• January 8, 2013

Update (January 8, 2013):  If anyone is still following this punishing saga besides me (described below if you are new to the lawsuit), they may want to read U.S. Mag. Judge Janie S. Mayeron’s 54-page denial of Michael Afremov’s motion to add a claim against Michael LaFond and others for punitive damages. Chances are that most Minnesota Litigator readers have other (and better) things to do with their time.  But here’s my best shot at an executive summary in case you are curious: the motion was denied against all defendants in its entirety because Afremov was unable to point to “clear and convincing” evidence of the critical premise of his entire suit, that attorney Michael LaFond knowingly participated in Afremov’s tax fraud.  The order is also noteworthy in some sharp language directed to Afremov’s lawyers (at page 23).  The Court found that

[Afremov’s papers in support of his motion] misstated the record or misrepresented the content of documents. Suffice it to say that inaccurate descriptions of a record do not advance a party’s interests and do not instill confidence in the Court that the parties and lawyers trust that the unvarnished (and accurate) record will support their position.

Ouch.  One can get into trouble by supporting one’s argument by citation to evidence that the Court believes does not say what you say it says.  (See Footnotes 8-9 at p.24.)

Original post (October 10, 2012):  Regular readers of Minnesota Litigator will understand that I could not resist attending the marathon hearing this past Friday of the serpentine legal malpractice saga pitting Plaintiff Mike Afremov against his former attorney Mike LaFond and his New Hampshire law firm Sulloway & Hollis (and other lawyers there), pending before U.S. District Court Judge Patrick J. Schiltz.

I sat through a long day of excellent argument by Twin Cities legal malpractice litigators Charles Jones (for LaFond and Sulloway & Hollis), Richard Thomas (for Harrington and Longergan), and Gerry Fornwald (from Afremov) so you don’t have to.

The Case In A Nutshell

Afremov/LaFond appear to have concocted a ridiculous and implausible fiction as part of a defense in a multi-million dollar shareholder dispute co-founded by Afremov (AGA Medical).  Their story was a cover-up to hide kick-back payments that Afremov was given by AGA Medical suppliers, which were falsely characterized as “loans” and “down payments” by business partners for expensive Persian rugs (after the fact) that Afremov had supposedly arranged to obtain for the suppliers.

(U.S. District Court Judge Patrick J. Schiltz (D. Minn.), near the outset of the day-long hearing on Friday, noted the critical ambiguity as to which, as between Afremov and LaFond, was responsible for weaving the tapestry of deceit underlying the entire case.  From Afremov’s lawyers’ portrayal in response to Judge Schiltz’s inquiry, with apologies for the scrambled metaphor, it seems that Afremov provided the inspiring egg, which LaFond fertilized, and the pair reared this sick chick until its demise when Afremov pulled the rug out from under LaFond and pled guilty to making the whole thing up (out of whole cloth, of course).)

Afremov won hundreds of millions of dollars in the settlement of the underlying AGA Medical dispute for which the elaborate tapestry of lies had been woven as a defense.  LaFond and his law firm also profited handsomely (more than $10 million), from a “success fee” for that dispute.

But, ultimately, charged with felony tax fraud, Afremov confessed to the carpet yarn that he says he spun with help of Mike LaFond, Sulloway & Hollis, and, at a minimum, the acquiescence if not complicity of other lawyers at Sulloway & Hollis.

Then Afremov sued LaFond, essentially, for getting him into this mess.  At the hearing, Judge Schiltz pointed out that Afremov’s “mess” was (1) something for which Afremov himself cannot disclaim personal responsibility, and (2) the mess resulted in Afremov making hundreds of millions of dollars.  What harm or damage did Afremov experience that was not self-inflicted?

The Puzzle

With the brief nutshell account, above, the outcome does not seem hard to predict. “Your client’s hands are filthy,” as Judge Schiltz told Afremov’s attorney in this malpractice action, Gerry Fornwald.  (With this vivid language, Judge Schiltz was referring to the “unclean hands doctrine,” a legal rule that “a court will not redress a wrong when he who invokes its aid has unclean hands”).

If the story ended here, the case would not be complicated; Mr. Afremov’s claim would be thrown out of Court (and, one can predict, some of it will be).

Where it gets tricky, however, are aspects of Defendant LaFond’s conduct that Judge Schiltz seemed inclined to rule, crossed the line that lawyers owe even their most repugnant and unsavory clients.

To take the most extreme example, at a certain point in the Afremov Debacle, when it was clear to all that the carpet was unraveling with obvious criminal implications (for whom? at the time, there was great uncertainty), Afremov started paying not only LaFond and LaFond’s law firm for their legal services. AFREMOV WAS ALSO PAYING FOR A LAWYER FOR LAFOND, HIS LAWYER, AND PAYING FOR A LAW FIRM FOR HIS LAWYER’S LAW FIRM (Sulloway & Hollis) and then…(wait for it)…LAFOND BILLED AFREMOV FOR THE TIME THAT LAFOND SPENT WITH HIS OWN LAWYER (WHO WAS ALSO PAID FOR BY AFREMOV) as La Fond confronted his own legal risk and defense strategy arising out of the scheme in which LaFond played a role (“Mastermind,” Afremov argues/”unwitting victim,” Lafond implausibly protests).

So, as we near the probable end of this mess, it seems clear that Afremov’s admitted wrong-doing should and will, in fact, bar a substantial part of his claim against Mike LaFond.  On the other hand, lawyers do not get a free pass to behave badly when they represent badly behaving people.  It may require a trial for a fact-finder, whether judge or jury, to determine what Mike LaFond was up to and, once that has been established, whether that conduct resulted in conflicts of interest and/or breaches of fiduciary duty that lawyers owe all of their clients, without exception.

So far, in this post, I have recounted a fairly unique scenario unlikely to yield any valuable practice pointers to Minnesota civil litigators so I conclude with one very concrete and valuable pointer from this case:

In addition to LaFond, Afremov’s lawyers in the malpractice action attempted to and, ultimately, successfully added two of Afremov’s fellow Sulloway & Hollis lawyers as defendants in the third amended complaint and then the fourth amended complaint.

Unfortunately for them, Afremov’s  lawyers in the malpractice action never fulfilled the requirements of Minn. Stat. 544.42 as to Lonergan or Harrington.   They argued and will perhaps continue to argue adamantly that the statute has no role here, that Harrington and Lonergan had complete and total notice of all of the claims against them.  And they will lose.

Minnesota law may be wrong on this point (I believe it is) but it is not unclear. The professional malpractice claims against Lonergan and Harrington are dead because Afremov’s lawyers failed to meet the requirements of Minn. Stat. 544.42.  They might be dead for a half dozen or more reasons (statute of limitations, for one) but they only need to be dead for one reason and so they are.  (The fact that they are dead for a handful of reasons will likely spare us all yet another layer of alleged malpractice by Afremov (one would hope!)).

But the claims against LaFond and Sulloway & Hollis? Dead?  Not yet but soon, I predict.  One way or another.

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