our second case of the morning is a c f two thousand and six against de were stolen by him in one nine hundred ninety six they intervened in this action when we learned that there were some two million dollars to tourney fees some portion of which belonged to mr khan our that were available to those proceeds mr khan our portion of those proceeds to satisfy their commercial debt and it was our belief that the claims of the victims who settlement funds had been bezel by mr khan our had a priority over subsequent  support your position in that regard only what the statute itself says i did not yeah ok thank you that there is another issue though with respect to that the piercing of the corporate veil i'm not sure it's necessary to pierce the veil because the unfaithful trustee statute first looks to whether the proceeds that were embezzled could be traced and followed we believe that they can be and that they can be traced and followed to mr connor was firm indeed it was the firm who receive the funds it was the firm who made the annual payments of the annuity and in his sentencing statement mr connor acknowledged that his use of the bezel funds had been for the maintenance of his law practice so we believe that we out of the supplements as attorney fees to the con our law firm that are subject to the subject matter of the claims of the creditors but you can't do it under the unfaithful trustee statute if you can trace the funds simply changing the corporate structure of your entity doesn't doesn't insulate you the fact that mr khan our who is a sole practitioner incorporated himself as a single person corporation doesn't extinguish or prevent us from continuing to follow those funds that he continued to use in his law practice and so we believe we believe that under either the language of the statute that says that an attorney can affect the rights of clients as against the attorney by incorporating that also that the unfaithful trustee statute allows us to follow those funds through any changes that he makes in the form of corporate structure of this law from we think our claim and actions those funds go back to square one at that point with your clients back in the case you know i hope not just as a practical matter the amount of the beales mine is smaller than the seven hundred seventy five thousand dollars judgment  it's something a round or or a little under five hundred thousand dollars so it really isn't significant to us whether that amount is is higher or lower we would not request or urge a retrial of that issue yes in fact our lein is the first priority because that is simply not relevant to our clients then they they would collect their lien from the existing judgment so i would hope that simply as a practical matter that could be avoided i don't know what the situation is frankly or what the court would need to do if there's a determination that that our lean it is valid but is either pro rata with or behind some amount of a lien on the c s part because then potentially the size of the judgement of the allocation of fees would be relevant to our clients ability to collect but i think as a practical matter the court certainly should should look to avoid having to have a retrial of the issue of the courts allocation of fees that allocation i might have found a higher number but i think it was within the range of the evidence so we're not pushing for a retrial on that except for four cases of the fourteen cases four were separated out an agreement was reach between a c f and mr devereaux that on those four cases mr devereaux would get to keep the figures we didn't make that agreement don't agree with that agreement we can't think of a theory under which mr devereaux is entitled to mr conne ours portion of the clients are parties to this litigation haven't made a claim so because there's been no allocation of the fees on those four cases and we believe we have a leading asked of those fees that's primary because advocate  has waived its claim as to those four that we would require an allocation of the fees in those thirty terminations in those four cases on question i'm not going to talk very much about the adequacy of the complaint i think we said everything that's to be said about it there is one point that i would draw the court's attention to is i'm not sure how clear it was i don't think this court has ever required legal theories to be pled rather it is factual allegations that show the cause of action that are to be planned but if you look at the drug or country the prayer for relief number five where we specifically ask as part of our belief for all other statutory and common law remedies and i believe that that is more than sufficient to to leave the complaint open ended with respect to the potential existence of additional statutory claims such as the the unfaithful trustee statute together i don't know it was supposed to be a third party they did put together whatever the the trust agreement was or whatever the doma was or whatever they were calling it yes i would that certainly needs to be factored in that they did receive some number of years worth of annuity payments but the way the annuities were structured there was a long delay in the beginning of the abilities particularly as a christian i think our first annuity check was for ten years so there wasn't a lot of hers paid much more so as to  that went to the parents which did begin immediately but yes we would agree that those payments are something that has to be factored into the damage calculation but of course we didn't get to that point in the trial because the summary judgment ruling the i don't know whether the court wants me to talk about the affidavit said and probably not but i will ask it there will explain something about procedure which i thought was quite quite strange in terms of the courts  striking at the at the affidavits the court decided to deal with three inconsistent factual declarations from mr meyers by simply striking two of them and ignoring the inconsistency among them  e maybe the court could have done that if nothing else happened something else did happen we filed a motion with the court asking the court to strike all three of the affidavits based on harm the fact that they were all mutually inconsistent and appeared to be be fabricated we think that put the issue squarely before the court we asked the court the alternative to strike all the affidavit since they were inconsistent and therefore couldn't be reliable or in the alternative to find that the existence of an issue of the credibility of mr myers should result in the summary judgment thing to mine that motion to strike was was denied but the issue i think was placed squarely before the court and i think the court had to had to react to the inconsistency of the affidavits in determining whether questions of fact existed with respect to the existence of any assignment that would give the c f a right to pursue a claim that for a loan that was actually made by different appeal there were approximately eleven cases that the court did a quantum era with division of attorneys fees which is called for under indiana law when an attorney leaves a firm and cases go with him the courts have said in indiana that the attorney's fees are to be divided and under an equitable theory of quantum marijuana then the court is supposed to look at the amount of work that was done at each so each specific firm and then compare those and come to a conclusion as to a ppropriate division of the attorney's fees in this case we've only appealed two of the division fees on two of the cases there were originally twenty one cases that came over with me when i went from bed it was a killing that we brought on a product liability basis it was a design defect case what was important in that case is that after the  what he did was he settled with one of the primary defendants for the small sum of twenty thousand dollars he then went to the family and said that out of this twenty thousand dollars i'm keeping eight thousand dollars of it for attorney's fees and i'm keeping the other twelve thousand dollars to pay the case expenses the problem there was that he did not pay the case expenses and in particular there was one case expense that was critical that he did not pay and it was the expert the plaintiff's liability expert in that case was a lady by the name of shelly depp and she was a very highly qualified expert who would work with the consumer product safety commission sell she was to the expert to be used on this case unfortunately mr cohen our never paid her  after repeated attempts to get paid she made multiple requests at some point she finally said i'm done i'm not working on this case anymore when the clients learned that mr cohen our it was going to be criminally charged they decided to leave the farm and contacted me to take the case over when i began to work on the case i contacted misstep and was informed by her that she had no interest whatsoever in continuing on with the case at all the problem that that presented was that the deadline for x experts had already passed now the reason this is all important to the cases because and indiana the quantum  division of attorneys fees is an equitable equitable a claim for really and indiana even the indiana supreme court when they acknowledged in the case of columbus the lines that the attorneys fees are to be done during that through applicable procedure it said it only applies if both the client and the attorney are free from fault the court then in other cases in indiana have said if you come into equity the first thing you have to have is clean hands if you don't have clean hands you cannot seek equitable relief and in this case mr cohn our and on his behalf a c f are in here seeking a portion of the attorney spies on a case that he damaged the the problem with his settlement was twofold i've talked about the fact that the expert absolutely refused to go on with the case because of nonpayment but the other problem was the remaining defendants drew the conclusion that since one of the primary dip other defendants was released for twenty thousand dollars the case had no value so when we took over the case of late we had a very difficult time convincing the remaining defendants that the case did possess value and  get the case scheduled for mediation we prepared we had actually there were another instance of misconduct of mr cohen our that i think hoops bears on the case and that is even after he was notified that our firm was going to be taking over the case from him he refused to turn over the case file or the physical evidence in the case which was the bunk that we had to go and get a court order from the the court in our case ordering him to turn over the documents and the evidence the case file he refused to do so we ended up having to go in with the sheriff's forcibly and his office to take physical possession he did everything in his power to prevent this case from moving forward it is hard to believe that under a theory and approach that requires a party to have clean hands that the court can find mr cohen hours now entitled to an additional hundred twenty thousand dollars out of the subsequent settlement that was procured only through the efforts of myself and the la were what legal error was committed there was a court of appeals yes your honor the point is that there was no evidence to refute this testimony and that's what's important is at trial the only witnesses that were called or myself mr well the the amount of attorney's fees in this case that are to be divided between the bills or between a c f depending on how this court rules is also objects to whether or not mr cohn hours and title to recover the attorney fees because we have to remember that these are attorneys fees that are being claimed by mr cohn our and then after those get to mr cohen our they will either be divided to a c f or to the beales so the fact is that if mr cohn hour is barred from seeking the attorney's fees because of his misconduct then that bars the recovery in the first instance and then there is no issue between the bills or they see out his own conduct would be a bar to hypothetical these are zero funds that somebody is trying to hold right these are funds we've collected through attorneys fees we have held them in trust during the pendency of the simca and that brings us to one of the other issues in the cases those loans are being held in and in and indiana i  count which is required under indiana's law and attorneys have to maintain a trust account and all of the interest from the trust account goes to the indiana bar foundation and the attorneys don't get the interest off the trust accounts well in this case the judge at the very end of the case tacked on an order and term final order or warning prejudgment interest in this case well the problem with that is a c f never planned or sought pre judgment interest from myself or mr layton dorf no evidence was presented at trial regarding pre judgment interest and there's simply no way to calculate it because some of these settlements occurred after this litigation began without interest being paid to basically  yes absolutely made out the so we believe that the the court overlooked the clear fact that mr cohen our does not have clean hands when it comes to the are a subtle when we made it with respect to interest yes be that than leave them wrong and complain to a court of appeals we understand that we knew we were coming up on the other issues as well this was clear error and it's going to affect the the awards because the awards that we're appealing these two cases make up over approximately ninety percent of the top of the total war i mean that's what was frustrating for us is that we had an instance where the court agreed with us on nine out of eleven of the cases with regard to the division of attorney's fees and then chose two cases in which she entirely awarded ninety percent of the attorneys fees that a c f would seek up so and i wanted to touch upon the l b case because that one makes up by far the vast majority of the war here and on the l b case if you look at the cape the evidence that was presented at trial it is clear that the overwhelming amount of work that was done on the l b case was done at the late indoor firm the court only focused on five activities when it made its ruling to divide the attorneys fees and they gave the judge determined that a c f with mr cohen our new c f or title to forty percent of the attorneys fees generated from the l b case and to support that they pointed to five different activities and those activities when you look at them simply do not support any conclusion that that represents forty percent of the amount of work on the case importantly the l b case originated it began at the late indoor firm and it was referred to the cohen our firm it was only at the con our firm for about ten ten and a half months and when i left the cone our firm and went to the laden door firm the l b case came back with me because i was the attorney who had been working on the case i was the only attorney that worked on the case at both the laden door firm and at the cohen our f the evidence at trial was very clear there was documents and exhibits produced by identifying what tasks were performed on the lp case while it was at the cone our firm and what events were done while i was at the laden door for the vast majority of the work was done at the late into our firm one of the things we pointed to from an objective standpoint was the expenses the case expenses incurred at the con our firm on the l b case were only twenty seven hundred established there was no idea because what's important if you look at the file three weeks before the case they'll be case left one hour and went to leighton door for the code our firm filed a expert disclosure in which they conceded that the expert in the case could not identify any defect in the product because no testing had been done yet no testing had been done yet because the product itself hadn't been turned over to the  so the case was at an extremely nascent stage there was simply very little that have been done and one of the things the court pointed to was the she said that a settlement demand letter was submitted by the con our firm while the case was being handled by them that was a court required settlement statement a statement of damages and it was only two and a half pages long it had no identification of any defect in the your well we thought we had what we thought we had because the evidence was so overwhelming that that's why we're here today we can't understand where she came up with the percentages that she underway so i've got a practical question which is why is this not a bankruptcy all the arguments that all the parties are making or the arguments we would expect to be made in the bankruptcy proceedings and you chose not to respond or you can answer my question well that there are two there are two ways a bankruptcy case could have been filed mr connor and or the con our firm could have filed a bankruptcy case i can't speak to why they i think i can speculate as to why they did not but i don't know that for a fact as to why we did not follow involuntary petition your honor and under the bankruptcy code it in one you have to be an unsecured creditor in order to file an involuntary petition or participate in an involuntary petition secondly and we were secured creditor secondly your honor you have to have three unsecured creditors to join in that titian in order that if if the debtor has more than twelve creditors which in this case years were stuck with the legal theory they cited in their comply that two answers to that your honor first the theory set forth in the complaint it's not just that it's an alternative theory  or it's not just that they didn't cite a legal statute they said expressively in their complaint the basis on which they claimed an interest in these legal fees recall they were in intervene or asserting an interest in specific assets the specific assets belong to the con our law firm l l c which was organized in two thousand and seven your honor not come back to why that's important that's that's an alternative grounded decision but it's well you don't have to defend errors by district courts when you've got an alternative gravity graph that's where you want to register i'd be happy to proceed to the alternative ground the alternative ground your honor is the court also looked at the merits on the motion reconsider the court looked at the merits of the beales claim and again granted summary judgment to a c f with respect to that claim and so let's talk about those merits for a moment the complaint that was filed w to say the least skinny very few factual allegations the evidence that was offered by the beales in connection with the motion for summary judgment consisted of basically two things an  a different law firm so it's an unverified complaint and a copy of a default judgment entered against mr connor our personally and the con our dormant law firm that's it that's the entire evidence offered by the beatles in connection with the motion for summary judgment or as we set forth in our response to that your honor another verified complaint the fact it was filed the court can take judicial notice of that but the allegations collateral estoppel effect against anyone and certainly not against a so yet so when you look at the motion for summary judgment the beatles had zero evidence in the record in support of their nothing again motion for summary judgment to on the merits what the court found is that the indiana winning statute did not apply here to afford the beales alien against assets of the con our for the simple reason that that statute says nothing more than if there is and doesn't want her commingling of funds by trustee that the beneficiary of that trust is entitle to lean on personal assets of trustee in this case mr connor to lean on his personal assets there's nothing in that statute that would extend that lien to assets of any entity or corporation  owns instead that link statute would have given the beales a lean on mr conne ours equity in his law firm the con our law firm that was formed in two thousand and seven maybe gives them a lien on that but that would be the equity a c f was a creditor of the con our law firm in its claim gets paid before that equity and so the court ruled on the merits that that lean statute did not apply you have a question or moreover if we take a look at what they're claiming there's no connection between the con are long term which held these assets at issue he was another into the entirely on our law firm not established until ten years later so when mr kahn our testified at his sentencing hearing that he had taken funds from clients and invested them in the con our law firm if you read that testimony it was during the period two thousand and five to two thousand and seven that he testified to that and so there is no evidence in the record whatsoever that there's any connection between those funds that were in vessel the nine hundred ninety six and these assets nothing there's absolutely nothing in the record the beatles argue that tracing might be appropriate here but there is also no evidence in the record that would permit traces they never offered any evidence to show any connection between what happened in one nine hundred ninety six in the assets of conner a law firm in two thousand and fifty well there was versions of the green that were submitted to the court seemed to me to be different and i don't see any explanation from that  can you tell us how the signatures had legitimately be different if this is saying document your there is no evidence in the record to for me to speak to in terms to explain that to the court because those documents in affidavits were stricken of and i and we were up permitted to respond to those things i can't there's nothing in the record that i can speak to your honor that would answer your question if if the court would like me to provide an explanation that's not in the record i'd be happy to do that but there's nothing in the record zero and so i think there's nothing in the record that i can point the court to that would answer that question so if i said to say your honor i'm through with respect to the assignment issue you know as i say it's a red herring what we're talking about here is a parent company assigning a loan to a wholly owned subsidiary doing business in the same place with the same corporate officers so forth and so all the initial affidavit was from the chief credit officer of both candidates both the pear and the subsid carraige might have surprised by itself in the first instance to establish that advocate transferred its interest under the loan to a c f what's different versions of the transfer know i don't believe so your honor the first and foremost there's no requirement under the law anywhere that there be a written assignment of a loan like this from a parent to a subsidiary throughout the case below the beales argued not about mr marrs personal knowledge their argument was that as a matter of law an assignment along cannot occur without a written assignment document they confused article non's requirement for a valid security must be in writing with the requirements for an assignment of a loan and security agreement so there's actually no requirement whatsoever for there to be a writing from advocate to a c s so this whole issue with respect to whether there was a writing or not is entire at higher red herring no writing of it is required in the beales cannot point to any authority anywhere that would have required i believe that statute is intended as in almost every state or in every state that it will your cannot insulate himself from malpractise liability or liability to a client by incorporating it just because  corporation formed by an attorney or two if we also look at the host one case in the end then a statute you'll find that this is not a super priority lean to the extent they ha subject to anybody who's a good faith transferee would take free and clear that only what you would have here your honor is if you permit this lien to attach to assets of a corporation then you've created a secret l that no one loaning money to any law firm could ever know about that lien would arise from something that happened ten years ago a lender comes in does its diligence makes a loan to the law firm only to find out that there is a lien that's been created ten years ago i don't think that was the intent with respect to to pierce the corporate veil i don't think that was the intent with respect to the statu regarding self incorporation or with respect to ling statute because it would wreak havoc in the markets no one could loan money to a law firm in the state of indiana because there could be a secret lien out there that there's no way you could know about a nd that's why that lien statute also has a good faith transferee provision which says if you take for value in good faith then you take yours when a senior in this case there's no question that advocate took without notice there's no evidence presented it had any notice at all of what happened to the bills in one thousand nine hundred six it took without notice so it's a good faith transferee regardless of whether the lien attached bank accounts will make you mr jones indicated there is no requirement of a written document to make an assignment and that's not true one of the documents submitted by a c f was a copy of the sale agreement by which advocates sells loans to its subsidiaries that document required a written loan transfer document to evidence the sales so while there may not be a statute that makes such requirement advocate make such a requirement and that certainly creates an issue of fact  advocate says in writing that it must have a written agreement to transfer a loan to a subsidiary and no written document as it's produced bakri it's a question of fact of whether that assignment took place with respect to  the the unfaithful lien statute in the good faith purchaser i would note that advocates not the plaintiff here a c f is a c f did not qualify under the savings provisions of the unfaithful trustee statute because they did not take for value nor did they take take without notice of the claim according to advocate according to a c f the documents they submitted the transfer agreement that they submitted they paid zero to acquire this loan it was simply transferred to them and that acquisition didn't take place until twenty intel twenty thirteen at a time when mr kahn hour had already been arrested and pled guilty to the investment of funds so they took for no consideration and they took with knowledge of  mr the facts that would create these liens i don't think they qualify for that exception and finally i want to know mr mr devereaux those comments that he should be allowed to well that mr kind of was bad acts should enter into this should forfeit his fees we should forfeit to his victims not to as a windfall choose to the attorney his associate that handled the case after his departure that's all thank you very much counsel the case is taken  advisement court will take a brief break before the third case this morning