Opposition Brief — Dart v. Dart
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Supreme Court, U.S, |
7s. BD
4)
No. 95-1410 \
gn The
October Term, 1995 ce
THOMAS J. DART, et al.,
Petitioners
v.
W. A. DART, et al.,
Respondents
On Petition For A Writ Of Certiorari
To The Supreme Court Of The State Of Michigan
RESPONDENTS’ BRIEF IN OPPOSITION TO
PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT
OF THE STATE OF MICHIGAN
BARRIS, SOTT, DENN & DRIKER, P.L.L.C.
Eugene Driker
Counsel of Record
Stephen E. Glazek
Morley Witus
Counsel for Respondents
William A. Dart, Claire T. Dart, and
Dart Financial Corporation
211 W. Fort St., 15th Floor
Detroit, MI 48226-3281
(313) 965-9725
FOSTER SWIFT COLLINS & SMITH, PC.
Webb A. Smith
Allan J. Claypool
Counsel for Respondents
Kenneth B. Dart and
Robert C. Dart
313 S$. Washington Square
Lansing, MI 48933-2122
(517) 371-8100
Reardon-Parshall Co. 550 W. Fort St. Detroit MI 48226 (313) 962-0744 ot
QUESTION PRESENTED
Whether the Michigan Probate Court erred in concluding that,
under the particular facts of this case, Petitioners’ RICO claim
was in rem or quasi in rem and therefore enjoinable under this
Court's ruling in Princess Lida of Thurn and Taxis v. Thompson,
305 U.S. 456 (1939).
il
TABLE OF CONTENTS
QUESTION PRESENTED. ........ccccccccdeeeeepess
INDEX OF AUT RIOIEE Rie: <5 dbice ocacc cvdnness ce nen
I. STATEMENT OF THE CASE... 2.055555. Secesss
II. SUMMARY OF ARGUMENT ...........-cceecees
III. REASONS FOR DENYING THE WRIT..........
A. PROCEDURAL BARRIERS TO REVIEW .....
B.
. The Appeal is Moot Since Petitioners Purged
The Combet 6c ig cc isos igonatcsatccs tess’
2. The Contempt Order Is Unreviewable
Because It Is Not Final....................-
3. The Validity Of The Injunction Cannot Be
Collaerally Challenged In This Contempt
PYOCOGGIIN. bo 6 ia sins id bREREA ERR eee eee
THE PETITION DOES NOT PRESENT
ISSUES WORTHY OF THIS COURT'S
REVIEW cccvcctcececvcdudtiseenvareedenksens
. There Is No Conflict Regarding The
Applicable LAW. «0.000 osissaregas webaeseners
2. There Is No Genuine Issue Whether State
Law Applies To The Determination That An
Action Is In Personam or In Rem............
3. There Is No Genuine Issue Whether The
State Court Has The Authority To Determine
That An Action Is In Personam or In Rem ...
. The Probate Court Correctly Ruled, Under
The Unique Facts Of This Case, That
Petitioners’ RICO Claim Was In Rem Or
Quasi In Rem, Because It Centers On The
Administration Of A Trust And The Duties
Of The Trustee, And Interferes With Prior
State Court Jurisdiction Over The Trust......
EV. CONCTLAISIII « 6 vcincdsccdy sants ntamees ae eede res
APPENEIR oo cian ce caves cctsdetontussenepeaeavees
APPENDIX TABLE OF CONTENTS.................
PAGE(S)
i
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10
1]
————————e
ill
INDEX OF AUTHORITIES
PAGE(S)
CASES
Cassity v. Pitts, 995 F.2d 1009 (10th Cir. 1993) . 10, 12, 13, 14
Donovan v. Dallas, 377 U.S. 408 (1964) ........ 9 10, 11, 12
Fox v. Capital Co., 299 U.S. 105 (1936) ........ 7
General Atomic Co. v. Felter, 434 U.S. 12
NP a ks bees 7, 8.9, 10, 1]
Igleheart v. Igleheart, 402 F. Supp. | (S.D. Ind.,
Be aT en a ee oy ae ae pe a 13
In re Grand Jury Subpoena, 955 F.2d 670, 672
RTGS, aap ein Oe 5, 6
In re Hunt, 754 F.2d 1290 (5th Cir. 1985)...... 6. 7
Jacobsen v. U.S. Postal Service, 993 F.2d 649,
Ee ene eS
Kittredge v. Stevens, 126 F.2d 263 (lst Cir.),
cert. denied 317 U.S. 642 (1942)............. 13
Madruga v. Superior Court of California, 346
RE a er 7
Maggio v. Zeitz, 333 U.S. 56 (1948) ............8
Moody v. State of Alabama, 351 So.2d 552
(Ala., 1977), cert. denied 435 U.S. 969, and
cert. denied 439 U.S. 910 (1978).......... ee +
Phillips Petroleum Co. v. Shutts, 472 U.S. 797
SE Fe a a ai tas g
Princess Lida of Thurn and Taxis v. Thompson,
CN ee epecesenes .i.9 10. 11. 12
Stagner v. Pitts, 1993 W.L. 375809; 7 F.3d 1045
I a On. eT
Starr v. Rupp, 421 F.2d 999 (6th Cir. 1970)..... 13
Taffin v. Levitt, 493 U.S. 455 (1990)............ 2
Walker v. Birmingham, 388 U.S. 307 (1967) .... 8
aaa |
by
PAGE(S)
STATUTES
BD OBES S BUG OE ONG. cc civcciccccustencanss 2
Ty WR ME Scsevncedavenenssvecstovsesse
Oe I nd kc cv cankcsevercsnvuetaees 7
COURT RULES
SE, Ci ac BIG v0 6.6 ocr ico tava per tena ce nsioes 9
TREATISES
9 JAMES W. MOORE ET AL., MOORE'S FEDERAL
PRACTICE $110.13 (2d ed. 1995). ............ 7
I,
STATEMENT OF THE CASE
In February 1992, Petitioner Tom Dart filed the present
lawsuit against his parents and brothers in Ingham County
(Michigan) Probate Court, challenging the reorganization of trust
assets to which he had expressly agreed over five years previously.
After the Michigan Probate Court dismissed most of his claims
based on the statute of limitations, Tom married Petitioner Judy
Dart, who joined the trust litigation. Then, after almost a year and
a half of unsuccessfully litigating the claims they brought in the
Michigan Probate Court, Petitioners filed a similar lawsuit in
Florida state court, again claiming that the trust reorganization
was improper. Sarasota County (Florida) Circuit Court First
Amended Complaint, September 14, 1993. (Resp. App. A 2a-4a.)
Petitioners never identified any harm in having to litigate all
their claims in Michigan, since, after all, they are Michigan
residents, the reorganization took place in Michigan, and they had
originally chosen to litigate in the Michigan forum. Moreover,
Petitioners insisted that only the Michigan Probate Court had
jurisdiction over the trusts: “The consequence of the Probate
Court's exclusive jurisdiction is that ‘no other forum has the
jurisdiction to hear and determine the action.’” Petitioners
Memorandum of Law in Response to Brief in Support of Motion
to Compel Arbitration and Stay The Proceedings (May 12, 1992).
(Resp. App. B 6a.)
After lengthy hearings and briefing, the Michigan Probate
Court ruled that Petitioners should be enjoined from maintaining
similar claims concerning the trusts in other forums. See Order
_ Enjoining Petitioners Thomas J. Dart and Judith L. Dart From
Prosecuting Duplicative Litigation. (Pet. App. la.) The Michigan
Probate Court specifically found that the duplicative Florida suit
was an attempted “end-run” around rulings of the court, and it
constituted “oppression.” Tr. September 29, 1993. (Resp. App. C
8a.)
The Circuit Court affirmed the injunction. Order Affirming
Injunction, May 17, 1994. (Resp. App. D 10a.) The Michigan
to
Court of Appeals subsequently denied Petitioners’ application for
leave to appeal for lack of merit. (Pet. App. 61a.) Petitioners
attempted no further appeals, conclusively establishing the validity
of the injunction.
Despite having already been found to have engaged in
forum-shopping and ordered to desist, on July 8, 1994, Petitioners
filed yet another lawsuit, this time in Florida federal court,
alleging that the trust reorganization was a violation of the federal
RICO act. 18 U.S.C, § 1961, et seq. (Pet. App. 8a-5la.) In the
RICO complaint, they essentially claimed that Tom Dart’s parents
and brothers engaged in a criminal racketeering enterprise
designed to destroy his trust. (Pet. App. 8a.)' Petitioners did not
ask the Michigan Probate Court for clarification of the scope of
the injunction before filing their federal lawsuit, or notify the
court that they were planning such a lawsuit.
Petitioners say they were forced to violate the injunction
without first seeking clarification from the Michigan Probate
Court, because the four year RICO statute of limitations was
about to expire on July 11, 1994. (Petition, p. 4.) However,
Petitioners have concealed some crucial facts from this Court.
Their Petition fails to disclose that on July 8 and 11, 1994, they
also filed new pleadings in the Michigan Probate Court, asserting
the very same federal RICO claims as in their Florida federal suit.
See Tom and Judy Dart’s Civil Complaint, July 11 1994. (Resp.
App. E 12a-2la.)” Consequently, there was no need to run to
Florida to assert the federal RICO claims, since these claims were
part of the Michigan Probate case and state courts have concurrent
jurisdiction over federal RICO claims. See, Taffin v. Levitt, 493
' This was a rehash of the claim in their prior Florida state court action that
the defendants “engaged in a pattern of criminal activity through an enterprise
and have conspired to purposefully defraud the plaintiffs ....” (Resp. App
A 4a 4 149.)
* The other two Michigan Probate Court pleadings, Judy Dart’s First
Amended Petition, and Tom Dart’s Second Amended Petition, contain virtually
identical RICO claims as their Civil Complaint (which is attached as Resp. App
E 12a-21a)
U.S. 455 (1990). Petitioners avoided any statute-of-limitations
problem by filing the RICO claims in the Michigan Probate
Court.”
Petitioners later voluntarily dismissed their federal RICO claims
from the Michigan Probate case, to make it look as if they have
been deprived of the right to litigate these claims. Notice of
Voluntary Dismissal, September 2, 1994. (Resp. App. H 27a-28a.)
On July 29, 1994, respondents petitioned the Michigan Probate
Court for an order to show cause why Petitioners should not be
held in contempt for violating the injunction. The hearing was
adjourned at Petitioners’ request and the parties filed briefs
addressing the issue that Petitioners now raise before this Court.‘
After considering the briefs and oral arguments, the Michigan
Probate Court found Petitioners in civil contempt, holding that
Petitioners knowingly violated the injunction. (Pet. App. 75a.)
The Michigan Probate Court found that the federal RICO claim
was virtually identical to the previous claim under Florida's
criminal enterprise statute and so was covered by the injunction
(Pet. App. 75a.) Noting that “basically [ Petitioners’ federal suit] is
an action against the Trustee concerning the administration of the
Trusts and Trust property,” and therefore is in rem or quasi in
rem, the Probate Judge relied on federal precedents in determining
that the injunction could properly be enforced against Petitioners
(Pet. App. 70a-75a.)
The Michigan Probate Court deferred sentencing for two
months to give Petitioners the opportunity to purge the contempt
’ Further, Petitioners contend they only realized at the last minute that they
had a RICO cause of action, because they had just discovered a crucial July 11
1990, meeting between Tom Dart and WA. Dart. (Petition, p. 4.) Yet Petitioners
own pleadings prove that they and their counsel had known all about that
meeting for years. See Tom Dart’s First Amended Petition (October 2, 1992)
1 77 (specifically complaining about the July 1990 meeting) (Resp. App. F 23a.)
See also W.A. Dart’s Deposition Tr. August 26, 1992 (where Petitioners’ counsel
interrogated W.A. Dart about the July 11, 1990, meeting) (Resp. App. G 25a.)
* Petitioners suggest they were not allowed to brief or argue the in
personam/in rem issue, but Petitioners’ counsel did argue the issue at the August
ISth hearing. The Michigan Probate Court expressly addressed the doctrines
and precedents cited by Petitioners. (Pet App. 70a-75a.)
by dismissing their federal lawsuit. (Pet. App. 76a.) See also, Order
Finding Petitioners Thomas J. Dart and Judith L. Dart in Civil
Contempt of Court. (Pet. App. 52a.) In the interim, Petitioners
made some cosmetic modifications to their Florida federal
complaint, dismissing Dart Financial Corporation and the trusts
as defendants. At the sentencing hearing on October 14, 1994, the
Michigan Probate Court held that “the Trusts and the Trustee are
really inextricably a part of this Federal RICO action and that
dismissing the Trusts as defendants, and the Corporate Trustee as
a defendant, does not mean that the trusts and the Trustee are not
still involved in that.” (Pet. App. 77a.) Further, the Michigan
Probate Court noted that the federal complaint said: “ ‘At all
times material hereto, W.A. Dart has acted as Trustee of T-1, T-2,
and T-3....'” (Pet. App. 78a.) The court concluded: “[T]he
Trusts are still involved, the Trustee is still involved. The Trustee
at the time of these alleged improper actions, and the RICO suit,
is still a defendant.” (Pet. App. 78a.)
In light of this ruling, Petitioners avoided sanctions by means of
a stipulated Order “to permit Thomas J. Dart and Judith L. Dart
to purge themselves of such contempt”. (Pet. App. 56a.) The
order further provided that if Petitioners dismissed the Florida
federal suit in its entirety by the end of business on October 18,
1994, the RICO statute of limitations would be tolled and the
dismissal would be without prejudice; however, if they failed to do
this, Petitioners would be sentenced for contempt on October 19,
1994. Petitioners immediately dismissed the federal suit. Notice
of Stipulated Dismissal. (Pet. App. 59a-60a.) Because they purged
themselves of contempt, Petitioners were never sanctioned.
The Michigan appellate courts affirmed the order finding
Petitioners in contempt. The Circuit Court subsequently denied
Petitioners’ application for leave because it lacked merit (Pet.
App. 82a), as did the Court of Appeals. (Pet. App. 63a.) Finally,
the Michigan Supreme Court denied Petitioners’ application for
leave to appeal. (Pet. App. 65a.) None of the Michigan courts
issued written — let alone published — opinions.
This case has been pending for more than four years. Petitioners
slowed the proceedings to a virtual standstill by filing over a dozen
interlocutory appeals, from almost every significant adverse ruling,
and filing duplicative lawsuits in courts outside Michigan. Finally,
however, trial is scheduled to begin later this year, unless
Petitioners succeed in further delaying the case by means of their
pending Petition.
II.
SUMMARY OF ARGUMENT
This Court should not grant review of the unpublished
interlocutory orders as requested by the petition.
First, the appeal is moot since Peti'ioners purged the contempt
by complying with the Michigan Probate Court's injunction.
“Purging ends the state of contempt and thereby extinguishes any
contempt appeal.” In re Grand Jury Subpoena, 955 F.2d 670,
672 n.3 (11th Cir. 1992).
Second, there is no final judgment or order to review. Civil
contempt orders against parties are not final for purposes of
appeal, even after sanctions are imposed (and here no sanctions
have been imposed).
Third, the Petition challenges the validity of the injunction,
even though Petitioners previously exhausted their appeals from
the injunction. A party cannot collaterally attack the underlying
injunction in a contempt proceeding, particularly where the
injunction has already been conclusively affirmed on appeal.
Fourth, there is no genuine conflict in the reported cases
warranting this Court's intervention. All the cases agree on the law
concerning injunctions against federal litigants. Petitioners merely
contend that the Michigan courts erred in applying the law to the
facts of this case.
Finally, the decision of the Michigan Probate Court was
perfectly correct on the merits. The federal RICO suit was in rem
or quasi in rem, as it directly involved the trusts and the trust
assets, and thereby interfered with the Michigan Probate Court's
jurisdiction over the trust estate.
iil.
REASONS FOR DENYING THE WRIT
A. PROCEDURAL BARRIERS TO REVIEW
Petitioners have already had multiple levels of appellate review.
There are no exceptional circumstances warranting further review
by this Court — indeed, there are compelling reasons not to grant
-
review.”
1. The Appeal is Moot Since Petitioners Purged
The Contempt
Petitioners purged the contempt and avoided sanctions by
dismissing their federal lawsuit. In so doing, they waived appe llate
review of the contempt finding.
“*A long line of precedent holds that once a civil contempt
order is purged, no live case or controversy remains for
adjudication. . . .’ Once a contemnor has purged his contempt, he
sacrifices his ability to challenge the merits of the underlying
contempt order....” In re Grand Jury Subpoena, 955 F.2d at
672 (quoting In re Campbell, 628 F.2d 1260, 1261 (9th Cir.
1980)). Thus in In re Hunt, 754 F.2d 1290 (5th Cir. 1985), a party
was held in contempt for violating an anti-suit injunction which
prevented him from prosecuting certain litigation. He abandoned
the litigation, and the court held: “[T]he issue of the propriety of
> The Michigan Supreme Court denied leave to appeal because it was “not
persuaded that the questions presented should now be reviewed by this Court.”
(Pet. App. 65a.) This could either mean that the Michigan Supreme Court
considered the contempt appeal to be untimely because it was a belated
collateral challenge to the injunction, or because the contempt had been purged,
or because it was interlocutory. This ambiguous ruling is yet another reason why
the case is not appropriate for this Court to consider.
the contempt judgment ... is moot. Generally, the discharge of
a civil contempt . .. moots any appeal of the contempt judgment.”
754 F.2d at 1293.
2. The Contempt Order Is Unreviewable Because
It Is Not Final
In addition, the contempt finding is not a final appealable
order. First, the contempt finding is not final because the Michigan
Probate Court did not impose any sanction on Petitioners. See
Jacobsen v. U.S. Postal Service, 993 F.2d 649, 662 (9th Cir. 1992),
which held “an adjudication of civil contempt is not appealable
until sanctions have been imposed.” (Quoting Donovan v. Mazzola,
761 F.2d 1411, 1417 (9th cir. 1985)). Second, even if sanctions had
been imposed, a civil contempt order entered against a party is
interlocutory and cannot be appealed until after final judgment.
Fox v. Capital Co., 299 U.S. 105, 107 (1936) (“The rule is settled
in this Court that except in connection with an appeal from a final
judgment or decree, a party to a suit may not review upon appeal
an order fining or imprisoning him for the commission of a civil
contempt”); 9 JAMES W. MOORE ET AL., MOORE'S FEDERAL
PRACTICE 4110.13 (2d ed. 1995) $110.13(4), pp. 148-149 (“a
sentence of civil contempt ... is a nonappealable interlocutory
order”). Thus, there is no “final judgment or decree” that could
confer jurisdiction on this Court. 28 U.S.C. § 1257.
Petitioners cite General Atomic Co. v. Felter, 434 U.S. 12
(1977), to suggest that a civil contempt order is properly reviewable
by this Court. (Petition, p. 9 n.4.) Contrary to Petitioners’ assertion,
General Atomic did not involve a contempt order, so there was no
occasion to consider the finality or reviewability of contempt
orders. In General Atomic, the Court granted certiorari to review
an injunction and a writ of prohibition, which are reviewable on
wholly independent statutory grounds not applicable here. See 28
U.S.C. § 1292(a)(1); Madruga v. Superior Court of California,
346 U.S. 556 (1954) (the “State Supreme Court's judgment finally
disposing of the writ of prohibition is a final judgment reviewable
here under 28 U.S.C. § 1257.”). Therefore, Petitioners’ reliance
on General Atomic is misplaced.
3. The Validity Of The Injunction Cannot Be
Collaterally Challenged In This Contempt
Proceeding
On the one hand, Petitioners state that their unsuccessful
appeals of the injunction “are not at issue in this Petition,” and
that they are only seeking review of the finding of contempt
(Petition, p. 4). On the other hand, their very first question for
review asks whether the Michigan Probate Court erred when it
“enjoined petitioners from exercising their right... .” (Petition,
p. i). The rest of the Petition is entirely devoted to a collateral
attack on the injunction. This is improper.
A party cannot collaterally attack the propriety of an injunction
through contempt proceedings. “It would be a disservice to the
law if we were to depart from the long-standing rule that a
contempt proceeding does not open to reconsideration the legal
or factual basis of the order alleged to have been disobeyed and
thus become a retrial of the original controversy.” Maggio v. Zeitz,
333 U.S. 56, 69 (1948). Even an unconstitutional injunction
cannot be collaterally attacked in a contempt proceeding. Walker
v. Birmingham, 388 U.S. 307 (1967) (affirming the contempt
finding and refusing to decide the constitutional challenge to the
injunction because “defendants were precluded from attacking it
in this collateral proceeding”).
Petitioners already appealed the validity of the injunction and
lost. Petitioners cannot now collaterally contest the validity of the
injunction in this contempt appeal.®
® Petitioners suggest that this Court can review the injunction in connection
with the contempt appeal, relying on General Atomic (Petition, p. 9, n. 4).
However, in that case there was no prior exhaustion of appeals from the
injunction, no contempt adjudication, and no collateral attack on the injunction.
The matter came to this Court directly on review of the validity of the
underlying injunction.
Petitioners may argue that they never raised this challenge to the injunction
before because they did not realize the injunction would preclude them from
filing an action in federal court. However, this argument is refuted by the
Michigan Probate Court's findings that they committed “a knowing violation” of
the injunction by filing in federal court and they deliberately filed in federal
court because they “weren't succeeding in the Florida action, or the Michigan
action.” (Pet. App. 75a.) The Petition does not raise this as a formal question
presented for review because the Michigan Probate Court's finding that they
defied the injunction raises only a fact-bound issue of state law.
B. THE PETITION DOES NOT PRESENT
ISSUES WORTHY OF THIS COURT'S
REVIEW
1. There Is No Conflict Regarding The
Applicable Law
Petitioners contend that the orders of the Michigan courts in
this case are in conflict with the decisions of this Court. (Petition,
pp. 9-12). But the Michigan courts did not disagree with legal
principles embraced in the decisions of this Court. Instead, the
Michigan courts expressly relied on the rule of law that this Court
announced in Princess Lida of Thurn and Taxis v. Thompson, 305
U.S. 456 (1939), General Atomic, 434 U.S. 12 (1977), and
Donovan v. Dallas, 377 U.S. 408 (1964) — a state court cannot
enjoin in personam federal actions, but can enjoin litigants from
pursuing in rem and quasi in rem federal actions that would
interfere with the administration of an estate.
The only issue is whether, given the particular circumstances of
the trust assets and the nature of Petitioners’ RICO claims,
Petitioners’ federal action is in personam or in rem or quasi in
rem. That is a narrow, fact-bound issue without wide-ranging
application to other cases. The Court should not grant this
Petition, since “the asserted error consists of erroneous factual
findings or the misapplication of a properly stated rule of law.”
(Sup. Cr. R. 10(C)).
2. There Is No Genuine Issue Whether State Law
Applies To The Determination That An Action
Is In Personam or In Rem
There has never been a dispute in this case whether state or
federal law governs the validity of an injunction preventing parties
from prosecuting a federal lawsuit. The Michigan Probate Court
stated: “I am compelled to follow the Federal law here, United
States Constitution, United States Supreme Court's decisions, and
hold that this is In Rem.” (Pet. App. 73a.)
In order to demonstrate a conflict, Petitioners first need to
show that there are different rules, otherwise it is a “false
conflict”. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797
eo
10
(1985). There is no hint in any of the cases cited by Petitioners
that there is a federal rule for deciding whether an action is in
rem that varies in any way from the rule of any state or the rule
that the Michigan courts applied. Petitioners’ attempt to
demonstrate that the courts are “divided” proves nothing except
that the application of undisputed legal principles to differing
facts often yields differing results.
Petitioners distort the facts in an attempt to state an appealable
issue, claiming that “the Michigan courts appear to have applied
(at best) their own state law concepts of an in rem, quasi in rem
and in personam jurisdiction. . . .” (Petition, p. 14). The record
demonstrates that the Michigan courts did not invoke state law.
Instead, the Michigan courts relied entirely on federal precedent
on this issue Princess Lida, Donovan v. Dallas, and the
strikingly similar case of Cassity v. Pitts, 995 F.2d 1009 (10th Cir.
1993). (Pet. App. 70a-75a.)
3. There Is No Genuine Issue Whether The State
Court Has The Authority To Determine That
An Action Is In Personam or In Rem
Without citing any direct authority, Petitioners argue that the
Michigan Probate Court should not have even attempted to
decide whether the action was in rem — that the decision had to
be left to the federal court. (Petition, pp. 15-16.) This is
inconsistent with Princess Lida, Donovan v. Dallas, and General
Atomic. In Princess Lida, the state court made the determination
as to the nature of the federal action, and this Court upheld this
decision. In Donovan v. Dallas and General Atomic, the state
court also made the determination of whether the action was in
rem or in personam. If the rule that Petitioners urge were correct,
this Court would have overturned the state court action simply by
virtue of the fact that the state court had made the determination.
The Court did not take that approach. Therefore, Petitioners’
theory that a state court may not decide whether an action is in
rem or in personam fails.
Ll
4. The Probate Court Correctly Ruled, Under
The Unique Facts Of This Case, That
Petitioners’ RICO Claim Was In Rem Or Quasi
In Rem, Because It Centers On The Adminis-
tration Of A Trust And The Duties Of The
Trustee, And Interferes With Prior State Court
Jurisdiction Over The Trust
Stripped of its verbiage, the Petition presents only one issue
the fact-bound inquiry of whether in this particular case the
Michigan Probate Court erred in concluding that Petitioners’
RICO action was in rem or quasi in rem. Everyone agrees that if
this particular RICO action was in personam, then Donovan v.
Dallas and General Atomic apply and there should have been no
finding of contempt. Likewise, everyone agrees that if it was in
rem or quasi in rem, then Princess Lida applies and the contempt
finding was permissible. Petitioners have not shown that there is
any confusion in the lower courts concerning application of these
rules or that review of the Michigan decision would have any
significance outside of this particular dispute. The issue is therefore
not of sufficient importance to warrant this Court's attention.
In any event, the Michigan Probate Court's ruling was correct.
The Michigan courts followed this Court's settled rule:
[w]here the judgment sought is strictly in personam, both
the state court and the federal court, having concurrent
jurisdiction, may proceed with the litigation at least until
judgment is obtained in one of them which may be set up
as res judicata in the other. On the other hand, if the two
suits are in rem, or quasi in rem, so that the court, or its
officer, has possession or must have control of the property
which is the subject of the litigation in order to proceed
with the cause and grant the relief sought the jurisdiction
of one court must yield to that of the other. We have said
that the principle applicable to both federal and state
courts that the court first assuming jurisdiction over
property may maintain and exercise that jurisdiction to
the exclusion of the other, is not restricted to cases where
property has been actually seized under judicial process
12
before a second suit is instituted, but applies as well
where suits are brought to marshall assets, administer
trusts, or liquidate assets, and in suits of a similar nature
where, to give effect to its jurisdiction, the court must
control the property.
Princess Lida, 305 U.S. at 466 (emphasis added) (citations
omitted). Petitioners’ reliance on cases that bar a state court from
enjoining parties from pursuing strictly in personam federal
actions is misplaced, since these same cases explicitly recognize
the Princess Lida exception for in rem and quasi in rem cases.
E.g., Donovan v. Dallas, 377 U.S. at 412.
In assessing the nature of the Florida federal action, the
Michigan Probate Court relied extensively on Cassity, supra.,
which is almost exactly on point. (Pet. App. 70a-73a.) There, when
trust beneficiaries received adverse results in a state probate court
proceeding concerning alleged breaches of duty by the trustee,
they filed a federal court RICO action seeking damages for the
trustee’s misrepresentations. The Federal District Court yielded
jurisdiction to the state probate court. The Court of Appeals
affirmed, noting that the beneficiaries could bring their federal
RICO claims in state court. The court flatly rejected the benefi-
ciaries’ argument that RICO claims for money damages were
strictly in personam. The court followed Princess Lida, explaining
that a suit is in rem or quasi in rem if it “concerns or determines
the ownership, control and administration of a trust and the
powers, duties and liabilities of the trustees. ...” Cassity, 995
F.2d at 1012. The court further explained:
[mJost of the allegations in the complaint make
reference to the trust assets or the wrongful acts and
representations of Trustees. Thus, to rule on the
misfeasance of Trustees would require the court to
eee see.
ee
13
construe Trustees’ duties in light of the trust and the
Settlement Agreement upheld by the [state probate court].
Id.’
As in Cdssity, Petitioners’ Florida federal complaint concerns
the allegedly improper administration of the trust and breach of
trust duties. The allegations in the Florida federal complaint (1)
revolve around the trusts and the corporations that are wholly
owned by the trusts; (2) arise out of a trust transaction already
being litigated in the Michigan Probate Court; and (3) are based
on alleged injuries to Petitioners’ beneficial interests in the T-!
trust. As the Michigan Probate Court explained, “the Trusts and
the Trustee are really inextricably a part of this federal RICO
action”. (Pet. App. 77a.)”
Under Cassity, the federal RICO complaint without question
concerned the administration of the trust, and the powers, duties,
” See also Starr v. Rupp, 421 F.2d 999, 1004 (6th Cir. 1970) (“The fact that
plaintiffs pray for damages instead of an accounting and equitable relief on the
identical cause of action unsuccessfully asserted in the Probate Court, does not
confer jurisdiction on a federal court.”); Igleheart v. Igleheart, 402 F. Supp. 1, 4
(S.D. Ind., 1975); Kittredge v. Stevens, 126 F.2d 263, 267 (1st Cir.), cert. denied
317 U.S. 642 (1942); Moody v. State of Alabama, 351 So.2d 552 (Ala., 1977),
cert. denied 435 U.S. 969, and cert. denied 439 U.S. 910 (1978) (rejecting
argument that proposed action for money damages under federal anti-trust laws
was in personam in nature, and finding instead that proposed action was merely
a ploy to interfere with state in rem or quasi in rem proceeding)
* The crux of Petitioners’ Florida federal complaint (Pet. App. 8a-51a) is the
claim that the trustee breached his fiduciary duties and made misrepresentations
to injure the trust (“T-1"). See 4 9. (“At all times material hereto, W.A. Dart has
acted as the trustee of T-1, T-2 and T-3"); | 118 (“By virtue of their status as
fiduciaries of T-1, ... W.A. Dart and Claire Dart had a duty to provide complete
disclosure ...."); | 119 (“By so grossly breaching their fiduciary duties to
Thomas Dart, Dart Energy, T-1, and the remaining beneficiaries of T-1, WA
Dart and Claire Dart .-"); FF 124 and 133 (alleged scheme involved
“misrepresentation of the value of the assets taken from T-1,” in order to cause
“injury to T-1, Dart Energy, Thomas Dart, and all other beneficiaries of T-1"):
q 137 (“Plaintiffs Thomas Dart and Judith Dart were injured by the association
in fact in that the trust of which they are beneficiaries suffered a loss of hundreds
of millions of dollars as a result of defendants’ successful effectuation of their
scheme.”)
14
and liabilities of the trustee. Allowing the Florida federal RICO
action to proceed would have interfered with the jurisdiction of
the Michigan Probate Court. Therefore, the Michigan Probate
Court properly held Petitioners in contempt for violating the
injunction which prohibited such duplicative litigation.
’ Notably the court in Cassity imposed Rule 11 sanctions that were upheld
on appeal
The courts have a duty to protect the public from frivolous litigation
There was a day when clever counsel were admired by some for
inventive methods to resurrect dead litigation. That day has passed
When counsel seek to relitigate that which has previously been
litigated, they must be fully prepared to answer for their actions in
continuing to instigate litigation
Stagner v. Pitts, 1993 W.L. 375809: 7 F.3d 1045 (10th Cir. 1993
For the reasons
a
15
IV.
CONCLUSION
set forth above, respondents respectfully
request that the Petition be denied.
Date April 1. 1996
Respectfully submitted.
BARRIS, SOTT, DENN & DRIKER,
P.L.L.C.
By:
Eugene Driker
Counsel of Record
Stephen E. Glazek
Morley Witus
Counsel for Respondents Willian A
Dart, Claire T. Dart, and
Dart Financial Corporation
211 W. Fort Street, 15th Floor
Detroit, Michigan 48226-3281]
(313) 965-9725
FOSTER SWIFT COLLINS & SMITH, PC.
Webb A. Smith
Allan J. Claypool
Counsel for Respondents Kenneth B. Dart
and Robert C. Dart
313 S$. Washington Square
Lansing, Michigan 48933-2122
(517) 371-8100
No. 95-1410
gn The
Supreme Court of the Wnited States
THOMAS J. DART, et al.,
Petitioners
v.
W. A. Darr, et al.,
Respondents
APPENDIX
BARRIS, SOTT, DENN & DRIKER, P.L.L.C.
Eugene Driker
Counsel of Record
Stephen E. Glazek
Morley Witus
Counsel for Respondents
William A. Dart, Claire T. Dart, and
Dart Financial Corporation
211 W. Fort St., 15th Floor
Detroit, MI 48226-3281
(313) 965-9725
FOSTER SWIFT COLLINS & SMITH, PC
Webb A. Smith
Allan J. Claypool
Counsel for Respondents
Kenneth B. Dart and
Robert C. Dart
313 S. Washington Square
Lansing, MI 48933-2122
(517) 371-8100
A-ii
APPENDIX
Table of Contents
Page
APPENDIX A
First Amended Complaint, September 14, 1993,
Sarasota County (Florida) Circuit Court Case No. 93
SE ee ee ee eEeee been ee ereba la
APPENDIX B
Petitioners Memorandum in Response to Brief in
Support of Motion to Compel Arbitration and Stay
Proceedings, May 12, 1992, Ingham County (Michigan)
Probate Court File No. G-6372 .................c0eee: 5a
APPENDIX C
Transcript of hearing on Respondents’ Motion for
Injunction, September 29, 1993 .............. 6660000. Ta
APPENDIX D
Order Affirming Injunction, May 17, 1994, Ingham
County (Michigan) Circuit Court Case No.
tI te a ea he Ga
APPENDIX E
Complaint, July 11, 1994, Ingham County (Michigan)
Probate Court Civil Action No. 94-10386-CZ........... lla
APPENDIX F
Thomas J. Dart’s First Amended Petition, October 2,
1992, Ingham County (Michigan) Probate Court File
i ee esacdes ob debate inves 22a
APPENDIX G
W.A. Dart’s Deposition Transcript, August 26, 1992,
Ingham County (Michigan) Probate Court File No.
ee dds bhdbeeéan vinta aienae te vem 24a
APPENDIX H
Notice of Voluntary Dismissal, September 2, 1994,
Ingham County Probate (Michigan) Court Civil Action
i ET os Se te ee eee baeaeneecense 26a
la
APPENDIX A
First Amended Complaint, September 14, 1993, Sarasota County
(Florida) Circuit Court Case No. 93 3804 CA-01
2a
THE CIRCUIT COURT FOR
THE TWELFTH JUDICIAL CIRCUIT,
IN AND FOR SARASOTA COUNTY, FLORIDA
GENERAL JURISDICTION
JUDITH L. DART, THOMAS J. DART,
(INDIVIDUALLY AND IN BEHALF
OF DART ENERGY CORPORATION
AND THE THOMAS J. DART
RESIDUAL TRUST),
Plaintiffs,
Vv.
WILLIAM A. DART, CLAIRE T.
DART, KENNETH B. DART, ROBERT
C. DART, DART CONTAINER
CORPORATION, THE KENNETH B.
DART RESIDUAL TRUST, THE
ROBERT C. DART RESIDUAL
TRUST, DART FINANCIAL
CORPORATION, BENJAMIN O.
SCHWENDENER, WILLIAM L.
MYERS, JOANNE WILLIAMS,
RICHARD J. RASTALL, ALAN M.
VALADE, and AMERICAN
APPRAISAL ASSOCIATES, INC. d/b/a
STANDARD RESEARCH
CONSULTANTS,
Defendants,
and DART ENERGY CORPORATION
AND THE THOMAS J. DART
RESIDUAL TRUST,
Nominal Defendants.
FIRST AMENDED
COMPLAINT
JURY TRIAL
DEMANDED
Case No.:
93-3804 CA-01
FLORIDA BAR
NO. 145750
a
3a
| Plaintiffs, Judith L. Dart and Thomas J. Dart, individually and
in behalf of Dart Energy Corporation and the Thomas J. Dart
Residual Trust, by their undersigned counsel, file this First
Amended Complaint against the defendants and allege as follows:
SUMMARY OF THE CLAIMS
1. Through this action, plaintiff Thomas Dart seeks to right the
wrongs inflicted on himself, his family and his business as the
result of the unscrupulous behavior of his father, defendant
William A. Dart (“W.A. Dart”), his brothers, defendants Kenneth
and Robert Dart, and others who have been drawn into the
conspiracy to deprive Thomas Dart of the legacy bestowed upon
him by his late grandfather.
2. As hereinafter described, by threat, intimidation, and
coercion, and through a series of calculated maneuvers constituting
outright fraud, Thomas Dart's father and brothers (with the aid
and abetment of the other defendants) have unlawfully
manipulated the trusts created, and the multi-million dollar
corporations formed and developed by, Thomas Dart’s grandfather.
Attempting to deprive him of his grandfather's legacy, Thomas
Dart's father, in concert with his other sons, his personal legal
counsel and the other defendants named in this action, all of
whom are under W.A. Dart’s complete domination and control,
has:
(a) in nearly innumerable ways, breached his fiduciary duties
to Thomas Dart and his family and business;
(b) fraudulently induced, intimidated and coerced an
incapacitated son to approve a reorganization of the family
businesses, despite the devastating financial effect the
reorganization had on Thomas Dart, his family and
businesses, and the trust established by his grandfather for
his and his family’s benefit;
(c) breached and tortiously interfered with the terms of the
very agreement he had planned to use as the primary
vehicle for depriving Thomas Dart of his grandfather's
legacy;
4a
(d) unlawfully conspired to and in fact converted property
rightfully belonging to his disfavored son and his family and
business; and
(e) in the process inflicted severe emotional harm upon this
son and daughter-in-law.
For these wrongs and others more fully described below, the
plaintiffs seek redress from this Court.
THIRTEENTH CAUSE OF ACTION
(Florida Statute § 772.103)
149. Defendants W.A. Dart, Kenneth Dart, Robert Dart, Benjamin
0. Schwendener, Jr., Richard J. Rastall and Alan M. Valade have
engaged in a pattern of criminal activity through an enterprise as
defined and described in Florida Statute Section 772.102 and
have conspired to purposefully defraud the plaintiffs, Dart Energy
and T-1 of the amounts due Dart Energy and T-1 under the terms
of the Reorganization. By virtue of such conduct, these defendants,
through at least two separate instances of conduct that constitutes
theft, knowingly obtained and used property rightfully belonging
to Dart Energy and T-1 (and beneficially to plaintiffs) with the
intent to permanently deprive Dart Energy and T-1 of the right to
such property or the benefit therefrom. Further, by virtue of such
conduct, these defendants knowingly misappropriated such
property for their own use or for the use of persons (including
beneficiaries of T-2 and T-3) not entitled thereto.
APPENDIX B
Petitioners Memorandum in Response to Brief in Support of
Motion to Compel Arbitration and Stay Proceedings, May 12
1992, Ingham County (Michigan) Probate Court File No. G-6372
6a
STATE OF MICHIGAN
PROBATE COURT
COUNTY OF INGHAM
FILE NO.
G-6372
MEMORANDUM OF LAW IN RESPONSE TO BRIEF IN
SUPPORT OF MOTION TO COMPEL ARBITRATION
AND TO STAY THE PROCEEDINGS
In the matter of William F. Dart Trust
Statement of the Case
The Probate Court exists by virtue of constitutional mandate.
Its jurisdiction and powers are established by statute. The
legislature of the State has seen fit to vest exclusive jurisdiction of
“the internal affairs of all trusts” in the Probate Court. The
consequence of the Probate Court's exclusive jurisdiction is
that “no other forum has the jurisdiction to hear and
determine the action.” (Emphasis added.)
APPENDIX C
Transcript of hearing on Respondents’
Motion for Injunction September 29 1993
Sa
STATE OF MICHIGAN
IN THE PROBATE COURT
FOR THE COUNTY OF INGHAM
IN THE MATTER OF FILE NO. G-6372
THE WILLIAM F. DART TRUST HON. DONALD S
OWENS
UARDIAN AD LITEM’S MOTION FOR INTERVENTION
RESPONDENTS’ MOTION FOR INJUNCTION
BEFORE THE HONORABLE DONALD S. OWENS
Mason, Michigan — Wednesday, September 29, 1993
ow %
(THE COURT:] Mr. Driker says, “Well, they're more form
than substance, it’s basically the same; it’s the same transaction, or
occurrence, that these arise out of. You can call these by different
names, but, really, they're basically the same, and they ought to be
litigated here; and by the way, Judge, the Plaintiffs chose Michigan
as the forum for their action regarding this whole issue, the
Trusts, Reorganization, the Valuation, and so forth; and, since they
chose it they shouldn't be allowed now to go somewhere else just
because they have partially not succeeded on an issue.”
Now, I realize, for Tom Dart, if my decision that he is barred
by the statute of limitations from raising certain issues is upheld,
that that does prevent him from quite a bit, I realize that, and |
can certainly see why he might want to go someplace else where
he could litigate those issues and perhaps succeed. That would be,
of course, permitting a person to do an end-run around Michigan
law and decisions of this Court.
ee
And I think the authority of the case law is clear, and given the
enormous expense and time commitment and the possible losses
in this Court from duplicative legislation [sic, “litigation”], that
amounts to oppression, the case cited by Mr. Souris, the
Respondents in this case, and cannot be tolerated by our courts.
° fo) °
APPENDIX D
Order Affirming Injunction, May 17, 1994, Ingham County
(Michigan) Circuit Court Case No. 93-75904-A\
10a
STATE OF MICHIGAN
IN THE CIRCUIT COURT
FOR THE COUNTY OF INGHAM
Circuit Court
IN THE MATTER OF THE No. 93-75904-AV
WILLIAM F. DART TRUST (Hon. Lawrence M. Glazer)
Ingham County Probate
Court No. G-6372
ORDER AFFIRMING INJUNCTION
At a session of said Court, held in the Ingham
County Courthouse, City of Lansing, County of
ingham, State of Michigan on May 17, 1994
PRESENT: HON. Lawrence M. Glazer
Ingham Circuit Court Judge
Appellants, Thomas J. Dart and Judith L. Dart, appeal to this
Court from an Order Enjoining Petitioners Thomas J. Dart and
Judith L. Dart from Prosecuting Duplicative Litigation entered
on Octobe ‘r 15, 1993 by Ingham County Probate Judge Donald S.
Owens. The Court has considered the brief and re ply brief filed
by appellants, the brief filed by appe sllees, W.A. and Claire Dart
and Dart Financial Corporation, the brief filed by appellees,
Kenneth B. Dart and members of his family and Robert C. Dart
and members of his family, and the Report of the Guardian Ad
Litem. The Court has also heard oral argument of counsel for
appellants, appellees and the Guardian Ad Litem on April 22,
1994. After considering all of the briefs and arguments submitted,
IT IS HEREBY ORDERED that, for the reasons stated on the
record in open court on April 22, 1994, the Order Enjoining
Petitioners Thomas J. Dart and Judith L. Dart from Prosecuting
Duplicative Litigation entered by the Ingham County Probate
Court on October 15, 1993, is hereby affirmed in its entirety.
/S/
Lawrence M. Glazer
Ingham County Circuit Judge
lla
APPENDIX E
Complaint, July 11, 1994, Ingham County (Michigan) Probate
Court Civil Action No. 94-10386-CZ
12a
STATE OF MICHIGAN
IN THE PROBATE COURT
FOR THE COUNTY OF INGHAM
IN THE MATTER OF THE WILLIAM F. DART TRUST
THOMAS |. DART,
JUDITH C. DART.
individually and derivatively
on behalf of DART ENERGY
CORPORATION, COMPLAINT
Plaintiffs,
V.
W.A. DART, KENNETH DART, CIVIL ACTION
ROBERT DART, CLAIRE DART, NO. 94-10386-CZ
THE KENNETH B. DART RESIDUAL
TRUST, THE ROBERT C.
DART RESIDUAL TRUST,
BENJAMIN O. SCHWENDENER, JR. eet
RICHARD J. RASTALL, JURY TRIAL
ALAN VALADE. DEMANDED
DART FINANCIAL CORPORATION,
DART CONTAINER CORPORATION,
AMERICAN APPRAISAL
ASSOCIATES d/b/a
STANDARD RESEARCH
CONSULTANTS,
Defendants,
and DART ENERGY CORPORATION
and THE THOMAS J. DART
RESIDUAL TRUST,
Nominal Defendants
a tc OTE IT AT ALE OLED ES LAE LALA TE,
—~
ee ee ee ee er Srey
13a
Plaintiffs Thomas J. Dart and Judith L. Dart, for their
Complaint, represent as follows:
COUNT I
RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS ACT
18 U.S.C. §1962(b)
120. Paragraphs l through 119 are incorporated herein by
reference.
121. Each of the defendants conspired and agreed with the
remaining defendants to effectuate the scheme to defraud outlined
above, in violation of 18 U.S.C. § 1962(b).
Mailings
122. Having previously devised the scheme described above to
defraud plaintiffs and to obtain money and property from them by
means of false and fraudulent pretenses and representations, the
following defendants deposited or caused to be deposited the
following items in the United States mail on the dates indicated,
and addressed as indicated, for the purpose of executing that
scheme:
a. DATE: May, 1986
RECIPIENTS:
RESPONSIBLE
DEFENDANT:
SENDER:
CONTENTS:
RELATIONSHIP
TO SCHEME:
b. DATE: October, 1986
RESPONSIBLE
DEFENDANT
SENDER
RECIPIENTS:
CONTENTS:
RELATIONSHIP
TO SCHEME:
l4a
Morgan Stanley SRC
W.A. DART
Robert Gregory, at W.A. Dart's
instruction
Dart container financial statements,
organizational charts, tax sharing agree-
ment, and business summaries
Defendants. intended to, and did in
fact, retain an independent entity to
perform an appraisal so that the value
settled upon would appear objective
and fair. But defendants intended to,
and did in fact, manipulate the supply
of information to the company selected
so that the appraisal value in fact would
not be fair. The first step in this scheme
was, necessarily, to arrange for the
appointment of an unrelated entity to
perform the appraisal.
Benjamin 0. Schwendener, Jr.
Benjamin 0. Schwendener, Jr.
Idelle Hawitt, SRC
Letter outlining general premises of
the proposed reorganization
To facilitate SRC’s appraisal
ee
c. DATE: July, 1988
RESPONSIBLE
DEFENDANT:
SENDER SRC
RECIPIENTS:
CONTENTS:
RELATIONSHIP
TO SCHEME:
d. DATE: January, 1993
RECIPIENT:
RESPONSIBLE
DEFENDANT:
SENDER:
CONTENTS:
RELATIONSHIP
TO SCHEME:
W.A. Dart, Kenneth Dart, Robert Dart,
Benjamin 0. Schwendener, Jr., Richard
j. Rastall, Alan Valade
W.A. Dart, Robert Gregory
Draft SRC appraisal
An essential part of the scheme was
that SRC produce an appraisal that
appeared to be based on input from all
affected parties and on consideration of
all information supplied. To effectuate
this goal it was necessary for SRC to
allow Gregory as well as W.A. Dart to
see a draft of SRC’s work product and
to comment thereupon.
Thomas Dart
W.A. Dart
W.A. Dart
Fraudulent “promissory note” dated
1978
W.A. Dart refused to cause T-1 to pay
back funds it had borrowed from
Thomas Dart in order to prevent
Thomas Dart from being able to pay
attorneys to investigate and prosecute
the claims at issue in this Complaint
16a
and other claims. The fraudulent promis-
sory note was an effort to substantiate
W.A. Dart’s fraudulent claim that the
loan had never been made on its true
terms.
Each such mailing was a separate act of mail fraud in violation of
18 U.S.C. § 1341. Each was also a separate act of racketeering
activity within the meaning of 18 U.S.C. § 1961.
Wire Communications
123. Having previously devised the scheme described above to
defraud plaintiffs and to obtain money and property from them by
means of false and fraudulent pretenses and representations, the
following defendant transmitted or caused to be transmitted
information by wire in interstate commerce on the dates indicated,
and to the persons indicated, for the purpose of executing that
scheme:
a. DATE: August and September, 1986
RESPONSIBLE
DEFENDANT: W.A. Dart
PARTICIPANTS
IN CALL: W.A. Dart, Robert Gregory
SUBSTANCE OF
COMMUNICATION: WA. Dart directed Gregory that all
information and contact with SRC dur-
ing the appraisal should be exclusively
through W.A. Dart.
RELATIONSHIP
TO SCHEME: This directive enabled W.A. Dart to
control the flow of information to SRC,
and also enabled him to speak in confi-
dence to SRC when he ordered SRC to
produce an inaccurately low appraisal
of Dart Container.
b. DATE: February, 1987
RESPONSIBLE
DEFENDANT:
PARTICIPANTS
IN CALL:
SUBSTANCE OF
COMMUNICATION:
RELATIONSHIP
TO SCHEME:
c. DATE: March, 1987
RESPONSIBLE
DEFENDANT:
PARTICIPANTS
IN CALL:
SUBSTANCE OF
COMMUNICATION:
RELATIONSHIP
TO SCHEME:
d. DATE: June 3, 1991
W.A. Dart
W.A. Dart, Robert Gregory
This telephone conversation concerned
appraisal methods to be used by SRC.
W.A. Dart spoke by telephone with
Robert Gregory regarding the SRC
valuation in order to advance his and
the remaining defendants’ goal of ensur-
ing that SRC issued an appraisal that
appeared to be objective and exhaustive
but that in fact set a fraudulently low
value on Dart Container.
W.A. Dart
W.A. Dart, Robert Gregory
W.A. Dart instructed Gregory that all
data to be supplied to SRC should be
sent by Gregory to W.A. Dart, who
would then forward it to SRC.
This directive enabled W.A. Dart to
control the flow of information to SRC,
and also enabled him to speak in confi-
dence to SRC when he ordered SRC to
produce an inaccurately low appraisal
of Dart Container.
18a
RESPONSIBLE
DEFENDANT: W.A. Dart
PARTICIPANTS
IN CALL: W.A. Dart, Robert Gregory
SUBSTANCE OF
COMMUNICATION: _ This telephone conversation, which was
initiated by W.A. Dart, concerned
valuation methods and the SRC report.
Gregory stated his belief that SRC had
been ordered to produce an inaccurate-
ly low valuation of Dart Container. W.A.
Dart falsely stated that neither he nor
any other person had influenced SRC
in its valuation.
RELATIONSHIP
TO SCHEME: W.A. Dart made this statement to
conceal and advance his and the remain-
ing defendants’ scheme to obtain con-
trol over Dart Container at a price less
than the fair value of these assets.
Each such communication was a separate act of wire fraud in
violation of 18 U.S.C. § 1343, Each was also a separate act of
racketeering activity within the meaning of 18 U.S.C. § 1961.
124. The acts by each of these defendants were all related to
one another in that they shared a common goal, a common
method, and a common set of victims, all of which had been
jointly agreed upon by the defendants: the removal of Thomas
Dart from participation in Dart Container at the lowest possible
cost to T-2, T-3, Kenneth Dart, Robert Dart, Claire Dart, and
W.A. Dart, through misrepresentation of the value of the assets
taken from T-1. The lower the cost to these persons and entities,
the greater the injury to T-1, Dart Energy, Thomas Dart, and all
other beneficiaries of T-1. Each of the communications identified
in paragraphs 122 and 123 advanced this goal in the method
indicated.
1Ya
125. These acts satisfy the continuity requirement imposed by
the Racketeer Influenced and Corrupt Organizations Act in that
they each shared and together advanced a common goal, a
common method, a common set of victims, and in that they
continued over a period of at least eight years, from 1986 through
the present.
126. The mailings and wire communications were in furthcrance
of the scheme in that each either facilitated defendants’ goal of
causing SRC to produce an inaccurately low appraisal of SRC,
concealed the defendants’ awareness of the inaccuracy of the
valuation thus produced, or both.
The Enterprise
127. Dart Container Corporation is an enterprise engaged in
interstate and foreign commerce.
128. The purpose and effect of defendants’ scheme was to obtain
and maintain control over Dart Container ¢ vorporation. Defendants
achieved this goal through the pattern of racketeering activity
alleged in paragraphs 120 through 126 above, in violation of 18
U.S.C. § 1962(b).
129. Defendants bear the following relationship to the enterprise
NAME RELATIONSHIP
W.A. Dart Chairman of the Board
Kenneth Dart Officer and director
Robert Dart Officer and director
Claire Dart 50% shareholder
Benjamin 0. Schwendener, Jr. Director, Vice President
and Counsel
Richard J. Rastall Counsel
Alan Valade Counsel
130. The affairs of the enterprise affect interstate and foreign
commerce in that Dart Container maintains operations in at least
twelve states, and around the world, and has annual revenues in
excess of $900 million.
20a
COUNT Il
Racketeer Influenced and Corrupt Organizations Act
18 U.S.C. §1962(c)
131. Paragraphs 1 through 130 are incorporated herein by
reference.
132. An association in fact existed among defendants W.A.
Dart, Kenneth Dart, Robert Dart, Claire Dart, Benjamin 0.
Schwendener, Jr., Richard J. Rastall, and Alan Valade, which
constitutes an enterprise for purposes of 18 U.S.C. § 1962(c).
133. The shared purpose of this association in fact was the
removal of Thomas Dart from participation in Dart Container at
the lowest possible cost to T-2, T-3, Kenneth Dart, Robert Dart,
Claire Dart and W.A. Dart, through misrepresentation of the
value of the assets taken from T-1. The lower the cost to these
persons and entities, the greater the injury to T-1, Dart Energy,
Thomas Dart, and all other beneficiaries of T-1. Each of the
communications identified in paragraphs 122 and 123 advanced
this goal in the method there indicated and as more fully alleged
in paragraph 124 above.
134. The structure of this association in fact remained the same
from the time of its creation — when the goals identified in
paragraph 124 were agreed upon — through to the present. The
most active participants in the association in fact, and those
principally responsible for carrying out its goals, were and are
WA. Dart and Kenneth Dart.
135. Each of the defendants identified in paragraph 132
participated in the conduct of this association in fact through a
pattern of racketeering activity, as set forth in paragraphs 122 and
123 above.
136. The association in fact affected interstate commerce in
that its purpose and effect was to obtain control over Dart
Container Corporation, which is an entity engaged in interstate
commerce. The association in fact also affected interstate
commerce by using the mails and interstate wire communications
to effectuate its goal.
eA ae RO a i
91;
“wid
137. Plaintiffs Thomas Dart and Judith Dart were injured by
the association in fact in that the trust of which they are
beneficiaries suffered a loss of hundreds of millions of dollars as
a result of defendants’ successful effectuation of their scheme
138. Plaintiff Dart Energy was injured by the association in fact in
that, under the 1986 Reorganization Agreement, payments were
supposed to be made to Dart Energy sufficient to equalize the
value of that company and the value of one-third of Dart
Container. As a result of defendants’ scheme, effectuated through
the association in fact alleged herein, these payments were
hundreds of millions of dollars less than they should have been
99
aed
APPENDIX F
Thomas ] Dart’s First Amended Petition, October 2. 1992.
Ingham County (Michigan) Probate Court File No. G-6372
ee
23a
STATE OF MICHIGAN
PROBATE COURT
COUNTY OF INGHAM
FIRST AMENDED
PETITION
FILE NO. G-6372
In the matter of William F. Dart Trust
77. In July 1990, when Petitioner was in W.A. Dart's office
W.A. Dart gave Petitioner a document which has subsequently
been marked as Petitioner's Deposition Exhibit P-15. Petitioner
was asked to sign this document in order to guarantee Dart
container of California a “most favored customer” status as a Dart
Energy customer, and hence advance certain tax arguments being
made to the California taxing authorities. In reviewing this
document, Petitioner noted that buried within it were waivers of
objections to the 1986 Reorganization and its valuations. Petitioner
refused to sign the document
APPENDIX G
W.A. Dart’s Deposition Transcript, August 26, 1992, Ingham
County (Michigan) Probate Court File No. G-6372
25a
STATE OF MICHIGAN
IN THE PROBATE COURT
FOR THE COUNTY OF INGHAM
IN RE: WILLIAM F. DART TRUST VOLUME Il
VIDEO DEPOSITION
of WILLIAM A. DART, a witness called by Petitioner, taken
before Diane M. Spaniolo, Certified Shorthand Reporter and
Notary Public, on Wednesday, August 26, 1992, at 313 South
Washington Square, Lansing, Michigan, noticed for the hour of
9:00 a.m.
Q [BY MR. BOIES:] Let me turn to Exhibit P-15. You
indicated that you had told Mr. Schwendener to take out certain
language related to valuation. That language relating to valuation
that you instructed Mr. Schwendener to take out was language
contained in Exhibit P-15 is that correct?
A Yes.
Q. How did you happen to tell Mr. Schwendener to take
this language out?
A. I believe Tom contacted me and told me that he
wouldn't sign it with that in there.
Q. Do you recall meeting with your son Tom on or shortly
before July 11, 1990 in your office?
A. I don’t remember that specific date, but perhaps you can
refresh my memory with what may have occurred.
Q. Do you recall a time in or about the summer of 1990,
which I believe was in July, when your son Tom visited you in
your office and had with him one of his sons, one of your
grandchildren, and you gave him a copy of Exhibit P-15?
A. I don't recall that specifically.
Q. Do you recall that generally?
A. I didn’t recall handing this to Tom directly.
26a
APPENDIX H
Notice of Voluntary Dismissal, September 2 1994.
Ingham County Probate (Michigan) Court
Civil Action No. 94-10386-CZ
27a
STATE OF MICHIGAN
IN THE PROBATE COURT
FOR THE COUNTY OF INGHAM
IN THE MATTER OF THE WILLIAM F. DART TRUST
THOMAS J. DART.
JUDITH C. DART,
individually and derivatively
on behalf of DART ENERGY
CORPORATION,
Plaintiffs,
v.
W.A. DART, KENNETH DART,
ROBERT DART, CLAIRE DART,
THE KENNETH B. DART RESIDUAL
TRUST, THE ROBERT C.
DART RESIDUAL TRUST,
BENJAMIN O. SCHWENDENER, JR.,
RICHARD J. RASTALL,
ALAN VALADE,
DART FINANCIAL CORPORATION,
DART CONTAINER CORPORATION,
AMERICAN APPRAISAL
ASSOCIATES d/b/a
STANDARD RESEARCH
CONSULTANTS,
Defendants,
and DART ENERGY CORPORATION
and THE THOMAS J. DART
RESIDUAL TRUST,
Nominal Defendants
NOTICE OF
VOLUNTARY
DISMISSAL
CIVIL ACTION
NO. 94-10386-CZ
The Plaintiffs, Thomas J. Dart and Judith L. Dart, by their
attorneys, voluntarily dismiss this civil action, without prejudice,
28a
pursuant to MCR 2.504(A)(1)(a). To the best of our knowledge,
no adverse party has served an answer or a motion under MCR.
2.116.
FRASER, TREBILCOCK,
DAVIS & FOSTER, P.C.
September 2, 1994
By: /s/
Everett R. Zack (P22675)
Michael E. Cavanaugh
(P11744)
1000 Michigan National Tower
Lansing , MI 48933
(517) 482-5800
BODMAN, LONGLEY & CRAVATH, SWAINE &
DAHLING MOORE
Theodore Souris (P20803) David Boies
Charles N. Raimi (P29746) Worldwide Plaza
100 Renaissance Center 825 Eighth Avenue
34th Floor New York, NY 10019
Detroit, Michigan 48243 (212) 474-1000
(313) 259-7777
Attorneys for Plaintiffs
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.