|Oregon State Bar Bulletin MAY 2009|
Client Security Fund 2008 Annual Report
By Sylvia Stevens
For 38 years, since issuing its first award in 1970, the OSB Client Security Fund has afforded clients relief from the actions of dishonest lawyers. With a modest $5 annual assessment, Oregon lawyers finance a program that gives real meaning to our mission of public protection and ameliorates the damage to the profession that is caused by the misconduct of a few lawyers.
The CSF is managed for the Board of Governors by the CSF Committee, which consists of 12 lawyers and a public member. Committee members in 2008 were Scott Asphaug (chair), Susan Alterman (secretary), Martin Barrack, Jeffrey Chicoine, Mitzi Naucler, Tigran Eldred, J Russell Rain, Eric Foster, Linda Marshall, Joan-Marie Michelsen, Robert Quintero, Connie Swenson and Ron Palmer (public member). The work of the committee is challenging but also very rewarding.
The CSF “fund” is comprised of member assessments, together with interest on the invested funds and money collected by subrogation from the defalcating lawyers. It is a dedicated fund (not part of the OSB general fund) and is used only to reimburse claimants and pay the expenses of operation.
The principal requirement of eligibility for an award is evidence of dishonesty by an active member of the OSB. The CSF is not a substitute for a fee arbitration or a malpractice claim, and the committee often struggles to determine the value of an unearned fee claim. “Dishonest conduct” for purposes of the CSF means a defalcation, embezzlement or other wrongful taking. Unearned fee claims are reimbursed only if the lawyer took fees in advance but provided no services, or if there is evidence that the lawyer’s work was of no or only minimal value to the client.
Claims must be presented by the lawyer’s client or the client’s legal successor. Awards are limited to the amount actually misappropriated and do not include any consequential damages or interest. Each claim is investigated by a member of the CSF Committee; whose report is then reviewed by the full committee. The committee can either deny the claim or forward a recommendation for payment to the Board of Governors. An unsuccessful claimant may request board review of the committee’s denial. The Board of Governors can approve or deny any claim presented to it, and its decision is final.
There is no entitlement to an award from the CSF; reimbursement of any claim lies within the discretion of the CSF Committee and the Board of Governors. Claimants are required to exhaust their remedies against the lawyer, which in many cases means having either a civil judgment or criminal restitution judgment against the lawyer, and making a good faith effort to collect. No judgment is required for a claim of $5,000 or less if the lawyer was disciplined or resigned in connection with the same conduct. The reimbursement of any claim is subject to a limit of $50,000.
The bar is subrogated to the rights of reimbursed claimants against the defalcating lawyer to the extent of the award. The bar makes every effort to collect on subrogated claims, but the likelihood of collection from the lawyer is not a factor in the committee’s decision-making. Although recoveries are typically small, there are a handful of lawyers who make regular payments to the CSF, and a full recovery was made on three claims paid in 2008.
In 2008, we saw 46 claims for reimbursement, the highest number since 1999, and one of the five highest in CSF history. By contrast, the total paid out in 2008, $82,409 on 26 claims, was lower than the $107,790 paid out in 2007. Subrogation recoveries in 2008 were $28,290, significantly more than the $5,000-$6,000 collected in a typical year and due to a single large payment. Outstanding receivables hover around $1 million.
Following is a brief summary of the claims paid in 2008:
William Judy ($40,000)
This was the ninth award made to a former client of Grants Pass attorney William Judy. The claimant here was an elderly man who hired Judy in 1999 to probate the client’s brother’s estate. When the estate was settled in 2000, Judy convinced the client to loan Judy his inheritance of $50,001 at 20 percent interest. Judy made an interim interest payment of $10,000, but didn’t pay the note when it came due and admitted to the client that “the money is gone.” Judy submitted his Form B resignation in September 2004; he pleaded guilty to federal mail fraud and “structuring” charges in December 2004 and served a two-year prison term. This client’s loan to Judy was investigated by the FBI in connection with the criminal case, and Judy’s restitution order of
$3 million included the balance due to this client.
Timothy Dunn ($4,730)
The CSF made awards ranging from $200 to $1,500 to six former clients of Aloha attorney Timothy Dunn. Dunn had entered into a disciplinary diversion agreement in November 2004, but thereafter more complaints were received and a formal complaint arising out of approximately a dozen new matters was filed in September 2006. Dunn’s diversion was terminated in October 2006, and he was ultimately disbarred by a trial panel on Feb. 20, 2008. Dunn undertook the representation of all but one of these six claimants in 2007, but never informed any of them of his pending disciplinary charges prior to his interim suspension in October 2007. In each of these claims, the CSF found that Dunn had received fees in advance for work that was never done, was of only de minimis value or was incomplete, and that he failed to refund any of the unearned fees.
Eric Cumfer ($720)
Salem attorney Eric Cumfer was hired in May 2003 to represent a client in the direct appeal of a criminal conviction. Cumfer worked on the matter for a few weeks and obtained at extension of time to December 2003 for filing the opening brief. Cumfer didn’t file the brief, nor did he obtain a further extension of time. When the client filed a complaint with Disciplinary Counsel’s Office, Cumfer admitted that he had done no work on the matter since the end of July 2003. Cumfer also acknowledged his failure to refund the unearned portion of the retainer.
Will Childs ($14,470)
Four former clients of Eugene attorney Will Childs were awarded reimbursements ranging from $1,195 to $9,575. In three of the claims, the facts were similar: Childs undertook the representation, collected fees in advance and did some initial work on the matter, but stopped working on the matter without notice to the client and without refunding the unearned fees. The fourth matter involved failure to refund unearned fees as well as misappropriation of funds received on behalf of the client. Childs resigned from the bar with charges pending arising out of this and other client matters.
William Kent ($3,706)
The CSF made two awards to former clients of Eugene attorney William Kent, one for $1,000 and the other for $2,706. In both cases, the CSF concluded that Kent had failed to refund the unearned portion of fees paid in advance for legal services. Kent resigned from the bar in 2007 with charges pending relating to several client matters.
Dennis Tripp ($5,100)
The CSF made awards of $2,400 and $2,700 to two former clients of Portland attorney Dennis Tripp in 2008, after having paid five claims between 2005 and 2007. In the first matter, the clients retained Tripp in June 2001 to assist with some family business issues and gave Tripp a $3,000 retainer. Tripp accompanied the clients to a meeting of the family shareholders, after which Tripp advised the clients to “sit tight” and wait for the other family members to make the next move. The clients heard nothing further from Tripp and learned from a newspaper article that he died in April 2005. Tripp’s office records did not include any explanation for his use of the clients’ funds and there was no money in his trust account.
In the second claim, the client hired Tripp in September 2003 regarding a personal bankruptcy. He gave Tripp a $2,700 retainer and began to collect the financial records that Tripp requested for preparation of the petition. The last of the records were delivered to Tripp sometime in mid-2004. The client heard nothing from Tripp and was informed of Tripp’s death in April 2005. Tripp had not prepared or filed the bankruptcy petition and no portion of the client’s retainer was returned.
Cheryl Chadwick ($2,000)
Salem attorney Cheryl Chadwick was hired in September 2003 to represent a client in a federal immigration matter, for which the client paid $3,000 in advance. Chadwick withdrew from the case in early 2004 upon learning she would be indicted on money-laundering charges, to which she pleaded guilty in May 2005. The CSF concluded that Chadwick did very little work on the case and had failed to refund the unearned portion of the fee. In August 2005, the Oregon Supreme Court issued an interim order suspending Chadwick during the investigation and resolution of disciplinary charges relating to her conviction. She submitted a Form B resignation in February 2007.
Lewis Coover ($1,850)
The client hired Milwaukie attorney Lewis Coover on March 1, 2008 to seek an emergency change of custody of the client’s minor children. The client paid a retainer of $2,000 by money order, which was cashed by Coover on March 6. Coover filed an emergency motion and the matter was set for hearing on March 13, but he died unexpectedly on March 11, 2008. Coover’s file reflected the work he had done to prepare and file the motion, and to prepare for the hearing. However, there was no money in Coover’s trust account at the time of his death and no other evidence of the disposition of the client’s retainer. The CSF committee concluded that Coover’s failure to deposit the client’s retainer in his trust account constituted dishonesty within the meaning of the CSF rules.
David Tombleson ($2,500)
Oregon City lawyer David Tombleson was hired in January 2006 to dissolve the client’s business partnership. The client paid retainers totaling $3,500. The matter settled in June 2006. At that time, Tombleson promised the client a refund of the unearned portion of the retainer once the settlement was concluded. By early November 2006, all of the parties had signed a settlement agreement. In late 2006, the client tried to contact Tombleson for a report on the status of his legal matter, but Tombleson failed to respond and failed to refund the unearned portion of the retainer. In July 2007, Tombleson was suspended for failure to pay his bar dues. In April 2008, Tombleson was suspended for two years. The trial panel ordered that Tombleson pay restitution to this client in the amount of $2,500. Tombleson did not pay the restitution and his whereabouts are unknown.
Jeffrey Miller ($7,039)
Five former clients of Prineville attorney Jeffrey Miller received awards ranging from $500 to $2,039. In all of the cases, Miller was hired in the summer or fall of 2007 and paid a flat fee for the services to be performed. Miller did some work on the matters, but by early 2008 personal problems interfered with his ability to handle his client’s matters and he essentially abandoned them. The bar began to receive complaints about Miller in March 2008. In July 2008, on the bar’s petition, the Oregon Supreme Court placed Miller on inactive status due to mental disability. The CSF determined in some of the matters that Miller’s services were of de minimis value; in others credit was given for the work performed. In every case, however, there were unearned fees that Miller failed or refused to refund, which entitled his clients to reimbursement from the fund.
Morgain McGaughey ($8,000)
Two former clients of Medford attorney Morgain McGaughey received awards totaling $8,000. One of the clients retained McGaughey in June 2007 in a criminal matter and deposited an advance of $3,000 toward her legal fees. McGaughey filed a motion for a continuance, a waiver of jury and a motion for expert witness expenses. Within a few weeks, however, McGaughey had ceased communication with the client. Other than the initial pleadings, there was no evidence that McGaughey did any work on the client’s matter, and her billing records suggest that she charged the client for services that weren’t performed. The client eventually hired another lawyer to complete the representation. The CSF valued McGaughey’s work at $500, and the client received an award of $2,500 for the unearned portion of the fees.
The second client retained McGaughey in October 2006 to help recover custody of her children from the Oregon Department of Human Services. The client paid McGaughey a total of $11,000 over the next several months. McGaughey worked on the case until she abandoned her practice in August 2007. The client had exhausted her funds and was appointed new counsel in the matter. Although McGaughey’s time records indicated she spent quite a bit of time on the matter in conferences with the client, court appearances and reviewing voluminous records, the CSF investigation revealed that McGaughey appeared not to understand the complex factual and legal issues involved, and her work was of negligible value. The CSF concluded that McGaughey had earned only half of the fees charged and awarded the client $5,500.
ABOUT THE AUTHOR
Sylvia Stevens is general counsel for the Oregon State Bar. She can be reached at (503) 620-0222, or toll-free in Oregon at (800) 452-8260, ext. 359, or by e-mail at firstname.lastname@example.org.
© 2009 Sylvia Stevens