Friday, August 22, 2014

Suspension For Multiple Client Settlement Violations

 The Oregon Supreme Court imposed a 90-day suspension for misconduct that

arose as a result of settlements that the accused had brokered for a group of clients—all sexual abuse victims—in civil actions brought against the Portland Archdiocese, the State of Oregon, and Father Michael Sprauer.

The court

we first observe that, when the accused began his representation of the Sprauer plaintiffs, he recognized that, although their interests did not presently conflict, they could conflict at some point in the future. He subsequently wrote letters to each of his clients outlining the advantages and disadvantages of joint representation, advised them to obtain independent legal advice, and obtained their consent to proceed with joint representation. As noted, the JRAs that the plaintiffs signed explained that the accused would endeavor to negotiate each client’s claims individually and that he would have no role in any allocation decision.

When the accused began negotiations with the Archdiocese, he proceeded as agreed. The accused conferred with his clients individually and helped each decide on an acceptable individual settlement offer. As the Bar correctly recognizes, when the accused added those amounts together and offered to settle with the Archdiocese for the resulting total, the accused did not violate any rule of professional conduct. However, when the Archdiocese offered to settle for a figure that was nearly twice that total, a conflict arose. Each plaintiff had an interest in obtaining as great a portion of the surplus settlement as he could. Under those circumstances, the accused was ethically prohibited from deciding how to allocate the sum offered, and the accused does not contend otherwise.

When the conflict arose, the attorney failed to secure the required informed written consent and

An additional problem for the accused—and, in our view, an even more significant one—is evident in his division of the proceeds of the state settlement. Before negotiating the state settlement, the accused had informed his clients that, “[i]f all of you agreed to settle your cases on the same percentage basis as we did in the past, then I do not have a conflict.” However, when the accused accepted the state’s offer to settle the claims of all the Sprauer plaintiffs for a $1.05 million lump sum, he did not, in fact, distribute those funds on that basis. In his brief, the accused does not address that failure nor allude, as he did at the trial panel hearing, to possible “mathematical errors.” From the letters that the accused sent to the Bar, it appears that the accused decided, after agreeing to settle with the state, which client should receive what portion of the state settlement. The accused’s method of allocation may have been exceedingly fair, but each dollar that the accused allocated to one plaintiff was a dollar that he did not allocate to another—an allocation decision that, as he recognized in his JRAs, was one  in which he was to have no role. The accused’s decision to allocate the sum of $7,500 to New also was problematic for the same reason. The distribution to New may have been fair—perhaps more than fair, given New’s criminal history and the accused’s willingness to waive attorney fees and costs—but by allocating $7,500 to New, the accused deprived other client of those funds.

The court rejected charges of misrepresentations to the clients.

As to sanction

What we do find is that the accused’s substantial experience in the law had made him aware of the ethical problems that could arise if he were to participate in the allocation of a lump sum settlement offer; yet—particularly with respect to the state settlement—that is exactly what the accused did. In addition, the accused did not obtain the informed consent required by the rules of professional conduct at issue here, and, as a result, he exposed his clients to a risk of injury. Those are significant violations that, in light of the accused’s disciplinary history, warrant more than a 30-day suspension. We conclude that a 90-day suspension is appropriate.

The Portland Tribune reported on the case and noted

Gatti has been disciplined by the Supreme Court before. 

In 2000, the justices issued a public reprimand after he posed as a chiropractor while he attempted to obtain information about medical reviews by an insurance company that denied injury claims of workers. 

The court held that he violated a State Bar rule against deceit, but Gatti said he used deceit as an investigative tool.

Gatti claimed victory when the high court modified the rule in 2002, after federal prosecutors said it would hamper their investigative efforts when they directed others to engage in deceit.

A good teaching example of the dangers of settling claims for multiple clients. (Mike Frisch)

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