Braveheart

An Ad Hoc District of Columbia Hearing Committee proposed a 60-day suspension with 30 days stayed of an attorney who engaged in ethical violations primarily after he had been discharged as counsel for a group of clients who were victims of a financial fraud.

Following a legal career at several major law firms, Respondent organized Capital Legal Group (US) in approximately November 2013. Respondent referred to himself as the “managing partner” of Capital Legal Group, but had no associates or partners, relying instead on as-needed contract lawyers. Stip. 1; RX 1; Tr. 200-02, 282-83 (Wallace).

In approximately March 2014, Respondent was contacted by Richard Cole, whom he had known in the 1970s while in law school. Tr. 19, 503-07. Cole alleged that he had recently been the victim of fraud perpetrated by an organization calling itself Charter Investments (“Charter”). In brief, Charter purported to offer certificates of deposit at above-market rates. When investors wired funds to Charter’s account at the East West Bank in California, the funds were withdrawn immediately, and were never invested. Cole had invested – and lost – $280,000 through this fraud. DX 21 at 24. Cole had learned of eleven individuals, and one homeowner’s association (“HOA”), similarly victimized, and sought legal representation for the group on a contingency fee basis.

The respondent agreed to represent the clients for a contingent fee.

Disciplinary Counsel contends that Respondent mishandled the transition of the Charter clients’ matter to successor counsel, failed to specify the amount or nature of his claim for fees, if any, on his former clients’ recovery, and intentionally held up the distribution of funds to former clients who had fired him and then made disciplinary complaints against him, in violation of Rules 1.3(b)(2), 1.16(d), and 8.4(d). Respondent contends that he had a valid claim for fees, that any delay in clients receiving their settlement funds was caused by successor counsel’s fee agreement and the operation of California law pertaining to attorney liens, and that he did not violate any of the Rules charged.

The committee found each charged violation.

Notably, they found that the attorney’s retaliation against only the former clients who filed bar complaints prejudiced the administration of justice

Disciplinary Counsel contends that Respondent violated Rule 8.4(d) by retaliating against four clients who had reported his conduct to Disciplinary Counsel by selectively maintaining his fee claims against these clients only, by informing the clients he was about to serve an ACAB petition on them, requiring them to hire local counsel, and by asserting that he would not resolve his claims for fees against them until the disciplinary matters concluded. Respondent contends that he was entitled to resolve legitimate disputes with those clients, and that he was constrained in his ability to resolve his fee dispute because the clients had placed him in an adversarial position when they filed disciplinary complaints against him.

As set out at length above, Respondent made no good faith effort to either inform his clients of the fee he believed he was owed, or to resolve his fee claim through negotiation or the ACAB process. He seemed to believe that the clients had the obligation in the first instance to suggest what his fee should be, and that the fact that they did not do so is the principal reason no resolution was reached. That suggestion is absurd. If Respondent believed he was legitimately entitled to be paid for any work he may have done for his twelve Charter clients on the Charter matter, it stands to reason he would have asserted a fee claim against all – not just four – of the clients. His putative justification for this course of action was that the disciplinary complaints filed by the four clients at issue somehow tied his hands. However, reaching a settlement that interferes with a client’s ability to file a disciplinary complaint or requires the client to withdraw an existing complaint violates Rule 8.4(d)…

Another finding

We find Respondent’s testimony attempting to justify his selective decision to waive his fees to be untruthful, and to be contradicted by contemporaneous evidence, including Respondent’s own contemporaneous statements.

Respondent’s credibility is further undermined by the untruthful testimony he gave about the work he allegedly did for the Charter clients.

In some jurisdictions, such a finding would lead to a much harsher sanction.

An intriguing tidbit

On August 14, 2017, Respondent moved for sanctions and for an order to show cause, contending, first, that sanctions are appropriate for Disciplinary Counsel’s allegedly bad faith efforts to supplement the record with impeachment evidence. Respondent further contends that Disciplinary Counsel should be ordered to show cause why it should not be held in contempt for allegedly violating the Hearing Committee’s witness sequestration order. For the reasons discussed in the Confidential Appendix, infra, we recommend that Respondent’s motions be denied.

The probation proposed to follow the suspension has several conditions.

The case is In Re William E. Wallace and can be accessed here. (Mike Frisch)