Rex Carr claims financial ruin in court fight with Tillery group

Steve Korris Aug. 18, 2010, 2:34am



EAST ST. LOUIS – Rex Carr, "immensely successful" in the words of an appeals court, pleads financial ruin and old age in a bid to escape a $635,171.23 sanction.

"He has no ability to pay the sanction and no reasonable ability to pay it during his lifetime," Carr wrote to U.S. District Judge David Herndon.

Carr, 83 years old, wrote that he has a life expectancy of 6.7 years.

Herndon entered judgment against him in May for harassing Stephen Tillery and other former partners with lawsuits over fees.

Carr moved in May to alter judgment by reducing it to an amount he could pay.

He wrote that misplaced reliance on former partners forced him to borrow millions.

"He has borrowed as much as he can from banks, friends, relatives and former partners and has cashed in all available assets, including his GI life insurance," Carr wrote.

"He has no income of any sort from any source to pay the sanction other than the income to be earned from the practice of law."

A phone book ad for the Rex Carr Law Firm shows lists of jury verdicts and significant settlements obtained by the firm worth more than $1 million. Combined, they total more than $169 million.

"His law office expenses are just barely met month to month by small settlements and by loans keeping his modest staff employed and paid," Carr went on in his pleading.

"He has no stocks, bonds, rents, royalties, dividends or any other conceivable source of income.

"He has no ability to pay the sanction, or any part of it, unless he foregoes his required monthly payments of $31,514.30 on pre-existing debt to the banks and on the mortgages of the homes of his children which were taken out in order to pay living and law firm expenses over the last few years."

In trouble for suing too much, Carr proposed to sue again.

The motion to alter judgment called on Herndon to lift an injunction against further litigation, so Carr can revive a $7 million suit in St. Louis city circuit court.

Carr dismissed the suit in obedience to the injunction, but without prejudice.

"He has no intention of giving up such claims," he wrote in July.

Herndon has not set a hearing on the motion.

The break up

Carr led the firm of Carr Korein Tillery, which broke up in 2003.

He and lawyers at the new Korein Tillery agreed on terms for dividing future fees in pending cases, but disputes arose.

They signed a memorandum of understanding in 2004, but disputes continued.

The new firm sued Carr seeking declaratory judgment to enforce the memorandum, and Carr alleged in a counterclaim that they fraudulently induced him to sign it.

Carr filed and dismissed a series of suits in Madison and St. Clair counties.

He persisted in one until 2006, when St. Clair County Associate Judge Andrew Gleeson entered final judgment dismissing it.

Fifth District appellate judges in Mount Vernon affirmed Gleeson in 2007.

By then, Carr had started a federal court action seeking $20 million in compensatory damages under "Rico" racketeering law.

Herndon ruled he lacked jurisdiction because a court already adjudicated the matter.

Tillery and partners Steven Katz and Douglas Sprong moved to sanction Carr for harassing them, but Herndon denied the motion.

Carr appealed to the Seventh Circuit in Chicago to revive his case, and Tillery's group filed a cross appeal for sanctions.

Carr lost on both points.

Appeals Court: Carr 'is out of control'

"The plaintiff is out of control and his lawyers are neglecting their duties as officers of the state and federal courts by failing to rein him in," Circuit Judge Richard Posner wrote.

"This is Carr's eighth suit against the defendants complaining about the division of fees; a ninth is pending in Missouri," he wrote.

"You cannot maintain a suit, arising from the same transaction or events underlying a previous suit, simply by a change of legal theory," he wrote.

Posner branded Carr's multiple suits as "classic claim splitting," and he slammed the racketeering claim as "weak, indeed feeble."

He wrote that Carr's suit "borders on the frivolous, even though he is an immensely successful lawyer represented on appeal by one of the nation's premier law firms, Kirkland and Ellis, as well as by his son Bruce Carr of the Rex Carr Law Firm."

Along with judges Kenneth Ripple and Diane Wood, Posner directed Herndon to sanction Carr and consider an injunction against further litigation.

The next paragraph, however, practically guaranteed further litigation.

"Such injunctions permit the person enjoined to ask the court's permission to lift the injunction for good cause," Posner wrote.

"We mention this because some of the fees to which Carr may be entitled under the memorandum of understanding have not yet been paid," he wrote.

"Should the defendants refuse to pay him his share on a ground not placed at issue in this case or any of the previous litigation between Carr and the defendants, he will be entitled to bring a new suit," he wrote.

Tillery: No escrow exists

In February, back in Herndon's court, Tillery's group proposed to sanction Carr by requiring him to pay defense bills totaling $1,439,913.71.

Herndon disallowed most of the bills, trimming the sanction to $635,171.23.

In a footnote he wrote, "Per Carr's request, the amount of the sanction can be offset against the approximately $6 million that Carr's partners have escrowed for him as Carr's share of the attorney's fees from CKT cases pending when the firm was dissolved."

Tillery's group moved to amend the order, claiming no escrow existed.

At a hearing in May their lawyer, Robert Sprague of Belleville, told Herndon his clients transferred the money from a segregated account to the firm's regular account.

Sprague said accountants informed them that they would be liable for taxes on it if they didn't disburse it.

"There is no money in any account any place held by my clients for Mr. Carr's benefit," he said.

Herndon asked Carr, "You made a representation that there was an escrow account from which your portion could be deducted?"

Carr said yes and told Herndon he prepared a stack of exhibits.

He said a banker confirmed there were two Carr Korein Tillery accounts.

"I received no notice from anyone that that money wasn't in there," he said.

Herndon swore Carr in, and he swore what he already said was true.

"I got a seven and a half million dollar judgment," he said.

He said fees from four cases, totaling $6,897,000, went into an account.

"Although it was not a pure escrow, it is what they called an escrow account," he said.

"It was an acknowledgement that they owed me that money and that they some day would pay it to me," he said.

"If they have closed that account out, that's the day they should have paid me that money," he said.

Katz, also under oath, said, "Perhaps escrow was a poor choice of words because it can't be an escrow unless a court orders it."

He said accountants advised that Internal Revenue Service would deem the money theirs and they must distribute it so they could all pay their fair share of taxes.

"We had all concluded, as this court ultimately ruled and the Seventh Circuit ultimately affirmed, that Mr. Carr had been procedurally barred from recovering that money," Katz said.

Bruce Carr said the footnote was 100 percent correct.

Herndon said, "If one side to a dispute cites to me facts which turn out not to be true, the court is stuck with those facts?"

Bruce Carr said, "There is no manifest error that the court made by relying upon these facts."

'Moon is made of green cheese'

Herndon asked the Tillery group's other lawyer, Aaron Zigler of St. Louis, if he thought that was the law.

Zigler said, "In our internal discussions, talking about this, we related Mr. Carr's affidavit as something being akin to swearing that the moon is made of green cheese.

"If there were truly an escrow, my clients would not have been able to remove that money.

"It would have been stuck in the court and we would have to come to you or Judge Gleeson and say, give us an order that allows for the withdrawal of that money."

Herndon said, "It is my finding that there is no segregated account or escrow account."

He amended his order, removing the footnote.

Carr moved to alter judgment, arguing that adjudication of fees in 2006 shouldn't apply to fees he sought from cases in 2007.

"Plaintiff could not have made a claim to a fee from cases not yet settled," he wrote.

He wrote that he never had an opportunity to contest the amounts due from the cases.

"For all intents and purposes it is as if the case did not exist and Carr is left swinging in the wind, without recourse," he wrote.

He wrote that he surely was entitled to some explanation as to why he was foreclosed from seeking his share of a fee when no prior case had been filed seeking that share.

"Carr does not seek the solicitude of the court - he seeks the exercise of the might the court has to correct an injustice or, at the least, an explanation as to how the one refiling rule can bar a claim never before made in any court," he wrote.

He wrote that at least $1,055,297.66 could be due him and could be used as a setoff against the sanction.

Alternatively, he pleaded to reduce the sanction.

He wrote that his only unencumbered assets were "his home of very modest value," two cars, six and 14 years old, $144 in stock, and $81,000 in checking and savings accounts.

He wrote that he receives Social Security payments of $2,752 a month.

"Defendants have in no way been harmed by the plaintiff's conduct," he wrote.

"They have been greatly rewarded by the actions of the plaintiff," he wrote.

They have received at least $100 million in fees from class action litigation he brought to the firm, he wrote.

An injunction against litigation amounts to a fine of more than $7 million, he wrote.

Zigler answered in June that, "Carr's motion is simply further evidence of his refusal to accept the outcome of this case."

He wrote that Carr could and did raise his claim to fees in the 2007 cases.

He wrote that defendants owe him no part of fees they earned in any matter.

"Carr's bad faith is clearly reflected in his continuing to insist that his legal position is well founded and his claim that his inability to pay any sanction is a result of defendants' misdeeds," he wrote.

He predicted that the motion would be a preview to Carr's next lawsuit.

Carr replied in July that the Seventh Circuit specifically held that the district court could give him permission to sue for fees.

He wrote that the sanction could only be paid from sums he is owed by defendants.

He said his fee in one case, Clevenger, was more than enough to satisfy the award.

Carr wrote that if Herndon would allow an action for accounting, he could determine a proper setoff against the award.

He wrote that if defendants don't pay him a fair share, he would ask Herndon for leave to file an accounting action.

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