Judge Posner Is Not Amused

A March 12, 2014 decision by the 7th Circuit Court of Appeals must have been gratifying for the plaintiff-appellee in the case of Central States v. Lewis. Judge Posner gave the defendant-appellants a beat down – their lawyer in particular.

Plaintiff was a health plan. Defendant had been injured in a motor vehicle accident. The health plan paid for defendant’s medical bills to the tune of about $180,000 following a motor vehicle accident. Defendant (through her Georgia attorney — the accident took place in Georgia.) turned around and sued the person who caused the accident. So far, so good. The motorist’s insurance company paid defendant $500,000. The health plan has a lien against that settlement. The defendant is supposed to pay back her health plan the $180,000 because the wrongdoer has now paid for the injury. You can’t double dip. But her attorney just ignored the lien, paid his client $200,000 and pocketed the remaining 60%. (Awfully high as a contingency fee as Judge Posner notes).

The health plan filed suit to enforce the lien and get their $180k back. The District Court entered a preliminary injunction ordering the attorney to put at least $180k in his client trust account on behalf of his client until the lien issue was resolved. He ignored the order. When pressed, the lawyer proclaimed that his client had already spent her money and that none of the money in his firm’s account was from that settlement. When pressed for an accounting, their documentation was skeletal. The District Court entered a finding of civil contempt which was what was on appeal here.

The only supporting evidence cited (it is not discussed) is an affidavit by Lewis saying that she and her husband had spent her entire share of the settlement proceeds on a new house, a vehicle, and “repayment of personal loans, medical expenses, prescriptions, living expenses, and other expenses”; a pair of affidavits by Lashgari stating that neither he nor his law firm is “in possession of funds that could be used to” restore $180,000 to a client trust account; and a bank statement dated June 2011 for a trust account maintained by Lashgari’s law firm, Lashgari & Associates, P.C., www.lawyers4carwrecks.com (visited March 12, 2014). The bank statement shows the $500,000 deposit of the settlement proceeds and a subsequent withdrawal of $202,000, representing Lashgari’s disbursement to Lewis of her share of the settlement. The share he retained—$298,000, a shade short of 60 percent of the settlement proceeds—seems too high for a contingent fee, but he argues that Lewis owed him for unspecified “advances” that he had made to her. The latest entry in the statement is for June 30, 2011— fewer than three weeks before this lawsuit was filed—and shows a balance of $341,000.

These documents—the only evidence cited in the defendants’ brief—show that Lewis and Lashgari willfully ignored the plan’s lien against the settlement proceeds. Lewis’s statement does not indicate the value of her assets; even if she has spent every last cent of the settlement proceeds that she received, it doesn’t follow that she’s assetless— presumably she still has the vehicle and the house, and she has not indicated their value. And though her statement was not notarized until December 2012, it purports to state her financial situation as of May 2012; there is no subsequent information about her finances. As with Lewis, so with Lashgari: one of his affidavits states that the money in the trust account from Lewis’s settlement has been spent, but there is no information about the account’s current balance or the assets of his law firm.

. . .

The defendants’ conduct has been outrageous. After resolving the merits of the underlying suit, the district court should give serious consideration to transmitting copies of this opinion and the record to the Department of Justice and to the General Counsel of the Georgia Bar. In the meantime, we direct the district court to determine whether the defendants should be jailed (a standard remedy for civil contempt, see, e.g., Turner v. Rogers, 131 S. Ct. 2507, 2512–13 (2011); In re Grand Jury Proceedings, 280 F.3d 1103, 1107–08 (7th Cir. 2002)), until they comply with the order to deposit the settlement proceeds in a trust account.

Judge Posner described the defendants’ behavior as “contumacious effrontery.” He also questions why the District Court has been so slow to deal with this case.