Justia Professional Malpractice & Ethics Opinion Summaries

Dennis Malouf held key roles at two firms. One of the firms (UASNM, Inc.) offered investment advice; the other firm (a branch of Raymond James Financial Services) served as a broker-dealer. Raymond James viewed those dual roles as a conflict, so Malouf sold the Raymond James branch. But the structure of the sale perpetuated the conflict. Because Malouf did not disclose perpetuation of the conflict, administrative officials sought sanctions against him for violating the federal securities laws. An administrative law judge found that Malouf had violated the Securities Exchange Act of 1934, the Securities Act of 1933, the Investment Advisers Act of 1940, Rule 10b–5, and Rule 206(4)–1. Given these findings, the judge imposed sanctions. The SEC affirmed these findings and imposed additional sanctions, including disgorgement of profits. Malouf appealed the SEC’s decision, but finding no reversible error, the Tenth Circuit affirmed. View "Malouf v. SEC" on Justia Law

Ahmed co‐owned an LLC that owned a condominium building. Ahmed recruited individuals to pose as buyers for the building's units and to submit fraudulent loan applications to lenders, including Fifth Third. The participants split the loan proceeds; no payments were made on the loans. Kaufman was the seller's attorney for every closing. The closings were conducted by Traditional Title at Kaufman’s law office. Traditional received closing instructions from Fifth Third to notify it immediately of any misrepresentations and to suspend the transaction if “the closing agent has knowledge that the borrower does not intend to occupy the property.” Kaufman concealed the buyers’ misrepresentations and instructed closing agents to complete closings even when buyers were purchasing multiple properties. Ahmed and Kaufman extended the scheme to other buildings. Although Kaufman testified that he was not aware of the fraud, Ahmed testified that Kaufman knew the buyers were part of the scheme. Two closing agents testified that they informed Kaufman about misrepresentations in loan applications. The Seventh Circuit affirmed a fraud judgment for Fifth Third. Kaufman participated individually in each closing as counsel and personally directed Traditional’s employees to conceal the fraud from Fifth Third, for his personal gain. The judgment against Kaufman was not derived solely from Traditional’s liability, based on his membership in the LLC, so the Illinois LLC Act does not bar his liability. Kaufman is not shielded by being the attorney for the seller in the fraudulent transactions. View "Fifth Third Mortgage Company v. Kaufman" on Justia Law

Nutmeg LLC, formerly managed by Goulding, served as an investment advisor and sole general partner of more than a dozen investment funds, each a limited partnership under Illinois or Minnesota law. Goulding’s management of the Funds ended in 2009, when the SEC brought an enforcement action against him, Nutmeg, and others under the Investment Advisors Act of 1940, alleging that Nutmeg misappropriated client assets and failed to maintain proper records. The district court found that the SEC made the showing necessary to warrant the issuance of a restraining order prohibiting Goulding from managing the Funds and granted the SEC’s unopposed motion to appoint attorney Weiss as receiver for Nutmeg. Unsatisfied with Weiss’s performance, Goulding and limited partners from certain funds managed by Nutmeg filed an individual and derivative action on behalf of the Funds, alleging breach of fiduciary duty and legal malpractice. The court dismissed the federal securities law claim, claims against Nutmeg, all legal malpractice claims against Weiss and her firm, and two breach of fiduciary duty claims. The Seventh Circuit Affirmed, holding that even when viewed in the light most favorable to the plaintiffs, no reasonable jury could find that either Weiss or her firm willfully and deliberately violated any fiduciary duties. View "Goulding v. Weiss" on Justia Law

The Eighth Circuit affirmed the district court's grant of summary judgment to defendant in an action brought by plaintiffs and Glow Hospitality alleging claims against defendant, an attorney, for fraud and breach of fiduciary duties. Plaintiffs also alleged a vicarious liability claims against defendant's law firm.Count I is premised on a factually-complex relationship and intertwined history and on allegations that defendant failed to disclose information, failed to investigate, made false statements to the state court, and, primarily, engaged in dual representation. The court held that the district court correctly granted summary judgment, because Glow failed to support Count I, which lies outside the jury's common knowledge, with expert testimony. Count II alleged that defendant breached his fiduciary duties to Glow by failing to conduct further investigation into Glow's ownership interests, failing to update his opinion letter to First National, making false representations in his affidavits to the state court, and negligently overseeing the operation of Glow. The court held that Minn. Stat. 544.42 applies to Count II, and Glow's failure to comply with section 544.42's affidavit requirements mandated dismissal of this claim. Finally, the court held that the fraud claims were property dismissed, summary judgment on the aiding and abetting claim was proper, and the vicarious liability claims failed. View "Sandhu v. Kanzler" on Justia Law

Johnny Williams worked for Violeta Baker and her home healthcare services company, Last Frontier Assisted Living, LLC (Last Frontier), from 2004 to 2009. Baker hired Johnny to provide payroll, tax-preparation, bookkeeping, and bill-paying services. She authorized him to make payments from her accounts, both for tax purposes and business expenses, such as payroll. She also gave him general authority to access her checking account and to execute automated clearing house (ACH) transactions from her accounts. In addition, Baker allowed Johnny to write checks bearing her electronic signature. Johnny did not invoice Baker for his labor; rather he and Baker had a tacit understanding that he would pay himself a salary from Baker’s payroll for his services. In 2009 the Internal Revenue Service (IRS) notified Baker that her third-quarter taxes had not been filed and she owed a penalty and interest. Baker contacted Johnny to find out why the taxes had not been filed. When he could not produce a confirmation that he had e-filed them, Baker contacted her son for help. Baker’s son discovered that several checks had been written from Baker’s accounts to Personalized Tax Solutions (a business he maintained) and Deverette. A CPA audited the books and found that Johnny’s services over the time period could be valued between $47,500 and $55,000. Subtracting this from the total in transfers to Johnny, Deverette, and Personalized Tax Solutions resulted in an overpayment to the Williamses of approximately $950,000. A superior court found Deverette and Johnny Williams liable for defrauding Baker, after concluding that both owed her fiduciary duties and therefore had the burden of persuasion to show the absence of fraud. The court totaled fraud damages at nearly five million dollars and trebled this amount under Alaska’s Unfair Trade Practices and Consumer Protection Act (UTPA). After final judgment was entered against Deverette and Johnny, Johnny died. Deverette appealed her liability for the fraud. The Alaska Supreme Court affirmed Deverette’s liability for the portion of the fraud damages that the superior court otherwise identified as her unjust enrichment. But the Court reversed the superior court’s conclusion that she owed Baker a fiduciary duty, and reversed the UTPA treble damages against Deverette. The Court vacated the superior court’s fraud conclusion as to Deverette and remanded for further proceedings. View "Williams v. Baker" on Justia Law

The Supreme Judicial Court vacated the judgment of the superior court entering summary judgment in favor of Defendants on Plaintiff's complaint alleging attorney malpractice, holding that the court erred in concluding that Plaintiff failed to present evidence of causation to proceed with its legal malpractice claim.Plaintiff submitted an application for site plan review for approval of a commercial facility. The town's planning board approved the application. Abutters to the site appeal the decision to the town's board of appeals (BOA), and Plaintiff hired Defendants to represent it before the BOA. The BOA ultimately reversed the planning board's decision. Plaintiff appealed, but because Defendants failed to file a brief, the appeal was dismissed. Plaintiff then brought this action alleging that it suffered harm due to Defendants' negligence. The court granted summary judgment for Defendants, concluding that Plaintiff could not show either that the planning board's decision would have been upheld or that the BOA's decision would have been overturned absent Defendants' negligence. The Supreme Court vacated the judgment and remanded for further proceedings, holding that the superior court, had it originally reviewed the planning board's decision, would have concluded that the board's approval of the site plan did not reflect error. View "MSR Recycling, LLC v. Weeks & Hutchins, LLC" on Justia Law

RMG sued Harmelech in 2006. Attorney Mac Naughton represented Harmelech in that suit for 10 weeks. The relationship ended in a fee dispute. After he withdrew, the case settled with a consent judgment against Harmelech. Mac Naughton pursued Harmelech by acquiring rights to that judgment. In 2014, Mac Naughton and his company, Casco sued Harmelech to collect the RMG judgment and to set aside a conveyance. In 2015, Judge Holderman disqualified Mac Naughton from attempting to collect the judgment personally and from representing Casco in its collection efforts. Mac Naughton defied that order. In 2018, Judge Feinerman dismissed the 2014 claims predicated on the RMG judgment as a sanction for willful defiance of the Holderman Order. In 2016, Mac Naughton sued third parties to collect for himself money owed to Harmelech. Judge Blakey dismissed that case as a sanction for violating court orders. In 2017, Mac Naughton sued Harmelech to set aside another property conveyance. Judge Durkin dismissed the case on the same grounds. The Seventh Circuit affirmed in the consolidated cases. The Holderman Order disqualified Mac Naughton. It barred him from pursuing his former clients to collect on the RMG judgment. Mac Naughton willfully defied disqualification. The judges were within their discretion in sanctioning Mac Naughton by dismissing the actions he should not have brought. Regardless of whether Mac Naughton agreed with the Holderman Order, he had to follow it until it was undone through proper channels. View "Mac Naughton v. Harmelech" on Justia Law

The Supreme Court affirmed the judgment of the district court declining to grant Defendant's motion for summary judgment in this legal malpractice action, holding that Thomas v. Hillyard, __ P.3d __ (Utah 2019), squarely addressed the issues presented in this case.On advice from Defendant, Plaintiff, an optometrist, pled guilty to charges arising out of Plaintiff's Medicaid billing for his services. Plaintiff later sued Defendant for legal malpractice, alleging that Defendant failed to inform him of the consequences of pleading guilty or to advise him of the likelihood of success at trial. Defendant moved for summary judgment asking the district court to conclude that Plaintiff's claims failed as a matter of law under two rules embraced in other jurisdictions - the exoneration rule and the actual innocence requirement. The district court declined to adopt either rule. Around the time the Supreme Court heard Plaintiff's appeal, the Court decided Thomas, holding that neither the exoneration rule nor the actual innocence requirement have a place in malpractice law. Thus, based on Thomas, the Court affirmed in this case. View "Paxman v. King" on Justia Law

Terence Bruce and Stanley Nicholson were convicted by juries of common-law misconduct in office. Defendants were federal border patrol agents assigned to a Hometown Security Team (HST) task force that included Michigan State Police troopers, border patrol agents, and other officers operating in Jackson County, Michigan. Defendants had been assigned to ensure perimeter security around a home during the execution of a search warrant and to help search the home and remove confiscated evidence. The task force kept a tabulation of items seized, but defendants took additional property not included on the tabulation. Defendant Nicholson took an antique thermometer and barometer device, insisting that it was junk, and he accidentally ruined the device when he took it home to clean it. Defendant Bruce took a wheeled stool with a leather seat home with him, but he returned it to the police department when asked about it. Defendants were charged with common-law misconduct in office as well as larceny in a building. Defendants moved for directed verdicts, arguing that they were not public officers for purposes of the misconduct-in-office offense. The court denied the motions, and the jury convicted defendants of misconduct in office but acquitted them of larceny in a building. Defendants appealed. In an unpublished per curiam opinion, the Court of Appeals, held that defendants were not public officers and vacated the convictions. The State appealed. The Michigan Supreme Court held that whether defendants were public officers depended on the duties they exercised and the color of office under which they acted. In these cases, because defendants exercised duties of enforcement of Michigan law and acted under authority granted to them by Michigan statute, they acted as public officers. Accordingly, the Supreme Court reversed the Court of Appeals and remanded to that Court for consideration of defendants’ remaining issues. View "Michigan v. Bruce" on Justia Law

In this legal malpractice action against Plaintiff's former attorneys the Supreme Court reversed the order of the circuit court granting one attorney's motion to dismiss based on lack of personal jurisdiction and granted summary judgment in favor of all the former attorneys, holding that while the court erred when it dismissed one attorney for lack of personal jurisdiction it correctly granted summary judgment to that attorney and the other defendants.Plaintiff, a physician, filed this action against three attorneys he retained to prosecute a legal malpractice claim against his former divorce attorney. The court granted one attorney's motion to dismiss, finding it lacked personal jurisdiction due to insufficient minimum contacts in South Dakota. The court then granted summary judgment for all the defendants. The Supreme Court affirmed, holding (1) the circuit court erred when it determined it did not have personal jurisdiction over one attorney because that attorney's conduct and connection with South Dakota were such that it could reasonably anticipate being haled into a South Dakota court; but (2) because Plaintiff failed to establish a submissible case of legal malpractice against the defendants the circuit court correctly granted summary judgment. View "Zhang v. Rasmus" on Justia Law