 

12   That's the key, whether it was filed in good faith.

 

13             MR. ZLOTOFF:  Okay.

 

14             THE COURT:  That's my view of this.  Go ahead.

 

15   Postpetition conduct -

 

16             MR. ZLOTOFF:  Right.

 

17             THE COURT:  - is relevant to show whether the case was

 

18   filed in good faith.  So the filing - the filing date is the key

 

19   date, but pre - prepetition may show, shed light on that

 

20   question and postpetition -

 

21             MR. ZLOTOFF:  Right.

 

22             THE COURT:  - may shed light on that question.  But

 

23   the question is -

 

24             MR. ZLOTOFF:  Yes.

 

25             THE COURT:  - his good faith on the petition date.

 

                                                           133

 

 1             MR. ZLOTOFF:  Well, here's how I would enlighten that.

 

 2   For example, if he were hiding something large, an offshore bank

 

 3   account, a business.  I mean if you look in - I think it was

 

 4   Leavitt, the debtor failed to disclose a business.  It was later

 

 5   uncovered.

 

 6             Let's assume that Henson was stonewalling discovery

 

 7   because he wanted to hide a valuable asset such as that.  Then I

 

 8   think his obstruction of discovery could be an example of bad

 

 9   faith, just as in Leavitt it was.

 

10             But I think in Henson it really was small potatoes.  I

 

11   don't think anything amounted to anything other than just Mr.

 

12   Henson engaging in more of his - of his conduct of ill will

 

13   towards - towards Scientology.  And, unfortunately, that dragged

 

14   on and took a lot of time, but I'm not sure - as you say, Your

 

15   Honor, I'm not sure it enlightened any at all regarding whether

 

16   he filed in bad faith.

 

17             THE COURT:  I didn't say it did or it didn't.  I just

 

18   said the issue is his good faith on time - at the time of

 

19   filing.

 

20             MR. ZLOTOFF:  Right.

 

21             THE COURT:  And that's my view.

 

22             MR. ZLOTOFF:  I want to make clear, because I made

 

23   some changes by way of filings recently, before the - just a few

 

24   days ago, with regard to an amendment to the plan.  And I

 

25   misspoke in my trial brief when I said that I was withdrawing

 

                                                           134

 

 1   the previous plan and reinstating the plan effective - or the

 

 2   one that was filed in August.  Actually I was wrong.  There was

 

 3   a plan filed in December of that year, December '98.  And that's

 

 4   the one that was meant to be reinstated.

 

 5             And the addendum that I filed a few days ago simply

 

 6   stated, as I recall, that the debtor intended that the plan be

 

 7   paid off from the sale of his - from the pending sale.

 

 8             THE COURT:  So we're not doing that anymore or we are

 

 9   doing that?  You've got me a little confused.  I don't know - I

 

10   don't recall what was filed in December, because that - you're

 

11   now talking to me about that for the first time and -

 

12             MR. ZLOTOFF:  The plan that was filed several years

 

13   ago was the four percent plan, $150 a month.

 

14             THE COURT:  Okay.

 

15             MR. ZLOTOFF:  Mr. Rosen has stated that that plan

 

16   became infeasible.  It wasn't infeasible when the case began.

 

17   It was entirely feasible.  So what he says is completely wrong.

 

18   If we would have had a trial two years ago, he would have been

 

19   right.  It would have been infeasible, because Mr. Henson hadn't

 

20   had his house up for sale, didn't want to sell his house.  And

 

21   he had incurred attorney's fees.  And indeed it would have

 

22   looked infeasible to pay out to at $150 a month and pay my

 

23   attorney's fees, too.

 

24             And, by the way, I'm a creditor as well, just to make

 

25   the record clear.  And I have not been paid at all except

 

                                                           135

 

 1   through the Chapter 13, and that's not been very much a month, I

 

 2   might add.

 

 3             MR. ROSEN:  Is this opening statement, Judge?

 

 4             THE COURT:  This is his opening statement, but there's

 

 5   no - there's no proffer of evidence.

 

 6             MR. ROSEN:  Well, with all due respect, -

 

 7             THE COURT:  I don't want to talk about it.  It's his

 

 8   opening statement.  At the end of the statement if you want to

 

 9   say -

 

10             MR. ROSEN:  I move to strike it.  He's testifying.

 

11             THE COURT:  As to how much money he's making or not

 

12   making?

 

13             MR. ROSEN:  He's testifying as to what he has or has

 

14   not been paid.

 

15             THE COURT:  That's part of the record.  It's part of

 

16   the record.  If - through the 13, what he's been paid.  That's

 

17   part - and he can't get paid any other way.  He has to get Court

 

18   approval to get paid.

 

19             MR. ZLOTOFF:  I'm sorry.  I was responding to - I had

 

20   in my notes here that Mr. - Mr. Rosen brought this up as an

 

21   issue, talking about Mr. Harr getting paid postpetition, and

 

22   there was some discussion about whether I was paid postpetition.

 

23   I just wanted to make it clear I have not been.

 

24             But the point I wanted to make with regard to the plan

 

25   is the plan now is that it will get paid off from the sale of

 

                                                           136

 

 1   the property.  So it's the original plan with the proviso, as

 

 2   one would normally see in an application to sell, that the plan

 

 3   be paid off from the sale of the property.  So that to me

 

 4   establishes feasibility.

 

 5             MR. ROSEN:  Feasibility?

 

 6             THE COURT:  Please, Mr. Rosen, don't interrupt.

 

 7             MR. ROSEN:  Yeah.

 

 8             MR. ZLOTOFF:  Feasibility of the plan can be completed

 

 9   because the house can be sold -

 

10             THE COURT:  Right, I understand.

 

11             MR. ZLOTOFF:  - and creditors paid -

 

12             THE COURT:  I understand the argument.

 

13             MR. ZLOTOFF:  Okay.  With regard to the issue of

 

14   whether the debt is dischargeable or not dischargeable, I would

 

15   refer the Court to Exhibit 36, which is an instruction read by

 

16   Judge Whyte that specifically defined willful as including

 

17   recklessness or reckless conduct.  And so it plainly is not

 

18   dischargeable by - by virtue of the judgment -

 

19             THE COURT:  You said it's plainly not dischargeable?

 

20             MR. ZLOTOFF:  It's plainly not a debt excepted from

 

21   discharge by virtue of - there's no collateral estoppel, in

 

22   other words, to that - to that judgment as to a potential 52- -

 

23   523(a)(6) action.  It's just not the right standard at all.

 

24             I've heard this business about Judge March and my

 

25   reference to Judge March's order.  And I thought I made it

 

                                                           137

 

 1   clear, but Judge March was not reversed a hundred percent.  As I

 

 2   recall, she was reversed as to the sanctions order, but not as

 

 3   to the directive that a deposition be limited to one hour.

 

 4             All right.  Thank you, that's -

 

 5             THE COURT:  I have a question.

 

 6             MR. ZLOTOFF:  That's it.

 

 7             THE COURT:  Mr. Rosen says as of the date the petition

 

 8   was filed, essentially that Mr. Henson had plenty of money with

 

 9   which to deal with the $75,000 debt.  But as of the date the

 

10   petition was filed was there an outstanding claim for attorney's

 

11   fees?

 

12             In other words, was the debt finite at $75,000 as of

 

13   the petition date or was Mr. Henson dealing with the possibility

 

14   or even the expectation of a larger claim based on attorney's

 

15   fees or anything else?  Was there anything else out there?

 

16             MR. ZLOTOFF:  Yes.  I think the schedules did - did

 

17   list his own attorney's fees for the attorneys that represented

 

18   him -

 

19             THE COURT:  But I meant attorney's fees to get to the

 

20   75,000 - associated with having the $75,000 judgment against

 

21   him.  I don't - I don't know the situation with Judge Whyte and

 

22   what happened exactly, but my recollection is at some point

 

23   Judge Whyte issued an order for attorney's fees and RTC appealed

 

24   that.  But I don't remember the context of the date.

 

25             MR. ROSEN:  Well, since Your Honor has asked the

 

                                                           138

 

 1   question, obviously -

 

 2             THE COURT:  No.  Mr. Zlotoff can answer if he can, -

 

 3             MR. ROSEN:  Oh, sure.

 

 4             THE COURT:  - and then I'll let you respond in the

 

 5   context of responding to his opening statement, if you want.

 

 6   But normally we wouldn't have a response to an opening

 

 7   statement, that would be your closing argument.

 

 8             MR. ROSEN:  Okay.

 

 9             MR. ZLOTOFF:  I - I can't respond to what Judge Whyte

 

10   may or may not have done.  I can only -

 

11             THE COURT:  No, no.  I - was - see, Mr. Rosen is

 

12   saying, and that may prove important, he's saying, "Look,

 

13   essentially," and I may be exaggerating this a little, "Mr.

 

14   Henson didn't need a bankruptcy.  He could have written a check.

 

15   The claim was finite at $75,000 and he had a house and he had

 

16   money in the bank, and he could have just paid it.  He didn't

 

17   need bankruptcy."

 

18             But - and so what I'm asking - and what I'm asking you

 

19   is was there yet - was there yet a claim out there for RTC's

 

20   attorneys' fees and - RTC's attorneys' fees and associate - in

 

21   connection with any litigation out there, either before Judge

 

22   Whyte or elsewhere, such that Mr. Henson would reasonably have

 

23   expected that RTC's claim was not limited to 75,000, and it

 

24   wouldn't go away if he just wrote a check for 75,000?

 

25             And I don't even know - I haven't seen the bank

 

                                                           139

 

 1   records, so I don't know how much money he had in the bank and

 

 2   whether he could have written a check at all.  And I don't know

 

 3   whether he had any equity in his house at that point.  I

 

 4   understand that you've got a stipulation as to the value and the

 

 5   mortgage, and then we'd have to run the numbers with the - with

 

 6   Ms. Lucas' share and all of that.

 

 7             But I'm trying to understand whether - what his

 

 8   financial situation really was when he filed for bankruptcy.

 

 9             MR. ZLOTOFF:  All right.  Well, I - the schedules are

 

10   part of the exhibits, and they certainly don't disclose a large

 

11   amount of liquid assets.  But with respect to Judge Whyte's

 

12   Court, you know, I don't know.  All I remember is that RTC at

 

13   the beginning, somewhere at the beginning, I don't exactly know

 

14   when, filed a huge a claim.  It was like almost a million

 

15   dollars, I think.  And I don't know how -

 

16             THE COURT:  For its attorneys' fees?

 

17             MR. ZLOTOFF:  I think mostly it was for attorneys'

 

18   fees.

 

19             THE COURT:  So would that have been true as of the

 

20   petition date, the petition was filed, that Mr. Henson would

 

21   have expected RTC yet to file a claim for attorneys' fees or

 

22   not?

 

23             MR. ZLOTOFF:  Yeah, I don't -

 

24             MR. ROSEN:  How could he - how could he answer that

 

25   question?

 

                                                           140

 

 1             MR. ZLOTOFF:  I don't know, Your Honor.  I really

 

 2   don't know.

 

 3             MR. ROSEN:  You're asking what's - the counsel to tell

 

 4   you what's in his client's mind?

 

 5             THE COURT:  No.

 

 6             MR. ZLOTOFF:  Yeah, I don't know.

 

 7             THE COURT:  No, no.  I'm asking from reading the -

 

 8   what happened before Judge Whyte whether there was still

 

 9   outstanding the possibility - RTC got a judgment against him.

 

10             MR. ZLOTOFF:  Right.  Postpetition, right.

 

11             THE COURT:  Right - well, postpetition.  So when was

 

12   that judgment?  That was after I granted relief from stay, okay.

 

13             MR. ZLOTOFF:  I think so.  So I don't - I don't know

 

14   the answer -

 

15             THE COURT:  So when he filed the petition he wouldn't

 

16   have known that RTC got a judgment, right?

 

17             MR. ZLOTOFF:  That I think is accurate, Your Honor.

 

18             THE COURT:  So it could have been a hundred thousand

 

19   plus attorneys' fees?  Does that statute work that way or it's

 

20   limited to a hundred thousand and you don't get attorneys' fees

 

21   no matter what or you don't know, Mr. Zlotoff?

 

22             MR. ZLOTOFF:  You know, I don't know, Your Honor.

 

23             THE COURT:  Okay.

 

24             MR. ROSEN:  Judge, can -

 

25             THE COURT:  Anyway, both of you, I don't - I'll give

 

                                                           141

 

 1   you a chance to respond at the end -

 

 2             MR. ROSEN:  Can I interject just one thing for

 

 3   clarity?

 

 4             THE COURT:  No, please don't.

 

 5             MR. ROSEN:  Can I ask you a question, please?

 

 6             THE COURT:  An inquiry?  Sure.

 

 7             MR. ROSEN:  You keep talking about the filing of the

 

 8   petition.

 

 9             THE COURT:  Yes.

 

10             MR. ROSEN:  And I get very confused.  You say when he

 

11   filed the petition after the judgment, there is only one

 

12   petition in this case.  It was filed in February of 1998.  You

 

13   did not - he didn't file a second petition, a new petition after

 

14   the trial.  You reinstated the old one.

 

15             And every time you say, "Was it after the petition

 

16   date," I get confused, because I don't know if you're talking

 

17   about after February of '98 or after you reinstated, vacated the

 

18   dismissal.

 

19             THE COURT:  That's a fair question.

 

20             MR. ROSEN:  And we're dealing with one petition.

 

21             THE COURT:  Right.

 

22             MR. ROSEN:  And that confuses me no end, Judge.

 

23             THE COURT:  Okay.  So what I'm - what I'm talking

 

24   about is the date the petition was filed and whether Mr. Henson

 

25   needed bankruptcy.  And if he knew he was facing a trial with a

 

                                                           142

 

 1   possibility of a hundred thousand dollars with damages and the

 

 2   possibility of additional attorneys' fees on top of that, that -

 

 3   I'd like to know whether that was a possibility he was facing

 

 4   because he knew the RTC was coming after him if - and so I'd

 

 5   like to understand how that statute works, and I don't need to

 

 6   know it until the end of this - until closing arguments.  But I

 

 7   would appreciate an understanding of how that statute works.

 

 8             And Mr. Rosen told me that the maximum he could be -

 

 9   the maximum that could be awarded against him was a hundred

 

10   thousand dollars.  And the question is does that - does that

 

11   include all attorneys' fees, but I don't need an answer to that

 

12   now.  And frankly I don't even want - I don't want lawyer's

 

13   comments.  I would like a copy or a citation to the law, because

 

14   I can look it up myself if I -

 

15             MR. ROSEN:  The United States Code.  It's the -

 

16             THE COURT:  Well, the part about attorney's fees is

 

17   what I specifically -

 

18             MR. ROSEN:  Oh, I don't remember what section it is,

 

19   but there's an index, there's a table of contents to the Code -

 

20   I mean to the - to the Copyright Act.  It's in the - it is

 

21   within the United States Copyright Act.  It's entitled 17 of the

 

22   United States Code.

 

23             THE COURT:  Well, you deal with this all the time, so

 

24   if you happen to know the cite, I'd appreciate it.

 

25             MR. ROSEN:  I don't know it.  I don't memorize the

 

                                                           143

 

 1   cites for the sections.  I'm sorry.

 

 2             MS. KOBRIN:  17 USC -

 

 3             MR. ROSEN:  Hold on.

 

 4        (Creditor's counsel confer off record.)

 

 5             MR. ROSEN:  Don't guess.

 

 6             THE COURT:  Mr. Rosen, you're now telling her not to

 

 7   help the Court?

 

 8             MR. ROSEN:  No.  I said, "Don't guess."

 

 9             MS. KOBRIN:  Don't guess.

 

10             THE COURT:  Well, that's all right.  Ms. Kobrin,

 

11   guess.  It'll be okay, and I'll look it up and it might be

 

12   right.  It's not - I'm not going to rely on it if I look it up

 

13   and it's wrong.

 

14             MS. KOBRIN:  My recollection is that the remedies are

 

15   in 503.  17 - 17 USC 503, 504, 505.

 

16             THE COURT:  Thank you very much.

 

17             Okay.  Does that conclude your opening argument?

 

18             MR. ZLOTOFF:  Let me - let me just address one other

 

19   point, Your Honor, and that pertains to the order granting

 

20   relief from stay, which is Exhibit 209 of March 13th, 1998.  We

 

21   referred to it earlier.

 

22             And I mentioned that the Court reinstated the case

 

23   thereafter and in the meantime there was a lien recorded, which

 

24   apparently RTC kept everybody in the dark of, because it's been

 

25   arguing for years that it was an unsecured creditor.  And now we

 

                                                           144

 

 1   find out when the sale of the house comes to pass that all of a

 

 2   sudden it appears to be a secured creditor.

 

 3             Well, I looked in the - the transcript, and I don't

 

 4   have the transcript, but it's in the record, the Court record,

 

 5   RTC ordered it and put it in the record.  And I believe it's

 

 6   page 52 or 53 - it's not an exhibit here - wherein Your Honor

 

 7   had indicated that the relief was prospective as to - as to the

 

 8   case, but that matters that were in existence as of the

 

 9   dismissal would still be in effect.

 

10             And I think, as I understood that order, what it

 

11   meant, is that since there was relief from stay for the limited

 

12   purpose of continuing with litigation, but not for collection,

 

13   that the fact that in the interim, during dismissal or - whether

 

14   it was dismissal, I don't know - but subsequent to the order for

 

15   relief from stay, there was a judgement, and that's good.  But

 

16   my interpretation is that since there wasn't relief from stay

 

17   for collection, that the judgment would not be good because

 

18   there was no - there was no relief granted for that.

 

19             THE COURT:  Was the judgment good or not good?

 

20             MR. ZLOTOFF:  The judgment was good.

 

21             THE COURT:  So you're saying it was good for some

 

22   purposes, but not for collection purposes?

 

23             MR. ZLOTOFF:  Yes, that's what I'm saying.

 

24             THE COURT:  I think we should put on the list of

 

25   things that you should write about to me after the trial.

 

                                                           145

 

 1             MR. ZLOTOFF:  Okay.

 

 2             THE COURT:  And Mr. Rosen will have a response.

 

 3             And so, Millie, - there will be briefs on the effect

 

 4   of reinstatement of the case on RTC's status as a secured and/or

 

 5   unsecured creditor.

 

 6             MR. ROSEN:  We won't be briefing that, Judge, on this

 

 7   issue because this has absolutely nothing to do, as far as I can

 

 8   see, with our motion to dismiss the petition for bad faith.  It

 

 9   doesn't matter -

 

10             THE COURT:  I agree.  I agree.  It'll come up in Mr.

 

11   Zlotoff's case.

 

12             MR. ROSEN:  Yeah.

 

13             THE COURT:  And Mr. Zlotoff's efforts to confirm his

 

14   plan.

 

15             MR. ROSEN:  Yeah.  It has nothing to do - I -

 

16             THE COURT:  I agree.

 

17             MR. ROSEN:  Okay.  I'll shut up.

 

18             THE COURT:  Okay.  Does that conclude your opening

 

19   remarks?

 

20             MR. ZLOTOFF:  It does.

 

21             THE COURT:  Now do you rest?

 

22             MR. ROSEN:  Yes.

 

23             THE COURT:  Do you want to put on evidence on the

 

24   motions, which is what is before us or -

 

25             MR. ZLOTOFF:  Right.  You know, in my mind, Your

 

                                                           146

 

 1   Honor, I don't see any difference at all in the type of

 

 2   testimony with regard to the motion versus confirmation of the

 

 3   plan.

 

 4             THE COURT:  Well, we can then - since - so we can - if

 

 5   everybody agrees, we can then move, and you're going to present

 

 6   a joint presentation on both the motions and the confirmation of

 

 7   the plan.  And then RTC would - I mean - yes, then RTC would

 

 8   have an opportunity to respond to your case on the plan and

 

 9   reply on the - no, they'd be finished.  I guess we'd be

 

10   finished.

 

11             MR. ROSEN:  What I would do - what I would propose is

 

12   this.  I have no objection if Mr. - if in the presentation of

 

13   his evidence in opposition to our motion to dismiss, he in that

 

14   same presentation presents his evidence and support of his

 

15   motion to confirm the 13 plan.  And I will deal with that

 

16   evidence.

 

17             What I will reserve, since we're merging the two, is a

 

18   closing argument on our motion to dismiss and an opening

 

19   argument, if you will, an opening statement on our opposition to

 

20   confirmation.

 

21             I'll be happy to reserve those and deal with them

 

22   later, but if this is - if we're talking about presentation of

 

23   evidence, I don't have any objection.  I only have one request.

 

24   From -

 

25             THE COURT:  Wait.  Let me ask Mr. Zlotoff a question

 

                                                           147

 

 1   before you -

 

 2             MR. ROSEN:  Yeah.

 

 3             THE COURT:  So here we would go, you would present

 

 4   your opening argument, if any, on the effort to confirm the

 

 5   plan.  Mr. Rosen would have an opportunity to respond -

 

 6             MR. ROSEN:  I'll reserve until after he puts the

 

 7   evidence in.

 

 8             THE COURT:  If that's what you want, to have that

 

 9   opportunity to reserve.  So - or to have both opening - what's

 

10   your position as to whether both opening arguments should occur

 

11   first?

 

12             MR. ZLOTOFF:  I would - I would rather reserve, Your

 

13   Honor - I'd rather reserve mine as well.

 

14             THE COURT:  Okay.  So you're ready to present your

 

15   evidence.  And then Mr. - you don't really need an opening

 

16   argument.  It'll just be an argument, right, because the

 

17   evidence will be in?

 

18             MR. ROSEN:  It depends.

 

19             THE COURT:  How can you present an opening argument

 

20   after he's presented his evidence?

 

21             MR. ROSEN:  I just heard an opening argument with

 

22   counsel testifying about a amended plan that he's never amended.

 

23   I don't have any amended plan that says that the plan's going to

 

24   be funded out of a sale of the house.  I have no such document,

 

25   but he - counsel, you know, gets up and says it.  And that's

 

                                                           148

 

 1   gospel.

 

 2             THE COURT:  Not gospel for me.  It's either there or

 

 3   it isn't there.

 

 4             MR. ROSEN:  Yeah, it isn't.  You check your docket

 

 5   sheet; there's no such thing.  I can deal with that in my - in

 

 6   my opening, counseling, whatever you want to call it.

 

 7             The only issue I want to raise now on - on the

 

 8   presentation of evidence is as follows.  I think Your Honor

 

 9   ought to exclude Ms. Henson from the room - Ms. Lucas from the

 

10   room - I'm sorry - I guess it's Lucas - from the courtroom for a

 

11   moment and have Mr. Zlotoff make an offer of proof.

 

12             And the reason I say that is because Mr. Zlotoff and I

 

13   in the spirit of cooperation, as lawyers are supposed to do,

 

14   have had a long discussion about the testimony, the evidence

 

15   that he intends to offer through Ms. Lucas, and there isn't a

 

16   single thing that's admissible.

 

17             And we can - we can spend our time today and next

 

18   Monday and next Tuesday, you know, and on and on with this, but

 

19   I think the proper way, what I'm telling you, I'm making a

 

20   representation to you, that almost everything Mr. Zlotoff told

 

21   me he was going to elicit from Ms. Lucas is not admissible.

 

22             And, in fact, in his opening statement a moment ago

 

23   you heard one of it.  She's going to testify about the stock

 

24   purchase that Mr. Henson made.  And you know what's going on

 

25   here, Judge.  I mean I don't - I'm not letting any cat out of

 

                                                           149

 

 1   the bag.  Mr. Henson's not here.  So Mr. Zlotoff is trying to

 

 2   get in what would otherwise - testimony and evidence that would

 

 3   otherwise come in properly through Mr. Henson.

 

 4             He doesn't have Mr. Henson.  All of a sudden he has a

 

 5   witness who says, 'Well, I'm going to tell you about Mr.

 

 6   Henson's stock investment.  And I'm going to tell you what his

 

 7   intent was at the time.  And I'm going to tell you that he

 

 8   intended to act in good faith,' expert on mind-reading.

 

 9             So what I'm saying is -

 

10             THE COURT:  Okay.  I understand what you're saying.

 

11             Mr. Zlotoff, do you want to hear the - you want to

 

12   make an offer of proof and he'll object to pieces of evidence,

 

13   or do you want to put her on the stand?

 

14             And you could - you know you can always put in an

 

15   offer of proof and if you want to put her on the stand, put her

 

16   on the stand.  But if you want to put her on the stand right

 

17   away, that's fine.

 

18             MR. ROSEN:  This is my cross-examination of her.

 

19             THE COURT:  Mr. Rosen has just lifted of a stack of

 

20   about five inches worth of paper with a yellow pad on top.

 

21             MR. ROSEN:  Right.

 

22             THE COURT:  But you said it's about four hours.

 

23             MR. ROSEN:  It'll probably be longer, but I don't know

 

24   because I don't know what he's going to elicit other than what

 

25   he told me.

 

                                                           150

 

 1             THE COURT:  That's fine.  You have a right to

 

 2   cross-examination and he has a right to present his case in any

 

 3   way he wants to.

 

 4             MR. ZLOTOFF:  I don't know that we get out of the

 

 5   problem by offers of proof.  It seems to me simpler just -

 

 6             MR. ROSEN:  Sure you do.

 

 7             Well, I don't want to talk to -

 

 8             THE COURT:  If you get nothing in, he has nothing to

 

 9   cross-examine -

 

10             MR. ROSEN:  I have nothing to cross.

 

11             MR. ZLOTOFF:  No, no.  But my point is we'll spend

 

12   four hours, the same four hours.  And then - and then if you

 

13   rule in my favor, we spend four more hours, I guess.

 

14             MR. ROSEN:  I'm suggesting that counsel rise and make

 

15   a proffer of 'Here is what I expect to prove.  Here is what I

 

16   intend to prove through this witness.'  That doesn't take four

 

17   hours.  It takes about five minutes.

 

18             THE COURT:  Well, maybe or maybe not.

 

19             MR. ROSEN:  Well, it's less than four hours for a

 

20   proffer.

 

21             THE COURT:  It sounds like it would likely be less

 

22   than four hours.  I have less faith that your response to it is

 

23   going to be five minutes.  Then I do -

 

24             MR. ROSEN:  I didn't say my response was going to be

 

25   five minutes.

 

                                                           151

 

 1             THE COURT:  Right.

 

 2             MR. ROSEN:  I said the proffer is going to be five

 

 3   minutes.

 

 4             MR. ZLOTOFF:  Well, -

 

 5             THE COURT:  You get five minutes and he gets as long

 

 6   as -

 

 7             MR. ZLOTOFF:  Right.

 

 8             THE COURT:  - he gets his big stack of paper.

 

 9             MR. ROSEN:  I get 19 hours.

 

10             THE COURT:  He gets 19 hours.

 

11             MR. ZLOTOFF:  Yeah.

 

12             THE COURT:  That's what you insisted on - or you

 

13   insisted on more.  I limited you to 19 hours, if you recall.

 

14   And you told me it was outrageous, absolutely outrageous.

 

15             MR. ROSEN:  No.  You know that's not what I said.

 

16   What I said was it was outrageous to assign both sides the same

 

17   amount of time.  If you ever did that with a U.S. Attorney and

 

18   say, 'Well, why should the government have more time to put on

 

19   its case than a criminal defendant,' the U.S. Attorney would

 

20   say, 'What are you talking about'  There's no rule of practice

 

21   that each side gets the same amount of time.  It's not an

 

22   exercise in symmetry.

 

23             THE COURT:  Mr. Rosen, you're wasting time.  You're

 

24   wasting time.

 

25             MR. ZLOTOFF:  Is it my choice, Your Honor?

 

                                                           152

 

 1             THE COURT:  Yeah, absolutely.

 

 2             MR. ZLOTOFF:  I - I don't know why I should make

 

 3   offers of proof when I -

 

 4             THE COURT:  Fine.  Call your witness.

 

 5             MR. ZLOTOFF:  I'll just call the witness.

 

 6             THE COURT:  That's fine.

 

 7             MR. ZLOTOFF:  Could I make a correction, though?  I -

 

 8   I misspoke and I want to correct.

 

 9             Mr. Rosen's absolutely right, I didn't amend the plan.

 

10   I amended my motion to sell free and clear.  I filed that just a

 

11   couple days ago.  I served Ms. Seid and I said, "Debtor hereby

 

12   amends the prayer of his motion to sell free and clear to

 

13   provide that his plan shall be paid off from the proceeds of

 

14   such sale."

 

15             THE COURT:  So you have to amend your plan, Mr.

 

16   Zlotoff.

 

17             MR. ZLOTOFF:  I stand corrected.

 

18             So Ms. Lucas I call as a witness, Your Honor.

 

19             THE COURT:  Ms. Lucas, as you step forward to the

 

20   center microphone, my Deputy will swear you in, please.

 

21             And if you give all those papers to Mr. Zlotoff,

 

22   please.  You can't go on the stand with anything other than the

 

23   official exhibits.

 

24             THE CLERK:  Would you raise your right hand?

 

25             MS. LUCAS:  I would like to affirm, please.

 

                                                           153

 

 1             THE COURT:  That's fine.  No problem.

 

 2         VICTORIA AREL LUCAS, DEBTOR'S WITNESS, SWORN

 

 3             THE WITNESS:  Yes.

 

 4             THE CLERK:  Okay.  Take the stand.

 

 5             THE COURT:  Good afternoon, Ms. Lucas.

 

 6             THE CLERK:  Would the witness for the record please

 

 7   state your full name and spell your full name.

 

 8             THE WITNESS:  It's Victoria Arel, the middle name that

 

 9   I use is A-r-e-l, and my last name is Lucas, L-u-c-a-s.

 

10             THE COURT:  Ms. Lucas, could you kindly move the

 

11   microphone over.

 

12             THE WITNESS:  Oh.

 

13             THE COURT:  You don't have to be right on top of it,

 

14   but -

 

15             THE WITNESS:  Is that better?

 

16             THE COURT:  - direct - yes - directly in contact with

 

17   it would be good.

 

18             THE CLERK:  Thank you.

 

19                      DIRECT EXAMINATION

 

20   BY MR. ZLOTOFF:

 

21   Q.  Ms. Lucas, your relation, please, to Mr. Henson, the debtor

 

22   here?

 

23   A.  I'm his wife.

 

24   Q.  And how long have you been married?

 

25   A.  Twenty years.

 

                                                           154

 

 1   Q.  And of the 20 years how long have you lived together with

 

 2   him?

 

 3   A.  Twenty years except for this past year and almost a half

 

 4   now.

 

 5   Q.  And your residence, please?

 

 6   A.  302 College.

 

 7   Q.  In Palo Alto -

 

 8   A.  Palo Alto.

 

 9   Q.  And how long have you lived at that address?

 

10   A.  With the exception of eight and a half months last year and

 

11   part of this one, six years.

 

12   Q.  Did you buy the house together with Mr. Henson?

 

13   A.  Yes.

 

14   Q.  You refer - in front of you there should be a binder, a

 

15   small blue one.

 

16   A.  This one?  This?

 

17   Q.  Yes.

 

18   A.  This one here.

 

19             MR. ROSEN:  What is this?  What's this binder?

 

20             THE WITNESS:  Exhibits.

 

21             MR. ZLOTOFF:  I asked you before if you had a binder

 

22   of my exhibits, you said yes.

 

23             MR. ROSEN:  These are the ones - these are ones you

 

24   submitted earlier that we argued the in limines on?

 

25             MR. ZLOTOFF:  Yes.

 

                                                           155

 

 1             MR. ROSEN:  Oh, okay.

 

 2             MR. ZLOTOFF:  You don't have it?

 

 3             MR. ROSEN:  I have a - I have a red one.

 

 4             MR. ZLOTOFF:  Oh, well, I'll give you a blue one if

 

 5   you want.

 

 6             MR. ROSEN:  That's okay.

 

 7             MR. ZLOTOFF:  It's the same stuff.

 

 8             MR. ROSEN:  That's all right.  You fooled me -

 

 9             THE COURT:  Mr. -

 

10             MR. ROSEN:  - when you changed the color.

 

11             THE COURT:  Mr. Rosen, you're doing what I've asked

 

12   you not to do about 20 times.  You're talking to counsel on the

 

13   record.  All remarks should be to me.

 

14             MR. ROSEN:  Okay.

 

15             THE COURT:  And that's true for you, Mr. Zlotoff.

 

16             MR. ZLOTOFF:  All right.

 

17             THE COURT:  There's been enough rancor here to

 

18   maintain the dignity of the court.

 

19   BY MR. ZLOTOFF:

 

20   Q.  All right.  Ms. Lucas, if you could turn to Exhibit F,

 

21   please?

 

22             Do you have that?

 

23   A.  Yes.

 

24   Q.  Can you identify it?

 

25   A.  It says it's request to take judicial notice.  Is that the

 

                                                           156

 

 1   right one -

 

 2   Q.  Oh, I'm sorry.  Look at page 2, please.

 

 3   A.  Oh, page 2.  Oh, the grant deed.

 

 4   Q.  Yes.

 

 5   A.  Yes.

 

 6   Q.  Can you identify if?

 

 7   A.  This, as far as I can see, is a copy of the deed that we

 

 8   received when we bought the house.

 

 9   Q.  And it indicates a joint tenancy?

 

10   A.  Yes.

 

11   Q.  Can you explain the legal form in which you hold title?

 

12             MR. ROSEN:  Objection.  The witness is incompetent to

 

13   testify as to the legal form.  I don't have any objection to the

 

14   document going into evidence.  We already said that before on

 

15   September 11th.  This witness cannot explain what joint tenancy

 

16   means.

 

17             MR. ZLOTOFF:  Let me withdraw the question and ask a

 

18   different one, slightly different.

 

19   BY MR. ZLOTOFF:

 

20   Q.  Ms. Lucas, is it - do you own - or does this deed describe a

 

21   true joint tenancy or an ownership as community property?

 

22             MR. ROSEN:  Objection.

 

23             THE WITNESS:  It -

 

24             MR. ROSEN:  The deed speaks for itself.

 

25             THE COURT:  Sustained.

 

                                                           157

 

 1             MR. ROSEN:  It's the best evidence.

 

 2             THE COURT:  Sustained.

 

 3             And it would be asking for her legal opinion.

 

 4             MR. ZLOTOFF:  Okay.

 

 5   BY MR. ZLOTOFF:

 

 6   Q.  Ms. Lucas, is it your understanding that you own an

 

 7   undivided one-half interest in the house?

 

 8             MR. ROSEN:  Objection.  What does this have to do with

 

 9   anything?

 

10             THE COURT:  Overruled.

 

11             THE WITNESS:  Yes, it is my understanding that I do.

 

12   when I went to the title company, I - they - they told me that I

 

13   would get 50 percent of the -

 

14             MR. ROSEN:  Objection, move to strike.

 

15             THE WITNESS:  - proceeds.

 

16             THE COURT:  Wait.  You're -

 

17             MR. ROSEN:  Hearsay.

 

18             THE COURT:  Wait a minute.  You are not going to

 

19   interrupt her answers.  You're going to let her finish answer

 

20   every time.  You will never do that again in my court.  You will

 

21   let her finish her answer.  You will rise and you will - then

 

22   when I recognize you, you will state your objection, and not

 

23   before.  You will not say anything until I recognize you.

 

24             Could you repeat the question?

 

25   BY MR. ZLOTOFF:

 

                                                           158

 

 1   Q.  The question was:  Do you own an undivided one-half interest

 

 2   in the - in the residence?

 

 3             MR. ROSEN:  Objection.

 

 4             THE WITNESS:  I think it was -

 

 5             THE COURT:  Overruled.

 

 6             You have to understand how this works.  You can't

 

 7   answer, Ms. Lucas, until I rule on any objection that has been

 

 8   made.

 

 9             THE WITNESS:  I think it was your question, did I

 

10   understand that it was my - that I own 50 percent, an undivided

 

11   interest, and that is my understanding.

 

12   BY MR. ZLOTOFF:

 

13   Q.  Okay.  Thank you.

 

14             If you would turn to Exhibit L, please.  Do you see

 

15   that?

 

16   A.  Yes.  The World Savings.  This is what we get every month, a

 

17   loan statement -

 

18             THE COURT:  There's no question.

 

19             THE WITNESS:  I'm sorry.

 

20             THE COURT:  You're - she said - he said do you

 

21   recognize that, and the answer is yes or no.

 

22             MR. ZLOTOFF:  Yes, all right.

 

23             THE WITNESS:  Yes.

 

24   BY MR. ZLOTOFF:

 

25   Q.  And -

 

                                                           159

 

 1             THE COURT:  I couldn't hear your answer.

 

 2             THE WITNESS:  Yes.

 

 3             THE COURT:  Thank you.

 

 4   BY MR. ZLOTOFF:

 

 5   Q.  And explain what it is, please.

 

 6   A.  As it says, it's a loan statement.  This is what comes to us

 

 7   every month as an invoice, I guess, or a bill that asks for

 

 8   payment of the mortgage.

 

 9   Q.  All right.  And on the date indicated in the statement, the

 

10   ending balance is noted as $256,854.37?

 

11             MR. ROSEN:  Objection, leading.  Counsel's testifying

 

12   and best evidence.  The document speaks for itself as to what

 

13   the balance was.

 

14             MR. ZLOTOFF:  All right.  I withdraw the question.

 

15   BY MR. ZLOTOFF:

 

16   Q.  Is the - is the document an accurate statement of what the

 

17   balance was on the date indicated on the bill?

 

18             MR. ROSEN:  Objection.  It's trying - asking the

 

19   witness to impeach the document.

 

20             THE COURT:  She - you can ask her whether it's her

 

21   understanding that the document is in accord with her

 

22   understanding of the bill and that that would be - of what was

 

23   owed or what wasn't owed.

 

24   BY MR. ZLOTOFF:

 

25   Q.  Ms. Lucas, does this document - is this document in accord

 

                                                           160

 

 1   with your understanding of what the balance at the time of the

 

 2   statement was on that - owing on the house?

 

 3   A.  Yes.

 

 4   Q.  Ms. Lucas, I direct your attention to Exhibit A.  And

 

 5   Exhibit A is the petition.  The first page notes a file date of

 

 6   March 10th, 1998 in Mr. Henson's bankruptcy case.

 

 7             If you look on the second page, please, can you

 

 8   identify the writing, the handwriting, not the printed?

 

 9   A.  Yes.  It's my husband's.

 

10   Q.  Do you see in the - in the fourth column from the left

 

11   margin numbers under a heading, "Current Market Value"?

 

12   A.  Yes.

 

13   Q.  And you see the number $322,500?

 

14   A.  Yes.

 

15   Q.  Is it your understanding that that was more or less the

 

16   value of the property at that time?

 

17             MR. ROSEN:  Objection.

 

18             THE COURT:  Why -

 

19             MR. ROSEN:  The witness is incompetent to answer the

 

20   question -

 

21             THE COURT:  An owner can testify as to value, and

 

22   she's an owner.  How do you get around that?

 

23             MR. ROSEN:  Number one, there's no foundation as to

 

24   any basis for her testifying as to value.  Number two, according

 

25   to this document, she's not the owner because the debtor - Mr.

 

                                                           161

 

 1   Henson listed it as his property, you'll see under column 2,

 

 2   "Fee Simple."

 

 3             THE COURT:  She's just testified that she has a half

 

 4   interest in it.

 

 5             MR. ROSEN:  She just impeached the document, Judge.

 

 6   The document says "Fee Simple."  He owns it -

 

 7             THE COURT:  No, the previous document.

 

 8             MR. ROSEN:  Huh?

 

 9             THE COURT:  The previous document, the grant deed we

 

10   looked at.  Whether the grant deed impeaches this is a different

 

11   question.  She can testify as to value, but she should establish

 

12   some foundation for it.

 

13             MR. ZLOTOFF:  I already did, Your Honor.  She's an

 

14   owner.  I mean she may not - she may not -

 

15             THE COURT:  You know what, you would ask questions

 

16   like, you know, is it comparable to others in the neighborhood

 

17   or do you know whether it is.  You would establish a foundation

 

18   if you can do it.  If you can't, it's a problem.

 

19             An owner can testify to value, but you still have to -

 

20   Mr. Rosen is right, you still have to establish some foundation.

 

21   BY MR. ZLOTOFF:

 

22   Q.  Ms. Henson - Ms. Lucas, if you turn the page, please.  Do

 

23   you see Schedule B at the top?

 

24   A.  Yes.

 

25   Q.  And I direct your attention to the first handwritten entry,

 

                                                           162

 

 1   "Savings and Checking" - well, can you read it?

 

 2   A.  It says, "Savings and Checking Accounts, Wells Fargo."

 

 3   That's what you're looking at?

 

 4   Q.  Right.  Can you identify the handwriting here?

 

 5   A.  That's my husband's.

 

 6   Q.  Can you identify this account that's referred here?

 

 7   A.  Yes.  It's the Household account we had at - in fact, we

 

 8   still have it as a joint account.

 

 9   Q.  A joint between who and who?

 

10   A.  My husband and me.

 

11   Q.  And on or about March 10th, 1998, do you have a recollection

 

12   of what the approximate balance was in that account?

 

13             MR. ROSEN:  Objection, best evidence rule.  Federal

 

14   Rules of Evidence 101 through 107.  That is improper.

 

15             MR. ZLOTOFF:  But, -

 

16             MR. ROSEN:  1001.  I'm sorry.

 

17             MR. ZLOTOFF:  - Your Honor, there is no - there is no

 

18   best - there is no evidence.  I mean Mr. Henson - Mr. Rosen is

 

19   suggesting that there is a specific document that a bank would

 

20   have effective March 10th, 1998 with regard to the exact balance

 

21   to the penny in a certain bank account?  That's nonsense.

 

22             All anyone can ever do on a Schedule B with regard to

 

23   a bank account is give an approximation.  There is never going

 

24   to be a document exact to the penny on the petition date.  All

 

25   we're supposed - all the debtor is mandated to do here is give a

 

                                                           163

 

 1   best estimate.

 

 2             MR. ROSEN:  Number one, you already ruled in limine

 

 3   this document does not come in for the truth.  And I have no

 

 4   idea and I do object to why counsel is questioning the witness

 

 5   from the document.  If he wants to close the document and say,

 

 6   'Tell me what was in your account,' this is - this is not a

 

 7   proper examination.  This is prompting.

 

 8             Close up the document and ask the witness if she

 

 9   remembers what was the balance in the World Savings account on

 

10   the closing date, statement date just prior to the bankruptcy.

 

11   This is all prompted, scripted testimony.  You cannot show a

 

12   witness a document to refresh her recollection until the witness

 

13   has said, 'I don't have a recollection.'  That's number one.

 

14             Number two, the issue is not the amount on this date

 

15   of March 10th.  We understand that sometimes there is not a

 

16   balance, except most banks will give you a running balance each

 

17   day as they debit your account or credit your account for

 

18   deposits and checks.  Put that aside.

 

19             Let's assume that the - the evidence here ought be

 

20   what was at the last statement date just prior to this filing.

 

21   That is best evidence.  And not only - not only is it best

 

22   evidence under Rule 1001 of the Federal Rules of Evidence

 

23   through the 1007, I have a Ninth Circuit case right on it.

 

24   Right on this issue, that you cannot testify to what a document

 

25   says if the issue is what was the statement according to the

 

                                                           164

 

 1   bank, what did the bank - what was your balance in that account

 

 2   according to the bank.  The only evidence that could be offered

 

 3   is the bank statement.  You cannot have a witness testify as -

 

 4   orally as to what a bank statement would show.

 

 5             And, by the way, the case I'm referring to -

 

 6             THE COURT:  Do you have copies for everybody, Mr.

 

 7   Rosen?  We don't want to re- - go off the record and everybody

 

 8   leave while I go make copies of that.

 

 9             MR. ROSEN:  Sure.

 

10             THE COURT:  Do you want to hand me them, please?

 

11             MR. ROSEN:  Sure.

 

12             THE COURT:  Hand me a copy and Mr. Zlotoff a copy.

 

13             MR. ZLOTOFF:  Is it a bankruptcy case?

 

14             MR. ROSEN:  No, it's the Ninth Circuit.

 

15             MR. ZLOTOFF:  Does it arrive - arise out of

 

16   bankruptcy -

 

17             MR. ROSEN:  No.  It's - it's a rule of evidence.

 

18             THE COURT:  Could you please stop talking to each

 

19   other.

 

20             MR. ROSEN:  Well, he - he asked me the question.

 

21             THE COURT:  I'm not saying - blaming you, Mr. Rosen.

 

22             MR. ROSEN:  Good.

 

23             THE COURT:  I said could you please stop talking to

 

24   each other.

 

25             MR. ROSEN:  Okay.  Just give me a second, Judge, and

 

                                                           165

 

 1   I'll find the case for you.

 

 2             THE COURT:  I just need the - I want a copy of the

 

 3   case, to read.

 

 4             MR. ROSEN:  I said just give me a second and I'll find

 

 5   it for you.  Just hold on a minute, Judge.  I had it here a

 

 6   second ago and I think it go mixed up with something else.

 

 7             The name of the case is -

 

 8             THE COURT:  I don't want the name -

 

 9             MR. ROSEN:  - Lucasfilm -

 

10             THE COURT:  - first, but I - okay.  That's fine.  Tell

 

11   me the name if you know the name.

 

12             MR. ROSEN:  Yeah.  Lucasfilm - what did I do with the

 

13   case?  Oh, it's right here.  It's right in front of my nose.

 

14   Seiler, S-e-i-l-e-r, v. Lucasfilm LTD, 808 F.2d 1316, Ninth

 

15   Circuit Court of Appeals 1987.  I will quote from -

 

16             THE COURT:  I don't want you to quote.  I want you to

 

17   hand me a copy of the case, please, so I can follow along.

 

18             MR. ROSEN:  Okay.

 

19             THE COURT:  And I want you to hand Mr. Zlotoff a copy.

 

20             MR. ROSEN:  I don't have a copy for Mr. Zlotoff.

 

21             THE COURT:  Well, then we'll make them.

 

22             MR. ROSEN:  Okay.

 

23             THE COURT:  We'll recess for five minutes to make

 

24   copies of this case so I can see what you're talking about.

 

25             MR. ROSEN:  Okay.

 

                                                           166

 

 1             THE COURT:  If you have any other cases that you

 

 2   intend to use, I want copies of them now so that I can make

 

 3   copies of them -

 

 4             MR. ROSEN:  Do I have to make copies of Federal Rule

 

 5   of Evidence 101 to 107 also, Judge?

 

 6             THE COURT:  I have the Rules of Evidence here.

 

 7             MR. ROSEN:  Okay.

 

 8             THE COURT:  Is that the only case that you have any

 

 9   intention of using?

 

10             MR. ROSEN:  I don't know.  I haven't heard any other

 

11   questions.

 

12             THE COURT:  Well, you do know because you know what

 

13   the exhibits are and you do know what he intends to do.  You

 

14   told me yourself that you knew everything he was going to use

 

15   Ms. Lucas for and therefore you didn't think any of it was

 

16   admissible.  So you must know, I would assume, what cases are

 

17   relevant to these issues.  And I'd rather copy them once rather

 

18   than copy them seriatim.

 

19             Do you have any other cases that you want to share

 

20   with us at this time?

 

21             MR. ROSEN:  I don't know of any other at this time.

 

22             THE COURT:  Thank you.

 

23             MR. ROSEN:  Notwithstanding the Judge's comments and -

 

24   the Court's comments and - which I'm deeply offended by.

 

25             THE COURT:  I don't know why.  It's just repeating

 

                                                           167

 

 1   what you said.

 

 2             MR. ROSEN:  No, it's not.  If you -

 

 3             THE COURT:  We'll go off the record, please.

 

 4             MR. ROSEN:  - repeated what I said I wouldn't be

 

 5   offended.

 

 6             THE COURT:  We'll go off the record, please.

 

 7        (Recess taken from 3:52 p.m. to 4:04 p.m.)

 

 8             THE CLERK:  All rise.

 

 9             THE COURT:  Thank you, ladies and gentlemen.  Please

 

10   be seated.

 

11             I want you to know, Mr. Rosen, when I went - left the

 

12   Court, my Deputy came up to me and said that she was offended by

 

13   the way you threw the papers at her, and the Court is offended

 

14   as well.

 

15             MR. ROSEN:  I didn't throw any papers.

 

16             THE COURT:  Yes, you did.  You threw this decision at

 

17   her, which she had been willing to copy.  I didn't say a thing

 

18   to her.  She came to me and told me she didn't like the way you

 

19   threw it at her.  That's what I'm telling you, and I will not

 

20   tolerate any such behavior toward the Court or its staff.

 

21             Go on, Mr. Zlotoff.

 

22             MR. ROSEN:  And for the record I did not do that.

 

23             MR. ZLOTOFF:  Your Honor, I think - are we - we're

 

24   still arguing the issue of best evidence, I think, is where we

 

25   left off and whether or not Ms. Lucas is able to look at the

 

                                                           168

 

 1   schedules and offer testimony while looking at the schedules and

 

 2   while I'm asking her questions based on items in the schedule.

 

 3             THE COURT:  Ye- - first of all, the first objection

 

 4   was that we should make this document be closed and then you

 

 5   have to establish the standard for refreshing her recollection,

 

 6   rather than letting her just go down the document and ask her

 

 7   whether these numbers are accurate or inaccurate and, if so, how

 

 8   much inaccurate.

 

 9             The - the second objection, as I understand it, is

 

10   that she can't testify whether this was the approximate balance

 

11   at the time.  Rather, she has - you have to produce the bank

 

12   records.

 

13             Now having sat in bankruptcies for 12 years I've never

 

14   had anybody present the bank records to show that it was

 

15   accurate on an objection to a plan.  I've had people question

 

16   whether it was accurate and the other side, if they don't

 

17   believe it's accurate, have subpoenaed bank records.  But I've

 

18   never had anybody be subject to the best evidence rule in

 

19   connection with testifying regarding a petition.

 

20             The objection as to best evidence is overruled.

 

21             As to the other matter, whether or not these numbers

 

22   might reflect [sic] her recollection, one can use anything to

 

23   refresh one's recollection or a witness' recollection.  And I

 

24   think that technically it's correct.

 

25             Now I haven't researched whether or not the Court has

 

                                                           169

 

 1   to do it that way or the Court has some discretion in that

 

 2   regard.

 

 3             Do you know, Mr. Rosen?

 

 4             MR. ROSEN:  Yes.  You are required to first establish,

 

 5   elicit from the witness that she has no recollection.  You may

 

 6   then use anything to refresh her recollection.  Once you show it

 

 7   to her, you then take it away from her because the proposition

 

 8   is that the recollection of the witness now being refreshed, she

 

 9   is not testifying to what the document says - in law school we

 

10   used to call that past recollection recorded - she's not

 

11   testifying to what the document says.  But she says, 'Now that

 

12   I've heard that tune or heard that canary,' -

 

13             THE COURT:  It's present rec- -

 

14             MR. ROSEN:  - 'I now have a present recollection of

 

15   what it is.'

 

16             Your Honor, I just want to add one thing.  I think you

 

17   made a - you misunderstood something when you said subpoenaed

 

18   bank records.  I'm not talking about subpoenaed bank records.

 

19   I'm talking about the monthly statements that the depositor

 

20   receives from the bank.  That - that was the basis for the best

 

21   arg- - best evidence argument.  It was not that there had to be

 

22   any subpoena to the bank.

 

23             The month - every month the bank sends a statement

 

24   which shows the balance.  So you said subpoenaed bank records.

 

25   Whether it makes any difference to your ruling or not, I don't

 

                                                           170

 

 1   know.  But I just want to make sure the record is clear.

 

 2             She gets a bank statement.  We can establish that by

 

 3   asking her.  She gets bank statements every month.  Where are

 

 4   they?

 

 5             THE COURT:  I understand.

 

 6             The best - having heard that, of course the bank

 

 7   statement could be on one day and three days later you write a

 

 8   check for x dollars or even before you get the statement you

 

 9   could have written a check and it wouldn't necessarily be on

 

10   that statement.  So I understand the point, but it's not going

 

11   to be - you're not going to get the date unless you somehow -

 

12   the date of this petition unless you somehow - and this is a

 

13   very small amount, it's $1500, which if you're paying monthly

 

14   expenses, I assume could eat it up pretty fast.  So I'm not

 

15   going to require that here.

 

16             But I think I agree with him on the recollection, that

 

17   you will have to establish that she has no specific

 

18   recollection, if she doesn't, before you can use this document,

 

19   unless you have any law to the contrary - well, he didn't give

 

20   me law either, he gave me his opinion.  But -

 

21             MR. ZLOTOFF:  Well, -

 

22             THE COURT:  - I think - I think it's the general rule.

 

23   Whether I have discretion, I don't know.

 

24             MR. ZLOTOFF:  Yeah.  Except - you see, I don't think

 

25   that the issue is her recollection of this document.

 

                                                           171

 

 1             THE COURT:  No, it's not.

 

 2             MR. ZLOTOFF:  It's not.  The issue is whether this

 

 3   document was done in bad faith.

 

 4             THE COURT:  You misunderstand.  You misunderstand the

 

 5   rule.

 

 6             MR. ZLOTOFF:  Okay.

 

 7             THE COURT:  Let me take you through the rule.  Mr.

 

 8   Rosen just said it, but let me take you through it.

 

 9             The rule is that - for example here, approximately how

 

10   much was in your Wells Fargo account on the date of the filing

 

11   petition.  The witness can testify.  The witness says, 'I don't

 

12   remember exactly' or 'I don't remember.'

 

13             'I'm going to show you a document and ask you whether

 

14   it refreshes your recollection.'

 

15             MR. ZLOTOFF:  Okay, I understand.

 

16             THE COURT:  That's what Mr. Rosen said.  And then it

 

17   either does or it doesn't.

 

18             MR. ZLOTOFF:  That's fine.  Okay.

 

19             THE COURT:  But it doesn't have anything to do with

 

20   the document.  The document could be a dog bone.

 

21             MR. ZLOTOFF:  I you.

 

22             THE COURT:  It can be anything that would refresh your

 

23   recollection as to a particular fact.

 

24             MR. ZLOTOFF:  Okay.  I understand.  I appreciate it,

 

25   Your Honor.

 

                                                           172

 

 1             THE COURT:  So I - I - the objection is sustained in

 

 2   part and denied in part.

 

 3             MR. ZLOTOFF:  All right.  Thank you.

 

 4   BY MR. ZLOTOFF:

 

 5   Q.  Ms. Lucas, you have to close the booklet.

 

 6   A.  I just did.

 

 7             THE COURT:  Yeah.  Don't close the whole thing.  Just

 

 8   close that one exhibit and keep it open.  In other words, keep

 

 9   the blue sheet over it until -

 

10             THE WITNESS:  Okay.

 

11             THE COURT:  Yeah.

 

12             MR. ZLOTOFF:  I don't know whether she - I can't even

 

13   remember what - what she testified with regard to the bank - the

 

14   bank account.

 

15