MINNEAPOLIS (WCCO) - The attorney who made headlines for suing small businesses that can't afford to fight back has filed for Chapter 13 bankruptcy. Paul Hansmeier sues businesses, claiming discrimination against people with disabilities.
Disability experts believe his motive is to make money, not make businesses more accessible, as he proclaims.
Hansmeier has caused dozens of small businesses in Minnesota a legal headache, and cost them thousands of dollars.
His law firm Class Justice sues on behalf of a group of people with disabilities, claiming violations of the Americans with Disabilities Act, ADA's Accessibility Guidelines or the Minnesota Human Rights Act. Some are valid, but experts close to the cases claim he seeks a payday through a settlement.
And WCCO has learned it's what he did before suing for discrimination that has Hansmeier filing for Chapter 13 bankruptcy.
His former firm was part of a copyright trolling scheme that sued thousands of people for downloading online porn, and then settled for nominal amounts. Court documents show he made millions.
"The courts determined that was an abuse of the legal process," attorney Ted Sheu, with Best & Flanagan, said.
Sheu sued Hansmeier on behalf of a "John Doe" client and won. He now represents other firms and their clients in collecting money from Hansmeier for what judges deemed to be fraud.
"For the past two years we've been trying to collect on the sanctions and that leads us to where we are today," Sheu said. "He has the money somewhere. We've been trying to find it."
Hansmeier owes approximately $193,000 in their cases. He filed for bankruptcy a day before he was to go before a judge to prove why he should not be held in contempt of court for violating an order to turn over financial records. And two days before he was ordered to pay sanctions totaling $65,263 in Illinois.
"The timing was clearly designed to thwart the legal process, and the collections process," Sheu said.
"I assume he probably saw it coming," attorney Ian Ball said.
Ball, who's independent from this case, said this is typical from a debtor who has done their best to stymie creditors.
"Now that he's been pushed into a corner and doesn't have any other options, he's going into a bankruptcy as his last card to play," Ball said.
The bankruptcy documents detail Hansmeier's assets and liabilities, along with disclosing he lives in the swanky Carlyle condos in downtown Minneapolis. But those owed money say it doesn't show the whole picture, or how much money he has.
The creditors under Sheu allege Hansmeier transferred assets to his wife and, in the years leading up to bankruptcy, put at least $515,000 into a trust, which he controls. By filing for bankruptcy he avoided having to turn over his wife's financial records.
"He's what gives us all a bad name as lawyers," Sheu said. "The underlying conduct is one thing, and then refusing to 'man up,' so to speak, and pay the bill is another thing."
According to Ball, Chapter 13 is designed for people who can pay a portion of their debt and need time to pay it off. In this case Hansmeier proposes to pay $142,570 over five years.
"The big question is: Can the guy really do it?" Ball said. "Does he have ability to generate the money to fund this plan, and that's always a gamble."
Ball thinks Hansmeier may be trying to hold off creditors in this case. If it costs them more in legal bills to continue to fight, Hansmeier may get what he's after with the disability lawsuits - a settlement where he pays much less than he owes.
WCCO reached out to Hansmeier for a comment but has not heard back.
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