Opposition Brief — Jacobs v. Viener

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No. 04-059

ut 17S

JAN | 8 2005

IN THE |_ OFFICE OF THE

Supreme Court of the United States

CLERK

NEAL JACOBS,

Petitioner,

V.

GEORGE P. VIENER,

Respondent.

On PETITION FOR A Writ OF CERTIORARI TO THE

SUPERIOR COURT OF PENNSYLVANIA

BRIEF IN OPPOSITION

Harry J. RuBin

Counsel of Record

REES GRIFFITHS

BARLEY SNYDER

100 East Market Street

P.O. Box 15012

York, PA 17405-7012

(717) 846-8888

Attorneys for Respondent

192104 ce)

COUNSEL PRESS

(S00) 274-3321 © (X00) 359-6859

i

COUNTERSTATEMENT OF

QUESTIONS PRESENTED

Are constitutional questions presented under the developing

Pennsylvania case law regarding minority shareholders nights

where a controlling shareholder of a small closely held family

business misappropriates substantial cash and corporate

property, fires and freezes out the business’ co-founder for

“asking questions” about his defalcations, then transfers

productive corporate equipment and capital to his own

businesses in Mexico and, in response to co-founder’s ongoing

efforts to prevent the destruction of the business, stops taking

orders and bankrupts the company and where the court awards

1.2 million dollars in compensatory damages and a lesser amount

of punitive damages on account of this outrageous course of

conduct? To be answered in the negative.

Does the Superior Court’s order remanding the case for a

new trial as to damages only violate Defendant’s due process

rights? To be answered in the negative.

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TABLE OF CONTENTS i

Page |

COUNTERSTATEMENT OF QUESTIONS

PRESENTEO .. 2s sincauwnnucneveeeeeseuen i

TABLE OF CONTEIVES s ssdakcsacatseandev ss li

TABLE OF CITED AUTHORITIES ............ ill

TABLE OF APPLIED 66450 benaaausscnsxes iv

SUMMARY OF ARGUMENT ................. 1

A. No Issue Of Proportionality Under State Farm

Is Ripe For GWE o5.5 ckaiccicbenee cans as 2

B. The Lower Court Correctly Determined The

Monsete GF DRM: 63. sb casneess erases 3

C. The Superior Court’s Remand For A

Recalculation Of Damages Was Not

LincomstiGGh, ook cucnnwauacneean wens 8

Punitive Damages Were Properly Awarded

Under Pennsylvania Law and the US.

Constant «235.4 Gusnesesinte eases 9

SUMMARY AND CONCLUSIONS ............ 15 |

—————S eee

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TABLE OF CITED AUTHORITIES

Page

Cases: ”

BMW of North America v. Gore,

517 U.S. 599 (1996) ...... cece creer ee eeeee )

Kiser v. Schulte,

538 Pa. 219, 648 A.2d 1 (1994) .....------->- Y

Orchard v. Covelli,

590 F. Supp 1548 (W.D. Pa. See 3

State Farm Mut. Auto. Ins. Co. v. Campbell,

538 U.S. 408 (2003) .....---- eee eee reer 9

iv

TABLE OF APPENDICES

Appendix A — Defendant Neil Jacobs’ Motion For

Continuance Of Pretrial Conference In The Court

Of Common Pleas Of Berks County, Pennsylvania

Dated December 22, 2004 ..................

Appendix B — Defendant Neil Jacobs’ Motion For

Continuance Of Pretrial Conference In The Court

Of Common Pleas Of Berks County, Pennsylvania

Dated November 24, 2004 ..................

Appendix C — Defendant Neal Jacobs’ Motion For

Reconsideration Of The Motion For Continuance

Of Pretrial Conference In The Court Of Common

Pleas Of Berks County, Pennsylvania Dated

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Page

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SUMMARY OF ARGUMENT

This is a minority shareholder freeze-out case that arose

and was adjudicated under the common law of the

Commonwealth of Pennsylvania. No federal law or interest

applies to these private closely held Pennsylvania apparel

companies. No constitutional right protects the controlling

shareholder from liability for booting out his partner and

transferring their productive assets to Mexico for use by

himself and his female friend, the irrepressible Ms. Kim

Van Vu. No federal law or policy preempted the award of

compensatory damages for the majority shareholder’s

decision to bankrupt the domestic companies while they were

still viable. The trial court’s award to Plaintiff of the value

of his ownership interests before Mr. Jacobs rid himself of

Mr. Viener and set about to bankrupt the businesses they

founded and built together in favor of his Mexican ventures

with his newly found partner, Ms. Vu, was fair compensation

and fairly characterized as compensatory damages. Punitive

damages were awarded under exacting state rules for fraud

claims no less rigorous than federal standards. And the state

court rulings anticipated and conformed to the one-to-one

ratio established by State Farm. Even were some federal issue

presented, the petition is premature since the appellate court

returned the case to the trial court for recalculation of the

amounts of both compensatory and punitive damages.

2

A. NO ISSUE OF PROPORTIONALITY UNDER

STATE FARM IS RIPE FOR REVIEW.

State Farm proportionality is not ripe for review.

The Superior Court remanded to the trial court instructing it

to recalculate the amount of compensatory and punitive

damages. In its remand, the Superior Court noted that the

... Current ratio between punitive damages and

compensatory damages is less than a | to | ratio.

However, as the ratio between punitive damages

and compensatory damages in this case may

change as a result of our remand, we reach a

decision only as to the propriety of puniti.e

damages in this case so that, on remand, the trial

court may recalculate the amount of the punitive

damage award, if necessary, to comport with Mr.

Justice Kennedy’s admonition.

State Farm, 834 A.2d 546, 2003 Pa. Super. 324 at 441.

Far from preventing a disproportionate punitive damage

award, this Certiorari Petition was simply filed to further

delay the assessment of compensatory and punitive damages

for Defendants’ “wanton neglect and bad faith” which led to

the “ultimate failure” of the corporation co-founded by the

Plaintiff. Viener v. Jacobs, 834 A.2d at 561; 2003 Pa. Super

324 at 439. Contemporaneously with filing of this Certiorari

Petition, Defendant has made repeated efforts to stay the

lower court’s determination of the proper amount of

compensatory and punitive damages. See attachments.

3

B. THE LOWER COURT CORRECTLY DETER-

MINED THE MEASURE OF DAMAGE.

As the lower court noted, “a principal harm caused by

the misconduct of Jacobs was the destruction of the total

value of Viener’s ownership interest in NGN and related

entities.” Viener v. Jacobs, 52 Pa. D&C. 4th at 367 (Finding

of Fact #84). The trial court concluded and the Pennsylvania

Superior Court affirmed that where the Defendant had

destroyed the total value of Plaintiff's ownership interest in

these small closely held companies, the measure of

appropriate compensatory damages was to “provide the

minority shareholder with the fair value of his interest in the

corporation” that he had lost through the freeze-out and other

breaches of fiduciary duty. Viener v. Jacobs, 51 Pa. D&C.

4th at 297.

The Viener case represents but one small step in the

development of Pennsylvania corporate law governing

fiduciary duties owed to minority shareholders in closely held

Pennsylvania corporations. While protecting the rights of

minority shareholders in closely held family businesses is a

perennial task of state courts, the Pennsylvania courts’ ruling

in this matter touches no federal policy or precedent and raises

no constitutional questions. The Pennsylvania Superior Court

has simply affirmed that when a controlling shareholder

bankrupts a closely held business through unethical and

illegal conduct, a minority shareholder may recover the value

of his interest in the corporation lost through the freeze-out

and other breaches of fiduciary duty. Viener v. Jacobs, 834

A.2d at 558, 2003 Pa. Super 324 at 428. This was no

innovation in Pennsylvania law and presents no federal issue

for further review. See Orchard v. Covelli, 590 F. Supp. 1548

(W.D. Pa. 1984).

i ah

4

The trial court’s findings were concisely summarized by

the Superior Court as follows: |

| 15 The trial court’s Findings of Fact in its |

Opinion of June 30, 2000, reveal the following:

Viener and his father were in the textile business

in the Reading area for more than 50 years. Jacobs

was employed by the Viener family business and

was eventually offered a 20% ownership interest

in the Viener family business. Viener and Jacobs

began producing garments for a company that

employed Rush, who was a college friend of

Viener. Together, Viener, Rush and Jacobs decided

to begin their own company and formed NGN on

January 1, 1983. The three owned 33 1/3 %

interests in NGN. Viener served as president/

secretary/treasurer of NGN, Jacobs and Rush

served as vice- presidents. The three were subject |

to a shareholder’s agreement that guaranteed each

shareholder that he could sell his shares at the

current book value of NGN to the other

shareholders.

SS ee ee eee ey ae ne

{| 16 The present case arose when Viener

expressed concerns in 1994 _ regarding

questionable cash payments authorized by Jacobs,

whose duties were to manage manufacturing and

quality control, and made by NGN to one of its

subcontractors, N.V. Sportswear and its majority

shareholder, [Kim] Van Vu. See Viener, 51 Pa. |

D&C. 4th at 269. Initially, Viener acquiesced to |

the unorthodox cash payments based on the advice ;

of Joffred, then NGN’s auditor. Id., 51 Pa. D&C.

;

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4th at 270. At that time, Rush indicated that he

wished to make Joffred an officer in the company.

Initially, Viener supported that plan and wanted

to employ Joffred as chief financial officer.

Shortly thereafter, Jacobs and Rush voted to

remove Viener as president of NGN against

Viener’s wishes and demoted him to vice-

president. [FN7] Joffred then replaced Viener as

president of NGN. Eventually, Joffred suspended

NGN’s practice of making cash payments to

subcontractors. Nevertheless, in late 1994, at

Jacobs’ direction, Crown-Globe, Inc. (Crown-

Globe), another subcontractor of NGN, generated

false invoices of $53,276.59 to reflect “price

adjustments” to NGN. Id., 51 Pa. D&C. 4th at 272.

Thereafter, Jacobs caused NGN to pay the

$53,276.59 to Crown-Globe, who in turn repaid

Jacobs. Jacobs then paid the $53,276.59 directly

to Van Vu. Id., 51 Pa. D&C. 4th at 273.

FN7. Viener retained the same salary in the vice-

president position that he had as president.

4 17 Viener questioned Joffred via e-mail

regarding the cash payments. At trial, Joffred

confirmed that the invoices were fraudulent and

were an inappropriate attempt by Jacobs to divert

cash payments to Van Vu and N.V. Sportswear in

contravention of corporate policy. Viener, 51 Pa.

D. & C. 4th at 274. Thereafter, Joffred prevented

NGN from paying to Crown-Globe a second series

of invoices that totaled $48,135.61. Viener was

then voted out of his position as vice-president of

NGN by Jacobs and Rush on Joffred’s

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recommendation. Evidence presented at trial

indicates that Joffred intended to fire Viener as

vice-president for “wasting people’s time with

questions.” N.T. Trial, 8/11/1997, at 134-135.

Viener remained on NGN’s board of directors after

being fired but his participation on the board was

limited severely. Following Viener’s termination,

NGN ceased its regular practice of quarterly board

meetings, and the locks and doors at NGN were

changed to permit Viener access to NGN’s

facilities only during hours of regular operation.

Employees of NGN were warned that if they spoke

to Viener, they would be fired. Finally, Viener was

excluded from voting on issues of employee

compensation because Jacobs and Rush

established a committee consisting of all of the

other shareholders, directors and Joffred to handle

those matters. 71

4] 18 In late 1995, following Viener’s termination,

the sales of both NGN and RGC fell off, and they

sustained losses of approximately $900,000. In

1996, NGN and RGC lost $2.33 million. At this

time, NGN loaned textile equipment valued at

approximately $218,000 to Amex, a corporation

in Mexico, at Jacobs’ request. Viener, 51 Pa. D.

& C. 4th at 276. This equipment was collateral

for a loan held with CoreStates Bank, and the loan

documents with CoreStates Bank prevented the

transfer of these assets. Moreover, despite

dwindling capital accounts, Jacobs withdrew

$202,216.67 from his loan account for the purpose

of purchasing the equipment loaned to Amex.

7

[FN8] Neither the equipment purchased nor the

funds used to purchase the equipment were

returned to NGN by Jacobs, instead, part of the

equipment located at Amex was transferred to

Kimmex, a second facility in Mexico owned by

Jacobs and Van Vu. [FN9] The balance of the

equipment at Amex was sold, and the funds

acquired from the sale were reinvested in

equipment for Kimmex.

FN8. The shareholder loan accounts contributed

to NGN’s working capital and earned interest at

12% per annum. The shareholders took their profit

distributions and loaned money back to NGN as

part of its capital account. There were no

agreements or understandings as to the terms or

timing of loan payments. The shareholders made

advances or withdrawals irregularly. Viener, 51

Pa. D. & C. 4th at 267.

FN9. We note that Viener was never given an

opportunity to invest in Kimmex.

4 19 While the Kimmex transactions were taking

place, Jacobs allowed his responsibilities at NGN

to lax. As a result, J.C. Penney, a major client of

NGN, demanded that Joffred take over

responsibility for quality control because of its

concerns regarding the quality of NGN’s

merchandise and the timeliness of deliveries.

Viener, 51 Pa. D. & C. 4th at 278. Joffred took

over quality control from Jacobs, but NGN’s

viability continued its rapid decline, and the

company ceased operations on August 31, 1997.

Id., 51 Pa. D. & C. 4th at 279-280.

8

The trial court, referencing specific portions of the

record, made even more strongly worded findings concerning

the Jacobs/Crown-Globe/N.V. Sportswear connection. In

addition to stealing corporate assets and utilizing corporate

funds to set up Mexican ventures that replaced NGN, the

trial court also found that

two months before the trial in this lawsuit, the

Defendant, with his coconspirators, stopped

accepting orders for NGN and RGC, despite the

fact that during the prior six months NGN and

RGC had sold approximately 18 million dollars

worth of goods, had paid off its $500,000 over-

advance and was still going concern.

From this, the court concluded that Jacobs had intentionally

destroyed the Viener family business and siphoned off that

company’s productive assets for his own pecuniary benefit.

The court awarded Viener the fair market value of his interest

in NGN and RGC immediately before the freeze-out as

compensation for Jacobs’ destruction of the domestic

businesses for his own benefit. There was no fundamental

unfairness or infirmity in the court’s selection of its remedy

— just the thoughtful application of state precedent to

conduct whose venality and outrageousness was, fortunately,

largely unprecedented.

C. THE SUPERIOR COURT’S REMAND FOR A

RECALCULATION OF DAMAGES WAS NOT

UNCONSTITUTIONAL.

The Superior Court remanded to the lower court to

correct the expert’s “computational error” in fixing

compensatory damages. Plaintiff's expert treated RGC as a

aaa

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“break even entity” without sufficient factual support; thus,

his valuation failed to account for the fact that Viener owned

25% of RGC and 33% of NGN. As the Superior Court noted,

“.. because Willis failed to assess a separate value of RGC,

it is impossible for this court to correct his computational

error. . .”. Viener, 834 A.2d at 546, 934. The Superior Court’s

decision to remand for a new trial limited to the amount of

compensatory and punitive damages involves no new or novel

application of Pennsylvania law that deprived Defendant of

due process. Rather, the Pennsylvania rule is, if a trial court

making a damage award based upon the evidence before it

miscalculates the award or award some component of

damages it should have not awarded, the Order on Appeal

should be reversed and remanded to allow the lower court to

cure its mistake, not to award damage to the other party.

See Kiser v. Schulte, 538 Pa. 219, 233, 648 A.2d 1, 8 (1994)

(“A new trial limited to the issue of damages will be granted

where: (i) the issue of damages is not intertwined with the

issue of liability and (ii) where the issue of liability has been

... fairly determined.”)

Punitive Damages Were Properly Awarded

Under Pennsylvania Law and the U.S. Constitution

There was ample evidence of Jacobs’ reprehensible

behavior in this record to support an award of punitive

damages. In State Farm, 123 S. Ct. 1521 and BMW of North

America v. Gore, 517 U.S. 599 (1996), the U.S. Supreme

Court laid out factors pertinent to awarding punitive damages.

In State Farm the U.S. Supreme Court stated:

[T]he most important indicium of the

reasonableness of a punitive damages award is the

degree of reprehensibility of the defendant’s

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conduct. We have instructed courts to determine

the reprehensibility of a defendant by considering

whether: [1] the harm caused was physical as

opposed to economic; [2] the tortious conduct

evinced an indifference to or a reckless disregard

of the health or safety of others; [3] the target of

the conduct had financial vulnerability; [4] the

conduct involved repeated actions or was an

isolated incident; and [5] the harm was the result

of intentional malice, trickery, or deceit, or mere

accident. The existence of any one of these factors

weighing in favor of a plaintiff may not be

sufficient to sustain a punitive damages award;

and the absence of all of them renders any award

suspect.

In this case, Defendant Jacobs siphoned corporate cash

through his business associate and partner, Ms. Vu, removed

substantial productive assets of the company to Mexico, and

used company property and other substantial productive

assets for his own Mexican ventures, froze Viener out to

prevent him from asking questions about Jacobs’ ongoing

fraudulent schemes, and having taken productive assets

across the border, bankrupted NGN when it was still a viable

company. The trial court found evidence of bad motive; the

Defendant’s conduct was not an isolated incident. Rather,

the court found numerous specific actions to be indicative

of malice or reckless indifference toward Viener. Moreover,

following Viener’s termination and lockout in 1994, he was

helpless to prevent Jacobs’ ongoing self-dealing and

conversion of NGN’s assets. See 52 Pa. D&C 4th at 367-368

(Findings of Fact ##84-100). During the great part of Jacobs’

course of conduct, Viener was indeed a victim having

financial vulnerability. Thus, three of the five Gore factors

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are satisfied. Jacobs’ conduct was legally reprehensible under

United States Supreme Court and Pennsylvania standards,

and therefore, the Superior Court did not error when it held

that punitive damages had been appropriate.

The Pennsylvania Superior Court plainly articulated why

punitive damages were necessary and appropriate.

q 39 Jacobs argues that our holding in Pittsburgh

Live, Inc. v. Servov, 419 Pa. Super. 423, 615 A.2d

438 (1992), requires this court to reverse its award

of punitive damages. We disagree. In Servov, we

held that when fraud is the basis of compensatory

damages, the same fraudulent conduct is not

sufficient to base an award of punitive damages

without a showing of acts of malice,

vindictiveness or a wholly wanton disregard of

the rights of others. Servov, 615 A.2d at 442. We

have reviewed the record of this case extensively,

and we are satisfied that the trial court acted

properly in assessing punitive damages against

Jacobs. As the facts presented above demonstrate,

Jacobs’ actions (with Rush’s assent) led to the

usurpation of Viener’s right to participate in the

governance of a corporation that Viener

co-founded. As the trial court found, Jacobs’

misuse of corporate funds and property coupled

with his failure to undertake sufficient measures

to procure the continued success of NGN led to

its ultimate failure. We agree with the trial court’s

conclusion that minority shareholders in closely-

held corporations are particularly vulnerable to

this type of wanton neglect and bad faith, and it

is therefore necessary to punish this behavior to

ensure that it will not occur in future cases.

12

The Jacobs Certiorari Petition relies heavily on his own

discredited version of events. Plainly, Petitioner’s credibility

was for the trial court to determine and no appeal to the U.S.

Supreme Court lies from the lower court’s credibility

decisions. The court’s determination that Jacobs testified

untruthfully was buttressed by his own misconduct.

Following the determination of his liability, Jacobs made

repeated fraudulent transfers and deliberately misrepresented

his “net worth” to the lower court, making the trial court’s

decision he lacked veracity self-evidently correct. 52 Pa. D.

& C. 4th at 368-373 and 384-385.

The trial court was not swayed by the testimony

presented with regard to Viener’s alleged

mismanagement of NGN, no doubt due to both

the evidence presented by Viener indicating that

Jacobs (and Rush) limited Viener’s role as a

shareholder-director, and the self-dealing practices

of Jacobs that occurred before and after Viener’s

termination. Of course, the trial court, as fact-

finder, was free to believe all, part or none of the

testimony presented and weigh its credibility.

See Majczyk v. Oesch, 789 A.2d 717, 726 (Pa.

Super. 2001). The trial court heard all testimony,

weighed it and found that Jacobs’ testimony was

not credible. Therefore, we discern no error on

the part of the trial court when it concluded that

Jacobs breached his fiduciary duty to Viener.

Petitioner cannot transform Jacobs’ ongoing course of

theft, misuse of corporate property, misappropriation of

assets, or theft of corporate opportunity that led to the

13

destruction of this business into separate discrete and isolated

events.

Jacobs ... promoted his self-interests with his

business associate, Ms. Van Vu, at the expense of

the minority shareholder. He misused his power

by promoting his personal interests at the expense

of the corporate interests by, inter alia, creating

fraudulent schemes to circumvent company

policy. This conduct is wantonly tortious, despite

the fact that the books were later “reconciled” to

justify it. Jacobs cannot explain the loss of

significant amounts of NGN equipment even

though he “managed” NGN’s liquidation.

He reduced the company’s working capital, at a

time when it was short on cash, to pursue his own

interests in Mexico. He converted NGN’s

equipment. Jacobs failed to use his best efforts to

procure the continued existence of NGN. All of

this came at the expense of NGN and of Viener,

whose own interest in the company became

worthless after Jacobs’ failure to protect it. Viener

has been denied his proper share of the benefits

accruing from the company.

There are few remedies available for minority

shareholders in closely-held corporations under

these circumstances. They are particularly

vulnerable to the majority who can destroy their

interests with impunity by trying to hide behind

the business judgment rule. Such harm must be

punished and, thus, deterred. We will impose

punitive damages in a reasonable amount to

14

punish Jacobs for his self-dealing and outrageous

conduct which was a breach of his duty of loyalty

to Viener. Furthermore, Jacobs has deliberately

misrepresented his net worth to this court. In fact,

Jacobs thumbed his nose at the court with his

testimony.

52 Pa. D. & C. 4th at 383-384.

In its Memorandum Opinion of October 25, 2001, the

trial court also stated:

When Viener sought redress with the court, Jacobs

and Rush responded by failing to protect Viener’s

interests, as it was their duty to do. This is above

and beyond the wantonly tortious acts of Jacobs

in pursuing his self-interest by creating fraudulent

schemes to divert cash to Ms. Van Vu and by

converting company property for his own use and

benefit. We felt 1t imperative to punish such

outrageous conduct by a person who used the

power and position he had to do with the

company’s assets despite holding a position of

trust.

Much of Petitioner’s argument consists in separating

each of Jacobs’ defalcations and ignoring the connections

between them. Since the !ower court concluded those

defalcations were part of a single course of conduct which

destroyed the Plaintiff's business and the value of his

holdings in that business, Petitioner’s argument that these

were isolated events that do not merit an award of punitive

damages necessarily fails. The lower court’s Findings of Fact

were adequately supported in the record and were specifically

eel Pee ee eee ee PLO ee ee ee ee eee ee eee

15

affirmed by the Superior Court which refused to credit Jacobs’

version of events. There is simply no room for argument that

| punitive damages were constitutionally impermissible

punishment for Jacobs’ ongoing “acts of malice,

vindictiveness and wholly wanton disregard of the rights of

others.”

SUMMARY AND CONCLUSIONS

This Petition for Certiorari is at best premature and at

worst a deliberate effort to delay conclusion of this case in

the state court. As of the time this Certiorari Petition was

filed, neither the amount of compensatory damages nor the

amount of punitive damages had even been settled in the

State Court proceedings. The Superior Court remanded the

case to the lower court with the following instructions:

4 41 Nevertheless, because we find it necessary

to remand for a recalculation of compensatory

damages, we do not reach Jacobs’ argument that

the amount of punitive damages awarded was

unconstitutionally excessive. We are guided in our

judgment by the recent decision of the United

States Supreme Court in State Farm Mutual

Automobile Ins. Co., v. Campbell, U.S. __, 123

S.Ct. 1513, 155 L.Ed.2d 585 (2003). Writing for

the Court, Mr. Justice Kennedy stated, “Our

jurisprudence and the principles it has now

established demonstrate [. . .] that, in practice, few

awards exceeding a single-digit ratio between

punitive and compensatory damages, to a

significant degree, will satisfy due process.” *562

State Farm, at _, 123 S.Ct. at 1524. The current

ration between punitive damages and

16

compensatory damages is less than a | to | ratio.

However, as the ratio between punitive damages

and compensatory damages in this case may

change as a result of our remand, we reach a

decision only as to the propriety of punitive

damages in this case so that, on remand, the trial

court may recalculate the amount of the punitive

damage award, if necessary, to comport with

Mr. Justice Kennedy’s admonition.

Given his ongoing misconduct, it is not surprising that

Petitioner has sought to use these proceedings to delay or

prevent a final determination of his liability for compensatory

and punitive damages by besieging the state court with stay

requests based upon the pendency of this petition.

The ultimate injustice and deprivation of due process would

be that the corporate thief go unpunished. Accordingly, the

Petition should be denied.

Respectfully submitted,

Harry J. RuBin

Counsel of Record

Rees GRIFFITHS

BARLEY SNYDER

100 East Market Street

P.O. Box 15012

York, PA 17405-7012

(717) 846-8888

Attorneys for Respondent

APPENDIX

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APPENDIX A — DEFENDANT NEIL JACOBS’

MOTION FOR CONTINUANCE OF PRETRIAL

CONFERENCE IN THE COURT OF COMMON

PLEAS OF BERKS COUNTY, PENNSYLVANIA

DATED DECEMBER 22, 2004

IN THE COURT OF COMMON PLEAS

OF BERKS COUNTY, PENNSYLVANIA

No. 00-63 85

GEORGE P. VIENER,

Plaintiff

V.

NEAL JACOBS, NORMAN RUSH, MICHAEL A.

JOFFRED, ALLEN FRIEDMAN, N.G.N., INC., READING

GARMENT COMPANY, INC., ELLMAR

MANUFACTURING, INC., NEGAN LEASING, INC.,

ENERGY KNITS, INC., READING DYEING AND

FINISHING, INC., LITTLE CREEK MILLS, INC., LCMA,

INC., AMITY FINISHING, INC., AND G.N.K.

PARTNERSHIP,

Defendants

DEFENDANT NEAL JACOBS’ MOTION FOR

CONTINUANCE OF PRETRIAL CONFERENCE

Defendant Neal Jacobs (“Jacobs”), through his

undersigned counsel, hereby moves for a continuance of the

2a

Appendix A

hearing in the above-captioned matter presently scheduled

and in support thereof avers as follows.

1. The Court has scheduled a pretrial conference for

January 10, 2005.

2. The undersigned counsel has a pre-planned prepaid

family vacation to Florida from January 7, 2005 until January

15, 2005.

3. The undersigned counsel will also be out of state at a

prepaid conference in Florida from February 2, 2005 through

February 4, 2005 and is attached for a hearing on January

27, 2005.

4. The undersigned counsel will otherwise make himself

available at the Court’s convenience.

WHEREFORE, defendant Neal Jacobs respectfully

requests that the Court grant this motion and order the

continuance of this conference by entering an Order

substantially in the form attached.

Dated: December 22, 2004

STEVENS & LEE

By s/ John J. Miravich

John J. Miravich, Esquire

Attorney 1.D. No. 56124

111 North Sixth Street

P.O. Box 679

Reading, Pennsylvania 19603

(610) 478-2225

Attorneys for defendant Neal Jacobs

3a

APPENDIX B — DEFENDANT NEIL JACOBS’

MOTION FOR CONTINUANCE OF PRETRIAL

CONFERENCE IN THE COURT OF COMMON

PLEAS OF BERKS COUNTY, PENNSYLVANIA

DATED NOVEMBER 24, 2004

IN THE COURT OF COMMON PLEAS

OF BERKS COUNTY, PENNSYLVANIA

No. 00-6385

GEORGE P. VIENER,

Plaintiff

V.

NEAL JACOBS, NORMAN RUSH, MICHAEL A.

JOFFRED, ALLEN FRIEDMAN, N.G.N., INC., READING

GARMENT COMPANY, INC., ELLMAR

MANUFACTURING, INC., MEGAN LEASING, INC.,

ENERGY KNITS, INC. READING DYEING. AND

FINISHING, INC., LITTLE CREEK MILLS, INC., LCMA,

INC., AMITY FINISHING, INC., AND G.N.K.

PARTNERSHIP,

Defendants

DEFENDANT NEIL JACOBS’ MOTION FOR

CONTINUANCE OF PRETRIAL CONFERENCE

Defendant Neal Jacobs (“Jacobs”), through his

undersigned counsel, hereby moves for a continuance of the

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Appendix B

hearing in the above-captioned matter presently scheduled

and in support thereof avers as follows:

J. On August 16, 2004, the Pennsylvania Supreme Court

denied Jacobs’ petition for allowance of appeal.

2. On November 12, 2004, Jacobs filed an appeal of the

issues of the awarding punitive damages and of reopening

the record to allow additional evidence to the United States

Supreme Court.

3. Until the Supreme Court appeal is completed, the tnal

court lacks jurisdiction to proceed with a pretrial conference _

or, in the alternative, the trial court should in its discretion

not hold such a conference until after the appeal is completed.

4. Except if a special exception is specifically prescribed

in Pa.R.A.P. 1701(b), aft :r an appeal is taken, “the trial court

or other government unit may no longer proceed further in

the matter.” Pa.R.A.P. 1701(a). None of the special exceptions

are applicable here.

5. “Appeal” is defined in Pa.R.A.P. 102 as “[a]ny

petition for other application to a court for review of

subordinate governmental determinations. The term includes

an application for certiorari under 42 Pa.C.S. Section 934

(writs of certiorari) or under any other provision of law.

Where required by the context, the term includes proceedings

on petition for review.”

6. As the Pennsylvania Superior Court stated in holding

that a trial court lacked jurisdiction while a petition was

ee Rrerrone mer eraennmearanesrmeas

Sa

Appendix B

pending in the United States Supreme Court, “these rules

clearly encompass a petition for a writ of certiorari to the

United States Supreme Court.” Com. v. Fuchs, 372 Pa. Super.

499, 539 A.2d 1307, 1311 (1988). There, the Superior Court

held that a trial court lacked jurisdiction to proceed with a

case including scheduling a matter for trial while a party had

pending a petition for writ of certiorari to the United States

Supreme Court. /d. The Superior Court likewise rejected the

trial court’s reasoning that the party was obligated to request

a stay while the United States Supreme Court petition was

pending. /d.

7. In light of clear directive of Pa.R.A.P 1702 (a) and

the holding in Fuchs, any objection to a continuance of the

pretrial conference would be frivolous.

WHEREFORE, defendant Neal Jacobs respectfully

requests that the Court grant this motion and order the

continuance of this conference by entering an Order

substantially in the form attached. ©

Dated: November 24, 2004

STEVENS & LEE

By s/ John J. Miravich

John J. Miravich, Esquire

Attorney I.D. No. 56124

111 North Sixth Street

P.O. Box 679

Reading, Pennsylvania 19603

(610) 478-2225

Attorneys for defendant Neal Jacobs

6a

APPENDIX C — DEFENDANT NEAL JACOBS’

MOTION FOR RECONSIDERATION OF THE

MOTION FOR CONTINUANCE OF PRETRIAL

CONFERENCE IN THE COURT OF COMMON PLEAS

OF BERKS COUNTY, PENNSYLVANIA

DATED DECEMBER 28, 2004

IN THE COURT OF COMMON PLEAS

OF BERKS COUNTY, PENNSYLVANIA

No. 00-6385

GEORGE P. VIENER,

Plaintiff

NEAL JACOBS, NORMAN RUSH, MICHAEL A.

JOFFRED, ALLEN FRIEDMAN, N.G.N., INC., READING

GARMENT COMPANY, INC., ELLMAR

MANUFACTURING, INC., NEGAN LEASING, INC.,

ENERGY KNITS, INC. , READING DYEING AND

FINISHING, INC., LITTLE CREEK MILLS, INC., LCMA,

INC., AMITY FINISHING, INC., AND G.N.K.

PARTNERSHIP,

Defendants

DEFENDANT NEAL JACOBS’ MOTION FOR

RECONSIDERATION OF THE MOTION FOR

CONTINUANCE OF PRETRIAL CONFERENCE

Defendant Neal Jacobs (“Jacobs”), through his

undersigned counsel, hereby moves for a continuance of the

2g OATES eee ee a C i en Ke sy ae ;

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Appendix C

hearing in the above-captioned matter presently scheduled

and in support thereof avers as follows:

Final Appealable Trial Court Order

1. On October 25, 2001, the Trial Court entered an order

denying post trial motions and entering judgment on behalf

of George Viener (“Trial Court Order’).

2. As a final order, Jacobs properly appealed the Trial

Court Order pursuant to Pa. R. A. P. Rules 341 (a) and (b)(1).

Final Order of Superior Court

3. On September 3, 2003, the Superior Court affirmed

in part, reversed in part, vacated and remanded the Trial

Court’s Order (“Superior Court Order”).

4. Pursuant to Pa. R. A. P. Rule 1112(b), the Superior

Court Order is a final appealable order. ~

5. Pursuant to Pa. R.A. P. Rule 1112(c), Jacobs properly

appealed the Superior Court Order by filing a Petition For

Allowance of Appeal to the Pennsylvania Supreme Court.

6. A Petition For Allowance of Appeal under

Chapter 11 of the Appellate Rules concerning appeals from

a final order differs from a Petition For Permission To Appeal

under Chapter 13 of the Appellate Rules concerning appeals

from interlocutory orders.

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Appendix C

7. In is important to distinguish these two Petitions

because the Rule cited in Viener’s most recent motion to

reconsider and many of the cases cited therein pertain to a

Petition For Permission to Appeal and appeals from

interlocutory orders — neither of which are applicable here.

Pennsylvania Supreme Court Denies Petition

For Allowance of Appeal

8. On August 16, 2004, the Pennsylvania Supreme Court

denied Jacobs’ petition for allowance of appeal.

Denial of Petition of Allowance of Appeal

to a Final Appealable Order

9. On November 12, 2004, Jacobs filed an appeal of the

issues of the awarding punitive damages and of reopening

the record to allow additional evidence to the United States

Supreme Count by filing a petition for certiorari.

10. Pursuant to 28 U.S.C. § 1257(a), the Pennsylvania

Supreme Court denial of Jacobs’ Petition For Allowance of

Appeal is a final appealable order capable of being appealed

to the United States Supreme Court.

11. On November 29, 2004, the Trial Court granted

Jacobs’ motion to continue the pretrial conference after the

appeal process is completed. Jacobs’ counsel had faxed the

motion to opposing counsel immediately upon filing.

12. On December 7, 2004, the Trial Court granted

Viener’s motion to reconsider and scheduled the pretrial

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Appendix C

conference. The Trial Court entered the order a day before

Jacobs’ counsel even received the motion as the motion was

filed and then mailed but never faxed by Viener’s counsel.

13. Until the Supreme Court appeal is completed, the

Trial Court lacks jurisdiction to proceed with a pretrial

conference or, in the alternative, the Trial Court should in its

discretion not hold such a conference until after the appeal

is completed. If the United States Supreme Court accepts

the appeal it could reverse or vacate the Superior Court Order

or it may remand with specific instructions concerning the

issues of punitive damages or a second trial. Both issues

involve federal constitutional issues.

14. Except if a special exception is specifically

prescribed in Pa. R.A.P. 1701(b), after an appeal is taken,

“the trial court or other government unit may no longer

proceed further in the matter.” Pa. R.A.P 1701(a). None of

the special exceptions are applicable here.

15. “Appeal” is defined in Pa.R.A.P 102 as

“{a]ny petition or other application to a court for review of

subordinate governmental determinations. The term includes

an application for certiorari under 42 Pa.C.S. Section 934

(writs of certiorari) or under any other provision of law.

Where required by the context, the term includes proceedings

on petition for review.” Therefore, upon the filing of a petition

for certiorari with the United States Supreme Court, the Trial

Court may no longer proceed with the matter.

16. The Superior Court has addressed this exact issue

and held that the trial court lacks jurisdiction while a petition

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Appendix C

for certiorari is pending. As the Pennsylvania Superior Court

stated in holding that a trial court lacked jurisdiction while a

petition fox certiorari was pending in the United States

Supreme Court, “these rules clearly encompass a petition for

a writ of certiorari to the United States Supreme Court.”

Com. v. Fuchs, 372 Pa. Super. 499, 539 A.2d 1307, 1311

(Pa. Super. 1988). There, the Superior Court held that a trial

court lacked jurisdiction to proceed with a case including

scheduling a matter for trial while a party had pending a

petition for writ of certiorari to the United States Supreme

Court. Jd. The Superior Court likewise rejected the trial

court’s reasoning that the party was obligated to request a

stay while the United States Supreme Court petition was

pending. /d.

17. In light of clear directive of Pa. R.A.P 1701 (a) and

the holding in Fuchs, a continuance of the pretrial conference

should be granted. In his motion for reconsideration, Viener

fails to even cite Fuchs, let alone distinguish it.

Viener Cites The Wrong Rule Which Does Not

Pertain to Final Orders

18. Viener cites Pa. R.A.P 1313 claiming that “a petition

for allowance of appeal to the Pennsylvania Supreme Court

shall not stay proceedings before the lower court unless the

lower court or the appellate court (sic) a judge so orders.”

Paragraph 8 (emphasis added). Pa. R.A.P. 1313 does not

pertain to . petition for allowance of appeal (a petition from

a final order); instead it is found in Chapter 13 and pertains

exclusively to a petition for permission to appeal (a petition

from an interlocutory order). No one can argue that the appeal

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Appendix C

being pursued here is anything but an appeal from a final

order. While we assume our able opposing counsel was

simply hurrying to file the motion for reconsideration, the

improper citation to this rule combined with the Court ruling

on the motion without allowing a response by Jacobs, has

caused significant prejudice to Jacobs.

19. None of the cases cited by Viener remotely support

the theory that a trial court can proceed with a second trial

while the results of the first trial — a final order — are sill on

appeal to the United States Supreme Court. Instead, the cases

cited stand for certain basic principals: absent a supersedeas,

a trial court can (1) proceed when a petition for permission

to appeal (interlocutory appeal), as opposed to a petition for

allowance of appeal (final order) is still pending; (2) hold a

party in contempt of the trial court’s own order during the

pendency of an appeal; (3) enforce its own order to require a

party take certain actions or pay money; and (4) permit the

civil execution process to continue. None of these principals

are applicable here. Moreover, the Trial Court’s prior order

was vacated, and therefore, there is no trial court order to

enforce.

20. A close examination of the cases cited by Viener

reveal they do not support his agreement. For example,

Winpenny v Winpenny, 643 A.2d 677, 679 (Pa. Super. 1994)

involved a partition action. The trial court ordered partition,

the Superior Court affirmed and the Pennsylvania Supreme

Court denied allocatur. After the appellant exhausted all

appeals on that issue, the trial court ordered appointment of

a master in partition, the Superior Court affirmed and the

Pennsylvania Supreme Court denied allocatur. After the

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Appendix C

appellant exhausted these appeals, the trial court approved

the master’s acceptance of a bid to sell the property, the

Superior Court affirmed and the Pennsylvania Supreme Court

denied the petition. After the appellant had lost both phases

on the partition action and had exhausted all appellate rights

regarding such, the successful bidder moved the trial court

to enforce the prior order, to which all appval rights had

already been exhausted. The trial court granted the motion

to enforce the prior order, the Superior Court affirmed the

interlocutory order and the appellant filed a petition for

permission to appeal with the Pennsylvania Supreme Court.

21. While the petition for permission to appeal regarding

the enforcement of the prior order was still pending, the

master submitted a motion to the trial court for approval of

the distribution, costs and master’s fees. The trial court

accepted the master’s motion and the appellant appealed to

the Superior Court arguing that the trial court should not

have accepted the master’s motion to approve distribution

because, her petition for permission to appeal to the

Pennsylvania Supreme Court concerning the enforcement

order was still pending.

22. The Superior Court rejected the argument as

frivolous finding that the appellant had already exhausted

her appeal rights concerning both phases of partition and

reasoned that the appellant misunderstood the duties of a

master in partition. The Superior Court further recognizing

in framing the issue that the prior appeal that had still been

pending was on a “disparate issue.” The issues concerning

the partition had already been appealed and ruled upon prior

to the trial court proceeding.

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Appendix C

23. In Glynn v. Glynn, 789 A.2d 242, 245 n.4 (Pa. Super.

2001), the Superior Court in a footnote noted that a trial court

had authority to enforce the trial court’s own contempt order

even though an appeal was pending when the appellant had

not obtained a supersedeas of the contempt order. There, in

May 1997, the trial court ordered the appellant to make

alimony payments under an agreement previously entered

into with the trial court. No appeal was filed from the

May 1997 order.

24. Subsequent to the May 1997 order and after the

appeal time had expired concerning such order, the appellee

moved to compel compliance with the May 1997 order and

in September 1998 the trial court held appellant in contempt.

The appellant appealed. While the appeal was still pending

in September 1998, the appellee filed a second petition for

contempt, which the trial court granted in May 2000 and a

second appeal was filed. When ruling on the second appeal,

the Superior Court in a footnote mentioned that the trial court

could enter the second contempt order because it had the

authority to enforce its own order even though an appeal was

pending on the first petition for contempt.

25. Tanglwood Lakes Community Assoc. v Lascowski,

616 A.2d 37 (Pa. Super. 1992) was cited in Glynn and stand

for the same proposition: a trial court can entertain a motion

to enforce its prior final orders even though an appeal is

pending. There, the trial court had ordered appellants to make

certain payments and return certain real estate to its

preconstruction condition. While an appeal of that final order

was pending, the appellee filed a motion to hold appellants

in contempt, which the trial court granted. On appeal from

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Appendix C

the contempt order, the Superior Court once again recognized

that a trial court retains authority under Pa. R.A.P. 1701(b)(2)

to enforce its own orders. 616 A.2d at 39. Here, there is no

motion to enforce the Trial Court final order nor could there

be because that order has been, vacated.

26. Monroe County Children and Youth Services v.

Werkheiser, 598 A.2d 313, 351 (Pa. Super. 1991), offers no

help to Viener’s argument. There, the Superior Court simply

held that an appeal! of a final trial court order terminating

appellant’s parental rights does not act as an automatic

supersedeas to allow those rights to continue during the

appeal. Likewise in Tomimello v. James Way, 573 A.2d 218

(Pa. Super. 1990), the Superior Court recognized that a

plaintiff can execute against a money judgment while an

appeal is pending unless a supersedeas bond is posted.

27. Here, Viener is not seeking to execute against a

judgment. In fact, any judgment has been vacated by the

Superior Court. Moreover, any possible execution on the

judgment would be impossible because of the bankruptcy

stay. For the same reason, Jacobs is not required to file — and

in fact prohibited from filing — a supersedeas bond. Viener’s

argument that Jacobs is required to file a supersedeas bond

is meritless as there is no execution proceedings, there is no

judgment and there is a bankruptcy stay. See Bankruptcy

Stipulation and Order attached as Exhibit A.

28. The above cited cases fail within the rule itself:

1701(b)(2) which allows a trial court to enforce its own orders

such as by contempt or by the civil execution process. None

of those cases stand for the unsupported legal theory that a

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Appendix C

trial court can enforce a remand order of the Superior Court

while the appeal is continuing before the United States

Supreme Court.

29. Although Viener has not yet cited Rule 1701(b)(5)

that also has no application here. Pursuant to 1701(b)(5), a

party can file a motion with an appellate court to authorize

the trial court to go forward with the case even while the

appeal is pending and while the Superior Court retains

jurisdiction. See Pa. R. A. P. Rule 1701(b)(5) (trial court can

take any action directed or authorized on application/motion

to the appellate court); Montor Trail Council v. PaPUC, 690

A.2d 703 (1997) (appellate court granted motion of appellant

to allow commission to clarify its ruling while appeal was

pending.) Viener never filed a motion with the Superior Court

seeking to allow the Trial Court to proceed with the matter

while the appeal was still pending with the Superior Court.

30. Here, the Trial court’s Order was final, the Superior

Court affirmed in part, reversed in part, vacated and remanded

that Order and the Superior Court Order is considered final

and Jacobs’ appeal to the Pennsylvania Supreme Court was

pursuant to Pa. R.A.P Rule 1112(b) (Superior Court order

remanding to trial court is a final order) and 1112(c) (when

Superior Court enters final order, appeal proceeds as a

petition for allowance of appeal). The rule and cases cited

by Viener that pertain to appeals from interlocutory orders

and petitions for permission to appeal are simply not

applicable in this case.

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Appendix C

31. If the Trial Court denies Jacobs’ motion, then Jacobs

requests that the Trial Court certify this order because the

Court’s ruling would contradict the Superior Court’s holding

in Fuchs.

WHEREFORE, defendant Neal Jacobs respectfully

requests that the Court grant this motion and order the

continuance of this conference by entering an Order

substantially in the form attached. In the alternative, if the

Trial Court denies the motion, then defendant Neal Jacobs

respectfully requests that the Trial Court certify its order as

an order involving a controlling question of law as to which

there is substantial ground for difference of opinion, and that

an immediate appeal from the order may materially advance

the ultimate termination of the matter and enter the alternative

proposed order.

Dated: December 28, 2004

STEVENS & LEE

By s/ John J. Miravich

John J. Miravich, Esquire

Attorney I.D. No. 56124

111 North Sixth Street

P.O. Box 679

Reading, Pennsylvania 19603

(610) 478-2225

Attorneys for defendant Neal Jacobs

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Appendix C

EXHIBIT “A”

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF PENNSYLVANIA

CHAPTER 7

BANKRUPTCY NO- 01-24739

IN RE:

NEAL JACOBS,

DEBTORS

CONSENT ORDER

AND NOW, this day of 21%, 2002, upon the consent of

Michael Giles, Esquire, attorney for George Viener and

Charles J. Phillips, Esquire, attorney for Debtor and upon

consideration of the Debtor’s Motion for Permission to Seek

Reinstatement of Superior Court Appeal, and this Court being

of the opinion and finding that the relief sought in the

Debtor’s Motion is appropriate and should be granted, it is

hereby

ORDERED that the Debtor shall be, and hereby is,

granted permission to seek reinstatement of his Appeal to

the Superior Court of Pennsylvania to No. 1323 MDA 2001

and to prosecute the Appeal to its conclusion; and it is further

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Appendix C

ORDERED that George Viener is hereby granted relief

from the Automatic Stay for the limited purpose of defending

the Debtor’s Appeal through the entire appellate process until

a final, non-appealable Order is entered only; and it is further

ORDERED that the Automatic Stay shall remain in effect

for all other purposes.

BY THE COURT:

s/ Thomas M. Twardowski

Thomas M. Twardowski

s/ Michael Giles

Michael Giles, Esquire

501 Washington Street, 3° Floor

P.O. Box 942

Reading, PA 19603

Attorney for George Viener

s/ Charles J. Phillips

Charles J. Phillips, Esquire

Leisawitz, Heller, Abramowitch,

Phillips, P.C.

2201 Ridgewood Road, Suite 400

Wyomissing, PA 19610

Attorney for Debtor