Wednesday, February 28, 2018

A Failed Collaboration in Hoosierland

The Indiana Supreme Court has suspended an attorney

We find that Respondent, Robert John Wray, engaged in attorney misconduct arising from his solicitation of clients through a nonlawyer intermediary. For this misconduct, we conclude that Respondent should be suspended from the practice of law in this state for at least nine months without automatic reinstatement.

The case

The Commission filed a five-count "Verified Complaint for Disciplinary Action" on November 13, 2015, and later amended that complaint to add a sixth count. As set forth in more detail below, the amended complaint charged Respondent with a wide range of rule violations arising out of his professional relationship with Douglas Stephan, a nonlawyer. Following a hearing, the hearing officer filed a 64- page report finding Respondent committed violations as charged.

Respondent has represented several owners of allegedly defective modular or manufactured homes in actions against the homes’ installers, builders, or manufacturers. One of those owners was Stephan, who purchased a home from Joseph Callaghan, d/b/a Fahl Manufactured Homes ("Callaghan"). Respondent and Stephan developed a relationship under which Stephan (through his company Stephan Consulting, Inc., which Respondent helped Stephan incorporate) would solicit other owners to become plaintiffs in Stephan’s action and in other actions against Callaghan and other installers, builders, and manufacturers. Typically, Stephan would "cold call" the owners, offer to perform home inspections for them, and then ask those owners to sign an "Investor Agreement" and an "Attorney Agreement," both of which were drafted and/or approved by Respondent and included Respondent’s name throughout. The owners, and subsequently Respondent, would sign the Attorney Agreements, frequently without any direct communication with one another or discussion about the merits of the claim.

The Investor Agreements included statements falsely representing that the owners already had entered into fee agreements with Respondent. The Investor Agreements also included several statements that inaccurately described how litigation costs would be advanced and how the risks of litigation would be assumed. For example, the Investor Agreements stated Stephan would advance the costs of litigation in exchange for 50% of the client’s net recovery, but aside from the first few cases Stephan did not actually advance these costs.1 The Attorney Agreements provided that Respondent would receive a contingent fee of between 33% and 50%, and some Attorney Agreements also required a nonrefundable $1,000 retainer for costs.

Respondent entered into contracts with about 118 owners through his relationship with Stephan. One of these clients was David Lomperski, who – in exchange for a reduced contingent fee in his case – agreed to work with Stephan to identify other potential clients. Respondent helped draft an employment and noncompete agreement between Stephan and Lomperski.

The relationship between Respondent and Stephan eventually soured due to a dispute involving the advancement of costs, and Respondent proposed to Lomperski that they work together in the same capacity that Respondent had been working with Stephan. When they met to discuss this, Lomperski secretly recorded the conversation. Respondent also briefly entered into a similar relationship with David Blumenherst, who solicited at least two new clients using the same "Investor Agreement" template Respondent had provided Stephan.

 In addition to the misleading representations in the Investor Agreements regarding the advancement of litigation costs, after cases settled Respondent drafted a "Disbursement Authorization and Acknowledgement" form for his clients that in some instances inaccurately reflected the actual distributions and advancement of costs. After the accounting dispute arose between Respondent and Stephan, Respondent represented to clients that he had paid Stephan his share and instructed them not to pay Stephan, when in fact Respondent merely had "allocated" Stephan’s share against the amount Respondent believed Stephan owed him.

The Investor Agreements provided that Stephan "shall take the lead in communications with the attorney" and others and purported to grant Stephan the authority to advance the client’s claims and to "arrange for settlement." Notwithstanding this language, Respondent did have a general practice of writing his clients to notify them of significant events in their cases. However, Respondent admitted there often were delays of several months between the time that Stephan had clients execute Attorney Agreements and the time that Respondent eventually received those Agreements, and Respondent admitted further that he never raised the issue of these delays with Stephan. These delays could have led to claims being time-barred, although there is no evidence this occurred in any of the cases.

Several clients testified about what they felt was a lack of adequate communication or explanation from Respondent. Several clients also testified that they agreed to settle a claim against one defendant (Callaghan) based, at least in part, on Respondent’s representation that they could recover additional amounts against another defendant (Chilton). However, Chilton would have been among the parties covered by the release in the Callaghan settlement.2 The hearing officer found that Respondent misrepresented the viability of a potential claim against Chilton in order to motivate clients to settle claims against Callaghan.

During the Commission’s investigation into the events described above, Respondent represented to the Commission that "Stephan Consulting did not ‘solicit’ clients for my law office. Stephan Consulting provided financing and consulting to various homeowners under separate and distinct agreements with homeowners." The hearing officer found this statement was false with respect to both solicitation and financing.

Finally, from 2008 through 2015, Respondent failed to keep adequate trust account records and separate ledgers for each client. Respondent also kept more than a nominal amount of personal funds in his trust account.


...the actual and potential harm resulting from this type of arrangement is readily apparent. In this case, Respondent’s delegation of client intake responsibilities to Stephan led to impermissible solicitation of clients, misrepresentations to clients about financing and costs, and delays of several months before Respondent became involved with (or even aware of) the clients’ cases. Clients, whose primary point of contact was Stephan, encountered difficulty communicating with Respondent and remaining sufficiently apprised about their cases. Although many clients did obtain some recovery, those recoveries were greatly reduced due to a second contingent fee owed to Stephan, a middleman who was not actually providing the financing services clients were paying him to provide. And when a financial dispute arose between Respondent and Stephan, clients were caught in the middle.

Throughout all of this, Respondent lied. Respondent provided Stephan with Investor Agreements for clients to execute that Respondent knew were false in several material respects. Respondent falsely told several clients at the conclusion of their cases that Respondent already had paid Stephan. And when the Commission began investigating Respondent’s practices, Respondent falsely told the Commission that Stephan provided financing for clients, when Respondent knew Stephan was not doing so. Respondent’s pattern of dishonesty elevates his problematic arrangement with Stephan into a much more serious offense... 

Nor is this Respondent’s first encounter with the disciplinary process. Respondent and two other attorneys were publicly reprimanded by this Court in 2009 for deceptive advertising and improper use of a trade name

(Mike Frisch)

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