Hertz Suit Against Ex-General Counsel Over $200M Accounting Issue 'Nothing More Than a Series of Vague, General Allegations,' Motion to Dismiss Says
Jeffrey Zimmerman, top lawyer at the rental car giant from 2007 to 2014, argued in a motion to dismiss filed in the U.S. District Court for the District of New Jersey that Hertz failed to adequately allege gross negligence and misconduct forcing the company to restate its financial statements in 2011, 2012 and 2013.
June 25, 2019 at 09:00 AM
4 minute read
The original version of this story was published on Corporate Counsel
The Hertz Corp. former general counsel Jeffrey Zimmerman has asked a New Jersey federal court to dismiss a lawsuit accusing him and two other ex-top executives of owing the rental car giant more than $200 million in legal fees and other costs related to misstating company income.
Zimmerman argued in a motion to dismiss filed in the U.S. District Court for the District of New Jersey on June 20 that his former employer failed to adequately allege its ex-top lawyer engaged in gross negligence and misconduct that forced the company to restate its financial statements in 2011, 2012 and 2013.
“The complaint is nothing more than a series of vague, general allegations against all defendants, alleging that they collectively failed to correct accounting errors and weaknesses in the company's internal controls,” according to the motion, referring to co-defendants former Hertz CEO Mark Frissora and then-chief financial officer Elyse Douglas.
Specifically, it continued, the complaint contains only two allegations against Zimmerman: that he was urged by Frissora to review legal reserves twice during 2013 and that he knew about “possible” improper payments to Brazilian government officials.
“Neither claim alleges any actual misconduct by Zimmerman, nor does Hertz allege any connection between these allegations and the [restatement of finances],” the motion said. “Hertz's allegations come nowhere close to supporting an inference of gross negligence or misconduct by Zimmerman.”
Neither Zimmerman's attorney, Vincent Connelly of the Chicago office of Mayer Brown, nor Hertz attorney Herbert Beigel, who owns Herbert Beigel & Associates in Tucson, Arizona, immediately responded to emailed requests for comment. Zimmerman, who served as GC from December 2007 until he resigned in December 2014, could not be reached for comment.
Hertz's suit also states that “defendants' wrongful 'tone at the top' was a form of misconduct and gross negligence because it exacerbated various risk factors,” and led to inadequate internal controls and “a plethora of accounting errors.”
It also accuses the trio of “supporting” the 2012 acquisition of Hertz's competitor Dollar Thrifty Automotive Group and the relocation of Hertz's headquarters from Park Ridge to Estero, Florida, after the merger—a decision that, the lawsuit claims, led to the departure of more than half of Hertz's corporate office personnel.
“In effect, Hertz alleges that the company's executives made a series of business decisions with regrettable results,” Zimmerman's motion states. “These allegations are insufficient to state a claim against any of the defendants, let alone Zimmerman. Hertz does not (and could not) claim that Zimmerman's role as general counsel involved control over the company's accounting department, accounting methodology, the integration of another company into Hertz's systems, the physical location of Hertz's headquarters, or the decision of Hertz employees to leave the company.”
In addition, Hertz's suit also claims that Zimmerman violated his separation agreement by allegedly falsely stating that he had not engaged in gross negligence and misconduct and thus owes more than $200 million in investigative, legal and remediation costs associated with the financial restatement, including a settlement with the U.S. Securities and Exchange Commission.
“The alleged connection between these damages and Zimmerman's conduct is illogical because Zimmerman's separation agreement was signed after all these alleged damages were incurred,” according to the motion. A “class action lawsuit was filed in 2013, the SEC investigation was opened in June 2014, and Hertz's own internal investigation through outside counsel was substantially complete before Hertz and Zimmerman entered into the separation agreement in December 2014.”
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