• February 23, 2018

“A Tough Knot to Crack” (photo by Jay Fanelli)

Update (February 22, 2018): It did not take the Judge very long to vacate the order of dismissal in the case described below. It seems not so simple for an Ohio receiver to settle a Minnesota $1.7 million lawsuit for $70,000…

Original post (February 19, 2018): A Minnesota company (we’ll call it MinnCo) sued an Ohio company (we’ll call it OhioCo-1) in Minnesota on a $1.7 million claim.

A separate Ohio company (OhioCo-2) sued MinnCo in Ohio on a $33,000 claim.

MinnCo runs out of money. Lawyers take the Minnesota case against OhioCo-1 on a contingent fee basis.

OhioCo-2 obtains a judgment against MinnCo in Ohio for the $33,000. OhioCo-2 gets a receiver appointed in Ohio, and MinnCo’s Ohio receiver settles the OhioCo-1 claim (that is, the supposedly $1.7 million claim in Minnesota) for $70,000.

In other words, MinnCo’s Ohio-appointed receiver gets OhioCo-2’s judgment paid for and, on top of that, gets his own fees and costs paid but, to do so, he causes MinnCo to walk away from its claim against OhioCo-1 in Minnesota, potentially a $1.7 million asset for $70,000 (a 96% discount) (leaving MinnCo’s Minnesota lawyers with nothing).

Can the Ohio receiver do that? Can a receiver appointed in Ohio for a Minnesota company do that consistent with the fiduciary duties that the receiver owed MinnCo? Can an Ohio-appointed receiver exercise control over a Minnesota lawsuit?

These questions are not imaginary or hypothetical. It is the factual background of Homestar Property Solutions v. Safeguard Properties, et al. (See Homestar briefs here and here, trying to “undo” the receiver’s settlement of the case against Safeguard.)

U.S. District Court Judge Susan R. Nelson (D. Minn.) will have to figure this out.

We note something of a parade of lawyers representing Plaintiff Homestar (“MinnCo”). It seems to have started paying a law firm hourly, then shifted to another contingent fee arrangement with another firm, and then, apparently, a second contingent fee arrangement with a third law firm.

Does this protracted slog qualify as a “carousel of plaintiffs’ lawyers“? Or is this more in the nature of musical chairs or hot potato?

 

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