Law Offices of Brad Jackson Helps Clients Defeat $3 Million Lawsuit

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Our team recently obtained a great result for a group of seller and business broker clients in a lawsuit over the sale of an insurance agency. Our clients were facing nearly $3 million in damages after being accused of fraud, negligent misrepresentation, breach of contract, breach of fiduciary duty and other claims.

This case provides a good example of our work in business disputes and fiduciary litigation, as well as our representation of local and out-of-state clients.

The lawsuit was filed by Frisco, Texas-based CLA USA Property and Casualty Group against our clients from Dallas-based CapRock Services, which provides financing for small businesses, and Sarasota, Florida-based General Insurance Brokerage, LLC, which specializes in brokering the sale of insurance agencies.

Business Lawsuit Background

The dispute arose after General Insurance Brokerage identified Irving, Texas-based Innovative National Risk, LLC, as a potential CLA acquisition target. CLA bought the company from CapRock in 2014.

Shortly after the sale, CLA claimed, among other things, that Innovate National Risk’s operations failed to comply with state and federal laws. CLA argued that it was left holding the bag, accusing our clients of conspiring to make the sale happen so that CapRock could divest itself of the insurance agency and General Insurance Brokerage could collect commission payments.

How We Won

We were brought into the case late to represent CapRock and General Insurance Brokerage, which previously had been defended by separate lawyers.

Together, Brad Jackson and Cheryl Mann began an aggressive defense that resulted in the court striking the testimony of CLA’s expert witnesses, including an attorney, an actuary and a certified fraud examiner. We also convinced the court to enforce a jury trial waiver because we believed that our defense of CLA’s complicated and convoluted claims would be best understood by an experienced trial judge.

By the third day of trial before the Honorable Tonya Parker of the 116th Judicial District Court of Dallas County, we had clearly proven that General Insurance Brokerage, CapRock, and their principals, who CLA had sued personally as well, had done nothing wrong. That same day, CLA voluntarily dismissed all its claims and agreed to pay $200,000 to our client CapRock.

Cases like these are why we come to work every day. Our clients had their backs against the wall, facing millions of dollars in potential damages. We were able to devise an aggressive and effective defense that resulted in the complete vindication of our clients.

Behind Dallas Appeals Court’s $288 Million Ruling Against Credit Suisse

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A verdict of nearly $40 million issued four years ago in Dallas recently was affirmed as a $288 million judgment against Swiss banking giant Credit Suisse. Of course, as with most legal appeals, the story continues.

The case over a failed Las Vegas real estate deal ended its current local run with the recent 35-page ruling authored by Justice Elizabeth Lang-Miers of the 5th District Court of Appeals in Dallas.

The next stop apparently will be in Austin at the Supreme Court of Texas since Credit Suisse almost immediately announced its intention to appeal.

Failed Deal Leads to Vegas-sized Judgment

The ruling addresses Credit Suisse’s failed attempt to void the original 2014 verdict and eventual judgment in favor of the Dallas investment firm Highland Capital Management. Jurors awarded $40 million against Credit Suisse after finding the company duped Highland into investing $250 million to help refinance a Las Vegas resort.

When Lake Las Vegas went belly up as part of the 2008 financial crisis, Highland sued based on allegations that Credit Suisse knowingly manipulated the property’s perceived value by relying on a faulty appraisal, among other claims.

Even though the state district jury in Dallas agreed with Highland, the case continued to go through additional legal wrangling. The trial court eventually approved the verdict amount and signed a 2015 judgment for more than $288 million after ruling that Highland was owed additional damages beyond the $40 million jury award.

Why Appeals Cases Take So Long

With a jury verdict, court judgment and favorable appeals court ruling, some might think Highland is about to pocket a hefty chunk of change. Not so fast. In the land of appeals, as this case perfectly illustrates, the devil is in the details.

In every Texas case when a trial court enters a judgment where money is awarded, the losing party can post a court-approved supersedeas bond or cash deposit to cover the amount.

By doing so, companies such as Credit Suisse can prevent winning parties like Highland from enforcing a judgment while the case is on appeal. Like a lot of big companies, Credit Suisse can find $288 million between its couch cushions, which is one of the many reasons why appeals can take so long to resolve.

Now that Credit Suisse has announced its intention to appeal to the Texas Supreme Court, and since it can appeal to the U.S. Supreme Court in the event of an adverse ruling, it may be years before this legal saga reaches its eventual end.

Although the legal profession strives to uphold the idea that “justice delayed is justice denied,” the truth is that any court case can be delayed if one or more parties have the financial wherewithal and internal fortitude to continue the fight through appeals. Eventually, it’s up to our courts to decide the justice part.

 

Cryptocurrency Craze Leads to Fraud Charges in Dallas

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Most of us have seen news reports about the ongoing cryptocurrency craze, including the skyrocketing and plummeting prices for Bitcoin and other electronic currencies. Now, some cryptocurrency companies are facing federal investigators based on allegations of fraud

The latest news comes from Dallas, where a cryptocurrency bank founded less than a year ago has been charged along with its owners of fraud and other alleged wrongdoing. Launched in March 2017, AriseBank claimed to have raised $600 million in the past two months in an initial coin offering (ICO) for its AriseCoins. Such sales are like an initial public offering (IPO) of stock options.

The bank said it had “one of the largest crypto-currency platforms ever built.” But the Fort Worth Regional Office of the U.S. Securities and Exchange Commission says the bank was nothing more than an “outright scam.” The government says the company misled investors and sold unregistered securities under fraudulent terms.

After falsely claiming that it had purchased an FDIC-insured bank, AriseBank failed to tell investors that its co-founders have prior felony criminal convictions, according to the SEC.

Now, a Dallas federal judge has appointed a receiver to figure out how much of investors’ money, if any, remains.

It’s not hard to imagine that lawsuits from investors will soon follow, although collecting any judgment against AriseBank is now in doubt since the bank has been put under the government’s control and no one appears to yet know if any assets remain.

Investment Scams Nothing New

The trail of investment scams extends nearly as long as investing itself. That is why the cryptocurrency frenzy should send up a warning flare for many of today’s investors. For every quality investment opportunity, there are many more scams nearby.

One notable example came in 1986, when a California teenager formed ZZZZ Best Inc. and claimed the company was the “General Motors of carpet cleaning.” After the company sold millions in stock options, federal investigators discovered that ZZZZ Best was little more than a series of phony documents and sales receipts. In the end, investors lost more than $100 million and the company’s founder was sentenced to 25 years in prison.

Perhaps the greatest investment scam in history is rooted in Texas with the fall of energy giant Enron in 2001. Houston-based Enron was ranked as the seventh-largest company in the world. Unfortunately, the company was hiding billions of dollars in debt through a series of accounting transactions that relied on shell companies to conceal dire financial circumstances. In addition to resulting in the collapse of the global accounting firm Arthur Andersen, the fall of Enron caused billions of dollars in losses for investors and employees. More than 4,000 employees were let go after the company filed for bankruptcy protection.

AriseBank Lessons

The AriseBank story should serve as an important lesson for everyone. That’s especially true for those of us who are only mildly familiar with the ins and outs of the investing process. There are seemingly countless state and federal laws covering proper investment protocols and the sale and purchase of securities. Few “regular” investors know all the rules.

No matter how many TV commercials make it look easy to handle your own investment decisions, the truth is that investing is complicated business. Just because you have been successful enough to accumulate enough money to invest on your own doesn’t mean that you’ll enjoy the same success when it comes to finding the right investment opportunity.

That is why it is so important to have a trusted financial advisor and knowledgeable attorney involved if you’re thinking about plunking down your hard-earned cash in hopes of realizing positive returns in the future. Failing to do so could put you in the same position as the investors who backed AriseBank and are now waiting to see if the government can help them reclaim their money.

Why Massive Trinity Industries Judgment was Reversed

Big news for Dallas-based Trinity Industries came down late last month when a three-judge panel from the U.S. 5th Circuit Court of Appeals unanimously reversed and rendered, throwing out a $663.3 million adverse judgment. This case presented the odd situation where a plaintiff and jury said the government was defrauded, but the government wanted no part of it.

Like a lot of appeals court rulings, the final decision is focused more on the law’s intent rather than what the plaintiff alleged.

Case Background

The original 2014 verdict followed an earlier mistrial and three years of contentious litigation in the U.S. District Court for the Eastern District of Texas in Marshall. The lawsuit was filed under the federal False Claims Act by a man who owned a company that competed against Trinity. The False Claims Act allows individuals to file lawsuits aimed at protecting the government from fraud. Often, the government will join such cases as a plaintiff, but not always.

The plaintiff accused Trinity of defrauding the federal government by not disclosing a redesign in its ET-Plus guardrail system that was sold under federally subsidized state contracts. Jurors heard one week of testimony before slapping Trinity with a $175 million verdict that climbed to more than $663 million in the final judgment after the addition of penalties and attorney fees.

Court’s Reasoning

Trinity appealed, noting that the government never said there was anything wrong with the company’s guardrails as it continued to buy them. Notably, the Federal Highway Administration decided not to join the lawsuit as a plaintiff and instead issued an official memorandum during the trial expressing its continued confidence in the ET-Plus system.

On September 29, the 5th Circuit panel ruled in Trinity’s favor by reversing the earlier judgment and dismissing all claims against the company. Considering that Trinity didn’t tell the Federal Highway Administration about modifying its guardrail system and later made millions and millions of dollars selling the same system, you might ask, “So why didn’t Trinity lose on appeal?”

The answer, according to the unanimous three-judge panel, boiled down to a question of materiality.

The 5th Circuit noted that even though the plaintiff and the East Texas jury may have believed the government was defrauded, the government’s actions painted a much different picture.

“When the government, at appropriate levels, repeatedly concludes that it has not been defrauded, it is not forgiving a found fraud— rather it is concluding that there was no fraud at all,” the court concluded.

While some will argue that the ruling ignored the jury’s decision, the 5th Circuit’s reasoning no doubt will be relied upon by future defendants in False Claims Act cases until or unless this issue reaches the U.S. Supreme Court.