1035-00005 · Marguerite Delp · Correspondence/Client

client-letter-status-dormancy-renewal.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP Attorneys at Law 350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-7200

October 18, 2024

VIA FIRST CLASS MAIL AND EMAIL

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

Ms. Marguerite D. Fonseca 1847 Coldwater Canyon Drive Beverly Hills, California 90210

Re: *In re Estate of Teodoro R. Fonseca*; Los Angeles County Superior Court, Case No. 22STPB09714; Calderwood & Harkness LLP Matter No. 1035-00005 — Status Update and Standstill Renewal Recommendation

Dear Ms. Fonseca:

1. Purpose of This Letter

We write to provide you with a comprehensive status update on the contested probate proceeding captioned above during the current dormant period. As you are aware, the matter has been in standstill since the execution of the Settlement Standstill Agreement on April 28, 2023, pursuant to which all litigation deadlines have been tolled and the parties have refrained from filing new motions or propounding discovery. The current standstill period — Renewal #2, which was executed by all parties on April 28, 2024 — is set to expire on October 28, 2024, which is now only ten days away.

This letter is intended to address the following topics in detail so that you may make an informed decision regarding the next steps in this matter:

(a) the current procedural and administrative status of the probate proceeding, including the posture of the estate assets;

(b) a financial summary of legal fees billed and costs advanced by Calderwood & Harkness LLP through September 30, 2024;

(c) our recommendation regarding the execution of a Third Amendment to the Settlement Standstill Agreement, extending the standstill period from October 28, 2024, to February 28, 2025; and

(d) a discussion of the options and strategic considerations that will arise upon the eventual expiration of the standstill, whether at the end of the proposed renewal period or at some later date.

We have endeavored to be thorough in this communication, as we believe it is important for you to have a complete picture of the matter's posture before authorizing the proposed standstill renewal. We encourage you to review this letter carefully and to contact us with any questions at your earliest convenience. Given the approaching October 28 expiration date, time is of the essence in securing your authorization.

2. Current Status of the Proceeding

2.1 Procedural Posture

To orient this discussion, we begin with a brief recapitulation of the procedural history of this matter.

Your late husband, Teodoro R. Fonseca, passed away on September 3, 2022. Mr. Fonseca died intestate — that is, without a valid last will and testament. Upon his passing, you retained Calderwood & Harkness LLP to represent your interests as surviving spouse in the administration of his estate. On October 5, 2022, we filed on your behalf a Petition for Letters of Administration with the Los Angeles County Superior Court, Probate Division, seeking your appointment as administrator of the estate. That petition was assigned Case No. 22STPB09714 and was assigned to Department 29 of the Stanley Mosk Courthouse.

On November 14, 2022, the three adult children of the decedent — Rafael T. Fonseca, Isabela C. Fonseca-Greer, and Nicolás R. Fonseca (collectively, the "Contestants") — through their counsel, Damian R. Ortega and Lydia Kwan of Brennan, Ortega & Saldívar LLP, filed their initial objection to your petition. That initial objection raised concerns regarding your qualifications to serve as sole administrator and asserted that the decedent's children should share in the estate administration. Calderwood & Harkness filed a response to the initial objection on December 12, 2022, addressing each of the Contestants' claims and asserting your statutory priority as surviving spouse to serve as administrator under California Probate Code Section 8461.

On January 9, 2023, the Contestants filed an amended objection, which significantly expanded the scope of the contest. In addition to the administrative appointment issues, the amended objection introduced a new and material claim: the Contestants alleged the existence of a premarital agreement purportedly executed on May 30, 2008, between you and the decedent, which they contend would alter the distribution of estate assets and convert certain community property interests into the decedent's separate property. Calderwood & Harkness filed a comprehensive response to the amended objection on February 6, 2023, challenging both the authenticity and enforceability of the alleged premarital agreement and reaffirming your community property rights under California law.

On March 10, 2023, the parties entered into a stipulation — approved by the Court — providing for mediation of all disputed issues. Mediation was conducted on April 12, 2023, before the Honorable Constance Adler (Ret.), at the Westside Dispute Resolution Center in Santa Monica. While the mediation session was productive in identifying the parties' respective positions and narrowing certain factual disputes, the mediation ultimately concluded without resolution. Judge Adler noted in her closing remarks that the parties' positions, while divergent, were not irreconcilable and encouraged continued informal settlement discussions.

Following the unsuccessful mediation, the parties engaged in further negotiations, which culminated in the execution of the Settlement Standstill Agreement on April 28, 2023. The Settlement Standstill Agreement, which was signed by all parties and their respective counsel, provides for the tolling of all litigation deadlines, prohibits the filing of new motions or the initiation of discovery, requires the continuation of neutral estate administration, and preserves the parties' respective rights and positions in all respects. The agreement was designed to provide a structured period of de-escalation during which the parties could explore informal resolution while avoiding the substantial costs and disruption of active litigation.

The Settlement Standstill Agreement has been renewed twice since its original execution:

• Renewal #1, executed on October 28, 2023, extended the standstill period from October 28, 2023, to April 28, 2024 (a six-month extension).

• Renewal #2, executed on April 28, 2024, extended the standstill period from April 28, 2024, to October 28, 2024 (a second six-month extension).

Throughout the entire standstill period — from April 28, 2023, to the present — all litigation activity has remained fully suspended. No motions have been filed, no discovery has been propounded or responded to, and no court appearances have been required. The matter is dormant on the Court's docket. We note that the Court has not set any hearings or issued any orders requiring the parties to show cause as to the matter's inactivity, and we do not anticipate any sua sponte action by the Court during the proposed renewal period.

2.2 Estate Administration

As part of the stipulation filed with the Court on March 22, 2023, the parties agreed to the appointment of a neutral estate administrator to oversee the preservation and management of estate assets during the pendency of the probate proceeding. Pursuant to that stipulation, the Court approved the appointment of Ashford Fiduciary Services Inc., with Gerald Whitmore serving as principal officer, as the court-approved neutral estate administrator.

Ashford Fiduciary Services continues to serve in that capacity and has, by all accounts, performed its duties competently and without incident. Under the terms of the administration agreement, Ashford receives a monthly administration fee of $8,500, plus an annual asset-based fee of 0.15% of assets under administration. The monthly administration fee is shared equally between the parties, with $4,250 per month borne by you, Ms. Fonseca, and $4,250 per month borne by the Contestants collectively. The asset-based fee is paid from estate funds directly.

Ashford has been providing quarterly reports on estate assets and expenses to all parties and their respective counsel. We have reviewed each quarterly report received to date and are pleased to report that no irregularities, discrepancies, or concerns have been identified. The estate's liquid assets remain properly accounted for, the real property is being appropriately maintained, and all recurring obligations — including property taxes, insurance premiums, and maintenance expenses — are being paid in a timely manner.

In addition, Ridgeway Accounting Partners LLP, with Dennis Chua, CPA, as the lead accountant, continues to serve as the estate's accountant. Ridgeway has been responsible for maintaining the estate inventory, preparing all necessary federal and state tax filings (including the estate's fiduciary income tax returns), and performing ongoing financial reconciliation of estate accounts. Ridgeway's work has been consistent and thorough, and we have no concerns regarding the accuracy of the estate's financial records.

2.3 Status of Estate Assets

Set forth below is a summary of the principal assets of the probate estate and their current posture. We provide this summary for your reference and to ensure that our records remain consistent with your understanding of the estate's composition.

Real Property:

Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, CA 90210): This property has a current fair market value of approximately $8,450,000. You continue to occupy this property as your primary residence, and it is being maintained by you in the ordinary course. The property is not subject to any liens or encumbrances other than the standard property tax obligations, which are current. Our position remains that this property constitutes community property in its entirety.

Malibu Beach House (27100 Pacific Coast Highway, Malibu, CA 90265): This property has a current fair market value of approximately $6,200,000. The Malibu Beach House is currently maintained under Ashford Fiduciary Services' oversight, with a local property management company engaged to handle routine maintenance, security, and utility payments. The community property tracing claim on this property remains a central issue in the proceeding. Our position — supported by the analysis performed by Ridgeway Accounting Partners — is that approximately 61.6% of the property's value constitutes a community property interest. This percentage is derived from the community's contribution of approximately $1,800,000 in renovation costs and approximately $2,016,400 in mortgage payments during the marriage, measured relative to the current fair market value of $6,200,000. The Contestants have disputed this characterization and maintain that the Malibu Beach House was the decedent's separate property, acquired prior to the marriage. This issue will require resolution either through settlement or at trial.

Business Interests:

Lumiére Canyon Studios LLC: The decedent held a 50% membership interest in Lumiére Canyon Studios LLC, a film and television production company. Based on the most recent internal valuation, dated December 31, 2021, the enterprise value of Lumiére Canyon Studios was determined to be $31,600,000, placing the value of the decedent's 50% membership interest at approximately $15,800,000. You continue to serve as Chief Creative Officer of Lumiére Canyon Studios and are actively involved in managing the company's day-to-day business operations. As discussed further in Section 6 below, we note that this valuation is now nearly three years old and may warrant updating.

Pacific Rim Narrative Partners LLC: The decedent held a 35% membership interest in Pacific Rim Narrative Partners LLC, a media-focused investment fund. Based on the fund's most recent reported assets under management of approximately $78,500,000, the decedent's 35% interest has been valued at approximately $27,475,000. The fund continues to be managed by Victor Sandoval, the fund's managing partner, in the ordinary course of business. We have received no reports of material changes to the fund's operations or investment posture.

Financial Accounts:

Veltara Basin Bank, N.A. — Brokerage Account (acct. ending -4782): Current balance of approximately $5,120,000. This account remains frozen pending resolution of the probate proceeding, with investment management limited to preservation-oriented strategies as directed by Ashford Fiduciary Services.

Veltara Basin Bank, N.A. — Checking Account (acct. ending -3091): Current balance of approximately $342,000. This account is also frozen pending probate.

Veltara Basin Bank, N.A. — Money Market Account (acct. ending -6155): Current balance of approximately $1,875,000. This account is frozen pending probate.

intellectual Property and Personal Property:

intellectual Property Portfolio: The decedent's intellectual property portfolio consists of credits, residual rights, and associated interests in fourteen (14) feature films and six (6) television series. The net present value of these assets has been appraised at $4,600,000 by Pinnacle West Appraisal Group LLC, with the appraisal conducted under the direction of Dr. Sandra Fujimoto.

Personal Property (art, vehicles, furnishings): The decedent's tangible personal property, including an art collection, several vehicles, and household furnishings, has been inventoried and valued at approximately $1,250,000.

Total Probate Estate Valuation:

Based on the foregoing, the total estimated value of the probate estate, using our client-side valuations and estimates, is approximately $71,112,000.

We note for completeness that the Contestants, through their appraiser, Hargrove & Linden Appraisals Inc. (Morton Linden, principal), have proposed an alternative estate valuation of approximately $68,750,000. The disparity between the two valuations is attributable primarily to differing valuations of the Lumiére Canyon Studios and Pacific Rim Narrative Partners membership interests, as well as differences in the IP portfolio appraisal. While these valuation differences are not trivial, they are within a range that we believe is manageable in the context of settlement negotiations.

Non-Probate Assets:

For the sake of completeness, we confirm that the non-probate life insurance proceeds — consisting of a $3,000,000 term life insurance policy issued by Meridian Mutual Life Insurance Co. (Policy No. GH-TL-2019-05582) and a $2,000,000 whole life insurance policy issued by Commonwealth Fidelity Assurance Corp. (Policy No. GH-WL-2014-01247), for a combined total of $5,000,000 — were confirmed as payable to you as the named beneficiary on both policies. These proceeds have been distributed to you and are not subject to the probate contest. The Contestants have not challenged the beneficiary designations on either policy.

3. Summary of Legal Fees and Costs

3.1 Fees Billed

Total fees billed by Calderwood & Harkness LLP through September 30, 2024, are $487,250.00. These fees have been calculated in accordance with the billing rates established in our engagement letter dated October 12, 2022, which are as follows:

We note that billing activity has been substantially reduced during the dormant period under the Settlement Standstill Agreement. Since the standstill took effect on April 28, 2023, the firm's work on this matter has consisted primarily of periodic status reviews of the estate administration, negotiation and drafting of the standstill renewal amendments with Brennan, Ortega & Saldívar LLP, communications with Ashford Fiduciary Services Inc. and Ridgeway Accounting Partners LLP regarding estate administration and accounting, coordination with Pinnacle West Appraisal Group LLC regarding the status of the valuation work, and periodic privileged strategy consultations within the firm. During the standstill period, monthly fees have averaged approximately $4,500 to $7,000 per month, a significant reduction from the active litigation period.

The bulk of the $487,250 in fees was incurred during the active litigation period from October 2022 through April 2023, which involved the preparation and filing of the Petition for Letters of Administration, the preparation of two substantive response briefs to the Contestants' objections, extensive legal research on community property tracing, premarital agreement enforceability, and intestate succession issues, mediation preparation and attendance, and negotiation of the Settlement Standstill Agreement and the neutral administrator appointment stipulation.

3.2 Costs Advanced

Total costs advanced by the firm through September 30, 2024, are $62,340.00. These costs fall into the following principal categories:

• Pinnacle West Appraisal Group LLC — appraiser fees for business valuation services (Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC) and the intellectual property portfolio appraisal conducted by Dr. Sandra Fujimoto;

• Brindoval Forensic Document Services LLC — fees for Dr. Elaine Prescott's forensic examination of the alleged premarital agreement dated May 30, 2008, including her preliminary forensic report dated February 22, 2023;

• Court filing fees — filing of the Petition for Letters of Administration, responsive pleadings, and related filings with the Los Angeles County Superior Court; and

• Mediator fees — fees for the mediation conducted by the Honorable Constance Adler (Ret.) on April 12, 2023, at the Westside Dispute Resolution Center.

All costs advanced are subject to reimbursement in accordance with the terms of our engagement letter.

3.3 Outstanding Balance and Retainer

Upon engagement on October 12, 2022, you provided a $150,000.00 evergreen retainer, which has been held in the firm's client trust account and applied against invoices as they have been rendered. Payments received from you over the course of the engagement, including the initial retainer and subsequent payments, have been applied to fees and costs as billed.

As of September 30, 2024, the outstanding balance on your account is $38,590.00. We respectfully request that you remit this outstanding balance at your earliest convenience. Please note that the evergreen retainer has been applied as payments were received and any shortfall between amounts billed and amounts paid is reflected in the outstanding balance stated above.

We are happy to provide a detailed billing statement or to discuss any specific entries with you upon request. Please direct any billing inquiries to Patricia Dunmore, the billing partner assigned to this matter, who can be reached at (213) 555-7218 or pdunmore@calderwoodharkness.com.

4. Recommendation — Standstill Renewal #3

4.1 Proposed Terms

After careful consideration of the current posture of the case, the interests of the estate, and the relative costs and benefits of the available options, we recommend that you authorize the execution of a Third Amendment to the Settlement Standstill Agreement, extending the standstill period from its current expiration date of October 28, 2024, to February 28, 2025.

In anticipation of this recommendation, we have already transmitted a proposal to Damian R. Ortega of Brennan, Ortega & Saldívar LLP, via a letter dated October 10, 2024, proposing this renewal on terms consistent with the prior amendments. We have received a preliminary indication from Mr. Ortega that his clients are amenable to a further renewal, though formal agreement remains subject to the execution of the written amendment by all parties.

All material terms of the Settlement Standstill Agreement would remain unchanged under the proposed Third Amendment. Specifically, the Third Amendment would provide for the following:

(a) continued tolling of all litigation deadlines, including discovery cut-off dates, motion filing deadlines, and trial scheduling orders;

(b) a prohibition on the filing of new motions or the initiation of discovery by any party during the renewal period;

(c) continued administration of the estate by Ashford Fiduciary Services Inc. under the existing terms of the administration agreement;

(d) equal cost-sharing of the neutral administrator's monthly fee ($4,250 per month per side);

(e) renewability by mutual written consent of all parties upon expiration of the renewal period;

(f) terminability by any party upon thirty (30) days' written notice to all other parties and their counsel; and

(g) continued confidentiality of all settlement discussions and communications conducted during the standstill period.

A copy of the form of Third Amendment to the Settlement Standstill Agreement is enclosed with this letter for your review.

4.2 Rationale for Renewal

We believe that a third renewal of the standstill is in your best interest for several reasons.

First, continuing the standstill preserves the status quo and avoids the substantial costs that would be associated with reactivating litigation. If the standstill were to expire and the proceeding were to resume, the parties would need to engage in a full discovery program — including written discovery, document production, and depositions of multiple fact witnesses and expert witnesses — followed by the preparation and exchange of expert reports, potential dispositive motions, and ultimately trial preparation and trial. The costs associated with that process would be significant and would be incurred on an accelerated timeline. By contrast, the current standstill posture allows us to maintain our position at minimal cost while preserving all of our rights and claims.

Second, the informal settlement channel remains open. We have maintained periodic contact with Mr. Ortega's office throughout the standstill period, and there have been no indications that the Contestants have hardened their positions or are preparing for aggressive litigation. To the contrary, the extended dormancy period appears to have allowed passions to cool on both sides, which may facilitate more productive settlement discussions in the coming months. We view this as a positive development and one that counsels in favor of preserving the current framework.

Third, the Contestants have not indicated any intent to terminate the standstill or to resume an aggressive litigation posture. As noted above, Mr. Ortega has provided a preliminary indication that his clients are amenable to a further renewal. This suggests that the Contestants, like you, recognize the benefits of avoiding the costs and uncertainty of active litigation while settlement possibilities remain open.

Fourth, Ashford Fiduciary Services' neutral administration ensures that the estate's assets are being properly preserved, managed, and accounted for during this period. There is no risk that the standstill is resulting in waste or dissipation of estate assets. The quarterly reporting regime provides all parties with transparency into the estate's financial condition.

Fifth, we have proposed a shorter extension period for this renewal — four months, from October 28, 2024, to February 28, 2025 — rather than the six-month terms of the two prior renewals. This shorter term provides a natural decision point in early 2025 at which we can reassess the strategic landscape, evaluate any developments in the Contestants' posture, and determine whether further renewal, settlement efforts, or litigation reactivation is the most prudent course of action. We believe this shorter horizon strikes the right balance between preserving the benefits of the standstill and maintaining momentum toward an eventual resolution.

4.3 Client Action Required

In order to proceed with the Third Amendment, we require your written authorization to execute the amendment on your behalf, as well as your signature on the Third Amendment itself. A copy of the form of Third Amendment is enclosed for your review and signature. Please review the document, sign where indicated, and return the executed copy to our office at your earliest convenience, and no later than October 25, 2024, to allow sufficient time for all parties to execute the amendment before the current standstill period expires on October 28, 2024.

You may return the signed document by mail to our offices at the address set forth above, by email in PDF format to hquinn@calderwoodharkness.com, or by hand delivery. If you have any questions regarding the terms of the Third Amendment before signing, please do not hesitate to contact me directly.

5. Options Upon Standstill Expiration

While we recommend renewal of the standstill as discussed in Section 4 above, we believe it is prudent to provide you with an overview of the options that will be available upon the eventual expiration of the standstill — whether that occurs on February 28, 2025 (the proposed new expiration date), or at some subsequent date.

5.1 Option A — Further Renewal

The parties may agree to further extensions of the Settlement Standstill Agreement beyond February 28, 2025, if settlement discussions appear productive or if additional time is mutually desired. The Settlement Standstill Agreement as currently structured expressly contemplates the possibility of additional renewals by mutual written consent. Each additional renewal would follow the same format that has been used for the prior amendments: a written amendment executed by all parties and their counsel, specifying the new expiration date, with all other material terms remaining unchanged, including the thirty-day termination provision that allows any party to exit the standstill on notice.

We will continue to monitor the Contestants' posture and any indications of their willingness to continue the standstill framework. Should circumstances change — for example, if the Contestants indicate a desire to terminate the standstill or adopt a more aggressive posture — we will promptly advise you and adjust our recommendations accordingly.

5.2 Option B — Renewed Settlement Efforts

If the parties wish to pursue a more focused resolution of the contested issues, we could propose a second mediation session. This session could be conducted before the Honorable Constance Adler (Ret.), who is already familiar with the facts and issues in this matter and who expressed cautious optimism at the conclusion of the first session, or before another qualified mediator if the parties prefer a fresh perspective.

Any settlement discussions would need to address the key contested issues in this proceeding, which are as follows:

(1) The Alleged Premarital Agreement. The Contestants have produced a document purporting to be a premarital agreement between you and the decedent, dated May 30, 2008. Our position is that this document is not enforceable, and we believe that position is strongly supported by the forensic evidence. Dr. Elaine Prescott of Brindoval Forensic Document Services LLC produced a preliminary forensic report, dated February 22, 2023, in which she identified signs of alteration to the document and noted the absence of a second-page signature — a significant irregularity that calls the document's authenticity into serious question. If litigation is reactivated, we anticipate that Dr. Prescott's final report will further strengthen our position on this issue.

(2) Community vs. Separate Property Characterization of Business Interests. The characterization of the decedent's membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC — collectively valued at approximately $43,275,000 — as community or separate property is a central issue in this proceeding. Our position is that both interests were acquired or substantially enhanced during the marriage and therefore constitute community property, at least in substantial part. The Contestants contend that one or both interests should be characterized as the decedent's separate property.

(3) Malibu Beach House Community Property Tracing. As discussed in Section 2.3, our community property tracing analysis supports a finding that approximately 61.6% of the Malibu Beach House's current fair market value constitutes community property, based on the community's contributions of $1,800,000 in renovations and $2,016,400 in mortgage payments. The Contestants dispute this analysis and maintain that the property is the decedent's separate property in its entirety.

(4) Isabela's Promissory Note Claim. Isabela C. Fonseca-Greer has asserted a claim against the estate in the amount of $1,310,460, based on an alleged promissory note from the decedent. It is our position that the funds underlying this claim were a gift from the decedent to his daughter, not a loan, and that no enforceable promissory note exists. We believe the evidence supports this characterization.

(5) Nicolás's Oral Promise Claim. Nicolás R. Fonseca has asserted a claim based on an alleged oral promise by the decedent to convey certain property or funds to him. We contend that this claim is barred by the Statute of Frauds, which requires certain promises — including promises for the transfer of real property or promises that cannot be performed within one year — to be in writing and signed by the party to be charged. Without a written instrument, Nicolás's claim faces significant legal hurdles.

We wish to emphasize that our overall assessment of your litigation position remains strong. As the surviving spouse of a decedent who died intestate, your statutory entitlements under California Probate Code Sections 6400 through 6414 are substantial. Specifically, under Section 6401, you are entitled to receive one hundred percent (100%) of the community property and, under Section 6402, one-third (1/3) of the decedent's separate property (given that the decedent is survived by more than one child). These statutory entitlements, combined with the forensic evidence undermining the alleged premarital agreement, give us considerable leverage in any settlement discussions.

5.3 Option C — Reactivation of Litigation

Either party may terminate the standstill upon thirty (30) days' written notice to all other parties, or the standstill will expire by its terms at the end of the then-current renewal period if not further renewed. If the standstill expires on February 28, 2025 (assuming the proposed Third Amendment is executed), or at any other time, all tolled deadlines would resume and the matter would return to active litigation status.

If litigation is reactivated, we would anticipate the following next steps in the proceeding:

• Resumption of discovery: We would propound written discovery to the Contestants and would schedule depositions of Rafael T. Fonseca, Isabela C. Fonseca-Greer, Nicolás R. Fonseca, and Claudette Marchetti (the decedent's former business associate who may have knowledge relevant to the premarital agreement claim and the business valuation issues). The Contestants would likely propound discovery to you as well, and your deposition would likely be scheduled.

• Finalization of Expert Reports: We would work with Pinnacle West Appraisal Group LLC to finalize the estate valuation reports and would prepare rebuttal analyses to the competing valuation prepared by Hargrove & Linden Appraisals Inc. (Morton Linden). We would also commission Dr. Sandra Fujimoto to update the IP portfolio valuation if warranted.

• Final Forensic Document Report: We would engage Brindoval Forensic Document Services LLC to produce Dr. Elaine Prescott's final forensic examination report regarding the alleged premarital agreement. Dr. Prescott's preliminary report was favorable to our position, and we anticipate that her final report — which would involve a more thorough examination and would be prepared with the expectation that it may be introduced at trial — would further support our contention that the document has been altered and lacks proper execution.

• Dispositive Motions and Trial Preparation: Depending on the state of the evidence following discovery, we may have an opportunity to bring dispositive motions on one or more issues — for example, a motion to exclude the alleged premarital agreement or a motion for summary adjudication on the Statute of Frauds defense to Nicolás's oral promise claim. If the matter proceeds to trial, we would prepare trial briefs, witness lists, exhibit lists, and all other trial-related submissions.

We wish to be candid that the estimated additional legal costs for full litigation through trial would be significant. While we cannot provide a precise budget at this time without knowing the scope and complexity of the discovery that would be required, we would prepare and provide to you a detailed litigation budget at the time litigation is reactivated so that you may make an informed decision regarding the cost-benefit analysis of proceeding. We commit to keeping you fully informed of costs as they are incurred.

We will continue to monitor the Contestants' posture and any indications of their intentions as the February 2025 decision point approaches. Should we receive any communications from Brennan, Ortega & Saldívar LLP suggesting a change in the Contestants' position or strategy, we will promptly notify you and provide updated recommendations.

6. Upcoming Action Items and Next Steps

Based on the foregoing, the following action items require your attention in the near term:

1. Execute the Third Amendment. Please review the enclosed form of Third Amendment to the Settlement Standstill Agreement, sign where indicated, and return the executed copy to our office no later than October 25, 2024. As noted above, the current standstill period expires on October 28, 2024, and the Third Amendment must be executed by all parties before that date to ensure an uninterrupted standstill.

2. Remit Outstanding Balance. Please remit the outstanding balance of $38,590.00 at your earliest convenience. Payment may be made by check payable to "Calderwood & Harkness LLP Client Trust Account" and mailed to our office, or by wire transfer to the account specified on the enclosed invoice. Please contact Patricia Dunmore at (213) 555-7218 if you require wire transfer instructions.

3. Schedule a Strategy Discussion. We recommend scheduling a telephone call or in-person meeting in late January or early February 2025 to discuss strategy for the period following the February 28, 2025, standstill expiration. At that time, we will be able to assess whether the Contestants appear receptive to settlement discussions, whether a second mediation session is advisable, or whether the time has come to prepare for the reactivation of litigation. Please contact my assistant, Karen Lozano, at (213) 555-7204 to schedule a convenient time.

4. Updated Valuations. We recommend coordinating with Pinnacle West Appraisal Group LLC regarding whether updated valuations of the decedent's membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC may be advisable. The most recent internal valuation of Lumiére Canyon Studios is dated December 31, 2021 — nearly three years ago — and it is possible that the company's value has changed materially during that period, particularly given developments in the entertainment industry. An updated valuation would be necessary for any settlement discussions or trial preparation, and commissioning one in advance of the February 2025 decision point would allow us to negotiate from a position of current information. We will discuss the timing and cost of this effort with you at the strategy meeting referenced above.

5. Monitor Estate Administration. We will continue to review the quarterly reports issued by Ashford Fiduciary Services Inc. and coordinate with Ridgeway Accounting Partners LLP to ensure that the estate's financial records remain accurate and current. We will promptly notify you of any developments or concerns arising from the estate administration.

7. Conclusion

In summary, we recommend that you authorize the execution of the Third Amendment to the Settlement Standstill Agreement, extending the standstill period to February 28, 2025. This course of action preserves the status quo, avoids the substantial costs of litigation reactivation, and maintains the informal settlement channel that may ultimately lead to a negotiated resolution of this proceeding on terms favorable to you.

We remain confident in the strength of your legal position as surviving spouse of the decedent. Your statutory entitlements under the California Probate Code are substantial, the forensic evidence calls the alleged premarital agreement into serious question, and the community property tracing analysis supports your claims to a significant share of the estate's real property and business assets. While the path to resolution — whether through settlement or litigation — will require continued patience and strategic judgment, we believe you are well-positioned to achieve a favorable outcome.

Please do not hesitate to contact me directly at (213) 555-7210 or at hquinn@calderwoodharkness.com if you have any questions regarding this letter, the enclosed Third Amendment, or any other aspect of this matter. I am available to speak with you at your convenience and would welcome the opportunity to discuss any concerns you may have.

The firm remains fully committed to achieving the best possible outcome for you in this matter, and we appreciate your continued confidence in Calderwood & Harkness LLP.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Howard Quinn Partner

350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-7210

Email: hquinn@calderwoodharkness.com

Encl.: Form of Third Amendment to Settlement Standstill Agreement

cc: Patricia Dunmore, Billing Partner, Calderwood & Harkness LLP

Elliot Nguyen, Lead Associate, Calderwood & Harkness LLP

Timekeeper Category	Hourly Rate
Partners	$975.00/hour
Senior Associates	$650.00/hour
Associates	$525.00/hour
Paralegals	$295.00/hour

CALDERWOOD & HARKNESS LLP Attorneys at Law 350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-7200 | Facsimile: (213) 555-7201 www.calderwoodharkness.com
October 18, 2024
VIA FIRST CLASS MAIL AND EMAIL
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
Ms. Marguerite D. Fonseca 1847 Coldwater Canyon Drive Beverly Hills, California 90210
Re: *In re Estate of Teodoro R. Fonseca*; Los Angeles County Superior Court, Case No. 22STPB09714; Calderwood & Harkness LLP Matter No. 1035-00005 — Status Update and Standstill Renewal Recommendation
Dear Ms. Fonseca:
1. Purpose of This Letter
We write to provide you with a comprehensive status update on the contested probate proceeding captioned above during the current dormant period. As you are aware, the matter has been in standstill since the execution of the Settlement Standstill Agreement on April 28, 2023, pursuant to which all litigation deadlines have been tolled and the parties have refrained from filing new motions or propounding discovery. The current standstill period — Renewal #2, which was executed by all parties on April 28, 2024 — is set to expire on October 28, 2024, which is now only ten days away.
This letter is intended to address the following topics in detail so that you may make an informed decision regarding the next steps in this matter:
(a) the current procedural and administrative status of the probate proceeding, including the posture of the estate assets;
(b) a financial summary of legal fees billed and costs advanced by Calderwood & Harkness LLP through September 30, 2024;
(c) our recommendation regarding the execution of a Third Amendment to the Settlement Standstill Agreement, extending the standstill period from October 28, 2024, to February 28, 2025; and
(d) a discussion of the options and strategic considerations that will arise upon the eventual expiration of the standstill, whether at the end of the proposed renewal period or at some later date.
We have endeavored to be thorough in this communication, as we believe it is important for you to have a complete picture of the matter's posture before authorizing the proposed standstill renewal. We encourage you to review this letter carefully and to contact us with any questions at your earliest convenience. Given the approaching October 28 expiration date, time is of the essence in securing your authorization.
2. Current Status of the Proceeding
2.1 Procedural Posture
To orient this discussion, we begin with a brief recapitulation of the procedural history of this matter.
Your late husband, Teodoro R. Fonseca, passed away on September 3, 2022. Mr. Fonseca died intestate — that is, without a valid last will and testament. Upon his passing, you retained Calderwood & Harkness LLP to represent your interests as surviving spouse in the administration of his estate. On October 5, 2022, we filed on your behalf a Petition for Letters of Administration with the Los Angeles County Superior Court, Probate Division, seeking your appointment as administrator of the estate. That petition was assigned Case No. 22STPB09714 and was assigned to Department 29 of the Stanley Mosk Courthouse.
On November 14, 2022, the three adult children of the decedent — Rafael T. Fonseca, Isabela C. Fonseca-Greer, and Nicolás R. Fonseca (collectively, the "Contestants") — through their counsel, Damian R. Ortega and Lydia Kwan of Brennan, Ortega & Saldívar LLP, filed their initial objection to your petition. That initial objection raised concerns regarding your qualifications to serve as sole administrator and asserted that the decedent's children should share in the estate administration. Calderwood & Harkness filed a response to the initial objection on December 12, 2022, addressing each of the Contestants' claims and asserting your statutory priority as surviving spouse to serve as administrator under California Probate Code Section 8461.
On January 9, 2023, the Contestants filed an amended objection, which significantly expanded the scope of the contest. In addition to the administrative appointment issues, the amended objection introduced a new and material claim: the Contestants alleged the existence of a premarital agreement purportedly executed on May 30, 2008, between you and the decedent, which they contend would alter the distribution of estate assets and convert certain community property interests into the decedent's separate property. Calderwood & Harkness filed a comprehensive response to the amended objection on February 6, 2023, challenging both the authenticity and enforceability of the alleged premarital agreement and reaffirming your community property rights under California law.
On March 10, 2023, the parties entered into a stipulation — approved by the Court — providing for mediation of all disputed issues. Mediation was conducted on April 12, 2023, before the Honorable Constance Adler (Ret.), at the Westside Dispute Resolution Center in Santa Monica. While the mediation session was productive in identifying the parties' respective positions and narrowing certain factual disputes, the mediation ultimately concluded without resolution. Judge Adler noted in her closing remarks that the parties' positions, while divergent, were not irreconcilable and encouraged continued informal settlement discussions.
Following the unsuccessful mediation, the parties engaged in further negotiations, which culminated in the execution of the Settlement Standstill Agreement on April 28, 2023. The Settlement Standstill Agreement, which was signed by all parties and their respective counsel, provides for the tolling of all litigation deadlines, prohibits the filing of new motions or the initiation of discovery, requires the continuation of neutral estate administration, and preserves the parties' respective rights and positions in all respects. The agreement was designed to provide a structured period of de-escalation during which the parties could explore informal resolution while avoiding the substantial costs and disruption of active litigation.
The Settlement Standstill Agreement has been renewed twice since its original execution:
• Renewal #1, executed on October 28, 2023, extended the standstill period from October 28, 2023, to April 28, 2024 (a six-month extension).
• Renewal #2, executed on April 28, 2024, extended the standstill period from April 28, 2024, to October 28, 2024 (a second six-month extension).
Throughout the entire standstill period — from April 28, 2023, to the present — all litigation activity has remained fully suspended. No motions have been filed, no discovery has been propounded or responded to, and no court appearances have been required. The matter is dormant on the Court's docket. We note that the Court has not set any hearings or issued any orders requiring the parties to show cause as to the matter's inactivity, and we do not anticipate any sua sponte action by the Court during the proposed renewal period.
2.2 Estate Administration
As part of the stipulation filed with the Court on March 22, 2023, the parties agreed to the appointment of a neutral estate administrator to oversee the preservation and management of estate assets during the pendency of the probate proceeding. Pursuant to that stipulation, the Court approved the appointment of Ashford Fiduciary Services Inc., with Gerald Whitmore serving as principal officer, as the court-approved neutral estate administrator.
Ashford Fiduciary Services continues to serve in that capacity and has, by all accounts, performed its duties competently and without incident. Under the terms of the administration agreement, Ashford receives a monthly administration fee of $8,500, plus an annual asset-based fee of 0.15% of assets under administration. The monthly administration fee is shared equally between the parties, with $4,250 per month borne by you, Ms. Fonseca, and $4,250 per month borne by the Contestants collectively. The asset-based fee is paid from estate funds directly.
Ashford has been providing quarterly reports on estate assets and expenses to all parties and their respective counsel. We have reviewed each quarterly report received to date and are pleased to report that no irregularities, discrepancies, or concerns have been identified. The estate's liquid assets remain properly accounted for, the real property is being appropriately maintained, and all recurring obligations — including property taxes, insurance premiums, and maintenance expenses — are being paid in a timely manner.
In addition, Ridgeway Accounting Partners LLP, with Dennis Chua, CPA, as the lead accountant, continues to serve as the estate's accountant. Ridgeway has been responsible for maintaining the estate inventory, preparing all necessary federal and state tax filings (including the estate's fiduciary income tax returns), and performing ongoing financial reconciliation of estate accounts. Ridgeway's work has been consistent and thorough, and we have no concerns regarding the accuracy of the estate's financial records.
2.3 Status of Estate Assets
Set forth below is a summary of the principal assets of the probate estate and their current posture. We provide this summary for your reference and to ensure that our records remain consistent with your understanding of the estate's composition.
Real Property:
Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, CA 90210): This property has a current fair market value of approximately $8,450,000. You continue to occupy this property as your primary residence, and it is being maintained by you in the ordinary course. The property is not subject to any liens or encumbrances other than the standard property tax obligations, which are current. Our position remains that this property constitutes community property in its entirety.
Malibu Beach House (27100 Pacific Coast Highway, Malibu, CA 90265): This property has a current fair market value of approximately $6,200,000. The Malibu Beach House is currently maintained under Ashford Fiduciary Services' oversight, with a local property management company engaged to handle routine maintenance, security, and utility payments. The community property tracing claim on this property remains a central issue in the proceeding. Our position — supported by the analysis performed by Ridgeway Accounting Partners — is that approximately 61.6% of the property's value constitutes a community property interest. This percentage is derived from the community's contribution of approximately $1,800,000 in renovation costs and approximately $2,016,400 in mortgage payments during the marriage, measured relative to the current fair market value of $6,200,000. The Contestants have disputed this characterization and maintain that the Malibu Beach House was the decedent's separate property, acquired prior to the marriage. This issue will require resolution either through settlement or at trial.
Business Interests:
Lumiére Canyon Studios LLC: The decedent held a 50% membership interest in Lumiére Canyon Studios LLC, a film and television production company. Based on the most recent internal valuation, dated December 31, 2021, the enterprise value of Lumiére Canyon Studios was determined to be $31,600,000, placing the value of the decedent's 50% membership interest at approximately $15,800,000. You continue to serve as Chief Creative Officer of Lumiére Canyon Studios and are actively involved in managing the company's day-to-day business operations. As discussed further in Section 6 below, we note that this valuation is now nearly three years old and may warrant updating.
Pacific Rim Narrative Partners LLC: The decedent held a 35% membership interest in Pacific Rim Narrative Partners LLC, a media-focused investment fund. Based on the fund's most recent reported assets under management of approximately $78,500,000, the decedent's 35% interest has been valued at approximately $27,475,000. The fund continues to be managed by Victor Sandoval, the fund's managing partner, in the ordinary course of business. We have received no reports of material changes to the fund's operations or investment posture.
Financial Accounts:
Veltara Basin Bank, N.A. — Brokerage Account (acct. ending -4782): Current balance of approximately $5,120,000. This account remains frozen pending resolution of the probate proceeding, with investment management limited to preservation-oriented strategies as directed by Ashford Fiduciary Services.
Veltara Basin Bank, N.A. — Checking Account (acct. ending -3091): Current balance of approximately $342,000. This account is also frozen pending probate.
Veltara Basin Bank, N.A. — Money Market Account (acct. ending -6155): Current balance of approximately $1,875,000. This account is frozen pending probate.
intellectual Property and Personal Property:
intellectual Property Portfolio: The decedent's intellectual property portfolio consists of credits, residual rights, and associated interests in fourteen (14) feature films and six (6) television series. The net present value of these assets has been appraised at $4,600,000 by Pinnacle West Appraisal Group LLC, with the appraisal conducted under the direction of Dr. Sandra Fujimoto.
Personal Property (art, vehicles, furnishings): The decedent's tangible personal property, including an art collection, several vehicles, and household furnishings, has been inventoried and valued at approximately $1,250,000.
Total Probate Estate Valuation:
Based on the foregoing, the total estimated value of the probate estate, using our client-side valuations and estimates, is approximately $71,112,000.
We note for completeness that the Contestants, through their appraiser, Hargrove & Linden Appraisals Inc. (Morton Linden, principal), have proposed an alternative estate valuation of approximately $68,750,000. The disparity between the two valuations is attributable primarily to differing valuations of the Lumiére Canyon Studios and Pacific Rim Narrative Partners membership interests, as well as differences in the IP portfolio appraisal. While these valuation differences are not trivial, they are within a range that we believe is manageable in the context of settlement negotiations.
Non-Probate Assets:
For the sake of completeness, we confirm that the non-probate life insurance proceeds — consisting of a $3,000,000 term life insurance policy issued by Meridian Mutual Life Insurance Co. (Policy No. GH-TL-2019-05582) and a $2,000,000 whole life insurance policy issued by Commonwealth Fidelity Assurance Corp. (Policy No. GH-WL-2014-01247), for a combined total of $5,000,000 — were confirmed as payable to you as the named beneficiary on both policies. These proceeds have been distributed to you and are not subject to the probate contest. The Contestants have not challenged the beneficiary designations on either policy.
3. Summary of Legal Fees and Costs
3.1 Fees Billed
Total fees billed by Calderwood & Harkness LLP through September 30, 2024, are $487,250.00. These fees have been calculated in accordance with the billing rates established in our engagement letter dated October 12, 2022, which are as follows:
We note that billing activity has been substantially reduced during the dormant period under the Settlement Standstill Agreement. Since the standstill took effect on April 28, 2023, the firm's work on this matter has consisted primarily of periodic status reviews of the estate administration, negotiation and drafting of the standstill renewal amendments with Brennan, Ortega & Saldívar LLP, communications with Ashford Fiduciary Services Inc. and Ridgeway Accounting Partners LLP regarding estate administration and accounting, coordination with Pinnacle West Appraisal Group LLC regarding the status of the valuation work, and periodic privileged strategy consultations within the firm. During the standstill period, monthly fees have averaged approximately $4,500 to $7,000 per month, a significant reduction from the active litigation period.
The bulk of the $487,250 in fees was incurred during the active litigation period from October 2022 through April 2023, which involved the preparation and filing of the Petition for Letters of Administration, the preparation of two substantive response briefs to the Contestants' objections, extensive legal research on community property tracing, premarital agreement enforceability, and intestate succession issues, mediation preparation and attendance, and negotiation of the Settlement Standstill Agreement and the neutral administrator appointment stipulation.
3.2 Costs Advanced
Total costs advanced by the firm through September 30, 2024, are $62,340.00. These costs fall into the following principal categories:
• Pinnacle West Appraisal Group LLC — appraiser fees for business valuation services (Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC) and the intellectual property portfolio appraisal conducted by Dr. Sandra Fujimoto;
• Brindoval Forensic Document Services LLC — fees for Dr. Elaine Prescott's forensic examination of the alleged premarital agreement dated May 30, 2008, including her preliminary forensic report dated February 22, 2023;
• Court filing fees — filing of the Petition for Letters of Administration, responsive pleadings, and related filings with the Los Angeles County Superior Court; and
• Mediator fees — fees for the mediation conducted by the Honorable Constance Adler (Ret.) on April 12, 2023, at the Westside Dispute Resolution Center.
All costs advanced are subject to reimbursement in accordance with the terms of our engagement letter.
3.3 Outstanding Balance and Retainer
Upon engagement on October 12, 2022, you provided a $150,000.00 evergreen retainer, which has been held in the firm's client trust account and applied against invoices as they have been rendered. Payments received from you over the course of the engagement, including the initial retainer and subsequent payments, have been applied to fees and costs as billed.
As of September 30, 2024, the outstanding balance on your account is $38,590.00. We respectfully request that you remit this outstanding balance at your earliest convenience. Please note that the evergreen retainer has been applied as payments were received and any shortfall between amounts billed and amounts paid is reflected in the outstanding balance stated above.
We are happy to provide a detailed billing statement or to discuss any specific entries with you upon request. Please direct any billing inquiries to Patricia Dunmore, the billing partner assigned to this matter, who can be reached at (213) 555-7218 or pdunmore@calderwoodharkness.com.
4. Recommendation — Standstill Renewal #3
4.1 Proposed Terms
After careful consideration of the current posture of the case, the interests of the estate, and the relative costs and benefits of the available options, we recommend that you authorize the execution of a Third Amendment to the Settlement Standstill Agreement, extending the standstill period from its current expiration date of October 28, 2024, to February 28, 2025.
In anticipation of this recommendation, we have already transmitted a proposal to Damian R. Ortega of Brennan, Ortega & Saldívar LLP, via a letter dated October 10, 2024, proposing this renewal on terms consistent with the prior amendments. We have received a preliminary indication from Mr. Ortega that his clients are amenable to a further renewal, though formal agreement remains subject to the execution of the written amendment by all parties.
All material terms of the Settlement Standstill Agreement would remain unchanged under the proposed Third Amendment. Specifically, the Third Amendment would provide for the following:
(a) continued tolling of all litigation deadlines, including discovery cut-off dates, motion filing deadlines, and trial scheduling orders;
(b) a prohibition on the filing of new motions or the initiation of discovery by any party during the renewal period;
(c) continued administration of the estate by Ashford Fiduciary Services Inc. under the existing terms of the administration agreement;
(d) equal cost-sharing of the neutral administrator's monthly fee ($4,250 per month per side);
(e) renewability by mutual written consent of all parties upon expiration of the renewal period;
(f) terminability by any party upon thirty (30) days' written notice to all other parties and their counsel; and
(g) continued confidentiality of all settlement discussions and communications conducted during the standstill period.
A copy of the form of Third Amendment to the Settlement Standstill Agreement is enclosed with this letter for your review.
4.2 Rationale for Renewal
We believe that a third renewal of the standstill is in your best interest for several reasons.
First, continuing the standstill preserves the status quo and avoids the substantial costs that would be associated with reactivating litigation. If the standstill were to expire and the proceeding were to resume, the parties would need to engage in a full discovery program — including written discovery, document production, and depositions of multiple fact witnesses and expert witnesses — followed by the preparation and exchange of expert reports, potential dispositive motions, and ultimately trial preparation and trial. The costs associated with that process would be significant and would be incurred on an accelerated timeline. By contrast, the current standstill posture allows us to maintain our position at minimal cost while preserving all of our rights and claims.
Second, the informal settlement channel remains open. We have maintained periodic contact with Mr. Ortega's office throughout the standstill period, and there have been no indications that the Contestants have hardened their positions or are preparing for aggressive litigation. To the contrary, the extended dormancy period appears to have allowed passions to cool on both sides, which may facilitate more productive settlement discussions in the coming months. We view this as a positive development and one that counsels in favor of preserving the current framework.
Third, the Contestants have not indicated any intent to terminate the standstill or to resume an aggressive litigation posture. As noted above, Mr. Ortega has provided a preliminary indication that his clients are amenable to a further renewal. This suggests that the Contestants, like you, recognize the benefits of avoiding the costs and uncertainty of active litigation while settlement possibilities remain open.
Fourth, Ashford Fiduciary Services' neutral administration ensures that the estate's assets are being properly preserved, managed, and accounted for during this period. There is no risk that the standstill is resulting in waste or dissipation of estate assets. The quarterly reporting regime provides all parties with transparency into the estate's financial condition.
Fifth, we have proposed a shorter extension period for this renewal — four months, from October 28, 2024, to February 28, 2025 — rather than the six-month terms of the two prior renewals. This shorter term provides a natural decision point in early 2025 at which we can reassess the strategic landscape, evaluate any developments in the Contestants' posture, and determine whether further renewal, settlement efforts, or litigation reactivation is the most prudent course of action. We believe this shorter horizon strikes the right balance between preserving the benefits of the standstill and maintaining momentum toward an eventual resolution.
4.3 Client Action Required
In order to proceed with the Third Amendment, we require your written authorization to execute the amendment on your behalf, as well as your signature on the Third Amendment itself. A copy of the form of Third Amendment is enclosed for your review and signature. Please review the document, sign where indicated, and return the executed copy to our office at your earliest convenience, and no later than October 25, 2024, to allow sufficient time for all parties to execute the amendment before the current standstill period expires on October 28, 2024.
You may return the signed document by mail to our offices at the address set forth above, by email in PDF format to hquinn@calderwoodharkness.com, or by hand delivery. If you have any questions regarding the terms of the Third Amendment before signing, please do not hesitate to contact me directly.
5. Options Upon Standstill Expiration
While we recommend renewal of the standstill as discussed in Section 4 above, we believe it is prudent to provide you with an overview of the options that will be available upon the eventual expiration of the standstill — whether that occurs on February 28, 2025 (the proposed new expiration date), or at some subsequent date.
5.1 Option A — Further Renewal
The parties may agree to further extensions of the Settlement Standstill Agreement beyond February 28, 2025, if settlement discussions appear productive or if additional time is mutually desired. The Settlement Standstill Agreement as currently structured expressly contemplates the possibility of additional renewals by mutual written consent. Each additional renewal would follow the same format that has been used for the prior amendments: a written amendment executed by all parties and their counsel, specifying the new expiration date, with all other material terms remaining unchanged, including the thirty-day termination provision that allows any party to exit the standstill on notice.
We will continue to monitor the Contestants' posture and any indications of their willingness to continue the standstill framework. Should circumstances change — for example, if the Contestants indicate a desire to terminate the standstill or adopt a more aggressive posture — we will promptly advise you and adjust our recommendations accordingly.
5.2 Option B — Renewed Settlement Efforts
If the parties wish to pursue a more focused resolution of the contested issues, we could propose a second mediation session. This session could be conducted before the Honorable Constance Adler (Ret.), who is already familiar with the facts and issues in this matter and who expressed cautious optimism at the conclusion of the first session, or before another qualified mediator if the parties prefer a fresh perspective.
Any settlement discussions would need to address the key contested issues in this proceeding, which are as follows:
(1) The Alleged Premarital Agreement. The Contestants have produced a document purporting to be a premarital agreement between you and the decedent, dated May 30, 2008. Our position is that this document is not enforceable, and we believe that position is strongly supported by the forensic evidence. Dr. Elaine Prescott of Brindoval Forensic Document Services LLC produced a preliminary forensic report, dated February 22, 2023, in which she identified signs of alteration to the document and noted the absence of a second-page signature — a significant irregularity that calls the document's authenticity into serious question. If litigation is reactivated, we anticipate that Dr. Prescott's final report will further strengthen our position on this issue.
(2) Community vs. Separate Property Characterization of Business Interests. The characterization of the decedent's membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC — collectively valued at approximately $43,275,000 — as community or separate property is a central issue in this proceeding. Our position is that both interests were acquired or substantially enhanced during the marriage and therefore constitute community property, at least in substantial part. The Contestants contend that one or both interests should be characterized as the decedent's separate property.
(3) Malibu Beach House Community Property Tracing. As discussed in Section 2.3, our community property tracing analysis supports a finding that approximately 61.6% of the Malibu Beach House's current fair market value constitutes community property, based on the community's contributions of $1,800,000 in renovations and $2,016,400 in mortgage payments. The Contestants dispute this analysis and maintain that the property is the decedent's separate property in its entirety.
(4) Isabela's Promissory Note Claim. Isabela C. Fonseca-Greer has asserted a claim against the estate in the amount of $1,310,460, based on an alleged promissory note from the decedent. It is our position that the funds underlying this claim were a gift from the decedent to his daughter, not a loan, and that no enforceable promissory note exists. We believe the evidence supports this characterization.
(5) Nicolás's Oral Promise Claim. Nicolás R. Fonseca has asserted a claim based on an alleged oral promise by the decedent to convey certain property or funds to him. We contend that this claim is barred by the Statute of Frauds, which requires certain promises — including promises for the transfer of real property or promises that cannot be performed within one year — to be in writing and signed by the party to be charged. Without a written instrument, Nicolás's claim faces significant legal hurdles.
We wish to emphasize that our overall assessment of your litigation position remains strong. As the surviving spouse of a decedent who died intestate, your statutory entitlements under California Probate Code Sections 6400 through 6414 are substantial. Specifically, under Section 6401, you are entitled to receive one hundred percent (100%) of the community property and, under Section 6402, one-third (1/3) of the decedent's separate property (given that the decedent is survived by more than one child). These statutory entitlements, combined with the forensic evidence undermining the alleged premarital agreement, give us considerable leverage in any settlement discussions.
5.3 Option C — Reactivation of Litigation
Either party may terminate the standstill upon thirty (30) days' written notice to all other parties, or the standstill will expire by its terms at the end of the then-current renewal period if not further renewed. If the standstill expires on February 28, 2025 (assuming the proposed Third Amendment is executed), or at any other time, all tolled deadlines would resume and the matter would return to active litigation status.
If litigation is reactivated, we would anticipate the following next steps in the proceeding:
• Resumption of discovery: We would propound written discovery to the Contestants and would schedule depositions of Rafael T. Fonseca, Isabela C. Fonseca-Greer, Nicolás R. Fonseca, and Claudette Marchetti (the decedent's former business associate who may have knowledge relevant to the premarital agreement claim and the business valuation issues). The Contestants would likely propound discovery to you as well, and your deposition would likely be scheduled.
• Finalization of Expert Reports: We would work with Pinnacle West Appraisal Group LLC to finalize the estate valuation reports and would prepare rebuttal analyses to the competing valuation prepared by Hargrove & Linden Appraisals Inc. (Morton Linden). We would also commission Dr. Sandra Fujimoto to update the IP portfolio valuation if warranted.
• Final Forensic Document Report: We would engage Brindoval Forensic Document Services LLC to produce Dr. Elaine Prescott's final forensic examination report regarding the alleged premarital agreement. Dr. Prescott's preliminary report was favorable to our position, and we anticipate that her final report — which would involve a more thorough examination and would be prepared with the expectation that it may be introduced at trial — would further support our contention that the document has been altered and lacks proper execution.
• Dispositive Motions and Trial Preparation: Depending on the state of the evidence following discovery, we may have an opportunity to bring dispositive motions on one or more issues — for example, a motion to exclude the alleged premarital agreement or a motion for summary adjudication on the Statute of Frauds defense to Nicolás's oral promise claim. If the matter proceeds to trial, we would prepare trial briefs, witness lists, exhibit lists, and all other trial-related submissions.
We wish to be candid that the estimated additional legal costs for full litigation through trial would be significant. While we cannot provide a precise budget at this time without knowing the scope and complexity of the discovery that would be required, we would prepare and provide to you a detailed litigation budget at the time litigation is reactivated so that you may make an informed decision regarding the cost-benefit analysis of proceeding. We commit to keeping you fully informed of costs as they are incurred.
We will continue to monitor the Contestants' posture and any indications of their intentions as the February 2025 decision point approaches. Should we receive any communications from Brennan, Ortega & Saldívar LLP suggesting a change in the Contestants' position or strategy, we will promptly notify you and provide updated recommendations.
6. Upcoming Action Items and Next Steps
Based on the foregoing, the following action items require your attention in the near term:
1. Execute the Third Amendment. Please review the enclosed form of Third Amendment to the Settlement Standstill Agreement, sign where indicated, and return the executed copy to our office no later than October 25, 2024. As noted above, the current standstill period expires on October 28, 2024, and the Third Amendment must be executed by all parties before that date to ensure an uninterrupted standstill.
2. Remit Outstanding Balance. Please remit the outstanding balance of $38,590.00 at your earliest convenience. Payment may be made by check payable to "Calderwood & Harkness LLP Client Trust Account" and mailed to our office, or by wire transfer to the account specified on the enclosed invoice. Please contact Patricia Dunmore at (213) 555-7218 if you require wire transfer instructions.
3. Schedule a Strategy Discussion. We recommend scheduling a telephone call or in-person meeting in late January or early February 2025 to discuss strategy for the period following the February 28, 2025, standstill expiration. At that time, we will be able to assess whether the Contestants appear receptive to settlement discussions, whether a second mediation session is advisable, or whether the time has come to prepare for the reactivation of litigation. Please contact my assistant, Karen Lozano, at (213) 555-7204 to schedule a convenient time.
4. Updated Valuations. We recommend coordinating with Pinnacle West Appraisal Group LLC regarding whether updated valuations of the decedent's membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC may be advisable. The most recent internal valuation of Lumiére Canyon Studios is dated December 31, 2021 — nearly three years ago — and it is possible that the company's value has changed materially during that period, particularly given developments in the entertainment industry. An updated valuation would be necessary for any settlement discussions or trial preparation, and commissioning one in advance of the February 2025 decision point would allow us to negotiate from a position of current information. We will discuss the timing and cost of this effort with you at the strategy meeting referenced above.
5. Monitor Estate Administration. We will continue to review the quarterly reports issued by Ashford Fiduciary Services Inc. and coordinate with Ridgeway Accounting Partners LLP to ensure that the estate's financial records remain accurate and current. We will promptly notify you of any developments or concerns arising from the estate administration.
7. Conclusion
In summary, we recommend that you authorize the execution of the Third Amendment to the Settlement Standstill Agreement, extending the standstill period to February 28, 2025. This course of action preserves the status quo, avoids the substantial costs of litigation reactivation, and maintains the informal settlement channel that may ultimately lead to a negotiated resolution of this proceeding on terms favorable to you.
We remain confident in the strength of your legal position as surviving spouse of the decedent. Your statutory entitlements under the California Probate Code are substantial, the forensic evidence calls the alleged premarital agreement into serious question, and the community property tracing analysis supports your claims to a significant share of the estate's real property and business assets. While the path to resolution — whether through settlement or litigation — will require continued patience and strategic judgment, we believe you are well-positioned to achieve a favorable outcome.
Please do not hesitate to contact me directly at (213) 555-7210 or at hquinn@calderwoodharkness.com if you have any questions regarding this letter, the enclosed Third Amendment, or any other aspect of this matter. I am available to speak with you at your convenience and would welcome the opportunity to discuss any concerns you may have.
The firm remains fully committed to achieving the best possible outcome for you in this matter, and we appreciate your continued confidence in Calderwood & Harkness LLP.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Quinn Partner
350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 555-7210
Email: hquinn@calderwoodharkness.com
Encl.: Form of Third Amendment to Settlement Standstill Agreement
cc: Patricia Dunmore, Billing Partner, Calderwood & Harkness LLP
Elliot Nguyen, Lead Associate, Calderwood & Harkness LLP
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October 18, 2024

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