Exhibit 1

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R.O. vs. Medalist Holdings, LLC

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IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR THE COUNTY OF PIERCE

________________________________________________________

R.O., by and through her mother, )

S.H., and K.M., by and through )

her mother, L.M., )

)

Plaintiffs, ) No. 17-2-04897-1

)

vs. )

)

MEDALIST HOLDINGS, INC., et al. )

)

Defendants. )

_________________________________________________________

VERBATIM TRANSCRIPT OF PROCEEDINGS

_________________________________________________________

Wednesday, May 23, 2018

Before The Honorable G. Helen Whitener

Pierce County Courthouse

Tacoma, Washington

<<<<<< >>>>>>

Kimberly A. O'Neill, CCR #1954

Official Court Reporter

Department 11, Room 202-A

(253) 798-7281

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R.O. vs. Medalist Holdings, LLC

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A P P E A R A N C E S

For the Plaintiffs: MICHAEL T. PFAU

JASON P. AMALA

Attorneys at Law

PFAU COCHRAN VERTETIS AMALA PLLC

403 Columbia Street, Suite 500

Seattle, Washington 98104

(206) 462-4334

For the Plaintiffs: ERIK L. BAUER

Attorney at Law

THE LAW OFFICE OF ERIK L. BAUER

215 Tacoma Avenue South

Tacoma, WA 98402

For the Defendant: ERIC M. STAHL

JAMES GRANT

Attorneys at Law

Davis Wright Tremaine LLP

1201 Third Avenue, Suite 2200

Seattle, WA 98101-3045

(206) 622-3150

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R.O. vs. Medalist Holdings, LLC

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TABLE OF CONTENTS

R.O. vs. MEDALIST HOLDINGS, LLC

No. 17-2-04897-1

Proceedings of May 23, 2018

Page:

Plaintiffs' Motion to Compel Compliance with

Court's Order...................................6

Plaintiffs' Motion for Sanctions..................45

Defendant's Motion to Withdraw....................45

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R.O. vs. Medalist Holdings, LLC

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BE IT REMEMBERED that on Wednesday, the

23rd day of May, 2018, the above-captioned cause came on

duly for hearing before THE HONORABLE G. HELEN WHITENER,

Judge of the Superior Court in and for the county of Pierce,

state of Washington; the following proceedings were had, to

wit:

<<<<<< >>>>>>

THE COURT: All right. Good morning,

everyone.

MR. AMALA: Good morning, Your Honor.

MR. PFAU: Good morning, Your Honor.

MR. BAUER: Good morning, Your Honor.

MR. STAHL: Good morning, Your Honor.

MR. GRANT: Good morning, Your Honor.

THE COURT: Go ahead and be seated. All

right. We're on the record on R.O. vs. Medalist Holdings,

LLC, Cause No. 17-2-04897-1. Go ahead and introduce

yourselves for the record.

MR. PFAU: Michael Pfau on behalf of the

Plaintiffs, Your Honor.

THE COURT: Good morning.

MR. AMALA: And good morning, Your Honor.

Jason Amala on behalf of Plaintiffs.

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THE COURT: Good morning.

MR. BAUER: Good morning, Your Honor.

Erik Bauer for the Plaintiffs.

THE COURT: Good morning.

MR. STAHL: Good morning, Your Honor.

Eric Stahl, Davis Wright Tremaine, here for the Medalist

defendants.

THE COURT: All right. Good morning.

MR. GRANT: And good morning, Your Honor.

Jim Grant on behalf of the Medalist defendants as well.

THE COURT: All right. Counsels, we have

the motions that were brought previously set over to be

resolved today. We have the motion to withdraw. We also

have the objection to the withdrawal, and we have motions

for sanctions and attorney fees against Backpage pursuant to

CR 11. And, of course, we still have the issue regarding

the motion to compel; would that be accurate?

MR. PFAU: That's accurate, Your Honor.

MR. STAHL: Yes, Your Honor.

THE COURT: Okay. Any particular order?

MR. PFAU: Your Honor, we would like to

start with the motion to compel and then take the sanctions

motion separately. Mr. Amala is going to argue the motion

to compel, and I'm going to argue the motion for sanctions.

THE COURT: And, Counsel, what is your

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preference?

MR. STAHL: I think it makes sense to

start with the motion to withdraw first to make clear who we

are representing.

THE COURT: Well, I'd like to start with

the motion to compel as you were -- "you" being the

attorneys for the Defense -- representing the Defendants as

a whole at the time my order went into effect. The

withdrawal does not affect the decision in regards to

compliance on my motion -- or, actually, my order and the

motion to compel; so let's hear that one first.

MR. AMALA: Your Honor, may we approach?

THE COURT: Of course.

MR. AMALA: Good morning, Your Honor.

Jason Amala on behalf of the Plaintiffs, R.O. and K.M. And

I'll keep this somewhat succinct, Your Honor, because there

really wasn't much of an opposition to the motion, at least

substantively. In January, you entered a very clear order

that compelled these defendants to search for responsive

documents to our discovery requests and those discovery

requests had been issued months earlier. We finally came to

you for relief to get them to answer discovery or at least

to get the ball rolling. Those search terms and what they

were ordered to produce was very similar to what these

defendants -- or, actually, was identical to the search that

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these defendants had done in the J.S. litigation which was

litigated for five-plus years.

The Court's order was entered in January and over the

next five months until we filed this motion, we met and

conferred with the Defendants multiple times, trying to get

them to comply with the Court's order. It got to the point

where we asked them to at least start producing responsive

information on a rolling basis and what we were told was:

"We're still looking, and we don't know what records we

have; We're trying to identify what sources there are; We

haven't started our review yet." And we filed this motion

because the Defendants -- at least two of them pleaded

guilty. Their assets are being seized, and we still don't

have any documents in response to your order.

And I'll say what's most troubling is that we filed this

motion and in response, the representation to the Court was

the same representation that we had been hearing for five

months. And I think it's highlighted on Page 3 of their

opposition where they say, quote -- at Line 3, quote, "nor

have these documents been reviewed for privilege, privacy

concerns, or confidentiality," end quote. So in our reply,

we focused on this argument about reviewing for privilege

because that, really cutting to the chase, seemed like that

would be the one argument the Court might find somewhat

compelling, saying that these folks should have an

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opportunity to review for privilege; and it occurred to us

that the U.S. Senate had had a subpoena to which these folks

were ordered to comply. They were held in contempt of

Congress, and they litigated some of these issues before a

federal judge in D.C., and so we thought "let's go look at

the docket to see if there had been any court orders on this

privilege issue because if they have litigated the issue

somewhere else, they shouldn't get to relitigate it here."

And that's where we found -- what we provided in the

supplemental declaration of Mr. Pfau are the declarations by

counsel for these defendants, representing to the Court in

D.C. the exact opposite of what they're telling this Court,

and that is, that they spent 30,000 attorney hours reviewing

these same documents for these same issues and produced them

to the U.S. Senate. I believe the cost was around three

million dollars that they paid to their lawyers. What was

even more troubling is that Davis Wright Tremaine, the same

law firm who is here today -- and I'm going to give them the

benefit of the doubt to the extent we can. Ms. Roos'

declarations indicate that Davis Wright Tremaine was counsel

of record and oversaw that entire review and production; so

at some point, there had been this -- I think an argument

that, well, gosh, we've got to pretend like we don't know

what Perkins Coie did and now their own declarations from

Perkins Coie indicate that Davis Wright Tremaine oversaw

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that entire review for these same issues. They've already

done the review for privilege. They've already done the

review for responsiveness, and so that's why we'd ask that

the motion to compel be granted. The order that we've

provided to the Court allows them to withhold documents that

they have flagged for privilege as long as they haven't

litigated the issue and lost elsewhere and that seems

entirely appropriate.

And I will flag for the Court, because I understand at

the last hearing there was some arguments about, well, now

they want this stuff from the Senate, and we're going to

have to cross that bridge a different day because I'm very

concerned that we issued these discovery requests at the end

of last year. We have an order from you and now it appears

that they have reviewed all of these and cataloged them for

responsiveness, and yet we didn't get any of those in

response to our discovery requests, yet have we received any

documents in response to your order. So, we will cross that

bridge a different day; but for today, we ask the documents

that they have identified as being responsive to your order

be produced within a week. They know what documents are

privileged. They've flagged those in a prior case. My

understanding is they provided the U.S. Senate with a

privilege log, so that work has been done and there's no

reason that they can't comply with your order and produce to

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us what they flagged, withholding what they claim is

privileged as long as they haven't litigated that issue

somewhere else and lost. Thank you, Your Honor.

MR. STAHL: Your Honor --

THE COURT: Counsel?

MR. STAHL: Thank you, Your Honor. The

issue before the Court is whether there's any basis for the

overreaching remedy they're asking for in this case, for us

to turn over 1.1 million documents that we had identified as

having certain search terms in responding to this Court's

order, not in J.S., not in the Senate hearing. It's an

overreaching remedy, and they're conflating two different --

three different things.

The documents we reviewed for this --

THE COURT: Let me stop you there. It's

an "overreaching remedy" to comply with my order?

MR. STAHL: No, they're not asking -- it's

an overreaching remedy for them to ask for us to turn over

these 1.1 million documents, which, contrary to what

Mr. Amala just said, have not been flagged as responsive.

They have been flagged as having certain search terms. This

is not work that was done for the Senate cases. This is the

period of time after J.S., so it's not work that was done

for the J.S. case.

Let me just take a step back and --

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THE COURT: Well, before you get there --

because you tend to talk pretty fast so that's why I tried

to slow you down, not because I'm not hearing you. It's

because I'd like to hear and understand what you're saying.

What I'm asking is based on your review of all of the

documents you have and the order that I entered, you were

not able to find any documents, whatsoever, that needed to

be turned over to be complied with my order?

MR. STAHL: No.

THE COURT: Because what I heard Counsel

state is as of today's date, they have not received any

documents in response to my order; so just answer that.

MR. STAHL: That's not true. First of

all, they received 95,000 pages that we have previously

produced in J.S., number one. Number two, they received

some number of documents specific to this case -- to the

case -- specific terms -- search terms that they asked us to

run which we did and which we have produced.

THE COURT: And these were produced after

my order?

MR. STAHL: Correct.

THE COURT: Okay.

MR. STAHL: The part of your order that we

are here discussing is the part that said go around these

500-plus search terms on data not from J.S. but from the

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period after J.S., from 2012 to the present. We worked

diligently to comply with that. Let me tell you what we

did. When we ran those 500-plus search terms against two

terabytes of data that had been gathered in the Spring of

2016 -- and just for some perspective, I looked this up.

Two terabytes of data is something like 150 million pages of

data; it's a vast amount of material. If printed out, it

would be more than anyone in this room could read in a

lifetime.

We ran those search terms. The results that came back

from just the search terms was 1.1 million documents. We

acted diligently and transparently going to the Plaintiffs

and saying "here's what we've got; it is going to take eight

to twelve months to search this material." And their own --

their own declaration, what Mr. Amala just said, kind of

makes the point. For a similar volume of documents, it took

a year to produce in the Senate case. I was not involved in

J.S., but the discovery there took thousands of hours and

several years and cost millions of dollars.

We went to the Plaintiffs and we said, "Can we discuss

how you want us to search these documents; Can we be more

precise? Can we narrow the search terms, or can we make

them, you know, more tailored to a way that actually

generates responsive material?" So, the 1.1 million

documents are documents that just have words like

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"requirement" or "terms of use" in them. They're not

necessarily responsive to any discovery request.

My May 20th letter, which is in the record and which I

believe the Court has read, sets out what we did and what

we're asking the Plaintiffs to discuss. It was a diligent

attempt to cooperate with them to get the discovery done in

the time that we had under the case schedule. We sent that

letter on May 20th, and we asked to confer with them. It

took us, I'll tell you, ten days to even get them to agree

to speak to us. They put all kinds of conditions on wanting

to speak to us in terms of additional information we wanted.

We conferred on -- Friday, I believe, was the -- March 30th.

They asked for some additional information which we provided

in e-mails on May 3rd -- and I'm sorry, April 3rd and April

6th which are in the record, also, in Mr. Pfau's

declaration. They never responded to that, and literally

until the day that we got Mr. Ferrer's communication that

caused us to -- the need to withdraw from representing the

Backpage defendants, we were communicating with them; and we

were trying to figure out a way to make this workable. The

last communication and last attempt to confer among the

parties was that April 6th e-mail until we got the motion to

compel.

So, this notion that we were not trying to comply or

ignoring the motion is just not true. It's not born out by

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the record. It's false, and we were diligently trying to

figure out a way to get this job done in the time that we

provided. So when I say there's no basis for the remedy

they're proposing, we've got 1.1 million documents that have

a search term that have not been determined to be either

responsive or privileged or not. They have not been

reviewed. We currently don't have a client we can

represent. These are Backpage.com documents gathered by

Backpage for the J.S. case. We no longer are able to

represent or to produce documents on their behalf or to

review them.

In terms of where we are now, they're asking for an order

that would compel our firm to turn over a million documents,

to turn over the larger database in which they are situated

in and which the motion documents are located. We can't

turn over documents on behalf of a client we don't represent

without knowing what's in them, whether they have

confidential or privileged material. The Court can

certainly order us to preserve those records, order us to

cooperate with Backpage or with Counsel, which we're going

to do, anyway. And we are officers of the court, and we're

not going anywhere; but in terms of an order for us to start

reviewing and producing materials, much less to produce it

in a week, is not -- it's not realistic.

I'll also say that we have not met or conferred over the

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remedy they sought in this motion. The last communication,

again, was April 6th when we were trying to figure out how

to comply with the order generally. There was no meet and

confer over this idea that they can seize the 2-terabyte

database. There was no meet and confer over the idea that

we should turn over 1.1 million records in a week. The

request raises all kinds of practical problems and just

physically how those records would be copied, who would pay

for it, who would do the review, this sort of stuff the

parties are supposed to meet and confer over before

burdening the Court with a motion like this.

And, you know, I'll just add that the meet and confer

requirement is mandatory in Division II. Clarke vs. State

says you have to confer before you bring this to the Court.

They cite a Division I case, Amy vs. Kmart, that says, well,

in some circumstances, you don't need to confer. That's not

the rule in this division.

The documents -- the motion is not properly directed to

the clients that I'm standing here for today, the Medalist

parties. Again, these were collected by Backpage in the

course of the J.S. case. The Medalist parties were not

defendants, and so we would ask that the Court either deny

the motion or direct the parties to preserve the records and

to confer further.

THE COURT: So your remedy that you're

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requesting the Court to do today, Counsel, if I heard you

correctly, is to deny the motion and direct you to preserve

the records, which I believe I've already done, and direct

you to confer further for a client that you're indicating

you no longer represent.

MR. STAHL: My request is that you deny

the motion. I'm suggesting, if the Court is inclined to do

so, that it could extend the existing preservation order;

and beyond that, again, we will cooperate with Backpage.com

or its new counsel, but what I think is improper is to

conflate the obligations of the clients with their attorneys

or former attorneys which is what they're asking the Court

to do.

THE COURT: Okay.

MR. GRANT: Your Honor --

THE COURT: One second, Counsel.

MR. GRANT: Sure.

THE COURT: Counsel, I'd like to hear from

you in regards to the response given that they have not

fully complied but substantially complied within their

capabilities.

MR. AMALA: And I appreciate you asking

that, Your Honor, because that's where I wanted to start.

That is not accurate and even remotely close to accurate.

What has been produced to us -- and let me back up. If the

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Court may recall, when we came on the motion to compel

before you entered your order, the issue is that in the J.S.

case, those documents ended in January of 2012. The

Plaintiffs in this case -- and that's because the girls in

that case had been sold on the website in 2010, so the

Court, in J.S., had limited the discovery, the scope of

discovery until -- I think it was January 1, 2012.

When we -- the girls in this case were sold in late 2014

and early 2015, so when we came to you on the motion to

compel, it was because the discovery we had received in J.S.

ended in 2012; and so we essentially asked you to require

them to do the same search and production that had been

ordered in J.S.

The 95,000 documents we've received are the documents

from J.S., not the documents we came asking you to compel.

They're basically asking for credit for the documents that

took us a half a dozen or more motions to compel in the J.S.

case and that was plainly not the focus of why we came to

you in this case. They basically just gave us what they

gave us in J.S. and now they want credit for it, but

obviously, the focus of your order was -- I mean, does it

include those? Yes. But the focus is making sure we got

the documents for the time period that's at issue in this

case. So have they given us the J.S. documents or regiven

them to us? Yes. But that was plainly not the primary

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focus of the motion or the focus of your order.

The only other documents we have received are a relative

handful and those are about the advertisements for our own

clients, and we're talking -- I mean, I don't know the total

off the top of my head, Your Honor, but it is a very, very

small amount, and we had to kick and scream to get them to

give them to us by literally telling them you've already --

you've got this because in the criminal cases for these

girls, those documents had been produced, so we essentially

said, "Well, we know you gave them to law enforcement; Can

you at least give us what you gave to law enforcement?"

That is the extent to what we've received and that's why

I've made the statement your search, which you ordered, they

have not complied with. They've essentially given us

documents on our own clients that they gave to law

enforcement and then the documents from J.S. The purpose of

your order has not been complied with nor have we received

anything in response to your order we will get in that

context. To put it simply, we've received nothing from them

from after January 2012 other than the documents about our

own clients.

And I'll just -- unless the Court has any pointed

questions for me, I do want to address just a couple of

issues. We met and conferred --

THE COURT: One second.

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MR. AMALA: Yes, Your Honor.

(Pause.)

THE COURT: I'm looking at the -- and both

counsels were referring to the January 12th court order I

signed; correct?

MR. AMALA: Yes, Your Honor. And, Your

Honor, if I -- I know you asked me to pause. Mr. Pfau

pointed out something I should have probably made clear.

They actually didn't give us any new documents. The J.S.

documents, they basically said you can keep what you already

have. I guess I should make that clear. There was no new

search. They just said you can keep what you've already

got.

THE COURT: All right. Counsel?

MR. AMALA: And, Your Honor, may I --

two --

THE COURT: Are you finished?

MR. AMALA: Just the last two points, Your

Honor. We're here on a motion to compel compliance with

your order. The parties have met and conferred in good

faith multiple times, and I will add -- I want to make

something very -- I think there's a point at issue here, and

I'm a little concerned about some semantics, that the

language that is being used appears to be very careful which

is saying the documents haven't been reviewed in this case,

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and that is --

THE COURT: Well, you heard that too?

MR. AMALA: Yeah.

THE COURT: Okay. Go ahead.

MR. AMALA: And that is obviously not the

issue because they -- we know they have reviewed these to

the tune of 30,000 hours and multi-million dollars and that

this law firm is the one that oversaw that review. I don't

think there's case law that says you can review all of your

documents in one case and in the next case pretend like you

don't know what's in your documents.

Regarding the withdrawal, as the Court pointed out, this

is the firm that has overseen the entire process, and we

have grave concerns that they have tried to -- I want to be

careful with my words. They have tried to not -- they've

distanced themselves, pretending like they don't know what

Perkins Coie did. We know now -- we now know that's not

true and now this firm is saying we want to withdraw and

punt to the next law firm, and this is the firm that has

overseen the entire process and that's why I think the Court

started with this motion correctly, which is they're the

firm that should be ordered to compel or to comply with the

order. Thank you.

THE COURT: All right.

MR. STAHL: Mr. Grant was involved in the

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earlier --

MR. GRANT: Well, I wanted to point out

and respond to some of Mr. Amala's comments which are not

accurate, Your Honor, and let me just put it this way. The

requests in the PSI production are different than the

requests here. As is true in any document production, you

deal with the collection requests that you get in that -- in

that context, so -- that we reviewed documents -- I should

step back; I'll correct that. Actually, the other parties

reviewed documents. In the context of the PSI production

does not mean that that's the same exercise that will be

done here. It's a very different exercise now that has to

be based on the search terms and --

THE COURT: But you represent all of them?

MR. GRANT: We actually did not handle

the -- this is the other point I have to correct. We did

not handle the review and production of documents of the

PSI. That was done by the Perkins Coie firm and by other

contractors with Perkins Coie. We represented one of my

partners who is a First Amendment expert. We represented

parties in that context having to do with the First

Amendment issues of the PSI subpoena; it's overbroad in its

violation.

THE COURT: And when you took over from

Perkins Coie, you were aware of what was already completed

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and how it was completed?

MR. GRANT: Your Honor, we did not take

over from Perkins Coie in the PSI list.

THE COURT: All right.

MR. GRANT: Perkins Coie had --

THE COURT: Just this --

MR. GRANT: Perkins Coie had the document

responsibilities in the PSI case; that was not ours. We

certainly coordinated with cocounsel, including Akin Gump --

THE COURT: Well, that's what I was

asking.

MR. GRANT: -- including Paul Hastings and

including Perkins Coie, so there was coordination but that

was not our role; and we were not the ones responsible for

the document collection there.

THE COURT: Right, but you were privy to

what was covered by Perkins Coie in that representation --

MR. GRANT: I'll be honest. I don't want

to overstate because I'm not sure we were privy as to what

Perkins Coie was producing in that context. We relied on

our cocounsel for that work; so as I'm saying, that's not

our work. It's not -- it's not what we were doing, and it's

really -- you know, it's sort of reflective of -- the

responsibilities for document productions fall to the

client, as was true in that matter and as is true here, so

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the client here or the party here that has the obligations

to produce documents is Backpage.com. We did previously

represent them. Now, this is where the two motions sort of

become intertwined. Now, we have the difficulty that we

don't represent them. We don't have authority to represent

them. We don't even have communications with them, so the

problem is the next stage in the -- in the compliance would

be virtually impossible given the lack of relationship, but

I wanted to make sure it was clear that the involvement in

the PSI has a completely different set of requests, a

completely different review that was done. You can't say

that because, you know, we or our cocounsel fulfilled our

obligations in another case, that means, de facto, we did

not fulfill our obligations in this case.

MR. AMALA: Your Honor, I'm going to --

MR. GRANT: That's an unfair

characterization.

MR. AMALA: I'm going to -- I want to --

and I'm sorry to interrupt. I'm going to object and move to

strike Mr. Grant's -- he's essentially conceded he has no

foundation or personal knowledge for the statements he just

made regarding his firm's involvement, and I'm very

concerned because the representations he just made, to which

he says he doesn't have personal knowledge because he wasn't

involved, directly conflict with the evidence that's before

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the Court in Ms. Roos' declaration; and I can read the Court

the excerpts, but it's in the record.

THE COURT: Will you read it into the

record.

MR. AMALA: I will. This is Ms. Roos'

declaration from November 8, 2016.

THE COURT: And just read the portions

that are applicable.

MR. AMALA: Thank you, Your Honor. And

this was Exhibit 3 to Mr. Pfau's supplemental declaration

that was filed for this motion. Ms. Roos begins in her

declaration and says that, quote, "On" -- this is paragraph

(2), quote, "On August 10, 2016, Perkins Coie was engaged to

conduct a document review and production in connection with

Request Nos. 1, 2, and 3 of the October 1, 2015, subpoena

duces tecum (the 'Subpoena') issued to Carl Ferrer (CEO of

Backpage) by the Senate Permanent Subcommittee on

Investigations," and parentheses, "('PSI')," end

parentheses. "With regard to the PSI proceeding, Backpage

and Mr. Ferrer have been represented at all times by the

firms of Akin Gump and Davis Wright Tremaine," end quote;

and she then refers to those firms as "Counsel of Record."

Then in paragraph (4), Ms. Roos states, quote, "Perkins

Coie's work on this matter, including the identification of

particular custodians and other sources of records

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potentially responsive to the Subpoena, as well as the

selection of particular search terms utilized in the review,

was performed at the direction of Backpage, in consultation

with Counsel of Record," end quote, which she identified as

including Davis Wright Tremaine. She then goes on in her

declaration, in both this declaration and the other

declaration as Exhibit 1 to Mr. Pfau's supplemental

declaration, to state how Davis Wright Tremaine helped to

collect data sources that were, then, given to Perkins Coie

and was actively involved in the search and the review that

Perkins Coie did at the behest of Davis Wright Tremaine

acting as counsel.

Thank you, Your Honor, and I apologize for the

interruption.

MR. GRANT: And I apologize, Your Honor,

but that is not what I just said. The quotes are accurate

and it is true, as I've just explained to the Court, that

Davis Wright was one of the counsel of record along with

Akin Gump and along with Paul Hastings and along with

Perkins Coie, but Davis Wright -- and Ms. Roos says it in

her declaration that Perkins Coie did a review. Perkins

Coie collected the documents to the extent that they were

collections that others had, including what we had from the

J.S. case, but it is absolutely not true that Davis Wright

was responsible for that review and collection. Davis

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Wright was counsel of record in the PSI case on First

Amendment issues, not in regard to the document production;

and I take offense to that because there's a suggestion that

I misrepresented that to the Court.

THE COURT: Well, I read it so I'm

familiar with what's in it; but what I'm trying to figure

out, Counsel from Davis Wright Tremaine, is that even though

your firm, you're stating, did not necessarily review the

documents, since you were counsel of record, part of the

threesome, for lack of a better word, are you saying that

you were not aware of what documents had been reviewed in

this case or in that case?

MR. GRANT: In the PSI case?

THE COURT: In the PSI case.

MR. GRANT: I would say in a general

sense, Your Honor, we were aware of what kinds of documents

were being reviewed. We certainly knew the three requests

that the Permanent Subcommittee on Investigations had posed,

the requests that they had made. We knew that the review

was taking place. We were not involved in doing a review,

but we did know generally what the kinds of documents were

and what the collections were.

THE COURT: And given that knowledge base,

when you were compelled to produce documents in this case,

having that information, are you saying you were not aware

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of the likelihood that many of those documents would be

relevant to this case?

MR. GRANT: I would say we were aware of

the likelihood that that collection of documents would be

part of the big pot that would have to be reviewed for

purposes of this case.

THE COURT: Okay.

MR. GRANT: And one set of document

requests there in the PSI, the Perkins firm did the review

and collected and produced the documents that were relevant,

another set of requests here that are a different set of

requests; so the process that has to happen is you go find

the full collection of materials you have to work with,

which, I suspect, subsumed the PSI materials and more, then

you run the search terms against that collection because now

you have to focus on the specific requests in this case, not

some request from some other case, and determine from that

what kinds of hits you get.

THE COURT: But here's where I'm having a

little problem following your reasoning. You have the PSI

case --

MR. GRANT: Mm-hmm.

THE COURT: -- and you have certain

documents that you are aware were reviewed, and you just

indicated from that subset you were aware that some of them

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may be relevant in this case, so you don't have to go review

the whole amount to come up with the PSI amount. You're now

reviewing a small subset to see whether or not it's relevant

to this case; and afterwards, as you're doing your

compliance with the Court's order, you can, then, go beyond

it. But what I'm hearing is nothing was turned over;

whereas, what I'm saying is couldn't you have looked at the

subset that was already reviewed in the PSI case and see if

you can comply with this Court's order, see what's relevant

in that subset -- it's not the big picture here; we're just

dealing with the subset -- and, after complying with this

Court's order, indicate to Counsel, hey, there might be some

more in the bigger scheme of documents. And, of course, my

terminology isn't as great as all of you because you've been

dealing with it, but I'm trying to make it as reasonable as

possible. You didn't have to go, so we're looking at the

small subset, just the PSI stuff that very likely, based on

what you said, would have documents relevant to this case

and would be relevant to complying with my court order; but

that wasn't even done.

MR. GRANT: Your Honor, those materials

may or may not be relevant to the request here.

THE COURT: But you never checked.

MR. GRANT: Because the process is that

you need to have the collective whole in order to work from

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it, and here's why.

THE COURT: Why?

MR. GRANT: If we had gone off with

just -- I can see the motion coming from the Plaintiffs now.

If we had gone off just to re-review the collection of

materials that had been produced with the PSI and nothing

else, I can guarantee you we would have had a motion to

compel by the Plaintiffs against us saying that's not the

request we made and that's not the Court's order. What you

have to do is go back to your old collection of documents

and make sure you encompass all those materials for all the

search terms that were subject to the Court's order, so

that's why -- and this is just the logical progression that

you always do in a process like this.

THE COURT: So what I'm hearing is you're

saying you could not comply with the Court's order on a

rolling basis --

MR. GRANT: No.

THE COURT: -- that you had to comply with

the Court's order by reviewing all of the documents again.

So every time -- what I'm hearing and correct me if I'm

wrong -- so every time you get a Court, whether it's this

Court or another Court in regards to these issues, you would

have to go back from scratch to look at the whole; whereas,

you reference the PSI case and that case had documents

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relevant to this one and a letter indicating this is just

the first of many on a rolling basis; we're going to give

you this amount so that we can, at least, start complying

with the Court's order. You're saying that couldn't be done

is what I'm hearing.

MR. GRANT: No, I'm not saying that, Your

Honor. What I'm saying is that, first of all, that's not --

that's not a rolling basis review. That would be taking a

subset of materials, re-reviewing it, having to run these

search terms against that subset of materials; but it's a

process, then, we would have to duplicate for the source

materials from which that came. This is what I mean; you've

got the small pot which is the -- which is the production

that came out of the PSI. You've got the bigger pot which

is the production -- or which is the collection of materials

from the PSI. Then you've got a bigger pot, still, which is

the collection of all the documents from Backpage that is

potentially responsive, the 2 terabytes. So what you're

suggesting is you have to search all that once through a

PSI. Then you have to search the same materials all over

again because I can't segregate them back out just for the

PSI pot. Then you've got to search them all over again for

the -- for the entire collective pot.

What I'm saying, Your Honor -- I've been doing this 35

years and some pretty big document productions back in my

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earlier days, I can attest, but I don't do much of it now,

but that is not --

THE COURT: Back then you didn't have the

ability to do quick search terms on databases.

MR. GRANT: I can tell you a story about

20 million pages of documents in the Exxon Valdez case; but

in any event, that is not how you undertake a process like

this. I believe what I wanted to say, too, that had that

been the issue in the -- in the communications with

Mr. Amala and Mr. Pfau about how to go about doing this, had

there been a suggestion that that's how you should have

proceeded, we could have addressed that suggestion. That's

not what happened in the course of this meet and confer.

What happened was, as is typical in a process like this, we

had gotten to the stage where we knew there was a huge

collection of documents and that the search term hits were

vastly overbroad. They were going to get lots and lots of

junk information. That's the way this process works. We

were trying to work out that issue with them. That comes to

the point when Mr. Ferrer indicates to us -- gives us an

indication that we can no longer represent him as counsel.

That's where we stand.

THE COURT: So the Court's order was

January 12, 2018, and what I'm hearing you say is at that

point in time, you knew it was not going to be realistic to

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comply for many months with the Court's order.

MR. GRANT: I'm not saying that, Your

Honor, and Mr. Stahl has been more directly involved in

this, certainly, than I have, but my understanding is that

in that process, we went out to collect the materials to

find out exactly what we had. This is not easy stuff; it

takes some time.

THE COURT: Well, okay. For

clarification --

MR. GRANT: Sorry.

THE COURT: -- when I say "comply,"

meaning, produce the documents to the other side within a

relatively short period of time is what I'm hearing. It

would have taken many, many, many, many months.

MR. GRANT: Given the volume of materials

we were talking about, given the problem of too many hits

with the search hits, it would have taken many months and a

vast amount of work, and Mr. Amala's example of the PSI

matter is exact proof of that --

THE COURT: And that --

MR. GRANT: -- and in order to do it

there, it took -- I'm sorry, Your Honor.

THE COURT: And that the more efficient

way of approaching this by utilizing search terms that were

previously done that produced documents of similar discovery

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requests, or if not similar, the same in different cases,

you're saying you could not do that on a rolling basis; you

had to, then, review the whole.

MR. GRANT: Again, Your Honor, I don't

want to misstate. I'm not saying we couldn't do things on a

rolling basis in one fashion or another. I'm saying the way

we were approaching this is the way that is traditionally

done in a document production like this. We were trying to

determine how many hits there were going to be against those

search terms. When we did and we found out that it was a

problem, Mr. Stahl conferred with him about that.

THE COURT: And you're saying

traditionally done by way of Davis Wright Tremaine or in the

industry?

MR. GRANT: In the industry.

THE COURT: Okay.

MR. GRANT: I'm saying -- and I've worked

for other law firms as well, and I've dealt with a lot of

document productions in my day; that's how you do it.

THE COURT: Okay.

MR. AMALA: Your Honor, if I --

THE COURT: I'm sure Counsel --

MR. AMALA: Yeah, briefly.

THE COURT: -- probably would not agree.

MR. AMALA: You know, and I appreciate

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Mr. Grant may have a few years on me, but I appreciate the

reference to the traditional litigation and paper copy,

using the Exxon Valdez. I don't imagine a Court ever in the

country endorsed the idea that Exxon reviews those 20

million pages of documents, catalogs them, does a privilege

log in one case and then when the next case is filed

involving the same oil spill, they get to say, we need to

re-review those 20 million documents and pretend like we

don't know what of those 20 million are responsive; and that

is the issue here. These documents are not a mystery;

they're just not. And Ms. Roos' declaration makes that

clear. The PSI Subcommittee was focused on these same

issues that we are in this case, and that is the fundamental

problem.

We also repeatedly asked them to produce documents on a

rolling basis and at no point did Mr. Stahl or Davis Wright

Tremaine tell us that these documents had already been

reviewed for confidentiality and for privilege. And

confidentiality, Ms. Roos talks about the 40,000 documents

that they had redacted for confidentiality. At no point

during our meet and confers did they tell us, oh, by the

way, we've already overseen the review of all these

documents. That would have been a very different

discussion, and that's why we're asking the Court to order

them to produce the documents that were responsive to the

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search terms. They can withhold documents that they have

already flagged for privilege because they've already done

that. That is a fair way to proceed and balance the

interests of the parties and especially since they've

already reviewed these, there's no risk. I guess if there's

a little risk of overbreadth, the Court is well within its

discretion to allow that to happen so long as its privilege

is protected which it can do by allowing them to withhold

documents that they already flagged as privilege, after

that, is completely fair. To the extent it's over --

slightly overbroad somehow, we'll have to review those

documents, but we'll take that burden at this point because

we are very afraid that we're, essentially, asking to

re-review the 20 million "Exxon" documents that have already

been reviewed.

MR. GRANT: Your Honor --

THE COURT: Counsel, what I'd like to know

is, just for the record, in regards to Defendants Ferrer,

Larkin, and Lacey from Backpage.com and Medalist Holdings,

how many of these cases, nationwide, does Davis Wright

Tremaine participate in as counsel?

MR. GRANT: For which parties, those four

that you mentioned or five?

THE COURT: Correct.

MR. AMALA: And, Your Honor, may I -- just

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so you get a -- I think the question you're asking, to make

sure we're clear here, this -- and I think they've referred

to this. The Court may want to ask as of the date of the

Court's order in January, how many cases throughout the

country did Davis Wright represent these defendants because

we have this issue about them trying to withdraw in

different cases; so if the Court is trying to get a sense

for how involved has this law firm been involved in

representing these defendants across the country, the

answer, I think, will be -- if you're asking the time when

you entered your order, you'll probably get a different

answer than if Counsel tries to answer based on today.

MR. GRANT: I was going to give the Court

a complete answer and --

THE COURT: My question went to overall

and that includes cases you may have recently been allowed

to withdraw from so that we're clear.

MR. GRANT: Right, so I was going to

answer by saying as things stand right now, maybe six or

eight because of the withdrawals. Virtually, every court

has signed off on withdrawal notices or orders of

withdrawal.

In terms of going back in time, there were as many as 17

cases total, this one being one of the 17. There are

different varieties, Your Honor. So, for example, there are

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instances where the firm represented Backpage.com against

the Sheriff of Cook County, obtained an order there

declaring that his action of cutting off credit card

services was an unlawful, unconstitutional prior restraint;

and we have some other cases that also involve actions

against governmental parties and then some cases, as are

civil matters, most of which, apparently, have been brought

by Mr. Pfau's firm.

THE COURT: So overall from the first

time, I guess, Davis Wright Tremaine started representing

one or more parties that are connected somehow to

Backpage.com and Medalist Holdings, the largest amount of

cases would have been 17.

MR. GRANT: We've represented the parties

in other prior cases as well, some of which have terminated.

THE COURT: Okay. So I want to know

overall to include terminated cases.

MR. GRANT: Yeah, it would go back to the

proceedings against the State of Washington where we

invalidated the laws. I'm sorry. I'm scratching my memory.

I would say 25, Your Honor, is my estimate.

THE COURT: And, of course,

representations were for different types of things, but

overall from day one when someone walked in that's connected

to these parties to Davis Wright Tremaine for

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representation, about 25.

MR. GRANT: Approximately.

THE COURT: Approximately.

MR. GRANT: And, Your Honor, because there

are differences of organizations in time here, you have to

bear in mind that up through April of 2015 --

THE COURT: '15.

MR. GRANT: -- that was all one company;

they were all collectively owned. Well, that's not accurate

to say one company --

THE COURT: Well --

MR. GRANT: -- but then ownership changes

April of 2015.

THE COURT: Correct, and I'll deal with

that when I get to the withdrawal. Now, presently after

various withdrawals over time, Davis Wright Tremaine has

about six or eight of these cases approximately.

MR. GRANT: It's a rough number, Your

Honor.

THE COURT: Okay. All right. At the end

of the day, I entered an order on January 12, 2018, and the

order was specific in regards to the motion brought to

compel full and complete responses from Backpage corporate

defendants with regards to discovery requests outlined in

what was deemed Appendix A; the pleadings were 72 pages.

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The order was relatively straightforward, requiring full and

complete responses from the Backpage corporate defendants

regarding the discovery requests outlined, full and complete

responses regarding discovery requests outlined, including

declarations and evidence submitted in support thereof; and

then production of all records in the J.S. matter required

that the same search methodology employed in the J.S. case

be utilized which is why my questioning in regards to PSI

was along those lines, that you could do a search to, at

least, start complying with the Court's order and not wait

to get everything when you have been representing the

parties before this Court over a number of years in

different phases but most specifically in regards to this

case and the J.S. case and cases throughout the U.S.,

addressing very similar issues.

To require the Plaintiff to wait for a review of

discovery that the Defense is privy to, has been analyzing,

has been reviewing throughout the states, not just even

Washington State but throughout the states in response to

very similar requests, I don't find that to be efficient. I

don't find that to be comporting with the technology we can

use today.

The Exxon case, kind of dated, Counsel, there.

MR. GRANT: Agreed, Your Honor.

THE COURT: But we have many ways of

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responding more timely to discovery involving a vast amount

of documents, and it's time to change the responses to these

requests so that they're more timely by utilizing those

search engines a little more efficiently; and I'm finding

that wasn't done in this case.

January 12th -- we're now at May 23rd, five months later,

and documents that were turned over in response to my order

with documents that were, previously, available and could

have been turned over before that hearing; so to say that

you were complying with my order by turning over something

that was already available, packaged and ready to be shipped

out, so to speak, is not complying with this Court's order.

That is not in response to the arguments I heard, the

pleadings I reviewed, and the request that was made which

resulted in my order, so I'm finding there was not

compliance.

In regards to a remedy, it's a little difficult, so

before I give a decision in regards to remedy, I'm going to

hear the motion to withdraw.

MR. AMALA: Thank you, Your Honor.

MR. GRANT: May I add one comment, Your

Honor?

THE COURT: Sure.

MR. GRANT: The first we have heard of

this idea of producing the PSI documents as though they're

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supposed to be the same thing, without further review, is in

this motion.

MR. STAHL: The reply.

MR. GRANT: The reply. It is tantamount

to a complete, new, and different discovery request to us;

and Monday morning quarterbacking, you should have done it

this way, though we never asked for it this way, Your Honor,

I submit that's entirely unfair to us to say that looking at

this backwards, we should have done the production that way

when the way we were going about doing the production was

entirely reasonable and was an effort to work in good faith

with Plaintiffs' Counsel, so doing it this way effectively

lets the Plaintiffs bring in brand-new discovery requests,

brand-new approaches about how these things should be

reviewed and produced. And then, because it's never been

asked for before, convince a Court to, in some fashion,

impose a remedy against the law firm rather than against the

party on whose behalf the law firm was acting, I suggest

it's unfair, Your Honor.

THE COURT: Thank you, Counsel.

MR. AMALA: And, Your Honor --

THE COURT: I will note -- I don't need a

response.

MR. AMALA: Thank you, Your Honor.

THE COURT: I will note, Counsel, that

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your terminology that the way you went about producing the

documents was "entirely reasonable" does not comport with my

decision here today, and I'm finding that it was not

reasonable given the technology that was available to Davis

Wright Tremaine, given the history Davis Wright Tremaine had

with these defendants, not just in this case, not just

locally in Washington State but nationally, and it was

foreseeable to Davis Wright Tremaine to, basically, respond

to this Court's order of January 12, 2018, in a more

expeditious manner than the manner in which it was done to

the point where, as we sit here today, May 23rd, there has

been no response comporting with my order of January 12,

2016; so, therefore, this Court cannot find that it was

reasonable.

All right. Counsels, let's get to the next motion

because we have three which would be --

(Interruption.)

THE COURT: All right. The motion to

withdraw, Counsel, I'll hear that motion at this time. I

will note for the record, and I'm not going to hear any new

arguments other than -- well, I'm going to allow you to

supplement the record, if needed, briefly. However, I have

received the pleadings filed by Davis Wright Tremaine in

regards to their motion to withdraw. I've reviewed those in

camera, and I'll allow both sides to make a brief record,

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and then I will give my ruling in regards to my in-camera

review on the case.

MR. GRANT: Your Honor, I will, briefly.

I think we covered the background, the relationship, the

nature of the agreements that's between Davis Wright and the

respective clients, the distinction between the Medalist

parties and the Backpage.com parties; and Mr. Ferrer pointed

out the issues under the Rules of Professional

Responsibility and, in particular, the inability for us to

continue to represent Mr. Ferrer and the Backpage.com

parties for lack of authority, lack of communication, and

other problems that we've identified.

THE COURT: All right.

MR. GRANT: I'll answer other questions if

the Court has any, but I'll just leave it at that for now.

THE COURT: Thank you. Counsel?

MR. PFAU: I'll address this, Your Honor,

and if there are any issues specifically in the motion to

compel, I'll let Mr. Amala -- or I'll ask the Judge to let

Mr. Amala comment.

We object to their withdrawing at this point in the

litigation. Your Honor has the discretion to allow them to

withdraw or not. I want to point out that this is a very

unusual situation in that we have their corporate counsel

for over a decade that has been intimately involved in the

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issues pertaining both to the motion to compel and the

motion for sanctions and also to point out that we're

shooting in the dark a little bit because we weren't privy

to what they filed; although, we have a long history with

this firm and this defendant.

Your Honor, I think eventually, if they're allowed to

withdraw or if they are forced to be disqualified from

representing the remaining defendants, those may be issues

down the road; but you'll recall, Your Honor, I said Carl

Ferrer is not showing up. There won't be an attorney here.

I speculated about that. Carl Ferrer is not here. There's

no attorney here, and it puts the Plaintiffs in a highly

prejudicial position if they're allowed to withdraw before

the issues on the documents and the sanctions are sorted

out, and that's all I can say without having been privy to

why they claim they feel the need to withdraw.

THE COURT: All right. So given that and

your request, it appears, Counsel, you'd like to have the

motion regarding sanctions addressed first before I do the

motion for withdrawal.

MR. PFAU: I would, Your Honor, and

also -- yes, Your Honor, I would.

THE COURT: Okay.

MR. PFAU: And one more point with regard

to the motion to withdraw, we would ask that any portion of

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what they filed that is not clearly privileged, if need be,

Plaintiffs be allowed to receive some information about

that. Joint Defense agreements, for example, are not

generally privileged.

On the motion for sanctions, Your Honor, and I'm going to

argue this but there may be different ways that we can

divide this, so to speak, based on what you ultimately do on

the motion to withdraw; but for the record, and I know

you've read our pleadings, and I appreciate that, but again,

because these situations are so extraordinary, I want to

read a small portion of the plea agreement into the record

because I think it's very relevant; and this is cited on

our -- in our brief on Page 3 of 16. It's a direct quote

from Mr. Ferrer's plea agreement: "In 2004, I co-founded

the website www.Backpage.com," open quote -- or open

paren/open quote, "('Backpage')," closed quote/closed paren,

"along with M.L.," Michael Lacey, "and J.L.," James Larkin,

who, I will point out, are the principals behind the

Medalist defendants. "Backpage eventually became the

second-largest classified advertising website in the world

and, during its 14 years of existence, has derived the great

majority of its revenue from fees charged in return for

publishing advertisements for," quote, "'adult'," unquote,

"and," quote, "'escort'," closed quote, "services."

Importantly, next paragraph: "I have long been aware

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that the great majority of these advertisements are, in

fact, advertisements for prostitution services (which are

not protected by the First Amendment)." Skipping ahead a

little here, and may I also point out that that has always

been Plaintiffs' position in our allegations, "Acting with

this knowledge, I conspired with other Backpage principals,"

open paren, "(including but not limited to M.L. and J.L.),"

Larkin and Lacey, the Medalist principals, and he names

others, "to find ways to knowingly facilitate the state-law

prostitution crimes being committed by Backpage customers."

That is Plaintiffs' theory of the case. It's what we

have alleged and in various ways, it's what they've denied.

For example, specifically, he says, "I worked with my

co-conspirators," which include Larkin and Lacey, the

principals for the Medalist defendants, "to create," open

quote, "'moderation' process -- or processes through which

Backpage would remove terms and pictures that were

particularly indicative of prostitution and then publish a

revised version of the ad. Such editing did not, of course,

change the essential nature of the illegal service being

offered in the ad -- it was merely intended to create a

veneer of deniability for Backpage. These editing practices

were only one component of an overall, company-wide culture

and policy of concealing and refusing to officially

acknowledge the true nature of the services being offered in

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Backpage's 'escort' and 'adult' ads."

I read that into the record, Your Honor, to emphasize not

only how sanctionable the actions have been but also how

extraordinary it is vis-a-vis this law firm and their

defendant. And I want to make very clear, because I

understand these things, I am not suggesting that Davis

Wright Tremaine conspired and -- but corporate defendants

through -- it starts up here, corporate owners; corporate

CEO; corporate counsel, Liz McDougall; corporate lawyers,

Davis Wright; litigation lawyers, Perkins Coie. Clients

don't always tell lawyers what's going on. I'm talking

here, we're not moving for sanctions against Davis Wright

Tremaine. We're set at moving for sanctions against all the

Backpage defendants.

And in my motion, Your Honor, and I'm happy to talk more

about any specific issue, a global picture is we have fought

in the seven or eight lawsuits we have across the country,

and others have fought, arguing these very points that this

is just -- there is a co-conspiracy basically to whitewash

prostitution ads; and as a result of that, whether escort is

legal or not, children were trafficked. That's the heart of

our case, and we're -- let's not forget this, you know -- we

get involved in all these lawyer arguments -- children were

gravely, gravely, gravely hurt while men who started out in

the journalist field made hundreds of millions of dollars

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and paid lawyers millions of dollars across this country to

basically deny what we are alleging.

I used four examples in our brief. One was their

corporate counsel in, I think, March of 2017, importantly --

while in the J.S. case -- importantly, while our case was

pending, filed a motion to dismiss essentially denying all

we've alleged and creating a fiction about how Backpage was

actually trying to protect children. Then in a hard-fought

battle to actually get a corporate representative to

testify -- because all of the principals pled the Fifth,

refused to testify. As we prepared the J.S. case for trial,

their corporate lawyer, Liz McDougall, basically, and we've

set out segments of her deposition, again reinforced the

same fiction.

Now, in this case as litigation goes on, we filed

requests for admissions asking them to admit basically the

facts that we now see in Ferrer's plea agreement; and on

behalf of all corporate defendants, they deny that the

banned terms were used for the purposes we allege.

And again, Your Honor, if you can bear with me, Request

for Admission No. 11, part of our materials, "Admit that by

January 1, 2014, you knew that the majority of the escort

advertisements in the --", quote, "in the -- in the Seattle

escort section of Backpage.com were advertisements for

prostitution." Subject to their objection, corporate

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defendants deny request for -- Request No. 11.

We go on to ask them of the banned terms, really

masking -- I'll read it -- Request for Admission 58: "Admit

that you removed 'banned terms' from advertisements posted

in the 'Seattle escorts' and 'Tacoma escorts' sections of

Backpage.com in 2015," the relevant time period, "to mask

illegal activity on the website, such as prostitution."

"On behalf of the corporate defendants, we deny this."

I submit to you, Your Honor, I, in my career, have not

seen a case where sanctions are more appropriate, where a

corporate defendant misrepresented to opposing party,

misrepresented to the courts here and around the country

what was really a criminal activity; and I have said in the

past in oral argument, this is akin to a criminal activity.

We now know, based on Ferrer's plea agreement, that it was

criminal activity.

I am sure what you're going to hear from the Davis Wright

attorneys is we crafted a long objection that said not all

defendants know all the information involved, and I want to

address that specifically, perhaps in rebuttal; but what's

really, really important, and I know we mentioned this when

we were here on Friday, there is nothing in their response

brief that amounts to critical evidence. All you have is

lawyers' discussions about what this particular defendant

may or may not have known. There is not one signed

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declaration from a representative of Backpage or of the

Defendants that they -- well, Backpage -- any Backpage

defendants; and if we're going to split them in two, the

Backpage.com defendants or the Medalist defendants, there's

nothing in their statements that says what -- from a

witness -- what Carl Ferrer is saying is not true, nothing,

not a shred of evidence.

Also, Your Honor, while they make a distinction that

maybe some of the corporate defendants didn't know what the

Backpage defendants were doing, there's really no evidence

that says I, CEO of Medalist defendants, or I, owner,

Michael Lacey, had no idea that there was prostitution

occurring. We have a declaration that has gone unchallenged

that says these were all criminal activities.

Your Honor, I ask that all the Backpage defendants be

sanctioned, and we're asking for a sanction of $300,000, a

hundred thousand to each of these girls, a hundred thousand

to the court, and reasonable attorney's fees; and I would

submit that that is a tiny sanction when you consider the

grave harm that occurred to these girls and the hundreds of

millions of dollars that these corporate owners made.

Your Honor, if your intent is to let them withdraw before

they're sanctioned, I think there are avenues we can look

at, for example, to sanction the Backpage.com -- the

Backpage.com defendants now as opposed to the Medalist

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defendants, but if that -- I think, when you answer a

discovery response, you need to do it truthfully; and the

Medalist defendants did not do that. I ask that all the

defendants be sanctioned. But in rebuttal, I'm happy to

address your thoughts if the motion to withdraw becomes

relevant.

THE COURT: All right. Counsel, I'm aware

of the conflict you've raised in regards to Backpage.com;

so, I believe, in responding, and you let me know if I'm

right, you'll probably be responding for Medalist at this

juncture.

MR. STAHL: That's correct, Your Honor,

and let me start there. First of all, the motion for

sanctions, here, is really premised on an entirely post-hoc

view that everything Mr. Ferrer said in his negotiated plea

agreement is true and all the prior representations are,

necessarily, false; and by the way, there is evidence in the

record contradicting Mr. Ferrer's plea agreement. We

submitted, I think, four of the several additional

declarations that Mr. Ferrer submitted in prior proceedings.

But more to the point for the Medalist parties, they are,

essentially, asking for a finding of liability without

coming forward with any admissible evidence. Mr. Ferrer's

plea agreement, as to the Medalist parties, is classic

hearsay. It's an out-of-court statement offered for the

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truth of what's in that statement against a different party.

A representation by Mr. Ferrer is not a representation by

the Medalist parties. They try to conflate them. Mr. Pfau

made a vertical chart with his hands as if to indicate the

Medalist parties are somehow responsible for Backpage.com.

I think we've explained in our papers and in our

declaration, and it's also in the record that the Medalist

parties don't own Backpage. They haven't had operating --

they haven't had operating control of it since 2015, so as

to the Medalist parties, you can't hold Mr. Ferrer's latest

statement as a basis to hold them liable.

The three representations that they rely on as the basis

for finding sanctionable conduct here, it's really three

things. Two of them were in the J.S. case. They point to a

Backpage.com corporate deposition given in the J.S. case in

2016 and also a Backpage declaration that was submitted in

J.S. in 2016 or 2017. The Medalist parties were not

defendants in that case. The Medalist parties did not make

those representations. There's no basis for tabbing or

sanctioning the Medalist parties for what happened in the

J.S. case.

I'll also add, and this is relevant to, I think, all the

defendants, there's no basis under the Court's inherent

authority, or Rule 11, to sanction a party in the proceeding

before the Court for something that happened in a different

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case which resolved, was dismissed by agreement and settled,

so we don't think the J.S. representations have anything to

do with -- or can provide any support for sanctions in this

case but certainly not as to the Medalist defense.

Mr. Lacey and Mr. Martin [sic] were not in that case nor

were the parties.

As for the requests for admission, there was no

misrepresentation by the Medalist parties. We were very

upfront in those discovery responses where we said in a

portion of the responses that they neglected to cite or to

mention in their motion that the discovery responses were

based on knowledge and information available to Backpage.com

because the other parties did not have the knowledge to

answer the discovery generally. They are requests for

admission that were denied that the Medalist parties

continued to deny. And, frankly, if that's the basis for

the sanctions motion, then this is really just another

discovery motion that we -- that also fails because there

was no meet and confer basis; but the Medalist parties

expressly disclaimed knowledge and did not make those

responses in the request for admission.

There's no basis to hold that a civil -- that a party in

a civil action can be sanctioned because a codefendant pled

guilty in a criminal case. Mr. Ferrer may be subject to

cross-examination or discovery about his prior inconsistent

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statements, but that's not a basis for essentially trying to

bring a backdoor finding of liability against all the

defendants based on the recent developments. We would ask

that the sanction motion be denied.

THE COURT: As to Medalist Holdings.

MR. STAHL: As to the Medalist parties,

but I think that there's -- it would be grounds for the

Court to deny it on behalf of all the parties that are --

THE COURT: So who are you representing?

MR. STAHL: I'm representing the Medalist

parties, Your Honor, and I want to be clear about that; but

I do think some of the grounds apply generally as well.

THE COURT: Now, in regards to the

Backpage defendants, what notice was given to them in

regards to -- given the information you received that made

you want to file your notice of intent to withdraw, what

information was given to the Backpage defendants in regards

to the motion?

MR. STAHL: I can represent to the

Court --

MR. GRANT: You mean the motion for

sanctions, Your Honor?

THE COURT: Say that again?

MR. GRANT: You mean the motion for

sanctions?

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THE COURT: Correct. All the motions that

we had --

MR. GRANT: Right.

MR. STAHL: They were forwarded to

Mr. Ferrer's criminal counsel as well as to the addresses we

had for Backpage.com and Mr. Ferrer.

THE COURT: And that was done when?

MR. STAHL: More or less contemporaneous

with -- our papers, I know, were served on Ms. Clarence when

we -- when we served them on the court. The responses may

have trailed by a day or so.

THE COURT: And the Backpage defendants

were notified in regards to the proceeding and the various

motions that are before the Court?

MR. STAHL: I can represent that I

forwarded the papers to Mr. Ferrer's criminal lawyer and

mailed them to the address we had for Mr. Ferrer and

Backpage.com.

MR. GRANT: And, Your Honor, we've done

that consistently throughout even as to the hearing last

Friday. We sent notice of this hearing today, so we've

tried to continue to make sure that they know what's going

on in this and other matters.

THE COURT: All right. Thank you.

Counsel, the last word, it's your motion.

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MR. PFAU: The last word is this: The

Medalist defendants, in a sense, did not exist until the

motion to withdraw.

And as to the now new Backpage defendants --

THE COURT: Counsel, what do you mean they

did not exist?

MR. PFAU: Well, in this sense, Your

Honor, when they answered the discovery and Counsel made the

distinction of what's in J.S. and what's not. I won't

reargue that other than to say I don't need to because there

are answers to interrogatories that are misrepresentations,

and there are requests for admissions that are

misrepresentations and those misrepresentations are answered

on behalf of the corporate defendants. This law firm has

represented all the defendants in this litigation until the

plea deal.

THE COURT: So let me ask you this: In

regards to the interrogatories, did you receive separate

responses, one from Backpage.com, the Backpage defendants,

and one from Medalist Holdings?

MR. PFAU: No, we did not, Your Honor.

THE COURT: So throughout this proceeding,

responses and representations have been made to -- from the

defendants, which were Backpage.com and Medalist Holdings,

represented by Davis Wright Tremaine as a whole.

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MR. PFAU: That's right, Your Honor, with

the caveat, as Counsel pointed out, that in an objection,

they said not all defendants have the knowledge but what --

that's not an appropriate response because, as Counsel

knows, counsel and client have a duty of reasonable inquiry;

so, Larkin and Lacey and the Medalist defendants have been

defendants in this case. They've been defendants in other

cases, and they have watched as the United States Senate

voted, you know, 96-0 to hold them in contempt. It has

always been the Backpage defendants. That's why there's

grounds to sanction both.

If you're inclined to separate them, Your Honor, I would

point out that with the -- what I'll call -- now, we're

calling the Backpage defendants, we have filed a motion for

sanctions. No lawyer has showed up. No response has been

filed because there won't be one. It's essentially

unopposed. The motion, if we're going to now at least

conceive of them as different defendants, I think there is

grounds on this record to sanction the Medalist defendants

for their -- for the false discovery responses; and if Your

Honor, for some reason, is not willing to sanction them, we

need discovery responses from them telling them what of the

various Medalist Holdings or Medalist defendants knew about

this, didn't know about this, not giving us evidence that's,

basically, Ferrer's contradictory statements. We know he

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R.O. vs. Medalist Holdings, LLC

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lied previously, and that's why we're here before you but

declarations from the Medalist principals denying what

Ferrer said is true and perhaps depositions for the

limited -- and I mean limited because we're not talking

about liability here; that comes later -- limited purpose of

proving what I believe is true; which is, the coconspirators

knew what was going on, were part of the whole process and

should be sanctioned, too, and made hundreds of millions of

dollars with that knowledge.

THE COURT: Counsel, briefly.

MR. STAHL: The discovery responses were

responded to on behalf of all the corporate defendants

because that's how they were drafted and directed. They

were directed to all corporate defendants. We responded on

behalf of --

THE COURT: Whoa, whoa, whoa, Counsel, one

second.

MR. STAHL: When --

THE COURT: They were drafted --

MR. STAHL: No, when we received --

THE COURT: Well, one second. You're

saying you were drafting a response because it came to you

as one but wouldn't it have been the onus placed on you, if

you thought there was a distinction between the two, to

identify it as such and respond separately?

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MR. STAHL: And we did that, and we said

these responses are on behalf of Backpage.com which is the

operating entity that has the knowledge, so -- and I think I

heard Mr. Pfau just say --

THE COURT: So -- slow down -- so if

that's the case, are you saying, then, that Medalist

Holdings has not responded to anything in this case if it

was only just Backpage.com because in one instance, I'm

hearing you represented both. You were responding as one or

separately, but then I also just heard you say, when I asked

that question, that your responses were on behalf of

Backpage. So where were your responses on behalf of

Medalist Holdings?

MR. STAHL: The actual -- the actual

discovery requests that we received were directed to all the

corporate defendants with no distinction, so we responded in

turn by saying these objections and responses are submitted

by all the defendants; however, the answers and the parties

will be operating with the ownership of the website. The

operating entity of the business is Backpage.com, so to the

extent we are giving substantive responses, that's the

entity that has the knowledge, that's --

THE COURT: In regards to the website.

MR. STAHL: Correct.

THE COURT: Okay. I'm following.

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MR. STAHL: The request for admission, had

we received separate requests, and I think I heard Mr. Pfau

say they need additional discovery to determine exactly what

Medalist did and did not know.

MR. PFAU: That's not what I said, but --

MR. STAHL: Well, you said there may be --

there may be the need for additional discovery about their

knowledge. That's not in the record and certainly not the

basis for sanctions.

The sanctions motion also did not identify any false

representation in any interrogatories. They're talking

about the denial of the request for admission.

MR. GRANT: May I just pick up one point

on your question, Your Honor? So the answer is that, yes,

we responded on behalf of all the corporate defendants

making the distinction, as Mr. Stahl has pointed out, about

the information obtained from Backpage, and that's also true

in the individual responses to the request for admission

where there is information that we provided -- it said

Backpage.com, LLC, provides the information; but as is true

in lots of corporate parent settings, the corporate parent

is not the one who has that information and, therefore,

denies the request on the subject of the objections.

THE COURT: All right. I'm going to give

a ruling that combines the motion to withdraw with the

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sanctions against Backpage and the Backpage defendants and

the Medalist Holdings defendants, and the reason I'm doing

that is Counsels for the Defendants pretty much have

provided the Court with pleadings that the Court has

reviewed in camera to support their motion to withdraw, and

they have made a record today and at the last hearing to

support their motion to withdraw; and after reviewing the

pleadings filed in camera, I am going to grant the motion to

withdraw as to the Backpage defendants.

In regards to the pleadings I've reviewed and the

arguments I've heard at the last hearing, as well as this

hearing, I am also going to disqualify Davis Wright Tremaine

from representing Medalist Holdings in this matter. The two

entities are intertwined in such a manner that to allow

Davis Wright Tremaine to continue to represent Medalist

Holdings will create an injustice on the administration of

justice but will also, more probable than not, create

conflicts of interest that this Court will have to address

moving forward.

My review has indicated that the request by Mr. Ferrer to

terminate the attorney-client relationship created a -- I

guess the word is "revoked," the consent given to Davis

Wright Tremaine to allow them to represent these multiple

parties. There's a nature of the conflict that I saw that

continued representation would be prohibited even if the

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other clients were to give consent. Mr. Ferrer revoked his

consent because of his -- I think the term used in the case

law is "material changed circumstances," the federal

conviction being a major one; that and the facts pertaining

to that are related to the facts intertwined in this case

significantly or similar to the facts in this case.

This Court finds that there would be material detriment

to the other clients and a high possibility that the lawyers

would encounter conflicts proceeding forward.

Pursuant to GR 15, I am going to seal the pleadings to

include the declaration provided; and I'm talking about the

pleadings that were filed for my in-camera review.

I am finding that this case, up to this point, started

with an 83-page Complaint for Damages. Answers were filed

by the Defendants as a whole, no material distinction was

made between Davis Wright Tremaine and -- sorry -- between

the Backpage defendants and Medalist Holdings in regards to

the responses to pleadings and the motions brought before

the Court and the arguments that were made up until the

request for the motion to terminate.

We have a scheduling order that was in place with a trial

date, I believe, in October. Discovery was delayed due to

the lack of compliance or substantial or significant

compliance with my court order in January, and now we're

five months away from an October 16, 2018, confirmed trial

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date. Prejudice can flow both ways in litigation. It can

flow to the Defense or from the Defense to the Plaintiff,

and I'm finding that there's grave prejudice flowing to the

Plaintiffs in this case due to no actions of their own but

due to multiple issues, which, some of which we have

addressed here today. The administration of justice,

because of my ruling to allow Davis Wright Tremaine to be

allowed to withdraw from representing the Backpage

defendants and my disqualification of them proceeding

forward, representing the Medalist Holdings company, has

placed the Court in operating and moving forward this case

less efficiently at this late stage in the game.

I am going to require, however, that my protective order

regarding the documents in this case continue for 60 days.

Within that time frame, the documents need to be placed in

trust. Davis Wright Tremaine will be required to comply

with my previous order, will be required to secure all

documents pursuant to that order or a new order and to work

with the Plaintiffs to secure those documents for future

litigation in this matter.

Davis Wright Tremaine will remain counsel to secure the

interests of their clients and that being Medalist Holdings

as the Backpage defendants previously, because of

Mr. Ferrer's request, are no longer their client which

brings me to the motion for sanctions.

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I am going to grant the motion for sanctions. I believe

an adequate record has been made supporting sanctions in

this case for a number of reasons, all listed by Plaintiffs,

but also the Court looks at what constitutes a bad faith,

and there are three ways the Court can look at it.

Pre-litigation misconduct: I'm finding that given the

history of the defendants in this case in the multiple cases

they've had, not just before this Court -- I have two -- not

just in this state but nationally, it is clear to this Court

that their conduct was to necessitate delay where there were

what appears to be clearly valid claims or rights being

asserted by the Plaintiff which, months and years later, is

now being disclosed by Mr. Ferrer as seen by his plea and

the statements made in those pleadings in the Arizona case

which I reviewed.

Another one that the Court can consider in regards to bad

faith is procedural bad faith and that is vexatious conduct

during the course of litigation, wasting private and

judicial resources, making claims that, months later, were

found to be untruthful. Many of the statements that I'm not

placing into the record can be seen in the pleadings the

Court reviewed in camera provided by the Defense which will

be placed under seal if there is further review of this

matter.

And a third factor that can constitute bad faith is

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substantive bad faith, and I'm not finding that in this

case.

I will say, also, supporting my position regarding the

pre-litigation misconduct and procedural bad faith were the

Court's review of the Interrogatory No. 2 and the Request

for Production No. 1. The various requests for admission

were taken into consideration and Exhibit 3, the declaration

of Attorney Elizabeth McDougall.

I will note that Mr. Ferrer's condition of his plea in

March 2018 in Arizona were for overriding conspiracy with a

start date of 2004 through March of 2018 during the time

period not only when this case was filed but the J.S. case,

that this Court also had, was filed.

Sanctions in the amount of $100,000 for each plaintiff is

being ordered. That needs to be paid within 30 days of

today's date. Failure to comply, the Court will issue

sanctions in the amount of one dollar for every page of the

1.2 million documents -- and, actually, not page, for the

documents. So, there were 1.2 million documents, one dollar

for every document, so that will be $1.2 million for every

14 days of noncompliance.

Reasonable attorney fees will be allowed and granted,

subject, of course, to any objections to the amount. If not

objected to, that needs to be paid within 30 days, as well,

of production of the billings.

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The question, then, becomes what happens to the R.O. vs.

Medalist Holdings case as we have a trial date of October

2018? And I'll hear from Counsel.

MR. PFAU: Your Honor, Plaintiffs, at this

juncture, would like to hold the trial date until we can --

obviously, there has been a sea shift in terms of lawyers

involved and our ability to get discovery. If Your Honor

would indulge us and let us hold the trial date until we can

determine who's going to appear on behalf of the Medalist

Holdings. I'm confident no one will appear on behalf of the

Backpage defendants, and we can address that later; but I

would like to hold the trial date, Your Honor.

THE COURT: And what I'd like, Counsels,

is because my ruling came on a special-set, I am going to

ask that we set a hearing for presentation of an order for

me to review so that my findings are entered into the

record, so I will be on recess next week, so I would ask

that it be set upon my return.

MR. PFAU: And, Your Honor, just so I'm

clear, sanctions were applied against all defendants;

correct?

THE COURT: Correct.

MR. PFAU: Okay. Thank you, Your Honor.

THE COURT: I did not separate; it's one

as far as my order goes.

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MR. PFAU: I understand. I just wanted to

clarify.

MR. AMALA: Your Honor, so that we make

sure we note the presentation properly, may I ask when the

court reporter believes a transcript would be available so

that we can present an order properly?

THE COURT: Okay. That will be up to Miss

Kim.

(Discussion off the record.)

MR. AMALA: Your Honor, the court reporter

has indicated two weeks from today as the Court is on recess

next week.

THE COURT: Okay.

MR. AMALA: So if it's acceptable to the

Court, we'll get the transcript and put it into the proposed

order and try to work it out with Counsel and then go to

presentation.

THE COURT: So I'd like to schedule the

presentation; I don't want to lose parties.

MR. AMALA: Sure.

(Discussion off the record.)

MR. AMALA: So, Your Honor, two weeks from

today would be June 6th, and I think, just to make sure we

proceed, we have no issues with the procedure. I think if

we gave everyone -- I would suggest that a week to,

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basically, absorb the transcript in an order and that way,

we could note it -- if we -- if we filed it and noted it for

presentation -- filed it on the 12th and -- or, I guess, it

would be the 13th and note it for presentation, whatever the

Court would have available that would fit within the five

days for a presentation which, I think, would either be

the --

MR. GRANT: One suggestion, Your Honor,

will you allow a little bit more time there for getting the

transcript -- I'm sure it's two weeks but to be sure -- and

to give us an opportunity to deal with this. Honestly,

we've got a lot of things to digest and chew on.

THE COURT: Exactly, before that order is

entered, in addition to which the 30- and 60-day time frame

that I've given Davis Wright Tremaine does not start until

that order is entered, so it doesn't start today. It starts

when that order is entered --

MR. GRANT: I appreciate that.

THE COURT: -- so the sooner we can get

that order done.

MR. GRANT: I was just trying to allow

enough of a window of time, once we get the transcript, to

deal with the draft of the order and the presentation; and,

obviously, we're going to have -- I think we're going to

have further issues still but -- so I would suggest sometime

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the week of the 18th, perhaps, for a return hearing.

MR. PFAU: The 18th of June?

MR. GRANT: Yeah, exactly.

MR. PFAU: Okay.

THE COURT: That's fine.

MR. GRANT: All right.

(Discussion off the record.)

THE COURT: So let's special-set it for

9:00.

MR. PFAU: On the 21st.

MR. STAHL: 9:00 a.m. on the 21st?

THE COURT: Yes. Now, Counsels, we need

to fashion an order which I will do regarding sealing the

documents for -- that I reviewed in camera. I don't think I

need your signatures for that. However, I believe your

objections, if any, need to be noted.

MR. AMALA: Your Honor, the only, I guess,

objection we would file, just to reiterate Mr. Pfau's

request, that to the extent there's any information that's

not -- that should not be sealed or redacted that that be

accounted for. Obviously, we haven't seen it so we don't

know, so we'll probably file something very short, unless

the Court can -- is there anything in there that may not be

sealed, if that makes sense? I don't want to file an

objection to the file, but if you need that to be able to

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say I'm not redacting X, Y, and Z.

MR. PFAU: Let me -- let me just step in.

I think it would be helpful if we filed a one-page, no more,

objection so Your Honor understands our objection. If for

some reason this is appealed, then the appellate court would

understand our objection.

THE COURT: Yes.

MR. PFAU: Okay.

THE COURT: So I think that would be the

best way to proceed; however, we're in open court at this

time. I've indicated that I will be ordering the document

sealed subject to reconsideration, of course, Counsel, from

your motion.

My question is: Is there anyone in the courtroom that is

objecting to the sealing of the pleadings filed and the

motion to withdraw as well as the declaration other than the

litigants involved in this case? I will note that there are

individuals in the courtroom. No one has indicated that

there is any objections, and I will be sealing it subject to

a Bone-Club analysis. All right?

MR. AMALA: Okay.

MR. PFAU: Thank you.

THE COURT: Anything else, Counsel?

MR. PFAU: No, Your Honor.

MR. AMALA: No, Your Honor. Thank you.

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MR. STAHL: No, Your Honor.

THE COURT: I'll see everyone on the --

MR. PFAU: 21st.

THE COURT: The 21st at 9:00. Court will

be in recess.

(Proceedings concluded.)

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R.O. vs. Medalist Holdings, LLC

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IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR THE COUNTY OF PIERCE

_________________________________________________________

R.O., by and through her mother, )

S.H., and K.M., by and through )

her mother, L.M., )

)

Plaintiffs, ) No. 17-2-04897-1

)

vs. )

)

MEDALIST HOLDINGS, INC., et al. )

)

Defendants. )

_________________________________________________________

REPORTER'S CERTIFICATE

_________________________________________________________

STATE OF WASHINGTON )

) ss.

COUNTY OF PIERCE )

I, Kimberly A. O'Neill, Court Reporter in the state

of Washington, county of Pierce, do hereby certify that

the foregoing transcript is a full, true, and accurate

transcript of the proceedings and testimony taken in the

matter of the above-entitled cause.

DATED this 5th day of June, 2018.

Kimberly A . O ' Neill

_____________________________

KIMBERLY A. O'NEILL, CCR

License No. 1954

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