As Captain Renault said, "I'm shocked, shocked, to find that gambling is going on in here!" And like Captain Renault, not really. On the last day of 2013, I noted in a post some news stories about the happenings in a class action suit alleging a scheme to transform most or all of $6 million settlement into attorney's fees without fully disclosing the scheme to roughly 600 clients until it was too late for them to do anything about it. Those articles were eye-opening to say the least. But now I can safely say that you haven't seen anything yet. I have in my digital fingers the appellate briefs from the main case (the appeal of an injunction issued by the trial court). The Respondent's Brief, in particular, is something you won't see very often. Check them out:
2013 was a turbulent year in the class action world and in mine. As a result, there were some newsworthy stories I didn't have time to cover this past year. One such news story involves the transfer to Los Angeles County of a suit alleging a scheme to transform most or all of $6 million settlement into attorney's fees without fully disclosing the scheme to roughly 600 clients until it was too late for them to do anything about it. Here's how Courthouse News Service summed up the shocking allegations: "A California law firm accepted a $6 million 'secret settlement' of a labor class action against a bank, agreed to dismiss the claims without telling 600 clients, then tried to convert the whole settlement into legal fees, a class action claims in state court." Jamie Ross, Class Claims Lawyer Took 'Secret' $6M Deal, Courthouse News Service (October 22, 2012). Who would do such a thing? Courthouse News Service identified the defendants in the proposed class action suit: " Lead plaintiff Kendra Cutting sued Mark Yablonovich; an attorney in his law office . . . , and The Law Offices of Mark Yablonovich, in Alameda County Court." Ibid. It appears from the docket that the attorney in Mr. Yablonovich's office was dismissed with prejudice from the action not too long after it was filed.
Courthouse News Service wasn't alone in covering these disturbing allegations. For example, Law360 noted, "Because the Yablonovich lawyers allegedly did not first approve the deal with their clients, the Cutting complaint said the firm's actions represented a breach of fiduciary duty and legal malpractice." Scott Flaherty, LA Attys Sued Over 'Secret' $6M Wells Fargo OT Settlement, Law360.com (October 19, 2012).
Anyhow, in April 2013, Alameda sent this fine example of what not to do to clients to Los Angeles. I guess that Northern California felt that Los Angeles wasn't grimy enough already. You can read the original complaint here. Or, better yet, get the whole thing here. The case appears to be stayed while appeals involving Initiative Legal Group are pending. Those appeals can be viewed here and here. But you can check on the status of the L.A. Superior Court action by using the Case Summaries tool and entering case number BC512429.
I've covered the very interesting moves of attorneys from Initiative Legal Group to Capstone Law here. Now, a suit filed in San Francisco Superior Court, entitled Maxon v. Capstone Law, CGC-13-528884, offers a possible context for the rapid movement of attorneys from Initiative Legal Group to Capstone Law, and that context is disturbing. In a column on law.com, Scott Graham, of The Recorder, reports on the allegations contending that Capstone Law was formed to hide assets from a fraud lawsuit filed against Initiative Legal Group related to dealings with 600 clients. Scott Graham, Plaintiffs Shop Hit With New Ethics Suit, The Recorder (February 21, 2013).
It appears that attorneys at Initiative Legal Group are starting to appear at a "new" firm named Capstone Law, APC. But Capstone is in the same building as Initiative Legal Group, so, fishy. Perhaps its is just a coincidence, but maybe it has something to do with the problems Iniative Legal Group is having in Lofton v. Wells Fargo Home Mortgage, Case No. CGC-11-509502 (see also, Maxon v. Initiative Legal Group APC, App. Ct. Case No. A136626). Nothing like a change of name to shake off the taint of allegations like those, right?
Would you look at that? What was once a three-laywer firm now has 38 lawyers! My, Capstone, how you've grown...in the last two weeks.
Maybe Orders like this are contributing some urgency to the effort to shuffle ILG attorneys to a "new" firm, but I'm just going out on a limb and speculating there.
Holy smokes! Capstone must be the fastest growing law firm in the state of California. Capstone now has 50 lawyers, according to the state bar records on November 16, 2012, at about 1:14 p.m. At this rate, they may be at 51 or 52 lawyers by the end of the day! Strange thing though - it looks like Capstone's growth continues to come almost exclusively from ILG, which has dwindled to around 17 lawyers. So odd that attorneys abandoning ILG would all choose to work with the exact same people that seem to have gotten into a few tough scrapes lately... Errr, unless, maybe, just speculating here, this is a turnkey firm to carry on where ILG leaves off.
And with ILG down to 13 unique attorneys (removing two duplicate entries) and Capstone up to 54 entries (not checked for duplicates), I think I see a trend starting to develop.