On February 13, 2018, in a decision that could have a large impact on bankruptcy litigation nationwide, the United States Bankruptcy Court for the District of Delaware granted the Motion to Dismiss filed by Gordon & Simmons on behalf of its client, David Schwartz (“Schwartz”), against Debtors Rent-A-Wreck of America, Inc. and Bundy American, LLC (collectively, “RAWA” or “Debtors”), two companies that are among several private companies owned by J.J.F Management Services, Inc. (“JJFMS”).  John J. Fitzgerald, Jr. is the owner, president, CEO and chairman of the board of directors of JJFMS, as well as the chairman of the board of RAWA.

In her opinion granting the dismissal of RAWA’s Chapter 11 petitions, U.S. Bankruptcy Judge Laurie Selber Silverstein concluded that RAWA’s bankruptcy petitions fell on “the dark side of the spectrum ranging from the clearly acceptable to the patently abusive,” determining that RAWA failed to demonstrate true financial distress worthy of bankruptcy protection, and that RAWA’s underlying purpose for the bankruptcy was to terminate Schwartz’s Los Angeles Rent-A-Wreck franchise.

Schwartz, the founder of the Rent-A-Wreck and Bundy names, has been in litigation with RAWA in the United States District Court for the District of Maryland and the United States Court of Appeals for the Fourth Circuit for more than ten years, beginning in June 2007. As Gordon & Simmons’ attorneys led Schwartz to victories in two jury trials and subsequent appeals, Schwartz has had to endure multiple attempts by RAWA to terminate his business. In court, Schwartz was found to own an exclusive, royalty-free Rent-A-Wreck franchise in Los Angeles California. Schwartz has endured attempts by RAWA to divert his customers to other Rent-A-Wreck franchises hundreds of miles away, and these efforts resulted in a civil contempt citation against RAWA in June 2017.

Less than one month later, in July 2017, RAWA filed for Chapter 11 bankruptcy protection in Delaware, openly seeking to reject Schwartz’s franchise under 11 U.S.C. § 365, aiming to achieve through bankruptcy what RAWA was unable to do during the course of more than a decade of litigation in the U.S. District Court for the District of Maryland and the U.S. Court of Appeals for the Fourth Circuit. Gordon & Simmons’ members sought to dismiss RAWA’s bankruptcy petitions as made in bad faith, and further opposed any attempt by RAWA to reject Schwartz’s exclusive Los Angeles franchise that he had defended through more than ten years of litigation.

After a two-day trial and multiple rounds of briefing, Judge Selber Silverstein entered her opinion, concluding that the “primary purpose of [RAWA’s] bankruptcy filing is to reject Mr. Schwartz’s franchise agreement so Debtors can open the Los Angeles territory to multiple royalty-paying franchisees,” and stating that “[i]t is easy to conclude that if Debtors did not think they could reject Mr. Schwartz’s franchise agreement (and gain the benefit of his territory), they would not have filed these bankruptcy cases.”

Judge Selber Silverstein concluded her opinion by stating, “. . . here, I have no doubt these petitions were just another chapter in the attempt to terminate Mr. Schwartz’s franchise and obtain the benefit for JJFMS.  These bankruptcy petitions fall on the dark side of the spectrum ranging from the clearly acceptable to the patently abusive.”

An additional summary of Judge Selber Silverstein’s Opinion granting Schwartz’s Motion to Dismiss can be found at: https://www.law360.com/articles/1012296/rent-a-wreck-ch-11-case-tossed-as-bad-faith-filing

Gordon & Simmons secured a jury verdict of $229,500 for its client, Hillary F., in a dispute over her ouster from a Maryland limited liability company (“LLC”).

In May 2014, Hilary F., invested in and became a member of an LLC that marketed advertising on golf carts as its business model.  At that time, Hilary F. and her two partners signed an Operating Agreement, agreeing that her membership interest was worth $229,500, and further, that Hilary F. had earned her membership interest through months of sweat equity in the growing business.

Despite this agreement, in October 2014, after Hillary F. had invested substantial additional sweat equity and cash in the company, Hilary F’s partners ousted her from the company, attempting  to take back her membership interest without any compensation, intending to sell her interest in the business to new investors in order to obtain more capital.

In December 2014, Hilary F. sued her erstwhile partners for breaching the Operating Agreement. After filing suit, and hiring two sets of counsel, Hilary F. retained G&S to bring the case to trial.

Gordon & Simmons tried this case over four (4) days before a Montgomery County, Maryland jury. After impassioned closing arguments, the jury unanimously found that Hilary F. had made substantial and valuable contributions to the company, that her partners had breached the Operating Agreement by ousting her from the Company without compensation, and that Hilary F.’s partners owed her $229,500, the value of her membership shares. The jury’s verdict also may allow Hilary F. to recover her attorneys’ fees and costs incurred during the case.

Hilary F. was delighted with the result, and with Gordon & Simmons’ thoughtful, measured guidance both before and during trial. Hilary F. wrote:

Although I have a great deal of experience dealing with law firms and lawyers, I have never been inclined to offer a testimonial in praise of the legal professionals I have worked with, but it is my absolute pleasure to do so for Roger Simmons, and the firm of Gordon & Simmons, LLC.

Roger, unlike a prior counsel involved with my case, saw exactly what to do right from the get-go and developed a brilliant strategy. Had I retained he and his firm at the beginning of my case I could have saved myself an immense amount of money in legal fees. He knew what to do from the very first, not after months and months of legal machinations.

My case was multi-faceted, intricate and arduous.  At every single step of our year-long engagement Roger, Jacob and their staff were not only diligent, prepared and determined, but they produced results, winning a six-figure jury verdict for me.

It is one thing to be a brilliant attorney, it is another to have tremendous “bed-side manner” and be able to communicate with, and relate to, a client effectively. I found this case difficult as I am not a fighter, but just determined to see justice done. At different times during the course of the case, my emotions often were getting the better of me — especially outrage and despair. The firm was by my side, always with excellent counsel, with exceptionally good legal judgment and, importantly to me, with comforting, yet strong, words of logic.

I couldn’t recommend Roger Simmons and the firm of Gordon & Simmons more highly. I would be glad to speak to anyone who is considering retaining Gordon & Simmons about my case and specifically regarding how well it was managed and  how exceptionally professional, tenacious and honest this firm is.

Gordon & Simmons is pleased that the jury followed Maryland law and found that a limited liability company membership interest is personal property that cannot be taken without just compensation. The firm is pleased that the jury recognized Hilary F.’s efforts for, and investment in, the company, even when her partners did not, and compensated her accordingly.

Gordon & Simmons (“G&S”) was successful in removing a lis pendens on motion to the D.C. Superior Court on behalf of one of its business clients. The D.C. Superior Court granted G&S’s motion, prepared and filed by Roger Simmons & Chris deBettencourt, to cancel a lis pendens in litigation that was brought against property owned by G&S’s client, a Washington D.C. property developer. The lis pendens threatened to block the pending sales of the developer’s renovated condominium property. G&S argued, inter alia, that there was no basis for the lis pendens against its client’s property first, because the lis pendens failed to state a dollar amount for damages and second, because the underlying litigation did not involve the ownership of the property. G&S’s successful motion will allow the developer to proceed with the sales of condominium units it had contracted to sell.