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The ugly breakup of Haymond & Lundy has spawned several lawsuits, and a federal judge has now closed the books on one of the cases with a decision that finalizes the dissolution of the firm and awards more than $900,000 to attorney Marvin Lundy. In a trio of decisions in Haymond v. Lundy, Senior U.S. District Judge Norma L. Shapiro in Philadelphia upheld most of the recommendations of court-appointed receiver Martin Heller and the accountant Heller hired to help sort out disputes over the firm’s assets. Significantly, Shapiro found that Connecticut attorney John Haymond is legally responsible for $1.5 million in funds that he claims were illegally taken by his other former partners, Scott E. Diamond and Andrew F. Napoli. Shapiro refused to exercise jurisdiction over Napoli and Diamond, finding instead that Haymond must pursue his claims against them in another pending lawsuit that she is also handling. As a result, Shapiro issued a ruling that divides the firm’s available funds by awarding $913,595 to Lundy, $142,454 to Haymond and $50,000 to Robert Hochberg. The lawsuits began in 1999 soon after Lundy claims he discovered that Hochberg had been suspended from practicing law and was therefore illegally practicing law in Philadelphia. Shapiro ultimately found that Hochberg had engaged in the illegal practice of law and permanently enjoined him from practicing in Pennsylvania. But in a significant setback for Lundy, Shapiro tossed out his RICO claim and held that none of the other lawyers could be held responsible under a conspiracy theory for keeping Lundy in the dark about Hochberg’s disbarment. In February 2001, Lundy suffered another setback when a jury found that Lundy had breached his partnership agreement with Haymond by failing to use his “best efforts” to obtain fees from his former firm, Manchel Lundy & Lessin, in the two months prior to the breakup of Haymond & Lundy. The jury also rejected Lundy’s claim that Haymond had breached their agreement by failing to inform him that Hochberg had secretly transferred his 10 percent interest in the firm over to Haymond after Hochberg pleaded guilty to federal charges and was suspended from practicing law. After the verdict, the focus of the case shifted to non-jury issues as Shapiro oversaw the firm’s dissolution. DISSOLUTION DISTRIBUTION Now, Shapiro has accepted most of the recommendations made by the court-appointed receiver and ordered a distribution of the firm’s assets. The receiver concluded that Haymond & Lundy had more than $5.2 million in assets, including more than $1.7 million in cash; more than $1.5 million in accounts receivable but not collected from Marvin Lundy; more than $1.5 million in accounts receivable but not collected from Hartford, Conn.-based Haymond Napoli & Diamond; and more than $300,000 in costs advanced. The receiver calculated the partnership’s liabilities by first putting aside $525,000 in reserve for debts due third parties. In calculating the amounts due to Hochberg, Lundy and Haymond — the fees they were entitled to minus the amount they owed the partnership — the receiver allocated more than $2.6 million of the partnership assets to Lundy ($983,595 in cash); more than $1.6 million in cash to Haymond; and $50,000 in cash to Hochberg. But the recommendation assumed that more than $1.5 million received by Haymond Napoli & Diamond from clients on cases originally handled by Haymond & Lundy or Manchel Lundy & Lessin would be paid, it has not. Haymond argued that Shapiro should exercise jurisdiction over Napoli and Diamond and order the pair to put the funds in escrow. Shapiro refused, saying that Haymond and his former firm, Haymond Napoli & Diamond, should be “treated as one entity.” As a result, she said, the firm’s accounts receivable “are attributable as accounts receivable of Haymond because Haymond agreed to transfer those accounts to [Haymond Napoli & Diamond].” In a separate opinion, Shapiro also rejected a motion by Lundy, which was joined by Haymond, that asked her to exercise jurisdiction over Haymond Napoli & Diamond in order to seize the $1.5 million in funds that were never escrowed. However, Shapiro found that both Lundy and Haymond opposed Haymond Napoli & Diamond’s attempt to intervene in the case and that the firm therefore was not a party. Lundy’s lawyer, Paul Rosen of Philadelphia-based Spector Gadon & Rosen, argued that the receiver must possess all potential assets of the partnership before a distribution can occur, even those assets held by “non-parties.” Shapiro, he said, had in rem jurisdiction over the funds. Shapiro said she accepted the receiver’s finding that from December 1999 through January 2002, Haymond Napoli & Diamond withheld $1.5 million in attorney fees it received from clients on cases originally handled by Haymond & Lundy or Manchel Lundy & Lessin. But she found that while she had the power to force Haymond Napoli & Diamond to return the money, there could be potential constitutional issues if she did so. She also found that she had the power to order the receiver to bring a lawsuit to get the funds but concluded that there was a “better solution.” She decided that “Haymond, whose tacit approval of [Haymond Napoli & Diamond's] decision not to escrow the attorney’s fees allowed that firm to withhold $1.5 million from [Haymond & Lundy], will be charged with the consequences of his actions,” Shapiro wrote. “But for Haymond’s collusion with HND, H&L would have collected all the fees in question.” Shapiro said it would be “unfair to Lundy to await a further adjudication of the fees HND may retain by virtue of Haymond’s willingness to let HND evade the court’s jurisdiction.” In an interview yesterday, Rosen said he was pleased that Lundy will now have the opportunity to appeal the decisions that tossed out his RICO and conspiracy claims. Haymond’s lawyer, Melvin Shralow of White & Williams, said he is studying Shapiro’s decisions and has not yet discussed them with his client. Attorney Howard Klein of Philadelphia’s Conrad O’Brien Gellman & Rohn, who represents Hochberg, Napoli and Diamond, said he, too, is studying the decisions and may later argue that the rulings in the federal case have preclusive effects in pending state court litigation. Klein also said that he believes Haymond’s separate federal lawsuit against Napoli and Diamond over the $1.5 million is “without merit” since the fees at issue were generated after Haymond ceased to be their partner.

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