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Thursday, June 23, 2016

Ind. Decisions - 7th Circuit decides one Indiana case today, reversing Conour Firm funds distribution decision

In AFC 2006 Corp., v. Mark C. Ladendorf, Attorney At Law, P.C., And Timothy F. Devereux (SD Ind., Pratt), a 12-page opinion, Judge Easterbrook writes:

Attorney William F. Conour stole more than $4.5 million from clients’ trust funds, was convicted of fraud, and is serving ten years in prison. Shortly before these crimes came to light, attorney Timothy Deve reux left Conour Law Firm, LLC, and took 21 clients with him to Mark Ladendorf’s law firm. These clients ultimately produced attorneys’ fees aggregating some $2 million. This appeal presents a three-­corner fight about who gets how much of that money. The contestants are Devereux and the Ladendorf Firm (collectively the Lawyers), several persons from whom Conour stole (collectively the Victims), and ACF 2006 (the Lender), whose parent corporation Advocate Capi tal, Inc., made a loan to the Conour Firm to finance the legal work and out-­‐‑of-­‐‑pocket expenses that a contingent-­fee law firm must bear while suits are in progress.

There are two principal questions. First, how much of the $2 million goes to the Conour Firm for the services it per formed before Devereux left? Second, how are the funds to which the Conour Firm is entitled to be divided between the Victims and the Lender? * * *

The norm that victims of a lawyer’s breach of trust have a remedy notwithstanding the later grant of a security interest to a commercial lender is one of long standing and is reflect-­‐‑ ed in Indiana by §30-­4-­3-­22(c)(2). Section 23-­1.5-­2-­7 tells us that the use of the corporate form to hold assets of a legal practice does not change that norm. It follows that the Victims have priority over the Lender in the funds that the Conour Firm is entitled to receive from the Lawyers.

The judgment of the district court is reversed, and the case is remanded for the entry of judgment consistent with this opinion.

Posted by Marcia Oddi on June 23, 2016 04:14 PM
Posted to Ind. (7th Cir.) Decisions