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.

***

 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.

***

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.

 

 

Advertisement

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.

****

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.

IOLTA UPDATE if you accept Credit Cards: Circular 230 Disclosure: CBS Radio v. Emmis = DQ:

Credit Cards and IOLTA – New Problem

If you have been innovative over the past few years and started to accept credit card payments, and then posted them when required, directly to your IOLTA trust account (thanks Dan Reed and LawPay – a great ISBA member benefit) you better check your merchant account now.

Congress added Section 6050W to the code effective Jan 1, 2013.  As reported in LawBizzCoo, a legal business blog, there is a new requirement that if the credit card processor’s information is not exactly as contained in the IRS’s file (i.e. name change of firm, new address) the processor must withhold 28% of each deposit processed by the credit card company, including funds deposited in IOLTA.

The Disciplinary Commission may start getting notices of bounced checks from banks (required under the rules allowing banks to hold IOLTA funds) and lawyers may start getting certified letters from the Commission.  Those funds are not being mis-deposited, so you cannot just move them, they are held for potential taxes. You have to come up with the funds, and answer the grievance, in short order. Take a moment now and check your EIN letter and your Merchant Account Agreement. Fix it ASAP.

The same will happen to your general account, but that will not automatically involve the DC. It may later, but your landlord will not appreciate the rent check bouncing.

I discussed this with my office manager and she has been on top of it for a while, thanks to AffiniPay (a/k/a LawPay and Dan Reed). Whether you are with LawPay or some other provider, it is your skin in the game. Make sure everything lines up as it should.

***

Tax abuse schemes are serious! Up to $190M serious for one lawyer.

The IRS issued one of its worst ideas a few years ago, called the Circular 230 Disclosure. Good in theory, to require lawyers to warn clients and potential clients not to construe information in a letter or email as being tax advice from the author to engage in a tax scheme, unless that is the purpose of the letter. Now a majority of lawyers’ posts of recipes or sports commentary carries a long disclaimer at the end that no client lacking an MBA could understand, and that most posters do not understand, or they would not prize their every utterance so highly!

But, sometimes folks should avoid doing what lawyers like Donna Guerin did, and review the tax code before writing tax schemes.

Ms. Guerin wrote a scheme so good she and her co-author claimed that her law firm’s clients could save millions of dollars in taxes. And she was no fly-by-night lawyer. A partner in the once prestigious BIG law firm Jenkins & Gilchrist, she recently pleaded guilt to criminal tax fraud, will go to prison for 8 years and has agreed to a penalty and restitution of $190 Million. Her partner entered his plea early and only has to pay $1.6 Million.

For my lawyer friends, be careful with the indiscriminate use of the Circular 230 language, and for the lawyers who do tax work, go back and read Circular 230 in-depth. Then be careful.

****
Great fight, but Ice goes down.

Speaking last week on the Ethics of Developing and Representing Businesses, I was asked to discuss those lawyers who get disqualified from cases for overlooking and violating a Conflict of Interest. Rules 1.7 & 1.9 of the Indiana Rules of Professional Conduct are pretty clear when lawyers must not violate the pledge of loyalty we take to our clients (see Comment 1 to RPC 1.7). But lawyers continue to lose focus of their duty, often when one engagement is completed and a chance to earn a new fee surfaces in a “new” case.

I have had the call on the Ethics Hotline (facts changed to protect the calling lawyers) where a previous client went to a new lawyer, with a similar problem, and the same or similar issues. The old lawyer gets in the case, deciding that things have changed since the first time these folks met. Then that old lawyer just hates getting the call or letter saying “I think you have a conflict and need to get out of the case.”  Take that call seriously!

One of Indy’s premiere big firms, Ice Miller was hired by Walter Berger, an employee of Emmis Broadcasting Co., to help him in a senior management employment contract in 2002. Emmis had suggested Ice Miller to Berger. In 2005 Berger renewed that contract with Emmis, then several months later left Emmis to go to work for CBS Radio, Inc. Emmis did not like that, hired their lawyers, Another of Indy’s top big firms, Barnes & Thornburg to sue CBS for hiring Berger, (USDC, So. IN, Case No. 1:06-cv-0920) then it discharged B&T and hired Ice Miller to represent it in the case.

Ice shows up in the suit, and CBS and Berger demand it get out of the case due to an alleged conflict of interest. Ice, showing an incredible amount of chutzpah, lashed back with several defenses and a couple of accusations (which to an outsider read like they were based on client confidences), including that there is no conflict because “it is clear” that Berger breached the Emmis contract. The facts and issues were well briefed by both sides (materials in the ICLEF book) and Federal Judge Larry J. McKinney wrote a great explanation of the tests and the considerations involved in a DQ motion, in his 14 page Order. It is available on Pacer, or through Westlaw($$$).

Bottom line, loyalty is paramount, the issues are looked at from the client’s POV, and while case dicta and commentary makes it sound tough for the clients to prevail, in reality it is hard for a lawyer to win on this issue. There are a few outlier cases, but from my study, the issue, once raised, should be seen in the practical light of “how much is it worth to fight this issue, plus the possible ethics complaint, if you win? Is there enough in the case to pay all that?”  After looking at that, you should consider the option to prepare that Motion to Withdraw and have a talk with your now ex-client.

It had to happen; Blogger Beware – the hand you bite may bite back; Durham Suspended; Parenting Time Changes; Indiana Talks.

I knew it would happen

I know this lawyer, and the nice things the hearing officer reported to the Supreme Court about her are true, from my experience. But she got reprimanded. I must admit, the facts are hard to decipher from the recitation of events in the opinion, but it appears that the lawyer took on a big case, apparently too big for a single lawyer to take on in the manner she did. She created a class of 64 plaintiffs who may not have had similar interests (since some had settled their claims before becoming part of the class), and they gave her authority to settle without getting further input from the clients, which is power that a lawyer should not have. The Court says that they insisted on it, and she accepted the authority. During mediation, she had a short period of time to accept or reject an offer that seemed appropriate for all 64 clients. She exercised the authority to settle rather than to leave the offer on the table. (Thanks OC and mediator).

It is not clear who reported the matter, but it does not sound (from the opinion) that any of the clients were upset with the settlement, offended by her actions, or thought any inappropriate action had occurred, but that is not the test under Rule 8.4.  Lawyers must let the clients make the decisions to settle, as painful as that can be from time to time (Rule 1.2(a)). Aggregate settlements are tricky creatures, and must be handled with care and with the informed consent of each client (Rule 1.8(g)). When lawyers fail to get informed consent, it usually leads to the failure to explain a matter so the client can make an informed decision (Rule 1.4(b)).

Although the Disciplinary Commission lawyer argued for and sought a suspension from the practice, the public reprimand seems right.

****

Blogger Beware

The National Law Journal reported that a Chicago lawyer and blogger got caught up in a legal matter that prompted her to make allegations that the IL probate process is “a sleazy world of probate” and that there is “malpractice and malfeasance by attorneys and the court.”  Amazingly someone took offense at that.  The lawyer Joanne Denison now faces an ethics complaint.

It seems to stem from the court rejecting an application by Denison to serve as a guardian, after the court found that Denison had notarized the signature of a woman who might have been  suffering from dementia at the time of the signature, and that the document favored the woman’s daughter, a client of Denison, over others in the family.  They thought that was worthy of disqualification from serving as guardian in this matter. Denison went ballistic, created a blog in the name of the potential ward, and started blasting away at the judges and lawyers alike.  She named names and recounted allegations, apparently without due regard to the facts underlying the matters.

The ethics allegation is that the blog contains “comments that are false or made with reckless disregard for the truth.”  Oops.

I will take that into consideration as I write and edit this blog, and invite others to do likewise in their own writings.  As one reply to the NLJ article mentions, Rule 8.3(a) states: “A lawyer who knows that another lawyer has committed a violation of Rule 8.4(b) or Rule 8.4(c) shall inform the appropriate professional authority.”  That is not an invitation to inform via blog.

H/T Patrick Olmstead

****

Durham Suspended

Indy Ponzi scheme convict Tim Durham, the subject of a previous post here, was suspended from the practice of law based on his finding of guilt in the $200M fraud case of Fair Finance. Durham was sentenced to 50 years, so unless he was planning a jail-house lawyer routine, this finishes his legal career. The Order is here.

The Indy Star claimed [login required] it was the Disciplinary Commission that suspended him, but we know  that the Supreme Court keeps that power to itself. Durham still has a challenge to the suspension, but…

BTW, this is Durham’s second suspension, the first was due to failure to pay his annual registration fee last October.  Kirkland & Ellis, one of the biggest of BigLaw firms in Chicago, has decided to provide a pro bono appeal for Durham, according to the Indiana Business Journal. If you cannot pay registration for your license, you probably qualify for indigent services.Good to see the poor getting adequate legal representation to protect their rights. It worked so well for Mike Tyson.

Parenting Time changes

Two lawyers in my office have produced a short video on the changes in the Indiana Parenting Time Guidelines. The changes go into effect on March 1.

You may want to watch, or link to it. Andy Perkins and Rachel Arndt did a nice job, here.

IndianaTalks.com Interview

Indy lawyer Stephen Terrell will be interviewing me this coming Tuesday, Feb. 26 at 9:00 pm on his weekly online “radio” show. Steve has been on-line for 3 weeks now, and has had some very interesting interviews.  You can listen by tuning your browser to http://www.indianatalks.com/.  Steve discusses information of the week, and then conducts his interview for much of the hour.

Don’t know what we will talk about, but Steve and I, while friends for a decade, disagree about most of the important things in life, and this will be my chance to show him the errors of his ways for you all to hear. Plans are to discuss law, politics and religion. Where could we disagree about any of these matters?

I only hope the Hoosiers have put the Gophers away by 9:00.

Win One, Still Trouble; Charge for That? Neglect of Client in several ways

This is a Win?
The lawyer got sued for malpractice for failure to talk client out of a litigation financing deal. The court ruled that he wins since the lawyer did not refer the client to the lender, did not recommend the use of a litigation financing  program, and did not offer an opinion supporting the deal with the lender when the client made the loan.

Elwin Francis suffered a personal injury. He filed suit, but found himself needing funds up front, So, he borrowed funds from Law Bucks, who submitted a lien for $96,000 on the settlement.

The law firm representing Mr. Francis settled the personal injury matter for $150,000, with consent, and when all the expenses were  paid, Mr. Francis got a check for $111. He did not think that was enough, so he sued his lawyers. [Apparently the client forgot the $$ he got from Law Bucks]. The NY court looked at the documents, at the duty that the lawyer took on in representing Mr. Francis, and at the facts to see if there was conflicting duties that extended to Law Bucks, and found there was no endorsement or contacts between the firm and Law Bucks.

Getting sued by a client is trouble, but winning is good.

Lesson for us?  Stay out of endorsing a lender in a litigation financing program. You may become the guarantor.

***

Charge for that?

Rule 1.8(j) has been around for a while. It is a pretty straightforward rule: “A lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.”  Pretty close to a “Thou shalt not ….” with fewer exceptions than the Rule on Hearsay.

Tom Lowe, a lawyer from Minnesota is old enough to have been around when the MN Supreme Court enacted that rule there.  Sexual relations rulings in ethics cases have been around for decades, and the Rule changes started popping up in several states in the late 1990s (IL 1997, Kan 1998). The no-sex Rule came about as a part of the McCrate Amendments to the Model ABA Rules of Professional Conduct in 2002. Indiana adopted the current Rule 1.8(j) on Sept. 30, 2004, as part of the comprehensive update of the RPC (at p. 39 of the Order)*

So Lowe not only violated that rule, but, to add insult to injury he added the time he spent with her (a family law client) while he breached the rule to her bill.  [insert your inappropriate hourly billing (or quarter-hour or one/tenth hour) or other time based billing quip at this spot – I am trying desperately to leave those and other puns out of the post.]

There are important reasons for the rule about sex with a client, and I am not making fun of those, but his billing for his time?  That reminds me of this song…

Lowe got an indefinite suspension of his license, with a minimum period of 15 months before he may apply for renewal. Well done MN.

* I chaired the ISBA subcommittee that reviewed the ABA proposals and led to the addition of 1.8(j) to the Indiana Rules of Professional Conduct. Thanks to my subcommittee.

***

Client Neglect Stemming from Mental Health Issues

The front page of the Indiana Judges & Lawyers Assistance Program website states: Research has shown that lawyers may suffer from substance abuse and depression at a rate higher than the general population. Experience has shown that lawyers may be more reluctant than others to seek help for their own problems.

One of the critical consequences of mental health problems is the impact on our clients.  As stated by JLAP Ex. Dir. Terry Harrell: “When I hear that a good lawyer, with no history of neglecting clients, is not returning telephone calls — my radar goes up and I start looking for other signs of depression.” She shares statistics on the increased level of mental health problems that should cause every lawyer to take a slow look in the mirror. Women lawyers appear to have a 10% greater problem than the general female population, while male lawyers  reportedly suffer a problem with depression at a rate more than 200% of the general male population.

When lawyers neglect clients for any reason the clients often get upset. If there is not a good reason for the perceived neglect (such as, “I am in trial all month…”) and the client does not see a way to successfully get the lawyer’s attention, a complaint to the Disciplinary Commission may be their only recourse.

Several cases recently have highlighted the issue of mental health, and I will focus on one. This lawyer (I don’t need to name him) recently stipulated to the following facts: The misconduct includes neglecting clients’ cases, failing to do the work for which he was hired, failing to respond to clients’ requests for information, failing to inform clients of the status of their cases, failing to safeguard unearned fees by placing them in a trust account, and failing to completely refund unearned fees. Respondent knew he was suffering from depression and other health related issues that interfered with his ability to attend to his clients’ needs.”

The lawyer and the Commission agreed that these violations of the Rules occurred: “The parties agree that Respondent violated these Indiana Professional Conduct Rules prohibiting the following misconduct: Rule 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. 1.15(a): Failure to safeguard property of a client. 1.16(a)(2): Failure to withdraw from representation when the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client. 1.16(d): Failure to refund an unearned fee promptly upon termination of representation. 3.2: Failure to expedite litigation consistent with the interests of a client.”  That is quite a list.

There is the specific requirement under Rule 1.16(a)(2) that states the affirmative duty that a lawyer “shall not represent a client…if: (2) the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client.”

We need to talk about this situation more.  There was this previous post on Age Related Issues in the Law, but it did not tie the violation to 1.16(a)(2). Apparently we need to have more discussion about this.  There are 10,000 Baby Boomers hitting 65 every day. They are not all lawyers, but enough of them are for problems to show up..  65 is not the magic age where age related cognitive disorder hits, but it is one birthday closer to the issue showing up.

Mental illness extends far beyond age related disorder, and beyond depression, bi-polar disorder and other issues.  But it hits lawyers in greater numbers than the general population.  When it hits, all the suffering lawyer’s clients are affected. Be aware.

Good Use of Probation; So bad, so bad; Reciprocal Discipline imposed

Using Probation in Disciplinary Proceedings

Drugs and alcohol are problems for lawyers.  The evidence is clear that many problems come from addictions. The Indiana Supreme Court and Disciplinary Commission recognizes that reality with greater frequency.  Take Marla Muse’s case as an example. The facts are sketchy in the opinion, but they start with a plea of Guilty to Possession of Marijuana as a Class D Felony.

RPC Rule 8.4(b) states that “It is professional misconduct for a lawyer to: (b) commit a criminal act that reflects adversely on the lawyer’s … fitness…”  Ms. Muse agreed that she violated that standard.  The court’s sanction is as follows:

For Respondent’s professional misconduct, the Court suspends Respondent from the practice of law for a period of 180 days, beginning February 15, 2013, with 30 days actively served and the remainder stayed subject to completion of at least two years of probation. The Court incorporates by reference the terms and conditions of probation set forth in the parties’ Conditional Agreement, which include:(1) Respondent shall maintain complete abstinence from mind-altering drugs during her probation.(2) Respondent shall have no violations of the criminal law of this state or the Rules of Professional Conduct during her probation.(3) If Respondent violates her probation or the JLAP monitoring agreement, the Commission will petition to revoke her probation and request the balance of the stayed suspension be actively served without automatic reinstatement, and Respondent may be reinstated only through the procedures of Admission and Discipline Rule 23(4) and (18).

It seems that a period of probation, working with JLAP in a well monitored probation program will do more to protect the clients of Ms. Muse than any longer suspension and return to the profession without requiring some assistance.  *

***

How bad can one lawyer get?
Amy McTeer had it bad for the guy. Amy was a criminal defense lawyer, who forgot that you want to be sure at the end of the case it is the client who goes to jail. She worked hard, and got him out of jail, the illegal way – she helped him escape. To compound matters she posted photos on Facebook of her out with the escapee. She was arrested in 2011 for these matters, and the Oklahoma Supremes finally accepted her resignation of her license.

The whole sordid story, drugs and troubles can be found here.

***

Reciprocal Discipline

Did you realize that if you get busted in one state for ethical violations, it can carry over to other states where you are licensed?

Mark J. Hughes, a now former member of the Indiana Bar was disbarred in Arizona. The State Bar of Arizona reported:

In the matter of Mark J. A. Hughes, the Presiding Disciplinary Judge accepted a consent agreement between Hughes and the State Bar and ordered him disbarred.

In three cases, the State Bar charged that Hughes revealed information relating to the representation of a client without informed consent, engaged in conflicts of interest and failed to take steps to protect his client’s interests upon termination of representation. The State Bar also alleged that Hughes failed to maintain confidences and preserve the secrets of his client, engaged in unprofessional conduct, and made disparaging, offensive, and provocative comments and accusations about his client and client’s family members in their presence. Finally, the State Bar charged that Hughes engaged in the unauthorized practice of law while suspended. Hughes agreed not to contest any of the charges.

As a result of the consent agreement, the Presiding Disciplinary Judge issued an order on May 1, 2012, declaring Mark J. A. Hughes’ disbarment. Hughes must pay $1,202 for all costs and expenses associated with the State Bar of Arizona’s investigation.

The Indiana Supreme Court sent Hughes a Rule to Show Cause why similar treatment should not occur here in Indiana. The standard under the A&D Rule 23(28)(c) is that similar treatment should occur here. No reply as to why it should not.

* The author is a JLAP volunteer.

Zealous Representation?; Alabama joins Indiana on Group Coupon issue; Who is the client?

Zealous? Don’t Talk to me about Zealous! -1-

Wisner v. Laney is an important case on lawyer civility, but an opinion with a problem. First, the issue.  As stated in the opinion, counsel for both sides went over the line. Plaintiff’s counsel was ordered to apologize to the jury for comments about the defense counsel.

Defense counsel still thought that the opponent went too far, and the trial court should have either called a mistrial or dismissed the case. That did not happen. As stated by Justice David, “Again, the trial court judge is in the best position to determine when enough is enough and whether or not the behavior of counsel would warrant a new trial.” and “we nonetheless express our displeasure with the conduct of counsel, particularly that of plaintiff’s counsel.” Also the court found: “Although plaintiff’s counsel’s behavior was most troubling, both attorneys should have acted in a manner more becoming of our profession.”

Now the problem: in the conclusion the court says: “The duty to zealously represent our clients is not a license to be unprofessional.”  In the 2004 amendments to the Indiana Rules of Professional Conduct the Supreme Court deleted the word and standard of “zealous” representation from the Preamble, in favor of an “effective advocate” standard. The ABA Model Rules still use the term “zealous” three times in the Preamble. Section 2 of the MRPC states in part: “As advocate, a lawyer  zealously asserts the client’s position under the rules of the  adversary system.” It is also found in Sections 8 & 9 of the MRPC.  One example of the change in Indiana’s Rule 8 is: “a lawyer can be a zealous an effective advocate”.

So now the court reintroduces the issue of zealous advocacy in the most recent “civility” opinions issued by the court. Was that intentional by the court, or a lapse to the language lawyers used a decade or more ago?

1. Bad take-off on the Jim Mora Playoffs speech from 2001

***

GROUP COUPON OPINION SPREADS

Alabama State Bar’s ethics committee joined Indiana in banning lawyers from participating in daily deal coupon programs such as Groupon. An issue that has been ruled on by several states, first Indiana and now Alabama have found the deal plans contain too many “ethical landmines” to pass muster.

Indiana’s 2012 opinion was the first to take aim on the practice, calling it fraught with peril, and identifying eight Rules in the Indiana RPC, plus one guideline that were in peril with the proposal.  NY, NC and SC looked at fewer issues in approving the proposal.   The Legal Examiner in Alabama had an article that hit the highlights of that state committee’s ruling.

****

WHO IS THE CLIENT?

Ethical questions to the ISBA Hotline panel are often explored in more detail by asking the caller “Who is your client?”  A recent Minn. case discussed in the Jan. Minn. Ethics Update takes that question a step further.

In Fredrikson & Byron v. Saliterman the law firm started working with the owner and CEO of “LOS” in an arbitration matter where LOS was one of the parties. Saliterman, the contact and CEO of LOS had separate legal counsel in the arbitration. He received LOS’s engagement letter, addressed to him, and it said, among other things, “Thank you for selecting F&B to represent you in the litigation matter concerning [LOS].”

When the matter was over, and LOS was insolvent, Saliterman was billed for the legal  fees due.  The question addressed by the trial and appellate courts was “Who was F&B’s client?” The appellate court decided that ambiguity in a fee agreement goes against the law firm, so F&B did not get paid.

The lesson?  Make sure your engagement letters identify, by name, the client, such as, “In this matter the firm of XYZ is representing only [client’s name].”  If you want a guarantor for payment, get a payment guaranty from the CEO in the CEO’s personal capacity, (or parent in a child’s matter) and not as the representative of the business entity.

Fraud is trouble; Theft from Child; Research Issues; Epic Trust Fund Breach

FRAUD LEADS TO TROUBLE
Indianapolis lawyer Paul J. Page has agreed to plead guilty for his scheme to defraud a bank. Hard to tell whether this is a business deal gone bad (which even by a lawyer is not a big concern of this blog) or a bad thing done in his role as a lawyer.

More interesting is all that is written about his friend and colleague, former Indy Prosecutor Carl Brizzi.  Too early to tell if Page’s fraud leads to Brizzi trouble, but I smell smoke in the air.

*****
ELKHART LAWYER STEALS FROM CHILD’S FUND

Juan Garcia Jr., an Elkhart In. lawyer has pleaded guilty to stealing the funds of a child, whose funds from a personal injury settlement were placed in trust with Garcia by the child’s guardian. When the guardian noticed some discrepancies, she met with Garcia who tried to bribe her to remain silent. The bribe money also came from the child’s funds. The guardian took the bribe money to the police, and the charges followed.

One interesting aspect is to read the subscribers’ comments to the news story on this case from the Elkhart Truth.

****

UPDATE YOUR RESEARCH

The lesson from the Thul case out of ND IL federal court is to update your research.  Biglaw firm Skadden Arps lawyers filed Motion to Dismiss (as usual), but did not cite the recent (2012) 7th Cir. case on the basis for their motion. Trial judge went ballistic.  Their action he said “likely amounted to conduct sanctionable under FRCP 11(b)(2) and 28 USC 1927.”  The judge has set a hearing for Jan 17, but by today, Jan. 10,  all three lawyers from Skadden shall “show cause in writing … why they should not be sanctioned” in any of four ways set out in the opinion, and must “appear in person” for what sounds like a slap down by the judge.  Ouch.

Just a reminder that the best daily blog for keeping up with legal issues in Indiana is still the Indiana Law Blog, written by Marcia Oddi.  I owe her my thanks for many of the cases I can give you a bit different look at.

I check ILB regularly, and so should you.

***
BUYING TRUST ACCOUNT TROUBLES?
A trust account is a serious matter. Written about before here, it is not a personal checking account, not a place for your funds, not a line of credit for your office and not something to be taken lightly. You never want the Supreme Court to call your handling of your trust account an “ethical failure of epic proportions” as the Wisconsin court did for Joe Weigel.

The now former lawyer found out the hard way. It started with a seemingly innocent act. Weigel worked for a lawyer in Wisconsin, and eventually bought his practice (permitted under IN RPC 1.17) in 1999. While working there he “knew of a deficit in the trust account” but did not research that until after he and his new partners bought Alvin Eisenberg out.  He said he thought the problem was only $200-250 thousand. In reality, the deficit was near a million dollars. But he had bought the practice anyway.

He did not report Eisenberg to the WI Disciplinary Commission at the time that he worked there or when he bought the practice. When asked, Weigel responded, “I thought of it but just made a moral decision not to do that.”

Not the kind of “moral decisions” that lawyers should make. For 13 years Weigel juggled the books, borrowing from one client to pay another, or holding the funds due a third-party to pay someone in a different case. Finally his luck ran out, he got caught and now is out of the profession.

If you have a trust account problem, fix it immediately. This is a place where self-reporting with counsel at your side should be considered.

Lying to the Bar Exam Board – Bad idea; Legal Fees pay for Legal Work, not Housekeeping; Age Related Issues in the Law

Liar, Liar, License on Fire

Leah Harmuth, a Calif. lawyer former lawyer, lost her license when the Board of Examiners found that she had lied about her alleged disability and need for extra time to take the Bar Exam. She said that she suffered a disability and needed extra time, and a quiet place to take the exam. She took it, passed and later moved to NY, where she tried it again. The NY examiners checked her story, found she lied to them and they reported the information to CA.

Oops. Honesty in your bar application is critical. After nearly three years as a lawyer, including time at one of San Francisco’s premiere law firms, known as MoFo, she now is not a lawyer.

I have served on the Indiana Supreme Court Character and Fitness Board, and have spoken at three of Indiana’s four (soon five) law schools about the Bar Admission process. One more horror story to share with the students. These pop up occasionally. Kind of like Coach O’Leary. You have to be scrupulously honest in a job application. A lie on the application can cost you your license to practice law at any time. No statute of limitations on that offense.

****

What can you do for lawyer’s fees? Get Suspended

Katherine Guste was a nice woman, she helped an old man with his legal needs, by preparing a Power of Attorney for the client. Then the client, who suffered a debilitating disease needed some additional legal help. He had an accident, and was charged with hit and run. She handled the criminal matter. Then Guste started helping him with personal matters, driving him places, helping him move from one nursing home to another. Nice things, but he had agreed to pay her normal hourly rate as a lawyer for performing those non-legal services. Eventually she claimed she had provided 220 hours of service, after he decided he had been hoodwinked, and complained to the Louisiana Disciplinary Commission. But she was paid for over 250 hours.

That did not matter. The LA Supreme Court decided that lawyers’ hourly fees are unreasonable for general labor work and she could not mix the two types of work for the same fee. Rule 1.8 prohibits mixing work like this. She had other discipline matters too, and ultimately she got her license suspended for two years. Ouch.

Be careful charging lawyers fees for standing at the copy machine.

***

“What do we do with a General, when he stops being a General…”*

[*words and lyrics by Irving Berlin] In the movie musical White Christmas, Bing Crosby’s character sings about what to do with General Waverly after the war and he is no longer in charge. Lawyers see this dilemma as well with our older members of the Bar.

The Ohio Supreme Court this week issued an “age-associated cognitive disorder” opinion for a 71-year-old lawyer who was charged with an ethical violation during the handling of a couple of estate matters, and was confused in his explanation to the disciplinary commission. Raymond O’Neal complained about his memory problems during his testimony, so the commission had him submit to a psychiatric exam by a medical professional. The doctor found age-associated cognitive disorder, and recommended some age-appropriate strategies for minimizing the effects of the disorder.

The Ohio Supreme Court suspended O’Neal for two years, withheld 18 months, but started off with a six month suspension. During the six months before return, he must undergo a thorough geriatric psychological assessment and prove that he will be fit to return to the competent, ethical and professional practice of law. Not sure how he will do that based on the problems he exhibited to the court and outlined in the 9 page opinion.

Congratulations to the Bar and Bench in Ohio. This is a difficult area of enforcement, but the duty to protect the clients is important. I invite older lawyers to discuss this issue with family and partners.

Fraud gets 50 years; Mayhem gets jail; Shameless Plug.

Fraud gets lawyer prison time.

Indiana lawyer, now businessman Tim Durham gets 50 years for defrauding about 5,000 depositors in Fair Finance, with their total losses exceeding $200M.  Durham, admitted to practice law in Indiana in 1987, and suspended in June 2012, had what various magazines and stories showed as “the good life.”  It was based on the frauds he committed after he left the practice of law, apparently.

Starting his  legal practice at Ice Miller, he moved on to even bigger and better things. He once was married into one of the most prominent families in Indianapolis, and apparently wanted more. He acquired Fair Finance, and apparently took investment lessons from Bernie Madoff. The lure of cars, yachts and houses led him astray, and the 50-year-old, who must now serve at least 43 years in prison under current federal guidelines, may not get out in this lifetime.

If you get too excited at the chance to “hit the lottery” with someone else’s money, recall the lesson of Tim Durham.

***

Don’t Trash the Office Before you are Evicted

Dallas lawyer Thomas Corea was jailed after making a real bad situation even worse.  First he was disbarred for stealing client funds, then he was evicted from his office.  But he was the smart one who showed the landlord.  After getting his eviction notice he trashed the office, doing more than $100,000 in damages.  That got the interest of the police, and he was jailed, and his bond increased to $500,000 for the first four felony charges.

Corea at one time had been host of an “ask your lawyer” TV show, but that turned out bad when he sued the station for $1.4M for not forwarding all calls.

It was the graffiti that got him in the eviction. He (or the vandal) wrote several messages on the wall, including one message that was a derogatory remark about an Arizona judge who had found him in contempt. He included her phone number and an invitation to call her…

Update – Another Dallas PI lawyer has now asked the court to appoint him custodian of the files left by Corea, since he cannot provide legal services to his clients disbarred and jailed.  It sounds similar to Indiana’s Attorney Surrogate Rule that allows this kind of help. No word from the ABA Journal if the help is welcomed by Corea.

****

Shameless Plugs on Ethics (and other) Courses I am Presenting

Ted Waggoner, editor/author of this blog presented an hour of Ethics for the General Practice Solo and Small Firm Section of the ISBA on Nov. 29. The course was “Hiring and Training New Law Firm Personnel: How to Avoid Losing $85,000 or your License.”

On February 28, I will also be presenting an hour of Business Law Ethics at an ICLEF program. It has the tentative title of “Developing and Representing the Business Entity.”

On Jan. 23,  I will be presenting a seminar in kicking off the 2013 Ivy Tech Ag Seminar Series, titled “Family Farm Ownership: What is the Right
Solution for You and Your Family?”

For further information about either of these programs, please contact me.