We now move from the sublime to the ridiculous. Oliver, Close, Worden, Winkler and Greenwald have now sued the lawyer for FTI, alleging that he should resue the insurance company. The theory is that since there was not a trial, there was no decision on the merits. The problem is that Illinois Supreme Court Rule 273 specifically states that any involuntary dismissal is a decision on the merits. The case against the insurance company was dismissed because Oliver, Close, Worden, Winkler and Greenwald failed to reinstate the case as is required by Supreme Court Rule 369. And they didn’t do anything for over three years, not ten days or thirty days or even a whole year. It is interesting that the firm chose to sue FTI’s lawyer and not simply resue the insurance company themselves. I believe the reason to be that they are trying to intimidate counsel for FTI. They don’t want the insurance company’s lawyer to show up and ask for sanctions, which he would surely get.
The real issue again is how a law firm that has such a disregard for its own client can continue to do business. On its web site the firm claims the following clients:
Chase Bank; Rockford Bank & Trust; First National Bank of Beloit; Commercial Mortgage & Finance Co.; Aqua-Aerobics Systems, Inc.; Seiberling Associates, Inc.; Bourn & Koch, Inc.; Rockford Pubic Library; Quality Metal Finishing co.; Smith Oil corp.; Great American Insurance Companies; Dial Machine, Ins.; Rochelle Travel Plaza; FTI International, Inc.; Nelson Carlson Mechanical Contractors Co.; Pierce Biotechnology, Inc.; Kasper Trucking, Inc.; YMCA of the Rock River; Rockford Health System; Rockford Memorial Hospital; SupplyCore, Inc.; Rollette Oil Co., Inc.
Of course, FTI, which is most assuredly not a client of Oliver, Close, Worden, Winkler and Greenwald, is listed so it is difficult take the list with a lot of confidence.
Nevertheless, if they are clients, how can these clients continue to do business with these guys ? And if they continue to have this firm represent them, what does that say about how they will treat their own customers? It seems to me that if a client is looking for a lawyer who will abuse the system, that client is unlikely to be looking for fairness in other transactions.
Friday, May 30, 2008
Thursday, May 1, 2008
The Saga Continues
Fortunately for the law firm, the Winnebago County Illinois Circuit Judge took their motion to dismiss seriously. Unfortunately for the firm the Judge also took his job seriously. He stated that after looking at all the documents, he could find no basis for the claim that the bank owned the lawsuit and denied the motion to dismiss.
The law firm has now filed an answer in which it has, in addition to strange and contradictory denials of various allegations, raised a number of defenses as strange as its previous motion to dismiss. Let us take these defenses one at a time. Let us first note the areas of practice for the law firm (from their page on lawyers.com),
"Oliver, Close, Worden, Winkler & Greenwald practices in the following areas of law: Business Transactions, Corporate and Commercial Real Estate, Banking, Labor and Employment, Probate and Estate Planning, Civil Trial and Appellate Practice in all State, Federal, and Bankruptcy Courts, and General Practice."
Clearly, this is a firm with an advertised expertise in business law. Now on to the defenses.
The first affirmative defense is that the corporation was dissolved in 2004. This defense ignores the Illinois Statutes concerning the dissolution of corporations. Illinois Statute number 805 ILCS 5/12.30 provides that dissolved corporations can wrap up its affairs and sue and be sued. The defense, promulgated on behalf of the law firm, seems to be unaware of this Statute. And, oh by the way, isn’t the law firm which represents the corporation supposed to tell them that it has to be reinstated? The law firm which is supposed to supply that information is Oliver, Close, Worden, Winkler & Greenwald.
The second affirmative defense asserts that the since the Bank had a lien, FTI could not pursue the claim until the banks lien was resolved. This is simply nonsense. The lien gave the Bank rights to monies recovered by the corporation, but the right to pursue the claim against the insurance company belonged to FTI. Suggesting otherwise simply demonstrates a remarkable lack of comprehension of debtor-creditor relationships, a key part of business law.
The third affirmative defense is merely a restatement of the second, this time pointing out that there was a receiver appointed, an irrelevant fact.
The fourth defense is that once the corporation was dissolved, the asset became the asset of Julie and James Schanstra. Aside from the conflict with the previous two defenses, the real problem is that again it ignores the Statute which specifically provides that dissolution does not transfer title to any corporate asset.
The fifth affirmative defense is that once the bankruptcy was filed, only the trustee could pursue the claim against the insurance company. The problem is that the Schanstras, not the corporation, filed the bankruptcy so this defense is one more piece of nonsense. It is odd that a law firm, priding itself on its business law acumen, doesn’t know the difference between an individual and corporate bankruptcy.
So let us review. The law firm represents the Schanstras and FTI for many years. The firm takes hundreds of thousands of dollars in fees from these clients. The law firm unceremoniously dumps FTI and Schanstra when a bigger fish comes along, without giving any warning to them. The law firm nevertheless continues to handle a case that puts is critical to the continued operation of the corporation. The law firm fails to promptly resolve the case, putting the law firm in severe financial straits. The law firm fails to pursue the lawsuit, causing it to be dismissed. The law firm fails to tell anybody that the suit is in jeopardy for failure to reinstate the case. The Schanstras pay over $200,000 to the bank for the right to pursue the lawsuit. The lawsuit is dismissed and now the law firm blames the Schanstras. I’m going to go out on a limb here and say that this is real loyalty to a client. I guess their loyalty only goes as deep as the client’s pocketbook.
The law firm has now filed an answer in which it has, in addition to strange and contradictory denials of various allegations, raised a number of defenses as strange as its previous motion to dismiss. Let us take these defenses one at a time. Let us first note the areas of practice for the law firm (from their page on lawyers.com),
"Oliver, Close, Worden, Winkler & Greenwald practices in the following areas of law: Business Transactions, Corporate and Commercial Real Estate, Banking, Labor and Employment, Probate and Estate Planning, Civil Trial and Appellate Practice in all State, Federal, and Bankruptcy Courts, and General Practice."
Clearly, this is a firm with an advertised expertise in business law. Now on to the defenses.
The first affirmative defense is that the corporation was dissolved in 2004. This defense ignores the Illinois Statutes concerning the dissolution of corporations. Illinois Statute number 805 ILCS 5/12.30 provides that dissolved corporations can wrap up its affairs and sue and be sued. The defense, promulgated on behalf of the law firm, seems to be unaware of this Statute. And, oh by the way, isn’t the law firm which represents the corporation supposed to tell them that it has to be reinstated? The law firm which is supposed to supply that information is Oliver, Close, Worden, Winkler & Greenwald.
The second affirmative defense asserts that the since the Bank had a lien, FTI could not pursue the claim until the banks lien was resolved. This is simply nonsense. The lien gave the Bank rights to monies recovered by the corporation, but the right to pursue the claim against the insurance company belonged to FTI. Suggesting otherwise simply demonstrates a remarkable lack of comprehension of debtor-creditor relationships, a key part of business law.
The third affirmative defense is merely a restatement of the second, this time pointing out that there was a receiver appointed, an irrelevant fact.
The fourth defense is that once the corporation was dissolved, the asset became the asset of Julie and James Schanstra. Aside from the conflict with the previous two defenses, the real problem is that again it ignores the Statute which specifically provides that dissolution does not transfer title to any corporate asset.
The fifth affirmative defense is that once the bankruptcy was filed, only the trustee could pursue the claim against the insurance company. The problem is that the Schanstras, not the corporation, filed the bankruptcy so this defense is one more piece of nonsense. It is odd that a law firm, priding itself on its business law acumen, doesn’t know the difference between an individual and corporate bankruptcy.
So let us review. The law firm represents the Schanstras and FTI for many years. The firm takes hundreds of thousands of dollars in fees from these clients. The law firm unceremoniously dumps FTI and Schanstra when a bigger fish comes along, without giving any warning to them. The law firm nevertheless continues to handle a case that puts is critical to the continued operation of the corporation. The law firm fails to promptly resolve the case, putting the law firm in severe financial straits. The law firm fails to pursue the lawsuit, causing it to be dismissed. The law firm fails to tell anybody that the suit is in jeopardy for failure to reinstate the case. The Schanstras pay over $200,000 to the bank for the right to pursue the lawsuit. The lawsuit is dismissed and now the law firm blames the Schanstras. I’m going to go out on a limb here and say that this is real loyalty to a client. I guess their loyalty only goes as deep as the client’s pocketbook.
Wednesday, April 30, 2008
The Point
Litigants can no longer expect to receive FAIR and SWIFT justice. The system has, at best, broken down. Lawyers defending cases are paid on an hourly basis, therefore their interest is in having the case take the most hours. Defendants generally don’t care when they pay legitimate claims. Getting things done has therefore become a significant problem. Courts of appeal are routinely deciding cases that are more than four years old. Shockingly, this seems to have become accepted as the norm by lawyers and judges. The problem is that claimants often need their compensation sooner rather than later.
The solution is to publicize the wrongs that are committed so that those who commit those wrongs can be embarrassed into being part of the solution, not the entire problem.
Take the case of Debbie Shank.
Debbie Shank, while working at Wal-Mart, bought a health and accident insurance polity through the company. She was subsequently injured when the car she was driving was broadsided by a truck. . Her health and accident policy covered her medical expenses, which were over $400,000. She sued the truck driver and recovered about one million dollars. She suffered devastating injuries, including brain damage that left her with short term memory loss. Shortly after the accident, her son was killed in Iraq and she can’t remember being told of his death, so that every time she is told that he died, it becomes a new experience for her. Furthermore, after legal fees and costs were deducted, she was only left with enough to pay back the health and accident insurance carrier. Her health and accident policy sued to recover what it had paid. Subrogation clauses giving insurance companies the right to recover their payments are standard in the insurance industry. Debbie’s situation, however, cried out for compassion. Wal-Mart’s lawyers, however, are not paid for compassion. They were paid to recover the money it had paid out. And they won. Of course they won, the subrogation clause was part of the insurance contract and there really was no defense.
CNN picked up the story and after a few months, Wal-Mart abandoned its claim, deciding that the adverse publicity was more expensive than the subrogation claim. Now, a reasonable examination of the case should cry out for more details, for example, was the case settled too cheaply, were the attorney’s fees too high, did the Court approve the settlement and so on. But the salient fact here is that the public knew that Debbie Shank really deserved a break and that Wal-Mart gave her one. It only took the publicity from CNN to make that happen.
We are trying to do the same thing, publicizing outrages so that the public can make up its mind and, by extension, embarrassing litigants into resolving cases rather than obstructing their resolution. I welcome requests to examine other litigation. Send requests and information to johncap2008atgmail.com.
The solution is to publicize the wrongs that are committed so that those who commit those wrongs can be embarrassed into being part of the solution, not the entire problem.
Take the case of Debbie Shank.
Debbie Shank, while working at Wal-Mart, bought a health and accident insurance polity through the company. She was subsequently injured when the car she was driving was broadsided by a truck. . Her health and accident policy covered her medical expenses, which were over $400,000. She sued the truck driver and recovered about one million dollars. She suffered devastating injuries, including brain damage that left her with short term memory loss. Shortly after the accident, her son was killed in Iraq and she can’t remember being told of his death, so that every time she is told that he died, it becomes a new experience for her. Furthermore, after legal fees and costs were deducted, she was only left with enough to pay back the health and accident insurance carrier. Her health and accident policy sued to recover what it had paid. Subrogation clauses giving insurance companies the right to recover their payments are standard in the insurance industry. Debbie’s situation, however, cried out for compassion. Wal-Mart’s lawyers, however, are not paid for compassion. They were paid to recover the money it had paid out. And they won. Of course they won, the subrogation clause was part of the insurance contract and there really was no defense.
CNN picked up the story and after a few months, Wal-Mart abandoned its claim, deciding that the adverse publicity was more expensive than the subrogation claim. Now, a reasonable examination of the case should cry out for more details, for example, was the case settled too cheaply, were the attorney’s fees too high, did the Court approve the settlement and so on. But the salient fact here is that the public knew that Debbie Shank really deserved a break and that Wal-Mart gave her one. It only took the publicity from CNN to make that happen.
We are trying to do the same thing, publicizing outrages so that the public can make up its mind and, by extension, embarrassing litigants into resolving cases rather than obstructing their resolution. I welcome requests to examine other litigation. Send requests and information to johncap2008atgmail.com.
Tuesday, February 19, 2008
FTI v. Worden (continued)
Well now, this is just strange. As we mentioned the last time we looked in on this case, despite having taken hundreds of thousands in fees, the law firm has decided to stiff the client. It really is sad that the loyalty a true professional would be expected to show is subverted to mere pride.
Apparently not having any real defense to the lawsuit, the law firm has filed a rather bizarre motion. Before addressing that motion, some additional background is necessary. FTI had a rather substantial loan with Bank One, a local Rockford, Illinois bank. Worden had represented them when those loans were negotiated. In 2003, when the company was in financial trouble, due in part to not having recovered for the vandalism to the corporation, Jim Schanstra sought to borrow additional funds from the bank. The bank, however, had been sold and noticed that there was no personal guarantee for the outstanding loan. The bank wanted Schanstra to sign a cross-collateralization note before it would lend any money. A cross-collateralization note is a guarantee by the individual that he will pay the loans of another, in this case, the corporation. Schanstra absolutely did not want to guarantee the corporate note. Just before he was ready to finalize the loan, Worden told him that the law firm could no longer represent him with regard to the loan as the firm also represented the bank. Somewhat dumbstruck, Schanstra went to a new lawyer to whom the firm referred him and signed a note, which had a cross-collateralization clause. Thereafter, Schanstra was forced into personal bankruptcy. In his bankruptcy, he listed his ownership of the corporation, but did not list the assets of the debt as there is no way to do so on a bankruptcy form. The bank objected to his bankruptcy and Schanstra ultimately settled with the bank, paying a limited amount of money but also giving the bank his personal causes of action. The law firm is now claiming that since Schanstra gave his personal causes of action to the bank, that therefore he was also giving the corporations rights to the bank and that therefore the case should be dismissed.
That motion is stupid for a number of reasons:
1. Corporations are legal entities separate from their stockholders. If this were not true, any time a stockholder of a corporation assigned his interest in a personal cause of action that would also include every corporation in which he owned stock. Ignoring the possible anomalies that would arise when different shareholders assigned interests to separate people, the abolition of the difference between individuals and corporations would necessarily invalidate the protections that the corporate structure provides.
2 For a corporation to give anything away, it is necessary that the shareholders or president give it away in the corporate name, something which did not occur here.
3. Even if Schanstra’s ceding of his personal actions to the bank were to be seen as giving the corporate action to the bank, it is only the right to proceeds that is given not the ability to sue. Here then, the suit could not be dismissed, but the proceeds would go to the bank
We shall see if the judge can understand these basic rules.
Apparently not having any real defense to the lawsuit, the law firm has filed a rather bizarre motion. Before addressing that motion, some additional background is necessary. FTI had a rather substantial loan with Bank One, a local Rockford, Illinois bank. Worden had represented them when those loans were negotiated. In 2003, when the company was in financial trouble, due in part to not having recovered for the vandalism to the corporation, Jim Schanstra sought to borrow additional funds from the bank. The bank, however, had been sold and noticed that there was no personal guarantee for the outstanding loan. The bank wanted Schanstra to sign a cross-collateralization note before it would lend any money. A cross-collateralization note is a guarantee by the individual that he will pay the loans of another, in this case, the corporation. Schanstra absolutely did not want to guarantee the corporate note. Just before he was ready to finalize the loan, Worden told him that the law firm could no longer represent him with regard to the loan as the firm also represented the bank. Somewhat dumbstruck, Schanstra went to a new lawyer to whom the firm referred him and signed a note, which had a cross-collateralization clause. Thereafter, Schanstra was forced into personal bankruptcy. In his bankruptcy, he listed his ownership of the corporation, but did not list the assets of the debt as there is no way to do so on a bankruptcy form. The bank objected to his bankruptcy and Schanstra ultimately settled with the bank, paying a limited amount of money but also giving the bank his personal causes of action. The law firm is now claiming that since Schanstra gave his personal causes of action to the bank, that therefore he was also giving the corporations rights to the bank and that therefore the case should be dismissed.
That motion is stupid for a number of reasons:
1. Corporations are legal entities separate from their stockholders. If this were not true, any time a stockholder of a corporation assigned his interest in a personal cause of action that would also include every corporation in which he owned stock. Ignoring the possible anomalies that would arise when different shareholders assigned interests to separate people, the abolition of the difference between individuals and corporations would necessarily invalidate the protections that the corporate structure provides.
2 For a corporation to give anything away, it is necessary that the shareholders or president give it away in the corporate name, something which did not occur here.
3. Even if Schanstra’s ceding of his personal actions to the bank were to be seen as giving the corporate action to the bank, it is only the right to proceeds that is given not the ability to sue. Here then, the suit could not be dismissed, but the proceeds would go to the bank
We shall see if the judge can understand these basic rules.
Wednesday, February 6, 2008
FTI v. Oliver, Worden and Close in Rockford, Illinois
FTI International, Inc. is an Illinois corporation that faced several difficulties in 2001. It manufactured automatic assembly machines when the market was being manipulated by and taken over by China. Despite this pressure, FTI was managing to get by until an employee of its security company, for reasons best known to him, vandalized the company. The resulting damage included not only the physical plant, but a good deal of product, inventory and tools. The product which had been sold created the biggest problem for the company as not only was the needed cash flow now unavailable, but the delay in shipping product to major customers caused a rift that caused the loss of those customers. And those customers provided literally millions of dollars in revenue for the company. The company filed a claim against its insurance company. That claim was handled by the companies attorneys, Oliver, Close, Worden, Winkler & Greenwaldof Rockford, Illinois. The claim was for in excess of $500,000, of which the insurance company, Cincinnati Insurance, paid $90,000. Naturally, a lawsuit ensued. Not only was the lawsuit not promptly resolved, and a result of the loss of those proceeds combined with the loss of current and future revenue was that FTI closed its doors, but the law firm actually failed to properly prosecute the case and the case was ultimately dismissed because of that failure. Stunningly, a lawyer from the law firm actually represented to the Court that she wasn’t sure if the firm represented FTI. Sometime after that, Curt Worden, the lawyer from the firm who actually was the contact between FTI and the firm, suggested to Jim Schanstra, president of the corporation, that the case be settled for $150,000. Of course, no such offer was made by Cincinnati and Schanstra rejected the offer in any event. When Schanstra ultimately found out that the case had not been prosecuted, the corporation sued the law firm. Schanstra, not having any faith in the legal system, worries about what a judge might do.
The key to analyzing any case is determining the facts, figuring out what the issues are, finding the applicable law and then applying the law to the facts. We have set out the facts so the next step is to determine the issues are. To do that we determine what it is that the party wants, the issues tell us how to get there. This case is a simple legal malpractice case. The issue is whether the law firm is liable to FTI. In order to prove its case, FTI must establish that the law firm owed it a duty, that the firm breached the duty and that the corporation suffered damages as a result.
Applying the law to the established facts, the attorney client relationship has established the duty, the failure to prosecute the case is the breach of that duty and the failure to recover from the insurance company shows that there are damages.
Given the rather straight forward nature of the malpractice, and further given that FTI and its president, Jim Schanstra, have paid the firm literally hundreds of thousands of dollars, one might suppose that the firm would feel an obligation to fess up and make sure that compensation is promptly paid by its malpractice insurance carrier. One would be wrong.
We will monitor the case.
The key to analyzing any case is determining the facts, figuring out what the issues are, finding the applicable law and then applying the law to the facts. We have set out the facts so the next step is to determine the issues are. To do that we determine what it is that the party wants, the issues tell us how to get there. This case is a simple legal malpractice case. The issue is whether the law firm is liable to FTI. In order to prove its case, FTI must establish that the law firm owed it a duty, that the firm breached the duty and that the corporation suffered damages as a result.
Applying the law to the established facts, the attorney client relationship has established the duty, the failure to prosecute the case is the breach of that duty and the failure to recover from the insurance company shows that there are damages.
Given the rather straight forward nature of the malpractice, and further given that FTI and its president, Jim Schanstra, have paid the firm literally hundreds of thousands of dollars, one might suppose that the firm would feel an obligation to fess up and make sure that compensation is promptly paid by its malpractice insurance carrier. One would be wrong.
We will monitor the case.
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