Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Stone owned STM, which owed Fifth Third about $1 million, secured by liens on business assets and on Stone’s house. Stone’s attorney, Atherton, introduced Stone to Waldman, a potential investor. Stone did not know that Atherton was indebted to Waldman and had given Waldman STM’s proprietary business data. Atherton filed STM’s Chapter 11 bankruptcy petition to preserve assets so that Waldman could acquire them. Atherton allowed the automatic stay to expire. Fifth Third foreclosed, obtaining judgments and a lien on Stone’s house. Waldman paid Fifth Third $900,000 for the bank’s rights. Waldman and Atherton offered to pay off Stone’s debts and employ him in exchange for STM’s assets and told Stone to sign documents without reading them, to meet a filing deadline. The documents actually transferred all STM assets exchange for a job. Ultimately, Waldman owned all STM assets and Stone’s indebtedness, with no obligation to forgive it. Waldman filed garnishment actions; Stone filed a Chapter 11 bankruptcy petition, alleging that Waldman had fraudulently acquired debts and assets. Atherton was disbarred. The bankruptcy court found that Waldman and Atherton had perpetrated “egregious frauds,” invalidated Stone’s obligations, and awarded Stone $1,191,374 in compensatory and $2,000,000 in punitive damages. The district court affirmed. The Sixth Circuit affirmed the discharge, but vacated the award of damages as unauthorized. View "Waldman v. Stone" on Justia Law

Goldberg, a medical malpractice attorney, appeared before Judge Maloney in several cases. Following complaints that Goldberg concealed assets and retained unearned fees, Maloney ordered Goldberg to pay the estates involved. Goldberg failed to do so. Maloney directed him to show cause why he should not be held in contempt. Following a hearing, Maloney found Goldberg to be in criminal contempt and cited Goldberg for attempting to suborn witnesses, charges that did not appear on the hearing notice. Goldberg received a sentence of 18 months. An Ohio appellate court affirmed. Before the Ohio Supreme Court, Goldberg argued for the first time that he had not received sufficient notice of the charges and ineffective assistance because his attorney failed to raise this notice claim. The Ohio Supreme Court declined further review. In 2004, the district court granted habeas relief on the basis that Goldberg received constitutionally inadequate notice. The Sixth Circuit reversed, finding that Goldberg had procedurally defaulted on his lack-of-notice claim by failing to raise it in the state court of appeals. On remand, the district court determined that Goldberg had not demonstrated sufficient cause or prejudice to overcome the procedural default, and denied his petition. The Sixth Circuit affirmed. View "Goldberg v. Maloney" on Justia Law

Defendants, two of three lawyers who represented several hundred Kentucky clients in a mass-tort action against the manufacturer of the defective diet drug "fen-phen," settled the case for $200 million, which entitled them under their retainer agreements to approximately $22 million each in attorney fees. By visiting clients and obtaining their signatures on "confidential settlements," for lesser amounts, the two actually disbursed slightly more than $45 million, less than 23 percent of the total settlement. The lawyers kept the remainder for themselves and associated counsel, transferring much of it from the escrow account to various other accounts, including out-of-state accounts. The scheme was discovered; the lawyers were disbarred and convicted of conspiracy to commit wire fraud, 18 U.S.C. 1343, 1349. One was sentenced to 240 months, the other to 300 months. They were ordered to pay more than $127 million in restitution. The Sixth Circuit affirmed, rejecting a variety of challenges to the sufficiency of the evidence and trial procedures.

The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application.

Petitioner, convicted of a non-fatal shooting, was sentenced as a habitual offender to 29-1/2 to 60 years for assault with intent to commit murder, to run concurrently with a sentence of 40 to 60 months for a felon-in-possession conviction, and a consecutive term of two years for a felony firearm conviction. He claims that his Sixth Amendment right to counsel was violated because his attorney fell asleep while he was being cross-examined. Michigan state courts rejected appeals. The district court denied habeas relief. The Seventh Circuit affirmed. At most, the attorney was asleep for part of a single cross-examination; a petitioner must show that his attorney slept through a substantial portion of the trial for the "Cronic" presumption of prejudice to attach. Noting the overwhelming evidence, the court stated that petition did not show a reasonable probability that counsel could have prevented prejudicial events from occurring had he been awake, much less that it would have affected the outcome of the trial. Although the attorney was later arrested for cocaine use, there was no evidence that he was using cocaine during the trial..

Plaintiff, an attorney who handled Chapter 11 proceedings for a client, submitted a petition for fees after the case was converted to a Chapter 7 proceeding. The bankruptcy court denied the petition because of the attorney's failure to comply with disclosure rules, abusive conduct toward others involved in the case, excessive or incomplete billing, and disruptive behavior. The Sixth Circuit affirmed, noting the attorney's "flagrant" disregard of deadlines and the rules for appeal.