Lawyers can get into significant amounts of ethical trouble over money issues. They can put their licenses at real risk by messing up their trust accounting obligations, they can get in trouble for overbilling clients, and, often, if they end up suing a client for failure to pay bills that are appropriately due, they will get a counterclaim for legal malpractice filed in response.
Over the last week, two items popped up on the radar screen that demonstrate even more ways that lawyers can run afoul of the ethics rules on topics involving money.
The first is a classic example of things that lawyers cannot do – because of the dishonesty involved – even if the end result is that their clients are not actually harmed by what transpired.
This story involves a lawyer in Pennsylvania who has been suspended for four years for making payments from his own personal funds to clients and misleading them about the outcomes of the handling of their matters. As happens pretty frequently, I saw this story thanks to an ABA Journal online article, but here is a link to the full order of the Pennsylvania Supreme Court which really comes about by way of a consent agreement for the level of discipline.
Interestingly, as far as these things go, his suspension was made retroactive all the way back to February 25, 2016 when the lawyer was temporarily suspended on an emergency basis over the misconduct. So, by the time the ultimately suspension order was issued, he has already served the full amount of the suspension and can, presumably, seek reinstatement in Pennsylvania.
More interestingly, his downfall came about as a result of falling down, quite literally. He experienced a vasovagal syncope and collapsed in such a way that he broke his face very severely. While hospitalized, others at his firm tried to cover on his matters and learned of what the lawyer had been doing.
As the filings with the Pennsylvania court detail, what he had been doing was paying clients out of pocket on their cases and telling him that these were settlements obtained for them in their cases, when, in reality, he had failed to file their matters. (There were even more clients identified where he was stringing them along about the status but had not yet gotten to the point of paying them.)
There were, as you might expect, lots of other deceptions the lawyer had to engage in to cover up the trail of what he was doing. The filings also lay out that, as often is the case when something like this takes place, the lawyer’s conduct came along despite a clean prior disciplinary history after he began experiencing problems of anxiety and depression. And that aspect of the tale makes it a little easier to attempt to be sympathetic, right up until you focus on the amounts involved.
The amounts involved amounted to in excess of $500,000, including a $424,000 payment to one of the four clients. Yes, you read those numbers right.
If I happened to have a half a million lying around that I could easily part with, I’m pretty confident I would not still be practicing law in the first place.
Shifting to the related topic that is easier to invoke sympathy, one of the things that the ethics rules in nearly every jurisdiction do is bar lawyers from providing funds to clients in order to help those clients meet their day-to-day needs. Instead, the only things that lawyers can do by way of advancing expenses to clients for which no repayment would be required is if the expenses are litigation expenses related to a matter the lawyer is handling for the client.
Last week, in connection with its first ever virtual annual meeting, the ABA House of Delegates was reportedly going to consider a resolution revising Model Rule 1.8(e) to allow for a “humanitarian” exception to this ethical prohibition. A proposal was recently enacted in New York to do likewise. I thought I had read somewhere that the ABA proposal had passed, but I cannot find anywhere online to confirm that. The resolution and report that was to be considered can be obtained from the download button link below.
Historically, the primary concern (as I understand it) that has always driven this prohibition is that, without it, deep pocketed lawyers would be able to obtain business simply by being able to pay clients directly to keep their cases.
Given the continued economic struggles being created as the pandemic rages on, it will be interesting to see what sort of traction, if any, such measures get moving forward.