Judge Christopher Nuechterlein has heard the opening salvos in a request by former Forest River Inc. president Brad Mart to order billionaire Warren Buffett deposed in Mart’s wrongful-dismissal lawsuit.
Attorneys for Mart and Forest River appeared today (July 26) before Judge Nuechterlein, U.S. Federal Court, in South Bend, Ind. The request is “before the court,” a court official told RVBUSINESS.com, but no indication how soon the judge will rule was given.
Buffet’s Berskshire Hathaway Inc. owns Forest River.
Mart petitioned for a deposition of Buffett to demonstrate the parent company’s role in his firing, according to a June 17 motion in the court. Omaha, Nebraska-based Berkshire, one of the defendants named in Mart’s lawsuit, has said it wasn’t involved in the dismissal. In a July 6 brief, Berkshire asked the court to protect Buffett from questioning, Businessweek reported.
Mart’s lawyer is Stephen Kennedy, of Kennedy Clark & Williams PC in Dallas, who made the deposition request and argued his client’s position today in court. Kennedy spoke first, followed by Cary Lerman, of Munger Tolles & Olson LLP, Los Angeles, attorney for Berkshire Hathaway. Ron Lipinski, an attorney with Seyfarth & Shaw LLP, Chicago, spoke on behalf of Forest River and Pete Liegl.
Today’s hearing focused on Buffett and Berkshire Hathaway, jurisdictional thresholds and the standards the court should apply in the case.
The judge gave no outward statement outward indication how he would rule, other than saying he would issue his decision “soon.”
The request to depose Buffett, the world’s third-richest person, escalates a conflict that already includes Mart’s allegations of fraud and threats of violence at Forest River, the Elkhart, Ind.-based recreational vehicle maker. Mart’s chance of winning a settlement may improve if the judge orders the deposition.
Buffett isn’t accused of wrongdoing. His deposition would help determine facts of the case, and may lead to his testimony at trial.
The court may withhold an order for a deposition of Buffett, at least temporarily, and direct Mart to seek discovery through affidavits and interviews with lower-ranking Berkshire employees, lawyers said.
Mart requested Buffett’s deposition to combat Berkshire’s claim that the firm should be dropped from the lawsuit for lack of jurisdiction.
Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, the company said in a June 1 request to dismiss the case. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements can help show that.
Buffett, 79, bought Forest River in 2005 and left its CEO, Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint.
Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.
“There is no legitimate basis to the allegations of the threats or the fraud,” said Jeanine Gozdecki, lead attorney for Liegl and Forest River. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.” Gozdecki, of Barnes & Thornburg LLP, is seeking a dismissal.
Liegl said in a sworn statement that he runs Forest River independently of Berkshire and the parent company didn’t play a role in his decision to fire Mart. Liegl, who is also a defendant in the case, didn’t mention the allegations of fraud in a statement in support of his motion for a dismissal.
Mart has also asked to depose Berkshire CFO Mark Hamburg and Secretary Forrest Krutter. The company offered Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett, according to court filings. Mart rejected that offer. Berkshire’s Krutter declined to comment.
Priority One Financial Services, the recreational industry’s oldest and largest F&I outsourcing provider, announced on Tuesday (Feb. 9) an exclusive partnership with VertiSEL, a leading solutions provider for credit denials.
This venture will make credit-repair solutions available to marine and RV dealers and their customers that are seeking to secure financing for the purchase of a boat or RV, according to a news release.
Since 2007, auto dealers, including the nation’s No. 1 Chrysler dealer have utilized VertiSEL’s credit-solution program and have seen significant increases in sales revenue and customer satisfaction. Over 30% of the customers who enroll in the 90-day program return to purchase a unit from the dealership.
“With this exclusive partnership, Priority One can take a program that has had proven success in the auto industry and make it available to marine and RV dealers immediately.” said Gary Rademaker, strategic alliance director for Priority One, which was acquired in 2007 by Forest River Inc., a Berkshire Hathaway company.
Priority One will identify customers who do not currently qualify to finance a recreational purchase due to derogatory credit and refer them to VertiSEL’s 90-day credit improvement program. The service has proven to provide substantial increases in the credit score of clients who enroll and participate in the exclusive course. Priority One will monitor the customer’s progress and upon completion, qualified customers will be referred back to the dealership for purchase. This will ensure the customer has a pleasant and satisfying experience, and the dealership retains a customer and a sale, without any additional work for the dealership or their staff.
“This program can be the difference between making the sale or not and that’s the type of competitive advantage we are committed to bringing our dealers.” said Rademaker.
Priority One has been serving the marine and RV industry since 1987 and serves as the F&I managed services provider for hundreds of dealers nationwide. For more information, visit www.P1FS.com.
Founded in 2007, VertiSEL’s proprietary software and comprehensive tools put denied applicants back into dealerships ready and qualified to purchase. VertiSEL’s exclusive partnerships provide best-of-breed solutions to clients which are unobtainable outside of the VertiSEL solution. For more information call Sean McCoy, president, at (866) 634-5855 or email firstname.lastname@example.org.
Publisher’s Note: RVBUSINESS.com touched bases recently on a variety of topics with Forest River Inc. founder and CEO Peter J. “Pete” Liegl. Here’s a verbatim transcript of that on-the-record conversation, which took place in the aftermath of the company’s successful “Pick Your Partners” dealer meeting that drew some 2,000 people from 700 U.S. and Canadian dealerships in late September to the Berkshire Hathaway Inc. subsidiary’s home complex on the west side of Elkhart, Ind. Parts of this interview appear in the upcoming issue of RV Business, the magazine.
RVBUSINESS.com: Pete, your dealer meeting this year was impressive to say the least, as most in this industry are well aware.
Liegl: It was considerably more than last year, obviously. But we’ve got Coachmen in there and a couple of other things we didn’t have last year.
RVBUSINESS.com: What signal or message are you sending these dealers?
Liegl: It’s not different than any other year. We are trying to give the best product at the best price ratio. Obviously, there’s only a couple of financially strong manufacturers in the RV business, and us being one. Dealers have gotten burned severely with a couple of other manufacturers who filed bankruptcy or went out of business and I think they realize that. The opportunity is phenomenal right now for us. We are going to expand the motorized area drastically. We’ve done OK in the towables and we’ve been into motorized quite a few years now, and we’ve got a pretty good handle on the products that we make in motorized and we just need to make more.
RVBUSINESS.com: Those are ambitious goals, considering that RVIA forecaster Richard Curtin predicts that motorized in 2010 is only going to occupy 7.8% of the market. Why would you expect growth in motorhomes?
Liegl: For several reasons. When you look at two other manufacturers that went bankrupt and might be coming back out, there’s a hell of an opportunity. We are completely convinced that the RV business is here to stay. It might be a little different than we’ve known it in the past. In total there is something like 21 manufacturers who used to manufacture some form of RV who are not with us here in the last 12 months.
But things are good. Things are not bad out there. I think it’s going to continually improve. Obviously, we all know the recession is over. It was over at the end of June. The recovery is going to take a little longer, but dealers are selling. Dealers are getting flooring. Customers are getting financing. The RV industry’s not bad right now.
RVBUSINESS.com: The RV industry generally leads in to – and out of –downturns. At least that’s how the old saying goes. Did it appear to hold true this time around?
Liegl: I believe it is holding true. We are doing more in sales and bottom line in the last three months than we did during a comparable period last year. And last year wasn’t a bad year. That’s also a little misleading because we have Coachmen (Forest River last year purchased the RV segment of Coachmen Industries Inc.) now with us. So, obviously we are not comparing true apples to apples. But even if we did compare apples to apples, which I do, we are doing better than we did last year during the same time period. You could just walk that (Forest River’s dealer) show and not hear anybody and look at them and know that the enthusiasm is running high.
RVBUSINESS.com: So, back to your earlier comment, you agree with (Federal Reserve Chairman Ben) Bernanke that the recession is over?
Liegl: Yeah. I think he predicted that sometime back. We still have high unemployment here, but it is improving. Interest rates are low. Gas isn’t expensive. Things are good.
RVBUSINESS.com: Flooring is still a challenge.
Liegl: Yes, in some cases it is. But again, dealers are required to do what they should have done in the last five years. We as an industry, we as a country, got sloppy. We gave people financing that shouldn’t have had it. We were lax on collecting the curtailments, paying the interest. Well, 20 years ago, we didn’t have that problem. Every dealer knew you were supposed to pay your curtailments and your interest. With this sub-prime attitude, giving financing to people who shouldn’t have it, primarily in housing, is a problem.
The big problem that we’ve experienced – and are now getting over – is that you’ve got to pay your interest to a financing institution. You’ve got to pay your curtailments, and they (a lot of dealers) weren’t used to that. They (finance companies) are holding their feet to their fire, and if they (dealers) don’t (pay curtailments), they aren’t going to get any more (credit). Now, people have accepted and understand that, and they’re more current with that situation than they were six months ago.
RVBUSINESS.com: Looking back at your dealer meeting, is it possible that you brought more dealers to Elkhart for your two-day get together than you’ll see at early December’s Louisville Show.
Liegl: I guess so. I don’ know what they (RVIA) are forecasting. But we were blessed with the number of dealers that did show up. I was very favorably impressed. And the attitudes were phenomenal.
We’ve got a lot (of dealers) who still didn’t come for various reasons that we expect to see in Louisville, and we are going to maintain our presence there. And our display this year will be as big, if not bigger than last year. I think we are going to see a lot of dealers down there, too. It might not be as many, but the Louisville Show comes and goes very quickly, and you don’t get to see as many dealers as you want and you don’t get to spend the time with them that you want. There might be fewer people coming to Louisville this year, I don’t really know. But I personally think there is going to be a product shortage next year. Some people think I’m crazy if you publish that. But I don’t care. I don’t think there’s going to be a product shortage, I know there is going to be a product shortage.
RVBUSINESS.com: Is this prediction based on growing demand in the market or on the industry’s inability to keep up after a tough year?
Liegl: Primarily on the manufacturers’ ability to beef up and give the market what it needs. It’s my understanding — and I had a list not too long ago — that 21 manufacturers have gone out of business. Obviously, even if the market shrinks, which it has and is going to be smaller next year than it was a few years back, there are not as many people (companies) to build the product. So, we plan on getting our share.
RVBUSINESS.com: What kind of pace are you on dollar-wise in 2009?
Liegl: We are going to do probably in the area of $1.8 billion.
RVBUSINESS.com: How many employees are you now?
Liegl: I think 6,200, nationwide.
RVBUSINESS.com: I know it’s a simplistic view, but a lot of people see the towable side of the industry turning into a what might best be described as a two-horse race between Forest River and Thor over the next few years. Your thoughts on that audacious statement?
Liegl: We are the financially strongest one, obviously. And we will be No. 1. There isn’t going to be any horse race. You just have to look at the recent stats. Our numbers are increasing where our other competitor’s out there are decreasing. We are only a few percentage points different right now when you put together Coachmen, Forest River and Palomino. Last month, I think we had 45% of the camping trailer business, retail. The July numbers are out and we aren’t doing as much as I want, but it’s acceptable.
Fleetwood Enterprises Inc. has sold its Trendsetter military housing assets to CMH Manufacturing Inc. for $4.5 million in cash following last week’s bankruptcy court approval of the sale, according to Modular Home Builder.
CMH is a subsidiary of the Clayton Homes family of companies, subsidiaries of Berkshire Hathaway, which also owns Forest River Inc., Elkhart, Ind. Trendsetter manufactures modular barracks for the U.S. military in two adjacent facilities located in Belton, Texas, south of Waco.
Under the terms of the purchase agreement, CMH will enter into new contracts to complete current Trendsetter projects at Fort Sam Houston and Fort Bliss, and for another building at Fort Sam Houston. It is expected that CMH will make conditional job offers to most of the unit’s team members. Fleetwood’s existing bonding obligations on its military business, which Fleetwood backs with letters of credit, will be significantly reduced as a result of the transaction.
With Warren Buffet’s backing and government connections, it won’t be too long before Trendsetter will be building more than military hosing for the government, the magazine speculated. “Clayton Homes seems to be weathering the storm better than most modular home builders,” the magazine concluded.