Javier Lopez was the Lead trial lawyer in this lawsuit alleging alter ego and piercing the corporate veil against defendant and its attorney owner.
Archive for year: 2018
Harley Tropin is currently acting as lead counsel for plaintiffs in a multimillion dollar Ponzi scheme, Daccache v. Raymond James & Associates, Inc., et al., Case No. 16-cv-21575-FAM/JJO (USDC So.Dist. Fla.), a multimillion dollar Ponzi scheme involving sales to EB-5 investors at the Jay Peak ski resort in Vermont. As a result of their leadership and work, in conjunction with the court-appointed receiver, investors received a settlement worth over $150 million.
We’ve all heard it—blockchain and distributed ledger technologies (DLT) are the next big thing. But what can we, as litigators, expect to encounter as these technologies continue to gain traction?
For the less tech savvy of us, imagine blockchains/DLT similarly to how you view the internet. The internet, for most of us, is an amorphous protocol that allows us to use our most essential day-to-day tools—like email, legal research, social media, etc. Similarly, blockchains and DLTs are record-keeping protocols upon which your clients are actively building software to enhance their businesses.
At their most basic level, blockchains/DLT are decentralized, encrypted and secure record keeping protocols that allow for data to be kept uniformly and simultaneously across a network of unrelated computers/servers/devices (called nodes) located anywhere in the world.
Because blockchains/DLT’s utilize encryption and are distributed in their entirety across a wide number of devices, it is near impossible to hack or improperly alter a blockchain or DLT, so they are considered immutable methods of record keeping.
In addition, blockchain/DLT records can be kept publicly—as is the case with blockchain-based cryptocurrencies like bitcoin. Conversely, they can be maintained privately, as is the case with many DLTs being developed and used by financial institutions today.
While blockchain/DLT are technologies of the future, there is a good chance that your phone can ring from a client regarding this technology right now. Per Deloitte’s 2018 global blockchain survey, 74 percent of all respondents reports that their organizations see a “compelling business case” for the use of blockchain—and many of these companies are moving forward with the technology. About half of that number (34 percent) say their company already has some blockchain system in production, while another 41 percent of respondents say they expect their organizations to deploy a blockchain application within the next 12 months.
What does this mean for us litigators? It means that some of our most high valued clients plan on adopting or already have adopted record keeping systems that are public, immutable and truly global.
Because blockchains/DLT can be kept public, meaning that anyone can observe the transactions as recorded on those ledgers, it will logically follow that enterprising litigators will utilize this information to support complaints and legal arguments. Blockchain/DLT’s immutable records will not require the same discovery or audit requirements that we are used to. Rather than having to forensically untangle a series of transactions through documentary and deposition discovery—it will all be laid out as clear as day on the blockchain/DLT.
Litigators will also likely attempt to attribute their opponent’s knowledge of information simply as a result of that party’s access to a blockchain/DLT. A client’s utilization of this secure and potentially public form of record keeping will render certain defenses, such as plausible deniability, moot.
Government agencies are just as interested in blockchains as private enterprise. The efficiencies that blockchains/DLT provide to interstate and cross-border trade and commerce, will also be a boon for agents charged with investigating and policing cross-border transactions for regulatory and trade violations.
Should your clients adopt this technology, be proactive in providing risk assessment and risk management advice. Advocate a mindset that once data is logged on a blockchain/DLT, it will be there forever.
Since blockchain/DLT nodes can be located anywhere in the world, jurisdictional issues will arise as a result of this technology. Through this technology, your clients may be exposing themselves to the jurisdiction or jurisdictions of the location of every single node on their chain. Stay on top of your client’s choice of law and jurisdictional clauses. This is especially important where your client is utilizing self-executing “smart contracts”—or programs that allow for transactions and exchanges to automatically take place as a result of data recorded on their blockchain/DLT.
As our clients rightfully determine that the increased efficiencies, security and other benefits of these technologies outweigh their legal risks, our courts can expect to face an uptick of blockchain/DLT-related issues of first impression. It is our privilege and burden as litigators to educate the judiciary on this technology, to ensure that they can competently and confidently rule on the myriad blockchain/DLT-related issues.
For example, it remains to be determined what authentication judges will require to admit blockchains/DLTs as evidence, or if these records will be considered admissible on their face. The state and federal precedent that we set now will have widespread ramifications as these technologies continue to be implemented in all aspects of commerce.
Daniel Maland is an attorney in Kozyak Tropin & Throckmorton’s complex litigation department. He consults on emerging technologies, with a focus on cybersecurity, blockchain, distributed ledger technologies and smart contracts, as well as the implementation of such technology in maritime industries. He may be reached at email@example.com
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By Mary Hanbury
Sears has filed for bankruptcy and said it is closing 142 stores before the end of the year.
GlobalData Retail’s Neil Saunders says it is wise for these stores to stay open for the holiday shopping season in order to clear out inventory, but he warns that customers may be turned off of the deals because of the uncertainty around warranties.
Sears has long been a top seller of appliances in the United States, and many of those items come with warranties.
Sears has filed for Chapter 11 bankruptcy protection and announced it will close 142 stores. These stores will close by the end of the year, giving them the chance to tap into the holiday shopping season on their way out.
While holiday sales are a good time to clear out inventory, at least one analyst says that some customers might be turned off by the uncertainty around the retailer’s warranties.
“Sears will still be running up a down escalator,” Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients on Monday morning.
He continued: “Many consumers will now be nervous about buying bigger ticket items from the retailer for fear that it may not be around to back guarantees or fix problems come the new year.”
Sears has long been known as one of the leading appliances sellers in the United States, and many of those products are sold with warranties.
Despite its past woes, Sears has said that it will honor these warranties.
“We are a leader in the service contracts industry and proudly stand behind our product,” a Sears spokesman told Business Insider’s Hayley Peterson last year. “Sears, as well as any other company that legally sells service contracts, is required to meet regulatory requirements designed to provide adequate resources to fulfill service contracts into the future. We will fulfill our commitment to our customers and members.”
A spokesperson for the company did not immediately respond to Business Insider’s request for comment on what will happen with its warranties now that it has filed for bankruptcy.
However, experts say the warranties could be dissolved.
“The warranties are going to be a huge issue,” Lopez-Castro, a partner at the Florida-based law firm KozyakTropin& Throckmorton, told Business Insider on Friday, before Sears had filed for bankruptcy. “There’s a real risk that they will not be honored.”
She said gift cards and rewards points earned through Sears’ Shop Your Way loyalty program could also be erased with the bankruptcy.
“I would advise customers to redeem their points now,” she said.
As Sears has now filed for Chapter 11 bankruptcy protection, the fate of its warranties and rewards points will be decided in court. Sears has a lot of creditors to pay, so honoring outstanding warranties and loyalty points might become a lower priority.
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By César Rojas Ángel
Sears cerrará 46 tiendas este mes y 142 más antes de terminar el año pero mantendrá una base de las 700 tiendas más rentables y presentará un plan para saldar sus deudas.
El 15 de octubre Sears Holdings Corp presentó una solicitud a un juez de Nueva York para acoger las firmas padres de la compañía, Roebuck and Co y Kmart Corp. bajo el capítulo 11 del Código de Bancarrota de EstadosUnidos. Una medida desesperada luego de no obtener ganancias desde 2011.
En un comunicado, la cadena estadounidense anunció una serie de acciones para lograr una línea de liquidez de 300 millones de dólares, continuar racionalizando su modelo operativo y “crecer rentablemente a largo plazo”.
El plan, además de contemplar los cierres de algunas tiendas e incluir nuevos préstamos, está marcado por la renuncia de Eddie Lampert como director, aunque seguirá siendo miembro de la junta directiva.
Eddie Lampert, el billonario que acusan de llevar a Sears a la crisis
Para muchos analistas, los movimientos financieros de Edward Lampert son parte de la causa de la bancarrota. El multimillonario adquirió la compañíaen 2005 por 11 mil millones de dólares y actualmente se calcula que él y sufondo de cobertura ESL Investments posee el 50% de las acciones de Sears y es su más grande acreedor.
La compañía vendió 235 de sus mejores tiendas por 2,7 miles de millones de dólares a la firma Seitage Growth Properties, también de Lampert. El billonario también se convirtióen el mayor accionista de la marca de ropa Land’s End Inc., cuandoesta se separó de Sears en 2014.
Estos movimientos podrían hacer parte de la investigación ahora que los acreedores presentaron el caso por bancarrota en la corte.
“Cuando vas a bancarrota, empiezas a vivir en una pecera y cada transacción será vista y examinada”, le dijo a Reuters Corali Lopez-Castro, Managing Partner de la firma de abogados Kozyak Tropin & Throckmorton.
Otros intentos por evitar esta situación fueron la venta de Craftsman, una marca de herramientas, a Stanley Black & Decker por 900 millones de dólares. Y también hubo un acuerdo para vender la marca de electrodomésticos Kenmore a Amazon.com.
Sears: el gigante de las tiendas por departamentos que perdió estatura
Para muchos, Sears fue una versión temprana de Amazon. Desde su fundación en 1880, la compañía empezó a distribuir catálogos y a entregar productos por correo. Su crecimiento fue tal que cuando construyeron la Torre Sears en 1976 se instaló como el edificio más alto del mundo.
De los cerca de 100 mil empleados, ahora quedan alrededor de 70 mil y de las 3500 tiendas que alcanzó a contaren el pasado quedarán 700 al final del año.
Las acciones de la compañíabajaron un 20% a 32 centavos. Lo cual capitaliza a Sears en 32 millones de dólares.
En estos casos, los accionistas generalmente pierden todo o la mayor parte de sus inversiones cuando una compañía aplica a la bancarrota. La habilidad de Sears para evitar el cierre definitivo dependerá de la disposición de los acreedores y proveedores para mantener la compañía a flote.
Las ventas en la próxima temporada navideña serán claves para determinar el futuro de Sears.
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By Karen Appold
A federal judge sided with UnitedHealthcare and other payers in a case that challenged an Overpayment Rule adopted by CMS in 2014.
CMS implemented the rule to comply with the ACA, which introduced a new mandate that if a Medicare Advantage insurer identified an overpayment it was required to report the overpayment and return the overpayment amount to CMS within 60 days, says Richard L. Trembowicz, JD, associate principal, ECG Management Consultants, a healthcare consulting firm.
The Overpayment Rule defined an overpayment as a payment resulting from any diagnostic code that was inadequately documented in a patient’s medical chart and which a Medicare Advantage insurer should have determined through reasonable diligence that the claimed code was undocumented and, therefore, the insurer had received an overpayment.
“In effect, the 2014 Overpayment Rule required that all diagnoses submitted to support risk adjustment payments be 100% correct on review, and that reasonable diligence would be required to avoid a False Claims Act (FCA) charge if an overpayment was not returned within 60 days,” Trembowicz says. “Most insurers conduct a representative sample of medical chart documentation and coding practices to satisfy the reasonable diligence standard, but they do not review 100% of patient charts, creating a factual conundrum of how much of a proactive review is reasonable.”
Here are three other things MCOs should know about the September 7 ruling.
- The court addressed various reasons for finding that the Overpayment Rule was inequitable. The court concluded that CMS was imposing stricter requirements for reporting and identifying overpayments on Medicare Advantage payers than traditional Medicare regulations.
The Social Security Act requires “actuarial equivalence” between CMS payments made to Medicare Advantage payers and those made under traditional Medicare. The court stated that although payments for services under traditional Medicare and Medicare Advantage are set by the same methodology, the Overpayment Rule “systemically devalues payments” to Medicare Advantage payers, says Maria Garcia, JD, of counsel, KozyakTropin& Throckmorton.
The court found that CMS doesn’t have the legislative authority to apply more stringent standards to impose FCA consequences through regulations. The court reached this conclusion because the FCA imposes liability for knowingly submitting false claims for payment to the government, while the Overpayment Rule states that only reasonable diligence must be used to determine whether an overpayment from CMS has been received and therefore has to be returned, Garcia says.
“Simply put, the court found that the FCA’s and Overpayment Rule’s standards were inconsistent, yet imposed the same severity of penalties,” Garcia says. “The court agreed with UnitedHealthcare that Congress intended the FCA to punish and deter fraud, and to not punish an honest mistake or an incorrect claim submitted through mere negligence.”
- The ruling is a significant win for insurance companies. At this point, the ruling likely nullifies the obligations imposed on Medicare Advantage payers to report overpayments as delineated in the Overpayment Rule, Garcia says. Furthermore, insurance companies may face lower costs when reporting to CMS.
Although this ruling only addressed Medicare Advantage plans, which are covered under Medicare Part C, it may also effect Medicare Part A and Medicare Part B overpayment rules and their validity because of the various similarities between the overpayment reporting requirements applicable to these other sections of the Social Security Act. “Medicare Advantage payers should be ready to assess potential changes and review internal procedures to comply with the developing CMS reporting requirements for possible overpayments,” Garcia says.
- The ruling is not final. Because a DC Circuit Court made the ruling, it can be appealed to the U.S. Supreme Court. However, “CMS is unlikely to prevail and instead, CMS will likely adjust the rule to comply with the decision, most easily by recognizing the differences between Traditional Medicare and Medicare Advantage data in applying the concepts of overpayment to risk adjustment,” Trembowicz says.
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By Zach Schlein
Following a Sept. 6 ruling by federal Judge Federico A. Moreno denying dual requests for summary judgement, litigation concerning the use of the Ultra brand in Croatia and Europe proceeded to trial in the Southern District of Florida on Monday. According to one attorney, the jury could reach a decision by Friday.
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By Karen Appold
On July 16, President Trump nominated Judge Brett Kavanaugh, 53, to the Supreme Court seat being vacated by retiring Justice Anthony Kennedy. Kavanaugh is a conservative jurist who served on the U.S. Court of Appeals for the D.C. Circuit since 2006. A graduate of Yale and then Yale Law, Kavanaugh clerked for President Kennedy and then worked for independent counsel Kenneth Starr, assisting with Starr’s investigations into President Bill Clinton.
Although Kavanaugh’s paper trail on health policy is not vast, it does include some intriguing clues about how he might rule on future cases, says Daniel Ehlke, PhD, associate professor, Health Policy and Management, SUNY-Downstate School of Public Health in Brooklyn, New York. Given Kavanaugh’s previous stances and voting history, here’s a look out how he could impact healthcare legislation.
- He might support limiting government regulation in healthcare. In Seven-Sky v. Holder, which challenged the enforcement of the minimum essential coverage or individual mandate required under the ACA, Kavanaugh authored the dissent opinion. “Although he did not make a decision on the merits in this case, he indicated that the individual mandate may be under the purview of the federal tax code and that only the IRS could assess, collect, and enforce the tax penalty,” says Maria D. Garcia, JD, of counsel, KozyakTropin& Throckmorton, Coral Gables, Florida. “Regarding future ACA legislation, it is probable that Kavanaugh would be amenable to limiting government regulation of the healthcare market.”
- He might support FDA’s oversight of experimental drugs. In the 2007 case, Abigail Alliance for Better Access to Developmental Drugs v. von Eschenbach, Daniel E. Dawes, JD, associate professor, Complex Health Systems, Nova Southeastern University, Fort Lauderdale, Florida, says Kavanaugh, along with the 8-2 majority, concluded that, “there is no fundamental right ‘deeply rooted in this nation’s history and tradition’ of access to experimental drugs for the terminally ill.”
“The court sided with the FDA and upheld the process for how the FDA should provide access to experimental drugs,” Garcia says. “Thus, although Kavanaugh has ruled against the FDA in other cases, here Kavanaugh showed support for FDA oversight in specific instances for the use of unapproved drugs. This may play a part in his future decisions.”
- He might favor government policies regarding pharmaceuticals. In a number of cases, Kavanaugh has ruled to maintain the status quo of deference to the FDA and seems to agree with its objective of ensuring systems and approaches are in place to protect consumer safety, Dawes says. “If he becomes a member of the Supreme Court, he could very easily continue this path of deference to the government agencies that have managed the pharmaceutical industry.”
In the 2016 Cytori Therapeutics v. FDA case, Kavanaugh said, “a court is ill-equipped to second-guess that kind of agency’s scientific judgment.” “Considering that the Trump Administration has singled out and is keen on reforming the pharmaceutical industry, and Kavanaugh seems sensitive to legislative and administrative actions that bolster healthcare access and quality as well as judicial decisions undermining markets, he may very well rule in favor of the government if their policies do not overreach,” Dawes says.
- He might vote conservatively in contraception and abortion cases. In the 2015 Priests for Life v. HHS case, Kavanaugh stated that the ACA’s requirements around mandatory contraception coverage violated the freedom rights of religious employers. “This shows that he is a fairly traditional conservative legal thinker when it comes to contraception and reproductive rights, and will tend to value religious belief, broadly defined, over the health decision-making of women,” Ehlke says. “The blanket protections afforded by Roe v. Wade are therefore very much under threat, even if a national ban on abortion is unlikely.”
Another example of Kavanaugh’s conservative approach to contraception is his willingness to be on record, in a dissent, stating that allowing a 17-year-old immigrant to have the autonomy to decide to get an abortion is a “radical extension of the Supreme Court’s jurisprudence on abortion,” Dawes concludes.
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By Mike Curley
Investors have slapped Bank of America with a proposed class action accusing the banking giant of knowingly helping five investment advisers perpetuate a $102 million Ponzi scheme by allowing them to transfer the funds through the bank.
Following on the heels of a government enforcement action, Mary Beth Heinert and Richard R. Schultz Jr. filed the suit in Florida federal court on behalf of 637 investors from whom Perry Santillo, Christopher Parris, Paul Anthony LaRocco, John Piccarreto and Thomas Brenner allegedly stole millions starting in 2011.
The investors claim the five used their status as members of their communities to persuade people to invest in their companies, which purported to do business in real estate, stock investments and medical research, only to funnel the money into Bank of America accounts and use them to either pay out to previous investors or for personal purposes.
“Bank of America had actual knowledge that the individual defendants were using Bank of America accounts to engage in illicit activity, and willingly assisted the fraud anyway,” the complaint states.
The funds went toward paying for homes and cars, country club memberships and trips to Las Vegas, according to the complaint. Santillo used some of the money to commission a song describing himself as a high-rolling “King Perry” in “ten thousand dollar suits,” then played the song at a party in Las Vegas, according to the complaint.
The scheme was brought down when the Securities and Exchange Commission launched a civil enforcement suit against the five men in June.
In the new complaint, the investors hold Bank of America responsible for keeping the scheme afloat, saying the bank knew the scam was using accounts opened in its branches and did nothing to stop it.
As part of the scheme, the five conspirators opened as many as 100 Bank of America accounts, which they used to manage and transfer the millions they took from their marks, the complaint alleges.
The proposed class claims Bank of America knew what the five conspirators were doing and had a duty to act on the signs of a Ponzi scheme, such as frequent transactions in a business account unrelated to the business’s function and multiple transfers to one person from several different accounts, according to the complaint.
Had the bank taken action to close or freeze the accounts involved, the scheme would have fallen apart much sooner, the suit says, adding that the bank had the power to close the accounts at any time and had no reason to keep them open.
“The individual defendants could not have run this scheme undetected for so many years without Bank of America’s knowing and substantial assistance,” Heinert and Schultz claim.
“We look forward to working to get relief for the class,” Harley S. Tropin of KozyakTropin& Throckmorton PA, attorney for the class, told Law360 in an email.
Counsel for the defendants could not immediately be reached for comment.
Heinert and Schultz are represented by George Franjola of Gilligan Gooding &Franjola PA and Harley S. Tropin, Tal J. Lifshitz and Robert J. Neary of KozyakTropin& Throckmorton PA.
Counsel information for the defendants was not available.
The case is Heinert et al v. Bank of America, N.A. et al, case number 5:18-CV-00324 in U.S. District Court for the Middle District of Florida.
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Kozyak Tropin & Throckmorton is a complex commercial litigation firm founded in 1982 that focuses its practice on bet-the-company commercial cases, class actions, healthcare and bankruptcy matters.