BOBBY N. HARMON
Louisville, Kentucky 40229
Respondent, pro se
THE ARBITRATION TRIBUNALS OF THE
AMERICAN ARBITRATION ASSOCIATION
In the matter of the Arbitration between MARY LOU WOO, Trustee, Claimant, and Bobby N. Harmon, Respondent
Case No. 74 166 00491 03 JUSC
RESPONDENT’S MOTION TO DISMISS COMPLAINT OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT
ARBITRATION
DATE: June 14, 2004 and June 15, 2004
TIME: From 9:00 A.M. (Hawaii Time)
BEFORE: Judith Neustadter
________________________________
RESPONDENT’S MOTION TO DISMISS
THE COMPLAINT OR IN THE ALTERNATIVE
FOR SUMMARY JUDGMENT
Respondent BOBBY N. HARMON hereby submits this MOTION TO DISMISS THE COMPLAINT OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT, and prays that this Arbitration dismiss the above referenced matter, or in the alternative grant the Respondent a summary judgment, and that costs be granted to the Respondent, for the following reasons which shall be further defined and set forth in the accompanying memorandum filed herewith:
THE CLAIMS SET FORTH IN THE COMPLAINT ARE BARRED OR OTHERWISE PRECLUDED BY:
A. Claimant’s own NEGLIGENCE and OMISSIONS.
B. Acts of BAD FAITH AND/OR FRAUD.
This Motion is made pursuant to the Arbitration Schedule issued by the Arbitrator, the Commercial and Employment Rules of Arbitration issued by the American Arbitration Association, and is supported by the attached memorandum.
DATED: Louisville, Kentucky, May 4, 2004.
__________________________________
BOBBY N. HARMON
Respondent, pro se
MEMORANDUM IN SUPPORT OF RESPONDENT’S MOTION TO DISMISS THE COMPLAINT OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT
The claims set forth in the Complaint are barred or otherwise precluded by the following:
A. NEGLIGENCE and OMISSIONS on the part of Claimant, her attorney and her accounting firm.
1. In her MEMORANDUM IN SUPPORT OF CLAIMANT’S MOTION TO STRIKE WITNESSES (pp 13-14), Claimant states:
“On July 1, 1999, Federal Insurance filed a motion to dismiss Respondent’s complaint. On July 9, 1999, PricewaterhouseCoopers & Lybrand, LLP filed a motion to dismiss Respondent’s complaint. On July 23, 1999, Marsh & McLennan Companies, Inc. filed a joinder in Federal Insurance’s motion to dismiss Respondent’s complaint. On July 29, 1999, P&C filed a joinder in Federal Insurance’s motion to dismiss Respondent’s Complaint. On July 31, 1999, John Mullen & Co., Inc. filed a joinder in Federal Insurance’s motion to dismiss Respondent’s Complaint. It [sic] this time, Respondent was represented by Arnold Phillips.
“On August 9, 1999, the Judge David Ezra of the U.S. District Court stated his intention to grant all the motions to dismiss. Based on Judge Ezra’s statement, Respondent voluntarily agreed to dismiss his RICO complaint against Federal Insurance, PricewaterhouseCoopers, LLP, Torkildson, Katz, Marsh & McLennan Companies, Inc., and John Mullen & Co., Inc.
“The court gave Respondent leave to file an amended complaint that removed the dismissed parties or restated the basis for any claim against the dismissed defendants and the other defendants still parties to the RICO Lawsuit. The court informed Respondent and his counsel that if the amended complaint was not filed within thirty days from the date of the order, the dismissal of defendants would be with prejudice. Respondent failed to timely file an amended complaint and, accordingly, the dismissal all claims against the dismissed defendants was with prejudice.”
Contrary to the preceding statement, it was CLAIMANT’S FAILURE to file an amended complaint, and NOT the failure of the Respondent or his attorney, as clearly evidenced in Claimant’s Exhibit 7 and Exhibit 8.
Claimant’s Exhibit 7 is a letter dated October 29, 1999, addressed to Trustee Mary Lou Woo from my then-attorney Arnold Phillips II, in which he stated:
“With regard to the above reference bankruptcy proceeding from our telephone conversations and the meeting that we attended in Gregg Dunn’s office this afternoon you indicated that you will take over all the decisions with regard to the litigation of Bobby Harmon in the Hawaii Supreme Court, the First Circuit court proceeding and the RICO proceeding in United State District court.
“We understand that you are in control of the decisions regarding what is to be done on these cases and by whom. As you are aware the RICO amended complaint is due on Monday, November 1st....
“Please let me know if there are any questions or what you would like from me regarding this series of lawsuits.”
Claimant’s Exhibit 8 is a letter dated November 11, 1999, from Lissa H. Andrews addressed to Steven Guttman, Esq., in which she stated, in part:
“We represent Federal Insurance Company (“Federal”) in connection with the above-captioned matter. Federal was dismissed from this lawsuit pursuant to Judge David A. Ezra’s Order, entered August 9, 1999 (the “Order”). Pursuant to the Order, Federal was dismissed without prejudice for a period of thirty days. Judge Ezra also ruled that should Plaintiff Bobby Harmon fail to reinstate his action against Federal within the thirty day period, then the dismissal would be with prejudice....
“On September 3, 1999, less than thirty days from the entry of the Order, Plaintiff filed a Motion to Amend Complaint. ... Magistrate Kurren set a deadline of November 1, 1999 for Mr. Phillips to submit another proposed amended complaint to Jeffrey H.K. Sia, Esq., counsel for Defendant P&C Insurance Co., Inc., for review.
“On October 13, 1999, Plaintiff and his wife filed a Chapter 7 Petition in U.S. Bankruptcy Court. On October 28, 1999, Defendant P&C filed a Notice of Bankruptcy Filing by Plaintiff in this action. The Court’s docket sheet indicates that the filing of this Notice stayed the action...
.
“Plaintiff has no cause of action against Federal. As you were recently appointed counsel for the Bankruptcy Trustee, we wanted to advise you of the foregoing and Federal’s position relative to the filing of a motion for leave to file the proposed First Amended Verified Complaint. If you have any questions relative to the foregoing, or if you intend to pursue the filing of the proposed First Amended Verified Complaint against Federal, please call me so that we can first discuss the matter further....”
These two Exhibits provide clear evidence that it was understood by all parties that it was Trustee Mary Lou Woo’s responsibility to pursue Respondent’s claims against various third parties – not the responsibility of Respondent or his attorney. Claimant’s own negligence and omissions in not filing a timely Amended Verified Complaint resulted in allowing many of the Defendants in Harmon’s RICO lawsuit to escape liability and has caused Respondent to suffer irreparable harm and damages. The fact that Harmon was assured by Trustee Woo that she would “step into his shoes” and diligently pursue all existing claims against third parties was a major reason why he chose to declare bankruptcy, as he believed he did not have the financial means to adequately pursue these claims on his own.
2. The SETTLEMENT, RELEASE AND INDEMNIFICATION AGREEMENT and related documents (Claimant’s Exhibit 3) contained numerous errors, omissions and contradictions when filed with the Court for approval:
a. Trustee Mary Lou Woo was negligent in her filing of an incomplete and erroneous TRUSTEE’S MOTION TO APPROVE SETTLEMENT (Claimant’s Exhibit 1). This Motion was filed on February 18, 2000, to which was attached an incomplete and unsigned copy of the Settlement Agreement listed as Exhibit A (Claimant’s Exhibit 2). The effective date of the Settlement Agreement in this Exhibit A was stated as “February ___, 2000". The ORDER GRANTING TRUSTEE’S MOTION TO APPROVE SETTLEMENT (Claimant’s Exhibit 2), was filed on March 24, 2000. Yet the effective date on the copy of the SETTLEMENT AGREEMENT (Claimant’s Exhibit 3), which was attached to this Order, is shown as April 24, 2000. Still yet, the AGREEMENT was not signed by several parties to the Agreement until well after the date the Order was filed. Specifically, the AGREEMENT was not signed by PRICEWATERHOUSECOOPERS, LLP until April 26, 2000; by FEDERAL INSURANCE COMPANY until June 29, 2000; and by MARSH & McLENNAN COMPANIES until September 11, 2000.
b. Another critical omission in the SETTLEMENT AGREEMENT is the fact that EXHIBIT “5" is missing (the page only indicates: “TO BE PROVIDED BY STEVEN GUTTMAN, ESQ”). The reason that this EXHIBIT “5" was not attached to Claimant’s Motion for Approval of Settlement was due to the fact that all parties had NOT agreed to, or signed, the Settlement Agreement at the time this Motion for Approval was filed. In other words, there had NOT been a mutual understanding or “meeting of the minds” among the parties at the time Respondent signed the AGREEMENT, or even when the Trustee filed her Motion to Approve Settlement.
When Respondent asked in his letter dated November 4, 2000, addressed to Bradley Tamm, why EXHIBIT “5" was not attached to the AGREEMENT, and what were the contents of this exhibit, the response which came from Steven Guttman in his letter dated December 14, 2000, (Claimant’s Exhibit 5) was, in part, as follows:
“You had forwarded to me Mr. Harmon’s letter addressed to you dated November 4, 2000. His letter inquired as to Exhibit 5 to the settlement agreement and expressed “concerns regarding possible misrepresentations” in regard to the settlement. I telephoned you upon receipt of your transmittal letter enclosing Mr. Harmon’s correspondence and have been meaning to further follow up with you by letter.
“As we discussed, Exhibit 5 is the bankruptcy court pleading entitled, ‘Order Approving Settlement, Release and Indemnification Agreement. I believe you have a copy of this Order, but if not, please telephone Terri Viernes of my office and she will provide you with a filed copy of the pleading.”...
In fact, as Respondent later learned, Exhibit 5 was NOT the Order, and the reason that it was not attached to the Settlement Agreement when it was filed with the Court for approval was due to the fact that, unknown to Respondent, secretive Settlement negotiations were still continuing among some of the parties to the Agreement. Consequently, this was either another serious error or omission on the part of Steven Guttman, or a fabrication in order to conceal the fact that the Settlement Agreement had not actually been approved and signed by all parties at the time of the filing of the TRUSTEE’S MOTION TO APPROVE SETTLEMENT.
3. The ORDER GRANTING TRUSTEE’S MOTION TO APPROVE SETTLEMENT (Claimant’s Exhibit 2) was filed with the Court on March 24, 2000. This Order stated, “The Motion to Approve Settlement Agreement (“Motion”), filed herein on February 1, 2000, by Trustee MARY LOU WOO (“Trustee”), came on for hearing on March 22, 2000....” The date of the filing of the Motion was actually February 18, 2000, and not February 1, 2000.
This Order was allegedly approved by JUDGE LLOYD KING on March 24, 2000; however, the Order was not actually signed by Judge King, but rather was “rubber-stamped” with his printed name. There are no initials of any person who may have “rubber-stamped” the document, which brings into serious question whether or not Judge King actually reviewed and approved this Order, or if he actually reviewed the Settlement Agreement which contained numerous factual errors and omissions, did not state an effective date, and was not signed by all parties.
4. Claimant’s Disputed Issue No. 2 in this Arbitration states: “Whether the payment of settlement proceeds under the Agreement constitute wages from the Kamehameha Schools and are entitled to such treatment.” For various letters on this issue, refer to Respondent’s Exhibit 25: DEBTOR BOBBY HARMON’S OBJECTION TO FINAL REPORT AND COMPENSATION APPLICATION.
Briefly, however, Respondent’s major arguments regarding this issue are as addressed in the following letters:
o Arnold Phillips letter to Steven Guttman dated November 17, 1999, in which he stated, in part:
“On the other litigation the major element of damages which Mr. Harmon has is his loss of income and benefits from his employment at KSBE. Whether the damages are found to be due as a result of the RICO violation, the whistle blower action, wrongful termination or breach of contract they would cover the same elements of damage for the same time - November 1996 to date of trial....
“For the four year period of time the claim for salary and benefits would be for $364,000 exclusive of interest....”
o Harmon’s letter dated February 24, 2001, addressed to Personnel Director, Kamehameha Schools Bishop Estate (Respondent’s Exhibit 19) in which he stated, in part:
“This is to inform you that I have not yet received my Form W-2 and Form 1099-R for the year 2000....
“The 2000 Form W-2 is for the Wage Income I received last year in Settlement of various lawsuits with Kamehameha Schools Bishop Estate. The Form 1099-R is for the Retirement Income payments I received from my Pension Plan....
“I would also like to request at this time your estimates for the revised monthly Retirement Benefits under my Kamehameha Pension Plan due to the addition of the Wage Income received in the Settlement....”
o Matt Tsukazaki’s letter of February 28, 2001, addressed to Arnold T. Phillips, Roy F. Hughes and Bradley R. Tamm, in which he stated, in part:
“Enclosed please find a copy of a February 24, 2001 letter from Bobby N. Harmon to the Personnel Director of Kamehameha Schools....
“In addressing Mr. Harmon’s letter, we note that the settlement payment was not classified as wages and was not compensation in return for services. Mr. Harmon will not be receiving a W-2 for that amount. Nor will he be receiving a Form 1099-R as the settlement would not have adjusted his total earned income at Kamehameha Schools and would not have affected the amount of his retirement benefits....”
o Harmon’s letter to Steve Guttman dated March 28, 2002, which quotes from an article published in The Bureau of National Affairs’ Corporate Counsel Weekly (November 8, 2000) entitled: Lawsuit Settlements: Tax Issues for Corporate Counsel. Briefly, the article stated:
“As all companies know, payments that are in the nature of wages are subject to withholding requirements for federal income tax, social security and unemployment tax, and generally state income and employment taxes as well.
“If a lawsuit is brought regarding some kind of employment discrimination or wrongful termination, and a settlement is reached, the question is what portion of the settlement ought to be treated as wages....
“A word should be said about penalties a company may face. The penalty for failure to withhold is significant . . . It is important to make this withholding determination before the case is fully resolved. . . .”
The Settlement Agreement (p. 10) states, “RELEASORS understand and agree that the settlement amounts and other consideration described above constitute a complete compromise, accord and satisfaction, waiver and release of all claims for general and special damages, physical pain and emotional distress, and pain and suffering related to injury to reputation.” It is RESPONDENT’S understanding that SPECIAL DAMAGES include wage loss; therefore, this clause in the AGREEMENT does not preclude the fact that some or all of the settlement amount could, and should, be treated as wage loss. Added to this is the fact that Bradley Tamm stated in one of the settlement conferences that 100% of the settlement amount could be “characterized” as wage income, and all attorneys present at that meeting were in agreement with this characterization.
It cannot be denied that a large portion of the special damages suffered by Respondent in this case consisted of the loss of wages and employee benefits. The only issue that should have been a matter for discussion during the settlement negotiations was the percentage of the settlement amount that was to be considered wages. Due to the fact that all parties at the table, in the presence of Steven Guttman and Judge Kurren, agreed with Bradley Tamm’s proposal that 100% of the amount would be characterized as wages, I accepted this proportional allocation as did all other parties at that conference. It was not until months after the Agreement was signed, and Respondent began to question when he would be receiving his IRS Forms W-2 and 1099-R, that Matt Tsukazaki responded on Kamehameha Schools’ behalf, stating that “... the settlement payment was not classified as wages and was not compensation in return for services.” This 180-degree reversal on the part of Kamehameha Schools raised some serious issues in the mind of the Respondent.
First of all, which party or parties in this case actually had the responsibility and the authority to determine how the settlement payment was to be classified. Respondent was led to believe at the time by his attorney that this was an issue which needed to be mutually agreed upon by all parties. It was, and still is, Respondent’s understanding that if there were any questions as to how, and in what proportions, the Settlement payment was to be classified and distributed, these issues should have been negotiated until all parties had a clear understanding of the matter, and a MUTUAL AGREEMENT had been reached, BEFORE the Settlement Agreement was drafted and signed. Since Matt Tsukazaki was also the drafter of the Settlement Agreement, it would appear that he also had the greater responsibility and opportunity to make certain that the terms of the Agreement were clear and unambiguous. If Kamehameha Schools’ intent had been that NONE of the settlement proceeds were to be classified as wages, then Matt Tsukazaki could have worded the Agreement to state simply that “NO PORTION OF THESE DAMAGES ARE TO BE CONSIDERED AS WAGES.”
A second question concerns the identity of the person, or persons, who had the ultimate responsibility and authority for coordinating Kamehameha’s legal defense, for decision-making relating to these issues, for paying their attorneys’ fees and costs, and for paying any settlements that were due in this case.
Since both Kamehameha Schools and P&C Insurance Company had insurance policies which should have protected them in this case, this ultimate authority would normally have rested with the insurance company’s authorized, INDEPENDENT CLAIMS ADJUSTER. The key question, then, should be WHO was the authorized claims adjuster responsible for coordinating the activities of Kamehameha Schools many lawyers in this case, and who had the decision-making and check-writing authority to settle this insurance claim. Connected to this question is the question of WHO - which attorney or attorneys for Kamehameha Schools and P&C Insurance Company - was coordinating this case with the insurance company’s adjuster. The answers to these questions have never been provided. As a consequence, it is still not known to the Respondent exactly WHO was ultimately responsible for making the erroneous decision that “none” of the Settlement was to be classified as wages. It was Matt Tsukazaki’s denial of this fact, however, and the lack of disclosure on the part of Kamehameha Schools and P&C Insurance Company as to WHO the true, independent Claims Adjuster was in this case, that was the proximate cause which gave rise to Respondent’s so-called “letter writing campaign”.
Therefore, Claimant’s unreasonable agreement with Matt Tsukazaki’s untenable position that the payments in the Settlement Agreement do not cover wage loss was incorrect and a further example of NEGLIGENCE and OMISSIONS on the part of the Claimant, her attorney and her accounting firm.
Therefore, Respondent maintains that Claimant and her attorney have made serious legal errors and omissions in this case which have caused grievous harm to the Respondent, and maintains that the instant arbitration proceedings have been brought for the improper purpose of covering up these errors and omissions.
B. Acts of BAD FAITH AND/OR FRAUD.
Section L of the SETTLEMENT AGREEMENT (Claimant’s Exhibit 3, pp. 14 and 16) states:
“1. No Representation. The Parties acknowledge that no promise, agreement, fact, or opinion not expressed herein has been made by or to them to induce this agreement and that this settlement is made with full knowledge of the facts and possibilities of the subject matters of this AGREEMENT....”
“14. Entire Agreement. This AGREEMENT is intended to be a fully integrated agreement and therefore contains all of the terms and agreements agreed upon between the Parties and supersedes and cancels each and every other prior conflicting agreement, promise and/or negotiations between them. Moreover, the terms of this AGREEMENT are contractual and not a mere recital.”
At the time Respondent signed the AGREEMENT on January 27, 2000, and at the time he received a check dated May 30, 2000, from the Bankruptcy Estate, he had no knowledge of the fact that all parties had NOT already agreed to the terms of the AGREEMENT and, in fact, had not made payments to the Estate. Claimant’s Exhibits 23 and 24 give factual evidence with regard to the ACTS OF BAD FAITH that were being perpetrated against Respondent during that time period.
Claimant’s Exhibit 23 is a letter dated June 2, 2000, from Steven Guttman to Respondent’s attorney Arnold Phillips, in which Mr. Guttman states, in part:
“Your letter asked for a settlement statement. Mr. Harmon had requested copies of the settlement checks. As to the former, the settlement agreement has the total amount being paid and except as to the $---------- paid over to your client this morning pursuant to his exemption claim, the balance is with the Trustee, subject to appropriate court orders for distribution. Based on communications from Jeff Sia, my impression is that you are aware of the issue they have raised and the coordination being done by Bob Katz as to the resolution of the issue. I have confirmed with Lissa Andrews that she has received the check from her client and is authorized to issue it upon receiving the fully signed side letter. I am uncertain as to who has been requested to sign the side letter and of those individuals, who has not signed off on it. If the matter of the remaining payment is not resolved soon, the Trustee is prepared to file the appropriate motion with the Bankruptcy Court. As to producing copies of the checks, I will take another look at the confidentiality provision. I know that until we started to receive payments, we did not know the specific payment allocation among the parties.
“Is the federal action officially still pending? If so, is there a further status conference scheduled? In my last conversation with Mr. Sia, there were 3 parties who had not paid the settlement amount, including Federal Insurance and the process to resolve the Federal Insurance matter was still under discussion....”
Claimant’s Exhibit 24 is a letter dated June 29, 2000, from Joell H. Yuen, Secretary to Lissa H. Andrews, addressed to Steven Guttman, in which Yuen states, in part:
“Enclosed please find the following:
o Faxed copy of Lissa H. Andrews’ executed Scope of Release Agreement;
o Faxed copy of Eugene Dominique’s executed Settlement, Release and Indemnification Agreement; and
o A check for $6,875.00 from Federal Insurance Company....”
Respondent was never informed by his attorneys, or by the Trustee, of “the issues” that had arisen with Federal Insurance Company, or that “side agreements” were being made between various other parties that were signatories to the AGREEMENT. Furthermore, Respondent was not provided a copy of the signed AGREEMENT until sometime in October, 2000. It is therefore evident that the Respondent was not, in the spirit of good faith and fair dealing, informed of all the facts in this case when he was induced to sign the Settlement Agreement. It is also evident that Steven Guttman was not acting in the spirit of good faith and fair dealings with respect to the interests of the Respondent or the Bankruptcy Estate when he was negotiating the settlement in this case.
WHEREFORE THE PREMISES CONSIDERED, the Respondent respectfully requests the Arbitrator:
(A) to dismiss the above-captioned matter with prejudice and grant costs to the Respondent, or in the Alternative,
(B) grant the Respondent a summary judgment and award costs to the Respondent.
DATED: Louisville, Kentucky, May 4, 2004.
_____________________________
BOBBY N. HARMON, pro se
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