About The Spear Report, Independent Investor and Gregory Spear

Arbitration, main round

After the Emergency Arbitrator found that I was personally liable, I had no other alternative than to get a real lawyer in the US to defend myself. I asked my norwegian lawyers if they knew any, and got a recommendation. I phoned their “US contacts” and I was politely told that they could take the case, but that they would require a prepaid retainer of $250.000 and estimated a total cost $500.000. That was a bit over my budget, but to their defence, it was probably my norwegian lawyers who were clueless. They had given me the contact information of a big (expensive) company typically handling cases for goverments, large multinationals and similar. The people in the US company however did provide me with the contact details of the lawyer who would become my lawyer in defending myself, and later help me win my case against Gregory Spear.

Since I now stood the risk of being held personally liable, losing all my personal assets, I had to go on the offensive, and I filed a counterclaim against Gregory Spear’s company. My lawyer advised me against trying to pull Gregory Spear personally into the case at this stage, as that can be done just as easily later on assuming I would win the case.

Both parties had agreed in advance that the case would be handled on written documentation only. This was probably just as well; 98% of the communication had been done via email, so it could easily be referenced in writing. Both myself, and I guess Gregory Spear, spent months creating briefs, affidavits, responses and responses to responses.

Gregory Spear kept inflating both damages and claims about what I had done, what my intentions had been from the start and all the bad stuff I had done to his company. He claimed I set out to defraud him from the outset; that I had defrauded him. He claimed that I did not deliver what I had promised. He also tried to pull additional people into the case, including  my girlfriend, who was listed as a board member in my companies was part of the fraud, and that she was personally liable as well.

Since I was filing a counterclaim I had to go through the actual losses at my end as well, including time and assets that Gregory Spear had effectively managed to freeze as part of the Emergency Process.

During the first round; Emergency Arbitration; there was one lawyer selected by the arbitration administrators which would act as judge and jury, which we both submitted papers to. Since I had elected not to file any claims in the emergency arbitration, I also elected not to pay any part of the costs of that process. The Emergency Arbitrator spent $16.800 briefly looking at our filed papers, probably at a rate around $500/hour or so. Life must be really good for these kinds of lawyers in countries where an amount of $16.800 amounts to 1.5 times the average yearly salary. I was ordered to cover 1/3rd of the costs of the emergency arbitration, an amount I naturally would not even consider paying until the final outcome of the main arbitration round had been settled (and wisely so).

In the main round of arbitration, things are more expensive. First we get a list of potential “arbitrator judges”, and we get to vote on who we would like. Then the administrators select from our votes. Then we also have to get one lawyer each. Well, theoretically you do not have to, but the arbitrator made it very clear that it was not his job to educate us on how the legal system worked, which basically means you risk being royally screwed over unless you know how to play by the rules. Both me and my counterparty elected to have professional representation in this process.

At this time Gregory Spear, having already fronted the full cost of the emergency arbitration process, probably realized that this next round, with my counterclaim, would become a lot more expensive. After one of the initial phone conferences with the elected arbitrator, it was suggested myself and Gregory Spear stayed online after the administrative stuff had been taken care of to see if there would be any possible way we could settle. By now I had offered to basically walk away from all the money he owed me, if he stopped this waste of time and money.

I’m not sure what Gregory Spear is smoking, but the only settlement he was willing to discuss was that I hand over my assets and a few hundred thousand dollars in damages, or that I became his slave. He actually had the nerve to suggest a settlement whereby I would work, without any compensation, creating software and systems for him until he would be able to build a profitable business, as defined by himself. Or else he would press on, and would demand a million dollars or more. I gave the only response I could; Gregory, you are crazy.

From the time Gregory Spear filed his initial case against me in August 2007, we both spend lots of time writing affidavits, briefs, timelines with facts, responses, counter-responses and more. We also wrote checks. To arbitration administrators and lawyers. Lots of them. My own expenditure on legal fees alone is around $150.000. By the time our claims had been filed, Gregory Spear had increased his claim against me to $300.000, and I had filed a counterclaim of $483.384 . We spent most of 2008 filing papers back and forth. We fought wherever we could of course; Gregory Spear tried to stop me from filing claims before I made him “whole” by paying half of what he had contributed so far. I tried to stop him from filing responses based on him missing deadlines set by the arbitrator. We fought about the maximum size of filings.

Later in the process, Gregory Spears attempts another “settlement offer”:

Marius,
Before the Arbitrator reviews my argument for rejecting your brief, we could jointly tell him to hold off if you think this might be a good time to explore a settlement along the lines of the following. We should do that quickly, however, before he starts reviewing all those documents…

In family court you’d have a chance, Marius, but this is just plain old contract law, and I believe contract law favors my case heavily. Many of your arguments, for example, rely on communications we had before the contract was signed, but the Contract, in Article 29, says the arbitrator has to ignore all of that. He has no choice. My request for a reasoned decision signals him that his decision is going to court, so he’s going to be careful. Nothing will matter to him but the letter of the contract, and that is totally in my favor.

I know you are counting on a court overturning your personal involvement, but a Norwegian court is extremely unlikely even to accept the case for review. That happens very, very rarely…

There is nothing you will think is fair about this. Think about this as an alternative to a strong chance of a $400,000 debt ($300k in damages and at least $100k for the arbitration and Norwegian court costs) and losing all the purchased property, too, plus months more litigation and distraction.

Settlement Offer

Summary:
I win, you lose, but no damages.
You cooperate in delivery, etc.
You pay all arbitration costs.
You get 5 years of rev. share.

Detail:
We drop all of our respective claims and remedies.
I am the owner of all of the purchased property and everything you’ve done since the contract began. Includes full software repository.
You install it and teach us how to maintain it and answer any questions we have or a future developer has to the best of your ability for six months.
You drop your complaint about the aaii data.
You cannot ever use any of the purchased property or the work you’ve done since our contract began.
You pay the full cost of the entire arbitration, including the emergency portion. We can work out a payment plan. If you don’t pay on time, the amount owed escalates.
You retain your rev. share as stated in the contract for 5 years from the settlement date, but there is no minimum annual amount.
You have a non-compete restriction as in the Contract for 2 years from settlement date.
You sign as a person and all of your corporate holdings are collateral against a default.
We ask Arbitrator H. to retain jurisdiction to quickly settle any disputes.
We agree that if the Arbitrator’s orders are not followed, a court is instructed to impose punitive penalties in addition to damages.
All in legal language, of course. This time, by lawyers.

Eh, no thanks. These settlement offers also rhyme very badly with the claims he puts forth towards the arbitrator. If I’m a fraudster, and if I’m unable to deliver what I have promised, why the hell does he insist on me hanging around making the systems he needs? Unfortunately, settlement discussions remain outside of the universe of documentation that can be pulled into the main case; they can not be submitted as documentation.

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