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Archive for the ‘California LPL’ Category

Are Verbal Fee Splits Among California Law Firms Okay?

Posted on: July 18th, 2019

By: Greg Fayard

The answer to this question is now “no.” When different law firms split a legal fee–say a contingency fee–verbal “gentlemen’s agreements” are not permitted under California’s new ethics rules. The old ethics rules allowed different law offices to verbally agree to a referral fee wherein the referring lawyer would get, say, 5% of any total recovery by another, unaffiliated lawyer. New Rule 1.5.1, now requires that the unaffiliated lawyers splitting or dividing such a fee have their own agreement in writing. Further, the client has to consent in writing to that fee split. The written disclosure to the client must disclose the terms of the fee split and the identity of the lawyers who are splitting the fee. As long as the total fee charged by all lawyers is not increased due to the agreed split, fee sharing among different law offices is permissible under California’s ethical rules.

The agreement among unaffiliated law offices need not be signed, however. An informal e-mail setting forth the terms of the fee split could suffice.

The lesson here is casual, oral arrangements among California law firms to split legal fees are no longer permitted under the ethical rules.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Can a California Supervising Lawyer Be Disciplined for an Associate’s Misconduct?

Posted on: June 28th, 2019

By: Greg Fayard

The answer to this question is yes, in certain circumstances. This is a change under the current rules of professional conduct for lawyers compared to the prior rules, which expired last October 31, 2018.

Rule 5.1 says supervising lawyers must make reasonable efforts to ensure the firm has measures to ensure all lawyers comply with the ethical rules. Such measures include policies and procedures on conflicts of interest, a calendaring system, guidelines on workloads and proper supervision of inexperienced lawyers. However, a supervising lawyer can be responsible for a subordinate lawyer’s violation of an ethical rule if the supervising lawyer ordered the violation, or knew the relevant facts and conduct and ratified it, or knew of the violative conduct at a time when its consequences could have been avoided but failed to mitigate it or take remedial action. A “supervising” lawyer is a case-by-case question of fact.

Where the potential ethical violation, however, was a reasonable resolution to a problem, or an arguable question of professional responsibility, then the supervising lawyer would not be subject to discipline for the subordinate’s ethical lapse.

The point is: supervising lawyers now have some responsibility for the ethical breaches of junior lawyers, or those they supervise. An experienced lawyer for example, who is supervising another experienced lawyer but who is practicing in a new area, could be disciplined for that equally seasoned lawyer’s ethical lapse. Rule 5.1 does not only apply to the experienced lawyer supervising a less experienced lawyer.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Fourth Circuit Affirms $61 Million TCPA Judgment

Posted on: June 18th, 2019

By: Matt Foree

The United States Court of Appeals for the Fourth Circuit recently affirmed a judgment based on a jury verdict of over $61 million for illegal telemarketing calls made under the Telephone Consumer Protection Act (“TCPA”). As a matter of background, plaintiff Thomas Krakauer brought the TCPA lawsuit against Dish Network, L.L.C. (“Dish”) after he received telemarketing calls from Dish’s third-party contractor, Satellite Systems Network (“SSN”), which made calls on its behalf, despite the fact that Krakauer had listed his telephone number on the national Do Not Call registry. The TCPA provides for a private right of action to those who have received more than one telephone solicitation within any 12-month period to a number listed on the Do Not Call registry without consent or an established business relationship. The TCPA provides for statutory damages of $500 per violation, which can be trebled to $1500 per violation for willful or knowing violations.

In 2015, Krakauer filed a class action lawsuit in the District Court for the Middle District of North Carolina. The District Court certified the class and the case went to a jury trial. The jury awarded $400 per call as damages and found that the calls were willful, thereby trebling the damages, which resulted in an over $61 million jury verdict.

Dish appealed the judgment on several bases. When it challenged the standing of some of the class members, the Fourth Circuit made quick work of that argument, relying on the U.S. Supreme Court’s recent Spokeo, Inc. v. Robins decision to find that standing existed. In so holding, the court underscored the legal traditions recognizing intrusions upon personal privacy. Dish also challenged class certification. Noting that Dish’s core argument seemed to be that the class included a large number of uninjured persons, the Fourth Circuit upheld class certification, finding that the class certified by the District Court easily met the demands of Rule 23.

Finally, Dish argued that it was not liable for SSN’s conduct and that the violations were not knowing or willful to permit treble damages. The court found that considerable evidence supported an agency relationship between Dish and SSN. Among other things, the court referred to the provisions of the parties’ contract giving Dish broad authority over SSN’s business and the fact that Dish authorized SSN to use its name and logo during its operations. Finally, the court found that the willful or knowing standard was met, thereby upholding the judgment.

Throughout the Fourth Circuit’s opinion, the court made several charitable statements about the TCPA, suggesting that the statute is straightforward and easy to apply. It also described the appropriateness of TCPA claims for class certification. In sum, this case provides a case study of many of the landmines confronted by TCPA defendants, including potentially devastating statutory damages, class certification, and vicarious liability issues. This case is just the latest reminder that those operating in this space would do well to ensure strict compliance with the TCPA to avoid a similar fate.

If you have questions or would like more information, please contact Matt Foree at [email protected].

Avoiding Legal Malpractice Tip: Don’t Sue Your Client For Fees

Posted on: June 17th, 2019

By: Greg Fayard

Sometimes clients don’t pay their attorneys’ fees. Should the unpaid lawyer sue his or her client for owed legal fees? While the lawyer certainly has the right to file suit, a lawsuit against a client can trigger a cross-claim for legal malpractice or breach of fiduciary duty. If you don’t want a lawsuit with your client, it is better to not file a lawsuit against your client. If, however, you have no choice (e.g., the amount is significant and the client is ignoring your collection efforts), make sure you file it after the statute of limitations has run on a legal malpractice claim. In California, wait more than one-year after you ended your representation or performed any legal work for the now delinquent former client. Better yet, before you decide to bring a claim for fees, conduct an analysis of any tolling provisions in the legal malpractice statute, such as when the delinquent client knew or should have known of any facts that could support a malpractice claim, or when the delinquent client suffered an “actual injury.”

Some lawyers prefer the slightly less formal process of resolving fee disputes through fee arbitration available through county bar associations, or the State Bar.

Regardless of the forum, before bringing a claim for fees, whether in fee arbitration or in court, double check your insurance policy to verify that a cross-claim for legal malpractice is a covered claim. Lastly, ask yourself, is paying your deductible and possible higher insurance premiums in future years worth filing a fee claim? More often than not, the answer is “no.”

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

The State Bar of California Moves to Suspend Michael Avenatti’s Law License

Posted on: June 11th, 2019

By: Paige Pembrook

On June 3, the State Bar of California filed a petition to place attorney Michael Avenatti – infamous for his past representation of Stephanie Clifford (a.k.a. Stormy Daniels) and his own present legal woes – on involuntary inactive status, which is the first step toward disbarment. The State Bar action follows Avenatti’s indictment for his alleged embezzlement of millions of dollars from clients in California, conduct that the Bar says poses “a substantial threat of harm to clients or the public.”

The State Bar petition primarily focuses on the case of former Avenatti client Gregory Barela, who alleges that Avenatti illegally withheld settlement funds and then repeatedly lied about it. Barela alleges that Avenatti did not disclose receipt of Barela’s settlement funds despite Barela’s repeated inquiries over several months, that Avenatti refused to provide an accounting of the settlement funds as required by California law, and that Avenatti presented Barela with a falsified settlement agreement that misrepresented that dates that payment would be received.

The State Bar stated that Avenatti provided no defense or response to the State Bar investigators. Avenatti disagreed and stated that he “offered to cooperate with the Bar and instead they decided to issue a press release as a stunt.” Avenatti has until June 13 to file a formal response and request a hearing, or else he will waive his right to a hearing.

Although the allegations in the State Bar petition to suspend Avenatti’s license appear extreme, all attorneys should be wary of misappropriating client funds in violation of California Rules of Professional Conduct, Rule 1.15, and Business and Profession Code section 610. Under Rule 1.15, attorneys have a duty to properly hold, manage, and account for money held in trust on behalf of clients, and sometimes on behalf of others. An attorney violates Rule 1.15 when the attorney’s trust account balance falls below the amount required to be held on behalf of his or her clients, and it is due to a willful act of the attorney, regardless of the attorney’s explanation. If the Rule 1.15 violation occurs due to the attorney’s dishonesty, recklessness, or grossly negligent management of the client trust account, then the misappropriation of client funds also violates Business and Profession Code section 6106 and almost always results in severe discipline, including possible disbarment.

Whether or not they are in the public spotlight, all attorneys must attentively manage their client trust account to ensure that they always contain the amounts held on behalf of clients. Otherwise, those attorneys may be exposed to State Bar discipline, disbarment, and civil liability to their clients, just like Avenatti.

For more information, please contact Paige Pembrook at [email protected].