Reprimand For Corporate Client Conflict
The New Hampshire Supreme Court Professional Conduct Committee has reprimanded an attorney who negligently violated Rule 1.9 and 8.4(a).
The Committee accepts the Hearing Panel’s recommendation and approves the facts as stipulated by clear and convincing evidence. It further found that David I. Frydman’s conduct violated Rules of Professional Conduct 1.9 and 8.4(a), as stipulated.
The Committee also concluded that a Reprimand is appropriate. Its sanction is in accord with the purposes of attorney discipline.
The complaint was filed by the state Secretary of State.
The complex stipulation of facts establish that the corporate attorney represented several related entities in an administrative proceeding. After a corporate reorganization, he represented the successor-in-interest to only one of the former clients.
He violated the Rule by failing to obtain the informed consent of the successors to the former entity clients in a substantially related matter.
It was stipulated that the conflict did not affect his independence and judgment.
The Office of Disciplinary Counsel agreed to drop a Rule 1.7 charge
The Union Leader reported on the allegations
A Concord lawyer and key figure in the legal breakup of the non-profit Local Government Center empire faces serious conflict of interest and duty to former client charges brought by lawyers for the New Hampshire Supreme Court’s Professional Conduct Committee.
David Frydman is legal counsel for HealthTrust Inc., the former arm of the LGC that manages health insurance plans for cities, towns and other public entities throughout New Hampshire.
In a complex, 23-page “notice of charges,” two lawyers for the Supreme Court’s Attorney Discipline Office, Deputy General Counsel Brian Moushegian and Assistant Disciplinary Counsel Elizabeth Murphy told Frydman to prepare to defend himself against the allegations first contained in an October 2015 complaint brought by Secretary of State Bill Gardner.
For more than a decade, Gardner was involved in a bitter, litigious battle with the LGC over his allegations that it improperly kept surpluses generated in profits from its health insurance business and used them to subsidize other lines of coverage it offered, including property and liability insurance.
Gardner had declined public comment about this complaint. Under the rules of legal discipline, a case remains private unless and until it reaches the stage of notices of charges.
The essence of this complaint is that Frydman violated lawyer conduct rules by remaining as HealthTrust’s lawyer in appealing a state Bureau of Securities Regulation order in 2012.
This ruling was that the LGC’s Property Liability Trust (PLT) had to return to HealthTrust $17.1 million it had received in subsidies. In turn, HealthTrust and PLT were ordered to return another $36 million in surpluses to their members.
In November 2012, the HealthTrust and PLT created separate governing boards and written bylaws to try and comply with the ruling ordering the LGC member groups to subdivide.
Frydman continued as general counsel for all LGC entities until Sept. 1, 2013 when he became just HealthTrust’s lawyer.
This was a day after the LGC restructured and changed its umbrella name to the New Hampshire Municipal Association.
The complaint questions whether Frydman remaining as legal counsel for HealthTrust violated duty to his former clients PLT and committed a conflict of interest in advising his new employer while possessing information about his previous ones that had been part of the LGC network.
“Among other things, there was a significant risk that Mr. Frydman’s representation of HealthTrust was, or could have been, materially limited by his knowledge of confidential information concerning LGC PLT’s and PLT’s financial circumstances, business practices/plans and/or communications and strategy regarding the administrative proceeding and appeal,” the notice of charges reads.
Frydman referred all questions about the complaint to his longtime lawyer in this controversy, former state prosecutor Michael Ramsdell.
“We don’t think there is any merit to these charges. We think when the process runs its course that the committee will find that there has been no violation here,” Ramsdell said Friday afternoon during a telephone interview.
“It may be complicated. We are confident that the committee will find that outcome when it runs its course.
“We hope you will do a story when that occurs as well.”
The notice of charges fault Frydman for never receiving informed, written consent from his former client, the Property Liability Trust, that it was OK for him to engage in representing HealthTrust in the continued litigation.
Frydman was a former general counsel to the New Hampshire House of Representatives before he was hired as general counsel to the LGC in January 2011.
Prior to getting to this point, Gardner’s complaint was reviewed by the Professional Conduct Committee’s general counsel, then investigated, then reviewed by a screening committee and then turned over to a disciplinary counsel to investigate.
This notice of charges is the result of the work of the disciplinary counsel.
The matter now will head to a hearings committee and then go before the full Professional Conduct Committee.
(Mike Frisch)