case: 13-2214 document: 23 filed: 12/04/2013 pages:...
TRANSCRIPT
13-2214
IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
______________________________________________________________________________
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS HEALTH AND
WELFARE FUND, an Employee Welfare
Benefit Plan, by Howard McDougall, a
Trustee thereof, in his representative
capacity,
Plaintiff-Appellee,
v.
BEVERLY LEWIS and DAVID T.
LASHGARI, ESQ.,
Defendants-Appellants.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Appeal from the United States
District Court for the Northern
District of Illinois, Eastern
Division
No. 11-cv-4845
The Honorable Joan Lefkow,
Judge Presiding.
______________________________________________________________________________
REVISED BRIEF OF DEFENDANTS-APPELLANTS
BEVERLY LEWIS and DAVID T. LASHGARI, ESQ.
__________________
Arnold H. Landis
Law Offices of Arnold H. Landis, P.C.
77 West Washington Street
Suite 702
Chicago, Illinois 60602
(312) 236-6268
Attorney for Defendants-
Appellants
______________________________________________________________________________
ORAL ARGUMENT REQUESTED
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I. APPELLANTS’ STATEMENT PURSUANT TO FRAP 26.1
Appellants, Beverly Lewis and David T. Lashgari, by and through their
attorneys, Law Offices of Arnold H. Landis, P.C., as and for their Corporate
Disclosure Statement Pursuant to FRAP 26.1, state as follows:
1. Appellants are not a corporation and, therefore, no Rule 26.1
statement is necessary.
By: s/ Arnold H. Landis
Arnold H. Landis, Attorney for
Appellants
Law Offices of Arnold H. Landis, P.C.
77 W. Washington, Ste. 702
Chicago, Illinois 60602
(312) 236-6268
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ii
II. TABLE OF CONTENTS
Page
I. RULE 26.1 STATEMENT…………………………………………………...………. i
II. TABLE OF CONTENTS……………………………………………………………. ii
III. TABLE OF AUTHORITIES…………………………………………………….…. iii
IV. JURISDICTIONAL STATEMENT..……………………….……………………..... 1
V. ISSUE PRESENTED FOR REVIEW AND STANDARD OF REVIEW...……. 1
VI. STATEMENT OF THE CASE……….……………………………………………... 1
VII. STATEMENT OF FACTS………………………………………………………..….. 2
VIII. SUMMARY OF THE ARGUMENT……………………………………………..…. 8
IX. ARGUMENT………………………………………………………..………...………. 8
X. CONCLUSION………………………………………………………………………… 9
XI. APPENDIX…………………………………………………………………………... 10
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iii
III. TABLE OF AUTHORITIES
Page(s)
In re Resource Technology Corp., 624 F.3d 376, 387 (7th Cir. 2010)………..... 8
U.S. v. Hoover, 240 F.3d 593, 596 (7th Cir. 2001).……………….……...…..….. 1
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1
IV. JURISDICTIONAL STATEMENT
Appellee filed a complaint seeking equitable relief under § 502(a)(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29
U.S.C. § 1132(a)(3). According to Appellee’s complaint, the district court allegedly
had jurisdiction pursuant to 29 U.S.C. § 1331 and 29 U.S.C. § 1132(a)(3).
This Court has appellate jurisdiction pursuant to 28 U.S.C. §1292(a). On
May 3, 2013, the district court entered an order finding Appellants in contempt of
court for violating an injunction. On June 3, 2013, Appellants filed a notice of
appeal. The appeal was docketed on June 4, 2013.
V. ISSUE PRESENTED FOR REVIEW AND STANDARD OF REVIEW
Whether the district court erred in finding Appellants in contempt of court?
The standard of review is abuse of discretion. U.S. v. Hoover, 240 F.3d 593, 596 (7th
Cir. 2001).
VI. STATEMENT OF THE CASE
On July 19, 2011, Appellee filed a complaint seeking equitable relief under §
502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as
amended, 29 U.S.C. § 1132(a)(3). Appellee claimed that Appellants dissipated
settlement proceeds that allegedly belonged to Appellee. On May 15, 2012, the trial
court ordered Appellants to restore the settlement fund in the amount of
$180,033.46. Appellants were unable to do so. On October 2, 2012 a rule to show
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cause was issued for Appellants. On May 3, 2013, the trial court found Appellants
in contempt of court.
VII. STATEMENT OF FACTS
1. On October 8, 2009, Appellant David T. Lashgari (Lashgari) filed a
seven-count complaint on behalf of Appellant Beverly Lewis (Lewis) in the case of
Beverly Lewis and Michael Lewis v. L. E. Schwartz & Son, Inc., and Joseph
Hanson, in Bibb County State Court (Georgia), Civil Action File Number 73321
(Georgia lawsuit). (A121)
2. The Georgia lawsuit was based on both the accident-related injuries
Beverly Lewis had sustained and also based on the post-accident tortious conduct
the defendants had engaged in against Lewis. (Id.)
3. On April 5, 2011, the defendants in the Georgia lawsuit filed a Motion
for Summary Judgment as to Lewis' Counts I, IV, VI, and VII. (Id.)
4. In support of their Motion for Summary Judgment, Mr. Hanson and
his employer filed an affidavit from the investigating police officer in which he
testified:
Based on my education, training, and experience as a police
officer, my personal observations at the scene, and statements taken
from witnesses at the scene, it is my opinion that Mr. Hanson's vehicle
failed to keep in the proper lane, as indicated on the crash report, due
to a sudden hydroplane incident involving the vehicle operated by Joe
Hanson. (¶)17, Affidavit of Brad Brown, Motion for Summary
Judgment). (A121-122)
5. Lashgari was unable to obtain evidence necessary to counter the
testimony of the investigating police officer for the October 8, 2008 car accident
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contending that Mr. Hanson was not negligent in the operation of his vehicle at the
time of the collision. (A122)
6. Fearing a ruling by the Court in favor of the defendants' summary
judgment motion due to inability of the Plaintiffs to counter the evidence presented
by Defendants contending that Mr. Hanson was not negligent in the operation of his
vehicle at the time of the collision, Lashgari filed a voluntary dismissal of the
Georgia lawsuit on May 5, 2011. (Id.)
7. Subsequent to the dismissal of the action, Mr. Brent Hyde, Esq., the
attorney for the Defendants in the Georgia lawsuit and Lashgari held several
conferences. (Id.)
8. During the above conferences, Mr. Hyde and Lashgari discussed the
potential course of litigation in case Plaintiffs re-filed the Georgia lawsuit.
9. Mr. Hyde and Lashgari had lengthy discussions on the value of the
defendants' post-accident tortious conduct, the potentially pro-plaintiff African-
American jury pool in Bibb County and their mutual agreement concerning the
difficulty the plaintiffs would have to prevail on the driver's liability for causing the
car accident in the face of testimony from the investigating police officer supporting
the defendants' contention that defendant Hanson was not negligent in the
operation of his vehicle at the time of the collision. (Id.)
10. During these discussions, Mr. Hyde agreed that Mr. Hanson had
admitted in his deposition testimony of March 15, 2010 that shortly after the car
accident of October 8, 2008 in which Lewis was injured, Mr. Hanson had prevented
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Lewis from having any contact with her daughter and her grandchildren after
Lewis had retained legal counsel. (A122-123)
11. During these discussions, Lashgari also revealed to Mr. Hyde that
Lashgari believed in case he refiled the Georgia lawsuit he could potentially obtain
the statement of an employee of defendant employer, L. E. Schwartz & Son, Inc.
who had disclosed to. Lewis' son (Troy) that for an extended period of time following
Lewis' car accident of October 8, 2008, L. E. Schwartz & Son, Inc. management
employees, including Mr. Joseph Hanson, participated in "Tuesday morning"
meetings to discuss newly obtained private medical information concerning Lewis.
(A123)
12. Lashgari further disclosed to Mr. Hyde that in case of refilling the
Georgia lawsuit, the new evidence and testimony from the relatives of Lewis would
show that Mr. Hanson was surreptitiously tapping the unsuspecting relatives of
Lewis regularly for the purpose of obtaining new information on Lewis' medical
conditions for several months following the car accident of October 8, 2008 so he
could discuss the newly obtained information with other management employees of
L. E. Schwartz & Son, Inc. during their "Tuesday morning" meetings. (Id.)
13. During these discussions, Lashgari further disclosed to Mr. Hyde that
by the time the refiled Georgia lawsuit would be ready for a jury trial, Lewis'
psychiatrist, psychologist, and perhaps an independent expert in emotional health
could potentially testify that the emotional and psychological injuries resulting from
Mr. Joseph Hanson's egregious conduct of depriving Lewis to have any contacts
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with her grandchildren and her daughter (Mrs. Hanson's wife) was having
devastating detrimental effects on her emotional and physical health. (Id.)
14. During these discussions, Mr. Hyde finally agreed that, a Bibb County
jury, with a well-known reputation for being pro-plaintiff, even without finding Mr.
Hanson negligent in operation of his vehicle at the time of the accident, could get
upset at him for his admitted post-accident tortious conduct and find Mr. Hanson
liable to Lewis for intentional infliction of emotional distress and based on that
finding may decide to "punish" Mr. Hanson severely. (Id.)
15. Based on the above-referenced discussions, the attorney for the
defendants in the Georgia lawsuit and Lashgari were able to settle Lewis’ claims for
Five Hundred Thousand Dollars ($500,000). (A123-124)
16. At all times mentioned above and during the course of representation
of Lewis, Lashgari was acting as an attorney and an employee in employment of the
corporation known as, Lashgari and Associates, Attorneys at Law, P.C. (A124)
17. At all times mentioned above and during the course of representation
of Lewis, Lashgari has neither conducted business as a sole proprietorship nor
under any name except as an employee of the corporate entity known as Lashgari
and Associates, Attorneys at Law, P.C. (Id.)
18. The above settlement funds were deposited in the trust account of
Lashgari and Associates, Attorneys at Law, P.C. on June 8, 2011. (Id.)
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19. Georgia law specifically requires that, "a lawyer shall promptly deliver
to the client ... any funds or other property that the client ... is entitled to receive."
(State Bar of Georgia Rule 1.15(1)(c)) (Id.)
20. Lewis’ portion of the above settlement funds was disbursed to Lewis on
June 15, 201l. (Id.)
21. The contingency-fee based attorney fees earned by the law firm of
Lashgari and Associates, Attorneys at Law, P.C., of the above settlement funds
were later transferred to the operating account of Lashgari and Associates,
Attorneys at Law, P.C. (Id.)
22. On July 19, 2011, Appellee filed its complaint. (A1-12)
23. According to Appellee’s complaint, it paid $108,003.47 on behalf of
Lewis for her medical expenses and it has a lien for all payments made on behalf of
Lewis in the amount of $108,003.47. (A8)
24. According to Appellee’s complaint Appellee’s Health and Welfare Plan
(Plan) grants Appellee subrogation and reimbursement rights and requires the
repayment by any responsible party of amounts paid by Appellee on behalf of a
covered individual. (A9)
25. According to Appellee’s complaint, the Plan creates an equitable lien
for Appellee’s payment of Lewis’ covered medical benefits against Lewis and
Lashgari, to the extent that funds, in the amount of Appellee’s equitable lien are
maintained in Lashgari’s client trust account or in an escrow account, or the extent
that Lashgari has distributed to himself an attorney’s fee and to the extent that
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Lewis has received any distribution of the balance of the $500,000.00 settlement.
(Id.)
26. On February 3, 2012 Appellee filed a motion for a preliminary
injunction. (A13-17)
27. On February 21, 2012, Appellants filed their response to Appellee’s
motion for a preliminary injunction. (A18-99)
28. On March 2, 2012, Appellee filed its reply in support of its motion for
preliminary injunction. (A100-104)
29. On May 15, 2012, the trial court granted Appellee’s motion for
preliminary injunction and ordered Appellants to restore the settlement fund in the
amount of $180,033.46.1 (A105-119)
30. On July 25, 2012, Appellee filed a motion for a rule to show cause
against Appellants for their alleged failure to comply with the Preliminary
injunction. Appellee’s motion was not supported by affidavit as required by Local
Rule 37.1. (A128-133)
31. On October 2, 2012, a rule to show cause was entered against
Appellants. (A134)
32. On February 12, 2013, Appellants filed their response to the rule to
show cause. (A135-143)
33. On March 18, 2013, Appellee filed its reply to Appellants’ response to
the rule to show cause. (A144-164)
1 This amount was different than the amount prayed for in Appellee’s complaint.
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34. On April 30, 2013, the trial court conducted a hearing on the rule to
show cause. (A165)
35. On May 3, 2013, the trial court entered an order finding Appellants in
contempt. (A166-169)
36. On June 3, 2013, Appellants filed a notice of appeal to this court from
the May 3, 2013 order. (A-170)
VIII. SUMMARY OF THE ARGUMENT
An alleged contemnor’s inability to pay is a valid defense in a civil contempt
proceeding. In re Resource Technology Corp., 624 F.3d 376, 387 (7th Cir. 2010).
Appellants lacked the inability to restore the settlement fund because the
settlement funds no longer existed as of May 15, 2012.
IX. ARGUMENT
The Trial Court Abused Its Discretion In Finding Appellants In Contempt of
The Preliminary Injunction Because Appellants Lacked The Ability To
Restore The Settlement Fund.
On May 15, 2012, the trial court granted Appellee’s motion for preliminary
injunction and ordered Appellants to restore the settlement fund in the amount of
$180,033.46. (A105-119) However, as of May 15, 2012, no funds from the
settlement were in the possession of Appellants. (A124-125 and A136-142)
Therefore, Appellants lacked the ability to (1) restore the settlement fund and (2)
comply with the trial court’s order. An alleged contemnor’s inability to pay is a
valid defense in a civil contempt proceeding. In re Resource Technology Corp., 624
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F.3d 376, 387 (7th Cir. 2010). The trial court abused its discretion in finding
Appellants in contempt of the preliminary injunction because appellants lacked the
ability to restore the settlement fund.
X. CONCLUSION
For the foregoing reasons, Appellants respectfully request that this Court
reverse/vacate the order of contempt entered on May 3, 2013. Further, Appellants
request such additional relief as may be just.
By: s/ Arnold H. Landis
Arnold H. Landis, Attorney for
Appellants
Law Offices of Arnold H. Landis, P.C.
77 W. Washington, Ste. 702
Chicago, Illinois 60602
(312) 236-6268
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XI. APPENDIX
Page
May 3, 2013 Court Order ..………………...……………………………………....…..…. a1
Transcript of April 30, 2013 Court Hearing………………………………….………… a5
All of the material required by parts (a) and (b) of Circuit Rule 30 are
included in this appendix.
By: s/ Arnold H. Landis
Arnold H. Landis, Attorney for
Appellants
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CERTIFICATE OF SERVICECertificate of Service When All Case Participants Are CM/ECF Participants
I hereby certify that on ___________________, I electronically filed the foregoing with theClerk of the Court for the United States Court of Appeals for the Seventh Circuit by usingthe CM/ECF system. I certify that all participants in the case are registered CM/ECF usersand that service will be accomplished by the CM/ECF system.
s/__________________________________
CERTIFICATE OF SERVICECertificate of Service When Not All Case Participants Are CM/ECF Participants
I hereby certify that on ___________________, I electronically filed the foregoing with theClerk of the Court for the United States Court of Appeals for the Seventh Circuit by usingthe CM/ECF system.
Participants in the case who are registered CM/ECF users will be served by the CM/ECFsystem.
I further certify that some of the participants in the case are not CM/ECF users. I havemailed the foregoing document by First-Class Mail, postage prepaid, or have dispatched itto a third-party commercial carrier for delivery within 3 calendar days, to the followingnon-CM/ECF participants:
counsel / party:_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
address:_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
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_____________________________________
s/__________________________________
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