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HomeMy WebLinkAbout09-18-08F:\FILES\CGents\Mumma 5844.1 (estate) 8747 (Kim`' l.Mtumna Estate\5844. LAnsw to Mot to Disqualify -FINAL Created: 9/20/04 0:06PM Revised: 9/ 18 /O8 1:46 PM George B. Faller, Esquire I.D. Number 49813 No V. Otto, III, Esquire I.D. Number 257763 Jennifer L. Spears, Esquire I.D. Number 87445 MARTSON DEARDORFF WILLIAMS OTTO GILROY & FALLER MARTSON LAW OFFICES l.0 East High Street Carlisle, PA 17013 (717) 243-3341 Attorneys for Barbara McK. Mumma and Lisa M. Morgan IN RE: Estate of Robert M. Mumma, Deceased ~o ~~ ~ IN THE COURT OF COMMON PLE`~F CUMBERLAND COUNTY, PENNS:~'~AI NO. 21-86-398 -= `' -T' --CJ .der. ORPHAN'S COURT DIVISION .~ ~~ ANSWER AND NEW MATTER OF BARBARA MCK. MUMMA AND LISA M. MORGAN TO MOTION TO DISQUALIFY MORGAN. LEWIS & BOCKIUS AND THE MARTSON LAW OFFICE FROM CONTINUING LEGAL REPRESENTATION OF THE ESTATE AND THE TRUSTS TO: ROBERT M. MUMMA, II, Pro Se YOU ARE HEREBY NOTIFIED TO FILE A WRITTEN RESPONSE TO THE ENCLOSED NEW MATTER WITHIN TWENTY (20) DAYS FROM SERVICE HEREOF OR A JUDGMENT MAY BE ENTERED AGAINST YOU. Barbara McK. Mumma and Lisa M. Morgan respond as follows to the Motion of Robert M. Mumma, II, to Disqualify Morgan, Lewis & Bockius LLP ("Morgan Lewis") and The Martson Law Office (the "Martson Firm") from Continuing Legal Representation of the Estate and t:he Trusts: 1. Admitted. By way of further response, Mr. Mumma, II, is, upon information and belief, being assisted by James G. Gault, Esquire, though Mr. Gault has not entered his appearance of record on behalf of Mr. Mumma, II. 2. Denied. To the contrary, a disclaimer was filed in this matter on or about ~~anuary 12, 1987, whereby Mr. Mumma, II, disclaimed any interest under the will of ,, ., ~_ ,, ,_~ _ `, t- -/', _.. Robert M. Mumma. No court has issued a final ruling on the effect of the disclaimer. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 31 below. 3. Denied. After reasonable investigation, Mrs. Mumma and Mrs. Morgan are without knowledge or information sufficient to admit or deny the allegations of this paragraph, which they therefore deny. 4. Denied. Mrs. Mumma and Mrs. Morgan incorporate herein their responses to paragraph 2 above and paragraph 31 below. 5. Denied as stated. The allegations of this paragraph constitute legal conclusions, to which no response is required. By way of further response, Barbara Mumma and Linda Mumma are contingent remaindermen of the trusts established under the will of Robert M. Mumma. 6. Admitted. 7. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that they retained Morgan, Lewis & Bockius LLP to advise them in their capacities as executors and trustees of two trusts established under the will of Robert M. Mumma. That retention occurred in 1986, and Morgan Lewis has continued to act as counsel to Mrs. Mumma and Mrs. Morgan as to certain matters since that time. By way of further response, Robert M. Mumma had retained Morgan Lewis to provide certain estate planning and other advice prior to his death. Any remaining allegations of this paragraph are denied. 8. Admitted. 9. Admitted. 10. Denied. The allegation that Mrs. Mumma and Mrs. Morgan have retained "two area law firms" is vague and ambiguous. While Morgan Lewis has an office located in Harrisburg, lawyers in that office have performed very little work on behalf of Mrs. Mumma and Mrs. Morgan. 'to the extent that the paragraph seeks to allege that Mrs. Mumma and Mrs. Morgan have had no legitimate reason to retain both Morgan Lewis and the Martson Firm, that allegation is denied. On the contrary, both Morgan Lewis and the Martson Firm have provided appropriate and necessary legal services, in particular, but not limited to, with respect to the defense of litigation and claims asserted by Mr. Mumma, II, against the estate, the executrices and the trusts. Invoices for work performed by the two firms have been produced in discovery in these proceedings. Notably absent from Mr. Mumma, II's allegations is even a single example of allegedly duplicative or unnecessary work. In fact, Mrs. Mumma and Mrs. Morgan have retained Morgan Lewis, the Martson Firm and c-ther firms as needed and appropriate to the litigation and other matters that have confronted them as executrices and trustees, including the numerous claims and lawsuits advanced against them by Mr. Mumma, II. 11. Admitted. By way of further response, Mrs. Mumma and Mrs. Morgan have produced copies of invoices for work performed by Morgan Lewis and the Martson Firm in these proceedings. 12. Denied. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate by reference their response to paragraph 10 above. 13. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that they did not consult Mr. Mumma, II, Barbara M. Mumma or Linda M. Mumma prior to retaining either Morgan Lewis or the Martson Firm. By way of further response, they were under no obligation to do so. Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 10 above. 14. Admitted. By way of further response, the timing and scope of Mr. Mumma, II's relationship with Morgan Lewis was the subject of a hearing and adjudication in the above- referenced action more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 15. Admitted. 16. Admitted in part, denied in part as stated. Mrs. Mumma and Mrs. Morgan admit that the late Arthur L. Klein attended a meeting in May or June 1986, at which the executrices, Mr. Mumma, II, Barbara Mumma and Linda Mumma were present. At that meeting, Mr. Klein explained in detail the provisions of the will and discussed with the family various suggestions and options to pursue regarding the administration of the estate. Mr. Klein attended the meeting as legal counsel for the estate. Morgan Lewis lawyers subsequently met on other occasions with members of the family, at the request of Mrs. Mumma and Mrs. Morgan, to explain various issues relating to the estate, the trusts and /or assets owned by them. Morgan Lewis acted at all such times at the request of and as counsel to Mrs. Mumma and Mrs. Morgan. The work performed by Morgan Lewis on behalf of Mrs. Mumma and Mrs. Morgan, and the interactions among Morgan Lewis attorneys and Mr. Mumma, II, Barbara Mumma and/or Linda Mumma were the subject of a hearing and adjudication in the above-captioned action more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. Any remaining allegations of this paragraph are denied. 17. Admitted. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 16 above and their New Matter below. 18. Admitted in part, denied in part as stated. Mrs. Mumma and Mrs. Morgan admit, on information and belief, that Mr. Mumma, II, provided documentation regarding his financial affairs to Mr. Klein. The allegations regarding the scope of those materials are vague and ambiguous and are not susceptible of a meaningful response. They are, therefore, denied. By way of further response, on information and belief, Mrs. Mumma and Mrs. Morgan deny that Mr. Mumma, II, `'`engaged in extensive discussions and meetings" in which attorneys from Morgan Lewis were acting as counsel to him. Mrs. Mumma and Mrs. Morgan deny the remaining allegations of this paragraph. The factual allegations of this paragraph were the subject of a hearing and adjudication in the above- captioned action more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. Any remaining allegations of this paragraph are denied. 19. Admitted. By way of further response, the advice given to Mr. Mumma, II, regarding issues related to his disclaimer was the subject of testimony and adjudication in the above-captioned matter more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 14 and their New Matter below. 20. Admitted. By way of further response, the advice given to Mr. Mumma, II, regarding issues related to his disclaimer was the subject of testimony and adjudication in the above-captioned matter more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their response t:o paragraph 14 and their New Matter below. 21. Admitted. 22. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that Mr. Mumma, II, executed at least one copy of the disclaimer. They are without knowledge sufficient t:o admit or deny the remaining allegations of this paragraph, which they therefore deny. By way of further response, the circumstances surrounding Mr. Mumma, II's execution of the disclaimer were the subject of a hearing and adjudication in the above-captioned matter more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 23. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that Mr. Mumma, II, wrote the following note to Mr. Klein: Art Please find a copy signed for the Executors of the estate. I am keeping all of the other copies, and ask that Lisa be given this one to hold. Thank you. Bob By way of further response, following further discussion among Mr. Mumma, II, Mr. Klein and others, the disclaimer was filed with the Court on January 12,1987, at the direction and with the knowledge and authorization of Mr. Mumma, II. Mrs. Mumma and Mrs. Morgan deny any remaining allegations of this paragraph. The circumstances surrounding Mr. Mumma, II's sending of the signed disclaimer to Mr. Klein and its ultimate filing were the subject of a hearing and adjudication in the above-captioned matter more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 24. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that the disclaimer was filed with the Court on January 12, 1987. They deny that such filing was contrary to instructions given by Mr. Mumma, II. Rather, the disclaimer was filed at the direction of Mr. Mumma, II, and with his knowledge and authorization. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate their response to paragraph 23 above and their New Matter below. 25. Admitted in part, denied in part as stated. Mrs. Mumma and Mrs. Morgan admit that Morgan Lewis transmitted the disclaimer to Mr. Martson and instructed him to file it. Mrs. Mumma and Mrs. Morgan deny that this action was taken "at the sole direction of Morgan, Lewis & Bockius," inasmuch as the filing of the disclaimer occurred with the knowledge and authorization of Mr. Mumma, II. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 23 above and their New Matter below. 26. Admitted. By way of further response, Mrs. Mumma and Mrs. Morgan incorporate herein their responses to paragraphs 23, 24 and 25 above. 27. Admitted. 28. Admitted. By way of further response, the reasons for and circumstances surrounding the termination of Morgan Lewis' attorney-client relationship were the subject of testimony and adjudication in the above-captioned matter more than 19 years ago. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 29. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that Morgan Lewis has acted as their counsel in the above-captioned and other matters, and that in the course of such representation, Morgan Lewis has taken positions on their behalf that have been adverse to positions advanced or taken by Mr. Mumma, II. Morgan Lewis also has been adverse to matters in which Mr. Mumma, II has filed claims against it directly and against Mr. Klein. The allegation that any actions taken by Morgan Lewis have been "calculated" is vague and ambiguous, and Mrs. Mumma and Mrs. Morgan are unable to admit or deny it. Mrs. Mumma and Mrs. Morgan deny that Morgan Lewis has taken any actions to improperly "deplete and prejudice" Mr. Mumma, II's interests. Mrs. Mumma and Mrs. Morgan further deny any remaining allegations of this paragraph. Mrs. Mumma and Mrs. Morgan incorporate herein their response to paragraph 30 below. 30. Denied. Mrs. Mumma and Mrs. Morgan deny that Morgan Lewis itself has ever sued Mr. Mumma, II. Mr. Mumma, II has filed at least two lawsuits against Morgan Lewis. See Robert M Mumma, II v. Arthur L. Klein, et al., No. 4430 1990 (C.P. Cumberland) (dismissed for non pros April 26, 1991); Robert M. Mumma, II v. CRH Inc., et al., No. 99-1546 (C.P. Cumberland). In addition, Mr. Mumma, II, also filed a complaint against Mr. Klein with the Office of Disciplinary Counsel of the Supreme Court of Pennsylvania. To the extent this paragraph is meant to refer to actions filed by Morgan Lewis on behalf of Mrs. Mumma and/or Mrs. Morgan, they deny that Morgan Lewis "has repeatedly sued" Mr. Mumma, II. In fact, Morgan Lewis has, on behalf of Mrs. Mumma and Mrs. Morgan, filed only two complaints against Mr. Mumma, II, both in 1988. Byway of further response, Mr. Mumma, II's assertion that the filing of those complaints constituted grounds for disqualification of Morgan Lewis in this case was the subject of a hearing and adjudication in the above-captioned matter. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 31. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that Morgan Lewis has prepared on their behalf various filings and communications that make reference to the disclaimer. Those filings and communications are in writing and speak for themselves, and Mrs. Mumma and Mrs. Morgan deny all characterizations of them. By way of further response, Mrs. Mumma and Mrs. Morgan deny that either they or Morgan Lewis acting on their behalf have taken any position on the merits of Mr. Mumma, II's attempted revocation of the disclaimer. Mrs. Mumma and Mrs. Morgan have not filed documents seeking to have Mr. Mumma, II's revocation of his disclaimer stricken or overturned, as they lack standing to seek such relief, and they ]lave consistently stated that they take no position on that issue. Rather, their filings and statements on the issue have related to the fact that the validity of Mr. Mumma, II's revocation of his disclaimer lias never been adjudicated by persons having standing to do so. A ruling on the issue is essential so that Mrs. Mumma and Mrs. Morgan are able to fulfill their fiduciary duties and properly account t:o the correct parties in interest and identify those individuals who, ultimately, will be the remaindermen of the trusts established under the will of Mr. Mumma, Sr. The remaining allegations of this paragraph are denied. By way of further response, the Auditor appointed by the Court to make recommendations on various matters in the above-captioned matter recognized that the validity of Mr. Mumma, II's attempt to revoke his disclaimer is a significant unresolved issue in these proceedings, stating in a September 26, 2005, letter, "I believe there is support for their concern that the validity of the revocation has not been finally litigated." Similarly, the Superior Court has recognized the significance of the revocation issue: We note that there is some dispute over whether [Mr. Mumma, II] actually possesses a legitimate property interest in decedent's Estate. As the trial court noted, one threshold question is whether [Mr. Mumma, II] remains a beneficiary in light of his January 6, 1987 filing of an irrevocable disclaimer of his interest under the decedent's will. In re Estate of Robert M. Mumma, No. 856 MDA 2005, Memorandum at 12 n. l (Pa. Super. Mar. 7, 2006). In light of the significance of the issue, the Auditor "ask[ed] that Mr. Mumma provide me with the name, address, and birth date of each of his children." To date, Mr. Mumma, II has not complied with the request of the Auditor. Nor has he offered any explanation for his failure to do so. Mrs. Mumma and Mrs. Morgan have filed a motion seeking to have the Court require Mr. Mumma, II to comply with the Auditor's instruction. 32. Denied. The allegations of this paragraph constitute legal conclusions, to which no responsive pleading is required. Mrs. Mumma and Mrs. Morgan therefore deny them. By way of further response, Mr. Mumma, II's assertion that Morgan Lewis' actions on behalf of Mrs. Mumma and Mrs. Morgan have constituted a breach of the Rules of Professional Conduct was the subject of a hearing and adjudication in the above-captioned matter. Mrs. Mumma and Mrs. Morgan incorporate herein their New Matter below. 33. Denied. The allegations of this paragraph constitute legal conclusions, to which no responsive pleading is required. Mrs. Mumma and Mrs. Morgan therefore deny them. 34. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that the Martson Firm has filed most of the litigation papers filed on behalf of Mrs. Mumma and ]Mrs. Morgan in the above-captioned matter, and that it has participated in the preparation of various litigation filings on behalf of Mrs. Mumma and Mrs. Morgan. Mrs. Mumma and Mrs. Morgan deny the remaining allegations of this paragraph. 35. Denied. Mrs. Mumma and Mrs. Morgan are without knowledge sufficient to admit or deny the allegations of this paragraph as they pertain to Mr. Mumma, II's "belief" The allegations are, therefore, denied. To the extent that a further response is required, Mrs. Mumma and Mrs. Morgan deny the allegations of this paragraph. 36. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that the Martson Firm has acted as their counsel in the above-captioned and other matters, and that in the course of such representation, the Martson Firm has taken positions on their behalf that have been adverse to positions advanced or taken by Mr. Mumma, II. The allegation that any actions taken by the Martson Firm have been "calculated" is vague and ambiguous, and Mrs. Mumma and Mrs. Morgan are unable to admit or deny it. Mrs. Mumma and Mrs. Morgan deny that the Martson Firm lias taken any actions to improperly "deplete and prejudice" Mr. Mumma, II's interests. Mrs. Mumma and Mrs. Morgan further deny any remaining allegations of this paragraph. 37. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that the Martson Firm filed on their behalf a response to Mr. Mumma, II's motion seeking vacation of the appointment of Mr. Andrews as auditor in these proceedings. That response was in writing and speaks for itself, and Mrs. Mumma and Mrs. Morgan deny all characterizations of it. 38. Denied. On the contrary, none of the counsel present on behalf of Mrs. Mumma and Mrs. Morgan at the August 18 hearing expressed any view regarding whether Mr. Andrews' appointment should be vacated. Rather, they awaited testimony of Mr. Andrews on the subject of his ability and willingness to continue in that capacity. Following the hearing, they participated in discussions aimed at finding a mutually agreeable candidate to replace Mr. Andrews, and they wrote to the Court seeking an extension of the deadline for the parties to do so. 39. Denied as stated. The transcript of the August 18 hearing and the Court's order entered at the conclusion of the hearing are in writing and speaks for themselves, and Mrs. Mumma and Mrs. Morgan deny all characterizations of them. 40. Denied. The allegations of this paragraph constitute legal conclusions to which no r. esponsive pleading is required, and Mrs. Mumma and Mrs. Morgan deny them. By way of further r. esponse, the positions taken by Morgan Lewis and the Martson Firm in this litigation are in writing in various filed documents, transcripts and other documents and speak for themselves, and Mrs. Mumma and Mrs. Morgan deny all characterizations ofthem. Those positions have on many issues been adverse to positions taken by Mr. Mumma, II. To the extent that a further response is required, Mrs. Mumma and Mrs. Morgan deny the allegations of this paragraph. 41. Denied. The allegations of this paragraph constitute legal conclusions to which no responsive pleading is required, and Mrs. Mumma and Mrs. Morgan deny them. By way of further response, the allegations of this paragraph are vague and ambiguous and are not susceptible of a meaningful response. To the extent that a further response is required, Mrs. Mumma and Mrs. Morgan deny the allegations of this paragraph. 42. Denied. The allegations of this paragraph constitute legal conclusions to which no responsive pleading is required, and Mrs. Mumma and Mrs. Morgan therefore deny them. Byway of further response, Mrs. Mumma and Mrs. Morgan deny that any actions taken by them, Morgan Lewis or the Martson Firm with respect to the estate of Robert M. Mumma or the trusts established under his will have improperly "depleted, frustrated [or] prejudiced any interests of Mr. Mumma, II, Barbara Mumma or Linda Mumma or otherwise have been inconsistent with or in violation of Mrs. Mumma and Mrs. Morgan's "legal and fiduciary duties." On the contrary, Mrs. Mumma and Mrs. Morgan have at all times attempted to protect the estate and the trusts against repeated attacks and litigation by Mr. Mumma, II that have had, and continue to have, an adverse financial impact upon the estate and the trusts. 43. Denied. The allegations of this paragraph constitute legal conclusions to which no .responsive pleading is required, and Mrs. Mumma and Mrs. Morgan therefore deny them. Byway of further response, Mrs. Mumma and Mrs. Morgan deny that any actions taken by them, Morgan :Lewis or the Martson Firm with respect to the estate of Robert M. Mumma or the trusts established under his will have improperly "converted" or "prejudiced" any interests of Mr. Mumma, II, Barbara :Mumma or Linda Mumma or otherwise have been inconsistent with or in violation of Mrs. Mumma and Mrs. Morgan's "legal and fiduciary duties." Mrs. Mumma and Mrs. Morgan also deny that there exists any legitimate question as to the ownership of any asset owned by the estate of Robert M. :Mumma or the trusts established under his will. 44. Admitted. 45. Denied. Mr. Martson's affidavit is in writing and speaks for itself, and Mrs. Mumma and Mrs. Morgan deny all characterizations of it. The circumstances surrounding Mr. Martson's execution of an affidavit in 2004 was the subject of testimony at the August 18, 2008 hearing, the transcript of which is in writing and speaks for itself. Mrs. Mumma and Mrs. Morgan deny all characterizations of that testimony. 46. Admitted. By way of further response, the Auditor continued the deposition in response to a letter from counsel to Mrs. Mumma and Mrs. Morgan raising various concerns regarding the purported scope of the deposition as outlined in the notice. 47. Denied. The allegations of this paragraph constitute legal conclusions to which no response is required, and Mrs. Mumma and Mrs. Morgan therefore deny them. By way of further response, Mrs. Mumma and Mrs. Morgan deny that any testimony by individual attorneys from Morgan Lewis or the Martson Firm will be "aligned against the interests of Mr. Mumma, II, Barbara Mumma, Linda Mumma, or any other contingent remainderman of the trusts established under the will of Robert M. Mumma. Moreover, any testimonyby such attorneys would not constitute grounds or basis for disqualification of Morgan Lewis or the Martson Firm in this case. 48. Denied. The allegations of this paragraph constitute legal conclusions to which no responsive pleading is required, and Mrs. Mumma and Mrs. Morgan deny those allegations. 49. Admitted in part, denied in part. Mrs. Mumma and Mrs. Morgan admit that Mr. Mumma, II, did not seek concurrence of their counsel prior to the filing of the instant motion. They admit that, had concurrence been sought from their counsel, it would not have been given. Mrs. Mumma and Mrs. Morgan lack information sufficient to admit or deny the allegation that Mr. Mumma, II did not seek concurrence of other counsel or interested parties, or as to Mr. Mumma, II's motions in not seeking concurrence. 50. Admitted. NEW MATTER 51. Mrs. Mumma and Mrs. Morgan incorporate herein their responses to paragraphs 1 through 50 above. 52. The instant Motion is not the first in which Mr. Mumma, II, has sought in these proceedings to have Morgan Lewis disqualified from acting as counsel for Mrs. Mumma and Mrs. Morgan. 53. In January 1989, Mr. Mumma, II, filed a Motion for an Order disqualifying Morgan, Lewis & Bockius from representation of Mrs. Mumma and Mrs. Morgan in the above-captioned matter. A true and correct copy of Mr. Mumma, II's Motion is attached as Exhibit "A." 54. As in the instant motion, Mr. Mumma, II's prior motion alleged, among other things, that: Mr. Mumma[, II] relied upon the advice of Mr. Klein, and, on or about January 6, 1987, Mr. Mumma[, II] executed Disclaimer, drafted by [Morgan Lewis], under which Mr. Mumma[, II] disclaimed his interest in [his father]'s estate in favor of his children. Although Mr. Mumma[, II] specifically directed Mr. Klein not to file the disclaimer with the Cumberland County Court at the time the disclaimer was executed, he has recently ascertained that the disclaimer was so filed on January 12,1987, by [Morgan Lewis'] corresponding counsel in Cumberland County... . Exhibit A ¶¶ 13, 17. 55. Mr. Mumma, II's prior attempt to have Morgan Lewis disqualified was prompted by Morgan Lewis' having filed on behalf of Mrs. Mumma and Mrs. Morgan two Complaints and a Petition. As summarized by Judge Sheely in findings of fact, the Complaints and Petition sought relief as follows: On December 27, 1988, a complaint for declaratory judgment and relief was filed by [Mrs. Mumma and Mrs. Morgan] at 21-86-398 of the Cumberland County Court of Common Pleas, Orphans' Court Division. The complaint generally seeks declaratory judgment under 42 Pa. C.S.A. 57533 and 20 Pa. C.S.A. 5711 that Article Thirteenth of decedent's will does not bar [Mrs. Mumma and Mrs. Morgan] from selling shares of Nine Ninety-Nine, Inc. (999) and Hummelstown Quarries, Inc. (Hummelstown) owned by the estate to a publicly traded overseas entity. On December 27, 1988, [Mrs. Mumma and Mrs. Morgan] petitioned this court for the Estate of Robert M. Mumma, deceased, for declaratory judgment under 42 Pa. C.S.A. 57533 and for other relief under 20 Pa. C.S.A. Subch. 33C [sic] and §7133. The petition generally seeks a confirmation of [Mrs. Mumma and Mrs. Morgans] authority to se11999 and Hummelstown and certain other related real estate owned by the estate and Mumma family members and for an order under 20 Pa. C.S.A. Subch. 33C [sic] §7133 that the estate may submit any issues nonselling shareholder raises in connection with the sale of his/her interest in 999 and Hummelstown to voluntary judicial arbitration in the Court of Common Pleas of Cumberland or Dauphin County. On December 27, 1988, a complaint in equity and declaratory judgment at No. 66 Equity 1988 was brought by [Mrs. Mumma and Mrs. Morgan] against [Mr. Mumma, II] in the Cumberland County Court of Common Pleas. The complaint generally seeks a declaratory judgment declaring that the right of first refusal asserted by [Mr.] Mumma[, II] with respect to Pennsy Supply, Inc., is invalid and that the Mumma Realty Associates power of attorney executed by [Mr.] Mumma[, II], is valid and enforceable and entitles [Mrs. Mumma and Mrs. Morgan] to act as attorney in fact to execute in [Mr.] Mumma[, II]'s name the deeds and other documents necessary to complete the sale of Mumma Realty Associates I and Mumma Realty Associates II properties to a proposed buyer; and finally declare that the MRA I and MRA II agreements are valid, enforceable and binding on [Mr.] Mumma, II and enter an order requiring Mr. Mumma[, II] to specifically perform his duties and obligations under the MRA I and MRA II agreements. Exhibit D ¶¶ 46-47, 49-50, 52-53. 56. Based on the filing of the complaints and the petition, Mr. Mumma, II contended that: [Morgan Lewis] must be disqualified from representing [Mrs. Mumma and Mrs. Morgan] in these two related actions. a. Mr. Mumma[, II] is a former client of [Morgan Lewis]. b. The subject matter of [Morgan Lewis'] prior representation of Mr. Mumma[, II] is substantially related to the subject matter of this action and [No. 66 Equity]. In fact, in several instances, as set forth below, [Morgan Lewis] is attempting to take action against Mr. Mumma[, II] which is contrary to the very legal advice which it rendered to him and the directions which he gave to [Morgan Lewis] as his attorneys. c. [Mrs. Mumma and Mrs. Morgans] interests with regard to these lawsuits are materially adverse to the interests of Mr. Mumma[, II]. d. [Morgan Lewis] never advised Mr. Mumma[, II] of its proposed representation of [Mrs. Mumma and Mrs. Morgan] in this action, and certainly did not ask his consent to such representation, which consent would have been, in any event, refused. e. [Morgan Lewis'] representation of [Mrs. Mumma and Mrs. Morgan] in these lawsuits violates its duty of loyalty to Mr. Mumma[, II] as well as its duty to preserve his confidences even after the termination of its employment. The representation also violates its duty to avoid even the appearance of impropriety. Exhibit A ¶10. 57. On January 25, 1989, President Judge Sheely held a hearing on Mr. Mumma, II's motion to disqualify Morgan Lewis. At the hearing, Mr. Mumma, II testified at length regarding, among other matters, his retention of Morgan Lewis, and the reasons for and circumstances surrounding his execution of the disclaimer. Mr. Klein also testified on these matters, and Mrs. Morgan testified briefly as well. The transcript of the January 25, 1989, hearing is attached as I?xhibit "B." Copies of documents marked as exhibits at the hearing are attached as Exhibit "C." 58. On February 13, 1989, Judge Sheely entered an opinion and order in the above- captioned action and in Barbara McK. Mumma et al. v. Robert M. Mumma, II et al., No. 66 Equity 1.988 (C.P. Cumberland) ("No. 66 Equity"). A copy of that opinion is attached as Exhibit " D." 59. With respect to Mr. Mumma, II's retention of and Morgan Lewis and the scope of that relationship, Judge Sheely made the following findings of fact: At a meeting with Arthur Klein of Morgan, Lewis in May or June, 1986, at which all members of the immediate family were present, Mr. Klein explained in detail the provisions of the will and discussed with the family various suggestions and options to pursue regarding the administration of the estate. Mr. Klein of Morgan, Lewis attended this meeting as legal counsel for the estate; however, he did not specifically state that he only represented the estate. During the meeting, Mr. Klein discussed with all present the possibility of the children disclaiming their interest under the will in favor of their children in order to gain some tax benefit by avoiding "double" taxation. On August 21, 1986, Mr. Mumma[, II] met with Mr. Klein in order to discuss his own personal estate planning needs. As a result of that meeting, Mr. Mumma[, II] retained the legal services of Morgan, Lewis for his own estate planning needs. Mr. Klein began working on Mr. Mumma[, II]'s estate planning needs, however, by letter dated September 5, 1986, Morgan, Lewis through Mr. Klein, informed Mr. Mumma[, II] that Morgan, Lewis represents the Mumma Estate by stating: One matter we discussed which I did not note in the memorandum is that if you or any of your companies were to become involved in negotiations with your father's Estate to buy the operating company (or anything else for that matter), Morgan, Lewis & Bockius would represent the Estate and you would obtain other counsel. I know that Lisa and your mother are satisfied with that understanding and you indicated that you were also. Defendant's Exhibit No. 1. Mr. Mumma,[II] understood that Morgan, Lewis was only representing him concerning his "estate planning and related matters." Mr. Mumma,[II] understood that he would need separate legal counsel if he or any of his companies were to enter negotiations with the Estate to purchase the operating company (Pennsy Supply, Inc.) or to purchase anything else for that matter from the Estate. Mr. Mumma,[II] provided Mr. Klein with documentation of his financial assets and liabilities in order to facilitate his estate planning. These statements and documentations of Mr. Mumma,[II]'s financial status were returned to Mr. Mumma, [II] . Mr. Mumma[, II] has substantial and extensive experience with attorney-client relationships as he has retained at least twelve different attorneys to represent him concerning personal as well as business matters. On March 26, 1987, Morgan, Lewis received a retainer in the amount of $20,000 from Mr. Mumma[, II]. The $20,000 was drawn from the corporate account of Kimbob, Inc. (Defendant's Exhibit No. 8). Morgan, Lewis continued to represent Mr. Mumma[, II] with regard to his personal estate planning needs until August 14, 1987, at which time Mr. Mumma[, II] advised Mr. Klein that he would seek other representation. (Defendant's Exhibit No. 9). Morgan, Lewis, by letter dated August 14, 1987, returned $6,100 from the $20,000 retained on Mr. Mumma[, II]'s account after deducting charges for work performed on his personal estate planning matters as well as the disclaimer matter. (Defendant's Exhibit No. 9). Mr. Mumma[, II] was not charged for any consultation, legal research or work performed by Morgan, Lewis concerning the tenants-in-common agreements or any other matter of the Mumma Estate. (Plaintiff s Exhibit No. 3). Exhibit D ¶¶ 5-14, 19, 43-45. 60. Judge Sheely also made findings regarding Mr. Mumma, II's execution and the subsequent filing of the disclaimer: In early January, 1987, Mr. Mumma[, II] and Mr. Klein had a discussion concerning Mr. Mumma[, II] disclaiming his interest under his father's will in favor of his children. [Mr.] Mumma[, II] authorized Mr. Klein to draft a disclaimer of his interest for his review. Mr. Klein informed Mr. Mumma[, II] by letter, dated January 6, 1987, that for the disclaimer to be effective, it must be filed with the Clerk of the Orphans' Court Division of Cumberland County. (Defendant's Exhibit No. 7). Mr. Mumma[, II] executed the qualified disclaimer of interest on January 6, 1987, (Plaintiff s Exhibit No. 1) and said disclaimer was filed with the Court of Common Pleas of Cumberland County, Orphans' Court Division on January 12, 1987, in Book 115 at Page 20 with the knowledge and authorization of Mr. Mumma[, II]. (See, Plaintiff s Exhibit No. 1 and No. 2). Mr. Mumma[, II] does not dispute that he intends his disclaimer to be effective, nor does he claim it is now invalid. Id. ¶¶ 15-18, 56. 61. In his opinion, Judge Sheely discussed at length and rejected Mr. Mumma, II's contention that Morgan Lewis should be disqualified under Rule 1.9 of the Rules of Professional Conduct: In essence, Mr. Mumma[, II] alleges that a conflict of interest exists in Morgan, Lewis' continued representation of [Mrs. Mumma and Mrs. Morgan]. Mr. Mumma[, II] points to Rule 1.9 as his authority for his motion. Rule 1.9 reads as follows: Conflict of Interest: Former Client A lawyer who has formerly represented a client shall not thereafter: (a) represent another person in the same or substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after a full disclosure of the circumstances and consultation; or (b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known. Rule 1.9, Rules of Professional Conduct, 42 Pa. C.S.A. (Purdon Supp. 1988). In considering a motion for disqualification of aparty's legal counsel, courts are reluctant to grant such a serious remedy because when presented with such a serious request, courts must be careful to preserve a balance, delicate though it may be, between an individual's right to his own freely chosen counsel and the need to maintain the highest ethical standards of professional responsibility." Slater v. Rimar, Inc., 462 Pa. 138, 338 A.2d 584, 590 (1975). Because motions for disqualification are at times interposed for tactical reasons, courts must approach such motions with caution as a client whose attorney is disqualified incurs a loss of time and money in being compelled to retain new counsel who in turn have to become familiar with the prior comprehensive investigation which is the core of modern complex litigation. The client, moreover, may lose the benefit of its long- time counsel's specialized knowledge of its operations. See, ~, Government of India v. Cook Industries, Inc., 569 F.2d 737 (2nd Cir. 1978); Ries v. MTD Products, Inc., 14 D.&C.3d 566 (1980). Pennsylvania's appellate courts have not directly addressed conflicts of interest issues under the newly adopted Rules. However, the comment to the Rules explains that Rule 1.9 merely incorporates the basic elements of Canons 4 (client confidentiality), 5 (loyalty to client), and 9 (appearance of impropriety) contained in the former Code. Thus, the Rules hopefully provide clearer guidance to both the bench and bar when faced with questions of conflict of interest with a former client than was provided by the Code. Under Rule 1.9 the test for disqualification focuses on the analysis of whether the subject matter of the representation of the former client and the present client are "substantially related." In raising a conflict of interest challenge, the burden is on the moving party to establish a violation of Rule 1.9. See, Pa. Power & Light v. Gulf Oil Com•, 74 D.&C.2d 431 (1975); INA Underwriters Ins. v. Nalibotsky, 594 F. Supp. 1199 (E.D. Pa. 1984). A court in addressing the "substantial relationship" issue must answer the following questions: 1. Did the lawyer have anattorney-client relationship with the former client? 2. What was the nature and scope of the prior representation at issue? 3. What is the nature of the present lawsuit against the former client? See, INA, supra, Nemours Foundation v. Gilbane. Aetna, Federal Ins., 632 F.Supp. 418 (D. Del. 1986). Under the present facts, there is no dispute that an attorney-client relationship existed between Morgan, Lewis and Mr. Mumma[, II]. Thus, the thrust of our analysis moves onto the nature and scope of that prior representation. Mr. Mumma[, II] argues that Morgan, Lewis represented him not only in his own personal estate planning needs and disclaimer needs, but so, too, did Morgan, Lewis represent him with regard to the negotiations and liquidations of Kim Company and Pennsylvania Supply Company and the formation of the related tenancy-in-common. We do not believe that the facts of this case, nor the applicable law in regards to this matter, adequately supports Mr. Mumma[, II]'s argument. In reaching this conclusion, our attention is first drawn to the letter, dated September 5, 1986, in which Mr. Klein clearly states to Mr. Mumma[, II] the terms of Morgan, Lewis' representation. (Defendant's Exhibit No. 1). In that letter, Mr. Klein clearly stated that he was employed by Mr. Mumma[, II] solely for estate planning purposes and disclaimer purposes under Mr. Mumma[, II]'s father's will. Moreover, Mr. Mumma[, II] was given express notice that Morgan, Lewis would not act as Mr. Mumma[, II]'s attorney if Mr. Mumma[, II] entered into negotiations with the Estate for the purchase of any Estate assets. Thus, Mr. Mumma[, II] had express notice that Morgan, Lewis' duty of loyalty and representation attached to their representation of the Estate and that no attorney-client relationship could exist with Mr. Mumma[, II] if he sought to purchase Estate assets. On further review of the facts, it is clear to this court that Morgan, Lewis' attorney- client relationship with Mr. Mumma[, II] did not expand beyond the understanding of the above-noted September 5, 19861etter. (Defendant's Exhibit No. 1). Although there were meetings (both in Harrisburg and in Philadelphia) in which Morgan, Lewis participated, those meetings were attended at all times by the executrixes of the Estate and Morgan, Lewis as legal counsel for the Estate. Even the correspondence that Mr. Mumma[, II] received following some of these meetings advised him that Morgan, Lewis was writing at the request of the Estate with regard to questions concerning the dissolution of some corporations in which Mr. Mumma[, II] was a shareholder. (See Defendant's Exhibit No. 3). We do note, however, that at some of these meetings Mr. Mumma[, II], upon reviewing drafts of documents, had certain questions and suggestions. Because Morgan, Lewis undertook some legal research to answer these questions and suggestions, Mr. Mumma[, II] now argues that Morgan, Lewis was acting as his attorney when in fact these legal answers were mutually beneficial to the Estate. Moreover, we take special note that Mr. Mumma[, II] was not charged for such legal research. (See, Plaintiff's Exhibit No. 3). Thus, the mere fact that Mr. Mumma[, II] relied on the Estate's legal research and received some answers to questions from Morgan, Lewis attorneys (as authorized by the Estate), is insufficient, in and of itself, to expand the basic attorney-client relationship beyond the original scope of legal representation as noted in the September 5, 1986 letter. Indeed, Mr. Mumma[, II]'s arguments concerning his expanded legal representation by Morgan, Lewis are no more than unilateral "assumptions" or "understandings" which do not overcome the very clear and precise definition of their relationship from the very start. [I]n Pennsylvania Power & Light, the court stressed that the mere reliance upon legal work performed for another person that happened to also benefit the party seeking disqualification, is not sufficient to establish anattorney-client relationship. Id., at 437-438. Mr. Mumma[, II]'s role, like that in Pennsylvania Power & Light, was limited to reviewing and commenting upon documents prepared for the Estate by Morgan, Lewis. Moreover, there was no evidence that Mr. Mumma[, II] paid any fees to Morgan, Lewis for work in connection with the liquidations, and more importantly any "advice" he may have received was provided to him (as well as to the other shareholders) as a service by the Estate in an effort to persuade him to participate voluntarily in these transactions. Finally, we note the most telling observation is that during this hearing held on January 25, 1989, Mr. Mumma[, II] testified repeatedly that he knew Morgan, Lewis was the attorney for the Estate. In summary, then, it is clear that Mr. Mumma[, II] has failed to carry the burden of persuasion to establish that the existence of anattorney-client relationship extended beyond that of legal counsel for estate planning purposes and disclaimer purposes, to that of legal counsel representing his interests in the company liquidations and tenancies-in-common issues. Moving on, our next question to answer is "what is the nature of the present lawsuit against the former client?" As stated in our findings of fact, the Orphans' Court matter and the Equity matter basically concerns a dispute over the sale of certain Estate assets. More specifically, the Orphans' Court matter focuses on two issues: 1) the interpretation of the decedent's will, and 2) the offering of appraisal rights to Mr. Mumma[, II]. At this point we find it necessary to note that although Mr. Mumma[, II] seems to find some dissatisfaction with Morgan, Lewis' implementation of the qualified disclaimer under his father's will, Mr. Mumma[, II] does not seek to void its effect or intent. Therefore, we find the disclaimer is not at issue or in dispute in either of these pending matters. Thus, the issue of the disclaimer is not "substantially related" to the issues raised in either of-the present proceedings. Consequently, Morgan, Lewis' prior representation of Mr. Mumma[, II] with regard to the disclaimer is not a basis for disqualification of Morgan, Lewis. Moving on, we find that the thrust of the pending proceedings focuses on will interpretation issues which are clearly unrelated to Morgan, Lewis' prior representation of Mr. Mumma[, II]. The other thrust of these proceedings focus on proposed corporate restructuring and the propriety of offering appraisal rights to Mr. Mumma[, II]. These matters, then, are subjects which we find unrelated to Morgan, Lewis' prior representation of Mr. Mumma[, II]. The remaining inquiry under the "substantial relationships" test is whether during the course of his representation, Mr. Mumma[, II] may have disclosed confidential information to Morgan, Lewis that is now relevant to the issues in the present lawsuits. INA Underwriters, su~~ra. We also note, as the court did in Realco Services, Inc. v. Holt, 479 F.Supp. 867 (E.D. Pa. 1979), that: If a client in a prior representation might have imparted confidential information to his lawyer in dealing with particular issues, and if issues arise in the second suit which would permit the use of such confidences against the original client, the substantial relationship test is met, and disqualification is required. Id., 479 F.Supp. at 871. (Original emphasis). In this case, though, we will not "allow [our] imagination to run free with a view to hypothesizing conceivable but unlikely situations in which confidential information `might' have been disclosed" which is relevant to the pending suits. INA Underwriters supra. Mr. Mumma[, II]'s attorney-client relationship with Morgan, Lewis and their legal representation of Mr. Mumma[, II]'s personal estate planning and disclaimer under this father's will, conceivably included the intimation of confidential financial information. However, we do not believe that that type of information is now relevant to the present lawsuits or will even become an issue. Thus, the size of Mr. Mumma[, II]'s personal assets and the size of the tax benefits be stood to gain under the disclosure are not relevant to the present lawsuits, and therefore do not provide a basis for disqualification, under Rule 1.9 or the applicable caselaw. ~!d. pp. 10-19. 62. Based upon the foregoing findings of fact and analysis, Judge Sheely made the following conclusions of law: 1 The subject matter of the pending lawsuits are not substantially related to any prior legal representation Morgan, Lewis provided Mr. Mumma[, II]; 2. Any confidential information Morgan, Lewis acquired during their prior legal representation of Mr. Mumma[, II] is not now relevant to the pending lawsuits; 3. Morgan, Lewis have not violated Rule 1.9 of the Rules of Professional Conduct in their current representation of the Estate of Robert M. Mumma, deceased. ~'d. p. 19. 63. Judge Sheely denied Mr. Mumma, II's motion to disqualify Morgan Lewis. 64. Following Judge Sheely's decision, Mr. Mumma, II filed a motion for an order pursuant to 42 Pa.C.S. § 702(b) certifying the questions raised in Judge Sheely's opinion for interlocutory appeal. 65. On May 12, 1989, Judge Sheely entered an order reading as follows in the above- captioned action and No. 66 Equity: AND NOW, this 12th day of May 1989, having considered the motion of Robert M. Mumma, II, to disqualify Morgan, Lewis & Bockius as counsel for [Mrs. Mumma and Mrs. Morgan], said motion is DENIED. Furthermore, this Order involves a controlling question of law as to which there is substantial ground for difference of opinion and an immediate appeal from this Order may materially advance the ultimate determination of the matter. 66. Notwithstanding the entry of the May 12,1989, Order, Mr. Mumma, II, did not appeal ;fudge Sheely's February 13, 1989 Opinion and Order on the recusal issue at that time. 67. Mr. Mumma, II, raised the issue of Morgan Lewis' disqualification in his motion for post-trial relief filed following the entry of Judge Sheely's March 24, 1992 Opinion and Order In re Declaratory Judgment in No. 66 Equity. Judge Sheely denied Mr. Mumma, II's post-trial motions on all issues, including his contention that Morgan Lewis should have been disqualified: [Mr. Mumma, II]'s final argument contends that this court erred in denying to disqualify Morgan, Lewis & Bockius in our lengthy opinion and order dated February 13, 1989. [Mr. Mumma, II] raises the same argument in the present action as he raised in the initial action, namely, that Morgan, Lewis gave [Mr. Mumma, II] advice with regard to the MRA agreements, while at the same time also representing him in regard to [Mr. Mumma, II]'s personal estate planning. However, in our February 13, 1989 opinion and order, this court concluded that "the subject matter of the pending lawsuits are not substantially related to any prior legal representation Morgan, Lewis provided Mr. Mumma." (February 13, 1989 opinion and order, at 19). Additionally, this court cited a letter from Mr. Klein to [Mr. Mumma, II] dated September 5, 1986, in which Mr. Klein clearly stated the Morgan, Lewis and Bockius solely represented [Mr. Mumma, II] for estate planning purposes and disclaimer purposes under the will of Mr. Mumma, Sr. (Id., at 13) We do not believe that [Mr. Mumma, II] has argued any issue novel to our February 13, 1989 opinion and order. Therefore, we do not believe [Mr. Mumma, II]'s contention that Morgan, Lewis should be disqualified from the present action contains any merit... . No. 66 Equity, Opinion and Order In re Motion for Post-Trial Relief at 24-25 (C.P. Cumberland Nov. 5, 1992) (Sheely, P.J.). Mr. Mumma, II included in his appeal from Judge Sheely's ruling the issue of"[w]hether the l.aw firm of Morgan, Lewis &Bockius should be disqualified from representing the executrices when the firm gave the family advice with regard to the MRA agreements while at the same time advising [Mr. Mumma, II] in his personal estate planning." The Superior Court affirmed Judge Sheely's decision on this and all other issues. Barbara McK. Mumma, et al. v. Robert M. Mumma, II, et al., No. 56 Harrisburg 1993, Memorandum (Pa. Super. Nov. 5, 1993) [433 Pa. Super. 660, 639 A.2d 846], allocatur denied, 539 Pa. 679, 652 A.2d 1324 (1994). 68. Mr. Mumma, II's present motion to disqualify Morgan Lewis arises out of the same allegations and arguments that were the basis for his prior motion. 69. Both Mr. Mumma, II's prior motion and his current motion alleged that Morgan Lewis should be disqualified from representing Mrs. Mumma and Mrs. Morgan in litigation against Mr. Mumma, II because Morgan Lewis previously had advised Mr. Mumma, II regarding his disclaimer and other personal and estate planning matters. 70. Both Mr. Mumma, II's prior motion and his current motion cite the same Rule of Professional Conduct -Rule 1.9 - as alleged authority for disqualification of Morgan Lewis. 71. Both Motions seek the same relief, including nearly-identical requests that Morgan Lewis be ordered to have no communication with any replacement counsel subsequently retained by Mrs. Mumma and Mrs. Morgan. 72. Mr. Mumma, II's current motion does not cite any new or different activity by Morgan Lewis in respect of its representation of him than was previously presented to and considered by the Court in connection with Mr. Mumma, II's prior motion. 73. By virtue of the proceedings surround Mr. Mumma, II's prior motion to disqualify Morgan Lewis, Judge Sheely's Opinion and Order, the Superior Court's affirmance, and the Supreme Court's denial of allocatur, Judge Sheely's conclusion that there are no grounds supporting disqualification of Morgan Lewis from representing Mrs. Mumma and Mrs. Morgan in litigation against Mr. Mumma, II is now the law of the case. 74. To the extent that Mr. Mumma, II's prior attempts to have Morgan Lewis disqualified occurred in the context of No. 66 Equity or other related litigation, he is foreclosed from pursuing the relief sought in the current motion by the doctrines of res judicata and/or collateral estoppel. 75. Mr. Mumma, II, also advanced his claims against Morgan Lewis in prior litigation to which Mrs. Mumma and Mrs. Morgan were not parties. 76. In December 1990, Mr. Mumma, II commenced an action captioned Robert M. Mumma, II v. Arthur L. Klein, Esquire and Morgan, Lewis & Bockius, No. 4430 Civil 1990 (C.P. Cumberland). 77. Morgan Lewis and Mr. Klein served a rule to file a complaint on Mr. Mumma, II. 78. A judgment of non pros was entered against Mr. Mumma, II on February 26, 1991. 79. Mr. Mumma, II thereafter filed a motion to strike or open the judgment of non pros. 'Chat motion was never argued to or ruled upon by the Court. The action was dismissed pursuant to 1?a. R.J.A. 1901 by Order dated October 26, 1993. 80. Mr. Mumma, II's untimely complaint in the action alleged breach of contract by Mr. Klein and Morgan Lewis arising out of the events that were the subject of the January 25, 1989, hearing and Judge Sheely's February 13, 1989 Opinion. A copy of the untimely complaint is attached as Exhibit "E." 81. In addition, since the filing of Mr. Mumma, II's original Motion seeking disqualification of Morgan Lewis, Morgan Lewis has acted as counsel to Mrs. Mumma and Mrs. Morgan or otherwise in matters adverse to Mr. Mumma, II, in addition to the above-captioned action and No. 66 Equity, in at least the following additional actions: Robert M. Mumma, II v. Nine Ninety-Nine, Inc. et al., No. 14 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Nine Ninety-Nine, Inc. et al., No. 15 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Barbara McK. Mumma et al., No. 84 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Dauphin Deposit Bank & Trust Co., No. 4753 S 1993 (C.P. Dauphin) (defense of third-party discovery directed to Mrs. Mumma and Mrs. Morgan); Robert M. Mumma, II et al. v. D-E Distribution Corp. et al., No. 666 Equity, Nov. Term 1993 (C.P. Philadelphia); Robert M. Mumma, II v. G-A-T Distribution Corp., No. 423 Civil 1994 (C.P. Cumberland); Robert M. Mumma, II et al. v. Estate of Robert M. Mumma, et al., No. 04-6183 Civil (C.P. Cumberland)); and Robert M. Mumma, II v. Commonwealth of Pennsylvania, et al., No. 477 M.D. 2004 (Pa. Cmwlth.) 82. Mr. Mumma, II has not filed motions seeking disqualification ofMorgan Lewis from representing Mrs. Mumma and Mrs. Morgan in the actions listed in paragraph 81 above. 83. The Martson Firm, too, has acted as counsel to Mrs. Mumma and Mrs. Morgan or otherwise adverse to Mr. Mumma, II, in addition to the above-captioned action and No 66 Equity, in at least the following additional actions: Robert M. Mumma, II v. Nine Ninety-Nine, Inc. et al., No. 14 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Nine Ninety-Nine, Inc. et al., No. 15 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Barbara McK. Mumma et al., No. 84 Equity 1990 (C.P. Cumberland); Robert M. Mumma, II v. Mumma Realty Associates, No. 91-12 Equity (C.P. Perry); Robert M. Mumma, II v. Mumma Realty Associates, No. 5007 Equity 1991 (C.P. Dauphin) Robert M. Mumma, II v. G A-T Distribution Corp., No. 423 Civil 1994 (C.P. Cumberland); Robert M. Mumma, II v. CRHInc. et al., No. 99-1546 (C.P. Cumberland); Robert M. Mumma, II v. Mumma Realty I, et al., No. 3932 S 1999 (C.P. Dauphin); Robert M. Mumma, II v. Mumma Realty I, et al., No. 99-811/99-10 LIS PEN (C.P. Perry); Robert M. Mumma, II v. Mumma Realty I, et al., No. 99-5569 (C.P. Cumberland) Robert M. Mumma, II et al. v. Estate of Robert M. Mumma, et al., No. 04-6183 Civil (C.P. Cumberland); Robert M. Mumma, II v. Boswell, Tintner, Piccola & Wickersham et al., No. 2004- CV-1779 (C.P. Dauphin); and Barbara McK. Mumma et al. v. Robert M. Mumma, II et al., No. 06-2197 (C.P. Cumberland). 84. Mr. Mumma, II has not filed motions seeking disqualification of the Martson Firm 'from representing Mrs. Mumma and Mrs. Morgan in the actions listed in paragraph 83 above. 85. Morgan Lewis and the Martson Firm also have written numerous letters and other ;papers and correspondence in their capacities as counsel for Mrs. Mumma and Mrs. Morgan. 86. In light of the foregoing, it has been amply clear to Mrs. Mumma, II and others for more than 20 years that Morgan Lewis and the Martson Firm were counsel to Mrs. Mumma and Mrs. Morgan on various aspects of the estate of Robert M. Mumma and the trusts established under his will, and in litigation relating to them. 87. Moreover, in the context of their representation of Mrs. Mumma and Mrs. Morgan, Morgan Lewis and the Martson Firm have prepared and filed various briefs, papers and correspondence citing the impact of the absence of any litigation of the validity of Mr. Mumma, II's revocation of his disclaimer by parties having standing to do so upon the above-captioned matter and the administration of the estate of Robert M. Mumma and the trusts under his will. Thus, neither this issue nor the role of Morgan Lewis and the Martson Firm in advancing it is novel. Rather, the issue has been present in this litigation for many years. 88. Under these circumstances, the failure of Mr. Mumma, II to file a motion seeking disqualification ofthose firms from the above-referenced action constitutes a waiver of any grounds or claims for disqualification of Morgan Lewis or the Martson Firm. 89. Mr. Mumma, II is estopped at this late juncture from seeking disqualification of Morgan Lewis or the Martson Firm as counsel to Mrs. Mumma and Mrs. Morgan. 90. Disqualification of Morgan Lewis and/or the Martson Firm at this juncture would severelyprejudiceMrs. Mumma and Mrs. Morgan as executrices and fiduciaries because, unlike Mr. Mumma, II who has retained numerous different counsel over the course of the family litigation against them, they have attempted to maintain continuity and consistency in using the services of Morgan Lewis and the Martson Firm. Any need to change counsel would necessarily result in enormous additional expense and inefficiency, and would severely impact Mrs. Mumma and Mrs. Morgan's ability to timely conclude proceedings on the accounts that have been filed with the Court and to effectively defend the numerous claims asserted by Mr. Mumma, II against the estate, the executrices and the trusts. 91. As Judge Sheely cautioned in his February 13,1989, opinion, "[b]ecause motions for disqualification are at times interposed for tactical reasons, courts must approach such motions with caution as a client whose attorney is disqualified incurs a loss of time and money in being compelled to retain new counsel who in turn have to become familiar with the prior comprehensive investigation which is the core of modern complex litigation. The client, moreover, may lose the benefit of its long-time counsel's specialized knowledge of its operations." Exhibit D at 11-12 (citations omitted). 92. Mrs. Mumma and Mrs. Morgan consistently have sought to have the accounts, and the objections to them, addressed and resolved so that the estate can be closed after more than 20 years. Contrary to his claimed desire to have an opportunity to present his claims to the Court, Mr. Mumma, II's actions -including the filing of the instant motion -suggest that his goal is, in fact, to delay the process indefinitely. WHEREFORE, Mrs. Mumma and Mrs. Morgan respectfully request that Mr. Mumma, II's motion to disqualify Morgan Lewis and the Martson Firm from continuing representation of Mrs. Mumma and Mrs. Morgan be denied. Respectfully submitted, MARTSON LAW OFFICES By George ller, Esquire I.D. Number 49813 No V. Otto, III, Esquire I.D. Number 257763 Jennifer L. Spears, Esquire I.D. Number 87445 10 East High Street Carlisle, PA 17013 (717) 243-3341 Attorneys for Barbara McK. Mumma and Lisa M. Morgan Date: September 18, 2008 IN THE COURT OF COMMON PLEAS FOR CUMBERLAND COUNTY BARBARA McK, MUMMA and LISA M. MORGAN, Executors of and Trustees under the Will of Robert M. Mumma , deceased, , Plaintiffs, v. , ROBERT M. MUMMA, II, , BARBARA M. McCLURE and , LINDA M. ROTH, , Defendant. ORPHAN'S COURT DIVISION J '.r ORDER .~-1~- AND NOW, this ~~ day of January, 1989, defendant Robert M. Mumma, II having filed a motion to disqualify Morgan, Lewis & Bockius from any further representation of the plaintiffs i.n connection with this matter, it is hereby ORDERED that ~- prQ.~~Pd~ i ncrTs in th; ~ ma.t.t-e,-r--ar_€~__~~~,~Ep_pentiing a de~~ Qn_ qn _this motion except for a.,s~~~Tpr~~-~y--et}rer--si-de--limited-to-the-.subject matter of the__.m-oti.Qn,~ which discovery may-commence--immediately. ~ ~ ~ , A Hearin on this motion is scheduled for '~:~~-~~`~"+~ ~~'~ 1 ~ at ~:00 ~.m. in Courtroom No. ~ r -- ~; ~~ ~.~ ~ J. A TRUE COPY FROM RECORD ~~, Teatirnony wherof. ~ he,reurtto set my hand and tt,o sea-I of saki Coact ~ °' 2 ~- Thia ~`~: day of io` CI of the ns Co4n ~m~iand CouMY IN THE COURT OF COMMON PLEAS FOR CUMBERLAND COUNTY BARBARA McK. MUMMA and LISA M. MORGAN, Executors of and Trustees under the Will of Robert M. Mumma, deceased, . Plaintiffs, v. ROBERT M. MUMMA, II, BARBARA M. McCLURE and LINDA M. ROTH, . Defendants. ORPHANS' COURT DIVISION 21-86-398 MOTION OF ROBERT M. MUMMA, II FOR AN ORDER DISQUALIFYING MORGAN, LEWIS & BOCKIUS FROM REPRESENTATION OF PLAINTIFFS Robert M. Mumma, II ("Mr. Mumma") hereby moves for an order in the form attached hereto, disqualifying plaintiffs' counsel, Morgan, Lewis. & Bockius ("ML&B"), from representing plaintiffs in this action, barring ML&B from communicating with plaintiffs' new counsel concerning this action and staying all proceedings until this motion is decided. In support of this motion, Mr. Mumma avers as follows: Introductory Facts 1. Robert M. Mumma ("decedent") died on April 12, 1986. He was a resident of Cumberland County, Pennsylvania, and left a Last Will and Testament dated May 19, 1982, and a Codicil thereto dated October 12, 1984. Letters testamentary on decedent's estate-were granted to plaintiffs by the Register of Wills of Cumberland County on June 5, 1986. ;:, 2. Plaintiffs are Barbara McK. Mumma ("Mrs. Mumma"), decedent's widow, and Lisa M. Morgan ("Mrs. Morgan"), one of his daughters. The decedent had three other children, Barbara M. McClure ("Mrs. McClure"), Linda M. Roth ("Mrs. Roth") and Mr. Mumma . 3. One of the principal corporations controlled by the Mumma family is known as Nine Ninety Nine, Inc., which is a holding company that controls a number of other operating companies. Mr. Mumma, Mrs. Morgan, Mrs. McClure and Mrs. Roth are all shareholders of Nine Ninety Nine, Inc. At the time of decedent's death the only other shareholder of Nine Ninety Nine, Inc. was Kim Company, another Mumma family company, which has since been dissolved. There is a dispute between Mr. Mumma and plaintiffs as to who now owns or has the right to vote the Nine Ninety Nine, Inc. shares formerly owned by Kim Company. 4. Plaintiffs, purporting to acr as executors of decedent's will, as trustees under the decedent's will and individually, have entered into a letter of intent with a publicly-traded, foreign company to sell all the issued and outstanding shares of Nine Ninety Nine, Inc. and certain other assets. 5. Plaintiffs, asserting that they and the estate own a majority of the outstanding and issued stock of Nine Ninety Nine, Inc., have stated that they intend to cause Nine Ninety Nine, Inc. to make a reverse stock split, which is a corporate trick which, if allowed to proceed as envisaged by plaintiffs, will have the effect of a compulsory purchase of the -2- l- Nine Ninety Nine, Inc. shares owned by Mr. Mumma and any of his sisters who do not want to sell their shares to the proposed buyer. 6. Plaintiffs, represented by ML&B, have brought two related lawsuits in this County against Mr. Mumma. In the instant action, plaintiffs seek the following relief: a. a declaration that the estate's shares in Nine Ninety Nine, Inc. and Hummelstown should be sold to a foreign, publicly-traded corporation notwithstanding Article Thirteenth of decedent's Will, which provides in part that "it is my desire that if expedient and possible, the businesses which I have personally directed during my lifetime and in which I have had an interest be continued for the benefit of and under the management and control of my immediate family"; and b. an order that plaintiffs, as executors, may submit to "voluntarily judicial arbitration" any issues a non- selling shareholder raises in connection with the sale of his or her interest in Nine Ninety Nine, Inc. and Hummelstown Quarries, Inc. 7, In the second action, No. 66 Equity 1988, filed by plaintiffs and ML&B against Mr. Mumma, plaintiffs seek: a. a declaration that Mr. Mumma's right of first refusal to purchase Pennsy Supply, Inc., a wholly-owned subsidiary of Nine Ninety Nine, Inc., is "invalid"; b. a declaration that a power of attorney, drafted by ML&B, is, notwithstanding its revocation by Mr. Mumma, valid and enforceable, and entitles plaintiffs to act as -3- Mr. Mumma's attorney-in-fact to execute various documents alleged to be necessary to complete the sale of properties held by members of the Mumma family as tenants-in-common; and c. a declaration that two agreements drafted by ML&B supposedly for the benefit of the tenants-in-common, including Mr. Mumma, which agreements constitute the stated basis for the aforementioned power of attorney, are valid and grant a valid and enforceable power of attorney to plaintiffs to sign such deeds and other documents as necessary to carry out the purposes of the two agreements, including the sale of property. ML&B Representation of Mr. Mumma 8. After the death of decedent, ML&B undertook the representation of the estate and the primary beneficiaries, including Mrs. Mumma, Mr. Mumma, and his sisters. In May or June, 1986, all of these individuals met with Arthur L. Klein, a partner of ML&B, at the ML&B offices in Philadelphia. At this time, the will was read, and there were extensive discussions concerning estate matters. 9. At this meeting, Mr. Klein gave legal advice to Mr. Mumma and his two sisters having children concerning certain tax advantages available if they chose to disclaim their interests under the Will of the decedent in favor of their children. 10. Also, during the course of this meeting, Mr. Klein advised Mr. Mumma and the others present that it was the intention to keep the Mumma family businesses within the family -4- ~ ~~ and that Mr. Mumma would have an opportunity to negotiate for the purchase of the businesses. 11. During this meeting, Mr. Mumma told Mr. Klein that he needed estate planning advice and set up with Mr. Klein a second meeting in Philadelphia at which he met with Mr. Klein, gave him a copy of his personal financial statement, and privately discussed with Mr. Klein his personal estate planning concerns. This was followed by drafts of documents and further meetings and discussions. The Disclaimer 12. Mr. Mumma also pursued further with Mr. Klein the disclaiming of his interests under the Will in favor of his children. Because of a deadline for taking such action, Mr. Mumma and Mr. Klein discussed this matter extensively by telephone in early January 1987 while Mr. Mumma was in Colorado. Among the issues which were critical to Mr. Mumma's decision regarding this issue and on which Mr. Klein advised Mr. Mumma were the potential value of the estate and his interest in the estate, the tax implications of such a disclaimer, the effect such a disclaimer would have on Mr. Mumma's standing to participate on behalf of his children in the administration of the decedent's estate, and the timing of any public filing and therefore public notice of the disclaimer. 13. Mr. Mumma relied upon the advice of Mr. Klein, and, on or about January 6, 1987, Mr. Mumma e::ecuted a Disclaimer, drafted by ML&B, under which Mr. Mumma disclaimed his interest in decedent's estate in favor of his children. -5- 1'% _ I _ 14. Mr. Klein advised Mr. Mumma that the approximate value of the decedent's estate was $12 million and that the approximate value of his interest was $2 million. Mr. Mumma relied on this statement to his detriment in connection with his decision to disclaim. 15. Mr. Klein also advised Mr. Mumma that his execution of a disclaimer of his interest under the will would not reduce Mr. Mumma's ability to participate on behalf of his children in the review of the administration of decedent's estate. Mr. Mumma relied on this statement in connection with his decision to disclaim. 16. On or about December 27, 1988, ML&B, on behalf of plaintiffs and without any prior consultation with Mr. Mumma, filed in this Court a Petition For Appointment of Guardian Ad Litem for Mr. Mumma's children, the intended purpose of which is to attempt to preclude Mr. Mumma to the greatest extent possible from participation on behalf of his children in the administration of decedent's estate. 17. Although Mr. Mumma specifically directed Mr. Klein not to file the disclaimer with the Cumberland County Court at the time the disclaimer was executed, he has recently ascertained that the disclaimer was so filed on January 12, 1987, by ML&B's corresponding counsel in Cumberland County. He was led to the discovery of this fact by the complaint filed by ML&B in the this action, which specifically recited that the disclaimer was filed with this Court on January 12, 1987. The Tenants In Common Agreement -6- ):. 18. In December 1986, ML&B gave legal advice to the shareholders of Kim Company and Pennsylvania Supply Company, two Mumma family companies, which shareholders included the plaintiffs and Mr. Mumma, as to the advisability for tax purposes of dissolving these companies and distributing their assets to the shareholders prior to the end of 1986. 19. Although the shareholders of Kim Company and Pennsylvania Supply Company agreed to the dissolution and distribution prior to the end of 1986 and although draft agreements among tenants in common were prepared by ML&B during December 1986, these agreements were not finalized in December. At a meeting that month in Harrisburg at which ML&B representatives were present, including Mr. Klein by telephone, Mr. Mumma requested extensive changes to the drafts which were presented to him. Among the many subjects discussed was insistence by Mr. Mumma upon provisions whereby, if any of the individual Owners wanted to sell any of the properties, any or all of the other Owners would have an absolute right of first refusal to buy such property. 20. Since Mr. Mumma intended to be away most of the month of January, he told Mr. Klein that he would go ahead and sign a power of attorney in connection with the dissolutions but that it was essential that the draft agreement be rewritten to accommodate the changes discussed and that he was signing based upon this express understanding. Mr. Klein agreed. Mr. Mumma does not believe that any unattached signature pages were signed -7- ~' at this time. It is his recollection that his one sister was not present and that another simply participated by telephone. 21. In February or March 1987, there was at least one meeting held in Harrisburg at which a new draft was presented and discussed and further changes were made. At this time or shortly thereafter, signature pages were circulated. Mr. Mumma instructed ML&B at the meeting that the signature pages should be affixed to the final agreement when prepared, and that he wanted to receive copies. Mr. Mumma was never furnished with copies of these final documents. 22. Plaintiffs have attached to their Equity complaint in this action against Mr. Mumma two documents entitled Mumma Realty Associates, Agreement Among Tenants In Common, both allegedly made as of December 19, 1986. One document purports to refer to Kim Company and the other to Pennsylvania Supply Company. Plaintiffs rely on these documents (the "Purported Agreements") to support their prayers for declarations respecting (a) Mr. Mumma's right of first refusal to purchase Pennsy Supply, Inc., which is the principal operating company controlled by Nine Ninety Nine, Inc., and (b) plaintiffs' alleged right to act as Mr. Mumma's attorney-in-fact to sell certain assets. 23. The Purported Agreements are not the final agreements to which Mr. Mumma agreed, and he never agreed to the terms set forth in the Purported Agreements- In fact, Mr. Mumma knows that, until the Purported Agreements were filed with this Court, he had never seen some of the language in the Purported Agreement dealing with the assets of Kim Company. This language -8- p< consists of a paragraph (obviously typed with a different typewriter) running from page 7 to page 8 of the Purported Agreement, which paragraph provides, inter alia, that the "individual Owners" will receive cash instead of Union Quarries, Inc. stock. By implication, this provided that the estate would receive 100 percent of the Union Quarries stock held by Kim Company. The Union Quarries stock is quite valuable, and Mr. Mumma never agreed to this provision. 24. Mr. Mumma also did not agree to the other terms set forth in the Purported Agreements, which apparently were authored by ML&B, who represented him with regard to this transaction, and which Purported Agreements ML&B is now attempting to use against him in these proceedings. ML&B Withdrawal from Representation 25. In late March 1987, Mr. Mumma told Mr. Klein that the family situation was deteriorating and that he thought it best that he obtain separate counsel. He asked Mr. Klein for a bill, which was submitted and paid. 26. In June 1987, at a family meeting at Mrs. McClure's house, Mr. Mumma was asked by plaintiffs to execute and deliver a power of attorney to allow a parcel of land to be sold by Mumma Realty Associates I. Mr. Mumma did not want the lot to be sold and so informed plaintiffs, but Mr. Mumma was prevailed upon to deliver the power on being offered a right of first refusal to purchase Pennsy Supply, Inc. 27. Shortly after this meeting, Mrs. Morgan spoke to Mr. Klein about the right of first refusal that the family had -9- ,: ~ granted Mr. Mumma, and Mr. Klein advised Mrs. Morgan negatively concerning the giving of this right. A month or two later, Mr. Mumma asked Mrs. Mumma when he would receive a letter setting forth his right of first refusal, and she informed him that ML&B had advised the estate not to issue such a letter. Disqualification 28. ML&B must be disqualified from representing the plaintiffs in these two related actions. a. Mr. Mumma is a former client of ML&B. b. The subject matter of ML&B's prior representation of Mr. Mumma is substantially related to the subject matter of this action and the related Equity action. In fact, in several instances, as set forth above, ML&B is attempting to take action against Mr. Mumma which is contrary to the very legal advice which it rendered to him and the directions which he gave to ML&B as his attorneys. c. The plaintiffs' interests with regard to these lawsuits are materially adverse to the interests of Mr. Mumma . d. ML&B never advised Mr. Mumma of its proposed representation of plaintiffs in this action, and certainly did not ask his consent to such representation, which consent would have been, in any event, ref~ised. e. ML&B's representation of plaintiffs in these lawsuits violates its duty of loyalty to Mr. Mumma as well as its duty to preserve his confidences even after the termination -10- of its employment. The representation also violates its duty to avoid even the appearance of impropriety. WHEREFORE, Mr. Mumma respectfully requests that ML&B be disqualified from representing plaintiffs in this action and ordered not to communicate with replacement counsel concerning the subject matter of this action and further requests that all proceedings be stayed pending resolution of this Motion. Further reasons in support of this motion are set forth in the accompanying memorandum. Respectfully submitted, James R. Ledwith Jon A. Baughman Anthony Vale PEPPER, HAMILTON & SCHEETZ 3000 Two Logan Square 18th & Arch Streets Philadelphia, PA 19103 (215) 981-4000 John B. Fowler, III FOWLER, ADDAMS, SHUGHART & RUNDLE 28 South Pitt Street Carlisle, PA 17013 (717) 249-8300 s Attorneys for Robert M. Mumma, II ~,' -11- -.' ~'' VERIFICATION I, Robert M. Mumma, II, hereby state: 1. I am a defendant in this action; 2. I verify that the statements made in the foregoing Motion are true and correct to the best of my knowledge, information and belief; and 3. I understand that the statements in said Motion are made subject to the penalties of 18 Pa. C.S. §4904 relating to unsworn falsification to authorities. Robert M. Mumma II Dated: ~~ f~~~ CERTIFICATE OF SERVICE I, Jon A. Baughman, certify that a copy of the attached Motion of Robert M. Mumma, II for an Order Disqualifying Morgan, :Lewis & Bockius From Representation of Plaintiffs, and a copy of the supporting memorandum were served upon plaintiffs' counsel, William E. Zeiter, 2000 One Logan Square, Philadelphia, PA 191D3, by hand delivery on January 12, 1988. JON A. B GHMAN /~ (~~' i ~- y `~' QB_~.E~~EE_NIZA ~IT_ ROBERT M. MUMMA, II ~N4EX TO ~IIT~EI -.SSES IZI RF~T_ ~RQ~ 3 56 REDIRE~T_ R~CR~~~ ARTHUR L. KLEIN, 79 111 124, 131 130 as on c ross FOR PLAINTIFFS LISA M. MORGAN 136 145 -- -- INDEX TO E XHIBITS -EQ-R-?~i~. -~EEN~AL~1I MflBIC~ AI)l1 ITTED Ex. No. 1 - letter (9/5/86) 8 136 Ex. No. 2 - letter (11/11/86) 10 136 Ex. No. 3 - letter (12/3/86) 17 136 Ex. No. 4 - memorandum (3/11/87) 29 136 Ex. No. S - agreement 31 136 Ex. No, 6 - agreement 31 136 Ex. No. 7 - letter (1/6/87) 41 136 Ex. No. 8 - invoice 44 136 Ex. No. 9 - letter (8/14/87) SO 136 Ex. No. 10 - power of attorney 54 136 Ex. No. 11 - letter (11/10/86) 84 136 F._4 R~~iE_ __P_J,..A_I-~tI~FE~ Ex. No. 1 -letter (1/9/87) 69 147 Ex. No. 2 - letter (1/12/87) 69 147 Ex. No. 3 - matter detail report 111 147 MR. FOWLER: R11 right. Your Honor, if I 2 may, I"d like to introduce to the Court Jon Baughman, James 3 Ledwith, and Anthony Vale of Pepper, Hamilton and Scheetz. 4 They are lead counsel for the matters before Your Honor this 5 afternoon. 6 THE COURT: Is that Mr. Mumma in the back? 7 MR. BAUGHMAN; This is Mr. Robert Mumma, II. 8 MR. MARTSON: Your Honor, Thomas Kittredge 9 will be lead counsel for the Plaintiffs in this matter. 10 THE COURT: And the -- 11 MR. KITTREDGE: If I could introduce the 12 others, Arthur Klein and Joseph O'Connor also from Morgan, 13 Lewis and Bockius. And these two ladies are the 14 co-executrixes of the estate of Robert Mumma, Lisa Mumma and 15 Mrs. Robert Mumma. Oh, I"m sorry, Lisa Morgan. I 16 apologize. 17 THE COllRT: You may proceed. 18 MR. BAUGHMAN; Thank you, Your Honor. I 19 would proceed by calling Mr. Robert Mumma as my first 20 witness on this motion for disqualification. 21 Let me say, if I may, before I begin, that I have 22 some concerns as to the confidentiality as to some possible 23 documents and testimony that we believe are still subject to 24 the attorney-client privilege. 25 I would not ask the Court for any relief at this 2 time, but if we run into this kind of roadblock, I may well 2 ask the Court if we could somehow be protected so we could 3 preserve the confidentialities. I mention that only as a 4 preliminary matter at this time. 5 THE COURT: If the issue arises, we'll take 6 care of it at that time, 7 MR. BAUGHMAN: Mr. Mumma. g Whereupon, g ROBERT M. MUMMA II, 10 having been duly sworn, testified as follows; 11 DIRECT EXAMINATION 12 BY MR. BAUGHMAN: 13 Q Mr. Mumma, when was the first time that you 14 had any contact with Mr. Arthur Klein from Morgan, Lewis and 15 Bockius? 16 A Approximately twa weeks to two months after 17 my father died. 18 Q And that would be at approximately what time 19 period? 20 A Late spring, early summer of 1986. 21 Q What was the occasion for your meeting Mr. 22 Klein? 23 A Mr. Klein had called for a meeting of the 24 beneficiaries of my father's estate in Philadelphia at the 25 offices of Morgan, Lewis and Bockius. 3 Q Who was present at that meeting? 2 A My mother, Lisa Morgan, Linda Roth, Barbara 3 McClure, myself, Mr. Klein. The other people are my 4 sisters. 5 Q What was Your understanding of what Morgan, 6 Lewis was or what they were doing as of the time you went 7 into that meeting? 8 MR. KITTREDGE: If Your Honor please, his 9 understanding I think is not relevant. What he was told 10 perhaps would be. 11 THE COURT: Well, he can certainly testify as 12 to whY he believed he was being called there, and I overrule 13 the obJection. You can state that. 14 THE WITNESS: Well, there had been some 15 discussion amongst my sisters and myself as to what was 16 going on with the estate, and we had been told that Mr. 17 Klein -- if we came down -- Mr. Klein would explain 18 everything to us and let us know what was going to happen 19 and how these things were going to evolve and where we stood 20 at that time. 21 BY MR. BAUGHMAN: 22 Q Would You describe to the Court what took 23 place at the meeting? 24 A Well, Mr. Klein -- it was like a luncheon 25 meeting that had been extended into the afternoon -- so this 4 was a rather long meeting, four or five hours. And he went Z through the Will page by page, paragraph by paragraph, and 3 explained to everybody what the Will meant, answered 4 questions as to what the different paragraphs meant. 5 He explained to everybody what their interest in 6 the estate was, gave an approximate value of the estate, 7 went through the right of the individuals to disclaim from 8 the estate, basically tried to answer any questions that any 9 of us had with regards to the estate. 10 Q What, if anything, was discussed by Mr. Klein 11 at that meeting with regard to a possibility of disclaiming 12 under the Will? 13 A He mentioned to all the parties that there 14 was an option to disclaim their individual interest in the 15 estate and that there would be certain tax ramifications 16 with regards to that that may be beneficial to some of the 17 parties. 18 Q Could you explain a little further how -- 19 what tax ramifications would be beneficial, if you 20 understand? 21 A Well, my understanding was that if you 22 disclaimed, that there is a generation-skipping provision in 23 the Tax Code that would essentially allow that share to pass 24 to my beneficiaries and my estate and save one step of 25 tax -- approximately SO percent of the value would go 5 through or -- let's see. My beneficiaries would get 2 essentially twice as much ,out the estate as what the 3 beneficiaries of someone who did not disclaim would get. 4 Q What, if anything, did Mr. Klein say at this 5 meeting as to who he was representing and who he was not 6 representing? 7 A He didn't say anything. It was implied. 8 Q Well, what to your understanding was -- what 9 was implied to you? 10 MR. KITTREDGE: If Your Honor please, I would 11 obJect to what he implied. 12 MR. BAUGHMAN: Well, Your Honor, it seems to 13 me that one of the primary issues here is what was the 14 reasonable understanding of Mr. Mumma as to who was 15 representing wham. 16 THE COURT: The testimony is that he didn't 17 say specifically. He can testify what he believed from the 18 conversation. I'll permit him to say that, overrule the 19 obJection. 20 THE WITNESS: It was my understanding that 21 Mr. Klein was there acting on behalf of all of the 22 beneficiaries and the estate to see ti~~~ this thing was 23 going to be settled in an amicable fashion and explained to 24 everybody what the purpose of the Will was, how the Will 25 anticipated seeing that the assets of the estate were to be 6 finally distributed, and that he was the director of the 2 process, so to speak. 3 BY MR. BAUGHMAN: 4 Q Well, were there any disputes among the 5 beneficiaries as of that time? 6 A No, none, 7 Q What, if any, questions did you ask Mr. Klein 8 at that meeting? 9 A Well, I asked him with regards to the -- 1.0 several things came up that were particularly of personal 11 interest to me, Number one, we got into a discussion about 12 a clause in the Will that provides that distribution per 13 stirpes not per capita, which I didn"t understand, and 14 apparently became confusing not only to me but to Mr. Klein, 15 and we got into a long discussion as to what that meant and 16 never did get a resolution to it. 17 We got into a discussion about the phrase in the 18 Will that family owned and controlled corporations, or 19 corporations that my father had managed at time of his 20 death, it was his desire to see that then stayed within the 21 family control and family interest. 22 Q But what, if anything, did Mr. Klein say 23 about that? 24 A Mr. Klein said that that was his 25 understanding of the Will, and that his fob, or one of his 7 jobs, would be to see that that was carried out. And that 2 it was his understanding that I was to buy these family 3 corporations or operating companies, PennsY Supply, Inc. in 4 particular. S Q After that meeting, what was the next 6 contact, if any, that you had with Mr. K lein? 7 A I engaged Mr. Klein to do some work in 8 conjunction with this on my own estate b ecause one of the 9 things that came out of t his meeting was that there was a 10 lot of diffe rent ramifica tions as to how a Will should be 11 written, and I went down to Philadelphia to meet with Mr. 12 Klein to discuss that and met with him and a Mrs. Wilford at 13 that meeting and gave them some information, financial 14 statements, and some other information regarding my personal 15 estate. 16 Q What, if anything, was said at this meeting 17 about Mr. Klein's representation of you? 18 A Well, he agreed to represent me. 19 MR. BAUGHMAN: I'd like to have this marked 20 as Defendant's Exhibit 1 for identification, if I may. 21 (Whereupon, Defendant's Exhibit No. 1 was 22 marked for identification.) 23 BY MR. BAUGHMAN: 24 Q Now, I show you what's been marked for 25 identification as Defendant's Exhibit 1, and I'll tell you 8 that that is a document which recently has been produced by 2 Morgan, Lewis and Bockius in discovery in this case. Do you 3 have -- first of all, do You have any recollection of this 4 particular document, which is a letter from Mr. Klein to you 5 dated September 5th, 1986? 6 A No, I do not recall it. I couldn't find this 7 when I went through mY files. It wasn't in there. 8 Q Let me read to you the second paragraph of 9 that letter, and -- Your Honor, I don't know what Your 10 practice is in a non-Jury case at looking at documents 11 before they're admitted. I have a copy I'd be happy to have 12 You have if you would find that easier. If you prefer not 13 to, I refrain. 14 THE COURT: I prefer Just not to see it. I 15 think I can listen. 16 MR. $AUGHMAN: Fine. Very good. 17 $Y MR. BAUGHMAN: 18 Q Let me read to you, if I may, the second 19 paragraph of that letter which says, "One matter we 20 discussed which I did not note in the memorandum is that if 21 you or any of your companies were to become involved in 22 negotiations with your father's estate to buy the operating 23 company for anything else for that matter), Morgan, Lewis 24 and Bockius would represent the estate and you would obtain 25 other counsel. I know that Lisa and Your mother are 9 satisfied with that understanding and you indicated that you 2 were also." What recollection, if any, do you have as to 3 that discussion? 4 A Weil, I do recall that we were discussing my 5 purchase of PennsY Supply. Inc. and maybe some portions of 6 real estate that the estate decided to sell, and my 7 understanding was that Mr. Klein was going to handle this in 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 such a manner that it could be done amicably; but if we got down into negotiations, they would negotiate on behalf of the estate and I would have to get other counsel. MR. BAUGHMAN: I would ask the reporter to mark this for identification as D-Z. {Whereupon, Defendant's Exhibit No. 2 was marked for identification.) BY MR. BAUGHMAN: Q Mr. Mumma, D-1 was dated, I believe it was, September of 1986, and is it correct that you had a meeting with Mr. Klein to discuss your personal estate matters sometime shortly prior to the date of that letter? A Apparently at the end of August, yes. Q Did you have -- do you recall what you had in the way of contact with Mr. Klein between then and let's say November of 1986? A Well, I think he sent me some drafts of things, and we discussed some things on the telephone, and 10 then they called for a meeting regarding the estate in 2 November. 3 Q And they was who? 4 A The estate -- Mr. -- it was either Mr. Klein 5 or my sister, 6 Q Now, where -- you don't need to look at D-2 7 yet -- I'm getting a little ahead of myself, but where was 8 the meeting called for? 9 A The meeting was called to be held at the 10 offices of Pennsy Supply, Inc. in Harrisburg. 11 Q And who was at that meeting? 12 A I believe aII the parties that were at the 13 Philadelphia meeting and Mr, Hadley, Mr. George Hadley, who 14 is my personal accountant and the accountant for the 15 corporations. 16 Q And that would be the family corporations? 17 A Family corporations and for the estate was 18 there also. 19 Q And is he a member of a firm? 20 A He's a member of Zucker, Kennedy and Feldman. 21 Q And had that firm -- for how long had that 22 firm represented Your family interest? 23 A As near as I can figure since 1961 or '62. 24 Q What was the subject that was announced to 25 You at that meeting in November of 1986? 11 A The subject was changes in the 1986 Tax Law 2 and the General Utilities Doctrine with regards to the 3 dissolution of Pennsylvania Supply Comp any, which was the 4 old, origina l company that was founded in 1921 by my 5 grandfather, Walter Mumma, and a subsid iary of that company, 6 Kim Company, which was founded in 1947 by my father. 7 Q Who was explaining this to the family 8 members? 9 A Mr. Klein. 10 Q Would you tell the Court to the best of your 11 understanding why it was that the dissolution of these 12 companies was being discussed as you understood it? 13 A My understanding was that the Tax Reform Act 14 in '86 was going to disallow the General Utilities Doctrine 15 and thus make or subJect dissolutions to a double tax after 16 1986, at least with corporations in this size range, so that 17 then were recommending that these corporations be dissolved 18 before December 31st, 1986, so that they could take 19 advantage of this doctrine and save a step in the tax. 20 Q Let's take Kim Company first. Kim Company -- 21 what primarily did Kim Company do? What kind of company was 22 it? 23 A Kim Company had no active employees at the 24 time. Thev primarily were a real estate investment company, 25 and they owned the shares of stock or approximoteiy half the 12 shares of stock of a holding company called 999, Inc., which 2 basically was a holding company for the operating companies. 3 Q And Pennsy Supply is a subsidiary of 999, 4 Inc.? 5 A Pennsy Supply is a subsidiary of 999, Inc. 6 Q So Kim Company held 999. Did it hold any 7 real estate? 8 A They held real estate, yes. g Q And the idea was to dissolve it and 10 distribute the assets to the shareholders? 11 A That's correct. 12 Q And who were the shareholders of Kim Company? 13 A Shareholders of Kim Company were my three 14 sisters and myself and Pennsylvania Sup.plY Company. My 15 mother may have had a let for a~n interest in Kim Company 16 also. 17 Q Did Your father, prior to his dying, have an 18 interest in Kim Company? 19 A No. 20 Q Now, the other company was Pennsylvania 21 Supply Company, is that right? 22 A Yes. 23 Q And it was a shareholder actually of Kim 24 Company? 25 A That's correct. 13 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q In fact, wasn't it the largest shareholder of Kim Company? A It was the largest shareholder. Q And who were the other shareholders of Pennsylvania Supply CampanY? A The shareholders were the estate, which I recall had 70 0 and some shares, and the four children. Q Okay. And the proposal was -- did this company also hold real estate? A Pennsylvania Supply Company owned a substantial a mount of real estate, yes. Q And so the proposal was to dissolve both of these compani es and distribute the assets prior to the end of the year? A That`s correct. Q And is it correct that all of the shareholders of these two companies were present at that meeting being addressed by Mr. Klein? A That's right. Q And that's Your sisters and your mother and Yourself? A All the shareholders were there, the accountant fo r the company was there, and Mr. Klein was there. Q What -- do You recall anything else that was 14 discussed at that meeting? 2 A Well, the first topic or the first point that 3 I raised was that my conversation with my father had always 4 been that he was very proud that there was a company that 5 had been formed in 1921 that had been in existence at this 6 time for over 35 or 36 nears, and that he did not in any 7 case ever want to see that company put out of business. 8 I felt that he had the same kind of affinity for 9 Kim Company also, but probably less so, so one of the big 10 topics of concern was -- and my sister Babbs felt the same 11 wan as I did about this -- was that we did not want to see 12 Pennsylvania Supply Company dissolved. Just -- that was -- 13 we did not think that that would in any way have been 14 something that my father would have contemplated. 15 Q Did you discuss that with Mr. Klein? 16 A We discussed that with Mr. Klein. 17 Q What did Mr. Klein say? 18 A Well,. Mr. Klein said that he could understand 19 that, and that I asked him if it would be possible to do 20 this without dissolving the campany, and he said that he 21 would go back and research. 22 Q And did he do so? 23 A He did, and he sent me a memorandum on it, 24 which is this letter of November 11th. 25 Q AlI right. And this is a letter from Mr. 15 Klein to you, is that right? 2 A Prom Mr. Klein to me, that's correct. 3 Q And this was after the meeting you had in 4 Harrisburg? 5 A That's right. 6 Q And how is that letter marked? 7 A That's Defendant's Exhibit 2. 8 Q No, I'm sorry. Is there anything at top of 9 the letter tha t describes how it's to be handled? 10 A Personal and confidential. 11 Q And in there he gives you information on 12 whether or not it would be possible to keep Pennsylvania 13 Supp1Y Company in existence? 14 A That's right, and I should also mention that 15 I was the vice president of Pennsylvania Supply Company at 16 this time and chief executive officer at this time. 17 Q Now, at the meeting in November with the 18 family members , the shareholders present, what, if anything, 19 did Mr. Klein say about who he was representing and who he 20 was not repres enting? 21 A He didn't say anything. I assumed that he 22 was representi ng the shareholders of these companies and the 23 companies. 24 Q Now, this particular copy of this document 25 was obtained f rom the files of Morgan, Lewis and Bockius. 16 First of all, is there anybody carboned copied on this 2 letter to you from Mr. Klein? 3 A Well, George Hadley, the CPA from Buffalo is 4 carboned cop ied. 5 Q Is there anybody blind copied on this? 6 A Yes, apparently he sent blind copies to the 7 executrixes of the estate and two other attorneys, a Martha 8 Manning and Mary Sue Rothenberg. 9 Q And do you know them? 10 A No, I do not know them. 11 MR. BAUGHMAN: I'm going to ask that this 12 document be marked as D-3 far identification. 13 (Whereupon, Defendant's Exhibit No. 3 was 14 marked for i dentification.) 15 BY MR. BAUGH MAN: 16 Q I show you what's been marked as D-3, and can 17 you tell the Court what that document is? 18 A This is a letter sent to me by express mail, 19 and it's exp laining Pennsylvania Law with regards to the 20 dissolution of Pennsylvania Supply Company and Kim Company. 21 Q And is that the subject, once again, that you 22 had discusse d with Mr. Klein? 23 A That's right. 24 Q And who sent you that letter? 25 A Martha Manning. 17 Q Okay. And it's on what letterhead? 2 A Morgan, Lewis and Bockius. 3 Q And are there any carboned copies noted on 4 that letter to you from Morgan, Lewis? 5 A Yes, with enclosure to Arthur Klein and Lisa b Morgan. 7 Q And is there any blind copy? 8 A Yes, there was a blind Copy to a William E. 9 Zeiter, Esquire . 10 Q At that time, and that would be early 11 December, 1986, did you know a William E. Zeiter, Esquire? 12 A No. 13 Q Do you now know a William E. Zeiter, Esquire? 14 A Since December 27th, yes. 15 Q And do you know what firm he's a partner in? 1fi A Morgan, Lewis and Bockius. 17 Q You said that You knew him since December 18 27th, December 27th of what year? 19 A Of 1988. 20 Q So that's Just last month? 21 A That's right. 22 Q I want to Jump, Just for a minute, back a 23 little bit earl ier to where you began when you came down to 24 Morgan, Lewis a nd Bockius. What, if any, association had 25 there been betw een your family and Morgan, Lewis and Bockius 18 prior to Your family going down to see Morgan, Lewis? 2 A Well, my sister Lisa was employed by Morgan, 3 Lewis, and my father had engaged Mr. Klein to do some estate 4 planning. 5 Q In fact, at this time we are now up into, 6 December of 1986, was she still employed by Morgan, Lewis at 7 that time? 8 A Yes. 9 Q I'm now going to show you a Copy of one of 10 the two complaints that has been filed in this court against 11 you, and this is No. 66 Equity 1988, and I take it you've 12 had a chance to see that, is that right? 13 A That's correct. 14 Q In fact, when did you first receive a copy of 15 that complaint? 16 A I think it was on December 27th. 17 Q And how did you receive it? 18 A It was handed to me by Mr. Zeiter. 19 Q And Mr. Zeiter was mentioned at the top of 20 the first page, is that right? 21 A That"s right. 22 Q Now, after you received these letters from 23 Morgan, Lewis explaining how the liquidation of corporations 24 could be achieved and still keeping the shells of the 25 companies there, what was the next thing to happen, Mr. 19 Mumma? Was there another meeting or -- 2 A Well, that meeting was adJourned, and they 3 then sent notice of a special meeting of the shareholders 4 for January 7th. 5 Q No, I'm sorry. I'm getting you very 6 confused. You're talking about what happened after December 7 27th, 1988. 8 A Right. 9 Q I want to put you back at November and early 10 December of 1986 when you were talking about liquidating 11 these two corporations. 12 A Okay. 13 Q And my question is, after you had received Z4 this information from Morgan, Lewis about that, what was the 15 next thing that happened? 16 A The next thing that happened is that we got a 17 call for a hurry-up evening meeting the end of December, 18 perhaps the 19th or sometime thereafter that -- 19 Q 1986? 20 A 1986 -- that Mr. Hadley was to attend, and 21 they were bringing up the documents that they wanted us to 22 sign with regards to this dissolution of these two 23 companies, and we were to go to this meeting to go through 24 this paperwork. 25 Q And who attended the meeting as best you can 20 recall? 2 A My recollection is that George ~iadley was 3 there. There was an attorney from Morgan, Lewis by the name 4 of Bill Skinner, who T was introduced to. My sister Lisa 5 was there, my mother was there, and Mr. Klein attended the 6 meeting via a speaker phone. 7 Q Now, you have two other sisters, Linda and 8 Barbara, who I think you call Babbs, is that right? 9 A That"s correct. 10 Q Were Linda or Babbs there? 11 A I don't recall their being there. I think 12 that we may have attempted to call Linda via the telephone 13 during the meeting. I4 THE COURT: Where was this meeting held? 15 THE WITNESS: This was held on Paxton Street, 16 Pennsy Supply's main office. 17 BY MR. BAUGHMAN: 18 Q In Harrisburg? 19 A Tn Harrisburg. 20 ~ Q And could you tell the Court basically what 21 happened at that meeting? 22 A Well, Skinner arrives with this stack of 23 documents that we"re going to go through, and he's going to 24 explain to everyone what it's for, and these are the 25 documents that are necessary to dissolve the corporation. 21 And we go through -- they had an agreement for the 2 tenants-in-common, and we go through that, and I had a lot 3 of questions about it. And we got Art Klein on the 4 telephone, and we started -- 5 Q Why did you get Art Klein on the telephone? 6 A Because I was not happy with the language of 7 the agreement, the drafted language, and I wanted changes 8 made. And we were going through what changes had to be made 9 in order to have the effect that I wanted out of the 10 agreement, and so in a sense we were drafting new language 11 over the telephone, and Skinner was writing it down onto the 12 draft that he had of the agreement. 13 Q How -- how did that meeting end or what else 14 happened at the meeting? 15 A Well, it was -- the meeting ended with the 16 understanding that in order for them to comply with the 17 time, that this company had to be liquidated by December 18 31st, and that I would sign the documents necessary for the 19 liquidation, the liquidation of the assets, but that the 20 agreement among the tenants and the management agreements 21 and the subseque nt agreements th at were necessary to control 22 the assets after the liquidation were going to be redrawn to 23 provide for the language that I insisted on. 24 And that because I was taking a trip, 25 contemplating a trip in January the first week that I always 22 take, they requested for me the power, the general power of 2 attorney, because I was the vice president of this company 3 and the senior officer, so that they could effect this 4 dissolution or liquidation, I guess, of the assets. 5 Q Was there general agreement among the 6 shareholders that You would go forward and liquidate the 7 companies and distribute the assets? g MR. KITTREDGE: Your Honor, please, I obJect 9 to the leading. 10 THE COURT: Overrule the abjection. You can 11 ask him. 12 MR. BAUGHMAN: I'll rephrase it, Your Honor. 13 BY MR. BAUGHMAN: 14 Q What agreement, if any, was there among those 15 assembled as to what would happen, if anything, after the 16 meeting? 17 A Well, I had an agreement with Mr. Klein that 18 other than the dissolution, nothing would happen until we 19 hammered out the appropriate agreement for the 20 tenants-in-common and got the right language and inserted it 21 in there. 22 Q Let's talk about -- you said other than the 23 dissolution. What agreement, if any, was there as to 24 whether there would be a dissolution? 25 A The parties that were at that meeting were 23 going ahead. We were going ahead with the dissolution, but 2 as to how those assets would be managed afterwards, we 3 had -- Mr. Klein knew what my concerns were, and I made it 4 obvious to him what parameters that I wanted in the new 5 agreement. 6 Q And did he agree to that? 7 A He agreed to that. He agreed that they would 8 draft the new language, but there was not time, given all 9 these other things that their office had to do to dissolve 10 these companies in the given time, there was not time to 11 draft this new agreement, get everybody reassembled, go 12 through it again, and have it done. 13 In other words, they agreed that they would get 14 the dissolution done and the liquidation aspect done, and 15 they would come back and have another meeting. We're going 16 to sit down. We're going to put these points in a new draft 17 which we'll sit down with everybody and sign the papers 18 later. 19 Q What, if anything, did Mr. Klein or Mr. 20 Skinner -- was Mr. Skinner a partner to your understanding 21 in Morgan, Lewis? 22 A I doubt that he was a partner. 23 Q But You don"t know one way or the other? 24 A I don't know. 25 Q What, if anything, did Mr. Skinner or more 24 particularly Mr. Klein say at that meeting about who they 2 were rep resenting and who they weren't representing? 3 A Well, nothing, and I think the point is, I'm 4 the one -- when I raised questions to Mr. Skinner, I 5 insisted that he get Art Klein on the speaker phone to 6 explain this stuff to me, and that's why Mr. Klein was 7 called. Mr. Skinner didn't have the answers, and I said I 8 want to know what's going on here, so I insisted that they 9 call Art Klein. 10 Q What did You understand your relationship to 11 be to Mr. Klein? 12 A My understanding was Mr. Klein was advising 13 me and protecting me and giving me the language that I 14 needed to achieve things I wanted to achieve in this 15 agreement, and that's what I went through with him. 16 I told him personally -- one of the items that was 17 up for discussion was the ability to use Your shares in 18 these tenants-in-common as collateral for loans and 19 financing arrangements, and I explained to Mr. Klein that I 20 needed to be able to do that, and Mr. Klein agreed. 21 He said that he would change the language in that 22 so that you're allowed to do that, and we went through the 23 right of first refusal, I told him I want to have the right 24 of first refusal. If they are going to do something wi th 25 the stock of Union Quarrie s, Inc., I want to be able to buy 25 it. 2 Q Would you explain to the Court what you mean 3 about this right of first refusal? 4 A Well, we were all going to be 5 tenants-in-common, Jointly own this, and there was a 6 provision -- 7 Q Jointly owned the assets of two companies? 8 A These assets, that's right. And the question 9 that I had is, well, if X wants out, what do the other 10 parties do? They're in now. They shouldn"t be forced to 11 get out because one of the other parties wants out. 12 It was agreed that those parties would have a 13 right of first refusal either together as a group or maybe 14 one or two of them acting in concert could exercise it or 15 one as an individual could exercise the right of first 16 .refusal. 17 Q Now, it is the right of first refusal to do 18 what? 19 A To buy the other people out if they decide to 20 sell, because there was no reason in my mind that if I have 21 a share of an interest in a piece of real estate, that 22 because one of my sisters elected to get out or the estate 23 elects to get out, that I should have to give up my share at 24 that time. 25 It seemed to me if I was going to exercise the 26 right of first refusal, then that would allow us to stay in. 2 That's the way it ought to be, and it was. We went over 3 that in detai l. 4 Q What, if any, agreement was reached as to the 5 this right of first refusal? 6 A Mr. Klein agreed that we would have it. 7 Q You mentioned that you signed -- you were 8 going to be o ut of the area in January? 9 A That's right. I always take a ski trip the 10 first week in January. 11 Q And you signed a power of attorney in that 12 regard? 13 A They made it a general power of attorney for 14 me so that th ey would be able to go through this 15 dissolution, and in case something got overlooked and I was 16 out of town, they had a piece of paper they could go filing 17 documents wit h. 18 Q To Your knowledge who, if any, other 19 shareholders also signed a power of attorney at that time? 20 A I don't believe any other shareholders did. 21 Babbs was the other officer of the corporation. 22 Q Now, You've, I take it, read this complaint 23 at the equity action, have you not? 24 A Yes. 25 Q And are you aware that one of the things that 27 this action was brought for was to get the Court to say that 2 certain tenants-in-common agreements mean certain things and 3 mean that the companies can be sold, that the assets of Kim 4 Company and Pennsylvania Supply Company can be sold, whether 5 or not You approve of that? Do you understand that? 6 A That's right. My understanding is that 7 they're trying to do exactly what I told Mr. Klein I didn't 8 want to have happen, and he advised me that the language 9 would provide that it couldn't be done. 10 Q Now, there are attachments to the agreement, 11 and I apologize that in this Copy there aren't any tabs. 12 You have to go beyond the complaint itself, which is like 13 ten pages and a couple verifications, and then there's a 14 document which is Exhibit A to the complaint, and it says 15 Mumma Realty Associates, Agreement Among Tenants-In-Common, 16 and it is -- well, it's a little confusing. Let's see. 17 It's 18 pages, 19 pages long including a signature page. Do 18 You see that? 19 A Correct. It's immediately after the 20 verification. 21 Q Right. Now, looking at the signature page, 22 which is page 19, is that your signature, the third 23 signature? 24 A Yes. 25 Q And looking at the document that precedes it, 28 did You ever sign a document -- or did You sign that 2 signature page when the document preceding it was attached 3 to it? 4 A I did not sign the signature page that was S attached to the document. The signature page that I signed 6 was passed around the table as a separate sheet of paper. 7 Q Okay. Let's go to that. When did you sign 8 the signature page that You recall? 9 A MY recollection is that the signature page 10 was signed at the subsequent meeting when they presented the 11 redrawn document. 12 Q When was that subsequent meeting? 13 A That was the following March or April, 14 somewhere in there. 15 Q And where was that meeting? 16 A That was held at Pennsy Supp1Y"s offices in 17 Harrisburg. 18 Q And did anybody from Morgan, Lewis and 39 Bockius attend that meeting? 20 A That meeting they had a real estate expert 21 attend by the name of Jerry Browner. 22 MR. $AUGHMAN: I'm going to ask the court 23 reporter to mark this document. 24 (Whereupon, Defendant"s Exhibit No. 4 was 25 marked for identification.) 29 THE COURT: I don't believe he answered the 2 question whether or not anYbodY from Morgan, Lewis and 3 Bockius attended -- 4 THE WITNESS: Oh, excuse me, Mr. Browner was 5 from Morgan, Lewis. 6 MR. BAUGHMAN: And is he a partner in Morgan, 7 Lewis? 8 THE WITNESS: I believed him to be. 9 MR. KITTREDGE: Thank you, Your Honor. 10 BY MR. BAUGHMAN: 11 Q I show you what's been marked for 12 identification as Defendant's Exhibit 4 and ask you if you 13 can tell me what that is? 14 A This is a letter I received by Federal 15 Express from Jerry Browner of Morgan, Lewis and Bockius. 16 Q And what -- does he attach anything to that? 17 A He attaches a revised draft agreement that's 18 annotated as to the revisions that -- well, they're 19 underlined, I think. 20 Q Now, is the copy -- did you find a copy of 21 that in Your files? 22 A Yes, I found this in mY files in the -- well, 23 my secretary did -- in the Federal Express folder. 24 MR. BAUGHMAN: Okay. I"m now going to have 25 marked for identification D-5 and D-6. 30 (Whereupon, Defendant's Exhibit No. 5 was 2 marked for identification.) 3 (Whereupon, Defendant's Exhibit No. 6 was 4 marked for identification.) 5 BY MR. BAUGHMAN: 6 Q And I now show you what's been marked as D-5 7 and D-6 and ask you if you've ever seen them before? 8 A Yes, this is another draft of the, a 9 different draft of the same agreement. 10 THE COURT: Are both D-5 and D-6 drafts? 11 BY MR. BAUGHMAN: 12 Q Let's take that -- you were referring when 13 you said another draft of the same agreement, you were 14 referring to what document? 15 A D-5. 16 Q Now, would you tell the Court what D-6 is? 17 A D-6 is a management agreement that was 18 passing around at the same time. 19 Q And is that also in the form of a draft? 20 A Yes. 21 Q Do you have any understanding as to what a 22 management agreement would have to do with? 23 A My understanding was that the 24 tenants-in-common could not act as individuals to manage 25 this real estate or sell it or lease it or anything else, 31 that they needed a broker or a manager, and they wanted to 2 form a management company that would be called Mumma Realty 3 Associates, Inc. 4 And that company would manage the real estate so 5 that when outside parties were dealing with this property, 6 they would go to this management company that was to be 7 owned by the individuals involved, and that company in o 8 sense would collect the ransom, pay the debts, and do the 9 active, day-to-day management. Well, then that company was 10 to hire a professional manager to collect the rents and pay 11 the debts off. 12 Q And you say that was your understanding. How 13 did You acquire that understanding? 14 A Through these agreements and through my 15 discussions with Art Klein. 16 Q And who was to own this company, if you were 17 told? 18 A My understanding was that the children were 19 to own the company. 20 Q Okay, Now, I'm going to go back again to the 21 complaint, and we saw that there was this document that 22 purported to have your signature on, and I'll tell you that 23 the complaint says that that was signed by you on December 24 the 19th. Now, as I understand it, what you're saying is 25 that the only time you signed the signature page was in 32 connection with reviewing a draft later; that is, sometime 2 in 1987? 3 A That's my recollection because I signed two 4 signature pages, one for Kim Company's real estate and one 5 for Pennsylvania Supply Company's, but mY recollection is 6 that at the December 19th meeting, only one document was 7 presented. It was -- then when they came around afterwards, 8 they all of a sudden had two documents, one for each 9 company. 10 Q Now -- and I take it the percentage 11 interests, are they the same? 12 A No, they're not, because the percentage of 13 ownership was different for the two companies and thus -- 14 that's why they had to have the two signature pages and the 15 two different agreements. 16 Q Now, your files contain a copy of D-4, which 17 was a draft of an agreement sent to you by Mr. Browner in -- 18 I don't know the date, but sometime -- when was it sent to 19 you? 20 A Here it says March 11th, and it was fed exed, 21 so I think it was probably that day. 22 Q And then D-5 and D-b are different drafts, 23 one of another draft of the tenancy-in-common agreement and 24 one a draft of a separate management agreement, and do You 25 have a recollection as to whether they are also drafts you 33 discussed with Mr. Browner? 2 A I believe they would be, yes. 3 Q All right. Now, I had showed you or asked 4 you to refer to that first agreement, and by looking at the 5 second paragraph of that -- 6 THE COURT: Which exhibit are we referring to 7 now? 8 MR. BAUGHMAN: I apologize, Your Honor. I'm 9 back to the complaint and to the Exhibit A to the complaint, 10 when the complaint says that was a document signed by Mr. 11 Mumma on or about December 19th, 1986. 12 THE COURT: Okay. 13 BY MR. BAUGHMAN: 14 Q Mr. Mumma, by looking -- well, you can look 15 anywhere on that document you want to -- but would you tell 16 the Court, if you're able, does that agreement purport to 17 pertain to Kim Company or to Pennsylvania Supply Company? 18 A As I see it, this pertains to both from the 19 first page. 20 Q Well, if you take a look at the third line in 21 the second paragraph, do you see it says that the real 22 property had originally been owned by Kim Company? Do you 23 see that? 24 A Yes, okay, by joint deed of Kim Company and 25 Pennsylvania Supply Company. 34 Q Then look at page 19, and is that the 2 percentage, or roughly at least, that you owned in Kim 3 Company? 4 A That's correct. 5 Q And then the next purporteu agreement, which 6 is Exhibit B to the complaint, is it correct that that 7 pertains to Pennsylvania Supply Company? 8 A Yes. g Q And that also has the signature page with 10 Your signature on it, is that right? 11 A That's right, with a different percentage of 12 ownership. 13 Q And is Your testimony the same with regard to 14 that; that is, that You didn't sign that agreement with the 15 signature page attached on December 19th to your 16 recollection? 17 A That's mY recollection. 18 Q And then let's Just go on while we're at it 19 and take a look at the next exhibit, which is called power 20 of attorney, do You see that? 21 A I see that. 22 Q Is that the power of attorney that You 23 executed in December, 1986, or does it appear to be? 24 A Yes, this I recall. 25 Q And do You know what the complaint says about 35 the power of attorney? 2 A Well, I know what it says. The reason I 3 signed this was because of anticipation of my going away. 4 They may have needed this to effect the dissolution. That's 5 why I gave it to them. 6 Q Okay. Now, back to the Kim Company 7 agreement, which is Exhibit A to the complaint, I want you 8 to look at page seven of that. 9 A Yes. 10 Q Do you have that? 11 A I do. 12 Q And at the bottom of page seven it says as a 13 short paragraph, and I'm going to read it. It continues 14 over to the top of page eight. "BY execution hereof, each 15 of the owners hereby transfers to such manager his or her 16 respective interest in all of the receivables and all other 17 non-real estate assets originally held by Kim Company, 18 Harrisburg, Pennsylvania, and distributed in the aforesaid 19 liquidation transaction as an advance toward the fund 20 requirements mentioned in the preceding paragraph." 21 Now, up to that point -- let's not take it any 22 further -- it's talking about the non-real estate assets 23 being transferred to this management company that you talked 24 about, is that right? 25 A That was my understanding, yes. 36 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Is that your understanding of what would happen? A Yes. Q But then it continues in a parenthetical phrase, "except for 272,000 and some odd dollars being distributed to the individual owners in lieu of Union Quarries, Inc., stock, which amount shall be held by manager for distribution to them in 1987." Now, did you ever agree to that? A No. Q What discussions, if any, did you have with Mr. Klein either in November or December of 1986 with regard to the subject of Union Quarries? A Union Quarries was owned 50 percent by the Mumma family -- or was at this time -- and 50 percent by the Hemet family, and Mr. Klein was concerned that a fractional share, if allowed to be distributed to an individual, could have been sold to the Hemet interest for a large -- well, in effect, transferred control of the corporation to the Hempts, and thus he wanted to keep this stock together as a block and not distribute the shares. Q Now, if it would have been transferred to the manager, would it have been kept in a block? A Yes. Q What, if anything, was discussed with Mr. 37 Klein about the individual shareholders selling their part 2 of the interest in Union Quarries to the estate? 3 A That was not discussed. It was never 4 contemplated that the estate would end up with Union 5 Quarries. 6 Q Prior to receiving a copy of this complaint 7 delivered to You by Mr. Zeiter, had You ever seen that 8 language tha t I read to You, pages seven and eight? 9 A Never. 10 Q As a matter of fact, prior to receiving the 11 complaint de livered to you by Mr. Zeiter, had Morgan, Lewis 12 and Bockius ever delivered to you any executed 13 tenants-in-c ommon agreements? 14 A Never. 15 Q Let me gust be sure that this is clear. 16 The -- Mr. H emet owned 50 percent, owns 50 percent of Union 17 Quarries? 18 A That's correct. 1g Q And he's not related to the Mumma family? 20 A That's correct. 21 Q And the other SO percent of Union Quarries, 22 as of Decemb er, 1986, was held in the name of Kim Company? 23 A Kim Company, that's correct. 24 Q Okay. Now, You had mentioned earlier that 25 there had be en discussion by Mr. Klein at this first meeting 38 that he had with the family members about refusing one's 2 :interest, disclaiming one's interest, under the Will in 3 favor of one's children. Would You tell the Court what, if 4 zany, further discussions you had with Mr. Klein concerning 5 that? 6 A Well, we had extensive discussions concerning 7 it because of this per stirpes not per capita clause in the 8 Will, and the fact that I had ,lust remarried and had had a 9 child who was living at the time of my father's death, and i0 it was assumed that I would be having children who would 11 have been born subsequent to my father's death. 12 So we went through long, involved conversations as 13 to what to do about that, if the Will was interpreted 14 adversely to my youngest child, Younger children, and it was 15 decided that we could incorporate some kind of an equalizing 16 provision in the Will. 17 And, of course, all this gets into, well, what is 18 the estate of my father worth because at a certain value, 19 vis-a-vis my estate, you would achieve an equalization. But 20 if my father's estate was substantially more than my estate 21 at this time, it might be that you could never catch up. 22 You never would be able to achieve the equalization. Mr. 23 Klein was representing to me that my interest -- 24 Q Well, I prefer -- I don't want to go into a 25 lot of detail about what Mr. Klein was telling you. Let me 39 stop you there. Let me ask you this. This discussion You 2 had with Mr. Klein, did it pertain to any other family 3 members other than You? 4 A No. 5 Q This was strictly between you and Mr. Klein, 6 isn't that right? 7 A Mr. Klein and I, that's correct. 8 Q And what was your understanding of the 9 relationship between You and Mr. Klein? 10 A Mr. Klein was representing me to see that my 11 intentions would be carried out with regard to my estate. 12 Q Now, did you ultimately decide that you 13 would, based on the advice that Mr. Klein gave you, that you 14 would take action to disclaim your interest in favor of your 15 children? 16 A Yes. 17 Q Now, with regard to -- let me ask you this. 18 What -- did you discuss with Mr. Klein any concerns you had 19 about whether, if you did disclaim, You could continue to 20 participate in the affairs of the estate and have a say in 21 the administration of the estate, and I'd like you to gust 22 answer Yes or no? 23 A Yes. 24 Q And was that one of the factors you took into 25 account in making your decision? 40 A That was a very important factor. 2 Q Now, was there anything about -- without 3 going into the reason for it -- was there anything about 4 whether or not Your disclaiming your interest would become 5 public knowledge? Was that discussed with Mr. Klein? 6 A Yes. 7 Q And did you have a desire that it not become 8 public knowledge? 9 A It was everyone's desire that it not become 10 public knowledge. 11 Q BY everyone, you mean everyone within your 12 family? 13 A Everyone that knew I was considering this was 14 very, very concerned that this might become public. 15 Q Now, where were You at the time when the 16 deadline was approaching for filing with the executors, 17 under the Internal Revenue Code, a disclaimer? 18 A i was in Colorado. 19 Q And at that time did Mr. Klein send to you 20 documents that You could sign to effect that? 21 A He sent them for mY review, the disclaimer, 22 Yes. 23 (Whereupon, Defendant's Exhibit No. 7 was 24 marked for identification.) 25 Q I show you what's been marked far 41 identification as D-7, and is that a copy of a letter Mr. 2 Klein sent You in that regard that also has some handwriting 3 on it? 4 A Yes. S Q And whose handwriting is that? 6 A It's my handwriting. 7 Q Now, Mr. Klein in his letter says that he's 8 sending you a number of copies and asks you to sign them and 9 return them, is that correct? 10 A That's correct. 11 Q Would you tell the Judge what that 12 handwriting on this letter represents? 13 A That represents mY instructions to Mr. Klein. 14 Q And would Yau read that note? 15 A "Art, please find a Copy signed for the 16 executors of the estate. I'm keeping all of the other 17 copies and a sk that Lisa be given this one to hold. Thank 18 You. Bob." 19 Q And did You send that note back to Mr. Klein? 20 A My recollection is I put this -- I put the 21 signed Copy into the Federal Express binding that he had 22 sent along w ith this and gave it back to the Federal Express 23 driver. 24 Q And how many copies did you send back? 25 A One to my knowledge. 42 Q Now, recently have You been shown copies of 2 documents that were supposedly copied to You of 3 communications between lawyers and executors with regard to 4 this disclaimer ? 5 A That's right. 6 Q And is it correct that those documents that 7 You've recently seen in a deposition show -- they said in 8 the letters tha t they had been filed with the Court? 9 A That's right. 10 Q Do You recall having received those documents 11 at the time, th ose letters? 12 A I don't recall those, and I cannot find those 13 in my file. 14 Q Well, at least as to Your understanding, when 15 was the first t ime that You ascertained that the disclaimer 16 had been filed with the Court? 17 A When Mr. Zeiter informed me that they were 18 going to ask fo r an ad litem. 19 Q Tell the Court what do You mean by that? 20 A On the 27th, at that meeting, when it was 21 announced they wanted to sell this company, Mr. Zeiter said, 22 '"And by the way , we're going to ask for an ad litem for Your 23 children." And that's the first time that -- I realized 24 when I got the ad litem notice back, that they had filed the 25 disclaimer with the courthouse. 43 Q Well, did he ask your agreement to do that? 2 A Mr. Zeiter? 3 Q Yes. 4 A No, absolutely not. 5 Q Did he even consult with you about whether 6 that would be a good idea? 7 A No waY. In fact, mY whole discussion was 8 with Mr. Klein. From day one, as soon as we got notice that 9 the custody of my children or my bov was a matter of 10 dispute, I spent a lot of time with him and Mrs. Wilford 11 discussing what the heck could happen here. 12 Q Well, I don't want you to go into a lot of 13 detail about the discussions that you had. 14 A Okay. 15 Q I think you've said enough about -- but let 16 me ask you this. Did you read the complaints that were 17 filed in this case? 18 A Yes. 19 Q And did then mention publicly in the 20 complaints that you had filed a disclaimer? 21 A Yes. 22 (Whereupon, Defendant's Exhibit No. 8 was 23 marked for identification.) 24 Q I show You what's been marked for 25 identification as D-8, and what is D-8? 44 A D-8 is an invoice from Morgan, Lewis and 2 Bockius to me at Kimbob, inc. 3 Q What's the date of that? 4 A The date is March 26th, 1987. 5 Q Now, do you recall in the motion to 6 disqualify -- first of all, You verified the motion to 7 disqualify in this case, did You not? g A I did. g Q And do You recall in the motion to disqualify 10 we said that as of that time, that You had told Mr. Klein 11 that You should get independent counsel; that is, as of 12 March, 1987? Do You remember saying that? 13 A I remember that. 14 Q Okay. Now, is that still Your recollection? 15 A No, it's -- as we got back through this, I 16 had requested in March that Mr. Klein send me an invoice, 17 and it was sometime later that I informed him that I didn't 18 think we would need his -- that I felt that I probably 19 should get independent counsel. 20 Q So that as of March, 1987, this was an 21 interim invoice? 22 A That's right, and, in fact, we were coming -- 23 our corporation was coming to the end of its fiscal year, 24 and I asked that that invoice be prepared. 2S Q Okay. And I take it this was sent to You and 45 was paid? 2 A That's right. 3 Q Now, did there come a time in June of 1987 -- 4 we're moving forward again -- where you received information 5 that your sister Lisa was in the process of negotiating an 6 agreement of sale to sell one of the properties of Kim 7 Company? g MR. KITTREDGE: If Your Honor please, I think 9 we're getting into this whole first refusal claim of the 10 Defendant in the case. I don't think that has anything to 11 do whatever with the motion to disqualify. 12 THE COURT: What's the relevancy of this? 13 MR. BAUGHMAN: Your Honor, first of all, by 14 way of offer of proof, Mr. Mumma was and continued to be 15 represented by Morgan, Lewis and Bockius until early August, 16 1987. There are events that had to do with this right of 17 first refusal in information that we have gust recently 18 discovered that shows that there was a violation of the duty 19 of loyalty by Mo rgan, Lewis and Bock ius that was occurring 20 during the same time that t hey were representing Mr. Mumma; 21 that is, that th ey had two clients, and that they were 22 representing the estate in a way tha t was adverse to the 23 interest of Mr. Mumma, and it has to do with this very 24 issue. 25 MR. KITTREDGE: If Your Honor please, the 46 only issue that we have before us today is the motion to 2 disqualify. The issue there is, was the former 3 representation by Morgan, Lewis and Bockius of Mr. Mumma 4 somehow substantially related to an issue that's now pending 5 before the Court to a complaint in the Orphans' Court 6 proceeding. 7 THE COURT: That's a correct statement of the 8 law. I'm not really familiar with all the facts, the 9 background. I almost have to let it come in and sift 10 through it later an. 11 MR. KITTREDGF: If Your Honor please, if 12 Morgan, Lewis and Bockius violated the duty of loyalty owed 13 to Mr. Mumma in some respect back in the summer of 1987, 14 that may well be the subJect of a claim, but it's not before 15 the Court today. 16 THE COURT: See, I don't know if it is or 17 not. I'll let him answer the question, and then I'll sift 18 it out at the next break. 19 MR. KITTREDGF: Fine. 20 BY MR. BAUGHMAN: 21 Q The question, Mr. Mumma, had to do with -- 22 did a time come when you became aware that some property was 23 going to be transferred that You didn't previously know 24 about? 25 A Approximately May of 1987. 47 Q And tell the Court what happened. 2 A I was away ou t of the country with my mother, 3 and upon my return, I found out that they had entered into 4 an agreement to sell a piece of real estate that my father 5 and I had pl anned to build a hotel on and indeed had started 6 with the protect, and I went to call Jerry Duffy, who is the 7 attorney handling the settlement far the estate. 8 I called it to Mr. Duffy's attention that I had a 9 right of first refusal on this piece of property, and they 10 did no t have the right to sell it to this third party. They 11 then - - Mr. Duffy apparently informed the estate that he 12 would not proceed to the sale unless they had my agreement 13 to it, and there was a meeting at my sister's, Barbara's, 14 house among all of the family members to discuss this issue, 15 and -- 16 Q Now, have you recently checked your records 17 to see where this meeting was? 18 A As near as I can tell from my calendar, it 19 happened at 4:30 on July the 7th, 1987. And we went to the 20 meeting, and we discussed not only this issue but several 21 other issues, one of which was the sale of Pennsy Supply, 22 Inc. and what the estate's intentions were. 23 The estate -- Kim said it was their intention to 24 sell me the corporation, and that they had all this trouble 25 getting the value rights and everything else on the estate 48 to go, but they wanted to sell this piece of property. They 2 did not want to go ahead with the hotel protect, even though 3 I did and had been actively seeking investors for it. 4 THE COURT: When did your client's S representation, his representation by Morgan, Lewis and 6 Bockius cease and terminate? 7 MR. BAUGHMAN: About a month and a half after 8 that, in the middle of August, Your Honor. I think it's 9 essentially undisputed although Morgan, Lewis was quick to 10 uu~~~it our initial statement in the motion that it had ceased 11 in March. Mr. Klein has been deposed. We have obtained 12 documents, and this is a letter dated August 14th that says 13 that that's when it was that he withdrew. 14 THE COURT: You want to ask your client that 15 and how he determined that date? 16 MR. BAUGHMAN: How~he determined? 17 THE COURT: When he ceased to be represented 18 by Morgan, Lewis and Bockius. 19 MR. BAUGHMAN: I can go into that. 20 THE COURT: I'd like to have him state that. 21 I'm not really sure at this point because after the 22 representation was ceased, at least allegedly, we won't have 23 to get into this matter. 24 MR. BAUGHMAN: Right. 25 BY MR. BAUGHMAN: 49 Q Mr. Mumma, would You tell the Court whether 2 at some point in time you had a discussion with Mr. Klein 3 concerning whether or not he should continue to represent 4 you? 5 A Well, I called Mr. Klein about some of these 6 difficulties and everything and got -- while he made an 7 honest effort to try and work everything out -- it became 8 obvious that things weren't going to go that way. g And I called him in August sometime -- from going 10 through my records, sometime in August -- and told him that 11 unfortunate as it was, it appeared that this thing was not 12 going to go down the road as we had hoped it would, and that 13 probably I should get other counsel to keep him from getting 14 into the middle of all this. And he thanked me far that, 15 and said he'd send me a final bill. 16 (Whereupon, Defendant's Exhibit No. 9 was 17 marked for identification.) 18 Q I show you what's been marked for 19 identification as D-9 and ask you what that is? 20 A It's a letter from Art Klein to me. 21 Q And what's the date? 22 A August 14th, 1987. 23 Q And is this the letter -- and it's a two-page 24 letter -- but is this the letter in which he says that per 25 your request, that he's sending a final bill, and he's sorry SO that You have to cease the representation? 2 A Yes. 3 Q Now, Mr. Mumma, prior to August the 14th, 4 1987, did Mr. Klein ever suggest to you that there was any 5 conflict in h is representing the estate and his representing 6 you? 7 A Only to the extent that if we got into 8 negotiations over a certain purchase, I should go get 9 separate coun sel, but that's the only thing he ever said to 10 me. 11 Q That is, if you were to buy Pennsy Supply and 12 negotiate wit h the estate? 13 A That's right. 14 Q Now, this letter to you dated August 14th, 15 1987, are the re anY carboned copies? 16 A There are no carboned copies. 17 Q Are there any blind copies? 18 A There's a blind Copy to William Zeiter. 19 Q Once again, as of this time, you still didn't 20 know who he was? 21 A No. 22 Q Now, I'd like to return to this meeting in 23 early July -- 24 THE COURT: Excuse me, I think what we'll do, 25 gentlemen, is give my court reporter a break. We'li take 51 about a ten minute recess, and then we'll start back in 2 where we are now. We'll stand in recess for about ten 3 minutes. 4 MR. BAUGHMAN: Thank You, Your Honor. 5 (Whereupon, a brief recess was taken.) 6 THE COURT: You may proceed. 7 MR. BAUGHMAN: Thank You, Your Honor. 8 BY MR. BAUGH MAN: g Q Mr. Mumma, let me take you back to the early 10 July meeting at Your sister Babb's house which You were 11 discussing, and You mentioned that the two issues discussed 12 were the sal e of this property -- where was the property? 13 A The property was in off the old bypass across 14 from Erford Road or the Penn Harris Motel. 15 Q In Lemoyne? 16 A In Lemoyne. 17 Q And the other subJect was your interest in 18 buying Penns Y Supply? 19 A That's correct. 20 Q Now, could You tell the Court the bottom 21 line. What happened at that meeting? 22 THE COURT: Excuse me. First of all, was 23 anybody from Morgan, Lewis and Bockius present at that 24 meeting? 25 MR. BAUGHMAN: Was there, Mr. Mumma? 52 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE WITNESS: I think Lisa Morgan may have still been with -- MR. BAUGHMAN: I happen to know. THE WITNESS: Let me lust state she wasn't. Oh, okay. Then no, the answer is no. BY MR. BAUGHMAN: Q But all your three sisters and your mother and you? A That's correct. Q And they were the only people? A That"s the only people. Q Okay. And what happened at that meeting? A Well, we got into all this, and I explained to them that that motel protect or hotel protect was a substantial protect for me and that I didn't want to give it up. And then we got into the PennsY Supply thing, and it was agreed that -- it was my sister Barbara's suggestion that I be given a right of first refusal for the purchase of Pennsy Supply, Inc. and also be given 60 to 90 days to put together a proposal to buY the corporation. And if I did that, then if they gave me that, I agreed that I would sign this power of attorney that Mr. Duffy told them that they needed to go ahead with the selling. 53 Q And what happened? 2 A They had a power of attorney there that was 3 drafted. I signed it. They agreed that I would get the 4 right of first refusal. 5 (Whereupon, Defendant's Exhibit No. 10 was 6 marked for identification.) 7 BY MR. BAUGHMAN: g Q I show You what's been marked D-10 for 9 identification and ask You what that is? 10 A It"s a copy of the power of attorney that 11 they asked for me to sign. 12 Q And this one is unexecuted, is that right? 13 A This one is unexecuted. 14 Q And the initials RMM II in the upper 15 left-hand corner, do you know whose handwriting that is? 16 A That's mY sister's, Lisa Morgan s, 17 handwriting. 18 Q Now, what was the next thing to Your 19 knowledge -- this was in early July, 1987 -- what was the 20 next thing to Your knowledge that happened with regard to 21 this right of first refusal? 22 A Approximately two months later I called Kim 23 and asked them where this right of first refusal was that I 24 was expecting, and she told me that they had decided not to 25 give it to me on the advice of Morgan, Lewis and Bockius. 54 Q Now, up to the time when Morgan, Lewis ceased 2 representing you in August, 1987, with regard to the matters 3 about which you had been consulting Morgan, Lewis, which was 4 the tenants-in-common agreements and the drafts and the 5 disclaimer and all those matters you've told the Court 6 about, up to August of 1987, were there other counsel that 7 you were consulting about those matters? 8 A No. 9 Q I"m sorry. I apparently have referred to in 10 some of my que stions to a person named Kim. Who is Kim? 11 A Mrs . -Mumma . 12 Q Your mother? 13 A Correct. 14 Q Finally, going once again back to December 15 the 27th, 1988 , which was .lust last month, you mentioned 16 that's when yo u got the complaints, that Mr. Zeiter gave 17 them to yau. Just to put that in context, would you tell 18 the Court what that occasion was all about? 19 A I had requested early in November that they 20 hold a shareho lders meeting of 999 because it was called for 21 in the bylaws and yet there hadn't been any since my 22 father's death, so they scheduled a shareholders meeting for 23 December the 27th, 1988. 24 Q And they being? 25 A They being the officers of the corporation. 55 Q Well -- 2 A Kim and Lisa. 3 Q WhY was Mr. Zeiter there? 4 A I don't know. Well, I didn't know at the 5 time. Mr. Zeiter was there, he said, at the time to 6 represent the estate, and one of the things -- apparently 7 this thing had been well-planned. (portion of answer omitted 8 by Court direction.) 9 Q Now, they filed two lawsuits against you, and 10 Mr. Zeiter gave you copies? 11 A That's correct. 12 Q Just to make the record clear, did they ask 13 your consent to represent the executrixes of the estate in 14 suing you prior to suing you? 15 A No. 16 MR. BAUGHMAN: You may cross-examine. 17 CROSS-EXAMINATION 18 BY MR. KITTREDGE: 19 Q Mr. Mumma, do you recall at the meeting on 20 December 27th, that it was explained to you on behalf of the 2i corporation that the disclosure of the identity of the 22 proposed purchaser of the company was a matter of the 23 highest confidentiality? 24 A I remember that Mr. Zeiter threatened that he 25 was going to have me arrested if I ever disclosed the name 56 of the corporation, that I remember. 2 MR. KITTREDGE: If Your Honor please, I would 3 request of the Court that that portion of the transcript 4 which discloses the name that Mr. Mumma ,lust unfortunately 5 testified about be sealed. It is a matter of the greatest 6 confidentiality. It impacts on the securities exchange -- 7 THE COURT: For the purposes of this 8 proceeding, why the name of any proposed purchaser is not of 9 any particular relevancy to me, so we'll Just direct that 10 the transcript omit that particular part of Mr, Mumma's 11 testimony. 12 - MR. KITTREDGE: Thank you, Judge. I 13 appreciate that. 14 BY MR. KITTREDGE: 15 Q Mr, Mumma, do you have before you D-9, which 16 is a copy of the letter dated August 14th, 1987, from Mr. 17 Klein to yourself? 18 A Yes, I do. 19 Q Did you find a Copy of D-9 in your file? 20 A tdo . 21 Q You did not. But D-9 is, in fact, a letter 22 which you received from Mr. Klein, isn't that correct? 23 A Yes, I remember receiving that letter. 24 Q Looking at D-8, Mr. Mumma, do you have that 25 in front of you also? 57 A Yes, 2 Q This is a copy of an invoice of $20,000.00 3 dated March 26th, 1987? 4 A That's correct. 5 Q And a copy of your check paying the invoice? 6 A That's correct. 7 Q And it was agreed, was it not, between you 8 and Mr. Klein that that amount would be held as a deposit on 9 the account of fees that you would be required to pay 10 eventually for the services being rendered to you, isn't 11 that right? 12 A Yes, for all types of services that he was -- 13 that Morgan, L ewis were going to do for me and my companies, 14 that's correct . 15 Q And you certainly understood that in order 16 for the legal services being performed for you, you were 17 going to pay, isn't that right? 18 A Certainly. 19 Q And D-9, which is the letter that Mr. Klein 20 sent you after the termination of hlorgan, Lewis and Bockius' 21 representation of you, enclosed a check for $6,100.00, which 22 was the amount left of the retainer which you had previously 23 ~~Forwarded, isn 't that correct? 24 A I assume. I don't know. I never got a 25 breakdown of the actual hours. 58 Q Well, if you"11 look at D-9, Mr. Mumma, the 2 second paragraph or the first paragraph says,"Enclosed is a 3 check in the amount of $6,100.00, repre senting the 4 difference between t he $20,000.00 paid on account and the 5 charges recorded on Your matters." Do you see that? 6 A Um-hum. 7 Q Then it says -- second paragraph -- "The time 8 was about eq ually divided between the disclaimer matter, 9 which as you know presented some very difficult issues, and 10 tax and esta te planning generally for you, including working 11 up drafts of a crummey trust for inter vivos gifts of 12 closely held company stock, an irrevoc able life insurance 13 trust and a Will." Do You see that? 14 A I see that. 15 Q Now, the 20,000 that yo u paid in March of 16 1987 was the only money You ever paid to Morgan, Lewis and 17 Bockius -- 18 A That's right. 19 Q -- and you got $6,100.00 of that back, so the 20 total amount that you had paid to Morgan, Lewis and Bockius 21 was $13,900.00? 22 A That's right. 23 THE COURT: Before I forget, your payment to 24 them, was that a corporate check or was that your individual 25 check? 59 THE WITNESS: That was a corporate check, 2 Your Honor. 3 THE COURT: And why did you write a corporate 4 check if these things were rendered to you individually? 5 THE WITNESS: Because Mr. Klein was doing a 6 lot of these things with -- it was mY understanding that it 7 was going to be part of our corporate strategy, vis-a-vis 8 the potential purchase of Pennsy Supply. 9 THE COURT: Thank You. 10 BY MR. KITTREDGE: 11 Q Did You ever go to Mr. Klein after receiving 12 his August 14, 1987, letter in which he said that they 13 were -- the time being billed was time for the disclaimer 14 and estate planning generally for you and say, Mr. Klein, 15 where is your invoice or statement for all the legal 16 services you rendered to me in connection with the 17 administration of the estate or the liquidation of Kim 18 Company and Pennsylvania Supp1Y Company and the drafting of 19 all these agreements among tenants-in-common and so forth? 20 Where is the bill for that, Mr. Klein? Did you ever ask him 21 that? 22 A No, I didn't. 23 Q Did you ever pay a dime to Morgan, Lewis and 24 Bockius, sir, on account of any of the services having to do 25 with the administration of the estate or liquidation of Kim 6O Company or Pennsylvania Supply Company? 2 A Well, i got advice from him on those matters. 3 Q My question, sir, was: Did you ever pay a 4 dime? 5 A tike I said, I did not get an hourly billing 6 from him that broke down precisely what he was charging me 7 for. This letter here generally says what he spent his time 8 on. I did not get a breakdown by the hour as to what he or 9 Mrs. Wilford or any of the other people that worked on my 10 behalf were doing. 11 Q Did you ever ask Mr. Klein to submit a bill 12 with respect to legal services rendered to you in connection 13 with the liquidation of Kim Company ar the liquidation of 14 Pennsylvania Supply Company? 15 A No, they should have sent those to those two i6 companies. 17 Q Well, was he representing those two companies 18 nor was he representing You? 19 A My understanding was he was representing 20 those companies. Morgan, Lewis and Bockius was representing 21 those companies and representing the shareholde rs of those 22 r.ompanies. And I guess as an officer of the co mpany and as 23 director of the company, they were representing me. 24 Q A s of December, 1986, Mr. Mumma, prior to the 25 execution of any of the documents with respect to the 61 liquidation of Kim Company and Pennsylvania Supply Company, 2 at that time did you have the right of first refusal as to 3 any of the properties held by Pennsylvania Supply Company or 4 Kim Company? 5 A Which date did you give again? 6 Q As of December, 1986, prior to the execution 7 of any of these documents that we`ve discussed that were 8 signed on December 19th. 9 MR. BAUGHMAN: ObJectian, lesal conclusion, 10 and it's irrelevant. 11 THE COURT: He was asked quite often about 12 these rights of first refusal, so I think it's Just as 13 relevant far him to ask the same thing. 14 THE WITNESS: My understanding was this 15 particular lot over -- the one lot that was sold in 16 Pennsboro Center -- we had an agreement, my father and I, 17 that we were going to build a hotel on that lot and the lot 18 next to it owned by Highspec, Inc. 19 THE COURT: Now, did that answer your 20 question? 21 MR. KITTREDGE: No, sir, it did not. 22 BY MR. KITTREDGE: 23 Q My question, sir, was whether as of December 24 ]_9th, 1986, prior to the execution of the documents which 25 bear that date, did you hold a right of first refusal with 62 respect to the properties held by Kim Company or 2 Pennsylvania Supply Company? 3 A Well, I had a right to the property of our -- 4 Highspec, Inc. had the right to a piece of property on the 5 lot, I believe it was, that was in Pennsboro Center, or not 6 Pennsboro Center, but in Lemoyne Square. 7 MR. BAUGHMAN: Your Honor, perhaps it needs 8 to be made clear that was owned by Kim Company. 9 THE WITNESS: It was owned by Kim Company. 10 BY MR. KITTREDGE: 11 Q Putting aside that Lemoyne property, this was 12 the property that was the subJect of the sale of June of 13 1987, isn't that correct? 14 A Yes. 15 Q Or July, '87, whichever it might have been. 16 Putting that property aside as to the other properties held 17 by Kim Co~~;aany and Pennsylvania Supply Company, did you have 18 a right of first refusal as of December 19, 1986, prior to 19 the execution of all these documents bearing that date? 20 A Well, I'd have to look at the list of the 21 ,properties to review it. Offhand, I would say no, but I 22 would have to qualify that without seeing a list of the 23 properties. 24 Q As of December 19, 1986, when the liquidation 25 was under consideration, Kim Company owned about 82 percent 63 of the stock, or I'm sorry, the estate owned approximately 2 82 percent of the stock of Kim Company, is that correct -- 3 owned ar cont rolled, let's put it that way, 82 percent of 4 the stock in Kim Campanv? 5 A I'm not sure that is correct. 6 Q Well, is it incorrect by a percentage point 7 or something or is it simply somebody else owned all that 8 stock? 9 A I'm not sure that it's correct. I mean, it 10 goes through a lot of different corporations, and it all 11 starts back w ith 750 shares to Pennsylvania Supp1Y Company 12 that I can't determine how they ended up in my father's 13 name. 14 Q Well, you will agree, won't you, Mr. Mumma, 15 that as of De cember, 1986, the estate controlled 16 Pennsylvania Supply Campanv with the majority of the shares 17 outstanding? 18 A Well, it all goes back to where these 750 19 shares that c ame from my grandfather's estate to my father, 20 who was not a beneficiary of his estate. We can't follow 21 through with that transaction, 22 Q So your answer is you don't know? 23 A That's what I said. I don't know. 24 Q And your answer would be the same with 25 respect to th e control of Kim Company? 64 a Kim Company was controlled by Pennsylvania 2 Supply Compan y. 3 Q Okay. So Your answer would be the same? 4 A I know who controlled Kim Company. I don't 5 know who cont rolled Pennsylvania Supply Company. 6 Q You testified with respect to your 7 understanding with Mr. Klein having to do with Morgan, Lewis 8 and Bockius' representation of the estate, vis-a-vis you, in 9 respect of th e proposed sale of, possible sale of the 10 companies, do You recall that? 11 A That's right. 12 Q It may be that I misunderstood what you said, 13 but if so, I' d like to find that out. You have before You 14 D-1? 15 A Yes, I do. 16 Q Now, I think you testified that D-1, this 17 letter dated September 5, 1986, from Mr. Klein to you, is 18 not something you were able to find in your file, is that 19 correct? 2O A That's correct. 21 Q Do you have any real doubt, sir, that, in 22 fact, you received a copy of this document at or about the 23 time -- the date it bears? 24 A No, I could very well have received it. 25 Q And the second paragraph in there where Mr. 65 Klein says, "One matter we discussed which I did not note in 2 the memorandum is that if you or any of your companies were 3 to become involved in negotiations with Your father's estate 4 to buy the operating company (or anything else for that 5 matter), Morgan, Lewis and Bockius would represent the 6 estate and you would obtain other counsel. I know that 7 Lisa and Your mother are satisfied with that understanding 8 and You indicated that you were also." That's an accurate 9 statement, isn`t it? 10 A Well, it was mY understanding that if there 11 was going to be negotiations for the sale of a piece of 12 property or for the sale of the corporation, Mr. Klein could 13 not represent both parties. 14 He had a fiduciary responsibility to Morgan, Lewis 15 to the estate in those negotiations. I understood that. 16 But as far as everything leading up to that negotiating 17 position, I didn`t understand that he wasn't representing me 18 there. 19 Q But you certainly understood that if the sale 20 of the operating company by the estate to you became the 21 subject, Morgan, Lewis would continue to represent the 22 estate and would not be disabled from doing so by reason of 23 the fact that he was providing services to You with respect 24 to Your estate planning or the disclaimer, isn't that 25 correct? 66 A Yes, with respect to a third party, then 2 would contin ue to represent me. 3 0 It doesn't say that there, does it? 4 A It says only -- what it sous is that if 5 they're nego tiating with me for the sale, they're going to 6 represent -- I should get separate representation. But it 7 doesn't say that if they're going to sell the asset to a 8 third party, that I should get representation. 9 Q When you sent back D-7, Mr. Mumma, do you 10 have that in front of you? 11 A Yes. 12 Q That's the letter dated January 6, 1987, from 13 Mr. Klein to you which bears a handwritten note? 14 A That's right. 15 Q You found this document in your files, sir? 16 A Yes, I found a Copy of this in my file. 17 Q A Xeroxed copy? 18 A Yes, I think that there was -- yes, I believe 19 that's correct. 20 Q Where were you when you received this letter? 21 A I was in Colorado. This came via Federal 22 Express. 23 Q Okav. Where in Colorado were you? 24 A Snowmass, Colorado. 25 Q Do you have a condo or house there? 67 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A We had a house there. Q Did you have a Xerox machine in the house, Mr. Mumma? A No, I did not have a Xerox machine in the house. Q Do you have D-10 in front of you, Mr. Mumma, that's the draft form of the power of attorney? A Yes, I do. Q Do You know who prepared that document? A No, I don't. Q But you signed it? A Yes. Q And you gave it to Mrs. Morgan and your mother? A I gave it to Mrs. Morgan, signed it in the presence of my sisters and my mother and Mrs. Morgan. Q And did you shortly thereafter ask Mrs. Morgan to send it back to you? A I only asked for it to be returned to me when I was told that they would not go through with the right of first refusal. Q And was it returned to You, sir? A Subsequent to that, it was. Q Do you have that document here today? A I do not have that here today. 68 Q Do you know where it is? 2 A I've been looking far it. I don't know 3 offhand where it is. 4 Q But you haven't been able to find it, is that 5 what You're saying? 6 A That's what I'm saying. It may be that I`ve 7 shredded it instead of filing it. 8 MR. KITTREDGE: If Your Honor please, might I 9 mark a couple of exhibits? 10 THE COURT: Certainly. 11 {Whereupon, Estate's Exhibit No. 1 was marked 12 for identification.) 13 (Whereupon, Estate's Exhibit No. 2 was marked 14 for identification.) 15 MR. KITTREDGE: May I present these, Your 16 Honor? 17 THE COURT: Sure. 18 BY MR. KITTREDGE: 19 Q Mr. Mumma, would you look at the exhibit 20 that's been marked Estate One and tell us what it is? 21 A Well -- 22 Q Have You seen it before, sir? 23 A No, I don't recall seeing this before. Well, 24 I guess I saw it at the deposition the other day. Prior to 25 that, I don't recall seeing it. 69 Q And this appears to be a letter to Mr, 2 William Martso n fro m Mr. Klein enclosing two signed copies 3 of your discla imer with respect to your remainder interest 4 in the two tru sts u nder your father's Will? 5 A Yes, this was while I was in Colorado. 6 Q And it says there that following confirmation 7 by phone from you, Mr. Martson was to follow through with 8 the disclaimer and file one with the Orphans' Court here in 9 Cumberland Cou nty. Do you see that? 10 A I se e that. 11 Q And this document shows that a letter was 12 sent -- a copy of t he letter was sent to you? 13 A Yes, but like I say, I was in Colorado at the 14 time. 15 Q And you don't recall at the time receiving 16 it? 17 A No, I don't think I could have. Well, I 18 wouldn't have been here to receive that. 19 Q You don't recall seeing it when you returned 20 from Colorado? 21 A I do n"t recall. 22 Q How about Estate's Exhibit 2? Would you look 23 at that far us and tell us whether you can recall at or 24 shortly after Janua ry 12, 1987, whenever it was you returned 25 from Colorado, if y ou saw a copy of the document marked 70 Estate Z? 2 A I don't recall this, and this would have been 3 contrary to my instructions to Mr. Klein, 4 .Q You see the second paragraph there, "In 5 accordance with the requirements of the Pennsylvania -- let 6 me go back a step. This is a letter addressed to the 7 executrixes of your father's estate, Mrs. Mumma and Mrs. 8 Morgan from Mr. Klein. 9 THE COURT: From whom? 10 THE WITNESS: From Mr. Klein. 11 BY MR. KITT REDGE: 12 Q And in the first paragraph it says, "Dear Kim 13 and Lisa: Enclosed is a Copy signed by Bob of his 14 irrevocable and unqualified disclaimer of his entire 15 interest in both trusts under the Will of Robert M. Mumma." 16 A nd in the second paragraph, "In accordance with 17 the require ments of the Pennsylvania Probate, Estates and 18 Fiduciaries Code, Bill Martson in Carlisle is filing a 19 signed Copy of the disclaimer with the Clerk of the Orphans' 20 Court divis ion of Cumberland County." Do you see that? 21 A Yes, I see that. 22 Q And you don't recall seeing that in January 23 of 1987? 24 A No, because that was -- no, I don't recall 25 that. 71 Q It is true, though, isn't it, Mr. Mumma, that 2 you had been advised by Mr. Klein that for the disclaimer to 3 be effective under the Pennsylvania Probate Code, it had to 4 be filed with the Orphans' Court? 5 A It was a matter of discussion between Mr. 6 Klein and I as to whether or not it had to be filed in 7 conjunction with the filing with the IRS, and Mr. Klein did 8 not give me a definitive answer on that; so when you say he 9 informed me of this, no, he could not and would not give me 10 a definitive answer on that. In fact, he had another 11 attorney from the firm discuss the issue with me. 12 Q So, it's your testimony, Mr. Mumma, that what 13 you wanted was that the disclaimer be delivered to the 14 executrixes so that it would be effective under the Internal 15 Revenue Code? 16 A Only to my sister Lisa. 17 Q But your purpose in having that done was to 18 have the disclaimer effective under the Internal Revenue 19 Cade, isn't that correct? 20 A But it was to be delivered to my sister Lisa. 21 Mr. Klein informed me that my mother would be very upset if 22 I followed through with this, and I asked him not to send 23 this to her but to give it to Lisa because I wanted to 24 discuss it with her personally. 25 Q And your purpose in having it delivered to 72 Mrs. Morgan was so that it would be within the nine-month 2 period contained in the Internal Revenue Code and would be 3 effective for IRS purposes, isn't that right? 4 A That's right, and my sister at the time was 5 an attorney at Morgan, Lewis and Bockius, so it seemed to me 6 that she could get it so it would meet the purpose of the 7 Internal Revenue Code and it need not go any further or be 8 distributed to anybody else. 9 Q When you signed the disclaimer, was it your 10 intention, sir, that it be effective? 11 A For the tax purposes, yes. 12 Q But not for other purposes? 13 A That's correct. 14 Q And Mr. Klein never explained to you or told 15 You that you couldn't do that? 16 A No, he never told me that I couldn't do that. 17 It was a matter of discussion as to whether that could be 18 done or not. 19 Q Did there come a time, Mr. Mumma, when you 20 examined the fi le here in the Register of Wills office in 21 Cumberland Coun ty with respect to your father's estate? 22 A No, I have never examined the file. 23 Q Do you have D-4, Mr. Mumma? 24 A Yes. 25 0 And D-4 is a letter or a memo from Mr. 73 Browner of Morgan, Lewis and Bockius directed to a number of 2 people with a draft of the agreement among tenants-in-common 3 and, I guess, the Management Agreement also is a draft 4 there, 5 A Well, the Mumma Realty Associates Agreement 6 is here. Yes, the Management Agreement is a part. 7 Q Okay. And that's dated March what? 8 A The letter is dated March 11th, 1987, 9 Q And there was a meeting, I think you said, 10 subsequent to that document going out where it was 11 discussed, is that correct, with Mr. Browner? 12 A I have a lot of trouble as to which document 13 is which with all of these different drafts, and there was a 14 meeting with M r. Browner that he was present at. 15 Q All right. And it was at that meeting with 16 Mr. Browner th at you signed some detached signature pages, 17 is that correc t? 18 A Yes. 19 Q Okay. And then were to go with this new 20 agreement that Mr. Browner was putting together when 21 everybody fina lly agreed as to what it would contain? 22 A That's right. 23 Q Those are the only signature pages you ever 24 signed? 25 A That's mY recollection. That's correct. 74 Q Okay. 2 A They are the only ones I ever saw where there 3 were two signature pages. 4 Q You mentioned, sir, that you never agreed 5 that the estate would hold or receive the 50 percent block 6 of Union Quarries stock that was at that time held by whom, 7 Kim Company? 8 A Kim Company, that's correct. 9 Q Okay. Is it your testimony that your 10 intention at that time was that Union Quarries stock would 11 go to the management company? 12 A when we discussed this on the 19th, it was my 13 understanding it was going to be put in some kind of a trust 14 and then sold out of that trust and that I would have an 15 opportunity to buy that 50 percent of it at that time. 16 Q That is, if it were sold out of the trust, 17 you could buv it? 18 A That's right. You've got to understand that 19 this particular share of stock was the subJect of a long and 20 involved anti-trust suit and had certain inheritant 21 liabilities with it. 22 Q Well, am I correct that you did not disagree 23 with the idea of holding the block together as opposed to 24 dividing it up among all the various shareholders? 25 A I agreed with Mr. Klein to that extent. 75 Q That it should be kept together? 2 A Yes, that that block of stock should be kept 3 as a block. 4 Q Do you know of any reason, Mr. Mumma, as of 5 December, 1986, if Kim Company were controlled by the estate 6 or by Pennsylvania Supply Company and that was controlled by 7 the estate, that that stock wouldn't have been sold to 8 whomever the estate wanted to have it sold to? 9 A Because that was not the agreement. 10 Q I realize your testimony is that at this 11 December 19, 1986, meeting there was an agreement otherwise, 12 but prior to that time, with the estate in control of both 13 Kim and Pennsylvania Supply, there was nothing that could 14 have stopped them from selling that Union Quarries stock to 15 whomever they pleased? 16 A I'm not willing to conceive that at all. 17 They would have had a fiduciary responsibility to sell it to 18 the highest bidder, not Just anybody they wanted to. 19 Q You have or you carry on a business that is 20 known as Kimbob? 21 A That's right. 22 Q That's a Pennsylvania corporation? 23 A That's correct. 24 Q You have other businesses, Adams County 25 Asphalt, is it? 76 A That's correct. 2 Q That also is a Pennsylvania corporation? 3 A That`s correct. 4 Q These are substantial businesses? 5 A Well, I don't know what substantial is. 6 Q They're not as large as Pennsylvania Supply 7 Company and Kim Company were, but still they are very 8 substantial businesses? 9 A Yes. 10 Q Okay. Without getting into specifics 11 about -- 12 A I guess it depends on whose evaluation you 13 use for Penn sylvania Supply Company and Kim Company. I've 14 never seen o ne. 15 Q In the course of your business dealings with 16 Kimbob and A dams County Asphalt, You've retained or engaged 17 lawyers to p rovide you with legal advice? 18 A That's correct. 19 Q And you've engaged lawyers to provide you 20 with legal a dvice with respect to other projects that you're 21 undertaking -- 22 A That's correct. 23 Q -- such as this hotel, for example, out in 24 Lemoyne that you've mentioned? 25 A That's correct. 77 Q How many lawyers would you say you have 2 consulted for legal advice in the last three years? 3 A Probably three on the real estate matters, 4 two or three on the workmen's comp liability matters, two on 5 the contract claims matters, several lawyers with regards to 6 the litigation with the estate, and Mr. Boswell continues to 7 serve as secretary of the various corporations. 8 Q And You would also have, in the last three 9 nears, engaged counsel to represent you in connection with 10 personal matters besides Morgan, Lewis and Bockius in your 11 estate planning? 12 A Yes, I've had counsel engaged with regards to 13 mY divorce and custody actions, yes, sir. 14 Q Would it be fair to say that over the last 15 three years you probably have received legal services from 16 perhaps a dozen different lawyers? 17 A Not Just me, but me and the corporations. 18 Yeah, out of that whole group, that's probably fair. 19 Q You're the sole shareholder of Kimbob? 20 A Yes. 21 Q And You're the sole shareholder of Adams 22 County Asphalt? 23 A That's correct. 24 Q So they are your companies? 25 A As I said, controlled companies. 78 MR. KITTREDGE: Would you bear with me gust 2 for a second, Judge? 3 THE COURT: Go ahead. Take your time. 4 MR. KITTREDGE: I've concluded. 5 THE COURT: Redirect. 6 MR. BAUGHMAN: I have no redirect, Your 7 Honor. 8 THE COURT: I have no questions. Thank you. 9 You may step down. 10 MR. BAUGHMAN: Your Honor, I have one other 11 witness. I'd like to call Arthur Klein as on 12 cross-examina tion. 13 Whereupon, 14 ARTHUR L. KLEIN, 15 havin g been called as on cross-examination, 16 having been duly sworn, testified as follows: 17 DIRECT EXAMINATION 18 BY MR. BAUGHM AN: 19 Q Mr. Klein, you're a partner of Morgan, Lewis 20 and Bockius, is tha t right? 21 A Yes, sir. 22 Q And you specialize in what area? 23 A Esta te plans. 24 Q You' ve heard Mr. Mumma testify, Is it 25 correct that you me t with all the members of the Mumma 79 did you? 2 A I did not make the statement I'm not 3 representing you. 4 Q And you didn't make any other statement to 5 that effect, did you? 6 A No, but I did say it was clear that I was 7 there as cou nsel to the estate. 8 Q To your knowledge at that time with regard to 9 their positi ons as beneficiaries, were you aware that any of 10 the children were represented by other counsel? 11 A I was not aware that the children were 12 represented by other counsel. 13 Q Do you have the exhibits in front of you? 14 Are they up there? 15 A Yes. 16 Q Could you look at D-1? 17 A Are they blue? 18 Q I'm sorry? 19 A Are they blue? 20 Q Blue, yes, sir. Blue is Defendant. 21 A Okay. All right. Let me see here. I see 22 four. 23 MR. BAUGHMAN: Your Honor, if I may approach 24 the witness? 25 THE WITNESS: Maybe you could help me find 81 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 lt. THE COURT: Come on up. BY MR, BAUGHMAN: Q And that is your letter to Mr. Mumma in September of 1986 where You discussed Your representation of him with regard to -- is it correct that you referred to it as estate planning and related matters? A Yes. Q Now, aside from the second paragraph of that letter -- we've discussed that before -- but that`s the one where you talk about -- if any of Your companies were to become involved in negotiations with your father's estate, do You see that paragraph? A Yes. Q Aside from that, is it correct that during the entire period of your representation of Mr. Mumma, you never said anything to him about any potential conflict in your representation of him and your firm's representation of the estate? A There was no need to say that. This was central to our understanding that we were primarily counsel to the estate. On matters that he was not -- that didn't touch on the estate -- we represented him if the estate had nothing to do with it. If there was any matter that the estate was on the 82 other side, it was clear to both of us -- and perhaps I 2 could have written a longer paragraph -- but it seems to me 3 that where or anything else for that m atter, that obviously 4 couldn't anticipate every twist and tu rn and what kind of S opposing situation might develop, but it was fundamental to 6 our relationship and understanding. 7 It was probably in Bobby's - - Bobby 's desire that 8 that be understood, that Morgan, Lewis would not be 9 incapacitated because he was anxious to have a sales 10 transaction take place between the estate and himself, and 11 it would have been a complicating factor. 12 He wanted to be able to deal with the estate, and 13 he wanted us to be able to represent the estate in dealing 14 with him because he would benefit most from most of those 15 relationships, and it was fundamental to our entire 16 relationship. 17 Q Well, you used words, Mr. Klein, such as 18 fundamental to relationships, but my question was whether, 19 aside from that paragraph, you never said or spoke or wrote 20 to Mr. Mumma and said to him that I see that there is a 21 potential conflict in our representation of you, vis-a-vis 22 our representation of the estate, or mention anything else 23 about the possible need for Morgan, Lewis to withdraw from 24 his representation? 25 A We had a good understanding of that based on 83 the conversation I had before this letter and with this 2 letter, and there was never a thought in my mind afterwards 3 that it needed further elaboration or discussion. 4 Q Let's get at this this way, Mr. Klein. We've 5 seen what's in this letter, and all it says is that if Bob 6 ever negotiates with the estate to buy Pennsy Supply or any 7 other assets from the estate for that matter, then he will 8 get separate counsel. Now, if you said something to Mr. 9 Mumma other than that, please tell the Court what you said. 10 A I have no recollection of another specific 11 exchange. 12 Q How about a general exchange, if there was 13 anything that bears on this? 14 A Ne and I had discussions over the entire term 15 of our acquaintance, and it's very possible in one of those 16 discussions that there would have been another opportunity 17 to make that clear, but I cannot recall a specific occasion. 18 (Whereupon, Defendant's Exhibit No. 11 was 19 marked for identification.) 20 BY MR. BAUGHMAN: 21 Q I'm handing you D-11, but before that I gust 22 have a couple other questions. I take it that all of this 23 in September and perhaps October of 1986, you were engaged 24 with Mr. Mumma in giving him extensive estate planning 25 advice, is that fair? 84 A I'd say we began that effort at that time and 2 got into it fairly deeply and then set it aside because we 3 had the other matters to contend with. 4 Q And did that include obtaining from him and 5 reviewing his personal financial statement? 6 A Well, obviously I needed to know the general 7 size of his estate and generally what it was composed of. 8 Q And so, therefore, you needed to review his 9 financial statement, is that right? 10 A He and I discussed how large his estate was 11 in general terms. He may or may not have shown me a 12 financial statement. I found no financial statement in my 13 file, but if he did, he took it back right away. 14 Q Now, I take it from what You write in D-1, in 15 that second paragraph we've b een talking about, that You did 16 have occasion to talk to Mr. Mumma about the possibility of 17 him buying Pennsy Sup ply? 18 A Yes. 19 Q And you were aware of the language in the 20 Will in which it was said that it was the intent of the 21 testator to keep the family business in the family? 22 A Well, Article 13 of the Will pretty much 23 speaks for itself. 24 Q Well, does it say something different from 25 that? Isn't that what it says? 85 A Oh. Z Q Now, D-11 is the letter from Lisa Morgan to 3 George Hadley. George Hadley was the accountant for the 4 estate, is that correct? 5 A Right. 6 Q And she encloses a draft that she says she 7 and you had drafted. Did you two draft that? 8 A I believe we did. 9 Q And that draft is the letter for Mrs. Mumma 10 to send to Bob Mumma that says that Lisa and I w ould welcome 11 an offer from you for the purchase of PennsY Sup ply, isn't 12 that what it says? 13 A Yes. 14 Q And you participated in drafting this so it 15 would be such that the executrixes would fulfill their 16 fiduciary duties, isn't that right? 17 Q That was a lawyer letter that had that 18 association, yes. 19 Q Thank you. Now, come November of 1986, the 20 issues of liquidating kim Company and Pennsylvan ia Supply 21 Company arose, isn"t that correct? 22 A That's right. 23 Q And you met in November with all the family 24 members in Harrisburg to explain to them why it would be 25 advantageous to liquidate those two companies? 87 agreement. 2 I went through all of this and the other related 3 matters with our clients, When I got through, Mrs. Mumma 4 and Lisa, who early on complained to us all the time the 5 children were kept in the dark, so I said, well, now we know 6 what we are going to do first thing. 7 What we've got to do is get the children together 8 and explain what you've recommended to us and why, so on 9 behalf of the executors, a meeting was arranged in 10 Harrisburg where I lectured for five or six hours. We went 11 through the whole business. We went through whnt wa nn~ 12 advised the executors and what the game plan would be if 13 they went through with the advice. 14 So there were two meetings, one with the executors 15 in Philadelphia where we went through all the analysis and 16 the advice, and the second meeting with -- the executors 17 asked us to meet with the family members to explain to them 18 what we had advised the executors and talked about the game 19 plan that followed from that. 20 Q Okay. Now, let's Just understand a few 21 things. You say that -- I think you mentioned that there 22 were some people that had a few little splinter interests. 23 I take it that the children themselves, not as beneficiaries 24 of the estate, owned 20 per cent of Kim Company, isn't that 25 right? 89 A Well, we have two companies, and gust to make 2 that a little more precise, we have Pennsylvania Supply 3 Company at the top, and the estate owned, I believe, 98 plus 4 percent of that. The children's interest was around a half 5 a percent, each of the four children with about a half a 6 percent each. Pennsylvania Supply Company owned slightly 7 more than 80 percent of Kim Company. 8 Q And by mY mathematics that means that the 9 children themselves, individually as shareholders, owned two 10 percent as shareholders. 11 Q Each of the children, when you run Kim 12 Company through Pennsylvania Supply Company and You get the 13 half a percent effect, it works out that the children are 14 somewhere around four and a half percent, I believe, so if 15 You took -- put the two companies together, you come out 16 that the ch ildren have four and a half perce nt each, and 17 Mrs. Mumma, herself, I believe owned a small percent, maybe 18 one or one and a half percent. So four and a half times 19 four is? ZO A Eightee n percent. 21 Q Excuse me, 18 percent. Thank you. Now, when 22 You came to meet with the other shareholders of these two 23 companies, those that held these little splinter interests, 24 did you explain to them that you only represented the estate 25 and that you weren't representing them with regard to the 90 dissolution of these companies? Did you explain that to 2 them? 3 A There again, let me say there was no 4 occasion -- 5 Q Excuse me, please. I understand that you 6 have opinions, and Your counsel can bring them out on cross, 7 but my question is only as to what you told these people. 8 Did You tell th em you weren't repre senting them? 9 A I made no statement like that. 10 Q Thank You. Now, as a result of this five or 11 six hours of lecturing, it's true, is it not, that Bob Mumma 12 had a num ber of questions that he put to you, isn't that 13 right? 14 A I think Bob Mumma's main concern at that 15 meeting - - he had three or four co mments, suggestions, or 16 whatever You want to call them in regard to the game plan 17 that foll owed off the liquidation. There was no -- 18 everybody agreed when we got throu gh that, from a tax paint 19 of view, liquidation was in order. 20 Q Right. My question was only -- please. 21 A Well, all right. Everybody agreed on that. 22 Everybody agreed, and there was no dissent from this that a 23 partnership-like arrangement had to be in place to manage 24 the real estate after it came out of corporate solution. 25 Everybody agreed on that. 91 The comments that Bob had, the questions that he 2 had were either incidental transitions, incidental issues, 3 or what I would call technical points that didn't go to the 4 fundamentals of anY of this, 5 Q And the bottom line -- Bob Mumma asked You 6 some questions at the meeting, and, as a matter of fact, you 7 had to go back and do some research to find out the answers 8 to those questions? 9 A Well, I think i know the question you're 10 talking about. He wanted to know if you could have a 11 complete liquidation for tax purposes and still leave a 12 corporate shell. 13 Q And you researched that, did you not? 14 A I told him at the meeting I thought it was 15 possible, that I sort of remembered a rule, and had an 16 associate research the legislative history. And it was 17 pretty clear as soon as you left an empty shell and the only 18 clear purpose was of maintaining the name and couldn't use 19 it far anything else -- so I answered his question. He 20 asked a question, and it was not a matter of representing 21 him. I simply answered his questions. 22 Q Well, you sent him a couple letters, right? 23 You sent him one -- look at D-2 and D-3 -- and Your 24 associate sent him another, and You give him some legal 25 research, right? 92 A Well, I have to tell You that this concern of 2 keeping the shells alive is not only Bob's concern, although 3 he was the one who was talking about it the most, Mrs. Mumma 4 felt the sentimentality with re spect to Pennsylvania Supply 5 Company. Mrs. Mumma's name is Kim, and Kim Company is her 6 name. 7 I think everybody was interested in this question 8 and would stand Judgment on the whole thing. I don't know 9 how in the world you can make this a matter of 10 representation of Bobby out of my answering a question like 11 that. 12 Q Well, I'll tell You what, if you would gust 13 try to answer the question, and I'm sure your counsel will 14 give You a chance to say whatever else You want to say. 15 In any event, mY questions are usually pretty 16 straightforward. MY question is whether it isn't true that 17 D-2 and D-3 represent letters that on one hand You, and on 18 the other hand Your associate working for You, sent to Mr. 19 Mumma furnishing the results of your legal research on the 20 this question? 21 A Yes. 22 Q And as a result You we re successful, and, in 23 fact, as far as You know, those shell companies still are 24 there, is that right? 25 A I guess. As far as I know they are, Yes. 93 Q Now, there was then another meeting, and that 2 was -- at least has been testified to -- there was a meeting 3 on or before December 19th, and you've heard some testimony 4 and a lot of questions about that, right? 5 A Right. 6 Q And that one You didn't attend in person, 7 right? 8 A I was in mY office in Philadelphia. I was on 9 the speaker phone Bobby said. lp Q That was December 19th, 1986. Now, you see a 11 complaint up there. It's a fat document that has a 12 caption -- I understand You're an estate and tax lawyer, 13 but -- 14 A I'll find it. 15 Q And it has some attachments, and I apologize 16 to you for not having it tabbed. You see that first 17 attachment, and that's an agreement that says Agreement 18 Among Tenants-In-Common? lg A Yes. 2p Q Now, I understand that it's Morgan, Lewis's 21 position that there were -- two of these were actually 22 executed on December 19th, but let me ask you some questions 23 about that. I take it that You did not see the final 24 document that was even taken to the meeting on December 25 19th, is that fair? 94 A That's fair. I didn't see it until after the 2 meeting. 3 Q And, in fact, you didn't see it after the 4 meeting until a couple months later, isn't that right? 5 A Well, the prec ise time I don't know, some 6 period of time in January or early February. 7 Q So at least it was over a month? 8 A Month later. g ~ ~ fter the December 19th meeting, before you 10 ever laid eyes on anything like that -- 11 A Well, before -- let me be clear on that. 12 Bobby had voiced a concern about the bankruptcy and 13 involuntary transfer of creditors provisions in these 14 agreements which I, from my point of view as the tax and 15 estate planning counsel here viewed as technical but knew 16 were probably important to him, and we had said at the 17 meeting that when we could get our hands on the real estate 18 lawyer -- and for some time about a third of all the 19 property in the country was going in and out of corporations 20 or being sold or what have You -- so we could not get our 21 hands on the real estate lawyer. 22 As soon as a real estate lawyer in our firm was 23 freed up and I got somebody to take on that project, we let 24 him know that all of the parties to this agreement had said 25 at the meeting of December 19th that they would work toward 95 an approved and refined agreement, and I wanted a real 2 estate lawyer to do it because the improvements and 3 refinements were in this way; and I got my real estate 4 lawyer the end of January or early February, and that's when 5 I focused on it. I may have seen copies of this document in 6 passing, but I wasn't prepared to focus on it until a month 7 or so -- 8 Q But you`re not able to sit here today and say 9 you saw it sometime in December, 1 986? 10 A No, I couldn't say that. It's possible that 11 I did, but I don't remember seeing it. i2 Q And I take it there were all kinds of 13 suggestions being made to change w hatever document it was 14 that the people in Harrisburg had, isn't that right? 15 A There were two changes in relation to these 16 that were voiced, and they were voiced by Bobby. One had to 17 do with the ability to make gifts of his interests or any of 18 the co-tenants being able to make gifts of their interests, 19 and the other went to the provisions dealing with the 20 prejudice of one's interest or what would happen in the Z1 event one went bankrupt and judgment was against you and how 22 that would affect you. Those were the two tangible 23 concerns. I would sav the fundamentals of this agreement 24 were not the subject of any disagreement at any point. 25 Q well, even you, Mr. Klein, agree that there 96 were changes that were suggested and were agreed should be 2 made, isn't that right? 3 A There were changes that were suggested, and I 4 think that the changes that were suggested nobody cared much 5 about except Bobby, and everybody was prepared to go ahead 6 with them on a new agreement as soon as we could get a real 7 estate lawyer to work on it. 8 Q Including you? 9 A Absolutely. 10 Q And I take it that there were some meetings 11 with Mr. Browner and the shareholders in early 1987 at which 12 drafts were discussed, isn't that right? 13 A Yes, I was -- Jerry was taking that pretty 14 much on his own, but he was pretty much aware of what was 15 going on. 16 Q Now, at that meeting, or at least that part 17 you participated in by phone in December of 1986, once again 18 neither you nor Mr. Skinner nor anyone else from Morgan, 19 Lewis said anything to these people about the fact that you 20 weren't representing them, isn't that right? 21 A There was no comment. Nobody made a 22 statement Morgan, Lewis is not representing Babbs. Morgan, 23 Lewis is not representing Linda, and so forth. 24 Q And so forth includes Bob? 25 A Right. 97 Q Now, it's correct, is it not, that you had. 2 had, prior to this December meeting, some meeting with Your 3 clients in which then said that they wanted to have some 4 kind of maJOritY rule provision in that agreement, isn't 5 that right? 6 A Now else would You possibly have an 7 arrangement on this? 8 Q Please Just answer the question. 9 A Absolutely. 10 Q And it's also correct that you didn't point 11 out to the other shareholders at the December meeting that 12 that was the case, isn't that right? 13 A The fundamental element throughout here was 14 that the estate would remain in the control position that it 15 had to begin with. 16 Q Please Just answer the question. You didn't 17 mention that at the December meeting, isn't that right? 18 A I do not recall the statement of the 19 proposition that the maJority will control in the 2d decision-making, partnership-like arrangement, but it was 21 clear that that was understood by all from~ the beginning of 22 the discussion of th is with everyone, which goes back to 23 nearly the November meeting. It was not a subJect. It was 24 fundamental through the whole thing, and it was certainly 25 clear in everybody's mind. 98 Q Well, once again, gust to be clear, you 2 didn't say anything about it, right? 3 A I maY have said something about it. 4 Q Well, now -- 5 A We had a long discussion. 6 Q Well, look -- 7 A The discussion -- I do not recall 8 specifically making the statement this partnership 9 arrangement that we have in place here will be governed by 10 the normal maJoritY-vote arrangement, but the fact that it 11 was so was well, understood, and the discussion that we had 12 may very well have -- I don't know. I can't remember 13 specifically pointing to that provision of the agreement, I 14 will say that; but we had general discussions what the whole 15 deal was, and that was part of the whole deal. 16 Q You would also agree, would You not, that 17 this agreement, according to your testimony -= and we have 18 had Your deposition -- that according to your testimony, 19 that that agreement included a right of first refusal 20 provision such that if any of the shareholders wanted to 21 sell, the other shareholders could buy them out, isn't that 22 right? 23 A Yes, it does. If any shareholder would 24 desire to sell -- for instance, if Bobby wanted to sell his 25 four and a half percent interest in one of the parcels, 99 before he could sell it to an outsider, he had to offer it 2 to the other co-tenants, to his partners. 3 Q And it's also true, is it not, that at the 4 December meeting, you didn't discuss with the shareholders 5 the relationship, if any, between this right of first 6 refusal provision and this, in your mind, maJority rule 7 provision? You didn't discuss any such relationship, is 8 that right? 9 A Because that was outside the malority rule. i0 Q Once again, did you discuss any such 11 relationship? 12 A It was -- the maJority rule was one ruling to 13 that provision. That provision was a matter -- 14 Q Mr. Klein, did you discuss it at that 15 meeting, any such rule? 16 A I wish you'd start again. 17 Q Did You discuss at that meeting any 18 relationship between the right of first refusal provision 19 and what You referred to as the majority rule provision? 24 A Na. 21 Q Mr. Klein, did You sense at any time up 22 through that December, 1986, meeting that Your interest with 23 regard to representing the estate was adverse in any way to 24 the interest of Bob Mumma? 25 A Absolutely, positively not. Bob Mumma and 100 the other fractional owners came out of this deal because of 2 the liquidation, it seems t o me, in a much better position 3 than they were before they were minority sharehol ders in a 4 corporation, and everybody was in agreement that was the 5 thing to do, and there was no disagreement at all in the 6 fundamentals ar principles. There was no -- no, absolutely 7 not. 8 Q So you would agree that you were negotiating 9 with these other shareholders, isn't that right? 10 A Only in regards to maybe Union Quarries to 11 the extent that was a sales transaction. 12 Q With regard to that, was your interest 13 contrary to that, your interest in representing the estate 14 contrary to the interest of Mr. Mumma? 15 A No, I think Mr. Mumma and everybody else was 16 in 100 percent agreement that the Union block had to remain 17 a single unit. There was only one possible place that it 18 could go because no other interest was large enough to 19 absorb it in. 20 And we have the further consideration that 21 although the estate wasn't paying capitol gains tax, the 22 income tax Placed the (unintelligible) on the liquidation, 23 and this was an opportunity for them to get some money out 24 of it . 25 Q Just for the record, Union Quarries -- and 101 correct me if I misstate it -- it is Your position that it 2 was agreed that the estate would take 100 percent of Union 3 Quarries and give cash to the individual shareholders to 4 recompensate for that, isn't that Your position? 5 A That was a desire on the part of everybody. 6 Q And far the moment, that was Your position 7 anyway, right? 8 A It wasn't a position. It was something I 9 offered. It was a desire on the part of everybody. 10 Q Was that Your desire? That's what You 11 recommended? 12 A This was really brought to me. Of all the 13 things I was counseling them on, I was not involved in the 14 history of Union Quarries or the Hempt family or any of this 15 business. 16 Q And Your position is that the only question 17 that Bob Mumma raised -- he said, Well, it`s okay if the 18 estate gets 100 percent of that stock, but they have to 19 agree that they won't sell part of it off? 20 A Right. Bobby made that comment, and I think 21 Kim and Lisa said absolutely. 22 Q And is that something that's in this 23 agreement, that You say is the agreement, that's required 24 under this agreement? 25 A No, that was Just -- Bobby asked them to make 102 that promise, and they did. 2 Q But it's not in the agreement? 3 A It's not written in there, no. 4 Q But at no time did you sense that you were 5 adverse with regard to Bob with regard to this, is that 6 right? 7 A It wasn't a matter of being adverse or not 8 adverse. 9 Q Did You believe that you were adverse to Bob 10 with regard to that issue? 11 MR. KITTREDGE: What issue are we talking 12 about now? 13 MR. BAUGHMAN: The issue of Union Quarries. 14 THE WITNESS: No, I would not say -- Bobby 15 was the one who brought the idea up. 16 BY MR. BAUGH MAN: 17 Q And You understood, did you not -- 18 A Except -- as far as the cash consideration, 19 perhaps ther e was a cash consideration determined, and that 20 was to be de termined by George Hadley. George Hadley was 21 Bobby's acco untant. 22 Q I don't understand. 23 A Well, in a sense what you have here is that 24 the minority shareholders sold their little piece of Union 25 Quarries, ea ch of them to the estate, in return for which 103 then got some cash; and in that sense You have a sale 2 transaction, if that's what You mean, then you've got a 3 transaction where Bobby is on the other side from the 4 estate. 5 Q Well, You understood, did You not, Mr. Klein, 6 that under the Code of Professional Conduct as it existed at 7 that time that if You sensed that there was any adverseness 8 between the estate and Bob, that You had an obligation to 9 counsel both clients about that potential problem, isn't 10 that right? 11 A Bob was not our client by any means in these 12 matters. Bob was clearly, positively not our client. 13 Q Well, Mr. Klein, isn't it true -- well, are 14 You familiar -- you were familiar at t he time with the Code 15 of Profession al Responsibility, isn't that right? 16 A Generally. 17 Q And generally. overall, you were obligated to 18 follow that, right? 19 A Right. 20 Q And was it Your understanding that that Code 21 required that if You had a materially adverse position to 22 any present client, even if it had nothing to do with your 23 representation of that client, that you had a problem and 24 had to counsel that client about that and cease Your 25 ~ representation, did You understand that? 104 A Two things, number one, Bobby was not our 2 client in this matter. Bobby was Your client in his own 3 estate banking, and we had an understanding to begin with 4 that was isolated from it entirely, so Bob was not even 5 viewed as a client of ours in this regard. 6 Secondly, this was a sort of a contract of 7 adhesion, if you will. The estate came in -- this is the 8 situation. This is what indicated -- the estate had 80 9 percent control shareholders, and that is what's to be put 10 in place, and the fundamentals of that everybody agreed to. it That's what people had reservations about, such as 12 the bankruptcy provision and such as the gifts to Your 13 family and whatever other minor things. Everybody was in 14 agreement that when we got a real estate lawyer, we would 15 prepare a new agreement that would be executed next year. 16 Q You say it was a contract of adhesion. Do 17 You mean you were framing this -- 18 A What I mean is that the executors were in 19 control of the situation, and they clearly -- they would not 20 have undertaken the liquidation that was needed to be done 21 without having some mechanism or control afterwards, but it 22 would have left them in. 23 And a contract of adhesion is probably the wrong 24 word to use in a situation where the controlling person and 25 the controlling party and controlling shareholders, whom we 105 represented, put forth a program, and it was explained to 2 the minority shareholders, and there was agreement on all of 3 the fundamentals after proposition, after all propositions, 4 and the reservations that Bobby expressed were matters which 5 would be -- which were dealt with or would be dealt with, 6 and everybody agreed that that was the case. 7 Q Well, we started this with a question. 8 Please listen to it, okay, because it has to do with the 9 first part of Your answer where you said, Well, my 10 representation of Bobby didn't have to do with this, it had 11 to do with something else. 12 Did You understand, Mr. Klein, that even if your 13 representation of Bob was -- had nothing to do with any of 14 this, it was totally separate; that You still could not 15 represent another client in another separate matter before 16 that client was adverse, doing something adverse to the 17 interest of Bob? Did you understand that while he was your 18 present client, you couldn't do that? Did You understand 19 that to be the law? 20 A With respect to this client, Bob and I had 21 the understanding to begin with that if he was on the other 22 side from the estate in any matter, we represented the 23 estate and he got his own counsel as he wished. 24 Q Well, now, I have to go back because the only 25 understanding You've testified to and told the Court about 106 is that contained in D-1. Do you want to get that? That's 2 Your letter of September 5th, and that only has to do 3 with -- if Bob ever is going to negotiate to buy Pennsy 4 Supply or estate assets, he's going to have to get his own 5 attorney and negotiate with you? 6 A It didn't say or anything else? 7 Q Yes, it sans with your father's estate to buy 8 the operating company (or anything else for that matter), 9 Morgan, Lewis and Bockius would represent the estate, 10 A Why we would limit it is the reason that I 11 mentioned first. The operating company that was on his 12 mind, that was on our mind. 13 Q Excuse me, Mr. Klein, the Judge can read what 14 that is. I take it when You refer to what you discussed 15 with Bob, that's what You discussed, right? You'll stand by 16 that, right? 17 A The -- let me say this. What constituted the 18 operating company or what constituted the company was not 19 a -- was not that clear a matter. The company could go to 20 everything because Pennsylvania Supply Company embraced 21 everything. 22 It could be a company all the way down the line. 23 Of course, we wouldn't say, Well, we can't represent the 24 estate on the sale of the Pennsy Supply, Inc. stock but not 25 on the other things. 107 Q Please, Mr. Klein, I'll give you a chance and 2 your counsel will let You say anything you want to say. All 3 I'm going to establish, and I think we established it 4 before, but Just to be sure. That says whatever it says, 5 and if you want to explain to the Judge what You think it 6 says, that's fine, but that's all You said to Bob about any 7 potential conflict? 8 A That's right, the only potential conflict. 9 MR. KITTREDGE: If Your Honor please, I think 10 the witness should be permitted to at least complete his 11 answer without being interrupted. 12 MR. BAUGHMAN: Well, I don't want to badger 13 the witness, Your Honor. 14 THE COURT: I'll tell you, we went through 15 this about ten times now. I don't think it's necessary to 16 go through what the meaning of that letter is anymore. 17 MR. BAUGHMAN: I don't intend to take it any 18 further, Your Honor. 19 BY MR. BAUGHMAN: 20 Q Now, it's correct, is it not, Mr. Klein, that 21 Mr. Browner met with the shareholders in early 1987, and 22 they discussed these revised drafts or whatever you want to 23 call them? 24 A Refinements I would call them. 25 Q And you assumed that they had been executed, 108 isn't that right? You assumed that Mr. Browner had gotten a 2 signed amendment or whatever you want to call it, 3 refinement, isn't that right? 4 A No, I didn't assume that they were executed. 5 Q Isn't it true that until you found out in 6 June of 1987 from Mrs. Morgan that they hadn't been 7 executed, you thought they had been executed? R A No, I knew the process was going on, and I 9 knew it was going on very long, but -- 10 Q But you hadn't made anY such assumption or 11 didn't make that assumption? 12 A No. 13 Q But whether or not you made an assumption, 14 you did find aut in June of 1987 -- Mrs. Morgan said, By the 15 way, tr: ~ .rafts h adn't been executed. Didn't she tell you 16 that? 17 A Yes, she did. 18 Q And the reason she told you that was she was 19 bringing to your attention that Bob was obJecting to the 20 sale of the property in Lemoyne, isn't that right? 21 A Ne was objecting to the sole of some 22 property, yes. 23 Q In Lemoyne? 24 A Well -- 25 Q You don't know where it was? 109 A Right. 2 Q Okay. And so you were discussing with Mrs. 3 Mumma what the operative agreement might be as to whether or 4 not Bob would have to agree to that sale, isn't that what 5 you were discussing with her? 6 A Yes, but even if you had the later agreement, 7 I'm sure they were identical in that regard. 8 Q Well, did you ever consider, Mr. Klein, that 9 Bob Mumma was your client at that time? 10 A This was the same partnership-like 11 arrangement back in December that I didn't consider him my 12 client on this one either. 13 Q Well, look, he was still your client for some 14 purposes, wasn't he? He was still an active client in June 15 of 1987? 16 A He and I had discussions about his estate 17 planning that were separate, distinct, carried on in 18 isolation, and bore on -- this had nothing to do with it at 19 all. 20 Q He was your client -- take a look at D-9. He 21 was your client? 22 A I know that I sent him money back. 23 Q He was Your client until August 14, 1987, 24 isn't that right? 25 A That's the time at which we formally ceased 110 that relationship, although I must say I don't think after 2 March that I, that he and I talked. 3 Q But You still considered him Your client, I 4 think you said, in Your deposition? 5 A Yes, I -- what I thought was that the -- some 6 day when all this has taken -- all this was done, that we 7 would probably finish up with matters. 8 MR. BAUGHMAN: Thank you very much. That's 9 all I have. 10 THE COURT: Any further questions? 11 MR. KITTREDGE: Just a couple, if Your Honor 12 please. 13 (Whereupon, Estate's Exhibit No. 3 was marked 14 for identification.) 15 CROSS-EXAMINATION 16 BY MR. KITTREDGE: 17 Q Mr. Klein, I hand You a document which has 18 been marked as Estate Exhibit 3. Would You please look at 19 that and tell the Court what it is? 20 A This is a Morgan, Lewis Matter Detail Report, 21 which is our computerized summary of time recorded. It's a 22 time sheet. 23 Q Well, what does that particular record relate 24 to? 25 A It relates to Bobby Mumma and his estate 111 planning bible. 2 Q A typical entry on that record, which is 3 Estate Exhibit 3 -- would you explain to the Court one of 4 the lines? 5 A Just pick one? 6 Q Yes, just pick one. 7 A Starting with the posting date or just the 8 active description? 9 Q Why don't you just explain to the Court what 10 the different entries going across relate to? 11 A All right. There are a series of entries -- 12 actually the quote up in the far left, I don't know what 13 that is -- but the second column over is the posting date, 14 that means the date on which the entry was put in. 15 There's another column called rate, which is the 16 rate of time charged associated with the lawyers; and amount 17 charged, which is the product of the next column; and the 18 preceding column is the number of hours charged. The next 19 one is the name of the lawyers. The next is activity date. 20 That's the date on which the activity took place, and the 21 last column is called description of activity. 22 Q Looking at the description of activity, would 23 you -- well, let me go back a step. Would you tell the 24 Court what the date of first activity reflected on that 25 record is? What's the date of the first entry? 112 A Looks like 8/21/86. 2 Q So that's August 21st of 1986? 3 A That's what it looks like, yes. 4 Q Do you recall when approximately it was that S you undertook to provide legal advice or services to Mr. 6 Mumma with respect to his estate planning? 7 A It was at that time, the end of August. 8 Q Okay. And are those legal services and 9 advice reflected on that record before you? 10 A Yes. Do you want me to read t hem? 11 Q No. In a general way, can you describe for 12 the Court what servi ces are reflected on that record? 13 A Well, up to -- from the end of August through 14 October, what's refl ecte d is tax analysis in connection with 15 estate planning and the working up of some documents as 16 discussion drafts. There was also a little discussion -- I 17 see noted here some discussion of the disclaimer. 18 Q Other than the estate planning advice and the 19 disclaimer, were anv other legal services reflected on 20 there? 21 A No, wait a second, let me go clear to the 22 end. No, at the end, toward the end, there's a mention of 23 considered ESOP for Kimbob and Gemini. That consideration 24 was very brief, and it was entirely within an estate 25 planning context, so there might have been some estate 113 planning advantage in having an ESOP. 2 Q Would you tell the Judge, please, when the 3 last activity date reflected on that record is, the last day 4 that legal services were rendered to Mr. Mumma? 5 A The last activity date shown is April 1, 6 1987. 7 Q Do you have in front of you as one of the 8 Defendant's exhibits, the August, 1987, letter from you to 9 Mr. Mumma in which the $6,100.00 left over in the retainer 10 was returned to him? 11 A Now, that is Defendant's Exhibit 12 number -- 13 Q Nine. 14 A Yes. 15 Q Did you send that letter to Mr. Mumma? 16 A I did. 17 Q The second paragraph starts, "The time was 18 about equally divided between the disclaimer matter, which 19 as You know presented some very difficult issues, and tax 20 and estate planning generally for you, including working up 21 drafts and so on." Do you see that? 22 A I do, yes, sir. 23 Q Was Mr. Mumma, in the $20,000.00 that he 24 deposited with the firm and received back $6,100.00, was any 25 part of that charged to Mr. Mumma involved with the 114 liquidation of Kim Company or Pennsylvania Supply Company 2 for advice or legal services to Mr. Mumma in connection with 3 the administration of the estate of Mr. Robert Mumma? 4 A No. 5 Q Now, going back to, I believe you said, the 6 summer of 1986 when you first met the family, would you tell 7 the Judge how that m eeting came about? 8 A Well, I first met the family members before 9 that, but the family meeting that Bobby talked about? 10 A Yes. 11 Q I understood from the executors that the 12 other children; that is, other than Lisa who were not 13 executors, were clamoring for a meet ing. They felt that 14 they were being kept in the dark and that we should have a 15 meeting, sit dow n, go over the Will, show them what they're 16 entitled to, and what's involved. 17 Q A ll right. At the start of the meeting with 18 the children and Mrs. Mumma, did you state to them what the 19 purpose of the meeting was? 20 A I believe I did, yes. 21 Q As best You can recall, what did you tell 22 them the purpose of the meeting was, why the meeting had to 23 be called? 24 A The meeting was called to acquaint them with 25 the Will and describe to them what they would be entitled to 115 under the Will and to talk about the estate taxes and 2 something called an Q-tip election, which is an election to 3 qualify the trust under the Will for the benefit of Mrs. 4 Mumma for the marital reduction, which had tax ramifications 5 that bore on everybody involved in the estate, and I thought 6 should be aired. 7 Q Did you say anything to the assembled group 8 with respect to who had requested that you hold the meeting? 9 A Yes, I told them the executors did. 10 Q And did you tell them who you were there on 11 behalf of? 12 A Yes, sir, obviously I told them I was on 13 behalf of the executors, i don't think there was any 14 question about that at all. 15 Q Now, focusing on the meeting in November with 16 all the family members having to do with the proposed 17 liquidation of Kim Company and Pennsylvania Supply Company, 18 had you been requested to hold that meeting? 19 A Yes. 20 Q For what purpose had you been requested to 21 hold that meeting? 22 A To explai n the advice I had given the 23 executors about the '86 Tax Reform Act and the game plan 24 that would follow from a liquidation of the corporations. 25 Q And when the group assembled for that 116 meeting, did you tell that group why the meeting was b~:_,^ 2 called? 3 A Yes. 4 Q What did you tell them? 5 A I told them I was there to explain something 6 called the General Utilities Doctrine, and they had become 7 more expert than they wanted to be in it by the time they 8 got through, and I was doing that on behalf of the estate. 9 Q Now, when Mr. Mumma, the Defendant, first 10 asked you to provide him leg al advice in connection with his 11 estate planning, did you dis cuss with him your 12 representation of the estate and how that might be affected 13 by your undertaking to repre sent Mr. Mumma in connection 14 with his estate planning? 15 A Yes, it was a condition of M. L. B, being 16 able to give Bobby Mumma estate planning advice that it be 17 understood that if he was ever on the other side from the 18 estate, that we would be the representatives of the estate 19 and he would have his own counsel. And he was in agreement 20 with that, and he was -- obviously he's an individual who 21 has a lot of counsel to consult, and he was not perturbed in 22 the slightest. 23 Q If it had been suggested to you by Mr. Mumma 24 at the time that your undertaking to represent him and 25 provide legal services in connection with his estate 117 planning would thereafter disable you and Morgan, Lewis and 2 Bockius from representing the estate, vis-a-vis him, with 3 respect to the possible sale of the operating companies, 4 would you have undertaken that representation? 5 MR. BAUGHMAN: Your Honor -- 6 THE WITNESS: Definitely not. 7 BY MR. KITTREDGE: 8 Q Now, in the fall up through the end of 1986 9 when the liquidation of Kim Company and Pennsylvania SUpp1Y 10 Company was in progress, Mr. Klein, can you tell me who it 11 was that was in control of the maJoritY of the shares of 12 Pennsylvania Supply Company? 13 A The estate owned 98 percent of Pennsylvania 14 Supply Company. 15 Q And who was in control of Kim Company? 16 A Pennsylvania Supply Company owned 81, 2, or 3 17 percent of Kim Company, so indirectly the estate was in 18 control of Kim Company. 19 Q At any time in connection with the 20 liquidation of Kim Company and Pennsylvania Supply Company, 21 was there any suggestion or contention raised at any time by 22 Mr. Mumma, or for that matter anybody, as to whether, in 23 fact, the estate controlled those two companies or not? 24 A No, no, that relationship and that sequence 25 of control was known by all. 118 Q Would You explain to the Court the purpose of 2 the power of attorney that was executed by Mr. Mumma on 3 December 19, 1986, in connection with the liquidation of Kim 4 Company and Pennsylvania Supply Company? 5 A The power of attorney is separate from the 6 agreement itself. It was a power that each of the partners, 7 as it were, gave to enable a transaction that was to be 8 carried out in accordance with or under that agreement to be 9 done by signature of any one of them. 10 Q Was that purpose explained at the time to the 11 family members? 12 A Yes. The separateness of it was for the 13 convenience of recording probably; that is, the agreement 14 itself grants the power -- the agreement itself contains a 15 grant of power. The fact that you had a separate document 16 also as a single or separate one or two-page document would 17 enable you to have a recording without having to put into 18 the Recorder of Deeds a very thick agreement among 19 tenants-in-common that other people wouldn't be interested 20 in. 21 Q Would you look at Estate Exhibit 1 and Estate 22 Exhibit 2, which are respectively the letter dated January 23 6th, 1987, to Mr. Mumma, and the letter dated January 9, 24 1987, to Mr. Martsan? 25 A Excuse me a second, I have Plaintiffs' 119 Exhibit 1, is that what you want me to look at? 2 Q Yes. 3 A Plaintiffs' Exhibit 1 is dated January 9. 4 Q I'm sorry. That's the letter to Mr. Martson? 5 A Yes. 6 Q And Exhibit 2 is the January 12 letter to the 7 executrixes of the Will? 8 A Yes. 9 Q I apologize for that. Look at Estate Exhibit 10 1 first. 11 A Um-hum. 12 Q The letter is to Mr. Martson? 13 A Yes. 14 Q Does that reflect a copy to Mr. Mumma? 15 A Yes, there's three copies indicated. He's 16 the first one. 17 Q Can you tell the Court whether a copy of this 18 letter was sent to Mr, Mumma at or about January 9, 1987? 19 A I certainly believe it was. 20 Q Look at Estate Exhibit 2. 21 A Yes. 22 Q Does that reflect a copy of this letter went 23 to Mr. Mumma at or about January 12, 1987? 24 A Yep. 2S Q Can You tell the Court whether, in fact, a 120 copy of this letter was sent to Mr. Mumma? 2 A Yes. 3 Q The second paragraph of the January 12, 1987, 4 letter says, "In accordance with the requirements of the 5 Pennsylvania Probate, Estates, and Fudiciaries Code, Bill 6 Martson in Carlisle is filing a signed copy of the 7 disclaimer with the Clerk of the Orphans' Court Division of 8 Cumberland County.'" Did you discuss with Mr. Mumma the 9 filing of the disclaimer in the Orphans' Court in Cumberland 10 County? 11 A Yes. 12 Q Would you tell the Court what that discussion 13 was? 14 A Well, this was - - this topic was part of a 15 number of discussions. Mr. Mumma was very desirous of not 16 having the disclaimer, which he had decided that he wanted 17 to make in order to get the tax savings, he very much wanted 18 to avoid having that filed with the Court. 19 We discussed it, and it was our a dvice to him that 20 he needed to have, to get a 9-month period, an irrevocable, 21 giving-up disclaimer of his interest in order to achieve the 22 tax result. 23 And it was our advice to him that under 2518 of 24 the Internal Revenue Code, which we believe incorporates at 25 the very least that you have something that will work for 121 state law purposes -- you can't have an irrevocable 2 disclaimer that says it's an irrevocable disclaimer, that 3 you do something with it that keeps it from having any 4 effect for state purposes, obviously that cannot complete 5 the legally-binding irrevocable disclaimer that must be 6 made. 7 In the course of the discussion of this issue, and 8 I did this with Bobby because he was one of my smartest 9 clients. We shared with him our thinking and analysis in a 10 greater degree than maybe we would with others, and I read 11 to him from the Tax Code which says that for a disclaimer to 12 have effect, that it's got to be filed in the Court. 13 And I read him the 2518 requirements, and I said 14 that a strained argument, and one that we certainly would 15 never want a client of ours to proceed on, if it didn't get 16 into the Court within the nine months, that the executors 17 trodded it in later. 18 You can argue that the executors having received 19 this document, which is effective and which under the 20 Written Instruments Act says its intent to be legally bound, 21 that that compels those executors within a reasonable time 22 to lodge it, and because there is that comp ulsion, it will 23 get there someday; so th eoretical ly you can argue that you 24 met 2518's requirements, but that certainly would take a 25 risk, and if it backfire d on you, you would be in the 122 untenable and awful position of having given the executors a 2 document which has that legal effectiveness and which 3 declares that its intending to be legally bound so that they 4 have to follow that direction and when the time comes, make 5 distribution to Bobby's children and not to Bobby, but have 6 the IRS say Bobby made a gift when he did that because he 7 didn't get everything nailed down within the nine months; 8 and we couldn't possibly let him do it, so if he made the 9 decision to go through with the disclaimer, he had to get it 10 into Court within the nine months. 11 We had a lot of discussion on it -- and I don't 12 know whether you want me to go into detail -- but we went 13 over a number of negative points, all of which were 14 emphasized, because we were concerned that he not do 15 something that he'd later regret; and, as a matter of fact, 16 because of some of these things, as smart as Bobby is, I 17 wanted to have explained by somebody who w as more of an 18 expert in the probate area than I. 19 We had a good long conversation with Mr. O'Connor 20 of our office, who was more of a probate law expert, to make 21 sure that Bobby understood the pros and cons and all the 22 negatives and all the risks. And after that, Bobby said he 23 wanted to make it, and he wanted to make it effective, and 24 we should go ahead and do it. 25 And it was at his clear direction that we go ahead 123 and do it and do it in the right way to make it effective, 2 which was to file it with the Court, and he knew damn well 3 from the copies of these letters right afterwards that we 4 had. 5 Q What was the date of this conversation with 6 yourself and Mr. O'Connor and Mr. Mumma? 7 A It was the last day for filing. 8 Q And that was? 9 A January 12th, 1987. 10 MR. KITTREDGE: Would Your Honor bear with me 11 Just for a second, please? I have nothing furth~ .Judge. 12 THE COURT: Any additional questions you 13 would like to ask Mr. Klein? 14 MR. BAUGHMAN: A few, Your Honor. 15 REDIRECT EXAMINATION 16 BY MR. BAUGHMAN: 17 Q Now, I thought you had testified on direct 18 examination, Mr. Klein, that the only discussion you had in 19 which you explained the possibility of conflict to Bob was 20 set forth in paragraph two of D-1, the letter of September 21 the Sth, but is it now your testimony that you told him that 22 there was a condition on your representation of him that if 23 there was anything that would be involved that would involve 24 the estate on one side and him on the other side, that you 25 wouldn"t represent him, is that your testimony, that you 124 went beyond the language of D-1? 2 A I think the language of D-1 was probably too 3 narrowly stated. I think the understanding was that Kim and 4 Lisa were prepared to let me go ahead and advise Bobby, 5 because basically they were our clients to begin with, only 6 if it was understood that if Bobby was ever engaged in 7 anything controverted with them -- the things that we had in 8 mind at that time were possible sale transactions, but the 9 concept or the spirit of it, I think, extended beyond that. 10 Q Was it too narrowly stated in Your letter or 11 was it too narrowly stated in Your conversation with Mr. 12 Mumma? 13 A I think it's too narrowly stated in my 14 letter. 15 Q Well, let me understand. I take it that -- 16 first of al l, you did a file memo. and you sent that to him 17 along with this letter? 18 A Right. lg Q And You didn't even mention anything about -- 20 A Right, because I didn't think it was 21 appropriate for mY file memo or engagement letter. 22 Q But You did think it was appropriate, in 23 fact, You w ere trying to be careful, were You not, that You 24 better say something in Your cover letter to him about this, 25 isn't that right? 125 A Bobby was one of the nicest, most engaging, 2 smartest, good individuals that I have encountered. I never 3 thought in a million years that he would take the course of 4 action he`s taken here, which in my Judgment is Just 5 horrendous, and if I thought I was dealing with somebody I 6 hod to elaborate to that extent, I would have written a 7 two-page document. I would not have even undertaken the 8 representation in the first place. 9 Q So that you -- 10 A If I had written a legal document and sent it 11 to him, I think he would have been insulted because he and I 12 had an understanding. 13 Q So that Your discussion was broader than the 14 report? 15 A The concept and spirit of what we were 16 talking abou t, I think, extended beyond those words, and, as 17 a matter of fact, I think that for anything else, for that 18 matter, certainly suggests that. I won't even argue that. 19 Q With regard to Your responses to the, I would 20 say some what leading questions of your counsel, about what 21 You told the people at these various meetings, I take it 22 .You're s till sticking to Your testimony, are you not, that 23 you never told the shareholders that You were not 24 representing them, isn't that right? 25 A I don't have to tell somebody something that 126 they already know. 2 Q And so, therefore, You would agree that you 3 never told them that, right? 4 A Yes. 5 Q Now, You were testifying about powers of 6 attorney, on the questioning by your counsel, that were 7 executed in connection with these agreements that you say 8 were executed on December 19th, do You remember that 9 testimony? 10 A Yes, the power of attorney is a separate 11 document aside from the agreement. 12 Q Right. And You told the Judge that such 13 powers of attorney were executed, didn't you? 14 A I said -- well, I should have a nswered it 15 this way. I was not present there, but the po wers of 16 attorney that accompanied the agreements were powers of 17 attorney in relation to the agreements and not in relation 18 to anything else. 19 Q Well, isn't it true You testifi ed at your 20 deposition that you didn`t know one way or the other whether 21 there were any powers of attorney, isn't that right? 22 A Well, the powers of attorney -- I didn't know 23 whether they were signed there or not. I was in 24 Philadelphia, but if there were signed powers of attorney in 25 connection -- at that time there was no power of attorney 127 that we prepared other than in connection with that. 2 Q Page 67 -- 3 THE COURT: Have these depositions been filed 4 as of Yet? 5 MR. BAUGHMAN: Your Nonor, they haven't. 6 They were gust taken on Monday. In fact, we could do that 7 promptly if that would -- g THE WITNESS: Well, mY answer is -- g THE COURT: Well, wait now. If this is 10 something we have to refer to, I'd like to have the 11 depositions filed. 12 MR. BAUGHMAN: Absolutely. Your Honor, I will 13 see that that's ac complished. 14 MR. KITTREDGE: We`11 be glad to do that. 15 THE COURT: You're referring now -- 16 MR. BAUGHMAN: I'm referring to page 67. 17 THE WITNESS: Do You want me to read it? lg THE COURT: Let him ask a question. 1g MR. BAUGHMAN: Your Honor, I must apologize, 20 different Courts s ometimes insist upon certain methods of 21 impeachment, and I don't know what practice this Court has. 22 I would normally s imply refer to the testimony and ask the 23 witness if that's what he said. 24 THE COURT: That's fine here. 25 BY MR. BAUGHMAN: 128 Q Let me refer you to line four, where I'm 2 going to begin reading. 3 "Question, were powers of attorney executed by any 4 of the tenants-in-common on December 19th? 5 "Answer, you mean aside from within the 6 agreements? 7 "Question, yes. 8 "Answer, I'm not sure. I don't know. 9 "Question, did you ever see a draft of any such 10 power of attorney? 11 "Answer, I believe there might have been powers of 12 attorney independent of the agreement. I believe there may 13 be, but I can't recall for the convenience of recording. 14 "Question, the files you produced don't contain 15 any such powers of attorney signed on December 19th. I take 16 it none are being withheld on the grounds of privilege, is 17 that fair?" 18 And Your counsel and you both say that's fair, 19 right? 20 A Right. 21 MR. BAUGHMAN: Your Honor, with your 22 indulgence, I Just have one other thing, and I need to check 23 a document. I may be finished. 24 THE WITNESS: I say -- 25 THE COURT: Wait. Let's not volunteer any 129 more. 2 MR. BAUGHMAN: I have nothing further. 3 THE COURT; Would you like to consult with 4 your counsel about something You wanted to say? 5 MR. KITTREDGE: Would You indulge me Just for 6 a second? 7 RECROSS EXAMINATION 8 BY MR. KITTREDGE: 9 Q Mr. Klein, do you have anything that You 10 think useful to add to the deposition testimony that was 11 read by Mr, Baughman and the testimony you've already given 12 with respect to the powers of attorney separate from 13 whatever the contents of the agreement among 14 tenants-in-common were? If you have something by way of 15 clarification or addition, please -- 16 A Here's what I want to say, that I believe 17 that the agreement documents had with them powers of -- 18 separate power of attorney forms which would have been 19 customary and would have been utilized for convenience in 20 recording, but I was not present to see whether or not those 21 were signed. 22 MR. BAUGHMAN: Well, as a matter of fact, Mr. 23 Klein, Your files don't -- 24 MR. KITTREDGE: I have nothing further. 25 MR. BAUGHMAN: Excuse me. I apologize. 130 THE COURT: Now, go ahead. 2 REDIRECT EXAMINATION 3 BY MR. BAUGHM AN: 4 Q Your files don't contain any such documents, 5 isn't that ri ght? The only evidence that your firm has been 6 able to find of any such power of attorney which, as a 7 matter of fac t, you filed in connection with that sale in 8 June of 1987, was one executed by Bob, isn't that correct? 9 A Well, repeat that please. 10 Q You went through your files in response to a 11 subpoena serv ed upon yau? 12 A Yes. 13 Q And your files don't have any copies of such 14 powers of att orneys executed by Lisa or by Babbs or by 15 Linda, isn't that right? 16 MR. KITTREDGE: If Your Honor please, I 17 obJect to the questions to the extent that he uses the word 18 you, I think not in a personal sense to Mr. Klein, but You, 19 Morgan, Lewis and Bockius. 20 MR. BAUGHMAN: I would accept that 21 correction. 22 MR. KITTREDGE: I think the record should 23 show that Mr. Klein didn't go through all those files trying 24 to find them. 25 THE WITNESS: Those files are enormous, and 131 we had people going through them. I'm sure they looked 2 diligently, and there was nothing uncovered, otherwise You 3 would have them. 4 But I have to say this, too. This estate has used 5 other counsel than Morgan, Lewis on real estate 6 transactions, and these executors keep their own files, and 7 there are probably other things that they have in their 8 files that we don't have copies of. g MR. BAUGHMAN: Well, at least to Your 10 knowledge today, you're not aware that anyone has uncovered 11 such powers of attorney? 12 THE WITNESS: In our files? 13 MR. BAUGHMAN: Well, You're not aware they've 14 been uncovered anywhere? 15 THE WITNESS: Right. 16 MR. BAUGHMAN: Thank You very much, 17 THE COURT: I have Just a couple questions. 18 BY THE COURT: 19 Q There are three other children besides Mr. 2O Mumma, II, is that correct? 21 A Yes. 22 Q Do any of those other children have children, 23 do you know? 24 A Yes, I think they do. 25 fl Did you bring up this idea of disclaiming? 132 Is this something that you brought forward and explained to 2 all the children at one of these meetings? 3 A The first meeting I mentioned it because we 4 believed that we should mention it because it's the 5 responsibilit y of the executors to mention, 6 Q And then later on, the -- 7 A There was only one person who picked up on 8 it. 9 Q And this was Robert Mumma, II? 10 A Right. 11 Q And i presume that Kim Company and 12 Pennsylvania Supply Company, as of today, have not been 13 liquidated? 14 A They`ve been liquidated. 15 Q They have been liquidated? 16 A They have been completely liquidated, but the 17 dissolution p rocess, the final -- 18 Q I don't understand. I'm not a corporate 19 expert. What 's the difference between -- 20 A Liquidation for this purpose and for the 21 income tax pu rpose means you have emptied out a corporation 22 of all of its assets. It's an empty sack. 23 Q And where are the assets? 24 A The assets are -- there are two types of 25 assets. Ther e's stock in other corporations that came up, 133 and those assets are in the hands of the individual 2 shareholders; and then there are real estate assets that 3 came up, and that's wha t the subJect of these agreements 4 were, and they are in t hese Mumma Rea lty Associates I and 5 Mumma Realty Associates II, which are partnership-like 6 arrangements subJect to these agreeme nts. 7 Q The real estate assets do not vest these 8 tenants-in-common -- 9 A They do. They do vest -- title -- 10 theoretically title is in each one of the individuals so 11 that Lisa has 4.561, whatever it is, percent of each little 12 parcel, and that's the reason for -- the necessity -- that's 13 why we have to have a partnership-like arrangement for the 14 management of it and an agreement among the 15 tenants-in-common to create something that has a management 16 capability similar to a partnership. 17 If it had not been for the Realty Transfer Tax -- 18 the Realty Transfer Tax has an exemption where you take real 19 estate out of the corporation and give it to the 20 shareholders where they become tenants-in-common in exact 21 proportion to their common equity, and that's what we are 22 taking advantage of. 23 However, we cannot have a real partnership as part 24 of that arrangement because if we were to put the stock into 25 a partnership before you brought it out of corporate 134 solution, You lose the exemption. 2 Q What maJor things remain to be done then to 3 close out this estate as of today? What are the maJor 4 things that need to be done? 5 A We have not had either a Pennsylvania 6 Inheritance Tax audit or Federal State Tax audit, and those 7 are two maJor things that we have to take care of. I think 8 that's about it. That's about it. There was nothing else 9 that truly has an executorial function, as that takes place 10 shortly after death, but, You see, the entire estate goes 11 into trust for the benefit of Mrs. Mumma with the same 12 fiduciaries for her lifetime. 13 Q And once the audit is completed, You'll be in 14 a position to file Your first and final account? 15 A Yes. 16 THE COURT: That's all I have. AnY other 17 questions? 18 MR. BAUGHMAN: None, Your Honor, 1g MR. KITTREDGE: No, sir. 20 THE COURT: Thank you, Mr. Klein. I believe 21 You may step down. 22 MR. BAUGHMAN: Your Honor, I would move the 23 admission of Defendant's Exhibits 1 through 11. 24 THE COURT: AnY obJection? 25 MR. KITTREDGE: No obJection. 135 THE COURT: They're admitted. 2 MR. BAUGHMAN: That's all Defendant has, and 3 we rest, 4 THE COURT: You may proceed with your side. 5 MR. KITTREDGE: Thank You, Your Honor. Mrs. 6 Morgan. 7 Whereupon, g LISA MORGAN, g having been duly sworn, testified as follows: 10 DIRECT EXAMINATION 11 BY MR. KITTREDGE: 12 Q Mrs. Morgan, would you state Your name for 13 the record, please? 14 A Lisa Mumma Morgan. 15 Q Would you tell the Judge what connection, if 16 any. You have with the estate of Bob Mumma? 17 A With the estate I was named as executrix of 18 the estate, and subsequently I'm also named. as trustee of 19 the trust. In bath capacities, I'm co-executrix and 20 co-trustee along with my mother, Kim Mumma. 21 Q And were You related to the decedent? 22 A Yes, he was my father. 23 Q I'd like you to go back now to approximately 24 the time of your father's death and tell how it came about 25 that the executrixes, yourself and your mother, selected 136 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 counsel for the estate. A Well, prior to my father's death, he had contacted me actually, and said that he wanted someone to do some estate planning and a new will for him, and he eventually hired Mr. Klein through the recommendation of somebody in the trust and estate section -- I'm not sure who -- to do this, and he had been working with Mr. Klein for several months drafting Wills and doing some estate planning prior to his death. Q Okay. At this time, and we're talking about, I take it, late '85, early 1986? A About his death? Q No, his first contact with Morgan, Lewis and Bockius? A Yes, it would have been somewhere in that time frame. Q Where were You employed at that time? A At Morgan, Lewis. Q In which section? A The litigation section, Q Well, subsequent to your father's death then, letters were issued by the Orphans' Court with respect to the administration of the estate? A Correct, Q And through the recommendation of somebody in 137 the estate section of Morgan, Lewis and Bockius, the 2 esta te -- the executrixes, yourself and your mother, came to 3 Mr. Klein for representation? 4 A Right. Well, dad had already been dealing 5 with Art Klein on his estate matters , and mom and I felt 6 that since Art was already familiar with his estate it was 7 the most logical choice. 8 Q NOW, I want You t0 ~o back in vnur mini to 9 the spring and summer of 1986 and give us your best 10 recollection as to approximately when it was that there was 11 a first meeting with Mr. Klein of all the members of the 12 family? 13 A I believe it was in the summer of '86 that 14 the family came to Philadelphia and met at the Morgan, Lewis 15 office with Mr. Klein. 16 Q Okay. Would you tell the Court how that 17 meeting came about? 18 A My mother and I basically requested that we 19 schedule a meeting with the family because predominantly my 20 sisters had been saying that they felt that they were in the 21 dark, that they really didn't know what we were doing with 22 the estate, and they felt left out. 23 And my mother and I felt that in an effort to make 24 them feel aware of what we were doing, that we would ask Art 25 if he would sit down with the family and explain to them, go 138 over the Will with them, because I believe they had been 2 given copies or we told them we had copies, but they didn't 3 understand it. 4 And w e asked Art if he would sit down and tell 5 them what we we re doing with the estate, Just so they 6 weren't in the dark, and the meeting was set up at our 7 request, and I believe it was I who contacted mY brother and 8 sisters and let them know that we were going to do this. 9 ~ Q When You contacted Your brother a nd Your two 10 sisters to tell them that this meeting was going to be held, 11 what did You tell them the purpose of the meeting was? 12 A I don't recall my specific words, but I know 13 I would have said that mom and I had asked Art to-sit down 14 with everYbodv and explain to them what was going on in the 15 estate, and we'd scheduled a meeting in Philadelphia on such 16 and such a date if they wer e available. 17 Q Did You tell them who Mr. Klein and Mo rgan, 18 Lewis and Bockius were? 19 A They all new that Morgan, Lewis was the 20 estate counsel, and I don't know whether I spec ifically said 21 Morgan, Lewis is representing the estate, but I know I said 22 that we had requested Art to sit down on behalf of mother 23 and I to explain to them what we were doi ng as trustees and 24 executrixes. 2S Q Now, there was a meeting that was held 139 sometime in the fall of 1986 with Yourself and your mother 2 to explore the possibilities of a liquidation and in view of 3 the then-pending change in the tax laws respecting the 4 General lltilities Doctrine, do You recall that? 5 A Yes. 6 Q Could You tell us where that meeting took 7 place? 8 A That took place at Morgan, Lewis also, and I 9 believe there were two people from Lucker, Kennedy present 10 along with Art, mother, and myself. And I'm not sure 11 whether Mr. O'Connor ducked his head in or not. 12 Q At the conclusion of that meeting was any 13 decision taken by the executrixes as to what should be done? 14 A At or about the conclusion of that meeting, l5 it may have been a day or so later, but we decided that we 16 were going to go ahead and liquidate because we thought it 17 had a significant tax advantage for the estate, and so we 18 made the determination to go ahead with the liquidation. 19 Q Thereafter was it discussed as to what would 20 be told the rest of the family with respect to the proposed 21 liquidation? 22 A Yes, Art had -- or someone in the firm hod 23 somewhat laved out to me what needed to be accomplished, and 24 we again requested that Art come and explain to the family 25 what we were going to do as opposed to Just scheduling the 140 shareholders meeting, copying all this paperwork down in 2 front of them, and saying we move that we liquidate. We 3 felt that it was a good idea to sit down and take the time 4 to explain to them what the estate was doing, and why we 5 were going to do it. 6 Q Okay. Did you contact the other family 7 members to set up that meeting? 8 A I or my mother did, yes. 9 Q And were they told at the time what the 10 purpose of the meeting was? 11 A Yes, they were told that we were going to 12 have a meeting to discuss the estate business, and I don't 13 know if we specifically told them we were going to 14 liquidate, but we told them that we were going to have a 15 meeting because we wanted Art to explain what the 16 executrixes' actions were going to be. 17 Q Now, do you know whether either of your 18 sisters or your brother consulted counsel in connection with 19 the proposed liquidation and the various papers that were 20 going to be executed in connection with it? 21 A I believe my sister Babbs -- 22 MR. BAUGHMAN: ObJection, foundation, unless 23 she is personally aware of that. You have to lay a 24 foundation for what her knowledge is. 25 THE COURT: Well, she can state how she 141 arrived at these beliefs that her sister contacted counsel. 2 Go ahead. 3 THE WITNESS: At the meeting with Jerry 4 Browner, Babbs raised certain issues. One of them was what S happened if one party went bankrupt, hurt the others, and 6 she stated at that meeting that these suggestions had been 7 furnished to her by counsel. 8 Q Now, at some point, did it come to you r 9 attention that the possibility of Mr. Klein and Morgan, 10 Lewis and Bockius rendering legal services to your brother 11 in connection with his estate planning was, at least, 12 pending? 13 A Yes, Art called me -- I think I was still at 14 Morgan at the time -- and Art called me and said that Bobby 15 had requested that he do s ome estate plannins and did we 16 have an obJect ion to it. 17 Q And what? 18 A Did we have an objection to his 19 representation of Bobby in that capacity. 20 Q All right. And what was your response on 21 behalf of the executrixes of the estate? 22 A Well, I had some concerns about defining 23 roles and maki ng sure that there was no conflict, and Art 24 assured me he was drafting a letter that was going to set 25 everything out and that it was understood that he was 142 representing Bobby only in estate planning matters and not 2 in any matters in which he was involved with the estate, and 3 based on that, I said okay. 4 THE COURT: Well, while I think of it, I have 5 another question. When did you leave the Morgan, Lewis and 6 Bockius firm? 7 THE WITNESS: I left February 1st, 1987, 8 THE COURT: Okay. 9 BY MR. KITTREDGE: 10 Q Would you look at Estate Exhibit 1, which is 11 the January 9, 1987, letter from Mr. Klein to Mr. Martson? 12 A Yes. 13 Q You'll note the ultimate paragraph in which 14 you say, or in which Mr. Klein says, "I will have copies of 15 the disclaimer delivered to the executors, Kim Mum ma and 16 Lisa Morgan, on Monday."' Did you, in fact, receiv e a 17 disclaimer sign ed by Bobby from Mr. Klein? 18 A Yes, I did. 19 Q At mY request did you try to locate that 20 earlier today? 21 A Yes, I did. 22 Q With what success? 23 A Not too much. All the files in my office 24 have been boxed up by mY secretary because we are undergoing 25 construction, a nd I started going through them box by box 143 and page by page but didn't have enough time to finish 2 before we got here. 3 Q Was your secretary in today? 4 A No, she was at the funeral of an uncle. 5 Q You heard Mr. Mumma earlier this evening 6 testify with respect to a meeting held an December 27, 1988? 7 A Yes. 8 Q Which was a meeting of the shareholders of 9 what corporation? 10 A 999, Inc. 11 Q And what was the relationship of 999, Inc. to 12 Kim Company and Pennsylvania Supply Company? 13 A At that time there wasn't a relationship. At 14 one point in time Kim Company had owned some shares of 999, 15 Inc., but with the dissolution those shares all went aut to 16 the individual shareholders. 17 Q Did your brother make any comment at that 18 meeting on December 27th as to his attitude with respect to 19 the proposed sale? 20 THE COURT: What date are we talking about? 21 MR. KITTREDGE: December 27, 1988, last 22 month. 23 THE WITNESS: He certainly did. He got up 24 from the table and said over his dead body was this sale 25 going to go through, and he was going to exhaust every 144 resource he had to see that it wouldn't and left. 2 MR. KITTREDGE: I have no further questions. 3 MR. BAUGHMAN: Just a few. 4 CROSS-EXAMINATION 5 BY MR. BAUGHMAN : 6 Q Mrs. Morgan, you said that your father 7 received estate advice from Morgan, Lewis and Bockius, is 8 that right? 9 A Yes. 10 Q Did he execute a Will whic h had been drafted 11 by Morgan, Lewi s and Bockius? 12 A Did he execute a Will? 13 Q Yes, ma'am. 14 A Not to my knowledge. 15 Q And the Will that was prob ated was a Will 16 executed by and drafted by Mr. Boswell, i s that right? 17 A Or his firm, right. 18 Q Right. You said that Babb s mentioned 19 something about having had counsel at the Jerry Brawner 20 meeting. He's the real estate partner at Morgan, Lewis? 21 A He`s a real estate partner at Morgan, Lewis, 22 yes. 23 Q And I take it that meeting was sometime in 24 early 1987, is that right? 25 A I believe that meeting was April 27th or 21st 145 of 1987. 2 Q Thank You. Now, you mentioned that Art Klein 3 assured You that he was drafting a letter to your brother 4 that would spell out the limitations on the representation. 5 Did You eve r see a copy of that letter? 6 A I honestly don't remember if I did or not. I 7 don't even know if I was carboned or not. 8 Q Take a look at D-1. It doesn't show a carbon 9 to you, but I would Just like to know if you remember seeing 10 it? 11 A I don't ever recollect seeing this, so mY 12 answer is n o, I don't believe I did. 13 Q But You didn't see any other letter that Mr. 14 Klein sent to your brother on that subJect, did you? 15 A On the subJect of his representation? 16 Q Yes. 17 A I don't recall, no. 18 MR. BAUGHMAN: Okav. Thank you very much. 19 THE COURT: AnY other questions? 2O MR. KITTREDGE: I have nothing further. 21 THE COURT: Of this witness? 22 MR. KITTREDGE: Of this witness, yes. 23 THE COURT: Thank You. You may step down. 24 MR. KITTREDGE: If Your Honor please, I'll 25 move the admission of Estate's Exhibits 1, 2, and 3. 146 MR. BAUGHMAN: No obJection. 2 THE COURT: They"re admitted. 3 MR. KITTREDGE: I have nothing further, Your 4 Honor. 5 THE COURT: You're resting? 6 MR. KITTREDGE: Yes, sir. 7 MR. BAUGHMAN: No rebuttal, Your Honor. I 8 have argument, if Your Honor feels -- 9 THE COURT: I'll tell you what, It would 10 help me a heck of a lot more if you would set forth your 11 position in writing on the testimony that's been presented 12 here today. 13 I certainly don't want to delay this. Would two 14 weeks be sufficient for you gentlemen to submit whatever you 15 want to submit in writing? I"m not -- quite frankly this is 16 the first time I ever recall being involved in this issue. 17 We did get a memorandum from your firm on the law, and -- 18 MR. BAUGHMAN: You should have. 19 THE COURT; There are no Pennsylvania 20 appellate cases involving the removal of an attorney. 21 There's some Federal court cases, apparently, and a 22 Philadelphia court case, but as of yet, I don't think 23 anybody has found any appellate case on this issue. If you 24 can, I`d be very much appreciative of knowing what that 25 Says. 147 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Why don`t we do this. Why, each side will be given two weeks to submit a memorandum of law or any other matters in connection with this issue, and after that's been submitted, why I'll try to get, within another two weeks, a decision handed down. Do you feel that's enough time to get your memorandums in, two weeks from today? MR. KITTREDGE: I believe we could. THE COURT: Have I set up another hearing? MR. KITTREDGE: You've scheduled a hearing for February 17th with respect to the petition in Orphans' Court. Could I ask -- THE COURT; Obviously we're going to have to get it decided before that. MR. KITTREDGE: Could I ask when it might be passible that we could have a transcript? MR. BAUGNMAN: Your Honor, I have a request 17 that might affect that because we're very concerned about 18 this matter proceeding with Morgan, Lewis representing the 19 estate and having sued Mr, Mumma, and we've cited authority 20 to the effect that if we're right -- we think we clearly 21 are -- that he should not be sub.lected to being sued by them 22 pending the outcome of this matter. We'd respectfully ask 23 this proceeding be stayed until this matter is resolved, if 24 we're talking about the type of very serious ethical 25 concerns that we are. 148 THE COURT: When was the next hearing 2 scheduled, gentlemen? 3 MR. KITTREDGE: February 17th, Judge. 4 THE COURT: That is Friday. 5 MR. KITTREDGE: Judge, it would appear to me 6 what has occurred here today -- the proceeding was 7 relatively straightforward and uncomplicated -- and I don't 8 think we really need a transcript to submit whatever papers 9 we think appropriate to the Court by way of argument. 10 THE COURT: You don't need one? 11 MR. BAUGHMAN: No, Your Honor, I`m happy to 12 do it without a transcript, and I think we can proceed with 13 the fresh recollection of the testimony without a transcript 14 at this point. 15 THE COURT: Okay. Well, if that's the case, 16 how much time did You need to get any additional matters 17 submitted? 18 MR. KITTREDGE: A week? Could you have yours 19 submitted in a week? 20 MR. BAUGHMAN: Ten days? 21 THE COURT: Today is the -- 22 MR. KITTREDGE: Now about the end of next 23 week, next Friday? 24 THE COURT: February 3rd? Okay. I think if 25 You get me Your memorandums by February 3rd, I'll get my 149 opinion out by the 10th. 2 MR. KITTREDGE: That's fine. 3 THE COURT: That will give me a week to get 4 my opinion out. It might nat be that detailed, but I'll 5 certainly get one out. 6 MR. BAUGHMAN: Maybe I don't need to ask, 7 maybe counsel for P laintiff won't obJ ect to it, but I would 8 like to have a stay pending February 10th anyway. g MR. KITTREDGE: Well, we would obJect to any 10 stay, Your Honor. It's absolutely vi tal from the standpoint 11 of the estate that -- 12 THE COURT: Excuse me. I'm not going to do 13 anything about that until the 17th. I'm certain that I'll 14 have an opinion dow n by that time. 15 MR. KITTREDGE: Well, if Your Honor please, 16 the Defendant and Respondent in the Orphans' Court 17 proceeding have filed preliminary objections in both of 18 those proceedings. We are required to respond to those, and 19 certainly we would not be disabled by going forward. We 20 need time to file -- 21 THE COURT: If there have been preliminary 22 obJections filed, then the hearing on the 17th -- obviously 23 the preliminary obJections are going to have to be decided 24 first. 25 MR. KITTREDGE: Well, if Your Honor please, 150 it seems to me -- 2 THE COURT: Isn"t that right? how can I have 3 a hearing if you have preliminary obJections about it? 4 MR, KITTREDGE: I think if you examine the 5 preliminary obJections, it would probably make a lot of 6 sense to combine the hearing that's now scheduled for the 7 17th with a hearing on the preliminary obJections. 8 THE COURT: You better consult with local 9 counsel as to how we handle preliminary obJections. As of 10 now, they're not be~;e me. I mean, I don't know -- I don't 11 have any knowledge of preliminary obJections being filed, I 12 don't think. 13 MR. KITTREDGE: Well, we would certainly 14 respond to them promptly, and by that I mean by the end of 15 next week. 16 THE COURT: Well, I'll tell You what. As of 17 now, we're going to enter this order on this case: By 18 agreement of counsel, counsel will file any briefs to the 19 Court on this matter by February 3rd, 1989. The Court will 20 render its decision by February 10th, 1989. 21 So as of now, the hearing for February 17th is on 22 go. If there are any other matters that will delay this 23 hearing, the Court will act accordingly when notice has been 24 received of some, but we'll decide the counsel issue before 25 the 17th. And what else need needs to be done then, I don't 151 know. 2 MR. KITTREDGE: That's certainly fine, Your 3 Honor. 4 MR. BAUGHMAN: Well, Your Honor, we would not 5 object to them fili ng of a brief or whatever. It is -- 6 THE COURT: They can do whatever they want to 7 do to represent the estate until I hand down a decision. 8 Otherwise -- so at least until the 10th, then represent the 9 estate. That's the way it is. 10 MR. KITTREDGE: Fine. 11 MR. BAUGHMAN: Thank You, Your Honor. 12 MR. KITTREDGE: Thank yau, Judge. 13 THE COURT: With that, we'll stand adjourned. 14 I hope everybod y ha s a safe trip. 15 (Whe reupon, Court adJourned at 8:10 p.m.) 16 17 18 19 20 21 22 23 24 25 152 hereby certify that the proceedings are containted fully and accurately in the notes taken by me on the above cause and that this is a correct transcript of the same. ,, ~ j_ Laura F. Handley Official Court Reporter The foregoing record of the proceedings on the hearing of the within matter is hereby approved and directed to be filed. ~~ Cam" 9 ~ :~ ~'~". }'fi• -,r i ~ 7~ 4,'11! ' i ,' ~ ~ ~ -~-~' , arold E. Shee DEFENDANT'S EXHIBIT 1 MG~RGAN. LEWfS & BOCKIUS WA3MIN070N COVNSt.LCw3 A7 tJtW {1{rW YORK 2000 ONE LOGAN SCUARE Los ANOCtca PMitACEtph11A,PENNSVtvA1VtA 19tO3 Tttt-„awcf2t3) 989-3000 ' f:.itc Aoawtss MOAtE60GK 7tttu ~ 3-+9t3 AgTNUR L.KtElN Gat o+wtct (2t 6) 969-Saga September 5, 1986 PERSONAL AND CONFIDEN2IAL Plr. Robert M. Mumma, II ICimbob, Inc. P.Q. Box 2255 Rarrisburg, PA I~105 Dear Bab: T4t+-M I r'lAH1~t S~UttG I.ONpON Thank you for coming down to meet with me. I have began wank on your Will, insurance trust and the trust for the Gemini stack and should have first drafts to discuss with you in a few days. Enclosed is a copy of a file memorandum I made after our meeting on August 2lst. One matter we discussed which I did not note in the memorandum is that if you or any of your companies were to become involved in negotiations with your father`s Estate to buy the operating company (ar anything else for that matter, Morgan, Lewis & 8ockius would represent the Estate and you would obtain other counsel. Z know that Lisa and your mother are satisfied with that understanding and you indicated that you were also. I do not believe we discussed fees. ~rd.inarily fees are based mainly on the time involved. Other factors may enter into the determination of the fee on any particular matter, such as the novelty or difficulty of the questions involved, the amount involved and the results obtained, the special experience or ability of the lawyer performing the services and any special time limitations imposed. With respect to your estate planning and related matters, however, I find no indication for a departure from standard hourly rates. Sam Andes sent rae a copy of your antenupti~l agreement. I have reviewed it with Pam Wilford, my colleague we had lunch with. Pant and I believe that the agreement will protect the assets set forth in the April, 1985 financial statement mentioned in the agreement in the event of a divocce or MOS~GArI. LEw~s S Boc-c~us Mr. Robert M. Mumma, II September 5, 1986 Page 2 upon your death. However. it is not clear to us what effect it would have as to other assets. If the specified assets represented two-thirds of your estate, could your wife claim the entire other third if she survived you, or only a third of the other third, or nothing? To the extent your wealth is built up inside the existing corporations, you should be protected. But to the extent you invest outside them, the assets you acquire might not be protected, although there is language which could be interpreted to protect all your assets. The agreement could be "tightened up" but I am nat sure it would be worthwhile to do so if there would be any discomfort in raising the subject with your wife. This is something we should discuss. I will be calling you in a few days to arrange for a meeting to review the draft trust agreements and Will. In the meantime, if you have any question or comment, please do not hesitate to call. Sincerely yours, Arthur L. Klein /rkb cc: Pamela F. Wilford, Esq. MORGAN. LEWt3 ~ HOCKtUS WAf NIM070N CvuNSCLaRS wt Lww NLwYOMK 2000 ONE 1.00AN SOUAnC (.Ol AMaEI.i3 PMILkOCI.rMtA,PE/MN~YLVwNtA IS{Q3 ti LC ~nON4(2~S} /~~-l000 G.qi A9D~Cif~ MORLC~CC1~ ?i~ia- •~-~Y~! AwT-~uR ~ KL[~+r November 11, 198b a.. ~,..~. r:~s,..~-fas PERSONAL AND CONFIDENTIAL Mr. Robert M. Mumma, II Rimbob, Inc. P.O. gox 2?55 Harrisburg, PA 17105 Re: Liquidation of Pennsylvania Suppiy Company and Rim Company "Completion" before December 3i, 1986 Dear Bob: M~~w.i M^wff~s~uwp LOMapH Attached are ghotocopies of a couple of pages from the legislativt history of the Tax Reform Act of I98b discussing the General i7tilities transition rule and indicating (in the paragraph marked) that the completeness concept is the same as for purposes of ZRC 5337 of present law. Also attached is a photocopy of the portion of the 5337 regulations with highlighted discussion of the permitted retention of assets to meet contingent liabilities and contingent expenses. Even though the liquidating corporations cauld retain funds as a reasonable reserve against unascertained oc contingent liabilities or expenses, there would see:a to be no reason to do so, since the distributed assets would still be in the hands of family members in case an unanticipated claim arose. If you have any question ar comment about the foregoing or any other aspect of the plannad liquidations, please give me a call. Sincerely yours, /rkb Arthur L. Klein cc: George W. Hadley, 3r., CPA bcc: Barbara McK. !summa Lisa M. Morgan, Esq. Martha E. Manning, Esq. Mary Sue Rothenberg, Esq. ~Qd~O u-205 ~ err«:t~ da~r, The reperl of the Gensrnl Utilitira doctrina is 8enerally effective sn es a strib tfo na n d d u dot n ~ r i 9 te r :fed n ~ e ~ ~ e ~ ~ fereaa sitio al rul s a t !! an rovid- ~ p f it ed is the H use bi Il. Thus. t raniections for which the re quisite cuts action had occurred prior to November Z0, 1985, under the special • cfie rules and definitions provided in the Houx bill and the Report of ., af- the Committee on Ways and Means will gentraily continue to be 'eat grandfathered. However, in order to qualify under those transition- ,~„$ al rules, all the liquidatenng~ sales or distributions, tinstead of at r11r ~ least one such sale or distribution) must be completed before Janu- che arryy 1. 1988. The a~reemeat provides tvvo additional transitional !sz rules, one of 8eneral spplicatio~ and one applicable only to certain .'ers closely held carparationa. ~tE Gsrural trwisitianal rules •sfer -rre.. In addition to the rule discussed above, the new provisions do not ,°~- apply to the foliowit~g transactions: non tl} a liquidation completed before January 1. 19$T; of t2) a deemed liquidation pursuant to a section 338 election where ~~ the acquisition date tthe first date on which there is a qualified of stock purchase under section 338) occurs before January 1, 198 i ; :e a t3) a liquidation purauaat to a pine of liquidation adopted before t 1 1988 A 1 1986 th t i t d b f l J ~Ees ugus ; e anuary , , , a s comp e e ore ' td} a liquidation of a corporation if a majority of the votin8 stock .on zon of the corporation is acquired on or after August 1, 1986, pursuant 1986 and it to a written bindin8 contract in effect before August 1 '°~ , , the liquidation is completed before January 1, 1988; r1r" t5) a liquidation of a corporation if there wan s binding written ~ e=' eoatract or contracts to acquire subata~ntially all the assets of the ~~O ~ corporation in effect bafort A~~st 1, 1986, sad the liquidation is ~ ' completed before January 1. 1988; and 'i -t t6} a deemed liquidation, under section 338, of a corporation for ~ which a stock purchase under section 338 first occurs on ~ or after ~. 1986, purntant to a written hinding contract in effect before August 1, 1988, provided the section 338 acquisition date occurs. before January 1, 1988. ~a J-a A pplan of liquidation is sdo tad if the plan has been approved by f li 37 2 if l b ' ~ r- qui- an o - t )). a p the shareholders. tSee sec. 1.3 heal. dation would have been considered adopted for purposes of com- it will mencing the present-law 12-month period under section 337 f till- , be deemed adopGsd far this purpose. " adoption Athoug~h the ~psc~ai additional definitions of the term i h C R f b ire ttee t eport o omm e of a. plan provided in the House ill and for purposes of determia~inngg l oa Wa s sad Means continua to a `'e ar y pp y 198b whether the uisite action was taken prior to November 20 F ~ it , , such special es do not apply for purposes of determining wheth- "'rees er a play of liquidation is sdapted before August 1, 1986. 'attr+e '" For purpoeea of detersain~'ng whether them was a bindusg writ- all the assets of a cor- t tiall ll b t ~g3s " y su s an o se tea contract ar contracts all the tantiall b " 1986 h v:rt~ y s su , t e term poratioa before At~ust 1, assets" shall generally eaean 7t3 percent of the 6rosa fair market value and 90 paroent of the net fair market value of the assets. In 500001 II-2t)S addition, turn though the coalesce or contract Dover a leaser amount of assets, if such contract ar contracts would require share. holder approval under tine appplicable state law that may rewire such apgrovat far a sals of subauntially all of such corporatavn s asreta, than the shall qualify as contracts to sell substsintislly all the assets and s~ be considered binding even though shareholder approval has net yet been obtained. M acquisition of stock or assets will be considered made ~St.rsu- snt to s binding written contract even though the contract ~a sub- ject to norms] commercial due diligence or similar provisiaas and the final terms of the actual acquisition may vary pursuant to such vtsians. For purposes at these rule, a liqquidation is completed by a re. quired date if it would be considered completed for purposes of sec- tion 33? of present law by that date. Far esample, there may be a diatsibution of assets to a ualiFied liquidating trust GSee, c.g., Rev. Itul. 90-15d, 19$0-1 C.B. 316). Certain clossly held eorporat#oru The conference agreement deletes the House bill a:ception for distributions to certain lon;~ terra aancorporau shareholders. The conference agreement provides as additional transitional rule for certain closely held corporations. Corporations eli~iole for this rule an generally entitled to present law treatment aRth respect to liq- uidating sales and distributions ocxurring before January 1. 19$9, provided the liquidation is completed before that date. A liquid~- tion will be treated as completed under the same standard that is applied under the general transitional rules. However, this special transitional cult requires the recognition of iacame as distribu- tions of ordinary income property (appreciated property that wot:.id sot product capital gain if disposed of in a taxable transaction) and :hart-term capital gain property. Thus, the failure of as eligible closely htld corporation to complete its liquidation by Decxmber 31, 1986, or otherwise to satisfy the genera: transitions! rules, will result is the Ions of nonrecognition treatment for the distributiaa of appreciated ordu~a~r uicome and short-term capital gain proper- ty. C rporations eligible for this rule may also make as S election prior to January 2, 1989, without becoming subject to the special S corporation: rules of the conference agreement. Such eligible, rlect~ ing corporations, however, will be subject to the I95d Code version of section 1374: A corporation is eligiblt for this ruk if its value does not exceed ;10 million and'more than 50 percent of its stock l owned by IO or fewer individual who have held their stock far five years or longer. Full relief is availabk under this rule only if the corpora- tion's valu: does not exceed ;5 million; relief is phased out for cor- porations with values between 35 million and ;10 million. For pur- poses of this role, a rnrpontion's value will be the higher of the value on ~iugust 1, 2985, and its value as of the date of adopp. tioa of a plan of liquidation ion, is the case of a nonliquidatiag distribu- tion, the date of such distribution), and aggregation rules siaulaz to those in section 1563 apply, a:cept that caatrol is defined as 50 per- cent rather than 84 percent. SCO~Q2 caRr,~x la~vmwrcotvs- ~ ~ ti ~l 30.109 • • • pns~ u havity bast made by the subsiatiarya A rea}iud toa as a Yk by the Subsidiary of proprny +rhick bas dettiaed in vrlue wit! simifatly not be taco{nised. U the xitiste subsidiary a s tetember d a irotsp d txntrdkd sssbsidiaries havist~ a umtrsan parattt eorpora- tioa, tDe asnerda+eae raquira is Kfaa that aA other subadiarks it the direct lints d uack tstnsership abo+rc the level d the aeilitK subsidiary mwt alp liquidau cwnpktely. 'these other subaidiarsss mwe diartbau that asxu (less axes: reuitted to meet cbtimss in com- pku liquidattan within the 12 mantis Pcrsod beiinnsei on the date d tstfoptioa d the selfini stthaidiary's plan d liqusdatim! Tht amendment ntadc by rise committee wi11 apply both wbsrs the parent d the subsidiary which made a sale ar systhat-ie d property ekes a tarryaver Dula is the subsidiary's tsssess ti.a., a basis determined under xc. 33Mbff it and where the parent takes a basis cgtA1 to to cat for tYe subastfirry's stttrh f order sa. 33a(btf 211. F.A'attrve Qate: This prwt~gt n effactivs far sales a eachanses made pursuant to a plan of Ugwtfatsan adapted an a after January i, 1416. t4et~m+[e a/floc-It is ptittxted that this provision wi11 rta have say st~ettticam effect on to revrnues.-- oenra Coatmiwa Rnoars. .oaa Howe bull.---No prw;sion. Satan aaaandnsen[•--Under pedetts faro, s terpors- cion wDitR sells to assets std liquidatas oanpkuly withrn 12 nsattlu iersenliy is not losable on pen from iu sale d assets. to shanttokcn, havevrr. an tasab,e oa the liquidation proceeds they ncpvs The soli:»c company to this acuau~.- s uaabfe, harrver. of st is a castroikd sttbtidiary o: parent rACporatson. In :^:s lattee situuton, the parent cwporacso[t rs not tatao~e sriert a liquidatss thr svoddiary It halt the parrnt ana the subsidiary plan to liquidate sfser the subsrdur>~ ;ci= iu poets, 4o+KVer. two taus may be tmtsoxC. T:~e subsidiary stay be taaad on iu pen from the sale and tae prrent's shareholders may also be usable .hrn the yar. ens tiqutdata. The Sault anxrdmrnt adds a rule that tf a eattrotiea sntbssdiary Seib to asseu std then bah tt and us parent cnrporstson tiqudatt completely, only one six wtu be imposW ttsxi that ,rill tap onfy an the parent's sharehoic. m. This rule mould be eftetttve la sates of assets uncle- s plant d compktt iiqudattat adopted on a alter Janu- ary 1, 1416, Canleren[r atnernen[.-The contertnce acreerte»t td ~Seaau atnrndment.--Coflfenna Camtntt- rrr -f15 Cwnmitta Reports an P.L. 85~86h are at 1958.3 CB 811. .lf) Ctrttmitttx Reports on 1954 Cade Sec 3?" ss ori~inalty enactrd wen reproduced at :61 CCH j 2469.20 and 264.15. -• Guaofrr: Ri . $1.331 1. below,. Haas nor nlleet Code i7i~ 337() as addrd by P.L. D~6-,Shc9 (B~A of 14dG) ar chaa~as male by P.L. 9t-Z~8 (T ERA) and P.L. 9+6.4?l (ISRA of 1980 Sea ~ Z4~1.0117..- , ~ Ra~ulations (f 24~aJ ~ 1.337.1. Gaaeral.--latcepc as provided in sections 337(c}and 3921 b ~. if a corporaaon distributes all of its assets In complete liquidation within 12 months after the adoptifut of a plan of liquidation, which plan must be adopted on f>T after jute 22, 1954, no gain a loss shall be recognizf:d from the sale of property tan defined :n seetitm 337(b}) during such 12-month period. For this purpose such sales may be made before the adoption of the plan ad Iigmdation if made wl the same day such plan u adopted. AJ! asseu (test assets rotained to mat claims), both tangible and intangible. must be distributed nrithia tlu 1Z-maatb period. My aaseu retained after the explra- tifxs dthe 12-month period fa the payeaent of claims (including unascertained or contingent liabilities a expenses) must be specifualty set apart for that purpose and mfust be rea:alabie in amount in relation to the iceuts involved. The 12-month period shall begin fAl the dace Of adoption Of the plan determined as provided in paragraph • h of ~ 1.3337-2 and no extension of such period can be granted. Set: section 4531 d N;,t $ : relative to nonrecognition of gain on the distribution of ctrtain installment obligauor.;. F.xcept• to the exunt provided in section 341(ex4), sales or exchanges made b~• a collapsible cfnpontion (as-definf:d in sf:ctian 341(b}) are excluded from the operation. of section 337 by section 337(c>. Accordingly, except as provided in section 3;ire :r a • sfxtifsn 331 does not appty to any sale or exchange of property whenever the disu.bu- tion of such property in partial or complete liquidation to the shareholders in lieu of such sale or exchange wmtld have resulted in the taxation of the gain from sue distribution in the manner provided in section 341{a) as to anp shareholder or ~tou;d • See. Comm[suoner s•. Coup Httldi[rs Co , 31~ U 5.331 i f9a51 atsd Gn;reO States v. CumberlanQ Pub/tr Strvtee Co.:338t1.5.as1114301 For psxpaes d this rule, the iratp d corporations to +htch this rule wall apply must consrttute an "affiliated croup" as defined m sectson i50ks~ d present taw An aiiiltated croup wtil gwttiy under thss provtstan reisrd- i63K CCH-Seartdard Federal Tau Reports lets whether the croup elects sunder -et 1'Gl • :•. censottdated tax return .~Iw lot aurpoxs of :h.> r.. -, escepttons co the deknstrtsr. of -;ncwd;nic ~•,r:~. -,.. - contuned to cotton l:Os+br of prcxnt :rte s±: ~~. . apply Therefore, rite members of the aiirr:au~ trovo a~< to fie dstermrned a s1 the corporations rtterttd to - xcttan !50[tbr wen rmmben of the croup Red. § 1.337.1 !( 2470 500003 30.110 csxzwtx L1QvmwTlvt~cs- ~ say tt z4~1 + Gtttioa: Red § 1.33T-1, fi~dow, dues oat reflect Code Se+c. 337( a: added h P.L. 9~6-Sd9 (BTA of 19~d0) oar chtur~a made by P.L. 97-2s6 (TE1~A) old P.L. 9~6-~71(ISRA of 19~0~ Sae ~ 2s71.0117..- have resulted in the taxation of the gain in such manner, but far the application of section 341(d). Likewise, section 337 does not apply to sales or exchanges made by a corporation if such corporation is liquidated in a transaction to which section 333 is applicable, or in s iranurtion to which section 332 applies (except to the extent provided in settiosl 33?(cx2x$}), Seccioa 392(b) provides special roles with respect to the recognicion of gain or loss upon certain sales made by s liquidating corporation during 1954 and 1955. (Reg. ~ 1.337-1.j .001 Histotioai Coanmens~ Propwed 12/11/54. Adopted 12/1/55 by T.D. 6152. Amended 3/4/65 by T.D. b80B. ('~ 2471 J Gain or toss of Corporation in Liquidation • ccx .01 Sales ar euhanges is coaaection with liquidations.-lf a plan of complete liquidation is adopted and within 12 months after the date of adoption of the plan sl! the net assets of the corporation are distributed in complete liquidation, no gain or loss is recognized by the liquidating corpora- tion from the sale or exchange of iu propeny {other than inventories. installment obligations from sales ca customers in the regular course of its business. and installment obligations from uIe of any other property sold before the date of adoption of the Uquitiation plan) within the 12•manch period. The 12-month period begins on the date the plan fs adopted and ends at I2 o`clock midnight on the day ppreceding the corresponding date in the following calendar year (Rev. Rut. 79-3, 1979-i CB 143). No extension of this 12•month period is allowed. The regulations state that the sales may be made before the adoptiost-of the plan of liquidation and stil! court within this rule if they are made on the same day the plan is adopted. if the sale of the liquidstitt~ corporation's assets produced a loss, it is desirable to avoid Code Sec. 337. Thsa tan be done by delaying the sale of part of ttte assets until after the expiration of the twelve-mouth ptriod. Set Rev. Rul. 77-i 50, .017, below . See Code Sec. 453(h) at ~ 2f38SA, regarding use of the installment method by shareholders in Code Sec. 337 liquidations. Enough assts may be retained after the rxpiration of the 12-month period to pay off c!a"ems including contingent liabilities ar expenses. But they must be specifically set side for that purpose and must be reasonable in amount in relacion to the items involved. The fact that negotiarions may love bran be;ttn by either the corporation or iu shareholders far the sale or exchange before adoption of the plan to liquidate is immaterial. Tlu dart of adoption of the plan of liquidaaon is the dace on which occurs the first step in the plan, but not G-ter than the doer of adoption of the resolution by the shareholders authorizing the distribution of the corporate assets in redemption of aI4 the stock pursuant to which the corporation is liquidated. Unusual salts of property maght be a factor in determining the dace of adoption of the plan. Even invsntory may be subject to this ruse, if substantially all of it which is attributable to a trade or business of the corporation is sold to one person in one transaction; in this case, too, installment obligations acquired in the transaction also become "nonrecognition" property. ~ 2471.01 Rag. § 1.33?-I el9as. Comnntrct Clearin= Houx. inc. • • saoa~~ 30,122 C1C]tTAIN LIQtT1DATIONS- ;317 tt 2aa4j .a3 Uasutbaistd alt.- .!4 ~' astiEicaas.- rn.rr«e a~ i ca. ca. ccr+at ss-1 ~ s s47s. 7a s. c~ tksWknes caa. « .r. Y u.s.. rc~v ~ +8. r 2a at+. eon. deu.. 294 us.63o. usn: (9176.166 P. zd 17. . -• Gtrtfaa: Reg: ~ 1.337-~ 6dow, does aoc r+eA'art cheng~es made b3' P.L. 9T•Z~8 (TSFRA~. f- t R~utstyasss [~ 2472j ;1.337.2. Sales or exclutttges within the scope of action 337.-(a) Provided the other tbttditions of section 337 are met, sales or exchanges which occur on or afar the dsu on which the plan of compteu liquidation is adopted and within tht IZ-month period thensfter are subject to the provisions of such section. The date on which a sale occurs depends primarily ,upon the intent of the patties to be gathered from the terms of the cmttract and' the surrounding circumstances. Fn ascertaining whether a sak a exchange occurs oa or after the date on which the plan of complete liquidation is adopted, the fact that ntgotiationa for sale may have been commenced, tither by the corporation or its shareholders, or both steal} be disregarded. Moreover, an executory contract to sell is to be distinguished from a contract of sale. Ordinarily, a sale has not occurred when a contract to sell has been entered into but tint and possession of the property have sot bete transferred utd the obligation of the seller to se11 or the buyer to buy is conditional. , (b) Ordinarily the date of the adoption of a p4n of compete liquidation by a corporation is the dart of adoption by the shareholders of the nsotucion authorizing the dtsuibutiat of all the assets ad the orpor lion (attar than those retained co meet k e claims) in redemption of atI of its st~occ . Wh n the corporation sells sutxtantialty all of its property of the type dei'uted in section 337{b) prior to the date of adoption by the attarehotcien of such resolution, then the date of the adoption of the ptan of complete liquidation by such corporation is the date of the adoption by the shareholders of such resolution and gain. or lass wilt tx recognized with respect to such sales. Where no substantsai pan of the property of the type defined in section 337(b) has been sold by the corporation prior to the date of adoption by the shareholders of such resolution, the date of the adoption of the plan ~ wtapfete liquidation by such corporation is the dart of adoption by the shareholders of such resolution and no gain or loss wilt Ix recognized oa eats of such propertyq oa or after such date, if all the corporate assets (other than these reuined to meet claims) art distributed in liquidation to chi shareholders within 12 months after the Batt of the adoption of aucb resolution. In all other cases the dace of the adoption of the plan of liquidation shall be dtttrmined from all the facts and circumstances. Section 337 stroll sot apply in any case in which all of the corporate asseu (other than those retained to meet claims) ate not distributed to the shareholders within IZ months after the date of the adoption of a resolution by the shareholders autlwtisit~ the distribution of alt tt~ corporatr assets in redemption of act the corporate stork. A corporation „d!} lee considered to have distributed all of its property otl+er than sssas retained to mat claims even though it has retained an amount of cash equal to its lt:toan liabilities and liquidating expenses plus an amount of cash set aside under arrangttetenu for the payment after the else of the IZ-myth period of unasc!ertaiatd a contingent liabilities and tnettingtnt expenses. Such arrangements far payment must be made ist good faith, the amount set aside must be reasonable, and no amount may be set aside to. meet claims of shanhotdera witft respect to their stock. If it is established to the satisfaction of the Commissioner that then an shareholders who cannot Lx located, a distribution in Liquidation fruludea a transfer to a Stau official. trustee, or other person sutltoristd by }aw to naive distributions for the benefit of such shareholders. !`or the purposes of this parasraph "property of the type defined in section 337(b)" means property upon the salt of which section 337(a) may provide for the nonrtcognition of gain or lou upon sa}t or exchange during a 12-month period. including property described in subparagraph (A) of section 337(b)t 1) if sold ar ~ 2471.985 Rig, § 1.337.2 ot9as. Co~amerts Ctearin~ House. Ine SQt0Ut~5 c$az'~rr LiQtrm~~oxs- s ssT tt z4asl 30.123 » Gntion: Rem § J..937 ~ below, does nor r+rflscr chan~u made by P.L. 97•a4d i ~~~~ ... tzchaagtd at any time under the conditions set forth in section 337(bx2) and including installment obligations acquired in respect of such sale or exchange. (Reg. § 1.33i-2.j .Q61 H~ooeiKat Coestmenx Fropoeed 12/11/54. Adopted 12/2/55 by T.D. 6152. j~ 2473] ~•CCX • • Sobs a ExthonQes .001 What is a sale or exchange?-The nonrecognition of gain or lass provisions in connection with corporate liquidations apply to sales or exchanges or property by the liquidating corporation within a prescribed period. Code Sec. 337 defines the word 'property", but not "sale or exchange". In the absence of definition, the latter term is to be given its commonly accepted meaning. Annotations at ~` 4717.43-.658, relating to sales or txchsngts for capital gain and loss purposes, can be applied to determine whether a transaction is s sale or exchange for Sec. 337 purposes, except that the spetisl Code provisions which treat certain happenings u if they were sates or exchanges or capital assns probably srt not to be applied. These are Code Sec. 165(g), treating worthlessness of securities as a sate or exchange. Sec. 166(d), prescribing similar treatment for ntutbusiness bad debts. Sec. 1232, relating to retircmrnt of bonds (by the liquidating corporation r, and Sec. 1234, insofar as it relates to failure to exercise options. These are exceptions for capital gain and loss purposes. A Sec. 331fa) distribution in complete liquidation of a corporation is a "sale or exchange" within the commonly acceptsd meaning, at least historicsily, according to the Internal Revenue Service (set Rtv. Rul. 57.243, 1957-I CB 116, at'~ 2471.931 and it is applicable for Sec. 337 purposes. In determining generally whether a sale or exchange occurs, such rases u the Supreme Court decisions that rcuipt of a bogus on execution of an oil and gas lease is not a sate or exchange (~ 4729.132), and that catdemnation is a sale, but tht sale proceeds do not include tht portion awarded as interest ~§ 4729.0777), apply equally for Sec. 337 purposes. So also does the decision that settlement of a judgment is not a salt (14717.5414). Aa iavolttatary oonversioa, althou h got technically a "sale or sxchutge." is treated as suds. Under Coe Sec. 337(e>, as added by P.L. 95.628, the nonrecognition treatment sppiies to gain or toss from the destruc- tion, theft, seizure, requisition, or condemnation of property (including the salt or exchange of pcapeny under the threat or imminence of requisition or condemnation) if s plan of fiquidation is adopeed within 60 days after the date the Involuntary conversion occurs, and the liquidation otherwise quaii• flee under the 1Z-month liquidation rules of Code Sec. 337. This provision appiits qtly if the liquidating corporation so elecu at such time and in such manner as may be prescribed by regulation. If the election is made, it applies to all gains and losses from all involuntary conversions xcurnng during the 60•day period. .01 One tat.-The nonrecognition of gain or loss to a corporation an sale ar exchange of iu assets within 12 'months after adoption of a plan to liquidate applies to all sales or exchanges of its assets within that period.. single tax is usually imposed at the shareholder level. however, gain subject to the depreciation recapture rules is recogni2ed. Ser ~ 2471.01 and 2473.0115. There is a special rule in the case• of a liquidation of some subsidiaries. See 12471.27. sa3A CCH-~Stsadsrd Fad+ra3'fa~c itepotcs Red. § 1.337-2 ¶ 2473.01 5~4U~6 DEFENDANT'S EXHIBIT 3 tf .'. =/ 1 WASNINCiTON NEw YOaK 1.03 ANGELES MARTHA E.MAt^t NtNG 6+rt wwtcY t2t5) 963-5237 F~XPRESS MAIL MoRGAN, L.EwtS ~ BoCK1US COUNSELORS A7 1~AW 2flOfl ONE 1..OGAN SQUARE PHiLgtj El.PH1A.PENNSYt,VAN1A 19103 TE LEPNQNt:<215) 963-5000 Gw~ct Avo>tESa: MO{tLE80CK TClta: &3-t3t5 December 3, 1986 MIAMI t'lAitlilSHURG {-.ONDON Mr. Robert Mann Mumma, II R.D. #1, Hox 58 Bomansdale, PA 17006 Dear Mr. Mumma: At Lisa Morgan's request, I enclose herein a copy of Section 1103 of the Pennsylvania Business Corporation Law (the "BCL") relating to the dissolution of corporations. Under Section 1103 of the BCL, when a corporation adopts a certificate of election to dissolve as Pennsylvania Supply, Company and Kim Company have, "the corporation shall cease to carry on its business except in sa far as may be necessary for the proper winding up thereof, but its cornarate existe~nce__shall continue unties articles of dissolutio,~} have been filed by the Department of State, ar until a decree dissolving the corporation has been entered by a court of common pleas.,." (emphasis added). The corporation does not cease to exist until the articles of dissolution are filed. The articles of dissolution are filed after the debts and obligations of the corporation have been paid and tax clearance has been obtained from the Department of State. We are nvt, at this stage, executing articles of dissolution. MOaGAnt. L~w~s S~ goCx~us Mr. Robert Mann Mumma, II December 3, 1986 Page Two If you have any questions regarding the above, please do - not hesitate to call me. - ~ very truly yours, Martha E. Manning MEM:ck cc w/enc.: Arthur L. Klein, Esquire Lisa M. Morgan, Esquire bcc w/enc.: William E. Zeiter, Esquire 1?ENNSYLVANIA BUSINESS CORPORATION LP..W Section 1 i03. Certificate of Election to D'sssol.•e.--Upon the execution by all the shareholders of a written a~;rern:ent for the ~•oiuntan• dissolution of a business corporation, or upon the adoption at a meeting of the•shuehoiders of a resolution for the ~•oluntar<• dissolution of a business corporation, u the case may be, a certificate of eteeYion to dissolve shall be eseaaed under the seal of the cer• poration artd signed by tn•o duly authorized otfscers of the corporation, which shall set forth; (1) The name of the corporation. (2) The address, including street and number, if any, of the registered office of the corporation in this Commonwealth. (3) The names and respective addresses, including street and number, if any, of its officers. (4) The names and respective addresses, including street and number, if any, of its directors. (5) If the election to dissoh•e a•as by written agreement of ail shareholders. a statement that the agreement .ras signed by all shareholders of record of the cor- poration, or signed in their names by their duly authorized attorneys. (6) if the election to dissohe was by resolution adopted at a mteting of the shareholders, the number of shares outstanding, the number of shares entitled to vote in respect of the dissolution of the corporation, and the number of shares voted for and against the voluntary dissolution of the corporation, respectivei}•, and if the shares of any class are entitled to vote as a class, the number of shares ot` such class and the number of shares of all other classes voted for and against the voluntary dissolution of the Corporation. The certificate of election to dissolve shall be deli~•ered to the Department of State, Upon the filing by the Department of State of a certificate of election to dis- solve, the corporation shall cease to care on its business. except in so far as may be necessary for the proper winding up thereof, but its corporate existence shall con- tinue until articles of dissolution hare been riled by tht Department of State. or until a decree dissolving the Corporation has been entered by a court of common pleas as elsewhere provided in this att. i Act of ~itat• s, 1933. P.L. 3G4: artlerrde:l, .let of rrrl}• ?, 1937, P.L. ~323:.•!ct ~~ Seyte~nber 2C>, 1951, P.L. 1475: Art ~j :` asember 10, 1939, P.L. t 4t3G: Act o f ]anuary t 3, 196(, P.L. 1303.E ` MORGAN, LEWIS & FJOCKtUS WASMIN GTON COUNSELORS AT 1,.AW t+lEw YORK 2000 aNE LOC;AN SQUARE LOS ANGELES PHILAOELPNiA, PENNSYLVANIA 19{03 TELEO~+O~+G:R~4> 469.5000 ~AOLE ~CORES$: MORLEBOCK +'ELE~c: 89.316 MEMORANDUM FEDERAL EXPRESS TO: Lisa M. Morgan Barbara McK. Mumma Robert M. Mumma II Barbara M. McClure Linda M. Roth FROM: Gerald T. Brawner DATE: March 11, 198? RE: Agreement Among Tenants-in-Common--Mumma Realty Associates, Incr MuMt HARRISBURG LOetpON I attach a revised copy of the Agreement and a copy of the Management Agreement. I would like to arrange a meeting with you after you have had an opportunity to review the enclosed. ;' i /emw cc: Arthur L. Klein, Esquire SQU.i92 MUMMA REALTY As~SOCI,~TEB AGREEMENT A~ONC3 TENANTS-IN-COMMON AGREEMENT made as of the 19th day of December, 1986 by and among LISA M. MORGAN and BARBARA McK. ~, as ........ r~rrrrr.^rr ....~....~...~...r.....r~...~1 Executrices of the Estate of Robert M. Mumma, _ ROBERT M. M[J1~~MA II,1r B~A~RBARA M, McCLUR E, LINDA M. ROTIi and LISA M. MORGAN, Individually., (hereinafter sometimes individually called an ^Ownerp and collectively the pOwners.^') WHEREAS the Owners awn 100$ of the real property hereinafter described as tenants-in-common, with undivided percentage interests therein presently as set forth an the signature page hereof, by~jaint deed of Kim Company and Pennsylvania Supply Company, Harrisburg, Pennsylvania, dated December 19, 1986, in connection with the liquidation of said caxporations and recorded as set forth in Annex A hereto attached, which real~ro~erty is mare fully described ..rrrrr.rrrrr r~rr..rrrrnrrir rr • ^rr~rr~.r^r ~n Exkiibit~Ai heret~,att~ a~~c~h~d ,_~ dude a part hereof, {hereinafter called the ryPremises"); WHEREAS each of the Owners desires to enter into this Agreement to provide for the management and ultimate disposition of the Premises and to govern the relationship among themselves during the period of their joint ownership. ~Q1.92 NOW THEREFORE, the Owners, in consideration of the mutual promises expressed herein and each intending to be legally bound hereby, agree as follows: 1. Term^ of tt~e Agreement . Each of the Owners by his or her execution hereof hereby subjects his or her undivided interest in the Premises to this Agreement for the Term. as herein defined, as the same may be amended or modified in accordance with the terms and conditions hereof. The term {the "Term") of this Agreement shall be for years beginning on the date hereof and ending on 2. Appointmex,},t of Manager, Authority. {a) The Owners shall select, from time to time, a person (or persons) to act as agent for the owners (herein called the "'Manager") in the management of the Premises as hereinafter set forth, and such person(s) upon he execution of a mane ement a reement with the Owners shall thereu on assume all of the res onsibilities for th proper and efficient management of the Premises in accordance with such management agreement. The initial Manager shall be~Mumma Realty Associates, Inc, ~ (b) The Manager shall have the duties, rights and authority, for and on behalf of the Owners as provided in the mans ement agreement the "`Mena ement A reement") in substantiall the form hereto attached as Exhibit B. 3. $,lloc~t~on of I come and~E ,penses. The Manager shall make payments to the Owners in respect of theme Premises in accordance with their res active ercenta e interests in the Premises. a ~r:g1.93 The Owners shall advance or cause to be advanced to the Manager in accordance with their respective percentage interests, ,ugh funds from time to time as may be requested by the M~anaQer as aut2~ri2ed under ttie Mai},aagit,~ent Aareement, including without limitation funds required to pay for the maintenance, management and operation of the Premises, - - - ..a~r..r.rr. interest and principal on any Ioans, real estate taxes, insurance premiums, repairs, work ordered by public authorities and for the cost of any improvement thereon i accordance with the Management Agreement. Should any Owner ~~~r.~ r~r.~ ~~ rn r~~~ 11rl~~rrr~rl* for any reason fail or refuse to promptly advance or cause to be advanced his or her proper share of funds required, then,^ the other Owners at their opti ~n~ or any of them,n shall have the right to pay such delinquent Owner's proper share and (a) to acquire the entire interest of such delinquent Owner at its "Fair Market Valuep as hereinafter defined less any amounts paid by such owners or (b) to charge the delinquent Owner and to recover said sum plus any costs, including attorney's fees, from such Owner (including directing the Manager to withhold future payments due such jdelinquent Owner hereunder to which such Owner would otherwise be entitled until the amounts due from such delinquent Owner is fully paid). By execution hereof, and as an advance toward their e ent mentioned in the recedi ara ra h 3 S~C~p194 each of the Owners hereby transfers to such Manager his or her respective interest in all of the receivables, and all other non-real estate assets, originally held by Pennsylvania Supply Company, Harrisburg, Pennsylvania and distributed to the shareholders thereof in the aforesaid liquidation transaction which sums the Manager shall have the right to ^i r- sn. r iw w ..~...rw.~.~r..n collect fram time to time and shall be deposited in the .... ~c~~ount, as defined in the Management Agreement. _.-_._..__~._.r. 4. No Partition; Tra~nsf~rs and Encumbrances ~ Each of the owners by his ar her execution hereof acknowledges and agrees that it is in his ar her best interest that the interest of all the Owners in the Premises ;continue to be held undivided, and in consideration of each of the respective Owners agreement to hold such interest undivided each of such Owners hereby agrees for the Term hereof: ja) All right of any owner under law or otherwise to have the-Premises partitioned is hereby waived, and no owner shall for the Term seek to have the Premises I'~partitianed, or his or her interest severed from the whale. jb} Except as hereinafter permitted in this Section 4jb}, no Owner shall mortgage, pledge, grant a 'security interest in, hypothecate or otherwise lien or encumber, in whale or in part, his or her undivided interest in the Premises, without obtaining the prior consent of the Owners which consent the other Owners shall have the right to sn~-~g~ j refuse in their respective reasonable discretion. Any such transaction purported to be accomplished contrary to the provisions hereof shall be absolutely void. ! (i} Each Owner shall notify the other Owners (the "Consenting Owners"), prior to granting to any- , person any lien or encumbrance upon his or her interest, including any refinancing of any obligation secured by a lien already approved by the Consenting Owners, and request their respective consents to the granting of such lien or encumbrance, and the Consenting Owner's as a condition to their respective consents shall require, among other things: (a) that the lien or encumbrance on such Owner's interest shall be created by separate instrument and not as a part of a blanket mortgage or other instrument covering other property of such Owner; (b) that any such lien or encumbrance shall be by its terms expressly subject to and subordinate to this Agreement; (c} that the proposed lienholder shall execute with the Consenting Owners an agreement in due form for recording, which agreement shall provide that (i) in the event of default by such Owner under the instrument creating the lien or encumbrance ar the instrument evidencing the obligation secured thereby, the Consenting Owners s S~Q~-g6 r shall concurrently therewith receive notices of default and shall have a right to cure any such default within a reasonable time after the Owner shall fail to do so; and (b) if a default shall continue uncured beyond any reasonable period of cure giving rise to the exercise by the lienholder of any right or power in such lien instrument or the instrument evidencing the obligation secured thereby then, the Consenting Ow»ers shall have a right to purchase prior to any action by such lienholder thereon, the lien instrument and the underlying obligation for the then unpaid principal balance of the debt, accrued interest to the date of payment and such lienholder's reasonable costs as apportioned to the Premises. (iij In the event any Owner shall suffer a judgment on his ar her undivided interest in the Premises, or the holder of any lien or other encumbrance shall proceed to foreclose the lien thereon then the occurrence of either of such events shall constitute a breach of this covenant by such Owner (the „Defaulting Owner°) and a default hereunder, and the Defaulting Owner shall within the earlier of 5 days of such occurrence or prior to the foreclosure of the Lien in execution on the judgment, pay to the judgment creditor or lienholder such sums as will be necessary to cause such lien to be immediately released. 6 54U19~ If the Defaulting Owner shall fail to do sa then the Consenting Owners are hereby authorized and i empowered on behalf of such Defaulting Owner to pay the full amount due an such judgment or lien, including interests and costs thereon, and to purchase the same and (a) to recover from such Defaulting Owner the full amount paid to the holder of such judgment or lien; or (b) by written notice (the "'Option Notice") to the Defaulting Owner exercise the irrevocable option hereby granted to purchase the Defaulting Owner's entire interest in the Premises at its then fair market value determined in accordance with paragraph 4e hereof by written notice to such Defaulting owner, less any amounts paid in respect of the judgment or lien. Payment of the purchase price, less any amounts due the lienholder, which the Consenting Owners shall be responsible for paying, and delivery of a special warranty deed by the Defaulting Owner to the Consenting Owner, shall be made on the date specified in the Option Notice. (c) Except as hereinafter permitted in this Section 4(c}, no Owner shall sell, (ease, assign or I otherwise transfer his or her interest in the Premises, in I I~whoie or in part, to any person not then an Owner, without r (first offering to the other Owners the right of first refusal i to acquire or lease such Owner's interest on the same terms ~~and canditians as those on which such Owner (the "Selling ~~owner"} is willing to make such sale, Iease, assignment or ' S4U198 i i other transfer to any other party. The Selling owner shall promptly notify the other Owners in writing of all of such i 1 terms and submit with such notice to the other Owners a full `: and accurate copy of any bona fide offer {which may be in preliminary ar "'letter of intent"' form) the Selling Owner desires to accept. If the other Owners or any one or more of them shall elect to exercise the right of first refusal ~ herein granted they must do so within 30 days after receipt of notice of the terms and conditions from the Selling Owner, otherwise the right of first refusal as to such particular offer to the Selling Owner shall be null and void. Xn the event the other Owners or any of them exercises the rights granted hereunder, such Owners shall purchase the interest on the terms set forth in such notice from the Selling Owner, unless the Selling Owner intended to transfer such interest by gift to persons other than his or her minor children in which event the other Owners shall pay a purchase price equal to the fair market value of such interest determined by appraisal in accordance with Section 4(e) hereof. The Owners' right of first refusal herein granted shall continue for the Term hereof and may continue to be exercised by the Owners notwithstanding their declining to exercise such option in any particular instance, unless the Selling Owner shall sell or dispose of the Premises or any interest therein pursuant to an offer which the other owners have failed or declined to accept pursuant to this Section, in which case the purchaser of any interest of the Selling Owner shall thereafter hold his interest in the Premises subject to the continuing rights of first refusal of the Owners as to future sales or dispositions. (d) Notwithstanding the foregoing any Owner may at any time transfer in trust his or her interest in the Premises to his or her minor children; provided, one or more of the Owners shall be appointed the trustee under the instrument creating the trust. (e) Upon the death of an Owner, the other Owners (the "Offering Owners") shall have the right to purchase the deceased owner's undivided interest in the Premises for a purchase price equal to its Fair Market Value, as defined below, within 180 days after the death of such deceased Owner by submitting to the executor, administrator or other personal representative of such deceased Owner (the "Offereey) an offer to purchase the interest accompanied by a written appraisal made by an independent M.A.I. the Offeree shall accept or reject the offer to purchase the Premises within 60 days of its receipt and if not rejected within such 60 day period the offer to purchase shall be deemed accepted and payment of the purchase price and delivery of a deed by the Offeree shall be done within 90 days of the date of Offeree's acceptance of the offer to purchase. If the Offeree is not satisfied with the purchase price which would 9 J~~~~ be required to be paid based on such appraisal, the Offeree may accept the offer in writing within the 60 day period as aforesaid which acceptance shall be contingent only upon Offeree obtaining a satisfactory additional appraisal within 45 days after the date the Offeree accepted the offer. If the Offeree submits to the Offeror an additional appraisal, which shall be made by an independent M.A.I., within such 45- day period the purchase price to be paid by the Offeror shall be the average of the two appraisals, provided the higher appraisal is not greater than i10~ of the lower appraisal. If the higher appraisal is more than 110$ of the lower appraisal, the Offeror and Offeree shall within i0 days of the receipt of second appraisal direct the two appraisers to select a third appraiser. The third appraiser shall within 15 days of his appointment appraise the interest in the Premises to be sold and deliver his written appraisal to the Offeror and Offeree. Offeror and Offeree shall within 5 days of the receipt of the third appraisal average the two appraisals which are the closest in value and disregard the other appraisal. The average of such two appraisals shall be the Fair Market Value of the interest to be sold. Within 90 days of the Offeree's acceptance of an offer from the Offeror (or if further appraisals are involved and the Fair Market Value to be established thereby has not been resolved within such 90-day period, then within 30 days following the determination of such value and the resultant IO S~~fl~a1 purchase price), the sale of the undivided interest in the Premises shall be consummated by delivery to the Offeror by the Offeree of a special warranty deed conveying the interest in the Premises in farm satisfactory to the Offeror's counsel or title insurer, and concurrent payment by the Offeror of the purchase price. The title to the interest being transferred shall be good and marketable, free and clear of all liens, encumbrances, conditions, easements, restrictions and other matters affecting title (other than this Agreement, those existing at the time of the acquisition of title to the Premises by the Owners or those approved by the owners). Title to the interest being transferred shall be insurable at regular rates by a title insurance company approved by the Offerors. Realty transfer taxes and other charges and lexpenses as are customarily apportioned and adjusted between the seller and buyer in similar real estate transactions shall be apportioned and adjusted between the parties as of the date of delivery of the deed and payment of the purchase price as aforesaid. 5. Aption by Owners. General overall management of the Premises and of all matters arising out of or in connection with the Premises, including without limitation a sale or mortgage of the entire Premises or any part thereof, shall be vested in the Owners jointly and each Owner shall abide by the policies and decisions jointly made by such Owners in respect thereof. Any agreement, approval, '' ~ 5~0~2 decision, consent, request or other action of the Owners hereunder shall be by majority (in interest) vote and in writing unless otherwise indicated. 6. ~iab ity, Indemnity. No Owner (or Manager, if he or she is also an Owner) shall be liable to any other Owner for any mistake of judgment ar other action taken or omitted in good faith. Any owner who breaches this Agreement shall indemnify and hold every other Owner harmless from any claim, cost, expense, loss or liability incurred by reason of such Owner's breach of the Agreement. 7. Arbitration. If there is any dispute with respect to the Premises, or this Agreement, or any other matter concerning the Premises, or the proper .relationships and obligations among the Owners as co-tenants or parties to this Agreement, such dispute at the option of any Owner shall be conclusively resolved by arbitration before a single arbitrator in Dauphin County, Pennsylvania in accordance with the rules of the American Arbitration Association. The decision resulting from the arbitration shall be binding on all the owners with no rights of appeal to a court or any other tribunal, and any Owner may enforce the decision of the arbitrator in a court of competent jurisdiction. 8. Terminatio n. This Agreement shall terminate at the end_oE the Term. a r on the sale or other disposition 12 s~~ze3 of all of the Premises and the distribution to the Owners of all of the net proceeds thereof, or at such other time as the owners may agree. 9. Binding Effect; Effect oz~ Transferee. This Agreement contains the entire understanding among the Owners with respect to the Premises and may not be changed or modified orally. This Agreement shall inure to the benefit of and shall be binding upon the heirs, personal representatives and permitted assigns of the Owners. Whenever any person acquires any interest in the Premises which interest may only be acquired in accordance with the terms hereof, whether upon the death of an Owner or otherwise, other than pursuant to a sale, lease, pledge or other disposition of the interest of all Owners in a tract or parcel constituting a part of the Premises, such interest so acquired shall be subject to all of the terms of this Agreement with the same force and effect as if such person had owned such interest at the time of the execution of this Agreement and had signed this Agreement as an owner. ,~,~ iaemo~andum afr th~r,s ^_cLreem~e~ t, ~h~~ bey r~e~c~o~rded in the appropriate land records of Dauphin, Cumberland [and Perry) rrr rr rr r r rrrrrrrrr Counties, Pennsylvania. 10. Execut,~on of Carve-Out Agreements. Each Owner shall, promptly following the request of a majority (in interest) of the Owners, execute an agreement among the 13 ~~~02d4 owners, in substantially the fora of this Agreement, with respect to any one or more tracts or parcels constituting a part of the Premises, and such amendments to this Agreement as shall be necessary to cause the parties' agreements with respect to such tracts or parcels tv be governed by such replacement agreement and not by this Agreement. 11. No Partnershix~. The parties do not intend to create hereby any partnership or joint venture between themselves with respect to the Premises or any other matter. This Agreement is solely far the benefit of the Owners and shall not affect any rights or remedies of other parties with respect to any Owner or the Premises. 12. Notices. Ail notices or other communications required under or relating to this Agreement shall be effective only if in writing, and shall be personally delivered or transmitted by telegram or telex, or shall be mailed United States registered or certified mail, return receipt requested, postage prepaid, 9r by private overnight courier, to the other respective parties at his ar her address below set forth, or at such other address as such other parties shall designate by notice, and shall be effective when delivered to such address. Any official U.S. Postal Service delivery receipt ar + r tten acknowledgement by private cour~ ~erR shall constitute conclusive proof of such delivery. 14 J~~Q2~ 13. Further Assurances. Each Owner shall, promptly following the request of the Owners from time to time execute, acknowledge, deliver and record ar file such further documents or instruments and da such further acts as may be necessary or desirable to carry out more effectively the purposes of this Agreement or to protect the rights and interests of the Owners against third parties, and pay any costs personally incurred in connection therewith. Zf any Owner shall refuse or otherwise fail to execute any deed or other instrument necessary or desirable to carry out any of the purposes under this Agreement or to effectuate a decision of the Owners thereunder with respect to the Premises, or any part thereof, the other Owners notwithstanding the provisions of Section ~ hereof, shall be entitled to specific performance of the obligation to execute such deed or other instrument together with all casts of the proceeding in which such specific performance is obtained and reasonable counsel fees expended therefor. As further assurance of the foregoing obligation, each owner hereby makes, constitutes and appoints each of the other Owners, with full power of substitution, as his, her, or its attorney-in-fact coupled with an interest to execute any such deed or other instrument to carry out any of the purposes of this agreement or to effectuate a decision of the Owners thereunder, in the name of an vn behalf of such refusing ar otherwise failing Owner. 15 ~U2C~6 To facilitate the recording of any such deed or other instrument, each of the Owners has executed and delivered to the Manager, as escrow agent, a power of attorney in recordable form with respect to the Premises conveyed into the names of the Owners and subject by this Agreement. i4. Governing Law. This Agreement and all issues arising hereunder shall be governed by the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF the parties hereto have caused these presents to be duly signed and sealed the day and year first above written. 16 ~Q~~ Percentage Interest Lisa M. Morgan, Executrix ) Estate of Robert M. Mumma ) 1065 Tilghman Court ) Wayne, PA 19087 ) Barbara McK. Mumma, Executrix } Estate of Robert M. Mumma ) P.O. Box 3331 Harrisburg, PA 17105 9$.08612% Robert M. Mumma II 0.47847% RD #1 Box 58 Bomansdale, PA 17008 Barbara M. McClure 0.47847% 129 S. Lewisberry Road Mechanicsburg, PA 17005 Linda M. Roth 0.47847% 16216 Pepperview Court Chesterfield, MO 63017 Lisa M. Morgan, Individually 1065 Tilghman Court Wayne, PA 19087 17 0.47847% 100.00000% SOQ+~trB ti_ 5 ~ a AC,R~EMENT AMONG _TENAN'~S-IN-COj~SMON AGREEMENT made as of the 19th day of December, 1986 by and among LISA M. MORGAN and BARBARA McK. ~, as Executrices of the Estate of Robert M. Mumma, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. ROTH and LISA M. MORGAN, Individually, (hereinafter sometimes individually called an "'Owner"' and collectively the "Owners."') . WHEREAS the Owners own 100 of the real property hereinafter described as tenants-in-common, with undivided ~: ,h percentage interests therein presently as set forth on the signature page hereof, by joint deed of Kim Company and ~J;j' Pennsylvania supply Company, Harrisburg, Pennsylvania, dated C December 19 1986 in connection with the li quidation of said corporations and recorded as set forth in Annex A hereto attached, which real property is mare fully described in Exhibit A hereto attached and made a part hereof, (hereinafter called the "Premises"j; WHEREAS each of the Owners desires to enter into this Agreement to provide for the management and ultimate disposition of the Premises and to govern the relationship among themselves during the period of their joint ownership. NOW THEREFORE, the Owners, in consideration of the mutual promises expressed herein and each intending to be legally bound hereby, agrees as follows: saoozo ~ ~ . in respect of the Premises in accordance with their respective percentage interests in the Premises. The Owners shall advance or cause to be advanced to the Manager ~.n accar~lance with thei respectiyg„~ interests, such funds from time to time as may be requested by the Manager as authorized under the Management Agreement, including without limitation funds required to pay for the maintenance, management and operation of the Premises, interest and principal on any loans, real estate taxes, insurance premiums, repairs, work ordered by public authorities and for the cost of any improvement thereon in accordance with the Management Agreement. Should any Owner for any reason fail or refuse to promptly advance or cause to be advanced his or her proper share of funds required fter re±ceint of written notice Prom the Manager, then,^the other Owners at their option, (or anyl~one or more of the Owners if a ma~orit~ in interest of the Owners sha13 fail to exercise sy~,~_o_ntion) shall have alter writte not~c~ to the delinquent owner, the right to pay such delinquent Owner's proper share and ~, er~,after (a) to acquire the entire interest of such delinquent Owner at its "Fair Market Value"', ,.. as hereinafter defined, less any amounts paid by such Owners in respect of such delinquent Owner's share ar (b) to charge the delinquent Owner and to recover .the amounts pJa~d, plus any casts ,end e~gnses reasonab,~,v incurred, including attorney's fees incurred in the collection thereof from such 3 s~oosz • 1. Term of the Ac ppm~. Each of the owners by his~her or its execution hereof hereby subjects hiss her, ar its undivided interest in the Premises to this Agreement for the Term as herein defined, as the same may be amended or modified in accordance with the terms and conditions hereof. The terra (the "Term"') of this Agreement shall begin as of thg date hereof and shall end ten yg~rs after the date of death of Barbara McK. Mumma... 2. ~ppo ntme of M~,~arter; Authority. (a) The Owners shall select, from time to time, a Berson (or persons) to act as agent for the owners (herein called the "Manager"'} in the management of the Premises as hereinafter set forth, and such person(s) upon the execution of a management agreement with the Owners shall thereupon assume all of the responsibilities for the safe, k proper and efficient management of the Premises in accordance v ~,~ \ with such management agreement. The initial Manager shall be ~•; Mumma Realty Associates, Inc. (b} The Manager shall have the duties, rights and authority, far and on behalf of the Owners as provided in the management agreement (the "'Management Agreement") in substantially the form hereto attached as Exhibit B. 3 . ~1 ~ocat,~,on of ,income and Expenses . The Manager sh811, after nayfntt the cLrrent ~xaenses incurred in _ ,tom ~ianageme~.~ c,>f .~„~ rem make payments to the Owners E t z saaass- Owner (including the right of such Owner or Owners to direct the Manager to withhold future payments due such delinquent Owner hereunder to which such Owner would otherwise be entitled, until the nP,~,,,tire amount due Prom such delinquent owner is fully paid). By execution hereof, and as an advance toward of their respective obligation to provide funds to the Manager as hereinabave required, each o! the Owners hereby transfers to such Manager his, her or its respective interest in alI of the receivables, and all other. non-real estate. assets, originally held by Pennsylvania Supply Company, Harzisburg, Pennsylvania and distributed to the shareholders thereof in the aforesaid liquidation transaction which sums the Manager shall have the right to collect from time to time and shall be deposited in the Account, as defined in the Management Agreement. 4. Na partitio Transfers and Encumbrances. ' Each oP the Owners by his or her execution hereof acknowledges and agrees that it is in his, her or its best interest that the interest of ail the Owners in the ,, Premises continue to be held undivided, and in consideration of each of the respective Owners agreement to hold such interest undivided and for other good and valuable consideration^ (a) Each of the Owners hereby waives far~h~ 4 SQp023 1 Tezm hereof his, her, ar its__right to have its respective interest inAthe Premises partitioned,hand hereby agrees that no Owner shall for the Term seek to have the Premises paztitioned, or his,~/~her, or its undivided interest held ,separately or otherwise severed from the whole. (b) Except as hereinafter permitted in this Section 4(b), no Owner shall mortgage, pledge, grant a security interest in, hypothecate or otherwise_tran_,_, sf r, lien or encumber, in whole or in part, his~her, or, its undivided interest in the Premises, without obtaining the prior consent of the~Owners which consent the Owners shall have the right to refuse in their respective reasonable discretion. Any such transaction purported to be accomplished contrary to the provisions hereof shall be absolutely void. (i) Each owner shall notify the other Owners {the "'Consenting Owners"'), prior to granting to any person any lien or encumbrance upon his,,, her, ~~,its interest, including any refinancing or any obligation secured by a lien Qr encumbrance already approved by the Consenting owners, and request their respective consents to the granting of such Lien or encumbrance, and the Consenting owner's as a condition to their respective consents shall require, among t other things: _L,~„Z„ that the lien or encumbrance on such owner's interest shall be created by separate instrument 5 5a~U14 and not as a part of a blanket mortgage or other instrument covering i_ n addition t~~i. wn S. `~.~.L1~ in ~~ Poem { ~~~ other property of such owner; that any such lien or encumbrance shall be by its terms expressly subject to and subordinate to this Agreement; s,32 that the proposed lien holder shall execute with the consenting Owners an agreement in due farm for recording, which agreement shall provide that.;, j81 in the event of default by such Owner under the instrument creating the lien or encumbrancs or the instrument evidencing the obligation secured thereby, the Consenting owners shal3~ receive notices of~'each such default and shall have a right to cure such default (s) within a reasonable time,,.~,~ the default~„~a Uwner shall have failed to Y do so within the grace period~n such i instrument; and (B) it a default shall s continue uncured beyond any reasonable period of cure giving rise to the exercise by the lienholder of any right 6 s~Q~~,Jr or power in such lien instrument or the instrument evidencing the obligation secured thereby then, the Consenting Owners shall have a right to purchase prior to the exercisg of env remedy,~ by such lienholder thereon, the lien instrument and the underlying obligation for the then unpaid principal balance of the debt, accrued interest to the date of payment and such lienholder's reasonable costs as apportioned to the portion of the Owner's interest in the Premises ~ subiect to such lien. w {ii}~ In the event any owner shall suffer a judgment on hi~,.~,her, o~its~,undivided interest in the Premises, ar the holder of any lien or other encumbrance shall proceed to foreclose the lien thereon then the occurrence of either of such events shall constitute a breach of this covenant by such Owner (the "Defaulting o~.~ner"') and a default hereunder, and the befaulting owner shall within Che earlier of 5 days of such occurrence or prior to the foreclosure of the lien in execution on the judgment, pay to the judgment creditor ar lienholder such sins as will be necessary to cause such lien to be ir.~ediately released. {2) If the Defaulting Owner shall 7 ~0~~6 fail to do so then the Consenting Owners are hereby irrevocably authorized and empowered on behalf of such Defaulting Owner to pay the full amount due on such judgment or lien, including interest and casts thereon, and to purchase the same and (a} to recover from such Defaulting Owner the full amount paid to the holder of such judgment or lien; or {b) by written notice {the "'Option Notice") to the Defaulting Owner exercise the irrevocable option hereby granted to purchase the Defaulting Owner's entire interest in the Premises at its then fair market value determined in accordance with paragraph 4{e) hereof by written nOt1C@ to such Defaulting owner, less any amounts paid in respect of the judgment or lien. Payment of the purchase price, less any amounts due the lienholder, which the Consenting Owners shall be responsible for paying, and delivery of a special warranty deed by the Defaulting Owner to the Consenting Owner, shall be made on the date specified in the Option Notice. {c} Except as hereinafter permitted in this Section 4(c}, no Owner shall sell, lease, assign, or otherwise transfer his„~her, ar its undivided interest in the Premises, in whole or in part, to any personhwithout first offering to the other Owners the right of first refusal to acquire such Owner's interest an the same terms and co»ditions as those on which such Owner (the "Selling owners is willing to make such sale, lease, assignment or other 8 ~Q~~.~ transfer to any other party. The Selling Owner shall promptly notify the other Owners in writing of all of such terms and submit with such notice to the other Owners a full and accurate copy of any bona fide offer (which may be in preliminary or Metter of intentM form) the Selling Owner desires to accept. If the other Owners or any one or more of them shall elect to exercise the right of first refusal herein granted they must do so within 30 days after receipt of notice of the terms and conditions from the Selling owner, otherwise the right of first refusal as to such particular offer to the Selling Owner shall be null and void. In the event the other Owners shall purchase the interest on the terms set forth in such notice Pram the Selling Owner, unless the Selling Owner intended to transfer such interest by gift to persons other than his or her minor children in which event the other Owners shall pay a purchase price equal to the fair market value of such interest determined by appraisal'in accordance with Section 4(e) hereof. The Owners' right of first refusal herein granted shall continue far the Term hereof and may continue to be exercised by the Owners notwithstanding their declining to r exercise such option in any particular instance, unless the Selling Owner shall sell or dispose of the Premise or any interest therein pursuant to an offer which the other owners i have failed or declined to accept pursuant to this Section, in which case the purchaser of any interest of the Selling 9 S~QO18 Owner shall thereafter hold his interest in the Premises subject to the continuing rights of first refusal of the Owners as to future sales or dispositions. (d) Notwithstanding the foregoing, nothing herein shall preclude a transfer to Barbara McK. Mumma, an owner or any trust primarily for the benefit of Barbara McK. Mumma and/ar any of the issue of Robert M. Mumma (if one or more of the Owners and Barbara McK. Mumma represent a aajority of the trustees of such trust}. (e) Upon the death of an Owner, the other J Owners (the Offering Owners'), shall have the right to purchase the deceased Owners undivided interest in the Premises for a purchase price equal to its Fair Market Value, as defined below, within 180 days after the date of death of such deceased Owner by submitting to the executor, administrator or other personal representative of such deceased Owner (the ~Offeree') an offer to purchase the. ,interest accompanied by a written appraisal made by an independent M.A.I. the Offeree shall accept or reject the offer to purchase shall be deemed accepted and payment of the purchase price and delivery of a deed by the Offeree shall be done within 90 days of the date of Offeree~s acceptance of the offer to purchase. If the Offeree is not satisfied with the purchase price which would be required to be paid an such appraisal, the Offeree may accept the offer in writing within the 60 day period as aforesaid which acceptance shall be 10 540019 contingent only upon offeree obtaining a satisfactory additional appraisal within 45 days after the date of offeree accepted the offer. If the offeree submits to the Offerer an additional appraisal, which shall be made by an independent K.A.I., within such 45-day period the purchase price to be paid by the Offeror shall be the average of the two appraisals, provided the higher appraisal is not greater than llfl~ of the lower appraisal. If the higher appraisal is more than 110 of the lower appraisal, the Offeror and offeree shall within IO days of receipt of second appraisal direct the twa appraisers to select a third appraiser. The third appraiser shall within 15 days of his appointment appraise the interest in the Premises to be sold and deliver his written appraisal to the Offeror and offeree. Offeror and offeree shall within 5 days of the receipt of the third appraisal average the two appraisals which are the closest in value and disregard the other appraisal. The average of such • two appraisals shall be the Fair Market Value of the interest to be sold. Within 90 days of the Offeree's acceptance of an offer from the Offeror (or if further appraisals are involved and the Fair Market Value to be established thereby has not s been resolved within such 40-day period, then within 30 days ~ #, following the determination of such value and the resultant s purchase price), the sale of the undivided interest in the Premises shall be consummated by delivery to the Offeror by i 11 sooo2o the offeree of a special warranty deed conveying the interest in the Premises in form satisfactory to the offeror's counsel or title insurer, and concurrent payment by the Offeror of the purchase Brice. The title to the interest being transferred shall be good and marketable, free and clear of all liens, encumbrances, conditions, easements, restrictions and other matters affecting title (other than this Agreement, those existing at the time of the acquisition of title to the Premises by the Owners or those approved by the Owners}. Title to the interest being transferred shall be insurable at regular rates by a title insurance company approved by the Offerors. Realty transfer taxes and other charges and expenses as are customarily apportioned and adjusted between the seller and buyer in similar real estate transactions shall be apportioned and adjusted between the parties as of the date of delivery of the deed and payment of the purchase price as aforesaid. (f) If a petition in bankruptcy shall be filed by ar against any Owner (the "Bankrupt Owners) then the f ilinq of such petition shall be deemed to be an offer by the Bankrupt Owner to sell his or her undivided interest in the s Premises at its Fair Market Value on the date of such t f ilinq, which offer the other owners shall have the right to accept upon written nobice to the Bankrupt Owner and the (Bankruptcy Court having jurisdiction, if .given within the rlier of 45 days of the date of such filing or the date a ].2 ~QQ~. majority in interest of the Owners had actual knowledge of such filing. Upon the acceptance of such offer the other Owners, ar if the other Owners shall have failed or declined to accept such offer within the 45 days then any Owner may within five days thereafter accept such offer by written '.notice to the Bankrupt Owner and the Bankruptcy Court having !,jurisdiction. Payment of the purchase price and delivery of I the deed by such Bankrupt Owner shall occur within twenty-one days of the date of acceptance of the offer and the customary costs of settlement shall be borne equally between the Bankrupt Owner and the purchasing owner(s}. For purposes of this Section a(f) the term 'Fair Market ValueN shall mean the average of three independent written appraisals obtained by the Owner{s}. Each appraisal shall have been prepared by an appraiser who is an M.A.T. 5. ~c,_,tion by Owners. General overall management of the Premises and of all matters arising out or of in connection with the Premises, including without limitation a sale or mortgage of the entire Premises or any part thereof, shall be vested in the Owners jointly and each Owner shall abide by the policies and decisions jointly made by such Owners in respect thereof. Any agreement, approval, decision, consent, request or other action of the Owners hereunder shall be by majority (in interest) vote and in :citing unless otherwise indicated. 13 s~oo22 6. Liability: Indemnity. No Owner {or Manager, if he or she is also an Owner) sha21 be liable to any other Owner for any mistake of judc~nent ar other action taken or omitted in good faith. Any Owner who breaches this Agreement shall indemnify and hold every other Owner harmless from any claim, cost, expense, lass or liability incurred by reason of such Owner's breach of the Agreement. 7. rbitra~ion. If there is any dispute with respect to the Premises, or this Agreement, or any other matter concerning the Fremises, or the proper relationships and 'obligations among the Owners as co-tenants or garties to this Agreement, such dispute at the option of any Owner shall be conclusively resolved by arbitration before a single arbitrator in Dauphin County, Pennsylvania in accordance with the rules of the American Arbitration Association. The decision resulting tram the arbitration shall ba binding or all the Owners with n right of appeal to a court or any other tribunal, and any owner may enforce the decision or the arbitrator in a court ar competent jurisdiction. 8. Tg~-~nin tion. This Agreement shall terminate at the end of the Term, or on the sale or ether disposition of all the Premises and the distribution to the Owners of all of the net proceeds thereof, or at such other time as the Owners may agree. 9. 8indinq Effect; E ~tect on ~~~ns~eree. This Agreement contains the entire understanding among the Owners lA saoa23 with respect to the Premises and may not be changed or modified orally. This Agreement shall inure to the benefit of and shall be binding upon the heirs, personal representatives and permitted assigns of the Owners. whenever any person acquires any interest in the Premises which interest may only be acquired in accordance with the terms hereof, whether upon the death of any Owner ar otherwise, other than pursuant to a sale, lease, pledge or other disposition of the interest of all Owners in a tract or parcel constituting a part of the Premises, such interest sa acquired shall be subject to all of the tetras of this ' Agreement with the same force and effect as if such person had owned such interest at the time of the execution of this Agreementwith the same farce and effect as if such person had owned such interest at the time of the execution of this Agreement and had signed this Agreement as an Owner. A memorandum of this Agreement shall be recorded in the.. appropriate land records of Dauphin, Cumberland and Perry Caunties,nPennsylvania. 20. Exec~~.Q~ of Ca~yg-¢~ Agreements. Each Owner shall, promptly fallowing the request of a majority (in interest) of the Owners, execute an agreement among the owners, in substantially the form of this Agreement, with respect to any one or more tracts or parcels constituting a part of the Premises, and such amendments to this Agreement as shall be necessary to cause the parties' agreements with 15 5QQ024 respect to such tracts or parcels to be governed by such replacement agreement and not by this Agreement. li. ~o P~~,tnershi.Q. The parties do not intend to create hereby any partnership or joint venture between themselves with respect to the Premises or any other matter. This Agreement is solely for the benefit of the Owners and shall not affect any rights or remedies of other parties with respect to any Owner or the Premises. 1Z. Notices. All notices or other communications required under or relating to this Agreement shall be effective only if in writing, and shall be personally delivered or transmitted by telegram or telex, or shall be - mailed United States registered or certified mail, return receipt requested, postage prepaid, or by private overnight courier, to the other respective parties at his ar her address below set Earth, or at such other address as such other parties shall designate by notice, and shall be effective when delivered to such address. Any official U.S. Postal Service delivery receipt or written acknowledgment by private courier shall constitute conciusive~proof of such delivery. 13. ~;~t~ier Assurances. Each Owner shall, promptly following the request of the owners from time to time execute, acknowledge, deliver and record or file such further documents or instruments and do such further acts as aay be necessary or desirable to carry out more effectively 16 S~Ot~25 the purposes of this Agreement or to protect the rights and interests of the Owners against third parties, and pay any costs personally incurred in connection therewith. If any Owner shall refuse or otherwise fail to execute any deed or other instrument necessary ar desirable to carry out any of the purposes under this Agreement or to effectuate a decision of the Owners thereunder with respect to the Premises, or any part thereof, the other Owners notwithstanding the provisions of Section 7 hereof, sha21 be entitled to specific performance of the obligation to execute such deed or other instrument together with all costs of the proceeding in which such specific performance of the obligation to execute such - deed or other performance is obtained and reasonable counsel fees expended therefor. As further assurance of the foregoing obligation, each Owner hereby makes, constitutes and appoints each of the other Owners, with full power of substitution, as his, her, or its attorney-in-fact coupled with an interest to execute any such deed or other instrument tc carry out any of the purposes of this agreement or to effectuate a decision of the Owners thereunder, in the name of an on behalf of such refusing ar otherwise failing Owner. To facilitate the recording of any such deed or other instrument, each of the Owners has executed and delivered to the Manager, as escrow agent, a power of attorney in recordable form with respect to the Premises conveyed into the names of the Owners and subject to this Agreement. 17 sQOO2s 34 . Inval id__i~,v.. The invalidity or unenforceability of any one or more provisions in this Agreement shall not affect the validity or enforceability of the remaining portions of this Agreement, or any part thereof. 15. Governing Law. This Agreement and all issues arising hereunder shall be governed by the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF the parties hereto have caused these presents to be duly signed and sealed the day and year first above written. 18 5~©~~ f Percentage of Interest ) Lisa M. Morgan, Executrix ) Estate of Robert M. Mumma ) 1065 Tilghman Court ) Wayne, PA 19087 ) } Barbara Mck. Mumma, Executrix ) Estate of Rabert M. Mumma ) P.O. Box 3331 ) Harrisburg, PA 17145 ) Robert M. Mumma, I2 RD #1 Box 58 Bomansdale, PA 37008 Barbara M. McClure 129 S. Lewisberry Road Mechanicsburg, PA 17005 ~._,...~~_.~._ •~~%- --mil' Linda M. Rath 16216 Pepperview Court Chesterfield, MD 63017 Lisa M. Morgan, Individually 1065 Tilghman Caurt Wayne, PA 19087 98.08612$ 0.4?847$ 0.47847$ 0.47847$ 0.47847$ l0o.o0oao$ l8 ~U~28 { ' 5 ~ ~~ MANAGEMENT AGREEMENT AGREEMENT made this day of , 1987 between LISA M. MORGAN and BARBARA McK. MOMMA, as Executrices of the Estate of ROBERT M. MU2~IIrIA, ROBERT M. MOMMA, II, BARBARA M. McCLURE, LINDA M. RUTH and LISA M. MORGAN, Individually, {hereinafter sometimes individually called an "Owner", and collectively called the "'Owners"') and MOMMA REALTY ASSOCIATES, INC., a Pennsylvania corporation (hereinafter called the "Manager"). owners own certain real property and the improvements thereon situate in Dauphin, Cumberland and Perry Counties, Pennsylvania (the "Property"). Certain buildings on the Property have been leased to commercial tenants therein (the "Leases"). Manager has prior to the date hereof performed certain acts {the "Prior Acts") on behalf of the Owners, including without limitation the execution of leases, agreements of sale and maintenance of the Premises, which Prior Acts the' Owners hereby ratify and confirm. Owners and Manager agree as follows, each intending to be legally bound: 1.. Owners hereby hire Manager, which hereby agrees to act as' owners' agent in respect of the Froperty, to perform the services expressly provided herein in the name, for the account of and at the expense of the owners. 2. The Manager shall perform the following services: 500069 i i t (a) To advertise available space and to rent space now or hereafter becoming vacant to desirable tenants on terms and conditions satisfactory to the Owners. {b) Prepare invoices, bill and use Manager's reasonable best efforts to collect all rents and other sums due under present or future Leases, which shall be deposited in the Account (as hereinafter defined). (c) Select and hire, pay and supervise, all persons necessary to be employed to carry out Manager's duties hereunder, and to discharge or cause to be discharged all unnecessary or undesirable persons in accordance with law and good management policies. Each such employee shall be tAe Manager's employee and not an employee of the Owners. Manager may, in lieu of directly hiring employees, contract with any other entity for the furnishing of such services, provided Manager shall first obtain the written consent of the Owners. (d) Cause the Property to be maintained in good condition, including interior and exterior cleaning, and cause repairs, alterations and restoration thereof and improvements thereto to be made only after approval of the Owners, including, but not limited to, glumbing, heating, lighting, carpentry, decorating and such other incidental alterations or changes therein as may be proper, subject only to the limitations contained herein ar in any Lease. Any restoration or ordinary repairs or alterations involving an expenditure of S5Qo0 or mare for any one item, shall be made only at the direction of the- S'(~0~~~ owners, but emergency repairs, immediately necessary for the preservation or safety of the Property of for the safety of tenants or other persons, or required to avoid the suspension of any necessary service in or to the Property, or to preserve oz protect the Property, may be made by the Manager irrespective of the cost thereof, without the direction or prior approval of the Owners, provided, however Manager shall notify owners promptly after making such expenditure. (e) Cause all such acts and things to be done in or about the Property as shall be necessary to comply with any and all orders or to remedy violations affecting the Property of which Manager has actual notice, placed thereon by any federal, state or municipal authority or by any board of fire underwriters ar other similar body having jurisdiction. (f) Cause to be prepared and filed in connection with any employees the necessary forms far unemployment insurance, social security taxes and withholding taxes and all other farms required by any federal, state or municipal authority. (gj Pay from and to the extent of the balance from time to time in the Account the sums required to pay the expenses of operating the Property and of performing the services to be performed by Manager hereunder, including without limitation real estate taxes, assessments, municipal claims and charges, water and sewer rents; utility charges; the costs of effecting the repairs, alterations, restoration, improvements to _. 3 S(30O'71 t be effected hereunder; salaries and expenses of personnel necessary to perform Agent's duties hereunder; the costs of necessary equipment, tools, appliances and supplies; and advertising and rental commissions payable in connection with obtaining tenants; all in accordance with annual budgets (the first of which, for the balance of 1987, is attached as Exhibit B) prepared by Manager and submitted to the Owners no later than 30 days prior to each calendar year end, which shall be subject to Owner's approval, not to be unreasonably withheld or delayed (the "Budgetsp), and provided that no single expenditure not reflected on the applicable Budget which is in excess of $5,000 shall be made (subject to the same exceptions as in clause (d) above) without the Owners' prior written approval, which shall not be unreasonably withheld or delayed. (h) Contract for utility, maintenance and other needed services in the proper operation of the Property. (i) Purchase equipment, -tools, appliances and supplies necessary to carry out Manager'sduties hereunder. (jj Purchase, to the extent available, such insurance coverage as the Owners shall specify and Manager shall agree is adequate to protect the Owners' and the Manager's respective interests. (kj Supervise the installation of tenant improvements and finishes as required by Leases. (1) To establish and maintain complete and orderly files containing correspondence, rent records, payroll 4 records, insurance policies, leases, receipts and all other documents pertaining to the Property and the management and operation thereof. Maintain books of account reflecting all receipts and disbursements in the perforn-ance of Manager's obligations hereunder, including without limitation records of all employees and payrolls and of all materials and services purchased and all other expenditures made on all invoices relating thereto. All books, records and such other documents shall be and remain the groperty of the Owners and the Owners or any of them shall have access _to them at reasonable intervals during working hours after reasonable notice. (m) Render to Owners unaudited statements reflecting Manager's receipts and disbursements, quarterly not sore than 20 days after the end of each calendar quarter, and annually, no more than 6a days after the end of each calendar year, all to include narrative summaries and explanations of any variances from Budget and to be in a fora reasonably satisfactory to Owners. Cooperate with owners' independent auditor in reviewing and auditing the books and accounts relating to tie Property. {n) Use its reasonable best efforts, in the performance of its obligations hereunder, to do so in a fashion consistent with applicable requirements of any deed ar other restrictions affecting the Property, or any part thereof, and of the requirements of any governmental authorities. 5 soao~3 (o) To review periodically all hazard liability and other insurance carried for the account of the Owners in connection with the property, and to maintain in force and effect such insurance as the Owners. shall from time to time require. Such other similar duties as are customarily performed by managers of like commercial projects in Dauphin County Pennsylvania at the time of reference; provided, however notwithstanding the foregoing, Manager without the prior written consent of the Owners, shall have no right or authority implied or apparent: (i) to sell ar otherwise transfer or to grant a lien or otherwise encumber the Property ar any part thereof or any interest of an Owner therein; (ii) to remove or demolish any buildings or other improvements which comprise part of the Property or make any exterior alterations or structural interior alterations to any improvements unless the same shall have been agproved in writing by the Owners. 3. Owners~,~y from time to time pay to Manager a reaso b 4 hereunder./~ 4. Far purposes of this Agreement, the term pGross Revenuesy shall mean: all rents, receipts, revenues, income and all other monies received by the Manager in respect of the Property. Any payments made by Manager.hereunder shall be made out of the Gross Revenues, or as may be provided therefor by 6 SaQ~~4 Owners, as herein provided. Manager shall not be obliged to make any advance to or for the account of owners ar to pay any amount except out of funds so held or provided, nor shall manager be obliged to incur any liability or obligation unless Owners shall furnish Manager with the necessary funds for the discharge thereof. If Manager shall advance voluntarily any amount for Owners' account, for payment of any obligation ar necessary expense connected with its duties hereunder, Owners shall reimburse MAnager promptly upon receipt of original invoices therefor. 5. ~ Manager shall deposit all Gross Revenues into the account ~ at called yMumma Realty Associates I" (the "'Account) and Owners shall deposit all sums from time to time required by the Hudgets or as otherwise may be necessary for Manager to make the disbursements required or permitted to be made by it hereunder, including without limitation to pay Manager's compensation hereunder, as they fall due, and from which Manager shall draw to make such disbursements so long as the balance thereafter remaining is sufficient to permit Manager to make such disbursements as they fall due. The Manager shall remit to the Owners monthly, on or before the fifteenth day of each month, in accordance with their respective percentage interests as identified in Schedule 1 hereto attached and made a part hereof, all funds (other than security deposits and other refundable deposits) held by the :Manager for the Owners' account as herein provided, after S~©QO'~'S (i) deduction of any management fee due to the Manager and (ii) retention in said special account of such reserves as the owners may authorize. If security deposits or other funds are required by law to be held in a segregated account and are, by law, allowed to be held by the Manager, such deposits yr funds shall be held in a separate special account at such bank. Monies held by the Manager for the Owners' account shall in na event be commingled with the Manager's own funds, if any, or with funds, if any, held by the Manager for the account of other parties, and all such funds so held for the Owners' account shall be trust funds in the hands of the Manager. Any failure of Owners to maintain sufficient funds in the Account shall, 'nte relieve Manager of any duty to make disbursements therefrom. 6. Manager shall not be liable to Owners for any loss ar damage not solely and directly attributable to Manager's awn negligence or willful miscanduct. Owners will indemnify and hold harmless Manager from any liability not caused by its negligence or willful misconduct, for damages, penalties, costs and expenses: {a) for injury to any persons ar property in, about and in connection with the Property; (b) for all acts performed by the Manager in good faith pursuant to this Agreement ar any other instructions of owners. 7. Manager shall be named as an additional insured under the liability insurance policies it is required to carry hereunder., 8 5~+~~7'6 8. Owners shall have no personal liability hereunder and Manager shall look solely to the Property, insurance proceeds, Owners' interest in the Property, they. ac. Reyelnues, the funds and property of Owners from time to_time in the Account or otherwise in Manager's possession. 9. Manager may not subcontract, sell, assign, pledge or otherwise transfer or encumber all or any part of its rights and obligations hereunder, without the prior written consent of the Owners, which consent the Owners shall have the right to refuse in their own respective judgment and discretion. Any such purported transfer in violation of this paragraph 9 shall be void and of no further effect. 10. The term of this Agreement shall begin at the execution hereof by the Owners and shall expire one year,.from the date hereof. This Agreement may terminate upon 60 days notice by the Manager to the Owners or if by the Owners then upon 60 days notice given by a majority~in interest of the Owners. Upon the termination of this Agreement, Manager shall immediately pay over to Owners all funds and property then held for Owners' account and deliver all books and records and other instruments in its possession relating to the Property, provided that Manager may first pay itself, from the Account or any other funds or property of Owners then in Manager's possession, any amounts then owning hereunder by way of compensation or otherwise to the date of termination and Owners shall pay any balance thereof to Manager on demand. 9 SU00'~ r i 11. The term "'Owners"' as used herein shall mean the majority in interest of the Owners subject to this Agreement as such majority in interest is indicated in that certain Agreement among tenants-in-Common dated as of December 19, 1986, as the same may be amended. 1~,. This Agreement shall benefit and bind the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns; contains the entire Agreement between the parties; cannot be amended except in writing signed by the Manager and a majority of the Owners then in interest; and shall be governed by Pennsylvania iaw. y3„~ Notices hereunder may be given by registered or certified mail, return receipt requested, postpaid or by private overnight delivery services, addressed to Owners at their respective addresses listed in Exhibit A hereto attached; and to Manager at P.O. Box 3331 Harrisburg, PA 17105 or at such other addresses as any of the foregoing persons shall from time to time specify by notice to the other. 14. Manager's obligations hereunder shall be excused or delayed to the extent performance is precluded or delayed by acts of God or ether events beyond Manager's reasonable control. IN WITNESS WHEREOF, the respective parties hereto have duly executed this Agreement on the date first above written. MtJMMA REALTX ASSOCIATES, INC. I4 5~©~~$ P.ttest • BY Secretary (Corporate Seal) Lisa M. Morgan, as Executrix of the Estate of Robert M. Mumma Lisa M. Morgan ,as Executrix Barbara McK. Mumma, as Executrix of the Estate of Robert M. Mumma Barbara McK. Mumma,-as Executrix Witness: Robert M. Mumma, II Barbara M. McClure Linda M. Roth Lisa M. Morgan, Individually 12 S~~(j'~ i' c RG Ew~S S gOCKI 5 Mr. Robert M. M mma, .,~ ,7anuary 5, 198 ~ ~~~ Page ~' i the writing is received by the executors within nine months of the ate o ea , 111 a erson ma in the 1sc almer has not acre ed the interest or an o its nefits an (iv as a result o suc re usa t e interest asses without an direc ion on the par o t e erson ma in t er to a ene iciary or ene iciaries other than him. in addition, as a matter of Pennsylvania aw, a 2sclaimer to be effective must be filed with the Clerk of the Orphans' Court division of the county where the decedent was domiciled. You and I have discussed that any of your children born after your mother's death would not participate in the distribution of your disclaimed share of your father's estate. And there may even be an argument that a child of yours born after your father's death before your mother's should not participate. You plan to deal with the possible inequality in benefits among your children by providing an equalization gift in a trust you will create in the near future over a substantial portion of your Gemini stack. To follow through with a timely "qualified disclaimer" of your interest in your father's estate, sign four of the copies of the Disclaimer {keep the fifth), and return them to me, Federal Express, in the prepaid envelope provided. There is a Federal Express office at 209 Ventnor Avenue in Aspen, where a drop off can be made until 7:00 p.m. I will have copies delivered to your mother and Lisa, as Executors, and a copy filed with the Court in Carlisle. If you have any question, please call. My home telephone number is {215-66?-2844). Sincerely yours, ~'t~~~'' Arthur L. Klein /rkb Enclosures SQf~U82 ~J1~ 17/OD aJ: lt7 (~ i17t.01.7Jf70 '~ '~ rnaa f Cl7 LM i ~j vVJ ~ , - MORCiAN, Lewis & 6ocK~us - .::~ ; : NO.. :,;-=;,;~,~ ~M-,• .:~.;' , „ ~ ~y li,: ~:,r'+' ~ rA'. 5 ~~ '- C.4UNitLOwi As Lww y ~ ., ~ . ZODO.ON[ 1,.OOAN $4Vnllt ~ ~ . ~f~ ~ rv.-:~,r~~. - ~~ " .. . p ~~ . _ ~ ~'% PNil.AOCL~'H1A.Pt/JNiYLVANiA liitp3' .~ . f .- r' 7 .iA' 7 w~ t ~ y. ~ ~~ '4 x*~ ' "`T"1~'+Y' '` '~' . C Q ~ ,r,~~ ~~.. .., r , - - ~ `,~ . ~ ,~ r .... ACCOUNT N r ~ ( ROb rt M: `.Mumma II ~ ~ . _ : r O. ,: - •' ' ~~` ~ ~`:;.; ~ 135 3/2G/87 ° • ."``~~4838 ~. T ~ ~ X32QBob IArv ~ ' .y , r- .. J[~S'I,-'yi+'" ~}.' .''i+n'!~# '~ S ~ {'y ~• ' PLO, BOX 225 tL[A9i~;ENp.YOUR REMIT-7ANCfi 70t5: -' ' ~ Harrisburg, PA 17105 ~ .. ~, .,y .ti::, : s .MoR~AK.'Lew~s!~ 6 QCx~us;= . "~:' . r O. BOX 8600 3-bOSO'. ~.~.a..,.:;~.- ' 'Y 1'HfLADELlNiA i ~~' . ,'~aj _tTA f y. +'F~~ .1.~ 1 b t ~~ j ~ ~ .1.^`: =i ,. :.~: ~,n $20', 000.00 Ot11GlNAL - RGTAIN C~JR YOUPt RlCOROS ' ., ~ ?r ;,: r ~~ f ''",~ ,:• < ...., ;. ;~,t! DETAI .,,; v, :r:" 'lS~~',~.~... .~~. ,•.):` .'}r'.i" ,,~' ..:. .~ .S".71"~/ Ir!~l774 fi'. 1~2LV~VVV,~V•V~•..._....I,~.~„,, ~~ :~{r'- `' y .»,......._Tvt~ntSt ~1SCLUSdu~_.I?Si.37,R.t'.A.Land 4a C@1'~~ ..~.....«.,....«...... ---- ---- «.._......:.:_ ., • ~ ~ - ,: ~ : • tG-: A ~~ ~ N T E R E D APR 1 1887 ~ ~~ . ~ ~.~ ., . >:;acs Morgan, Lewis i Socki[ua ~ ~ ~~' of Counselors ~t Laa ~ ' T .~ ' ~~ ~ ~~~ 1 ~~~~ ~.03i30115~.5~. ~L i2Z6Z 5~' R-~M~ S~Q 1`78 Wn.SNING7QN NCw YoaK LOS ANG ClCS AF2TMUR l.. Kt.EsN pug o•w K+ ~2+S+96 J•5 ~~+ MORGAN, LEWlS S BOGKtUS COVNSCf•Oas AT l.Aw 2x40 ONE L06~+N $OUAtiE PHi6A0E6rMtA,PENNSYLVANiA 19103 Ti r.tr»o«c{2+S) 9d 3-8000 Cwau Aoowiss taORt.E80GK August 14, 1987 Personal and Confidential Mr. Robert M. Mumma, II i{imbob, Inc. P.O. BoX 2255 Harrisburg, PA 17105 Dear Bob: MtAM1 FEAR a+SdVaG ~oNOON Enclosed is a check in the amount of $6,100, representing the difference between the $20,000 paid on account and the charges recorded an .your matters. The time was about equally divided between the disclaimer matter, which as you know presented some very difficult issues, and tax and estate planning generally for you, including working up drafts of a '~Crummey"' trust far inter vivos gifts of closely held company stack, an irrevocable life insurance trust and a Will. You said you will be consulting other counsel to proceed with your estate plan. The draft documents you have are not final and further work will be required. I would be happy to discuss the thinking behind the drafts with your new counsel. As I said on the phone, I atn strains within your family develop and will be resolved and family harmony re; love and affection the Mommas have far be highly unfortunate if disagreements investments were to divide the family. terribly sorry to see the hope all controversies stared soon. I know the one another and it would over business policy and ~iSTA' ice-. ~ ~-,~ 3 -~ ~ MoRGAN. ~.f:Wl$ d, BOCKIVS Mr. Robert M. Mumma, II August 14, 1987 Page 2 Pam Wilford joins me in wishing you well. If circumstances change, and it would no longer be inappropriate for ML&B to counsel you, we would be most happy to serve you again. Sincerely yours, Arthur L. Klein / rkb Enclosure bc: wiiliam E. Zeiter 0 o ' ^ T i f~ S 3 } r t 1 ~ ,~ 7 ~ y a d " n ti ~- r s• ~' w r d ._ D fl i fl r •• .- 0 .~ z >s a-i 3 O ~nn 4~ __ p 7 N _ c ~,,,, z ~z N Q+ CA o C itt ~~ ~ ~- ~ . ~, - r~ _ X ~ -~ ~Zi x•1 ~ ... 1 •~ in 1 ~ ~ ~~ , C i a ;J ~ r. _ ~ : . j ~ ~ , C ~ ~" 1 ., ~„ q v .. ~ ~ ~. ,}'~l POWER OF ATTO,RNE~t ' KNOW ALL MEN BY THESE PRESENTS, the Undersigned, ROBERT M. MUMMA, II of , doing business as MUMMA REALTY ASSOCIATES, being one of the owners of an undivided interest in the real property hereinafter described by virtue of a deed dated December 19, 1987 from Kim Company and Pennsylvania Supply Company of Harrisburg, Pennsylvania to MUMMA REALTY ASSOCIATES, and duly recorded in the appropriate Offices for the Recording of Deeds, has made, constituted and appointed and by these presents- does make, + constitute and appoint MUMMA REALTY ASSOCIATES, INC. a Pennsylvania corporation, my true and lawful attorney-in-fact (hereinafter called "'attorney"') , for me and on my behalf and in my name, place and stead: To grant, bargain, sell, transfer, set over, convey, exchange and dispose of, in whole or in part, all my right, title and interest in and tv that certain_ real property described in Exhibit A hereto attached and ma3"e a~ part ~liereof, (hereinafter called the "Property"') for any price or consideration, and upan any terms, reservations, restrictions ar conditions as my attorney shall deem appropriate, and to execute and deliver in my name such agreements, deeds, conveyances and other instruments as are necessary or desirable in connection therewith; To manage, let, sublet and demise the Property, to enter and re-enter upon the same, taking possession thereof from time to time, to give notices to quit and the like, to collect any and all rents, issues and profits due and to became due, with power to institute actions at law and suits in equity in my name and to conduct all manner and procedures at Iaw with respect thereto; and To do, in addition to the powers herein specifically set forth, all other acts or things whatsoever and to exercise all other powers in my behalf, regardless of whether or not referred to hereinbefore as fully as though herein specifically expressed, which in the sole discretion of my attorney may be deemed advisable to be done far me in connection with such grant, bargain, sale, transfer, set over, conveyance, exchange or disposition, as fully and completely as I might or could da personally, giving and granting unto my attorney for the said purpose, full and complete power and authority to have, use and take all lawful means in my name and for the purposes aforesaid. I hereby revoke ail other powers of attorney previously given by me, to the extent inconsistent herewith. IN WITNESS WHEREOF, I have hereunto fixed my hand and seal on this day of June, 1987. Witness: Robert M. Mumma, II ~()U:1'79 COMMONWEALTH OF PENNSYLVANIA COUNTY OF On this day of 1987, before me, a Notary Public in and for said County, personally appeared Robert M. Mumma, II to me known (or satisfactorily proven} to be the individual described in and who, executed the foregoing power of attorney and acknowledged to me that he executed the same for the purposes therein contained. iN WITNESS WHEREOF, I hereunto set my hand and official seal. (NOTARIAL SEAL) Notary Public My Commission expires: - sa~~8~ MORGAN, LEWIS S DOCKiUS WAS N/NGTON GOUrISCLOR$ AT ~,AW NCw YOart 2000 OhtE LOGAN SoUARE LOS AN4CtE5 pN/tAOELPFIIA.PENNSYLVANIA l91p3 TC ~E P«O«[ :i~S~ 96~•S000 Caic ~ooACas. MORtE80CK %4 C1 8]-s 3~5 LISA ;"~ MORG.~N November 10, 1986 George Hadley RE: Letter of intent to RMM II Dear George: ~ v~rtr~ar+~~~ ~ ~ ~~~~ i to»ao» Please find enclosed a proposed letter of intent to Bobby as per our conversation of last week. Art and I jointly drafted this today and would appreciate your comments and suggestions. I will call you toward the end of the week to discuss it with you. In the meantime, if you have any questions concerning the letter, please do not hesitate to call. I appreciated the article form the Wall Street Journal. Thank you for taking the time to send it to me. Very truly yours, ~~ Lisa M, .'Korgan LMM/ ltt cc: Mrs. Robert M. Mumm« Arthur L. Klein, Esquire sooocs ESTATE OF ~ RoaeFrr M. Mutv~t~s- {fip~!a~~'p ~''~ Box 333t ~~ HAwA~sauwC. PA. 17105 EX[CLYRIXE! gARBAAA MCK. MOMMA t..t$A MOMMA MORGAN _ Robert M. Mumma II Kimbob, Inc. P.O. BOX Harrisburg, PA Dear Bobby: Lisa and I, as executrixes of the Estate of Robert M. Mumma, would welcome an offer from you for the purchase of the Pennsy Suppiy business. In our minds, your purchase of the business would certainly be in sine with your father's intentions. Currently, we are involved in valuing the business for estate and inheritance tax purposes with the help of George Hadley. You are free to discuss with George the pertinent facts and figures which might help you in putting together your offer. We do not intend to offer the company for sale to any third parties until you have had an opportunity to study the situation and present us with a proposal. ' Finally, this letter is merely an expression of our present intention, and we do not intend to be ' legally bound hereby. Sincerely, Barbara McK. Mumma saaaos MORGAN, LEWiS & BOCKIUS WASHINGTON COUNSELORS AT LAW MIAMI NEW YORK 2000 ONE L.O GAN SQUARE HARRisBURG LOS ANGELES Pfi1LADELPNtA.PENN5YLVANIA 1910) LONOON TCIEPMOw t:(2t S) D63-5000 C~wIC Aoowtsy MORLE80CK TC~tt: 83~~3~5 ARTHUR L-KLEIN D~•t o~w to i2~5) Si83'3u• January 9, 1987 FEDERAL EXPRESS William F. Mattson, Esquire Mattson, Deardorff, Williams & Otto Ten East High Street Carlisle, PA 17013 Re: Estate of Robert M. Mumma, Deceased Disclaimer by Robert M. Mumma, II Dear Pill: Enclosed please find two signed copies of Bob Mumma's Disclaimer with respQct to his remainder interest in the two trusts under his father's Will. As we discussed, following confirmation by phone from me that bob Mumma wishes to follow through with the disclaimer. you. will file one of the signed copies of the Disclaimer with the Clerk of the Orphans' Court division on Monday, January 12, 1987, the last day on which a timely "qualified disclaimer" can be made by a beneficiary under the Wili of Robert M. Mumma. You will, of course, obtain proof of filing. I will have copies of the Disclaimer delivered to the Executors, Kim Mumma and Lisa Morgan, on Monday. Thank you again for all of your help. Sincerely yours, /~ Arthur L. Klein /rkb Enclosures cc: Robert M. Mumma, II Barbara McK. Mumma Lisa M. Morgan, Esq. MORGAN. LEW1S & BOGKIUS WAS H)N GTON CdUN5Et0 AS AT L.AMr M/AM1 NEW YORK 2000 ONE LOGAN SQUARE HARRISBVRG (.OS ANGECE5 f7HILA0ELPHiA,PENNSY LVANiA f9i03 LONDON TC l[~fsOlaG(275) 9635000 CA~It AD O.1t33: MORLEBOCM Ttt[><~ 83.1316 ARTMVR I..KLEtN Mrs. Barbara McK. Mumma Mrs. Lisa M. Morga n, Executrixes, Estate of Robert M. Mamma P.O. Sox 3331 Harrisburg, PA 17105 January I2, 1987 Re: Disclaimer by Robert M. Mumma, II Dear Kim and Lisa: Enclosed is a copy signed by Bob of his irrevocable and unqualified disclaimer of his entire interest in both trusts under the Will of Robert M. Mumma. In accordance with the requirements of the Pennsylvania Probate, Estates and Fiduciaries Code, Bill Martson in Carlisle is filing a signed copy of the Disclaimer with the Clerk of the Orphans' Court division of Cumberland County. Another signed copy of the Disclaimer is also being delivered, by hand, today to Lisa in Philadelphia. Sincerely yours, /rkb Enclosure Arthur L. Klein cc: Robert M. Mumma, II William F. Martson, Esq. bcc: W. Wesley Nagle, Esq. Joseph A. O'Connor, Jr., Esq. Francis J. Mirabello, Esq. COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION Estate of Robert M. Mumma, Deceased No. 21-86-398 DISCLAIMER BY ROBERT M. MUMMA, II WHEREAS, ROBERT M. MUMMA ("the Testator"), of the Borough of Wormleysburg, County of Cumberland and Commonwealth of Pennsylvania, died on April 12, 1986, leaving a last Will and Testament dated May 19, 1982 with a Codicil thereto dated October 12, 1984 (hereinafter "the Will"); and WHEREAS, the Testator was survived by his wife, BARBARA McK. MUMMA, and all four of his children, ROBERT M. MUMMA, II, BARBARA N1. McCLURE, LINDA M. ROSS and LISA MUMMA MORGAN; and WHEREAS, under Article SEVENTH of the Will, the Testator bequeathed to his testamentary trustees an amount equal to fifty percent (50$) of his total gross estate to be held in trust exclusively for the benefit of his said wife during her lifetime; and WHERE AS, in the fifth paragraph of said Article SEVENTH, the Testator directed that upon the death of his said wife, "the principal of this Trust, as it is then constituted, shall be paid over by my surviving trustee unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. ROSS and LISA M. MUMMA, free of trust, share and share alike, per stirpes and not per capita"; and WHEREAS, under Article EIGHTH of the Will, the Testator gave his residuary estate to his testamentary trustees to be held in trust exclusively for the benefit of his said wife during her lifetime; and WHEREAS, under the second paragraph of Article EIGHTH, the testator directed that upon the death of his said wife, "the principal of this (residuary] trust, as it is then constituted, ...shall be paid over by my surviving trustee...unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. ROSS and LISA M. MUMMA, share and share alike, per stirpes and not per capita"; and WHEREAS, the undersigned, ROBERT M. MUMMA, II, wishes to make a qualified disclaimer, within the meaning of Section 2518 of the Internal Revenue Code, of his entire interest in bath such trusts; and WHEREAS, ROBERT M. MUMMA, II has not accepted an interest in either of such trusts nor any benefits therefrom; NOW, THEREFORE, ROBERT M. MUMMA, iI, for himself, his successors and assigns, intending to be legally bound, does hereby, pursuant to Section 6201 of the Pennsylvania Probate, Estates and Fiduciary Code, absolutely, irrevocably and unqualifiedly renounce and disclaim all right, title and interest in and to the principal of the trust under Article SEVENTH of the Will and the principal of the trust under Article EIGHTH of the Will and refuses to accept any benefits whatever under said Articles of the Will. o.~.a: 901 OB RT M. 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OElL •~•.~~ lL1ZEx 1J a oa :~.~_...._ Q i C1D) (u3 .. zo:aL at stir: ~ izLLEa •r: D sz: r e IN IZF; 1;'STATE Ul~~ IN THE CU~C.iT~T OJ~ COMMON PLEAS OJ~~ 33 RURL•sRT M.:MUMMA. CU.MBERLANI) COUNTY, P~~f+~11'~A~~ OP,7'H.A,NS~ GOUR'I' I7JVISION ,~.. . NU.21~86-39E ~' ca'J~~~r~ ... O~py~Qr,, :~ tur}L~~Tp~ " .,r:: ` ORDER of couRT C~~~~:~~~':..~ .,` ~. . AND NOW, tbi5 ] St'' day of September, 2008, upon consideration of the Emergency Mation Ta Prevent Public Sale of Real Estate by T'a~ Claim Bureau I7ue to Nonpayment of Delinquent Taxes by the ExecutriceslI'rustees, aRule is hexeby issued upon all interested parties to show cause why the relief requested should not be granted. RtJLl/ RETURNABLE on or before 12:fl0 Haan on Friday, September 19, 24U8. $Y THE CCIURT; Taylor P. Andrews, Esq Auditor Robert M. Mumma, zl 840 NJarket Street Suite 164 Lerrzoyne, PA ]. 7U43 Pro Se Robert M. IVlumma; II 6880 S.E. Harbor Circle Stuart, FL 349961968 .., ,: ~~ ~, ~" ,~% ~~~ LJ~ {,..,~ ,~ . i ~% Rot-ert .M. Muin.rna; II Box 58 Bowm~ansdale, PA 1.70U8 Cieor~~ $. I/aller. Esq. 10 Easst IIigh Street Carlisle, PA J 7013 1=3rady I,. Careen, 3,;sq. Morgan, Lewis &)3ocl,Cius, LLI' J 70 J Market Street Philadelphia, PA 19103-292J Lindfl Mumma Roth P.Q. Box 480 Mechanicsburg, PA 17(.)55 Pro Sc Ptalph A.. ,l~acobs, Esq. i 51 S Market Street Suite 705 Philadelphia,l'A 19102 :rC ~,~ ~ ~~~~ WAS NINETON NCw YpaK LOS /1NGCLCS AIt7HUR l..Kl£IN January b, 1987 LONOON~ f~~ ;~ Cx/ { i t ~~ lJ" Snowmass Village, Colorado 82615 J Re: Qualified Disclaimer f I to Estate of Robert M. Mum ~ Mr. Robert M. Mumma, II 26 Stanton Lane 1 / 111 FEDERAL EXPRESS Dear Bob: fifi~~ K-i Enclosed please find five copt~e`~s of a document which you may use to make a "qualified your interest in your dad's estate. v ~, ~~ ~ ti ~~ C~ s sclaimer disclaimer" of '~ As we have discussed, if you make a disclaimer of your interest in your dad`s estate, then upon your mother's death the share of your dad's estate which would otherwise pass to you will pass to your issue. By making a "qualified disclaimer" under IRC S25I8, you will not be making a taxable gift. Furthermore, since your dad died before enactr.:ent of the Tax Reform Act of 1986, the new generation skipping tax imposed by the Act will not apply when distribution is made to your issue. Accordingly, a qualified disclaimer of your interest in your dad's estate will result in the share of his estate which would have passed to you passing to your issue without any further wealth transfer taxation (other than the estate tax on your mother's death) . A ~ ~ ~f~~ j Z~•Z~~~' Section 2518 of the Internal Revenue Code provides that the term "qualified disclaimer" means with respect to an interest under a Wili an "irrevocable and unqualified refusal" to accept the interest but only if -- (i) such refusal is in writing,.{ii) 5~t~U81 MORGAN. LEWIS ~ BOCKtUS CCUNS6lOR! A7 LAW MI,pMI 2000 ONC ~.O C3 AlN SQUAAt HARR+58uRG PHit.t.0£L1~'HiA,F~ENNSYLVANtA 19103 rctc.«owcaz+sl vat-soon C.rcc AOORCSi h10RL£80CN rccca as-+a+s D~~ t A TRUE COPY FROM RECORD " 'imony wherot,l hereunto .. _. my hand and the seal of said Court at Carlisle. PA 'mig`,i~~y~ eshti 2p Clerk of the Orphans Court Cumberiand County BARBARA McR. MUMMA AND IN THE COURT OFC OMMON ,LEAS OF LISA M. MORGAN, individually CUMBERLAND COUNTY, PENNSYLVANIA and as executrixes of the CIVIL ACTION - EQUITY ESTATE OF ROBERT M. MUMMA, Deceased, . Plaintiffs V . ROBERT M. MUMMA, II, NO. 66 EQUITY 1988 Defendant BARBARA McR. MUMMA AND IN THE COURT OF COMMON PLEAS OF LISA M. MORGAN, individually CUMBERLAND COUNTY, PENNSYLVANIA and as executrixes of the ORPHANS' COURT DIVISION ESTATE OF ROBERT M. MUMMA, . Deceased, . Plaintiffs V . ROBERT M. MUMMA, II, . BARBARA M. MCCLURE, AND . LINDA M. ROTH, NO. 21-86-398 Defendants . IN RE: DEFENDANT ROBERT M. MUMMA, II'S MOTIONS TO DISQIIALIFY MORGAN, LEWIS & BOCRIUS FROM LEGAL REPRESENTATION OF THE ESTATE OF ROBERT M. MUMMA, DECEASED BEFORE SHEELY, P.J. ORDER OF COURT ~.; AND NOW, this / ~ ~~ day of February, 1989, defendant's motion to disqualify the law firm of Morgan, Lewis &.. Bockius from legal representation of the Estate of Robert M. Mumma, deceased, is DENIED. By the Court, i _ ~,. arold E. Sheely, P.J. ~ ,.,~- ~' `T Thomas M. Kittredge, Esquire John F. Stillmun, III, Esquire William F. Martson, Esquire For .the Plaintiffs John B. Fowler, III, Esquire Jon A. Baughman, Esquire Anthony Vale, Esquire For the Defendants :pbf f, ;-._ .J.' vm BARBARA McR. MUMMA AND LISA M. MORGAN, individually and as executrixes of the ESTATE OF ROBERT M. MUMMA, Deceased, Plaintiffs V ROBERT M. MUMMA, II, Defendant BARBARA McK. MUMMA AND LISA M. MORGAN, individually and as executrixes of the ESTATE OF ROBERT M. MUMMA, Deceased, Plaintiffs V ROBERT M. MUMMA, II, BARBARA M. McCLURE, AND LINDA M. ROTH, Defendants . IN TAE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - EQUITY NO. 66 EQUITY 1988 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA . ORPHANS' COURT DIVISION . NO. 21-86-398 IN RE: DEFENDANT ROBERT M. MUMMA. II'S MOTIONS TO DISQIIALIFY MORGAN, LEWIS & BOCKIDS FROM LEGAL REPRESENTATION OF THE ESTATE OF ROBERT M. M[JMMA, DECEASED BEFORE SHEELY, P.J. OPINION AND ORDER OF COIIRT On January 25, 1989, a hearing was held before this court concerning Robert M. Mumma, II's (Mr. Mumma) motion to disqualify Morgan, Lewis & Bockius (Morgan, Lewis) as counsel for plaintiffs in both of the above-captioned actions. What follows is this court's findings of facts, discussion, and conclusions of law . ~~ FINDINGS OF FACTS I. Robert M. Mumma, II, is a defendant in both of the above actions. 2. The decedantr Robert M. Mumma, died testate on April 12, 1986. 3. On June 5, 1986, letters testamentary for the Estate of Robert M. Mumma were granted to Barbara McK. Mumma and Lisa M. Morgan as executrixes under instruments dated May 19, 1982 and October 12, 1984. 4. Morgan, Lewis represents the plaintiff executrixes, Barbara McK. Mumma and Lisa M. Morgan in both of the above actions and have been legal counsel to the estate since the death of the decedant. 5. At a meeting with Arthur Rlein of Morgan, Lewis in May or June, 1986, at which all members of the immediate family were present, Mr. Rlein explained in detail the provisions of the will and discussed with the family various suggestions and options to pursue regarding the administration of the estate. 6. Mr. Rlein of Morgan, Lewis attended this meeting as legal counsel for the estate; however, he did not specifically state that he only represented the estate. ?. During the meeting. Mr. Rlein discussed with all present the possibility of the children disclaiming their interest under the will in favor of their children in order to gain some tax benefit by avoiding "double" taxation. 8. On August 21, 1986, Mr. Mumma met with Mr. Klein in order to discuss his own personal estate planning needs. NO. 1526 CIVIL 1988 9. As a result of that meeting, Mr. Mumma retained the legal services of Morgan, Lewis for his own estate planning needs. 10. Mr. Rlein began working on Mr. Mumma's estate planning needs, however, by letter dated September 5, 1986, Morgan, Lewis through Mr. Klein, informed Mr. Mumma that Morgan. Lewis represents the Mumma Estate by stating: One matter we discussed which I did not note in the memorandum is that if you or any of your companies were to become involved in negotiations with your father's Estate to buy the operating company (or anything else for that matter), Morgan, Lewis & Bockius would represent the Estate and your would obtain other counsel. I know that Lisa and your mother are satisfied with that understanding and you indicated that you were also. Defend ant's Exhibit No. 1. 11. Mr. Mumma understood that Morgan, Lewis was only representing him concerning his "estate planning and related matters." Mr. Mumma understood that he would need separate legal counsel if he or any of his companies were to enter negotiations with the Estate to purchase the operating company (Pennsy Supply, Inc.) or to purchase anything else for that matter from the Estate. 12. Mr. Mumma provided Mr. Rlein with documentation of his financial assets and liabilities in order to facilitate his estate planning. 13. These statements and documentations of Mr. Mumma's financial status were returned to Mr. Mumma. 14. Mr. Mumma has substantial and extensive experience with attorney-client relationships as he has retained at least ~¢ -~, -3- NO. 1526 CIVIL 1988 twelve different attorneys to represent him concerning personal as well as business matters. 15. In early January, 1987, Mr. Mumma and Mr. Rlein had a discussion concerning Mr. Mumma disclaiming his interest under his father's will in favor of his children. 16. Mr. Mumma authorized Mr. Klein to draft a disclaimer of his interest for his review. 17. Mr. Rlein informed Mr. Mumma by letter, dated January 6, 1987, that for the disclaimer to be effective, it must be filed with the Clerk of the Orphans' Court Division of Cumberland County. (Defendant's Exhibit No. 7). 18. Mr. Mumma executed the qualified disclaimer of his interest on January 6, 1987, (Plaintiff's Exhibit No. 1) and said disclaimer was filed with the Court of Common Pleas of Cumberland County, Orphans' Court Division on January 12, 1987, in Book 115 at Page 20 with the knowledge and authorization of Mr. Mumma. (See, Plaintiff's Exhibit No. 1 and No. 2). 19. On March 26, 1987, Morgan, Lewis received a retainer in the amount of $20,000 from Mr. Mumma. The $20,000 was drawn from the corporate account of Rimbob, Inc. (Defendant's Exhibit No. 8). 20. In November, 1986, Morgan, Lewis counseled the executrixes on the advisability of liquidating two family companies prior to the end of 1986. The two companies were Kim Company and Pennsylvania Supply Company. 21. Mr. Mumma was vice-president of both companies in November, 1986, and as such, was their senior officer. '`~ ~. -4- NO. 1526 CIVIL 1988 22. The shareholders of Rim Company were as follows: Pennsylvania Supply Company (7,241 shares), Mr. Mumma (334 shares), Mrs. McClure (333 shares), Mrs. Roth (333 shares), Mrs. Morgan (333 shares), and Mrs. Mumma (106 shares). 23. The shareholders of Pennsylvania Supply Company were as follows: the decedent (700 shares), Mr. Mumma (3 shares),-Mrs. McClure (3 shares), Mrs. Roth (3 shares), and .Mrs. Morgan (3 shares). 24. Both Rim Co. and Pennsylvania Supply Company held substantial real estate although they were non-operating. 25. In November, 1986, Morgan, Lewis met with the shareholders of the two above named companies to discuss the possible liquidation of the companies. 26. Present at the meeting in addition to all the shareholders, were Mr. Rlein and Mr. Hadley, the family accountant.. 27. At the meeting Mr. Mumma raised questions concerning the possibility to liquidating the companies while maintaining their corporate shell or identity for possible future use. 28. Ali family members/shareholders were concerned with the answer to the above questions although Mr. Rlein could not answer the questions without conducting some legal research. 29. After conducting legal research concerning Mr. Mumma's various questions, Mr. Rlein sent Mr. Mumma a letter dated November 11, 1986, with a blind carbon copy going to, among others, the executrixes of the estate. The letter contained ;~~~; -5- N0. 1526 CIVIL 1988 answers to Mr. Mumma's questions regarding the feasibility and mechanics of the liquidation of the corporations as proposed by Mr. Mumma. (Defendant's Exhibit No. 2). 30. Mr. Klein's associate, Martha E. Manning, sent Mr. Mumma a letter dated December 3, 1986, at Executrix Morgan's request in which Section 1103 of the Pennsylvania Business Corporation Law relating to the dissolution of corporations was relayed to Mr. Mumma. 31. In December, 1986, William Skinner, an associate in the corporate department of Morgan, Lewis, met in Harrisburg with the executrixes and Mr. Mumma to review a draft of a tenants-in-common agreement which concerned the handling of the liquidated assets of Rim Company and Pennsylvania Supply Company. 32. Mr. Skinner appeared at this meeting as legal counsel for the estate, however, he did not mention that Morgan, Lewis was not acting as legal counsel of the shareholders. 33. After the meeting was under way, Mr. Klein participated in this meeting via telephone from Philadelphia to answer questions concerning the proposed agreement and certain changes were suggested by Mr. Mumma. 34. The changes suggested included the right of first refusal provision, which would give any shareholder (who would become a tenant-in-common) the right to buy the interest of any other shareholder who wanted to sell his or her interest. The other suggested change pertained to the ability of the tenant-in- common to pledge their interest, to grant gifts, etc. N0. 1526 CIVIL 1988 35. Morgan, Lewis sent all shareholders including Mr. Mumma a revised copy of the tenant-in-common agreement under cover of letter dated March 11, 1987 (Defendant's Exhibit No. 4). 36. In December, 1986, Mr. Mumma executed a power of attorney to enable the liquidation of the corporations to proceed while he was in Colorado during the month of January, 1987. 37. During the Spring of 1987, Morgan, Lewis met with the tenants-in-common at the Estate's request to discuss drafts of tenants-in-common agreements as well as the management agreements for the jointly-held properties. 38. During a February or March, 1987 meeting with some of the tenants-in-common present, Mr. Mumma signed two unattached signature pages for the draft agreements. These pages were later attached to the final agreements of the tenants-in-common. 39. In July, 1987, the executrixes called a meeting at Mrs. McClure's home which was attended by all of the tenants-in- common. The meeting was called to discuss the sale of some property in Lemoyne, Pennsylvania owned by the tenants-in-common. 40. Mr. Mumma opposed this sale. However, he agreed to sign a power of attorney to permit the sale only upon obtaining the agreement of all the shareholders of Nine Ninety- Nine, Inc. (999) that he would have right of first refusal to buy Pennsy Supply, Inc. 41. No representative of Morgan, Lewis was present at this above meeting. 42. After the meeting, Executrix Morgan consulted with Mr. Rlein who advised against the granting of the right of first refusal to Mr. Mumma. NO. 1526 CIVIL 1988 43. Morgan, Lewis continued to represent Mr. Mumma with regard to his personal estate planning needs until August 14, 1987, at which time Mr. Mumma advised Mr. Rlein that he would seek other representation. (Defendant's Exhibit No. 9). 44. Morgan, Lewis, by letter dated August I4, 198.7, returned $6,100 from the $20,000 retained on Mr. Mumma's account after deducting charges for work performed on his personal estate planning matters as well as the disclaimer matter. (Defendant's Exhibit No. 9). 45. Mr. Mumma was not charged for any consultation, legal research or work performed by Morgan, Lewis concerning the tenants-in-common agreements or any other matter of the Mumma Estate. {Plaintiff's Exhibit No. 3) . 46. On December 27, 1988, a complaint for declaratory judgment and relief was filed by the above plaintiffs at 21-86- 398 of the Cumberland County Court of Common Pleas, Orphans' Court Division. 47. The complaint generally seeks declaratory judgment under 42 Pa. C.S.A. §7533 and 20 Pa. C.S.A. X711 that Article Thirteenth of decedent's will does not bar plaintiffs from selling shares of Nine Ninety-Nine, Inc. (999) and Hummelstown Quarries, Inc. (Hummelstown) owned by the estate to a publicly traded overseas entity. 48. Morgan, Lewis represents the plaintiffs in this current matter before the Orphans' Court. 49. On December 27, 1988, Executrixes Barbara McR. Mumma and Lisa M. Morgan petitioned this court for the Estate of .« -8- N0. i526 CIVIL 1988 Robert M. Mumma, deceased, for declaratory judgment under 42 Pa. C.S.A. §7533 and for other relief under 20 Pa. C.S.A. Subch. 33C [sic] and X7133. 50. The petition generally seeks a confirmation of the petitioners' authority to sell 999 and Hummelstown and .certain other related real estate owned by the estate and Mumma family members and for an order under 20 Pa. C.S.A. Subch. 33C [sic] §7133 that the estate may submit any issues nonseiling shareholder raises in connection with the sale of his/her interest in 999 and Hummelstown to voluntary judicial arbitration in the Court of Cammon Pleas of Cumberland or Dauphin County. 51. Morgan, Lewis represents the petitioners in this matter. 52. On December 27, 1988, a complaint in equity and declaratory judgment at No. 66 Equity 1988 was brought by the above plaintiffs against the defendants in the Cumberland County Court of Common Pleas. 53. The complaint generally seeks a declaratory judgment declaring that the right of first refusal asserted by Mumma with respect to Pennsy Supply, Inc.,. is invalid and that the Mumma Realty Associates power of attorney executed by .Mumma, is valid and enforceable and entitles plaintiffs to act as attorney in fact to execute in Mumma's name the deeds and other documents necessary to complete the sale of Mumma Realty Associates I and Mumma Realty Associates II properties to a proposed buyer; and finally declare that the MRA I and MRA II agreements are valid, enforceable and binding on Robert M. Mumma, NO. 1526 CIVIL 1988 II and enter an order requiring Mr. Mumma to specifically perform his duties and obligations under the MRA I and MRA II agreements. 54. Morgan. Lewis represents the plaintiffs in this equity matter. 55. On December 29, 1988, Robert M. Frey, Esquire was appointed by this court as Guardian Ad Litem for the minor persons interested in the estate of Robert M. Mumma. deceased, with authorization to represent said minor persons in all matters related to the sale of 999 and Hummelstown and the actions for declaratory judgment and other relief pertaining thereto to actions now pending before this court and in any further proceedings in the Court of Common Pleas of Cumberland or Dauphin County, Pennsylvania. 56. Mr. Mumma does not dispute he intends his qualified disclaimer to be effective, nor does he claim that it is now invalid. DISCIISSION Mr. Mumma's motion to disqualify Morgan., Lewis as legal counsel for the plaintiff in the pending litigation draws our attention to the Rules of Professional Conduct (Rules) as adopted by the Pennsylvania Supreme Court. The Rules became effective on April 1, 1988 and, as such, superseded the former Code of Professional Responsibility (Code). .Defendant's motion is based on the argument that Morgan, Lewis represented Mr. Mumma in prior matters which were substantially related to the pending Orphans' Court and Equity matter. In essence, Mr. Mumma alleges that a conflict of {~_ -1©- NO. 1526 CIVIL 1988 interest exists in Morgan, Lewis' continued representation of the plaintiffs. Mr. Mumma points to Rule 1.9 as his authority for his motion. Rule 1.9 reads as follows: Conflict of Interest: Former Client A lawyer who has formerly represented a client shall not thereafter: (a) represent another person in the same or substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after a full disclosure of the circumstances and consultation; or (b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known. Rule 1.9, Rules of Professional Conduct, 42 Pa. C.S.A. (Purdon Supp. 1988). In considering a motion for disqualification of a party's legal counsel, courts are reluctant to grant such a serious remedy because when presented with such a serious request, courts must be careful "to preserve a balance, delicate though it may be, between an individual's right to his own freely chosen counsel and the need to maintain the highest ethical standards of professional responsibility." Slater v. Rimar, Inc., 462 Pa. 138, 338 A.2d 584, 590 (1975). Because motions for disqualification are at times interposed for tactical reasons, courts must approach such motions with caution as a client whose attorney is disqualified incurs a loss of time and money in being compelled to retain new counsel who in turn have to become ,~ a. ~ -ll- ~:., N0. 1526 CIVIL 198 familiar with the prior comprehensive investigation. which is the core of modern complex litigation. The client, moreover, may lose the benefit of its long-time counsel's specialized knowledge of its operations. See, a-g•. Government of India v. Cook Industries. Inc.. 569 F.2d 737 (2nd Cir. 197$); Ries v. MTD Products, Inc.. 14 D.&C.3d 566 (1980). Pennsylvania's appellate courts have not directly addressed conflicts of interest issues under the newly adopted Rules. However, the comment to the Rules explains that Rule l.9 merely incorporates the basic elements of Canons 4 (client confidentiality), 5 (loyalty to client), and 9 (appearance of impropriety) contained in the former Code. Thus, the Rules hopefully provide clearer guidance to both the bench and bar when faced with questions of conflict of interest with a former client than was provided by the Code. Under Rule 1.9 the test for disqualification focuses on the analysis of whether the subject matter of the representation of the former client and the present client are "substantially related." In raising a conflict of interest challenge, the burden- is on the moving party to establish a violation of Rule 1.9. See, Pa. Power & Light v. Gulf Oil Corp., 74 D.&C.2d 431 (1975); INA Underwriters Ins. v. Nalibotsky, 594 F.Supp. 1199 (E.D. Pa. 1984). A court in addressing the "substantial relationship" issue must answer the following questions: 1. Did the lawyer have an attorney-client relationship with the former client? ~~~~ -12- NO. 1526 CIVIL 19813 2. What was the nature and scope of the prior representation at issue? 3. What is the nature of the present lawsuit against the former client? See, INA, su ra, Nemours Foundation v. Gilbane, Aetna, Federal_ Ins.,. 632 F.Supp. 418 (D. Del. 1986). Under the present facts, there is no dispute that an attorney-client relationship existed between Morgan, Lewis and Mr. Mumma. Thus, the thrust of our analysis moves onto the nature and scope of that prior representation. Mr. Mumma argues that Morgan, Lewis represented him not only in his own personal estate planning needs and disclaimer needs, but so, too, did Morgan, Lewis represent him with regard to the negotiations and liquidations of Rim Company and Pennsylvania Supply Company and the formation of the related tenancy-in-common. We do not believe that the facts of this case, nor the applicable law in regards to this matter, adequately supports Mr. Mumma's argument. In reaching this conclusion, our attention is first drawn to the letter, dated September 5, 1986, in which Mr. Klein clearly states to Mr. Mumma the terms of Morgan, Lewis' representation. (Defendant's Exhibit No. 1). In that letter, Mr. Klein clearly stated that he was employed by Mr. Mumma solely for estate planning purposes and disclaimer purposes under Mr. Mumma's father's will. Moreover, Mr. Mumma was given express notice that Morgan, Lewis would not act as Mr. Mumma's attorney if Mr. Mumma entered into negotiations with the Estate for the purchase of any Estate assets. Thus, Mr. Mumma had express notice that Morgan, Lewis' duty of loyalty and representation '~~ ~ -13- NO. 1526 CIVIL 198ts attached to their representation of the Estate and that no attorney-client relationship could exist with Mr. Mumma if he sought to purchase Estate assets. On further review of the facts, it is clear to this court that Morgan, Lewis' attorney-client relationship with Mr. Mumma did not expand beyond the understanding of the above-noted September 5, 1986 letter. (Defendant's Exhibit No. 1). Although there were meetings (both in Harrisburg and in Philadelphia) in which Morgan, Lewis participated, those meetings were attended at all times by the executrixes of the Estate and Morgan, Lewis as legal counsel for the Estate. Even the correspondence that Mr. Mumma received following some of these meetings advised him that Morgan, Lewis was writing at the request of the Estate with regard to questions concerning the dissolution of some corporations in which Mr. Mumma was a shareholder. (See Defendant's Exhibit No. 3). We do note, however, that at some of these meetings Mr. Mumma, upon reviewing drafts of documents, had certain questions and suggestions. Because Morgan, Lewis undertook some legal research to answer these questions and suggestions, Mr. Mumma now argues that Morgan, Lewis .was acting as his attorney when in fact these legal answers were mutually beneficial to the Estate. Moreover, we take special note that Mr. Mumma was not charged for such legal research. (See, Plaintiff's Exhibit No. 3). In addressing a motion for disqualification, the Court of Common Pleas of Lehigh County in Pennsylvania Power & Light succinctly summarized the law of Pennsylvania regarding the existence of an attorney-client relationship: N0. 1526 CIVIL 198rs Although the relationship of attorney and client may be implied from the conduct of the parties, such conduct must evidence an offer or request by the client for legal services and an acceptance of the offer by the attorney. It is clear that an attorney- client relationship exists only with the consent of both parties. [S]uch relationship is "personal, reciprocal, and confidential" and "[i]t must be entered into freely, fairly and advisedly by the attorney and client." Such relationship may "not be forced upon one party without the consent of the other." Pennsylvania Power & Liaht, 74 D.&C.2d at 437 (1975) (Citations omitted). Moreover, "Pennsylvania courts have often stressed the consensual nature of the attorney-client relationship." Connelly v. Wolf, Block. Schorr & Solis--Cohen, 463 F.Supp. 914, 919 {E.D. Pa. 1978). Thus, the mere fact that Mr. Mumma relied on the Estate's legal research and received some answers to questions from. Morgan, Lewis attorneys (as authorized by the Estatej, is insufficient, in and of itself, to expand the basic attorney- client relationship beyond the original scope of legal representation as noted in the September 5, 1986 letter. Indeed, Mr. Mumma's arguments concerning his expanded legal representation by Morgan, Lewis are no more than unilateral "assumptions" or "understandings" which do not overcome the very clear and precise definition of their relationship from the very start. Mr. Mumma argues, however, that because he reviewed certain documents prepared by Morgan, Lewis for the Estate, Morgan, Lewis had expanded their Legal representation of Mr. Mumma. We do not agree. In Stainton v. Tarantino, 637 F.Supp. ~~ N0. 1526 CIVIL 198b 1051 (E.D. Pa. 1986), the court found that an attorney-client relationship did not arise between the attorney and his partners in a real estate partnership even though the attorney had drafted documents for real estate transactions from which the other partners derived a benefit. The court stated that: Although [the attorney) prepared some of the legal documents in the real estate transactions in question, he was performing such work for himself and for the partnership. He was not performing personal legal services in connection with these real estate deals for the [partners], although as his partners in the transactions they benefited from [the attorney's) work. Stainton, 637 F.Supp. at 1066. Similarly, in Pennsvlvania Power & Light, the court stressed that the mere reliance upon legal work performed for another person that happened to also benefit the party seeking disqualification, is not sufficient to establish an attorney- client relationship. Id., at 437-438. Mr. Mumma's role, like that in Pennsvlvania Power & Light, was limited to reviewing and commenting upon documents prepared for the Estate by Morgan, Lewis. Moreovex, there was no evidence that Mr. Mumma paid any fees to Morgan, Lewis for work in connection with the liquidations, and more importantly any "advice" he may have received was provided to him (as well as to the other shareholders) as a service by the Estate in an effort to persuade him to participate voluntarily in these transactions. Finally, we note the most telling observation is that during this hearing held on January 25, 1989, Mr. Mumma testified repeatedly that he knew Morgan, Lewis was the attorney for the Estate. ~~, ~. '~ -16- NO. 1526 CIVIL 198ts In summary, then, it is clear that Mr. Mumma has failed to carry the burden of persuasion to establish that the existence of an attorney-client relationship extended beyond that of legal counsel for estate planning purposes and disclaimer purposes, to that of legal counsel representing his interests in the company liquidations and tenancies-in-common issues. Moving on, our next question to answer is "what is the nature of the present lawsuit against the former client?" As stated in our findings of fact, the Orphans' Court matter and the Equity matter basically concerns a dispute over the sale of certain Estate assets. More specifically, the Orphans' Court matter focuses on two issues: 1) the interpretation of the decedent's will, and 2) the offering of appraisal rights to Mr. Mumma. At this point we find it necessary to note that although Mr. Mumma seems to find some dissatisfaction with Morgan, Lewis' implementation of the qualified disclaimer under his father's will, Mr. Mumma does not. seek to void its effect or intent. Therefore, we find the disclaimer is not at issue or in dispute in either of these pending matters. Thus, the issue of the disclaimer is not "substantially related" to the issues raised in either of the present proceedings. Consequently, Morgan, Lewis' prior representation of Mr. Mumma with regard to the disclaimer is not a basis for disqualification of Morgan, Lewis. Moving on, we find that the thrust of the pending proceedings focuses on will interpretation issues which-are clearly unrelated to Morgan, Lewis' prior representation of Mr. Mumma. The other thrust of these proceedings focus on proposed ~w ~.~ ~_ -17- NO. 1526 CIVIL 1988 corporate restructuring and the propriety of offering appraisal rights to Mr. Mumma. These matters, then, are subjects which we find unrelated to Morgan, Lewis' prior representation of Mr. Mumma. The remaining inquiry under the "substantial relationships" test is whether during the course of his representation, Mr. Mumma may have disclosed confidential information to Morgan, Lewis that is now relevant to the issues in the present lawsuits. INA Underwriters, supra. We also note, as the court did in Realco Services, Inc. v. Holt, 479 F.Supp. 867 (E.D. Pa. 1979), that: If a client in a prior representation might have imparted confidential information to his lawyer in dealing with particular issues, and if issues arise in the second suit which would permit the use of such confidences against the original client, the substantial relationship test is met, and disqualification is required. Id., 479 F.Supp. at 871. (Original emphasis). In this case, though, we will not "allow [our) imagination to run free with a view to hypothesizing conceivable but unlikely situations in which confidential information 'might' have been disclosed" which is relevant to the pending suits. INA Underwriters supra. Mr. Mumma's attorney-client relationship with Morgan, Lewis and their legal representation of Mr. Mumma's personal estate planning and disclaimer under this father's will, conceivably included the intimation of confidential financial information. However, we do not believe that that type of information is now relevant to the present lawsuits or will even become an issue. Thus, the size of Mr. Mumma's personal assets . ~,..`~ -18 - N0. 1526 CIVIL 1988 assets and the size of the tax benefits be stood to gain under the disclosure are not relevant to the present lawsuits, and therefore do not provide a basis for disqualification under Rule 1.9 or the applicable caselaw. CONCLIISIONS OF LAW 1. The subject matter of the pending lawsuits are not substantially related to any prior legal representation Morgan, Lewis provided Mr. Mumma; 2. Any confidential information Morgan, Lewis acquired during their prior legal representation of Mr. Mumma is not now relevant to the pending lawsuits; 3. Morgan, Lewis have not violated Rule 1.9 of the Rules of Professional Conduct in their current representation of the Estate of Robert M. Mumma, deceased. In accordance with these findings of facts, discussion, and conclusions of law, we order: ORDBR OF COIIRT AND NOW, this /.3,~i day of February, 1989, defendant's motion to disqualify the law firm of Morgan, Lewis & Bockius from legal representation of the Estate of Robert M. Mumma, deceased, is DENIED. By the Court, /s/ Harold E. Sheely P.J. ~`r~~~y -19- N0. -1526 CIVIL 1988 Thomas M. Kittredge, Esquire John F. Stillmun, III, Esquire William F. Martson, Esquire For the Plaintiffs John B. Fowlerr III. Esquire Jon A. Baughman, Esquire Anthony Vale, Esquire For the Defendants :pbf -24- ROBERT M. MUMMA, II, Plaintiff .# vs. irr vow IN THE COURT Of COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA No. Q430 Civil. 1990 CIVIL ACTION - LAW ~' ARTHUR L. KLEIN, ESQUIRE, ;.;, , and MORGAN, LEWIS & BOCKIU5, ~~ - • • ~; Defendants JURY TRIAL DEMANDED ; ~-- ::~ c.; ~ ; ~*, _ _-f, c> NOTICE `•~~ •t ~ ~' • YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the follawizzg pages, you must take action within twenty {20) days after this Complainti and Notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or db~ections to the Claims set forth against you. You ere warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court r:ithout further nat3ce for any money claimCd in the Complaint Qr far any other claim ar relief requested by Plaintiff. You may lose money ar property or other rights important to you. • YOU SHOULD TARE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE TH$ OFFICE SET FORTF€ BELOW TO FIND QUT WHERE YQU CAN GET LEGAL HELP. COURT ADMINISTRATOR, 4th Floar CUMBERLAND COUNTY COURTIiOUSE CARLISLE, PENNSYLVANIA 17b13 PHONE: (727) 24f3-6200 AGl[vn ~ a.e.wwn ~ ....• •w • r .. . .... ... .. ._ . _ _ ... ` 02i27i81 13:52 !3''1' 17 2~ 1850 M D ~ & 0 ~ g@q ROBERT M. MUMMA, IZ, ~ Plaintiff vs. ARTHUR L. KLEIN, ESQUIRE, and MORGAN, LEWI5 & BOCKIVS, Defendants IN THE CQURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANSA No. 443fl Civil 1990 : CIVIL ACTION - LAW JURY TRIAL DEMANDED AND NOW cvmQS the Plaintiff, Robert M. Mumma, Ii, by and through his attorney, William C. Coatopoulos, Esquire, and respectfully rapresQnts es follows in support of this Complaint: 1. Plaintiff, Robert M. Mumma, II, ("RMMII"), is an adult individual residing at Bowmansdale, York County, Pennsylvania. 2. Defendant, Axthur L. Klein, individual., is an attorney licensed to Commonwealth of Pennsylvania and preCt3Ci: and/or partner with the law firm of MORGAN, his main offices located tit 2QQQ One Logan Philadelphia County, Pennsylva»it~. Esquire, an adult practice law in the ~q Iaw as an employee LEWZS & BOCKTUS, with Square, Philadelphia, 3. befendant, MORGAN, LEWIS & BOCKIUS, is !i Pl:nr,Sylvania law firm believed to be organized and doing business d8 +~ partnership, with its main offices locate4 at 200a One Logan 1 Square, Philadelphia, Philadelphia County, Pennsylvania. 4. At all relevant times herein, Qefendant, Arthur L. Klein, Esquire, was acting-in the course of and within the scope of hSS employment ar association with the law fixm of Defendant, MORGAN, LEWIS & BOCKIUS, which firm held him aut tv members of the general public,~including Plaintiff, RMMII, to be a competent attorney. 5. In June of 1986, Defendant, Arthur L. Klein, Esquire, who represented the Estate of Robert M. Mumma, the father of RMMZI, met with the beneficiaries of said Estate, onB Of wrtom was RMMII, nt the law offices of Defendant, MORGAN, LEWIS & 80CKIUS. 6. At the aforesaid meeting, Defendant, Arthur L. Klein, Esquire, .advised the said beneficiaries, including RMMII, that the Estate was valued at approximately 512.5 million. 7. At the aforesaid meeting, Defendant, Arthur L. Klein, Esquire, personally advised Plaintiff, RMMII, that the Estate intended to offer-him the first opportunity to purchase Penney Supply, Inc.. in accordance with the expres8 desire of his late father, Robert M. Mumma. 2 G $. Shortly thereafter, Plaintiff, RMMII, employed Defendant, Arthur L. Klein, ESguirC, and Defendant, MORGAN, LEWZS & 80CKIUS, for the purpose of representing ham in the planning of his estate and other matters. 9. Defendant, Arthur L. Klein, Esquire, and Defendant, MORGAN, LEWIS & BOCKIUS, accepted such employment and undertook to perform these services fox Plea.htiff, RMMII, puxsuant to their express and implied contracts of employment and legal representations with him. t.~ 10. Plaintiff e+rsd Defendants agreed 'upon, end Plaintiff paid Defendants, monies as compensation far said legal services pursuant to said contracts of employment end legal representation. 11. between Juns of 1986 ersd Octobex' Of 1986, Flaintiff, RMMII, met numerous times with Defendant, Arthur L. Klein, Esquire, and other attorneys and ernplaysss of I}efendar,t, MORGAN, LEWZS & BOCKZUS, concerning various legal matters, and tllso conferred with them by telephone and in writing. 12. During this pQriod of time, Pleir'itiff , RMMII, D3"avtded Defendant, Arthur L. Klein, Esquire, w~.th a personal finencisl 3 a~~c,r~ni io:as ~~t ~ roan s7 u x Ot t3 .v,.n., stateement, and confided to him many det8ils as to his personal Finances and business and private intentions. Count I: Breach of, Contract -- Right of First Re„~„fusal 13. Feragraphs 1 through 12 are incorparat®d herein by reference as if fully set forth. 14. In October of 1966, Defendant, Arthur L. Klein, Esquire, advised the shareholders of Kirn Company and Pennsylvania Supply Company, t"the Companies"), including Plaintiff, RMMII, who was also vice-president of each of .the Companies, to dissolve the Companies in order to takc advantage of a change in tax laws. 1S. Thereafter, Plaintiff, RMMII, held a discussion with Defendant, Arthur L. Klein, Esquire, to ensure Chet he, RMMZI, hnd a right of first refusal with respect to the liquidated assets in the event that he agreed to the dissolution of the aforesaid Companies. 16. Defendant, Arthur L. Klein, Egciuire, expressly advised Plaintiff, RMMII, in December oP 1486 that he, RMMII, had a right of first refusal with respect to the liquidated assets in the event that he agreed to the dissolution of the aforesaid Companies. 4 i ].7. As s result of and in reliance upon Defendant, Arthur L. Klein, Esquire'8 zspresentations, Plaintiff, RMMIZ, agreed to .~ the dissolution of the Companies and executed a power-af-attorney and blank deeds in order to effectuate same. i$. On or about November 30, 1985, a Plan of Dis$alution and Complete Liquidation was adopted t3s to the respective Companies and Certificates of Election to Dissolve wexe filed with the Commonwealth of Pennsylvania. i9. As a further result of end in xelie,nce upon Defendant, S.. Arthur i~. Klein, Esquire's representations, Plaintiff, RMMIZ, executed a Hill of Sale and Assignment and Assumption on or about December 19, 1986, together with the ether shareholders of the Companies, wherein said shareholders agreed to transfer all real and personal property of the Companies to themselve9r as tenrlnts in common. 20. AS a further xesult of and in reliance upon Defendant. .Arthur L. Klein, Esquire's repre$entatians, Flaintiff, RMMII, in his capacity as vice-president of the Companies, on or about December 19, 198b, executed a aoint deed of the Companies txansferzing all real estate owned by said Companies to their shareholders as tenants in common, collectively known as Mumma 5 02i27i81 13:54 '~"'T 1_ .3 1850 M D W& 0 Rea3.ty Associates. . '~ ~ ~..~, 21. Subsequently thereto, in approximately December 1988, Plaintiff, RMMII, after 8nothex party made an offer to purchase some MRA Properties, attempted to exercise his right of first refusal with respect to MRA Prapartx.es by making a bona fide offer to the Estate for its purchase. 22. The Estate, taking th~a position that Plaintiff, RMMII, had no such right of first refusal, declined Co sell MRA Properties to him, 23. befendant, Arthur L. Klein, Esquire, awed Plaintiff, RMMiI, the professional contractual obligation to pzaperly, correctly and accurately advise him as to the right of first refusal regarding MRA ~ropertic3s. 24. Defendant, Arthur L. Klein, Esquire, breached has professional contractual obligation to Plaintiff, RMMII, by negligently, careieswly and erroneously advising him that he had a right of first refusal regarding MRA Properties in the event he agreed to the dissolution of the Companies. 25, Defendant, Arthur L. Kie3n, Esquire, who throughout the 6 ,, s aforesaid period of tune represented both the EstatB and RMMZI, was engaged fn a aanflict of interest by advis~.nq Plaintiff, . '~ RMMIY, that the latter had said r#.gh~t of first refusal when he knew ar should have known that the Estate would take the position th8t Plaintiff, RMMI2, had no such right and would refuse to sa1.1 Penney Supply, Inc., to him. - 2b. Defendant, Arthur L. Klein, Esquire, owed Plaintiff, RMMIZ, the prtifessiona~. GontraCtunl obligation to 8dvise him to seek othex counsel when it became apparent that he, Arthur L. Klein, Esquire, was esagaged in the mfaxesaid conflict of interest. 27. Defendant, Arthur L. Klein, Esqul.re, breaChod his professional contractual obligation to Plaintiff, RMMII, by engaging in the aforesaid conflict of interrest and by failing to advise him to seek other Counsel. when such conflict became apparent. 28. By his aforesaid conduct, Defendant, Arthur L. Klein, Esquire, failed to exercise the ordinary skill and knowledge possessed by attorneys practicing law in the Commonwealth of Pennsylvania. 7 @2i2.?r91 13: 56v $71? z43 28v0~ ..._ M D W ~ & 4 _ ~ -- - . _ _-- - - _ . ®811 29. The aforesaid conduct of Defari6ent, Arthur L. Klein, Esquire, constituted breaches of the express and implied contracts of employment and legal representation with Plaintiff, R1~SI Z . 30. As a direct and proximate result of the aforesaid breaches of professional contractual obligation, Plaintiff, RMMIZ, was. caused to agree to the dissolution of Kim ~ampany and Pennsylvania Supply Company. 31. As a further direct and proximate result of the aforesaid breaches of professional contractual obligation, Plaintiff, RMMII, was precluded from 'exercising his right of first refusal regarding MRA Properties and in fact was precluded ~ from purchasing MRA Properties from the Estate. WHEREFORE, Plaintiff, RMMIZ, demands ju6gmsnt against the Defendants, jo~.ntly and severally, in an amount in 8xcess of Ten Thousand Dollars plus costs and interest es provided by law. Count ZZ: Breach of Cantracti -- Disclaimer 32. Faregraphs 1 through 12 are inGSarporated heze~in by refereanCe as if fu11y sat forth. ~0'L/'L~l /y i 13 : ~ 'p' ( 1 J iC.'~tl Pf L n a v - - 33. On sever8l occasions between June Of 1986 and 3anuary of Z 487, Deftendant, Arthur L. Klein, Esquire, advised Plaintiff , RMMII, that the value of his father's Estate was approximately Si2.5 million. 34. During this period of time, Defendant, Arthur L. Klein, Esquire, further advised Plaintiff, RMMIi, to execute a disclaimer to his share of the Estate in order to take advantage of certain tax benefits. 35. As a result of and in reliance upon Defendant, Arthur L. Klein, Esquire's representations, Plaintiff, RMMIY, executed such a disclaimer on or about January 6, 1987. 36, Defendant, Arthur L. Klein, Esquire, owed Plaintiff, RMMII, the professional contractual obligation to properly, correctly and accurately advise him as to the actual valve of the Estate. 37. Plaintiff, RMMII, believes and therefore avers that Defendant, Arthur L. Klein, Esquire, knew or should have known, in his capacity as attorney for the Estate, that the actual value of the Estate was approximately 540 to S7d million. 4 va.- .,.. .ra av-v. y ~ iv aVw rl v » u V ~„ „a„ i` t 38. Defendant, Arthur L. Klein, Enquire, breached his pxofessiona~ contractual obiigr~tion to Plaintiff, RMMII, by negligently, carelessly and erroneously ndvisinq him that the value of thG Estate was appXaximately 512.5 million when in fact Defendant, Arthur L. Klein, Esquire, knew or should have known thct its actual value was approximately 540 to 570 million. 39. In addition, contrary to Plaintiff, RMMI1's explicit instructions to keep the disclaimer strictly confidential, Defendant, Arthur I... Klein, Esquire, provided Copies Of the original signed disclaifisr to the other bcrteficiarie,s of the Estate, including the ca-executxi,ces. 40. Sn addition, Contrary to Plaintiff, RMMSI's explicit instructions not to file the disclaimer with any court, Defendant, Arthur L. Klein, Esquire, caused the eHeGUted disclaimer to be filed with the Register of Wills a£ Cumberzand County, Pennsylvania, on or about January 12, 1987. 41. Defendant, Arthur L. Klein, Esquire, owed P~.aintiff, RMMII, the professional contractual obligation to maintain the confidentiality of their attorney•client relationship, to not disclose Confidential information, such as the di.sClaimer, to others, and to follow his client's instructions in not disclosing ip XEROX TEIECOP I ER 295 2-. i ; 1:40 PM; ? i 7 243 1861, 2 i 69635494 +R 14 0?/27i91 13:57 48717 243 1850 M D W & 0 ~t014 a said disclaimer to others or filing it with the court. . •~ 42. 8y his aforesaid conduct a8 alleged herein, Defendant, Arthur L. Klein, Esquire, breached his professional contractual pbligation to Pla~.ntiff, RMM21. C3. By his nforesaid conduct as alleged herein, Defendant, Arthur L. Klein, Esquire,• failed to exerciese the ordinary skill and knowledge passessefl by attorneys practicing l..aw in the Commonwealth of Pennsylvania. 44. The aforesaid conduct of Defendant, Arthur L. Klein, Esquire, constituted a breach of the express and ~.mplied contracts of employment end legal representation with Plaintiff, RNIlrlY I . 45. As a direct and graximate result of the aforesaid breach of professional contractual obligation, Plaintiff, RMMII, wss caused to agree to disclaim his interest in the Estate dnd, in fBCt, to execute such a disclaimer. WHEREFQRE, Fiaintiff, RMMII, demands ,judgment against the Defent3ants, jointly and sevesrally, in an amount in excess of Ten Thousand Dollars plus casts and interest as provided by law, 11 td'l..~27i91 13:58 ~' x'71. X43 185@ MDW&0 ~ 015 Count III: Cnnssguenti.al Datuecl8s -- Attorney's Fees,_Costs and Expenses ,~ - 4b. Paragraphs 1 through 45 are incorporated herein by reference as if fully set forth. 4?. As a direct and proximate result of the rsfc7resaid breaches of Hrafessitinal contractual obligation by Defendant, Arthur L. Klein, Esquire, Plaintiff, RMrlII, has been caused to undertake substantial legal represeritatian in order to obtain recognition of his right of first refusal regarding Pennsy Supply, Inc., and to revoke the disclaimer to his share of the Estate of his father. 48. By undertaking this substantial legal representation, Plaintiff, RMMII, has incurred an$ expects to incur iri the foreseeable future, significant attorney's fees, costs and expenses. 49. As a further direct and proximate result of the aforesaid breaches of professional contractual obligation by Defendant, Arthur L. Klein, Esquire, Plaintiff, RMMZI, is entitled to a refund of all monies paid DeLendante~ far their Xega1 representation of him in the matters set forth herein. a. x vu vr~o• a~.in, Y,,. 4`!J 10.7b 17 1! 1I tX V ~bLb ` ~ ~ WHEREFORE, Plaintiff, RMMYI, demands judgment against the Defendants, jointly rind severally, in the amount of the attorney's fees, costs and expenses expended by him and expended in the foreseeable future by him in order to obtain recognition of t33s right of first refusal and to revoke the disclaimer to the Estate, and ail attorney's fees paid Defendants, as well as casts and expenses, together with interQst as provided by law, for their Legal representation of him in the matters sat forth herein. RESPECTFULLY SUBMITTED: William C. Cbstopoulos, Esquire KOLLAS, COSTOPOULOS, FOSTER & FIELDS 831 Market Street/p.0. Box 222 Lemoyne, PA 17043 phone: (71~) '76z-2121 ATTORNEY FOR PLAINTIFF DATED: February 25, 1995. 13 F:\F(1.E51Cliwts\Muvuna 5844.1 (estate) 8747 (Kir Mwnma Estate15844-1.398.certservice CERTIFICATE OF SERVICE I, Tricia D. Eckenroad, an authorized agent of Martson Law Offices, hereby certify that a copy of'the foregoing Answer and New Matter of Barbara Mck. Mumma and Lisa M. Morgan to Motion to Disqualify Morgan, Lewis & Bockius and the Martson Law Office from Continuing Legal Representation of the Estate and the Trusts was served this date by depositing same in the Post Office at Carlisle, PA, first class mail, postage prepaid, addressed as follows: Mr. Robert M. Mumma, II BOX 58 Bowmansdale, PA 17008 Mr. Robert M. Mumma, II 6880 S.E. Harbor Circle Stuart, FL 34996-1968 Mr. Robert M. Mumma, II 840 Market Street, Suite 164 Lemoyne, PA 17043 Ralph A. Jacobs, Esquire JACOBS & SINGER, LLC 1515 Market Street, Suite 705 Philadelphia, PA 19102 (Attorney for Barbara Mann Mumma) Brady L. Green, Esquire MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103-2921 (Attorney for Estate and Executrixes) Ms. Linda Mumma 212 North Duke Street Durham, NC 27701 M^ART,~ON LAW C~ICES `--//~/ N h / ' /1 By ~ ~~ "cia D. Eckenroac 10 East High Street Carlisle, PA 17013 Dated: September 18, 2008 (717) 243-3341