Plaintiff s Opposition to EAPD Defendants Motion in Limine to Exclude Evidence of Alleged Harm Suf...

8/6/2019 Plaintiff s Opposition to EAPD Defendants Motion in Limine to Exclude Evidence of Alleged Harm Suf Opps

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TO ALL PARTIES AND THEIR ATTORNEYS OF RECORDPlaintiff CMKM Diamonds, Inc. ("CMKM") submits their OPPOSITION TO

3 DEFENDANTS DONALD ROGER GLENN AND EDWARDS ANGELL PALMER &4 DODGE LLP'S ("EAPD Defendants") MOTION IN LIMINE TO EXCLUDE EVIDENCE5 OF ALLEGED HARM SUFFERED BY PLAINTIFF CMKM DIAMONDS, INC.'S67 SHAREHOLDERS, on file herein, and pursuant to EDCR 2.47 hereby move the Court for anorder denying the EAPD Defendants' Motion.89 This Response by Plaintiff is based upon and supported by the following Memorandum of

10 Points and Authorities, the pleadings and papers on file, the affidavits and exhibits attached hereto,11 and any argument that the Court may allow at the time of hearing.12 Dated:13141516171819202122232425262728

June 23, 2011FRIZZELL LAW FIRM

/s/ Bill FrizzellBill Frizzell

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CMKM Diamonds, Inc. ("CMKM") submits herein its response to the Motion in Limine of

MEMORANDUM OF POINTS AND AUTHORITIESI. INTRODUCTION

EAPD Defendants' asks this Court to rule in advance of offering to "exclude evidence of5 alleged harm suffered by Plaintiff CMKM Diamonds, Inc.' s Shareholders".6789 Donald Roger Glenn and Edwards Angell Palmer and Dodge, LLP (collectively, "the EAPD

A, Evidence of Harm Suffered by (:]\1K[\j Shareholders is Admissfblec-

10 Defendants") to Exclude Evidence of Alleged Harm Suffered by Plaintiff CMKM Diamonds,11 Inc.' s Shareholders, seeking that this court deny that motion while further stating as follows:12 Background and Facts:13 In 2007, Urban Casavant left and Kevin West took over as the Chief Executive Officer of141516 contact from shareholders and attorneys for shareholders who had learned of investigations by the

CMKM Diamonds, Inc. ("CMKM"). He was then soon deluged with phone calls and other

17 Securities and Exchange Commission ("SEC"), other regulatory bodies and criminal investigators.18 These shareholders came to realize that massive fraud had taken place in the issuance and sale of19 shares of CMKM stock over a period of several years. Reports later surfaced in which the SEC20 found that the extent of the damages for securities fraud those investors who purchased shares of21222324 over this massive fraud and hundreds threatened law suits against the company. As well, dozens

CMKM on the public markets totaled $250 million.Thousands of CMKM shareholders thereafter contacted CMKM expressing their outrage

25 of attorneys representing individual and groups of CMKM shareholders threatened to file suit26 against CMKM on behalf of these shareholders for their losses, including as class actions for27 "fraud on the market" claims. In fact, some cases were filed including in Texas and Nevada.28

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1 CMKM was therefore faced with a dilemma. Every one of these shareholders could seek2 damages in a "fraud on the market" class action on behalf of the thousands who were defrauded3 for the total losses of $250,000,000. In such suits, CMKM would have little if any defense to such4 claims, because there was no doubt that material misinformation was disseminated, and material5 omissions made, as shares of CMKM were being fraudulently issued and sold that were then6 bought by investors the public stock markets at inflated prices.789 of CMKM and a number of other insiders of the company, as CMKM was itself helpless in the

Although such fraudulent actions were being perpetrated by a dishonest chairman and CEO

10 hands of those perpetrating these acts of fraud. Yet, CMKM would have almost no defenses in11 that case which could prevent it from being held liable for these massive damages because those12 perpetrating the fraud had apparent authority to act for CMKM.13 CMKM was then, and is now, a struggling company in which all cash and other liquid assets1415 had been plundered from the company, along with many other assets including hundreds of

billions of shares of its common stock. Yet, with little cash but through significant efforts,1617 progress has been made and CMKM has survived and has managed to maintain the bulk of its18 substantial diamond mining interests, and to also pursue legal claims against those who have19 robbed the company and otherwise caused damages to it. As assets have been maintained and20 some other assets recovered, and as legal actions are being been pursued, there is optimism that21 some value can be returned to the shares of CMKM.222324 CMKM shareholders and their attorneys by stating the reality that if such class action claims were

This has been made possible because CMKM responded to threats of such law suits by

25 filed and pursued against CMKM that any and all means ofCMKM's survival would be exhausted26 in fighting those claims, which would then cause the company to fail.2728

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1 Therefore, in discussions with shareholders, groups of shareholders and their legal2 representatives at various stages in the process of initiating class action and other claims against3 CMKM, it was determined that it was in the best interest of both CMKM and its shareholders for4 CMKM to avoid such litigation by agreeing to acknowledge the claims for damages against it by5 these shareholders as debt obligations of CMKM to these wronged shareholders.6 This agreement with the shareholders put CMKM in the position to survive. By avoiding7 impending litigation against it, CMKM has instead been able to direct its limited resources to89 continue those efforts described above to pursue positive goals on behalf these shareholders. Of

10 course, it was not possible for CMKM to guarantee that any of its efforts to maintain and recover11 its assets, or its efforts to recover damages from those who had caused the company harm would12 be successful. Nor was there any guarantee that the obligations/debts to CMKM shareholders,13 which it agreed to incur to prevent impending lawsuits by those shareholders, could be met1415 through its efforts to recover those damages as well from those who had caused such damages to

CMKM shareholders, which had then also become damages to CMKM.1617 Thus, in addition to harm to CMKM by those who committed acts against it, CMKM now18 also seeks recovery of damages from those who caused these additional damages: Its indebtedness19 to its shareholders which was incurred as a result of substantial shareholder claims against, claims20 which were caused by those who committed act which caused CMKM to incur liabilities to its21 shareholders which ultimately resulted in this debt.222324 Dodge, LLP, for which damages are sought as directly caused a substantial portion of the damages

The acts and omissions of Defendants Donald Roger Glenn and Edwards Angell Palmer and

25 incurred by CMKM which are evidenced by the debt it owes to its shareholders for their26 acknowledged claims against CMKM for their market losses.2728

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1 Therefore, the damages caused to its shareholders are clearly relevant to the claims made by2 CMKM in this matter.3 Argument and Authority:4 The EAPD defendants complain that damages to the shareholders of CMKM should not be5 available to the jury. However, these defendants demonstrate in their motion that they have been6 on notice for a lengthy period that such damages are indeed evidence of direct damages to CMKM789

for those reasons as stated above.Debts of a plaintiff to others caused by the actions of a defendant are common types of

10 damages sought by plaintiffs in law suits. For example, medical bills are often owed to doctors11 and hospitals as damages caused by events involving personal injuries. Money damages can be12 owed to a homeowner while sought from a sub-contractor who caused the problem addressed in a13 law suit. The damages in this matter are of similar description. Therefore, because such damages14151617 Dept. ofTransp., 113 Nev. 815 (1997) "damages" have been defined as:

are common, authority regarding such damages one way or the other is not plentiful.As stated in the opinion of the Nevada Supreme Court in its opinion in Amesano v. State

18 A pecuniary compensation or indemnity, which may be recovered in the courts by any person19 who has suffered loss, detriment, or injury, whether to his person, property, or rights, through the20 unlawful act or omission or negligence of another. A sum of money awarded to a person injured21 by the tort of another. Restatement, Second, Torts,12A. Money compensation sought or awarded222324

as a remedy for a breach of contract orfor tortious acts.As indicated earlier in this reply, to successfully plead a securities fraud claim under the

25 fraud-on-the-market theory, a plaintiff must establish only that: (1) a defendant made a material26 misrepresentation of fact; (2) which affected a stock's market price; and (3) the plaintiff27 detrimentally traded the stock during the period in which the stock's price reflected the material28

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1 misrepresentation, No. 84 Employer-Teamster v. America W. Holding, 320 F.3d 920 (9th Cir.2 2003).3 As a further consideration by CMKM in deciding not to challenge an action by the4 shareholder(s), in Basic Inc. v. Levinson, 485 U.S. 224, 247 (1988), the Court held that in a5 securities fraud action premised on a fraud on the market, purchasers and sellers of securities in67 the marketplace are entitled to a presumption of reliance. The presumption of reliance is premisedon a belief that, at the very least, "market professionals generally consider most publicly89 announced material statements about companies, thereby affecting stock market prices." Id. at 247

Ion. 24. Because a material misrepresentation or omission is generally embedded in the market price11 of the security, an investor who purchases or sells the security will have presumably relied on the12 misrepresentation.131415

In their own deliberations as to the understanding reached between CMKM and itsshareholders, the shareholders had to consider that while officers and directors of a corporationcan also be the subject of a fraud on the market class action suit, it is difficult if not impossible for16

17 shareholders to take action against other parties, including for example, these EAPD Defendants.18 This is especially true after the decision rendered in Central Bank of Denver, N.A. v. First19 Interstate Bank of Denver, N.A., 511 U.S. 164,177-78,191-95 (1994), which held that holding20 that only the SEC can bring aiding and abetting actions under 1O(b)), which therefore excludes21 claims for fraud on the market brought by shareholders.2223 Furthermore, those shareholders were faced by the reality that in class actions involving24 the purchases and sale of securities, federal securities laws preempt any state claims. U.S. Mortg. v25 Saxton, 494 F.3d 833 (9th Cir. 2007). The Nevada Supreme Court thus affirmed that the district26 court had properly dismissed the complaint for failure to comply with the substantive and2728

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1 procedural requirements of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u-2 4 (PSLRA).3 Meanwhile, courts nationwide have determined that one can affirm a debt and therefore4 ascertain the obligation BAC Home Loans Servicing, L.P. v. Everman, 2009 CA 15 (2-18-2011);5 Wells Fargo Bank v. Young, 2009 CA 12 (1-14-2011); Bank of Boston Connecticut v. Avon678

Meadow Asso., 40 Conn. App. 536 (1996).Wherefore, the EAPD Defendants' request that this court deny the motion to exclude

9 evidence of damages to CMKM's shareholders as such information is central to the damages1 0 sustained by CMKM in this matter. CMKM also seeks any and all such other relief to which it is11 justly entitled.1 21 3 Dated: June 23, 2011.1 41 51 61 71 81 92 02 12 22 32 42 52 62 72 8

FRIZZELL LAW FIRM


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CERTIFICATE OF SERVICE12 Pursuant to NRCP 5(b), I certify that on June 23, 2011, I caused the followingdocuments entitled: PLAINTIFF'S OPPOSITION TO EAPD DEFENDANTS'3 MOTION IN LIMINE TO EXCLUDE EVIDENCE OF ALLEGED HARM4 SUFFERED BY PLAINTIFF CMKM DIAMONDS, INC.'S SHAREHOLDERSto be served electronically to the following recipients:56789

1011 I declare under penalty of perjury under the laws of the State of Nevada that the above istrue and correct. Executed on June 23,2011 at Henderson, Nevada.

James R. CondoPatricia Lee RefoAndrew StoneSnell & Wilmer LLP400 E. Van BurenPhoenix, AZ 85004-2202

Alex L. FugazziSnell &Wilmer LLP3883 Howard Hughes Pkwy,Suite 1100Las Vegas, NV 89169

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