A Fraught Situation And The Joys Of Willful Blindness

The Massachusetts Board of Bar Overseers split over the appropriate sanction in a matter involving a fee petition seeking $75 million in a class action

When class actions settle, courts face a fraught situation. In most such cases, the attorneys for the plaintiff class are entitled to a percentage of the settlement as a contingent fee, and the fee requires court approval. Fed. R. Civ. P. 23. Having compensated the plaintiffs in exchange for a release and dismissal, the defendants disappear, leaving no viable challenger to litigate the amount of the fee that will be taken from the class settlement. At that point, the proceeding becomes, effectively, ex parte. The plaintiffs’ lawyers file a petition for their fees, which class members rarely question.

This bar discipline case exposes the pitfalls of class action settlements. Following resolution of a complex securities litigation, the respondent, Garret J. Bradley, the former managing partner of the Thornton Law Firm LLP (“Thornton”), signed a fee application, which contained several misrepresentations. After a series of newspaper articles, the federal judge overseeing the case questioned the veracity of Bradley’s application as well as similar applications filed by other lawyers. Years of litigation ensued, ending in a report by a Special Master (adopted by the judge), finding Bradley and his co-counsel had misrepresented material facts to the court. Bar counsel opened an investigation and ultimately filed a Petition for Discipline. After a hearing at which only the respondent testified, the majority of a divided hearing committee recommended a suspension of Bradley’s law license for six months. A dissenting member (the public member) would recommend a suspension of two years. Both parties have appealed. Having reviewed the briefs and the record, we adopt the hearing committee’s findings of fact and conclusions of law. Rather than its recommended sanction of a six-month license suspension, we recommend that the Supreme Judicial Court suspend the respondent’s law license for six months and one day.

The fee

On November 2, 2016, the federal court judge approved the joint fee application of all the plaintiffs’ attorneys in the amount of $75 million.

The hearing committee majority credited Bradley’s testimony that he did not carefully read his declaration in its entirety before he signed it. (Hearing Committee Report (HCR) ¶ 14). He read page two and “flipped through” page three “with sufficient comprehension to discern that it consisted of ‘boilerplate’.” (HCR ¶ 28, quoting Respondent’s testimony). He admitted doing nothing to confirm the accuracy of the information, relying on those who prepared the documents and his partners, who presented the documents to him for signing. Specifically, the majority wrote that they credited Bradley’s recollection that he, “did not read the declaration carefully enough to understand what he was signing was not accurate or was misleading. Bar counsel failed to introduce any evidence to the contrary.” (HCR ¶ 24).

Unanimously, the hearing committee agreed that the declaration and Exhibit A misrepresented material facts, upon which the federal judge relied when he approved the settlement as well as the fee petition. Paragraph 4 of the declaration stated that the hourly rates were “the same as my firm’s regular rates charged for their services, which have been accepted in other complex class action.” While the latter part of the sentence was true (the rates had been accepted in other cases), Thornton handled only contingent fee litigation and had never charged a client an hourly rate. As the hearing committee observed, “A reasonable reviewer of the body of the declaration would have understood there was some basis for identifying an hourly rate, and that the basis was work for which some client paid on an hour basis. There were no such clients.” (HCR fn. 18).

Investigative journalism

The inaccuracies came to light in a series of articles in the Boston Globe starting in November 2016.

As a result

The judge appointed a Special Master to look into the billing issues. The process took about two years, at the conclusion of which the Special Master reported to the judge on his findings. Ultimately, the court reduced the total fee for the plaintiffs’ lawyers from $75 million to $60 million and reallocated the specific amount owed to each firm.

Board findings on Respondent’s asserted inattention to the document he signed

we agree with and adopt the committee majority’s legal conclusion that the respondent did not act in breach of his duties of candor toward the tribunal under Mass. R. Prof. C. 3.3(a)(1) (“A lawyer shall not knowingly … make a false statement of fact or law to a tribunal …”) (emphasis added). For the same reason, we adopt the majority’s conclusion that he did not violate Rule 8.4(c) by engaging in “dishonesty, fraud, deceit, or misrepresentation.”

Cassandra dissent

Our colleagues in dissent express concern that our decision will encourage lawyers to turn a blind eye to their duty to review documents before filing them. If a careless failure to read a document would result in a lighter sanction, it would behoove attorneys to not read what they sign. We do not share this concern. Each case will be judged on its own merits and based on its own facts. Like all cases, the facts of this matter are unique. We would not accept an unsupported defense that a respondent did not read a document before signing. Moreover, the failure to read a pleading, even if proved, would not be exculpatory, as we discuss below; it goes only to state of mind. The inquiry does not end there. Taking Bradley at his word, we adopt the committee majority’s conclusion that he failed to act with diligence and therefore violated Mass. R. Prof. C. 1.3. The committee had a sufficient basis for the finding. Bradley admitted that he failed to do anything to verify the accuracy of the information in his declaration. He inappropriately relied on others who prepared the documents. We have held other lawyers in breach of Rule 1.3 for carelessness when reviewing documents filed in court. See, e.g., Matter of Fitzgerald, 35 Mass. Att’y Disc. R. 137 (2019).

For the same reasons, Bradley’s actions prejudiced the administration of justice…

We agree with and adopt the committee’s conclusion that Bradley violated Rule 3.3(d). The rule imposes a heightened duty of disclosure in ex parte matters. Bradley was under a duty to “inform the tribunal of all material facts known to [him] that will enable the tribunal to make an informed decision, whether or not the facts are adverse.” Because State Street had no interest in the fee award, it was incumbent on Bradley and his co-counsel to fully disclose the facts to the judge. Indeed, comment [14A] to the rules uses class action fee litigation as an example of an ex parte matter requiring fulsome disclosure.

Lastly, we address Mass. R. Prof. C. 8.4(h) (other misconduct reflecting adversely on a lawyer’s fitness to practice). The hearing committee concluded that bar counsel proved a violation of the rule, because filing a declaration without reading it is a clear dereliction of one’s ethical duties. We agree. On the other hand, we do not agree that the failure to correct the material prior to the March 2017 hearing violated the rule, since we have concluded that Bradley had no such duty.

Sanction

we determine that a license suspension in the range of six months is reasonable and fair in light of our precedent. We add one more factor. Given Bradley’s cavalier attitude toward signing the documents, he would benefit from an ethics refresher. He should satisfy the bar that he understands his responsibilities. Accordingly, we recommend to the Supreme Judicial Court that it require him to take and pass the Multistate Professional Responsibility Examination.

Dissent

We disagree with our colleagues in the majority on a fundamental point. Bradley’s misconduct was not merely negligent; it was reckless. He was willfully blind to the facts stated in his declaration and the attached Exhibit A. We accept the hearing committee majority’s finding that Bradley did not read the documents in their entirety. The finding rested at least partly on its assessment of the respondent’s credibility, and we will not disturb it. As our colleagues noted, bar counsel has pointed to no evidence that he read the entire filing, word for word, front to back.

Unlike our colleagues, we view the failure to read the documents (or ask questions about the basis for the assertions) as willfully blind. The declaration consisted of two pages of text. The same is true for the attachment. Moreover, we are persuaded that, if Bradley had actually read the documents, he would not have changed a word. He intended to mislead the judge to believe that his brother worked for his law firm, his brother’s “regular hourly rate” was $500, 23 lawyers listed as staff attorneys were Thornton employees, and they too had “regular hourly rates,” of $425. None of this was true, and the respondent knew it. Indeed, he did not need to read his declaration to know what it said. He knew it already. Bradley admitted that he discussed using a rate of $425 for the staff attorneys with lawyers at Lieff and Labaton. He knew that his brother would be listed as an employee of the firm with a rate of $500. Accordingly, whether he actually read the documents is irrelevant; he knew they were false.

The majority opinion suffers from a logical inconsistency. On the one hand, the majority accepts that Bradley did not carefully read the entire document. But on the other hand, it is clear that if he had read it, nothing would have changed. In other words, he chose not to inform himself of the contents because the contents did not matter to him. This is not a simple lack of diligence. It’s an attempt to perpetrate a fraud on the federal court. The “mens rea,” or mental state, required for a violation of Rule 3.3(a) is “knowledge,” not intent. A tribunal may infer knowledge from willful blindness toward the existence of a fact. Zimmerman, supra; see also Model Penal § 2.02(7). The willful blindness doctrine essentially equates gross recklessness toward the falsity of a statement as the equivalent of knowledge of that statement’s falsity, in order to avoid rewarding respondents and criminal defendants who put their heads in the sand in order to avoid actual knowledge. That is exactly what occurred here. Accordingly, we would have adopted the conclusions of the hearing committee dissent and concluded that Bradley violated Rule 3.3(a)(1) and 8.4(c).

When a lawyer signs an affidavit under the pains and penalties of perjury, he or she must comply with a higher duty of care. For this reason, our case law imposes a presumptive two-year license suspension for lying under oath. This is even more so in ex parte matters. In a case where he was to share in a $75 million legal fee, Bradley had a duty to not file a misleading declaration and attachment. His duty was not simply to read it, but to correct it. We do not agree that Bradley could reasonably rely on the reassurances of others, either his partners who presented the document to him, or the lawyers at the other firms. Again, he knew what the document said without having to read it. He had participated in discussions about sharing the salaries of the staff attorneys and their hourly rates. This appears like a conspiracy to mislead the court. One conspirator cannot avoid punishment by relying on his co-conspirators.

The dissenters recommend a two-year suspension. (Mike Frisch)