2010: The Year in Ethics and Bar Discipline
Constance V. Vecchione, Bar Counsel, January 2011
With this column, the Office of Bar Counsel offers its annual year-end review of significant developments in ethics and bar discipline
The full bench of the Supreme Judicial Court issued seven disciplinary decisions in 2010, and another 164 decisions or orders were entered by either the single justices or the Board of Bar Overseers. Several nondisciplinary cases by the appellate courts also addressed ethics-related issues. Finally, substantial changes to the provisions of Mass. R. Prof. C. 1.5 on fee agreements take effect on March 15, 2011. Several of the noteworthy decisions by the Board and the courts, as well as the changes to Rule 1.5, are described below.
Trust account record keeping
A decision with important ramifications for all lawyers, Matter of Murray, 455 Mass. 872 (2010), prospectively creates a rebuttable presumption that a lawyer who receives cash in trust, does not deposit the funds to a trust account, and cannot account for its disposition has converted the funds and deprived the owner permanently. In Murray, the lawyer had received cash taken from an elderly client’s home. He failed to document the amount of cash received, did not deposit the funds to a trust account, and did not maintain adequate records of disbursement. Although the lawyer was suspended for six months, the future sanction will be indefinite suspension or disbarment unless the lawyer rebuts the presumption.
Two SJC decisions illustrated both the function and limits of conditions imposed as a prerequisite to reinstatement from suspension or disbarment. In Matter of Nicholas J. Ellis, 457 Mass. 413 (2010), the full bench reinstated a disbarred attorney who had shown rehabilitation, with an array of conditions including a prohibition on practicing with family members or other members of his former firm. By contrast, in Matter of Shyavitz, 26 Mass. Att'y Disc. R. __(10/18/10), the single justice rejected reinstatement conditions including that the attorney not be permitted to hold trust funds for five years. The single justice remanded the case to the Board, questioning whether reinstatement would have been recommended without this condition. The Board then voted to recommend that the petition for reinstatement be denied, and the matter returned to the county court. The single justice held that the conditions initially recommended by the Board in Shyavitz indicated that the attorney could not be trusted under any circumstances to protect the interests of clients, while the Ellis conditions suggest only that Ellis is “vulnerable to being led astray by other members of his family but do not suggest that he is unworthy of trust if he is freed from their influence.”
Mortgage fraud and rescue schemes yielded three bar discipline cases in 2010: Matter of Hanserd, 26 Mass. Att'y Disc. R. __(2/23/10); Matter of Foley, 26 Mass. Att'y Disc. R. __(2/27/10); and Matter of Coppo, 26 Mass. Att'y Disc. R. __(9/30/10). Among other violations, the lawyers in each of these cases provided false HUD-1 settlement statements to the lenders. Coppo and Foley received suspensions of 18 months; Hanserd was suspended for a year and a day in light of mitigating factors. One other mortgage fraud discipline case, Matter of Alberino, SJC no. BD-2010-121, is currently pending before the SJC.
Unauthorized practice of law
Three very different decisions, two disciplinary and one civil, highlighted issues involving the unauthorized practice of law. In Matter of Hrones, 457 Mass. 844 (2010), the SJC suspended a lawyer for a year and a day for facilitating the work of a paralegal who was conducting an unsupervised employment discrimination practice within the lawyer’s office, with resulting harm to clients. Although the lawyer argued that he had simply failed to supervise the paralegal adequately, the court found that the lawyer had assisted the paralegal in the unauthorized practice of law because the paralegal’s activities included “determining fee arrangements and executing fee agreements, counselling clients about their legal rights, drafting and filing pleadings, conducting discovery, negotiating settlements, and deciding whether and when to remove cases from the MCAD or EEOC for filing in State or Federal court.”
In Matter of Shanahan, 26 Mass. Att'y Disc. R. __(3/9/10), a single justice of the SJC determined that a suspended lawyer’s representation of clients before local planning and zoning boards constituted unauthorized practice of law, even though nonlawyers (such as architects or engineers) frequently appear as representatives in such proceedings. “An activity that may not constitute practicing law when performed by another category of professional may well become the practice of law when a lawyer, disbarred or not, performs it.” The court extended the lawyer’s suspension by three years pursuant to Supreme Judicial Court Rule 4:01, § 17(8).
In the civil case, Real Estate Bar Association v. National Real Estate Information Services, 608 F.3rd 110 (1st Cir. 2010), the United States Court of Appeals for the First Circuit vacated an earlier decision against REBA by the U.S. District Court. REBA had brought suit in state court against NREIS, claiming that NREIS’s provision of real estate settlement services and its business as a title insurance agent constituted the unauthorized practice of law under Mass. Gen. Laws c. 221, §§ 46 and 46A.
NREIS removed the case to federal district court on diversity grounds. The district court, interpreting such sparse state case law as existed, found that the practices at issue did not constitute the unauthorized practice of law and entered judgment against REBA. The district court also found for NREIS on its counterclaim alleging that REBA’s bringing of the lawsuit in state court violated the dormant Commerce Clause of the U.S. Constitution. The Court of Appeals vacated the finding for NREIS on its counterclaim and certified two questions to the Supreme Judicial Court:
The matter was argued in the SJC this fall and a decision is pending.
- Whether NREIS’s activities, either in whole or in part, constitute the unauthorized practice of law
- Whether NREIS’s activities, in contracting with Massachusetts attorneys to attend closings, constitute the unauthorized practice of law.
In addition to the REBA case, two other nondisciplinary decisions raising ethics issues (one civil by the Massachusetts Appeals Court and one criminal by the SJC) involved the obligations of escrow agents and prosecutors, respectively.
NRT New England, Inc. v. Moncure, 78 Mass. App. Ct. 397 (2010), concerned the scope of an escrow agent’s fiduciary obligations. After the buyer in a purchase and sale agreement failed to close on the purchase of the property, the plaintiff real estate broker filed an action against the seller, claiming an interest in the deposit based on an assignment in an unrelated matter from the would-be buyer. Quoting from a bar discipline decision, Matter of the Discipline of Two Attorneys, 421 Mass. 619, 628-629 (1996), the Appeals Court held that “‘self-dealing by an escrow holder, such as an escrow holder’s unauthorized collection from escrowed funds of a debt owed by a party to the escrow agreement, would be a breach of duty.’” (Emphasis in original). The court affirmed the superior court decision awarding damages (the deposit) trebled under Mass. Gen. Laws c.93A, § 11, plus attorneys’ fees.
In Commonwealth v. Miranda, 458 Mass. 100 (2010), two witnesses were paid a reward by a chamber of commerce pursuant to a program that awarded $3000 upon indictment and an additional $2000 upon conviction. Payments under the program were conditioned, however, upon receipt of letters provided by prosecutor’s office verifying that the information from the witness led to indictment, conviction or both. The SJC rejected the due process violation but exercised its superintendency authority to hold that “prosecutors in the future may not provide (or participate in providing) monetary awards to witnesses contingent on a defendant’s conviction.” The court declined to decide whether the prosecutor’s involvement in the program violated Mass. R. Prof. C. 3.4(g) but “expressly disapproved” a prosecutor’s involvement in a reward program contingent upon conviction.
Changes to Mass. R. Prof. C. 1.5
On December 22, 2010, the SJC issued an order making extensive substantive amendments to the text and comments of Mass. R. Prof. C. 1.5. The amendments take effect March 15, 2011 and incorporate the court’s directives in Malonis v. Harrington, 442 Mass. 692 (2004), Saggese v. Kelley, 445 Mass. 434 (2005), Liss v. Studeny, 450 Mass. 473 (2008), and Matter of an Attorney, 451 Mass. 131 (2008). Bar counsel will write a comprehensive article describing the revisions to the amended rule before it goes into effect, but in the interim, some of the important changes are as follows.
First, Rule 1.5(e), which concerns division of fees between lawyers not in the same firm, has been modified to include referral fees explicitly and to codify the holding in Saggese that, at or before the time that the lawyer and client enter into the fee agreement, the client must consent in writing to the division of the fee. The requirement remains that the total fee must also be reasonable.
Second, Rule 1.5(c) on contingent fees adds two new sections, 1.5(c)(7) and 1.5(c)(8). If the lawyer intends to pursue a claim against the client for fees or expenses when the attorney-client relationship is terminated before the conclusion of the contingent fee case, then the contingent fee agreement has to state the basis on which fees and expenses will be claimed and the method by which they will be calculated. If a lawyer is the successor to counsel who was terminated before the conclusion of the case, then the fee agreement must state who— the client or successor counsel— is liable to pay the fees and expenses of prior counsel. An additional amendment to Rule 1.5(c) also requires the lawyer to provide the client with a written itemized statement of services rendered and expenses incurred within twenty days after demand by the client at any time prior to the occurrence of the contingency.
Finally, Rule 1.5(f) as amended includes two alternative forms for contingent fee agreements, with instructions for their use in Rule 1.5(f)(1)-(3). Form A is intended to be a client-friendly, off-the-shelf version that may be used by attorneys without any special explanations to the client. Form B contains options in paragraphs 3 and 7 that require an explanation to the client and a specific designation by the client of his or her selection. To assure that the client is given a choice, attorneys using Form B are required to include both alternatives in paragraph 3 and, where applicable, paragraph 7, in order that the client will see and can question the alternative selected. Per Rule 1.5(f)(4), however, the requirements of subsections f(1)-(3) do not apply to organizational clients.
The full text of the bar discipline decisions, summaries of important cases, and other news and events relating to the rules of professional conduct or the disciplinary process are found at the Office of Bar Counsel website, www.mass.gov/obcbbo. Stay up to date with changes and have a happy new year.
© 2006. Board of Bar Overseers. Office of Bar Counsel. All rights reserved.