Taboo-busting case pits Fort Lauderdale bankruptcy judge vs higher federal courts

U.S. Bankruptcy Judge Raymond Ray, left, and U.S. District Judge Darrin Gayles

By Noreen Marcus,

Judges rarely criticize one another in public. A judge hardly ever calls out a colleague for holding a bogus trial.

But that’s precisely what Miami U.S. District Judge Darrin Gayles did last month to Fort Lauderdale U.S. Bankruptcy Judge Raymond Ray. According to Gayles, Ray “should never have conducted” an 11-day trial in the case of Wortley v. Chrispus Venture Capital.

That’s just one of the oddities in this only-in-South Florida legal saga. Other features are smoking-gun emails, a disgraced partner of the notorious Scott Rothstein, and a game plan to save the planet with clean fuel. The company formed to do that, Global Energies LLC, imploded into pieces that are still being collected, nine years later, in bankruptcy court.

Five years ago the 11th Circuit U.S. Court of Appeals powered past another taboo when its judges accused bankruptcy lawyer Chad Pugatch of covering up a client’s false statements and hiding incriminating emails in the Wortley case. The court told Ray to make sure Pugatch, his client, and the client’s business partner did not “profit from their misconduct.”

In an exchange between 11th Circuit Judge Peter Fay and Pugatch, Fay blurted, “That’s an outright lie,” according to the transcript of a July 30, 2014 hearing. Pugatch had just repeated client Richard Tarrant’s denial that the scheme at the center of the case ever existed.

The Atlanta court’s opinion, handed down two weeks after the hearing, lists the many Florida Bar rules Pugatch may have violated by allowing his client to give false testimony. The opinion apparently launched a Florida Bar investigation of Pugatch.

The litigation also calls into question the methods and rulings of Ray, who announced in December he’ll retire from the Fort Lauderdale bankruptcy bench later this year.

Do-it-yourself lawyer

And it turned Boca Raton investment banker Joseph Wortley into a do-it-yourself lawyer. When Ray ordered the trial that Gayles recently censured, Wortley had to go buy a book about courtroom procedure.

Wortley also maintains a website about the case.

In his order last month, Gayles reversed Ray’s anti-Wortley ruling, the result of that unnecessary trial. Gayles ordered Ray to rule for Wortley, assess his damages, and sanction Pugatch and the others just as the 11th Circuit told Ray to do five years ago.

Not only has that not happened, Ray essentially tried to overrule the 11th Circuit, a court that sits one rung below the U.S. Supreme Court – and two rungs above him.

Attorney Chad Pugatch

In an interview with Florida Bulldog, Pugatch denied the false statement charge and said he didn’t withhold any email evidence. Pugatch characterized the emails as benign and taken out of context.

He has asked Gayles to reconsider his ruling because the trial in front of Ray was the first time he was allowed to defend himself and his client, Pugatch said. Before that, their due process rights were ignored, he asserted.

“Anybody who reads Judge Ray’s order can see that we didn’t do anything wrong,” Pugatch said. “That’s vindication in our mind.”

Judges are barred from speaking about matters that may come before them, and the Wortley case might return to Ray.

Wortley said recently he couldn’t recall winning a single argument in bankruptcy court. “If I said the sun rose in the east, and Chad [Pugatch] said it rose in the west, Judge Ray would say it rose in the west,” he said.

The 11th Circuit spots a plot

In 2014, the 11th Circuit ruled that James Juranitch and Richard Tarrant, Wortley’s erstwhile partners in Global Energies, schemed to shove him out the door. Global was owned by Wortley, Juranitch, and Chrispus Venture Capital LLC, Tarrant’s company.

Advised by Pugatch, the court said, Juranitch and Tarrant used involuntary bankruptcy to force an auction of Global’s assets. The winning bid was $750,000–a small fraction of what Wortley said the company was worth. The successful bidder was Chrispus, the name on the bankruptcy petition.

James Juranitch

As Tarrant and Juranitch started a new company, Plasma Power LLC, Wortley sued them for allegedly filing the Global Energies petition in bad faith.

Pugatch said the petition was a good faith attempt to revive Global Energies. “The company was dead before the bankruptcy was filed,” he said.

Ray agreed with Pugatch. It wasn’t until the case reached the 11th Circuit that Wortley started gaining ground.

Wortley’s Exhibit A is a string of emails between Tarrant and Juranitch that Wortley discovered late in the game. The emails dated June 17-19, 2010 detailed their plan to buy out Global Energies on the cheap and open Plasma Power.

“Finally the [new company] may have to stand up to a legal battle from [Wortley] and needs to dot its I’s and cross its T’s,” Juranitch said in a June 17 email to Tarrant.

The elusive email drop

During the legal battle, Wortley received a load of documents from his former partners that should have included the tell-tale emails, but didn’t, the 11th Circuit observed. Pugatch said he’d handed over every relevant communication.

Steven Lippman

Eventually Wortley got the emails from Steven Lippman, an associate at Pugatch’s law firm who was tidying up a related state court case before going to prison. An ex-partner in Scott Rothstein’s Fort Lauderdale firm, Lippman got a three-year sentence for aiding and profiting from Rothstein’s massive Ponzi scheme.

Pugatch said the emails were made available to Wortley, but he didn’t retrieve them. “The stuff he says was withheld was sitting there in a box for months and his attorneys failed to pick them up.”

The 11th Circuit disagreed. “In sum, the parties, who had the evidence that Wortley needed to substantiate his claims, blocked his access to it and deliberately prevented him from finding it.”

The court voided the Global Energies sale and ordered other next steps: Sanctions that Ray had imposed against Wortley would be vacated. Wortley was to be compensated “for any and all damages,” plus attorneys’ fees and costs, the 11th Circuit decreed.

Ray’s supervisors on the appellate court told him to do everything necessary “to ensure that Chrispus, Juranitch, Tarrant, and Pugatch do not profit from their misconduct and abuse of the bankruptcy process.”

Plasma Power is still in operation after nine years. Juranitch declined to comment through an assistant.

A ‘resurrection’

Tarrant said he wanted to reorganize Global Energies, and an email stating his desire to “resurrect” the company was shortened to eliminate that word and therefore falsified.

Richard Tarrant

Tarrant denied ever making a false statement about his talks with Juranitch before the bankruptcy filing. According to Tarrant, when he said he never discussed pushing Wortley out of the company, he meant they never had a conversation about that.

Pugatch said the company that succeeded Global Energies is another failure. “Plasma Power has never made a penny, never had a deal come through.”

Tarrant said, “Plasma Power is on the back burner as we now pursue a water remediation technology.”

In 2017, Ray held the 11-day trial in which Wortley represented himself. Then Ray issued a 70-page order that blasted Wortley and awarded him nothing.

“It is the opinion of the Court that Mr. Wortley’s personal animosity and rancor towards Mr. Juranitch and Mr. Tarrant has fueled this case far beyond the rational stopping point of a traditional bankruptcy case,” Ray wrote in his June 25, 2018 order.

The judge held Tarrant and Juranitch blameless, finding they simply used bankruptcy as a vehicle to reorganize the company. Based on “new” and “substantially different” evidence, he concluded that Wortley was the only one who benefited from the bankruptcy.

Enter the Florida Bar

And about those emails the 11th Circuit wanted Pugatch punished for concealing?

Ray said the problem occurred in state court, so he had no right to issue sanctions. Even if he could act, “the delay in producing the ‘smoking gun’ emails was justifiable or excusable, and the alleged misconduct only rose to the level of recklessness, at the most.”

Wortley said he filed a complaint against Pugatch with the Florida Bar after the 11th Circuit’s opinion. Pugatch said the matter was resolved years ago in his favor. Asked for written proof, he declined to share it.

The Florida Bar doesn’t publicly acknowledge it’s investigating a lawyer unless and until there’s a finding of probable cause to proceed against the lawyer.

The Global Energies bankruptcy, now a Chapter 7 liquidation, grinds on without Pugatch. He’s still in the fight, but only on his own behalf. He anticipates clarification from a higher court.

“One way or the other, it’s going back up to the 11th Circuit and we’re going to find out what they meant,” Pugatch said.

After Judge Gayles’ ruling last month, an attorney for Wortley asked him to step in and execute the 11th Circuit’s master plan from 2014 because of Ray’s “hostility to Wortley’s position.” The motion is pending.

Wherever the case lands, Wortley said he’ll fight on. He spoke nostalgically about starting Global Energies with his old friends Juranitch and Tarrant. They moved in the same social circle, meeting and playing golf at the Royal Palm Yacht and Country Club in Boca Raton. Tarrant has special status because he’s married to Hillsboro Beach Mayor Deb Tarrant.

The three men wanted to build an enterprise that would turn trash into energy. Juranitch contributed ideas, Tarrant seed money, and Wortley management.

“It would have been a huge advance in living for human beings throughout the world,” Wortley said wistfully.

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  • U think judge Gay les is on point?

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