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U.S. Supreme Court holds that bad faith fee sanction under court’s inherent authority is limited to fees incurred solely from the misconduct

Hello everyone and welcome to this Ethics Alert which will discuss the important and very recent United States Supreme Court opinion which held that a bad faith fee sanction based upon a court’s inherent authority is limited to fees incurred solely as a result of the misconduct.  The case is Goodyear Tire & Rubber Co., v. Haeger, 813 F. 3d 1233, No. 15–1406 (Argued January 10, 2017—Decided April 18, 2017).  The United States Supreme Court opinion is here:  https://www.supremecourt.gov/opinions/16pdf/15-1406_db8e.pdf

According to the opinion, which was delivered by Justice Kagan, the Haegers sued Goodyear Tire & Rubber Company, alleging that the failure of a Goodyear G159 tire caused the family’s motorhome to swerve off the road and flip over.  “After several years of contentious discovery, marked by Goodyear’s slow response to repeated requests for internal G159 test results, the parties settled the case. Some months later, the Haegers’ lawyer learned that, in another lawsuit involving the G159, Goodyear had disclosed test results indicating that the tire got unusually hot at highway speeds. In subsequent correspondence, Goodyear conceded withholding the information from the Haegers, even though they had requested all testing data. The Haegers then sought sanctions for discovery fraud, urging that Goodyear’s misconduct entitled them to attorney’s fees and costs expended in the litigation.

“The District Court found that Goodyear had engaged in an extended course of misconduct. Exercising its inherent power to sanction bad-faith behavior, the court awarded the Haegers $2.7 million—the entire sum they had spent in legal fees and costs since the moment, early in the litigation, when Goodyear made its first dishonest discovery response. The court said that in the usual case, sanctions ordered pursuant to a court’s inherent power to sanction litigation misconduct must be limited to the amount of legal fees caused by that misconduct. But it determined that in cases of particularly egregious behavior, a court can award a party all of the attorney’s fees incurred in a case, without any need to find a “causal link between [the expenses and] the sanctionable conduct.” (citation omitted)

“As further support for its award, the District Court concluded that full and timely disclosure of the test results would likely have led Goodyear to settle the case much earlier. Acknowledging that the Ninth Circuit might require a link between the misconduct and the harm caused, however, the court also made a contingent award of $2 million. That smaller amount, designed to take effect if the Ninth Circuit reversed the larger award, deducted $700,000 in fees the Haegers incurred in developing claims against other defendants and proving their own medical damages. The Ninth Circuit affirmed the full $2.7 million award, concluding that the District Court had properly awarded the Haegers all the fees they incurred during the time when Goodyear was acting in bad faith.

Goodyear argued that, due to the failure of the court to link the fee with the misconduct, the fee award should be reversed and an instruction to the trial court to reconsider the matter. The Haegers argued that the award should be upheld because the lower courts articulated and applied the appropriate but-for causation standard, or, even if they did not, the fee award in fact passes the but-for test.

“The Haegers’ defense of the lower courts’ reasoning is a non-starter: Neither court used the correct legal standard. The District Court specifically disclaimed the need for a causal link on the ground that this was a “truly egregious” case. 906 F. Supp. 2d, at 975. And the Ninth Circuit found that the trial court could grant all attorney’s fees incurred “during the time when [Goodyear was] acting in bad faith,” 813 F. 3d 1233, 1249—a temporal, not causal, limitation. A sanctioning court must determine which fees were incurred because of, and solely because of, the misconduct at issue, and no such finding lies behind the $2.7 million award made and affirmed below. Nor is this Court inclined to fill in the gap, as the Haegers urge. As an initial matter, the Haegers have not shown that this litigation would have settled as soon as Goodyear divulged the heat-test results (a showing that would justify an all-fees award from the moment Goodyear was supposed to disclose). Further, they cannot demonstrate that Goodyear’s non-disclosure so permeated the suit as to make that misconduct a but-for cause of every subsequent legal expense, totaling the full $2.7 million.”

“Although the District Court considered causation in arriving at its back-up award of $2 million, it is unclear whether its understanding of that requirement corresponds to the appropriate standard—an uncertainty pointing toward throwing out the fee award and instructing the trial court to consider the matter anew. However, the Haegers contend that Goodyear has waived any ability to challenge the contingent award since the $2 million sum reflects Goodyear’s own submission that only about $700,000 of the fees sought would have been incurred regardless of the company’s behavior. The Court of Appeals did not address that issue, and this Court declines to decide it in the first instance. The possibility of waiver should therefore be the initial order of business on remand.”

The opinion held that “(w)hen a federal court exercises its inherent authority to sanction bad-faith conduct by ordering a litigant to pay the other side’s legal fees, the award is limited to the fees the innocent party incurred solely because of the misconduct—or put another way, to the fees that party would not have incurred but for the bad faith.”  The case was reversed and remanded.

Bottom line: This U.S. Supreme Court opinion is important since it addresses and resolves (at least in the federal courts) the question of whether a court exercising its inherent authority to sanction bad faith misconduct by awarding fees must limit the fees to those incurred as a direct result of the lawyer’s misconduct.  The opinion found in the affirmative and that the fees awarded must be shown to have been incurred solely as a result of the misconduct.

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

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New Jersey lawyer receives censure for neglecting client matters, failing to communicate with clients, and fraud and dishonesty

Hello everyone and welcome to this Ethics Alert which will discuss the recent New Jersey Supreme Court Order which adopted the findings of the New Jersey Disciplinary Review Board and censured a lawyer for neglecting client matters, failing to communicate with clients, and engaging in conduct involving fraud or dishonesty.  The case is In The Matter of John R. Dusinberre, D-37 September Term 2015 078531 (Supreme Court of New Jersey April 5, 2017).  The New Jersey Supreme Court Order is here:  http://drblookupportal.judiciary.state.nj.us/DocumentHandler.ashx?document_id=1082216 and the Disciplinary Board (DRB) Decision dated November 9, 2016 is here:  http://drblookupportal.judiciary.state.nj.us/DocumentHandler.ashx?document_id=1077667

According to the DRB Decision, the lawyer was charged with violating Bar rules in four separate matters:

“In the first matter, respondent represented Anthony Domenick and 407-409 Summer Associates, LLC for a Paterson condominium development known as ‘Sandy Hill at Summer Street.’ The terms of the representation called for respondent to file a public offering statement (POS) with the New Jersey Division of Community Affairs (DCA) and to record a master deed in the county clerk’s office. Respondent told his client that he had filed the POS with the DCA and furnished him with a copy of a November 12, 2007 POS carrying registration number ‘04368.’ Respondent stipulated that he never filed a POS with the DCA. Rather, he had fabricated the POS and created a fictitious registration number; the DCA had never assigned a registration number to the Sandy Hill project. Although respondent also failed to record the master deed, he either informed his client, or led him to believe, that he had done so.

“In a second matter, respondent represented a client identified only as ‘Mr. Cerquirra’ and ‘88 St. Francis LLC’ regarding a condominium development project at 88 St. Francis Street in Newark. The representation required respondent to register the project with the DCA and to obtain a registration order. Respondent informed the client that he had obtained a registration order for the project from the DCA. He also gave the client an October 27, 2008 letter, purportedly from DCA’s Manager of the Planned Real Estate Department, Stewart P. Pallonis. Enclosed with that letter was an order of registration from the DCA carrying registration number 04487, and signed ‘Stewart P. Pallonis.’  In fact, respondent never registered the 88 St. Francis Street project with the DCA. Rather, he had fabricated both the Pallonis letter and the registration order, signing Pallonis’ name to both documents before giving them to the client.

“In a third matter, respondent represented Sterling Properties (Sterling) for a Cedar Knolls condominium project known as ‘Viera at Hanover.’ The representation required respondent to register the project with the DCA, but he failed to do so. Respondent, nevertheless, led Sterling to believe that he had registered the project with the DCA, knowing that he had not done so. In reliance on respondent’s false information, Sterling went forward with the project.

“In a fourth matter, respondent represented Sterling for another condominium project in Piscataway. That representation, too, required respondent to register the project with the DCA. Again, respondent failed to do so. Respondent led Sterling to believe that the Piscataway project, too, was registered with the DCA, knowing that it was not. Relying on respondent’s statements, Sterling proceeded with the development project.”

“During respondent’s entire thirty-four-year career at MSLD, he reported to Barry Mandelbaum, the managing attorney, and twelve years his senior. Respondent described Mandelbaum as a “benevolent despot” and a “mentor.” Respondent was never “encouraged” to generate business for the firm. Rather, he tended to work on legal matters that Mandelbaum generated.

“Respondent described his relationship with Mandelbaum as a stressful one. Mandelbaum would berate respondent publicly, place notes on respondent’s door about perceived failings, and subject him to ‘105 decibel,’ public ‘dress downs,’ all of which were extremely embarrassing.

“As the law firm grew larger, younger attorneys became partners. By the mid-2000s, some of those partners had come to expect respondent to complete work on projects that they had generated, placing additional pressure on respondent to perform.

“Several years before respondent engaged in the within misconduct, MSLD established an executive committee to manage the law firm. Respondent perceived that the new arrangement rewarded some of the younger, income-generating attorneys, at his expense. Feeling exposed, he became “terrified” about losing his job. At that juncture, he grew even more reliant on Mandelbaum for protection:

So my desire and drive to please him became extremely strong. And I can’t tell you the number of times when I would have an issue with a client, I would hear the client five minutes later on the phone with Barry and then I would hear Barry’s footsteps stomping down the hall to basically dress me down or yell at me and to confront me, or whatever it might be very publicly.

And it was extremely upsetting and got to the point where I went from a lawyer who loved to go to work every day to a lawyer who dreaded pulling into the parking lot of my law firm, counting whose cars were in to try and decide whose work I should be doing that day so that I wouldn’t get yelled at or — or, you know, almost — I almost use the word bullied, although I’m an adult and was an adult at the time, and it’s a hard concept to have, but it’s the desperate situation I found myself in. (T20-10 to T21-2.)

“Worried about being ‘kicked out’ of MSLD, respondent felt tremendous pressure to complete tasks on time, according to schedules that other attorneys prepared for him. Also pressing was the fear that, because he was over sixty years old and had never been in another legal setting, he could not strike out on his own.”

The DRB Decision also found that the lawyer had no prior discipline, expressed remorse for his misconduct, and paid former clients, the firm and the DCA hundreds of thousands of dollars as restitution.  The DRB recommended a censure (which is a stronger sanction than a reprimand in New Jersey).  The New Jersey Supreme Court adopted that sanction and censured the lawyer.

Bottom line:  This case is unusual, to say the least.  Although the lawyer provided significant mitigation (including the serious “berating” by a supervising partner and “cracking under the pressure” of the partner’s criticism), his underlying misconduct, including his multiple false statements to clients, neglecting client matters and failing to communicate, would appear to be serious enough to merit a suspension, notwithstanding the mitigation that he provided.  The lawyer was in his 50’s and 60’s when the misconduct occurred. One could certainly conclude that the lawyer’s testimony about the “pressure” of the practice was somewhat of an excuse and not an explanation.

As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding ethics, risk management, or other issues, please do not hesitate to contact me.

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

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Washington State Bar suspends some ethics opinions because of antitrust concerns arising from 2015 U.S. Supreme Court opinion

Hello and welcome to this New Year’s Eve 2015 Ethics Alert blog which will discuss the recent decision of the Washington State Bar to suspend some ethics opinions because of antitrust concerns arising out of the U.S. Supreme Court’s February 2015 opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission.  I previously blogged about the Supreme Court’s decision here: USSC NC dental licensing opinion, the LegalZoom antitrust lawsuit in North Carolina based upon the USSC opinion here: LegalZoom filed antitrust lawsuit against NC Bar and the settlement of that lawsuit here:  LegalZoom settles antitrust lawsuit against NC Bar.

According to a recent ABA Journal article, the Washington State Bar Association has advised its ethics committee to stop issuing ethics opinions which could be interpreted as having the effect of restraining trade in the legal services market.  The bar stated that it suspended the opinions so it could “proceed very deliberately” in the wake of the U.S. Supreme Court’s February 2015 opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission. 

That U.S. Supreme Court decision permitted an antitrust action against the North Carolina state dentistry board for its decision prohibiting non-dentists from whitening teeth to proceed. The opinion stated that when a state board is controlled by active market participants in the market it regulates, state-action antitrust immunity cannot be applied unless the restraint of trade is affirmatively expressed by state policy and the policy is actively supervised by the state.

Bottom line:  This is more fallout from the 2015 USSC Dental Board decision.  As I have stated in my previous blogs, there have been lawsuits against state Bars in the past attacking the entity’s state action immunity.  The Supreme Court opinion refers to three specific cases and appears to suggest that these cases should be interpreted to mean that only the actions of a state entity which is actively supervised by the state (i.e. the Supreme Court in the case of a state Bar) have antitrust immunity and the rest of the entity’s actions may not have such immunity.

I wish you and yours a very happy and healthy 2016!

Disclaimer:  this e-mail 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

NOTICE OF CONFIDENTIALITY:  This electronic communication and the information contained herein is legally privileged and confidential proprietary information intended only for the individual and/or entity to whom it is addressed pursuant to the American Bar Association Formal Opinion No. 99-413, dated March 10, 1999 and all other applicable laws and rules.  If you receive this transmission in error, you are advised that any disclosure, copying, distribution, or the taking of any action in reliance upon the communication is strictly prohibited.  Any unauthorized use, distribution, or disclosure of this communication is strictly prohibited.  If you have received this in error, please notify us immediately by return e-mail at the above telephone number and then delete message entirely from your system.  Thank you for your cooperation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Ohio lawyer suspended indefinitely after conviction for filing false documents with IRS and falsifying e-mail in malpractice action

Ohio lawyer suspended indefinitely after conviction for filing false documents with IRS and falsifying e-mail in malpractice action.

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The Florida Bar’s Board of Governors approves guidelines for advertising past results which prohibit past results on billboards and TV and radio advertisements

Hello and welcome to this Ethics Alert which will discuss the Guidelines for Advertising Past Results which were approved by the Florida Bar’s Board of Governors (BOG) on December 13, 2013 (and revised on 1/17/14) as well as the decision of the Bar’s Standing Committee on Advertising to disapprove 15 and 30 second television advertisements which advertised past results at its January 23, 2014 meeting (as reported in the February 15, 2014 issue of The Florida Bar News).  The guidelines state that the Bar “generally will not approve” billboard and television and radio advertisements since they “do not lend themselves to effective communication” of the disclaimers that are required under the revised lawyer advertising rules.  The Bar guidelines for past results are on The Florida Bar’s website http://www.floridabar.org.

The Guidelines for Advertising Past Results were initially approved by the Bar’s Board of Governors at its December 13, 2013 meeting and, inter alia, restrict references to past results in billboards and other such display advertisements and television and radio advertisements.  The guidelines state:

Indoor and outdoor display and radio and television media do not lend themselves to effective communication of such information. Consequently, the Bar generally will not approve advertisements in such media that include references to past results. Although the revised advertising rules permit lawyers to advertises past results with disclaimers and adequately explain the context, the guidelines state that these disclaimers may not be adequate when the advertisement is on a billboard or in a TV or radio spots. 

The Bar guidelines also state that any amount claimed to have gone to a client in an advertisement in an “acceptable” advertising medium must be the net amount and, if the client received a structured settlement, the amount must be the value in current dollars. The guidelines also state that, unless the advertising law firm can show an exception, any advertisement that includes a dollar amount award must have the following disclaimer: “Most cases result in a lower recovery. It should not be assumed that your case will have as beneficial a result”.

            The guidelines for past results also state:  “An advertisement of past results that does not prominently disclose information necessary to prevent the advertisement from being misleading violates Rule 4-7.13(a)(2).  The following are examples of ads that would be a violation:

 

Advertising that the lawyer obtained a $1 million judgment without disclosing that the fees and costs exceeded the amount of the judgment or that the court issued a $500,000 remittitur.

 

Advertising that the lawyer obtained a $1 million judgment without disclosing that the defendant offered to settle for $2 million.

 

Advertising a success at trial without disclosing that the judgment was overturned on appeal.

 

Advertising a success percentage without disclosing material limitations on the types of cases accepted. (E.g., advertising a percentage of success in traffic ticket cases without disclosing that the percentage only includes minor infractions by first-time offenders.)

 

Advertisement by a criminal defense lawyer that an acquittal on one or more charges was obtained without disclosing that the client was convicted of other crimes in the same case.


The guidelines also state that lawyers cannot claim to have “won” in a case when there are opposing claims or mixed results or if the judgment amount was
substantially less than sought or less than a settlement offer:

 

Results should not be characterized as wins unless such a characterization is not debatable. The following are examples of ads that would be a violation:

 

Advertising a case as a win when there were opposing claims and mixed results.

                        Advertising a case as a win when the judgment was for substantially less than was sought or less than a settlement offer.

According to a February 15, 2014 Florida Bar News article, at its January 23, 2014 meeting, the Bar’s Standing Committee on Advertising (SAC) disapproved 15 and 30 second television advertisements proposed by an Orlando law firm and upheld the advertising staff’s finding that they did not comply.  The law firm’s lawyer claimed that the advertisements met the rule and guideline standards since they disclosed net award amounts to the clients and; therefore, accurately reflected the actual amounts received by clients.  The advertisements also had a written disclaimer: “Most cases result in a lower recovery.  It should not be assumed that your case will have as beneficial a result.”  The lawyer also stated that the rules as interpreted by the guidelines may be unconstitutional.  The SCA voted to find noncompliance because of its uncertainty on how to apply the guidelines and pending guidance from the BOG.

During the SCA’s discussion of the Orlando firm’s advertisements, Elizabeth Tarbert, Bar Advertising Counsel, reported that Bar staff, at the BOG’s direction, had reviewed several hundred advertisements which had been approved since the new Bar advertising rules went into effect which contained past results. Ms. Tarbert said that several hundred did not comply with the guidelines and the affected law firms would be notified.  

The article also states that when the BOG approved the guidelines, it decided that law firms with advertisements which were previously approved but did not meet the new guidelines would be given a reasonable amount of time to remove or change the advertisements.  According to the article, around 350 advertisements from about 70 different law firms previously approved by the Bar may no longer be allowed under new advertising guidelines.  The Bar is sending between 90 and 100 letters to lawyers or law firms who had submitted advertisements to the Bar under new advertising rules and were told either that the ads complied with the new rules or would comply if certain changes were made.

Bottom line:  The guidelines for past results were a response to complaints about lawyer billboards and TV and radio advertisement advertisements which contained statements from clients such as “my lawyer got me $$$$ (fill in the number)”.  The SCA applied the rules and guidelines and disapproved the advertisements but asked for further guidance.  Stay tuned for the continuing saga of the interpretation of, and challenges to, the 2013 revised Bar Advertising Rules…

            …and let’s 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 2013 Florida comprehensive advertising rule revisions, Florida 2013 comprehensive lawyer advertising rules, Florida Bar, Florida Lawyer Advertising opinions, Florida Lawyer advertising rules, joe corsmeier, Joseph Corsmeier, Lawyer advertising, Lawyer Advertising opinion, Lawyer advertising rules, Lawyer ethics, Lawyer Ethics and Professionalism, Uncategorized

2013 in review

The WordPress.com stats helper monkeys prepared a 2013 annual report for this blog.

Here’s an excerpt:

The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 18,000 times in 2013. If it were a concert at Sydney Opera House, it would take about 7 sold-out performances for that many people to see it.

Click here to see the complete report.

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Florida Bar’s Standing Committee on Advertising issues proposed advisory opinion which cautions lawyers against using “hidden text” or another firm’s name in a website page “metatag”

Florida Bar’s Standing Committee on Advertising issues proposed advisory opinion which cautions lawyers against using “hidden text” or another firm’s name in a website page “metatag”.

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