Lloyd's of London comes to the rescue in $3.7 million judgment against Lakin

Steve Korris Jan. 18, 2008, 12:48am



TULSA – Lloyd's of London, famous for bearing risks no one else can bear, has chosen to defend Tom Lakin and the Lakin Law Firm in an Oklahoma legal malpractice case.

Lloyd's posted a $4 million civil bond, fired three lawyers and hired three lawyers to seek relief in federal court from judgment in favor of former Lakin client Stephen Williams.

Chief U.S. Judge Claire Eagan of the Northern District of Oklahoma granted Williams a $3,752,601.80 default judgment against Lakin and the firm last April.

Lakin had settled an injury claim for Williams against Union Pacific Railroad, but Williams did not receive the full benefit of the settlement.

Like many personal injury clients of the Lakins and other firms, Williams invested the proceeds with SBU Incorporated.

SBU owner James Gibson fled to Belize with their money.

Federal agents captured him and brought him back for a trial that resulted in a long prison sentence.

Williams holds Lakin responsible for recommending Gibson and failing to monitor him.

Lakin argues that Williams freely chose SBU and that government regulators should have monitored Gibson.

Lakin's arguments mean nothing, however, unless he can overturn Eagan's judgment.

He has filed three motions for relief in district court and two appeals at the Court of Appeals in Denver.

Eagan recused herself after granting judgment and assigned District Judge Gregory Frizzell to hear Lakin's challenges to her judgment.

David Herrold of Tulsa sued Lakin and the firm for Williams in September 2006.

In January 2007, having heard no response from Lakin, Herrold moved for default judgment.

Eagan declared Lakin in default last February.

Williams filed an affidavit in March stating that in 1991, he lost his left leg and three toes from his right foot when a train rolled over him.

"Immediately after the accident David Herndon, known to me to be L. Thomas Lakin's law partner at that time, met with me at the hospital at Oklahoma and entered into an attorney-client relationship with me," he wrote.

Herndon left the Lakin firm upon receiving appointment as a federal judge, and Tom Lakin took over the case.

When Union Pacific settled the claim, Williams wrote, Lakin and the firm advised him to structure part of the proceeds through SBU.

"…[T]hey recommended SBU, assured me it was a good company and my investment would be safe and risk free…," Williams wrote.

They told him payments would be backed by U.S. Treasury bonds and he would receive them unless the U.S. government went out of business, he wrote.

In April, Eagan determined the damages Lakin owed.

In May, Williams served garnishment summonses on Great American Insurance and Illinois State Bar Association Mutual, past malpractice insurers of the Lakin firm.

On June 13, Williams moved to require Tom Lakin's appearance at a hearing to discover his assets.

On the same day, Lakin's son Brad Lakin responded to the suit.

In an affidavit Brad Lakin swore that Daniel Esrey of Atlanta, counsel for Affinity Insurance Services, agreed to defend Tom Lakin and the firm.

"At no time was I informed by any of our carriers that they would not defend the Lakin Law Firm or L. Thomas Lakin," he wrote.

He swore he learned about the default judgment on May 30, from a newspaper article.

He retained John Tucker of Tulsa, who moved to set aside the default judgment.

Eagan denied the motion in July.

Williams then served garnishment summonses on Regions Bank, Merrill Lynch, Lloyd's of London and Lakin's former class action teammates at Freed and Weiss in Chicago.

For Lloyd's, Esrey answered on Aug. 9 that the insurer never agreed to indemnify Tom Lakin or the firm.

Esrey wrote that Lakin's policy provided no coverage for Eagan's judgment.

Magistrate Judge Paul Cleary set an Aug. 15 asset hearing for Tom Lakin, but a day before the hearing Tucker moved to quash the appearance.

Tucker claimed the court lacked personal jurisdiction over Tom Lakin because he had not visited Oklahoma in more than 10 years and because all allegations in the case occurred outside Oklahoma.

"…{A] judgment rendered without jurisdiction is a void judgment," Tucker wrote.

He wrote that Lakin could not come to Oklahoma anyway due to travel restrictions in a criminal case in federal court at the Southern District of Illinois.

A grand jury indicted Lakin last year on morals charges.

On the date of the hearing, Tom Lakin filed a declaration giving his address at 919 Hibiscus in Key West, Fla.

Lakin wrote that SBU trusts were placed with First National Bank of Belleville.

"Unbeknownst to me," Lakin wrote, "Mr. Gibson was later permitted by an Illinois appellate decision to remove trust funds from the First National Bank of Belleville to another financial institution.

"The Illinois appellate decision was not published or known to me.

"Steve and Rita Williams were two of the most pleasurable clients I had the privilege to represent in my entire career.

"The S.B.U. devastation soured my interest in the practice."

Cleary held the hearing without Tom Lakin. The firm's chief financial officer, Steve Schweitzer, testified that the firm held nearly $3 million in client trust accounts.

Two days later, Herrold moved to turn over the trust accounts to Williams. Herrold warned that Lakin might abscond with the money.

That same day, Lakin moved for reconsideration of the denial of his motion to set aside the default judgment.

Tucker wrote that Gibson's actions were the sole cause of Williams's damages.

"Defendants owed no duty to advise Plaintiff as to how his settlement proceeds should be handled because their contractual relationship did not extend to the choices Plaintiff made," Tucker wrote.

"Plaintiff elected to use SBU," he wrote.

Three days later, Tucker appealed Eagan's denial of reconsideration and separately filed another motion to set aside the default judgment.

He renewed his plea that the court in Tulsa lacked jurisdiction over Tom Lakin.

Lakin beefed up his defense on Aug. 23, adding attorneys Jeffrey Kass, Clark Cole and Wilbur Tomlinson.

The next day, Herrold associate Greg Wright of Overland Park, Kan., demanded Tom Lakin's appearance at an asset hearing.

Wright deplored "the plethora of serial, dodgy filings they made just prior to and since Lakin's failure to appear."

"There can be no doubt Lakin's actions in advising Williams regarding the settlement of his case against Union Pacific directly arise out of his representation of Williams in the underlying Oklahoma lawsuit," Wright wrote.

He wrote that Tom Lakin would use travel restrictions as an excuse to avoid appearing.

At that point Lloyd's of London dropped its claim that it owed Lakin no defense.

Lloyd's posted a $4,040,805.97 bond on Aug. 27, freezing collection efforts in the district court while the Court of Appeals reviewed the case.

On Sept. 14, Cleary quashed Tom Lakin's appearance.

On Sept. 21, Wright opposed Lakin's motion for reconsideration.

"A plaintiff's attorney has the obligation to minimize the risk for a client as much as possible in a structured settlement situation," Wright wrote.

He argued that Lakin failed to ensure that Gibson set up a trust, purchased bonds or gave Williams a security bond.

He wrote that the court properly exercised jurisdiction because Tom Lakin filed eight suits in Oklahoma from 1993 to 2002, pursuing as many as four at a time.

On Sept. 27, attorneys Kass, Cole and Tomlinson withdrew from Lakin's defense, five weeks after joining his team.

On Oct. 10, Lakin moved to admit Robert Skinner, Annmarie Tenn and Joseph Pull, all of Ropes and Gray in Boston, as counsel for him and the firm.

Tucker stayed with the team, but he no longer signs the pleadings.

Tenn moved on Oct. 15 to reopen the time to appeal the default judgment.

Skinner moved Oct. 16 for Lloyd's to join Lakin's motion for reconsideration.

Herrold responded Nov. 2 that as a garnishee, Lloyd's lacked standing to join Lakin's motion. He argued that the court stayed all garnishment action in the case.

There the case stalled.

On Dec. 17 the appellate court halted briefing pending further order.

The appellate court ordered Lakin to file a report in 30 days on the status of its motions in district court.

Thirty days passed, but Lakin filed no report.

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Union Pacific
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