CAUSE NO, C-1-CV-10-002345 MICHAEL COKER AND JOHN MADSEN IN THE COUNTY COURT Plaintiffs’ Counter-Defendants, v. AT LAW NUMBER ONE, CHRIS BUFFUM AND REBECCA BUFFUM AND SANDY CREE! YACHT CLUB, LTD. Defendants/ Counter-Plaintiffs. TRAVIS COUNTY, TEXAS DEFENDANTS! MOTION FOR SANCTIO1 TO THE HONORABLE JUDGE OF SAID COURT: COME NOW, CHRISTOPHER BUPFUM AND REBECCA BUFFUM, (the Buffums"), Defendants in the above-styled and numbered cause and pursuant to TEX, R. Civ. P. 13 & 215, and Local Rule 2.2, file this Defendants’ Motion for Sanctions, and would respectfully show this court the following L INTRODUCTION On August 10, 2009, Plaintiff Coker signed an Owner Finance Houseboat Sales Agreement (the “Houseboat Agreement”) whereby Coker agreed to purchase an 85 Sumerset houseboat (“Houseboat”) owned by the Buffums docked in Slip Number A-37 at the Sandy Creek Yacht Club, Volente, Ti as, and the Buftums agreed to provide owner financing for the purchase. Pursuant 40 the Houseboat Agreement, Coker agreed to make principal, interest and insurance payments detailed in the Houseboat Agreement until the Installment Loan Note securing the Houseboat was paid in full, at which time the Buffums would transfer lille (o the Houseboat to Coker. Dofeadams Motioa for Sanctions Page 1 0f 17 Filed 10 July 29 P12:55 Dana DeBeauvoir County Clerk ‘Travis CountyThe Houseboat Agreement granted the Buffums a security interest in property on or a part of the Houseboat, and prohibited Coker from permitting any other security interest or lien to be placed on the Houseboat. Coker made payments against the Houseboat Agreement for only three months — August 2009, September 2009 and October 2009 - with the third month’s payment being made by a check issued by Coker’s business, GlobeTrack Wireless, Inc. The GlobeTrack Wireless check was returned for insufficient funds. (On August 17, 2009, Coker signed a Lease Agreement for a one-year tem with JIL Sandy Creek Marina, Ltd. (“Sandy Creek”) to lease Slip A-37 commen: September 1, 2009 and terminating on August 31, 2010 (the “Slip Lease”), Coker, by signing the Slip Lease, granted Sandy Creck « lien and security interest ‘on the Houseboat and all equipment placed in or on the marina or the Houseboat and granted Sandy Creek all of the rights and remedies afforded a secured party under the Uniform Commercial Code, in addition to and cumulative of Sandy Creck’s landlord Jicns and any other fien rights provided by law. Coker and Sandy Creek agreed the Slip Lease constituted a security agreement under the Uniform Commercial Code and Coker agreed to execute such financing statements as Sandy Creek might demand and to permit Sandy Creek to file the Lease Agreement as a financing statement, On or about December 14, 2009, Sandy Creek cable locked the Hlousboat 10 Sandy Creek's dock duc to Coker’s non-payment of monies due under the Slip Lease and asserted a right to a lien, including a Federal maritime lien, as a wainst all boats, vessels, and other property located in, on or with any boat or vessel subject to the Slip Lease, Defendants Motion for Sanctions Page? of 17Coker has not paid the slip rental fees or charges for electricity usage on Slip A-37 since November 2009. On January 25, 2010, the Bufums declared the Houseboat Agreement to be in default, and in accordance with the Houseboat Agreement accelerated all payments due. Coker has not made any payments pursuant to the Houseboat Agreement since the notice of defeult On May 25, 2010, to protect their interest, the Buffiums paid $9,000.00 to Sandy Creek to purchase the Slip Lease between Sandy Creck and Coker and all of Sandy Creek's rights under the slip Lease, including its lien rights ‘As the purchaser of the Slip Lease, the Buffums have the right to sue for ail monies due Sandy Creek under the Slip Lease. ‘The Buffums and Coker executed a valid and enforceable written purchase and finance agreement when they executed the Houseboat Agreement. The Buffums fully performed their obligations under the Houseboat Agreement. Coker breached the Fouscboat Agreement by: (A) failing to pay the principal, interest and insurance payments required under the Houseboat Agreement; &) permitting a Tien to be asserted against the Houseboat; and © creating a Federal maritime lien against the Houseboat that the Buffums were compelled to pay and have removed, Coker’s breach of the Houseboat Agreement has caused injury to the Buffiums including, but not limited to, loss of principal payments, accrued interest, insurance Defendants Motion for Ssnetions Page 3 of 17premiums, monies paid to Sandy Creek to satisfy the Federal maritime lien wrongfully created against the Houseboat by Coker, and attomey’s fees and costs ‘On July 20, 2016, the Parties (Michael Coker, John Madsen and Rebecca Buflum) attended mediation. ‘The Parties negotiated a settlement agreement that, among other things, required Plaintiffs to wire settement funds to the undersigned’s IOLTA account, (Exhibit “A”), As a condition precedent to mediation, counsel for the Parties agreed that any settlement would be predicated on funds being wired imo the undersigned’s JOLTA account rather than payable at a later date, Prior to leaving mediation, Plaintiffs’ counsel assured Defendants’ counsel that she had received an email forwarded by her clients from their purported financial advisor indicating that the money wire had been initiated by their financial advisor. This statement was later confirmed by email from Plaintifis’ Counsel to Defendants’ counsel, (Exbibit “B”). On July 22, 2010, two days after the mediated settlement agreement and two days after the funds were due, Plaintiffs’ counsel again contacted Defendants’ couse! and stated that she had received another email stating that due to an internal “error” the wire ‘transfer was not processed immediately, but that it was now being processed immediately and the company apologized for the error and any inconvenience it may have caused, As of the date of this filing and nine days after the funds were due no fuads have been wired into the undersigned's IOLTA account or otherwise paid 10 Deiendants Since the funds have not been received it is clear that Plaintiffs negotiated the settlement in bad faith and the “emails” from their financial advisor were either fabricated or were lies. ‘The facts could not be more clear: Defendants Motion for Sanetions(1) Coker and Madsen insisted on mediation; (2) Coker and Madsen, as a condition to mediation signed a Rule 11 ‘Agreement in which they agreed to attend and mediate in good faith; (3) Coker and Madsen agreed, as a condition 10 mediation, that any settlement would be funded by an immediate wire transfer to Defendants’ counsel; (4) Coker and Madsen negotiated a settlement requiring wire tansier payment and then refused to honor the settlement agreement; (5) Coker and Madsen, after the mediation continued their deliberate deception and traud on this Court by lying about the existence of a wire transfer. The conclusion is equally clear: Coker and Madsen deliberately, with malice, with conternpt, and with the intent to cause harm entered into a sham agreement to mediate in good faith, agreed to a bogus settlement and then in the furtherance of their malice and contempt fabricated the existence of a wire transfer gone awry. Plaintiffs’ bad faith conduct is not limited to this case, Plaintif¥s are serial and professional abusers of the civil justice system. There is ample evidence that Plaintiffs have engaged, and continue to engage, in a systematic and malicious pattern of deception and bad faith in all litigation in which they have been or are involved. PlaintifY5 and or their companies have been named in several closed and pending lawsuits resulting numerous, judements, sanctions, contempt of court, an indictment resulting in a felony mail fraud convi n, and a securities fraud finding resulting in an administrative penalty, Defendants Motion for Sanctions Page 5 of 17Defendants request that this court grant their Motion for Sanctions, strike Plaintiffs’ pleadings, award Defendants reasonable attorney's fees and costs for preparing and attending mediation, and attorneys’ fees for the preparation of this Motion and attending a hearing, Plaintiffs’ grotesque manipulation of the judicial process and their predatory assault on unknowing vietims and the judicial system must be permanel ly eliminated I. FELONY CONVICTION, ADMINISTRATIVE PENALTIES, UNSATISFIED JUDGMENTS, SANCTIONS, AND CONTEMPT OF COURT Defendants have attached to this Motion the following; a certified copy of John Madsen's felony conviction for mail fraud; the administrative finding against Jokn Madsen and Michael Coker for securities fraud; unsatistied judgments against both Plaintifis; court ordered sanctions; and contempt of court: 1. United States of America v. John Jorgen Madsen a/lda Kleinstrup J. Madsen: Cause No, CR-01-1010-PHX-SRB; Violation 18 U.S.C. § 1341 (Mail Fraud): In The United States District Court District of Arizona, ‘On November 5, 2001, Defendant, John Jorgen Madsen entered a Plea of Guilty. The court adjudicated Defendant guilty of the following offense: violating 18 U.S.C. § 1341 Mail Fraud, a Class D felony offense On February 4, 2003, judgment was entered and Defendant was placed on probation for a term of five (5) years and ordered restitution to twelve victims for 4 total amount of $2,354,000.00. Madsen judicially admitted that if the United States would proceed to trial it could prove the facts beyond a reasonable doubt ‘The ordered restitution still remains unpaid. (Exhibit “C” at P. 10-11). In The Matter of International Global Positioning, Inc., John J. Madsen, Michaet Coker: Cause No. 67086: Order to Cease and Desist, Order of Restitution, Order for Administrative Penalties and Consent to Same By: Respondent International Global Positioning, Inc. Respondent John J. Madsen and Respondent Michael J. Coker. ‘On June 4, 2004, John J. Madsen and Michael Coker consented to entry of an order by the Arizona Corporation Commission that Respondents Madsen and Coker violated A.RS. § 44-1841, 1842, & 1991. The commission ordered Coker Defendauts Motion for Sanetions Page 6 of 17and Madsen pay tution in the amount of $590,951.00 and pay an administrative penalty in the amount of $25,000.00. ‘The ordered restitution stil smains unpaid. (Exhibit “D” at P. 4-6). Grigshy Master Planners et. al v. SOS GPS Holdings, LLC, Satellite Onbourd Systems ine, John Madsen, Michael Coker and JMMC Holdings, LLC, Cause NO. D-i-GN-08-004057; In the 419" Judicial District Court Travis County Texas. ‘On February 17, 2009 Coker entered into a settlement agreement with the Grigsby Plaintiffs agreeing to pay the sum of $210,000 in five installments over & six-week period. Coker never made a single payment. (Exhibit “E") ‘On April 3, 2009, the court granted Plaintiffs’ Motion to Compel ordering Defendants to comply with discovery requests and provide dates for Madsen’s and Coker’s depositions. (Exhibit *F”) ‘On June 11, 2009, the court granted Plaintiffs’ Motion for Contempt signing an Agreed Order ordering Defendants to pay Plaintiffs $50,000.00 pursuant to their seitlement agreement by May 21, 2009. The court further ordered Plaintiffs to pay the remaining settlement proceeds by June 5, 2009, In the event Plaintiffs do not pay, they are to comply with the April 3, 2009 onder and pay $€,000 in sanetions. (Exhibit “G”), On July 2, 2009, the court granted Plaintiffs’ Second Motion for Contempt ordering Defendants to pay $12,000 in sanctions by July 10, 2009 and to provide discovery responses and deposition dates for Madsen and Coker by July 10, 2009, The court also made findings of fact and conclusions of law consistent with the above described abuses. (Exhibit “H”), On October 12, 2009, the court granted Plaintiffs’ Motion to Show Ceuse and Request for Additional Sanctions ordering Defendants to pay $10,000 in sanctions and ordering Madsen and Coker to present for deposition. (Exhibit “I”). 4. Thomas R. Jefferies v. Michael Coker, John Madsen, International Global Positioning, Inc., and 3 Family Investments, LLC Trust; Cause No. GN304892, In The 126" Judicial District Court Travis County, Texas, On January 17, 2006, the court entered an Agreed Judgment against Defendants in the amouint of $149,191.20. On March 7, 2006, the Judgment was abstracted in ‘Travis County. The judgment still remains unpaid. (Exhibit “J”). State of Arizona ex rel., Arizona Corporation Commission v. International Global Positioning, Inc., John J. Madsen, Michael Coker ef al.; Cause No. 132004 00390; In ‘The Superior Court of the State of Arizona in and for the County of Maricopa ‘Defendants Motion for Sanctions Page 7 of 17‘On May 13, 2009, Steven Ball Assistant Attorney General renewed the juulgment taken against Defendants in the amount of $590,951 on July 24, 2004. “Attesting that no payments have been made and the total balance due adding judgment interest is $914,982.55, The ordered restitution still remains unpaid, (IExhil 40), Corporate Express of the West, Ine. v. John J. Madsen; Cause No. 97-21331; In ‘The Superior Court of the State of Arizona in and for the County of Maricopa ‘On January 15, 1999, the court entered judgment on behaif of Plaintiff against Defendant finding that John J. Madsen did fraudulently transfer assets with the actual intent to hinder, delay, or defraud a creditor and awarded $9,819.85 in attorney's fees and $492.60 in costs. The judgment still remains unpaid. (Exhibit “1, Corporate Bxpress of the West, Inc. v. The Madsen Group and John Madsen; Cause No, CV1996-08789; In The Superior Court of the State of Arizona in and for the County of Maricopa. On March 9, 2007, the judgment creditor renewed the judement entered against Defendants taken on March 13, 1997 in the amount of $69,784.30 attesting that no payments have been made and the total balance due adding judgment interest is $154,938.62. The judgment still remains unpaid. (Uxhibit *M”), Paradise Village Interiors, LTD and William J. Beran v. Michael Coker and John Madsen, Cause No. CV99-12995; In The Superior Court of the State of Arizoma in and for the County of Maricopa. On February 23, 2006, Robin C. Carter attorney for the judament creditor renewed the judyment taken against Defendants in the amount of $12,167.06 on February 23, 2001, attesting that 0 payments have been made on the original Judgment. The judgment stil remains unpaid, (Exhibit “N"). David Birdsell, Trustee v. John J. Madsen; Cause No. B-96-12743-PX-CGC; In the United States Bankruptcy Court for the District of Arizona, On April 20, 1998, the court entered a stipulated judgment against John J Madsen in the amount of $30,000.00 after Madsen failed to make six equal payments of $5,000.00 under the settlement agreement, The judgment still remains unpaid, The judgment still remains unpaid, (Exhibit “O”). Richard Klugman v. International Global Positioning, Ine, John J. Madven, and Dwight Jory, Cause No. GN-103254; In The 201° Judicial District Count of Travis County, Texas. Defendsnts Motion for Sanctions Page 8 of 17‘On May 1, 2002, the Parties entered into a Rule 11 Agreement wherein Defendants will pay $75,000.00 by May 31, 2002. If the Defendants don’t pay an agreed judgment will be entered for $85,000. Defendants breached the agreement, On January 22, 2003, Defendants’ counsel filed a Motion to Withdraw as Counsel citing non-payment tor services rendered which was granted by the court, ‘On April 7, 2003, the case was called for trial and John Madsen appeared pro se. The court entered judgment on behalf of Plaintiff end made the following findings (Q) Klugman deposited $50,000 with Madsen and Jory; 2) Klugman had a right to refund from Madsen and Jorys (3) Madsen and Jory did not refund Klugman’s money; (4) The Parties entered into a binding and enforceable settlement agreement and Madsen and Jory breached the agreement. The court entered judgment and awarded Klugman a total of $85,000. The judgment still remains unpaid. (Exhibit “P”). Ml, ARGUMENT & AUTHORITIES When considering sanctions, the court should ensure that the punishment fits the crime. TransAmerican Nat. Gas Corp. v. Powell, $11 S.W.2d 913, 917 (Tex. 1991), When the court decides to sanction, the sanctions must have a direct relationship to the offensi re conduct, measured by a direct nexus among the conduct, the offender, and the sanctions imposed. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex, 2003); Trans- American, $11 8.WW.2d at 917. ‘The court must not impose sanctions more severe than necessary to promote full compliance with the rules. Spolin Hosp., 104 S.W.3d at 882; Chrysler Corp., 841 SW.2d at 849. “Nothing requires that a trial court test the effectiveness of lesser sanctions by actually implementing and ordering each and every sanction that could possibly be imposed before striking the pleadings of a disobedient party.” Cire ». Cummings, 134 S.W.3d 835, 842(Tex. 2004), “The record must reflect that the court “consider” the availability of appropriate lesser sanctions, and cautions that in all but the most exceptional cases, the trial court must actually test the lesser sanction Defendants Motion for Sanctions Page 9 of 17before striking the pleadings.” /d. The Supreme Court of Texas in TransAmerican Natural Gas Corp. v. Powell developed two-part test for courts to apply when deterinining whether a sanction is “just.” 811 S,W.2d 913, 917 (Tex. 1991). First, there must be a direct nexus among the offensive conduct, the offender, and the sanction imposed. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003) (citing TransAmerican, 811 S.AWV.2d at 917). A just sanction must be directed against the abuse and toward remedying the prejudice caused fo the innocent party, and the sanction should be visited upon the offender. Id. ‘The Corpus Christi Court of Appeals held, “that Texas courts have inherent power to sanction for bad faith conduct during litigation.” Kutch v. Del Mar College, 831 S.W.2d 506, 509 (Tex. App-Corpus Christi 1992, no writ). ‘The court noted that the core functions of the judiciary are: hearing evidence, deciding issues of fact raised by the pleadings, deciding questions of law, entering final judgment, and enforcing that judgment, and stated: Inherent power to sanction exists to the extent necessary to deter, alleviate, and counteract bad faith abuse of the judicial process, such as any significant interference with the traditional core functions of Texas courts. Accordingly, for inherent power to apply, there must be some evidence and factual findings that the conduct complained of significantly interfered with the court's legitimate exercise of one of these powers fa. at 510. “Death penalty sanctions should only be imposed in the face of flagrant bad faith...” Hernandez v. Mid-Loop, Inc., 1710 SW.34 138, 143 (Tex.App. ~ San Antonio 2005, no pet). Defendants Motion for Sanctions Page 10 of 17Iv. ANCTIO! Defendants have incurred expenses in preparing and filing this motion. Under ‘Texas Rules of Civil Procedure 215 & 13, and Local Rule 2.2, Defendants are emtitled to reasonable expenses and fees incurred ia obtaining this order, and the costs and fees of mediation in the amount of $10,000.00. Furthermore, Defendants request this court to impose sanctions in the amount of $7,500.00, and (o strike Plaintiffs’ pleadings. ‘These sanctions are justified because there is a direct relationship between Plaintiffs" past and current conduct and this request for sanctions, Pursuant to the Texas Supreme Court holdings in TransAmericam and Spohn, there is direet nexus among Plaintiffs’ offensive conduct, Plaintiffs, and the sanctions requested. ‘These just sanctions are directed against Plaintiffs? abuse and toward remedying the prejudice caused to Defendants. Plaintiffs’ past conduct justifies the sanctions requested in this matter as all other sanctions have proven to be ineffective to gain Plaintifts’ compliance, Therefore, afler considering lesser sanctions this court should strike Plaintiffs’ pleadings and award sanctions in the amount of $7,500.00. As stated above, the Corpus Christi Court of Appeals held, “that Texas courts, have inherent power to sanction for bad faith conduct during litigation, Plaintifi obstructive, dilatory, and bad faith tactics are clearly designed to unjustly impede Defendants’ rights, to cause Defendants to incur unnecessary anguish, costs and fees, and have forced Defendants to file this Motion for Sanctions Plaintiffs have engaged in a pattern and practice of morally corrupt behavior demonstrating thereby a callous disregard for the rule of law clearly intending 10 challenge the integrity and core of the judicial system. Plaintiffs long litigious history Defendants Motion for Sanetions Page 11 of 17including Madsen’s mail fraud federal conviction, the finding of Arizona Corporation Commission that Madsen and Coker committed securities fraud, Coker’s and Madsen’s multiple breaches of settlement agreements, the staggering number of unsatisfied judgments, and their history of sanctionable conduct in Travis County ultimately culminating in contempt of the court justifies this court imposing the death penalty in this mater. Plaintiffs continue with impunity to make a mockery of this country’s ‘u officials, the Texas, Arizona, United States judicial systems while continually prey upon unsusped ing victims, It is abundantly clear that Coker and Madsen never intended to mediate in good faith and consequently honor the executed settlement agreement. As of the date of this filing and despite hollow assurances fo the contrary, Coker and Madsen sfill have not wired the funds into the undersigned's IOLTA account or otherwise funded the settlement The death penalty sanction was clearly designed and intended for exactly these types of litigants who continually prey upon unsuspecting persons in furtherance of their ongoing criminal enterprise. V. CONCLUSION/PRAYER For these reasons, Defendants ask this court to set this Motion for heating and, after the heating, strike Plaintifis’ pleadings, award Defendants $7,500.00 in sanctions as wnces and conduct no other lesser sanction is appropriate or just under the circur: described above, and award $10,000 in mediation costs and attorney's fees, and order for all further and such relief this court deems appropriate. Defendants Motion for Sanctions Page 12.0f 17Respectfully submitted, PUTONTI & ESCOVER, P.C. By JOHN W. ESCOVER State Bar No, 24029539 STEPHEN M. PUTONTI State Bar No. 24011461 2101 Lakeway Blvd, Suite 230 Austin, Texas 78734 Tel: (512) 263-0939 Fax: (512) 263-0943 Email: John@Puronti-Hscover.corn ‘THE STRATTON LAW FIRM, P. C. By JOHN ROBERT STRAT State Bar No. 19361500. P.O. Box 2232 Austin, Texas 78768-22 ‘Tel: 512 445-6262 fax: 512 444-3726 Email: JRStratton@Stratton|_awl‘irm, ATTORNEYS FOR DEFENDANTS CERTIFICATE OF SERVICE ‘This is to certify that a true and correct copy of the above and foregoing legal instrument has been served on all parties of record via eservice and/or fuesimile on the dayof____ 2010 Via Facsimile Ms. Lorinda Holloway Ms. Nikelle Meade Brown McCarroll, L.L.P. 111 Congress Avenue; Suite 1400 Austin, Texas 78701 ‘Yelephone: 512-472-5456 Facsimile: 512-479-1101 Email: LHolloway@mailbme.com John W. Escover Defendants Motion for Sanctions Page 3 of 17RIFICATIO STATE OF TEXAS COUNTY OF PERSONALLY APPEARED BEFORE ME, John W. Escover, a person whose identity is known to me, After I administered an oath to him upon his oath he said Defendants’ Motion for Sanctions and the facts stated in it are within his personal knowledge and are true and correct, John W, Escover , . GIVEN UNDER MY HAND AND OFFICIAL SEAL this 2" day of wl, .2010. = Notary Public My Commission expires: Defendants Motion for Sanctions Page 14 of 17