Case: 13-2214 Document: 23 Filed: 12/04/2013 Pages: 25blogs.reuters.com/alison-frankel/files/2014/03/... · 28. On March 2, 2012, Appellee filed its reply in support of its motion

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

Case: 13-2214 Document: 23 Filed: 12/04/2013 Pages: 25

i

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


77 W. Washington, Ste. 702


(312) 236-6268


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


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


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


2

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


3

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


4

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


5

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.)


6

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


7

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.


8

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


9

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.



Appellants


77 W. Washington, Ste. 702


(312) 236-6268


10

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.



Appellants


a1

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a2


a3


a4


a5


a6


a7


a8


a9


a10


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:_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

s/__________________________________


Documents

Case: 13-2214 Document: 23 Filed: 12/04/2013 Pages: 25blogs.reuters.com/alison-frankel/files/2014/03/... · 28. On March 2, 2012, Appellee filed its reply in support of its motion