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Ethics Byte

Focus returns to tighter discipline with Supreme Court’s return of 24 cases

By Diane Karpman

Diane KarpmanRecent signs suggest that the discipline pendulum (which shifts every decade or two) is about to radically switch once again. On Thursday, June 21, in an unprecedented move, the Supreme Court of California, which by law has the last word in attorney discipline, referred 24 (yes, twenty-four) cases back to the State Bar Court. These cases represent many hours of heavily negotiated, fact-intensive, detailed stipulations, which were signed, sealed and delivered to them. The ink was already dry on these settlements, in which the respondents, trial counsel, and State Bar Court judges had all signed off. In the past, some in the legal profession had assumed the Supreme Court would merely "rubber stamp" these State Bar Court’s determinations. Obviously, that’s not true anymore.

Every year, hundreds of disciplinary stipulations are approved. This is a long, tedious process, involving the application of case precedents and the balancing of mitigating and aggravating factors. “The 24” were returned for "further consideration of the recommended discipline in light of the applicable attorney discipline standards. See In Re Silverton (2005) 36 Cal. 4th 81, 89‑94; and In Re Brown (1995) 12 Cal. 4th 205, 220.)” 

Both of those cases were returned for imposition of greater discipline. Silverton is iconic as one of the very few double disbarment cases. Inferentially, the sanctions in these 24 cases are insufficient. However, are there some discernable trends we can glean from these rejects? Obviously, because these cases are still “in play,” we can’t discuss the particulars, but some overarching trends appear to be clear. About half of the cases involved financial shenanigans or "loan modifications." This is to be expected when you consider that the State Bar allocated vast resources to the Loan Modification Task Force, and more importantly, that people were losing their homes because of these situations.

“The 24 cases” are sending a strong message that sharing fees with a non‑lawyer is not just going to be a slap on the wrist. Quite a few involve this circumstance, prohibited by Rule 1‑320 (Financial Arrangements with Non‑lawyers). This rule codifies the centuries-old concept that a lawyer’s independent judgment will be impaired if there is fee splitting with a non‑lawyer.

This is a topic that is resonating all over the world. A few years ago, Slater & Gordon (a plaintiffs’ class action firm in Australia) was permitted to go public. Washington, D.C. has permitted non‑lawyer law firm ownership for many years and, as far as I know, the sky has not fallen on those attorneys. However, in those situations the lawyers maintained primary control over the entity. This may have been lacking in the rejected “24 cases,” in which it seemed the lawyers were receiving a small percentage of the fees collected for loan modifications processed by non‑attorneys.

Another factor that appears in these cases is the failure to make a refund to the clients (3‑700 (d)). When a member’s employment is terminated, he or she must give back the file and promptly refund any part of the fee paid in advance that remained unearned. This is another theme repeatedly appearing in “the 24.”

By citing to Silverton, it seems that any repeat player must be subject to substantial disciplinary sanction in a subsequent case (at least half a dozen of the 24). There are attorney disciplinary standards which apply and, according to standard 1.7(a), the degree of discipline imposed in a subsequent proceeding must be greater than that imposed in the prior proceeding unless it would be "manifestly unjust." (This is rarely found.) Note that Standard 1.7(b) requires disbarment if a member has a record of two prior impositions of discipline. (Yes, this is a three strikes rule, which has existed for decades.)

In reviewing the actual papers for “the 24,” there is an almost startling absence of case law in support of their deviations from the standard discipline. The standards are similar to "sentencing guidelines." “The 24 cases” all recite what would ordinarily be the discipline, and then deviate, without much case support for the deviation.

A license to practice law cannot be loaned out or sold to the highest bidder. While we were in school studying torts, some people were in the streets studying crimes, and are often far more sophisticated than lawyers. Some of them set up entire “law offices” staffed by non‑attorneys, then retain newly admitted lawyers, or those tottering on the brink of retirement, and run an entire “practice mill” around their license. These criminals find lawyers on the margin, suffering from some type of impairment, an incest victim, or someone with a seriously ill spouse. They would find some attorney suffering from some circumstance that made it easy to dominate them and then simply use the attorney’s name. This was widespread in the ‘80's and ‘90’s, especially in heavily urban areas like the Wilshire Corridor and Ventura Boulevard, where no one knew their neighbors. It would take them about two or three years to tarnish a lawyer’s license, and then these operations would simply move in a "new lawyer." Many of “the 24” suggest that type of operation, where lawyers are fungible, just figureheads to give these criminals the ability to engage in the unauthorized practice of law.

Another indication that disciplinary prosecution is becoming more intense is that the State Bar has begun prosecuting lawyers for MCLE violations. Please read the MCLE rules. There are some "bonanza units," like teaching a course, that entitle you to four units for every one hour in class. Writing an article is “one for one.” Many of the people who are being investigated by the State Bar for MCLE issues just didn’t know how to accurately count their units. Be sure that you get your units and keep track of them to protect yourself. Just because "the 24 cases" were rejected does not mean that Jack Bauer is going to be there to rescue you.

Legal ethics expert Diane Karpman can be contacted at 310-887-3900 or