Justia Legal Ethics Opinion Summaries

Plaintiffs, members of Global Fitness gyms, believed that Global misrepresented the terms of its gym memberships and sued as a class. The parties settled: Global agreed to pay $1.3 million to the class members, class counsel’s fees as ordered by the court, and the claims administrator’s fees and costs. The court approved the agreement over the objections of some class members and ordered its implementation. The Sixth Circuit affirmed. The Supreme Court denied certiorari. In the meantime, Global had sold all of its gyms and funneled $10.4 million of the proceeds to its managers through “tax distributions.” The payments Global owed to the class were in escrow under the terms of the settlement agreement, which made no similar provision for class counsel and the claims administrator. Days before its payment obligation under the agreement came due, Global notified the court it could not meet its remaining obligations. The court held Global Fitness and its managers in civil contempt. The Sixth Circuit reversed. Global had no legal obligation to conserve funds to pay class counsel and the claims administrator while the appeals were pending. Its obligation to pay became definite and specific only once the appeals were exhausted. The court erred in considering any of Global’s conduct from before that date and by holding the managers jointly and severally liable. View "Gascho v. Global Fitness Holdings, LLC" on Justia Law

Kerr sought judicial review of the final determination that Kerr’s husband was not disabled and not entitled to any Social Security disability insurance benefits before his death. Kerr was due to receive any payment owed to Mr. Kerr. The parties stipulated to reversal and remand under 42 U.S.C. 405(g). Kerr then sought an award of $3,206.25 in attorney fees under the Equal Access to Justice Act, 28 U.S.C. 2412(d), with any fees awarded “be made payable to Plaintiff’s counsel,” attaching an “Affidavit and Assignment of EAJA Fee.” The Commissioner did not oppose the motion. The district court granted the award, declined to honor Kerr’s assignment, and concluded that it was required to order payment to Kerr as the prevailing party. The court held that it could not “ignore the Anti-Assignment Act,” which prohibits “an assignment of a claim against the United States that is executed before the claim is allowed, before the amount of the claim is decided, and before a warrant for payment of the claim has been issued” but “le[ft] it to the Commissioner’s discretion to determine whether to waive the Anti-Assignment Act and make the fee payable to Mr. Marks.” The Commissioner responded that she would accept [Kerr’s] assignment and suggested that the court deny as moot Kerr’s Rule 59(e) motion. The district court and Sixth Circuit agreed that Kerr’s motion was moot, and did not reconsider the application of the AAA to the EAJA assignment. View "Kerr v. Commissioner of Social Security" on Justia Law

Circle, a family-owned general contractor, built 42 Army warehouses. Over a period of seven years, a subcontractor, Phase, paid two electricians about $9,900 less than the wages mandated by the Davis-Bacon Act, rendering false some compliance statements that Circle submitted to the government with its invoices. The government pursued Circle for nearly a decade of litigation, although Phase had paid $15,000 up front to settle the underpayment. The government sought $1.66 million, of which $554,000 was purportedly “actual damages” under a theory that all of Phase’s work was “tainted.” The Sixth Circuit rejected that theory, reversed an award of $763,000 to the government, and remanded for an award of $14,748, stating that “in all of these warehouses, the government turns on the lights every day.” Circle has paid its attorneys $468,704. The Equal Access to Justice Act provides that, if a court awards damages to the federal government, but the government’s original demand for damages was both “substantially in excess of the judgment finally obtained” and “unreasonable when compared with such judgment,” the court must “award to the [defendant] the fees and other expenses related to defending against the excessive demand,” 28 U.S.C. 2412(d)(1)(D). The Sixth Circuit held that Circle was entitled to an award unless it “committed a willful violation of law or otherwise acted in bad faith, or special circumstances make an award unjust.” The government did not establish either exception. View "Wall v. Circle C Construction, LLC" on Justia Law

Attorney King approached Terry, a supposed drug dealer, at a strip club. King offered to help Terry launder drug money. Terry, actually a confidential informant, told the police, who arranged several meetings that Terry secretly recorded. Terry told King that he had drugs shipped in from Mexico but that he didn’t sell the product at the “street level.” None Terry's statements were true. King proposed to imitate what he had seen on Breaking Bad: One option was to use a “cash heavy” entertainment business. He also suggested funneling money through his IOLTA trust account used by attorneys to hold client money: King would provide fictitious legal services, deduct payments from the account, and return the remaining money to Terry. They agreed to the IOLTA account approach. Terry gave King $20,000. King promised to deposit it in his IOLTA account. King gave Terry a check for $2,000 in February and another for the same amount in March. King was convicted of two counts of money laundering and one count of attempted money laundering and was sentenced to 44 months in prison. The Sixth Circuit affirmed, rejecting arguments that the introduction of recorded conversations between him and the informant violated his Sixth Amendment right to confront witnesses and that the court improperly allowed the prosecution to ask him about his prior arrest for cocaine possession. View "United States v. King" on Justia Law