Morganroth & Morganroth v. DeLorean

123 F.3d 374, 48 Fed. R. Serv. 121, 38 Fed. R. Serv. 3d 348, 1997 U.S. App. LEXIS 21486, 1997 WL 460741
CourtCourt of Appeals for the Sixth Circuit
DecidedAugust 14, 1997
DocketNos. 95-1563, 95-1620
StatusPublished
Cited by51 cases

This text of 123 F.3d 374 (Morganroth & Morganroth v. DeLorean) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morganroth & Morganroth v. DeLorean, 123 F.3d 374, 48 Fed. R. Serv. 121, 38 Fed. R. Serv. 3d 348, 1997 U.S. App. LEXIS 21486, 1997 WL 460741 (6th Cir. 1997).

Opinion

MERRITT, Circuit Judge.

OPINION

This case concerns a fee dispute between a lawyer and two of his former clients. Following a trial that lasted over three months, a jury awarded the lawyer over five million dollars in compensatory damages and five million dollars in punitive damages, but returned a verdict in favor of the former clients on the lawyer’s RICO claim. The district court struck the punitive damages award on the ground that punitive damages are not allowed under Michigan law. The former clients appeal the compensatory and consequential damages award on a myriad of grounds discussed below. The lawyer cross-appeals the punitive damages issue. For the reasons set forth below, we AFFIRM the compensatory damages award, we AFFIRM the district court’s alteration of the judgment to strike the punitive damages, and we AFFIRM the denial of the defendants’ post-trial motion for Rule 11 sanctions on the plaintiffs’ RICO claims.

I

FACTS

The plaintiffs, Mayer Morganroth and his law firm, Morganroth & Morganroth, represented the defendants, John DeLorean and Logan Manufacturing (which is now Ecclesiastes 9:10-11-12, Inc.), for a period of approximately ten and one half years during the 1980’s and early 1990’s. The scope of representation included a wide range of litigation and transactional matters, including criminal actions, divorce proceedings, bankruptcy and legal malpractice cases, tax matters, and various corporate transactions. During the course of much of this representation, DeLorean was the sole owner of Logan. Although DeLorean and Logan made a few partial payments to Morganroth for his services, Morganroth claims that they have not paid him for the vast majority of his work. According to Morganroth, the defendants’ assets were frozen due to a variety of lawsuits and restraining orders. Morganroth claims that he continued to represent the defendants despite not getting paid based on DeLorean’s assurances that the defendants would pay him in full once their assets were unfrozen.

In January of 1993, DeLorean received $5,750,000 from the sale of Logan’s assets. Rather than paying Morganroth, however, DeLorean filed a malpractice action against him in New York. That action has been dismissed and is unrelated to the current action. Shortly after DeLorean filed that suit, however, Morganroth brought this action seeking to recover his fees. Morganroth alleged RICO violations, fraud, breach of express contract, breach of implied contract, account stated, and unjust enrichment. The jury found for the defendants on the RICO claims, but found both DeLorean and Logan liable for fraud, breach of express contract, and account stated. Because it found that DeLorean and Logan had breached express contracts, the jury did not make any findings with respect to Morganroth’s claims for breach of implied contract, quantum meruit, and unjust enrichment. The jury awarded the plaintiffs $4,739,894 in past due fees and expenses ($3,427,905 from DeLorean and $1,311,989 from Ecclesiastes) and $600,000 for lost business and income. In addition, the jury imposed $5,000,000 in punitive damages against DeLorean.

After the trial and verdict, the defendants filed motions seeking Rule 11 sanctions for Morganroth’s RICO claims and asking the court to strike the punitive damages award. The district court denied the Rule 11 motion, but struck the punitive damages award based on Michigan law.

II

ANALYSIS

The parties have raised a myriad of issues on appeal. We will deal with each issue in turn.

[379]*379A. Admission of Irrelevant “Bad Character” Evidence

The defendants claim that Morganroth’s RICO cause of action was a sham claim. They argue that by including this claim, Mor-ganroth was able to present evidence of De-Lorean’s bad character that was not relevant to any of Morganroth’s other claims. The defendants argue that the district court erred by denying their motion to dismiss the RICO claim and their motion to try that claim separately. Because of these errors, they claim, Morganroth’s “bad character” evidence unfairly prejudiced DeLorean’s defense of the contract, fraud, and account stated claims. We need not review the district court’s rulings on DeLorean’s RICO motions, however. Instead, we find that, with one exception, the evidence about which DeLorean complains was either presented with no contemporaneous objection or was relevant to the non-RICO claims. The one exception is not sufficiently prejudicial to warrant a new trial.

1. Failure to Pay Other Attorneys

Morganroth presented evidence that DeLorean failed to pay a number of his prior attorneys. DeLorean now complains, in particular, about Thomas Kimmerly’s testimony that DeLorean owed him three million dollars (R. 291 at 156) and Howard Weitzman’s testimony that DeLorean owed him two million dollars (R. 289 at 128 & 141-44). At trial, however, DeLorean did not assert objections based on relevance, bad character evidence, or prejudice to this testimony or any of the other evidence that DeLorean did not pay other lawyers. DeLorean did object when his former wife Christina Thomopoulos, testified that he had not paid prior lawyers, but his objection was based only on the marital privilege. The court overruled that objection, and DeLorean did not make any objection to the substance of the testimony. By consistently failing to object to this evidence, DeLorean waived this claim.

Even if DeLorean had not waived this claim, evidence that DeLorean consistently failed to pay other lawyers was relevant to prove the element of intent to defraud in Morganroth’s fraud claim. See United States v. Ellzey, 874 F.2d 324, 329 (6th Cir.1989); Fed.R.Evid. 404(b) (“Evidence of other ... wrongs ... may ... be admissible for ... proof of ... intent_”). DeLorean accurately cites United States v. Jerkins, 871 F.2d 598, 603-05 (6th Cir.1989) for the proposition that evidence of other wrongs is admissible under Rule 404(b) only if those wrongs were near in time and substantially similar to the actions at issue and the evidence is not unduly prejudicial. The evidence that DeLo-rean failed to pay other attorneys meets this test. Jerkins explicitly states that the other acts need not be identical to the act as issue. DeLorean’s non-payment of other attorneys is not dissimilar to his nonpayment of Mor-ganroth in any material way. With respect to nearness in time, the Jerkins court upheld admission of prior bad acts that had occurred six years before the activities at issue in that case. Under that standard, DeLorean’s nonpayment of attorneys whose representation of DeLorean overlapped with Morganroth’s is clearly sufficiently near in time. Finally, the probative value of this evidence to demonstrate fraudulent intent, which is not easily susceptible of proof, far outweighs its minor prejudicial effect.

2. Forging of Signatures and Documents

DeLorean’s ex-wife, Christina Tho-mopoulos, testified that she observed DeLo-rean practicing forging signatures, aging documents, handling documents with rubber gloves, and steaming open envelopes.

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123 F.3d 374, 48 Fed. R. Serv. 121, 38 Fed. R. Serv. 3d 348, 1997 U.S. App. LEXIS 21486, 1997 WL 460741, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morganroth-morganroth-v-delorean-ca6-1997.