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Latest Effort Underway to Remake Arbitration Law in Conn.

Submitted by Amaris Elliott-Engel on Sat, 03/04/2017 - 18:34

My latest piece for the Connecticut Law Tribune:

Legislation that would provide a wholesale update to Connecticut arbitration law for the first time in a half-century, an effort that's failed several times already, recently received a hearing in the General Assembly and appears ready to gain traction.

Advocates of adopting the model "Revised Uniform Arbitration Act" (RUAA) are hoping that 2017 will be the year the legislation will finally be passed.

By the count of Barry Hawkins, the bill has been introduced four times since the National Conference of Commissioners on Uniform State Laws promulgated the law in 2000.

Hawkins, a partner with Shipman & Goodwin who testified in favor of the bill on Monday on behalf of the Connecticut Bar Association's Alternative Dispute Resolution Section, said proponents of the bill have made tweaks to address concerns of the groups that were opposed to the bill in the past.

For example, labor unions were concerned that the proposed law would affect their collective bargaining agreements and their grievance processes, Hawkins said. The proposed law makes it clear that collective bargaining agreements are excluded, he said.

Other opponents were concerned that the law would pre-empt punitive damages, but advocates have made clear that—just like Connecticut's current arbitration law—judges and arbitrators still have the ability to award punitive damages if the law provides for it, said Hawkins, who also is a member of the Uniform Law Commission and helped draft the RUAA.

"Hopefully all the opposition has been satisfied," Hawkins said.

Houston Putnam Lowry, a lawyer with Polivy, Taschner, Lowry & Clayton who also testified in favor of the RUAA, said he thinks the legislation may have legs this year because House Rep. William Tong, one of the co-chairmen of the Judiciary Committee, has expressed an interest in enacting legislation to make the state's legal environment friendlier to businesses.

Tong previously introduced an omnibus bill that proposed adopting a version of the Delaware Rapid Arbitration Act, but the Bar Association's ADR section asked Tong to consider support for the RUAA instead, Lowry said.

The Delaware law prevents parties from designing the arbitration process they want to use, while the RUAA fills in the gaps in arbitration agreements that parties have already agreed on in principal, Lowry said.

Tong did not respond to a request for comment.

Harry N. Mazadoorian, an arbitrator and a senior fellow at Quinnipiac University School of Law's Center on Dispute Resolution, said the time is ripe to reform Connecticut's arbitration law because the state is in a fiscal crisis and Connecticut courts are facing budget cuts.

"This is the one time we don't want to discourage arbitration as an alternative to our courts," Mazadoorian said.

One of the advantages of the RUAA is that it would explicitly put on the books that arbitrators are empowered to grant preliminary relief, including provisional remedies, Lowry said. Right now, prejudgment remedies are authorized only by case law, which has put a "judicial gloss on the statute," Lowry said.

The law also would require arbitrators to disclose "facts which might call the arbitrator's impartiality into question," Lowry said in his written testimony.

The RUAA also provides default positions if parties have not already addressed those positions in their arbitration agreements, Mazadoorian said.

The bill enforces arbitration agreements contained in electronic documents, he added.

Raphael L. Podolsky, public policy advocate for Connecticut Legal Services, proposed an amendment to the RUAA that would prevent the use of "rights enforcement disabling clauses" in all consumer contracts, whether they are enforced through the courts or arbitration.

Podolsky said in his written testimony that such clauses restrict consumers from getting punitive damages, fail to provide for the waiver of fees and costs for consumers who can't afford them, and force consumers into forums that are geographically distant and more costly than their home state courts.

Podolsky also said applying the amendment to consumer contracts that are enforceable through arbitration or through the courts would avoid a Connecticut version of the RUAA being deemed pre-empted by the Federal Arbitration Act.

The proposed amendment is based on something similar in New Mexico, Podolsky said.

Hawkins and Mazadoorian both said they think the proposed amendment Podolsky raised would run afoul of the FAA itself.

Most alternative dispute providers have built-in protocols against unfair consumer arbitration provisions, Mazadoorian said. For example, many providers won't accept consumer cases requiring consumers to travel from Connecticut to Washington in order to pursue their dispute, or won't accept cases requiring substantial sums in arbitration fees, he said.

If enacted, the RUAA would go into effect Oct. 1.

Eighteen states and the District of Columbia have enacted the RUAA.


New Virtual Law Advice Clinic Aims to Help Low-Income Residents

Submitted by Amaris Elliott-Engel on Fri, 10/21/2016 - 17:48

Here is my piece just published by the Connecticut Law Tribune about a new pro bono program aiming to help close the access to justice gap:

The power of the internet is being harnessed to make it easier for low-income Connecticut residents to access legal advice, and to make it easier for pro bono attorneys to volunteer to help people who can't afford to pay for attorneys.

Statewide Legal Services of Connecticut is one of the legal aid law firms in eight states which are partnering with the American Bar Association on a virtual law advice clinic that allows low-income clients to ask questions about civil law and for attorneys to answer their questions online whenever convenient for them.

Instead of dropping into a legal aid clinic to talk to a lawyer in person, clients can type their questions and submit them on a computer.

Judge Elliot N. Solomon, deputy chief court administrator and co-chairman of the Connecticut judiciary's Access to Justice Commission, said this new program is unique because it makes it more convenient for people with low to moderate incomes to access legal advice and more convenient for lawyers to be able to provide pro bono service to people who need it.

"It's a win-win both from the perspective of the client and the lawyer," Solomon said.

For clients, the program enables them to access legal advice if they can't afford to take time off from work or if they have some kind of disability that makes travel more difficult, Solomon said.

Clients can get quick responses to their questions with this program, Solomon said. For people who are overwhelmed because they are facing an eviction or debt collection, "sometimes the easiest course of action is to ignore it, which is the least effective" way, he said.

For lawyers, this program makes it easier to do pro bono work whenever they have free time, whether it's at "airport terminals, their offices or late at night," Ashleigh Backman, SLS' pro bono attorney manager, said.

"We saw this as a great way for busy associates, busy solo practitioners, to be able to do pro bono work and accept legal questions they feel most competent answering," Backman said.

Starting six years ago, Tennessee was the first state to run the virtual pro bono clinic. Connecticut and six other states launched their own a few weeks ago. The program will be in 75 percent of the country by November.

Connecticut's version of the program,, is still in beta testing, Backman said. The client feedback so far is "that it was really easy to get an answer for free," she said.

People can ask questions about such civil legal issues aslandlord-tenant problems, consumer debt, employment, workers' compensation, family law, wills, and health law, Backman said.

The program also could be used to send out mass legal information if there is a disaster in Connecticut, Backman said.

There are between 30 and 35 attorneys actively volunteering in the program, Backman said, and SLS would like to recruit more attorneys to participate.

Backman explained that the program is not a live chat but a "virtual space to ask questions."

Clients have to meet requirements for income eligibility, Backman said. Clients also have to sign a retainer agreeing that their attorney-client relationship will end after their questions are answered, she said.

As the site administrator, SLS is providing some quality control by making sure the volunteer attorneys do not have any disciplinary issues with their law licenses and provide legally accurate answers, Backman said.

Attorneys can ask further questions of clients through the computer program, Backman said.

"The attorney is in the driver seat," she said.

SLS will steer complex questions that would benefit from more in-depth legal services to its own staff, she said.

SLS hired Jonathan Caez as the site administrator. Caez sends out clients' questions to attorneys and encourages attorneys to respond to questions in the queue, Backman said. Cindy Fernandez, a paralegal as well as SLS' executive assistant, also will be supporting the project.

Providing a legal answer is going to empower clients and give them hope that there is someone on the other end who cares, Backman said.

The judiciary is going to assist the program by marketing it to potential pro bono volunteers and to potential clients, especially through the court's outreach program in the state's libraries, Solomon said.

The program also has been launched in Louisiana, Mississippi, New York, Oklahoma, Virginia and Wyoming.

Software developers at Baker, Donelson, Bearman, Caldwell & Berkowitz built the Free Legal Answers website.                     

Conn. Ethics Panel OKs Barter of Legal Services

Submitted by Amaris Elliott-Engel on Sun, 10/25/2015 - 23:02

Here's my latest piece for the Connecticut Law Tribune:

Connecticut lawyers can now be paid by clients for their services in chickens and eggs. Well, not quite.

But an opinion issued by the Connecticut Bar Association's Standing Committee on Professional Ethics seems to have opened the door for lawyers to engage in barter.

The committee was asked to offer an opinion on whether an attorney may barter his or her legal services as part of a clearinghouse in which the members exchange goods and services. In this barter exchange program, the attorney is paid in "barter currency," which can be used to purchase goods and services from other members in the exchange. Attorney members and non-attorney members alike also must pay membership dues to such programs.

The opinion, which was drafted this past summer by three members of the CBA committee before it was ultimately approved by a majority of the committee, says that attorneys can ethically participate in barter exchange programs. But there are some limitations.

Marcy Tench Stovall, committee chairwoman and counsel at Pullman & Comley, said the main takeaway from the opinion for a lawyer admitted to practice in Connecticut is that "it's permissible for a lawyer to be paid through a barter exchange, but they have to comply with the all the relevant rules of professional conduct."

Those caveats include that attorneys participating in a barter exchange have to have a written engagement agreement, including spelling out that barter currency will be used as the compensation for legal services. "The cardinal principle governing a lawyer's fee still applies: the fee must not be unreasonable, regardless of form of payment," the opinion says.

A lawyer's participation in a barter exchange still has to comply with all applicable rules for attorney confidentiality, client solicitation and advertising, Stovall said. As a result, any ads published by the barter exchange about an attorney participating in the program must be true and not misleading, according to the opinion.

So what might a lawyer trade legal services for on such an exchange? Exchange Enterprises, which bills itself as "Connecticut's longest trusted barter company," offers everything from acupuncture treatments and small appliance parts to wigs and wedding consulting. Legal services aren't listed among the categories, but other professions such as accounting, opthalmology and sports medicine are represented., a national barter website, includes postings from a number of lawyers. One Dallas practitioner is willing to draft wills and contracts in exchange for landscaping work that includes building a retaining wall. An Ohio attorney is offering "generic legal services and consultation" in exchange for a used car. And a California legal provider is offering civil or family law document preparation in exchange for professional photography services.

Kimberly Knox, a partner at Horton, Shields & Knox who has a practice focusing on professional disciplinary matters, said the committee's opinion "shows that the profession is becoming more flexible" and responsive to clients who may want to compensate their lawyers in non-traditional ways.

Karen Rubin, who is counsel with Thompson Hine's Cleveland office with a practice focusing on professional responsibility, wrote a column in October about the bar opinion on the Lexology website. She noted that barter exchanges have been growing around the country so much so that there is now a trade group, the National Association of Trade Exchanges.

Ethics opinions issued by the American Bar Association and from Massachusetts and California in the 1970s suggested it was improper for attorneys to participate in barter exchange agreements. More recently, ethics opinions from New York, Utah and North Carolina have found it ethical for a lawyer to participate in a barter exchange program if certain requirements are met.

"Bar regulators are extremely cautious by nature and they want to advance the interpretation of ethics rules step by step," Rubin said. "This opinion actually represents a friendlier attitude, a change in attitude, toward barter exchange agreements because … some previous ethics opinions, including from the American Bar Association, were very hostile to the idea of barter exchange arrangements."

The CBA opinion says that attorneys must preserve their independent professional judgment and keep the sole authority to accept matters if they are participating in a barter exchange program. The barter exchange also must not have any influence over the legal services provided through the clearinghouse, and the barter exchange must not be entitled to information about the representation of the client.

The committee also found that a lawyer's participation in a barter exchange program doesn't violate the rules against sharing legal fees with non-lawyers. The committee further opined that litigation expenses can only be paid in advance for legal services if there is a written fee agreement.

Rubin noted that other jurisdictions may not be able to follow Connecticut's lead in allowing attorneys to participate in barter exchanges. She questioned how a barter transaction would work in states where legal fees paid in advance must be put into a client trust account.

In her column, Rubin further said "there might be issues in a barter transaction where a lawyer receives plumbing services immediately, but 'pays' with legal services that will stretch out over an extended period of time: are the plumbing services advance fees, and how will they be 'withdrawn' only as earned?"

Death Penalty in Connecticut Ruled Unconstitutional

The Connecticut Supreme Court, 4-3, has ruled that the state's death penalty is unconstitutional for inmates who were already sentenced to death, The Huffington Post's Kim Bellware reports. Legislators already repealed the death penalty for future crimes.

The majority ruled that execution of inmates who committed capital felonies prior to April 2012 would violate the state's ban on cruel and unusual punishment.

NAACP Wants Investigation Into Black Attorney's Death

Submitted by Amaris Elliott-Engel on Mon, 07/27/2015 - 10:37

Here's a piece I wrote for the Connecticut Law Tribune about the mysterious death of a black attorney and the NAACP's call for further investigation into his death:

Abe Dabela was 35 years old and life seemed to be going well. He had come to the legal profession late, after a series of jobs in the health care industry, and had recently completed a stint as an associate at a major law firm. He loved riding motorcycles and was passionate about health care, social justice and the Second Amendment.

But the Redding Police and the state medical examiner's office say he took his own life on April 5, 2014. Now the Connecticut NAACP, along with Dabela's family, are calling for an investigation into whether the Ethiopian-American attorney was actually murdered.

Here is the police version of events: Gugsa Abraham "Abe" Dabela was only a few minutes from his house in upscale Redding when he flipped his SUV while going around the curve. The vehicle was found at about 1:40 a.m. Dabela had been shot once in the head. A semi-automatic handgun was found in the vehicle.

Scot X. Esdaile, president of the Connecticut NAACP, said in an interview that the civil rights organization plans to put together a team of former law enforcement officers and attorneys to conduct its own investigation. He emphasized that the NAACP has not reached any conclusions about Dabela's death. But he also said there have been many instances where a black men was lynched or murdered as part of a hate crime and authorities have called the death a "suicide."

America has a "long deep-rooted history of blacks being found dead at the side of the road by racist people," said Esdaile, who noted that Redding is 95 percent white.

"Right now, the country is really, really on a cutting edge with racial politics," Esdaile said. "Here we are in Connecticut with a situation that is very mysterious. … It's the duty of the NAACP to make sure things are handled right and in accordance with the laws of this country."

Dabela's family has listed several questions about the Redding Police Department's investigation: Why wasn't a bullet found in the car? Did Dabela's political views in favor of gun rights and his dealings with Redding police to obtain a gun-carry permit negatively influence the investigation into his death? Why, according to a statement by the family, has "Redding exhibited such indolence and apathy for the last 15 months, despite state crime lab reports that suggest this was potentially a homicide?"

Dabela's sister, Albab Dabela, also is an attorney. Family members have declined to speak to the media.

Redding Police Chief Doug Fuchs said in a statement that investigators from his department spent hundreds or hours investigating the attorney's death, and their work has been reviewed by the Connecticut State Police Major Crimes Unit and others, and no one has yet to refute their work. The Danbury News-Times reported that Dabela, when applying for a pistol permit in 2013 with the Redding police, thanked Redding officers for their "service and professionalism" in an email.

Fuchs did not immediately respond to a request for comment for this article.

Dabela's family and the NAACP are planning a news conference in front of the police department on Aug. 5 to further press the issue.

Darnell D. Crossland, president of the Norwalk branch of the Connecticut NAACP and a Stamford-based attorney, said the news conference is being held to address the concerns of Dabela's family and "in light of the fact that there are so many unanswered questions" about Dabela's death.

According to postings on a motorcycle rider website,, Dabela went to high school in Bethesda, Maryland. On his LinkedIn page, Dabela said he graduated from the University of Maryland and then obtained a master's in public health from Drexel University in Philadelphia, where he wrote about the problem of Americans without health insurance in the years immediately before the passage of the Affordable Care Act.

He then spent the next few years working mostly in health care-related jobs, ranging from outreach coordinator at the Philadelphia Department of Public Health to assistant operations manager of a Maryland nursing home.

Dabela attended the Benjamin N. Cardozo School of Law in New York City, participating in the school's securities arbitration clinic and interning at the New York City firm of Schiff Hardin. He received his J.D. in 2011 and was admitted to the Connecticut bar in 2012.

Dabela was hired as an associate in Wilson Elser Moskowitz Edelman & Dicker's Stamford office, where his practice included alternative dispute resolution, product liability, commercial contracts, insurance coverage and professional liability. The firm did not respond to calls seeking comment.

After working with Wilson Elser for two years, Dabela formally established his own firm in Redding about one month before he was killed.

He also provided pro bono legal advice about Second Amendment rights, some of it coming on online forums such as

After his death, a funeral service for Dabela was held in the Metropolitan Memorial United Methodist Church in Washington, D.C. The service was announced on the DCSportsBike website, on which Dabela was often affectionately referred to known as "Googs."

"Abe was a great friend to this community and a valued subject matter expert on legal issues," wrote one poster. "He was always willing to give his advice free of charge, which is an uncharacteristic trait for any lawyer. He was also a true champion of the Second Amendment. I can't quantify how much I have learned from him. … He was a loyal friend and an avid rider. We lost a good one."

CT Legal Aid Funding Crisis Leads to Lobbying Office Closing

Due to a funding crisis, Connecticut's three major legal aid nonprofits have had to close their joint office that lobbied legislators, The Connecticut Law Tribune's Michelle Tuccitto Sullo reports. The closure of the Legal Assistance Resource Center of Connecticut is stemming from a funding shortfall with court filing fees being lower than expected and low interest rates on money held in attorney IOLTA accounts generating reduced interest income.

Judge Orders Lawyer to Pay $236,000 Law School Debt

Submitted by Amaris Elliott-Engel on Tue, 06/16/2015 - 17:54

Here's a piece I wrote for the Connecticut Law Tribune about a lawyer's law school debt:

Law school students learn how to argue over contracts. But that doesn't necessarily mean they can litigate their way out of a contract to pay their law school loans. One Branford-based attorney is facing this reality after a federal judge ruled that, more than two decades after receiving his law degree, he owes the federal government more than $236,000 for his legal education.

Gregory P. Cohan went to the University of Bridgeport Law School—now the Quinnipiac School of Law—and got his Connecticut bar license in 1993. But he hasn't made a payment on his law school loans since 2001. A few years before that, he consolidated his federal law school loans under the William D. Ford Federal Direct Loan Program, which ties monthly repayment amounts to an individual's income. After 25 years, any balance left on loans is forgiven.

According to Cohan's calculations, his payment should have been about $100 a month. But the government puts the number at $300.

Cohan argued in court papers that because the federal Department of Education incorrectly calculated his monthly repayment, the government materially breached his student-loan agreement, made it impossible for him to pay back his loans and thus discharged his duty to perform under the contract.

"The defendant, the non-breaching party, is entitled to the benefit of the bargain," Cohan wrote. "The plaintiff agreed to reasonable, affordable payments for [a] period of 25 years, then forgiveness of any unpaid balance. The parties agreed that defendant would not be charged more than he could afford to pay, and that he would not have an unmanageable debt hanging over his head for the rest of his life."

The disagreement stems from how Cohan's income was calculated. Cohan reported that his 2001 income was $14,605. But Assistant U.S. Attorney Christine Sciarrino, who handled the case for the federal government, took issue with Cohan's calculations. Because income tax filings actually reflect the previous year's income, Sciarrino said Cohan couldn't officially compute his 2001 salary in December of that year. She said he should have used his adjusted gross income from 2000, which was $26,960. That would have put his loan repayment burden at $310.17 per month, she said.

U.S. District Judge Jeffrey A. Meyer acknowledged that it was within the government's discretion to use the alternative documentation Cohan submitted for his annual income instead of his actual tax returns. But there isn't any evidence in the record, Meyer said, that Cohan even tried to pay the $100 a month that he believed he actually owed beginning in 2002.

"Defendant has presented no evidence to support his statement at oral argument that the government 'made it impossible for [him] to make the payments' or that he was unable to calculate his payments because he lacked access to the Federal Register," Meyer said. "Defendant is and was a practicing attorney. In fact, this debt arises directly as a result of his legal training. … He has provided no reason why he could not have done his research and mailed payments many years ago."

When Cohan consolidated his loans in August 1999, he owed $97,658.55. Now he has been ordered to pay $236,535. That's because while the case has been pending, the unpaid principal balance has been accruing at 8.25 percent every year.

The federal government declared that Cohan was in default on Sept. 17, 2002, and his entire loan balance became due 270 days after payment was due at the end of 2001. The government did not file to collect on Cohan's loans until May 2011.

Sciarrino noted that Cohan was required to pay under the income contingent repayment plan because direct consolidation loans must be repaid that way if a borrower has defaulted on the underlying loans. Cohan defaulted on his underlying loans in the 1990s, according to the opinion.

Cohan did not respond to a request for comment. The U.S. Attorney's Office declined to comment.

Law-Breaking Company Offers to Build Houses for Habitat for Humanity

Submitted by Amaris Elliott-Engel on Tue, 05/26/2015 - 11:14

Here's a piece I wrote for the Connecticut Law Tribune about an unusual sentencing request:

The normal drill for punishment in federal court is prison time, fines or probation. But a North Branford-based construction company that ran afoul of the law is asking U.S. District Judge Janet Bond Arterton to consider sentencing the company to build two homes.

The hook is that the houses wouldn't be sold for profit. They would be constructed for Habitat for Humanity, and the efforts would be considered community service.

Cherry Hill Construction Co. pleaded guilty to filing a false tax return and a making a false statement in connection with the documents required by the Employee Retirement Income Security Act of 1974, which sets out a minimal standard for retirement plans. The company stated that its contributions to the retirement plans needed to be only $52,198 when they should have totaled nearly $580,000.

The company faces a $500,000 fine and five years' probation. But instead of paying the fine, Cherry Hill wants to build two new family homes in New Haven on behalf of Habitat and donate all the labor and materials. The company placed the value of such an effort at $155,000 to $200,000.

The government is opposing the proposal for several reasons. U.S. Attorney Deirdre Daly and Assistant U.S. Attorney Douglas Morabito said in court papers that Cherry Hill should be made to pay the full $500,000 because corporations can't be imprisoned and fines are the principal deterrent against criminal behavior by corporations.

The government officials said they also oppose providing a benefit to just one organization, rather than society in whole. "The proposal puts the court in the unusual position of directing that community service be done for the benefit of a specific entity," prosecutors said. "Although Habitat for Humanity is a wonderful organization, to some extent this proposal puts the court in the position of picking and choosing beneficiaries of a criminal sentence."

The government also had qualms about the possibility of Cherry Hill reaping positive news from the proposal even though it has promised not to seek any such publicity for any court-ordered community service.

Cherry Hill owner Robert Sachs, who authorized the guilty plea of his family's firm, said in a statement to the court that the 42-year-old company's financial problems started because an employee embezzled money. With the economy in a tough spot in 2010, the company's cash flow dried up. That led to the company underfunding its employee benefit plans and submitting false paperwork to the plan's administrator, Sachs said. The company also falsely claimed a tax deduction for more than the company actually paid into the plan.

In court papers, Cherry Hill's counsel, Robert Casale, argued that community service should be substituted for a monetary fine because the diversion of funds from the employee benefit plan was not driven by corporate greed but because the company's cash flow was eaten up from embezzlement and poor conditions in the construction market.

Robert Santillo, who worked as Cherry Hill's manager, pleaded guilty in 2012 to two counts of tax evasion. He had received more than $790,000 from a subcontractor used by Cherry Hill on asbestos removal projects and created a limited liability company to conceal his taxable income. Casale said in court papers that Santillo is also estimated to have stolen between $1 million and $2 million from Cherry Hill, eating "away at the company like an intestinal parasite."

"Cherry Hill is a defendant in this case because it made a bad decision during a time of crisis," Casale wrote. "There is no question that the company appreciates the wrongfulness of its actions and has taken steps to ensure that this will not happen again."

The company also agreed to make full restitution to the retirement plan funds and to pay back the taxes it owes to the Internal Revenue Service.

Casale declined to comment. Morabito did not respond to a request for comment.

Alan Sobol, chairman of Pullman & Comley's white collar, criminal defense and corporate investigations practice, said the defense strategy was interesting, but not likely to succeed. For one thing, he said, fines are meant to benefit all of society, not just one particular cause. He called Cherry Hill's idea an "interesting and creative approach. [But] it's not likely to carry the day with the court."

Sobol said he would instead recommend arguing that the sentencing guidelines for white-collar crimes regarding financial fraud are not based on empirical data and can be set aside altogether since sentencing guidelines are no longer mandatory.

An example of guidelines that are based on data are the drug offenses involving powder cocaine, Sobol said. But he argues the guidelines regarding financial fraud and drug offenses involving crack cocaine were developed out of knee-jerk reactions to, respectively, financial scandals over the last three decades and fears about the increasing use of crack in the 1980s. That is a strong reason, he said, that one could argue against the $500,000 fine in the Cherry Hill case.

Tribe Sues Over Efforts to Halt Payday Loans

The Otoe-Missouria Tribal Nation is suing the Connecticut Department of Banking over the agency's efforts to curb the payday loans the tribe offers over the Internet, The Connecticut Law Tribune's Jay Stapleton reports. The tribe argues Connecticut's administrative enforcement action to stop its payday-loan businesses violates its tribal sovereignty. The tribe's lending companies charge up to 700 percent.

The U.S. Court of Appeals for the Second Circuit ruled against tribal immunity in a similar lawsuit.

Financier Claims Art Fraud Over Rockwell, Rodin and Renoir Works

Submitted by Amaris Elliott-Engel on Sun, 03/15/2015 - 12:40

Here's a piece I wrote for the Connecticut Law Tribune regarding a Connecticut financier who alleges his Manhattan art dealer defrauded him:

The art world has become a big business, with more than $6 billion in modern art and $1.26 billion in contemporary art sold in 2011. And with big business comes big litigation.

Multiple lawsuits filed by a Connecticut financial executive alleging that his Manhattan art dealer defrauded him illustrates the stakes raised when buyers spend thousands, even millions, of dollars procuring art.

Richard C. McKenzie Jr., a Greenwich-based financier, has spent $200 million on art for his Seven Bridges Foundation, which aims to support up-and-coming artists by purchasing their work. The foundation also displays paintings by famous artists in order to inspire budding artists.

In a lawsuit pending in Connecticut federal court, McKenzie alleged that he was defrauded into buying an allegedly fake Pierre-Auguste Renoir painting, an Auguste Rodin sculpture and a Ernst Barlach bronze cast for a total of close to $570,000 by Manhattan gallery Forum Gallery. McKenzie asserts that Robert Fishko, the proprietor of Forum Gallery, befriended McKenzie's former wife and McKenzie himself, gained their trust and nurtured a business relationship that turned fraudulent.

McKenzie also is seeking punitive damages for $1.7 million.

In total, Forum Gallery and Fishko were paid $11.8 million during the dozen years Fishko was McKenzie's exclusive agent in finding art for his collection, according to the plaintiff's court papers.

In a separate lawsuit in New York federal court, McKenzie asserted that Forum Gallery and Fishko marked up the costs of procuring paintings by Norman Rockwell and other artists. McKenzie also alleged that Forum Gallery violated the contract it had with him on the terms on which it was to buy art for him on the primary and secondary markets.

McKenzie stated in court papers that a principal of a competing gallery told him that Fishko bought a Ralph Goings painting on his behalf at such a high price that the gallery pocketed $398,125, or a 114 percent profit. Fishko responded in court papers that the profit margin was only 13.1 percent.

In an interview, Fishko said that his long-time business relationship with McKenzie went sour after a California-based art dealer told McKenzie that Fishko's gallery had been overcharging him and misrepresenting the value of the art it had sold him. Fishko denies this. "I'm very proud of the work that I do for the artists that I represent and I'm very, very sure that Mr. McKenzie and the Seven Bridges Foundation … received everything that he bargained for and more," Fishko said.

There was no wrongdoing, fraud or violations of contractual or fiduciary obligations, Fishko added.

All the allegations in the New York case were struck down this month after U.S. District Judge Laura Taylor Swain, of the Southern District of New York, ruled against McKenzie's claims for fraud, breach of contract and breach of fiduciary duty. The judge said McKenzie could not show that Fishko misrepresented the prices at which sellers were willing to deal regarding the Rockwell and Goings paintings.

"Plaintiffs' evidentiary proffers fall far short of the clear and convincing showing required to demonstrate fraud," Swain said.

McKenzie has filed a third amended complaint in the Connecticut lawsuit pending before U.S. District Judge Janet Bond Arterton, but the judge has not yet made a decision on allowing the submission of the complaint. In the complaint, McKenzie set out a cloak-and-dagger scenario in which Fishko led him through Paris back alleys to a dimly lit apartment of a seller in financial straits to induce him to buy a fake Renoir painting. Fishko called that allegation an "absurd fabrication."

Even though McKenzie bought the Renoir painting in 2000, the Rodin sculpture in 2002, and the Barlach bronze cast in 2002, he alleges that he did not have reason to discover that the works were allegedly fake or inauthentic until 2014 when the various' artists committees decided to not include his property in their catalogs.

However, Fishko's counsel, Andrew Nevas, of Verrill Dana in Westport, said in court papers that his clients have provided proof of the authenticity of the artistic works. "McKenzie's willingness to advance knowingly inconsistent and false allegations is, sadly, not a surprise, as he is a serial and vexatious litigator," defense documents stated.

Forum Gallery's and Fishko's counsel maintain that the statute of limitations on all of McKenzie's claims have expired because he did not conduct due diligence about the authenticity of the Renoir and the two sculptures until 2014. "McKenzie, an extraordinarily sophisticated plaintiff who has purchased tens of millions of dollars of art, cannot evade the obvious fact that he had the means available to him to verify Forum's alleged representations himself," the defense said.

The defense is also going to seek sanctions for the prosecution of "patently unfounded, insufficient and time-barred claims."

Eric Grayson, the founder of commercial law boutique Grayson & Associates in Greenwich, said in an interview that his client can prove the higher standard of clear and convincing evidence needed to show fraud in the Connecticut lawsuit. The true test of the authenticity of the Rodin, Barlach and Renoir artworks is whether Fishko would "buy the three pieces back if he's that convinced that they are authentic works," Grayson said.

Fishko "took advantage of relationships that he had with Mr. McKenzie," Grayson said. "We are going to pursue this diligently with vigilance."

As for the New York case, McKenzie is a considering an appeal, Grayson said.

Fishko said there has been a sea change in the art business in the last 20 years because many investors now "come into the art business because they feel it's either a good place to put money or invest money." But the whole reason for Seven Bridges Foundation and McKenzie's art procurement was not for investment but to promote art by inspiring art, Fishko said.

Outside art law expert Robert A. Darwell, the founder of Sheppard Mullin Richter & Hampton's art law practice and a senior partner at the firm, said that there has not been an increase in litigation specifically because there is a new wave of collectors entering the art market. But because the value of art has been rising and there are more investors in the art world, Darwell said "it tends to lead to heightened sensitivities and potential claims."

Art appraisers, museums and galleries are facing more litigation, including for speaking freely about the authenticity of works, Darwell said.


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