There’s good news for Fort Lauderdale attorney Chad P. Pugatch, who spent years fighting a damning ruling from a federal appellate court that found he “abused” the bankruptcy process.
Pugatch is a veteran litigator and shareholder at Rice Pugatch Robinson Storfer & Cohen. But he found himself the subject of a 2014 ruling by the U.S. Court of Appeals for the Eleventh Circuit, which reversed a bankruptcy sale and determined the attorney knowingly provided false testimony in a deposition.
But the latest ruling in the case by U.S. Bankruptcy Judge Raymond Ray in Fort Lauderdale clears Pugatch’s name, finding no wrongdoing, and concluding that “the alleged misconduct only rose to the level of recklessness, at the most.”
“It took us all these years and a lot of angst, a lot of time in court … but the entire story came out,” Pugatch said. “It was a large relief for me. I knew I did nothing wrong, and all of my peers knew that I did nothing wrong and were very kind to continually relay that to me. But until you have it play out in court, you worry about it.”
Pugatch might have won the latest round, but the litigation is far from over. The opposing party, investor Joseph G. Wortley, promised Tuesday to challenge the latest decision on claims it disregarded the appellate court order.
“Of course I’m going to appeal,” Wortley said. “This judge has decided that the Eleventh Circuit mandate means nothing.”
The Eleventh Circuit found Pugatch helped client Richard Tarrant and his company Chrispus Venture Capital LLC conspire with their business associate, James Juranitch, to shut Wortley out of their company through an involuntary bankruptcy filing.
At trial, Pugatch and his clients denied any wrongdoing. The lawyer and the onetime business partners denied they plotted to push Wortley out of the venture, Global Energies LLC, which marketed a plasma technology that Juranitch developed. Each testified they had not discussed using bankruptcy as a tool to wrestle away control of the company.
But Wortley’s attorneys later discovered an email string they dubbed a “smoking gun” because it showed the partners doing just that — discussing a forced Chapter 11 bankruptcy filing if communication further deteriorated — and copying Pugatch on the conversation.
“Pugatch, of course, knew better,” the Eleventh Circuit wrote in a damning decision that took aim at the attorney, his clients and other litigants.
Listen to the appellate court judges’ reaction to counsel during oral arguments:
Pugatch said the email string — included in the latest ruling — started with a message from a litigant who wasn’t a Rice Pugatch client. He said the message sought his opinion and included multiple inaccuracies, which later were corrected during a call with the parties.
But the appellate court found the messages helped prove Wortley’s assertions. It remanded the case with instructions for the bankruptcy court to wipe out its ruling in the partners’ favor and enter “judgments to ensure that Chrispus, Juranitch, Tarrant and Pugatch do not profit from their misconduct and abuse of the bankruptcy process.”
“The bankruptcy court shall vacate the sanctions imposed upon Wortley and ensure that he is fully compensated for any and all damages, including awarding Wortley attorneys’ fees and costs,” the Eleventh Circuit ruled. “The only reason that this court does not impose any of these remedies is that Chrispus, Juranitch, Tarrant, and Pugatch have not had an appropriate hearing, which will be conducted before the bankruptcy court.”
NO BAD FAITH
Wortley’s former lawyer, David R. Softness in Miami, described the yearslong litigation as “a long, arduous case” that turned on the unexpected discovery.
“They all denied it, then all of a sudden some emails surfaced that showed they’d all been working together,” Softness said. “That’s what the Eleventh Circuit took issue to … and reversed everything.”
The appellate ruling led to a Florida Bar inquiry targeting Pugatch, but the bar closed the investigation without recommending any disciplinary action.
“It can wear on you,” Pugatch said. “All we ever wanted and asked for was a full trial where the truth would come out, and we knew that it would take care of itself.”
Pugatch got the good news Monday when Ray cleared his name.
The attorney long argued his team never concealed the email messages and turned them over to Wortley’s side. He claimed Wortley cycled through so many lawyers — about 20 by one count — that his then-attorneys neglected to collect a box of documents from opposing counsel.
Ray found the argument convincing.
“Although the procedure of waiting for opposing counsel to retrieve the discovery may not be the best practice, the court found that Mr. Pugatch and his law firm did not commit any discovery misconduct in bad faith,” the bankruptcy judge wrote. “Additionally, the court found no evidence of bad faith conduct by Mr. Pugatch and his law firm during the course of the bankruptcy, including the filing of the bankruptcy case.”
Without a bad faith finding, Ray said the court could not find in Wortley’s favor and sanction Pugatch and his firm.
For his part, Wortley said the ruling was consistent with the judge’s previous opinions.
“It’s obvious he was going to rule for Chad (Pugatch). If Chad said it was Thursday and it was a Monday, he was going to rule for Chad,” Wortley said. “It’s just a complete miscarriage of justice. We should never have had to have a trial. All we should have had was for Judge Ray to do what he was instructed to do by the Eleventh Circuit. For the Eleventh Circuit to issue a mandate and for Judge Ray to not do it is a complete corruption of the judicial system.”
Meanwhile, a Big Law attorney representing the other defendants celebrated Ray’s decision in the hard-fought case, which included an 11-day trial, 14 witnesses and about 200 exhibits.
“It’s taken over four years to be vindicated, and we’re extremely pleased,” said Akerman Fort Lauderdale partner Michael I. Goldberg, who represented investor Tarrant and two companies, Chrispus Venture Capital LLC and Plasma Power. “My clients had legitimate reasons. They were owed a million dollars and had legitimate reasons to put the company in bankruptcy.”
Read the ruling: