Dailey Law Firm files for bankruptcy amid embezzlement claims

The law firm, which specializes in medical malpractice, Social Security, class action, mass tort and criminal defense, has four attorneys listed on its website, including principal Brian Dailey. It was founded in 1927 in Iowa and relocated to metro Detroit in 1992, with additional offices in Chicago and Indianapolis.

Brian Dailey
Brian Dailey

Dailey did not return a message for comment, nor did Scott Kwiatkowski, attorney at Southfield-based Goldstein Bershad & Fried PC representing Dailey’s firm in the bankruptcy case.

The financial trouble for Dailey Law began with family issues and a cancer diagnosis, which was exacerbated by liquidity shortcomings brought on by the COVID-19 pandemic, according to the bankruptcy cover sheet.

Then in 2021, the law firm discovered that a former employee allegedly “wrongfully diverted” $600,000 in settlement proceeds. The firm was ordered to pay $600,000 into Wayne County Circuit Court in connection to the settlement from about five years ago, the filing said. Unable to pay the sum, the firm was appointed a receiver.

Dailey Law filed a lawsuit earlier this year against insurance company Travelers Indemnity Co. in an attempt to recoup the $600,000 that was allegedly embezzled. According to that lawsuit, Dailey contracted Travelers in 2010 to protect against commercial losses before expanding its insurance coverage to include “employee dishonesty” in 2019.

In February 2021, one of the firm’s employees quit abruptly, and in the following months the firm discovered the employee embezzled $600,000 by diverting settlement checks, the lawsuit says. The former employee, who is not named in the court documents, denied the allegations and filed a counter complaint.

The dispute between Dailey Law and the insurance company centers on the insurance policy, which limits $25,000 per loss. The firm claims that it was victim of dozens of losses, while the insurance company argues that it is only on the hook for one $25,000 payment.

The law firm projects that it will need to spend $525,800 in the next three months to avoid “immediate and irreparable harm.” Its accounts receivable total $636,500, and the firm has 36 cases of unknown value in litigation or pre-lawsuit.

The law firm‘s largest creditors listed are:

  • Utah-based On Deck Capital Inc.: $189,269
  • U.S. Small Business Administration: $147,344
  • Detroit-based Honigman LLP: $80,000
  • Belleville-based Surgical Capital Management: $78,000

Another unrelated, personal insurance dispute connected to Dailey is also ongoing. In a lawsuit filed last year by Dailey against Citizens Insurance Co., Dailey alleges a storm caused $200,000 in damages to his home in Grosse Pointe Shores and that the insurance company wrongfully denied the claim.

Related Posts