# Opposition Brief — DeLorean v. Morganroth > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2272%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1998 - **Citation:** 523 U.S. 1094 ## 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? [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2272%3A2. Public record. Not legal advice.