In the Matter of Robert John Wray

FILED
Feb 27 2018, 2:26 pm
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
IN THE
Indiana Supreme Court
Supreme Court Case No. 02S00-1511-DI-648
In the Matter of
Robert John Wray,
Respondent.
Decided: February 27, 2018
Attorney Discipline Action
Hearing Officer Christopher M. Goff
Per Curiam Opinion
Chief Justice Rush, Justice David, Justice Massa, and Justice Slaughter concur.
Justice Goff did not participate.
Per Curiam.
We find that Respondent, Robert John Wray, engaged in attorney
misconduct arising from his solicitation of clients through a nonlawyer
intermediary. For this misconduct, we conclude that Respondent should
be suspended from the practice of law in this state for at least nine months
without automatic reinstatement.
This matter is before the Court on the report of the hearing officer
appointed by this Court to hear evidence on the Indiana Supreme Court
Disciplinary Commission’s “Amended Verified Complaint for
Disciplinary Action,” and on the post-hearing briefing by the parties.
Respondent’s 1980 admission to this state’s bar subjects him to this
Court’s disciplinary jurisdiction. See IND. CONST. art. 7, § 4.
Procedural Background and Facts
The Commission filed a five-count “Verified Complaint for
Disciplinary Action” on November 13, 2015, and later amended that
complaint to add a sixth count. As set forth in more detail below, the
amended complaint charged Respondent with a wide range of rule
violations arising out of his professional relationship with Douglas
Stephan, a nonlawyer. Following a hearing, the hearing officer filed a 64-
page report finding Respondent committed violations as charged.
Respondent has represented several owners of allegedly defective
modular or manufactured homes in actions against the homes’ installers,
builders, or manufacturers. One of those owners was Stephan, who
purchased a home from Joseph Callaghan, d/b/a Fahl Manufactured
Homes (“Callaghan”). Respondent and Stephan developed a relationship
under which Stephan (through his company Stephan Consulting, Inc.,
which Respondent helped Stephan incorporate) would solicit other
owners to become plaintiffs in Stephan’s action and in other actions
against Callaghan and other installers, builders, and manufacturers.
Typically, Stephan would “cold call” the owners, offer to perform home
inspections for them, and then ask those owners to sign an “Investor
Agreement” and an “Attorney Agreement,” both of which were drafted
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and/or approved by Respondent and included Respondent’s name
throughout. The owners, and subsequently Respondent, would sign the
Attorney Agreements, frequently without any direct communication with
one another or discussion about the merits of the claim.
The Investor Agreements included statements falsely representing that
the owners already had entered into fee agreements with Respondent. The
Investor Agreements also included several statements that inaccurately
described how litigation costs would be advanced and how the risks of
litigation would be assumed. For example, the Investor Agreements stated
Stephan would advance the costs of litigation in exchange for 50% of the
client’s net recovery, but aside from the first few cases Stephan did not
actually advance these costs.1 The Attorney Agreements provided that
Respondent would receive a contingent fee of between 33% and 50%, and
some Attorney Agreements also required a nonrefundable $1,000 retainer
for costs.
Respondent entered into contracts with about 118 owners through his
relationship with Stephan. One of these clients was David Lomperski,
who – in exchange for a reduced contingent fee in his case – agreed to
work with Stephan to identify other potential clients. Respondent helped
draft an employment and noncompete agreement between Stephan and
Lomperski.
The relationship between Respondent and Stephan eventually soured
due to a dispute involving the advancement of costs, and Respondent
proposed to Lomperski that they work together in the same capacity that
Respondent had been working with Stephan. When they met to discuss
this, Lomperski secretly recorded the conversation. Respondent also
briefly entered into a similar relationship with David Blumenherst, who
solicited at least two new clients using the same “Investor Agreement”
template Respondent had provided Stephan.
1The hearing officer credited Stephan’s testimony that he and Respondent eventually reached
a verbal agreement that Respondent would front the litigation costs because Stephan was
bringing in so many clients for him.
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In addition to the misleading representations in the Investor
Agreements regarding the advancement of litigation costs, after cases
settled Respondent drafted a “Disbursement Authorization and
Acknowledgement” form for his clients that in some instances
inaccurately reflected the actual distributions and advancement of costs.
After the accounting dispute arose between Respondent and Stephan,
Respondent represented to clients that he had paid Stephan his share and
instructed them not to pay Stephan, when in fact Respondent merely had
“allocated” Stephan’s share against the amount Respondent believed
Stephan owed him.
The Investor Agreements provided that Stephan “shall take the lead in
communications with the attorney” and others and purported to grant
Stephan the authority to advance the client’s claims and to “arrange for
settlement.” Notwithstanding this language, Respondent did have a
general practice of writing his clients to notify them of significant events
in their cases. However, Respondent admitted there often were delays of
several months between the time that Stephan had clients execute
Attorney Agreements and the time that Respondent eventually received
those Agreements, and Respondent admitted further that he never raised
the issue of these delays with Stephan. These delays could have led to
claims being time-barred, although there is no evidence this occurred in
any of the cases.
Several clients testified about what they felt was a lack of adequate
communication or explanation from Respondent. Several clients also
testified that they agreed to settle a claim against one defendant
(Callaghan) based, at least in part, on Respondent’s representation that
they could recover additional amounts against another defendant
(Chilton). However, Chilton would have been among the parties covered
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by the release in the Callaghan settlement.2 The hearing officer found that
Respondent misrepresented the viability of a potential claim against
Chilton in order to motivate clients to settle claims against Callaghan.
During the Commission’s investigation into the events described above,
Respondent represented to the Commission that “Stephan Consulting did
not ‘solicit’ clients for my law office. Stephan Consulting provided
financing and consulting to various homeowners under separate and
distinct agreements with homeowners.” The hearing officer found this
statement was false with respect to both solicitation and financing.
Finally, from 2008 through 2015, Respondent failed to keep adequate
trust account records and separate ledgers for each client. Respondent also
kept more than a nominal amount of personal funds in his trust account.
Discussion
The Commission alleged, and the hearing officer concluded following
an evidentiary hearing, that Respondent violated the following Indiana
Rules of Professional Conduct:
1.4(a)(2): Failing to reasonably consult with a client about the
means by which the client’s objectives are to be accomplished.
1.4(a)(3): Failing to keep a client reasonably informed about the
status of a matter.
2Respondent partially disputes this, arguing that he believed at the time there was a potential
claim against Chilton that would survive the release. To make a long story short,
Respondent’s theory hinged upon whether the clients’ homes were manufactured or modular.
This was a fact that was readily ascertainable prior to the settlement with Callaghan; and
indeed, Respondent advised clients just two weeks after their settlement with Callaghan that
there was no viable action to be taken against Chilton.
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1.4(a)(4): Failing to comply promptly with a client’s reasonable
requests for information.
1.5(a): Making an agreement for, charging, or collecting an
unreasonable fee or amount for expenses.
1.15(a): Failing to maintain and preserve complete records of
client trust account funds.
5.3(b): Failing to make reasonable efforts to ensure that the
conduct of a nonlawyer employee over whom the lawyer has
direct supervisory authority is compatible with the professional
obligations of the lawyer.
5.3(c): Ordering or ratifying the misconduct of nonlawyer
assistants, or failing to take reasonable remedial action with
respect to the misconduct of nonlawyer assistants under the
lawyer’s supervision.
5.4(a): Improperly sharing legal fees with a nonlawyer.
7.3(a): Improperly soliciting employment in-person, by phone,
or by real time electronic contact from a person with whom the
lawyer has no prior relationship when a significant motive is
the lawyer’s pecuniary gain.
7.3(e): Improperly giving something of value for a
recommendation for employment.
7.3(f): Accepting employment when the lawyer knows, or
reasonably should know, that the person seeking the lawyer’s
services does so as a result of lawyer conduct prohibited under
Rule 7.3.
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8.1(a): Knowingly making a false statement of material fact to
the Disciplinary Commission in connection with a disciplinary
matter.
8.4(a): Violating the Rules of Professional Conduct through the
acts of another.
8.4(c): Engaging in conduct involving dishonesty, fraud, deceit,
or misrepresentation.
The Commission also alleged, and the hearing officer concluded, that
Respondent violated the following Indiana Admission and Discipline
Rules:3
23(29)(a)(2): Failing to create, maintain, or retain appropriate
trust account records.
23(29)(a)(3): Failing to maintain a ledger with separate records
for each client with funds deposited in a trust account.
Respondent has petitioned this Court to review the hearing officer’s
findings and conclusions. In his petition, Respondent admits the trust
account violations but disputes the other charges. The Commission carries
the burden of proof to demonstrate attorney misconduct by clear and
convincing evidence. See Ind. Admission and Discipline Rule 23(14)(g)(1).
We review de novo all matters presented to the Court, including review
not only of the hearing officer’s report but also of the entire record. See
Matter of Wall, 73 N.E.3d 170, 172 (Ind. 2017). While this Court reserves the
right to make the ultimate determination, the hearing officer’s findings
receive emphasis due to the unique opportunity for direct observation of
witnesses. Id.3Admission and Discipline Rule 23 was amended effective January 1, 2017. The citations
herein are to the version of Rule 23(29) in effect at the time of Respondent’s misconduct.
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The overarching issue in this case involves the nature of Respondent’s
relationship with Stephan. Respondent has contended throughout these
proceedings that Stephan acted independently and that Respondent
merely accepted referrals from him. The Commission has contended that
Stephan was acting as Respondent’s agent. The hearing officer
acknowledged conflicting evidence on this point but ultimately concluded
the Commission had proven the existence of an agency relationship. Upon
review of the materials before us, we agree with the hearing officer.
In his petition for review, Respondent strenuously attacks Stephan’s
credibility. Indeed, the hearing officer in his report expressly questioned
the credibility of both Stephan and Respondent, but ultimately found key
portions of Stephan’s testimony corroborated by independent evidence
and logical inferences. This type of credibility determination was within
the hearing officer’s purview to make, and we find ample support for his
findings in this case. Respondent helped Stephan incorporate Stephan
Consulting, the business Stephan used to recruit other potential plaintiffs.
The Investor Agreements and Attorney Agreements used by Stephan (and
later by Blumenherst) were drafted and/or approved by Respondent and
contained his name throughout. Stephan performed the client intake and,
as the Agreements expressly contemplated, served as the primary point of
contact for the clients. Respondent later drafted an employment and
noncompete agreement between Stephan and Lomperski, who assisted
Stephan in identifying potential plaintiffs. When Respondent’s
relationship with Stephan soured, Respondent attempted to persuade
Lomperski to take Stephan’s place in the recruitment scheme and
discussed (in a conversation secretly recorded by Lomperski) the need for
Lomperski to get out of the noncompete agreement Respondent had
drafted. In sum, this was not merely a referral system, and Respondent’s
role in the client recruitment process was anything but passive. We find
the evidence clearly and convincingly establishes an agency relationship
between Respondent and Stephan. See Restatement (Third) of Agency §§
1.01, 1.03 (2006).
As the issues have been framed in this case, many of the rule violations
found by the hearing officer consequently follow from the finding of an
agency relationship between Respondent and Stephan. See, e.g., Rules
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7.3(a) (barring solicitation by a lawyer or the lawyer’s employee or agent)
and 8.4(a) (addressing violation of professional conduct rules through the
acts of another). Respondent’s remaining challenges to the hearing
officer’s findings and conclusions are not persuasive. With respect to the
Rule 1.4 charges, Respondent attacks the credibility of those clients who
testified to a lack of adequate communication or explanation from
Respondent, and he points to the existence of some written
correspondence between himself and those clients. Similar to Stephan’s
testimony though, the hearing officer found the clients’ testimony largely
corroborated by independent evidence and logical inferences, and we find
ample support for the hearing officer’s findings and reasoning.
With respect to the Rule 8.1(a) and 8.4(c) charges, Respondent contends
he was not dishonest or deceitful with either his clients or with the
Commission. For example, Respondent asserts there is little material
difference between Stephan being “paid” and having funds “allocated”
against Stephan’s alleged debt to Respondent, but under the
circumstances there plainly was a difference. Stephan disputed the alleged
debt, and if Respondent did not pay him, Stephan presumably could seek
payment from the clients (which likely is why the clients were seeking
clarification and confirmation of payment from Respondent). And while
Respondent argues that the solicitation component of his statement to the
Commission was simply a good-faith defense to the matters being
investigated by the Commission, he makes no argument about the
financing component of his statement, which was objectively false.
Notwithstanding the plain language (and asserted purpose) of the
Investor Agreements, Stephan was not providing financing to the
homeowners, and Respondent testified he knew Stephan was not
advancing these funds and that Respondent was paying these costs out of
his own trust account instead.
Finally, Respondent advances an alternative argument with respect to
Rule 7.3. Respondent argues that even if Stephan was soliciting clients as
Respondent’s agent, and even though Rule 7.3(a) generally prohibits such
solicitation, Rule 7.3(b)(3) provides a “safe harbor” in this case.
Respondent is mistaken. Rule 7.3(b)(3) by its express terms addresses
solicitation that “concerns an action for personal injury or wrongful death
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or otherwise relates to an accident or disaster . . . .” Allegedly defective
workmanship in a manufactured or modular home, standing alone, is not
the type of injury encompassed by this rule. And while Respondent
advances a colorable policy argument in favor of expanding the scope of
permitted solicitation under Rule 7.3, an attorney has the obligation to
conform his practices to the applicable professional conduct rules as
written, not whatever alternative rules the attorney believes would be
better.
In sum, we find sufficient support for the hearing officer’s findings and
conclusions with regard to each of the charged rule violations.
Accordingly, we find Respondent violated Professional Conduct Rules
1.4(a)(2), 1.4(a)(3), 1.4(a)(4), 1.5(a), 1.15(a), 5.3(b), 5.3(c), 5.4(a), 7.3(a), 7.3(e),
7.3(f), 8.1(a), 8.4(a), 8.4(c), and Admission and Discipline Rules 23(29)(a)(2)
and 23(29)(a)(3). We turn now to the question of sanction.
Respondent’s arrangement with Stephan shares some similarities with
the type of business model we have confronted in disciplinary cases
involving attorneys’ association with corporations marketing “foreclosure
assistance” or “debt relief” services to consumers. See, e.g., Matter of
Mossler, 86 N.E.3d 387 (Ind. 2017); Matter of Dilk, 2 N.E.3d 1263 (Ind. 2014).
To be sure, there are important distinctions. Respondent had much more
substantive involvement in his clients’ cases than did the attorneys in
cases such as Mossler and Dilk, whose marginal roles in the business
schemes at issue amounted to little more than creating the illusion of
meaningful attorney involvement. Further, unlike the largely worthless
services sold by the debt relief companies to consumers in those cases,
Respondent’s services provided some value for his clients, many of whom
obtained recoveries they might not otherwise have obtained.
Nonetheless, the actual and potential harm resulting from this type of
arrangement is readily apparent. In this case, Respondent’s delegation of
client intake responsibilities to Stephan led to impermissible solicitation of
clients, misrepresentations to clients about financing and costs, and delays
of several months before Respondent became involved with (or even
aware of) the clients’ cases. Clients, whose primary point of contact was
Stephan, encountered difficulty communicating with Respondent and
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remaining sufficiently apprised about their cases. Although many clients
did obtain some recovery, those recoveries were greatly reduced due to a
second contingent fee owed to Stephan, a middleman who was not
actually providing the financing services clients were paying him to
provide. And when a financial dispute arose between Respondent and
Stephan, clients were caught in the middle.
Throughout all of this, Respondent lied. Respondent provided Stephan
with Investor Agreements for clients to execute that Respondent knew
were false in several material respects. Respondent falsely told several
clients at the conclusion of their cases that Respondent already had paid
Stephan. And when the Commission began investigating Respondent’s
practices, Respondent falsely told the Commission that Stephan provided
financing for clients, when Respondent knew Stephan was not doing so.
Respondent’s pattern of dishonesty elevates his problematic arrangement
with Stephan into a much more serious offense. See Matter of Ellison, 87
N.E.3d 460, 462 (Ind. 2017).
Nor is this Respondent’s first encounter with the disciplinary process.
Respondent and two other attorneys were publicly reprimanded by this
Court in 2009 for deceptive advertising and improper use of a trade name.
Matter of Loomis, Grubbs and Wray, 905 N.E.2d 406 (Ind. 2009). Notably,
Respondent undertook his unethical arrangement with Stephan around
the same time he was being disciplined for a prior unethical scheme to
attract clients. One would have hoped our reprimand would have
prompted Respondent to consider his ethical obligations and business
practices more carefully. See Matter of Powell, 76 N.E.3d 130, 135 (Ind. 2017)
(“[I]n many instances an attorney will be chastened by discipline for a first
offense, adequately remedy his or her professional shortcomings, and be
unlikely to recidivate going forward”). Instead, Respondent continued his
enterprise with Stephan for several years and then sought to pursue
similar client solicitation arrangements with other middlemen. Under
these circumstances, Respondent’s prior discipline is a significant
aggravating factor.
After careful consideration of this matter, we conclude that Respondent
should be suspended for a period of at least nine months, after which he
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may be reinstated only after proving by clear and convincing evidence his
remorse, rehabilitation, and fitness to practice. See Admis. Disc. R.
23(18)(b).
Conclusion
For Respondent’s professional misconduct, the Court suspends
Respondent from the practice of law in this state for a period of not less
than nine months, without automatic reinstatement, effective April 9,
2018. Respondent shall fulfill all the duties of a suspended attorney under
Admission and Discipline Rule 23(26). At the conclusion of the minimum
period of suspension, Respondent may petition this Court for
reinstatement to the practice of law in this state, provided Respondent
pays the costs of this proceeding, fulfills the duties of a suspended
attorney, and satisfies the requirements for reinstatement of Admission
and Discipline Rule 23(18).
The costs of this proceeding are assessed against Respondent. The
hearing officer appointed in this case is discharged.
Rush, C.J., and David, Massa, and Slaughter, JJ., concur.
Goff, J., did not participate.
A TT O RN E YS FO R RES P ON DE NT
James P. Fenton
Daniel G. McNamara
Fort Wayne, Indiana
A TT O RN E YS FO R I ND IA NA S U P R EM E CO U R T
DIS CI PLI NA R Y C OM M IS S I O N
G. Michael Witte, Executive Director
Rachel B. Gallagher, Staff Attorney
Indianapolis, Indiana
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