After a daylong trial Jan. 20, a bankruptcy court in Santa Barbara let stand an earlier ruling that Ira Distenfield aimed to deceive Los Angeles attorney Richard Lubetzky by concealing a stock sale and not paying $115,000 in legal fees related to the sale of We the People.
U.S. Bankruptcy Court Judge Robin L. Riblet called Distenfield’s actions “fraudulent in the beginning” but also found no evidence for Lubetzky’s claims of theft. She said a state court ruling that resulted in jail time for Distenfield was valid and that she would not allow Distenfield to escape repaying Lubetzky $115,000 plus interest.
Distenfield built up We the People, a legal document services franchise, into a national organization and has been involved with PRstore, another franchising venture.
In 2005, a multimillion-dollar deal to sell We the People to Pennsylvania-based Dollar Financial Group disintegrated into litigation. Distenfield filed for bankruptcy a year ago, telling the Business Times that he’d run out of money to keep up the legal battle.
Before that filing, Los Angeles attorney Richard Lubetzky had settled with Distenfield to recover $115,000 in unpaid legal fees. Distenfield told Lubetzky that a chunk of Dollar Financial stock would be available to cover the settlement, but Distenfield sold the stock and didn’t pay Lubetzky, a key issue that came before Riblet on Jan. 20.
Just before Distenfield filed for bankruptcy, a Los Angeles Superior Court judge had agreed with Lubetzky and sentenced Distenfield to jail for contempt of court. Distenfield eventually served two and half days in jail.
Now a creditor in Distenfield’s bankruptcy, Lubetzky had asked Riblet to award him his settlement money, plus attorneys’ fees and $500,000 in punitive damages. Lubetzky told the Business Times he’s racked up more than $100,000 in bills trying to enforce his settlement.
After the daylong trial, Riblet ruled from the bench that Distenfield intended to deceive Lubetzky in concealing the stock sale but added the deception wasn’t serious enough to merit punitive damages. Specifically, she said that Distenfield seemed to have skipped paying Lubetzky in order to keep funding his legal fight with Dollar Financial. “He was between a rock and a hard place,” Riblet said.
Riblet said that Distenfield won’t be able to get out of paying the $115,000 settlement. “He made a choice, and he got in a lot of trouble for that choice,” Riblet said, referring to Distenfield’s jail time. “It was fraudulent in the beginning.”
Distenfield, who broke into tears on the stand while describing his struggle against Dollar Financial, called the hearing a victory.
The judge found no evidence to support Lubetzky’s claims that it constituted fraud for Distenfield to steer money from the Dollar Financial stock sale into his personal bank account or shift a $3.4 million Hope Ranch house owned by We the People into his family trust.
“Every point was that discussed today, we won,” Distenfield said, adding that his side had conceded that Lubetzky’s bill would have to be paid.
After the trial, Lubetzky said that without his ability to collect punitive damages or attorney’s fees, “it’s a victory, but it’s a hollow victory.”
We the People’s current franchises, including one in Santa Barbara, aren’t connected to Distenfield.