No Communication With 2,200 Clients Draws Proposed Suspension
A two-year suspension has been recommended by an Illinois Hearing Board for two attorneys based on misconduct found in connection with a debt relief business.
The summary
The Administrator alleged Respondents formed a debt settlement law firm, Legal Helpers Debt Resolution, LLC (LHDR) and contracted with nonattorney debt settlement companies to enroll LHDR clients and perform much of the work on client matters. The Administrator charged Respondents with failing to consult with clients about the means by which the objectives of the representation are to be pursued, failing to explain matters to the extent reasonably necessary to allow clients to make informed decisions about the representation, collecting unreasonable fees, failing to supervise the nonattorney employees of the debt settlement companies and assisting nonattorneys in the unauthorized practice of law.
The Hearing Board found Respondents engaged in most of the charged misconduct and recommended that both Respondents be suspended for two years. The recommendation took into consideration the scope of the misconduct, the substantial harm to vulnerable and unsophisticated clients, Respondents’ significant financial gain and their failure to appreciate the actual harm they caused.
The attorneys let the non-lawyers do the work
Respondents do not dispute that very little or no direct communication between an LHDR attorney and LHDR clients occurred, either about the means by which the objectives of the representation were to be pursued or to explain the scope of the representation to the extent necessary for clients to make informed decisions. Instead, Respondents rely on the scripted presentations nonattorneys made to LHDR clients, the written materials provided to clients and the advice Respondents received from ethics experts to refute the charges they violated Rules 1.2(a) and 1.4(a)(2) and (b).
We find the Administrator proved by clear and convincing evidence Respondents failed to consult with clients about the means by which the objectives of the representation were to be accomplished. The language of Rules 1.2(a) and 1.4(a)(2) pertaining to consultation is specifically directed to “a lawyer.” We interpret “consult” to require two-way communication between lawyer and client and find no support in the language of the Rules or the case law that allows a lawyer to delegate all or virtually all client communications to a nonattorney. There are times when a nonattorney may relay information from a lawyer to a client or vice versa but we cannot envision a scenario in which it would be acceptable for a nonattorney to take over the lawyer’s duties of communication with a client. This is especially true in this case, when the nonattorneys responsible for communicating with clients were not Respondents’ employees and were not under Respondents’ direct control.
And
We…find clear and convincing evidence that Respondents violated Rule 5.3(a). As equity partners of LHDR, Respondents had managerial authority that required them to make reasonable efforts to ensure LHDR had measures in place giving reasonable assurance that the conduct of the nonattorneys associated with LHDR was compatible with Respondents’ professional obligations. For the following reasons, LHDR’s measures for monitoring the nonattorneys did not provide the necessary reasonable assurance that they were acting consistently with Respondents’ professional obligations. Nor were Respondents’ efforts in this regard reasonable.
Respondents delegated the task of supervising the strategic alliance partners to Jason Searns. Searns did not directly supervise the nonattorney case managers and negotiators who handled LHDR client files. Rather, they reported to nonattorney supervisors within the strategic alliance partners. Searns’ supervisory efforts consisted of providing the nonattorneys with scripts, policies, and procedures and conducting quarterly compliance reviews.
The nonattorneys were responsible for virtually all communications with clients, yet neither Searns nor any LHDR attorney had direct knowledge of the nonattorneys’ communications or other important aspects of the nonattorneys’ daily activities. Scripts and lists of policies and procedures provide some helpful information to nonattorneys but they are not a substitution for an attorney’s actual observation and communication. LHDR attorneys had very minimal if not zero knowledge whether the nonattorneys adhered to LHDR’s scripts and procedures. Nor did they have the ability to enforce adherence given the vast numbers of clients.
As to sanction
Having found misconduct, we must determine the appropriate sanction to recommend. There are significant aggravating factors that impact our recommendation. Respondents’ misconduct affected 2,200 clients in Illinois and thousands more in other states. Respondents exposed clients to unreasonable risks of harm and caused actual harm to many clients. See In re Lewis, 118 Ill. 2d 357, 515 N.E.2d 96 (1987). Clients came to LHDR because they were under financial pressures. In many instances, their involvement with LHDR caused them to experience even greater financial problems as well as emotional distress. After ending their relationships with LHDR, many clients had to file for bankruptcy and incur additional attorney fees. Respondents’ misconduct is further aggravated by the fact it was focused on clients who were vulnerable and, in many instances, unsophisticated. See Lewis, 118 Ill. 2d 357.
Respondents placed more importance on their own success and financial gain than they did on their clients’ interests. The Panel heard no expressions of remorse for the harm their clients suffered. Additionally, in the opinion of this Panel, Respondents did not sufficiently contemplate the ethical problems that LHDR’s model and operations caused and ultimately did not acknowledge the gravity of these problems.
In mitigation, we consider Respondents’ cooperation in these proceedings and lack of prior discipline. We also consider the evidence of Respondents’ good character, including good reputations for truth and veracity and involvement in charitable activities. However, the mitigating evidence pales in comparison to the scope of the misconduct. LHDR made restitution to Illinois clients, but that occurred primarily as a result of the Attorney General’s action against LHDR. Moreover, some clients, such as Jennifer Green and Charles E. Powell, did not receive restitution of the full amount they paid to LHDR.
(Mike Frisch)