Sunday, October 14, 2018

Doctor In The House

A staff report from the web page of the Ohio Supreme Court

The Ohio Board of Professional Conduct has issued an advisory opinion concerning the advertisement by lawyers of their juris doctor degrees and other earned academic degrees and professional licenses.

Advisory Opinion 2018-06 replaces a 1994 opinion that addressed the ability of lawyers to advertise their juris doctor (J.D.) degrees while working in other professions or business and communicate the holding of other degrees and licenses while engaged in the practice of law.

The board concludes that the J.D. degree represents formal training in the law and may be displayed by a lawyer in another business or profession even when the lawyer does not actively practice law. The board advises however, that an appropriate disclaimer be added to the display of the J.D. degree in order to not mislead business clients that the lawyer does not provide legal advice or services. The display of other academic degrees or professional licenses is permitted, the board concludes, as long as the information is not false, misleading, or non-verifiable.

The board cautions lawyers that the display of other degrees and licenses should be done in a manner to avoid an implication that the lawyer specializes in an area of law. Specialization in an area of the law requires certification by organizations approved by the Ohio Supreme Court.

Finally, the board concludes that the display of the J.D. in a law-related business such as real estate consulting, title agency, or accounting requires the lawyer to pay close attention to a professional conduct rule dictating the requirements for lawyers to reiterate in writing to business clients that they are not providing legal services that carry the ordinary protections of conflicts of interest checks, attorney-client confidentially, and professional independence found in the practice of law.

(Mike Frisch)

October 14, 2018 in Law & Business, Professional Responsibility | Permalink | Comments (0)

Friday, September 14, 2018

All That Jazz: Spoliation In Big Sky Country

The Montana Supreme Court exercised supervisory control in a matter in which it is alleged that Montana State University - Bozeman negligently hired and failed to protect a student from a predatory professor. 

we find that exercise of supervisory control is necessary and proper and accordingly reverse and remand for further proceedings.

The Professor

In 2006, MSU hired Shuichi Komiyama as a teaching professor in the Music Department of the MSU College of Arts and Architecture (A&A). At pertinent times, Komiyama was also the Director of the MSU Orchestra and Jazz Band.

The lower court action

By order filed April 11, 2018, the District Court summarily adjudicated liability against MSU on Plaintiff Breanne Cepeda’s asserted negligence claim as an evidence spoliation sanction pursuant to M. R. Civ. P. 37(e).

The court vacated the default sanction.

Concerns about the professor's conduct from many sources led to an investigation by in-house counsel and a spoliation issue

More troublesome is MSU’s failure to preserve all emails associated with the email accounts of Leech, Agre-Kippenham, Letendre, and Komiyama music students other than Cepeda, that may have existed on the MSU email server or faculty computers on June 15, 2011. Apart from an unverifiable, self-serving showing that they likely contained no relevant information other than as referenced in emails retained pursuant to its internal investigation, MSU’s affidavit showings, through in-house counsel, were at best vague or ambiguous as to when unpreserved emails associated with the MSU accounts of Leech, Agre-Kippenham, and Letendre were in fact irrecoverably lost. Further, other than a showing that Komiyama and Cepeda primarily, if not exclusively, communicated by private email, MSU made no particularized evidentiary showing in response to Cepeda’s sanctions motion as to whether and to what extent, if any, emails associated with MSU email server accounts assigned to Komiyama music students would still have been present on the MSU server on June 15, 2011.

Though Leech and Agre-Kippenham retired in May 2011, MSU’s measured evidentiary showing and arguments evince tacit acknowledgment that it did not preserve all of the emails associated with the MSU accounts of Leech, Agre-Kippenham, and then-still-active Letendre that existed on June 15, 2011. Substantial evidence thus supports the District Court’s finding that MSU retained only the faculty and student emails that it deemed relevant to its internal investigation. Based on MSU’s vague and ambiguous evidentiary showing, we cannot say that the District Court’s implicit finding—that MSU breached a duty to take reasonable action to preserve information at least potentially relevant to a reasonably foreseeable adverse claim—was clearly erroneous.

But

However, the balance of the District Court’s sanctions analysis is more problematic. Without any predicate finding, the court insinuated that MSU failed to preserve the entirety of the subject faculty and student emails in bad faith, i.e., with the intent or purpose of concealing unfavorable evidence. Except for disputable evidence of a breach of a duty to preserve the entirety of music department faculty and student emails, neither the District Court nor Cepeda have cited any non-speculative direct or circumstantial evidence indicating that MSU knowingly failed to preserve any potentially relevant student or faculty email communications with the purpose or intent of concealing unfavorable evidence. To the contrary, MSU’s failure to preserve occurred in the midst of MSU’s own aggressive investigation of Komiyama at a time when the decision to reinstate or terminate him from employment hung in the balance. The only real-time assessment reasonably supported by the limited record before us was that MSU was actively searching for evidence manifesting the propriety or impropriety of Komiyama’s conduct and relationships with students, including Cepeda, in the face of serious and already significantly-substantiated allegations of misconduct. Beyond rank speculation and conjecture, neither the District Court nor Cepeda cited any substantial direct or circumstantial evidence that would support a finding or inference that MSU knowingly failed to preserve evidence with purpose or intent to conceal unfavorable evidence.

Thus

We hold that exercise of supervisory control is necessary and proper on the ground that this case presents a significant question as to whether the District Court is proceeding  under a mistake of law which, if uncorrected prior to final judgment, will likely cause significant injustice rendering ordinary appeal inadequate. Upon extraordinary review, we hold that the District Court abused its discretion in imposing default judgment against MSU as a spoliation sanction under M. R. Civ. P. 37(b)-(c) and (e). We therefore reverse that portion of the District Court’s sanctions order and remand for further proceedings in the ordinary course.

The Bozeman Daily Chronicle reported on the lower court action

A Helena judge has ruled Montana State University allowed email evidence about conductor Shuichi Komiyama to be destroyed and so the university is liable in a former student’s lawsuit, which alleges the university is to blame for hiring a convicted sex offender who coerced her into having sex.

Judge James Reynolds ruled Wednesday in Lewis and Clark County District Court that whether it was done intentionally or negligently, MSU’s failure to preserve all staff and student emails concerning Komiyama “irreparably damages” the former student’s ability to make her case and to respond to MSU’s accusations against her.

Preserving relevant evidence is critical to the court’s “search for the truth,” Reynolds wrote, quoting a 2015 Montana Supreme Court decision. “’There can be no truth, fairness or justice in a civil action where relevant evidence has been destroyed before trial.’”

  MSU’s attorneys had insisted that the university did a reasonable job preserving those emails of Komiyama and other evidence that officials found relevant to the university’s internal investigation. That investigation led to the conductor being banned from campus in April 2011 and losing his job.

University attorneys argued that MSU turned over more than 1,700 pages of evidence to the student’s attorney.

They argued that when some emails were deleted or written over by the MSU computer system, it was not intentional but part of routine practice to free up space in the server a few months after students, administrators and professors leave the university.

“MSU should not get the benefit of the systematic removal of email accounts of its professors, students, and Komiyama, and be the only party to determine what was relevant,” Reynolds wrote. “MSU does not get to determine what will be relevant and important in foreseeable lawsuits.”

Relevance is a decision for trial courts, the judge wrote.

Geoffrey Angel, the Bozeman attorney for the former student, declined to comment on the judge’s ruling. Anderson Forsythe, the Billings attorney for MSU, referred questions to the university.

“MSU is still looking at the ruling, and the case is ongoing,” the university said in a written statement. “The university does not comment on pending litigation.”

Judge Reynolds ordered that MSU pay the former student’s unspecified costs and fees for her effort to seek legal sanctions. His order did not set any date for determining those costs.

The judge also rejected MSU’s effort to have the former student sanctioned for deleting some of her own email and texts. He ruled that unlike MSU, she is not a “sophisticated litigant” who should know the legal rules.

 Also, the judge wrote, MSU attorney Pam Merrell sent out a “do not destroy” notice in June 2011, two months after Komiyama was booted off campus, telling staff that a lawsuit was likely and so all email, voicemail, videos, calendars, correspondence and other evidence should be preserved. MSU had a duty to ensure that emails and texts weren’t deleted, but “allowed that very thing to happen,” the judge wrote.

The former student originally sued MSU in October 2012, charging MSU was negligent for hiring a music professor who turned out to be a convicted sex offender and who coerced her into non-consensual sex.

The erased email would have been critical for showing when MSU knew of Komiyama’s behavior, including the extent of a 2009 complaint by a former male music student, the judge wrote.

The student’s attorney argued MSU shouldn’t have allowed email accounts to be erased for Alan Leech, interim music department head; Susan Agre-Kippenhan, former dean of the College of Arts and Architecture; Diane Letendre, former Title IX director; Komiyama; Heather Bentz, former assistant dean; Merrell; and several MSU students.

Leslie Taylor, then MSU legal counsel, said in an affidavit she directed that Komiyama’s email account be retained, but the judge wrote MSU decided what was relevant and let the rest of his emails be erased. Taylor did not direct a search of Letendre’s email or save Leech’s account when he retired in May 2011.

“This Court finds troubling,” Reynolds wrote, that while MSU sent out a “do not destroy” message, it still let the system systematically delete accounts. “By allowing the systematic deletion of the email accounts, MSU was able to shape the available evidence and limit (the student’s) opportunity to present her claim.”

(Mike Frisch)

September 14, 2018 in General Counsel, Hot Topics, Music, Professional Responsibility | Permalink | Comments (0)

Thursday, August 16, 2018

Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility

Submissions and nominations of articles are being accepted for the ninth annual Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility.  To honor Fred's memory, the committee will select from among articles in the field of Professional Responsibility with a publication date of 2018.  The prize will be awarded at the 2019 AALS Annual Meeting in New Orleans. Please send submissions and nominations to Professor Samuel Levine at Touro Law Center: slevine@tourolaw.edu<mailto:sl evine@tourolaw.edu>.  The deadline for submissions and nominations is September 1, 2018.

(Alan Childress)

 

August 16, 2018 in Professional Responsibility | Permalink | Comments (0)

Monday, July 23, 2018

A Necessary (Witness) Evil

The Tennessee Court of Criminal Appeals affirmed the grant of a motion to disqualify an attorney under the 'necessary witness" provision of Rule 3.7

The defendant is charged with exploiting her mother 

The State indicated that the proof at the trial on the exploitation charge would show that Defendant used the victim’s resources, funds, and property to benefit herself to the victim’s detriment all during the time that Defendant was acting as caretaker for the victim. The State referenced a quitclaim deed and a durable power of attorney with healthcare, prepared by trial counsel in 2011 and 2012, respectively, as evidence that would be introduced at trial. The State indicated that trial counsel would be called to testify regarding the preparation of these documents; the monetary compensation, if any, that trial counsel received for preparation of these documents; and the extent to which trial counsel had interactions with the victim. The State also indicated that Defendant used a credit card in the victim’s name to pay $1000 to trial counsel and that trial counsel’s testimony would be necessary at trial to explain the charge and/or payment. Thus, the State concluded that trial counsel was a necessary witness and should, therefore, be disqualified from representing Defendant.

Below

The trial court held a hearing on May 12, 2017. At the hearing, the trial court noted that there was a potential conflict because the trial judge was a former law partner of trial counsel. During argument on the motion, trial counsel maintained that he was never paid for preparing the quitclaim deed or power of attorney, that he was not responsible for the actual execution of the documents he prepared, and that he had no idea whether the documents were actually even used or filed. Moreover, trial counsel informed the trial court that he never had any contact with the victim. Trial counsel maintained that he was not a necessary witness.

The judge recused himself and the new judge granted the motion

Specifically, the trial court noted that the issue relevant to the prosecution of Defendant is not who prepared the documents but rather who paid for the services, who benefitted from the services, and who authorized the services and/or payments. The trial court opined that trial counsel was the only person who could provide this testimony and that the issues were “central to the allegations in the case.” While recognizing Defendant’s right to counsel of her own choosing, the trial court acknowledged that the issues raised by the motion, coupled with trial “counsel’s prior contact with Defendant overcome the deference to Defendant’s choice of representation.” The trial court “reluctantly” disqualified trial counsel, explicitly finding that there was “no improper behavior” and taking no position on “potential attorney/client privilege” matters.

Here the court reviewed for an abuse of discretion

We have been unable to find any Tennessee cases defining the term “necessary witness” in the context of Rule 3.7. However, several courts within the Sixth Circuit have addressed what it means to be a “necessary witness” for purposes of disqualification. In both Ohio and Michigan, whose rules of professional conduct pertaining to disqualification contain language identical to our own rule, there are cases interpreting what qualifies as a necessary witness for purposes of disqualification...Based on the marked similarities to our own rule, we confidently conclude the above-cited cases can and should be used as persuasive authority in rendering our decision.

In this case, trial counsel’s testimony is certainly material and relevant. He prepared a quitclaim deed giving property to Defendant from the victim and a power of attorney with healthcare giving Defendant power of attorney over the victim’s affairs. This evidence is relevant regardless of whether the documents were actually executed. Trial counsel also confirmed that he received payment from Defendant on a credit card that the victim jointly owned with defendant. We conclude that the trial court properly determined that trial counsel is a necessary witness. 

None of the three Rule 3.7 exceptions applied.

We are in somewhat of a unique position, being required to determine whether trial counsel’s testimony is necessary, material, and relevant without having anything other than an indictment charging Defendant with a crime. When placed in this position, the fact that trial counsel has potential testimony, which may be used by the State at trial to build its case, leads us to conclude that the trial court properly determined trial counsel should be disqualified. Thus, while we acknowledge that disqualification of trial counsel as a consequence of an appearance of impropriety is not per se barred, we conclude that the facts of this particular case qualify it as one of “the rarest of cases” in which disqualification is an appropriate bar against that appearance.

(Mike Frisch)

July 23, 2018 in Professional Responsibility | Permalink | Comments (0)

Thursday, March 23, 2017

A Cavalier Attitude In The Bluegrass State

The Kentucky Supreme Court has denied relief to an incarcerated defendant who was convicted of biting off the ear of a fellow inmate.

The defendant was represented at trial by a public defender from the Pacudah Department of Public Advocacy.

Another attorney in the same office represented the victim in an unrelated criminal matter in which the representation concluded eight days prior to the trial of the defendant.

Defense counsel advised the court of the potential conflict on the morning of trial (with her erroneous belief that the representation of the victim was ongoing). The defendant refused to sign a waiver of the conflict of interest but the trial nonetheless went forward to conviction.

The court here found counsel was not burdened by an actual conflict of interest under these circumstances.

As to the ethics of the situation: "Attorneys ethical obligations under our Rules of Professional Conduct do not define the scope of [the defendant's] Sixth Amendment rights."

Translation: It may have been unethical, but the defendant gets no relief. 

Justice Hughes concurred and expressed concern about Pacadah DPA's "cavalier approach to shielding its clients from intra-office conflicts."

Justice Wright also concurred, opining that a public defender office need not be treated the same as a for-profit law firm for imputed conflict of interest purposes.  (Mike Frisch)

March 23, 2017 in Clients, Professional Responsibility | Permalink | Comments (0)

Monday, February 20, 2017

Call for papers & nominations: Zacharias Prize for Scholarship in PR

Thanks for this reminder from Sam Levine at Touro:

Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility

Submissions and nominations of articles are now being accepted for the eighth annual Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility. To honor Fred's memory, the committee will select from among articles in the field of Professional Responsibility, with submissions limited to those that have a publication date of calendar year 2017. The prize will be awarded at the 2018 AALS Annual Meeting in San Diego.  Please send submissions and nominations to Professor Samuel Levine at Touro Law Center: slevine@tourolaw.edu.  The deadline for submissions and nominations is Sept. 1, 2017.

A worthy honor to the legacy of Fred, whom I am proud to have known back in the day. (Alan Childress)

February 20, 2017 in Conferences & Symposia, Professional Responsibility, Teaching & Curriculum | Permalink | Comments (0)

Thursday, December 29, 2016

A Tale Of Two Attorneys And The Open Range

The Nevada Supreme Court held that a judgment was properly set aside in part due to opposing counsel's misconduct.

The plaintiff was the estate of a man killed when he struck a cow while driving on the open range.

Michael Adams struck respondent Susan Fallini's cow while driving on a portion of highway designated as open range.' Adams died as a result, and Adams' estate (the Estate) sued Fallini for negligence. The Nevada Highway Patrol's accident report indicated that the accident had occurred on open range. Additionally, Adams' family appears to have created a memorial website for Adams prior to the lawsuit, which explained that Adams' accident occurred on open range and opined that open range laws are unjust.

From the Las Vegas Review-Journal in 2014

Fallini was sued in 2007 by the family of California mining geologist Michael Adams, who died in 2005 after his car struck one of the rancher’s cows on state Route 375.

The Fallini’s Twin Springs Ranch is open range, and Nevada law protects open-range ranchers from being sued if their cows are struck by cars.

Adams was also drunk and speeding when he struck the cow, according to police reports, but that didn’t stop his mother from filing a lawsuit against Fallini.

The fact that the accident was on open range was an inconvenient one for the plaintiff.

But the defendant made a poor choice of counsel, who is now disbarred.

We hold the district court did not abuse its discretion in granting Fallini's NRCP 60(b) motion for fraud upon the court. First, the initial judgment in this case would likely not have been obtained but for Fallini's counsel's abandonment of his client and his professional obligations to his client... Standing alone, that might not warrant relief, as the lawyer is the client's agent and the acts and omissions of an agent ordinarily return to the principal who hired the faithless agent, not those who dealt with the agent in his representative capacity. But here, the Estate's counsel seized on that abandonment as an opportunity to create a false record and present that record to the district court as the basis for judgment. Together, these acts and omissions merited relief.

The district court did not abuse its discretion in finding that the Estate's counsel breached his duty of candor to the court. Although counsel may request that the opposing party admit certain facts that counsel already knows or should know the answer to, if the opposing party fails to respond, we hold that counsel may not rely on the deemed admission of a known false fact to achieve a favorable ruling.

One side had a dilatory lawyer who was eventually disbarred; the other an overzealous lawyer who relied on the concession of a falsehood

...counsel violates his duty of candor to the court when counsel: (1) proffers a material fact that he knew or should have known to be false, see generally Sierra Glass & Mirror v. Viking Indus., Inc., 107 Nev. 119, 125-26, 808 P.2d 512, 516 (1991) (providing that counsel committed fraud upon the court "in violation of SCR 172(1)(a) and (d)" when he proffered evidence and omitted pertinent portions of a document to "buttress" his client's argument, and that he "knew or should have known" that the omitted portion was harmful to his client's position)...

We hold that the Estate's counsel's duty of candor required him to refrain from relying on opposing counsel's default admission that the accident did not occur on open range, when he knew or should have known that it was false, and that the district court did not abuse its discretion in finding the Estate's counsel committed a fraud upon the court when he failed to fulfill his duties as an officer of the court with candor.

The trial court order on the judgment was reported in the Pahrump Valley News. 

It should have been an open and shut case. However, Fallini’s first attorney, former Nye County Public Defender Harry Kuehn, failed on multiple occasions to perform the necessary legal work to properly defend Fallini’s interests. In fact, Kuehn’s work on the case was so shoddy that he ignored a request for admissions where Adams’ attorney, Las Vegas lawyer John Aldrich, asked Fallini to admit that the accident did not occur in open range.

By failing to deny that one admission, and then failing to do anything of substance to defend Fallini — the judge in the case first sanctioned Kuehn $1,000, then $5,000, then $500 a day at one point during the case — Aldrich eventually won a $2.5 million summary judgment against Fallini in July 2010.

The Nevada Supreme Court reversed that award in March 2013, lowering it to $1 million and then remanding the case back to [Judge Robert] Lane’s court...

When the judge’s order came in Wednesday, it complimented Aldrich for zealously representing his client while at the same time accusing the attorney of violating the state’s professional rules of conduct...

The trial judge further stated

“This is not to suggest that Mr. Aldrich is an unethical attorney,” the order states.

Still, Fallini’s attorney Hague blasted Aldrich during the July 28 hearing, accusing him of manufacturing evidence and bending the rules to suit his own needs.

“The court took notice that essentially two plus two equals four and then agreed with plaintiff that two plus two equals five as a matter of law. That is not how the system should work,” Hague told the court. “This is the most egregious case of fraud upon the court that I have ever seen.”

Aldrich said he was taken aback by the verbal assault.

“That is difficult to listen to. To stand there and listen to my integrity being questioned over and over by someone who does not know me is very difficult,” Aldrich said.

The attorney at one point asked the entire argument made by Hague be stricken from the record.

Further reportage from the Las Vegas Review-Journal.

If the link to the opinion does not work, try here. The case is Estate of Adams v, Fallini, No. 68033.  (Mike Frisch)

December 29, 2016 in Professional Responsibility | Permalink | Comments (0)

Wednesday, June 1, 2016

Shotgun Divorce: Attorney Disqualified For Exploring Consultation

The Montana Supreme Court affirmed the disqualification of local and national counsel in an action brought against O. F. Mossberg & Sons as a result of a brief consultation with the plaintiff.

The District Court disqualified Mossberg’s out-of-state counsel, Renzulli Law Firm, and its local counsel, Tarlow & Stonecipher, pursuant to Rule 1.20(c) of the Montana Rules of Professional Conduct. The basis for the court’s disqualification order was a prospective client consultation that Luke Keuffer had with an attorney from Tarlow & Stonecipher, which was later used in a deposition of Stephanie Keuffer by John Renzulli of the Renzulli Law Firm. The court found that the continued involvement in the case by Mossberg’s counsel gave the Keuffers reason to question whether their case can proceed fairly and cause to question what they may have disclosed in the consultation to Tarlow & Stonecipher that may later be used against them in the current litigation. The court also found that Mossberg’s counsel’s actions undermine the public’s trust in the legal profession. For the reasons discussed below, we affirm the District Court’s order disqualifying Renzulli and Tarlow & Stonecipher.

Luke and Stephanie were out hunting. She had a Mossberg rifle.

The Keuffers allege that the Mossberg rifle fell and struck Luke’s rifle and then discharged and shot Luke in the face, causing serious and permanent injury. On August 10, 2010, Luke called Tarlow & Stonecipher, PLLC, and spoke to attorney Margaret Weamer “regarding [Luke’s] possible claim against [a] gun manufacturer for injuries sustained in [a] hunting accident.” Weamer’s time record indicates that she spoke with Luke for six to twelve minutes. After discussing the case with Luke, Weamer advised him that Tarlow & Stonecipher would not be interested in taking the case.

The issue came to light at a deposition and led to a disqualification motion

The court found that Renzulli improperly used the Keuffers’ consultation against them during Stephanie’s deposition. The court found that the purpose of Renzulli’s questioning was to intimidate the Keuffers and create an impression they have a bad case. The court indicated the uniqueness of the situation as Renzulli did not use “information learned” from the consultation, but used the fact that the consultation occurred. The court concluded that this was equally a violation of the Rules because Renzulli used the consultation to intimidate and create an adverse inference about the Keuffers’ case. The District Court disqualified Mossberg’s counsel because their actions defeat the purpose of the Rules of Professional Conduct which threatens the public’s trust in the legal system.

The court

In this case...Renzulli consciously used the information learned in Luke’s consultation with Tarlow & Stonecipher for tactical litigation purposes.

The majority concluded that the trial court had not abused its discretion in ordering disqualification.

Justice Beth Baker dissented

The District Court found that Mossberg’s counsel did not use or reveal information learned from the phone conversation in violation of Rule 1.20(b). The court concluded, however, that there was “no reason why the rule should not be equally applicable when an attorney uses the fact that they consulted with a party and declined to represent that party to intimidate that party or to create an adverse inference about that party’s case.” The court concluded further that “knowing that certain information was not disclosed may be just as harmful as information that was disclosed.” The District Court made no finding that Luke disclosed information that could be significantly harmful to him in the case, and acknowledged that “it is not clear what information was disclosed/learned during Luke’s 6-12 minute consultation with Weamer.” It found nonetheless that “defense counsel used the fact that a consultation even occurred against the [Keuffers] in a significantly harmful manner...

Here, Renzulli used Luke’s communication with Weamer during his deposition of Stephanie as a litigation tactic to imply that the Keuffers had a weak case. Renzulli’s questioning demonstrated a lack of professional, courteous, and civil attitude toward not only the Keuffers, but to the legal system. Renzulli’s attempt to harass and intimidate the Keuffers was out of bounds. Even though the District Court found as a matter of fact that Renzulli did not reveal any specific information that Luke divulged to Weamer, the District Court properly recognized that Luke’s communication to Tarlow & Stonecipher of “the facts” that prompted him to seek legal assistance was not to be “used” against him by counsel for the adverse party. Accord Perry, ¶¶ 29-30 (analyzing whether an attorney violated her duty of confidentiality to a prospective client). See also M. R. Prof. Cond. Preamble ¶ 18. Renzulli acknowledged that he was attempting to do just that by suggesting that the Keuffers had to shop the case around before they could find a lawyer who was willing to take it...

The interests of Renzulli’s client—about whom the Court is noticeably silent— also are entitled to consideration before disqualifying counsel of its choice. Recognizing that a party “must not be lightly separated from her counsel of choice,” we have suggested that disqualification of counsel should not be used for punitive purposes.

Justice Laurie McKinnon also dissented

In my opinion, the District Court abused its discretion in imposing the severe remedy of disqualification, particularly given that the relationship between a prospective client and a lawyer do not impose duties as stringent as between an actual and/or former client and his lawyer. Imposition of such a severe remedy as disqualification should be sparingly imposed, in light of its significant effect in disrupting litigation...Under the circumstances here, disqualification of Mossberg’s counsel was an abuse of discretion when the District Court could have simply precluded the offensive line of questioning by both Renzuilli and Tarlow & Stonecipher and thereby maintained the integrity of the proceeding. The public’s trust in the legal system in not undermined when a trial court perceives an abuse by counsel and corrects it by a fair, proportionate, and measured remedy.

(Mike Frisch)

June 1, 2016 in Clients, Law Firms, Professional Responsibility | Permalink | Comments (0)

Monday, April 18, 2016

Sanctions Affirmed

The Rhode Island Supreme Court affirmed the imposition of Rule 11 sanctions against an attorney who had represented an unhappy seller of real estate and had purported to represent other client in the litigation.

 The appellant, Keven McKenna, represented Mrs. Wells in those legal battles and he purported to represent  several other plaintiffs as well. The Blanchards filed a lawsuit for malicious prosecution and abuse of process, naming Mr. McKenna and others as defendants...During that lawsuit, the Blanchards became aware, through deposition testimony, that several of the named plaintiffs in the prior cases had not been aware that they had been parties to some or all of the lawsuits filed by Mr. McKenna, supposedly on their behalf...

In his written submission to this Court, Mr. McKenna argues that the trial justice erred in granting the motion because: (1) the Superior Court lacked jurisdiction to impose sanctions in closed cases; (2) Mr. McKenna was protected "by the Due Process and Freedom of Speech Clauses of the R.I. and U.S. Constitutions"; (3) Mr. McKenna was immune from sanctions under the Anti-SLAPP Act, G.L. 1956 § 9-33-2, and G.L. 1956 § 45-24-67; and (4) the principles of res judicata, collateral estoppel, statute of limitations, laches, and the law of the case doctrine protected Mr. McKenna from sanctions.

The arguments presented to us by appellant in his written submissions are unpersuasive. Further, Mr. McKenna failed to appear before this Court to elucidate his reasoning for challenging the trial justice’s decision. Thus, we are unconvinced that the trial justice abused her discretion in finding that no attorney-client relationship existed between Mr. McKenna and Nicholas S. Mancieri. See In re Briggs, 62 A.3d 1090, 1097 (R.I. 2013) ("this Court reviews a trial justice’s decision to award or deny Rule 11 sanctions under an abuse-of-discretion standard"). Our review of the record demonstrates that Mr. McKenna received adequate notice of the show cause hearing on Rule 11 sanctions, a point that is accentuated by the fact that Mr. McKenna submitted an objection with supporting evidence, appeared at that hearing to present arguments, and even submitted the testimony of a witness in support of his objection to the motion for sanctions.

The sanctions amount to a tad less than $20,000. (Mike Frisch)

April 18, 2016 in Professional Responsibility | 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)

Friday, April 1, 2016

Carving Up The Benihana Estate

The New York Court of Appeals decided a case involving the estate of Benihana founder Rocky Aoki.

This appeal involves a challenge to the validity of two partial releases of testamentary powers of appointment executed by the decedent Hiroaki (Rocky) Aoki, the founder of the Benihana restaurant chain. The Appellate Division's order declaring the partial releases valid should be affirmed.

The court discussed the role of attorneys in various instruments prepared before and after Rocky's marriage to his third wife. She had attacked the validity of the releases.

[Attorneys] Dornbush and Shaw were clearly Rocky's fiduciaries. But that is only one part of the equation. The critical inquiry is whether they were either parties to the Releases or stood to directly benefit from their execution, such that the burden shifted to Devon and Steven to demonstrate that the Releases were not procured by fraud.

 Here, the only individuals who stood to benefit from Rocky's execution of the Releases were his descendants. Neither Dornbush nor Shaw were parties to the Releases or stood to directly benefit from their execution (cf. Matter of Gordon, 45 NY2d at 698-700; Fisher, 108 NY at 29-30). If anything, the execution of the Releases all but ensured that Dornbush and Shaw would have no interest in, nor would receive any benefit from, the trust assets...

  Absent any evidence of fraud, one who signs a document is bound by its terms...Because Keiko failed to raise a triable issue of fact that the Releases were signed as a result of fraud or other wrongful conduct, the Appellate Division properly granted Devon and Steven summary judgment.

Justice Stein dissented

 To be sure, nothing in the record provides uncontroverted proof that the attorneys drafted, and arranged to have Rocky execute, the Releases at the behest of the children, only, and in the absence of a request by Rocky. In fact, there is some evidence to indicate that Rocky was present at all of the meetings attended by Kevin and Kana, perhaps demonstrating that the attorneys were not in an attorney-client or agency relationship with the children, but met with them only in furtherance of their professional and fiduciary obligations to Rocky. Nevertheless, all of the conflicting evidence, considered together, is sufficient to create a triable question of fact regarding whether the attorneys were acting on behalf of -- or as agents of -- the children, and not Rocky, when they drafted the Releases and supervised their execution.

Accordingly, I would reverse the Appellate Division order granting summary judgment to Devon and Steven Aoki, and remit the case to that Court...

Daughter Devon is an actress of some note. (Mike Frisch) 

April 1, 2016 in Clients, 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)

Friday, December 4, 2015

When A Client Threatens Suicide

The Virginia State Bar is addressing a difficult issue that attorneys sometimes face

May a lawyer disclose otherwise confidential information to protect a client who threatens to commit suicide?

Rule of Professional Conduct 1.14 ("Client With Impairment") http://www.vsb.org/pro-guidelines/index.php/rules/client-lawyer-relationship/rule1-14/ provides guidance to a lawyer whose client's physical and financial well-being is at risk of substantial harm due to the client's diminished capacity. Sadly, there have been many instances when a client facing incarceration, loss of child custody, or loss of income and property has informed his or her lawyer that the client intends to commit suicide. When the lawyer "reasonably believes" that such a threat is credible, the lawyer "may take reasonably necessary protective action" on behalf of the client. Neither the Rule nor the Comments which follow it specifically address a client's threat of suicide, but the Rule should be interpreted to allow the lawyer to contact the client's family, close friends, mental health care providers, or emergency medical services personnel so that an intervention can be made to save the client from harm. Lawyers who take protective action consistent with Rule 1.14 do not violate Rule of Professional Conduct 1.6 ("Confidentiality of Information") http://www.vsb.org/pro-guidelines/index.php/rules/client-lawyer-relationship/rule1-6/ because Rule 1.6(a) permits disclosures which are "impliedly authorized in order to carry out the representation". Lawyers must nonetheless adhere to the requirement of Rule 1.14(c) to reveal otherwise confidential information "only to the extent reasonably necessary to protect the client's interests."

The Standing Committee on Legal Ethics has opined that it is not a violation of the ethical duty of confidentiality for a lawyer to disclose to appropriate authorities a client's stated intention to commit suicide. See LEO 560 http://www.vsb.org/docs/LEO/560.pdf

(Mike Frisch)

December 4, 2015 in Clients, Professional Responsibility | Permalink | Comments (0)

Tuesday, November 17, 2015

Zacharias Prize Recipients Named

Samuel Levine of Touro Law Center has announced that the winners have  been selected for the sixth annual Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility.  The Prize will be awarded to Elizabeth Chamblee Burch, for her article Judging Multidistrict Litigation, 90 NYU L. Rev. 71 (2015), and Morris A. Ratner, for Class Counsel as Litigation Funders, 28 Geo. J. Legal Ethics 271 (2015). The Prize will be awarded at the AALS Annual Meeting in New York in January. Congrats! (Alan Childress)

November 17, 2015 in Judicial Ethics and the Courts, Law & Business, Professional Responsibility | Permalink | Comments (0)

Friday, October 23, 2015

A Boyfriend Named Evilsizer

The Iowa Supreme Court has held that a criminal defendant's threats against  a Dubuque County Attorney did not require that entire office's disqualification from the prosecution.

In this case of first impression, we are asked to decide whether under the facts presented here, the district court was correct in granting the motion for recusal or disqualification of the individual prosecuting attorney and the entire Dubuque County Attorney’s Office in its prosecution of the defendant. For the reasons set forth below, we conclude that the district court’s decision to disqualify the individual prosecuting attorney constituted an abuse of discretion. Consequently, it was likewise unnecessary to disqualify the entire Dubuque County Attorney’s Office. The writ of certiorari is sustained, and the case is remanded to the district court for further proceedings.

The defendant's threats came after a hearing on her boyfriend's criminal case. Although they were not co-defendants, they shared the same prosecutor.

On May 30, Erickson attended the bond review hearing for her boyfriend, James Evilsizer. Barnes also represented the State in the case against Evilsizer. After the hearing, the district court denied his requested relief, and Evilsizer was returned to the Dubuque County jail. Later that day, Erickson visited Evilsizer at the jail. The conversation between the two was video recorded. During the recorded conversation, Erickson made multiple disparaging remarks about Barnes. Erickson called Barnes a “c*nt,” a “biased c*nt,” and “literally Satan.”

Erickson also made remarks that could be taken as threats against Barnes. After Evilsizer told Erickson that her horoscope for the day said she was going to have a romantic evening, Erickson responded, “Yeah, with a sniper rifle for the State.” Later in the conversation, Erickson told Evilsizer, “I’m on the verge of going and buying a sniper rifle and just shooting this chick in her face.” When the two were discussing Erickson seeing Barnes after Evilsizer’s bond hearing, Erickson said she had thought, “Really, b*tch? You’re lucky we’re in court right now and I’m pregnant.”

Erickson also told Evilsizer that she was going to “get [Barnes] disbarred” by reporting her to the “judicial disciplinary committee” and that the committee would “rip her apart.” In addition to the remarks about the assistant county attorney, Erickson told Evilsizer that she was “about to snap the f*ck out,” that the State was “pushing [her] over the edge,” and that she was “borderline suicidal.”

These recorded remarks led to the revocation of Erickson's bond.

The court

Here, the district court did not adequately explain its reasoning for concluding that Barnes had an actual conflict of interest or a serious potential for a conflict of interest. The district court provided no authority to support its decision to disqualify Barnes. The district court order also did not clarify under which standard Barnes was disqualified—actual conflict or serious potential for conflict...

We agree with the reasoning of other courts that have addressed the issue that threats alone are not sufficient to support a conflict of interest for a prosecutor which would require disqualification or recusal.

And there would be no imputed disqualification to the  county attorney's office.

THOnline reported on the oral argument and the underlying case. (Mike Frisch)

October 23, 2015 in Professional Responsibility | Permalink | Comments (0)

Sunday, October 4, 2015

Nevada Supremes Instruct On Dealing With Allegations Of Attorney Misconduct In Civil Litigation

The Nevada Supreme Court has provided guidance to lower courts with respect to the proper trial and appellate court approach to attorney misconduct

After the jury rendered a verdict in favor of the [defendant] manufacturer, the plaintiff filed a post-trial motion seeking a new trial based upon alleged misconduct committed by the manufacturer's attorney. The district court denied the motion, but failed to make the detailed findings required by the Nevada Supreme Court.

The Nevada Supreme Court recently issued two opinions clarifying how claims of attorney misconduct must be handled both by the district court and subsequently on appeal. In this opinion, we take the opportunity to summarize those recent developments and to provide guidance to district courts tasked with resolving claims of misconduct. Because the district court in this case failed to make detailed findings regarding the alleged misconduct that might have enabled us to determine whether those cases would have affected its decision, we must remand the case to the district court to reconsider its decision in light of those cases and to make the necessary findings. To assist the district court, we identify some factors that must be considered on remand.

Holding

When a party claims misconduct by opposing counsel, the legal standard under which that misconduct is reviewed depends on whether a timely trial objection was made. See Lioce, 124 Nev. at 17-19, 174 P.3d at 980-82. When a timely objection was not made at trial, any review of that misconduct, either post-trial by the trial court or on appeal, is considerably more circumscribed than if an objection was made. When resolving a motion for a new trial based on unobjected-to attorney misconduct, "the district court shall first conclude that the failure to object is critical and the district court must treat the attorney misconduct issue as having been waived, unless plain error exists." Id. at 19, 174 P.3d at 982. To decide whether there is plain error, the district court must then determine "whether the complaining party met its burden of demonstrating that its case is a rare circumstance in which the attorney misconduct amounted to irreparable and fundamental error." Id. And "[lin the context of unobjected-to attorney misconduct, irreparable and fundamental error is error that results in a substantial impairment of justice or denial of fundamental rights such that, but for the misconduct, the verdict would have been different." Id. Thus, in this case, because no objection was lodged at trial, a new trial would only be warranted if Pentair committed misconduct and the misconduct amounted to "plain error."

Trial courts must

On remand, the district court must clarify, at a minimum, whether it found that no misconduct occurred or rather whether it concluded that misconduct did occur but was harmless under the standards of Lioce in view of: (1) the nature of the claims and defenses asserted by the parties; (2) the relative strength of the evidence presented by the parties; (3) the facts and evidence that were either disputed or not substantively disputed during the trial; (4) the type, severity, and scope of any attorney misconduct; (5) whether any misconduct was isolated and incidental on the one hand or repeated and persistent on the other; (6) the context in which any misconduct occurred; (7) the relationship of any misconduct to the parties' evidence and arguments; and (8) any other relevant considerations...when serious and repeated attorney misconduct has demonstrably occurred, the district court's deference to the jury is more limited than if such misconduct had not occurred, and the trial court must carefully consider whether the misconduct led the jury astray and caused it to base its verdict upon something other than the evidence and the applicable law.

The case involves a products liability action against a manufacturer of swimming pool filters. An explosion had cost the plaintiff an eye. (Mike Frisch)

October 4, 2015 in Judicial Ethics and the Courts, Professional Responsibility, The Practice | 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)

Wednesday, August 19, 2015

What To Do When Third Party Steals Escrow Funds

A proposed ethics opinion in North Carolina deals with the issues that arise from third party escrow theft

Proposed 2015 Formal Ethics Opinion 6
Lawyer’s Professional Responsibility When Third Party Steals Funds from Trust Account    
July 16, 2015

Proposed opinion rules that when funds are stolen from a lawyer’s trust account by a third party who is not employed or supervised by the lawyer, and the lawyer was managing the trust account in compliance with the Rules of Professional Conduct, the lawyer is not professionally responsible for replacing the funds stolen from the account.

NOTE: This opinion is limited to a lawyer’s professional responsibilities and is not intended to opine on a lawyer’s legal liability.

Inquiry #1:

John Doe, a third party unaffiliated with Lawyer, created counterfeit checks that were identical to Lawyer’s trust account checks. John Doe made the counterfeit checks, purportedly drawn on Lawyer’s trust account, payable to himself and presented the counterfeit checks for payment at Bank. Bank honored some of the counterfeit checks. As a consequence, client funds held by Lawyer in his trust account were utilized for an unauthorized purpose. Lawyer properly supervised all nonlawyer staff participating in the record keeping for the trust account. Lawyer also maintained the trust account records and reconciled the trust account as required by Rule 1.15-3. Lawyer had no knowledge of the fraud and had no opportunity to prevent the theft.

Does Lawyer have a professional responsibility to replace the stolen funds?

Opinion #1:

No.

A lawyer who receives funds that belong to a client assumes the responsibilities of a fiduciary to safeguard those funds and to preserve the identity of the funds by depositing them into a designated trust account. Rule 1.15-2, RPC 191, and 97 FEO 9. The responsibilities of a fiduciary include the duty to ensure that the funds of a particular client are used only to satisfy the obligations of that client. RPC 191 and 97 FEO 9. Rule 1.15-3 requires a lawyer to keep accurate records of the trust account and to reconcile the trust account. A lawyer has an obligation to ensure that any nonlawyer assistant with access to the trust account is aware of the lawyer’s professional obligations regarding entrusted funds and is properly supervised. Rule 5.3.

If Lawyer has managed the trust account in substantial compliance with the requirements of the Rules of Professional Conduct (see Rules 1.15-2, 1.15-3, and 5.3) but, nevertheless, is victimized by a third party theft, Lawyer is not required to replace the stolen funds. If, however, Lawyer failed to follow the Rules of Professional Conduct on trust accounting and supervision of staff, and the failure is a proximate cause of theft from the trust account, Lawyer may be professionally obligated to replace the stolen funds. Compare RPC 191 (if a lawyer disburses against provisionally credited funds, the lawyer is responsible for reimbursing the trust account for any losses caused by disbursing before the funds are irrevocably credited).

Under all circumstances, Lawyer must promptly investigate the matter and take steps to prevent further thefts of entrusted funds. Lawyer must seek out every available option to remedy the situation including researching the law to determine if Bank is liable;1 communicating with Bank to discuss Bank’s liability; asking Bank to determine if there is insurance to cover the loss; considering whether it is appropriate to close the trust account and transfer the funds to a new trust account; and working with law enforcement to recover the funds.

Inquiry #2:

Prior to learning of the fraud and theft from the trust account, Lawyer issued several trust account checks to clients and/or third parties for the benefit of a client. Despite the theft, there are sufficient total funds in the trust account to satisfy the outstanding checks. However, because of the theft, funds belonging to other clients will be used if the outstanding checks are cashed.

What is Lawyer’s duty to safeguard the remaining funds in the trust account?

Opinion #2:

Lawyer must take reasonable measures to ensure that funds belonging to one client are not used to satisfy obligations to another client. Such reasonable measures include, but are not limited to, requesting that Bank issue stop payments on outstanding trust account checks; providing Bank with a list of outstanding checks and requesting that Bank contact Lawyer before honoring any outstanding checks; and determining if Bank is liable and, if so, demanding the outstanding checks be covered by Bank. If Lawyer determines Bank is not liable or liability is unclear, Lawyer must maintain the status quo and prevent further loss by not issuing new trust account checks. If payment will be stopped on the outstanding checks, Lawyer must contact the payees and alert them to the problem.

Inquiry #3:

Assume the same facts in Inquiry #2 except there are insufficient funds in the trust account to satisfy the outstanding checks. Must Lawyer deposit funds into the trust account to ensure that the outstanding checks are not presented against an account with insufficient funds?

Opinion #3:

No. In addition to the remedial measures listed in Opinion #2, Lawyer should notify the payees if Lawyer knows that the checks will not clear.

Inquiry #4:

Hacker gains illegal access to Lawyer’s computer network and electronically transfers the balance of the funds in Lawyer’s trust account to a separate account that is controlled by Hacker. Lawyer’s trust account now has a zero balance. Lawyer has written several trust account checks to clients and/or third parties for the benefit of clients. Because of the theft, there are insufficient funds in the trust account to satisfy the outstanding checks.

Does Lawyer have a professional responsibility to replace the stolen funds?

Opinion #4:

No, Lawyer is not obligated to replace the stolen funds provided he has taken reasonable care to minimize the risks to client funds by implementing reasonable security measures in compliance with the requirements of Rule 1.15.

Rule 1.15 requires a lawyer to preserve client property, to deposit client funds entrusted to the lawyer in a separate trust account, and to manage that trust account according to strict recordkeeping and procedural requirements. To fulfill the fiduciary obligations in Rule 1.15, a lawyer managing a trust account must use reasonable care to minimize the risks to client funds on deposit in the trust account. 2011 FEO 7.

In 2011 FEO 7 the Ethics Committee opined that a lawyer has affirmative duties to educate himself regularly as to the security risks of online banking; to actively maintain end-user security at the law firm through safety practices such as strong password policies and procedures, the use of encryption and security software, and the hiring of an information technology consultant to advise the lawyer or firm employees; and to insure that all staff members who assist with the management of the trust account receive training on and abide by the security measures adopted by the firm.

If Lawyer has taken reasonable care to minimize the risks to client funds, Lawyer is not ethically obligated to replace the stolen funds. If, however, Lawyer failed to use reasonable care in following the Rules of Professional Conduct on trust accounting and supervision of staff, and the failure is a proximate cause of theft from the trust account, Lawyer may be professionally obligated to replace the stolen funds.

Inquiry #5:

Lawyer is retained to close a real estate transaction. Prior to the closing, Lawyer obtains information relevant to the closing, including the seller’s name and mailing address. Lawyer also receives into his trust account the funds necessary for the closing. Lawyer’s normal practice after the closing is to record the deed and disburse the funds. Lawyer then mails a trust account check to the seller in the amount of the seller proceeds.

Hacker gains access to information relating to the real estate transaction by hacking the email of one of the parties (lawyer, realtor, or seller). Hacker then creates a “spoof” email address that is similar to realtor’s or seller’s email address (only one letter is different). Hacker emails Lawyer with disbursement instructions directing Lawyer to wire funds to the account identified in the email instead of mailing a check to seller at the address included in Lawyer’s file as previously instructed. Lawyer follows the instructions in the email without first implementing security measures such as contacting the seller by phone at the phone number included in Lawyer’s file to confirm the wiring instructions. After the closing and disbursement, the true seller calls Lawyer and demands his funds. Lawyer goes to Bank to request reversal of the wire. Bank refuses to reverse the wire and will not cooperate or communicate with Lawyer without a subpoena.

While pursuing other legal remedies, does Lawyer have a professional responsibility to replace the stolen funds?

Opinion #5:

Yes. Lawyers must use reasonable care to prevent third parties from gaining access to client funds held in the trust account. As stated in Opinion #4, Lawyer has a duty to implement reasonable security measures. Lawyer did not verify the disbursement change by calling seller at the phone number listed in Lawyer’s file or confirming seller’s email address. These were reasonable security measures that, if implemented, could have prevented the theft. Lawyer is, therefore, professionally responsible and must replace the funds stolen by Hacker. If it is later determined that Bank is legally responsible, or insurance covers the stolen funds, Lawyer may be reimbursed.

Inquiry #6:

While pursuing the remedies described in Opinion #2, may Lawyer deposit his own funds into the trust account?

Opinion #6:

Yes.

Generally, no funds belonging to a lawyer shall be deposited in a trust account or fiduciary account of the lawyer. Rule 1.15-2(f). The exceptions to the rule permit the lawyer to deposit funds sufficient to open or maintain an account, pay any bank service charges, or pay any tax levied on the account. Id. The exceptions were expanded in 1997 FEO 9 to include the deposit of lawyer funds when a bank would not route credit card chargeback debits to the lawyer’s operating account. These exceptions to the prohibition on commingling enable lawyers to fulfill the fiduciary duty to safeguard entrusted funds.

Therefore, notwithstanding the prohibition on commingling, Lawyer may deposit his own funds into the trust account to replace the stolen funds until it is determined whether the Bank is liable for the loss, insurance is available to cover the loss, or the funds are otherwise recovered. If Lawyer decides to deposit his own funds, he must ensure that the trust accounting records accurately reflect the source of the funds, the reason for the deposit, the date of the deposit, and the client name(s) and matter(s) for which the funds were deposited.

Inquiry #7:

With regard to all of the situations described in this opinion, what duties does Lawyer owe to the clients whose funds were stolen?

Opinion #7:

Lawyer must notify the clients of the theft and advise the clients of the consequences for representation; help the clients to identify any source of funds, such as bank liability and insurance, to cover their losses; defer a client’s matter (by seeking a continuance, for example) if necessary to protect the client’s interest; and explain to third parties or opposing parties as necessary to protect the client’s interests. If stop payments are issued against outstanding checks, Lawyer must take the remedial measures outlined in Opinions #1 and #2 to protect the client’s interest. Finally, Lawyer must report the theft to the North Carolina State Bar’s Trust Accounting Compliance Counsel.

Endnote
1. See e.g. N.C. Gen. Stat. §25-4-406.

(Mike Frisch)

August 19, 2015 in Professional Responsibility | 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)

Monday, June 29, 2015

That's A Fact

The Fifth District Court of Appeal of Florida affirmed a criminal conviction and criticized defense counsel's advocacy

While no discussion of the merits of the case is required, we find it necessary to comment on the appellant's improper insertion of alleged facts in both the statement of the facts and the argument sections of her brief. As an appellate court, we are required to consider the facts in the light most favorable to the appellee, and the appellant must properly address the facts in that manner. Such was clearly not done by the appellant in this case. The facts in this case were highly disputed, and the trial court conducted an evidentiary hearing thereon. The court thereafter expressly found the testimony of the victim to be more credible than the testimony of the appellant. In spite of this explicit finding, the appellant's brief improperly presented as "fact" the testimony of the appellant, and counsel based her legal arguments on those facts. Such practices are inappropriate and unprofessional.

Hat tip to the excellent sunEthics blog. (Mike Frisch)

June 29, 2015 in Professional Responsibility | Permalink | Comments (0)