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Five lawyers cleared of malpractice in ongoing Flynt brothers dispute
ANNIE YAMSON
Special to the Legal News
Published: September 8, 2015
The latest chapter in an ongoing business dispute between Hustler co-founders and brothers Larry and Jimmy Flynt came to a close recently when the 6th U.S. Circuit Court of Appeals decided that five lawyers accused of legal malpractice were properly granted summary judgment.
The ruling affirmed the judgment of the U.S. District Court for the Southern District of Ohio.
The case involved the Hustler enterprise, which was founded in 1969 by the brothers.
Case summary states that many members of the Flynt family have worked for the enterprise over the years, “but family strife led to business discord.”
In 2000, Larry and Jimmy had a falling out.
“The result has been an endless stream of litigation,” Judge Jeffrey Sutton wrote in the opinion that he authored on behalf of the court of appeals. “At issue in today’s installment of this saga is whether five attorneys who were associated with the Hustler enterprise committed legal malpractice and tortiously interfered with contractual relations, business relations and expectancy interests.”
Court documents state that Hustler published its flagship magazine in 1974 and litigation soon followed.
The initial cases were criminal prosecutions in which Larry and Jimmy were indicted for pandering obscenity in 1976.
The brothers retained the services of a Buffalo, N.Y. law firm known at the time as Lipsitz, Green, Fahringer, Roll, Schueler & James.
A young associate named Paul Cambria represented Jimmy, who was acquitted, and a named partner, Harold Fahringer, represented Larry, who was convicted but later had the conviction overturned on appeal.
Two decades passed before Jimmy and Cambria crossed paths again.
In 1997, Jimmy formed Hustler News & Gifts, Inc., an Ohio corporation that operated a Hustler bookstore in Cincinnati.
The next year, Larry and Jimmy faced more prosecution for the sale of obscene materials at the bookstore.
They retained three lawyers, Cambria, Lou Sirkin and Alan Isaacman, who was Hustler’s longtime corporate counsel.
In 1999, a plea bargain was reached and the corporation conceded guilt and paid a fine.
Following this conviction, Jimmy incorporated a separate entity named Hustler Cincinnati, Inc., of which he was the sole owner.
He opened a new storefront in Cincinnati under the new name.
In December 2000, Jimmy opened another Hustler store in Monroe operated by an entity named Hustler Hollywood-Ohio, Inc.
Though Jimmy held all the shares of Hustler Hollywood-Ohio, court documents speculate whether he was the true owner or just a straw man used to shield Larry from prosecution. One of Larry’s companies owned the land on which the Monroe store sat.
In 2001, Larry fired Isaacman, the corporate attorney, and retained the services of Cambria’s law firm, by then named Lipsitz Green Scime Cambria.
At the time of this agreement, Jimmy owned two entities: Hustler Cincinnati and Hustler Hollywood-Ohio as well as the land on which the Cincinnati store sat.
“Over the next four years, the business relationship between Jimmy and Larry changed significantly,” Sutton wrote.
The brothers entered into several transactions involving the payment of rent and licensing fees to the parent company.
In the end, Jimmy owned just one piece of Hustler-related property: Hustler Cincinnati.
In 2009, a dispute between Larry and Jimmy’s sons led Larry to fire Jimmy from the enterprise and remove him from the Larry Flynt Revocable Trust, which holds many of Hustler’s assets.
That same year, Jimmy filed a suit in state court, alleging legal malpractice by Cambria and his law firm. The trial court dismissed the claims.
“So ends the prelude to this lawsuit,” Sutton wrote. “In 2010, after the state court dismissed the action, Jimmy and Hustler Cincinnati filed this lawsuit in federal court.”
Jimmy and his company alleged that the five attorneys of Lipsitz Green committed malpractice by representing both him and his brother in several transactions where the brothers had adverse interests.
The district court granted summary judgment to the attorneys after it found that there was no attorney-client relationship between Jimmy or Hustler Cincinnati and Lipsitz Green. The court of appeals agreed.
“First, there is no express contract,” Sutton wrote. “It is true that Cambria represented Jimmy in the 1976 and 1998 criminal prosecutions.”
The court of appeals pointed out that, under Ohio law, an attorney-client relationship ends when the lawyer completes the task for which he was hired which, in this instance, were the criminal cases.
“Nor is there any evidence that Larry’s 2011 retainer with Lipsitz Green encompassed representation of Jimmy or Hustler Cincinnati,” Sutton wrote. “Larry and Cambria both testified that the agreement did not cover Jimmy.”
The appellate panel held that Jimmy could not identify any legal advice that he received from Cambria and his firm nor was there any evidence he paid the firm any money.
“If we follow the money, it leads to Sirkin, not Lipsitz Green, as the attorney for Jimmy and Hustler Cincinnati,” Sutton wrote.
In the end, the court of appeals found that Jimmy could not prove an attorney-client relationship between him and Cambria or any of the attorneys at Lipsitz Green, therefore, he could not prove legal malpractice.
But Sutton went on to reprimand the attorneys for not being more careful when dealing with the business.
“None of this is to say that Cambria and Lipsitz Green acted wisely in their dealings with Hustler Cincinnati,” Sutton wrote.
The appellate panel noted that Cambria and his firm should have “explicitly defined the scope of their representation of Larry and his companies,” especially since there was a risk that businesses and personal relationships would blur in the family-owned business.
“Although no reasonable jury could find that an attorney-client relationship existed here, the case is closer that it should have been,” Sutton wrote.
Judges Bernice Donald and Jack Zouhary, who sat by designation, joined Sutton to affirm the judgment of the district court.
The case is cited Hustler Cincinnati, Inc., et al. v. Cambria, et al., case No. 14-4130.
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