Duff v. Central Sleep Diagnostics, LLC, No. 13-3837 (7th Cir. 2015)Annotate this Case
Investors in Central Sleep filed suit against the company, Dachman, its promoter, and others, claiming fraud, RICO violations, conversion, fraudulent conveyance, civil conspiracy, and securities fraud. Dachman was also convicted for his fraudulent conduct. He spent the funds he stole from investors on a tattoo parlor, vacations and cruises, a new Land Rover, rare booksm and to fund personal stock trading and gambling. Goodman represented the defendants. A judge ordered Central Sleep into receivership and issued a stay against “all civil legal proceedings” involving the defendants. The receivership closed; victims received pennies on the dollar. Goodman obtained a judgment for unpaid legal fees and submitted a claim, but also filed a lien against the proceeds of the Dachmans' state court medical-malpractice lawsuit. Neither Goodman nor the Dachmans informed the receiver or the judge of those proceedings. The receiver learned of the malpractice suit and recovered the settlement proceeds. When the receiver proposed a distribution plan, Goodman argued that his lien entitled him to be paid in full from the malpractice suit proceeds, rather than pro rata from the receivership estate like other creditors. The judge offered Goodman the opportunity to post a bond to delay distribution, pending appeal. Goodman did not post a bond. The judge approved the plan and the funds were distributed. The Seventh Circuit affirmed and granted the receiver’s motion for sanctions against Goodman.