“A System Designed To Fail”
Two attorneys should be disbarred for misconduct, according to a recent report of recommendation of the California State Bar Court Review Department
Respondents Stevan John Henrioulle and Ronald Veridiano Uy appeal the disbarment recommendations of a hearing judge who found they engaged in a widespread scheme to defraud their clients by charging and collecting legal fees without any intent to perform legal services or by filing meritless lawsuits. The hearing judge also found they were culpable of other misconduct in nine client matters, including the failure to perform with competence, communicate with clients, return unearned fees, render an accounting, and aiding and abetting the unauthorized practice of law (UPL) by a former attorney who had resigned with disciplinary charges pending.
This misconduct occurred during a two-and-a-half-year period when Henrioulle and Uy were suing lenders for predatory practices on behalf of homeowners facing foreclosures. Henrioulle and Uy deny committing any fraud, although they admit much of the misconduct, which they characterize as simple negligence due to their high-volume litigation practice.
We have independently reviewed the record (Cal. Rules of Court, rule 9.12) and adopt most, but not all, of the hearing judge’s culpability determinations. As we discuss more fully below, we do not find that Henrioulle and Uy engaged in an intentional scheme to defraud their clients. Nevertheless, when viewed holistically, we find that their misconduct was reckless, amounting to a habitual disregard of their clients’ interests, which constitutes moral turpitude, in violation of Business and Professions Code, section 6106. -2- 1
Ultimately, we conclude that the evidence in mitigation is insufficient to outweigh the aggravation and the widespread misconduct, which resulted in significant harm to numerous clients. Having considered the Rules of Procedure of the State Bar, title IV, Standards for Attorney Sanctions for Professional Misconduct and the relevant decisional law, we recommend disbarment for both Henrioulle and Uy.
The review department rejected the effort of one of the attorneys to lay blame on the other
Uy argues that Henrioulle was solely responsible for handling the litigation in several client matters and thus Uy may not be held vicariously liable since he was unaware of Henrioulle’s misconduct. We reject his argument because it is not supported by the record. Uy admits in his brief on appeal: “While there was an agreed upon division of labor between Mr. Uy and Mr. Henrioulle, Mr. Uy and Mr. Henrioulle understood that as the attorneys of record for each of the clients, they both were individually responsible for the entirety of a client’s file and the management of the office.” Henrioulle also stipulated that “both [Henrioulle and Uy] were jointly and severally responsible for the representation of all of the clients mentioned in this Notice of Disciplinary Charges.”
The attorneys had employed a resigned former attorney and established a loan-modification practice
The habitual disregard of client interests in this case began with Henrioulle and Uy’s money-getting scheme involving a broadly based intake process that brought them far more clients than they could properly handle. They advertised their services to financially distressed individuals for whom English was their second language. In Henrioulle’s own words, the firm grew from a “mom-and-pop practice to an explosion of clients.” The chaos was increased by their lack of supervision of a resigned attorney who was not entitled to practice law, but who, acting in his capacity as the firm’s litigation manager, nevertheless made several untrue and unwarranted representations to prospective clients, all the while holding himself out as entitled to practice.
It was a system designed to fail. The breadth of Henrioulle and Uy’s incompetence, coupled with the non-refundable retainers and monthly fees collected regardless of whether services were provided, greatly exacerbated the harm sustained by highly vulnerable clients, many of whom lost their causes of action and endured foreclosures and evictions.
In weighing the appropriate discipline, we have considered the evidence in mitigation, which includes 36 years of discipline-free practice for Henrioulle, Uy’s emotional difficulties, their cooperation in these proceedings, good character evidence, and community and pro-bono activities. But, ultimately, this evidence is insufficient to outweigh the harm caused by Henrioulle and Uy’s widespread incompetence and disregard of their clients’ interests, combined with their refusal to return unearned fees and their failure to supervise an employee who was not entitled to practice law. A discipline less than disbarment simply is not warranted by the standards or the decisional law.
The review department also recommends that restitution be paid to a number of clients. (Mike Frisch)