Case 2:11-cv-01315-JAK-CW Document 98 Filed 03/04/13 Page 1 of 10 Page ID #:1386

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BOSTWICK & JASSY LLP GARY L. BOSTWICK, Cal. Bar No. 79000 gbostwick@bostwickjassy.com JEAN-PAUL JASSY, Cal. Bar No. 205513 jpjassy@bostwickjassy.com KEVIN L. VICK, Cal. Bar No. 220738 kvick@bostwickjassy.com 12400 Wilshire Boulevard, Suite 400 Los Angeles, California 90025 Telephone: 310-979-6059 Facsimile: 310-314-8401 THOMAS & LOCICERO PL JAMES J. MCGUIRE, admitted pro hac vice jmcguire@tlolawfirm.com DEANNA K. SHULLMAN, admitted pro hac vice dshullman@tlolawfirm.com 400 N. Ashley Drive, Suite 1100 Tampa, Florida 33602 Telephone: 813-984-3062 Facsimile: 813-984-3070 FOWLER & GOOD LLP CHRISTOPHER B. GOOD, Cal. Bar No 232722 cgood@fowlergood.com 15303 Ventura Blvd., 9th Floor Sherman Oaks, CA 91423 Telephone: 818-302-3480 Facsimile: 818-279-2436 Attorneys for Defendant INVESTORSHUB.COM, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA KENNETH EADE, Plaintiff, v. INVESTORSHUB.COM, INC., a Florida corp., DOE 1, aka NO DUMMY, DOE 2, aka JANICE SHELL, DOE 3, aka FASTER183, DOE 4, aka STOCK MAVIN, DOE 5, aka RENEE, DOE 6, aka VIRTUAL DREW, DOE 7, aka BOB 41, DOE 8 aka OVERACHIEVER, DOE 9, aka DOBERMAN, and DOE 10, Defendants.
CASE NO. CV11-01315 JAK (CWx)
APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

Case No. CV11-01315 JAK (CWx) DEFENDANT INVESTORSHUB.COM, INC.S NOTICE OF APPLICATION AND APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE AGAINST KENNETH EADE FOR FAILURE TO COMPLY WITH COURT ORDERS Date: April 1, 2013 Time: 1:30 pm Courtroom: 750

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TO ALL THE PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that Defendant Investorshub.com, Inc. will, and hereby does, request that this Court issue an Order to Show Cause compelling plaintiff Kenneth Eade (Eade) to appear to this Court and to show what cause he has, if any, and why he should not be held in contempt for failing to comply with the Court orders of September 27, 2011 and July 2, 2012. Pursuant to the Courts January 7, 2013 Order, notice is hereby given that the Court has set an Order to Show Cause hearing for April 1, 2013 at 1:30 p.m. in Courtroom 750 of the above entitled court located at 255 E. Temple Street, Los Angeles, California, 90012. This application is made on the grounds that Eade has failed, without adequate excuse, to obey the Courts orders of September 27, 2011 and July 2, 2012. Investorshub.com, Inc.s application is based on the Notice, the accompanying Memorandum of Points and Authorities, the Declaration of Christopher B. Good, all papers and pleadings on file with the Court, all papers and pleadings of which this Court may take judicial notice, and such further evidence and argument which may be presented to the Court. This Application is made pursuant to the January 7, 2013 Court Order and following multiple conferences with Eade pursuant to Local Rule 7-3. (Declaration of Christopher B. Good, 3)

Dated: March 4, 2013

BOSTWICK & JASSY LLP By /s/ Kevin L. Vick KEVIN L. VICK

THOMAS & LOCICERO PL By

CASE NO. CV11-01315 JAK (CWx)

/s/ Deanna K. Shullman DEANNA K. SHULLMAN

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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CASE NO. CV11-01315 JAK (CWx)

Admitted pro hac vice FOWLER & GOOD LLP By /s/ Christopher Good CHRISTOPHER B. GOOD Attorneys for Defendant InvestorsHub.com, Inc.

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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MEMORANDUM OF POINTS AND AUTHORITIES Defendant Investorshub.com, Inc. through its counsel of record herein, requests that this Court issue an Order to Show Cause compelling compliance with the September 27, 2011 and July 2, 2012 Court orders (Court Orders) and order that Kenneth Eade (Eade) appear in this Court and show what cause he has, if any, and why he should not be held in contempt for failing to comply with the Court Orders. Eade should also be ordered to make all payments pursuant to the aforementioned Court Orders within ten (10) days. I. BACKGROUND The underlying Libel lawsuit filed by Eade was dismissed in favor of Defendants on a special motion to strike pursuant to California Code of Civil Procedure 425.16 et seq (Anti-SLAPP motion ) on July 12, 2011. (Docket 53, Courts Minutes (In Chambers) Order, dated July 12, 2012). Subsequent to that order, a motion was brought for the Recovery of Attorneys Fees and Costs Pursuant to the California Code of Civil Procedure 425.16(c). The Court granted Investorshub.com, Inc.s Motion on September 27, 2011 and ordered costs and fees in the amount of $49,000.00 to be paid by Eade to Investorshub.com, Inc. within thirty (30) days. (Docket 60, Courts Order Awarding Attorneys Fees, dated September 27, 2011). Eade did not abide by the Court Order and did not pay the costs and fees award as required. (Declaration of Christopher B. Good, 4). On December 9, 2011, a Motion for Sanctions against Plaintiff Kenneth Eade was filed by Defendant Investorshub.com, Inc. On February 13, 2012, the Court stated in its Civil Minutes that Plaintiff failed to submit any evidence of his inability to pay the awarded attorneys fees and comply with the Courts prior Orderthe Courts tentative view is that the Court will set and Order to Show Cause re: Contempt subject to the submission of supplemental briefing of the parties (Docket 69, Courts Minute of
CASE NO. CV11-01315 JAK (CWx)

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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Defendant Investorshub.com Inc.s Motion for Contempt and/or Sanctions Against Plaintiff for Failure to Comply with Courts Order Re Payment of Attorneys Fees, dated February 13, 2012.) Upon supplemental briefing, the Court imposed sanctions of $2,500 against Eade, required Eade to participate in a debtors examination and ordered Eade to submit monthly updates in writing to defense counsel regarding the status of the French proceedings (Docket 72, Courts Minutes of Defendant Investorshub.com Inc.s Motion for Contempt and/or Sanctions Against Plaintiff for Failure to Comply with Courts Order Re Payment of Attorneys Fees, dated March 26, 2012.) Neither the sanctions nor monthly update has been complied with by Eade. (Declaration of Christopher B. Good, 4, 5). At the July 2, 2012 Court hearing, the Court admonished Judgment Debtor for not appearing as there were many lines of inquiry the Court wished to discuss with Judgment Debtor regarding his assets; including, but not limited to, his ability to pay for an extended trip to Mexico while claiming a lack of financial resources, his failure to explain the ownership of the Maserati, the status of his family law proceeding, the present value of his stock and the status of the French property. (Docket 79, Court Minutes of Status Conference, dated July 2, 2012.) Eade, in response to the Courts strong urging to pay the amounts ordered by the Court, indicated in his November 13, 2012 declaration that [t]his month [November], I will begin making monthly payments to the Defendants voluntarily until I can sell the property in France and pay off the judgment, but the Defendant is not satisfied with the monthly payments and has offered to settle for monthly payments that are equivalent of over half my monthly disposable income. (Docket 91, Status Report filed by Plaintiff Kenneth Eade 9, dated November 13, 2012). Over the past 5 months, Eade has paid only $2,000 and has not met his obligation to submit monthly updates regarding the French property. (Declaration of Christopher B. Good, 4, 5). At the January 7, 2013 Further Status Hearing, the Court ordered
CASE NO. CV11-01315 JAK (CWx)

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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an Order to Show Cause Hearing Regarding civil contempt which the Court set for April 1, 2013 at 1:30 p.m. The Court directed Investorshub.com, Inc. to timely file this application. (Docket 97, Court Minutes: Status of Conference re Settlement, dated January 7, 2013.) II. EVIDENCE OF CONTEMPT A. Violation of Multiple Court Orders The Court has issued two separate orders requiring Eade to pay Defendant Investorshub.com, Inc. The first Court order was on September 27, 2011 and Eade was ordered to pay $49,000.00. The Second Court order was on March 26, 2012 and Eade was sanctioned in the amount of $2,500.00. To date, Eade has paid only $2,000.00 towards the $51,500.00 that he has been ordered to pay. In addition to refusing to comply with the Courts monetary orders, Eade has also failed to comply with the Courts March 26, 2012 order to provide monthly updates regarding the status of the French property. Eade also has refused to provide actual financial data in connection with his claims of inability to pay the Courts orders as requested by the Court. (Docket 69, Court Civil Minutes from February 13, 2012.) B. Eades Misrepresentations to the Court and Transfer of Assets Subsequent to the September 27, 2011 Court Order Throughout the last year and a half, Eade has failed to disclose or has misrepresented his financial situation to the Court and Investorshub.com, Inc. Of particular import is the status of his ownership in stock for the Independent Film Development Corporation. At the debtor examination of Eade in June of 2012, Eade claimed that the stock had no value and that he was unable to sell any of the stock. Despite the supposedly valueless nature of the stock, Eade indicated at the examination that he had transferred, in the past few months, in excess of 10,000,000 shares to his wife for
CASE NO. CV11-01315 JAK (CWx)

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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personal reasons, the stock certificates being held in an unknown location in Russia. He also testified that the transfer was done months before June 21, 2012. (A true and correct copy of excerpts from the Examination were attached as Exhibit 2 to the Declaration of Christopher B. Good filed in support of Docket 85, Status Report, dated September 27, 2012). This statement has been found to be inconsistent in two regards. First, the SEC filing in which Eade identifies the transferring of the stock, he indicates that the stock were transferred on June 4, 2012 as part of a separation agreement, just three weeks prior to the examination. (A true and correct copy of excerpts from the Examination were attached as Exhibit 1 to the Declaration of Christopher B. Good filed in support of Docket 85, Status Report, dated September 27, 2012). Second, in his September 20, 2012 Status Report filed with the Court, Eade identified that his current wife, Valentina Eade, holds 6,486,900 shares of Independent Film Development Corporation. (Docket 84, Status Report of Plaintiff Kenneth Eade, pg. 2:23-24, dated September 20, 2012). Eade has yet to explain why he misrepresented the transfer date of the stock or why he transferred the stock, either the 10 million or 6.5 million, in the first place if it had no value. Eade also identified a transfer to a client of approximately 500,000 shares as a thank you.. This transfer also occurred in the past few months prior to June of 2012. (A true and correct copy of excerpts from the Examination were attached as Exhibit 2, pgs. 70-77, 127-133 to the Declaration of Christopher B. Good filed in support of Docket 85, Status Report, dated September 27, 2012). What is clear is that all these transfers were all done after the September 27, 2011 Court Oder. Eade should have to explain these stock transactions to the Court. C. Eades Refusal to Pay De Minimis amounts in spite of the Discontinuing of Spousal Support Eade has confirmed in the examination and in subsequent declarations with the Court that his Spousal Support payments have ceased. By his own admission, this should free up $1,000 per month to pay iHub. Further, Eade has indicated that he is
CASE NO. CV11-01315 JAK (CWx)

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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in the process of a work-out with the IRS whereby he is hopeful to be able to pay a lump sum to clear the outstanding balance. This would free up an additional $2,000+ per month in payments. (A true and correct copy of excerpts from the Examination were attached as Exhibit 2, pgs. 207-213 to the Declaration of Christopher B. Good filed in support of Docket 85, Status Report, dated September 27, 2012). Despite these admissions, Eade has only made 2 payments of $1,000 since September 2012. D. Eades Failure to Disclose other Relevant Proceedings Finally, Eade has shown a pattern of concealment in regards to his assets. Eade only discloses information regarding his assets to the Court upon Investorshub.com, Inc. informing the Court of assets which Eade has withheld disclosure of from the Court. At no time prior to January 3, 2013, did Eade identify in any of his declarations that he was awarded $125,000 and the return of 3 million shares of Independent Film Development Corporation in July 30, 2012. While Eade indicated in his declaration that he does not believe the monetary judgment is collectible, and the transfer agent has not yet issued [him] the 3 million shares his declaration does not explain why he had not previously disclosed this asset to the Court. (Docket 95, Status Report Re: Motion for Contempt, and/or Monetary Sanctions, dated January 3, 2013.) The fact is that he only disclosed this information because Investorshub.com, Inc. indicated to the Court that such asset was in existence. The Court made clear in the February 13, 2012 order that Eade has the burden of establishing the inability to pay the awarded attorneys fees. (Docket 69, Court Minutes of Defendant Investorshub.com, Inc.s Motion for Contempt, dated February 13, 2012.) Eade has not met his burden and therefore is clearly in contempt of the Courts multiple orders.

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CASE NO. CV11-01315 JAK (CWx)

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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III. LEGAL ARGUMENT Federal Courts have the inherent power to impose sanctions against parties and attorneys for willful disobedience of Court orders or bad faith misconduct. See Chambers v. NASCO, Inc., 501 U.S. 32, 43-44, 111 S.Ct. 2123 (1991); see also Fink v. Gomez, 239 F. 3d 989, 991 (9th Cir. 2001) (federal court has inherent power to levy sanctionsfor willful disobedience of a court order) (internal quotations omitted). Federal courts also have inherent power to punish for contempts. See Chambers, 501 U.S. at 44. The underlying concern that gave rise to the contempt powerwas disobedience to the orders of the Judiciary[.] Id. (quoting Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 798, 107 S.Ct.2124, 2132 (1987)); see also Roadway Exp., Inc. v. Piper, 447 U.S. 752, 764, 100 S. Ct. 2455 (1980) (core purposes of the contempt sanction are protecting the due and orderly administration of justice and in maintaining the authority and dignity of the court) (internal quotations omitted). Courts are authorized to impose a wide range of sanctions pursuant to their inherent power, including censure or formal reprimand, fines, attorneys fees and costs, or compensatory damages. See e.g., In re Girardi, 611 F.3d 1027, 1039, 1067-1068 (9th Cir. 2010) censure or formal reprimand, and attorneys fees and costs); Resolution Trust Corp. v. Dabney, 73 F. 3d 262,267 (10th Cir. 1995) (fines); B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1108-1109 (9th Cir. 2002) (compensatory damages).

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE

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CASE NO. CV11-01315 JAK (CWx)

IV. CONCLUSION For the foregoing reasons, Investorshub.com, Inc. respectfully requests that this Court issue an Order to Show Cause requiring Kenneth Eade to explain why he should not be held in contempt of court for failure to abide by the September 27, 2011 and July 2, 2012 Court orders and further order that all payments be made within ten (10) days.

Dated: March 4, 2013

BOSTWICK & JASSY LLP By /s/ Kevin L. Vick KEVIN L. VICK

THOMAS & LOCICERO PL By /s/ Deanna K. Shullman DEANNA K. SHULLMAN Admitted pro hac vice

FOWLER & GOOD LLP By /s/ Christopher Good CHRISTOPHER B. GOOD Attorneys for Defendant InvestorsHub.com, Inc.

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APPLICATION FOR ORDER TO SHOW CAUSE WHY A CONTEMPT CITATION SHOULD NOT ISSUE