|Oregon State Bar Bulletin APRIL 2010|
Client Security Fund Annual Report
By Sylvia Stevens
“…a plan to relieve or mitigate pecuniary losses to the clients of active members caused by dishonest conduct of those members in their practice of law.”
With modest annual assessments,1 Oregon lawyers have for more than 40 years funded a program that provides real relief to clients of dishonest lawyers and serves, in some small way, to restore their confidence in the legal profession. In 2009, the CSF paid out more than $157,000 to 30 claimants for losses caused by 15 lawyers.
The Client Security Fund is managed by a committee of 12 lawyers and a public member.2 Individual committee members investigate the claims. The committee meets six times a year to review the claims and make recommendations to the Board of Governors, which has final authority on all awards. The fund is comprised entirely 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), used only to reimburse claimants and pay the expenses of operation.
Claims can be made only by a client of an active member of the OSB, or by the client’s legal successor, and there must be evidence of an established lawyer-client relationship or the lawyer must have been acting in a fiduciary capacity related to the lawyer’s practice of law. Claims are eligible for reimbursement only if there is evidence of dishonesty, which, 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 the services were of de minimis value. Awards are limited to the amount actually misappropriated and do not include any consequential damages or interest. The maximum reimbursement of any claim is $50,000.
The CSF is a “fund of grace”; reimbursement of any claim lies within the discretion of the 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 bar is subrogated to the rights of a reimbursed claimant against the defalcating lawyer to the extent of any award. Recovery on subrogated claims is minimal, as most of the lawyers are no longer practicing and many have left the area. In 2009, the CSF recovered slightly more than $3,800 of its receivables, which total approximately $1 million.
The following claims were paid in 2009:
Glenn C. Brown ($13,973)
Seven clients of Sisters attorney Glenn C. Brown received awards totaling $13,973. In each case, Brown received payment in advance. In late 2007, Brown abandoned his practice, leaving many client matters unfinished. The Oregon Supreme Court suspended Brown temporarily in June 2008, pending the outcome of three pending disciplinary cases involving complaints of 16 clients. The allegations included neglect, failure to maintain client funds in trust, failure to account for client funds, failure to cooperate, dishonesty and misrepresentation. Brown eventually submitted a Form B resignation that was effective in December 2008.
Jeffrey Detlefsen ($21,825.23)
Portland attorney Jeff Detlefsen’s client complained that Detlefsen refused to provide a satisfactory accounting after the client paid $68,391.00 to satisfy a lien securing Detlefsen’s fees. The bar charged Detlefsen with dishonesty and charging an excessive fee. While the disciplinary case was pending, Detlefsen refunded a few thousand dollars to the client. The bar’s investigation indicated that even after figuring in the refund, the client had overpaid Detlefsen by $21,285.23. Detlefsen refused to refund anything more. Shortly thereafter, Detlefsen submitted a Form B resignation which became effective in October 2008.
Gerald Douglas ($1,300)
The CSF made awards to two clients of Gerald Douglas, one for $300 and the other for $1,000. Douglas died unexpectedly in February 2009, leaving several client matters unfinished. The fees were not deposited into a trust account, nor were they agreed by the clients to be “earned on receipt.” The committee and the Board of Governors agreed that the failure to properly hold unearned client funds in trust met the dishonesty requirement of the fund.
Timothy Dunn ($12,000)
The CSF made awards ranging from $200 to $6,100 to five former clients of Aloha attorney Timothy Dunn. Dunn undertook the representation of these claimants at various times in 2007, but didn’t inform any of them of a pending formal disciplinary matter involving numerous charges, including the violation of prior disciplinary probation terms. An interim suspension order was entered in October 2007. In each of these cases, 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.
Michael Genna ($3,600)
Genna collected a $5,000 retainer in November 2006 to handle an extradition proceeding. He did some work before essentially abandoning the case and ignored the client’s requests for an itemized statement of his time. Genna submitted a Form B resignation in January 2008 while being prosecuted on three different matters involving excessive fees and improper handling of funds. The award represents the portion of the fee not earned by Genna.
Sharon Hockett ($1,435)
A client deposited a retainer of $1,700 with Roseburg attorney Sharon Hockett in May 2005 for help obtaining parental rights. Over the next two years, Hockett and the client spoke periodically about his case; the client’s April 2007 bill showed a trust balance of $1,435. The client decided to wait a few more months before proceeding further. In December 2007, Hockett submitted a Form B resignation in the face of unrelated disciplinary charges. The client was unable to contact Hockett after her resignation, and she did not respond to his request for the balance of his retainer.
William Horton ($24,500)
Portland attorney William Horton settled a matter for his client and deposited the settlement proceeds of $35,000 into his trust account. Despite many demands, Horton never disbursed the net proceeds to the client, who eventually filed a bar complaint and initiated a fee arbitration with the bar. Horton took his own life in late January 2009. The CSF subpoenaed Horton’s trust account records, which showed that within 30 days of depositing the client’s settlement check there was less than $50 in the account. The award reflects a deduction of 30 percent for Horton’s fee.
Jacob Johnston ($2,000)
Gresham attorney Jacob Johnston was hired in February 2006 in a probate matter. The client gave him a retainer of $2,000. In March, Johnston requested an additional $252 to obtain a bond. The client heard nothing more from Johnston until August 2007, when he advised her he was leaving the practice of law. In November, he refunded the $252 advanced for the bond but did not respond to the client’s request for a refund of the unearned retainer. The CSF investigation revealed that Johnston had not done any work on the case since his initial meeting with the client. Johnston was suspended in September 2009 in connection with this and another matter.
Jacqueline Koch ($6,291)
The CSF made awards to two of Portland attorney Jacqueline Koch’s clients, one of $1,500 and the other of $4,791. The first award was based on the client’s overpayment of fees due to Koch’s billing error. Despite demand, the client was unable able to recover the funds from Koch. The second award represented unearned fees paid in advance for an appeal in which Koch defaulted. During the time she handled both of these matters, the bar was investigating several complaints against Koch. She defaulted in the formal disciplinary proceeding and was suspended in December 2008; she submitted a Form B resignation in January 2009.
Thomas La Follett ($17,500)
Canby attorney Thomas La Follett negotiated a $25,000 settlement for a minor, which the court ordered be put into a restricted account under the control of a conservator. In October 2008, La Follett submitted a Form B resignation during the pendency of unrelated disciplinary proceedings involving commingling and converting client funds. In late 2008, a probate court inquiry into this client’s conservatorship revealed that the settlement funds had been wrongfully spent by La Follett.
Samuel J. Nicholls ($7,000)
Beaverton attorney Samuel J. Nicholls was retained to conclude a client’s divorce and defend her in a fee collection initiated by her former lawyer. She paid Nicholls a retainer of $7,000, but he did virtually no work on the case. Nicholls was suspended for part of the time he represented the client but failed to inform her of that fact. The former lawyer obtained a judgment against the client because Nicholls couldn’t respond to the matter during his suspension. The client didn’t learn about the entry of judgment until served with a foreclosure notice. Nicholls was disbarred based on his representation of this client, including his failure to account for the money he received from her.
John Oh ($20,590)
Five clients of Portland attorney John Oh received awards ranging from $500 to $8,100. In each case, Oh collected retainers from clients to handle their immigration matters, but he abandoned his practice and left the state without notice and without completing the work undertaken. Despite many promises, Oh failed to return any of the unearned fees.
Thomas Okai ($16,976.50)
The client deposited a retainer of $23,000 with Ontario attorney Thomas Okai. On the client’s behalf Okai sent $12,000 to accounting and bankruptcy professionals who would assist with the client’s problems. The client subsequently instructed Okai that he had no further need for the services of the Oregon accountant and bankruptcy lawyer. Okai continued to work on other matters for the client, but after about a year he closed his practice and instructed the client to retrieve his file. The client’s demands for the refund of his advanced fees were not answered. The client then contacted the accountant and the bankruptcy lawyer and learned that they had returned the advanced fees to Okai more than a year before. The CSF award included those funds as well as the balance of the remainder determined to be unearned by Okai.
Michael Shinn ($9,000)
Portland attorney Michael Shinn handled a wrongful death claim; his client was the personal representative of the decedent’s estate. When the case settled, the client agreed that Shinn could withhold $9,000 from the settlement proceeds for expenses relating to a legal malpractice case she wanted him to pursue against the decedent’s former lawyer. When summary judgment was entered against the personal representative in the malpractice case, she decided not to appeal and requested a return of the unearned cost advance. Shinn did not respond and the client complained to the bar. Disciplinary counsel’s investigation disclosed that, while no costs had been incurred on the case, Shinn had withdrawn and misappropriated all of the cost advance.
Joseph Watson ($615)
At the conclusion of his representation of a client, Oregon City attorney Joseph Watson agreed to hold the client’s wallet for safekeeping during the client’s incarceration. At the time, it contained three money orders totaling $715. When the client was released from jail and recovered his wallet, the money orders were gone. The client later discovered that Watson had apparently forged his signature to cash the money orders while the client was in jail. Watson repaid $100 and promised to repay the balance, but stopped communicating with the client. He did not respond to the disciplinary investigation of the client’s complaint and a trial panel disbarred him in 2008.
1. $5 per year from 2003 through 2009; raised to $15 in 2010.
2. Committee members in 2009 were Susan Alterman (chair), Robert Quintero (secretary), J. Russell Rain, Eric Foster, Linda Marshall, Joan-Marie Michelsen, Connie Swenson, Martin Barrack, C. Scott Howard, Michael McGean, Max Taggard and Ron Palmer (public member).
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.
© 2010 Sylvia Stevens