response to johnson protective order

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF OHIO

In re: : Case No. 14-57104 : John Joseph Louis Johnson, III, : Chapter 11 : Debtor and Debtor in Possession. : Judge John E. Hoffman, Jr.

OMNIBUS RESPONSE OF THE OBJECTING CREDITORS IN OPPOSITION TO (I) THE MOTION OF DEBTOR AND DEBTOR IN POSSESSION FOR ENTRY OF A

PROTECTIVE ORDER CONCERNING DEPOSITIONS SCHEDULED FOR AUGUST 21, 2015, AND (II) THE MOTION OF JOHN JOSEPH LOUIS JOHNSON II AND

KRISTINA JOHNSON FOR PROTECTIVE ORDER

RFF Family Partnership, LP (the “Family Partnership”), for itself and on behalf of

Capital Financial Holdings, LLC, Capital Holdings Enterprises, LLC, Cobalt Sports Capital,

LLC, EOT Advisors, Inc., ProPlayer Funding, LLC, and Rodney Blum (collectively with the

Family Partnership, the “Creditors”), responds as follows in opposition to (i) the Motion of

Debtor and Debtor in Possession for Entry of a Protective Order Concerning Depositions

Scheduled for August 21, 2015 filed August 17, 2015 [ECF 353] (the “DIP Motion”) by John

Joseph Louis Johnson III (the “Debtor”), debtor and debtor in possession herein, and (ii) the

Motion of John Joseph Louis Johnson II and Kristina Johnson for Protective Order also filed

August 17, 2015 [ECF 351] (the “Parents’ Motion” and together with the DIP Motion, the

“Motions”) filed by the Debtor’s parents, John Joseph Louis Johnson II and Kristina Johnson. As

set forth below, those Motions seek to improperly limit the Creditors’ discovery as to these

important witnesses1 with respect to the Debtor’s motion (the “Conversion Motion”) to convert

1 As the Court is aware the Debtor has consistently blamed his parents for his financial circumstances, claiming that they improperly took out loans from the Creditors on his behalf. In addition, the Debtor has listed his parents as potential witnesses in his initial disclosures, indicating his intent to call them at the evidentiary hearing. That is clearly inconsistent with their

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this chapter 11 case to a case under chapter 7 of title 11 (the “Bankruptcy Code”) of the United

States Code. The evidence the Creditors intend to elicit from them goes to the totality of the

circumstances here and specifically to, among other things, the Debtor’s alleged good faith

herein and his qualifications to be a debtor under chapter 7 of the Bankruptcy Code – two of

several essential issues that are before the Court with respect to the Conversion Motion. Given

that, the limitations jointly requested by the Debtor and his parents are absolutely improper. The

remaining ‘parade of horribles’ set forth in the Motions (such as their “fear” that the parents’

depositions could go the full 14 hours allowed under the rules and that the Debtor’s parents

would then have to either spend the night in a hotel or drive home in the dark) are ridiculous, an

eventuality that would only occur should the Debtor and/or his parents (collectively, the

“Johnsons”) further impede, delay or frustrate the depositions.2 In sum, the Motions are without

merit and should be denied.

RESPONSE IN OPPOSITION3

position now that the Conversion Motion is limited to post-petition conduct given his consistent claim that he has had little if any communication with his parents since the commencement of this case.

2 In fact, the reasons that both of the Debtor’s parents depositions are now scheduled to begin and end on August 21 (the last day for discovery herein) is as an accommodation to their counsel who requested they be moved from the original start date of August 17 since he claimed to have a conflict that date and that he needed the next days to prepare his witnesses (the undersigned is unavailable on August 20), coupled with the refusal of Debtor’s counsel to agree to extend the time to conclude discovery beyond August 21. (It is also important to note that the Debtor himself recently cross-noticed his parents’ deposition to commence immediately following those of the Creditors, thereby himself extending the depositions.)

3 Given the extraordinarily compressed time frame allowed for the briefing of this issue, the Family Partnership will forego a detailed background statement, since the Court is generally aware of the facts underlying this contested matter. Nonetheless, suffice it to say that the Debtor’s parents have closely followed the Debtor’s play book by seeking to frustrate at virtually every turn the Creditors’ legitimate discovery efforts, including by avoiding service of the subpoena herein and other delay tactics with the result that the Creditors are being forced to depose these critical witnesses on the very last day allowed for discovery. The simultaneously


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As they of course informed the Debtor prior to the filing of the Motions, the Creditors

intend to proceed with discovery in this contested matter in accordance with the applicable

rules.4 Thus, the Creditors will examine the Debtor’s parents as to non-privileged matters

relevant to the Conversion Motion. More specifically, the Creditors’ plan to examine the

Debtor’s parents as to certain claims and defenses respecting the Conversion Motion, and to do

so regardless of whether those claims and defenses touch on facts arising from the period prior or

subsequent to the commencement of this case. That is entirely proper and necessary. For

example, the Creditors will examine the Debtor’s parents as to the Debtor’s alleged investigation

and his failure to pursue claims herein. As stated in the objection [ECF 186] of Capital Financial

Holdings, LLC to the Conversion Motion at p. 2, the Creditors believe that “[the] Debtor has …

made literally no apparent effort to investigate and prosecute claims and causes of action against

the ‘advisors’ that he claims fraudulently borrowed millions of dollars from the creditors in this

case without his knowledge or consent.”5 The Creditors are entitled to discovery in that respect,

particularly in light of the Debtor’s perfunctory claim that, “[he] has not pursued claims against

his parents because the Debtor has no reason to believe that his parents have any assets or

meaningful income from which to satisfy claims that may exist.” Debtor’s reply brief in support

of Conversion Motion (the “Reply”) [ECF 197] at ¶ 74. That the Creditors’ examination will by filed DIP Motion and Parents’ Motion are only the most recent of the Johnsons’ stratagems in this respect.

4 The Johnsons misrepresent the discussions among counsel prior to the filings of the Motions by implying that Mr. Levinson was unreasonable by not agreeing to designate one attorney to question the Debtor’s parents, would not agree to limit the scope of the depositions, and saying he planned to use the full 7 hours for each of the deponents. In fact, the undersigned informed the Johnsons’ counsel that the Creditors had not then determined the examiner(s) and that the Creditors would otherwise proceed in accordance with and as limited by the applicable rules.

5 The Debtor has elsewhere acknowledged that his so-called advisors were in actual fact his parents.


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necessity touch on the knowledge and actions of the Debtor’s parents prior to the commencement

of this case, is both obvious and essential since that is the only way the Creditors will obtain

information as to the substance and extent of that investigation.

Further, the Creditors intend to seek discovery with respect to underlying details and

accuracy of the Debtor’s contention that, “[his] counsel has requested documents and

information from his parents,” and that, “[t]o date, his parents have not provided documents that

precede the bankruptcy.” Reply ¶ 75. Given the obvious continued close relationship between the

Debtor and his parents6 and the critical importance of this issue relative to the Debtor’s claimed

good faith in his prosecution of this chapter 11 case as fiduciary for the Creditors, it is absolutely

appropriate in this context that the Creditors independently examine the Debtor’s parents as to

nature, extent and findings of the Debtor’s alleged investigation.7

Similarly, the Creditors intend to examine the Debtor’s parents with respect to the use of

the proceeds of the Creditors’ loans to the Debtor. Upon information and belief, and based on the

documents produced by the Debtor to date, a significant portion of those loan proceeds were

used by Kristina Johnson to purchase luxury consumer items and not, as the Debtor claims, for

business purposes. As this Court has noted, this goes directly to whether the Debtor would

qualify as a debtor under chapter 7 of the Bankruptcy Code. 8

6 Indeed, the Creditors find it quite troubling that the Debtor is essentially seeking to protect his parents through the DIP Motion rather than joining in or otherwise supporting the Creditors’ discovery efforts to reveal the facts surrounding his parents’ actions. The mere facts that Debtor’s counsel has led this effort, and the Motions were filed simultaneously and the arguments contained therein essentially mirror each another clearly demonstrate that the Debtor and his parents are proceeding in concert.

7 During his deposition the Debtor essentially refused to provide any details with respect to that investigation, asserting instead attorney client privilege.

8 The Debtor’s parents further claim that the Creditors are seeking to use the depositions as a way to gather information to validate their claims against the bankruptcy estates in general and


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In sum, the Johnsons’ concerted effort to impose limitations on the Creditors’

examination of the Debtor’s parents should be seen for what it is, a clear attempt to obstruct

proper discovery.9

Similarly, the Court should reject the additional absurd limitations the Johnsons seek to

impose on the Creditors. There is no basis for requiring the Creditors to produce to the Debtor 48

hours in advance of the deposition any documents they intend to use in examining the Debtor’s

parents, let alone barring their use if not so produced. (The Creditors note parenthetically that

those documents have not yet even been identified.)

Likewise, there is no basis to limit the number of examiners at the deposition. (The

Creditors note parenthetically that it is unlikely that all seven of them will want to examine the

Debtor’s parents. Indeed, several have already indicated their intent to just listen to the

depositions telephonically.)

Finally, there is no basis whatsoever to limit at this time the duration of the examination.

To do so will only invite further obstruction by the Debtor and his parents of the depositions

progress.

this is somehow improper, notwithstanding that a showing that those claims are in fact valid (as the Debtor well knows) is further evidence of the Debtor’s bad faith in the commencement of this case and the scheduling of some 63 of his 74 creditors (including all of the Creditors) as disputed. Indeed, the Debtor has taken the position in both the Reply and during his deposition that the Creditors’ loans are usurious and/or that the Creditors breached some duty to him. Since he also says his parents took out most of the loans, inquiry into their prepetition discussions involving the parents and the Creditors has been placed squarely at issue by the Debtor. So, he cannot now limit the Creditors’ discovery.

9 Based on the Debtor’s position that his parents improperly took out loans in his name and/or improperly diverted the proceeds to destinations unknown, the Creditors anticipate that the Debtor’s parents may well assert their right against self-incrimination under the Fifth Amendment to the U.S. Constitution. The Debtor’s attempt here to limit their testimony to post-petition date conduct, unrelated to their actions prepetition, may be designed to allow them to avoid ‘pleading the fifth.’


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response to johnson protective order