Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Category: Ethics & Professional Responsibility

New York Lawyer Censured for Falsifying Billing Records

January 11, 2018

A recent New York Law Journal by Jason Grant, “Manhattan Lawyer Censured for Falsifying Time Records, Even Though Clients Unscathed” reports that a Manhattan lawyer has been publicly censured for adding 94.8 hours of fabricated billing to his law firm’s internal records, in an effort to look busy to his partners, even though he removed the false entries before the bills went out to clients.

A unanimous Appellate Division, First Department, panel censured lawyer Jeffrey Leighton, while noting that the Attorney Grievance Committee and Leighton had stipulated to the punishment, even though there is apparently no precedent for a censure when the clients aren’t cheated.  The panel also noted, under mitigating factors weighing against a harsher punishment, that Leighton, a 34-year veteran lawyer, had lost his partnership at his firm because he’d padded the bills.

“The [First Department Attorney Grievance] Committee found no precedent for any public censure for falsifying time records where clients were not harmed,” the panel wrote, adding, “Disciplinary cases involving false or over-billing that have resulted in public discipline involved more egregious conduct in which the clients were directly impacted by the misconduct.”

However, the panel also pointed out that “the Committee and [Leighton] agree that public censure is appropriate because he engaged in this conduct for a period of over two years, he is a senior attorney with extensive experience, and although he did not intend to financially benefit or over-bill his clients, he intended to and did ‘deceive his colleagues and his firm about how busy he was.’”

Leighton was admitted in the Second Judicial Department in 1983, according to the panel, which consisted of Justices David Friedman, Marcy Kahn, Ellen Gesmer, Cynthia Kern and Peter Moulton.  He had an office in the First Judicial Department at all relevant times, and the committee and Leighton stipulated that between March 2012 and September 2013 he’d engaged in a pattern of making fake internal firm billing entries, the panel wrote in the Jan. 4 decision.

In mitigation of the punishment, the panel pointed out in Matter of Jeffrey Leighton, 2018 NY Slip Op 00089, that Leighton had never previously been the subject of a disciplinary investigation, that he cooperated with the committee, and that he’d “expressed genuine remorse and embarrassment.”

Bitcoin for Legal Fees?

December 21, 2017

A recent Law.com story, by Ben Hancock, “What’s Next: Blockchain and Justice; Net Neutrality Fights Brews; Bitcoin for Legal Fees,” reports that the skyrocketing prices for crypto-currencies are making for some interesting legal battles, but they also present another novel question to lawyers: What if my client wants to pay my legal fees in Bitcoin?  In an op-ed, Kaufman Dolowich & Voluck attorney Ian Anderson walks through the ethical and practical considerations of that question — and notes that Bitcoin isn’t treated by the IRS as legal tender.

“Like the country lawyer accepting a bushel of apples for drafting a will, payment in Bitcoin is payment in property,” Anderson writes.  He also notes that payment in crypto-currency raises money laundering concerns, and that if the value of the token goes to zero, it could put the client and attorney in conflict.

Takeaway: “Some attorneys believe … that such flexible payment models attract new clients.  But for cases with minimal fees or attorneys who are not tech-savvy, receiving payment in Bitcoin may be more trouble than it’s worth.”

PA Supreme Court: Unethical Fee-Splitting Not Automatically Unenforceable

December 19, 2017

A recent Legal Intelligencer story, by Zack Needles, “Unethical Fee-Splitting Agreements Not Automatically Unenforceable, Justices Say,” reports that, in a closely watched case that waded into the murky ethics of business arrangements between lawyers and nonlawyers, a majority of the Pennsylvania Supreme Court could agree on only one thing: fee-splitting arrangements between lawyers and nonlawyers are not per se unenforceable just because they violate attorney ethics rules.

But beyond that, a majority of the six-member court—Justice Sallie Updyke Mundy recused because of her participation on the lower court panel—was unable to reach a consensus in SCF Consulting v. Barrack, Rodos & Bacine.  The larger questions of how best to deter unscrupulous lawyers from entering into unethical agreements and what responsibility, if any, nonlawyers have to avoid such agreements remain without definitive answers.

The overall effect of the decision was to reverse a ruling by a split three-judge panel of the state Superior Court, which held that a consultant to Philadelphia securities litigation firm Barrack, Rodos & Bacine was not entitled to an allegedly promised cut of the firm’s profits from cases he worked on because that type of fee-splitting agreement violates Rule 5.4 of the Pennsylvania Rules of Professional Conduct.  The high court remanded the case to the Philadelphia trial court to determine whether this particular agreement is enforceable.

But other than proceeding with the understanding that there is no bright-line rule rendering an unethical fee-sharing agreement unenforceable, ”the common pleas court will be in a position of making its own judgment as to the relevance of any wrongful conduct on [the nonlawyer party’s] part, without present guidance from this court,” Chief Justice Thomas G. Saylor wrote in the opinion announcing the judgment of the court (OAJC), which was joined by Justice Kevin M. Dougherty.

In SCF Consulting, the Superior Court said the alleged arrangement in which Scott C. Freda—SCF Consulting’s sole member—was to receive 5 percent of the firm’s annual profits generated by cases he assisted with violated Rule 5.4, which bars, with few exceptions, attorneys from sharing legal fees with nonlawyers.

According to court documents, SCF alleged it was induced by Barrack Rodos to work exclusively on the firm’s behalf in securities class actions in exchange for both a fixed annual consulting fee and a 5 percent cut of any profits gained from cases SCF worked on.

SCF alleged that the firm subsequently refused to make the profit-share payments, however, court documents said.  Following discovery, the firm moved for summary judgment and Philadelphia Court of Common Pleas Administrative Judge Gary S. Glazer granted the motion, finding that the fee-sharing aspect of the alleged payment arrangement ran afoul of Rule 5.4.

On appeal, Senior Judge James J. Fitzgerald III, joined in the majority by Judge Jacqueline O. Shogan, affirmed Glazer’s ruling rejecting SCF’s argument that the agreement fell within the exception to Rule 5.4 that allows nonlawyer employees to participate in profit-sharing compensation or retirement plans.

“As the trial court accurately noted, appellant was not an employee of the firm participating in a formalized program benefiting employees based upon the profitability of the firm,” Fitzgerald said.  “Therefore, the exception in Rule 5.4(a)(3) is unsustainable in the instant case because there is a direct link between the specific fees and specific payment to appellant, a nonlawyer.”

The Supreme Court granted allocatur in the case in February, agreeing to decide “whether the trial court and Superior Court erred in sustaining [respondent's] demurrer to all [c]ounts of [petitioner's] complaint, where, even assuming arguendo that the compensation plan was in violation of Rule 5.4, Pennsylvania law, public policy and the interests of justice require such an agreement to be enforced because an attorney must not be shielded from liability, nor financially rewarded for violating the Rules of Professional Conduct.”  The high court heard arguments in the case in October.

In their Dec. 19 OAJC, Saylor and Dougherty took the position that while an unethical fee-splitting agreement between a lawyer and a nonlawyer is not per se unenforceable, it may still be deemed unenforceable if it’s determined that the nonlawyer party bore some responsibility for the ethical violation.

“The ultimate outcome of this case may turn on factual findings concerning Appellant’s culpability, or the degree thereof, relative to the alleged ethical violation,” Saylor said in the OAJC.

But Justice Max Baer, in a concurring and dissenting opinion joined by Justice Debra Todd, said that while he agreed with the OAJC’s rejection of a bright-line prohibition on enforcing unethical fee-sharing agreements, he disagreed with the notion that a nonlawyer could bear any culpability for a breach of ethics rules that only govern attorneys.

Baer said he would have held that the agreement between Barrack Rodos and plaintiff SCF Consulting was enforceable and did not violate public policy.  “I agree with the OAJC insofar as it holds that a fee-sharing agreement between a lawyer and a non-lawyer in violation of Rule of Professional Conduct 5.4(a) is not per se unenforceable as a violation of public policy,” Baer said.  “However, because a nonlawyer is not bound by the Rules of Professional Conduct, the non-lawyer committed no unethical or illegal act by entering into the agreement and, thus, can bear no measure of responsibility relative to the law firm’s material violation of the rules governing the profession.”

“To ensure compliance with the professional conduct rules prohibiting the type of fee-sharing agreement at issue, I would refer the law firm or responsible attorney to the Disciplinary Board for prosecution of purported ethical violations and imposition of disciplinary sanctions,” Baer added.

Justice David N. Wecht, joined by Justice Christine L. Donohue, penned a dissenting opinion, supporting a third approach: adopting a bright-line rule rendering unethical fee-splitting agreements unenforceable while still allowing nonlawyer parties to seek relief in equity.

“To prevail in equity (as distinct from a claim at law in tort or contract), the nonlawyer would have to demonstrate all of the predicates of an equity claim, such as unjust enrichment, unclean hands, or other elements, and would have to show that he or she entered into the agreement with clean hands,” Wecht said.  “In my view, this time-honored standard best accommodates the OAJC’s recognition that the parties’ relative levels of responsibility should be considered.”

Dougherty, in an opinion concurring with the OAJC, expressed concern that a bright-line rule rendering all unethical fee-splitting agreements unenforceable might actually encourage dishonest attorneys to enter into such agreements knowing they’ll never have to uphold their end of the deal.

Wecht acknowledged that allowing nonlawyer parties to pursue equitable remedies may still not be enough to deter such practices by lawyers.  In response to that anticipated criticism, he made a recommendation similar to Baer’s.

“Courts that encounter such fee-splitting agreements, whether in enforcement pleadings or equity actions, should report the attorneys involved to the Office of Disciplinary Counsel for investigation,” he said.  “Further, in principle, I see no impediment that would bar the Disciplinary Board itself from requiring disgorgement of fees when appropriate.”

SCF’s attorney, George Bochetto of Bochetto & Lentz in Philadelphia, noting that the Supreme Court offered “broad guidance” but left a lot of details to be worked out in the trial courts, said he foresees additional litigation stemming from fee-splitting arrangements.

Billing Misconduct Leads to 2 Year Suspension for Georgia Attorney

December 18, 2017

A recent Law.com, by Mike Scarcella and Kristen Rasmussen, “Barnes & Thornburg Partner Suspended for 2 Years for Billing Misconduct” reports that a Barnes & Thornburg partner in Atlanta who faced possible disbarment for fraudulently billing a corporate client tens of thousands of dollars instead will be suspended for two years, the Georgia Supreme Court says.  John F. Meyers was a Seyfath Shaw labor and employment partner at the time of the professional conduct violations.

John F. Meyers, a member of the Georgia bar since 1983, is a labor and employment partner in Barnes & Thornburg’s Atlanta office.  He joined the firm in 2012 from Seyfarth Shaw.  Barnes & Thornburg removed Meyers’ biography from the firm’s website after the discipline was announced.

Barnes & Thornburg said in a statement: “The conduct underlying the complaint against Mr. Meyers occurred before he joined [the firm].  We are committed to providing the best possible service to our clients and, above all, this includes the highest standards of ethical and professional conduct.”

Meyers, then at Seyfarth Shaw, ran afoul of ethics rules through his relationship with a lawyer named Michael L. DiTano, formerly an in-house counsel at the New Jersey-based manufacturer J.M. Huber Corp.  The privately held company was a client of Seyfarth Shaw, and DiTano was the contact person for the law firm on the account.

DiTano told Meyers that Huber allowed him to do outside legal work—for his own clients—as long as those services were performed on personal time and posed no conflict to the interests of the company, according to the Georgia Supreme Court’s discipline order.

Several Seyfarth Shaw lawyers, including Meyers, beginning in 2011 provided legal services for some of DiTano’s outside, personal clients.  But Seyfarth Shaw ran into trouble trying to collect fees on some matters, the Georgia Supreme Court said.

“When difficulties arose in collecting the fees for those services from the in-house counsel’s personal clients, the amounts due were rolled into the bills sent to the law firm’s corporate client, with the descriptions of the work that had been performed edited to eliminate information that would make clear that the work was not performed directly for the corporate client,” according to the Georgia Supreme Court’s order.

Huber fired DiTano in 2012 after it discovered the billing scheme.  DiTano, who had worked at the company for more than a decade, in 2013 voluntarily surrendered his Georgia bar license.

Meyers, who is also a member of the Florida bar, resigned from Seyfarth Shaw around the time he was confronted about the altered bills that had been submitted to Huber.

In the disciplinary proceeding in Georgia, he denied participating in any scheme to defraud Huber.  Meyers claimed DiTano duped him by saying the billing procedure was acceptable because the services would ultimately benefit Huber.

“Our position is that John Meyers is an honest guy that did what lawyers in that position do,” Meyers’s lawyer, Lester Tate, said during a November 2015 hearing before a special master, David Anthony LaMalva.  “And our defense in this case … is actual innocence.  This is not a technical defense.  This is a case where John had been dealing with an inside general counsel for a long period of time and he did what the inside general counsel told him to do.”

LaMalva found Meyers violated various Georgia bar rules, including one that forbids an attorney from making a material misrepresentation of fact.  LaMalva, finding Meyers complicit in the billing scheme, recommended disbarment.  A review panel later concluded that disbarment was too harsh.  The Georgia Supreme Court agreed.

“This court agrees that a two-year suspension from the practice of law is a sufficient sanction for Meyers’ conduct in this case,” the state justices wrote in their unanimous decision.

Meyers paid Seyfarth Shaw about $95,300—an amount that included improper billings paid by Huber and other bills that the company had not paid, according to the Georgia Supreme Court.

Court Ordered Attorney and Client to Pay Opposing Counsel

November 6, 2017

A recent Daily Business Review story by Samantha Joseph, “Attorney and Client Ordered to Pay Opposing Counsel Over Frivolous Lawsuit,” reports that the litigation in Palm Beach County alone has cost about $4,000, with a mounting legal bill of about $20,000 for the Broward case.  A state appellate court sanctioned Palm Beach attorney Guillermo J. Farinas, holding him personally responsible for half of an attorney fee award against his client.

Florida’s Fourth District Court of Appeal held Farinas and client Joseph Manzaro equally liable for “frivolous and completely meritless” filings in a child custody case that jumped from Broward to Palm Beach County.  It remanded the case to the lower court with instructions to divide the opposing side’s attorneys fees between Farinas and Manzaro, then took the additional step of making an allowance for future litigation expenses.

“If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee,” the court ordered.  It was an unusual sanction, but ethics lawyer Andrew Berman has seen it employed with growing frequency as judges order attorneys to explain why courts shouldn’t sanction them along with their clients.

“Appellate courts have become frustrated with frivolous appeals and motions,” said Berman, senior partner at Young Berman Karpf & Gonzalez in Miami and Fort Lauderdale, who was not involved in the litigation.  “It’s done as a method to dissuade people from taking frivolous positions.”

Court records show Farinas turned to the Palm Beach Circuit in 2016 to file a complaint for relief from a 2012 agreed final order from Broward County, claiming extrinsic fraud and lack of personal jurisdiction.  Litigants typically have a one-year window to seek to set aside an order, with exceptions for fraud, mistakes and other causes under Florida Rule of Civil Procedure 1.540(b).

Farinas’ filings suggest he anticipated two hurdles: a potential deadline impediment and the leap from one county—which still maintained jurisdiction—to another.  To mitigate these, he brought the fraud claim and pitched his Palm Beach filing as an independent action.  But the appellate court rejected both strategies, citing precedent requiring litigants to raise fraud claims in the original court.

“The appellant has had multiple opportunities to raise the issues presented in his complaint to the Broward Circuit Court and, in fact, has done so,” Judge Jeffrey T. Kuntz wrote in a unanimous decision with Judges Carole Taylor and Dorian Damoorgian.  “His attempt at filing a new lawsuit in a different circuit, after those prior attempts were rejected and while other new attempts still remain pending in the Broward Circuit Court, is completely devoid of merit.”