Thursday, June 7, 2018

Chesley Injunction Maintained

An injunction against disbarred lawyer Stanley Chesley remains in force and effect per a decision of the united States Court of Appeals for the Sixth Circuit.

Circuit Judge Suhrheinrich tells the well-known tale of true evil succinctly and well, leading to the relevant denouement

At the time of his disbarment and subsequent retirement, Chesley was the sole shareholder of an Ohio-based law firm, Waite, Schneider, Bayless, & Chesley, L.P.A. (“WSBC”). Trouble was, in Ohio, Chesley could no longer own and operate a law firm because he was not an admitted attorney. See Ohio Rev. Code § 1785.05. So Chesley got together with a fellow WSBC lawyer—Thomas Rehme—and executed a so-called “wind-up agreement” on April 15, 2013. Ostensibly, the agreement’s purpose was to help wind up WSBC’s business en route to dissolving the firm. It also served as a vessel through which Chesley could move his assets.

Through the wind-up agreement, Chesley conveyed all of his WSBC shares to Rehme for no consideration. Meanwhile, both before and after executing that agreement, Chesley funneled $59 million of his personal funds into the firm. This left Chesley with empty pockets to show his judgment creditors when they inevitably came knocking.

And knocking they came...


The district court held that freezing Chesley’s assets served the public interest because “hundreds of judgment creditors will likely otherwise lose their ability to recover anything while the creditors of WSBC are satisfied [through the ABC action].” That conclusion was not an abuse of discretion in light of Chesley’s past behavior and the concerns over the legitimacy of the ABC action. And, despite the ABC action’s dismissal, that conclusion remains as relevant (if not more so) today. For the same reasons discussed within the context of irreparable harm, Chesley has offered no reason to trust that he will discontinue his years-long scheme to avoid the $42 million judgment. The central focus of that scheme has been to ship all of his money away to places safe from the plaintiffs’ reach but still within his control. If we were to lift the injunction, he would be free to continue doing that, which raises the same concerns about his judgment creditors’ ability to recover what they are owed. Accordingly, this factor also weighs in favor of affirming the injunction.

Moreover, there are institutional interests at stake. The litigation stemming from the Guard case settlement has been lumbering its way through federal and state courts for two decades. In its wake, officers of the court have been disbarred and imprisoned; Kentucky and Ohio state courts have been pitted against one another; and Chesley has forced the federal courts to use judicial resources to try to stop it all. There is a fundamental public interest in ending such abuse of the judicial system, in conserving judicial resources, and in preventing further confusion and disruption in this litigation...

The preliminary injunction serves an important purpose—“to allow a victory by [the plaintiffs] to be meaningful.” AIG Aviation, Inc. v. Boorom Aircraft, Inc., 142 F.3d 431, 1998 WL 69013, at *3 (6th Cir. 1998) (unpublished table case). Balancing the four preliminary injunction factors, it is clear that the district court did not abuse its discretion in entering this relief to serve that purpose. Even with the ABC action’s dismissal, this relief is necessary today. Chesley and his co-defendants have proven apt at moving money around to evade the plaintiffs, and freezing his assets affords both the district court and the plaintiffs the time they need to resolve this case.

(Mike Frisch)

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