Auto Erratic

SunCor filed a lawsuit, and wound up getting slapped with a $28.6 million jury verdict

SunCor is known within the real estate industry for its integrity and fairness. Our tenants and buyers are treated as partners, and we are dedicated to providing lasting value they can depend upon.

-- From SunCor Web site

Duplicity is a dangerous game, especially when Michael Manning is in the ballpark.

Michael Manning: "The level of fraud here was amazing."
Casey McKee
Michael Manning: "The level of fraud here was amazing."

The Phoenix barrister is to law what Randy Johnson is to pitching. When facing Manning, it's best to screw your helmet on tightly, tread lightly in the batter's box, take a couple of meager cuts, then go sit in the dugout.

On second thought, the Big Unit analogy isn't precisely apt, because Manning's game isn't all power. He possesses Greg Maddux's guile, too. He's studious, disciplined. No fine detail goes unnoticed. If you're a dangerous fastball hitter, Manning will finesse you, rock you to sleep with some wicked junkball, induce you into a meek grounder to second.

Whichever incarnation of Michael Manning trots from the bullpen, chances are, you're going to make an out.

Manning is the lawyer who mowed down Charles Keating in what was then the largest commercial litigation in U.S. history. The case generated 50 million documents, and Manning recovered nearly $300 million for the Federal Deposit Insurance Corporation.

He got the FDIC $140 million in the Western Savings & Loan case.

He beaned notorious bank swindler Mario Renda, who wound up in prison.

He retired the State Bar's director for sexual harassment -- after no other lawyer in the city would take the case.

He got an $8 million settlement from Maricopa County for the survivors of jail inmate Scott Norberg.

In bankruptcy court, he recently won an $18 million judgment against J. Fife Symington III.

And on March 16, Manning won the largest punitive-damages award in a commercial fraud case in Arizona history -- $26 million from SunCor, a development company.

After a three-week trial, a jury deliberated for just two and a half hours, then gave Manning's client exactly what Manning asked for -- $28.6 million in all, counting actual damages.

The fact that his case was a counterclaimagainst SunCor, which had sued Manning's client,makes the verdict even more astonishing.


John Bergstrom, Manning's client in the SunCor case, is a soft-spoken, friendly, Midwestern kind of guy -- not unlike Manning himself, who hails from Kansas City.

Bergstrom is a car dealer from Wisconsin. He was born, raised and still resides in Neenah, a city of about 20,000 located a half-hour south of Green Bay.

Bergstrom, 54, left his hometown to attend college at Marquette University in Milwaukee. He graduated in 34 months, then returned to Neenah and went to work for a Chevrolet dealer. He married and had three children. In 1982, he and his brother, Dick, scraped together enough to open their own dealership.

Since then, his business has steadily expanded. The Bergstroms now own 19 dealerships, all in Wisconsin, all in relatively small communities. His shop in Neenah was recently cited as the most outstanding Saturn dealership in the nation.

In January 1996, while attending a convention in Florida, Bergstrom was approached by James Mullin, a real estate broker who was marketing a revolutionary concept -- a used-car auto mall. Mullin represented SunCor, a 14-year-old Phoenix development company headed by John Odgen. SunCor is a subsidiary of the publicly traded Pinnacle West Capital Corporation, which is also the holding company of Arizona Public Service, the state's largest utility.

SunCor, which claims a net worth of $300 million, had developed the Tempe Autoplex, an 80-acre cluster of new-car dealerships that line a broad loop road near I-10 and Elliott in Tempe. Mullin pitched Bergstrom on Autoplex II, 54 acres east of the new-car auto mall across Priest Drive. Autoplex II was to be dedicated to used-car dealers and other automotive businesses.

Bergstrom bit. It's tough to sell autos in winter in the Midwest, and he planned to move used cars from his Wisconsin dealerships to Tempe. He bought three lots within Autoplex II in September 1996 for $1.5 million and broke ground on a $15 million Drivers Mart dealership.

But SunCor, a cash cow for Pinnacle West, had misrepresented its intentions for Autoplex II. Six months before Mullin began enticing Bergstrom, SunCor granted Judson Ball, an office developer, an option to purchase 37 acres within Autoplex II. SunCor ultimately backed out of its deal with Ball, who testified that Ogden bluntly told him: "[T]his is the way it's going to be. Times have changed." Ogden, named the Valley Partnership's "Developer of the Decade" in 1997, denies making such a statement.

SunCor sold 22 acres to an insurance company, General American, which would eventually construct office buildings, not used-car shops, in Autoplex II.

The auto mall premise hinges on volume and variety. It's supposed to be a high-traffic, one-stop shopping site for car buyers. The concentration of different dealers is the lure.

The fact that SunCor was abandoning its exclusive auto mall concept put Bergstrom in a precarious position. His big investment in Autoplex II represented half the worth of his entire company. And SunCor's deviation from the plan gravely compromised that investment. Bergstrom strenuously objected to SunCor's veer away from the used-auto mall concept.

SunCor agreed to pay Bergstom $1 million for his trouble. SunCor would contend that Bergstrom was required to use that $1 million to market his used-car shop and the Autoplex in general. In fact, the written agreement says nothing specific about how the $1 million was to be spent; it merely gave SunCor the right to approve Bergstrom's marketing plan, which it did.

Despite SunCor's attempt at mollification, the auto mall dream was a shambles, in Bergstrom's view. He pulled the plug on his Autoplex II project in April 1998. In a stock deal, he sold his store to Auto Nation, which was owned by Blockbuster founder Wayne Huizenga.

Two months later, SunCor sued Bergstrom, demanding that he return the $1 million.

"I almost died," John Bergstrom says. "I'd never been sued for anything before. I had never been in a courtroom in my life.

"When they sued us and attacked our integrity, we weren't going to roll over."

He dispatched a partner with orders: "Spend whatever it takes to go find the best attorney that you can" in Arizona.

Michael Manning was loosening up.


SunCor's lawsuit against Bergstrom opened Pandora's box. Documents contained in SunCor's own files doomed their cause. Manning had to get a court order to see them, but once he did, he was dumbfounded at the "incredible arrogance and corporate greed" of SunCor.

"The level of fraud here was just amazing," he says.

SunCor's files held more smoking guns than Puff Daddy's entourage. As he introduced them to the jury, Manning says he felt "like a kid in a candy store."

SunCor marketed Autoplex II as a development that "will feature pre-owned vehicles and other automotive uses." Its pamphlet enthused, "Car buyers will have the opportunity to view the inventory of eight to 12 used vehicle dealers at one convenient location . . ." SunCor issued a press release in November 1996 touting "an auto park exclusively designed for the fast-growing pre-owned auto market."

In winning the City of Tempe's agreement to repay SunCor $500,000 for infrastructure improvements, SunCor averred that Autoplex II would offer 54 acres "created specifically for the growing pre-owned vehicle market." Tempe would rake in sales tax, SunCor said. The city's economic development director testified that SunCor Vice President Margaret Kirch told her that Autoplex II would contain 22 sites.

Yet a marketing study prepared in 1995 for SunCor told a far different story. The report's opening line stated: "We estimate that the . . . site has the potential to secure five to seven used car and truck dealerships." SunCor removed this telltale "Summary and Recommendations" page from the copy of the marketing study it gave Bergstrom.

Document after document unearthed by Manning indicated that while SunCor was crowing publicly about its commitment to Autoplex II, behind the scenes it was undercutting Bergstrom, hawking the land to anyone who had the cash to help SunCor "upstream" money to its voracious parent, Pinnacle West.

About the same time that Mullin was selling Bergstrom on the exclusive used-auto park, an internal SunCor memo announced the appointment of a new project manager for Autoplex II. The memo noted that the official would "focus on the next phase of Autoplex-Autoplex II which will feature 'new car alternatives' (a.k.a. used cars) and back office . . ."

A SunCor-circulated map of Autoplex II showed one continuous loop road lined with automotive businesses. Yet before Bergstrom's land purchase closed, SunCor was working with its architects on other uses. One map from September 1996 labels the interior of the loop as "office or auto" -- a designation that prompted the architect to scribble: "Office & auto uses are intermixed -- will this be confusing to buyers?"

David Merkel, who served as Tempe city attorney at the time, says the city's contract with SunCor required the developer to inform the city of any change in plan.

"We found out about the sale [of 22 acres to General American] after, not before the fact. That was contrary, we believe, to what the contract provided for," Merkel says.

He says he and other Tempe officials had a "contentious" meeting with SunCor chief Odgen. Merkel testified that Odgen told him "how stupid he thought we were." Tempe's economic development director testified that Odgen was "intimidating" and raised his voice. Odgen denies both assertions.

Despite what Merkel perceived as SunCor's breach of contract, the city did little other than try to renegotiate its reimbursement deal with SunCor (that deal has since completely unraveled, Merkel says). Perhaps not coincidentally, SunCor officials -- including Odgen and Kirch -- have been frequent and generous donors to the campaigns of Tempe Mayor Neil Guiliano, contributing $1,660 since 1993.

Once the land was in the hands of General American, Kirch met with Bergstrom to convince him of SunCor's commitment to the used-car park. Within a week, however, Kirch made notes of a phone conversation with Mullin in which the two discussed "why might DM [Bergstrom] fail."

The damning evidence clearly impressed the jury. It means little to Steve Gervais, SunCor's vice president and general council.

"We obviously disagree with the verdict," he says. "We're going to ask the trial court judge to set the verdict aside, and, if necessary, we'll appeal, because the verdict is not supported by the evidence or the law.

". . . This case is far from over."

He declined to comment on specific allegations.

Today, the property that was to become Autoplex II is a mélange of office buildings. Tempe isn't getting the sales tax it expected.

The structure that Bergstrom built is now occupied by an Enterprise car rental sales outlet. No other auto-related businesses are visible in Autoplex II.

Yet Bergstrom is breathing a sigh of relief. He says he had neglected his business and family in Wisconsin for six months to focus on the court case.

"This project was very, very dangerous for us, for us to take that kind of risk. It was scary," he says. "It would have been fine if [SunCor] had done what they said they'd do. But they didn't."

He's not impressed with the business atmosphere hereabouts.

"It's left a sour taste," he says. "I think in the Phoenix business environment and how they do business, he who has power can do whatever he wants. That sort of scares me."

Of course, a closer like Michael Manning can quell a lot of fear.

Manning tells me that a week into the trial, when things were going dreadfully for SunCor, he offered to settle the case for $3 million. SunCor's legal team said its client was willing to settle, but only if Bergstrom paid SunCor $1 million.

Manning rolls his eyes and smiles.

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