Opposition Brief — Shoen v. Shoen
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Supreme Court, U.S.
No. 98-86 FILED
In The
Supreme Court of the An
oe
October Term, 1997
EDWARD J. SHOEN,
Petitioner.
SAMUEL W. SHOEN, CECILIA M. SHOEN-HANLON,
THERESA SHOEN-ROMERO, KATRINA M. SHOEN-
CARLSON, MICHAEL L. SHOEN, LEONARD S. SHOEN,
SAMWILL, INC., CEMAR, INC., KATTYDID, INC.,
THERMAR, INC., MICKL, INC. and L.S.S., INC.,
Respondents.
On Petition for Writ of Certiorari to the
Arizona Court of Appeals
RESPONDENTS’ BRIEF IN OPPOSITION
WALTER GILMORE “GIL” SHAW KATHLEEN COUGHENOUR
ANGELO PATANE Counsel of Record
SHAW & PATANE KATHLEEN COUGHENOUR
1432 North Seventh Street LAW OFFICE
Phoenix, Arizona 85006 4220 West Northern Avenue
(602) 257-0058 Suite 115
Phoenix, Arizona 85051-5757
(602) 934-6563
Attorneys for Respondents
148027 (800) 274-3321 * (800) 359-6859
COUNSEL PRESS
QUESTIONS PRESENTED
1. Does imposition of punitive damages on one member
of a board of directors who acted with particular malice, and
who caused other directors to take actions that constituted
breaches of fiduciary duty by the entire board, comply with the
Due Process Clause of the Fourteenth Amendment to the United
States Constitution?
2. Does imposition of punitive damages against defendant
based upon the motives underlying conduct, when proven by
clear and convincing evidence, comply with the Due Process
Clause of the Fourteenth Amendment to the United States
Constitution?
3. Has petitioner waived his right to bring a challenge to
the punitive damage award under the Equal Protection Clause
of the Fourteenth Amendment to the United States Constitution,
by failing to raise that challenge in the trial court or before the
Arizona Court of Appeals?
4. If petitioner has not waived his right to bring an equal
protection challenge, does the award of punitive damages
imposed on him, based on tortious conduct motivated by malice
and a particular motive to injure respondents, comply with the
Equal Protection Clause of the Fourteenth Amendment to the
United States Constitution.
il
PARTIES TO THE PROCEEDING
AND RULE 29.6 STAT®MENT
Petitioner Edward J. (“Joe”) Shoen was petitioner/cross-
respondent before the Arizona Supreme Court, appellant/cross-
appellee before the Arizona Court of Appeals, and defendant
before the Arizona Superior Court in Maricopa County.
Respondents Samuel W. Shoen, Cecilia M. Shoen-Hanlon,
Theresa Shoen-Romero, Katrina M. Shoen-Carlson, Michael
L. Shoen, Leonard S. Shoen, Samwill, Inc., Cemar, Inc.,
Kattydid, Inc., Thermar, Inc., Mickl, Inc., and L.S.S., Inc., were
respondents/cross-petitioners before the Arizona Supreme Court,
appellees/cross-appellants before the Arizona Court of Appeals,
and plaintiffs before the Arizona Superior Court in Maricopa
County.
Each corporation named above has no parent companies,
nor does any corporation named above have any ownership
interest in any nonwholly owned subsidiary.
ili
TABLE OF CONTENTS
EE er ee
Parties to the Proceeding and Rule 29.6 Statement ...
a eS sae be ken eeen
ieee aenee essen
wie bash aoe ks
Reasons for Denying the Writ ............seceeees
I.
The Decisions Of The Arizona Courts, And Their
Application Of Nevada Law, Are Completely
Consistent With This Court’s Rulings On Punitive
Damages, And Do Not Require Review. ......
A.
The Law Applied by the Trial Court Provided
Adequate Protection for the Due Process
ge ae ee
l.
The award in this case is not
constitutionally infirm as a deprivation
OEE MOORS, oc cee css cesses
Nothing in Nevada law prohibits
holding one joint tortfeasor liable for
punitive damages even when others are
not similarly liable, when such liability
is justified by the facts of a particular
Page
il
ill
1]
13
iv
Table of Cited Authorities
3. The evidence before the trial court
established a causal nexus between Joe’s
malicious conduct and the harm
suffered by the respondents. ........
Joe Shoen Did Not Adequately Raise an
Equal Protection Argument Below, and Is
Barred from First Raising Such an Argument
ae ee mere! Sag Cpe ee
Even If the Equal Protection Challenge Had
Been Timely Raised, the Award in this Case
Did Not Deprive Joe Shoen of the Equal
Protection of the Laws Applied. ........
BRE eer rer, were Age eaaperd Si nostn tener ay
TABLE OF CITED AUTHORITIES
Cases Cited:
Bankers Life & Casualty Co. v. Crenshaw, 486 U.S. 7i
(1988)
ee er ee Oe ee ee ee a ee ee ee ee ee ee ee oe ee ee eo a ee ee
BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ..
Coughlin v. Tailhook Ass'n, 112 F.3d 1052 (9" Cir.
1997)
oe ee i es a em ee oe ee ee ee ee oe kr ee ee ee ee bee
Granite Constr. Co. v. Rhyne, 817 P.2d 711 (Nev.
1991)
26:60 9 Ce. 68 £42 8S Oe 6.264 2 6S Oo . OS: Oe 6'8 6.0 2S 4:51) 30
Page
18
19
19
15
Table of Cited Authorities
Page
Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415 (1994) ;
She's se xa Ae COP RES RAR DOG REED ee ewe eet 13
Hotel Riviera, Inc. v. Short, 396 P.2d 855 (Nev. 1964)
Eee w kb AOC RAG ee a ee ke 16, 17
Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1
SPOR es i dee 8 Rone PASE a 12, 13
TXO Production Corp. v. Alliance Resources Corp., 509
Rea SG LOE: 5-05 ws Al wa oe ee es Beene 13
Statutes Cited:
Pe Se a Se EE hey caves es ke eee eau xs 15
Pee Bec es ae EES 0 16 kao adobe crests 14
United States Constitution Cited:
POTOSONE AATMONOINOR cook i koa ee dawn Winns eee A, 12, 13
Rule Cited:
United States Supreme Court Rule 10 .............. 4
Other Authority Cited:
Annot., Apportionment of Punitive or Exemplary
Damages as Between Joint Tortfeasors, 20 A.L.R.3d
Se RRO Wirthdin co 4 sh a BAA ea ess 15, 16
vi
APPENDIX
Page
Appendix A — Transcript Of Proceedings .......... la
Appendix B — Defendant Edward J. Shoen’s Motion For
Judgment Notwithstanding The Verdict Or,
Alternatively, For Remittitur Of Punitive Damages
Dated Octolet: 2ay Te ice yeaa chika e eens 164a
Appendix C — Appellant’s Opening Brief Dated
November 20, SFRO svikis teak ev chee eaenenaiws 183a
]
Respondents Samuel W. Shoen, Cecilia M. Shoen-Hanlon,
Theresa Shoen-Romero, Katrina M. Shoen-Carlson, Michael
L. Shoen, Leonard S. Shoen, Sarwill, Inc., Cemar, Inc.
Kattydid, Inc., Thermar, Inc., Mickl, Inc., and L.S.S., Inc.
respond in opposition to the Petition for a Writ of Certiorari
submitted by Petitioner Edward J. (“Joe” Shoen), and request
that the court deny certiorari.
STATEMENT OF THE CASE
Introduction. In his Petition for a Writ of Certiorari,
Petitioner Edward Joseph (“Joe”) Shoen repeats the same tactics
he has already found unsuccessful before the Arizona courts —
to rely on a 1988 opinion dealing with an appeal of a very
limited four-day preliminary injunction hearing, rather than
acknowledging the substantial and significant additional
evidence presented during a seven-week trial some six years
later. According to Joe, his liability in this case is premised on
certain limited collective actions of the Board of Directors and,
as a result, an award of punitive damages against him alone
cannot be justified under the law of Nevada, which all parties
concede applies in this case.
Joe disregards the facts that were the basis for the jury's
finding that he breached his fiduciary duty to Respondents.
The only issue appealed in this case was the punitive damage
award. Joe Shoen’s breach of fiduciary duty, and the amount of
compensatory damages, thus were conclusively established in
the trial court. The trial court, and the Arizona Court of Appeals,
properly applied the law of Nevada to all the facts presented,
including those facts discovered by the plaintiffs after the 1988 -
preliminary injunction application. They correctly concluded
that those facts more than adequately justify an award of punitive
damages against Joe Shoen. Nothing in Joe’s Petition compels
a contrary conclusion, or justifies a grant of review by this Court.
2
Facts. The facts set out by Petitioner are incomplete, at
best. The events of July 24, 1988, while a substantial factor in
the suit against the AMERCO Board of Directors, were not the
only bases for plaintiffs’ claims against the Board, or against
Joe Shoen. Those events began years earlier, and continued for
years thereafter, as discussed in the opinion of the Arizona Court
of Appeals (Appendix A to Petition, at 2a-9a).
The events of July 24 and 25, 1988 followed a
shareholders’ advisory meeting at which liquidity options for
family members were discussed. At that meeting, Joe Shoen
physically assaulted his brother Sam, who became one of the
plaintiffs who brought the suit against the Board. This assault
effectively broke up the meeting. Reporter’s Transcript of
Proceedings, September 1, 1994, 1:30 p.m., pages 59-60
(hereinafter, e.g., 9/1/94 p.m. 59-60) (cited portions of the trial
transcript are included in Appendix A to this Brief).
A week later, while respondents were in New York
exploring liquidity options for their AMERCO stock, Joe hastily
called a Board of Directors’ meeting for 9:00 p.m. on Sunday,
July 24, 1988. 8/31/94 p.m. 52. Testimony from other directors
made it clear they relied almost exclusively on information
provided by Joe Shoen regarding the activities of the dissident
family members — information that Joe characterized as fact,
but for which he never revealed his “confidential” source.
9/29/94 p.m. 33-34; 10/4/94 p.m. 82-85; 9/15/94 a.m. 32-33,
ats
At trial six years later, Joe finally revealed his purported
source for this “privileged” and “confidential” information.
According to Joe, his information that the dissenting family
members were engaged in an imminent sale of the company to
a corporate raider came from a tape recording delivered to him
at his office, after business hours, by a mystery woman he had
never seen before or since. According to Joe, this purported
SS ee
3
tape contained a conversation between his brother, Sam, and
Sam’s attorney, David Victor, discussing plans regarding
AMERCO. Joe claimed he listened to the tape, allegedly played
it for his brother Mark (who did not testify at trial), and then
destroyed it. At trial, Joe acknowledged that, until a few days
before his testimony, he had never revealed the existence of
this purported tape, even to his own attorneys. He had not told
the other directors the alleged source of itis information, but
had told them he knew for a fact that the information he had
given them was true. 9/28/94 a.m. 10-23; see also 9/27/94 p.m.
52, 66-71.
Joe thus convinced the Board that the “dissident” family
members (who became the plaintiffs in the suit against the
AMERCO Board members) were bent on breaking up the
company and selling it off. Paul Bilzerian, a notorious corporate
takeover advisor in the 1980’s, was consistently placed at the
center of Joe’s scenario of what was in store for AMERCO.
9/29/94 p.m. 33-34. At trial, however, Joe admitted that the
only basis for this claim was his knowledge that Sam had once
had lunch with Bilzerian, and that Sam and Bilzerian had
graduated from Harvard Business School the same year.
10/4/94 p.m. 8-9.
Joe also withheld from Jock Patton, the Board’s attorney,
the fact that on June 24, just before the Sunday night Board
meeting, Joe had formed a voting trust with three brothers and
a sister, which would effectively control 45.8% of the company.
9/20/94 a.m. 98, 100, 105-106. He also did not tell non-family-
member directors about the voting trust. 9/26/94 a.m. 95,
10/4/94 p.m. 105-106.
At approximately midnight on Sunday, July 24, 1988, the
Board took the action Joe contends was the sole basis for his
liability: it voted to issue AMERCO’s 8,099 authorized but
4
unissued shares to five employees. 8/31/94 p.m. 52. These
employees thereupon gave their votes to the Board, which in
turn gave the votes to Joe. 9/26/94 p.m. 34-35. Unbeknownst
to the Board’s attorney or the non-family-member directors,
those shares bootstrapped Joe and his secret voting trust into
absolute control of AMERCO, with a bare majority of the voting
stock. 8/31/94 p.m. 52-53. Each of the five employees was
required by Nevada statute to make a down payment of
$162,000. The balance of the $4.3 million purchase price
required of each was “secured” by non-recourse promissory
notes. 9/20/94 a.m. 77-79; 9/26/94 a.m. 91-93. Because the
employees lacked the resources to pay even the down payment,
Joe Shoen personally “financed” the down payments from his
children’s conservatorship accounts. 8/31/94 p.m. 77, 9/28/94
a.m. 44,
Although the July 1988 share issuance began the breaches
of fiduciary duty that were the subject of plaintiffs’ claims against
the Directors, it was only the foundation of the damages awarded
against the Board and Joe Shoen. Further breaches of fiduciary
duty continued virtually unabated until the 1994 trial. The
wrongs alleged at trial by the plaintiffs included:
* Issuing the 8,099 shares to dilute plaintiffs’ then
majority so as to give conirol to defendants (8/31/94
p.m. 51-54);
* Authorizing dilution stock to retain a future majority
(9/7/94 a.m, 89-90): creating an executive stock option
program, which could be used to create a new majority
(10/3/94 p.m. 20-23): tolling interest on director Dodds’
Stock purchase note to retain a majority (9/7/94 p.m.
42-43); authorizing issuance of new special voting
preferred stock, and giving power to determine the
amount issued, as well as contro! of the votes of any
5
such stock issued, to Joe Shoen and his employee,
Charlie Bayer (9/7/94 p.m. 13-16, 10/4/94 a.m. 32-
33); allowing three family members (Joe, Mark, and
Jim Shoen) to exchange common stock for Common
Series A, to which can be attached special voting rights
(10/3/94 p.m. 15-18); but refusing to adopt a fair price
provision recommended by attorney Jock Patton
(10/3/94 p.m. 62-64).
* Holding shareholders’ meetings in remote locations so
as to discourage attendance (9/14/94 a.m. 69-71);
conducting a ten-minute shareholder meeting in a remote
location, then refusing to accept plaintiffs’ ballots, and
instead requiring them to drive at least four hours to
locate the nearest open post office before midnight (9/
12/894 a.m. 48-49); changing procedures to make
nominations more difficult (9/7/94 a.m. 86-87);
prohibiting electronic or stenographic recording at
shareholder meetings (9/7/94 a.m. 84-85, 9/13/94 p.m.
84-85); eliminating voting by written consent (9/7/94
a.m. 87-88); prohibiting write-in ballots when their
opponents held a majority, but allowing write-in voting
when their opponents were in a minority (9/13/94 p.m.
65-84); misleading a non-family-member shareholder
aligned with the plaintiffs that a nomination had been
properly made, then declaring the nomination invalid
(9/13/94 p.m. 92-97); and pre-electing directors before
an annual shareholder meeting (9/26/94 p.m. 39-40,
9/13/94 a.m. 59-60, 9/6/94 p.m. 27-31, 9/13/94 p.m.
65-69, 9/12/94 a.m. 48-49),
¢ Passing oppressive Bylaw provisions, then requiring a
“super-majority to amend them (9/7/94 a.m. 89);
creating a “poison pill” with a one-way “super-majority”
requirement (8/31/94 p.m. 55-57); creating “golden
ea
6
parachutes” with the same effect as the “poison pill”
(10/3/94 p.m. 31-32); amending the bylaws to require
50% of the shareholders to call a shareholder meeting
(Trial Ex. 329) and to require a two-thirds “super-
majority” to approve any sale or merger not
recommended by the Board (10/3/94 p.m. 22-23);
Staggering the terms of the AMERCO Board to delay
by three years any transfer of control (9/7/94 a.m. 90-
91), and creating staggered terms for the boards of
AMERCO’s three largest subsidiaries, thereby further
delaying the time required for a new shareholder
majority to obtain actual control of the AMERCO
system (10/3/94 p.m. 5-15); amending the Bylaws to
give the Chairman (Joe Shoen) two votes (9/7/94 p.m.
10-11); amending the Bylaws so directors could appoint
their own replacements and thus bypass a shareholder
election (10/3/94 p.m. 30); and reducing the annual
meeting quorum requirements to compensate for the
loss of two members of Joe’s voting trust (9/7/94 p.m.
11-12);
- Establishing an employee stock ownership plan with
non-pass-through voting (9/7/94 a.m. 56): appointing
defendants and their employees as ESOP trustees
(10/3/94 a.m. 38-42, 11-17); causing the ESOP to join
Joe Shoen’s voting trust (9/7/94 a.m. 91-93); breaching
a federal court settlement by placing the dilution shares
into the ESOP, and thereby removing those shares from
the state court’s jurisdiction (8/31/94 p.m. 83-86).
Taking away plaintiffs’ employment and their life and
health insurance (8/31/94 p.m. 67-68, 9/13/94 a.m.
57-58); selectively withholding dividends from plaintiff
Sam Shoen, forcing him to sue for payment (8/31/94
p.m. 4-5); invoking the corporation’s right of first
7
refusal to bar plaintiff Michael Shoen from gifting stock
(9/7/94 a.m. 93-94), but waiving that right of first
refusal for members of Joe Shoen’s voting trust
(9/14/94 p.m. (2) 7); accelerating pre-payment of a non-
delinquent mortgage owed by Michael Shoen to an
AMERCO subsidiary (9/7/94 p.m. 5-6); causing
AMERCO to fund Joe Shoen’s personal lawsuits against
the plaintiffs (9/7/94 p.m. 12); and causing the
corporation to retain and compensate as consultants
shareholders who joined defendants’ voting trust
(10/3/94 p.m. 23).
These acts stood against a backdrop of Joe Shoen’s unique
and malicious acts, which were not shared with the other
defendants. Joe himself personally terminated his own father’s
employment contract, and admitted at trial his father had not
breached the contract. L.S.’s health insurance was also
terminated, but Joe commented that he wasn’t worried about
this, because he understood his father would be eligible for
Medicaid. 9/28/94 a.m. 44, 47-54; 8/25/94 p.m. 100-102. At
the age of 73, the founding father of AMERCO, having given
all but two percent of his stock to his children, thus found
himself, as a direct result of Joe’s actions, without a job, without
medical insurance, and with minimal financial resources. He
was forced to sell his home, buy a modest tract house, and
begin several new business to provide himself with income.
8/25/94 p.m. 105-106.
Joe, who had assaulted his brother Sam at the June 16
shareholder advisory meeting, assaulted his brother Mike at a
subsequent annual shareholder meeting. 9/7/94 a.m. 79-82;
8/31/94 p.m. 93-96, 9/13/94 a.m. 59. Joe alone, of all the
directors, testified he was angry with his brother Sam, and
believed Sam was out to personally destroy him. 9/27/94 p.m.
45; 9/28/94 p.m. 51-53, 8/25/94 p.m. 29. Joe admitted that his
separate personal litigation against his father and his brother
8
Mike was funded by AMERCO. 9/7/94 p.m. 12. In 1989, Joe
told attorney Steve Case that he wanted to make life as difficult
as possible “under any pretext” for Mike, L.S., Sam, and Mary
Anna, in connection with stock reorganization of their holding
companies, through which they owned the AMERCO stock,
and which companies were also plaintiffs in the litigation.
9/14/94 p.m. (1) 42-45. Joe’s sister Katrina testified about how
Joe coddled her over a period of time, frightened her with stories
that “Sam wanted to sell the company . . . out from under us,”
and provided her such goodies as a free Corvette. 9/1/94 p.m.
31-32, 54.
Katrina told the jury about a shareholder meeting Joe
enticed her and Theresa to attend, under the guise that their
opinions were valuable and needed. As it turned out, Joe only
wanted them there to make up a quorum so the shareholders
could approve an ESOP. She testified that, after the meeting,
Joe celebrated like someone “who just won a major league
basebali championship,” and she felt she had been used. At that
point, Katrina began to have serious doubts that Joe’s actions
in running the company were objective. 9/1/94 p.m. 42-47.
Theresa testified about the same event, in essentially the
same manner, stating the meeting was called to order as soon as
she walked in. She felt she had been “railroaded” to enable Joe
and his cronies to pass an ESOP that had been turned down by
the majority of the shareholders less than six months before.
9/13/94 a.m. 45-48. Only months before the 1994 trial began,
Joe offered Theresa an opportunity to join his voting trust in
exchange for liquidity for her stock, but told her he would
never allow L.S., Mike, or Sam to achieve any liquidity for
their stock. 10/5/94 a.m. 88-90.
During his trial testimony, Joe Shoen testified about the
value of AMERCO stock (9/28/94 p.m.(1) 6). A trial exhibit
ee eee
9
revealed to the jury the number of shares he owned; a simple
mathematical calculation would have set the value of his
AMERCO stock, based on his own testimony and on evidence
presented to the court, at more than $70 million. 9/28/94 p.m.
(1) 6-7; Trial Ex. 534. Joe also told the jury that his salary for
fiscal year 1994 had been $207,798, and that he had received a
bonus of $2,101,490. 9/29/94 a.m. 38-40.
On October 6, 1994, at the end of a seven-week trial, Judge
Thomas Dunevant III instructed the jury regarding the claims
they would need to decide. 10/6/94 a.m. 4-20. The court
instructed the jury that plaintiffs were asserting claims against
all the defendants for tortious breach of fiduciary duty
(10/6/94 a.m. 10-11), and that plaintiffs also claimed punitive
damages should be assessed against Joe Shoen in connection
with the breach of fiduciary duty claim (10/6/94 a.m. 17). The
jury was clearly instructed on the standard to apply to determine
these claims:
Some of the claims in this case require proof by
clear and convincing evidence.
A party who has the burden of proof by clear
and convincing evidence must persuade you by the
evidence that the claim is highly probable. This
standard is more exacting than the standard of more
probably true than not true, but it is less exacting
than the standard of proof beyond a reasonable
doubt.
If you find the director defendant Edward J.
Shoen liable to plaintiffs for plaintiffs’ breach of
fiduciary duty claim, you may consider whether
10
additional damages called exemplary or punitive
damages should be awarded to plaintiffs and assessed
against defendant Edward J. Shoen. The purpose of
punitive damages is to punish the wrongdoer and to
deter similar conduct by others. However, such
damages cannot be awarded on the basis of plaintiffs’
breach of contract claim.
To recover such damages, plaintiffs have the
burden of proving by clear and convincing evidence
that Edward J. Shoen has been guilty of oppression,
fraud, or malice, express or implied. In order to
prove oppression, fraud, or malice, express or
implied, plaintiffs must prove conduct, which forms
the basis of plaintiffs’ breach of fiduciary duty claim,
motivated by hatred and ill-will and the deliberate
and evil intent to injure plaintiffs.
To prove such guilt by clear and convincing
evidence, plaintiffs must persuade you that the
punitive damages claim is highly probable. This
burden of proof is more exacting than the standard
of more probably true than not true, which applies
to all other claims in this case, but is less exacting
than the standard of proof beyond a reasonable
doubt.
10/6/94 a.m. 9-10, 17-18.
The jury deliberated, and concluded that the Board had
breached a fiduciary duty to the plaintiffs, and awarded nearly
$1.5 billion in damages. The jury also concluded that defendant
Edward J. Shoen had been guilty of
oppression, fraud or malice through conduct, which
forms the basis of a breach of fiduciary duty owed
SER etre nett Mere
eee ner eee ere ee
1]
to the plaintiffs, motivated by hatred and ill-will and
the deliberate and evil intent to injure plaintiffs,
and imposed $70 million in punitive damages against Joe Shoen.
10/7/94 p.m. 3-4.
Post-trial motions ensued, including Joe Shoen’s Motion
for Judgment Notwithstanding the Verdict or, Alternatively, for
Remittitur of Punitive Damages (Appendix B.) Judge Dunevant
reduced those sums following post-trial motions, to $461 million
and $7 million, respectively. Joe Shoen then appealed only the
grant of punitive damages (see Appellant’s Opening Brief,
Appendix C). In his post-trial motions and his brief in the
Arizona Court of Appeals, Joe challenged the punitive damage
award as violative of due process, but did not raise an equal
protection issue.
REASONS FOR DENYING THE WRIT
I.
THE DECISIONS OF THE ARIZONA COURTS, AND
THEIR APPLICATION OF NEVADA LAW, ARE
COMPLETELY CONSISTENT WITH THIS COURT’S
RULINGS ON PUNITIVE DAMAGES, AND DO NOT
REQUIRE REVIEW.
Review on certiorari “is not a matter of right, but of judicial
discretion.” Rule 10, Rules of the Supreme Court of the United
States. Such review of a state court decision is granted in two
limited circumstances:
(b) When a state court of last resort has decided an
important federal question in a way the conflicts
with the decision of another state court of last
12
resort or of a United States court of appeals.
lor]
(c) When astate court... has decided an important
question of federal law which has not been,
but should be, settled by the Supreme Court,
or has decided a federal question in a way that
conflicts with applicable decisions of the
Supreme Court.
Id. In this case, review is not appropriate. The conduct of Joe
Shoen was not “indistinguishable from that of every other
member of the board,” as alleged in the Petition. Instead, Joe
Shoen’s conduct clearly demonstrated the malice underlying
his calculated orchestration of the actions that literally destroyed
the value of the plaintiffs’ stock in AMERCO. The decision of
the Arizona Court of Appeals correctly applied the applicable
law to the facts of this case, and this Court need not review that
decision.
A. The Law Applied by the Trial Court Provided Adequate
Protection for the Due Process Right of Joe Shoen.
Petitioner first argues that the punitive damage award against
him violates due process. That assertion cannot be supported.
Repeated constitutional challenges to punitive damage
awards imposed by state courts have been raised before the
United States Supreme Court, particularly since 1988. See, e.g.,
Bankers Life & Casualty Co. v. Crenshaw, 486 U.S. 71 (1988)
(challenging constitutionality of punitive damage award
pursuant to Eighth Amendment prohibition against excessive
fines); Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1 (1991)
(challenging constitutionality of punitive damage award as
violative of the Due Process Clause of the Fourteenth
13
Amendment); TXO Production Corp. v. Alliance Resources
Corp., 509 U.S. 443 (1993) (challenging constitutionality of
punitive damage award as violative of substantive due process).
The rule developed in these cases has been that punitive
damage awards survive constitutional challenges based on due
process if state law provides certain procedural safeguards, and
do not if those safeguards are not present. See, e.g., Honda
Motor Co., Ltd. v. Oberg, 512 U.S. 415 (1994) (reversing award
of punitive damages because Oregon law does not provide for
judicial review for excessiveness).
1. The award in this case is not constitutionally infirm as
a deprivation of due process.
Haslip sets out in detail the kinds of procedures necessary
to protect against abuses of punitive damages that might lead to
constitutional violations. Haslip, 499 U.S. at 19-23. These
include: (1) instructions that enable the jury to determine the
nature and purpose of punitive damages and to enable them
reasonably to determine whether to impose such damages and
in what amount, id. at 19-20; (2) post-trial procedures at the
trial court level for scrutinizing punitive damage awards, id. at
20; (3) appellate review of punitive damage awards, id. at 20-
21.
All the procedural protections approved by the Supreme
Court not only are present in this case, but also have been utilized
by Joe Shoen. All parties agreed that Nevada law applied in
this case, and punitive damages under Nevada law are strictly
limited by statute:
Except as otherwise provided in NRS 42.007, in an
action for the breach of an obligation not arising
from contract, where it is proven by clear and
ee
14
convincing evidence that the defendant has been
guilty of oppression, fraud or malice, express or
implied, the plaintiff, in addition to the
compensatory damages, may recover damages for
the sake of example and by way of punishing the
defendant. Except as otherwise provided in this
section or by specific statute, an award of exemplary
Or punitive damages made pursuant to this section
may not exceed:
(a) Three times the amount of compensatory
damages awarded to the plaintiff if the amount of
compensatory damages is $100,000 or more: or
(b) Three hundred thousand dollars if the
amount of compensatory damages awarded to the
plaintiff is less than $100,000.
Nev. Rev. Stat. § 42.005(1) (emphasis added).' The jury was
1. The states of mind supporting punitive damages were codified by
the Nevada Legislature in 1995:
1. “Conscious disregard” means the knowledge of the
probable harmful consequences of a wrongful act and a willful
and deliberate failure to act to avoid those consequences.
2. “Fraud” means an intentional misrepresentation,
deception or concealment of a material fact known to the person
with the intent to deprive another person of his rights or property
or to otherwise injure another person.
3. “Malice, express or implied” means conduct which is
intended to injure a person or despicable conduct which is
engaged in with a conscious disregard of the rights or safety of
others.
(Cont'd)
ae a a
15
fully instructed on that standard for imposing punitive damages
— a standard that required the jury to find that it was “highly
probable” that Joe’s conduct justified imposition of such
damages.
Joe filed a post-verdict motion seeking relief from the award;
indeed, Joe himself admits that the jury’s original award was
reduced from $70 million to $7 million as a result of the post-
trial procedures in this case. Finally, Joe Shoen already has had
full access to Arizona’s appellate courts. This Court need not
provide further review.
2. Nothing in Nevada law prohibits holding one joint
tortfeasor liable for punitive damages even when others
are not similarly liable, when such liability is justified
by the facts of a particular case.
Not all jurisdictions agree on whether punitive damages
may be imposed on a single defendant and not on others if the
defendants are jointly and severally liable for the underlying
wrong. See generally Annot., Apportionment of Punitive or
Exemplary Damages as Between Joint Tortfeasors, 20 A.L.R.3d
666 (1968). That annotation recognized the majority rule, with
which Nevada courts agree, that
(Cont'd)
4. “Oppression” means despicable conduct that subjects a
person to cruel and unjust hardship with conscious disregard
of the rights of the pérson.
Nev. Rev. Stat. § 42.001. Although these definitions were not included in
the Nevada statutes at the time this case was decided, they were adopted
from Nevada case law that was controlling at the time this case was tried.
Coughlin v. Tailhook Ass'n, 112 F.3d 1052, 1055-56 (9" Cir. 1997), citing
Granite Constr. Co. v. Rhyne, 817 P.2d 711 (Nev. 1991).
OE
16
[Jn an action against joint tortfeasors punitive or
exemplary damages may be awarded in different
amounts against the several defendants or they may
be awarded against one or more of the defendants
and not others, depending upon the differing degree
of culpability or the existence or nonexistence of
actual malice on the part of the defendants.
Id. at 668-69. That annotation cites, among other cases, Hotel
Riviera, Inc. y. Short, 396 P.2d 855 (Nev. 1964), a case
defendant vainly attempted to distinguish from this one in the
Arizona courts. The court in that case did hold defendants had
waived their right to assert error in a form of verdict that
permitted the jury to assess punitive damages against two
defendants but nct against a third. Hotel Riviera, 396 P.2d at
863. It did not stop there, however, but made its position on
this issue quite clear:
The proper rule, . . . appears to be:
* * * that the jury, in an action against joint tort-
feasors, may make awards for exemplary damages
in different amounts, depending upon what the
evidence shows and the jury finds to be the differing
degree of culpability among the several defendants.
seems to be in accord with the majority of cases
which have passed on this point.
In Thomson v. Catalina, 205 Cal. 402, 405, 271
P. 198, 200, 62 A.L.R. 235, the court Said: “ * * *
juries should be allowed so to admeasure and
apportion such exemplary damages as to make the
example as well as the punishment fit the offense.”
Other authorities are cited by the parties on this point
but we forego further discussion of it. We find no
merit in the error assigned.
Id. (citations omitted in part).
ee
17
Nothing in the Petition gives rise even to an inference that
the Nevada Supreme Court has changed its mind since it decided
Hotel Riviera. Nevada stands with the majority of jurisdictions
that allow a jury to impose punitive damages against one joint
tortfeasor and not against others when the facts of a given case
justify such a result. The facts in this case did justify such a
result. Despite Joe’s attempts to justify his actions, despite his
argument that “everybody else was doing it,” the Arizona Court
of Appeals saw the truth — everybody else wasn’t doing it!
Joe Shoen’s conduct stands in sharp contrast to the conduct
of the other defendants. Joe’s independent and unique conduct
more than justifies an award of punitive damages against Joe
alone. Joe participated with the other defendants in nearly 50
acts of entrenchment and t ies of fiduciary duty, but only
Joe committed distinct and unique acts of deceit, vengeance,
and outright physical violence. Joe was one of only three family-
member directors, but only Joe was both the Chairman of the
Board and the President of AMERCO. Joe was the only family
member who became an ESOP trustee. Only Joe had the proxies
of the “key employees.” Only Joe had the voting rights to the
preferred stock. Only Joe attempted subtle bribery of his sister
Katrina in an attempt to lure her swing vote into his voting
trust. Only Joe stated he wanted to make the lives of his family
members as difficult as possible. Only Joe eavesdropped on
privileged communication between his brother Sam and Sam’s
attorney, destroyed a tape of that communication, and then not
only failed to disclose that tape as the basis for his “fears” of
what his siblings were doing in July of 1988, but also somehow
neglected to disclose the purported tape to his own attorneys
until shortly before his testimony during the 1994 trial. Only
Joe personally terminated the employment contract of the
company’s founder, his own father, on the feeblest of pretexts.
Only Joe cut off the health insurance of his epileptic sister. Only
Joe turned shareholder meetings into shareholder beatings.
18
The picture is clear: Joe Shoen alone acted with the kind of
malice that deserves punishment by way of punitive damages.
The Arizona Court of Appeals correctly affirmed the trial court’s
award of punitive damages against Joe Shoen alone, and this
Court need not review that holding.
3. The evidence before the trial court established a causal
nexus between Joe’s malicious conduct and the harm
suffered by the respondents.
Joe Shoen also raises a substantive due process argument,
contending the evidence did not show that his malicious actions
caused the harm suffered by respondents. That contention also
fails when the evidence is carefully examined.
At the end of the trial, the jury was instructed to “consider
the character of [Joe] Shoen’s conduct or motive and the extent
of harm to plaintiffs that Edward J. Shoen caused ....”
10/6/94 a.m. 18, 160a. (Emphasis added). By that time, the
jury had heard how Joe almost single-handedly orchestrated
the issuance of the dilution Shares, by feeding half-truths and
outright misinformation to other members of the Board, and
by holding back from other board members and the board’s
attorneys information about a secret voting trust. They had heard
testimony about a shareholders’ meeting to which Joe lured his
Sisters solely to make up a quorum so Joe could pass an
Employee Stock Ownership Plan into which the board, at Joe’s
direction, promptly placed the dilution stock, in direct violation
of a federal court settlement agreement. The testimony presented
went on and on, and plainly established that Joe Was not in the
same position as any other director. In fact, he was ina unique
Position, as Chairman of the Board, President of the company,
and the head of a shareholders’ voting trust. And not only was
he in a unique position, he had unique motivations in seeking
to injure the respondents.
19
The members of the jury examined Joe’s actions, and the
motivation behind them; they had the opportunity to see all of
the witnesses and to evaluate their testimony, their body
language, and their demeanor. At the end of the trial, the court
properly instructed the jury that, before imposing punitive
damages against Joe, they must find that his conduct was a
cause of the harm suffered by the respondents. Sufficient
evidence was presented from which the jury could have, and
did, find that Joe’s conduct was a unique factor in causing
respondents’ harm. That conclusion, and the imposition of
punitive damages against Joe Shoen, did not deprive him of
due process.
B. Joe Shoen Did Not Adequately Raise an Equal Protection
Argument Below, and Is Barred from First Raising Such
an Argument Here.
This Court will not review a challenge to punitive damages
that was not raised at the trial court level. E.g., Bankers Life &
Cas. Co. v. Crenshaw, 486 U.S. 71, 76 (1988). Joe Shoen’s
post-trial motion and his opening brief in the Arizona Court of
Appeals challenged the award of punitive damages against him
on due process grounds. Appendices B and C. Joe did not,
however, challenge the award on equal protection grounds in
those courts. /d.
As a result, this Court must reject Joe Shoen’s challenge to
the punitive damage award as a deprivation of equal protection.
C. Even If the Equal Protection Challenge Had Been Timely
Raised, the Award in this Case Did Not Deprive Joe Shoen
of the Equal Protection of the Laws Applied.
The Court thus far has come close to an equal protection
analysis in only one case. See BMW of N. Am., Inc. v. Gore,
517 U.S. 559 (1996) (holding that lawful conduct of auto
eee
20
manufacturer outside Alabama could not be considered by an
Alabama court in determining appropriate level of punitive
damages to be imposed). Nevertheless, Joe Shoen contends,
without any real support in existing case law, that imposition
of punitive damages on one director when the entire Board was
sued violates equal protection principles as arbitrary and
irrational discrimination. That argument also must fail.
The injury to the stock of the dissenting shareholders was
not a result of a single act, but of a succession of acts, and Joe
was the driving force behind those acts. His argument that his
malice did not cause respondents’ injuries is disingenuous at
best. Joe Shoen was not singled out in this case in an arbitrary
or irrational manner. His conduct, like the conduct of every
other defendant, was closely examined. The jury had the
opportunity to observe Joe’s demeanor as he testified, to view
his body language and listen to his tone and inflection, and to
determine whether Joe had a personal vendetta against the
family members who opposed him.
Substantial evidence was presented to the court and the
jury that distinguished Joe’s conduct, and Joe’s motives
underlying that conduct, from that of any other Board member.
Joe Shoen alone took actions with the motive to injure the
plaintiffs and to destroy the value of their stock, to keep them
“under his thumb” while denying them any opportunity to
escape. Only Joe, as the motivating factor behind the secret
voting trust, had access to information that made it plain that
Board actions designed to create a “level playing field” would
instead have the effect of permanently entrenching Joe and his
secret voting trust cronies in power and destroying the value of
the stock of his siblings and his father.
There is nothing arbitrary or irrational about imposing
punitive damages on one whose behavior so merits punishment.
21
Indeed, it would be arbitrary and irrational to refuse to do so!
Joe Shoen’s constitutional challenge to the punitive damage
award must fail, as it has already, and this Court need not further
review that conclusion.
CONCLUSION
Petitioner has presented this Court with no reason to accept
review of the punitive damages assessed against him in this
case. This Court need not grant review in this case for any
alleged constitutional infirmity in the imposition of punitive
damages, because no such infirmity exists. The process for
imposing punitive damages against Joe Shoen complied with
every procedural safeguard discussed by the United States
Supreme Court in applicable cases, and the award thus was not
imposed in violation of Joe Shoen’s due process rights. Nothing
in Nevada law prevents assessing punitive damages against one
joint tortfeasor and refusing to assess them against another, so
long as the culpability of the tortfeasor against whom such
damages are assessed justifies the award. That rule is followed
in most jurisdictions. The award of punitive damages against
Joe Shoen likewise is not constitutionally defective based on
lack of causation; the jury heard substantial evidence that enabled
them to conclude that Joe Shoen’s conduct did cause the harm
suffered by respondents, and that his motive in causing that
harm was so malicious as to subject him to puntive damages. In
this case, Joe Shoen’s culpability differed in both degree and
motivation from the culpability of his fellow directors, and
punitive damages were properly imposed.
Joe Shoen did not properly preserve an equal protection
challenge to the punitive damage award, since he did not raise
that challenge before either the trial court or the Arizona Court
of Appeals. This Court therefore should decline review of this
case on equal protection grounds. In any case, the punitive
22
damage award was not imposed in an arbitrary and irrational
fashion, but was directly related to Joe’s particular culpability;
the award thus does not violate any principles of equal
protection.
For all of the foregoing reasons, Respondents request the
Court to deny the Petition for Certiorari in this matter.
Respectfully submitted,
KATHLEEN COUGHENOUR
Counsel of Record
KATHLEEN COUGHENOUR
LAW OFFICE
4220 West Northern Avenue
Suite 115
Phoenix, Arizona 85051-5757
(602) 934-6563
WALTER GILMORE “GIL” SHAW
ANGELO PATANE
SHAW & PATANE
SHAW & PATANE
1432 North Seventh Street
Phoenix, Arizona 85006
(602) 257-0058
Attorneys for Respondents
4
APPENDIX A
la
APPENDIX A — TRANSCRIPT OF PROCEEDINGS
IN THE SUPERIOR COURT OF THE STATE OF
ARIZONA IN AND FOR THE COUNTY OF MARICOPA
No. CV 88-20139
LEONARD S. SHOEN, et al.,
Plaintiffs,
VS.
EDWARD J. SHOEN AND PAUL J. SHOEN, et al.,
Defendants.
BEFORE THE HONORABLE THOMAS DUNEVANT, III
Phoenix, Arizona
REPORTER’S TRANSCRIPT OF PROCEEDINGS
August 25, 1994, 1:30 p.m.
(29) * * *
Q What did Joe say to you?
A [PLAINTIFF L. S. SHOEN] My first conversation with
Joe was that he was very aggressive, angry, and specifically
angry with Sam.
2a
Appendix A
Q_ Did Joe — stop you for a second.
Did Joe convey his intentions about the Board of Directors
to you?
A Yes.
Q Okay.
A He told me that he had enough votes and that they
were going to, to go up and elect a board.
Q. Did he — excuse me, L.S.
A He didn’t tell me he was going to take — specifically
knock me off the board. He told me Sam would not be on the
board.
(100) * * *
Q BY MR. SHAW: Mr. Shoen. now prior to the
shareholders’ meeting in March of 1989, beginning of 1989,
you were still being compensated under your consulting
agreement?
A Yes, until early in 1989.
Q Okay. I am going to hand you what’s been marked as
Exhibit 211 first and ask if you could justify that by date and
who authored that particular letter to you.
A This is dated February 20, 1989, and its often — and
it's written to me by my son Edward Joe as president and
chairman of the board of Amerco.
De tes a aa al
3a
Appendix A
Q Okay. Does that letter indicate to you that you had
been compensated under a particular clause of your contract?
A es.
Q What particular clause was that?
A Disability clause.
Q Had you ever informed Joe that you were, in fact,
disabled?
A No.
{101} Q Has he ever communicated to you the fact that
you were disabled, I mean, pursuant to your, pursuant to your
retirement, or consulting agreement?
A No.
Q Okay. Does that letter, in fact, terminate your consulting
agreement with Amerco?
A With a condition, yes.
Q And the condition is what?
A. The condition that I testified under oath that I was not
manic depressive. I had testified at an IRS trial that Joe was
involved in.
Q And you then subsequently, or Joe wrote to you
specifically about —
4a
Appendix A
A I told, I testified that I —
Q No, no, I am not concerned about what you testified
about, Mr. Shoen. He indicated that you testified under oath
about a particular disorder?
A Yes.
Q_ Okay. You did not suffer from a particular disorder?
A He said I said under oath that I did not suffer from this
disorder.
Q And, in fact, you then — he offered you a condition,
right?
[102] A Yes.
Q_ What was that condition?
A If your testimony is controverted by a physician —
Q_ Well, just, just —
A If I'd get a psychiatrist to certify that I was disabled
and I had this specific mental abnormality, which I wasn’t
basically responsible for my actions, but he would — that they
would reconsider continuing my compensation under the
disability clause.
Sa
Appendix A
A) Seadllialeactiieg
Q_ I think you mentioned earlier in your testimony that
you had, that you had some income at this time [the time of his
termination] from fleet ownerships? a
A Yes.
Q Okay. But outside of the fleet ownership program or
income stream, was this your only other source of compensation?
A That was the only thing I had as compensation. I still
had some money in the profit-sharing trust.
Q. And, in fact, by this time you had actually received a
dividend, hadn’t you, in, in the spring of 1989?
[106] A I probably had, I can’t recall now — yes, yes, I
think it was the fall of 1987 that the first dividend —
Q But you had no other regular source of income?
A No, no, no.
August 31, 1994, 1:30 p.m.
[4] * * *
Q All right. Sam, in early 1988 was, was a dividend
declared?
A [PLAINTIFF SAMUEL W. SHOEN] It was issued in
early *88 I believe, yes.
6a
Appendix A
Q_ And were you entitled to such a dividend?
A All shareholders were, and I was. also.
Q Did you receive — do you recall receiving a dividend,
personally?
A No, sir, it was withheld by the company.
Q What do you mean withheld by the company?
A They issued that dividend to every shareholder but to
me.
Q Was there a reason provided to you why your dividend
was withheld?
[S}JA No
Q_ Did you eventually receive your dividend?
A_ Thad to go to court te get it.
Q BY MR. BISBEE: With your 51 percent of share, or
pardon me, 51 percent majority ownership in the company that
you believed you had on July 25th after the issuance of those
8,099 shares, how much ownership did your group represent
in the company?
A Roughly, the plaintiffs group represented roughly 47
and some odd percent.
7a
Appendix A
Q_ Was that less than the new numbers from the issuance
of the 8,099 shares?
A Iam sorry, I don’t understand that question.
Q Well, did you have less ownership position now than,
than the defendant’s group?
A Yes, they had the 8,099 shares.
Q What do you know now occurred on, on July 24th
and subsequent that affected your shareholders’ rights in
Amerco?
A The first thing they did was take all the shares of stock
that the company owned, that they had repurchased over the
years and some shares of stock that they owned that they had
actually never sold, and they sold those shares to five so-called
key employees.
Q Do you know who those five key employees were?
A Yes. They were Gary Horton, who is the treasurer,
Gary Klinefelter, who was the general counsel, John Dodds,
who was an executive vice president, and a director, Hank
Martin, who was president of the insurance companies, and a
man by the name of Harry DeShong, who was in charge of the
marketing department.
~ a rT
le ee ee ee ee
Sa
Appendix A
Q Okay.
A Is that five, or did I miss somebody?
QI believe that was five.
A Okay
Q Do you understand now what the effect of [53] issuing
those shares to those five individuals had upon your stock?
A Yes, I do.
Q What was that?
A They diluted us from a majority to a minority and set
‘Cup so that they controlled the votes of those Shares so that -
they stuffed the ballot box, is what they did.
Q Well, your group representing 40 some percent, 48.
49 percent of the stock, ] believe, was in New York. Was anyone
in that group represented here by the plaintiffs? Was anyone in
that group notified of the July 24th meeting?
A No, we were not.
[S54] * * +
Q What was the total amount or total number of authorized
Shares in 1988 on July 24th to, that could have been issued or
were authorized, pardon me. by Amerco?
9a
me Appendix A
A The number, the total number that were authorized by
the company were 100,000.
Q Did this board subsequently attempt to increase that
authorization?
A Yes, they did.
{55} Q Do you know how much they tried to increase it
by?
A They added 7,500 more shares of authorized but, but
unissued stock that they could keep in the treasury. They
reloaded the gun, is what they did.
Q_ Did they amend the articles of incorporation to affect
the number of shareholders required to call special meetings?
Q BY MR. BISBEE: What other actions are you aware
of or have become aware of, Sam, that affected your interest in
the corporation?
A Well, I will try to go through them in basically the
sequence that they occurred, but I am sure I will get some of
them out of sequence.
[56] First thing they did was they sold this stock for — to
these so-called five key employees. They then took back from
those five key employees the right to vote that stock. The
chairman of the board, Joe Shoen, teok that back, so that while
the stock was sold to these employees, the employees didn’t
get to vote it.
een
ee
10a
Appendix A
Once they had the votes, they then authorized the 7,500
additional shares. They restocked the treasury. They authorized
the issuance of, I believe, 100,000 shares of preferred stock.
They later, within a few days, I believe, authorized that
stock, that preferred stock to be made voting.
They then authorized the creation of what’s called a poison
pill. The poison — should |] explain that?
Q_ Well, let me ask you a question about that. What do
you understand the meaning of “poison pill” to be?
A The way this poison pill works is if any combination
of existing shareholders gets together, that comprises over 50
percent of the stock in the company. The directors have the
right to give stock to those shareholders who are not a member
of that 51 percent group at half the price.
[57] Q And this is done for what purpose?
A This is done for the same purpose as the original
issuance of the 8,099 shares. This is done so that were any
group of existing shareholders to get together that could
potentially throw these people off the Board of Directors. they
could then issue additional shares of Stock at a heavily
discounted price to themselves and their shareholder allies to
Once again dilute this majority back out.
Q Do you recall any other changes to the articles of
incorporation or the corporate bylaws that affected your position
within the company as a stock owner?
lla
Appendix A
A Yes, I do.
Q And what would that be?
A They passed what is called a 66 and two-thirds super
majority requirement. In other words, once they had amended
the bylaws to their satisfaction in the articles, they passed a
requirement that would take 66 and two-thirds percent of the
shareholders to change them back the way they were.
In other words, they used the existing bylaws and the 50
percent majority that they required to entrench themselves with
these devices. Once they had successfully entrenched
themselves, they destroyed the [58] weapon they used to
entrench themselves.
Q What was your understanding of the rationale for
entering into these, the Board of Directors entering these actions’
‘YT
A Do you mean their stated reason or, or why they really
did it?
Q Your opinion.
A The reason they did it was to entrench themselves tn
power, to freeze us out of the company, and to, and to perpetuate
in these deals, to perpetuate themselves on the Board of
Directors, and to perpetuate their power, and in the case of
myself and my father, to attempt to punish us for something
that they didn’t like we did.
SS ea ee cee a
eS eee eee
l2a
Appendix A
[67)* *
Q Did you have health and life insurance through the
company, even though you were no longer an active manager?
A Yes, I did
Q. Did you maintain that health and life insurance, or did
the company maintain it for you, even though you were no
longer on the board as of July of ’88”
A As of — yes, as of July of '88, I had [68] health
imsurance with the company.
Q Was that health and life insurance at some time
discontinued?
A Yes.
Q When was it discontinued?
A The health insurance was discontinued the day after
ve filed our written consent with the company, which I think
was the 29th of July, 1988.
Q. And the life insurance?
A The life insurance was discontinued sometime later. |
don't recall when that was discontinued.
Q_ Was any reason given to you for the discontinuing the
health and life insurance that you had been provided through
Amerco?
——
l3a
Appendix A
A No, sir.
(77)* * *
Q The money from, that went from Joe Shoen’s
conservatorship accounts to pay for those, or loan, pardon me,
loan to the five key employees stock, five key employees for
their 8,099 shares on July 24th, that was from a conservatorship
account?
A Yes, sir, it was from two conservatorships from my
brother Joe's two children.
[83] * + *
Q_ In order to resolve that issue, there was a settlement
entered into in the Federal District Court, is that correct?
A Yes, sir.
Q Do you recall the, the essence of that settlement
agreement, what it was intended to do?
A Yes, I do.
Q Could you briefly describe it?
A The agreement was that none of the 8,099 shares that
had been issued to these five key employees would be
transferred into the employee stock ownership plan.
Q For the reasons you have previously [84] described,
that was still a concern of yours, even at that time?
1
i]
j
4
:
l4a
Appendix A
A It was even more of a concern at that time.
Q Do you remember the approximate date
of the
settlement agreement?
A It was sometime in the mid to late fall of 1988.
Q. And this current action was filed when?
A This lawsuit was filed in, on, I be
lieve, August 3rd,
1988.
Q Now, the intention, what was — strike that.
That Federal settlement agreement, did you fe
el it provided
you with a degree of protection?
A Yes, I felt — yes, I felt it provide
protection.
d us pretty darn good
Q Protection insofar as the 8,099 shares?
A Yes. Do you want me to explain it or no? A
Q If you can keep it brief, sure.
A_ We knew that none of these so-called ke
could pay the interest payments on the stock. We
would force the company to repossess the
when the stock went back into the com
couldn’t vote it. We knew if they couldn
would have our majority back.
y employees
knew that it
stock. We knew that
pany’s treasury, they
‘t vote that stock, we
15a
Appendix A
[85] Q So you felt that this was an opportunity to get out
of some of the mess that you had seen?
A Yes. As soon as the first interest payment came up for
these key employees, we would be out of the woods.
Q_ Well, if this stock was put into an ESOP, why was that
a concern to you?
A Well, I can speak for myself.
Q Exactly.
A One of the, one of the departments that reported to me
when I was president of U-Haul International was the human
resource personnel department, and I knew from our 401-K
plan and from our profit-sharing plan that, that the Federal
government regulations on plans which are intended to provide
employees with benefits, such as profit-sharing, are pretty darn
strict, and that I believed, and I actually tried to understand the
law in the law library, but I believed that if that stock ever got
into the ESOP, it would be impossible to get out of it because it
would be there for the benefit of employees. The government
protects those kinds of things.
Q So you felt that with the Federal settlement agreement,
that you could avoid that problem, perhaps get some of that
voting power back to your stock, if you [86] will?
A Yes, very definitely.
Q. Did, in fact, some of those 8,099 shares get put into
the ESOP?
a — a
l6a
Appendix A
A Yes, sir, they did.
Q. Did, in fact, that violate the Federal settlement
agreement?
A Yes, it did.
Q And that has been deemed a fact, has it not, by this
Court?
A Yes.
(93]* * *
Q_ Well, can we characterize the general tenor of the
meeting as shareholders’ business then?
A Well, not really, no.
Q_ Well, why wouldn’t you characterize it in that fashion?
A Well, the way it started out was my brother Mike and |]
had both brought with us little pocket tape recorders, and the,
my brother, Joe, announced at the beginning of the meeting
that everybody would have to give up their tape recorders, so |]
gave mine up. One of the guards came and collected it.
My brother, Mike, said that he wasn't going to give his up.
He had a right to tape record the meeting if he liked. and after
some pretty nasty discussion, he was allowed to keep his tape
recorder.
I requested mine back. but they wouldn’t give it to me.
17a
Appendix A
Q And then did the meeting progress in, in the
shareholders’ meeting fashion?
A Well, it wasn’t like any shareholders’ meeting should
be, what people normally think of.
Q_ Well, what made it different?
A Well, it was extremely hostile, extremely [94] tense. A
shareholder by the name of Bert Miller, who I hadn’t seen in
years, showed up, and he spoke of his concerns about this
issuance of the 8,099 shares.
He was on the receiving end of a barrage of obscenities
from my brother Mark.
Q_ As the meeting progressed, did something memorable
occur to you?
A Yes, as the meeting broke up, it did.
Q What happened?
A Well, we had elected the directors, or I should say they
had elected themselves again.
I was, I was about to pick up my briefcase off this chair,
and my brother, Mark, started shouting at my brother, Mike,
that his father was a Jew killer, or his father-in-law was a Jew
killer.
Mike held up his tape recorder and he says, go ahead, Mark,
keep talking, I can’t quite hear you, or something like that.
18a
Appendix A
The next thing that I noticed was Mark was to my right at
that point and Mike was to my left, and Mark came lunging
across in front of me throwing a punch, which I initially thought
was aimed at me, but it was actually aimed at Mike.
The next thing I noticed was that Mike was, was standing
about five or eight feet away from me. His [95] arms were pinned
to his side from behind by my brother, Joe, and my brother,
Mark, was pounding him with his fists.
Q_ What did you do when you saw that?
A Well, I looked at the guards, and they are just Standing
there watching all of this, and no one was doing anything, so |
went over and I grabbed Joe from behind and pulled him off
Mike.
Q Did that seem to stop the scuffle?
A Well, I thought it had, and I went back to to get my
briefcase. On the way back to get my briefcase. my brother
Mark hit me with a punch.
Q_ Did you respond?
A Well, actually it was such a melee, I didn’t really notice
it, but he started yelling at me how he had sucker punched me,
and at that point, at that point one of the guards came over and
grabbed Mark and was about to escort him out of the
shareholders’ meeting.
Q_ The guard was about to escort Mark?
19a
Appendix A
A Mark out of the shareholders’ meeting because he was
creating quite a ruckus.
Q. All right. And what happened?
A Mark shouted at the guard, not me, you blank, I have
got a green sticker, get him, and pointed at me.
[96] Q Well, did the guard come after you?
A Yeah, two guards came and got me and hauled me out.
Q Did that effectively end that year’s shareholders’
meeting?
A Yes.
September 1, 1994, 1:30 p.m.
[31)* * *
Q Okay. Did he talk with you at all about, or did you
have any conversations with him about the overall management
philosophy that Joe was wishing to use?
[32] A [PLAINTIFF KATRINA (SHOEN) CARLSON]
Joe said that this company has been run too emotionally over
the past years with the tamily and that he was very unemotional
in terms of, that he is a very professional businessman in terms
of being involved with this company, that he did not take into
any consideration, except for the fact that he wanted this
company to be run well and profitably.
20a
Appendix A
Q And at the time. prior to the 1987. May 1987
shareholders’ meeting, had you made up your mind at all about
how you were going to vote on any —
A No.
Q — directors or anything like that?
A No, I was very conflicted.
Q Did you talk with Joe about any — about Mike and
Sam and L.S. being on the board?
A Yes.
Q_ Do you recall what the nature of those discussions were.
what you talked about?
A Joe said absolutely L.S. and Sam should not be on the
board. He did not Say anything about Mike. that ] recall, but
that they weren’t — all I can Say is that.
[42] * + *
Q BY MR. SHAW: When you walked in at this meeting
and you decided to Stay, Katrina, what began to happen? Can
you describe briefly what you observed, what you heard?
A It was very rushed. We were barely sitting down before
it was called to order. We just came in, and it was very fast.
Q Do you recall the first thing that was discussed or was
on the agenda for discussion?
2la
Appendix A
A Well, there was a discussion about special shareholders’
meetings. This was a special shareholders’ meeting, and I
understood that certain shareholders present did not want such
a small percentage to be able to call their own meetings, so they
wanted to increase the percentage to, I don’t know, 35, 40
percent, or something. I don’t really recall exactly.
Q_ What was ultimately passed, do you recall?
A A 20 percent, it was increased to 20 percent, 20 percent
of stock to call a shareholders’ meeting, special shareholders’
meeting.
Q_ Do you recall the next thing that was discussed?
[43] A Yes. It wasn’t — there was really, to even classify
this as normal discussion, is stretching it. It was very cuick. It
was a discussion about an ESOP.
Q_ Had you been aware of previous discussions about an
ESOP prior to this meeting in 1988 amongst the shareholders?
A Yes.
Q Could you describe what you were aware of as you sat
there at that meeting that morning?
A_ I was aware that there was lots of ways to, to give
employees benefits. This was a way that we had voted against
in September. I was aware that there was a concern, and I did
not understand the complete concern, but there was concern in
my family about using it as a device to entrench management,
to dilute other ownership of shares, and I understood that that
ee MT
22a
Appendix A
was not a possibility that I felt was necessary to risk, and so
when it came up again, I was very surprised.
Q_ If 1 can stop for you a second.
A I'm sorry.
Q In September of 1987 it was discussed at a shareholders’
meeting, is that what you are testifying to?
A Oh, I, I — yes.
Q And when it came up on the agenda here, were [44]
you surprised that it was even being brought up for discussion?
A Absolutely.
Q Why were you surprised?
A_ It was voted down at the °87 meeting. I voted against
it, as well.
Q_ And was a vote taken on the ESOP?
A Yes.
Q_ And did you vote for it at that time?
A I voted against it.
Q_ Do you recall what your sister Teresa did with her vote?
23a
Appendix A
A She voted against it.
Q Did it pass, though, with the people that were there?
A Yes, it did.
Q So there was a discussion about the special
shareholders’ meeting, the number of people, number of people
to call a special shareholders’ meeting, discussion of the ESOP.
In your review of the minutes, is there anything else that you
recall that was discussed?
A Yes. I know that I was elected to the Board of Directors
at that meeting.
Q Okay. Did you — what happened when you [45] were
elected? What did you do?
A_ I voted against it. I did not want to be on the Board of
Directors. I believe I voted against it. Of course, you know, I
don’t —
Q Why didn’t you want to be on the board?
A It was my senior year. I was writing a senior honor’s
thesis. It was a paper that was going to be over, you know, it
was hundreds and hundreds of pages, and I had been working
on it for the first semester and was going to have to complete it
by the end, by May, which I was graduating that year, so it
was, I believe, very clear to them that I did not have the time.
Q Okay. You didn’t have the time. Did you have any
other concerns, other than just time?
:
EE
24a
Appendix A
A_ I was very concerned then. It was not a pleasant
environment.
Q. At that particular meeting you are talking about?
A Yes, because I felt that I was being railroaded.
Q What gave you that impression?
A The way that things were going so fast, and with.
without any regard to discussion, very little regard to discussion.
Q Is there anything else that was discussed at [46] that
meeting that you can recall today?
A Not that I can recall.
Q About how long was the meeting?
A 10 to 15 minutes.
Q After the meeting adjourned, could you tell the jury
what you observed or what you saw?
A It was like, like kids who just won a major league
baseball championship. I felt like there was such this feeling
that they just won something. | basically voted against
everything that was there, and it was, it was like now leave.
kind of feeling, like I was used. I feit very used, right then and
there. I mean, it was clear, and I didn’t quite know what had
happened, in terms of how, but I knew that they did not —
whatever. I was not wanted any more, and the meeting was
Over.
sip ci ma eh a a
25a
Appendix A
Q_ Did it end rather abruptly?
A Yes.
Q After this meeting, did you become — did you begin
to have any more concerns about Amerco and what was
happening at the company? _
A I was very concerned at this point.
Q_ What were you becoming concerned about, Katrina?
A Well, I had specific concerns about how I was informed
about what Joe was informing, how he was — [47] the things
that I based my decisions on before seemed to not be true any
more.
Q_ Like what? Can you identify a few instances or
specifics?
A This concept of Joe as this independent businessman
who had this nonfamily feeling, that he was very objective about
running this company and that he wasn’t going to try a fast
one, that he was working within everybody’s, you know, what
everybody wanted, now, of course, dad is going to get on Sam’s
side, kind of thing, but don’t worry about it, don’t pay attention
to that.
[54] + * *
Q BY MR. SHAW: You mentioned you didn’t have a
car. You were getting ready to go to Aspen. Did Joe offer
anything to you at that time?
26a
Appendix A
A Yes =.
Q BY MR. SHAW: Did Joe Shoen offer a vehicle?
A Yes, he did.
Q What kind of vehicle was it?
A It was a Corvette.
Q. And did it wind up in Aspen with you?
A Yes, it did.
[59] Q Could you explain to the jury what you observed?
A Yes. We had just broken for a break. We had, you know.
an afternoon break. People went to the restroom. I believe |
did. I came back, and Joe was looking at Sam’s notes. and I, I
think I was in there a while while he was, but I didn’t See that.
Then Sam came in and Said Joe, you are, you are looking
at my notes. Please don’t. I want my notes.
Q Excuse me, you were in the room when Sam came
back in?
A Yeah, I was in the room when Sam came back in.
Q All right.
27a
Appendix A
A And Joe wouldn’t give them to him, so Sam tried to
take them from him, just tried to hold onto the binder, and Joe
pulled it away, and, and started screaming things at Sam.
Q_ Do you recall some of the things he said?
A Things like, you know, in other words, you know,
exactly what he said, some of it I don’t think I should say, but
some of it —
Q_ Excuse me, Katrina, let me ask you a specific question.
Did he talk about the company or did he [60] express any,
anything to Sam about the company?
A_ In the words he was saying at that point?
Q Yeah.
A Maybe — well —
Q Only if you can recall.
A I really don’t recall specifically. He said he had the
right to look at those notes, though.
Q Okay. How did this all, how did this altercation end?
What did you recall observing?
A lobserved a very clear situation where Sam was being
nonviolent and Joe went after him, and then Paul joined it,
then Paul joined in on Sam with Joe, and then Mike hugged
Paul and tried to take him away and said I love you, I love you,
I love you.
28a
Appendix A
Q_ And did this break up the meeting?
A Yes, and I just have to Say that it was very —
Q_ Let me, let me — broke up the meeting, correct?
A Yes, it did.
Q_ As you observed this. Katrina, what were you thinking?
A I was thinking Joe is not the objective businessman he
Says he is, and —
Q What caused you to reach that conclusion at [61] that
point?
A The look in his eyes and his behavior.
September 6, 1994 (afternoon session)
i247}, * 2% 6
Q Shortly after the consent was presented, your group
then entered into the lawsuit and things progressed. Do you
recall in March 1989 a shareholder meeting being held in Reno.
Nevada?
A [PLAINTIFF MARY ANNA SHOEN EATON] Yes.
Q_ I think you stated before you attended a number of
shareholder meetings prior to this?
A Yes.
29a
Appendix A
[28] Q Overall, Mary Anna, could you describe the
general climate or the feel of that meeting when you literally
walked into the room compared to the ones you attended before?
THE WITNESS: Well it-felt very confrontational even
oppressive.
Q BY MR. SHAW: What do you mean oppressive?
A_ I noticed I didn’t have on a green sticker.
Q_ Did you observe other people wearing green stickers?
A_ I observed a security guard in the room.
Q_ Who were the people wearing the green stickers?
A Board of Directors were wearing green stickers.
Q_ Anything else you recall about the meeting that made
it intimidating or confrontational?
A The way in which it was conducted.
[29] Q Could you describe that briefly?
A Well, there were a set of rules and regulations read right
away. Excluded any kind of recording devices and it went on
from there. There would be no note taking, no stenographers
or no note taking by stenographers and no recording devices.
i, ies aa oe ene
;
30a
Appendix A
Q At the conclusion of the me
conclusion of the meeting
break out?
eting or the ordinary
did you see a physical altercation
Yes.
Q Can you describe just generally what you observed?
A Generally what I observed was Mike bent over
clutching his tape recorder to his chest and Mark trying to rip it
away from him, and I could see very quickly there was a crowd
of men around, and I could see through the cracks of Mike's
clothes being ripped at.
Q Now the 1989. the next me
this was the first meeting he
meeting?
eting in September of 1989,
ld in Tonopah. Did you attend that
A No.
Q Did you attend the September 1990 me
eting that was
also held in Tonopah?
Did you go to that meeting?
A Yes.
Q Were you in Florida at the time?
[30] A Yes.
Q How did you get to the Tonopah meeting?
A Florida is kind [of] inacce
you go to Dallas or Atlanta. Spe
ssible. Can’t get here unless
nt a day before in Vegas, spent
3la
Appendix A
the night at dad’s house and then in the morning had like a
caravan between my dad’s house and Tonopah, which took
better part of a day drive. I think for an early morning meeting
we left well before lunch. I can’t remember.
Q_ Did you stop for lunch along the way? How many
hours do you think the drive actually is?
A Five, maybe six.
Q When you got up at the meeting, what occurred?
A Well, there was a — we signed in. We sat down some
management and Board members came onto a little stage area,
Joe gave a prepared speech. They passed out the ballots and
they left.
Q Now, how long do you think the meeting ultimately
took?
A Ten minutes.
Q What were you left to do at the end of the meeting?
Did you have a chance to actually give your ballots to the
company?
A They took off without so much of a good-bye. Leaving,
ran out the back door through the back stage [31] entrance into
acar. Personally, I didn’t notice they were gone for five minutes.
I still had my ballot in my hand. There had been a collection
of the ballots. There would be mention of a post part by
midnight. In Tonopah in the early evening and already we had
———————————
i Oi Sead ek a gn a ete
32a
Appendix A
Q Could you find a post office?
A_ We made a little fun of it. Actually we found a post
office. Got there about 15 minutes before midnight. Put a
newspaper — thankfully there was a person still working there
behind the window. Took her picture at the window that she
postmarked it. Found an envelope and addressed it and gave it
to her and got it done just under the wire. We had a little fun
looking at a map and trying to get it all put together.
Q Did you have to drive back to Las Vegas?
A Yes.
Q_ Was this the last Shareholder meeting you attended?
A Yes.
September 7, 1994, 9:35 am.
[56] Q Okay. And did you have conversations with other
people about, about, about the effect Or, or possible effects of
the ESOPS?
A [PLAINTIFF MICHAEL L. SHOEN] Yes, I sure did.
Q. And as a shareholder sitting there in the company, Mike,
in the spring of 1988, what was your concern about what an
ESOP would, would or would not do to your position as a
shareholder?
A It would — the ESOP. | felt, was simply what I called
a control mechanism. It Was a device that I, that | understood
33a
Appendix A
was commonly used by, by, by, often by management, but in
situations where shareholders were also management.
It was used to, to basically give them a free vote. It is as if
essentially, would take the place of Katrina’s vote. They
could manufacture the vote, make it as large as they wanted.
They could, because they were the directors, and if they had
control of the directorship, they could appoint the trustee who
voted the ESOP. They could construct the ESOP in such a way
with nonpass-through voting so that essentially the directors
controlled its vote through the selection of the trustee.
I had absolutely no doubt in my mind as to the purpose of
[79] ” x ”
Q Okay. Could you describe that one, please?
A Well, what happened was I got up, I got up and there
were a lot of people around me, ov there were people around
me in the immediate proximity. There was a security guard who
was a lady who was fairly short and had dark, fairly short hair,
and she started to lead me out, but she didn’t lead me out by
the closest door, which I was fairly close to an exit door, but
there were a lot of people there.
She led me out through this other anteroom, and she took
me by the arm and started to lead me a couple steps.
After I got a couple steps, my brother Joe appeared, and |
was somewhat stunned by this point, and I was kind of — it
was — I had a quizzical reaction like, what’s he doing.
:
a
34a
Appendix A
[80] He motioned to her. He replaced her and took my, my
elbow as she had to, to appear to escort me out.
What he did was he increased the pressure on the elbow.
He then moved the elbow in his hand to sort of control me, and
he started to wind up this way.
At that point I knew that I was going to get hit in the
stomach, and at that point I had my, this little silver tape recorder
that I had borrowed. It wasn’t really a real big thing. It was
about yo big, so I felt well, if I can pull that tape recorder down
to my stomach, I am going to deflect that blow.
I can remember thinking — he caught a piece of it, but I
really didn’t deflect it. He got me a good hit in the stomach,
and I thought well, I know what to do now, I am going down
because I have done that before. | am going to fall down forward,
and so I proceeded to do that. I fell down forward.
Thereupon came the blows that I received. At that point
they were, were far greater in intensity than the first set in the
first incident. They weren't separated by, you know, ten seconds
or, or fifteen or five or whatever or twenty, I don’t know.
Q At the conclusion of this assault, did you get up and
leave the meeting?
[81] A | Well, when the blows stopped, I didn’t put my
head up right away because at this point I was concerned about
my health, I mean, I was concerned, the blows were hard enough.
So I figured, I waited, you know, a second or a split second
and I looked up, and there was my brother, Joe, and Harry
DeShong, sort of wrestling like two big bears, like wrestling
off into a corner, Standing by Harry wrestling Joe into a corner.
35a
Appendix A
As soon as I stood up, there was a security guard right in
my face, a gentleman with red hair and a mustache, fairly young
man, I mean, 25 or something, right in my face and said, get
out of here, and you are getting out of here.
By then I was starting to go shake a little bit, and, and I
said — | thought, at that point I thought, I looked down and I
thought, I still have this tape recorder, which amazed me, and I
thought well, maybe I have got tapes back in the meeting room,
which by, you know, there was this adjacent room right next to
us, so I said, I have got to get my, I think I said my jacket or
something, I have got to get something from that room.
He said no, you are not, you are not going to get anything,
but he wasn’t going to touch me, either, I could tell that.
I said, I want my stuff, and I was concerned [82] that
somebody would be taking my stuff in the next room.Then
this security guard with, with, the lady with the short black hair
came in, and she said, I will take you in there. The gentleman
with red hair wouldn’t take me. It was my impression that he
was afraid to take me into the next room, and I said I need
somebody to take me into the next room and get my stuff.
[84] * * *
Q_ If you could turn your attention to the September '90
meeting procedures, and let me ask you: Do you recall whether
or not the 1990 meeting procedures [85] allowed recording of
any recording devices of any kind in the meeting room?
A Well, the, there was a prohibition on recording devices
of all kinds.
36a
Appendix A
Q_ And how was that interpreted at the meeting?
A At the meeting — well, at the meeting they allowed
the stenographer. I had written them previously and requested
them to bring a stenographer, but they allowed my stenographer.
Q_ This is at the ’89 meeting?
A_ No, this is at the ’90 meeting.
Q Okay. So you had Stenographers at the °89 and °90
meeting both?
A That’s correct.
Q_ The last several meetings have also been held in
Tonopah, Michael. Have you attended those meetings?
A Ihave not attended since the 1990 meeting.
Q Let me show you what’s been marked as Exhibit 257.
Would you identify that, please?
A This is a, a compilation of a number of ballots for an
annual shareholder meeting of September 28, 1990. | think
that there is probably 15 ballots here or more.
Q_ Okay. The first page of that document, does [86] it
contain a number of Proposals that were put forth to the
Shareholders at that annual meeting?
A Yes, it does.
37a
Appendix A
Q One of the proposals there, I believe, deals with
nominating procedures for directors?
A I don’t think that was a matter that was voted on by
the shareholders. I think that was a bylaw amendment. I don’t
think it is in here.
Q Forgive me. I got a little off track here, a little bit
confused.
Let me back up a minute. As the 1990 meeting approached,
Michael, did you attempt to nominate anybody for positions as
directors within the company or anybody that you are aware of
within your plaintiff’s group?
A You mean in, in a write-in ballot?
Q_ Correct.
A No, did not.
Q_ Did you learn of anything that occurred regarding the
nominating procedures prior to this September meeting?
A Yes, I did.
Q_ What did you learn?
A Well, what had happened was that on May | of 1990
the Board of Directors amended the bylaws to change [87] the
~ nominating procedures, and what that did was that they said
that you have — any nominations have to be 120 days in
advance of the meeting date and that the nominations have to
38a
Appendix A
be done according to certain sections of the securities and
exchange laws, which were very, very complicated and required
a lot of work.
What happened was that the, the directors didn’t tell any
of the shareholders that the 120-day requirement existed, so
what they did was they, they amended the bylaws to, to include
this 120-day requirement. They then filed it with the, with the
Nevada Secretary of State, and then four days later the 120-day
time period ended.
So for practical purposes, that prevented any shareholder
that year from nominating any director and being in compliance
with their stated nominating procedures.
Q During this four-day window, you did not receive
notification from this company that this occurred?
A _ No, I didn’t. I received it about 20 days before the
September meeting, or about 100 days too late.
Q When you look at the proposals that were placed there
by the directors for approval of the shareholders there on Exhibit
257, that ballot, Michael, [88] as you look at those, could you
identify a few of those Proposals that caused you very specific
concerns as a shareholder in this company?
A Well, all of them except for six, number six. The last
One caused me plenty of concern or I guess more concern.
Q Could you identify which proposal you are talking
about?
39a
Appendix A
A Well, starting with number five, amended the articles
of incorporation, prohibit stockholder action by written consent.
Q_ Why did that cause you concern from your perspective?
A Because it just insured that it was, it was one more
device that insured that that, the existing directors or, or the
directors who, who would be in the future elected by the voting
trust in which Jim Shoen, Paul Shoen, and Joe Shoen held a
controlling interest, that, that there would really be — that that
would be one more thing that would keep them in power
because you couldn’t get a group — you couldn’t have a bunch
of shareholders, couldn’t get 66 percent of the shareholders
together and say, we don’t want these guys and let’s take a
written consent and put in new directors. You couldn’t do that
any more.
[89] Q Anything else at that 1990 shareholders’ meeting
that came up that troubled you as a shareholder?
A Sure. The number four that now required that, that
number four said that, that, that to amend in the future the
company’s articles of incorporation, you had to have a 66 and
two-thirds majority of the shareholders to do it.
Well, in the worst case scenario, Joe and Jim and Paul and
Mark, other voting trusts, would always have more than one-
third so that no one could ever, could ever make any changes
to the articles of incorporation without them, no one could make
any changes.
Q_ As you go on up the listing there, what’s the next item
that caused you concern?
54
40a
Appendix A
A Well, the number three, the, to increase the amount of
authorized preferred stock. Part of that was to, to, to do a split,
which just made it more confusing, but that was a fairly minor
concern.
The real concern was the amount of increased authorized
but unissued stock.
Q_ Why did that concern you?
A Because you could delight anyone with it. You could,
you could — they had it sitting there, and if they ever got
challenged, they then authorized and had enough stock sitting
here so that they could issue it to [90] their friend and, and by
this time as we understood, they could then simply — they
could literally issue it to their child and have their child put it
in an ESOP, and according to what I understood the situation
to be, they would dilute out any other new majority.
Q_ What’s the last item on the, on the list there? You are
going from bottom to top. What’s item No. 1?
A Well, really two more.
Q Excuse me?
A Improve amend — there is the classified Board of
Directors, which was, which was, you know, I mean, in the
Situation that we were in, it was something that I didn’t agree
with.
Q Could you define what you mean by classify Board of
Directors?
.
{
4
;
atin te 28 Sas.
4la
Appendix A
A. That is called a staggered board where you are really
electing people for four-year terms, but because you have to
start out, you say well, here’s two of the eight directors, will
first have a one-year term, and another two will have a two-
year and another two will have a three-year and another two
will have four years.
Then when the first group comes up for re-election that
had one year, then the first time they are re-elected, they then
get a four-year term. So you [91] have got all these four-year
terms essentially ending up with a whole_ bunch of four-year
terms, so you could come in and have by some, by some
situation you could get a group of shareholders that has a 67
percent and enough to come in here and maybe do something
and get a change in, in the control of the board, but you could
only do it two people at a time, and it would give the remaining
board six of the eight, a year’s time to take further to, to figure
out further ways to protect their jobs and protect their interests.
* * *
Q In January of 1991, Michael, did you learn of an event
that, that, in your mind, justified some of your fears about what
the ESOP was going to be used for involving £ voting trust?
[92] A Well, what happened ultimately, I know it
happened by January of 1991, I can’t say specifically, what
happened was the voting trust or voting agreement that my
brothers, Jim and Paul and Joe had, and my sister, Sophia, and
my brother, Mark, they then broadened that to include the ESOP
so that the ESOP trustee then became a signatory to their voting
trust.
42a
Appendix A
By this time the voting trust that had I just referred to had
lost two of its members. Paul and Sophia refused to resign by
January of 1991, so then the remaining people, which were,
which were Jim Shoen, Joe, and Mark, they then added the
ESOP, and they added it until 1999, I believe. So what
happened was that, that the ESOP. something, something —
there was a secondary effect because at that point in time Joe
Shoen — there were three individuals who together comprised
what was called the trustee, singular, of the ESOP.
Well, Joe Shoen was one. They were appointed by the
board, and two gentlemen who worked for Joe were the other
two, Gary Horton and Don Mumey. Well, once the ESOP was
a signatory to the voting trust, even if Joe Shoen was removed
and even if there were people who were what I would consider
to be independent trustees in the ESOP. the ESOP had
essentially given up its vote to the majority of this voting trust
because the [93] voting trust was voted by the majority, so
there was sort of a double effect of assuring, in my mind, that
the ESOP would then always be voted with Joe Shoen, Jim
Shoen, and Mark Shoen.
Q_ In September of 1991 did you attempt to deal with
your stock in any way?
A_ Yes, I did.
Q What did you attempt to do with that stock?
A Well, I took a small amount and I was going to give
one share — this is after the 400 to 1. I wanted to give one
43a
Appendix A
share to a whole bunch of former employees, and I started off
with people whom I knew, and it was just sort of random, and
I called them up and_ said, would you like one share of Amerco
stock? These were former employees who had worked with
me.
They were all quite pleased, so I got all the paperwork and
all the — I got the right paperwork, and I don’t recall specifically
what it was. I sent it into the secretary and general counsel of
Amerco so that they could issue the new stock certificates and
send out the new stock certificates to people who were, you
know, friends of mine or former long-term employees. Well,
they were all former long-term employees, and some of their
family.
Q Was this an attempt to [gift] this stock [94] successful?
A No.
Q Why not?
A Because the secretary of the corporation contacted me
and wrote me back and told me that they are not going to allow
me to give this stock away, that they will consider, they are
considering that my gift is, in fact, a sale, and that they are then
exercising their right of first refusal and they are going to
purchase the shares that I am trying to give away.
So they sent me a check for those shares, and I never cashed
it. I put it in a drawer. I would not cash that.
)
————————————— -
44a
Appendix A
September 7, 1994, 1:35 p.m.
[5]Q Did you also lose your insurance benefits with this
company?
A [PLAINTIFF MICHAEL L. SHOEN] Yes, I did.
Q Do you recall when that exactly occurred?
A It was just after we filed the lawsuit.
Q. Okay.
A No, it was just after we filed the consent.
Q~ The consent was filed on June 29, or July 28, 1988.
On or about June 29 you lost your benefits with the company?
A That’s correct.
Q Has the company taken some other actions against you
individually —
A Yes.
Q That cause you concern that you feel is relevant to
your position as a shareholder in this company? .
A Yes.
Q Could you cite a few examples?
45a
Appendix A
A Well, the first thing I can remember in 1989, it was
against — with respect to a mortgage of my children, that my
children held, and I was affected because I had ended up paying.
Q What did the company do in relationship to a mortgage
that you held?
[6]A Well, a subsidiary of a subsidiary of the company
called Nationwide Commercial Credit held a mortgage on the,
a note that my kids, my minor kids owed tc them.
Q Excuse me, is Nationwide Commercial Credit a
subsidiary of an Amerco subsidiary?
A Yes.
QI didn’t know if that was correct or not. They held the
note on this mortgage?
A Right.
Q_ And what happened in 1989?
A They, at the end of 1989 they wrote me a letter saying
that my kids were behind on the mortgage and were going to
foreclose.
Q Were you, in fact — was there a delinquency at all on
this mortgage?
A No, there never was.
Q_ Did they attempt to pursue foreclosure?
|
46a
Appendix A
A No. I contacted the law firm. I retained an attorney in
town. I ended up negotiating personally, directly with someone
in U-Haul in the Amerco legal department who I knew.
Q_ As a result of these negotiations, what happened?
A I paid off the mortgage.
(10) * * *
Q BY MR. SHAW: Well, let’s move onto a different area,
Michael, let’s just skip that.
In addition to some of these things we_talked about that
the Board of Directors did at the 1990 meeting, we went through
that, that, through that number of items, six items on the list.
Were there some other things that the board did that perhaps
didn’t quite make it out to the shareholders in terms of the
shareholder ratification that you became concerned about?
A Yes.
Q What about the way voting within the Board of
Directors is done, did you understand a change was made there?
A Yes.
Q_ And what was that change?
A Well, in approximately 1991 — | may be incorrect,
maybe it was ’92, I think it was ’91, the board voted to give
the chairman of the board essentially two votes. They gave him
before this — before this time the chairman only voted when
i wae el
47a
Appendix A
there was a tie, and, and the board then made a change in about
1991 wherein, wherein the chairman from that time on would
have a vote, his regular vote plus his, his tie-breaking vote, so,
so [11] in certain instances he would have two votes.
Q You had been on the Board of Directors of Amerco
from approximately 1975 through 1984, is that your
recollection?
AI think so.
Q Now, while you were on the board during that time
period, did the chairman have these two votes?
A_ No, he did not.
Q Did you learn of anything else that the board did
dealing with perhaps a number of shareholders required to
conduct certain business?
A Well, yes, I did.
Q What was that?
A In 19 — well, what they did was they reduced the
quorum requirements for shareholders’ meetings to one-third.
This was done in 1991.
Q Okay. And by one-third, you mean a third of the
shareholders, only a third of the shareholders had to show up
to conduct business?
A That’s correct, had formally been at a half, and what
had happened was that the, the, that the voting trust that I talked
48a
Appendix A
about earlier lost temporarily two members at that time period,
so they didn’t have a 50 percent quorum with the loss of those
two members.
So, at that point then the board reduced the [12] quorum
so, and the effect was that that voting trust of, of Joe Shoen,
Mark Shoen, Jim Shoen, and the ESOP would then always be
able to have a quorum at a shareholders’ meeting.
Q_ They would always have that 33 and a third percent?
A Yes.
Q Now, Mr. Shoen, are you a party in other litigation
that’s been brought by your brother against you and your father?
A Yes, I am.
Q_ Do you understand how that litigation was funded?
A Yes.
Q_ How did you obtain that understanding?
A Through sworn testimony at which I was present.
Q_ What is your understanding of how that litigation was
funded?
A Funded by Amerco.
* * *
49a
Appendix A
[13] * * *
Do you have any other concerns about anything the board
has done with, with preferred stock?
A Yes, I do.
Q What kind of concerns do you have, Mike?
A Well, in 1993, they created — well, they have some
preferred stock out there, first of all, that I want to differentiate
that is, that is essentially debt, most preferred stock that people
think of is debt.
In 1993 they also created or authorized what they call
preferred stock B voting.
Q Is this a different type of stock?
A Yes.
Q BY MR. SHAW: Mr. Shoen, how did you arrive at
your understanding of what preferred stock is?
A By reading SEC filings, by reading the Amerco file,
by reading the 10-Ks and 10-Qs, by, by reading deposition
testimony, by reading affidavits of the treasurer of Amerco.
[14] I also, I have got, I have taken courses, you know, in
business, and I know what it is from there. I know what it is
based upon my experience working in Amerco.
50a
Appendix A
Q You are not purporting to give us a legal definition
here today, are you?
A No.
Q With the Court’s permission, I would again ask Mr.
Shoen to tell us what his definition of preferred stock is.
THE COURT: You may answer.
THE WITNESS: Well, general definition?
Q BY MR. SHAW: As you understand it.
A Well, my general understanding is that most preferred
stock, and certainly most preferred stock that is listed say in the
paper, the stock prices, is another form of debt. It is called
preferred stock. it is generally not voted, has no voting rights,
and generally there is a fixed rate. It pays at like 8 and a half
percent, and it’s really — it can be a better form of debt than
say going to a bank, depending upon what their rates are. That’s
most preferred stock.
Q_ Well, is your concern primarily over the debt, the debt
aspect of this stock or is it over something else?
[15] A Well, no, the series B, what I mentioned, is first of
all, itis only authorized, it’s never been issued, but it is a voting
preferred stock.
Q_ Has voting rights attached that could be voted by the
holder —
a
Sla
Appendix A
A Yes, yes. And the, and the unusual thing about this
stock is that, is that along with the authorization of the stock,
which is valued at $20 million, was also created the so-called
special committee, which the Board of Directors created in 1993,
and the special committee is composed of two members, Joe
Shoen and his employee, Charlie Bayer.
They have a number of characteristics. They are empowered
by the board to attach any voting characteristics they choose
for attaching to this stock any time that they want.
Furthermore, the board also indemnified them in advance
of any act they might take, including the attachment of any
voting rights they might decide to attach.
So, what this stock, it is very similar in my understanding
— in effect it is very similar to a poison pill. It is sitting —
Q You are sitting there as a shareholder today and you
see this series B stock, what does that mean to [16] you in your
position in the company? What do you feel is the effect of that
series B preferred stock?
A Itmeans that they can create votes whenever they want
to and as many as they want, and they have got the preapproval
of the board and the authority to do that.
September 12, 1994, 9:30 a.m.
[48] * * *
Q Anything about that last meeting that you recall that
caused you particular concern as a shareholder?
j —
52a
Appendix A
A [PLAINTIFF CECILIA SHOEN-HANLON] Oh, a few
things, but, but one was that we went all the way, all of us, a
good majority of shareholders went out there and went into the
shareholders’ meeting, and there was a lot of signing and things
like this, but we sat down, and I can’t be sure who came in. It
could have been Joe, but I can’t remember. I haven’t talked
about this in a long time.
Anyhow, the gist of it was that they had all the shares they
needed to pass what they wanted to pass.
Was this 1990 we are talking about?
Q My question was the 1990 meeting, yes.
A And they had all of these on the agenda, all of which I
had opposed, written to the Board of Directors and opposed,
which I got no, no, no response from the Board of Directors.
They said they had enough votes. The meeting was over,
and that we will have to bring our ballots, mail them in by that
day, by that night, postmarked by that date, and this was about,
the meeting [49] maybe adjourned around, I don’t know, I know
it was dusk, and I think it was 5:00, or maybe a little after that.
The post office, if there was one in Tonopah, was closed.
We had to drive back into Las Vegas and find the large
post office there to mail our votes in.
Q Have you attended any more shareholders’ meetings
since the September of 1990 meeting in Tonopah?
A Not personally, no.
53a
Appendix A
Q As you sit here today, Cecilia, what is your position,
or what is your current situation as a shareholder from your
perspective?
A I’ve been put into a permanent minority position. I
cannot get — I cannot sell my stock for fair market value. I
would have to go to the Board of Directors, which has been
extremely hostile and has not even, has never shown that they
would be helpful in any way.
September 13, 1994, 9:05 a.m.
[45] * * *
Q BY MR. SHAW: Now, on the morning of the meeting
that you actually wound up attending, Theresa, did you receive
a phone call?
A [PLAINTIFF THERESA SHOEN ROMERO] Yes, I
received a phone call from the Towers.
Q Okay. And in essence the phone call said, Katrina has
already testified, in essence, just come on down, we are waiting
for you. Is that your general [46] recollection of the phone
call?
A Yes, it is.
Q And you went down to the Towers?
A Yes, we did.
3
>
54a
Appendix A
Q What, what happened when you went down to the
Towers. Briefly if you could describe when you walked into
the room, who did you see there?
A When we walked into the room, it appeared to me as if
we had walked into the middle of the meeting. There was a
buffet, was already eaten, and most of it was gone anyway, and
everybody was sitting in there waiting for us. We didn’t get
there until the afternoon. I know it couidn’t -— it had to be
sometime after 12:00, and it just appeared that we were walking
in the middle of a meeting.
Q So when you walked into the meeting and you got
these impressions, what began to take place? What happened
next?
A Well, I looked around and I saw that nobody from the,
from the plaintiff’s side was there. They were all — it was my
brother, Joe, Mark, Jim, Paul, Sophy was there, Katrina and
me, several of the peopie that work for U-Haul, and various
other people who I don’t recall. The meeting — I’m sorry.
Q No, go ahead and describe, did the meeting [47]
essentially convene? Someone call it to order?
A The meeting was immediately called to order once we
arrived.
Q_ Who was presiding?
A Joe was presiding.
Q. As the meeting unfolded, what took place? What’s: your
recollection of what happened in this meeting?
55a
Appendix A
A My main recollection is when they passed the ESOP,
the ESOP had just been turned down less than six months
previously, and Joe got up there — well, I am not too sure if it
was Joe, but somebody got up there and read the motion, barely
stopped to breathe, as far as I was concerned, no discussion
took place, the motion was voted on, and it passed.
I couldn’t even believe it. I was so shocked I didn’t know
what to do.
Q Did you have — did you vote for or against —
A_ I voted against the motion.
Q What shocked you about it? Why were you shocked?
A I was shocked because I felt like I had been trapped,
like they had completely railroaded me. They, they had gotten
me to come down to this meeting to make a [48] quorum to get
this ESOP passed, and that was the whole intention of it, and
they were taking advantage of what I considered a very young,
naive girl, both Katrina and I, the two youngest girls in the
family, they took advantage of it.
[57] * * *
Q Now, after the lawsuit had been going on for some
time, did the company take any action directed towards you,
specifically?
A They took me off payroll in 1989, around February or
March, and they cut off my insurance.
i
rt
56a
Appendix A
Q_ Now, did you reinstate your insurance in any way with
the company?
A I was on COBRA for 18 months.
Q_ Let me just — by COBRA, do you mean — tell the
jury for those that may not know what COBRA is, what you
had to do to keep your insurance intact.
A That meant that I had to pay full price for my insurance,
but —
Q Who did you pay?
A_ I paid Oxford.
Q The company?
A Yeah, the company.
Q_ Now, did your COBRA benefits run out at some point?
A After 18 months my COBRA benefits ran out.
Q_ Did you try to get insurance?
A_ Yes, I tried several places, but —
[58] * * *
Q BY MR. SHAW: Were you — three more questions.
Were you able to get insurance?
57a
Appendix A
A No, I was not.
Q What for, I mean, why not?
A Because I have a pre-existing condition.
Q Do you mind telling the jury what that is?
A. I have epilepsy.
Is that common knowledge within your family?
> #
Yes, that 1s.
[59] om ” «
Q Now, after this situation with the lawsuit beginning,
did you attend the March 1989 shareholders’ meeting in Reno,
Nevada?
A Yes, I did.
Q Did you see the assault on your brother, Mike?
A Yes, I did.
Q Did you attend the next meeting in Tonopah in
September of 1989?
A Yes, I did.
Q Now, how many more meetings did you attend in
Tonopah, Theresa?
58a
Appendix A
A_ I know IJ attended the 1990 shareholders’ meeting, and
I can’t recall if I attended the 1991 because the 1990 was so
devastating.
Q What do you mean it was so devastating? What sticks
in your mind about the 1990 meeting?
A Well, after having flown from Phoenix to Las [60]
Vegas, taking a cab to my father’s house, driving four and a
half, maybe five and a half hours to, to Tonopah, got into the
meeting room, Joe walked onto the stage and gave about a 5 to
15-minute speech, said that he had enough votes to elect his
board and pass his motions, and he said if we wanted to have
our votes counted, that we would have to get them postmarked
that day.
This was after 5:00. There were no post offices open in
Tonopah. There was not another city, except for Las Vegas. We
would have to drive back after having gotten out of the car
probably not even 45 minutes. We had to get back in the car
and drive another four and a half, five hours back to, to Las
Vegas and get them postmarked before midnight, which we
were able to do.
September 13, 1994, 1:40 p.m.
(65) * * *
Q. What was the next shareholder meeting that you
attended for the Amerco system?
59a
Appendix A
A. [WITNESS RON BELLEC] In 1989.
Q. Now there’s been testimony that — was that the
September meeting in Tonopah?
[66] A. Yes, it was.
Q. And at that meeting, did you — do you recall whether
or not you cast your votes in any way?
A. Yes, I did.
Q. What was the vehicle through which you cast your
votes? I mean, was there a ballot that you wrote something on?
A. Yes.
Q. And what did you do with the ballot when you were
finished voting?
A. In 1989, I gave it to the tallier of votes, which at that
time was Mr. Klinefelter, I believe.
Q. No directing your attention to 1990, did you attend
the Amerco shareholders meeting in 1990, in Tonopah?
A. Yes, I did.
Q. Do you recall when you attended, the manner — did
you vote at that meeting?
A. Yes, I did.
60a
Appendix A
Q. Do you recall the manner in which you voted at that
meeting?
A. Through a write-in ballot.
[69] * * *
Q. BY MR. MICHAEL SHOEN: Mr. Bellec, after the
meeting was over, did — were the ballots — was your ballot
accepted by any representative of the company at that 1990
meeting?
A. No, it was not.
Q. And were any other write-in ballots accepted, to your
knowledge?
A. No, they were not.
Q. And what happened to the write-in ballots that were —
that were present at that meeting?
A. After the company management left, the group that was
going to vote by write-in ballot got together and selected one
of our number to drive to Las Vegas, which was about four and
a half to five hours away, to mail the ballots. We had to meet a
midnight deadline.
[74] Q. Directing your attention to page 20, to the last —
last full paragraph of that page, I’d like to ask you if this Amerco
public document form 10-Q, a portion of Exhibit 383, dated
September 30, 1990, formed a portion of the basis for your
believing that, in fact, the write-in votes of the 1990 shareholder
meeting had been counied by Amerco.
Le
a ea
6la
Appendix A
A. Yes, it did.
Q. And what in this document gave you that reason to
come to that belief?
A. In the four items that were before the shareholders to
vote on, it indicates both pro and con. 49,362 for, and 46,435
against. And I have numbers in the other three categories.
Q. And does this, the number of negative votes cast that is
mentioned in this public document, correspond to your
calculations of the number of votes cast in write-in ballots by
[75] what you have characterized as the outside group?
A. Approximately, yes.
Q. Thank you. How did — were there any statements made
by anyone representing the company at that meeting, as to
whether or not write-in ballots were a proper form of voting?
A. That’s correct, there was.
Q. And who made a statement in that regard?
A. Mr. Joe Shoen.
Q. And what did Mr. Joe Shoen say?
A. Ican’t tell you exactly what he said, but I can paraphrase
it. Jt was something to the effect: At this time, you can vote,
and the ballots have been distributed. And you can put an X
by the person that you choose, or write in the person’s name
that you choose below in the appropriate space. And then turn
the ballots in to the secretary.
62a
Appendix A
* * *
Q. And did you write in someone?
A. I did.
Q. And I take it it would be someone other than a person
that was on the management slate?
A. I did.
[77] * * *
Q. BY MR. MICHAEL SHOEN: Now Mr. Bellec, did
you have occasion to attend the shareholder meeting in Tonopah
in 1991?
A. I did.
Q. And how did you vote? What was the mechanism
through which you voted at that shareholder meeting in 1991?
A. By write-in ballot that I had prepared the day before.
* * *
[738)}* * *
Q. Now Mr. Bellec, were you presented with a ballot at
the 1991 meeting in Tonopah from Amerco?
63a
Appendix A
A. Yes, I was.
Q. Now did that document, Exhibit — identification 264
— did that differ than the ballot that was provided you by the
company the previous year, in any significant respect?
[79] A. Substantially.
Q. What differences was there, sir?
A. Major differences that do not provide any avenue for
dissenting votes or other — or write-in candidates.
* * *
Q. BY MR. MICHAEL SHOEN: Mr. Bellec, did you have
occasion to meet with L. S. Shoen the night prior to this 1991
shareholder meeting, and with him analyze the votes that you
expected would be voted at this 1991 meeting?
A. I did.
Q. And can you tell us a little bit about that analysis that
you made?
A. I determined that we could win the election.
Q. And why did you — what did you base that on?
A. It had been reported to me, and I believed it to be true,
that Paul Shoen and Sophie Shoen had not signed up on the
64a
Appendix A
voting trust agreement from the then inside group, and would
not be attending the 1991 shareholders’ meeting, and would
not be supplying the proxy to anybody.
If either one of those two did not vote, then that meant that
the then outside group would have a plurality of the votes
present at the meeting and, therefore, could win the [80] election
for directors.
[81] * * *
Q. And did you play any role in the transportation of those
ballots to Tonopah?
A. I personally carried the envelope that contained those
ballots, in the car to Tonopah.
Q. Now Mr. Bellec, do you recall approximately how many
votes L. S. Shoen was voting at that meeting, either by himself
or in proxy, in his ballot?
A. Don’t have the exact number in mind. However, I do
know that it was 57 percent of the outstanding shares present at
the meeting. \
[82] Q. Now, how did you, in 1991 at that meeting,
transmit these write-in ballots to the company?
A. We personally handed them to Gary Klinefelter, the
secretary.
65a
Appendix A
* * *
Q. So then you are telling me that you sent a duplicate set
of the ballots through the mail, and you aleo hand-delivered a
set to Mr. Klinefelter?
A. That’s correct.
Q. Now Mr. Bellec, did you have occasion, subsequent to
this 1991 September meeting, to learn whether or not the ballots
that you and |. S. Shoen submitted at that meeting, the write-in
ballots, were accepted or counted?
A. Yes, I did.
Q. And when, approximately, did you learn that, whether
or not they were counted?
A. I don’t know. But within a matter of weeks or [83]
months I had determined —
Q. And what did you learn as to whether or not they had
been counted?
A. I determined that — I learned that our write-in ballots
had not been accepted in 1991.
Q. And what did you base that determination on?
A. The company reported to the SEC via their 10-Q or
10-K, that the management-nominated nominees for director
had been elected without opposition, by 30 percent of the
outstanding shares of the company.
66a
Appendix A
Q. Now going back to your comment about — now did
you have occasion to correspond with Mr. Gary Klinefelter, the
secretary of Amerco, on this subject?
A. I did.
Q. Based upon that correspondence, did you — did that
further your determination as to whether or not — as to whether
or not the company considered the write-in ballots to be valid?
A. Yes.
Q. And what was your understanding, based upon your
correspondence with Mr. Klinefelter?
A. That the company had determined that because we had
not nominated according to the nomination procedures, that
write-in ballots were not legal.
Q. Well, now did the company — in between the 1990
and [84] the 1991 balloting, did anyone from the company
communicate to you that write-in ballots would not be acceptable
in 1991, as they were in 1990?
A. No, they did not.
Q. Did you make any search of the company’s bylaws or
articles of incorporation, to ascertain whether or not there had
occurred, since the 1991 meeting, a prohibition on write-in
ballots?
A. I did.
67a
Appendix A
Q. And what did you find?
A. I discovered that there was no prohibition against write-
in ballots, nor had there been any change in the bylaws or articles
of incorporation that referred to write-in ballots.
* * *
[94] * * *
Q. Now Mr. Bellec, was there a process with all these
exhibits and other letters that you have testified, that we haven't
marked as exhibits here — was there a process going on between
you and Mr. Klinefelter with respect to your changes in your
nomination document?
A. Yes, there were.
Q. Could you explain that, please.
A. I had read what I thought to be the requirements for
nomination for directors for Amerco. And in it, it had a clasue
that talked about the Schedule 14A from the SEC. And we had
to answer all the questions. And I misread that and did not
understand that was what was required.
I asked Mr. Klinefelter to tell me specifically and exactly
what questions he wanted me to answer with regards to nominees
for directorships. And over — through all this correspondence,
he finally did answer most of my questions.
* * *
68a
Appendix A
[95] * * *
Q. Mr. Bellec, did you have further correspondence from
Mr. Klinefelter? Did you at any time learn that — did you at
any time come to believe that in fact you had finally authored
an acceptable nomination?
A. Yes, I did.
[96] Q. And approximately when did you come to believe
that?
A. Subsequent to all of this correspondence, I have
additional correspondence prior to the deadline, which was
sometime in April or May, that indicated to me that I had
substantially complied with all the requirements. And he said
in one of his letters that my nominations would appear and be
presented at the next annual meeting.
Q. Who made that statement?
A. Mr. Klinefelter.
Q. Now Mr. Bellec, were, in fact, your nominations [97]
accepted at the 1993 annual shareholder meeting?
A. No, they were not.
69a
Appendix A
Q. BY MR. MICHAEL SHOEN: Did you come to learn
why your nominations were not accepted at the 1993 annual
shareholder meeting?
A. Yes, I did.
Q. What was your understanding of the reason they were
not accepted?
A. There is a clause in by bylaws that says that at the
discretion of the chairman of the meeting, anything that he or
she considers to be out of order will not be accepted.
Q. Now that’s the restated bylaws of Amerco?
A. That’s correct.
Q. Now based upon that experience, do you feel that there
is any way that you are going to be able to nominate any
candidate, whether write-in ballot or the conventional process,
that Amerco had required for any future — future shareholder
meeting, and have that nomination accepted or have the vote
accepted?
A. I don’t see any way possible that a majority of the
shareholders can effect a change in management through the
election process.
September 14, 1994, 9:40 a.m.
[69] * * *
In, in September of 1990 the board decided to, to start
holding meetings in Tonopah, Tonopah, [70] Nevada, correct?
70a
Appendix A
A [DEFENDANT PAUL F. SHOEN] I am not sure on
the date, but there was a decision made to start holding the
meetings there, yes.
Q_ Do you recall how the decision was made?
A Notprecisely. I remember that, that I believe Jim Shoen
opened the road atlas and started pointing out places in Nevada,
I believe, at the time he was living there, and since we were, we
were a Nevada Corp., that was generally agreed to hold the
meetings in Nevada.
Q_ Really, is it your opinion, Mr. Shoen, that the board
has made it extremely difficult for shareholders to attend annual
meetings by placing them in Tonopah?
A Iam not sure.
Q_ Well, let me ask you, there is no commercial airlines
flying into Tonopah, are there?
A Not that I am aware of.
Q_ And the shareholders either drive some distance from
some point, either, either probably there is air service into Reno
and Las Vegas, they probably drive from Reno or Las Vegas?
A Yes.
Q Unless they want to charter an aircraft, correct?
[71] A. Yes.
Tila
Appendix A
Q And your knowledge in the past is Amerco, in fact,
would use its own jet to go to these meetings?
A. As far as I know they would. I don’t know precisely
how they — I don’t know for a fact how they get to the meetings.
They have had company aircraft.
September 14, 1994, Afternoon Session
[42] Q Well did you represent — let me name some of
the Shoen family members, and I'll ask if you can recall whether
or not you did represent these specific individuals.
Somewhere around May of 1989, Samuel Shoen, L.S.
Shoen, Theresa Shoen, Mary Anna Shoen-Eaton, Cecilia Shoen-
Hanlon, Katrina Shoen, and Michael Shoen?
A [WITNESS STEPHEN CASE] I represented all those
people. I think your date is correct.
Q It’s fair to say you also represented at various times
Edward Shoen and Paul Shoen?
A I represented all of you.
Q Thank you. Mr. Case, I’m going to hand you what
has been marked for identification purposes as Exhibit No. 221
and ask you if you can identity that document?
A Yes, I can.
Q And what is it?
72a
Appendix A
A This is a letter that 1 wrote on May 12 of 1989 to Samuel
Shoen, L.S. Shoen, Theresa Shoen, Mary Anna Shoen-Eaton,
Cecilia Shoen-Hanlon, Katrina Shoen, and to yourself, Michael.
Q Thank you. Have you had an opportunity to review
this letter, Exhibit 221, within the past two weeks outside of
the courtroom?
A Yes, I have.
Q_ And looking at that Exhibit 221, this letter of May 12,
1989, is there anything in there that you see today [43] that
was untrue when you wrote it on Mary 12" of 1989?
A_ No, to the best of my knowledge it was accurate.
Q And I am going to direct your attention, Mr. Case, to
the first paragraph of that letter only, and am only going to ask
you some questions with respect to the basis for — or rather
any experiences you might have had that led you to make certain
statements in this letter.
Did you have an occasion in the preparation of this letter,
or immediately prior to your authorship of this letter, did you
have occasion to have a conversation with Joe Shoen?
A Yes, I did.
Q And during that conversation did you come to an
understanding that Joe Shoen expressed any bitterness about
anything?
A_ Yes, he did.
73a
Appendix A
Q_ And what did he express bitterness about?
A He was bitter about attacks on his family, and about
process servers waiting and serving his children, minor children.
Q First of all, when approximately was this conversation,
or do you recall when the conversation was that you had with
Mr. Joe Shoen prior to your authorship of this letter?
A Idon’t really specifically recall the date, but it would
have been immediately prior to my writing the letter.
Q And do you recall where you were when the
conversation [44] occurred, or where Mr. Joe Shoen was when
the conversation occurred?
A Ido. I was in my office in Scottsdale, and Joe was at
the offices of Amerco.
Q_ And did Joe Shoen during that conversation make any
statement with respect to making life as difficult as possible
under any pretext for any members of the Shoen family?
A Yes, with regard to some stock certificate registration,
he said he would make it as difficult as he could.
* * *
Q BY MR. SHOEN: Mr. Case, what statement did he
make to the best of your recollection as to — what’s your best
recollection as to the statement he made with respect to as
difficult as possible?
74a
Appendix A
A That he would make the transactions, the registration
of stock and the transactions with Amerco as difficult as he
could under the circumstances.
Q Okay. Is there any reason that you recall today [45]
that you wrote something else down?
A | used the term life. Perhaps loosely. The term life in
that — in my context in my mind was related to the transactions
that I had been inquiring about.
Q Okay. Now did — at this time did Joe Shoen make
any statements with respect to hiring anybody to — to make
things as difficult as possible.
A Yes, he did. He said he had hired Ken Pavia (phonetic)
for that purpose.
Q_ Did he make any further statements with respect to his
hiring experts tc assist him in this purpose?
A He asked me to relate to U-Haul you could assume he
had experts in all phases of the transactions. ,
Q What transactions was he talking about?
A It’s my recollection it related to the reincorporation of
some holding companies in Nevada as opposed to the possibility
of reissuance of stock of existing holding companies.
75a
Appendix A
September 14, 1994, 3:40 p.m.
[7] # * *
Q How is the right of first refusal handled on your stock?
Your common stock has the right of first refusal, too, doesn’t
it?
A [DEFENDANT PAUL F. SHOEN] Yes, it does.
Q And why is, why is that not an impediment to your
selling your stock?
A Well, because the company has agreed to lift the right
of first refusal on my shares in order to — so that they can be
sold in the public market.
September 15, 1994, 9:35 a.m.
[32] Q In fact, Joe told you that, in fact, he suspected
that Katrina was involved in a 13-D filing, didn’t he?
A [DEFENDANT PAUL F. SHOEN] I don’t know if he
used those exact words [33] or, or, or — but that’s probably a
fair characterization.
Q Okay. Well, if Joe knew prior to July 25th of 1988
that there was a 13-D filing in the works — well, let me ask
you this, isn’t a 13-D filing something that gives public notice
to everybody that wants to go and look at what you are intending
to do in conjunction with your shares?
A Yeah. It is, it is a filing required by the SEC that is
basically a public disclosure document.
ereeiitmeaa
76a
Appendix A
Q Did you ask Joe if he actually knew what was in the
13-D?
A I don’t believe we knew what was in the 13-D atall. |
was, I was part of those conversations, and, and all we could do
was speculate.
Q When Joe told you that he knew about the 13-D, Mr.
Shoen, did you question the basis for his knowledge? How
did he find out?
A Yes.
Q. And what did he say?
A I believe he said that it was privileged information —
Q. And you took him at his word, didn’t you?
A Yes, I did.
Q You didn’t ask him who this privileged [34] source
A No, I didn’t.
Q. Okay.
A He chose to keep it privileged.
{37} Q Remember having your deposition taken, well,
on more than one occasion, but I am referring to August 22nd,
T7a
Appendix A
1988, a long time ago, but you remember you were deposed at
that point?
A Yes.
Q I would just like you to take a look at page 63, line 22,
Mr. Shoen, and, and line 22 there. You were asked the question
about whether or not — who had all of this information, weren't
you?
A Ican read it.
Q Please feel free to. Thanks.
A “QUESTION: Did anyone other than Joe Shoen
provide information at this meeting on Saturday about the threat
of a hostile takeover?
“ANSWER: No, Joe had all the new information.”
September 20, 1994, 9:15 a.m.
[77] * * *
Q Now, you say that they paid $100 per share down as
par value. First of all, where did they get this much money,
$162,000?
A [ATTORNEY-WITNESS JOCK PATTON] There was
a discussion there and, and Joe volunteered to, to arrange to
finance that $162,000 for them as an individual.
Q Okay. And then were they — well, the price per share
was $2,715, is that correct?
78a
Appendix A
A That's correct.
Q That was the total price?
A Per share.
Q How was the difference per share between the $100
and the $2,715 taken care of?
A There was a promissory note executed by each
individual to pay that difference.
Q And would you explain to us how a promissory note
works?
A Well, a note is the same as you would have with, with
your house mortgage. You sign a note and you agree to pay
interest and principal over time to retire the debt.
[78] Q Now, this works out to be a big debt for people
that aren't independently wealthy. It works out to be, we did
the math yesterday, over $4 million in debt that the key
employees had.
Was there a discussion about how the key employees were
going to pay for this debt and make the interest payments on
this debt?
A Yes, there was.
Q_ And tell us what the discussion was in that regard.
79a
Appendix A
A Well, there were two means of repaying the debt. One
was through bonuses because as the board said, the individuals
had been historically underpaid, but the principal means by
which they intended to do it was to have the company buy
back those shares, that stock over time.
The company had a practice in the past many years of
buying back stock, and it expected to be buying back some
stock in the future to fund some plans that had, that it had in
place, so it was expected that those shares would be bought
back and the proceeds used to retire the debt.
Q_ There’s been some discussion that the promissory notes
that the key employees executed were nonrecourse promissory
notes. Is that consistent with [791 your recollection?
A Yes.
Q And, and what is a nonrecourse — how does a
nonrecourse promissory note differ from a regular promissory
note”
A Well, aregular promissory note signed by an individual
means that that person is individually liable to the extent of
everything they have.
A nonrecourse promissory note is a note that is secured by
something, in this case stock, and the only remedy in the event
of nonpayment is to take the stock back.
Q And why was a nonrecourse promissory note used in
this case as opposed to a regular promissory note?
80a
Appendix A
A Well, the purpose here was to motivate the employees
and give them a reward for, for performance, assuming they
did perform and the stock went up. The idea here was not to,
to terrify them by giving them, them a huge debt that they
would have to pay in the event that things went badly.
The exercise here is motivation, not destruction of an
individual's morale.
[98] * * *
Q You are not aware of the voting dynamics that have
occurred since 1988 that essentially involved this stock that
was issued that night to be in neutral third-party hands?
A lam not aware of it at all.
(100) * * *
Q_ But what I am saying, if those facts that were presented
to you were false or misleading or were half truths or didn’t tell
you the whole truth, then maybe, through no fault of your
own, some of this advice might have been off base and might
have been wrong?
A_ It would entirely depend on the nature of the difference
between what I was told and, and what the realities were.
8la
Appendix A
(105) * * *
Q Well, on July 24, didn’t you testify and agree, Mr.
Patton, earlier that on July 24 certain shareholders took action
by consent?
A [ATTORNEY WITNESS JOCK PATTON] Yes.
Q. And by definition when they took action by consent,
they had a numerical majority, 50 percent plus?
A Acting as shareholders, yes.
Q_ And where did they get that, that numerical majority?
Did they get it from something that you had advised them to
do?
[106] A That was the consequence of what they did.
September 26, 1994, 9:30 a.m.
(o1)* * *
Q Well, on the night of the 24th when the formal board
meeting was called around 9:00 p.m. or so, that evening, Sunday
evening, do you remember the, the 8,099 shares that were being
issued?
A [DEFENDANT WILLIAM E. CARTY] I remember
that — I don’t know, I don’t know if I remember it from then
or where, but I have [92] heard it so many times.
82a
Appendix A
Q_ Did you understand at that time that those 8,099 shares
were going to change the math and give control from one side
to the other?
A_ I think I understood that.
Q Were you aware that Mr. Joe Shoen personally loaned
some, some funds to, to the five key employees so they could
go forward with the transaction?
A Iam aware of that now. I might have been aware of it
then, but I am not sure.
Q_ Well, did the issue of how these key employees were
going to pay for their stock ever come up that evening?
A It probably did. I can’t say it did.
Q Were you aware of the amounts of money required to
purchase these, the stock?
A_ I think each person had to put up $160,000, something
like that.
Q_ And that was —
A I think I heard that here in this trial, actually.
Q_ Okay. I believe it was $162,000 per, per employee was,
was in essence the down payment or par value of the stock?
A That’s correct.
83a
Appendix A
[93] Q Okay. That still left a balance of, of about $21
million for all five employees?
A Yes.
Q Do you recall any discussions that night, July 24th,
about, about Amerco loaning to these five key employees the
$21 million?
A Idon’trecall specific discussions, but I knew what went
on, and we worked it out on the board where it made sense,
and I don’t remember exactly — I thought that it was a good
idea, and I supported it. At the time we, we did the best we
could, and it looked realistic, when you worked it out.
Q Were you apprised of how this loan was to be a
nonrecourse type of thing?
A lamsure all of that type of thing was discussed. That’s,
that’s — I’ve been, I have run the product end, the marketing
end, but never the finance or legal end of the business, and
there is plenty of guys there that were looking out for what I
was interested in.
Q Do you recall who got the proxies for the stock that
was issued that night for those 8,099 shares?
AI think Joe did, but, but I am not sure. I think the
board did. I am not sure.
Q. All right.
A They were on our side, I will say that.
84a
Appendix A
[os] * * *
Q Okay. On that weekend, and particularly that night of
July 24th at the formal board meeting, were you aware that
Joe, Paul, and Jim Shoen, who were all directors, and then
Mark and Sophy Shoen were part of a voting trust?
A I don’t know if I knew that or not. I should have known
it, if I didn’t.
Q I’m sorry, what —
A I say, I don’t know if I knew that then or not.
September 26, 1994, 1:30 p.m.
[34] fe ee
Q. Okay. Well, let’s say that Mr. Dodds, in his capacity,
after July 24th, 1988, he owed 4.4 million dollars, didn’t he,
to the company”
A. [DEFENDANT WILLIAM E. CARTY] Whatever the
record says.
Q. He owed, what was it, $162,000 to Joe Shoen?
A. I don’t know what he owed to Joe.
Q. Well —
85a
Appendix A
A. Yes, I do. I think it was 162,000.
Q. Okay. Well, before we go on that much more, there
was some testimony in here from Jock Patton that with respect
to whether the proxy to vote the shares of the key employees
was given to the Board or given to [35] Edward Shoen on July
24th. Do you recall of your own recollection who it was given
to? Was it given to Joe Shoen, or was it given to someone else?
A. I don’t recall.
Q. You don’t?
A. No.
Q. Well, Mr. Carty, let me hand you what’s been marked
as Exhibit 402, and direct your attention to Page Number 5,
ask you to take a look at that and see if that refreshes your
recollection. I will direct you to Page 5 on 402, Mr. Carty.
A. Just a minute.
The proxy was a gift to the chairman of the Board, and he
was chairman of the Board, that’s correct.
Q. Joe Shoen.
[39] Q. Right.
Well, Mr. Carty, wasn’t it true that — that the directors had
such control through the shareholder directors, Edward Shoen,
Paul Shoen and Jim Shoen, their voting trust, that the Board
could actually — board actually knew that which directors
would be elected months before the election took place?
86a
Appendix A
A. I — I didn’t have that knowledge, I don’t know if
anybody else did or not. We — they have held stockholder
meetings in the board room when I was there.
Q. Right.
Mr. Carty, | am going to hand you Exhibit 530, minutes of
the meeting of the Board of Directors of August 7, 1990, ask
you to take a look at that document.
You were a director in August of 1990, were you not?
A. Yes.
What did you want me to look at?
Q. First page.
And referring down here to under Roman Numeral I, slate
of directors?
A. Yes.
Q. And the second paragraph under there, where it starts
out, “Further resolved that the Board [40] affirms — ”
A. Yes.
Q. “Directors to be — to be elected”?
‘Pas.
87a
Appendix A
Q. Wasn’t that a little presumptuous because — that the
Board could affirm in advance the directors to be elected two
months ahead of the meeting?
A. That was a mistake in there, Mike. I think that was
directed — where it says “elected,” I think it was changed to be
nominated, that I remember.
Q. So then this exhibit is incorrect, right?
A. That, to me, it’s incorrect, if it still says that, because
there was discussion about that.
I think it was a typographical error or something.
Q. Just an incorrect exhibit, right?
A. In my judgment, that does not properly state it. Change
one word, it does.
Q. Well, let’s say that the exhibit is incorrect. Could they,
in 1990, know who was going to be elected two months
immediate of the annual shareholder meeting?
A. I couldn’t tell what Shoens would be lined up with
what Shoens two months ahead of anything, so I don’t know
how to answer that.
88a
Appendix A
September 27, 1994, 1:15 p.m.
[45] * * *
Q Okay. And were you angry at the time you left the
meeting?
A I was angry and, and frustrated, both.
[s2)* * *
Q — how did you find out that, that Sam and L.S. had
met with David Victor?
A [EDWARD J. SHOEN] Well, I was told that.
Q By who?
A By a person whose name I do not know, and that same
person furnished me a tape of a telephone conversation between
my brother Sam and David Victor in which they discussed a
big plan and a small plan —
(66) * * *
THE COURT: The jury is not present. Counsel.
MR. SHAW: Two things, quickly, Your Honor. One deals
with some testimony we just heard from the stand about a tape
recording; never heard of that before until today. It has never
been produced; needless to say we have had outstanding
discovery requests and 26.1 required disclosure of the existence
of it. More perplexing is the fact it was provided by a person
ee
89a
Appendix A
who Mr. Shoen could not recall. It is kind of like the easel
sheets, it now shows up.
I am really troubled by it, and I am troubled by, by the fact
that apparently he made up some, some, some of the foundation
for Mr. Shoen’s beliefs on [67] the, on, on the critical weekend
in question here.
Sitting here as the testimony came out, I was perplexed
immediately as to what to do about it, perhaps now bring it to
the Court’s attention. ° ‘he tape exists, we certainly want a
copy. If it doesn’t exis. wad there is no copy to be found, I ask
that that part of the record be stricken and a proper instruction
be given to the jury.
I think that it was clearly erroneous to discuss it in this
courtroom based on the nondisclosure of the tape.
THE COURT: Excuse me, Mr. Shoen.
MR. MICHAEL SHOEN: Might I join in the same motion
that Mr. Shaw has and add a couple of pieces of facts.
I have got 12 volumes of depositions of Mr. Joe Shoen by
me here and four different cases, and I can’t recall that ever
having been mentioned.
Additionally, Your Honor, apparently this information was
part of the basis that the board considered. We have depositions,
[ don’t know how many volumes, of all of the board members
and the people that were there in those meetings, that that tape
has never been mentioned before. It is kind of a devastating
piece of evidence that we can’t rebut.
90a
Appendix A
[68] THE COURT: Thank you.
MR. SHAPIRO: Your Honor, I believe it had, the subject
has come up before, maybe not in precisely the way it came out
today, but I would have loved to have heard that tape, too. It
doesn't exist, or at least to my knowledge it doesn’t exist, and I
have asked Mr. Shoen whether it exists, and he said no, it doesn’t.
It has come up in response to questions asked in depositions,
and I believe the way it came up was he indicated that he knew
that his father had met with, with David Victor on, on Thursday
of that week and that Sam had conversations with them, knew
that David Victor was with them in New York.
When asked, how do you know that, he said, I was given
that information by a confidential source.
That's, that’s what he is talking about, so he may not — I
don't know because I haven't gone back through all these
transcripts and that. Most of these cases I have never seen, don’t
know anything about, but it is possible that, that the statement,
you know, tape recording never came up, but he did say
confidential source. He has never been able to identify the
source. He doesn’t know who this person is.
I would love to put a name to it, but he doesn’t know, and
that’s what he has told me, so this [69] subject has all come out
and come out exactly the same way and the story has all been
told before countless times.
It is possible, although I would ask Mr. Shoen because he
has reviewed his deposition more recently than I did, but I don’t
recall any mention of a tape recording that was given to him by
9la
Appendix A
some anonymous person, but, but the anonymous person who
told him about David Victor has all been disclosed, and that’s
been his testimony from the beginning, so it is not really a new
issue.
The only new issue is that he was given a tape of this
conversation.
THE COURT: Mr. Shoen, is the tape recording available?
MR. EDWARD SHOEN: No, sir, it doesn’t exist.
THE COURT: It does not exist?
MR. EDWARD SHOEN: No.
THE COURT: Did it ever exist?
MR. EDWARD SHOEN: Yes, it existed and I played it for
one person besides myself — no, I played it to my wife and,
and I played it to my brother, Mark, and I have never played it
for anyone else. None of ine directors have ever heard it.
THE COURT: And when did you play it for your [70]
brother — you played it for your wife? When did you play it
for your wife?
MR. EDWARD SHOEN: That Friday evening when I got
home and then, and then for my brother, Mark, when he came
over, I played it for him. I played it for him, and that’s the last
time it’s been played.
THE COURT: And who made the tape recording?
92a
Appendix A
MR. EDWARD SHOEN: I do not know. A person gave it
to me Friday afternoon somewhere between 5:00 and 6:00 after
the ordinary close of business at my office.
THE COURT: And you are saying this is someone that
you did not know?
MR. EDWARD SHOEN: Someone | do not know.
THE COURT: When was the first time you saw this person
that gave you the tape recording?
MR. EDWARD SHOEN: Same day, that evening, late in
the afternoon.
THE COURT: Have you seen that person since?
MR. EDWARD SHOEN: No, sir, I have not.
THE COURT: And who destroyed the tape recording?
MR. EDWARD SHOEN: I threw it away.
THE COURT: When?
MR. EDWARD SHOEN: Same evening.
THE COURT: Why did you throw it away?
[71] MR. EDWARD SHOEN: Because the person told me
that, that they needed it to remain confidential, and I figured
the only way I could keep it confidential was to throw it away.
93a
Appendix A
September 28, 1994, 9:10 a.m.
[44] * * *
And how much did each of the key employees pay?
A [DEFENDANT EDWARD J. SHOEN] 162,000, except
one of them paid 161,900.
Q Because he had one fewer share?
A Yes, sir.
Q Okay. Where did they get that money?
A I loaned it to them.
You personally?
>
Yes, Sir.
September 28, 1994, 1:30 p.m.
[6] * * *
Q. And based on all of the information you have, in your
capacity as the chief executive officer with Amerco, your
meetings with all of these people who were actually going to
[7] buy stock, and your own personal opinion, do you have
feelings about your own stock? Because you own a considerable
amount of stock also; correct?
A. Yes, I do.
94a
Appendix A
Q. What is your opinion as to the value of Amerco
stocktoday?
Q. BY MR. SHAPIRO: What is your opinion as to the
value of Amerco stock today?
A. That it would sell for somewhere around 20 to $25 per
share.
[10] * ~* *
Q. I want to start with something you talked about late
yesterday afternoon as we were nearing the conclusion of the
afternoon session.
You were going through a list of things, and matters of —
things that you were aware of, things that you heard, bits and
pieces of information that was coming to you over the weekend
of July 22d through the 25th. Do you recall giving generally
some testimony about that?
[ll] A. [DEFENDANT EDWARD J. SHOEN] Yes, sir, I
do.
Q. Now at the time, you were getting information from a
variety of different sources. You testified, Mr. Shoen, about
receiving a tape cassette of a conversation between David Victor
and Sam Shoen. Do you remember that testimony yesterday?
A. Yes, sir, I do.
Q. Now when did you get that tape?
95a
Appendix A
A. Late in the day on Friday. After 5:00 o'clock, after the
close of business.
Q. And it — after the close of business?
>
Yes.
Q. Was it personally delivered to you?
A. Yes, it was.
Q. The messenger, or the person with the tape, personally
walked up to you and handed you the tape?
A. Yes.
Q. Was it a cassette of some kind?
A. Yes, it was a normal cassette tape.
Q. A normal cassette, not a little microcassette of — kind
of like a song cassette that they have songs on?
A. Exactly.
Q. I think you believed you'd never saw this person before?
A. Yes, I did not know that person.
[12] Q. Can you describe that person to us today at all?
A. Generally.
| Fe Seer ee ern nMenesEr Sener rer
96a
Appendix A
Q. Was he tall?
A. It was a woman.
Q. It was a woman. Was she tall?
A. No, not a tall person.
Q. About how high?
A. About average height, maybe five-four or five-three.
Normal height for a woman. Not a tall person.
Q. Do you remember the color of her hair?
A. Dark hair.
Q. Was she dressed nicely?
A. Office dress. Not pants.
Q. And you had never seen this person before?
A. That’s correct.
Q. How did she get up to you after closing? Don’t you
lock the doors downstairs at 5:00 o'clock?
A. No. We do today. We did not then.
Q. She went right up to — your office is on the 11" floor;
right?
97a
Appendix A
A. Yes.
Q. She got on the elevator, went up tc 1!th floor, and
went up to you and handed you this tape?
A. I didn’t see her come up. She actually called first. I
don’t want to miss — she called first.
[13] Q. She called you from someplace?
A. Yes.
Q. Off the premises?
A. From someplace. I don’t know from where.
Q. What did she say when you called her — or she called
you? Excuse me. What did you say?
A. I said, “Hello. U-Haul.”
Q. And what was her conversation?
A. She said she wanted to speak to the president. I told
her she was.
Q. And she had the president's number?
A. I don’t know for sure what number she had. But you
don’t have to have the president’s number for it to ring. It’s
widely disseminated. But you could have got it — there’s a
variety of ways for you to get to that number.
98a
Appendix A
The switchboard stays open till 6:00. You could get through
the main switchboard and get transferred up. You could dial it
direct. I don’t know how —
Q. She might have gotten to you through the main
switchboard?
A. It’s possible, absolutely. I don’t know how.
Q. Did she tell you what she had for you at that time?
A. In a vague way, yes.
Q. What vaguely did she say?
A. She said something to the effect that she had a tape[14]
I needed to listen to.
Q. And did she tell you who the tape was between?
A. No, sir.
Q. Did she tell you what the contents of the tape were —
A. No.
Q. Did you ask her those questions?
A. I asked her who she was and what it was about.
Q. And did she tell you?
CRT ERE PN ee NS Oe MTT NET
99a
Appendix A
A. She did not tell me who she was. And she said it had to
do with the company’s business, and she was sure I would
want to listen to it.
Q. That obviously piqued your interest, and you invited
her to come up and give you the tape?
A. Not exactly, but —
Q. What exactly happened?
A. When she refused to give her name, I said, “Well, you
no, I ordinarily, you know, have no place to go. I don’t know
your name. How can I deal with you?”
And she volunteered something to the effect, “Well, I can
bring the tape right by.”
I says something to the effect of, “Fine.”
Q. And she brought it by shortly thereafter?
A. Within less than 15 minutes.
Q. When you got this tape from her, did you ask any [15]
questions of her?
A. I don’t specifically recall asking questions from her,
no. But — I’m sure I asked her something, but I don’t recall.
Q. Did she again try to convey to you what was in the
tape, other than something about company business?
100a
Appendix A
A. No.
Q. So at the time you took the tape from her hand, you
really had no idea what was on that tape?
A. I had no idea.
Q. There is no labeling on it, or anything at all?
A. Nothing.
Q. She never gave you her name?
A. Never.
Q. But yet she said she wanted to keep this confidential?
A. I don’t know if she said that or if I just implied that,
but she did not want to give her name.
Q. If she would walk into the courtroom here today, do
you think you would be able to identify her?
A. Maybe.
Q. Maybe. Now how did you go about — this was Friday
night. And I think you testified you actually played the tape
Friday night?
A. Yes.
[16] Q. Now did you listen to it by yourself?
10la
Appendix A
A. Within a few minutes after getting the tape, | went and
got in my car and drove home. And about halfway home, I
popped the tape into the cassette player of my car.
Q. Okay. And as you put this tape in, did you recognize
the voices on it?
A. I recognized my brother’s voice.
Q. Did you recognize the other voice?
A. No, I did not.
Q. Did you understand who that other person was?
A. In a general sense, yes.
Q. How did you understand in a general sense who he
A. I believe my brother addressed him by his first name.
Q. And what first name did you hear on the tape, Mr.
Shoen?
A. I believe “David,” but I’m not absolutely certain, as I
sit here.
Q. You believe “David.” And did you jump to the
conclusion it was David Victor?
A. No, I didn’t.
102a
Appendix A
Q. Did you come to the conclusion it was David Victor?
A. I did, yes.
Q. As you listened to the tape?
A. Notas I listened to the tape, no. Let me — I am not for
a fact certain, as I sit here today. I don’t believe I [17] knew it
was David Victor as I listened to the tape.
Q. Did you understand what they were talking about?
A. In a general way.
Q. Did it sound like a conversation between an attorney
and his client?
A. Yes, it did.
Q. At that time, you were a member of the State Bar,
weren't you, Mr. Shoen?
A. Yes, | was.
Q. Were you inactive at that point or were you active?
A. I was active at that point.
Q. Did it trouble you that you might be listening to the
privileged communication of a lawyer and his client, Mr. Shoen?
A. No at that time it didn’t trouble me.
103a
Appendix A
Q. Does it trouble you today?
A. It troubles me to discuss it here, yes.
Q. Isn’t that really unethical to listen to an attorney and
client discuss anything, unless they want you to be a part of
that conversation; correct?
A. I’m not sure about that, but I wonder what’s ethical.
Q. Isn't that one of the first things you learn in law school
when you are dealing with ethics, is that you are entitled to
keep your conversations between your client, if you are a lawyer,
privileged and confidential, under most circumstances?
[18] A. It’s a litthe more complicated than that, but I am
generally aware of it, yes.
Q. There was no one else talking between what you have
later surmised to be David Victor and Mr. Shoen, was there?
A. I don’t understand your question.
Q. It was a bad question. There was nobody else talking
in the background? Or you didn’t hear anybody else but David
Victor and Sam Shoen?
A. There may have been a secretary come on the line at
some point, but I absolutely don’t recall here today.
Q. A secretary to either one of the parties?
A. May have been. I don’t recall.
104a
Appendix A
Q. I assume you also understand the secretaries are also
bound by attorney/client privileges?
A. I accept what you say.
Q. Why does it trouble you to talk about it here today,
Mr. Shoen?
A. Well, because it may — my attorney pointed that out to
me at lunch, that it may violate attorney/client privilege and it
may be unethical. He pointed that out to me at lunch.
Q. Did he talk about some of the problems with it being
unethical?
A. He just basically said it may be unethical.
Q. Now when this lady delivered the tape to you, I forgot
to ask you, did you ask where it came from at all, what [19] her
source was?
A. I asked her something, but it was apparent she had no
desire to become more involved than giving me the tape.
Q. And, in fact, you took it home. And who else listened
to the tape?
A. My recollection today is that I played it for my brother
Mark later than evening. And I’m not absolutely certain. My
wife may have overheard it. I can’t remember if I played it on a
tape machine in our house or only in my car. I just can’t
remember.
105a
Appendix A
Q. Now no one else heard the tape?
A. I don’t believe anyone heard the tape, no.
Q. Now Mr. Shoen, prior to hearing about it in this
courtroom, you never told anybody about this tape, have you?
Other than the people who listened to it.
A.
Q.
A.
Q.
A.
Q
Prior to what point, exactly?
You testifying about it in this courtroom today.
No, I told my attorney about it.
And when did you do that?
This Saturday.
But you realize that — I think we have heard some
testimony earlier about the extent of this litigation, how long
we have been at it. But during this six years, you didn’t tell
your attorney, nor did you tell any of us, i.e., the plaintiffs’
attorneys, about the existence of this tape, up [20] until this
Saturday?
A. I believe I have answered every question. And to answer
that question i , no, I didn’t tell anyone until this Saturday, or
in open court, until yesterday.
Q. I just wanted that to be clear.
I think this tape — you testified yesterday it talked about a
big plan and a little plan?
ee
106a
Appendix A
A. Could be big plan, small plan. Again, it’s been a long
time, and I don’t remember.
Q. Some-sized plan versus another-sized plan?
A. Yes, that’s my recollection.
Q. Now do you recall telling any of the directors about
this? Just for clarification — I’m sorry to interrupt so quickly,
but Mark was not a director in 1988, was he?
A. He was not. That’s correct.
Q. And after you played the tape for Mark, did you tell
any of the other directors you had a tape of conversations between
Sam and David Victor?
A. No, I did not.
Q. If we asked you for the tape today here, Joe, we couldn’t
get it, could we?
A. No, you couldn't.
Q. Why is that?
A. I threw the tape away.
Q. You threw it in the trash can? Destroyed it? How [21]
did you destroy the tape, Joe?
A. I threw it away. I don’t recall if I threw it in the trash
can or broke it in half, but I don’t have it. And I threw it away.
107a
Appendix A
Q. And why did you throw it away?
A. To protect whoever gave it to me.
Q. Even though you didn’t know who the person's name
was?
A. That’s right.
Q. She didn’t tell you her name?
>
That’s correct.
Q. She didn’t tell you where she worked?
A. That’s correct.
Q. So if we’d have had the opportunity, or if you had
mentioned it six years ago when we asked you those questions,
we really could not have identified that person, could we?
A. You might have.
Q. Just by the fact that she is a woman of medium build
and wears nice clothes?
A. No, it would have taken more than that.
Q. But that’s about all the information you can recall about
her today; isn’t that true?
108a
Appendix A
A. Yes. But if I’d have been asked six years ago, I probably
could have recalled in extreme detail. And I would have had to
answer, and someone might have figured it out.
[22] Q. Of course, we didn’t know you had a tape six
years ago, did we?
A. No, you didn’t.
Q. Now in your mind, this tape caused you concern about
what the actions of Sam was going to be in New York City?
A. Yes.
Q. It caused you concern by what you heard on that tape?
A. Yes.
Q. It caused you concern. You let Mark listen to it, but
you didn’t share it with any other decision maker during the
weekend of July 23rd or 24th, did you, Mr. Shoen?
A. No, I didn’t.
Q. Did you try to relate to them what was on the tape?
A. I tried to review with the people what we knew. And
some of the information that we knew was information I had
gotten from the tape. Some of it was from other sources.
Q. Did you bother to tell the defendant directors that you
got this information from a tape that you no longer had, that
you destroyed, that you got from some anonymous source?
en ee ee
‘a
109a
Appendix A
A. No, I told them that I knew it for a fact.
Q. Knew the information on that tape was for a fact?
A. Yes.
Q. Of course — excuse me. I misspoke there. That you
knew certain information for a fact. You didn’t tell the defendant
directors where you got that information, in other [23] words?
A. That’s correct.
Q. You didn’t think it was important for them to know
that you got it from a tape, from an anonymous source that you
wouldn’t identify?
A. No, I didn’t.
Q. Or couldn’t identify, perhaps?
A. No, I didn’t think it was important.
[44] * * *
Q. Anything else you can think about, that you have asked
him [L. S. Shoen] to do, that he hasn’t?
A. No, I don’t recall here today, no, sir, I don’t.
Q. So we have a truck study, useful life of truck study,
which you are not sure whether he did or didn’t do it, or what
happened to it?
110a
Appendix A
A. No, I am very sure what happened to it.
Q. And you say he didn’t complete it?
A. No, he did — he did telephone conversations with
Camille Gaudio. She wrote up the material. She may have
sent it to him for editing. I do not know. She then presented it
and — attempted to present that material to me. So I do know
what happened to that.
Q. In your mind, it was just not of good quality stuff?
A. No, that’s not what I am saying here.
Q. I am trying to understand. Did you have a specific
complaint about your father’s study about useful life of trucks?
A. No, sir, I didn’t.
Q. Did you find the work to be acceptable and in line
with what you requested of him?
A. I would say yes.
Q. So he performed that duty satisfactorily?
A. Yes, sir, he did.
[47] * * *
Q. BY MR. SHAW: Mr. Shoen, if you could — well, let
me take the exhibit away from you here for a second, and I will
ask you a question on it.
llla
Appendix A
Under comments up at the far right-hand side, it indicates
that L. S. Shoen resigned. Is that what that says up there?
A.
Q.
Q.
A
Q.
It says, resigned, dash, personal.
Personal. It doesn’t say “fired”, does it, or “laid off”?
No, sir, it doesn’t.
Doesn't say “terminated”?
. No, sir, it doesn’t.
It implies L. S. Shoen resigned from this company and
from this contract?
A.
But we know that’s not true.
Q. That’s very true. Why would it wind up in a company
document that he in fact resigned?
A.
Someone put that in. That’s what — someone must
[48] have typed it in.
Q. Well, in fact, Mr. Shoen, would they have typed it in_
from this document here? I don’t believe this is an exhibit, but
maybe you can identify that for us.
A. No, I don’t believe they could have —
Q. Well —
A. — typed it in from this.
112a
Appendix A
Q. Excuse me. Mr. Shoen, let me ask you a question about
that document. That’s a personnel action document?
A. Yes, sir, it is.
Q. In fact, the document indicates Mr. Shoen was
voluntarily terminated?
A. Yes, it does.
Q. You signed that document?
A. Yes, sir, I did.
Q. He didn’t voluntarily get out of his contract, though,
did he?
A. Yes, he did.
Q. Oh, he voluntarily told you he wanted to get out of the
contract, Mr. Shoen?
A. No, he voluntarily failed to perform his duties, and he
suffered the exact consequence that you would get from failing
to perform your duties.
Q. And voluntary — well, that’s not what that refers to,
does it?
[49] A. Yes, it is exactly what this refers to. I filled this
out, so I know exactly what it refers to.
113a
Appendix A
Q. Your understanding of voluntary means that he
voluntarily took actions resulting in his termination?
A. Yes, sir.
Q. But that particular document usually refers to whether
or not the person left the company voluntarily, whether they
resigned, terminated, were laid off?
A. No, sir.
Q. What other box could you have marked there under
reasons for termination?
A. Well, it says, voluntary. And then it has an asterisk,
and says: Explain reason in detail in comment section below.
Then in the comment section I have written in, in my own
handwriting: L. S. has repeatedly failed to act in the best interests
of Amerco. And then I signed it.
Q. Mr. Shoen, there are two other boxes you could have
marked there. What are they?
A. Discharge and lay off.
Q. He was discharged from this company, wasn’t he? He
was fired? -
A. I don’t believe that, but it won’t make any difference.
I terminated his employment. Certainly, I terminated the sending
of money to him.
Q. You actively took an act that terminated his [50]
employment; correct?
114a
Appendix A
MR. SHAPIRO: Objection, Your Honor. Mr. Shaw is
simply arguing with the witness over words. I object to the
form of the question. It’s argumentative.
MR. SHAW: I am not getting very responsive answers,
Your Honor.
THE COURT: Ove
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