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Thursday, December 08, 2011

Chesley's Law Firm Claims It Was Stiffed By Wealthy Client: Cincinnati Federal Court Showdown Between The 1% Crowd

Chesley In Court; Firm Claims Client Owes $$$$ 
By James McNair
Bellwether Contributor
CINCINNATI (TDB) -- In a new lawsuit sure to make juicy gossip fodder for Cincinnati’s 1 percent crowd, the law firm headed by Stan Chesley is tangling with one of its  deepest-pocketed clients.  Former Provident Bank president and former Check ‘n Go co-owner Allen Davis has hired lawyers to fight claims he has stiffed Chesley's firm out of millions of dollars in legal fees.  Davis's lawyer says such a claim lacks merit.  Years ago, Chesley moved into Davis's Indian Hill mansion.  You can see it by clicking here. It is supposed to be the biggest mansion in Hamilton County.

The falling out  between Davis and Chesley came to light in a U.S. District Court lawsuit filed Tuesday in Cincinnati.  Chesley's firm, Waite, Schneider, Bayless & Chesley, represented Davis in a six-year civil dispute that somewhat resembled a family feud. The complex case centered on the accounting treatment of CNG Financial shares that Allen Davis received from his ex-wife in a divorce agreement. CNG – Check ‘n Go’s parent company, whose majority owners are Davis’ sons Jared and David – booked the stock as compensation, which would have stuck Allen Davis with a hefty income tax bill. The older Davis hired Chesley in 2005, and the two sides fought it out in seven legal venues, racking up tens of millions of dollars in legal fees along the way.

This latest twist in the saga claims Chesley's firm won court decisions at every stage, including the U.S. Supreme Court. The eventual payday would be a lucrative one for Chesley because his firm would receive a third of any buyout after the first $10 million, either by Davis’ sons or by an outside buyer. His sons rejected an outside offer to buy CNG for $90 million in 2005. Later, Allen Davis refused to sell his stake to his sons for $56.8 million.  Davis finally reached an out-of-court settlement with his sons this year and relinquished his minority stake in CNG. But sometime before the deal was struck, Davis parted ways with Chesley. In its suit, Chesley’s firm says it doesn’t know how much money Davis received for his stock. It wants a federal judge to force the deal out in the open and award Waite, Schneider its one-third share  Here's an excerpt from the lawsuit:

"29. Defendant Davis has materially breached the Fee Agreement by, among other things, (a) failing to disclose and otherwise concealing the terms of settlement with CNG and/or its principals; and (b) failing to remit the attorney fees to which the Waite Law Firm is entitled pursuant to the Fee Agreement.
30. Accordingly, as a result of these breaches of contract, the Waite Law Firm is entitled to an award of damages in an amount equal to 33-1/3% of the amount recovered by Defendant Davis from CNG and/or its principals (after the first $10 million from any source of value), which includes, but is not limited to, the proceeds or other value received from the sale or transfer of Defendant Davis’ CNG stock, tax savings on the treatment of option exercises, the payment of additional dividends, guarantee fees paid to Defendant Davis, the value of additional shares of CNG issued to Defendant Davis, and the fair value attributed to the injunctive relief obtained on Defendant Davis’ behalf."   

It looks like Davis will fight the federal court action.  His lawyer, Ben Dusing of Baker Hostetler, says,  "The suit is entirely without merit.”  There are coincidences beyond the dispute.  One federal judge in Cincinnati  who most certainly won’t hear the case is Susan Dlott – Mrs. Chesley. And local muckety-mucks know that the mansion the Chesleys occupy in Indian Hill – once the biggest and most expensive house in Hamilton County – was built for Allen Davis.

1 comment:

  1. It is so nice to be one of the 99%