Mitchell v. Burt & Gordon, P.C. (In Re Stein)

208 B.R. 209, 1997 U.S. Dist. LEXIS 6319, 1997 WL 228873
CourtDistrict Court, D. Oregon
DecidedApril 21, 1997
Docket392-33885-S7, Adversary No. 92-3112-S, Civil No. 93-438-FR
StatusPublished
Cited by7 cases

This text of 208 B.R. 209 (Mitchell v. Burt & Gordon, P.C. (In Re Stein)) is published on Counsel Stack Legal Research, covering District Court, D. Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mitchell v. Burt & Gordon, P.C. (In Re Stein), 208 B.R. 209, 1997 U.S. Dist. LEXIS 6319, 1997 WL 228873 (D. Or. 1997).

Opinion

FINDINGS OF FACT AND CONCLUSIONS OF LAW

FRYE, Judge.

The matters before the court are the resolutions of claims for relief one, four, five and six and the remedy under claim for relief two.

The following constitutes findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

BACKGROUND

This is an adversary proceeding in which the trustee in bankruptcy, John H. Mitchell, seeks to recover property for the bankruptcy estate of the debtor, Alexander Y. Stein, punitive damages, attorney fees, and costs. The trustee in bankruptcy sets forth six claims for relief in the amended pretrial order. These claims are (1) avoidance of fraudulent transfer under O.R.S. 95.200 et seq.; (2) breach of fiduciary duty; (3) tortious breach of the duty of good faith and fair dealing; (4) to set aside the Sheriff’s sale; (5) turnover of property of the estate under 11 U.S.C. § 542(a); and (6) recovery of avoided transfer under 11 U.S.C. § 550(a)(1).

On January 17, 1997, the court dismissed the third claim for relief for the tortious breach of good faith and fair dealing.

On February 24, 1997, a jury returned a verdict against the defendants Burt & Vet *212 terlein, P.C., Robert G. Burt, and Mark A. Gordon. The jury found that defendants Burt & Vetterlein, P.C., Robert G. Burt, and Mark A. Gordon breached their fiduciary duties to Alexander Stein, which caused Stein to suffer the loss of his stock in In Focus Systems, Inc. (In Focus Systems). The jury found that plaintiff Mitchell was entitled to recover punitive damages from the three defendants in the following amounts: Burt & Vetterlein, P.C. — $786,000; Robert G. Burt — $670,000; and Mark A. Gordon — $17,000.

The following claims were tried to the court and remain to be resolved: (1) avoidance of fraudulent transfer under O.R.S. 95.200 et seq.; (4) to set aside the Sheriffs sale; (5) turnover of property of the estate under 11 U.S.C. § 542(a); and (6) recovery of avoided transfer under 11 U.S.C. § 550(a)(1).

FINDINGS OF FACT

Alexander V. Stein was a client of the defendant Burt & Gordon, P.C.; Burt & Vetterlein, P.C.; Burt, Vetterlein & Bushnell, P.C.; and Burt & Associates (hereinafter referred to as Burt & Gordon, P.C.) from July 10, 1986 until September 25, 1989. Stein was the subject of an investigation by the Department of Insurance and Finance, Division of Finance and Corporate Securities, of the State of Oregon. Stein had been accepting funds from persons and entities in the State of Oregon for investment purposes. As of May of 1988, Stein owed investors approximately $32 million dollars including the promises that he had made to pay interest on the investments.

Sometime around June 8, 1988, Stein entered into a written fee agreement with the law firm of Burt & Gordon, P.C. At or about this time, two of Stem’s investors, Nathan J. Levin and James D. Vick, paid Burt & Gordon, P.C. $20,000 for attorney fees incurred on behalf of Stein.

On August 10, 1988, Stein obtained 71,500 shares of stock in the company, In Focus Systems, for a purchase price of $572,000.

On September 15, 1988, Stein executed an irrevocable stock power to Burt & Gordon, P.C. for his 71,500 shares of stock in In Focus Systems.

On September 16, 1988, Stein delivered to Burt & Gordon, P.C. a stock certificate for the 71,500 shares of Stein’s stock in In Focus Systems as security for the debt that Stein owed to Burt & Gordon, P.C. for legal services rendered. By letter dated September 16,1988, Burt & Gordon, P.C., through attorney Mark Gordon, memorialized this transfer, stating, in part, as follows:

This is to confirm our understanding and agreement with respect to your assignment of your In Focus Systems, Inc., Stock Certificate No. 6 to Burt & Gordon, P.C.
Your assignment is for the purpose of paying all outstanding fees, costs, and advances due to Burt & Gordon, P.C., by you, AVS Research, Inc., and AVS Capital Fund, Ltd., under our Client Matter No. 5390 or otherwise, either now or in the future (hereinafter referred to as “Obligations”). It is not a pledge of the stock, nor a transfer of a security interest in the stock. The stock will be returned to you upon full payment of the Obligations. If, however, such Obligations are not paid within 30 days of our formal, written demand therefor, Burt & Gordon, P.C., shall be free to sell the stock to satisfy the Obligations upon any terms it, in the exercise of its sole discretion, and with no obligation to you to obtain a “best price” or otherwise look after your interests, deems appropriate. Any funds received by Burt & Gordon, P.C., in excess of the Obligations (including Burt & Gordon P.C.’s costs in selling the stock, if any), shall be returned to you.

Plaintiffs Exhibit 1.

On October 26, 1988, Andrea Bushnell, an associate in the law firm of Burt & Gordon, P.C., attended a bankruptcy hearing for the bankrupt, Valley Oil Co. Valley Oil Co. was one of Stein’s investors, and Stein owed money to Valley Oil Co. Ann Fisher, an attorney representing the interests of the creditors of Valley Oil Co., stated at that hearing that she had discovered Stem’s interest in the stock of In Focus Systems, and that she felt that the bankruptcy estate of Valley Oil Co. could *213 pursue the In Focus Systems stock as an asset of Stein. Fisher was not aware that Stein had delivered his stock in In Focus Systems to Burt & Gordon, P.C.

On November 11, 1988, Gordon wrote to Stein as follows:

This is to confirm our recent telephone conversation wherein I informed you of Attorney Fisher’s comments on the In Re Focus Systems, Inc., stock at an October 26, 1988, Valley Oil “status” hearing. The stock is, obviously, a “targeted” asset. Giving due regard for the Cease and Desist Order, you should consider how to best dispose of the stock for your current needs prior to any action by Attorney Fisher.

Plaintiffs Exhibit 57. Both Robert Burt and Mark Gordon were aware at all times during their representation of Stein that Stein had other legal and financial problems, including threatened civil actions as well as possible criminal prosecutions.

On November 17, 1988, Eric Vetterlein, an associate in the law firm of Burt & Gordon, P.C., conducted research and prepared a memorandum at the direction of Mark Gordon on the topic of the law firm’s interest in the stock of In Focus Systems. In that memorandum, Vetterlein reported to Gordon, in part, as follows:

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Bluebook (online)
208 B.R. 209, 1997 U.S. Dist. LEXIS 6319, 1997 WL 228873, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mitchell-v-burt-gordon-pc-in-re-stein-ord-1997.