|Oregon State Bar Bulletin AUGUST/SEPTEMBER 2010|
There Oughtta Be a Rule! (But There Isn't)
By Sylvia Stevens
Recently, I heard from an arbitrator (a respected trial lawyer of many years’ experience) who was distressed at being “stiffed” when the lawyer for one of the parties in an arbitration refused to pay the arbitrator’s fee on the ground that he was unable to collect it from his client. My caller was certain he had seen authority in years past obligating lawyers to pay the litigation expenses of other professionals1 that were incurred on behalf of their clients. I replied that I was not aware of any such authority in Oregon. Moreover, I had always believed that the issue was governed by agency law and was not a matter of professional regulation.
The caller’s certainty of the existence of such a requirement nevertheless piqued my curiosity, so I undertook to research the issue. To confirm my belief that there was no Oregon authority on point, I began by looking through all of the old OSB Informal Opinions2 and then the former OSB Formal Opinions.3 In the latter volume I found former OSB Opinion No. 307 from 1975.
Opinion No. 307 began with recognition that a lawyer’s personal obligations are not within the bar’s jurisdiction. “However, where there is a question of nonpayment of professional financial obligations, there is more concern regarding possible ethical problems to be considered.” The opinion also recognized that there was no disciplinary rule governing the situation, but found persuasive the case of Burt v. Gahan, 220 NE 2d 817, 351 Mass 340 (1966), a breach of contract action by a court reporting firm against a lawyer that had engaged its services for his client’s hearing. The issue in Burt was whether in the absence of an express agreement with the court reporting firm, the lawyer was responsible. The court found in the affirmative:
While in a broad sense counsel may be an agent and his client a principal, there is much more involved than more agency….The attorney usually determines what steps are to be taken in his client’s interest, and the acts of the attorney in the conduct of litigation are binding upon the client. We therefore deem the just and equitable rule of law thus established to be that, in the absence of express notice to the contrary, court officials and persons connected, either directly or indirectly, with the progress of the litigation, may safely regard themselves as dealing with the attorney, instead of with the client.
Burt v. Gahan, supra at 818-19. The court acknowledged contrary decisions in a few other jurisdictions, but found them unpersuasive, concluding: “There is no hardship in the rule we adopt, as it would be a simple matter for the attorney to exclude himself from liability by a statement to that effect.” Id at 819.
The authors of Opinion No. 307 opined that the result in Burt v. Gahan was “fair to all parties involved in a situation where an attorney hires an expert on behalf of his client.” Nevertheless, the opinion concluded that “the question is basically a legal one, and does not come under the jurisdiction of this Committee.”
While I found no reported opinions in Oregon, Burt v. Gahan appears to have been the beginning of a nationwide trend away from the historical rule that attorneys are liable for client litigation expenses only if they expressly assume such liability. The “modern rule” as expressed in Burt is that the attorney will be liable unless responsibility is expressly disclaimed.4 With regard to court reporting expenses, some jurisdictions have gone so far as to enact statutes making lawyers liable for court reporting services they request.5
When sued by the court reporting companies, some lawyers raise RPC 1.8(e) as a defense, contending that the rule’s requirement that clients be “ultimately liable” for litigation expenses insulates the lawyer from personal liability. Courts are not persuaded. “The lawyer’s personal liability to the court reporter does not alter the fact that the client is ultimately responsible for the expense… (T)he attorney’s payment is an advance of litigation expenses. Such an advance is expressly permitted by (Rule) 1.8(e)(1)… We therefore reject appellants’ claim that they cannot be bound by a contract with the court reporters because such a contract would violate (Rule) 1.8(e).” Cahn v. Fisher, supra, fn. 4.
Of course, Burt and similar cases were civil claims, not professional discipline cases. This being a column about lawyer’s responsibilities under the Oregon Rules of Professional Conduct, I expanded my research to include a survey of bar counsel in other jurisdictions. While only a few had case citations to offer, several responded that they routinely investigate complaints that a lawyer has failed to pay a court reporter. In many cases, the bar’s inquiry is sufficient to resolve the problem, but where it does not, prosecution may follow.
Some lawyers are charged with violating RPC 4.4(a), which prohibits a lawyer from using “means that have no substantial purpose other than to embarrass, delay, harass or burden a third person.” Most often, however, the charge is “conduct prejudicial to the administration of justice,”6 especially where the lawyer’s unwillingness to pay the court reporter’s fees has led to an unsatisfied judgment, failure to appear at a show cause hearing and the issuance of a bench warrant.
It is undisputed that the disciplinary rules are not intended and should not be used as a means to coerce debt collection. However, as noted by a disciplinary board in Massachusetts, discipline is appropriate when a court has to issue a warrant “to compel the lawyer’s obedience to its commands.”7 It is also found appropriate where the lawyer’s conduct is particularly egregious, as evidenced by the following cases.
In People v. Eamick, 168 P3d 519 (Colo. 2007), the lawyer engaged a court reporter for a deposition without disclosing that neither the lawyer nor his client could afford to pay. The court rejected the lawyer’s Rule 1.8(e) argument (see discussion above) and concluded that the lawyer’s conduct prejudiced the administration of justice. He was suspended for 31 days.
The lawyer in People v. Whitaker, 814 P2d 812 (Colo. 1991), hired a court reporter but never paid the bill. She defaulted in a small claims action brought by the court reporter, failed to answer interrogatories and a bench warrant was issued for her arrest. She also failed to respond to the bar’s inquiry and formal charges. The court concluded that her repeated promises accompanied by her continuing failure to pay amounted to dishonesty and that her disregard of the judicial proceedings was conduct prejudicial to the administration of justice. She was suspended for 90 days. (The case also included a neglect charge.)
South Carolina has several reported cases in which a lawyer’s failure to pay a court reporter was found to be prejudicial to the administration of justice. In each case, however, the failure to pay the court reporter was only one of multiple charges brought against the lawyer. See In re Johnson, 685 SE 2d 610 (S.C. 2009) (lawyer disbarred for “numerous incidents of financial misconduct” including not paying a court reporter and “a pattern of egregious financial misconduct” including mishandling client funds); In re Braghirol, 680 SE2d 284 (S.C. 2009) (six-month suspension for failure to pay a court reporter, failure to pay a fee arbitration award and neglect of several matters); In re Smalls, 677 SE 2d 211 (S.C. 2009) (disbarment for egregious failures to safeguard and account for client funds and for mishandling client funds, including failing to pay a court reporter); and In re Hazzard, 661 SE 2d 102 (S.C. 2008) (one-year suspension for lawyer who, in addition to failing to pay a court reporter in one matter, neglected and misrepresented the status of two other matters, and failed to pay a fee arbitration award in yet another matter).
Although all of the authorities discussed above involve failure to pay court reporter fees, the same principles would apply as well to fees for other services that lawyers engage in connection with representing a client, including arbitrator fees. The potential for civil liability is clear. I am less confident that lawyers should be subject to professional discipline for nonpayment of “professional financial obligations,” except in the most egregious of cases where the lawyer has ignored a court order or engaged in dishonest conduct in connection with the transaction.
I do not mean to suggest that lawyers should feel free to ignore these professional financial obligations. On the contrary, even if no discipline or even a civil claim ensues, failure to honor such obligations can do significant harm to the lawyer’s reputation. The legal community in Oregon remains relatively small and reputations are hard won and easily lost. It is hard to imagine why a lawyer would put his or her reputation at risk over something that is so easily preventable.
As RPC 1.8(e) makes clear, lawyers are not supposed to finance their clients’ legal cases. When costs are advanced by the lawyer, the client is to be “ultimately liable” for those costs “to the extent of the client’s ability to pay.”8 A lawyer who doesn’t wish to advance litigation costs can collect a deposit from the client at the beginning of the representation or before the costs are incurred. If the lawyer knows the client won’t be able to pay the costs unless the case has a successful outcome, then the lawyer should be prepared to assume the obligation herself or decline the case. There is no excuse for “stiffing” a professional colleague and a lawyer who does so has only himself or herself to blame if the word gets around that the lawyer can’t be trusted.
1. Court reporters, arbitrators, investigators and expert witnesses are obvious examples, but there are undoubtedly others.
2. The writing of informal (and undistributed) opinions was discontinued in early 1997 when the Legal Ethics Committee and the Board of Governors concluded that the committee’s time was better spent on opinions that could be used by the entire membership.
3. These were repealed in 1991. At the same time, the BOG issued formal opinions 1991-1 through 1991-129, which incorporated many of the older opinions. The OSB Formal Opinions from 1991 through 2004 were further revised to conform to the Oregon Rules of Professional Conduct and reissued in 2005.
4. See, e.g., Free v. Lankford & Assoc., Inc., 643 SE 2d 771 (Ga. 2007); Williams v. N. Alabama Court Reporting Serv., 833 So2d 622 (Ala. 2001); and Cahn v. Fisher, 805 P2d 1040 (Az. 1990)
5. See, e.g., Cal.Civ.Proc.Code §2025.5(h); NJ Stat.Ann. §4:14-6(c); and 225 Ill.Comp.Stat. 415/28.
6. Colorado’s Rule 8.4(h) is identical to Oregon RPC 8.4(a)(4) which makes it misconduct for a lawyer to “engage in conduct prejudicial to the administration of justice.”
7. Bar Counsel v. Doe, AD 99-25, 15 Mass. Atty. Discipline Reports 693.
8. This language does not appear in the ABA Model Rules, which allow the recovery of advanced costs to be contingent on the outcome of the case. Oregon rejected that approach, but the additional language recognizes that unsuccessful contingent fee clients may not have the wherewithal to reimburse the costs so allows lawyers to essentially forgive the client’s obligation.
ABOUT THE AUTHOR
Sylvia Stevens is executive director 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