Thursday, December 7, 2017
A six-month suspension without automatic reinstatement has been imposed by the Indiana Supreme Court in a failure to supervise case.
Since 2008, Respondent’s practice has been dedicated almost exclusively to consumer debt resolution. During that time, Respondent has been affiliated with Lexxiom, Inc., a Nevada corporation with headquarters in California. Functions performed by Lexxiom for Respondent have included marketing, client intake, bookkeeping, administration of banking transactions, and communications with clients and debt collectors.
Nonlawyer personnel at Lexxiom would interview potential clients and then forward the information to Respondent, who could accept or reject the client. Under Respondent’s standard engagement contract with clients, Respondent would provide non-litigation legal services and litigation consultation for an initial flat fee (usually 8-10% of the amount of debt the client was seeking to resolve) plus monthly maintenance and settlement accumulation fees. Clients also had the option to engage Respondent separately to provide litigation services. After the client and Respondent executed an engagement contract, Lexxiom would notify creditors of Respondent’s representation and would undertake communication to negotiate settlements with the creditors.
For those clients not domiciled in Indiana who had a legal claim or defense, Respondent employed attorneys in other states to provide as-needed, state-specific legal counsel to Respondent’s clients. Respondent paid those attorneys, who were not associated with Respondent’s firm, a monthly retainer.
In connection with his relationship with Lexxiom, Respondent opened a trust account in California. Respondent failed to certify this trust account with the Clerk of the Indiana Supreme Court. Respondent was not a signatory on the account; rather, the only signatories were two nonlawyer corporate executives of Lexxiom. Clients authorized Lexxiom to withdraw agreed attorney fees from their funds held in trust and also to withdraw settlement accumulation fees once sufficient savings had accumulated to negotiate debts. Because of the large number of clients with funds in the trust account and the high volume of daily transactions, withdrawals from and deposits into the trust account were made by Lexxiom on a "batch" basis whereby a single transaction into and out of the trust account would involve multiple clients.
As a result of errors by Lexxiom personnel, Respondent’s trust account was overdrawn on at least three occasions in December 2015. Due to the batching system used by Lexxiom and his own lack of oversight, Respondent did not immediately realize that his trust account had gone out of balance. After Respondent was alerted to the problem, he engaged an independent accounting firm to reconcile the balance and replenished the funds that mistakenly had been withdrawn from the trust account by Lexxiom.
Respondent did not adequately supervise the client intake, debt settlement, or trust account administration services performed by nonlawyer personnel at Lexxiom.
While the particular facts and rule violations in each case differ slightly, ultimately these cases all derive from the same essential problem; namely, the respondent lending his or her imprimatur as an attorney to legal functions performed in large part by a corporation’s nonlawyer personnel, without the requisite degrees of direct involvement and oversight mandated by our rules governing attorney conduct.
In Fratini, Joyce, and Dilk, we suspended the respondent attorneys for six months without automatic reinstatement. We agree with the Commission and Respondent that the same sanction is warranted in this case, and we therefore approve the parties’ proposed discipline.