In the Matter of Hass , 477 Mass. 1015 ( 2017 )

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SJC-12131
IN THE MATTER OF DAVID M. HASS.
May 31, 2017.
Attorney at Law, Disciplinary proceeding, Suspension.
The respondent attorney, David M. Hass, appeals from the
order of a single justice of this court suspending him from the
practice of law for two months. 1 We affirm.
Background. In early 2013, the respondent settled a
client's personal injury claim against the Massachusetts Bay
Transportation Authority (MBTA) for $6,600. Understanding that
the settlement would not be paid until approximately July, 2013,
the client signed a release of her claim, and the respondent
delivered the release to the MBTA. In late February, 2013, the
client informed the respondent that she wanted to obtain an
advance on the settlement, and she authorized the respondent to
provide information about her claim to suppliers of such
services. 2 From his work with other clients, the respondent was
1
This bar discipline appeal is subject to this court's rule
governing such appeals. See S.J.C. Rule 2:23, 471 Mass. 1303
(2015). We have reviewed the materials filed. Pursuant to our
rule, we dispense with oral argument.
2
The parties refer to this arrangement as "lawsuit funding"
or "litigation funding." Others have described similar or
related arrangements as "alternative litigation finance" (ALF).
See American Bar Association, Commission on Ethics 20/20,
Informational Report to the House of Delegates, at 5 (Feb.
2012). "Defined most generally, ALF refers to mechanisms that
give a third party (other than the lawyer in the case) a
financial stake in the outcome of the case in exchange for money
2
familiar with the process. He sent a facsimile transmission to
an entity, inquiring about potential suppliers for the client.
Eventually, the client obtained three advances from two
suppliers, and the respondent received related documentation, as
described below:
1. In late February, 2013, the respondent received a "cash
advance agreement" and other documents from Global Financial
Credit, LLC (Global) indicating that, in consideration of a
"cash advance of $1,025.00" the client assigned a security
interest in the proceeds of the MBTA settlement to Global. The
respondent signed and returned documents acknowledging that he
would pay Global that amount, together with other fees described
in the agreement, from the client's portion of the MBTA
settlement. On March 4, 2013, the respondent received a formal
"notice of assignment" from Global.
2. On or about March 14, 2013, the respondent received
documents from Excel Legal Funding (ELF). At a meeting at the
respondent's office, the client executed an "irrevocable letter
of instruction," and the respondent signed an "attorney
acknowledgment." Pursuant to the acknowledgment, the respondent
agreed that the settlement funds would not be disbursed to the
client until ELF was paid in full; acknowledged receipt of the
client's letter of instruction; agreed to place the documents in
his file; and represented, "to my knowledge the plaintiff has
not received any prior cash advances against his/her claim/s."
ELF thereafter gave notice to the respondent that the client had
granted it a "security interest and lien" in the amount of $920
from the proceeds of her MBTA claim. The respondent's file has
an ELF lien notice sticker affixed to it.
3. On or about April 12, 2013, the respondent received a
second letter of instruction from Global, signed by the client,
as well as a cash advance agreement for $725. The respondent
signed and returned to Global an accompanying acknowledgment
representing "that [the client] has NOT previously received a
paid to a party in the case." Id. The report indicates that
"[c]onsumer ALF suppliers are distinguishable from settlement
factoring companies; the former take a partial assignment in a
claim that has not yet been settled or reduced to judgment,
while the latter purchases a claim that has been reduced to
judgment, typically as a result of a judicially approved
settlement." Id. at 6. We express no view about the propriety
of these arrangements.
3
cash advance against his/her legal claim similar to the attached
agreement."
The MBTA paid the $6,600 settlement in late June, 2013, and
the respondent deposited the settlement funds into his client
trust account. A settlement statement was prepared reflecting
the $1,998.00 payoff amount for Global's two cash advances to
the client and accompanying fees; the respondent's legal fees
and costs of $2,569.30; and the balance, $2,032.70, due to the
client. There was no payoff amount indicated for ELF. The
respondent disbursed the amounts indicated on July 2 and 3,
2013.
The respondent did not notify ELF of receipt of the MBTA
settlement funds. As of July 2, 2013, under the terms of the
client's agreement with ELF, approximately $1,265 would have
been due. When ELF inquired about the MBTA settlement and
learned that the respondent already had disbursed the settlement
proceeds to the client, it demanded payment from the respondent.
The respondent refused. It was ELF's request that bar counsel
investigate that gave rise to these proceedings. 3
After a hearing, at which the respondent and a witness from
ELF testified, a majority of the hearing panel found that the
respondent made intentionally false statements to Global and ELF
concerning the absence of prior cash advances, in violation of
Mass. R. Prof. C. 4.1 (a), 426 Mass. 1401 (1998), and Mass. R.
Prof. C. 8.4 (c), 426 Mass. 1429 (1998). The hearing panel
unanimously found that the respondent failed to comply with the
client's ELF letter of instructions by failing to contact ELF to
determine what the client owed to ELF, in violation of Mass. R.
Prof. C. 1.2 (a), 426 Mass. 1310 (1998), and Mass. R. Prof. C.
1.3, 426 Mass. 1313 (1998). It also found that the respondent
failed to notify ELF that the settlement proceeds had been
received, and failed to promptly deliver funds to ELF, in
violation of Mass. R. Prof. C. 1.15 (c), as appearing in 440
Mass. 1338 (1998). A majority of the panel recommended a three-
month term suspension. Both the respondent and bar counsel
appealed.
The board adopted the hearing committee's findings of fact
and conclusions of law, but recommended that the respondent
receive a public reprimand. At bar counsel's request, the board
filed an information in the county court. See Rules of the
3
During the disciplinary investigation, the respondent and
ELF agreed to settle ELF's claim for $700.
4
Board of Bar Overseers § 3.57(a) (2011). The single justice
concluded that the hearing committee's findings, adopted by the
board, were supported by the record. He concluded that a two-
month term suspension was warranted. The respondent appeals.
Discussion. We begin with the immutable principle that
"[t]he most fundamental duty which a lawyer owes the public is
the duty to maintain the standards of personal integrity upon
which the community relies. The public expects the lawyer to be
honest and to abide by the law." Matter of Barrett, 447 Mass.
453, 464 (2006), quoting American Bar Association, Standards for
Imposing Lawyer Sanctions § 5.0 Introduction (1991). See Matter
of Hilson, 448 Mass. 603, 619 (2007). The respondent's
principal argument is that the client's agreements with Global
and ELF were either void or voidable, pursuant to G. L. c. 271,
§ 49, and G. L. c. 140, § 96, and that his own failure to comply
with his client's letter of instruction and his separate
agreements with ELF and Global, as well as the evident
misrepresentations concerning the absence of prior advances
contained therein, therefore should be excused. 4 We reject that
proposition.
The single justice correctly observed that the respondent's
ethical obligations in these circumstances are independent of
the validity, legality, or enforceability of his client's
agreements with the suppliers. See, e.g., Matter of Powers, 26
Mass. Att'y Discipline Rep. 518 (2010) (suspension of one year
and one day based on false affirmations concerning insurance
coverage and falsified insurance declarations, with aggravating
factors); Matter of Lippman, 17 Mass. Att'y Discipline Rep. 381
(2001) (eighteen-month suspension based on failure to disclose
existence of prior unrecorded mortgage, and falsified documents
and false statements concerning mortgage, with mitigating and
aggravating factors). The respondent falsely represented to two
suppliers that, to his knowledge, the client had not received
any prior cash advances against her MBTA settlement, and the
suppliers relied on those representations in deciding to advance
funds to the client. 5 Irrespective of the validity of the
4
On the view we take of the case, we do not address the
respondent's arguments concerning the validity of the cash
advance arrangements between the respondent's clients and the
suppliers.
5
We presume that the respondent was not of the view, at the
time the misrepresentations were made, that the proposed
5
transactions between the client and the suppliers, the
respondent violated his ethical obligation not to "engage in
conduct involving dishonesty, fraud, deceit, or
misrepresentation." Mass. R. Prof. C. 8.4 (c), 426 Mass. 1429
(1998). See Matter of Barrett, 447 Mass. at 464 ("engaging in
conduct that is dishonest or deceitful, or that adversely
reflects on an attorney's fitness to practice, will suffice" to
constitute violation of rules of professional conduct).
The same is true of the respondent's failure to comply with
his client's written instructions concerning the MBTA settlement
proceeds, and his own obligations to ELF once the proceeds were
received. The hearing committee concluded that the respondent's
failure to notify ELF was the result of "extreme[]
careless[ness] to the point of gross negligence," and was not "a
conscious decision." That conduct is proscribed by the
disciplinary rules. The respondent's postdisbursement
rationalization concerning the validity of the underlying ELF
transaction with the client does not excuse his own prior
misconduct. Indeed, if there had been any dispute about the
proper disbursement of the settlement funds, both the rules of
professional conduct and the agreement with ELF would have
precluded disbursement to the client until the dispute was
resolved.
Turning to the question of sanction, we consider whether
the two-month suspension imposed by the single justice "is
markedly disparate from those ordinarily entered by the various
single justices in similar cases." Matter of Gustafson, 464
Mass. 1021, 1023 (2013), quoting Matter of Alter, 389 Mass. 153,
156 (1983). "[W]e give 'no special deference' to the
determination of the single justice [as to disciplinary
sanction] but both we and the single justice give 'substantial
deference' to the board's recommendation." Matter of Sharif,
459 Mass. 558, 563 (2011), quoting Matter of Doyle, 429 Mass.
1013, 1013 (1999).
We agree with the single justice's observation that the
respondent's misconduct was more serious than failure promptly
to notify a third party and deliver funds to satisfy a lien, and
that more than a public reprimand is required. See Matter of
Kelleher, 26 Mass. Att'y Discipline Rep. 281 (2010) (stipulation
to public reprimand for failing to notify third party and
deliver funds to satisfy lien, where mitigating circumstances,
transactions were "illegal." Otherwise, the petition for
discipline might well have charged additional misconduct.
6
including restitution, present); Matter of Hughes, 25 Mass.
Att'y Discipline Rep. 277 (2009) (same). We also agree that the
respondent's misconduct is less egregious than that in Matter of
Phillips, 24 Mass. Att'y Discipline Rep. 547 (2008). In that
case, the attorney was suspended for three months based on an
intentional breach of fiduciary duty and violation of a court
order to create a trust (with the proceeds of a settlement) for
the benefit of a client's child, by facilitating the client's
access to the child's funds. It is also less egregious than
that in Matter of Rafferty, 21 Mass. Att'y Discipline Rep. 550
(2005), where the single justice accepted a stipulation to a
three-month suspension for an attorney who violated a court
order to preserve settlement funds for the benefit of a minor by
paying one-half of the funds to the minor or to her landlord for
household expenses, and later lost track of the funds. Although
restitution of the full settlement amount was made in
both Phillips and Rafferty, unlike in those cases, in this case,
no violation of a court order was involved. 6
The hearing committee, as the sole judge of credibility,
declined to credit the respondent's explanations for his
misconduct, and found no factors to weigh in mitigation of
sanction. Its findings were adopted by the board and the single
justice. With respect to factors in aggravation, the board and
the single justice adopted the hearing committee's findings
concerning the respondent's substantial experience in personal
injury law and practice in general, and his experience with
litigation funding suppliers in particular. See Matter of
Luongo, 416 Mass. 308, 311-312 (1993). The same was true of his
apparent lack of insight with respect to the ethical obligations
imposed by the rules of professional conduct, see Matter of
Clooney, 403 Mass. 654, 657 (1998), lack of remorse, and lack of
candor in the disciplinary proceedings. See Matter of
Eisenhauer, 426 Mass. 448, 457, cert. denied, 524 U.S. 919
(1998). Considering all of these factors, we are satisfied that
a two-month suspension is not markedly disparate from the
sanctions imposed in comparable cases.
Finally, we note that the respondent filed a motion to
dismiss in the county court. He contends that the motion should
have been allowed, because bar counsel did not address in the
county court the points he raised regarding the board's
findings. Although bar counsel did not respond expressly to the
respondent's motion, she did not concede that there was error.
6
We acknowledge that, after the disciplinary proceedings
commenced, the respondent reached a settlement with ELF.
7
The single justice independently reviewed the record and
concluded that the board's findings were supported by
substantial evidence. See Matter of Barrett, 447 Mass. at 459-
460; Matter of Segal, 430 Mass. 359, 364 (1999). Although a
party risks much by failing to respond to an argument raised by
an opponent, that failure does not equate necessarily with
victory for the opponent.
Conclusion. The order of the single justice, imposing a
two-month term suspension, is affirmed.
So ordered.
The case was submitted on the papers filed, accompanied by
a memorandum of law.
David M. Hass, pro se.