ILNews

COA: Trial court is wrong to order shareholders to pay attorney fees

Back to TopCommentsE-mailPrintBookmark and Share

In a case that stems from a failed transaction in 2000 to purchase an event-decorating company, the Indiana Court of Appeals has reversed the order that shareholders of a corporation are liable for attorney fees on a wrongful stop-payment claim.

Gregory Rankin, Robert Cochrane and John Bales created CBR Event Decorators Inc. to purchase Todd Gates’ event-decorating company. A $100,000 check and signed asset purchase documents were mailed to Gates, who signed and returned them to the shareholders. But the shareholders stopped payment on the check that same day after believing Gates misrepresented the value of the assets after speaking with some of his employees. Gates sued CBR and the shareholders when attempts to renegotiate the purchase agreement failed.

Gates alleged against CBR breach of the asset purchase agreement, wrongful stop payment of a check, and breach of the promissory note; and alleged fraudulent conveyance and wrongful withdrawal of capital against the shareholders. He also sought to pierce the corporate veil. The trial court ruled in favor of Gates and ordered the veil pierced. As part of an agreement staying execution of the judgment pending appeal, the shareholders provided Gates with an irrevocable letter of credit issued by PNC bank for $1 million.

The piercing of the corporate veil was reversed on appeal in 2012, but the appeals court wrote in its opinion that the trial court should determine the portion of the attorney fees the shareholders are liable for to Gates as a result of the wrongful stop payment. The trial court ordered attorney fees of $290,093 plus 18 percent interest.

The trial court, without holding a hearing, ordered the funds from PNC Bank deposited with the trial court clerk after Gates requested the deposit before the letter of credit expired. That order, along with the attorney fee issue, were before the Court of Appeals in CBR Event Decorators, Inc., Gregory Rankin, Robert Cochrane and John Bales v. Todd M. Gates, 49A02-1302-CT-159.

The judges noted there was some confusion based on the language of the 2012 opinion in CBR I as to whether the shareholders should have to pay attorney fees. The wrongful stop payment claim was pled only against CBR, not the shareholders, Judge Margret Robb wrote. The shareholders could only be liable for these fees if the corporate veil was pierced, but that decision was reversed in CBR I.

The judges rejected Gates’ argument that regardless of any allegedly incorrect outcome, the legal doctrines of claim preclusion, issue preclusion and law of the case preclude the trial court and COA from addressing the issue of attorney fees. None of those doctrines are applicable here, so the appeals court does not have to uphold the award of attorney fees against the shareholders.

The order granting Gates’ request to deposit the letter of credit funds with the trial court clerk was not an improper ex parte order, the COA ruled. The trial court’s order wasn’t necessary to effectuate transfer of the funds to the clerk, as the terms of the letter allowed Gates to draw down the available balance of the letter of credit by providing a written demand to the bank, which he did.


 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Whilst it may be true that Judges and Justices enjoy such freedom of time and effort, it certainly does not hold true for the average working person. To say that one must 1) take a day or a half day off work every 3 months, 2) gather a list of information including recent photographs, and 3) set up a time that is convenient for the local sheriff or other such office to complete the registry is more than a bit near-sighted. This may be procedural, and hence, in the near-sighted minds of the court, not 'punishment,' but it is in fact 'punishment.' The local sheriffs probably feel a little punished too by the overwork. Registries serve to punish the offender whilst simultaneously providing the public at large with a false sense of security. The false sense of security is dangerous to the public who may not exercise due diligence by thinking there are no offenders in their locale. In fact, the registry only informs them of those who have been convicted.

  2. Unfortunately, the court doesn't understand the difference between ebidta and adjusted ebidta as they clearly got the ruling wrong based on their misunderstanding

  3. A common refrain in the comments on this website comes from people who cannot locate attorneys willing put justice over retainers. At the same time the judiciary threatens to make pro bono work mandatory, seemingly noting the same concern. But what happens to attorneys who have the chumptzah to threatened the legal status quo in Indiana? Ask Gary Welch, ask Paul Ogden, ask me. Speak truth to power, suffer horrendously accordingly. No wonder Hoosier attorneys who want to keep in good graces merely chase the dollars ... the powers that be have no concerns as to those who are ever for sale to the highest bidder ... for those even willing to compromise for $$$ never allow either justice or constitutionality to cause them to stand up to injustice or unconstitutionality. And the bad apples in the Hoosier barrel, like this one, just keep rotting.

  4. I am one of Steele's victims and was taken for $6,000. I want my money back due to him doing nothing for me. I filed for divorce after a 16 year marriage and lost everything. My kids, my home, cars, money, pension. Every attorney I have talked to is not willing to help me. What can I do? I was told i can file a civil suit but you have to have all of Steelers info that I don't have. Of someone can please help me or tell me what info I need would be great.

  5. It would appear that news breaking on Drudge from the Hoosier state (link below) ties back to this Hoosier story from the beginning of the recent police disrespect period .... MCBA president Cassandra Bentley McNair issued the statement on behalf of the association Dec. 1. The association said it was “saddened and disappointed” by the decision not to indict Ferguson police officer Darren Wilson for shooting Michael Brown. “The MCBA does not believe this was a just outcome to this process, and is disheartened that the system we as lawyers are intended to uphold failed the African-American community in such a way,” the association stated. “This situation is not just about the death of Michael Brown, but the thousands of other African-Americans who are disproportionately targeted and killed by police officers.” http://www.thestarpress.com/story/news/local/2016/07/18/hate-cops-sign-prompts-controversy/87242664/

ADVERTISEMENT