Justia Legal Ethics Opinion SummariesArticles Posted in Business Law
Engel v. Pech
A limited liability partnership and one of its partners retained a lawyer but limited the scope of representation to having the lawyer represent the partnership in a specific, ongoing case. After the partnership lost the case, the partner sued the lawyer for malpractice. In an amended complaint, the partnership was added as a plaintiff. The partner’s complaint was filed before the statute of limitations ran; the amendment was filed after. The trial court issued its judgment of dismissal, the partner filed a motion for reconsideration along with a proposed second amended complaint. The trial court denied the motion as untimely and without merit because the proffered second amended complaint did not “present any new allegations which could support the claim. The Second Appellate District affirmed. The court concluded as a matter of law that the partner has suffered no damage as a result of the attorney’s alleged malpractice to the LLP during the Wells Fargo litigation and that the partner’s malpractice claims were properly dismissed. Further, the court held that given that all damages for any malpractice claims were suffered by and belong to the LLP, there is no “reasonable possibility” that the partner can amend the complaint to state a viable malpractice claim. View "Engel v. Pech" on Justia Law
Gilbert v. Radnovich
This appeal arose from a district court’s decision denying a motion for sanctions and attorney fees against Roy Gilbert’s former attorney, William Mitchell. The underlying litigation giving rise to the sanctions request stemmed from a dispute over a medical transport business and the business relationship between Gilbert and Richard Radnovich. Gilbert was the sole member of two LLCs: Resilient Transportation Leasing, LLC, and Resilient Transport LLC. According to Gilbert’s complaint, Radnovich was allegedly the owner of two business entities: Injury Care Emergency Medical Services (ICEMS) LLC and “Injury Care EMS,” as well as other entities not at issue in this appeal. In 2017, Gilbert executed an agreement purporting to sell Resilient Transport, LLC, to Injury Care EMS, LLC. According to Gilbert, Injury Care EMS, LLC, was never formed. Gilbert alleged that this “fictitious” LLC was an alter ego of Radnovich. The parties signed a supplement to the agreement which amended the business name for ICEMS, LLC to ICEMS, P.C, and clarified that Resilient Transport, LLC, would be subsumed by ICEMS, P.C. into another fictitious business called “Resilient Transport Operated by Injury Care EMS,” and that Resilient Transport, LLC would later be dissolved. Following a breakdown in both the agreement and the relationship, Gilbert sued Radnovich and the business entities. Mitchell filed the initial and amended complaint on behalf of Gilbert against Radnovich. Later in the proceedings, a second attorney substituted for Mitchell and soon after, both sides stipulated to dismiss the case with prejudice. A few weeks later, Radnovich filed a motion for sanctions and attorney fees against Mitchell. The district court denied the motion. Radnovich appealed, arguing the district court abused its discretion in denying sanctions and attorney fees against Mitchell. Finding no reversible error or abuse of discretion, the Idaho Supreme Court affirmed the district court’s decision. View "Gilbert v. Radnovich" on Justia Law
Pettis v. Simrall
This case presented an issue of first impression for the Mississippi Supreme Court: whether an attorney’s representation of a general partnership created an implied attorney-client relationship between the attorney and the individual members of the general partnership, and, if so, whether the Mississippi Rule of Professional Conduct prohibiting communication by a lawyer with an individual represented by other legal counsel was violated. James Pettis, III, attorney for the plaintiff, appealed a chancery court order disqualifying him for a violation of Mississippi Rule of Professional Conduct 4.2, which prohibited a lawyer from communicating with a person they know to be represented about the subject of the representation. After a careful review of the law, the Supreme Court reversed the chancery court’s order, rendered judgment in favor of Pettis, and remanded for further proceedings. View "Pettis v. Simrall" on Justia Law
Landcastle Acquisition Corp. v. Renasant Bank
The case arises out of the insolvency of the Crescent Bank and Trust Company (“Crescent”) and the conduct of its customer lawyer, a manager of his law firm, Morris Hardwick Schneider, LLC (“Hardwick law firm”). In 2009, Crescent, a Georgia bank, made the lawyer a loan for $631,276.71. The lawyer, as his law firm’s manager, signed a security agreement that pledged, as collateral, his law firm’s certificate of time deposit (“CD”) for $631,276.71. When Crescent failed, the Federal Deposit Insurance Corporation (“FDIC”), as receiver, took over and sold the lawyer’s loan and CD collateral to Renasant Bank. The lawyer then made loan payments to Renasant, and Renasant held the CD collateral. Landcastle sued Renasant (as successor to the FDIC and Crescent), claiming Renasant was liable for $631,276.71, the CD amount. Landcastle’s lawsuit seeks to invalidate the Hardwick law firm’s security agreement. The Eleventh Circuit reversed the district court’s ruling. The court explained that Landcastle’s lack-of-authority claims are barred under D’Oench because they rely on evidence that was outside Crescent’s records when the FDIC took over and sold the lawyer’s loan and CD collateral to Renasant. The court concluded that the lawyer’s acting outside the scope of his authority did not render the security agreement void but, at most, only voidable. A voidable interest is sufficient to pass the CD security agreement to the FDIC and to trigger the D’Oench shield View "Landcastle Acquisition Corp. v. Renasant Bank" on Justia Law
United States v. Filer
Barsanti was delinquent on $1.1 million of senior secured debt it owed to BMO Harris Bank. Barsanti’s owner, Kelly, hired attorney Filer and Gereg, a financing consultant. After negotiations with BMO failed, Filer introduced Gereg to BMO as a person interested in purchasing Barsanti’s debt. Filer created a new company, BWC, to purchase the loans. BWC purchased the loans from BMO for $575,000, paid primarily with Barsanti’s accounts receivable. Barsanti also owed $370,000 in delinquent benefit payments to the Union Trust Fund. Filer, Kelly, and Gereg used BWC’s senior lien to obtain a state court judgment against Barsanti that allowed them to transfer Barsanti’s assets beyond the reach of the Union Fund, using backdated documents to put confession-of-judgment clauses into the loan documents and incorrectly claiming that Barsanti owed BWC $1.58 million. Filer then obtained a court order transferring Barsanti’s assets to BWC, which then transferred the assets to Millwork, another new entity, which continued Barsanti’s business after the Illinois Secretary of State dissolved Barsanti for unpaid taxes. Gereg was Millwork's nominal owner in filings with the Indiana Secretary of State. Barsanti filed for bankruptcy. Filer instructed others not to produce certain documents to the bankruptcy trustee.After a jury convicted Filer of wire fraud 18 U.S.C. 1343., the district court granted his motions for a judgment of acquittal. The Seventh Circuit reversed and remanded. The evidence was sufficient to support the jury’s verdicts. View "United States v. Filer" on Justia Law
Farnum v. Iris Biotechnologies Inc.
Iris, incorporated in 1999, went public in 2007. In 2019, the SEC revoked the registration of Iris’s securities. Since its incorporation, Chin has been chairman of Iris’s three-member board of directors, its president, secretary, CEO, CFO, and majority shareholder. Chin’s sister was also a board member. Farnum was a board member, 2003-2014, and owned eight percent of Iris’s stock. In 2014, Farnum requested inspection of corporate minutes, documents relating to the acquisition of Iris’s subsidiary, and cash flow statements, then, in his capacity as a board member and shareholder, sought a writ of mandate. Before the hearing on Farnum’s petition, Farnum was voted off Iris’s board. The court denied Farnum’s petition (Corporations Code 1602) because Farnum no longer had standing to inspect corporate records due to his ejection from the board, and his request was “overbroad and lack[ed] a statement of purpose reasonably related to his interests as a shareholder.”Weeks later, Farnum served 31 inspection requests on Iris and subsequently filed another mandamus petition. The superior court denied the petition and Farnum’s associated request for attorney fees. On remand with respect to certain records, Farnum sought reimbursement of his expenses in enforcing his rights as a shareholder ($91,000). The court of appeal affirmed the denial of the request. Farnum scored “only a partial victory” given the scope of what he sought; there was no showing that on the whole, Iris acted without justification in refusing Farnum’s inspection demands. View "Farnum v. Iris Biotechnologies Inc." on Justia Law
Duro, Inc. v. Walton
The Seventh Circuit affirmed the judgment of the district court concluding that the terms of a settlement resulted in a de facto assignment of a corporation's theoretical legal malpractice claim to Amit Shah by using the corporation as his alter ego, holding that there was no error.In 2013, Shah and another minority shareholder of Duro, Inc. brought this action against Duro and its third shareholder, alleging money laundering and racketeering. In 2015, Plaintiffs added a shareholder derivative claim of legal malpractice, nominally on behalf of Duro, against a law firm and its attorneys (May Oberfell), who had represented Defendants in the case. In 2017, Plaintiffs settled their claims, preserving any claims Duro might have against May Oberfell. Shah subsequently took effective control of Duro and transferred all of Duro's assets except the legal malpractice claim. Thereafter, Shah, through Duro, filed a complaint against May Oberfell. The district court granted summary judgment for May Oberfell, concluding that the legal malpractice claim had undergone a "de facto" assignment, and therefore, the claim was barred under Indiana law. The Seventh Circuit affirmed, holding that May Oberfell was entitled to summary judgment. View "Duro, Inc. v. Walton" on Justia Law
Kellogg, et al. v. Watts Guerra, et al.
This appeal stemmed from mass litigation between thousands of corn producers and an agricultural company (Syngenta). On one track, corn producers filed individual suits against Syngenta; on the second, other corn producers sued through class actions. The appellants were some of the corn producers who took the first track, filing individual actions. (the “Kellogg farmers.”) The Kellogg farmers alleged that their former attorneys had failed to disclose the benefits of participating as class members, resulting in excessive legal fees and exclusion from class proceedings. These allegations led the Kellogg farmers to sue the attorneys who had provided representation or otherwise assisted in these cases. The suit against the attorneys included claims of common-law fraud, violation of the Racketeer Influenced and Corrupt Practices Act (RICO) and Minnesota’s consumer-protection statutes, and breach of fiduciary duty. While this suit was pending in district court, Syngenta settled the class actions and thousands of individual suits, including those brought by the Kellogg farmers. The settlement led to the creation of two pools of payment by Syngenta: one pool for a newly created class consisting of all claimants, the other pool for those claimants’ attorneys. For this settlement, the district court allowed the Kellogg farmers to participate in the new class and to recover on an equal basis with all other claimants. The settlement eliminated any economic injury to the Kellogg farmers, so the district court dismissed the RICO and common-law fraud claims. The court not only dismissed these claims but also assessed monetary sanctions against the Kellogg farmers. The farmers appealed certain district court decisions, but finding that there was no reversible error or that it lacked jurisdiction to review certain decisions, the Tenth Circuit Court of Appeals affirmed. View "Kellogg, et al. v. Watts Guerra, et al." on Justia Law
Melendez v. Westlake Services, Inc.
Melendez purchased a used 2015 Toyota from Southgate under a retail installment sales contract. Southgate assigned the contract to Westlake. Weeks later, Melendez sent a notice alleging Southgate violated the Consumer Legal Remedies Act (CLRA) and demanded rescission, restitution, and an injunction. Melendez later sued Southgate and Westlake, alleging violations of the CLRA, the Song-Beverly Consumer Warranty Act, Civil Code 1632 (requiring translation of contracts negotiated primarily in Spanish), the unfair competition law, fraud, and negligent misrepresentation. Westlake assigned the contract back to Southgate. Default was entered against Southgate. Westlake agreed to pay $6,204.68 ($2,500 down payment and $3,704.68 Melendez paid in monthly payments). Melendez would have no further obligations under the contract.The parties agreed Melendez could seek attorney fees, costs, expenses, and prejudgment interest. Westlake was entitled to assert all available defenses, “including the defense that no fees at all should be awarded against it as a Holder” The FTC’s “holder rule” makes the holder of a consumer credit contract subject to all claims the debtor could assert against the seller of the goods or services but caps the debtor’s recovery from the holder to the amount paid by the debtor under the contract. The trial court awarded attorney fees ($115,987.50), prejudgment interest ($2,956.62), and costs ($14,295.63) jointly and severally against Westlake, Southgate, and other defendants. The court of appeal affirmed. The limitation does not preclude the recovery of attorney fees, costs, nonstatutory costs, or prejudgment interest. View "Melendez v. Westlake Services, Inc." on Justia Law
Missakian v. Amusement Industry, Inc.
Alevy was an owner, officer, and board member of Amusement, a real estate company, engaged in the ongoing Stern Litigation. In 2010, Alevy offered Missakian employment as in-house counsel at Amusement, including working on the Stern Litigation. Under the Oral Contract, Missakian would receive a salary of $325,000, and, after the Stern Litigation ended, Missakian would receive a bonus of $6,250 for each month he had worked on that litigation plus 10 percent of the recovery, excluding ordinary litigation costs. The parties exchanged multiple written drafts but never signed a written contract. Missakian left Amusement in 2014. The Stern Litigation settled months later. Amusement received $26 million. Missakian never received the Monthly Bonus or the Stern Litigation Bonus.A jury issued a verdict in favor of Missakian on the claims for breach of oral contract and promissory fraud and made special verdict findings in favor of Alevy on promissory fraud. The trial court granted judgment notwithstanding the verdict (JNOV) on Missakian’s promissory fraud claim against Amusement.The court of appeal reversed. The Oral Contract is void under Business and Professions Code section 6147, 2 which requires contingency fee agreements to be in writing. The jury’s special verdict on promissory fraud was inconsistent because it found Alevy did not make a false promise, but that Amusement (acting only through Alevy) did. Because the court cannot choose between the jury’s inconsistent responses, the court should have ordered a new trial. View "Missakian v. Amusement Industry, Inc." on Justia Law