CLARKSBURG – A prominent attorney has filed a federal lawsuit against a regional law firm and four of its attorneys claiming they schemed against him and tricked him as well as damaged his reputation.
Scott Segal filed his complaint against Dinsmore & Shohl and attorneys David M. Thomas, Jeremy S. Rogers, Robert Palumbi and John J. Berry in U.S. District Court in Clarksburg.
“The complaint speaks for itself,” Steve Ruby, Segal’s attorney for this case, told The West Virginia Record. “Loyalty to clients is a law firm’s most fundamental obligation; without it, the legal profession can’t function. Mr. Segal looks forward to putting the evidence before a jury and letting the jurors hold Dinsmore & Shohl accountable.”
A spokesman for Dinsmore said the firm declined to comment about this case.
According to his complaint, Segal says Dinsmore was his attorneys for more than 15 years. But in 2017, he says the firm secretly stripped him of more than $20 million in collateral as well as a $3 million loan guarantee. He says the firm carried out the move to benefit the Puskar Trust, another client, which had paid Dinsmore larger fees than Segal had.
Then, Segal claims, Dinsmore tricked him into letting the firm represent the Puskar Trust in a lawsuit against him.
“In that lawsuit, without warning, Dinsmore publicly and baselessly accused Mr. Segal of fraud, damaging a reputation for honesty that he has earned over decades and that forms the cornerstone of his law practice,” the complaint states. “Dinsmore successfully concealed its disloyalty to Mr. Segal until September 2020, when he finally was able to obtain information, through litigation, that revealed Dinsmore’s misconduct.
“Dinsmore’s attack on its longtime client shocks the conscience and violates bedrock principles of the legal profession, and it has caused Mr. Segal reputational and other damages so severe that he is compelled to bring this action.”
The 19-page complaint details Segal’s history with Dinsmore and a biotechnology company called Protea Biosciences Inc., in which he was an investor and a member of its board of directors. In 2005, Milan Puskar invested in the company and joined the board as well.
In 2009, Protea needed working capital. Puskar suggested taking a loan from Centra Bank, which was based in Morgantown. Puskar, the late drug magnate, had an ownership interest in the bank and could help provide flexibility for Protea to pay the loan.
The company took out a $3 million loan from Centra. Segal and Puskar – as well as other investors – executed guaranty agreements with the bank on the loan. Segal guaranteed $750,000 of the loan.
In 2010, Centra was purchased by United Bank, thus reducing Puskar’s ability to ensure that flexibility on loan payments. Around the same time, Puskar was diagnosed with cancer. And soon after, Puskar – as trustee of The Milan Puskar Amended and Restated Trust, executed a guaranty agreement for the entire amount of the loan. The guaranty was secured by 500,000 shares of Mylan Laboratories stock. At the time it was posted, the value of the collateral was worth more than $10 million.
Segal says Dinsmore has provided legal service for the Puskar Trust since its inception. Puskar died in October 2011.
In 2017, Segal says Protea began having financial difficulties. The Puskar Trust authorized the bank to liquidate a portion of the stock that served as collateral.
But, Segal says the Puskar Trust consulted with Dinsmore and attorneys Thomas and Rogers “to devise a strategy to avoid the loss of any of the collateral that Mr. Puskar had posted for the loan ... a scheme for the Puskar Trust to escape the Puskar Guaranty and evade the protections that Mr. Puskar put in place for his friends and business partners, including Mr. Segal.”
He claims Dinsmore, Thomas and Rogers advised the Puskar Trust to form a special-interest limited liability company to buy the note from the bank, thus transferring the guaranties on the loan and control of the loan collateral stock to that LLC.
PITA LLC was formed November 21, 2017. PITA’s manager is Kyle Pratt, Puskar’s grandson and a trustee of the Puskar Trust. Rogers is the organizer. The Puskar Trust is the only member of PITA.
“PITA was created for the sole purpose of acquiring the assignment of the note and transferring the collateral, including the stock, to the Puskar Trust,” the complaint states. On November 21, 2017, PITA paid the bank more than $3 million to buy the note. The Puskar Trust provided PITA with the money. Dinsmore, Thomas and Rogers represented PITA and the Puskar Trust, according to the complaint.
The next day, PITA released the collateral to the Puskar Trust and has made no demand to the trust to pay any amount.
“PITA’s release of the collateral and effective waiver of the Puskar Guaranty contradicted Mr. Puskar’s wishes and exposed Mr. Segal to liability that would not have existed had the Puskar Trust and PITA acted in accordance with Mr. Puskar’s wishes,” the complaint states.
On December 1, 2017, Protea filed for Chapter 11 bankruptcy protection. As of that filing, PITA still claimed Protea and the loan guarantors owed more than $3 million on the loan.
Soon thereafter, PITA and the Puskar Trust hired Dinsmore to represent them in a lawsuit to recover the outstanding loan balance. They asked Segal’s personal attorney for a waiver from Segal to allow Dinsmore to represent PITA and the Puskar Trust in the lawsuit.
Segal says none of the communications from Dinsmore about the lawsuit revealed PITA had released the loan collateral to the Puskar Trust with no attempt to collect it. He also says none of the communications revealed the defendants planned to file a civil lawsuit against Segal to collect more than his share of the outstanding balance of the loan, accuse him of fraud or seek punitive damages.
The lawsuit was filed in September 2018 against Segal and others in Monongalia Circuit Court. The case still is pending. Segal says his reputation has been damaged and that he has incurred substantial legal fees fighting that lawsuit. Palumbi and Berry represented PITA and the Puskar Trust in the state court case.
He accuses Dinsmore and the Dinsmore attorney defendants of legal malpractice, negligence, fraud, breach of fiduciary duty and tortious interference with business relations. He seeks compensatory damages, damages for past and future annoyance and inconvenience, punitive damages, exemplary damages, attorney fees, court costs, pre- and post-judgment interest and other relief.
Segal is being represented by Ruby as well as Raymond Franks II, both of Carey Douglas Kessler & Ruby in Charleston. The case has been assigned to District Judge Thomas Kleeh.
U.S. District Court for the Northern District of West Virginia case number 1:20-cv-00267
