"I expose a Ponzi scheme, I've turned over and worked with the FBI to find all kinds of hidden money, I'm probably single-handedly responsible for the Hoffmans being indicted,"
- John O. Murrin
The Minnesota Supreme Court suspended a semi-retired Twin Cities lawyer's law license for six months, determining that he filed multiple frivolous lawsuits in an ill-fated effort to recover $600,000 in losses he suffered from a real estate Ponzi scheme. John O. Murrin, III, who also founded the referral service DIAL L-A-W-Y-E-R-S, headed a successful law practice for several decades. However, after a hefty investment in a real estate speculation firm turned out to be a Ponzi scheme, Murrin played an instrumental role in exposing the scheme, working with the Federal Bureau of Investigation and helping to obtain the convictions of several of the scheme principals. However, it was his quest to seek civil relief from those he deemed responsible that eventually culminated with a voluntary bankruptcy filing, and now, a suspension of his license to practice law.
In 2004, Murrin decided to invest $600,000 into Avidigm Capital Group, Inc. ("Avidigm"), which advertised itself as speculating in real estate through "foreclosure prevention." Avidigm promised to pay Murrin $11,000 monthly interest payments in return for his investment. In the beginning, Avidigm made interest payments as promised. However, Murrin became alarmed when the flow of interest payments stopped in 2006. Additionally, the security interest granted to Murrin that supposedly was worth $900,000 turned out to be worth merely $200.
Murrin then approached the FBI with his suspicious, and over the next few years, played a key role in a federal investigation of Avidigm that resulted in the filing of criminal charges against Avidigm CEO Steve Mattson and Texas couple Jim and Teresa Hoffman, who allegedly operated Avidigm behind the scenes. Mattson was sentenced to a year in prison, and the Hoffmans are scheduled to be sentenced in November for mortgage fraud convictions.
Not content to stop there, Murrin then began the sequence of events that would eventually leave him bankrupt and result in his law license being suspended. According to the Minneapolis Star Tribune, which provides a detailed account of Murrin's travails, Murrin filed a 131-page lawsuit in a Minnesota state court seeking damages against nearly 50 defendants for their alleged roles in the scheme. Judge Denise Reilly, finding that the lawsuit was so "confusing as to be comprehensible," dismissed the suit several times while giving Murrin a chance to amend the suit to provide more clarity. Finally, with the suit still lacking, Judge Reilly dismissed the case outright and ordered Murrin and his wife to pay civil sanctions of nearly $500,000 to the defendants he had sued.
Murrin and his wife appealed the award of sanctions, and the court ruled that Murrin's wife was exempt from the sanctions. Following that decision, Murrin's wife then filed another lawsuit in state court, this one tipping the scales at 181 pages. This time, the defendants removed the case to federal court, which generally has less tolerance for such suits. The suit was only slightly more successful, and met with equal displeasure by the assigned judge, United States District Judge Patrick J. Schultz.
Indeed, in an Order for Judgment entered in Murrin's favor, Judge Schultz pulled no punches in summarizing Murrin's litigation tactics:
This Court has first-hand knowledge of the Murrins’ litigation strategy, which the Court earlier observed “resembles nothing so much as peine forte et dure — a method of torture by which heavier and heavier weights are placed on the chest of a defendant until the defendant either confesses or suffocates.” Docket No. 337 at 2. Perhaps never in the history of this District has more paper been filed by a litigant to less effect. By way of example, the Court points out that the docket in this case contains over four hundred entries despite the fact that this action has barely progressed past the pleading stage. The Murrins have proven to be singularly incapable of following the Federal Rules of Civil Procedure and singularly incapable of following the directions of this Court.
However, the order of sanctions against Murrin was not overturned, and several of those originally sued by Murrin then helped push Murrin into bankruptcy in retribution for what they deemed excessive and overreaching legal tactics. A bankruptcy judge later imposed a receivership on Murrin's assets, observing that
"Ultimately, far too much of his asserted right to root around in discovery was based on a shallow and conclusory theory of 'conspiracy' among nearly four dozen named defendants, and nothing more.
After Judge Reilly filed an ethics complaint against Murrin with the Office of Lawyers Professional Responsibility, it was recommended that Murrin's law license should be suspended for a year. After reviewing the recommendation, the Minnesota Supreme Court agreed, but imposed a six-month suspension. Murrin insinuated he would fight the decision, maintaining that "I got hit for doing the right thing. And I'll never back down."
A copy of the Judgment obtained against Avidigm by Murrin is here.
A copy of the Minnesota Supreme Court's decision suspending Murrin is here.