# Opposition Brief — Jacobs v. Viener

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2005
- **Citation:** 543 U.S. 1146

## Text

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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.

ii
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

ili

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
ee a i Se oh en eas

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.

;
g

5

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

6

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

9

“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

10

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

4
‘
}

11

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

4a
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 ;

7a
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.

8a
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

9a
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

10a
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

lla
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

12a
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.

13a
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

l4a

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

15a
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.

l6a

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

17a

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

18a
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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386003_1578%3A2. Public record. Not legal advice.