Supreme Court of Ohio Clerk of Court - Filed April 07, 2017 - Case No. 2017-0474
IN THE SUPREME COURT OF OHIO
CONNIE MCGIRR : 792 Tuggle Road : Case No.: Lancaster, Kentucky 40444 : : And : : MARY ANN BAILEY : 307 Scott Avenue : Cumberland, Kentucky 40823 : : And : : DEBBIE CARMAN-STATON : P.O. Box 390 : Hustonville, Kentucky 40437 : ORIGINAL ACTION IN : PROHIBITION And : : PATRICIA GAUNCE : 440 Wells Lane : Versailles, Kentucky 40383 : : And : : NORMA HALL : 564 Grandchester Street : Lexington, Kentucky 40505 : : And : : JOYCE HANLEY : 2532 Dressage Way : Lexington, Kentucky 40504 : : And : : ALICIA ROBERTS, Trustee : ESTATE OF MARJORIE HULSE : 3413 Flintridge Circle : Lexington, KY 40517 : : And : : :
LISA PEEK : 3109 N. Ky Hwy 501 : Kings Mountain, KY 40442 : : And : : BRENDA RENTAS : on behalf of ANTHONY RENTAS : 120 Old Chapel Gap School Road : Crab Orchard, Kentucky 40419 : : And : : ESTATE OF SHEILA FITCH : c/o Penny L. Hines, Esq. : 504 E. Mt. Vernon Street : Somerset, Kentucky 42501 : : And : : MICHELLE SHARPE-ROBERTS : 3154 Clear Fork : Eubank, Kentucky 42567 : : And : : CORINA STEARNS : P.O. Box 1515 : Russell Springs, Kentuckyy 42642-1515 : : And : : LISA SWIGER : P.O. Box 433 : Saylersville, Kentucky 41465 : : And : : STEPHANIE CARTER, Adminx : ESTATE OF LINDA TOLER : P.O. Box 3482 : Wise, Virginia 24293 : : And :
DEBORAH TURNER : 1112 Phoenix Garden : Lawrenceburg, Kentucky 40342 : : And : : BETTY JEAN WIDNER : P.O. Box 362 : Evarts, Kentucky 40828 : : And : : JOYCE A. BROWN : 2513 Ridgefield Lane : Lexington, Kentucky 40509 : : And : : LINDA DUNAWAY : P.O. Box 62 : Cumberland, Kentucky 40823 : : And : : BILLIE JUNE ROBERTS : 320 Logan Creek Drive : Stanford, Kentucky 40484 : : Relators, : : vs. : : HONORABLE RALPH WINKLER, : Hamilton County Court of Common : Pleas : Probate Court Division : 230 East 9th Street, 10th Floor : Cincinnati, OH 45202 : : Respondent. :
______
RELATORS COMPLAINT FOR WRIT OF PROHIBITION ______
Brian S. Sullivan (0040219) DINSMORE & SHOHL LLP 255 E. Fifth Street, Suite 1900 Cincinnati, Ohio 45202 Phone: (513) 977-8200 Fax: (513) 977-8141 Email: [email protected]
Attorney for Relators
EXHIBIT 18 Motion to Dismiss in ABC Action (ll +6) IN THE COURT OF COMMON PLEAS PROBATE DTVISION HAMILTON COLTN:rr, OHIO
IN TFIE MAT'TER OF Case No. zot6oo3659
Judge Ralph E Wrnkler WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L.P.A. Magistrate Rogena D Stargel
MOTION TO DISMISS, OR IN THE ALTERNATTVE TO STAY THE PRQ-CEEDINGS IN. THE ASS I GNM ENT FOR .TH E BENEFIT OF CREDITO RS r{.mION
The real parties in interest and ouners of Waite, Schneider, Bayless & Chesle¡'
Co., L.P.A. ("WSBC"), Connie McGirr, Mary Ann Bailey, Debbie Carman-Staton, Patricia
Gaunce, Norma Halì, Jo¡,se Hanley, Alicia Roberts, Trustee for the Estate of Marjorie
Hulse, Lisa Peek, Brenda Rentas on behalf of Anthony Rentas, Wendy Fitch,
Administrator, Estate of Sheila Fitch, Michelle Sharpe-Roberts, Corina Stearns,
Stephanie Carter, Administrator for the Estate of Linda Toler, Deborah Turner, Betb'
Jean Widner, Joyce A. Brou'n, Connie Centers, Linda Dunau'ay, Lucille Kre1,, and Billie
June Roberts and all those similarl¡' situated that may be Pìaintiffs (collectivell',
"Movants"), hereþ1, move this Court to dlsmiss this action, or in the alternative, to stay the Assignment for the Benefit of Creditors action ("ABC Action") currently pending before it until the resolution of litigation currentll' pending behveen Movants and
WSBC, Stanley M. Chesley ("Chesley"), and Thomas Rehme ("Rehme") before the
Southern District Cotrrt of Ohio, Case No. t6-464, McGírr u. Rehme et al., the
I-lonorabìe Robert Cleland presiding. This action is predicated on issues already decided in Kentuck), and issueslnqr¡f,¡,.,ffi:ÆËrLr"í,iË.the southern District of ohio, including a
\Arc DEc I3 Åitta, I2
&u\ ,oo request for the appointment of a receiver for WSBC. The interests of comity and judicial economy require that the instant matter be stayed.
Res
B van, Esq. (oo4ozr9) Christen M. Steimle, Esq. (oo86Sgz) DrNsrrrone & SsoHL Lt P 2bS E.Fifth Street, Suite rgoo Cincinnati, Ohio 45202 Phone: (Stù gZZ-Bzoo Fax: (Sß) gZZ-Bt t Email: [email protected] [email protected]
2 MEMORANDLIM IN SUPPORT I. Introduction
This ABC Action is nothing more than WSBC's attempt to avoid the jurisdiction of a federal court. On April 12,2016, Movants filed the McGirr action against Chesley,
WSBC, and Rehme, the purported Trustee of WSBC, alleging that Chesley, WSBC, and
Rehme engaged in a series of fraudulent transfers to avoid paf ing a valid and enforceable judgment obtained by Movants against Chesley in Kentucþ. Those fraudulent transfers continued even after Kentucky court orders issued rn aid of execution of its judgment against Chesley, that transferred Chesley's Tooyo interest in
WSBC to the judgment creditors' counsel. (See Exhibits A and B).
On April t5, 2or.6, Movants filed a motion for temporary restraining order and preliminary injunction in the McGírr action requesting relief, including that WSBC be enjoined from continuing to transfer its assets and that a receit er be appointed to control the assets of WSBC. A tw,o day hearing occurred before the Southern District of
Ohio, rvhich included the presentation of more than one hundred exhibits and hours of live n'itness testimon),. Also pending before the Southern District of Ohio are motions to dismiss, motions to amend the compìaint, and a renen,ed motion for preliminary injunction. Indeed, the parties have been actively litigating in federal court for eight months ancl have fììed a multitude of briefs on several complex ìegal issues. - Despite the effort and expense expended by the parties and the federal court, and before the federal court could issue a ruling on the pending motions, WSBC purportedly transferred its assets and filed the ABC Action. The transfer, according to papers filed b)'WSBC in this action, \\¡as accomplished through Rehme. Movants have claimed in
The McGirr action that aìl transfers by Rehme are fraudulent transfers. The ABC Action
.1 is nothing more than an end run around the federal court's jurisdiction. Moreover, under the Kentucky execution orders, the transfer is in eontempt of those orders and in furtherance of a sham transaction. (See Exhibit B).
Upon ìearning of the ABC Action, Movants fìled a motion for temporary restraining order before the Southern District of Ohio, u,hich that court granted. That order prohibited Mr. Goering, the purported Assignee of WSBC's assets from taking any action pertaining to those assets until the federal court issued its decision on the preliminary injunction motion. The federal court extended that order hvice, finding that the alìeged transfer of WSBC's assets "nas u'ithout consideration, and that this transfer appears to be n'ith the intent to frustrate the judgment creditors. This nen' action puts
WSBC's assets and transfers before another court rvhrle these same issues are pending before this one." (See October rT,2016 Restraining Order, attached hereto as Exhibit C, at r-z). That court also found that the "purported transfer of assets and nen' litigation is nothing more than an attempt to have an Ohio state court decide issues that are properly, pendrng before this ffederal] Court." (ld. at z). Finall1,, that court found a srgnificant danger of irreparable harm should the ABC Action be permitted to proceed.
(rd.).
Neither Rehme nor WSBC have an)' standing to ask this Court to dispose of the assets of WSBC. Movants are the successors to Chesley's too% interest in WSBC.
Chesley, WSBC and Rehme's fraudulent transfers of assets in defiance of the Kentuc\' execution orders are no\\¡ the subject of extensive briefing that is pending in the McGirr action. t
I Chesley's interlocutory appeals of one of the execution orders have already been denied by the Kentucky Court of Appeals and Supreme Court. (See Exhibit D).
4 There is further evidence that the ABC Action is nothing more than another attempt by Chesley to avoid the judgment against him and to seek the assistance of this
Court to help in that pursuit. According to Eric Goering, the ABC Action ivas fiìed to pal' creditors of WSBC - an entity that has long since ceased operating as a law firm.
Ho\r,ever, in the McGirr action the in house accountant for WSBC, Steve Horner, has already testified that WSBC has no debt. (See Deposition of S. Horner, excerpts attached as Exhtbit E, at 55:15-24). Rehme also nas unabìe to identifl,any debts or obligations that needed to be paid. (See Deposition of T. Rehme, excerpts attached as
Exhibit F, at 63:4-r4). Therefore, the only potential creditors are Movants - u'ho are not actually creditors but successors in interest to the oninership and assets. Yet WSBC and Chesle! havs stated multiple times, includrng in this action, that Movants are not creditors. So, according to rvhat WSBC has assefted thus far, because no creditors exist, aìl the cash from inct-r¡lle and the sale of assets nill go to the remainder beneficiary -
Stanìey Chesley. II. Law and Analysis
A court has the discretion stal, proceedings in the interest of comity, orderly procedure, or judicial economy. State exrel. Zellner u. Cincínnotí Bd. of 8d.,3+ Ohio
St.zd rgg, 2oo (Ohio rgß).When considering n'hether to grant a stay of a matter pending in state court in light of a parallel federal proceeding, the court shouìd consider
¡'hich forum has the ability to issue a more complete disposition of the matter and n'hich court possesses greater familiarity and expertise u'ith the trial of such issues. See id. at zor.
In the present case, the federal coutt can afford tnore complete relief betlveen the parties and has more familiarity u'ith the pertinent issues. First, the federal court has
5 jurisdiction o\/er not onìy WSBC, but also Chesìey and Rehme-both necessary to a full resolution of the issues betrveen the parties. Second, the ABC Action attempts to distribute assets of WSBC after those assets have already been executed on by Movants.
Movants claim that all asset transfers by WSBC are fraudulent conveyances is already pending in the Southern District of Ohio before Judge Cìeland. The federal court is more familiar u'ith the history betrveen the parties, the m1'riad of interrelated conduct by Chesley, and the legal issues determining the parties' relationship, That court has invested significant resources in presiding over the tr'r'o-day hearing, considering the multitude of briefs filed by the parties, and issuing several interim orders on pending rssues, Indeed, its position as to the ABC Action has been made clear. (See Exhibit C).
Without a stay, the parties n'ill continue to litigate in hvo courts, even though an order from federal court should be dispositive of the issues pending before this Court in hvo rvays. First, Movants claim that the purported assignment of WSBC's assets u'as invalid because the Kentucky court has previousll' transferred Chesley's interest in
WSBC to Movants'counsel. (See Exhibit B). Thus, because Motant's counsel did not srgn the ABC, it is ineffective, Second, the question of n'hether Movants are valld onmers/creditors of WSBC is before the federal court, r,vhich n'ould render litigation on that issue in this Court dupìicative. Moreover, given the similarity of the pending issues, there is a significant danger of conflicting orders from the lrvo coutts. Finally, this Court should not expend its resources to learn a complicated litigation histoq'involving these parties nhen judiciaì resources have alread),been expended by the federal court.
For these reasons, this action should be dismissed as a forum shopping duplicate action. In addition, the action n,as fiìed bi, a paft1, n'ithout standing. In the alternative,
6 a stay of the ABC Action is appropriate pendrng a decrsion b), the federal court in the parallel proceedings.
III. Conclusion
For the foregoing reasons, Movants respecrfuìly ask this Court to dismiss the ABC
Action, or in the alternative stay the Actlon pending resolution by the federal court of the parallel proceeding. The interests of comity, orderly procedure, and judicial economy iveigh in favor of this approach,
bm
Bri S. llivan, Esq. (oo4ozr9) Christen M. Steimle, Esq. (ooB6Sgz) DlNstvroR¡ & Sgoul u-P 2SS E.Fifth Street, Suite rgoo Cincinnati, Ohio 4;2oz Phone: (Sß) 9ZZ-Bzoo Fax: (Sß) gzz-Bt+t Email : brian.sulì [email protected] christen.stei mì [email protected]
CERTI FIç-ATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing rvas served by regular
U.S. mail, postage duly prepaid, this lL day of December , 2c76, upon the follor'r'ing:
Donald J. Rafferfy, Esq. Michael A. Galasso, Esq. CoHrN Tonl KrrE & Srexrono LLC RoBurNs K-ellv PemtRso¡t & Tucrnn z5o E Fifth Street, Suite z35o 7 West Seventh Street, Suite r4oo Cincinnati, OH 4gzoz Cincinnati, OÍ-l 45zoz draffert]'(Ðctks.com [email protected] Attorneg for Waite Schneìder Attorneyfor Eríc W. enng, Bcyless & Chesley Co., L,P.A. Assignee
7 EXHIBIT zo I E o¡ (Ð E EO OONE CIßCUIT,,DISTRICT CO U R T COMMONWEALTH OF KENTUCKY JUN 2 3 206
BOONE CIRCUIT COURT OtAuil; I t/ DIVISION III 0 cAsE No.05-cl-00436
MILDRED ABBOTT, et al. PLAINTIFFS
V
STANLEY M. CHESLEY' et al. DEFENDANTS
ORDER
Thrs matter comes betore the Court on the Platntrtl.s Motlon to Transtþr Benetìcial lnterest rn Property Held ¡n Trust. The Court havtng read the memorandums l'iled by the pañres. revrewed the tìle. and berng in all ways sutlictently advtsed, hereby fìnds as follows
This Courr enrered Judgment against Defendant Chesley on August I , 2014. tindrng hrm
prevlously awarded 3ointly and severally liable as a matterof law tbr the $42 mrllron tn damages to Plalnt¡fls agarnst Det'endant's Gallion, Cunningham. and Mills Sard Judgment was made iìnal pursuant to CR 54.02 and Detþndant Chesley cird not post a supersedeas bond to secure a stay ol' ent'orcement pendrng appeal
As part of post-ludgment d¡scovery, Defèndant Chesley drsclosed the Wrnd-Up
Agreement f'or hrs tbrmer law fìrm, Watte, Schnetder, Bayless & Chesley. Co , L PA'
("WSBC") The Wrnd-Up Agreement provrdes that Defendant Chesley rvould transt'er lrts shares rn WSBC to Thomas F, Rehme to hold rn trust lbr the exclustve purposes ol'wrnding up WSBC fbr the benefìt of rts employees, credrlors, and Chesley Per the Agreement, Mr Rehme ts authorized to lrqurdate corporate assets and drstrrbute proceeds to creditors as requtred and the pay out the remainder to Defendant Chesley as long as Def'endant Chesley does not recelve any legal lees other than fbr services performed prior to the etlective date of hts rettrement, Ð GÐ
-t Both prior to and aIìer Detèndant Chesley was drsbaned tn Kentucky and hrs ret¡rement of hrs Ohio bar lrcense. he lranslbned more than $59 mtllton dollars fiom hrs personalaccounts
ro WSBC $ 1.322.000 of that amount was transferred on or afier the date of the Wind-Up
Agreement.
Detèndant Chesley strll owns a benetìcral rnterest rn WSBC Plarntrlïs argue that thrs
rnterest rs sub.¡ect to executlon tbr the purpose of satrsfyrng Plarntrff's Judgment agalnst
Delèndant Chesley. To thrs end. PlarntitTrequests that the Court order that Defèndant Chesley's
benelìcral tnterest rn WSBC be transferred to Plalntrtls and that any drstnbutlons that would be
nrade to Detèndant Chesley be made to the PlaintttTs through therr counsel.
Det'endant Chesley ob¡ects. argurng that WSBC ts an Ohto legal prot'esstonal assocralton
t'ormed and malntalned under Chapter 1785 ol'the Ohro Revrsed Code and. therefbre. an Order
such as the Pla¡nt¡fI rs requesttng exceeds thts Court's lunsdtction The Coul dtsagrees
There is no drspute that thrs Court has personallunsdtctton over Defendant Chesley He is
a party to the case at hand and a vahdludgment has been entered agatnst hlm, aludgment which
the PlarntrlTs are wtthtn therr rrghts to seek the Court's asslstance to collect
The law ls clear that when the Judgment state has personallunsdtctton over theJudgment
debtor. that state may exerclse that.¡urrsd¡ctlon to take actton on that judgment See E.slules of
IJngur ex rel Strachmun v Pctlesttnnn Authortty, Tl5 FSupp.2d253,262-64 (D R 1.2010) The
Restatement (Second) Conflict olLarvs S 55 (1971) states that, " a state has power to exerctse
ludrcral .¡urrsdrctron to order a person, who rs sub.¡ect to its judrcral lurisdtctron, to do. or not do.
an act rn the state. although the carrying out of the decree may aflèct a thtng rn another state."
Furrhermore. K R S S 426 384 grves the Court the authonly to enforce the sunender of money,
2 @ (Ð securitles, or any other property of lhe defendant in the execut¡on and enforcement of a judgment
IT IS HEREBY ORDERED AND ADJUDGED as tbllows:
1 Defendant Chesley shall direct that his beneficial interest rn the shares oi WSBC be
transfened ro Plaintiffs within fourteen ( l4) days of the date of this Order and all
drstnbutrons pursuant to sard tnterest are to be made to Plaintifls through thetr counsel;
2. Defendant Chesley rs hereby Ordered to direct Thomas F. Rehme to make all
payments derived from Chesley's rnterest in the sharesof WSBC payable to the
Plarntrffs through their counsel, Hon Angela Ford;
3. If for any reason, includrng but not limited to any action by another court in any other
¡ulsdiction, monetary payment(s) ls/are made to Chesley from hts tnterest tn WSBC,
Chesley and his atromey shall immediately turn over satd payment(s) to Plaintifïs'
counsel, Angela Ford;
4 Defendant Chesley and his counsel are to provtde a copy of this Order to Thomas F.
Rehme nn& DATED this ö J day of June, 2015
R. SC RAND, JUDG B NE CIRCUIT COURT
COPIES TO ALL ATTORNEYS OF RECORD
NE IFq AY BOONE a' llT .ôt 3 ¡C NE CtßCUlTiolsTRtcT c0uRT
sEP 2 5 20t5
COMMONWEALTI{ OIT KENTUCKY Y, CTERK BOONE CTRCUIT COURT c DIVISION III cAsE NO.05-CI-00436
MILDRED ABBOTT' et al. PLAINTII..'FS v
STANLEY M. CHESLEY, et al. DIFENDANTS
ORDER
This matter is before the Court on the Plaintiffs' Motion to Execute, The Court, having reviewed Plaintiffs'Motion and Memorandum, SupplementalMemorandun, Defendant's
Opposrtrorq Plaintiffs' Reply, the Court fÌle, and having heard argument from counsel, and the
Court being in all ways sufficiently advised, fìnds as follows.
l-his Court entered Judgrnent against Def'endant Chesley on August 1,2014, findrng him jointly and seve¡ally liable as a matter of law for the $42 rnillion tn damagcs prevtously awarded to Plaintiffs against Defendants Gallion, Cunninglram and Mills. The Judgrnent against
Defendant Chesley was made final pursuant to CR 54,02, and Defendant Chcsley did not post a
'l'his supersedeas bond to secure a stay of enforcement pending appeal. Court entered an Order on June 23,2A15 on Plaintiffs'Motion to Transfer Beneficial Intelest rn Propeúy Held ln Trust, which ordered Defendant Chesley to direct that any distributions or paymcnts payable to him througlr his law ftrm Waite, Schneider, Bayless & Chesley, Co., L.P.A. ("WSBC"), from his interest in WSBC or pursuant to tire V/ind-Up Agreement winding up V/SBC's busrness be paid to Plaintiffs through their counsel jn satrsfaction of the Judgment against him, No payments have been made to Plaintiffs pursuant to this Coutt's June 23, 2015 Order. Additronally, this Court has granted multrple motions to compel against Defendant Chesley and in favor of Plaintrffs (Feb. 13,2015), regarding Defendant chesley's incomplete discovery responses. see order
Order (Mar, 27,2A15); Order (June 9, 2015)'
plaintjffs have obtained documents showing that despite the above Orders, Defendant
requests, This includes Chesley failed to identify fee i¡rcome responsive to Plaintiffs' drscovery
Rockwell Int'l corp case No fees Defendant chesley may receive from Merilyn cook, et al v ,
any 1:90-cv-001g1-JLK in the United States District Court for the Disfrict of Colorado, and
1 :04-CV additional fees he rnay be entitled to from In Re Fannie Mae Secarities Ltttg', Case No
("Fannie Mae -01639 rn the United States District Court for the Dlstrict of Columbia
Lidgarion"). 'l'he Court has concerns that afler this issue was raised rn the Plaintiffs' instant 8,2015, Chesley Motion and after the Court conductcd a Hearing on the Motion on September
to include potential then supplemented his Objections and Responses on September 16,2015 inconre inlhe Cook matler.
Defendant Chesley clarms fhat he no longer controls WSBC pursuant to the Wrnd-Up
Pleas Judge Robert P' Agreenrent dated April 15,2014. Hamllton county court of comnton
when he found, "Mr Ruehlman agïees wth chesley as noted rn hts August26,2015 Ordcr
interest rn the Wind-Up Chesley owns no shares of WSBC and has only a contingent remainder
WSBC are separate and Agreement trust holding the shares of WSBC. PlarntiffMr. Chesley and
and Rehme, as trustee, are independent entities." Judgc Ruehlman went on to o¡der that wsBc
to them' "to disregarcl and not effectuate any of thc Kentucky Orders" that apply hls 'fhis Court is not arvare what documentatron was submitted to Judge Ruchlman before
instant Molion parnt a different Order of Au gvst26,201 5, but the docurnents submrtted with the
show prcture of the current relationship among WSBC, Rehme, and Chesley. Those documents
is pard. In that Chesley continues to maintain control over WSBC and to direct where money
2 (
Fannte MaelÍigalion october 2ll4,hedirected payment of over $16 million in fees from the in control of the operating into two separate accounts. Plaintiffs argue that Chesley remains
the account' Documents show hc has signed account for WSBC, signing evety check drawn on
has directed payruents to hrs bank documents and a tax doculnent on behalf of wsBC and
of $164,145'88 to Frost Brown attorneys in this matter from a wsBc Bccount in the amounts Documentsaisoshowthat Toddand$l42,56l.72toBentonBentonLuedke inoctober20l4
the tobacco litigatron through the Defendant chesley is entitled to control the payee of fees from
payments into a'wsBC account while castano Trust and ln Decembe t 2014 he directed those fèe he had directed prevlous payments to personal accounts'
rn asserting he signed all srxty- Chesley disagrees, arguing that Plaintifß were incorrect
Fifth Third Bank account' four of the checks they subrnitted that rve¡e drawn on wsBC's
of the checks \¡/ere signed chesley responds that he only signed nine (14%) and that a majority
is confused" with cheslcy's "on by steven Iìomer, a cPA at wsBC, whose signature "eastly
and have a capital 'c' " Tlìis small copies of checks because both start with the letters 'st'
argument that he and wsBc are admission that chesley signed the nine checks does not help hrs separate entities.
jurisdiction over As this Court stated in its June 23,2015 Order, it has personal
actlon on the Judgment entered Defendant Chesley and may cxcrclse that.lurisdiction to take Authonly,Tl5 F' Supp 2d against him, see Eslates o/ungar exrel strachmanv Palestmtan
of Laws$ 55 (1971), see also KRS S 253,262-64 (]D.R.I. 2010);Restatement (Second) of Conflict
426.384.
This Courl norv finds that the Wind'Up Agreement is a sham, arrd that Defendant
disregard a corporate entity Chesley continues to control a¡d direct WSBC. This Cou¡t may
3 ,,( loss of corporate separateness and lvhen there is 1) domination of the corporation resulting in a
corporation would sanction fraud or (2) circumstances under which continued recognition of the
Properfies, LLC,360 S W 3d promole rnjustrce.,' Inrer-'I'el Technologres, Inc v Linn snrion
Agreement or to the 152,I650{y.2012). Chesley is operating wtthout regæd to the Wincl-Up
He is exercising the right to control wsBC's supposed purpose of wsBC's continued extstence.
checks' The court finds he is activrtres, including drrecting the payment of fbes and signing
to be a wind-up pcriod' to prevent utilizing WSBC and its existence during what ts supposed
Judgment' The Court finds he is taking Plaintiffs, his judgment creditors, fronr executing on their
assets to WSBC, including fees fronr the action to rencJer himself insolvent while directing
transfer of $59 million fiom his personal Famie Mae Lrtigatron and tobacco litigation, and the
supreme court in Inter'Tel Teclurologies accounts to wsBC, chesley is engaging in what the
,',an into hability-free corporations while described as intentional scheme to squirel assets
at 168 (quoting sea-Land services' Inc tt heaping liabilities upon an asset'free corporation,"' Id.
Peppersource,g4lF.2d5lg,524(Fifthcir,199l)'Thiscourtrecognizesthatitshouldnot
should not "hesitate in those cases where the disregard the co¡porate entiiy lightly, but it also
of an allegedly separate corporate entify'" circumstances are ext¡eme enough to justrfu drsrcgard
the cortrt finds that the wind up Id at 168.In Lght of the evrdence submitled by Plaintiffs, control over wsBC Agreemcnt is a sham and that in reality chesley retalns
ITISIIERBI}YORDERDDANDADJIJDGEDasfolÌows:
shall irnmediately l, The plaintifTìs Motion is GI{ANTED. Defendant Chesley thlough their hansfer his ownership rnterest in wsBc to the Plainliffs
remains in full effect As undersrgned counscl. This court's June 23, 2015 Order
rmmediately fum directed in that order, Defendant Chesley and his attomeys shaìl
4 I
payments made to Defendant over to Plaintiffs' counsel any and all monetary
Chesley from hts interest in WSBC;
Trustee of the castano Trust that 2. Defendant chesley shall immediately drrect the the Castano Trust shall all payments to which he and/or WSBC are entitled from
be paid directly to Plaintiffs' counsel; and
matter of Merílyn Cook' et al v 3. Defendant Chesley shall advise the Court in the
Roctot,elllnt,lcorp.,cas¿No. l:90-cv-00181-JLK,intheunitedstatesDrstrict
or fees to which he and/or cor¡rt for the Dishict of colorado that all payments
through their undersigned V/SBC æe entitled shall be paid d.irectly to Plarnliffs
counsel.
SePtember 2015' DATED 'n "{auYof
R. SCHRAND, GE CIRCUIT COI]RT
COPIES TO: ALL ATTORNEYS OF RECORD
5 Case L1-6-cv-00464-RHCDoc#.83Frled L1|ITn6Page 1of 5 PAGEID#. 1907
EXHIBIT 2 3 c IN THE I-INITED STATES DISTRICT COURT o FOR THE SOUTHERN DISTRICT OF OHIO WE,STERN DIVISION
CONNIE MCGIRR, et al., Cir,rl Action No. r: t6-cv-464 Plarntiffs, Judge Robert Cìeland vS EXTENDED TEMPORARY THOMAS F. REHME, et al , RESTRAINING ORDER Defendants
Thls matter is before the Court on Plaintiffs' Renen'ed Motion For Preliminar¡'
Injunction against Defendants Thomas Rehme ("Rehme"), Waite, Schneider, Bayless, &
Chesle1,, Co, L P.A. ("WSBC"), and Stanlel' M. Chesley ("Chesle1,"). (Doc. Bz). The current Temporary Restrarning Order (Doc. ZS), rvhich n'as tssued t'ith notrce to the affected parties, and prer.iously extended, rvith notice, ls scheduled to expire today. The underl¡,i¡g facts have not changed. The Court finds, based upon thosc facts, that rt is appropriate to extend the existrng Temporary Restrainrng Order pendrng the court's determrnation as to the Motron for Preltrntnary In¡unctton The current Temporary
Restratning Order as set forth belon,, SFIALL BE AND IS HEREBY, extended for fourteen (rq) additional da1's.
The Court fincls that the Ruìe 65 factors n'etgh in favor of grantrng a temporaf restraining order. To begrn, Plaintiffs have proven a likelihoocì of success on the merlts
There rs no dispute that WSBC filed a nerv actton rn the Hamllton County Probate Court
(See Doc Zo). This fihng follorved Rehme's attempt to transfer all assets of WSBC to a nerr, "Assrgnee," IvIr. Eric Goenng. The Court notes that thls transfer \\'as n'lthout consideratron, and that this transfer appears to be n'ith the lntent to frustrate the judgment creclitors This nen, actlon puts WSBC's assets and transfers before another Case 116-cv-00464-RHC Doc # 83 Frled 1,Oll7lL6Page 2 of 5 PAGEID # 1"908
court ¡,hrle these same issues are pendtng before this one. Importantll', this Court has the pou'er to order the same reìref as sought tn the probate court. The new Asstgnee ts akin to a receiver, albeit one that rvas hand-prcked b1'WSBC and thus whose impartralrty
Plaintiffs reasonably questron, and Plaintiffs have already asked thls Court to appoint a recetver. This issue u'as discussed at ìength durtng the preliminary injunchon healtng
It is not lost on the Court that WSBC appears to be forum shopping The Court finds the timrng of this purporterì transfer particularll,troubltng, as this filing comes n'htle a motion for prelrrnrnary injunction ts pendtng, after a hvo day heartng, and a motton for leave to amend the compÌaint to assert ne\\' causes of actlon ts also pendrng The purported transfer of assets and neu, lrtrgatton is nothrng more than an attempt to have an Ohro state court decide issues that are properly pending before this Court.
The Court further finds a significant danger of irreparable harm. The concealment or dissipation of assets constitutes ineparablc harm. NCR Corp. u. Feltz, No. 9r-4o11, 9r-
Nat. Bank 4o33 and 91-4oSB, 1993 WL tt}76, at "z (6th Clr. Jan. zr, tggg), Huntíngton *9 (N'D u Gutshard., Mlbunt & Shorts, IlC, No. z:tz-CY-tog5, 2or2 WL 59o2916, at
Olrro Nov 26, zotz) Plaintlffs argue that thrs nen' actton gives \AISBC the pon'er to drssipate its assets through use of the Assrgnee l-Iere, the terms of the assignment and order filed by \4/SBC reveals that the nen'Assignee has the authort¡' to sell all of WSBC's assets for the benefit of rts credrtors. (Doc 7o at r). But it rs hrghly unhkely that the nerv
Assig¡ee urll recognrze Plaintiffs as creditors of \{SBC. Before this Court, \{¡SBC has repeatedll,argued that Plaintiffs are not creditors of WSBC and have no right to an1'WSBC assets, despite the fact that another court has expressìy ordered both that Chesley transfer hls interest ln WSBC to Plaintlffs and that Plarntlffs can dtrectll'execute on the assets of
WSBC. platntlffs' status as a creditor of WSBC ts squarely before this Court' Thus,
2 Case 1 16-cv-00464-RHC Doc # 83 Frled tOlLTlt6 Page 3 of 5 PAGEID # l-909
through this purported assrgnment, Rehme/\,VSBC has attempted to remo\¡e thrs decrsron from this Court, place it in the plenary discretion of the nen' Assrgnee, rvho rvill have unfettered authonty to deny Plaintiffs'claim and selì or liquidate all WSBC assets before a fair and rmpartral decrsion can be made
Moreover, Chesley', nho rs rntegral to this dispute, is not a part¡'to the probate court litigation, and the fraudulent transfer claims currently pendrng before this Court are certainly relevant to the probate court litigation. Accordingìy, the Court finds without ternporary in¡unctive reliel there is a significant risk that WSBC's assets n'rll be ìrquidated u'ithout recognitron of Pìarntrffs' claims and before a decislon as to their status can be made, and Plarntrffs rr.ill be left rnthout any recourse. Thls factor rveighs in favor of temporary rn¡unctive reìref.
Conslderrng the harm to others, the Court is not conranced that WSBC is at nsk for greater harm than that rvhich *'as ¡ust dcscnbcd by thc Court r\s such, this factor l'erghs ln favor of granttng the temporary restratntng order
Frnall¡,, the Court ñnds that, to the extent imphcated, the public interest lçould be sen'ed by deternng others from engagrng in fraudulent transfer of funds See Concheck *3 u Barcroft, No. z. ro-cr,-656, zoto WL 4r r749o, at (S.D. Ohlo Oct. r8, zoro). Srmiìarìy, forum shopping wlll not be toìerated. See Mitan u. Int'l Fdehty Ins. Co., z3 F. App'x z9z,
298-99 (6th Cir. zoor).
Accordrngly,
IT IS ORDERED THAT, untrl further order by the Court:
1. The Defendants, including all agents and assignees of Defendants, shalì not asstgn, drsburse, drstnbute, transfer or take any action related to any asset of VVSBC, includrng money, outslde of basic office expenses;
3 Case 116-cv-00464-RHCDoc# 83Frled 1,0lL7lL6 Page 4of 5 PAGEID# 1910
2. The Defendants, including all agents and assrgnees of Defendants, shall not negotiate or enter rnto any agreements pertaining to income due WSBC and/or Cheslel';
3. Chelsey, including hts agents and assignees, shall not directìy or through anyone acting on hrs behalf or for his benefit take nor drrect an)¡ money that could be claimed by WSBC or anyone rvho may o\\'e nìoney to WSBC; 4. WSBC, including its agents and assignees, shall not asstgn, disburse, dtst¡bute, transfer or take any actron on any assets, includrng money, outslde of basic office expenses; S. Rehme, rncluding his agents and asstgnees, shall not, tn his capacity as secretary of WSBC and as Chesley's trustee under the zo13 Wrnd-Up Agreement transfer records of an1' kind or enter any agreements on behalf of WSBC or authorize the asslgnment, disbursement, distributlon, transfer or take any other action on any of l\¡SBC's assets, including lnoncy, outside of basrc office expenses;
I 6. WSBC, including tts agents and assignees, shall not make ân)r at.itntt-t.n,t, transfers, dlstributrons, disburserlents, or other payments to Chesley or on behalf of or for the benefit of Cheslel,;
Z Chelsey, for himself or an)¡one acttng on hts behalf or for his benefit shall not enter agreements or take nor direct any mone)¡ that could be clalmed by WSBC or any person or entity who may orve WSBC monel'; and
B. Rehme shall not, rn his capacity as secretary of WSBC and as Chesìe1"5 trustee uncler the zor3 \{¡ind-Up Agreement authorlze or factlttate an}¡ assignments, transfers, distnbutlons, <ìisbursements, or other pa1'ments to Chesley or on behalf of
Chesley
4 I Case 116-cv-00464-RHCDoc# 83Frled 1"0lL711.6Page 5of 5 PAGEID# l-9L1
Having carefully consrdered the facts of this matter, the Court finds that the bond
already posted by Plaintiffs tn thrs ltttgatton sufficient. No addltronal bond shall be
requrred.
SO ORDERED.
S/Robert H Cleland ROBERT H CLELAND UNITED STATES DISTRICT JUDGE
Dated October 17,2016
I hereby certrfy that a copy of the foregorng document was matled to counsel of record and/or pro se partres on thts date, October 17,2016, by electrontc and/or ordlnary mall
S/Lrsa Waoner Case Manager and DePutY Clerk (313) 234-5522
5 ral'tf tstt
EXH IBIT z È Þ É
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@outt of Øppesls
NO, 2015-CA-001066-l
MOVANT STANLEY M. CHBSLEY
MOTION FOR TNTERLOCUTORY RELIE}- BOONB CIRCUIT COURT v AÇTION NO. 05-cI-00436
RBSPONDENTS MILDRED ABBOTT, ET AL.
ORDBR
*{r ** ¡*:t( ,t t tl.t ¡f * *ti t*
JI-IDGES. BBFORE: J. LAMBERT, STUl\dBo AND VANNIETBR,
interlooutory N{ovanl, Stanley Chesley (hereinafter, "Chesley"), seeks
65.07 to dissolve an relief, pursuant to Kentucþ Rules of civil Procedure ('cR") ,
on June 23,20T5,whioh he describes order of the Boone ci¡ouit courtr, as entered
jilrng lútcrlocutory Rcliof, Movant sougbt emetgency ¡ Srmullancous with the of bis Motlon fo¡ thc ci¡cuit court order pendi:rg ihis cou¡t's dcoislon on tho lntermediatc ¡clief under cr{ ãs¡liol to stay ;;;;;;;;i;;i,rruroryr"tiei ÁyóraordãrcrtAugurt25,20l5,thiscourtdcnicdthomotlonforemergcnov íntermedjals ralisf. -1- relief, Chesley seeks the as a,,manclatory injunction."2 In adclition to interlocutory
to supplement the record Court,s orde¡ on two other motions. First, Chesley seeks
And Second, Chesley seeks with an additional exhibit ("Motion to Supplemtl'")'
seal another exhibit with the court an orde¡, pursuant to cR 7,A3,to file under
pleadings, all arguments and (,,Motion to Filo Under Seal"). Having reviewed the
relief, deny the lnotion to applicable law, we deny the motion for interlocutory
an exhibit under seal'3 supplenrent the record and deny the request to file
A short synopsis of the underiying facts are as follows, On August 1,
judgment against Chesley and in favor of 2014, the Boone Circuit Court entered a
the court held Chesley jointly and Mildred Abbott, et al. ("Abbott"), In the ordet,
as recovery for the breach severally liable for $42 millio'dollars owed to Abbott
a significærtly greater fee for of Chesley's fiduciary duty to his clients by taking without the knowledge or his work than he was entitled and for taking the money
stems from his role in what has consent of the clients. Chesley's breach of duty action.a 'I'he Boone Circuit become known as the,,fen-phen" diet drug settlèment
judgment on September 19, Court issued amended orders to the August 1, 2014
2 Motion for Inlerlocutory Rolief at 4'
Court" Casr¡ No' 2015-CA-00106?' rvhlch concerns the sarne 3 Chcs.loy has ¿ concu¡ronl action beioro fhls bs hæ ñled I Pcùtlotl lor W't of Prohibition a Motion to facts discussed i:r tbis o¡Oer. l¡ t¡,r tóno*.nt ucllon, lntorest i¡ Property Held in Trusl, Memora¡dum of l¡rv Frle under seal Plar¡tiffs'trlotron ro Tlansfe¡ Bencfiorat an Additional Exhibit' The Court ;; srpp; ¡ttuo¡.¿ g*biUiit and ¡ Motion to Supplement tho Rcco¡d witlr -¿ motrons ln cnss No. 201 5-cA-001067 by soparate ordcr, wl¡ lssus dec'lons on tnu *¡ì-on¿ tr,o pondrng
Case No. 98-Cl-795 . Darla Guard v, A H, Robi¡s Co , Boono Ctrcutt Cotul, 2- collection of annual 2014 and october 22,2014 modising language as to the
such interest could begin interest on the judgment and the date from which
orders, none of the original conclusive calculation. Holvever, within the amcnded
amended or vacatcd by the findings of liability against chesloy were altered,
couft's judgment and rulingss but did circuit court, chesley appealed the circuit
enfo¡cement of the judgment would be not post a supersedeas bonrJ6 to ensure
stayed pending his aPPeal'
Asaresultofhisroleinthe..fen-phen',aotion,Chesleywasdisbarred
Bar tlss',n v, Cheslqt, 393 S'W' 3d 584 by the Kentucþ Supreme court. Kentucþ
(Ky,2013).Hesubsequentlyresignedhisohiolaw]icense.Becauseohiodoes
interest in a law firm, Chesley transferred his allow B non..attorney to own an 'ot Bayless & chesley co', L'P'A' interest in the law firm of waite, schneider, who was authorized to liquidate the (,,wsBC,) to a t.ust held by an ohio attomey,
assets,paycreditorsanddistributetheremainingassets'Chesleyholdstheonly
more than $59 million dollars from his shares in'wsBC and had transfened
over $1 million dollars after the b"¡st was in personal accounts to wsBC, inoluding
plaoe.
984' 20 l4-CÀ00 1?25, 201 4-CA-00 1900 and 20 I 4-CA-001 r also each stylcd' Chælel v' Åbbon' Ttosc ar¡ooals a¡s purposes, including briefing, hy order Tbese appeuls wero consolidate<1, for all and areïunently bcfom this Court' datod JanuarY 20' 20 15.
ó Sse CR ó2.03 and 73 04, -3- on June 9, 2015, the oircuit court conducted a hearing on Abbott's
the motion to transfer Chesley's beneficial interest in the trust to satìs$ $42
circuit court has million dollar judgrnent. Abbott argued that because the to direct the jurisdiction over Chesley himself, it h'¿s the authonty to order him
to Abbott's attorney to settle trust to pay over any disbursed frmds he will reccive
that because the trust is located the August l,z}l|judgment, chesley countered
the distribution of any frJrnds in ohio, the circuit court lacked jurisdiction to control 23,2075, finding it has personal frorn it. The circuit court entered an order on June against him' The jurisdiction over chesley and a valid judgment was entered
circuit court plaintìffs ars withïn their circuit court also found Abbott and the other
collect on the judgment and state law gives righls to seek the court's assistance to of chesley's money in the execution the court authority to enforce the surrender
seeks interlooutory relief from this order. and enforcement of a judgment. chesley the parties, the Having reviewed the record and thc argutneuts of
is not an injimction, as argued court finds that the June 23,2015 cilcuit court order
meant only to execute the circuit çourt's by Chesley, but is a post-judgment order
the $42 million dollar judgment, as previous frnding that chesley is liablo for estsblished in its August 1, 2014 decision' characterization of The Court finds Chesley is incorrect in his iegal
the relief he is seeking pursuant to cR the June 23,2015 or 4 ó5.07 carurot be granted. CR 65,07 exprassly provides that a p^rïy affected by entry of a tomporary injunction may seek relief before this Court. Cotnntonwealth, ex rel. Conway v, Shepherd,336 S.W,3d 98, 101 (Ky' 201 1). As st¿ted n Curry v. Farmers Livestock MH., 343 S,W,2 d 134,,135 (Ky. 1961), a temporary a claim can injunction is designed merely to hold the status quo until the merits of must establish that be decided. A rnoving parly seeking relief from an injunction and its rights are or will be violated and the movant will suffer immediate iorp*il, injury, loss, or damage pending a final judgment in the action' ,Søe CR 6s.04(l), The court has reviewed tJre August I,2014 order, as well as the provide findìIgs of fact and subsequent June 23, 2015 order, and finds both 54.02, of chesley's conclusions of law to support the final adjudication, under cR judgment of million liabiliry for breach of fiduciary dufics for the amount $42 judgment through the dollars and for Abbott's entitlement to seek execution of the from chesley's collection of distributions and payments made as a benefrt flowing certain issues remain to shares in WSBC. Chesley briefly argues, by footnote, that demand fbr punitive be adjudioated before the circuit court, inoluding Abbott's duties. damages in relation to the claim of breach of fiduciary 5 CR 54,02(1)7 (emphasis added) provides: When more than one claim for relief ìs presonted in an action, whethe¡ as a olaim, counterclairn, cross-claim, or third-party claim, or when multiple parties are involved, the court møy g'anl afinal Judgment upon Qne or more but less than all of the claints or partíes only upon a determinatìon that therc is no just reason for delay' The and shall recite iudgrnent shall recite such determination i¡ufttt. judgment is fi¡al, In the absence of such recital, any ordðr oi other form of decision, however designated, *hi.h adjudicates less than all the claims or the rights antl liabiiities of less thær all the parties shall not terminate the action as to any of the olaims or parties, and the order or other form of decision is interlocutory and subject to revision at any time before the entry of judgment adjudioating all the claims and the rights and iiubilitios of all the Parties. a court The court acknowledges that cR 54.02(1) requires a specific recital in just judgment involving multiple claims or parties that "there is no reason for it, In delay,'to denote a final decision of the court on the specifîc issues(s) before recital' our review of the aforementioned orders, we did not find that specifio Court However, we find in those orders neither language from Boone Ci¡cuit of rights stating it is entering an injrinction nor language indicating pleservation 23, 2015 order pending a final trial on the merits. 1-he Boone Circuit Court's June was not a is not subjeot to review undet CR ó5.07 if the circuìt's decision under CR temporary injunction, This Court finds that tle order, when analyzed rnultiple pardcs"' 7 cR 54,02 ls rirled, "Judg¡rent upon multlplo clai¡ns or i¡volvl¡g -6- 65,04(l),isnotaninjunction,temporaryorotlrcrwise,andnotcapableofbeing was not entered during the pendency of subject to interlocutory relief. The order a final judgment ineffectual' It is the lawsuit itself and it certainly does not render to give effect to that final judgment' very much the opposite. It is rlesigned lnshowneeTelecomRes"Inc'v'Brown'354S''W'3d5a2(Ky'2011)' rendering deten¡inations to grant final Kentucky,s highest court st¿ted that in as alleged by chesley in this judgment as to fewer than all claims in the litigation, rnatter,therebymakingpossibleanimmediatcappealfromthejudgment,courts disallowing piecemeal appeals, but a hial should be sensitive to the general rule the rulc' Id' a|551' AJld' where the court is granted disoretion in applying aspect of the litigation' the hial judgment truly disposes of a distinct and separable just reason for delay will only be disturbed if court's determination that there is no Court finds no evidence of abuse of discretion that discreti0n was abused. /d. The The June 23,20L5 order served only to restate in the decisions by Boone oircuit. judgrnent against and personal jurisdiction over the circuit courl's previous to enforce a final and appealable judgmcnt chesley by addressing Abbott's motion marshaling the assets " ' and distributing and to seek an assignment and "[a] [of] Ass,n v' Nesler,697 S.w. 2d 136,139 the proceeds.,, .geg Sec' Fed' Sav, & Loall (Ky. 1e8s)' -7 - Despite that lack of the recital of "no just reason for delay" the Court finds that it is not fatal. The entry of the August | , 2074 order establishing Jrure 23,2015 order giving chesloy's liability and the follow-up, post-judgment efforts against the trust Abbott the ability to move forwa¡d in executing collection on the claim' This Court disbursements, when read plainly, are ftnal adjudications courr orders at issue in this matter to has not found rimiting language in the circuit fi¡rds the ci¡cuit court justify Chesley's request for interlocutory relief' This Cou¡t riabirity on the question of his breach of intended to finarize the issues of chesley's order, and to give legal authority frduciary duties, as set forth in the August 1,2014 executing the judgment in the June to Abbott and her counsel to rnove forward in 23,2015 order. Two frnal motions pending in this action require resolution: the seal. chesley has moved to Motion to supplement and the Motion to File under ("Motion to supplement"). The supplement the record with an additional oxhibit memorzuldum filed in exhibit in question is categorìzed by chesley as â response as filed by Angela M, the coufi of common Pleas in Hamilton county, obio, "Defendant Angela M' Ford, who is counsel for Abbott. The exhibit is titled, to Intervenefiled by Ylai\e schneider Ford,s Response ín opposition to the Motion ("Ford's ohio Response")'8 Bayless & chesley co., LPA" in case No. 41500067 July 22,2015 i¡¡ the Couf of Common Plcas. I Chesley alloges the Ford Ohio Reoponso was filed on I In summary, Chesley argues that ¡\bbott's attorney, Angela Ford, makes conflicting argurnents in her Ohio pleadinge when compared to the pleadings she has submitted on behalf of Abbott as counsel before this Court as 1o the "extrateüitotial effect" of the August 1,2014 and June 23,2015 orders of the Boone Circuit Court. By moving to have this exhibrt addod to the record before this Court, Chesley seeks to rebut argtunents by Abbott that the respondents have been procedrually blocked in Ohio from executing the cbcuit court orders to judgment collect the disbursements from the t¡ust to satisfy the against Chesley' The Court is unpersuaded tlat this exhibit should be added to the record. Chesley cites no case law or statute to support his arguments a¡rd fails to demonstrate how the aticlition of this item is helpful to the Court in evaluating the request for interlocutory relief and the questíon ofthe i¡tent and effect of the Boone Ci¡cuit Court's orders. This exhibit is not reievant to the matter at hand. For this reason, the Court denies movant's request to supplement the record' The frnal motion before the Court is Chesley's request to file, under seeks to file tåe sea1, another exhibit with the Court, pursuant to CR 7'03. Movant "Plaìntffi' Motion b Transfer Beneficial Interest in Property Held in Wust, by privato oou¡scl ¡¡ llto Cou-t of Common e Tho Cou¡t notos ürat it appears r\ngela Ford is represented us cou¡sol for pi.^, *ùf r io footr"ky, lr"fo¡s bãth the Boone Ci¡cult Cou¡t and this Court, sba so¡vo¡ ldsotified Algela Ford as being responsiblo Abbott, In tbe towcr court acttor\ tl¡c Boo¡re Cr¡cr¡il Court has iår t.il..iittg ñuds owed by Chæloy to Abbott and oùor rospondonts' -9- Memorandum of Law in Support and Attached Exhtblts", a document that was originally frled in the lower court action in Boone Circuit Court Case No. 05-CI- 436. 'fhe lower courl. approved, by order dated January 30,2015, an agreed and its protoctive order by the parties to place the "motion to transfer" to accompanying documents under seal. chesley algues that as the "motion protective order, this hansfer,, documents remain subject to the circuit oourt's public view' Court should $ant the request for protection from placed undor The Court has reviewed the documents proposed to be in the favor of openness, public seal and its contents. The court prefers to err As noted in Roman disclosure and aocoss to documonts in judicial actions. documents Cathalic Diocesev. Noble,92 S.W.3d 72a $ but may be sealed if the right to access is are presumptivcly available to the public, In reviewing the outweighed by the interosts favoring non'disclosure"' Id' at731' the did not identify any of documents for which chesley seeks protection, cou¡t CR 7'03(1) and finds no the privacy data generally subjcct to protection u:nder CR Chesley has not cause to support protection of the documents urde¡ 7'03(4)' this Court fìnding that thç requested iclentifred a reason so compelling as to support is not beholden to the decision documents be hidden from public view, This Court protective order, ofthe clrcuit court as to its acceptance ofthe parties' agreed Chesley's motion on this issue is denied' -l0- CONCLUSION For the foregoing reasons, the Court ORDBRS that the motion for to supplemsnt the interlocutory relief be, and heroby is DBNIBD, The motion The motion to file an exhibit under record with an additional exhibit is DBNIED. seal is DEMED. ENTERBD 0gT 0 7 2ûrf JTIDGE, COURI'OF APPEALS - 11- t 1 TO BE PUBLISI-IED lSwtaúg þnyrnav Ø,snú sf 2015-SC-o00599-I MOVANî STANLEY M, CHESLEY ON REVIEW FROM COURT OF APPEALS 1066-I V cAsE NO. 2015-CA-00 BOONE CIRCUIT COURT NO' O5-CI-00436 RESPONDENTS MILDRED ABBOT'T, ET AL. OPIMON AND ORDER pEtfvl NG IHTpRtq cuToRY- 8¡ÐLIÞF StarrleyM'Cheeley,pursuanttol(enttrcþRuleofCivilProcedure(CR) the octobe r 7 , 2015, order entered 65,09, moves this Court to vacate or modify Motion for Interlocutory Relief by the court of Appeals, which denied chesley's the Boone circuit court was not an under cR 6s.o7, As the order entered by properly the subject of an injunction, temporary or otherwise' it is not we affirm the judgment of the court of interlocutory reliei mbtion. Therefore, Appe als, was removed In the mid-1990s, the popular werght-loss drug fen-phen ancl other dangerous side- lrom lhe marl Products Home) on manufacturer of fen-phen, American Home {American bchalfofKentuckyplaintiffswhoallegedinjuriescausedbytheiruseofthe law practices' they pooled drug. while the three attorncys operatecl separate pursue the case. The case they filed, their resources in a collective effort to Products' Inc et ø1" Boone Circuit Darla S, Guard, et al' u' Amerìcan Home ' CourtCaseNo.gB.cI-795{Guard)wascertlfiedasaclassactionrnMay1999. WhiletheKentucþlitigationwaspending,Americanl{omewasalsothe lawsuit in Pennsylvania' That federal defendant in a multi-dïstrict class-action litigatronresultedinanationwideclass-actionsettlernentinAugust2000, the Kentucþ plaintiffs opted out of the However, on the advice of counser, nationwidesettlementtopursuetlreirclaimsinstâtecourt.Subsequently, Chesley,whohadbeeninvolvedint}renationalsettlement,initiatedafen-phen circuit court' Despite their íniLial lawsuit on behalf of a few clients in Boone oppositìon,Cunningham,Gallron,andMillseventua.llyagreedtoconsolidate Chesley,scasewiththeGuardcase.ThiswasagreedtobytheGuardattorneys and his experience in the nalional fen- due to Chesley's national reputation phen settlement' Withtheclaimsmerged,theattorneysenteredintoanarrangement outliningtheroleeachattorncywouldperforminthelitigatron.Itwasagreed thatGa]lionwouldserveasleadtrialcounsel,CunninghamandMillswould informa[ion, and chesley would serve enroll clienLs and maintain client contacr asleadnegotiatorrntheefforttosecurcasettiementwithAmericanHome. Additlonally,ifChesleysucceededinreachingasettlemcntwithAmerican Home, he would receive a share - initially 27 percent, but later reduced to 2l percent- of the attorney fees owed to Cunningham, Gallion, and Mills under their respective retai¡rer agreements, On May 1,zOQt, a scttlernent was reached with American Home, The settlement agreement required the decertification of the Guard. case âs a class action ancl the dismissal of all individual claims. In exchange for this, American Homc agreed to pay the aggregate sum of $200 million which was to be disbursed to the 431 clients for whom Mills, Cunningham, and Gallion had fee contracts. The claims of the 143 other indivlduals who had joined the class action, but who had not personally retained any of the class attorneys, were to be disrnissed without prejudice. Additionally, American Home left it to Mills, Cunningham, and Gallion to determine how much of the $ZOO mittion fund would be allocated to each client, contrary to the terms of the settlement agreement, Milis, cunningham, and Gallion failed to inform their clients about the total settlement amount' Nor were the clients made aware of the provision that American Home could terminate the settlement if less tha¡ 95o/o o[ the claimants accepted the setllement agrecment by Scptembcr 1, 2001, While Mills, Cunningham, and Galhon obtained the necessary releases, they did so by failtng to revea-l essential information and making misleading statements to their cljents. After the class action was deccrtified by tire circuit court, the GucLrd attorneys distrjbuted approximately $73 million to Lheir cljents. A further $20 million was diverted to the creation of the Kentucþ Fund for HeaJthy Living ó was divided (KF,HL). The balance of the money, approximately $106 million, a¡nong the attorneys for the class' AsubsequentinvestigationbytheKentuckyBarAssociation{KBA) Aftcr the uncovered the excessive payments to the Guard' attorneys' a law suit requesting an investigation became public, the Respondents filed of misappropriated funds, accounting of the setúement money, disgorgement andajudgmentagainsttheclassattorneysformoniespaidinexcessofthe contingent fee contracLs. ThecircuitcourtgrantedpartialsummaryjudgmenttotheRespondents and Mills had breached their after determining that Cunningham, Gallion, fiduciaryclubybyviolatingtheircontingcntfeeagrecments.ontheissueof cornpensatorydamagesfort]rebreachoflrduciaryduty,thetrialcourt Mills owed their clients concluded that Cunningham, Gallion' and Gallion, and Mjlls were approximatcty $+2 million' Additionally, Cunningham, adjudgedtobejointlyandseverallyliable'AstoChesiey,thecircuitcourt remained regardmg his liability concluded that genuine issues of matenal fact judgment against him' and denied the motion for summary Gallion' and Mills On appeal to the Court of Appeals' Cunningham' challengedthesurnmaryjudgmentdeterminationonthebreachoffiduciary dutyclaimandtheassessmenlofiointandsevera]liability'TheCourtof judgment deterrnining Appcals reversed the circuit court,s award of summar¡l thatgenuineissuesofmaterialfactremainedunresolved.Thedenialof 4 not appcalable and summary judgment against Chesley rvas deemed Appeals' accordingly was not reviewcd by the Court of Subsequently,thisCourtgranteddiscretionaryreview'InAbbottu, Chesley,413S,w,3d5s9(Ky.2Ol3),wedeterminedthatLhecircuitcourt properlyenteredsummaryjudgmentagainstCunningham,Gallion,a¡rdMllls onthebreachoffiduciarydutyclaimF\rrther,weagreedwitlrthecircuitcourt to joint and scveral liability' that Cunnrngham, Gallion, and Mills are subject Astothesurnmajyjudgmentdeterminationagainstchesley,weagreedwith order denying summary judgment the Court of Appcals that the circuit court's wasnotappealable'Thecasewasthenremandedtothecircuitcourt, InAugust2o: 4,thecircuitcourtgrântedtheRespondents,motionfor circuit court concluded that summary judgment against Chesley'i The the Responclents' breach of fiduciary summary judgment was appropriate on preclusion or collateral e stoppel' In duty claims lhrough the doctrine of issue that chesley had a full and fair reaching its decision, the circuit court reasoned to these claims during the opportunity to present his case with respect proceedingsínKenãtckgBarAss,nu,Chesleu,393S.w.3d58a(Ky.2013). FindingthatnogenuineissuesofmateríalfacLexisted,thecircuitcourt liable with cunningham' determined ttrat chesley was jointly and severally Subsequently' Chesley Gallion, and Mills to the Resporrdents for $42 million' dated September 19, 2014, r The circuit court later entered two amended orders of tÌ¡e ordcr as to the calculation October 22, 2015, which modified the wordi:rg and both amendcd orders date fo¡ a¡d the collection of a¡rr¡ual irrterest' Adcl"itionallY There is no just cause for delaY," noted that'[t]his Order ís F¡nal and Appealable' 5 and rulings' but did not post a appealed the circuit court's judgmcnt of the judgment would be tolled supersedeas bond to guarantee enforcement during his aPPeal,2 settlement' Chesley was Due to his actions during Lhe Guard' permanentlydisbarredfromthepracticeoflawinKentucþ.3Afterwards, law in Ohio' Chesley's forme¡ law firm' Chesley retired from the practice of Co'' L'P'A' (WSBC) is an Ohio iegal Waite, Schneider, Bayless, & Chesley professionalassociationformedunderChapterlTsSoftheohioRevïsedCode. UnderSectionlTS5'0s,aprofesslonalorganizationmayonlyissueitscapital to render lhe same professiorral stock to $roqe indiyiduals legally authorized serviceforwhichthatassociationwasorganized.WithChesleysrcurr€rrrütlt fromthepracticeoflaw,hewasnolongerpermittcdtobeashareholderof wsBc.4 Assuch,ChesteytransferredhisownershipinterestinWsBCtohisOhio lawyer,ThornasRehme,tobeheldintrustduringthewindingupperiorlof Kentucky disbarment and hïs WSBC. Both prior to and after Chesley's stYled court's judgment and rulings are each 2 Chesley's aPPeals of the ci¡cuit and CA-OO 1725, 2014-cA-001900 , ancl20l4-CA-001984, a;s Chesleg u. Abbott,2Ol4' of APPeals' are currentlY pending before the Court due to therr imProPer use of the 3 ChesleA, 393 S.W.3d at 602. AdditionallY, a¡rd Mills were also PermanentlY settlement fund Cunningham; Gallion, Quardcasc Cunningtøm u, Kentttckg Bar the of law ín l(entucþ See disbarred from Practrce Bar Ass'n, 266 S.w.3d 802 (KY. S.W.3d 808 (KY 200B); Gallion u. KenhtckY ,Ass'n, 266 89 (KY 2010), Further, an KenítckY Bar llss 'n v. Mílls, 318 S,w.3d 2008); and who presided over the Guard of Galhon a¡¡d the ci¡cutt court 3udge assoc¡ate in the case. Sce Kenù-tckg Bør Ass'n u' settlement were disberred for thei¡ actions and Kentuckg EarrAss'n v. Bamberger, 354 Helmers,3 s3 s,w.3d 599 (Kv 2Ol l) S,w.sd 576 (KY' 2011)' t}le sole sha¡eholder of WSBC' a It is noteworthy that Chesley rvas 6 of milhon from his retir€ment from the Ohio bar, he transferred a total $59 personal accounts to WSBC, onJune9,20l5,t]recircuitcoultconductedahearingonRespondents, the trust to satisfy thc $+2 motion to lransfer chesley's beneficial interest in millionjudgment.Thecircuitcourtacknowiedgedthatithadpersonal jurisdictionoverChesleyandthattherehadbeenavalrdjudgmententered againsthim.Assuch,thecircuitcourtviewedtheRespondents'motionas legítimateefforttosecufet}recircuitcourt,sassista¡lceincollectingan court ordere d Chesley on June outstanding judgrnent' Accordingly, the circutt from Chesley's 2g,2oI5, to direct Rehme to make all payments derived holdingslntlresharesofWsBCpayabletotheRespondentsthroughtheir counsel. Inresponse,Chesleyrequestedrelieffron¡theCourtofÂppealsunderCR and his appeal to this Court 65.07 The Court of Appeals denied the motion' foiiowed. ANAr/.YSIS cR65.0lauthorizesâpil.tytorequestinjunctiverelieffromtlrecircuit tnjunction, or permanent court in the form of a restraining ordcr, temporary court by interlocutory order injunction in a final judgment, when the circuit a temporary injunction' the has denied, dissolved, modified, or granted the courl of Appeals adversely affected party is able to seek relief from pursuanttocR6s,oT.Afteranadversedecisioninthatcourt,apartymay judgment of the court of move this court pursuant to cR 65.09 to review the 7 or not to review the order of the Appeals' However, the decision as to whether the Court' CR 65'09' Court of Appeals is discretionary with Whiledíscretionary,theCourt,srevicwis"limitedtothosecaseswhich Cotlegiate Athletíc Assl7- u. Lasege, 53 demonstrate extraordinary cause ,, Nat,l S,W,3d77,84(Ky.2O0t);CR65'09("Suchamotionwillbeentertainedonlylor extraordinarycauseshowninthemotion'o)'Demonstratingextraordinary causeisnotaneasytask.infactwehaverecogruzedthatthemovantfacesan nenormousburden,,whenrequcstingrclicfpursuanttocR6s'09.Couner. Jountal,Inc,u,Lawson,30TS'W'3d617'620(2010)(quotingKindredHosps' of 916' 919 (Ky' 2006))' However' an abuse Ltd. P'ship u. Lutrell,lgO S'W'3d discretionbythecourtsbelowcanconstitu|cext¡aordinarycausc,'Lasege,53 S.W.3d at 84, of Appeals ancl the crcuit courL Chesley contends tJrat t1le Court With regard to the circuit courl' Chesley committed an abuse of discretion' claimsthatitexceededitsauthoritybyorderingChesleytotransferfunds beingheldinaforeignjurisdiction.Additionally,Chesleyafguesthatthe judgmentoftheCourtofAppealsdeprivedhimofhisrighttoappeilatcreview umandatory he labels a injunction,,, from the circuit court,s order, which Howevcr,inreviewingChesley,smot.lon,weconcludethathisrequest[orrelief improper' und.er CR 65'09 is procedurally Asaprerequisiteforobtainrnginterlocutoryrelicffrornanorderofthe 09' the order at issue must be an circuit court under CR 65'07 or CR 65 inlunction.ChesleyaJguesthatthecircuitcourt'sJune23,20l5,order I grantedmandatoryinjunctivereliefand,'vasenteredpriortotheadjudication concludes that the order was a of all outstanding claims' As such' Chesley and CR appellate review under CR 65'07 temporary injunction and subject to 65.09.5l{owever,Chesleyismistakeninhischa¡acterizationofthecircuit court's June 23, 2015 order' onAugust|,2o]4,thecircuitcourtgrantedSummaryjudgmentagainst ChesleyforRespondents,breachoffiducia¡ydutyclaims,Inthefinalamcnded 22' 2014' Chesley was also held to be version of the order, entered October Gallion, a¡rd Mills for the existitrg jointly and severa-lty liable wÌth cunningham, judgmentamountof$42million'Additionally'theoctober22'2O14'order a¡d appeaJable order' Subsequently' expressly noted that it was â linal Chesleyfiledamotionforthecircuitcourttoreconsideritsorderandamotion tovacatethejudgmentpursuanttoCR60'02'Bothmolionsweredenied' to circuit court,s summary judgment order Afterwards, Chesley appealed' the the Court of APPeais' post a supersedeas bond to stay However, Chesley declined to enforcementofthejudgmentpendinghisappeal'subsequently,lhecircuit rcquiring chesley to trarsfer his court e¡rtered its June 23, 2015, order benefìcialinterestinhisohiotrusttotheRespondentstosatisfythe$42 ffig"ry"itril.sleydirectstheCourttorevicrvBahnru,Lgonerí6 ôi' npp'2010)' rnBølør' the Courtof Fìn, Serus. /nc,,330 s:ü;3d"tt' lTex' default a turnover or¿åi issue¿ pursuant to a Appcals of Texas, concludcd that the act€d as a mandatory injunclion againat judgmcnt ín a rorer-gnl;;;d;ti;"' **itoottd in an analvsrs of judgment debtor. ,r 'ü"îä"i]i-ú"t ¿.t"t-inat,on not dispositive n^tÌ¡e bar' RatJrer' the Texas,o turnover .,u,r-,i.]'nolåi, ¡t 11se^at the applicarion of the Kentucky Rules of civil outcome of this case is govcrned by Procedure. I millionjudgment.Chesleymaintainsthatthccircuitcourt'sorderisa temporaryinjunctionasitoccurredpriortoafina]judgmentadjudicatingall the claims against hirn, Atemporaryinjunctiongenerallyfunctionstoholdthestatusquountil therneritsofanactioncanbedecíded,Curryu.FarmersLíuestockMkt,,,343 S.w.2d134,135(Ky.1961).Althoughthecircuitcourtmaygrantalemporary injunction,itisonlyempoweredtodosodurrngthependencyoftJreaction. (Ky' 2008) 'while all price u. paíntsuílle Tourism comnL'n,261 s.w.3d 482,484 theclaimsagainstChesleyhaveyettoberesolvcd'tJ:ecircuitcourthas of fiduciary duty claims' entered a final judgment on the breach UndercRs4.o2,whereacaseinvolvesmultipleclaims,thecircuitcourt ispermittedto"grantafinaljudgmentastofewerthana]ltheclarms,and hencetomakepossiblearrimmediateappeal,uponaciet.erminationthatthere isnojustreasonfordelay''shawneeTelecomRes''Inc'u'Brotttrt'354S'W'3d 542,54g(Ky,20f1)(citingWatsonu'BestFin'Serus''Inc'245S'W'3d722(Ky' 2008}l.uWherethejudgmentirulydisposesofadistinctandseparableaspect that there is no just rcason for of the litigation, the tria-l court's determinalion was abuscd"' Id' delay will only be disturbed if that discretion Inthecaseatbar,thcctrcuitcourtunderCR54.02enteredalina] judgmentonResponclents'breachoffìduciarydutyclaims'Thecircuitcourt wasempowcredtoenteravalidfinaljudgmentonthebreachoffiduciaryduly claimsdespitethefactthattherewereothercollateralclaimsoutstanding'The they remain to be circuit court,s order did not concern those issues and 1O a finai judgment under cR adjudicated, Rather, the circurt court by entering 54.02,permittedthejudgmentonthecentralissuetobeappealedtoavoid unnecessarydelay,Assuch,therewasañna'l'¡udgmentregardingthebreach of the ctrcuit oourt,s October 22,2014, of f.rduciary duty ctaims upon the entry order. Theentryofalinaljudgmentonthebreachoflrduciarydutyclaimsis circuit court's subscquent June 23' critical in evaluating the cha¡acter of the chesley to comply with an unpaid 20r s, order, That order, which required of the case and therefore cannot judgment, did not occur during the pendency beviewedasbeingatemporaryinjunction.Thecircuitcourt'sorderdidnot tl:ers was an ad.¡udication of the breaeh seek to rnaintain the etatus quo untll offiduciarydutyclarms(oranyotherclaims),ratheritwasenteredtogiveforce judgment for whlch Chesley had not to that nearly one year-old judgmcnt' a soughtastaybyfilrngasupersedeasbondpursuâfittoCR62.03'Insteadof order was a post-judgment order in being an injunction, tJre June 23' 2015' judgment to collect on thc outstanding furtherance of Respondents'efforts againstChesleyAstheorderwasnotaninjunclion,weagreewiththeCourt 23, 2015, orcler ts not subject to revierv of Appeals that the circuit court,s..}une undercR65'0T.Accordingly,ChcsleyisnotentitledtoreliefundercR6S.09' Duetothisdetermination,Chesley'sclaimsthatthecircuïtcourt ordering him to transfer his interest in exceeded the scope of its jurisdiction in theohiotrusttotheRespondentsarenotproperlybeforethisCourt'Whether lhecircuitcourthastheauthority,underKentuckyRevisedStatute(KRS) 11 property held in a foreign 426.984,to compel a defendant to transfer jurisdictioninpaymentofajudgmentisanissuethathasyettobeaddressed byKentucþ,sappellatecourts.However,asthatissueisnotproperlybefore decline to address it' the court on this cR 65.09 rnotion, we was nol an injunction' it rs not As the Boone Circuit Court's order subjecttoínterlocutoryrelief,Therefore,Chesley'smotionforinterlocutory the order of the court of Appeals is DENIED' relief pursuant to cR 6s,09 from All sitting. All concur' ENTERED: June 16,2016' t2 IT ¿ E ! r @ Page 1 UNITED STATES DTSTRICT COURT SOUTHERN DISTRICT OF OH]O WESTERN DIVISION *** CONNIE MCGIRR, et a1., Pfarntiffs, VS. CASE NO. 1:l-6-cv-464 THOMAS F. REHME, €t â1., VOLUME I Defendants. +++ Deposition of STEVE HORNER/ CPA, Wrtness herein, caÌJ-ed by the Plarntrffs for cross-examrnatton pursuant to the Rules of Crv:-l Procedure, taken before me, Vrcky L. Marcon, a Notary Pubtrc wrt.hrn and for the State of Ohio, ât the offrces of Dinsmore, 255 trast Fifth Street, Suite 1900, Crncinnatr, Ohro, ofl Tuesday, May 24, 2016, âL 10 : 05 a. m. *** a: Page 55 1 maintenance and upkeep of that? ¿ A. YeS. 3 O. l\nd Drckens and Crumpet is owned 4 by either Stan or his wrfe? 5 A. Was owned by Stan. 6 A. À11 right. Ànd so the sale of 1 Èhat condo recently, the amount realized from o the sale went to Drckens and Crumpet, whrch rs 9 wholly owned by Stan? 10 A. YeS. 11 A. À11 rrght. And SÈan's not I2 rermbursed the firm for alL of those mortgage 13 payment,s rts made for aIl, of those years? 74 A. NO. 15 A. Okay. Other than the Dickens and I6 Crumpet debt, which we, I belreve we've I1 extrng'uished through the sale of that condo, 1B what. other debt does the frrm have in 201-6? 19 MR. RAFFERTY: Currently? Are you 20 MR. SULLIVAN: Yeah . 2T THE WITNESS: Current debt? Not 22 accounts payabJ-e, debt ? a . Debt. 24 A None 25 a The Frfth Thrrd debt, you're EXHIBIT 2 I !E É f Page 1 COURT OF COMMON PLEAS HAMILTON COUNTY, OHIO *** MILDRED ABBOTT, et â1., Plarntr ffs, VS. CASE NO . M151 ].7 9 STANLEY M CHESLEY, et 41., Defendants. *** Deposrtron of THOI4AS F. REHME, ESQ., a wrtness herern, caÌled by the plarntiffs for examrnatj-on pursuant. to the Rul-es of CrvrI Procedure, t.aken before me, Patt:- Stachler, RMR, CRR, CLR, CME, a Not.ary Publrc wrthrn and for the State of Ohio, ât the Of frces of D:-nsmore & Shohl- | LLP, 255 East Frft.h Street, Surte 1900, Crncrnnatr, Ohro, on March 15, 20L6, âL 10:30 a.m. qbborr, Mrldred, eú âl v Chesley, Stanley 11 , ei al Thomas F Rehme, Esq Page 63 1 1800s. It had a drfferent name. And there's Z plenty of stuff to go over, I'11 tell you. And I'm trying to go over some of rt. 4 O. All right. Àr¡d as -- you would 5 agree that one of your obligat,ions in windrng 6 up the affarrs r-s to make sure aLl the debts 1 and oblrgatrons are Pard? o A. Rrght. . 9 a. And I'm tryrng to figure ouÈ what 10 those are. But other than lease, You're not 11 abl-e to tell- me any other obhgat.ion that's I2 part of the wrnd up of the affairs of the law 13 firm? L4 A, No, T can't. 15 O. okay. I6 MR. RÀFFERTY: You're talkrng about 1'7 as lve sit here today? 1B MR. SULLIVAN: Yeah. 19 MR. RAFFERTY: Right? 20 MR. SULLIVAN: Yeah. 2I Okay. Tom, I'm going to take a break ') '> íor a second. I 'm gor-ng to Iook at these ¿J documents, Okay? 24 THE WITNESS: Good luck. 25 (Recess taken from II:32 to 11:57') Mrke ¡¿obley Repori¡ng 800-894-432? EXHIBIT 19 Assignee's Opp'n to Mot. Dismiss (T +6) IN THE COURT OF COMMON PLEAS PROBATE DI\TISION HAMILTON COLIN:IY, OHrO IN THE MATTER OF: Case No. 2016003659 WAITE, SCHNEIDER, BAYLESS & Judge Ralph E. Winkler CHESLEY CO., L.P.A. Magistrate Rogena D. Stargel ASSIGNEE'S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS OR, IN THE ALTERNATI\TE, STAY PROCEEDINGS Now comes Eric W. Goering, Assignee forthe Benefit of Creditors herein, andhereby states as follon's for his Memorandum in Opposition to the Motion to Dismiss or, in the Alternative Stay Proceedings : I. INTRODUCTION Movants have requested the Court to dismiss or stay this Assignment for the Benefit of Creditors ("ABC") on the grounds that they are parties to a fraudulent transfer case in another court and that they are the onners of the Assignor such that the Deed of Transfer to the Assignee is not effective. As more fully explained below, Movants are not the ou'ners of the Assignor under Ohio lavv because they are not "shareholders," they cannot be shareholders of a legal professional association uncler Ohio lau, because they are not Ohio attorneys, and, even if they rvere shareholders - vvhich they are not - the Deed u,as properly executed by the sole offìcer and director of the Assignor. This case is an assignment for the benefìt of at least 35 creditors that are not parties to the fraudulent transfer case, provides relief not available in the fraudulent transfer action, and does not diminish Movants'rights Frt-f J in any rvay, either as potentiåtldiédii-é'i8 þ?*,tfþ:A-$ö,"oi i.r other litigation. Movants cite to Ztrll J.iìll -t+ Pil 2' 3l o270O543-r (ñt4Y no authority for the relief they request rvhich, if granted, rvould be prejudicial to nonparties and other creditors. The Motion must be denied. II. BACKGROUND FASTS A. Corporate History Waite, Schneider, Bayless & Chesìey Co., LPA ("WSBC") rvas incorporated on February zz, tg9z with the Ohio Secretary of State as an Ohio professional corporation. The corporation is in good standing rvith its zo16 biennial report having been fiÌed on July 27, zotíby its sole shareholder, Thomas Rehme. The corporation was formed pursuant to R,C. Chapter 17o1 and r7B5 with Stanley M. Chesley ("Chesley") as its initial director and shareholder. Chesley was disbarred in Kentucþ in 20tz, and he resigned his Ohio law license and retired from the practice of law in April 2013. Because a non-attorney is not able to oun an interest in a larn¡ firm under Ohio law, the day before he resigned his Ohio license he transferred all of his shares in WSBC to a trustee, Thomas Rehme, to effectuate the vvind-up of the affairs of WSBC on April 15, 2013. Subsequently, Rehme transferred the shares to Thomas F. Rehme, Trustee, Inc. ("Rehme"). In August 2ot4, the Movants obtained a judgment against Chesley, and the other defendants, joint and several, in the amount of $4z,ooo,ooo ("Kentucþ Judgment"). WSBC and Rehme \\¡ere never parties to the Kentucky case and Movants never obtained a judgment against them. Consequently, the Kentucþ court has never had jurisdiction over WSBC or Rehme. An appeaì of the Kentucþ Judgment is currently pending with the Kentucþ Court of Appeals. Unequivocally, Rehme is the sole shareholder and director of WSBC. See Ex.r (WSBC corporate records). o27OO543-l 2 B. Kentucþ Orders More than tr,r,o years after Rehmebecame the sole shareholder of WSBC, on June 23, 2o1S, in post-judgment proceedings in the Kentucþ case, the Kentucþ court directed Chesley to direct the transfer his benefìcial interest in WSBC to Movants. And on September 25, zor;, the Kentucþ court ordered Chesley to transfer his interest in WSBC. At the time these Kentucþ Orders were entered, hor.r'et er, Chesley had no orvnership interest in WSBC, due to the transfer in zot3, and held only a beneficial interest under the trust. It bears repeating that WSBC u¡as ne\/er a parfy to the Kentucþ case, and never had notice or the opportunity to be heard. Nevertheless, Movants now contend that they are the "reaì parties in interest and o\^ners"' of WSBC by virtue of the tn'o Kentucþ orders. The specific ìanguage of the Orders are as follows: June 23, zor5 Order: lT tS HEREBY ORDERED AND ADJUDCED as l'ollorvs I Dclcndonr Chcslcy shall transferred ro Pla¡nr¡ffs wirhln founeen ( l4) dals ot'the date of thls Ordcr and all dtstnbuttons pursuant r0 sald rnterest ate to be made to Plaintifli through therr counscl: September 25, 2or5 Order: lT IS IìEREBY ORDERtrf) AND AIIJUDGED os follorvs: shall trnmediatcly l. Thc plainrifls Motion is OR¡\NTED. Defe ndant Chesley transfcrhisorwrcrshiprntcrcslinWsBCtotbel,laint¡ffsthroughtheir renìsrns in full effcu A's undersrgncd counscl. This Court's Junc 23, 2015 Order .shall rmmcdrately tum drrÊcted in rhar Order, Dcfendant Chcstcy nnd hrs al¡ùmeys t Motron, p. t. 027OO543-r 3 madc to Defcndant ov€r to Plaintlfß'counscl any and aJl monctary P'ryn¡enls CheslcY from hrs in¡ucsl in WSBC; The fìrst Order directed no transfer of WSBC stock at all, rather, it stated that Chesley "shail direct that his beneficial interest in the shares of WSBC be transferred to Plaintiffs..." Chesley had no ou'nership interest in WSBC at this time and r,vas ordered to direct that his beneficial interest - u'hich is an interest in the trust - be transferred. Chesley did not direct WSBC's sole shareholder, Rehme, to transfer his benefìcial interest. Subsequently, the second Orderthen directed that Chesley shall "transfer his ownership in interest in WSBC to Plaintiff through their undersigned counsel." Again, Chesley had no ownership interest in WSBC to transfer as all shares had been transferred to Rehme over tn'o years earlier in zor3, C. The Assignment for the Benefit of Creditors On September 12, zot6,WSBC exercised its statutory right under Ohio larv, pursuant to Ohio Revised Code Chapter t3or, to file a Deed of Assignment forthe Benefit of Creditors ("ABC"). On the same date, this Court entered a Letter of Authorify and Order Acknorvledging Acceptance by Mr. Goering of WSBC's Assignment for the Benefit of Creditors, Movants, n'ho are the same Plaintiffs in the McGirr case, \ ¡ere given notice of the ABC the following day n'hen WSBC filed a Notice with the federal court. See,Ex. z. Subsequent to the effectiveness of the Assignment, Movants filed a Motion for Temporary Restraining Order in theMcGirr case. Movants did not provide notice of their request for injunctive relief in McGirr to Goering. Moreover, Mot,ants submitted no evidence, by affidavit or otherwise, to support their Motion. Despite such lack of evidence, the federal court entered a Temporary Restraining Order ("TRO") on September r9, zot6. 027OO5"13-¡ 4 Subsequently, counsel for Movants fonvarded the TRO to Goering, rvho is not a paÈyto the case, and took the position that Goering !\'as bound by the TRO. Out of an abundance of caution, Goering restricted his administration of the estate in the ABC about one rryeek after its commencement. The court extended the TRO on October 4 and rB, zo16. Again, counsel for Movants continued to communicate to Goering their position that the TRO applied to the ABC and Goering continued to limit administration of the estate despite the factual and legal defieiencies in Movant's position. To obtain clarification on the TRO issue, Goering filed a Petition for Writ of Prohibition and/or Mandamus ("Petition for Writ")'as an original action with the U.S. Court of Appeals for the Sixth Circuit on October 27, zot6 r,vhich sought an order dissolving the TRO. Subsequently, the TRO dissoìved and the administration of the ABC continued in full. To date, Goering has: ¡ Accepted the Assignment and posted bond; . Conferred and met on numerous occasions n'ith counsel for WSBC, the remaining employees of WSBC, former employees of WSBC, professionals such as accountants and atLorneys, third parties and creditors; o ftsyjslyed the books and records of the corporation, as rveìl as t oluminous la'iv firm records and files; . Inspected the physical assets of the Assignment rvhich are in multiple locations; . Met u'ith the lessors of the physical locations; . Conducted and filed an Inventory; z In re Enc W. Goering, Asstgnee of Wate, Schnetder, Bayless & Chesley Co., LPA Pursuant to In re Watte, Schneder, Bayless & Chesley Co , LPA, Case No zot6oo365g m the Ilamtlton County, Ohrc Court of Common Pleas, Probate Divísíon, No. 16-4zzr (6th Clr ) 0270o543-r 5 a Requested and obtained appointment and partial u,aiver of appraisers; a Taken possession ofthe assets; a Established a bank account; a Incurred and paid certain post-assignment expenses; a Terminated services and contracts; a Reduced liabilities and expenses; a Directed the termination of WSBC's +ot(k) plan; a Expended substantial time and effort in n'orking with lead class counsel to finalize time and cost information for the submission of an attorney fee application for cases in u'hich WSBC performed sen'iced prior to the Assignment; a Initiated an inventory and photographs of the tangible office equipment for sale; o Reviewed and conferred rvith professionals regarding tax liabilities and the retention and destruction of legal files; a Revien'ed numerous litigation matters relating to the Assignment; a Arranged for and accepted distributions of assets and the transfer of funds to the ABC account; a Revierved potential legal claims to be asserted and met r,r'ith potential defendants; a Identified potential claimants and created a sen'ice list; a Obtained courl approval for regular mail sen'ice based of notice to potentiaì claimants; o27oo543-r 6 . Retained a third party vendor to perform the sen,ice function on a large service list; o Maintained insurance as to assets; and . Defended the ABC from claims by Movants. III. LEGAL ARGUMENT In the Motion, Movants seek an order dismissing or staying the ABC on the basis thatthey are "[t]he real parties in interest and o\t,rìers of ... IWSBC]..." as a result of two orders from a Kentucþ court against Chesley.s Movants have no authority for this novel argument other than a single citation to a case holding that a court has discretion to stay an action in the interest of comity, orderly procedure, or judicial economy.4 As more fully explainedbelor,r,, Movants are not the or,r'ners of WSBC and, even if theyrvere, the equitable principles they seek to invoke weigh heavily against a stay as it would damage creditors and the estate, A. Movants are not the owners of WSBC as they allege. The entire Motion is premised upon the false predicate that Movants orvn WSBC. They unequivocally do not. Movants are 20 plaintiffs in the McGírc case, which constitute a small number of 3Bz people who are the joint and several judgment creditors of Chesley through the Kentucþ Judgment. None of Movants or the other judgment creditors of Chesley hold a judgment against WSBC. Movants are potential claimants in this ABC as a result of claims they have asserted against WSBC \n McGirr.s 3 Motlon, p r; Exs. A, B q Motron, p.5. s Counsel for zo the Movants rn thls actron are the same counsel for 374 plarntrffs n McGrr and 382 total pìaintiff¡udgment creditors in Kentucþ. In other lvords, the zo Mot'ants in the case at bar are the a subset of itte SZq platntrffs n McGvr which, tn turn, are a subset of the 3Bz plaintiffjudgment credrtors tn Kentucþ 7 1. Movants are not the owners of WSBC as a matter of law because they are not shareholders. Pursuant to the Articles of Incorporation filed u'ith the Ohio Secretary of State, WSBC is formed under R.C. Chapter 1701 and 1785. See Ex. 3 (WSBC Articles of Incorporation). it is axiomatic that a corporation is onmed onìy by its sharehoÌders. A "'[s]hareholder" means a person whose name appears on the books of the corporation as the owner of shares of the corporation." R.C. $ rTor.or(F). The books and records of WSBC evidence that the sole shareholder is Rehme. See Ex. r. Chesley rvas divested of onnership in WSBC r,r'hen he transferred his shares to Rehme in April, 2otg. Afteru'ards, Chesley held only a beneficial interest under trust.6 Chesley appears nor,r'here in the books and records of WSBC as a shareholder. Rehme has been the sole shareholder since April, 2013. There was no interest in WSBC to transfer in 2o1S. Moreover, even if Chesìey \ rere a shareholder in zor5 - i,r,hich he u'as not - put simply, he never transferred any interest in WSBC. While Chesley may be in contempt of the Kentucky orders, the order does not transform Movants into shareholders. Rather, it simply instructs a partf to do something r,vhich did not occur. Stated differently, the Kentucþ orders are not self-effecfuating. They do not state that any interest in WSBC was thereby transferred and, instead, order Chesley (at the time, not a shareholder) to transfer an interest, r,vhich he did not transfer. Even if Chesley u'ere a shareholder to transfer shares in WSBC, this unper{ormed transfer cannot be used to claim status as a sharehoìd.er. In an analogous case, the First District Court of Appeals has held that there must be an affirmative act to transfer stock from an executor to a legatee: o Indeed, Movants acknorvledge thrs as they allege ln the McGtrr case that "Chesley rs the remainder beneficiary " of WSBC after the transfer of shares to Rehme First Amended Complarnt,ll 42. o27oo543-r 8 A widow, r,r,ho, as executrix and residuary legatee under her husband's wilì, elects to take under the vvill, causes a part of the shares of stock standing in the name of her husband to be transferred to her o\,\¡n name, and accepts a real estate dividend from the corporation in her o\^n name, does not thereby constitute herself the equitable owner of all the stock of her former husband. There must be some affirmative act to transfer assets from the executrix to the legatee although they are one and the same person. Kuerze u. Western German Bank, rz Ohio App. 4rz, 4zo (Hamilton Cty. App. tgtg) (emphasis added). As in Kuer ze,the Movants have not become shareholders under Ohio larv by virlue of the Kentucþ orders ivhich could not have been performed since Chesley was not a shareholder at the time, and r,r'hich r,r'ere not performed in any er¡ent. 2 Movants are prohibited from Ìreing shareholders in WSBC because they are not attorneys. WSBC is a professional corporation under R.C. Chapter t7B5 as legal professional association. See Ex. 3. Onty a person duly licensed to practice lar,r'in Ohio may hold stock in a professional association. R.C. g r7BS.oS. Further, the shares of a professional legal corporation may only be transferred to indir.iduals duly licensed to practice law in Ohio. R.C. g r71g.o7. To the extent the Kentucþ order couìd be interpreted to transfer shares in WSBC, such transfer is not permitted by Ohio lau,thereby precluding any claim by Movants as to being shareholders/orn'ners of WSBC' 3 The books and records ofWSBC are devoid of any evidence that Movants are shareholders of WSBC and Movants have never had any role or connection the operation or management of the corporation. In connection r,r'ith the administration of the ABC, Goering has revien'ed the books and records of the corporation and met rn'ith its attolneys, accountants, employees and former employees. Put simply, there is no evidence that any of the Movants have ever had any connection to the corporation in any form. None of the current or former WSBC have o27OO543-r 9 met or communicated with Movants and Movants have had no role in the ownership, management, or operation of the corporation - nor do Movants appear in any of the tax records of WSBC. 4. Movants are judicially estopped from claiming ownership in WSBC by virtue of positions they have taken in General Division of the Common Pleas Court. Movants speak from both sides of their mouths lvhen they contend that they are owners of WSBC. For example, Movants are suing WSBC in the McGirr case asserlting claims for fraudulent transfers at the same time they contend to ourn the corporation. Likei,vise, Movants have taken the position in other litigation that Chesley no longer had standing to inten'ene in an action because "Rehme holds too%o of Chesley's interest in WSBC in trust" under the u'ind up agreement.T Contraryto the arguments they make in the case al bar, Movants also asserted that "WSBC may only act through its Trustee [Rehms]."4 More importantly, in arguing that they succeeded to the beneficial interest of Chesley under the trust, Movants stated: "As Rehme is the sole shareholder of WSBC, he controls the actions of WSBC."g Yet, now Movants contend thet Rehme is not the orurer of WSBC and they are the o'nmers instead. Judicial estoppel precludes a pany from taking a position that is inconsistent n'ith a stance taken in a prior case. See, e.g., Lotuery u. Stoual/, 9z F.3d 2rg) 223 (+th Cir. 1996) (internal citations omitted). Judicial estoppel is an equitable doctrine that "is utilized in order to presen'e the integrity of the courts b1, preventing a party from abusing the judicial process through c¡'nical gamesmanship." Browníng u. Leuy, zB3 F.3d T6t, T76 (6th Cir. zooz) (internal citation omitted). It is an equitable doctrine invoked by the court at its z Defendants Response to Motion to Inten'ene at p r, Chesley u Ford, No A15ooo6Z (Ex C) 8 Defendants Response to Motlon to Intervene at p. 2, Chesley u. Ford, No. A15ooo6Z (Ex. +) Response to Motron to Inten'ene ., o u. Ford, No' A15ooo6z (Ex'q) :"::":*r" l;.n*ley discretion designed to prohibit parties from deliberately changing positions "according to theexigenciesofthemoment." NewHampshíreu.Maine,53zU.S.742,74g-So(zoor);see also Boler Co, u. Watson & Chalin Mfg.,Inc., BT2F. Supp. zd rot3, rozo (N.D. Ohio zoo4) (internal citation omitted) (judicial estoppel places limits on litigants who argue whatever state of facts seem adrrantageous at a point in time, and u'ho argr-le a contradictory state whenever self-interest may dictate a change). The position taken by Movants is that Rehr¡e is the shareholder of WSBC. They are judicially estopped from reversing that position when the need suits them. B. Even if Movants are the owners of WSBC - which they are not - the resolution authorizing the deed of transfer for the ABC is valid because it was authorized by the corporation's sole director and officer. As set forth above, Movants are not shareholders of WSBC. Holvet er, even if they were shareholders, such status ivould not nullify the authority of Rehme as WSBC's sole director to execute the deed of assignment to Goering. Except where the Revised Code, articles of incorporation, or regulations require corporate action to be taken by shareholders, all of the authority of the corporation is exercised by, or under the direction of, its directors. R.C. $ rZor.Sg(A). Directors are in no sensethepersonalrepresentativesoftheshareholders. Lambu,Lehmann,lloOhioSt.Sg, r43 N.E, zZ6 Ogzq} Rather, it is the duty of directors to act in the best interest of the corporation. See, R.C. S tZot.Sg(B)-(E). In the case at bar, the books and records of WSBC shon' that Rehme is the corporation's sole director. See, Ex. r. As its sole director, Rehme had the authority under Ohio lau'to execute the resolution and deed of assignment. It makes no difference whether o270oj43-l l1 Rehme \\'as, or was not, WSBC's shareholder. The assignment is authorized in his capacity as the sole director and officer of the corporation. c. The Motion disregards the statutory procedure to challenge an ABC and there is no authority to grant the relief requested by Movants. Movants' single authority to dismiss or stay this ABC is a case hoìding that courts have the equitable discretion to stay proceedings.'o But, the Revised Code provides a specific mechanism for a creditor to challenge an ABC. When a creditor of an assignor files a complaint alleging that the assignee named in the deed of assignment is not a suitable person to administer the trust, or that the administration thereof will not be for the best interests ofthe creditors and assignors, there is a statutory process to replace the assignor r,r'ith trustees. O.R.C. 55 rg$.oS; 1313.06. The Probate Court may also remove an assignee for cause. O.R.C. g r3r3.o7. Movant's Motion to Dismiss or Stay is an attempt to circumvent the statutory procedures in the Revised Code governing assignments. D. The McGirr case does not impede the ABC. Movants contend that this Court should dismiss or stay the ABC because of the claims they have asserted in the McGirc case. Hon¡e\¡er, nothing in the ABC prevents or impedes the McGirr case from going forr.r'arcl nor does it provide a basis to dismiss this case. The McGírr case is currently set for a scheduling conference on January 77,2016' Preliminarily, i¡ .nould be note that the 20 Movants are a subset of the 3Bz judgment creditors of Chesley and, rvhile Movants mal' assert claims in the ABC, they are not yet judgment creditors of WSBC as they are Chesley. The claims in the cases are not the same. At the time of the ABC, the Complaint in McGircn as by zo plaintiffs (iclentical to Movants) asserting causes of action for fraudulent transfers. In December 2ot6, an Amended to Motlon, p s o27OO543.r 12 Complaint was filed asserting claims by SZ+ plaintiffs of the 382 judgment creditors of Chesley. TheAmended Complaint asserted causes of action for civil conspiracy and fraud, in addition to the fraudulent con\/eyance claims. The pleadings have not yet closed in the McGirr case and no case schedule or trial date has been set. As a second point, Movants claim to be the only creditors of WSBC is faìse. Movants contend that the Chief Financial Officer of WSBC, Steve Horner, testified that the corporation had no debt.tt This is not an accurate characterization of Horner's testimony. Horner testified that he did not recall any outstanding debt, other than trade payables. See, Ex. 5. The testimony \t/as responsive to a line of questioning as to credit debt. Regardìess of Horner's testimony months before the Assignment, it is indisputable there are substantial potential claimants in the ABC such as: l. Internaì Revenue Service - over $3,4oo,ooo z. State of Ohio - unknor'rryl 3. The B judgment creditors of Chesìey that are not parties to theMcGirr case - unknolvn 4. The g74 plaintiffs in the McGirr case - unknoun 5. Ciq' o¡ Cincinnati - unknou'n 6. Central Trust Tor,r'er Associates, LP - unltno'trryt 7. Claims by former employees - unknoltn B. Claims by Movants' counsel for attorney fees in state court ìitigation g. Stanley M. Chesley - claim for indemnification ro. Professional fees: Cohen Todd Kite and Stanford; Frost Brortm Todd; Clark Schaefer Hackett - unknoun tt Motron, p 5 o270O5.{3-r 13 rr. Potential claims by approximately r4 bankruptcy trustees - unknovvn 12, WSBC - statutory claims as assignor There are likely other creditors which are not yet knor,rin as the claims deadline has not yet passed. It should also be noted that Movants' claim to be the sole of creditors of WSBC, despite being factually untrue, is also irrelevant as insoh,ency is not required to make an assignmentforthebenefìtofcreditors. Wambaughu.Northweste¡'nMut.LífeIns.Co.,Sg Ohio St. zz8, para. z of syallabus (rB9B) ("[e]ven though the maker of such transfer should be fully solvent, still the transfer n'ill be held to be an assignment if it is made to a trustee in trust for the beneñt of creditors."). The claims in the McGírr case are not the same claims in the ABC, nor do the cases have a complete identity of parties. Not only cl Nor does an ABC delay a suit by creditors. Id. at I 136. An assignment for the benefit of creditors does not operate to discharge the assignor from the obligation to pay its debts. Id. at$ rg6. The corollary of this principle is that an assignment does not preclude a creditor from pursuing the assignor, if he sees fit. Id. A creditor may, notvvithstanding an o27OO543-l 74 assignment for the benefit of creditors, sue the assignor and, if the facts warrant, recover a judgment for the amount found to be due. /d. Finally, Movants contend that their request in McGirr for the appointment of a receiver provides a basis for dismissing or staying this case.12 If the McGirr court appoints a receiver over WSBC, which it has not done, it rvould not affect the ABC. Once an ABC is made and,the assets transferred by operation of larv, the subsequent appointment of a receiver will not aìter the deed of trust. Uníon Bank of Chícago u. Kcnsas City Bank, 96 U.S. zz3, zg6 (U.S. r89o). .WSBC, E. "lhe McGirr court has jurisdiction over but not Goering or the A-BC. Goering is not parfy to the McGirr case and lhe McGirr court cannot exercise jurisdiction over the ABC. In Ohio, the assignee in an ABC represents the creditors as well as the assignor. Spangenberg u. Schwartz, g Ohio Dec, Reprinl 244, tBZl WL Zg6g (Hamilton Cty. App. t877), citing Hanes u. Tiffany, z5 Ohio St. S+g (Ohio ßZÐ. Jurisdiction in ABC matters has been vested exclusively in the probate court under Ohio lan' since the enactment of the stailtte in r8bg. Wambaugh u. Northwestern Mut. Life lns. Co., Sg Ohio St. zz9,245,52 N.E. 839, B4z (Ohio lBgB). The filing of the deed of assignment and the qualifying of the assignee confer upon the probate court jurisdiction of all assigned property that is "exclusit'e in all respects in rvhich it is adequ ate." Mercer v. Cunnínghant, Sg Ohio St. 353, 4r N.E. ZBB (Ohio tBgS). Upon the filing of an assignment for the benefìt of creditors in the probate coutt of the proper county and the qualifying of the assignee, the court acquires exclusive jurisdiction of the subject matter of the assignmenl. JohnV. Farutell & Co. u. Findlay Dry Goods Co.,5 12 Motion, p.3 o27OO543-l 15 Ohio C.D. 3o3, rB95 WL r3o5 (Hancock Cry. App. rBgS); Clapp u. Huron Banking Co.,5o Ohio St. S2B,35 N.E. 3oB (Ohio t8gg). The filing in probate court of the assignment deed instantly attaches the probate court's jurisdiction. /d. Once the jurisdiction of the probate court is invoked, it excludes the jurisdiction of every other court. Id.; see also Cornell u. Sulter, r3 Ohio C.D. 384, rgor WL 7gg, para. z of syllabus (Circuit Ct. rgor) ("[t]he question of the right, po\,ver and jurisdiction of the probate court to administer estates of insolvent debtors has been firmly settled by a ìong line of decisions of the Supreme Court and inferior courts of this state."). That the General Assembly "... intended to vest in the probate court full and complete jurisdiction of the u'hole subjects of assignments of this character, nas not hastily reached or incautiously stated, but was the result of careful consideration and deliberate judgment." Sagler u. Sinrpson,4S Ohio St. r4r, 1b1, t2 N.E. r8r, rBS (Ohio rBBZ) (internal citation omitted), Full and complete jurisdiction in the state probate court over the n'hole subject matLer of ABCs "has been accepted and foìlowed in practice since" the enactment of the statute. Id., cítíng Blandy u. Benedict, 4z Ohio St. 295 (Ohio rBB+) and Srare ex rel. Belþrd u. Hueston, 44 Ohio St. 1,4 N.E. +Zr (Ohio tBB6). O.R.C. 1313.02 provides: An assignment for the benefit of creditors as provided in Section r3r3.o3 of the Revised Code is effective onl1, f¡onr the time of its delivery to the probate judge, and the exact time of such clelivery shall be endorsed therein b)'the judge, rryho shall immediately note the filing on the journal of the court. In the case at bar, the assets of WSBC r,r,ere transferred to Goering as Assignee on September 12,2c16. The corporation stiìl exists. While the McGirr court is free to enter judgment against WSBC and other parties, only this Court can administer the assets of o27oo5¡13-l r6 WSBC. Movants cannot utilize the federal court to accomplish administration of the assets because the Rer.ised Code places jurisdiction exclusively in this Court for the ABC. F. Movants' allegation that the assets ofthe ABC will be distributed to Chesley is without authority or evidentiary foundation, and is contraryto the Revised Code. Movants allege that, because there are no creditors of WSBC, that the ABC r,r'ill result in the assets of the corporation all be distributed to its former shareholder, Chesley.l¡ This is both factually and ìegalìy wrong. First, to the extent that Movants obtain a judgment in the McGirr case, or to the extent that they are determined by this Court to have claims in the ABC, they would be creditors of the ABC. Second, the only claim by Chesley of rvhich Goering has any knou4edge, is a claim for indemnification. Third, in order for Chelsey to receive a distribution from the Â.8C, the claims of all creditors u'ould have to be paid in full. If that occurs, any surplus n'ould be payable to WSBC. If Movants had unpaid claims at that time, they could simply execute against Chesley's beneficial interest under the trust to obtain any funds payable to Chesley. This Court could simply order any surplus in the ABC paid to Movants. The Court controls the funds and their distribution. G. Movants seekto apply the Kentucþ orders against non-parties in violation of their due process rights. Neither WSBC or Rehme are parties to the Kentucky action. Movants' attempt to appìy the Kentuclq,orders to them, as non-parties, r'iolates their due process rights. It is axiomatic that "a jndgment rendered in violation of due process is void in the rendering state and not entitled to full faith and credit elser,r'here." United Sfates u. 13 Motlon, p 5. o27OO543-l L7 Bigford,365 F.3d 859, 866 (roth Cir, zoo4), citing World-Wide Volkswagen Corp. u. Woodson,444U.S,z86, zgt, roo S.Ct. SSg,62 L.Ed.ed +go (rg8o). With respect to a state court's pou'er to render a valid personal judgment against a nonresident defendant, "due process" requires "that the defendant be given adequate notice of the suit," per Mullane u. Cenû'al Hanouer Bank & Trust Co,, ggg U.S. 3o6, 313-14, 7o S.Ct. 65z, 94 L.Ed. 86S (rgSo), and "be subject to the personal jurisdiction of the court" per International Shoe Co. u. Washington, 9z6 U.S. 3ro, 9t6,66 S,Ct. r54, 9o L.Ed. 95 (1945). Bigford, g6S F.Sd at 866 (citing World-Wide Volkswagen, 444U.5. at 2gr, too S.Ct. SS9). "It is a principle of general application in Anglo-American jurisprudence that one is not boundby a judgmentinpersonam in a litigation in which he is not designated as a parly or to rvhich he has not been made a paûy by sen ice of process." Taylor u. Sturgell,s53 U.S. 88o,884, r28S. Ct. z16r, zt66-67,t7tL.Ed. zd r55(zoo8),quotì.ng Hansberryu.Lee,grt U,S.32, 4o,6r S.Ct. rr5, 85 L.Ed. zz(tg+o). Kentucþ, the state from rvhich the Kentr-rcþ Orcler-s arose, recognizes that, fundamentally, the hallmarks of procedural due process are notice and an opporlunity to be heard. See, Hilltop Basic Resources, Inc. u, County of Boone, t8o S.W.3d 464, +6q (Ky' zoo5); Storm u. Mullíns, r99 S.W.3d 156, 16z (Ky.zoo6) ("[o]rdinarily, notice and an opportunity to be heard are the basic requirements of due process."). It is not disputed that WSBC has never been a parfy- to the Kentucþ case. It was not served u'ith process, and it r.r'as not provided with notice. Nor did WSBC receive any other substantive or procedural rights when the Movants moved for the relief granted in the Kentucky Orders. Simply stated, r,r.ithout affording it due process of larv, the Kentucþ Court had no personal jurisdiction over WSBC to enter any order purporting to affect its rights and interests. o270O5¡l3-r rB In an analogous case, a Nevada court has found the Kentucky orders to be unenforceable against WSBC. WSBC is the beneficiary of quarterly pay'rnents arising from its prosecution of tobacco class action litigation. Those pal'rnents are distributed from a trust called the Castano Directed Distribution Trust ("Castano Trust"), rvhich was established as part of the setLlement of the tobacco class action litigation to provide a mechanism to pay the attorneys' fees portion of the settlement. See, Abbott u. Chesley, Eighth Judicial District Court, Clark County, Nevada, Case No. A-r5-7266r6-F ("Nevada Matter"). In zo15, before the ABC, Movants commenced garnishment proceedings in Nevada in an effort to seize payments from the Castano Trust due to be paid to WSBC. In Nevada, these same parties atLempted to use the same Kentucþ Orders to support their attempt to garnish attorneys' fees due to be paid to WSBC. Thc Ncvada Court rejected Movants' request and concluded that because WSBC lvas not a party to the Kentucþ Matter, the Kentucþ Orders r,r'ere I'oid, invalid, and unenforceable against WSBC, and that due process protections dictated that the Kentucìcy Judgment against Chesley could not be used to garnish WSBC's interest in the Castano Trust. (See, Nevada Decision, February rL,2ot6, atlached hereto as Ex. 6). The Nevada Court's Decision was reafñrmed after a request for reconsideration. (See, Nevada Reconsideration Decision March, gt, zot6, attached hereto as Ex. 6), fV. CONCLUSION The ABC can onìy benefit Mor.ants. It allou's an independent, s'w'orn fiduciary, under bond, to liquidate assets and provide for a distribution of claims. Alì of rvhich occurs with motion, notice, and order of this Court. If Movants have a legal claim to distribution from the ABC, they r,r.ill receive pal.rnent pursuant to court order. But, even if Movants are not t9 entitled to payment from the ABC, they rvould still receive any funds as a surplus rn'ould be payable to Chesley, against u'hom they have a judgment. Moreover, any judgment entered in the McGírr case would likely be binding as to any determination on claims. In either event, Movants are not prejudiced in any r+'ay by the ABC. The statements Movants make in the Motion to the effect that Goering is going to somehorv conceal or dissipate assets, deny their claims, and distribute money arbitrarily have no evidentiary or legal basis. This Court rvould ne\¡er allor'v such illegal actir.ity nor rvould Goering ever engage in such conduct. On the other hand, dismissal or stay of the ABC n'ill cause prejudice to the other creditors. This Court is the best forum to administer the assets in the ABC for the benefit of all creditors. Movants are not the ou'ners of WSBC and could not be o\\rrìers of WSBC as non- licenscd attorneys. Moreover, even if the)¡ u¡ere the shareholders of the corporation, lvhich they are not, the Deed of Assignment lvas properly authorized by the corporation's soìe officer and director. For the foregoing reasons and authorities, the Motion must be denied. Resp ectfully subm itted, Michael Galasso (*ooZz4Zo) Robbins, Kelll', Patterson & Tucker 7 West Seventh Street, Suite r4oo Cincinnati, Ohio 452o2-z4r7 ßtÐ Zzt-933o I (s1g) 7zr-5oor fax [email protected] Attorney for Eric W. Goering, Assignee o2700543-l 20 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing has been served upon the following this +th day of January, 2ot7 by regular U.S. mail, postage prepaid: Donald J. RafferEy, Esq. 2So East Fifth Street, Suite z35o Cincinnati,OH 45zoz Brian S. Sullivan, Esq. Christen M. Steimle, Esq. Dinsmore & Shohl, LLP 2ss E.Fifth St., Suite rgoo Cincinnati, OH 45zoz Michael d.. Galässo 0270osd3-r 27 MTNUTES OF THE ANNUAL MEETINC n OF THE SHAREHOLDERS OF WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L.P.A Pursuant to a Waiver of Notice signed by all of the voting shareholders, which was ordered filed with the Minutes of the meeting, the Annual Meeting of the sha¡eholders of Waite, Schneider, Bayless & Chesley Co., L'P A. was held at l:00 p'm' on the l5th day of April, 2013 at l5l3 Fourth and Vine Tower in the City of Cincinnati, State of Ohio. Stanley M. Chesley, President of the corporation, hereby appoints Thomas F' Rehme as President of said corporation. was present Thomas F. Rehme, President of the corporation stated that a quorum and called the meeting to order. transfers all fl Stanley M, Chesley, previous stockholder of the corporation hereby of the corporation's outstanding voting stock to Thomas F. Rehme: Thomas F. Rehme - 250 shares, Notice Thomas F. Rehme, Secretary of the Corporation, presented the Waiver of which was ordered filed of the meeting, signed by the sha¡eholder of the corporation' with the Minutes of the meeting. of the The Secretary then presented the Minutes of the last Annual meeting and ordered shareholders held on 24'h day of April which Minutes were read approved frled. The president stated that the next order of business would be the Treasurer's of Profìt r report. The president presented to the meeting a Balance Sheet and Statement EXFIIBIT U 0õ 1_ and Loss of the corporatron f'or the fìscal ycar ettdtng Dcccnrtrcr 31.2012 Afìer drscussron, upon nlotlorr cluly madc. sccondccl and uttatttlttously ca¡rled. st¡ch fìnancral statc¡tcnts \vere approved aucl ordelccl filcd rvrth the lr4tlltrtcs o1'tlte nrcettng The Presiclent anlloullccd that thc llcrt order ol'busincss would bc tllc elcctiolt ol the Drrectors for the cor'ì1rng year Wlrcrcupon the nalttc ol-l-honlas F Rehnlc tvas dttll' '[he¡c placed in nontinatron aucl sccoudecl. betng no lìrrthcl nonlinatlot-t, on rnotton duly nlade ancl secondecl. it rv¿rs unanrnlously rcsolved that thc llollllllatlolls be closed Upon a votc benrg lakerr,'fhonras F lìelune was Iltlatllll.lottsl¡'electcd to serve ¿ìs Dlrector lbl the enstlltlg ycar and untll hts Stlccessol shall havc bcen elcctcd and qualrlìed ol' After a cour¡:lcte cllscr.rssrorl ol-r,anous aspects of'thc bttslness alld o¡rcrattons r thecor.poratlon,tlpol.llllotlolldttl¡,tttadcanclsecondccl.thcf.ollou.ttrgrcsolutlonwas unanrntottsly acloptcd '.RESOI-VllD, that thc acts ol'the Dircctot ancl ofÏcers of thrs corpotation in thc fìrrthcl.ance of tlrc cor'¡:orate busnicss prior to the datc of thrs meet¡lg bc. and the sanre hcrcbl, are, tattlìecl, a¡rprovcd, conlìrnled and adoPted b)' thc shareltolclet.'' There berng no fìrrthcl buslucss. orì lllottoll clul)'tlraclc. seconclccl and unanrntottsly carttcd, thc nreeltng tvas acllottrllcd ]"t-toMAs l.' R IvlE. l)RllSlDIrNl- TIIOM¡\S F REI-IME. S TARY C^ À MINUTES OF THE ANNUAL MEETINC OF fl THE BOARD OF DIRECTORS OF WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L P'4. The Arulual Meeting of the Board of Directors of Waite, Schneider, Bay less & Chesley Co., L.P.A. was held at l5l3 Fourth and Vine Tower, rn the City of Cincinnati, Ohio on the l5th day of April, 2013 at I :30 p.m., immediately following the adjournment of the Annual Meeting of Shareholders' The President, acting as Chairman of the meeting, stated that a quorum was present and called the meeting to order. The followrng Director was present: Thomæ F. Rehme, being the only Director of the Corporation' Thomas F. Rehme, acting as Secretary of the meeting, presented to the meeting was ordered the Waiver of Notice of the meeting, signed by the Sole Director' which r filed with the Minutes of the meeting' lt- of The Secretary then presented the Minutes of the last meeting of the Board and ordered filed' Directors on April 24,z}lzwhich Minutes were read and approved A quorum being present, the President stated that the first matter to come before the ensuing year' After the meeting was the election of the offìcers of the corporation for was unanimously elected nominations had been made, each of the persons named below to fill the office set opposite his or her name: President Thomas F, Rehme Vice President Thomas F. Rehme SecretarY Thomas F. Rehme Treasurer Thomas F. Rehme ,,WHEREAS, the Balance sheet and the Profit Loss Statement of the corporation for the fiscal year ending December 31, 2012 was submitied to the Board at this meeting by the Treasurer, and C represented by him to be correct' NOW THEREFORE' BE l1'RESOI-VED. that the Balattcc Slteet ¿rrld Profit and Loss State¡lc¡lt of the corporation lol the liscal 1'ear cnding Decenrber 31.2012, be anct it rs hereby approvecl and orclerecl fìled $,rth the Mrnutes of the ì\4eetrng ' Upon nrotro¡ of the Presrclcnt, scconded ancl unantnrottsll'carricd. a Corporate of' Resolution \vlth Frfth Tlrircl llank ri,as adoptccl ancl a co¡ty rs attachcd to the mintrtes the mcettng. madc Aîter a disc¡ssioll of thc operatrons of thc corporatron. trpon fvlolron duly and seconclccl, thc lollo..vrng rcsoluttotl \\ras ulla¡'llttlously acloptctl ..RESOLVED, that lhc acts ol'the of'fiCers Of thrs corporatlon ln lurtlrera¡ce of tþc corporate bustlrcss pl'lol to the clatc of thls tneetlng be and the sanle helcby arc, ratifiecl. approved. co¡rtirnred and adopted by the drrectot 'l-hcrc. being not firrther bustncss, on Motton duly tnacle, sccotlclcd ancl runant ntousl¡' carrlccl, the rrtcct t ltg ii'as adJ ottrnccl THOMAS F REI-Iì\4E, PIìEStDENI' 34x*r? &t/*^a' .|I-IOMAS I] REI-IN4E. SI]CIìE]"ARY (- JOINT WRITTEN CONSBNT TO ACTION OF SI{AREHOLDER AND THE BOAììD OF DIRECTORS OF TFIONI¡\S F. REI{N'IB, 1'IìUSTEE, In\C. The undersrgnecl, berng (r) the sole Shareholcler and (rr) tlre solc nrenrbcr of'the Boarclof "Co_r:poralron") Drrectors of Thomas F Reìrnre, Tnrstee, inc (thc hereby \val\/es the callrng or holclrng of a specral meetlng of the Shareholclels aud Boarcl ol'Duectors aucl consents ln \\,lrtrng effectrve as of September l, 2016 to tlre actlons set forth belon, The unclersrgned further clrrect that copres of thls wntten consellt (the ''Consent") be f,rled u,rÌh the rnlrlutes ancl proceedrngs of the Corpolation as may be rcqurrcd by apphcable lart,or b¡,tlre Code of Regulations of tlte Corporatron, as al-¡leltded, ca¡rrtalrzecl terms used herern and not otlrcr\\.lse dcfì¡red rVrll hat'e the nreanings set forth rn the Cocle of Regulatrons IìBSOLVBD, that the Corporatlon be and hereby acknon,leclges anclacccpts thc contlrbutron rnto Corporatron of all of the shares of the \\¡arte Schnerctel Ba¡'less & Cheslel'Co. LP¡\ (''WSBC") lnto the Corporatron such that as of Se¡rtenrber 1.2016. Cor¡:oratron shall be tìre sole shareholcler of \\¡SBC FURTHBR RBSOL\/ED, that all actrons ¡:revrousl¡,taken ancl all agreentents. ursltunterlts. clocuments. ancl certrficates executecl, clelrvered and filecltluough the clate hereolby an1'officer of the CorpoÌ'atlon, n.r co¡rnectron *'lth the transacttotrs clescttbed rn ot contctttplatccl b¡, ths foregorng resolutrons, are hereby autitorrzcd a¡rptovecl. ratrfiecl ancl confitmecl rn all lespects FURTHBR RBSOLVBD, that the ofñcers o{'the Corpolatlon ¿ìre lrercb¡,authortzecl ancl empol,ered. for and on behalf of the Corporatroll. to execute and deltvel sttch ttlsttttmellts ol documents. and to talçe such actlons. as nla)/ bc tequttecl to finalrze ancl pclf'ect the trattsfel of ou,nershrp of the shares of WSBC to Corpotattort FURTHBR RBSOLVBI), that tlie Corporatrorr. as sole sharel-rolcler of \\/SBC. heretry authonzes and apltroves the comrlrellceu'ìerÌt of art r\sstgnllrent fot the Benellt of Creclttots acttott u,rth respect to the WSBC ll'ì the Plobate Coutt of Llamrltoll Cottnty Ohto, appottitrng Errc \\/ Goering as the assrguee. and that Thonias F Rehne. sliallbe. atrd herebl,ts. atltlioltzecl ancl e¡rpou,ered to execlìte and clelrver all agreertrents. lnstrLlnrerlts. clocutllellts. atlcl celttltcates tllat ¡na¡,be requrred to conlnlence such legal proceedrrtgs artcl to takc'sttch othel ancl Iìrrthct acttotrs as rì1ay be reqtttted to proceed u'tth sttch actlol.l ln tlte Ptobate Cottt't FURTIIBR RBSOLVED. rhat a certilìed copl.of tlrese resolutrons shall be clelrveled to sttch pelsons and elitltles reqLtestll'ìg copres of these tesoìttttolts allcl that sltcìl tesolutlolts ancl tlte authorrty vested rn the Ar¡thonzed Olficels heleby shall telltaln rn lirll fbrce allcle['f'ect tttrtlla certrfied co¡ly of the resolutroll of tlrc Boarcl of Dltectots and Shaleholclel of tlie Cotporattott reyok¡tg or ¡rodrf¡,r¡g thcsc resolutro¡s ancl such ar.tthonty shall havc bcclt filecl n,rth sltch persons arrd eutlttes recetvtng certlfìccl coples of these tesoltttlous IStgrtattrrc page to follort'] The foregorng resolutron rs, by the srgnatures belorv of all of the Shareholclers and all of the Duectors of the Corporatron, passecl by the shareholders and the Boatd of Drrectors IN WITNESS WHEREOF, the undersrgned have executed and delrverecl thls Conseut on thrs _ day of September ,2016 SHAREHOLDER By F Rehrne, Trustee BOARD OF DIRECTORS Thonras F Rehme, sole dlrectol 2 92{095 I j JOINT WIìITTEN CONSBNT TO ÂCTION OF SI.IAIìBHOLDEIì AND T}I[ ]]OARD OF DIRBCTORS OF WAITE SCI{NEIDBR BAYLBSS & CI{ESLEY CO., L.P.A. The unciersigned. berìg (r) the sole Shareholcler, and (rr) the sole nrenrber of,the Boarclof Drrectors of \\/arte Schncrcler Bal,less & Chesley Co, LP¿\ (thc 'Colporation"). hcrcby \\,ar\/es the callrng or holclrng of a specral nreetlng of the Shareliolclers ancl Boarcl of Drrcctors ancl consents rn rvrrting effect¡r,e as olSeptenrber 1,2016 to the acttons set fortlr belorr, 'l'he unclersigned further drrect that coples of tliis rvritten cor'ìsent (the ''Consertt'') be ñled rvrth the lu'Ìlnutes ancl proccccLngs of the Colporatlou as may bc rcqurrccl by applrcable lau, ol bv the Cocìe of Regr.rlatrons of the Corporatron. as amenclecl, ca¡lrtalrzed tertrrs usecl hereln ancl not otlrclq,tse clefined u'rll har,e the nreanrngs set folth rn the Cocle of Regulatrorts RBSOLVBD, that the Corporatron be ancÌ herebl'acknoi.r,ledges tlìat all of,the shares o1'the Colpolattou shall be transfeued by Thornas F Rehure- Trustce to Thorlras F Rehnte. Ttustee Inc. ("Nerv Os,ner') snch that effectrve as of Septeniber 1.2016. the sole shareholclel of' Corporatron shall be Ncrv Ou,trer. FUIìTHEll RBSOLVBD, that all actrons prevrousll, taken aud all agteetlerlts. lllstlun.ìetlts. docnments, arrclceftificates executecl. cìelri'ered ancl fileclthtough thc date hereof b1'¿111' officel of the Corporatlon. ru connection rvith tlie transacttons descllbed ttl ot contetnplatecl b¡'the foregorng resoIutrolrs. are lrerebl, authorrzecl. approved latlfìed and conflltnecl rn all tespects FURTHER RBSOLVED, that the officers of the Corpolatlon are hetebl'authonzed atlcl enrpou'ered, f'orancl oll behalf of the Colpotatiott. to exccLtte atrcl cleltvet sttch lnstlttttlents ol docrrmcnts, and to take suclt acttons, as ula)/ bc tec¡tttred to l-lnallze attcl 1:etlect the ttansler ol orvner shrp of the Cor¡torattoll's shat es to Neu' Ou'ttcr FURTHER IìESOLVBD, tliat Thornas F Rehrle, shall be. and ltetebl' ts, autliortz,ecl ancl enrporvered to execrìte ancl deliver all agreemertts, instrttt-uents, cloctturetrts. atrcl celtificates that nray be lequired to col'r-ullel1ce an Assrgnment for the Bellefit of Cledltols actloll tr'ttli tes¡lect to the Corporatlon l1 the Ptobate CoLrrt of I-larnrltou Corttttl'- Oliro. apporntttrg Ettc \\/ Goettng as the assrgnee, aucl to take such other ancl huther actrons as nla\/ bc teqtttrecl to ¡ttoceecl u'tth stlch actrou ln the Probate Coutt FURTHBII RESOLVEI), that a certrfìecl cop¡,of these resolutrons shall be clelrt,eteclto sttch persons and entltres reqlrestulg coples of these tesoluttons and tliat such resolttttotrs attcl tlte a¡tho¡ty vested ln tìle Authouzeci Ofhcers heretry shalllellrattr ln firlI lbrce and cf{'ect Lrlltll a certrftecl copy of the resoltrtron of the Boarcl of Dlrectors arld Sltareholder ol'the Corllotatloll revokll'lg or nrodrf¡rug these resolutrorts ancl sttch atlthol rty shall have been fìled ri'rtlt strch pelsolls atid entlttes tecel\/tng ccr-ttfiecl collles of thcse tcsoltlttol.ts ISrgnatrrte PaP.e to fbllorr'] The foregoing resolutlon rs, by tlie srgnatures belorv of all of tlie Shareholdels and all of the Directors of the Corporation, passed by the shareholders and the Boald of Duectors IN WITNESS WFIEREOF, tlre undersrgrred have executed and dclrvered thrs Consent on thrs _ day of September, 2016 SHAREI.IOLDBR By *--,*- 7 F*ø^- Thomas F Rehme, Tlustee BOARD OF DIRBCTORS 1.h--.- 4 f¿jt Thomas F Rehure, Sole Dlectot^-- 92t09r I 2 Case 1 l-6-cv-00464-RHC Doc #. 70 Ftled 09/1"3/16 Page. L o'f 2 PAGEID #.ITB9 IN THE UNITED STATES DISTRICT COURT FORE THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION CONNIE MCGÌRR, er a/, Ctvrl Actton No I l6-cv-464 Plarnttffs, Judge Robef H Cleland vs N'TICE oF FILING oF THOMAS F REHME, CI CII , ASSIGNMENT FOR THE BENEFIT OF CREDITORS PROCEEDING IN OHIO Defendants BY WAITE SCHNEIDER BAYLESS & CHESLEY CO., LPA Warte, Schnerder, Bayless & Chesley Co , LPA (''Warte Irrrnt") hereby gtves nottce to the Court and the partres of the filrng of a proceedrng captroned ln the Matter of Ilraúe, Schneder, Bayless & Chesle¡, Co, LPA, Case No 2016003659 (the "WSBC ABC Case'') rn the Hamrlton County, Ohro Probate Court (the "Probate Court") A copy of the Letter of Authorrfy and Order Acknorvledgrng Acceptance by Enc W Coerrng of Warte Schnerder Bayless & Chesley Co , LPA's Assrgnment for the Benefit of Credrtors (the "ABC Orcler") that was entered by the Probate Court on September 12,2016 rs attached hereto as Exhrbrt A The WSBC ABC Case rs a statutory proceedrng under Ohro Rev Code Sl30l 01. el seq, pursuanl to rvhrch all assets of the Warte Frrm rvere transferred and assrgned to the Assrgnee (Errc W Goerrng, Esq ) to be managed, operated, and lrqurdated under the supervrsron of the Probate Court The Assrgnee ls empowered to collect and lrqurclate all assets, to resolve and pay the clarms of cred¡tors of the Warte Flrm tvlthrn the proceedrng, and to otherrvrse take such actlons as may be requrred to rvrnd dorvn the Walte Frrnl under the super\¡lsron of the Probate Court As a consequence of the WSBC ABC Case and the ABC Order, Thonras F Rehme no longer has possesston or confrol of the assets or operatrons of the Warte Ftrm EXHIBIT ìr õ og e Case. 1.16-cv-00464-RHC Doc # 70 Ftled 09/l-3/1"6 Page 2 of 2 PAGEID # 1790 Respectful ly subm rtted /s/ Donald J Raflerrv Donald J Rafferty (0042614) Donald W Mallory (0070875) Cohen, Todd, Krte & Stanford, LLC 250 E Frfth St, Surte 2350 Crncrnnatr, OH 45202-5136 Phone (513) 333-5243 Fax (513)241-449s Emarl drafferty@ctks com Emarl dmallory@ctks com Attorneys for lI/aúe, Schneder, Bayless & Chesle¡,Co,LPA CERTIFICATE OF SER\rICE This rs to confirm that a copy of the forgorng NOTICB OF FILING OF ASSIGNMENT FOR THE BENEFIT OF CRT,DITORS PROCEEDING IN OHIO BY WAITE SÇHNEIDER BAYLESS & CHESLEY CO., LPA was electronrcally filed on September 13,2016 Notice of this filrng wrll be sent to all partres by operatron of the Court's CM/ECF electronrc filrng system, and the fìling may be accessed through that system. /s/ Donald J. Raffertv Donald J. Rafferty 924@5 2 2 Case 1.16-cv-00464-RHC Doc #.70-1, Frled 09/13/L6 Page 1of 5 PAGEID # I79I COURT OF COMMON PLEAS PROBATE DIVISION HAMILTON COUNTY, OHIO 2A1,6{'03659 fN THE MATTER OF Case No wAtTE, SCHNETDER, BAYLESS & Judge Ralph E. Wrnkler CHESLEY CO., L.P.A. Magistrate LETTER OF AUTHORIry AND ORDER ACKNOWLEDGING ACCEPTANCE BY ERIC W. GOERING OF WAITE, SCHNEIDER, BAYLESS & GHESLEY CO.. L.P.A.',S ASSIG;NMENT.EOR THE BENEFIT OF CREDIT9RE The Court is advrsed and hereby acknowledges that Eric W. Goering, an Ohio resident, who is duly licensed to practice law ln the State of Ohlo (the "Assignee") has accepted the Assrgnment for the Benefit of Creditors of Waite Schnelder Bayless & Chesley Co,, L,P.A. (the "Company"). ln recognition of such acceptance, it is hereby ORDERED, ADJUDGED, and DECREED that: 1, The Assignee shall be the assrgnee of the Company empowered with all rights and responsibilrties pursuant to Ohto Revised Code Section 1301.01, et seq. 2. The Assignee is hereby authorized to continue, manage, and operate the business of the Company until further order of this Court, or to cease the business of the Company and liquidate, sell, includrng a sale free and clear of all liens, mortgages, claims, interests, or other encumbrances, or otherwise dispose of the personal and real property of the Company, as the Assigne-e deems appropriate in his sole discretion. 3, The Assignee is hereby aüihorized to take possession of the operating accounts other banking inn'eoi-,lpuny in whatever name held, which and lgl,oUDtslSf EXHIBIT h a mór{Jt4-t 92101t 2 Case 1,L6-cv-00464-RHC Doc #,70-L Ftled.09/13/1-6 Page.2of 5 PAGEID #,t792 are used in the operation of the business of the Company, to receive and collect any and all accounts receivable, rents, income, or other sums due and owing to the Company, whether the same are now in possession, due, or shall hereafter become due and payable, and to do all things and to enter tnto such agreements in connection with the management, care, and preservation of the personal and real property of the Company as the Assignee may deem advisable, and is authorized to incur such expenses and make such distributions as may be advtsable or necessary in connection with the care, preservation, and/or liquidation of the personal and real property of the Company. 4, The Assignee is authorized to pay bills, fees, salaries, and invoices incurred in the normal operation of the business of the Company, or as a part of the liquidation proceeding, and to do all things necessary in the management or liquidation of the Company, including but not hmited to the payment of the Assignee's fees, and those of his agents, and legal fees rncurred in connection wrth this proceeding or as otherwise rendered by legal counsel on behalf of the Company in any litigation, however, any such expenditure in excess of $10,000 shall be made only upon order of the Court. 5. ln carrying out hls duties as set forth herein, the Asstgnee is entitled to act in the exerôise of his own sound business ludgment as he deems appropriate withln his sole discretion. The Assignee shall not be liable for any action taken or not taken by him in good farth and shall not be hable for any mistake of fact or error of judgment or for any acts or omissions of any kind unless caused by his wiltful misconduct or gross negligence. The Assignee shall be indemnified and held harmless, through the û¡ó115t+r 922048 2 Case. 1,1-6-cv-00464-RHC Doc # 70-1 Frled, 09/l-3/16 Page, 3 of 5 PAGEID # 1793 personal and real property of the Company, from and against any and all liabilrtres, costs, and expenses, including but not limited to, the cost of any bond requrred by thrs Order and legal and other fees and expenses rncurred by him arising from or rn any way connected to the perforrnance of hrs duties as the Assignee. 6. The Company and its respective agents, employees, and representatives of any other persons or entities operating under the direction or conlrol of the Company, immediately upon receipt of this Order turn over to, or cause to be turned over to, the Assignee all accounts receivable, accounts, rents, or other moneys they hold which are derived from the personal or real property of the Company, and all books and records, management records, accounting records, busíness operation accounts or other bankrng records, and other rtems necessary to the operation of any and all of the business of the Company, and to turn over all items the Assignee determines to be necessary to operate or liquídate the Company, including, but not limited to, employee records, existrng inventory, accounts receivables, accounts payable records, invoices, contracts or other agreements, security deposit recotds, leases and the like, 7. This Order is intended to bestow on the Assignee the maximum powers avallable to him under applicable law, including without limltatron the ability (a) to brtng and defend actions in his own name as Assignee or rn the name of the Company, (b) to enter into contracts on behalf of the Company, (c) to collect any accounts or other monies due to the Company, (d) to pay, to the extent posstble, any and all expenses incurred in the normal operation of the Company, or as part of any liquidation efforts, including without limítation expenses necessary to avoid loss or damage to our interruption in (as the case may be) any of the company's property and busíness m6l43l+t 9aor82 Case' 1,16-cv-00464-RHC Doc # 70-1 Frled. 09/13/16 Page 4 of 5 PAGEID # 1794 shall be deemed to be the person responsible for acling on behalf of the Company within the meaníng of Rule 9001(5) of the Federal Rules of Bankruptcy Procedure. L The Assignee and the Assignee's agents (a) may rely on any and all outstanding court orders, judgments, decrees, and rules of law, and shall not be liable to anyone for their own good-faith compliance with any such order, judgment, decree, or rule of law, (b) may rely on, and shall be protected in any action upon, any resolution, certificate, statement, opinion, report, notice, consent, or other document believed by them to be genuine and to have been signed or presented by the proper parties, (c) shall not be liable to anyone for their good-faith compliance with thelr duties and responsibilities as an assignee, oras counseloragentforAssignee, and (d) shall not be liable to anyone for their acts or omissions, except upon a finding by this Court that such acts or omissions were outside lhe scope of their dutles or were grossly negligent' Except for matters set forth in subsection (d) of the.preceding sentence, persons dealing with the Assignee shall only look to the bond posted by the Assrgnee to satisfy any liability, and neither the Assignee nor Assignee's counsel or agents shall have any personal liability to satisfy any such obligation. No person or entity may file suit against the Assignee or his agents, or proceed against the Assignee's bond, without first obtaining an Order of this Court. 10. The Assignee shall post a bond acceptable to this Court within ten (10) days of the entry of this Order. The bond shall be and hereby is, set in the amount of $50,000.00. 0l6t45la.t 9zo{8 ¡ Case, 1,16-cv-00464-RHC Doc #, 70-1 Frled, 09/13/l-6 Page 5 of 5 PAGEID #. L795 IT 1S SO ORDERED. Proba Court ô Magistrate -ti¡:o I Aí.Jt OF ¡,tT.;F Olerk 026tstt+¡ 922018 2 - -i: ¡-éæ+-i;-F Doc lD --> F038-0668 ÏJ/('íiÍì lru,,'! Departlnent of State The State of Ohio AnthonyJ. Celebrezze, Jr. Sctmtary ofState 59017 1 $ Certificate @ lt ls beÌeby (crtlfled thel lhe S&rer1q of $¡te of 0hto has cultody of the Raor& of lmorporulroo ,nd l|ltlttllueous nhnp, tltst sld ott- rttodt sltorv the frhng and reordrng of 'JÂllÉr SCtlllEl0ER, B^YL€SS C CIItSLEY t0., L.P.A f 018 0ó70 Recorded on Roll --_d tr¡me Unlled States of Amerlca thc Rer¡rú of lncorponlron ând }fi$llâ¡eouJ tlhngs slrte of0hlo ofnre of the Sefr1tsry of Slâle wltncsS m) hatrd ând the seal of th¡5geu¡y of Sla;?6t the Crl) of Columbus, ohlo, lhls da¡ of .,.-."'.-----'-. 8? --_- ÄD ¡9- Jr EXHIFIT' "c Ðo Page 2 a 3 Doc lD --> F038 0668 /l) iit0lttJ'"trü .,'. ,rr.¡V r.U ,, l)L ì1.G' i'iìflF'¿35l0NAL n,'"4ê2y'.îè ,1R'¡'ICLI s OF ItlCOlìPOl{^'tIOl¡ t'*t -. ?ÍN o!' tr^IT¡', 9CllNl)IDl,lì, D¡tyt,lSS ¿ C¡llSLFY CO , t, p ¡ì I, stanley ¡t Chcslêy, l318 Ccntral lrust ToNcr, crncr¡ì- ¡ìatr, Olrro, 45202, fhc undersrgned, berng lcAally nuthorrzed to practrce ¡årv rn the State of Ohro, hercby ostabl¡slì and form a professronal assocrâtron rn accordôncc vrth Clrapters 170l and l.?85 oh¡o Revrsed Code, àn<ì âdopL t.he follorrrng artrclcs of rncorpor.r- t¡on for such assoc¡aClon ÀNTICLD ¡ IIÀ¡IE - The name of lhê acsoclatron ìs r¡ô¡te, Schnelder, Bayless t Chesley Co , L P.A ÀNTICLI: II. PNINCIPÀIJ OFTICE The Àssocratron lvllL have res prrnclpal offrce åt 1318 CeDèral TrusÈ Toher, Crnc¡nnatr, llamrlton Cou¡ìby, ohro, 45202 ÀRr¿cLF,_I-rI -. Pulgog: Thìs assocraL¡on rs organrzed for the folloltrng purposes To engage r¡ì tlìa prflc¡¡ce of law as a lat" assoc¡â- tron and to carry on gcrvrces rncrdent thcreto such as to at)pear tn a representãtlve capac¡ty as an attorney, to drarv ¡)apcrs, ¡:loadrngs ar¡d documents¡ Èo perform ¿rny act Ìn connêctron r¡tth legâI proceedtngs beforc a federâ¡, state, or munìcrpaL court, or any subdrvtslotr lhereof, ùo rdrìse or dlrect otlìcrs âs to clvll or crrm¡¡ral låN, enforce, settle, âdlust or compromlse dafaults, drsltuteg, and clarns. Prepâre, drarv, asslsL rn the preparttron or dlawtng of atry papers relalrng to the rrqhts of olhers, and to ¡>repare, drâtr, Procure, assr6E rrì preparâtlon or drawlng of affrdavlts, tleecls, rr¡119, conveyances, and mortgagca, Such Pract¡ce of lav rs tlìc sole a¡rcl exclusrve profcasronâL scrvlces Lo bc rc¡tdered by lhrs ¡ssoctatloll. To o|rì propcrLy, cnLcr rtìto collÈ.racts, attd c.rrry otr an!, l)usrrreçs rìecesaary or r ¡ìtrdentaL Lo bl¡c .lccoln¡)lrslì- mcnt ôr furLlìcrâncÊ of thc l)ulposcs or ol)lccLs of bhrs a 9soc tn tr on Page 3 Doc lD --> F03B-0668 li(r(ìlJíi -í)ri,7l ,,1\o l)rofasironal sorvtcos of th¡c Âssoc r¡tron slì.rÌl l:c car r¡cd on I only th¡ough offrqcrs, cnploycos, ¡nd ¡gcnLs, c¿ch of t'holn ¡9 lrccnsod to render ¡rrofessronal legal. scrvtccs through âdm¡ss¡on to thê ståte l)ar of Ohro and adñ¡s€ron to Pr¡ct¡co before tlìe Ohro Suprene Côurb such persons shall PracÈ¡ce lhe professron of larv ¡n accordance rÍ¡th alt rules for professronål conduct promul- gated by the Supreme court of ob¡o ÀRTICLE IV POi9:Rq lne assocraL¡on shall have all the rlghts and porers now or lìcreðfter confer¡ed on professlonaÌ aggocrattons by tho laws of fhe sÈate of Ohro, rncludlng' but not lrn¡hed bo Èhose Powers set forth rr tho Code of negulä!¡ons of Èhrs professronal' assoclatron, ÀRTICI,D V DURÀ1,lOt¡ Tha perrod of duratton of thrs Professlonal ðssocrat¡on s¡¡all be pcrpetual untll d¡sso¡ve.l by a votc of thc shareholdors as hereìnafter provrded ÀfIJg!!-yL--!f RrcroRs Thc assoc¡at¡oD rs to be ntatraged by a boðrd of drrcctors the nuìber of dttecEors conslrtutrl¡9 tlìc ¡nltral bo.r¡d of drrec- tots rs ono (I) âtìd thc nane a¡rd ôddrcss of the ln¡tlal dlrccbor JS l¡ûrno ¡g!:99= - ¡t choçrcv ,stânrev ¿il:':iÌli:t"iii"'i;äi. Tho ttìrtral dtroctor 5ntll ho¡{ì offrcc tlnt}ì lrrs succossor or suc- l'ccs"ors .1tc cleclod aììd (luotrfy t5 PÌovldo(ì rn thc codc of lìcgulÂ- 'l aro,t" l'hcrc¡lLcL tlìc Lcrm of offìcc of c¡ch dlrcctor sh'rlI l¡c 't a Page 4 Doc lD --> F038 0668 l"(,('íJÍl {}ii?:¿ !for a ¡¡errocl of o¡ìc (l) yc.rr ùxl unÈlt lhe electron and quðl,rtrca- t¡on of a sucsessor '¡hc nunbcr of d¡rcctorg set fortlì horcrn and constrtuÈrng thc rn¡tìaL board of drrecbors sh¡ll bo the au- thorrzed number of dtrcctors unirl such nurìbor rs ciìangcd D!' å regulatron duly adopted by the sharcholders ÀRTICLFYII RECULÀTIoì|S lho lnrtral d¡rector shal¡ submrt the proposed Codo of negulatror¡s for thrs assocratron to the sharohol.der at a meetrng to be !ìeld for thât purpose not nore than thrrty (30) days fo¡]ow- ìn9 a¡)proval of Lhe Àrtrclcs of Incorpo.ratron by thc Secrctary of state Pollowrng the adoplror¡ of sard code of negulatrons by an affrrmatlve vote of lhe shdrcholder, tlìe ¡ntcrnaì affarrs of the I assocraLrorì are to l)e rcgulated and managcd rn âccordanco wrÈh il sard Code of negulatrons ii ÀRTrCLf: Vl¡I, SrrÀRf,ltOLDERq rl The nanìe and adclress of tlìc ìndrvrdual nr,o rs to bc lhe ti I shareholder of the assocrat¡o¡r rs as follols I ¡lame Àddress I Stanley ¡l clìcslcy l3l8 Central Trust. Toncr c¡ncrnnatr, Ohro 45202 ÀNI'ICLL IX S¡IÀRIIS AND RNQUINED CÀPITÀL î\c naxrmum number sharcs wh¡ch the corporðLton ts I of I I .luLhorr¿cd to lìavc ouLstônd¡ng rs Seven llundrcd Prfty (?5n) eharcs, I all of whrcl¡ sl¡nll- bc comon ghares w¡Lhout ¡>ar valuc Tìrc nmount of Lhc stùtcd cal)rtal r¡lth lrltrch tlìc assoclnLlon sìrôlì l)ag¡D l)u.,\¡ìcss ls Í,cvcn llutrdrcd Frfty (9?50 00) froll¿rs ò]r1l_çrrrj.v.:_!ss!rl_4ll-1'It¿ll1:l¡_:ol'--slo.cI ; 'Îhc ç¡rflr c5 ()f t¡ìc ù55oq)..1Lrotì may only l)c ¡5suc(l l"o, hcld I l Page 5 Doc lD --> F038 0668 l,'t'(r0fl .(ì(ì'?íÌ by. or Lrôrìsfclrcd to ¡ pcrson Ìvho ¡s Lca¡lly f,uthorl/o(l to ¡rrac- trcc Ið\ ¡n Lhc Staìtc of Ohro Sl)arcs of the ðssocìatron heLcl by a decc¡sccl or retrrcd sharclroldor Ghall l)e crt¡ìcr redcened or ca¡ìcelled by trìe assoctatron or Èransferred Èo a Person qual Lfrcd to hold t.no sharcs wrthrn 6rx (6) nonths after tlre date of deatlì or ret¡rcnenL, Sl)âres ¡reld by a shÀrelìolder who bccones legally ,drsqualrfreil from pracE¡crng law i¡ì glìe StaLc of Ohro shall bc so rerleened, cancclled or Eransferred t\'rthrn nrncty (90) days âfter the d¡squalrfrcaÈron becomes frnal. ShÂres shall not be trans- ferred to qualrfred non-shareholders wrthou! frrst berng offercd at therr farr value Lo the remâJnrng sltâreholders of the assocla- tron Shares ¡ìoL Eo redeemed or transferred ttrthrn thc regulred perrod of tine sha¡I be cancelled ât the end of guch Perrod AR?rcLE xr _gСgl9!9E!s.:_lus!-T,g 'Ihe foll"ov¿rng provrslons arC hereby agrced to for tlìe Pur- pose of defrn¡ng, lrnttrng, and regulat¡ng lhe excrcrse of the powers and authôrrt.y of the assocratton or of rts shareholdars, o'l uf rLs tlr¡eulors, foÈ the of and dcfrn¡ng rr qhio.I o¡ Pu¡poee "toottng prrvrìeges th"ttofuuu and of thc sharcholdcrs utong I ì Tlìe Doard of Drrectors of the assocla¡ron rs lìereby I cmpowered from trne bo trme to authôrr?e the rssuânce and salc of tlìc àuthorlzcd unrssuc(ì 5hares of thc ---a6soc¡aLlotì's caPrtal stock, an(ì to f¡x the amounL of constderatro¡) for lthlch the aa6oclat¡olì ghnll fron lrme Lo btmc rssue socll shâre6, and rn rLs (ìrscrcÈlon !o gr.rnh fron Lrme to trlna to such pcrsons for sttch pclrods al¡d ulto¡t such torms âs Che Boar.l of nlrec- tors may daom advrgâble, optìôns Lo turchtse sìlch nrlm- ber of authorrzod unlssued chares as tlle Board of trrrcctors nay r¡ì 1ts dÌscrctron docm â(ìv¡sabIc 2 SEockholdcrs thall ll.lvc tho t)rc-cmPLrvc rrgllL to ¡rutcltasc, r¡ì l)roporg¡on Lo thc 5lìûres hcld by tlìcm, àny art<ì alI a¿ìdr'tronal sll.rros of tnc.luLhorl?c(l cairrtal stock Khrcll Lhc lloard of l)rrcctors nr¡y ([ocrrc 4 Page 6 Doc lD --> F038 0668 l''l'(,;13 {}(-i'74 Lo soll from trrc !o Crnc, bofore scllrng sucll .r(¡dttroDal slìarcs to oÈhers, utllc5s c\!stlng sbockholders \Jâtvc tr \trlElrì9 tìtc1r lrrc-cmpÈ¡vc rlghL to Purclìåse suclr s¡ìa res ,' I slìåres of stock slìall be sublect to the resÈrrctroq it Lh.1t. any stockholdcr, h¡s helrs, ad¡D¡l¡rstratorg, exoculors, lcgaI represont.a!Ives, or ebtaÈe, desrrrng to scll h¡s ti I stock, shall frrst offer rL to the remð¡n¡ng stockholders, ll who sha1l. be entrtled Eo purchase the sharas al)PorÈroned lr to Èhcrr holdrngs at a prtce per share no! exceed¡ng thôl a! vhrch rÈ w\ll be offerêd to the âssocrntlon or any it other qualrfrcd purchasers If the rema¡nlng sÈockholders shall not purchtse lhc stock ('rthln thrrty dsys after rt to the i! noLrce, thà sellrng stockholder shall offer r assocìattoni ônd r¡ tlìe assoclatron does not purchðse the ' il stock, the sellrng 6tockholder nay seLl rt bo any other : qualrfred purqhasers st not less bhan the Pr¡ce at whrch i il Èhe stock was offered to the remarnrng stockholders ånd to the assocråtron r¡c soár¿ oi orráctors shall have the i rrght to nodrfy ôr add to lhe âbove restrlcilons any otherl coñdrtrons or iestrrctrons under whrch shares shâlI be i rssued, soLd, or held The assocratron may purchase, hold, sell, and re¡ssue tny of r.ts shares, añ.1- lo the exten! that ihe authorrly of ' thä shareholders or drrectors !s regurled by taç to maLe any sulh purch¡se, salc, or relssuc' the Ûcard of Drrec- r tois shatl be and heÌeby rs fully vcsLed vlth such ! authorr ty I Àctron on any t,ELLcr at any Ehâreholders' meeÈlng,- I reqardlnq whrcÍr the Statubes of ohro provrde tlìat unlèss i otúen¡sé provrded ln the Àrtlcle6 of IncorPoratlon or i Rcoulatroni of an aEsocratlon there shatl tje the i afÉrrmat¡ve vote cìÍ a larger proportron than the holders i of a målorrty-thc of the shares onèrEled Èo vote thereon, nay I bc takei by affrrnal-rve vote of the holdcrs of a malorrly o? each class on shares entrtled to vohe by classes on suclt a matter I, be sub- 6 The Prìvate propercy óf shârehôlders sh.l.ll not rl p¡yme¡t debts T .¡cc! lò the of corPoråÈc I ti subsc¡ìbed nly nðnìc ; il rll l.ll'fNEss f'll¡llRllo¡', I havc h3reunto Llì lr... day of r9B2 tlt I cy t, Page 7 HAMILTo*äntñYtJfffi*oFCouRrs COMMON PLEAS DWISION EI,ECTRONTCAI,LY FIT,ED JuLy 22, 2015 A2¿22 PM TR-â.CY WINKLER C1erk of Courts HamiLton County, Ohio CONFTRMATTON 426773 STANLEY M CTMSLEY A 1500067 vs, JUDGE ANGELA M FORD JODY M L{JEBB]ÐRS FILING TYPE: REPLY PAGES FILED: 32 EFRfM EXHIBI]T ! ao E ELECTBONICALLY FILEÐ 07/2212015 1422 I REPL i A 1500067 / CONFIRMATION NUMBEB 426773 COURT OF COMMON PLEAS I{AMTLTON COIINTY, OHIO STANLEY M. CHESLEY, Case No A15ooo67 Plaintiff, Judge Ruehlman DBFBNDANT ANGEI-A. M. FORD'S RBSPONStr,IN OPPOSITION TO THE ANGEL"A M. FORD, ESQ , et al , MOTION TO INTERVENE FILED BY WAITE SCHNIìIDIIII BAYLBSS & Defendants CHESLEY CO., LPA L lntroduction Inten¿enor Waite Schneidel Bayìess & Chesìey Co., LPA. ("WSBC") seelts to intervene in this action to seeì< r'elief flom three motions filed in a Kentucky court and a subpoena issued by a I(entuclcy court. Since WSBC's motion has been filed, the motions and subpoena have been luled upon by the Kentucì WSBC has no legal ground to intervene in this action. Stanìey Chesley, a-s sole sharehoìder of WSBC, transferred all of his shares to Thomas Rehme, âs trustee, pursuant to a Wind Up Agreement. Pursuant to this Agreement, Rehme holds too% of. Chesley's interest in WSBC in tlust fol the exclusive purposes of rvinding up WSBC for the benefit of its employees, creditors, and Chesley. The agreement also pelmits Rehme to liquidate corporate assets and distribute proceeds to creditors as required and to pay the remainder to Chesìey-as long as he does not receive any legal fees other than for services pelfolmed priol to the effective date of his retirement. Chesley no ìonger has any interest in WSBC because on June 23, eor5, the I(entucky court ordered Chesley, as a judgment debtor', to transfer lris interest in WSBC to his judgment creditors, pulsuant to Kentucky statutory lau', The l(entucl ordered Chesìey to transmit the Older to his designated Trustee, Thomas Rehme. ELECTRONICALLY FILED 07122/20151422 I REPL / A 1500067 / CONFIBMATION NUMBEA426773 Finally, the l(entucky eourt ordered Chesley to direct Rehme to mal which Chesley had been entitled to his judgment creditors through theil attorney. Thus, by operation of this orcler, Chesley's juclgment creditors have succeeded Chesley as the sole benefîciaries of his intelest in the trì-lst created by the Wind Up Agreement, and Rehme, as trustee, must, as a matter of law, act for their benefit, This Motion to Intervene has a single impermissible purposer to asl< this Court to interfere with a valid l(entucky judgment and to act in defìance of a l(entucky Judge's Order with the goal of preventing the juclgment creditors from collecting their judgment. WSBC may only act through its Trustee. The Trustee is now acting contrary to the benefit of the judgment creditols who are the soìe beneficialies of Chesley's intet'est in WSBC. In fact, by acting contrary to the judgment creditors' interests, the Trustee is exposing himself to claims that he is in breach of his fiduciary cluties, in acìdition to acting in clefiance of a Court Order, The Motion must be denied. Moreover, the Ftrlì Faith and Credit Clause precludes this Court from issuing any order rvhich contradicts or disregards the Kentucky court's order. This is exactly what WSBC seeks. Indeed, the Motion boldìy asks that this Court "declare[] that any Order that emanates from the Transfer Motion, CSH Compel Motion or the Chesìey Compel Motion is null and void as to WSBC (and Mr. Rehme)." (See Motion to Intervene at g). A more bìatant invitation for this Court to violate the Full Faith ancl Credit Clause of the Constitution cannot be imagined, Furthermore, WSBC's motion misstates certain fundamental issues. First and foremost, Chesley's juclgment creclitors are not required to domesticate the judgment in Ohio. Second, Ford has every right to seek post-judgment discovery against Chesley and, to the extent the l(entucky court has jurisdiction, to coÌlect on that jucigment 2 ELECTRONICALLY FILED 07122/20151422 / REPL / A 1500067 / CONFIRMATION NUMBER426773 through the processes and procedures availabìe in Kentuclcy. To the extent that WSBC- or Chesley for that mafter-talces issue with the Kenfucky court's decisioris pertaining to either discovery or eoìlection, its remedy is through the l(entucþ court system. Indeed, Chesìey is pursuing an appeaì of the Kentucky court's order, Chesìey cannot ask this Court for an order excusing compliance rn'ith a vaìid order of the Kentucky court. This court is not the appelìate court for l(entucþ. And, this Court is r,r'ithout the authority or the jurisdiction to nullify another court's Order or to interfere in the Kentucky action as WSBC has requested. Therefore, WSBC's motio¡r must be denied' n. Proceedings Before the Kentucþ Court WSBC's motion identifies three motions that were pending before the Kentucky court at the time WSBC filed its motion, and the Kentucky court has since ruled on aìl of them. Chesley now asl from doing so under the Full Faith and Credit Clause of the United States Constitution. A. Motion to Transfer Beneficial Interest In May 2ot;, Ford, on behalf of her clients, Chesley's judgment creditors, filed a Motion to Transfer Beneficial Interest in Properry Held in Trust. The basis for this motion is simple: Chesley transferred Tooyo of his interest in WSBC, his law firm in which he was the sole shareholder, to Thomas Rehme, to hold as trustee for the benefit of its employees, creditors, and Chesley. Per this Agreement, after WSBC's creditors are paid, the remainder of WSBC's proceedsis to be distributed to Chesìey. As Chesley retains a beneficial interest in WSBC, his creditors are entitled to that interest. On June 2g, zor1, the Kentuclçy court entered an order granting this motion and required Chesley to direct that his beneficial interest in tlie shares of WSBC be transferred to his judgment creditors r,r.ithin fourteen days and that all distributions 3 ELECTBONICALLYFILEDOT/22/20151422 IREPL / A'I500067 / CONFIRMATIONNUMBER426TT3 pursuant to said interest be made to the judgn-ient creditors through Ford, as their counsel. (See Transfer Order, attached hereto as Exhibit A). On July 9, 2o1S, Chesley filed a motion for enlargement of time to comply lvith the l(entucky court's order. (See Enlargement Motion, attached hereto as Exhibit B), Chesley requested that the l(entuclcy court provide him with additional time to comply with its order transferring Chesley's beneficial interest in WSBC so that he could file an appeal and seek a stay of the order from the Kentucky Court of Appeals . (See íd.). Ford, on behalf of her clients, opposed this motion. (See Response to Enlargement Motion, attached hereto as Exhibit C). The Kentucky court denied Chesìey's motion, and so the order remains valid and enforceable, (See Order, attached hereto as Exhibit D), Chesle/s entire beneficial interest in WSBC belongs to his judgment creditors. B. Motion to Compel Clark Schaefer l-Iackett & Co, to Comply with Subpoena Duces Tecum Ford also filed a motion to compel Clark Schaefer Hackett & Co. ("CSH") to comply with a subpoena duces tecum issued out of the Kentucþ court and served on CSH's Kentucky office. That court considered CSH's objections to the subpoena, including whether the subpoena violated the restraining order issued from this Court, and granted the motion to compel. (See CSH Compel Order, attached hereto as Exhibit E), That court noted that, "CSH has offices located in the State of I(entucþ from which they transact business. The injunction set forth by the Ohio Courl, rvhether [it] be still in effect or not, cannot limit this Court's ability to Order a business located and transacting business in Kentucþ to comply with Kenruclq' ìaiv to secure a Judgment from a Kentucl 4 ELECTRONICALLY FILED 07122]20151422 I REPL / A 1500067 / CONFIRMATION NUMBER426773 comply with the subpoena and produce the requested documents, Documents have already been produced. C. Second Motion for Contempt Against Chesley and Counsel and/or to Compel Discovery Responses. Ford also filed a motion against Chesìey and his eounsel, seel contempt and/or to compel discovery responses. This motion reìates to rvritten discovery initialìy served by Ford on Chesìey in December of 2074. Through this motion, Chesley's judgment creditors continued to complain that Chesley's responses were insufficient, That court found that Chesley's responses remained deficient and further found that Chesìey had failed to comply with the court's previous orders. (See Chesley Compel Order at r, attached hereto as Exhibit F). That court further recognized that, prior to and after Chesley's disbalment in Kentucky, he transferred more than $59 million cìoìlars from his personal accounts to WSBC. (See id. at z). The court granted the motion to compeì in part, specifically requiring Chesley to produce information pertaining to WSBC as to ceftain identified discovery requests. (Id. at z-3). The court also awarded Chesley's judgment creditors their fees and expenses incurred in the filing of the motion. (/d. at g). III. Larv and Argument A. WSBC Does Not Have the Authority to Intervene in this Action. A trustee must act for the benefit of the trust's benefìciaries. See Bank One Trust Co., N.A. u, Scherer, roth Dist. Frankìin No. rrAP-lr4o, 2012-Ohio-53o2, f 30 (r'ecognizing that "[a] trust is a fiduciary reìationship in r,vhich one person, i,e., the trustee, hoìds a properby interest, subject to an equitable obligation to keep or use that interest for the benefit of another, i.e., the beneficiary"); see also R.C. g 5BOB.o1 5 ELECTRONICALLY FILED 07122120151422 / REPL / A 1500067 / CONFIRMAT|ON NUMBER426773 (providing that "[u]pon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries . . ."). Indeed, the Wind Up agreement specifically requires that Rehme act for the benefit of Chesley, By operation of the Kentuclcy coutt's order, Chesley's interest in WSBC now belongs to the judgment creditors. They are norv beneficiaries of the trust, and Rehme must act for their benefit, As Rehme is the sole shareholder of WSBC, he controls the actions of WSBC, WSBC's motion to intervene in this action, and ask this Court to improperly interfere with the l(entucky court's order, is not in the judgment creditors' best interest. WSBC seeks to prevent the judgment creditors from successfully enforcing and collecting a valid Kentucky judgment against Chesley. Moreover, WSBC is incuruing fees to file this motion, which is also not in the best interest of thc judgment creditors. Accordingly, WSBC has no authority to move to intervene, and this motion must be promptly denied. Furthermore, this Court has no authority to interfere with or alter Rehme's obligations as trustee to the beneficiaries, There can be no dispute that, as a matter of law, the judgment creditors are now the beneficiaries under the trust, Rehme has obligations as a matter of lalv. He must act for their benefit. Failure to do so exposes him to claims for breach of his fìduciary duties. This Court cannot enter an order relieving Rehme of such obligations, and this is exactly what WSBC seel simply gone too far. 6 ELECTRONICALLY FILED O7PA2ü5 14 22 / REPL / A 1500067 / CONFIRMATION NUMBER 426773 B. WSBC's Motion Asks this Court to Act in Defiance of the Full Faith and Credit Clause of the Constitution. WSBC boldly asks this CourÌ if it needs to compìy with any potential orders issued from the l(entucl the Chesley Compel Motion, Except now, Orders on those motions have been issued and Chesley has been directed to act. The Kentucky court's order directs Chesìey to turn over his beneficial interest in WSBC. Rehme's duty has now shifted to the judgment creditors. This Court cannot interfere in either the trustee/beneficiary relationship or with the order of the Kentucþ couft. Not surprisingìy, WSBC cites no authority which would permit an Ohio court to excuse a third-part-y's compliance with the valid order of a sister state, Because there is none. The Full Faith and Credit Clause of the United States Constitution, art. IV, $ r, forbids the very relief Chesley seeks from this Court. The Clause plainly requires that judicial proceedings in each State be given full faith and credit in the courts of every other State. Dauis u, Dauis,3o5 U.S. 32,39,59 S. Ct. 3, 83 L. Ed, 26, (tgS8). Indeed, a judgment rendered in one state can only be chalìenged in another state court on the basis that the court in the first state lacked julisdiction to properly render the judgment. Dw'fee u. Duke,375 U.S, 106, t1o (tg63); see also Berke u. Nortlrcutt,7g8 F.zd +68 (6th Cir, i986), This concept of fulì faith and credit is not novel and, in fact, is centraì to our system of jurisprudence. Underwríters Nat'l Assurance Co. u, N.C. Life & Aecident & Health Ins, Guar. Assh, 45S U.S, 6gt, 7og, roz S. Ct. 1357, 7t L. Ed, zd 558 (tg8z). Under well-settled Ohio law, "a collateral attack on a judgment issued by a different court in a civii case will succeed only nhen the first ruìing was issued without 7 ELECTRONICALLY FILED 07122120151422 I REPL / A 1500067 / CONFIBMATION NUMBER426773 jurisdiction or was the product of fraudulent conducL." Ohio Pyro, Inc. u. Ohio Dept. of Commerce, rr5 Ohio St,3d 87S,383, eooT-Ohio-5o24, 875 N,E.ed SSo. Here, WSBC cannot plausibly argue that the Kentucky coutt lacks jurisdiction over Chesley, and the order directs Chesley to act. Any arguments as to the merits of the court's order need to be made to the Kentucl has aìready made them to the I(entucþ court, which rejected his arguments and rejected his motion for additional time to comply with that court's order. Chæley's remedy is to pursue an appeaì to the I(entucþ Court of Appeals, which he is doing, This Court has absolutely no authority to hold that the orders emanating from the Kentucþ court are "nuìl and void" nor to tell WSBC-or Chesley, for that matter-that it need not folìorv them, The FuÌl Faith and Credit Clause, not to mention principles of collateral estoppeì and coìlateraì attacl<, forbid such actions. These issues should be, and in fact are, being handled by the Kentuclry courts. There is nothing for an Ohio court to do on this matter, other than respect the valid and enforceable orders of the Kentucky courts. Therefore, this Court must deny WSBC's requested relief. C, Ford's Actions in Kentucþ Do Not Violate the Restraining Order. WSBC ignores that the Restraining Order at issue in this case only limited Ford's ability to pursue collection through the Ohio courts, The Order did not, nor couìd it, limit her abiìity to coìlect against Chesley through the Kentuclty or other courts. Nor did it limit hel ability to obtain discovery pertaining to Chesìey's assets in non-Ohio jurisdictions, Indeed, it expressly permits such conduct. (See January r4 Order, at p. 2, no, 1). B ELECTRONICALLY FILED 07I2A2O15 1422 / REPL / A 1500067 / CONFIRMAÏION NUMBER426773 Moreover, to the extent that WSBC chalìenges the Kentucky court's orders on discovery motions, this Court is without the authority to intervene in those proceedings. Ohio and l(àntucl is sought wishes to seek the protection of the court from allegedìy burdensome discovery, he must petition the court in which the action is pending or from r,vhich the subpoena is issued. See Ohio Civ.R. z6(C); Ohio Civ,R. +s(CXg); Ky.R.Civ. P. e6.o3(r); Ky,R,Civ. P. 45.04. Ohio courts have no authority to modify or quash the subpoenas issued by a sister state. See Thomas u. Rome, Bth Dist. Cuyahoga No, 99679, zot3-Ohio-4o46,\77 (recognizing that Civ.R,+S(CXS) limits the ability to quash a subpoena to the issuing cour[). "Principles of comity and full faith and credit prohibit Ohio courts from countennanding otherlvise valid discovery orders issued by foreign courts." Id. at 1l t6 (quoting Físcher Brewing Co.,Inc. u. Flax, r3B Ohio App.Sd 92, 96, Z4o N.E,zd gSt (Bth Dist. 20oo)). "Any issues regarding priviìege, admissibility and undue burden should be decided by the [issuing court]." /d. at f tB. Thus, WSBC must petition the Kentucky courls for relief against discovery. Finalìy, WSBC ignores the fact that Ford has no obligation to domesticate the judgment in Ohio. And WSBC's attempt to compare this situation to prejudgment attachment is nonsense, The Unl and they have every right to move forward to collect it vvith the assistance of tl-re courts, Therefore, Ford has not vioìated the Restlaining Order', and WSBC is not entitìed to the remedies it seeks. 9 ELECTRONICALLY FILED 07/2A20151422 I REPL / A I500067 / CONFIRMATION NUMBER426773 fV. Conclusion WSBC is without the authority to intervene in this action because intervention is not in the best interests of the judgment creditors. This motion must be denied on that basis alone. Furthermore, WSBC asks this Court to issue an order that directly contradicts and expressly disregards the order of a I(entucky court, There is no authority which would permit this Couft to do this. Accordingly, this Court must deny the Motion to Intervene. Respectfully submitted, /s/ S- Sulhluan Brian S. Sullivan, Esq.(oo4ozr9) Christen M, Steimle, Esq. (oo86Sgz) DrÌ{s}4oRE & SuouL, LLt 2SS E. Fifth Street, Suite rgoo Cincinnati, Ohio 4Seoz Phone: (59) 977-Bzoo Fax: (5l3) 977-Bt4t Email: [email protected] ch rist en.stei mle@ dinsmore, com At t orney s for D efendant Angeln M, Ford, Esq. 10 ELECTRONICALLY FILED 07/22]20151422 / REPL / A 1500067 / CONFIFMATION NUMBER426773 CERTIFICATE OF SERVI C.E I hereby certify that a copy of the foregoing was served on the folìowing via U,S. Mail on this zznd day of July, 2015: Vincent E. Mauer Donaìd J. Rafferby FRosr BnOwN TODD LLC CoHEN, ToDD, Kre & Sr¿.Nrono LLC 33oo Great American Tower z5o E. Fifth Street, Surte z35o 3or E. Fourth Street Cincinnati, Ohio +Szoz Clncinnati, Ohio +Szoe /s/ Brío:nS.,Sulliuøn 9778920v I 11 ELECTRONICALLY FILED 07/22120151422 I REPL / A 1500067 / CONFIRMATION NUMBER426773 ¡lccrrr, connre, ei al v Rchme¿ Thomôs F , ec al Sceve Horner, CP\ Page 55 1 marntenance and upkeep of that? 2 A. Yes. 3 A. And Drckens and CrumPet rs owned 4 by erther Stan or hrs wife? 5 A. tüas owned bY Stan. 6 A. À11 right. And so the sale of 1 that condo recently, the amount reaLrzed from B the sale went Èo Dickens and Crumpet', whtch rs 9 wholly owned by Stan? 10 A. Yes. 11 A. All right. And Stan's not I2 rermbursed the f:"rm for all of those mort'gage 13 pay.rnents its made for all of those years? L4 A. No. i.5 A. Okay. Other than the Drckens and 16 Crumpet debt, whrch we, f belreve we've 71 extrngrurshed through the sale of that condo, 1B what other debt does the frrm have in 2016? 19 MR. RAFFERTY: Currently? Are you 20 MR. SULLIVAN: Yeah. 2I THE WITNESS: Current debt? Not 22 accounts payable, debt? ZJ A. Debt. 24 A. None. 25 O. The Frfth Third debt, yourre EXF{IBIT Mrl.e MobIey ReporIrn9 800-894-432? õa s 5 Hccrrr, Connle, et al v Rêhne/ Thoms F , el al Steve Horner, CPA Page 56 1 familrar wrth ùhat? ) A. Yes. 3 A. That was Pa:-d off rn 2014. 4 Correct? 5 A. Yes. 6 a. All rrght. Any other debts sr.nce 1 Frfth Thrrd's debt rn 2014 was pard off? MR. RAFFERTY: And the Dickens and 9 Crumpet that he described. 10 MR. SULLIVAN: Yeah. 11 THE I¡iITNESS: I don' t recal-1 any. I2 A. Okay. Now back to my question we 13 erere tal.krng al¡out earlier. So therers no debt' 14 of the frrm, therets no unfunded PensLon 15 obligation. Rrght? 16 A. Yes. 7-l A. So the payables, Lf you wrll, of 1B the firm of Vlaite Schnerder as we rolled rnto 19 2016 was the fease, your salary, MelLssa's 20 salary and other ordrnary e)q)enses? 2T A. Matt Lad's salary. 22 a. The car guy? ZJ A. And storage costs, telephone, 24 tradrtronal- office type expenses. 25 A. Rrght. And then as money is ¡¡¡ke Mobley Reporirnq 800-894-4327 Electronlcatly Filed 0U11'nü6 03:37:59 PM A 'l DAO &,-t'å{''* 2 EIGHTH JUDICLAL DISTRICT COITRT cLERK oF THE couRr 3 CI,ARKCOI'NTT, NEVADA 4 5 Mn¡nsDAs¡orr 6 Plaindtr, us. Case No, A-rS-Zz66r&F 7 I SrAr.rLErM. CnestsY, DeptNo. VII DefendanL 9 10 DECrsroHerypOnoEn ll Ttis case arls€s from a judgment obtained by Plaintiff Mildred ebbott against L2 DefendaDt Sta¡ley Cbesley ín Kentudry case o5-Cl-oo436. Now before tbe Court is Third 13 PaËy Clatmant \{aite Schneider Bayless & Cheslds ("WSBd) Petitiou to Determine Title ,1 14 iu Property Subject to Wrongñrl Attachmeut and Tbi¡il Party Castano Directed Distribution 15 Tnlst's ("Castano Trust") Motion to Inærplead. The maBer cane befo¡e the Court on 16 February 1zot6, Tbe Court $ants WSBCs Petition to Deternine Tltle and finds that t7 Abbotfs judgment against Cbesley in case oS{I-oo496 cannot be used to grunish WSBC's 18 iuterest in the Casta¡o Ttust The Court denies C¿stano Tnrst's Motion to lnterplead as 19 moot, 20 I. Proc€dural and Facfr¡al Background 27 Chesley used to be an atto¡ney licensed to practice i¡ Obio. He was the sole ovrn¡er of 22 WSBC. In eo(3, Chesley was disbarred based on allegatious that he improperly retained 23 funds thst should bave gone to bis clienl Cbesley transferred ownershlp of WSBC in a ?4 Wind-Up Agreement iu April of zotg, Abbott and otber Plaiutiffs (hereinafter referred to 2s as'Abbott') obtained a second amended judgment against Cbesley in Kentucþ case o5-CI. Ë eF EtE z6 oo496 on October 22, 2oL4 based on the same circumstances tbat lead to Chesley's åþ=ä rì ¡¡¡ 798 zz disbarmenL Abbott did not na¡re WSBC as pa¡ty to the action. .€EA ,; r (-S.Ît er/ I EXHIBIT' 2 o5'CI-ooqA6. Abbott asserted that Chesley maintaiueil a beneficial interest in WSBC, On 3 June q3, zor5, tbe Kenhrcþ Cou¡t ordered Cbesley to transfer his beneficial interest in 4 WSBC and any pa¡ments derived f¡om tbat inte¡est to Abbotu 5 ebbott subsequently filed a motion to e,xect¡te. Abbott argued tbat Chesley faÍled to 6 comply with the Kentucþ Court's June 23, zot5 order. Cbesley argued that be no longer The 7 had in interest in WSBC. The Kenh¡clty Court issued an order on September 25, zor5. I Keutuclsy Court found that "tle Wind-Up Agreement in a sba-, and that Defenda¡t 9 Cbesley continues to cont¡ol and direct WSBC" and disregarded WSBCs corporate identity. 10 The Kentucþ Court essentially n¡led that Chæley was an alter ego of WSBC, thougþ it 11 never used that term, Tbe Kentucþ Court ordered Chesley to transfer bis interest in WSBC t2 and any pa¡rments derived from tbat i¡terest to ¿bbo'tt" Tbe order specifically add¡essed a tbe Castano Trusq whicb makes periodic tra¡sfers to WSBCs account for fees earoed in 14 pa^st cases involving tbe tobacco industry. The Kentuclry Court ordered Chesley to direct 15 the Castano Ttust "tbat all payurents to which l0besley] and/or WSBC are entitled from the r6 Castano Tn¡st sball be paid directly to Plaintiff counsel." WSBC was never named a party to L7 case o5{t.oo4gó and did not have an opporh¡nify to argue to tbe Kentucþ Court tbat it r8 wes not a¡ alter ego of Chesley. 19 On October 22, zor1, nbbott filed an application of foreign judgment in the instant 20 case. The application was made in Nevada because it is where Castano Trust is located- 2t ¡bbott seeks to garnish funds from tle &stano Thrst that are due to be paid to WSBC. 22 WSBC was not named as a party in the tnstant case. On January 8, 2ot6, Castano Thrst 23 filed a motion to interplead WSBC as a defenda¡L 24 Ou January 13, 2016, WSBC filed its petÍtion to determine title to WSBCs interest i¡ -¡ 25 tbe C¡sta¡o Trust WSBC argues its interest i¡ tbe Castano Tn¡st is WSBC's sole property ËsF É¡ tl ¡. 4Eõ z6 and Cbestey bas no interest i¡ tbe Castano Trust, Abbott ñled a response on January 29, ÈbË order, and WSBC are alter'egos of ÁEË 27 zo16, arguing tbat under the Kentucþ Court's Chesley ãåå zB each otber, and Cbesley is a personal beueficiary of the Castano TrusL 2 n 1 II. Discussion 2 "Only property ow¡ed by tbe judgment debtor is subject to garnishmenl.." 3 Broolcbryv. Nev, Stete Banlg gre P.Ad Sor, Soz CNev. zorg). "If the propertylevied on is 4 claimed by a third persoo as the person's properly... the plaintifr or the thi¡d-party claimant 5 is entitled to a hearing within ro dap thereËom before tbe cor¡¡t havi¡g jt¡risdidiou of tbe 6 8etÍon, in order to determi¡e title to the propelty in çrestion, urhich bearing uust be 7 granted by the úþu¡t upou tle filing of an application or petition therefor." NRS 3r.oZo. I In order for a Court to fud tbat parties a¡e alter egos, "[t]here must be zuch unity of 9 i¡terest and ownenship tbat one is inseparable from tüe other." Ðruù Ins..-ExCh. v, Palmgf 10 J. Srn¡anson..Iqc.. r8p P.gd 6S6, 66o CNev. ¿oo8). Alter egos are liable for eacb otbe¡s' 1l debts because "adberence to the corporate ficdon of a separate entity woul{ under tbe t2 ci¡cumstances, sancdon fraud or promote injustice." Pola¡ís Indus. Cqfp. v. -lGplen.747 13 P.2d884 886(Nw. 1987), t4 The procedure for determining whether parties a¡e alter egos, and thus co-jud,gment ^ 15 debtors, appears to be simila¡, if not identical, in Nevada and Keutudry. In Nevada, "a l6 defen¿lant who is subject to a judgment creditor's alter ego claim must receive, iu au t7 independ,ent action, fonnal noticg service of process, an opportuuity to couduct discovery, t8 åct-6nding, and a¡ opportunity to be heand, before the claim is resolved.'Callie.v. 19 BoWling. 16o P.3d 828,87y8r (Nw. zooT), In Kentucþ, it ls also proper to secure a 20 þdgment agai¡st one debtor aud then briug "a piercing suit' against potentiel alter egos, 2L Inter-Tel Techs.. Inc v, Linn Stadon Properties. LLC, 96o S.W.gd rSa t68 (Ky. ¿ore). 22 Both states require that notice be given before a court determines tbat individuals or 23 entiües are alter egos. 24 In the instart case, Abbott failed to give WSBC notice that WSBC was a potential I 25 aìter ego of Chesley until the Kentucþ Cou¡t already ruled on the issue. WSBC was not Éd E5 r¿ ô¡. d, >z 26 ¡amed as a parÈy in IGntucþ case o54l-oo436. Abbott did not bring any separate action ¿. ã¡l À bË 27 against WSBC to a.qsert and ô that Chesley WSBC are alter egos. Tbe lGnhreþ Court made z EË Å â 28 3 1 an alter ego determination in a case with no way for WSBC to assert a defense 2 Abbott's claims. 3 Tbe Court cannot axtend full faith and credit to an order resultin6 from a lackof due *The 4 p¡ocess. ñrll faitb and øedit clar¡se of the United States Consdn¡tion reçiræ that a 5 filal judg¡treut entered iu a sister state mr¡st be resp€cted by tbe courts of tbis state abs€nt a 6 showing of taud, lack of due process or lack of jurisdiction in the rendering state.o Mason 7 v.-QÉ$enaire, rz$ P¡d 1pr6, 448 (Nev. eoo6) (quoting Rosenstein v. Steele. ?47 P,zd z3o, I 4r (Nev. tgBZ). I lbe Court finds that respecting the lGnhrcþ Order declaring Cbesley and WSBC to 10 be alær egos would create a due procæs violation Í! this case. Abbott æks tbis Court to l1 apply an order entered soleþ agains Chesley to deprive a nonparty of its properly. The L2 Court graots WSBC's petition and detemines that WSBC's interest in tìe Csstano Trust is 13 uot subject to garnishment by Abbott WSBC's interest in the Castano Trust is le sole 14 propery. Abbott may attach fr¡nds disrÍbuted to Chesley individually, not funds 15 disuibuted to WSBC. r6 III. Conclr¡slon t7 The Court $ants WSBC's Petitiou to Determine Title and finds tbat Abbott's r8 Judgnent againqt Cbestey in case o5{l-oo4g6 cannot be used to geruish WSBC's interest 19 i¡ the Castano Trust Becaue this Order removes the conf,ict regarding title to funds held 20 bythe Castano Trust, the Cou¡t denies Caslano Tn¡st's Motion to Interplead as mool 2L 22 tt 23 DATEDtbis of Febntary,ze16, 24 du; 25 È¡ôf. z6 E.i E EEÉ UNoeM¡n¡E BELL 27 DtsrRrcTCounrJt¡ocs ãËa z8 4 A I Crnrmeeru orSnvlçs 2 lhe undersigned hereby certifies tbat on tìe date of filing, a coPy of tbls Order was 3 elecbonically served tbrougb tbe Eiebtb Juöcial DisEiet Court EFP system o& if no e-mail 4 was provided, by faæimÍle, U.S. Mail and/or placed in the ClerlCs Office attorney folder(s) 5 for: 6 Name Party 7 I Joh¡W. Mujle, Esq. Cou¡sel for Mild¡ed Abbott John W. Mujie & Associates I .AnEela Ford. Eso. lo Brisn D. Sbaplro, Esq. Counsel for Stpnley Chæley 11 Brisn D. Sbapiro, il,c 12 fromas Fell, Esq. Counsel for C¡st¡no Dirccted Distríbution Trust 13 Fen¡emoreCraig, P.C. 14 WillKemp, Esq. Kemp, Jones & Cot¡ttba¡ù LLP Counsd for Waite Schnelder 15 Bayless & Chesley Co. Don¡ld J. R¡fferty, Esq. r6 Cohen" Todd" Kite & Stanford, v 18 19 20 2t 22 [J:, ,îi( 23 !{', 24 L,ew Clrnx, DSPARTIYIEN'I VII '{ 25 AFFIRNÁATION åsE 26 Pursusfitb l{Rs æ08.0@ Tle urüsrolgnett doos hersby sffirm lhal the ptecsdlnq Dpçlst9n andp¡dâr n¡e{, sË É ln Dldrttl Co¡rt ca¡o numbst 4829818 DOES XOT ccdah ths sodsl s€€¡lnty 27 numbâr gt any poreon. ÉEã zB /s/ Llnda Marie Eefl Oats 2n0118 daa Dbûtct Coutt JtdSp 5 Eleclronicolly Flled 03/31/2016 09:46:524M I DAO &"'l'Ê&""'* 2 EIGÍITH JITDICIAL DISTRICT COURT cLERK oF TlrE couRr 3 CI.ARK COUNIY, NEVADA 4 5 MnonroAnuorr, 6 Plaintitr, us. Case No. A-rS-Zz66r6-F 7 I StAr.¡LErM. CnesltrT, Dept No. vII Defendant. 9 10 Drcts¡or*n¡YpORonn 11 This case arises from a judgment obtained by Plaintiff lvlildred nbbou agairst 12 Defendant Stauley Cbesley in Keutucþ case o5-CI-00496. On February ll, 2016, the Court r3 ruled Abbott's judgpent against Chesley i¡ case oS-CI-oo436 cannot be used to garnisb t4 Waite Schneider Bayless & Chesley's ("WSBCI bterest iu tbe C¿sta¡o Directed A 15 DisÛíbution Trust ("Castano Trust"). Now before tbe Cor¡¡t is Abbortfs Motion to 16 Reconsider the Court's Ruliug Dated Febnrary tr, aot6. This matter r'r¡as scheduled to come t7 before the Court on Marc.h 8, zo16. The Court now ruIes on tle motion witbout an oral 18 hearing pursuant to EDCR z.æ(c). The Court denies.{bbotfs Modon to Reconsider. The 19 Court also g¡a¡ts Abbott's Motion to Seâl Exbibits 8 and 9 to Abbott's rrsponse to WSBCs 6 t¡J u 20 petition to determÍne title in properly. Tbe Court racates the bearing currently set for AprÍl IIJ UJ r- Þ- a"o 3 Chæley continues to conbol and di¡ect WSBd and disregarding WSBC's corPorate 4 identip, The Kentuclcy Court essentially ruled that Cbesley w¡rs ân alter ego of WSBC, 5 though it never used that term. The order specifically addressed the Casta¡o fh¡st, wbich 6 makes perlodic transfers to WSBC's accou¡L Tbe Keohrcky Court ordered Chesley to direct 7 the Castano Tn¡st "tbat all palments to uùicb tChesleyl and/or WSBC a¡e eutitled from the I castano Trust sbatl be paid directly to Plaintiff counsel.'' wsBc wa¡i ne\ter named a party 9 to crse oS-CI-oo4g6 and did not have an opportuuity to a¡gue to the Kenhrcþ Coutt tbat it 10 was notan alter ego ofCbesley. 11 On October zz,2oL5, ¡bbott filed an application of foreign judgment iu the lnsta¡t L2 case. lbe application was made in Nevad4 wbere C¿stano Trust is located. Abbot seeks to 13 garuisb funds f¡om tbe Casta¡ro Tn¡st that are due to be paid to WSBC. WSBC was not L4 named as a party in the instant case. On January 8, z9t6, Casta¡ro Tn¡$ filed a motion to r5 interplead WSBC as a defendant. On January 13' 2016, WSBC filed ie petition t( t6 determine title to WSBC's interest in the Castano Th¡sL t7 On February u, 2016, the Court ruled that enforcing tbe lGutuclcy Order dedaring 18 Cbesley and WS¡C to be alter egos would create a due process violation ln the inslant case. l9 WSBC did not receive notice of the Kenhrcþ case that found Chesley and WSBC to be alter 20 egos, Tbe Kenttrclcy Court made au alter ego determination in a case with no \¿ray for WSBC 2l to assert a defense agaiu.st Abbott's claims. WSBC's i¡terest i¡ the Casta¡o Trust is its sole 22 property. Ttre Court found Abbott may attacb fuDds distributed to Cbesley individually' not 23 fulils distributed to WSBC. 24 Ou February 22, 2c.16, Abbott filed a motion to reconsider tbe February tt, eot6 J 25 Decision. Abbott argues the Declston was ern)neot¡s becar¡se it mi"applied the law to FÊ õ> È¡âþ 26 Abbon's claims, WSSC filed au oppositiou on Marsh T,zot1rasserdng Abbott was merely 3Ë E 27 rearguing issues already n¡led on by tbe Courl Abbott argued addidonal grounds for ÊEA 28 reconsideration in its repl¡ frled on Ma¡ch 8, zo16. .t I II. Discr¡sslon ^ 2 .4. Motion to Seal 3 Abbott filed a response to WSBCs petidon to determine title to WSBC's i¡terest ln 4 the C¡stano Trust on January zg, zot6, The reponse contains e¡ùibits Abbstt Dow moves 5 to have seated. Exhibits 8 and 9 are ñnancial documents coutaining confidential 6 informatÍon such as account nunbers. 7 Nevada Supreme Court Rule Pa¡t VII governs the sealing of Court recor&. Tbe I Court may seal records when there are compelling circunstances. The sensitive ûnaucial 9 information within tbe exhibits jrrstiûes sealing tbese Court records. In addition, Abbott's lo rnotion to seal wa¡¡ unopposed. Sgg EDCR 2.2o(e). Therefore, the Cor¡rt grants Abbott's 11 motion to seal Frùibits 8 and 9. t2 B. Motion for Reconsideration r3 Reconsideration is only appropriate when "subståntially different evideuce is t4 subsequently introduced or the decision is clearly erroDeous." Masonry & Title Conbactors â 15 Aqfl¡pf,S.-Nev. v. Jolley. Urga & WirttL 94r P.zd 486, 489 Nev. rggZ). "Only in very mre 16 instauces iu wbich new issues of fact or law are raised supporting a ruling contrary to tbe 17 nrling already reached sbould a motion for rehearing be granted." Moore y. City of I¡s 18 Ve6as. SSt P.ed p¿+ U6 Nev. rEZ6). 'Rebea¡ings a¡e not granted as a matter of right' and 19 a¡e not allowed for the puryoses of reargumeul.." Geller v.-McCowan. t78 P.ed 38o, 38r 20 (Nev. r94Z). 2L In tle motion for reconsideration, abbon first reargues the issues ra¡sed in WSBC's 22 petition to dete¡uine title to WSBCs interest in the Casta¡o Tn¡st: whether Cbesley was tbe 23 rn¡e beneficiary of the trust ratber than WSBC and whether Cbesley and WSBC were alter 24 egos. Abbott does not provide the Court with new evidence or persuade the Court tbat it j 25 ruled erroneously on these points. Ë E5 !.¡ôþ 26 Abbott raises two additional argurueuts that the Court's February lt, eor6 Decísiou 3Ë g ãÉI 27 was er¡oneous. First, Abbott argues the Court should not have er¡aluated tbe merits of jåå 28 3 1 Keuhrcþ order in deciding whether to extend full faith and credit. Secouù Abbott 2 the Kentuclcy order did not violate due process. 3 t. The Cor¡rt Properly Evaluated the Due Process Impllcations of tùe KentudnY Courtto Decision 4 'Under the Full Faith and Credit Clar¡se of the UDited States Constih¡tion, a 5 ff"al judg¡¡rent sister state must be respected.., However, not all judgpents are 6 entered in a entitled to full åith and credit iu Nevada." Citv of Oakland v Desert Outdoor A&.er. Inc* 7 uTbe I z6Z pld 48, So-Sr (Nev. zorr). futl faith and credit clause of tbe United States Constih¡tion reguires that a ûnal jud$nent entered in a sister state must be respected by 9 a showing of fraud, lack of due prooess or lack of ju¡iseliction 10 tbe courts of tbis state abseut Maso-n v. &¡isenaire. rz8 P.gd 448 (Nev. aoo6) (quoting 11 in the renderiag state." 446, (Nev. t2 Rosenstein v. Steele. 747P.2à23o, 231 t98Z). tbe authority a¡d the duty to er¡aluate the due Process ímplications of 13 This Court bad orders in case o54l-oo+36. The case Abbott cites to dispute tle 14 tbe lgntucþ Court's goes througb a due process analysis. sæ Milliken v Mqver. 3tl us 15 court's evaluation by ebbott is not a basis for the Court to 16 ¿6g (rg+o), Therefore, this argument Prcper v ræonsiderits nrling. Decision 1B 2. The Court ProperlyDetermined thatthe KenttrcþCor¡¡t'g Violated Due Process 19 Generally, "[d]ue process is satisfied by guius both parties 'a meauingful 20 opporhrntty to present theh case,"' JD Consfr. v IBEX Int'l Glgu!, 240 Pgd 1033' 1o4O 2t (Nev. eoro) (quoting Mathews v, Eldridge.4c4 U.S. 319, 349 Qgl6} tn its Febntary rr, 22 process zo16 Decision, the Court concluded enforcing tbe Kentucþ order wor¡ld violate due 23 becawe WSBC bad no notice of the Kentucþ case. Abbott a¡gues two bases for the Cou$ 24 to reconsider its findings on tlis issue. First, Abbott arguæ the Cotlrt improperþ used J 25 Nevada law in determiuing tbe proper procedure for Abbott's alter ego claim. Secoud, å Ël 26 Abbott argues WSBC received notice oftbe Kenh¡cþ case througb Cbesley. EËÉ 27 Ê8tr JâO 28 l- 4 Law to Estabüsh the Proper I a. The Cor¡rt Did Not Use Nev¡da n Procedure for Abbott's ^{ter Ego Claim 2 In its February u, zo16 Decision, tbe Court cites bot.b Nevada and 3 Kentucky law to evaluate the due proces¡¡ required in an alter ego cJaim. The Cout found 4 "[bJoth states require that notice be given before a æu¡t determines that individuals or 5 entitiæ a¡e alter egos." SCe Ca[ie.y. Bowline, 16o P,3d 878, 879-8r (Nev. eooT) and Inter' 6 (Ky. T-elTechs..Inc. v. r.inn Station Fropertieç. LLC.36o S.W.gd 5e, 168 zou)' 7 the Court did not ûnd that tbe Kenhrcþ order violated due process because it åiled I to follow Nevzda law. Tte Court found the Kennrd I failed to follow its owD law. 'lhougb Abbott a¡gues the Court misinterpreted lGnhrclry law' 10 Abbott did not cite a single case where Kenhreþ courts have allou¡ed e clainant to establish 1l an alter ego relationship without nvins notice to botb aleged alter ego parti€s. t2 did not Furthermore, tbe Court did, not ûnd a due process violation solely because ¡bbott 13 bring a separate claim agÀinst WSBC. The Court found a due Process violation becat¡se 14 æeking to establish WSBC did not receive notice of any actiou, including case o5-Cl'oo436, - 15 an alær ego relationsbip between WSBC and Chesley. 16 of the The Court conectly found tbat due process required WSBC to receþe notice 17 tlris tnding actiou relating to its purported alter ego relationship witb Chesley. Becar:se 18 Court to reconsider was not e¡Totreous, tbis argument by Abbott is not a proper basis for the 19 itsruling. 20 b. WSBC Did Not Receive Nodce of the Kenh¡dsy Proceedings 2t Through ChesleY 22 Abbott argues WSBC received notice of the lGnhrdcy case througb 23 Cteslds tnvolvement in tle case. Abbott asserts three oetbods: (r) thoWh Chesley as 24 WSBCs registered agent for service of process, (s) through WSBC palng Chesley's -t d 25 aüoneys fees, and (g) though virtual representation by Chesley. ,q 8F çt¡ ô¡- give to a related d Bõ 26 Sulng a registered agent in his indþidual capacity does not notice bË 27 were requfud that WSBC entity tbat its ir¡terests may be at risk ^å,bbott artues' "if it zô Ëf; ,-{ âa 28 5 I receive a copy of the motion, for purposes of noticg the motion would bave been deliræred 2 to Cbesley..." (Reply in Supp. of MoL Recons. at p. a.) If ít bad been reqrired tlat WSBC 3 reccive any pleading in the Keutudry case, tbe Court would have directed servlce to WSBC, 4 puttíng Chesley and WSBC oo notice tbat Chesley was acting as a regisæred agent not in 5 his hdh/iduat capacþ. The Cou¡t flnds it concerning that Abbott argues Chesley aded 6 püely i¡ bis individual capacity when siguing docunrents regarding the Castano Trust 7 "individually and as Presldent of WSBC' [ld,-at p. 6) wbile simulta¡eor¡sly areuing Ctesley I acted as a representative of WSBCs interest by being sued in his individual capacity. 9 Payiog the attorneys fees for another individual doæ not entitle the payee to notice 10 regarding tle case at issue. PayÍng attoneys fees does not make the payee a parfy to the 1t actÍou. Under Ner¡ada Rule of Professioual Conduct r.g(0 aûd lGnttrclsy Supreme Court t2 Rule Uo(r.8)(f), attorne)¡s must keep inforrration relating to the reprcsentatiou of a client B co¡fidential from nou.clients payl¡g forthe client's representation. r4 Tbe Court is not persuaded by Abbott's viñ¡al representation argu¡uent for two 15 reasorur. First, the Kentucþ court made no mention of virtual representatiou in r6 decision. It would be i[ogical to conclude tlrat a due process violation based on a lack of 17 notÍce could be cured by a silent and i¡visible ânding by a court. Secoud, vttuål r8 represeutation cannot sewe as an end run arouud the due proc€ss issue i¡ this case The 19 standa¡d for virn¡aÌ representation is simíla¡ to the ståndård for alter egos. Iu order for a 20 Court to find parties are alter egos, '[t]bere must be such unþ of i¡terest and ownenhip 2l tlat one is inseparable from tbe otber." Truck Inç. Exch. v. Pqlmeç J.- $wBtrSo¡.JPc. r89 22 P.gd 656, 66o CNev. zooS). The determining factor of virtual representation "is such 23 identity of ioterest as to give reasonable assu¡ance that the coutingent rigbts of the absent 24 party will be protected by the person joiued in the suil" Harrís v Jackson. r9a SWSd 297, go¡ (Ky. (May 24, zooó) (+roting v. Nat & Thtst,,Co, of 25 zoo6), as mod Çhnoll First -Eggk d eË lJaz z6 l¿xingon^ zz7 S,W.zd4to, 411 (Ky.tgSo). There is a critic¡I distinction ín the degreeof tbe ËE Ë 27 unity of i¡terests. lhls distinction is reflected in the procedures courts may take to áÉã ¡oê z8 determine alter ego relatlonships and virh¡al representation. Courts must provide nodce 6 ô I potentÍal alter egos regarding cåses seeking to establish alter ego relationships. A court 2 may not rely on a virhial representation determination, even if oue bad existed in this case, inherent in an 3 to deprive a party of the opporttuity to add¡ess the higher unity of interest 4 alter ego relationship. proper notice of case oS'CI- 5 The Cou¡t correctly found that WSBC did not receive 6 00436, Because this finding was not erroneous, this argument by Abbott is not a proPer 7 basis for the Cou¡t to reconsider its ruiing' B III. Conclusion that its February u, zot6 9 Abbott failed to provide a basis for the Court to conclude lo ruling was erroneow. Tbe Cou¡t denies Abbotl's Motion to Reconsider the Cou¡t's Ruling and 11 Dated February 11, 2o1ó. The Court grants Abtott's Motion to Seal Exhibits 8 and 9 t2 vacates the hearing currently set for April rz, zot6. 13 L4 ê- 15 DÀTED tbis day of March, zo16. 16 L7 i8 BsLL 19 DIsrruCr COURT JUDGE 20 2t 22 23 24 J J 25 ûl dë Êa ol tr¡ 26 ãkJ=2 À l'': F a1 27 e ES /{ oâ 2B 7 t CBrrrrrclrs or SsRvfcE 2 Tbe u¡dersigped bereþ e¿rtiûes that on the date of filing, a copy of thís Order was 3 electronícally serveil tbrougb tbe Eigbth Juöcial District Court EFP system or, if no e'mail 4 was provided, by facsimile, U.S. Mail and/or placed in the Clerk's Office attorney folde(s) 5 for: 6 Name PaËy 7 I Joh¡W. Mujie, Esq. Cou¡sel for Mild¡ed Abbon Jobn W. Mujie & Associates 9 A¡sel Ford. Eso, 10 Brian D. Shapiro, Esq. Cour¡s€l for Stanley Cbesley t1 Bria¡ D. Shapiro, LLC t2 Tbomas Fell, Esq. Counsel for Castano Directed Trust 13 Fen¡emore Craig, P.C. Distribution 14 Will Kemp, Fsq. Kemp, Jones & Coulthard, LLP Counsel for Wa lte Sch¡eider 15 Bayless & Chæley Co. r6 Donald J. Itatrerty, Esq. Cohen. Todd. Kite & Stanford, LLC t7 18 19 20 2t 22 23 d" ELBYDA¡IL 24 LAw C[^ER& Dnpenr¡¿rxr VII 25 cqõ>t -,= AFFIRMATION 9BE z6 Pursuant to NRS 23s8.æ0 ;l¡-E9rr14 Tho undorslgnod doos hot€by aftum thsttho pro€dhnl¡gålgû!fflQEl$ûlôd ln Dbt¡lcl Coutt css€ nurnD€r A€266f € DOÉS XOT conbbì üe sodsl sscr¡tlv ËËF zT numlor ol ony psßon. 3åå ,a @oBþ Obùlcl Court Judgo I EXHIBIT 20 Magistrate's Order in ABC Action 6 +Z) ffiruTffiffiffiM JAN 1 I 2017 PROBATE DIVISION HAMILTON COUNTY, OHIO flffiAffiË ruff, âl IN THE MATTER OF: Case No.2016003659 WAITE, SCHNEIDER, BAYLESS & Judge Ralph E. Winkler CHESLEY CO., L,P.A. Magistrate Rogena D. Stargel ORDER DENYING MOTION TO DISMISS OR IN THE ALTERNATIVE TO STAY THE PROCEEDINGS IN THE ASSIGNMENT FOR THE BENEFIT OF CREDITORS ACTION (MAGISTRATE'S ORDER) Thrs matter comes before the Court on the 1Oth day of January 2017 for heartng on the Motron to Drsmrss or rn the Alternat¡ve, to Stay the Proceedtngs tn the Assrgnment for Benefrt of Credrtors Actron Present before the court was Brlan Sulllvan on behalf of the Movants 1 Also appeanng was Mlchael Galasso on behalf of the Assrgnee and Donald Rafferty on behalf of the Asstgnor The Movants argue that they are entrtled to the reltef sought because the probate actron rs predrcated on tssues already decrded by a Kentucky court and on tssues whlch have been argued and are currently pendrng before the Unrted States Dtstnct Court for the Southern Drstr¡ct of Ohro The Movants fufiher argue that ln the tnterest of comtty and ¡udrcral economy the probate matter should be dlsmtssed or ln the alternatlve stayed FINDINGS OF FACT I make the followrng frndrngs of fact FILED t, c 0 Lr'ïT. çgTTt,'*, "r,:åt [13È't' 20ll JÀfl 19 ÂH 8: I I r The movants represent 20 lndlvrduals out of a class of 300+ plarntrffs who secured a $42,000,000 00 ¡udgment agarnsl Stanley Chesley ln Boone County Clrcutt Coult proceedtngs 1 1 Stanley M Chesley tncorporated Warte, Schnerder, Bayless and Chesley, Co , LPA (hereafter "WSBC") on February 22, 1982 Mr Chesley was the tnrttal drrector and sole shareholder 2 On Aprrl 1 5,2013 at the annual meetrng of the shareholders, Mr Chesley, then servrng as presrdent of the WSBC, appornted Thomas F Rehme as presrdent of WSBC At the same meetrng, Stanley Chesley, rn hts capactty as the sole stockholder of WSBC, transferred all of the votrng shares of the corporatron to Thomas F Rehme, Trustee 2 On thrs same date Thomas F Rehme was elected as the sole drrector of the corporatron Mr Rehme was charged wrth wrndrng up the busrness atfatrs of WSBC Stanley Chesley held a benefrcral rnterest rn the corporatron and would be entrtled to recetve any funds remarnrng after payment of the credltors of WSBC 3 On Aprrl 1 5,2013, the annual meetrng of the Board of Drrectors of WSBC was held At thrs meetrng offrcers were nomrnated and elected Thomas F Rehme was elected as Presrdent, Vrce Prestdent, Secretary and Treasurer of WSBC 4 On September 1 ,2016, Thomas F Rehme, Trustee transferred all of the shares of WSBC to Thomas F Rehme, Trustee, lnc (hereafter "Rehme")thereby makrng Rehme the sole shareholder of WSBC Rehme authorrzed and consented to the commencement of the Assrgnment of Benefrt of Credttors actton rn Hamrlton County Probate Court Thomas F Rehme was authorrzed by Rehme to execute all documents necessary to effectuate the assrgnment for benefrt of credrtors actron 5 Stanley Chesley was drsbarred by the State of Kentucky n 2012 Mr Chesley resrgned h¡s Ohro lrcense to practrce law rn Apnl 2013 2 The mrnutes of the Aprrl 15,2013 Annual Meetrng of Shareholders references Mr Rehme as Thomas F Rehme only The Jornt Wrrtten Consent lo Actron of the Shareholder and Board of Drrectors of Warte, Schnerder, Bayless and Chesley, Co , LPA references Mr Rehme as Thomas F Rehme, Trustee 2 6 On August 1,2014, the Boone Crrcurt Court of Kentucky entered ludgment agarnst Mr Chesley, frndrng hlm ¡orntly and severally llable wlth others for g42,000,000 00 Thls order was amended on October 22,2014 The amendment dtd not rmpact the amount of the ¡udgment rendered agatnst Mr Chesley 7 On June 23, 2015, the Boone County Crrcurt Court lssued an order to Mr Chesley drrectrng hrm to transfer hrs beneftctal tnterest tn hts shares of WSBC to the rnovants through therr counsel 3 The order further ordered Mr Chesley to drrect Thomas F Rehme to make all payments that were denved from Mr Chesley's tnterest tn WSBC to movants' counsel, Angela Ford Nerther Thomas F Rehme nor WSBC were parttes to these proceedtngs 8 On September 25,2015, the Boone County Ctrcurt Court constdered a motton to execute whlch was filed by Mr Chesley's credttors The Boone County Clrcutt Court held that the 2013 Wrnd-Up Agreement was nothtng more than a sham engtneered to prevent Mr Chesley's credrtors from collectrng on the $42,000,000 00ludgment The Boone County Ctrcurt Court rssued another order to Mr Chesley whrch drrected hrm to ¡mmedlately transfer hls ownershrp rnterest rn WSBC to movants through therr counsel The court further ordered that all monetary payments due to Mr Chesley from hts rnterest rn WSBC was to be pard to movants'counsel The order also drrected all payments due to Mr , Chesley from the Trustee of the Castano Trust and a matter4 pendrng ln the Colorado Drstrrct Court was to be pard to Movants' counsel Nerther Thomas F Rehme norWSBC were made partres to these proceedrngs 3 The Crrcu¡t Court ruled that Stanley Chesley marntarned a benef¡cral rnterest rn WSBC 4 Menlyn Cook, et al v Rockwell lnt'l Corp , Case No 1 90-cv-00181-JLK 3 g Mr Chesley has not comphed wrth the orders of the Boone County Clrcutt Court WSBC has transferred no payments to Movants' counsel 10 The Movants do not beheve that the Asstgnee, Enc Goerlng, wtll protect thetr lnterests The Movants fear that the Assrgnee rmproperly pay corporate debts whlch wtll decrease the total amount of money ava¡lable to the Movants to satrsfy the Kentucky ludgment 11 The Assrgnee argues that the Movants are not shareholders of WSBC The Movants cannot be shareholders of WSBC as they are not ltcensed Ohto attorneys The WSBC corporate records rnd¡cate that Thomas F Rehme, Trustee, lnc ts the sole shareholder and drrector of WSBC The Asstgnee asserts that the Movants hold no ludgment agarnst WSBC The Assrgnee also argues that the Boone County Clrcult Court Orders are not self-effectuatrng tn Ohro as netther WSBC or Thomas F Rehme were partres to the Kentucky proceedrngs and Stanley Chesley has not transferred any benefrcral rnterest to the Movants 12 Errc Goerrng ln hls capacrty as the Assrgnee has represented to the court that he ls a non-rnterested thrrd party who w¡ll admtn¡ster the ABC case so as to maxtmlze the return to all of the credrtors He has asseded that he wlll pay the credttor's clalms as dlrected by thrs court, rncludrng any money that may be owed to Movants tf recogntzed by thrs court þs an approprrate clalmant of Mr Chesley DECISION Movants' counsel argues that the federal court ts the proper forum to provrde more complete relref between the partres Counsef further argues that the federal court possesses greater famrlrarrty and greater expertrse wrth the trral of such rssues as rnvolved ln thrs case Counsel has frled motrons tn the Federal Drstrtct Court whrch have 4 been argued, but not yet declded Counsel clalms that drsposltlon of the federal court motlons wlll determrne whether Stanley Chesley fraudulently transferred hls lnterest tn WSBC to avold hls credrtors and whether the Movants are the credrtors/owners of WSBC Counsel pornts out, that unhke the Kentucky proceedtngs, the Federal proceedrngs rnclude WSBC and Thomas F Rehme as parttes Counsel takes the posrtron that the ABC proceedrngs are unnecessary as the tssues related to the 5 hqurdatron of WSBC are already pendrng before the federal dlstrrct court Counsel posrts the ABC proceedrng wrll attempt to drstnbute assets that have already been executed upon by the movants thereby caus¡ng trreparable harm to the Movants Movants' counsel also argues that contrnuatton of the probate proceedtng ts dupltcattve gtven the pendrng federal proceedrngs and would not be ln the best lnterest of ¡udtctal economy Lastly, counsel argues that the federal court ts supporttve of Movants' posrtron as demonstrated by the Temporary Restrarnrng Order lssued by the federal court on October 17 ,2016 6 The court flnds no merrt rn Movants' arguments The matters pendrng tn Federal Dtstnct Court do not squarely lrbe wrth matters to be ad¡udtcated rn the ABC proceedtng The purpose of the federal court actron rs to provtde a means for the credttors of Stanley Chesley to execute on the $42,000,000 00 ¡udgment The purpose of the ABC actron rs to wrnd-up the buslness affarrs of WSBC, to lrqutdate the assets of the corporatton, to pay the credltors of the corporatron and to drstrrbute any rematntng assets to Stanley Chesley ln settlement of hrs benefrcral rnterest The Ohro Revtsed Code provrdes a mechanlsm for an owner of a corporatron to pursue a process for orderly drstrrbut¡on of s As parl of the federal proceedrng, lhe Movants have requested the appotntment of a recerver for WSBC ó See Exhlblt C to Movants' Motron to Drsmrss lt should be noted that the ïemporary Restrarntng Order has srnce exprred 5 assets to satrsfy the debts and obhgatrons owed to the credltors of the corporatton To grant the rehef the Movants seek would be a dtsservlce to the credltors of WSBC Ïhere would be no party rnterest rn to collect the legal fees whtch are due to WSBC 7 lf the probate matter was drsmrssed ownershrp of the corporatton, pursuant to Ohlo law, would revert back to Rehme 0 The Movants have taken the posrtton that Thomas F Rehme, as sole shareholder and drrector of Rehme wtll take acttons whrch w¡ll favor Stanley Chesley, to the detrrment of the movants Untrl the federal court rules the pendrng motrons, the Movants have no abtlrty to enforce any ownershrp rtghts Therefore, the admrnrstratron of WSBC would remarn wrth Rehme Gtven the Movants' assertlon regardrng the fraudulent transactrons related to the transfer of the WSBC shares, thls court concludes that the reversron of ownershtp to Rehme rs not the result rntended by the Movants Thus, thrs court frnds that rs ultrmately tn the Movants' best rnterests to contrnue wtth the ABC actlon The use of ABC proceedrngs places a thrrd party tn charge of the ltqutdatron of the corporatron The Assrgnee can negottate the remarnrng bustness affarrs of the corporatron The non-rnterested Asstgnee can marshal assets, prevent unnecessary expendrtures and safeguard agarnst any rmproper transfer of corporate assets The Assrgnee can steer lrqurdatron of the corporatton rn an effrctent, ttmely and orderly fashron Presently, Rehme rs the sole shareholder of WSBC As the sole shareholder of WSBS, Rehme exercrsed hrs Ohro statutory rrghts to purse hqurdatron of the corporatron z Please refer to Assrgnee's Notrce of Supplemental Authortty frled herern January 10,2017, where the Colorado Drstnct Court den¡ed the Movants request to substrtute them as real partres rn rnterest for Stanley Chesley I An Ohro lrcensed attorney must operate the LPA 6 through an ABC proceedrng There are no grounds to grant Movantg' request to dtsmlss a matter that has been properly rnrtrated by the owner of the corporatton Fufthermore, the Movants lack standrng to assert any oblecttonse to these proceedtngs as they are not credrtors of WSBC At best the Movants are credttors of Stanley Chesley The court acknowledges that the Movants have a vested tnterested tn assurtng that any monles whrch may be due to Stanley Chesley as the result of hrs beneftclal lnterest ln WSBC are not drmln¡shed Admrttedly, the Movants may be able to assert an lnterest tn money due to Mr Chesley upon lrqurdatron of WSBC and the Movants may be able to request dlstnbutlon of these funds to them rn satrsfactton of thetr Kentucky ¡udgment, but the Movants must frle the appropnate actron wrth thrs court to protect thetr lnterests ln these funds Contlnuatron of the ABC actron wrll not prohrbrt the Movants from asserttng any of these rtghts The ABC proceedrngs wrll not only assure that the corporate assets are hqurdated tn a manner so as to maxrmrze the potenttal return to the WSBC credttors and Stanley Chesley, but wlll also maxrmrze the possrble return to the Movants as well The more money payable to Mr Chesley, the more money potenttally avatlable to the Movants from whrch they may collect on thelr ¡udgment The courl also frnds no merrt rn the Movants' request to stay the proceedtngs The Federal Drstnct Court matter has been pendrng for several months Movants' counsel does not know when the federal court wrll rssue rts dectsron Th¡s court frnds that the tssuance of an order of stay does no servrce to anyone as all WSBC matters w¡ll be held rn l¡mbo Expenses wrll be ongorng Assets of the corporatron may go e See R C 1313 05 and R C 1313 06 7 uncollected as there is no certarnty as to who rs entttled to pursue collectlon of sald assets Lrqutdatron of the marshalled assets wlll have to cease untrl the stay ts ltfted The wlnd-up of the corporate affarrs wrll be prolonged thereby prolongtng any potenttal recovery to the Movants Thrs court frnds that conttnuatron of the ABC actlon ls tn the best rnterests of WSBC, WSBC credltors, Stanley Chesley and the Movants lT lS ORDERED AND ADJUDGED that the relref sought rn the Motron rs hereby denled The Assrgnment for Benefrt of Cred¡tors Actron shall proceed pursuant to R C 1313 01, et seq IT IS SO ORDERED M Rogena D Stargel CERTIFICATION The court adopts this order as ¡ts judgment without waiting for the filing of timely objections by the parties. Written objections must be filed within ten days to stay the execution of this Order. A party may not raise on appeal the court's adoption of any finding of fact or conclusion of law, whether or not specifically designated as a finding of fact or conclusion of law under Civ. R. 53(DX3Xa)(ii), unless the party specifically and timely objects to said finding of fact or conclusion of law. Civ. R. 53. Ralph Winkler, Judge A (]ÜpY 0l' Tþll$ ['l,i'iRY cc Mrchael Galasso, Esq WAS MAILED Tf) Iþi[ PA ni ES 1 Bnan Sulltvan, Esq LISTE Ëil 0N Donald Rafferty, Esq Urrul\ uu irK I EXHIBIT 21 ORDER ESTABLISHING BAR DATES FOR FILING OF PROOFS OF CLAIM EXHIBIT 22 TRANSCRIPT OF JANUARY 10, 2017 Page 1 COURT OF COMMON PLEAS HAMILTON COUNTY, OHIO PROBATE DIVISION * * * IN THE MATTER OF: WAITE, SCHNEIDER,. BAYLESS & CHESLEY CO., LPA CASE NO. 2016003659 * * * Partial Transcription of Hearing before Magistrate Rogena D. Stargel, pursuant to the Rules of Civil Procedure, by Patti Stachler, RMR, CRR, CLR, CME, a Notary Public within and for the State of Ohio, January 10, 2017. * * * Audio Transcription Page 2 1 APPEARANCES: 2 3 On behalf of the Assignee: 4 Robbins, Kelly, Patterson & Tucker 5 By: Michael A. Galasso, Esq. The Federated Building 6 7 West Seventh Street Suite 1400 7 Cincinnati, Ohio 45202 513.721.3330 8 [email protected] 9 10 On behalf of the Crediors: 11 Dinsmore & Shohl, LLP 12 By: Brian S. Sullivan, Esq. First Financial Center 13 255 East Fifth Street Cincinnati, Ohio 45202 14 513.977.8200 [email protected] 15 16 * * * 17 18 19 20 21 22 23 24 25 Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 3 1 P R O C E E D I N G S 2 THE MAGISTRATE: This is the 3 matter of Waite, Schneider, Bayless, Chesley 4 Company, LPA, Case Number 2016003659. We're 5 here today for several matters. One is the 6 motion to dismiss or, in the alternative, stay 7 the proceedings which have been filed by what 8 I'm going to refer to as the McGirr plaintiffs. 9 Then the assignee has filed the 10 following: an application authorizing the 11 retention of an accounting firm; an application 12 authorizing the retention of a legal firm, 13 Robbins, Kelly, Patterson & Tucker; an 14 application authorizing retention of Jonathan 15 Coughlin to advise on ethical issues; an 16 application for an order establishing 17 procedures for interim compensation and 18 reimbursement of professionals; an application 19 to notify creditors and establish the bar date 20 for claims; an application for sale of office 21 equipment and other assets; the rehearing on 22 the application of the order which authorized 23 service of the pleadings by ordinary mail; and 24 an application for the appointment -- 25 employment of Levin Sitcoff firm as counsel for Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 4 1 the assignee in the Rocky Flats litigation. 2 Have I left anything out? 3 MR. SULLIVAN: No, your Honor. 4 THE MAGISTRATE: Okay. I would 5 assume, Mr. Sullivan, you would like to start with 6 the motion to dismiss. 7 MR. SULLIVAN: We would. 8 THE MAGISTRATE: All right. 9 MR. SULLIVAN: Your Honor, Brian 10 Sullivan, Christen Steimle on behalf of the 11 plaintiffs. 12 Unfortunately, your Honor, this is 13 yet another saga between my clients and 14 Mr. Chesley at Waite Schneider law firm. As 15 the Court is probably well aware, this -- a 16 number of Courts have rendered opinions about 17 this dispute, including the Ohio Supreme Court. 18 The reason we're here today is we 19 filed an action in the United States District 20 Court for the Southern District of Ohio 21 involving the very same issues in which they're 22 trying to avoid by filing this assignment to 23 the benefit of creditors. But in that action, 24 your Honor, we filed against Mr. Chesley and 25 the Waite Schneider law firm. I'm going to Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 5 1 take you back just very briefly, but this all 2 emanates from Mr. Chesley's pending disbarment 3 with the Ohio Supreme Court. He decided to 4 transfer the assets out of his name to his 5 longtime colleague and friend Tom Rehme. He 6 did so in April of 2013. 7 That transaction, which is called 8 the windup agreement, has been the subject of a 9 series of judicial rulings, mostly from the 10 Kentucky court where these plaintiffs sued 11 Mr. Chesley for the underlying Fen-Phen fraud 12 that was involved and obtained a substantial 13 judgment against him. But two times the judge 14 in Kentucky has rendered an opinion on that 15 transaction, in July and September of 2016. 16 Each time, it was not met kindly by the Court 17 because at the last opinion in September of 18 2016, Judge Schrand described it as a sham 19 transaction and ordered Mr. Chesley to unwind 20 that. He's not done that, and they freely 21 admit that Mr. Chesley has refused to do that. 22 We implemented the lawsuit against 23 Waite Schneider in the federal court, as I just 24 mentioned, and we obtained a series of 25 temporary restraining orders. Initially, one Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 6 1 involving a fee that was the subject of dis -- 2 a claim in the Duke Energy class action matter. 3 We -- that deposit has been made, so there's 4 about a million-eight that's sitting with the 5 Judge Cleland, who is sitting by assignment. 6 All the federal judges here recused themselves, 7 so Judge Cleland out of Detroit, Eastern 8 District of Michigan, is hearing the case. 9 Then we went through a significant 10 process of a preliminary injunction hearing. 11 We took testimony, and I will freely suggest or 12 admit to the Court everything in that case has 13 been contentious, litigated to the hilt. We 14 were able to obtain a leave from the Court to 15 allow us to take discovery. 16 I took the deposition of Steve 17 Horner, who was, for all intents and purposes 18 during all the relevant time period, the 19 accountant at Waite Schneider. I took the 20 deposition of Tom Rehme. We had to get an 21 order from Judge Martin to allow that to happen 22 here in Hamilton County, and I took the 23 deposition of Mr. Rehme, who was the supposed 24 person who Mr. Chesley transferred the law firm 25 assets to. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 7 1 Significantly, that testimony was the 2 subject and is the subject of the federal court 3 case. The questions posed to them were, what are 4 the creditors, what are the debts of Waite 5 Schneider. These would be the two people to ask. 6 They both testified under oath that they had no 7 knowledge of any debts belonging to the law firm. 8 Now, this is testimony taken in 2016. There's a 9 series of events that are the subject of dispute 10 from the time Mr. Chesley signed the windup 11 agreement until then, which is part of the 12 lawsuit. It's a number of transactions 13 essentially where he continued to use the law firm 14 for his own free purposes and took out millions of 15 dollars, which we're asking the federal court to 16 have Mr. Chesley be held accountable as well as 17 Mr. Rehme and Waite Schneider for allowing that to 18 happen. 19 But when asked the question, who 20 are the -- what are the debts, they both said 21 they don't know of any. 22 Now, they then -- we go through a 23 two-day preliminary injunction hearing. Each 24 side puts on testimony. We introduce the 25 testimony of Mr. Horner. That's been tendered Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 8 1 to Judge Cleland. We gave him the deposition 2 of Tom Rehme. That's in front of him. And 3 Waite Schneider and Mr. Chesley were allowed 4 their opportunity to put in evidence and they 5 brought five witnesses who testified live, 6 including one, who's Marion Little. 7 Marion Little is a lawyer in 8 Columbus who prepared the windup agreement 9 that's at the subject of all of this dispute 10 and gave testimony as to what its purpose was, 11 what its intent is, and what is the effect. 12 We've argued back and forth in a 13 series of these different cases what is the 14 effect of the windup agreement. But Mr. Little 15 testified under oath in the federal case that 16 Mr. Chesley is the beneficiary of the assets. 17 Undisputed. That's been -- and that testimony 18 was taken in July of 2016 when I cross-examined 19 him. 20 So you have the person who said 21 the windup agreement supposedly transferred the 22 assets, belongs to Mr. Chesley. You have the 23 two employees at Waite Schneider, because 24 Mr. Rehme was an unpaid employee, but he did 25 work there, who have said there are no debts. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 9 1 And we're on the verge of waiting for Judge 2 Cleland to issue a preliminary injunction. 3 It's been fully argued, briefed, evidence 4 submitted. That's at the end of July. And 5 then the briefing occurs. There's motions to 6 dismiss. There's all sorts of other stuff 7 going on. 8 Then what happens? These 9 entities, Mr. Chesley and the Waite Schneider 10 law firm, decide to create yet another 11 opportunity to have another Court hear their 12 essentially dispute. And they run to this 13 Court and file this assignment for the benefit 14 of creditors. 15 Unbeknownst to us, because they 16 didn't tell us about this until after the fact, 17 but it appears that Mr. Rehme, who's on the 18 receiving end of one preliminary injunction -- 19 or temporary restraining order, on the 20 receiving end of a preliminary injunction 21 hearing, while we're waiting for that decision, 22 transfers the assets of Waite Schneider out of 23 his name to a company created by the Waite 24 Schneider lawyer, Mr. Rafferty. We never knew 25 about this, but this corporation is Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 10 1 incorporated on August 30th. It's called Tom 2 Rehme Trustee, Inc. He transfers the assets 3 there. The next day he transfers it to 4 Mr. Goering and says, here, you deal with this 5 law firm in winding up the affairs. And then 6 they file that with Judge Cleland. 7 We file a restraining order motion 8 in front of Judge Cleland and he granted it. 9 And it's important, your Honor, that I just 10 point out a couple of the things that he said 11 in his temporary restraining order, which I 12 think is relevant for our purpose here today. 13 He says, The Court finds that without 14 temporary injunctive relief, there is a 15 significant risk that Waite, Schneider, Bayless & 16 Chesley's assets will be liquidated without 17 recognition of plaintiffs' claims -- that's my 18 client -- before a decision as to their status can 19 be made and plaintiffs will be left without any 20 recourse. 21 That's one thing he finds. He finds 22 that -- after he says that, our status as creditor 23 of Waite Schneider squarely before the Court, 24 Thus, through this purported assignment, 25 Rehme/Waite Schneider has attempted to remove this Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 11 1 decision from the Court, place it in the plenary 2 discretion of the new assignee who will have 3 unfettered authority to deny plaintiffs' claims 4 and sell or liquidate all of Waite, Schneider, 5 Bayless & Chesley assets before a fair and 6 impartial decision can be made. 7 Those are the findings of the Federal 8 Court when he granted the injunctive relief. And 9 then it was about to expire and we asked the Court 10 to renew it, and he did. We have three 11 restraining orders on this issue which tell Waite 12 Schneider, you cannot proceed further in this 13 action. 14 Unfortunately, we have a gap in 15 time. The restraining order ended, the 16 preliminary injunction has not yet been ruled 17 upon by the Court. It is still pending. And 18 since that date, they've now engaged in a 19 series of maneuvers in an effort to what we 20 view is deny our clients their right and 21 further the interest of Mr. Chesley and his 22 interest. 23 How do I say -- what's the basis 24 for that? I'd like to -- your Honor, it was 25 interesting because despite the testimony of Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 12 1 these two people said there's no creditors, 2 that they have drummed up some list of here are 3 the creditors of which we think are existing 4 out there. 5 The first is the Internal Revenue 6 Service. That's a creditor of Mr. Chesley. 7 The Waite Schneider law firm was owned by him. 8 To the extent that Waite Schneider law firm had 9 an IRS obligation while he was the owner, that 10 obligation flows to Mr. Chesley, that's 11 Mr. Chesley's obligation. 12 They cite two claims by former 13 employees. I don't know who those are because 14 they don't identify them, but there are no 15 former employees. All of them were gone when 16 the windup agreement was signed except for 17 Mr. Horner, who was the only paid employee, and 18 a part-time secretary, Mr. Rehme, said he 19 didn't take anything. 20 Another creditor is Stan Chesley 21 himself. They claim by indemnification. Stan is 22 the ultimate recipient of the assets of Waite 23 Schneider. He's now a creditor of Waite Schneider 24 according to this indemnification and he is the 25 defendant who's participated in this scheme for Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 13 1 the last three-and-a-half years where he's used 2 Waite Schneider to take money out for his own 3 personal benefit without really any justification, 4 but certainly with the knowledge of Mr. Rehme and 5 Mr. Horner. 6 Another creditor is the Frost 7 Brown Todd law firm. Frost Brown Todd is 8 Mr. Chesley's personal counsel, always has 9 been. In the case -- in the preliminary 10 injunction case that we had in front of 11 Judge Cleland, I asked those questions. Frost 12 Brown has never once entered an appearance for 13 Waite, Schneider, Bayless & Chesley. How is it 14 a creditor of the law firm? It's not. It's 15 Mr. Chesley's lawyers. And the list goes on. 16 All of these are identified as creditors of the 17 law firm and they are not. 18 I'll submit, your Honor, this is yet 19 another sham lawsuit, the same kind of lawsuit the 20 Ohio Supreme Court described when Waite Schneider 21 and Mr. Chesley decided to sue my clients and this 22 forum -- he was the lawyer -- in front of Judge 23 Ruehlman, and they got orders from Judge Ruehlman 24 because they found friendly forum until we went to 25 the Ohio Supreme Court and the Ohio Supreme Court Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 14 1 called them out and said, that's a sham lawsuit. 2 There was no basis to bring it in the first place, 3 there was no basis to continue it, and ordered 4 Judge Ruehlman to terminate the case, which he 5 finally did. 6 That's what we're faced with here. 7 They've run to this Court to find another 8 friendly forum for issues that are litigated 9 currently in the federal court in the Eastern 10 District of Michigan sitting by assignment. 11 They may not like the rulings, but they're 12 getting a fair shake. They're getting their 13 opportunity to be heard. They're getting the 14 opportunity to put on evidence. We're waiting 15 for a decision. 16 What we don't get here is an assignee 17 who's already denied our existence as a creditor. 18 They fight us tooth and nail on our existence to 19 do anything in this case. They decide that 20 they're a bunch of trumped up creditors, despite 21 the evidence which is clearly overwhelming to the 22 contrary, and at the end of the day they want to 23 cull together assets to pay to Mr. Chesley. 24 That's Mr. Little's testimony, where the money's 25 ultimately going. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 15 1 The only way we're going to be 2 able to tell Mr. Chesley and the Waite 3 Schneider law firm to stop is to do what we've 4 done. Stay this matter. It's already being 5 heard. We've already asked for a receiver. 6 The same thing as an assignee. Judge Cleland's 7 considering that. All of the assets of Waite 8 Schneider have been in front of Judge Cleland 9 now for a significant period of time. 10 We've alleged a series of 11 fraudulent transfers from Mr. Rehme and Waite 12 Schneider that have allowed Mr. Chesley to take 13 money out of the law firm for his own personal 14 benefit. All of that can't be litigated here. 15 And, finally, Mr. Chesley himself 16 is a defendant in our case in federal court. 17 He's not a defendant here, can't be a party 18 here. He's what they identify as a creditor. 19 He's somebody they're looking out for. 20 So, your Honor, the only way to 21 stop this nonsense, frankly, is now -- is to 22 grant our motion. They have a forum. We'll go 23 back to Judge Cleland, who will hear this and 24 he'll handle it in a manner that it should be 25 handled as to whether we have claims, whether Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 16 1 we're entitled to collect against Mr. Chesley, 2 whether we're entitled to collect against Waite 3 Schneider and Mr. Rehme, and that's the reason 4 we filed the motion. 5 THE MAGISTRATE: In all of the 6 proceedings that you spoke of when you were 7 pursuing the TROs and the preliminary injunctions, 8 had you ever brought in Waite Schneider as a 9 party? 10 MR. SULLIVAN: Yeah. In the federal 11 lawsuit, Waite Schneider is an original defendant. 12 Mr. Rehme is a defendant in that case as well. So 13 the Court has jurisdiction. And I don't know all 14 of the reasons, as I state in here, because, 15 again, a lot of pleadings have been filed, but 16 Waite Schneider and Mr. Rehme moved to dismiss the 17 complaint in that action, and I think one of them 18 was a jurisdictional claim and the Court recently 19 denied that motion to dismiss. 20 THE MAGISTRATE: Okay. And then in 21 your argument you're saying that your clients will 22 have no recourse if we don't dismiss this action? 23 MR. SULLIVAN: Correct. 24 THE MAGISTRATE: The law firm itself 25 would be the one entitled to any receipts, I would Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 17 1 assume. That's going to be a question I'm going 2 to be asking Mr. Galasso in a few minutes. 3 Mr. Chesley started the LPA, had many employees at 4 one point in time, and I know many of the 5 employees left. I don't know the timeline in 6 there. But wouldn't he collect earnings from the 7 company as the fees come in? It's not like a 8 check's written to Stan Chesley. Wouldn't the 9 check be written -- 10 MR. SULLIVAN: Well, you know, that's 11 a good question, and the answer is, it's not 12 clear. I'll use an example. During the existence 13 of Waite, Schneider, Chesley -- Mr. Chesley was 14 involved in what we call the Castano Trust. It's 15 the tobacco litigation. And payment is made 16 quarterly of 600-some-thousand dollars for a 17 number of years. There's been a lot of debate as 18 to who's entitled to that money, whether it's 19 Mr. Chesley himself or whether it's the law firm. 20 And I won't get -- bore you with 21 all the details, but it's been litigated 22 extensively about whether it's Mr. Chesley's 23 claim, it's the law firm's claim. So money 24 does go -- because he is the one who has 25 received all of that money, right up until the Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 18 1 time had we filed this. 2 So when the windup agreement had 3 already been signed, supposedly Mr. Rehme's 4 running the shop, those payments of 5 600-some-thousand dollars on a quarterly basis 6 would have gone to Mr. Chesley. He's put it in 7 his pocket. 8 You need to remember the other 9 point, your Honor, is, the law firm 10 essentially, the only assets it has is a stream 11 of potential income for lawsuits that were 12 settled or got resolved while the law firm had 13 the case. They're -- we're running out of 14 assets. That's our problem. The Castano 15 Trust, money is being paid out, a substantial 16 amount is already being paid out. This Rocky 17 Flats, which Mr. Rehme identified in his 18 deposition, is the biggest asset. 19 I deposed Louise Roselle, who is a 20 former employee of the law firm, and it was the 21 biggest asset. That Rocky Flats case settled. 22 And there's a fee claim due, I think, coming 23 soon, either tomorrow or the next day or next 24 week, I can't remember which, for the 25 plaintiffs' fees. Mr. Chesley and his law firm Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 19 1 are one of many. That's been a big issue about 2 who gets to represent Waite Schneider, and 3 that's a lot of the reasons they filed this 4 motion to appoint a Colorado lawyer. 5 We are very concerned because 6 Mr. Galasso has represented that only $4 million 7 would be the fee claim. We know from the facts of 8 that case that the fee award's approximately $90 9 million given the size of the settlement, and so, 10 you know, we're concerned that that's one of the 11 few remaining assets that can be used, actually, 12 to satisfy our claims. And I do and they'll tell 13 you because they got a ruling from the Colorado 14 Court yesterday -- but I would think, if you look 15 at the Colorado Court, while it denied the motion 16 to intervene or substitute as a party -- and I get 17 that Mr. Chesley's not, you know, entitled to a 18 fee out there. It's the Waite Schneider law firm. 19 Effectively what the Colorado Court judge did 20 yesterday is say this belongs with Judge Cleland 21 in the McGirr case. And that's where we think it 22 does belong ultimately is with Judge Cleland in 23 the McGirr case because that is an asset that we 24 can use to satisfy our claims. 25 They don't have many other assets Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 20 1 beyond that. Most of these cases have run out 2 or settled or whatever, or they've been 3 transferred to the successor firm, for lack of 4 a better word. It's not truly the successor, 5 but the Markovits, Stock, DeMarco law firm was 6 created and they took a number of the cases. 7 But we're running out of places to 8 find money to satisfy our clients' claims 9 against Mr. Chesley, who is the owner of the 10 law firm who, you know, transferred the law 11 firm's interest to his friend in the sham 12 transaction that has been described. So that's 13 why it's a significant problem here. 14 And, you know, again, I don't want 15 to underscore -- I can't find a better word 16 than to say offended that they would tell you 17 that their biggest claims are the lawyers that 18 represent Stan personally or the IRS that Stan 19 owes personally. I mean, that's offensive to 20 say that you're going to go out and get assets 21 to satisfy the creditors of Waite Schneider and 22 you recognize the creditors should be his 23 lawyers, the IRS, and himself. 24 THE MAGISTRATE: Well, there would be 25 proofs of claim that would have to be filed and Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 21 1 there would be documentation to support these are 2 Waite Schneider's debts. 3 MR. SULLIVAN: There would. But I 4 would suggest I think Judge Cleland is dead on 5 when he suspects that we won't get a fair shake. 6 And I think that's true because we've already been 7 denied our existence as creditors. It's a debated 8 issue, but they've already filed pleadings with 9 this Court to say we don't have a claim against 10 Waite Schneider. 11 THE MAGISTRATE: To me it's like a 12 puzzle, and so that's why I'm struggling. I am 13 sympathetic to your clients' positions and the 14 mountain that you have to overcome, but I still 15 start from the position that this LPA has been in 16 existence since the '80s, I believe. It was an 17 ongoing concern. It was a business. They had to 18 file appropriate tax returns. They had all the 19 reporting requirements for employees. 20 So I have a business and I'm going 21 to either have legitimate creditors or I'm not. 22 The assignee is going to have to issue proofs 23 of claim. People are going to have to come in 24 and provide proper documentation. I believe in 25 the ABC case the Court would be able to ferret Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 22 1 out this is a legitimate claim of Waite 2 Schneider versus, oh, no, this is coming from 3 Stan Chesley's individual obligations and so it 4 will not be honored. So we would be able to 5 tee it all up, pay the assets. And then you do 6 have a judgment from Kentucky which the Court 7 would give full, faith, and credit and would 8 honor and you would have the ability to assert 9 a creditor's bill against whatever might be 10 left going to Mr. Chesley. And this Court has 11 oftentimes recognized those and have redirected 12 payments -- 13 MR. SULLIVAN: Right, but -- 14 THE MAGISTRATE: -- to the 15 beneficiary, to -- 16 MR. SULLIVAN: -- remember, when you 17 say that people can come in and make a claim, 18 we've already taken that evidence. We've already 19 asked the people who ran the business -- 20 THE MAGISTRATE: But the ABC -- 21 MR. SULLIVAN: -- who are the 22 creditors of the law firm? And they said there 23 are none. For instance, I'll use as an example. 24 The lease where the Waite Schneider law firm was, 25 the lease expired that month. It's not a Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 23 1 three-year written obligation unless they've 2 entered into that since then. But at the time 3 there was even no further lease obligation. Are 4 there employee claims, 401(k)? No, those have 5 been fully satisfied. Stan's pension has been 6 fully satisfied. 7 THE MAGISTRATE: You were able to 8 verify that in all the -- in the federal 9 litigation? 10 MR. SULLIVAN: Well, I'll take the 11 sworn testimony of these witnesses to be truthful, 12 yeah. 13 THE MAGISTRATE: Them saying that it 14 was. Okay. 15 MR. SULLIVAN: Yeah. I mean, if 16 they -- you know, if for some reason they weren't 17 accurate or truthful, that's a different question 18 altogether. But, you know, that's to say let's go 19 and ask who are the creditors. We've already done 20 that. We're in the middle of the litigation and 21 we've asked that very question and we've got an 22 answer. And now we've got this where they come in 23 and say, well, we have creditors. Well, those are 24 only creditors of his. And they claim he's an 25 ultimate creditor for this claim for Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 24 1 indemnification. 2 So I'm afraid, frankly, your 3 Honor, that this is going to be used as a sham 4 to continue to avoid the obligations to our 5 clients, to continue to use the assets for 6 Stan's personal benefit. It's the same thing 7 he did right up until the time -- right 8 after -- I mean, he filed the -- or signed the 9 windup agreement. 10 I mean, it's appalling what you 11 see in the evidence, that he would take out 12 money hand over fist. I mean, the testimony of 13 Mr. Rehme was essentially this. If Stan asked 14 for money, you would pay it. The answer's yes. 15 The man was on their checking account. They -- 16 I mean, again, it's egregious. They tell the 17 Court, well, this was a mistake. I asked 18 Mr. Horner, when did you discover this mistake 19 that Stan is writing checks to himself on the 20 law firm's checking account when he's no longer 21 a lawyer? Well, we discovered it just a couple 22 weeks before I took his deposition. 23 I mean, there's no confidence at 24 all that any of these people will do anything 25 that's right, justified, or in accordance with Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 25 1 the ultimate beneficiaries, us. 2 THE MAGISTRATE: Well, now the assets 3 have been switched to the assignee, so what 4 argument can you have that Mr. Goering's not going 5 to do what he should be doing? 6 MR. SULLIVAN: Because Mr. Goering is 7 fighting me tooth and nail through a lawyer that 8 they're hiring. Everything we filed, they file 9 against us. They've already said in their 10 pleadings they don't recognize us as creditors. 11 Do I believe that Mr. Goering will give us a fair 12 shake? No, I don't. Do I think Mr. Galasso will 13 give us a fair shake? No. Do I think any of 14 that's necessary? Ultimate answer's no because I 15 got a federal judge who's considering the issue 16 and has already said in an order the transfer from 17 Mr. Rehme to Mr. Goering is forum shopping. 18 I don't have Brian Sullivan's 19 opinion. I've got a federal judge who put that 20 in an order. That's pretty significant. And 21 mindful, your Honor, this comes on the heels of 22 the law firm sued our clients and the Ohio 23 Supreme Court had to tell them it's a sham 24 lawsuit. Do I think that law firm's going to 25 be fair to us? There's no possible way. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 26 1 THE MAGISTRATE: Thank you. 2 Mr. Galasso. 3 MR. GALASSO: Thank you, your Honor. 4 I'm going to go out of order a little bit in what 5 I would normally do. 6 THE MAGISTRATE: Okay. 7 MR. GALASSO: So normally I would 8 just talk about what my response to the motion is. 9 But there are so many inaccuracies in what was 10 just said that I want to go through a few points 11 and clarify facts. 12 So the first thing I'd like to do 13 is talk about the fact that we are in your 14 courtroom today with no evidence, nothing. 15 What Mr. Sullivan says is not evidence. What 16 he says someone said in a deposition is not 17 evidence. And so procedurally, I don't know 18 how we got here. Because there is a procedure 19 to challenge whether Mr. Goering is unqualified 20 or he's not disinterested. There's a statutory 21 procedure in the ABC statute to follow. And 22 they chose not to do that. And, instead, they 23 chose to come to this Court and file a motion 24 with -- as far as I can tell has no precedent 25 whatsoever and take the position that we have Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 27 1 one citation that says that a Court has 2 equitable power to stay cases under certain 3 circumstances, which I'll concede the Court has 4 equitable power to stay cases. But that is not 5 the procedure that gets us here today. 6 On December 21st I sent a letter to 7 Mr. Sullivan and I said to him, In connection with 8 the motion that you filed on December 12, we would 9 like to depose your clients. I do not expect that 10 these depositions will take very long and that it 11 will be fine to schedule them an hour apart. 12 Additionally, we will travel to them in Kentucky. 13 In other words, Mr. Sullivan is 14 taking the position that his clients are the 15 owners of Waite, Schneider, Bayless & Chesley. 16 All of the evidence -- we've done a lot of work 17 to this point to administer this case. We can 18 find no evidence of that, and we're entitled to 19 know what the basis of these claims are. 20 Do you want to know what response 21 I got to this letter? Nothing. 22 So as we sit here today, there's 23 no evidence and Mr. Sullivan just comes in 24 and paraphrases things and talks about what 25 people -- other people talked about. I don't Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 28 1 understand how this Court could base a decision 2 granting a motion to dismiss or stay based 3 simply on the legal arguments of counsel that 4 paraphrase his interpretation of evidence. 5 It's just a complete violation of due process. 6 But evidence aside, what I wanted to 7 do is talk about some of the points that 8 Mr. Sullivan made, and I tried to make notes. 9 First off, Mr. Goering has never, 10 quote, denied the claims of Mr. Sullivan's 11 clients. Okay. And we put on a declaration, a 12 sworn affidavit in the McGirr case where 13 Mr. Goering said exactly the opposite. He 14 said, I have no predetermined intention to deny 15 anyone's claims. I mean, really, it would be 16 speculative for him to say what a claim is or 17 what a claim isn't. 18 And we went on to say in one of 19 our pleadings that in the McGirr case that the 20 Court ultimately decides that the movants in 21 this case are judgment creditors of Waite 22 Schneider, we believe that would be a binding 23 determination by another Court as to the 24 validity of that claim. We think that's true. 25 But what -- it's not Mr. Goering's Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 29 1 job to deny a claim or not. The statute says 2 that claims are submitted. Mr. Goering -- and 3 it's not just Mr. Goering. Other parties have 4 the ability to object to claims, and if there's 5 an objection, it is for this Court to decide 6 who has a claim, not Mr. Goering. And so 7 Mr. Goering is a neutral. He has no stake in 8 whether the movants in this case are paid on 9 their claims or not. 10 And I think that the whole thing 11 could be remedied by exactly what your Honor 12 said, and that is, if the thought is that the 13 movants feel like they might not be successful 14 in submitting a claim to this Court in the ABC, 15 they are a judgment creditor of Mr. Chesley. 16 And so, ultimately, under the statute, if there 17 is a surplus, the surplus would be payable to 18 Waite Schneider as the assignor and then, 19 ostensibly, through this trust arrangement 20 where Mr. Rehme holds the shares, to 21 Mr. Chesley. 22 So let's -- the Court controls 23 that disbursement. Let's have a creditors' 24 bill. There's -- no one's in danger of money 25 running out the door here. These are claims Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 30 1 for this Court to determine. So that's one 2 point. Mr. Goering has not taken a position 3 that he's antagonistic to anyone or that he's 4 denied their claims. We've reached out to them 5 at the outset of this case, sought a meeting 6 with them, asked us to hear us out and just 7 without success. 8 Mr. Sullivan said that we're looking 9 out for Mr. Chesley. Nothing could be farther 10 from the truth. Mr. Goering never even spoke to 11 Mr. Chesley prior to agreeing to accept the 12 assignment in this ABC case. And I will posit to 13 the Court that we are oppositional to Mr. Chesley 14 on a number of fronts and that he is not at all 15 pleased with us. 16 The creditors of Waite, Schneider, 17 Bayless & Chesley. There is a $9 million or so 18 IRS claim and there's about $2-1/2 million on that 19 in penalties that are on top of that. The basis 20 for that claim, as I understand it based on the -- 21 my investigation to date, is that there are 22 certain draws that were taken from the corporation 23 that were not subject to withholding, FICA and 24 that type of thing. And so there is tax owed as a 25 result of that according to the IRS's position. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 31 1 And those draws relate, at least as I know, not 2 only to Mr. Chesley but to another Waite Schneider 3 employee. And, in fact, there is a wage and hour 4 audit where two other people receive 1099 payments 5 where the IRS believes they should be classified 6 as W-2 employees. 7 I have received a letter from 8 Mr. Chesley's tax counsel that evidences a dispute 9 as between Mr. Chesley and Mr. Goering as to 10 claiming credits for certain things in certain tax 11 years. There are issues in which the entire 12 liability for that $11-1/2 million tax claim might 13 be hoisted on Waite, Schneider, Bayless & Chesley. 14 And so to give an example, one of 15 the elements of relief that the McGirr 16 plaintiffs seek in federal court is a piercing 17 of the corporate veil or an alter ego theory of 18 liability. And if that's the case, then the 19 case law is clear that Waite Schneider is going 20 to be on the hook for the entire tax liability 21 joint and several with Mr. Chesley. 22 So I don't -- and there's one 23 other piece of this. There are certain 24 vehicles, there's 29 motor vehicles, as this 25 Court's aware, that Mr. Goering has taken Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 32 1 possession of, that he is storing, that he's 2 insuring, he's having appraised and we will 3 eventually come to this Court with a proposal 4 to liquidate and sell those vehicles. The IRS 5 is claiming a lien on those vehicles. 6 Mr. Goering has been in contact 7 with an attorney at the Internal Revenue 8 Service regarding this claim. We have placed 9 the Internal Revenue Service on notice of the 10 assignment for benefit of creditors and we 11 essentially need to get an accountant retained 12 to deal with some of the taxation issues. 13 And I'll give you another point on 14 the taxation issues. There -- Mr. Sullivan 15 referenced what he called about $610,000 in 16 quarterly payments from the Castano Trust. 17 That's actually -- the last distribution was 18 about $648,000 and change and then at the end 19 of the year there's some catchup provisions 20 that vary but could be another $10,000, so 21 somewhere in the neighborhood of $2-1/2 million 22 a year. 23 Do we need to make quarterly 24 estimated tax payments on those? Do we need to 25 pay Ohio commercial activity tax? These are Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 33 1 all things that need to be determined and make 2 both the State of Ohio and the Internal Revenue 3 Service creditors. Now, ultimately, what are 4 their claims and what are their amounts? I 5 don't know. But they're creditors. 6 There are employees that have -- 7 Mr. Goering personally contacted every former 8 employee of Waite, Schneider, Bayless & Chesley 9 and some of them asked to be noticed on the 10 creditors' matrix. Some of them contend that 11 they were not paid monies that were owed to 12 them at the time that they left the law firm 13 prior to the ABC. 14 There's one particular employee 15 who has a liability, I believe, or that we're 16 investigating, at least, of somewhere between 17 900,000 and $1.28 million that he may owe 18 Waite, Schneider, Bayless & Chesley for which 19 he vigorously disputes those claims and that he 20 has offsets for that he's going to assert 21 through the claims process in this case. 22 So there are other creditors. I 23 spoke to Mr. Horner about his deposition testimony 24 when I saw the motion that got filed in this case. 25 And what -- he went through a line of questioning Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 34 1 about lines of credit and credit extensions that 2 have been paid to various lending institutions. 3 And so the question was posed, is there any other 4 debt, and he said, other than trade payables. So 5 he's -- he said, I don't recall. So not only is 6 he not testifying that there is no other debt, he 7 says, not that I recall, and he's excluding trade 8 payables and he doesn't know about tax debts and 9 he doesn't apparently know all the debts and this 10 is before the ABC. 11 So to say that Mr. Sullivan took 12 Mr. Horner's deposition so, therefore, there's 13 no debts is just not accurate, nor is it even 14 relevant. Because as the case law in my brief 15 indicates, you don't have to be insolvent to 16 have to file an ABC. In fact, I can't even 17 find a requirement that you have a creditor. 18 And so there's case law from the 19 Ohio Supreme Court that says that solvency or 20 the number of creditors is not even an issue. 21 Mr. Sullivan quotes at length from a 22 temporary restraining order issued in the McGirr 23 case. In the McGirr case, there was one TRO that 24 escrowed about -- a little less than $2 million 25 from a class action settlement with the Clerk of Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 35 1 Courts pending the disposition of the McGirr case. 2 Then there was a preliminary -- a motion for a 3 preliminary injunction hearing that was held and 4 then, subsequent to that, there was an assignment 5 for the benefit of creditors. 6 The day after the ABC, notice was 7 filed in the McGirr case advising the Court and 8 parties of the existence of this ABC. About a 9 week later, Mr. Sullivan then filed a motion 10 for another temporary restraining order in 11 which he sought to restrain -- you know, I 12 think it was any action with respect to any 13 asset of Waite Schneider. 14 Now, when the Court in this case 15 signed on September 12 the ABC order, Waite 16 Schneider ceased to have any assets. At that 17 point the corporation still exists and it's 18 still there. It's just that its assets have 19 been assigned for the benefit of its creditors. 20 So I don't know that there were any assets for 21 that to affect at that time. And Mr. Goering 22 not only has never been a party to the McGirr 23 case, but he never even received notice of that 24 application for a TRO. 25 A telephone conference was held. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 36 1 The judge in the McGirr case asked Mr. Sullivan 2 to submit an order. Mr. Sullivan drafted an 3 order and he e-mailed it to the Court and the 4 Court signed it. 5 So when he says that the Court 6 found, well, there's no evidence that the Court 7 ever held. There's not an affidavit, not a 8 declaration, not a deposition, not even a 9 verified motion. A hearing really wasn't even 10 conducted. They had a telephone conference. 11 Then this TRO issues and 12 Mr. Sullivan's office takes the position that 13 Mr. Goering is somehow bound by that. Now, out 14 of an abundance of caution, we restricted our 15 activities in this case to make sure that we 16 didn't run afoul of a Court order, but we don't 17 believe that that ever applied to us from the 18 outset. Because we never received notice of 19 it, because there was no evidentiary foundation 20 for it, and because it just kept getting 21 extended, we came to this Court and said, we'd 22 like an extension of our statutory duties to 23 file inventories and things like that until we 24 can get through this restraining order issue. 25 We went to the Sixth Circuit Court Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 37 1 of Appeals, we filed a petition for a writ of 2 mandamus for all of those deficiencies that I 3 just pointed out. 4 I won't deny that the Court signed an 5 order that said that. But what I will say is that 6 there was never any evidentiary foundation for 7 that. And that TRO dissolved. And when it 8 dissolved, this case has been administered ever 9 since and has been pending for four months. 10 If the McGirr case wants to issue 11 a preliminary injunction, it's free to do that. 12 That request is still pending. But because the 13 TRO dissolved and no injunction issued from the 14 McGirr case, now the movants have come to you 15 and they've said, oh, geez, well, let's stay 16 this case. 17 Well, what does that do? That 18 affects everyone. Not only is it to their own 19 detriment, it's to the detriment of everyone 20 else in the case. The expenses in this 21 continue to accrue. We have been able to 22 narrow them. We've been able to cut them. But 23 we've got issues to deal with. We've got law 24 firm files in four separate physical locations 25 that date back to the 1950s, many of which Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 38 1 present complicated issues like protective 2 orders from Kentucky relating to the Arch 3 Diocese of Covington that require certain 4 information to be maintained in a certain way. 5 What do we do with that now? What 6 do we do with the nonclient files that probably 7 need to be preserved for purposes of 8 litigation, but we're not sure and need to 9 investigate? 10 There are five bank accounts which 11 do not hold Waite Schneider funds but which are 12 IOLTA accounts that hold the funds of third 13 parties, and those total approximately $2 14 million. Now, what do we know about those 15 accounts? Well, some of them are associated 16 with -- well, they're all associated with 17 litigation in some form, but those funds need 18 to be -- we need to -- the Court needs to know 19 who those belong to, how those can be 20 distributed, how those can be treated. 21 The assets in this case are 22 substantial. The vehicles, they could be worth 23 between 1 and $4 million. We really don't know 24 because the appraisals aren't complete. 25 There's a case called Hanford, Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 39 1 there's a half a million dollars ready to be 2 disbursed from a Court in Washington. There 3 are the office assets, which I will contend are 4 probably somewhat nominal in the context of 5 this case. There are claims against former 6 employees. There's other litigation. 7 Mr. Sullivan references the 8 Castano Trust. There's at least $35 million 9 worth of assets here to be administered for the 10 benefit of creditors. And that's for the 11 benefit of all the creditors. 12 Mr. Goering doesn't have the 13 ability to deny claims or distribute funds 14 without order of the Court. And despite 15 Mr. Sullivan's position, we have no 16 predetermined intent or way to treat his 17 clients' claims. The claims haven't even been 18 filed yet. 19 Mr. Sullivan said, quote, there is a 20 lot of debate, end quote, over what the Castano 21 asset is. No, there's not. There is a final 22 nonappealable order from the Nevada Court that's 23 been filed with this Court in which the Court 24 determined that the interest under the Castano 25 Trust belongs to Waite, Schneider, Bayless & Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 40 1 Chesley, that Mr. Chesley has no individual 2 interest in those funds, and that Mr. Sullivan's 3 clients could not garnish those funds because the 4 order was not enforceable against Waite, 5 Schneider, Bayless & Chesley. They asked for 6 reconsideration of that ruling and the Court stuck 7 with its prior ruling. So there's not a lot of 8 debate over that issue. It's been determined. 9 Mr. Sullivan contends that there's 10 no recourse for his clients, and that's not 11 true either not only for the reasons that 12 ultimately if they don't have a claim in this 13 case they get the money anyway because they 14 will get it as any surplus that goes back to 15 the assignor, but also because the McGirr case 16 is not the same thing as this ABC. 17 The McGirr case is a claim that 18 certain transfers by Mr. Chesley to Waite 19 Schneider or from Waite Schneider to 20 Mr. Chesley are, one, fraudulent conveyances 21 either as transferor or transferee within some 22 period of time governed by the statute of 23 limitations. It's not clear to me what those 24 claims are, how much they are, what period of 25 time they cover. And then the amended Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 41 1 complaint now has a claim for fraud, and those 2 are not dispositive of what's before this 3 Court. 4 So with those corrections, I wanted 5 to just summarize what our position is on the 6 motion to dismiss or stay. Number one, the 7 movants are not the owners of Waite, Schneider, 8 Bayless & Chesley, have not ever been and are not 9 today. And it's not just my determination. The 10 Colorado Court ruled the same way yesterday. 11 A shareholder under Ohio law is 12 somebody whose name is on the books and records 13 as owning the company. The name on the books 14 and records as owning the company is Rehme. 15 That's the shareholder of the company. 16 Number two, they can't be 17 shareholders of Waite Schneider because even if 18 you accept this argument that these orders that 19 said for Mr. Chesley to transfer an interest 20 that he no longer had to the movants in Waite 21 Schneider, if you assume that was 22 self-effectuated, which the Colorado Court said 23 it wasn't, the transfer never occurred and, 24 under Ohio law, it's void because a legal 25 professional association can't be owned by Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 42 1 nonlawyers. So there could never be a 2 transfer. 3 Thirdly, whether they're 4 shareholders or not isn't even dispositive 5 because it's undisputed and the movants don't 6 even contend that Mr. Rehme is not a director 7 of Waite Schneider. And a corporation acts 8 through its directors and the resolution and 9 the transfer to the ABC was properly authorized 10 by a director. It's not a shareholder action. 11 It's a director action. 12 So with those points made, we turn 13 to the movants coming to this Court and 14 essentially asking for injunctive relief that 15 didn't happen or hasn't yet happened in the 16 McGirr case for which they have no evidence, 17 for which they didn't follow the statutory 18 procedure, and would hold hostage this case to 19 the detriment of everyone while all of these 20 expenses accrue and none of these things can be 21 addressed. 22 One of the most problematic things is 23 retaining an accountant because we need to know -- 24 we need to be able to discuss with the IRS what 25 their claims are. We need to know what the tax Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 43 1 liability is. We need to know, as income comes 2 in, whether we should be making tax payments, what 3 the obligations are to file returns, is there 4 going to be a fiduciary return for the ABC. We 5 need to know those things. And the case simply 6 can't be put on hold. 7 And to put it on hold for the 8 McGirr case, the McGirr case is set for its 9 initial case management conference next week. 10 No trial date, no case scheduling order. The 11 only discovery to date has been limited 12 discovery on injunctions. Initial disclosures 13 haven't been made. That case is, on a rocket 14 docket, at least a year from trial. 15 So the movants in this case do 16 have recourse, and their recourse is to file a 17 claim in this case and hopefully to be paid 18 from that claim. And if they're not paid from 19 that claim, to attach any surplus that might 20 exist. 21 So I just dispute the whole 22 factual premise that this is some type of, 23 quote, sham transaction designed to harm the 24 other parties. 25 Rocky Flats -- one more correction, Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 44 1 your Honor. Rocky Flats is a case that got filed 2 in 1990. That case is the epitome of complex 3 fiercely litigated class action litigation between 4 sophisticated parties. The case has been through 5 two appeals to the Tenth Circuit Court of Appeals, 6 one called Cook 1 and one called Cook 2. The case 7 went to a four-month jury trial, I believe, in 8 2005, in which Waite Schneider took the most 9 witnesses at trial, in which Ms. Roselle stayed in 10 an apartment in Colorado for a month during the 11 trial, during the holidays, and they got a 12 verdict -- I'm giving rough numbers now, but I 13 think the compensatory verdict was like 176 14 million and there were about $200 million in 15 punitive damages, huge verdict. 16 The verdict was lost in Cook 1. 17 They developed some very complicated legal 18 arguments and in Cook 2 the verdict was back. 19 It went on two separate petitions for cert to 20 the Supreme Court and ultimately it settled for 21 $375 million. 22 And that was -- well, the money -- 23 there's $2-1/2 million that the defendants are 24 going to pay in for class notice. The money 25 for the $375 million would be paid in -- I Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 45 1 think in July of this year. Waite Schneider 2 was counsel in that case actively from 1990 3 until Mr. Chesley was disbarred in Kentucky, 4 resigned his law license in Ohio in like 2012. 5 There is a fee application that will 6 be submitted on January 12th by lead class 7 counsel, and Mr. Goering and myself have spent an 8 enormous amount of time interviewing people, 9 reviewing tons of records, and coming up with a 10 detailed declaration of Mr. Goering that he 11 executed Friday of last week and that will be 12 filed on the 12th, this week, where Waite 13 Schneider has what we call a lodestar of $4 14 million in time and about $533,000 in expenses. 15 We are not making a claim, as 16 Mr. Sullivan contends, for $4 million in fees. 17 The application that's coming in Rocky Flats, 18 if there were ever a case for an enhanced fee, 19 it's this one based on the risk, the length of 20 time and everything else that went on, and 21 it's -- the -- the product of this fee 22 application is very solid. 23 They seek a common fund recovery 24 of 40 percent, so approximately $150 million 25 and $8 million in expenses. There is then Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 46 1 what's done from that is called a lodestar 2 crosscheck. The lodestar crosscheck for Waite 3 Schneider would be approximately 2.4, so, round 4 numbers, about $9.8 million. 5 Action is necessary now to protect 6 that fee, to enhance that fee, to make sure 7 that it's the biggest fee, and then that's only 8 part one because, once the fee is approved, we 9 turn to part two. And part two is determining 10 the apportionment of what the Court awards as a 11 fee and what amount of that is attributable to 12 Waite Schneider. 13 And so these are important things. 14 That asset should be protected for the benefit 15 of everyone, including Mr. Sullivan's clients. 16 And there's been a lot of work done to do that. 17 And I tried to detail in our opposition 18 everything that Mr. Goering has done to date, 19 and we've been in this case four months. 20 So if Mr. Sullivan is offended 21 that a corporation elected its statutory right 22 to file this state court liquidation proceeding 23 and put all its assets in a pot that is for the 24 benefit of creditors, not a -- not the benefit 25 of the assignor, then I'm offended that he's Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 47 1 offended because this is neutral. There's no 2 person more qualified than Mr. Goering. He 3 practices exclusively in insolvency as a 4 Chapter 7 trustee and his reputation in this 5 community is without question. So to say that 6 he's going to run off with the money or this is 7 a sham transaction designed to harm anyone is 8 just -- has no foundation whatsoever. 9 THE MAGISTRATE: Thank you. You 10 answered my questions when you were making your 11 argument. 12 MR. GALASSO: Okay. Thank you. 13 THE MAGISTRATE: Mr. Sullivan. 14 MR. SULLIVAN: Your Honor, I guess 15 I'm going to bounce around. The first thing is, I 16 cited an order that a federal judge signed. I'm 17 not sure where Mr. Galasso comes up with this 18 theory that the judge somehow was tricked because 19 I prepared the proposed order. It's an order of 20 the federal court and what he found based on his 21 knowledge of the case. 22 The cite to the evidence, I don't 23 know why Mr. Galasso thinks he knows so much 24 about what Mr. Horner testified to because he 25 wasn't there. Mr. Rafferty was. He Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 48 1 represented Mr. Horner. I gave to this Court 2 the testimony of Mr. Horner. It's right there 3 in the transcript. What other debts do you 4 have? 2016. Can't think of any. It's not my 5 interpretation. That's what the man raised his 6 right hand and said. 7 Mr. Rehme, the guy who 8 orchestrated this transfer, same question is 9 before your Court. It wasn't Brian Sullivan's 10 interpretation. It was Mr. Rehme's answer. 11 What other debts are out there? Can't think of 12 any. 13 So I've yet to hear who are the 14 creditors other than what he just said is the 15 IRS, which we know is because of Mr. Chesley 16 himself; didn't identify anybody else. 17 Now, to say that we're going to 18 get the fair shake like he wants to suggest 19 we're going to get is not true. Waite 20 Schneider, the entity itself, filed a pleading 21 yesterday in this case reiterated for the 22 umpteenth time, we're not a creditor. Shares 23 in the same thinking of Mr. Galasso, because 24 what did Mr. Galasso say and the things that 25 Mr. Goering has done since he's been involved? Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 49 1 Defend this action by us. They're fighting us. 2 They're not looking out for us. They're 3 fighting us, they're denying our existence, 4 they got Waite Schneider denying our existence 5 as a creditor. And so we're going to meet with 6 every single instance fighting them to prove 7 what a Kentucky Court has already said. 8 Mr. Chesley's transfer of the law firm was a 9 sham. Mr. Chesley was ordered to transfer that 10 to us; did not do it. 11 We're in the middle of a federal 12 lawsuit where the entity, Waite Schneider, is a 13 defendant. What do they do? They try and take 14 the assets and come down to here. 15 Do I think this is a sham lawsuit? 16 Yes, I do. I don't say that lightly. I say it 17 on a history of what we're dealing with. This 18 entity, the law firm, will spend resources 19 filing lawsuits described by the Ohio Supreme 20 Court as a sham. You cannot get a more public 21 rebuke of an action than that opinion. That's 22 what we're dealing with here. And to parade up 23 here and say we've done all of this work, we've 24 interviewed employees, we're working so hard -- 25 yes, he sent me a letter because he wants to Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 50 1 take depositions of all my clients. Why? 2 Because he's fighting with us. He didn't tell 3 me that Mr. Chesley, who is receiving the 4 Castano money, and there's no debate about 5 that -- Mr. Rehme told me, Mr. Horner 6 verified -- Mr. Chesley took the money every 7 quarter and put it in his pocket until we took 8 the deposition and until we went out to Nevada 9 to try and get it and then they said, no, it 10 belongs to the law firm. 11 You know, the person who's abused 12 the entity the most is Mr. Chesley. And I 13 don't hear one thing about the things we're 14 trying to do against Mr. Chesley to recover 15 funds. In fact, they haven't even talked to 16 the man, according to them. All they have to 17 do is look in the pleadings, which we filed, 18 the evidence that we've submitted in front of 19 Judge Cleland and they would see over and over 20 again an abuse of this. 21 I'll just give you one last 22 example. There's a -- there was a condominium 23 here in Cincinnati, Ohio. The law firm paid 24 all the expenses, paid the homeowners 25 association fee, paid the mortgage. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 51 1 Condominium was sold right in the middle of 2 this lawsuit. Where did the money go? Law 3 firm's paid all the expenses. Law firm went to 4 Stan. I hear Mr. Galasso saying, we're going 5 after that, that was an asset of the law firm. 6 No. Mr. Chesley had the law firm, which is the 7 typically, what he did, pay all of the expenses 8 and then he reaps the benefit. So hundreds of 9 thousands of dollars were recovered in the sale 10 of the condominium and not one mention about an 11 effort to recoup that on benefit of the law 12 firm. 13 The cars that he talked about, he 14 didn't tell you that we uncovered that 15 Mr. Chesley was selling the cars during our 16 lawsuit, supposedly wasn't authorized to act on 17 behalf of the law firm because, you know, he'd 18 been resigned and disbarred in Kentucky. Right 19 up before our preliminary injunction hearing, 20 the car was auctioned, Mr. Chesley's authority 21 was the one that was needed to sell the car. 22 We don't know where that money went. And the 23 cars have been used over the course of the 24 years, you know, frankly, as a shell game. 25 They went from the law firm to Mr. Chesley's Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 52 1 wife. She sold them back to the law firm. I 2 mean, it just -- it goes on and on. 3 So we don't think we're going to 4 get a fair shake. But the more important thing 5 on that is that we are down the road. We're 6 not in this, you know, what he says is going to 7 get years and years resolved. We are in the 8 middle of a hearing that's already been 9 submitted, evidence has already been tendered, 10 we're waiting for the Court to order the 11 preliminary injunction. We've asked for a 12 receiver to be appointed for the law firm, the 13 very same thing we're dealing with here. 14 There's no need to repeat 15 everything that's already of record in an 16 effort to change the record in a way that 17 benefits either the law firm or Mr. Chesley. 18 That is a complete waste of effort. And for 19 that reason, now is the time to stay the action 20 or dismiss it, let the federal case, which the 21 entity is a defendant, defend itself and let 22 the federal judge continue on with the case as 23 he is doing. 24 THE MAGISTRATE: Did Judge Cleland 25 indicate how long it would take him to issue a Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 53 1 decision? 2 MR. SULLIVAN: He did not, your 3 Honor. We do have a telephone conference with him 4 on the 17th. 5 THE MAGISTRATE: Okay. 6 MR. SULLIVAN: So, you know, it's 7 been fully -- you know, like I said, it's all been 8 briefed and there's a lot of exhibits and stuff 9 like that tendered to him. And obviously I would 10 like to know myself when he's going to issue. We 11 just don't know. 12 THE MAGISTRATE: Sure. Thank you. 13 MR. SULLIVAN: Okay. 14 THE MAGISTRATE: Mr. Rafferty, since 15 you're here, I don't want to ignore you. Did you 16 want to be heard on this motion? 17 MR. RAFFERTY: No, your Honor. I was 18 just -- 19 THE MAGISTRATE: Okay. I just wanted 20 to be fair. 21 I've been thinking about this 22 motion for a long time, probably over a week 23 and the way it's all working out in my head and 24 actually thought about the maneuvers when the 25 case was first filed earlier or late summer, I Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 54 1 guess, of 2016 and the reasons behind all of 2 it. 3 But all of that aside, if I'm just 4 looking at the straight law of the case, I have 5 your clients, Mr. Sullivan, with a valid 6 judgment from Kentucky which they're trying to 7 execute on. You've pursued it in very 8 different venues and you've been opposed. Some 9 of the things that Mr. Chesley has done been 10 slapped down, like the case where he was suing 11 the McGirr plaintiffs. 12 But in 2013 he transferred over 13 his shares of Waite Schneider to Mr. Rehme. 14 Mr. Rehme did a subsequent transfer in 15 September. And in anticipation, I'll even give 16 you that -- I'm second guessing him -- but 17 probably in anticipation of doing this ABC 18 action to safeguard against any negative ruling 19 that might come out of the US District Court 20 case. 21 Is it forum shopping or is it 22 clever lawyering? I didn't see anything 23 improper with it in that the law provides for 24 all of these avenues to occur. It's horrendous 25 that you've got to fight in all these different Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 55 1 forums, but I can't find anything improper 2 about the ABC case. So in regards to the 3 motion to dismiss, I would have to deny it. 4 I'm aware plaintiffs are not 5 creditors of -- well, don't have -- are not 6 owners -- excuse me -- are not owners of Waite, 7 Schneider, Bayless & Chesley. The Kentucky 8 order has no impact here in Ohio and would not 9 stop Mr. Rehme from transferring the assets to 10 an assignee. 11 Then I started thinking about, okay, 12 well, should I stay it because there are issues 13 pending in federal court and perhaps -- not being 14 privy to all the pleadings in federal court, I 15 said perhaps they could still be adequately 16 addressed, the law firm could be protected, the 17 McGirr plaintiffs could be protected, the 18 creditors of Waite Schneider could be protected. 19 But for whatever reason, the 20 order's not forthcoming. So now I do have 21 people with interests that are sort of 22 jeopardized. Definitely, the creditors who 23 have yet to be identified, but the creditors of 24 the law firm are sitting over there and they're 25 unprotected. I don't really have anybody to Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 56 1 run the business, per se, because Mr. Rehme has 2 assigned his interest to the assignee. If I 3 keep the assignee's hands tied, then no issues 4 can be addressed with all of the assets, the 5 fees that are coming in. 6 And even when I boil it right 7 down, it really impacts the McGirr people, too, 8 because I do believe the McGirr plaintiffs have 9 a way to get money out of this ABC. You just 10 have to bring it and they'll be protected. And 11 if I hold up any kind of administration of the 12 ABC case, then I am delaying whatever monies 13 could be made available to the McGirr 14 plaintiffs. 15 So after assessing all of that, I 16 see that there is no benefit from the stay at 17 this point. So I'm denying that request for 18 relief as well. I'll write a decision. Of 19 course, you have the right to file objections. 20 Now, turning our attention to the 21 other applications, I think the first one up is to 22 retain the accounting firm. 23 MR. GALASSO: Your Honor, Mike 24 Galasso on behalf of the assignee. We have filed 25 an application for an order authorizing Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 57 1 Mr. Goering to retain Blue & Company as an 2 accountant to advise him on matters relative to 3 the administration of the ABC. We properly served 4 this and all of the motions -- the other six 5 motions that are before the Court today on what 6 I'll call the service list which is the 382 McGirr 7 plaintiffs plus the 20 or so other odd-known 8 creditors to this point and received no objection. 9 The law firm previously used as 10 its accountant Clark, Schaefer & Hackett. We 11 believe that Clark, Schaefer & Hackett would 12 have a conflict of interest in carrying over as 13 a CPA from the assignor to the assignee. There 14 are competing claims between the two as to the 15 apportionment of certain credits and 16 liabilities, and it's very important for 17 Mr. Goering to be able to retain tax counsel so 18 he can determine immediately whether he needs 19 to start making quarterly estimated payments 20 and things of that nature. And I'll give you a 21 couple examples. 22 The Castano Trust is a quarterly 23 distribution. The fourth quarter distribution 24 was made to Mr. Goering. It is in his account. 25 The first quarter distribution of 2017 has been Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 58 1 made to Mr. Goering. It's in his account. We 2 need to know what we need to do to treat that 3 for taxation purposes. 4 The ABC statute expressly 5 authorizes the retention of counsel, but it 6 doesn't use the word accountant in that, but in 7 this case we certainly need it. We're going to 8 have tax issues with the IRS, the State of 9 Ohio, and the City of Cincinnati, and it's a 10 pretty pressing issue. 11 We are not asking the Court to 12 approve any specific rates or the 13 reasonableness of any fees. We'd just like the 14 authority to engage Blue & Company as 15 Mr. Goering's accountant. We've already spoken 16 to them. They've agreed to do it. They're 17 very qualified to do it. It's a small office 18 of a much larger firm and they're more than 19 qualified to advise us on the tax implications 20 for the ABC and then, going forward, as they 21 bill, we will come to the Court and we will 22 submit motions to approve the reasonableness, 23 appropriateness of the fees, the necessity of 24 the work, the rates and those things. We would 25 just like the ability to go ahead and engage Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 59 1 them now subject to that -- the future approval 2 of their compensation. 3 THE MAGISTRATE: Thank you, 4 Mr. Galasso. 5 Mr. Rafferty and Mr. Sullivan, are 6 you going to be wanting to be heard on any of 7 these applications? 8 MR. SULLIVAN: Your Honor, I don't 9 know that I have standing to -- 10 THE MAGISTRATE: Right. 11 MR. SULLIVAN: -- because they deny 12 our existence as a creditor. Obviously, I'm not 13 prepared to address this. 14 THE MAGISTRATE: Speak to any of 15 this. 16 MR. SULLIVAN: I would ask the Court, 17 if that's the rest of the matters, I don't know 18 that it's relevant or necessary for me to remain. 19 THE MAGISTRATE: It will not be 20 necessary, but before you leave, just because I 21 like to protect all interests and I don't like to 22 do work over, I am going to order that the 23 assignee always give notice to you of all pending 24 applications in case there's any -- 25 MR. SULLIVAN: I appreciate that. Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 60 1 THE MAGISTRATE: -- ruling down the 2 road that puts you back in. 3 MR. SULLIVAN: That would be helpful. 4 THE MAGISTRATE: Okay. 5 MR. GALASSO: And, your Honor, we 6 don't dispute or admit that anyone or is not a 7 creditor of the ABC. We consider Mr. Sullivan's 8 clients potential claimants which is why we have 9 served all of these pleadings upon them in case 10 they do have a position. So if he's got a 11 position on these, we're more than happy to hear 12 him out. 13 MR. SULLIVAN: Well, having not been 14 served with that myself, I'm not sure -- 15 THE MAGISTRATE: To do that. 16 MR. GALASSO: You were on the service 17 list as well. 18 MR. SULLIVAN: My point, though, is, 19 your Honor, you've made your ruling. I guess 20 unrelated question. Have the proceedings thus 21 far, were they audio recorded? 22 THE MAGISTRATE: Yes, they've been 23 recorded. The light's not on in front? 24 MR. SULLIVAN: It is not. 25 THE MAGISTRATE: But it is being Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 61 1 recorded here. 2 MR. SULLIVAN: All right. Because 3 we're going to ask for a transcript. 4 THE MAGISTRATE: That's fine. 5 MR. SULLIVAN: Then with your 6 permission, I'll be excused? 7 THE MAGISTRATE: Yes, you may. 8 MR. SULLIVAN: Thank you, your Honor. 9 THE MAGISTRATE: You're welcome. 10 * * * 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 62 1 STATE OF OHIO ) 2 COUNTY OF MONTGOMERY ) SS: CERTIFICATE 3 4 I, Patti Stachler, RMR, CRR, CLR, 5 CME, a Notary Public within and for the State 6 of Ohio, duly commissioned and qualified, 7 DO HEREBY CERTIFY that the audio 8 file of the above hearing was reduced to 9 writing by me stenographically and thereafter 10 reduced to typewriting. 11 I FURTHER CERTIFY that I am not a 12 relative or attorney of either party, in any 13 manner interested in the event of this action, 14 nor am I, or the court reporting firm with 15 which I am affiliated, under a contract as 16 defined in Civil Rule 28(D). 17 18 19 20 21 22 23 24 25 Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 63 1 IN WITNESS WHEREOF, I have 2 hereunto set my hand and seal of office at 3 Dayton, Ohio, on this 11th day of January 2017. 4 5 6 7 ______PATTI STACHLER, RMR, CRR, CLR, CME 8 NOTARY PUBLIC, STATE OF OHIO My commission expires 10-5-2018 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mike Mobley Reporting (937) 222-2259 EXHIBIT 23 Movants' Objections in ABC Action (tT SS) (t IN THq,COURT OF COMMON PLEAS PROBATB DIVISION ITAMTLTON COUNTT, OHIO IN THE MATTER OF: Case No. zo16oo3659 Judge Ralph E. Winkler WAITE, SCHNEIDER, BAYLESS & CHBSLEYCO., L.P.A. Magistrate Rogena D. Stargel MOVANTS' OBJECTTONS Tp rHE ORDE&DEIiEN9 TO-STAY, THE PRoCEEDTNGS II\.THE ASSIGNME-NT' FORT'HE BENEFIT OF CREDIT'O.RS ACTIpN pursuant to Civ.R. S3(DX3), Movants file these objections tq the Magistrate's Decision and Order filed January 19, zorT (the "Magistrate's Decision," attached hereto as Exhibit A). I. Introduction The Magistrate's Decision coneludes that this ABC Action must continue because (z) (r) the Court cannot dismiss the action because it was properly initiated; and staying or dismissing the action would do a disservice to WSBC's creditors. Respectfully, neither of these findings is correct. This Court has no authorþ to continue to hear the ABC Action because it was not properly initiated. First, Thomas F. Rehme ("Rehme") had no authority to transfer the shares of WSBC to Thomas F. Rehme, Inc. ("Rehme, Inc.'i) because the Kentucky court found that the Chesìey to Rehme transfer of shares was a sham, which null and voids that transaction-a transaction found by the Kentucþ courL to be designed to "prevent Plaintiffs, his judgment creditors, from executing on tþittIl$Fmgnt, The Court find's he is taking action to rend.er himself irr"r".'1Ë'',.'$tiÎtÏ,1üiïåÈ[i;t'äilë* . wsBc, . . . , and the transfer mi¡ion from his personat B to Motion to Dismiss at 4), of $5e "¿Sòtùtl{rÈ0*Ë*J;'i;-. 2oo|5( That transaction is also the basis for a claim of fraud in the McGírr action pending in federal court. Additionally, Chesley's failure to comply with Kentucky orders is the basis for an arrest warrant issued by the Kentucky court.r This Court should not allow an action to move forward based upon Chesley's contempt of court and potential incarceration for that conduct and while also defending an allegation of defrauding his creditors by using WSBC as a vehicle to do so. Thus, this action was not properly initiated, and this Court should not continue hearing it. Second, even if Rehme had the authority to transfer the shares, according to Goering and WSBC, non-Ohio lawyers cannot hold shares in an LPA. Rehme, Inc. is a for profit corporation-not an Ohio larvyer or an LPA. Thus, this transfer was entirely improper, and Rehme, Inc. cannot be a shareholder of WSBC. Accordingly, the ABC Action was not properly initiated for this reason as well, and this Court cannot continue hearing it. Whether the proper paper-work was filed, which is on what the Magistrate's Decision relies, cannot erase the foregoing facts and render the action proper. Furthermore, the Magistrate's Decision concludes that the purpose of the AnC Action is to protect creditors and thus, Movants will be protected by the ABC Action. But such conclusions improperly apply the Ohio statute in a vacuum. During the hearing, the Magistrate recognized that the transfer was likely made to avoid a negative decision from the federal court. That is forum shopping and potentially frauduìent conduct. Moreover, the Magistrate's Decision recognizes that Chesley has not complied u'ith the Kentucky court's orders. That is contempt. Thus, Rehme, Chesley, and Goering come to this Court seeking equity when they have failed to previously do equity , Chesley sued the Hamilton County Sheriff and received an injunction against the execution of the arrest warrant. Flowever, that case has recently been transferred from Judge Ruehlman to a new judge in light of the Ohio Supreme Court Opinion on Judge Ruehlman's orders. 2 and are.proceeding in a manner that has been shown to be in contempt of another court. This Court should not reward such behavior. A court's ultimate responsibilþ is to do justice. Indeed, each court has the inherent power to ensure equity is done. Thus, Magistrate's Decision wrongly concluded that it is without authority to act. It certainly has the authority to act to ensure that justice is done, which is what Movants seek. Accordingly, this Court should find Movants' objections to be well-taken and not adopt the Magistrate's Decision. Instead, the Court should grant Movants'motion. II. Law andAnalysis A. The Magistrate Wrongly Found That This Court Has Authority to Hear This Action. This Court has no authority to preside over WSBC's assets because, as found by the Kentuclçy court's orders, Rehme had no authority to make the transfers he purportedly made. And, even if he did, the transfer to Rehme, Inc. was improper-by Goering;s own admission. (See Opposition Brief at 9) (arguing that Movânts, as non- Ohio lawyers, cannot be shareholders in WSBC). Therefore, this Court cannot continue to hear the ABC Action. Importantly, the Kentucþ court found that the original transfer of Chesley's shares from Chesley to Rehme was a sham. (See Ex. B to Motion to Dismiss at 3). After examining a significant amount of evidence, the Kentucþ court found that Chesley continued to control WSBC after he executed the Wind-Up Agreement which, by its terms, divested. him of his power and authority to control WSBC. (See id.). Yet, he did not follow the express terms of that Agreement and continued to control WSBC and take money from WSB C. (See id. at 3-4). He continued to be an authorized signatory on its 3 bank accounts for years, not to mention sign legally binding bank and tax documents on behalf of WSBC. (See id. at 4). Thus, based on this and other evidence, the Kentucky court concludedthat Chesley's transfer of WSBC to Rehme was a sham. (/d. at S)' The Kentucþ court's decision is controlling. Legally, because the transfer was found to be a sham, Rehme never owned anything. (See id. at 4) Golding that the transfer was a sham and Chesley continues to control WSBC). Chesley's shares always remained under his ownership and control. Accordingly, the Magistrate's Decision vwongly found that Rehme was the sole shareholder of WSBC. Pursuant to the Kentucþ court's order, Chesley did not part with ownership of his shares and was required to transfer the shares to Movants' c9unsel, (Id.at 4-5). There can be no dispute that the Kentucky court had jurisdiction over Chesley, and thus Chesley is rbquired to obey this ord.er. This Court should not condone a party's contempt of another court's order and is also required to give full faith and credit to this order. See Dauís u. Dauis,goS U.S. 32,39, Sg S. Ct. 3, 83 L. Ed. 26, (rgSB). And, notably, the Ohio Supreme Court concluded that Judge Ruehlman lacked jurisdiction over WSBC's claim that it was not liable for Chesley's debts, and that his judgment creditors, Movants herein, had. no right to-seize WSBCis assets. See State ex rel Ford u. Ruehlmcn, No. 2or1-r41o, zor6-Ohio-3529, Íllt ZS-Z+. As Chesley did not transfer WSBC's assets to Goering, the ABC Action was not properly initiated. And Rehme had no authority to transfer the WSBC shares to Rehme Inc., or to Mr. Goering. As such, this Court has no authority over the ABC Action. Additionally, Goering has argued that Movants cannot be shareholders of WSBC because they are not Ohio lawyers. (See Opposition Brief u, e)-. By this same logic, the transfer to Rehme, Inc. was similarly problematic. Rehme, Inc. is a for-profit 4 corporation. It is neither an Ohio lawyer, nor an LPA. Thus, according to Goering's arguments, Rehme, Inc. cannot be a shareholder of WSBC, and so the transfer from Rehme, Inc. to Goering was improper. For these reasons, this Court does not have authority to preside over the ABC Action. The action was not properly initiated because Rehme had no authority to transfer the shares and/or assets of WSBC. By the plain language of the Kentucky court's order, the transfer from Chesley to Rehme wâs a sham, and thus of no legal effect. All subsequent transfers were void or, at a minimum, frauduient. As such, this action was not properly initiated, and the Court has nQ jurisdiction over the assets. B. The Magistrate Incorrectly Concluded It Had No Authority To Act. The Magistrate's Decision recognizes that Chesley, Rehme, and thus even Goering, have come to this Court through inequitable conduct. At the hearing on January ro, the Magistrate specifically found that Rehme's transfer of WSBC'S assets was likely to avoid a negative d.ecision coming from the federal court in the McGirr u. Rehme matter. (See Transcript of Hearing in Probate Court, attached hereto as Exhibit B, at 54:r5-zo). This finding acknowledges that Rehme was, in fact, forum shopping, not to mention attempting to remove assets from a court that might issue a decision removing the assets from Rehme's possession. The Magistrate's Decision also acknowledged the Kentucþ court's orders and found that Chesley had not complied with them. Chesley's refusal to obey the Kentucky court's orders is contempt' In spite of such findings, the Magistrate's Decision denied Movants' motion. Instead, the Magistrate chose to condone both Chesley's and Rehme's fraudulent and improper conduct, disregard valid Kentucky Orders, overlook the Ohio Supreme Court's 5 opinion, discount the pending action for fraud in Ohio federal court and punish Movants-who are innocent. The Magistrate's Decision is based primarily on her conclusion that because Rehme properly fîled the necessary paperwork t9 initiate the ABC Action, she had no authority to grant Movants' motion. That decision is, respectfully, wrong, as set forth above. But, more importantly, the Magistrate's Decision wrongly concludes that this Court has no authority to grant Movants' motion. To the contrary, this Court has the inherent power to follow the law and do equity, and the present circumstances require this Court to exercise such Power. The law is clear that forum shopping should not be condoned. See Mítan u. Int'I Fidelity Ins. Co.,2g F. App'x 2g2, 2g8-gg (6th Cir. zoor) (sanctioning a parry for blatant and repeated forum shopping). A litigant should not be able to "switch horses" in the middle of litigation because he dislikes the judge's rulings in the case. The system is not one to be "gamed" so that assets can be manipulated from court to court. As a matter of justice and equity, this Court has the power to stop such blatant forum shopping, and it should do so. Moreover, litigants cannot ask a court to do equity when they themselves have (Ohio been inequitable. See Greer-Burger u. Temesi, n6 Ohio St.Sd 324, 332, n. S zoo1)Uecognizing the maxim that "he who seeks equity must do equity, and that he must come into court with clean hands"). "Equitable relief is not available to a person who 'has violated good faith by his prior-related conduct.'" Id, (quoting Marínaro u. Major Indoor Soccer League, Br Ohio App.gd 42, 45,6ro N'E.zd +So(rqqr)). The Magistrate acknowledged that the transfer was likely made to avoid an adverse ruling in federal court. (See Ex. B at 54:r5-zo). Such action is, by definition, inequitable, not to 6 mention, likely fraudulent. This Court is not required to permit such actions simply because Rehme filed the necessary paperwork with the Court. Nq argument. can be made that ABC Actions are intended to assist creditors in avoiding another court's jurisdiction at the expense of wronged individuals-in this case, Movants. Finally, the Magistrate's Decision recognizes that Chesley is in contempt of the Kentucþ court's orders. Its decision to permit this action to continue improperly condones this contempt, The action was not properly initiated, A court has the BQwer to fashion a remedy for contemptuous behavior. See Líberte Capital Grp., LLC u. Capuill,46z F.3d 543,557 (6th Cir.zoo6) (citing Chambers u. NASCO,Inc,5otU.S. 32, 45 (1991)) ("The district court has inherent authOrity to fashion the remedy for contumacious conduct."). Thus, this Court has the power to grant Movants the requested relief. Equity requires this Court dismiss this action because it arises out of inequitable conduct. This Court should not adopt the Magistrate's Decision and should instead grant Movants'motion. c. The Magistrate's Decision Purports to Protect wsBC's Creditor{ But It Ignored the Fact That No Creditors Exist According to WSBC's PrinciPals. The Magistrate's Decision found that granting Movants' motion would be a disservice to WSBC cred.itors, and that it would be better for Movants if the action continued. But this decision ignores that there are no WSBC creditors, further showing that this action is a sham. WSBC's ourn principals and employees testified that WSBC had no creditors. (See Exs. E and F to Motion to Dismiss, Deposition of S. Horner, at arguments SS:LS-24 and Deposition of T. Rehme, at 6g:4-t4). Counsel's after-the-fact do not trump this testimony. The Magistrate cannot decide this case in a vacuum or 7 ignore that the circumstances leading to this ABC Action establish fraudulent and inequitable conduct. Although the Magistrate acknowledged the general purpose qf an ABC Action, her decision improperly ignores the facts and circumstances of this case, which clearly show an improper motive. The Magistrate's Decision concludes that allowing the ABC Action to continue would be in the best interests of Movants. But the decision itseìf exemplifies why that is incorrect. First, it concludes that Movants are not creditors of WSBC, despite acknowledging that this question is before the federal court. (Magistrate's Decision at 6- ù. Such a conclusion also ignores the effect of the Kentucky court's order, which is to permit Movants to execute on WSBC based upon Chesley's sole ownership interest therein. Thus, the Magistrate's Decision suggests an answer to an issue not properly before it at this time-Movants' status as creditors. Indeed, the Magistrate's Decision barely acknowledges Movants' status as creditors of Chesley.'z (Magistrate's Decision at such a conclusion Z) (stating that Movants are "at best" creditors of Chesley). Although is beyond dispute, the Magistrate's Decision suggests it is an outstanding issue. Thus, permitting WSBC's assets to be liquidated and distributed when the Court hus already made such statements pertaining to Movants shows that the continuation of the ABC Action is improper and not in Movants'best interest. D. The Magistrate's Decision Implicitþ Admits The Federal Court trs A More Appropriate Venue For This Dispute' The Magistrate's Decision does not directly address whether the federal court has the power to provide more complete relief. It simply notes that the purposes of the 2 Elsewhere, the Magisfate's Decision acknowledges that Movants have a right in these proceedings due to their statusofcreditorsofbhesley. (ld.at?). Accordingly,Movantshavestandingtoraisetheseissuesandobjectionsto the Magistrate's Decision.- See Davet v. Sheehan, 8th Dist. Cuyahoga No' 101452, 2014-Ohio-5694, 11 22 ,,refers (recogni-zing that standing to whether a party has a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy")' I actions are different. (/d. at S). However, even accepting that the purposes of the actions are different does not change the conclusion that the same factual issues are in play in both actions, thus increasing'the danger of conflicting orders and findings. As the Magistrate's Decision acknowledges, one such issue is whether Movants are creditors of WS3C. The Magistrate's Decision, on the one hand, notes that Movants' rights to WSBC assets depends on the federal court's findings. (/d. at 6). Movants maintain that this conclusion is incorrect, as such a finding is coterminous with the Kentucky court's order. Then, on the other hand, the Magistrate's Decision states that Movants are not creditors of WSBC. (Id. at ù. Importantly, this has not yet been d.ecided, and this Court is without the jurisdiction or evidence to make such a pronouncement at this time. Instead, only the federal court can make such a ruling, as it has jurisdiction over Chesley, Rehme, and WSBC. But the Magistrate's Decision permits this action, which will ultimately result in the dissemination of all WSBC assets-to which'Movants have a claim-to proceed without Movants' status being determinea. rne federal courl can also only decide the claims pending against Chesley, Rehme, and WSBC, again because this Court lacks jurisdiction over those individuals. The Magistrate's Decision wrongly refuses to stay this action until such integral factual decisions are made. The Magistrate's Decision does not dispute the fed.eral court is more familiar with the action, nor does it deny that the federal court can afford more relief. Ind.eed, the Magistrate implicitly acknowledged that it could during the hearing. Thus, given the intertwined and complicated factuaì predicate to this ABC Action, this Court should wait for the factual findings it acknowledges the federal court will be making before allowing assets ultimately due to the Movants to be improperly 9 distributed to other "creditors" manufactured by Chesley and WSBC. The Magistrate's Decision permits the collection and distribution of assets the Kentucþ court has already declared rightfuily belong to Movants. Such a conclusion is improper. III. Conclusion For the foregoing reasons, Movants respectfully request that this Court grant the objections to the Magistrate's Decision, refuse to adopt the Magistrate's Decision, and grant Movants' underlying motion to dismÍss this action. Alternatively, this Court should stay the action pending a decision from the federal court in the rr action. S. Sullivan, Esq. (oo4ozr9) Christen M. Steimle, Esq. (oo86Sgz) Drwsuon¡ & SHoHI-nP 2SS E. Fifth Street, Suite rgoo Cincinnati, Ohio 452c2 Phone: (stS)gZZ-Bzoo Fax: (stS) gZZ-Bt'+t Email: [email protected] christen. steimle @ dinsmore.com 10 CERTIFICATE OF SER\rICE I hereby certify that a true and correct copy of the foregoing was served. by regular the follqwing: U.S. mail, postage duly prepaid, this 3oth daY of January ' 2¡17, upon Donald J. RaffeÉy, Esq. Michael A. Galasso, Esq. COuNN TOOO IOTB & STANFORD LLC RoBBINS KnrrY PerrEnsox & Tucrpn 2So E. Fifth Street, Suite z3io 7 West Seventh Street, Suite r4oo Cincinnati,OH 45zoz Cincinnati,OH 45zoz [email protected] mgalasso@rþt.com Attorney for W oríte S chneíder Attorneg for Eríc W, Bayless &Chesley Co., L.P*4. 11 EXHIBITA PROBATE DIVISION HAMILTON COUNTY, OHIO Fd&ffiÐ No.2016oo365#'V .t g IN THE MATTER OF: Gase 20n WAITE, SCHNEIDER, BAYLESS & Judge Ral h *,ù#$ CHESLEY CO., L,P.A. Magistrate Rogena TO STAY THE ORDER DENYING MOTION TO DISMISS OR IN THE ALTERNATIVE OF CREDITORS PROCEEDINGS IN THE ASSIGNMENT FOR THE BENEFIT ACTION (MAGISTRATE'S ORDER) 2017 for hearing This matter comes before the court on the 1oth day of January in the on the Motion to Dismiss or in the Alternative, to Stay the Proceedings cou¡1was Brian Sullivan Assignment for Benefit of Cieditors Action. Present before the Galasso on behalf of the on behalf of the Movants.l Also appearing was Michael Assignee and Donald Rafferty on behalf of the Assignor' because the probate The Movants argue that they are entitled to the relief sought court and on ¡ssues which action is predìcated on issues already decided by a Kentucky States District Courl for have been argued and are currently pending before the United the interest of comity the southern District of ohio. The Movants further argue that in or in the alternative and judicial economy the probate matter should be dismissed stayed. FINDINGS OF F,ACT: I make the following findings of fact: pla¡ntifls who secured a $42,000,000'00.iudgment ¡ The movants represent 20 individuals out of a class of 300+ againsl Stanley ihesley in Boone County Circuii Courl proceedings 1 EXHIBIT A Bayless and chesley' co'' 1. Stanley M. chesley incorporated waite, schneider, the initial director and LPA (hereafter'WSBC") on February 22, 1982' Mr' Chesleywas sole shareholder. Mr' Chesley' 2, On April 15, 2013 at the annual meeting of the shareholders, F' Rehme as president of then serving as president of the wsBC, appointed Thomas as the sole stockholder cf WSBC. At the same meeting, Sianley Chesley, in his capacity to Thomas F' Rehme' WSBC, transferred all of the voting shares of the corporation as the sole director of the Trustee.2 On this Same ciate Thomas F. Rehme was elected the business affairs of wsBC' corporation. Mr, Rehme was charged with winding up and would be entitled to Stanley Chesley held a beneficial interest in the corporation of wsBC' receive any funds remaining after payment of the creditors Directors of wsBC was 3. On April 15,2013, the annual meeting of the Board of Thomas F' Rehme was held. At this meeting officers were nominated and elected' of wsBC' elected as President, Vice President, secretary and Treasurer transferred all of the shares 4. On September 1 , 2016,Thomas F. Rehme, Trustee (hereafter "Rehme") thereby making Rehme of wsBC to Thomas F. Rehme, Trr-lstee, lnc. to the commencement the sole shareholder of wsBC. Rehme authorized and consented Probate court' of the Assignment of Benefìt of creditors action in Hamilton county necessary to Thomas F. Rehme was authorized by Rehme to execute all documents effectuate the assignment for benefit of creditors action. 20'1 l'/irtChesley b, Stanley Chesley was disbarred by the State of Kentucky in 2 resigned his Ohio license to practice law in April 2013' references Mr' Rehme as Thomas F' Rehme 2 The nìnutes of the April 15, 2013 Annual lVleeling of shareholders Boarcl of Directors of Waite, Schneider, Bayless arrd only. The Joint wriflen Consent to Act¡on of the Shareholder and Trustee' ðÀårruy, Co., LPA references Mr. Rehrne as Thomas F Rehme' ¿ 6. On August 1,2014, the Boone Circuit Court of Kentucky entered judgment against Mr. Chesley, finding him jointly and severally liable with others for 542,000,000.00. This order was amended on Octoþer 22,2014. The amendment did not impact the amount of the judgment rendered against Mr. chesley. 7. On June 23, 2015, the Boone County Circuit Court issued an order to Mr. Chesley directing him to transfer his beneficiai interest in his shares of WSBC to the movanls through their counsel.3 The o¡der further ordered Mr. Chesley to direct Thqmas F. Rehme to make all payments that were derived from Mr. Chesley's interest in WSBC to movants' counsel, Angela Ford. Neither Thomas F. Rehme nor WSBC were parties to these proceedings. B. On September 25,2A15, the Boone County Circuit Court considered a motion to execufe which was filed by Mr. Chesley's creditors. The Boone County Circuit Court held that the 2013 Wind-Up Agreement was nothing more than a sham engineered to prevent Mr, Chesley's creditois from collecting on the $42,000,000'00 judgment. The Boone County Circuit Courl issued another order to Mr. Chesley which directed him to immediately transfer his ownership interest in WSBC to movants through their counsel' The court further ordered that all monetaìy payments due to Mr, Chesley from his interest in WSBC was to be paid to movants' counsel. The order also directed all payments due to Mr., Chesley from the Trustee of the Castano Trust and a matteÉ pending in the Colorado District Couri was to be paid to Movants' counsel. Neither Thomas F. Rehme nor WSBC were made parlies to these proceedings. 3 The Circuit Court ruled that Stanley Chesley maintained a beneficial interesl in WSBC q Merilyn Cook, et al. v. Rockwell lnt'l Corp., Case No. 1:90-cv-00181-JLK. .)a g. Mr. Chesley has not complied with the orders of the Boone County Circuit Court. WSBC has transferred no payments to Movants' counsel. 10, The Movants do not believe that the Assignee, Eric Goering, will protect their interests. The Movants fear that the Assignee improperly pay corporate debts which will decrease the total amount of money available to the Movants to satisfy the Kentucky judgment, 1 1. The Assignee argues that the Movants are not shareholders of WSBC. The Movants cannot be shareholders of WSBC as they are not licensed Ohio attorneys. The WSBC corporate records indicate that Thomas F. Rehme, Trustee, lnc, is the sole shareholder and director of WSBC. The Assignee asserts that the Movants hold no judgment against WSBC. The Assignee also argues that the Boone County Circuit Court Orders are not self-effectuating in Ohio as neither WSBC or Thomas F. Rehme were parties to the Kentucky proceedings and Stanley Chesley has not transferred any beneficial interest to the Movants. 12. Eric Goering in his capacity as the Assignee has represented to the court that he is a non-interested third party who will administer the ABC case so as io maximize the return to all of the creditors, He has asserted that he will pay the creditor's claims as directed by this court, including any money that rrray be owecJ to Movants if recognized by this court as an appropriate claimant of Mr. Chesley. DECISION: Movants' counsel argues that the federal court is the proper forum to provide more complete relief between the parties. Counsel further argues that the federal courl possesses greater familiarity and greater expertise with the trial of such issues as involved in this case. Counsel has filed motions in the Federal District Court which have 4 that disposition of the federal court been argued, but not yet decided. counsel claims motionswilldeterminewhetherStanleyChesleyfraudulentlytransferredhisinterestin are the creditors/owners of wsBc to avoid his credilors and whether the Movants the Federal WSBC' Counsel points out, that unlike the Kentucky.proceedings, as patlies' counsel takes the proceedings include wsBc and Thomas F. Rehme as the issues related to the position thai the ABc proceedings are unnecessary liquidationofWsBCarealreadypendingbeforethefederaldistrictcourt'sCounsel positstheABCproceedingwillattempttodistributeassetsthathavealreadybeen irreparable harm to the Movants' executed upon by the movants thereby causing of the probate proceeding is duplicativè Movants, counsel also argues that continuation be in the best interest of judicial given the pending federal proceedings and would not court is supportive of Movants' economy. Lastly, counsel argues that the federal order issued by the federal position as demonstrated by the Temporary Restraining court on October 17,2016.6 The matters pending in Federal The court finds no merit ìn Movants' arguments. be adjudicated in the ABC proceeding. District court do not squarery jibe with matters to provide a means for the creditors of stanley The purpose of the federal court action is to judgment. The purpose of the ABC action is chesley to execute on the $42,000,000.00 towind.upthebusinessaffairsofWsBC,toliquidatetheassetsofthecorporation,to any remaining assets to Stanley pay the creditors of the corporation and to distribute Revised code provides a chesley in settlement of his beneficial interest. The ohio pursLle a process for orderly distrìbution of mechanism for an owner of a corporation to have requested the appointment of a receiver for wsBC' s As part of lhe federal proceeding, the Movants noted lhat lhe TerÌporary Restraining order has sihce o see Exhibil c to Movants' Motion to Dismiss. lt shculd be expìred 5 of the corporation' To assets to satisfy the debts and obligations owed to the creditors of WSBC' There grant the relief the Movants seek would be a disservice to the creditors lf the would be no party interest in to collect the legal fees which are.due to wsBc'7 Ohio law' probate matter was dismissed ownership of the corporation, pursuant to position that Thomas F' would revert back to Rehme.s The Movants have taken the which will favor Rehme, as sole shareholder and director of Rehme will take actions rules the Stanley Chesley, to the detriment of the movants. Until the federal court pending motions, the Movants have no ability to enforce any ownership rights' Movants' Therefore, the administration of WSBC would remain with Rehme' Given the of the WSBC asserlion regarding the fraudulent transactions related to the transfer the result shares, this court concludes thai the reversion of ownership to Rehme is not Movants' best intended by the Movants. Thus, this coufi finds that is ultimately in the interests to continue with the ABC action. The use of ABC proceedings places a third party in charge of the liquidation of ihe the corporation. The Assignee can negotiate the remaining business affairs of corporation. The non-interesled Assignee can marshal assets, prevent unnecessary The expenditures and safeguard against any improper transfer of corporate assets. Assignee can steer liquidation of the corporation in an efficient, timely and orderly fashion presenily, Rehme is the sole shareholder of WSBC. As the sole shareholder of WSBS, Rehme exercised his Ohio statutory rights to purse liquidation of the corporation where the z please refer to Assignee's Notice of Supplemental Authority filed herein January 10,2017, parties for colorado District court denied the Movanls request to substitute them as real in interest Stanley ChesleY. s An Ohio licerrsed altorney must operate the LPA. 6 through an ABC proceeding. There are no grounds to grant Movants' request to dismiss a matter that has been properly initiated by the owner of the corporation. Furthermore, the Movants lack standing to assert any objectionse to these proceedings as they are not creditors of WSBC. At best the Movants are credítors of Stanley Chesley. The court acknowledges that the Movants have a vested interested in assuring that any monies which may be due to Stanley Chesley as the result of his beneficíal interest in WSBC are not diminished. Admittedly, the Movants may be able to assert an interest in money due to Mr. Chesley upon liquidation of WSBC and the Movants may be able to request distribution of these funds to them in satisfaction of their Kentucky judgment, but the Movants must file the appropriate action with this court to protect their interests in these funds. Continuation of the ABC action will not prohibit the Movants from asserting any of these rights. The ABC proceedings will not only assure that the corporate assets are liquidated in a manner so as to maÌimize the potential return to the WSBC creditors and Stanley Chesley, but will also maximize the possible return to the Movants as well. The more money payable to Mr. Chesley, the more money potentially available to the Movants from which they may collect on their judgment. The courl also finds n<.¡ rnerit in lhe Movants' request to stay the proceedings. The Federal District Court matter has been pencling for several months. Movants' counsel does not know when the federal coutl will issue its decision. ïhis court finds that the issuance of an order of stay does no service to anyone as all WSBC matters will be held in limbo. Expenses will be ongoing. Assets of the corporation may go e See R.C. 1313.05 artd R.C. 1313.06. 7 uncollected as there is no certainty as to who is entitled to pursue collection of said assets. Liquidation of the marshalled assets will have to cease until the stay is lifted. The wind-up of the corporate affairs will be prolonged thereby prolonging any potential recovery to the Movants. This court finds that continuation of the ABC action is in the best interests of WSBC, WSBC creditors, Stanley Chesley ànd the Movants. lT lS ORDERED AND ADJUDGED that the relief sought in the Motion is hereby denied. The Assignment for Benefit of Creditors Action shall proceed pursuant to R.C, 1313. 01, et seq. IT IS SO ORDERED o M istr Rogena D. Stargel CERTIFICATION The court adopts this order as its judgment without waiting for the filing of timely objections by the parties. Written objections must be filed within ten days to stay the execution of this Order. A party may not raise on appeal the court's adoption of any finding of fact or conclus¡on of law, whether or not spec¡fically designated as a finding of fact or conclusion of law under Civ. R. 53(D)(3)(a)(ii), unless the party specifically and timely objects to said finding of fact or conclusion of law, Civ. R. 53. Ralph Winkler, Judge O ¡'¡ilY Ût' Ï¡:i,i i:ii-l''tì'/ cc: Michael Galasso, Esq 11yr\" î,riitll.$ì Til îriI i]/\fì'flÊS _ rq- t1 Brian Sullivan, Esq. LISTF-Ü iti {lll Donald Rafferty, Esq. Utr'ul i ù B EXHIBIT B Page 1 COURT OF COMMON PLEAS HAMILTON COUNTY, OHIO . PROBATE DIV]S]ON *** TN THE MATTER OF: I/tArTE, SCHNETDER,. BAYLESS & CHESLBY CO., LPA CASE NO. 20r6003659 *** Partial- Transcription of Hearing before Magistrat.e Rogena D. StargeJ-, pursuant to the Rules of Civil Procedure, by Patti Stachler, RMR, CRR/ CLR/ CME, a Notary Public within and for the State of Ohio, January 10, 2011. *** EXHIBIT B Audio Transcription Page 2 t- APPEARANCES: Z J On behaÌf of the Assignee: 4 Robbins, KelIY, Patterson & Tucker q By: Michael A. Galasso, Bsq. The Federated Building 6 7 West Seventh Street Suite 1400 1 Cincinnati, Ohio 45202 51"3.12r.3330 I mgalassoßrkPt. com 9 10 On behalf of the Crediors: 11 Dinsmore & Shohl, LLP 12 By: Brian S. Sull-ivan, Bsq. First Financial- Center 13 255 East Fifth Street Cincinnati-, Ohio 45202 I4 513. 9-11 .8200 brian . sul I ivanßdinsmore . com 15 I6 *** I1 18 79 20 2T 22 ZJ 24 25 Mike Mobley Reporting (e31) 222-2259 Audio Transcription Page 3 1 PROCEEDINGS 2 IHE MAGTSTRATE: ThiS iS IhC 3 matter of Waite, Schneider, Bayless, Chesley 4 Company, LPA, Case Number 2016003659. We're 5 here today for several matters ' One is the 6 motion to dismiss or, in the al-ternative, stay 1 the proceedings which have been filed by what B I'm going to refer to as the McGirr plaintiffs' 9 Then the assignee has filed the 10 following: an appl-ication authori zing the 11 retentj-on of an accounting firm; an application I2 authori zinq the retention of a legal firm, t-3 Robbins, Ke11y, Patterson & Tucker,' ârI I4 application authorizing retention of Jonathan 15 Coughlin to advi-se on ethical issues,' ârl 16 application for an order establishing r'7 procedures for interim compensation and 1B reimlcursement of professionals; an application I9 to notify creditors and establ-ish the bar date 20 for cl-aims; an application for sale of office 2I equípment and other assets; the rehearing on LLaa the application of the order which authorized LJ service of the pleadings by ordinary mail; and 24 an app-lication for the appointment 25 employment of Levin Sitcoff firm as counsel for Mike Mobley Reportrng (931 ) 222-2259 Audio Transcription Page 4 1 the assignee in the Rocky Flats litigation. 2 Have I left anything out? J MR. SULLIVAN: No, Your Honor. 4 THE MAGISTRATE: OkaY. I woul-d 5 assume, Mr. Sullivan, VOü woul-d like to start with 6 the motion to dismiss. 1 MR. SULLIVAN: We would. B THE MAG.ISTRATE: Al-I right . 9 MR. SULLIVAN: Your Honor, Brian 10 Sull-ivan, ChrisLen Steimle on behal-f of the 11_ plaintiffs. 1,2 Unfort.unately, your Honor, this is 13 yet another saga between my clients and L4 Mr. Chesley at Wait.e Schneider l-aw firm. As 15 the Court is probably well aware, this -- a I6 number of Courts have rendered opiníons about L1 this dispute, including the Ohio Supreme Court. 1B The reason we're here todaY is we L9 filed an action in the United Statcs District 20 Court for the Southern District of Ohio 2I invoJ-ving the very same issues in which they're LLaa trying to avoid by filing this assignment to 23 the benefit of credibors. But in that action, 24 your Hono::, we filed against Mr. Chesley and )\ the Viaite Schneider law firm. I'm going to Mike Mobley Reporting (931) 222-2259 ¡ Audio Transcription Page 5 1 take you back just very briefty, but this all- 2 emanates irom Mr. Chesley's pending disbarment 3 with the Ohio Supreme Court - He decided to 4 transfer the assets out of his name to his 5 longtime colleaque and friend Tom Rehme ' He 6 did so in April of 2013 - 1 That transaction, which is called a B the windup agreemenl, has been the subject of 9 series of judicial rulings, mostly from the 10 Kentucky court where these plaintiffs sued 11 Mr. Chesley for the underlying Fen-Phen fraud I2 that was involved and obtained a substantial 13 judgment against him. But two times the judge I4 in Kentucky has rendered an opinion on that 15 transacti-on, in Juty and September of 2Ot6 - 76 trach time, it was not met kindly by the Court I1 because at the last opinion in September of 1B 201-6, Judge Schrand described it as a sham L9 Lransaction and ordered Mr. Chesley to unwind 20 that. He's not done that, and they freely 2I admit that Mr. Chesley has refused to do that. 22 We implemented the l-awsuit against )? Waite Schneider j-n the federal court, âs I just 24 mentioned, and we obtained a series of 1tr 1. -) temporary restraining orders. Initially, one Mike Mobley Reporting (931) 222-2259 Audio Transcription Page 6 1 involvíng a fee that was the subject of dis z a claim in the Duke Energy cl-ass action matter ' 3 We that. deposit has been mader so there's 4 about a million-eight that's sitting with the 5 Judge Cl-eland, who is sitting by assignment ' 6 All t.he federal- judges here recused themselves, 1 so Judge Clel-and out of Detroit, Eastern B District of Michigan, is hearing the case. 9 Then we *etrt through a significant 10 process of a preliminary in¡unction hearing. 11 We took testimony, and I will- freely suggest or T2 admit to the Court'everything in that case has 13 been contentious/ litigated to the hi1t. We L4 were able to obtain a leave from the Court to 15 allow us to take discoverY. I6 I took the deposition of Steve I1 Horner, who was, for all intents and purposes 1B during all- the relevant time period, the 19 accountanL at Waite Schneider ' I took the 20 deposition of Tom Rehme. !f e had to get an 2I order from Judge Martin to all-ow that to happen 22 here in Hamilton County, and I took the z3 deposition of Mr. Rehme, who was the supposed 24 person who Mr. Chesley transferred the law firm l:) assets to. Mike MobJ-ey Reporting (931) 222-2259 Audio Transcription Page 1 1 Significantly, that testimony was the 2 subject and is the subject of the federal courL 3 case. The questions posed to them were, what are 4 the creditors, what are the debts of Waite 5 Schneider. These would be the two people to ask' 6 They both testified under oath that they had no 1 knowledge of any debts belonging to the law firm. B Now, this is testimony taken in 2016. Therers a 9 series of events that are the subject of dispute 10 from the time Mr. Chesley signed the windup 11 agreement until then, which is part of the 72 lawsuit. It'.s a number of transactions 13 essentially where he continued to use the l-aw firm L4 for his own free purposes and took out millions of 15 dol-lars, which we're asking the federal- court to I6 have Mr. Chesley be hetd accountabl-e as well as 71 Mr. Rehme and Waite Schneider for allowing that to 1B happen. 79 But when asked the question, who 20 are Ehe what are the debts, they both said 2I they don't know of any. zz Now, al"O then we qo through a LJa1 two-day prel-iminary injunction hearing. Each 24 side puts on testimony. We introduce the 25 testimony of Mr. Horner. That's been tendered Mike MobJ-ey Repor:ting ( 937 ) 222-2259 Audio Transcription Page I 1 to Judge Cleland. We gave him the deposition 2 of Tom Rehme. That's in front of him. And 3 Waite Schneider and Mr. Chesley were al-l-owed 4 thei-r opportunity to put in evidence and they 5 brought five witnesses who testified 1ive, 6 including one, who's Marion Little. 1 Marj-on Little is a lawYer in B Columbus who prepared the windup agreement 9 that's at the subject of all of this dispute 10 and gave testimony as to what its purpose was/ 11 what its intent is, and what is the effect. I2 We've argued back and forth in a 13 series of these different cases what is the T4 effect of the windup agreement. But Mr. Little 15 test.ified under oath in the federal- case that I6 Mr. Chesley is the beneficiary of the assets. 1-1 Undisputed. That's been and that testimo.ny 1B was taken in July of 2016 when T cross-examined 19 him. 20 So you have the person who said 2I the windup agreement supposedly transferred the )) assets, belongs to Mr. Chesley. . You have the 23 two employees at Waite Schneider, because 24 Mr. Rehme \^ras an unpaid empj-oyee, but he did 25 work there, who have said there are no debts. Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 9 1 And we're on the verge of waiting for Judge 2 Cl-eland to issue a preliminary injunction. J) rt's been fully argued, bríefed, evidence 4 submitted. That's at the end of July. And 5 then the briefing occurs. There's moLions to 6 dismiss. There's all sorts of other stuff 1 going on. B Then what happens? These 9 entities, Mr. Chesley and the Waite Schneider 10 l-aw firm, decide to create yeL another 11 opportunity to have another Court hear their I2 essentialty dispute. And they run to this 13 Court and file this assi-gnment for the benefit I4 of creditors. 15 Unbeknownst to uS¡ because theY 16 didn't tell- us about this until after the fact, I1 but it appears that Mr. Rehme, who's on the 1B receiving end of one preliminary iniunction 19 or temporary restraining order, oD the 20 rqceiving end of a prel-iminary injunction ¿I hearing, while we're waiting for that decislon, )a transfers the assets of Waite Schneider o,r.: of LJa-) his name to a company created by the Waite 24 Schneider lawyer, Mr. Rafferty. We never knew LJac. about this, but this corPoration is Mike Mobley Reporting (931 ) 222-2259 Audio TranscriptÍon Page 10 1 incorporated on August 30th. Itrs cal-l-ed Tom 2 Rehme Trustee, Inc. He transfers the assets 3 there. The next day he transfers it to 4 Mr. Goer,ing and says, here, Yoü deal with this 5 law firm in windilg up the affairs. And then 6 they file that wrth Judge Cleland. 1 We file a restraining order motion B in f ront. of Judqe Clel-and and he granted it. 9 And it's important, your Honor, that I just 10 point out a couple of the things that he said 11 in his t.emporary restraining order, which I 72 think is relevant for our purpose here today. 13 He says, The Court finds that wj-thout T4 temporary injunctive relief, there is a 15 significant risk that Waite, Schneider, Bayless & 76 Chesley's assets will be liquidated without 71 recognition of pJ-aintiffs' claims that's my 1B client before a decision as to their status can I9 be made and plaintiffs will be left without any 20 recourse. 27 That's one thing he finds. He finds 22 that after he says that/ our status as creditor z-) of Waite Schneider squareJ-y before the Court, 24 Thus, through thís purported assignment, t5 Rehme/Waite Schneider has attempted to remove this Mike MobJ-ey Reporting (931 ) 222-2259 Audio Transcription Page 11 1 decision from the Court, place it in the plenary 2 discretion of the new assignee who will have 3 unfet.tered authority to deny plaintiffs' claims 4 and sell or liquidate alt of Waite, Schneider, 5 Bayless & Chesley assets before a fair and 6 impartial O".:sion can be made. 't Ihose are the findings of the Federal ö Court when he granted the injunctive relief- And 9 then it was about to expire and we asked the Court 10 to renew it, and he did. Ilrle have three 11 restraining orders on this issue which tell waite I2 Schneider, you cannot proceed further ín this 13 action. 74 UnfortunatelY¡ w€ have a gap in ) 15 time. The restrainì-ng order ended, the 16 preliminary injunction has not yet been ruled 1,1 upon by the Court. It is stj-ll pending- And 1B since Lhat date, they've now engaged in a 19 series of maneuvers in an effort to what we 20 view is deny our cl-ients their right and 2I further the interest of Mr. Chesley and his interes L. . 23 How do I saY what's the basis 24 for that? f'd tike to your Honor, it was ,/5 interesting because despite the testimony of Mike MobIey Reporting ( 937 ) 222-2259 Audio Transcription Page 12 1 these two peoPle said there's no creditors, 2 that they have drummed up some list of here are 3 the creditors of which we think are existing 4 out t.here. 5 The first is the Internal Revenue 6 Service. That's a creditor of Mr. Chesley. 1 The Vüaite Schneider law firm was owned by him. I To the extent that Waite Schneider l-aw firm had 9 an IRS obligation while he was the owner, that 10 obligation flows to Mr. Chesley, that's 11 Mr. Chesley' s obl-igation. I2 They cite two claims bY former t_J1') employees. I don't know who those are because 74 they don't identify them, but there are no 15 former employees. Al-l of them h/ere gone when I6 the windup agreement was signed except for T1 Mr. Horner, who was the onJ-y paid employee, and 1B a part-time secretary, Mr. Rehme, said he 19 didn't take anything. 20 Another creditor is Stan ChesleY 2I himself. They claim by indemnification. Stan is 22 the ultimate recipient of the asseLs of Waite 23 Schneider. He's now a creditor of Waite Schneider 24 according to this indemn-ification and he is the 1f /l defendant who's participated in this scheme for Mike Mobley Reporting ( 937 ) 222-2259 Audio Transcription Page 13 1 the last three-and-a-half years where he's used 2 Waite Schneider to take money out for his own 3 personal benefit without really any justification, 4 but certainly with the knowJ-edge of Mr. Rehme and 5 Mr. Horner. 6 Another credi-tor is the Frost l Brown Todd law firm. Frost Brown Todd is ö Mr. Chesley's personal counsel, always has 9 been. In the case in the preliminary 10 injunction case that we had in front of 11 Judge CleJ-and, I asked those questions. Frost L2 Brown has never once entered an appearance for 13 Waite, Schneider, Bayless a Chesley. How is it I4 a creditor of the law firm? It's not. It's 15 Mr. Chesfey's J-awyers. And the l-ist goes on. I6 All- of these are identified as creditors of the 71 faw firm and they are not. 1B I ' 1l submit/ yolrr Honor, ahis is yet 19 another sham lawsuit, the same kind of lawsuit the )^ Ohio Supreme Court described when Waite Schneider 2I and Mr. Chesley decided to sue my clients and this .)a LL forum -- he was the lawyer in front of Judge Ruehlman, and they got orders from Judge Ruehl-man 24 because they found friendly forum until we went to 25 the Ohio Supreme Court and tfie Ohio Supreme Court Mike Mobley Reporting (931 ¡ 222-2259 Audio Transcription Page 14 1 cal-led them out and said, that's a sham -l-awsuit. a L There was no basis to bring it in the first place, 3 there was no basis to contj-nue it, and ordered 4 Judge Ruehlman to terminate the case, which he 5 f inaIJ-y did. 6 That's what we're faced with here. 1 They've run to this Court to find another õ friendly forum for issues that are litigated 9 currently 1n the federal court ín the Eastern 10 District of Michigan sitting by assignment. 11 They may not l-ike the rulings, but they're L2 getting a fair shake. They're getting their 13 opportunity to be heard. They're getting the L4 opportunity to put on evidence. We're waiting 15 for a decision. I6 Íühat we don't get here is an assignee 71 who's already denied our exisLence as a creditor ' 1B They fight us tooth and naif on our existence to 19 do anything in this case. They decide that 20 they're a bunch of trumped up creditors, despite 21 the evidence which is clearly overwhelming to t.he LZaa cont Tary, and at the end of the day they want to ZJ cutl together assets to pay to Mr. Chesley' 24 That's Mr. Little's testimony, where the money's LJ ultimately going - Mike Mobley Reporting (931 ) 222-2259 Audio TranscriPtion Page 15 1 The only way we're going to be 2 able to tetÌ Mr. Chesley and the V'laite 3 Schneider law firm to stop is to do what we've 4 done. Stay this matter. ft's already being 5 heard. We've already asked for a receiver. 6 The same thing as an assignee. Judge Cleland's 1 considering that. Alt of the assets of Waite B Schneider have been in front of Judge Cleland 9 now for a significant period of time. 10 We've atteged a series of 11 fraudulent transfers from Mr. Rehme and Waite I2 Schneider that have allowed Mr. Chesley to take 13 money out of the law firm for his own personal T4 benefit. Al1 of that can't be litigated here. 15 And, f inal-ly, Mr . ChesJ-eY himsel f I6 is a defendant in our case in federal court. I1 He's not a defendant here, can't be a party 1B here. Hets what they identify as a creditor. I9 FIe's somebody they're J-ooking out for. 20 So, your Honor, the onlY waY to 2T stop this nonsense, frankly, is now is to 22 grant our motion. They have a forum. We'll go 23 back to Judge Cleland, who will hear this ancl 24 he']l handle it in a manner tllat it should be )q handled as to whether we have claims, whether Mike Mobley Reporting (931 ¡ 222-2259 Audio Transcription Page 16 1 werre entitled to collect against Mr. Chesley, 2 whether we're entitled to collect against Waite 3 Schneider and Mr. Rehme, and that's the reason 4 we filed the motion. J THE MAGISTRATE: In al-l of the 6 proceedings that you spoke of when you \^rere 'l pursuing the TROs and the preliminary injunctions/ U had you ever brought j-n Wait.e Schneider as a 9 party? 'LU MR. SULLIVAN: Yeah. In the federaf 11 lawsuit, Waite Schneider is an original- defendant. I2 Mr. Rehme is a defendant in that case as.well. So 13 the Court has jurisdiction. And T don't know all T4 of the reasons, âs I state in here, because, 15 again, a lot of pleadings have been filed, but I6 Waite Schneider and Mr. Rehme moved to dismiss the 77 complaint in that action, and I think one of them 1B was a lurisdictional claim and the Court recently 79 denied that motion to dismiss. 20 THE MAGISTRATE: Okay. And then in ,/. L your argument you're saying that your clients wil-l ZZ have no recourse if we don't dismiss this action? )? MR. SULLIVAN: Correct. 24 THE MAGTSTRATE: The law firm ítself ZJ-tr woul-d be the one entj-tled to any receipts, I woul-d Mike MobJ-ey Reporting (931 ¡ 222-2259 Audio Transcript.ion Page L7 1 assume. That's going to be a questi-on I'm going 2 to be asking Mr. Gal-asso in a f ew minutes. 3 Mr. Chesley started the LPA/ had many employees at 4 one point in time, and f know many of the 5 employees left. I don't know the tirneline in 6 there. But wouldn't he,collect earnings from the 1 company as the fees come in? It's not like a B check's written to Stan Chesley. Wouldn't the 9 check be written :- 10 MR . SULLIVAN : Wel J- , You know, that ' s 11 a good question, and the answer is, it's not T2 clear. I'11 use an êxample. During the existence 13 of Waite, Schneider, Chesley Mr. Chesley was 'r4 involved in what we call the Castarlo TrusL. I['s t_J1tr the tobacco litigation. And payment is made 76 quarterÌy of 600-some-thousand dollars for a I1 number of years. There's been a l-ot of debate as 1B to whofs entitled to that money/ whether it's 79 Mr. Chesley himself or whether it's the law firm. 20 And I won't get bore you with 2I all the details, but j-t ' s been litigated tt exIensively about whether it's Mr. ChesJ-ey's 23 c,laim, it's the law firm's claim. So money 24 does go because he is the one who has 25 received all of that money/ right up until the Mike Mobley Reporting (937) 222-2259 Audio Transcription Page 18 1 time had we filed this. 2 So when tþe winduP agreement had 3 already been signed, supposedly Mr- Rehme's 4 running the shoP, those PaYments of 5 600-some-thousand dollars on a quarterly basis 6 would have gone to Mr. Chesley. He's put it in 1 his pocket. B You need to remember the other 9 point, your Honor, is, the }aw firm 10 essentially, the only assets it has is a sLream 11 of potential- income for l-awsuit.s that were I2 settled or got resol-ved while the law firm had 13 the case. They're we're running out of L4 assets. That's our problem. The Castano 15 Trust, money is being paid out, a substantial- 16 amount is al-ready being paid out. This Rocky 1'1 Flats, which Mr. Rehme identified in his 1B deposition, is the biggest asset. 19 I deposed Louise RoseJ-le, who is a 20 former employee of the faw firm, and rt was the LL biqgest asset. That Rocky Flats case settled. 22 And there's a fee claim due, I think, coming 23 soon, €ither Lomorrow or the next day or next 24 week, T can't remember which , for the ,ltr LJ plaintiffs' fees. Mr. ChesJ-ey and his l-aw firm Mike Mobley Reporting (931) 222-2259 Audio Transcription Page 1"9 1 are one of many. That's been a big issue about 2 who gets to represent Waite Schneider, and 3 that's a 1ot of the reasons they filed this 4 motion to appoint a Colorado l-awyer. 5 Vle are very concerned because 6 Mr. Galasso has represented that only $¿ mill-ion 1 woul-d be the fee cl-aim. We know from the facts of a, that case that the fee award's approximately $90 9 million given the size of the settlement, and so¡ 10 you know, we're concerned that that's one of the 11 few remaining assets that can be used, actualIy, 72 to satisfy our claims. And I do and they'll tell 13 you because they got a ruling from the Colorado I4 Court yesterday but I would think, íf you look 15 at the Colorado Court, while it denied the motion T6 to intervene or substit.ute as a party and I get I7 that Mr. Chesley's not, you know, entitled to a 1B fee out there. It's the Waite Schneider law firm. I9 trffectively what the Colorado Court judge did 20 yesterday is say this belongs with Judge Cleland 2I in the McGirr case. And that's where we think it )) does belong ultimately is with Judge Cleland in 23 the McGirr case because that is an asset that we 24 can use to satrsfy our claims. 1tr /. -) They don't have many other assets Mike Mobley Reporting (931 ) 222-2259 Audio Transcript ion Page 20 1 beyond that. Most of these cases have run out 2 or settled or whatever, or they've been Ja transferred to the successor firm, for l-ack of 4 a better word. It's not truly the successor, 5 but the Markovits, Stock, DeMarco law firm was 6 created and they took a number of the cases ' 1 But we're running out of Places to R find money to satisfy our clients' claims 9 against Mr. Chesl.y, who is the owner of the 10 law firm who, you know, transferred the l-aw 11 firm's interest to his friend in the sham I2 transaction that has been described' So that's 13 why it's a significant problem here. I4 And, you know, agaín, I don't want 15 to underscore T can't find a better word I6 than to say offended that they would telt you I1 that their biggest claims are the lawyers that 1B represent- Stan personally or the TIS that Stan T9 owes personally. I mean, that's offenslve to 20 say that you're goíng to go out and get .assets 2T to satisfy the creditors of Waite Schneíder and ZLaa you recognize the creditors should be his j-msel ZJ lawyers, the IRS, and h f . 24 THE MAGISTRATE: Wel-l-, there would be Z.Jat proofs of claim that woul-d have to be filed and Mike Mobley Reporting ( 931 ¡ 222-2259 Audio Transcription Page 2I 1 there would be documentation to support these are 2 Waite Schneider's debts. 3 MR. SULLIVAN: There would. But I 4 woul-d suggest I think Judge Clel-and is dead on 5 when he suspects that we won't get a fair shake. 6 And I think that's true because we've already been 1 denied our existence as creditors. It's a debated B issue, but they've already filed pleadings with 9 t.his Court to say we don't have a claim against 10 Waite Schneider. 11 THE MAGISTRATE: To me it's like a I2 puzzle, and so that's why I'm struggling. I am 13 syrnpathetic to your clients' positions and the T4 mountain that you have to overcome, but I still 15 start from the position that this LPA has been in t6 existence since the '80s, I be]ieve. It was an L1 ongoing concern. It was a business. They had to 1B fife appropriate tax returns. They had aÌl- the I9 reporting requirements for empJ-oyees. 20 So I have a business and I'm going 27 to either have legitimate creditors or f'm not. 22 The assignee 1s going to have to issue proofs ZJ of cl-aim. People are going [o have to come in 24 and provide proper documentation. I believe in 25 the ABC case the Court would be able to ferret Mike Mobley Reporting (931 ) 222-2259 Audio Transcriptíon Page 22 1 out this is a legitimate cÌaim of Waite 2 Schneider versus, oh, rtor this is coming from 3 Stan ChesJ-ey's individual obligations and so it 4 will not be honored. So we would be able to 5 tee it atl up, pay the assets. And then you do 6 have a judgment from Kentucky which the Court 1 would give full, faith, and credit and would I honor and you would have the ability to assert 9 a creditor's bilf against whatever might be 10 left going to Mr. Chesley. And this Court has' 11 oftentimes recognized those and have redirect.ed I2 payments 13 MR. SULLIVAN: Right, but T4 THE MAGISTRATE: _- tO thc 15 beneficiary, to 76 MR. SULLIVAN: remember, when You T1 say that people can come in and make. a claim, 1_B werve already taken that evidence. We've already T9 asked the people who ran the business -- 20 THE MAGISTRATE: But the ABC z,La1 . MR. SULLIVAN: who are the 22 creditors of the law firm? And they said there ¿J are none. For instance, f tll- use as an example. 24 The lease where the Vrlaite Schneider l-aw firm was, 25 the l-ease expired that month. It's not a Mike Mobley Reporting (931 ) 222-2259 ¡ Audio Transcription Page 23 1 three-year written obligation unl-ess they've z entered into that since then. But at the time 3 there was even no further l-ease obligation. Are 4 there employee cl-aims, 401 (k)? No, those have 5 been fully satisfied. Sian's pension has been 6 fully satisfied. 1 THtr MAGISTRATE: You were able to B verify that in aÌI the in the federal 9 I it igation? 10 MR. SULLfVAN: Well, I'11 take the 11 sworn testimony of these wit.nesses to be truthfuJ-' 1"2 yeah. 13 THB MAGISTRATE: Them saying that it 74 was. Okay. l-JItr MR. SULLIVAN: Yeah. I mean/ if 76 they you know, if for some reason they weren't I1 accurate or truthful, that's a different question 1B altogether. But, you know, t.hat ' s to say let ' s go I9 and ask who are the creditors. We've already done 20 that.. We're in the middle of the litigation and 1A LL we've asked that very quest.ion and we've got an ¿¿ answer. And now v,/e've got this where they come in ¿J and sâV, well, wê have creditors. Well, those are 24 only creditors of his. And they cl-aim he's an 25 ultimate creditor for this claím for Mike Mobley Reporting (931 ¡ 222-2259 Audio Transcríption Page 24 1 lndemni fication 2 So I'm afraid, frankJ-Y, Your 3 Honor, that this is going to be used as a sham '4 to continue to avoid the obligations to our 5 clients, 'to continue to use the assets for 6 Stan's personal benefit. It's the same thing 1 he did right uP until the time right B after T mean, he filed t.he or signed the 9 windup agreement. 10 I mean, it's aPPalling what You 11 see in the evidence, that he would take out 1,2 money hand over fist. I mean, the testimony of 13 Mr. Rehme was essentially this- If Stan asked T4 for money, you would pay it. The answer's yes. 15 The man was on their checking account. They T6 I mean, again, it's egregì-ous. They tell the 1aTI Court, well, this was a mistake. I asked 1B Mr- Horner, when did you discover thís mistake I9 that Stan is writing checks to himself on the 2A law firm's checking account when he's no longer 2I a lawyer? Well, w€ discovered it iust a couple 22 weeks before I took his deposition- ¿J I mean, there's no confidence at 24 all that any of t.hese peopJ-e will do anything 2\ that's rlght, justifled, or in accordance with Mike Mobley RePorting (931) 222-2259 Audio Transcription Page 25 I the ultimate beneficiaries, us. 2 THE MAGISTRATE: Vlel1, no\^¡ the assets J) have been switched to the assignee, so what 4 argument can you have that Mr' Goering's not going 5 to do what he shoul-d be doing? 6 MR. SULLIVAN: Because Mr. Goering is 1 fighting me tooth and nail through a lawyer that () they're hiring. Everything we fiJ-ed, they file 9 agaj-nst us. They've already said in their 10 pleadings t.hey don't recognize us as creditors . 11 Do T bel-ieve that. Mr. Goering will give us a fair 12 shake? No, I don't. Do f think Mr. Galasso wil-l 13 give us a fair shake? No. Do I think any of 14 that's necessary? Ultimate answer's no because I 15 got a federal judge who's considering the issue I6 and has aÌready said in an order the transfer from I1 Mr. Rehme to Mr. Goering is forum shopplng. .LÕ I don't have Brian Sulli-van's I9 opinion. I've got a federal judge who put that 20 in an order. That's prett.y signif icant - And 2I mindful/ your Honor, this comes on the heels of aa LZ the law firm sued our cl-ients and the Ohío a'7 Supreme Court had to tel-l- them it's a sham 24 Iawsuit. Do I think that law firm's going to ZJatr be f air . to us? There' s no poss.ible way. Mike Mobley Reporting (931]) 222-2259 Audio Transcrj-ption Page 26 1 THE MAGISTRATE: Thank You. 2 Mr. Galasso. 3 MR. GALASSO: Thank You, Your Honor. 4 I'm going Eo go out of ordeq a little bit in what 5 I would normal-lY do. 6 THE MAGISTRATE: OkaY. 7 MR. GALASSO: So normallY I would B just tafk about what my response to the motíon is. 9 But there are so many inaccuracies in what was 10 just said that I want to go through a few points 11 and cJ-arify facts. 72 So the first thing I'd l-ike to do 13 is talk about the fact that we are in your t4 courtroom today with no evidence, nothj-ng. 15 What Mr. Sullivan says is not evidence. Illhat 76 he says someone said in a deposj-tion is not I1 evidence. And so procedurally, I don't know 1B how we got here. Because there is a procedure 79 to chal-Ienge whether Mr. Goering j-s unqualífied 20 or he's not disinterested. There's a statutory 2.1 procedure in the ABC statute to follow. And t) they chose not to do that. And, instead, thev ZJ chose to come to this Court and file a motion 24 with as far as f can tell has no precedent ,1. J whatsoever and take the position that we have Mike Mobley Reporting (931 7 222-2259 Audio Transcri-Ption Page 27 1 one citation that says that a Court has a L equitable power to stay cases under certain 3 circumstances, which T'Il- concede the Court has 4 equitabJ-e power to stay cases. But that is not 5 the procedure that gets us here today. 6 On December 21st I sent a letter to 1 Mr. Sullivan and I said to him, In connection with B the motion that you filed on December 12, we woul-d 9 like to depose your clients. I do not expect that 10 these depositions will take very long and that it 11 wilt be fine to schedule them an hour apart. I2 Additionally, we will travel to them in Kentucky. 13 In other words, Mr. Sullivan is I4 taking the position that his clients are the 15 owners of Waite, Schneider, Bayless e Chesley. I6 All of the evidence we've done a lot of work 71 t.o this point to administer this case - We can 10 -LO find no evidence of that, and we're entitled to I9 know what the basis of these claims are. 20 Do you want to know what response 2I I got to this letter? Nothing ' ZZ So as we sit here today, there's 23 no evidence and Mr. Sullivan just comes in 24 and paraphrases things and talks about what -tr people other people talked about. I don't Mike Mobley Reportrng ( 937 ¡ 222'2259 Audio Transcription Page 28 1 understand how this Court could base a decision 2 granting a motion to dismiss or stay based 3 simpty on the legal arguments of counsel that 4 paraphrase his interpretation of evidence. 5 It's just a complete viol-ation of due process. 6 But evidence aside, what I wanted to ,1 do is talk about some of the points that B Mr. Sul-l-ivan made, and I tried to make notes. 9 First off, Mr. Goering has never/ 10 quote, denied the claims of Mr - Sul-livan's 11 clients. Okay. And we put on a decl-aration, a I2 s\^/orn affidavit in the McGirr case where 13 Mr. Goering sa j-d exactty the opposite. He !4 said, T have no predetermined intention to deny 15 anyone's cl-aims . I mean, really, it would be I6 specuJ-ative for him to say what a cLaim is or I1 what a claim isn't. 1B And we went on to say in one of I9 our pleadings that in the McGírr case that the IU Court ultimately decides that the movants in 2I this case are judgment. creditors of Waite ZLaa Schneider, we believe that would be a binding LJa') det.ermination by another Court as to the 24 validity of t-hat cf aim. We think that's true ' 25 But what j.t's not Mr. Goering's Mike Mobley Report.ing ( 937 ) 222-2259 Audio Transcription Page 29 1 job to deny a claim or not- The statute says 2 that cÌaims are sub,mitted. Mr. Goering and 3 it's not just Mr. Goering. Other parties have 4 the ability to object to claims, and if there's 5 an objection, it is for thi-s Court to decide 6 who has a claim, not Mr. Goering. And so 1 Mr. Goering is a neutral. He has no stake in ö whether the movants in this case are paid on 9 their claims or not. 10 And I think that the whol-e thing 11 could be remedied by exactly what your Honor I2 said, and that is, if the thought is that the 13 movants feef like they might not be successful I4 in submitting a cl-aim to this Court in the ABC, 15 they are a judgment creditor of Mr- Chesley. 16 And so, uJ-timately, under the st.atute, if there T1 is a surplus, the surplus woul-d be payable to 1B Waite Schneider as the assignor and then, 19 ostensibly, tl.rrough this trust arrangement 20 where Mr. Rehme hol-ds the shares, to 27 Mr. Chesley. LLaa So let's -- the Court controls 23 that disbursement. Let's have a creditors' 24 b,ill. There's no one's in danger of moneY z,Jatr runnrng out the door here. These are claims Mike Mobl-ey Reportj-ng (931) 222-2259 Audi-o Transcrj-ption Page 30 1 for this Court to determine. So thatrs one point. Mr. Goering has not taken a position 3 that he's antagonistic to anyone or that he's 4 denied their cl-aims. We've reached out to them à at the outset of this case, sought a meeting 6 with them, asked us to hear us out and just 7 without success. (, Mr. Sul-l-ivan said that we're looking 9 out f or Mr. ChesJ-ey. Nothing could be f arther 10 from the truth. Mr. Goering never even spoke to 11 Mr. ChesJ-ey prior to agreeing to accept the L2 assignment in this ABC case. And I wíll posit to 13 the Court that vve are oppositional to Mr. Chesley t4 on a number of fronts and that he is not at all 15 pleased with us. 16 The creditors of Vüaite, Schneider, 77 Bayless a Chesley. There is a $g mill-ion or so 1B IRS cfaim and there's about ç2-I/2 million on that 79 1n penatties that are on top of that. The basis 20 for that claim, as I understand it b,ased on the 2I my investigation to date, is that there are ¿¿a.t certain draws that were taken from the corporation 23 that were not subject to withholding, FICA and 24 that type of thing. And so there is Lax owed as a 25 result of that according to the lRS's position. Mike Mobley Reporting ( 937 ) 222-2259 Audio TranscriPtion Page 31 1 And those draws relate, ât l-east as f know, not 2 only to Mr. Chesley but to another waite schneider 3 employee. And, in fact, Lhere is a wage and hour 4 audit where two other people receive 1099 payments tr. where the TRS believes they should be classified 6 as W-2 emploYees. 7 T have received a letter from Õ Mr. Chesley's tax counsel that evidences a dispute 9 as between Mr. ChesJ-ey and Mr. Goering as to 10 claiming credits for certain things in certain tax 11 years. There are issues in which the entire I2 liability for that $rr-I/2 mil-Iion tax claim might 13 be hoisted on Waite, Schneider, Bayless & Chesley' I4 And so to give an examPle, one of 15 the el-ements of relief that the McGirr T6 plaintiffs seek in federal court is a pier'cing I7 of the corporate veil or an al-ter ego theory of 1.8 l-iability. And if thaL's the case, then the I9 case law is cÌear that Waite Schneider is going 20 to be on the f,oJf for the entire tax fiability 2I joint and several- with Mr. Chesley' ZZ So I don't and there's one ¿-J other piece of this. There are cer[ain 24 vehicles, there's 29 motor vehicles, as this 25 Court's aware, that Mr- Goeríng has taken Mike Mobley Reportrng ( 937 ) 222-2259 Audio Transcription Page 32 1 possession of, that he is storing, that he's 2 Ínsuring, he's having appraised and we wilÌ 3 eventually come to this Court with a proposal 4 to liquidate and sell- those vehicles ' The IRS 5 , is clai-ming a lien on those vehicles. 6 Mr. Goering has been in contact 1 with an attorney at the Internal Revenue I Service regarding this claim. We have placed 9 the fnternaL Revenue Service on notice of the 1-0 assignment for benefit of creditors and we 11 essentiaJ-Iy need to get an accountant -r:etained T2 to deal with some of the taxation issues. 13 And f'll give YOu another Point on 1"4 the taxation issues. There Mr. Sullivan 15 referenced what. he called about $610,000 in 76 quarterJ-y payments from the Castano Trust. 11 That's actually the last dj-stribution was 1B about ç648, OOO and change and then at the end I9 of the year there's some catchup provisions 20 that vary but coul-d be anoLher $10,000, so 27 somewhere in the neighborhood of ç2-1/2 million 22 a year. ¿J Do we need to make quarterlY 24 estimated tax payments on those? Do we need to LJ1tr pay Ohio commercial activíty tax? These are Mike Mobley Reporting ( 937 ) 222-2259 Audio Transcription Page 33 1 all- things that need to be determj-ned and make 2 both the state of ohio and the Internal Revenue 3 Service creditors. Now, uftimately, what are 4 their claims and what are their amounts? I 5 don't know. But they're creditors. 6 There are empl-oYees that have 1 Mr. Goering personally contacted every former o employee of Waite, Schneider, Bayless e Chesley 9 and some of them asked to be noticed on the 10 creditors' matrix. Some of them contend t.hat 11 they l^/ere not paid monies that were owed to I2 them at the time that they left the l-aw firm 13 prior to the ABC. IA There's one particular emPloYee 15 who has a liability, T befieve, or that we're T6 investigating, ât least, of somewhere between I1 900,000 and çI.28 million that he may owe 1B Waite, Schneider, Bayless & Chesley for which 19 he vi-gorously disputes those claims and that he 20 has offsets for that he's going to assert 2T through the claims process 1n this case. )) So there are other creditors. I z5 spoke to Mr. Horner about his deposiLion testimony 24 when I saw the motion that got filed in this case. z3 And what he went through a line of questioning Mike Mobley Reporting ( 937 ) 222^2259 Audio Transcription Page 34 1 about lines'of credit and credit extensions that ) have been paid to varj-ous lending institutions. 3 And so the question was posed, is there any other 4 debt, and he said, other than trade payables. So 5 he's he said, f don't recal-l-. So not only is 6 he not testj-fying that there is no other debt, he 1 says, not that I recall, and he's excluding trade B payabJ-es and he doesn't know about tax debts and 9 he doesn't apparent.ly know atl the debts and this 10 is before the ABC. 1-L So to say that Mr. Sul-'l ivan took 72 Mr. Horner's deposition so, therefore, there's 13 no debts is just not accurate, nor is it even I4 rel-evant. Because as the case law in my brief 15 indicates, you don't have to be inso.l-vent to I6 have to fite an ABC. In fact, I can't even T1 find a requirement that you have a creditor. 1B And so there's case law from the I9 OhÍo Supreme Court that says that solvency or 20 the number of creditors is not even an issue. 2I Mr. Suflivan quotes at length from a a.) LL temporary restraining order íssued in the McGirr ¿J case. In the McGirr case, there was one TRO that 24 escrowed about a little less than ÇZ million 25 from a class action settl-ement with the Clerk of Mike Mobley Reporting (931 ) 222-2259 ù: Audio TranscriPtion Page 35 1 courts pending the disposition of the McGirr case. /, Then there was a preJ-iminary a motion for a 3 preì-iminary injunction hearing that was held and 4 then, subsequent to that, there was an assignment 5 for the benefit of creditors. 6 The day after the ABC, notice was -t filed in the McGirr case advising the CourL and B parties of the existence of this ABC. About a 9 week later, Mr. Sullivan then filed a motion 10 for another temporary restraj-ning order in 11 which he soughi to restrain you know, I T2 think it was any action with respect to any 13 asset of Waite Schneider. I4 Now, when the Court in this case l5 signed on September L2 the ABC order, Waite I6 Schneider ceased to have any assets - At that I1 point the corporation still exists and it's 1B still there. ft's just that its assets have I9 been assigned for the benefit of its creditors. 20 So I don't know that there were any assets for a1 LI that to affect at that time. And Mr. Goering LL not only has never been a party to the McGirr 23 case, but he never even recej-ved notice of that 24 apptication for a TRO. 25 A telephone conference was held. Mike Mobley Reporting ( 937 ) 222-2259 rì Audio Transcription Page 36 1_ The judge in the McGirr case asked Mr- Su.ll-ivan 'submit 2 to an order. Mr. Sullivan drafted an J order and he e-mailed it to the Court and the 4 Court signed 1t. 5 So when he says that the Court 6 found, well, there's no evidence that the Court 1 ever held. There's not an affidavlt, not a 8 declaration, not a deposition, not even a 9 verified motion. A hearing really wasn't even 10 conducted. They had a telephone conference. 11 Then this TRO issues and T2 Mr. Sullivan's office takes the position that 13 Mr. Goering is somehow bound by that. Now, out 14 of an abundance of caution, wê restricted our 15 activities in this case to make sure that we T6 didn't. run afoul- of a Court order, but we don't L1 believe that that ever applied to us from the 1õ .LÕ outset. Because we never received notice of 79 it, because there was no evidentiary foundation 20 for it, and because it just kept getting 2I extended, w€ came to this Court and said, we'd 22 like an extension of our statutory duties to 23 fite inventories and things like that until we 24 can get through this restraining order issue. 25 We went to the Sixth Circuit Court Mike Mobley Reporting (931 ) 222-2259 Audio TranscriPtion Page 31 1 of Appeals, we fited a petition for a writ of ¿ mandamus for aII of those deficiencies that I 3 just pointed out. 4 I won't deny that the Court signed an 5 order that said that - But what I will say is that 6 there was never any evidentiary foundation for 1 that. And that TRO dissol-ved. And when it o (J dissolved, this case has been administered ever 9 since and has been pending for four months. 10 If the McGirr case wants to issue 11 a preliminary injunction, it's free to do that. t2 That request is st.itl pending. But because the 13 TRO dissolved and no injunction issued from the t4 McGirr case/ now the movants have come to you 15 and they've said, oh, geez, welI, let's stay T6 this case. T1 Well-, what does that do? That 1B affects everyone. Not only is it to their own t9 detriment, it's to t-he detriment of everyone 20 efse in the case. The expenses in this 2I continue to accrue. Vùe have been able to 22 narrow them. We've been able to cut them. But 23 we've got issues to deal with. VrJe've got law 24 firm files in four separate physical locations 25 that date back to the 1950s, many of which Mike Mobley Reporting (937) ??2-2259 Audio Transcription Page 38 1- present complicated issues l-ike protective 2 orders from Kentucky reJ-ating to the Arch 3 Diocese of Covington that require certain 4 informat.ion to be maintained in a certain way. 5 What do we do with that now? What 6 do hre do with the,nonclient fj-l-es that probably 'l need to be preserved for purposes of B lit.igation, but we're not sure and need to 9 j-nvestigate? 10 There are five bank accounts which 11 do not hold Waite Schneider funds but which are I2 IOLTA accounts that hold the funds of third 13 parties, and those totaf approximatel-y ÇZ I4 mitlion. Now, what do we know about those 15 accounts? Well, some of them are associated T6 with welf , they're all- associated .with I1 tj-ti.gation in some form, but those funds need 1B to be we need to the Court needs to know 79 who those belong to, how those can be 2Q distributed, how those can be treated. 2I The assets in this case are substantial. The vehicles, they could be worth z) between 1 and $¿ million,. Vüe reaf ly don't know 24 because the appraisal-s aren't compleie. ,/.5 There's a case called Hanford, Mike Mobley Reporting ( 937 ) 222-2259 Audio Transcription Page 39 1 there's a half a mil-lion doll-ars ready to be 2 disbursed from a Court in Washinqton. There J are the offíce assets, which I will contend are 4 probably somewhat nominal in the context of 5 this case. There are claims against former 6 employees. There's other litigation. 1 Mr. Sultivan references the 8 Castano Trust. There's at least $35 million 9 worth of assets here to be administered for the 10 benefit of creditors. And that's for the 11 benef it of al-l- the creditors. L2 Mr. Goering doesn't have the 13 ability to deny claims or distribute funds 14 without order of the Court. And despite 15 Mr. Sull-ivants position, we have no I6 predetermined intent or way to treat his I1 cl-ients' claims . The claims haven't even been 1B filed yet. 19 Mr. Sul-livan said, quote, there is a 20 lot of debate, end quote, over what the Castano 21 asset is. No, there's not. There is a final 22 nonappealable order from the Nevada Court that's LJ been filed with Lhis Court in which the Court 24 determined that the interest under the Castano 25 Trust belongs to Waite, Schneider, Bayless & Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 40 1 Chesley, that Mr. Chesley has no indivj-dual 2 inferest in those funds, and that Mr. SuIIÍvan's 3 clients could not garnish those funds because the 4 order was not enforceabl-e against Vriaite' 5 Schneider, Bayl-ess & Chestey. They asked for 6 reconsideration of that ruling and the court stuck 7 with its prior ruling. So there's not a lot of ö debate over that íssue. It's been determined. 9 Mr. Sul-livan contends that there's 10 no recourse for his clients, and that's not 11 true eíther-not onl-y for the reasons that L2 ultimately if they don't have a claim in this 13 case they get the money anyway because they I4 wil-I get it as any surplus that goes back to -1 5 the assignor, but also because the McGirr case 16 is not the same thing as this ABC. I1 The McGi-rr case is a claim that 1B certain transfers by Mr. Chesley to Waite 19 Schneicler or from Waite Schneider to 20 Mr. Chesley are / one / f rauduì-ent conveyances 2I either as transferor or transferee within some z-Laa period of time governed by the statute of ¿J timitations. It's not cl-ear to me what those 24 claims aret how much they are/ what period of 25 time they cover. And then the amended Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 4I 1 complaint now has a claim for fraud, and those 2 are not dispositive of what's before thi s 3 Court. 4 So with those corrections, I wanted 5 to just summarize what our position is on the 6 motion to dismiss or stay. Number one, the 1 movants are not the owners of Waite, Schneider, B Bayless & Chesl.yr. have not ever been and are not 9 today. And it's not just my determination- The 10 Colorado Court ruled the same way yesterday. 11 A sharehol-der under Ohio law is I2 somebody whose name is on the books and records 13 as owning the company. The name on the books T4 and records as owning the company is Rehme. 15 That's the shareholder of the company. t6 Number'two, they can't be t1 sharehol-ders of Waite Schneider because even if 1B you accept this argument that these orders that I9 said for Mr. Chesley to transfer an interest 20 that he no longer had to the movants in Waite Schneider, if you assume thàt was 22 self-effectuated, which the Colorado Court said Z) it wasn't, the transfer never occurred and, 24 under Ohio law, it's void because a legal ¿3 professional association can't be owned by Mike Mobley Reporting (931) 222-2259 Audio T.ranscription Page 42 1 nonlawyers. So there coul-d never be a 2 transfer. 3 Thirdly, whether theY're 4 shareholders or not isn't even dispositive tr J because it.'s undisputed and the movants don't 6 even contend that Mr. Rehme is not a director 7 of Waite Schneider. And a corporation acts I through its directors and the resolution and 9 the transfer to the ABC was properJ-y authorized 10 by a director. ft's not a shareholder action. 11 It's a director action. 72 So with those points made, ye turn 13 to the movants coming to this Court and AT1A essentiaJ-1y asking for injunctive relief that 15 didn't happen or hasn't yet happened in the 16 McGirr case for which they have no evídence, 7-Ì for which they didn't follow the statutory 1B procedure, and would hold hostage this case to 79 the detriment of everyone while al-l of these 20 expenses accrue and none of these things can be 2I addressed. 22 One of the most problematic thrngs is ZJ retaining an accountant because we need to know 24 we need to be able to discuss with the IRS what 25 their claims are. We need to know what Lhe tax Mike Mobley Reporting ( 937 ) 222-2259 Audio Transcription Page 43 1 liability is. We need to knowr âs income comes z in, whether we shoul-d be making tax payments, what 3 the obligations are to file returns, is there 4 going to be a fiduciary return for the ABC- We 5 need to know those things. And the case simpJ-y 6 can't be put on hold. 1 And to put it on hold for the B McGirr case, the McGirr case is set for its 9 ínitial case management conference next week. 10 No trial- dat.e, ûo case scheduling order. The 11 only discovery to date has been limited T2 discovery on injunctions. Initial discl,osures 13 haven't been made. That case is, on a rocket \4 docket least a year from trial. 15 So the movanLs in this case do 16 have recourse, and their recourse is to file a L1 cÌaim in this case and hopefully to be paid 1B from that claim. And if they're not paid from I9 that claim, to attach any surpJ-us that might 20 exlst. 2T So f just dispute the whol-e 22 factual premise that this is some type of, 23 quote, sham transaction designed to harm the 24 other partles. 25 Rocky fÌats one more correction, Mike Mobley Report.ing ( 937 ) 222-2259 Audio Transcription Page 44 1 your Honor. Rocky Flats is a case that got filed 2 in 1990. That case is the epitome of complex 3 fiercely J_itigated class action litigation between 4 sophisticated parties. The case has been through 5 two appeals to the Tenth Circuit Court of AppeaÌs' 6 one cal-led Cook l- and one call-ed Cook 2- The case 1 went to a four-month jury trial, I believe, in B 2005, in which Waite Schneider took the most 9 witnesses at trial, in which Ms. Rosel-le stayed in 10 an apartment in Colorado for a month during the 11 trial, during the holidays, and they got a 1^ verdict I'm giving rough numbers now, but I 13 think the compensatory verdict was like 1"16 I4 mil-Iion and there were about $200 míllion in 15 punitj-ve damages, huge verdict. 76 The verdict was lost in Cook 1. 71 They developed some very complicated legal aÔ LO arguments and in Cook 2 the verdict was back. 19 It went on two separate petitions for cert to 2A the Supreme Court and ultimately it settfed for a1 LL $375 million. aa /, 1, And that was well, the money z) there's $2-I/2 mi111on that the defendants are 24 going to pay in for class notice. The money 25 for the $375 million would be paid in I Mike Mobley Reporting (931) 222-2259 Audio Transcription Page 45 1 think in July of this year. Idaite Schneider 2 was counsel in that case actively from 1990 3 until- Mr. Chesley was disbarred in Kentucky, 4 resigned his law license in Ohio in l-ike 2012. 5 There is a fee apptication that wil-l 6 be submitted on January 12th by lead class l counsel, and Mr. Goering and myself have spent an B enormous amount of time interviewing people' 9 reviewing tons of records, and coming up with a 10 detailed declaration of Mr. Goering that he' 11 executed Friday of last week and that will be I2 filed on the 72th, this week, where Waite 13 Schneider has what we call a lodestar of $¿ I4 mill-ion in time and about $533,000 j-n expenses. 15 We are not making a claim, as L6 Mr. Sullivan conLends, for $a million in fees. T7 The application that's coming in Rocky Flats, 1-B if there were ever a case for an enhanced fee, L9 it's this one based on the risk, the length of 20 time and everything else that went oor and 2I it's the the product of this fee 22 application is very solid. 23 They seek a colrìrnon fund recovery 24 of 4O percent, so approxímately $150 million 25 and $g million in expenses. There is then Mike Mobley Reportlng ( 937 ) 222-2259 Audio Transcription Page 46 1 what's done from that is cal-Ied a lodestar 2 crosscheck. The lodestar crosscheck for Waite 3 Schneider would be approximately 2-4, so¡ round 4 numbers, about $9.8 million. 5 Action is necessary now to Protect 6 that fee, to enhance t.hat fee, to make sure 1 t.hat j-t's the biggest fee, and then that's only B part one. because/ once t.he fee is approved, wê 9 Lurn to part two. And part two is determining 10 the apportionment of what the Court awards as a 11 fee and what amount of that is attributable to T2 Waite Schneider. 13 And so these are important t.hings. 74 That asset shoul-d be protected for the benefit 15 of everyone, including Mr. Sullivan's cJ-ients. 16 And Lhere's been a l-ot of work done to do that . r'l And I tried to detail in our opposition 1B ewerything thab Mr. Goering has done to date, 79 and we've been in this case four months. 20 So if Mr. Sulfivan is offended a1 that a corporation elected its statutory right 22 to file this state court liquidation proceeding ¿J and put alt its assets in a pot that is for the 24 benefit of creditors, not a not the benefit 25 of the assignor, then I'm offended that he's Mj-ke Mobley Reporting (931) 222-2259 Audio Transcription Page 41 1 offended because this is neutral-. There's no ¿ person more qualified than Mr. Goering' He 3 practj-ces exclusively in insolvency as a 4 Chapter 7 trustee and his reputation in this 5 community is without question. So to say that 6 he's going to run off with the money or this is 1 a sham transaction designed to harm anyone is o just has no foundation whatsoever. 9 THE MAGISTRATE: Thank You. You 10 answered my questj-ons when you were making your 1L argument. 72 MR. GALASSO: Okay. Thank You. 13 THE MAGISTRATB: Mr. Sul-l-ivan. T4 MR. SULLIVAN: Your Honor, I guess 15 I'm going to bounce around. The first thing is, I 1.6 cited an order that a federal judge slgned. f'm I1 not sure where Mr. Gafasso comes up with this 1B theory that the judge somehow was tricked because 1.9 I prepared the proposed order. It's an order of a^ the federal- court and what he found based on his a1 /. L knowledge of the case z¿ The cite to the evidence, I don't know why Mr. Galasso thinks he knows so much 24 about what Mr. Horner testified to because he 1É ZJ wasn't there - Mr. Rafferty was. He Mike Mobley Reporting (931) 222-2259 Audio TranscriptÍon Page 4 B 1 represented Mr. Horner. I gave to this Court 2 t.he testimony of Mr. Horner. It's right there 3 in the transcript. Vühat other debts do you 4 have? 2016. Can't think of any. ft's not my 5 interpretation. That's what the man raised his 6 right hand and said. 1 Mr. Rehme, the guY who B orchestrated this transfer, same question is 9 before your Court. It wasn't Brian Sullivan's 10 interpretation. It was Mr. Rehme's answer. 11 What other debts are out there? Can't think of 12 any. 13 So Ifve yet to hear who are the I4 credit.ors other than what he just said is the 15 IRS/ which we know is because of Mr. ChesÌey 16 himself; didn't identify anybody else. T1 Now, to say that we're going to 1B get the fair shake like he wants to suggest 1q we're going to get is not true. Waite 20 Schneider, the entity itself, filed a pleading 21. yesterday in this case reiterated for the 22 umpteenth time, we're not a creditor. Shares 23 in the same thinking of Mr. Galasso, because 24 what did Mr. Galasso say and the things [haL z3 Mr. Goering has done since he's been involved? Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 49 L Defend this action by us. They're fighting us. 2 They're not l-ooking out f or us . They' re 3 fighting üs, they're denying our exisLence, 4 they got Waite Schneider denying our existence 5 as a creditor. And so we're þoing Lo meet with 6 every single instance fiqhting them to prove 1 what a Kentucky Court. has already said. B Mr. Chesley's transfer of the law firm was a 9 sham. Mr. Chesley was ordered to transfer that 10 to us; did not do it. 11 We're ín the middle of a federal I2 Iawsuit where the entity, Wait.e Schneider, is a 13 defendant. Vùhat do they do? They try and take I4 the assets and come down to here. 15 Do I think this is a sham lawsuit? I6 Yes, I do. I don't say that tightly. I say it I1 on a history of what we're dealing with. This 1B entity, the faw firm, will- spend resources T9 filing lawsuits described by the Ohio Supreme 20 Court as a sham. You cannot get a more public a1 ¿I rebuke of an action than that opinion. That's aa LL what we're deaÌing with here. And to parade up z3 here and say we've done all of this work, we've 24 interviewed employees/ we're working so hard 25 Vês, he sent me a letter because he wants to Mike Mobley Reporting ( \¿¿937 t )I 2?2-2259 Audio Transcription Page 50 1 take depositions of all my cl-ients - Vühy? 2 Because he's fighting with us. He didn't tell 3 me that Mr. Chesl"y, who is receiving [he 4 Castano money, and therets no debate about 5 that Mr. Rehme told me, Mr. Horner 6 verified Mr. Chesley took the money every 1 quarter and put it. in his pocket until we took I the deposition and until we went out to Nevada 9 to try and get it and then they said, Ilo¡ lt 10 belongs to the law firm. 11 You know, the person who's abused I2 the entity the most is Mr. Chesley. And I 13 don't hear one thing about the things wefre I4 trying to do against Mr. Chesley to recover 15 funds. In fact, they haven't even t.alked to 76 the man, according to them. All they have to I1 do is look in thre pleadings, whlch we flled, 1B the evidence that we've submitted in front of I9 .Iudge CÌeland and they would see over and over 20 again an abuse of this. 27 , I'11 just give you one last /,1. example. There's a there was a condominium 23 here in Cíncinnati, Ohio. The law firm paì-d 24 alI the expenses/ paid the homeowners LJ association fee, paid the mortgage. Mike Mobley Reporting (931) 222-2259 Audio Transcription Page 51 1 Condominium was sold right in the middle of 2 this lawsuit. Where did the money go? Law 3 fírm's paid all the expenses. Law firm went to 4 Stan. I hear Mr. Gafasso saying, we're going 5 after that, that was an asset of the law firm. 6 No. Mr. Chesley had the law firm, which is the 1 typicalty, what he did, pay all of the expenses and then he reaps the benefit. So hundreds of 9 thousands of dollars were recovered in the sale 10 of the condominium and not one mention about an 11 effort to recoup [hat on benefj-t of the law L2 firm. 13 The cars that he talked about, he 14 dj-dn't tel-l you that we uncovered that 15 Mr. Chesley was selling the cars during our I6 l-awsuit, supposedly wasn't authorized to act on t1 behalf of the law firm because, Vou know, he'd 1B been resigned and disbarred in Kentucky. Right 19 up before our preliminary injunction hearing, 20 the car was auct-ioned, Mr. Chesley's authorì-ty 2L was the one that was needed to sell the car. aa z- z- We don't know where t-hat money went . And the ZJ cars have been used over t.he course of the 24 years, Vou know, frankly, as a shell game. 25 They went from the law firm bo Mr. Chesley's Mike Mobley Reporting (93-t ) 222-2259 Audio Transcription Page 52 1 wife. She sold them back to the law fi-rm. I La mean, it just it goes on and on. 3 So we don't think wefre going to 4 get a fair shake. But the more important thing 5 on tha-t is that we are down the road. We're 6 not in this, you know, what he says is going to 1 get years and years resolved. We are in the B middle of a hearing that's already been 9 submitted, evidence has already been tendered, 10 we're waiting for the Court to order the 11 preliminary injunction. hlerve asked for a I2 receiver to be appolnt.ed for the law firm, the 13 very same thì-ng we're deal-ing with here. I4 Therers no need to repeat 15 everything that's already of record in an I6 effort to change the record in a way that T1 benefj-ts either the law firm or Mr. Chesley. 1B That is a complete waste of effort, And for 19 that reason/ now is the time to stay the action 20 or dismiss it, tet the federal case, which the 2I entity is a defendant, defend itself and let. ZL the federal judge continue on with the case as .)') LJ he is doing 24 THE MAGT'TRATE: Did Judge crerand indicate how long it would take him Lo issue a Mlke Mobley Reporting (931) 222-2259 Audio TranscriPtion Page 53 1 decision? |.\ ¿ MR. SULLIVAN: He did not, Your 3 Honor. We do have a telephone conference with him 4 on the 17th. 5 THE MAGISTRÄTE: OkaY. MR. SULLIVAN: So, You know, it's ^ 1 been fully you know, like T said, it's all been E briefed and there's a l-ot of exhibits and stuf f 9 Iike that. tendered to hlm. And obviously I would 10 like to know myself when he's going to issue. Itüe 11 just don't 'know. t2 THE MAGISTRATE: Sure. Thank You. l3 MR. SULLIVAN: Okay. T4 THE MAGISTRATE: Mr. RaffertY, since 15 you're here, I don't want to ignore you. Did you 16 want to be heard on this motion? I1 MR. RAFFERTY: No/ your Honor. I was 1B j ust L9 THE MAGISTRATE: Okay. I just wanted 20 to be fair. 27 I've been thinking about this ..\ ZL. motion for a long time, probably over a week /< and the way it's all working out in my head and 24 actually thought about the maneuvers when the 25 case was first filed earÌier or late summer, I Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 54 1 guess/ of 2016 and the reasons behind all of 2 ir. 3 But atl of that aside, Lf Irm just 4 looking at the straight law of the case, r have 5 your cl-ients, Mr. Sull-ivan, with a valid 6 judgment from Kentucky which they're trying to 1 execute on. You've pursued it in very B different venues and you've been opposed. Some 9 of the things that Mr. Chesley has done been 1_0 slapped down, l-ike the case where he was suing 11 the McGirr plaintiffs. t2 But in 2073 he transferred over 13 his shares of Waite Schneider to Mr. Rehme. I4 Mr. Rehme did a subsequent transfer in 15 September. And in anticipation, f'll- even give I6 you that I'm second guessing him -- but LI1- probably in anticipation of doing this ABC 1B action to safeguard against any negative ruling 79 that might come out of the US District Court 20 case 2I fs it forum shopping or is it .)a LL clever lawyering? I didn't see anything LJ improper with it in that the law provides for 24 aII of these avenues to occur. It's horrendous ,/.5 that you've got [o fight in a]l these different Míke Mobley Reporting (937 ) 222-2259 Audio Transcription Page 55 1 forums, but I can't find anything improper 2 about the ABC case. So in regards to the 3 motion to dismiss, I would have to deny it. 4 I'm aware plaintiffs are not I 5 credit.ors of wel l , don t have are not 6 owners excuse me are not owners of Waite, 7 Schneider, Bayless & ChesIey. The Kentucky ö order has no impact here in Ohio and would not 9 stop Mr. Rehme from transferring the assets to 10 an assignee. 11 Then f started thinklng about, okay, I2 well, shouJ-d I stay it because there are issues 13 pending in federal- court and perhaps not being 74 privy to all the pleadings in federal court, I 15 said perhaps they coul-d stil-l- be adequately I6 addressed, the l-aw firm coul-d be protected, the I1 McGirr plalntiffs could be protected, the 1B creditors of Vüaite Schneider could be protected. I9 But for whatever reason/ the 20 order's not forthcoming. So now I do have 27 people with interests that are sort of L')) jeopardized. Defini-tely, the creditors who ZJ have yet to be identified, but the creditors of 24 the law firm are sitting over there and they're .E LJ unprotected. I don't really have anybody to Mike Mobley Reporting (931 ) 222-2259 Audio TranscrÍption Page 56 1 run the business, per s€r because Mr. Rehme has 2 assigned his interest to the assignee. If I ') J keep the assignee's hands tied, then no issues 4 can be addressed with all- of the assets, the Jtr fees that are coming in. 6 And even when I boil it right 1 down, it really impacts the McGirr people, too, B because I do believe the McGirr plaintiffs have 9 a way to get money out of this ABC. You just 10 have to bring it and they'1I be protected. And 11 if I hold up any kind of administration of the 1 .') LL ABC case, then I am delaying whatever monies l3 could be made avai-lable to the McGirr T4 plaintif f s. 15 So af ter assessing al-l of that, I 10 see that there is no benefit from the stay at 71 this point. So I'm denying that request for 1B relief as wel-l-. I'11 write a decision. Of 79 course, Voü have the right to fiÌe objections. 20 Now, turning our attention to the 2I other applications, f think the f irs t one up is t.o 22 retain the accountíng firm. ,) .) LJ MR. GALASSO: Your Honor, Mike 24 Galasso on behalf of the assignee. Ilrle have filed 25 an application for an order authorizrng Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 5'7 1 Mr. Goering to retain Blue & Company as an 2 accountant to advise him on matters relative to 3 the administration of the ABC. Vrle properly served 4 this and all of the motions the other six 5 motions that are before the Court today on what 6 I'l-l caII the service list which is the 382 McGirr 1 pJ-aintiffs plus the 20 or so other odd-known I creditors to this point and received no objection. 9 The 1aw firm previously used as 10 its accountant Clark, Schaefer & Hackett. üüe 11 believe that Clark, Schaefer & Hackett would I2 have a conflict of interest in carrying over as 13 a CPA from the assignor to the assignee. There I4 are competing cl-aims beLween the two as to the 15 apportionment of certain credits and I6 tiabilities, and it's very important for 71 Mr. Goering to be able to retain tax counsef so 1B he can determine immediately whether he need.s I9 to s Iart making quarterly estimated payments 20 and things of that nature. And I'11 give you a 21 couple examples LL The Castano Trust is a quarterly ZJ distrj-buLion. The fourth quarter distribution 24 was made to Mr. Goering. It is in his account. LJÕtr The first quarter distribution of 2011 has been Mike Mobley Reporting (93-t ¡ 222-2259 Audio Transcription Page 58 1 made to Mr. Goering. It's in his account. We 2 need to know what we need to do to treat that 3 for taxation Purposes. 4 The ABC statute exPresslY 5 authorizes the retention of counsel-, but it 6 doesn't use the word accountant in that, but in 1 this case we cert.ainly need it. We're going to 8 have tax i-ssues with the IRS/ the State of 9 Ohio, and the City of Cincinnati, and it's a 10 pretty pressing issue. 11 We are not asking the Court to T2 approve any specific rates or the 13 reasonableness of any fees. We'd just like the I4 authority to engage Blue & Company as 15 Mr. Goering's accountant. lVe've already spoken L6 to them. They've agreed to do it. They're L1 very qualified to do it. It's a small office 1B of a much larger firm and theyrre more than I9 qualified to advise us on the tax implications 20 for the ABC and then, going forward, âs they 2I bill, w€ will- come to the Court and we will zz sub,mit motions to approve the reasonabJ-eness, z,Ja') appropriateness of the fees, the necessity of 24 the work, the rates and those things. We woul-d 25 just like the ability to go ahead and engage Mike Mobley Reporting (931¡ 222-2259 Audio Transcription Page 59 1 them now subject to that the future approval 2 of their compensation. 3 THE MAGISTRATE: Thank You¡ 4 Mr. Galasso. tr. Mr. Rafferty and Mr. SuIIivan, are 6 you going to be wanting to be heard on any of 1 these applícatj-ons? ' B MR. SULLIVAN: Your Honor, I don't 9 know that I have standing to 10 THE MAGISTRATE: Right. 11 MR. SULLIVAN: because they deny 12 our exj-stence as a creditor. ObviousJ-y, Irm not 13 prepared to address this. T4 THE MAGISTRATE: Speak to any of 15 this. I6 MR. SULLIVAN: I would ask the Court., !1 if Lhat's the rest of the matters, f donft know 1B that it's rel-evant or necessary for me to remain. 79 THtr MAGISTRATE: It will not be 20 necessary/ but before you leave, just because I 2I fike to protect all interests and I âon't like to z¿ do work over, I am going to order that the ZJ assignee al-ways give notice to you of all pending 24 applications in case there's any LJ MR. SULLIVAN: f appreciate that. Mike Mobley Reporting ( e37 ) 222-2259 È Audio Transcript.ion Page 60 1 THE MAGISTRATE: -- ruling down the ¿a road t,hat puts you back in. 3 MR. SULLIVAN: That would be helpful. 4 THE MAGISTRATE: OkaY. q MR. GALASSO: And/ Your Honor, wê 6 don't dispute or admit that anyone or is not a ,J creditor of the ABC. We consider Mr. Sullivan's B cl-ients potential cl-aimants which is why we have 9 served atl of these pleadings upon them in case 10 they do have a position. So if he's got a 11 position on these, w€'re more than happy to hear I2 him out. 13 MR. SULLIVAN : Wel l-, having not been I4 served with that myself, I'm not sure 15 THE MAGISTRATE: To do that. I6 MR. GALASSO: You were on the service T7 list as well 1B MR. SULLIVAN: My point, though, is, 19 your Honor, you've made your ruling. I guess 20 unrelated question. Have the proceedings thus 2I far, were they audio recorded? )) THE MAGISTRATE: Yes, they've been ZJ recorded. The light's not on in front? 24 MR. SULLIVAN: It is not. )^ THE MAGISTRATE: But it is being Mike Mobley Reporting (931 ) 222-2259 Audio Transcription Page 67 1 recorded here. 2 MR. SULLIVAN: Al-1 right . Because 3 we're going to ask for a transcri-pt. 4 THE MAGISTRATE: That's fine. 5 MR. SULLIVAN: Then with your 6 permission, I'11- be excused? 1 THE MAGISTRATE: Yes, Vou may. I MR. SULLIVAN: Thank You, your Honor. t 9 THE MAGISTRATE: You re wel-come 10 :k** 11 I2 13 I4 15 1"6 I1 ,L ti I9 20 2I LL)) 23 24 25 Mike Mobley Reporting ( 937 ) 222-2259 Audio Transcription Page 62 1 STATE OF OHIO ) 2 COUNTY OF MONTGOMERY ) SS: CERTIFICATE 3 4 I I Patti Stachler, RMR, CRR, CLR, 5 CME, a Notary Publ-ic within and for the State 6 of Ohio, duly commissioned and quaì-ified, 1 DO HEREBY CERTIFY thai the Audio B file of the above hearing was reduced to 9 writing by me stenographically änd thereafter 10 reduced to typewriting. 11 I FURTHER CERTTFY that I am not a I2 relative or attorney of either party, in any 1') IJ manner interested in the event of this action, T4 nor am I r ot the court reporLing firm with 15 which I am affil-iated, under a contract as 16 defined in Civil- Rule 28 (D) . r'l 1B '1 !J 0 20 zl- 24 LJ1tr Mike MobJ-ey Reporting ( 937 ) 222-2259 Audio Transcription Page 63 1 IN WITNESS WHEREOtr, I have a Z hereunto set my hand and seal of office at 3 Dayton, Ohio¡ otr this 11th day of January 2011. 4 5 6 r¡,;.11 1 PATTI STACHLER, RMR/ CRR/ CLR, o U NOTARY PUBLIC, STATE OF OHIO My commission expires 10-5-2018 9 10 11 I2 13 I4 15 76 I1 1B 19 20 27 )) LJ 24 z-Jatr Mike Mobley Reporting ( 937 ) 222-2259 EXHIBIT 24 Entry Denying Objections and Adopting Order (U S6) PROBATE COURT OF HAMILTON COT'NTY,MruTffiffiffiffi RALPH WINKLER PROBATE JUDGE NAR 1 4 7t1t In Re Waite, Schneider, Bayless & Chesley, Co., L.P.A Case No. 2016003659 ffiAffiEruü, dt ENTRY DENYINGING OBJECTIONS A¡ID ADOPTING MAGISTRATE'S ORDER This matter came on for hearing on February 23, 2017 on Objections to the Magistrate's Order filed January 19,2017. .Present for the hearing were Brian Sullivan, Ch¡isten Steimle, Michael Galasso, Dennis Deters, and Eric Goering. The Court, having considered the objections and the written response, having considered the oral arguments of counsel, and having conducted an independent review, finds that the Magistrate properly determined the facts and appropriately applied the law. In addition, the Court notes that while movants filed a motion to dismiss, they did not specify the statutory basis or procedural rule under which they were proceeding. The mechanism for seeking dismissal at the outset of a civil matter is generally set forth in Civil Rule 12. Under Civil Rule 12, there are various bases for seeking dismissal. Further construing the motion and arguments in light of Civil Rule 12, the Court finds that the motion is not r¡'ell taken in this regard either.l Finally. the Court reiterates the conclusion reached by the Magistrate that the objecting parry's interests are protected rvithin the context of the assignment. They have represented that lftisnotclearrvhetheraprobatecourtevenhasjurisdictiontosetasideanassignntentorrvhetheritmustbe pursued in the general diviston. courts of limited jurisdiction and can exercise jurisdiction as provided by R.C. ;6y statute. R.C. I 3 I 3.0 I el seq., providing that an Assignment for Benefit of judge, is silent on the matter of setting such an assignmenf aside. Flistorical F,eÂting aside a deed of assígnment falls rvithin the province of the general division \W; l92s (ohio Com. Pl., Seneca County, 1934) citing Standard Honte & Savings v. Jones et al., 64 Ohio St. 147. Further, the plenary equitable porver ofthe probate court is not a general equíty pou,er, but rather equitable power to dispose ol matters properly before the couft. Fellers v. Belau, 178 N.E.2d 530 (Ohio Conr. Pl., Paulding County, l96l ). d()3,oo the related federal litigation may result in a determination that they are creditors of the assignor, if so, they would likely be entitled to a distribution by the assignee. If they are.found not to be creditors of the assignor, the Magistrate has laid out the redress they may seek through the assignment case. Therefore, the Court hereby denies the objections and adopts the Magistrate's Order. SO ORDERED. Winkler, Probate Judge OF WINKLER THE RK TO RU /r 0F THIS ENTRY VriAS IVIAILED T0 T}]E C0PY r r ,l I n I IìOLLOVI/ING PARIIIS f\lOT IlJ DEI'AULT Oru ?,\1:] Brian Sullivan Michael Galasso FILED c o u lT^1 s{l9 i?};i : i ß8P ^" , ¡¡H 2tit,HAR -l.h 8: 52