Category Archives: Grounds for lawyer withdrawal

Florida Supreme Court suspends two lawyers for conflict of interest Bar Rule violations under “hot potato doctrine”

Hello everyone and welcome to this Ethics Alert, which will discuss recent opinion of the Supreme Court of Florida suspending two Florida lawyers for 30 days for violating Bar Rules related to conflicts of interest under what is being called the “hot potato” doctrine. The cases are: The Florida Bar v. Steven Kent Hunter, Case No.: SC16-1006, TFB No. 2014-70,728(11C) and The Florida Bar v. Philip Maurice Gerson, Case No.: SC16-1009, TFB No. 2014-70,729(11C).  The April 11, 2018 Supreme Court opinion is here:  https://efactssc-public.flcourts.org/casedocuments/2016/1006/2016-1006_disposition_141625_d31a.pdf

The Florida Supreme Court opinion suspended the two lawyers for 30 days each for seeking payments for their clients from a scientific institute created in a class action tobacco settlement notwithstanding objections from their previous clients.  The opinion found that the lawyers violated Florida Bar Rules 4-1.7 (conflict of interest – current clients), and 4-1.9 (conflict of interest – former clients) by seeking relief adverse to the clients’ interests.  The case involved the so called “hot potato doctrine”, which was established in a March 27, 2014 Florida Supreme Court opinion involving the same lawyers.

The 2014 Supreme Court opinion quashed a Third District Court of Appeals opinion reversing a trial court order disqualifying the lawyers on the same underlying facts as the 2018 Bar case.  That opinion stated:  “Additionally, with this opinion, we ask The Florida Bar to investigate whether any Florida Rules of Professional Conduct were violated during the underlying proceedings or during the presentation of this case to this Court.  The case is Patricia Young et al. vs. Norva Achenbauch, et al., Case No. SC12-988, and the March 27, 2014 opinion is here:  http://www.floridasupremecourt.org/decisions/2014/sc12-988.pdf

In Young, the Court said that a lawyer who has a conflict of interest between two current clients cannot avoid the current-client conflict rule (4-1.7) by dropping one client “like a hot potato.”  Before that opinion, it was argued that a client who a lawyer dropped because of a conflict of interest became a former client under Bar Rule 4-1.9, which is potentially less restrictive.

The underlying litigation began with a putative class-action lawsuit filed by a different lawyer on behalf of a number of flight attendants alleging damages for second hand smoke inhalation. That case settled with no compensation to class members; however, the settlement provided that $300 million would be paid to create a foundation sponsoring scientific research on cigarette smoking.  The settlement also allowed individual suits for compensatory damages by class members, as long as those claims were not based on alleged fraud and misrepresentation.  The lawyers were among the lawyers who took on individual suits by flight attendants.

The referee found in his report that the lawyers (and the other lawyers) were “wholly unsuccessful” in the individual cases, partly because class members could not prove causation.  The referee also found that, after the unsuccessful lawsuit, the lawyers then turned to “Plan B”, which was to negotiate payments to class members from the foundation. Two of Gerson’s former clients sent letters to the foundation stating they objected to any plan to undercut the foundation’s activities and funding.  Hunter, the other lawyer, received an objection from a foundation board member who he had previously represented in one of individual lawsuits, and who was being paid $60,000 annually to serve on the foundation board.

According to the referee’s report, Gerson believed the letters were solicited to stop the petition to approve a distribution from the foundation. Gerson and Hunter then withdrew from representing anyone who had voiced an objection, and filed a petition alleging that the institute had substantially deviated from its approved purpose and had misused settlement funds.

The institute and the objectors then filed a petition to disqualify the lawyers because of a conflict of interest and the disqualification issue was addressed in the Florida Supreme Court’s 2014 opinion, which created the so called “hot potato” doctrine.  The referee found that the 2014 opinion was binding in the ethics case; however, the referee recommended only an admonishment, finding that neither lawyer had any prior disciplinary record, the case involved legal issues that were unsettled before the 2014 Supreme Court decision, and the issue of whether the petition sought relief adverse to class members was “fairly debatable.”

The Florida Supreme Court opinion approved the referee’s findings of fact and the recommendation that the lawyers be found guilty of violating Florida Bar Rule 4-1.7; however, the opinion rejected the recommendation that the lawyers be found not guilty of violating Bar Rule 4-1.9, and found both lawyers guilty of violating that rule. The opinion also disapproved the referee’s recommendation of an admonishment and suspended both lawyers for 30 days.

Bottom line:  This is an unusual case where the Florida Supreme Court issued an opinion in an underlying case and sent the case to The Florida Bar for investigation.  The opinion relied on the court’s previous finding in the civil case and suspended the lawyers, even though the referee found the conflict to be “fairly debatable”.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19 N. Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Joseph Corsmeier

about.me/corsmeierethicsblogs

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Eighth Circuit Appeals Court reverses trial court and permits law firm to withdraw for client’s failure to pay fees and fulfill obligations to lawyer

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent opinion of the Eighth Circuit Court of Appeals reversing a trial court order and permitting a law firm to withdraw because of the client’s failure to pay the firm’s fees and to provide the firm with information “critical for its defense.”  The case is Sanford v. Maid-Rite Corporation, Case No. 15-2424, and the opinion is here:  http://media.ca8.uscourts.gov/opndir/16/03/152424P.pdf

According to the opinion, the underlying matter involved a class action filed by current and former franchisees against Maid-Rite. The allegations were that Maid-Rite made false representations regarding the company’s profitability that induced them into purchasing the franchises.  In September 2014, Maid-Rite and the other defendants retained the law firm as counsel. The engagement letter provided that the law firm would bill on an hourly basis and the firm “reserved the right to withdraw from this representation for good cause.”  “Good cause” included the failure to make timely payments and the failure to follow the firm’s advice on a “material matter.”

The opinion states that the client paid one invoice but failed to pay any more invoices and the firm “repeatedly advised them that the firm would seek to withdraw unless their outstanding bills were paid. Although defendants promised several times to pay the invoices, they did not and a significant unpaid balance resulted. Defendants also repeatedly failed to provide Larkin with information critical for its defense.”  On January 28, 2015, the firm moved to withdraw and, on April 16, 2015, the magistrate judge stayed discovery while the district court considered the motion. The district court affirmed on June 5, 2015 and the firm filed an interlocutory appeal with the federal Eighth Circuit Court of Appeals.

The opinion applied the Minnesota Rules of Professional Conduct, which permit a lawyer to withdraw if:

(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or

(7) other good cause for withdrawal exists.

The Minnesota Bar Rule also requires the lawyer to show good cause and notify the client of the motion to withdraw.  The opinion found that the firm met all the requirements to file a motion to withdraw and; therefore, a presumption arose that the firm would be permitted to withdraw. The opinion also stated that “there was no rebuttal to the presumption that withdrawal was appropriate since there was no evidence that the firm waited too long to withdraw and the discovery period was still open. There was also no prejudice to any third parties.”  The opinion reversed the trial court’s order as an abuse of discretion. And permitted the firm to withdraw.  The opinion followed Fid. Nat’l Title Ins. Co. v. Intercounty Nat’l Title Ins. Co., 310 F.3d 537 (7th Cir. 2002), which held that a law firm could file an interlocutory appeal to challenge the denial of a motion to withdraw.

Bottom line:  Lawyers who would like to withdraw from representing a client must be prepared to cite a proper basis for the withdrawal under the Bar rules, whether it is permissive or mandatory.  This law firm’s motion to withdraw in the federal case was denied by the trial court; however, the firm was permitted to file an interlocutory appeal challenging the denial, and the appeals court granted the withdrawal.  Not all jurisdictions may permit interlocutory appeals of such an order and, in most jurisdictions (including Florida), if the court does not permit the withdrawal (and any appeals are exhausted), the lawyer is required to continue the representation, notwithstanding any financial burden and/or the failure of the client to fulfill his or her obligations.

Be careful out there!

Disclaimer:  this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Filed under Attorney Ethics, Ethics and lawyer withdrawal, Grounds for lawyer withdrawal, joe corsmeier, Joseph Corsmeier, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer withdrawal