Opposition Brief — DeLorean v. Morganroth
Supreme Court brief1998
Ask Donna
What actually matters in this document.
Text
Supreme Court, U.S.
F IL ED
No. 97-1389 MAR 26 1998 4
CLERK
In The
Supreme Court of the United States
.
' October Term, 1997
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware Corporation (formerly known as Logan
Manufacturing), a Delaware Corporation, Jointly and Severally,
Petitioners,
vs.
MORGANROTH & MORGANROTH, a Michigan General
Partnership, and MAYER MORGANROTH,
Respondents.
On Petition: for Writ of Certiorari to the
United States Court of Appeals for the Sixth Circuit
RESPONDENTS’ BRIEF IN OPPOSITION
MAYER MORGANROTH
Counsel of Record
_ MORGANROTH & MORGANROTH
Attorneys for Respondents
3000 Town Center
Suite 1500
Southfield, Michigan 48075
(248) 355-3084
Mase (800) 274-3371 + (800) 359-6859 LA poeliate
A OFVISION OF COUNSEL PRESS
i
QUESTION PRESENTED
Whether the Sixth Circuit was correct in affirming the jury
verdict rendered in favor of Morganroth on claims for fraud,
breach of contract, and account stated based on the finding that
the verdict was not the product of passion or prejudice, but was
supported by overwhelming and compelling evidence?
TABLE OF CONTENTS
Pre or eer es nie
eee Tr GE «5 owen 00a cesekokee eee
A. Nature of the Case/Course of Proceedings/
OTE: oc knccincntcsnsanciunnienan
. GONE. ccccccciccnqonetesensuuenee
Reasons for Denying the Writ ....................
I. The Sixth Circuit Correctly Determined That No
Reason Exists For Reviewing The District Court’s
Rulings Denying The Pretrial Motions To Dismiss
The RICO Claim Because The Same Evidence
Would Have Been Admitted Regardless Of The
Presence Of A RICO Claim. ...............
A. DeLorean’s and Logan’s Consistent Failure
to Object to the Admission of Such Evidence
Operated as a Waiver. ..........2..2...
B. The Challenged Evidence Was Admissible
Pursuant to Rule 404(b) as to Morganroth’s
SN i i ea we
C. The Challenged Evidence Was Admissible to
Rebut DeLorean’s and Logan’s Affirmative
Defenses and Recoupment Defenses. ....
Page
10
11
11
13
iil
Contents
Page
II. The Sixth Circuit Also Correctly Concluded That
No Reason Exists For Reviewing The District
Court’s Rulings Denying The Pretrial Motions To
Dismiss The RICO Claim Because Overwhelming
Evidence Supported The Jury Verdict On The
Claims Of Fraud, Breach Of Contract, And
CE AGUS ec tr cadens sawesveses 15
A. Overwhelming Evidence Supported the
Jury’s Verdict on Morganroth’s Breach of
eC re 16
B. Overwhelming Evidence Supports the Jury
Verdict on Morganroth’s Fraud Claim. ... 20
C. Overwhelming Evidence Supports the Jury
Verdict on Morganroth’s Account Stated
St, -tacaene es Tocccccvssesccseseces 23
Ill. Even If It Were Somehow Necessary To Review
The District Court’s Denial Of The Pretrial RICO
Motions, The District Court Did Not Abuse Its
Discretion In Denying Such Motions In Any
hawt dsnh nese odurtcowkbodcseee waves 24
A. The Supposed Deficiencies Regarding the
RICO Claim Raised on Appeal to the Sixth
Circuit Missed the Mark. .............. 24
1. Morganroth provided sufficient legal and
factual support to withstand the pretrial
PPT TTT TT TT TT 24
iv
Contents
Page
2. Requisite racketeering activity was well
pled and supported by sufficient
evidence to withstand motions to
dismiss and/or summary judgment. .. 26
B. No Compelling Reasons Exist For Granting
PRINS ohsnnocncndcencbeasas vee. 28
CORGUUGL 6.0 veka Chasse RR be 29
TABLE OF CITATIONS
Cases Cited:
Adkins v. GAF Corp., 923 F.2d 1225 (6th Cir. 1991) . 19 \
Cathey v. John Manville Sales Corp., 776 F.2d 1565 (6th
CR See. 5 hd bth eckas bh aeons eenneetewenes 19
City of Cleveland v. Peter Kiewit Sons Co., 624 F.2d 749
Cl es ED wate xR edeanls 065Re eee eds 13
Dana Corp. v. Blue Cross Blue Shield Mut., 900 F.2d
ee ee es SD ied oni nhédte ie bkch evewek ke 26
Holmes v. Securities Investor Protection Corp., 503 U.S.
ee Rs 4b 6 eee eee 0oers ss 28
Newmyer v. Phitaletic Leasing, Ltd., 888 F.2d 385 (6th
Cae Bee eee ei Sioa ioe is ine S8c4 6k cs. 26
Contents
Page
TCP Indus., Inc. v. Uniroyal, Inc., 661 F.2d 542 (6th
Ce SUES sa vackabaseset ccnscen uae eenaew 12, 13
United States v. Anendondo-Morales, 624 F.2d 681 (Sth
| AS og Os 3 ee a ee 12
United States v. Ausmus, 774 F.2d 722 (6th Cir. 1985)
si eee ae hace ae ae kaa aaa es 12
ra ae i a ee eee ee a er 12
United States v. Ellzey, 874 F.2d 324 (6th Cir. 1989) . 12
United States v. LeBlanc, 612 F.2d 1012 (6th Cir. 1980)
pe Seat e Ay Pe ee Pr ys: ee eee Te 1
Statutes Cited: :
of 8 8 errr rere err ee 26
os bo bis-o'l os ces seseey exsehanunes 26
SEE TN EE Gs Suee obi ak wean ecudvessent ees 26
fs | Se rT re eer roe 26
Pe SE: 5s on owas chee eeiteckaneusasnt 26
fp oe 8 a eer perrree errr er es 26
vi
Contents
Page
We ee 6 Se 86 ERR GRA 25
ee se I 6 osc Wa ae soi ccoeee eee seenuan 25
Be i EE dee cnvescdvecurecusedveccess 25
Se EE Ms G'cc aca cn ees cbeeuTeseceue es 25
Sp ED A. 0 0 sivued ens peeps lean ce cues. y
Rules Cited:
en MME OE LUV Ni cia dadavedeceveweue sess 2
Pe SEP Oe OED Gasecevenedacesschunesans 24
a 2 Py asd cabcndu cook saeseseckehes 25
eG di na wn cal nia oa gn oe Ronee aes 13
CED Spas ani eactavacd¥eamnaee neces 11, 13
A a ad a a aw eog be Ae A ae 11, 12
U.S. Seprome Court Rule 10 2... ccc cscccnccccccss 9
vii
Contents
APPENDIX
Appendix A — Transcript Of Jury Verdict Dated January
sess ce heed Gh eenek «a asik daeae Acid & dies
Appendix B — Transcript Of Trial Proceedings Dated
i Oi MME ob. s'c isa a vadese'e CK cook raw e
Appendix C — Transcript Of Trial Proceedings Dated
ET GE es ied ecw eewenosns
Appendix D — Transcript Of Trial Proceedings Dated
September 28, 1994 (AM) ............cccceees
Appendix E — Transcript Of Trial Proceedings Dated
BOONE REMIND po kk cnc s centcaussscenn
Appendix F — Transcript Of Trial Proceedings Dated
December 1, 1994 (PM) .......cccccccccccceces
Appendix G — Transcript Of Trial Proceedings Dated
ee ee
Appendix H — Transcript Of Trial Dated December 22,
Pe oi bo Gs NS ces baka ne Kee RE eek deen
Appendix I — Personal Financial Statement Of John Z.
DeLorean Dated January 15, 1993 ..............
Appendix J — Stipulation Of Facts ................
Page
la
12a
29a
46a
63a
65a
75a
8la
84a
86a
vili
Contents
Appendix K — Plaintiffs’ Brief In Opposition To Motion
To Dismiss Or Stay Entire Action Or Alternatively To
Dismiss Count I From The Complaint In The Instant
Action For Failure To State A Claim, Or Alternatively
For More Definite Statement Of Count I Of The
Complaint In The Instant Action Dated June 21,
FOO obs k resi ics eG keusus case eesaweewunes
Appendix L — Plaintiffs’ Combined Brief In Opposition
To Motion For Partial Summary Judgment Against
Count I And Motions For Judgment On The Pleading
Against Count I And II Dated February 14, 1994 ..
Appendix M — Plaintiffs’ Brief In Opposition To
Defendants’ Motion For Separate Trials Dated
PR OM; WE os nhs eee s pean aevens ae
Appendix N — Plaintiffs’ Brief In Opposition To
Defendants’ Motion For Judgment As A
Matter Of Law (Fed. R. Civ. P. 50(a)) Re Plaintiffs’
RICO Claim Dated December 14, 1994 .........
Page
100a
124a
192a
1
STATEMENT OF THE CASE
A. Nature of the Case/Course of Proceedings/Disposition.
The Petition misrepresents the nature of the case and course
of proceedings below.
Attorney, Mayer Morganroth, and his law firm, Morganroth
& Morganroth (collectively, “Morganroth”), filed the subject action
against John Z. DeLorean (“DeLorean”) and Ecclesiastes 9:10-11-
12, Inc. f/k/a Logan Manufacturing Co. (hereinafter, “Logan”),
consisting of seven claims: (1) RICO; (2) common law fraud;
(3) breach of express contract; (4) breach of implied contract;
(5) account stated; (6) quantum meruit; and (7) unjust enrichment.
DeLorean and Logan filed a sham counter-complaint alleging
malpractice, which was dismissed on motion. Nevertheless,
DeLorean and Logan asserted affirmative defenses and recoupment
defenses challenging every aspect of Morganroth’s representation.
These defenses survived and were fully litigated at trial
notwithstanding dismissal of the counter-complaint.
On September 8, 1994, trial of the instant action commenced,
and after 42 days of testimony, evidence, argument by counsel,
instructions, and deliberations, the jury returned its verdict on
January 4, 1995 in favor of Morganroth with respect to the claims
for fraud, breach of express contract and account stated, and in
favor of DeLorean and Logan on Morganroth’s RICO claim. (App.
A). The jury also found against DeLorean and Logan on their
affirmative defenses and recoupment defenses, and did not render
a verdict on Morganroth’s quasi contract claims because they found
the existence of an express contract. (App. at 4a-6a).
By orders dated April 17, 1995, the District Court denied
DeLorean’s and Logan’s post-judgment motions for attorney fees
on the RICO claim, relief from judgment, and for new trial, but
granted DeLorean’s motion to alter or amend the judgment by
striking the punitive damages award.
niacin |
2
DeLorean and Logan thereafter filed an appeal with the Sixth
Circuit alleging that they were prejudiced by virtue of the District
Court’s denial of their pretrial motions to dismiss the RICO claim,
that the jury verdict on Morganroth’s claims for fraud, breach of
contract, and account stated was against the weight of the evidence,
and that the District Court erroneously denied DeLorean’s and
Logan’s motion for Rule 11 sanctions on the RICO claim.
Morganroth filed a cross-appeal regarding the District Court’s post-
judgment order striking the punitive damage award.
After full briefing and oral argument, the Sixth Circuit affirmed:
(1) the jury verdict in favor of Morganroth; (2) the District Court’s
denial of DeLorean’s and Logan’s post-trial motion for Rule 11
sanctions on the RICO claim; and (3) the District Court’s post-
judgment order striking the punitive damage award. (Pet. App.
A). Subsequently, DeLorean and Logan filed a motion for
reconsideration with the Sixth Circuit, which was denied on
October 14, 1997. (Pet. App. B).
B. Relevant Facts.
The Petition misrepresents virtually all of the facts relevant to
this case. A correct recitation of the relevant facts is set forth below.
This case tells the story of an attorney, Morganroth, who
successfully devoted over ten years of his life working day and
night for two clients, DeLorean and Logan, to the detriment of his
large legal practice in order to provide legal representation to fight
for DeLorean’s freedom and to save tens of millions of dollars in
assets of DeLorean and Logan. (R.287 at 162, 164-165; R.250 at
66; R.277 at 6-13; R.271 at 131; R.300 at 22-24, 29-30; R.301 at
77-78, 119-123, 148-161). When Morganroth’s representation
ceased in February 1993, DeLorean was free from criminal charges
in the United States (R.289 at 149-150), and possessed a net worth
of in excess of $51 million (App. at 13a-19a, 22a-28a, 84a-85a),
but DeLorean and Logan had defrauded Morganroth out of in
excess of $5 million in legal fees and expenses.
3
DeLorean first contacted Morganroth in 1982, and indicated
that he was interested in Morganroth acting as his legal counsel.
(R.256 at 33-34). At the time, DeLorean already had been arrested,
and sought counsel in connection with the California criminal
cocaine case and with respect to various civil actions which were
on the horizon. (R.256 at 33-37; R.287 at 162-164). A formal
arrangement was discussed where DeLorean orally agreed to pay
Morganroth’s customary hourly rate in accordance with
Morganroth’s standard practice. (R.256 at 37-38, 47, 49-50; R.277
at 14-16).
In early 1983, DeLorean asked if Morganroth was available
to serve as his lead trial counsel in the criminal cocaine case, but
Morganroth had to decline because he already was committed to
handle another trial. (R.256 at 38-41). DeLorean then asked
Morganroth to focus his attention on the possibility of suing the
British and United States governments, to examine papers and
documents regarding existing and potential problems, and to try
to settle claims that had been filed against DeLorean and Logan by
the Trustee in the DMC bankruptcy proceedings (the “Trustee’’).
(Id. at 41-42, 44-46). During the discussions, DeLorean re-
confirmed that Morganroth would be paid his customary hourly
rate. (Id. at 47).
Just a couple of months later, an avalanche of cases tumbled
down on DeLorean and Logan, including adversary proceedings,
district court proceedings, and tax proceedings. (Jd. at 48, 51-52,
56-59). In connection therewith, restraining orders were entered
against DeLorean and Logan with respect to their assets. (/d. at
48-49).
Although Morganroth was not counsel of record in 1983 and
1984, he performed substantial legal services for DeLorean and
Logan, and he continued to provide consultation and advice to
DeLorean regarding the defense of the California criminal cocaine
case which was tried in 1984. (Jd. at 60-61, 86-87).
4
In 1984, district court proceedings pending against DeLorean
and Logan around the country were consolidated in multi-district
litigation, Judge George E. Woods presiding. (/d. at 59-60).
In 1985, Morganroth took over as sole litigation counsel for
DeLorean and Logan in all proceedings, including a criminal
warrant issued in Switzerland, and became counsel of record. (/d.
at 60-66, 87; R.288 at 58, 61-62, 69-71). The civil cases were
massive, most of which each sought $100 million per count and
in the aggregate $500 million per case. (R.256 at 57; R.288 at
84).
From the time Morganroth took over the multitude of civil
actions through September 1987, enormous discovery and motion
practice was conducted. (R.256 at 97-99, 131; R.288 at 86).
Morganroth was unassisted in his representation of DeLorean and
Logan, while the opposition had dozens of attorneys working on
the matters. (R.288 at 66-69; R.300 at 29-30).
DeLorean also was indicted in Detroit on criminal racketeering
and tax charges, and a trial was conducted in 1986. (R.256 at 147,
150). Morganroth coordinated the defense of the case and worked
on it seven days a week. (R.256 at 149-151; R.287 at 159-162).
Morganroth even was responsible for bringing in the key evidence
believed to have turned around the case and resulted in acquittal.
(R.256 at 152-157; R.287 at 160-161; R.289 at 149-152).
In 1987, DeLorean and the Trustee commenced settlement
negotiations, at the strong suggestion of Judge Woods and Judge
Graves, regarding a multitude of complex cases brought by the
Trustee. A marathon negotiating session involving 12-14 attorneys
on behalf of the Trustee on the one hand, and Morganroth, attorney
Thomas Kimmerly (“Kimmerly”), and DeLorean on behalf of
DeLorean and Logan on the other hand, lasted approximately 24-
35 straight hours, and resulted in a settlement of the Trustee’s claims.
(R.294 at 61-66; R.288 at 123-125, 132).
5
DeLorean was extremely pleased with the settlement of the
Trustee’s claims as he actually received a net gain. (R.294 at 72,
103, 120-123; R.288 at 122-123; R.290 at 29-31; R.289 at 157:
R.301 at 60-61). Prior to Morganroth’s representation, DeLorean
had made offers to personally pay $29 million to settle with the
Trustee, and DeLorean would not have received any of the assets
held by the DeLorean Family Trust. (R.288 at 115-116). But in
the settlement, DeLorean received all of the assets from the
DeLorean Family Trust worth $25-$50 million including Logan,
even though DeLorean had no ownership interest or rights therein
whatsoever (R.294 at 119; R.288 at 79-83, 95-102, 107-108);
and he also received $2 million in cash, the $800,000 Bridgewater
Escrow, patents, trademarks and tradenames valued by DeLorean
at $15 million plus other valuable benefits in exchange for two
payments totalling $9.36 million to be made by Logan, a company
which DeLorean had not even owned. (R.294 at 70, 82-83, 98,
102-103; R.288 at 102-115). In fact, the settlement was so good
that the DMC creditors committee filed objections thereto (R.294
at 108, 112-113), and their counsel, Malcolm Schade (“Schade”),
called the settlement the best leveraged buyout he ever saw. (R.300
at 31).
Morganroth had performed substantial legal services on behalf
of DeLorean and Logan from late 1982 through the 1987
settlement, however, Morganroth still had not received one cent in
payment of fees or for expenses advanced. (R.256 at 98-99, 112-
113; R.277 at 40; R.288 at 91, 105). By the time of the 1987
settlement with the Trustee, legal fees and expenses owed to
Morganroth by DeLorean totalled $4 million, and owed by Logan
totalled in excess of $1 million. (R.277 at 24). When DeLorean’s
and Logan’s assets were released from the restraints in 1987,
DeLorean and Logan collectively paid Morganroth $450,000 on
account. (/d. at 24-26). DeLorean also began attempting to sell
assets so that he could clear up his debts including the outstanding
fees owed to Morganroth. (App. at 56a-62a).
Although the 1987 settlement with the Trustee resolved a
multitude of claims, a lot of other cases were still pending against
6
DeLorean and Logan which Morganroth continued to work on,
and a lot of cases were coming down the pike. (R.294 at 102-104,
128-130; R.287 at 179-181; R.288 at 45-46). In addition,
Morganroth became general corporate counsel for Logan, worked
on many commercial transactions for both DeLorean and Logan,
and represented Logan in several cases. (R.294 at 76, 131-134).
On January 24, 1989, DSQ filed an action in New York against
DeLorean seeking to enforce a $53 million default judgment
rendered in London. (R.295 at 32-37). When the action was filed,
ex parte restraining orders were entered by the court over
DeLorean’s and Logan’s assets. (/d.). The restraints interfered with
Logan’s ability to make the final payment of the 1987 settlement
which was due within one week, but Morganroth successfully
petitioned for an extension on one occasion. (/d. at 81-85).
Summary judgment in favor of DSQ was eventually granted,
but enforcement was stayed. (/d. at 85-91). DeLorean then finally
relented to Morganroth’s repeated urging to hire United Kingdom
counsel which DeLorean had previously rejected on the grounds
that he did not think he could get justice there. (Jd. at 23, 29-30,
46-47, 77-78; R.300 at 188-194, 198-199; R.301 at 42-46).
Morganroth paid all expenses to fly to the United Kingdom to
assist in a motion to set aside the default judgment, which was
granted, but the ruling was stayed for appeal. (R.295 at 103-117,
139; R.290 at 135-140).
By mid-October 1990, DeLorean and Logan had reached a
settlement of the DSQ case, and as of that time, Morganroth had
received sporadic payments from DeLorean and Logan totalling
$800,000 on account. (R.271 at 36-37). Morganroth believed that
he would be paid the outstanding balance based upon DeLorean’s
repeated acknowledgement of amounts due and repeated promises
to pay during regular oral discussions regarding fees and during
DeLorean’s review of detailed time sheets and periodic invoices.
(R.278 at 118, 131; R.296 at 45-46, 160-162; R.301 at 172-184;
R.303 at 69-74).
eee
7
When the 1990 settlement was consummated, the restraining
orders over the assets were vacated and DeLorean resumed the
process of attempting to sell his substantial assets which would
produce more than sufficient cash to satisfy the outstanding fees
owed to Morganroth. (R.277 at 48). Morganroth sent written
composite bills to DeLorean and Logan with back up
documentation because of the fact that the assets were going to be
sold in order to pay all of the outstanding fees. (Jd. at 49-50, 56-
62). Prior to sending the composite billings, Morganroth discussed
with DeLorean the fees owed and agreed to retroactively reduce
his hourly rate because of the volume of work, amount of money
owed over the eight year relationship, and the promise of immediate
payment. (/d. at 51-52, 54; R.278 at 9, 17-18). After DeLorean
received the 1990 billings for Logan and himself,' DeLorean
confirmed that all fees would be paid upon the sale of any one of
the assets. (R.277 at 64-65). In addition, Logan carried the fees
owing to Morganroth on its audited financial statements. (/d.)
Morganroth continued to perform substantial legal services
on behalf of DeLorean and Logan with respect to civil matters,
commercial transactions, tax matters, corporate matters, sales of
assets and properties, and a criminal warrant issued out of the United
Kingdom. (/d. at 67, 69, 77-78, 87-90, 96-99). During such time
period, Morganroth sent bills carrying forward the unpaid fees
and expenses, DeLorean continued to acknowledge the amounts
due and Logan continued to carry its debt on its audited financial
statements. (R.292 at 147-150, 152-154, 173, 215-220; R.277 at
65-74, 76-77, 95-96). DeLorean also continued to represent that
all of the amounts owed by DeLorean and Logan would be paid
from the proceeds of sale of assets and properties. (R.277 at 69,
71, 74).
1. Although the formula was correctly set forth in DeLorean’s )
billing, the amount of $2,595,305 was inadvertently set forth in the )
billing as a result of a typographical error as opposed to $3,595,305,
which was owed by DeLorean. (R.277 at 51-52, 91). )
)
VO
8
In August 1992, DeLorean sold his New York co-op for $11.5
million. (/d. at 74-75; R.288 at 113). When the sale was
consummated, DeLorean advised Morganroth that the proceeds
were being used to pay off the DSQ settlement and for a capital
infusion in Logan so that the company would be stronger in order
to facilitate an imminent sale of Logan’s assets, and therefore, he
would be paid all fees at the closing of the Logan sale. (R.277 at
75). Based upon DeLorean’s representations, Morganroth continued
to perform legal services for DeLorean and Logan. (/d. at 77-78,
86-90, 97-98, 103-106).
In December 1992, a closing for the Logan asset sale was
scheduled, but DeLorean then advised Morganroth that the fees
would be paid by the end of January 1993 because of tax
considerations instead of at the closing. (Jd. at 96, 99, 107). During
a telephone discussion, DeLorean for the first time raised an
objection to payment of an hourly fee for the Cork Gully case. (/d.
at 100-102). Although Morganroth reminded DeLorean that
DeLorean had agreed in May 1990 and then again in October and
November 1990 that the fee for the Cork Gully case would be
converted from contingent to hourly in connection with the
agreement to dismiss the case as part of the consideration given in
the DSQ settlement, Morganroth agreed to waive the $400,000
fee if all other fees were satisfied by the end of January. (/d.)
On January 5, 1993, the Logan asset sale was consummated
and DeLorean received $5.75 million in cash with additional
substantial installment payments to be paid to him. (/d. at 107,
111). Morganroth spoke with DeLorean regularly after the closing,
and DeLorean told Morganroth not to worry about fees and that
there also would be plenty of money derived from a deal that he
structured through his New Jersey law firm for the sale of the
Bedminster Estate which was scheduled to close during the first
few days of February. (/d. at 107-110).
Instead of paying Morganroth as promised, DeLorean and
Logan filed a sham malpractice lawsuit against Morganroth in New
York on February 2, 1993. (Jd. at 108-109). Nevertheless,
a ge
er a
9
DeLorean continued to represent that all fees were going to be
paid and even sought tax advice from Morganroth which was
provided since Morganroth had not yet found out about the
lawsuit. (/d. at 108-109, 113, 134). Soon after the New York ~
malpractice action was served, the case was dismissed by the court
on motion. (Jd. at 109-110).
Morganroth later learned that attorney Edward Freidberg
(“Freidberg”) had secretly commenced working on the malpractice
lawsuit to “handle” Morganroth as of October 15, 1990, and that
Freidberg received approximately $1 million from DeLorean and
Logan during a two-year time period when Morganroth was told
no funds were available. (/d. at 112-125; App. at 70a-74a).
REASONS FOR DENYING THE WRIT
Pursuant to Rule 10 of the Rules of the Supreme Court of the
United States, review on a petition for a writ of certiorari is not a
matter of right, but of judicial discretion. Rule 10 further provides
that a petition for a writ of certiorari will be granted only for
compelling reasons.
No special or important reasons exist in this case warranting
the granting of DeLorean’s and Logan’s Petition. The issues
proposed for review do not involve a conflict among the circuits.
To the contrary, the Petition actually challenges the sufficiency of
the evidence regarding the jury verdict rendered in favor of
Morganroth on the claims for fraud, breach of contract, and account
stated. Apparently recognizing that Rule 10 makes clear that a
petition for certiorari is disfavored when the asserted error consists
of erroneous factual findings or the misapplication of a properly
stated rule of law, DeLorean and Logan attempt to characterize
their arguments as focusing upon the issue of standing to sue under
the RICO statute. But any purported issues in this case regarding
RICO were rendered moot when the jury found in favor of
DeLorean and Logan on the RICO claim. Indeed, the Sixth Circuit
properly concluded, from its review of universal rules of law
governing the admission of evidence as applied to the record in
10 |
this case, that DeLorean’s and Logan’s request for a review of the
District Court’s denial of their pretrial motions to dismiss the RICO
claim was unnecessary. In short, the Sixth Circuit affirmed the
jury verdict on the grounds that: (1) DeLorean and Logan waived
their right to object to the admission of evidence that they later
alleged to be prejudicial after trial since they failed to so object
during trial; (2) regardless of the presence of the RICO claim, the
evidence challenged by DeLorean and Logan as inadmissible was
relevant to support Morganroth’s non-RICO claims and to rebut
DeLorean’s and Logan’s affirmative defenses and recoupment
defenses; and (3) the jury verdict rendered in favor of Morganroth
was not the product of passion or prejudice from the RICO claim,
but was supported by overwhelming and compelling evidence. In
any event, the objective of DeLorean’s and Logan’s Petition is far
too narrow and limited for this Court to grant the Petition.
DeLorean’s and Logan’s Petition should be denied.
Ne
I. THE SIXTH CIRCUIT CORRECTLY DETERMINED
THAT NO REASON EXISTS FOR REVIEWING THE
DISTRICT COURT’S RULINGS DENYING THE
PRETRIAL MOTIONS TO DISMISS THE RICO CLAIM
BECAUSE THE SAME EVIDENCE WOULD HAVE
BEEN ADMITTED REGARDLESS OF THE PRESENCE
OF A RICO CLAIM.
Although the jury found in favor of DeLorean and Logan on
the RICO claim, DeLorean and Logan contend that this Court
should review the District Court’s rulings on the pretrial RICO
motions because the District Court’s refusal to dismiss the RICO
claim purportedly allowed Morganroth to present inflammatory
evidence at trial regarding nine discreet categories of evidence.
The Sixth Circuit, however, carefully analyzed each of the nine
categories of challenged evidence and correctly determined that
review of the District Court’s rulings on DeLorean’s and Logan’s
pretrial RICO motions was unnecessary since the so-called
inflammatory evidence was presented with no contemporaneous
objections and/or was relevant to the non-RICO claims and
defenses. As shown below, the Sixth Circuit properly sustained
TT F
1]
the District Court’s evidentiary rulings regarding each of the
categories of evidence challenged by DeLorean and Logan
regardless of the presence of the RICO claim.
A. DeLorean’s and Logan’s Consistent Failure to Object
to the Admission of Such Evidence Operated as a Waiver.
The record, as confirmed by the Sixth Circuit, reveals that
DeLorean and Logan did not assert objections based on relevance,
bad character evidence or prejudice to four of the categories of
evidence challenged on appeal — (1) failure to pay other attorneys;
(2) ties to organized crime;? (3) statement about Hillel Levin; and
(4) relationship with Roy Nesseth.
The Sixth Circuit correctly found that the consistent failure to
object to this evidence operated as a waiver by DeLorean and
Logan of their claim regarding the admission of such evidence.
Such a failure to object at the time of admission operates as a
waiver pursuant to Fed. R. Evid. 103(a). See United States v.
LeBlanc, 612 F.2d 1012, 1013-1015 (6th Cir. 1980).
B. The Challenged Evidence Was Admissible Pursuant to
Rule 404(b) as to Morganroth’s Claim For Fraud.
As the Sixth Circuit concluded, even if DeLorean’s and Logan’s
consistent failure to object had not operated as a waiver, the
admission of evidence that DeLorean and Logan consistently used
the same devices to avoid paying other attorneys during the same
time period that they attempted to avoid paying Morganroth was
relevant to prove the element of intent to defraud in Morganroth’s
fraud claim pursuant to Fed. R. Evid. 404(b). Because it is difficult
2. The record reveals, and the Sixth Circuit found, that
DeLorean not only failed to object to the admission of the exhibits
regarding this category, except for one exhibit, but he, in fact,
introduced 11 exhibits regarding this very subject matter. The one
objection that DeLorean did make was only on the grounds of lack
of foundation, but, after objection, a witness provided further
testimony that established the foundation.
12
to prove intent, knowledge or plan by direct evidence, such elements
normally must be inferred from circumstantial evidence. See United
States v. Anendondo-Morales, 624 F.2d 681, 684 (Sth Cir. 1980);
see also United States v. Ellzey, 874 F.2d 324, 329 (6th Cir. 1989);
United States v. Ausmus, 774 F.2d 722, 727-728 (6th Cir. 1985).
Accordingly, Rule 404(b) provides that evidence of “other acts” is
admissible for proof of specific intent elements.’ (/d.). Consequently,
whether or not the District Court had ruled differently on
DeLorean’s and Logan's pretrial RICO motions, the Sixth Circuit
correctly found that the evidence regarding non-payment of
attorneys was relevant to Morganroth’s common law fraud claim
and the probative value for establishing fraudulent intent far
outweighed any minor prejudicial effect.
The same holds true for DeLorean's failure to reimburse
attorney Robin Bailey for funds advanced based upon DeLorean's
false promise of immediate repayment. The District Court
confirmed that the testimony regarding Bailey was admissible
pursuant to Rule 404(b) regardless of the presence of a RICO
claim as it was probative of DeLorean’s and Logan's “motive,
opportunity, intent, preparation, plan, knowledge, identity or
absence of mistake or accident” with respect to Morganroth’s
common law fraud claim. (R.307 at 11-13). With respect to Bailey
as well as other attorneys, including Morganroth, DeLorean made
false promises of payment of money to an attorney without any
present intention of performance in order to deceive and mislead
the attorney.
The Sixth Circuit found that this testimony was not sufficiently
prejudicial to warrant reversal in any event. Reversal based on
improper admission of evidence is appropriate only when the
admission interfered with substantial justice. TCP Indus., Inc. v.
3. Indeed, a trial court is accorded broad discretion in
determining the admissibility of such evidence under Rule 404(b),
which determination can only be disrupted upon a showing of an
abuse of discretion. United States v. Ausmus, 774 F.2d at 728; United
States v. Blankenship, 775 F.2d 735, 739 (6th Cir. 1985).
13
Uniroyal, Inc., 661 F.2d 542, 550 (6th Cir. 1981); Fed. R. Civ. P.
61 (“No error in... the admission .. . of evidence . . . is ground
for setting aside a verdict or for vacating, modifying, or otherwise
disturbing a judgment or order, unless refusal to take such action
appears to the court inconsistent with substantial justice. The court
at every stage of the proceeding must disregard any error or defect
in the proceeding which does not affect the substantial rights of
the parties.”); Fed. R. Evid. 103(a) (“Error may not be predicated
upon a ruling which admits or excludes evidence unless a substantial
right of the party is affected. . . .”). As the Sixth Circuit found, in
light of the compelling evidence supporting Morganroth’s case,
admission of this evidence was harmless and would not warrant
reversal. See City of Cleveland v. Peter Kiewit Sons Co., 624 F.2d
749, 756 (6th Cir. 1980).
C. The Challenged Evidence Was Admissible to Rebut
DeLorean’s and Logan’s Affirmative Defenses and
Recoupment Defenses.
The Sixth Circuit properly found that the District Court's
admission of the balance of the challenged categories of evidence
— (1) forging of signatures and documents; (2) ties to organized
crime; (3) purported cancellation of Logan pension plan; (4) money
laundering;* (5) relationship with Roy Nesseth; and (6)
appropriation of Logan profits — was correct on the grounds that
this evidence illustrated the difficulty and complexity of
Morganroth’s representation of DeLorean and refuted DeLorean’s
claim that Morganroth negligently failed to make diligent inquiry
into factual matters related to Morganroth’s representation.
At trial, DeLorean and Logan brought this evidence into issue
through the assertion of affirmative defenses and recoupment
4. This category related to Morganroth’s opening statement
where he described allegations regarding actions by DeLorean that
formed the basis for a later claim in bankruptcy proceedings in which
Morganroth represented DeLorean. As the Sixth Circuit noted, the
District Court issued a cautionary instruction to the jury that
Morganroth's statements were not evidence and that they would have
to decide the case on evidence actually admitted during trial.
14
defenses alleging that Morganroth performed minimal legal services
on their behalf (R.287 at 126-128) and that the positions advanced
on their behalf in the underlying matters of representation were
insupportable and made without investigation. (/d. at 150).
In order to rebut the contention that Morganroth performed
minimal legal services, Morganroth offered evidence of the nature
and complexity of the legal issues and allegations that were publicly
made throughout Morganroth’s representation such as those that
Kimmerly worked on as co-counsel with Morganroth on behalf of
DeLorean and Logan for which they still owe Kimmerly $3 million,
those that Weitzman defended against in the California and Detroit
criminal trials on behalf of DeLorean with the assistance of
Morganroth, and those that were involved in the civil actions
Morganroth took over from Weitzman.
In order to rebut the contention that certain positions advanced
were insupportable and made without any investigation,
Morganroth offered evidence that he, as well as other attorneys,
were misled by information and documents supplied by DeLorean
that later were discovered to contain misrepresentations and
revisions of history after the attorney-client relationship had been
terminated. (R.307 at 12). For this purpose, Morganroth offered
testimony of Kimmerly and Weitzman regarding “factual”
information that Morganroth, Weitzman, and Kimmerly received
from DeLorean in contrast to the true facts that later surfaced,
testimony of Thomopoulos’ regarding DeLorean’s forgery of the
GPD documents and alteration of a prenuptial agreement in contrast
to the “factual” information that DeLorean provided to Morganroth
and other co-counsel for the purpose of defending DeLorean in
various matters, and testimony of officers of Logan that DeLorean
claimed in 1993 to have legitimately canceled the Logan pension
plan in 1988 in contrast to DeLorean’s statements to Morganroth
as to the existence of the pension plan in 1992 and instructions on
how to deal with it in connection with the Logan assets sale, among
5. Although DeLorean and Logan contend that Morganroth
supposedly characterized Thomopoulos as “incredible” during the
divorce, no such characterization was made by Morganroth.
15
other evidence uncovered after the termination of the attorney-
client relationship.
As the Sixth Circuit and the District Court concluded, the
evidence regarding these six categories was properly admitted
because such evidence: (1) described the nature and details of
lawsuits in which Morganroth defended on behalf of DeLorean
thereby demonstrating and bolstering the amount and complexity
of the work; (2) demonstrated DeLorean’s failure to disclose crucial
information to Morganroth which substantially increased the
amount of work Morganroth was required to perform; (3) served
as proof of the amount billed to DeLorean; and (4) supported
Morganroth’s assertion that DeLorean impeded investigation by,
among other things, forging documents and misleading his
attorneys.
Il. THE SIXTH CIRCUIT ALSO CORRECTLY
CONCLUDED THAT NO REASON EXISTS FOR
REVIEWING THE DISTRICT COURT’S RULINGS
DENYING THE PRETRIAL MOTIONS TO DISMISS THE
RICO CLAIM BECAUSE OVERWHELMING EVIDENCE
SUPPORTED THE JURY VERDICT ON THE CLAIMS
OF FRAUD, BREACH OF CONTRACT, AND ACCOUNT
STATED.
The Sixth Circuit not only correctly found that the challenged
evidence would have been admitted regardless of the presence of
the RICO claim, but it also properly sustained the District Court’s
finding that the jury verdict was supported by overwhelming and
compelling evidence in any event.
The record does not support DeLorean’s and Logan’s bald
contention of a biased and prejudiced jury. DeLorean’s and Logan’s
position on appeal merely mimicked their contention set forth in
their motion for a new trial, but the District Court, who had the
Opportunity to observe the witnesses as well as the demeanor and
attentiveness of the jurors, rejected the position. (R.222). The
absence of any prejudice or bias was evidenced by the jury’s
16
demeanor, attentiveness, and attitude observed by all during the
course of the trial as well as the precise and analytical questions
raised by the jury during deliberations. (App. at 81a-83a; R.266 at
2-5). Had the jury been biased, then they would not have found in
favor of DeLorean and Logan on the RICO claim.
Indeed, the Sixth Circuit and the District Court concluded
that Morganroth’s fraud, breach of contract, and account stated
claims were supported by substantial and overwhelming evidence
adduced at trial. The testimony of at least 13 witnesses, including
DeLorean and officers of Logan, and the introduction of hundreds
of trial exhibits as well as stipulations of fact agreed to by the
parties overwhelmingly supported Morganroth’s claims of fraud,
breach of contract, and account stated. In contrast, DeLorean and
Logan did not present even a single fact witness to dispute the
testimony and evidence presented by Morganroth.
A. Overwhelming Evidence Supported the Jury’s Verdict
on Morganroth’s Breach of Contract Claim.
On appeal, DeLorean and Logan suggested that Morganroth
presented insufficient evidence to demonstrate: (1) the existence
of an express contract;® and (2) the amount of hours performed by
Morganroth in connection with the contract. As determined by the
Sixth Circuit, Morganroth presented overwhelming evidence to
the jury that was clearly sufficient to warrant its findings on both
of the foregoing ‘ssues.
DeLorean and Logan reiterate in their Petition that Morganroth
could not have worked enough hours to justify the jury verdict.
They make much of the fact that Morganroth threw out his time
sheets during the course of the ten year representation. But, as the
6. In the Petition, DeLorean and Logan finally unequivocally
concede that an express contract existed as pled and proved by
Morganroth at trial. Even though DeLorean and Logan stipulated
and admitted to the existence of a binding express contract with
Morganroth at trial (R.276 at 4-5; R.272 at 93-94), they took the
contrary position on appeal.
aise |
17
Sixth Circuit concluded, the testimony reveals that Morganroth
along with Jeffrey B. Morganroth (“JBM”) prepared detailed time
sheets which indicated services performed, date of performance,
amount of hours, and a running balance owing for all cases,
including Cork Gully, throughout the entire representation. (R.278
at 118; R.296 at 45-46, 160-162; R.301 at 175-176; R.303 at 69-
74). The testimony further reveals that Morganroth regularly
provided the time sheets to DeLorean at his office for review, and
only threw out the time sheets after approval by DeLorean in an
effort to prevent DeLorean’s adversaries from having any
possibility of discovering the litigation strategies and thought
processes. (R.301 at 172-184; R.302 at 139-140; 203-238). This
procedure regarding review and approval of time sheets was
confirmed by Walter Keating as well, a client of Morganroth’s
who was referred by DeLorean in 1991 on DeLorean’s advice that
Morganroth had the “best legal mind in the United States” and
Morganroth had been “the basis of solving all of [DeLorean’s]
personal problems and [DeLorean’s] business asset problems.”
(App. at 47a-56a). George Bushnell, President of the American
Bar Association and a member of the Michigan Disciplinary Board,
testified that there was nothing wrong with throwing out time
sheets, and that actually providing the time sheets to a client at the
lawyer’s office for review would be above and beyond the standard
of care. (R.258 at 11, 18-25). The testimony further demonstrates
that Morganroth not only provided DeLorean with the time sheets
for review and approval, but that Morganroth regularly discussed
the amount of outstanding fees with DeLorean, and that DeLorean
on each occasion acknowledged the amounts due and promised
that the fees owed by Logan and him would be paid in full. (R.296
at 45-46, 123, 160-162; R.301 at 165-172; R.303 at 95-98).
DeLorean and Logan could not present a single fact witness
at trial to contradict the explicit testimony regarding DeLorean’s
review and approval of detailed time sheets as well as his constant
acknowledgement of the amount of fees owed during the entire
representation. Nor could DeLorean and Logan present a single
fact witness at trial to contradict explicit testimony by Morganroth
on how he worked 80 to 100 hours per week, devoting a high
18
percentage of his time to DeLorean/Logan matters during a ten
year period. (R.277 at 6-13). The testimony of every fact witness
completely supported Morganroth’s testimony regarding the long
hours he devoted to the representation of DeLorean and Logan,
including, but not limited to: (1) testimony by Kimmerly who
acted as DeLorean’s attorney and closest confidant for 20 years
(R.287 at 158, 162-165; R.288 at 17; R.290 at 13, 16; R.250 at
65-71; R.289 at 115); (2) testimony by Schade, an attorney who
represented adversaries of DeLorean and Logan in approximately
12 of the matters handled by Morganroth (R.300 at 29-30);
(3) testimony by JBM who personally observed Morganroth’s long
work hours devoted to DeLorean/Logan matters when he served
as a law clerk during the summers and as Morganroth’s partner
after he passed the bar in the fall of 1988 and who took over the
day-to-day responsibilities of virtually all of the firm’s non-related
matters (R.301 at 119-124, 126, 142-161, 222-225; R.270 at 134-
154); (4) testimony by DeLorean himself (R.272 at 86-
87); (5) testimony by Steven Fellows, an attorney who shared
office space with Morganroth until 1991 and was called as a witness
by the defense (R.272 at 115-116; App. at 76a-78a); and
(6) testimony by Maria Reed, who worked as Morganroth’s
secretary and was called as a witness by the defense (App. at 78a-
80a). Even the Honorable George E. Woods, presiding judge over
the massive multi-district litigation, noticed the long hours devoted
by Morganroth on behalf of DeLorean and Logan:
Well, Mr. Morganroth, I would be the last person in
the world to depreciate your efforts on behalf of
your client. I can’t say that I have ever seen anybody
who’s been more assiduous in their attention or who
has worked harder on their client’s behalf than you.
As you say, you have burned the candle at both
ends running back here and there and doing every
single thing that you can. He is fortunate to have
you.
19
I am not going to engage in further repartee on this.
I meant it earlier when I said I thought you had
done a great deal of running for and on behalf of
your client. I did it to be very frank with you, because
I have seen you absolutely draining yourself right
out of the end of the faucet on this thing, doing
everything that you can on behalf of your client
and I commend you for that. (R.295 at 83-85).
In addition, further evidence supported the amount of the jury
verdict,’ including, without limitation:
* DeLorean admitted personally owing fees to Morganroth in
the amount of $2.2 million near the end of 1990 and $2.5
million in 1991 as attested to in a loan commitment prepared
and signed by DeLorean (R.277 at 41-46), a letter to the
American Arbitration Association prepared and signed by
DeLorean (Jd. at 46-47; R.272 at 93-94; App. at 96a), and
several personal financial statements of DeLorean (App. at 13a-
22a, 43a, 99a);
* Periodic bills carrying forward the unpaid amounts and
itemizing legal services performed by Morganroth on
DeLorean’s behalf were sent, the last of which was dated
December 17, 1992, which reflected an unpaid balance owed
personally by DeLorean in the amount of $3,927,905® (R.277
at 50, 86-90, 96-99, 108-109, 113, 134);
7. The verdict is entitled to considerable deference. Adkins v.
GAF Corp., 923 F.2d 1225, 1232 (6th Cir. 1991). Unless the Appellate
Court is “certain indeed that the award was contrary to all reason,”
then the award must be sustained. Cathey v. John Manville Sales
Corp., 776 F.2d 1565, 1572 (6th Cir. 1985).
-
8. DeLorean misrepresents in the Petition that Morganroth
could not substantiate the expenses charged in the billings and that
Morganroth erroneously overcharged DeLorean by including
$11,000 in sanctions, among other things. DeLorean’s contention
not only is false, but the record reveals that DeLorean and Logan
(Cont’d)
20
¢ Logan admitted that it owed fees to Morganroth in the amount
of $1,408,648.26 in its certified financial statements dated 1991-
1993, and officers of Logan acknowledged that DeLorean swore
under oath to such debt on an annual basis (R.292 at 150, 153,
173, 217-220, 224-225; R.272 at 93-94).
B. Overwhelming Evidence Supports the Jury Verdict on
Morganroth’s Fraud Claim.
DeLorean and Logan have not challenged on appeal any aspect
of Morganroth’s pleading or proof regarding the fraud claim, except
they contend that the evidence somehow was insufficient to establish
that Morganroth reasonably relied upon the fraudulent
misrepresentations made to him which induced him to perform
the extensive legal services. At trial, Morganroth presented
overwhelming evidence that he performed legal services and
incurred expenses for and on behalf of DeLorean and Logan which
continued in reliance upon repeated representations,
acknowledgments, assurances, and sworn statements made by
DeLorean and Logan over a ten year time period.
DeLorean and Logan, however, have suggested that
Morganroth could not reasonably rely upon such representations
because he served as DeLorean’s attorney in fee disputes with
attorneys William Garratt (“Garratt”) and William Simon
(“Simon”), other attorneys such as Kimmerly and Weitzman had
not been paid, and allegations of fraud were leveled against
DeLorean in litigation by others. DeLorean’s and Logan’s position
not only was rejected by the jury after hearing all the evidence, but
the District Court and the Sixth Circuit correctly rejected the position
as well.
DeLorean’s and Logan’s contention that the evidence does
not support Morganroth’s reasonable reliance upon the fraudulent
(Cont'd)
were in fact undercharged as: (1) Morganroth did not charge for some
of the services performed; and (2) Morganroth retroactively reduced
his hourly rate based upon volume of work and promise of immediate
payment.
21
misrepresentations made to him over a ten year period utterly misses
the mark because they stipulated to such reliance. DeLorean and
Logan stipulated that:
(i) DeLorean and Logan at all times were aware
that Morganroth and his firm intended to be
compensated for services rendered to DeLorean and
Logan;
(ii) DeLorean and Logan at all times were aware
that Morganroth and his firm intended to be
reimbursed for expenses they incurred on DeLorean’s
and Logan’s behalf; and
(iii) When Morganroth and his firm rendered legal
services to DeLorean and Logan and paid expenses
on their behalf, Morganroth and his firm did so with
the expectation of being compensated.
(App. at 92a). In fact, DeLorean even admitted that Morganroth
kept working because Morganroth “figured I was going to pay”
(App. at 66a-68a), and that his statements to Morganroth may
have led Morganroth to believe full payment was forthcoming.
(App. at 64a, 68a-73a; R.272 at 48-49).
Such admissions as well as Morganroth’s testimony as to his
reliance (R.270 at 115) were further corroborated by DeLorean’s
conduct of praising Morganroth’s performance, referring clients to
Morganroth, and making what appeared to be good faith payments
on account throughout the entire representation. (R.294 at 120-
123; R.295 at 205; R.271 at 135; R.289 at 16; App. at 47a-51a;
R.264 at 237-240). Indeed, the record is replete with evidence that
Morganroth provided services and incurred expenses on behalf of
DeLorean and Logan in reliance upon the false representations,
acknowledgments, assurances, and sworn statements.
Notwithstanding these repeated representations, acknowledgments,
and assurances, Morganroth learned during discovery in the instant
action that at the time DeLorean and Logan made such
22
representations: (1) DeLorean had been receiving and had access
to large sums of cash although he had continuously claimed to
lack access to any funds (App. C; R.292 at 95-98); and (2) DeLorean
and Logan had secretly retained attorney Freidberg to bring a sham
malpractice case against Morganroth in order to “handle” him and
avoid paying the large balance owed, while continuing to induce
Morganroth to provide legal services on their behalf for a period
of 2 1/2 years thereafter since they wanted Morganroth to continue
to provide legal services but knew he would not do so if aware of
their true intent.
Moreover, any awareness by Morganroth that other attorneys
had not been paid by DeLorean has no bearing because Morganroth
was led to believe by DeLorean that attorneys had not been paid
as a result of bail requirements and restraining orders that left no
liquid assets available — the same reason given to Morganroth for
the outstanding fees owed to him. (R.256 at 38, 48-49; App. at
67a-68a). The same holds true for DeLorean’s non-payment of
Kimmerly — even Kimmerly himself believed he would be paid.
(R.287 at 166-169). In addition, Weitzman’s testimony confirms
Morganroth’s reliance upon the fraudulent misrepresentations as
Weitzman testified that Morganroth, like Weitzman, believed that
DeLorean would never stiff him. (R.289 at 158-159).
Reference to Morganroth’s representation of DeLorean in fee
disputes with Garratt and Simon further misses the mark. The
Garratt fee dispute was arbitrated, and Garratt’s request for
$600,000 was reduced to $125,000 award by virtue of PeLorean’s
affirmative defenses.’ (R.270 at 168). Meanwhile, Morganroth
learned during discovery in the instant action that DeLorean’s
position in the Simon fee dispute was premised upon DeLorean’s
fabricated version of events. (R.106, Ex.29 at 266, 269-271, 443-
444). DeLorean even contended that he had not paid Simon
9. DeLorean incorrectly suggests that Morganroth’s RICO
claim alleges a scheme to defraud attorney Garratt. On the contrary,
Morganroth did not allege that DeLorean or Logan engaged in any
RICO scheme against attorney Garratt.
23
because he lacked access to funds, but discovery in the instant
action proved otherwise. (R.281 at 137-148).
~ Finally, DeLorean’s and Logan’s contention that Morganroth
should not have relied upon their repeated representations and
acknowledgements over a ten year period because allegations ‘of
fraud had been leveled against DeLorean is devoid of merit as
well. DeLorean’s and Logan’s position is ironic in light of their
constant assurances to Morganroth during his representation that
they had not engaged in the wrongdoing alleged. During the trial,
however, Morganroth presented substantial evidence that he, as
well as other attorneys, were misled by information and documents
supplied by DeLorean that later were discovered to contain
misrepresentations and revisions of history after the attorney-client
relationship had been terminated. (R.307 at 12). Leave it to
DeLorean to suggest that Morganroth could not rely upon the
repeated representations of his client, but somehow should
reasonably rely upon negative allegations made by the client’s
adversary during contentious litigation.
C. Overwhelming Evidence Supports the Jury Verdict on
Morganroth’s Account Stated Claim.
As the District Court and Sixth Circuit determined,
Morganroth’s account stated claim was supported by overwhelming
evidence as well.
The testimony of Morganroth and JBM revealed that
throughout the ten year representation, DeLorean regularly reviewed
and approved time sheets which indicated the services performed
on behalf of DeLorean and Logan, the date of performance, the
amount of hours devoted, and a running balance of legal fees
owed. (R.278 at 118; R.296 at 45-46; R.301 at 172-184; R.303 at
69-74). On each occasion, DeLorean agreed to the balance owing
and promised full payment by both debtors. (/d.) In addition, the
testimony of Morganroth and JBM also revealed that the
outstanding balance for legal fees owed to Morganroth by
DeLorean and Logan was regularly discussed with DeLorean, and
24
on each occasion DeLorean acknowledged the amount due and
promised full payment. (/d.) The testimony further showed that
after DeLorean and Logan received periodic billings, DeLorean
ackncwledged the amounts due and promised full payment through
February 2, 1993. (R.277 at 65-78, 86-90, 96-99, 103, 106, 108-
109, 113, 134).
Ill. EVEN IF IT WERE SOMEHOW NECESSARY TO
REVIEW THE DISTRICT COURT’S DENIAL OF THE
PRETRIAL RICO MOTIONS, THE DISTRICT COURT
DID NOT ABUSE ITS DISCRETION IN DENYING SUCH
MOTIONS IN ANY EVENT.
A. The Supposed Deficiencies Regarding the RICO Claim
Raised on Appeal to the Sixth Circuit Missed the Mark.
In their appeal to the Sixth Circuit, DeLorean and Logan argued
that the District Court abused its discretion in denying their pretrial
motions to dismiss the RICO claim because: (1) Morganroth failed
to provide any legal or factual support other than to simply argue
that the RICO claim was based on previous RICO claims upheld
by other judges; and (2) the only act that could have injured
Morganroth was DeLorean’s non-payment of fees and expenses
which would not constitute racketeering activity under RICO.
Although both contentions were erroneous, DeLorean and Logan
have reiterated them in the Petition.
1. Morganroth provided sufficient legal and factual support
to withstand the pretrial motions to dismiss.
A review of the briefs and exhibits submitted by Morganroth
to the District Court in opposition to the motions completely refutes
DeLorean’s and Logan’s position that Morganroth simply argued
that the RICO claim was based on previous RICO claims upheld
by other judges. In opposition to the Rule 12(b)(6) motion,
Morganroth submitted a brief devoting in excess of 23 pages to
RICO and citing in excess of 37 cases and legal authorities. (App.
K). In opposition to the summary judgment motion, Morganroth
ee
25
submitted a 66-page brief, citing 75 cases and legal authorities and
referring to 57 accompanying exhibits consisting of deposition
testimony, affidavits, and documentary evidence.'° (App. L; R.106).
The District Court did not deny the motions on the basis of argument
that prior judges upheld RICO claims against DeLorean and Logan,
but by exercising its sound discretion after reviewing voluminous
case law and legal authority cited, as well as the testimony of
numerous witnesses, documentary evidence, and stipulations of
fact made by the parties, under the applicable standards of review
which were_clearly set forth in Morganroth’s briefs. (App. K-L).
Morganroth’s briefs addressed each challenge to the RICO
claim and demonstrated that: (1) the predicate acts alleged were
related and amounted to or posed a threat of continued
activities; (2) a RICO enterprise was well pled and supported by
more than sufficient evidence to establish a genuine issue of material
fact; (3) violations of 18 U.S.C. § 1962(a) were well pled and
supported by more than sufficient evidence to establish a genuine
issue of material fact; (4) violations of 18 U.S.C. § 1962(b) were
well pled and supported by more than sufficient evidence to
establish a genuine issue of material fact; (5) violations of 18 U.S.C.
§ 1962(c) were well pled and supported by more than sufficient
evidence to establish a genuine issue of material fact; (6) violations
of 18 U.S.C. § 1962(d) were weil pled and supported by more
than sufficient evidence to establish a genuine issue of material
fact; and (7) injury to Morganroth’s business or property by reason
of violations of 18 U.S.C. § 1962 was well pled and supported by
more than sufficient evidence.
10. DeLorean and Logan also filed a pretrial motion for a
separate trial of the RICO claim, and a Rule 50(a) motion for directed
verdict as to the RICO claim and quasi contract claims only. In
opposition to these motions regarding the RICO claim, Morganrotr
filed lengthy briefs citing numerous cases and legal authorities and
referring to substantial testimony, exhibits, and stipulations of fact
made by the parties. (App. M-N).
26
2. Requisite racketeering activity was well pled and supported
by sufficient evidence to withstand motions to dismiss and/or
summary judgment.
The one line devoted to this contention in DeLorean’s and
Logan’s appeal to the Sixth Circuit appeared to be premised upon
the assertion that non-payment of money cannot constitute
racketeering activity. DeLorean reiterates this same assertion in the
Petition.
The RICO statute defines racketeering activity as the
commission of any act delineated in 18 U.S.C. § 1961(1). As
pointed out in Morganroth’s appellate brief to the Sixth Circuit,
the RICO claim was not based upon the non-payment of money,
but rather, the commission of five different types of predicate
racketeering acts set forth in 18 U.S.C. § 1961(1): (1) violation of
18 U.S.C. § 1341; (2) violation of 18 U.S.C. § 1343; (3) violation
of 18 U.S.C. § 1952; (4) violation of 18 U.S.C. § 1956; and (5)
violation of 18 U.S.C. § 1957. (R.1 at 26-33).
The Sixth Circuit has ruled that the commission of at least
two predicate acts occurring within ten years of each other in
furtherance of even a single fraudulent scheme is sufficient to satisfy
the pattern of racketeering activity element. Newmyer v. Phitaletic
Leasing, Ltd., 888 F.2d 385, 396-397 (6th Cir. 1989). Accord,
Dana Corp. v. Blue Cross Blue Shield Mut., 900 F.2d 882, 886-
887 (6th Cir. 1990). Morganroth not only alleged the commission
of such racketeering acts with respect to the Morganroth Scheme,
but more than sufficient evidence was adduced during discovery
and at trial to withstand a challenge to the factual sufficiency of the
“racketeering activity” allegation based upon the Morganroth
Scheme alone. (App. at 139a-141a, 223a-229a; R.106; R.1).
Nevertheless, DeLorean and Logan attempt to cloud the issues
by arguing that Morganroth lacked standing to bring the RICO
claim because he alleged the commission of multiple schemes that
purportedly were unrelated and did not cause injury to Morganroth.
DeLorean’s and Logan’s position founders on two separate grounds.
27
First, Morganroth did not allege the commission of the multiple
schemes for the purpose of seeking damages therefor as DeLorean
and Logan disingenuously suggest,'' but such schemes were
alleged for the purpose of delineating an ongoing association in
fact enterprise having a common purpose, continuity of structure
and personnel, and pattern of roles necessary to carry out the
racketeering activity over an extended period of time.
Second, the multiple schemes alleged by Morganroth were
interrelated; they were not haphazard events strung together by
Morganroth as DeLorean and Logan incorrectly contend.
Morganroth alleged that key participants in the development,
manufacture, and distribution of the DeLorean sports car secretly
came together to form a criminal network and used their positions
and relationships to commit illicit activities for the purpose of
illegally obtaining money and property. Ultimately, the car
company failed because the criminal network-illegally and
fraudulently diverted funds to line its own pocket that were
necessary for the operation of the car company. When the members
of the criminal network could no longer forestall allegations of
wrongdoing, they hired attorneys to defend their conduct. The
attorneys thought they were defending the legitimate business
operations of the failed car company based upon facts and
documents provided to them. In reality, the criminal network
attempted to further their overall scheme so that the members of
the criminal network could defend against the allegations of
wrongdoing while protecting and keeping their ill-gotten gains
intact by fraudulently inducing the attorneys to perform legal
services in reliance upon false promises of payment and false
information. It is within this context that Morganroth alleges that
the multiple schemes were committed by the criminal network.
Morganroth was one of the attorneys that the criminal network
deceived along with Weitzman, Kimmerly, and others.
11. Morganroth alleged that injury to his business and property
was proximately caused solely by reason of the violations of the
RICO statute that were directed against him in connection with the
Morganroth Scheme only.
28
B. No Compelling Reasons Exist For Granting Review.
In a last ditch effort to create a reason for this Honorable Court
to grant the Petition, DeLorean and Logan disingenuously contend
that further guidance regarding an issue of RICO standing is
needed. They contend that this case somehow involves a purported
conflict in the circuits regarding the application of the RICO
standing rules enunciated in Holmes v. Securities Investor Protection
Corp., 503 U.S. 258 (1992) because some circuits have
distinguished between corporate shareholders and corporate
creditors.
DeLorean’s and Logan’s position utterly misses the mark
because this case in no way involved any purported issue regarding
the application of the RICO standing rules enunciated in Holmes
to different classes of plaintiffs nor was any such issue even raised
by DeLorean and Logan with the District Court or the Sixth Circuit.
Indeed, the Sixth Circuit could not have reached this issue even if
the issue had been raised at the District Court level because it
determined that review of the District Court’s rulings regarding
the RICO claim was unnecessary. Consequently, the Sixth Circuit’s
decision in this case did not and could not have conflicted with
any decision of another Circuit Court or state court of last resort
regarding the application of Holmes.
Moreover, DeLorean’s and Logan’s assertion that Morganroth
should not have been entitled to pursue a RICO claim because he
once represented DeLorean and Logan and purportedly was in
pari delicto with them equally misses the mark as well. DeLorean
and Logan are unable to cite any portion of the RICO statute or
any law that prohibits a lawyer from pursuing a RICO claim against
another for violations of the RICO statute that were perpetrated
directly against the lawyer. Likewise, DeLorean and Logan are
unable to cite any statute or law that prohibits a lawyer from
pursuing claims against his former client merely because the lawyer
once represented the client. In this case, DeLorean and Logan not
only committed wrongs directly against Morganroth, but they filed
malpractice claims and counterclaims against Morganroth and
29
asserted affirmative defenses and recoupment defenses that
challenged virtually every aspect of Morganroth’s representation.
As the jury determined after hearing all of the evidence, Morganroth
was not in pari delicto with DeLorean — Morganroth was a victim
of fraud perpetrated by DeLorean and Logan directly against him.
Indeed, the record reveals that Morganroth not only discovered
after the termination of his representation that DeLorean and Logan
had defrauded him out of substantial legal fees and expenses, but
that DeLorean’s assurances that he had not engaged in any
wrongdoing were based upon misrepresentations, revisions of
history, and perhaps fabricated documents.
CONCLUSION
For all of the foregoing reasons, Respondent, Morganroth,
respectfully requests this Honorable Court to deny the Petition.
Respectfully submitted,
MAYER MORGANROTH
Counsel of Record
MORGANROTH & MORGANROTH
Attorneys for Respondents
3000 Town Center
Suite 1500
Southfield, Michigan 48075
(248) 355-3084
APPENDIX
la
APPENDIX A — TRANSCRIPT OF JURY VERDICT
DATED JANUARY 4, 1995
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Case No. 93 CV 70848 DT
Detroit, Michigan
Wednesday, January 4, 1995
MORGANROTH & MORGANROTH, a Michigan general
partnership, and MAYER MORGANROTH,
Plaintiffs,
-VS-
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
JURY VERDICT
TRANSCRIPT OF TRIAL
BEFORE THE HONORABLE ANNA DIGGS TAYLOR
UNITED STATES DISTRICT COURT JUDGE, and a jury.
* * *
2a
Appendix A
[2] Detroit, Michigan
Weanesday, January 4, 1995
10:35 a.m.
THE COURT: We received a note that says, “We have
reached a verdict, the jury.”
Are the parties prepared to receive the verdict?
MR. FLESHMAN: Yes, Your Honor.
MR. MORGANROTH: Yes, Your Honor.
MS. NADLER: Yes, Your Honor.
THE COURT: All right. Bring in the jury.
(Jury enters the courtroom at 10:35 a.m.)
THE COURT: Court is in session. Be seated.
The Court is in receipt of a note that says, “We have reached
a verdict,” signed “The jury.”
Will the foreman please rise.
Do you have a unanimous verdict on all the issues before
you?
JUROR GACH: Yes, we do.
3a
Appendix A
THE COURT: All right. Give it to the clerk, please. (Juror
gives verdict form to clerk.)
THE COURT: You can sit down. I’m going to have him
read it to us.
All right. Please read the verdict.
CLERK FRANKEL: The verdict form reads:
[3] We, the jury, answer the questions submitted as follows:
“Plaintiffs’ RICO Claims.
“1. Do you find that any Defendant violated RICO Section
1962(a)? 2
“A. Defendant, John Z. DeLorean. Answer: No.
“B. Defendant, Ecclesiastes (formerly known as Logan
Manufacturing Company). Answer: No.
“2. Do you find that any Defendant violated RICO, Section
1962(b)?
“A. Defendant, John DeLorean. Answer: No.
“B. Defendant, Ecclesiastes. Answer: No.
“3. Do you find that any Defendant violated RICO Section
1962(c)?
4a
Appendix A
“A. Defendant, John DeLorean. Answer: No.
“B. Defendant, Ecclesiastes. Answer: No.
“4. Do you find that any Defendant violated RICO Section
1962(d)?
“A. Defendant, John DeLorean. Answer: No.
“B. Defendant, Ecclesiastes. Answer: No.
“Plaintiffs’ Fraud Claims.
“5. Do you find that any Defendant committed fraud or
intentional misrepresentation?”
As to “John DeLorean. Answer: Yes.”
As to “Ecclesiastes. Answer: Yes.”
[4] “Plaintiffs’ Breach of Express Contract.
“6. Do you find that any Defendant breached an express
contract with Plaintiffs?”
As to “Jonn DeLorean. Answer: Yes.”
As to “Ecclesiastes. Answer: Yes.”
“Plaintiffs’ Breach of Implied Contract Claims.
“7. Do you find that any Defendant breached an implied
contract with Plaintiffs?”
This is left blank.
Sa
Appendix A
MS. NADLER: That’s correct.
THE COURT: That’s right.
CLERK FRANKEL: “Plaintiffs’ Account Stated Claims.
“8. Do you find that any Defendant is liable to Plaintiffs
by virtue of an account stated?”
As to “Defendant John DeLorean. Answer: Yes.”
As to “Defendant Ecclesiastes. Answer: Yes.”
“Plaintiffs’ Quantum Meruit Claims
“9. Do you find that any Defendant is liable to Plaintiffs
by virtue of a quantum meruit?”
As to John DeLorean, this is left blank.
And as to Ecclesiastes, this is left blank.
“Plaintiffs’ Unjust Enrichment Claim.
“10. Do you find that any Defendant is liable to Plaintiffs
because they were unjustly enriched?”
As to John Z. DeLorean, this is left blank.
[5] And as to Defendant Ecclesiastes, this is also left blank.
“11. What is the grand total of fees and expenses, if any,
to which you find (without any deductions) that Plaintiffs are
entitled?
6a
Appendix A
“A. To Plaintiffs against Defendant, John Z.
DeLorean.” The answer is “$3,427,905.00.”
“B. To Plaintiffs against Defendant, Ecclesiastes.”
Answer: “$1,311,989.00.”
“C. Do you find that Defendant, John Z. DeLorean,
is also responsible to Plaintiffs for the amount you awarded
against Ecclesiastes in subpart B above?” Answer to C is “Yes.”
“12. From that amount, what amount, if any, do you find
should be deducted because of Defendants’ defenses?
“Answer: Zero dollars and zero cents.
“13. What is the total amount that you award Plaintiff for
loss of business and income up to present time other than
specified in your answer to Question 11?”
Answer for part A: “To Plaintiffs against Defendant,
John Z. DeLorean, $600,000.00.”
And then part B: “To Plaintiffs against, Defendant
Ecclesiastes, Zero dollars and zero cents.
“14. If you find that Plaintiffs will sustain loss of business
and income in the future, give the total amount of [6] damages
that you award Plaintiffs for each of the following years in
which Plaintiffs will sustain damages.”
Answer:
Part A: “To Plaintiffs against Defendant, John Z.
DeLorean:”
Ta
Appendix A
1995, the answer is zero.
1996, the answer is zero.
1997, the answer is zero.
1998, the answer is zero.
1999, the answer is zero.
2000, the answer is zero.
2001, the answer is zero.
2002, the answer is zero.
And 2003, the answer is zero.
Part B: “To Plaintiffs against Defendant,
Ecclesiastes:”
1995, zero.
1996, zero.
1997, zero.
1998 is zero.
1999 is zero.
2000 is zero.
8a
Appendix A
2001 is zero.
2002 is zero.
And 2003 is also zero.
[7] “15. What is the total amount that you award to
Plaintiffs for punitive damages?
“A. To Plaintiffs against Defendant, John Z.
DeLorean.” The answer is “$5 million.”
“B. To Plaintiffs against Defendant, Ecclesiastes.”
The answer is “zero.”
And the verdict form is signed by the foreperson.
THE COURT: Please poll the jury. Is there a request for a
poll?
MR. FLESHMAN: Yes, there is, Your Honor.
THE COURT: Please poll the jury.
CLERK FRANKEL: Cynthia Ann Johnson, was that and
is that still your verdict, as stated in the record?
JUROR JOHNSON: Yes.
CLERK FRANKEL: Danny Raye Hawes, was that and is
that still your verdict, as stated in the record?
9a
Appendix A
JUROR HAWKS: Yes.
CLERK FRANKEL: Denise Michelle O’ Rourke, was that
and is that still your verdict, as stated in the record?
JUROR O’ROURKE: Yes.
CLERK FRANKEL: Janet Carol Driscoll, was that and is
that still your verdict, as stated in the record?
JUROR DRISCOLL: Yes.
CLERK FRANKEL: Susan Marie Perry-Nolte, was that
and is that still your verdict, as stated in the record?
[8] JUROR PERRY-NOLTE: Yes.
CLERK FRANKEL: Mariette L. Maleszyk, was that and
is that still your verdict, as stated in the record?
JUROR MALESZYK: Yes.
CLERK FRANKEL: Linda Pear! Flowers, was that and is
that still your verdict, as stated in the record?
JUROR FLOWERS: Yes.
CLERK FRANKEL: And Steven J. Gach, was that and is
that still your verdict, as stated in the record?
JUROR GACH: Yes.
THE COURT: Thank you very, very much. You all worked
10a
Appendix A
very hard and paid close attention to all the evidence and the
instructions. Thank you very much.
At this time, you are discharged and dismissed.
Step into your room before you leave in case something is
on somebody’s mind. But you are discharged and dismissed,
and tell Jeanne Burgess downstairs.
JURORS: Thank you.
THE COURT: Thank you so much.
(Jury leaves the courtroom at 10:42 a.m.)
THE COURT: Does anyone have anything that must be
resolved before we discharge the jury?
(Applause heard coming from the jury room.)
MR. MORGANROTH: I think they had something to say.
MR. FLESHMAN: Your Honor, may I inquire as to what
[9] the local customs, practices or rules are about contact of the
jury after they are discharged?
THE COURT: Oh, I think you are each free to talk with
them.
Is that all?
MR. FLESHMAN: That’s all.
lla
Appendix A
THE COURT: All right. And you are free to look at the
verdict form.
But maybe you should, you know, thank them or whatever
before they leave, because I’m going and tell them they can go
right now.
So let them see the verdict form before you send it
downstairs. Staple it together and send it downstairs to file.
(Proceedings adjourned at 10:45 a.m.)
STATE OF MICHIGAN
Ss.
COUNTY OF WAYNE
I, Denise A. Mosby, certify that the foregoing is a correct
transcript from the record of proceedings in the above-entitled
matter.
s/ Denise A. Mosby
DENISE A. MOSBY, CSR-RPR
Official Court Reporter
Dated: January 12, 1995
12a
APPENDIX B — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED SEPTEMBER 22, 1994
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Docket No.
93-CV-70848 DT
Detroit, MI
9-22-94
9:00 a.m.
MORGANROTH & MORGANROTH, a Michigan general
partnership, and MAYER MORGANROTH,
Plaintiffs,
-VS-
JOHN Z. DE LOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
TRANSCRIPT OF TRIAL
BEFORE THE HONORABLE ANNA DIGGS TAYLOR
UNITED STATES DISTRICT JUDGE, and a jury
* * *
13a
Appendix B
[116] Q. Your name, sir?
A. Frank Shaler.
Q. And, sir, are you the accountant for John DeLorean?
A. I’ve just prepared tax returns.
Q. So you do work for John DeLorean? You do tax returns
for him?
A. Yes.
(118) * * *
Q. Now, sir, during the course of the years, did you prepare
certain financial statements for John DeLorean?
A. Yes.
[121] Q. Okay. Let me take that from you for the time
being. Let me show you Exhibit 155 and ask you whether or
not the first page of that particular exhibit is a letter from you?
A. Yes, it is.
Q. And the second page, what is that?
A. It’s a draft of a financial statement.
14a
Appendix B
Q. Now, dated January 18th, 1993, did this come from
your records, sir?
A. Looks like my writing on it, yeah.
MR. M. MORGANROTH: I would offer Exhibit 155 into
evidence, Your Honor.
MR. FREIDBERG: No objection.
THE COURT: Received.
Q. (BY MR. MORGANROTH): Now, sir, it reads Januar,
18th, 1993, do you see that, sir?
A. Yes.
Q. Says, “I have prepared your personal financial statement
as of January 15, 1993 from the data you sent to me and it is
enclosed.” Addressed to Dear John, is that correct?
A. That’s right. Correct.
Q. Now you see on the bottom it says, “Frank, [122] this
sounds too much like a disclaimer. Would you mind rewording
it something like this? Says the same thing but more softly.
Dear J., In accordance with your instructions I prepared your
personal financial statements as of January 15, 1993.”
Who put that on this particular letter?
A. I believe Mr. DeLorean did.
15a
Appendix B
Q. Did he tell you why he wanted you to change your sort
of like disclaimer regarding his financial return? Pardon me,
his financial statements.
A. No.
Q. On the next page there’s a listing of assets.
A. Yes.
Q. And he shows bank accounts of a million five hundred
thousand?
A. Yes.
Q. By the way, whose handwriting is this?
A. That’s my handwriting.
Q. Where did you get the information from to put these
things down?
[123] A. Might have been a telephone call or fax. I don’t
recall.
Q. Well, who would have told you? Who would have given
you these facts?
A. Mr. DeLorean.
Q. Next item is, “notes receivable from the sale of Logan
Manufacturing Company, two million eight hundred fifty
thousand dollars.” Who gave you that information?
l6a
Appendix B
A. I believe Mr. DeLorean.
Q. The next is “preferred stock from sale of Logan
Manufacturing, four million five hundred thousand dollars,”
who gave you that fact?
A. Mr. DeLorean.
Q. Next is “real estate, land and buildings at Logan, Utah,”
with other explanations about it, “two million five hundred
thousand dollars,” who gave you that figure and that statement?
A. Mr. DeLorean.
(126) * * *
Q. What is Number 2 item? I can’t quite read that. Can
you read what you put down there?
A. “Can’t balance rental properties paid in —”
I can’t read the rest of it. Looks like “different
amounts of rent.”
Q. Tell me, sir, this Paragraph 5, says “legal fees payable.”
Now, were you asking a question of John DeLorean what legal
fees he owed?
A. Yes.
Q. Why were you asking him that in 1993?
17a
Appendix B
A. Well, I was trying to prepare a financial statement for
him.
Q. In the past Mr. DeLorean carried on his financial
statement owing appreciable amount of legal fees, didn’t he?
A. I don’t recall. If you showed me one, I could maybe.
Q. Okay. I won’t put it in yet, but let me show you Exhibit
136 and ask if he shows — if that refreshes your memory he
showed he owed two million five in legal fees in 1991?
A. It does.
Q. Didn’t you ask him what happened to all the [127]
legal fees, to all these legal fees, did you pay them? Didn’t you
ask him that?
A. No.
Q. Well, you asked him about the legal fees, didn’t you?
Weren’t you asking him what happened to those legal fees?
A. I was asking whether he owed any at the present time.
Q. And he told you how much that he owed in legal fees
in 1993 to any lawyer in the world?
A. From the notes there, apparently said zero.
Q. Um-hmm. Tell me, had you ever had any discussions
— strike that.
18a
Appendix B
You’ve had discussions with Mr. DeLorean that he owed
Thomas Kimmerly a lot of money, didn’t you?
A. I don’t believe so.
Q. Never had discussions where Mr. DeLorean told you
he owed Thomas Kimmerly legal fees?
A. No.
Q. Now, sir, let me show you the exhibit I just showed
you which is 136 and ask you whether or not you prepared
that financial statement for Mr. DeLorean?
[128] A. Well, there’s really two statements here. There’s a
typed one.
Q. Um-hmm.
A. Which apparently was a copy of one I provided to him,
and then I was changing it to try to prepare a later financial
statement.
Q. Are you saying that there’s one statement but writings
over that statement?
A. Yes.
Q. Just one statement but then lined through, then amended
somehow? Is that what you’re saying, sir? You see where it
says December 31, 1990 at the top?
A. Yes.
19a
Appendix B
Q. And you see where it’s changed to December 1991?
A. Yes.
Q. Now, sir —
MR. M. MORGANROTH: I’ll offer Exhibit 136 into
evidence, Your Honor.
MR. FREIDBERG: No objection.
THE COURT: Received.
* * *
iMmij* ° *
Q. Let me show you Exhibit 156 and ask you if that’s a
December 31, 1990 financial statement of John DeLorean?
A. Yes, it is.
Q. Did you prepare it?
A. Yes.
Q. Do you see where it says legal fees payable to
$2,500,000?
A. Yes, um-hmm.
20a
Appendix B
[142])* * *
Q. (BY MR. MORGANROTH): Now, was it the procedure
that Mr. DeLorean would send to you the previous financial
statement that [143] you had prepared for him and sent it back
with notes on it changing the figures as he saw — understood
it to be changed and sent it to you and then you typed out the
new financial statement with the new figures in it?
A. No. That’s not the way I recall, no.
Q. Well, how was it done then?
A. Well, he might send me a note saying that different —
there’s different amounts for different categories at this time.
We might do it by telephone. Some cases he might have crossed
out some figures on a prior statement and put in new figures.
Q. Either way, those figures came from him, is that correct?
A. That’s right.
Q. Let me show you Exhibit 141 and ask you whether
that comes from your records.
A. Yes. I believe it does, um-hmm.
Q. And it’s regarding John DeLorean again, is it not?
A. Yes.
MR. M. MORGANROTH: I’d offer Exhibit 141 into
evidence, Your Honor.
2la
Appendix B
[144] THE COURT: Any objection to 141?
MR. FREIDBERG: Can’t seem to find my copy.
Could I ask you what the Exhibit was?
THE COURT: Show counsel.
MR. M. MORGANROTH: It was Exhibit Number 11 in
Frank Shaler’s deposition if that’s what you’re looking for.
MR. FREIDBERG: That’s fine. I have no objection.
THE COURT: Received.
Q. (BY MR. MORGANROTH): Mr. Shaler, would you
read the paragraph at the top of this statement?
A. “Frank Shaler, please do new financial statement as of
January 15th, 1993. We may be doing development deal on
farm which would raise the value considerably. I think I am
going to sell.” I can’t make out the next word.
Q. Can you read the word patents?
A. Yes. “Sell some patents” maybe.
* * *
[163] * * *
22a
Appendix B
Q. Let me show you Exhibit 59 — pardon me, 159, and
ask you whether or not that’s a final of a financial statement for
January 15, 1993 for John Z. DeLorean?
A. I believe it is.
Q. And did you prepare that, sir?
A. It looks like it, yes.
MR. M. MORGANROTH: I would offer Exhibit 159 into
evidence, Your Honor.
MR. FREIDBERG: No objection, Your Honor.
THE COURT: Received.
Q. (BY MR. MORGANROTH): Mr. Shaler, not to go
through the same figures again, for identification purposes, this
is the final of the one that had the work sheet for January 15,
1993 that shows the $51,000,000 net worth, is that correct?
[164] A. This one shows a 51,000,000 net worth, yes.
Q. And this is the final of the one that you identified before
as a work sheet that had $51,000,000 net note worth, is that
correct?
A. Well, let me see the work sheet. This one?
Q. Is that correct, sir?
A. Yes, that’s correct.
23a
Appendix B
Q. And that’s the one that no longer has the $2,500,000
owed to attorney fees on it — for attorney fees on it, is that
correct?
A. It has no liabilities for attorney fees.
Q. Now, sir, let me show you Exhibit 144 and ask you if
that’s a final — excuse me, if that is a financial statement of
November 30, 1990 —
A. Yes, it is.
Q. — that you prepared?
A. Yes.
(187]* * *
Q. And then you have below it, January 15, 1993, is that
what it says?
A. Yes.
Q. And you cross out November 30, 1990, is that correct,
sir?
A. Yes. I was just taking an old copy of the 1990 letter
and making one up for the secretary for 1993.
Q. You see where it says below, “I have prepared your
personal financial statement as of January 15, 1993 from the
data you sent to me and it is enclosed?” Do you see that, sir?
Nhe Ds
oe
24a
Appendix B
A. Yes.
Q. Let me show you Exhibit — let me show you Exhibit
170 and ask you whether or not those are notes that you took
regarding John Z. DeLorean?
A. Looks like I made up some questions before I prepared
the financial statement as of January 15th, 1993 and called Mr.
DeLorean and asked him the questions.
Q. What’s the exhibit number on that, sir?
A. 170.
[188] MR. M. MORGANROTH: Court please, I would
offer Exhibit 170 into evidence.
MR. FREIDBERG: No objection.
THE COURT: Received.
Q. (BY MR. MORGANROTH): Now, at the top left it
says “call J.Z.D.,” something to that effect, is that correct?
Yes.
January 15, 1993?
Yes.
You asked him these questions six of them?
> 0 > © >
Apparently.
25a
Appendix B
Q. Says J.Z.D. questions?
A. Yes. Sometimes I don’t ask him all I write down
originally.
Q. You don’t write down everything you ask him, is that
right?
A. Sometimes by the time I get to the telephone — this
was written on the 8th of January and I didn’t call him until the
15th. Some of them — I don’t see an answer after the first one,
for instance, so maybe it didn’t appear pertinent by the 15th.
Q. Number | is the purchase of Logan — pardon [189]
me, purchaser of Logan retaining its name, do you see that
question?
A. Yes.
Q. So you knew Logan Manufacturing was closing, sale
was being closed, Logan Manufacturing’s assets in January of
1993, is that correct?
A. Yes.
Q. Tell me, didn’t Mr. DeLorean tell you that Mayer
Morganroth was supposed to be paid his legal fees out of that
closing?
A. No.
Q. Well, do you see where you asked Number 4, loan from
brother, zero?
26a
Appendix B
A. Yes.
Q. Didn’t you ask him what happened to that loan?
A. No. I just asked him how much it was. How much he
owed him as of January 15th, 1993. I’m just preparing a balance
sheet. I wasn’t preparing anything else.
Q. Well, he had already sent to you a proposed financial
statement showing he owed his brother nothing, didn’t he,
before you asked him these questions?
A. I don’t recall. Maybe in one of these [190] prior.
Q. Sir, Mr. DeLorean sent to you a financial statement
prepared by him with notes, the changes, and he left out owing
his brother any money? Isn’t that why you called him and asked
him what happened to the loan?
A. That apparently is why I called and him ask him, yes.
Q. And, sir, didn’t you next ask him what happened to
the legal fees you owed of two and a half million dollars?
A. No. I just asked him if he was sure it was zero.
Q. Because just matter of a few months before, whatever it
was, he showed he owed $2,500,000, is that right?
A. Probably.
Q. And you never saw a check in any of his records?
A.
Q.
that?
A.
27a
Appendix B
I don’t see any checks anyway.
You never saw a check register showing he had paid
I hadn’t seen any checks or check registers for a year or
two before this. This statement was —
[191] Q. The answer is — excuse me, the answer is you
never saw any evidence that that money had been paid, isn’t
that true?
A.
Q.
> 2 >
That is true.
So you asked him what happened to it, isn’t that right?
No. Just wanted to make sure it was zero.
And he told you it was zero?
Yes.
Now let me show you Exhibit 180 and ask you if you
can identify that as a work sheet financial statement that you
prepared?
A.
Q.
A.
It’s a work sheet for a financial statement.
Yes?
Yes.
28a
Appendix B
MR. M. MORGANROTH: I would offer Exhibit 180 into
evidence, Your Honor.
MR. FREIDBERG: No objection.
THE COURT: Received.
Q. (BY MR. MORGANROTH): Now, sir, do you see
where there’s a figure for legal fees payable of $500,000?
A. Looks like 2,500,000.
* * *
29a
APPENDIX C — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED SEPTEMBER 23, 1994
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Docket No.
93-CV-70848 DT
Detroit, MI
9-23-94
9:00 a.m.
MORGANROTH & MORGANROTH, a Michigan general
partnership, and MAYER MORGANROTH,
Plaintiffs,
-VS-
JOHN Z. DE LOREAN and ECCLESIASTES 9:10. 11-12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
TRANSCRIPT OF TRIAL
BEFORE THE HONORABLE ANNA DIGGS TAYLOR
UNITED STATES DISTRICT JUDGE, and a jury
* * *
30a
Appendix C
.. Testimony of Frank Shaler
[10] * + *
Q. (BY MR. M. MORGANROTH): Did Mr. DeLorean
ever tell you why he gave you a million dollars to take a
deduction for Hufstedler and another million dollars for
Weitzman plus?
A. I just received the letter from him.
Q. He goes further and says: “To Howard Weitzman,
property, Pauma Valley, four million dollars.”
Did he ever tell you why he felt four million dollars
should be the amount?
A. No.
Q. Then he puts the Howard Weitzman furnishings and
equipment, Pauma Valley, one million dollars. Did you ever
see a bill of sale of the furnishings?
A. No.
Q. Now, sir, do you recall the company called Ephesians
6:12, Inc.?
A. Yes.
Q. Was that another company that Mr. DeLorean [11] had?
A. A company that he owned all the stock in, yes.
3la
Appendix C
Q. Do you recall on January 15, 1985, he had a corporate
meeting of the sole director and sole secretary of the corporation
to pay over to John DeLorean four million dollars?
A. I don’t specifically remember it. If you want to refresh
my memory —
Q. Certainly, sir.
A. I’ve read it, yes.
Q. Do you recall that he had such a corporate meeting in
order to pay himself from Ephesians four million dollars?
A. Well, it notes that the corporate meeting was in Vale,
Colorado. I wasn’t there.
Q. Yes, sir, but you have a copy of the minutes in your —
A. Yes.
Q. And you received that from Mr. DeLorean, did you
not?
A. Yes, I did.
Q. And actually from Ephesians, he did transfer a great
deal of money, did he not, in 1985? =
A. Well, I know there was some money transferred. [12] I
don’t recall any of the details at the moment. If you have
anything to refresh me —
32a
Appendix C
Q. You don’t know if it came out to four million dollars,
is that right?
A. That’s right.
Q. But you knew there was quite a bit of money
transferred, is that right?
A. Well, you’d have to refresh my mind on it. I don’t
remember that far back.
Q. Well, let’s take one item alone. In that particular
document if it refreshes your memory, he transferred all the
monies coming from his book rights, is that correct?
A. Well, the corporation is buying the rights for the book
from Mr. DeLorean, according to this, these minutes, yes.
Q. And the monies are being turned over to Mr. DeLorean,
up to four — or four million dollars worth, isn’t that true, sir?
A. I think it says — let me see what it says again.
Q. Do you see where it says it pays four million dollars to
Mr. John Z. DeLorean?
A. It says shall pay.
Q. [13] Shall pay?
A. Yes.
Q. Do you know if Ephesians got somewhere around a
33a
Appendix C
million dollars as a down payment on this book that was
transferred to Mr. DeLorean right away?
A. I know they got something. Without something to
refresh my memory, I wouldn’t know how much it was.
Q. Do you know he got royalties after he got his down
payment from the book?
A.
Well, Ephesians owned the rights and they got royalties
as I recall.
Q.
It also says John Z. DeLorean would draw a salary of
$60,000 a month from Ephesians on top of the four million.
Do you know whether he did that or not?
A.
Q.
o> | > & >
I don’t think he did, no.
You don’t know if he — are you sure he didn’t?
Pretty sure.
But he did draw a great deal of money?
On just the royalties he drew.
Pardon?
I think he just drew the royalties out of [14] there.
And the royalties was a lot of money, wasn’t it?
34a
Appendix C
A. It’s — I don’t remember. Might be a million bucks,
yeah.
MR. FREIDBERG: Your Honor, we'd like to object to “a
lot of money.” If he asks him how much money —
THE COURT: Sustained.
MR. M. MORGANROTH: He just answered, your Honor,
and he said at least a million bucks.
THE WITNESS: That’s my recollection.
MR. FREIDBERG: I'll stipulate that’s a lot of money.
THE COURT: Apparently it’s all relative.
MR. FREIDBERG: That’s true.
MR. M. MORGANROTH: Yes, your Honor.
Q. (BY MR. M. MORGANROTH): Do you recall Mr.
DeLorean in 1988 conveying to himself the assets of Cristina
Holdings of $1,360,000?
A. You’d have to refresh my memory. I don’t [15] have
any recollection.
Q. Let me show you a February 1, 1988 meeting of the
board of directors of Cristina Holdings Corporation.
A. It states that the remaining inventory in Cristina lq
Holdings is being conveyed to Mr. DeLorean in payment of an
account payable to him.
35a
Appendix C
Q. How much money?
A. Well, since it says — it says $1,360,000 but it refers to
an inventory so somebody had to place that value on it, I would
think.
Q. Do you know that — do you place values of Cristina
Holdings assets from year to year according to your records?
A. Did I?
Q. Yes, didn’t you?
A. I don’t think so.
Q. You don’t think so. Cristina Holdings actually was a
corporation that owned a great deal of art, antique furniture,
and a valuable collection of all kinds of, shall we say, art and
furniture?
A. Antiques.
Q. Antiques?
[16] A. Mm-hmn, yes.
Q. And in fact Mi. DeLorean had a gentleman by the name
of Maur Dubin practically employed full-time acquiring those
things, isn’t that true?
A. Well, he ran the store they had, I believe.
Q. They had a store. What kind of store did they have?
36a
Appendix C
A. Antiques store, as I understood, and art.
Q. When did Mr. DeLorean have an antiques store?
A. When this corporation was in business. I think it was
in the early eighties.
Q. Is that where all that $1,360,000 comes from that’s
assigned to him, from the antiques store?
A. Yeah. He loaned money to the company to buy items
and this is paying back for what he’s loaned them.
Q. So that’s money he wouldn’t show on his tax return?
A. You don’t show loans on a tax return.
Q. Exactly. So it’s more income that he was getting during
that time that —
MR. FREIDBERG: Your Honor, [17] I’m going to object
to the “more income.” He hasn’t said that. He said you don’t
show it on your income tax return because it’s not income. So
he’s asking an improper question.
MR. M. MORGANROTH: Sir —
MR. FREIDBERG: He’s assuming a fact not in evidence.
THE COURT: Sustained.
Q. (BY MR. MORGANROTH): Not taxable income, is
that right?
37a
Appendix C
A. Not income at all. I would think it was repaying a debt.
Q. What it is then is monies that were distributed to him
for his use during 1988, is that correct, sir?
A. I'd say just his debt was paid.
Q. Let’s put it very simply. He got $1,360,000 in 1988
from that instrument and from Cristina Holdings Corp., right?
A. That’s a —
MR FREIDBERG. Your Honor, I’d like to object. He’s
already indicated that he got the inventory. Mr. Morganroth is
not saying that he got the money. He’s [18] misstating that and
assuming facts not in evidence and not what this witness has
testified to.
THE COURT: Sustained.
Q. (BY MR. M. MORGANROTH): Sir, did Mr. DeLorean
sell the Cristina Holdings inventory for three million dollars in
the last year?
A. Last year?
Q. Two years; how’s that?
A. 1993 and °94?
Q. 1993 and 1992. Let's take those two years.
38a
Appendix C
A. I don’t know. I —
Q. You didn’t know that upon sale of his apartment in
New York, his co-op, that he held a sale from all of the houses
in New York by Sotheby’s selling the furniture and inventory
from Cristina Holdings?
MR. FREIDBERG: Your Honor, he’s asking a question
as if he didn’t know. The question is what does he know.
Q. (BY MR. M. MORGANROTH): All right, sir. Do you
know that? How’s that?
A. I know he had a sale of some furniture that was in his
apartment, yes.
[35] * * *
Q. Excuse me. I thought you just testified a little while
ago that you knew of that sale of his antiques?
A. Well, I know of the sale of the co-op apartment. I don’t
recall — maybe I assumed I knew of the sale because he’d have
to get rid of the furniture somehow, but I don’t know anything
specifically about the sale of furniture.
Q. Okay. Did you ever question Mr. DeLorean about a
statement that he made to you that he had somehow sold his
furnishings at the Pauma Valley Ranch to Howard Weitzman?
A. He told me he sold the — they went to him in
connection with his fees.
39a
Appendix C
The furnishings?
The furnishings, yes, mm-hmm.
Did you ever say to him you have no bill of sale?
> Oo PF ©
No, I never did.
Q. Let me show you your notes, see if that refreshes your
memory that you asked him why no bill of sale?
[36] A. Well, these were some notes I made when I was
probably preparing the return. I don’t see any reference to the
fact that I called and asked him these questions.
Q. You wrote down there, did you not, “Why no bill of
sale?”
A. Yes, one of the notes I made going through the data |
had when I was preparing the return, mm-hmm.
Q. Was it that Mr. DeLorean took the position that
somehow the furnishings were gone, he didn’t know how, that
he should get a deduction because it was part of an attorney’s
fee for a million dollars he gave to Howard Weitzman in
furniture, isn’t that true?
A. That’s my recollection that he thought the furnishings
went with the home to Howard Weitzman.
Q. And he wanted you to deduct that as part of an attorney
fee beyond two and a half million dollars, beyond the four or
five million dollars we’ve already been discussing because he
40a
Appendix C
says the furnishings that were missing, somehow he gave to
Howard [37] Weitzman, isn’t that true?
A. He believed he’d given them to Howard Weitzman and
that possibly they should be part of the cost basis for the sale.
Q. And you questioned why no bill of sale, isn’t that right?
A. Well, just among a lot of notes I made at the time I was
looking over the records. I believe I later found out that they
were in the house when it was turned over to Mr. Weitzman so
I concluded I didn’t need a bill of sale.
Q. You concluded that?
A. Yes.
Q. Did you write that off as an attorney fee to Howard
Weitzman, furniture that was missing from Pauma Valley?
A. I believe the return shows the Pauma Valley real estate
and furniture on the property and equipment went to Mr.
Weitzman for an attorney fee.
Q. Did you ever ask Mr. Weitzman whether he ever got
the furniture?
A. I could never get to talk to him. I’d call him and he
never returned my call.
[38] Q. Really. Did you ever write him?
4la
Appendix C
A. Yes. No answer.
Q. And you asked that question?
A. No, I didn’t ask that question.
Q. In fact, it was Mr. DeLorean’s position the furniture
had been stolen and therefore it was Mr. Weitzman’s
responsibility and he got another million dollars because the
furniture was stolen out of the place, isn’t that correct?
A. Not that I know of, no.
Q. All right, sir. Mr. Shaler, do you remember Mr.
DeLorean writing to you in his own hardwriting and giving
you a list of the furnishings at Pauma Valley which disappeared
or went with the sale? Do you remember that?
A. Yes.
Q. Do you recall calling Mr. DeLorean May 24, 1990 —
A. Specifically?
Q. Yes, and asking him for the cost amounts and appraisal
of those items? Do you remember that, sir?
A. How would I? Please.
42a
Appendix C
Q. This was another million dollars in 1990 that Mr.
DeLorean was asking you to deduct?
A. I don’t recall ever separating that from the house.
Q. I see. And in 1990 — let’s mark this.
(Exhibit 954 was marked for identification)
Q. (BY MR. M. MORGANROTH): This is the appraisal
and the note from Mr. DeLorean that you received in 1990
_ where you make your note May 24, 1990. Is that correct, sir?
A. Yes.
MR. M. MORGANROTH: I would offer Exhibit 954 into
evidence, your Honor.
MR. FREIDBERG: I have no objection.
THE COURT: Received.
(Exhibit 954 was received into evidence)
Q. (BY MR. MORGANROTH): For the record, [42] this
is on J. Z. DeLorean’s notepad. Would you read the page into
evidence?
A. “Frank Shaler: This is a list of furnishings at Pauma
Valley acquired over the years. I have circled those sent to me.
The rest just plain disappeared or went with the sale.”
43a
Appendix C
And I made a note — there was no date on that. I made a
note below that dated May 24th, 1990, “I called JZD, Mr.
DeLorean, and said I need cost amounts, not appraisal amounts.
He said he did not know costs.” I can’t read the next word.
“Purchased over a number of years. I asked if they came from
Cristina Holdings and he said no. I suggested estimating the
cost and he said we might use 50 percent of appraised figures.”
Q. And, sir, you left out one thing when you read that.
You left out the parentheses. It says: “I have circled those sent
to me. The rest just plain disappeared (or went with the sale.)”
A. Correct, mm-hmm.
Q. There’s parentheses, sort of an afterthought, [43] “or
went with the sale,” isn’t it?
A. Well —
MR. FREIDBERG: Your Honor, I’m going to-object. He’s
asking now for the conclusion of the writer who put parentheses
as an afterthought.
THE COURT: Sustained.
Q. (BY MR. M. MORGANROTH): Tell me, sir,
furnishings were shipped to Mr. DeLorean, were they not, from
Pauma Valley?
A. Not that I know of.
Q. Well, he’s saying the circled ones he had shipped to
him?
44a
Appendix C
A. Well, apparently some of them, yes.
Q. Maybe all of them, sir?
A. Not that I know of.
Q. Did Mr. DeLorean ever tell you that his brother Charles
had a lien on the furnishings at Pauma Valley?
A. No.
Q. See if this refreshes your memory. By the way, it’s in
your handwriting, is it not?
A. No, it’s not my handwriting.
Q. Okay. Is that part of your records, sir?
A. Apparently.
[95] * * *
Q. Well, yes, I want to know what you recall, yes. That’s
fair game.
A. I recall that I was presented a listing showing some
payments made by Cristina Holdings to Mr. DeLorean and I
said that it looked as if they were making — they paid these
expenses and because — and they were in effect paying off a
loan that he had made to Cristina Holdings by paying those
expenses of his.
45a
Appendix C
Q. Was it your understanding that they conveyed to him
assets of Cristina Corporation to pay off the loan?
MR. M. MORGANROTH: Objection, your Honor. I'd like
to know who “they” is.
MR. FREIDBERG: Cristina Corporation.
Q. (BY MR. FREIDBERG): Was it your understanding
that Cristina Holding Corporation owned by Mr. DeLorean
transferred assets to him in payment of the loan?
A. I don’t believe I have any knowledge of anything like
that.
46a
APPENDIX D — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED SEPTEMBER 28, 1994
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CIVIL ACTION NO. 93 CV 70848 DT
MORGANROTH & MORGANROTH, a Michigan partnership,
and MAYER MORGANROTH,
Plaintiffs,
v.
JOHN Z. DELOREAN, and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing, a Delaware corporation), jointly and severally,
Defendants.
JURY TRIAL PROCEEDINGS
AM SESSION
BEFORE THE HONORABLE ANNA DIGGS TAYLOR
United States District Judge
737 US Courthouse & Federal Building
231 Lafayette Boulevard West
Detroit, Michigan
Wednesday, September 28, 1994
47a
Appendix D
APPEARANCES:
MAYER MORGANROTH, ESQ.,
JEFFREY MORGANROTH, ESQ.,
ELEANOR NADLER, ESQ.,
In behalf of Plaintiffs.
STANLEY FLESHMAN, ESQ.,
In behalf of Defendants.
* * *
Testimony of Walter Keating
[74] * * *
Q. Now, sir, are you a client of mine?
A. Yes.
Q. And, sir, who referred you to me or recommended me
to you?
A. John DeLorean.
Q. And when did he recommend me to you for you to
use me [75] as your attorney?
A. In April 1991 or thereabouts. April 15th or thereabouts.
Q. How long had you known John DeLorean before April
1991?
48a
Appendix D
Since he was General Manager of Chevrolet.
How many years would that be?
A
Q
A. 20 years ago, I think.
Q. Did you consider yourself —
A
I knew him before that. I knew him when we were
Q. Did you consider yourself a friend of his?
A. Yes.
Q. Tell me in April of 1991, when Mr. DeLorean
__recommended that you contact me to become your attorney,
was that over a telephone or in person that he did that?
A. Well, when he heard that I had a problem, a very serious
personal problem, he called me and he said, Walter, I think you
ought to think very seriously about getting some really — the
best representation that you can get.
And he says the best legal mind that I know in the United
States is Mayer Morganroth.
And I took his advice and hired you.
Q. Did he say anything else regarding whether or not
Morganroth had represented Mr. DeLorean?
A. He said, yes, you were the basis of all of his— [76]
solving of all of his personal problems and his business asset
problems.
49a
Appendix D
Q. And tell me, can you remember anything else he said
at that time?
A. Other than to say that he was in the habit of contacting
you, Mayor Morganroth as often as possible preferably I’m
talking on business matters, preferably on a daily basis, to make
sure that you were going in the proper direction.
And I found that to be very good advice, as a matter of
fact.
Q. Tell me, sir, did you hire Mayer Morganroth to
represent you?
A. Yes, I did, happily.
Q. And, sir, was there an hourly fee arrangement made
with you?
A. Yes.
Q. And what was that hourly fee?
A. $400 an hour.
Q. And did we ever reduce that to writing or make a written
contract of it?
A. Not that I know of.
Q. Tell me, sir, after Mayer Morganroth began to represent
you in the problem as you related before, was that a litigation
or trial?
50a
Appendix D
[77] A. Yes.
Q. And did you hire Mayer Morganroth after that, after
that trial was over for other matters?
A. Yes, I did.
Q. Is he still your lawyer in matters in litigations?
A. Yes, he is.
Q. Tell me, sir, did you ever talk to Mr. DeLorean after
the first time that he recommended Mayer Morganroth and
discuss —
A. Many times.
Q. — was there any discussions between you and Mr.
DeLorean as to Mayer Morganroth?
A. Yes, he reiterated his position that I’d do very well to
contact Mr. Morganroth on a daily basis in order to keep my
business on the straight and narrow and it was very good advice.
Q. When was the last time Mr. DeLorean told you that?
A. Let me see. Several times in ’°92. And I see — I see
John all the time.
Q. Tell me, did Morganroth and you ever come to any
conclusion as to what should be done regarding billing and
time sheets?
Sla
Appendix D
A. Yes.
Q. What would be done with time sheets after we agreed
that on a particular billing?
[78] A. It was recommended to me that when we get our
billing, there will be a time sheet connected to it.
And that what we should do in order to get out of the
possibility of having the record being part of the — any lawyers
thing that he can come in and depose, that we destroy it and
just have the cover sheet that shows the amount of the total bill.
Q. And, sir, have you agreed to and paid every bill as
submitted to you during the last — since 1991?
A. Yes, sir. Not only that, but I do the same thing with
other lawyers now.
* * *
[84] Q. And you testified that you were informed or
recommended to you that the time sheets be destroyed; is that
right?
A. Yes.
Q. That’s the time sheets recording the time spent by your
attorney?
A. Yes.
Q. That recommendation was given to you by Mr.
Morganroth?
52a
Appendix D
A. Yes, to protect them from discovery.
Q. You have no written contract with Mr. Morganroth?
A. No, no.
Q. The criminal case, was that on an hourly basis or flat
fee?
A. Hourly. When you say “flat fee”, you mean he sent me
a bill for a flat amount?
Q. Yeah.
No, hourly.
How do you know how many hours he put in?
A
Q
A. It was on the sheet.
Q. So you actually saw some sheet at sometime that
A. Yes.
Q. —a representation of the hours and time?
A. How many hours, right.
Q. Would it say something — little time sheet that says
[85] first day of trial whenever that was.
The trial was in July of 1991, correct?
53a
Appendix D
A. Yes.
Q. Okay. So he gave a time sheet that says July 21, 1991
trial appearance two hours, three hours whatever?
A. Uh-huh.
Q. Correct?
A. Yes.
Q.-And you could compare that time sheet to your
memory as to what happened on that day which you saw Mr.
Morganroth do?
A. Correct.
Q. And you — did you go through all those time sheets?
A. I sure did.
Q. You when through everyone of them?
A. Yes, sir.
Q. It wasn’t until after you went through every one of
those time sheets and verified to your own personal knowledge
that the time had been spent that you agreed to the bill; is that
correct?
A. You mean he sent me a whole bunch of them at once,
is that what you’re saying or as he sent me the bills?
54a
Appendix D
Q. As he sent you the bills you went through the time
sheets?
A. One time sheet; with it that says how much time he
[86] spent on each thing.
Q. As far as like the back up documents, if there were
any?
A. There were none that I know of.
Q. You never saw any of those?
A. Just time break down.
Q. The time break down came in some kind of letter?
A. Mayer Morganroth spent so much time at $400 an
hour.
And one of the other people in his office spent so much
time at so much an hour if they were there, you know. And
that’s the way the time sheet worked out.
Q. Okay. But did the time sheet — whatever we want to
call this document, did it say spent four hours on such-and-such
a day doing such-and-such a thing?
A. I don’t think he brought it down that close, but I’m
not sure.
Q. Did you ever see any such document that documented
how much time Mr. Morganroth spent on a particular day do
doing a particular task?
55a
Appendix D
A. Yes.
Q. What was it?
A. The piece that was connected to the cover sheet, you
know, which is the bill, the statement. That’s what I’m looking,
for the statement.
Q. Excuse me. What was your understanding of what was
[87] being destroyed?
A. The hourly rate. Not the hourly rate, but the hours
spent by each individual person and where it was.
Q. Was that some document that you actually had seen at
some point in time?
You saw it and said, okay, you can destroy this now?
A. We did.
Q. Okay. You saw it and approved it and then allowed it
to be destroyed; is that right?
A. Or agreed with it, yes. I never had to disagree with
any one of his statements.
Q. Now for the criminal case in 1991, how long did that
take to try?
A. I would say three weeks.
56a
Appendix D
Q. You had Mr. Thomas Kinney, Mr. Robert Forest, Mr.
Morganroth present?
A. Yes. Mr. Morganroth was the lead attorney for that.
Q. When you say “lead attorney”, was he the one that got
up, did the opening statement, closing arguments?
A. No, no. He was the lead attorney on the — when you
get to the — to the opening statement and stuff, my heavens,
all the work is done.
You know, all that stuff that he had to go through before,
that was unbelievable.
Testimony of Alfred Rapetti
[91] Q. And back in 1975, and thereafter, did you have—
any business dealings with Mr. DeLorean?
A. Yes.
Q. When you first start being involved with Mr. DeLorean
regarding business dealings —
A. There was some involvement in the mid 70’s far as the
car company was concerned.
Then there were no dealings from the mid 70’s to 1987
when I met with him and we had discussion as to possible sale
of some of his assets.
57a
Appendix D
Q. When: was that meeting, if you recall?
A. Probatbly in May, June 1987.
Q. Did ycou undertake to do some work regarding selling
some of his asssets?
A. Yes.
Q. And diid you after that time, meet with him and talk to
him fairly regutlarly?
A. Yes.
Q. And diid you attempt to sell any of his assets?
A. Yes.
. Did yOu attempt to get him any financing on any of
his assets as well?
A. Yes.
Q. Did rthere come a time when you met Mayer
Morganroth?
[92] A. Yees.
Q. And wvhen was that, if you recall?
A. I believe the first time was at one of the hearings in
Detroit. No, I’n™ sorry. It was before that because it was — had
58a
Appendix D
to do with the restraints that the — that DSQ put on the
company.
Q. Now, sir, in 1987-1988, you were working to get the .
sale of Logan Manufacturing or other assets of Mr. DeLorean’s;
is that correct?
A. Yes.
Q. You would know that Paul Wallace transaction because
you actually negotiated it; isn’t that true?
THE READER: I’m sorry. I’m not sure where you are.
MS. NADLER: I went to page 10.
A. Yes.
Q. You were the moving party that did all the negotiations
as far as the business negotiations back and forth with Wallace
in order to purchase the assets of Logan Manufacturing, correct?
A. Yes.
Q. Also with the Logan manufacturing sales that took
place, Mr. Wallace, John DeLorean, was allowed to keep certain
assets; is that not true?
A. Yes.
[93] Q. In any event, over the span of 1987-88-89 and
*90 and ’91 and 1992, were there many offers to Mr. DeLorean
to purchase Logan Manufacturing?
59a
Appendix D
A. Yes.
Q. And did you — could you quantify how many?
A. During that period of time, there were probably on a
serious basis, probably eight.
Q. Okay. When you say a serious basis, there were also
numerous others that —
A. Yes.
Q. — that were offered? Okay.
Would you say there were offers exceeding 20 or 30 of
them that were submitted —
A. Probably.
Q. —to Mr. DeLorean?
Tell me when you get to the serious basis you mean
that the offer that was submitted that Mr. DeLorean started to
consider signing; is that correct?
A. Yes.
Q. Tell me, could you control Mr. DeLorean and advise
him whether or not a deal was good or bad?
A. I gave the advice, but it was always his decision.
60a
Appendix D
*x * x
[112] Q. Tell me, sir, do you have an understanding that
Mr. DeLorean of Logan Manufacturing owed Mayer
Morganroth a substantial amount of fees as of January 5, 1993?
A. It was my understanding there was a substantial amount
of fees that were owed, yes.
Q. And that was something that was supposed to be paid
after the closing according to the agreement of Mr. DeLorean
and myself, Mr. Morganroth, that you understood; is that
correct?
A. I—I took it for granted that the obligation was going
to be paid.
Q. In fact, in order to have the transaction closed with
Paul Wallace Mr. Morganroth agreed to subordinate his debt to
that closing so as soon as possible the transaction could close;
isn’t that true?
A. Yes.
Q. And that was under the basis that Mr. Morganroth was
owed that money, but would permit Wallace to close without it
being an obligation of Wallace to pay Morganroth, correct?
A. Yes.
Q. Mr. Rapetti, do you recall during °87—88, that Mr.
DeLorean said these other buyers are getting financing in order
to buy the company.
6la
Appendix D
Mr. Rapetti, why don’t you get me the financing [113]
so I can pay off everybody and get the financing for Logan so
I can, keep Logan.
Do you remember him wanting to go that direction?
A. Yes.
Q. Tell me, did you get to see or meet with Roy Nesseth
while you were performing services for Logan?
I have met him, yes.
Did you ever see him at Logan?
. Yes.
Did you ever tell John DeLorean shouldn’t be there?
A
Q
A
Q
A. Yes.
Q. Did Mr. DeLorean listen to you?
A. Sometimes.
Q. But somehow Roy Nesseth always got back there, right?
A. Yes.
Q. Do you remember frantically calling me in December
1992 saying that “Roy Nesseth is back at Logan. He’s going to
destroy another deal”?
62a
Appendix D
A. Yes.
Q. And do you recall me telling you “I told Mr. DeLorean
to keep that man away from there but he never seems to listen
to me”?
A. Yes.
63a
APPENDIX E — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED DECEMBER 1, 1994
UNITED STATES OF AMERICA
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Civil Action No. 93-CV-70848-DT
MORGANROTH & MORGANROTH, a Michigan partnership,
and MAYER MORGANROTH,
Plaintiffs,
-V-
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11:12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, Jointly and Severally,
‘Defendants.
TRIAL
Proceedings had and testimony taken in the above-entitled
matter before HONORABLE ANNA DIGGS TAYLOR, United
States District Court, at Detroit, Michigan, on Thursday,
December 1, 1994.
APPEARANCES:
MORGANROTH & MORGANROTH, P.C.
2000 Town Center, Suite 2000
Southfield, Michigan 48075
(BY: MAYER MORGANROTH, ESQ.)
i 64a
Appendix E
-AND-
KRAMER, LEVIN, NATFALIS, NESSEN, KAMIN
& FRANKEL
919 Third Avenue
New York, New York 10022
(BY: ELLEN R. NADLER, ATTORNEY AT LAW)
Appearing on behalf of Plaintiffs.
* * *
Testimony of John Z. DeLorean
(os) * * *
“Q. In August of 1992, you put into your book that you
didn’t have money to give to me. You didn’t put in your book
that you weren’t paying me because of the fact of some errors,
did you? Did you, sir?
“A. I don’t know what put in the book.
“Q. You didn’t tell me there were any errors that you were
claiming in August of 1992, you just told me at that particular
time that you didn’t have any money right then, isn’t that true,
it all had to go for DSQ and for money to Logan and for you to
live on, and you would pay me when the closing took place.
“A. I never said I would pay you. I said I would handle
you or you might have interpreted that.
* * *
ee
65a
APPENDIX F — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED DECEMBER 1, 1994
UNITED STATES OF AMERICA
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Case No. 93-CV-70848-DT
MORGANROTH & MORGANROTH, a Michigan Partnership,
and MAYER MORGANROTH,
Plaintiffs,
-\V-
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11:12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, Jointly and Severally,
Defendants.
TRIAL
Proceedings had and testimony taken in the above-entitled
matter before HONORABLE ANNA DIGGS TAYLOR, United
States District Court, at Detroit, Michigan, on Thursday,
December 1, 1994.
APPEARANCES:
MORGANROTH & MORGANROTH, P.C.
2000 Town Center, Suite 2000
Southfield, Michigan 48075
(BY: MAYER MORGANROTH, ESQ.)
-AND-
66a
Appendix F
‘= 2
Testimony of John Z. DeLorean
[43] * * *
“Q. You didn’t send me a check for four fifty,
“A. Somebody did get a check for four fifty.
“Q. After Logan paid a portion of the bill they owed me
and you paid a portion.
“A. Not a portion. You said it was paid in full.
“Q. I billed you for years after that. Did you ever write
one thing to me contesting any of those bills; did you?
“A. Not that I know of.
“Q. And you carried it for two million two in your financial
statement, and then two million five in your financial statement
owing me personally, didn’t you, sir?
“A. Yes, sir. Whatever you told me, I wrote it down.
“Q. This is a bill for December 3rd, 1990, identified as
Plaintiff’s Exhibit 374, Morganroth & Morganroth, December
3, 1990, Mr. [44] John Z. DeLorean, RE: Fees for services
rendered: Balance total including costs, two million five
hundred and twenty thousand eight hundred and nineteen
dollars, signed Mayer Morganroth. Do you remember seeing
that, sir?
67a
Appendix F
“A. No, I don’t, but I know I got a lot of bills at different
times.
“Q. Did you at any time ever send me a letter that that bill
wasn’t accurate or correct?
“A. No, I told you on the telephone.
“Q. Sir, did you ever send me a letter saying that wasn’t
accurate or correct?
“A. No, not that I know of.
“Q. Let me show you Exhibit — by the way, sir, Exhibit
374, December 3, 1990, is almost two months after this
settlement was made in front of Judge Rosen with DSQ; isn’t
that true, sir?
“A. Probably.
“Q. For the récord, I will read in Exhibit 447, which was
January 15, 1986.
“Dear Mike,
“We begin a new year. Hopefully a year that will see the
end of the harassment [45] I’m subject to. I want to thank you
for your friendship and support. As one man fighting those
giant firms, you've already taken a serious toll!” — with a
Capital “T” underlined twice.
“Best wishes for the New Year. May it be your best ever.
68a
Appendix F
“So then, you still hadn’t paid me any money; had you?
“A. You kept on working. You figured I was going to pay.
“Q. Yes, I sure did.
“A. Because you knew I was tied up. I didn’t have any
money to pay anybody.
“Q. Exhibit 532, is dated May 7, 1991, addressed to Mr.
John Z. DeLorean. Sir, do you recall receiving the May 7, 1991,
Exhibit 532, bill?
“A. No, I don’t recall. I don’t recall that, but I know I
recall whatever you sent me I put down. ~
“Q. Put down where?
“A. Whereever we put it down.
* * *
(so) * * *
“Q. For identification, Exhibit 364, this is a letter of
December 21, 1992, to John Z. DeLorean, Road One,
Lamington Farm, from Morganroth & Morganroth, Mayer
Morganroth, and I ask you if you recall receiving this letter,
sir?
“A. I don’t recall it, but doesn’t mean I didn’t get it. I just
don’t recall it.
4
<
4
&
&
69a
Appendix F
“Q. For the record, the letter states as follows:
“Dear John,
“I write to you with respect to a large unpaid balance
of legal fees and costs past due and owing to my law firm by
Logan Manufacturing and you, and to confirm our telephone
conversation today.
“During today’s telephone conversation when we again
discussed the significant balance owing to my law firm by
Logan Manufacturing and you I stressed that my law firm and I
really need at least a substantial payment of said unpaid balance
to [51] be made in connection with the closing of the Logan
Manufacturing assets sale. Nevertheless, based upon your
representation that all unpaid invoices owed by Logan
Manufacturing and you to my law firm will be satisifed in full
on about the end of January, 1993. I agreed to wait until such
time for payment.
“In addition, I also agreed during our telephone
conversation of today, that I will reduce the balance of the
outstanding invoices by four hundred thousand dollars charged
for the Cork Gully matter in the event that all amounts owed
by Logan Manufacturing and you exclusive of the four hundred
thousand dollars are satisfied on or before the end of January,
1993.
“You don’t recall this matter, sir?
“A. No.
“Q. If I were to tell you that you had a notation in your
journal regarding that letter and the conversation we had would
that refresh your memory?
70a
Appendix F
“A. No, but I didn’t say I didn’t get it. I just don’t
remember it right now. I [52] get a pile of mail this high every
day.
“Q. Tell me, sir, didn’t you on December the 20th —
December 21st, excuse me — didn’t you on December 21st tell
me that you were going to pay that bill by the end of January,
1993, the entire bill?
“A. No, I didn’t. I said it would be handled. And by that I
was in my mind implying that we were going to get this thing
straightened out. But that doesn’t mean you wouldn’t have taken
it that way. I’m not denying that.
“Q. Handled?
“A. Yes.
“Q. But you said it would be paid, taken care of; didn’t
you?
“A. No, I didn’t. I never have said that.
“Q. Really. You never said it would be taken care of.
“A. I may have said it would be taken care of meaning the
same as handled, handled taken care of, meaning we will sit
down and straighten this thing out. And when we do, you will
get paid what you’re properly owed, [53] and I will get paid by
your insurance company.
“Q. When did you say to me at any time you will get paid
by my insurance company?
ERE Re NOLAN LEO AOS Co Son
GARE LNA ELL OE LMI Ge Fer
Tila
Appendix F
“A. I didn’t say that. -
“Q. All you said was, after I said if you pay me the entire
amount by the end of January you promised that we’d give
you a four hundred thousand dollar reduction, do you remember
what you said?
“A. No.
“Q. You said I will take care of that. I will be taking care
of it prompt; do you remember that?
“A. No, I’m sure I didn’t say that.
“Q. Now, sir, I’m going to ask you a question: How did
you get Ed Freidberg to represent you in 1990-1991? He did
represent you in 1990-1991, didn’t he, and ’92, didn’t he?
“A. I paid him.
“Q. But you didn’t pay me any money during that time.
“A. Because I had planned at some time that we would
straighten that out.
“Q. By the way, the day after or even [54] the very same
day that the closing took place in New York of Logan
Manufacturing, you sent a one hundred fifty thousand dollar
check to Ed Freidberg, didn’t you, as a retainer?
“A. Very soon thereafter.
“Q. What was that for? To sue me?
72a
Appendix F
“A. No, it was to handle you.
“Q. I see. So you could pay him to handle me, but you
couldn’t pay me for those years.
“A. It was to take care of you.
“Q. I see.
“A. That is what “take care of” means.
“Q. And, sir, when you got the bill in 1992, December,
and you got this letter in 1992, you didn’t say you disagreed
with anything. You said it would be taken care of; isn’t that
true?
“A. I told you what I meant.
“Q. You told me what I meant. Why didn’t you say what
you meant was it’s too hard for you to tell the truth?
“A. No, it’s just not the right time.
“Q. It wasn’t the right time to tell the truth?
[55] “A. I did tell you the truth. I told you my version of
the truth as oppose to your version.
“Q. The fact is you were afraid that I wouldn’t work and
get the sales close in Logan Manufacturing; isn’t that true?
“A. No, the sale was — when was that? Was it after?
OM oR eas rag A eS er en
[Fane Depm ancvopacrte hay am REY
SAIS RNIN YER RTM LISELI MA IAS RESIN ORM IEA SBOE AE
PIII ECA
73a
Appendix F
“Q. January 5th, 1993.
“A. What was the date of that thing?
“Q. December 26th, 1992.
“A. I don’t recall. I think everything was done by that
point in time.
“Q. Couldn’t be done. Remember you went there on
Christmas Day and you walked out. The deal was aborted and
you walked out and there wasn’ta deal.
“A. Not because I wanted to change any documents. It
was because they hadn’t finished their study of the charges
against me and they wanted to hold back too much money, and
I refused to do that.
“Q. That was January — December if you recall, I seen
you on Christmas.
“A. Oh.
[56] “Q. Do you remember now I seen you on Christmas
because they said there was no deal any longer because they
couldn’t come up. And by the way and by ‘they’ I’m taking
about the purchaser, Wallace, could not come up with the extra
million dollars as a down payment rather than the five hundred
and seventy-five; as you recall that?
“A. Just vaguely.
74a
Appendix F
“Q. Do you remember I flew in on Christmas Day and sat
with Wallace’s attorney, Howard Petty, and we worked the entire”
— “with Wallace’s attorney and with Howard Petty, and we
worked the entire day into the evening and we contacted the
bankers at home in Utah wherein I convinced the bankers to
make the payment they were going to make in a year from
then, right, so they could” — “so that the price could go up to
five million seventy fifty as long as your down payment or else
the deal was a no go; do you remember that?
“A. No, but it’s possible.
* * *
75a
APPENDIX G — TRANSCRIPT OF TRIAL
PROCEEDINGS DATED DECEMBER 6, 1994
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CIVIL ACTION
No. 93-CV-70848-DI
MORGANROTH & MORGANROTH, a Michigan Partnership,
and MAYER MORGANROTH,
Plaintiffs,
Ve
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
Proceedings held in the above-entitled case before Judge
Anna Diggs Taylor, taken by Patricia A. Everett, CSR-4602, a
Certified Shorthand Reporter and Notary Public, in and for
Oakland County, Michigan (acting in Wayne County,
Michigan), at 740 United States Courthouse, Detroit, Michigan,
on the 6th day of December, 1994, commencing at or about
9:00 a.m., pursuant to the applicable court rules.
* * *
76a
Appendix G
Testimony of Steven Fellows
[36] * * *
Q. (By Mr. Morganroth): During the eighties did you have
the opportunity to see me work?
A. Many times.
Q. Would you come into the office on Saturdays?
A. I would.
Q. Did you see me working on Saturdays?
A. Always, unless i were out of town.
[37] Q. How about on Sundays?
A. On Sundays if I came in you were there.
Q. And how about at nights, did you ever come to my
house and see me working at nights?
A. On several occasions. In fact, I stopped coming. I used
to cali you to come over to watch Monday Night Football once
in a while. And we would sit in your lower level and you would
dictate through the entire football game. Your wife would fall
asleep on the couch, and I would say goodbye to you about
midnight because you were still dictating, yes.
Q. And tell me, sir, did I do that throughout the years that
you were in the office, that kind of work?
77a
Appendix G
A. Yes. You’ve always worked, for the most part, seven
days a week, day and night.
Q. And how about Mr. DeLorean during the eighties, did
he come into the office often?
A. Yes.
Q. Tell me, did he ever call at night?
A. Yes.
Q. How often?
A. I feel that — I can only answer that as to calls that i
took. If you were on your other line and [38] the phone would
ring, I would pick it up. I would just tell you on many occasions
I answered the phone after hours and John DeLorean was on
the phone. Also there were many times I heard other attorneys
page you or call you to let you know Mr. DeLorean was calling.
Q. Throughout all the years that you were in the office
with me, did John DeLorean ever tell you that he was unhappy
or dissatisfied with anything I did for him?
A. He told me the contrary. We spoke from time to time
and he often told me that he thought you were the best.
Q. And tell me, during the period of time that we were
together in the office — I never asked you this — well, did you
form any opinion as to my capabilities as a lawyer?
A. Yes, I have.
78a
Appendix G
Q. And what was your opinion?
A. You were one of the best practitioners that I’ve ever
known. I called you at one time an enigma. You’re one of the
Sew people that have been in practice as long as you have and
has stayed a general practitioner. You've handled virtually every
type of case. Over the years I’ve had to [39] go off into a
specialty. I couldn’t keep up with a general practice, and I feel
that you’re an excellent attorney.
Q. Now, you talked about the tremendous workload that I
had in your direct examination. Did I give work to other lawyers
in the office?
A. Yes, you did.
Q. And were there times over the years where I supported
the other lawyers by paying the rent and by giving them money
when they needed it?
A. That’s true.
Testimony of Maria Reed
1143} ° © *
CROSS-EXAMINATION
BY MR. MORGANROTH:
Q. Mrs. Reed, you still work for me, don’t you?
79a -
Appendix G
A. Yes, I do.
Q. And have worked for me part-time for a few years now
again?
A. Yes.
Q. And you work at nights?
A. I work at night, Saturdays, Sundays.
Q. Do I work at nights and Saturdays and Sundays?
A. Yes.
[144] Q. And there’s other secretaries in the office but you
work after-hours and Saturdays and Sundays now; is that correct?
A. Yes.
Q. And you’ve done that for the last few years for me;
correct?
A. Yes.
es 4
(160) * * *
Q. Now, I thought that from 1986 to ’91 you were working
on a part-time basis for Mr. Morganroth; is that correct?
80a
Appendix G
A. Sometimes I would stay after work and do things for
him, overload of work that he had. But it was never on the
DeLorean thing, it was just other, you know, cases.
Q. But you would be working basically after 5:00 for Mr.
Morganroth?
A. Yes.
Q. And you would be working sometimes on Saturdays.
A. Sometimes on Saturdays.
* * *
8la
APPENDIX H — TRANSCRIPT OF TRIAL
DATED DECEMBER 22, 1994
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Civil Action No. 93-CV-70848-DT
Detroit, Michigan
Thursday, December 22, 1994
MORGANROTH & MORGANROTH, a Michigan general
partnership, and MAYER MORGANROTH,
Plaintiffs,
-V-
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation, (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
TRANSCRIPT OF TRIAL
BEFORE THE HONORABLE ANNA DIGGS TAYLOR
UNITED STATES DISTRICT COURT JUDGE, and a jury.
APPEARANCES: -
For the Plaintiffs: _ MAYER MORGANROTH, ESQ.
ELLEN R. NADLER, ESQ.
JEFFREY B. MORGANROTH, ESQ.
NOT PRESENT:
For the Defendants: EDWARD FREIDBERG, ESQ.
82a
Appendix H
* * *
[6] * * *
THE COURT: The court was in receipt a note at 10:45
saying:
QUESTION: Page 97, Section 1962(b) reads the same as
page 103, Section 1962(c). Is this intentional?
And I’ve notified the — well Mr. Pierce is still not here,
although he did call to ask what the last questions were and I
had the law clerk tell him he simply must come downtown.
And this is the note I planned to return.
Ignore page 103 because it repeats 1962(b) instead of
reciting 1962(c). Simply be governed by page 104 which
correctly states the elements of 1962(c) which is directed against
a defendant who “conducted or participated in the conduct of
the enterprise through that pattern”.
[7] Is there an objection to this?
MR. MORGANROTH: No.
MS. NADLER: No, Your Honor.
THE COURT: All right.
(Whereupon court was in recess. Court was back in session
at about 12:45 p.m.)
83a
Appendix H
THE COURT: Earlier this morning, the court received a
note from the jury requesting index of exhibits and I told the
law clerk just to tell them to wait until after the New Year so I
could confirm with counsel.
But in the meanwhile, Ms. Nadler has produced the list of
exhibits, index of exhibits, that both sides apparently had relied
upon during trial and she has redacted the names of the witnesses
who introduced each exhibit and any other information other
than the list and the number of each one.
So I’ll ask if counsel have any objection, now, to the court
sending in this list to the jury. And there are copies for each
member of the jury.
Any objection?
MS. NADLER: We have no objection.
MS. FALTER: No objection, Your Honor.
THE COURT: All right. I'll keep mine. We’ll take in there
all right.
84a
APPENDIX I — PERSONAL FINANCIAL
STATEMENT OF JOHN Z. DELOREAN
DATED JANUARY 15, 1993
JOHN Z. DELOREAN
PERSONAL FINANCIAL STATEMENT
January 15, 1993
Assets
Bank accounts $1,500,000
Notes receivable from sale of Logan
Manufacturing Company 2,850,000
Preferred stock from sale of 4,500,000
Logan Manufacturing Company
Real estate:
Land and industrial buildings,
Logan, Utah, leased for ten years
with rent at $240,000 a year
plus profit sharing for the first
three years and $300,000 a year
for the last seven years. Leasee
has the option to purchase
for $2,500,000 2,500,000
Lamington Farm, Bedminster,
New Jersey, 434 acres with
residence and ten rental
properties providing more than
85a
Appendix I
$200,00 of gross rental
income. Estimated market
value 30,000,000
Oil and mineral interests 50,000
Patent, trade mark and marketing
rights acquired from De Lorean
Motor Company at acquisition
cost 10,000,000
Other patents at estimated
market value 5,000,000
Judgment against H.L. Weitzman 600.000
Liabilities
Private loan secured by first mortgage
on New Jersey farm. Interest
rate is 1/4% under prime until
the year 2000
Net worth
$57,000,000
6.000.000
$51,000,000
86a
APPENDIX J — STIPULATION OF FACTS
STIPULATION OF FACTS
1. Ecclesiastes 9:10-11-12, Inc. was formerly known as
Logan Manufacturing Company (“Logan”).
2. Logan changed its name to Ecclesiastes 9:10-11-12, Inc.
(“Ecclesiastes”) in or about January 1993.
3. DeLorean Research Limited Partnership (“DRLP”) was
a limited partnership formed in 1979 for the purpose of
investing in the research and development of the DeLorean
sports car.
4. GPD was established and controlled by Colin Chapman
(“Chapman”) and Fred Bushell (“Bushell”).
5. DRLP entered into a contract with GPD regarding the
performance of the research and development of the DeLorean
sports car (the “DRLP/GPD Contracts”).
6. The DRLP/GPD Contract called for GPD to cause the
research and development or the DeLorean sports car to be
performed by subcontracting the work to Lotus.
7. A private placement memorandum with attachments and
exhibits was presented to HELP and its partners for the supposed
purpose of soliciting and raising $20.0 million for research and
development.
8. $17.8 million was raised from DRLP pursuant to the
DRLP private placement memorandum and attachments and
exhibits.
ated at tediiade Silla ‘
87a
Appendix J
9. Chapman was the chairman and controlling shareholder
of Lotus.
10. Bushell was the Chief Financial Officer of Lotus.
11. By February 25, 1982, DMCL had been placed in
receivership based upon agreement by the Board of Directors
of DMCL.
12. In 1984, a company known as Pacific International
Equipment Inc. (“Pacific”) attempted to purchase the assets of
Logan from the DMC Bankruptcy Trustee.
13. In or about 1982, Howard Weitzman (“Weitzman”) was
retained to defend DeLorean in the California criminal case.
14. Weitzman eventually was named lead trial counsel in
DeLorean’s California criminal case.
15. Weitzman represented DeLorean and/or Logan in civil
lawsuits through 1985.
16. Intentionally deleted.
17. Weitzman received $1.1 million from the ultimate sale
of the Pauma Valley Property.
18. In 1986, Weitzman joined the law firm of Wyman
Bautzer.
19. DeLorean hired Edward Freidberg (“Freidberg”) and
the Freidberg Law Corporation as counsel in connection with
the Wyman Bautzer action.
88a
Appendix J
20. Freidberg and his firm filed a countersuit against
Weitzman in the Wyman Bautzer action for breach of fiduciary
duties, negligence, and over payment of attorney fees.
21. In or about 1985, DeLorean testified under oath that
he would have put his head in an oven had Weitzman not
continued to provide legal services through the conclusion of
both criminal actions and that no amount of money could repay
Weitzman for saving DeLorean’s life and for the job Weitzman
performed for him.
22. Bill Simon (“Simon”) and his firm Hertzog, Calamari
and Gleason (“HC&G”) were retained in or about 1982 to defend
DeLorean and Logan.
23. DeLorean and Logan represented that they would pay
Simon’s customary hourly rate for legal services.
24. In or about October 1983, Simon and HC&G withdrew
as counsel for DeLorean and Logan in all matters for
non-payment of legal fees.
25. On or about October 20, 1983, DeLorean sent a letter
to the presiding judge in the matters handled by Simon for the
purpose of requesting that Simon not be permitted to withdraw
since, according to DeLorean, DeLorean did not have any funds
to pay for legal services at that time.
26. In or about 1984, Simon and HC&G instituted legal
proceedings against DeLorean in an attempt to collect the unpaid
balance due them in the amount of $87,556.60.
89a
Appendix J
27. DeLorean asserted a malpractice counterclaim against
Simon and HC&G which was premised on the basis that Simon
had negligently allowed DeLorean’s adversaries to obtain
personal and confidential documents located at DeLorean New
Jersey estate during Simon’s supervision.
28. Alan Greenberg (“Greenberg”) and Graubard Mollen
Dannett Horvitz and Pomerantz (“GMDH&P”) were retained
by DeLorean in connection with two tax matters.
29. On January 24, 1989, Weinberg and GMDH&P were
also retained to provide legal services in connection with the
DSQ Enforcement Action.
30. On or about January 5, 1993, the sale of the assets of
Logan was Consummated.
31. No monies were paid to Weinberg, Greenberg or their
firm from the proceeds of the sale of Logan’s assets.
32. Freidberg and his firm were paid an initial $250,000
retainer by DeLorean and Logan for the malpractice action to
be filed against Morganroth and his firm, and Weinberg,
Greenberg and their firm.
33. DeLorean and Logan never complained to Weinberg,
Greenberg or their firm that any mistakes were made by them
during any time that they provided legal services to DeLorean
and Logan.
34. On or about February 2, 1993, DeLorean and Logan
instituted malpractice claims against Morganroth and his firm
and Weinberg, Greenberg, and their firm in New York.
90a
Appendix J
35. Morganroth and his firm were not told that Logan sent
Freidberg and his firm an initial $250,000 retainer in 1990.
36. Cristina Holdings Corporation purchased art, antiques,
and furniture, some of which were then put to personal use by
DeLorean.
37. DeLorean and others sent letters through the mails in
connection with the Eureka/DMCI transaction.
38. Numerous telephone calls were made by DeLorean and
others in connection with the Eureka/DMCI transaction.
39. Pleadings, motions, and correspondence were filed with
the court and served upon opposing counsel and interested
parties through the mail in connection with Pacific’s attempt to
purchase Logan’s assets from the DMC Bankruptcy Trustee.
40. Numerous telephone calls were made by and among
DeLorean, Nesseth, and others in correction with Pacific’s
attempt to purchase Logan’s assets from the DMC Bankruptcy
Trustee.
41. DeLorean sent letters to Weitzman through the mails
in connection with unpaid legal fees and costs offer to Weitzman.
42. DeLorean and Logan caused the mails to be used on
numerous occasions in connection with legal services provided
by Weitzman to them.
43. DeLorean placed telephone calls to Weitzman in
connection with unpaid legal fees and costs owed to Weitzman.
9la
Appendix J
44. DeLorean and Logan caused the wires to be used on
numerous occasions in connection with legal services provided
by Weitzman to them.
45. Kimmerly received numerous letters from DeLorean
through the mail during the course of providing legal services.
46. Kimmerly received a $50,000 check from Cristina
Corporation through the mail.
47. DeLorean and Logan placed telephone calls to
Kimmerly in connection with legal services provided by
Kimmerly to them.
48. DeLorean sent a letter through the mail to a judge and
others in an effort to prevent Simon and his firm from
withdrawing notwithstanding the failure to pay legal fees.
49. DeLorean and Logan caused the mails to be used in
connection with the legal services provided by Simon to them.
50. DeLorean caused the mails to be used on numerous
occasions in connection with legal services provided by
Weinberg, Greenberg and their firm.
51. DeLorean and Logan caused the wires to be used on
numerous occasions in connection with legal services provided
by Morganroth and his firm to them.
52. On several occasions, including during the years 1991
to 1993, Logan’s audited financial statements state there is an
outstanding balance owed to Morganroth and his firm in the
amount of $1,408,689.26 for legal services rendered, which
amount still has not been paid.
92a
Appendix J
53. DeLorean and Logan at all times were aware that
Morganroth and his firm intended to be compensated for services
rendered to DeLorean and Logan.
54. DeLorean and Logan at all times were aware that
Morganroth and his firm intended to be reimbursed for expenses
they incurred on DeLorean’s and Logan’s behalf.
55. When Morganroth and his firm rendered legal services
to DeLorean and Logan and paid expenses on their behalf,
Morganroth and his firm did so with the expectation of being
compensated.
56. At the time of the 1987 settlement negotiations with
the DMC Bankruptcy Trustee, DeLorean had no ownership
interest in Logan and no beneficial rights.
57. At the time of the 1987 settlement negotiations with
the DMC Bankruptcy Trustee, Logan was in an irrevocable
trust with DeLorean’s ex-wife, Cristina, as a trustee.
58. At the time of the 1987 settlement negotiations with
the DMC Bankruptcy Trustee, DeLorean’s New Jersey Estate
had been noticed for foreclosure because of arrearage on
mortgage payments.
59. As a result of the 1987 settlement with the DMC
Bankruptcy Trustee, DeLorean replaced his ex-wife, Cristina,
as the chairman and sole director of Logan.
60. As a result of the 1987 settlement with the DMC
Bankruptcy Trustee, the multi-district litigation wherein
DeLorean and Logan were defendants in numerous lawsuits
USENET
93a
Appendix J
demanding damages in excess of $500 million was dismissed
and releases were granted to DeLorean and Logan.
61. In 1987, Judge Woods strongly recommended that
DeLorean settle with the DMC Bankruptcy Trustee.
62. Judge Graves also strongly recommended that
DeLorean settle with the DMC Bankruptcy Trustee.
63. At the time of the settlement with DSQ in October of
1990, DeLorean’s New Jersey Estate had been foreclosed upon
and was scheduled for foreclosure sale in late October 1990.
64. The mortgage loan from Merrill Lynch was permitted
to close and the foreclosure of DeLorean’s New Jersey Estate
was stopped and the property redeemed by virtue of the October
1990 settlement which according to its terms permitted same.
65. At the time of the 1990 DSQ settlement, the
Cooperative Board of DeLorean’s New York Cooperative
Apartment had declared DeLorean in default for having placed
liens on the proprietary lease, stock, and proceeds of the
Cooperative Apartment in violation of restrictive covenants.
66. At the time of the 1987 settlement, the Cooperative
Board of DeLorean’s New York Cooperative Apartment had
declared DeLorean in default for nonpayment of maintenance
fees and for violation of the proprietary lease, stock certificate
covenants, and agreements for having caused liens to be placed
on the Cooperative Apartment and for nonpayment of
maintenance fees and charges.
94a
Appendix J
67. Both in 1987 and 1990, the Cooperative Board of
DeLorean’s New York Cooperative Apartment demanded that
DeLorean be evicted. -
68. Logan’s December 31, 1992 financial statement stated
that Logan owed Morganroth and his firm legal fees of
$1,408,689.26.
69. DeLorean was sent written Logan reports for several
years including 1993 that stated that Logan owed Morganroth
and his firm $1,408,609.26.
70. DeLorean wrote in his published book, stated publicly
on many occasions, and testified under oath that Weitzman saved
DeLorean’s life.
71. On October 16, 1990, DeLorean wrote to the American
Arbitration Association and stated that he had four attorneys
that he had consulted with at the time of the October 11, 1990
settlement.
72. DeLorean told the American Arbitration Association
on October 16, 1990 that he had reached an agreement with the
British Government to end litigation with them.
73. In 1992, DeLorean attempted to have Arthur Anderson
hire Morganroth to defend itself in the action brought against it
by the British Government.
74. DeLorean told Morganroth in 1992 that it was
important to DeLorean for Arthur Anderson to win their case.
95a
Appendix J
75. Logan’s financial statements prepared for and approved
by DeLorean in 1992 stated that Morganroth and his firm were
owed $1,408,689.26 by Logan.
76. DeLorean requested that Morganroth render advice for
DeLorean’s benefit in connection with certain tax matters in
1992 through February 2, 1993.
77. DeLorean requested Morganroth to provide assistance
to DeLorean’s tax attorney, Mr. Elgort, in 1992 through
February 2, 1993 for DeLorean’s benefit.
78. On August 31, 1990, a summary judgment of
foreclosure was rendered by Judge Deannu in New Jersey on
DeLorean’s New Jersey Estate regarding DeLorean’s default
under the Saike mortgage on the property.
79. A mortgage foreclosure sale was set for late October
1990 on the DeLorean’s New Jersey Estate.
80. On May 6, 1986, DeLorean swore under oath that he
was in arrears on his New Jersey Estate mortgage payments and
on his New York Cooperative Apartment payments.
81. On May 6, 1986, DeLorean swore under oath that his
Detroit civil attorney, C. William Garratt, was owed $222,000.
82. In 1986, DeLorean swore under oath that his attorney,
Morganroth, had not been paid one cent.
83. On May 6, 1986, DeLorean swore under oath that his
bank balance was under $1,000 and that he had no job, no
prospects, and barely enough to pay child support.
96a
Appendix J
84. On October 3, 1990, DeLorean sent a letter through
the mail to the American Arbitration Association representing
that “I owe Mayer Morganroth $2.2 million which I am unable
to pay (he is forced to pay his own expenses to defend me), my
California attorney has sued me for $687,000 of unpaid fees,
and I am unable to pay the attorney who is defending this action.”
85. On September 5, 1990, DeLorean signed a
commitment with Lakevue Funding that stated that Morganroth
and his firm were owed $2.2 million as of that date by DeLorean.
86. In 1990, DeLorean swore under oath that Morganroth
is extremely competent.
87. In January of 1989, DeLorean’s New Jersey Estate was
appraised at $21,600,000, exclusive of the land and houses.
88. Morganroth and his firm represented Logan in the First
Security Bank loans and renewals.
89. Morganroth and his firm represented Logan and
DeLorean in the two Merrill Lynch loan transactions.
90. Morganroth and his firm represented DeLorean and
Logan in the Saike loan transaction.
91. Morganroth represented Logan in the NAC/Heller loan
extension.
92. Judge Woods restrained 834 Fifth Avenue from evicting
DeLorean because the result would impair Logan’s Court
approved settlement and the ability of Logan to perform it.
SRN TPR EHEC IE ES
97a
Appendix J
93. DeLorean’s December 31, 1989 financial statement was
submitted to Judge Gerald Rosen and to the United States
District Court by DeLorean on September 4, 1990, wherein
DeLorean indicated his gross assets were $63,525,000.
94. DeLorean’s December 31, 1989 financial statement
stated that DeLorean’s New Jersey Estate was valued at
$30,000,000.
95. DeLorean stated that Logan’s worth on December 31,
1989, inclusive of the underlying property, to be $18,000,000.
96. DeLorean made a submission to Judge Gerald Rosen
that his financial net worth as of December 31, 1989 was
$45,555,000.
97. Morganroth rendered legal services to DeLorean
regarding the DeLorean Family Trust.
98. DeLorean’s New Jersey Estate was purchased by
DeLorean pursuant to land contract.
99. During the time period of 1982 through the present,
DeLorean and/or Logan possessed, had an interest in, was
affiliated or related to the entity or individual on any of the
following savings accounts, checking accounts or commercial
accounts, and/or was a signatory of such accounts at one time
or another during such time period.
A. Account bearing the name of Cristina Corporation
at United Nations Bank, New Jersey (Account Number 260
4484);
98a
Appendix J
B. Account bearing the name Ecclesiastes at United
Nations Bank, New Jersey (Account Number 260 4977);
C. Account bearing the name DeLorean at United
Nations Bank, New Jersey (Account Number 603 9572);
D. Account bearing the name of Logan at United
Nations Bank, New Jersey (Account Number 260-4771);
E. Account bearing the name of Logan at Cache Valley
Bank;
F. Account bearing the name of Cindy L. Brady/
Cristina DeLorean at Security Savings (Account Number
503 12085000584);
G. Account bearing the name of Lamington Estates
at United Nations Bank, New Jersey (Account Number
603-682-9);
H. Account bearing the name Lamington Beef at
United Nations Bank, New Jersey (Account Number 603-683);
I. Account bearing the name Cristina Holding
Corporation at Banker’s Trust Company (Account Number
415 579 72);
J. Account bearing the name of DeLorean d/b/a
Lamington Beef at Somerset Trust Company;
K. Account bearing the name DeLorean Special
Account at Bank of Lafayette; and
99a
Appendix J
L. Account bearing the name or DeLorean at Somerset
Trust Company (Account Number 6-94611).
100. DeLorean’s December 18, 1991 Personal Financial
Statement was prepared by Frank Shaler (“Shaler”) pursuant to
DeLorean’s instructions.
— 101. DeLorean’s December 31, 1990 Personal Financial
Statement was prepared by Frank Shaler (“Shaler”) pursuant to
DeLorean’s instructions.
102. DeLorean’s November 30, 1990 Personal Financial
Statement was prepared by Frank Shaler (“Shaler”) pursuant to
DeLorean’s instructions.
103. DeLorean’s September 30, 1990 Personal Financial
Statement was prepared by Frank Shaler (“Shaler”) pursuant to
DeLorean’s instructions.
104. On October 25, 1982, DeLorean Motor Cars (“DMC’’)
voluntarily filed for bankruptcy.
105. DeLorean Motor Company Limited (“DMCL”) was
responsible for manufacturing the DeLorean sports car.
100a
APPENDIX K — PLAINTIFFS’ BRIEF IN
OPPOSITION DATED JUNE 21, 1993
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Case No. 93-CV-70848-DT
Hon. Anna Diggs Taylor
MORGANROTH & MORGANROTH, a Michigan general
partnership, and MAYER MORGANROTH,
Plaintiffs,
VS.
Re re Dean
JOHN Z. DELOREAN and ECCLESIASTES 9:10-11-12,
INC., a Delaware corporation (formerly known as Logan
Manufacturing), a Delaware corporation, jointly and severally,
Defendants.
MAYER MORGANROTH (P17966)
In Pro Se and on behalf of
Morganroth & Morganroth
2000 Town Center
Suite 2000
Southfield, MI 48075
(313) 355-3084
LE RRR mn PT ECS eB MOI ENN IHD
10la
Appendix K
MARE C. PIERCE (P25946)
PIERCE & PIERCE, P.C.
Attorney for Defendants
255 S. Woodward Avenue
Suite 205
Birmingham, MI 48009
(313) 647-0404
PLAINTIFFS’ BRIEF IN OPPOSITION TO MOTION TO
DISMISS OR STAY ENTIRE ACTION OR ALTERNATIVELY
TO DISMISS COUNT I FROM THE COMPLAINT IN THE
INSTANT ACTION FOR FAILURE TO STATE A CLAIM,
OR ALTERNATIVELY FOR MORE DEFINITE STATEMENT
OF COUNT I OF THE COMPLAINT IN THE INSTANT
ACTION
STATEMENT OF FACTS
On October 19, 1982, the nightmare began for John Z.
DeLorean (“JZD”) when he was busted by federal agents in
connection with his acquisition of 220 pounds of pure
Columbian cocaine valued at approximately $24,000,000.
Shock reverberated across the country as the videotape of JZD’s
bust was played over and over again on television with the
vivid scene of JZD examining the large quantity of cocaine and
remarking that the cocaine was “as good as gold.”’ Life would
never be the same for the once high flying and flamboyant JZD
who had been one of the most captivating forces in the
automobile industry and who had been adored by the public.
A disgraced JZD not only faced life in prison for major criminal
charges, but his fortune and reputation were in grave jeopardy
in light of the countless civil lawsuits that were contemplated
against him and his affiliated entities. In fact, JZD’s horror story
102a
Appendix K
took a turn for the worse on October 25, 1982 when JZD’s
motivating force, his beloved car company, filed for bankruptcy
and the car company’s British counterpart, DMCL, faced certain
doom while in receivership which had commenced in early
1982.
JZD intended to fight to remain a free man so he shopped
for attorneys to represent him in his do or die criminal trial. In
November of 1982, JZD was referred to Mayer Morganroth
(“Morganroth”) in his search for a permanent attorney. JZD
consulted with Morganroth and he retained Morganroth to
structure a defense and to provide consultation and advice with
respect to JZD’s criminal cocaine trial and certain other lawsuits
contemplated by JZD and his affiliated entities. The defense
structured by Morganroth along with his strategy and advice
with respect to JZD’s criminal cocaine trial were flawlessly
implemented by Howard Weitzman and Donald Re who had
taken on the trial duties. Miraculously, JZD was acquitted of all
charges. Although a free man, JZD’s legal troubles and
entanglements had just begun.
In mid 1983, a flood of civil cases were filed against JZD,
all of which consisted of multiple counts of fraud, embezzlement,
breach of fiduciary duties, racketeering activity, and breach of
contract allegedly committed by JZD. A myriad of parties sought
hundreds of millions of dollars from JZD and in many instances
$100,000,000 per count in multiple count lawsuits, most of
which were filed in Detroit. In addition, JZD’s snow grooming
company, Logan Manufacturing Company (“Logan”), whose
name was subsequently changed to Ecclesiastes, was joined as
a defendant in some of the lawsuits as well. Making matters
worse, JZD’s wife, Cristina, broke JZD’s heart when she filed
for divorce, and the board of JZD’s prestigious Co-op took
103a
Appendix K
steps to evict JZD. A devastated and emotionaily broken JZD
turned to Morganroth to provide consultation, advice, and
strategy with respect to the multitude of cases, and emotional
support with respect to JZD’s legal troubles and the loss of the
love of his life, Cristina. JZD was so impressed with
Morganroth’s legal advice that he instructed Morganroth to take
over all legal matters for JZD and Logan as of 1985.
Although Morganroth made serious inroads in the civil
defense of JZD and Logan and successfully warded off the
offensives taken by the plaintiffs in the multitude of cases, JZD
suffered a serious blow in 1986 when he was indicted in Detroit
for multiple counts of tax fraud and racketeering activity. Again
facing serious criminal charges, JZD turned to Morganroth along
with Weitzman to save his skin. JZD requested Morganroth to
act as co-counsel to structure and quarterback the defense. Again,
Morganroth’s strategy and defense were successful and this time
Morganroth uncovered the key evidence that changed the course
of the trial. JZD was acquitted of all charges once again.
Nevertheless, JZD’s and Logan’s continuing legal troubles
and entanglements were so cumbersome and enormous that
Morganroth was forced to turn away and reject numerous other
clients in order to devote necessary time and energy to solving
crisis after crisis for them. In fact, Morganroth worked day and
night, during every legal and religious holiday, vacations,
weekends, at the office, at home, while driving in his
automobile, and even while he was receiving treatment in the
hospital in an effort to save JZD and Logan
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.