Buffett Won’t Testify in Forest River Suit?

August 4, 2010 by · Comments Off on Buffett Won’t Testify in Forest River Suit? 

Warren Buffett

Warren Buffett

Judge Christopher Nuechterlein has sided with management in a preliminary ruling in the suit against Forest River Inc.

In a decision announced this afternoon (Aug. 4), the judge ruled that plaintiff Brad Mart, former president of Forest River, cannot order billionaire Warren Buffett, CEO of Berskshire Hathaway Inc., Forest River’s parent company, to be disposed in the suit.

Ron Lipinski

Ron Lipinski

Ron Lipinski, attorney with Seyfarth & Shaw LLP, Chicago, representing Forest River and its current CEO, Pete Liegl, told the judge’s ruling was “consistent with our position” which he argued during an hour-long hearing on July 26.

Mart’s attorney had argued for extensive discovery, but today’s ruling came down on the side of limited discovery.

But Lipinski stopped short of putting too much weight on the decision.

“It’s a preliminary discovery ruling. I don’t know that you can classify it as a victory or a loss. If the case proceeds, it (the request for Buffett’s deposition) may be raised again,” he said.

The judge further ruled that Mart can take some limited discovery and file his briefs. Preliminary discovery is to be completed by Oct. 1.

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, Neb.-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 first 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 in court. Kennedy spoke first, followed by Cary Lerman, of Munger Tolles & Olson LLP, Los Angeles, attorney for Berkshire Hathaway.

The request to depose Buffett, the world’s third-richest person, escalated a conflict that already included 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 could help determine facts of the case, and may lead to his testimony at trial.

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 founder and 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.

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