TO CATCH A THIEF

By Mark Blank, Jr., Esquire

Yes; that is correct. The title of this article matches that of a 1955 Alfred Hitchcock classic (both a comedy and a thriller) starring Grace Kelly, Cary Grant and Jesse Royce Landis. Although the flick is one of my favorites, this article is not meant to be a film review. Instead, the subject is a case in which the plaintiff, as it turned out, was a thief; the defendant was a lawyer (a civil practitioner), who was honest but maybe a bit naive at the time. The plaintiff (Jeb) sued the lawyer (the writer) for negligence and breach of fiduciary duty (i.e., malpractice). It all began some years ago when Jeb, a middle-aged man, waltzed into my office. He had been sued in a Michigan state court by his former employer1. The Michigan lawsuit in which Jeb was the defendant was for breach of contract, fraud, fraud in the inducement, embezzlement, conversion, misrepresentation, tortious interference, breach of fiduciary duty (you know, all of the usual garden variety), etc. The ad damnum was for in excess of $1,100,000. Three of the counts were to be tried by bench and the remainder by jury. When Jeb first consulted me, the Michigan case was in the pretrial stages. Jeb’s local counsel referred him to me to explore bankruptcy. After I analyzed the situation and Jeb’s personal information, I advised against bankruptcy, but invited Jeb to return for a reevaluation should there be an unfavorable verdict. Jeb was smug. He acted confident that there would be a defense verdict, that he would be fully exonerated, but that if there were a plaintiff’s verdict, he assured me, at most it would be for a nominal sum on breach of contract. “All the other claims are just bullshit,” Jeb reassured me.

Well, guess what. Yes; the inevitable: a plaintiff jury verdict for $1,100,000. So Jeb took me up on my return invitation and came to me in a panic, and his attorneys, spread out over Pennsylvania, Florida2 and Michigan, were all rooting for bankruptcy3

Under pressure (duress, coercion, are probably the more appropriate terms) to try to save Jeb and his assets and to put a halt on the Michigan state court proceedings, I put together a bankruptcy, mostly in hopes that this would stop the roller coaster, and we could work something out.

Jeb’s bankruptcy was, on the trustee’s motion, ultimately dismissed. Among other problems, Jeb had not filed tax returns for several years. (The filing of returns is a requirement in most bankruptcy chapters.)

Following the dismissal, Jeb consulted another lawyer, who filed a second bankruptcy. Between the dismissal of the first and the subsequent filing, the Michigan court proceeded on the nonjury counts and entered judgment in the amount of $700,000, bringing the total verdict to $1,800,000. The court also placed a constructive trust on Jeb’s personal residence, his retirement fund with Raymond James, his Rehoboth beach house and his Disney timeshare. Meanwhile, the bankruptcy court (in the second bankruptcy filing) held that most of Jeb’s property, for various reasons, was not exempt pursuant to Bankruptcy Code Section 522 (relating to exemptions). Jeb was compelled to settle with Jon, the Michigan plaintiff. As a result, Jeb was forced to disgorge, as well as to relinquish the Disney timeshare and the Raymond James retirement fund. The remainder of the debts, mostly attorney’s fees and litigation costs, with a scattering of some credit cards, were discharged in the bankruptcy. Jeb’s Philadelphia attorneys had me served with the complaint4. I was, of course, blamed for everything that Jeb had lost.

1Partner, colleague, co-owner; although the subject company was a corporation, I was never clear as to the precise business relationship between Jeb (the Michigan defendant) and Jon (the latter being the Michigan plaintiff).

2There was litigation in Florida over Jeb’s participation as a principal in an alleged fraudulent scheme involving the transfer of a Disney timeshare.

3Often attorneys labor under the impression that bankruptcy is a be-all end-all, a fail-safe that will get them off the hook. This notion is misconstrued and could not be further from the truth.

I was oblivious to it all. Nevertheless, I wrote a three page, single spaced memorandum to the representative of my insurance carrier as to why, whatever I did or did not do, was not the cause of Jeb’s losses. (To put it in legal terms: causation, proximate cause.)

As the case unfolded, things became clearer and clearer. As it turned out, Jeb’s and his wife Jane’s principal residence had been transferred from ownership as tenants by the entireties to a family limited partnership, supposedly to protect it from creditors. Jeb had formed a corporation designated RUSI, Inc., the initials of the name of Jon’s company that Jeb had looted. (RUSI, Inc. most probably was established for the purpose of deceit, snaking customers, misappropriating funds and other miscellaneous trickery.)

The Disney timeshare was acquired by Jeb as the result of a fraudulent transaction involving, among other things, misrepresentations, forgery and identity fraud.

Although the home in Rehoboth Beach was owned as tenants by the entireties, that real estate was purchased with ill-begotten cash that had been funneled from the Michigan corporation. Lastly, the retirement fund with Raymond James was owned by

4The lawsuit against me was brought in the Philadelphia Court of Common Pleas. The attorneys initially tried to lure me into Philadelphia to accept service so as to make it a clear case that Philadelphia was the proper forum. I did not fall for it. Instead, I was served the conventional way, that is, by the Chester County Sheriff. Nevertheless, the subsequent motion for change of venue was denied, and so the case proceeded in Philadelphia anyway.

5Just as I, the second lawyer initially did not know that the Raymond James retirement fund was held by RUSI, Inc. This is probably why, after that fact was discovered, the attorney filed a Chapter 11 on behalf of RUSI, Inc. to try to protect the asset. 6Plaintiff was Jeb along with his wife Jane. I never met Jane, never talked to her or even knew who she was. I saw her for the first time on the day of the trial.

RUSI, Inc., the shell corporation that Jeb had created5. (I had never heard of a retirement fund that was owned by an entity rather than a human being. That is why I did not think to ask in the first place. How Jeb maneuvered this, I will never know.)

All of this information was revealed piece by piece in the civil action – law Jeb and Jane vs. Mark Blank, Jr 6. My counsel’s motion for summary judgment was summarily denied (per Judge Annette Rizzo).

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In preparation for trial, five defense motions in limine were filed and brought before the court. (The motions were carbon copies of the summary judgment motion.) Prior to Judge Alfred J. Snite’s rulings on the motions, my counsel suggested going nonjury. “I want to be tried by a jury of my peers,” Jeb told his counsel, who advised mine accordingly. My attorney’s response: “His peers, are you kidding?

A Delaware County plaintiff in Philadelphia, complaining about losing his beach house, in front of a jury of single mothers on welfare and unemployed men trying to support their families? Come on!”

The trial was converted to nonjury. But it did not matter anyway. Four of the five motions in limine were granted. For all intents and purposes, the trial was over. The next day Jeb’s attorneys filed a motion for a voluntary nonsuit. In open court, Jeb’s counsel and Jeb engaged in a colloquy, in the presence of the judge, that almost sounded like a guilty plea. By that time, my counsel had already prepared a motion for an involuntary nonsuit. (Obviously, it was not needed.)

Jon spent hundreds of thousands in litigation fees. Jeb’s state trial attorneys were out several hundred thousand dollars as a result of the second bankruptcy (those fees and costs having been discharged). Jeb’s foolish Philadelphia lawyers, working on a contingency, put forth a lot of time and effort for, as it turned out, nothing, in a case that they mistakenly thought would be an easy winner. If the latter attorneys (1) had done a thorough investigation; (2) learned all of the facts and history; (3) researched bankruptcy law ; and (4) were more professional, they might have rejected the case. They were naive, as was I. The case cost me over $12,000. Okay, the thief got caught, but was it worth it?

The biggest mistake (and my only one at that) was taking the case in the first place.

Bankruptcy was not, never was, and never could be a solution for Jeb.

7At oral argument on the motions in limine, after repeated questions by Judge Snite, which Jeb’s counsel could not answer, the latter conceded: “I don’t know anything about this area of the law”! Counsel telephoned his expert who came to court to help him out, which he could not do, since the latter seemed to be in the dark about the case, tort litigation and lawyer malpractice. (I perused his expert report, and it was a joke.)

8As for me, Jeb did not tell me the half of it and, all the while, played the role of the victim, as thieves often do.

For the readers, there are a lot of lessons, among them:

(a) don’t take a case under pressure; (b) know all of the facts and history; (c) your client could be a thief and, if so, probably will not be forthright8;

(d) even if she/he is not a thief, beware, as any case has the potential of blowing up, and the aftermath could prove to be disastrous.

There is much more to the story. Space limitations and the potential “all right, enough is enough Blank, we get the point” factor preclude any further discussion. Oh, just one more thing. My insurance premium - did it go up? No! Why not? Well, among other things, I was not (never have been, am not and never will be) a thief. And the lawsuit against me was frivolous.