Law360 reported on the referee’s report in the case

A court-appointed referee on Tuesday recommended disbarment for an attorney and a three-year suspension for his father for their involvement in a secret settlement covering thousands of insurance cases and for their subsequent actions in bankruptcy court trying to avoid a $2 million judgment against them.

Judge George Shahood, the referee appointed by the Florida Supreme Court in the cases, said that Harley Kane should be disbarred and that his father Charles Kane should receive a three-year suspension. The referee added that they should both have to satisfy the civil judgment against them as a condition for readmission.

The $2 million judgment against the father-son team, who ran their law firm Kane & Kane PA, was the result of a lawsuit brought by Stewart Tilghman Fox & Bianchi PA, William C. Hearon PA and Todd S. Stewart PA against Kane & Kane and other attorneys and firms who had “pulled the rug out from under them,” in the words of one court, by working out a secret deal with Progressive Casualty Insurance Co. to settle more than 2,500 personal injury protection and bad faith claims.

In December, the U.S. Supreme Court rejected the Kanes’ bid to review an Eleventh Circuit decision that refused to discharge the judgment in bankruptcy.

In addition to the dealings surrounding the secret settlement, the referee found that Harley Kane had had his firm pay his personal real estate taxes in violation of the bankruptcy court’s order in order to hinder and delay payment of the judgment. Kane also lied during the bankruptcy proceedings in order to get the judgment discharged, the report said.

“In addition to misleading his clients, there is clear and convincing evidence Harley Kane engaged in additional, multiple acts of dishonesty involving the bad faith lawyers, the civil litigation and the bankruptcy court,” the referee said.

The origins of the insurance dispute stretch back more than a decade.

Kane & Kane, along with attorneys Laura Watson — who is now a state judge and is facing disciplinary charges over her role in the matter — Darren Lentner, Amir Fleischer and Gary Marks, and their respective law firms, joined forces to solicit health care providers for PIP suits against Progressive, according to court documents.

By 2002, the firms had amassed 440 health care providers with about 2,500 PIP claims for unpaid bills and associated attorneys’ fees against Progressive. That year, the attorneys decided to pursue bad-faith claims against Progressive as well and hired the Stewart firms to handle the bad faith claims.

The PIP attorneys and the Stewart firms entered a contract related to the bad faith claims in which it was originally expected that the clients would receive 60 percent of recovered funds and the attorneys’ fees would make up the other 40 percent. The Stewart firms were to receive 60 percent of those fees. In the PIP cases, the clients were set to receive 10 percent of recovered funds, with the PIP attorneys sharing 90 percent.

The Stewart firms worked on the case for two years, obtained favorable rulings and began settlement negotiations with Progressive, but in May 2004, the PIP attorneys secretly met with the insurer and reached a $14.5 million deal covering all of the PIP and current and future bad faith claims — and initially providing no payout to the Stewart firms while indemnifying Progressive against further fee claims as well.

Several legal actions followed, in which the Stewart firms won the $2 million judgment in a state court suit, won dismissal of Chapter 11 filings by the Kanes and their firm on the grounds that they were entered in bad faith, and prevailed on claims in the Kanes’ subsequent Chapter 7 filings regarding discharge of the state court judgment.

The Kanes are represented by Scott Tozian and Gwendolyn H. Daniel of Smith Tozian Daniel & Davis PA.

The Florida Bar is represented by bar counsel Ghenete Wright Muir and Alan Pascal.

The cases are The Florida Bar v. Harley Kane, case number SC13-389, and The Florida Bar v. Charles Kane, case number SC13-388, in the Supreme Court of Florida.

— Additional reporting by Nathan Hale. Editing by Ben Guilfoy.