Oregon State Bar Bulletin — FEBRUARY/MARCH 2011

Bar Counsel
Client Security Fund:
2010 Annual Report
By Sylvia Stevens

By their annual assessment to the Client Security Fund, Oregon lawyers contribute to one of the Oregon State Bar’s most important missions: protection of the public. Through the CSF, full or partial reimbursement is available to clients who are victimized by dishonest attorneys. In a small but meaningful way, this relief helps to restore client confidence in the legal profession.

2010 began with 23 claims pending from 2009 and 40 new claims were received during the year. Fifteen claims were denied and 28 remain under investigation. Twenty-one awards were made on claims against 11 lawyers; the awards totaled more than $151,000.

The Client Security Fund is managed by a volunteer committee of 12 lawyers and a public member who investigate the claims and make recommendations to the Board of Governors, which has final authority on all awards. Member assessments, together with interest on the invested funds and money collected by subrogation from the defalcating lawyers make up the fund. It is a dedicated account (not part of the OSB general fund) and is used only to reimburse claimants and pay the expenses of operation.

Awards are made from the fund only if there is evidence of dishonesty in an established lawyer-client relationship or where the lawyer was acting in a fiduciary capacity related to the lawyer’s practice of law. Awards are limited to the amount actually misappropriated and maximum reimbursement on any claim is $50,000.

Since its inception in the late 1960s, the CSF has made awards of more than $2.6 million on claims involving 144 lawyers. Awards in excess of $1 million have been made on behalf of 7 lawyers; awards in excess of $50,000 have been made on behalf of 11 lawyers.

Following is a brief summary of awards that were made in 2010:

William Horton: $62, 218
Awards were made to three of William Horton’s clients. In two of the cases, the clients had deposited fees with Horton in advance of his performing legal services. The services were not complete at the time of Horton’s unexpected death in January 2009 and his trust account records showed that the client funds had been withdrawn before they were earned. One client was reimbursed $3,500 and the second received $8,718. In the third matter, Horton’s client deposited $150,000 into escrow in lieu of an undertaking or bond on appeal. When the appeal was concluded, $98,000 of the escrow funds were distributed to the successful respondent and Horton’s client’s share of $52,000 was distributed to Horton and deposited into his trust. Horton never notified his client of the outcome of the appeal or the receipt of the escrowed funds. At the time of Horton’s death, there were no funds in his trust account. Horton’s client received the maximum award of $50,000.

James Oakey: $4,000
Two different clients hired Oakey in late 2008 and advanced fees of $2,500 and $1,500 respectively. Neither client heard from Oakey after the initial meetings; eventually they contacted the bar and learned that Oakey had died unexpectedly in April 2009. In both cases, the CSF concluded that Oakey had wrongfully failed to hold the client funds in trust and that he had not done any work on their matters to earn any of the advanced fees.

Charles Coulter: $1,375
Charles Coulter died unexpectedly in April 2009 leaving several client matters uncompleted. Three clients submitted claims for the balance of their unearned fees. The CSF determined that funds remain in Coulter’s trust account, but because there was no probate and no one authorized to sign on the account, there was no way for the clients to receive a refund of their prepaid but unearned fees. Although there was no evidence of dishonesty on Coulter’s part, the BOG authorized awards to the three clients and was able to recover the trust account funds from the bank.

Gerald Douglas: $4,750
Douglas died unexpectedly in February 2009. In December 2008 a client deposited $5,500 with Douglas for assistance with state and federal tax problems. Douglas’ records indicated that he had earned $750 in fees prior to his death, entitling the client to a refund of the balance. The CSF concluded that Douglas’s wrongful failure to hold the unearned fees in trust constituted dishonesty within the meaning of the CSF rules.

Karen Read: $2,713.35
Read was co-counsel with a Florida law firm in the Dow Corning breast implant class action. In May 2007, Read received funds in settlement of a client’s claim. From that amount, the client was obligated to the Florida law firm for its attorney fees and for costs of $2,713.35. Read provided the client with a disbursement statement indicating that the Florida firm’s costs would be reimbursed first, then the attorney fees would be deducted, and the client would receive the balance. Read disbursed the client’s share of the proceeds shortly after the settlement check cleared and withdrew the remainder of the settlement funds in a lump sum in December 2007. In April 208, after many demands from the Florida firm, Read sent a check for its share of attorney fees on the case, but she did not reimburse the costs incurred on behalf of the client. Read never provided a satisfactory accounting of the settlement funds. The CSF concluded that Read misappropriated the amount that should have paid the client’s cost obligation. Read closed her practice in April 2009 and has been suspended since July 2010 for failure to pay bar dues.

John Mottram: $10,000
Mottram handled subrogation claims on damaged vehicles for a car rental company. In exchange, he received one-third of the recovery. In December 2007 he settled one such claim for $15,000 but did not inform the client. In May 2008 he told the client that the claim remained unresolved. In October 2008, Mottram told the client that a settlement had been reached but that he was waiting for the funds to arrive. In December 2008, Mottram’s client contacted opposing counsel and learned that the settlement had occurred a year prior. When confronted, Mottram admitted having failed to inform the client and remit any of the settlement proceeds. Mottram submitted a Form A resignation effective Dec. 31, 2008. The CSF awarded the client its share of the settlement.

Martin Capetz: $2,000
A client hired Capetz in July 2007 in connection with a DUII arrest. Capetz required a $2,000 advance payment. Capetz arranged for another lawyer to handle the client’s arraignment on Aug. 1, 2007. As it turned out, the client’s case wasn’t on the docket and the other lawyer didn’t charge for his time. In November 2007 the client was informed by the D.A.’s office that he would not be charged. Capetz refused to refund the advanced fees. The CSF concluded that Capetz had not earned any of the fees and had wrongfully failed to deposit them into trust. Capetz submitted a Form B resignation that was effective Jan. 21, 2010.

Michael Shinn: $50,190.50
Three awards were made to former clients of Michael Shinn. In one matter, the clients had paid a $10,000 retainer in connection with a code enforcement dispute. After a few months, Shinn essentially abandoned the matter and failed to account for his time or refund any unearned fees. The CSF found that Shinn had earned approximately $2,000 and awarded the clients $8,000 for their loss.

The second matter arose out of Shinn’s representation of a client in a personal injury case. During the pendency of the injury case, the client filed a Chapter 7 bankruptcy, but the trustee abandoned the claim on the understanding that the recovery would not exceed the outstanding medical liens. The case settled and Shinn paid himself his attorney fees and gave the client his $10,000 statutory bankruptcy exemption. Shinn withheld $40,000 for payment of the client’s outstanding medical bills, but never paid them and after a period of time all the liens were released. Shinn failed to account for or deliver the remaining funds to the client. The client recovered $30,000 on a malpractice settlement and the CSF paid the remaining $10,000.

The third matter involved Shinn’s representation of a client with an uninsured motorist claim. After arbitration in April 2005, the matter was resolved. After the client signed the release and satisfaction, Shinn deposited the settlement check into his trust account, assuring the client that after payment of costs and expenses of the case the client would receive the net proceeds. Within a few hours the client had second thoughts about the settlement; he contacted Shinn demanding that he stop the processing of the check. Shinn did nothing and over the next several months failed to respond to the client’s many inquiries about the settlement, the payment of fees and expenses and when the client would receive his share. In March 2006, the client filed a complaint with the bar, and in the subsequent investigation it was discovered that Shinn had insufficient funds in his trust account to pay the client his share of the settlement. After deducting costs and expenses from the settlement and allocating a reasonable fee to Shinn, the client was awarded $32,190.50.

John Oh: $3,000
The clients in this matter retained Oh in September 2007 to help them with an immigration matter and advanced $3,000 toward his fees. The clients didn’t hear from Oh after their initial meeting and in March 2008 learned that he had relocated to Los Angeles. When the clients contacted Oh he promised to calculate the unearned portion of the fee and refund it by the end of April 2008. The clients heard nothing further from Oh and there is no evidence that he did any work on their legal matter. Oh was suspended in February 2009 on unrelated charges; the trial panel in a second proceeding recommended disbarment in February 2010 on multiple matters, including this one. The trial panel recommendation is on appeal.

Keith Hayes: $9,043.44
The CSF made awards to four clients of Keith Hayes. In the first matter, Hayes was retained in May 2009 and collected $1,250 in advance. He filed a simple petition for the client but did no other work on the case and had no contact with the client. At the time Hayes was the subject of several pending disciplinary matters. An order suspending Hayes from practice during the pendency of his disciplinary cases was entered in January 2010. When the client confronted Hayes about the suspension, Hayes promised to refund the fees but never did so. The CSF allocated $225 to Hayes for the work he performed and the client was awarded $1,025.

In the second matter, the client hired Hayes in December 2009 to represent her in a divorce. She paid $2,500 as a “minimum non-refundable fee earned upon receipt.” Hayes filed the client’s petition for dissolution and attended an unsuccessful mediation. Due to his January 2010 interim suspension, Hayes did not complete the client’s matter and did not refund any portion of the fees she paid in advance. The CSF concluded that his earned fees would have been no more than $450 and awarded the client the balance of $2,050.

The client in the third matter hired Hayes in 2006 to file a Chapter 13 bankruptcy. She had legal insurance that paid $750 for the bankruptcy; the terms of the policy required that Hayes accept that amount as his full fee in the case. Hayes did not disclose the $750 payment to the court or the trustee, and over the three years of the plan he collected $4,000 in fees through the client’s plan. In February 2010, the bankruptcy court ordered Hayes to disgorge fees in 16 cases, including this one. Hayes failed to refund the client’s fees and the CSF awarded her $4,000.

The fourth matter was also a Chapter 13 bankruptcy for which Hayes was retained in early 2008. The client’s plan wasn’t confirmed, but she was granted leave to file an amended plan. However, after a few efforts to negotiate with creditors, Hayes essentially abandoned the case and the Chapter 13 was dismissed. Hayes had received his fees from the client’s preliminary plan payments. After the case was dismissed, the client learned that the trustee had refunded the balance of her preliminary plan payments, in the amount of $1968.44, to Hayes. The client was unable to recover the funds from Hayes. The record showed that Hayes had cashed the refund check shortly after the case was dismissed. The CSF awarded the client $1,968.44. Hayes was disbarred by a trial panel effective July 27, 2010.

Linda Wilson: $1,729.50
The client hired Linda Wilson in the fall of 2005 to modify the terms of a divorce decree, paying a $2,500 fee in advance, plus $154 for filing fees. Nothing was filed in the case, but in October 2005 Wilson issued a billing statement showing the deposit of $2,654 to trust and a charge of $924.50 for 3.7 hours worked. That was the last the client heard from Wilson. At the time she was retained in this case, Wilson was involved in a formal disciplinary proceeding that was scheduled for trial in December 2006. Wilson ignored several requests from the client for a refund of the unearned fees. Wilson was suspended in April 2007 and submitted a Form B resignation in July 2008; she died insolvent in May 2010. The client was awarded the balance of unearned fees and costs that should have been in Wilson’s trust account.

The Client Security Fund Committee is comprised of: Max Taggart, chair; Theresa Wright, secretary; Jane Angus; Martin Barrack; Steven Bennett; Jessica Cousineau; Christopher Eggert; Linda Gouge; C. Scott Howard; Eric Kekel; Michael McGean; Elizabeth Welch; Carlos Calderon, public member; and Sylvia Stevens, fund administrator.

 

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 sstevens@osbar.org

Ethics opinions are published and updated on the bar’s website here.

An archive of Bar Counsel articles is available here.


© 2011 Sylvia Stevens

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