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     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




     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






                              Direct   Cross   Redirect   Recross


     Victoria Arel Lucas

      By Mr. Zlotoff:          153





     Exhibits:                               Received in Evidence











 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.




 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




 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.




 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.




 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.




 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




 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




 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




 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




 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




 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




 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."




 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




 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




 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




 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




 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




 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




 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




 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 -




 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




 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




 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




 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




 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




 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




 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




 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.




 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




 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.




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




 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.




 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




 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




 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




 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.




 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.




 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




 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




 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




 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




 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.




 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.




 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.




 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




 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




 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?




 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.




 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




 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




 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




 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




 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




 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




 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.




 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




 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 -




 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.




 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




 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




 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




 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 -




 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.




 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?




 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




 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




 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




 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, -




 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




 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




 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




 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.




 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.




 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.




 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




 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.




 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




 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.




 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




 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.




 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.




 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




 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.




 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




 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.




 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




 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.




 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




 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 -




 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.




 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




 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.




 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




 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




 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




 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 -




 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 -




 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




 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.




 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




 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.




 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




 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.




 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




 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




 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




 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 -




 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




 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




 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




 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.




 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, -




 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.




 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




 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,




 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.




 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




 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




 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...




 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




 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




 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.




 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?




 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.




 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.




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




 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.




 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




 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




 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




 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




 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.




 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




 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




 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




 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




 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




 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




 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?




 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




 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




 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




 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




 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.




 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




 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




 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




 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




 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.




 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.




 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?




 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.




 1             THE COURT:  That's fine.  No problem.




 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




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.




 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.




 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.




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




 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.




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.




 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.




 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?






 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.




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.




25   Q.  And -




 1             THE COURT:  I couldn't hear your answer.


 2             THE WITNESS:  Yes.


 3             THE COURT:  Thank you.




 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.




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.




25   Q.  Ms. Lucas, does this document - is this document in accord




 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.




 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.




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,




 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




 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




 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




 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.




 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




 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




 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




 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




 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.




 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.




 1             THE COURT:  So I - I - the objection is sustained in


 2   part and denied in part.


 3             MR. ZLOTOFF:  All right.  Thank you.




 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.