Motion to Dismiss

Should Judge Lynne Hufnagel be benched? Ask the bankrupt cabbies, bullied witnesses and banished lawyers who've tasted her bitter brand of justice.

Throughout it all, Hufnagel backed her receiver at every turn. She routinely approved Mathis's fee requests and sealed YCCA financial information from public view, so that even the board-elect had no clue as to the company's economic state; minutes of board meetings were sealed, too. When Mathis complained of "acts of violence" against the company and widespread "miking"--the disruption of radio communications by drivers holding their mikes open--Hufnagel issued a temporary restraining order authorizing Yellow Cab employees to go on private property, seize company equipment and impound the cabs of mutinous drivers. (After the city attorney's office expressed qualms about enforcing such an order, Hufnagel toned it down considerably.) And when drivers tried to challenge Mathis's continuing reign, they found her harder to remove than an unwanted tattoo; one motion to dismiss the receiver languished in Hufnagel's court for eighteen months before she got around to denying it.

Cowley says he and other members of YCCA's board of directors were "pretty well intimidated" by Mathis and her evident strong support from the judge. Early in the receivership, Mathis told several boardmembers she'd run into the judge by chance at the Esquire Theatre and discussed the case with her; before long, rumors were spreading that Mathis and Hufnagel were meeting secretly to plot the company's fate.

Mathis has denied ever holding such meetings, but in a recent deposition she stated that the judge called her approximately once a month "and asked questions about the conduct of the business." In most court proceedings, such ex parte discussions would be strictly forbidden; whether they were proper or not, Yellow Cab's elected but powerless leaders were under the impression that they had nowhere to go for relief. As the situation deteriorated, boardmembers complained that they were being threatened with contempt or defamation charges for protesting the receiver's policies.

"I can blame Karen Mathis to a point for what happened, but I have to blame Lynne Hufnagel, too," says Leroy Jones, a fired YCCA driver who joined with other exiles to launch the Freedom Cab Company. "She should have curtailed the receiver's powers instead of continuing to expand them. Karen Mathis would never have been able to do what she did without Lynne Hufnagel's help."

In the summer of 1993, more than two years after her appointment, Mathis proposed selling Yellow Cab's assets to three Florida cab tycoons for $1.1 million in cash and another $1 million over seven years. Somehow the focus of the receivership had shifted from conducting an election to a fire sale of the company ("End of the Road," August 25, 1993). Creditors, drivers and even a majority of the board of directors filed objections to the sale, which amounted to a liquidation that would leave the co-op stuck with the debts and little else.

Hufnagel, though, approved the sale. Figuring they had nothing left to lose, the YCCA board filed a petition for reorganization with Denver's federal bankruptcy court. The petition listed the company's assets and liabilities as "unknown."

Mathis fought the bankruptcy action, apparently with the judge's blessing. (She also billed YCCA nearly $50,000 for her efforts and those of an attorney she hired to represent her, which, boardmembers claimed, amounted to using the owners' money to keep them from regaining control of their company.) But in early 1994, after extensive testimony, U.S. Bankruptcy Court Judge Donald Cordova issued a stay suspending the receivership, blocking the sale and, for all practical purposes, removing the case from Hufnagel's court.

"The owners of the co-op should be allowed to decide for themselves what the future of this company should be," Cordova said. "This Court has some concerns about due-process issues."

Judge Cordova found it "curious" that what was supposed to have been a short-term receivership had lasted a total of 32 months, during which time Mathis and her law firm charged the company roughly $1.3 million in fees and expenses while paying off only $140,000 in pre-receivership debt owed to creditors. As he saw it, YCCA was denied due process in Hufnagel's court because its elected board of directors was never seated, it had no representation before the court, and it was, "in essence, disenfranchised by the Court's order."

Cordova was also troubled by the way in which Judge Hufnagel approved Mathis's fees without issuing proper notice to other parties. Half the time, Hufnagel would issue an order setting a time limit to object to the fees that was signed the same day as the order approving the fees--effectively denying the drivers and their creditors an opportunity to object. Mathis explained that the judge would send out an unsigned draft of the order to certain litigants ahead of time, but an unsigned order has no legal effect, and many interested parties received no notice whatsoever. The process, Cordova noted, "makes absolutely no sense at all."

Bankruptcy Judge Sidney Brooks went even further. Brooks, who presided over YCCA's subsequent lawsuit against Mathis in an effort to recover her fees, issued a scathing opinion that touched on many of the irregularities of Hufnagel's handling of the case.

"The record presented to this Court is absolutely devoid of reasons, persuasive or otherwise, as to why the elected board of directors was not seated and why the receivership was allowed to last as long as it did," Brooks wrote. He considered the "extraordinary and questionable procedure" for approving the receiver's fees to be "unseemly streamlined, almost invisible, and encased in mystery; it was a judicial process on automatic pilot."

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