The Bankruptcy Panel for the Sixth Circuit Court of Appeals has ruled that a bankruptcy judge from the Western District of Tennessee abused his discretion by imposing sanctions in the form of attorney’s fees and expenses related to a debtors’ bankruptcy case and related litigation.
Articles Posted in Legal Ethics
Hidden Treasure and Bad Faith Leads to Sanctions
Richard Thomas Robol, Esq., who aided in the recovery of treasure from a shipwreck, has been sanctioned by a District Court in Ohio for engaging in bad faith conduct during related litigation. Robol represented Recovery Limited Partnership (“Recovery”), the organization which discovered the wreck of the S.S. Central America, and recovered vast amounts of gold from it.
Through many years of litigation, Robol misrepresented himself to the Court, and apparently aided defendants by concealing gold-sale inventories, which the Court had Ordered his clients to produce. On June 10, 2016, the US Court of Appeals for the Sixth Circuit affirmed the District Court’s ruling, which had imposed sanctions on Robol in the sum of $224,580.
Dispatch Printing Company (“Dispatch”) initially filed the action in 2000, seeking an accounting of the gold recovered from the wreck. Following commencement of the action, the District Court had issued multiple Orders, directing Recovery to produce its financial records from the year 2000. Recovery produced only one inventory from sales to a California gold company in 2000, and claimed it had no other inventories in its possession. Robol repeatedly represented to the Court that there were no other records. More Contempt Orders followed.
Indiana Court of Appeals Reverses Dismissal
The Indiana Court of Appeals has reversed the dismissal of a woman’s malpractice complaint against her attorney, finding that the trial court’s Rule 12(b)(6) Order was improper.
Elaine Chenore hired Attorney Robert Plantz in July, 2005 to pursue a claim for money damages against William Knight. Chenore was awarded approximately $11,000 in January, 2006. In December, 2006, Knight filed a Chapter 13 Bankruptcy Petition. Plantz was notified, and collection proceedings were stayed. Although Plantz informed Chenore of the bankruptcy petition, she did not receive notice directly from the Bankruptcy Court. Plantz told her to “wait until notified by the Bankruptcy Court” and that he was going to appear for her there.
In July, 2012 Chenore learned that Knight’s bankruptcy had been discharged and that he had paid 100% of the claims filed, but paid her nothing, because no Notice of Claim had been filed on her behalf. Chenore then sued Plantz, who moved to dismiss under Rule 12(B)(6), claiming the two-year statute of limitations for attorney malpractice had expired. Chenore replied that the statute of limitations had been equitably tolled, because Plantz never told her that he did not appear for her in the Bankruptcy Court. The trial court granted Plantz’s motion.
Skadden $35 Million Legal Malpractice Suit
Creditors of a bankrupt conglomerate have sued Skadden, Arps, Slate, Meagher & Flom in New York state court, after allegations that Skadden acted unethically in failing to disclose or obtain waivers for multiple conflicts. The plaintiffs are lenders and private equity funds owed over $90 million, who forced a company, Evergreen International Aviation Inc., to file for Chapter 7 protection in Delaware state court in late 2013. Jay Goffman, Esq. was also named as a Defendant, who heads Skadden’s corporate restructuring group.
The suit was filed after a Bankruptcy judge in Delaware granted the creditors derivative standing to sue Mr. Goffman and the firm. The suit specifically alleges that Skadden provided a broad scope of legal services to help operate various companies, all of which were controlled by Delford Smith, a principal of Evergreen International Aviation, Inc., who operated his business empire out of Oregon.
The suit claims that Goffman gave priority attention to Smith’s personal interests at the expense of unrelated creditors. Smith died in 2014. According to the complaint, Smith was “the source of much of Goffman’s success as a business originator.”
The complaint details two “likely fraudulent transfers” in 2013, diverting cash and other assets, which would have been part of the bankrupt estate. First, there was a transfer of two aircraft, valued at $10.6 million, to Evergreen Vintage Aircraft, a non-profit controlled by Smith, apparently without consideration.
Second, in May, 2013, Evergreen International agreed to sell stock of its helicopter subsidiary to Erickson Air-Crane Inc. for $250 million in cash and other consideration. The complaint alleges that Skadden represented five different companies in the sale, including Evergreen International, its helicopter subsidiary, a separate holding company, and Smith.
Illinois Appeals Court Rules Attorney’s Lack of Communication Cost Client
The Court of Appeals of the Seventh Circuit of the state of Illinois has affirmed a judgment in Estate of Stanley Cora v. John C. Jahrling. Attorney John Jahrling had represented Stanley Cora in a home sale with knowledge that there was a language barrier. Cora sold his home for $35,000, in spite of an approval showing fair market value was $106,000, and Jahrling also failed to include a requested life estate for Cora, which would have allowed him to reside in the upstairs apartment of the house rent-free for the rest of his life.
During the negations and sale, Jahrling could not communicate directly with Cora because Cora only spoke Polish. Jahrling relied on opposing counsel to communicate with his client. Following an attempt by the buyers to evict Cora from the upstairs apartment, he sued Jahrling for legal malpractice. Cora died in 2006 before trial, but his estate continued to pursue the case.
The Appeals Court ruled that Jahrling had acted as Cora’s attorney, relying on evidence Jahrling had received a payment from another attorney at the closing on the sale of his home. The closing documents also identified Jahrling as Cora’s attorney.
The Appeals Court also determined that Jahrling’s inability to communicate with his client, coupled with his reliance on opposing counsel for all communications was “unreasonable per se” and that the lower court had correctly relied on the discrepancy between the fair market value of the home and the sale price.
Connecticut Grievance Committee Rejects Malpractice Settlement:
The Connecticut Attorney’s Grievance Committee has rejected a settlement based on a lawyer’s failure to document legal transactions between the law firm and their former client.
Iowa Practice change in Legal Malpractice Claim Arising From Criminal Representation
The Iowa Supreme Court has recently made a decision permitting a criminal defendant to sue his attorney for legal malpractice, without having to prove that he was innocent of the criminal charges. The Defendant was Robert Baker, who sued his attorney after claiming the attorney advised him to enter a plea agreement on a solicitation charge, so that other charges would be dismissed.
Rolnick v. Sight’s My Line, Inc., No. 03-15-00335-CV: Texas Court of Appeals Dismisses Legal Malpractice Claim
The Texas Court of Appeals has recently dismissed a legal malpractice claim against a Florida attorney for lack of jurisdiction. In Rolnick v. Sight’s My Line, Inc., the owner of a Florida corporation filed a legal malpractice claim against several Texas law firms, alleging that they had failed to properly perfect a security interest on behalf of the corporation.
Kelly v. Orr, No. D067735: California Appellate Court Reverses Judgment Time-Barring Legal Malpractice Claim of Successor Trustee
The Fourth District Court of Appeals of California recently reversed a decision of the trial court dismissing a legal malpractice claim based on a lapsed one-year statute of limitations. In Kelly v. Orr, a grantor created a trust agreement that named a successor trustee upon the resignation of the current trustee. However, when the current trustee resigned, the daughter of the grantor seized control of the trust and became trustee. She then retained a law firm using trust assets and followed their advice on how to manage the trust.
McPhillips v. Bauman, 2015 NY Slip Op 08218: Appellate Division of Supreme Court of New York Affirms Dismissal of Legal Malpractice Claim
The Appellate Division of the Supreme Court of New York recently affirmed the decision of New York’s Supreme Court, dismissing a legal malpractice claim. In McPhillips v. Bauman, a physician employed by the Department of Corrections sued an Assistant Attorney General who was assigned to represent him in a lawsuit brought by the estate of a deceased inmate.