No Recall

In a reciprocal discipline matter from Hawaii, the New York Appellate Division for the First Judicial Department imposed a two-year suspension

In June 2021, a six-day hearing was held before a Hearing Officer at which respondent proceeded pro se. The relevant facts are as follows: in or about January 2010, respondent was retained by the corporate client following his discussions with the client’s employee (the employee), who at all relevant times was the only individual from the client with whom respondent communicated regarding the representation, which lasted until approximately April 2010. All of the client’s officers were natives of Japan and were not fluent in English, although the employee’s English fluency was “good to very good.” The employee induced the client’s Chief Operating Officer to sign the retainer agreement with respondent, which specified the scope of respondent’s representation but the provisions addressing the fee(s) to be charged for the agreed upon work were left open and blank.

In January 2010, respondent sent the client an invoice reflecting 59.75 hours of work billed at an hourly rate of $1,000 (which exceeded the rate he charged other clients and the common hourly rates for law firm partners in Hawaii, which in 2009-10 ranged from $275 to $650 per hour). On January 25, 2010, the client paid respondent’s invoice for a total of $62,239. Respondent and the employee had agreed that respondent would receive a total legal fee of $100,000 from the client out of which respondent would pay the employee a $10,000 “commission” (i.e., a kickback), which respondent paid to the employee in or about February 2010 out of the $62,239 legal fee he received from the client.

On or about February 14, 2010, respondent submitted a second invoice to the client for 37 hours of work again billed at an hourly rate of $1,000 for a total of $40,148. After respondent submitted this invoice, the client began to take issue with the amounts charged. In March 2010, respondent revised the invoice so that it reflected a reduced hourly rate of $250. In April 2010, after a further revision, the client paid respondent $6,803.

During his representation of the client, respondent, at the request of the employee and without disclosure to and approval by the client, prepared a broad indemnification agreement (in English) naming the employee as the indemnitee and the client as the indemnitor. The employee secured the signature of the client’s Chief Operating Officer on the agreement. Respondent charged the client for the time he spent preparing the indemnification agreement.

Between 2014 and 2016, the client commenced multiple legal proceedings against the employee and others alleging malfeasance, including the actions described above. The client obtained an arbitration award and civil judgment against the employee for over $30 million, of which $129,325 in damages was found attributable to the scheme the employee carried out with respondent. In 2016, respondent appeared for a civil deposition in connection with the aforementioned arbitration/litigation during which he testified, inter alia, that he did not recall billing the client at the rate of $1,000 per hour, the employee asking him for the $10,000 kickback, or the previously discussed indemnification agreement.

By September 22, 2021 report, the Hearing Officer found that the ODC had proven by clear and convincing evidence that respondent had engaged in professional misconduct. The Hearing Officer cited the fact that in his answer to the ODC’s petition of charges and in his testimony at the hearing thereon respondent addressed in detail the areas respondent could not “recall” at his deposition. The Hearing Officer found that respondent’s inconsistency evidenced dishonesty on respondent’s part, as did his payment of the unauthorized $10,000 commission to the employee. The Hearing Officer found that respondent violated the Hawaii Rules of Professional Conduct (HRPC) rules 1.5(a) (charging an unreasonable fee); 1.5(b) (failure to communicate to a new client the basis or rate of fee, preferably in writing, before or within a reasonable time of commencing the representation); 1.13(b) (if the lawyer for an organization knows that an employee thereof is engaged in action, intends to act, or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of the law, which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization); 1.7(a), 1.7(b), 1.13(b), 1.13(e), and 1.13(g) (conflict of interest – dual representation of an organization and employee thereof without obtaining informed consent from the organization); and 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).

On the issue of sanction, the Hearing Officer found that respondent knowingly and intentionally engaged in the misconduct at issue, which resulted in harm to the client, and that such was aggravated by dishonest or selfish motive, multiple offenses, and refusal to acknowledge the wrongful nature of his conduct. Nevertheless, the Hearing Officer also found mitigating factors, namely, no prior discipline and a cooperative attitude toward the proceeding. The Hearing Officer recommended that respondent be suspended for a period of three years.

The Hawaii Supreme Court concluded that a two-year suspension was appropriate. (Mike Frisch)