Free Proposed Findings of Fact - District Court of Arizona - Arizona

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Roger L. Cohen, #004409 Kathi Mann Sandweiss, #011078 JABURG & WILK, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 (602) 248-1000 Attorneys for Defendants Ross

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA SHIMKO & PISCITELLI, et al., Case No: CIV-04-78-PHX-FJM Plaintiffs, v. DAVID GOLDFARB; RICHARD ROSS, et al. Defendants. ROSS DEFENDANTS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. Defendants Richard and Marcia Ross (the "Ross Defendants") submit the following proposed findings of fact and conclusions of law: FINDINGS OF FACT 1. In or about 2000, Plaintiffs Shimko & Piscitelli, an Ohio law firm, and

Timothy Shimko (collectively, "Shimko") began representing a group of limited liability companies (the "CORF Entities") in connection with their business operations. 2. In or about Fall, 2001, the CORF Entities retained Shimko as counsel in a

series of filed or threatened lawsuits. 3. The CORF Entities requested that Shimko also defend the Ross Defendants

and the other officers, employees and their spouses named in any such lawsuits, at the expense of the CORF Entities. There was no written fee agreement. 4. All bills for legal services were addressed and mailed to the CORF Entities.

From December 5, 2001 to April 23, 2003 the bills were sent to the attention of the

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

billing department at CORF Management Services, L.P. and mailed to the company address, first at 10210 N. 2nd St. in Phoenix, and later at 7272 East Indian School Road, Scottsdale. 5. None of the bills were sent to any of the individual defendants, and none of

the individuals were copied on any of the bills. Even the final bill, attached as Exhibit 1 to the Complaint, and including all amounts purportedly due and owing through April 30, 2003, is addressed only to the billing department of CORF Management at its address on Indian School in Scottsdale. 6. Shimko made no effort to isolate any particular legal service that might have

been associated with any individual defendant. 7. All checks issued to pay Shimko's fees were drawn on business accounts of

the CORF Entities. In total, the CORF Entities paid Shimko more than $475,000.00 on behalf of the CORF Entities and the individual defendants. 8. 9. 10. Mr. and Mrs. Ross never paid any of the legal bills. Mr. and Mrs. Ross never agreed to pay any of Shimko's legal bills. Shimko did not request payment from any individual defendant prior to his

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withdrawal from representation. 11. In April, 2003, Shimko demanded that the individual defendants agree in

writing to be personally liable for all past and future fees and to provide personal collateral to secure payment. All of the individual defendants, including Mr. Ross, expressly refused to sign any personal guarantees or to be responsible for fees. 12. On April 29, 2003, the same date as the last service they provided, Shimko

wrote to Mr. Brill, with copies to the other individual defendants, the following: "[t]his letter is to inform you that in light of the current litigation, potential conflicts may arise between you as an individual and CLS and CMS and their owners." The Ross Defendants and the others were not advised of the potential conflict of interest until just before the Attorneys withdrew as counsel, and just after the individuals refused to personally guarantee payment of fees. 2
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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

13.

At all times relevant, Shimko was counsel for the CORF Entities. Among

his other duties as partnership counsel, Shimko negotiated and drafted employment agreements on behalf of the CORF Entities. The billing statements reflect that, among his other duties as partnership counsel, Shimko handled transfer of the CORF license, made changes to the Director's agreement to create vice president agreements, and negotiated noncompete agreements with clients for new products. 14. Shimko failed to advise Defendants of the potential conflicts involved in his

simultaneous, joint representation of the CORF business entities, its officers and employees, the general partner and limited partners. Shimko failed to advise the

Defendants that they might have different interests and conflicts with the general partner and officers and employees. 15. Shimko failed to advise individual Defendants that they might have conflicts

with the other defendants and different interests than the other defendants, depending upon their personal assets and financial situations, how the assets were held, their level of involvement in CORF activities and promotions, and their knowledge of activities at CORF. 16. Shimko failed to explain to individual Defendants that he could not make a

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separate settlement on their behalf because doing so would conflict with his duty of loyalty to his other clients. The individual Defendants never waived this and other potential conflicts because they were never advised of them. 17. Shimko failed to advise individual Defendants of the risks and potential

conflict involved in his representation of multiple clients with different levels of involvement and potential culpability. Shimko failed to advise individual Defendants that they might have conflicting interests and should seek independent counsel even though some of the other clients Shimko represented continued to engage in activity that Shimko had warned them against. 18. At a dinner meeting with the lead attorney for plaintiffs in the underlying

CORF-related lawsuits, as offer was extended to Shimko whereby the plaintiffs would 3
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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

dismiss their lawsuits against Brill and Ritchie, who had been CORF officers and employees. Shimko did not offer to enter into a separate agreement on behalf of the Ross Defendants because that would have conflicted with his duty to the other individual defendants. 19. 20. Shimko personally loaned $250,000.00 to the CORF Entities. The terms of the loan transaction were not fully disclosed and transmitted in

writing to the Ross Defendants and the other individual defendants in a manner that could be reasonably understood by the clients. 21. Shimko failed to advise the Ross Defendants and the other individual

Defendants of their right to seek independent counsel in connection with the loan transaction. 22. Shimko failed to explain to the Ross Defendants that some debts to him

were corporate, and some were purportedly personal; and he failed to explain how he would allocate monies he received from CORF between his legal bills and loan repayment. 23. By applying monies received from CORF preferentially to repayment of the

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loan, Shimko increased the risk that CORF would be unable to pay legal bills, thus increasing the risks that the Ross Defendants would be charged with payment. The loan transaction and risks were not explained to the Ross Defendants, and their interests were materially affected. 24. transaction. 25. Shimko received approximately $603,816.00 in payments from the CORF Shimko failed to obtain the Ross Defendants' written consent to the loan

Entities, which payments were applied to the $250,000.00 loan. 26. Shimko provided legal services to Aztec Medical Group Partners, LLC, in

exchange for an interest in the company, which was co-owned by the Ross Defendants and the other individual Defendants. Shimko failed to advise individual Defendants to 4
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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

have independent counsel review the Aztec Medical transaction and operating agreement, and failed to obtain individual Defendants' written consent to the transaction. 27. Shimko never talked to the Ross Defendants about their personal financial

situation, and had no knowledge of the individual defendant's relative financial strength to each other. 28. Shimko never talked to any of the individual Defendants about the

advisability of having separate counsel to make separate agreements, and save their individual situations at the expense of the rest of the group. 29. Shimko believed, without factual support, that the individual Defendants

"were like the four musketeers. . . in for a penny and . . in for a pound." 30. Shimko never reviewed the Arizona ethical rules pertaining to representing

multiple parties in litigation. 31. Shimko never discussed conflict issues with his former clients, because he

"didn't see any conflict issues to be discussed." 32. Shimko never advised the Ross Defendants that any confidential

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attorney/client communications they had would be shared or shareable with the other Defendants. 33. Frank Piscitelli, a former partner of Plaintiff Timothy Shimko and an

original named Plaintiff in this lawsuit, performed a substantial portion of the services described in Shimko's billing statements, for which Shimko charged more than $100,000.00. 34. in this case. 35. David Welling, during period when he was an unlicensed law clerk, Mr. Piscitelli evaded service of a subpoena in order to avoid being deposed

preformed services for which Shimko billed the CORF Entities at the rate of $350.00 per hour, for a total of 310 hours.

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

II.

CONCLUSIONS OF LAW 1. Shimko's bills must be reduced by an amount equal to the total amounts

billed for services performed by Frank Piscitelli and David Welling. 2. The Ross Defendants did not enter into a contract with Shimko and had no

contractual obligation to pay any portion of the fees that are the subject of this lawsuit. 3. Shimko engaged in conflicts of interest in violation of ER 1.7 and ER 1.8,

Rule 42, Rules of the Arizona Supreme Court. 4. Shimko's actions constitute clear and serious violations of his ethical duties

to his clients, which violations significantly diminished the value of the services rendered by Shimko; Shimko's fees are properly forfeited in full. 5. Shimko is not entitled to equitable relief in the form of quantum meruit

recovery for the reason that there was an express contract between the CORF entities and Shimko for payment of Shimko's bills. 6. Shimko further is not entitled to equitable relief in view of his unethical

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conduct as described above. 7. Because Shimko was expressly aware that Ross was a limited partner, and

that he did not participate in controlling the business, Shimko cannot assert a claim against Ross as an alleged general partner. 8. The Ross Defendants are entitled to recover their reasonable attorney fees

incurred in this lawsuit pursuant to A.R.S. § 12-341.01. DATED this 11th_day of August, 2008. JABURG & WILK, P.C. s/ Roger L. Cohen Roger L. Cohen Kathi Mann Sandweiss Attorneys for Defendants

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

CERTIFICATE OF SERVICE I hereby certify that on August 11, 2008, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF system for filing, and for transmittal of a Notice of Electronic filing to the following CM/ECF registrants: Timothy Shimko, Esq. TIMOTHY SHIMKO & ASSOCIATES 2010 Huntington Building 925 Euclid Avenue Cleveland, Ohio 44115 Attorneys for Plaintiffs David and Rhona Goldfarb 11437 N. 53rd Place Scottsdale, Arizona 8525 Pro Per Defendants Goldfarb Richard J. McDaniel, Esq. 11811 N. Tatum Blvd., Suite 1051 Phoenix, Arizona 85208 Attorney for Woodcock Defendants

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s/ Julie Sullivan

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