Justia Legal Ethics Opinion Summaries

The Tax Court upheld the IRS’ disallowance of losses claimed by various LLCs that had been created by a tax attorney as tax shelters and a 40 percent penalty for a “gross valuation misstatement,” 26 U.S.C. 6662(a). An LLC is generally treated as a partnership for tax purposes, so that its income and losses are deemed to flow through to the owners and are taxed to them rather than to the business. How much income or loss should be recognized on the owners’ tax returns is now determined by an audit of the business. The LLCs at issue were formed to reduce taxes by transferring the losses of a bankrupt Brazilian electronics retailer to create what is called a distressed asset/debt (DAD) tax shelter, based on a tax loophole closed by the American Jobs Creation Act of 2004, 26 U.S.C. 704(c) the year after creation of the tax shelters at issue. The Seventh Circuit affirmed, characterizing the LLCs as entities without economic substance, not recognized for federal tax law purposes. View "Superior Trading, LLC v. Comm'r of Internal Revenue" on Justia Law

Attorney Turza sent out a fax, titled the “Daily Plan-It,” containing business advice. The fax was sent to CPAs who were not Turza’s clients, about every two weeks. The Telephone Consumer Protection Act of 1991, 47 U.S.C. 227, prohibits any person from sending unsolicited fax advertisements; even permitted fax ads must tell the recipient how to stop receiving future messages. Turza’s faxes did not contain opt-out information. The district court certified a class of the faxes’ recipients and ordered Turza to pay $500 in statutory damages for each of 8,430 faxes. ($4,215,000): $7,500 to the representative plaintiff ; $1,430,055.90 to class counsel for attorneys’ fees and expenses; and any residue, after payments to class members, to the Legal Assistance Foundation of Metropolitan Chicago “as a cy pres award.” The Seventh Circuit affirmed on the merits, rejecting an argument that the faxes were not ads, but vacated the remedial order. View "Holtzman v. Turza" on Justia Law

Thomas Konrad accepted a loan from Bob Law upon the advice of attorney Douglas Kettering. Law and Kettering had been partners in at least one of Law's business ventures and had an attorney-client relationship. Thomas's parents (the Konrads) provided their land as collateral for Thomas's loan. Thomas later defaulted on the note. Seven months after Kettering passed away, Law brought suit to enforce the note and mortgage against Thomas and the Konrads. Law settled with Thomas and the Konrads. Law then sought to recover from the Kettering Estate the amounts outstanding on the note, claiming that Kettering's acts - including his conflict of interest with Law and his alleged fraudulent inducement of the Konrads into signing the note and mortgage - voided the note and mortgage, and therefore, the Estate was liable to Law for the interest due on the note. The circuit court granted summary judgment for the Estate. The Supreme Court affirmed, holding (1) the contract between Law and Thomas did not contravene public policy because it was drafted by an attorney who failed to disclose a conflicting attorney-client relationship; and (2) the theory that Kettering fraudulently induced the Konrads into signing the note and mortgage rested on mere speculation. View "Law Capital, Inc. v. Kettering" on Justia Law

Thirteen years after the divorce was finalized, the Lamar County Chancery Court found that the former husband, Appellee John David Gatwood, was in arrears on certain financial obligations imposed by the divorce decree. Because of various extenuating circumstances, the chancellor ordered Gatwood to pay off his debt in monthly installments. More than a year after the chancery court judgment, the former wife's attorney, Jack Parsons, successfully filed a suggestion for writ of garnishment, significantly accelerating payment of Gatwood's financial obligations. Circumstances related to the manner in which the writ of garnishment was obtained resulted in sanctions against Parsons; the garnishment proceedings also gave rise to other rulings which were appealed to this Court. After review, the Supreme Court declined to find the trial court erred: evidence at trial supported that court's finding that attorney's fees and sanctions against Parsons and his client were appropriate. Accordingly, the circuit court's decision was affirmed. View "Cooper v. The Estate of William David Gatwood" on Justia Law

Jared Barton sued Korrine Linvog, her parents Thomas and Madonna Linvog, and the State. Barton reached a settlement with the Linvogs through which the Linvogs agreed to advance Barton money in exchange for his promise not to execute a judgment against them above their insurance policy limits. Neither Barton nor the Linvogs disclosed this settlement to the court or to the State. After a jury trial, Barton was awarded $3.6 million, and the trial court entered judgment against the State and the Linvogs. In the process of paying the judgment, the State discovered the agreement. The State then moved to vacate the judgment on grounds of fraud and misrepresentation. The trial court denied the motion but sanctioned Barton's attorney for failing to disclose the terms of the agreement. Barton's attorney appealed the sanction. Finding no abuse of discretion in its sanction against Barton's attorney, the Supreme Court affirmed. View "Barton v. Dep't of Transp." on Justia Law

A class of Motorola investors claimed that, during 2006, the firm made false statements to disguise its inability to deliver a competitive mobile phone that could employ 3G protocols. When the problem became public, the price of Motorola’s stock declined. The parties settled for $200 million. None of the class members contends that the amount is inadequate. Two objected to approval of counsel’s proposal that it receive 27.5 percent of the fund. One objector protested almost a month after the deadline and failed to file a claim to his share of the recovery. The Seventh Circuit dismissed his appeal, stating that he lacks any interest in the amount of fees, since he would not receive a penny from the fund even if counsel’s share were reduced to zero. The other objector claimed that fee schedules should be set at the outset, preferably by an auction in which law firms compete to represent the class. Noting the problems inherent in such a system, the court held that the district judge did not abuse her discretion in approving the award. View "Liles v. Motorola Solutions, Inc." on Justia Law

This appeal concerned the parties' dispute over an arbitration award to plaintiff. Plaintiff appealed the district court's ruling on interest and attorney's fees, and Lloyd's cross-appealed requesting return of an alleged overpayment to plaintiff from a fund which held that the award in escrow pending the outcome of litigation. The court concluded that the decision of the arbitrators did not foreclose the district court from awarding interests on the remaining portions of the arbitration award; plaintiff was entitled to post-award, pre-judgment interest pursuant to Nev. Rev. Stat. 17.130; to the extent the mandate must include instructions on pre-judgment interest to comply with Rule 37(b) of the Federal Rules of Appellate Procedure, the court reformed the mandate as such; plaintiff was entitled to collect post-judgment interest on his post-award, pre-judgment interest from the date of this opinion until the date Lloyd's pays the interest; plaintiff was entitled to attorney's fees pursuant to Nev. Rev. Stat. 689A.410(5); and the district court did not impermissibly overpay plaintiff when it released the funds from the escrow account and included interest on the contract damages through the date of payment. Accordingly, the court reversed and remanded in part and affirmed in part. View "Lagstein v. Certain Underwriters" on Justia Law

The Kivers retained C&T, an Illinois law firm, to prepare trusts to benefit their daughters, Diane and Maureen, among others. Maureen and Diane each served as trustee of various trusts. Maureen died in 2007. Her husband, Minor, represents Maureen’s estate, which filed suit against C&T, alleging that C&T failed to disclose the existence and terms of certain trusts to Maureen, to her detriment, and failed to make distributions to her. The estate filed a separate state court suit against Diane, alleging that Diane breached her duties as trustee by failing to disclose the existence of certain trusts to Maureen or make distributions to her. Diane was a client of C&T during the relevant period. The district court entered an agreed protective order governing discovery disclosure to deal with privilege issues and denied the estate’s motion to compel production. The estate violated the protective order. The district court imposed sanctions and dismissed several of the estate’s claims. The Seventh Circuit affirmed, stating that “The complexity of the multiple trusts … the untimely death of Maureen, the pursuit of concurrent state and federal suits … the length of this litigation, and the disorderly nature of the estate’s presentation… evoke a middle installment of Bleak House." View "Scott v. Chuhak & Tecson, PC" on Justia Law

Hinds County Youth Court Judge William Skinner, II took action in a case in which he was recused and abused the contempt power. Judge Skinner and the Mississippi Commission on Judicial Performance submitted a Joint Motion for Approval of Recommendations, recommending that Judge Skinner be publicly reprimanded, fined $1,000, and assessed $100 in costs. The Supreme Court found that the more appropriate sanction was a thirty-day suspension without pay, a public reprimand, a $1,000 fine, and $100 in costs. Furthermore, the Court modified "Mississippi Commission on Judicial Performance v. Gibson," (883 So. 2d 1155 (Miss. 2004)) and its progeny to the extent that they mandated the Court examine moral turpitude as a factor in determining sanctions. Instead, the Court and the Commission should examine the extent to which the conduct was willful and exploited the judge's position to satisfy his or her personal desires. View "Mississippi Commission on Judicial Performance v. Skinner, II" on Justia Law

Shareholders of a closely held corporation brought a derivative suit against a shareholder-director and the corporation's former attorneys for fiduciary fraud, fraudulent conveyance, legal malpractice, and civil conspiracy. After an evidentiary hearing, the superior court ruled all the claims were time-barred. Upon review of the matter, the Supreme Court affirmed the superior court's dismissal of most claims, but reversed its dismissal of two and remanded those claims for further proceedings. View "Gefre v. Davis Wright Tremaine, LLP" on Justia Law