Husband Sues Wife’s Divorce Lawyers for Fraud

GeorgiaLeeLang025Statistics suggest that 98% of family law cases settle out of court. For the unlucky few who can only obtain finality and closure with the aid of lawyers and judges, the journey is long, tortuous, and expensive.

Kenneth Felis of Vermont found himself engaged in divorce court proceedings that drained him emotionally and financially.

The parties had one child and a family estate worth between $12 to $15 million dollars, made up of cash, real estate and business interests.

HIs wife, Vicki, retained the law firm of Downs, Rachlin Martin to represent her in the court action. They, according to Mr. Felis, escalated the conflict by implementing a strategy that generated exorbitant legal fees and was intended to “harass and injure” him.

He sued the law firm for fraud and breach of fiduciary duty for “pursuing unreasonable legal positions, demanding extensive and unnecessary discovery, promoting and claiming outrageous asset valuations, raising claims without proper foundation . . . and billing excessive time.”

The firm had retained business valuators Gallagher, Flynn and Company on behalf of Ms. Felis, who were also named as defendants in Mr. Felis’ lawsuit.

Felis argued that at the outset of the multi-year litigation the “red fee-building flag went up” when Vicki Felis’ lawyers twice asked the court  and obtained  large distributions of cash to fund her lawyers and the business valuators.

Many jurisdictions permit family law litigants to request advances of cash or assets to enable them to pay for their litigation. It is only recently that British Columbia’s family law legislation was amended to permit these applications as well.

Mr. Felis was particularly incensed by his wife’s claim that he had “wastefully dissipated” millions of dollars from the family assets. To respond to the allegations, Felis’ lawyer was compelled to review and produce copious, detailed financial records and accounting documents, a process that required extensive time and generated additional legal fees.

The Court found Ms. Felis’ allegation of dissipation of funds to be without merit and dismissed her claim.

As for the business valuators, Mr. Felis argued that after years of discovery and production of all relevant documents, Gallagher, Flynn and Company “intentionally and wrongfully put up false expert testimony in an attempt to influence the court to improperly value [plaintiff’s] business assets and achieve an exorbitant and outrageous property distribution for Ms. Felis that was not grounded in the law.”

Mr. Felis also alleged that his wife’s lawyers submitted a false financial affidavit that incorrectly identified her debts, in an effort to gain increased child support.

By the time the divorce proceedings were finalized Ms. Felis’ lawyers’ bill was over $800,000 not including the business valuators’ bill of $248,000, all of which would be paid from the parties’  family assets, meaning that Mr. Felis was on the hook for one-half of over a million dollars in legal and valuation fees.

Regrettably for Mr. Felis, both the trial and appeal courts held that his wife’s lawyers owed no “duty” to him on which he could base a claim of breach of fiduciary duty. The law firm’s duty was to their client, not their client’s spouse. They also held that Felis had not alleged or  proven the requisite elements of fraud and thus, that claim failed as well.

The simple fact is that spouses may choose the lawyer they wish. Some divorce lawyers approach all their cases as a full-scale battle and unfortunately, unsophisticated clients tag along for the ride, while more discerning clients put a stop to strategies that only increase the conflict.

Mr. Felis’ complaints may have been legitimate  but there is no basis in law for the  courts to intervene.

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