Friday, June 10, 2011

Practice Pointer: You Can't Sue A Current Client

The New Jersey Supreme Court has reprimanded an attorney for his response to the "age old" conflict of interest between diligent representation and non-payment of accumulated fees.

While representing an incarcerated client on a murder charge, the attorney sought to withdraw due to unpaid fees. Denied. He then sued his current client for fees, forcing the court to remove him. This conduct violated Rule 1.7.

The court's syllabus explains the facts:

Respondent represented the client from March 2005 through August 2008. By late July 2007, respondent was owed $50,000 in legal fees. At that time, the client's brother told respondent that he was going to refinance a property he owned and he agreed to pay respondent the $50,000 out of the refinancing. The brother subsequently told respondent that he could pay only $10,000 from the refinancing but would pay the remaining fees later. This was confirmed in writing. When the brother paid respondent an additional $10,100, in March 2008, the funds did not come from a refinancing, but from the brother's sale of the property. Respondent was owed $70,000 in fees at that time and had incurred $13,846.57 in costs, but had been paid only $20,764 in fees.

After the client's brother told respondent in June 2008 that "there was no more money," and suggested that the client "take a plea," respondent wrote to the family and to his client informing them that the balance due was more than $60,000 and that he would have to move to be relieved as counsel if payment was not made. Respondent advised them of their right to fee arbitration pursuant to Rule 1:20A-6 (the pre-action notice) and that he would have to sue to collect the balance if payment was not received within thirty days. Respondent moved unsuccessfully to be
relieved as counsel in July 2008. He informed the court of his intention to sue to collect the fees owed. The court set a trial date on the murder charges for December 2008. In late August, respondent filed a complaint against his client and the client's family for $74,000 in legal fees and costs. Later, by two amended complaints, he increased the amount sought to nearly $87,000 and also sought to have the sale of the property set aside on the ground that the sale to another family member for $1 was fraudulent and intended to keep respondent from being able to reach it to
satisfy his fees.

Respondent reported to the trial court in late September that he was ready to proceed with trial on the murder charges, but after the client learned of the suit for the fees, the client asked for new counsel. The trial court relieved respondent as counsel at that point because the court perceived that it would be impossible for respondent to represent his client in a murder trial now that he had sued for the fees. Respondent maintained he could represent the client, stating later that he had named the client in the action because he believed he had to, but that his intention was to collect only from the client's family. The judge referred the matter to the Office of Attorney Ethics (OAE).

As to sanction:

In respondent's case, as the unpaid fees grew, he sought unsuccessfully to withdraw as counsel. Although his situation was difficult, there is a clear inference from the record that respondent sued his client for the purpose of being relieved after the trial court initially denied his motion to withdraw. Knowingly creating an irreconcilable conflict of interest for that purpose by filing suit requires discipline. Mitigating factors that affect the quantum of discipline in this matter include: (1) respondent provided a pre-action notice and moved to withdraw before filing suit; (2) he included the client in the suit only because he believed the client was an indispensable party as the clientand a party to the retainer agreement; (3) respondent never looked to recover payment from the client; (4) the OAE has conceded there is a perception of a lack of clarity in the RPCs, and (4) respondent has never been disciplined during his thirty-one years as a member of the bar. The Court defers to the DRB determination that respondent be reprimanded.

The court looked to the Rules of Professional Conduct and the Restatement for guidance and clearly had sympathy for the situation that the attorney found himself in. However, the court was clear that an attorney may not create a conflict in order to be relieved of the obligations of the representation.

Justice Rivera-Soto concurred in part and dissented in part. In his view, the "proper resolution of this matter is to adjudge the Respondent liable for an infraction...but impose no discipline."

Why had the attorney let the fees accumulate? "They are from Perth Amboy." (Mike Frisch)

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