What Not to Say to an Aggressive Trial Attorney

Adam M. Spence Uncategorized

“I’ll see you in Court!”   A Defendant walked up to Baltimore County and “Super Lawyer” Adam Spence and smugly said this after an early settlement discussion regarding issues facing a company (but before civil litigation commenced).  Within a month, Defendant was behind bars for violating a protective order and was also being served with a massive civil Complaint and an Emergency Injunction Order preventing his continued dissipation of corporate assets.

It goes without saying that no one should ever taunt an aggressive, competent attorney like Mr. Spence with comments like “I’ll see you in Court.”  Adam Spence is more than happy to oblige.

FIRM ACTIVE IN RECEIVERSHIPS IN SEVERAL BUSINESS DISPUTES

The above comment was only the start of a very active year of commercial litigation for the Law Offices of Spence | Brierley involving business disputes and business dissolution matters. Mr. Spence was appointed by a Circuit Court as a Receiver in two different cases.  In a third case, Mr. Spence was able to have his client effectively act as Receiver.   In another case, Mr. Spence was able to have a third-party appointed as Receiver.

BAD CONDUCT BY A MAJORITY OWNER – THE LEAD UP TO A RECEIVERSHIP

In the commercial litigation context, this firm often sees a majority member or owner of a company taking unlawful actions that are detrimental to minority members or shareholders (minority in the sense of owning less than full control of the company).  For instance, a person in “control” of a company may feel empowered to drain profits of a company by taking excessive withdrawals or using company assets for personal expenses.  Or that person may “lock out” a minority owner by refusing access to the books and records or even locking them out of the company office.

Such conduct is illegal.

THE RIGHTS OF THE PARTY WHO HOLDS LESS THAN A MAJORITY SHARE OF THE COMPANY (THE “MINORITY” OWNER)

When the minority owner is able to establish illegal conduct or that the company cannot operate as it was intended due to the conduct of the other party, the minority owner should file a Complaint seeking dissolution of the Company and requesting appointment of a Receivership.

WHAT IS A RECEIVERSHIP?

A Receiver is appointed by the Court to manage the property of a company when the owners are unable to do so (for instance, when an owner is stealing all profits and refuses to share them with other owners). When appointed, the Receiver immediately takes control over all of the company’s affairs and assets, including its bank accounts, equipment and receivables.   Thus, appointment of a receivership immediately prevents any further losses, ensuring that company assets are preserved while the Court determines the profit and distribution shares of the respective owners

A POWERFUL TOOL IN BUSINESS DISPUTES. 

The appointment of or the threat of appointment of a Receiver is a powerful tool for a party in litigation to ensure that its interests are not jeopardized while court proceedings on on-going. Business disputes may take over a year to resolve at trial or otherwise:  if a Receiver is not appointed, a person in control can dissipate the company’s assets during litigation.

CASE STUDY ONE.  ADAM SPENCE IS APPOINTED BY THE COURT AS THE RECEIVER.

In a recent case, Mr. Spence was Court appointed to preserve the assets of a limited liability company while its owners and creditors fought over the right to the company’s assets.  At one point, Mr. Spence attended a liquor license hearing and successfully prevented a creditor from transferring the company’s liquor license to the detriment of other creditors.  Similarly, Mr. Spence is working with the parties to arrange for the sale of certain company assets, which proceeds will ultimately be paid over to certain creditor(s) of the company.

 CASE STUDY TWO.   ADAM SPENCE OBTAINS AN INFORMAL RECEIVERSHIP BY HIS CLIENT

In the “I’ll see you in Court!” case, after obtaining an emergency injunction wresting control of the business from the Defendant majority owner, the company’s very existence was at stake.

Employees effectively had different owners telling them to do different things.  Third parties owing money refused to pay because of the competing claims by the owners to the money.  Creditors were at the doorsteps demanding payment on several loans as well.

Through complex court maneuverings and Orders, Adam Spence was able to successfully prevent the majority owner from taking control of and gutting the business for his sole personal gain.  Since that time, the minority owners have been able to collect monies for the Company to pay off employees and several corporate loans, avoiding massive negative impacts on their personal credit reports.  While it is still unclear if the company will survive due to the majority owner’s unlawful misconduct, at least losses have been minimized.

CASE STUDY THREE.  ADAM SPENCE OBTAINS THE APPOINTMENT OF A RECEIVER FOR A MINORITY OWNER.

In another case, Mr. Spence’s client had partners who secretly sold partnership properties and diverted over $1,000,000 in proceeds to themselves along with profits and rents from the partnership.  The Court froze those funds and the Court appointed a Receiver for the company.  The Receiver has since taken control of the partnership’s properties and is in the process of selling those properties.  The proceeds of those sales and the frozen monies will be distributed to the partners based on a full accounting by the Receiver of the “profits” that each partner should receive.  Although Mr. Spence’s client will likely not fully recover all of its monies lost in the partnership, it should receive a substantial portion.

In closing, please “Do Not Feed the Animal.”