July 21, 2019

Archives for November 20, 2014

Saving Ourselves From Ourselves (Part One): We Are The Borg

“We are the Borg. You will be assimilated.
Lower your shields and surrender your ships.
We will add your biological and technological distinctiveness to our own.
Your culture will adapt to serve us.
Resistance is futile.”

rhodesThe Borg is a mass consciousness, an ethos. I Googled “ethos” and here’s what came on top:

Ethos: the characteristic spirit of a culture, era, or community as manifested in its beliefs and aspirations.

The law profession is a culture and community with its own ethos, manifested in both expressed and unspoken rules of belief and aspiration. From the moment we applied to law school, we’ve been giving our implied consent to being assimilated into this ethos. Little did we know it included its own version of the Borg: as we saw in the Killing Them Softly series, our assimilation can result in cognitive- and performance-impairing brain damage.

I spent last week witnessing the legal profession’s Borg Ethos in action as I conducted my “Beyond Burnout” CLE workshop in Cincinnati, Columbus, and Cleveland. Some attendees found it within themselves to escape assimilation. As one said in his course evaluation, “Today I moved closer to taking the steps I need to take to rediscover the creativity, vigor, and passion which came so naturally before I learned to think like a lawyer.”

Like him, we can save ourselves… if we want to.

The workshops were prompted by a new Ohio CLE mandate for instruction in “mental health issues.” Ohio also requires instruction in not just the Rules of Professional Conduct but also the Ohio “Lawyer’s Creed” and “Lawyer’s Aspirational Ideals.” Those requirements contain some fascinating anti-assimilation provisions.

Consider for example this excerpt from The Lawyer’s Creed:

To my colleagues in the practice of law, I offer concern for your reputation and well-being.

And this one from The Lawyer’s Aspirational Ideals:

As to my colleagues in the practice of law, I shall aspire . . . to offer you assistance with your personal and professional needs.

Amazing. Ohio lawyers have an ethical duty to be concerned for the well-being of fellow lawyers, and to offer assistance with their personal needs — such as helping each other to not be assimilated by the legal profession’s Borg Ethos.

This goes way beyond Model Rule 8.3, the Colorado version of which says we must report something that “raises a substantial question as to [another] lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.” In my legal ethics class, we called this the “Rat-On Rule,” and we all knew we would never do that. That’s how the Borg Ethos works: it sucks us in, detaches our normal sensibilities — even the evolutionary survival parts of our brains that instinctively want to look out for the safety and well-being of the other members of our tribe. By contrast, Ohio has made this duty to care explicit.

Truly amazing. When we see a duty to care appearing in CLE ethics requirements, we know that the winds of change are truly blowing in our profession. We’re going to hoist our sail to them in this series. To prepare, we do well to follow the advice the shrunken head on the Knight Bus in Harry Potter and The Prisoner of Azkaban:

“Fasten your safety belts, clench your buttocks! It’s going be a bumpy ride!”

Rhodes has been a lawyer for nearly 30 years, in firms large and small, and in solo practice. Years ago he left his law practice to start a creative venture, and his reflections on that topic appeared in an article in the August 2014 issue of The Colorado Lawyer. His ebook, Life Beyond Reason: A Memoir of Mania, chronicles his misadventures and lessons learned about personal growth and transformation, which are the foundation of much of what he writes about here. If you enjoy reading this blog and would like to contribute a blurb to Kevin’s upcoming collection of these posts, please email Kevin at kevin@rhodeslaw.com.

A collection of Kevin’s blog posts, Enlightenment, Apocalypse, and Other States of Mind, is now available as an ebook. Click the link to sample and download it from the distributor’s webpage. (Soon to be available on iTunes, Barnes & Noble, and Scribd.) Includes Forewords from Debra Austin, author of the Killing Them Softly law journal article, and from Ron Sandgrund, author of an article on lawyers exiting the law in the August 2014 issue of The Colorado Lawyer, in which Kevin was interviewed.

Tenth Circuit: Damages Award on Default Judgment Upheld in Complex Litigation

The Tenth Circuit Court of Appeals issued its opinion in Niemi v. Lasshofer on Tuesday, November 4, 2014.

John Niemi, along with co-plaintiffs Robert Naegele, III, and Jesper Parnevik, was working on a large-scale development project in Breckenridge, Colorado, known as the Fairmont Breckenridge. Azco, LLC and Azco II, LLC, as well as Mesatex, LLC – companies run by Niemi, collectively known as the Azco entities – were the purchasers of the properties for the Fairmont. Based on the success of Phase I of the project, Niemi and the co-investors sought $200-$220 million in financing for Phase II. Defendants Lasshofer and Michael Burgess represented that they could provide financing for Phase II, but required the investors to agree to stop looking for other financing and to provide a $180,000 loan commitment fee. The investors agreed and wired the money. Following an extensive due diligence process, plaintiffs provided an additional $2 million “upfront collateral deposit” to Lasshofer and Burgess. The loan proceeds never materialized, despite repeated assurances from Burgess and Lasshofer that the funds were coming, and eventually Burgess was indicted on criminal fraud charges and sentenced to 180 months’ imprisonment. As part of his plea bargain, Burgess indicated that the funds from the investors were deposited in an account belonging to Innovatis Asset Management, SA (IAM), a company associated with Lasshofer. Burgess implicated Lasshofer as his co-defendant and stated that IAM was continuing to defraud investors. Even after Burgess’s arrest, Lasshofer continued to assure the investors that their funds were coming, but no money ever materialized.

The three investors met to discuss how they would recover from the fraud, and during the conversation Niemi, acting on behalf of the Azco entities, expressly assigned all causes of action and claims to Parnevik, Naegle, and himself. The three filed a Verified Complaint in April 2012, initiating the lawsuit and identifying the various parties and their relationships. The amended complaint filed in July 2012 alleged 17 claims for relief, including a claim under the Colorado Organized Crime Control Act (COCCA) against the Lasshofer defendants and a common law fraud claim against all defendants. In March 2012, the district court issued a TRO to guard against dissipation of the Lasshofer defendants’ assets, and in June 2012 the court issued a preliminary injunction, effectively freezing the worldwide assets of the Lasshofer defendants. After a hearing in March 2013, the court found the Lasshofer defendants to be in contempt of its June 2012 preliminary injunction. In a joint filing between the investors and the Lasshofer defendants, the Lasshofer defendants declared they would no longer devote resources to the case at the district court level, would not participate in discovery, and would not answer Plaintiffs’ amended complaint. The district court eventually entered default judgment against the Lasshofer defendants and awarded over $61 million to the plaintiffs, trebled to $185 million. Lasshofer appealed.

Prior to reaching the merits, the Tenth Circuit had to resolve issues related to its authority to decide the appeal. Plaintiffs had requested the Tenth Circuit to employ the “fugitive disentitlement doctrine” to dismiss the Lasshofer defendants’ appeal. The Tenth Circuit could find no circumstances that would warrant application of the doctrine. Plaintiffs also contend that the Lasshofer defendants must post a bond on the default judgment before appealing, but the Tenth Circuit disagreed, finding that would be sharply at odds with the rules of procedure. Since all issues were ripe due to the district court’s dismissal of claims with prejudice, the Tenth Circuit evaluated the merits of the appeal.

First, the Lasshofer defendants raised several issues related to the district court’s authority to hear the case. They contended (1) Plaintiffs lacked standing to bring their claims, and the district court thus lacked subject matter jurisdiction, (2) the court lacked personal jurisdiction over the Lasshofer defendants, and (3) venue was not proper in the District of Colorado. The Tenth Circuit first addressed the standing claim. Defendants argued that the plaintiffs were not proper parties, because the loan agreement listed Azco as the borrower. However, after reviewing the record, the Tenth Circuit was satisfied that plaintiffs possessed proper standing to bring their claims. The defendants argued that the Loan Agreement barred transfer of the right to sue, but the district court held, and the Tenth Circuit agreed, that the Loan Agreement was a tool of defendants’ broader fraudulent enterprise, and therefore its terms were void and unenforceable.

The Tenth Circuit likewise disposed of defendants’ arguments that the court lacked personal jurisdiction over them. Plaintiffs had many connections to Colorado, and although the Loan Agreement specified jurisdiction was proper in the District of New York, the defendants contended they would have disputed New York jurisdiction also. Therefore, the U.S. District Court for the District of Colorado was the proper venue for the claims. The court also concluded that sufficient minimum contacts existed to confer personal jurisdiction over Lasshofer.

Finally, defendants argued several errors in the determination of damages. The Tenth Circuit reviewed the record and found no error in the court’s calculation. After entry of default judgment, the court requested that plaintiffs present evidence regarding their damages. Plaintiffs presented two different damages calculations, based on two different methods of arriving at the damages amount, that were nearly identical in the total amount. The district court chose the actual damages and trebled it. There was no error in its decision.

The Tenth Circuit denied plaintiffs’ motion to dismiss based on the fugitive entitlement doctrine, denied defendants’ motion to file a surreply based on that motion, denied plaintiffs’ motion to require defendants to post a bond, and denied the requests to award fees and costs. The district court’s award of damages was affirmed, except to the extent it applied to one defendant that did not exist at the time of the controversy. The Tenth Circuit ordered the district court to vacate its order of contempt. The case was remanded for further proceedings.

Tenth Circuit: Unpublished Opinions, 11/19/2014

On Wednesday, November 19, 2014, the Tenth Circuit Court of Appeals issued no published opinion and three unpublished opinions.

United States v. Thompson

Mosher v. Long Beach Mortgage Co.

Torres v. Bodycote International Aerospace & Defense & Energy

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.