Friday, July 1, 2022

Shortchanged

A two-year reciprocal suspension by the New York Appellate Division for the First Judicial Department based on sanction imposed in the Southern District

the statement of charges alleged that from 2007 to 2019, respondent, as principal of Michael Faillace & Associates, P.C., represented plaintiffs in wage and hour cases arising under the Fair Labor Standards Act (often workers claiming they were denied overtime or proper wages), and regularly used a client retainer agreement that provided, in sum and substance, that if a recovery was made, the client would pay legal services "the greater of a sum equal [to] 40% of any and all sums recovered either as a result of trial or by way of settlement (including attorneys fee awards) or the amount of 'reasonable attorneys fees' determined by the Court or agreed upon [by] the defendants." It was alleged that in 13 specific cases, respondent underpaid clients by disregarding court orders which awarded attorney fees below 40% of the settlement amounts, and instead took funds to which clients were entitled as attorneys' fees in excess of the court mandated amount.

For example, in one case in which respondent's firm represented 13 plaintiffs, the court approved a settlement and approved a total of $205,024.46 in costs and attorneys' fees to be paid to the firm. The court specifically rejected the firm's request for attorneys' fees in the amount of 40% of the settlement amount, finding that one-third of the settlement was consistent with the norms of similar litigation in the Second Circuit and that respondent's firm had not identified circumstances justifying departure from the norms. Respondent disregarded the court order and transferred $280,259.58 into the firm's business account, thereby depriving his clients of more than $75,000 to which they were entitled.

Respondent was also charged with making misrepresentations to the Committee on Grievances. In February 2019, counsel to the Committee on Grievances advised respondent that he was being investigated for alleged professional misconduct. In two letters in response, respondent admitted that in four actions his firm had disbursed lesser amounts of the settlements but claimed that his firm had instituted a number of remedial measures to preclude future disbursement mistakes; in fact, respondent misrepresented the steps taken by the firm. It was also alleged that during a mediation, when two of respondent's clients informed him that they wished to settle their claims, he told them that he would decide the amount of the settlement and would not allow them to settle. As a result, the case did not settle at the mediation.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2022/07/shortchanged.html

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