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UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Fagen, Inc., a Minnesota corporation, and Midwest Ethanol Transport, LLC, a Minnesota limited liability company,

Civil No. 12-CV-02703 (MJD/SER)

Plaintiffs/Counter-Defendants /Third-Party Plaintiffs vs.

MEMORANDUM OF LAW IN SUPPORT OF EXERGY Exergy Development Group of Idaho, DEVELOPMENT GROUP OF IDAHO, L.L.C., an Idaho limited liability company, L.L.C.’S MOTION TO COMPEL and James T. Carkulis, individually, FURTHER DEPOSITION OF THOMAS A. JENSEN OR, IN THE Defendants/Counterclaimants, ALTERNATIVE, MOTION TO COMPEL FURTHER DEPOSITION OF and FAGEN, INC./MIDWEST ETHANOL TRANSPORT, LLC Fagen, Inc., a Minnesota corporation, Third-Party Plaintiff, vs. Hawley Troxell Ennis & Hawley LLP,

[D.Minn. L.R. 7.1(b)(2)]

Third-Party Defendant. and Exergy Development Group of Idaho, L.L.C., an Idaho limited liability company, and James T. Carkulis, individually, Defendants/Counterclaimants /Crossclaimants vs. Hawley Troxell Ennis & Hawley LLP, Crossdefendants.

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Defendant/Counterclaimant/Crossclaimant, Exergy Development Group of Idaho, L.L.C. ("Exergy") hereby respectfully submits this Memorandum of Law pursuant to Local Rule 7.1(b)(2) in connection with its Motion to Compel Further Deposition of Thomas A. Jensen or, in the Alternative, Motion to Compel Further Deposition of Fagen, Inc./Midwest Ethanol Transport, LLC. I. INTRODUCTION AND STATEMENT OF RELEVANT FACTS By the present Motion, Exergy seeks an Order pursuant to Federal Rule of Civil Procedure (“F.R.C.P.”) 37, compelling the further deposition examination of Thomas A. Jensen in his capacity as a nominee designated to testify on Topic No. 7 of Exergy’s Notice of Deposition of Fagen, Inc. (“Fagen”) and/or Midwest Ethanol Transport, LLC (“MET”) or, in the alternative, to compel the further examination of Fagen/MET on this subject. The subject matter of examination at issue is not only reasonably calculated to lead to the discovery of admissible evidence, but bears directly on a critical issue in this case: namely the purchase price of the Big Blue Project (the “Purchase Price”) under that certain Limited Liability Company Interest Purchase Agreement between Exergy and Fagen (the “Purchase Agreement”) and the relationship of that figure to the value of the project. The relevance of this subject matter to the issue of damages is critical. Exergy propounded its Notice of Deposition of Fagen/MET (the “Notice”). That Notice identified several topics, including (most relevant to the present Motion) the following:

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“7. The formulation of the $11,447,000 purchase price for the ninety-nine (99) membership units in Exergy Minnesota Holdings, including (without limitation) the participation of Jennifer Johnson in the process. See, e.g., Fagen Depo. at 122:10-129:6.” See Declaration of Angelo L. Rosa at ¶ 2 and Exhibit 1 thereto, filed concurrently herewith (“Rosa Decl.”). In response to the Notice, Fagen/MET nominated Ms. Jennifer Johnson as its representative competent to testify regarding the topics in question. Ms. Johnson was deposed on 13 May 2015. When requisitioned regarding Topic No. 7, her testimony included the following: “19 Q. Okay. Do you know which attorneys came 20 up with this number? Again, I'm not asking for you to 21 disclose communications. 22 A. Yes, I do. 23 Q. Okay. And which attorneys were those? 24 A. At that time, Leonard Street and Dinard [sic] 25 counsel… 1 Q. Okay. Which particular attorneys? 2 A. My main contact here was always Tom 3 Jensen, and then, as needed in other areas, he brought 4 other people in.” See Excerpts of Deposition of Jennifer Johnson, Exhibit 2 to Rosa Decl. at pp. 62-63 (boldface and italic emphasis added).1 On 26 June 2015, Exergy reconvened the deposition of Fagen/MET, with Mr. Jensen sitting for examination. See Rosa Decl. at ¶ 4. His deposition could be described

For the Court’s ease of reference, a full copy of the condensed transcript of Jennifer Johnson’s deposition testimony is submitted concurrently herewith under seal, with relevant portions of the transcript highlighted. 1

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as bordering on the brink of farce and is exemplified by the following partial excerpt from Mr. Jensen’s deposition: “13 Now, assuming we're talking about that 14 number, would Ms. Johnson's testimony as given here 15 be accurate, did counsel come up with the number 16 that represents the Big Blue purchase price? 17 A. I don't remember. 18 Q. Is there anything you could refer to 19 that would refresh your recollection? 20 A. To my knowledge, no… 8 Q. Was Ms. Johnson testifying truthfully 9 that her counsel or Fagen's counsel came up with 10 the Big Blue purchase price number? 11 A. I don't think I can answer that. 12 Q. Why not? 13 A. Because I don't remember. 14 Q. Okay. What specifically do you not 15 remember? 16 A. I don't know how to answer that 17 question…” 9 Q. No. Look, all right, I think I should 10 explain my question a little bit. I'm not talking 11 about the signing of the document, I'm not talking 12 about the subsequent negotiation -- or the 13 negotiation that preceded the execution of the 14 document. What I'm trying to get at is the 15 formulation of the purchase price and how a 16 reduction in the term loan debt came to represent 17 the purchase price, how that concept was, a, 18 contrived, and, b, who came up with the idea -19 A. I can't answer it. Q. Now, can you tell me why the purchase 7 price is based on a reduction of only 95 percent of 8 those particular term loans that are integrated 9 into the final purchase agreement? 10 A. No. 11 Q. Did any party, to your recollection, 12 propose a different percentage? 13 A. I don't recall.” 4

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See Excerpts of Deposition of Thomas A. Jensen, Exhibit 3 to Rosa Decl. at pp. 6-7, 23-24 (boldface and italic emphasis added).2 After myriad questions mostly resulting in the same obfuscation by Mr. Jensen, Exergy suspended the deposition with the admonition that a motion to compel may be filed. See Rosa Decl. at ¶ 4 and Exhibit 3 at pp. 34-35. Between 6 July and 7 July 2015, Exergy’s counsel exchanged extensive meet and confer correspondence with counsel for Fagen/MET regarding their deficient testimony regarding Topic 7 in compliance with Local Rule 7.1(a). See Meet and Confer Statement, filed concurrently herewith, and Exhibit 1-4 thereto.

Fagen’s refusal to cooperate with

providing complete testimony has made the present Motion necessary and exasperated the continuing circus of this litigation . See id. II. DISCOVERY REQUESTS AT ISSUE Pursuant to Local Rule 37.02, the following constitutes the document request at issue in this Motion: SUBJECT MATTER FOR DEPOSITION: “7. The formulation of the $11,447,000 purchase price for the ninety-nine (99) membership units in Exergy Minnesota Holdings, including (without limitation) the participation of Jennifer Johnson in the process. See, e.g., Fagen Depo. at 122:10-129:6.” See Exhibit 1 to Rosa Decl.

For the Court’s ease of reference, a full copy of the condensed transcript of Thomas A. Jensen’s deposition testimony is submitted concurrently herewith under seal, with relevant portions of the transcript highlighted. 2

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RESPONSES TO DATE: 1.

Jennifer Johnson’s testimony that Fagen’s counsel the firm known (at the

time) as Leonard Street and Deinard were responsible for the formulation of the purchase price in question and knowledgeable of information responsive to questions directly relevant to the subject matter of Topic No. 7. See Exhibit 2 to Rosa Decl. 2.

Thomas A. Jensen’s testimony that he neither knew nor could recall

information responsive to questions directly relevant to the subject matter of Topic No. 7, specifically the following questions/lines of inquiry: Deposition Question

Response Alleged to be Deficient

did counsel come up with the number A. I don't remember. Id. at 6:17. that represents the Big Blue purchase price? See Deposition of Thomas A. Jensen dated 26 June 2015 (“Jensen Depo.”) at 7:8-10. Q. Is there anything you could refer to A. To my knowledge, no. Id. at 6:20. that would refresh your recollection? Id. at 6:18-19. Q. Was Ms. Johnson testifying truthfully A. I don't think I can answer that. Id. at that her counsel or Fagen's counsel came 7:11. up with the Big Blue purchase price number? Jensen Depo. at 7:8-10. Q. Why not? Id. at 7:12.

A. Because I don't remember. Id. at 7:13.

Q. Let's break it down, then, with that A. Not much. I mean, I wasn't –Id. at 14:20. answer. What can you tell me about the communications between Ron Fagen and James Carkulis regarding this concept? Id. at 14:16-19.

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Q. What is that? Id. at 14:21.

A. Well, I mean, I wasn't -- I mean, I can't -- I just can't remember if I was even on a call or anything that they were both on that I would -- that would have been their conversation. Id. at 14:22-25

What I'm trying to get at is the formulation A. I can't answer it. Id. at 15:19. of the purchase price and how a reduction in the term loan debt came to represent the purchase price, how that concept was, a, contrived, and, b, who came up with the idea -- Id. at 15:14-18. Q. Okay. I mean, that gets us part of the A. I don't remember. Id. at 16:13. way there. But do you recall who proposed the notion of reducing the purchase price? Was it a concept that originated with Exergy, to your knowledge, or was it a concept that originated on the Fagen side of the table? MR. THOMAS: You mean reducing the debt? You said reducing the purchase price. MR. ROSA: Excuse me, Rich. Thank you. BY MR. ROSA: Q. Reducing the debt on –Id. at 16:2-12. Q. Now, can you tell me why the purchase A. No. Id. at 24:10. price is based on a reduction of only 95 percent of those particular term loans that are integrated into the final purchase agreement? Id. at 24:6-9. Q. Did any party, to your recollection, A. I don't recall. Id. at 24:13. propose a different percentage? Id. at 24:11-12.

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III. SUMMARY OF DISCOVERY ISSUES Based upon the foregoing, the discovery issues before this Court are as follows: 1. Whether Fagen/MET should be ordered to direct Thomas A. Jensen to submit to examination again after due preparation by consulting all files and documentation relevant to the subject matter identified in Topic 7 of the Notice. 2. In the alternative, whether Fagen/MET should be ordered to nominate another deponent competent to submit to examination again after due preparation by consulting all files and documentation relevant to the subject matter identified in Topic 7 of the Notice.

IV. ARGUMENT Fagen/MET, and more specifically its counsel, are deliberately obstructing Exergy’s right to discovery. Fagen/MET representative, Jennifer Johnson, openly admitted (a) that Fagen/MET’s legal counsel was responsible for the formulation of the Big Blue Purchase Price identified in the Purchase Agreement, and (b) that Thomas A. Jensen was the attorney primarily knowledgeable about the transaction. See Exhibit 2 to Rosa Decl. When deposed about the same subject matter, Mr. Jensen refused to either (a) confirm that his own client’s allegations were correct; (b) formulate any recollections about the subject matter he was being examined about; or (c) convey any substantive information about the subject matter of examination. See Exhibit 3 to Rosa Decl. Fagen/MET has implicated its counsel as the party responsible for making a critical business decision on its behalf and, in characteristic form, its counsel has refused to provide information in response to Exergy’s request. 8

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A.

Exergy’s Motion to Compel Concerns Subject Matter That Fall

Squarely within the Scope of Discoverable Material. F.R.C.P. 26(b)(1) defines the scope of discovery in civil litigation as follows: The parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense – including the existence, description, nature, custody, condition, and location of any document or other tangible things and the identity and location of persons who know of any discoverable matter. For good cause, the Court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence… Fed. R. Civ. P. 26(b)(1). “Rule 26(b) of the Federal Rules of Civil Procedure is widely recognized as a discovery rule which is liberal in scope and interpretation . . .” Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992). Here, the information sought by way of Exergy’s Deposition Notice is essential the very nature of discoverable information in this matter. Fagen/MET openly disclosed that the formulation of the Big Blue Purchase Price was the machination of its counsel and explicitly identified which attorney (i.e. Thomas A. Jensen) was responsible for the transaction memorialized in the Purchase Agreement. See Exhibit 2 to Rosa Decl. The deposition of Mr. Jensen was therefore the obvious discovery proceeding by which this information could be obtained; Fagen/MET’s identification and nomination of Mr. Jensen to testify as a corporate representative on Topic No. 7 confirms this. The disconnect, however, lies in Mr. Jensens’s refusal to provide substantive responses. See, e.g., Section II, supra.

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B.

Exergy is Entitled to a Complete Response to Its Discovery Requests

under the Applicable Federal Rules of Civil Procedure. F.R.C.P. 37(a) authorizes the filing of a motion to compel complete answers where previous answers have been incomplete or evasive and states, in pertinent part, that: “ (B) To Compel a Discovery Response. A party seeking discovery may move for an order compelling an answer, designation, production, or inspection. This motion may be made if: (i) a deponent fails to answer a question asked under Rule 30 or 31; (ii) a corporation or other entity fails to make a designation under Rule 30(b)(6) or 31(a)(4); (iii) a party fails to answer an interrogatory submitted under Rule 33; or (iv) a party fails to respond that inspection will be permitted— or fails to permit inspection—as requested under Rule 34. (C) Related to a Deposition. When taking an oral deposition, the party asking a question may complete or adjourn the examination before moving for an order. (4) Evasive or Incomplete Disclosure, Answer, or Response. For purposes of this subdivision (a), an evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer, or respond.” Fed. R. Civ. P. 37(a)(3)(B), (a)(4) (boldface emphasis added). The evasive and conveniently lacking state of Fagen’s primary transactional counsel regarding the details of a topic and a business decision that his own client stated he was responsible for is precisely the sort of evasive response that F.R.C.P. 37 is intended to address. In the specific context of a corporate representative deposition such as that which is at issue in the present Motion, "[T]he responding party must make a conscientious goodfaith endeavor to designate the persons having knowledge of the matters sought by [the opposing party] and to prepare those persons in order that they can answer fully,

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completely, and unevasively, the questions posed by [the opposing party] as to the relevant subject matters." Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633, 638 (D.Minn. 2000) (emphasis added). Furthermore, "Any other interpretation of the Rule would allow the responding corporation to 'sandbag' the depositional process 'by conducting a half-hearted inquiry before the deposition but a thorough and vigorous one before the trial.' " Id. Here, Fagen/MET and its counsel have attempted to shield themselves from scrutiny by claiming that a Motion to Compel cannot force Mr. Jensen to recall what he does not recall. See Exhibit 2 to Meet and Confer Statement. This is an illegitimate response. Fagen/MET is obligated to prepare its corporate representatives for deposition. See, e.g., Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633, 638 (D. Minn. 2000) (describing corporation’s obligation to prepare 30(b)(6) deponents, possibly “by having them review prior fact witness deposition testimony as well as documents and deposition exhibits”). However, what is unique in this situation is that the client’s nominated defendant is the attorney who was in charge of the transaction and a member of the law firm that serves as counsel of record for Fagen/MET in this action. It is impossible to believe that the reasons for the formulation of the Big Blue Purchase Price have evaporated into thin air, that Mr. Jensen could not identify what files or documents he might review to refresh his recollection on the very transaction he was responsible for, or that he would not even review the file prior to the deposition. This is further established by the fact that Mr. Jensen has sat for examination in this case before regarding other issues pertaining to the transactions between Exergy and Fagen. See Exhibit 4 to Rosa Decl. Mr. Jensen’s level 11

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of recollection and competency in testimony in that earlier deposition indicates that he is not ignorant of the transactions at issue in this case as his recent testimony contemplated by this Motion would lead one to believe. Id. Exergy urges the Court to not be duped by the actions of Fagen/MET and its counsel in this regard. Exergy is entitled, as a matter of law, to complete and responsive answers to its discovery requests, including all deposition questions. Fagen’s/MET’s counsel have been identified as the parties having knowledge. They therefore do not have the luxury of not remembering and not being able to even recall what documents might exist to refresh their remembrances of things past. In the words of the legendary Judge Learned Hand: “a court ought not to be put off by [a] transparent sham, and the fact that the witness gives some answer cannot be an absolute test.” United States v. Appell, 211 F. 495 (S.D.N.Y. 1913) (quoted in Life Music Inc. v. Broadcast Music, Inc., 41 F.R.D. 16, 24 (S.D.N.Y. 1966) (pattern of evasive (“I don’t recall”) deposition testimony sanctioned)). C.

Fagen/MET Should be Compelled to Either Produce Mr. Jensen for

Further Examination or Present a Witness Competent to Testify to the Topic in Question. Although Fagen/MET has nominated what Exergy believes is the proper designee to testify regarding Topic No. 7, should this Court consider the attorney identified by his own client as having responsibility for the decision about which information is sought NOT the correct party to give testimony, it is therefore only proper that the Court order Fagen/MET to designate another witness possessing the knowledge necessary to give

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Exergy the full and complete responses to its examination as it is entitled to do so under F.R.C.P. 37. D.

Exergy is Entitled to an Award of Attorneys’ Fees and Costs Incurred

in Bringing the Present Motion. Fagen/MET and, in this particular instance, its counsel, have dragged this exercise in fact discovery far beyond the deadline for the completion of such discovery, Fagen/MET and its counsel have nominated not one, but two witnesses who have been incompetent to provide responses to Topic No. 7 and the deposition examination about that topic. There has been a complete stonewalling of Exergy’s attempts to meet and confer in good faith about this topic. Now, the only recourse Exergy has is to file the present Motion to Compel. This chronology of bad faith and gamesmanship is precisely the sort of conduct that justifies an award of attorney’s fees and costs payable to by Fagen/MET and/or its counsel. Should this Honorable Court grant the present Motion to Compel, Exergy respectfully requests that the Court also grant its request for sanctions and allow Exergy leave to submit an Affidavit of Fees and Costs for the Court’s approval. V. CONCLUSION Based upon the foregoing, Exergy respectfully requests (a) an Order compelling either: (i) Thomas A. Jensen to sit for further examination or (ii) the nomination of another deponent competent to testify regarding Topic No. 7; (b) an Order directing Fagen/MET’s counsel to properly prepare Mr. Jensen or an alternate nominee to testify to the fully extent

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possible within the parameters of F.R.C.P. 30(b)(6); and (c) an Order granting Exergy an award of attorney’s fees and costs payable by both Fagen/MET and its counsel.

DATED: 13 July 2015

Respectfully Submitted,

/s/ Angelo L. Rosa Angelo L. Rosa, Esq. (Admitted Pro Hac Vice) MARSH ROSA LLP P.O. Box 1605 Boise, Idaho 83701 Telephone: (801) 440-4400 Facsimile: (801) 415-1773 E-mail: [email protected]

/s/ Bryan R. Battina Bryan R. Battina (#338102) TREPANIER MACGILLIS BATTINA P.A. 8000 Flour Exchange Building 310 Fourth Avenue South Minneapolis, Minnesota 55415 Telephone: (612) 455-0503 Facsimile: (612) 455-0501 E-mail: [email protected] ATTORNEYS FOR DEFENDANTS/COUNTERCLAIMANTS/CROSSCLAIMANTS EXERGY DEVELOPMENT GROUP OF IDAHO, LLC, AND DEFENDANT JAMES T. CARKULIS, INDIVIDUALLY

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on 13 July 2015 I submitted the foregoing to the Clerk of the Court for service on CM/ECF Registered Participants as reflected on the Notice of Electronic Filing, including, but not limited to, the following: Keith Moheban

[email protected]

Timothy Kelley

[email protected]

James C. MacGillis

[email protected]

Bryan R. Battina

[email protected]

Richard J. Thomas

[email protected]

Bryon Ascheman

[email protected]

/s/ Angelo L. Rosa _____ _____ Angelo L. Rosa

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