Life Partners Investors Want Goodman & Nekvasil DQ'dBy Michelle Casady
Law360, Houston (January 13, 2017, 6:14 PM EST) -- The investors who are class-action plaintiffs in an adversary case in the Life Partners Holdings Chapter 11 told a Texas bankruptcy judge on Thursday to disqualify and sanction Goodman & Nekvasil PA because the firm sent out solicitation letters to Life Partners investors and lied to the court about it.
U.S. Bankruptcy Judge Russell F. Nelms in May approved a $1 billion settlement to resolve class-action litigation alleging that thousands of investors were duped into purchasing life insurance investments. The class-action plaintiffs told the court that the rules of professional conduct are clear, and that when the firm in the summer of 2015 sent solicitation letters to Life Partner investors — including at least two of the named plaintiffs in the adversary proceedings — it “engaged in improper and unethical” behavior in a “transparent attempt to flout long-standing ethical rules.”
The court should not be fooled by the firm's attempts to characterize the letter as investigatory in nature, the class told the court, because the premise that the firm would need to investigate before filing a Financial Industry Regulatory Authority arbitration proceeding against brokers “is a farce.”
“Compounding the above ethical violation, one of the law firm’s named partners also violated the rules of professional conduct by failing to be honest and forthcoming in his representations to the court,” the motion reads. “In responding to the court’s direct question about whether the law firm did any kind of solicitation in connection with Life Partners, the law firm’s partner (who, only a few months earlier, had authored and signed the letter), alternated between skirting the truth, feigned memory loss, and an attempt to gloss over the law firm’s solicitation effort by characterizing the letter as 'investigatory.'”
Name partner Kalju Nekvasil told Law360 on Friday that he believes this motion was filed after his firm successfully had the court lower the class-action lawyers' attorney fees by more than $5 million, decreased from an initial request from the attorneys that exceeded $30 million.
“Other similar motions have been filed in the past by the same law firm and denied by the court,” he said. “And we believe that this motion will be similarly denied.”
The class-action plaintiffs said that during an August hearing on an objection to the settlement, the court asked Nekvasil whether he had conducted any solicitation in the case.
According to the motion, which quotes from the proceeding, Nekvasil told the court that he “may have” but wasn't sure and that he could have “sent out an investigatory letter or a solicitation letter” but “did send out a letter at some point in time.” He also told the court that he couldn't say whether the letters led to him representing any of the clients.
The plaintiffs said they have learned that the firm sent letters in June and July 2015 to Life Partner investors that when read by “any reasonable person” would indicate the firm was available for hire in the underlying litigation.
Disqualifying the firm will not affect its ability to represent investors in individual FINRA arbitration against third parties and will not negatively affect its clients, the class-action plaintiffs argued in seeking the “narrowly tailored sanction” it said is appropriate for the ethical violations described.
According to online court records, firm attorneys Nekvasil and Stephen Krosschell are listed as counsel for 21 creditors.
Counsel for the class-action plaintiffs did not return a phone call seeking comment Friday.
The class-action plaintiffs are represented by Keith L. Langston of Langston Law Firm
Counsel information for Goodman & Nekvasil PC wasn't available Friday.
The case is In Re Life Partners Holdings Inc et al., case number 15-40289, in the U.S. Bankruptcy Court for the Northern District of Texas, Fort Worth Division.
--Additional reporting by Shayna Posses. Editing by Sara Ziegler |
