AVOIDING MALPRACTICE AND DISCIPLINE
JAMES G. BOGLE, JR.
Senior Assistant Attorney General
P. O. Box 11549, Columbia SC 29211
V: 803.734-3970
F: 803.734-6679
jbogle@scag.gov
CONTENTS
I. General Procedure in Disciplinary Investigations and Hearings.
II. A Review of Ethical Infractions.
III. Real Estate Closings and Flips.
IV. Social Media and Civility.
V. Flat or Advance fees and retainers
VI. Mental Health Issues as a Defense to Attorney Misconduct
I.
1
17
58
65
80
83
General Procedure in Disciplinary Investigations and Hearings:
A.
The Rules for Lawyer Disciplinary Enforcement, effective January 1,
1997, and found at Rule 413 of the South Carolina Appellate Court Rules
(SCACR), govern the procedure for investigations. They establish the
Commission on Lawyer Conduct and the Office of Disciplinary Counsel
(ODC).
The Supreme Court, effective January 1, 2010, adopted
substantial amendments to Rule 413.
B.
Disciplinary Counsel, Rule 5 of Rule 413:
1.
Disciplinary Counsel screens complaints, refers them to other
agencies when appropriate, conducts preliminary investigations,
and recommends to an Investigative Panel of the Commission and
conducts investigations, and prosecutes formal charges.
1
2.
The Supreme Court may appoint additional active members of the
South Carolina Bar to assist Disciplinary Counsel.
C.
Grounds for Discipline, Sanctions Imposed, Deferred Discipline:
1.
Grounds for discipline, Rule 7(a):
a.
Violate or attempt to violate the Rules of Professional
Conduct, Rule 407, SCACR, or any other rules of this
jurisdiction regarding professional conduct of lawyers. For
conduct prior to September 1, 1990, the Code of
Professional Responsibility, found at former Rule 32 of the
Supreme Court, applies. There is no statute of limitations
in South Carolina for attorney misconduct.
b.
Engage in conduct violating the applicable Rules of
Professional Conduct of another jurisdiction.
c.
Willfully violate a valid Order of the Supreme Court,
Commission
on
Lawyer
Conduct,
Panels
of
the
Commission in a proceeding under these Rules, willfully
fail to appear personally as directed, willfully fail to
comply with a subpoena issued under these Rules, or
knowingly fail to respond to a lawful demand from a
disciplinary authority to include a request for a response or
appearance under Rules 19(b), (c)(1) or (c)(3).
d.
Be convicted of a crime of moral turpitude or a “serious
crime,” as defined in Rule 2 of Rule 413, SCACR.
2
e.
Engage in conduct tending to pollute the administration of
justice or to bring the courts into disrepute or conduct
demonstrating an unfitness to practice law.
f.
Violate the oath of office taken to practice law in this state
and contained in Rule 402(k), SCACR.
g.
Willfully violate a valid court order issued by a court of
this state or of another jurisdiction.
h.
Employ a person in violation of Rule 34 (a lawyer who has
been disbarred, suspended or transferred to incapacity
inactive status), of Rule 413, SCACR.
i.
Willfully fail to comply with the terms of a finally accepted
deferred disciplinary agreement or any terms of a finally
accepted Agreement for Discipline by Consent.
j.
Willfully fail to comply with a final decision of the
Resolution of Fee Disputes Board.
2.
Rule 19 covers screening and investigations. Disciplinary Counsel
may receive a complaint from any source, and if the information
contained therein raises allegations that would constitute attorney
misconduct if true, Disciplinary Counsel shall conduct an
investigation.
3.
Rule 19(c) addresses a notice of investigation. It requires that the
notice contain a statement of allegations being investigated, and
the rules allegedly violated, with the provision that the
3
investigation can be expanded if appropriate. The lawyer is
required to respond within 15; the lawyer has an opportunity to
meet with Disciplinary Counsel. The name of the complainant, is
disclosed unless an Investigative Panel determines that there is
good cause to withhold that information.
4.
Rule 19(c)(3) allows Disciplinary Counsel or the lawyer to request
that the lawyer appear before Disciplinary Counsel to respond to
questions.
The appearance shall be on the record, and the
testimony under oath or affirmation.
5.
Rule 34 prohibits a lawyer who has been disbarred, suspended, or
transferred to incapacity inactive status from being employed by a
member of the South Carolina Bar as a paralegal, investigator, or
any other capacity connected with the practice of law. In addition,
a lawyer who is disbarred, suspended or transferred to incapacity
inactive status shall not serve as an arbitrator, mediator, or thirdparty neutral in any Alternative Dispute Resolution proceeding in
this state, nor shall any member of the South Carolina Bar directly
or indirectly employ such a lawyer in such a proceeding. See,
Matter of Bilbro, 325 S.C. 146, 480 S.E.2d 451 (1997), where the
Respondent employed an attorney who had been suspended from
practice by the Supreme Court.
In an earlier proceeding, that
attorney had been held in contempt for practicing law while under
suspension.
4
6.
Sanctions, Rule 7(b):
(a) Disbarment, (b) Suspension for a
definite period of time not to exceed three years (replaces the preJanuary 1, 2010 Indefinite Suspension, and Definite Suspension up
to two years), (c) Public Reprimand, (d) (Confidential)
Admonition, provided that an Admonition may be used in
subsequent proceedings as evidence of prior misconduct solely
upon the issue of sanction, (e) Restitution to persons finically
injured, repayment of unearned or inequitable attorney’s fees, and
reimbursement to the Lawyers’ Fund for Client Protection, (f)
Assessment of the costs of the disciplinary proceeding, including
the services of the court reporter, (g) Assessment of a fine, (h)
Limitations on the nature and extent of the lawyer’s future
practice; and (i) Any other sanction or requirement the Supreme
Court may determine is appropriate.
7.
The burden of proof to establish attorney misconduct is clear and
convincing evidence (Rule 8).
8.
Letter of Caution, Rule 2(r):
a.
A Letter of Caution is “a written caution or warning about
past or future conduct issued when it is determined that no
misconduct has been committed, or that only minor
misconduct not warranting imposition of a sanction has
been committed.” A Letter of Caution may be issued by
Disciplinary Counsel, an Investigative Panel, or the Court.
5
It is not a form of discipline, and does not constitute a
finding of misconduct unless the letter specifically states
that misconduct has been committed. A Letter of Caution
shall not be considered in subsequent proceedings unless it
is relevant to the misconduct alleged.
9.
Deferred Discipline Agreement, Rule 2(h): A confidential
agreement between the lawyer and an Investigative Panel for the
lawyer to undergo treatment, participate in CLE, or take other
corrective action. It is only available for minor misconduct that
can be addressed through treatment or a rehabilitation program. It
can only be entered into prior to the filing and service of Formal
Charges. For a public reprimand issued for, among other things,
violating a deferred discipline agreement, see Matter of Allen, 366
S.C. 174, 621 S.E.2d 356 (2005).
D.
Lawyers Charged With or Convicted of a Crime, Rule 16.
1.
Clerks of all courts are required to transmit a certified copy of any
indictment, information or complaint charging a lawyer with a
crime, to Disciplinary Counsel within ten days of the filing of such
document.
In addition, Clerks are required to transmit to
Disciplinary Counsel a certified copy of the judgment of
conviction within ten days after conviction. And by order dated
June 28, 2010, Rule 8.3 of the Rules of Professional Conduct was
amended to require lawyers to report to the Commission on
6
Lawyer Conduct within 15 days when they are charged (by arrest
warrant, indictment, information or complaint) with a “Serious
Crime.”
2.
“Serious Crime” is defined at Rule 2(aa): “Any felony; any lesser
crime
that
reflects
adversely
on
the
lawyer’s
honesty,
trustworthiness, or fitness as a lawyer in other respects; or, any
crime a necessary element of which, as determined by the statutory
or common law definition of the crime, involves interference with
the administration of justice, false swearing, misrepresentation,
fraud, deceit, bribery, extortion, misappropriation, theft, willful
failure to file income tax returns, or an attempt, conspiracy or
solicitation of another to commit a serious crime.”
3.
If Disciplinary Counsel determines that the crime is a serious crime
she shall seek an Interim Suspension under Rule 17(a). Other
crimes shall be processed in the same manner as any other
information coming to the attention of the Commission.
4.
The Supreme Court may place a lawyer on Interim Suspension
upon notice of the filing of an indictment, information or
complaint charging the lawyer with a serious crime. Matter of
Nelson, 326 S.C. 262, 486 S.E.2d 97 (1997). The practice has
generally been to wait for an indictment, but if an arrest warrant is
detailed or the crime is serious enough, the Court has suspended
based on that warrant, see Matter of Ervin, 383 S.C. 59, 678 S.E.2d
7
405 (2008) (interim suspension for arrest for pointing and
presenting a firearm, a felony, in a “road rage” incident). The
Court shall immediately place a lawyer on Interim Suspension
upon conviction of a serious crime. Matter of Yarborough, 483
S.E.2d 473 (S.C. 1997). The fact that sentencing may be delayed,
or an appeal taken, shall not prevent the Court from imposing an
Interim Suspension. A lawyer placed on Interim Suspension may
apply to the Court for reconsideration of the order. The order of
Interim Suspension shall be public. Rule 17.
5.
A Panel Hearing based on a criminal conviction is not held until
all direct appeals are exhausted. A certified copy of the judgment
of conviction constitutes conclusive evidence that the lawyer
committed the crime, and the sole issue in any disciplinary
proceedings based upon such a conviction shall be the nature and
extent of discipline to be imposed. An acquittal, a dismissal, or
reversal or vacating of a conviction shall not automatically
terminate any proceeding pending against the lawyer, and the
Commission may proceed on the basis of the available evidence
other than the charge or the conviction. See, Rules 16(d) and (e).
E.
Discipline by Consent, Rule 21:
1.
At any stage in the proceedings, the lawyer and the prosecutor may
agree to the imposition of a stated sanction in exchange for an
admission of any or all of the allegations of misconduct. If an
8
Agreement is entered into after the filing of Formal Charges, then
it shall admit or deny allegations contained in the Formal Charges.
If it is agreed to before filing of Formal Charges, it shall contain
the specific factual allegations which the lawyer admits, as well as
applicable provisions of the Rules of Professional Conduct the
lawyer has violated. It must be signed by Disciplinary Counsel,
the lawyer, and, if applicable, his or her counsel. The signature of
a lawyer’s counsel shall indicate counsel has advised the lawyer
regarding the Agreement and believes the lawyer is voluntarily
entering into it. An Affidavit shall also be provided stating that the
lawyer consents to the sanction, the consent is voluntarily given,
and the matters admitted in the Agreement and the facts stated in
the Affidavit are true.
a.
The Agreement and Affidavit shall be submitted to an
Investigative Panel if Formal Charges have not been filed,
or to a Hearing Panel if Formal Charges have been filed.
The Panel shall either reject it, or submit it to the Supreme
Court if it determines it should be accepted. The Court
may then either reject the Agreement or issue a decision
disciplining the lawyer based upon the Agreement. If the
Agreement is rejected by the Panel or the Court, the
proceedings shall continue. The rejected Agreement and
Affidavit may not be used against the lawyer in any further
9
proceedings. When the Court enters a decision disciplining
the lawyer, the Agreement and Affidavit become available
to the public.
F.
Hearings:
1.
Rule 15(b) allows Disciplinary Counsel to issue investigative
subpoenas requiring the attendance of the lawyer or witnesses, as
well as the production of documents.
2.
After Formal Charges are filed, Disciplinary Counsel and
Respondent may subpoena witnesses and the production of
pertinent documents at a deposition or hearing held under these
rules. Rule 15(c).
3.
Willful failure to comply with a Subpoena is punishable as
contempt of the Supreme Court.
Attacks on the validity of
subpoenas shall be heard and determined by the Investigative or
Hearing Panel before which the matter is pending.
4.
Upon conclusion of an investigation, Disciplinary Counsel may
recommend to the Investigative Panel the filing of Formal Charges.
The Panel may adopt, reject or modify that recommendation. If it
finds cause to be the lawyer committed misconduct, it may accept
an agreement for discipline by consent, impose a confidential
admonition or deferred disciplinary agreement, admonish the
lawyer pursuant to Rule 19(d)(5), or direct Disciplinary Counsel to
file Formal Charges. Rule 19(d).
10
5.
Default: The lawyer has 30 days to file an Answer to the Formal
Charges. Failure to answer shall constitute an admission of the
factual allegations contained in the Formal Charges. Failure to
appear when specifically so ordered by the Panel or the Court shall
be deemed to be an admission of the factual allegations that were
the subject of the appearance; the merits of any motion or
recommendation to be considered at such appearance shall be
conceded. Rule 24.
6.
Discovery: Within 20 days of the filing of an Answer, Disciplinary
Counsel and Respondent shall exchange the names and addresses
of all persons known to have knowledge of the relevant facts. The
prosecution may withhold such information only with permission
from the Chair of the Hearing Panel for good cause shown. The
Chair’s review of a requested withhold is held in camera, but the
party making such a request must advise the opposing party of it.
Rule 25(a).
a.
Within 20 days of the date of the filing of an answer, the
chair of the hearing panel shall set a date for the exchange
of witness lists and exhibits no later than 30 days prior to
the hearing. Disciplinary counsel and respondent shall
exchange exhibits to be presented at the hearing, names and
addresses of witnesses, exhibits to be presented at the
11
hearing, witness statements, and summaries of interviews
with witnesses who would be called to testify. Rule 25(b).
b.
Depositions shall be allowed only if agreed upon, or if the
Chair of the Panel grants permission based upon a showing
of good cause. The Chair may place restrictions or
conditions on the manner, time and place of any deposition.
Rule 25 (c).
c.
Disciplinary Counsel shall provide Respondent with
exculpatory evidence relevant to the Formal Charges.
Rule 25(d).
d.
Both parties have a continuing duty to supplement
information required to be exchanged. Rule 25(e).
e.
All discovery shall be completed within 60 days of the
filing of the Answer. Rule 25(f).
f.
If a party fails to timely disclose a witness’ name and
address, statements, summary of witness interviews
required to be disclosed or exchanged, the Hearing Panel
may continue the Hearing, preclude the party from calling
the witness or introducing the document, or take such other
action as may be appropriate. If Disciplinary Counsel has
not timely disclosed exculpatory material, the Panel may
require the matter to be disclosed and grant a continuance,
12
or take such other action as may be appropriate. Rule
25(g).
7.
Hearings (Rule 26): Upon receipt of the Answer or upon the
expiration of the time to Answer, the Commission shall schedule a
public hearing. It is conducted by three or more members of a
Hearing Panel of the Commission (Rule 4(c)).
Disciplinary
Counsel shall present evidence on the Formal Charges, and may
call the Respondent as a witness. Both parties shall be allowed to
present evidence and cross-examine witnesses. A transcript of the
hearing shall promptly be prepared and filed with the Commission,
with a copy available to the Respondent at his or her expense.
Either side may submit proposed findings, conclusions, and
recommendations for sanction or order of dismissal to the Panel.
Rule 26(c).
8.
Panel Report: Within 60 days after the filing of the transcript, the
Hearing Panel shall file with the Supreme Court a record of the
proceeding, and a Report setting forth a written summary,
proposed findings of fact, conclusions of law, and minority
opinions, and recommendations for dismissal, sanction, or transfer
to incapacity inactive status. Rule 26(d).
G.
Panels (Rule 4):
1.
The attorney members of the Commission, other than the Chair or
the Vice Chair, shall be divided into eight Panels of four attorney
13
members and two public members. These Panels shall serve as an
Investigative Panel or a Hearing Panel. If the Panel is assigned to
serve as an Investigative Panel, the chair shall add either the chair
or the vice-chair to the Panel to increase its membership to seven.
Rule 4(b).
2.
Rule 4(f) sets forth the powers and duties of the Investigative
Panel, which include reviewing recommendations of Disciplinary
Counsel after investigation, the power to issue either a letter of
caution with or without a finding of misconduct, issue notice of
intent to impose a confidential admonition, enter into a deferred
discipline agreement, consider an agreement for discipline by
consent, authorize formal charges, refer the matter to another
agency, or dismiss the compliant.
3.
Rule 4(g) provides for the powers and duties of a Hearing Panel,
which include ruling on pre-hearing motions, conducting hearings
on Formal Charges, and making findings and recommendations to
the Supreme Court for sanctions or for dismissal.
H.
Rule 12, access to disciplinary information (confidentiality):
1.
Complaints, proceedings, records, information or Orders relating to
an allegation of misconduct or incapacity are confidential. While a
matter remains confidential, members of the Commission, its staff,
Disciplinary Counsel, his staff, members of the Supreme Court,
and its staff shall not reveal the existence of the complaint except
14
to persons directly involved in the matter, and then only to the
extent necessary for a proper disposition of the matter. Note: the
complainant and the lawyer under investigation are not listed in
this prohibition.
2.
When Formal Charges are filed, the Formal Charges and any
Answer shall become public 30 days after the filing of the Answer
or, if no Answer is filed, 30 days after the expiration of time to
Answer. Rule 12(b).
3.
Once Formal Charges and an Answer become public, all
subsequent records and proceedings relating to misconduct
allegations shall be open to the public.
But if allegations of
incapacity are raised during the misconduct proceedings, all
records, information and proceedings relating to those allegations
are confidential.
4.
Disclosure: The Commission may disclose information at any
stage of the proceedings (Rule 12(c):
a.
When it determines there is a need to notify another person
to protect that person, or to notify a government agency to
protect the public or the administration of justice;
b.
To appropriate law enforcement officials when it is determined that the Commission is in possession of reliable
information indicating the person has violated the criminal
law;
15
c.
Upon waiver in writing by the lawyer;
d.
To persons from whom and entities from which it appears a
lawyer has misappropriated money or other property, when
the Commission determined that the disclosure of the
information will tend to prevent further misappropriation or
likely facilitate restitution, recovery, or compensation from
the Lawyers’ Fund for Client Protection, insurance
coverage, title insurance, or other sources; or
e.
To the appropriate disciplinary authority in any jurisdiction
where the lawyer is admitted to practice law, or has applied
for admission to practice law concerning a matter where
there is evidence the lawyer committed misconduct under
lawyer or judicial disciplinary rules of that jurisdiction, or
where a lawyer receives any sanction under Rule 7(b) of
Rule 413.
5.
When necessary to obtain permission from a tribunal to withdraw
from representation, a lawyer may reveal the fact that the client has
filed a complaint with the Commission, in order to establish good
cause for withdrawal. If such a Motion includes a reference to a
complaint that is confidential, the lawyer shall serve a copy of the
Motion upon the client, but give opposing counsel only notice of
the Motion without revealing the existence of the complaint. Any
hearing held on the Motion is under seal. No members of the
16
tribunal or its staff who learn of the existence of the complaint
shall reveal that fact to any other person. Rule 12(d).
6.
In order to protect the interests of a complainant, witness, third
party or respondent, a Hearing Panel may, for a good cause shown,
issue a protective order prohibiting the disclosure of specific
information, and direct that the proceedings be conducted in a
manner to preserve the confidentiality of such information. Rule
12(e).
7.
Disciplinary Counsel’s work product, Commission deliberations,
and records of the Commission’s deliberations shall not be
disclosed.
8.
Permissive Disclosure by the parties: either party may disclosure
in proceedings before a Hearing Panel statements and other
evidence, gathered prior to the matter becoming public, that were
subject to discovery under Rule 25, to the extent admissible under
the South Carolina Rules of Civil Procedure, or the South Carolina
Rules of Evidence.
II.
A Review of Ethical Infractions:1
A.
Neglect of client’s case.
1.
The most common complaint made by clients is that their lawyer
“hasn’t done anything.” Typical neglect cases involve:
a.
Failure to do any work on case;
1
The author would extend special thanks to Deputy Disciplinary Counsel Barbara M. Seymour, for making
available her summaries of recent cases.
17
b.
Procrastination;
c.
Failure to keep client informed;
d.
Failure to return phone calls;
e.
Failure to file an answer;
f.
Failure to perfect appeal or to meet other deadlines such as
notice statutes, statute of limitations, or appearing in court.
2.
Rules of Professional Conduct involved:
a.
Rule
1.1,
Competent
representation
requires
representation:
the
legal
Competent
knowledge,
skill,
thoroughness and preparation reasonably necessary for the
representation.
b.
Rule 1.3, Diligence: A lawyer shall act with reasonable
diligence and promptness in representing a client.
c.
Rule 1.4, Communication: (a) A lawyer shall keep a client
reasonably informed about the status of a matter and
promptly comply with reasonable requests for information.
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed
decisions.
3.
Approximately one-third of all complaints involve a charge of
neglect.
4.
There is a fine line between neglect and legal malpractice, which is
often difficult to draw.
18
a.
Some courts have held that one isolated instance of
ordinary negligence without willfulness or dishonorable
conduct is not neglect, although it might be legal
malpractice.
b.
Aggravating factors that raise negligence to neglect:
(i)
Multiple instances of negligent handling of legal
matters. Matter of McBratney, 366 S.C. 523, 623
S.E.2d 96 (2005); Matter of McFarland, 381 S.C.
353, 673 S.E.2d 421 (2009); and Matter of
Holcombe, Opin. No. 26854 (S.C. Sup. Ct.), filed
August 9, 2010.
(ii)
Lack of familiarity with basic rules of practice.
Matter of Belser, 277 S.C. 250, 287 S.E.2d 139
(1982).
(iii)
Failure to follow basic court rules, and improper
filing of discovery motions for a trial, where
Respondent was appointed to represent a defendant
in an appeal. Matter of Stratos, 374 S.C. 212, 648
S.E.2d 607 (2007).
(iv)
Failure to take any substantial step on behalf of
client (gross negligence). Matter of Treacy, 277
S.C. 514, 290 S.E.2d 240 (1982).
19
(v)
Failure to communicate with a client. Matter of
Gay, 374 S.C. 418, 653 S.E.2d 272 (2007): Matter
of Braghirol, 383 S.C. 379, 680 S.E.2d 284 (2009);
and see Matter of Leppard, 272 S.C. 414, 252
S.E.2d 143 (1979):
“Once an attorney accepts employment
he has a duty to keep in touch with his
clients such that they may be advised of
the progress of the case. This duty is over
and above that of diligently pursuing the
matter entrusted to the attorney.”
(vi)
Misrepresentation to clients about the status of their
case is misconduct. Matter of Weinberg, 355 S.C.
649, 587 S.E.2d 101 (2003).
(vii)
The Court will not accept as an excuse office
system failure, or the increased change of pace
brought about by court rules and increased business,
as defenses to charges of neglect. Matter of Davis,
277 S.C. 532, 280 S.E.2d 644 (1981).
(viii)
Closing law office without notice to clients, the
Courts, or opposing counsel, Matter of Moody, 387
S.C. 352, 692 S.E.2d 906 (2010). Moody was
sanctioned for neglect and abandonment of several
20
client matters. Including a grandparent adoption
matter where the lawyer had done no work, after
being paid $1,100.00; Definite Suspension for two
years, retroactive to date of interim suspension, plus
restitution, costs, monitoring by Lawyers Helping
Lawyers, completion of trust account school and
ethics school. See also Matter of Willoughby, 383
S.C. 352, 692 S.E.2d 906 (2009).
(ix)
An attorney found guilty of neglect may be ordered
to refund the retainer fee. Matter of Davis, 366 S.C.
344, 62 S.E.2d 529 (2005); see also Matter of
Miles, 335 S.C. 381, 517 S.E.2d 442 (1999), where
the Court directed restitution be resolved by the Fee
Dispute Resolution Board of the South Carolina
Bar; and Matter of Brown, 387 S.C. 305, 692 S.E.2d
536 (2010).
5.
Avoid neglect charges by setting up office systems:
a.
In the initial conference fully inform the client in words
that client can understand, about the fee, reasonable
expectations of success or failure, and most importantly,
the expected time frame for accomplishing various stages
of the litigation.
21
b.
Obtain a written fee agreement and, if on an hourly basis,
bill the client monthly or quarterly so the client can be
apprised of the amount of time and effort expended in his
or her behalf.
Fee agreements are mandatory in cases
taken on a contingency basis, and where flat or advance
fees are involved; see Rule 1.5, page 80 infra.
c.
Communicate with the client regularly. Return telephone
calls promptly and send the client copies of all
correspondence, pleadings, and memoranda.
d.
Have a reliable and effective docket control system.
e.
Provide for a check and balance system on your docket
control system, such as a computer reminder.
f.
Designate one person in your office to be in charge of
docket control (preferably a non-lawyer), and designate a
backup person where possible.
g.
Never try to cover up an error or mistake to your client. A
misrepresentation can turn malpractice into neglect, or
worse, because it shows unprofessional conduct. Matter of
Amick, 288 S.C. 486, 342 S.E.2d 623 (1986); and Matter of
McBratney, supra.
B.
Conflicts of interest.
1.
Business dealings with clients. Don’t. But if you have to:
a.
Rule 1.7 is the general rule on conflicts of interest.
22
(a)
A lawyer shall not represent a client if the
representation involves a concurrent conflict of
interest, which exists if:
(1)
The representation of one client will be
directly adverse to another client; or
(2)
There
is
a
significant
risk
that
the
representation of one or more clients will be
materially
limited
by
the
lawyer’s
responsibilities to another client, a former
client, or a third person or by a personal
interest of the lawyer.
(b)
But the lawyer may still represent the client if:
(1)
The lawyer reasonably believes he or she
will be able to provide competent and
diligent representation to each affected
client;
(2)
the representation is not prohibited by law;
(3)
the representation does not involve the
assertion of a claim by one client against
another in the same litigation or another
proceeding before a tribunal; and
(4)
each affected client gives informed written
consent.
23
b.
Rule 1.8(a) covers business transactions between lawyer
and client. It contains three requirements:
(1)
The terms of the transaction must be fair and
reasonable to the client and fully disclosed and
transmitted in writing to the client in a manner
which can be reasonably understood by the client;
(2)
The client is advised in writing and given a reasonable opportunity to seek the advice of independent
counsel in the transaction; and
(3)
The client must consent in writing to the transaction. See Rule 1.8(a)(3).
c.
Matter of Key, 354 S.C. 557, 582 S.E.2d 400 (2003),
Public Reprimand for misconduct in handling commercial
property transaction involving dual representation of both
buyer and seller, and Respondent’s misconduct in handling
former
client’s
foreclosure
matter
for
failing
to
communicate with client regarding dismissal of action
without prejudice. See also Matter of Rollins, 281 S.C.
467, 316 S.E.2d 670 (1984), where the Respondent, serving
as guardian for a minor and without approval of the Probate
Court, invested $95,000.00 of the child’s funds in a newly
formed speculative corporation and lent $5,000.00 of the
24
child’s money to the purchaser of a house he owned;
Disbarred.
d.
Matter of Dobson, 310 S.C. 422, 427 S.E.2d 166 (1993).
Lawyer engaged in
complex
business transactions,
including some that indicated he knew or should have
known were illegal or fraudulent investment schemes;
further, lawyer deliberately evaded knowledge of facts
which tended to implicate him in a fraudulent scheme (2year Definite Suspension).
e.
Matter of Conway, 305 S.C. 388, 409 S.E.2d 357 (1991).
Lawyer formed a corporation with other individuals for the
purpose of buying and developing acreage on James Island.
After a loan closing, Respondent directed an associate in
his firm to write him a check for $200,000.00 out of the
proceeds of the loan. Monies were also paid to a firm for
the cost of engineering and design work, but the principal
of that firm wrote checks back to Respondent on numerous
occasions, characterized as “kick-backs” at the Panel
Hearing. “An attorney who enters into business with his
client does not, in the eyes of the client, or the public
generally, shed his professional standing and obligation,
and there is no just reasons why he should be permitted to
do so. . . An attorney should approach such business trans-
25
actions with caution and must carefully explain to his client
the need for independent legal advice. . . In addition, an
attorney does not lose his fiduciary responsibility as an
attorney in a business context. He will still be held to the
standards and obligations of his profession.” Disbarred.
f.
Matter of Kenyon, 327 S.C. 307, 491 S.E.2d 252 (1997):
Lawyer engaged in complex business transactions to assist
the family of a deceased client, who had committed suicide
while being sought by federal drug enforcement agents in
1988. The transactions involved the disposition of
properties owned by the client, or in which the client had an
interest, as well as failure to properly file documents with
the Probate Court. The Court found the lawyer guilty of
assisting a client to engage in criminal or fraudulent
conduct; failing to consult with clients about the limitations
the Rules of Professional Conduct place upon lawyers;
failing to require clients to rectify a fraud, or reveal the
fraud; and representing a client when the representation
was limited by a conflict, or the attorney’s own interest.
Kenyon was later disbarred after being convicted of
operating a Racketeering Enterprise, possession of a
firearm with an obliterated serial number, and two counts
of money laundering; the Racketeering Acts included two
26
counts of murder, Matter of Kenyon, 348 S.C. 233, 559
S.E.2d 590 (2002).
g.
Matter of Westmoreland, 353 S.C. 44, 577 S.E.2d 209
(2003): A partnership was created in 1980 to buy, renovate
and sell apartments and land on Hilton Head Island.
Respondent prepared the partnership agreement, which
provided for arbitration of any controversies or claims
arising out of it. Respondent represented the partnership,
or the individual partners, between 1980 and 1991 in
various matters. In 1990 and 1998 actions were brought by
partners against each other, or the partnership; in the 1988
action, Respondent represented two of the partners against
the partnership and the others, without proper consultation
concerning conflicts of interest. When it became apparent
Respondent would be required to testify both as a witness
to some events, and as a party-defendant to others, he failed
to
withdraw;
an
Order
disqualifying Respondent
was
from
subsequently
further
issued
participation.
Public Reprimand.
2.
Financial assistance to clients in connection with pending
litigation: Rule 1.8(e):
27
a.
A lawyer shall not provide financial assistance to a client in
connection with pending or contemplated litigation, except
that:
(1)
a lawyer may advance court costs and expenses of
litigation, the repayment of which may be
contingent on the outcome of the matter; and
(2)
a lawyer representing an indigent client may pay
court costs and expenses of litigation on behalf of
the client.
b.
A lawyer may not advance living expenses to a client
whom he represents in contemplated or pending litigation.
Matter of Strait, 343 S.C. 312, 540 S.E.2d 460 (2000); and
Matter of Hoffmeyer, 377 S.C. 395, 661 S.E.2d 60 (2008).
3.
Representation of multiple clients.
a.
Refer back to Rule 1.7 for the general rule on conflict of
interest.
Representation of one client against another
current client is improper unless the attorney reasonably
believes he can adequately represent both, and unless both
consent after consultation about the advantages and
disadvantages. If the interests of the clients are directly
adverse, dual representation would be improper, such as in
a divorce (even and uncontested one, because the
28
proceeding is inherently adversarial), or a tort matter where
one client may have a claim against another.
4.
Representation against former client.
a.
A lawyer may not represent a client against a former client
if he possesses confidential information obtained from the
prior representation. Rule 1.8(b) provides: “a lawyer shall
not use information relating to representation of a client to
the disadvantage of the client unless the client consents
after consultation, except as permitted or required by these
Rules [Rule 1.6 (Confidentiality of information) or Rule 3.3
(Candor toward the tribunal)].”
5.
Financial interest of an attorney.
a.
Rule 1.8(c): A lawyer shall not solicit a substantial gift
from a client, including a testamentary gift, or prepare an
instrument giving a lawyer or a person related to the lawyer
a substantial gift from a client, unless the lawyer or other
recipient of the gift is related to the client. “Related
persons” is defined at Rule 1.8 (c) as a spouse, child,
grandchild, parent, grandparent or other relative or
individual with whom the lawyer or the client maintains a
close, familial relationship.
6.
Imputed disqualification.
a.
Rule 1.10:
29
(a)
While lawyers are in a firm, none of them shall
knowingly represent a client when any one of them
practicing alone would be prohibited from doing so
by Rules 1.7 (Conflict of interest, general rule),
1.8(c) (Preparation of instrument), or 1.9 (Conflict
of interest, former client), unless the prohibition is
based on a personal interest of the prohibited lawyer
and does not present a significant risk of materially
limiting the representation of the client by the
remaining members of the firm.
b.
When a lawyer has terminated an association with a firm,
the firm is not prohibited from thereafter representing a
person with interests materially adverse to those of a client
represented by the formerly associated lawyer and not
currently represented by the firm, unless:
(1)
the matter is the same or substantially related to that
which the formerly associated lawyer represented
the client; and
(2)
a lawyer remaining in the firm has information protected by Rules 1.6 (Confidentiality) and 1.9(c)
(Former
representation,
information
used
to
disadvantage of former client) that is material to the
matter.
30
c.
A disqualification prescribed by this Rule may be waived
by the affected client under the conditions stated in Rule
1.7 (Conflict of interest, general rule).
d.
The disqualification of lawyers associated in a firm with
former or current government lawyers is governed by Rule
1.11 (Special conflicts of interest for former and current
government officers and employees).
7.
Lawyer as witness (former DR 5-101(e)):
a.
A lawyer may not accept employment in litigation if he or
she knows or it is obvious that he or she will be a witness,
except:
(i)
uncontested matters;
(ii)
matters of formality;
(iii)
nature and value of legal services;
(iv)
disqualification would work substantial hardship on
client.
b.
Frequently, lawyers will have to testify as to legal
documents which they prepared. They should not represent
either side to litigation concerning those legal documents.
Matter of Westmoreland, supra.
8.
Guidelines.
31
a.
Establish office procedure whereby all new matters that
come into the office are reviewed and screened for
potential conflicts.
b.
Do not accept representation of a client where a potential
conflict exists, unless you have made full disclosure to
client in writing and have received written consent to
proceed.
c.
Never mix your personal business with your legal business,
especially where the client is unsophisticated because of
age or education.
d.
Never make loans to clients.
e.
If your client discharges you, your withdrawal from the
case is mandatory.
Do not stand on your retainer
agreement and refuse to release the case to another lawyer.
(1)
If the case is before a court, obtain an order
permitting you to withdraw.
(2)
Do not require client to sign a release of liability as
to your representation. Matter of Hanna, 301 S.C.
310, 391 S.E.2d 728 (1990). See Rule 1.8(h)(1).
(3)
In Matter of an Anonymous Member of the South
Carolina Bar, 287 S.C. 250, 335 S.E.2d 803(1985)
the Court recognized the common law right of
attorney to claim a retaining lien to a file. But see
32
Matter of Tillman, 319 S.C. 461, 462 S.E.2d 283
(1995), where a lawyer was publicly reprimanded
for refusing to return a client file after being
discharged. The Respondent asserted two separate
liens:
(1) a lien on representation; and (2) a
common law retaining lien on the client file. The
Court found no basis in law for a lien on
representation, and no basis in fact for the retaining
lien. See Rule 1.16(a)(3). Before you claim such a
right, read these opinions carefully.
C.
Trust account violations. Rule 1.15.
1.
2.
Typical violations:
a.
Misappropriation;
b.
Commingling;
c.
Failure to keep appropriate records;
d.
Failure to make accounting to client.
Most serious form of ethical violation and normally results in
suspension or disbarment and a requirement that restitution be
made.
See Matter of Trexler, 343 S.C. 608, 541 S.E.2d 822
(2001); Matter of Warlick, 352 S.C. 149, 573 S.E.2d 776 (2002);
Matter of Wolf, 357 S.C. 399, 594 S.E.2d 157 (2004); Matter of
Arsi, 357 S.C. 8, 591 S.E.2d 627 (2004) (Arsi was later convicted
in circuit court of breach of trust with fraudulent intent); Matter of
33
Buchanan-Lyon, 375 S.C. 429, 653 S.E.2d 277 (2007); Matter of
Greene, 371 S.C. 207, 638 S.E.2d 677 (2006) (allowing an
organization which turned out to be an illegal pyramid scheme to
use his trust account to disburse funds, after Respondent became
aware its accounts had been frozen in a criminal investigation);
Matter of Wilmeth, 373 S.C. 631, 647 S.E.2d 185 (2007)
(disbarment not made retroactive to date of interim suspension);
Matter of Ham, 387 S.C. 297, 692 S.E.2d 532 (2010) (indefinite
suspension, retroactive to date of interim suspension, plus
restitution; Matter of Smalls, 382 S.C. 551, 677 S.E.2d 211 (2009)
(lawyer bounced more than one hundred checks on three trust
accounts over a two-year period, and failed to properly document
his trust account transactions; disbarred, retroactive to date of
interim suspension, plus restitution, costs, and completion of
education program); and Matter of Ruffin, 382 S.C. 598, 677
S.E.2d 25 (2009) (misappropriation of about $140,000.00 from
trust account, including funds received to pay off mortgages,
medical liens, and to pay clients for personal injury claims;
disbarment, not retroactive to interim suspension, plus restitution
and costs).
a.
After disbarment or suspension the Court will direct
Disciplinary Counsel and the Respondent to develop a plan
for restitution. See, Matter of Trexler, 343 S.C. 608, 541
34
S.E.2d 822 (2001), where Respondent was disbarred, and
ordered to make immediate restitution to “all injured
parties, including clients, organizations, and the Lawyers’
Fund for Client Protection.”
3.
Do’s and Don’ts.
a.
FOLLOW RULE 417, SCACR. And keep good records:
(1)
Make notations on checks, check stubs, and deposit
slips of client’s name, case caption or other remarks
that will allow you later to identify purpose of bank
transaction.
(2)
Reconcile all accounts at the end of the month;
never allow an insufficient funds situation to arise. See
Matter of Gates, 428 S.E.2d 716 (S.C. 1993), where
Respondent disbursed money from his trust account for
real estate transactions, although he did not have all the
funds on hand for the disbursements. Instead, he would
disburse funds in one closing by using funds that were
on hand for a later closing.
See also Matter of
Nwangaza, Op. No. 27053 (S.C. Sup. Ct. filed October
10, 2011)(9-month suspension for conduct that included
four trust account checks returned for insufficient
funds, and failure to follow Rule 417, SCACR).
35
(3)
Review all cancelled checks and supervise work of
office personnel who have access to trust account.
(4)
Keep a ledger with a page for each client showing
receipts and disbursements by date, check number,
and amount.
b.
Do not deposit personal funds into your trust account
even if you intend to immediately disburse the money out
of the account. Matter of Williams, 351 S.C. 415, 570
S.E.2d 521 (2002); Matter of Nwangaza (2011), supra.
c.
Remove legal fees when earned; do not leave fees to
accumulate. Deposit fees in office or personal account; do
not pay your bills by writing check from trust account. See
Matter of Hensel, 340 S.C. 385, 532 S.E.2d 279 (2000);
and section on Flat Fees, infra.
d.
In Matter of Keegan, 373 S.C. 176, 644 S.E.2d 722 (2007),
a Public Reprimand was issued for failure to properly
manage real estate and general trust accounts, and failure to
properly supervise a dishonest employee.
Respondent’s
paralegal had manipulated software and caused checks to
be paid to her from both trust accounts.
Respondent
misunderstood that a reconciliation had to be conducted on
a monthly basis, instead of in large monthly groups. When
the
reconciliation
36
discovered
the
misappropriation,
Respondent transferred funds from his operating account to
his trust accounts to cover all losses, and reported the theft
to federal authorities.
D.
Attorneys fees and clients’ files.
1.
The Commission will not review fee disputes; however, the
Commission will become involved (1) if attorney charges a clearly
excessive fee, or (2) if attorney ignores an order of the Fee Dispute
Committee. See Matter of Sims, 380 S.C. 61, 668 S.E.2d 408
(2008).
2.
Flat or Advance fees: see Rule 1.5(f), infra at page 80. There
must be a written fee agreement containing the terms set out
therein.
3.
Contingency fees: Rule 1.5(c) provides as follows:
(a)
Fee may be contingent on the outcome of the matter for
which the service is rendered.
A contingency fee
arrangement shall be in writing signed by the client, and
shall state the method by which the fee is to be determined,
including the percentage or percentages that shall accrue to
the lawyer in the event of settlement, trial or appeal,
litigation and other expenses to be deducted from the
recovery, and whether such expenses are to be deducted
before or after the contingent fee as calculated.
Upon
conclusion of a contingent fee matter, the lawyer shall
37
provide the client with a written statement stating the
outcome of the matter and, if there is a recovery, showing
the remittance to the client and the method of its
determination. Failure to provide the client with such a
disbursement sheet is misconduct. Matter of Williams, 336
S.C. 578, 521 S.E.2d 497 (1999).
Failure to reduce a
contingency fee to writing in violation of Rule 1.5 is
misconduct, Matter of Atwater, 355 S.C. 620, 586 S.E.2d
589 (2003).
4.
A lawyer shall not enter into an agreement for, charge, or collect:
a.
Any fee in a domestic relations matter, the payment or
amount of which is contingent upon the securing of a
divorce or upon the amount of alimony or support, or
property settlement in lieu thereof, provided that a lawyer
may charge a contingency fee in collection of past due
alimony or child support; or
b.
A contingent fee for representing a defendant in a criminal
case. Rule 1.5(d).
5. Do not collect contingency fee for obtaining uncontested PIP benefits.
Matter of Hanna, 294 S.C. 56, 362 S.E.2d 632 (1987).
6. It’s not your money: Matter of Boyd, Opin. No. 26847 (S.C. Sup.
Ct.), filed August 9, 2010, six-month suspension where a lawyer
deposited client fees (the firm’s earned fees) into his personal account.
38
E.
Miscellaneous, recurring violations.
1.
Failure to cooperate with the Commission on Lawyer Conduct
constitutes failure to cooperate with the Court, and such conduct,
where inexcusable, will not be tolerated. Matter of Held, 325 S.C.
150, 480 S.E.2d 453 (1997); Matter of Kitchel, 361 S.C. 149, 604
S.E.2d 381 (2004). Failure to respond to subpoenas issued by the
Commission pursuant to an investigation has resulted in contempt
sanctions, including fines and imprisonment.
It can result in
interim suspension, Matter of Glover, 380 S.C. 22, 667 S.E. 2d 728
(2008). See also Matter of Redmond, (failure to submit timely
responses to ODC in seven of nine attorney grievances filed, and
other misconduct) 26659, June 1, 2009, public reprimand.
2.
Communication with jurors. Do it at your own risk. See Rules
3.5(a), (b) and (c) which prohibit an attorney from seeking to
influence a judge, juror, or member of the jury venire or other
official by means prohibited by law.
See Matter of Two
Anonymous Members of the S. C. Bar, 298 S.E.2d 450 (1982);
Matter of Delgado, 279 S.C. 293, 306 S.E.2d 591 (S.C. 1983)
(conversing with a juror sitting on a case where Respondent
represented the defendant, even though the topic of conversation
was limited to a discussion of a lawyer’s role in defending a person
he knows to be guilty and the disadvantages faced by a defendant
due to the State’s resources); and Matter of Smith, 338 S.C. 465,
39
527 S.E.2d 758 (2000) (immediately following trial where jury
awarded a low verdict in his client’s favor, Respondent approached
jurors and asked why they awarded that amount; Respondent
acknowledged he was frustrated with the verdict and his frustration
must have been apparent to the jurors, who were still members of
the venire for other cases to be tried during that term of court).
3. Conviction of a serious crime, Rule 17(a): Matter of Limehouse, 307
S.C. 278, 414 S.E.2d 783 (1992) (conspiracy to commit extortion,
attempting to influence, prevent or hinder a witness from
communicating with a Federal Law Enforcement Officer, Federal
Court; Indefinite Suspension); Matter of Mendenhall, 316 S.C. 196,
447 S.E.2d 858 (1994) (ex parte communication with a party; sexual
relations with a party during a time that party was appearing before
Respondent as a Family Court Judge; conviction for two counts of
Official Misconduct under S.C. Code Ann. § 8-1-80; Disbarred);
Matter of Evans, 325 S.C. 23, 478 S.E.2d 686 (1996) (felony DUI
conviction causing death, use of drugs, and making false statements to
insurer regarding fatal accident, Disbarred, but became the first lawyer
ever reinstated when the underlying misconduct involved a conviction
for a homicide, in Matter of Evans, 380 S.C. 108, 669 S.E. 2d 85
(2008) (subsequently reinstated to the practice of law by Order of the
Supreme Court dated November 6, 2008); Matter of Roberts, 331 S.C.
25, 503 S.E.2d 160 (1998) (acceptance of a bribe and conviction of
40
one count of criminal sexual conduct in the third degree, by deputy
solicitor, Disbarred); Matter of Floyd, 338 S.C. 457, 527 S.E.2d 357
(2000) (robbery of an automobile, use of a firearm in a crime of
violence, and bank robbery, Federal Court, Disbarred); Matter of
Welch, 355 S.C. 93, 584 S.E.2d 369 (2003) (bank fraud stemming
from Respondent’s involvement in a check kiting scheme involving
trust and title accounts; Disbarred); Matter of Gailliard, 362 S.C. 428,
608 S.E.2d 434 (2005) (conviction for assault and battery of a high and
aggravated nature, which occurred when Respondent struck his
teenage son with his truck; Indefinite Suspension); Matter of Ervin,
___ S.E.2d ___, 2010 WL 1904873 (SC 2010) (lawyer arrested for
pointing and presenting a firearm in connection with a “road rage”
incident, completed PTI and charges were dismissed and expunged; 6month Definite Suspension, retroactive to his interim suspension on
February 21, 2008, plus 24 months of counseling); Matter of Pearman,
381 S.C. 383, 673 S.E.2d 432 (2009) (lawyer was arrested for
representing himself to be a SLED agent to get sex from a prostitute
for free; the “prostitute” was an undercover SLED agent; the lawyer
also claimed to have information about ongoing vice investigations
that he could provide to her; at the time of his arrest, the lawyer was
employed by the Office of Disciplinary Counsel, and during this
encounter displayed his identity badge issued by the Supreme Court;
2-year Definite Suspension, after completion of PTI, not retroactive to
41
the date of his interim suspension two years earlier); Matter of Reaves,
383 S.C. 132, 678 S.E.2d 439 (2009 (guilty plea to failure to file state
income tax return, 90-day Definite Suspension); and Matter of Harte,
Op. No. 27051 (S.C. Sup. Ct. filed October 10, 2011)(former Family
court Judge disbarred
for federal convictions for Conspiracy to
Commit Mail Fraud and Money Laundering; conduct involved
assisting individual in concealing assets resulting from criminal
activities).
4. Conduct occurring outside literal scope of attorney-client
relationship can result in discipline. Matter of Gregory, 305 S.C. 270,
411 S.E.2d 430 (1991), where the lawyer created false tax returns to
qualify for a loan.
5.
Incorrect or false CLE certification. Matter of Iseman, 290 S.C.
391, 350 S.E.2d 922 (1986); Matter of Diggs, 344 S.C. 397, 544
S.E.2d 628, 96 A.L.R. 5th 599 (2001) (90-day Suspension); and
Matter of Campbell, 373 S.C. 100, 644 S.E.2d 682 (2007) (59-day
Definite Suspension, retroactive to Interim Suspension for
continuing to practice law after being suspended by the Supreme
Court due to failure to correct CLE requirements. But see also,
Matter of Bonecutter, 375 S.C. 414, 653 S.E.2d 269 (2007), where
a 2-year Definite Suspension, retroactive to the 2005 Interim
Suspension, was imposed for continuing to practice after being
suspended for noncompliance with CLE requirements and non-
42
payment of license fee, as well as failure to respond to a Notice of
Full Investigation in a timely manner.
6.
Misconduct
involving
dishonesty,
fraud,
deceit
and
misrepresentation. Matter of Walker, 305 S.C. 482, 409 S.E.2d
412 (1991).
7.
Controlled substances:
Conviction for driving under the
influence of methamphetamine, completion of PTI for arrest for
driving under influence of drugs and methamphetamine, six-month
suspension, Matter of Green, 371 S.C. 506, 640 S.E.2d 463 (2007).
Conviction for possession of hydrocodone, acetaminophen,
marijuana and cocaine, two-year definite
suspension
not
retroactive to interim suspension, Matter of Cureton, 373 S.C. 1,
644 S.E.2d 661 (2007). Use of cocaine and encouraging others to
make misleading statements to clients, 90-day definite suspension,
Matter of Rhoad, 375 S.C. 403, 653 S.E.2d 253 (2007). Matter of
Strich, 366 S.C. 373, 622 S.E.2d 543 (2005) (State Grand Jury
conviction for distribution of cocaine by conspiracy, in violation of
S.C. Code Ann. § 44-53-370(b) (2002); One-year Definite
Suspension). Matter of Farlow, 380 S.C. 35, 668 S.E.2d 790
(2008) (federal convictions for accommodation distribution of
marijuana without remuneration and possession of “ecstasy”, 2year Definite Suspension, not retroactive to interim suspension; the
Court noted that at Respondent’s sentencing hearing it was also
43
determined she had given perjured testimony in the trial of another,
and that both criminal charges and the finding of perjury occurred
prior to Respondent’s admission to the practice of law. Farlow’s
subsequent petition to make her suspension retroactive to the date
of her interim suspension was denied, Matter of Farlow, 385 S.C.
241, 684 S.E.2d 548 (2009).
F.
Of special interest:
1.
Reciprocity. Rule 29 allows the Court to require a statement from
a respondent as to why South Carolina should not impose an
identical discipline as may have been handed down in another
state.
Matter of Harper, 369 S.C. 68, 631 S.E.2d 85 (2006)
(Respondent was licensed to practice law in South Carolina and
Florida, resided in Florida, and pleaded guilty in federal court to
misprison of a felony; received 2-year Suspension by the Supreme
Court of Florida, and an identical suspension by Supreme Court of
South Carolina). Rule 29’s stipulation that a lawyer licensed here
must have been disciplined “in another jurisdiction” doesn’t limit a
case to discipline from outside South Carolina; see Matter of
Edwards, 380 S.C. 84, 668 S.E.2d 791 (2008), where reciprocal
discipline was predicated on discipline by the United States
Bankruptcy Court in South Carolina.
3.
Secret Recording: An attorney shall not record a conversation or
any portion of a conversation of any person, whether by tape or
44
other electronic device, without the prior knowledge and consent
of all parties to the conversation. This Rule shall be applied
irrespective of the purposes for which such recordings were made,
the intent of the parties to the conversation, whether anything of a
confidential nature was discussed, and whether any party gained an
unfair advantage from the recording.
Matter of Anonymous
Member of the S. C. Bar, 304 S.C. 342, 404 S.E.2d 513 (1991)
(recording of telephone conference call with several parties);
Matter of an Anonymous Member of the S. C. Bar, 283 S.C. 369,
322 S.E.2d 667 (1984) (recording telephone conversation, and
misrepresenting identity of the caller); and Matter of Warner, 286
S.C. 459, 334 S.E.2d 90 (1985) (attempt to have client secretly
record meeting with a judge).
But in Matter of the Attorney
General’s Petition, 308 S.C. 114, 417 S.E.2d 526 (1992), the
Attorney General petitioned the Court to amend its Order in
Anonymous (1991), fearing its application would hinder law
enforcement investigations. The Court responded by amending its
previous rulings to allow surreptitious recording of certain
conversations when such recording is done with the prior consent
of, or at the request of, an appropriate law enforcement agency
in the course of a legitimate criminal investigation. An attorney
charged with making an unethical recording shall have the
45
burden of proving such recording was made pursuant to one of the
exemptions set forth in the Court’s Order.
a.
In Matter of Duncan, 340 S.C. 622, 533 S.E.2d 894 (2000),
an Indefinite Suspension was issued for Respondent’s
representation of a criminal client, involving secret video
recording. While Duncan and his client were alone in a
polygraph room at the Lexington County Law Enforcement
Center the night the client was arrested, Duncan’s
conversation with his client was videotaped by personnel of
the Sheriff’s Department.
The client was arrested for
murder. Duncan later learned of the unauthorized taping,
and obtained a copy from the Public Defender who had
taken over representation. Duncan gave (or caused to be
given) the tape to a television reporter, with knowledge that
the tape and a news report related thereto would most likely
be broadcast extensively in the midlands, including the
county where the client would be tried. The Court found it
was Duncan’s intent to influence the upcoming trial to the
client’s advantage, and to make known the actions of the
Sheriff’s Department in videotaping the client. After the
tape was broadcast, Duncan provided an Affidavit for use
in the client’s trial, wherein he stated he did not believe the
State or the client could receive a fair trial in Lexington
46
County. Duncan also pled guilty to one count of making a
false declaration to a Federal Grand Jury, during an
investigation of the incident.
4.
Improper Influence: Former DR 9-101(C), Supreme Court Rule
32, prohibited an attorney from stating or implying “that he is able
to influence improperly or upon irrelevant grounds any tribunal,
legislative body, or public official.” See, Matter of Davies, 293
S.C. 508, 362 S.E.2d 9 (1987), where a letter written by
Respondent suggested that the association of a former public
official with a law firm could improperly influence members of a
State agency. This prohibition is now found in Rule 8.4(f). See,
Matter of Fewell, 316 S.C. 302, 450 S.E.2d 46 (1994), where, in
addition to cocaine and tax convictions, Respondent had a client
provide sexual favors to a Family Court Judge in exchange for
favorable rulings; and Matter of Pstrak, 352 S.C. 505, 575 S.E.2d
559 (2003), where Respondent falsely represented in a letter to a
clerk of court that he was a town “prosecutor,” and that he had
personal connections with a county attorney and a mayor; in
another matter, representing a client charged with a traffic offense,
Respondent sent a letter to the Traffic Court advising that he was a
City Prosecutor, Director of the South Carolina Trooper’s
Coalition, and that his client had made a large donation to that
organization in the past: Eight-month Suspension.
47
5.
Sexual misconduct:
In Matter of Parrott, 325 S.C. 162, 480
S.E.2d 722 (1997) Respondent was suspended for four months.
The evidence showed that he had pulled down a woman’s bathing
suit while she was sunbathing; he later pleaded guilty to assault
and battery pursuant to North Carolina v. Alford, 400 U.S. 25
(1970). The Court also found that Respondent had tried to do the
same thing five years earlier, but he was not prosecuted for that
offense.
There have been other cases involving sexual misconduct
by attorneys and judges. Usually the misconduct occurred when
the attorney had a sexual relationship with the client, or a judge
had a sexual relationship with a party who appeared before him.
See, e.g., Matter of Bilbro, 324 S.C. 132, 478 S.E.2d 253 (1996)
(6-month suspension); Matter of Gravely, 321 S.C. 235, 467
S.E.2d 924 (1996) (judicial case, public reprimand); Matter of
Mendenhall, 316 S.C. 196, 447 S.E.2d 858 (1994) (attorney and
family court judge, disbarred); Matter of Keitt, 321 S.C. 373, 468
S.E.2d 875 (1996) (90-day Suspension); and Matter of McBratney,
320 S.C. 416, 465 S.E.2d 733 (1996) (90-day suspension).
Since the above cases were decided Rule 1.8(m) was
amended to specifically address the issue, and now prohibits a
lawyer from having sexual relations with a client when the client is
in a vulnerable condition, or is otherwise subject to the control or
48
undue influence of the lawyer, when such relations could have a
harmful or prejudicial effect upon the interests of the client, or
when sexual relations might adversely affect the lawyer’s
representation of the client. The relationship between lawyer and
client is a fiduciary one in which the lawyer occupies the highest
position of trust and confidence. Except in limited circumstances,
such as when the lawyer and client are married to each other, a
sexual relationship between lawyer and client presents a significant
danger of harm to client’s interests and should be avoided. Three
problems are presented: (1) voluntariness of client’s consent; (2)
the relationship could prejudice the client’s legal interests,
especially when the client is involved in a domestic relations case;
and (3) a lawyer engaged in an intimate relationship with a client
may not be able to exercise the proper degree of professional
judgment and independence required to fully represent the client.
See also Matter of Bellino, 308 S.C. 130, 417 S.E.2d 535
(1992), where an attorney received a 6-month suspension (in
addition to the approximately 31 months he had been suspended
since his conviction), for taking indecent liberties with clients.
Bellino had been court marshalled by the Marine Corps: “This
case is not about sex or sex abuse, it is about power – the
awesome power that comes with a license to practice law -- and
the abuse thereof. . .
49
[Mr. Bellino] took advantage of his
superior position as an officer in the Marine Corps and as a
lawyer.
It would be difficult to imagine anyone more
vulnerable or more subject to the control of another than the
women on whom Mr. Bellino forced himself.” Bellino later
received an indefinite suspension for making or attempting to
make inappropriate social contacts with women who were clients
or prospective clients; he had previously been placed on interim
suspension after being arrested for allegedly committing
inappropriate acts against a female client, Matter of Bellino, 364
S.C. 313, 613 S.E.2d 369 (2005).
See also Matter of Hoffmeyer, supra, 9-month suspension
for misconduct that included a sexual relationship with a client in a
domestic relations matter; the Court found a violation of Rule 1.14,
which requires a lawyer to maintain a normal client-lawyer
relationship with a client, when the client’s capacity to make
adequately considered decisions in connection with representation
is diminished, whether because of minority, mental impairment, or
for some other reason.
In the instant case, the client was
depressed, taking prescription medication for anxiety, showed
signs of anorexia, and during Respondent’s representation was
hospitalized several times for treatment of dehydration and
malnutrition due to anorexia.
50
Sexual Harassment: Matter of Yarborough, 337 S.C. 245,
524 S.E.2d 100 (1999) (unwanted sexual advances and
inappropriate sexual comments to client, Public Reprimand); and
Matter of White, 363 S.C. 523, 611 S.E.2d 917 (2005) (sexual
harassment
of
clients
and
other
misconduct,
18-month
Suspension).
6.
Violation of discovery requirements:
(a)
Failing to fully disclose exculpatory material and
impeachment evidence regarding statements given by the
State’s key witness in a murder execution, as required by
Brady v. Maryland, 373 U.S. 83 (1963), Matter of Grant,
343 S.C. 528, 541 S.E.2d 540 (2001).2
(b)
Discovery abuse in civil matter, depositions: Matter of an
Anonymous Member of the South Carolina Bar, 346 S.C.
177, 552 S.E.2d 10 (2001):
“[Actions] taken in a
deposition designed to prevent justice, delay the process, or
drive up costs are improper and warrant sanctions.” The
Court went on to direct judges to “use their authority to
make sure that abusive deposition tactics and other forms
of discovery abuse do not succeed in their ultimate goal,
‘achieving success through abuse of discovery rules rather
than by the rule of law.’”
The facts are discussed in detail in the Supreme Court’s Opinion in Gibson v. State, 334 S.C. 515,
514 S.E.2d 320 (1999).
2
51
7.
Unauthorized Practice of Law: In Matter of Galmore, 340 S.C.
46, 530 S.E.2d 348 (2000), a Public Reprimand was issued for,
inter alia, failure to report to the Commission on Lawyer Conduct
another attorney’s offer to practice law while that attorney was
under suspension. Galmore had taken over representation of a
client in Federal Court when his former partner, Yarborough, was
suspended from the practice of law.
Yarborough’s
suspension,
Yarborough
At a meeting after
offered
to
oversee
Galmore’s handling of the case in return for a fee, which was paid
by the client. While Galmore refused to allow Yarborough to work
on the case or to supervise his work, he failed to report
Yarborough’s offer to practice law while under suspension. See
also, Matter of Smith, 350 S.C. 510, 567 S.E.2d 868 (2002), 6month suspension for misconduct involving practicing law after
Respondent’s membership in the South Carolina Bar had been
terminated because he failed to pay Bar dues, Rule 410(d),
SCACR; see also Matter of Pearson, 355 S.C. 459, 586 S.E.2d 135
(2003), 146-day suspension for continuing to practice after being
suspended for failure to comply with Continuing Legal Education
requirements. See also Matter of Foti, where the lawyer was
suspended from practice for failure to comply to mandatory CLE
requirements, and for a period of two weeks during that
52
suspension, conducted at least 22 real estate closings; public
reprimand, Op. No. 26790 (S. C. Sup. Ct., filed March 22, 2010.
8.
Forgery/signing another’s name without permission: Matter of
Belding, 356 S.C. 319, 589 S.E.2d 197 (2003), where Respondent
created a fictitious set of divorce documents, including a summons
and complaint and correspondence where he signed another
lawyer’s name, and a Court Order changing venue where
Respondent signed the judge’s name, one year Suspension; Matter
of Dodds, 366 S.C. 304, 621 S.E.2d 666 (2005) (signing
documents with another attorney’s name to suggest that attorney
was in fact acting as Guardian ad Litem for child in Family Court
matter, 90-day Suspension); Matter of Mozingo, 330 S.C. 67, 497
S.E.2d 729 (1998) (among other misconduct, forging Supreme
Court Justice’s signature to a Family Court order; Disbarred); and
Matter of Walker, 305 S.C. 482, 409 S.E.2d 412 (1991) (indefinite
suspension for signing Circuit Judge’s name to expungement
order).
9.
False representation to Court: Matter of Barker, 352 S.C. 71,
572 S.E.2d 460 (2002) (6-month Suspension for falsely
representing to Family Court in divorce pleadings, corroborating
witness, and Respondent’s own testimony, that Respondent and
wife had lived separate and apart for one year).
53
10. Alternation of law school transcript: Matter of Aboyade, 353 S.C.
488, 578 S.E.2d 727 (2003): 1999 graduate of the University of South
Carolina School of Law prepared a false transcript of her law school
grades, increasing her GPR from 2.96 to 3.505, and submitted it to law
firms in several states, all of which hired her in partial reliance upon
the representation in the transcripts; Disbarred.
11.
Advertising:
Matter of an Anonymous Member of the South Carolina Bar I, 385
S.C. 263, 684 S.E.2d 560 (2009), charges dismissed. The lawyer aired a
television commercial in which he said he would “work to protect” his
workers compensation clients’ jobs. Disciplinary Counsel alleged that the
advertisement was misleading, and that gave prospective clients a false
impression that if the lawyer represented them, they would not be fired.
See Also in the Matter of Anonymous Member of the South Carolina Bar
II, 386 S.C. 133, 687 S.E.2d 41 (2009), where two charges were filed
against a real estate lawyer for his marketing practices. In the first it was
contended that the practice of asking lenders, realtors, and brokers to
deliver the lawyers discount coupons to prospective clients was improper
in-person solicitation. The Supreme Court disagreed, and held that lawyers
could use non-lawyers for solicitation purposes under those circumstances,
as long as they were not under the control of the lawyer, the materials
were “distributed randomly”, and the lawyer was not present. However,
that attorney was also charged with improper use of the words “expert”
54
and “specialist” on his website, when neither he nor his associates were
certified. The Supreme Court held this conduct improper, and issued a
letter of caution.
12.
Rule 403, SCACR, compliance:
Rule 403 of the Appellate Court Rules requires that, subject
to certain exceptions, an attorney cannot appear in a legal
proceeding alone unless he or she has had a certain number of trial
experiences approved by the Supreme Court. An attorney whose
trial experiences have not been approved may appear as counsel if
he or she is accompanied by an attorney whose trial experiences
have been approved under that Rule, and the other attorney is
present throughout the hearing, trial, or deposition.
In Matter of Moore, 345 S.C. 144, 547 S.E.2d 651 (2001),
the Respondent was disciplined for, among other things, appearing
in court by himself without having complied with Rule 403.
In Matter of Curry, 373 S.C. 620, 647 S.E.2d 179 (2007),
the Respondent received a 6-month definite suspension for, among
other misconduct, appearing in court without being properly
certified under Rule 403. Curry had been involved in a prior
disciplinary action that had ended in a Deferred Disciplinary
Agreement (DDA) in 2001, which concerned his failure to obtain
Rule 403 certification. The DDA prevented him from appearing in
court without meeting the requirements of Rule 403. The question
55
presented in the 2007 case was whether Curry’s conduct after 2001
violated the terms of the DDA and Rule 403. A new complaint
had been filed against him in 2002, and when Disciplinary Counsel
reviewed his file no certificate of compliance with Rule 403 was
found.
Curry admitted he had appeared alone at depositions.
Evidence showed that in one case an attorney worked as cocounsel with Curry in two cases, but was not aware he lacked Rule
403 certification, that Curry considered him present for the purpose
of Rule 403 compliance, but Curry did not ask that attorney to
appear specifically as Rule 403 counsel.
Another attorney
appeared with Curry at one or two hearings, some guilty pleas, and
a deposition, but was not aware Curry lacked 403 certification and
did not consider his presence to be for Respondent’s compliance
with Rule 403. A third attorney testified he attended numerous
hearings, trials, and depositions as Curry’s Rule 403-certified cocounsel.
However, that attorney merely watched and did not
participate in the proceedings.
In addition to these situations,
Curry admitted appearing alone at depositions, status conferences,
pre-trial conferences, roll calls and roster meetings.
Curry claimed ambiguity between the pre-2000 version of
Rule 403 (“actual conduct and trial of a case”), the post-2000 Rule
403 (“hearing, trial, or deposition”), his DDA (“will not appear in
court”), and Matter of Moore (“court of record”). The Court found
56
no ambiguity, and held that Rule 403, as well as the DDA, clearly
encompassed
Curry’s
appearance
at
pre-trial
and
status
conferences.
A final question was his appearance with Rule 403-certified
co-counsel. Curry admitted that he did not inform the attorneys
who accompanied him that their presence was needed for
compliance with Rule 403. That defeated the purpose of Rule 403:
to allow an attorney to gain trial experiences by actively
participating in court proceedings while in the presence of a
certified attorney, who is available to assist when necessary. A
certified attorney’s “presence” means more than mere physical
presence; he must be aware of his reason for being present so that
he is prepared to aid the uncertified attorney. And much like a
certified attorney who was less prepared to assist because he was
unaware Curry was attempting to acquire Rule 403 certification, a
certified attorney who is present, but tends to his own business
(e.g., reading other client files) is not “present” for purposes of
Rule 403.
Matter of Conway. 374 S.C. 75, 647 S.E.2d 235 (2007), 9month Definite Suspension for misconduct that included appearing
alone at hearings, depositions and trials since his admission to
practice in 1999, where the Court had no record of Rule 403
certification.
57
III.
Real Estate Closings and Flips:
A.
The area of real estate practice has been under frequent review by the
Supreme Court over the last several years, in matters involving Federal
criminal violations, unauthorized practice of law, and trust account
violations. In State v. Buyers Service Company, Inc., 292 S.C. 426, 357
S.E.2d 15 (1987), the Supreme Court set forth in precise language what
was, and was not, the practice of law in a real estate transaction.
In Matter of Foster, 356 S.C. 129, 587 S.E.2d 690 (2003), Public
Reprimand, Respondent had permitted a non-lawyer employee to perform
real estate closings in his absence and without his supervision, and had
allowed her to sign his name to documents in the transaction. As a result
of his failure to supervise, Respondent was not aware of inaccuracies in
HUD-1 Settlement Statements prepared in a number of the closings. No
client funds were misappropriated as a result of the HUD-1 inaccuracies or
Respondent’s failure to properly reconcile his real estate trust account.
In Matter of McMillian, 359 S.C. 52, 596 S.E.2d 494 (2004),
Respondent was disbarred for a combination of problems, as a result of
allowing non-attorneys access to his real estate practice.
McMillian
entered into a business arrangement with Carolina Title Services, Inc.
(CTS), through its manager Amy Cook, to close large volumes of real
estate loans. Neither Cook nor any other CTS employees were licensed to
practice law.
Closings took place as follows:
the handling of the
underlying transactions were solicited by CTS; lenders sent loan packages
58
to CTS; CTS’s non-lawyer staff would do the title search and prepare the
closing documents; Respondent attended closings, reviewed documents
and signed HUD-1 Statements as “settlement agent;” CTS would see to
recording and disbursement of proceeds, issuance of title policies, and
other necessary matters. Respondent opened a trust account, and gave
Cook signatory authority over it. Neither clients nor, for the most part,
lenders were advised of Respondent’s limited role in the closing.
In
November 2001 Respondent became aware of a $119,000 negative
balance in his trust account, and learned that one or more lenders would no
longer accept his checks because of NSF problems.
Later, another
$188,000 shortage was discovered, as well as one with a different bank for
$250,000. Unknown to Respondent, Cook had directed that one of the
banks place a Sweep Order on the trust account, whereby funds were
swept out of that account on a daily basis into Cook’s personal account.
Chicago Title was involved, and had to pay out over $800,000.
Violations included Rule 5.3(a): A partner in a law firm shall
make reasonable efforts to ensure that the firm has in effect measures
giving reasonable assurance that a non-lawyer employee or associate’s
conduct is compatible with the professional obligations of the lawyer.
The Truth-in-Lending Act means exactly what is says. HUD-1
Statements have to be accurate. For discrepancies and misrepresentations
on a HUD-1 Statement which led to a Public Reprimand, see Matter of
Nevill, 361 S.C. 396, 605 S.E.2d 534 (2004).
59
In Matter of Fayssoux, 26617, March 23, 2009, the Respondent
conducted twenty eight real estate closings related to fraudulent schemes
conducted by a group of business associates, who had sense been
imprisoned for wire fraud, mail fraud and bank fraud. One scheme
involved fake mechanics liens filed by, and on behalf of, some brokers as
a cover for payment of kickbacks, while another scheme involve the use of
entities owned or controlled by the brokers as “straw parties” in flip
transactions, in which the values of the properties were fraudulently
inflated. Lawyer acknowledge that he was not aware of the criminal
activity of his associates, but admitted that there were a number of red
flags in those transactions which should have alerted him to the fraud. In
addition, he loaned money from his law firm pension and profit sharing
account on some of the transactions, loans that were not reflected on the
settlement statements sent to lenders. Due to the lawyer’s self-report, and
cooperation with disciplinary counsel, and long history of no prior
discipline, the Court declined to impose a suspension, and issued a Public
Reprimand.
In Matter of Fortson, 361 S.C. 561, 606 S.E.2d 461 (2004), a 60day Definite Suspension was imposed for the utilization of non-attorneys
employed by South Carolina Real Estate Services, in Fortson’s closings.
The total amount of funds from Respondent’s clients misappropriated by
Anna Knox, daughter of the owner of South Carolina Real Estate Services,
was over $1.1 million. Each of the HUD-1 Settlement Statements from
60
twelve closings involved bore Respondent’s signature as “settlement
agent.”
After learning of Knox’s misappropriation, Respondent self-
reported to Disciplinary Counsel; Knox was indicted and pleaded guilty.
In companion cases, Frank Bryant Brown was definitely suspended
and disbarred, Matter of Brown, 361 S.C. 347, 605 S.E.2d 509 (2004).
Before being admitted to practice law Respondent worked for a North
Carolina real estate firm in Rock Hill. There he conducted real estate
closings without an attorney being present, and signed his own name to
the necessary documents. He would often have other employees notarize
documents, even though they were not present at the closings. In other
matters, with at least one other law firm, Respondent performed closings
prior to being admitted to practice, and without an attorney present. After
becoming a licensed attorney, Respondent allowed non-lawyers under his
supervision to conduct closings outside his presence. He also continued
the practices of witnessing and notarizing documents that were executed
outside his presence, and soliciting witnesses and notarized signatures
from individuals not present during execution. The above fact led to a 2year Definite Suspension.
In a separate set of facts, involving false
representations on HUD-1 Statements and fraud, including illegal property
“flips,” Respondent was disbarred.
In an illegal property flip, the seller enters into a sales contract
with Buyer A. Prior to the sale, Buyer A enters into a contract to sell the
same property at a higher price to Buyer B. Buyer B uses that contract to
61
obtain financing. Buyer A obtains no financing. The conveyances are
made concurrently, with Buyer A using the loan proceeds obtained by
Buyer B to purchase the property from seller. The flip transaction is
illegal when the information to the lender, including the information on
the HUD-1 Settlement Statement, fails to disclose that the property is
being conveyed in two transactions. Often documents have to be predated, or post-dated to mislead the lender. Title commitments, seller’s
affidavits or confirmations, and closing attorney certifications must
contain false information for this scheme to work. Often, neither seller
nor Buyer B is aware of the other’s involvement. In those cases, Buyer A
retains the excess loan proceeds. Buyer B then has a loan on the property
that far exceeds the property value. In other cases, Buyer B is in collusion
with Buyer A, and they share the excess loan proceeds and leave the
lender with property insufficiently valued to cover its loan.
The cooperation of the closing agent is necessary for an illegal
property flip to succeed. First, the title search required by a lender will
reveal that the seller owns the property, rather than Buyer A (the party the
lender believes is the seller). Second, the closing agent must actually
close the “Buyer A to Buyer B” transaction first, in order to fund the
“seller to Buyer A” transaction. However, the deed from seller to Buyer A
must be recorded prior to the deed from Buyer A to Buyer B.
Finally, the lender’s closing instructions, which require that the
closing agent verify the property has not been conveyed within a certain
62
time period, prior to the closing, and/or that there is no simultaneous
conveyance of the property, are ignored.
Another practice frowned upon by the Court is a “witness only”
closing. In Matter of Boyce, 364 S.C. 353, 613 S.E.2d 538 (2005), a
Public Reprimand was issued. In 2004, Boyce was the closing attorney in
a real estate transaction, representing the borrower. The borrower and his
wife had obtained approval for an equity credit line to be secured by their
residence. Buyer contacted Respondent, and requested she assist in a
“witness only” closing of the line of credit. Respondent did not prepare a
deed, mortgage, note, or other legal instrument; she did not ensure that
another attorney did so.
Neither Respondent nor someone under her
supervision conducted a title examination, nor ensured another attorney
did so. Neither Respondent nor someone under her supervision recorded
the documents at the Registrar of Deeds, nor ensure that another attorney
did so. Finally, Respondent signed the HUD-1 Statement certifying she
had prepared it, that it was true and accurate, and that she had or would
cause funds to be disbursed in accordance with the statement. She did not
disburse the funds, and her fee on the HUD-1 was inaccurately presented.
Participating in “witness only” closings, when no other South
Carolina licensed attorney is involved, has the effect of assisting in the
unauthorized practice of law and constitutes a failure to carry out the
responsibilities of a closing attorney.
Signing a HUD-1 Settlement
Statement represents that a licensed attorney has or will disburse the
63
funds, and has completed other steps required of a closing attorney by the
Supreme Court.
B.
The improper conducting of real estate closings has also led to discipline
for unauthorized practice of law, and improper use of notaries and
witnesses. In Matter of Robinson, 372 S.C. 487, 642 S.E.2d 735 (2007),
Public Reprimand, Respondent had closed about thirty real estate
transactions, all but one of them involving refinances, but took no action
to verify that the company arranging the transactions had done the title
work, nor did he ensure that another South Carolina attorney had
performed that service.
While Respondent did review the relevant
documents at each closing, when they concluded he forwarded the
documents to the company and did not record the mortgages nor take any
affirmative action to confirm the mortgages had been properly recorded.
In Matter of Swafford, 374 S.C. 10, 647 S.E.2d 208 (2007), Public
Reprimand, after the closing, and outside the presence of the buyer,
Respondent had his assistant sign the mortgage as a witness, even though
the assistant had not been present at its execution. Respondent then asked
the assistant to sign a statement, under oath, attesting she had seen the
buyer execute the mortgage and that she, along with Respondent, had
witnessed its execution. The assistant signed and Respondent notarized
her signature. Violations included Rules 1.1 (making false statement of
material fact to third person), and 5.3 (reasonable efforts to ensure nonlawyer employee’s conduct is compatible with the professional obligations
64
of the lawyer). See also Matter of Roper, 373 S.C. 72, 644 S.E.2d 53
(2007). And don’t forget Matter of Helton, 372 S.C. 245, 642 S.E.2d 573
(2007), where an Indefinite Suspension was issued where 112 of 125 real
estate closings had been closed by non-lawyer assistants, including the
lack of any meaningful supervision by Respondent, the preparation of
documents, title insurance commitments and policies, and the failure by
Respondent or any other South Carolina lawyer to review the closing
documents.
At closings conducted outside of his office, Respondent
would often bring the documents back to his office, and then have an
assistant witness them, and have them notarized. Violations included
Rules 1.1 (competent representation), 1.3 (diligence), 1.4 (keep client
informed), 4.1(a) (not make false statement of material fact to third
person), 5.3 (non-lawyer’s conduct), and 5.5(a) (assisting others in
unauthorized practice of law).
IV. Social media and civility.
Rule 1.1, Competence.
The duty of competence requires a lawyer to be knowledgeable about the
substantive law in the area in which the lawyer practices. At least one court has
found that the issuance of a “friend” request on a social networking site
constituted a contact in violation of a temporary restraining order. Thus, for
family law practitioners, and criminal defense attorneys subject to no-contact
orders, the duty of competency may require them to warn their clients of the
danger of social networking sites. In the family court field, a study indicates that
65
66% of attorneys use Facebook for online evidence. But this goes beyond family
court: for a practitioner to be truly competent he or she must understand exactly
what Facebook or MySpace is, how postings can be made, and how the
information can be made available. Right now, if Facebook was a country, its
population would be ranked third in the world, behind China and India, and ahead
of the United States. With the use of social media increasing as predicted, it may
soon be possible that a basic awareness of social media will be necessary for the
competent practice of law.
Diligence, Rule 1.3
The Comment to Rule 1.3 provides that a lawyer shall act with zeal in
advocacy upon the client’s behalf. In litigation the duty of diligence as applied to
social media may trigger several obligations, including asking a client, as well as
the client’s family or business contacts, about their social networking activities.
For example, does the client or client’s business (or the government) site have a
Facebook profile? If so, does it contain disparaging comments about the opposing
party?
The duty of diligence may require the lawyer to at least view a client’s
Facebook or MySpace profile if they have one, or, if the profile has been
restricted with privacy settings, diligence may require the lawyer to ensure that
the lawyer is accepted as a “friend” in order to have access to the client’s profile.
A lawyer may also use Facebook to effectively screen clients, declining to
represent those who are less forthcoming with facts, or who tell one story in
person that is different from the one told online.
66
In In re Goldstein, 990 A.2d 404, 408 (Del. 2010), the court found that a
lawyer failed to provide competent representation because he failed to explain to
the client that the client’s conduct regarding a social networking contact in
violation of a restraining order was unlawful.
Facebook and other social networking sites are sources of possible
evidence; ignoring them may be violation of the duty of diligence in Rule 1.3.
The duty of diligence may also require a lawyer to warn the client against
posting damaging content in the future, at least for the duration of litigation. If it
is assumed that opposing counsel is also likely to search online for information
about the adversary client, the lawyer should advise the client not to post
information or pictures that could negatively impact their case. It could be argued
that the duty of diligence also requires a lawyer to monitor the Internet for
information potentially adverse to the client’s position throughout the course of
the litigation.
Duty to Preserve Evidence, Rule 3.4
Rule 3.4(a) prohibits a lawyer from unlawfully altering or destroying
evidence and from assisting others in doing so. Lawyers have a duty to preserve
electronically stored information, and that includes social networking profiles and
information posted on them. In Partee vs. United Recovery Group, C.V. 09-9180
(C.D. Cal., May 3, 2010), a motion to dismiss was granted based , in part, on
evidence submitted by the defendant from the plantiff’s Myspace page, which
revealed that she worked in Utah, as evidence that she also lived in Utah. See also
United States vs. Gagnon, No. 10-52-B-W (D. Maine, April 23 2010), noting that
67
the defendant’ s son, as evidence by the Facebook page submitted into evidence,
apparently harbored considerable animosity toward a witness. See also In re T.T.,
228 S.W.3d 312 (Tex. Ct. of App. 2007), where in a case involving termination of
parental rights the Court considered the father’s statement on his Myspace profile
that he did not want children.
A lawyer has an affirmative duty to ensure the preservation of a client’s
social network profile if that profile contains information or content relevant to
the litigation. In Beye vs. Horizon Blue Cross Blue Shield, 568 F. Supp. 2d
___(D.N.J. 2006), the court ordered the plaintiffs to produce any writing that
related to their eating disorders, including entries on social networking sites such
as Facebook and Myspace.
Duty to Supervise, Rule 5.1
The duty to supervise is found at Rules 5.1 and 5.3. A lawyer with
supervisory authority will be responsible for the unethical acts of the lawyers and
non-lawyers the lawyer supervises. These duties are set forth Rules 5.1 and 5.3.
Rule 5.1(a) requires a managing partner to take responsible efforts to ensure that
all lawyers under his or her supervision comply with ethical requirements. Rule
5.1(b) requires a lawyer with supervisory duties to take reasonable efforts to
ensure that any lawyer reporting to him or her complies with all ethical duties.
Thus, the duty to supervise requires more than a “do no harm” approach. The
lawyer supervising must take affirmative steps to ensure that the lawyers and nonlawyers below him or her in the reporting structure are aware of and in
compliance with the Rules of Professional Conducts to the same extent as applies
68
to the lawyer. Rule 5.1(a) would then require that managing partners take the
formative steps to educate lawyers about the ethical use of social media. This may
require that the law firm take the affirmative step of adopting and implanting a
policy or set of guidelines to address the use of social media by the lawyers.
Rule 5.3(b) holds a lawyer responsible for unethical conduct of his or her nonlawyer staff. So, just as Rule 5.1 requires a firm to educate its attorneys about
social media, so too would Rule 5.3(b) require education of the non-lawyer staff.
It will be difficult to do this is if the managing lawyer has no experience or
knowledge in this area. And this would be no defense to a disciplinary action. It
therefore seems necessary for lawyers to get “up to speed” quickly, despite how
daunting and unfamiliar social media may appear.
The Pennsylvania Ethics Committee addressed ethical obligations in the
context of a non-lawyer staff member’s use of social networking sites for informal
discovery. See Philadelphia Bar Association Opinion 2009-02 (March 2009). The
committee concluded it would be unethical for a lawyer to instruct or permit a
non-attorney staff person to send a “friend” request to a non-party witness for the
purpose of accessing information on the witness’s Facebook profile. Unless the
staff member disclosed his or her identity, and affiliation with the supervising
attorney, and the purpose of the request, the conduct would be an impermissible
deception in violation of Rule 8.4. Under Rule 5.3 the supervising lawyer would
be responsible for the staff member’s conduct. Similarly, Delaware requires that,
when attempting to contact a witness, a lawyer’s agent promptly disclose the
purpose of his contact and his affiliation with the lawyer.
69
See Monsanto
Company vs. Etena Casualty Insurant Company, 593 A.2d 1013 (Del. Sup. Ct.
1990). The Monsanto duty of disclosure wass thus extended into the virtual world,
or risk a a violation of Rules 4.2 (communication with person represented by
counsel) and 4.3 (dealing with unrepresented person).
Flip the coin and suppose that non-lawyer personnel suggested the
“friend” request idea to the supervising attorney. Rule 1.1 would require that
attorney to have at least a basic understanding of the concept of social media
before responding to the suggestion. The duty of competence applies.
Rule 1.3 would suggest that a diligent attorney ask a witness about her social
networking use during her deposition, and seek additional information by formal
discovery request where appropriate.
Confidentiality, Rule 1.6
There are numerous stories of confidentiality breaches by way of attorneys
posting on blogs. One of the most widely published was Matter of Peshek, were
an Illinois Assistant Public Defender was charged with violating ethical rules,
including Rule 1.6, for information posted on her blog (Ill. Commission No.
09CH89, August 25, 2009). In Peshek’s posts she regularly referred to clients by
first name, nickname, or jail identification number, and described in detail their
cases, personal lives, and drug use, among other personal and private
embarrassing information.
The social networking LinkedIN, geared toward professionals, including
attorneys, allows users to connect with other users who are then added to each
other’s network. Once connected, users can view all of the connections in each
70
other’s network. This could lead to the inadvertent disclosure of an attorney-client
relationship. That same risk exists in the context of “friend” lists in a user’s
Facebook profile.
Some social networking applications utilize geo-tagging. Geo-tagging
“tags” information and pictures with GPS coordinates. Foursquare is a popular
location-based social networking service that utilizes geo-tagging. It lets users
“check in” to a place when there, tell friends were they are, and track the history
of where they been and who they have been there with. Points are rewarded each
time a user announces their location. For example a user can announce to her
friends that she is at a local coffee shop by accessing the Foursquare application
through her cellphone. Twitter users can also include their location when posting
a tweet, using the “tweet your location” feature. Facebook announced “Facebook
Places” in August 2010.
But suppose a lawyer agrees with a client to meet outside the office to
discuss her case. Because of the high profile nature of the client, she cautions the
lawyer not to disclose their meeting, lest their plans be revealed. The lawyer then
suggests an out-of-the-way restaurant. The meeting goes well and the lawyer
agrees to represent to the client. On the way back to her office the lawyer the
lawyer tweets “Had a good meeting with a new client. Life is good.” Because the
lawyer has enabled the “tweet your location” in her twitter account, her update
includes exact coordinates at the time of the post. Then, suppose a waiter from the
restaurant takes a break, after the lawyer and her client have left, and logs onto
Twitter from his iPhone. The waiter, who likes to follow local business people,
71
including the lawyer, sees the lawyer’s tweet about meeting with a new client; the
tweet, which is geotagged, appears with an address one block from the restaurant.
The waiter quickly figures out that the new client is a prominent person and posts
to his twitter account: “Just waited on lawyer X, who lunched with Ms. Y.” So
much for not disclosing the attorney-client relationship.
Suppose, as another example, the lawyer got a call from her son, a college
student, during lunch. The son had come home for a surprise visit but forgotten
his key, so the lawyer tells her son to stop by the restaurant and pick up a spare
key. The son is at the restaurant for just a moment, but being a devoted Facebook
user, he “checks in” to the restaurant via Facebook places, which he accesses with
his mobile phone. He checks in with father as well. All of the son’s Facebook
“friends” now know where the lawyer had lunch, thus reducing the secrecy the
lawyer took great pains to ensure.
Trial publicity, Extrajudicial statements, Rule 3.6(a)
Rule 3.6(a) prohibits attorneys from making extrajudicial statements that
have a substantial risk of materially prejudicing a legal proceeding. The story of
Florida Assistant State Prosecutor Brandon White was an example of how a
lawyer may violate the prohibition against trial publicity. At the end of a trial,
where he was second chair, White posted about the case on his Facebook page.
His post was written as a parody of the theme song from Gilligan’s Island, and
described his own performance during the trial as “totally awesome.” At the time
White posted the update the jury had completed deliberations but not yet returned
a verdict.
72
Rule 5.1 supports the need to educate other lawyers about the hasty nature
of White’s post. But a paralegal could publish information on his or her Facebook
profile just as easily as a lawyer. Thus, Rule 5.3 suggests that training should be
extended to the office’s non-lawyer staff as well.
Attorney Frank R. Wilson was impaneled on a jury in a burglary trial.
Despite the court’s instruction not to discuss the case, Wilson posted an entry on
his blog that indentified the crime, the first name of the defendant, and the name
of the judge, whom he described as a “stern attentive woman with thin red hair
and long spidery fingers, that . . . you probably wouldn’t want snapped at you.”
As a result of these posts the verdict was vacated and remanded for a new trial.
See Mike Frisch, “Lawyer-Juror-Blogger sanctioned in California”, Legal
Professor’s Blog (August 3, 2009), at: http://www.lawproffesorstypepad.com
Judges have fallen prey to the lure of social media as a way to discuss
matters pending before them. In Pennsylvania, for example, a special education
hearing officer who posted about matters before her was removed from her
position. Stingle vs. Office of Dispute Resolution, 631 F. Supp. 2d 564 (M.D.
Penn. 2009). And a criminal court judge in New York was transferred, allegedly
in part of because of his social networking activities. See John M. Annese, “Staten
Island Criminal Court Judge to be transferred to Manhattan after Facebook
postings, sources say,” Staten Island Advance, October 15, 2009. Finally, there
was the case involving Ohio Common Pleas Judge Shirley Strickland Saffolk,
who allegedly posted more than 80 comments on a local newspaper’s website
using a pseudonym. Many of the comments discussed cases being tried before
73
her, and many where about a high profile murder trial over which she was
presiding. The Ohio Supreme Court removed her from the case after she refused
to recuse herself. See “Judge Removed from Ohio serial killing case”, CNN.com
(April 23, 2010).
Improper ex parte communications, Rule 3.5
Rule 3.5 prohibits a lawyer from trying to influence a judge, juror or
prospective juror, or other official by unlawful means. The Florida Judicial Ethics
Advisory Committee issued an opinion banning state judges from becoming
“friends” on social media sites with lawyers who may appear before them, see
Florida Judicial Ethic Op. 2009-20, November 17, 2009. By extending or
accepting friend requests with lawyers, judges would be conveying, or
committing others to convey, the impression that the lawyers held a position of
special influence over them. The effect, from Slate (April 30, 2010):
In the wake of that advisory opinion, Florida judges were forced to
dramatically change their Facebooking habits. According to the Orlando Sentinel,
there was a mass exodus of judges from Facebook, and lawyers were de-friended
left and right.
South Carolina, dealing just with magistrates (as of this writing), issued an
Ethics Advisory Opinion allowing magistrates to participate in social networking
and recognizing that such participation is a way to promote the public’s
understanding of the Judiciary (S.C. Judicial Ethics Advisory Opinion No. 08176, January 29, 2009). New York has taken a middle of the road approach,
giving the judges the option to participate in social networks provided the judge
74
exercises an “appropriate degree of discretion” and stays current on the
technology (New York Advisory Committee on Judicial Ethics, Opinion No. 08176, January 29, 2009). Kentucky allows Judges to participate in online social
networking but offers strong words of caution about the potential dangers of such
participation (Ethics Commission of Kentucky Judiciary, “Judges Membership on
internet based social networking sites,” Kentucky Judicial Ethics Opinion JE119, January 20, 2010).
In Texas, Judge Kathryn Lanan requires every juvenile who appears
before her in Juvenile Court to “friend” her on Facebook or Myspace. If the
minor’s activities updates reveal involvement in illegal activities, he or she is
summoned back to court. See http://www.slate.com/id/2252544/
A North Carolina Judge was issued a public reprimand for engaging in
multiple ex parte communications, through Facebook, with the husband’s
attorney in a contested domestic case before him, exchanging posts such as “two
good parents to choose from" and "I have a wise Judge." He also independently
investigated the facts of the case, and did not disclose the “friendship” to the
wife’s attorney until after the fact. See Matter of Terry, N. C. Judicial Standards
Comm., Inquiry No. 08-234, April 1, 2009:
http://www.aoc.state.nc.us/www/public/coa/jsc/publicreprimands/jsc08-234.pdf.
A Superior Court Judge in Georgia resigned days after his relationship
with a woman who was a defendant in a matter pending before his court became
public (Georgia Judge resigns after questions raised about Facebook contact,
ABA Journal, January 7, 2010).
75
A Florida Judge was accused of having an inappropriate relationship with
a prosecutor. According to the complaint filed by the Florida Judicial
Qualifications Commission, the judge and the lawyer exchanged over 1,400 calls
and text messages over a 155-day period (about 9.35 per day), during which the
prosecutor was trying a capital murder case before the judge.
The Florida
complaint alleged 3388 calls and texts during and after the trial. The defendant in
the case, who had been found guilty and sentenced to death, was awarded a new
trial in light of these allegations. The judge resigned. See Judge Accused,
Prosecutor Cleared re 3,388 Calls & Texts During & After Death-Penalty Case:
http://www.abajournal.com/news/article/judge_prosecutor_allegedly_exchanged/
Candor toward the tribunal, Rule 3.3
Candor to a tribunal is the hallmark of lawyer conduct, In re Amberly, 996
A.2d 793 (Del. 2010). The general prohibition against dishonesty is found in Rule
8.4 which prohibits lawyers from engaging in conduct involving dishonesty,
fraud, deceit, or misrepresentation. Rule 4.1 prohibits the making of false
statement of material fact by a lawyer in course of representing a client. Rule 3.3
requires the exercise of candor in the specific context of litigation. Finally, Rule
4.1(b) prohibits a lawyer from knowingly failing to disclose a material fact when
disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.
False postings on social media sites, particularly when related to litigation, can
involve violations of all of these rules.
Civility, the oath of office, Rule 402(k)(3)
76
Lawyers are required to be civil to each other, and to judges, as
represented by the revised oath all of us had to take. For a civility breach
involving a written communication, see Matter of White, Op. No. 26939 (S.C.
Sup. Ct., filed March 7, 2011), a 90-day suspension for sending the following
communication to his client’s (a church) landlords, copied to the town manager:
You have been sent a letter by purported Town Manager Kenneth McIver.
The letter is false. You notice McIver has no Order. He also has no brains
and it is questionable if he has a soul. Christ was crucified some 2000
years ago. The church is His body on earth. The pagans at Atlantic Beach
want to crucify His body here on earth yet again.
We will continue to defend you against the Town's insane [sic]. As they
continue to have to pay for damages they pigheadedly cause the church.
You will also be entitled to damages if you want to pursue them.
First graders know about freedom of religion. The pagans of Atlantic
Beach think they are above God and the Federal law. They do not seem to
be able to learn. People like them in S.C. tried to defy Federal law before
with similar lack of success.
For a breach of civility regarding email, See Matter of an Anonymous
Member of the Bar, Op. No. 26964 (S.C. Sup. Ct., filed April 25, 2011), where
during a hotly contested domestic matter the mother’s attorney sent the father’s
attorney the following email:
I have a client who is a drug dealer on . . . Street down town [sic]. He
informed me that your daughter, [redacted] was detained for buying
cocaine and heroine [sic]. She is, or was, a teenager, right? This
happened at night in a known high crime/drug area, where alos [sic] many
shootings take place. Lucky for her and the two other teens, they weren't
charged. Does this make you and [redacted] bad parents? This incident is
far worse than the allegations your client is making. I just thought it was
ironic. You claim that this case is so serious and complicated. There is
nothing more complicated and serious than having a child grow up in a
high class white family with parents who are highly educated and
financially successful and their child turning out buying drugs from a
crack head at night on or near . . . Street. Think about it. Am I right?
77
At the hearing on this matter the sender of the email admitted the recipient’s
daughter had no connection to the domestic matter. “We publish this Letter of
Caution in the In re Anonymous format so as to provide guidance to the bar. We
caution the bar that henceforth, this type of conduct could result in a public
sanction.”
See also Matter of Lovelace, Op. No. 27052 (S.C. Sup. Ct. filed October
10, 2011). At the beginning of the deposition of the defendant in a civil suit
where Respondent represented the plaintiff, Respondent asked if anyone wanted
to take a break. The defendant said something to the effect of “No, let’s get this
crap over with.” Respondent stood and pointed his finger at the defendant and
warned him not to speak in that manner, the defendant stood and told Respondent
not to point his finger at him, and Respondent then slapped the defendant in the
face. Respondent later pleaded “no contest” to a criminal charge of simple assault
and battery. The Court suspended him for 90 days, with conditions involving
anger management treatment.
Conduct intended to disrupt a tribunal, Rule 3.5(d)
Rule 3.5(d) prohibits a lawyer from engaging in conduct intended to
disrupt a tribunal or engage in undignified or discourteous conduct that is
degrading to a tribunal. Again return to Kristine Anne Peshek, supra, whose
public defender blog about her clients also included less than favorable
commentary about judges. In addition, Florida Attorney Shawn Conway, was
reprimanded for calling a judge “an evil, unfair witch” in a blog post, criticizing
her practice of setting what he claimed to be an unreasonably short time period
78
before trial. He appealed that decision unsuccessfully to the Florida Supreme
Court on constitutional grounds, arguing his comments were protected by the first
amendment. See Florida Bar vs. Conway (2008), at:
http://www.nytimes.com/2009/09/13/us/13lawyers.html?sq=schwartz&st=cse&ad
xnnl=1&scp=3&adxnnlx=1311178313-/zSE6A/hBGf1uQWj7UIlqg
Fairness to opposing counsel and party, Rule 3.4(e)
Rule 3.4(e) requires a lawyer to act with fairness to opposing counsel and
the opposing party in a trial. Specifically, the rule prohibits the lawyer from
alluding to any matter he or she does not reasonably believe is relevant or that
will not be supported by admissible evidence. Rule 4.4(a) prohibits a lawyer from
using means that have no substantial purpose other than to embarrass, delay, or
burden in representing a client. Thus, a lawyer may be limited in how she uses
what she finds as a result of an online investigation. Just because the information
is exciting or embarrassing does not mean it is relevant for a trial, or ethical to
use. For example, imagine a worker’s compensation claimant who contended he
suffered an on- the-job back injury which prevented him from enjoying his
favorite hobby, deep sea fishing. The lawyer for the insurance company discovers
a video on YouTube of the claimant at a deep sea fishing competition, clearly as a
participant. This evidence would be relevant and could be used for impeachment
at a trial.
But suppose the lawyer also found a second video of the same event,
posted on YouTube by a different user. The quality of the second video is poor
and the sound barely audible. But, at the end of the clip the claimant is shown
79
receiving a good luck kiss from a beautiful woman, who is not his wife. The
lawyer shows both videos to the claimant at his deposition. The claimant is clearly
discomforted by the first, but becomes quite upset at the second. The lawyer then
identifies the second video for inclusion as a trial exhibit. She chose it over the
first video, because despite its poor quality she thinks it will give the complaint a
motivation to settle, or even withdraw his claim. Under these facts the lawyer
risks violating Rule 4.4(a) because the true purpose of using the second video is to
embarrass the plaintiff by exposing his affair. See Embry vs. Indiana 923 N.E.2d
1 (Ind. Ct. of App. 2010) (finding that prosecution’s use of a witnesses’ My Space
profile as evidence of impeachment was proper).
This section is largely drawn from Margaret M. DiBianca, Ethical Risks
Arising From Lawyers’ Use of (and Refusal to Use) Social Media, 12
Delaware Law Rev 179 (2011), with her permission. She also operates the
blog http://goingpaperlessblog.com/author/mdibi/, which also includes the
Social Media Research Repository. Ms. DiBianca is a practicing attorney
who lives and works in Wilmington, Delaware. She describes herself as on
a mission to find an easier way to get things done.
V. Flat, or Advance fees:
The Supreme Court, in the disciplinary case Matter of Halford, Op. No. 26924
(S.C. Sup. Ct., Filed April 11, 2011) caused concern in the profession about “flat fees.” In
its original opinion the Court indicated that flat fees must be deposited into a trust
account. After a petition was filed by the South Carolina Association of Ethics Counsel,
the Court reconsidered, and refiled the opinion with this footnote: “Respondent stipulates
that the deposit of ‘flat fees’ into his operating account was a violation of the Rules of
Professional Conduct. We accept the stipulation here for purposes of honoring the
80
Agreement for Discipline by Consent. The handling of ‘flat fees’ is a complex matter and
we do not intend in this opinion to set forth a categorical rule addressing ‘flat fees’.”
A flat fee is a fixed payment for specified legal services. Unlike the hourly fee, it
does not change based upon the time devoted to the matter. Flat fees can be advantageous
to the clients because they know the exact amount they will have to pay. They can also be
advantageous to lawyers because they give lawyers an incentive to perform services
efficiently in either of two ways: by trying to resolve the matter quickly, and by
delegating work to a subordinate in the firm with a lower hourly rate who can
competently perform the services.
But flat fees can be disadvantageous, to both clients and lawyers. From the
lawyer’s perspective the flat fee may be risky, because the lawyer may devote more time
to the matter than anticipated, with the result that his actual payment becomes an
effective lower hourly rate. They can also be disadvantageous to clients, if the lawyer
resolves the matter very quickly, and the client feels that the fee was unreasonable
because the effective hourly rate became high.
On July 30, 2012 the Court amended the Rules of Professional Conduct to address
flat, or advance fees:
Rule 1.5, RPC, Rule 407, is amended by adding Paragraph (f):
(f) A lawyer may charge an advance fee, which may be paid in whole or in part
in advance of the lawyer providing those services, and treat the fee as
immediately earned if the lawyer and client agree in advance in a written fee
agreement which notifies the client:
(1) of the nature of the fee arrangement and the scope of the services to be
provided;
(2) of the total amount of the fee and the terms of payment;
81
(3) that the fee will not be held in a trust account until earned;
(4) that the client has the right to terminate the lawyer-client relationship
and discharge the lawyer; and
(5) that the client may be entitled to a refund of all or a portion of the fee
if the agreed-upon legal services are not provided.
Comment 4 to Rule 1.5 is amended to provide:
Terms of Payment
[4] A lawyer may require advance payment of a fee, but is obliged to return any
unearned portion. A lawyer may accept property in payment for services, such as
an ownership interest in an enterprise, providing this does not involve acquisition
of a proprietary interest in the cause of action or subject matter of the litigation
contrary to Rule 1.8(i). However, a fee paid in property instead of money may be
subject to the requirements of Rule 1.8(a) because such fees often have the
essential qualities of a business transaction with the client.
The following Comments are added to Rule 1.5:
Payment of Fees in Advance of Providing Services
[10] A lawyer may treat a fee paid in advance of providing services as the
property of the lawyer and deposit the fee in the lawyer's operating account, rather
than hold the fee in trust, if the client agrees in a written fee agreement which
complies with Paragraph (f)(1) through (5), and the fee is reasonable under the
factors listed in Rule 1.5(a). The language describing such arrangements varies,
and includes terms such as flat fee, fixed fee, earned on receipt, or nonrefundable
retainer, but all such fees are subject to refund if the lawyer fails to perform the
agreed-upon legal services.
[11] When the lawyer has regularly represented a particular client, the written fee
requirement in Paragraph (f) may be satisfied by a single agreement with the
particular client that is applicable to multiple current or future matters or files,
without the need for the lawyer and client to enter into a new written agreement
for each individual matter.
Paragraph (c) of Rule 1.15, RPC, Rule 407, SCACR, is amended to provide
as follows:
(c) A lawyer shall deposit into a client trust account unearned legal fees and
expenses that have been paid in advance, to be withdrawn by the lawyer only as
fees are earned or expenses incurred, unless the lawyer and the client have entered
82
into a written agreement concerning the handling of fees paid in advance pursuant
to Rule 1.5(f).
Comment 9 to Rule 1.16, RPC, Rule 407, SCACR, is amended to provide as
follows:
Assisting the Client Upon Withdrawal
[9] Even if the lawyer has been unfairly discharged by the client, a lawyer must
take all reasonable steps to mitigate the consequences to the client. The lawyer
may retain papers as security for a fee only to the extent permitted by law. See
Rule 1.15. When permitted, a nonrefundable retainer still must comply with Rule
1.5 and not be unreasonable.
VI. Mental Health Issues as a Defense to Attorney Misconduct.
If mental health issues exist, but too much damage – usually financial - has been
done, a mental health defense to a disciplinary complaint may not succeed. In Matter of
Thompson, Op. No.25205 (Filed October 30, 2000) the Respondent was disbarred.
He had been a single practitioner in Charleston Thompson began experiencing
emotional problems in the early 1970s shortly after his return from Vietnam. In 1988, he
was diagnosed with. bipolar disorder and was hospitalized in Charleston. His mental
illness was exacerbated by the fact that he was also experiencing financial and marital
difficulties.
In 1996 Thompson self-reported to the Commission on Lawyer Conduct that he
had imbalances in his trust account he could not resolve. He met with the investigator and
consented to: (1) a temporary suspension from the practice of law; (2) the appointment of
a trustee to administer his bank account; (3) the freezing of his accounts; and (4) an audit
of his trust accounts.
83
Thompson then moved to Pennsylvania where he attempted suicide. He was
subsequently involuntarily committed and hospitalized at the Medical University of
South Carolina Medical Center.
On September 13, 1996, the ODC filed a complaint alleging the closing of a trust
account on the suspicion of check kiting, negative balances on six occasions with the
maximum overdraft of $23,031.00 and that Thompson wrote eighteen checks for personal
use totaling $62,184.00. Further, it was alleged that his other Trust Account reflected
negative balances 25 times with a maximum overdraft of $83,591.00. Eighteen trust
account checks were returned for insufficient funds. As a result of an audit by Chicago
Title there was shortage of $128,923.00 in that account.
The Complaint also alleged that Thompson engaged in a complicated check kiting
scheme and that he commingled personal funds into his trust accounts.
Thompson filed an Answer admitting to all of the factual allegations, but denying
that he was capable of forming the requisite intent to engage in check kiting and denying
all specific allegations pertaining to check kiting.
On August 22, 1996, the Court placed Thompson on Temporary Suspension. On
February 12, 1997, Thompson was transferred to Incapacity Inactive Status. Dr. Donna
Schwartz-Watts, Associate Professor of the University of South Carolina School of
Medicine in the Department of Neuropsychology and Director of Forensic Services,
examined Thompson in October 1998 to determine whether he should remain on
Incapacity Inactive Status. Although she testified that Thompson had bipolar disorder,
84
Dr. Schwartz-Watts opined that Thompson knew the difference between right and wrong
while committing acts of misconduct.
A Panel Hearing was held in Columbia in 1999. Based on the testimony and
uncontested medical evidence, the Panel concluded that Thompson suffered from "an
aggravated and severe case of bipolar disorder beyond his control and ability to cope for
a period of ten years." The Panel issued a Report recommending an Indefinite Suspension
until "he is able to demonstrate by competent medical evidence that he has sufficiently
recovered from bipolar disorder disease to the point of being able to exercise the
discretion and judgment necessary to practice law." The Attorney General, prosecuting
the matter on behalf of ODC appealed the decision of the Panel and requested that the
Court disbar Thompson.
Rule 26(c)(7) directs the Panel "file a report . . . setting forth the findings of fact
and conclusions of law. . . " The Panel presented several examples of Thompson's
misconduct, including examples of check kiting, overdrafts, and commingling.
Thompson admitted to all of the factual allegations in the Complaint except for his ability
to form the requisite intent to engage in check kiting. The Panel, therefore, focused
primarily on the mitigating facts of: (1) Thompson's severe bipolar disorder; (2) his
cooperation with the investigation; and (3) his efforts to effect restitution.
While the Panel's recommendation included the details of the two trust accouint
matters, the recommendation did not sufficiently detail all of Thompson's misconduct.
Each of these acts was proved by clear and convincing evidence. The Panel did not
provide sufficient details of Thompson's misconduct in its Recommendation. For the
85
Court to properly review this matter; the full extent of Thompson's misconduct must be
evaluated. Based on the severity of Thompson's financial misconduct as presented in
evidence before the Panel, as described in the Panel Report and as summarized in the
attorney General’s brief, the Court disbarred Thompson.
The Attorney General's office argued that the Panel erred by failing to set forth
Thompson's violations of the Rules of Professional Conduct.
Thompson argued that because he admitted to all of the misconduct alleged by the
ODC, it was unnecessary for the Panel to address his ethical violations. However, for the
Court to properly review this matter and decide upon an appropriate sanction, the Panel
should set forth the Rules of Professional Conduct Thompson violated.
The Attorney General argued the Panel erred in finding Thompson lacked the
mental capacity to commit the misconduct. The Court agreed and declined to accept
Thompson's assertion of impairment as mitigation in light of the serious misconduct
committed.
The medical testimony demonstrated that Thompson suffered from severe bipolar
disorder. The Panel had to determine whether the medical evidence served to mitigate
Thompson's misconduct. According to the Panel's Recommendation, "Based on the
medical evidence in this case, during the period prior to and including 1995 and 1996,
Mr. Thompson, by reason of his manic depressive state, did not have the requisite mental
capacity and judgment to manage and direct his law practice or his financial affairs."
However, the Court noted that the Panel acknowledged in its report that Dr. Schwartz-
86
Watts testified that "[Thompson] knew the difference between right and wrong while
committing acts of misconduct."
Thompson demonstrated mental competency through his complicated financial
scheme. Many of the activities Thompson participated in required foresight, extensive
planning, and the ability to coordinate complex tasks. The Court concluded:
“This is a tragic case and we understand the struggle the Panel had in reaching its
recommendation. Nevertheless, while we emphasize that this Court considers
mitigation factors such as mental illness and restitution in attorney discipline
matters, we disbar Thompson because his mental illness does not excuse the long
term pattern and scheme of misconduct in this case.”
JGB31July2012
87