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Ex parte Maynard, Cooper & Gale, P.C.

Supreme Court of Alabama

December 21, 2018

Ex Parte Maynard, Cooper & Gale, P.C.
Maynard, Cooper & Gale, P.C. In re: Oleg Sirbu and AAL USA, Inc.

          Jefferson Circuit Court, CV-17-905393


          BRYAN, JUSTICE.

         Maynard, Cooper & Gale, P.C. ("MCG"), petitions this Court for a writ of mandamus directing the Jefferson Circuit Court ("the circuit court") to vacate its July 30, 2018, order denying MCG's motion for a change of venue and to enter an order transferring the underlying action to the Madison Circuit Court on the basis of the doctrine of forum non conveniens. For the reasons set forth below, we grant the petition.

         Facts and Procedural History

         On December 28, 2017, AAL USA, Inc. ("AAL"), a Delaware corporation doing business in Alabama, and Oleg Sirbu, a resident of Dubai, United Arab Emirates (hereinafter referred to collectively as "the plaintiffs"), sued MCG, asserting a claim of legal malpractice pursuant to the Alabama Legal Services Liability Act, § 6-5-570 et seq., Ala. Code 1975 ("the ALSLA"), and seeking, among other relief, disgorgement of all attorney fees paid by the plaintiffs to MCG.

         At all times relevant to this action, Sirbu was the majority shareholder of AAL, Paul Daigle was a vice president and then chief executive officer, and Keith Woolford was its chief financial officer. AAL maintains, repairs, and overhauls helicopters through various government contracts or subcontracts on United States military bases. According to the plaintiffs, MCG represented the plaintiffs from some point in 2014 through October 28, 2016.[1] The complaint specifically names two MCG attorneys -- Jon Levin and J. Andrew Watson III -- as shareholders of MCG whose allegedly wrongful conduct was performed within the line and scope of their employment with MCG. The complaint alleged that MCG generally, and Levin and Watson specifically, "played an integral role in engineering, implementing and finalizing a scheme orchestrated by Daigle and Woolford to takeover [sic] AAL ... and cause substantial financial injury to [the plaintiffs]." The bulk of the complaint concerns an asset-purchase agreement ("the APA") entered into between AAL and Black Hall Aerospace, Inc. ("BHA"). The complaint alleges that in May 2015 MCG began drafting corporate-formation documents for BHA, an entity owned, at least in part, by Daigle and Woolford, a fact allegedly not disclosed to the plaintiffs. At some point before the formation documents for BHA were completed, MCG referred the corporate-formation work to Sirote & Permutt, P.C., which completed the formation of BHA.

         The events giving rise to this litigation began on September 23, 2016, when AAL received a "base-debarment" letter notifying it that it no longer had access to certain military bases outside the continental United States. Woolford forwarded this letter to MCG, and, according to the plaintiffs, MCG "immediately embarked in a central role in Daigle's and Woolford's scheme to steal the assets of AAL." The details of this scheme are set forth in detail over numerous paragraphs in the plaintiffs' complaint. For purposes of this petition, it is sufficient to state that the complaint alleged that Levin worked closely with Woolford and Daigle to draft the APA pursuant to which BHA, Daigle, and Woolford would purchase all of AAL's assets, as a way to cure the base-debarment problem. The plaintiffs alleged that MCG knew that the APA would "gut" the plaintiffs -- its current clients -- while simultaneously benefiting Daigle, Woolford, and BHA -- other clients of MCG -- and that this "clear and irreconcilable conflict of interest ... was never disclosed to [the plaintiffs]." The plaintiffs further alleged that, while the specific terms of the APA were being negotiated, Levin was in negotiations with Daigle about going to work at BHA; that Levin would be granted shares in "the new BHA (post-AAL sale)"; that Levin failed to disclose this fact to the plaintiffs; and that Levin put his own financial interests above those of the plaintiffs. Additionally, the plaintiffs alleged that MCG knew that the terms of the APA were unfair to the plaintiffs, yet it failed to provide legal counsel to the plaintiffs on the specific terms of the APA; instead, they alleged, Watson actively counseled Daigle and Woolford regarding the APA, against the interest of the plaintiffs. The plaintiffs further alleged that Levin used his contacts at the commercial bank regularly used by AAL to override the bank's security procedures to wrongfully transfer millions of dollars from AAL to BHA without authorization or approval from Sirbu. On October 25, 2016, four days after Levin allegedly accepted an employment agreement with BHA, Levin sent Sirbu a document detailing the steps needed to complete the transfer of assets from AAL to BHA; the plaintiffs allege that Levin still did not disclose his employment with BHA at this time and that he provided "deceptive" legal advice to the plaintiffs in order to quickly finalize the sale of assets to BHA.

         In addition to the legal work related to BHA and the APA, the plaintiffs alleged that MCG began, in August 2015, communicating with only Woolford and Daigle, to the exclusion of the plaintiffs, on issues that directly and negatively affected the plaintiffs. For example, the plaintiffs alleged that MCG assisted Woolford and Daigle in factoring an AAL account payable without advising the plaintiffs, which left AAL in significant debt to its parent corporation. Also, in September 2015, MCG began assisting Woolford and Daigle in the formation of DAGDA Aerospace, LLC, a direct competitor of AAL. The plaintiffs alleged that MCG failed to disclose this information to the plaintiffs or to obtain their consent for MCG's representation of a direct competitor; the plaintiffs also alleged that "MCG billed all legal services performed for the creation of DAGDA to AAL..., accepted payment from AAL ... for the legal services to create DAGDA, but intentionally or negligently failed to disclose this information to Sirbu or obtain his consent for such payments." Additionally, the plaintiffs alleged that MCG aided Daigle and Woolford in the incorporation of Corvis Arrow, LLC, which was wholly owned by Daigle and Woolford, for the purpose of transferring ownership of an airplane from AAL to Corvis. The plaintiffs alleged that MCG knew that AAL funds were being "diverted for the purchase" of the airplane but that the plaintiffs had no knowledge that AAL funds were being used to purchase the airplane and never consented to the use of AAL funds to purchase the airplane. The plaintiffs further alleged that, by these actions, MCG aided and abetted Woolford and Daigle in embezzling money from the plaintiffs and that the legal services provided by MCG for the incorporation of Corvis and the purchase and transfer of ownership of the airplane were billed to and paid by the plaintiffs, without the plaintiffs' knowledge of or consent to the transactions. Finally, the plaintiffs alleged that MCG provided legal services to Daigle and Woolford in forming Hindsight Coffee, LLC, which was owned by BHA and another individual who intended to run the day-today operations of a retail coffee company. The plaintiffs alleged that all legal services provided by MCG related to the formation of Hindsight Coffee were billed to and paid by AAL, without the plaintiffs' knowledge, which, they said, resulted in MCG aiding and abetting Woolford and Daigle in embezzling funds from the plaintiffs.

         On February 2, 2018, MCG moved for a change of venue of the action from Jefferson County to Madison County pursuant to § 6-3-21.1, Ala. Code 1975, Alabama's forum non conveniens statute. MCG argued that both the interest of justice and the convenience of the parties and witnesses required a transfer.[2]MCG presented evidence indicating that the plaintiffs' action arises from legal services provided in Madison County, by MCG attorneys who worked and resided in Madison County, to their former client, AAL, which has its principal place of business in Madison County. In contrast, MCG argued, its "mere presence" in Jefferson County -- where MCG's principal place of business is located -- is "the hallmark of a 'weak connection to the case.'" (Quoting Ex parte Engineering Design Grp., 200 So.3d 634, 642 (Ala. 2016).)

         To rebut the allegation in the plaintiffs' complaint that the officers of MCG direct, control, and coordinate the firm activities from MCG's principal place of business in Jefferson County, MCG presented evidence indicating that it has offices in several counties in Alabama, including a Huntsville office in Madison County; that management of MCG is spread throughout the firm's offices; and that the Huntsville office has its own managing partner. MCG also has "practice group leaders" located in various offices, and the "two practice groups most relevant to the matters in this action" -- the corporate-securities-and-tax practice group and the government-solutions practice group -- "are both headed out of [MCG]'s Huntsville office."

         MCG also presented evidence indicating that all the events related to the legal services provided by MCG related to the allegations in the plaintiffs' complaint took place in Madison County and that, in addition to Levin and Watson, who work in MCG's Huntsville office and reside in Madison County, an additional six current and former MCG Huntsville attorneys worked on matters at issue in the complaint, and each of those individuals still practices law in Madison County. Additionally, MCG presented evidence indicating that both Daigle and Woolford were located at AAL's headquarters in Huntsville at all relevant times set forth in the plaintiffs' complaint; that BHA, DAGDA, and Hindsight Coffee are all located in Madison County; that MCG referred BHA's corporate- formation transaction to Sirote & Permutt's Huntsville office for completion; and that the purchase price for AAL used in the APA was based on information received from an accounting firm located in Huntsville.

         Levin testified that he was the "primary billing attorney and was responsible for sending bills to AAL ... for work performed by MCG. All activity related to generating, editing, and issuing bills to AAL ... took place under [his] supervision in MCG's Huntsville office." Levin was also the primary billing attorney responsible for sending bills to BHA for work performed by MCG. Levin further testified that, in relation to the alleged wrongful transfer of funds from AAL's commercial bank, he contacted two individuals in Huntsville to facilitate that transfer. In addition to the fact that AAL's headquarters is located in Huntsville, Levin testified that, although Sirbu was a resident of Dubai, the contact information that Sirbu provided to the federal government was a telephone number and an address in Huntsville.

         Watson, who was co-chair of MCG's government-solutions practice group during the relevant time set forth in the plaintiffs' complaint, testified that all events related to the legal services MCG provided to the plaintiffs and to the entities mentioned in the plaintiffs' complaint took place in Madison County; that all documents related to MCG's services set forth in the complaint are located in Madison County; and that all witnesses with potentially relevant information related to the transactions at issue in the complaint are in Madison County, with the exception of Sirbu, who lives in Dubai, and Woolford, who lives out-of-state. Watson further testified that none of the events related to MCG's legal services described in the plaintiffs' complaint took place in Jefferson County and that he was not aware of any witnesses or documents related to this action that are located in Jefferson County.

         On February 26, 2018, the plaintiffs filed an amended complaint. The amended complaint included additional allegations of fact to support new allegations of breaches of the standard of care related to MCG's alleged failure to properly supervise, monitor, or train its attorneys regarding ethical rules and obligations that apply to dual representation of adverse parties in corporate transactions. Specifically, the plaintiffs alleged that MCG set various firm policies through its leadership structure, which is based "almost exclusively" in Jefferson County at MCG's Birmingham office; that "almost all" members of MCG's board of directors are based in Birmingham; that the function and implementation of MCG's conflicts policies is run through a database in Birmingham; that a conflicts report is generated in Birmingham; that MCG either ignored or wholly failed to employ its conflicts policy in relation to its representation of the plaintiffs; and that the failure to require, implement, or follow the firm's conflicts-of-interests policies occurred "in substantial part" in Birmingham.

         The materials before this Court indicate that the parties engaged in limited, venue-related discovery governed by an order of the circuit court; that order, however, is not included in the materials before this Court. On June 12, 2018, the plaintiffs filed their response in opposition to MCG's motion for a change of venue with evidence attached to support their opposition. The plaintiffs argued that the connection to Jefferson County was strong because MCG's principal place of business is there; because MCG's conflict-of-interest check system and policies were developed in Jefferson County; because the conflict-of-interest policies were drafted by individuals in MCG's Birmingham office; because two attorneys in the Birmingham office are the members of MCG's ethics and loss-prevention committee; because invoices for legal services were mailed to the plaintiffs from the Birmingham office; and because payments from the plaintiffs were deposited in a bank in Jefferson County. The plaintiffs also argued that a judgment in their favor for disgorgement of attorney fees would affect the MCG Birmingham office because it has "seven times more shareholders than the number of MCG shareholders in Madison County." The plaintiffs also argued that "[t]he vast majority of the harms in this case are felt in Dubai where [the] plaintiffs ... suffered catastrophic economic and reputational damage."[3]

         On July 17, 2018, MCG filed its reply in support of its motion for a change of venue. MCG argued that neither the fact that its principal place of business was in Jefferson County nor the new allegations in the plaintiffs' amended complaint were sufficient to create a strong connection of the case to Jefferson County. MCG attached additional evidence, including affidavits and excerpts from deposition testimony, to rebut the evidence submitted by the plaintiffs in their motion opposing the change of venue. The same day, the plaintiffs filed an emergency motion to strike seven affidavits that were attached to MCG's reply, arguing, among other things, that MCG deprived them of the opportunity to depose the individuals who had submitted affidavits, which, they said, was in contravention of what the parties had agreed to and the circuit court approved.

         After conducting a hearing on July 19, 2018, the circuit court entered an order on July 30, 2018, granting the plaintiffs' motion to strike and denying MCG's motion for a change of venue. The circuit court concluded that neither the interest of justice nor the convenience of the parties and witnesses required a transfer ...

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