Loading

Attorney E-Newsletter

October 2011

Third Circuit Addresses Reasonable Inquiry into Client-Provided Information

On August 24, 2011, the United States Court of Appeals for the Third Circuit handed down a significant decision examining a law firm’s duty to investigate information provided by the client before incorporating it into pleadings or motions. The case was In Re: Taylor, No. 10-215 (8/24/2011).

This case arose on appeal from the District Court’s decision reversing the imposition of sanctions under Rule 9011 of the Federal Rules of Bankruptcy Procedure on the law firm for a creditor, HSBC. The law firm filed a motion for relief from the automatic stay and a response to the debtors’ objections to HSBC’s proof of claim. The court found that in its many responses to bankruptcy petitions, HSBC did not provide information directly to its retained counsel, but required them to retrieve debtor information from an electronic database maintained by a third party. Counsel was discouraged from communicating directly with any HSBC staff. In fact, the referrals to the law firms themselves were electronically generated without any involvement by HSBC staff.

The law firm prepared its documents based on information in the database, which did not reflect a substantial dispute over HSBC’s addition of a flood insurance premium onto the debtor’s monthly payment, to which the debtors objected. Much of the arrearage alleged by the law firm was due to the disputed premiums, but this information did not appear in the third-party database. The court found that the database had frequently been found to contain errors in the past. The documents filed by the law firm stated that no payments had been made, even after the debtors submitted a response setting forth six payments, four of which had been cashed by HSBC.

After four hearings, the bankruptcy court determined that the law firm, the senior partner, the bankruptcy managing attorney, and HSBC were subject to remedial sanctions because of false statements in the proceedings. The lawyers and law firm appealed, and the District Court overturned the sanctions against all parties.

On appeal, the Court of Appeals reversed the District Court’s determination and reinstated the sanctions. Sanctions against HSBC were reinstated because HSBC did not appeal. As to the lawyers and law firm, the Court of Appeals accepted the bankruptcy court’s finding that “[f]or at best a $540 dispute, the Udren Firm mechanically prosecuted a motion averring a $4,367 post-petition obligation, the aim of which was to allow HSBC to foreclose on [the Taylors’] house.”

The Court then examined whether the lawyer made reasonable inquiry into the accuracy of the information in the electronic database, noting the term is defined as “an objective knowledge or belief at the time of the filing of a challenged paper that the claim was well-grounded in law and fact.” Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 289 (3d Cir. 1991). The Court stated that “It is . . . usually reasonable for a lawyer to rely on information provided by a client, especially where that information is superficially plausible and the client provides its own records which appear to confirm the information.” The Court concluded that:

[A]n attorney must, in her independent professional judgment, make a reasonable effort to determine what facts are likely to be relevant to a particular court filing and to seek those facts from the client. She cannot simply settle for the information her client determines in advance— by means of an automated system, no less—that she should be provided with.

Particularly in light of the fact that the opposing party provided information which contradicted that in the client’s database, the Court concluded that the firm had a duty to check with its client for an explanation of the allegations set forth by the opposing party. The Court stressed that reliance on computerized records is not inherently unreasonable, but noted that the system in question permitted parties at every level of the filing process – HSBC staff, the third-party provider, and the law firm -- to disclaim responsibility for inaccuracies and pass them off to other parts of the process. Ultimate responsibility, the Court determined, rests with the attorneys. The Court concluded,

We appreciate that the use of technology can save both litigants and attorneys time and money, and we do not, of course, mean to suggest that the use of databases or even certain automated communications between counsel and client are presumptively unreasonable. However, Rule 11 requires more than a rubber-stamping of the results of an automated process by a person who happens to be a lawyer. Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a “form pleading” she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry.

Blawging: Advertising or Free Speech?

A disciplinary case in Virginia is attracting much attention these days, as it raises the question of when a lawyer’s public comments turn into advertising, and to what extent the First Amendment protects a lawyer’s right to make potentially self-promoting comments in a public forum.

Richmond lawyer Horace Frazier Hunter went before a disciplinary committee hearing on October 18, charged by bar counsel with violations of Rules 1.6 (Confidentiality of Information), 7.1 (Communications about a Lawyer’s Services), 7.2 (Advertising), and 7.5 (Firm Names and Letterheads), based on statements about his own case results made in “This Week in Richmond Criminal Defense,” a law blog (or blawg[1]) at his firm’s website authored at least in part by Hunter. The bar took the position that since the website is devoted in part to marketing the firm and attracting business, any discussion of Hunter’s cases is advertising and must include a disclaimer. Hunter argued that his writings are news and commentary which are protected under the First Amendment, and that the state cannot regulate the content of information posted on such sources. After a hearing, the bar committee imposed a public admonition and ruled that Hunter must add a disclaimer to his log, and that he must remove information pertaining to a particular juvenile client. Hunter has stated his intention to appeal.

The ultimate decision in the Hunter case will probably be widely read and studied within the legal community, as it raises important issues along the often troubling lines between regulation of professional communications and speech which is protected under the First Amendment.

Prosecutors on the Dock

In other disciplinary cases, two high-profile former prosecutors face their own day of reckoning in other states.

In Arizona, former Maricopa County Attorney Andrew Thomas, a close ally of controversial sheriff Joe Arpaio, and two of his former deputies face disciplinary charges arising from criminal cases they brought against county officials and judges. The accusations against them include conflicts of interest; filing criminal and civil cases to embarrass or burden rivals, or filing without probable cause or sufficient evidence; criminal conduct; and conduct involving dishonesty and fraud. Thomas and a deputy are accused of filing bribery and obstruction charges against Superior Court Judge Gary Donahoe without probable cause; of pursuing a grand-jury investigation of Donahoe, county supervisors and other officials despite conflicts of interest; and of filing misdemeanor charges against Supervisor Don Stapley in 2008 after the statute of limitations had lapsed. The hearing attracted so much attention that it was live-streamed on the Internet.

In Kansas, a disciplinary panel recommended the indefinite suspension of former Attorney General and Johnson County District Attorney Phill Klein, based on findings that Klein committed misconduct in his prosecution of abortion doctor George Tiller, who was later murdered. The panel’s 184-page report found that Klein had:

  • Told the Supreme Court that his investigation wasn’t seeking the identities of specific women who received abortions at Tiller’s clinic, though his staff recorded the license plates of visitors to Tiller’s clinic and subpoenaed the guest list from a hotel frequently used by patients;
  • Made false statements under oath that his office never sought to identify the names of abortion patients;
  • Ignored warnings by the court not to talk about the case when he discussed it on Bill O’Reilly’s Fox News show, without a “legitimate law enforcement purpose”;
  • Mishandled redacted medical files obtained from Tiller’s office by storing them in an open garage, a private vehicle and the dining room of an investigator; and
  • Selectively presented information to a Johnson County grand jury investigating Planned Parenthood.

The Kansas license of Klein, now an instructor at the Liberty University School of Law, has lapsed, but Klein vigorously defended the charges and denied all wrongdoing. The Supreme Court of Kansas will ultimately make the decision in the case.

Disciplinary Board Secretary Publishes Continuing Education Schedule

Disciplinary Board Rule §89.279 requires that formerly admitted attorneys seeking reinstatement from disbarment or suspension for more than one year, or from administrative suspension, retired status or inactive status for more than three years, must take courses meeting the requirements of the current schedule published by the Office of the Secretary within one year preceding the filing a petition for reinstatement.

The Secretary of the Disciplinary Board has published a schedule of the courses an attorney seeking reinstatement must take. The schedule states:

Every formerly admitted attorney who petitions for reinstatement under these rules shall take the following:

A minimum of thirty-six (36) hours of accredited PA CLE courses with a minimum twelve (12) of those hours in the area of Ethics. Twelve (12) credits may be taken in pre-approved, interactive, Internet or computer based CLE programs.

Any petitions filed on or after December 1, 2011, by formerly admitted attorneys who have been disbarred or suspended for more than one year shall include the Bridge the Gap course taken through an accredited PA CLE provider as part of the thirty-six hours of credits.

Note: Accredited PA CLE courses taken for reinstatement may be used to meet CLE requirements once reinstated.

The schedule was published on October 22, 2011, at 41 Pa.B. 5621.

Completion of required CLE courses is considered, but not conclusive, in determining whether the formerly admitted attorney possesses the required competency and learning in law to be reinstated.

Dirty Rotten Scoundrels’ Files

The legal profession owes a debt of gratitude to conservators, who undertake the review and distribution of the files and records of former attorneys who are suspended or disbarred, die, become disabled, or disappear (disappearance happens). The work is often hard, tedious, unappreciated, and done for little or no compensation.

Some conservators in South Carolina have discovered an even more odious problem. They reported to the Supreme Court that the files of departed attorneys were not maintained in a safe and sanitary condition, and in some cases were moldy and infested with insects and rodents. This led the Court to issue an order authorizing conservators to petition for relief from the duty to examine, remove, and relinquish papers in files kept in unsanitary or unhealthy conditions.

Nothing in the Rules of Professional Conduct requires a lawyer to maintain personal or professional hygiene, but Rule 1.15(b) requires that all property in which a client has an interest, including the client’s file, must be “appropriately safeguarded.” Comment (1) to Rule 1.15 adds, “A lawyer should hold property of others with the care required of a professional fiduciary.” The dictionaries don’t say so, but most likely “professional” excludes bugs and rodents.[2]

Let Us Know

Got a tip, a link, a correction, a question, a comment, an observation, a clarification, a wisecrack, an idea you’d like to see addressed? We are always glad to hear from you. Write us at comments@padisciplinaryboard.org.

[1] How far into the future must we define this term each time we use it?

[2] Unless you are a professional entomologist or rodentologist.[3]

[3]Yes, “rodentologist” is a word. Rodentologists even have an association.[4]

[4]In fact, the British Association of Rodentologists calls itself the BAR (as distinguished from The Bar) and states “the BAR has offered specialist training to many people interested in the health and welfare of rodents, especially Guinea Pigs.”[5]

[5]Although, thankfully, “the training offered by the BAR extends well beyond guinea pigs.”[6]

[6]The Bar has not always been so dedicated to the health and welfare of rodents, especially guinea pigs.[7]

[7]There are those who allege the presence in The Bar of certain species of rodents.