“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

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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.

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.

 

 

Neglect gets 3 years; Lawyer arrested for fraud?; Report your Sex Offender Client? NY says no!

There must have been neglect, statement of proof in the opinion would be nice.

Louis Denney eventually had four DI cases filed, one for each year of 2008, 2009, 2010, and finally one in 2011 that did him in. Unfortunately the Order reads more like a CCS entry, so it is hard to tell what all Denney did. We are told that the Hearing Officer, Judge Jeff Todd issued a 56 page report, Denney appealed and was heard by the Supreme Court, and the court adopted that Report, but we just get a snippet of info on Counts 2,5,7 and 9. The court found violations of Rules 1.2(a), 1.3, 1.4(a) & (b), 1.5(a), 1.15(d), 1.16(a)(3) & (d), 3.1, 3.2, 3.4(c), 4.4(a), 5.4(a), 8.1(b) and 8.4(b).  Denney was a busy guy, and apparently  neglected many of his cases. He did fight the allegations and the Hearing Officer report, but the final order does not offer many details.

There is no link to the 56 page report, so what we know is that Denney: charged unreasonable fees, neglected client cases, failed to do the work for which he was hired, failed to communicate, refused to return unearned fees, disobeyed court orders for accountings, and made scandalous and irrelevant accusations against a judge when the judge refused a continuance, in an attempt to remove the judge from the case.

As a result he is suspended from the practice for three years without automatic reinstatement, and we know  that Justice Rucker would have approved a one year suspension, and Justice David would have disbarred Denney.

What we don’t know that would be educational for lawyers who review disciplinary matters is: How many total counts were found against the respondent; were any counts found for the respondent; what time frame was Denney committing violations, and did he continue to violate the duty to clients after the 2008 complaint (which resulted from his failure to respond to grievance), and was the 2008 issue (or the ’09 or ’10 issues) wrapped into the 2011 matters? Were any clients made whole during this matter or will the ISBA’s Client’s Financial Assistance Fund be involved, if the clients are aware of this benefit?

I imagine writing disciplinary opinions is difficult, but we could learn more if more information and judicial reasoning was put on display in the opinions that are issued. Especially after a well fought hearing.

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Lawyer Arrested for Benefits Fraud…

Shawn Donahue pleaded not guilty to fraud in Harrison County recently.  The Louisville Courier Journal’s story called it welfare fraud, but it appears to be unemployment compensation benefits at issue.

The allegations are that Donahue received UE benefits while still working for a couple local entities that were paying him for legal work. It is alleged that he failed to disclose the earnings. Donahue’s lawyer, Bart Betteau predicted that his client would be cleared of the charges.

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NY Opinion, Lawyer not required to Report Inaccurate reports by Sex Offender

Legal services lawyer is contacted by potential client PC, who is a registered sex offender.  Lawyer is asked to review an administrative filing, made under penalty of perjury, to a state agency. She does, and in confirming the information submitted determines that the allegation of being a felon is inadequate, because pc did not disclose the sex offender status of Level Three Rapist, and pc did not register as required by law, under his properly spelled name.  PC  did not appear for appointment, so Agency decided not to represent him further, but did not report the evidence it found to the agency.

Should lawyer have reported the findings to the state agency? NY Ethics Committee says No! (see Opinion 963) Rules of Professional Conduct # 1.6 deals with confidentiality of client communications, and if PC had not become a client, Rule 1.18 carries duties to prospective clients. The rub is that Rule 3.3 “Conduct before a Tribunal” puts duties to disclose confidential information on lawyers, if the situation meets the standards. Here it is a close call, but since the lawyer did not appear before the tribunal, but only reviewed information submitted to it, and the submission was not by the lawyer, the committee finds that “It would not make sense to require a lawyer to take reasonable remedial measures regarding proceedings before a tribunal in which the lawyer has never appeared on behalf of the client.”

But does the lawyer have to report the failure to register properly with the police?  Rule 1.6(b)(2) in NY and in Indiana, is a permissive rule.  “A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (2) to prevent the client from committing a crime… and in furtherance of which the client has used or is using the lawyer’s services” (Ind. Rule).  NY’s Rule 1.6 does not have the “and in furtherance” language.  Indiana’s does which makes it even less likely that a disclosure would be appropriate even with the permissive disclosure language.

In NY the committee previously opined that past crimes cannot be revealed under this provision, only future crimes. Either way there is no mandatory disclosure, but a permissive disclosure in NY looks to be less risky than in Indiana, where there was no use of the lawyer’s services in furtherance of the misreporting.

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Jeffersonville INNS of Court meeting

Thursday March 21, Ted Waggoner will attend the Jeffersonville IN Inns of Court meeting at the invitation of Judge Terry Cody to speak on the Indiana Attorney Surrogate Rule, and its application to lawyers and law firms.  Ted chairs the Attorney Surrogate Rule Special Committee of the ISBA. 

Contact me for more information about this important rule.

IN Re: Kendall Redux

Kendall – Redux

The 2004 case of In Re Michael Kendall (see 3-24-04 entry) is a landmark case among Indiana’s legal fee cases.

Kendall’s law firm went bankrupt, and several clients’ fees could not be refunded, having been deposited into his general account. The issue was whether those funds should have been safe in a trust account. In a 13 page opinion. the Supreme Court expounded on the proper use of “flat fees” “non-refundable retainers” and how lawyers can protect their livelihoods.

The hearing officer had found violations of Rule 1.4 on communicating with clients, but on the big fee issues, Rules 1.5 & 1.15, found no violation.  The Disciplinary Commission appealed those findings, and the Supreme Court found there were violations of Rules 1.5, & 1.15. The court distinguished Kendall’s actions from those found in the In the Matter of Stanton case, when flat fees for criminal matters, deposited in the lawyer’s general account was permissible. Kendall deposited advance fees for hourly work in the lawyer’s general account.

FLAT FEES

The court’s discussion starts with a helpful paragraph:  Advance fee payments are subject to different requirements, depending upon the terms of the agreement between the lawyer and the client.  This discussion will distinguish between the advance fees charged by the respondent here (that were to be earned in the future at an agreed rate) and advance fees that are agreed to cover specific legal services regardless of length or complexity (fixed or “flat” fees). 

After the discussion the Court held: “We therefore hold that Prof. Cond. R. 1.15(a) generally requires the segregation of advance payments of attorney fees, as discussed below….  Except in the case of flat fees governed by Stanton, a lawyer’s failure to place advance payments of attorney fees in a separate account violates this rule.”

The per curiam opinion, authored by now Chief Justice Dickson, defined a “flat fee” that could be charged, and once collected placed in the firm’s general account, as follows: “As distinguished from a partial initial payment to be applied to fees for future legal services, a flat fee is a fixed fee that an attorney charges for all legal services in a particular matter, or for a particular discrete component of legal services.”

Are you paying attention reader? Flat fees can be charged and put in the general office account.  But they must qualify as flat fees.  And you must explain, accurately, how that works, so the client is not misled.

UNREASONABLE FEES = NON-REFUNDABLE RETAINERS?

Kendall’s other mistake was to use language in his fee agreement that must have been common (considering how often the issue arises), a provision that fees paid were non-refundable unless otherwise provided by law.  That language is a huge red-flag, and while the Supreme Court has not yet said the term “non-refundable retainer” is forbidden, they have not approved it in recent history when addressing the situation.  In Kendall they held that even though the Commission never proved he had taken and kept a non-refundable retainer, and never failed to resolve a retainer when he was discharged before the completion of the case, the Court  still found the fee agreement that included a threat that the fees paid could not be refunded was unreasonable and in violation of Rule 1.5.

In language that I still find confusing, the court said the following two things: 1) “In discussing [in Thonert] the nonrefundability provision, we observed: We do not hold that unrefundable retainers are per se unenforceable.  There are many circumstances where, for example, preclusion of other representations or guaranteed priority of access to an attorney’s advice may justify such an arrangement.  But here there is no evidence of, for example, any value received by the client or detriment incurred by the attorney in return for the nonrefundable provision, other than relatively routine legal services.  [Thonert] 682 N.E.2d at 524.  Where a retainer is thus justified, a lawyer would be well advised to explicitly include the basis for such non-refundability in the attorney-client agreement; and 2) We hold that the assertion in an attorney fee agreement that such advance payment is nonrefundable violates the requirement  of Prof. Cond. R. 1.5(a) that a lawyer’s fee “shall be reasonable.”

How clear is that? The non-refundable retainer fee may be permissible, but to say so in the fee agreement violates the reasonable fees requirement.

Word that part of your fee agreement carefully, yet make it clear for the average client.

And remember, even though the Court did not say it out loud, no fee is Non-Refundable.

CONCLUSION

Michael C. Kendall, in the face of other undisclosed charges recently filed by the Disciplinary Commission, tendered his resignation of his license to practice law. On Jan. 28, 2013 the Supreme Court accepted his resignation, and said that he may not apply for reinstatement for at least five years.

I don’t know Michael C. Kendall, but the 2004 opinion included the following paragraph: The hearing officer received significant evidence of Kendall’s professional reputation.  Several highly respected witnesses testified favorably for Kendall, praising his history of ethical practice, his integrity, his significant public service, and his strong dedication, care, and commitment to his clients’ cases.  The hearing officer recognized that Kendall “deserves sanction” but noted that the “accolades from the various witnesses were impressive and unchallenged,” and urged that “the penalty needs to be tempered by what seems to be the Respondent’s superior ethical history until this recent period.”  Findings at 23. 

A few years ago a friend of mine had some troubles, and got a reprimand. Folks tried to help, but a second round of complaints hit. He resigned his license to practice as a lawyer. It was right for him. I hope this was right for Kendall.

Happy New Year; New Rules; Be Honest; Tell Your Friends

NEW YEAR’S RESOLUTION.

I wish you and your staff a Happy New Year. If you read this blog I know you also read other blogs, and many of them have offered resolution suggestions for the new year. Here is mine.

I was at a closing last week and the seller asked if I had set any resolutions for 2013. My reply was “Work hard, and keep out of trouble.” Thinking about that later, I need to revise that first one to “Work smarter.” I have reached the age where working harder is not going to do it any longer. And the issues my clients have are not solved by working harder, so I must continue to work smarter.

Good luck to you and your clients, the kind of luck that comes from working smarter.

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NEW RULES (redux)

In the last post I suggested that we all read the new rules issued for 2013. Just in case you got too wrapped up in parties, parades and football, I thought I would remind you to take a look. Stay on top and be ready.  Your judge might be expecting that from you. Your client’s new lawyer will if pursuing a malpractice claim, for any reason.

Don’t forget the new Parenting Time Guideline changes go into effect on March 1, 2013 as well.

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BE HONEST AND EXPLAIN THE REAL BASIS FOR YOUR FEE

Finally a story out of Cincinnati. Kathleen Mezher offered a free consultation to  potential clients coming to her law office. Lots of lawyers do this. But do they follow her improper practice of billing for that time if the client signs up? Do they explain the fees kick in when the client signs up? Do you?

In this case, a potential client came in to discuss her mother’s estate. The meeting was advertised as a free consultation. The potential client showed up, discussed the proceedings with the associate lawyer Espohl and agreed to hire the firm. She then talked in more particulars about the estate proceedings, left some important papers and then waited. Three weeks later the client decided to go someplace else and asked for the papers to be returned. The client got her papers, and a bill for $375, of which $250 was charged for the “Attorney Client consultation” that had been identified as a freebie.

The event was called the “failure to communicate the basis of a fee and misleading communication about a fee” by the Ohio Supreme Court, violating Rules 1.5(b) and 7.1. Mezher and her associate Espohl both got public reprimands for their actions. The court opinion speaks in detail about the need to communicate to the client if a free consultation can turn into a client interview for which payment is required. Here the lawyers did not have a good policy for that change in circumstances, or adequately explain that policy to the clients.

Well worth the read, especially if you offer free consultations. 

Query: If your first engagement is a free consultation, then you start to charge a fee for that meeting, is that a change in fee arrangements that also requires a Rule 1.8 warning under Indiana’s more strict view?  What would the Disc. Comm. think? Do you want to be the test case?

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TELL YOUR FRIENDS

If you enjoy the information you get in this blog, please tell your friends, or better yet forward to you friends, the blog that is about those who might be Lawyers With Troubles. Maybe it will help a fellow lawyer avoid a problem.  They can go to the site www.lawyerswithtroubles.wordpress.com and sign up.

Stay Up on the Rules; Trust Account is for Client Funds; How Much is Take Home Anyway?

Ten New Rules
Indiana Supreme Court has amended ten of the Rules lawyers need to know effective Jan. 1, 2013.  You can review them here and realize that service of pleadings on fellow lawyers is now permissible through email, if agreed. PDF format becomes a standard, and several changes to the RPC, including Rule 5.5 on cross-state practice will go into effect.

If you don’t take the occasion to read the various rules that affect your profession, and you life as a lawyer, you have several days in the next two weeks to take that opportunity. Out of the office, often with a book in hand, you might choose to make that book (or tablet) the Rules of Court, and the link above to make sure you are reading the most current rules.

And for a kick, read the Administrative Rules (you may skip the details of Rule 7(d), 8(b), and App to Rule 1 – unless you are a judge) and the Admission and Discipline Rules, in addition to the RPC.  Finish by going back and reading Rule 22 of the A&D Rules. That is the Oath of Attorneys. You took that oath when you were admitted (you might have a copy on your wall someplace), and you would have repeated it if you attended an Indiana Bar Foundation Fellows dinner. At the dinner a Supreme Court Justice leads the crowd in a recitation of the Oath.  A good moment for all in attendance.

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YEAR END TRUST ACCOUNT ALERT

Year end temptations get to some lawyers, the temptation to leave earned funds in the trust account a few weeks longer to move income into next year.  You may want to read the opinion: In the Matter of Jacob Dunnick.

Dunnick was trying to avoid having an IRS lien enforced, and so he started operating his office general funds and paying his office bills out of his trust account. He wrote a check to the Commission for Continuing Legal Education out the funds in his trust account, and the Commission reported him under Rule 8.3. A couple of months later Dunnick bounced a check on the trust account, and under the IOLTA Rule (1.15), that is an automatic report to the DC from the depositor bank.

For playing with his trust funds like this, Dunnick gets a real 60 day suspension (six months, stayed, 60 days served, one year probation). He will need to work with a CPA to quarterly audit and report the trust account to the DC, and he must take the Trust Fund Management class.

Prior lawyer-clients of mine have reported that the Trust Fund Management class is quite worthwhile. If you are uncertain about the means and methods of handling the trust funds or other property that you obtain from your clients, you should keep an eye out for the class. Or you might buy and read the classical treatise on the issue “The ABA Guide to Lawyer Trust Accounts” available through Amazon or the ABA (where you will be surprised to find the price is about 1/2 the Amazon price, and there is $10 off if you belong to the LPM Section).

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Finances causing Troubles?

I ran across an interesting article on Inc.com’s website.  Maybe it fits your needs, maybe it does not, but I know many lawyers who suffer from the problem of inadequate fees, and I have spoken about the issue at the ISBA SSF Conference in years past.

“You Don’t Charge Enough. Here’s How to Fix That.” tackles a problem that affects many lawyers, we let the jokes and the reputation as sharks keep our fees too far below the value that our services provide to our clients. A worthwhile read before you set your office budget for 2013.

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And on that note, I want to wish you the best of the holidays.  As noted Indiana lawyer Derrick Wilson said “Make sure you wish the readers a Merry Christmas, Happy Hanukkah, Kwanzaa, Festivus or holiday of their choice.”  And so I do (once again, following the sage advice of Mr. Wilson…)

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.

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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.

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“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.

Hourly Billing leads to Suspension; How Much is Too Much?: Know the Battles to Fight

Billing is one of the toughest things lawyers do.

The legal field is struggling with the proper method of billing for legal services.  There are a number of ways, mostly broken down into the following styles: Contingency, Hourly, Value Pricing and some hybrids such as menu billing or flat fee billing.

Each method has its critics, and the Indiana State Bar Association recently held a session at its Annual Meeting on “The Future of Legal Fees.”  MS lawyer and ABA bestselling author Mark Chinn was the presenter.  One fear expressed there was that Value Pricing fees could run afoul of ethics issues.

Any system of billing can run afoul of ethical issues. The primary breach is in the lawyer, not the system. “But lead me not into temptation…” Michael Murphy, a Massachusetts lawyer, learned the hard way.  He was a salary lawyer for an unnamed law firm.  On at least two cases he “knowingly spent more time than necessary” in order to increase his billables. He reviewed materials multiple times, often for hearings that had not been scheduled yet. He billed for time performing tasks that “should have been delegated” to lower cost lawyers at smaller billing rates. He billed for performing tasks that others had performed. Author John Conlon regularly writes about the problem for clients about misallocation of duties between higher priced lawyers and the lower priced associates or non-lawyer staff.

Murphy’s firm refunded the fees, and wrote off unpaid bills, but Murphy got a Year and A Day suspension.  Rumor has it that this kind of billing problem occurs with enough frequency that it should be discussed in biglaw and small firm settings, and forbidden by policy. The Mass. Court found the fees charged was a violation of Rules 1.5(a) and 8.4(c).

H/T Andy Perkins

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106 Paragraphs in the Ethics Complaint => Suspension

Illness does not give you a “Free Pass” card.  Kjell Engebretsen, a Boone County, IN lawyer appears to have struggled for years in representing his clients.  The battles may have had to do with depression or other illnesses, but were manifested in his refusal to do the clients’ legal work, or to cooperate with the Disciplinary Commission.

The charges included: neglecting clients’ cases, failing to do the work for which he was hired, failing to communicate with clients, failing to inform clients that medical problems would severely limit his ability to represent them, failing to inform clients of court orders and hearings, failing to appear at hearings and a pretrial conference, unilaterally terminating his representation of clients without protecting the clients’ interests, failing to refund unearned fees, and failing to cooperate with the Commission.

This is the fifth action against the respondent filed by the DC, and there may have been others not filed before the 2008 matter. At the time of this Order he was on two other suspensions (failure to pay costs, and non-cooperation with a show cause order), and did not respond to the charges filed here.

The Court found violations of the following Rules of Professional Conduct:

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.

1.16(d): Failure to protect a client’s interests upon termination of representation.

1.16(d): Failure to refund an unearned fee upon termination of representation.

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

8.1(b): Failure to respond in a timely manner to the Commission’s demands for information.

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

For all that, the result may surprise you.  Read the opinion, and J. David’s dissent.
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Pick your Battles Carefully, Especially When You get the Lede

Vikrant Pawar, a NYC lawyer had to file the suit. His honor apparently was tested by the allegation.  Then the slap-down hits.  As reported in the New York Law Journal [full story behind a paywall]:

“The charge of stealing a $6.95 order of chicken wings, hardly constitutes that of a serious crime,” Manhattan Supreme Court Justice Louis York wrote, holding that Vikrant Pawar had not made a sufficient case that the charge amounted to slander.

So an event that merited the attention of Pawar’s family and staff, and the owner of the Wings Shop, has now been made a record in the courts, and in the popular legal media.  Now we know he was accused of stealing chicken wings, and that the court does not find that charge to be an insult to his integrity.

Maybe the better resolution was to pay the tab, tip the waiter and stay quiet.  H/T Patrick Olmstead.

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If you see a story worth mentioning in the blog, please share at ted@peterson-waggoner.com

Stay Current (redux):Taking one for the Team: Taking one from Court Staff

Stay Current (redux)

Several weeks ago I posted about the lawyer’s duty to Comply with the Rules,  all about keeping up on your payment of registration fees and attending mandatory CLE.  I should have posted it for Marion County (now) resident Susan Kriesel in 2008.

In 2008 Kriesel, a licensed attorney since 2002, was suspended for both issues, non-payment of dues and failure to comply with MCLE.  But so what?  She continued to practice, in a firm, for another three + years. Finally caught, she was charged and the Supreme Court Order accepted an agreed discipline she worked out with the Commission.

As punishment she got an indefinite suspension from the practice of law and a $250 fine, plus costs. The court questioned if the agreed punishment was sufficient, and after discussion of the serious consequences to Ms. Kriesel, decided it was sufficient 5-0. It is unlikely Ms. Kriesel will practice again.

In Georgia, a lawyer who was disbarred went on to impersonate another lawyer, and got a year in prison for Identity Theft. Different in some respects, but similar in several ways.

What role did the supervising attorney have in Ms. Kriesel’s case? Nothing appears on the Clerk’s docket at this time to suggest any disciplinary actions are pending.  Rule 5.1(a) seems to suggest that certain duties exist for the managing partner, and are implicated over this issue.

Also, no requirement of the refund of fees paid by clients, or of wages Kriesel earned during the three years is in the court’s Order, and no discussion of the Unauthorized Practice of Law issue that seems to be a part of the case. A discussion about UPL would have been a real help to the Indiana Bar.

Taking one for the team

It is tough enough being a public defender.  The client Lamarcus Williamson pleaded guilty to a “series of crimes” and when the judge throws the book at him, Williamson throws a sucker punch at his lawyer.  And the punched lawyer, Dan Hall, was covering the hearing for Williamson’s real PD, who had a conflict.

So you do a fellow lawyer a favor and get a bloody lip in the process.  Thanks Dan for taking one for the team.

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Now the Team takes one from the Court Staff

Beginning in 1991 a member of the court staff in Atlanta GA decided to set a misdemeanor criminal file aside, and not set it for follow-up or trial.  Twenty years later the stack grew to some 2000 misdemeanor cases.  Amazingly nobody (defendant, defense lawyer or prosecutor) noticed or complained that their case had not been resolved.

Most of the files were from 2008-2010, but some were considerably older. Not much the court could do but start setting things for hearing, and to allow prosecutors to dismiss.

Good for a court to have a clean out of the file closets and old file cabinets at least every quarter-century. When was the last time you cleaned out your file drawers?