DeLorean v. Cork Gully

• Decision Date: 14 August 1990
• Docket Number: No. 88-CV-74835-DT.,88-CV-74835-DT.
• Parties: John Z. DeLOREAN, and Logan Manufacturing Company, a Delaware Corporation, Plaintiffs, v. CORK GULLY, A United Kingdom Entity, Chartered Accountants; Sir Kenneth Cork; PFM Shewell; Robert Weiss; Christopher Hughes; Sheldon Toll; Honigman Miller Schwartz & Cohn, a Michigan Professional Partnership; Malcolm Schade; Yale Levin; and Price Waterhouse & Company, a New York Corporation, Jointly and Severally, Defendants.
• Court: U.S. District Court — Western District of Michigan

118 B.R. 932 (1990)

John Z. DeLOREAN, and Logan Manufacturing Company, a Delaware Corporation, Plaintiffs, v. CORK GULLY, A United Kingdom Entity, Chartered Accountants; Sir Kenneth Cork; PFM Shewell; Robert Weiss; Christopher Hughes; Sheldon Toll; Honigman Miller Schwartz & Cohn, a Michigan Professional Partnership; Malcolm Schade; Yale Levin; and Price Waterhouse & Company, a New York Corporation, Jointly and Severally, Defendants.

No. 88-CV-74835-DT.

United States District Court, E.D. Michigan, S.D.

August 14, 1990.

COPYRIGHT MATERIAL OMITTED

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Mayer Morganroth, Southfield, Mich., for John DeLorean and Logan Mfg. Co.

Merle R. Jenkins, Jr., Jenkins, Reebel & Zameck, Southfield, Mich., for Cork Gully, Sir Kenneth Cork, PMF Shewell and Christopher Hughes.

Eugene Driker, Sharon Woods, and Morley Witus of Barris, Sott, Denn & Driker, Detroit, Mich., for Robert Weiss, Sheldon Toll and Honigman, Miller.

A. William Rolf, Tucker & Rolf, Southfield, Mich. and Howard W. Goldstein, Mudge, Rose, Guthrie, Alexander & Ferdon, New York City, for Malcolm Shade.

MEMORANDUM OPINION AND ORDER

ZATKOFF, District Judge.

INTRODUCTION

This action was commenced by the filing of a complaint in the United States District Court for the Southern District of California on or about April 5, 1988. Thereafter, defendants moved to dismiss or for transfer of this action on the ground of improper venue. Chief Judge Gordon Thompson, Jr. of the Southern District of California, granted defendants' motion to transfer and on December 6, 1988, ordered the case transferred to the Eastern District of Michigan pursuant to 28 U.S.C. § 1406.

Subsequent to the transfer, defendants filed various dispositive motions. Plaintiffs moved to amend their complaint, which was permitted. Defendants then filed supplements to their briefs in support of the dispositive motions. Rather than ruling on defendants' motions, the Court decided it was in the best interest of justice to first allow full discovery. Discovery is now closed, defendants have renewed their dispositive motions and the case is ripe for decision.

Plaintiffs' amended complaint alleges violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, malicious prosecution, intentional infliction of emotional distress and tortious interference with business relationships. After reviewing the amended complaint, the Court is convinced that this action is clearly a collateral attack on the bankruptcy proceedings which involved the DeLorean Motor Company.¹ For reasons more fully explained below, it is the opinion of the Court that the amended complaint does not form the basis of a cause of action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and that plaintiffs' pendant state law claims are without merit.

As indicated, various dispositive motions have been filed by defendants. A summary of these motions is as follows: Defendant Malcolm R. Schade (Schade) has moved for summary judgment pursuant to Fed.R.Civ.P. 56. Defendants Honigman Miller Schwartz and Cohn (HMSC), Robert B. Weiss (Weiss) and Sheldon S. Toll (Toll) have moved for judgment on the pleadings and for summary judgment pursuant to Fed.R.Civ.P. 12(c) and 56 respectively. Defendant Paul F.M. Shewell (Schewell) has moved for summary judgment pursuant to Fed.R.Civ.P. 56. Finally, defendants Cork Gully, Sir Kenneth Russell Cork (Cork) and Christopher J. Hughes (Hughes) (the U.K. defendants), have moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2), (5) and (6) and for summary judgment pursuant to Fed.R.Civ.P. 56. The U.K. defendants advise they will waive their 12(b)(2) and (5) objections to service of process and personal jurisdiction if this Court decides to dismiss the complaint with prejudice or grant summary judgment.² Former defendants Price Waterhouse and Yale Levin had moved to dismiss pursuant to Fed.R. Civ.P. 12(b)(1) and (6). On January 31, 1990, however, these defendants and plaintiffs reached a resolution and an appropriate order of dismissal was entered. Price Waterhouse and Levin are no longer parties to this suit. Voluminous exhibits, deposition transcripts, affidavits and other extraneous matter have been submitted in support of the various dispositive motions. Accordingly, the Court will treat motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and motions for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) as motions for summary judgment pursuant to Fed.R. Civ.P. 56.

I. SUMMARY JUDGMENT

Summary judgment is appropriate where no genuine issue of material fact remains to be decided and the moving party is entitled to judgment as a matter of law. Blakeman v. Mead Containers, 779 F.2d 1146 (6th Cir.1986); Fed.R.Civ.P. 56(c). "Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In applying this standard, the Court must view all materials offered in support of a motion for summary judgment, as well as all pleadings, depositions, answers to interrogatories, and admissions properly on file in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); United States v. Diebold, 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Cook v. Providence Hosp., 820 F.2d 176, 179 (6th Cir.1987); Smith v. Hudson, 600 F.2d 60 (6th Cir.1979), cert. dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979). In deciding a motion for summary judgment, the Court must consider "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2512. Although summary judgment is disfavored, this motion may be granted when the trial would merely result in delay and unneeded expense. Poller v. Columbia Broadcasting Systems, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); A.I. Root Co. v. Computer/Dynamics, Ind., 806 F.2d 673, 675 (6th Cir.1986). Where the nonmoving party has failed to present evidence on an essential element of their case, they have failed to meet their burden and all other factual disputes are irrelevant; thus, summary judgment is appropriate. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552; Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) ("When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." (Footnote omitted)).

II. PARTIES

This case is most easily understood with an explanation of the parties and what brought them together. The DeLorean Motor Company (DMC) bankruptcy proceeding began on October 25, 1982, when DMC voluntarily filed a Chapter 11 reorganization case (The "Chapter 11 Case") in the United States Bankruptcy Court for the Eastern District of Michigan.³ The Chapter 11 case was commenced six days after DMC's Chairman and Chief Executive Officer, John Z. DeLorean ("JZD"), had been arrested in Los Angeles on federal narcotics charges. By order of then United States Bankruptcy Judge George E. Woods, dated November 15, 1982, five unsecured creditors of DMC were appointed as members of the Official Chapter 11 Unsecured Creditors' Committee of DMC (the "Chapter 11 Committee"). At that time, Defendant Schade was elected Chairman of the Chapter 11 Committee as the representative of the Industrial Development Board of the Department of Economic Development (DED), which is a department of the British Government and an unsecured creditor of DMC (Affidavit of Malcolm R. Schade at pg. 3).

Subsequently, on November 18, 1982, defendant HMSC was appointed counsel to the Chapter 11 Committee and was specifically authorized to assist the Chapter 11 Committee in carrying out its duties. Defendants Toll and Weiss are partners of the law firm HMSC. At the request of the Chapter 11 Committee, former defendant Price Waterhouse was appointed as Examiner and the former Price Waterhouse partner Levin also a former defendant, was appointed liaison to the Court and parties in interest, by an order of Bankruptcy Judge Woods dated February 23, 1983. (Schade affidavit at 4).

Defendant Cork Gully is Coopers & Lybrand-UK, a United Kingdom partnership of professional accountants which conducts an insolvency practice in the United Kingdom. Defendants Sir Kenneth Cork and Christopher Hughes are chartered (certified public) accountants who are residents of the United Kingdom. Hughes is, and Cork was until his retirement from Cork Gully in 1983, a member of the Cork Gully firm. Defendant Paul F.M. Shewell is a retired chartered accountant and a citizen of the United Kingdom. Schewell was a member of Cork Gully until in or about February 1985, when he moved to Hong Kong. Defendants Cork, Shewell and Hughes are former or current Joint Receivers of DSQ Property Company Limited, formerly known as DeLorean Motor Cars Limited (DMCL). DMCL was a Northern Ireland corporation that was a manufacturing subsidiary of DMC. Financial difficulties caused DMCL to default in the repayment of certain secured indebtedness, and defendants Cork and Shewell were appointed Joint Receivers of DMCL pursuant to an indenture (loan and security agreement) between DMCL and the secured creditor. On or about February 25, 1985, Schewell resigned as a Joint Receiver of DMCL and Hughes was appointed to replace him in that capacity.

After DMC filed the Chapter 11 reorganization case, the Joint...