Opposition Brief — Capital Suisse, Inc. v. Henchoz

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No. 04-1365

OFFICE

In The CE OFTHE CLep,

Supreme Court of the Gnited States

CAPITAL SUISSE, INC., CAPITAL SUISSE, S.A.,

CAPITAL SUISSE SECURTITIES, INC., ZOOLEY

SERVICES LIMITED, ZOOLEY OF UTAH, INC.,

FERNLAND LIMITED, AND PHILIPPE D. DAVID

GUBBAY, DOUGLAS P. HOYT, AND JOHN DOES 1-10,

Petitioners,

HENTSCH HENCHOZ & CIE,

Respondent.

On Petition for Writ of Certiorari

to the Supreme Court of Utah

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

NEIL A. KAPLAN

Counsel of Record

PERRIN R. LOVE

WALTER A. ROMNEY, JR.

CLYDE SNOW SESSIONS & SWENSON

201 South Main Street, Suite 1300

Salt Lake City, Utah 84111

Telephone: (801) 322-2516

Facsimile: (801) 521-6280

Counsel for Respondent

June 3, 2005

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

COUNTERSTATEMENT OF

THE QUESTIONS PRESENTED

Whether the Utah Supreme Court in its discretion

may dismiss an appeal because of appellants’ wilful

disobedience of district and appellate court orders and the

appellants’ failure to remedy the violations as a condition

to a decision on the merits of the appeal?

CORPORATE DISCLOSURE STATEMENT

No ruublicly-held corporation owns any stock in re-

spondent. Respondent Hentsch Henchoz & Cie, a private

banking partnership organized under the laws of Switzer-

land, merged in 2002 with Lombard Odier Darier Hentsch

& Cie, a private banking partnership organized under the

laws of Switzerland. No parent corporation owns any stock

in respondent.

TABLE OF CONTENTS

Page

COUNTERSTATEMENT OF THE QUESTIONS

caso can etn ange Tet OS Tile Cera ete a i

CORPORATE DISCLOSURE STATEMENT............... ii

TABLES OF CORMTMINTG oiscscisscsscsicsceicscccssicssenss........ iii

EAEEss OF MTIIOMNTERS .oocicc Vv

COUNTERSTATEMENT OF THE CASE.................... 1

1. The Initial State Court Proceedings ................. 4

2. The Utah Supreme Court’s First Decision........ 5

3. The District Court’s Decision on Remand......... 8

4. The Utah Supreme Court’s Final Decision of

oe tan, Sn dR IC. TBAT EOE a 9

REASONS FOR DENYING THE PETITION.............. 11

I. THE CLAIMED FEDERAL CONSTITU-

TIONAL ISSUES WERE NOT PROPERLY

RAISED BELOW AND, FOR THAT REA-

SON, WERE NOT DISCUSSED, ANALYZED

NOR DECIDED BY THE UTAH SUPREME

on pe age gh Era aisha 11

A. Capital Suisse Ignores the Requirements

Cine 11

B. Capital Suisse Only Fleetingly Raised a

Generic Due Process Issue Below and Only

Upon Remand to the District Court ............. 12

C. Capital Suisse Did Not Raise the Equal

Protection Issue Below .............ccec00--........ 16

Il.

TABLE OF CONTENTS -— Continued

Page

Il. THIS CASE IS INAPPROPRIATE FOR

CERTIORARI REVIEW SINCE CAPITAL

SUISSE’S VIOLATIONS OF THE DISCOV-

ERY ORDERS ARE FACTUALLY AND LE-

GALLY INDEPENDENT BASES FOR DIS-

MISSAL OF THE APPEAL BY THE UTAH

SUPREME COURT. .............ccsccsssecessessseseseeseees

THERE IS NO GENUINE CONFLICT BE-

TWEEN THE DECISION OF THE UTAH SU-

PREME COURT AND THE CASES CITED IN

THE PETITION. ..............-cccscsscsescessssssrsssccosesevess

A. The Second Circuit Pennzoil Decision........

B. On Certiorari Review of the Second Cir-

cuit Opinion in Pennzoil, This Court Em-

phasized that an Appellate Court has

Inherent Authority to Remedy Contempt ...

C. The Utah Supreme Court’s Decision Relied

Upon, and is Fully Consistent With, the

Precedent of This Court and a Myriad of

D. The Purported Conflict is Totally Insignifi-

TABLE OF AUTHORITIES

Page

CASES

Adams v. Robertson, 520 U.S. 83 bs 7 5 PR aeeRCR Rom 12, 13, 14

Bankers Life & Cas. Co. v. Crenshaw, 486 U.S. 71

GR a lirichclnsiinibseibicdiecddinensabcsidiaieat te ao. 14, 15

Bd. of Dirs. of Rotary Int'l v. Rotary Club of Duarte,

GORTED. GOAT CAGGFY iii sisi seis ceicicccs 13, 15, 19

Cardinale v. Lousiana, 394 U.S. 437 RO its: 12

D’Aston v. D’Aston, 790 P.2d 590 (Utah Ct. App.

SPE thie lahinsagiaiaiiaeiiraaeiubinceiecabisiaatigage age 7

District of Columbia Court of Appeals v. Feldman,

tite cose sep oe OR 12

Greenwood v. Greenwood, 191 Conn. 309, 464 A.2d

FEM OND sicishils cstinsclescigeiiis onions ES Es jot 8 7

Hammond Packing Co. v. Arkansas, 212 U.S. 322

CIE i cecccnsinitiacsspapticatigcecigee ee ances. Freee? 22

Henry v. First Natl Bank of Clarksdale, 595 F.2d

291 (5th Cir. 1979), cert. denied, 444 U.S. 1074

RPT esscusaooecnsigaietatc eee si iphiohathiie atiticigtn tl ot 24

Hill v. California, 401 U.S. 797 (1971) veceeccscescoeeeeooeecs..... 12

Juidice v. Vail, 430 U.S. 827 (1977) ..eccecccccssessecseoeeoeeoses.... 20

Natl Hockey League v. Metro. Hockey Club, Inc.,

is ey bn, OS aaa 23

Nat'l Union of Marine Cooks & Stewards v. Arnold,

BI OY IO aiisiistmenriscetie as 21, 22

Rude v. Rude, 153 Cal. App. 2d 243, 314 P2d 226

I cot chccascbnaebiicnccbale elas otcsisl, Musee Gre eco 7

Stewart v. Stewart, 91 Ariz. 356, 372 P2d 697

IE scclesiriiciiniciniasiaiid cium auir beac. Z

TABLE OF AUTHORITIES — Continued

Page

Strange v. Strange, 464 S.W.2d 216 (Tex. Civ. App.

ROTBD ccccrcccecsnsseccissnensitithiicsiiplinintiindstiguaainadapdndeati ama naiasiais 7

Taylor v. Illinois, 484 U.S. 400 (1988)............cccccccsereeeeeees 14

Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir.

1986), rev'd on other grounds, 481 U.S. 1 (1987).....passim

Texaco, Inc. v. Pennzoil Co., 481 U.S. 1 (1987) .......... passim

Webb v. Webb, 451 U.S. 493 (1981)..............ccccceeeeeeeeeeees 14

STATUTES AND RULES

y Bin Tok bgt RRRMC Ua om Wer ree oe ee 12

Rule 364, Texas Rules of Civil Procedure.......................+- 18

Sen. Cs. 8: EE eee 3, 11, 12

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

Respondent Hentsch Henchoz & Cie (“HH&C”) re-

spectfully submits this Brief in Opposition to the Petition

for a Writ of Certiorari (“Petition”) filed by petitioners

Capital Suisse, Inc., Capital Suisse, S.A., Zooley Services,

Ltd., Zooley of Utah, Inc., Fernland Limited, and Philippe

D. David Gubbay (collectively “Capital Suisse”).

S 7

COUNTERSTATEMENT OF THE CASE

The Petition represents the culmination of Capital

Suisse’s concerted efforts to perfect and preserve its theft

of $25 million from HH&C. Between December 2000 and

March 2001, HH&C wired nearly $25 million to the

Gibralter account of Capital Suisse, S.A., a purported

“Mutual Fund for the Professional Investor,” headquar-

tered in Marbella, Spain. Capital Suisse, however, ulti-

mately proved to be a sham; HH&C’s money was never

invested, but transferred from the Gibralter account to

accounts in Salt Lake City, Utah, and wired throughout

the world to Capital Suisse’s principals, family and

friends.

To trace and recover its $25 million, HH&C invoked

the assistance of the Spanish courts, and then the Utah

courts. Capital Suisse steadfastly refused to provide

information to enable HH&C to trace or recover its money,

eventually (i) removing documents maintained in its Utah

office to Spain, (ii) defying orders of the Utah district court

to answer HH&C’s interrogatories and document requests,

and to return the documents from Spain to Utah, and (iii)

refusing to recognize the jurisdiction of the Utah courts or

to participate in the litigation further.

After the district court granted summary judgment on

HH&C’s claims against Capital Suisse (in the amount of

$24,730,000.00 plus interest), Capital Suisse attempted to

resurrect the jurisdiction of the Utah courts by appealing

an earlier decision of the district court denying Capital

Suisse’s Motion to Dismiss HH&C’s Verified Complaint for

improper venue. The Utah Supreme Court, however,

stayed the appeal until Capital Suisse complied with two

conditions: (i) post a bond in the amount of the judgment,

and (ii) comply with the outstanding orders of the district

court within thirty days.

Capital Suisse did neither. Capital Suisse did not post

a bond, did not return all documents from Spain, did not

adequately answer HH&C’s interrogatories (many of

which were intended to trace HH&C’s money), and did not

produce documents maintained in Marbella, Spain. None-

theless, Capital Suisse sought a “Certification,” first in the

district court and then in the Utah Supreme Court, that it

had made a “good faith” attempt to comply with the

conditions. The Utah Supreme Court invited further

briefing, and then dismissed Capital Suisse’s appeal per

curiam, because Capital Suisse “failed to comply with this

court’s decision.” (Petitioner’s Appendix (“Pet. App.”) 18a).

Now, Capital Suisse petitions this Court for a Writ of

Certiorari. Contrary to the Petition, this case does not

present an opportunity “to resolve two separate conflicts

regarding a court’s ability, consistent with due process and

equal protection principles, to deprive a party of its right

to appeal based upon the party's inability to comply with

court-imposed conditions on that right.” (Petition (“Pet.”)

at 3). For the following reasons, this Court should deny the

Petition:

First, this “opportunity” was never presented to the

Utah Supreme Court, in violation of this Court’s Rule

14.1(g)i). None of the arguments in the Petition were ever

presented below. Capital Suisse made a passing, generic

reference to “due process” in its Certification before the

Utah Supreme Court, but made no assertion that imposi-

tion of a bond that it claimed it had no ability to pay raised

a federal Due Process Clause claim, and cited no authority

at all to support such a claim. Further, Capital Suisse

never even invoked the words “equal protection,” much

less raised a federal Equal Protection Clause claim before

the Utah Supreme Court.

Second, the Petition ignores an independent ground

for dismissal of the appeal. The Petition focuses almost

exclusively on Capital Suisse’s claimed “inability” to post a

bond for the amount of the judgment, but ignores the

independent ground on which dismissal of the appeal

rested — Capital Suisse’s refusal or failure to comply with

the outstanding orders of the district court.

Third, there is no conflict between the Utah Supreme

Court decision and the Second Circuit decision in Texaco,

Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir. 1986), rev'd on

other grounds, 481 U.S. 1 (1987). In Pennzoil, the Second

Circuit enjoined application of a Texas statute that re-

quired an appellant in all cases to post a supersedeas bond

as a condition of an appeal. Jd. at 1156. The Second Circuit

held this mandatory or “inflexible” requirement, without

regard to the appellant’s ability to pay, violated the Due

Process Clause of the United States Constitution. Id. at

1154.

The Utah Supreme Court, on the other hand, fash-

ioned “a remedy that is fair and just under the circum-

stances, taking into account the facts of the particular

case,” and dismissed the appeal only after it gave Capital

Suisse an opportunity to “show cause” why the appeal

should not be dismissed. This Court and numerous state

courts have upheld the authority and the right of an

appellate court to dismiss the appeal of an appellant who

stands in contempt of the district court. That principle was

never addressed in the Second Circuit Pennzoil decision.

Finally, the conflict, if any, is not significant because both

Pennzoil and this case are unique and factbound.

1. The Initial State Court Proceedings.

The first decision of the Utah Supreme Court thor-

oughly and accurately presents the factual basis necessary

for this Court’s determination of the Petition. (Pet. App.

la-6a). However, certain facts not addressed in the Utah

Supreme Court decision were erroneously presented in the

Petition. First, the Petition incorrectly alleges tha in lieu

of redeeming HH&C’s shares in the Capital Suisse Fund,

that “Capital Suisse offered to provide HH&C valuable

stock in a related company.” (Pet. 5). In fact, these shares

were worthless shares in a company called PetsMarketing,

Inc., offered to HH&C as part of Capital Suisse’s fraud.

(Pet. App. 47a; Respondent’s Appendix (“Resp. App.”) 5)-

7b). The district court specifically found that:

[The] Capital Suisse Defendants misrepresented

to HH&C, and to this Court, the value of the

PetsMarketing shares purportedly transferred to

HH&C at over $30 million. In fact, those shares

had virtually no market or market value. More-

over, the Capital Suisse defendants themselves

manipulated the trading in Pets/Marketing, Inc.

to boost artificially the publicly-quoted price of

PetsMarketing, Inc. shares.

(Pet. App. 47a).

The Petition also incorrectly asserts that “because

Capital Suisse could no longer afford office space in Utah,

it moved its records to Spain — with full disclosure to the

court and plaintiffs.” (Pet. 7). This statement is flatly

untrue and is squarely contrary to the record. It is clear

from the record that the materials were removed from

Utah to Spain to evade production. (Pet. App. 47a-48a;

Resp. App. 3b-4b). Capital Suisse’s agent in Utah, on

advice of his counsel, refused to participate in shipping the

documents and other materials to Spain to avoid possibly

obstructing justice. (Resp. App. 3b-4b). Moreover, neither

the district court nor HH&C was aware that the docu-

ments had been shipped to Spain. (Pet. App. 23a-25a; 47a-

48a). When the district court ordered Capital Suisse to

return the materials to Utah and make them available for

discovery, Capital Suisse refused to comply with the

district court’s order and abandoned its defense of the

litigation. (Pet. App. 48a). As the district court ruled in

granting HH&C summary judgment, “[t]his is not the

conduct of legitimate business persons.” Id.

2. The Utah Supreme Court’s First Decision.

After the district court’s entry of summary judgment,

Capital Suisse appealed to the Utah Supreme Court on the

sole ground that the district court erred in refusing to

enforce a forum selection clause purportedly requiring the

litigation to proceed in the British Virgin Islands. (Pet.

App. 6a). The Utah Supreme Court did not reach this issue

on the merits. Instead, it considered the threshold issue

raised and fully briefed by HH&C, whether the Utah

Supreme Court “may dismiss a civil appeal when the

appellant disobeys the orders of the district court in the

same action.” Id.

The Utah Supreme Court first noted that Capital

Suisse’s contemptuous conduct was clearly sufficient to

dismiss the appeal outright:

In the present case, Capital Suisse’s defiance of

district court orders is clearly sufficient to war-

rant dismissal of the appeal. Though not for-

mally adjudged in contempt, Capital Suisse’s

wilful disobedience would certainly have been

adequate to support an order of contempt had

Capital Suisse not absented itself from the litiga-

tion. Capital Suisse repeatedly refused to comply

with discovery requests from HH&C and went to

extreme lengths to prevent access to the Zions

and Wells Fargo bank accounts. Upon being or-

dered by the district court to comply with discov-

ery, Capital Suisse shipped all of its documents,

records, and computer hard drives from Utah to

Spain. On the heels of this insubordination, upon

being ordered to return the awol documents and

other evidence, Capital Suisse abruptly withdrew

from the litigation, claiming that the district

court had no jurisdiction over it.

(Pet. App. 9a-10a).

Based upon well-reasoned authorities from numerous

jurisdictions and its own plenary powers, the Utah Su-

preme Court unanimously concluded:

[T]his court, in its discretion, may dismiss the

appeals of appellants who have wilfully disobeyed

an order of a lower court in the same action. We

agree with the approach adopted by the court of

appeals that allows the reviewing appellate court

to exercise its discretionary authority by fashion-

ing a remedy that is fair and just under the cir-

cumstances, taking into account the facts of the

particular case. Such authority is indispensable

since it would “violate[] the principles of justice

to allow a party who flaunts the orders of the

courts to seek judicial assistance” on appeal.

D’Aston, 790 P.2d at 593 (citing Stewart v. Stew-

art, 91 Ariz. 356, 372 P.2d 697, 700 (1962); Rude

v. Rude, 153 Cal.App.2d 243, 314 P.2d 226, 230

(1957); Greenwood v. Greenwood, 191 Conn. 309,

464 A.2d 771, 773 (1983); Strange v. Strange, 464

S.W.2d 216, 219 (Tex. Civ. App. 1970) (per cu-

riam)).

(Pet. App. 8a-9a).

The Utah Supreme Court, in its discretion, fashioned

a “fair and just [remedy] under the facts and circum-

stances of the particular case.” (Pet. App. 12a-13a). The

Court ruled:

Accordingly, we hereby stay this appeal to allow

Capital Suisse time to comply with the following

conditions, which must be fulfilled before we will

entertain the appeal on the merits. First, Capital

Suisse must, within thirty days from the date of

this decision, bring itself into compliance with

the orders of the district court in this matter, in-

cluding those orders requiring Capital Suisse to

comply with discovery and to return all of the re-

quested documents and evidence to Utah. Sec-

ond, inasmuch as we are concerned that any

continued delay will lead to the further dissipa-

tion of Capital Suisse’s assets, we also require

Capital Suisse to post bond with the district

court in the amount of any unsatisfied portion of

the judgment that has been entered against it.

(Pet. App. 13a).

The Utah Supreme Court remanded the matter to the

district court to make the following relevant determinations:

“(1) whether Capital Suisse has adequately complied with

the orders of the district court within thirty days from the

issuance of this decision; ... and (3) whether Capital

Suisse has posted an adequate bond in that amount [of the

outstanding judgment).” Id.

Finally, the Utah Supreme Court ordered that:

Capital Suisse must, within ninety days, provide

this court with notice that it has complied with

these conditions, including the relevant orders of

the district court regarding whether Capital

Suisse has fulfilled the court’s discovery orders

within the allotted thirty-day time period and

posted bond in the appropriate amount. If, at the

end of ninety days, Capital Suisse has failed to

comply with each of these requirements, or con-

tinues to resort to evasive or dilatory tactics, the

appeal will be dismissed without further notice

or argument.

Id.

3. The District Court’s Decision on Remand.

After the expiration of the thirty day period prescribed

by the Utah Supreme Court, the parties fully briefed the

issue of whether Capital Suisse had complied with the

specific conditions of the Utah Supreme Court. Following a

hearing on the compliance issue, the district court entered

its order determining that Capital Suisse had not complied

with the express conditions set forth in the Utah Supreme

Court’s decision. (Pet. App. 15a-17a).

4. The Utah Supreme Court’s Final Decision of

Dismissal.

Capital Suisse then filed a Certification of Good Faith

Attempt to Comply with Court Order (“Certification”) in

the Utah Supreme Court. (Resp. App. 10b-27b). By order

dated November 10, 2004, the Utah Supreme Court

requested further briefing as to why it “should not dis-

miss” the appeal for Capital Suisse’s “failure to comply”

with the Court’s prior decision. (Resp. App. 28b-29b).

Capital Suisse told the Utah Supreme Court to regard its

Certification as its “brief in response to the Court’s Order

to Show Cause.” (Resp. App. 30b-31b). The Certification

made only a fleeting reference to “due process,” without

specifying the United States or Utah Constitution, and

made no mention at all of “equal protection.”

HH&C filed a Brief in Opposition to Capital Suisse’s

Certification, with exhibits and affidavits, presenting

evidence that Capital Suisse had not met the Utah Su-

preme Court’s express conditions, and asserting that

Capital Suisse’s protestations of “good faith” were nothing

more than one final attempt to preserve the fruits of its

fraud and its wilful disobedience of the district court

orders. (Resp. App. 32b-51b).

As to the condition that Capital Suisse post a bond,

HH&C presented evidence that Capital Suisse had failed

to show that it did not have the ability to post a bond in

the full amount of the judgment. HH&C demonstrated

that none of HH&C’s $25 million was subject to the orders

of the Spanish Court freezing Capital Suisse’s accounts in

Gibralter and Spain, because Capital Suisse initially had

wired HH&C’s money out of those accounts in violation of

the Spanish Court orders. (Resp. App. 37b-41b). HH&C

argued that, because Capital Suisse had also wircd

HH&C’s $25 million out of the Salt Lake City acccunts

and beyond the jurisdiction of the Utah (or American)

courts to enforce a judgment, a bond in the full amount of

the judgment was the only meaningful remedy available to

HH&C. Id.

As to the condition that Capital Suisse comply with

the outstanding orders of the district court, HH&C pre-

sented evidence that Capital Suisse had not made a good

faith effort to return all documents from Spain, and had

not made a good faith effort to answer HH&C’s interroga-

tories or to produce documents. (Resp. App. 42b-50b).

HH&C presented evidence that Capital Suisse’s responses

were patently deficient because Capital Suisse asserted

that the information subject to the interrogatories could be

ascertained from the records returned to Utah. Id. Those

records were incomplete, were more than three years old,

and did not provide the most fundamental information

repeatedly requested by HH&C — such as the current

location of HH&C’s $25 million. HH&C argued that

Capital Suisse’s discovery responses were a bad-faith

continuation of its steadfast obstruction of HH&C’s at-

tempts to trace or to recover its money, and its wilful

disobedience of the district court orders. Id.

By Order dated January 11, 2005, the Utah Supreme

Court dismissed Capital Suisse’s appeal per curiam,

because Capital Suisse “failed to comply with this court’s

decision in the above-captioned matter.”

REASONS FOR DENYING THE PETITION

I. THE CLAIMED FEDERAL CONSTITUTIONAL

ISSUES WERE NOT PROPERLY RAISED BE-

LOW AND, FOR THAT REASON, WERE NOT

DISCUSSED, ANALYZED NOR DECIDED BY

THE UTAH SUPREME COURT.

Capital Suisse bases its Petition on the assertion that

the Utah Supreme Court’s discretion in dealing with

Capital Suisse’s repeated recalcitrance violates the Due

Process and Equal Protection Clauses of the United States

Constitution. These federal constitutional claims were not

adequately raised below or sufficiently addressed by the

Utah Supreme Court to make this case worthy of certio-

rari review.

A. Capital Suisse Ignores the Requirements of

Rule 14.1(g)(i).

Supreme Court Rule 14.1(g)i) requires a petitioner to

specify the stage of state-court proceedings in which the

federal questions sought to be reviewed were raised and

the way the questions were passed on by the state courts.

Rule 14.1(g)(i) requires in pertinent part:

If review of a state-court judgment is sought,

specification of the stage in the preceedings, both

in the court of first instance and in the appellate

courts, when the federal questions sought to be

reviewed were raised; the method or manner of

raising them and the way in which they were

passed on by those courts; and pertinent quota-

tions of specific portions of the record or sum-

mary thereof, with specific reference to the

places in the record where the matter appears

... 80 as to show that the federal question was

timely and properly raised and that this Court

has jurisdiction to review the judgment on a writ

of certiorari.

Sup. Ct. R. 14.1(g)(i).

Contrary to the mandates of Rule 14.1(g\{i) which the

Petition ignores, the federal constitutional issues sought

by Capital Suisse to be reviewed by this Court were not

timely and properly raised in the Utah courts. Therefore,

this Court should decline to exercise jurisdiction to review

the judgment on a writ of certiorari. Adams v. Robertson,

520 U.S. 83, 86 (1997) (““[Wle have adhered to the rule in

reviewing state court judgments under 28 U.S.C. § 1257

that we will not consider a petitioner’s federal claim

unless it was either addressed by, or properly presented to,

the state court that rendered the decision we have been

asked to review.”). See also Hill v. California, 401 U.S. 797,

805 (1971); District of Columbia Court of Appeals v.

Feldman, 460 U.S. 462, 482 n.16 (1983) (“[T]he Court will

not decide federal constitutional issues raised here for the

first time on review of state court decisions.”) (quoting

Cardinale v. Louisiana, 394 U.S. 437, 438 (1969)); 28

U.S.C. § 1257(a) (1993) (in order for the Court to have

jurisdiction to issue a writ of certiorari a federal Constitu-

tional right must have been “specially set up or claimed”).

B. Capital Suisse Only Fleetingly Raised a

Generic Due Process Issue Below and Only

Upon Remand to the District Court.

In its initial briefing to the Utah Supreme Court,

Capital Suisse did not raise any due process issue. It failed

to do so despite the fact that HH&C argued that the

appeal should be dismissed because of Capital Suisse’s

wilful disobedience of the district court’s orders and, also,

that a bond was necessary to prevent further dissipation of

Capital Suisse’s assets. In its Reply Brief to the Utah

Supreme Court, Capital Suisse argued that it has a

“substantive right to appeal,” but did not argue that

dismissal of the appeal for its contemptuous conduct, or

requiring the imposition of a bond, would violate due

process. (Pet. App. 12a).

After remand, Capital Suisse argued in its Certifica-

tion to the Utah Supreme Court that it had made a good

faith attempt to comply with the Utah Supreme Court’s

conditions. Capital Suisse made only a single, fleeting

reference, without citation to any authority, to generic due

process:

Absent a finding by this Court that the bond re-

quirement has been satisfied in light of the Span-

ish Court’s orders, or, at a minimum removing

the requirement that Capital Suisse post a bond

that it clearly cannot provide, Capital Suisse is

denied due process and has been, in effect, con-

demned to the equivalent of the “death penalty”

as any opportunity for it to have its appeal heard

on the merits would ve lost. Capital Suisse there-

fore requests that the Court hold the bond is suf-

ficiently satisfied.

(Resp. App. 19b).

Capital Suisse cited no authority to support this

reference and made no other due process arguments.

Thus, Capital Suisse did not raise its federal claims with

“fair precision and in due time.” Adams, 520 U.S. at 88.

This Court has consistently determined that an isolated

citation to a federal issue in the midst of an unrelated

argument is insufficient. Id.; Bd. of Dirs. of Rotary Int'l v.

Rotary Club of Duarte, 481 U.S. 537, 550 n.9 (1987). See

also Taylor v. Illinois, 484 U.S. 400, 406 n.9 (1988) (“ge-

neric reference” to Fourteenth Amendment insufficient to

preserve a constitutional claim); Bankers Life & Cas. Co. v.

Crenshaw, 486 U.S. 71, 77-78 (1988) (vague appeal to

constitutional principles does not preserve constitutional

claim).

Capital Suisse’s passing reference to “due process” did

not even specify a federal or state constitutional issue. As

this Court explained in Adams:

[T]he passing invocations of “due process” we

found [in petitioners’ state court reply brief] fail

to cite the Federal Constitution or any cases rely-

ing on the Fourteenth Amendment, but could

have just as easily referred to the due process

guarantee of the Alabama Constitution and thus

did not meet our minimal requirement that it

must be clear that a federal claim was presented.

520 U.S. at 89 n.3 (emphasis in original) (citations omit-

ted). See also Bankers Life, 486 U.S. at 77-78 (“[A]t the

minimum there should be no doubt from the record that a

claim under a federal statute or the Federal Constitution

was presented in the state courts and that those courts

were apprised of the nature or substance of the federal

claim at the time and in the manner required by the state

law.” (quoting Webb v. Webb, 451 U.S. 493, 501 (1981))

(emphasis ix original)).

The Petition now relies primarily upon the Second

Circuit’s Decision in Texaco, Inc. v. Pennzoil Co., 784 F.2d

1133 (2d Cir. 1986), rev’d on other grounds, 481 U.S. 1

(1987), as the authority for its due process argument.

However, Capital Suisse never cited the Pennzoil case to

the Utah Supreme Court as authority for a violation of due

process — even after the district court had determined that

Capital Suisse had not complied with the Utah Supreme

Court’s conditions. Capital Suisse’s only citation below to

the Second Circuit’s Pennzoil decision was for the narrow

proposition that “a judgment creditor’s primary concern

when a judgment in his favor is stayed pending appeal is

that he be secure ... from loss resulting from the stay of

execution.” (Resp. App. 15b-16b). Capital Suisse did not

cite Pennzoil for the proposition that a bond imposed on a

contemptuous appellant violates the Due Process Clause if

an appellant cannot pay it. See Adams, 520 U.S. at 88

(“The discussion of ‘a federal case, in the midst of an

unrelated argument, is insufficient to inform a state court

that it has been presented with a claim.’” (quoting Bd. of

Dirs. of Rotary Int'l, 481 U.S. at 550 n.9)).

Additionally, Capital Suisse never raised any due

process challenge to the Utah Supreme Court’s condition

that Capital Suisse comply with the outstanding discovery

orders of the district court. As a result, the Utah Supreme

Court never addressed the Pennzoil decision or fully

analyzed the due process issue.

This Court is faced with the same situation as in

Adams and Bankers Life. The Petition makes no reference

to where and how the due process issue was timely and

properly preserved, as required by Rule 14.1(g)(i). Even

after being invited by the Utah Supreme Court to submit

additional briefing after remand, Capital Suisse failed to

do so. (Resp. App. 28b-29b; 30b-31b). Despite this opportu-

nity to raise a federal Due Process Clause claim, Capital

Suisse did not do so, and the issue was not determined by

the Utah Supreme Court. Therefore, this is not a proper

case, factually or legally, for certiorari review on the due

process issue asserted in the Petition.

C. Capital Suisse Did Not Raise the Equal

Protection Issue Below.

This Court should not review Capital Suisse’s asser-

tion that the Utah Supreme Court decision conflicts with

federal Equal Protection Clause precedents established by

several state courts and this Court. The Petition makes no

reference to raising equal protection, state or federal, in

either the district court or in the Utah Supreme Court

because Capital Suisse never did so. See Rule 14.1(g)i).

For this reason, in this case the Utah Supreme Court has

not construed, nor interpreted, the federal Equal Protec-

tion Clause in a manner that could be inconsistent with

the decision or precedent of any other court. Moreover, the

cases cited in the Petition purportedly conflicting with the

Utah Supreme Court’s opinions (Pet. 20-21) were not

raised nor cited below and are clearly distinguishable as

they do not involve the situation where an appellate court,

in its discretion, requires a bond from a contemptuous

appellant in order to reach the merits of the appeal. As a

result, for the same reasons discussed in sections I.A. and

I.B., supra, the Petition should be denied.

Il. THIS CASE IS INAPPROPRIATE FOR CER-

TIORARI REVIEW SINCE CAPITAL SUISSE’S

VIOLATIONS OF THE DISCOVERY ORDERS

ARE FACTUALLY AND LEGALLY INDEPEND-

ENT BASES FOR DISMISSAL OF THE APPEAL

BY THE UTAH SUPREME COURT.

Based on Capital Suisse’s wilful disobedience of the

district court’s discovery orders and a concern that Capital

Suisse would continue to resort to evasive and dilatory

tactics, the Utah Supreme Court imposed two conditions

on Capital Suisse: fully comply with the outstanding

orders of the district court within thirty days, including

returning all documents removed from Utah to Spain and

answering HH&C’s outstanding interrogatories and

document requests, and post a bond in the amount of the

judgment. (Pet. App. 13a). Despite the Utah Supreme

Court’s imposition of two conditions, the Petition focuses

almost exclusively on the condition requiring the posting

of a bond.

The parties submitted extensive briefing to the

district court concerning Capital Suisse’s purported “good

faith” compliance with the Utah Supreme Court’s man-

date. After review of the memoranda and after a hearing,

the district court determined that Capital Suisse had not

complied with the requirements of the Utah Supreme

Court, specifically holding that Capital Suisse “failed to

respond to Plaintiff’s discovery requests as ordered.” (Pet.

App. 16a). Capital Suisse merely repeated the arguments

made to the district court in its Certification to the Utah

Supreme Court after the district court issued its order and

determination. (Resp. App. 10b-27b).

At no time did Capital Suisse assert that its wilful

disobedience to the district court’s orders, or its failure to

cure its contemptuous conduct, raised any federal consti-

tutional issue. The Petition remains silent about this

alternative basis for dismissing the appeal: Capital

Suisse’s failure to respond to HH&:C’s outstanding discov-

ery. This independent basis for the Utah Supreme Court’s

decision to dismiss the appeal makes this case unworthy of

certiorari review.

Ill, THERE IS NO GENUINE CONFLICT BE-

TWEEN THE DECISION OF THE UTAH SU-

PREME COURT AND THE CASES CITED IN

THE PETITION.

The Petition argues that Utah Supreme Court’s

decisions conflict with the nearly twenty-year-old decision

of the Second Circuit in Pennzoil, but the Petition does not

point to cases in any other jurisdiction addressing the

specific due process issue raised in Pennzoil. Further,

there is no conflict between the Utah Supreme Court’s

dismissal of Capital Suisse’s appeal and the Pennzoil case.

A. The Second Circuit Pennzoil Decision.

The Petition rests its assertion of an “important due

process issue” (Pet. at 12) almost entirely on an alleged

conflict between the Utah Supreme Court decisions and

the Second Circuit opinion in Pennzoil. (Pet. 12-16).

However, the Second Circuit’s decision in Pennzoil is both

factually and legally distinguishable from this case.

Pennzoil did not address the power of a state appellate

court to dismiss an appeal of a contemptuous appellant.

Instead, the issue of the Second Circuit, on which Capital

Suisse relies, was whether Rule 364 of the Texas Rules of

Civil Procedure violated Texaco’s due process right to

appeal because its mandatory and inflexible application to

all appeals deprived Texaco of due process. Texaco, Inc. v.

Pennzoil Co., 784 F.2d 1133, 1154 (2d Cir. 1986), rev’d on

other grounds, 481 U.S. 1 (1987).

In the instant case there is no “inflexible” statutory

requirement at issue. In fact, the Utah Supreme Court

crafted a flexible remedy to address Capital Suisse’s wilful

disobedience to discovery orders. Relying on precedent

from this Court and a number of other jurisdictions, the

Utah Supreme Court correctly held an appellant does not

have an absolute right of appeal after engaging in re-

peated wilfully disobedient and contemptuous conduct.

(Pet. App. 12a) (“the right of appeal is not absolute and

may be forfeited”). Unlike the mandatory bond require-

ment statutorily imposed in Pennzoil, the Utah Supreme

Court’s approach is a “fair and just” approach “under the

facts and circumstances” of this particular case. (Pet. App.

13a).

B. On Certiorari Review of the Second Circuit

Opinion in Pennzoil, This Court Empha-

sized that an Appellate Court has Inherent

Authority to Remedy Contempt.

In Texaco, Inc. v. Pennzoil Co., 481 U.S. 1 (1987), this

Court reversed the Second Circuit, holding that the

Younger abstention doctrine prohibited the Second Circuit

from considering constitutional claims that had not been

presented to the Texas courts, much like the claims in this

case had not been presented to the Utah Supreme Court.

See id., 481 U.S. at 16-17. The majority Opinion, therefore,

did not address the due process issue.

However, this Court’s decision emphasized the impor-

tance of the individual states controlling their contempt

procedures. This Gourt noted that neither the federal

district court nor the Second Circuit “applied the appro-

priate standard in determining whether adequate relief

was available in the Texas courts.” 481 U.S. at 10. In so

ruling, this Court confirmed a state’s interest in vindicat-

ing its contempt power:

This Court repeatedly has recognized that the

States have important interests in administering

certain aspects of their judicial systems. [cita-

tions omitted] In Juidice v. Vail, 430 U.S. 327

(1977), we held that a federal court should have

abstained from adjudicating a challenge to a

State’s contempt process. The Court’s reasoning

in that case informs our decision today:

“A State’s interest in the contempt proc-

ess, through which it vindicates the

regular operation of its judicial system,

so long as that system itself affords the

opportunity to pursue federal claims

within it, is surely an important inter-

est. Perhaps it is not quite as important

as the State’s interest in the enforce-

ment of its criminal law, Younger, su-

pra, or even its interest in the

maintenance of a quasi-criminal pro-

ceeding such as was involved in Hu/ff-

man, supra. But we think it is of

sufficiently great import to require ap-

plication of the principles of those

cases.”

481 U.S. at 12-13 (quoting Juidice, 430 U.S. at 335). This

Court emphasized that the contempt power “stands in aid

of the authority of the judicial system, so that its orders

and judgments are not rendered nugatory.” Jd. at 13

(quoting Juidice, 430 U.S. at 336 n.12).

The Utah Supreme Court did nothing more than

vindicate Utah’s important interests in administering it

own judicial system by fashioning a fair and just remedy

to deal with a contemptuous and defiant appellant. This

comports with this Court’s opinion in Pennzoil recognizing

the right of States to control their own contempt proce-

dures.

C. The Utah Supreme Court’s Decision Relied

Upon, and is Fully Consistent With, the

Precedent of This Court and a Myriad of

Other Courts.

Capital Suisse claims that the Utah Supreme Court

added a “judicial gloss to the constitutional right to appeal

by stating that ‘it is not absolute and the right may be

forfeited, or a valid appeal may be dismissed, due to the

acts or omissions of the appellant.’” (Pet. 9, quoting (Pet.

App. 12a)). This “judicial gloss” is well-founded in the

precedents of this Court. In reaching its decision, the Utah

Supreme Court cited this Court’s ruling in the National

Union case:

[Tihe United States Supreme Court has held

that dismissing the appeal of an appellant who

wilfully defies court orders does not violate due

process, but rather, may be a “reasonable means

of safeguarding the collectibility of [a] judgment.”

Natl Union of Marine Cooks & Stewards v. Ar-

nold, 348 U.S. 37, 41, 43-44 (1954) (“While a

statutory review is important and must be exer-

cised without discrimination, such a review is not

a requirement of due process.”).

(Pet. App. 12a).

In National Union, this Court upheld the authority of

a state court to dismiss an appeal because of an appel-

lant’s actions to frustrate the effectiveness of a judgment.

This Court noted:

While this Court has not, until now, passed upon

the constitutionality of a state court’s dismissal

of an appeal in a case like the present, it has de-

cided somewhat comparable issues. Where the

subject matter of litigation has been removed or

has removed itself from the jurisdiction of a state

court in violation of that court’s orders, this

Court has upheld a dismissal of the offending

litigant’s appeal.

348 US. at 43.

The Petition unsuccessfully attempts to distinguish

National Union in a footnote, stating that National Union

does not “control the outcome of this case” because (i) the

National Union petitioner “did not make a good faith effort

to comply with the lower court’s bond order,” and (ii)

because the state of Washington, unlike Utah, does not

provide a constitutional right to appeal in civil cases. (Pet.

17 n.3). The differences are insignificant because the Utah

Supreme Court, as well as the district court, decided that

Capital Suisse’s “good faith” efforts were insufficient to

comply with the district court’s prior discovery orders.

After rejecting Capital Suisse’s “good faith” arguments,

the Utah Supreme Court dismissed the appeal. Further,

the National Union decision was not based on a state

granted constitutional right of appeal, and did not suggest

that the outcome would have been any different if the

Washington State Constitution provided for an absolute

right of appeal in civil cases. The Petition ignores the clear

holding in National Union: dismissal of an appellant’s

appeal does not violate due process when the appellant

defies a lower court’s orders. 348 U.S. at 45. See also

Hammond Packing Co. v. Arkansas, 212 U.S. 322, 350-54

(1909) (holding trial court’s striking of pleadings and entry

of default judgment did not violate due process when the

party refused to comply with discovery orders); Nat?

Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639,

643 (1976) (upholding dismissal of complaint as a sanction

for plaintiff’s failure to comply with discovery orders and

answer interrogatories) (per curiam). Consistent with this

Court’s prior rulings, the Utah Supreme Court correctly

dismissed Capital Suisse’s appeal as result of its contemp-

tuous conduct.

D. The Purported Conflict is Totally Insignifi-

cant.

Nearly twenty years have passed since the Second

Circuit opinion in Pennzoil. As the Petition readily illus-

trates, few courts have faced the issue involved in Penn-

zoil. In fact, the Second Circuit recognized that the scope

and precedential value of its decision was limited:

We hasten to note that our decision rests partly

upon the extraordinary circumstances of this

case, which are unlikely ever again to recur: a

private civil money judgment in an amount un-

precedented in the annals of legal history, a clear

inability on the part of the judgment debtor to

comply with a state law mandating a bond in the

full amount of the judgment pending appeal, the

prospect that the state appellate court would not

rule on the constitutionality of the state law be-

fore the judgment creditor acted to enforce the

judgment, and the likelihood that immediate en-

forcement of the Texas lien and bond provisions

would lead to irreversible destruction of the

debtor before its appeal could be heard and de-

cided on the merits, thus robbing its right of ap-

peal of any meaning and effect. For these reasons

our decision, like that of the Fifth Circuit in

Henry v. First Natl Bank of Clarksdale, 595 F.2d

291 (5th Cir. 1979), cert. denied, 444 U.S. 1074

(1980), is obviously a narrow one in its scope and

application.

Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133, 1157 (2d Cir.

1986), rev'd on other grounds, 481 U.S. 1 (1987). Even

stretched to the extreme, the Utah Supreme Court’s

decision presents no important conflict with the Second

Circuit’s decision in Pennzoil requiring review by this

Court.

Nor would granting the Petition provide any appre-

ciable assistance to the lower courts. The Petition suggests

that the issues presented “are of national significance.”

(Pet. 23). However, Capital Suisse reaches this conclusion

by merely stating that “the right to appeal a decision of a

state trial court [] is found in state constitutions across

the country.” Jd. Capital Suisse’s conclusory statement

does not make this case worthy of certiorari review. Like

the Second Circuit’s decision in Pennzoil, the circum-

stances of this case are unique. Despite Capital Suisse’s

argument that the Utah Supreme Court acted “arbitrar-

ily,” the Supreme Court found, based upon a review of

specific conduct, that Capital Suisse wilfully disobeyed the

lower court’s orders. (Pet. App. 10a). Such a conclusion was

well reasoned based upon the wilful conduct of Capital

Suisse. Therefore, the risk that any “federal or state court”

would arbitrarily “extinguish” appeal rights is non-

existent. Since the purported conflict is insignificant, the

Petition should be denied.

CONCLUSION

For the foregoing reasons, this Court should deny the

petition for writ of certiorari.

Respectfully submitted this 3rd day of June, 2005.

NEIL A. KAPLAN

Counsel of Record

PERRIN R. LOVE

WALTER A. ROMNEY, JR.

CLYDE SNOW SESSIONS & SWENSON

201 South Main Street, Suite 1300

Salt Lake City, Utah 84111

Telephone: (801) 322-2516

Facsimile: (801) 521-6280

Counsel for Respondent

Neil A. Kaplan (3974)

Perrin R. Love (5505)

Walter A. Romney, Jr. (7975)

Attorneys for Hentsch, Henchoz & Cie

201 South Main Street, Suite 1300

Salt Lake City, Utah 84111

Telephone: (801) 322-2516

Facsimile: (801) 521-6280

IN THE DISTRICT COURT OF THE

THIRD JUDICIAL DISTRICT IN AND FOR

SALT LAKE COUNTY, STATE OF UTAH

In the Matter of:

The Criminal Proceeding of the

Kingdom of Spain and Hentsch

Henchoz & Cie against:

Philip David Gubbay

Court of First Instance and

Instruction

No. 2 Marbella :

Court No. 1346/2000 . AFFIDAVIT OF

- DAVEE. SMITH

HENTSCH HENCHOZ&CIE,_ =. Consolidated Case No.

Plaintiff > 010905355

bias . Judge Ronald E. Nehring

PHILIPPE D. DAVID GUBBAY, :;

CAPITAL SUISSE, S.A., CAPITAL :

SUISSE, INC., CAPITAL SUISSE :

SECURITIES, INC. ZOOLEY

SERVICES LIMITED, ZOOLEY

OF UTAH, INC., FERNLAND

LIMITED, DOUGLAS P. HOYT,

and JOHN DOES 1-10,

Defendants.

STATE OF UTAH )

: a

COUNTY OF SALT LAKE )

Dave E. Smith, after being duly sworn under oath,

states as follows:

1. I am a resident of the state of Utah. My home

address is 12378 South Margaret Rose Drive, Riverton,

Utah 84065. I am a Certified Public Accountant (“CPA”).

2. I am represented by James R. Holbrook of

Callister, Nebeker & McCullough, with regard to this

affidavit.

3. I was employed with members of the Capital

Suisse Group of Companies (the “Capital Suisse Group”)

from December 1, 1999, through April 1, 2002, when I

resigned. During that time, I held the following posi-

tions: Chief Financial Officer (“CFO”), Executive Vice

President and Director of Capital Suisse Management,

Director, Secretary and Controller of Zooley of Utah,

Inc., Controller of Capital Suisse, Inc. and Treasurer of

Capital Suisse Securities. My proposed written employ-

ment agreement was with Capital Suisse, Inc. In my

experience, it was common for Capital Suisse Group

employees and officers frequently to change titles and

positions within the group.

4. My job duties with the Capital Suisse Group

included, among other things, maintaining the financial

records and books of Capital Suisse, Inc. and Zooley of

Utah, Inc. (“Zooley of Utah”), executing wire transfers

and cashiers checks on behalf of these companies, and

managing their bank accounts, including the accounts at

Zions First National Bank (“Zions Bank”) and Wells

Fargo Bank (collectively, the “Utah accounts”).

5. In addition, I was the Registered Agent in Utah

for PetsMarketing, Inc. (“PetsMarketing”) and, for a

period of time I was the Controller for PetsMarketing.

PetsMarketing conducted all of its operations through

its wholly owned subsidiary, PetsMarketing Insur-

ance.com Agency, Inc. (“PMIA”), an Ohio corporation. In

my capacity as Controller, I was in charge of the ac-

counts payable and accounting and made payments and

disbursements on behalf of PMIA from two Utah bank

accounts in its name at Zions Bank.

6. In each of positions I held (as set forth above), I

reported to and took instructions directly from Philip

[sic] D. David Gubbay (“Gubbay”) and considered him to

by my ultimate supervisor. Every time I wired signifi-

cant assets out from the Uteh accounts, I did so upon

written or telephonic instructions of Gubbay that were

faxed from Spain (or elsewhere) to me at the offices of

Capital Suisse, Inc. and Zooley of Utah (the “Utah

offices”), located at 15 South Temple Street, Salt Lake

City, Utah.

7. In early January 2002, Gubbay requested that I

remove from the Utah offices and send to Spain all

documents and computer data maintained there. After

consultation with my lawyer, I refused to do so because I

was concerned that complying with those directions

would constitute an obstruction of justice in light of the

ongoing litigation before this court. I advised Gubbay

that 1 would not comply. Several days later, on January

18, 2002, Andrew Yurcho (“Yurcho”), who is the U.S. in-

house counsel and the head of the San Diego office for

the Capital Suisse Group of Companies, and Harrison

Beal (“Beal”), the Secretary of Capital Suisse Manage-

ment, traveled from San Diego to Utah. On January 14,

2002, Yurcho and/or Beal met with Holme Roberts &

Owen. On January 15, 2002, Yurcho and Beal removed

from the Utah offices all documents and computer data

(i.e., computer hard drives) maintained there. I took a

leave of absence so that I would not be present when the

removal occurred. Among the documents removed were:

a. All books and financial records of Capital

Suisse, Inc. and Zooley of Utah;

b. All written instructions from Gubbay di-

recting wire transfers or other disburse-

ments from the Utah accounts;

c. All written and e-mail communications be-

tween officers and employees of the Capi-

tal Suisse Group in Spain and officers and

employees of the Capital Suisse Group in

Utah.

8. In reviewing the Verified Complaint and being

familiar with the subject matter thereof, many of the

documents and data removed from Utah would have

directly related to HH&C’s claims, including for example:

a. The wire transfer instructions directly

from Gubbay;

b. E-mails from myself and others, including

Douglas P. Hoyt (“Hoty”) and Edward B.

Stonehocker (“Stonehocker”) concerning

the Fund’s representations on its website

about the Net Asset Value (“NAV”) repre-

sentations concerning independent audi-

tors, representations concerning the role of

the Utah office as Administrator of the

Fund;

c. Documents corroborating that letters were

dictated from Spain, even when sent from

Utah;

d. E-mails and other documents showing how

and why Gubbay orchestrated the reverse

merger for PetsMarketing, as described be-

low.

9. Neither I nor Hoyt nor Stonehocker or anyone

else in the Salt Lake City offices of the Capital Suisse

Group of companies prepared any net asset valuations

for Capital Suisse, S.A.

10. Based on my personal knowledge and involve-

ment with PetsMarketing, including review of certain

documents, I can represent that on or about March 20,

2000, in accordance with instructions from Douglas

Hoyt (an in-house counsel for the Capital Suisse Group),

who was acting on instructions from Gubbay, PetsMar-

keting which is a Delaware corporation. On or about

March 27, 2000, PMIA was incorporated as an Ohio

corporation; PMIA subsequently became a wholly-owned

subsidiary of PetsMarketing. On or about June 19, 2000,

acting on instructions from Gubbay, I opened an account

at Zions Bank for PMIA. I was the signatory for that

account and was responsible for disbursements neces-

sary for PMIA to conduct day-to-day business; I ob-

tained permission from Gubbay before making large

disbursements. On or about August 30, 2000, PetsMar-

keting had its first private placement of shares. Of the

18,512,000 shares issued, Zooley Services obtained

16,000,000, making it the majority owner of PetsMar-

keting. In exchange for those shares, Zooley Services

transferred to PMIA its portfolio of health insurance

policies for family pets. Zooley Services had previously

acquired the portfolio through the bankruptcy proceed-

ings for PetsHealth, an earlier company in the business

of selling medical insurance for pets, in which Zooley

Services had an interest.

11. Gubbay, acting directly and through Zooley

Services, hired Russell Smith (the former President of

PetsHealth) es the President of PetsMarketing and

Robert Cashman (also a former director of PetsHealth)

as the Secretary of PetsMarketing.

12. Yurcho, through Equitrade Securities, Inc.

(“Equitrade”), tried to obtain permission from the NASD to

quote PetsMarketing on the Pink Sheets LLC (“Pink

Sheets”) by filing a Form 15c-211 with the NASD. The

NASD, however, rejected the Equitrade Form 15c-211 as

deficient. Consequently, in April 2001, Gubbay instructed

Yurcho who informed me and others that PetsMarketing

needed to undergo a reverse merger with LifeSoft, a public

shell corporation, i.e., only LifeSoft would survive the

merger and be re-named PetsMarketing. Because LifeSoft

was already eligible to be quoted in the Pink sheets, it

would be possible after the merger for the LifeSoft shares,

now called “PetsMarketing” shares, to be quoted in the

Pink Sheets. Thus, the merger circumvented the require-

ment that a new Form 15c-211 be filed in order for

PetsMarketing shares to be quoted in the Pink Sheets.

LifeSoft was dormant before the merger, and was revived

for the purpose of allowing PetsMarketing shares to be

quoted on the Pink Sheets notwithstanding the NASD’s

concerns with Equitrade’s Form 15c-211.

13. As part of the reverse merger, Zooley Services was

given another nine (9) million share of PetsMarketing,

bringing its ownership total to 25 million shares, or_over

sixty percent (60%) of the outstanding shares.

14. Nerja Communications (“Nerja”), a company

owned actually by Gubbay and nominally operated by

Beal (the Secretary of Capital Suisse Management),

used its trading account at Equitrade Securities, Inc., a

broker-dealer in Orange County, California, to periodi-

cally purchase small amounts PetsMarketing shares at

prices from approximately $8.00 to $10 per share. To

fund Nerja’s purchases of PetsMarketing, I wired

money, acting on instructions from Gubbay, from the

Utah accounts to MJK Clearing, the clearing firm for

Equitrade.

15. Included among the wire transfers that I made,

or am aware of, from the Utah accounts upon written

instructions from Gubbay were:

a. $181,050 to Gubbay’s father, Donald Gub-

bay, in Manley;

b. $250,00 to Gubbay’s wife, Veronique Gub-

bay, another $750,000 to Swiss Finance,

S.I., and another $155,000 to Ophir Prop-

erties, Limited;

c. $150,000 to Gubbay’s sister, Denyse Anne

Pentecost, in New Calendonia;

d. $1,027,356 to Marianne Zenger, a sales

agent of the Capital Suisse Group, in

Spain and Switzerland;

e. $7,291,666 to pseudonym accounts code

name “Koukouk” in Switzerland and the

Guernsey Islands that I later determined

were beneficially owned by Willy Zenger,

who is Marianne Zenger’s father;

f. $501,000 to Terrence Vandeveld, the Man-

aging director of Capital Suisse Securities,

who is also Marianne Zenger’s brother-in-

law;

g. $1,520,000 to Capital Suisse Management,

parent of Capital Suisse Securities;

h. $112,000 to Transmeridian, Inc. for the

benefit of William Slivka, the President of

Capital Suisse Securities;

i. $75,000 to the Charleston Group for the

benefit of Robert Cashman, Secretary of

Capital Suisse Securities;

j. $300,042 to Andrew Yurcho, in-house coun-

sel for the Capital Suisse Group;

k. $96,000 to the Maro Group for the benefit

of Roy Lerman, Head of Marketing for the

Capital Suisse Group;

1. $328,750 to Yves George Larielle, a Vice

President of Capital Swisse Group, in Gi-

braltar;

m. $464,230 to Tul Intervest in Gibraltar,

Larielle is sole signatory to account;

n. $315,000 to Elite Trading in Gibraltar,

Larielle is sole signatory on account;

o. $75,000 to Holme Roberts & Owen;

p. $367,566 to Mark Hendricks, a General

Counsel and Senior Vice President of the

Capital Suisse Group of companies; and

q. $252,000 to Nerja Communications, In.c,

the company that bought PetsMarketing

stock as set forth above.

r. $4.95 million to Donald Gubbay in Vanu-

aru ($4.5 sent by Douglas P. Hoyt).

These amounts total $19,161,660.00.

DATED this 22nd day of May 2002.

/s/ Dave E. Smith

Dave E. Smith

AFFIANT

SUBSCRIBED AND SWORN TO before me this 22nd

day of May 2002.

/s/ Dawn M. Hales

NOTARY PUBLIC

DAWN M. HALES

4095 S. Kifferney Circle

[SEAL] West Valley City, Utah 84119

My Commission Expires

February 3, 2004

STATE OF UTAH

10b

Brent O. Hatch (5715)

Mark H. Richards (9018)

HATCH, JAMES & DODGE

10 West Broadway, Suite 400

Salt Lake City Utah, 84101

Telephone: (801) 363-6363

Facsimile: (801) 363-6666

Attorneys on Appeal for Defendants

IN THE UTAH SUPREME COURT

HENTSCH HENCHOZ & CIE,

Plaintiff,

CERTIFICATION OF

bao GOOD FAITH ATTEMPT

PHILIPPE DAVID GUBBAY, | TO COMPLY WITH

CAPITAL SUISSE, S.A., COURT ORDER

CAPITAL SUISSE SECURI- | (ORALARGUMENT

TIES, INC., CAPITAL SUISSE,| REQUESTED)

INC., ZOOLEY SERVICES Supreme Court Ne.

LIMITED, ZOOLEY OF UTAH,| 99020683

INC., FERNLAND LIMITED, | Consolidated Case No.

DOUGLAS P. HOYT, AND 010905355

JOHN DOES 1-10,

Defendants.

Defendants Philip D. Gubbay, Capital Suisse, S.A.

(the “Fund”), Zooley Services Limited (“Zooley”), Capital

Suisse, Inc., Zooley of Utah, Inc., and Ferland [sic] Limited

(“Fernland”) (all collectively “Capital Suisse”) through

their appellate counsel respectfully submit this Certifica-

tion of Good Faith Attempt to Comply with Court Order.

11b

INTRODUCTION

On August 15, 2002, Capital Suisse appealed the July

17, 2002 Order of the trial court granting Hentsch Hen-

choz & Cie’s (“HH&C”) Motion for Summary Judgment

and Motion to Dismiss in this matter. The basis of the

appeal is that the trial court erroneously failed to enforce

a forum selection clause found in each of the agreements

at issue in this case. On August 6, 2004, this Court issued

an opinion’ that did not reach the merits of the appeal.

Instead, this Court found that Capital Suisse had not

complied with the trial court’s orders, stayed the appeal,

and ordered that Capital Suisse comply with two condi-

tions: First, the Court required Capital Suisse, within

thirty days of the its order, to bring itself into compliance

with this Court’s outstanding orders. Second, the Supreme

Court required Capital Suisse to post a bond in the

amount of any unsatisfied portion of the judgment that

has been entered against it.

The Court remanded the case to the trial court to

make the following determinations:

(1) whether Capital Suisse has adequately com-

plied with the orders of the district court within

thirty days from the issuance of this decision; (2)

the amount of the unsatisfied portion of the dis-

trict court judgment; and (3) whether Capital

Suisse has posted an adequate bond in that

amount.

Opinion at 125.

* See Hentsch Henchoz & CIE v. Gubbay, __ P.3d __, 2004 WL

1753372 (Utah 2004) (herein after referred to as the “Opinion”). —

iE ey

12b

Because Capital Suisse’s appellate counsel was not its

trial counsel, appellate counsel sought to determine what

particular orders of the district court had not been com-

plied with as well as to determine Capital Suisse’s ability

to post a bond. For either of two independent reasons,

Capital Suisse has been unable to post a bond. First,

Capital Suisse does not have the present financial where-

withal to come close to posting a bond of the magnitude

required by the Court. Second, even if Capital Suisse had

adequate financial wherewithal, its assets have been

frozen by the orders of a Spanish Court.’ Therefore, it was

never possible for Capital Suisse to comply with this

Court’s requirements. Capital Suisse has, however, made a

good faith effort to comply with the Court’s requirements

outlined in its opinion, and on that basis requests that this

Court now reach the merits of its appeal.

CERTIFICATION

I. THE COURT’S REQUIREMENTS THAT CAPI- ;

TAL SUISSE POST A BOND |

One of the Court’s two requirements imposed on

Capital Suisse was that Capital Suisse post a bond “in the

amount of any unsatisfied portion of the judgment that

has been entered against it.” Id. at J 24. HH&C repre-

sented to the trial court that this amount totals

$27,868,098.63. [Exh. B, HH&C’s Memorandum in Opposi-

tion to Defendants’ Expedited Motion Seeking Declaration

* Capital Suisse respectfully notes that nothing has prevented

HH&C from seeking to collect on the judgment it obtained while the

appeal has been pending, the reason a bond typically is posted.

13b

Regarding Outstanding Orders and Satisfaction of Bond

(“HH&C’s Opposition Mem.”) at p. 13]°

On remand, Capital Suisse demonstrated to the trial

court that it could not post the bond required by this Court

for two separate and independent reasons. First, Capital

Suisse demonstrated that it lacks the financial ability to

post a bond in the amount claimed by HH&C. Second,

Capital Suisse demonstrated that there exist several

Precautionary Measures and Orders issued by the Spanish

Marbella Court in the Spanish Case that strictly prohibit

Capital Suisse from accessing any of its remaining assets.

Capital Suisse argued to the trial court that the Spanish

Court’s Orders, which freeze all of Capital Suisse’s assets,

adequately safeguard Capital Suisse’s assets from dissipa-

tion and thus satisfy this Court’s reason for requiring the

bond. See Opinion at 7 24.

While the Court’s Opinion does not state the reason

for the Court having imposed the particular requirement

of posting a bond, Capital Suisse believes the bond was

ordered for the purposes set forth in Utah Rule of Civil

Procedure 62(g), which provides:

Power of appellate court not limited. The provi-

sions in this rule do not limit any power of an

appellate court or of a judge or justice thereof to

stay proceedings or to suspend, modify, restore,

or grant an injunction, or extraordinary relief or

to make any order appropriate to preserve the

status quo or the effectiveness of the judgment

subsequently to be entered.

* References herein are made to the pleadings filed with the trial

court because the record has not yet been updated to include page

numbers to these pleadings.

ee Te ee

14b

Rule 62 governs the stay of proceedings to enforce a

judgment and the rules governing supesedeas bonds that

are required for any such stay. (Exh. C, Capital Suisse’s

Reply Memorandum in Support of Expedited Motion

Seeking Declaration Regarding Outstanding Orders and

Satisfaction of Bond (“Capital Suisse’s Reply Mem.”) at p. |

4]. Because this Court held in its decision that its re- :

quirement that Capital Suisse post a bond for any unsatis- ,

fied portion of the judgment was based on the Court’s ,

concern that “any continued delay will lead to the further

dissipation of Capital Suisse’s assets,” or, in other words,

to maintain the status quo, Capital Suisse determined

that the bond required by the Court is a supercedeas bond.

See Diversified Holdings, L.C. v. Turner, 63 P.3d 686, 702

(Utah 2002) (“the purpose of a supersedeas bond is to

protect nonappealing parties by maintaining the status

quo during the appeal and insuring that those who have

obtained the judgment under review will not be prejudiced

by a stay of the judgment pending final determination of

the appeal”).

Capital Suisse pointed out on remand to the trial

court that in dealing with supersedeas bonds, courts have

held that the bond may be waived if the party seeking to

stay a judgment pending appeal demonstrates that it is

financially impossible for it to post the bond. See, e.g.,

HCB Contractors v. Rouse & Assocs., 168 F.R.D. 508, 512

(E.D. Pa. 1995) (“the court possesses the power to waive

the requirement of a supersedeas bond”). [Exh. A, Capital

Suisse’s Memorandum in Support of Expeditied [sic] Motion

Seeking Declaration Regarding Outstanding Orders and

Satisfaction of Bond (“Capital Suisse’s Opening Mem.”) at

15b

pp. 5-6].* Capital Suisse directed the trial court’s attention

to the Tenth Circuit’s decision in Miami International

Realty v. Paynter, 807 F.2d 871 (10th Cir. 1986), in which a

jury found Paynter, an attorney, liable for malpractice and

awarded the plaintiff $2,100,000. Paynter appealed the

decision and moved for a stay of execution of the judgment

and a waiver of supersedeas bond. The trial court granted

Paynter motion to stay and waived the supersedeas bond.

The plaintiff then appealed the trial court’s decision.

On appeal, the Tenth Circuit upheld the trial court’s

waiver of the supersedeas bond. In its decision, the Tenth

Circuit noted that trial courts “have inherent discretionary

authority in setting supersedeas bonds.” Jd. at 873. It then

quoted the following from the Second Circuit’s decision in

Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133, 1154 (1986):

A judgment creditor’s primary concern when a

judgment in his favor is stayed pending appeal

is that he be “secure . . . from loss resulting from

the stay of execution.... ” In making that de-

termination we look to general equitable princi-

ples. Accordingly, when setting supersedeas

bonds courts seek to protect judgment creditors

as fully as possible without irreparably injuring

judgment debtors.... A full supersedeas bond

may be required “where there is some reason-

able likelihood of the judgment debtor’s inability

or unwillingness to satisfy the judgment in full

upon ultimate disposition of the case and where

posting adequate security is practicable”,

whereas no bond or a reduced bond would suf-

fice when the creditor’s interest, due to unusual

* Capital Suisse’s Opening Mem. references the Affidavit of Philip

Gubbay a copy of which is attached hereto as Exh. H.

16b

circumstances, would not be unduly endan-

gered. ...

Id., citing Wunschel & Small, Inc., v. United States, 554

F.Supp. 444-45 (U.S.C1.Ct.1983) (Rule 62(d) does not

preclude the court from issuing a stay without a bond or

upon the posting of a partial bond); C. Albert Sauter Co.

v. Richard S. Sauter Co., 368 F.Supp. 501, 520-21

(E.D.Pa.1973) (stay of execution granted following defen-

dants’ showing of lack of sufficient assets to satisfy the

judgment or to obtain a bond in amount thereof and that

execution of the judgment would place each of the defen-

dants in insolvency).

The Tenth Circuit, having concluded that a stay of

judgment could be obtained under Rule 62(d) without

obtaining a supersedeas bond where the party appealing

judgment has demonstrated that posting the bond is

financially impossible, held that the trial court did not err

in granting Paynter’s request for stay without a su-

persedeas bond. The court found that Paynter’s motion for

a stay was supported by his affidavit in which he stated

that he did not have sufficient assets to post a supersedeas

bond for the amount of the judgment. See also HCB

Contractors, 168 F.R.D. at 512 (waiving requirement of

supersedeas bond upon finding party lacking assets to post

bond). [Exh. A, Capital Suisse’s Opening Mem. at pp. 5-7].

Capital Suisse demonstrated to the trial court that it

lacks sufficient assets to post the bond required by this

Court. [/d. at p. 7]. Capital Suisse further demonstrated

that all of its attempts to obtain a bond were denied. [Jd.].

HH&C produced no evidence disputing these facts. Capital

Suisse therefore asked the trial court to find that the bond

requirement was waived or satisfied because Capital

17b

Suisse had done all it could do in regards to positing a

bond. [/d.}.

Capital Suisse also demonstrated to the trial court

that even if it possessed sufficient assets to post the bond,

the Orders by the Spanish Court in the Spanish Case that

freeze all of Capital Suisse’s assets would prevent Capital

Suisse from posting a bond. [Jd.]. The Order requires the

“freezing and preventive seizure of the balances of the

bank accounts, deposits of securities, bonds, shares, public

debt, contents of security boxes, or other financial assets”

of Capital Suisse in all jurisdictions where Capital Suisse

has assets, including Spain, Gibraltar, Amsterdam, New

York and Salt Lake City. (Jd. at pp. 7-8]. These Orders

remain in effect at the present time. [Jd. at p. 8]. Capital

Suisse argued to the trial court that because the Orders

entered in the Spanish Case prohibit the disposal (in any

form) of any of the assets of Capital Suisse, any attempt by

Capital Suisse to post the bond required by this Court

would violate the Orders and, moreover, the Spanish

Court Orders effectuated the purpose of this Court’s

Opinion requiring the posting of a bond. [Jd_].

In support of its argument, Capital Suisse cited Utah

Rule of Civil Procedure 62(i)(2), which provides “Upon

motion and good cause shown, the court may permit a

deposit of money in court or other security to be given in

lieu of giving a supersedeas bond under Subdivision (d).”

[Exh. A, Capital Suisse’s Opening Mem. at p. 8). Capital

Suisse also directed the trial court’s attention to D’Aston v.

D’Aston, 790 P.2d 590 (1990), a decision relied upon

heavily by this Court in its Opinion in this case, that a

party seeking a stay “merely has the obligation to come

forward and offer a reasonable alternative to the trial

court to safeguard [its] assets from dissipation pending her

18b

appeal.” Jd. at 594. [Jd.]. Capital Suisse argued that the

Orders entered in the Spanish Case, which freeze all of

Capital Suisse’s assets, provide an alternative safeguard of

Capital Suisse’s assets from dissipation. See Paynter, 807

F.2d at 874 (finding trial court’s order enjoining the

transfer or disposing of any assets a sufficient alternative

safeguard to supersedeas bond); see also HCB Contractors,

168 F.R.D. at 514 (holding an order restraining the trans-

ferring of judgment debtors assets sufficient alternative

security to waive supersedeas bond). [Exh. A, Capital

Suisse’s Opening Mem. at p. 8].

Capital Suisse noted to the trial court that the clear

desired intent of this Court’s requirement that Capital

Suisse post a bond is to protect HH&C from any further

dissipation of Capital Suisse’s assets. [Jd. at p. 9)]. It then

argued that because Capital Suisse’s assets are frozen

pursuant to the Spanish Court’s Orders, there is no threat

that Capital Suisse’s assets will be dissipated pending the

appeal of this matter. [Jd.]. Capital Suisse therefore asked

the trial court to find that this Court’s bond requirement is

unnecessary as it will provide no additional protection to _

HH&C in this regard. [Id.}.

In its Opposition to Capital Suisse Motion, HH&C

argued that this Court’s opinion clearly states that Capital

Suisse must post a bond or the appeal is dismissed. [Exh.

B, HH&C’s Opposition Mem. at p. 9]. In other words,

HH&C argued that the Court’s Opinion granted the trial

court no discretion to determine whether Capital Suisse

was unable to post a bond or whether it had provided

adequate alternative safeguards. [Jd. at pp. 9-10].

At the hearing on Capital Suisse’s Motion, the trial

court agreed with HH&C’s position. It found that it only

19b

had authority on remand to determine whether Capital

Suisse had or had not posted a bond. [Exh. D, Transcript of

October 20, 2004 Hearing before Judge Anthony. B. Quinn

(“Hearing Transcript”) at pp. 3, 5 36.]. The trial court

refused to look beyond that fact to Capital Suisse’s argu-

ments regarding its inability to post the bond. [Id.].

Finding that Capital Suisse had not posted a bond, a fact

that is not disputed, the trial court concluded that Capital

Suisse had not met the bond requirement in this Court’s

Opinion. [Id. at p. 36].

At the time this Court entered its Opinion requiring

the bond, it had no facts before it that would allow it to

know it would be impossible for Capital Suisse to post the

required bond. In Jn the Matter of the Discipline of Jamis

M. Johnson, 48 P.3d 881 (Utah 2002), Justice Durham

argued “Where the judgment is equivalent to a profes-

sional death penalty, I believe that this court’s review

should precede execution.” Jd. at 887 (Durham, J., concur-

ring and dissenting). Absent a finding by this Court that

the bond requirement has been satisfied in light of the

Spanish Court’s Orders, or, at a minimum removing the

requirement that Capital Suisse post a bond that it clearly

cannot provide, Capital Suisse is denied due process and

has been, in effect, condemned to the equivalent of the

“death penalty” as any opportunity for it to have its appeal

heard on the merits would be lost. Capital Suisse therefore

requests that the Court hold the bond requirement is

sufficiently satisfied.

20b

Il. THE COURT’S REQUIREMENTS REGARDING

OUTSTANDING ORDERS OF THE TRIAL

COURT

Capital Suisse’s appellate counsel was not Capital

Suisse’s trial counsel. Without having first-hand back-

ground knowledge of the procedural posture of this case,

counsel for Capital Suisse attempted to determine what

outstanding orders of the trial court existed. Based on a

review of the record in this case prior to appeal and

conversations with Capital Suisse, counsel for Capital

Suisse believed the only outstanding order from the Court

that Capital Suisse had failed to comply with was the trial

court’s March 25, 2002 Order requiring Capital Suisse to

return to Utah all documents produced in the ordinary

course of business in Utah that were removed by Capital

Suisse during the course of this litigation (as specifically

noted in the Court’s Opinion at J 24).

Capital Suisse’s counsel also spoke to HH&C’s counsel

regarding which orders of the trial court remained out-

standing.” HH&C’s counsel responded that the documents

that had been removed from Utah needed to be produced

and that there may be an issue with respect to Capital

Suisse’s responses to interrogatory and document re-

quests. Based on the fact that HH&C had been provided

the information sought by the discovery requests and

given the fact that HH&C’s counsel was indefinite as to

* The reason why Capital Suisse contacted HH&C’s counsel was to

determine exactly what discovery HH&C still considered it needed,

given the fact that a default judgment had already been entered in this

case. It makes absolutely no sense to Capital Suisse that it be required

to produce discovery on issues that have been resolved by entry of the

default judgment.

21b

whether HH&C believed interrogatory and document

requests still required further response, Capital Suisse

believed that the Court’s requirement as it related to

Capital Suisse’s compliance with the outstanding orders of

the trial court would be satisfied by returning the docu-

ments removed from Utah.

Capital Suisse returned all documents and/or materi-

als it had removed from Utah in its control and possession

on September 3, 2004. [Exh. E Second Affidavit of Philip

Gubbay at p. 3]. The materials thereafter were immedi-

ately made available to HH&C’s counsel for review. [Exh.

B, HH&C’s Opposition Mem. at p. 8; Exh. F, Letter to

HH&C dated September 3, 2004]. Also on September 3,

2004, Capital Suisse filed with the trial court an expedited

motion seeking a declaration from the trial court that by

returning the materials removed from Utah, it had com-

plied with the court’s remaining outstanding orders as

required by this Court’s Opinion. [Exh. A, Capital Suisse’s

Opening Mem.]. HH&C filed an opposition to Capital

Suisse’s Motion on September 20, 2004. [Exh. B, HH&C’s

Opposition Mem.].

In its opposition, HH&C claimed that Capital Suisse

has not adequately complied with the orders of this Court

because (1) Capital Suisse’s production of the documents

removed from Utah was insufficient and that (2) Capital

Suisse has failed to respond to HH&C’s interrogatories

and document requests. In particular, HH&C claimed that

the responses to its discovery requests were necessary to

trace nearly $25 million that was allegedly fraudulently

obtained by Capital Suisse. [Exh. B, HH&C’s Opposition

Mem. at p. 3]. HH&C alleged that its discovery requests

sought the most fundamental information — i.e., “how and

where the Capital Suisse Defendants had hidden and

22b

laundered HH&C’s $25 million, and where it was located.”

(Id. at pp. 5-6].

In regards to the materials returned to Utah, HH&C

relied on the affidavit of a former employee of Capital

Suisse, David Smith, who HH&C claims stated that the

materials removed from Utah included (a) computer hard

drives, (b) records of wire transfers and financial records

of Zooley of Utah, and (c) emails regarding an entity

named PetsMarketing. HH&C claimed that these materi-

als were not included in Capital Suisse’s production of the

materials removed from Utah. [Id. at pp. 8-9].

In its Reply Memorandum, Capital Suisse demon-

strated to the trial court that despite HH&C’s claim to the

contrary, Capital Suisse in fact had returned all docu-

ments in its control and possession it removed from Utah.

Capital Suisse demonstrated that as a result of this case

and the orders freezing all of the assets of Capital Suisse

issued in In the Matter of: The Criminal Proceeding of the

Kingdom of Spain and Hentsch, Henchoz & Cie against |

Philip David Gubbay, Court of First Instance and Instruc- |

tion No. 2 Marbella, Court No. 1346/2000 (the “Spanish |

Case”), which involves the same issues and has been

consolidated with this case, Capital Suisse was unable to

pay its employees. [Exh. C, Capital Suisse’s Reply Mem. at

p. 3; Exh. E, Second Affidavit of Philip Gubbay at { 10-11).

Some of the disgruntled employees, in order to retaliate

against or pressure Capital Suisse to pay their wages, in

turn, stole or destroyed equipment, documents, computers,

and other assets of Capital Suisse, including some docu-

ments, computers, equipment and other materials that

had been removed by Capital Suisse froma Utah. [Jd., Exh.

E, Second Affidavit of Philip Gubbay at 7{§ 14-16]. In

complying with the trial court’s outstanding order, Capital

23b

Suisse returned all of the documents it had. To the extent

there are computer hard drives or other documents in its

possession and/or control, Capital Suisse demonstrated

that it had returned them to Utah. [Exh. C, Capital

Suisse’s Reply Mem. at 3, Exh. E, Second Affidavit of

Philip Gubbay at 7J 14-16}.

Capital Suisse also demonstrated that HH&C’s claim

that the wire transfer records and financial records for

Zooley were absent was disingenious. Capital Suisse

directed the trial court’s attention to the Appendix to

HH&C’s Memorandum of Points and Authorities in Sup-

port of Motion for Summary Judgment on the First,

Second and Sixth Claims Against Capital Suisse Defen-

dants (“HH&C’s Summary Judgment Mem.”) at Nos. 27

and 28, in which HH&C attached copies of the bank

records and wire transfer records for Zooley of Utah. [Exh.

C, Capital Suisse’s Reply Mem. at p. 1]. Thus, HH&C

already had in its possession the information it claimed

was absent from Capital Suisse’s production of the docu-

ments removed from Utah.

Finally, Capital Suisse demonstrated to the trial court

that it did not possess the information on PetsMarketing

that David Smith claimed in his Affidavit was sent to

Spain. [Exh. E, Second Affidavit of Philip Gubbay at

{ 16)}. While the materials Capital Suisse returned to

Utah contained a few emails mentioning PetsMarketing,

those emails were drafted by Douglas Hoyt in his capacity

of general counsel for Capital Suisse and are protected

under the attorney client privilege and thus not required

to be produced. Capital Suisse prepared a privilege log

containing this information that it made available to

counsel for HH&C. [Exh. G, Letter to HH&C dated Octo-

ber 19, 2004.) HH&C made no attempt to demonstrate

I iii i i

24b

why the information is relevant and Capital Suisse under-

stands that HH&C made no attempt to subpoena any of

the information regarding PetsMarketing from PetsMar-

keting.

In response to HH&C’s argument that Capital Suisse

failed to comply with the trial court’s outstanding orders

by failing to respond to its interrogatories and discovery

request, Capital Suisse demonstrated to the trial court

that HH&C already possesses the information it sought to

discovery in its discovery requests. Capital Suisse again

directed the trial court’s attention to the Appendix to

HH&C’s Summary Judgment Memo. at Nos. 27 through

28, in which HH&C attached copies of the Utah bank

records of Capital Suisse during the period when HH&C

alleges that Capital Suisse laundered its money out of the

Utah banks accounts all over the world. [Exh. C, Capital

Suisse’s Reply Memo. at p. 1]. Capital Suisse also noted to

the trial court that also attached is a detailed flow chart

prepared by HH&C that analyzes the flow of HH&C’s

funds for the transaction at issue. [Jd.] In addition, Capital

Suisse pointed out to the trial court that in the documents

removed from Utah that Capital Suisse returned are all of

the financial records for Capital Suisse’s operations in

Utah. [Id.].

Capital Suisse also drew the trial court’s attention to

the fact that HH&C recently represented in the Spanish |

Case, in opposition to a motion by Capital Suisse seeking

to extend discovery in that case, that HH&C’s discovery is

sufficient, there is no need for further discovery, and that a

trial date should be set. [Jd. at p. 2].

ee a ae La yn ae eee ae

Capital Suisse, on the remand of this matter to the

trial court, argued that, given its representation to the

25b

Spanish Court in a case consolidated with this one, HH&C

cannot, in good faith, now claim that it does not have the

discovery it has requested from Capital Suisse. [Td.].

HH&C already possesses that very information.

In a good faith effort to comply with this Court’s

Opinion, Capital Suisse also diligently endeavored to

secure documents and materials in the possession and/or

control of third parties prior to the hearing on its Motion.

Capital Suisse was able to locate a data tape containing

information from one of the computer hard drives removed

from Utah that was in the possession of an attorney in

California. Upon receipt of the data tape in Utah, counsel

for Capital Suisse immediately made it available to HH&C

for review and copying. [Exh. G, Letter to HH&C dated

October 19, 2004.] HH&C declined Capital Suisse’s invita-

tion to review and copy the tape.

Capital Suisse also produced copies of its financial

and accounting records that Capital Suisse ultimately had

to purchase from one of its disgruntled former employees

who had taken the records when he left Capital Suisse.

[Id.] These records were also made available to HH&C for

review. HH&C also declined the invitation to review these _

records.

In addition, Capital Suisse produced copies of its

audits performed during the relevant years to this case.

[Id.] HH&C again rejected Capital Suisse’s invitation to

review these audits.

After producing these documents in Utah, Capital

Suisse prepared responses to Capital Suisse’s Second Set

26b

of Interrogatories and Document requests, which it served

on HH&C on October 19, 2004.°

Ill. CAPITAL SUISSE DID EVERYTHING REA-

SONABLY WITHIN ITS POWER TO COMPLY

WITH THIS COURT’S OPINION

In an effort to comply with this Court’s Opinion so

that the merits of its appeal may be reached by this Court,

Capital Suisse acted in good faith and did everything

reasonably within its power. At the hearing held on Capi-

tal Suisse’s Motion on October 20, 2004, the trial court

found that its hands were, in effect, bound by the ex-

tremely limited instructions contained in this Court’s

Opinion. The trial court held that because it had deter-

mined that some discovery was produced outside the

thirty-day limit set by this Court, even if Capital Suisse

had now fully complied with the trial court’s outstanding

orders, the: court was “not in a position to determine

whether there has been full compliance outside the 30

days.’ [Exh. D. Hearing Transcript at pp. 34-35]. The trial

court therefore concluded that the Court’s requirement

* The Second Set of Interrogatories and Document Requests

contains essentially identical requests to those in HH&C’s First Set of

Interrogatories and Document Requests in addition to numerous other

requests. Because the Second Set encompassed all information sought

by the First Set, Capital Suisse responded to the Second Set.

" Again, Capital Suisse firmly believes that the information sought

by HH&C’s discovery was provided to HH&C within or prior to the

thirty-day period established by the Court. When HH&C thereafter

complained that an issue still allegedly existed with respect to Capital

Suisse’s discovery responses, out of an abundance of caution, Capital

Suisse prepared specific written responses and obtained additional

documents from a third party.

27b

regarding the outstanding orders had not been met by

Capital Suisse. [/d. at p. 35].

Disregarding what Capital Suisse believes was the

spirit and intent of this Court’s Opinion, HH&C has, of

course, argued (and will again argue) that because Capital

Suisse did not strictly satisfy this Court’s Opinion (and

irrespective of whether Capital Suisse could comply), this

Court should not reach the merits of Capital Suisse’s

appeal. Capital Suisse requests that this Court determine

that Capital Suisse has made a good faith effort sufficient

to address this Court’s concerns such that the Court will

reach the merits presented by Capital Suisse’s appeal.

Absent this, Capital Suisse asks the Court to require

the trial court to (1) determine whether a bond is neces-

sary given that Capital Suisse has not sought a stay of

execution of judgment on appeal; and (2) conduct an

evidentiary hearing to determine whether the discovery

produced by Capital Suisse sufficiently responds to

HH&C’s request for discovery seeking “how and where the

Capital Suisse Defendants had hidden and laundered

HH&C’s $25 million, and where it was located,” which

HH&C admits is the only relevant discovery remaining in

this case.

RESPECTFULLY SUBMITTED this 4th day of November,

2004.

HATCH, JAMES & DODGE

By: Brent O. Hatch

Brent O. Hatch

Mark H. Richards

Attorneys on Appeal for Defendants

28b

IN THE SUPREME COURT OF THE STATE OF UTAH

Hentsch Henchoz & Cie,

Plaintiff/Appellee,

v. Case No. 20020683-SC

Philippe D. David Gubbay; Capital

Suisse, S.A.; Capital Suisse

Securities, Inc.; Capital Suisse, Inc.;

Zooley Services Limited; Zooley of

Utah, Inc.; Fernland Limited;

Douglas P. Hoyt; and John Does 1-10,

Defendants/Appellants.

ORDER

(Filed Nov. 10, 2004)

This matter is before the court on its own order to

show cause.

IT IS HEREBY ORDERED that Appellants Philippe

D. David Gubbay, Capital Suisse, S.A., Capital Suisse,

Inc., Zooley Services Limited, Zooley of Utah, Inc. and

Fernland Limited show cause why this court should not

dismiss their appeal for failure to comply with this court’s

decision in the above-captioned matter. See Hentsch

Henchoz & Cie v. Gubbay, 2004 UT 64.

The Appellants’ brief is to be filed on or before 5:00

p.m., November 24, 2004. The Appellee Hentsch Henchoz

and Cie’s brief is to be filed on or before 5:00 p.m., Decem-

ber 8, 2004. Briefs should be filed with the Clerk of the

Court and should not exceed fifteen (15) pages in length.

ial

29b

Extensions in briefing length or time will not be permit-

ted.

FOR THE COURT:

Nov. 10, 2004 /s/ Michael J. Wilkins

Date Michael J. Wilkins

Justice

30b

LAW OFFICES

HATCH, JAMES & DODGE

[Address Omitted In Printing]

November 24, 2004

VIA HAND-DELIVERY

Clerk of Court

Utah Supreme Court

450 South State

Salt Lake City, Utah 84114

Re: hH IE v. et al.

Case No. 20020683-SC

Dear Clerk:

We have recently received from the Court a copy of an

Order to Show Cause in the above-referenced matter dated

November 10, 2004. The Order requires Defendants to

submit a brief demonstrating cause why the Court should

not dismiss Defendants’ appeal.

On November 4, 2004, Defendants filed with the

Court their Certification of Good Faith Attempt to Comply

with Court Order (the “Certification”). Please regard the

Certification as Defendants’ brief in response to the

Court’s Order to Show Cause. The Certification is fifteen

(15) pages in length, exclusive of cover sheet and signature

block, as required by the Court.

31b

If you have any questions regarding this matter or if

: there are any concerns regarding the form or length of the

Certification, please do not hesitate to contact me.

. Sincerely yours,

/s/ Brent O. Hatch

Brent O. Hatch

c: Walter A. Romney, Esq.

32b

IN THE UTAH SUPREME COURT

HENTSCH HENCHOZ & CIE,

Plaintiff and Appellee,

vs.

PHILIPPE D. DAVID GUBBAY,

CAPITAL SUISSE, S.A., CAPITAL °

SUISSE SECURITIES, INC., Supreme Court

CAPITAL SUISSE, INC., ZOOLEY * No. 20020683-SC

SERVICES LIMITED, ZOOLEY

OF UTAH, INC., FERNLAND

LIMITED, DOUGLAS P. HOYT,

and JOHN DOES 1-10,

Defendants and Appellants.

BRIEF OF APPELLEES IN OPPOSITION TO

APPELLANT’S CERTIFICATION OF GOOD FAITH

ATTEMPT TO COMPLY WITH COURT ORDER

Brent O. Hatch (5715) Neil A. Kaplan (3974)

Mark H. Richards (9018) Perrin R. Love (5505)

HATCH JAMES & DODGE Walter A. Romney, Jr. (7975)

10 West Broadway, Suite 400 CLYDE SNOW SESSIONS

Salt Lake City UT 84101 & SWENSON

Telephone: (801) 363-6363 201 South Main Street,

Suite 1300

Salt Lake City UT 84111

Telephone: (801) 322-2516

Attorneys for Appellants Attorneys for Appellee

TABLE OF CONTENTS -

IIIT ceerciscccinbeshiicinnnseiigcntshunnstinniminnintiannddainbedal 1

33b

I. DESPITE THE COURT’S EXPRESS CONDI-

TION, CAPITAL SUISSE ADMITTEDLY

FAILED TO POST A BOND IN THE FULL

AMOUNT OF THE JUDGMENT..............cccccce.

A. A Bond is the Only Meaningful Remedy

for Capital Suisse’s Contempt of Court,

and to Prevent Further Dissipation of

HH&C's $25 million................cccccccccscccocoocess

II. CAPITAL SUISSE FAILED TO COMPLY

WITH THE ORDERS OF THE DISTRICT

A. Capital Suisse Did Not Return All Docu-

ments Removed from Utah or Respond to

HH&C’s Discovery Requests Within Thirty

RPE REA TE Bes EC OSE aOR

B. To This Day, Capital Suisse Has Not Com-

plied with the Outstanding Orders of the

District Court, but Has Refused to Provide

the Most Fundamental Information Re-

BEF Re

ct pg an ON TR OE Coe a

TABLE OF AUTHORITIES

CASES:

Chubb Integrated Systems Ltd. v. National Bank,

103 F.R.D. 52, 60 (D.D.C. 1984) ooo cccccccccccccecccccceeceen.

Alexander v. F-B.I., 192 F.R.D. 50, 52 (D.D.C. 2000)........

C. Albert Sauter Co. v. Richard S. Sauter Co., 368

MMU: OE CEN, Win. TI) oascinssassecisacascetsaransscscesscirnaneae

Capacchione v. Charlotte-Mecklenburg Schools, 182

F.R.D. 486, 490 (W.D.N.C. 1998) .oo..ceccccccccccccccccceccceceees.

——

34b

HCB Contractors v. Rouse & Assoc., 168 F.R.D. 508

Reis Sei Sidi desnegstbiatasiitadiintaietied cchmhenndedacadnddabutgetadesdbocs 7

In re Auction Houses Antitrust Litigation, 196

es Se, Ae CEs Be BOD setntntadnccchcosncnastinnnaccaisons 13

Miami Int'l. Realty Co. v. Poynter, 807 F.2d 871

Ce Se I avi co ckocsdictaiediniercdecenceia cela naabbakeaseaeascestins 7

Miller v. Federal Express Corp., 186 F.R.D. 376, 385

i, 8 hy RRR pierre et Pe oe eae en nee ert) ee 13

Schmidt v. Schmidt, 610 A.2d 1374, 1377 (Del.

CRP REIN i LeRtaos eh SO ee OER OR ep MALES EA See MO 1

Shearson Lehman Hutton, Inc., v. Lambros, 135

F-R.D. 195, 198-99 (M.D. Fla. 1990)............. eee 13

Starlight Int'l., Inc., v. Herlihy, 186 F.R.D. 626, 640

I I icicles Re 13

OTHER AUTHORITIES:

Be Pee Mee I iciceoicsedaicciesed bags Ridin ss Cpaiuiclaediadoncnmamintias 13

INTRODUCTION

In its Opinion in Hentsch Henchoz & Cie v. Gubbay,

2004 UT 64 (“Opinion”), this Court ordered Capital Suisse

to satisfy two conditions: (1) post a bond in the entire

amount of the outstanding judgment (approximately $27

million) within ninety days, and (ii) within thirty days,

comply with the outstanding orders of the trial court. See

Opinion, { 24. This Court imposed these conditions to

remedy defendants’ “defiance,” “disobedience,” and “insub-

ordination” of the district court and its orders. Jd., J 18. In

so ruling, this Court emphasized that

“the processes of the appellate court are [only]

available to one who recognizes his responsibility

35b

to obey court orders while they remain in effect,”

and “a litigant is not free to determine to what

extent he will comply with the law.”

Id, { 19, quoting Schmidt v. Schmidt, 610 A.2d 1374, 1377

(Del. 1992).

Following argument on October 20, 2004, the district

court determined that Capital Suisse failed to satisfy

either of these express conditions.’ Nonetheless, Capital

Suisse submits a “Certification” to this Court that it made

a “good faith” attempt to satisfy them. Its “Certification” is

replete with vagaries, half-truths, and omissions, however,

and its assertion of “good faith” is a sham. Capital Suisse

has not attempted to satisfy this Court’s express condi-

tions, but instead to evade them and preserve the fruits of

its fraud and its willful disobedience of the district court’s

orders.

As this Court knows too well by now, Capital Suisse

stole $25 million from HH&C, laundered it through Salt

Lake City bank accounts to family and friends all over the

world, repeatedly refused to tell HH&C where its money

was, and removed documents to Spain to prevent HH&C

from finding out. To avoid this Court’s express condition,

Capital Suisse claims that a bond is unnecessary, because

its assets have been frozen by the Spanish Criminal Court.

What Capital Suisse fails to disclose, however, is that only

about $600,000 has been frozen, none of it part of HH&C’s

$25 million. It is supremely ironic that Capital Suisse

asserts that these orders of the Spanish Criminal Court

prevent dissipation of HH&C’s $25 million, when Capital

* The Order is reprinted in the Addendum (“Add.”) to this Brief, at

pages 1-3. ;

36b

Suisse violated those orders by transferring the money out

of the Gibraltar and Salt Lake City bank accounts. Noth-

ing short of the bond ordered by this Court will prevent

dissipation of HH&C’s $25 million, or remedy Capital

Suisse’s willful disobedience of the district court.

Equally important, Capital Suisse did not comply with

the outstanding orders of the district court. Within the 30-

day deadline set by this Court, Capital Suisse did not

return to Utah all the documents removed to Spain (in

violation of the district court’s March 25, 2002, order), and

did not answer HH&C’s interrogatories or respond to its

documents requests (pursuant to the district court’s

November 15, 2001 and February 8, 2002 orders). The

afternoon before the district court hearing to determine

whether Capital Suisse had complie* with this Court’s

express conditions, Capital Suisse purported to return

additional documents that had been removed from the

offices of Capital Suisse’s Utah affiliates, and to respond to

HH&C’s interrogatories and document requests. Even this

belated attempt did not comply with this Court’s express

conditions, because Capital Suisse still has not returned

all the removed documents to Utah. It did not answer the

vast majority of interrogatories, but instead simply re-

ferred HH&C to the documents returned from Spain.

Those documents are now more than three years old, and

do not answer HH&C’s central questions — where is its

money now? Capital Suisse has failed or refused to provide

current information, and failed or refused to produce

documents from its “worldwide headquarters” in Marbella,

Spain.

Consequently, and in accordance with the explicit

instructions in its Opinion, this Court should dismiss

Capital Suisse’s appeal without further notice. To do

37b

otherwise would enable Capital Suisse to continue to

“determine to what extent it will comply with the law,” id.,

and reward its disobedience and insubordination.

ARGUMENT

I. DESPITE THE COURT’S EXPRESS CONDITION,

CAPITAL SUISSE ADMITTEDLY FAILED TO

POST A BOND IN THE FULL AMOUNT OF THE

JUDGMENT.

This Court noted in its Opinion that the district court

entered summary judgment in the amount of $24,730,000,

plus interest. See id., J 11. This Court stated unequivo-

cally that Capital Suisse must post a bond for the “unsat-

isfied portion of the judgment” Id., { 24. Capital Suisse

attempts to excuse its admitted failure to post the neces-

sary bond by claiming (i) that it does not have the finan-

cial “wherewithal” to post the bond, and (ii) the bond is

unnecessary because Capital Suisse’s remaining assets

were frozen by the Spanish Criminal Court, which “effec-

tuated the purpose of this court’s Opinion requiring the

posting of a bond.” Certification of Good Faith Attempt to

Comply with Court Order (“Cert.”), at 7.

A. ABond is the Only Meaningful Remed for Capi-

tal Suisse’s Contempt of Court. and to Prevent

Further Dissipation of HH&C’s $25 million.

Throughout its Certification, Capital Suisse never

informs this Court how much money has been frozen in

the accounts in Spain or Gibraltar, or the source of the

money. To do so would squarely undercut Capital Suisse’s

assertions that it lacks the “wherewithal” to post a bond,

38b

or that the Spanish Criminal Court orders protect HH&C

against dissipation of its $25 million.

Only about $540,000 remains in the Gibraltar ac-

count, and about $60,000 in the Spanish account, See

Affidavit of Luis Juega Garcia, Add., at pages 4-6, JJ 11-

12. None of HH&C’s $25 million remains in either account,

because Capital Suisse wired it to family and friends all

over the world to evade the freeze orders.

As this Court will recall, HH&C made seven wire

transfers to the Gibraltar account between December 2000

and March 2001. There can be no question that Gubbay

directed HH&C to wire its money to the Gibraltar account

to evade the May 25, 2000, Spanish Criminal Court order

freezing the account in Spain. Capital Suisse then wired

HH&C’s $25 million from the Gibraltar account to the Salt

Lake City accounts at Wells Fargo and Zions Bank, and

from those accounts to Gubbay’s family and friends

throughout the world. Many of the transfers occurred after

the Spanish Criminal Court froze the Gibraltar account on

May 15, 2001, and the Salt Lake City accounts on May 17,

2001. Indeed, this Court noted that between June 26 and

July 25, the Zions account went from a balance of

$2,207,006.04 to $804,468.31. See Opinion, 16 & n.1.A

week later, only about $150,000 remained in the Salt Lake

City accounts. See Brief of Appellees (“Br. App.”), State-

ment of Facts, 1¥ 38, 43.

Specifically, and without limitation, Gubbay directed

the following transfers out of the Salt Lake City accounts:

¢ Gubbay’s father, Donald Gubbay, received $5.31 mil-

lion, mostly wired to his account in Port Vila, Vanu-

atu, a South Pacific island known as a money

laundering center and tax haven, including transfers

39b

on May 21, June 5 (twice) June 28, and Aug. 2,

2001;

* Gubbay’s wife, Veronique Gubbay, received $1.1

million, including transfers to accounts in France

on May 18, June 7, and July 17, 2001;

¢ Gubbay’s sister, Denyse Anne Pentecost, received

$150,000, including $75,000.00 wired to an account

in New Caledonia on June 5, 2001;

¢ Marianne Zenger, the insider who “introduced”

Gubbay to HH&C, received more than $1 million,

including $441,000 on June 6, 2001; and

¢ more than $7 million was wired to an account in

Switzerland under the psuedonym recipient identi-

fied as “Koukouk” received more than $7 million.

See id., [J 47-48.

Because HH&C’s $25 million is not subject to the

Spanish Criminal Court orders, Capital Suisse’s assertion

that those orders protect HH&C from further dissipation,

is false and utterly disingenuous. Without a bond, Gubbay

and his family can dissipate it with impunity. Moreover,

Gubbay has repeatedly violated the very orders that he

now asserts protect HH&C. When asked in the Spanish

Criminal proceeding, whether he had ordered the transfer

of funds in violation of the May 17 order, Gubbay asserted

his privilege against self-incrimination. See id. But Gub-

bay’s Affidavit appended to Capital Suisse’s Certification

conclusively establishes the violations. Indeed, had Gub-

bay obeyed the Spanish Criminal Court orders at the time,

HH&C in all probability would never have been forced to

40b

seek relief in the Utah courts to preserve and to recover its

money.”

Capital Suisse cites several decisions for the proposi-

tion that a court may waive a bond “if the party seeking to

stay a judgment pending appeal demonstrates that it is

financially impossible for it to post the bond.” Cert., at 5.

Not one of these decisions is relevant. Unlike this Court,

not one of these courts required a bond as a remedy for a

party’s “defiance,” “disobedience,” and “insubordination” of

the district court. Further, not one of these courts did what

Capital Suisse asks this Court to do — excuse it from

posting any bond whatsoever. In fact, each court required

alternative security in lieu of a bond. Most important, not

one of those defendants did what Gubbay and Capital

Suisse did here — steal the plaintiffs’ money, place it

beyond the jurisdiction of the court, and refuse to return

it. Despite Capital Suisse’s artful protestation that it lacks

* Gubbay summarized the Spanish Criminal Court orders in the

following terms:

5. On approximately July 25, 2000, the Spanish Marbella

court entered a Precautionary Measure, ordering that all of my

personal assets and the assets of all companies under my direc-

tion and control in Spain be frozen. This precautionary Measure

became effective indefinitely on approximately January 24, 2001.

The July 25, 2000 Precautionary Measure remains in effect at

this time.

6. On approximately May 15, 2001, the Spanish Marbella

court extended the July 25, 2000 Precautionary Measure to in-

clude the assets held by myself and the Fund in Gibraltar, Am-

sterdam, and New York City. ...

7. The Spanish Marbella Court further extended the July

25, 2000 Precautionary Measure on approximately May 17, 2001,

to include the Wells Fargo Bank and Zions First National Bank

accounts in Salt Lake City of myself, the Fund and Zooley. . . .

Affidavit of Philip D. Gubbay, Cert., Ex. H, 7 5.

mma

al A tt mt

41b

the “wherewithal” to post a bond, there can be no question

that Gubbay and those he controls have HH&C’s $25

million, or very large portions of it.’

By wiring HH&C’s $25 million to foreign bank ac-

counts held by family and friends, Gubbay and Capital

Suisse have nullified the effectiveness of HH&C’s Utah

judgment. This Court’s express condition that Capital

Suisse post a bond for the entire amount of the judgment,

is the only meaningful remedy for Capital Suisse’s disobe-

dience of the district court orders. Because Capital Suisse

has failed to post the required bond, this Court should

dismiss Capital Suisse’s appeal without further notice.

* In C. Albert Sauter Co. v. Richard S. Sauter Co., 368 F.Supp. 501

(E.D. Pa. 1973), the court waived a supersedeas bond to secure a $1.2

million judgment, but (i) placed in escrow all of the defendant com-

pany’s stock in escrow; (ii) placed in escrow the individual defendants’

shares of other securities and cash, (iii) required the individual

defendants to post an [sic] cash bond of $100,000; and (iv) placed severe

restrictions on the defendants ability to pay out any monies. See 368

F. Supp. at 520-21. In Miami Int'l. Realty Co. v. Poynter, 807 F.2d 871

(10th Cir. 1986), the Tenth Circuit waived a supersedeas bond to secure .

a $2.1 million judgment in a legal malpractice action, but placed in

escrow $500,000, the limits of the firm’s malpractice coverage. See 807

F.2d at 874. In HCB Contractors v. Rouse & Assoc., 168 F.R.D. 508

(E.D. Pa. 1995), the court froze the transfer of substantial real estate

assets, and permitted liens to be filed against them. See 168 F.R_D. at

514.

42b

II. CAPITAL SUISSE FAILED TO COMPLY WITH

THE ORDERS OF THE DISTRICT COURT.

A. Capital Suisse Did Not Return All Documents

Removed from Utah or Respond to HH&C’s Dis-

covery Requests Within Thirty Days.

In its Opinion, this Court specifically and expressly

held that

Capital Suisse must, within thirty days from the

date of this decision, [to] bring itself into compli-

ance with the orders of the district court in this

matter, including those orders requiring Capital

Suisse to comply with discovery and to return all

of the requested documents and evidence to

Utah.

Opinion, { 24. The relevant district court orders included

(i) its March 25, 2002, order requiring Capital Suisse to

return from Spain all documents that had been removed

from the offices of Capital Suisse’s Utah affiliates, and (ii)

its November 15, 2001, and February 8, 2002, orders

requiring Capital Suisse to Respond to HH&C’s First and

Second Sets of Discovery, which included interrogatories

and documents requests.

The thirty days expired not later than Tuesday,

September 7, 2004. By correspondence dated September 3,

2004, Capital Suisse informed HH&C (through counsel)

that materials removed from the Utah subsidiaries to

Spain were available for inspection. Upon inspection,

HH&C found that the documents were not organized, and

that many had merely been dumped into a box. No index

existed. See Affidavit of Walter A. Romney, Jr., Add. Pages

15-20, {J 3-6.

43b

Even without an index, however, it was clear that

Capital Suisse had not returned all of the documents and

materials removed to Spain.“ Obviously missing were

computer hard drives, compact and/or floppy disks, and

other electronic data specifically removed and ordered to

be returned. There were no records of wire transfers or

financial records of Zooley of Utah. There were a few

random e-mails, but not the e-mails or other documents

showing (i) how and why Gubbay orchestrated the reverse

merger with PetsMarketing, Inc., (ii) how Capital Suisse

calculated its net asset valuation, or (iii) investments

made by Capital Suisse. All of these were materials

identified by David Smith as removed to Spain. See id.,

WW 7-12.

Aside from its failure to return all documents removed

from Utah within thirty days, Capital Suisse made not the

slightest attempt to answer HH&C’s interrogatories or to

produce documents maintained by Capital Suisse at its

“worldwide headquarters” in Marbella, Spain. That failure

is simply inexcusable. Nonetheless, Capital Suisse asks to

be excused from this failure, because it

believed the only outstanding order from the

Court that Capital Suisse had failed to comply

with was the trial court’s March 25, 2002 Order

* All of these documents and materials were identified in the

affidavit of David Smith, an officer and employee of Capital Suisse’s

Utah affiliates. In January 2002, Gubbay directed Smith to ship all

documents and records from Capital Suisse’s Utah offices to Spain.

Smith refused, but two other representatives of Capital Suisse flew to

Salt Lake City and shipped all documents, records, computer hard

drives, and other data, to Spain. See Br. App., Statement of Facts, J 55.

Smith’s Affidavit is reprinted in the Addendum to this Brief, at pages 7-

14.

44b

requiring Capital Suisse to return to Utah all

documents produced in the ordinary course of

business in Utah that were removed by Capital

Suisse during the course of this litigation (as

specifically noted in the Court’s Opinion at { 24).

Cert., at 10.

This assertion defies credulity, and strongly belies

Capital Suisse’s claim of “good faith.” This Court specifi-

cally referenced the HH&C’s interrogatories in its Opin-

ion, when it noted that the District Court had

ordered Capital Suisse to comply with HH&C’s

outstanding discovery requests, which it noted had

been outstanding for “some time.” In response,

Capital Suisse invoked the Fifth Amendment

privilege against self-incrimination and otherwise

refused to answer. Capital Suisse’s privilege claim

was also denied by the district court, and the

court again ordered Capital Suis: : to answer the

interrogatories and ordered all of the Capital

Suisse defendants to answer the complaint.

Opinion, J 9 (emphasis added). Moreover, HH&C’s Brief of

Appellees repeatedly referenced the outstanding discovery

requests, and summarized many of the interrogatories

that Capital Suisse had refused to answer. See generally,

Br. App., Statement of Facts, 77 52-55 & n. 5. Finally,

Capital Suisse admits that HH&C’s counsel identified the

outstanding interrogatories among the orders of the

district court. See Cert., at 10.

There simply is no “good faith” explanation for Capital

Suisse’s failure to comply with the district court’s orders

within thirty days. Pursuant to its Opinion, therefore, this

Court should dismiss Capital Suisse’s appeal on the

merits.

45b

B. This Da apital Suisse Has Not Complied

with the Outstanding Orders of the District

Court, but Has Refused to Provide the Most

Fundamental Information Requested by HH&C.

Following a hearing on October 20, 2004, the district

court entered its order determining that Capital Suisse

had not complied with the express conditions set [sic] in

this Court’s Opinion. The afternoon before the hearing,

Capital Suisse notified counsel for HH&C that additional

documents had been returned to Utah from Spain. That

same day, Capital Suisse purported to serve on HH&C its

Response to Plaintiffs’ Second Set of Discovery Requests

(“Response”). A copy is attached to the Addendum at pages

21-48. These last-minute maneuverings, however, still do

not comply with the district court’s outstanding orders.

First, Capital Suisse has not returned all of the

documents removed from the offices of the Salt Lake

subsidiaries. Capital Suisse still has not returned docu-

ments relating to PetsMarketing, documents relating to

alleged investments by Capital Suisse, still has not re-

turned e-mails, correspondence, or memos relating to

investments or investment decisions. Capital Suisse

purports to have found one of the several computer hard

drives removed from the offices, but has not returned the

others. Indeed, Capital Suisse now claims that it is “im-

possible” to return all of the documents and computer

information removed from the Salt Lake City offices. See

Cert., at 12. But the “impossibility” of returning all docu-

ments and computer materials does not demonstrate “good

faith.” To the contrary, it demonstrates the prejudice to

HH&C caused by Capital Suisse’s wilful disobedience of

46b

the district court, and the propriety of this Court’s re-

quirement that Capital Suisse return all documents.”

Second, Capital Suisse’s Response to HH&C’s Discov-

ery Requests refuses to disclose any meaningful informa-

tion. Tellingly, Capital Suisse does not append its Response

to its Certification to this Court, because that would have

displayed the bankruptcy of its purported “good faith.”

HH&C’s interrogatories requested the most fundamental

information, including:

¢ the current location of any and all monies received

by any of the defendants from HH&C, directly or

indirectly (Interrogatory No. 2); all accounts in

which any of HH&C’ s monies received by any of

the defendants were deposited or transferred (In-

terrogatory No. 3);

¢ the current location of any and all monies received

by any of the defendants from Capital Suisse Man-

agement (Interrogatory No. 4);

¢ all accounts in which any of Capital Suisse Man-

agement Inc.’s monies received by and of the de-

fendants were deposited or transferred, including

* Capital Suisse baldly and incorrectly asserts that “HH&C made

no attempt to demonstrate why the information is relevant and Capital

Suisse understands that HH&C made no attempt to subpoena any of

the information regarding PetsMarketing from PetsMarketing.” Cert.,

at 13. The PetsMarketing documents are important because Capital

Suisse attempted to redeem PetsMarketing shares to HH&C when

HH&C demanded an accounting of its investment. HH&C issued

subpoenas to PetsMarketing, after first obtaining Letters Rogatory

from Judge Nehring, and to its holding company, its president, its

attorney, its transfer agent, and its broker. HH&C’s counsel, Walter A.

Romney, Jr., and its private investigator flew to Canton, Ohio, and

Orange County, California, to personally retrieve documents from

PetsMarketing and its agents.

AGI Nad a Bea eons

47b

the name of the institution and the account num-

ber (Interrogatory No. 5);

¢ each and every purchase, sale exchange, transfer

or other transaction received by any of the defen-

dants from HH&C (Interrogatory No. 6);

* each and every purchase, sale exchange, transfer

or other transaction received by any of the defen-

dants from Capital Suisse Securities (Interrogatory

No. 7);

¢ all investment holdings of Capital Suisse, S.A.

from November 1, 2000, to date, and the value of

each holding (Interrogatory No. 8); and

¢ all shareholders, officers, and directors or each de-

fendant other than Douglas P. Hoyt and D. David

Gubbay, and the percentage of shares held by each

shareholder (Interrogatory No. 9).

Capital Suisse provides none of the information

requested by these interrogatories. Instead, Capital Suisse

asserts that the “information sought” in these interrogato-

ries can be “ascertained from” from the records returned to

Utah, and “pursuant to Utah Rule of Civil Procedure

33(d), Capital Suisse refers HH&C to those documents.”

See Response, Add., pages 21-48. As Capital Suisse well

knows, the documents are incomplete, relate only to

Capital Suisse’s Utah affiliates, and are now more than

three years old. Further, Capital Suisse has not produced

any documents from its “worldwide headquarters” in

Marbella, Spain

It is axiomatic that a party has a duty to “provide

true, explicit, responsive, complete and candid answers to

interrogatories, “Alexander v. FB.I., 192 F.R.D. 50, 52

(D.D.C. 2000), and is “obliged to respond by furnishing

aia ia

48b

such information as is available to the party.” In re Auction

Houses Antitrust Litigation, 196 F.R.D. 444, 445 (S.D.N_Y.

2000) (emphasis in original). Most important, a party must

provide all information known at the time it answers the

interrogatories. See, e.g., Chubb Integrated Systems Ltd. v.

National Bank, 103 F.R.D. 52, 60 (D.D.C. 1984) (when an

interrogatory “seeks facts within the knowledge of [the

party] at the time of” the answer, the party must “disclose

the information”) (emphasis in original); Shearson Leh-

man Hutton, Inc. v. Lambros, 135 F.R.D. 195, 198-99 (M.D.

Fla. 1990) (a party is “required to disclose what informa-

tion they do possess at the time they respond”).

Moreover, Capital Suisse cannot rely on Rule 33(d) to

avoid its duty to provide current information. Rule 33(d) is

available only if the burden of deriving or ascertaining the

answer is substantially the same for the party serving the

interrogatory as for the party served. See U. R. Civ. P.

33(d). Capital Suisse cannot claim in good faith that the

burden of identifying the “current location” of HH&C’s $25

million is the same for HH&C as it is for Capital Suisse

(even if that crucial information were to be found in the

documents, which it is not).

Finally, Capital Suisse cannot reference the docu-

ments available for inspection, and require HH&C to sift

through them in hopes of ascertaining the response. Rule

33(d)* does not authorize “document dumps;” a party must

* See, e.g., Starlight Int’l., Inc., v. Herlihy, 186 F.R.D. 626, 640 (D.

Kan.1999) (a party cannot meet its discovery obligations simply by

referring generically to past or future production of documents, but

must specifically identify which documents contain the answer;

otherwise the party “must completely answer the interrogatory without

referring to the documents”); Miller v. Federal Express Corp., 186

F.R.D. 376, 385 (W.D. Tenn. 1999) (a “responding party must specify

(Continued on following page)

49b

specifically identify the document(s) where the answer is

found. Capital Suisse has made no attempt to direct

HH&C to the documents where the interrogatory answers

may be found, because, as Capital Suisse knows, the

documents do not include the answers.

As a result of Capital Suisse’s failure to comply with

these basic principles, HH&C to this day does not know

the “current location” of the more than $5 million wired to

Gubbay’s father in Vanuatu. HH&C still does not know the

“current location” of the more than $1 million wired to

Gubbay’s wife in France, the $150,000 wired to Gubbay’s

sister, or the more than $1 million wired to insider

Marianne Zenger. HH&C’s efforts to trace its money, as

reflected in the exhibits to its summary judgment memo-

randum, reached a dead end. Gubbay and Capital Suisse

know where HH&C’s money is, HH&C does not.

Capital Suisse’s assertion that HH&C “already pos-

sesses the information it sought to discover,” Cert. at 13, is

especially misleading. Capital Suisse references a pleading

that HH&C filed in the Spanish Criminal Court, stating

that there is now sufficient evidence to require Gubbay to

stand trial. Cert., at 14. The Spanish proceeding is crimi-

nal, not civil — its purpose is to try Gubbay for his crimes,

not to recover HH&C’s money. Because of Gubbay’s privi-

lege against self-incrimination under Spanish law, HH&C

does not have the right to review Capital Suisse’s docu-

ments or to trace its assets. See Affidavit of Luis M. Juega

documents from which answer may be derived with sufficient detail to

permit requesting party to locate [them]”); [Capacchione v. Charlotte-

Mecklenburg Schools, 182 F.R.D. 486, 490 (W.D.N.C. 1998) (a party

“abuses the option” in Rule 33(d) “when the party simply directs the

[requesting] party to a mass of business records”).

50b

Garcia, Add. at pages 4-6, {{ 5-7. HH&C’s submission to

the Spanish Criminal Court therefore has nothing to do

with its long overdue need for honest answers from Capi-

tal Suisse here.

In summary, Capital Suisse has not responded to the

outstanding orders of the district court in good faith. Its

Response, in fact, does nothing more than continue Capi-

tal Suisse’s steadfast efforts to wire HH&C’s money

beyond the jurisdiction of the Utah courts, and to block

any recovery by HH&C. HH&C’s position today is no

different than it was three years ago, when Capital Suisse

violated the orders of the Spanish Criminal Court freezing

its accounts, and the orders of the Utah district court. To

hear Capital Suisse’s appeal on the merits would reward

Capital Suisse for its continued intransigence, because

Capital Suisse has done nothing that rectifies its earlier

contempt of court.

CONCLUSION

For the reasons stated above, this Court should

dismiss Capital Suisse’s appeal without further notice.

Capital Suisse has not satisfied either of the two condi-

tions imposed by this Court’s Opinion. Capital Suisse has

not posted a bond, and has not complied with the out-

standing orders of the district court.

51b

Respectfully submitted this 8th day of December,

2004.

/s/ Perrin Love

Neil A. ixaplan

Perrin R. Love

Walter A. Romney, Jr.

Clyde, Snow, Sessions & Swenson

Attorneys for Plaintiff/Appellee

Hentsch Henchoz & Cie

Supreme

14 re iy

JUN 14 2005 |

No. ss

IN THE

Supreme Court of the Anited States

CAPITAL SUISSE, INC., CAPITAL SUISSE, S.A., CAPITAL SUISSE

SECURITIES, INC., ZOOLEY SERVICES LIMITED,

ZOOLEY OF UTAH, INC., FERNLAND LIMITED, AND

PHILIPPE D. DAVID GUBBAY,

Petitioners,

Vv.

HENTSCH HENCHOZ & CIE, DOUGLAS P. HOYT, AND

JOHN Dogs 1-10,

Respondents.

On Petition for Writ of Certiorari to the

Supreme Court of Utah

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

GENE C. SCHAERR *

LINDA T. COBERLY

ERIC W. BLOOM

MELISSA E. O’ BOYLE

WINSTON & STRAWN LLP

1700 K Street, N.W.

Washington, D.C. 20006

(202) 282-5000

* Counsel of Record Counsel for Petitioners

June 14, 2005

WILSON-EPES PRINTING CO., INC. -— (202) 789-0096 — WASHINGTON, D.C. 20001

‘ie

TABLE OF CONTENTS

Page

I. This Case Properly Presents an Important Due

Process Issue that the Court Below Decided

Erroneously and in Conflict with a Decision of the

United States Court of Appeals for the Second

ASRS SESW SSIS O'R oe vac a l

A. The Utah Supreme Court Expressly Addressed

the Due Process Issue Raised In The Petition........ 2

B. The Utah Supreme Court’s Decisions Conflict

With the Second Circuit’s Decision in Texaco,

an cc sdynuksaunioomswdaciveacn’ 2

C. The Utah Supreme Court's Decisions Conflict

With Due Process Principles Established By

UN chiral siathscchducwasdnidaccasvenstinasdoxomsaiocuiont 3

D. The Question Presented Is Of —

IN poise hack acitc stuns sasasioncesncoancns 5

II. The Equal Protection Issue Raised In The Petition

Was Also Raised Below And Is Equally Worthy Of

My MN asic snvektsiiessscnaidtasereaetapasesesitncsoen’ 6

II]. HH&C’s Attacks On Petitioners’ Integrity Are False

Se a ii apes ane stcasissessccuvesinensilcaseustaivsacacnicoeass 9

SERENE il

TABLE OF AUTHORITIES

CASES

Barber v. Gladden, 298 P.2d 986 (Or. 1956) ............004.

Braniff Airways v. Nebraska State Bd. of Equalization

& Assessment, 347 U.S. 590 (1954) oe eee

Cohen v. Cowles Media Co., 501 U.S. 663 (1991)........

Crowell v. Randell, 35 U.S. 368 (1836).............cccceceeee

D’Aston v. D’Aston, 790 P.2d 590 (Utah Ct. App.

Gilbert v. State Farm Ins. Co., No. S-10454, 2004

WL 1701109 (Alaska July 28, 2004)...

Greenhouse v. MCG Capital Corp., 392 F.3d 650 (4th

Ais RD icin cachnsibatnanssasrusninpeadincs pctaigsuinadtondianiasst

Griffin v. Illinois, 351 U.S. 12 (1956)................c.ccesesees

Hammond Packing Co. v. Arkansas, 212 U.S. 322

Illinois v. Gates, 462 U.S. 213 (1983) ......eeeeeeseeeeeeeeee

Jack Spring, Inc. v. Little, 280 N.E.2d 208 (Ill. 1972)...

La Grasta v. First Union Sec., 358 F.3d 840 (1 1th Cir.

Limes U.P OO SIS ass sncanscstooncpnninee

Mayer v. Chicago, 404 U.S. 189 (1971)...

Nat’l Hockey League v. Metro Hockey Club, Inc., 427

Oe Ee ee NN ss riciccedonitanasics ni cedeasnitaes canieanieseanoes

- iii-

TABLE OF AUTHORITIES

(continued)

Page

Nat’l Union of Marine Cooks and Stewards \ v. Arnold,

Pe SB oF OR iss cease asses 4-5,7

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987)........ccecceceeeee 5

Taylor v. Illinois, 484 U.S. 400 (1988) 00.0... cee eeeeeeees 6,7

Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir.

1986), rev'd on other grounds, 481 U.S. 1 (1987).. 2, 3, 5, 6

MISCELLANEOUS

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Wes SNE Ae 8 8B vice ccrsdiecsaeargnascuosane enna aiiiied 6

ats Sas WU LE Biase cscs ics datvanis dacaiads Iramaacdaaseaencs 6

Neb. Const. art. I, § ER ah sutinsaspaenrenissoseendasoonmeahiieeaeen dications 6

PEM, ONE: OR Do ie isu csdsticesciacstin cutis cee 6

Py RAE BV BF ii cikig stds ninveo eamdidasncuictaane 6

Sm RAO OE WR ie cai iaps scidncneos Wn Gaacas pocauaicecahnacal 6

Respondent Hentsch Henchoz & Cie (“HH&C”) has

failed to undermine the showing by petitioners (“Capital

Suisse”) that this case properly presents two important federal

issues that deserve to be reviewed and decided by this Court.

As shown below, HH&C’s various attempts to argue that

petitioners waived these issues below, or to explain away the

important conflicts created by the decision below, are utterly

unpersuasive. The same is true of HH&C’s irrelevant and

false attacks on petitioners’ truthfulness and integrity. '

I. THIS CASE PROPERLY PRESENTS AN IMPORTANT

DUE PROCESS ISSUE THAT THE COURT BELOW

DECIDED ERRONEOUSLY AND IN CONFLICT WITH A

DECISION OF THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT.

With respect to the due process issue raised in the

petition, HH&C asks this Court to deny the petition on the

basis that petitioners failed to raise the argument below and

because, in HH&C’s judgment, the Utah Supreme Court

decision was narrowly tailored to address a unique set of facts

not likely to be replicated. In fact, not only did petitioners

raise the due process issue below, but the Utah Supreme

Court expressly addressed that question in its decision. More

fundamentally, notwithstanding HH&C’s efforts to transform

the issue presented into a factual question, the Utah Supreme

Court’s holding that it may extinguish a_ state-granted

constitutional right to appeal by imposing conditions with

which compliance is impossible raises an important question

of law on which the lower courts are divided, and which this

Court has previously shown interest in resolving.

' Respondent erroneously re-captioned the style of the case so that each

defendant below is identified as a petitioner. Under this Court’s Rule

12(6), however, each party below who did not join in the petition is

considered a respondent and thus accorded an opportunity to respond to

the petition.

A. The Utah Supreme Court Expressly

Addressed the Due Process Issue Raised In

The Petition.

Although Capital Suisse clearly raised the due process

issue below (see App. 135a, Resp. App. 19b), that is

irrelevant now because the Utah Supreme Court squarely

resolved that issue. As this Court has repeatedly held, “[i}t is

irrelevant to this Court’s jurisdiction whether a party raised

below and argued a federal-law issue that the state supreme

court actually considered and decided.” Cohen v. Cowles

Media Co., 501 U.S. 663, 697 (1991) (citations omitted).

HH&C blindly claims that tre due process issue was “not

discussed, analyzed nor 7: 2iced by the Utah Supreme Court.”

See Resp. Opp. at 11. But that is false. The Utah Supreme

Court considered the due process issue and found no

violation, stating that this Court “has held that dismissing the

appeal of an appellant who willfully defies court orders does

not violate due process, but rather, may be a reasonable

means of safeguarding the collectibility of [a] judgment.”

App. 12a (emphasis added; citation and internal quotation

marks omitted). That is why HH&C itself conceded in the

district court, after remand, that “/t/he Supreme Court

specifically addressed due process concerns in its Opinion.”

App. 109 n.7. HH&C’s revisionism cannot be reconciled

with either the Utah Supreme Court’s express language, or

with HH&C’s own district court concession.

B. The Utah Supreme Court’s Decisions

Conflict With the Second Circuit’s Decision

in Texaco, Inc. v. Pennzoil Co.

HH&C further argues that 7exaco, Inc. v. Pennzoil Co.,

784 F.2d 1133 (2d Cir. 1986), rev'd on other grounds, 481

U.S. 1 (1987), does not conflict with the Utah Supreme

Court’s opinions because, according to HH&C, “Pennzoil did

not address the power of the state appellate court to dismiss

an appeal of a contemptuous appellant.” Resp. Opp. at 18.

But HH&C’s attempt to reframe the issue does not eradicate

the conflict. The Second Circuit’s Pennzoil decision clearly

prohibited a State court from placing impossible conditions

on a State-granted constitutional right to appeal. Pennzoil,

784 F.2d at 1154. In contrast, the Utah Supreme Court

determined that it could impose unachievable threshold

requirements on Capital Suisse before it could appeal,

notwithstanding the fact that neither the Utah Supreme Court

nor the district court had ever found Capital Suisse in

contempt. Accordingly, there is an inherent conflict between

Pennzoil and the decision below.

c. The Utah Supreme Court’s Decisions

Conflict With Due Process Principles

Established By This Co:rt. :

HH&C also contends that the Utah Supreme Court’s

decisions were “[flully [c]onsistent” with this Court's

decisions because “the Utah Supreme Court, as well as the

district court, decided that Capital Suisse’s ‘good faith’

efforts were insufficient to comply with the district court's

prior discovery orders.” Resp. Opp. at 22. The record

emphatically belies this claim, and instead demonstrates that

neither the Utah Supreme Court nor the district court ever

considered whether Capital Suisse made good faith efforts to

satisfy the Utah Supreme Court’s discovery and bond

requirements.

On remand, for example, the district court bluntly stated

that its role in determining compliance was “pretty limited,”

and suggested instead that Capital Suisse raise with the Utah

Supreme Court the issue of whether its inability to comply

may excuse its partial non-compliance. App. 105a, 107a.

The Utah Supreme Court, however, issued but a two-sentence

opinion summarily dismissing the appeal on the sole ground

that petitioners “have failed to comply with this court’s

decision{.]” App. 18a. Nowhere does the Utah Supreme

Court even hint that it considered Capital Suisse’s arguments

that its good faith efforts to comply should be deemed

sufficient. ‘

On the merits, HH&C argues that this Court’s opinions

demonstrate that “dismissal of an appellant’s appeal does not

violate due process when the appellant defies a lower court’s

orders.” Resp. Opp. at 22 (citing Nat'l Union of Marine

Cooks and Stewards v. Arnold, 348 U.S. 37 (1954);

Hammond Packing Co. v. Arkansas, 212 U.S. 322 (1909); and

Nat'l Hockey League v. Metro Hockey Club, Inc., 427 US.

639, 643 (1976)). But that is an inaccurate reading of this

Court’s cases.

In Hammond, this Court upheld the trial court’s striking of

pleadings for failure to comply with discovery orders as

consistent with due process, but took great care to emphasize

that the Court had not penalized the defendant “for a failure to

do that which it may not have been in its power to do.”

Hammond, 212 U.S. at 347. Elaborating further, the

Hammond Court noted that “[aJll the statute required was a

bona fide effort to comply with an order. . . and therefore any

reasonable showing of an inability to comply would have

satisfied the requirements both of the statute and the order.”

Id. at 347. :

Similarly, in National Hockey League, this Court affirmed

the dismissal of a complaint as a sanction for plaintiff's

failure to comply with discovery orders. Resp. Opp. at 23.

However, the Court qualified its holding, observing that a

district court should not dismiss a complaint “because of

petitioner’s noncompliance with a pretrial production order

when it has been established that failure to comply has been

due to inability, and not to willfulness, bad faith or any fault

of petitioner.” Nat'l Hockey League, 427 U S. at 640 (quoting

Societe Internationale v. Rogers, 357 U.S. 197, 212 (1958)).

Finally, this Court similarly noted in National Union — a

case discussed in the petition — that the appeal there “was not

summarily dismissed.” Nat'l Union, 348 U.S. at 44. Instead,

the National Union petitioner “was allowed 15 days, after

being adjudged in contempt, within which to purge itself.”

Id.

In sum, HH&C’s own authority confirms Capital Suisse’s

position that due process obligated the Utah Supreme Court to

determine whether Capital Suisse was unable — despite good

faith efforts — to comply with the court's discovery and bond

requirements before dismissing its appeal. HH&C’s

misreading of this Court's decisions merely confirms the need

for the Court to grant this petition and resolve the conflict

over what it means to provide a litigant with a “fair

opportunity” for a “meaningful appeal.”

D. The Question Presented Is Of Significant

National Importance.

HH&C has likewise failed to undermine petitioners’

showing that the issue presented here is one of significant

national import. For example, HH&C assumes that the

Second Circuit’s Pennzoil decision is of limited significance

because of its “extraordinary” facts. Yet despite these

“extraordinary” facts, four Justices found the due process

issue worthy of analysis in concurring opinions, and reached

conflicting conclusions. See Pennzoil Co. v. Texaco, Inc.,

481 U.S. 1, 22, 23, 28-29, 32 (1987); Pet. 14-15. The

Pennzoil concurrences demonstrate the importance as well as

the disagreements surrounding the question presented here.

? HH&C oddly accuses Capital Suisse of “focus[ing] almost exclusively

on the condition requiring the posting of a bond” in the courts below,

Resp. Opp. 17, and “remain[ing} silent about” Capital Suisse’s purported

failure to comply fully with the district court's discovery orders. That is

untrue. Capital Suisse repeatedly emphasized its inability to comply fully

with the discovery requirements imposed by the Utah Supreme Court.

See, e.g., Pet. at 10 n. 2 (production of all documents impossible because

some were destroyed by disgruntled employces); id. at 11 (same): id. at

17-18 n.3 (noting “good faith efforts . . . to comply with a pretrial

production order”); id. at 19-20 (noting that Capital Suisse was “incapable

of complying with its discovery and bond obligations”).

HH&C further dismisses as “conclusory” Capital Suisse’s

observation that numerous state constitutions contain an

unconditional right to appeal. In fact, however, Capital

Suisse cited several such state constitutional provisions in

their petition, and there are many others.’ Thus, the issue

presented here will plainly affect litigants in States across the

country.

Il. THE EQUAL PROTECTION ISSUE RAISED IN THE

PETITION WAS ALSO RAISED BELOW AND Is

EQUALLY WorRTHY OF Tuts Court's REVIEW.

The equal protection issue raised in the petition likewise

merits this Court’s review. Significantly, HH&C does not

dispute that the decisions below conflict with the three state

supreme court decisions cited in the petition. See Pet. at 20-

22 (citing Barber v. Gladden, 298 P.2d 986 (Or. 1956); Jack

Spring. Inc. v. Little, 280 N.E.2d 208 (Ill. 1972); Gilbert v.

State Farm Ins. Co., No. S-10454, 2004 WL 1701109 (Alaska

July 28, 2004)). Nor does HH&C dispute that the decisions

below conflict with this Court’s own equal protection

precedent. See Pet. at 22-23 (citing Lindsey v. Normet, 405

U.S. 56, 77 (1972); Griffin v. Illinois, 351 U.S. 12 (1956)).

In fact, HH&C does not address Capital Suisse’s equal

protection argument at all, except to say that Capital Suisse

did not raise it below. Resp. Opp. At 16. But HH&C is

wrong. While perhaps not invoking the magic words that

HH&C demands, Capital Suisse did raise the equal protection

* In addition to Utah, large states such as lilinois, Pennsylvania, Texas

and Florida grant their citizens a constitutional right to appeal civil

judgments, as do a number of other states, including Nebraska, Kentucky,

Louisiana and New Mexico. See Ill. Const. art. VI, § 6; Pa. Const. art. V,

$ 9; Pennzoil, 784 F.2d at 1154 (“The Texas constitution grants a right of

appeal to all civil and criminal litigants.”); Neb. Const. art. |, § 23; FI.

Const. art. V, § 4; Ky. Const. § 115; La. Const. art. 5, § 10; N.M. Const.

art. 6, § 2.

TD SAAT TS MNCL MN AEE HT RENAE RENNIE

argument below, and the Utah Supreme Court, while not

perfectly clear, appears to have addressed the argument.

In Capital Suisse’s Certification of Good Faith Attempt to

Comply with Court Order to the Utah Supreme Court, Capital

Suisse explained that a party may be excused from a

supersedeas bond requirement when it is “financially

impossible for it to post the bond,” and then cited as support

for that proposition the equal-protection decision of an

intermediate Utah appellate court in D’Asion v. D'Aston, 790

P.2d 590 (Utah Ct. App. 1990). Resp. App. 14b. The

D’Aston Court, citing this Court's decision in National Union,

addressed the constitutionality under the equal protection

clause of dismissing an appeal where a party had failed to

comply with a bond requirement. D’Aston, 790 P.2d at 594.

Thus, while Capital Suisse could perhaps have been more

explicit, the propriety of imposing bond requirements upon

those who lacked the requisite resources and were unable to

comply was in fact before the Utah Supreme Court. See App.

131a-135a; Resp. App. 12b-19b. And denying access to

courts based upon a party's financial status raises an obvious

equal protection issue (beyond the obvious due process tssue)

that would be apparent to any experienced judge. See, e.g.,

Griffin, 351 U.S. 12 (declaring unconstitutional state rule

requiring criminal defendants to pay for transcripts prior to

appellate review because it “cut off appeal rights for indigents

while leaving avenues of appeal open for other defendants”’);

Mayer v. Chicago, 404 U.S. 189 (1971) (noting “flat

prohibition” against “making access to appellate processes

from even [the State’s] most inferior courts depend upon the

[convicted] defendant’s ability to pay).

In its opposition, HH&C nevertheless cites Taylor v.

Illinois, 484 U.S. 400, 406 n.9 (1988), for the proposition that

a “generic reference” to Fourteenth Amendment claims is

“insufficient to preserve a constitutional claim.” Resp. Opp.

at 14 (internal quotes omitted). HH&C fails to note, however,

that this Court held that the petitioner there had preserved his

Sixth Amendment claim in much the same way that

petitioners preserved their equal protection claim here:

Although the petitioner had not expressly stated his reliance

on the Sixth Amendment, he “cited and relied upon, through a

quotation from an Illinois Appellate court decision, two of our

Compulsory Process Clause cases[.|” /d. Accordingly, this

Court went on to say, “the authority cited by petitioner, and

the manner in which the fundamentai right at issue has been

described and understood by the Illinois courts, make it

appropriate to conclude that the constitutional question was

sufficiently well presented to the state courts to support our

jurisdiction.” /d. So too here.*

Moreover, as noted earlier, this Court does not even need

to assess and evaluate the sufficiency of the arguments made

below when the state court itself appears to have addressed

the constitutional issue. Here, the Utah Supreme Court,

quoting National Union, specifically acknowledged that “a

statutory review is important and must be exercised without

discrimination ....” App. 12a (emphasis added). And in

discussing its authority to limit a plaintiff's substantive right

to appeal under article VIII, section 5 of the Utah

Constitution, the Utah Supreme Court relied heavily on

D Aston, which as noted above explicitly addressed federal

equal protection requirements. See App. 6a-9a; see also

D'Aston, 790 P.2d at 594.

* See also Illinois v. Gates, 462 U.S. 213, 247 (1983) (“no particular form

of words or phrases is essential” to preserve argument); Crowell v.

Randell, 35 U.S. 368, 392 (1836) (“[I]t ts not indispensable that [the issue]

should appear on the record, in totidem verbis, or by direct and positive

statement”); Braniff Airways v. Nebraska State Bd. of Equalization &

Assessment, 347 U.S. 590, 598 (1954) (Court accepted issue for review,

“[t]hough inexplicit” below).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.