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Corporate vs personal liability

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solidaxle

Junior Member
What is the name of your state? Ohio

In late 2004 I was an officer in a small C Corporation. I met with a litigation attorney at the office of our Corporate Attorney to discuss a potential legal case that we might raise. Our Corporate Attorney found the litigation attorney and set the meeting up. We were looking for a sole practitioner who would work on a contingency fee basis.

We met for approximately 90 minutes discussing our potential case. The litigator asked questions and asked for data in written form. He indicated that he would review our information and advise us whether he would consider taking the case on a contingency fee basis. He indicated that if he did not take it on a contingency basis that his litigation rate was $295/hour.

Several weeks passed and after we sent the litigator the written data that he had requested. I then received a telephone call from the litigator advising me that after reading the data he felt that the case was too involved and complicated and indicated that he would only take the case on a fee basis. Our telephone conversation was approximately 10-15 minutes long. I thanked him and advised him that I would discuss his position with our Corporate counsel but I believed that we would not pursue any action on a fee basis.

He called a few days later as a followup and I advised him that we had discussed the matter and elected to not pursue the case except on a contingency fee basis. He said that he would close his files.

A few weeks later we received a bill for 3.75 hours @ $295/hour. I contacted our corporate attorney and indicated my surprise at receiving a bill as I understood the meeting and review to be simply exploratory. Our corporate counsel agreed that he too was surprised and recommended that I write the litigator with my impression.

I did so and advised the litigator that ususally when dealing with other lawyers "on the clock" we executed a letter of engagement and representation, identified the fee structure, identified the categories of billing (admin, litigation, research, associate paralegal work, etc.) and finally determined a dollar amount of exposure for work along with an agreed deliverable. We had done none of that and only received a 10-15 minute phone call as a deliverable. I received no reply to my letter.

Our Corporate counsel received a telephone call from the litigator offering to settle for 50% of the money which our counsel relayed to me. Within a short period of time we disolved our Corporation and liquidated all assets.

Now almost 2 years later, our Corporate Attorney has retired, and I receive a letter from the litigator personally threatening to sue me and my former Corporation if I do not pay him. He states that he will ask for all statutory interest and attorney fees as part of the complaint.

I am not concerned about his suing my former Corporation as it is out of business and has no assets. Any judgement would be moot. My question is what is my personal liability and how can I personally be named in this? All communication was done throught the Corporation's attorney or on Corporate letterhead, and the issue was he was considering was exclusively a business issue. What should I do to protect myself without having to hire counsel?

By the way the letter did not have any standard collection verbage found on most attorney collection matters that I have seen. There was no disclaimer indicating that this letter was an attempt to collect a debt, etc......

Thanks in advance.
 
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seniorjudge

Senior Member
Q: My question is what is my personal liability and how can I personally be named in this?

A: You danced all around the question of just exactly what your involvement was with this corporation. Give us facts and details and we might be able to give you an opinion or two.
 

solidaxle

Junior Member
Q: My question is what is my personal liability and how can I personally be named in this?

A: You danced all around the question of just exactly what your involvement was with this corporation. Give us facts and details and we might be able to give you an opinion or two.

I was the President of the Corporation and a principal stock holder. I was acting in that capacity when I met with the litigator. I worked at the company on a daily basis and we had just under 20 employees. Not sure what other detail you're looking for.
 
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badapple40

Senior Member
I don't mean to get personal, but can you tell me what law firm the litigator is with AND his name?

I need to make sure it isn't my firm or one of my partners involved, then I'll answer your question.

You can PM the info if you aren't comfortable doing so online.
 

badapple40

Senior Member
Based on information you sent to me, I have no conflict.

Therefore:

There is some recent case law out of the 8th Appellate District that indicates that single shareholder corporations are no legal protection and that the shareholder/single officer is responsible for the debt. That case (State ex. rel. Petro v. Mercomp, Inc. -- and Manny Rock) has been appealed to the Ohio Supreme Court. They have not yet ruled on the jurisdictional issue. That case may be why is now pursuing the case against you.

However, assuming typical corporate rules apply, that your corporation was not underfunded and no other badges of fraud are present, a fundamental question remains: how did you sign any agreement with this attorney?

I think you have some options here. One is to file a bar grievance against this individual. Option two is to let him sue you, and you defend the lawsuit. I would defend both the corporation and for yourself.

He should have had his fee agreements in writing. And he never indicated that he'd be charging you on the clock for the consultation. Tsk tsk for him.

I will send you a PM.
 

solidaxle

Junior Member
You are correct neither the Corporation or myself signed any agreement with the litigator. Basically because we believed that his initial evaluation of taking the case under a contingency fee basis was at no cost. Incidently our meeting at the office of our Corporate attorney was after hours for his convenience. Our Corporate attorney was also under the impression that the consult was at no cost.

To your other point. While I was a shareholder in the Corporation, I was a minority shareholder holding 49% ownership. My partner who owned 51% was also present at the meeting with the litigator but was not threatened with being sued. Perhaps because my partner is a female (and not related) the litigator assumed she was not an owner?

I have sent you a PM.

What do you mean by the corporation being underfunded? I have heard of underfunded pension plans but not underfunded corporations.
 
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