Oregon State Bar Bulletin JANUARY 2016
2015 Annual Report:
Client Security Fund
By Sylvia E. Stevens
It is with mixed emotions that I submit this, my last Annual Report. While I look forward to the new challenges that retirement will bring, I will sorely miss the Client Security Fund. During my 20 years as administrator of the fund, I have had the pleasure of working with many committed volunteers in Oregon and around the U.S. and Canada. I have also been privileged to make at least a small contribution to the bar’s public protection mission.
OSB Client Security Funds was established in 1967 “to relieve or mitigate pecuniary losses to the clients of active members caused by dishonest conduct of those members in their practice of law.” Over its lifetime, the CSF has made awards in excess of $4.6 million to partially or fully compensate clients of 206 lawyers.
The CSF a dedicated fund, not part of the OSB’s general funds, and is made up entirely of the annual member assessment, interest on invested funds, and money collected by subrogation from the defalcating lawyers. Recoveries average less than $5000 per year, as most lawyers responsible for CSF claims are disbarred, deceased or otherwise without assets. Money in the fund is used only for the payment of awards and for the expenses of operating the program.
For 20 years the fund maintained a minimum reserve of $500,000 to promote stability and protect against volatility in claims. The reserve exceeded its minimum for several years and allowed for modest annual member assessments of $5 from 2003 through 2009 and $15 from 2010 through 2012. An unusually high volume of claims in 2012 and 2013 depleted the reserve, and in 2013 the Board of Governors increased the assessment $45. The Board of Governors also raised the reserve minimum to $1 million. At the end of 2015 the reserve balance was just over $1 million, and the annual assessment for 2016 was reduced to $15. Claims activity in 2014 and 2015 returned to normal levels; if that continues, it is likely that the assessment will remain at $15 for several years.
Claims to the CSF must be submitted by the client or the client’s legal successor. Upon receipt, claims are assigned to members of the CSF Committee, which is responsible for investigating them. The committee is comprised of 13 volunteers — 12 lawyers and a public member. The committee gives final approval to awards of less than $5,000; recommendations for larger awards go to the Board of Governors for approval. The Board of Governors also reviews requests for reconsideration if the committee has denied a claim.
To be eligible for award from the fund, there must be 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. Dishonesty includes failing to refund fees where no work was done on the matter or where the work done was de minimis or of no value to the client.
The fund received 40 new claims involving 26 lawyers in 2015; 16 claims were carried over from 2014 and four claims were carried over from 2013. The committee denied 16 claims, four of which denials were affirmed by the Board of Governors on the claimant’s request for review. The committee gave final approval to 22 awards totaling $28,917.44. On the committee’s recommendation, the Board of Governors approved 10 claims totaling $157,018.16. The year’s total of $185,935.56 is less than the $250,000 budgeted for the year and is very much in line with historical CSF activity. Seventeen claims, requesting a total of $210,030, were carried over to 2016.
Following are brief summaries of the claims paid in 2015.
Gary Bertoni: $3,000
The CSF made an award of $3,000 to reimburse a client for a trial fee that Bertoni refused to refund, despite the case having resolved without trial and Bertoni’s promise to refund the unearned trial fee.
Steven Cyr: $20,207
This award represents the difference between the amount Cyr collected from a personal representative and the amount the probate court determined was a reasonable fee. Although Cyr initially told the client that the probate would be relatively straightforward and estimated his fees in the range of $5,000-8,000, he ultimately billed and collected more than $27,000. The court was not persuaded by Cyr’s claim of “complications”; it found that Cyr did little work on this simple, low asset case and that anything more than $2,500 was excessive and unwarranted.
Jeffrey Dickey: $25,485
The client hired Dickey in 2013 for defense against criminal charges and to pursue a forfeiture recovery. Because the client was incarcerated, he gave Dickey his power of attorney for the purpose of vacating client’s apartment, selling or storing his personal property, paying his bills, and generally acting on client’s behalf during his incarceration. Investigation revealed that between March 2013 and September 2014, Dickey or his domestic partner/assistant withdrew more than $28,000 from the client’s bank account, nearly all of which appeared to be for their personal use (i.e., cash withdrawals at bars and casinos, and purchases for restaurant meals, gas, home improvement and entertainment). Dickey claimed that some of the withdrawals were in payment for his professional services, but he never billed the client and could not produce supporting documentation. The amount of the award is the best calculation the CSF Committee could make, based on deposits and withdrawals during the relevant time.
Susan Gerber: $32,240
The CSF made awards to six of Gerber’s clients who had retained her for post-conviction relief cases. Prior to October 2014, Gerber practiced in Ontario, mostly handling post-conviction cases and criminal appeals. In October 2014, Gerber was placed on involuntary inactive status due to her inability to assist in the defense of several pending disciplinary cases. The CSF awards, ranging from $4000 to $15,000 represented the amounts collected by Gerber for which no meaningful work was done on the clients’ matters.
Bryan Gruetter: $1,385
This award represents the amounts owed to a client from a personal injury settlement for damages sustained by the client and her minor son in an automobile accident, but which Gruetter misappropriated. The committee believes this is the last of the Gruetter claims.
C. David Hall: $9,334
Hall represented a client in claims for injuries sustained in a motor vehicle accident, and resolved the claims by a settlement of $27,000 in mid-2012. He paid himself $9,510 for his fees and advanced costs, leaving $17,940 as his client’s share. He made payments to two of her medical providers and delivered a small amount to the client, but never accounted for the balance of $9,334 before being suspended on unrelated charges in May 2013. Despite the client’s demands, Hall had no further contact with her. At the time the client made her claim, Hall’s trust account had a balance of $52.
Mary Landers: $4,180
A client hired Landers to assist in a custody dispute that was resolved in March 2010. Believing that her client’s ex-spouse would initiate new disputes, the client and Landers agreed that the client would deposit more funds toward a future representation. Available records showed that the client made payments to Landers between October 2009 and May 2011 totaling $6,100; during the same period Landers billed the client $1,920. By September 2014, the client decided that no additional disputes would be forthcoming and sought a refund of the balance of funds on deposit with Landers. The client was unable to make contact with Landers, and was unaware that she had closed her practice sometime in 2012.
Jason McBride: $12,720
The CSF made awards to four of McBride’s immigration clients, ranging from $2,600 to $4,120. In each case, the award reimbursed a client for some or all of the fees paid in advance but unearned. As with the numerous other awards made to McBride’s clients, the committee found little evidence that McBride had performed any meaningful services for them. In three of the cases, McBride accepted retainer funds when he knew his impending suspension would not allow him to finish the work.
Dale Maximiliano Roller: $12,252
A client hired Roller in May 2013. He paid a “non-refundable fee” of $17,000 and also gave Roller $10,000 for his bail. The client was subsequently released from custody and Roller received a bail refund of $7,491. Unhappy with Roller’s representation, the client terminated the relationship before the criminal case was concluded. Roller eventually returned the bail refund to the client, but refused to refund the unused portion of the fee despite a fee arbitration panel decision that the client should receive a refund of $12,000. At one point Roller told the client he was “bankrupt and living in a trailer.” The award represents the amount awarded in arbitration plus the $252 court fee the client paid to respond to Roller’s petition to vacate the arbitration award.
Peter Schannauer: $940
In February 2012, a client paid Schannauer a fixed fee of $940 to petition for modification of a visitation order. Schannauer did nothing for several months and did not respond to the client’s requests for updates on her case. In August 2012, the client demanded a refund of the fees she had paid. Schannauer informed her he had filed a petition on her behalf in July and assured he would provide timely representation going forward. He did not inform his client that he was being investigated by the bar for neglecting several other client matters and mishandling their funds. Despite his assurances, Schannauer did nothing more on the client’s case and failed to appear at the March 2013 hearing, at which time the client’s petition was denied. The committee concluded that this client received no value from Schannauer’s services.
Michael Stedman: $6,500
A client hired Stedman in January 2012 to represent him in a criminal case, paying an initial retainer of $2,500 and a $4,000 trial fee. Over the next year, Stedman had virtually no contact with the client. In July 2013, Stedman told the client the criminal charges could be resolved through a civil compromise if the client wired Stedman $5,000 immediately, which the client did. In fact, there was no compromise and within a few weeks the client received a trial notice. The client called Stedman, who said he was quitting practice to travel the world, but if the client would advance $14,000, Stedman would handle the upcoming trial. When the client called Stedman two days later, he found that Stedman’s telephone had been disconnected. The client immediately hired another lawyer, who was quickly able to effect a civil compromise and a refund from Stedman of the $5,000 the client had previously deposited for that purpose. The client heard no more from Stedman, and there is no evidence that Stedman did anything on this client’s case other than file a notice of appearance and seek several continuances.
Estate of Randolf J. Stevens: $1,167
Stevens was retained on Jan. 6, 2014 to assist a client with a custody matter; the client paid a retainer of $1,500 that Stevens deposited to his trust account. At the time, the client had an outstanding balance of $137 from services provided previously by Stevens. In the new matter, Stevens billed 0.8 hours for the initial meeting and charged the client $196. Stevens died on Jan. 27, 2014 without doing anything more on the client’s new matter. Funds in Stevens’ trust account at the time of his death were insufficient to cover all the funds due to his clients.
Sandy Webb: $45,000
A client hired Webb in November 2014 to represent him in a medical malpractice claim. The client and Webb agreed that Webb’s fee would be one-third of any pre-trial settlement or 40 percent of a trial award. In December 2014, Webb negotiated a settlement with one of the defendants for $100,000. Webb deposited the funds into her trust account and paid herself $48,000 for fees and costs, leaving a balance of $52,000 owed to the client. Webb also sent an initial distribution of $6,000 to the client. Approximately 10 days later, Webb sent the client a check for $46,000, but it bounced. The replacement check also bounced. By the end of January 2015, Webb was no longer communicating with the client. In response to the client’s continuing demands for his funds, Webb’s husband sent the client $1,000, but no further funds were forthcoming.
Alan Wood: $1,525
The CSF made awards to two of Woods’ clients, one for $1,000 and the other for $525. The first claim involved Wood’s representation of a client in a child and spousal support matter. Wood took the case through the bar’s Modest Means Program at the agreed fee of $60 per hour. The client deposited a $1,000 retainer on June 2, 2014 but Wood did no work on her case. Sometime later, the client called the bar and learned that Wood had been suspended on June 18, 2014. When the client went to Wood’s home to retrieve the documents she had left with him, he promised to review his records and refund any unused portion of her retainer. She never heard from him again and the court records do not indicate he did anything on her behalf.
The second claimant also hired Wood through the bar’s Modest Means Program. This client hired Wood to prepare dissolution documents for her to file pro se, and paid a retainer of $525 on June 4, 2014. Wood drafted a petition and sent it to the client for review; she made corrections and returned the petition to Wood, but never heard from him again. Without assistance, the client was unable to proceed with the dissolution and the committee found that Wood’s services were of no value to her.
ABOUT THE AUTHOR
Sylvia Stevens was executive director of the Oregon State Bar and administrator of the OSB Client Security Fund until her retirement in December 2015. The members of the 2015 Client Security Fund Committee were Lisa Almasy Miller (chair), Ronald W. Atwood, Steven R. Bennett, Lisanne Butterfield, Carlos Calderon (public member), William A. Davis, David Malcolm, Mitzi Naucler, Karen Park, Stephen Raher, Mark G. Reinecke and Stephanie Thompson.
© 2016 Sylvia Stevens