REID COLLINS & TSAI DEFEATS MOTION TO DISMISS LEGAL MALPRACTICE LAWSUIT AGAINST MORRIS, MANNING & MARTIN RELATED TO FIP PONZI SCHEME
- Nationally renowned business litigation and trial firm Reid Collins & Tsai LLP leads prosecution of legal malpractice action against Atlanta-based law firm Morris, Manning & Martin, LLP.
- Court ruled that matter will proceed against Morris Manning.
- Reid Collins is one of the nation’s leaders in legal malpractice claims, with significant experience successfully prosecuting major national and regional law firms for claims related to a variety of professional misconduct and negligent advice.
Reid Collins & Tsai LLP (“Reid Collins”) obtained a major victory in a legal malpractice action related to a $310 million nationwide Ponzi scheme that exploited military veterans in desperate financial straits and targeted elderly investors seeking a safe retirement investment. The lawsuit arises from flawed legal advice provided to Future Income Payments LLC (f/k/a Pensions, Annuities, and Settlements, LLC) (“FIP”) by Atlanta-based law firm Morris, Manning & Martin, LLP (“Morris Manning”). The action alleges that errors in the legal analysis of Morris Manning’s lead partner and ongoing conflicts of interest in the firm’s representation materially contributed to the collapse of FIP and hastened the descent of its business model from a viable financial platform assisting retirees and military veterans to a Ponzi scheme seeking to avoid collapse.
On April 30, 2024, the South Carolina federal court denied Morris Manning’s motion to dismiss based on a statute of limitations defense, ruling that the case should proceed to discovery.
Background
FIP was a fast-growing company in a controversial but potentially profitable space. Founded in 2011, FIP provided lump-sum cash advance payments to seniors and military veterans in exchange for future pension payments. The business model held risks: characterized as loans, the financial transactions might violate state usury laws against excessive interest rates (as had happened to a competitor firm in California); characterized as assignments or transfers, they might violate federal laws against assigning or alienating pensions.
As alleged in the action, FIP sought to accelerate its growth and avoid legal setbacks, considering changes to its business model to instead connect pensioners with investors who would acquire those future pension payments. FIP would act as a middleman receiving fees for servicing and administrating those transactions. FIP retained James Maxson, a Morris Manning partner, to, among other things, evaluate and opine on FIP’s proposed structure change and identify any potential issues. Maxson delivered a memo on Morris Manning letterhead presenting a conclusion that it was “unlikely” a court would deem the proposed investment transactions to be “investment contracts” requiring registration or exemption under the federal securities laws and failing to identify fundamental flaws in FIP’s structure.
In addition, Maxson and Morris Manning went on to represent FIP despite a substantial ongoing conflict of interest in their representation of various entities controlled by Maxson’s client Benjamin Geber which stood to profit through FIP commissions only if Morris Manning blessed FIP’s new business model. As FIP’s outside general counsel from 2012 through its collapse in 2018, Maxson knew the business intimately and drafted and reviewed FIP legal documents and marketing materials which were used to secure investors, but failed to disclose the regulatory risk FIP faced, the conflicts of interest in its structure, and other material issues.
The deficient and conflicted legal advice propelled FIP toward numerous enforcement actions by state agencies and attorneys general, and ultimately, company-destroying liability for mail, wire, and securities fraud. Maxson departed Morris Manning in January 2015 but continued representing FIP until it ceased operations in April 2018, leaving investors victimized by the scheme owed approximately $310 million. Though FIP collapsed under massive civil and criminal liability, Morris Manning kept its legal fees.
Reid Collins represents Beattie B. Ashmore, the court-appointed Federal Receiver for the FIP Receivership Entities. The case is captioned Beattie B. Ashmore, a Receiver for the FIP Receivership Entities v. Morris, Manning & Martin, LLP, Civil Action No. 6:23-cv-04592-BHH (U.S.D.C. District of South Carolina).
PRESS COVERAGE:
REID COLLINS & TSAI LLP TRIAL TEAM OBTAINS JURY VERDICT IN LOUISIANA FEDERAL COURT IN CIVIL RIGHTS CASE RELATED TO POLICING INCIDENT
- Nationally renowned business litigation and trial firm Reid Collins & Tsai LLP leads pro bono prosecution of civil rights case alongside the ACLU of Louisiana.
- Verdict is first jury trial victory for the ACLU of Louisiana’s Justice Lab initiative challenging racially discriminatory policing practices.
- Jury finds St. Tammany Parish Sheriff’s Office deputy liable for intentional infliction of emotional distress upon 14-year-old who attempted to record the violent arrest of his mother.
May 3, 2024 – This week, national trial firm Reid Collins & Tsai LLP (“Reid Collins”) obtained a jury verdict on behalf of client Mr. De’Shaun Johnson in its prosecution of his federal civil rights case in Louisiana. Johnson is the son of Teliah Perkins, who was violently arrested at her own home in Slidell, Louisiana in May 2020 in response to a minor traffic violation she did not commit. Reid Collins is representing Mr. Johnson and Ms. Perkins pro bono in partnership with the ACLU of Louisiana’s Justice Lab.
On Wednesday, the Eastern District of Louisiana jury, composed of citizens of the greater New Orleans area, awarded Johnson $185,000 for the intentional infliction of emotional distress by St. Tammany Parish Sheriff’s Office deputy Ryan Moring as Mr. Johnson tried to film the violent and unnecessary arrest of his mother.
On May 5, 2020, officers Kyle Hart and Moring arrested Ms. Perkins while her son and nephew watched and tried to record on their phones. Hart and Moring tackled Ms. Perkins to the ground and held their body weight on her as she told officers “You’re choking me!” As Mr. Johnson started to record the incident on his phone, Deputy Moring stepped in front of him to prevent him from capturing the incident. Moring pushed Mr. Johnson (14 years old at the time) in the chest and aimed his Taser directly at him. When Mr. Johnson objected “You can’t Tase a child,” Deputy Moring responded: “Watch me.”
Since the incident, Mr. Johnson was diagnosed with post-traumatic stress disorder and received treatment as a result.
“We are proud to represent De’Shaun and to have worked with the ACLU of Louisiana’s Justice Lab on this important matter,” said Keith Cohan, Reid Collins & Tsai LLP partner. “There should be accountability for law enforcement officers who seek to intimidate those observing them in the line of duty. With this victory, that’s exactly what happened today.”
“We are thrilled to see justice served for De’Shaun,” said Nora Ahmed, ACLU of Louisiana legal director. “As we face imminent threats to our rights to record police in Louisiana, the Justice Lab—and our pro bono partners and colleagues like the Reid Collins team with whom we prosecuted this case—will continue to fight for brave individuals like Ms. Perkins and her son and fight for a world of justice and safety for all people.”
This marks the first jury trial-to-verdict victory for the ACLU of Louisiana’s Justice Lab initiative (https://aclujusticelab.org/). Reid Collins is proud to be a part of the Justice Lab’s litigation campaign to challenge racially discriminatory policing practices and combat police violence against people of color.
The case is captioned Teliah C. Perkins et al. v. Kyle Hart et al., U.S.D.C. Eastern District of Louisiana, Civil Action No. 2:21-CV-00879.
Press coverage:
REID COLLINS & TSAI LLP OBTAINS $12 MILLION SETTLEMENT FROM FORMER DURA AUTOMOTIVE EXECUTIVES IN BANKRUPTCY-RELATED LAWSUIT
- National trial firm Reid Collins & Tsai LLP represents the Chapter 7 Trustee for the estate of Dura Automotive Services, LLC in lawsuit against former Dura executives Lynn Tilton and Kevin Grady.
- Lawsuit alleges claims for breach of fiduciary duty against both Tilton and Grady including the failure to pursue a sale of the company to interested third parties.
- Settlement terms include $12 million payment, achieved before case had even entered discovery.
AUSTIN – September 12, 2023 (PRNewswire) – On Friday, the U.S. Bankruptcy Court for the District of Delaware approved a $12 million settlement of a civil litigation pursued by national trial firm Reid Collins & Tsai LLP (“Reid Collins”) on behalf of Jeoffrey Burtch, the Chapter 7 Trustee (“Trustee”) for the estate of Dura Automotive Services, LLC (“Dura”) against former Dura executives, including Lynn Tilton.
In April 2022, Reid Collins filed suit on behalf of the Trustee against Tilton and another former Dura executive, Kevin Grady. Dura, an automotive parts manufacturer, was a portfolio company of a group of funds called Zohar, also managed by Tilton.
The Trustee’s complaint asserts claims for breach of fiduciary duty against both Tilton and Grady for, among other things, failing to pursue the sale of the company to a group of interested third parties and instead pushing Dura into bankruptcy in an effort to allow Tilton to purchase the company herself at a sharp discount. The settlement was achieved quickly, before active discovery in the case had begun, even before Defendants’ motions to dismiss had been argued and adjudicated.
Reid Collins partner Craig Boneau, who leads the prosecution of the lawsuit, on the settlement’s significance:
“The settlement is an excellent result for the Trustee in a case that represents an important challenge to a common tactic designed to improperly take assets – pushing a company towards or into bankruptcy when a viable sale is possible. Our team expertly navigated numerous factual and legal complications related to Tilton’s Zohar funds and their parallel bankruptcy, and ultimately brought about a successful resolution quickly and efficiently.”
The case is captioned Jeoffrey L. Burtch, as chapter 7 trustee of the estates of Dura Automotive Systems Cable Operations, et al. v. Lynn G. Tilton and Kevin Grady, No. 2022-0343 (Court of Chancery, State of Delaware).
Press coverage of the settlement:
