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Commonwealth of Massachusetts

NO. BD-2010-093

IN RE: WAYNE R. MURPHY

S.J.C. Order of Term Suspension entered by Justice Gants on October 20, 2010, with an effective date of November 19, 2010.1

SUMMARY2

The respondent was admitted to the Bar of the Commonwealth on December 20, 1990. In Matter of Murphy, 23 Mass. Att’y Disc. R. 491 (2007), the respondent received a public reprimand for lack of diligence, failing to inform clients that their case had been dismissed, failing to withdraw promptly after being discharged, and failing to deliver the clients’ files to successor counsel.

In about 2001, the respondent represented an investment advisory business as well as its principal. He was paid a quarterly retainer to ensure his availability.

In November 2004, a life insurance company filed a complaint in U.S. District Court in Massachusetts against the business, the principal as trustee of the business’s profit-sharing plan, an employee of the business who was an agent for the life insurance company, and a former employee of the business who had applied for and received second-to-die life insurance policies on his life and the life of his wife in the amount of $22,000,000 (the insured) naming the profit-sharing plan as beneficiary. The insurance company sought a declaratory judgment that the life insurance policies had been properly rescinded and requested disgorgement of the commission paid to the employee-agent.

On January 12, 2005, the respondent entered into a new retainer agreement with the client. Among other things, the respondent agreed to serve as general counsel to the business, the principal, and to the principal’s other businesses and to represent the principal and her employees in the pending litigation brought by the insurance company in federal court.

On February 9, 2005, the insured filed an answer in the federal action agreeing to rescission of the insurance policy and a cross-claim against the profit- sharing plan, the principal as trustee of the plan, and the agent/employee. The cross-complaint alleged failure of the business to pay all of his salary, breach of contract, and conversion of his funds in the profit-sharing plan. The former employee’s attorney served the respondent with a copy of the cross-complaint.

In March 2005, the respondent filed an answer to the complaint but he did not file an answer to the insured’s cross-claim. On May 17, 2005, the insured filed and served on the respondent a motion for default against the respondent’s clients for their failure to answer the cross-claim. The respondent took no action of substance to oppose the motion, and default was entered on June 28, 2005.

On August 4, 2005, the insured filed and served on the respondent a motion for default judgment supported by an affidavit claiming damages in the amount of $938,640. The respondent did not oppose this motion, and it was allowed on August 18, 2005, with judgment entering against the three cross-claim defendants jointly and severally in the amount of $938,640.

Between August 18, 2005, and January 2006, the respondent took no action to vacate or oppose the default judgment against his clients. On January 6, 2006, the insured filed and served on the respondent a motion for entry of a separate and final judgment against the respondent’s clients. On January 10, 2006, the respondent filed an opposition and a motion to vacate the default judgment. On January 10, 2006, the court denied the motion to vacate without prejudice to its being renewed with supporting affidavits.

On January 25, 2006, the respondent filed an opposition supported by an affidavit in which the respondent represented that he had prepared an answer to the former employee’s cross-claim, that he mailed the answer to the court, that he had his office contact the court when his clients informed him that they had received notice of default, and that the clerk’s office informed his office that an answer to the cross-claim had been filed. The respondent knew when he filed this affidavit that he had never filed an answer to the cross-claim.

On January 26, 2006, the court granted summary judgment to the insurance company, ordered rescission of the life insurance policies, and held the employee/agent liable for the commission he had received. The court also denied the respondent’s motion to set aside the default judgment and entered judgment by default against the respondent’s clients, holding them jointly and severally liable on the cross-complaint in the amount of $938,640.

The respondent filed a timely notice of appeal from the judgment entered against his clients. On March 3, 2006, the insured filed and served on the respondent a proposed execution against the principal in her individual capacity instead of her capacity as trustee of the profit-sharing plan. The respondent understood that execution was proposed against the principal in her individual capacity, but he did nothing to correct, amend, or oppose the execution.

On November 9, 2006, the First Circuit Court of Appeals affirmed entry of the judgment, ruling that the cross-claim defendants had failed to establish excusable neglect for failing to answer the cross-complaint. The principal and her employee discharged the respondent as their attorney on December 20, 2006. In 2010, the respondent entered into an agreement with the insured to satisfy the judgment against the clients in return for the insured’s release of the clients.

The respondent’s lack of diligence, competence, and preparation in representing his clients and his failure to seek their lawful objectives violated Mass. R. Prof. C. 1.1, 1.2(a), and 1.3. By filing a false affidavit, the respondent violated Mass. R. Prof. C. 8.4(c), (d), and (h).

In a second matter, the respondent was administratively suspended from the practice of law on October 7, 2004, for failing to provide to bar counsel information requested in the course of an investigation. The order of administrative suspension immediately suspended the respondent from the practice of law and prohibited him from accepting fees for legal services while he was administratively suspended. The order also provided that the respondent was required to comply with S.J.C. Rule 401, § 17, in full if he was not reinstated within thirty days.

On October 28, 2004, the principal of the investment advisory business sent the respondent a check in payment of his quarterly retainer for the period from October 1 through December 31, 2004. The respondent did not inform her of his administrative suspension or return the unearned portion of the fee.

On December 23, 2004, the respondent filed in the Supreme Judicial Court for Suffolk County and the Office of Bar Counsel an affidavit of compliance in which he intentionally misrepresented that he had complied with the order of administrative suspension by sending written notice of his suspension to all of his clients and refunding any part of fees he had been paid in advance that he had not earned. The court reinstated the respondent from his administrative suspension on December 24, 2004.

The respondent’s failure to refund the unearned portion of the retainer violated S.J.C. Rule 4:01, § 17(f), and Mass. R. Prof. C. 3.4(c), and 8.4(d) and (h). By filing a false affidavit of compliance, the respondent violated Mass. R. Prof. C. 8.4(c), (d), and (h).

In a third matter, the respondent borrowed $35,000 from the principal of the investment advisory business in December 2004 on what he told her would be a short-term loan. The $35,000 loan agreement between the respondent and his client was not fair and reasonable to the client. The respondent provided no security to assure his repayment of the loan, he did not propose to pay any interest on the loan, and he did not sign a promissory note. The respondent also did not reduce the terms of the loan transaction to writing, and the client did not consent in writing to the loan transaction. The respondent’s loan transaction with the client violated Mass. R. Prof. C. 1.8(a).

The respondent did not repay the loan as promised. At the respondent’s request, the client recouped the loan by deducting a portion of the retainer paid to him each quarter until the loan was repaid in full.

This matter came before the Board of Bar Overseers on a stipulation of facts and disciplinary violations and a joint recommendation for a suspension from the practice of law for one year and one day. On September 13, 2010, the Board voted to accept the stipulation and recommend the agreed-upon disposition to the Supreme Judicial Court.

On October 20, 2010, the Supreme Judicial Court for Suffolk County ordered that the respondent, Wayne R. Murphy, be suspended from the practice of law for one year and one day. The county court denied the respondent’s motion to stay the effective date of the suspension until November 30, 2010, so that he could conclude pending cases.


FOOTNOTES:

1 The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

2 Compiled by the Board of Bar Overseers based on the record filed with the Supreme Judicial Court.



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