RECEIVED by Michigan Court of Appeals 1/20/2012 5:03:41 PM

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2 STATE OF MICHIGAN IN THE COURT OF APPEALS IN RE MANUEL J. MOROUN and DAN STAMPER, Court of Appeals No Appellants, MICHIGAN DEPARTMENT OF TRANSPORTATION, Plaintiff, Wayne County Case No CK v DETROIT INTERNATIONAL BRIDGE COMPANY, and SAFECO INSURANCE COMPANY OF AMERICA, Defendants. {35809/1/DT DOCX;1} APPELLANTS MANUEL J. MOROUN AND DAN STAMPER S BRIEF ON APPEAL KERR, RUSSELL AND WEBER, PLC William A. Sankbeil (P19882) Joanne Geha Swanson (P33594) Attorneys for Appellant Manuel J. Moroun 500 Woodward Avenue, Suite 2500 Detroit, MI (313) was@krwlaw.com ORAL ARGUMENT REQUESTED MOGILL, POSNER & COHEN Kenneth M. Mogill (P17865) Jill M. Schinske (P70958) Attorneys for Appellant Dan Stamper 27 E Flint Street, 2 nd Floor Lake Orion MI (248)

3 TABLE OF CONTENTS INDEX OF AUTHORITIES... ii STATEMENT OF BASIS FOR JURISDICTION... v STATEMENT OF QUESTIONS PRESENTED... vi INTRODUCTION... 1 CONCISE STATEMENT OF FACTS AND PROCEEDINGS... 3 A. Mr. Stamper and Mr. Moroun... 3 B. Sanctions Imposed By the January 12 Order and Subsequent Proceedings... 9 ARGUMENT I. Where, in Litigation Between an Agency of the State and a Corporation, a Trial Court Orders Two Individuals Affiliated With the Corporation to Be Jailed Until the Trial Court Determines There Has Been Completion of a Construction Project Without Having Given Notice to Either to Show Cause Why They Should Not Be Personally Sanctioned, the Trial Court s Order is Unconstitutional, Violates the Notice and Hearing Requirements of MCL (2) and MCR 3.606(A), and Must Be Reversed II. III. IV. A. The Standard of Review is De Novo B. Mr. Moroun and Mr. Stamper Are Not DIBC C. Absent an Order to Show Cause Specifically Naming Mr. Moroun and Mr. Stamper, Neither Has Received the Fair Notice to Which They Are Entitled as a Matter of Due Process, Statute and Court Rule Because the Trial Court s Order Jailing Appellants Did Not Give Them the Keys To Their Cells and Was Not the Least Restrictive Alternative Adequate to the Proposed End, It Was a Manifestly Improper Use of the Civil Contempt Power and Is Invalid as a Matter of Law The February 1 Order Is Not Definite And Specific Enough To Serve As The Basis Of A Contempt Finding A. The Order DIBC Has Allegedly Violated Is Not Clear And Definite, A Prerequisite To Any Contempt Charge B. The February 1 Order Contains Contradictory Commands And It Is Therefore Impossible For DIBC To Comply C. The Court Has Abandoned Paragraph 8 Of The Gateway Project Thus Making It Impossible for DIBC To Finish Construction Where, As Here, the Judge Who Ordered Incarceration Acted As Both Accuser and Finder of Fact, and Has Become Personally Embroiled in the Litigation, Any Further Proceedings Regarding Appellants Should Be Held Before a Different Judge RELIEF REQUESTED {35809/1/DT DOCX;1} i

4 INDEX OF AUTHORITIES Cases Crampton v Department of State, 395 Mich 347; 235 NW2d 352 (1975) DeGeorge v Warheit, 276 Mich App 587; 741 NW2d 384 (2007) Edidin v Detroit Econ Growth Corp, 134 Mich App 655; 352 NW2d 288 (1984) Elliott v Bradshaw, 59 So3d 1182 (Fla App, 2011) Elliott v Smith, 47 Mich App 236; 209 NW2d 425 (1973) Grace v Center for Auto Safety, 72 F3d 1236 (CA 6, 1996) Henry v Rouse, 345 Mich 86; 75 NW2d 836 (1956) Holmes v Holmes, 281 Mich App 575; 760 NW2d 300 (2008) In re Contempt of Auto Club Ins Assoc, 243 Mich App 697; 624 NW2d 443 (2000) In re Contempt of Dudzinski, 257 Mich App 96; 667 NW2d 68 (2003) In re Contempt of Rochlin, 186 Mich App 639; 465 NW2d (1991) In re Contempt of Scharg, 207 Mich App 438; 525 NW2d 479 (1994) In re Contempt of Steingold, 244 Mich App 153; 624 NW2d 504 (2000) In re Hague, 412 Mich 532; 315 NW2d 524 (1982) In re MB, 101 Wash App 425; 3 P3d 780 (2000) In re Murchison, 349 US 133; 75 S Ct 623; 99 L Ed 942 (1954) In re Oliver, 333 US 257; 68 S Ct 499; 92 L Ed 682 (1948) {35809/1/DT DOCX;1} ii

5 In the Matter of Hirsch, 116 Mich App 233; 323 NW2d 349 (1982) In the Matter of Meizlish, 72 Mich App 732; 250 NW2d 525 (1976) Kline v Kline, 104 Mich App 700; 305 NW2d 297 (1981) KLN v State, 881 NE2d 39 (Ind App, 2008) Laker v Soverinsky, 318 Mich 100; 27 NW2d 600 (1947) Lawrence M Clarke, Inc v Richco Constr, Inc, 489 Mich 265; 803 NW2d 151 (2011) M & C Corp v Erwin Behr GmbH & Co, KG, 2007 US Dist LEXIS , unpublished opinion of the US District Court, ED Mich, issued February 9, 2007 (Docket No. 91-CV DT) M & M Aerotech, Inc v Dept of Treasury, 1999 Mich App LEXIS 2745 unpublished opinion per curiam of the Court of Appeals, issued November 23, 1999 (Docket No ) Mathews v Eldridge, 424 US 319; 96 S Ct 893; 47 L Ed 2d 18 (1976) Mayberry v Pennsylvania, 400 US 455; 91 S Ct 499; 27 L Ed 2d 532 (1971) Mead v Batchler, 435 Mich 480; 460 NW2d 493 (1990) NLRB v Cincinnati Bronze, Inc, 829 F2d 585 (CA 6, 1987) People v Johnson, 407 Mich 134; 283 NW2d 632 (1979) People v Kurz, 35 Mich App 643; 192 NW2d 594 (1971) People v Lowenstein, 118 Mich App 475; 325 NW2d 462 (1982) People v Matish, 384 Mich 568; 184 NW2d 915 (1971) Porter v Porter, 285 Mich App 450; 776 NW2d 377 (2009)... 12, 16 Project BASIC v Kemp, {35809/1/DT DOCX;1} iii

6 947 F2d 11 (CA 1, 1991)... 17, 18 Richmond Black Police Officers Ass n v City of Richmond, 548 F2d 123 (CA 4, 1977) Shillitani v United States, 384 US 364; 86 S Ct 1531; 16 L Ed 2d 622 (1966) Soloman v Western Hills Development Co, 110 Mich App 257; 312 NW2d 428 (1981) Spallone v United States, 493 US 265; 110 S Ct 625; 107 L Ed 2d 644 (1990)... 16, 24, 25 Taylor v Hayes, 418 US 488; 94 S Ct 2697; 41 L Ed 2d 897 (1974) United Mine Workers v Bagwell, 512 US 821; 114 S Ct 2552; 129 L Ed 2d 642 (1994)... 15, 21, 22, 24 Wayne County Executive v Acorn Investment Co, 2005 Mich App LEXIS 6, unpublished opinion per curiam of the Court of Appeals, issued January 4, 2005 (Docket Nos ) Wechsler v Aetna Life Ins Co, 83 Mich App 320; 268 NW2d 394 (1978) Wilcox v Gauntlett, 200 Mich 272; 166 NW 856 (1918)... 13, 14 Statutes MCL (4) MCL (2)... 14, 15, 19 MCL Other Authorities Schulman, Moscow & Lesser, Michigan Corporation Law & Practice (2012 Supp) Rules MCR MCR 3.606(A)... 3, 15, 19 Constitutional Provisions Michigan Constitution, 1963, Art United States Constitution, Am V and XIV {35809/1/DT DOCX;1} iv

7 STATEMENT OF BASIS FOR JURISDICTION Jurisdiction exists in this Court pursuant to MCR 7.203(A), MCR and MCR 7.202(6)(a). Appellants Manuel J. Moroun and Dan Stamper appeal from an Opinion and Order entered by Wayne County Circuit Court Judge Edward Prentis on January 12, 2012 ordering their imprisonment in the Wayne County Jail as a sanction for the contempt of the Detroit International Bridge Company ( DIBC ) ( January 12 Order ) (Exhibit 1). Mr. Moroun and Mr. Stamper timely filed their Claim of Appeal the same day the January 12 Order was entered. {35809/1/DT DOCX;1} v

8 STATEMENT OF QUESTIONS PRESENTED 1. Whether the Trial Court s January 12 Order must be reversed because it indefinitely incarcerates non-parties Manuel J. Moroun and Dan Stamper until the Trial Court determines there has been completion of a construction project without having given them notice to show cause why they should not personally be sanctioned, or an opportunity to be heard, in violation of the United States and Michigan Constitutions and the notice requirements of MCL (2) and MCR 3.606(A)? Appellants Manuel J. Moroun and Dan Stamper say yes. The Trial Court says no. MDOT did not seek any sanction against Appellants. 2. Whether the Trial Court s January 12 Order indefinitely incarcerating Manuel J. Moroun and Dan Stamper is a manifestly improper use of the civil contempt power and invalid as a matter of law because it does not provide Mr. Moroun or Mr. Stamper the opportunity to purge the contempt by performing a specific unequivocal affirmative act and is not the least restrictive alternative adequate to the proposed end? {35809/1/DT DOCX;1} Appellants Manuel J. Moroun and Dan Stamper say yes. The Trial Court says no. MDOT did not seek any sanction against Appellants. 3. Whether the underlying February 1, 2010 Order used as the basis for sanctions is too vague and unclear to support an order to show cause? Appellants Manuel J. Moroun and Dan Stamper say yes. The Trial Court says no. MDOT would say no. 4. Whether any further proceedings regarding Appellants should be held before a different judge when the judge who ordered incarceration acted as both accuser and finder of fact and has become embroiled in the case? Appellants Manuel J. Moroun and Dan Stamper say yes. The Trial Court says no. MDOT would say no. vi

9 INTRODUCTION This appeal challenges the January 12 Order of Wayne County Circuit Court Judge Prentis Edwards incarcerating Appellants Manuel J. Moroun and Dan Stamper in the Wayne County Jail as a sanction for the contempt of the Detroit International Bridge Company ( DIBC ). Mr. Moroun and Mr. Stamper are not DIBC. They have committed no crime. They have not been charged with violating any court order, nor have they been heard on any such charge. Mr. Moroun and Mr. Stamper had no notice that their personal liberty was at risk, and have not been told what they personally did or failed to do to warrant this sanction. The January 12 Order should be reversed for the following reasons. First, the incarceration of Mr. Moroun and Mr. Stamper without notice, hearing or an opportunity to defend violates the basic right to due process guaranteed to every citizen by our Federal and Michigan Constitutions, and conflicts with the statutes and court rules that govern contempt proceedings in the circuit court. The January 12 Order requires Mr. Moroun and Mr. Stamper to remain in jail indefinitely or until DIBC fully complies with the Court s February 1, 2010 Order ( February 1 Order ) (Exhibit 2) granting the request of the Michigan Department of Transportation ( MDOT ) for specific performance of a construction contract and directing DIBC to complete its portion of the Ambassador Bridge Gateway Project. Second, the January 12 Order violates the fundamental tenet of civil contempt that the contemnor holds the keys to the jail in his pocket. The January 12 Order fails to identify any specific act that Appellants must perform to purge the contempt and secure their release. The Order simply states that Appellants will be released when DIBC has fully complied with the February 1 Order, which means completion of the Project. MDOT believes completion of the {35809/1/DT DOCX;1} 1

10 Project to its satisfaction will take a minimum of nine to twelve months. The January 12 Order is, in essence, an indefinite prison sentence that fails to provide either Appellant with the proverbial key to his own release that is the hallmark of civil contempt. Further, the January 12 Order is not the least restrictive alternative adequate to the proposed end. Third, the underlying February 1 Order an order relating to an extremely complex construction project the drawings as to which run to nearly 230 pages and involve extensive construction activity under traffic at the busiest international crossing in North America -- is not sufficiently definite and specific to support an order to show cause or contempt proceedings against Mr. Moroun, Mr. Stamper or DIBC. Finally, the Trial Court Judge improperly acted as both accuser and factfinder. Throughout these proceedings, MDOT never sought contempt against Mr. Moroun or Mr. Stamper individually; it was the Court, acting on its own, that injected Mr. Moroun and Mr. Stamper into this process by ordering Appellants to appear in court on January 12 and imprisoning them without a proper show cause hearing for DIBC s asserted failure to comply with the Court s February 1 Order. The Trial Court improperly attributed to DIBC an unexplained desire not to complete the Project when, in fact, DIBC is strongly motivated to complete the Project as soon as possible, so that it can facilitate travel for commerce and the public, put an end to costly litigation and get on with the business of the company. However, the underlying February 1 Order which orders specific performance of an executory construction contract that leaves issues of design and construction plans to the parties further agreement is not sufficiently specific to resolve the issues between MDOT and DIBC, and the Trial Court has refused DIBC s requests for clarification of the February 1 Order, alternative dispute resolution, {35809/1/DT DOCX;1} 2

11 or trial on the remaining count of MDOT s complaint. As a result, the Trial Court has prevented the entry of a final order and, consequently, a right to appeal by DIBC. Any further proceedings regarding Appellants in the trial court should be assigned to a different judge. CONCISE STATEMENT OF FACTS AND PROCEEDINGS In 2009, MDOT filed suit in Wayne County Circuit Court against DIBC and the Safeco Insurance Company of America ( Safeco ) arising from a dispute between MDOT and DIBC over completion of a portion of a multi-million dollar construction project known as the Ambassador Bridge Gateway Project. MDOT, DIBC and Safeco are the only parties to the lawsuit. The underlying dispute arises out of the parties differing interpretations of their respective contractual obligations. Mr. Moroun and Mr. Stamper are not parties to the action and have never been served with the process necessary to make them parties. A. Mr. Stamper and Mr. Moroun Dan Stamper is the President and a director of DIBC. He is 62 years-old, married and a life-long Michigan resident with deep roots in the community. Mr. Stamper is the primary decision-maker regarding the Gateway Project, as he has candidly acknowledged in testimony before the Trial Court. September 1, 2011 Transcript ( 9/1 Tr. ) (Exhibit 3) at , 141. At no point in the underlying litigation has the Trial Court ordered Mr. Stamper to do or to refrain from doing any act, with one exception: On June 13, 2011, on MDOT s ex parte motion pursuant to MCR 3.606(A), the Trial Court ordered Mr. Stamper, in his capacity as President of DIBC, to appear before the court and show cause why the Detroit International Bridge Company should not be held in civil contempt for failure to comply with the terms and provisions of this Court s February 1, 2010, Opinion and Order. {35809/1/DT DOCX;1} 3

12 June 13 Order (Exhibit 4) (Emphasis added). As directed by the Trial Court, Mr. Stamper, in his capacity as President of DIBC, appeared at each hearing on the order to show cause directed at DIBC. At no point in the underlying action has MDOT sought or evidenced entitlement to individual sanctions against Mr. Stamper. In particular, on October 21, 2011, MDOT filed its Proposed Findings of Fact and Conclusions of Law with respect to the show cause hearing, seeking the imposition of sanctions against DIBC and not seeking the imposition of any sanctions against Mr. Stamper or against any other individual (Proposed Findings, Exhibit 5). The Trial Court s November 3, 2011 Order ( November 3 Order ) (Exhibit 6) reiterates in its introductory paragraph that the matter is before the Court for an Order to Show Cause Hearing to determine whether the Detroit International Bridge Company (DIBC) should be held in civil contempt for failure to comply with the February 1, 2010 Order of this Court. Id. (emphasis added). The same order concludes that DIBC is in civil contempt of this Court. November 3 Order at 12. The Order does not find Mr. Stamper in contempt of court. Mr. Moroun is a director but not an officer of DIBC. See Moroun s Motion to Excuse and Brief (Exhibit 7) and Moroun s Reply (Exhibit 8). His trust is a minority shareholder in DIBC Holdings, the holding company that is the sole owner of DIBC. Id. Mr. Moroun is 84- years old and has had several heart procedures. January 12, 2012 Transcript ( 1/12 Tr. ) at 21 (Exhibit 9). He is married, a long-time Michigan resident, and deeply rooted in the community. This action has been pending for 2½ years. Prior to the November 3 Order directing Mr. Moroun to be present in court on January 12, Mr. Moroun had never appeared, and was never required to appear, at any court hearing related to the underlying litigation. He was not {35809/1/DT DOCX;1} 4

13 mentioned in any Court order or directed to take, or refrain from taking, any action. His testimony was never solicited by subpoena or affidavit and, except for testimony elicited by several general cross-examination questions propounded by an MDOT attorney relating to the corporate structure of DIBC, Mr. Moroun was not mentioned in any testimony. 1 The November 3 Order directed Mr. Moroun, for the first time, to attend a January 12 hearing scheduled by the Court to determine the appropriate sanctions to be imposed for DIBC s contempt. November 3 Order at 13. There was no notice that the Trial Court order directing Mr. Moroun to appear at the January 12 hearing was to adjudicate Mr. Moroun s conduct or to subject him to sanctions for DIBC s conduct. In the November 3 Order, Mr. Moroun, whom the Court incorrectly referred to as the owner of DIBC, was ordered to appear to ensure that the proper decision makers for DIBC are present. November 3 Order at 13. The only other reference to Mr. Moroun in the November 3 Order related to an option urged upon the Court by MDOT to appoint a Receiver to stand in the place of the owner of DIBC Manual Matty Moroun and its officers with authority to make decisions regarding implementation of the Order. November 3 Order at 12. The November 3 Order does not indicate that the purpose of requiring Mr. Moroun s appearance was to adjudicate his personal liberty, whether as a matter of civil or criminal contempt or for any other reason. By motion seeking to excuse his appearance from the January 12 hearing and to inform the Court in advance that Mr. Moroun was not the owner of DIBC, Mr. Moroun demonstrated 1 Mr. Moroun s name was mentioned at a September 1, 2011 hearing when Mr. Stamper was generally asked to whom he answers. Without answering specific to the Gateway Project, Mr. Stamper testified that he answers to the Centra Board and identified Mr. Moroun as a member of that board. As Mr. Moroun explained in his Reply, prior to 2008, DIBC was owned by Centra but is now wholly owned by DIBC Holdings. See Moroun Reply at 4 (Exhibit 8). {35809/1/DT DOCX;1} 5

14 that DIBC was wholly owned by DIBC Holdings, a fact MDOT later admitted. See MDOT Response to Motion to Excuse ( MDOT Resp., attached as Exhibit 10) at 2 (admitting that DIBC Holdings owns DIBC and is the sole owner of DIBC ) and MDOT Resp. at 3 (attaching March 30, 2010 corporate disclosure statement attesting that DIBC is wholly owned by DIBC Holdings). The November 3 Order did not indicate that a purpose of the hearing was to punish Mr. Moroun or Mr. Stamper for DIBC s actions, and there wasn t a scintilla of evidence to support any sanctions against Mr. Moroun or Mr. Stamper. Legally, under well-recognized principles of corporate law, a corporation s distinct legal identity immunizes its shareholders and directors from liability for the conduct of the corporation absent their active participation, and there were neither allegations nor evidence of any such acts by Mr. Moroun. Constitutionally, the federal and state Constitutions (along with applicable Michigan statutes and court rules) simply did not allow Mr. Moroun to be held in contempt or sanctioned for DIBC s contempt without factually supported notice and an opportunity to be heard. Shockingly, premised on procedural error and erroneous factual findings, and without regard for the well-accepted legal principles addressed below, the Trial Court ordered that Mr. Moroun, along with Mr. Stamper, be imprisoned for an indefinite period of time (until the Trial Court believes the Project is complete). 2 2 The Court s remarks at the January 12 hearing - repeated in the January 12 Order - illuminate the Court s refusal to distinguish between DIBC and Mr. Moroun. At the hearing, the Court remarked that DIBC has filed a Request for, to Excuse Mr. Moran Moroun from this hearing and that [I]t is the Detroit International Bridge Company s contention or claim that Mr. Moroun is not the owner of the Detroit International Bridge Company and that he has no authority regarding the Ambassador Bridge Gateway Project. 1/12 Tr. (Exhibit 9) at 13 (emphasis added). See also January 12 Order at 1 ( In addition, DIBC has a request that {35809/1/DT DOCX;1} 6

15 The Court s asserted reliance upon the record to support the premise that Mr. Moroun exercised decision-making authority over the Gateway Project is revealing. In the January 12 Order, the Court goes so far as to say that there has never been the slightest hint [t]hroughout these lengthy proceedings that Mr. Moroun does not have an ownership in the DIBC or have any authority related to this Project and [r]egardless of the designation assigned to Mr. Moroun, the record in this case clearly shows that he has the power over decisions with respect to the Project and the power to ensure compliance with the Order of this Court. January 12 Order at 2. The Court does not explain how it could possibly reach a factual conclusion based upon the absence of record evidence on this issue inasmuch as Mr. Moroun s authority was never an issue in the case, and all of the record evidence regarding responsibility for the Gateway Project places decision-making authority in Mr. Stamper. See 9/1 Tr. at , 141 (Exhibit 3). Nonetheless, the Court concluded that Mr. Moroun was a decision maker and used this conclusion as the basis for its decision to incarcerate Mr. Moroun. From the bench, the Court explained: The key, the key decision makers at the Detroit International Bridge Company, Manuel Moroun, Dan Stamper and Matthew Moroun have the responsibility to ensure that the Detroit International Bridge Company fully comply with the order of this Court. Control of the compliance process is in the hands of these key decision makers at the Detroit International Bridge Company. 1/12 Tr. at Similarly, identifying Mr. Moroun, Mr. Stamper and Matthew Moroun as key decision makers, the January 12 Order states that DIBC decision makers have the Manuel Matty Moroun be excused from attending the January 12, 2012 hearing. It is the contention of DIBC that Mr. Moroun is neither the owner of the DIBC nor a decision maker regarding the Ambassador Bridge Gateway Project (Project). DIBC therefore asserts that Mr. Moroun s presence at the hearing would not assist the Court in devising an appropriate sanction ) (emphasis added). The Court was wrong in stating DIBC was making the request. Mr. Moroun, through his individual counsel, filed the motion to excuse. {35809/1/DT DOCX;1} 7

16 requisite understanding of the project to ensure its timely completion, that control of the compliance process is in the[ir] hands, and that they have the obligation to ensure the completion of [DIBC s] portion of the Project in accordance with the February 1, 2010 Order. January 12 Order at 4. This was the first time throughout these lengthy proceedings that the Trial Court had ever intimated that it intended Mr. Moroun to be held personally liable or responsible for DIBC s compliance with the Court s orders or that it believed that Mr. Moroun had made decisions contrary or inconsistent with the Court s orders. At no time had Mr. Moroun ever been held to have personally violated any order of the Court, or ordered to show cause why he personally should not be held in contempt or imprisoned for DIBC s contempt. MDOT sought no relief against Mr. Moroun, as evidenced by MDOT s October 21, 2011 Proposed Findings of Fact and Conclusions of Law (Exhibit 5), and each of the show cause orders entered by the Trial Court have been directed solely to DIBC. See, e.g., 4/27/2010 Order to Show Cause (Exhibit 11); 6/13/2011 Order to Show Cause (Exhibit 4). Further, nothing in the record supports the Trial Court s perception of Mr. Moroun as a decision maker regarding the Gateway Project or DIBC s compliance with court orders. There is nothing in the record regarding Mr. Moroun s understanding of the project. There is absolutely no evidence that Mr. Moroun assumed [c]ontrol of the compliance process or exerted power and control over decisions regarding compliance with the February 1, 2010 Court Order or construction of DIBC s portion of the Project. January 12 Order at 4. Nor is there any evidence that Mr. Moroun did not intend to carry out construction of [DIBC s] portion of {35809/1/DT DOCX;1} 8

17 the Project in conformity with the Order of this Court, without the Court imposing meaningful coercive measures. Id. at 5. B. Sanctions Imposed By the January 12 Order and Subsequent Proceedings On January 12, 2012, the Trial Court announced the sanctions it was imposing as a result of its finding that DIBC was in civil contempt of court. After ordering DIBC to pay a fine of $7, within 14 days and directing MDOT to submit within 14 days its costs and attorney fees incurred in the litigation, the Court ordered the immediate jailing of Mr. Moroun and Mr. Stamper: IT IS ORDERED THAT Manuel Matty Moroun and Dan Stamper shall be imprisoned in the Wayne County Jail until the Detroit International Bridge Company complies with the February 1, 2010 Order of this Court. IT IS ORDERED THAT the imprisonment of Manuel Matty Moroun and Dan Stamper shall cease when the Detroit International Bridge Company has fully complied with the February 1, 2010 Order of this Court or they no longer have the power to comply with the February 1, 2010 Order of this Court. IT IS FURTHER ORDERED THAT this matter is continued until February 9, 2010 for further review of the status of the project and the appearance of the Vice President of DIBC, Matthew Moroun. January 12 Order at 6. See also 1/12 Tr. at 16. In ordering that Mr. Stamper and Mr. Moroun be jailed, the Trial Court did not state whether it was finding either or both in contempt of court or whether it was ordering them to be jailed as a sanction for its finding that DIBC was in civil contempt of court. 1/12 Tr. at Mr. Stamper and Mr. Moroun were not at any time given a trial or a hearing before being jailed. The January 12 Order indefinitely imprisons Mr. Moroun and Mr. Stamper until there is full compliance by DIBC (not by Mr. Moroun or Mr. Stamper) with the Court s February 1 Order (Exhibit 2). The February 1 Order stated in part that DIBC shall complete construction {35809/1/DT DOCX;1} 9

18 of its portion of the Gateway Project in accordance with the plans attached to the Performance Bond and the Maintenance Agreement. February 1 Order at 15. Based upon the work that MDOT asserts remains to be performed, incarceration would continue for a minimum of nine to twelve months the time necessary to complete the Project. For example, to complete modifications on Piers 11, 12 and 13, just one of the items MDOT insists needs to be completed, MDOT s own estimate is that such work will take 34 weeks. See MDOT s June 1, 2011 Motion for Relief To Ensure Real and Meaningful Progress (without exhibits) (Exhibit 12), at 3. This is just one item; the Trial Court has listed seven items that need to be completed. Upon announcement of the Trial Court s decision, Mr. Moroun and Mr. Stamper immediately moved (by oral and written motion) for release pending appeal and orally moved to stay the January 12 Order pending appeal. The Trial Court denied both motions. See Order Denying Release Pending Appeal ( Release Order ) (Exhibit 13) and Order Denying Stay Pending Appeal of Order Directing that Manuel J. Moroun and Dan Stamper Be Imprisoned in the Wayne County Jail ( Stay Order ) (Exhibit 14). Appellants immediately filed in this Court a Claim of Appeal from the January 12 Order, an Emergency Motion for Release Pending Appeal of Order of Imprisonment, and a Motion for Immediate Consideration. Late in the day of January 12, this Court granted immediate consideration of the Motion for Release and, on a 2-1 vote, denied release pending appeal (January 12, 2012 COA Order, Exhibit 15). Hours later and seeking immediate consideration, Appellants filed an Emergency Motion for Peremptory Reversal and/or For Stay of Enforcement. On January 13, 2012, this Court granted immediate consideration of the motion, stayed [e]nforcement of the January 12, 2012, order of the Wayne {35809/1/DT DOCX;1} 10

19 County Circuit Court... only with respect to the imprisonment of Moroun and Stamper, until further order of this Court ; and directed that Mr. Moroun and Mr. Stamper be released forthwith. The Court also ordered expedited briefing and hearing of Mr. Moroun s and Mr. Stamper s appeal (January 13, 2012 COA Order, Exhibit 16). On January 18, 2012, the Trial Court issued a further order indicating that at the impending February 9, 2012 civil contempt proceeding, a determination will be made regarding the need for further steps to coerce compliance with the Feburary 1, 2010 Order of this Court. January 18 Order (Exhibit 17). The Order states that the Court will review a January 6, 2012 report prepared for MDOT by HNTB regarding the estimated costs to complete DIBC s portion of the Project and costs MDOT may be incurring as a result of DIBC s delay. The Order also directs the court-appointed monitor to submit a report updating his January 5, 2012 report indicating work relating to DIBC s portion of the Ambassador Bridge Gateway Project performed between January 5, 2012 and February 3, 2012 and addressing the status of certain specified items. Id. The Order further directs MDOT to submit by February 6, 2012 an estimate of the time MDOT would require to complete DIBC s portion of the Gateway Project. {35809/1/DT DOCX;1} 11

20 ARGUMENT I. Where, in Litigation Between an Agency of the State and a Corporation, a Trial Court Orders Two Individuals Affiliated With the Corporation to Be Jailed Until the Trial Court Determines There Has Been Completion of a Construction Project Without Having Given Notice to Either to Show Cause Why They Should Not Be Personally Sanctioned, the Trial Court s Order is Unconstitutional, Violates the Notice and Hearing Requirements of MCL (2) and MCR 3.606(A), and Must Be Reversed. A. The Standard of Review is De Novo. 3 While a trial court s decision regarding a contempt motion is reviewed for an abuse of discretion, issues of law, including issues of constitutional law arising in the context of a contempt proceeding are reviewed de novo. DeGeorge v Warheit, 276 Mich App 587, 591; 741 NW2d 384 (2007); Porter v Porter, 285 Mich App 450, 455; 776 NW2d 377 (2009). B. Mr. Moroun and Mr. Stamper Are Not DIBC. The fiction underlying the January 12 Order is that non-parties Mr. Moroun and Mr. Stamper are tantamount to DIBC and stand in its place vis a vis the contempt proceedings. This is not so. It is an elemental principle of corporate law that the identities of shareholders, officers and directors are legally distinct from the corporation. As this Court explained in M & M Aerotech, Inc v Dept of Treasury, 1999 Mich App LEXIS 2745 at *13, unpublished opinion per curiam of the Court of Appeals, issued November 23, 1999 (Docket No ), 4 [i]t is well-established that a corporation is an entity separate from that of its individual shareholders, officers, and directors citing, Schusterman v Employment Security Comm n, 336 Mich 246, ; 57 NW2d 869 (1953) (emphasis added); Elliott v Smith, 47 Mich App 236, 240; 209 NW2d 425 (1973) ( The corporation is a separate and distinct legal entity, notwithstanding the 3 4 This de novo standard of review applies to each of the contempt issues raised. Unpublished opinions are attached as Exhibit 18. {35809/1/DT DOCX;1} 12

21 fact that Robert H. Smith was the sole shareholder, president of the corporation, and one of the directors ). Even if one of these gentlemen was a shareholder, which they are not, it would be of no legal moment. A shareholder s immunity from personal liability has, in fact, been codified. MCL (4) provides that [u]nless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he or she may become personally liable by reason of his or her own acts or conduct. See also, Schulman, Moscow & Lesser, Michigan Corporation Law & Practice (2012 Supp), 3.9(a), p 3-17 fn 57, citing, Gledhill v Fisher & Co, 272 Mich 353, 358; 262 NW 371 (1935), which states, A refusal to recognize the ordinary immunity of stockholders not only overturns a basic provision of statutory or common law, but is also contrary to a vital economic policy underlying the whole corporate concept, quoting, Powell, Parent and Subsidiary Corporations, p 6; Wechsler v Aetna Life Ins Co, 83 Mich App 320, 325; 268 NW2d 394 (1978) ( A corporation is a legal entity separate from its shareholders. ); Kline v Kline, 104 Mich App 700, 702; 305 NW2d 297 (1981), citing Bourne v Muskegon Circuit Judge, 327 Mich 175, 191; 41 NW2d 515 (1950); Soloman v Western Hills Development Co, 110 Mich App 257, ; 312 NW2d 428 (1981) ( Generally, the law treats a corporation as an entirely separate entity from its stockholders, even where one person owns all of the corporation s stock. [T]he trial court s finding of individual liability in the absence of any improper use of the corporate form is inequitable to [defendants] ). Directors are likewise not liable for the acts of the corporation. In Wilcox v Gauntlett, 200 Mich 272; 166 NW 856 (1918), plaintiff gave the seller a security deposit to protect against {35809/1/DT DOCX;1} 13

22 the buyer s failure to settle its account. Instead of retaining the deposit in a special account, the company commingled the deposit with its general funds. When the company later became insolvent, plaintiff sued the directors alleging that they were personally liable for negligently failing to ensure that the deposit was used for the single purpose for which it had been given. The Supreme Court disagreed, stating: Whether this act was done by Gauntlett and the other defendants, directors of the corporation, or by Gauntlett alone without their knowledge, the act was nevertheless a corporate act and not one of the individual. No personal liability of the directors arose under the circumstances and the verdict in their favor was properly directed. Id. at 275 (emphasis added). These principles are not arguable. Indeed, accepting the Trial Court s logic would mean that a shareholder could be held in contempt of court if a corporation did not satisfy the court s money judgment a preposterous proposition contrary to commercial law in every state. If the Trial Court s ruling is upheld, no one would ever again incorporate a business in Michigan, and corporations would be loathe to remain here. Thus, any such notion must be dispelled. With loss of personal liberty at risk a highly individual and closely guarded constitutional treasure this Court s first task is to determine whether Mr. Moroun and Mr. Stamper were individually accorded the due process rights required in contempt proceedings. As demonstrated below, they clearly were not. 5 5 See Mead v Batchler, 435 Mich 480, 498; 460 NW2d 493 (1990) ( It is axiomatic that the liberty interest of every citizen the right to personal, physical freedom is of paramount importance under the constitution. ) {35809/1/DT DOCX;1} 14

23 C. Absent an Order to Show Cause Specifically Naming Mr. Moroun and Mr. Stamper, Neither Has Received the Fair Notice to Which They Are Entitled as a Matter of Due Process, Statute and Court Rule. The right to be free from abusive use of the contempt power applies to everyone, regardless of wealth or poverty or whether the person at risk is publicly popular, unpopular or unknown. The United States and Michigan Constitutions (U.S. Const, Am V and XIV; Mich Const 1963, art 1, 17), MCL (2), and MCR all require that, except as to matters of summary criminal contempt, before any person may be incarcerated for civil or criminal contempt they must be given fair notice that they are being charged with contempt and a meaningful opportunity to be heard on that charge. The rights to be heard at a meaningful time and in a meaningful manner are the two most basic of an individual s rights to due process of law. It is, in fact, [t]he fundamental requirement of due process. Mathews v Eldridge, 424 US 319, 333; 96 S Ct 893; 47 L Ed 2d 18 (1976) (cites omitted) (emphasis added). Except in cases of summary criminal contempt, this right specifically applies in all cases of alleged contempt. In the well-known case of In re Oliver, 333 US 257, 275; 68 S Ct 499; 92 L Ed 682 (1948), a case arising out of Michigan s discredited one-man grand jury practice, the United States Supreme Court made it clear that due process of law... requires that one charged with contempt of court be advised of the charges against him, have a reasonable opportunity to meet them by way of defense or explanation, have the right to be represented by counsel, and have a chance to testify and call other witnesses in his behalf, either by way of defense or explanation. (emphasis added). See also Lawrence M Clarke, Inc v Richco Constr, Inc, 489 Mich 265, ; 803 NW2d 151 (2011); United Mine Workers v Bagwell, 512 US 821, 827; 114 S Ct 2552; 129 L Ed 2d 642 (1994), ( civil contempt sanctions... may be imposed in an ordinary civil {35809/1/DT DOCX;1} 15

24 proceeding upon notice and an opportunity to be heard ) (emphasis added); Spallone v United States, 493 US 265, 273; 110 S Ct 625; 107 L Ed 2d 644 (1990) (vacating findings of contempt against non-party individual members of city council); People v Johnson, 407 Mich 134, 149 fn 15; 283 NW2d 632 (1979). The right to meaningful notice is also codified in Michigan by statute and court rule. MCL (2) provides that in all cases of non-summary contempt, no person may be sanctioned unless opportunity has been given to defend. MCR 3.606(A) is even more detailed, requiring that the alleged contemnor receive notice that he or she is personally being charged with contempt. The rule provides in relevant part that For a contempt committed outside the immediate view and presence of the court, on a proper showing on ex parte motion supported by affidavits, the court shall either (1) order the accused person to show cause, at a reasonable time specified in the order, why that person should not be punished for the alleged misconduct; or (2) issue a bench warrant for the arrest of the person. (emphasis added). Notably and understandably, in a society that highly values individual freedom, the rule does not treat notice to an alleged contemnor as notice to the alleged contemnor s agents or employees. The case law as to notice has consistently reiterated the importance of these principles. In Porter, supra, 285 Mich App at , for example, this Court stated that in a civil contempt proceeding, the accused must be accorded rudimentary due process, i.e., notice and opportunity to present a defense (emphasis added). {35809/1/DT DOCX;1} 16 The failure to follow this process deprives the court of subject matter jurisdiction over the contempt

25 proceedings. In re Contempt of Steingold, 244 Mich App 153, ; 624 NW2d 504 (2000) (cite omitted). Importantly as to the instant matter, in In re Contempt of Auto Club Ins Assoc, 243 Mich App 697, ; 624 NW2d 443 (2000), this Court not only emphasized that a civil contempt proceeding must follow the procedures established in MCR 3.606, it also reversed a finding of contempt against the Auto Club Insurance Association where the order to show cause named only its attorney, not the association itself, as an alleged contemnor. See also Wayne County Executive v Acorn Investment Co, 2005 Mich App LEXIS 6 at *8-9, unpublished opinion per curiam of the Court of Appeals, issued January 4, 2005 (Docket Nos ) (vacating finding of contempt against non-party with ownership interest in subject properties and remand[ing] the case for the trial court to conduct a second show cause hearing to allow Karr to attend and present a defense ). Even where notice has been given, it must be specific. In In re Contempt of Rochlin, 186 Mich App 639, 649; 465 NW2d 388 (1990), for example, this Court reversed one of the criminal contempt charges against Rochlin where the charge was that he had perjured himself in failing to disclose his ownership interest in two automobiles and he was found guilty of contempt for having perjured himself in concealing a bank account. The First Circuit Court of Appeals illustrates these principles in Project BASIC v Kemp, 947 F2d 11, 17 (CA 1, 1991), making particularly clear the specificity of notice that is required before one may be held in contempt: [T]hose who would suffer penalties for disobedience must be aware not merely of an order s existence, but also of the fact that the order is directed at them. This tenet has not been stated frequently. Withal, the relative rarity of articulation testifies more to the sheer obviousness of the principle, cf., e.g., M. de Cervantes, {35809/1/DT DOCX;1} 17

26 Don Quixote de la Mancha, Pt. III, bk. 10 (1615) ( Forewarned, forearmed. ), than to doubts about its legitimacy. We think it is beyond serious question that, as a necessary prelude to a finding of contempt, the putative contemnor should have reasonably definite advance notice that a court order applies to it... A court order, then, must not only be specific about what is to be done or avoided, but can only compel action from those who have adequate notice that they are within the order s ambit. For a party to be held in contempt, it must have violated a clear and unambiguous order that left no reasonable doubt as to what behavior was expected and who was expected to behave in the indicated fashion... Project BASIC was cited with approval in Grace v Center for Auto Safety, 72 F3d 1236, 1241 (CA 6, 1996), where the court reiterated the high degree of specificity necessary in an order that is the basis of an allegation of contempt based on its violation: In a civil contempt proceeding, we have said, the petitioner must prove by clear and convincing evidence that the respondent violated the court s prior order. Glover v. Johnson, 934 F.2d 703, 707 (6th Cir.1991), citing N.L.R.B. v. Cincinnati Bronze, Inc., 829 F.2d 585, 590 (6th Cir.1987). The order must be definite and specific, in the words of Cincinnati Bronze, 829 F.2d at 591. In a formulation used by other circuits, the order must be clear and unambiguous. Project B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir.1991) (citing numerous cases). [U]nbroken lines of authority... caution us to read court decrees to mean rather precisely what they say, and ambiguities must be resolved in favor of persons charged with contempt. NBA Properties, Inc. v. Gold, 895 F.2d 30, 32 (1st Cir.1990) (Breyer, J.). (emphasis added). See M & C Corp v Erwin Behr GmbH & Co, KG, 2007 US Dist LEXIS at *15, unpublished opinion of the US District Court, ED Mich, issued February 9, 2007 (Docket No. 91-CV DT), report and recommendation adopted in part 2007 US Dist LEXIS 90092, unpublished opinion of the US District Court, ED Mich, issued December 7, 2007, quoting, 11A Wright, Miller & Kane, Federal Practice and Procedure (Civil 2d), 2960: [W]hen it is sought to charge a person with contempt who was not a party to the original action and thus not already within the jurisdiction of the court, that party must be served with process as in any other civil action. {35809/1/DT DOCX;1} 18

27 See also Richmond Black Police Officers Ass n v City of Richmond, 548 F2d 123, (CA 4, 1977) (due process violated, inter alia, when two of three appellants found in contempt even though not directed to show cause). In the instant case, the Trial Court s June 13, 2011 order to show cause did not place Mr. Moroun or Mr. Stamper on notice that either was personally charged with contempt. To the contrary, by not including either as a person who might be held in contempt at the hearing, especially after directing Mr. Stamper to show cause only why DIBC should not be held in contempt, the order affirmatively gave Mr. Moroun and Mr. Stamper notice that each was not a person who might be held in contempt. That neither Mr. Moroun nor Mr. Stamper has been a subject of the Trial Court s hearings as to whether DIBC is or is not in contempt of court is further reflected by the fact that (1) MDOT did not request a finding of contempt against either Mr. Moroun or Mr. Stamper in its October 21, 2011 Proposed Findings of Fact, Conclusions of Law, and Practical Recommendations (Exhibit 5) submitted following the conclusion of hearings on the June 13, 2011 order to show cause, and (2) the Trial Court s January 10, 2011 Order (Exhibit 19) and November 3, 2011 Order (Exhibit 6) found DIBC and not Mr. Moroun or Mr. Stamper in contempt of court and did not direct Mr. Moroun or Mr. Stamper personally to take or refrain from taking any action. Mr. Moroun and Mr. Stamper have had no notice whatsoever that they were personally at risk of being jailed for DIBC s contempt. Neither MDOT nor the Trial Court has ever alleged, let alone proven, that Mr. Moroun s or Mr. Stamper s acts or conduct make them personally liable for DIBC s asserted violations. If the Trial Court intended to imprison any specific individuals, it was required to afford them {35809/1/DT DOCX;1} 19

28 personal notice and an opportunity to defend in accordance with their federal and state due process rights, statutory law, court rules and case law. For all of these reasons, neither Mr. Moroun nor Mr. Stamper received the fair notice to which each was entitled as a matter of federal and state constitutional law, MCL (2) and MCR 3.606(A). The Trial Court s January 12 incarceration order denied due process of law and must be reversed. II. Because the Trial Court s Order Jailing Appellants Did Not Give Them the Keys To Their Cells and Was Not the Least Restrictive Alternative Adequate to the Proposed End, It Was a Manifestly Improper Use of the Civil Contempt Power and Is Invalid as a Matter of Law. The January 12 Order requires that Mr. Moroun and Mr. Stamper be jailed until the Detroit International Bridge Company complies with the February 1, 2010 Order of this Court and that their incarceration is to continue until the Detroit International Bridge Company has fully complied with the February 1, 2010 Order of this Court or they no longer have the power to comply with the February 1, 2010 Order of this Court. 6 {35809/1/DT DOCX;1} 20 While Appellants incarceration is to cease when DIBC has fully complied with the February 1, 2010 Order... or they no longer have the power to comply with the February 1, 2010 Order, the Order is a manifestly improper exercise of the civil contempt power for multiple reasons: 6 The January 12 Order does not expressly find either Mr. Moroun or Mr. Stamper in contempt of court. The Order refers to MCL as the basis for imposing contempt sanctions, January 12 Order at 5, but it does not state whether the Court was independently finding Mr. Moroun and Mr. Stamper in contempt of court or jailing them as a part of the sanction it was imposing against DIBC. This Court, in captioning this case as In re Contempt of Manuel J. Moroun and Dan Stamper and referring in its January 12, 2012 order to MCL as the basis for the Trial Court s order, appears to have concluded that the Trial Court found Mr. Moroun and Mr. Stamper in contempt. Appellants agree that, regardless of the absence of such a label in the Trial Court s order, its order was one of contempt.

29 1. The January 12 Order requires their incarceration but does not direct either Mr. Moroun or Mr. Stamper to take or refrain from taking any specific act or acts. 2. Appellants incarceration and release are entirely dependent on the actions of DIBC, regardless of who orders those actions or fails to do so on behalf of DIBC. 3. Completion of the remaining portions of the Gateway Project as ordered by the Trial Court will take from nine to twelve months. 4. The Gateway Project is a massive undertaking requiring multiple, frequent decisions and then follow-up action by engineers, contractors, subcontractors and others. Mr. Stamper, as president of DIBC and the person with overall responsibility for completion of DIBC s portion of the project, has issued and continues to issue orders to bring the Project to completion, but once he has issued the orders he can issue at any given point in time, follow through with these directives takes time, often weeks or months, yet the Trial Court s January 12, 2012 Order requires him to remain jailed until all work directed by him to be done has been completed. 7 In Bagwell, supra, the United States Supreme Court, in discussing civil contempt, stated civil contempt sanctions, or those penalties designed to compel future compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard. 512 US at 827. Imprisonment for a fixed term similarly is coercive when the contemnor is given the option of earlier release if he complies.... In these circumstances, the contemnor is able to purge the contempt and obtain his release by committing an affirmative act, and thus carries the keys of his prison in his own pocket. Id. at 828. In discussing fixed fines as a civil contempt sanction, the Court stated fixed fines also may be considered purgable and civil when imposed and suspended pending future compliance. Id. at Of course, jailing the key decision-maker while decisions need to be made and he is prepared to make them not only punishes rather than coerces, it also further materially impedes completion of the project. {35809/1/DT DOCX;1} 21