The United States Court of Appeals for the Sixth Circuit affirmed an injunction ordered by a lower court o prevent a disbarred Kentucky attorney from transferring assets that were being sought by his former clients in satisfying a multi-million dollar judgment against him. McGirr v Rehme is a case intertwined with more than 7 others involving Stanley Chesley, a disbarred Kentucky lawyer who defrauded hundreds of his former clients out of millions of dollars. McGirr v. Rehme, 891 F.3d 603, 605 (6th Cir. 2018)
http://www.opn.ca6.uscourts.gov/opinions.pdf/18a0101p-06.pdf
Three-and-a-half years ago, a Kentucky court issued a judgment in plaintiffs’ favor against Chesley for $42 million after it was discovered that Chelsey stole millions of dollars in settlement proceeds that should have been distributed to his clients. Since then, the plaintiffs have been trying to collect on that judgment and Chesley has been successfully evading them with the help of his confidantes. In the process, 4 other lawyers and a judge have been disbarred; two have been put in jail. Through it all, Chesley has managed to transfer most of his assets elsewhere, rendering himself judgment-proof. After the plaintiff’s had no luck collecting in state court, and Chelsey transferred all of his assets to his former firm to avoid collection by the plaintiffs, the plaintiffs filed an action in federal court for fraudulent conveyance.
While the fraudulent conveyance action was pending in federal court, his former law firm (now in possession with all of Chelsey’s assets) initiated an Ohio state probate court action. He claims that the probate action was started for legitimate purposes – to pay off his law firm’s creditors in a judicially supervised forum. The district court disagreed. Sensing Chesley was using the probate action to continue to conceal his assets, it issued a preliminary injunction freezing those assets from distribution in the probate action. Chelsey filed an interlocutory appeal to the Sixth Circuit, arguing that the preliminary injunction was improper.
The Sixth Circuit disagreed with Chelsea and affirmed the district court’s preliminary injunction even though the probate action had been dismissed and declared fraudulent. In doing so, the Sixth Circuit reviewed the four factors for entering a preliminary injunction: (1) likelihood of success on the merits; (2) irreparable harm; (3) harm to third parties; and (4) public interest. The Sixth Circuit held that “it is clear that the district court did not abuse its discretion in entering its relief” and “even with [the probate action’s] dismissal, the relief is necessary today.”
This article was written by Ryan Hansen, Law Clerk
