Bott v. Four Star Corp.

150 F.R.D. 95, 1993 U.S. Dist. LEXIS 9629, 1993 WL 264206
CourtDistrict Court, E.D. Michigan
DecidedJune 28, 1993
DocketNos. 79-71438, 86-CV-70176-DT
StatusPublished

This text of 150 F.R.D. 95 (Bott v. Four Star Corp.) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bott v. Four Star Corp., 150 F.R.D. 95, 1993 U.S. Dist. LEXIS 9629, 1993 WL 264206 (E.D. Mich. 1993).

Opinion

MEMORANDUM AND ORDER

COHN, District Judge.

I.

This the judgment collection stage of patent infringement cases. Plaintiffs, John A. Bott (Bott) and JAC Products, Inc (JAC) (collectively, “Plaintiffs”), brought suits against defendant, Four Star Corporation (Four Star), for, inter alia, infringement of patents owned by Bott and licensed to JAC. In these cases, judgments were entered for Plaintiffs on the claim of patent infringement against Four Star for damages and prejudgment interest in the amount of $7,156,959.1 [97]*97Plaintiffs say that only $383,817 of the judgments have been paid and that, with post judgment interest, in excess of $9,000,000 remains unpaid. Now before the Court is Plaintiffs’ motion styled “Plaintiffs’ Second Amended Motion For Proceedings Supplementary To And In Aid Of Judgments And For An Order To Show Cause Why Certain Persons Should Not Be Impled” (Motion to Implead). For the reasons which follow, the motion will be granted in part and denied in part.

II.

A

Plaintiffs assert that essentially all of the business assets of Four Star were transferred to other parties through several connected or related transactions. Plaintiffs say that these transactions were fraudulent as against the Plaintiffs and have defeated their ability to collect the unpaid judgments. To effect collection of the judgments against Four Star, Plaintiffs move to implead Masco Industries, Inc. (Masco), Mesick Metal Products, Inc. (Mesick), Huron/St. Clair, Inc. (Huron), Ralph Mandarino (Mandarino), Decorative Technologies, Inc. (Decorative), Automotive Design Technologies, Inc. (ADT), FSC Associates (FSC), Morton Harris (Harris), John Fauver (Fauver), James McLernon (McLernon), Erwin Ziegelman (Ziegelman), and NBD Bank, N.A. (NBD) (collectively “Impleader Defendants”). Mesick and Huron .are subsidiaries of Masco. Mandarino is president of Decorative and ADT, and, together with his wife, owns all of the stock of each. The stock of Four Star was owned in varying proportions by Mandarino, Harris, Fauver, McLernon and Ziegelman, each of whom also served as directors of Four Star. FSC is a Michigan limited partnership consisting of the former shareholders/directors of Four Star: Mandarino, is general partner, and Harris, Fauver, McLernon and Ziegelman, are limited partners. NBD, through its subsidiary NBD Business Finance, Inc. (NBDBF), was a secured creditor of Four Star.

B.

On October 14, 1992, Plaintiffs filed a motion styled “Plaintiffs’ Motion For Proceeding Supplementary To And In Aid Of Judgments And For An Order To Show Cause Why Certain Persons Should Not Be Impled,” which sought to implead all of the Impleader Defendants except NBD. On November 25, 1992, Plaintiffs filed a motion styled “Motion To Implead NBD Bank, N.A,” the brief in support of which contained as Exhibit 36 and incorporated by reference a paper styled “Plaintiffs’ Amended Motion For Proceeding Supplementary To And In Aid Of Judgments And For An Order To Show Cause Why Certain Persons Should Not Be Impled,” which merged the two motions. Responsive papers were separately filed by (1) Mandarino, Decorative, ADT and FSC, (2) Masco, Mesick & Huron, (3) Harris, Fauver, McLernon and Ziegelman, and (4) NBD. A hearing was held on December 16, 1992, at which time certain Impleader Defendants inquired whether the motion before the Court was Plaintiffs’ original motion or the amended motion.2 The Court directed Plaintiffs to file an amended motion identifying all of the parties and claims.

C.

On January 29, 1993, Plaintiffs filed the Motion to Implead now before the Court. Plaintiffs assert the following claims against the Impleader Defendants:

I. Fraudulent transfer in violation of the Michigan Fraudulent Conveyance Act, M.C.L. § 566.11, et seq.;3
[98]*98II. Conspiracy to commit fraudulent transfers;
III. “Piercing The Corporate Veil/Alter Ego Against Mandarino And His Controlled Corporations”;
IV. “Successor Liability Of Masco”; and,
V. “Conspiracy to Commit Common Law Fraud.”

Responsive papers have been separately filed by (1) Mandarino, Decorative, ADT and FSC, (2) Masco, Mesick & Huron, (3) Harris, Fauver, McLernon and Ziegelman, and (4) NBD.

III.

The following facts and allegations are gleaned from the papers before the Court:

A.

Auctioned of Assets of Four Star

The basis upon which Plaintiffs’ move to implead the several Impleader Defendants is best summarized as follows:

On information and belief, immediately after the [United States Court of Appeals for the Federal Circuit] rendered its last decision in October of 1988, Masco and Four Star, in collusion with NBDBF and in bad faith, orchestrated a sale of the assets of Four Star to Masco (or its subsidiaries) through an alleged foreclosure sale. This alleged foreclosure sale allowed NBDBF to be repaid all or a major portion of its outstanding loan balance of approximately $1,825,000.00, while transferring all or substantially all of the assets of Four Star to Masco (or one of its subsidiaries).

Plaintiffs proffer an agreement executed between Masco and NBDBF as contained in a document dated November 4,1988 (Maseo-NBDBF Agreement)4 in which Masco made the following “Offer”:

[T]o purchase from [NBDBF] all of the rights of Four Star in Four Star’s equipment and machinery which is more particularly described in Exhibit A attached hereto and Four Star’s intellectual property which is more particularly described in Exhibit B hereto, free and clear of the interest of [NBDBF] and any security interest or lien subordinate thereto and the interests of Four Star, at a foreclosure sale by auction by [NBDBF] upon the terms and conditions stated herein.

The purchase price stated in the agreement was $1,825,000, to be bid at auction. The schedule of equipment and machinery attached as Exhibit A to the Maseo-NBDBF Agreement identified a “Total Fair Market Value” of $1,834,975 and a “Total Forced Liquidation Value” of $1,326,400. The schedule of intellectual property, labeled “Schedule Of Patents, Patent Applications And Trademarks Of Four Star Corporation” attached as Exhibit B to the Maseo-NBDBF Agreement, which did not indicate a value, contained lists of “Apparatus Patents” and “Design Patents” and included “Pending Patent Applications” and “Trademarks.” The schedule of intellectual property also contained the following description in a paragraph labeled “Other Intellectual Property”:

All of Four Star Corporation’s inventions, improvements, knowhow, trade secrets, copyrights, designs, disclosures, patent applications, patents, design patent applications, design patents, trademarks, trademark registrations and applications for trademark registrations relating to luggage racks and grab rails, and to all other products of the type sold by Four Star in the course of its business, including but not limited to the items listed above.

Plaintiffs admit receiving notice of the foreclosure sale, and proffer the “Notice of Secured Party’s Sale” (Notice),5 which states that NBDBF intends to sell “in bulk ...

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150 F.R.D. 95, 1993 U.S. Dist. LEXIS 9629, 1993 WL 264206, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bott-v-four-star-corp-mied-1993.