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The Bar's Dirty Little Not-So-Secret Secret: Disciplinary System Discriminates Against Small Firms
posted by myshingle on Friday February 28, @04:56AM
Ethics & Malpractice Issues Carolyn Elefant writes: This month, the ABA Journal picks up the issue of whether bar commissions investigate and sanction solos and small law firms more frequently than their large firm colleagues in Picking on The Little Guy: Perception Lingers that Discipline Falls Hardest on Small Firms by Mark Hansen. Though the author collects a variety of views on the the disparate disclipline issue, ultimately, the article tows the party line that (1) evidence of disparate discipline is inconclusive; (2) to the extent that disparity exists, it can be explained by the fact that solo and small firm practice handles a greater client volume, thus, making them more likely to be targets of client complaints and (3) even if bias does exist, it's unintentional. Finally, the article dispenses the usual pap for solos and small firm lawyers: keep an eye on deadlines, put records and writing, find a mentor and take advantage of the law practice management courses offered by the bar. Enough!

Though hardly a scientific study, over the past few months, we at have monitored cases involving attorney misconduct and here's what we've observed: (1) there are blatant, almost unconscionable examples of situations where bar associations have overlooked misconduct by large firms while pursued small firms with an unexplained vengeance; (2) large firms and small firms alike commit errors and take advantage of clients - but large firm clients sue their former lawyers for breach of fiduciary duty or malpractice while small firm clients, for want of resources, file bar complaints; (3) even where small firms are sued and pay compensation for their wrongs, judges still often refer them to the bar for additional and unnecessary disciplinary action and (4) because clients incur no cost whatsoever to file a complaint, many do so over minor issues which may at best constitute a technical violation of the Code of Professional Responsibility but would not be worth pursuing if there were some cost, even a de minimus amount.

An Egregious Example of Overkill and Underkill

Admittedly, the following two examples are anectodal. But as the saying goes, just because you're paranoid doesn't mean someone isn't watching you and just because an example is an anectode doesn't render it devoid of value. In one case described in a previous post , the Missouri court, at the recommendation of bar counsel, suspended the licenses of two small firm attorneys for a minimum of one year because the attorneys had sued a former client of the large law firm where they had worked prior to going out on their own. Prior to the disciplinary action, the client, a large corporation had successfully sued the attorneys for breach of fiduciary duty and misuse of confidential information, recovering a judgment in excess of $800,000 which the attorneys paid. A one year suspension AFTER the attorneys had already paid more than $800,000 seems overly harsh and it's a result that we could only explain by the fact that the attorneys were small firm practitioners.

On the other end of the spectrum, we described in another post that attorneys from a large law firm (Jones, Day) had hacked into the website of an expert witness retained by opposing counsel. The expert subsequently filed complaints with the bar against the firm but according to the article, the complaints were dismissed. So, based on this albeit anectodal evidence, a large firm lawyer can engage in not just unethical but illegal activity without sanction while a small firm lawyers must pay twice - an $800,000 judgment and with their careers - for violating ethics rules on conflict of interest in a situation where the clients had the resources to adequately protect themselves. If this isn't disparate treatment, we don't know what is.

Everyone Makes Mistakes But Large Firms Get Sued, Small Firms Get Sanctioned

Large firm lawyers are as prone to error, client conflicts and generally unethical conduct as small firm lawyers. Case in point: the conduct of the large firms in the Enron fiasco, were Enron's large firm attorneys at minimum turned a blind eye to their cient's fraudulent activities or tried to assist in concealing it as described in this article on shareholder actions against Enron's law firms. But whereas small firm clients get even by bringing complaints of misconduct or poor service to the bar, large firm clients who get mad get their money back through civil lawsuits for legal malpractice or breach of fiduciary duty - causes of action that mirror the ethics code's proscriptions against incompetent representation or conflict of interest.

Just in the past month, we've uncovered two such lawsuits against large firms. The first, described in this article from the New York Law Journal (posted at 2//03) describes a malpractice suit against Proskauer, Rose, a large New York firm for negligently preparing and improperly filing a copyright infringement action. The article reports that the firm filed suit in the Southern District of New York, only to have the action dismissed for deficiencies that a smart first year law student would have recognized: the judge found that the defendants lacked adequate contacts with the selected forum, that the plaintiff had no standing to sue and failed to join necessary parties. Two weeks after the dismissal, Proskauer withdrew from the case. Following Proskauer's withdrawal, the judge assessed $135,000 in prevailing party fees against Proskauer's former client. In the malpractice suit, Proskauer tried to disclaim responsibility for the fees claiming that it no longer represented its former client at the time the fees were assessed. But the judge would not buy Proskauer's efforts to "shift the blame" for the award to the client's new attorney:

"[H]owever, it cannot be forgotten that Proskauer was the first attorney to unsuccessfully present plaintiff's arguments on the issues of standing, joinder of parties and proper forum on the motion to dismiss the federal action.
Were Proskauer a small firm or solo, we have no doubt that it would have faced discliplinary action for inadequate representation, possibly negligent supervision (no doubt, there's some low level flunky at the firm who will take the rap) and failure to accept its responsibility for the fees assessed its clients (the bar hates unapologetic lawyers). But we doubt that Proskauer would face similar action.

Another example of clients essentially taking the disciplinary process into their own hands comes from this article (from New York Law Journal, posted at 2/6/03), describing a lawsuit against Pennie and Edmonds by former clients for legal malpractice and breach of fiduciary duty. The judge allowed the case to proceed, finding that suit involved a question of whether the firm violated its ethical obligations by representing its clients, a university and two pharmaceutical companies at the same time in related matters. Again, notwithstanding the folly of representing two clients against each other without apparently disclosing the conflict, Pennie and Edmonds will likely never be subject to a bar complaint.

As these cases show, the ability of large firm clients to finance lawsuits against large firms essentially removes those cases from the bar's jurisdiction and and confines the charges of ethical violations and concommitant penalty to the judicial process. Now, while being sued is no fun, assuming one carries malpractice insurance, a civil suit is far preferable to a full blown bar complaint if only because a law firm can settle the case and bring it to an end. By contrast, once a client brings a complaint to a bar commission, the bar is free to undertaken an investigation and prosecution - even if the client and the lawyer resolve their differences and the client agrees to withdraw the complaint.

Even Where Small Firms Get Sued, They Still May Get Sanctioned

Of course, even in instances where small firm clients do sue their lawyers, they're still not shielded from referrals to the bar commission, often by the judges who presided over the clients' lawsuit. Such was the fate of the Missouri attorneys mentioned earlier, who suffered both an $800,000 judgment and a year's suspension for suing a client of their former employer. Two Florida attorneys narrowly escaped a similar fate as we described in this earlier post . A judge dismissed a lawsuit against filed by Florida attorneys, deeming the suit frivolous and "one of the worst examples of lawyering." The judge ordered the attorneys to pay the other side's legal fees which amounted to $200,000. The complaint was then referred to the bar (the judge denied having done so) and subsequently dismissed.

Once a law firm has been penalized by the court and made amends for its violations to its clients, there's no need for the bar to interpose itself and render a second sanction. But that does happen, and apparently, more often than not in cases involving small firms and solos.

No Cost To Filing A Complaint Gives Clients Incentive To File For Any Reason

Of course, one final reason for the multiple complaints that many lawyers face before bar commissions is the low barrier to filing one in the first instance. It costs a disgruntled client nothing, save the cost of a stamp to fire off a complaint against a former attorney. And once a complaint is filed - no matter how ludicrous or unfounded, bar counsel will open a file and force an attorney to respond.

Now, we recognize that there are plenty of lousy attorneys out there - you know, ranging from the ones who collect large retainers and never return phone calls to those who dip into client trust funds to pay bills. And we're not arguing that these attorneys shouldn't face some oversight or that clients should not have readily available recourse for an attorney's poor service. But if the bar were to impose some de minimus filing fee - even $15.00 or $25.00, (with some allowances for in forma pauperis fee waivers) a client with would think a little harder - and have more vested - before taking the time to file a complaint against an attorney. Moreover, the bar should offer arbitration (which would not "count" as a disciplinary action) for not just straightforward fee cases (e.g., a client claim that attorney was overpaid) but also for charges of poor service (e.g., failure to keep client appraised of case status or return phone calls) - for which the relief might be a negotiated refund on fees or lower percentage cut of a contingency award. After all, in most cases (except those involving egregious conduct or crimes of "moral turpitude"), clients simply want their money back. Finally, for trust account related issues or audits (a problem which large firms really don't face because clients rarely advance large fees), at least for a first offense, the bar should require a showing of actual harm to a client prior to disciplining an attorney for what are often simple accounting errors.

Even if the disparity in disclipline between large firms and small firms happens to be a product of the nature of their respective practices or the differences in their respective clients' ability to seek self-help for poor service court, the Bar's refusal to acknowlege that these disparities do in fact exist prevents development of solutions that will address problems with attorney performance across the board and not just in certain sectors. Foisting CLE requirements or practice management classes on solos and small firm attorneys (the majority of whom are as concientious as our large firm colleagues) may make the bars feel good, but it places a disproportionate burden on solo and small firm practitioners and frankly, the implication that we need help makes solos and small firms look bad. And that's not right.

Editor's Note - Read our short follow up pieces on the Enron Exemption from bar disciplinary action and Yet Another Example of Disparate Enforcement....]

Surely One Could Depart the Bench More Gracefully | Disparate Disciplinary Systems Follow Up - The Enron Exemption  >


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