Friday, March 24, 2017

Protecting Vulnerable Hoosiers: State May Sue Foreclosure Defense Law Firms

The Indiana Supreme Court affirmed the denial of summary judgment in favor of defendant law firms

Consumer Attorney Services, P.A., The McCann Law Group, LLP, and Brenda McCann (collectively “Defendants”) appeal the trial court’s denial of their motion for summary judgment, claiming they are all expressly or impliedly exempt from liability under each of the four statutes cited by the State in this civil suit. Finding that none of the Defendants properly fit within these statutory exemptions, we affirm.

The story

CAS is a Florida corporation that purports to specialize in foreclosure- and mortgage related legal defense work, requiring non-refundable retainers and monthly fees up front to be automatically deducted from bank accounts. McCann was an attorney licensed in Florida, who acted as CAS’s manager. CAS subcontracted with at least five Indiana attorneys to provide local services, who executed “Of Counsel,” “Associate,” and/or “Partnership” agreements with CAS. Under the “Partnership” agreement, the attorney acquired a 1% non-voting interest in CAS, and was to be involved with client intake and screening, to administer the referral of Indiana cases to other Indiana lawyers employed by CAS, and to provide clients with direct legal services as needed. Under the “Associate” agreements, CAS handled all aspects of client intake and communication, document preparation, and billing, with the attorney’s role limited to speaking with clients only when directly asked by the client, and meeting with them only once prior to filing any legal documents such as a bankruptcy petition (in order to obtain appropriate signatures), and speaking with opposing counsel only when “necessitated.” Appellant’s App. at 86. Under the “Of Counsel” agreements, the lawyer was a completely independent contractor, but was to perform essentially the same functions as under the Associate agreement. All of these agreements were entered into before CAS registered as a foreign entity authorized to do business in Indiana.

Complaints against the firms came quickly and the state filed this civil case.

The court found the claims were properly brought 

This Court has not previously interpreted the CSOA, but as discussed above, it is designed to serve the humane purpose of protecting vulnerable Hoosiers from further financial depletion by predators, and its specific protections exceed those contained in our common law. It is thus appropriate that the CSOA be liberally construed, in favor of those invoking its protections...

[Our] interpretation also compliments this Court’s disciplinary authority. In its argument supporting a CSOA law firm exemption, CAS asserts that such a ruling would “uphold[] the authority of the Indiana Supreme Court to discipline attorneys [and] regulate the practice of law[.]” Appellant’s Br. at 21. But the case for this construction of our Admission and Disciplinary Rules does not persuade. Rule 23 governs the discipline of attorneys, as individuals – it contains no provisions for the discipline of an entire firm as a whole. See Ind. Admis. Disc. R. 23 Sec. 3(a) (2017) (listing “types of discipline [which] may be imposed upon any attorney found to have committed professional misconduct”) (emphasis added). Indeed, with respect to law firms specifically, we have only three significant provisions regulating their conduct: (1) the unauthorized practice of law, Ind. Admis. Disc. R. 24; (2) registration as a Professional Company, Limited Liability Company or Limited Partnership practicing law in the State of Indiana, Ind. Admis. Disc. R. 27 Sec. 1, 1(b); and (3) maintaining adequate professional liability insurance for the firm, Ind. Admis. Disc. R. 27 Sec. 1(g). We thus find it reasonable that our General Assembly would choose to exempt attorneys specifically (who are subject to far more extensive disciplinary action by this Court5 ) while not exempting their firms.

March 24, 2017 in Bar Discipline & Process, Hot Topics, Law & Business, Law Firms | Permalink | Comments (0)

Monday, February 13, 2017

Won An Election, Lost A Job And A Claim

The United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a complaint brought by a former assistant county attorney who was terminated from longtime service after a successful run for public office

David Bobzien (“Bobzien”), the County Attorney for Fairfax County, Virginia, terminated the employment of Nancy Loftus (“Loftus”), an assistant county attorney, following her election to the Fairfax City, Virginia, City Council (the “City Council”). After an unsuccessful grievance proceeding, Loftus filed suit in the United States District Court for the Eastern District of Virginia, challenging Bobzien’s decision to terminate her employment “solely because she had been elected to the City Council.” J.A. 4. Loftus contended Bobzien’s actions violated her rights under the First Amendment to the United States Constitution as well as a Virginia statute and Fairfax County ordinance. The district court dismissed Loftus’ complaint, concluding the termination of her employment did not violate the First Amendment, Virginia law or the local ordinance. For the reasons set out below, we affirm the district court’s judgment.

Bobzian raised ethical concerns during the candidacy, citing Virginia bar ethics opinions

In response to Bobzien’s concerns, Loftus contacted the “Ethics Hotline” of the office of the Virginia State Bar’s Ethics Counsel (“Ethics Counsel”). She inquired: “is it unethical for me to be an [a]ssistant [c]ounty [a]ttorney for Fairfax County and also serve on the Fairfax City Council?” J.A. 57. Answering by letter, Ethics Counsel stated that the “short answer” is “it is not per se unethical for a lawyer to be employed in a law firm or government attorney’s office and concurrently hold a public position or office.” J.A. 57. Ethics Counsel then qualified his abstract answer by cautioning “lawyers that serve on public bodies will create conflicts of interest if the law firm in which the public official practices also interacts with the public body on which one of its lawyers sits.”

Loftus was placed on administrative leave and later terminated, leading to the suit

...Loftus’ claim must fail. Although Loftus contends her termination was in violation of the First Amendment, the Supreme Court has made clear that public employers may permissibly bar their employees from participating in a wide array of political activities, including running for elective office. If a public employee can be prohibited from running for office, it follows all the more strongly that she also can be barred from holding elective office while remaining a public employee. In large part, the constitutional questions raised by this case are resolved by Clements. If the resign-to-run and automatic resignation provisions of the Texas Constitution -- which stripped certain public employees of their office upon declaring their candidacy for the state’s legislature -- pass muster under the First Amendment, surely the termination of Loftus’ employment only after her election to the City Council survives First Amendment scrutiny.

...The record reflects multiple potential points of conflict that could face Loftus as a member of the City Council and an attorney in the Fairfax County Attorney’s Office. As the LEOs from the Standing Committee illustrate, it is not simply Loftus’ status as a public employee that creates a problem, but particularly her status as a lawyer for a public “law firm.” That role appears to create non-waivable conflicts of interest not simply limiting Loftus under her ethical duties as a lawyer, but imposing significant burdens on her public employer.

Moreover, Loftus is unable to point to any appellate authority to suggest that, all else being equal, her employment by a different municipality should be a dispositive factor in our analysis. In fact, she can muster only two district court cases to support her position, both of which are factually inapposite and of no precedential value. See Segars v. Fulton Cty., 644 F. Supp. 682 (N.D. Ga. 1986); Hickman v. City of Dallas, 475 F. Supp. 137 (N.D. Tex. 1979). Neither case involves an attorney representing one municipality while also running for office in another municipality to which her client potentially will be adverse in the future.

The court rejected other claims raised by the plaintiff. She had worked as an assistant county attorney since 1997.

The Washington Post reported on the firing. (Mike Frisch)

February 13, 2017 in Ethics, Hot Topics, Law & Society | Permalink | Comments (0)

Tuesday, January 3, 2017

Katten Muchin Prevails In Charging Lien Litigation

The Delaware Supreme Court has ruled in favor of the Katten Muchin law firm in a case involving application of the law of charging liens.

The case was a complex fight over the client's ouster from a family business

Martha reacted to her ouster by, among other things, litigating. She first retained plaintiff Katten Muchin Rosenman LLP to represent her in a § 220 books and records request of the Sutherland Lumber Companies.  Although Martha and Katten disagree over whether they entered into a written fee agreement, the parties agree that Katten was not providing its services on a contingency fee basis and was instead entitled to fees on an hourly rate basis and to reimbursement of its expenses.   Indeed, Katten sent Martha monthly invoices based on hourly billing, which Martha paid for several years.

In 2006, Martha, with Katten as her counsel, filed a derivative and double derivative action against Perry, Todd, and Mark alleging, among other things, that Perry‘s and Todd‘s employment agreements with the Sutherland Lumber Companies were a result of self dealing...

Some benefits were realized with respect to the employment agreements at issue but 

By 2011, [client] Martha accrued $766,166.75 in unpaid attorney‘s fees for services that Katten provided in this litigation between 2009 and 2011. In the spring of 2011, Katten withdrew as counsel. One of Martha‘s attorneys from Katten, Stewart Kusper, left the firm and continued to represent her.

After Martha‘s litigation concluded in 2012—without her securing any additional relief on behalf of the Sutherland Lumber Companies—she sought an award of attorney‘s fees from the Sutherland Lumber Companies for all of her fees arising from the § 220 action and from overcoming the special litigation committee‘s investigation and recommendation to terminate the litigation, plus $25,000 in fees for defending against the summary judgment argument aimed at the employment agreement claim. In total, Martha asked for $1.4 million in attorney‘s fees and, in doing so, she used Katten‘s invoices that detailed the services it provided to her and its expenses incurred on her behalf while it represented her as a reasonable basis for the fees she should be awarded.  Indeed, in Martha‘s petition for an award of attorney‘s fees, she argued that the $1.4 million in attorney‘s fees she incurred from Katten were "fair and reasonable."

...Relying on Katten‘s invoices, the Court of Chancery awarded Martha $275,000 in fees for the minor benefits that she obtained on behalf of the Sutherland Lumber Companies in 2007 when, as a result of Martha‘s and Katten‘s efforts, the Sutherland Lumber Companies amended Perry‘s and Todd‘s employment agreements.

The firm intervened and asserted a lien on the fee award.

The court here reversed the Court of Chancery

Although Delaware does not have a statute governing charging liens, Delaware has a long lineage of cases recognizing charging liens as a matter of common law.  Two recent Delaware cases address charging liens.   In Doroshow,  this Court confirmed that Delaware recognizes the long-standing common law right of charging liens. In Zutrau, the Court of Chancery adopted the definition provided by Corpis Juris Secundum that a charging lien is "an equitable right to have costs advanced and attorney‘s fees secured by the judgment entered in the suit wherein the costs were advanced and the fee earned." Today, we also endorse that definition of a charging lien.

Here, the modifications to Perry‘s and Todd‘s employment agreements— which are the basis for Court of Chancery‘s fee award—were adopted as a result of Martha‘s and Katten‘s efforts in the derivative and double-derivative action. Furthermore, Katten‘s unpaid fees arose from the same litigation that produced the benefits for the Sutherland Lumber Companies and which led to the Court of Chancery‘s award of attorney‘s fees. Therefore, based on our definition of a charging lien, Katten is entitled to a lien on the entire fee award of $275,000. The historical rationale for a charging lien—to promote justice and equity by compensating the attorney for her efforts and thus encouraging attorneys to provide legal services to clients—also supports this conclusion.

In its decision, the Court of Chancery seemed to read Doroshow as standing for a rule that an attorney may only seek a charging lien for fees the attorney incurred that were directly connected to her client‘s recovery. The Court of Chancery cited Doroshow‘s finding that, because the law firm in that case represented its client on a contingent fee basis, it was entitled to a charging lien because "the law firm had not been compensated before its work produced the funds." The Court of Chancery reasoned that because Katten had already been paid for the services that led to the benefits for the Sutherland Lumber Companies, it was not entitled to a charging lien. But, Doroshow dealt with a charging lien based on a contingency fee, and we held that the law firm was entitled to its agreed 40% contingent fee. Our decision in Doroshow did not limit the scope of charging liens in general. Rather, Doroshow demonstrates the application of this equitable right to a particular type of fee arrangement, and one fundamentally different than the one between Martha and Katten.

Here, Katten billed Martha regularly for its services based on the amount of time Katten‘s attorneys spent on the case and the attorneys‘ hourly rates. Katten billed Martha for approximately $3.5 million, of which Martha paid roughly $2.7 million. That Katten‘s services underlying the unpaid fees did not result in any benefit to the Sutherland Lumber Companies does not matter. In the case of hourly billing, unlike with a contingency fee, the total amount that the client is required to pay her lawyer is not based on the client‘s recovery. In Zutrau, the Court of Chancery considered the scope of a charging lien in the context of hourly billing and explained that "[i]t is no secret that litigation is expensive and that the costs of prosecution easily can exceed the recovery." The Court of Chancery found, "that the cost of prosecution conceivably could exceed the recovery does not excuse Zutrau from paying those fees." If, as here, an attorney has unpaid fees that are greater than the client‘s recovery, the attorney is entitled to a charging lien on the entire recovery. Moreover, the client remains obligated to pay her attorney any remaining unpaid fees. Martha was required to pay Katten its reasonable fees in accordance with their agreement whether she won or lost. Because Martha did not pay Katten for all of its services stemming from the litigation in which Katten produced the only benefits, Katten is entitled to the equitable right of a charging lien on the entire $275,000 fee award. Finding otherwise would lead to an inequitable result where attorneys with a claim for unpaid fees from litigation— where work had been billed on an hourly basis—could use the equitable right of a charging lien only to recover fees relating to the services that were directly connected to the litigation‘s beneficial results.

Like other contracts, contracts for the provision of legal services create incentives for parties, including clients. When a party, such as Martha, agrees to pay hourly fees to prosecute a complex case, she is assuring her counsel that it will not suffer the commercial damage of uncompensated services if it presses her claims as aggressively as she demands and as the law permits. To permit a client who is a party to such an agreement to escape a charging lien as if she made a strict contingency fee agreement limiting fees to a percentage of recovery is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien.

(Mike Frisch)

January 3, 2017 in Billable Hours, Clients, Current Affairs, Hot Topics | Permalink | Comments (0)

Friday, September 9, 2016

Confidentiality Trumps History

Should the interests of history create an exception to a lawyer's duty of confidentiality?

No, according to an opinion of the Maine Professional Ethics Committee

Bar Counsel has inquired whether, and under what circumstances, a law firm may consider donating old, inactive legal files that may have historical significance to a library or educational institution. As a matter of background, the attorney holds a variety of client files, many of which were generated by a single family, dealing with a public undertaking of significant historical interest in the attorney’s area. The files range back as early as the mid- to late 1800s, and run through the early to mid-1900s. The single family referenced above has indicated their consent, but for many of the other files, both the clients as well as the attorneys who were involved in the legal work generating the files are long since deceased, and it may be difficult to find a representative of either the attorneys or the families. Given the passage of time, and the historical import of the files, may the firm turn over these client files to a library or educational institution?

Analysis

The obligations imposed by Rule 1.6 extend indefinitely. They survive the death of the attorney, as well as the client, and may continue after the dissolution of a corporate client. Absent informed consent from the affected clients or some other applicable exception, a lawyer may not divulge information that constitutes a “confidence” or “secret” as defined above. This would mean that an individualized, document-by-document assessment would need to be undertaken in order to determine whether the particular document and the information within it constituted a “confidence” or “secret” of the client at the time it was made.

The Commission is not unmindful that this opinion may well restrict information that may have independent historical value. However, those values, though significant, do not trump the attorney’s obligation to keep the client’s confidences and secrets confidential. See, e.g., Oregon Formal Opinion 32005-23 (revised 2014); Virginia Legal Ethics Opinion #1307, dated November 13, 1989; Opinion #128, Committee of Legal Ethics of the District of Columbia Bar, dated July 19, 1983; and Oklahoma Bar Association Ethics Opinion #301, adopted June 16, 1983.

If the attorney believes that the files may contain a variety of matters that do not constitute confidences or secrets, the attorney nonetheless must make that determination consistent with Rule 1.6(d). A waiver by the family, the Personal Representative of an estate (to the extent one still exists) or similar person appearing to stand in the shoes of a deceased client is not sufficient to constitute a waiver of the attorney’s obligations of confidentiality. See Professional Ethics Commission Advisory Opinion # 192: Deceased client: Confidential information requested by Personal Representative, dated June 20, 2007.

We would note that to the extent the materials maintained by the attorney and that attorney’s law firm include files that are clearly segregated and marked in a manner that would make them non-legal (for example, copies of ancient and public documents, information that was directed to others outside of the attorney/client privilege, such as correspondence to third parties, and similar documents), those items may fall outside of the definition of “confidence” or “secret.” However, the attorney must be mindful, in making an analysis under Rule 1.6(d), that the determination of whether a client considered materials to be a “confidence” or “secret” is a subjective one unique to the client. Absent the attorney being able to make a reasonably reliable determination that the client did not consider the information to be confidential, disclosure is prohibited by Rule 1.6. See Board of Overseers of the Bar v. Turesky, File No. 93-S-124, Report dated April 26, 1995.

Lastly, it should be noted that in the event that a review is contemplated, it must be undertaken by the attorney and at that attorney’s direction. It would not be proper to allow any non-lawyer or other personnel not affiliated with the lawyer’s practice to review the files regardless of whether the outside party (such as a representative of a charitable or educational institution) agreed to hold any questionable materials confidential. See Virginia Legal Ethics Opinion 1307, supra.

Conclusion

In short, absent a reasonably reliable indication of informed consent or some other exception to the requirements of Rule 1.6 or a meaningful ability to determine that the materials held by the attorney were not client “confidences” or “secrets,” the attorney may not divulge the confidential materials in that attorney’s possession despite the passage of time and the potential historical significance of the materials.

(Mike Frisch)

September 9, 2016 in Hot Topics, Privilege | Permalink | Comments (0)

Monday, July 11, 2016

Office, Not Chief, May Properly Be Appointed As Counsel

The Virgin Islands Supreme Court vacated an order appointing the Chief Territorial Public Defender as counsel in a complex criminal case. The trial court may appoint the Office to a case but may not designate the particular attorney assigned.

The defendant initially had retained counsel 

In 2008, Miller was charged with a litany of offenses, including violations of the Criminally Influenced and Corrupt Organizations Act, 14 V.I.C. § 600 et seq. (“CICO”). Miller’s trial on these crimes commenced in May 2011, in which he was represented by the law firm of Dudley Clark & Chan, LLP. Following five days of deliberations, the jury was unable to reach a unanimous verdict, which resulted in the trial court declaring a mistrial on June 24, 2011.

The firm was thereafter permitted to withdraw for nonpayment of fees.

A public defender was appointed but withdrew due to a claimed conflict of interest.

The court did not find an actual conflict of interest, but nevertheless relieved Attorney Leycock from the case because it concluded that there existed a potential for a conflict of interest which warranted Attorney Leycock’s withdrawal. The court simultaneously ordered, “Chief Public Defender Samuel Joseph, Esq., is appointed to personally represent Defendant Miller.” (JA at 154.) Lastly, the court directed Attorney Joseph to create an “ethical wall” within the Office of the Territorial Public Defender to ensure that Miller received conflict-free representation.

At the beginning of the following year, on January 27 and 28, 2014, Attorney Joseph filed two motions to be relieved as counsel, raising substantially the same two issues. First, Attorney Joseph challenged the legal efficacy of the “ethical wall” which had been ordered by the court. Attorney Joseph argued that members of the Public Defender Administration Board and employees of the Office of the Territorial Public Defender had relationships with related defendants which gave rise to conflicts of interest, and he posited that those conflicts were imputed to the entire office. Attorney Joseph also contended that, under 5 V.I.C. § 3503(a), the Superior Court lacked the requisite authority to select an individual public defender to represent an indigent defendant, adding that such an order was disruptive to the operation processes of the Office of the Territorial Public Defender.

 The court decided the appeal on its merits

In his brief, Attorney Joseph informs that Attorney Leycock is no longer employed by the Office of the Territorial Public Defender, and concedes that the conflict-of-interest issue pertaining to Attorney Leycock’s representation of Miller is now moot. (Appellant’s Br. at 15.) Therefore, we proceed to address the sole remaining issue submitted for this Court’s review: whether the Superior Court exceeded its authority by specifically assigning Attorney Joseph to represent Miller in the criminal proceedings attendant to this appeal.

The trial court exceeded its authority by appointed the Chief rather than the Office

Admittedly, the trial court was justified in being concerned about the history of counsel involved in the representation of Miller, and we acknowledge the Superior Court’s emphasis on providing conflict-free representation for Miller. Nevertheless, choosing a specific public defender was not the appropriate solution for addressing the court’s concerns, as the order superseded the role of the Chief Public Defender and violated the separation of powers doctrine. See State ex rel. Robinson, 48 S.W.3d at 69-70 (while the trial court had a legitimate interest in “break[ing] the chain of continuances made by withdrawing defenders,” and ensuring that defendant’s case proceeded to trial without further delays, “[t]he trial court acted in excess of its authority” when it appointed specific public defenders to represent the defendant). It is the Chief Public Defender—and not the court—who possesses statutory managerial authority, and is best positioned to assess the Office’s resources and experience of its lawyers, in achieving effective case management...

Upon a finding of a defendant’s indigence, the Superior Court may appoint the Office of the Territorial Public Defender as counsel. However, the court lacks the statutory authority to order that a specific public defender be assigned to represent a defendant. Accordingly, we vacate the court’s orders appointing Attorney Joseph to represent Miller in the underlying criminal proceedings and remand this case so that the Superior Court may appoint the Office of the Territorial Public Defender, leaving the determination as to the specific attorney to be assigned to Miller to be made within the discretion of the Chief Public Defender.

(Mike Frisch)

July 11, 2016 in Clients, Current Affairs, Hot Topics | Permalink | Comments (0)

Friday, April 8, 2016

A Twist On Privilege Law

An attorney's effort to resist compelled disclosure of allegedly privileged information was rejected by the West Virginia Supreme Court of Appeals.

The case involved litigation over drilling rights

In January 2004, the Martins leased the right to drill for and produce natural gas on approximately sixty-one acres (the “Martin Lease”) to Martin Twist Energy Co., LLC (“MTEC”). Pursuant to the lease, MTEC drilled three wells upon the Martins’ property. Subsequently, AIO lent $2 million to MTEC. The loan was collateralized by various oil and gas leases and wells, including the Martin Lease and the wells that had been drilled. MTEC defaulted on its loan with AIO. Thereafter, AIO instituted foreclosure proceedings against MTEC in Kentucky. The proceedings resulted in the entry of an Agreed Judgment whereby the entire right and interest in the Martin Lease and the drilled wells was transferred to AIO in October 2008.

In March 2009, the Martins filed suit against AIO. The complaint set forth multiple grounds, including failure to pay appropriate royalties under the Martin Lease. Counsel for AIO, Scott Kaminski, first appeared in April 2009. Subsequently, AIO filed an answer and a counterclaim against Mr. Martin alleging that he interfered with AIO’s production from the wells by chasing AIO employees off the property with a gun and prohibiting them from working. A court-ordered mediation held in July 2010 was unsuccessful. A settlement offer presented by the Martins was rejected by Todd Pilcher (“Mr. Pilcher”), who was said to be acting on behalf of AIO.

Kaminski withdrew after consulting with disciplinary counsel. He then asserted attorney-client privilege to resist disclosure despite AIO's explicit waiver. He did so on behalf of a Mr. Twist (now deceased)

Rule 1.8(f) of the West Virginia Rules of Professional Conduct provides that a lawyer cannot accept compensation for representing a client from anybody other than the client unless three criteria are met. First, the actual client must give consent. Second, there can be no interference with the lawyer’s independent judgment. Third, all information relating to representation of the client must be protected as confidential. While Mr. Twist may have retained and paid Mr. Kaminski, the record does not establish how the Rule 1.8(f) criteria were met. Rather, what is plainly established is that no consent was given by AIO.

The attorney-client privilege belongs to the client. Typically, the client alone may waive the privilege. USF &G, 194 W. Va. at 442, 460 S.E. 2d at 688. The only privilege with respect to the Martin litigation belongs squarely with AIO, who is entitled to waive it regardless of the protestations of others who claim to be acting on behalf of AIO. We observe that all parties appear to accept the existence of an attorney-client relationship between AIO and Mr. Kaminski. The record establishes that AIO has expressly waived the privilege and provided documents to the Martins. The trial court’s conclusion that Mr. Kaminski failed to establish the existence of an attorney-client relationship with Mr. Twist and/or 530 West Main regarding the matters at issue with respect to the Martin complaint is not clearly in error and will not be disturbed...

We now address the claim by Mr. Kaminski that the West Virginia Rules of Professional Conduct apply to this matter such that he cannot be compelled to disclose client confidences. We find that Mr. Kaminski has failed to distinguish the evidentiary attorney-client privilege and the professional and ethical duties of confidentiality. The trial court correctly found that the evidentiary privilege exists apart from, and is not coextensive with, the ethical confidentiality precepts...

Rule 1.6 of the West Virginia Rules of Professional Conduct provides for the confidentiality of information relating to the representation of a client. Confidentiality applies even after withdrawal from representation. Here, Mr. Kaminski recognized his potential duties, consulted with disciplinary counsel, withdrew from representation, and disavowed pleadings. He has continued to assert and maintain confidentiality. Nevertheless, Rule 1.6(b)(6) specifically provides that an attorney may be compelled to reveal information relating to representation of a client so as to comply with a court order. That is the situation confronting Mr. Kaminski. The trial court did not commit clear error when it determined that the West Virginia Rules of Professional Responsibility do not bar disclosure of the contested documents.

The court further held that an attorney may not assert a "blanket claim of privilege" in response to an effort t o compel disclosure. (Mike Frisch)

April 8, 2016 in Clients, Hot Topics, Professional Responsibility | Permalink | Comments (0)

Wednesday, December 23, 2015

"Subject Matter" Conflicts Explored

The Massachusetts Supreme Judicial Court held that there was no actionable conflict of interest in a circumstance

when attorneys in different offices of the same law firm simultaneously represent business competitors in prosecuting patents on similar inventions, without informing them or obtaining their consent to the simultaneous representation...

We conclude that the simultaneous representation by a law firm in the prosecution of patents for two clients competing in the same technology area for similar inventions is not a per se violation of Mass. R. Prof. Conduct 1.7. We further conclude that based on the facts alleged in his complaint, Maling failed to state a claim for relief. Accordingly, we affirm the judgment of dismissal.

The story

The plaintiff, Chris E. Maling, engaged the defendant law firm Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Finnegan), including the three individual attorneys named in this suit, to represent him in connection with the prosecution of patents for Maling's inventions for a new screwless eyeglass.

After obtaining his patents, Maling learned that Finnegan had been simultaneously representing another client that competed with Maling in the screwless eyeglass market. Maling then commenced this action, alleging harm under various legal theories resulting from Finnegan's failure to disclose the alleged conflict of interest.

The court reviewed and applied the "subject matter conflicts" doctrine and found that no conflict had been properly alleged

 This court has not defined a minimum protocol for carrying out a conflict check in the area of patent practice, or any other area of law. However, no matter how complex such a protocol might be, law firms run significant risks, financial and reputational, if they do not avail themselves of a robust conflict system adequate to the nature of their practice. Although Maling's complaint does not plead an actionable violation of rule 1.7 sufficiently, the misuse of client confidences and the preferential treatment of the interests of one client, to the detriment of nearly identical interests of another, are serious matters that cannot be reconciled with the ethical obligations of our profession. 

This is a potentially significant holding for patent attorneys. (Mike Frisch) 

December 23, 2015 in Clients, Hot Topics, Law Firms, Professional Responsibility | Permalink | Comments (0)

Tuesday, December 15, 2015

Spoliation Of Evidence In New York

The New York Court of Appeals has reversed an Appellate Division decision on spoliation of evidence.

A party that seeks sanctions for spoliation of evidence must show that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a "culpable state of mind," and "that the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense" (Voom HD Holdings LLC v Echostar Satellite L.L.C., 93 AD3d 33, 45 [1st Dept 2012], quoting Zubulake v UBS Warburg LLC, 220 FRD 212, 220 [SD NY 2003]). Where the evidence is determined to have been intentionally or wilfully destroyed, the relevancy of the destroyed documents is presumed (see Zubulake, 220 FRD at 220). On the other hand, if the evidence is determined to have been negligently destroyed, the party seeking spoliation sanctions must establish that the destroyed documents were relevant to the party's claim or defense (see id.).

 On this appeal, we are asked to decide whether the Appellate Division erred in reversing an order of Supreme Court that imposed a spoliation sanction on the defendants. We hold that it did, and remand the matter to the trial court for a determination as to whether the evidence, which the Appellate Division found to be negligently destroyed, was relevant to the claims asserted against defendants and for the imposition of an appropriate sanction, should  the trial court deem, in its discretion, that a sanction is warranted.

Justice Stein dissented

 I part ways with the majority over its determination that the MP defendants' "culpable state of mind" amounted to, at most, simple negligence. I would hold that defendants acted with gross negligence in failing to preserve the ESI.

I further disagree with the majority's view that relevance is not to be presumed because the evidence was not intentionally or wilfully destroyed. The majority endorses the conclusion of the First Department in VOOM and the case upon which it relies -- Zubulake v UBS Warburg LLC (220 FRD 212, 220 [SD NY 2003] -- that, "[w]here the evidence is determined to have been intentionally or wilfully destroyed, the relevancy of the destroyed documents is   majority neglects to mention that VOOM further held that "destruction that is the result of gross negligence" also "is sufficient to presume relevance" (VOOM, 93 AD3d at 45). Inasmuch as, under VOOM, the MP defendants' gross negligence gives rise to a presumption of relevancy, I would remit to the Appellate Division for consideration of whether, in its discretion, a sanction is warranted.

 

 (Mike Frisch)

December 15, 2015 in Current Affairs, Hot Topics, Law Firms | Permalink | Comments (0)

Monday, September 28, 2015

Reforms Proposed For New York Bar Disciplinary System

A comprehensive series of reform proposals have been set forth in a recent report evaluating the New York State bar disciplinary system by the Commission on Statewide Attorney Discipline.

Two proposals strike me as particularly important and, in my view, should be adopted throughout these United States

Creation of a more easily accessible, searchable, consumer-friendly, statewide website geared toward the legal consumer. Critical information, such as where to file a grievance, should be available in languages in addition to English. Consideration should also be given to establishing a telephone “hot line” to accommodate individuals who do not have access to the internet.

Revision of court rules and procedures to allow “plea bargaining,” or discipline upon consent, to encourage prompt resolution of disciplinary charges, where appropriate.

A notable present flaw

The Subcommittee reviewed a survey conducted by the ABA Center for Professional Responsibility of all 50 states and the District of Columbia concerning the stage of a disciplinary proceeding at which the process becomes open to the public. Although the nuances may differ, the vast majority of jurisdictions open proceedings upon the filing of a formal charge following a finding of probable cause. New York is one of only 9 jurisdictions which do not permit public dissemination of information concerning disciplinary proceedings until, at the earliest, a recommendation that discipline be imposed, and usually upon a final adjudication.

While the Report does not advocate for a single enforcement mechanism to replace the present Departmental disciplinary apparatus, it does argue for uniformity of approach in proposing

Approval by the Administrative Board of the Courts, and by each Department of the Appellate Division, of statewide uniform rules and procedures governing the processing of disciplinary matters at both the investigatory and adjudicatory levels, from intake through final disposition, which strike the necessary balance between facilitating prompt resolution of complaints and affording the attorney an opportunity to fairly defend the allegations. These new rules and procedures should include uniform discovery rules and information-sharing for attorneys who are the subject of a disciplinary complaint. This recommendation is of the highest priority and a firm deadline for adoption should be established.

Also noteworthy is the singling out of one particular type of misconduct

It is the position of this Commission that the Administrative Board should take immediate action to ensure that judicial determinations of prosecutorial misconduct are promptly referred to the appropriate disciplinary committee. Of equal importance, given the perception or misperception, that claims of prosecutorial misconduct are routinely “swept under the rug,” the coordinator of attorney discipline, proposed earlier in this report, should compile, and release as part of an annual report, a statistical summary including, inter alia, the number of complaints of prosecutorial misconduct received and reviewed, the number resulting in public discipline and the number resulting in private discipline.

One final point re prosecutorial misconduct: It is abundantly clear from the public hearings and comments received by the Commission that there is a perception of rampant prosecutorial misconduct which is ignored by the disciplinary committees. As stated earlier, the Commission finds no support for that contention. However, given that prosecutors are public officials, and given that the public has every right to scrutinize the conduct of those it entrusts with public office, this Commission believes that in all cases in which a prosecutor is sanctioned for misconduct, even if the sanction is a private one, appropriately redacted details should be publicly released. The public must be able to make an informed judgment about whether the result of a complaint of prosecutorial misconduct is fair, whether the disciplinary committee did its job and whether the system is working.

Much to consider here but any effort to improve disciplinary process and make it more transparent is highly praiseworthy.

Will the District of Columbia ever get the message (eloquently stated by the Commission) that meaningful plea bargaining is the only way to escape its present logjam where virtually every case takes five to ten years to resolve?

I fear not. (Mike Frisch)

September 28, 2015 in Bar Discipline & Process, Current Affairs, Hot Topics, Professional Responsibility | Permalink | Comments (0)

Friday, September 25, 2015

Conviction Reversed Due to Prosecutor- Juror Ties

The Kentucky Supreme Court has reversed the wanton murder conviction of two defendants because the trial court allowed two jurors with ties to the prosecuting attorney to sit.

Appellants maintain that the trial court abused its discretion in this case by refusing to excuse potential jurors 27 and 75. Both of these jurors acknowledged during voir dire a significant relationship with Lee Tobbe, an attorney of long standing in Wayne County, it appears, and the assistant prosecutor for this case. Both jurors had been represented by attorney Tobbe in the past, and both had a more immediate connection with him. Juror 27, who owned and managed residential rental properties in Monticello, stated that attorney Tobbe was then representing his, Juror 27's, son. We discuss Juror 27 below, but begin with Juror 75 for obvious reasons.

The obvious reason was that the juror could not state that he could be impartial 

The prosecutor...asked whether Juror 75's relationship with attorney Tobbe would make it difficult for the juror to vote to acquit the defendants even if he felt the Commonwealth had failed to prove its case, and Juror 75 responded, "I really can't answer that. I'm trying to be honest with you." These exchanges occurred before the entire venire. At that point the prosecutor declared himself at a loss as to what else to ask Juror 75, said that he was sure defense counsel would have some questions for the juror and then moved on to other topics. Inexplicably, Appellants declined to question Juror 75 further regarding attorney Tobbe, so there the matter stood until the very end of voir dire.

Defense counsel did seek a peremptory challenge at the end of voir dire.

The other juror

 Unlike prospective Juror 75, prospective Juror 27 indicated that neither attorney Tobbe's prior representation of him, nor Tobbe's then current representation of Juror 27's son would have any bearing on the juror's ability to weigh the evidence. The cases cited above, however, make clear that the prosecutor's on-going representation of potential Juror 27's son gives that juror a close and presumptively disqualifying relationship with the prosecutor, a relationship so apt to produce bias that even confident assurances to the contrary by the juror cannot erase significant doubts about his impartiality.

Juror 27 also had ties to the case. (Mike Frisch)

September 25, 2015 in Hot Topics, The Practice | Permalink | Comments (0)

Monday, August 3, 2015

Error To Allow Deposition Of Counsel

The South Dakota Supreme Court held that a trial court had violated the attorney-client privilege by allowing the deposition of a party's attorney and admitting his admissions at trial.

This case arose out of a foreclosure action brought by Voorhees Cattle Co. (Voorhees) against Dakota Feeding Co. (DFC). In its answer to the complaint, DFC filed a third party complaint against B and B Equipment, Inc. (B & B) for breach of contract; B & B counterclaimed alleging impossibility of performance and breach of contract by DFC...

As a result of the fraud allegations, counsel for Voorhees, Thomas M. Maher, sought to depose DFC’s counsel William Van Camp and subpoenaed his records concerning his representation of DFC. Van Camp moved to quash the subpoena and enter a protective order.

Below

The court held a hearing on the motion on October 2, 2013. Van Camp argued that there was no applicable fraud exception to the attorney-client privilege and that he was acting as “an ordinary attorney” by performing due diligence on the transaction. Further, he stated that there is no statute or case law in South Dakota that allows an attorney to be deposed in ongoing litigation because of a fraud complaint such as this. Van Camp explained he was resisting the motion, in part because “they can conduct the discovery they want from my client, the discovery they want from DENR to see what information is there.” 

The deposition was taken and admissions from that deposition were admitted at trial.

The court found that this was error

Even if the court found that the communications may not have been privileged or that waiver was an issue, it should have considered whether deposing opposing counsel was the appropriate means of acquiring the information sought. The court failed to consider the implications of allowing discovery without bounds by the extraordinary means of requesting admissions from opposing counsel regarding client communications, deposing opposing counsel, and issuing a subpoena for the production of materials from counsel’s case files. “Taking the deposition of opposing counsel not only disrupts the adversarial system and lowers the standards of the profession, but it also adds to the already burdensome time and costs of litigation.” Shelton v. Am. Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 1986).

Opposing counsel “is [not] absolutely immune from being deposed.” Id. However, the circumstances under which opposing counsel may be deposed “should be limited to where the party seeking to take the deposition has shown that (1) no other means exist to obtain the information than to depose opposing counsel, (2) the information sought is relevant and nonprivileged; and (3) the information is crucial to the preparation of the case.” Id. (citation omitted). In this case, none of these considerations were taken into account. The court did not analyze the necessity for the discovery or consider reasonable alternative sources such as DFC’s principals or other witnesses such as the DENR employees that may have spoken with DFC’s attorney.

The judgment was nonetheless affirmed

Even though the privileged communications should not have been introduced, nor the deposition of the attorney and further discovery of attorney client privileged material allowed, those communications were germane to the claim by Voorhees, which is not being appealed because DFC satisfied the judgment against it. The communications did not prove, nor go to the heart of B & B’s claims...

The only issue between B & B and DFC decided by the jury was the amount of money owed B & B for the work done on the feedlot. As a result, the erroneous admission of the privileged communications was not unfairly prejudicial to DFC as against B & B. DFC’s claim that the error tainted the trial is not sufficient.

(Mike Frisch)

 

August 3, 2015 in Hot Topics, Privilege | Permalink | Comments (0)

Wednesday, July 15, 2015

No Inherent Sanction Authority When Settlement Breaks Down

A decision from the Massachusetts Supreme Judicial Court

The issue presented in this case is the scope of a judge's authority under the inherent powers of the court to order an attorney for a party to pay the other parties' attorney's fees as a sanction for the attorney's misconduct where that sanction is not authorized by any statute or court rule, and where the attorney has not violated a court order or rule of procedure. We conclude that a judge may exercise the court's inherent power to sanction an attorney with an assessment of attorney's fees only if the attorney has engaged in misconduct that threatens the fair administration of justice and the sanction is necessary to preserve the judge's authority to administer justice. Because we conclude that the judge abused his discretion in exercising the court's inherent powers to sanction the attorney under the circumstances in this case, and that the attorney's alleged misconduct was more appropriately addressed by a referral to the Board of Bar Overseers (board), we reverse the judge's order imposing sanctions.

The case involved a supermarket sale. The alleged misconduct was an attorney's solicitation letter to potential clients while a settlement was being negotiated. It was alleged that the settlement broke down due to the solicitation.

The court

The judge in this case essentially found that [attorney] Goren, by sending the solicitation letter, committed a breach of the "assumption of confidentiality" that was "central to the prospect of achieving settlement," and thereby thwarted a settlement that was on the verge of being executed, which wasted three months of attorneys' time that had been invested in negotiating the settlement, and "materially prejudiced" the court by delaying the judge's effort to move the consolidated cases towards trial. Further, although the judge recognized that he had no jurisdiction "[i]n a technical sense" to decide whether Goren had violated the rules of professional conduct, he nonetheless essentially found that Goren had violated these rules, and the judge relied on these violations to demonstrate that Goren had acted unreasonably to impede "the full and effective administration of justice." We review the judge's imposition of sanctions under the court's inherent powers for abuse of discretion. See Chambers, 501 U.S. at 55. "[A] judge's discretionary decision constitutes an abuse of discretion where we conclude the judge made 'a clear error of judgment in weighing' the factors relevant to the decision, . . . such that the decision falls outside the range of reasonable alternatives" (citation omitted). L.L. v. Commonwealth, 470 Mass. 169, 185 n.27 (2014).

We know of no other case, nor has one been cited by the parties or amicus, where a judge sanctioned an attorney pursuant to the inherent powers of the court for conduct that resulted in a breakdown of settlement negotiations where there was no breach of a settlement agreement or confidentiality agreement, and no violation of an order of the court or rule of procedure. The fair administration of justice does not require the settlement of a case; although the parties are free to settle their case, their entitlement under law is to a trial, not to a settlement in lieu of a trial...

It might be regrettable that money and time were wasted in negotiations that ultimately failed to bear fruit, but that risk is inherent in every negotiation. Because of the risk that judges may misuse the inherent powers to pressure a party to settle a case by threatening the party with sanctions, and also because of the risk that judges will be drawn into collateral disputes regarding what occurred during settlement negotiations by parties seeking sanctions, we must scrutinize with special care any exercise of the inherent powers in the context of settlement negotiations...

Because the alleged wrongs committed by Goren did not threaten the judge's ability to ensure the fair administration of justice, we conclude that the judge exceeded the inherent powers of a court by his assessment of attorney's fees and therefore abused his discretion in doing so.

(Mike Frisch)

July 15, 2015 in Hot Topics, Professional Responsibility | Permalink | Comments (0)

Friday, June 26, 2015

Mouse Clicks And Fair Trials

The Iowa Supreme Court reversed the Court of Appeals and reinstated a second degree murder conviction, rejecting a claim of juror bias. 

The juror had disclosed that she knew and was Facebook friends with a relative of the victim but

there is no evidence the juror provided false testimony during voir dire...

Webster’s lawyer elected not to thoroughly explore the nature of the relationship, including the intriguing mention that she and Frisbie’s stepmother were friends on Facebook. Instead, Webster’s counsel asked a series of questions that seemed more designed to rehabilitate the juror than challenge her. At the conclusion of the hearing, Webster did not challenge the juror for cause. Based on the record before us, we cannot conclude the juror engaged in misconduct by lying during the in camera hearing.

This was of some concern

That brings us to the most troublesome point in the case. There is some suggestion the juror, after the in camera inspection but prior to the verdict, clicked “like” on a Facebook comment by the victim’s stepmother which stated, “Give me strength.” A juror who directly violates the admonitions of the court and communicates with the mother of a crime victim about a case certainly raises questions about her ability to be an impartial juror. This action occurred after voir dire and apparently after the in camera hearing. Thus, Webster has not waived his bias challenge based upon this event, which would not have been uncovered through diligent use of ordinary trial processes. However, the record here does not disclose the court’s initial admonition or when the juror clicked “like.” In any event, while the short form admonition to the jury in the record indicated that the juror should not communicate with parties and witnesses about the case, the juror apparently thought (erroneously) that merely clicking “like” on Facebook was not a “communication.” Moreover, the communication did not relate to the guilt or innocence of the accused, but only showed a degree of empathy for a grieving stepmother who lost her son. A juror who does not have empathy for a grieving mother whose son was a homicide victim would be awfully cold hearted. If we disqualified jurors because they empathized with the family of crime victims, we would have no jurors...

Notwithstanding our resolution of the issues in this appeal, we do not approve of the juror’s conduct in this case. While the click of the mouse does not require reversal of Webster’s criminal conviction, it is troublesome nevertheless. While it did not occur in this case, a single click of the mouse on Facebook can trigger cascading responses. Further, messages posted on Facebook may be viewed by many persons, generating a perception of a miscarriage of justice. In the future our district courts would do well to recognize that in this day and age, our jurors are part of the new electronic world. This can pose a problem in our jury trials. We have held that the click of the mouse in this case was not misconduct sufficient to require a new trial...

The court provides a useful summary of the emerging body of case law and scholarship on social media and juror misconduct. (Mike Frisch)

June 26, 2015 in Hot Topics, Law & Society | Permalink | Comments (0)

Monday, May 11, 2015

Advertising Injunction Against Law Firm Vacated

The Georgia Supreme Court has vacated a permanent injunction and remanded a case where a nursing facility had sued to enjoin a law firm's advertisement seeking potential clients against it.

The case was described in this post by Alyson Palmer of the Daily Report

As recounted in briefs for both sides, the advertisement said the government had cited a nursing facility, Heritage Healthcare of Toccoa, "for failing to assist those residents who need total help with eating/drinking, grooming and personal and oral hygiene." The ad rhetorically asked whether readers' loved ones had suffered bedsores, broken bones, unexplained injuries or death. Providing the firm's contact information, the ad invited anyone concerned that a loved one was being "neglected or abused" at the facility to call McHugh Fuller.

The day after the ad ran, the owner of the facility, PruittHealth-Toccoa, sued the law firm in the Mountain Circuit Superior Court. Beside citing Georgia legal ethics rules on advertising and contacting prospective clients, the complaint alleged the ad had violated Georgia's version of the Uniform Deceptive Trade Practices Act because it was false and misleading. The nursing home company initially requested damages but later amended its complaint to seek only injunctive relief.

Superior Court Judge B. Chan Caudell promptly granted PruittHealth's request for a temporary restraining order prohibiting the law firm from running similar advertisements, then set the case for a hearing a little less than a month later.

In its defense, the firm pointed to a 2012 inspection report by the Department of Health and Human Services' Centers for Medicare & Medicaid Services. That report listed multiple deficiencies at the site under the heading "Assist those residents who need total help with eating/drinking, grooming and personal and oral hygiene." In particular, the document referred to one resident not having access to mouthwash in her room and another resident's long, dirty fingernails.

At the close of the hearing, Caudell found the ad was misleading and deceptive because it said the nursing facility had been cited "for failing to assist" residents in certain areas, while the government report did not use that "failing to" language in its report. He later issued a written order prohibiting McHugh Fuller from publishing or causing the ad to be published in the future and giving the firm 20 days to make sure any electronic posting of the ad by the newspaper was removed.

The law firm appealed to the Georgia Supreme Court, raising several arguments. The firm says that Caudell abused his discretion in finding the ad false and misleading. But the law firm also raises a procedural argument, saying it didn't have advance notice that the judge was going to make a final decision in the case based on the May 2014 hearing. McHugh Fuller later filed a separate appeal complaining that Caudell had excluded from the appellate record materials that the law firm thought should be included.

The court found that the trial court had erred in granting a permanent injunction without clear notice to the law firm that such an order was contemplated. (Mike Frisch)

May 11, 2015 in Current Affairs, Hot Topics, Law & Business | Permalink | Comments (0) | TrackBack (0)

Friday, May 1, 2015

Tax Avoidance Advice Suit May Proceed

Claims by the heirs to the Johnson & Johnson fortune against Proskauer Rose LLP on allegations of fraud, excessive legal fees and unjust enrichment may go forward, according to a decision yesterday by the New York Appellate Division for the First Judicial Department.

The court affirmed dismissal of the legal malpractice claim.

The law firm had initiated discussions of the possible sale of long-held J & J stock. The plaintiffs agreed to consider the law firm's proposal. 

The issue involved a complex series of steps recommended "to effectuate the tax [avoidance] strategy."

Between October 13, 2000 and November 30, 2000, plaintiffs took the complex series of steps recommended by TDG [a business that developed tax avoidance strategies] and Proskauer to effectuate the tax strategy. They paid TDG a total of $1,379,650 in fees and costs, of which they allege that $425,000 was paid by TDG to Proskauer to cover its legal fee.

In June 2001, Proskauer sent plaintiffs a 63-page opinion letter, dated December 29, 2000, which concluded that "it was more likely than not" that the scheme, already executed, would not generate any gain or loss, or accrue any penalties if it was disallowed by the IRS.

In January 2002, the IRS announced a tax amnesty program which allegedly would have been applicable to plaintiffs' situation. However, Proskauer did not notify plaintiffs of that program. In April 2006, the IRS sent plaintiffs a letter requesting documents and detailed information about the tax avoidance strategy they had implemented over five years earlier. Plaintiffs sought counsel from Waxenberg, but he informed them that Proskauer was conflicted by its representation of TDG. Concerned that the agency would ultimately challenge the scheme and assess penalties against them, plaintiffs secured a tolling agreement from Proskauer which, after a later extension, tolled the statute of limitations for any claims against Proskauer up to and including July 31, 2011. Ultimately, the IRS ruled the shelter transaction was not entitled to favorable capital gains tax treatment and assessed plaintiffs back taxes, penalties and interest amounting to millions of dollars.

In December 2010, plaintiffs became aware of a decision in a federal case in Massachusetts District Court (Fidelity Intl. Currency Advisor A Fund, LLC v United States, 747 F Supp 2d 49 [D Ma 2010]). That case was brought by a former Proskauer client who had executed a tax avoidance plan similar to that recommended to plaintiffs by Proskauer and Akselrad. The District Court, after a 44-day trial, issued findings of fact and conclusions of law which stated that the attorneys "agreed in advance to provide favorable legal opinions in order to induce taxpayer-investor" to get involved in the shelter opportunity, and that Proskauer and another law firm had "derived substantial profit from the promotion and sale of the tax shelter strategy, and therefore had a financial interest in upholding the strategy" (747 F Supp 2d at 212, 213).

In July 2011, plaintiffs commenced this action against defendants.

Key holding

this Court has stated that, where an attorney enters into a business transaction with a client whereby the two parties' interests may at some point diverge, the ethics rules place on the attorney the burden of obtaining the client's consent, after full disclosure, "irrespective of the sophistication of the client" (Forest Park Assoc. Ltd. Partnership v Kraus, 175 AD2d 60, 62 [1st Dept 1991] [holding that law firm should have been disqualified from representing the plaintiff in a litigation, which was an entity in which 49 of its partners were investors, where the firm had previously represented the defendant in connection with the transaction in which the entity was formed]; accord Schlanger v Flaton, 218 AD2d 597, 602-603 [1st Dept 1995]). Accordingly, defendants were required to place plaintiffs' interests above all else, without regard to their perceived pedigrees, fortunes or business savvy.

Indeed, the mere facts that plaintiffs were wealthy and could afford high-priced counsel are insufficient for us to draw the conclusion that, as a matter of law, they should have known that there was almost a 50% possibility that the tax strategy would not succeed. On this record, defendants cannot establish the specific backgrounds of plaintiffs and their familiarity with the tax code and IRS practices such that defendants can argue that plaintiffs were not justified in relying on defendants' advice. Ironically, this argument by defendants bolsters plaintiffs' excessive fee claim, since it invites the question why, if they were truly so sophisticated, they needed a $425,000 opinion from Proskauer to convince them to pursue the TDG/Proskauer strategy. Further, it is worth noting that one of the things a sophisticated investor is presumed to know to do before entering a transaction is to consult with its attorney (see Stuart Silver Assoc. v Baco Dev. Corp., 245 AD2d 96, 99 [1st Dept 1997]). That is precisely what plaintiffs did, and they were entitled to rely on defendants' advice.

Finally, plaintiffs' claim for punitive damages properly survived dismissal. Defendants' conduct is alleged to have been directed at a wide swath of clients, and the first amended complaint sufficiently alleges intentional and malicious treatment of those clients as well as a "wanton dishonesty as to imply a criminal indifference to civil obligations" (Walker v Sheldon, 10 NY2d 401, 405 [1961]). Indeed, although we offer no opinion regarding whether the particular scheme at issue was criminal in its manipulation of the tax laws, plaintiffs have demonstrated that similar tax avoidance schemes resulted in the indictments of some of their promoters. Accordingly, the demand for punitive damages is adequately stated. Defendants cite Denenberg v Rosen (71 AD3d 187 [1st Dept 2010], lv dismissed 14 NY3d 910 [2010]) for the purported proposition that an attorney's involvement in promoting an unsuccessful tax avoidance scheme can never support a claim for punitive damages. However, this Court made no such declaration in that case. Nor did this Court find in Denenberg that the pension plan at issue was generally defective. Rather, it held that "it was the operation of plaintiff's particular plan that caused the problems with the IRS" (71 AD3d at 195) (emphasis added).

(Mike Frisch)

May 1, 2015 in Clients, Economics, Hot Topics | Permalink | Comments (0) | TrackBack (0)

Friday, January 23, 2015

SLAPPed Down

The Washington State Supreme Court has held 

The city of Yakima claims the protection of statutes that were designed to protect the rights of those who engage in First Amendment protected communicative activity. U.S. CONST. amend. I. Those statutes-Washington's "anti -SLAPP" laws-protect speakers against frivolous,  speech-chilling lawsuits. We hold that a governmental entity like Yakima cannot take advantage of the anti-SLAPP statutes at least where, as here, the challenged lawsuit is not based on the government's own communicative activity. We reverse the Court of Appeals' decision to dismiss as moot Yakima's appeal of the trial court's decision to deny Yakima's anti-SLAPP motion. Instead, we hold that the case is ripe for review and reinstate the trial court's decision to deny Yakima's antiSLAP motion.

The case involves an employment claim by the police officer contending that he had been  subjected to a hostile workplace as a result of internal investigations into complaints filed by fellow officers. (Mike Frisch)

January 23, 2015 in Hot Topics, Law & Society | Permalink | Comments (0) | TrackBack (0)

Thursday, January 15, 2015

Medicaid Advice And Unauthorized Practice

The Florida Supreme Court has approved an ethics opinion dealing with whether providing medicaid advice violates prohibitions on the unauthorized practice of law

 the Florida Bar Elder Law Section’s Unlicensed Practice of Law Subcommittee petitioned the Florida Bar’s Standing Committee on the Unlicensed Practice of Law (Standing Committee) for an advisory opinion on whether it constitutes the unlicensed practice of law for a nonlawyer to engage in the following Medicaid planning activities leading up to the Medicaid application: (1) drafting of personal service contracts; (2) preparation and execution of qualified income trusts; or (3) rendering legal advice regarding the implementation of Florida law to obtain Medicaid benefits.

The committee

It is the opinion of the Standing Committee that it constitutes the unlicensed practice of law for a nonlawyer to draft a personal service contract and to determine the need for, prepare, and execute a Qualified Income Trust including gathering the information necessary to complete the trust. Moreover, a nonlawyer should not be authorized to sell personal service or Qualified Income Trust forms or kits in the area of Medicaid planning.

 It is also the opinion of the Standing Committee that it constitutes the unlicensed practice of law for a nonlawyer to render legal advice regarding the implementation of Florida law to obtain Medicaid benefits. This includes advising an individual on the appropriate legal strategies available for spending down and restructuring assets and the need for a personal service contract or Qualified Income Trust.

 It is the position of the Standing Committee that a nonlawyer’s preparation of the Medicaid application itself would not constitute the unlicensed practice of law as it is authorized by federal law. As noted earlier, it is also not the unlicensed practice of law for DCF staff to tell Medicaid applicants about Medicaid trusts and other eligibility laws and policies governing the structuring of income and assets when relevant to the applicant’s facts and financial situation.

The court order states that the inquiry was a result of activities of the Forida Department of Children and Families.

The opinion has the force and effect of the court's orders. (Mike Frisch)

January 15, 2015 in Bar Discipline & Process, Current Affairs, Hot Topics, Law & Society | Permalink | Comments (0) | TrackBack (0)

Sunday, November 30, 2014

California Upholds Internal Communication Law Firm Privilege

A decision issued last week by the California Court of Appeals, Second District, Division Three holds

The question before us is whether the attorney-client privilege applies to intrafirm communications between attorneys concerning disputes with a current client, when that client later sues the firm for malpractice. We conclude that when an attorney representing a current client seeks legal advice from an in-house attorney concerning a dispute with the client, the attorney-client privilege may apply to their confidential communications. Adoption of the so-called "fiduciary" and "current client" exceptions to the attorney-client privilege is contrary to California law because California courts are not at liberty to create implied exceptions to the attorney-client privilege. In the unpublished portion of the opinion, we hold that the exceptions to the attorney-client privilege embodied in Evidence Code sections 958 and 962 do not apply to the circumstances presented here. Accordingly, we grant in part the petition of Edwards Wildman Palmer LLP and Dominique Shelton for a writ of mandate, and remand to the trial court for further proceedings.

The court cites the Massachusetts and Georgia cases as well as the Chambliss law review article.

The client had retained the law firm to pursue an invasion of privacy claim against the Daily Mail. As the court noted

The relationship between [client] Mireskandari and the Firm was short lived and, for the most part, contentious.

The court rejected the suggestion that internal counsel and the client were "joint clients" of the firm

Shelton and Mireskandari were not joint clients for purposes of section 962. Shelton and Mireskandari did not retain the Firm "upon a matter of common interest." Mireskandari retained the Firm and Shelton to represent him in the Daily Mail case; Shelton consulted with in-house counsel not as a party to that action, but to obtain advice on how best to address Mireskandari's complaints about billing and his threats to hold the firm responsible for any damages he suffered. Mireskandari and Shelton were not co-parties; they did not employ the same attorney to oppose claims of an adversary or pursue a claim as joint plaintiffs; they were not represented by the same attorney in a business transaction.

The court vacated an order that had permitted discovery into the firm's internal communications.

Thank you to my former student Daniel Woofter for sending me the case. His article from the Georgetown Journal of Legal Ethics is cited in the opinion. (Mike Frisch)

November 30, 2014 in Hot Topics, Law Firms, Privilege | Permalink | Comments (0) | TrackBack (0)

Thursday, November 27, 2014

Conviction Reversed; Prosecutor Knowingly Used Perjured Testimony

The Indiana Court of Appeals had reversed a burglary conviction based on its conclusion that the prosecution knowingly used perjured testimony.

 The case involved the robbery of a Dollar General in December 2012.

A video showed that the perpetrator was a white female.

An employee named Greenlee (a white female) came under suspicion and confessed that it was she in the video. She implicated Smith (her black male boyfriend) and another female as accomplices.

Greenlee entered a guilty plea and admitted under oath that she was the one in the video.

She was awaiting sentencing when she was called as a witness in Smith's trial and offered to testify that it was Smith in the video.

After an objection by defense counsel (who was aware of Greenlee's plea) and a recess, the trial judge allowed the testimony.

The judge found that Greenlee's plea and trial was inconsistent but not necessarily false. Greenlee explained that her plea testimony was false because she was trying to aid Smith.

The prosecution granted Greenlee immunity for any false statements at her plea.

The court found that the issue had been preserved and that the prosecution had knowingly used perjured testimony. The witness gave mutually exclusive accounts of the robbery under oath and there was a "high probability" that her trial testimony was false.

Further, the grant of immunity did not solve the perjury problem, only Greenlee's problem.

Notably, a police witness testified that the video showed that the perpetrator was a white female.

Thanks to Don Lundberg for sending the case to us. (Mike Frisch)

November 27, 2014 in Highlights from bepress and Law & Society Review, Hot Topics | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 22, 2014

Ethics Journal Current Developments Issue Is Out

My favorite issue of the Georgetown Journal of Legal Ethics -our yearly compilation of student notes on current developments in ethics law -  has just hit the street.

This issue holds up well with the past editions and gives the reader excellent exposure to the hottest legal ethics issues that face 21st century members of the legal profession.

As co-faculty advisor (along with my colleague Professor Mitt Regan) to the journal, I am biased in its favor.

With that disclaimer, I highly recommend that all practitioners with an interest in ethics take a look.

Kudos to the journal staff for their hard work and dedication to this notable contribution to the profession. (Mike Frisch)

October 22, 2014 in Ethics, Hot Topics, Judicial Ethics and the Courts, Law & Society, Law Firms, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)