Legal Profession Blog

Georgia Considering Legal Malpractice Statute of Limitations In Transactional Matters

A summary of an oral argument held before the Georgia Supreme Court on May 18

DOUGLAS COE et al. v. PROSKAUER ROSE LLP (S21G1250)

The law firm Proskauer Rose, LLP provided a legal opinion to Douglas Coe, Jacqueline Coe, and GFLIRB, LLC, (collectively, “the Coes”) in 2002 regarding a proposed tax strategy.

The opinion advised that the Internal Revenue Service “should not” impose penalties on the Coes if they followed the proposed tax strategy; however, the IRS later audited the Coes, rejected the tax strategy, and imposed penalties.

After settling with the IRS in 2012, the Coes sued Proskauer in Fulton County State Court, claiming legal malpractice, fraud, and negligent misrepresentation. The trial court ultimately granted summary judgment in favor of Proskauer, and the Coes appealed the trial court’s decision.

The Court of Appeals, the state’s intermediate appellate court, affirmed the trial court’s decision, concluding that the Coes’ lawsuit fell outside the four-year statute of limitations period for fraud, misrepresentation, and legal malpractice because their claims accrued in 2002 when Proskauer provided them its legal opinion. The Court of Appeals also concluded that the Coes should have been on notice regarding the issues surrounding the tax strategy well before the IRS audit was complete.

The questions now before the Supreme Court are: Were the plaintiff’s claims of fraud and negligent misrepresentation barred by the four-year statute of limitations period applicable to legal malpractice claims? Did the plaintiffs fail, as a matter of law, to exercise ordinary care to discover the defendant’s allegedly fraudulent acts?

Several Georgia-based accounting firms filed a brief as amici curiae, or friends of the court, supporting Proskauer’s position in the case. Another amicus brief, also in support of Proskauer’s position, was filed by former presidents of the State Bar of Georgia and law firms
with substantial transactional practices in Georgia.

Attorneys for the Appellants (Douglas Coe et al.): Josh Belinfante, Jeven R. Sloan, Harry W. MacDougald
Attorneys for the Appellee (Proskauer Rose LLP): Harold D. Melton, Mark G. Trigg, Shari L. Klevens, Lisa S. Blatt, John S. Williams, Matthew Rice, Tyler Infinger, Denis Hurley Amici Curiae in Support of the Appellee (Aprio, LLP; Bennett Thrasher, LLP; Frazier & Deeter, LLC; Hancock Askew & Co; Mauldin & Jenkins LLC; Nichols Cauley & Associates, LLC.): Johannes S. Kingma, Jeffrey C. Hoffmeyer

Amici Curiae in Support of the Appellee (Former Presidents of the State Bar of Georgia, law firms with transactional practices in Georgia): Laurie Webb Daniel, Matthew D. Friedlander

Access the briefs:
- Brief of the Appellant
- Brief of the Appellee
- Reply Brief of the Appellant
- Amicus Brief in Support of the Appellee (Aprio, et al.)
- Amicus Brief in Support of the Appellee (Former Presidents of the State Bar of Georgia, et al.)

The heavyweights aligned with the firm demonstrate the significance of the issue of tolling statutes of limitations in transactional matters. (Mike Frisch)

No Summary Judgment For Departed Associate On Non-Compete Provision

A law firm associate and the office manager who departed and were sued by the former firm were granted summary judgment on a punitive damages claim but the denial of that relief was otherwise affirmed by the New York Appellate Division for the First Judicial Department

Plaintiff Feiner & Lavy, P.C., is a law firm that specializes in immigration law. Defendant Gadi Zohar, Esq. was a former associate attorney with plaintiff, and defendant Jihan Asli was its office manager for several years before joining Zohar's law firm, Zohar Law PLLC. Plaintiff alleges that defendants breached the terms of their employment agreements. According to plaintiff, Zohar entered into an employment agreement with plaintiff that included a requirement to maintain as confidential customer lists or other customer information, a noncompetition agreement, and a nonsolicitation agreement. According to plaintiff, the employment agreement prohibited Zohar from engaging in any business that conducts the same or similar business as plaintiff for a period of 36 months, within 90 miles of New York City or in the Israeli community. The agreement also purported to prohibit Zohar from directly or indirectly soliciting any business from customers or clients of plaintiff for a period of 36 months within 90 miles of New York City or in the Israeli community; or advertise on Israeli/Hebrew websites, TV or newspaper ads.

Plaintiff alleges that Asli entered into a confidentiality agreement wherein she agreed to maintain the confidentiality of customer or client information. Plaintiff alleges that Zohar breached the terms of his employment agreement by directly and indirectly engaging in the practice of immigration law in New York City and soliciting plaintiff's clients. As to defendant Asli, plaintiff alleges that she breached the terms of the confidentiality agreement by divulging confidential information pertaining to plaintiff's clients. Plaintiff contends that it is entitled to recover damages for defendants' alleged solicitation of its clients.

Defendants moved for summary judgment to dismiss the complaint, arguing that the employment agreement was null and void under Rule 5.6(a)(1) of the New York Rules of Professional Conduct, as it barred Zohar from representing clients and performing legal work within 90 miles of New York City. They argued that the noncompete clause should not be saved by partial severance to bring it into compliance with Rule 5.6(a)(1) because it was so overly broad that it constituted anticompetitive conduct and demonstrated plaintiff's lack of good faith in protecting its business interest. In addition, they argued that Zohar did not solicit plaintiff's clients, but its clients sought out Zohar after they were informed that he was no longer with plaintiff's law firm.

The court

We find that Supreme Court properly denied defendants' motion for summary judgment in that there remain issues of fact as to whether the non-solicitation clause is enforceable, and whether defendants solicited plaintiff's clients or disclosed confidential client information in violation of their respective agreements with plaintiff.

Rule 5.6(a)(1) of the Rules of Professional Conduct (22 NYCRR 1200.0) bars lawyers from "participat[ing] in offering or making a partnership, shareholder, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship," except under limited circumstances that are not relevant to this appeal. To the extent the noncompete provision in the employment agreement that Zohar executed with plaintiff seeks to prevent him from "conducting business activities that are the same or similar to those of [plaintiff]" within 90 miles of New York City or in the Israeli community, it is void and unenforceable (see Cohen v Lord, Day & Lord , 75 NY2d 95 [1989]; see also Denburg v Parker Chapin Flattau & Klimpl , 82 NY2d 375, 381 [1993]).

However, the noncompete clause here may be enforceable to the extent that it prohibits Zohar from soliciting plaintiff's clients (see Graubard Mollen Dannett & Horowitz v Moskovitz , 86 NY2d 112, 119-120 [1995]; see e.g. Feldman v Minars , 230 AD2d 356 [1st Dept 1997]).

Defendants' submissions failed to establish that the nonsolicitation clause was unenforceable as an undue restriction on Zohar's ability to practice law (see Cohen , 72 NY2d 95), or that Zohar did not solicit plaintiff's clients, through Asli, in violation of his employment agreement, which would be actionable (see generally Greenwich Mills Co. v Barrie House Coffee Co. , 91 AD2d 398, 404-405 [2d Dept 1983]). As for plaintiff's claims against Asli, rule 5.6(a)(1) precludes agreements that "restrict[] the right of a lawyer to practice after termination of the relationship," and is thus inapplicable to the enforceable confidentiality agreement that she executed with plaintiff. Accordingly, defendants' argument that this agreement was void and unenforceable, based solely on rule 5.6(a)(1), is unavailing.

The court found no basis for a punitive damages claim. (Mike Frisch)

Treasure Trove On Thumb Drives: Remand Ordered In Dispute Over Conduct Of Departing Attorneys

The Massachusetts Supreme Judicial Court has remanded in a suit brought concerning the conduct of departing law firm attorneys.

Over the course of more than two decades representing clients in asbestos litigation, the plaintiff Governo Law Firm LLC (GLF) systematically created the contents of a research library, a treasure trove of materials amassed from GLF's own matters as well as other sources, that gave it a competitive edge in attracting and providing legal services to clients in this specialized field. GLF also built electronic databases to render the library readily searchable, facilitating retrieval of the information. In the fall of 2016, these proprietary materials were taken by a group of nonequity employees at GLF (attorney defendants) as they prepared to start a new law firm, the defendant CMBG3 Law LLC (CMBG3), in case their planned purchase of GLF proved unfruitful. The attorney defendants took turns secretly downloading the library and databases, as well as GLF's employee handbook, other administrative materials, and client lists, onto high-capacity "thumb drives";  the attorneys then surreptitiously removed these materials from GLF's offices. They subsequently made an offer to GLF's sole owner, David Governo, to buy GLF, stating that they would resign if the offer were not accepted that day. Governo rejected the offer that same day and locked the attorney  defendants out of GLF's computer systems. The next day, the attorney defendants opened for business under the previously incorporated CMBG3, where they used the stolen materials and derived profits therefrom.

GLF filed a complaint in the Superior Court asserting claims against its former employees and CMBG3. A jury found some or all of the defendants liable on the claims for conversion, breach of the duty of loyalty, and conspiracy, and none of the defendants liable for unfair or deceptive trade practices in violation of G. L. c. 93A, § 11. The jury awarded GLF $900,000 in damages, calculated based on the defendants' net profits. The judge then issued a permanent injunction enjoining the defendants from using the library and databases, and ordering those materials removed from the defendants' computers.

In GLF's appeal from certain of the judge's instructions at trial, as well as his posttrial rulings, we first address the question whether the attorney defendants, who misappropriated proprietary materials from their employer during their employment, and subsequently used those materials to compete, may be liable for unfair or deceptive trade practices pursuant to G. L. c. 93A, § 11, for actions that were, in part, taken while still employed by GLF. We conclude that that they, and their new firm, may be. Because the judge erroneously instructed the jury that the defendants' preseparation conduct was not relevant to GLF's claim under G. L. c. 93A, § 11, and because GLF has shown that its rights were affected thereby, the matter must be remanded for a new trial on the G. L. c. 93A, § 11, claim. We next address the scope of the permanent injunction. Although the jury found that the defendants were liable for conversion of GLF's proprietary materials, the judge issued a permanent injunction precluding the defendants' use of
only a subset of these materials. We conclude that the judge abused his discretion. Finally, we consider GLF's claims with respect to pre- and postjudgment interest. We conclude that prejudgment interest was not required under G. L. c. 231, § 6H, but that GLF is entitled to postjudgment interest.

Three attorneys were involved

The materials copied included three different types of information: a research library, databases, and administrative files. The research library contained over 100,000 documents relevant to asbestos litigation, including witness interviews, expert reports, and investigative reports, and was known within GLF as the "8500 New Asbestos Folder" (8500 folder). The library was developed by GLF over a period of twenty years, at a cost of more than $100,000.  According to testimony by GLF's expert, these materials were "extremely valuable" and provided a competitive advantage to GLF over other law firms within the field of asbestos litigation.

The departure

The attorney defendants incorporated CMBG3 on November 1, 2016. On November 18, 2016, they "hijack[ed]" the scheduled GLF partners' meeting and offered Governo $1.5 million in cash, plus net profits for some of the attorneys' work performed through the end of the year, to buy GLF.8 The attorney defendants gave Governo until 5 P.M. that day to respond and told Governo that if he rejected their offer, they would resign in thirty days.

The offer was rejected that same day.

Instruction error

The erroneous instruction was prejudicial. Had the jury considered the attorney defendants' conduct during their employment -- in particular, their conversion of GLF property -- the jury well might have reached a different result.

Injunction error

the exclusion of the administrative files from the scope of the permanent injunction was an abuse of discretion.

The oral argument and other case materials from the Suffolk Law web page are linked here  (Mike Frisch)

Dismissal Of Claims Against Former Firm Affirmed

The Vermont Supreme Court affirmed the grant of summary judgment against an associate attorney who had sued his former law firm on a variety of theories premised on his belief that he had been undercompensated for his work.

Defendant hired plaintiff as an associate attorney in February 2016. Throughout his nearly two-year employment with defendant, plaintiff believed that he was underpaid.

His concerns came to a head and led to his termination

In February 2019, plaintiff filed suit, asserting claims for promissory estoppel, unjust enrichment, intentional misrepresentation, wrongful termination, defamation, and tortious interference with contractual relations. As relevant to this appeal, he first alleged that defendant promised him “a partnership-track position that would earn compensation of $100,000 within five years” and that he would receive “larger raises each of those years.” He argued that he relied on  this promise and continued to work for defendant when he otherwise would have left, and thus sought recovery under a promissory estoppel theory. Next, he argued that defendant was unjustly enriched by his work because it was inequitable for defendant to benefit from plaintiff’s work and billable hours under these circumstances. Third, he contended that Attorney Monaghan’s statement—that plaintiff’s goal of making partner and earning $100,000 in five years was “reasonable”—constituted an intentional misrepresentation because defendant never intended to make plaintiff a partner, but Attorney Monaghan made the statement to induce plaintiff to continue working for defendant. Finally, he asserted that defendant’s decision to fire him after he raised his legal claims in the April 2018 letter violated public policy. Defendant moved for summary judgment on all claims

There was no enforceable promise made or actionable misrepresentation

At best, Attorney Monaghan was expressing his opinion that it was reasonable that plaintiff might have the opportunity to become a partner and earn $100,000 annually in five years.

Nor was there unjust enrichment

there are no facts showing that plaintiff conferred an uncompensated benefit on defendant here. Defendant paid plaintiff the agreed salary for the work that he was hired to perform, and plaintiff even received numerous bonuses and raises. The record does not show that he took on any additional work beyond the scope of his employment that could be considered uncompensated. This latter fact distinguishes this case from the cases plaintiff cites in support of his argument; in each instance, the employee furnished an uncompensated benefit on the employer.

Public policy claim

Plaintiff asks us to conclude that public policy prohibits an employer from firing an employee in response to the employee’s threat to sue the employer. Plaintiff argues that there are several public policies violated when an employer fires an employee in response to a lawsuit, including the employee’s rights to access the courts, to raise claims against an employer, and to be free from retaliation for raising such claims.

Rejected

we need not determine the availability or scope of this type of wrongful termination claim under Vermont law because we conclude that plaintiff has not presented facts tending to show that his termination violated a “clear and compelling public policy” such that defendant’s conduct was “cruel or shocking to the average person’s conception of justice.”

...Here, plaintiff’s threatened lawsuit against defendant involved his own future compensation and promotion opportunities and thus does not implicate any public concern.

(Mike Frisch)

Inherent Conflicts; Trade Names

A Staff Report from the web page of the Ohio Supreme Court

The Ohio Board of Professional Conduct has issued two advisory opinions addressing rules regarding law firm representation of current clients and the use of trade names by law firms.

Advisory Opinion 2020-10 analyzes a law firm’s proposed representation of two adverse clients negotiating the same transaction. The board found an inherent conflict of interest in such an arrangement, even when the lawyers are separately assigned to each client, screening of the lawyers is utilized, and both clients consent to the arrangement. 

The board concluded that the lawyers’ independent professional judgment and competence would be compromised by the concurrent representation and would require an impermissible departure from the rules governing the imputation of conflicts.

Advisory Opinion 2020-11 concludes that a recent amendment to the Rules of Professional Conduct permits the use of trade names by Ohio law firms, provided the trade name is not false, misleading, or unverifiable. The opinion gives several examples of trade names that would be prohibited and identifies names that would be considered permissible.

Screening does not cure direct adversity

The steps proposed by the law firm in order to represent the two clients underscore the inherent nature of the conflict of interests that exist in the concurrent representation of two or more firm clients in the same transaction. The key features of the law firm’s proposal to resolve the conflicts, a combination of client consent and the screening of two groups of assigned lawyers, is not provided for in the Rules of Professional Conduct as a method to ameliorate conflicts arising from concurrent representation in the same law firm. The firm’s proposal would require a departure from the rules governing the imputation of conflicts that the Board is reluctant to endorse. For the foregoing reasons, the Board concludes that the law firm’s proposed concurrent representation of the two adverse clients in the same transaction is not permissible.

The trade name opinion

Because a trade name may contain one word or a combination of words, it may be considered misleading if it contains a material misrepresentation of fact or omits a fact necessary to make the trade name, considered as a whole, not materially misleading. Prof.Cond.R. 7.1, cmt. [2]. A trade name may also be misleading if a substantial likelihood exists that it will lead a prospective client to formulate a specific conclusion about the lawyer or the lawyer’s services for which there is no reasonable factual foundation. Id. For example, a trade name that implies results, such as “Zero Tax” or “Winning Law Firm,” would be considered misleading because it could lead a reasonable person or a prospective client to form an unjustified expectation that certain results can be obtained from the lawyer or firm. Id., cmt.[3]. In addition, trade names that imply a connection to a governmental agency, e.g. “Attorney General Collections,” “Public Defenders,” “Ohio Judge’s Law Group,” “Social Security Administration Associates;” imply expediency, e.g. “Divorce Fast,” “EZ Divorce,” “Quick Settlement;” or that imply a connection to an existing nonprofit or charitable organization, e.g. “Legal Aid Associates,” “Project Innocence Associates,” or “Legal Assistance Foundation;” are inherently false or misleading and implicate Prof.Cond.R. 7.1. See generally S.C. Bar Eth. Adv. Op. 03-04.

On the other hand, there exists a number of possible law firm names that utilize a trade name and that would be permissible under Prof.Cond.R. 7.1 and 7.5. For example, a law firm with multiple lawyers that concentrates its law practice in representing plaintiffs in personal injury law cases could ethically use the trade name “Ohio Personal Injury Associates.” Prof.Cond.R. 7.4(a), cmt.[1]. The name would only be considered false or misleading if no lawyers in the firm practice personal injury law or the firm ceased providing any legal services in the area of law used in the trade name. Likewise, a firm that exclusively practices in the area of insurance defense law may appropriately use the trade name “Ohio Insurance Defense Counsel.” However, a trade name is not required to reference the area of legal services the lawyer or the law firm provides in order to not be false, misleading, or nonverifiable. For example, a trade name such as “Summit Law” or “First Legal” would be permissible, even though the trade name does not indicate the area of law practiced

(Mike Frisch)

Dissolution Obligations At Issue

Certified questions in the Howrey bankruptcy case are up for argument before the District of Columbia Court of Appeals on September 12 

No. 18-SP-0218 ALLAN B. DIAMOND, CHAPTER TRUSTEE OF HOWREY, LLP V. BENSON KASOWITZ, ET AL

Christopher R. Murray, Esquire
Christopher Sullivan, Esquire
Shay Dvoretzky, Esquire
Michael Ryan Pinkston, Esquire
Robert Radasevich, Esquire
Jack Mckay, Esquire
Robert Novick, Esquire
Gregory G. Garre, Esquire
Brian R. Matsui, Esquire
Logan G. Haine-Roberts, Esquire

In a February 2018 opinion, the United States Court of Appeals for the Ninth Circuit sought guidance on governing District of Columbia law

Pursuant to D.C. Code § 11-723 we respectfully ask the District of Columbia Court of Appeals to resolve three questions of District of Columbia law that “may be
determinative” of this bankruptcy appeal. D.C. Code § 11- 723(a):

(1) Under District of Columbia law does a dissociated partner owe a duty to his or her former law firm to account for profits earned post-departure on legal matters that were in progress but not completed at the time of the partner’s departure, where the partner’s former law firm had been hired to handle those matters on an hourly basis and where those matters were completed at another firm that hired the partner?

(2) If the answer to question (1) is “yes,” then does District of Columbia law allow a partner’s former law firm to recover those profits from the partner’s new law firm under an unjust enrichment theory?

(3) Under District of Columbia law what interest, if any, does a dissolved law firm have in profits earned on legal matters that were in progress but not completed at the time the law firm was dissolved, where the dissolved law firm had been retained to handle the matters on an hourly basis, and where those matters were completed at different pre-existing firms that hired partners of the dissolved firm post-dissolution?

Our phrasing of the questions should not restrict the Court’s consideration of the issues. The Court may rephrase a question as it sees fit in order to best address the contentions of the parties or the specifics of D.C. law.

The Ninth Circuit cites the 1990 D.C. decision in Beckman v. Farmer on partnership dissolution.

The case is one of the career highlights of my friend and mentor Jake Stein, perhaps the most universally beloved lawyer in the history of the District of Columbia Bar. (Mike Frisch)

Resignation Accepted

The Nebraska Supreme Court affirmed a decision on the valuation of a departed partner of Fredericks Peebles & Morgan's interest.

This appeal concerns a determination of Fred Assam’s ownership interest in the law firm of Fredericks Peebles & Morgan LLP (FPM). After Assam voluntarily withdrew from the firm, FPM filed suit seeking a declaration of the rights of FPM and Assam under the governing partnership agreement (Partnership Agreement). Following a bench trial, the district court for Douglas County declared the fair market value of Assam’s interest in FPM to be $590,000. For the reasons stated herein, we affirm.

The story

FPM is a limited liability partnership composed of legal professionals. FPM has a nationwide practice which specializes in handling legal issues impacting Native American tribes, including, but not limited to, facilitating interrelationships between Native American tribes and the federal government, state governments, and other tribes, as well as foreign governments and foreign companies. FPM represents Native American tribes, entities, and individuals, as well as banks and financial institutions which deal with Native American tribes.

FPM was organized under the laws of the District of Columbia, and its principal place of business is located in Omaha, Nebraska. At the relevant time, FPM had dozens of attorneys throughout offices in Sacramento, California; Louisville, Colorado; Sioux Falls, South Dakota; Omaha, Nebraska; Winnebago, Nebraska; Peshawbestown, Michigan; and Washington, D.C.

As of October 1, 2014, FPM had five equity partners: Thomas W. Fredericks, John M. Peebles, Lance G. Morgan, Conly J. Schulte, and Assam. Fredericks, Peebles, Schulte, and Assam each held a 23.25 percent interest in FPM, and Morgan held the remaining 7 percent. FPM traditionally implemented a team approach in servicing its clients’ accounts, but nearly 90 percent of FPM’s clients were brought in by Fredericks, Peebles, Morgan, and Schulte. Assam, a financial attorney, worked on accounts brought in by the other equity partners. Only three clients followed Assam when he left FPM, two of which maintained a relationship with FPM.

Assam's actions came in the wake of compensation restructuring discussions 

On the evening of October 2, 2014, Assam sent an email to his partners in which he voluntarily resigned from FPM. In the email, Assam advised, “As you are all aware, over the course of the last few months, I have been under a personal attack by . . . Fredericks.” Assam stated the compensation structure Fredericks had proposed would “transfer complete control of [FPM] over to [Fredericks]. This means the life of my family and me will [sic] in complete control of a man who does not care for me and, in fact, will apparently act with intent to only to [sic] harm me.”

The following morning, Assam, whose office is located in Sioux Falls, flew to Denver, Colorado, to attend a partner meeting at the Louisville office, which had been scheduled prior to Assam’s resignation email. During his flight, Assam reviewed some of the more recent compensation structure proposals and realized the documents he had relied on when deciding to resign had significantly changed. At the meeting, Assam told the partners he had made a mistake and wanted to rescind his resignation and rejoin FPM. The partners declined and formally voted to accept Assam’s resignation...

After Assam’s resignation, the partners made him an offer of payment intended to represent the fair market value of his equity interest as set out in the Partnership Agreement. However, the two sides could not agree as to the value of Assam’s interest.

The firm filed and prevailed in a declaratory judgment action. 

Because we find no error in the district court’s ruling that FPM did not breach the Partnership Agreement, Assam is not entitled to a money judgment.

Fredericks Peebles & Morgan v. Assam can be found here. (Mike Frisch)

Ethics Of Spam Filters

The best Florida ethics blog - sunEthics - has a recent post of interest

Firm had duty to have sufficient procedures to ensure timely receipt of orders, and in using email system without safeguards or oversight firm could not claim excusable neglect under Fla.R.Civ.P. 1.540 when it failed to timely appeal emailed order it allegedly did not receive. [Added 10/18/17]

A trial court rendered an order assessing fees against Law Firm’s client.  The order was emailed to the mail addresses designated by each party’s counsel.  The clerk’s records showed that the email sent to Law Firm was accepted by the recipient server.  Law Firm, however, claimed that it never received the emailed order.  Accordingly, Law Firm’s client missed the deadline to appeal the order.  Law Firm filed a motion for relief from judgment under Fla.R.Civ.P. 1.540(b), alleging excusable neglect.
            A consultant who had provided IT services for Law Firm testified that the Firm’s system “was configured to drop and permanently delete emails perceived to be spam without alerting the recipient that the email was deleted.”  He had advised the Firm against this.  The Firm rejected the consultant’s recommendation to hire a third-party vendor to handle spam filtering “because [the Firm] did not want to spend the extra money.”  The Firm also rejected his recommendation to get an online backup system for about $700 to $1200 per year.  The consultant eventually ceased working for the Firm “because the firm rejected his recommendations.”
            An expert witness testified that Law Firm “did not properly implement and utilize its email filtering system.”  He understood that the Firm’s email system “was set to drop and delete emails identified as spam.”  The expert stated that, if the Firm was his client and wanted to implement such a system, “he would require the client to sign a waiver exonerating him from responsibility.”
            The trial court denied the motion for relief from judgment.  The First DCA affirmed, concluding that no excusable neglect was demonstrated.  The appeals court stated that, based on the testimony, the trial court could conclude that [Law Firm] made a conscious decision to use a defective email system without any safeguards or oversight in order to save money.  Such a decision cannot constitute excusable neglect.”  See, e.g., Bequer v. Nat’l City Bank, 46 So.3d 1199 (Fla. 4th DCA 2010) (reversing an order setting aside a default final judgment based on excusable neglect where the bank’s inaction was not the result of a ‘system gone awry,’ but rather of a ‘defective system altogether’).”
            The court concluded:  “Counsel has a duty to have sufficient procedures and protocols in place to ensure timely notice of appealable orders.  This includes use of an email spam filter with adequate safeguards and independent monitoring of the court’‘s electronic docket.  In cases where rendition of an appealable order has been delayed for a significant period of time, it might also include the filing of a joint motion for a case management conference to ensure that the order has not slipped through the cracks. [Law Firm] made no effort to do any of these things, reflecting an overall pattern of inaction and disengagement.  In short, there was an absence of ‘any meaningful procedure in place that, if followed, would have avoided the unfortunate events that resulted in a significant judgment against’ [Law Firm’s client].”  Emerald Coast Utilities Authority v. Bear Marcus Point, LLC, __ So.3d __ (Fla. 1st DCA, No. 1D15-5714, 10/6/2017) (on rehearing), 2017 WL 4448526.

(Mike Frisch)

Fee-Sharing In The Midwest

The Illinois Supreme Court held that fee-sharing agreement between law firms was enforceable

This appeal involves an action for breach of contract brought by one law firm against another after the defendant law firm refused to honor the fee-sharing provisions of the firms’ joint client retainer agreements. A single question of law is presented: Are fee-sharing provisions in otherwise valid retainer agreements between clients and two separate law firms void and unenforceable if the primary service performed by one firm is the referral of the clients to the other but the agreements fail to specifically notify the clients that the lawyers in each firm have assumed joint financial responsibility for the representation?

Reversing the judgment of the circuit court of Lake County dismissing the plaintiff law firm’s second amended complaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2014)), the appellate court answered that question in the negative, rejecting the defendant law firm’s argument that the agreements’ lack of an express statement that the attorneys assumed joint financial responsibility violated Rule 1.5(e) of the Illinois Rules of Professional Conduct of 2010 (eff. Jan. 1, 2010) and thereby rendered the agreements invalid. 2016 IL App (2d) 151148. In reaching this result, the court declined to follow the Appellate Court, First District’s decision in Donald W. Fohrman & Associates, Ltd. v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, to the extent that case held that fee-referral agreements must expressly inform clients that the attorneys are assuming joint financial responsibility.

We allowed the defendant law firm’s petition for leave to appeal in order to resolve the conflict between the appellate court’s decision in this case and Fohrman. Ill. S. Ct. R. 315(a) (eff. Mar. 15, 2016). We also granted the Illinois Trial Lawyers Association leave to file a brief amicus curiae. Ill. S. Ct. R. 345 (eff. Sept. 20, 2010). For the reasons that follow, we affirm the judgment of the appellate court and remand the cause to the circuit court for further proceedings...

We therefore agree with plaintiff that the fee-sharing provisions of the 10 joint client retainer agreements at issue in this case were not fatally defective under Rule 1.5(e) of the Illinois Rules of Professional Conduct of 2010 simply because they did not contain language specifically stating that plaintiff and defendant had agreed to assume joint financial responsibility for the representation. The circuit court therefore erred as a matter of law when it dismissed plaintiff’s second amended complaint on that basis, and its judgment was properly reversed by the appellate court. In light of this conclusion, we need not address plaintiff’s additional contentions that certain of the retainer agreements were not subject to the current version of Rule 1.5(e) because they were signed before the Rules of Professional Conduct took effect or that defendant should be estopped from contesting the validity of the agreements under Rule 1.5(e) based upon his failure to pursue the question in an earlier appeal.

(Mike Frisch)

Former Firm May Sue Successor Firm For Failure To Honor Lien

The New Hampshire Supreme Court has reversed and remanded the dismissal of a claim of one law firm against another alleging conversion

The plaintiff was retained by a client to pursue a personal injury action. In connection with the representation, the client signed the plaintiff’s standard engagement contract, which states, in relevant part:

If I discharge my attorney or he withdraws from representation, I agree to pay him at the rate of $350.00 per hour, $175.00 per hour for his legal assistant(s), quantum meruit, or thirty-three and one-third percent (33-1/3%) of the last settlement offer, whichever is greater, from any recovery obtained on my behalf. I do further agree that my attorney will be entitled to the full contingency fee identified in this contract if he substantially performs under the contract. I grant my attorney a lien for his fees and costs on any recovery I receive in my case.

The plaintiff worked for the client for two years before being discharged without cause. The client subsequently hired the defendants, who filed an action (underlying action) on behalf of the client. The defendants ultimately settled the underlying action on the client's behalf.

Prior to settlement, the plaintiff filed a motion to intervene in the underlying action, asserting that he possessed a contractual lien for fees and costs incurred during his representation of the client. The client objected to the motion, claiming, among other things, that: (1) intervention would be inappropriate because of the possibility of juror confusion and because the plaintiff retained the ability to bring a separate quantum meruit claim; and (2) the plaintiff had "neither a lien nor a contractual claim" and was limited to recovery in quantum meruit. The court denied the plaintiff’s motion "for the reasons stated in the [client’s] objection," without further elaboration. According to the defendants, the plaintiff subsequently filed a motion to vacate the court’s order, which the court denied, ruling that it was "an untimely motion to reconsider."

After the settlement of the underlying action, the client filed a motion to order that the settlement check be made "payable solely to [the client] and her counsel, R. James Steiner." The court granted the motion.

On the same day, the plaintiff filed a series of motions in the underlying action, including a second motion to intervene wherein he again asserted that he possessed a contractual lien, a motion for interpleader, and a motion to foreclose lien. The client objected to all these motions, and the court denied all of them without explanation.

The plaintiff then initiated this action against the defendants, again alleging that he had an enforceable contractual lien for fees against the defendants. The defendants moved to dismiss the action for failure to state a claim. In its order granting the motion, the court noted that the plaintiff’s contractual lien claim was "arguably barred by the doctrine of collateral estoppel." Nonetheless, the court found that the plaintiff’s claim failed on the merits because he had not submitted any evidence of his contract with the client, and, thus, failed to allege "facts that c[ould] be reasonably construed to meet the elements of an enforceable contract containing the lien term."

On the merits

 Having thus established that the plaintiff may have a valid lien for the reasonable value of his services, we next consider whether that lien is enforceable against the defendants. The plaintiff asserts that the contract signed by the client is enforceable against the defendants because the defendants were aware of the lien at the time they were retained, and because the client should not be required to pay both lawyers’ fees. The defendants’ position is that, if the plaintiff has any claim for fees, the claim lies only against the client. Under the particular circumstances of this case, we are persuaded by the plaintiff’s argument.

Because the defendants do not argue that they were unaware that the client had discharged a prior attorney before retaining their services, we conclude that the lien for fees claimed by the plaintiff may be enforceable against the defendants. In so holding, we follow the view espoused by the Indiana Supreme Court in Galanis v. Lyons & Truitt, 715 N.E.2d 858 (Ind. 1999). As that court aptly explained:

In a system of professional responsibility that stresses clients’ rights, it is incumbent upon the lawyer who enters a contingent fee contract with knowledge of a previous lawyer’s work to explain fully any obligation of the client to pay a previous lawyer and explicitly contract away liability for those fees. If this is not done the successor assumes the obligation to pay the first lawyer’s fee out of his or her contingent fee. [The successor lawyer] was in the best position to evaluate and to reach an agreement as to a reasonable fee for the value of the work already done in [the client’s] case. "Lawyers almost always possess the more sophisticated understanding of fee arrangements. It is therefore appropriate to place the balance of the burden of fair dealing and the allotment of risk in the hands of the lawyer in regard to fee arrangements with clients." In the Matter of Myers, 663 N.E.2d 771, 774-75 (Ind. 1996). [The successor lawyer] also had the option to discuss with [the client] the need for someone to pay [the prior lawyer’s] fee and to refuse to accept the case if [the client] could not resolve any open issues with [the prior lawyer]. [The successor lawyer] neither advised [the client] of the need to pay the fee nor contracted away that responsibility for himself. Under these circumstances, [the successor lawyer], not [the client], should bear the burden of his silence. Accordingly, [the prior lawyer] is entitled to recover the compensation due [him] from [the successor lawyer’s] contingent fee...

We find the Galanis court’s reasoning persuasive, and, therefore, hold that the trial court erred in dismissing the plaintiff’s amended complaint. Accordingly, we reverse the trial court’s judgment and remand for further proceedings consistent with this opinion. In so doing, we emphasize that, for purposes of this appeal, we have accepted the plaintiff’s allegations as true. See Coyle, 147 N.H. at 100. On remand, the plaintiff will bear the burden of establishing the reasonable value of his services, which, as the Galanis court observed, is to be measured by the benefit conferred upon the client –– an amount that may or may not be commensurate with the time or effort expended by the plaintiff. See Galanis, 715 N.E.2d at 862. Also relevant to the plaintiff’s entitlement to fees will be the issue of whether he was, as he alleges, discharged without cause. See First National Bank of Cincinnati v. Pepper, 454 F.2d 626, 633 (2d Cir. 1972) (stating that "attorney discharged for cause. . . has no right to payment of fees"); cf. People ex rel. MacFarlane v. Harthun, 581 P.2d 716, 718 (Colo. 1978) (en banc) (stating that attorney discharged or removed "for professional misconduct in the handling of his client’s affairs" has no right to assert a statutory attorney’s lien).

 (Mike Frisch)

The Burdens Of Law Firm Leadership

The Louisiana Attorney Disciplinary Board recommends a one-year suspension of an attorney who engaged in billing falsehoods over a three-year period.

As a member of a law firm, the Respondent generally billed on an hourly basis but on rare occasions had the opportunity to work on some cases on a contingency basis. The firm policy was to set hourly billing targets for attorneys with the firm at 1800 billable hours annually. Meeting or exceeding the annual billing targets established by the firm were factors taken into consideration for annual salary increases, bonuses, and/or promotion within the firm. 

From in or around 2012 through November 7, 2015, the Respondent internally recorded time entries and created receivables that were in part false and/or inflated. The Respondent self-reported his misconduct to the Office of Disciplinary Counsel by correspondence dated November 25, 2015. The Respondent’s law firm also reported Respondent’s conduct to ODC pursuant to the provisions of Rule 8.3(a).

The law firm reported to the Office of Disciplinary Counsel that its internal investigation was able to conclusively demonstrate that the Respondent submitted 428 entries which were classified as “certainly false” and an additional 220 entries that were “ reasonably certain to be false or inflated”. The Respondent’s conduct reflects violations of Rule 8.4(c) (conduct involving dishonesty, fraud, deceit and misrepresentation), and Rule 8.4(a) (violating or attempting to violate the Rules of Professional Conduct).

The attorney joined his firm in 1998 and rose to a leadership position.

The hearing committee was somewhat sympathetic

Finding Respondent’s testimony to be credible, it determined that Respondent engaged in misconduct due to his concerns that his accurate billable hour numbers were not commensurate with his leadership position within the firm, rather than any desire for direct financial gain. He submitted false and inflated billing for the purpose of making himself look good to enhance his opportunities for leadership positions and to ultimately become managing partner of the firm. As a member of the Board of Directors, the Respondent saw first-hand and on a monthly basis the extraordinary billable time and business dollars generated by key leaders of the firm. When his practice began to decline, Respondent gave in to his own internal pressures. He began to submit time on a dismissed contingency fee matter, and eventually on six other matters, in an effort to make himself look better “on paper” each month.

The Respondent received a discretionary bonus from the firm’s compensation committee for 2012, 2013, and 2014. While the testimony established that the legitimate hours billed by Respondent met and exceeded his billing targets in each of these years, he nonetheless fabricated billing entries.  The parties stipulated that due to his many contributions at the firm during that time period, the firm hypothesized that it was highly likely that Respondent would have received all or some of those merit bonuses even without the false inflation of his billable hours.  Still, the Committee recognized that testimony from firm members also supported the conclusion that the full amounts of the merit bonuses may not have been paid to the Respondent had his hours been accurately recorded.

He receives credit for time served on an interim suspension.

Pamela Carter concurred with reservations

One year suspension is inadequate in this matter where lawyer dishonesty is clear and unequivocal. There was continual intent on the part of Mr. Wallace for a period of three years. The firm’s investigation and conclusions that Mr. Wallace’s false entries were “reasonably certain” to be of a false nature is very telling. It is my opinion that the Board’s recommendation should also require that Mr. Wallace apply for reinstatement. There is no question that Mr. Wallace’s dishonesty was purposeful, calculated, done knowingly and intentional. Mr. Wallace deliberately inflated the amount of time recorded for the purpose of presenting to clients bills which reflected undisclosed premiums. Not discussed is the information in the record regarding Mr. Wallace’s violation of his supervisory duties, as a member of the firm (partner), and as a billing partner, even though the factual record is replete with evidence that he violated these rules. Mr. Wallace served as the firm's hiring partner, and was the head of recruiting.

Linda Bizzarro dissented

I don't believe a suspension of one year is sufficient to address the admitted, multiple instances of misconduct in this matter. Considering the number of false or inflated billing entries (428 confirmed, 200 "reasonably certain" to be false), the length of time Respondent repeated the intentional misconduct (3 years), and the amount of money involved in the scheme ($91,544 in false billing, $85,000 of bonus money voluntarily renounced), a one year suspension is inadequate. In my opinion the Board should adopt the Hearing Committee's sanction recommendation of one year and one day, which would require the Respondent to apply for reinstatement.

(Mike Frisch)

No Right For Firms To Accept Outside Investments

An opinion issued today by the United States Court of Appeals for the Second Circuit

Plaintiffs‐Appellants Jacoby & Meyers, LLP, a limited liability law partnership,  and Jacoby & Meyers USA II, PLLC, a related professional limited liability company  (together, “plaintiffs” or “the J&M Firms”), challenge the constitutionality of a collection  of New York regulations and laws that together prevent for‐profit law firms from  accepting capital investment from non‐lawyers. The J&M Firms allege that, if they were allowed to accept outside investment, they would be able to—and would—improve their infrastructure and efficiency and as a result reduce their fees and serve more clients, including clients who might otherwise be unable to afford their services. By impeding them from reaching this goal, the J&M Firms contend, the state has unconstitutionally infringed their rights as lawyers to associate with clients and to access the courts—rights that are grounded, they argue, in the First Amendment. The District Court (Kaplan, J.) dismissed the complaint, concluding that the J&M Firms failed to state a claim for violation of any constitutional right and that, even if such rights as they claim were to be recognized, the challenged regulations withstand scrutiny because they are rationally related to a legitimate state interest. We agree that under prevailing law the J&M Firms do not enjoy a First Amendment right to association or petition as representatives of their clients’ interests; and that, even if they do allege some plausible entitlement, the challenged regulations do not impermissibly infringe upon any such rights. We therefore AFFIRM the District Court’s judgment.  

Through a set of prohibitions of long standing in New York and similar to those widely prevalent in the fifty states and the District of Columbia, the State of New York prohibits non‐attorneys from investing in law firms. See generally N.Y. State Bar Ass’n, Report of the Task Force on Nonlawyer Ownership, reprinted at 76 Alb. L. Rev. 865 (2013) (“NYSBA Report”). The prohibition is generally seen as helping to ensure the independence and ethical conduct of lawyers. See id. at 876‐77. Plaintiffs‐Appellants  Jacoby & Meyers, LLP, a limited liability partnership (the “LLP”), and Jacoby & Meyers USA II, PLLC, a related professional limited liability company (the “PLLC”; together,  “plaintiffs” or the “J&M Firms”) bring a putative class action challenging New York’s rules, regulations, and statutes prohibiting such investments. The infusions of additional capital that the regulations now prevent, they declare, would enable the J&M Firms to improve the quality of the legal services that they offer and at the same time to reduce their fees, expanding their ability to serve needy clients. They assert that, were they able to do so, they would act on that ability in the interests of such potential clients. Because the laws currently restrict their ability to accomplish those goals, they maintain, he state regime unlawfully interferes with their rights as lawyers to associate with clients and to access the courts—rights they see as grounded in the First Amendment.

Circuit Judge Susan Carney affirmed the district court disposition. (Mike Frisch)

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.

No Rule 3.7 Exception For Fee Collection Actions

An opinion of the North Carolina Court of Appeals affirms a disqualification order based on the witness-advocate rule. 

This case presents the question of whether a categorical exception to the applicability of Rule 3.7 of the North Carolina Rules of Professional Conduct exists in fee collection cases. Harris & Hilton, P.A. (“Harris & Hilton”) appeals from the trial court’s order disqualifying Nelson G. Harris (“Mr. Harris”) and David N. Hilton (“Mr. Hilton”) from appearing as trial counsel in this action based on their status as necessary witnesses. Because this Court lacks the authority to create a new exception to Rule 3.7, we affirm the trial court’s order.

The story

On 10 June 2015, Harris & Hilton filed the present action in Wake County District Court against James C. Rassette (“Defendant”) to recover attorneys’ fees for legal services the firm had allegedly provided to Defendant prior to that date. The complaint asserted that Harris & Hilton was entitled to recover $16,935.69 in unpaid legal fees. On 13 November 2015, Defendant filed an answer in which he asserted various defenses, including an assertion that no contract had ever existed between the parties.

On 10 June 2016, a pre-trial conference was held before the Honorable Debra S. Sasser. During the conference, Judge Sasser expressed a concern about the fact that Harris & Hilton’s trial attorneys — Mr. Harris and Mr. Hilton — were also listed as witnesses who would testify at trial on behalf of Harris & Hilton. After determining that Mr. Harris and Mr. Hilton were, in fact, necessary witnesses who would be testifying regarding disputed issues such as whether a contract had actually been formed, Judge Sasser entered an order on 20 June 2016 disqualifying the two attorneys from representing Harris & Hilton at trial pursuant to Rule 3.7. On 27 June 2016, Harris & Hilton filed a notice of appeal to this Court.

The issue

Harris & Hilton does not dispute the fact that (1) Mr. Harris and Mr. Hilton will both be necessary witnesses at trial; (2) their testimony will encompass material, disputed issues; and (3) none of the three above-quoted exceptions contained within Rule 3.7 are applicable. Nor does it contest the fact that a literal reading of Rule 3.7 supports the trial court’s ruling. Instead, it asks this Court to adopt a new exception based on its contention that Rule 3.7 should not be applied in fee collection actions to disqualify counsel from both representing their own firm and testifying on its behalf.

 Harris & Hilton argues that permitting a law firm’s attorney to serve both as trial counsel and as a witness in a fee collection case is no different than allowing litigants to represent themselves pro se. It is true that litigants are permitted under North Carolina law to appear pro se — regardless of whether the litigant is an attorney or a layperson. See N.C. Gen. Stat. § 1-11 (2015) (“A party may appear either in person or by attorney in actions or proceedings in which he is interested.”); N.C. Gen. Stat. § 84-4 (2015) (“[I]t shall be unlawful for any person or association of persons, except active members of the Bar . . . to practice as attorneys-at-law, to appear as attorney or counselor at law in any action or proceeding before any judicial body . . . except in his own behalf as a party thereto[.]” (emphasis added)). 

However, the present case does not involve the ability of Mr. Harris or Mr. Hilton to represent themselves on a pro se basis. Instead, they seek to represent their law firm — a professional corporation — in a suit against a third party while simultaneously serving as witnesses on their firm’s behalf as to disputed issues of fact. It is well established that an entity such as Harris & Hilton is treated differently under North Carolina law than a pro se litigant. See LexisNexis, Div. of Reed Elsevier, Inc. v. Travishan Corp., 155 N.C. App. 205, 209, 573 S.E.2d 547, 549 (2002) (holding that under North Carolina law, a corporation is not permitted to represent itself pro se).

Harris & Hilton also makes a policy argument, contending that the current version of Rule 3.7 is archaic and fails to take into account the disproportionate economic burden on small law firms that are forced to hire outside counsel to litigate fee collection cases. However, in making this argument, Harris & Hilton misunderstands the role of this Court given that it is asking us not to interpret Rule 3.7 but rather to rewrite it — a power that we simply do not possess.

Thus

we cannot say that the trial court abused its discretion by applying Rule 3.7 as written as opposed to creating a new exception that neither appears within the Rule itself nor has been recognized by North Carolina’s appellate courts. Accordingly, we affirm the trial court’s disqualification order.

(Mike Frisch)

D.C. On Breakup Ethics

A new opinion of the District of Columbia Bar Legal Ethics Committee is summarized in the headnote

Numerous ethical obligations attach to both a law firm and its members in connection with the process of the dissolution of the firm. These obligations include, without limitation, the obligation to continue to competently, zealously and diligently represent and communicate with clients during the dissolution process; the obligation of the members of the firm, after consultation, to notify clients of the dissolution and provide clients with options under such notice; the obligation to facilitate the choice of new counsel by clients of the dissolving firm; and, the obligation to properly dispose of client files, funds and other property. As used in this Opinion, the term "dissolution" means the process of terminating the law firm's existence as a legal entity. Since dissolution of a law firm is a process and not a single event, the term is not limited to the legal or technical action which is required to terminate the existence of the firm as a legal entity under corporate, partnership, bankruptcy or other applicable law. Certain ethical obligations may apply at various points during the dissolution process itself and other ethical obligations may continue to apply after the firm has been dissolved. These ethical obligations may attach either when dissolution of the firm has been agreed to by its members or, absent such agreement, is nonetheless reasonably foreseeable. This Opinion does not address the departure of members of the firm in and of itself, even in significant numbers, absent an expectation that the firm itself will at some reasonably foreseeable time in the future be dissolved. 

The committee concludes

A lawyer has numerous ethical obligations in connection with the dissolution of his law practice or a law firm of which he is a member. A lawyer must consider the obligations to continue to diligently represent and communicate with clients during the dissolution period, to notify clients of the dissolution, to facilitate the clients' choice of counsel, and to properly dispose of client files, funds or other property. There are additional considerations for the dissolution of Rule 5.4(b) firms and solo practices.

D.C. Rule 5.4(b) permits association with non-lawyers 

(b) A lawyer may practice law in a partnership or other form of organization in which a financial interest is held or managerial authority is exercised by an individual nonlawyer who performs professional services which assist the organization in providing legal services to clients [subject to enumerated conditions].

 (Mike Frisch)

Two-Person Partnership Breakup Litigation That Began In 1992 Not Over Yet

The breakup of a two-person law firm well before the turn of the century is still working its way through the District of Columbia courts.

And its not over yet as reflected by a remand ordered yesterday by the Court of Appeals.

After the second trial held in this matter, a jury sided with appellant Sarah Landise and against appellee Thomas Mauro, finding that the two had entered into a partnership to practice law in the District of Columbia, that Ms. Landise was entitled to fifty percent of the partnership’s profits and losses, and that Mr. Mauro breached his fiduciary duties by converting partnership funds. Because the trial court decided that the case was sufficiently complex to merit bifurcation, the court limited the jury to the question of liability and ordered an accounting to determine the damages. Even though the court appointed a special master to conduct a final accounting of the partnership funds in June 2003, that accounting never happened. A string of conflicts and misunderstandings between the parties got in the way of the accounting, and each party blames the other for this failure. The case languished for over a decade before the trial court granted Mr. Mauro’s Motion To Dismiss for Failure To Prosecute in August 2013.

Ms. Landise prevailed here.

The story

This case began in 1992, when Sarah Landise brought suit against Thomas Mauro, alleging breach of an oral partnership agreement, conversion of partnership funds, and breach of fiduciary duty. The complaint alleged that Ms. Landise and Mr. Mauro had formed a law partnership in the District of Columbia, and the complaint requested an accounting of the partnership’s assets. A jury trial was held, at which Mr. Mauro argued that there was no such partnership, and that there could be no partnership because Ms. Landise was not licensed to practice law in the District. See Landise v. Mauro (Landise I), 725 A.2d 445, 445–47 (D.C. 1998). The jury at the first trial sided with Mr. Mauro, finding that Ms. Landise and Mr. Mauro had not entered into an oral partnership agreement, and that Ms. Landise had engaged in the unauthorized practice of law in the District of Columbia. Id. at 446.

A division of this court reversed and remanded for a new trial. Id. at 446– 47. The Landise I court clarified that Ms. Landise’s lack of a license to practice law in the District (Ms. Landise was licensed only in Virginia) did not preclude her claim for breach of partnership against Mr. Mauro, and the court held that— because the evidence of partnership was “overwhelming”—the jury’s confusion about the legal consequences of Ms. Landise’s unauthorized practice might have infected the jury’s verdict...

At trial two

A second jury trial was held, before Judge William M. Jackson, in July 2000. This time it was Mr. Mauro who requested an accounting, while Ms. Landise took the position that the amount of damages was not overly complicated and could be determined by the jury. While Ms. Landise identified eight payments totaling $444,190.33 by Mauro & Landise clients that, she claimed, Mr. Mauro deposited into his personal bank account, Mr. Mauro argued that the alleged partnership actually had more than eighty open cases, and so any calculation of damages would be sufficiently complex to require an accounting.

The matter languished for many years but dismissal was not appropriate

We are mindful, of course, that the partnership in this case dissolved many years ago, and that the difficulty of rendering an accurate accounting in light of this fact informed the trial judge’s decision to “bite the bullet” and dismiss the case. But any questions concerning the feasibility of an accurate accounting—including whether the surviving partnership documents provide the necessary information—are properly left to the special master in the course of performing her duties on remand.

Details of the partnership and its breakup can be found in the court's 1998 decision. (Mike Frisch)

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)

Imperfect Lien

The Utah Court of Appeals held that a law firm failed to perfect a lien on settlement proceeds after a partner and the case departed

Thomas D. Boyle represented Dawn Woodson in a wrongful death action while he was employed by the law firm Clyde Snow & Sessions PC (Clyde Snow) and then later by Prince Yeates & Geldzahler (Prince Yeates). After six years of litigation the parties reached a settlement. Clyde Snow asserted a lien on a portion of the settlement funds for attorney fees. Prince Yeates interpleaded a portion of the settlement, and the district court awarded those funds to Clyde Snow. Boyle appeals the district court’s order awarding the money to Clyde Snow. Because we determine Clyde Snow did not properly intervene, we conclude the district court lacked jurisdiction to award it attorney fees. We therefore reverse.

The case

In 2007, fifteen-year-old Caleb Jensen died while participating in a wilderness therapy program. His mother, Dawn Woodson, retained Clyde Snow to represent her in a wrongful death action. Boyle was lead counsel on the case. Woodson signed a contingency-fee agreement specifying that Clyde Snow would retain forty percent of any recovery...

In June 2010, three years after the case began, Boyle left Clyde Snow and joined Prince Yeates, and Woodson opted to have her case follow him there. Clyde Snow then filed a notice of its attorney lien. While he was with Prince Yeates, Boyle continued to represent Woodson until the case settled.

Settlement was reached in 2013.

On the merits

An attorney seeking to enforce an attorney lien must do so either "by filing a separate legal action‛ or ‚by moving to intervene in a pending legal action." Utah Code Ann. § 38-2-7(4)(a) (LexisNexis 2014). This section does not confer an unconditional right to intervene. See Bishop v. Quintana, 2005 UT App 509U, para. 5. Instead, a person desiring to intervene must submit a "timely application" and "shall serve a motion to intervene upon the parties as provided in Rule 5."

...Here, Clyde Snow did not file a timely motion to intervene. First, the only filing on behalf of Clyde Snow submitted before the parties’ settlement was a notice of Clyde Snow’s lien. After the parties’ settlement but before the court dismissed Woodson’s claims, Clyde Snow filed a restated notice of its attorney lien and an objection to the parties’ motion to dismiss the case, which stated that "Clyde Snow reserved its statutory right to intervene." But Clyde Snow never actually moved to intervene in the pending action.

Second, even if we construed Clyde Snow’s objection as a deficient attempt to intervene, it was not filed in a timely fashion.

The court also expressed concern about the danger presented to the client's interests

After the defendants expressed their concerns and objections to Clyde Snow’s participation, the court asked if anybody had ‚a strong objection‛ to keeping the case open, and no one replied. The court then decided to keep the case open for the sole purpose of resolving Clyde Snow’s attorney lien issue.

In doing so, the court inappropriately allowed Clyde Snow to derail resolution of the case by objecting to the parties’ stipulated agreement to dismiss Woodson’s claims. The court continuously referenced Clyde Snow and Boyle as parties even though neither had intervened as a party in this case. Although the actual parties did not reply when the court asked if anyone strongly objected to Clyde Snow’s participation, any further objections from the defendants would have been futile. Further, the court’s decision put the actual parties in an untenable situation: they either had to object to Clyde Snow’s presence at the risk of transforming Clyde Snow from non-party status to that of a party or refrain from objecting at the risk of having the court rule in a manner contrary to their interests.

(Mike Frisch)

Court Holds Mintz Levin Not Entitled To Summary Judgment On Discrimination And Retaliation Claims

The Massachusetts Supreme Judicial Court has held that summary judgment is not appropriate on most of an attorney's claims against the Mintz Levin law firm.

The court also held that some "self-help" options are available to an attorney alleging discrimination.

Here, we are asked to determine whether summary judgment should have entered for the employer on an employee's claims for gender discrimination and retaliation. In addressing the retaliation claim, we confront the novel question whether it is "protected activity" for an employee to search for, copy, and share with the employee's attorney confidential documents that the employee is authorized to access in the course of employment and that may help prove a discrimination claim.

The plaintiff is an attorney who worked for a Boston law firm, defendant Mintz, Levin, Ferris, Cohn, Glovsky and Popeo, P.C. (firm). During the course of her employment with that firm, from June, 2004, to November, 2008, she complained to her superiors and, ultimately, to the Massachusetts Commission Against Discrimination (MCAD), that she was being subjected to discriminatory treatment on the basis of her gender -- treatment that, she believed, led to her demotion in February, 2007. In the wake of this demotion, and on the advice of her attorney, the plaintiff searched the firm's document management system for items that might prove her assertions of discrimination. In November, 2008, after these searches were made known to the firm's chairman, the plaintiff's employment was terminated "for cause."

 The plaintiff sued; the firm countersued. All the plaintiffs claims were thrown out on summary judgment

We conclude, first, that the plaintiff has presented evidence from which a reasonable jury could infer that both her demotion and her termination were the result of unlawful discrimination, as well as evidence allowing an inference that both were the result of retaliation. Therefore, summary judgment for the defendants on those counts was inappropriate. Second, we hold that an employee's accessing, copying, and forwarding of documents may, in certain limited circumstances, constitute "protected activity," but only where her actions are reasonable in the totality of the circumstances. Finally, we conclude that judgment was entered properly on the claim against Cohen for tortious interference with contractual relations.

On self help

The question whether an employee's acts of self-help discovery in aid of claims under G. L. c. 151B, § 4, may ever, under any circumstances, constitute protected activity is one of first impression for this court. Taking into consideration the interests at stake and the views of other courts that have addressed the matter, we conclude that such conduct may in certain circumstances constitute protected activity under that statute, but only if the employee's actions are reasonable in the totality of the circumstances.

 New England In House had this report on the case. (Mike Frisch)

New York Declines Jurisdiction For Claims Against New Jersey Firm

A falling out among lawyer partners has led the New York Appellate Division for the Second Judicial Department to affirm dismissal on jurisdictional grounds.

In May 2012, the defendant Jeffrey G. Ephraim, an attorney residing in New Jersey, contacted the plaintiff, Ibrahim B. Shatara, an attorney residing in New York, to discuss forming a limited liability company for the purpose of practicing law. During ensuing negotiations, it was agreed that the defendant Luiza DiGiovanni would become a member of the newly formed company upon her admission to the New Jersey State Bar, and that the estate of DiGiovanni's father, who had been an attorney, would refer cases to Ephraim and the plaintiff. In June 2012, a certificate of formation of Ephraim & Shatara, LLC, was filed with the New Jersey Department of the Treasury. The main business address of Ephraim & Shatara, LLC, was located in Elizabeth, New Jersey. Additionally, since the plaintiff and Ephraim were both admitted to the New York State Bar, Ephraim & Shatara, LLC, filed an application for a certificate of authority for a foreign limited liability company to do business in New York State (see Limited Liability Company Law § 802[a]). Although that application was granted, the company failed to comply with the publication requirements (see Limited Liability Company Law § 802[b]) prior to the plaintiff's filing of a certificate of cancellation of Ephraim & Shatara, LLC, with the New Jersey Department of the Treasury in January 2013. The plaintiff alleges that Ephraim & Shatara, LLC, represented five clients in connection with proceedings in New York courts.

In February 2013, the plaintiff commenced the instant action against Ephraim, DiGiovanni, and the newly formed DiGiovanni & Ephraim, LLC (hereinafter DiGiovanni & Ephraim), to recover damages for, inter alia, fraud, conversion, and breach of contract in connection with the formation and dissolution of Ephraim & Shatara, LLC. The defendants were served with process in New Jersey. Thereafter, the defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction or, in the alternative, to dismiss the complaint pursuant to CPLR 327(a) on the ground of forum non conveniens or pursuant to CPLR 3211(a)(7) for failure to state a cause of action. The Supreme Court denied those branches of the motion which were to dismiss the complaint insofar as asserted against Ephraim and DiGiovanni & Ephraim pursuant to CPLR 3211(7) and (8) and CPLR 327(a), and directed a hearing on the issue of whether it was proper to exercise personal jurisdiction over DiGiovanni

...the plaintiff failed to establish, prima facie, that DiGiovanni & Ephraim was subject to the personal jurisdiction of the Supreme Court pursuant to CPLR 302.

(Mike Frisch)