Disciplinary Counsel v. Willard , 123 Ohio St. 3d 15 ( 2009 )

[Cite as Disciplinary Counsel v. Willard, 123 Ohio St.3d 15, 2009-Ohio-3629.]
DISCIPLINARY COUNSEL v. WILLARD.
[Cite as Disciplinary Counsel v. Willard, 123 Ohio St.3d 15, 2009-Ohio-3629.]
Attorneys — Misconduct — Partnering with nonlawyer organization — Six
violations of the Disciplinary Rules — License suspension, partially
stayed.
(No. 2009-0465 — Submitted June 16, 2009 — Decided July 30, 2009.)
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and
Discipline of the Supreme Court, No. 08-042.
––––––––––––––––––
MOYER, C.J.
{¶ 1} Respondent, John Thaddeus Willard of Hamilton, Ohio, Attorney
Registration No. 0002125, was admitted to the practice of law in Ohio in 1966.
The Board of Commissioners on Grievances and Discipline recommends that we
suspend respondent’s license for one year, staying the suspension upon
conditions, for his conduct in partnering with a nonlawyer organization to
represent clients and for representing them with very little preparation or
communication. We agree that respondent committed the misconduct found by
the board and find two additional violations of the Disciplinary Rules. We also
conclude that respondent’s reproachable acts warrant a harsher punishment than
that recommended by the board and accordingly suspend respondent for one year
with six months stayed.
I. Procedural History
{¶ 2} Relator, Disciplinary Counsel, filed a complaint against
respondent, alleging violations of six Disciplinary Rules based on respondent’s
conduct in representing numerous clients referred to him by a foreclosure
assistance service. A panel of the Board of Commissioners on Grievances and
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Discipline heard the case and concluded that respondent had committed four
violations of the Code of Professional Responsibility, but that there was a lack of
clear and convincing evidence that respondent had committed the other two
alleged violations. The panel recommended a suspension from the practice of law
for one year, with the entire suspension stayed. The board adopted the panel’s
findings and sanction, recommending a stayed suspension of one year.
{¶ 3} Relator filed objections to the board’s decision, arguing that there
was sufficient evidence to support finding violations of the remaining two
Disciplinary Rules and that respondent should be given a one-year suspension
with only six months stayed.
II. Misconduct
A. Introduction
{¶ 4} Respondent was contacted by Foreclosure Alternatives in 2004 to
represent customers in foreclosure actions. Foreclosure Alternatives is a company
that solicits clients who are defendants in pending foreclosure proceedings by
offering to intervene on their behalf and negotiate with the foreclosing lender.
The company is not owned by attorneys, and to the parties’ knowledge, it has no
attorney employees.
{¶ 5} Foreclosure Alternatives sends direct-mail advertisements to these
individuals. Any customers who respond are contacted by an employee to
schedule a meeting, and a packet of information is sent to the customer. The
packet includes a mediation agreement, which lays out the company’s fees, and
instructions for the customer to deposit money in an account on a monthly basis to
demonstrate to the lender the customer’s ability to make payments. A limited
power of attorney is also included in the packet, which provides authority to an
unnamed attorney to take legal action on the customer’s behalf. None of the
information provided discloses the fee that will be paid to the attorney out of the
general fee paid to Foreclosure Alternatives. The information does state that the
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company is “here to make this dreadful process go away,” and the panel found
that customers understood this phrase to mean that the company would resolve all
foreclosure issues in their best interests.
B. Respondent’s Protocol for Cases from Foreclosure Alternatives
{¶ 6} Respondent agreed to limited representation of customers referred
by Foreclosure Alternatives for a fixed fee of $150 per case. His representation
was limited to filing responsive pleadings, because the company retained
authority to negotiate with the lender. Respondent participated in a minimum of
28 cases referred by Foreclosure Alternatives.
{¶ 7} Under respondent’s usual protocol for these cases, he would
receive a copy of the foreclosure complaint filed against the client and the limited
power of attorney from Foreclosure Alternatives. He would then file an answer to
the complaint or a motion to strike and send a copy to the client along with a letter
stating: “This is a response I filed on your behalf. I had a referral from
Foreclosure Alternatives. If there are any other defenses you can think of, feel
free to call me.” This letter was the first communication with the client, and, in
fact, usually the first occasion for the client to learn the name of his attorney. Out
of the 28 or more Foreclosure Alternatives clients, respondent discussed cases
with only three or four of them.
{¶ 8} Negotiations with the lender were conducted by Foreclosure
Alternatives; respondent was not even informed of their progress. The next action
respondent would take was to notify the company when he received a motion for
summary judgment filed by the lender. If the client had no defense, respondent
sent a letter to the client stating: “A motion for summary judgment was filed. I
suggest that you consider a Chapter 13 bankruptcy or a bankruptcy.” Respondent
did not otherwise personally communicate with the client.
C. The Chandlers’ Case
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{¶ 9} The foreclosure on the home of David and Annette Chandler led to
this professional grievance. The Chandlers contacted the company after receiving
an advertisement. They then received the typical packet of information and
subsequently submitted a copy of the complaint filed against them by their lender,
Wells Fargo, the signed power of attorney, and the signed mediation agreement.
{¶ 10} After the Chandlers wrote a check for $450, half of the total fee,
Foreclosure Alternatives notified them that the “attorney has filed plea [sic] and
answered the complaint in your foreclosure case,” although the letter did not
identify the attorney, and no answer was ever filed. The company did not actually
refer the case to respondent for another two months. By the time respondent
received the file, in October 2006, the court had already entered a default
judgment against the Chandlers and had ordered that their house be sold. Instead
of contacting the clients, however, respondent told the company that it was too
late to help the Chandlers; he agreed, however, to do “something” and accepted
the fee. Respondent filed a motion to strike the complaint and eventually
contacted Wells Fargo. The lender’s representative informed respondent that the
sale of the Chandlers’ home would go forward as scheduled on October 23.
{¶ 11} The Chandlers learned of the sale of their home through a
newspaper notice only two weeks prior to the scheduled date. Upon contacting
Foreclosure Alternatives, the company informed them that everything was fine.
But on October 20, Foreclosure Alternatives told the Chandlers that their situation
was hopeless. The Chandlers were not notified that a motion to strike had been
filed, and they never received a copy of the motion. The foreclosure sale took
place as scheduled on October 23. It was only in early December that the
Chandlers learned respondent’s name by examining court documents. The
Chandlers wrote to respondent and requested that he forward their file to another
attorney, who subsequently filed the grievance against respondent along with a
civil suit against respondent and Foreclosure Alternatives.
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D. Disciplinary Rule Violations
{¶ 12} The board first found respondent to have violated DR 2-103(C) (In
general, a lawyer shall not request a person or organization to recommend or
promote the use of the lawyer’s services). We agree with the board’s finding.
Respondent entered into an oral agreement with Foreclosure Alternatives whereby
the company, which did not employ any attorneys, would solicit business from
customers and refer the cases to respondent. The company does not qualify as an
authorized referral service as described in DR 2-103(C)(1). Respondent had no
contact with the clients prior to the referral, and he obtained the business only
because of this agreement with the company. In fact, the clients did not even
know the identity of their attorney before he began work on their cases.
{¶ 13} The board also found respondent to have violated DR 3-101(A) (A
lawyer shall not aid a nonlawyer in the unauthorized practice of law). “We have
held that by advising debtors of their legal rights and the terms and conditions of
settlement in negotiations to avoid pending foreclosure proceedings, laypersons
engage in the unauthorized practice of law.” Cincinnati Bar Assn. v. Mullaney,
119 Ohio St.3d 412, 2008-Ohio-4541, 894 N.E.2d 1210, ¶ 20, citing Cincinnati
Bar Assn. v. Telford (1999), 85 Ohio St.3d 111, 707 N.E.2d 462. Though
respondent provided in-court legal representation by filing pleadings on behalf of
the Chandlers and other clients, all negotiations with creditors were performed by
Foreclosure Alternatives. This arrangement was part of the agreement between
respondent and the company. It is not contested that Foreclosure Alternatives
does not employ any attorneys.
{¶ 14} The board next found a violation of DR 3-102(A) (In general, a
lawyer shall not share legal fees with a nonlawyer). The Chandlers and other
customers paid a set fee to Foreclosure Alternatives to handle negotiations with
foreclosing lenders and to provide advice regarding their situation. This work
amounts to the practice of law. See Mullaney, 119 Ohio St.3d 412, 2008-Ohio-
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4541, 894 N.E.2d 1210, at ¶ 20. The company then transferred $150 of the set fee
paid by customers to respondent for each case he handled. Because Foreclosure
Alternatives does not employ attorneys, by his participation in this arrangement,
respondent shared legal fees with a nonlawyer.
{¶ 15} Finally, the board found a violation of DR 3-103(A) (A lawyer
shall not form a partnership with a nonlawyer if any of the activities of the
partnership consist of the practice of law). As we have explained, the actions of
respondent and Foreclosure Alternatives constituted the practice of law by
representing debtors facing foreclosure. Respondent partnered with the company
to provide these legal services, with respondent filing formal pleadings on the
clients’ behalf and the company advising the clients and negotiating with lenders.
Respondent has not filed objections to these findings, and we agree with the board
that respondent violated these four Disciplinary Rules.
{¶ 16} But the board found a lack of clear and convincing evidence to
support alleged violations of both DR 6-101(A)(2) and 7-101(A)(1), and relator
has now objected to their dismissal. The objections are well taken.
{¶ 17} DR 6-101(A)(2) prohibits a lawyer from handling a legal matter
without adequate preparation. The parties stipulated that respondent’s conduct
violated this rule, but the board concluded that even a more prepared attorney
could not have done more for the Chandlers because default judgment had already
been entered against them. The board assumed that the Chandlers’ circumstances
did not allow for any form of relief from the default judgment. But though a
default judgment had been entered, respondent still accepted the case from
Foreclosure Alternatives and filed a motion to strike without contacting his clients
to learn about their situation and any possible defenses. An attorney cannot be
adequately prepared to represent clients if he has never even bothered to contact
them.
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{¶ 18} The board’s analysis of DR 6-101(A)(2) also ignored the other
clients whom respondent represented on referral from Foreclosure Alternatives.
The stipulated facts show that respondent typically filed an answer to a
foreclosure complaint against clients without contacting them. His initial contact
involved a copy of the answer and a cover letter that put the burden on the clients
to put forth any additional legal defenses. Respondent discussed cases with only
three or four actual clients, and he did not negotiate with the clients’ lenders.
When a motion for summary judgment was filed against his clients, he simply
sent a letter to the client notifying them of that fact and suggesting that they file
bankruptcy. These facts show a lack of preparedness in violation of the
Disciplinary Rules for all Foreclosure Alternatives clients. We hold that
respondent violated DR 6-101(A)(2), as the parties stipulated.
{¶ 19} DR 7-101(A)(1) prohibits a lawyer from intentionally failing to
seek the lawful objectives of his client. The board’s finding that this alleged
violation is not supported by clear and convincing evidence is incorrect. With
respect to the Chandlers, respondent failed to seek their objectives by not
contacting them to discover whether there remained any means to aid them in
avoiding the pending foreclosure. With respect to the other clients, respondent
violated this rule by “surrendering [his] professional judgment to” the company.
Mullaney, 119 Ohio St.3d 412, 2008-Ohio-4541, 894 N.E.2d 1210, at ¶ 23. In
Mullaney, we noted that “[c]ounseling debtors in financial crisis as to their best
course of legal action requires the attention of a qualified attorney.” Id. at ¶ 24,
citing Columbus Bar Assn. v. Flanagan (1997), 77 Ohio St.3d 381, 383, 674
N.E.2d 681. Here, however, respondent was involved in the cases only to the
extent that he filed responsive pleadings in court. All advising and negotiation
were left to Foreclosure Alternatives. Respondent “failed to evaluate [his] clients’
situations and develop a strategy to meet their individualized needs.” Id. at ¶ 27.
We hold that respondent also violated DR 7-101(A)(1).
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III. Sanction
{¶ 20} The proper sanction for violations of the Disciplinary Rules is
determined by consideration of “the duties violated, respondent’s mental state, the
injury caused, the existence of aggravating or mitigating circumstances, and
applicable precedent.” Disciplinary Counsel v. Evans (2000), 89 Ohio St.3d 497,
501, 733 N.E.2d 609. Each factor is addressed below.
A. Duties Violated and Injury Caused
{¶ 21} Respondent’s representation of clients referred from Foreclosure
Alternatives led to violations of six Disciplinary Rules. Respondent arranged for
an organization to promote his services, partnered with a nonlawyer to aid the
other in the unauthorized practice of law and share legal fees, assumed cases
without adequate preparation, and failed to seek the objectives of his clients. He
represented at least 28 clients with very little communication and little or no
knowledge of each client’s particular circumstances. He relegated the negotiation
of his clients’ legal matters to nonlawyers, possibly leading to foreclosures on his
clients’ homes. Respondent’s misconduct may very well have resulted in clients’
losing their homes.
B. Mental State
{¶ 22} Because there has been no evidence presented to the contrary, we
presume that respondent’s mental state was healthy during the relevant period.
Disciplinary Counsel v. McCord, 121 Ohio St.3d 497, 2009-Ohio-1517, 905
N.E.2d 1182, ¶ 45.
C. Aggravating and Mitigating Circumstances
{¶ 23} A nonexhaustive list of the aggravating and mitigating
circumstances that may be considered in disciplinary cases is found in Section
10(B) of the Rules and Regulations Governing Procedure on Complaints and
Hearings Before the Board of Commissioners on Grievances and Discipline
(“BCGD Proc.Reg.”). In mitigation, the board noted that respondent has no prior
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disciplinary record, that he displayed a cooperative attitude during the disciplinary
process, that he lacked a dishonest or selfish motive, and that three letters were
submitted to the panel attesting to respondent’s character and reputation. BCGD
Proc.Reg. 10(B)(2)(a), (b), (d), and (e). On the aggravation side, the board
acknowledged the vulnerability and resulting harm to the victims of respondent’s
misconduct. BCGD Proc.Reg. 10(B)(1)(h). The Chandlers were lay people who
relied on an unnamed attorney to protect their interests in court as Foreclosure
Alternatives negotiated with the lender. Although respondent did not accept the
case until after default judgment had been entered against the Chandlers, he still
neglected to contact his clients, even after filing a motion to strike on their behalf.
The Chandlers learned of the pending foreclosure sale of their home of 18 years
through a newspaper notice.
{¶ 24} The board found this aggravating factor alone to outweigh the
mitigating factors, considering that many of the problems resulted from
respondent’s initial agreement with Foreclosure Alternatives. We also find two
additional aggravating factors. First, respondent committed multiple offenses in
his representation of each individual client. BCGD Proc.Reg. 10(B)(1)(d).
Second, respondent engaged in a pattern of misconduct because he represented at
least 28 clients referred from Foreclosure Alternatives over a two-and-a-half-year
period when his typical protocol resulted in disciplinary violations. BCGD
Proc.Reg. 10(B)(1)(c). We adopt the aggravating and mitigating circumstances as
found by the panel and board, with the addition of the two aggravating
circumstances.
D. Applicable Precedent
{¶ 25} The primary precedent is Cincinnati Bar Assn. v. Mullaney, 119
Ohio St.3d 412, 2008-Ohio-4541, 894 N.E.2d 1210. In that case, three attorneys
were disciplined for representing a total of approximately 2,000 clients in the
manner under review here. Id. at ¶ 5-18, 43-45. The attorneys entered an
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agreement with a company called Foreclosure Solutions, L.L.C., which similarly
solicited customers that were defendants in foreclosure actions, offering to
negotiate with the lender and provide an attorney to represent them in court. Id. at
¶ 8. The company then referred a case to an attorney and transferred a portion of
the fee paid by the customer. Id.
{¶ 26} The attorneys would then send each client a brochure describing
the foreclosure process and file boilerplate pleadings in response to the
complaints filed against their clients. Id. at ¶ 15. Copies of those pleadings
would also be sent to the clients. Id. The attorneys did not typically meet with
the clients or otherwise attempt to determine the circumstances of each client’s
case for possible legal defenses. Id. at ¶ 17. Instead, one of their standard letters
asked whether the client knew of any available defenses, similar to respondent’s
letters here. Id. When judgment was entered against a client, the attorneys would
notify the client of the pending foreclosure sale and recommend contacting a
bankruptcy lawyer. Id. at ¶ 15.
{¶ 27} The facts in Mullaney are strikingly similar to those in the instant
case. Two of the attorneys in Mullaney were found to have violated the very six
Disciplinary Rules that respondent violated. Id. at ¶ 19-27. We also took note of
nearly the same aggravating and mitigating circumstances in Mullaney. Id. at ¶
37-42. One attorney in Mullaney was given a public reprimand because we found
him to be an inexperienced associate who devoted many hours to his clients, but
was constrained by the standard policies in place at the firm for representing
clients referred by Foreclosure Solutions. Id. at ¶ 40. An injunction was ordered
against a second attorney, who was not admitted to practice in Ohio, prohibiting
him from practicing pro hac vice in the state for two years. Id. at ¶ 42. The third
attorney, an experienced practitioner most similar to respondent, was given a one-
year suspension, all stayed on the condition of no further misconduct. Id. at ¶ 41.
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{¶ 28} Despite the similarities to Mullaney, the current case is
distinguishable in ways that warrant a harsher punishment for respondent. First,
we adopted the recommendation of the board in Mullaney when neither party
objected to it. Id. at ¶ 1, 4. The relator, here, did object to the board’s
recommended sanction, asking us to hold that respondent had violated DR 6-
101(A)(2) and 7-101(A)(1), as we did above, and to order a one-year suspension
with only six months stayed.
{¶ 29} Second, respondent’s actions specifically relating to the Chandlers
adds additional misconduct to the protocol followed with his other clients, which
was nearly identical to that in Mullaney. Respondent testified that when he
received the Chandlers’ case file from Foreclosure Alternatives, he concluded that
it was too late to help them because a default judgment had already been entered
against them. The problem is that respondent took the case anyway, accepted the
fee, and filed a boilerplate motion to strike without even contacting the Chandlers.
Respondent in fact never contacted the Chandlers during the entire period he
represented them. This total lack of communication is more egregious than the
conduct we found objectionable in Mullaney.
{¶ 30} We have held that an actual suspension is warranted in somewhat
similar cases involving attorneys who represented clients through arrangements
with companies that employed nonlawyers and marketed living trusts to
customers. Disciplinary Counsel v. Wheatley, 107 Ohio St.3d 224, 2005-Ohio-
6266, 837 N.E.2d 1188, ¶ 3, 40; Columbus Bar Assn. v. Fishman, 98 Ohio St.3d
172, 2002-Ohio-7086, 781 N.E.2d 204, ¶ 1, 21; Cincinnati Bar Assn. v. Kathman
(2001), 92 Ohio St.3d 92, 93, 98, 748 N.E.2d 1091. But see Cincinnati Bar Assn.
v. Heisler, 113 Ohio St.3d 447, 2007-Ohio-2338, 866 N.E.2d 490, ¶ 18, 21
(ordering six-month stayed suspension of attorney that accepted referrals from a
nonlawyer company that marketed estate planning services, where attorney
personally interviewed clients and exercised independent judgment regarding
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each client’s circumstances). In each case, the attorney received referrals from
the companies after nonlawyer employees collected information from the
customer or completed the living-trust documentation, which was then forwarded
to the attorney for final preparation or approval of the legal documents. Wheatley
at ¶ 4-14; Fishman at ¶ 2-8; Kathman at 93-94. The attorney had little or no
direct communication with clients. Wheatley at ¶ 5, 13-15; Fishman at ¶ 2-7;
Kathman at 93-94. Respondent’s conduct in the case before us similarly deserves
an actual suspension.
E. Determination
{¶ 31} Respondent’s conduct in this case constituted violations of six
Disciplinary Rules and warrants an actual suspension from the practice of law.
We therefore decline to adopt the board’s recommended sanction and instead
order that respondent be suspended for a period of one year, with six months
stayed on condition that he commit no further misconduct. If respondent fails to
comply with this condition, the stay will be lifted, and respondent will serve the
one-year suspension. Costs are taxed to respondent.
Judgment accordingly.
LUNDBERG STRATTON, O’CONNOR, and CUPP, JJ., concur.
PFEIFER, O’DONNELL, and LANZINGER, JJ., dissent and would suspend
respondent from the practice of law in Ohio for one year, all stayed on conditions.
__________________
Jonathan E. Coughlan, Disciplinary Counsel, and Carol A. Costa,
Assistant Disciplinary Counsel, for relator.
Reminger Co., L.P.A., and Rick L. Weil, for respondent.
______________________
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