All filings to date pertaining to the Summary Judgment Motion can be found here.]
Jim wrote on June 16, 2009 at 7:52pm: ...And there was a news today in the OMW case as well. The defense filed a Motion for Summary Judgment, arguing the whole case should be thrown out by the judge, before it even goes to trial, based on the theory that the $200,000 promissory note violated the New York state usury laws.---
The promissory note is probably governed by New York law (it stipulates that on the note). And New York usury laws do indeed cap interest rates on loans at 16%. The note in question here promised the plaintiff's $40,000 after OMW concluded, in addition to the principal, making for an effective interest rate of about 92.5% (I haven't actually calculated this myself, but it sounds about right).
The problem with this argument is...state usury laws typically have a lot of exceptions to them, and New York is no exception to having lots of exceptions. And a big exception, which the Summary Judgment motion neglects to mention...limited liability companies (LLCs) cannot invoke the New York usury law as a defense. See this .pdf article, page 27: http://www.real-estate-law.com/infoFrame.php?pdf=Confusury_Unraveled_25.pdf .
The judge has scheduled a hearing in chambers on this Motion for July 7, and due to the exception pointed out above, I expect it'll be rejected. The note was clearly made out to "CHISHOLM PROPERTIES CIRCUIT EVENTS, LLC." <--- (note "LLC" at end)
There was a Motion to Vacate the Preliminary Injuction filed by Chisholm as well, using the same usury argument. The judge has yet to make (or announce when he will make) a ruling on that motion, but I expect it'll be rejected as well, for the same reason as above.
Jim wrote on June 19, 2009 at 5:03pm: Another brief update:---
Chisholm today filed "Emergency Motion for Expedited Hearing on Motion to Dissolve Preliminary Injunction and Writ of Attachment," meaning, that he wants the judge to hurry up and rule on the motion to Vacate the PI I mentioned in the last para to the post above.
Why the hurry? Well, according to today's filing, Chisholm was not able to pay all OMW expenses out of cash proceeds, and OMW creditors are coming a calling. In particular, the liability insurance company for OMW is owed $20,454.78 (a check that was sent to them alledgedly before the account freeze on June 3 was returned when they tried to cash it on the 5th), and "other bills and expenses from One Mighty Weekend remain unpaid, as well as defendants’ operating expenses."
We can also infer from this that Chisholm does not currently have $200,000 in his frozen bank accounts. If he had, money over that sum would have been unfrozen, in accordance with the PI, and payments to people like this insurance company would have been made.
Since this is an emergency motion, we may get a response from the judge on this before Monday; I'll keep an eye on things this weekend and report here if we do.
Jim wrote on June 21, 2009 at 9:12am: One new filing to report this morning (it actually came in very late Friday) and it's the victims' reponse to Chisholm's Emergency Motion mentioned above.---
And not surprisingly, they oppose it. They cite (among other reasons) that since Chisholm cried wolf during his last direly worded motion to lift the injunction (see post #63 above, saying OMW would otherwise have to be cancelled), he's probably crying wolf on this motion too.
They also dispute some of the facts related to Chisholm's new usury claim (ie, that it was Chisholm's lawyer who drew up the note, not the plaintiffs'), and mention that Chisholm has currently and cumulatively less than $100,000 in all his frozen accounts.
BTW, as to the usury claim...it has been pointed out to me that Chisholm is claiming criminal usury, not civil usury, as a defense. And that the New York criminal usury law (unlike civil usury) can be used as a defense by an LLC. This is true...but it opens up a whole other can o' worms.
This is a very complex area of the law, so I'm not even going to try to explain it all here (and I'd probably bore 95% of you to tears if I tried) but in short, there is considerable doubt under New York law whether a criminal usury defense can be used to completely void a loan, as to both principal and interest (as Chisholm would like to see happen). As one recent case put it, "Nothing we see in the criminal usury statute...provides for voiding". http://tinyurl.com/n2hvvz
So, this usury question is actually more interesting than I first thought. I guess we'll see how it all plays out on July 7.
One thing I should add, however...even if this criminal usury defense works, it'll only effect the contract claim on the note, not the tort claims. Chisholm is trying to kill the tort claims using another legal theory known as the "economic loss rule." Which is also very complex, so I won't try to explain it...suffice to say, I don't think it has a snowball's chance in hell of succeeding. Especially as to the fraud and RICO claims (which formed the backbone of the Preliminary Injunction). Again, we'll find out for sure on the 7th.
Jim wrote on June 22, 2009 at 4:54pm: We have a new Order from the judge today. It is an Amended Order actually, moving up the date of decision on Chisholm's Summary Judgment Motion a week, from July 7 to June 30. IOW, a week from tomorrow.---
No order as yet on the Emergency Motion to lift the bank account freezes; I get the impression the judge just wants to deal with all this in one sitting, so he simply moved up the date on the Summary Judgment.
If the Summary Judgment motion succeeds as to all the plaintiff's causes of action, the lawsuit will be thrown out. If not, the lawsuit will go on, and the injunction freezing the bank accounts will likely stay in place.
I've been asked to provide a summary of important upcoming dates in the Chisholm cases. This would be a good time to do that, I guess:
June 30, 2009: Chisholm's Summary Judgment motion in the Bardfield case (2009 OMW Orlando) will be taken under advisement (see above);
July 6, 2009: Deadline for submitting arguments for or against Johnny Chisholm getting slapped with sanctions (probably monetary) for discovery violations (refusing to provide documents, etc) in the DeForest case (2007 OMW Paris). The judge has indicated that he has found discovery violations, and Chisholm WILL be sanctioned, unless he can convince the court via argumentation otherwise. The ruling should come down shortly after the 6th.
July 16, 2009: Johnny Chisholm must appear before the judge in Pensacola to "show cause" why he should not be held in contempt of court for willful violation of the TRO during OMW. His "...failure to appear shall result in a warrant for his arrest."
Jim wrote on June 23, 2009 at 5:15pm: More filings today. First, the big news...Chisholm's Emergency Motion to unfreeze his bank accounts was officially DENIED, as being "untimely and unsupported." So, that injunction will remain in place, until at least June 30, when the judge will consider the summary judgment motion mentioned above.---
Also, Chisholm amended his summary judgment motion, actually backtracking a bit by admitting it was indeed his attorney who drew up the promissory note in the first place...including the proposed 40K fee. Although some minor changes suggested by the plaintiffs were later incorporated into the final version (also drawn up by Chisholm's attorney), it is pretty clear the idea for the loan Chisholm is now whining about being usurious originated with Johnny Chisholm himself. This will obviously make it more difficult for him to claim he was the innocent victim of loan sharking here.
Jim wrote on June 24, 2009 at 5:36pm: And here's today's Chisholm Courthouse Roundup:---
1) A new Order by the judge: We are back to July 6 (from June 30) as the date to consider Chisholm's motion to get the whole suit thrown out. Reason being was Chisholm's filing of an amended motion yesterday (noted above), so as to give the plaintiffs more time to consider the changes. Chisholm's bank account and asset freeze will thus remain in place until at least July 6....
Jim wrote on July 2, 2009 at 3:13am: And here's Chisholm Court Roundup for today...---
Like I said earlier, lots of filing activity, as the plaintiffs in the Bardfield (OMW) case filed their responses to Chisholm's summary judgment motion (ie, a motion to get the whole case thrown out, before even a trial).
The first document filed was their response to the motion to lift the injunction (ie, the bank account freeze). What was most interesting here was the fact that in support of this response, the plaintiff's deposed (ie, interviewed) Johnny Chisholm's accountant Robert Hayslette last week...no doubt in response to a subpoena.
And the accountant revealed some new things to us. It turns out there were more lies, or, as Chisholm's attorney put it, "outdated information" on that loan application than just the "no" checked on the lawsuit box (yeah I know, shocker). For one, there were more loans taken out for OMW, that were never revealed...*1.2 million* worth of promissory notes, in fact, just like the $200,000 being litigated in this case. This means, there are more potential plaintiffs out there, who too got screwed over in this mess.
And one of them is PRG, the lighting company, who I mentioned earlier was owed $163,543.68 (OK, this makes sense...I kinda thought that was a bit steep just to rent a bunch of lights and trusses for three days). So, not only dit they get screwed on the lighting contract, but they apparantly loaned Chisholm money too beforehand, and are out that too. Hence the suit in state court in Orlando.
The other interesting revelation the accountant made concerned cash handling during OMW, when the TRO was supposedly in effect. Turns out, many OMW cash handlers were NOT informed of the TRO, like they were supposed to, and some cash (at least $500) WAS misdirected...this will have certain consequences when Chisholm goes before the judge on the 16th to "show cause" why he should not be held in contempt of court.
The other big filing was the response to the summary judgment motion. I wont go into all the legal intracacies, but I'll simply repeat my earlier opinion: the battle over the usury question will be interesting. That could go either way, IMO, but my sense of it is the plaintiffs will prevail. I put the odds at 60-40. The tort claims, however, JC has no chance. His "economic loss rule" argument under current Florida law is a dog with fleas...99-1 odds for plaintiffs. Which means most of the counts (and the injunction) will almost certainly remain. We'll see on July 6th if I'm right.
Also attached to this response was a lengthy sworn declaration by Steven Bardfield, of which I posted page 1 of already to the photo section. It is a moving, frightening personal statement, detailing exactly how he and his friend were defrauded by JustCircuit and Johnny Chisholm. If I have time tomorrow, I'll post all 15 pages to the photo section.
Jim wrote on July 4, 2009 at 11:10am: On second thought, it would probably be easier for everyone if I just provided the whole document as a download, rather than further clutter up the photo section:---
http://www.sendspace.com/file/p0u29y
This link should be good to download the whole Declaration for the next seven days.
BTW, I just noticed a typo above...the hearing on Chisholm's Summary Judgment motion will be on the 7th (Tuesday), not the 6th.
Jim wrote on July 6, 2009 at 6:27pm: Today's Chisholm court news:---
Well folks, we got an unexpected early surprise today in the Bardfield/OMW Orlando case. Chisholm's motion to vacate the PI (ie, unfreeze his assets and bank accounts) was officially DENIED.
I had expected to see this ruled on, along with the whole Summary Judgment motion, tomorrow rather than today...but there you have it. The judge apparantly decided to just get this part over with, noting that 1) the PI was based on the almost certain success of the RICO claim, and 2) it's well settled law in Florada that the "economic loss rule" (ELR) defense cited by Chisholm does not apply to RICO claims. Thus, the asset freeze stays in place.
AND we can also read between the lines here that Chisholm's SJ motion tomorrow is also doomed, by the same logic. Barring a miraculous epiphany by the judge in the next 24 hours, we now know he'll uphold at least the RICO claim.
So, it's no longer a question of whether the SJ will fail tomorrow, but how badly it will fail. In preparation for tomorrow, here's a scorecard of the various legal claims to be decided on tomorrow, stacked up against the defenses Chisholm and his supporters had hoped would defeat them all:
Count 1: Action on the note ... Defense: Usury
Count 2: Fraud in the inducement ... Defense: ELR
Count 3: Conversion ... Defense: ELR
Count 4: Unjust Enrichment ... Defense: ELR
Count 5: Civil Theft ... Defense: ELR
Count 6: Breach of contract ... Usury
Count 7: Civil RICO ... Defense: ELR ... Result: LOSS for Chisholm
So, I'd say Count 7 was for all intents and purposes decided today. What remains for tomorrow is Counts 1 to 6.
Like I said above, the usury defense vs the 2 contract claims is interesting. It may be a close call, I think, turning on some unsettled points of New York law. So, there's a chance Chisholm may get Counts 1 and 6 tossed out, if his attorney argues well; we'll see. Win or lose, it'll make a great issue to appeal on, for either side.
The ELR is a much more feeble defense given the facts here, however, and as we can see it has already for all intents and purposes lost as to the RICO claim. I personally don't expect it to be much more successful against the other tort claims either (Counts 2 thru 5), but one to watch will be the "Civil Theft" charge, in that it calls for treble damages (ie, $600,000) if it is successful. That would pretty much render any win by Chisholm's usury defense as irrelevant.
Also, I should note that all the tort claims carry the possibility of punitive damages as well.
I'm not sure if we'll get the results immediately tomorrow, but if we do I'll post them here ASAP....
Jim wrote on July 10, 2009 at 4:13pm: Just a quick update: There have been no new filings in the Chisholm cases since last Monday. So, it looks like we will have to wait until this coming Monday at the soonest to find out officially how the big Summary Judgment hearing went.
Also a reminder about next week's significant date: July 16 (Thursday) Johnny Chisholm must appear before the judge to explain his apparant violation of the TRO during OMW, or a "warrant shalll be issued for his arrest."
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