1035-00005 · Marguerite Delp · Legal Memoranda

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the individuals to whom it is addressed and contains confidential legal analysis. Do not distribute, copy, or disclose without prior authorization.

TO: Howard Quinn, Responsible Partner; Patricia Dunmore, Billing Partner

FROM: Elliot Nguyen, Lead Associate

DATE: October 15, 2024

RE: Status Update and Standstill Renewal Recommendation — In re Estate of Teodoro R. Fonseca, Los Angeles County Superior Court Case No. 22STPB09714

MATTER NO.: 1035-00005

CLIENT: Marguerite D. Fonseca

I. Purpose

This memorandum provides a comprehensive status update on the dormant contested probate proceeding, In re Estate of Teodoro R. Fonseca, Case No. 22STPB09714, pending in the Los Angeles County Superior Court, Probate Division. The matter has been in a standstill posture since April 28, 2023, and the current renewal of the Settlement Standstill Agreement is set to expire on October 28, 2024. Accordingly, this memorandum is intended to bring the engagement team current on all material developments and to frame the recommendation set forth herein.

Specifically, this memorandum: (a) reviews the procedural history and current posture of the matter under the Settlement Standstill Agreement; (b) summarizes the composition of the probate estate and the contested issues between the parties; (c) provides an update on the status of estate administration by the neutral administrator; (d) reports on the financial status of the engagement, including fees billed, costs advanced, and the outstanding balance; and (e) recommends that the firm advise Ms. Fonseca to execute a Third Amendment to the Settlement Standstill Agreement (Renewal #3), extending the standstill period through February 28, 2025.

In addition to the foregoing, this memorandum outlines the strategic considerations and available options for the period following expiration of the renewed standstill, including the possibility of renewed mediation, direct settlement negotiations, or reactivation of litigation. It is my recommendation, subject to the partners' review and approval, that we begin internal strategic planning for the post-standstill period in January 2025 so that the firm and the client are prepared to act decisively once the Third Amendment expires.

II. Procedural History and Current Status

A. Background Summary

Teodoro R. Fonseca ("Decedent") died intestate on September 3, 2022, of cardiac arrest (natural causes), at the age of 62. At the time of his death, Decedent was a resident of Los Angeles County, California, and was domiciled at 1847 Coldwater Canyon Drive, Beverly Hills, California 90210. Decedent was a prominent figure in the entertainment industry, with significant business interests in film production and content investment.

Our client, Marguerite D. Fonseca ("Ms. Fonseca" or "Client"), is the surviving spouse of the Decedent. Ms. Fonseca and the Decedent were married on June 14, 2008, in Los Angeles County, California. The marriage remained intact and continuous from that date until the Decedent's death, a period of approximately fourteen years and three months. Ms. Fonseca has served continuously as Chief Creative Officer of Lumiére Canyon Studios LLC, a production company she co-founded with the Decedent in 2009, and she holds her own separate 50% membership interest in that entity. No community property agreement, postnuptial agreement, or other marital property arrangement was executed during the marriage, a point that is central to the dispute with the Decedent's children.

The Decedent was previously married to Claudette Marchetti. That marriage ended in dissolution in 2005, pursuant to a marital settlement agreement that included a property division of approximately $4.8 million and a spousal support buyout payment of $1.5 million, the latter of which was finalized in 2007. Three adult children were born of the first marriage, and those children are the contestants in this proceeding:

1. Rafael T. Fonseca (age 33) — the lead contestant, currently employed as Vice President of Development at Crestline Media Group Inc. Mr. Fonseca resides at 502 Olive Avenue, Unit 3, Burbank, California 91502. He has been the most active and vocal of the contestants and appears to be the driving force behind the contest.

2. Isabela C. Fonseca-Greer (age 30) — a documentary filmmaker and the principal of Amber Light Documentary Films LLC. Ms. Fonseca-Greer resides at 78 Eucalyptus Lane, Santa Monica, California 90402. She is the holder of a promissory note that forms the basis of one of the contested claims in the proceeding.

3. Nicolás R. Fonseca (age 26) — a graduate student, currently residing at 1190 Elm Street, Apartment 4B, Palo Alto, California 94301. Nicolás's involvement in the contest appears to be primarily at the direction of his older brother Rafael, and his individual claim relates to alleged oral promises by the Decedent to fund his graduate education.

The contestants (collectively, the "Contestants") are represented by Damian R. Ortega and Lydia Kwan of Brennan, Ortega & Saldívar LLP, located at 1900 Avenue of the Stars, Suite 2100, Los Angeles, California 90067. Mr. Ortega serves as lead counsel for the Contestants, with Ms. Kwan handling day-to-day communications and document production.

Calderwood & Harkness LLP opened this matter on October 12, 2022, following an initial consultation with Ms. Fonseca on October 7, 2022. The engagement team consists of Howard Quinn (Responsible Partner), Patricia Dunmore (Billing Partner), Elliot Nguyen (Lead Associate), and Grace Nakamura (Working Associate). A paralegal team has been utilized on an as-needed basis for document management and filing support.

B. Key Procedural Milestones

The following is a chronological summary of the key procedural events in the matter from its inception through the present:

October 5, 2022: Ms. Fonseca filed a Petition for Letters of Administration in the Los Angeles County Superior Court, Probate Division, seeking appointment as administrator of the Decedent's estate. The petition was filed on an expedited basis given the need to secure and manage the Decedent's business interests, including his membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC.

November 14, 2022: The Contestants, through counsel at Brennan, Ortega & Saldívar LLP, filed an initial objection to the Petition for Letters of Administration. The objection raised general concerns about Ms. Fonseca's suitability as administrator and asserted that the Contestants, as the Decedent's issue, had a right to participate in the administration. The initial objection did not reference any premarital agreement.

December 12, 2022: Calderwood & Harkness filed a Response to the Contestants' Initial Objection, addressing each of the Contestants' arguments and reaffirming Ms. Fonseca's priority under California Probate Code § 8461 as the surviving spouse of the Decedent.

January 9, 2023: The Contestants filed an Amended Objection to the Petition for Letters of Administration. The Amended Objection introduced, for the first time, a claim that the Decedent and Ms. Fonseca had entered into a premarital agreement dated on or about May 30, 2008, approximately two weeks before their wedding. The Contestants attached to the Amended Objection a two-page photocopy of the alleged premarital agreement. This document bore what appeared to be the Decedent's signature on the second page but conspicuously lacked Ms. Fonseca's signature. The introduction of this claim materially altered the scope and complexity of the proceeding.

January 18, 2023: Calderwood & Harkness filed a Petition for Preliminary Distribution of Non-Probate Assets, seeking release of life insurance proceeds totaling $5,000,000 to Ms. Fonseca as the named beneficiary under two policies: a $3,000,000 Meridian Mutual term life policy (Policy No. GH-TL-2019-05582) and a $2,000,000 Commonwealth Fidelity Assurance Corp. whole life policy (Policy No. GH-WL-2014-01247). The petition argued that these proceeds were non-probate assets payable directly to the named beneficiary and should not be subject to the probate administration or any claims by the Contestants.

February 6, 2023: Calderwood & Harkness filed a Response to the Amended Objection, addressing the premarital agreement claim in detail. The response argued that the alleged premarital agreement was unenforceable under California Family Code §§ 1610-1617 on multiple grounds, including the absence of Ms. Fonseca's signature, the failure to produce an original document, and the lack of evidence that the statutory requirements for a valid premarital agreement had been satisfied.

February 22, 2023: Dr. Elaine Prescott of Brindoval Forensic Document Services LLC issued a preliminary forensic document examination report concerning the two-page photocopy of the alleged premarital agreement. Dr. Prescott's preliminary findings were favorable to our client's position. She concluded that the photocopy exhibited signs of alteration, including irregularities in the alignment and formatting of text on the second page, and that the absence of Ms. Fonseca's signature on page two was consistent with an incomplete or draft document rather than a fully executed agreement. Dr. Prescott noted that a definitive opinion could not be rendered without examination of the original document, which the Contestants have not produced.

March 10, 2023: The Court entered a Stipulation and Order for Mediation, pursuant to which the parties agreed to submit the matter to mediation before the Honorable Constance Adler (Ret.) of Westside Dispute Resolution Center. The stipulation provided for a single mediation session with the option for additional sessions by mutual agreement.

March 22, 2023: The parties filed a Stipulation for Appointment of Ashford Fiduciary Services Inc. as neutral estate administrator. Gerald Whitmore, the principal officer of Ashford, was designated to manage the day-to-day administration of the estate pending resolution of the contested proceeding. The Court approved the stipulation on the same date. The appointment of a neutral administrator was a pragmatic resolution to the dispute over Ms. Fonseca's petition for letters of administration and allowed the parties to focus on the substantive contest.

April 12, 2023: Mediation Session #1 was held before Judge Adler (Ret.) at the offices of Westside Dispute Resolution Center. All parties and counsel attended in person. The mediation lasted approximately nine hours and involved multiple rounds of proposals and counterproposals. Ultimately, no resolution was reached. The primary impediment to settlement was a substantial valuation gap between the parties' respective positions on the Decedent's 50% interest in Lumiére Canyon Studios LLC and 35% interest in Pacific Rim Narrative Partners LLC, as well as the Contestants' insistence on the enforceability of the alleged premarital agreement. Judge Adler indicated her availability for a second session if the parties were willing.

April 28, 2023: In light of the failed mediation and the parties' mutual desire to avoid the cost of immediate litigation, the Settlement Standstill Agreement was executed by all parties and their respective counsel. The standstill agreement provided for a tolling of all litigation deadlines, a prohibition on the filing of new motions or discovery, continued neutral administration by Ashford Fiduciary Services Inc., equal cost-sharing of administration fees, renewability by mutual written consent, terminability on 30 days' written notice by either side, and comprehensive confidentiality provisions.

October 28, 2023: The First Amendment to the Settlement Standstill Agreement (Renewal #1) was executed by all parties, extending the standstill period from October 28, 2023, to April 28, 2024. The terms of the original standstill agreement were otherwise unchanged.

April 28, 2024: The Second Amendment to the Settlement Standstill Agreement (Renewal #2) was executed by all parties, extending the standstill period from April 28, 2024, to October 28, 2024. Again, all other terms remained unchanged.

C. Current Status

As of the date of this memorandum, the matter is dormant under the terms of the Settlement Standstill Agreement, as renewed by the Second Amendment. The current standstill period expires on October 28, 2024 — thirteen days from today. All litigation deadlines remain tolled, and no party may file new motions, propound discovery, or take any other affirmative litigation action during the standstill period absent a material breach or a 30-day written notice of termination.

Ashford Fiduciary Services Inc., through Gerald Whitmore, continues to serve as the neutral estate administrator in accordance with the stipulation approved by the Court on March 22, 2023. Ashford has been providing quarterly administration reports to both sides, the most recent of which was received on September 15, 2024 (covering the quarter ending August 31, 2024). No irregularities or concerns have been identified in Ashford's administration.

No substantive settlement discussions have occurred since the failed mediation on April 12, 2023. However, informal communications between counsel — primarily between myself and Lydia Kwan of Brennan, Ortega & Saldívar LLP — have indicated a mutual preference for continued standstill over litigation reactivation at this time. Ms. Kwan has informally conveyed that the Contestants are not presently inclined to resume active litigation but have not made any settlement overtures. This is consistent with our assessment that the Contestants' litigation position, while not without some arguable merit on the separate property characterization of certain assets, is significantly weakened by the deficiencies in the premarital agreement evidence.

The Petition for Preliminary Distribution of Non-Probate Assets (filed January 18, 2023) remains pending before the Court. However, it is noteworthy that neither side has objected to the non-probate characterization of the two life insurance policies at issue: the $3,000,000 Meridian Mutual term life policy (Policy No. GH-TL-2019-05582) and the $2,000,000 Commonwealth Fidelity Assurance Corp. whole life policy (Policy No. GH-WL-2014-01247). Ms. Fonseca is the named beneficiary under both policies. The petition has not been acted upon by the Court due to the standstill, but we do not anticipate opposition to the non-probate characterization when the matter is eventually brought to hearing. The proceeds total $5,000,000 and are not included in the probate estate total discussed below.

III. Summary of Estate Assets and Contested Issues

A. Probate Estate Overview

The total probate estate is estimated at approximately $71,112,000 based on our client's position, which relies on the preliminary valuations prepared by Pinnacle West Appraisal Group LLC. The Contestants estimate the total probate estate at approximately $68,750,000, based on differing valuations provided by their retained appraiser, Hargrove & Linden Appraisals Inc. (Morton Linden, CFA, ASA, lead appraiser). The principal area of disagreement between the two appraisal firms relates to the enterprise value of Lumiére Canyon Studios LLC and the assets under management valuation methodology applied to Pacific Rim Narrative Partners LLC.

The non-probate life insurance proceeds of $5,000,000 (described in Section II.C above) are not included in the probate estate total. Ms. Fonseca's entitlement to these proceeds as named beneficiary is not substantively disputed.

B. Asset-by-Asset Summary

The following table summarizes the principal assets comprising the probate estate, together with estimated values and each side's characterization of the asset:

As reflected in the table, the core dispute between the parties concerns the characterization of the major assets as community property versus separate property. Our client's position is that virtually all of the estate assets — with the possible exception of the Malibu Beach House, which was acquired pre-marriage but to which community funds made substantial contributions — are community property acquired during the fourteen-year marriage. The Contestants' position rests largely on the alleged premarital agreement and on arguments that certain assets were funded with pre-marital capital, arguments that face significant evidentiary challenges as discussed further below.

It is worth noting that the parties are in agreement on the characterization of two categories of assets: the Veltara Basin Bank checking account (account ending -3091, valued at $342,000) and the personal property (art, vehicles, and furnishings, valued at $1,250,000) are both acknowledged to be community property. The areas of agreement are relatively modest in dollar terms, but they do provide some common ground that may be useful in future settlement discussions.

C. Outstanding Contestant Claims

In addition to the general characterization dispute, the Contestants have asserted three specific claims that require individual analysis:

1. Alleged Premarital Agreement

The Contestants allege that the Decedent and Ms. Fonseca executed a premarital agreement on or about May 30, 2008, approximately two weeks before their June 14, 2008 wedding. In support of this claim, the Contestants produced a two-page photocopy of the purported agreement as an exhibit to their Amended Objection filed on January 9, 2023. The photocopy bears what appears to be the Decedent's signature on the second page but conspicuously lacks Ms. Fonseca's signature on that same page. No original of the document has been produced, despite a formal demand letter sent by this firm to Brennan, Ortega & Saldívar LLP on December 1, 2022, requesting production of the original. That demand has gone unanswered, and opposing counsel has not offered any explanation for the absence of the original document.

Dr. Elaine Prescott of Brindoval Forensic Document Services LLC conducted a preliminary forensic examination of the photocopy and issued her report on February 22, 2023. Dr. Prescott's findings were favorable to our position. She identified signs of alteration in the photocopy, including irregularities in text alignment and formatting on the second page, and concluded that the absence of Ms. Fonseca's signature was consistent with the document being an incomplete or draft version rather than a fully executed agreement.

Our internal analysis of the premarital agreement claim, set forth in a memorandum dated November 28, 2022, concludes that the alleged agreement is likely unenforceable under California Family Code §§ 1610-1617. The Uniform Premarital Agreement Act, as adopted in California, requires that a premarital agreement be in writing and signed by both parties (Cal. Fam. Code § 1611). Beyond the threshold signature deficiency, the Contestants have not demonstrated compliance with the additional enforceability requirements imposed by California Family Code § 1615, including that each party was represented by independent legal counsel (or expressly waived such representation in a separate writing), that each party received a full and fair disclosure of the other's financial obligations and property, and that the party against whom enforcement is sought had at least seven calendar days between first being presented with the agreement and signing it. Ms. Fonseca has confirmed that she was never presented with a premarital agreement, never consulted independent counsel regarding such an agreement, and never received any financial disclosure from the Decedent in connection with any proposed premarital arrangement.

2. Isabela's Promissory Note Claim

Isabela C. Fonseca-Greer asserts a creditor's claim against the estate in the amount of $1,310,460, based on a promissory note dated January 15, 2020, in the principal amount of $1,200,000, payable to Amber Light Documentary Films LLC (Isabela's documentary production company) at an annual interest rate of 3.5%, with a maturity date of January 15, 2025. Isabela calculates the accrued interest through the date of the Decedent's death (September 3, 2022) at $110,460, yielding a total claimed amount of $1,310,460 ($1,200,000 principal plus $110,460 in accrued interest).

Our client's position is that the $1,200,000 transfer was a gift from the Decedent to his daughter to fund her documentary film business, not a bona fide loan. Ms. Fonseca has stated that the Decedent frequently made gifts to his children to support their professional endeavors, and that neither the Decedent nor Isabela ever treated the transfer as a debt obligation. No repayment was ever demanded by the Decedent during his lifetime, no payments of interest or principal were ever made by Isabela or Amber Light Documentary Films LLC, and the promissory note was found among the Decedent's personal papers in a folder labeled "Kids — Financial Support" rather than in his business or financial records.

Our internal analysis of this claim, set forth in a memorandum dated January 30, 2023, supports a donative intent defense. The absence of any demand for repayment, the absence of any actual repayment activity, the characterization of the transfer in the Decedent's personal records, and the intrafamily nature of the transaction all support the inference that the Decedent intended the $1,200,000 as a gift. We note with particular interest that the promissory note's maturity date of January 15, 2025, is now approximately three months away. If that date passes without any demand for payment having been made during the Decedent's lifetime and without any repayment having been made by Isabela, it will further buttress the donative intent argument.

3. Nicolás's Educational Expense Claim

Nicolás R. Fonseca asserts a claim in the amount of $387,500, based on an alleged oral promise by the Decedent to cover Nicolás's graduate school tuition and living expenses for the period from 2021 through 2024. Nicolás contends that the Decedent made this promise verbally on multiple occasions, and that Nicolás enrolled in his graduate program and incurred expenses in reliance on the promise.

Our client's position is that any such oral promise is unenforceable. Our internal analysis, set forth in a memorandum dated February 15, 2023, identifies several defenses. First, the Statute of Frauds (Cal. Civ. Code § 1624) may bar enforcement of an oral promise that, by its terms, was not to be performed within one year (2021 through 2024 represents a three-year period). Second, the evidentiary challenges of proving the existence, terms, and scope of an oral agreement against a decedent's estate are significant, as the primary witness to the alleged promise (the Decedent) is unavailable to testify. Third, even if the promise were established, the measure of damages would be subject to dispute, as Nicolás has not provided a detailed accounting of the expenses allegedly incurred in reliance on the promise.

D. Malibu Property Tracing

The Malibu Beach House at 27100 Pacific Coast Highway, Malibu, California 90265, is a significant contested asset requiring a detailed community property tracing analysis. Grace Nakamura prepared a comprehensive memorandum on this issue, dated January 15, 2023, applying the Moore/Marsden principles established by the California Supreme Court in In re Marriage of Moore (1980) 28 Cal.3d 366 and In re Marriage of Marsden (1982) 130 Cal.App.3d 426.

The relevant facts are as follows:

• Purchase: The Decedent purchased the Malibu property on August 22, 2007, for $4,750,000. This acquisition occurred approximately ten months before the Decedent's marriage to Ms. Fonseca on June 14, 2008. The property was therefore acquired as the Decedent's separate property.

• Community Contributions: During the marriage, community funds were used to make two categories of contributions to the property: (a) a major renovation completed in 2016 at a total cost of $1,800,000; and (b) mortgage payments totaling $2,016,400, consisting of 142 monthly payments of $14,200 each, made from June 2008 (the month of the marriage) through March 2020, when the mortgage was paid off in full.

• Community Interest Claimed: Applying Moore/Marsden principles, our client claims a community interest in the Malibu property calculated as follows: total community contributions of $3,816,400 ($1,800,000 renovation + $2,016,400 mortgage payments) divided by the current fair market value of $6,200,000, yielding a community interest of approximately 61.6%.

The Contestants dispute this characterization and maintain that the Malibu property is entirely the Decedent's separate property, arguing that the pre-marriage acquisition controls the characterization. However, the Moore/Marsden line of authority clearly establishes that a community estate acquires a pro tanto interest in separate property when community funds are used to pay down the purchase price (through mortgage payments) or to make capital improvements. The Contestants' position on this asset is, in our view, legally untenable, and we believe Ms. Fonseca's 61.6% community interest claim is well-supported.

IV. Estate Administration Update

Ashford Fiduciary Services Inc., through its principal officer Gerald Whitmore, continues to serve as neutral estate administrator pursuant to the stipulation filed and approved by the Court on March 22, 2023. The engagement of Ashford has been a successful arrangement that has allowed for the orderly preservation and management of the estate's assets during the standstill period.

The fee structure for Ashford's services consists of a monthly administration fee of $8,500, plus 0.15% of assets under administration per annum. The $8,500 monthly fee is shared equally between the parties, with Ms. Fonseca responsible for $4,250 per month and the Contestants collectively responsible for $4,250 per month. Ms. Fonseca has been current on all of her cost-sharing obligations. We have not been advised of any delinquency by the Contestants.

Ridgeway Accounting Partners LLP, through Dennis Chua, CPA, continues to serve as the estate's accountant. Ridgeway is responsible for maintaining the estate inventory, preparing and filing all required tax returns (including federal estate tax returns and fiduciary income tax returns), and performing ongoing financial reconciliation of the estate's accounts and assets. No issues have been raised regarding Ridgeway's work product.

The operational status of the estate's principal business assets is as follows:

Lumiére Canyon Studios LLC (principal offices at 4200 West Olive Avenue, Burbank, California 91505) continues its operations in the ordinary course of business. Ms. Fonseca remains in her role as Chief Creative Officer and continues to hold her own separate 50% membership interest in the entity. The Decedent's 50% membership interest is being administered by Ashford Fiduciary Services Inc. pending resolution of the probate contest. Ashford exercises the Decedent's membership rights in a custodial capacity and has not sought to interfere with the day-to-day creative or business operations of the studio. Lumiére Canyon's operations have continued to generate revenue, and the entity remains financially healthy. However, as discussed in Section VI.C below, the unresolved status of the Decedent's 50% membership interest does create some governance uncertainty, particularly with respect to major strategic decisions that may require unanimous member consent under the operating agreement.

Pacific Rim Narrative Partners LLC (Victor Sandoval, managing member; offices at 8455 Beverly Boulevard, Suite 310, Los Angeles, California 90048) — the Decedent's 35% membership interest is being held in the estate and administered by Ashford. Mr. Sandoval, as managing member, continues to manage the fund's operations. Distributions attributable to the Decedent's 35% interest continue to accrue and are deposited into the estate account maintained by Ashford. We have not received any indication of operational difficulties at Pacific Rim, though we note that we have limited visibility into the fund's investment performance and portfolio composition. Updated information should be requested from Ashford in connection with the next quarterly report.

Veltara Basin Bank, N.A. Accounts — The Decedent's accounts at Veltara Basin Bank, N.A. — specifically, the brokerage account (ending -4782), the checking account (ending -3091), and the money market account (ending -6155) — remain frozen pursuant to our letter dated October 18, 2022, to Franklin Ybarra, Vice President and Branch Manager at Veltara Basin Bank. The freeze was implemented to preserve the assets pending resolution of the probate proceeding and to prevent unauthorized withdrawals or transfers. The accounts are being monitored by Ashford and Ridgeway Accounting Partners.

Real Properties — The Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, California 90210) and the Malibu Beach House (27100 Pacific Coast Highway, Malibu, California 90265) remain in their current status. Ms. Fonseca continues to reside in the Beverly Hills residence. The Malibu property is unoccupied and is being maintained through routine property management services arranged by Ashford. Title records for both properties are held by Coastline Title & Escrow Co. (Andrea Solis, title officer), and no transfers, encumbrances, or title actions have been recorded during the standstill period.

V. Financial Status of Engagement

A. Fee Summary Through September 30, 2024

The following is a summary of the financial status of the engagement through the most recent billing period ending September 30, 2024:

Total Fees Billed: $487,250

Total Costs Advanced: $62,340

The costs advanced include fees paid to Pinnacle West Appraisal Group LLC for preliminary estate appraisals, fees paid to Brindoval Forensic Document Services LLC (Dr. Elaine Prescott) for forensic document examination of the alleged premarital agreement photocopy, court filing fees for the Petition for Letters of Administration, the Petition for Preliminary Distribution, and related filings, and mediator fees for the April 12, 2023, mediation session before the Honorable Constance Adler (Ret.) at Westside Dispute Resolution Center.

Total Billed (Fees + Costs): $549,590

Evergreen Retainer Received: $150,000 (paid upon engagement, October 12, 2022)

Total Payments Received: $510,000 (inclusive of the retainer and subsequent payments)

Outstanding Balance as of September 30, 2024: $38,590

B. Billing Rates

The current billing rates applicable to this matter are as follows:

These rates are consistent with the rates set forth in the engagement letter dated October 12, 2022, as adjusted for the firm's standard annual rate increase effective January 1, 2024.

C. Billing Observations

Billing activity on this matter has been minimal during the dormant standstill period, which has now extended for approximately eighteen months since the execution of the original Settlement Standstill Agreement on April 28, 2023. The work performed during this period has consisted primarily of: (a) negotiating and documenting the standstill renewal amendments (Renewals #1 and #2); (b) periodic client correspondence to keep Ms. Fonseca informed of the status of the matter; (c) reviewing and analyzing Ashford Fiduciary Services Inc.'s quarterly administration reports; and (d) monitoring developments in relevant case law and responding to occasional inquiries from opposing counsel.

The outstanding balance of $38,590 is within a manageable range and does not give rise to any collection concerns at this time. Ms. Fonseca has been a reliable and timely payor throughout the engagement. I recommend that we include a request for payment of the outstanding balance in the next client communication letter, which will accompany the recommendation to execute Standstill Renewal #3. Combining the payment request with a substantive client update is, in my view, the most efficient and appropriate approach.

Ms. Fonseca has also been current on her share of the Ashford Fiduciary Services Inc. administration cost-sharing, paying $4,250 per month as required by the Settlement Standstill Agreement. These payments are made directly by Ms. Fonseca to Ashford and are not processed through our firm.

VI. Recommendation: Execute Standstill Renewal #3

A. Proposed Terms

I recommend that the firm advise Ms. Fonseca to authorize the execution of a Third Amendment to the Settlement Standstill Agreement (Renewal #3), extending the standstill period from its current expiration date of October 28, 2024, through February 28, 2025.

All existing terms of the Settlement Standstill Agreement would remain unchanged under the proposed Third Amendment, including:

• Tolling of all litigation deadlines in the probate proceeding;

• Prohibition on the filing of new motions, discovery requests, or other affirmative litigation actions by either side;

• Continued neutral administration of the estate by Ashford Fiduciary Services Inc.;

• Equal cost-sharing of Ashford's administration fees ($4,250/month per side);

• Renewability by mutual written consent of all parties;

• Terminability on 30 days' written notice by either party; and

• Comprehensive confidentiality provisions governing all communications and information exchanged during the standstill period.

Calderwood & Harkness has already taken a preliminary step toward this renewal. On October 10, 2024, I sent a proposal letter to Damian R. Ortega of Brennan, Ortega & Saldívar LLP, proposing the execution of a Third Amendment on the terms described above. As of the date of this memorandum, we have not yet received a formal response, though Ms. Kwan informally indicated by email on October 12, 2024, that the Contestants would "likely be amenable" to a renewal. I anticipate receiving a formal response within the next several business days.

It should be noted that the proposed Third Amendment encompasses a shorter renewal period than the prior two amendments. Renewals #1 and #2 each extended the standstill for approximately six months, whereas the proposed Renewal #3 would extend the standstill for approximately four months (October 28, 2024, through February 28, 2025). This shorter duration reflects a desire expressed by both sides during informal discussions to establish a nearer-term decision point. Both counsel recognized that the matter cannot remain in a standstill indefinitely and that the parties should begin to orient toward a resolution — whether through renewed settlement discussions, mediation, or litigation reactivation — in the first half of 2025.

B. Rationale for Renewal

The underlying factors that supported the original standstill and the subsequent renewals remain substantially in place, and I believe that a further renewal is in Ms. Fonseca's best interest for the following reasons:

Weakness of Contestants' Key Claims. The premarital agreement claim — which is the linchpin of the Contestants' position — remains weak. The Contestants have produced only an unsigned photocopy, forensic evidence suggests alteration, the original has never been produced despite our demand, and the agreement is likely unenforceable under the mandatory requirements of California Family Code §§ 1610-1617. Without a valid premarital agreement, the Contestants' separate property characterization arguments are significantly undermined, as they must then rely on tracing evidence to overcome the general community property presumption applicable to assets acquired during marriage (Cal. Fam. Code § 760).

Cost Avoidance. Active litigation would impose substantial costs on both sides. If the standstill were terminated and litigation resumed, the following steps would be necessary: updated appraisals from Pinnacle West Appraisal Group LLC (and presumably from Hargrove & Linden for the Contestants), depositions of the parties and key witnesses (including, at a minimum, Claudette Marchetti, Victor Sandoval of Pacific Rim Narrative Partners, Dr. Elaine Prescott, Morton Linden of Hargrove & Linden, and potentially Dr. Fujimoto), expert depositions, preparation of trial briefs and exhibits, and a multi-week trial before the probate court. Based on my review of comparable contested probate matters handled by the firm and my discussions with Patricia Dunmore regarding anticipated staffing and time requirements, I estimate the incremental cost to Ms. Fonseca of proceeding through trial at $500,000 to $750,000 or more. This estimate does not include additional expert fees, which could be substantial depending on the scope of updated appraisals and the need for rebuttal experts.

Preservation of Estate Value. Continued dormancy preserves the value of the estate by avoiding the depletion of assets through litigation costs. Every dollar spent on litigation is a dollar that is no longer available for distribution to the ultimate beneficiaries. Given the size of the estate (approximately $71 million), the cost of litigation is a relatively modest percentage of the total, but it is nevertheless a meaningful sum that can be avoided through continued standstill and, ultimately, negotiated resolution.

Favorable Settlement Dynamics Emerging. Informal signals from Brennan, Ortega & Saldívar LLP suggest that the Contestants may be more amenable to settlement discussions in early 2025 than they were at the time of the failed April 2023 mediation. Several factors contribute to this assessment. First, the passage of time has likely tempered the emotional intensity of the dispute, which was palpable at the April 2023 mediation. Second, and perhaps more significantly, Isabela's promissory note reaches its maturity date of January 15, 2025, without any prior repayment activity. If the maturity date passes without any demand for payment having been made (by the estate or by any party on behalf of the estate) and without any voluntary payment by Isabela, this will further support our donative intent argument and may cause the Contestants to reassess the viability of the $1,310,460 promissory note claim. Third, Nicolás may be completing or have completed his graduate studies by early 2025, which could reduce the practical significance of his $387,500 educational expense claim.

C. Risk Considerations

While I recommend the renewal, the following risks of continued standstill should be noted and discussed with the client:

Delay in Resolution. The primary risk of continued standstill is delay in resolving Ms. Fonseca's claim to the estate assets. Ms. Fonseca has been awaiting resolution of this matter for over two years, and the continued uncertainty regarding the status of key assets — particularly the Decedent's 50% membership interest in Lumiére Canyon Studios LLC and 35% interest in Pacific Rim Narrative Partners LLC — imposes both financial and emotional costs. While Ms. Fonseca has not expressed dissatisfaction with the standstill approach, it is important that we continue to communicate the firm's strategic rationale clearly and to ensure that Ms. Fonseca understands the trade-offs involved.

Stale Valuations. The preliminary valuations prepared by Pinnacle West Appraisal Group LLC were based in significant part on financial data from December 31, 2021 (for Lumiére Canyon Studios LLC) and other historical data points. As of the date of this memorandum, that data is approaching three years old. If litigation resumes, updated valuations will be necessary, and the current valuations may prove to be either understated or overstated depending on intervening market conditions and the performance of the underlying businesses. The cost of updated appraisals will be an additional expense to the client.

Ongoing Administration Costs. Ashford Fiduciary Services Inc.'s administration fees continue to accrue at $8,500 per month (total), with Ms. Fonseca bearing $4,250 per month. Over the course of the proposed four-month Renewal #3, Ms. Fonseca will incur an additional $17,000 in administration cost-sharing fees. Since the appointment of Ashford in March 2023, Ms. Fonseca has paid approximately $81,000 in administration cost-sharing (19 months × $4,250/month), and that figure will continue to grow for as long as the neutral administration remains in place.

Governance Uncertainty at Lumiére Canyon Studios LLC. Ms. Fonseca's role as Chief Creative Officer of Lumiére Canyon Studios LLC is operationally unaffected by the probate proceeding, as she holds her own independent 50% membership interest. However, the unresolved status of the Decedent's 50% membership interest — currently administered by Ashford in a custodial capacity — creates governance uncertainty. Major decisions requiring unanimous member consent (such as amendments to the operating agreement, the admission of new members, the sale of substantially all assets, or decisions regarding distributions) may be difficult or impossible to effectuate while the ownership of the Decedent's interest remains in dispute. This governance overhang is a practical concern that should be considered in evaluating the duration of any further standstill.

VII. Strategic Considerations Upon Standstill Expiration (February 28, 2025)

Assuming the Third Amendment is executed and the standstill is extended through February 28, 2025, the firm and the client should be prepared to pursue one of three strategic options upon expiration of the renewed standstill. I recommend that we begin internal planning for these contingencies in January 2025, with a goal of presenting Ms. Fonseca with a clear recommendation before the Third Amendment expires.

A. Option 1: Further Standstill Renewal

If both sides continue to prefer dormancy over active litigation, a Fourth Amendment to the Settlement Standstill Agreement could be negotiated. The terms of such an amendment would presumably follow the template established by the prior renewals, with the duration and any modified provisions to be agreed upon by the parties.

However, I would counsel caution regarding this option. The matter has been dormant for nearly two years since the failed April 12, 2023 mediation, and the diminishing returns of continued standstill should be weighed carefully. Each additional renewal extends the period of uncertainty for Ms. Fonseca, increases the cumulative administration costs, and risks creating an impression — both to the Court and to opposing counsel — that Ms. Fonseca is content with indefinite dormancy rather than actively pursuing resolution of her claims. While the standstill has served its purpose as a cost-management tool, there comes a point at which the benefits of dormancy are outweighed by the costs of delay. In my assessment, we are approaching that point.

B. Option 2: Renewed Mediation or Settlement Negotiations

I recommend that we explore the possibility of a second mediation session or direct settlement negotiations as the preferred option upon expiration of the Third Amendment. Several factors support this approach:

• The Honorable Constance Adler (Ret.) remains available as a mediator through Westside Dispute Resolution Center and has familiarity with the matter from the April 2023 session. Judge Adler's knowledge of the parties, the claims, and the contested issues would allow a second mediation to proceed efficiently without the need for extensive background briefing.

• By February 2025, the maturity date of Isabela's promissory note (January 15, 2025) will have passed. If, as expected, no demand for repayment is made and no voluntary payment occurs, the absence of any repayment activity over the full five-year term of the note will significantly strengthen our donative intent argument. This development may cause the Contestants to reassess the value of the promissory note claim and may create a more favorable negotiating dynamic for our client.

• Nicolás may have completed his graduate studies by this point (his program was described as covering the period 2021-2024), which could reduce the practical and emotional significance of his $387,500 educational expense claim. If Nicolás has in fact completed his studies using his own resources or other funding, the equitable force of his claim is substantially diminished.

• The passage of time since the failed April 2023 mediation may have allowed the parties' positions to soften. The emotional intensity that characterized the early stages of the proceeding — particularly Rafael's personal animosity toward Ms. Fonseca — may have abated, creating space for more productive settlement discussions.

If direct settlement negotiations are pursued as an alternative to formal mediation, I would recommend that initial discussions occur between counsel (specifically, between myself and Lydia Kwan or Damian Ortega) to identify potential areas of agreement and to develop a framework for a global settlement that addresses all contested issues, including the asset characterization disputes, the promissory note claim, and the educational expense claim.

C. Option 3: Reactivation of Litigation

If settlement discussions prove unproductive or if the Contestants decline to engage in meaningful negotiations, the standstill may be terminated on 30 days' written notice by either party, and active litigation would resume. While I view this as the least preferred option given the associated costs and uncertainties, the firm and the client must be prepared for this contingency.

Upon reactivation of litigation, the following key steps would need to be undertaken:

1. Formal discovery: Propound interrogatories, requests for production of documents, and requests for admission to the Contestants, with particular focus on the alleged premarital agreement (including the whereabouts of the original document), the factual basis for the separate property characterization claims, and the details of Isabela's promissory note claim and Nicolás's educational expense claim.

2. Updated Appraisals: Retain Pinnacle West Appraisal Group LLC to prepare updated valuations of all contested assets, including Lumiére Canyon Studios LLC, Pacific Rim Narrative Partners LLC, and the real properties. The Contestants would presumably engage Hargrove & Linden Appraisals Inc. to prepare updated competing valuations.

3. Depositions: Conduct depositions of key witnesses, including:

• Claudette Marchetti (the Decedent's first wife) — regarding the alleged premarital agreement, the circumstances of the Decedent's divorce from Ms. Marchetti, and any knowledge she may have regarding the Decedent's pre-marital assets and finances;

• Victor Sandoval (managing member of Pacific Rim Narrative Partners LLC) — regarding the Decedent's investment in the fund, the source of the initial capital contribution, and the fund's performance and distributions;

• Dr. Elaine Prescott (forensic document examiner) — to present her final opinions regarding the alleged premarital agreement photocopy;

• Morton Linden (Contestants' appraiser) — regarding his valuation methodology and conclusions;

• Dr. Fujimoto — regarding any relevant expert opinions;

• Each of the three Contestants — regarding their claims and their knowledge of the estate assets.

4. Final Forensic Report: Retain Dr. Prescott to prepare a final forensic document examination report for use at trial, building on her preliminary findings.

5. Trial Preparation: Prepare pretrial motions, trial briefs, witness lists, exhibit lists, and other materials necessary for a contested probate trial.

Based on comparable matters and the complexity of the issues involved, I estimate the timeline from reactivation of litigation to trial at approximately 12 to 18 months. This estimate accounts for the time necessary to complete discovery, depose all key witnesses, update appraisals, brief any pretrial motions, and obtain a trial date from the probate court.

Ms. Fonseca's position remains strong on the core issues, and I am confident that the client would achieve a favorable result at trial. Specifically:

• Under California Probate Code §§ 6400-6414, Ms. Fonseca, as the surviving spouse of a decedent who died intestate, is entitled to 100% of the community property and one-third of the separate property (if the decedent is survived by more than one child, which is the case here). Given our position that the vast majority of the estate consists of community property, Ms. Fonseca's share under intestate succession would be substantial.

• The community property characterization of the major assets (Lumiére Canyon Studios LLC, Pacific Rim Narrative Partners LLC, the Beverly Hills residence, and the financial accounts) is well-supported by the evidence and by established California community property principles.

• The premarital agreement evidence is, in our assessment, fundamentally flawed and unlikely to withstand judicial scrutiny. The absence of Ms. Fonseca's signature, the failure to produce the original, the forensic evidence of alteration, and the apparent noncompliance with the statutory requirements of California Family Code §§ 1610-1617 collectively render the alleged agreement unenforceable.

Nevertheless, the cost and uncertainty of trial counsel in favor of pursuing settlement if at all possible, and I recommend that Option 3 be treated as a last resort.

VIII. Action Items

Based on the foregoing analysis and recommendations, I propose the following action items for the engagement team:

1. Client Authorization for Renewal #3. Prepare and send a client update letter to Ms. Fonseca, summarizing the current status of the matter and requesting her authorization to execute the Third Amendment to the Settlement Standstill Agreement, extending the standstill period through February 28, 2025. The letter should explain the rationale for the renewal in accessible terms and should note the shorter renewal period as compared to prior amendments.

2. Outstanding Balance. Include in the client update letter a request for payment of the outstanding balance of $38,590 as of September 30, 2024. The request should be presented in a professional and routine manner, consistent with the firm's standard billing practices.

3. Finalize Third Amendment. Upon receipt of Brennan, Ortega & Saldívar LLP's formal agreement to the proposed renewal, finalize the Third Amendment and circulate it for execution by all parties and counsel. Target execution date: on or before October 25, 2024, to ensure the amendment is in place before the current standstill period expires on October 28, 2024.

4. Ashford Quarterly Report. Request an updated quarterly administration report from Ashford Fiduciary Services Inc. (Gerald Whitmore), covering the quarter ending November 30, 2024 (or the most recent available period). The report should include updated account balances, a summary of Pacific Rim Narrative Partners distributions accrued to the estate, and a status update on Lumiére Canyon Studios LLC operations.

5. Post-Standstill Strategic Planning. Begin preliminary internal planning for the post-standstill period. Schedule an internal strategy session for January 2025 to evaluate the three options discussed in Section VII above (further renewal, renewed mediation/settlement negotiations, or litigation reactivation) and to develop a recommendation for Ms. Fonseca. This session should include Howard Quinn, Patricia Dunmore, Grace Nakamura, and myself.

6. Valuation Update Assessment. Consider whether to request updated preliminary valuations from Pinnacle West Appraisal Group LLC in anticipation of potential activity in 2025. If renewed mediation or settlement negotiations are pursued, having current valuations will strengthen our negotiating position. If litigation reactivation becomes necessary, early engagement of Pinnacle West will reduce the lead time to trial readiness. I recommend that we obtain a scope-of-work proposal and fee estimate from Pinnacle West in December 2024 for discussion at the January strategy session.

IX. Conclusion

The matter of In re Estate of Teodoro R. Fonseca, Case No. 22STPB09714, remains well-positioned for our client, Marguerite D. Fonseca. The Settlement Standstill Agreement has been an effective cost-management tool over the past eighteen months, allowing Ms. Fonseca to preserve her legal rights while avoiding the substantial expense and disruption of active litigation. The Contestants' core claims — particularly the alleged premarital agreement — remain weak, and Ms. Fonseca's community property characterization of the major estate assets is supported by both the evidence and established California law.

I recommend that the engagement team approve and facilitate the execution of Standstill Renewal #3 (Third Amendment), extending the standstill period through February 28, 2025. At the same time, I recommend that we begin proactive strategic planning for the post-February 2025 period, with a particular focus on exploring renewed mediation or direct settlement negotiations as the preferred path toward resolution. The January 2025 internal strategy session will provide an appropriate forum for a comprehensive evaluation of the options and for the development of a recommendation to present to Ms. Fonseca.

I am available to discuss this memorandum and its recommendations at your earliest convenience. Please do not hesitate to contact me with any questions or if you require additional analysis on any of the issues addressed herein.

Elliot Nguyen Lead Associate Calderwood & Harkness LLP 350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Matter No. 1035-00005

cc: File (Matter No. 1035-00005) Enclosures: None

Asset	Est. Value	Client's Position	Contestants' Position
Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, CA 90210)	$8,450,000	Community Property	Partially Separate Property (alleging down payment from pre-marital funds)
Malibu Beach House (27100 Pacific Coast Highway, Malibu, CA 90265)	$6,200,000	Community Property (61.6% community interest based on $1,800,000 renovation and $2,016,400 in mortgage payments from community funds)	Separate Property (purchased August 22, 2007, for $4,750,000, pre-marriage)
Lumiére Canyon Studios LLC — Decedent's 50% membership interest	$15,800,000 ($31,600,000 enterprise value × 50%)	Community Property (entity formed March 18, 2009, during marriage; 50/50 per operating agreement)	Separate Property (funded with pre-marital capital)
Pacific Rim Narrative Partners LLC — Decedent's 35% membership interest	$27,475,000 ($78,500,000 AUM × 35%)	Community Property	Separate Property
Veltara Basin Bank Brokerage Account (acct. ending -4782)	$5,120,000	Community Property	Mixed/Separate
Veltara Basin Bank Checking Account (acct. ending -3091)	$342,000	Community Property	Community Property
Veltara Basin Bank Money Market Account (acct. ending -6155)	$1,875,000	Community Property	Mixed
IP Portfolio (14 feature films, 6 TV series — royalty streams/residuals)	$4,600,000 (NPV per Pinnacle West)	Community Property	Partially Separate Property
Personal Property (art collection, vehicles, furnishings)	$1,250,000	Community Property	Community Property
Timekeeper	Role	Rate
Howard Quinn	Partner (Responsible Partner)	$975/hour
Patricia Dunmore	Partner (Billing Partner)	$975/hour
Elliot Nguyen	Associate (Lead Associate)	$525/hour
Grace Nakamura	Associate (Working Associate)	$525/hour
Paralegals	As assigned	$295/hour

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the individuals to whom it is addressed and contains confidential legal analysis. Do not distribute, copy, or disclose without prior authorization.
TO: Howard Quinn, Responsible Partner; Patricia Dunmore, Billing Partner
FROM: Elliot Nguyen, Lead Associate
DATE: October 15, 2024
RE: Status Update and Standstill Renewal Recommendation — In re Estate of Teodoro R. Fonseca, Los Angeles County Superior Court Case No. 22STPB09714
MATTER NO.: 1035-00005
CLIENT: Marguerite D. Fonseca
I. Purpose
This memorandum provides a comprehensive status update on the dormant contested probate proceeding, In re Estate of Teodoro R. Fonseca, Case No. 22STPB09714, pending in the Los Angeles County Superior Court, Probate Division. The matter has been in a standstill posture since April 28, 2023, and the current renewal of the Settlement Standstill Agreement is set to expire on October 28, 2024. Accordingly, this memorandum is intended to bring the engagement team current on all material developments and to frame the recommendation set forth herein.
Specifically, this memorandum: (a) reviews the procedural history and current posture of the matter under the Settlement Standstill Agreement; (b) summarizes the composition of the probate estate and the contested issues between the parties; (c) provides an update on the status of estate administration by the neutral administrator; (d) reports on the financial status of the engagement, including fees billed, costs advanced, and the outstanding balance; and (e) recommends that the firm advise Ms. Fonseca to execute a Third Amendment to the Settlement Standstill Agreement (Renewal #3), extending the standstill period through February 28, 2025.
In addition to the foregoing, this memorandum outlines the strategic considerations and available options for the period following expiration of the renewed standstill, including the possibility of renewed mediation, direct settlement negotiations, or reactivation of litigation. It is my recommendation, subject to the partners' review and approval, that we begin internal strategic planning for the post-standstill period in January 2025 so that the firm and the client are prepared to act decisively once the Third Amendment expires.
II. Procedural History and Current Status
A. Background Summary
Teodoro R. Fonseca ("Decedent") died intestate on September 3, 2022, of cardiac arrest (natural causes), at the age of 62. At the time of his death, Decedent was a resident of Los Angeles County, California, and was domiciled at 1847 Coldwater Canyon Drive, Beverly Hills, California 90210. Decedent was a prominent figure in the entertainment industry, with significant business interests in film production and content investment.
Our client, Marguerite D. Fonseca ("Ms. Fonseca" or "Client"), is the surviving spouse of the Decedent. Ms. Fonseca and the Decedent were married on June 14, 2008, in Los Angeles County, California. The marriage remained intact and continuous from that date until the Decedent's death, a period of approximately fourteen years and three months. Ms. Fonseca has served continuously as Chief Creative Officer of Lumiére Canyon Studios LLC, a production company she co-founded with the Decedent in 2009, and she holds her own separate 50% membership interest in that entity. No community property agreement, postnuptial agreement, or other marital property arrangement was executed during the marriage, a point that is central to the dispute with the Decedent's children.
The Decedent was previously married to Claudette Marchetti. That marriage ended in dissolution in 2005, pursuant to a marital settlement agreement that included a property division of approximately $4.8 million and a spousal support buyout payment of $1.5 million, the latter of which was finalized in 2007. Three adult children were born of the first marriage, and those children are the contestants in this proceeding:
1. Rafael T. Fonseca (age 33) — the lead contestant, currently employed as Vice President of Development at Crestline Media Group Inc. Mr. Fonseca resides at 502 Olive Avenue, Unit 3, Burbank, California 91502. He has been the most active and vocal of the contestants and appears to be the driving force behind the contest.
2. Isabela C. Fonseca-Greer (age 30) — a documentary filmmaker and the principal of Amber Light Documentary Films LLC. Ms. Fonseca-Greer resides at 78 Eucalyptus Lane, Santa Monica, California 90402. She is the holder of a promissory note that forms the basis of one of the contested claims in the proceeding.
3. Nicolás R. Fonseca (age 26) — a graduate student, currently residing at 1190 Elm Street, Apartment 4B, Palo Alto, California 94301. Nicolás's involvement in the contest appears to be primarily at the direction of his older brother Rafael, and his individual claim relates to alleged oral promises by the Decedent to fund his graduate education.
The contestants (collectively, the "Contestants") are represented by Damian R. Ortega and Lydia Kwan of Brennan, Ortega & Saldívar LLP, located at 1900 Avenue of the Stars, Suite 2100, Los Angeles, California 90067. Mr. Ortega serves as lead counsel for the Contestants, with Ms. Kwan handling day-to-day communications and document production.
Calderwood & Harkness LLP opened this matter on October 12, 2022, following an initial consultation with Ms. Fonseca on October 7, 2022. The engagement team consists of Howard Quinn (Responsible Partner), Patricia Dunmore (Billing Partner), Elliot Nguyen (Lead Associate), and Grace Nakamura (Working Associate). A paralegal team has been utilized on an as-needed basis for document management and filing support.
B. Key Procedural Milestones
The following is a chronological summary of the key procedural events in the matter from its inception through the present:
October 5, 2022: Ms. Fonseca filed a Petition for Letters of Administration in the Los Angeles County Superior Court, Probate Division, seeking appointment as administrator of the Decedent's estate. The petition was filed on an expedited basis given the need to secure and manage the Decedent's business interests, including his membership interests in Lumiére Canyon Studios LLC and Pacific Rim Narrative Partners LLC.
November 14, 2022: The Contestants, through counsel at Brennan, Ortega & Saldívar LLP, filed an initial objection to the Petition for Letters of Administration. The objection raised general concerns about Ms. Fonseca's suitability as administrator and asserted that the Contestants, as the Decedent's issue, had a right to participate in the administration. The initial objection did not reference any premarital agreement.
December 12, 2022: Calderwood & Harkness filed a Response to the Contestants' Initial Objection, addressing each of the Contestants' arguments and reaffirming Ms. Fonseca's priority under California Probate Code § 8461 as the surviving spouse of the Decedent.
January 9, 2023: The Contestants filed an Amended Objection to the Petition for Letters of Administration. The Amended Objection introduced, for the first time, a claim that the Decedent and Ms. Fonseca had entered into a premarital agreement dated on or about May 30, 2008, approximately two weeks before their wedding. The Contestants attached to the Amended Objection a two-page photocopy of the alleged premarital agreement. This document bore what appeared to be the Decedent's signature on the second page but conspicuously lacked Ms. Fonseca's signature. The introduction of this claim materially altered the scope and complexity of the proceeding.
January 18, 2023: Calderwood & Harkness filed a Petition for Preliminary Distribution of Non-Probate Assets, seeking release of life insurance proceeds totaling $5,000,000 to Ms. Fonseca as the named beneficiary under two policies: a $3,000,000 Meridian Mutual term life policy (Policy No. GH-TL-2019-05582) and a $2,000,000 Commonwealth Fidelity Assurance Corp. whole life policy (Policy No. GH-WL-2014-01247). The petition argued that these proceeds were non-probate assets payable directly to the named beneficiary and should not be subject to the probate administration or any claims by the Contestants.
February 6, 2023: Calderwood & Harkness filed a Response to the Amended Objection, addressing the premarital agreement claim in detail. The response argued that the alleged premarital agreement was unenforceable under California Family Code §§ 1610-1617 on multiple grounds, including the absence of Ms. Fonseca's signature, the failure to produce an original document, and the lack of evidence that the statutory requirements for a valid premarital agreement had been satisfied.
February 22, 2023: Dr. Elaine Prescott of Brindoval Forensic Document Services LLC issued a preliminary forensic document examination report concerning the two-page photocopy of the alleged premarital agreement. Dr. Prescott's preliminary findings were favorable to our client's position. She concluded that the photocopy exhibited signs of alteration, including irregularities in the alignment and formatting of text on the second page, and that the absence of Ms. Fonseca's signature on page two was consistent with an incomplete or draft document rather than a fully executed agreement. Dr. Prescott noted that a definitive opinion could not be rendered without examination of the original document, which the Contestants have not produced.
March 10, 2023: The Court entered a Stipulation and Order for Mediation, pursuant to which the parties agreed to submit the matter to mediation before the Honorable Constance Adler (Ret.) of Westside Dispute Resolution Center. The stipulation provided for a single mediation session with the option for additional sessions by mutual agreement.
March 22, 2023: The parties filed a Stipulation for Appointment of Ashford Fiduciary Services Inc. as neutral estate administrator. Gerald Whitmore, the principal officer of Ashford, was designated to manage the day-to-day administration of the estate pending resolution of the contested proceeding. The Court approved the stipulation on the same date. The appointment of a neutral administrator was a pragmatic resolution to the dispute over Ms. Fonseca's petition for letters of administration and allowed the parties to focus on the substantive contest.
April 12, 2023: Mediation Session #1 was held before Judge Adler (Ret.) at the offices of Westside Dispute Resolution Center. All parties and counsel attended in person. The mediation lasted approximately nine hours and involved multiple rounds of proposals and counterproposals. Ultimately, no resolution was reached. The primary impediment to settlement was a substantial valuation gap between the parties' respective positions on the Decedent's 50% interest in Lumiére Canyon Studios LLC and 35% interest in Pacific Rim Narrative Partners LLC, as well as the Contestants' insistence on the enforceability of the alleged premarital agreement. Judge Adler indicated her availability for a second session if the parties were willing.
April 28, 2023: In light of the failed mediation and the parties' mutual desire to avoid the cost of immediate litigation, the Settlement Standstill Agreement was executed by all parties and their respective counsel. The standstill agreement provided for a tolling of all litigation deadlines, a prohibition on the filing of new motions or discovery, continued neutral administration by Ashford Fiduciary Services Inc., equal cost-sharing of administration fees, renewability by mutual written consent, terminability on 30 days' written notice by either side, and comprehensive confidentiality provisions.
October 28, 2023: The First Amendment to the Settlement Standstill Agreement (Renewal #1) was executed by all parties, extending the standstill period from October 28, 2023, to April 28, 2024. The terms of the original standstill agreement were otherwise unchanged.
April 28, 2024: The Second Amendment to the Settlement Standstill Agreement (Renewal #2) was executed by all parties, extending the standstill period from April 28, 2024, to October 28, 2024. Again, all other terms remained unchanged.
C. Current Status
As of the date of this memorandum, the matter is dormant under the terms of the Settlement Standstill Agreement, as renewed by the Second Amendment. The current standstill period expires on October 28, 2024 — thirteen days from today. All litigation deadlines remain tolled, and no party may file new motions, propound discovery, or take any other affirmative litigation action during the standstill period absent a material breach or a 30-day written notice of termination.
Ashford Fiduciary Services Inc., through Gerald Whitmore, continues to serve as the neutral estate administrator in accordance with the stipulation approved by the Court on March 22, 2023. Ashford has been providing quarterly administration reports to both sides, the most recent of which was received on September 15, 2024 (covering the quarter ending August 31, 2024). No irregularities or concerns have been identified in Ashford's administration.
No substantive settlement discussions have occurred since the failed mediation on April 12, 2023. However, informal communications between counsel — primarily between myself and Lydia Kwan of Brennan, Ortega & Saldívar LLP — have indicated a mutual preference for continued standstill over litigation reactivation at this time. Ms. Kwan has informally conveyed that the Contestants are not presently inclined to resume active litigation but have not made any settlement overtures. This is consistent with our assessment that the Contestants' litigation position, while not without some arguable merit on the separate property characterization of certain assets, is significantly weakened by the deficiencies in the premarital agreement evidence.
The Petition for Preliminary Distribution of Non-Probate Assets (filed January 18, 2023) remains pending before the Court. However, it is noteworthy that neither side has objected to the non-probate characterization of the two life insurance policies at issue: the $3,000,000 Meridian Mutual term life policy (Policy No. GH-TL-2019-05582) and the $2,000,000 Commonwealth Fidelity Assurance Corp. whole life policy (Policy No. GH-WL-2014-01247). Ms. Fonseca is the named beneficiary under both policies. The petition has not been acted upon by the Court due to the standstill, but we do not anticipate opposition to the non-probate characterization when the matter is eventually brought to hearing. The proceeds total $5,000,000 and are not included in the probate estate total discussed below.
III. Summary of Estate Assets and Contested Issues
A. Probate Estate Overview
The total probate estate is estimated at approximately $71,112,000 based on our client's position, which relies on the preliminary valuations prepared by Pinnacle West Appraisal Group LLC. The Contestants estimate the total probate estate at approximately $68,750,000, based on differing valuations provided by their retained appraiser, Hargrove & Linden Appraisals Inc. (Morton Linden, CFA, ASA, lead appraiser). The principal area of disagreement between the two appraisal firms relates to the enterprise value of Lumiére Canyon Studios LLC and the assets under management valuation methodology applied to Pacific Rim Narrative Partners LLC.
The non-probate life insurance proceeds of $5,000,000 (described in Section II.C above) are not included in the probate estate total. Ms. Fonseca's entitlement to these proceeds as named beneficiary is not substantively disputed.
B. Asset-by-Asset Summary
The following table summarizes the principal assets comprising the probate estate, together with estimated values and each side's characterization of the asset:
As reflected in the table, the core dispute between the parties concerns the characterization of the major assets as community property versus separate property. Our client's position is that virtually all of the estate assets — with the possible exception of the Malibu Beach House, which was acquired pre-marriage but to which community funds made substantial contributions — are community property acquired during the fourteen-year marriage. The Contestants' position rests largely on the alleged premarital agreement and on arguments that certain assets were funded with pre-marital capital, arguments that face significant evidentiary challenges as discussed further below.
It is worth noting that the parties are in agreement on the characterization of two categories of assets: the Veltara Basin Bank checking account (account ending -3091, valued at $342,000) and the personal property (art, vehicles, and furnishings, valued at $1,250,000) are both acknowledged to be community property. The areas of agreement are relatively modest in dollar terms, but they do provide some common ground that may be useful in future settlement discussions.
C. Outstanding Contestant Claims
In addition to the general characterization dispute, the Contestants have asserted three specific claims that require individual analysis:
1. Alleged Premarital Agreement
The Contestants allege that the Decedent and Ms. Fonseca executed a premarital agreement on or about May 30, 2008, approximately two weeks before their June 14, 2008 wedding. In support of this claim, the Contestants produced a two-page photocopy of the purported agreement as an exhibit to their Amended Objection filed on January 9, 2023. The photocopy bears what appears to be the Decedent's signature on the second page but conspicuously lacks Ms. Fonseca's signature on that same page. No original of the document has been produced, despite a formal demand letter sent by this firm to Brennan, Ortega & Saldívar LLP on December 1, 2022, requesting production of the original. That demand has gone unanswered, and opposing counsel has not offered any explanation for the absence of the original document.
Dr. Elaine Prescott of Brindoval Forensic Document Services LLC conducted a preliminary forensic examination of the photocopy and issued her report on February 22, 2023. Dr. Prescott's findings were favorable to our position. She identified signs of alteration in the photocopy, including irregularities in text alignment and formatting on the second page, and concluded that the absence of Ms. Fonseca's signature was consistent with the document being an incomplete or draft version rather than a fully executed agreement.
Our internal analysis of the premarital agreement claim, set forth in a memorandum dated November 28, 2022, concludes that the alleged agreement is likely unenforceable under California Family Code §§ 1610-1617. The Uniform Premarital Agreement Act, as adopted in California, requires that a premarital agreement be in writing and signed by both parties (Cal. Fam. Code § 1611). Beyond the threshold signature deficiency, the Contestants have not demonstrated compliance with the additional enforceability requirements imposed by California Family Code § 1615, including that each party was represented by independent legal counsel (or expressly waived such representation in a separate writing), that each party received a full and fair disclosure of the other's financial obligations and property, and that the party against whom enforcement is sought had at least seven calendar days between first being presented with the agreement and signing it. Ms. Fonseca has confirmed that she was never presented with a premarital agreement, never consulted independent counsel regarding such an agreement, and never received any financial disclosure from the Decedent in connection with any proposed premarital arrangement.
2. Isabela's Promissory Note Claim
Isabela C. Fonseca-Greer asserts a creditor's claim against the estate in the amount of $1,310,460, based on a promissory note dated January 15, 2020, in the principal amount of $1,200,000, payable to Amber Light Documentary Films LLC (Isabela's documentary production company) at an annual interest rate of 3.5%, with a maturity date of January 15, 2025. Isabela calculates the accrued interest through the date of the Decedent's death (September 3, 2022) at $110,460, yielding a total claimed amount of $1,310,460 ($1,200,000 principal plus $110,460 in accrued interest).
Our client's position is that the $1,200,000 transfer was a gift from the Decedent to his daughter to fund her documentary film business, not a bona fide loan. Ms. Fonseca has stated that the Decedent frequently made gifts to his children to support their professional endeavors, and that neither the Decedent nor Isabela ever treated the transfer as a debt obligation. No repayment was ever demanded by the Decedent during his lifetime, no payments of interest or principal were ever made by Isabela or Amber Light Documentary Films LLC, and the promissory note was found among the Decedent's personal papers in a folder labeled "Kids — Financial Support" rather than in his business or financial records.
Our internal analysis of this claim, set forth in a memorandum dated January 30, 2023, supports a donative intent defense. The absence of any demand for repayment, the absence of any actual repayment activity, the characterization of the transfer in the Decedent's personal records, and the intrafamily nature of the transaction all support the inference that the Decedent intended the $1,200,000 as a gift. We note with particular interest that the promissory note's maturity date of January 15, 2025, is now approximately three months away. If that date passes without any demand for payment having been made during the Decedent's lifetime and without any repayment having been made by Isabela, it will further buttress the donative intent argument.
3. Nicolás's Educational Expense Claim
Nicolás R. Fonseca asserts a claim in the amount of $387,500, based on an alleged oral promise by the Decedent to cover Nicolás's graduate school tuition and living expenses for the period from 2021 through 2024. Nicolás contends that the Decedent made this promise verbally on multiple occasions, and that Nicolás enrolled in his graduate program and incurred expenses in reliance on the promise.
Our client's position is that any such oral promise is unenforceable. Our internal analysis, set forth in a memorandum dated February 15, 2023, identifies several defenses. First, the Statute of Frauds (Cal. Civ. Code § 1624) may bar enforcement of an oral promise that, by its terms, was not to be performed within one year (2021 through 2024 represents a three-year period). Second, the evidentiary challenges of proving the existence, terms, and scope of an oral agreement against a decedent's estate are significant, as the primary witness to the alleged promise (the Decedent) is unavailable to testify. Third, even if the promise were established, the measure of damages would be subject to dispute, as Nicolás has not provided a detailed accounting of the expenses allegedly incurred in reliance on the promise.
D. Malibu Property Tracing
The Malibu Beach House at 27100 Pacific Coast Highway, Malibu, California 90265, is a significant contested asset requiring a detailed community property tracing analysis. Grace Nakamura prepared a comprehensive memorandum on this issue, dated January 15, 2023, applying the Moore/Marsden principles established by the California Supreme Court in In re Marriage of Moore (1980) 28 Cal.3d 366 and In re Marriage of Marsden (1982) 130 Cal.App.3d 426.
The relevant facts are as follows:
• Purchase: The Decedent purchased the Malibu property on August 22, 2007, for $4,750,000. This acquisition occurred approximately ten months before the Decedent's marriage to Ms. Fonseca on June 14, 2008. The property was therefore acquired as the Decedent's separate property.
• Community Contributions: During the marriage, community funds were used to make two categories of contributions to the property: (a) a major renovation completed in 2016 at a total cost of $1,800,000; and (b) mortgage payments totaling $2,016,400, consisting of 142 monthly payments of $14,200 each, made from June 2008 (the month of the marriage) through March 2020, when the mortgage was paid off in full.
• Community Interest Claimed: Applying Moore/Marsden principles, our client claims a community interest in the Malibu property calculated as follows: total community contributions of $3,816,400 ($1,800,000 renovation + $2,016,400 mortgage payments) divided by the current fair market value of $6,200,000, yielding a community interest of approximately 61.6%.
The Contestants dispute this characterization and maintain that the Malibu property is entirely the Decedent's separate property, arguing that the pre-marriage acquisition controls the characterization. However, the Moore/Marsden line of authority clearly establishes that a community estate acquires a pro tanto interest in separate property when community funds are used to pay down the purchase price (through mortgage payments) or to make capital improvements. The Contestants' position on this asset is, in our view, legally untenable, and we believe Ms. Fonseca's 61.6% community interest claim is well-supported.
IV. Estate Administration Update
Ashford Fiduciary Services Inc., through its principal officer Gerald Whitmore, continues to serve as neutral estate administrator pursuant to the stipulation filed and approved by the Court on March 22, 2023. The engagement of Ashford has been a successful arrangement that has allowed for the orderly preservation and management of the estate's assets during the standstill period.
The fee structure for Ashford's services consists of a monthly administration fee of $8,500, plus 0.15% of assets under administration per annum. The $8,500 monthly fee is shared equally between the parties, with Ms. Fonseca responsible for $4,250 per month and the Contestants collectively responsible for $4,250 per month. Ms. Fonseca has been current on all of her cost-sharing obligations. We have not been advised of any delinquency by the Contestants.
Ridgeway Accounting Partners LLP, through Dennis Chua, CPA, continues to serve as the estate's accountant. Ridgeway is responsible for maintaining the estate inventory, preparing and filing all required tax returns (including federal estate tax returns and fiduciary income tax returns), and performing ongoing financial reconciliation of the estate's accounts and assets. No issues have been raised regarding Ridgeway's work product.
The operational status of the estate's principal business assets is as follows:
Lumiére Canyon Studios LLC (principal offices at 4200 West Olive Avenue, Burbank, California 91505) continues its operations in the ordinary course of business. Ms. Fonseca remains in her role as Chief Creative Officer and continues to hold her own separate 50% membership interest in the entity. The Decedent's 50% membership interest is being administered by Ashford Fiduciary Services Inc. pending resolution of the probate contest. Ashford exercises the Decedent's membership rights in a custodial capacity and has not sought to interfere with the day-to-day creative or business operations of the studio. Lumiére Canyon's operations have continued to generate revenue, and the entity remains financially healthy. However, as discussed in Section VI.C below, the unresolved status of the Decedent's 50% membership interest does create some governance uncertainty, particularly with respect to major strategic decisions that may require unanimous member consent under the operating agreement.
Pacific Rim Narrative Partners LLC (Victor Sandoval, managing member; offices at 8455 Beverly Boulevard, Suite 310, Los Angeles, California 90048) — the Decedent's 35% membership interest is being held in the estate and administered by Ashford. Mr. Sandoval, as managing member, continues to manage the fund's operations. Distributions attributable to the Decedent's 35% interest continue to accrue and are deposited into the estate account maintained by Ashford. We have not received any indication of operational difficulties at Pacific Rim, though we note that we have limited visibility into the fund's investment performance and portfolio composition. Updated information should be requested from Ashford in connection with the next quarterly report.
Veltara Basin Bank, N.A. Accounts — The Decedent's accounts at Veltara Basin Bank, N.A. — specifically, the brokerage account (ending -4782), the checking account (ending -3091), and the money market account (ending -6155) — remain frozen pursuant to our letter dated October 18, 2022, to Franklin Ybarra, Vice President and Branch Manager at Veltara Basin Bank. The freeze was implemented to preserve the assets pending resolution of the probate proceeding and to prevent unauthorized withdrawals or transfers. The accounts are being monitored by Ashford and Ridgeway Accounting Partners.
Real Properties — The Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, California 90210) and the Malibu Beach House (27100 Pacific Coast Highway, Malibu, California 90265) remain in their current status. Ms. Fonseca continues to reside in the Beverly Hills residence. The Malibu property is unoccupied and is being maintained through routine property management services arranged by Ashford. Title records for both properties are held by Coastline Title & Escrow Co. (Andrea Solis, title officer), and no transfers, encumbrances, or title actions have been recorded during the standstill period.
V. Financial Status of Engagement
A. Fee Summary Through September 30, 2024
The following is a summary of the financial status of the engagement through the most recent billing period ending September 30, 2024:
Total Fees Billed: $487,250
Total Costs Advanced: $62,340
The costs advanced include fees paid to Pinnacle West Appraisal Group LLC for preliminary estate appraisals, fees paid to Brindoval Forensic Document Services LLC (Dr. Elaine Prescott) for forensic document examination of the alleged premarital agreement photocopy, court filing fees for the Petition for Letters of Administration, the Petition for Preliminary Distribution, and related filings, and mediator fees for the April 12, 2023, mediation session before the Honorable Constance Adler (Ret.) at Westside Dispute Resolution Center.
Total Billed (Fees + Costs): $549,590
Evergreen Retainer Received: $150,000 (paid upon engagement, October 12, 2022)
Total Payments Received: $510,000 (inclusive of the retainer and subsequent payments)
Outstanding Balance as of September 30, 2024: $38,590
B. Billing Rates
The current billing rates applicable to this matter are as follows:
These rates are consistent with the rates set forth in the engagement letter dated October 12, 2022, as adjusted for the firm's standard annual rate increase effective January 1, 2024.
C. Billing Observations
Billing activity on this matter has been minimal during the dormant standstill period, which has now extended for approximately eighteen months since the execution of the original Settlement Standstill Agreement on April 28, 2023. The work performed during this period has consisted primarily of: (a) negotiating and documenting the standstill renewal amendments (Renewals #1 and #2); (b) periodic client correspondence to keep Ms. Fonseca informed of the status of the matter; (c) reviewing and analyzing Ashford Fiduciary Services Inc.'s quarterly administration reports; and (d) monitoring developments in relevant case law and responding to occasional inquiries from opposing counsel.
The outstanding balance of $38,590 is within a manageable range and does not give rise to any collection concerns at this time. Ms. Fonseca has been a reliable and timely payor throughout the engagement. I recommend that we include a request for payment of the outstanding balance in the next client communication letter, which will accompany the recommendation to execute Standstill Renewal #3. Combining the payment request with a substantive client update is, in my view, the most efficient and appropriate approach.
Ms. Fonseca has also been current on her share of the Ashford Fiduciary Services Inc. administration cost-sharing, paying $4,250 per month as required by the Settlement Standstill Agreement. These payments are made directly by Ms. Fonseca to Ashford and are not processed through our firm.
VI. Recommendation: Execute Standstill Renewal #3
A. Proposed Terms
I recommend that the firm advise Ms. Fonseca to authorize the execution of a Third Amendment to the Settlement Standstill Agreement (Renewal #3), extending the standstill period from its current expiration date of October 28, 2024, through February 28, 2025.
All existing terms of the Settlement Standstill Agreement would remain unchanged under the proposed Third Amendment, including:
• Tolling of all litigation deadlines in the probate proceeding;
• Prohibition on the filing of new motions, discovery requests, or other affirmative litigation actions by either side;
• Continued neutral administration of the estate by Ashford Fiduciary Services Inc.;
• Equal cost-sharing of Ashford's administration fees ($4,250/month per side);
• Renewability by mutual written consent of all parties;
• Terminability on 30 days' written notice by either party; and
• Comprehensive confidentiality provisions governing all communications and information exchanged during the standstill period.
Calderwood & Harkness has already taken a preliminary step toward this renewal. On October 10, 2024, I sent a proposal letter to Damian R. Ortega of Brennan, Ortega & Saldívar LLP, proposing the execution of a Third Amendment on the terms described above. As of the date of this memorandum, we have not yet received a formal response, though Ms. Kwan informally indicated by email on October 12, 2024, that the Contestants would "likely be amenable" to a renewal. I anticipate receiving a formal response within the next several business days.
It should be noted that the proposed Third Amendment encompasses a shorter renewal period than the prior two amendments. Renewals #1 and #2 each extended the standstill for approximately six months, whereas the proposed Renewal #3 would extend the standstill for approximately four months (October 28, 2024, through February 28, 2025). This shorter duration reflects a desire expressed by both sides during informal discussions to establish a nearer-term decision point. Both counsel recognized that the matter cannot remain in a standstill indefinitely and that the parties should begin to orient toward a resolution — whether through renewed settlement discussions, mediation, or litigation reactivation — in the first half of 2025.
B. Rationale for Renewal
The underlying factors that supported the original standstill and the subsequent renewals remain substantially in place, and I believe that a further renewal is in Ms. Fonseca's best interest for the following reasons:
Weakness of Contestants' Key Claims. The premarital agreement claim — which is the linchpin of the Contestants' position — remains weak. The Contestants have produced only an unsigned photocopy, forensic evidence suggests alteration, the original has never been produced despite our demand, and the agreement is likely unenforceable under the mandatory requirements of California Family Code §§ 1610-1617. Without a valid premarital agreement, the Contestants' separate property characterization arguments are significantly undermined, as they must then rely on tracing evidence to overcome the general community property presumption applicable to assets acquired during marriage (Cal. Fam. Code § 760).
Cost Avoidance. Active litigation would impose substantial costs on both sides. If the standstill were terminated and litigation resumed, the following steps would be necessary: updated appraisals from Pinnacle West Appraisal Group LLC (and presumably from Hargrove & Linden for the Contestants), depositions of the parties and key witnesses (including, at a minimum, Claudette Marchetti, Victor Sandoval of Pacific Rim Narrative Partners, Dr. Elaine Prescott, Morton Linden of Hargrove & Linden, and potentially Dr. Fujimoto), expert depositions, preparation of trial briefs and exhibits, and a multi-week trial before the probate court. Based on my review of comparable contested probate matters handled by the firm and my discussions with Patricia Dunmore regarding anticipated staffing and time requirements, I estimate the incremental cost to Ms. Fonseca of proceeding through trial at $500,000 to $750,000 or more. This estimate does not include additional expert fees, which could be substantial depending on the scope of updated appraisals and the need for rebuttal experts.
Preservation of Estate Value. Continued dormancy preserves the value of the estate by avoiding the depletion of assets through litigation costs. Every dollar spent on litigation is a dollar that is no longer available for distribution to the ultimate beneficiaries. Given the size of the estate (approximately $71 million), the cost of litigation is a relatively modest percentage of the total, but it is nevertheless a meaningful sum that can be avoided through continued standstill and, ultimately, negotiated resolution.
Favorable Settlement Dynamics Emerging. Informal signals from Brennan, Ortega & Saldívar LLP suggest that the Contestants may be more amenable to settlement discussions in early 2025 than they were at the time of the failed April 2023 mediation. Several factors contribute to this assessment. First, the passage of time has likely tempered the emotional intensity of the dispute, which was palpable at the April 2023 mediation. Second, and perhaps more significantly, Isabela's promissory note reaches its maturity date of January 15, 2025, without any prior repayment activity. If the maturity date passes without any demand for payment having been made (by the estate or by any party on behalf of the estate) and without any voluntary payment by Isabela, this will further support our donative intent argument and may cause the Contestants to reassess the viability of the $1,310,460 promissory note claim. Third, Nicolás may be completing or have completed his graduate studies by early 2025, which could reduce the practical significance of his $387,500 educational expense claim.
C. Risk Considerations
While I recommend the renewal, the following risks of continued standstill should be noted and discussed with the client:
Delay in Resolution. The primary risk of continued standstill is delay in resolving Ms. Fonseca's claim to the estate assets. Ms. Fonseca has been awaiting resolution of this matter for over two years, and the continued uncertainty regarding the status of key assets — particularly the Decedent's 50% membership interest in Lumiére Canyon Studios LLC and 35% interest in Pacific Rim Narrative Partners LLC — imposes both financial and emotional costs. While Ms. Fonseca has not expressed dissatisfaction with the standstill approach, it is important that we continue to communicate the firm's strategic rationale clearly and to ensure that Ms. Fonseca understands the trade-offs involved.
Stale Valuations. The preliminary valuations prepared by Pinnacle West Appraisal Group LLC were based in significant part on financial data from December 31, 2021 (for Lumiére Canyon Studios LLC) and other historical data points. As of the date of this memorandum, that data is approaching three years old. If litigation resumes, updated valuations will be necessary, and the current valuations may prove to be either understated or overstated depending on intervening market conditions and the performance of the underlying businesses. The cost of updated appraisals will be an additional expense to the client.
Ongoing Administration Costs. Ashford Fiduciary Services Inc.'s administration fees continue to accrue at $8,500 per month (total), with Ms. Fonseca bearing $4,250 per month. Over the course of the proposed four-month Renewal #3, Ms. Fonseca will incur an additional $17,000 in administration cost-sharing fees. Since the appointment of Ashford in March 2023, Ms. Fonseca has paid approximately $81,000 in administration cost-sharing (19 months × $4,250/month), and that figure will continue to grow for as long as the neutral administration remains in place.
Governance Uncertainty at Lumiére Canyon Studios LLC. Ms. Fonseca's role as Chief Creative Officer of Lumiére Canyon Studios LLC is operationally unaffected by the probate proceeding, as she holds her own independent 50% membership interest. However, the unresolved status of the Decedent's 50% membership interest — currently administered by Ashford in a custodial capacity — creates governance uncertainty. Major decisions requiring unanimous member consent (such as amendments to the operating agreement, the admission of new members, the sale of substantially all assets, or decisions regarding distributions) may be difficult or impossible to effectuate while the ownership of the Decedent's interest remains in dispute. This governance overhang is a practical concern that should be considered in evaluating the duration of any further standstill.
VII. Strategic Considerations Upon Standstill Expiration (February 28, 2025)
Assuming the Third Amendment is executed and the standstill is extended through February 28, 2025, the firm and the client should be prepared to pursue one of three strategic options upon expiration of the renewed standstill. I recommend that we begin internal planning for these contingencies in January 2025, with a goal of presenting Ms. Fonseca with a clear recommendation before the Third Amendment expires.
A. Option 1: Further Standstill Renewal
If both sides continue to prefer dormancy over active litigation, a Fourth Amendment to the Settlement Standstill Agreement could be negotiated. The terms of such an amendment would presumably follow the template established by the prior renewals, with the duration and any modified provisions to be agreed upon by the parties.
However, I would counsel caution regarding this option. The matter has been dormant for nearly two years since the failed April 12, 2023 mediation, and the diminishing returns of continued standstill should be weighed carefully. Each additional renewal extends the period of uncertainty for Ms. Fonseca, increases the cumulative administration costs, and risks creating an impression — both to the Court and to opposing counsel — that Ms. Fonseca is content with indefinite dormancy rather than actively pursuing resolution of her claims. While the standstill has served its purpose as a cost-management tool, there comes a point at which the benefits of dormancy are outweighed by the costs of delay. In my assessment, we are approaching that point.
B. Option 2: Renewed Mediation or Settlement Negotiations
I recommend that we explore the possibility of a second mediation session or direct settlement negotiations as the preferred option upon expiration of the Third Amendment. Several factors support this approach:
• The Honorable Constance Adler (Ret.) remains available as a mediator through Westside Dispute Resolution Center and has familiarity with the matter from the April 2023 session. Judge Adler's knowledge of the parties, the claims, and the contested issues would allow a second mediation to proceed efficiently without the need for extensive background briefing.
• By February 2025, the maturity date of Isabela's promissory note (January 15, 2025) will have passed. If, as expected, no demand for repayment is made and no voluntary payment occurs, the absence of any repayment activity over the full five-year term of the note will significantly strengthen our donative intent argument. This development may cause the Contestants to reassess the value of the promissory note claim and may create a more favorable negotiating dynamic for our client.
• Nicolás may have completed his graduate studies by this point (his program was described as covering the period 2021-2024), which could reduce the practical and emotional significance of his $387,500 educational expense claim. If Nicolás has in fact completed his studies using his own resources or other funding, the equitable force of his claim is substantially diminished.
• The passage of time since the failed April 2023 mediation may have allowed the parties' positions to soften. The emotional intensity that characterized the early stages of the proceeding — particularly Rafael's personal animosity toward Ms. Fonseca — may have abated, creating space for more productive settlement discussions.
If direct settlement negotiations are pursued as an alternative to formal mediation, I would recommend that initial discussions occur between counsel (specifically, between myself and Lydia Kwan or Damian Ortega) to identify potential areas of agreement and to develop a framework for a global settlement that addresses all contested issues, including the asset characterization disputes, the promissory note claim, and the educational expense claim.
C. Option 3: Reactivation of Litigation
If settlement discussions prove unproductive or if the Contestants decline to engage in meaningful negotiations, the standstill may be terminated on 30 days' written notice by either party, and active litigation would resume. While I view this as the least preferred option given the associated costs and uncertainties, the firm and the client must be prepared for this contingency.
Upon reactivation of litigation, the following key steps would need to be undertaken:
1. Formal discovery: Propound interrogatories, requests for production of documents, and requests for admission to the Contestants, with particular focus on the alleged premarital agreement (including the whereabouts of the original document), the factual basis for the separate property characterization claims, and the details of Isabela's promissory note claim and Nicolás's educational expense claim.
2. Updated Appraisals: Retain Pinnacle West Appraisal Group LLC to prepare updated valuations of all contested assets, including Lumiére Canyon Studios LLC, Pacific Rim Narrative Partners LLC, and the real properties. The Contestants would presumably engage Hargrove & Linden Appraisals Inc. to prepare updated competing valuations.
3. Depositions: Conduct depositions of key witnesses, including:
• Claudette Marchetti (the Decedent's first wife) — regarding the alleged premarital agreement, the circumstances of the Decedent's divorce from Ms. Marchetti, and any knowledge she may have regarding the Decedent's pre-marital assets and finances;
• Victor Sandoval (managing member of Pacific Rim Narrative Partners LLC) — regarding the Decedent's investment in the fund, the source of the initial capital contribution, and the fund's performance and distributions;
• Dr. Elaine Prescott (forensic document examiner) — to present her final opinions regarding the alleged premarital agreement photocopy;
• Morton Linden (Contestants' appraiser) — regarding his valuation methodology and conclusions;
• Dr. Fujimoto — regarding any relevant expert opinions;
• Each of the three Contestants — regarding their claims and their knowledge of the estate assets.
4. Final Forensic Report: Retain Dr. Prescott to prepare a final forensic document examination report for use at trial, building on her preliminary findings.
5. Trial Preparation: Prepare pretrial motions, trial briefs, witness lists, exhibit lists, and other materials necessary for a contested probate trial.
Based on comparable matters and the complexity of the issues involved, I estimate the timeline from reactivation of litigation to trial at approximately 12 to 18 months. This estimate accounts for the time necessary to complete discovery, depose all key witnesses, update appraisals, brief any pretrial motions, and obtain a trial date from the probate court.
Ms. Fonseca's position remains strong on the core issues, and I am confident that the client would achieve a favorable result at trial. Specifically:
• Under California Probate Code §§ 6400-6414, Ms. Fonseca, as the surviving spouse of a decedent who died intestate, is entitled to 100% of the community property and one-third of the separate property (if the decedent is survived by more than one child, which is the case here). Given our position that the vast majority of the estate consists of community property, Ms. Fonseca's share under intestate succession would be substantial.
• The community property characterization of the major assets (Lumiére Canyon Studios LLC, Pacific Rim Narrative Partners LLC, the Beverly Hills residence, and the financial accounts) is well-supported by the evidence and by established California community property principles.
• The premarital agreement evidence is, in our assessment, fundamentally flawed and unlikely to withstand judicial scrutiny. The absence of Ms. Fonseca's signature, the failure to produce the original, the forensic evidence of alteration, and the apparent noncompliance with the statutory requirements of California Family Code §§ 1610-1617 collectively render the alleged agreement unenforceable.
Nevertheless, the cost and uncertainty of trial counsel in favor of pursuing settlement if at all possible, and I recommend that Option 3 be treated as a last resort.
VIII. Action Items
Based on the foregoing analysis and recommendations, I propose the following action items for the engagement team:
1. Client Authorization for Renewal #3. Prepare and send a client update letter to Ms. Fonseca, summarizing the current status of the matter and requesting her authorization to execute the Third Amendment to the Settlement Standstill Agreement, extending the standstill period through February 28, 2025. The letter should explain the rationale for the renewal in accessible terms and should note the shorter renewal period as compared to prior amendments.
2. Outstanding Balance. Include in the client update letter a request for payment of the outstanding balance of $38,590 as of September 30, 2024. The request should be presented in a professional and routine manner, consistent with the firm's standard billing practices.
3. Finalize Third Amendment. Upon receipt of Brennan, Ortega & Saldívar LLP's formal agreement to the proposed renewal, finalize the Third Amendment and circulate it for execution by all parties and counsel. Target execution date: on or before October 25, 2024, to ensure the amendment is in place before the current standstill period expires on October 28, 2024.
4. Ashford Quarterly Report. Request an updated quarterly administration report from Ashford Fiduciary Services Inc. (Gerald Whitmore), covering the quarter ending November 30, 2024 (or the most recent available period). The report should include updated account balances, a summary of Pacific Rim Narrative Partners distributions accrued to the estate, and a status update on Lumiére Canyon Studios LLC operations.
5. Post-Standstill Strategic Planning. Begin preliminary internal planning for the post-standstill period. Schedule an internal strategy session for January 2025 to evaluate the three options discussed in Section VII above (further renewal, renewed mediation/settlement negotiations, or litigation reactivation) and to develop a recommendation for Ms. Fonseca. This session should include Howard Quinn, Patricia Dunmore, Grace Nakamura, and myself.
6. Valuation Update Assessment. Consider whether to request updated preliminary valuations from Pinnacle West Appraisal Group LLC in anticipation of potential activity in 2025. If renewed mediation or settlement negotiations are pursued, having current valuations will strengthen our negotiating position. If litigation reactivation becomes necessary, early engagement of Pinnacle West will reduce the lead time to trial readiness. I recommend that we obtain a scope-of-work proposal and fee estimate from Pinnacle West in December 2024 for discussion at the January strategy session.
IX. Conclusion
The matter of In re Estate of Teodoro R. Fonseca, Case No. 22STPB09714, remains well-positioned for our client, Marguerite D. Fonseca. The Settlement Standstill Agreement has been an effective cost-management tool over the past eighteen months, allowing Ms. Fonseca to preserve her legal rights while avoiding the substantial expense and disruption of active litigation. The Contestants' core claims — particularly the alleged premarital agreement — remain weak, and Ms. Fonseca's community property characterization of the major estate assets is supported by both the evidence and established California law.
I recommend that the engagement team approve and facilitate the execution of Standstill Renewal #3 (Third Amendment), extending the standstill period through February 28, 2025. At the same time, I recommend that we begin proactive strategic planning for the post-February 2025 period, with a particular focus on exploring renewed mediation or direct settlement negotiations as the preferred path toward resolution. The January 2025 internal strategy session will provide an appropriate forum for a comprehensive evaluation of the options and for the development of a recommendation to present to Ms. Fonseca.
I am available to discuss this memorandum and its recommendations at your earliest convenience. Please do not hesitate to contact me with any questions or if you require additional analysis on any of the issues addressed herein.
Elliot Nguyen Lead Associate Calderwood & Harkness LLP 350 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Matter No. 1035-00005
cc: File (Matter No. 1035-00005) Enclosures: None
Asset | Est. Value | Client's Position | Contestants' Position
Beverly Hills Residence (1847 Coldwater Canyon Drive, Beverly Hills, CA 90210) | $8,450,000 | Community Property | Partially Separate Property (alleging down payment from pre-marital funds)
Malibu Beach House (27100 Pacific Coast Highway, Malibu, CA 90265) | $6,200,000 | Community Property (61.6% community interest based on $1,800,000 renovation and $2,016,400 in mortgage payments from community funds) | Separate Property (purchased August 22, 2007, for $4,750,000, pre-marriage)
Lumiére Canyon Studios LLC — Decedent's 50% membership interest | $15,800,000 ($31,600,000 enterprise value × 50%) | Community Property (entity formed March 18, 2009, during marriage; 50/50 per operating agreement) | Separate Property (funded with pre-marital capital)
Pacific Rim Narrative Partners LLC — Decedent's 35% membership interest | $27,475,000 ($78,500,000 AUM × 35%) | Community Property | Separate Property
Veltara Basin Bank Brokerage Account (acct. ending -4782) | $5,120,000 | Community Property | Mixed/Separate
Veltara Basin Bank Checking Account (acct. ending -3091) | $342,000 | Community Property | Community Property
Veltara Basin Bank Money Market Account (acct. ending -6155) | $1,875,000 | Community Property | Mixed
IP Portfolio (14 feature films, 6 TV series — royalty streams/residuals) | $4,600,000 (NPV per Pinnacle West) | Community Property | Partially Separate Property
Personal Property (art collection, vehicles, furnishings) | $1,250,000 | Community Property | Community Property
Timekeeper | Role | Rate
Howard Quinn | Partner (Responsible Partner) | $975/hour
Patricia Dunmore | Partner (Billing Partner) | $975/hour
Elliot Nguyen | Associate (Lead Associate) | $525/hour
Grace Nakamura | Associate (Working Associate) | $525/hour
Paralegals | As assigned | $295/hour

MEMORANDUM

MATTER NO.: 1035-00005

Record

Parties

Dates

Amounts