When Two Wrongs Don't Make a Right
This is one of those heartbreaking stories that will leave you shaking your head. The truth is that the bitter irony of the story could have been avoided. Any creditor pursuing a claim when a bankruptcy petition has been filed should pay close attention.
Former Concordia University baseball coach Spiro Lempesis (“Lempesis”) is an alleged sexual predator who's reported as having coerced one of his student athletes to perform indecent acts that he recorded in his office in return for reaching out to big league scouts on the student’s behalf. When the student filed suit against Lempesis in May 2013, Lempesis responded by filing a Chapter 7 bankruptcy petition in October 2013 and listed the student as a creditor. In re Lempesis, 2016 Bankr. LEXIS 3593, *2-3 (Bankr. N.D. Ill. Sep. 28, 2016).
In January 2014, Lempesis was granted a Chapter 7 Discharge. Despite this fact, the student and his attorneys continued to prosecute their state court lawsuit. They ignored Lempesis’ pro se answer which placed them on notice that he had filed for bankruptcy. The Student's attorneys even went as far dismissing the first lawsuit and refiling a new lawsuit based on the same allegations. Id. at *3.
In February 2015, Lempesis moved to reopen the bankruptcy case and filed a motion for an order of civil contempt against the student and his attorneys. He argued that they had failed to timely dismiss the first lawsuit and wrongfully filed the second suit while knowing that Lempesis was discharged in bankruptcy court. A trial was held in November 2015. Id. at *6.
Filing a bankruptcy petition places what is commonly referred to as an "Automatic Stay" on any pending legal matter. Id. at *10. The Automatic Stay “triggers a stay or injunction that halts the rights of creditors, with certain exceptions, (citation omitted) to act to collect money or obtain property from [a] [d]ebtor.” Id. at *11. In order to proceed with a pending legal matter once a debtor has filed for bankruptcy, a creditor has to first seek permission to proceed with a bankruptcy court by filing a motion to lift the Stay.
As a result of the student and his attorneys violating the Automatic Stay imposed in the bankruptcy case, Lempesis obtained a judgment against the student and his attorneys totaling $23,132.75, plus attorneys’ fees. Id. at *30. To add insult to injury, punitive damages totaling $50,000.00 were awarded against the student’s attorneys.
Why? Because they should have known better.
Creditors must have compliance protocols in place to ensure that they do not violate Automatic Stays in bankruptcy cases. Violation(s) of the Stay could result in tens of thousands of dollars in unnecessary fines, sanctions, and/or legal expenses.
Was Lempesis' alleged actions toward the student heinous? Yes. Did the judge like this outcome? Probably not. The point is that two wrongs don't make a right. You can't address a breach of the law by breaking it yourself. You will pay a price. It's a painful and expensive lesson.
Creditors should take note.
Founded in 1997, Gill Law Firm represents small, medium and large corporations in commercial debt recovery, small business and nonprofit startups throughout the state of Florida. To find out how the firm may help your company, please contact A. Wayne Gill, Esq. via email at email@example.com or by phone at (561) 454-0301.
Steve Schering. “Former Concordia University coach charged with sexually assaulting teen.” Chicago Tribune. 4 Sept. 2015. Web. 22 Nov. 2016.
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