'It's Art': These Lawyers Turned a 9-Day Racketeering Trial Into a $9M Defense Verdict

April 05, 2024 at 12:05 AM

ByCedra Mayfield

A pair of Atlanta litigators has secured a $9 million verdict for a Utah entrepreneur allegedly defrauded through a Georgia company's public trading scheme.

Defense counsel with Poole Huffman credit the seven-figure outcome that included treble damages to their ability to not only prove the plaintiffs' alleged fraudulent behavior through circumstantial evidence on cross-examination, but also pivot after being made "a character witness" by opposing counsel.

"I changed the entire theme of my closing on a dime," defense counsel Jon Huffman told the Daily Report.

'Stole Mr. Ehlert's Companies With a Pen'

Huffman partnered with Poole Huffman co-counsel Timothy Andrews to defend and counterclaim on behalf of Bradley Ehlert following his sale of his businesses, Ehlert Solutions Group Inc. and Interlock Concepts Inc., to Galaxy Next Generation Inc., a publicly traded company headquartered in Toccoa, Georgia.

Per defense counsel, the parties consummated the sale through a share purchase agreement in 2019.

As part of the sale, Galaxy entered into an employment agreement with Ehlert in which his service as its chief technology officer would garner him "8% of the combined businesses going forward," per Huffman.

But defense counsel said the arrangement didn't last long.

Within three months, Galaxy "falsely terminated [Ehlert] for cause, failed to pay vendors under which he had personal guarantees … and failed to pay the IRS," per Huffman. In addition to Ehlert being sued by vendors and pursued by the IRS as a result, defense counsel said their client's interest in the companies got diminished "to virtually nothing," after Galaxy "issued billions of shares of stock."

"Ultimately, Galaxy stole Mr. Ehlert's companies with a pen," Huffman alleged.

Allegedly seeking to hold Galaxy accountable, Huffman said Ehlert first sued the company in Utah, where Ehlert resides. But when both parties later agreed to move the matter to Atlanta, Huffman said opposing counsel for Galaxy sued Ehlert first.

"In a classic 'the best defense is a good offense tactic,' Galaxy made over a dozen claims of fraud against Mr. Ehlert," Huffman claimed.

'Failing to Disclose Accurate Information'

Atlanta attorneys Mike Ernst and Griff Lucas of Stokes, Carmichael, and Ernst served as plaintiff counsel on behalf of Galaxy, but did not respond to a Daily Report request for comment.

In the plaintiff complaint filed in the business division of the Fulton County Superior Court, the plaintiff duo launched claims of action against Ehlert ranging from breach of contract, fraud, conversion and breach of fiduciary duty to usurping corporate opportunities and securities fraud.

Among other allegations, plaintiff counsel asserted that Ehlert had made intentional "misrepresentations" by "concealing and failing to disclose accurate information … to induce Galaxy to enter into the [share purchase agreement] in which Galaxy would assume liability for … debts and contractual obligations despite having no knowledge of the true amount of debts owed by Interlock/ESG, an incomplete list of all Interlock/ESG's creditors, or no knowledge of all the outstanding contractual obligations of Interlock/ESG because of Ehlert's deceptions."

Defense counsel, however, countered that it had been Galaxy who'd engaged in misrepresentations that amounted to "fraud and criminal activity."

"Through the applicable time period, Galaxy misrepresented to the market in SEC-required filings and via multiple press releases that it had purchased my client's businesses before it had," Huffman claimed. "They misrepresented that Galaxy owned Ehlert's products before even a stock purchase agreement had been signed. Additionally, Galaxy and its CEO [Gary LeCroy] and CFO [Megan McGahee] borrowed money and signed a guaranty for Ehlert's companies prior to owning them."

According to Huffman, the parties' attempts to settle the matter stalled after plaintiff counsel offered to pay the defendant $100,000. Unable to reach a resolution, the matter proceeded to a business court trial before Fulton County Superior Court Judge Kelly Lee Ellerbe on March 4.

'When It Comes Together It's Art'

At trial, defense counsel claimed they had to overcome more than a dozen claims launched by opposing counsel by "systematically showing they were false."

Huffman said he and Andrews spent more time "dealing with [the plaintiff's'] false claims" than their own client's, but that didn't stop the defense duo from connecting with jurors.

Rather than operate as a legitimate business, defense counsel attempted to convince the jury that Galaxy had schemed to raise money from public markets and that Ehlert had been the plaintiff's latest mark.

"Fraud is almost always proved through circumstantial evidence. Thus, you win a fraud case during cross-examination. Nothing else matters as much," Huffman said. "The lawyer must show, through the force of his or her personality and through the precision of cross-examination, that the witness is a liar. If you do so, you prove fraud. You must be able to do this while maintaining a certain level of civility yet mocking disbelief when the witness lies. It's a balance in tension and when it comes together it's art."

During trial, defense counsel also argued that "civil Racketeer Influenced and Corrupt Organizations, or RICO, is a viable claim to juries," but Huffman said plaintiff counsel countered the argument.

When the plaintiff team contended that the absence of "any indictment, investigation by the SEC, or any other governmental agency action" meant there'd been "no crime in this case," defense counsel rebutted that "the standard for finding civil RICO was preponderance of the evidence instead of reasonable doubt."

"We argued that not all crimes are discovered [and] that no one was going to jail today—even though maybe someone should," Huffman said. "The jury got it and agreed. When people commit crimes, they must be held accountable."

But before the trial concluded, Huffman said the proceeding took an interesting turn during plaintiff counsel's closing statements.

According to defense counsel, the plaintiff team argued that Huffman "should not be trusted" since he'd "represented another client against the same parties," to whom Galaxy paid $2 million. While the previous case had been admitted into evidence, Huffman said it'd been the first time the jury had been made aware of Huffman's service as counsel in both cases.

"Opposing counsel had just made me a character witness. Thus, I embraced it. I changed the entire theme of my closing on a dime and must have said six to eight times during closing, 'If you don't stop them, they will do it again,'" Huffman said. "The entire closing was almost one-and-a-half hours long—by far my longest and most passionate."

$9 Million Verdict

After nine days of trial, the jury returned a split verdict that skewed heavily in the defendant's favor on the evening of March 14.

Jurors opted to award $26,000 to the plaintiff and $6.6 million to the defendants. However, because Ellerbe trebled $1.2 million awarded by the jury for RICO, Huffman said the defendant secured "exactly $9 million" in awarded damages.

"Plaintiff's counsel was shocked upon reading the verdict privately before it was announced openly in the court. Plaintiff's counsel stated in sidebar that maybe the jury was confused and asked the court to inquire into the verdict. We promptly objected and the court, rightfully, did not do so," Huffman claimed. "As defendant's counsel, we were delighted with the verdict."

When the defendant shed "tears of happiness and relief" upon learning the outcome, Huffman said defense counsel teared up, too, but that they hadn't been the only misty-eyed party. The Galaxy plaintiffs "also cried in the courtroom, but for different reasons," according to Huffman.

Huffman claimed, "The case was full of fraud, securities fraud, crimes and lies."