Wednesday, September 16, 2009

Suing Lender After Default Deemed Frivolous

A Massachusetts attorney who had defaulted on Law Access Loan Program loans that were guaranteed by The Educational Resources Institute ("TERI"), was sued by TERI, which obtained a default judgment The attorney sought to set the judgment aside on grounds that a district court found to be "perilously close to being frivolous." Thereafter, the attorney filed suit against a number of lenders and servicers of educational loans including TERI and its lawyers. The suit was resolved by summary judgment as to all defendants, with a finding that the suit was "wholly insubstantial, frivolous, and not advanced in good faith."

The attorney was charged with disciplinary violations related only to allegedly frivolous claims brought against the lender. The loan default was not charged as an ethical violation.

A single justice of the Supreme Judicial Court determined that the attorney's litigation behavior had violated ethical rules but noted that not every finding of frivolous claims merits disciplinary sanction:

There is no question that the respondent ignored valid summonses that he received, failed to respond to a valid action against him, and then engaged in repeated and persistent efforts to obtain relief from the default judgment that TERI had obtained in that action; there is also no question that these efforts were rejected by every tribunal that considered the respondent’s filings. As the special hearing officer noted, however, the misconduct cited in the petition for discipline concerns only the respondent’s “filing of frivolous claims in Superior Court,” not his various motions in the District Court, and not his appeals. The respondent’s Superior Court claims against TERI were found to be in violation of [a statute], and the respondent’s action in bringing and asserting those frivolous and unfounded claims required what can be seen as unnecessary expenditure of judicial resources as well as of the time and effort of opposing counsel. But, of course, every judicial award of fees and costs... because it must be based on a finding that the claims or defenses at issue were “wholly insubstantial, frivolous and not advanced in good faith,” involves the same arguably unnecessary expenditure of judicial and attorney resources - that is the point of the statute’s provision for the award of fees and costs. It is clear, however, that a judicial imposition of a sanction..does not result automatically or generally in the initiation of disciplinary proceedings, much less a sanction of suspension from the practice of law.

The single justice noted that the attorney has acknowledged the misconduct and determined that a proposed actual suspension was not required:

...in recommending suspension in this case, the board [of Bar Overseers] expressed concern about what it perceived as the respondent’s total lack of acceptance of the judgment that his lawsuit was frivolous, lack of insight about the nature of his misconduct, and his inability to appreciate the abusive (and ultimately self-defeating) nature of his behavior in this matter...I believe that the respondent may, finally, accept the judgment that the Superior Court action was frivolous and unfounded, and it is also worth noting that he apparently has been paying back the monies owed to TERI as well as the attorney’s fees that the judge awarded. It is also significant that throughout all the stages of this case in the courts (although not at all of the stages of discipline), the respondent represented himself. He serves, in my view, as a prime illustration of the adage that a lawyer who represents himself has a fool for a client. The respondent has not been subject to any prior discipline. This is not a fact in mitigation, but it might possibly suggest that when he is acting as an attorney for others, his conduct does not reflect the same type of persistent advancement of unlikely (at best) or groundless claims and arguments.

In consideration of (1) the disciplinary cases cited above that imposed a sanction of public reprimand or less for misconduct involving the advancement of frivolous and unfounded claims, and (2) the concerns articulated by the board (as well as the special hearing officer and appeal panel) in relation to this respondent and this case, I conclude that the appropriate level of discipline is a suspension for three months, suspended for one year under probationary conditions...One of the probationary conditions is to be - as the board, the appeal panel, and the special hearing officer all recommended - that the respondent take and pass the MPRE within a year. The second condition is that the respondent enter into a peer review or monitoring agreement, to be determined by bar counsel, for the period of one year.

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2009/09/a-massachusettsattorney-who-had-defaulted-on-his-law-school-loans-was-sued-by-the-lender-who-obtained-a-judgment-thereafter.html

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