Will Lawyers get in trouble blowing smoke?; Be careful what you share with an Inmate; 3-2 vote on an Agreed Discipline – what does that mean?

Good to see a Bar Association help out the member lawyers on difficult ethics issues. The King Co. Bar Assoc. in Washington State has asked for guidance from the State Supreme Court on how to handle a conflict in the drug laws. Marijuana use will soon be legal under WA state law, but the federal law has not changed. So is it unethical for a state licensed attorney to use dope? Is it unethical to advise companies on how to comply with the state law on selling dope?

There are other issues where state law and federal law are at odds in various states. Voting rights issues come up, gun possession issues, campaign finance, and abortion laws.  Are lawyers at risk for following state laws, and not federal laws?  Will drug laws be different?

Wait and see.

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When will lawyers learn to be careful when visiting inmates?

Lake County lawyer Carl Jones should have followed the rules about sharing information with a jailed client.  He could have sent the inmate’s girlfriend’s letter through the mail, but it would probably be read, and her promise to lie for the inmate at trial would have been found.

More importantly, he could have told the Disciplinary Commission the truth about the matter when first asked.  When he was later testifying he told a different story, and for that he got a suspension for six months, without automatic reinstatement.

Lawyers interactions with inmates are constitutionally protected, up to a point. The inmate is entitled to private conferences so that a legitimate defense can be presented to the court.  But because we have special privileges, we must be extra careful to follow the rules.  Jones is the second lawyer this year to get disciplined for an improper interaction with a prisoner-client.  Earlier this year this blog reported this story.A Google search found: “About 66,000 results (0.31 seconds)”  to that lawyer’s name – most for this event.

Be careful out there, or more especially, when you are visiting someone in there!

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Value of a Conditional Agreement for Discipline

Plea bargains are a way of life for criminal defense lawyers, and negotiated settlements are the rule for civil litigators, it makes sense to try to work out a disciplinary matter as well.  At least today, that is.

In the Matter of Noah Holcomb, Jr. is a case on point.  Holcomb’s opinion shows that he violated several pretty important rules, 1.15 (3 subsections as different violations) on safekeeping of client funds, commingling client and attorney funds; 8.4 fraudulent conduct (hiding cash from the IRS); 1.5 setting and honoring fee agreements, not charging unreasonable fees, 8.4 conversion, and four different A&D Rules on handling trust accounts.  In addition he neglected client files (Rule 1.3).

By the time the matter got to the Supreme Court he still had not made restitution, but — he had cooperated with the Disc. Comm.

The Court starts its discussion with the following:  “This Court has disbarred attorneys who committed the type of misconduct to which Respondent has admitted.”  The important part is next: “The discipline the Court would impose might have been more severe than proposed by the parties had this matter been submitted without the Commission’s agreement.”

Now the agreement did not result in a slap on the wrist – Holcomb got a three-year suspension, without automatic reinstatement – and the  strong language of warning that reinstatement could be hard to come by:

We note, however, that regardless of the date on which Respondent is eligible to petition for reinstatement, reinstatement is discretionary and requires clear and convincing evidence of the attorney’s remorse, rehabilitation, and fitness to practice law. See Admis. Disc. R. 23(4)(b). Moreover, the parties agree that restitution should be a condition for Respondent’s reinstatement. 

The vote to approve the outcome was an unusual 3-2 with Justices David and Rush dissenting with the comment: “believing the Respondent should be disbarred.”

It sounds unlikely that Holcomb will return to the practice, but he might. After reading the opinion, you might wonder, as I do, if we want him back in the profession.

Did the Commission go too light on Holcomb in order to get an agreement, and if so, why? Apparently three justices accepted the reason (assuming it was explained somewhere), although they did not include the reason in their rationale.  Will they accept that next time?  Is this opinion a shot across the Commission’s bow?

Or is it a shot across the bow of those attorneys who stand their ground?

Breathing Space – IND lawyers and 1st Amendment Rights; Lawyers and Child Porn – Problem in CA; Rule 1.8(a) will be Enforced.

CONGRATULATIONS TO SUPREME COURT

Faced with a tough question about the interplay between the rights of a group of defendants to a fair trial, and the feelings of a trial court judge, when her possible bias is pointed out, the Court, in one of two disciplinary cases filed against the lawyers who were trying to protect their clients, under the Rules, found no violation of the Rules of Professional Conduct. This issue was raised here a couple weeks ago.

Thomas M. Dixon, of Osceola, outside of South Bend, together with David A. Wemhof, of South Bend, was accused of violating Rule 8.2(a) for the contents of his Motion for Recusal.   The Rule  says;  “A lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge.”  The Hearing Officer found a violation, and Dixon submitted that ruling to the full Court.  The Court in a 4-1 opinion held no violation occurred. 

The concern of lawyers in representing clients who fear a biased judge would have been palpable if the court said that an allegation of bias is proof of “a statement..false… concerning the qualifications or integrity of a judge.”  Rule 11 requires that the lawyer endorse the statements, but most are statements of opinion, most often the opinion of the litigant, who is the one with the right to a fair hearing.

In this case, the judge who was asked to recuse was also the judge who ruled on the request, and who filed the complaint.  And Dixon did good legal work here. The Court distinguishes this case from the Wilkens case of 2003, showing the efforts Dixon put into supporting the statements that were made about the need for the trial judge to recuse herself.

Good for the Court.  There are some limits on the authority of the Disciplinary Commission to protect judges from the rights of litigants through the attacks on their lawyers.

Let’s see if this portends any outcome in the Wemhof or Ogden cases now in the process.

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Child Porn, and other automatic disqualifiers 

Gary Grant, a Cal lawyer, was found by the ICE (Immigration and Customs Enforcement) to have used email to register for a PayPal account, in order to purchase and download child pornography.  With over 100,000 images deemed pornographic, ICE found 19 photos and one video of youths who appeared to be between the ages of 14-16.

Grant pleaded “innocent” but later admitted that a few photos of underage girls were downloaded, and promptly deleted.  Such a deletion does not remove the photo from the computer.  He pleaded guilty to one charge of felony possession, and the prosecutors dismissed two other charges: the sentence was 90 days served three years probation and sex registration for life.  Grant later violated his probation, and spent an additional 183 days in jail.

The Cal State Bar automatically suspended Grant’s license, pending hearing. The Bar Court trial judge recommended disbarment, but the Bar Review Department later recommended a suspension for a period. Bar Counsel appealed the recommendation to the state Supreme Court, which at this time has not ruled.

The question before the court is the “moral turpitude per se standard” California has for lawyers.  If a lawyer is convicted of a crime that qualifies as moral turpitude per se, the disciplinary proceedings are a summary disbarment.

The article on this in the California Lawyer (callawyer.com) describes the hearsay evidence problems, since the Bar Counsel did not have access to the images, but had a computer analyst “describe the images” she had viewed. The appeal is from the Review Department panel’s conclusion that felony possession of child pornography meets the moral turpitude per se standard.  As Grant was charged with having 2 out of 100,000 images that qualified, and there was no “proof that Grant sought out child pornographic images, displayed a sexual interest in children, or otherwise intended to harm a minor” according to Judge Catherine Purcell, and it was a case of first impression, the decision was for suspension.

The history of Cal discipline for child pornography cases is described in the article.  The conclusion, in the 18 cases since 2007, none of them have been summarily disbarred.  There have been 33 summary disbarment actions in the 2011-2013 period, most for forgery, grand theft or other frauds.

The question arises: What is the purpose of the Bar Disciplinary Process?  To punish bad people who hold licenses to practice, or to protect the public?

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AUTOMATIC FEE INCREASES ARE SUBJECT TO RULE 1.8(a)

Ellen Corcella started working on a case in 2009, with a written fee agreement providing for hourly fees of $175 per hour.  When the case concluded in 2011, she billed the clients more than 60 hours at her then rate of $200 per hours.  Client files grievance, she refunds the excess of $1580 and all is well, right?

Not quite.  During the representation, the Court found that Corcella changed the fee agreement twice. The first time to a contingent agreement, then to a blended contingent and hourly fee agreement.  At no time did she give the Rule 1.8(a) warning.*

Let’s go over this again.  If you change a fee agreement, written or not, that does, or may favor you as the lawyer, you must give a Rule 1.8(a) advisory to the client.  Tell the client to take time to obtain an independent professional legal opinion that the transaction is fair and reasonable to the client.  You also must determine that the modification is fair and reasonable, and is understood by the client.  Finally, get the approval of the change in writing.  Follow the rule, with due regard for that part of the Comment as applies.  See below.

*  Rule 1.8. Conflict of Interest: Current Clients: Specific Rules

(a)    A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1)    the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

(2)    the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and

(3)    the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Comment 1 to Rule 1.8(a), in part:

…It does not apply to ordinary initial fee arrangements between client and lawyer, which are governed by Rule 1.5, although its requirements must be met when the lawyer accepts an interest in the client’s business or other nonmonetary property as payment of all or part of a fee. Paragraph (a) applies when a lawyer seeks to renegotiate the terms of the fee arrangement with the client after representation begins in order to reach a new agreement that is more advantageous to the lawyer than the initial fee arrangement…

“Causing grief to clients” = slapdown by judge; Learn from your neighbor lawyers’ mistakes; attend your clients.

Fee Shifting is no Reason to Mishandle a Case

There are a number of statutes that allow for fee shifting, and we hear calls daily for “tort reform” that pushes that idea.  Here it caused all kinds of bad incentives, as pointed out in a 113 page trial court order on the Fee Petitions under USTA and/or ELA environmental laws. [My experience in front of Judge Goshorn in a few cases is that he is normally a judge who uses few words to make his points – this output is unlike his normal work.]

Judge Goshorn of Wells County was asked to approve fees for the plaintiffs’ lawyer in the amount of $676,986.11. He denied the request, mostly due to the conduct of the plaintiff’s counsel in the handling of the case.  Award to counsel $0. actually less, due to several contempt of court orders.

The judge said many things in 113 pages, none complimentary to Mark E. Shere, the lawyer for the plaintiffs in this case. A few direct slapdowns:

• …Shere caused “untold grief and damage to [his] former clients”… [p.2]
• “has been an impediment, not a facilitator, to the just resolution of this cause.” [p.2]
• “this case has been extraordinarily and needlessly protracted…due to Mr. Shere’s fee agreement with his client.”  [p.3]
• “… Shere drove this case off a cliff, leaving in his wake two bankrupt and divorced clients and a third client in financial trouble with its reputation sullied.” [p.5]

The judge was just getting warmed up.  He continued through 169 Findings of Fact and Conclusions of Law, never letting up on Shere.  On page 96 he found that the Fee Agreement Shere had with his clients violated Rule 1.8(i) of the Indiana Rules of Professional Conduct which states:

(i) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may:

(1)acquire a lien authorized by law to secure the lawyer’s fee or expenses; and

(2)contract with a client for a reasonable contingent fee in a civil case.

Judge Goshorn saw the fee agreement as giving Shere a stake in the case for clients Witt, to his favor and to the favor of co-client Hydrotech. He found that:

• “… the driver of this litigation was recovery of the maximum amount of fees for Mr. Shere, not assisting the Witts.” [p.99]

But this was not a screed against plaintiffs’ lawyers, he gave some fees to lawyers who worked for Shere, ordering the payment to the Clerk, and the clerk to direct the fees to those lawyers. [p.113].

The judge did not feel particularly sorry for the defendants in the case either, denying their petition for fees from Shere or his clients. The Court found:

• “This litigation was a caged grudge match [I like that word-picture offered by the judge] with both sides throwing punches. … The Court is concerned about the chilling effect an award of fees to defendants in a USTA or ELA action might have…” [p.111-2]

Shere gets nothing due to the way he tried the case, putting his interests above those of the client.

This case was also addressed by the Indiana Supreme Court in a March 21, 2012 opinion where Shere and his clients were held in contempt of court.  The Court, in  a 3-2 opinion agreed with the contempt finding, overturning a reversal by the Court of Appeals.

For some reason I suspect we may see another Supreme Court opinion coming out in the future concerning the actions taken by counsel in this case.

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Learn from your Neighbors*

One lesson that is important is for lawyers to learn from the mistakes of their neighbors. It is one of the reasons this blog exists. Elden Stoops, for example, should have learned from neighboring county lawyer Jeffrey Price‘s 2009 public reprimand.  The cases as described sound surprisingly similar.  Both lawyers filed family law matters, seeking emergency relief.  Both offered proposed Orders to the court granting the emergency relief their clients sought. Neither petition cited or certified the steps made to notify the opposing parties of the filing of the emergency filing, as required under Trial Rule 65(B).  Both courts set hearings and immediately granted the emergency relief. [Query, when can parties, and lawyers, count on judges reading pleadings and knowing the law on such things?]

Later the opposing parties were notified of the actions taken.

Unlike Price, who was charged with one offense, Stoops was charged and sanctioned for two offenses. The one above was for violating Rules 3.5(b) – ex parte communication with a judge; 8.4(d) & (f) conduct prejudicial to the administration of justice, and assisting a judicial officer in violation of rules of judicial conduct. Stoops second violation was a conflict of interest, when co-clients turned against each other, and he took the case of one of the former co-clients.

Public reprimand for his actions. He had a clean record, and the court accepted the idea that he was trying to protect children, were mitigating factors accepted by the court.

* A lawyer from my firm was involved in the Stoops case.

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Take Care of the Clients

Ron Weldy has been a frequent poster on the ISBA email discussion lists.  He should have been paying attention to his clients’ matters a bit better.  The Supreme Court recently suspended Weldy for 180 days, 90 to serve and one year probation.  From the six counts, there were issues of fee agreements, client communication, case management, and knowledge of the law were problems for the respondent.  The list of rule problems is lengthy:

Violations: The parties agree that Respondent violated these Indiana Professional Conduct Rules prohibiting the following misconduct:

1.2(a): Failure to abide by a client’s decision concerning the objectives of representation.

1.3: Failure to act with reasonable diligence and promptness.

1.4(a)(3): Failure to keep a client reasonably informed about the status of a matter.

1.4(a)(4): Failure to comply promptly with a client’s reasonable requests for information.

1.4(b): Failure to explain a matter to the extent reasonably necessary to permit a client to make informed decisions.

1.5(b): Failure to communicate the basis or rate of the fee for which a client will be responsible before or within a reasonable time after commencing the representation.

1.5(c): Failure to disclose to a client the method by which a contingent legal fee will be determined.

1.7(a)(2): Representing a client when the representation may be materially limited by the attorney’s own self-interest.

1.15(e): Failure to properly secure disputed property until the dispute is resolved.

1.16(a)(3): Continuing representation of a client after the lawyer is discharged.

3.1: Asserting a position for which there is no non-frivolous basis in law or fact.

3.2: Failure to expedite litigation consistent with the interests of a client.

3.3(a)(1): Knowingly making a false statement of fact or law to a tribunal.

8.4(c): Engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.

8.4(d): Engaging in conduct prejudicial to the administration of justice.

This case is a good one to review before taking a weekend off.  Stay diligent, read the law. Be careful with your fee agreements

Corporate Lawyers have Troubles too; E-Discovery Issues; Reimbursements?

Corporate lawyers don’t get too much discipline press

Sometimes they deserve it, so they too, can stay off the radar of LawyersWithTroubles.

Ky. lawyer Ronald Hines was a corporate lawyer with Cody Properties, Inc.  He worked there for years, Cody was the employer.  Then trouble brewed in the corporate boardroom, and Hines took a side with one faction.  In fact he filed a suit against some of the corporate officers, without the Board’s approval, and expressed his opinion that the Board was not properly elected.  But he did not do it within the chain of command, or under the Rules of Professional Conduct.

He turned corporate files over to dissident shareholders, and objected to the LLC’s organizing papers that he had drafted to create the entity, calling them “fraudulent.”  He got fired by the new management, but still continued to hold himself out as “counsel for the corporation.”

The Kentucky Supreme Court found violations or Rule 1.7 – Conflict of Interests, 1.13(a) – Duty of Loyalty with Organizational Clients, 1.4(a) Failure to Communicate with Client (the new officers he was fired by), 1.16 Duties  Upon Termination of Representation, and 1.8 Duty of Confidentiality of Client Information.

The Court suspended Hines for 120 days for this series of violations.  KY does not report the process of reinstatement in this Order.

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“I [heart] hot moms”

One thing about technology is the great evidence that is contained there. Clients do dumb things, and tell the world.  Lawyers who help them “clean up the record” are doing even dumber (and more expensive) things as Virginia lawyer Matt Murray found out.

Fortunately for the client the VA Supreme Court upheld the $8.5M wrongful death verdict coming out of the tragic case, but Murray got tagged for a $542,000 legal fee sanction for advising the client to “clean up the Facebook pages” where, among other things, the deceased woman’s husband and plaintiff had a photo showing himself in a T-shirt that read “I love hot moms.”  Murray thought that might hurt the case, so he had a paralegal instruct the husband to remove that photo, 15 others and some text.  Because the husband had previously communicated with the adjuster through Facebook, the defendants knew of  the materials.

Murray has been reported to DC for abusing the Rules of Professional Conduct, and is now under investigation. He is no longer actively practicing law.

Another article on this case by Sharon Nelson: http://tinyurl.com/l586f5k

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Reimbursements — I  need an expense for that?

BIGLAW lawyers live in a different world.  One thought nothing of seeking $69,000 in reimbursements for cab fare, but forgot to first incur the $69,000 in fares.  Lee Smolen, of the Chicago office of Chicago’s biggest law firm Sidley & Austin, not only got his cab fares paid, but also $50,000 in entertainment expenses “not incurred for legitimate firm purposes.”

Apparently the partners at S&A did not see the humor, fired him and submitted the theft to the IL disciplinary authorities.

But it did not faze his new firm, DLA Piper, with law offices in Chicago and around the world.  It said that Lee had “learned from his experience” and will be a productive member of their team.

H/T John Conlon

Want Fewer Troubles? See a small firm lawyer; Prenda Redux; Township Courts

I had a good week leading up to and at the Indiana Solo and Small Firm Conference June 6-8 at French Lick Indiana. Kudos to Marc Matheny (also of the National SSF Conf. Board and the ABATECH Show Board) who chaired the conference this year and next.

Indiana’s conference was its largest yet, and I chaired the new series of courses called STAFF TRACK, which added to the knowledge and skills of law firm staff members.

Why do I say if you want fewer troubles see a small firm lawyer? Last month AM LAW, a leading legal publisher came out with an article on the latest big law survey by Altman-Weil Co. on where the law and practice is headed.  Steve Harper, an author and blogger interpreted the AM LAW article here.

His topic sentences are “The Troubling Big Picture; Group Stupidity; Lateral Incompetence; Institutional Ineptitude; and, Cognitive Dissonance” finding the focus of the leaders of the big firms as wrongheaded:  When asked to identify their greatest challenges over the next 24 months, most managers cited “increasing revenue.” The rest of the list is, in order: new business, growth, profitability, management transition, cost management, and attracting talent. If you’re wondering where clients fit—other than as a source of revenue and profits in items one, two, and three—“client value” finished eighth.

He summarizes the report of the responses by 250 of the largest 800 firms, as follows:

•Managing partners know that change is coming and clients are demanding it, but firms aren’t revisiting their basic strategies or business models.

•Growth and profits finish far ahead of enhancing client value as most law firm leaders’ top concerns.

•Leaders view aggressive lateral hiring as critical to law firm growth, but when laterals don’t produce, most firms don’t do much about it.

•Succession planning is problematic because senior partners don’t want to relinquish compensation that is tied to their client billings.

•As senior leaders continue to pull up the equity partner ladder on the next generation, morale plummets and managing partners worry about the absence of midlevel talent to serve clients in the future.

Client Value comes in Eighth? (One commentator was surprised the clients made the top ten at Biglaw!)  No wonder the mood at the SSF Conference was upbeat. Our “big” siblings at the Biglaw Firms are now leaving the good clients to those of us who care.

H/T Patrick Olmstead.

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More on Prenda Law.

A few weeks ago, I mentioned a federal judge is ticked-off at the Chicago law firm Prenda, that was pursuing copyright violations against folks it alleged had viewed internet pornography in violation of the copyright law.  Tying the copyright violation with the fear of exposure for that private act, lots of folks were settling the claims, and others who did not do so prior to the suit quickly settled before court notices were out.

In the earlier reports the judge said from the bench that something was not right. Well now he has unloaded on the lawyers, with this Order of the Court.  In an eleven page order he finds violations of Rule 11, (requiring lawyers to know the facts that they are alleging have some basis in fact) and acts of fraud upon the court.  He orders the firm to pay $81,000+ to the Court in 14 days to repay the John Doe defendant in the order for costs and attorney fees. The judge doubled the fees requested by the lawyers, due to the egregious acts of the Prenda firm.

The judge also reports the two lawyers in his case to the Disciplinary Committee of the State of California, plus every other state where they practice, and every court, both state and federal, where the lawyers have cases pending. He says they suffer from a moral turpitude that should not infect the bar.

Just to top things off, he sends his report to the US Attorney’s office to consider RICO charges and to the IRS for investigation of every lawyer in the law firm.

Moral of the story: Federal Judges do not play games with scoundrels.

H/T Vic Indiano

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Marion County Township Courts

More coming on this issue soon. Will the Legislature or Supreme Court do anything? I have recently had a chance to read the Small Claims Task Force Report: Report on the Marion County Small Claims Courts, authored by Court of Appeals Judges John Baker and Betty Barteau, Sr. Judge.

Some solid recommendations that went no place in the Indiana Legislature.  What will the Supreme Court do?  Will the Legislature do anything?

Is it all on WTHR 13 News to push the changes? I had a conversation on fees, ethics, and lawyer and judge discipline with Sandra Chapman this week.  It will be interesting to follow this story.

PA Judge steals Drugs?; Former VA Bar President gets Disbarred; the Indiana Oath of Attorneys

Another PA Judge goes bad?

Pennsylvania has had a run of bad luck with its judges. In 2011, two judges were sentenced for taking kickbacks for sending kids to a private juvenile prison instead of to juvenile probation. Now a judge is charged with stealing cocaine from the evidence locker on drug cases that had been closed.

Judge Paul Pozonsky resigned abruptly last year, after questions were raised about his residency. Now charges are pending for the alleged theft of drugs from his evidence locker. Pozonsky had changed the local rules for evidence in drug cases, requiring that the actual drugs be brought to court in criminal cases, and placed in evidence. After a while State Police did an inventory of the evidence closet, and found drugs missing and evidence tampered with.

His lawyer calls it “a serious matter, and he [Pozonsky] is treating it as such.” Really serious.
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Former Virginia Bar President Bills Big – Disbarred

With a billing rate of $850 per hour, former Virginia Bar President Glenn Lewis still thought he needed to pad his bill. But there is the padding of a coffee break while on the client’s clock, and then there is Lewis’s padding.

According to the Washington Post, Lewis was “once one of the Washington area’s highest-paid and most-respected divorce lawyers and a former president of the Virginia Bar Association…” See the previous post on the Icarus Rule.

Suing clients over a bill is often a mistake (one PLP defense lawyer reports that 90% of client claims for malpractice against lawyers are, in fact, cross claims filed when the lawyer first sued for unpaid fees), but when the client you sue is also a lawyer, and the suit is for $500,000 more in fees on a divorce case where the client has already paid $382,000, and the case settled during pre-trial work, that should be a concern that was considered before filing the first lawsuit. Among the charges in the suit was a claim $253,000 in interest on the past due legal fees [doing the math, $253,000 interest on $632,000 in fees, more than 1/2 of which had been paid might be a usurious interest rate].

When a smart client gets sued for fees, and the client can afford a billing expert, the lawyer’s time records will get reviewed, very carefully. Lewis’s records could not stand up to a serious challenge, although he did stand by the accounting offered to the court. When the records started showing more than 30 hours a day billed by Lewis, the situation got sticky for him. He blamed “block billing” but that is no excuse, the Virginia Disciplinary Commission decided. The decision is appealable to the VA Supreme Court.

Lewis settled the civil case with the lawyer-client. He had asked for $500K from the client, but Lewis paid out $102K to the client. Then the trouble got worse for Lewis. Two more former clients sued, they claimed that they had paid, but Lewis did not do the work, and refused to refund retainers. Once things started falling in, they fell hard, these two got default judgments and then more claims came in.

Bar Discipline Commissions understand that working with clients can be tough, but taking clients’ money and doing no work, that is just not acceptable. It is hard to understand why the lawyers violate their Oath of Attorneys.

 

Oath of Attorneys

FYI – this is Indiana Admission and Discipline Rule 22.

Upon being admitted to practice law in the state of Indiana, each applicant shall take and subscribe to the following oath or affirmation:

“I do solemnly swear or affirm that: I will support the Constitution of the United States and the Constitution of the State of Indiana; I will maintain the respect due to courts of justice and judicial officers; I will not counsel or maintain any action, proceeding, or defense which shall appear to me to be unjust, but this obligation shall not prevent me from defending a person charged with crime in any case; I will employ for the purpose of maintaining the causes confided to me, such means only as are consistent with truth, and never seek to mislead the court or jury by any artifice or false statement of fact or law; I will maintain the confidence and preserve inviolate the secrets of my client at every peril to myself; I will abstain from offensive personality and advance no fact prejudicial to the honor or reputation of a party or witness, unless required by the justice of the cause with which I am charged; I will not encourage either the commencement or the continuance of any action or proceeding from any motive of passion or interest; I will never reject, from any consideration personal to myself, the cause of the defenseless, the oppressed or those who cannot afford adequate legal assistance; so help me God.”

The Indiana Bar Fellows dinner will join in reciting the Oath of Attorneys this Friday at the annual Fellows Dinner, this time in Chicago.  If you are interested in becoming a Fellow of the Indiana Bar Foundation, call the IBF office.

When you, a lawyer, are in trouble, hire a competent lawyer; NY Times on Billing Troubles Abound with Fraud Allegation; More on Fee issues – what is a “document review” billing entry worth?

Can you believe this guy is [might once again be] a lawyer?

It is reportedly a heart stopping moment, you get a certified letter from the Disciplinary Commission inviting you to explain some complaint made against you.  It has to be even more disconcerting when the Commission files, and serves you with its Verified Complaint; now you are past the informal opportunity to solve the problem.

The Best Practice is to hire a competent lawyer to help you at the first letter, but if you don’t, then hire one at the complaint stage – you failed to get yourself off, get help.

Before you go to lunch, find someone, call and set an appointment. Do not go out for the afternoon golf game.  Save your license.

Jeffery Fetters had even been through the process before. In 2012 he started down a path he had previously walked in 2005.  This time he did not read the A&D Rules that govern the disciplinary process.  He misfiled his answer to the complaint. The misfiled answer did not meet the standards for an answer to a complaint. He apparently took the whole process lightly.

Just like he took the duty of effectively representing his client in the eviction process. He won the immediate eviction hearing, but did nothing after that, and eventually refused to talk to the client about the problems.

The court found the following violations:

The Court finds that Respondent violated these Indiana Professional Conduct Rules prohibiting the following misconduct:

1.2(a): Failure to abide by a client’s decisions concerning the objectives of representation.

1.3: Failure to act with reasonable diligence and promptness.

1.4(a)(3): Failure to keep a client reasonably informed about the status of a matter.

1.4(b): Failure to explain a matter to the extent reasonably necessary to permit a client to make informed decisions.

8.1(a): Knowingly making a false statement of material fact to the Disciplinary Commission in connection with a disciplinary matter.

Lots of failures there, and no effective way to answer the allegations because he did not follow the rules, or hire a competent lawyer to assist him.
What do you think the Court did? Answer is below.

DLA Piper in More Trouble

In March, I reported the biggest of the BIGLAW firms that may have gotten caught engaging in serious bill padding. And this was a billing problem of the magnitude of a $200,000 over-estimate, and it was as much as $675,000 in dispute. The NY Times article updating us on the value of the dispute now is here.

One rule of being a smart lawyer is to be real careful before deciding to “sue a client for fees.”  It is on many of the “do not ever do this” lists right before “fool around with the staff, nobody will ever know,” and after “what is a small loan from the trust account going to hurt.”  There are a lot of reasons, not to sue a client, and I will mention a couple illustrated by this case:

1 – you already created a litigation tiger and now you grabbed him by the tail.  Clients going through a lawsuit are often seriously ticked off, and to then be sued by your lawyers, the people you put your trust in, really gets under most clients’ skin.

2 – if you sue your client, be sure that you don’t have a smoking gun in the file, or on the computer. That means you don’t have anything that suggests, let alone shows that you were padding the bill or committing malpractice or ethical violations, or anything else, anywhere in a letter, an email, an interoffice communication, or on a scratch pad. Discovery is getting good.

If you think your client owes you $675K, then the client probably has the resources to spend another $500K searching your database.

Another reason to use a smaller firm?

The Times quotes a “billing ethics professor” (I did not know we have ethics professors who specialize in billing matters – but now know why we do) in this paragraph:

In a survey of about 250 lawyers that Professor Ross conducted in 2007, more than half acknowledged that the prospect of billing extra time influenced their decision to perform pointless assignments, such as doing excessive legal research or extraneous document review. There is also the issue of “featherbedding,” he said, or throwing armies of bodies at every problem.

When your law firm does not have “armies of bodies” hanging around looking for something to do, the “featherbedding” issue is mooted to a great extent.  And when your lawyer or small team of lawyers, that you know by name, are working on your matter, the thought of performing “pointless assignments” is not near as tempting as it might be if you are teaching a large class of first year lawyers the ways of research or the firm’s ethics of billing.

The most recent news in the case?

His [Victor’s] lawyer, Larry Hutcher at Davidoff Hutcher & Citron, amended the countersuit last week to include a fraud claim and a request for $22.5 million in punitive damages, a number representing 1 percent of DLA Piper’s reported revenue last year. (my emphasis)

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The other end of the Canada case.

Last week we discussed the Canada case, where the fees, though flat, were earned, and upon the client’s demand did not need to be returned.  Octavia Snulligan did not understand that rule before Canada was decided.

She too requested a flat fee, but did not appear to do the work required, or at least she could not satisfy the client that she was doing the work that was expected.  After five months she was fired, and the client wanted part of her retainer money back. Snulligan refused, and when she was asked for an invoice, she crafted one. She, like many lawyers do not keep time sheets, but she created one anyway, and showed 37.8 hours of work, in 32 entries.  28 of the entries were for “Document Review” without further explanation. The hearing officer, the commission and the Supreme Court were all unimpressed with the reconstructed time records.

So unimpressed that it was the most serious aggravating factor found. It was “calculated to mislead the Family, the Commission and the Hearing Officer” said the Supreme Court.

Snulligan got a retainer of $6,000 on a flat fee of $12,000. She had the case for five months and said she had worked it. The court said she failed to refund the unearned portion, which the hearing officer calculated as $5,000 in unearned fees of the $6,000 she had received.

The court goes out of its way to say that a “$12,000 total fee, or her collection of $6,000 of that fee before she was terminated would [not] have been unreasonable” if she had been able to complete the representation. But she did not, she was discharged and had not met the Realtor’s Rule of getting to the close before getting fired by the client.

Another good discussion on fee issues by the court, helping the bar to better understand where the line of good behavior ends before you get into bad behavior.

What do you think the Court did? Answer is below.

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Fetters got Six month suspension without automatic reinstatement [follow link to find out about automatic reinstatement], with a requirement for restitution for reinstatement.

Snulligan got a 30 day suspension without automatic reinstatement, but with a proviso that if she refunds the $5,000 in overcharged fees, she may petition for immediate reinstatement.

The Realtors’ Rule?; Aggression pays off in penalty; Automatic Reinstatement

Exonerated in a Discipline Case, and Good Explanation by the Court – a Two-fer

First it is good to see the Court side with a respondent on occasion. Robert Canada got a ruling in his favor, and on that gave a solid explanation of why. And while the court did not say so, exactly, it seems it implemented the Realtors’ Rule.

What is the Realtors’ Rule,  you ask?  When a realtor is trying to sell a property under listing, the seller cannot just walk away when there is a buyer.  The rule is if the real estate agent (I know Realtor® is a registered trademark of the NAR) produces a ready, willing and able buyer who makes a bona fide offer at or above the listing price (or a price the seller later sells for), the realtor has earned the full commission, and the fact that the seller refuses to complete the sale does not mean that the seller does not have to pay the realtor.

Canada offered to “get a plea” in a Class A Felony drug case in exchange for a fee of $10,000. That is what the client asked for, and what the lawyer agreed to do. He worked out a plea, the client was happy, and agreed that it was a good plea, then before entering the plea, the client changed lawyers “to get a better deal.”  New lawyer got the defendant the same deal that Canada had worked out. The client demanded a refund since Canada had not “earned the fee.”

There was a written fee agreement and the court looked it over carefully. The agreement contained the toxic words “fee is non-refundable” which is a big red flag for the Commission and the Court.  Here, although the court said there were qualifiers to the refund that were not appropriate in a flat fee agreement (possibility of preclusion of other representation and accessibility guaranteed), in this case, and because Canada had completed the task he agreed to perform, the fee was fully earned as the plea was obtained, even if the defendant did not accept it the first time. The red flag caused the review, but did not spell trouble – this time.

Canada estimated that he had spent 20 hours on the case, which did not seem to factor into the opinion.  In other words, as a flat fee case, the court did not retroactively do an hourly fee analysis (divide the fee by the hours to see if the resulting rate “shocked the consciences” of the judges. Nor should they.

Copy the following language, and imprint it on your minds, consciences, and the file folder where your form fee agreements rest:

Discussion: This Court has addressed fee agreements in Matter of O’Farrell, 942 N.E.2d 799 (Ind. 2011), Matter of Kendall, 804 N.E.2d 1152 (Ind. 2004), and Matter of Thonert, 682 N.E.2d 522 (Ind. 1997). Under the guidance provided by these opinions, we conclude that the fee Respondent charged in this case was a permissible flat fee (notwithstanding the fee agreement’s one sentence mentioning possible preclusion of other representation and guaranty of priority of access, which would have been more relevant if the fee were a general retainer). Moreover, the agreement properly advised Client that a refund was possible in the event of a failure to perform the agreed legal services. See Kendall, 804 N.E.2d at 1160. The hearing officer found the amount of the flat fee to be reasonable. We therefore find no infirmity with the fee agreement itself.

If you are looking into the use of flat fee agreements with clients (not to be confused with menu pricing agreements) pay close attention. I disagree that the preclusion issue or the guaranty of access are more properly for a general retainer, as taking a drug case often precludes other drug cases due to the conflict of interest rules, and guaranteed prompt access is always a premium item, and should not generally be given away. Nevertheless, it is a helpful opinion.

As one who tells lawyers never to use the words “fee” and “nonrefundable” in the same paragraph, let alone sentence, I partially retract that. But I still urge extreme caution. You may get the Canada treatment.

Mr. Canada, sorry you went through this, but your case improves the profession’s understanding on how to write flat fee agreements, and you were exonerated.  Thank you.

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 Big Time Aggressive Tactics Backfire Big Time

Gordon B. Dempsey takes no prisoners in litigation, at least in the cases where he is a party. The facts are pretty simple, buy an apartment building, don’t pay the payments, you get sued. In 2002 the foreclosure of his apartment building was ordered, and then his chapter 13 bankruptcy stayed the sale. The convoluted facts get worse, and you can read them here. Eventually, and after the parties “settled the suit” in 2008, Dempsey went on the attack again.

He seemed to have a concern with Jewish people, and with lawyers who might be Jewish. The court findings were:

… that Respondent violated these Indiana Professional Conduct Rules prohibiting the following misconduct:

3.1: Asserting a position for which there is no non-frivolous basis in law or fact.

4.4: Using means that have no substantial purpose other than to embarrass, delay, or burden a third person.

8.4(g): Engaging in conduct that was not legitimate advocacy, in a professional capacity, manifesting bias or prejudice based upon race, religion, and disability (mental condition).
The penalty section discusses Dempsey’s history of “unethical litigation practices” “virulent bigotry” as possibly enough of a reason for disbarment, but holds back from that.  He got a three-year suspension without automatic reinstatement.

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Automatic Reinstatement: What does it mean to get, or not get Automatic Reinstatement?

Disciplinary Commission staff lawyer Bob Shook, former prosecutor in Johnson County, explained the importance of getting automatic reinstatement at the Fulton County Bar Outing CLE a couple of years ago. Admission and Discipline Rule 23, § 4 covers reinstatement.  It says:

A person who has been suspended from the practice of law may petition for reinstatement when the term of suspension prescribed in the order of suspension has elapsed. … If costs have been imposed as part of an order of suspension or an order accepting an affidavit of resignation, those costs must be paid before a petition for reinstatement is filed.

 (b) A petition for reinstatement may be granted if the petitioner establishes by clear and convincing evidence before the disciplinary commission of this Court that:

(1) The petitioner desires in good faith to obtain restoration of his or her privilege to practice law;

(2) The petitioner has not practiced law in this State or attempted to do so since he or she was disciplined;

 (3) The petitioner has complied fully with the terms of the order for discipline;

 (4) The petitioner’s attitude towards the misconduct for which he or she was disciplined is one of genuine remorse;

 (5) The petitioner’s conduct since the discipline was imposed has been exemplary and above reproach;

 (6) The petitioner has a proper understanding of and attitude towards the standards that are imposed upon members of the bar and will conduct himself or herself in conformity with such standards;

 (7) The petitioner can safely be recommended to the legal profession, the courts and the public as a person fit to be consulted by others and to represent them and otherwise act in matters of trust and confidence, and in general to aid in the administration of justice as a member of the bar and an officer of the Courts;

 (8) The disability has been removed, if the discipline was imposed by reason of physical or mental illness or infirmity, or for use of or addiction to intoxicants or drugs;

 (9) The petitioner has taken the Multistate Professional Responsibility Examination (MPRE) within six (6) months before or after the date the petition for reinstatement is filed and passed with a scaled score of eighty (80) or above.

So, you have to show remorse, comply with the order, and take the MPRE and score an 80 or above.  That means you have to go back and seriously study ethics in detail.

According to what I recall Shook saying, the process for reinstatement usually will add about 9 months to the end of a suspension.  That means when you read disciplinary opinions found here, the words about reinstatement may mean the difference between functional disbarment and not.

 

 

Pretend you are a Supreme on DI cases; Duty when depressed; Sign Here Please; Filing Taxes is Timely

As a trial, I will be sharing the facts of a few DI cases, and poll the readers how they think the Court ruled, as punishment for the violations. Later in the blog entry I disclose the Court’s actual decision. Are you tougher than a Supreme?

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William Dittrich neglected several cases over a four-year period. The neglect included failing to do the work, refusing to respond to clients’ requests for information, not placing unearned fees in trust and failing to refund unearned fees.

He knew he had health and depression issues, but did not seek adequate treatment, and placed his interests ahead of his clients’ interests.

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Unsigned document to file with the court, client forgot to sign her name. What do you do? There are several wrong answers: file it unsigned, ask the staff to sign for the client, or worst of all – sign the client’s name to the document. Ray Robison chose the worst of the options.

Sisters were co-personal representatives, one signed all but one document in the stack of papers. Robison signed her name to the unsigned document, then sent them to the sister for her signatures. Sister noticed that the signature was not right.

Robison cooperated, withdrew without a fight, and the court acknowledged that his purpose was to avoid inconveniencing a client. But it was a violation of Rule 8.4 on fraud, dishonesty, deceit or misrepresentation.

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SC lawyer David Flowers failed to file tax returns for 2007-2010. An anonymous complainant reported these facts to the South Carolina Disciplinary Commission, and it got ugly. SC found he violated Rule 8.4 of the RPC, together with two other codes of lawyer conduct.

He admits he wants to give up the practice of law, and suffers from the stress of the practice. He has not yet paid the taxes due.

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Dittrich, got 90 day suspension with automatic reinstatement. Is working with JLAP according to the Opinion.

Robison got an agreement for a public reprimand accepted by the Court.

Flowers got 90 day “definite suspension” meaning that he must file for reinstatement, and he may not file until after he pays the taxes. There must have been some interest in figuring out who the “anonymous source” was, as it made the opinion.

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Tell me if you liked the polls in the body of the blog.

Report the Claim; Trust Account Abuse

Lawyer Messed Up Deal, Better Report

Koransky Bouwer & Poracky P.C. had an associate mess up. It ended up in Federal Court, then the 7th Cir. <here>.  Lots to put on the back of an associate.

The young associate filed a signed contract rather than send it to the parties as evidence that the deal was completed. The party not represented by the firm withdrew its acceptance before delivery of the contract to all parties, black letter law allows that. Client is justifiably upset.

While this is going on, the law firm that the associate works for, Koransky & Bouwer, renews its malpractice coverage with The Bar Plan, its professional liability carrier. In the process, there is a question that reads something like “are there any claims or potential claims in existence, now or before we renew?”  Firm, which knew about this problem, with one of the name partners being involved in the matter, said “no problem” [or words to that effect].

Client, not happy to have lost the contract sues the firm, who turns the complaint over to the PLP company.  It says something like “wait, from these dates and all, it appears you knew of this claim when you renewed your insurance, and you did not tell us.” Another black letter issue in the law is that a misstatement in an insurance application will void the application. So the Bar Plan says: “We have no duty to defend or pay for the claim!” K&B filed for declaratory judgment on that issue in ND Ind. federal court, the trial court said “sorry law firm, no coverage.” The 7th Circuit agreed.
Lesson? The quick response application often found in policy renewals is not your friend. Your duty to disclose still exists. Does that mean you must report every disgruntled client who might conceivably file a claim? This blog does not offer legal advice, but I recommend you read the underlying policy about when you need to submit a timely claim.

One lawyer has suggested that the insurance company should be required to show that it was prejudiced by the delay in the notice, but that is not the current state of the law, in this Circuit.

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Watch the Trust Account

Edguardo Martinez Suarez is a Hamilton County lawyer, with a pattern of trust account problems. In 2006 he bounced a trust account check, which automatically brought the Disciplinary Commission in via the rule of mandatory reporting of bounced trust checks by a bank holding an IOLTA account. Suarez said “it is a mistake” but could not show how the mistake occurred. In 2009 the Commission demanded a CPA audit of the account, but the CPA reported there was a lack of documents to allow for an audit.

With that, the Commission started an in-house audit. The Supreme Court characterized the findings as many “violations, which took place from 2006 through 2012, includ[ing] at least six instances of paying personal and business expenses from the trust account, 55 instances of disbursing funds in excess of the amount held in trust for each corresponding client, and making 14 cash withdrawals.”

Then to compound problems he committed another violation, keeping more than “a nominal balance of” personal funds commingled to protect the account. But the court, in reviewing the Agreed Stipulation with Suarez, found three good things: no prior discipline history; no selfish motive on Suarez’s part; and, no client lost any funds from his violations.

The parties agreed to a 60 day suspension, stayed with two years probation. For two years he must: 1) maintain his trust account in accordance with the Disciplinary Commission’s 51 page white paper on Trust Account Management: Handling Client and Third Party Funds most recently updated in March 2012; 2) Have the Trust Account monitored by a CPA approved by the Commission, and have quarterly reports made to the Commission; and, 3) Agree that a violation of probation will cause the 60 day suspension to go into effect, and there will be no automatic reinstatement after the suspension. Finally, at the end of probation Suarez will be required to petition for dismissal of the probation. Somehow he was not ordered into the CLE on trust account management.

Seems like an appropriate disposition, as no clients were harmed by the mistakes. Management of the trust account is one of the most critical skills an attorney with trust account duties must have. Failure there is a ticket to Discipline World, and it is tough to get out with your skin intact.

There are CLE courses on Trust Account management, the DC staff often are speakers. Indiana’s Solo and Small Firm Conference has done sessions on this in 2004 and 2007, and likely will do more. ISBA-CLE and ICLEF do sessions annually. A great book is out there by one of the ABA’s most successful writers, Jay Foonberg titled “The ABA Guide to Lawyer Trust Accounts” (my version is dated 1996.)

Protect yourself and your clients and your license. Review Rule 1.15 of the Rules of Professional Conduct, and Admission & Discipline Rule 23 Sec. 29-30, and Overdraft Rule 2.