News and Events
Kramon & Graham Prevails in Request for Terminating Sanctions for Massive Spoliation in Fraudulent Concealment Adversary Proceeding
The United States Bankruptcy Court for the District of Maryland recently delivered a potentially landmark opinion in a case involving spoliation and the concealment of assets by a bankruptcy debtor and his wife. The court concluded after a one-week trial that the spoliation was so egregious that terminating sanctions were justified and entered a judgment that effectively required the turnover of scores of properties and bank accounts to Kramon & Graham client and Chapter 11 Trustee, Roger Schlossberg.
Mr. Schlossberg engaged Kramon & Graham principals David Shuster and Jean Lewis as special litigation counsel to pursue the recovery of assets for the benefit of creditors. Through their investigation, the litigation team uncovered the use of a sophisticated wiping program by the debtor and his wife to delete untold amounts of electronically stored information.
The debtor, Vincent Abell, is no stranger to the court system. He filed for bankruptcy in March 2013 in an apparent attempt to avoid incarceration for his contempt in post-judgment discovery proceedings brought by one of the many victims ensnared in his “mortgage rescue” scam.
On behalf of the Trustee, Kramon & Graham filed a 43-count complaint against Abell, Bertola, various family members, and scores of business entities through which Abell attempted to hide his considerable assets. In their complaint, Mr. Shuster and Ms. Lewis employed an innovative recovery strategy that relied on the continuing-concealment doctrine -- a doctrine that based on the particular facts and circumstances of a case, permits a bankruptcy court to determine that assets belong to the debtor regardless of how those assets may be titled on paper or in land records.
In an opinion denying the defendants' motions to dismiss, the Court rejected the defendants' arguments that claims for declaratory relief, the imposition of a constructive trust, and turnover, were not available to the Trustee to pursue this theory of recovery. Bankruptcy practitioners will undoubtedly take notice of the Court's ruling on Kramon & Graham's litigation strategy to utilize the continuing-concealment doctrine in the recovery of assets for the estate. Mr. Shuster and Ms. Lewis are on the forefront of the development of this area of the law.
Separately, the Court's opinion on spoliation provides the latest, most comprehensive judicial discussion of sanctions for the destruction of electronically stored information and will be highly instructive to practitioners in both state and federal courts across the country.
Dave Shuster and Jean Lewis were supported by Kramon & Graham associate Justin Redd. Richard M. Goldberg of Shapiro Sher, as general bankruptcy counsel to the Trustee, was a key contributor to the litigation team's efforts on the motions to dismiss and the spoliation motions. The case, Abell v Roger Schlossberg, Chapter 11 Trustee, was covered by the Daily Record in "Bankruptcy judgment entered after 'astonishing' discovery violations" (subscription required).
