Opposition Brief — Sandhaus v. Weinreich
Supreme Court brief1995
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s Supreme Court, U, a
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No. 95-189 ee 5
CLERK
In The
Supreme Court of the Hnited States
—+
October Term, 1995
RICHARD SANDHAUS a/k/a DICK SANDHAUS, and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC.,
Petitioners,
VS.
STEPHEN WEINREICH,
Respondent.
On Petition for a Writ of Certiorari to the United States Court
of Appeals for the Second Circuit
RESPONDENT’S BRIEF IN OPPOSITION
DANIEL MARTIN
Counsel of Record
Attorney for Respondent
816 Silvia Street, 800B
Trenton, New Jersey 08628
(609) 530-8949
LA te (800) 3 APPEAL « (800) 5 APPEAL » (800) BRIEF 21
QUESTIONS PRESENTED
1. Did the district court abuse its di: :retion in dealing with
the issue of piercing the corporate veil, where the veil piercing
issue was:
(1) Raised in respondent’s complaint;
(2) Dealt with extensively in pre-tria: discovery by both
sides;
(3) Dealt with extensively at trial by both sides through the
testimony of witnesses, the introduction of evidence by
petitioners themselves on the issue, and the introduction without
objection of voluminous documentary evidence by respondent
bearing solely on the veil piercing issue;
(4) Briefed by both sides in post-trial closing arguments?
TABLE OF CONTENTS
Page
Questions Presented .......... ses ccecceeeeereeeees i
Table of Contents ........cccceccceccecversscccces ii
Table of Citations .........ccceececceceeccseececes ii
Statement of the Case ..........ceeeeeceeeeeececere 1
Reasons for Denying the Writ .......--seeeeeeeeeees 7
I. Respondent’s complaint and the pre-trial order
alleged sufficient facts to put petitioners on clear
notice that he was seeking to pierce the corporate
veil to reach petitioners SFC and Sandhaus. ..... 7
II. The district court did not abuse its discretion under
Rule 15(b) in finding that the issue of piercing the
corporate veil had been tried by consent. ....... 10
ComelesioG occ ccccccccvcedbvicencsceeypeccssers 19
TABLE OF CITATIONS
Cases Cited:
Arkla Exploration Co. v. Boren, 411 F.2d 879 (8th Cir.
OGD) ooks vidiccs secure eee 13
Bradford Audio Corp. v. Pious, 392 F.2d 27 (2nd Cir. 1968)
bc0caseeacudeeetitnweee 12
iii
Contents
Cole v. Layrite Prod. Co., 439 F.2d 958 (9th Cir. 1971) ...
Conley v. Gibson, 355 U.S. 41, 78S. Ct. 99 (1957) ......
Cornick v. Hi-Grade Cleaners Inc., 595 F. Supp. 718 (N.D.
PR Aa cb hs hiker eavetueiekererevesstvese
Dell v. Heard, 532 F.2d 1330 (10th Cir. 1976) ..........
Dunn v. Transworld Airlines, Inc., 589 F.2d 408 (9th Cir.
PR ia ats a Cae eas iho GbN See b ete eds cures ees
Ellis v. Arkansas Louisiana Gas Co., 609 F.2d 436 (10th
Nee ee awh eee date veces
Federal Savings & Loan Insurance Corp. v. Hogan, 476
PEER TUNEIG TOD voice deeetestesectesesss
Fejta v. G.A.F. Companies, Inc., 800 F.2d 1395 (Sth Cir.
ME, VATU AA Re Cues o 0 ew ev Ghee ce vees ces evaseee'e
os TEPER a Nos SS Se a ae
Hall v. National Supply, 270 F.2d 379 (Sth Cir. 1959) ....
Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449 (10th
SEE GUNES Aceh so NENc CoB WES CARN OC es c0bs's
Herrera v. Valentine, 653 F.2d 1220 (8th Cir. 1981) .....
Page
11
14,15
11
13
13
11
11
iv
Contents
Knudson v. Boren, 261 F.2d 15 (10th Cir. 1958) .........
Laffey v. Northwest Airlines Inc., 567 F.2d 429 (D.C. Cir.
1976), cert. denied, 98 S. Ct. 1281, 434 U.S. 1086, 58 L.
DG. A REPO bs an bebe dba bn cde ae vebawan eek
Lones v. Detroit, Toledo & Ironton R. Co., 398 F.2d 914
(6th Cir. 1968), cert. denied, 89 S. Ct. 714, 393 U.S.
PO, a as EE a eV cnekendetne see dee
Matter of Prescott, 805 F.2d 719 (7th Cir. 1986) ........
Mineral Industries, Etc. v. Occupational Safety, 639 F.2d
SRP GGA EOE) 0 v be Ce vsedahe ob sccedeksces 6
Morris v. New York State Department of Taxation and
Finance, 82 N.Y. 2d 135, 603 N.Y.S. 2d 807 (1993) ...
Neidland v. Unitd States, 338 F.2d 254 (3rd Cir. 1964) ...
Nielson v. Armstrong Rubber Co., 570 F.2d 272 (8th Cir.
| pape ee eS
Pariser v. Christian Health Care Systems, Inc., 816 F.2d
NFR Ga PTD nv hb cv deecikscecycuckweesesisac
Rath Packing Co. v. Becker, 530 F.2d 1295 (9th Cir. 1975),
affirmed on other grounds sub. nom. Jones v. Rath
Packing Co., 430 U.S. 519, 97S. Ct. 1305, 51 L. Ed. 2d
og bt gd) Bere Sete mage ere hy PLANES hi
1]
11
12
15
3,8
15
11
18
Vv
Contents
St. Joe Minerals Corp. v. Occupational Safety and Health
Review Commissioner, 647 F.2d 840 (8th Cir. 1981) ..
Stepp v. United States, 297 F.2d 909 (4th Cir. 1953), cert.
denied, 74 S. Ct. 627, 347 U.S. 933, 98 L. Ed. 1084
SE LRGs De UB GEN el s rk baesebie? cic cveces
Sunstream Jet Express v. Int’l Air Service Co., Ltd., 734
PEG BOWED ok 5 ows x tcadbaesvececaccee
United States v. For Use of Seminole Sheet Metal v. SCI.,
Inc., 828 F.2d 671 (11th Cir. 1987) ...............
United States v. 47 Bottles, 320 F.2d 564 (3rd Cir. 1963) ..
Usery v. Marquette Cement Mfg. Co., 568 F.2d 902 (2nd
oS go SIR OCIS Cee oo iD 9 a re
Vogrin v. Hedstrom, 220 F.2d 863 (7th Cir. 1955), cert.
denied, 350 U.S. 845, 76S. Ct. 86, 100 L. Ed. 753 (1955)
eee eee eeeeveveeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeaene
Wallin v. Fuller, 476 F.2d 1204 (Sth Cir. 1973) .........
Weissman v. Freeman, 868 F.2d 1313 (2nd Cir. 1989) ....
Wesco Mfg., Inc. v. Tropical Attractions of Palm Beach,
Inc., 833 F.2d 1484 (11th Cir. 1987) ...............
Page
15
1]
11
17
11
15
12
17
11
18
vi
Contents
Page
Rules Cited:
Federal Rule of Civil Procedure 8(a)(2) ........0-+e+05 7
Federal Rule of Civil Procedure 15(b) ........-0ceeee>
cscedeecesteebv eieeeeratnens 10, 11, 12, 14, 15, 16, 17, 18
APPENDIX
Appendix A— Verified Complaint ............+++++. la
Appendix B —Excerpts of Deposition of Stephen
Wolaralch ...cccctsdatssdstavedansscccptecvece 8a
Appendix C —Excerpts of Deposition of Richard
PP Pe Te TVET T Perri ry fet 19a
Appendix D — Excerpts of Trial Transcript Dated January
VE Beep ro rr Te Peer NS Tee 33a
Appendix E — Excerpts of Trial Transcript Dated January
14, 19946 .cccdvecsdegaccersiSheneieveserstecess 36a
Appendix F — Trial Exhibit20 ..........seeeeeeeees 40a
Appendix G— Trial Exhibit31 ............0eeeeeees 4la
Appendix H — February 11, 1994 Letter from Gerald
Kleinbaum to Judge Sweet with Handwritten Note ... 44a
Appendix I —Excerpted Defendants’ Post Trial
Memorandum of Law with Proof of Service ......... 46a
vii
Contents
Appendix J — Excerpted Defendants’ Proposed Findings
of Fact and ConclusionsofLaw .............++.+..
Appendix K — May 1, 1978 Agreement ..............
Appendix L— Excerpted Joint Pre-Trial Order ........
Appendix M — Excerpts of Closing Arguments and Briefs
eeeeeceaeeweoeaeev eevee eeeeeeaeeeeevaeeaeeev eevee eeeeeeaeee
a a chive
Appendix O — Excerpted January 11, 1994 Trial
Transcript (Admission of Exhibits) ................
Appendix P —Excerpted January 13, 1994 Trial
eevee eeveev oe eeoeeeneeeeeneaneeeeeeaeewneeneee
oer *® #® © #8 ee
Page
49a
52a
53a
58a
1
TO THE HONORABLE SUPREME COURT:
Respondent, Stephen Weinreich, respectfully requests that
this Court deny the Petition for Writ of Certiorari submitted by
petitioners.
STATEMENT OF THE CASE
The issue of piercing the corporate veil to hold petitioners
Richard Sandhaus (“Sandhaus”) and Science Faction
Corporation (“SFC”) liable for contractual damages was first
raised in respondent’s Complaint. Though the specific words
“piercing the corporate veil” were not used, respondent alleged
sufficient facts to put petitioners on notice that he sought to pierce
the corporate veil to hold Sandhaus and SFC liable under the May
1, 1978 contract between respondent and petitioner Dick
Sandhaus Production, Inc. (“DSPI’”’) (Agreement at Appendix K
at 52a).
The complaint alleged that DSPI and SFC were affiliated
companies, (paragraph 2), that Sandhaus was the principal of
both (paragraph 4), that Sandhaus formed SFC to perform the
same functions, and utilize the same assets as DSPI, (paragraph
11), and that Sandhaus commingled the assets of DSPI, SFC and
himself personally, in order to deprive respondent of his rightful
share of profits (paragraph 18) (Appendix A at 1a, 2a, 3a, Sa).
The veil piercing issue was also addressed by both sides in
pre-trial discovery. Respondent was asked in a pre-trial
deposition to explain the allegations of commingling contained
in paragraph 18 of the Complaint. He testified that though the
Silver System and its attendant technology was built by DSPI,
“,.. it somehow drifted across the lines of the two
corporations. . .” and came to be owned and exploited for profit
by Sandhaus and SFC (Appendix B at 12a). This testimony went
to the very heart of the veil piercing claim since respondent was
2
entitled under the contract between himself and DSPI to a 1/3
share of the profits derived from the sale or rental of the Silver
System and all similar of derivative systems. The District Court
characterized the circumstances surrounding the “purported
sale” of the Silver System from DSPI to SFC as “suspect,” and
relied heavily on the suspect transfer of the key asset in the case
from one dominated corporation to the other, in concluding that
the corporate veil should be pierced (4/28/94 Opinion at
Petitioners’ Appendix E at 40a).
Respondent also testified in the same pre-trial deposition
that the two corporations shared office space, and that he“. . . saw
no attempt nor actual separation of the uses of equipment or
furniture or anything else between the corporations, or for that
matter Dick Sandhaus personally.” (Appendix B at 15a).
The District Court cited the sharing of office space as
another factor in its decision to pierce the corporate veil
(Petitioners’ Appendix Eat40a.) \
Petitioner Sandhaus was also deposed on the veil piercing
issue prior to trial. He was asked about the relationship between
DSPI and SFC, specifically whether SFC was a subsidiary or
affiliate of DSPI (Appendix C at 21a-24a). He was asked about
the sharing of office space (Appendix C at 27a-30a) and he was
asked about the “suspect” transfer of the Silver System from
DSPI to SFC (Appendix N at 64a-66a).
Despite two pre-trial motions for summary judgment by
petitioners, respondent's veil piercing claim survived to trial. In
his July 24, 1989 decision on petitioners’ first summary judgment
motion, Judge Stewart narrowed the issues in the case by
dismissing respondent’s joint venture claims. However
respondent’s claim against SFC for breach of the May 1, 1978
written agreement was not dismissed. Since SFC was not a
3
signatory to the agreement (in fact it was not even in existence on
May 1, 1978 when the agreement was signed) the only possible
basis for a breach of contract claim against SFC was that
petitioner Sandhaus had used his domination and control over
DSPI and SFC to commingle the assets of the two co1 yorations in
order to deprive respondent of his rightful share of profits under
the agreement. In the joint pre-trial order signed by Judge Sweet
on November 29, 1993, SFC remained a defendant on the
contract claim. The pre-trial order included the uncontested fact
that Sandhaus was the president and sole shareholder of both
DSPI and SFC. (Appendix L, Facts (3) and (4) at 55a). It also
included the key factual allegation necessary for respondent's
veil piercing claim;
. .. defendant Sandhaus transferred the Silver
System as an asset from defendant DSPI to
defendant SFC without consideration.
(Appendix L at 56a, Contested Fact (7).
These allegations were sufficient under New York law to
pierce the corporate veil. New York law on veil piercing was
misstated by petitioners at page 4 of their Petition. In fact there
are only two, not three, essential elements of a veil piercing claim
in New York under Morris v. New York State Department of
Taxation and Finance, 82 N.Y. 2d 135, 603 N.Y.S. 2d 807 (1993):
..» (1) The owners exercised complete
domination of the corporation in respect to
the transaction attacked; and
(2) That such domination was used to commit
a fraud or wrong against the plaintiff which
resulted in plaintiff’s injury.
4
Clearly the allegations of total control of DSPI and SFC by
Sandhaus, and the use of Sandhaus’ total control to deprive
respondent of his rightful share of profits under the agreement, by
wrongfully transferring the Silver System “som DSPI to SFC,
were sufficient to put petitioners on notice going into the trial that
respondent was seeking to pierce the corporate veil to hold all
petitioners liable under the agreement between DSPI and
respondent.
Moreover, the fact that veil piecing was an issue in this case
was conclusively established by the actions of both sides at trial.
Much, if not most of respondent’s evidence, admitted
without objection by petitioners, was offered to establish the
liability of SFC and Sandhaus personally under the agreement. A
partial list of evidence offered by respondent under the veil
piercing theory includes:
* 118 contracts between SFC and its customers for the
sale or rental of laser light show systems under the
agreement (Appendix O at 69a — admission of exhibits
at trial, Appendix Q at 80a-82a — partial list of trial
exhibits).
¢ 99 Reports filed by SFC with the U.S. Bureau of
Radiological Health (“BRH”) evidencing rentals by
SFC of laser light show systems covered by the
agreement; (Appendix O at 68a, Appendix Q at 76a-
80a). The District Court relied on certain of these
contracts and BRH reports in awarding contractual
damages against petitioners (June 30, 1994 Opinion at
Petitioner’s Appendix D at 10a).
* ADSPI tax return establishing that for a period during
which SFC and DSPI shared office space, DSPI’s rent
5
was paid by SFC, a fact relied upon by the district court
in piercing the corporate veil (Petitioners’ Appendix E
at 39a).
¢ A letter written on DSPI stationery to the BRH,
requesting a regulatory variance for SFC (Appendix G
at 41a). This letter was also relied upon by the district
court in its decision to pierce the corporate veil;
(Petitioners’ Appendix E at 40a).
¢ Aproduct brochure designating SFC as an “affiliate” of
DSPI. This brochure, about which petitioner Sandhaus
was questioned in his pre-trial deposition (Appendix F
at 40a) was also relied upon by the trial court in piercing
the corporate veil. (Petitioners’ Appendix E at 40a).
Petitioners never once objected to any of this evidence.
Moreover, petitioners offered their own evidence on the veil
piercing issue, evidence which was not even arguably relevant to
any other issue at trial. Specifically petitioner Sandhaus testified
as follows at trial:
Since its organization and through the period
thatitwas actively engaged in business,
did DSPI maintainitsown bank accounts?
Yes
And did it maintain its own records of receipts
and disbursements and general ledgers?
Yes
Did it file tax returns in its name?
ees sa
Do you recall whether there are any officers
or directors of DSPI other than yourself?
6
I believe, though I am not certain, that my
father and/or sister are officers.
With respect to Science Faction Corporation,
since its organization has it maintained its
own bank accounts?
Yes
And since its organization, has it maintained
its own financial records, including ledgers?
Yes
Has it filed its tax returns in its own name?
Yes
Do you know whether or not there are any
officers and directors of Science Faction
Corporation other than yourself?
Again, I am not certain, but it is possible that
either my sister and/or father are officers.
When it was first incorporated, do you recall
that was the case?
I believe that when it was first incorporated,
my father and an attorney named John Dasher
appeared as officers.
(Appendix E at 37a-39a).
The fact that DSPI and SFC maintained separate bank
accounts and other financial records, filed separate tax returns
and had their own officers and directories, was relevant to one
issue and one issue alone — whether the corporate veil should be
pierced.
7
Moreover, any doubt that the above testimony concerned the
corporate piercing issue alone, was removed by petitioners’ own
post-trial written arguments in which they specifically cited this
testimony in arguing that the corporate veil should not be pierced.
(Appendix I, Petitioners’ Post-trial Memorandum at 47a,
Appendix J, Petitioners’ Proposed Findings of Fact and
Conclusions of Law at 50a). The testimony was not mentioned
anywhere else in petitioners’ post-trial submissions. Petitioners’
claim that they only addressed the veil piercing issue in their
post-trial submissions in response to respondent's raising it for
the first time in his post-trial brief, is belied by the fact that
petitioners’ post-trial submissions were not made in response to
respondent’s brief (Appendix H at 44a-45a, handwritten note
from petitioners’ attorney at the bottom of letter to Judge Sweet
dated 2/11/95).
Respondent, of course, also briefed the corporate piercing
issue in his post-trial brief (Appendix M at 59a-63a).
At no time, either at trial, or in their post-trial briefs and
motions, did petitioners ever object to consideration by the
District Court of the veil piercing issue.
REASONS FOR DENYING THE WRIT
L.
RESPONDENT’S COMPLAINT AND THE PRE-
TRIAL ORDER ALLEGED SUFFICIENT FACTS TO PUT
PETITIONERS ON CLEAR NOTICE THAT HE WAS
SEEKING TO PIERCE THE CORPORATE VEIL TO
REACH PETITIONERS SFC AND SANDHAUS.
Under F.R.C.P. 8(a)(2), as interpreted by this Court, a
complaint provides sufficient notice that a claim is being raised if
it provides petitioners with:
. . . fair notice of what plaintiffs’ claim is and
the grounds upon which it rests.
Conley v. Gibson, 355 U.S. 41, 47,78 S. Ct. 99, 102 (1957).
As set forth above, the New York Court of Appeals held in
Morris v. New York State Department of Taxation and Finance,
that there are two essential elements of a veil piercing claim under
New York law:
(1) Complete domination of the corporation
with respect to the transaction in question;
and
(2) The use of such domination to commit a
fraud or wrong against the plaintiff.
Morris, supra at 810-811.
Thus, in order for respondent’s Complaint to have put
petitioners on notice of a veil piercing claim, it had only to allege
the domination by Sandhaus of SFC and DSPI, and the use of that
domination to commit a wrong against respondent (cf. Cornick v.
Hi-Grade Cleaners Inc., 595 F. Supp. 718, 721 (N.D. Ill. 1984) —
Complaint sufficient to state a claim for piercing the corporate
veil where all three elements necessary for a veil piercing claim
under Illinois law alleged in the complaint.).
In the instant case, sufficient facts were Clearly alleged in
respondent’s complaint to put petitioners on notice of a veil
piercing claim.
The allegation of control of SFC and DSPI was contained in
paragraph 4 of the Complaint.
9
The use of such control to commit a fraud or wrong against
respondent was alleged in:
(1) Paragraph 11 which alleged that Sandhaus formed
SFC specifically to perform the same functions and utilize
the same assets as DSPI with respect to the agreement
between respondent and DSPI;
(2) Paragraph 18 which alleged that Sandhaus
commingled the assets of DSPI, SFC and himself
personally, in order to deprive respondent of his rightful
share of profits under the agreement; and
(3) Paragraph 2 which alleged that SFC and DSPI were
affiliated companies.
These allegations were clearly sufficient to put petitioners
on notice that respondent sought to pierce the corporate veil and
hold Sandhaus and SFC liable under the agreement between
DSPI and respondent. In fact when petitioners argued in their
Post-Trial Memorandum that the corporate veil should not be
pierced they used the same language used by respondent in his
Complaint, commingling of assets: “. . . there is no evidence that
the business affairs of DSPI or SFC were commingled warranting
the Court to disregard the separate corporate identities of those
corporations.” (Petitioners’ Post Trial Memorandum, Exhibit I at
47a, emphasis supplied). Thus petitioners cannot now argue that
they were not put on notice that respondent was seeking to pierce
the corporate veil by the allegations of commingling in the
Complaint.
Moreover, petitioners cannot deny that they were on notice
of a veil piercing claim, since they addressed the issue in pre-trial
discovery. Petitioners specifically asked respondent to explain
the allegations of commingling in paragraph 18 of the Complaint,
10
in his pre-trial deposition. Respondent explained tha: by
commingling he meant that though the Silver System and its
attendant technology was built and developed by DSPI,
Sandhaus used his control over both corporations to transfer it to
SFC where it generated millions of dollars in revenue (Appendix
B at 12a). Sandhaus too was asked in pre-trial depositions about
the use of his control of DSPI and SFC to transfer the Silver
System, under suspect circumstances, from one corporation to
the other, a transaction which if allowed to stand would result in
the denial of all recovery by respondent under the agreement
(Exhibit N at 64a-66a).
The veil piercing issue was then preserved in the Pre-Trial
Order wherein SFC remained a defendant in the breach of
contract claim although it was not a party to the agreement and in
fact did not even exist on May 1, 1978 when the agreement was
signed. Since the only possible theory for a breach of contract
claim against SFC was veil piercing, petitioners were Clearly on
notice that this claim remained. The essential facts for a veil
piercing claim were also alleged in the Pre-Trial Order;
Sandhaus’ total control over DSPI and SFC was stated as an
uncontested fact, and the transfer by Sandhaus of the Silver
System for no consideration was alleged as a contested fact
(Appendix L at 55a-56a).
Il.
THE DISTRICT COURT DID NOT ABUSE ITS
DISCRETION UNDER RULE 15(b) IN FINDING THAT
THE ISSUE OF PIERCING THE CORPORATE VEIL HAD
BEEN TRIED BY CONSENT.
As set forth above the issue of piercing the corporate veil
was sufficiently raised in respondent’s complaint, elaborated
upon in discovery, and preserved in the Pre-Trial Order.
1]
However, even if the issue had not been raised prior to trial, it was
clearly tried by consent under Rule 15(b) which reads in pertinent
part:
When issues not raised by the pleadings are
tried by express or implied consent of the
parties, they shall be treated in all respects as
if they had been raised in the pleadings.
In this case, the issue of piercing the corporate veil was tried
by both the express and the implied consent of petitioners.
Therefore it was entirely proper for the District Court to treat the
issue as if it had been raised in the pleadings.
It is the law in every Circuit that a District Court's decision to
try an issue not raised in the pleadings under Rule 15(b) will only
be reversed for an abuse of discretion (Fowler v. Sponge Products
Corp., 246 F.2d 223 (1st Cir.1957); Weissman v. Freeman, 868
F.2d 1313,1326 (2nd Cir.1989); United States v. 47 Bottles, 320
F.2d 564 (3rd Cir. 1963); Stepp v. United States, 297 F.2d 909 (4th
Cir. 1953), cert. denied, 74 S. Ct. 627, 347 U.S. 933, 98 L. Ed.
1084 (1954); Hall v. National Supply, 270 F.2d 379 (Sth Cir.
1959); Lones v. Detroit, Toledo & Ironton R. Co., 398 F.2d 914
(6th Cir. 1968), cert. denied, 89 S. Ct. 714, 393 U.S. 1063, 21 L.
Ed. 705 (1969); Sunstream Jet Express v. Int’l Air Service Co.,
Lid., 734 F.2d 1258, 1272 (7th Cir. 1984); Nielson v. Armstrong
Rubber Co., 570 F.2d 272, 276 (8th Cir. 1978); Cole v. Layrite
Prod. Co., 439 F.2d 958 (9th Cir. 1971); Ellis v. Arkansas
Louisiana Gas Co., 609 F.2d 436, 439 (10th Cir. 1979); Laffey v.
Northwest Airlines Inc., 567 F.2d 429, 477 (D.C. Cir. 1976), cert.
denied, 98 S. Ct. 1281, 434 U.S. 1086, 58 L. Ed. 2d 792 (1976)).
In this case, it is absolutely clear from the record below that
the issue was tried by consent and the District Court did not abuse
its discretion in deciding the issue under Rule 15(b).
12
A simple test for consent under Rule 15(b) was set forth by
the Tenth Circuit in Hardin v. Manitowoc - Forsythe Corp., 691
F.2d 449, 456 (10th Cir. 1982):
The test of consent is whether the opposing
party had a fair opportunity to defend and
whether he could have presented additional
evidence had he known sooner the substance
of the amendment.
Cf. Matter of Prescott, 805 F.2d 719, 725 (7th Cir. 1986).
Where as here, petitioners themselves offered evidence on
the veil piercing issue during the trial, and argued the merits of
the issue in post -trial briefs, consent under Rule 15(b) is clear:
Consent will ... be found when the party
opposing the amendment himself produces
evidence on the new issue.
Hardin, supra at 1457, emphasis supplied.
The reason for this rule is obvious. When a party itself
introduces evidence on an issue, it cannot later claim that it had
no notice that the issue was in the case:
" she introduced evidence as to
compensation agreed to be paid by her
for her transportation. She, of course, could
not be heard to say that the evidence was not
addressed to a pertinent issue.” [Vogrin y.
Hedstrom, 220 F.2d 863, 866 (7th Cir. 1955),
cert. denied, 350 U.S. 845, 76 S. Ct. 86, 100
L. Ed. 753 (1955) emphasis supplied. Accord
Bradford Audio Corp v. Pious, 392 F.2d al,
73 (2nd Cir. 1968).].
13
“, .. the appellant itself put into evidence all
of the state court record of the proceedings
..« [Dunn vy. Transworld Airlines, Inc., 589
F.2d 408, 413 (9th Cir. 1979)].
“The airline itself raised the issue . . . in its
own Trial Memorandum. . .” [Fejta v. G.A.F.
Companies, Inc. 800 F.2d 1395, 1396 (Sth
Cir. 1986); Federal Savings & Loan
Insurance Corp. v. Hogan, 476 F.2d 1182,
1188 (7th Cir. 1973)).
“, . » The fact that the issue . . . was raised by
the plaintiff during the trial ... . precludes
plaintiff from asserting Fed.R.Civ.P. Rule
8(c) as a bar ... because the issue was
necessarily tried with the express consent of
the plaintiff.” [(citations omitted emphasis
supplied); Knudson v. Boren, 261 F.2d 15, 19
(10th Cir. 1958); Arkla Exploration Co. v.
Boren, 411 F.2d 879, 883 (8th Cir. 1969)].
“Both parties without objection offered
evidence on the ... issue ...” [Herrera v.
Valentine, 653 F.2d 1220, 1223 (8th Cir.
1981))}.
As set forth above, petitioners put forth their own evidence
on the veil piercing issue. Specifically, petitioner Sandhaus
testified that SFC and DSPI maintained their own bank accounts,
receipts and disbursement journals, and general ledgers, that each
corporation filed its own tax returas, and that each had its own
officers and directors (Appendix E at 37a-39a).
This testimony was not even arguably relevant to any other
it
issue at trial, and establishes without doubt that petitioners were
clearly on notice that respondent was seeking to pierce the
corporate veil between the corporations. In fact petitioners
cannot even attempt to argue that the above testimony related to
any other issue at trial, since they cited this testimony in only one
section of each of their two post trial submissions, the section in
which they argued that the corporate veil should not be pierced:
208. There is no basis on which the Court may
disregard the separate corporate identities of
SFC and DSPI. Each corporation maintained
its own records, its own bank accounts, filed
its own tax returns, and maintained separate
records and books of account.
(Petitioners’ February 14, 1994 Proposed Findings of Fact and
Conclusions of Law, Appendix J at 50a). (See also, Petitioners’
Post-Trial Memorandum of Law at Point IX, Appendix I at 47a).
Thus, there is no question that petitioners introduced their
own evidence specifically on. the corporate veil issue, and
therefore that they consented to the trial of the issue.
Moreover, the fact that petitioners briefed the issue in their
Post-Trial Memorandum independently established their consent
to the trial of the veil piercing issue under Rule 15(b) (cf. Dunn y.
Transworld Airlines supra at 413: “The airline itself raised the
issue. . . in its own trial memorandum” Dell v. Heard, 532 F.2d
1330,1332 (10th Cir. 1976): “. . . the appellant responded to the
defense in a memorandum submitted to the Court. Consequently,
we hold that the issue was tried by the implied consent of the
parties.”
Consent to trial of an issue under Rule 15(b) may also be
implied by a party’s failure to object to evidence offered by the
15
other side on the issue, “. . . as long as the non-objecting party
was fairly apprised that the evidence went to the unpleaded
issue.” Neidland v. United States, 338 F.2d 254, 258 (3rd Cir.
1964); accord Mineral Industries, Etc. v. Occupational Safety,
639 F.2d 1289, 1293 (Sth Cir. 1981); Usery v. Marquette Cement
Mfg. Co., 568 F.2d 902, 906 (2nd Cir. 1977); St. Joe Minerals
Corp. v. Occupational Safety and Health Review Commission,
647 F.2d 840, 844 (8th Cir. 1981); Dell v. Heard, supra; Rath
Packing Co. v. Becker, 530 F.2d 1295, 1308 (9th Cir. 1975),
affirmed on other grounds sub nom. Jones v. Rath Packing Co.,
430 U.S. 519, 97S. Ct. 1305, 51 L. Ed. 2464 (1977).
In this case respondent introduced voluminous evidence
relevant to the veil piercing issue including 118 contracts
between SFC and third parties for the sale or rental of laser light
show systems, 99 reports filed by SFC with the BRH evidencing
rentals, a letter written on DSP! stationery seeking a regulatory
variance for SFC, a product brochure designating SFC and DSPI
as affiliates, and a DSPI tax return establishing that SFC made
rental payments for DSPI.
Petitioners never once objected to any of this evidence when
it was introduced at trial, and their failure to object was properly
used to infer consent for the veil piercing issue to be tried under
Rule 15(b).
Moreover, petitioners also failed to object in their Post-Trial
Memorandum and Proposed Findings of Fact and Conclusions of
Law, to the issue being raised.' In Rath Packing Co. v. Becker, 530
F.2d 1295 (9th Cir. 1975), affirmed on other grounds sub nom.
Jones v. Rath Packing Co., 430 U.S. 519, 97S. Ct. 1305, 51 L. Ed.
1. In fact as set forth above, in their post-trial briefs, defendants not only
failed to object to the veil piercing issue being raised, they substantively
addressed the substance of the issue in their submissions.
16
2d 64 (1977), the Ninth Circuit held that such a failure to object
may in and of itself infer consent under Rule 15(b):
By failing to object, Rath may be deemed to
have acquiesced in an expansion of the issues
by the court from those set forth in the pre-
trial order.
Rath, at 530 F.2d 1308.
Petitioners’ claim that the Second Circuit’s affirmation of
the District Court’s decision to try the issue, is in conflict with
decisions in other Circuits, is totally without merit, for several
reasons.
First, the District Court’s decision to try the corporate
piercing issue was not based, as suggested by petitioners,
exclusively on petitioners’ failure to object to evidence on the
issue at trial. The issue was raised in the pleadings, dealt with in
discovery, preserved in the pre-trial order, and petitioners
themselves put in evidence on the issue at trial, and argued the
issue in their Post-trial submissions. There was therefore ample
basis, apart from petitioners’ failure to object to respondents
evidence on the issue, for the District Court to infer consent under
Rule 15(b).
Secondly, respondent’s evidence on the veil piercing issue,
was in fact predominantly, and in some cases exclusively,
relevant to that issue alone. The DSPI tax return, establishing that
SFC paid DSPI’s taxes during a period of time when the two
supposedly separate corporations shared office space, was
clearly relevant only to the veil piercing issue, and petitioner
Sandhaus was examined on this issue with respect to those tax
returns at trial (Appendix P at 71a-73a). Similarly, the SFC
product brochure, (Appendix F at 40a), though it was also used at
17
trial to identify a product, was principally relevant because it
characterized SFC and DSP1 as affiliates, a characterization cited
by the District Court in its decision to pierce the corporate veil.
And the 118 contracts and 99 BRH filings in the name of SFC,
were also relevant only if the corporate veil was pierced, since
SFC was nota direct party to the agreement. Finally, the letter on
DSPI stationery, written by petitioner Sandhaus on behalf of
DSPI, (Appendix G at 41a), though arguably relevant to other
trial issues, was clearly most relevant to the veil piercing issue, as
evidenced by the fact that is was cited by the District Court only
in relation to that issue (Petitioners’ Appendix E at page 40a).
Petitioners’ argument, that simply because evidence
relevant to an unpleaded issue may also have been peripherally
relevant to an issue which was pleaded, a party’s failure to object
to such evidence may never be used to infer consent to the trial of
the unpleaded issue, is contrary to clear case law. As stated above,
the test as to when consent may be inferred under Rule 15(b) isa
simple one — if the opposing party was aware that the issue was
being raised, and he failed to object, consent may be inferred.
Hardin v. Manitowoc, supra at 456. Thus, even where evidence
may have been peripherally relevant to a pleaded issue, if the
evidence was so obviously relevant to an unpleaded issue that the
opposing party should have known that the unpleaded issue was
being raised, a failure to object may be used to infer consent
(United States v. For Use of Seminole Sheet Metal v. SCI., Inc.,
828 F.2d 671, 677 (11th Cir. 1987): “.... the evidence .. . was
much more strongly relevant to the theory that the subcontract
required SCI to transmit that payment to Floridaire, ‘and this
should have been apparent to defense counsel’ ’citing and
quoting Wallin v. Fuller, 476 F.2d 1204, 1210 (Sth Cir. 1973).
In this case, it not only “should have been apparent to
defense counsel” that the veil piercing issue was being raised, it
clearly was apparent, since respondent explicitly raised the issue
18
in his post-trial brief, and petitioners’ offered their own evidence
on the issue at trial, and argued the issue in their own post-trial
submissions.
The cases cited by petitioners are clearly distinguishable
from the instant case. In Wesco Mfg., Inc. v. Tropical Attractions
of Palm Beach, Inc., 833 F.2d 1484 (11th Cir. 1987), principally
relied upon by petitioners, the key factor cited by the Eleventh
Circuit in refusing to allow the trial of an issue by consent, was
the fact that the attorney for the party seeking to try the unpleaded
issue, did not raise the issue in his closing arguments (Wesco at
1487). In this case respondent not only offered evidence on the
veil piercing issue at trial, he also argued the issue extensively in
post-trial arguments (Appendix M at 58a-63a).
Similarly, in the other cases cited by petitioners, the decision
not to try an issue by consent under Rule 15(b) was based on a
finding that the Opposing party was not aware that a new issue
was being raised, when he failed to object to the introduction of
evidence (cf. Pariser v. Christian Health Care Systems, Inc., 816
F.2d 1248, 1253 (8th Cir. 1987): “Here we find nothing in the
transcript to indicate that Pariser intended to try a tortious-
interference claim or that the defendant in any way consented to
trial of such aclaim.” (emphasis supplied).
In contrast the record in this case is full of clear indications
that respondent intended to raise the corporate piercing issue —
allegations in the Complaint, questions put to petitioner in pre-
trial depositions, alleged facts in the pre-trial order, voluminous
evidence introduced at trial, and extensive post-trial arguments
on the issue. The record is also full of clear indications that
petitioners consented to the trial of the issue — their own
deposition questioning on the issue, the introduction of their own
evidence on the issue, and the post-trial arguments they made on
the issue.
19
CONCLUSION
For all of the reasons set forth above, respondents
respectfully request that the Petition for Writ of Certiorari be
denied.
Respectfully submitted,
DANIEL MARTIN
Counsel of Record
Attorney for Respondent
816 Silvia Street 800B
Trenton, NJ 08628
(609) 530-8494
la
APPENDIX A — VERIFIED COMPLAINT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC., and SCIENCE FACTION
SYSTEMS,
Defendants.
VERIFIED COMPLAINT
Stephen Weinreich, as the Plaintiff herein, by his attorneys,
Sandback & Birnbaum, for his complaint, upon his own
knowledge and upon information and belief, respectfully alleges
as follows:
1. That at all times hereinafter mentioned, plaintiff was and
is a resident of the State of New Jersey, and currently resides in
the Town of Monmouth Junction, State of New Jersey.
2. That at various times hereinafter mentioned, defendant
Science Faction Corporation, an affiliate of defendant Dick
Sandhaus Productions Inc., (hereafter “Science Faction”) was
and still is a corporation duly organized and existing under and by
virtue of the laws of the State of New York, which at various times
and from time to time has conducted business at various locations
within the City, County and State of New York, including 445
Park Avenue, and 333 West 52nd Street, New York, New York.
2a
Appendix A
3. That at various times hereinafter mentioned, defendant
Dick Sandhaus Productions, Inc., (hereafter “Sandhaus
Productions”), was and still is a corporation duly organized and
existing under and by virtue of the laws of the State of New York
and has at various times had its principal place of business at 1790
Broadway, New York, New York.
4. That defendant Richard “Dick” Sandhaus was and is the
principal of all the defendant corporations and businesses.
AS AND FOR A FIRST CAUSE OF ACTION
5. Plaintiff repeats and realleges each and every allegation
of the paragraphs of this complaint designated “1” through “4”
with the same force and effect as if herein set forth anew.
6. That on or about January 1, 1978, the plaintiff, Stephen
Weinreich, the defendant, Richard Sandhaus, and a third party,
Michael Metz, formed a business the purpose of which was to
design, develop and distribute Laser Light and derivative systems
for commercial, entertainment, and other uses.
7. That subsequent to said date various laser light systems,
techniques and technologies were developed and marketed
through the joint efforts of all of the aforementioned parties, and
that the plaintiff contributed substantial and significant time,
effort and expertise, in good faith, to the endeavor.
8. That during the first part of 1978, the plaintiff, Stephen
Weinreich, and the defendant Richard Sandhaus, agreed and
contracted verbally and in writing, that the plaintiff was entitled
to one-third (1/3) of all profits and assets of and belonging to and
generated by said business for his contributions, and that neither
3a
Appendix A
the plaintiff, Stephen Weinreich, nor the defendant, Richard
Sandhaus, nor the aforementioned third party Michael Metz
would each by himself separately own or control any more than a
one-third (1/3) share of said business.
9. That on or about May 1, 1978, the defendant, Richard
Sandhaus, acting on behalf of himself and the said business
entered into and signed a written agreement specifying that said
one-third (1/3) controlling interest and one-third (1/3) of the
receipts and profits of said business belonged to and were due and
owing to the plaintiff, Stephen Weinreich.
10. That Richard Sandhaus assumed responsibility for,
among other things during the course of the operation of the
business, handling the details of the marketing, sales, accounting,
and distribution of the earnings and profits of the business, and
the interest accrued thereon.
11. Subsequently, Richard Sandhaus formed a corporation
known as “Science Faction” to perform, and which actually did
perform, the same services as was performed by the aforesaid
business and used the same assets, technology, information,
hardware, and systems derived, developed and contributed by
and from the plaintiff, Stephen Weinreich and of the aforesaid
business, and used by the defendants.
12. Defendant Richard Sandhaus, both individually and in
his corporate capacities has marketed, sold and rented the initial
systems and technology derived by plaintiff, Stephen Weinreich,
and the derivative systems which were generated thereby.
Plaintiff has not received remuneration in proportion to the
income that has been derived by defendants from the successful
marketing and use of plaintiff's work product.
—__-+- -—_- - -
4a
Appendix A
13. That to the present, plaintiff has not received any stock,
assets, shares, interests, ownership, profits, or even any
information concerning the above, pursuant to the aforesaid
agreements, and which plaintiff is entitled as his full share of the
above business from defendants, other than some nominal
amounts.
AS AND FOR A SECOND CAUSE OF ACTION
14. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs of this complaint designated “1”
through “13” with the same force and effect as if herein set forth
anew.
15. Plaintiff has made demand of the defendants to account
for their actions and to provide records and all other relevant
information pertaining to the operation of the aforesaid
businesses and to pay to the plaintiff his just and rightful share as
per the aforementioned agreements, but defendants have
absolutely refused to comply with these demands. An accounting
of defendants’ actions is therefore necessary and essential.
16. Plaintiff possesses no adequate or complete remedy at
law for the injuries alleged herein. Plaintiff will be irreparably
injured should equity not intervene.
AS AND FOR A THIRD CAUSE OF ACTION
17. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs of this complaint designated “1”
through “16” with the same force and effect as if herein set forth
anew.
Sa
Appendix A
18. Defendants, and particularly defendant Richard
Sandhaus, have commingled the assets, liabilities, income,
expenses and properties of defendant Science Faction, defendant
Sandhaus Productions (including plaintiff’s share thereof) as
well as those properties and liabilities individually and
personally owned by defendant Richard Sandhaus.
19. That the aforesaid intermingling is fraudulent and a
breach of fiduciary duty on the part of defendants.
20. That the defendants hold in constructive trust for the
benefit of plaintiff, all assets of Science Faction and Sandhaus
Productions acquired after the 1st day of January, 1978, i.e. the
date of the aforesaid agreement among the parties, or generated
by said assets or businesses from said date.
21. That defendants additionally hold all of the assets
alleged in paragraph “19”, wherever their present location may
be or whatever the present form they can be traced to, after the
aforesaid commingling of assets and properties.
22. Plaintiff possesses no adequate or complete remedy at
law for the injuries alleged herein. Plaintiff will be irreparably
injured should equity not intervene.
AS AND FOR A FOURTH CAUSE OF ACTION
23. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs of the complaint designated “1”
through “22” with the same force and effect as if herein set forth
anew.
24. That Plaintiff is entitled to compensation and
6a
Appendix A
remuneration for the valuable ideas and services rendered to the
benefit of defendants, and to a share of the profits generated
thereby, on the basis of quantum meruit and quasi-contract.
25. Plaintiff possesses no adequate or complete remedy at
law for the injuries alleged herein. Plaintiff will be irreparably
injured should equity not intervene.
AS AND FORAFIFTHCAUSEOFACTION |
26. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs of the complaint designated “1”
through “24” with the same force and effect as if herein set forth
anew.
27. Defendants did fail to exercise ordinary care and did
negligently maintain their records and fail to pay plaintiff or give
notice to plaintiff relating to plaintiff’s rightful one-third (1/3)
share of Science Faction’s assets and profits, all to the detriment
and injury of plaintiff.
WHEREFORE, plaintiff demands judgment against the
defendants as follows:
1. That the defendants be required to account to the plaintiff
Stephen Weinreich for all monies and property received,
disbursed, held and assigned by defendants and for all
defendants’ actions and dealings in connection with said laser
light business and
2. That the defendants be required to pay to the plaintiff
FIVE MILLION ($5,000,000.00) DOLLARS, or such sum of
money which this Court finds is due and owing as a result of the
7a
Appendix A
operation of defendants’ laser light business (both with the
parties together and subsequently by the defendants alone), and
3. That the assets and properties acquired by defendants
after January 1, 1978, the date of an agreement between the
parties, be deemed in constructive trust for the benefit of plaintiff,
and
4. That the defendants be required to pay plaintiff the sum of
FIVE MILLION ($5,000,000.00) DOLLARS, or such amount as
this Court deems reasonable, for the valuable services rendered
by plaintiff, and the profits generated thereby, in quantum meruit
and quasi-contract, and
5. That the defendants be enjoined from disposing of any of
the assets acquired after January 1, 1978, i.e. the date of the
agreement between the parties, until such time as this Court may
decide the rights and obligations of the parties, and
6. That the defendants pay the costs, disbursements and
attorneys’ fees necessary to bring and maintain this action, and
7. For such other and further relief as to this Court may seem
just, proper and equitable.
Dated: Garden City, New York
May 19, 1983
s/ William A. Sandback
WILLIAMA. SANDBACK
A Member of the Firm of
SANDBACK & BIRNBAUM
1205 Franklin Avenue
Garden City, New York 11530
(516) 741-3222
8a
APPENDIX B — EXCERPTS OF DEPOSITION OF
STEPHEN WEINREICH
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 CIV 3966
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC., and SCIENCE FACTION
SYSTEMS,
Defendants.
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
MICHAEL METZ,
Plaintiff,
-against-
DICK SANDHAUS,
Defendant.
9a
Appendix B
*- * *
[311] become the 2000 series; they were then in turn used for the
promotion and sale of other systems including, for example, the
Kiss rodeo show, which I think is about as far as I can personally
go in the chronology. But everything that the business did as a
result of the sale and promotion of these systems is, of course,
derivative.
Q Were you paid for any services rendered in connection
with the Kiss rodeo show?
A No.
Q Are you making any claim in this lawsuit for services
rendered in connection with the Kiss rodeo show?
A No.
Q You allege in paragraph 11 of the complaint that
“subsequently Richard Sandhaus formed a corporation known as
Science Faction to perform, and which actually did perform the
same services as was performed by the aforesaid businesses and
used the” — I hate to burden the record. When did you first
become aware that a corporation called Science Faction
Corporation was formed?
AI would say looking at Exhibit AT, that it was in summer,
probably late summer of “78.
Q And then you say that Science Faction performed the
same services as was performed by the aforesaid business. What
services did Science Faction [312] Corporation perform after its
organization?
10a
Appendix B
A Science Faction Corporation was the embodiment of our
business venture.
Q What services did it perform?
A Designed, manufactured, and sold, and rented laser
entertainment systems and various other devices.
Q What facts do you have that Science Faction designed,
manufactured, rented, and sold laser systems?
A For one, I did the major part of the design of the systems. For
number two, I designed a trade show booth and was in attendance,
I believe, at two shows, and it may have been used at for
promoting Science Faction’s sale of systems, and there were
price lists published, and there were articles written in
magazines, and papers filed in the B.R.H. for which I did some
drawings regarding these systems.
And I had discussions and was in attendance with various of
the employees of Science Faction and talked to them about the
sale of systems, and as further systems were sold, Dick Sandhaus
said, “We just sold one to France or this to wherever,” and we had
lists of how many systems and what types were sold, and I had
arranged for the manufacture of parts for these systems, and I
personal fabricated many of the systems. That’s about as far as
[313] I can go offhand without —
Q So that your prime testimony, where you said that you
didn’t have any facts by which you could support the allegation
that Science Faction sold or rented the initial system and
technology derived by the plaintiff, that was not correct?
lla
Appendix B
A It was correct. You asked me whether I knew about the
specifics of sales and who was paid and under what
circumstances. I never saw money change hands and my
information is as far as where these systems went, once they went
out the door, is hearsay and a great deal of this information came
from Dick Sandhaus, from his mouth, in which I said before,
don’t make these things facts.
Q But you did observe sales being made and systems being
marketed by Science Faction Corporation?
A No, I don’t believe I ever saw an actual sale in progress. I never
saw money changing hands; I never saw anybody sign a contract
for the sale of the system.
I saw systems manufactured and I saw them go out the door. I
was never involved in the delivery of a system and so forth. I
don’t know, for example, if Xenon might have in fact been a
rental, and I was never told the truth about it. But I saw it in
operation at Xenon. So you are asking two different questions,
and I have [314] answered each of them separately, and they are
not conflicting answers.
Q Let me refer you to paragraph 18 of the complaint. Why
don’t you read that.
What facts do you know of to support the allegations
contained in that paragraph of the complaint?
A For one, I saw a bill from a publicity company — I don’t
remember the name of the company right now, but they were
people whom I had met at the office and who were doing publicity
at Science Faction Corporation — and the bill was addressed to
12a
Appendix B
Science Faction Corporation, and the subject of the bill was
promotion of the Susan Berkley radio show, which was produced
by Dick Sandhaus Productions.
As far as I know, it was the only business of Dick Sandhaus
Productions at that time.
Q Do you have any other facts to support that allegation?
A The arrangement among Dick and myself and Mike Metz
caused the Silver system to be built. And the Silver system was
presumably built under the, or rather sold or rented through Dick
Sandhaus Productions, as I was told by Dick, and yet somehow
that system became part of a contract with Xenon for Science
Faction to sell a system to Xenon, and so it somehow drifted
across the [315] lines of the two corporations.
And, in fact, Dick really had no right to maintain Science
Faction for himself, so that enters into it also.
Q You mentioned two things, a bill of Science Faction
Corporation for a radio show, and you mentioned the rental of the
Silver system by Science Faction Corporation to Xenon; is that
correct?
A Right. Well, or sale or something. Rental of the Silver system
in conjunction with the sale; I am not sure of the details.
Q Outside of that, what other facts do you have to support
that allegation?
A There was also the office that Science Faction shared with
Dick Sandhaus Productions and which, to the best of my
13a
Appendix B
knowledge, was never devised in terms of what was used for
either business.
Q You just testified that Science Faction Corporation rented
or sold the Silver system to Xenon but —
A Rented, I believe.
Q Doesn’t that directly contradict your earlier testimony
where you said you had no facts as to whether Science Faction
had rented or sold the Silver system to Xenon?
A No, as I just explained, that information came to me [316] by
way of Dick Sandhaus; he told me that and I do not know that for a
fact. I only know that from what Dick told me.
Q Is it your testimony that you had no other information as
to sales or rentals of laser lighting equipment other than from
what you learned from Dick Sandhaus?
A I believe that’s correct.
Q But from Dick Sandhaus you did learn that Science
Faction Corporation was renting or selling laser lighting
equipment?
A Yes.
Q And, in fact, you did observe Science Faction
Corporation marketing laser lighting equipment?
A Yes.
l4a
Appendix B
Q And you did, in fact, observe that Science Faction
Corporation was delivering laser lighting equipment?
A Well, as I say, I knew it was being manufactured. I saw — we
worked on systems being put together and, in fact, they were
shipped out but I never saw anything delivered.
Q Did you ever see any invoices on Science Faction
letterhead or billing head?
A I don’t believe so.
[317] Q Did you ever see any invoices on Dick Sandhaus
letterhead or billing head?
A Idon’t believe so.
Q Did you ever have any conversations with anyone where
you learned that Dick Sandhaus was personally for himself
selling laser lighting equipment or laser show equipment?
A As soon as Dick Sandhaus refused to distribute the stock in
Science Faction Corporation, he was taking our interest.
Q That’s not responsive. Did anyone ever tell you, did you
learn from anyone, that Dick Sandhaus was acting other than as
an officer of the corporation with regard to the sale or rental of
any laser systems?
A No, [have no specific knowledge of that.
Q Other than the Silver system which you testified was
manufactured by Dick Sandhaus Productions, Inc., and which
15a
Appendix B
was later rented by Science Faction Corporation, are you aware of
or do you have any facts of which you could support your
allegation that the assets of Science Faction Corporation and
Dick Sandhaus Productions, Inc., were comingled?
A IthinkI stated a couple of other reasons.
Q Isaid “assets.”
[318] A The assets?
Q Isaid “assets.” Just confine that to assets.
A There was a shared office, and I certainly, in viewing the
operation of the office, saw no attempt nor actual separation of
the uses of equipment or furniture or anything else between the
corporations or, for that matter, for Dick Sandhaus personally.
Q Let’s talk about, do you have any facts by which you can
support the allegation that Dick Sandhaus Productions, Inc.,
commingled liabilities with Science Faction Corporation?
A That bill that I said before, and as far as the office is concerned,
I repeat that.
Q Are there any other facts that you know of to support
“joined” liabilities?
A I don’t know that I can specifically tie the physical parts of the
laser systems into that, but it appeared that they were, to use the
word, joined.
Q What facts led you to believe that they were “joined”?
16a
Appendix B
A As I just said, “I didn’t like that word, but you used the word
“commingled.”
Q You did.
A And I just explained why I believe all those [319] assets and
whatever were commingled.
Q So the two things that you can point to are the fact that the
Silver system was manufactured by Dick Sandhaus Productions,
Inc., but was ultimately rented to Xenon by Science Faction
Corporation; that’s one, right?
A Yes.
Q And the second thing is the fact that Dick Sandhaus
Productions, Inc., and Science Faction Corporation appeared to
share offices.
A That’s two.
Q What other facts, then, do you have besides those two?
A The bill which I must say was one of the few bills that came
into that office, that I ever saw, and it just happened to be billed to
Science Faction for an expense of Dick Sandhaus Productions.
Q How are you aware that it was an expense of Dick
Sandhaus Productions?
A Because it was for the Xenol, Berkley radio show which was
the business of Dick Sandhaus Productions.
17a
Appendix B
Q Other than that one bill, are you aware of any other facts?
A No.
Q So then the facts regarding the “commingling [320] of
assets and liabilities” are restricted to the following three items:
The rental of the Silver system by Science Faction Corporation,
which was manufactured by Dick Sandhaus Productions, Inc.;
the sharing of offices between Dick Sandhaus Productions, Inc.,
and Science Faction Corporation; and your observation of this
bill; is that correct?
A Generally correct. You have somehow managed to have the
Silver system manufactured by Dick Sandhaus Productions and I
would say, and as I did say, it was sold through or rather — yes,
sold through or rented through, or Dick Sandhaus Productions
was somehow a vehicle involved in that procedure.
Q Do you have any facts by which you can support the
allegation that Richard C. Sandhaus personally has commingled
his properties and liabilities with Science Faction Corporation?
A Oh, for the — under the circumstances of his incorporation, he
is the sole owner of Science Faction Corporation; the assets, his
assets, were a third interest in what Science Faction is doing now,
and he has taken all of it, and so Science Faction is intimately
commingled with Dick Sandhaus and by the office arrangement
with Dick Sandhaus Productions.
[321]Q Do you have any facts by which you can support the
allegation that any liabilities of Dick Sandhaus personally have
somehow been commingled with Science Faction Corporation
and Dick Sandhaus Productions, Inc.?
18a
Appendix B
A No.
Q Do you have any facts by which you can support the
allegation that the income of Richard Sandhaus, Science Faction
Corporation, and Dick Sandhaus Productions, Inc., have been
commingled?
A As I said, for the moment, Dick Sandhaus, as far as I know,
owns all of Science Faction Corporation.
Q Answer the question. I said the income of Richard
Sandhaus, Science Faction Corporation, and Dick Sandhaus
Productions, Inc.
Al don’t have any facts, no.
Q Do you have any facts to support the allegation that the
expenses of Dick Sandhaus, Science Faction Corporation, and
Dick Sandhaus Productions, Inc., have been commingled?
A lalready stated that.
Q I would like you to answer that question.
A Please read it back.
(Question read)
2 ee ,,rcr eee er
19a
APPENDIX C — EXCERPTS OF DEPOSITION OF
RICHARD SANDHAUS
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 CIV 3966
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC., and SCIENCE FACTION
SYSTEMS,
Defendants.
880 Third Avenue
New York, New York
September 5, 1994
10:15 A.M.
Continued DEPOSITION of Defendant RICHARD
SANDHAUS, taken by Plaintiff, pursuant to Agreement.
*+ * +
[98] compliance with whatever the new regulations are.
This Exhibit 4 refers to specific wording on a warning logo.
20a
Appendix C
It’s like a label that appears on a product, and it would certainly be
true that as of this date, and this letter is from July of ’81, that we
would have been required to tell the BRH, to file the
supplemental information to them, to the effect that any
previously manufactured products were now in compliance with
this new regulation.
So, it would certainly make sense that we would have made a
filing that would cover both the 1003 and the 2000 series, because
those are all products that would have had to — if they were to be
used — would have to carry this new wording on the label.
MR. KLEINBAUM: Both are products manufactured prior
to the date of that letter.
Q. What had happened to the 1003 series at that point in
time?
A. Just sat on the shelf.
Q. It wasn’t sold?
A. No.
Q. Now, I believe your testimony has been that Dick
Sandhaus Productions, Inc. and Science Faction Corporation
were two separate corporations.
A. That’s true.
[99] Q. They never had a relationship to each other when
Science Faction Corporationcame into existence?
2la
Appendix C
A. Whatdo you mean by “relationship”?
Q. Other than renting space, as you have previously said,
and perhaps being physically housed in the same building, there
was no relationship in regard to the products being manufactured
or the marketing of any particular products? There was no
enterprise between the two of them?
What you are trying to say is that they did different things?
A. That’s correct.
Q. Would it be fair to say that Science Faction Corporation
was never held out to be a subidiary of Dick Sandhaus
Productions, Inc.?
A. True.
What do you mean by “held out”? Represented to be?
Q. Represented to the public as being a subsidiary in any
way connected with Dick Sandhaus Productions, Inc.
A. To my recollection, it was never represented to be a
subsidiary of the other.
MR. SANDBACK: Could we have this marked as [100]
an exhibit.
(A brochure was marked as Plaintiff's Exhibit 5 for
identification.)
Q. Would you take a look at that. Do you recognize that?
Appendix C
A. Yes.
Q. What is it?
A. It’s a piece of sales literature that describes the 2000, the
SFC 2000 series system, and it has photographs of visual displays
that are created by them.
Q. Was that prepared by Science Faction Corporation?
A. Yes.
Q. Do you remember when it was prepared?
A. Yes. It would have been in 1979 sometime, I think. Yes, it
would have been early °79.
Q. If you look on the last page, the writing that appears in
the small print at the very foot of the page, could you tell me what
that says there?
A. Yes, it says “Science Faction Corporation is an affiliate
of Dick Sandhaus Productions, Inc.”
Q. Did you approve that writing to appear on that particular
document?
A. Yes. I probably wrote it.
[101] Q. Could you tell me how you define affiliate, the
word affiliate?
A. Just as some kind of association, affiliation, association .
23a
Appendix C
Q. In the year 1979, did you prepare other types of
promotional materials for your 2000 series?
A. Probably, although I can’t specifically recall what it
would have been right now.
Q. Do you have a recollection as to whether or not you again
held out Science Faction Corporation to be an affiliate of Dick
Sandhaus Productions, Inc.?
MR. KLEINBAUM: When you say “held out,” you said
that — or the material contained a statement that it was an
affiliate of Dick Sandhaus Productions, Inc.
MR. SANDBACK: Correct. I will rephrase the
question to say that.
A. I really don’t recall without seeing the stuff. It’s a long
time ago.
Q. From 1979 to the present, have you ever made
representations to anyone, either in any of the promotional
material or verbally, that Science Faction Corporation was either
an affiliate or subsidiary of Dick Sandhaus Productions?
[102] MR. KLEINBAUM: Separate the question so that
there is no confusion.
MR. SANDBACK: I don’t think there is confusion in
the question. I never at any time before or after '79 represented
that Science Faction or Dick Sandhaus Productions, Inc. was an
affiliate — a subsidiary of the other.
24a
Appendix C
Q. You are not sure if they were an affiliate?
Q. Clearly, here, I have said it, and I have at various times
done things to help refer public relations, sales and marketing for
purposes of helping associate my personal name with Science
Faction Corporation, and I did that as a particular intentional
effort in the early days of Science Faction Corporation, because
my name personally was fairly well known to various people in
the entertainment business that could utilize our services.
Q. Your personal name does not appear as an affiliate there.
It is a corporate name.
A. It’s the corporate name, but the corporate name happens
to be my personal name or happens to include my personal name,
and it just seems less ostentatious to say it's an affiliate of a
corporation than to say that Dick Sandhaus is the president of
Science Faction Corporation. [111] leasing it or an outright sale?
A. I have never referred to it as a lease. It’s a full service
rental.
Q. Can you categorize it as a rental?
A. Yes.
Q. Now, the arrangements that you have discussed before
concerning Science Faction Corporation and Dick Sandhaus
Productions, Inc., besides Science Faction Corporation
apparently leasing space from Dick Sandhaus Productions, Inc.,
was there any other arrangement in regard to the sharing of
personnel or the sharing of certain physical equipment, etc.?
25a
Appendix C
MR. KLEINBAUM: I am going to object to that
question in terms that it is not related in time and it deals — it
proceeds on a premise that there is a rental of space by Science
Faction from Dick Sandhaus Productions.
MR. SANBACK: I think that’s what the testimony has
been this morning.
MR. KLEINAUM: I am not sure that that is entirely
true. I don’t think that has been the testimony. I don’t think that
was the testimony this morning. Maybe I am mischaracterizing it.
A. I testified that Dick Sandhaus’s office space, [112] which
was also used by Science Faction and for which Science Faction
paid —
MR. KLEINBAUM: All right.
A. There was also joint use by the two corporations of, you
know, telephone systems, Xerox machines, of like, general office
equipment, and that was stuff jointly paid for.
Q. How about personnel?
A. It would only have been in the case of secretarial.
Q. Were any invoices ever sent to customers of Science
Faction Corporation by Dick Sandhaus Corporation, Inc.? That
answer requires either a yes or a no.
A. It seems by definition that the answer is no.
Q. Isitno?
—--—w
26a
Appendix C
A. Science Faction invoices its customers, and Dick
Sandhaus invoices its customers.
MR. KLEINBAUM: Let me explain what he is driving
at. He’s saying if there are transactions between those two
companies as a result of which Science Faction may or may not
have paid some expenses or Dick Sandhaus paid some expenses
of Science Faction, were those charges ever reflected by
corresponding invoices from one corporation?
[113] THE WITNESS: You are asking if Science
Faction and Dick Sandhaus sent invoices to other parties?
MR. SANDBACK: I think I should clear the question
up.
Q. Did Dick Sandhaus Productions, Inc., to your
knowledge, ever bill anyone on behalf of Science Faction
Corporation?
MR. KLEINBAUM: I misunderstood the question.
A. Not to my recollection.
Q. Were there any accounts receivable attributable to
Science Faction Corporation made payable to Dick Sandhaus
Productions, Inc.?
A. Not that I can presently recall. It’s possible that that
could have happened.
Q. Under what circumstances could it have happened.
27a
Appendix C
A. Ican’t imagine.
MR. KLEINBAUM: He said it’s possible but he doesn’t
recall.
Q. It’s possible that Dick Sandhaus Productions dealt with
some customer, party, at some time and that subsequently Science
Faction dealt with that same customer, party, and that by mistake
the customer, party, would have paid the wrong company. But, I
mean, I don’t recall any [114] incident of that. But that’s a long
time ago.
Q. Did Science Faction Corporation ever hire Dick
Sandhaus Productions, Inc. to ever do any marketing or customer
relationships for it?
A. Not that I can specifically recall.
Q. Iam sorry. Do you want to continue?
A. No. I will just leave it at that.
Q. Did Science Faction Corporation ever have its corporate
offices at any other location other than where Dick Sandhaus
Productions, Inc. had its corporate offices?
A. Yes.
Q. Where was that and when was that?
A. Science Faction took office space at 333 West 52nd
Street sometime in 1979. That space was used solely by Science
Faction Corporation.
28a
Appendix C
Q. Was it used for a particular purpose?
A. The space?
Q. Yes, to your knowledge.
A. For the business of Science Faction Corporation
Q. In other words, as far as you knew, their entire business
was transacted out of this particular location?
A. No. Well, that became the case. When the space on 52nd
Street was first taken, it was used only for [115] manufacturing
and testing and as a demonstration facility, not for administrative
purposes, although subsequently it came to be used for all
purposes.
Q. Did Dick Sandhaus Productions, Inc. remain at 445 Park
Avenue?
A. Yes.
MR. KLEINBAUM: Until when?
MR. SANDBACK: We are talking about the time
period of ’78, ’79.
MR. KLEINBAUM: Okay.
Q. Subsequent to ’78, ’79, did Science Faction Corporation
ever merge its space with Dick Sandhaus Productions, Inc. again?
A. No, not to my recollection.
29a
Appendix C
Q. To your knowledge, did Dick Sandhaus Productions, Inc.
ever pay any expenses for Science Faction Corporation or vice-
versa?
A. I am not sure if the technically correct answer is yes or
no. I will tell you what kinds of things that did happen.
Q. Okay.
A. Sometime probably in late °79 or early °80, Dick
Sandhaus Productions became dormant, didn’t conduct any
activities. Yes, there were things, leases in the name [116] of
Sandhaus Productions, which were paid directly by Science
Faction Corporation that would have been leased for office space,
by lease payments on Xerox machines, that sort of thing, that
were after a certain date utilized only by Science Faction
Corporation, and they were paid for directly by Science Faction
Corporation. Is that the kind of thing you are asking me about?
Q. It may or may not be. Let’s take the Xerox machine as an
example.
A. Right.
Q. Was this a lease where you would be able to buy the
machine at the end of the lease?
A. It was actually a purchase from the beginning, and you
simply paid it over a period of five years or something.
Q. And did that asset get passed over?
A. Originally all the paper work would have been in the
30a
Appendix C
name of Dick Sandhaus Productions, but it was in Science
Faction.
Q. Was there a provision under your lease, holding it as
Dick Sandhaus Productions, Inc., to sublet it to a corporation
such as Science Faction Corporation?
A. Well, it wasn’t really sublet. It was sold.
Q. Dick Sandhaus Productions, Inc. assigned their [117]
right, title and lease to Science Faction?
A. Yes.
Q. So, there was a transfer on the books?
A. Right.
MR. SANDBACK: Could we have this marked as an
exhibit.
(An 1120 tax form was marked as Plaintiff’s Exhibit 6
for identification.)
Q. Let me show you this exhibit, which is marked as
Plaintiff’s Exhibit 6.
MR. KLEINBAUM: That is a U.S. form, 1120, for
1978.
Q. Do you recognize that?
A. Yes.
3la
Appendix C
Q. You assisted your attorney in providing it to us pursuant
to discovery requests.
MR. KLEINBAUM: He didn’t assist. He gave it to me
and I gave it to you. I assisted him.
Q. Would you take a look at the third page, which should
read, “Section 1561, Apportionment.”
A. Yes.
Q. Can you state on the record how this apportionment took
place between Dick Sandhaus Productions, Inc. and Science
Faction Corporation?
[118] MR. KLEINBAUM: If you know.
Q. If you know, of course.
A. No. I really don’t know.
Q. Could you consult with your accountant or some other
financial officer to determine how that apportionment took place,
and we will leave a space in the record for your answer?
A. Yes. I don’t even know what it is.
(INSERT):
Q. On the same exhibit, Exhibit 6, would you turn to page 7,
which should be line 26, other deductions.
32a
Appendix C
A. Yes.
Q. Under the line which indicates provisional and
consulting fees, there is a figure there of $62,667.
A. Yes.
Q. Can you tell us who was retained by Science Faction
Corporation during the time period in question as either a
professional or on a consulting basis?
MR. KLEINBAUM: Let me ask you a question. What
is the relevancy here What are you trying to get at?
MR. SANDBACK: The relevancy is that I want to. .. .
* * *
33a
APPENDIX D — EXCERPTS OF TRIAL TRANSCRIPT
DATED JANUARY 12, 1994
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 Civ. 3966 (CES)
January 12, 1994
10:00 a.m.
STEPHEN WEINREICH,
Plaintiff,
Vv.
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION and DICK SANDHAUS
PRODUCTIONS, INC.,
Defendants.
Before:
HON. ROBERT W. SWEET,
District Judge
APPEARANCES
DANIEL MARTIN
Attorney for plaintiff
GERALD M. KLEINBAUM
Attorney for defendants
mies
34a
Appendix D
[818] believe, are listed as officers. But I am not sure of the
answer with respect to directors. You would know that better
than I.
Q. Where there any other? You mentioned, just going back
for a minute in time, the first time that you met Steve Weinreich
and what he told you about his engineering background.
Were there any other occasions in which he told you —
MR. MARTIN: Objection, your Honor.
Q. —about his engineering background?
THE COURT: Overruled.
A. Irecall that when we were in Harrisburg, Pennsylvania,
for this BRH, state radiation control directors conference, that in
front of me he introduced himself to others there as a mechanical
design engineer.
Similarly, I heard him introduce himself to others in that
way at other times but that I don’t recall specifically.
Q. Did there ever come a time when the title to the Silver
System was transferred from DSPI to SFC?
A. Yes, there was.
THE COURT: What was the form of that transaction?
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i! Male gRy W fe aay ey nay Ta a a
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4
35a
Appendix D
THE WITNESS: As I understand it —
[819] THE COURT: No, never mind that. Just what
happened?
THE WITNESS: The accountant set up what I think
was called an exchange account between SFC and DSPI. The
Silver System was given some value and then assigned to SFC.
In exchange for that, there were things that SFC paid for,
for example, rent and other office equipment rentals and things
like that that were exchanged that SFC paid for on behalf of DSPI.
That is my best understanding of that.
THE COURT: No papers?
THE WITNESS: Only some entry in a tax filing. But,
no, I did not have an agreement prepared between the two
corporations.
Q. Was there ever a time when you — when I say “you,” I
am speaking about you now as an officer, as a representative of
SFC — or SFC went to a trade show in the summer of 1978?
A. Yes. We were an exhibitor at, I don’t recall the name of
the show, but it was a trade show that was directed at and attended
by owners and operators of nightclubs and discoteques. I believe
it was at the very end of June of 1978. I am not certain if I was
there on behalf of DSPI or SFC at that time. SFC was
incorporated in June of 1978. That's my answer.
* 8 a7
36a
APPENDIX E — EXCERPTS OF TRIAL TRANSCRIPT
DATED JANUARY 14, 1994
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 Civ. 3966 (CES)
January 14, 1994
9:50 a.m.
STEPHEN WEINREICH,
Plaintiff,
v.
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION and DICK SANDHAUS
PRODUCTIONS, INC.,
Defendants.
Before:
HON. ROBERT W. SWEET,
District Judge
APPEARANCES
DANIEL MARTIN |
Attorney for plaintiff
GERALD M. KLEINBAUM
Attorney for defendants
8 SES PANNE, ES A PENI TT ® PAR TIER | cS RE RS a PORE HRS Sry ara,
rs
egal se
SRE TMM AG Sie YBa
ail clea as hots
So DANN BS RAE TIE STR Fra SINE: | ge Mc PRISE IA, ©
[1147] of complying with the standard, with the performance
standard, that I regarded as being so different from any other laser
light show projectors that I felt it was appropriate to file an initial
report.
©. Why wasn’t an initial report filed for the Laserchaser II
later in 1986?
A. That’s because, in the course of this litigation, plaintiffs
have made extensive efforts to confuse the Court about what
different technologies were being referred to for regulatory
designation purposes as 2000, and so we decided at that point to
start calling something something else.
Q. Since its organization and through the period that it was
actively engaged in business, did DSPI maintain its own bank
accounts?
A. Yes.
Q. And did it maintain its own records of receipts and
disbursements and general ledgers?
A. Yes.
Q. Did it file tax returns in its name?
A. Yes.
38a
Appendix E
Q. Is it continuing to do so today?
A. Yes. Well, it is continuing to file tax returns in its own
name.
Q. Do you recall whether there are any officers or directors
of DSPI other than yourself?
[1148] A. I believe, though I am not certain, that my father
and/or sister are officers.
Q. With respect to Science Faction Corporation, since its
organization has it maintained its own bank accounts?
A. Yes.
Q. And since its organization, has it maintained its own
financial records, including ledgers?
A. Yes.
Q. Has it filed its tax returns in its own name?
A. Yes.
Q. Do you know whether or not there are any officers and
directors of Science Faction Corporation other than yourself?
A. Again, I am not certain, but it is possible that either my
sister and/or father are officers.
Q. When it was first incorporated, do you recall that that
was the case?
39a
Appendix E
A. I believe that when it was first incorporated, my father
and an attorney named John Dasher appeared as officers.
Q. Earlier this morning you were questioned about a
February 1978 memorandum between DSPI and Mr. Bud Praeger
of ESP with respect to Foreigner. Could you explain what that
memorandum was?
40a
APPENDIX F — TRIAL EXHIBIT 20
(Omitted here but submitted separately as Lodging Appendix)
4la
APPENDIX G — TRIAL EXHIBIT 31
DICK SANDHAUS PRODUCTIONS, INC.
445 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 688-7786
August 23, 1978
Hearing Clerk
Food and Drug Administration
Room 4-65
5600 Fishers Lane
Rockville, Maryland
Dear Sir:
Pursuant to 1010.4 of the Regulations for the Administration and
Enforcement of the Radiation Control for Health and Safety Act
of 1968, Science Faction Corporation (hereinafter referred to as
“manufacturer”) hereby requests a variance for its demonstration
laser system, SFC-1003.
The following will describe the product and the means by which
equivalent protection is provided.
1. The product is a demonstration laser system that is
intended to display visual images (abstract, representative
and/or textual) for artistic, entertainment, education and/or
advertising purposes. Images may be displayed for public
viewing in public venues (theatres, auditoriums, arenas,
discotheques, nightclubs, stadiums, parks, etc.) and/or in
restricted “studio” venues for still photography; motion
photography and/or videotaping. The product achieves its
intended functions by scanning patterns on projection
42a
Appendix G
screens, walls, ceilings, floors and other screen-like
surfaces. The scanned patterns and/or the scanning beams
(as they may be visual in airborn scattering media) provide
aesthetically appealing visual representations which may
constitute art, entertainment or information display for the
purpose of advertising, education, etc.
2. The product incorporates a CW laser. If the output of
such laser were restricted to Class I, or even to Class II, the
scanned CW laser radiation would be invisible or nearly
invisible when scanned over areas in excess of one hundred
square feet. Typically, the product is used to scan over areas
in excess of two hundred and fifty square feet.
3. We propose to deviate from the requirements of the
standard for demonstration laser products by incorporating
in our product a certified Class IV CW laser.
4. Such incorporation will allow the product to scan
effectively visible patterns in excess of two hundred and
fifty square feet. This is a necessary function of the product.
5. Equivalent protection is provided by scanning, and
displaying visual images according to parameters (radiant
power output, whole angle divergence of beam, scan
frequency, scan amplitude, distance from laser to viewer or
diffuse target, beam diameter at distance) set forth in
“tabulated values and limits for product’s accessible
emissions”, which is included in the product report
submitted by BRH Division of Compliance. To verbally
summarize these values and limits: product is used in such
manner as to ensure that all accessible emissions are within
the Class I limit. Because the scanning of the product’s CW
43a
Appendix G
laser radiation is of primary importance to ensuring this
equivalent protection, a “no-scan safeguard” is
incorporated in the product. Scan safeguard is accomplished
by reading voltage across a resistor wired in series with
product’s galvanometer scanners to sense scanners’ outputs.
If scanners do not receive proper control signal and/or
malfunction (e.g. damaged coil), voltage outside normal
range will be sensed across resistor and cause a physical
shutter (1/8” black aluminum) to be activated to prevent
emission of unscanned radiation from product.
6. It is requested that the variance be granted with no limit
to its time duration. Manufacturer anticipates production of
not more than ten such products.
7. The fully-operational prototype product is mobile and
will be used in multiple locations. Product will be stored at
manufacturer’s address.
8. Additional, more detailed information has been reported,
per 1002.10, to Director, BRH.
Please direct all correspondence to: Mr. Dick Sandhaus,
President; Science Faction Corporation; c/o Dick Sandhaus
Productions, Inc.; 445 Park Avenue; New York, New York 10022.
Sincerely,
DICK SANDHAUS
DS:ess
44a
APPENDIX H — FEBRUARY 11, 1994 LETTER FROM
GERALD KLEINBAUM TO JUDGE SWEET WITH
HANDWRITTEN NOTE
GERALD M. KLEINBAUM
ATTORNEY-AT-LAW
90 PARK AVENUE
NEW YORK, NEW YORK 10016-1387
(212) 245-6400
February 11, 1994
FACSIMILE
791-8558
Honorable Robert W. Sweet
United States District Court Judge
United States Courthouse
Foley Square
New York, New York 10007
Re: Weinreich v. Sandhaus, et al
83 Civ. 3966 (CES)
Dear Judge Sweet:
I herewith request an extension (a) to submit Defendants’
proposed findings of fact and conclusions of law and
memorandum of law which are due today to Monday, February
14, 1994, and (b) an extension of the time for argument to
Tuesday or Wednesday, February 15 or 16, 1994, at the Court’s
convenience. The Wednesday date will be less convenient for Mr.
Martin, but he would be able to attend.
The request is made because as a result of the snow
45a
Appendix H
emergency the office will close at 1:00 p.m. today and because of
staffing problems I will be unable to serve and file my papers
before the end of the day.
I have discussed the proposed extension with Mr. Martin
who has no objection thereto.
Respectfully yours,
s/ Gerald M. Kleinbaum
GERALD M. KLEINBAUM
GMK/vdb
cc: Daniel Martin, Esq.
(Handwritten on bottom of letter):
Dear Dan, This will confirm our conversation that I will not
read your papers until I have served defendants’ papers. Judge
Sweet extended d's time to serve and file until Monday &
scheduled (remainder of copy is illegible).
46a
APPENDIX I — EXCERPTED DEFENDANTS’ POST
TRIAL MEMORANDUM OF LAW WITH PROOF
OF SERVICE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 Civ. 3966 (CES)
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC.,
Defendants.
DEFENDANTS’ POST-TRIAL MEMORANDUM OF LAW
Preliminary Statement
Defendants, Richard C. Sandhaus also known as Dick
Sandhaus (“Sandhaus”), Dick Sandhaus Productions, Inc.
(“DSPI”), and Science Faction Corporation (“SFC”),
respectfully submit this Post-Trial Memorandum of Law upon
the conclusion of the trial of this action held before the Judge
January 5-7, 1994, January 10-14, 1994, and January 17-18,
1994.
The trial of this action concerned two claims by plaintiff and
counterclaims by defendants. Plaintiff's first claim is for breach
47a
Appendix I
of contract based on a letter written by plaintiff dated April 18,
1978, which was signed by DSPI on or about May 1, 1978 (the
“Letter”, Exhibit 1)), and provides, among other things, that in
consideration of plaintiff’s design work on a laser light show then
currently in production, plaintiff would be entitled to a one-third
* * *
POINT IX.
THERE IS NO EVIDENCE WARRANTING
THIS COURT TO DISREGARD THE
CORPORATE ENTITIES OF DSPI AND
SFC TO IMPOSE ANY PERSONAL
LIABILITY UPON SANDHAUS
There is no evidence that Sandhaus comingled his personal
affairs with either the business affairs of either DSPI or SFC.
Therefore, there is no basis to disregard the corporate entities of
DSPI or SFC to impose any personal. . . .
Moreover, there is no evidence that the business affairs of
DSPI or SFC were comingled, warranting the Court to disregard
the separate corporate identities of those corporations. Each
corporation maintained its own bank accounts, check books,
ledgers and filed separate and independent tax returns.
There is no evidence that Sandhaus personally ever sold or
rented any laser light show system.
7 * *
48a
Appendix I
STATE OF NEW YORK )
COUNTY OF NEW YORK _) 8s.:
I, Gerald M. Kleinbaum, being sworn, say: I am not a party
to the action, am over 18 years of age and maintain my offices at
90 Park Avenue, New York, NY 10016-1387.
On February 14, 1994, I served the within Defendants’
Proposed Findings of Fact and Conclusions of Law, and Post-
Trial Memorandum of Law, by facsimile transmission sent to:
Daniel Martin, Esq.
(609) 771-9342,
and by Express Mail by depositing a true copy thereof in a post-
paid wrapper, in an official depository under the exclusive care
and custody of the U.S. Postal Service within New York State,
addressed to:
Daniel Martin, Esq.
816 Silvia Street, Suite 800 B
Trenton, NJ 08628-3240
s/ Gerald M. Kleinbaum
GERALD M. KLEINBAUM
Sworn to before me this
14th day of February, 1994
s/ Robert C. Holstein
Notary Public
49a
APPENDIX J — EXCERPTED DEFENDANTS’
PROPOSED FINDINGS OF FACT AND
CONCLUSIONS OF LAW
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 Civ. 3966 (CES)
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION, and DICK
SANDHAUS PRODUCTIONS, INC.,
Defendants.
DEFENDANTS’ PROPOSED FINDINGS OF FACT
AND CONCLUSIONS OF LAW
Defendants, Richard C. Sandhaus also known as Dick
Sandhaus (“Sandhaus”), Dick Sandhaus Productions, Inc.
(“DSPI”), and Science Faction Corporation (“SFC”),
respectfully submit their proposed Findings of Fact and
Conclusions of Law upon the conclusion of the trial of this action
held January 5-7, 1994, January 10-14, 1994, and January 17-18,
1994,
As these proposed Findings of Fact and Conclusions of Law
are being submitted in advance of receipt of plaintiff's proposed
Findings and Conclusions and Post-Trial Brief, defendants
50a
Appendix J
request leave to amend or supplement this submission if
plaintiff's proposed Findings and Conclusions or Brief discloses
the existence of factual or legal issues which are not addressed
below.
208. There is no basis on which the Court may disregard the
separate corporate entities of SFC and DSPI. Each corporation
maintained its own records, its own bank accounts, filed its own
tax returns, and maintained separate records and books of
account.
209. The Letter is merely a letter of intent and not a binding
agreement. The intention of the parties should be determined by
the language of the document where the language is clear. The
first paragraph of the Letter says it is to “confirm our intention
...”, and the third paragraph says, “This letter is not intended to
be a complete agreement .. .”. It is clear that the parties did not
intend the Letter to be an agreement. The “complete agreement”
contemplated by Weinreich concerned many material elements
not embodied in the Letter. It is undisputed that a “complete
agreement” was never reached between the parties and that a
“complete agreement” was never executed.
210. In addition, there was no agreement between
Weinreich and DSPI as to the definition of “net profits” in the
letter prior to the time the Letter was signed, at the time the Letter
was signed, or thereafter. Agreement as to the meaning of “net
profits” was essential to the formation of a binding contract since
it was part of the formula on which Weinreich’s compensation for
his design service was to be based. The computation of “net
S5la
Appendix J
profits” in the Letter was left to future agreement between
Weinreich and DSPI since
52a
APPENDIX K — MAY 1, 1978 AGREEMENT
STEPHEN WEINREICH
5101 GORNIAK DRIVE
PARLIN, NJ 08859
(201) 727-7466
April 18, 1978
Dick Sandhaus
Dick Sandhaus Productions
1790 Broadway
New York, New York 10019
Dear Dick:
This will confirm our intention that all design work done by
Stephen Weinreich for the laser light show currently in
production is for the consideration of a 33 1/3% interest in the net
profit earned by sale or rental of this or similar or derivative
systems at prices and conditions mutually agreeable to Sandhaus
and Weinreich, such agreement not to be unreasonably withheld.
Any funds drawn by Stephen Weinreich and charged against this
project (other than expense reimbursements) will be considered
as drawings on profits.
This letter is not intended to be a complete agreement, but is to
express the general intent of both parties and is to govern in this
matter until such an agreement is executed.
Your signature below indicates your agreement with these terms.
Yours truly,
s/ Stephen Weinreich
Stephen Weinreich
ACCEPTED by illegible
date 5/1/78
53a
APPENDIX L — EXCERPTED JOINT
PRE-TRIAL ORDER
10/27/93
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
83 Civ. 3966 (CES)
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS a/k/a DICK SANDHAUS and
SCIENCE FACTION CORPORATION and DICK SANDHAUS
PRODUCTIONS, INC.,
Defendants.
JOINT
PRE-TRIAL ORDER
Plaintiff Stephen Weinreich (hereafter, “plaintiff” or
“Weinreich”) and defendants Richard Sandhaus, also known as
Dick Sandhaus (“Sandhaus”), Science Faction Corporation
(“SFC”) and Dick Sandhaus Productions, Inc. (“DSPI”) submit
this Pre-Trial Order in accordance with the rules of this Court and
the instructions of the Honorable Naomi Reice Buchwald, United
States Magistrate Judge, including the instructions in her letters
of September 14, 1993, and October 15, 1993.
1. Jurisdiction — This Court has jurisdiction over this
54a
Appendix L
matter pursuant to 28 U.S.C. 1331 because plaintiff Stephen
Weinreich (“Weinreich” or “plaintiff”) is a citizen of New Jersey
and the defendants are citizens of New York, and the amount in
controversy, exclusive of interest and costs, exceeds the
jurisdictional amount. Ae
2. This is anon-jury case.
4. Plaintiff's Claims — There are two causes of action
remaining in plaintiff’s complaint. The first is plaintiff's claim
for breach of an alleged agreement under which plaintiff was to
receive one-third of the profits from the sale or rental of certain
laser light show systems. Defendants understand this alleged
agreement to be set forth in the document annexed as Exhibit A.
The second claim in the action is a quantum meruit claim for
damages for the reasonable value of services rendered by plaintiff
to defendants. Plaintiff demands judgment against defendants on
each of the two causes of action, in the amount of $5 million, with
interest, costs and disbursements, and attorneys’ fees.
5. Defendants’ Claims for Relief
Defendants’ Answer alleges eight offsets and counterclaims
against plaintiff, as follows:
A. The first, second, and fourth counterclaims by DSPI
allege in substance that plaintiff falsely and fraudulently
represented to defendants Sandhaus and DSPI that he was a
design engineer with a degree in engineering, and that he had the
requisite skill and competence to work on the design and laser
lighting systems; that defendants Sandhaus and DSPI relied on
55a
Appendix L
these false and fraudulent representations and were induced to (a)
engage plaintiff to perform design work on the Foreigner system
and other laser lighting and special effects systems; (b) sign the
document annexed as Exhibit A; (c) that plaintiff’s work was
incompetent and
. + *
6. Uncontested Facts — The parties stipulate that the
following facts are not in dispute in this action, each party
reserving the right to object to the materiality or relevancy of any
such stipulated fact.
(1) Richard C. Sandhaus, sued herein as Richard
Sandhaus, also known as Dick Sandhaus, is now, and has been at
all Gimes mentioned in the complaint, a resident of the City,
County and State of New York.
(2) The defendant SFC is, and was at all times
mentioned in the complaint, a New York corporation organized
on June 7, 1978.
(3) At all times since SFC’s incorporation, Sandhaus
has been the president and sole shareholder of SFC.
(4) Atall times since DSPI’s incorporation, Sandhaus
has been the president and sole shareholder of DSPI.
(5) At all times since its incorporation, SFC has been
engaged in the business of designing, selling, and renting laser
systems and services for display and entertainment purposes and
producing laser shows. 2
56a
Appendix L
(6) Plaintiff is and was at all times mentioned in the
complaint a citizen of the State of New Jersey. He currently
resides at 14 Norton Road, Monmouth Junction, New Jersey. In
1977, 1978, and 1979, plaintiff resided at 5101 Gorniak Drive,
Parlin, New Jersey 08859.
(7) Plaintiff is not a college graduate. He has
(4) The document annexed as Exhibit A was signed by
Sandhaus in his capacity as President of DSPI.
(5) The document annexed as Exhibit A was signed by
defendant Sandhaus personally.
(6) Immediately prior to signing the document
annexed as Exhibit A Sandhaus asked Weinreich what Weinreich
meant by the word “similar” or “derivative” in the documents and
Weinreich responded that he meant “the same system except that
maybe the color is blue.”
(7) After defendant SFC was formed in 1978,
defendant Sandhaus transferred the Silver System as an asset
from defendant DSPI to defendant SFC without consideration.
(8) Since its inception not all of the business of SFC
has involved lasers.
(9) In 1978-1979, SFC offered for sale or rent other
products and services, besides the sale or rental of the Silver or
2000 Series Systems.
57a
Appendix L
(10) In or about October, 1988, Sandhaus provided a
complete list of all of the products or projects of SFC to the court
appointed expert.
(11) Methods of scanning other than by the use of
galyanometer scanners were common in laser light systems in
1978.
(12) The scanning method chosen is a significant
design characteristic of a laser light show system.
58a
APPENDIX M — EXCERPTS OF CLOSING
ARGUMENTS AND BRIEFS
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
93 Civ. 3966 (CES)
STEPHEN WEINREICH,
Plaintiff,
-against-
RICHARD SANDHAUS A/K/A DICK SANDHAUS and
SCIENCE FACTION CORPORATION and DICK SANDHAUS
PRODUCTIONS, INC.,
Defendants.
~~ CLOSING ARGUMENTS AND BRIEFS
Plaintiff, Stephen Weinreich, by his attorney Daniel Martin,
hereby submits these closing arguments and briefs in the above
entitled action.
I. Plaintiff's Contentions of Fact
A. Liability of Defendants Richard Sandhaus a/k/a Dick
Sandhaus, Science Faction Corporation (SFC) and Dick
Sandhaus Productions, Inc. (DSPI) for breach of contract
(1) Exhibit 1 is a valid enforceable agreement
Exhibit 1 was signed by plaintiff Stephen Weinreich on April
18, 1978, and by defendant Dick Sandhaus on May 1, 1978.
59a
Appendix M
Defendants made four arguments against the enforceability of the
agreement at trial. None of these arguments have any merit:
Defendant Sandhaus claimed that plaintiff induced him to
enter into the agreement by falsely claiming to be an engineer
(Trial Transcript (TT) at pages 811-812). This claim method of
figuring net profits was not difficult to arrive at in this case, is
confirmed by defendants’ own Affidavit in support of motion for
summary judgment (EX 1045) and trial testimony (TT 1103).
(2) Defendant Sandhaus personally and the corporate
defendants DSPI, and SFC, are all jointly and severally liable
under Exhibit 1.
Defendant Sandhaus testified at trial that he signed Exhibit 1
as president of DSPI. Presumably defendants will attempt to
convince the Court that only DSPI, a dormant corporation, is
therefore liable under the agreement. Overwhelming factual
evidence, and clear legal precedent, belie this claim.
First of all, Exhibit 1 was signed by defendant personally.
The letter was addressed to Dick Sandhaus, at Dick Sandhaus
Productions, but there is no reference under Mr. Sandhaus’
signature to his position as president of DSPI.
Moreover, the documentary evidence, supported by
defendant Sandhaus’ own trial testimony, makes it abundantly
clear that DSPI and SFC were treated by defendant Sandhaus as
his own “alter egos” with no personalities of their own. Judgment
against all, jointly and severally, is therefore mandated under
New York law (Oriental Commercial and Shipping Co. Ltd v.
Rossell, 609 F. Supp 75, 78 (SDNY 1985) (See legal arguments
infra for further discussion of this issue). aes ego” evidence
includes the following”: |
60a
Appendix M
(a) Defendant Sandhaus testified that he transferred title to
the Silver System, upon which the agreement was based, from
DSPI to SFC with no papers to support the transfer (TT 818-819).
(b) He further testified that the transfer was made because
he was the sole shareholder of both corporations and wanted to
transfer the laser portion of DSPI’s business to a new corporation
(Exh 1029, Sandhaus deposition, 1/14/86 at Page 68).
(c) After taking title to the Silver System, SFC rented it to
Xenon (and elsewhere) in its own name (TT 1122). SFC’s
responsibility to satisfy all obligations of the Silver System
(including the agreement to pay plaintiff 1/3 of the net profits
from the Silver and similar or derivative systems, under Exhibit
1), is thus clear.
Yet defendant testified that SFC in no way agreed to assume
any responsibilities under Exhibit 1 (Exhibit 1028, Sandhaus
deposition at 9/5/84, page 57-58).
(d) SFC’s 1978 tax return referred to DSPI and SFC as“. . .
component members of a controlled group...” and later tax
returns (Ex 462-464, 1050) apportioned taxable income between
the two corporations;
(e) SFC’s 1979 advertising literature (Ex 20) referred to
itself as, “... an affiliate of DSPI...”, though defendant
~ Sandhaus testified (Supra) that the Silver System was transferred
from DSPI to SFC in order to remove DSPI from the laser light
show business. Obviously the continuing “affiliation” was solely
based upon Mr. Sandhaus’ total control over both corporations.
6la
Appendix M
(f) A letter sent by Mr. Sandhaus to the BRH on August 23,
1978 requesting a variance for the Silver System for SFC was sent
on DSP! stationary (Ex 1044).
(g) Finally, defendant Sandhaus specifically referred to
DSPI and SFC as his alter egos on a number of occasions in his
trial testimony:
1. In referring to DSPI’s rental of office space, Mr.
Sandhaus stated: “I was the subtenant and ESP was the prime
tenant of the space.” (TT 791)
2. At TT 908, Mr. Sandhaus again referred to himself as the
corporation, (in this case SFC):
“So I marketed myself to him by direct mail and on the
telephone”;
3. And at TT 1149, Mr. Sandhaus said, “. . . 1am DSP, Dick
Sandhaus Productions, Inc.”
(3) All 2000 Series Systems, including various versions of
electronic controls, and custom specials including the Hollywood
Palace and the Empire State Building Systems are similar or
derivative of the Silver System under Exhibit 1.
As discussed at length below, Brian O’Brien, though
appointed by the Court as an independent expert, exhibited bias
in favor of defendants from the very beginning of his involve-
’. * *&
62a
Appendix M
voluntarily severed his business ties with defendants in
September, 1979, defendants continued to request his services in
connection with all of their projects.
(2) Defendant Sandhaus personally, and the corporate
defendants, DSP! and SFC, are all jointly and severally
liable to pay plaintiff for his services in quantum meruit
As discussed in part (2) above, defendant Sandhaus treated
DSPI and SFC as his alter egos, routinely shifting assets and
business between the companies, based upon his total control of
both companies. Under New York law, all defendants are
therefore liable to pay plaintiff in quantum meruit for his
services.
same period of time, which contain different entries (Ex 11, pages
D4, DS). ;
(3) Mr. Sandhaus falsely claimed in a pre-trial Affidavit (Ex
7) that he prepared all the ledgers; at trial he admitted that he
prepared only some of them (TT947-949).
B. Defendant Richard Sandhaus treated the corporate
defendants SFC and DSPI as his alter egos, exercising
total control of their operations, and transferring assets
freely between them. Ail defendants are therefore jointly
and severally liable to plaintiff in quantum meruit and
under Exhibit 1
As discussed above, defendant Sandhaus exercised total
control over SFC and DSPI. He transferred title to the Silver
63a
Appendix M
System from DSPI to SFC with no paperwork or corporate
resolutions supporting the transfer (TT8 18-819). He then went on
to rent the Silver System through SFC (TT1122), while claiming
that SFC had no responsibility to satisfy obligations of the Silver
System (Ex 1028 at pages 57-58). Mr. Sandhaus freely ignored
the separate corporate identities of SFC and DSPI (Ex 1050, 462-
464, 20, 1044) and considered both corporations to have no
identity separate from his own (TT 791, 908, 1149). The alter ego
doctrine, as set forth in Oriental Commercial v. Rossell 609
F.Supp. 75,78 (SDNY 1985), clearly applies in this case:
“To apply alter ego doctrine to justify the
disregard of a corporate entity, the court must
determine that there is such unity of interest
and ownership that separate personalities of
the corporations no longer exist, and that
failure to disregard the corporate form would
result in fraud or injustice.” (Cf. Gorrill vs.
Icelandair/F lugleider 761 F2d 847, 853 (2d
Cir 1985); Walter Heller & Co. v. Video
Innovations 730 F2d 50, 53-54 (2d Cir 1984);
Cooperstein v. Padricisn Estates 499 NYS 2d
423 (AD 2 Sept 1986)
64a
APPENDIX N — EXCERPTS OF DEPOSITION OF
RICHARD SANDHAUS
[68] Productions, Inc. assigned its right, title or interest in that
particular system to some other entity?
A. Yes.
Q. To whom was the right, title and interest to that system
assigned?
A. Science Faction Corporation.
Q. Would you tell me the circumstances under which that
assignment took place?
A. What do you mean, circumstances?
Q. How did it come about that the rights to this particular
system were assigned by Dick Sandhaus Productions, Inc. to
Science Faction Corporation?
A. Iam the sole shareholder of both of those corporations,
and I made a decision somewhere in the middle of “78 to establish
the corporation called Science Faction Corporation. That would
deal only in the area of laser display and laser related businesses
while concurrently, I was operating the previous existing
corporation, Dick Sandhaus Productions, Inc. for otherwise
unrelated things in the area of radio production and syndication,
things like that. And in order to keep projects totally discrete from
one another and to simplify bookkeeping and all kinds of things, I
just separated the areas of business that were unrelated to each
other.
65a
Appendix N
[69] Q. For purposes of bookkeeping, did you assign an
asset value to this system when you made the transfer?
A. Yes.
Q. What was that value?
A. Ican’t remember what it was, but it was determined just
by looking at all of the individual cost items that Dick Sandhaus
Productions had incurred in producing the system, which would
be material costs, component costs, payroll costs.
Q. Did you have this particular asset value memorialized in
some fashion in any of your books that you kept?
A. Iam not sure what you mean by “memorialized.” If you
are asking me how it was sort of kept in the way of bookkeeping?
Q. Was it reduced to writing in any form in any of your
corporate books?
A. Well, I don’t think there was some specific document that
refers to this and only this, but I can tell you that the manner of
bookkeeping was like an exchange item between the two
corporations, and had to do with the fact that there was office
space that was leased by Dick Sandhaus Productions which was
also used by Science Faction Corporation, so that there were a
number of things that [70] Science Faction started directly paying
for, things like office space, and so just those things were just kept
track of and numbers were exchanged.
Q. Is it your testimony, then, that Science Faction
established a debt to Dick Sandhaus Productions, Inc. and this
asset was transferred over in lieu of that debt?
66a
Appendix N
MR. KLEINBAUM: Iam not sure that is what his testimony
is.
MR.SANDBACK: That’s what I am trying to find out.
MR. KLEINBAUM: 1 don’t think there was a
characterization.
Just answer the question.
A. I don’t really know the technically correct answer. Very
simply, there were —
MR. KLEINBAUM: Answer the question, if you know the
answer.
A. Science Faction paid for things that Dick Sandhaus
benefited from in effect for exchange for the asset value of that
Silver System.
Q. For purposes of bookkeeping, you must have known at
that point in time how much you were setting off one against the
other; is that true?
67a
APPENDIX O— EXCERPTED JANUARY 11, 1994
TRIAL TRANSCRIPT (ADMISSION OF EXHIBITS)
(Sandhaus - direct)
[631] MR. KLEINBAUM: If your Honor pleases, may I just
look at them for a minute?
THE COURT: Yes.
MR. KLEINBAUM: And ask Mr. Sandhaus to look at them
as well?
THE COURT: No. You look at them and tell me whether or
not there is any objection to their entry.
All right, they are admitted subject to a motion to strike.
MR. KLEINBAUM: Motion to strike. The documents here
listed as affidavits because the witness is on the stand and these
would be inappropriate documents.
THE COURT: 6is admitted.
MR. KLEINBAUM: Excuse me?
THE COURT: 18 and 19 are admitted. 21 is admitted, 22,
23, 24, 26.
MR. MARTIN: Did you get 25, your Honor?
THE COURT: You didn’t offer it.
MR. MARTIN: Right. I’m sorry.
68a
Appendix O
THE COURT: 31 is admitted, 34.
Tell me what 34 through 132 are.
MR. MARTIN: They are itinerary reports sent by Mr.
Sandhaus to the Bureau of Radiological Health informing them
that a laser light show will be performed at a certain location on a
certain date. Each of them is a separate [632] report.
THE COURT: Is there any identification as to the time and
unit?
MR. MARTIN: Yes, there is.
THE COURT: They will be admitted.
(Plaintiff’s Exhibits 6, 18, 19, 21, 22, 23, 24, 25, 26, 31, 34
through 132, 133 through 137, 168 through 199, 202, 204, 315,
318 through 321, 324 through 441, 443 through 449, 458, 460 and
461, 1018 through 1031 for identification were received in
evidence)
THE WITNESS: It is not actually true that there was such
identification as to product.
THE COURT: 133 is admitted, 134, 135.
MR. KLEINBAUM: Your Honor, may I reserve the right to
strike with respect to 137?
THE COURT: Yes, you can reserve until the cows come
home.
69a
Appendix O
136, 137, 168 through 199, «12, 203, 204 isn’t evidence, but
I will take it.
315, I will take, 318, 319, 320, 321.
I take it that 324 through 441 — boy, are you going to have a
nice time on appeal with this record?
324 through 441 are similarly —
MR. MARTIN: Those are contracts that were provided in
discovery for shows, rental shows, for, in most [633] cases, rental
shows, sales contracts.
THE COURT: All right. 433 through 449 are admitted.
MR. KLEINBAUM: Did your Honor mention 443 through
449?
THE COURT: Yes.
MR. KLEINBAUM: Your Honor, I move to strike on the
ground that the witness is here and these affidavits, having been
made prior to this case. He is here, subject to examination. I don’t
believe they are admissible under Rule 803.
THE COURT: 458 is admitted. The motion is denied. 460,
4§1 are admitted. 1018 through 1031 are admitted.
MR. MARTIN: Your Honor, there is one additional exhibit
MR. KLEINBAUM: [also call your attention, your Honor,
70a
Appendix O
to Exhibits 315, 318, and 319. They are responses to requests for
admissions. We reserve all our rights as we reserved them in the
documents.
MR. MARTIN: No objection.
I have one more.
BY MR. MARTIN:
Q. Exhibit 1042, could I just ask you to identify this, Mr.
Sandhaus?
Tla
APPENDIX P — EXCERPTED JANUAM’ 13, 1994
TRIAL TRANSCRIPT
(Sandhaus - cross)
*- * *&
[1116] then at some point SFC began paying the rent.
THE COURT: Interchangeably, right?
THE WITNESS: No. There was a point at which it changed
and then it continued to be that way.
BY MR. MARTIN:
Q. In fact, Mr. Sandhaus, DSPI didn’t pay any rent from
June 1, 1979, through May 31, 1980, isn’t that right?
A. That —
Q. Let me refresh your recollection your recollection by
showing you —
A. That <euld well be true.
Q. Let me show you what has been marked 1050 for
identification, the corporated tax return for DSPI for the period
June 1, 1979, through May 31, 1980.
MR. KLEINBAUM: What exhibit number is that?
MR. MARTIN: 1050.
72a
Appendix P
Q. Do you recognize that?
MR. KLEINBAUM: Have you previously marked that?
THE COURT: No.
MR. MARTIN: No, this is new.
THE COURT: That is a tax return, is it, for?
MR. MARTIN: DSPI.
Q. First of all, is this the tax return for DSPI for that period?
THE COURT: I’m sorry. I missed the period.
[1117] A. I’m not certain because there don’t appear to be
signatures on this.
MR. KLEINBAUM: What year is that?
MR. MARTIN: June 1, 1979, through May 31, 1980.
Q. Wasn’t this produced in discovery as the —
A. Idon’trecall. Oh, I see. The Xerox says “Copy” on it.
MR. KLEINBAUM: Is this a copy of the return?
MR. MARTIN: That’s it, yes.
MR. KLEINBAUM: Maybe that will help you.
73a
Appendix P
MR. MARTIN: No, this is Science Factions, unless it is
attached.
THE WITNESS: No, itis not.
MR. MARTIN: I offer this 1050 in evidence.
THE COURT: Admitted.
(Plaintiff’s Exhibit 1050 for identification was received in
evidence)
BY MR. MARTIN:
Q. Mr. Sandhaus, does 1050 refresh your recollection as to
whether DSPI paid any rent during that period?
A. Yes, itrefreshes my recollection.
Q. Itdidn’t?
A. There is nothing listed at the line “Gross rents” so it tells
me that.
THE COURT: I suppose you would like to have it [1118]
admitted.
MR. MARTIN: Didn’tI offer it?
THE COURT: Maybe you did.
MR. MARTIN: Let me offer 1050.
74a
Appendix P
THE COURT: It is admitted.
BY MR. MARTIN:
Q. You testified earlier about a contract that Science Faction
entered into with Aucoin Management concerning the Kiss
project?
A. Idon’t recall if I testified about it. I am familiar with the
project.
Q. Let me show you a document marked 1018 for
identification.
MR. KLEINBAUM: Has that been produced?
MR. MARTIN: Yes, it has.
BY MR. MARTIN:
Q. Iask you if you can identify that document.
A. Yes. It lacks my signature, but it is signed by Aucoin
Management. It is an agreement between Kiss/Aucoin
Management Inc. and SFC.
Q. Under the contract, Science Faction was to design and
build a system and to perform certain —
MR. KLEINBAUM: Objection, your Honor.
THE COURT: Sustained.
75a
Appendix P
Q. What were Science Factions obligations under the
* * *
76a
APPENDIX Q — LIST OF PLAINTIFF’S TRIAL EXHIBITS
TABLE OF CONTENTS
Page
Volume]
1 Letter from Weinreich to DSPI, dated April 18, 1978
(1978 Letter) Ex 001
3 Letter from Xenon to SFC, dated September 11,1978 Ex002
7 Affidavit of Richard Sandhaus in support of motion
for summary judgment, sworn to September 18,1990 Ex004
9 DSPIdisbursements for 1977-79 Ex 009
10 SFC disbursements for 1978-79 Ex015
11 SFC Revenues for 1978-79 Ex 034
17 Schedule of Income for 2000 Series Ex 050
20 Science Faction Product Brochure Ex 076
40 Letter from SFC to BRH dated October 12, 1983
(Market Square Arena) Ex 080
41 Letter from SFC to BRH (date illegible) (Greenville
South Carolina) Ex 081
TTa
Appendix Q
42 Letter from SFC to BRH dated November 16, 1983
(Times Square) Ex 082
44 Letter from SFC to NCDRH dated December 1, 1983
(Times Square) Ex 083
45 Letter from SFC to NCDRH dated December 20, 1983
(Sheraton Centre Ballroom) Ex 084
46 Letter from SFC to NCDRH dated February 1, 1984
(Green Valley Country Club) Ex 085
48 Letter from SFC to NCDRH dated February 22, 1984
(Sheraton Washington) Ex 086
49 Letter from SFC to NCDRH dated March 12, 1984 (Grand
Hyatt Hotel) Ex 087
50 Letter from SFC to NCDRH dated March 14, 1984
(Radisson High Point) Ex 088
51 Letter from SFC to NCDRH dated March 14, 1984 (The
Limited, Inc.) Ex 089
52 Letter from SFC to NCDRH dated March 20, 1984 (The
Rand Building) Ex 090
53 Letter from SFC to NCDRH dated March 23, 1984 (Tammy
Brook Country Club) Ex 091
54 Letter from SFC to NCDRH dated May 1, 1984
(Harborfront Park) Ex 092
78a
Appendix Q
55 Letter from SFC to NCDRH dated May 11, 1984 (Chicago
Downtown Marriott) Ex 093
56 Letter from SFC to NCDRH dated June 5, 1984 (Georgia
World Congress Center) Ex 094
57 Letter from SFC to NCDRH dated June 5, 1984 (Hoosier
Dome) Ex 095
58 Letter from SFC to NCDRH dated September 7, 1984
(Radio City Music Hall) Ex 096
59 Letter from SFC to NCDRH dated September 28, 1984
( Starret City ) Ex 097
60 Letter from SFC to NCDRH dated October 2, 198
(Bonaventure Hotel) Ex 098
61 Letter from SFC to NCDRH undated (Hyatt Regency
Chicago) Ex 099
62 Letter from SFC to NCDRH dated October 16, 1984
( Eastern Michigan University) Ex 100
63 Letter from SFC to NCDRH dated October 18, 1984
(Clemson University Ampitheatre) Ex 101
64 Letter from SFC to NCDRH dated October 17, 1984
(Waverly Hotel Galleria Parkway) Ex 102
104 Letter from SFC to NCDRH (date illegible) (Potomac
Riverfest ) Ex 103
79a
Appendix Q
105 Letter from SFC to NCDRH dated June 6, 1986 (Grand
Hyatt Hotel ) Ex 104
106 Letter from SFC to NCDRH dated June 20, 1986 (State
Street, Rockford) Ex 105
107 Letter from SFC to NCDRH dated July 18, 1986
(Faneuil Hall) Ex 106
108 Letter from SFC to NCDRH dated August 4, 1986 (USS
Intrepid) Ex 107
110 Letter from SFC to NCDRH dated September 10, 1986
(Bayfront Convention Center) Ex 108
111 Letter from SFC to NCDRH dated October 21, 1986
(Kaufman’s Pittsburgh) Ex 109
112 Letter from SFC to NCDRH dated October 24, 1986
(Moorestown Mall) Ex 110
113 Letter from SFC to NCDRH dated October 27, 1986
(Alexis Park Hotel) Ex 111
114 Letter from SFC to NCDRH dated October 30, 1986 (The
Palladium, New York) Ex 112
115 Letter from SFC to NCDRH dated October 27, 1986
(Smith Haven Mall) Ex 113
117 Letter from SFC to NCDRH dated November 18, 1986
(The Plaza at Liberty Center) Ex 114
80a
Appendix Q
119 Letter from SFC to NCDRH dated December 30, 1986
(New York) Ex 115
134 Letter from SFC to BRH dated July 27, 1981
(supplementary product information) Ex 116
135 Affidavit of Richard Sandhaus sworn to September 21,
1988 Ex 117
170 Unsigned document purporting to be an agreement
between Levitan Design Associates, Inc. and Science
Faction Corporation Ex 120
312 Report of Consultant Leo Beiser “Evolution of Laser
Projection Systems,” dated April 30, 1993 Ex 138
313 Letter from Stephen Weinreich to Dick Sandhaus dated
December 7, 1978 Ex 183
315 Defendants’ Response to Plaintiff’s Requests for
Admissions Ex 184
320 Partially executed purported agreement between SFC
and Black & Decker (U.S.), Inc., dated June 14,
1984 Ex 206
344 Unsigned purported rental agreement between SFC and
Grand Illusions, dated January 16, 1984 Ex 213
353 Unsigned purported letter from SFC to C. Henning
Studios, dated May 10, 1984 Ex 215
8la
Appendix Q
Volume IT
354 Unsigned purported letter from SFC tu Melvin
Simon Associates, dated May 18, 1984 Ex 224
355 Unsigned purported letter from SFC to C. Henning
Studios, dated June 4, 1984 Ex 235
401 Unsigned purported letter from SFC and Staging
Inc., dated June 26, 1986 Ex 246
405 Unsigned purported letter from SFC to Bayfest
Inc. , dated August 28, 1986 Ex 256
406 Unsigned purported letter from SFC to
Kaufmann’s dated September 18, 1986 Ex 267
407 Unsigned purported letter from SFC to P.C.
Magazine, dated October 22, 1986 Ex 278
408 Unsigned purported letter from SFC to Smith
Haven Mall, dated October 27, 1986 Ex 289
409 Letter from SFC to The Palladium, dated October
31, 1986 Ex 299
410 Unsigned purported letter from SFC to Grant Liberty
Development Group Associates, dated November 4,
1986 Ex 306
436 Unsigned purported agreement for purchase of
Laserchaser 2 system, between SFC and Solid
Intertain, dated May 7, 1987 Ex 317
82a
Appendix Q
437 Purchase and sale and licewse agreement for the
Bayfront Park Laser Light Prv:ection System, between
SFC and the City of Miami, dated December 7,
1988 Ex 324
438 Unsigned purported purchase and sale agreement
between SFC and Busch Entertainment Corporation,
dated April 11, 1986 Ex 355
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.