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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2006

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0981%3A2. Public record. Not legal advice.