Ballard Spahr LLP does not have a valid claim to roughly $237,000 in unpaid legal fees it sought from a Wisconsin-based gem and fine metal investment fund that went through bankruptcy, the Seventh Circuit said Friday.

An oral agreement and conclusory affidavit are not enough to overcome Wisconsin state law and let Ballard Spahr pursue its fee claim against Greenpoint Tactical Income Fund instead of Michael Hull, who formerly controlled one of two managing entities behind the investment fund, a three-judge appellate panel said, backing bankruptcy and district court rulings on the issue.

Ballard relied mostly on the affidavit to prove the investment fund had agreed to pay the legal bills Hull incurred during a U.S. Department of Justice investigation into possible securities law violations and arbitration proceedings involving similar allegations against GTIF and its leadership, according to the ruling.

The affidavit asserted that GTIF's managing members had orally and unconditionally agreed to pay the fees relating to Hull's engagement, which the law firm wouldn't have undertaken without that assurance, according to the opinion. However, the panel said Friday it agreed with lower court findings that the affidavit "falls far short" of creating a genuine factual question over whether GTIF made such a promise.

Despite the affidavit's assertions, the attorney who drafted it cites no supporting documentation and doesn't specify any of the agreement's pertinent details, "such as who said what and when," the panel said. That isn't enough to unwind Ballard's summary judgment loss to a committee of GTIF equity holders that fought the firm's fee claim, it ruled.

Ballard argued that rejecting that part of the affidavit constituted an improper credibility determination, but the panel disagreed. Courts are allowed to observe when affidavits contain no facts and find them legally insufficient or conclusory at the summary judgment stage of litigation, it held.

Ballard had also pointed to GTIF's payment of some invoices and the fund's eventual scheduling of a $230,000 debt to the firm in its bankruptcy proceedings, but that still is not enough to reverse the equity committee's summary judgment, the panel said. Neither fact speaks to the relevant question under Wisconsin's statute of frauds, "which is not whether GTIF had any obligation to Ballard but whether it had a primary one," it held.

"No reasonable inference could lead a factfinder to find in Ballard's favor where it has no evidence of the promise itself and the evidence it does have is not tethered to the dispositive question under Wisconsin law," the panel said.

The court also rejected the law firm's argument that GTIF's oral agreement is enforceable on promissory estoppel grounds. Outside of the partner's affidavit, "the record contains no evidence of the promise" Ballard claims the investment fund made, it said.

And without such evidence, "no reasonable factfinder could conclude that the promise was 'one which the promisor should reasonably expect to induce' reliance," it ruled, citing case law on the issue.

Ballard had also asserted that Hull was entitled to GTIF's indemnification under both Wisconsin law and the investment fund's operating agreement, but the panel disagreed. Wisconsin law requires LLCs to indemnify any debt, obligation or liability a person incurs in their capacity as a current or former member or manager, but Hull was neither as he merely controlled Greenpoint Asset Management II LLC, one of GTIF's two decisionmakers, the panel said.

Hull could have availed himself of Wisconsin's statutory indemnification requirements had he opted to manage GTIF in his personal capacity, but he chose instead to control the fund through GAM "and that decision has consequences," the panel held. And GTIF's operating agreement does not trigger any indemnification rights for similar reasons, it said.

Representatives for Ballard and GTIF's equity committee didn't immediately respond Friday to a request for comment.

The U.S. Securities and Exchange Commission eventually went to trial against Hull, GAM, his investment management company Bluepoint Investment Counsel LLC, GTIF's other controlling member Chrysalis Financial LLC and Chrysalis manager Christopher Nohl on claims that they violated federal securities law with an offering that raised $53 million through "largely fictitious" gains in the Greenpoint fund, which was valued in part on a gem and mineral collection.

The men and their companies were hit with a $27.6 million judgment in September after a Wisconsin jury sided with the SEC on its claims years earlier. The trial court ordered the parties together to disgorge $12.56 million and pay $3.5 million in prejudgment interest, while also ordering a $5 million civil penalty for both Hull and Nohl and a $500,000 civil penalty for each of their businesses.

The SEC claimed in its 2019 suit that Hull and Nohl touted GTIF to investors claiming the fund had a $135 million asset value, even though that valuation was based almost entirely on unrealized gains. The SEC also claimed Chrysalis and GAM collected roughly $13.7 million in management and other fees "whenever cash was available" rather than covering other obligations and then loaned the individual defendants' own money to the fund at high interest rates.

Circuit Judges Amy St. Eve, Thomas Kirsch and Candace Jackson-Akiwumi sat on the panel for the Seventh Circuit.

Ballard Spahr is represented in-house by partners Matthew Summers and Charles Nelson.

GTIF's equity committee is represented by Elizabeth Janczak of Smith Gambrell & Russell LLP.

The case is Ballard Spahr LLP v. Official Committee of Equity Security Holders, case number 25-2134, in the U.S. Court of Appeals for the Seventh Circuit.