Last week, I again got to do two of my very favorite things: argue in the Court of Appeals and interact with future members of the legal profession.
This appeal, captioned First Financial Bank v. Tailored Fund Cap LLC, is before Ohio’s First District Court of Appeals. We are seeking to overturn First Financial Bank’s $1,187,886.29 judgment obtained against our firm’s New York-based Merchant Cash Advance company client.
This is the second time in the past month that we have argued a multimillion-dollar commercial litigation appeal in the First District. My partner Paul R. Kerridge, who leads our Appellate Practice, recently argued S&T Bank, Inc. v. Advance Merchant Services, et al.
As part of our Financial Services Litigation practice, we have represented MCA companies in lawsuits involving claims such as conversion, fraud, civil RICO and civil conspiracy. Learning the industry—which is crucial in Ohio commercial litigation—has been fascinating.
One major challenge in commercial litigation is breaking down dry and esoteric issues in a simple way that is intriguing enough to engage the factfinder. We pride ourselves on our ability to distill complex commercial disputes into clear and compelling storylines, tailoring our presentation to the jury, judge, or arbitrator. That is what telling the client’s story entails in business litigation.
One of my biggest influences is decorated trial attorney Bill Carmody of Susman Godfrey, who has won monumental plaintiff verdicts in cases involving the driest, most complicated subject matters imaginable.
Carmody once handled a case challenging whether the Nebraska Investment Finance Authority was entitled to continue receiving interest payments on “guaranteed investment contracts” (a popular investment vehicle in the ‘90s) purchased with proceeds of municipal bond offerings after the underlying bonds had been redeemed. Did you fall asleep while reading that? Carmody simplified the issue with a refrain that he repeated, “like a rock-n-roll song,” throughout his opening: “When the bonds go, the contracts go.”
We certainly had to simplify the issues in this case. To summarize the facts: Our client purchased over $4,000,000 of future accounts receivable of eighteen different companies; the Bank claimed it had a security interest in the accounts receivable of three of those companies; our client was paid (presumably by all eighteen companies) via a series of ACH transfers from a single deposit account; the Bank alleged that these payments were unlawful, and constituted conversion, because of its alleged security interest in the three companies’ accounts receivable.
We argued that the Bank failed to prove how much (if any) of the funds paid to our client were traceable to accounts receivable of the three relevant companies, as opposed to the other fifteen companies. We also argued that any security interest was stripped under R.C. 1309.332(B), precluding a conversion claim.
Our audience was obviously sophisticated—a Panel of three Court of Appeals Judges. Nonetheless, it is still crucial to be able to concisely summarize the case and why you win. We did that here by beginning our Brief with a hypothetical.
To help set the stage, consider the following hypothetical:
I owe you $10,000. On June 10th, I wire you $10,000 from a joint bank account held by my parents and me. Completely unrelated, I owe a bank a final payment of $15,000 under a loan agreement (my parents are not obligors on the loan) with a due date of July 1st. July 1st passes, and I fail to make the $15,000 payment to the bank. You find this out when the bank sues you for conversion, claiming that, had I not paid you $10,000, that money could have instead been paid to the bank.
- Did anything forbid me from paying you the $10,000 you were owed or make it wrong for you to accept that payment? No.
- Did the Bank have a property interest in the $10,000 paid to you that you “wrongfully interfered” with (second element of conversion)? No.
- Was my $15,000 debt to the bank even due at the time you received the $10,000? No.
- Is there any proof you were paid $10,000 of my money as opposed to $10,000 of my parents’ money (who had no obligation to the bank)? Not if the bank cannot prove, as a starting point, that I ever deposited any money into the joint account.
- Overlooking these failures to prove liability, if a court somehow concluded you committed conversion, could you be liable to the bank for the full $15,000 I still owe? No—how could “taking” $10,000 cause the bank $15,000 in damages?
- And assume I also paid money out of the joint bank account to five other people, totaling $100,000 of additional payments. Is the bank entitled to sue them too—and collect six judgments totaling $110,000—despite only $15,000 still being owed to the bank? No—that would be a windfall.
Did you convert the bank’s money? Of course not! Yet the trial court found conversion here by absurdly answering “yes” to all of the above questions.
In our next post, we will dive deeper into the legal issues.
About Durst Kerridge
Durst Kerridge maintains an extensive commercial and complex civil litigation practice throughout Ohio and nationwide. To schedule a consultation, call (513) 621-4999 or reach out to Alex J. Durst or Paul R. Kerridge.
