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Samsara Mem'l Trust v. Kelly, Remmel & Zimmerman

Supreme Judicial Court of Maine

August 19, 2014


Argued April 8, 2014.

As Amended November 13, 2014.

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[Copyrighted Material Omitted]

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On the briefs and at oral argument: John H. Branson, Esq., Branson Law Office, P.A. Portland, for appellants Raisin Memorial Trust, Samsara Memorial Trust, and Fauna Stone.

Jennifer A. Archer, Esq., Kelly, Remmel & Zimmerman, Portland, for appellee Kelly, Remmel & Zimmerman.



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[¶1] Raisin Memorial Trust, Samsara Memorial Trust, and Fauna Stone [1] appeal from a judgment entered in the Superior Court (Cumberland County, Cole, J. ) on Kelly, Remmel & Zimmerman (KRZ)'s complaint alleging that Raisin fraudulently transferred property to Samsara. Samsara separately appeals from a judgment entered in the Superior Court (Hancock County, A. Murray, J. ) dismissing its complaint against KRZ. These consolidated appeals require us to address two issues. First, we clarify the ethical obligation placed on judges to recuse themselves or disclose to parties their association with a lawyer whose firm is a party to the matter before the judge. Second, we construe certain portions of Maine's Uniform Fraudulent Transfer Act that authorize the award of damages against parties to a fraudulent transfer.


[¶2] The background facts are drawn from the docket entries, orders entered, and facts adduced at a final trial on damages. KRZ is a law firm based in Portland. Raisin and Samsara are charitable trusts with situses in Maine. Fauna Stone, a resident of Colorado, is the trustee of both trusts. The present appeal arises from two suits: KRZ's suit against Raisin and Samsara in the District Court (Portland) and Superior Court (Cumberland County), and Samsara's suit against KRZ in the Superior Court (Hancock County).

A. KRZ's Suit Against Raisin and Samsara in the District Court

[¶3] In June 2009, KRZ began representing Raisin in its efforts to foreclose on property that Raisin owned in Bar Harbor.[2] By early 2010, KRZ had become concerned with the size of Raisin's unpaid attorney fees. KRZ requested payment frequently throughout 2010 and informed Raisin that it would be unable to continue its representation if Raisin did not pay its balance. In late October 2010, KRZ again requested payment and stated that, if Raisin could not pay, KRZ would require an assignment of the mortgage on the property that Raisin owned in Bar Harbor. Stone responded that Raisin could not give KRZ a mortgage on the property, but did not disclose to KRZ that Raisin had transferred the property to Samsara three weeks earlier for no consideration.

[¶4] KRZ withdrew from representing Raisin in November 2010. In February 2011, KRZ filed a complaint against Raisin in the District Court (Portland) alleging breach of contract and seeking $55,136.79 in unpaid attorney fees and costs. In March 2011, Raisin and KRZ agreed to stay the case so that Raisin could pursue fee arbitration pursuant to M. Bar R. 9.

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When Raisin failed to initiate arbitration by September 2011, the District Court terminated the stay.

[¶5] In the fall of 2011, KRZ discovered that Raisin had transferred the Bar Harbor property to Samsara. KRZ accordingly amended its complaint to add Samsara as a defendant, add a cause of action alleging that the transfer was in violation of Maine's Uniform Fraudulent Transfer Act, 14 M.R.S. § § 3571-3582 (2013), and seek damages in the amount of double the property's value pursuant to 14 M.R.S. § 3578(1)(C)(3). KRZ also recorded a notice of lis pendens in the Hancock County Registry of Deeds and filed a motion for attachment of the property and trustee process, which the court granted. Around that time, Samsara attempted to sell the Bar Harbor property through a real estate broker. On October 28, 2011, the same day that KRZ recorded the notice of lis pendens and one day after KRZ served its amended complaint, Stone instructed the broker by email to " IMMEDIATELY REMOVE THE STREET ADDRESS FROM THE LISTING."

[¶6] In November 2011, Stone filed an appeal of the District Court's order of attachment and trustee process as well as its prior order permitting KRZ to serve Stone by alternate means. We dismissed the appeal because it was untimely and because Stone could not represent the trusts because she was not authorized to practice law in Maine.

[¶7] That same month, Raisin requested another stay in the District Court proceedings in order to seek fee arbitration, which the court granted. Raisin filed a petition before the Fee Arbitration Commission of the Board of Overseers of the Bar, and a hearing was held before a Fee Arbitration Panel in April 2012. Two days before the hearing, Raisin submitted a 350-page ex parte filing to the Panel. The Panel excluded the filing from its consideration, at which point Stone attempted to withdraw the fee petition and stopped taking part in the hearing. The Panel proceeded with the hearing in Stone's absence. In June 2012, the Panel issued a decision awarding KRZ a total of $52,217.40, representing unpaid attorney fees and interest. The District Court lifted the stay in the proceedings shortly thereafter.

B. Samsara's Suit Against KRZ in the Superior Court

[¶8] In May 2012, while the fee arbitration process was ongoing, Samsara filed a complaint against KRZ in the Superior Court (Hancock County) alleging that KRZ's recording of the notice of lis pendens constituted slander of title and tortiously interfered with Samsara's prospective economic advantage, namely, Samsara's sale of the Bar Harbor property. KRZ was served with the complaint on June 14, 2012, making its answer due on July 5, 2012. See M.R. Civ. P. 6(a), 12(a). KRZ served its answer on Samsara on July 6. On July 9, Samsara filed a motion for entry of default, which the court granted. KRZ then moved to set aside the default on the grounds that KRZ believed that its answer had been timely served, and that it had delayed effectuating service because it believed that Samsara should have asserted its claim as a counterclaim in the District Court once the stay was lifted following fee arbitration. The court ( A. Murray, J. ) granted KRZ's motion to set aside the default.

[¶9] In October 2012, KRZ moved to dismiss Samsara's complaint in the Superior Court on the grounds that KRZ's filing of the notice of lis pendens was absolutely privileged and because Samsara's complaint should have been filed as a compulsory counterclaim in the pending suit in

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the District Court. See M.R. Civ. P. 13(a). The court granted KRZ's motion and dismissed Samsara's complaint in May 2013.

C. Proceedings Resume in the District Court

[¶10] In September 2012--after the Fee Arbitration Panel issued its decision and while the Superior Court litigation was ongoing--Samsara filed an answer to KRZ's complaint and a counterclaim against KRZ in the District Court. Samsara's counterclaim alleged causes of action for tortious interference with prospective economic advantage and slander of title that were identical to its claims in its Superior Court complaint. KRZ moved to dismiss the counterclaim on the same grounds that it had presented in the Superior Court action. KRZ also filed a motion for confirmation of the arbitration award and for entry of judgment on Count I of its complaint alleging breach of contract.

[¶11] On January 30, 2013, the District Court entered an order confirming the arbitration award, entering judgment on Count I of KRZ's complaint, dismissing Samsara's counterclaim, and, upon Raisin's motion, removing the case to the Superior Court (Cumberland County). The order also set aside Raisin's default, which had been entered in September 2012, and granted KRZ's motion for attachment against Samsara filed in October 2011. The remainder of the proceedings took place in the Superior Court before Justice Cole.

D. Discovery Disputes in the Superior Court

[¶12] Soon after the case was removed to the Superior Court, KRZ requested a discovery conference to address disputes, which had arisen between the parties before removal, regarding KRZ's requests for production of documents and notices of deposition of the trusts. In November 2012, KRZ had served requests for production of documents on Raisin and Samsara. Raisin and Samsara served responses, which KRZ believed to be inadequate. KRZ had also noticed the trusts' depositions pursuant to M.R. Civ. P. 30(b)(6), to which the trusts responded by filing a motion for a protective order that would require KRZ to depose the trusts in Colorado.

[¶13] After holding a discovery conference, the Superior Court entered a discovery order on March 28, 2013, directing Raisin and Samsara to fully respond to KRZ's requests by April 5, 2013. The order required that Raisin and Samsara produce documents and records related to KRZ's allegations that Raisin's transfer of the Bar Harbor property to Samsara in October 2010 was a fraudulent transfer because, inter alia, the transfer was made without receiving equivalent value at a time when Raisin was insolvent or was made insolvent as a result of the transfer. See 14 M.R.S. § 3575. Specifically, the court ordered that Raisin and Samsara produce records of the trusts' assets and liabilities after October 2010; documents supporting Stone's contention that Raisin had the ability to pay its debts after 2009; all tax returns filed by the trusts after 2009; and documents related to the valuation of the Bar Harbor property. The order provided that, if no such documents exist, the trusts were to specifically state so in their responses. The order prohibited the trusts ...

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