Dirty Scams

APPEALS COURT REVERSES LEGAL MALPRACTICE ACTION AND REMANDS CASE FOR TRIAL

The Massachusetts Appeals Court has reversed and remanded an Essex Superior Court legal malpractice case. The attorney represented the Plaintiff, who was injured while dismatling a Light Tower twelve miles offshore in New York harbor. The Plaintiff suffered a severe brain injury when a loading platform where he was working separated from the tower and fell to ocean floor about 120 feet down. The worker was encased in the platform until it hit a leg of the tower, rolled and released him. Workers on the surface reported that he was underwater for several minutes before resurfacing, unconscious, but breathing. Workers dove in the water and brought him onto a barge, where he was revived.
The worker had hired a Gloucester maritime and workers’ compensation firm, which settled his worker’s compensation claim for only $7,500, and then pursued a Jones Act negligence suit in Federal Court against his employer and others. The attorneys’ had claimed the case had an estimated value of $1 million in court papers. Defendants in that case had argued that the worker’s compensation settlement precluded the Federal claim.
The case settled at a court-assisted mediation for only $200,000, after the attorneys told the client that he would lose if he went to trial. The attorneys had admittedly failed to advise the Plaintiff that the worker’s compensation settlement might compromise his Jones Act claim. The worker then sued his attorneys, claiming that they had negligently settled the workers’ compensation claim without disclosing the risks associated with that settlement, and then compelled him to settle the Federal claim to cover up their errors. A superior court judge dismissed the malpractice claim on the eve of trial, resulting in the appeal.
The Massachusetts Appeals Court reversed the dismissal and remanded the case to the  Superior Court for trial. They reasoned that the law regarding the preclusive effect of the settlement of a workers’ compensation claim was unsettled at the time and therefore mandated that the attorneys inform the client of the risks of settlement, and that the failure to advise the client was a breach of their duty.
The Appeals Court then determined that the trial judge had erroneously ruled that the workers’ compensation settlement was not a ‘final adjudication’ of that case, and made other errors regarding (a) the proof necesary to put the claims before a jury, and (b) the necessity of expert witness testimony regarding the reasonable settlement value of the case.
The case will now go forward, presumably to a jury trial on the merits. The client looks forward to his day in Court, still represented by his legal counsel, legal malpractice lawyer, The attorney.

Marston Appeals Court Decision

JPMORGAN CHASE BANK AGREES TO PAY $4.65 MILLION TO SETTLE AIDING AND ABETTING LAWSUIT RELATED TO MILLENNIUM BANK PONZI SCHEME

The attorney represented the Plaintiffs, Edmund and Roberta Mansor (“Mansors”), in a case filed against Defendant, JPMorgan Chase Bank, N.A. (“Chase”) in the U.S. District Court for the District of Massachusetts. the attorney and co-counsel negotiated a settlement of this action that will provide $4.625 million in monetary relief to fewer than two hundred investors who purchased or otherwise acquired CDs from the promoters of the Millennium Ponzi scheme, during the five months between September 25, 2008 and March 9, 2009.  This settlement marks the end of more than five years of hard-fought litigation, and has provided significant relief to the members of the settlement class.

The case arises from William Wise’s $150 million Millennium Bank Ponzi scheme, which involved the sale of bogus CDs with unrealistically high interest rates. Wise and alleged his co-conspirators, Jackie and Kristi Hoegel, used the accounts and services of two Washington Mutual Bank (“WaMu”), and later Chase branches in Napa, California to steal millions of dollars of deposits that they had collected from unsuspecting investors.  Wise is presently serving a 23 year sentence in federal prison after admitting his guilt in the criminal scheme. The Mansors brought this claim on behalf of a class of investors against Chase for aiding and abetting the Millennium fraud.
The Mansors alleged that the Millennium scheme was enabled by Chase employees, and particularly so by branch manager, Tamara Ressler (“Ressler”), who they claimed had acquired specific knowledge of Wise’s illegal activities while working at WaMu and willingly assisted the Millennium Bank fraud anyway, The Mansors had alleged, inter alia, that Ressler:
observed a high volume of checks being deposited into the Millennium accounts, which included memos referring to the terms and interest rate the CDs that investors believed they were purchasing;
observed that Wise and the Hoegels were not placing any money illegitimate banking or other investment activities;
received calls from investigators regarding the nature of the Millennium business and Wise;
recommended and established a remote wiring interface to reduce Millennium’s visibility at branch offices; and
assisted Wise and the Hoegels in having restraints removed from personal and Millennium accounts.
The Mansors further alleged that Ressler continued to assist the Millennium fraud after September 25, 2008, when the United States Office of Thrift Supervision placed WaMu into receivership with the FDIC, and sold certain of WaMu’s assets to Chase. Those assets included the Millennium Bank accounts, as well as the two Napa branches where Wise and the Hoegels had been executing their fraud.  Accordingly, all of the Napa branch employees, including Williams and Groves, became employees of Chase.
The Millennium Bank scheme finally came to an end on March 25, 2009, when the SEC filed a civil enforcement action against Wise and his associates in the United States District Court for the Northern District of Texas before Judge Reed O’Connor.  By that time, Millennium Bank investors had lost millions of dollars.
In early 2009, Mansors’ Counsel, the attorney, began investigating potential claims against third parties arising from the Millennium fraud. During that time, the attorney interviewed witnesses, including William Wise, his attorneys, the Hoegels and numerous investors in the Millennium scheme.  Based on this informal discovery, the attorney filed a complaint in Boston against Chase on March 23, 2012, which Chase, represented by Foley & Lardner LLP, moved to dismiss.

The parties then engaged in a court battle over ‘privilege’ issues after the attorney came into possession of documents voluntarily provided by the court-appointed Receiver in the SEC action, which included information relating to Suspicious Activity Reports (“SARs”) governed by the Bank Secrecy Act (“BSA”). Ultimately, the Court refused to suppress most of the documents in the attorney’s possession, which Chase then attempted to certify to the First Circuit Court of Appeals. The First Circuit agreed to review the issues, ordered full briefing, heard oral arguments in June, 2015, and then denied the Chase Petition in August, 2015.
Almost one year later, in April 26, 2016, the Court denied Chase’s motion to dismiss the Mansors’ Third Amended Complaint, and discovery proceeded, with numerous depositions being conducted throughout the U.S., including in Massachusetts, California, Texas, Colorado and the state of Washington.
Finally, in March, 2018, the parties by agreement conducted mediation before former Massachusetts Superior Court Judge Margaret R. Hinkle 8, and reached the material terms of a settlement of the class claims.  The Court, by Magistrate Judge Judith Dein, finally approved the settlement in the total amount of $1,625,000 on November 14, 2018. The SEC Receiver will now make a distribution of the settlement proceeds to the approved class members, constituting all persons who purchased or otherwise acquired Millennium CDs from September 25, 2008 through March 9, 2009.

MASSACHUSETTS APPEALS COURT REJECTS ATTORNEY’S ASSIGNED CLAIM AGAINST PROFESSIONAL LIABILITY INSURANCE BROKER

Boston Legal Malpractice the attorney represented the Appellant in this insurance coverage case, which settled with Liberty Mutual, the primary insurer following mediation, and then went forward with claims against the insurance agent, AIS Affinity Insurance (“AON”), who had procured policies of insurance for a Boston attorney. AON did not participate in the mediation.
The attorney had allegedly missed the statute of limitations in a claim brought by a surviving husband against tobacco companies, after his wife, a cigarette smoker since the age of thirteen (13), died of lung cancer. The husband sued the attorney, and ultimately settled with him, but only after the insurer maintained that he had no insurance for the claims under any of three (3) different potential policies of insurance, which named him as an insured.
The settlement included assignment of the attorney’s claims against his insurer and broker, based on the denial of coverage. The case against AON came on for summary judgment before a judge of the Suffolk Superior Court. After hearing, the judge granted summary judgment to the insurance agency. The husband appealed from the summary judgment against him.
In August, 2018, the appeals court affirmed in Perreault v. AIS Affinity Ins. Agency of New England, Inc., No. 17-P-1139 (Mass. App. Ct. Aug. 2, 2018). The Appeals Court considered the obligations of a broker with respect to a professional negligence policy.
Although the thrust of the decision focused on the issue of whether the broker had a “special relationship” with the attorney, ruling in the negative in this case, the Plaintiff/Appellant made two other arguments, which were seemingly overlooked by the Appeals Court.
First, the husband argued that the broker, by its representative, had made a binding promise that Liberty, through AON, would provide prior acts coverage under the attorney’s new policy if he made an installment payment on his existing policy, which he had communicated to the broker that he intended to cancel in less than two (2) weeks, upon his departure from his prior firm.
The broker advised the defendant to make the AGM policy payment in December 2009, “so that [it] does not cancel so we can offer you prior acts.” The defendant made the payment, and as planned, instructed the broker to cancel the AGM policy effective December 31, 2009. The attorney had the option of buying extended reporting coverage, but did not, thinking he would have prior acts coverage under the new policy. He did not.
The attorney made the payment, but did not get the promised prior acts coverage under the new policy. The husband argued that this was a breach of contract, or at a minimum, warranted application of promissory estoppel, meaning that the attorney, even in the absence of a binding contract, had relied to his detriment on the promise of the broker. The Superior Court judge, and the appeals court, never really reached the estoppel issue.
Second, the husband claimed that his demand letter to the attorney fell within a sixty (60) day “automatic extended reporting period” provided in each of the Liberty policies, which went into effect after a policy had cancelled. The husband argued that the policy, which was supposed to cancel on December 31, 2009, did not in fact cancel on that date, but on January 19, 2010. This meant that the cancelling policy was in force on January 4, 2010, when the new policy issued, and therefore there was no gap in coverage, which was one of the grounds for Liberty not to provide prior acts on the new policy.
Furthermore, using the January 19, 2010 cancellation date, and applying the sixty (60) day automatic extended reporting period, the claim would have been timely. The Appeals Court, however, retroactively applied the December 31, 2009 cancellation date, relying on language in the policy rather than the facts as occurred.
Because the broker’s representative with whom the attorney had always worked was out for vacation, he was moved to another AON broker, when he called to inquire about the status of his new policy. On January 4, 2010, that broker completed another application over the telephone, checking a box indicating that it was a policy with a January 4, 2010 prior acts date. The attorney admitted that he never reviewed the new policy and believed on January 4, 2010 and thereafter that he had been given prior acts as promised.
When the husband sent a demand letter to the attorney in March, 2010, Liberty took the position that there was no coverage under the new policy due to the January 4, 2010 prior acts date, and under the expiring policy because the claim was outside of the sixty (60) day automatic extended reporting period and denied the claim. Liberty did, however, agree to provide a defense under the AG policy with a full reservation of rights.
The entry of judgment was a disappointment for the husband, but likely the result of a lower court judge, and an appeals court, which was not pleased with the underlying conduct of the attorney, and his cavalier approach to his insurance coverage issues. Given the prior settlement with Liberty, the husband elected not to seek further appellate review from the Supreme Judicial Court.

Attorney Disbarred for Repeated Misuse of Client Funds and Failure to Cooperate with Disciplinary Investigation

The Massachusetts Board of Bar Overseers has adopted the recommendation of a hearing committee, disbarring an attorney for misconduct, mostly having to do with misappropriation of client funds. The attorney, William P. Corbett defended the accusations and the ultimate sanction of disbarment, both factually and on the board’s interpretation of the law.
The attorney readily conceded that the converted funds belonged to two clients and that he had caused deprivation for both, but argued that he made full restitution to both, that he was remorseful, and that mitigating circumstances, largely his diagnosis of severe and chronic depression, were not properly taken into consideration.
The alleged facts are as follows: the attorney joined the Mass bar in 1992 and maintained a solo law practice north of Boston. Two disciplinary petitions were filed by Bar counsel in August, 2014, concerning the attorney’s conduct with respect to two matters with two different clients. In the first instance, the attorney settled an accident case for a client, receiving $500,000 and $50,000 payments, client portions of which the attorney improperly withheld and misused for his own account. Similar circumstances occurred in the second case, also a contingent fee case involving a probate estate.
In each instance, rather than tender the client’s share of settlements, the attorney took the funds for his own use, in one case, failing to inform the client that the settlement had occurred. It was also determined that the attorney, once complaints were lodged, failed to cooperate with bar counsel’s investigation, violated an initial order of suspension, and also made misrepresentations to bar counsel during the course of the investigation.
The attorney’s mitigation defense was unusual. At his disciplinary hearing, the attorney called an expert psychiatric witness, who testified that the attorney was suffering from a major depressive disorder and attention deficit hyperactivity disorder (ADHD), which were responsible for his conduct.
The hearing committee largely rejected the testimony, finding that the attorney’s psychological condition “may have contributed to his circumstances, [but was] not persuasive in mitigation of his intentional and dishonest conduct.” The Board conceded that the conditions may have set the groundwork for the attorney’s misconduct, but that the attorney’s actions, “were too calculated and deliberate for the disabilities of depression and ADHD to have had a substantially contributing role”.
The board accepted the hearing committee’s recommendation that disbarment was appropriate, finding that the attorney’s remorse was “feigned”, and the he appeared unwilling to accept full responsibility for his actions. The board adopted findings that the attorney had persistently failed to provide properly requested records, failed to timely notify his clients of his administrative suspension, and failed to timely return files to a client, causing actual prejudice. Based on all of these aggravating factors, disbarment rather than indefinite suspension, was the appropriate discipline.
bbopublic.blob.core.windows.net/web/f/bd16-075.pdf

Massachusetts Supreme Judicial Court Reinstates Legal Malpractice Claim of Vessel Owner

The Massachusetts Supreme Judicial Court has reversed a lower court ruling granting summary judgment to a law firm, saying the firm had failed to use all measures to combat an erroneous ruling by a French court. The firm, Dechart, had represented a seafood company, whose fishing boat was severely damaged, while undergoing repairs in Tahiti, which is a French protectorate. The French court had given the company an opportunity to submit additional evidence of its losses incurred, but the law firm failed to make the additional submissions, information which it had in its possession.
The lower court judge in the case had entered summary judgment for the law firm, finding that the error of the French court was a ‘superceding’ cause of the damage suffered by the client. The SJC disagreed, ruling that the French court’s mistake was a concurrent, not a superceding cause, rendering the firm potentially liable for its failure to make the additional submissions.
Said the Court, “[w]here an attorney makes a reasonable and correct argument of law and loses because of judicial error that was not foreseeable, the attorney cannot be found negligent for failing to prevent or mitigate that legal error, but where the judicial error is foreseeable…then an attorney has an obligation to take reasonable and prudent steps to prevent or mitigate that error.”
The French court had ruled that a $1.76 million insurance subrogation claim, assigned to the vessel owner by its insurer, would have resulted in a double recovery to the owner, and was therefore improper, but the Court also indicated that it would entertain evidence of monies expended by the owner and other liabilities of the insurer forgiven, which would demonstrate actual consideration paid for the assignment.
It is this evidence that Dechart failed to produce, which the SJC said was a foreseeable “concurrent cause” of the losses suffered by the insurer, and therefore the owner, as assignee. The Court also indicated that a remand of the case was not necessary, as the evidence before it, made the negligence of the firm clear.
Karabati v. Dechert

Massachusetts Attorney Suspended Indefinitely for Criminal Forgery and Misconduct

A Massachusetts attorney has been suspended indefinitely as the result of two claims of misconduct, including falsifying information to the FBI and forging real estate documents.  Specifically, in April of 2006 and January of 2007, the attorney met with FBI agents and alleged that his bank had “misdirected” approximately $88,000 from his account.  The attorney furnished several documents to the FBI, which were found to have been fabricated.  The attorney pleaded guilty to criminal charges for this misconduct on October 29, 2007, and was sentenced to two years probation, which he failed to disclose to bar counsel, as required under S.J.C. Rule 4:01, § 12(8) and Mass. R. Prof. Conduct 8.4.

Subsequently, in 2014, the attorney also falsified real estate documents regarding a home he had rented from another attorney.  The landlord had informed the attorney of his intention to sell the property and then the attorney provided his landlord with an agreement indicating that the home would be purchased by a trust.  The landlord signed the agreement, and then received a purchase and sale agreement allegedly executed by a trustee as a buyer.  In reality, the attorney had forged the trustee’s signature and the trustee had no knowledge of this transaction.  This conduct violated Mass. R. Prof. Conduct 8.4(c) and (h).
In August 2016, Bar Counsel filed a Petition for Discipline with the Massachusetts Board of Bar Overseers related to the attorney’s misconduct.  In April 2017, the Board recommended that the attorney be indefinitely suspended, which the Supreme Judicial Court subsequently ordered.
See In Re Andrew S. Breines

ATLANTA-BASED PRIVATE EQUITY FIRM SUES LEGAL COUNSEL, ALSTON & BIRD LLP.

MSouth Equity Partners, an Atlanta-based private equity investment firm, has sued the legal firm, Alston & Bird LLP (“A&B”), in Fulton County Superior Court in Atlanta, GA, seeking to reclaim more than $7.6 million paid in federal and state taxes.  The plaintiffs allege that lawyers from A&B gave improper legal advice informing the client that the IRS would not challenge a proposed merger between a controlled company and another investment firm as a tax avoidance scheme.
The complaint contained affidavits from (1) the former chair of the tax section of the Atlanta Bar Association and the State Bar of Georgia, and (2) a professor of legal ethics from Mercer University’s Walter F. George School of Law, which asserted that the advice given by A&B, and its failure to recognize or admit the mistake, constituted legal malpractice.
A&B allegedly added to its initial mistake by failing to notify the client of the issue after the IRS had initiated an audit in 2014.  The firm also advised MSouth to agree to indemnify the buyer of the company for any outstanding tax liability resulting from the sale.
MSouth is also seeking punitive damages, legal fees and, pre-judgment interest on the basis that A&B demonstrated “willful misconduct, malice, and fraud,” and a “conscious indifference to the potential consequences” resulting to its clients. MSouth Equity Partners, L.P. v. Alston & Bird, LLP, Fulton County Superior Court, No. 2017:CV-287263.

LEGAL MALPRACTICE SETTLEMENT IMPENDING IN PORTSMOUTH NEW HAMPSHIRE INHERITANCE CASE

Judicial Referee and retired Judge, Gary Cassavechia, has imposed a March 21, 2017 deadline for the beneficiaries of the late Geraldine Webber to reach a settlement in a legal malpractice suit with Webber’s former attorney, Gary Holmes.  Prior to Webber’s death, Holmes wrote a last will and trust which left most of Webber’s $2 million estate to former Portsmouth police sergeant, Aaron Goodwin.  Goodwin was subsequently terminated from the Police Department after an independent panel determined that he had violated various sections of the city’s Code of Ethics and Police Duty Manual, by accepting the inheritance.
Cassavechia rejected the will, finding that Goodwin had exerted undue influence over Webber in convincing her to change the will to benefit him.  Webber had been diagnosed with dementia years before revising her estate plan, which was prepared by Holmes, according to testimony by her long-time physician. In January 2016, the Sloan Kettering Cancer Center and Shriner’s Burn Center, two of the original beneficiaries, successfully petitioned the Probate Court to permit a legal malpractice claim to proceed against Holmes. Any funds obtained from the legal malpractice case would be distributed among the various original beneficiaries.