Monday, March 9, 2009

Financial Realities Of Protracted Litigation

In an opinion and recommendation finding no ethical violations in the representation of a client in a divorce case involving substantial assets, an IIlinois Hearing Board rejected all allegations of misconduct. The accused attorney had left a partnership at Jenner & Block to enter enter solo practice. The client was a sophisticated consumer of legal services. The board resolved factual disputes between lawyer and client in favor of the lawyer in its findings and conclusions by crediting the testimony of of lawyer over the former client:

Over the course of two days, we heard testimony from several witnesses and reviewed many documents. Since the two key witnesses, [the client] and Respondent, provided conflicting accounts as to many of the events that are critical in deciding this case, we must address the believability of each account and the credibility to be given to each witness. After observing the demeanor and listening carefully to the testimony of both [the client] and Respondent, it appeared to us that Respondent provided a more reliable and trustworthy account of what happened.

We perceived [the client] to be sophisticated and very familiar with high-end professionals, legal proceedings, and fee agreements. The evidence indicated that she took an active role in her case and did not hesitate to ask questions or offer comments for discussion. We note that Respondent was only one of a series of attorneys [she] had engaged to handle her divorce, and not the first with whom she had difficulties. With respect to [her]testimony at the hearing, a disturbing pattern emerged of her retracting statements after being confronted with indisputable evidence that contradicted her assertions. Also troubling was the fact that, in her underlying dispute with Respondent, she made erroneous assumptions that easily could have been corrected. We do not believe [her] inaccuracies and inconsistencies were the result of innocent mistakes or a faulty memory; rather, in our minds they point to a calculated effort to twist the events to her favor. Overall we found [her] testimony to be sorely lacking in credibility.

Conversely, we found Respondent to be a credible witness. His recitation of events and explanations for his actions were plausible and supported by the documentary evidence, including his detailed billing statements. In addition, Respondent's former associate...presented an unvarnished account of the divorce proceedings, her responsibilities in the protracted litigation and her interactions with Catherine, all of which was consistent with Respondent's testimony. We also take note of the testimony of ... Respondent's opposing counsel, who dealt with Respondent for many months in an adversarial setting and considered him to be nothing less than honest and professional...

As a result of the resolution of the credibility issue:

We conclude that Respondent asked  the client for payment of fees that he had earned but which, under their fee agreement, [she] was not yet obligated to pay. We see nothing unethical in an attorney explaining the financial realities of protracted litigation to a client and asking for or suggesting that a client pay fees that have accrued, even if the fee agreement provides that they are due at a later date, so long as the attorney advises the client that he/she has no contractual obligation to make the payment and the attorney does not use his position of influence to pressure the client into compliance. In this case we accept as true Respondent’s statement that he advised [her] she had no contractual obligation to pay him prior to the conclusion of the trial court proceeding. We further note that [the client] had a considerable amount of experience in dealing with attorneys, and the payments were fair in light of the amount owed to Respondent. Although Respondent did not advise [her] to seek independent legal advice, that omission, by itself, does not mean that Respondent exerted any undue influence over her. We find therefore that the Administrator did not prove that Respondent breached his fiduciary duty to [her].

For the same reasons, we find that Respondent did not violate Rule 1.7(b) by representing a client whose interests were materially adverse to his own interests. Since we have found the Catherine’s payments to Respondent were not a "loan," cases where the attorney was found to have engaged in a conflict of interest by obtaining loans from a client or entering into a business transaction with a client are not apposite...

The board further found that the attorney did not overreach in the attorney-client relationship and had not failed to make disclosures to a tribunal. (Mike Frisch)

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