Opposition Brief — Adell v. John Richards Richards Homes Homes Building Building Co., LLC (No. 05-1532)

FILED

(A) AUG 2 ~ 2006

No. 05-1532 OFFICE OF THE CLERK

SUR ReMi) U

AT, U.S.

IN THE

Supreme Court of the United States

KEVIN ADELL,

Petitioner,

v.

JOHN RICHARDS HOMES BUILDING COMPANY, L.L.C.,

Respondent.

On PETITION FOR A Writ oF CERTIORARI TO THE

UnitTep States Court OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF IN OPPOSITION

Norman C. ANKERS

HONIGMAN MILLER SCHWARTZ

AND CoHN LLP

2290 First National Building

660 Woodward Avenue

Detroit, Michigan 48226

(313) 465-7306

Counsel for Respondent

202589 c-|

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

i

QUESTIONS PRESENTED

Should this Court grant certiorari where (i) the record in

this case is that respondent’s claims for damages were

established factually by evidence other than hearsay

testimony of an expert and (ii) the claimed conflict among

the courts of appeals about the admissibility of hearsay

testimony by an expert does not exist anyway?

ii

PARTIES TO THE PROCEEDINGS

AND STATEMENT PURSUANT TO RULE 29.6

The Petitioner is Kevin Adell, an individual. The

Respondent is John Richards Homes Building Company,

L.L.C., a limited liability company.

John Richards Homes, LLC is the sole member of John

Richards Homes Building Company, LLC.

iil

TABLE OF CONTENTS

Page

SI HUIINE none Ohd neuen en iWheed Kn i

Parties to the Proceedings and Statement Pursuant

I IN 6 00s dis Khe rene ois ccaeendewis il

EE ES 5, i cin kX ebb endeu see deducts iil

eee OE CH RO ok. rk iwc nde io Vv

ep EN Pe a l

IY UNIO i ot we gs a eae 12

ENA ey Pre re Oe Ter ere 4

i? GG sibs. fn Bea AW ARE KER ER OR 14

B. Events Leading to the Involuntary Bankruptcy

GO veh weseu ne veka oea ae VERA a 15

Oe Er er re 16

1. The involuntary bankruptcy case. ..... 16

2. Proceedings under 11 U.S.C. § 303(i). . 16

i: I cs a te ee are 20

iv

Contents

Reasons for Denying the Petition ............... 20

A. General Rules Relating To The Grant Of

CIR FER ik Fas er ee ro Views 20

B. The Decision In This Case Was Highly

Factually Dependent And Does Not Implicate

pe Bn 20

C. There Is No Conflict Among Circuits,

CT OS ee BO Meee Bee 23

cig Sa Ee Re BOUL aE) ale ese Pee of too a 29

TABLE OF CITED AUTHORITIES

Page

Cases:

Brantl v Finkel, 445 U.S. 507 (1980)

In re: SBA Factors of Miami, Inc. , 13 B.R. 99 (Bankr.

S.D. Fla. 1991)

International Adhesive Coating Co., Inc. v. Bolton

Emerson Intern., Inc., 851 F.2d 540 (1* Cir. 1988)

passim

Layne & Bowler Corp. v. Western Well Works, Inc.,

261 U.S. 387 (1923)

Local 159, 342, 343, 344 & 444 v. Nor-Cal Plumbing,

Inc., 1999 U.S. App. LEXIS 17968 at *28 (9 Cir.

Magnum Import Co. v. Coty, 262 U.S. 159 (1923) ...

Matter of James Wilson Assocs., 965 F.2d 160

(7" Cir. 1992)

Mitchell v. Lone Star Ammunition, Inc., 913 F.2d 242

(5" Cir. 1990)

Oklahoma City v. Turtle, 471 U.S. 808 (1985)

Robinson v. Missouri Pac. R. Co., 16 F.3d 1083

(10" Cir. 1994)

vi

Cited Authorities

South Cent. Petroleum, Inc. v. Long Bros. Oil Co.,

974 F.2d 1015 (8" Cir. 1992)

TK-7 Corp. v. Estate of Barbouti, 993 F.2d 722

(10" Cir. 1993)

U.S. v. Elliott, 91 F.3d 156 (9" Cir. 1996), cert.

denied, 519 U.S. 987 (1996)

Univ. of Rhode Island v. A. W. Chesterton Co., 2 F.3d

1200 (1* Cir. 1993)

Viterbo v. Dow Chem. Co., 826 F.2d 420 (5" Cir.

Walker v Soo Line R. Co., 208 F.3d 581 (7 Cir.

2000), cert. denied, 531 U.S. 930 (2000)

Zayre Corp. v. SM & R Co., Inc., 882 F.2d 1145

(7" Cir. 1989)

Statutes:

11 U.S.C. § 301

11 U.S.C. § 303

18 U.S.C. § 152

Page

Vii

Cited Authorities

Rules:

NE PN 0 vib k ve 0 hee aR Re ae t eee

PNG DH ciocind ke ceuuseeeeietene errr,

Treatises:

1 Dunn, Recovery of Damages for Lost Profits Cases

(6* GE, DOOR i ods intact cctie assent

Miscellaneous:

S. Rep. No. 95-989 at 33 (1978) ......-...eee.

Page

23

23

l

PRELIMINARY STATEMENT

This matter arises out of the involuntary bankruptcy case

of respondent John Richards Homes Building Company, LLC

(JRH), which was commenced by petitioner Kevin Adell (Adell)

on June 24, 2002 pursuant to section 303(b) of the Bankruptcy

Code. 11 U.S.C. § 303(b). JRH was and is in the business of

constructing homes.

Adell contracted with JRH to purchase land from JRH and

to have JRH build his home on the land. In purchase documents,

Adell swore to the accuracy of the allocation of the total price

of $3,030,000 as between the land he was buying and the home

JRH was building for him, Apx. 0710', but then later claimed

that JRH had cheated him by overcharging him for the land.

Apx. 0719. Before he made that claim, he had fired JRH from

the job site because he professed to be angry about water which

was accumulating on the property (even though the property

was easily dewatered and there was nothing unusual about the

water accumulation) and told JRH that he was going to have

his brother-in-law build his home for him instead. Apx. 0652-

0654. He sued JRH and its principal in state court, claiming

that he had been cheated (Apx. 0719); JRH denied the allegations

of liability in an answer (Apx. 0747) and countersued for breach

of contract in state court (Apx. 0765); and then, after JRH had

both filed an answer denying liability in that state court

proceeding and counterclaimed against Adell for breach of

contract, Adeli filed an involuntary bankruptcy petition, attesting

under penalty of perjury that he had an undisputed debt of

$800,000 which was owed to him by JRH. Apx. 0028.

On a highly factual record, the Bankruptcy Court, in an

opinion reported at 291 B.R. 727, found, among other things,

that Adell — who told JRH’s principal that he was worth

1. References to (Apx. __) are to the Appendix filed in the Sixth

Circuit.

2

hundreds of millions of dollars and that he had once been given

a hard time by a village in which he wanted to build a home, so

that he built “the ugliest home he could possibly think of just to

piss them off,” Apx. 0661, 291 B.R. at 733 — (a) specifically

filed his involuntary petition for the purpose of harming JRH’s

reputation, asking JRH’s principal and counsel, at a pre-petition

filing meeting, “Can the company take the hit to its reputation

if an involuntary bankruptcy [is] filed?”, 291 B.R. at 732, Apx.

0469-0470; (b) hired a publicist, who contacted the major Detroit

area media, to publicize the bankruptcy filing, 291 B.R. at 732,

Apx. 0820, 0834, 0836 — this before the Court had even

determined, as 11 U.S.C. § 303 contemplates will take place

after a hearing, whether the case was even suitable for

involuntary bankruptcy treatment;’ (c) provided false

information to the publicist that JRH had provided “payoffs” to

creditors to avoid the filing of the petition, which was repeated

by the publicist to the media, 291 B.R. at 732, Apx. 0834, 0836;

(d) gave the publicist the names of nine customers whom he

falsely claimed were dissatisfied with JRH’s work for

newspapers to contact, 291 B.R. at 732, Apx. 0834, 0836, two

of whom testified at trial that they were not in any way

dissatisfied (and none of whom testified that they were), 291

B.R. at 732, Apx. 0984-0989; (e) threatened criminal prosecution

of JRH in a letter written by his counsel if JRH did not refund

his money in full, plus discharge the mortgage on his property

and pay his attorney fees, 291 B.R. at 733, Apx. 0813; (f) boasted

of being worth hundreds of millions of dollars and of being

a very rich man, 291 B.R. at 733, Apx. 0499, Apx. 0656;

(g) threatened a trade creditor of JRH, Robert Clark, that if he

did not join in the involuntary petition, he would see to it that

the trade creditor would not be paid, 291 B.R. at 733, Apx.

2. See 11 U.S.C. § 303(h)(“after trial, the court shall order relief

against the debtor in an involuntary case under the chapter ...”).

3

0527-0528 — a violation of 18 U.S.C. § 152; (h) told another

trade creditor of JRH, Cynthia Weaver of EW Kitchens, that if

she joined in the involuntary filing, it would not cost her anything

to do so, 291 B.R. at 733, Apx. 0500 — another violation of

18 U.S.C. § 152, (1) concealed from the bankruptcy lawyers

who filed his involuntary petition at his request that JRH had,

in state court, already filed an answer denying the material

allegations of liability and had filed a counterclaim for breach

of contract, 291 B.R. at 734, Apx. 0945, instead insisting — as

he swore in his petition — that the debt was undisputed, and

concealed from those bankruptcy lawyers that JRH’s counsel

had written Adell’s other lawyer who had threatened JRH with

criminal prosecution that the claimed debt was hotly disputed

and that the effect of filing the involuntary bankruptcy petition

would be severely to harm JRH’s business, 291 B.R. at 734,

Apx. 0944, Apx. 0815, Apx. 0817, Apx. 0819; and (j) falsely

testified that he filed his involuntary petition out of concern for

creditors — at least one of whom he threatened that he would

make sure would not be paid if the creditor did not join in the

petition.

The evidence regarding JRH’s damages was equally fact-

intensive. JRH offered testimony of John Shekerjian, the

principal of JRH; David Johnson, a longtime builder of super-

lux homes in the metropolitan Detroit market; and Thomas

Frazee, a financial analyst and expert. All testified that the filing

of the bankruptcy petition had harmed JRH’s ability to sell

homes in a dramatic way. Contrary to Adell’s claim in his petition

that JRH’s damages were based solely on Frazee’s expert

testimony, the Bankruptcy Court found as a matter of fact that

Frazee’s conclusions “were supported by other credible

evidence.” 291 B.R. at 736. In particular, Shekerjian had

personally reviewed and agreed with Frazee’s calculations and

4

conclusions as to the damages JRH’s business would suffer for

five years by virtue of the filing of the petition (indeed, he

believed they were conservative, Apx. 0634-0640); that JRH

would lose approximately half of its home sales because of the

harm to reputation associated with the involuntary bankruptcy

filing; and that the profit margin on lost future sales would be

17%, which was consistent with the historical experience of

JRH and its affiliates, Apx. 0635).

Shekerjian, who had been in the real estate business for

approximately 20 years (Apx. 0623) and was thus qualified to

have personal knowledge to testify about the margins that had

been enjoyed historically and what the future would hold,

testified that JRH had been . veated as the entity to sell high-end

homes (with a price point north of $1,000,000) in January, 2001,

Apx. 0623; that prior to that time, homes of this type had been

sold by a number of affiliates of JRH, but that the decision had

been made to concentrate sales of these homes in one company

because the marketing of these homes is different from homes

at other price points, Apx. 0624-0625; that the affiliated entities

had sold approximately 40 homes at this price point in the five

years prior to his testimony, Apx. 0626; that neither JRH nor

any other affiliated entity had made a home sale in this price

range since the filing of the involuntary bankruptcy petition,

291 B.R. at 735, Apx. 0627; that this was so because reputation

is paramount to customers building these kinds of homes, and

no one wants to purchase a home from an entity that might be

going out of business because of bankruptcy, 291 B.R. at 735,

Apx. 0632-0633; that there were two specified, identified

customers who were in the middle of negotiations to purchase

homes who broke off negotiations, one of whom cited the filing

as his reason, 291 B.R. at 735, Apx. 0628-0631; that the

anticipated profit margin for the sale of the particular homes

calculated by Mr. Frazee was consistent with his personal

5

understanding of what the margins would have been, and that

JRH had provided Frazee with the anticipated budgets for the

homes to do these calculations, Apx. 0631; that Mr. Frazee’s

methodology of using the volume of sales of JRH’s affiliated

entities was a reasonable means of calculating what JRH’s sales

would have been in the future but for the filing of the petition

— indeed, Mr. Shekerjian said he would know of no other way

of doing so, Apx. 0634; that the 17 percent margin which Mr.

Frazee calculated would have been earned on lost future sales

was consistent with Mr. Shekerjian’s own experience in dealing

with these kinds of home sales and reasonable to predict what

would have happened in the future but for the filing because it

was based on “historical information,” Apx. 0635; that Mr.

Shekerjian’s conclusion that Mr. Frazee’s analysis was correct

was informed by “20 years in the business and understanding

what our margins would be,” Apx. 0635; and that Mr. Frazee’s

calculation that home sales would be affected for only five years

and that only half of home sales would be lost was actually

extremely conservative. Apx. 0636-0639.°

Thus, the fundamental claim of this petition — that “JRH

did not offer any fact witness to establish the existence of any

historical sales or profits,” petition, p. 2 (a fulcrum to its

argument that the only evidence of sales and profits was

inadmissible hearsay, and that there is a split of authority in the

circuits on whether inadmissible hearsay can be used to establish

an expert opinion) — is not true. It is simply not true, as the

petition asserts, that JRH’s expert Mr. Frazee “simply performed

3. While Adell makes the facile claim that JRH received huge

damages for each day it was in bankruptcy, “an improper petition leaves

a permanent scar, even if promptly dismissed,” Jn re: SBA Factors

of Miami, Inc.; 13 B.R. 99, 101 (Bankr. S.D. Fla. 1991); and, as the

legislative history in S. Rep. No. 95-989 at 33 (1978) explains, “{ajn

involuntary petition may put a debtor out of business if it is without

foundation and later dismissed.”

6

calculations based upon uncorroborated sale and profit

information given to him by JRH,” petition, p. 2. To the contrary,

Mr. Shekerjian expressly described the information that was

provided to JRH by Mr. Frazee as “historical information.”

Apx. 0635. Mr. Shekerjian expressly confirmed that the

calculation of a profit margin of 17% by Mr. Frazee for future

sales was consistent with his own past experience in dealing

with these kinds of homes and reasonable in terms of predicting

what the profit margin would have been on future lost sales

precisely because it was based on “historical information,” Apx.

0635; that conclusion was confirmed both by Mr. Shekerjian’s

20 years of experience in the business and Mr. Shekerjian’s own

“understanding” of the profit margins. Apx. 0635. As a matter

of fact, what Mr Frazee did here is rather like what experts

typically do. He took the historical documentation generated

by JRH and arrived at his own calculation of an average profit

margin and average sale price of the homes, 291 B.R. at 736,

Apx. 0566-0568, Apx. 0576-0579, Apx. 0618; and then Mr.

Shekerjian attested from personal knowledge that these

calculations were both historically accurate and that Mr. Frazee’s

projection of loss of half the sales of historical margins and an

average price of $1.9 million was a reasonable and indeed

conservative predictor of what would happen in the marketplace.

Mr. Frazee specifically took historical experience of affiliates

of JRH in the pre-January, 2001 time frame (remember that

JRH had been created in January, 2001 as part of an overall

reorganization of the affiliated entities to concentrate sales of

$1 million-plus houses); he concluded that using that experience

was pertinent to establish lost future profits of JRH because

JRH was using the same personnel and the same vendors and

incurring the same overhead as the various affiliates had for

those prior sales, Apx. 0566-0568, Apx. 0576-0579. Mr. Frazee

reviewed “the cost data” and “revenue numbers” for all the

affiliated entities that built houses at a price point north of

7

$1,000,000 as part of the documents he examined. He reviewed

“a great deal of additional detail” and “detailed ... cost sheets,

which essentially laid out the estimated costs for the construction

of homes that were constructed.” Apx. 0593. He looked at the

“actual costs, job costs” for each of the deals that were part of

his analysis. Apx. 0616. He confirmed, in response to counsel’s

question, that he “analyze[d] and t{oo]k into account each and

every single item of variable cost that was associated with the

construction of each and every one of those homes. Apx. 0619.

After he did that, Mr. Shekerjian, based on his personal

experience, verified that Mr. Frazee had used historical

information and validated that the profit margin on future sales

was consistent with his own experience as to past profit margin,

and an accurate predictor of what the future would be — indeed,

Mr. Shekerjian believed it to be conservative. Apx. 0634-0639.

“Perhaps the best evidence of lost profits is a comparison of the

experience of plaintiff's own business before and after the

interruption of its progress by the wrongful act of defendant. It

has never been seriously suggested that this evidence is

inadmissible to prove lost profits.” | Robert L. Dunn, Recovery

of Damages for Lost Profits Cases (6th ed. 2005), §5.7, p. 430.

For his own part, to inform himself in his analysis, Mr. Frazee

examined, among other things, as he testified, financial

statements for JRH, Apx. 0566; individual profit and loss

calculation documents for homes constructed by affiliates of

JRH over the past five years, Apx. 0566, documents which

showed Mr. Frazee the revenue that was generated, the income

that was received by the company and all the costs that were

associated with it. Apx. 0619. Mr. Frazee looked at market data

in the area serviced by JRH, Apx. 0566-0567; multiple listing

service data which captures information on real estate

transactions that were occurring in the public domain, Apx.

0567; data relating to permits and housing starts at the million

dollar price point in which JRH operated, Apx. 0567, and data

prepared by publicly traded companies in the construction

8

business and filed with the SEC. Apx. 0567. Likewise, Mr.

Johnson’s testimony as a developer with more than 20 years

experience in the market that that there had not been a downturn

in the market for the sale of $1 million-plus homes was

confirmed by Mr. Frazee’s own personal experience. Apx. 0570.

Thus, as the Sixth Circuit concluded, “[t]he record is not

as barren as Adell suggests,” 439 F.3d at 262; “[Shekerjian]

opined [that] Frazee’s use of historical sales data from the

Affiliates was a ‘reasonable’ predictor of JRH’s potential future

earnings,” id. at 263. Shekerjian testified factually that a 50%

reduction in sales over the next five years was reasonable and,

if anything, conservative, given the nature of the high-end home

business, because (i) the filing of the involuntary bankruptcy

petition was something that people would not forget, (ii) Frazee

had excluded several very expensive homes from his calculation

of the average price of homes sold over the previous five years,

(iii) JRH had sold no homes since the bankruptcy filing, although

50 permits for high-end homes had been issued during the six-

month period, (iv) high-end sales were primarily driven by the

‘ripple effect’ — sales lead to people talking, which leads to

more sales, so any negative publicity is potentially devastating

and the negative publicity in the market was quite devastating

and that JRH’s owt pian had been to double the number of

high-end homes sok} per ‘year. Apx. 0635-0640.

Allowing Mr. Stelserjian to confirm that the historical profit

margins calculated by Mr. Frazee after examining voluminous

records of 40 transactions involving JRH or its affiliates was

perfectly permissible so long as the underlying historical

documents were made available to the opposing party for

examination. There was no requirement that they be actually

introduced into evidence by JRH, and Adell does not even make

a claim that there is some kind of circuit split on this issue.

Zayre Corp. v SM & R Co., Inc., 882 F.2d 1145, 1149 (7th Cir.

1989)(“{t]he record reveals that Zayre did offer to make the

9

underlying records available at its individual stores. SM & R

does not deny this but argues that such a process would have

been unduly burdensome because it would have required SM

& R’s counsel to visit hundreds of Zayre stores to examine the

records. Such a procedure might very well have been impractical.

But SM & R never filed an affidavit under Fed. R. Civ. P. S6(f)

requesting a continuance to pursue discovery, or a motion for a

protective order under Rule 26(c), or a motion to compel

discovery under Rule 37(a), or in any other way ask the district

court to require Zayre to make the underlying records more

conveniently available before the district court entered summary

judgment. SM & R cannot now complain about the burden that

inspecting the underlying records would have imposed”).

Zayre’s teaching is especially instructive here because,

contrary to Adell’s claim in his petition that the underlying

documents were never produced, there was sharp factual dispute

as to whether the underlying records were indeed produced so

that Adell could cross-examine with respect to them; JRH

contended — and its counsel who was in charge of production

represented to the Court — that each and every single record

which supported the calculations as to which Mr. Shekerjian

and Mr. Frazee testified had been produced; some 15 boxes of

documents were produced in September, 2002, months before

the December hearing date. Apx. 0584. The most powerful

evidence that that is so is that in the final pre-trial order entered

by the Bankruptcy Court, the Bankruptcy Court had a specific

section asking for the parties to identify any evidence problems

likely to arise at trial. Apx. 0185. This would have been the

paradigm opportunity for Adell to complain if the documents

underlying the conclusion Mr. Frazee reached, validated by Mr.

Shekerjian based on his own experience, had not in fact been

produced. Adell did not identify the ostensible failure to produce

documents — or, for that matter, any other evidence problem

— in his portion of the pre-trial order. The trial court’s decision

10

during the hearing to reject the argument that the documents

had not been produced because Adell never timely identified

the problem as a problem in the pretrial order and waited until

the day of the hearing to move for exclusion (Apx. 0584-0585)

is the precise kind of pre-trial housekeeping duty to which trial

courts are entrusted.

Indeed, in his eagerness to create an issue for certiorari that

does not exist, Adell actually mischaracterizes the record. Adell

says in his petition that Mr. Frazee conducted no investigation

to determine whether the data supplied by JRH was in fact

accurate to form his conclusion, but instead says that “Shekerjian

indicated that the numbers Frazee used were those that ‘we gave

him’.” Petition at 8. In fact, as even a cursory examination of

the record reveals, Mr. Shekerjian did not use the word

“numbers,” he used the word “number”; and the “number” to

which Mr. Shekerjian was referring was the number of houses

sold by JRH or its affiliates in the $1,000,000+ price point range,

the records relating to which Mr. Frazee was using to reach a

conclusion as to what the historical profit margin was on the

sales of these homes as a basis for predicting profit margins on

lost future sales, not the numbers at which Mr. Frazee arrived

(17% profit margin; $1.9 million average sale price) after

conducting this analysis. See Apx. 0636-0637 (“[by JRH’s

counsel]: Take 35 plus homes over five years, that’s seven a

yea[r]. He assumes, he reduces it to four. Do you think that’s

reasonable, conservative? What’s your view, based upon your

experience with the market? [by Mr. Shekerjian]: First of all,

the number went down to 30 some, 35 or so. I mean the number

we gave him, the actual number was higher. He excluded a few

of the large ones, just to be conservative. So the average number

is what it is”). An examination of the record on this point reveals

just how careful Mr. Frazee’s calculation was, and how he did

not rely slavishly on information provided by JRH to inform

his conclusion. Among the approximate 40 transactions whose

financial records Mr. Frazee examined, Mr. Frazee found several

11

home sales where the price was extraordinarily and atypically

large or there was some other reason to exclude the data from

these home sales in the analysis Mr. Frazee was conducting;

including, for example, a transaction where the sale price of the

house was uncharacteristically large would have skewed the

approximate sale price inappropriately upwards, and thus

increase the dollar amount of damages in the calculation. Mr.

Frazee eliminated those “transactions” precisely to make his

analysis more informative and accurate. Apx. 0575.

Adell also says that two former employees of an affiliate of

JRH testified that the financial condition of JRH was ostensibly

deteriorating and that JRH was having difficulty paying its trade

creditors. But Mr. Shekerjian testified that these employees were

disgruntled ex-employees, Apx. 0972, 0973, 0977, who had been

dismissed from their positions, whose testimony was not

reliable; he testified that JRH’s financial picture was sound and

that JRH was not having difficulty paying trade creditors, Apx.

0975; one of the ex-employees, Deborah Lee Bijorkly, claimed

that there were liens on houses which had been built because of

these ostensible problems, but acknowledged on cross-

examination that she did not know the difference between a

lien and a notice of commencement, Apx. 0905; Mr. Shekerjian

testified that there were no liens, Apx. 0973 (and, as JRH’s

counsel pointed out in the trial court below, if there were liens,

they would have been matters of public record and would surely

have been introduced in evidence by Adell). Mr. Shekerjian also

testified that since all of the homes that were being built would

have been built in the $1,000,000-plus range and would have

been owner-financed, the general financial condition of JRH

would have been irrelevant to whether the homes would have

been built, anyway. Apx. 0976. The trial court, by expressly

crediting Mr. Shekerjian’s testimony on these points, implicitly

rejected — as the trial court, as the observer of the credibility of

the witnesses was entitled to do — Bjorkly’s and Seklar’s

contrary testimony.

12

OPINIONS BELOW

The Bankruptcy Court’s decision after trial awarding JRH

$6,413,230.68 in compensatory and punitive damages is

reported at 291 B.R. 727. The District Court’s decision affirming

the Bankruptcy Court’s decision and awarding JRH costs is

reported at 312 B.R. 849. The Sixth Circuit’s decision affirming

the Bankruptcy Court’s and District Court’s rulings is reported

at 439 F.3d 248. Adell did not seek rehearing, either before the

panel which rendered the decision or en banc.

After the Bankruptcy Court issued its award, Adell, within

ten days of entry of the award, liquidated Michigan assets he

owned and funneled them into a Florida mansion, and then

sought to invoke the benefit of Florida’s homestead exemption.

The Bankruptcy Court concluded that Adell was not a bona

fide citizen of Florida and found further that 11 U.S.C. § 303(i)

would have preempted the Florida homestead exemption even

if Adell were a bona fide Florida citizen to the extent that the

homestead exemption was interpreted to allow a defendant

required by federal law to pay an award for abuse of the

involuntary bankruptcy process to avoid paying the federal

award by the expedient of changing domicile and shielding his

assets in a homestead, and ordered Adell to sell the Florida house

he had purchased and remit the proceeds to JRH. 298 B.R. 591.

While Adell appealed this decision, he did not pursue the appeal;

and Adell has now paid the award in full, with interest, which

Adell did by tendering funds to the registry of the Bankruptcy

Court in March, 2006.

After the Bankruptcy Court issued its order, Adell filed a

voluntary Chapter 11 bankruptcy petition on his own behalf in

November, 2003. Eventually Adell’s Chapter 11 petition was

dismissed by the Florida District Court, on appeal from the

Florida Bankruptcy Court, after Adell proffered five plans of

reorganization. The District Court found that the Bankruptcy

13

Court had erred in essentially finding that Adell had filed his

petition in bad faith but not dismissing Adell’s petition. Adell

appealed the dismissal of his case to the Eleventh Circuit, which

dismissed his appeal. These decisions are not reported. Adell

has not sought certiorari to this Court from that dismissal. Adell

also purported to convert his dismissed Chapter I1 case to a

Chapter 7 filing, even though the linchpin of the District Court’s

decision was that bad faith had motivated his filing. The Florida

Bankruptcy Court dismissed Adell’s Chapter 7 filing; Adell

appealed to the Eleventh Circuit; the Eleventh Circuit denied

Adell’s emergency motion for stay pending appeal; and then

Adell dismissed his appeal.

Adell sought a stay pending appeal of the Bankruptcy

Court’s award. The District Court denied the motion for stay

pending appeal notwithstanding Adell’s proffered willingness

to post a supersedeas bond, finding that the award was governed

by Bankruptcy Rule 8017, which entrusts a stay to the discretion

of the court rather than providing a stay as a matter of right

upon the posting of a supersedeas bond, because “Mr. Adell’s

past and present manipulations of the judicial system are inimical

to the public interest and continue to exacerbate JRH’s injury

by making recovery unjustifiably expensive and prolonged.”

320 B.R. 139, 142. The Sixth Circuit also denied Adell’s motion

for stay pending appeal (filed by Adell because once his

invocation of voluntary bankruptcy had been rejected, he could

no longer claim the benefit of the automatic stay). This

November 1, 2005 decision of the Sixth Circuit is not reported.

Adell then filed an emergency motion for stay with this Court

while the Sixth Circuit had the appeal of the Bankruptcy Court’s

and District Court’s decisions under advisement. That motion

was denied by Justice John Paul Stevens; the decision is not

reported.

14

JRH argued to the Sixth Circuit that this post-award conduct

of Adell — including, among other things, liquidating his assets

to avoid paying the award, and representing to the Florida

Bankruptcy Court that his appeal in the Sixth Circuit was being

expedited (this to deflect the Bankruptcy Court’s query whether

Adell was simply not dragging out the proceedings) and

thereafter opposing JRH’s motion to expedite the appeal) —

was an independent basis for affirming the Bankruptcy Court’s

and District Court’s decisions. Because the Sixth Circuit

affirmed on the merits, it did not consider this issue.

STATEMENT

A. Background.

On December 28, 2001, Adell and JRH entered into a

contract for the construction of a home and sale of land to Adell

(on which the home would be located) in Bloomfield Hills,

Michigan for $3,030,000. Apx. 0825. In January and February

2002, Adell financed the purchase. He swore to the accuracy of

the allocation that had been made in closing papers as to the

respective value of the land which was being purchased

($1,750,000) and the home which was being built (the balance).

Much of this amount was used to purchase the land. Apx. 0710.

JRH’s principal John Shekerjian testified that a certain amount

of the money was held in trust for Adell to be used in connection

with construction of the home, and denied that the money was

not in fact held in trust. Apx. 0246-0247. JRH began preparing

the property for construction. The property experienced a not-

uncommon water problem — a hole was dug for excavation,

and it filled with water — but JRH had dewatering take place

and this problem was solved. But Adel] expressed dissatisfaction

with the progress which was being made on constructing the

property; he fired JRH from the job site; he told JRH that his

brother-in-law was going to build the house; and he claimed

that JRH had cheated him by overcharging him for the land,

15

even though he had previously sworn to the accuracy of the

allocation. Apx. 0653-0654. Adell also had a lawyer write a

letter on May 31, 2002, threatening JRH with criminal

prosecution and demanding that JRH refund Adell all of the

money that Adell had paid to JRH, and eliminate the mortgage

on the property which Adell had taken, and pay JRH his costs

and attorney fees. Apx. 0813.

B. Events Leading to the Involuntary Bankruptcy Case.

After receiving the threat, JRH and its counsel, E. Michael

Morris, asked for a meeting, which was attended by, among

others, Adell and the lawyer who had threatened JRH with

criminal prosecution. Adell pointedly asked John Shekerjian,

JRH’s principal, whether JRH could take the hit to its reputation

which would be associated with the filing of a bankruptcy

petition and repeated the threats in the letter. Apx. 0473, Apx.

0471. At this meeting and in subsequent correspondence, JRH

and its counsel specifically denied that Adell had been

overcharged for the land and pointed out that comparable land

sales were consistent with the price to which Adell had agreed

(in fact, JRH had invested more than the $1,750,000 sale price

of the land in the land); specifically disputed liability to Adell;

and specifically warned Adell that an involuntary bankruptcy

petition would be precipitous, improper and would work vast

harm to JRH, for which JRH would seek suitable redress. Apx.

0471-0472; Apx. 0817, 0818, 0819. Adell filed a state court

lawsuit after this meeting, accusing JRH and Mr. Shekerjian of

fraud and asserting other claims. Apx. 0719. Prior to the filing

of the involuntary bankruptcy petition, JRH and Mr. Shekerjian

answered the state court complaint; denied the material

allegations of liability; and counterclaimed against Adell for

breaching the contract to buy the land and home. Apx. 0747-

0765.

16

C. The Proceedings Below.

1. The involuntary bankruptcy case.

On June 24, 2002, Adell commenced the involuntary

bankruptcy case against JRH under Chapter 7 of the Bankruptcy

Code, 11 U.S.C. § 301 et seg. JRH moved to dismiss the

involuntary case on July 1, 2002. The Bankruptcy Court set a

hearing on the motion for July 15, 2002. Before the Bankruptcy

Court conducted its hearing on July 15, 2002 to determine

whether the case was even suitable for treatment as an

involuntary bankruptcy matter, Adell (a) threatened one trade

creditor that if he did not join the involuntary bankruptcy

petition, Adell would see to it that he was not paid what he was

owed; (b) promised another trade creditor that if she joined in

the petition, she would not have to pay anything; (c) boasted to

those creditors variously that he was very wealthy and owned a

television station and an exposition center; and (d) gave false

information to a publicist he hired for the express purpose of

publicizing the involuntary filing, including providing the names

of nine ostensibly dissatisfied customers of JRH whom he asked

the publicist to have the media contact and telling the publicist

that JRH had given payoffs to trade creditors to try to forestall

the filing. The filing was reported in the local media. Adell’s

publicist falsely told each media representative that it had an

“exclusive” story on its hands. Apx. 0527-0528; Apx. 0500;

Apx. 0834; Apx. 0836; Apx. 0984-0989.

On July 15, 2002, the Bankruptcy Court dismissed the

involuntary bankruptcy petition. Adell never appealed the

dismissal.

2. Proceedings under 11 U.S.C. § 303(i).

11 U.S.C. § 303(i) contemplates that after dismissal of an

involuntary bankruptcy petition, the Court retains jurisdiction

to conduct hearings to determine whether an award of attorney

17

fees and costs, compensatory and punitive damages is available.

Attorney fees and costs are awardable regardless of whether

the dismissed petition was filed in good faith; compensatory

and punitive damages are awardable if a filing is made in bad

faith.

Following discovery, the Court conducted a hearing on

JRH’s claim of entitlement to compensatory and punitive

damages and attorney fees and costs in December, 2002 and

January, 2003. John Shekerjian testified about Adell’s threats;

about the harm that JRH had suffered and would in the future

suffer because of the filing of the involuntary bankruptcy

petition, and, in particular, how the filing had devastated JRH’s

reputation. He reviewed calculations made by Thomas Frazee,

JRH’s outside damages expert, he confirmed that JRH and its

affiliates had historically experienced a 17% net profit margin;

that Mr. Frazee’s calculation of the volume of lost sales over

the next five years was accurate, and, indeed, conservative as

to amount; he confirmed that he had provided Mr. Frazee with

historical information to allow Mr. Frazee to make his

calculations; he testified that a 17% profit margin was accurate,

based on his understanding and experience, in predicting the

profit margin on lost future sales by JRH. Apx. 0634-0640.

David Johnson was a real estate developer who had

developed residential communities, including super-lux

communities, for more than 20 years in JRH’s market areas. He

testified that in his experience, the filing of the involuntary

bankruptcy petition had definitely harmed JRH’s ability to sell

houses, because the very filing of an involuntary bankruptcy

petition clouded the reputation of JRH and caused prospective

purchasers to seek out other super-lux builders who were not

affected by this taint to reputation. He testified that the market

18

for super-lux homes remained strong despite the impact of the

downturn of the economy on sales at other price points. Apx.

0507, 0510-0511.

Robert Clark was a trade creditor of JRH who testified that

he had been threatened by Adell that if he did not join the

involuntary bankruptcy petition, Adell would be in charge of

the distribution of assets in the bankruptcy and he would see to

it that Clark would not be paid. Apx. 0527-0528.

Cynthia Weaver of EW Kitchens testified that EW was a

trade creditor of JRH; that Adell identified himself as a very

rich man who owned a television station and an exposition

center, and told her that she could verify that this was so with

Adell’s lawyer; Adell’s lawyer in fact verified that information

in response to Weaver’s request.

Michael Layne of the Marx, Layne advertising agency

testified that Marx, Layne had been hired by Adell for the express

purpose of publicizing the involuntary bankruptcy petition, 291

B.R. at 732, Apx. 0535; Marx, Layne in fact notified the two

major Detroit newspapers and Detroit’s primary business trade

publication; that Marx, Layne had falsely told each of these

Detroit media outlets that they were getting an “exclusive” story

about the involuntary petition, presumably to maximize the

prospects of coverage, Apx. 0834, 0836; that Adell had given

Marx, Layne information that there were nine dissatisfied

customers of JRH whom the media should contact and that Adell

had told Marx, Leyne that JRH had engaged in “payoffs” to

forestall the filing of the involuntary bankruptcy petition, Apx.

0544-0545 (in fact, no payoffs were made).

Jean McIntyre and Larry Gainer, two of the nine ostensibly

dissatisfied customers identified by Adell to his publicist Marx,

Layne and, in turn, identified by Marx, Layne to the media,

19

testified that they were pleased with the work that JRH had

done and that they had no complaints or dissatisfaction, and

had no idea how Adell claimed to identify them as disgruntled

or dissatisfied with JRH in some way. No customer testified to

any dissatisfaction. Apx. 0984-0989.

Michael Morris, JRH’s counsel, testified to the meeting

that took place prior to the filing of the involuntary bankruptcy

petition to the threats made by Adell and to the fact that JRH

disputed liability in the meeting and in correspondence. Apx.

0469-0473.

Thomas Frazee, JRH’s outside economic expert, testified

that he had examined historical information of JRH and its

affiliates, including documents given to him by JRH which

reflected each and every cost associated with building the homes

built by JRH and its affiliates over the prior five years at price

points north of $1 million, to determine the average profit margin

of JRH and its affiliates and average sale price of JRH and its

affiliates with respect to these transactions, this to reach a

conclusion on how JRH would have performed in the future

with respect to sales lost as a result of the bankruptcy filing;

that he excluded certain transactions as being at too high dollar

a volume, which would skew the average calculations in a way

that Frazee believed inappropriate; and that he had examined

financial statements of JRH, had independently consulted the

multiple listing service, looked at housing starts from other

builders, examined public records filed with the SEC of similar

builders, spoken with area brokers about market demand and

verified that the housing market for houses north of the $1

million price point had not been affected by downturns in the

local economy. Apx. 0566-0568; Apx. 0576-0579; Apx. 0618;

Apx. 0570.

20

D. The Award.

On April 25, 2003, the Bankruptcy Court entered its award

in the amount of $6.413 million in JRH’s favor.

REASONS FOR DENYING THE PETITION

A. General Rules Relating To The Grant Of Certiorari

Petitions.

As this Court held in Layne & Bowler Corp. v. Western

Well Works, Inc., 261 U.S. 387, 393 (1923), petitions for

certiorari will only be granted “in cases involving the settlement

of which is of importance to the public, as distinguished from

that of the parties, and in cases where there is a real and

embarrassing conflict of opinion and authority between the

Circuit Courts of Appeal.” In the words of Chief Justice Taft in

Magnum Import Co. v. Coty, 262 U.S. 159, 163 (1923), certiorari

jurisdiction is “not conferred upon this court merely to give the

defeated party in the Circuit Court of Appeals another hearing.”

What is more, where a decision is dependent on a factual finding,

not a ruling of law with respect to which there is disagreement

among Circuit courts, certiorari is inappropriate; in the absence

of extraordinary circumstances, it is the “settled practice” of

this Court to accept “factual determinations in which the district

court and the court of appeals have concurred.” Branitl v Finkel,

445 U.S. 507, 512 (1980).

B. The Decision In This Case Was Highly Factually

Dependent And Does Not Implicate Any Circuit Conflicts.

Adell would have this Court conclude that there is an issue

ripe for consideration on certiorari on the state of this record:

whether an expert conclusion based on inadmissible hearsay

documents whose content JRH ostensibly made no effort to

prove, is, standing alone, enough to establish the fact that the

expert has concluded. That is not what this record presents at

all:

21

— For starters, the facts (what JRH’s affiliates’ historical

profit margins were, what the average price of homes was

historically and what future losses JRH would incur by virtue

of the filing of the bankruptcy petition) were not just testified

to by Mr. Frazee. Mr. Shekerjian also testified to these facts,

and he was subject to full cross-examination.

— Mr. Shekerjian testified that he provided historical

information to Mr. Frazee to inform Mr. Frazee’s analysis, and

Mr. Frazee likewise testified that he was provided with

documents showing each and every item of cost and revenue

which he used to perform his analysis. These documents were

produced to Adell’s counsel and so Adell had a full and fair

opportunity to cross-examine both Mr. Shekerjian and Mr.

Frazee about them. Analyzing these documents was a more than

appropriate way to calculate lost future profits of JRH.

— Indeed, for that matter the expert here did not even, as

the Sixth Circuit pointed out, use the underlying documents

showing the historical profit margins of JRH’s affiliates to prove

what JRH’s affiliates’ profit margins on house sales were — so

the expert’s testimony was not even classic hearsay. They were

simply used to make a prediction about what the sales price and

profit margins on future lost sales of JRH.

On this highly factual record, this case does not, therefore,

remotely implicate any ostensible circuit conflict on the issue

of whether expert testimony based on inadmissible hearsay

documents can, standing alone, establish a fact. Where a

principal of a business opines as to facts and those facts are

based upon a review of documents, the principal’s factual

conclusion is admissible so long as the underlying documents

are made available for examination. Zayre, supra. Under Rule

703, the documents need not be admitted into evidence; indeed,

they need not even be “admissible” in evidence, so long as they

are “of a type reasonably relied upon by excerpts in the particular

22

field in forming opinions or inferences upon the subject.”

Experts rely on business records of businesses all the time in

reaching their conclusions; they would in fact be admissible

under the well-established exception to the hearsay rule

contained in Rule 803(6); but Rule 703 makes clear that they

need not even be admissible in evidence for experts to rely upon

them in reaching their conclusion. See, e.g., International

Adhesive Coating Company, Inc. v. Bolton Emerson

International, Inc., 851 F.2d 540, 545 (ist Cir. 1988)(“Vesey

testified that he derived his damage estimates by reviewing

International’s business and financial records and through

interviews with company personnel. We think it obvious that

these are sources of information normally and reasonably relied

upon by accountants ...”); Local 159, 342, 343, 344 & 444 v.

Nor-Cal Plumbing, Inc., 1999 U.S. App. LEXIS 17968 at *28

(“[b]ecause the district court determined that the data was of a

type upon which accountants reasonably rely in forming their

opinions, it did not err in permitting the experts to rely on this

data in the course of their testimony or in admitting the data for

the limited purpose of explaining the basis of their opinions”);

South Central Petroleum, Inc. v. Long Brothers Oil Co., 974

F.2d 1015, 1019 (8th Cir. 1992)(“the district court expressly

limited the admission to the expert’s opinion and did not admit

the information on which the expert based his opinion.

Moreover, Long Brothers does not dispute that their opponent’s

expert based his opinion on information reasonably relied upon

by experts in the field”).

Adell simply has not, therefore, remotely demonstrated that

in this highly factual context, this Court should make the

“commitment of scarce judicial resources” that a grant of

certi ‘rari represents. Oklahoma City v. Turtle, 471 U.S. 808,

816 (1985).

23

C. There Is No Conflict Among Circuits, Anyway.

Even if this certiorari petition squarely implicated the issue

of whether an expert could testify to a fact based solely on

inadmissible hearsay, without more — and it simply does not

on this record, which is why the petition should be denied —

there is no conflict, anyway.

Adell argues that the First and Sixth Circuits have somehow

split from the Fifth, Seventh, Eighth, Ninth, and Tenth Circuits

on the requirements of expert testimony. Adell cites only one

case in the First Circuit for this alleged split; in turn, the case at

issue in this appeal is the only Sixth Circuit authority that Adell

cites to demonstrate that there is a split.

Neither of these two cases in the First and Sixth Circuits

represent any departure from the prevailing law of the other

circuits to which Adell refers. In International Adhesive Coating

Co., Inc. v. Bolton Emerson Intern., Inc., 851 F.2¢ 540, 545

(1* Cir. 1988), an accounting expert reviewed a company’s

financial records and prepared a report estimating lost sales. A

party attempted to argue that the expert was obligated to present

“invoices, statements, documents, breakdown or ... supporting

data” to support the damages he testified about. /d. at 545. The

court pointed out that such an argument ignores Federal Rule

of Evidence 705, which states:

The expert may testify in terms of opinion or

inference and give reasons therefor without first

testifying to the underlying facts or data, unless the

court requires otherwise.

The court also noted Federal Rule of Evidence 703, which

provides:

If of a type reasonably relied upon by experts in the

particular field in forming opinions or inferences

upon the subject, the facts or data need not be

24

admissible in evidence in order for the opinion or

inference to be admitted.

In the case at bar, Mr. Frazee examined business records,

which are of course of the type often relied on by experts to

make conclusions. The /nternational Adhesive court held that

the expert’s testimony “did not have to establish the validity of

the central, disputed factual claims in this case in order to have

a factual basis and be admissible.” /¢. at 545. In making its

holding, the court stated that any issues regarding the underlying

documentation went to the weight of the testimony, not its

admissibility; opposing counsel had the opportunity to expose

any weaknesses through cross-examination. /d. at 544.

Subsequent opinions by the First Circuit Court of Appeals make

it clear that the First Circuit did not “abandon its critical

gatekeeper function in favor of admitting hearsay through expert

testimony.” See Univ. of Rhode Island v. A. W. Chesterton Co.,

2 F.3d 1200, 1218 (1* Cir. 1993)(“Rules 703 and 705 do not

afford automatic entitlements to proponents of expert

testimony”). So the First Circuit simply did not violate the

hearsay rule by allowing the expert’s testimony; and, indeed,

the First Circuit has made clear that a proponent of expert

testimony cannot rely upon a hearsay fact to establish the truth

of the fact through the expert.

The Sixth Circuit Court of Appeals followed this well-

accepted approach in the case at bar. Mr. Frazee used historic

sales data from the past five years to estimate future lost profits.

Id. at 263. Adell argued that the bankruptcy court could not

accept the expert’s testimony without actual evidence in the

record of the sales data the expert examined. Jd. at 263. The

court disagreed and held that the expert’s testimony was

admissible under Federal Rules of Evidence 703 and 705.

Id. at 264. “[A]n opposing party who would challenge the

facts underlying the expert’s opinion must do so by cross-

examination.” Jd. at 264.

25

This position of the First and Sixth Circuit is consistent

with every other circuit in the country, including those cited by

Adell. See Robinson v. Missouri Pac. R. Co., 16 F.3d 1083,

1090 (10" Cir. 1994)(“[t]he burden is on opposing counsel

through cross-examination to explore and expose any

weaknesses in the underpinnings of the expert’s opinion’’);

South Cent. Petroleum, Inc. v. Long Bros. Oil Co., 974 F.2d

1015, 1019 (8" Cir. 1992)(“[a]ny weaknesses in the factual

underpinnings of (the expert’s) opinion go to the weight and

credibility of his testimony, not to its admissibility”); Walker v.

Soo Line R. Co., 208 F.3d 581, 587 (7" Cir. 2000), cert. denied,

531 U.S. 930 (2000)(in connection with an expert opinion, “[t]he

accuracy and truthfulness of the underlying [educational] history

is subject to meaningful exploration on cross-examination and

ultimately to jury evaluation”); Mitchell v. Lone Star

Ammunition, Inc., 913 F.2d 242, 252 (5" Cir. 1990)(holding

that an expert opinion is admissible despite opposing counsel’s

argument that the expert testimony relied on hearsay); U.S. v,

Elliott, 91 F.3d 156 (9" Cir. 1996), cert. denied, 519 U.S. 987

(1996)(holding that the government did not have to introduce

report into evidence that expert relied on).

Adell misconstrues a range of cases and ignores the Federal

Rules of Evidence in his attempt to manufacture a circuit split.

A typical example is Viterbo v. Dow Chem. Co., 826 F.2d 420

(S" Cir. 1987), which Adell claims is in direct conflict with

International Adhesive and the Sixth Circuit’s holding in this

case. In Viterbo, an expert physician gave his opinion regarding

the cause of a patient’s illness. /d. at 423. The expert’s opinion

relied on the patient’s oral statements that he experienced certain

symptoms, but the expert failed to inquire into the patient’s

family history. Jd. at 423. If he would have done so, the expert

would have found a family history of depression and

hypertension; the patient was also experiencing those symptoms,

indicating that hereditary traits could be the cause of the illness

26

instead of the cause the expert named. /d. at 423. The expert

also relied on tests which could have supported conclusions

other than the one arrived at by the expert. Jd. at 423. All that

Viterbo held was that because the expert did not even examine

medical records, conduct medical tests and had no scientific

literature to back up his opinion, his testimony was of no use to

the jury; the expert’s testimony was simply the patient’s

“testimony dressed up and sanctified as the opinion of an expert.”

Id. at 424.

This does not conflict in any way with the holding of the

Sixth Circuit here or the holding in /nternational Adhesive. In

the case at bar, Mr. Frazee did exactly what an expert is supposed

to do: he used his accounting expertise to examine each and

every item of cost and revenue associated with sales of JRH’s

affiliates to reach a conclusion as to what the average profit

margin was on these historical sales and what the average sale

price was for these sales, using documents of those transactions

to conduct his analysis. He did not simply take Mr. Shekerjian’s

Opinion with respect to what historical sales profit percentage

and historical prices had been and wrap that opinion into an

“expert” package. And Viterbo is not a case in which the expert

testified based on records but the records were not made

available for examination or admitted into evidence; to the

contrary, one of the reasons why the Court excluded the doctor’s

expert opinion in Viterbo is that he examined no records at all.

Similarly, International Adhesive did not hold that an expert

could rely upon the hearsay assertion of a fact to prove the fact

just by wrapping his testimony in the mantle of “expert” opinion;

nor did the Sixth Circuit in this case. Indeed, the Sixth Circuit

carefully pointed out that Mr. Frazee’s testimony was not used

to establish what JRH’s affiliates’ past profits were, based on

his examination of documents.

27

Adell likewise misconstrues the Seventh Circuit’s holding

in Matter of James Wilson Assocs., 965 F.2d 160 (7" Cir. 1992)

to create a conflict where none exists. In James Wilson, the value

of a building was at issue in order to determine a secured

creditor’s interest. Jd. at 172. In an effort to prove that the

building was worth much less than a reorganization plan

assumed, an expert architect planned to testify about the

building’s physical condition; however, the only source for the

expert’s knowledge was a report prepared by a consulting

engineer. Jd. at 172. The court rightly held that the expert’s

testimony was pure hearsay and would not be admitted. Jd. at

173. The architect was not an engineer and the engineer — to

the Seventh Circuit’s puzzlement — never testified; instead,

the architect purported to testify to the engineer’s conclusions.

The court’s conclusion that this was impermissible was hardly

remarkable. The Wilson Court did say, like the other circuit’s

have said, that an expert witness “is allowed to explain the facts”

underlying his opinion, “even if they would not be independently

admissible.” Jd. at 172-73.

The testimony of the experts in /nternational Adhesive was

not, as the Sixth Circuit pointed out in this case, introduced in

order to prove the underlying historical sales data, i.e., what

JRH’s affiliates had experienced. Mr. Shekerjian’s testimony

proved that; Adell never objected to Mr. Shekerjian’s testimony,

and Adell had the documents informing his conclusion to cross-

examine with. The expert testimony instead was put forth in

order to prove future lost profits of JRH; the experts used

underlying financial data as one of many tools to determine the

amount of damages. The Sixth Circuit approvingly cited James

Wilson and acknowledged that “expert testimony may not be

used to establish underlying facts not otherwise in evidence.”

439 F.3d at 264. But as the Sixth Circuit stated, there was no

independent need to establish the past profits of JRH’s affiliates,

and thus the expert’s testimony was only used to demonstrate

28

JRH’s future damages. /d. at 264. There was no hearsay violation

and consequently no conflict among the circuits.

Adell also cites TK-7 Corp. v. Estate of Barbouti, 993 F.2d

722 (10" Cir, 1993). However, a review of TK-7 Corp. indicates

that the Tenth Circuit does not disagree with the Sixth Circuit’s

or First Circuit’s reasoning, either. In TK-7 Corp., a party

produced an expert to testify as to future lost profits in Great

Britain. Jd, at 730. This testimony relied on another

professional’s market report projecting that the company would

be able to capture 5% of a certain segment of the market in

Great Britain. /d. at 731. However, the expert had no other basis

for his testimony other than these future sales projections

performed by another expert, and admitted that he had no

expertise regarding sales projections in Great Britain. /d. at 731,

732. The court thus excluded the expert’s testimony because it

simply repeated the findings of another expert. /d. at 732. This

failure to demonstrate any independent basis for the expert

opinion gave the opposing party little opportunity for meaningful

cross-examination. /d. at 732. By contrast, here, Mr. Shekerjian

confirmed the past profits of JRH’s affiliates; the documents

which informed Mr. Sherkerjian’s conclusion were available to

Adell for Adell to cross-examine; and so the Sixth Circuit did

nothing in conflict with any other circuit.

Unlike 7K-7 Corp., the testimony of experts in Jnternational

Adhesive and this case did not simply parrot information the

experts received from someone else. The experts in both cases

used financial data to do what experts do: to arrive at independent

conclusions that were not simply read from a market report

prepared by another expert. This independent analysis gave the

opposing parties ample opportunity to cross-examine the

testifying experts concerning the methodology used to arrive at

their opinions. By the Tenth Circuit’s own statement, it was a

lack of opportunity to cross-examine the expert whose finding

29

the testifying expert parroted that distinguished TK-7 Corp. from

the usual case where the expert’s “validation, expertly performed

and subject to cross-examination, ought to suffice for judicial

purposes.” /d. at 732.

The First, Sixth, Fifth, Seventh, Eighth, Ninth, and Tenth

Circuits are all in agreement that an expert’s testimony does

not have to establish the validity of disputed claims in order to

be admissible; it is only where a party uses expert testimony to

establish underlying facts not otherwise in evidence that the

courts bar the expert’s conclusions. Thus, the authority relied

on by the Sixth Circuit Court of Appeals in this case on appeal

is supported by a national consensus, and does not depart from

any other circuits’ holdings.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

NorMaN C, ANKERS

HONIGMAN MILLER SCHWARTZ

AND CoHN LLP

2290 First National Building

660 Woodward Avenue

Detroit, Michigan 48226

(313) 465-7306

Counsel for Respondent