The Office of Disciplinary Counsel (ODC) filed Formal Charges against Robert L. Hackett and Stephen L. Dunne on December 11, 1995. On March 7, 1996 these consolidated matters were brought on for hearing and on March 29, 1996, the next date upon which all parties were available, this hearing was concluded. The Hearing Committee makes the following findings and recommendations.
The charges against Messrs. Hackett and Dunne are closely related. They result from separate, but nearly identical complaints submitted by Elizabeth A. Alston on behalf of David W. Oestreicher, II, on July 6, 1994. (ODC Exhibits 1 and 3, respectively). Ms. Alston's two letters concisely set forth the underlying circumstances for the complaints, suggest which Rules of Professional Conduct were violated, and even offer citation and discussion of authorities on each point.
ODC filed its Formal Charges approximately five months after receiving these complaints. As noted above, the underlying circumstances for each are the same. They result from the dissolution of the law firm, Oestreicher & Hackett. As Mr. Hackett stated in his response to Ms. Alston's correspondence to ODC, his "ten-year professional relationship" with Mr. Oestreicher deteriorated, resulting in a "divorce" as "messy" as that from any failed marriage. (ODC Exhibit 2).
As is the case with any failed marriage, no party appears to be completely free of blame in this heated controversy.1 It is the role of this Hearing Committee, however, to consider only the charges of unethical conduct against Mr. Hackett and Mr. Dunne.
These charges all emanate from the controversy surrounding division of the legal fee derived from the settlement of a personal injury case, George C. Cormier, et al v. City of Lake Charles, et al, for $1,209,524.36. (Formal Charges against Mr. Hackett). ODC alleges that during the course of this litigation, the law firm of Oestreicher & Hackett dissolved and further that Mr. Oestreicher and Mr. Hackett "entered into a dissolution agreement to split firm legal fees on a 50% basis, including the Cormier case." Id. ODC further alleges that after having been put on notice that Mr. Oestreicher claimed 50% of the legal fee of $600,000, 2 Mr. Hackett withdrew the entire legal fees from the trust fund account of Messrs. Hackett and Dunne 3 and failed to segregate the disputed portion of the fees, $300,000. On this basis, ODC charges only Mr. Hackett in Count I with violation of Rules 1.15 and 8.4 (a)
In Count II against Mr. Hackett, ODC alleges that as a result of his unilateral settlement of the Cormier case, a Temporary Restraining Order (TRO) was sought and obtained by Mr. Oestreicher prohibiting distribution of the Cormier fee. In response, Mr. Hackett then had his new law partner, Mr. Dunne, file an allegedly fraudulent Motion and Memorandum to Dissolve Temporary Restraining Order and For Damages in the matter, David W. Oestreicher. II v. Robert L. Hackett, No. 94-09735, Civil DistrictCourt, Division B.
In this matter, Mr. Hackett and Mr. Dunne, as his counsel, allegedly misrepresented that there was no written dissolution agreement. Attached to the motion was an affidavit by Mr. Hackett which allegedly made essentially the same misrepresentation, and on June 24, 1994, before the Honorable Michael G. Bagneris, Mr. Hackett allegedly testified falsely to the same effect. On this basis, ODC charges both Mr. Hackett and Mr. Dunne with conduct involving dishonesty, fraud, and deceit, and misrepresentation, as well as with asserting a meritless and frivolous claim, all in violation of Rules 3.1, 3.3, 5.1(a)(b)(c), and 8.4(a)(c)(d) of the Rules of Professional Conduct. (Formal Charges Filed against Mr. Hackett and Mr. Dunne).4
ODC and Respondents introduced numerous exhibits and listed numerous witnesses, and even called one sitting judge to testify. The hearing in this matter took nearly two days. Considerable latitude was afforded ODC and Respondents to set forth their cases in view of the gravity of the charges. Much of this testimony, however, proved to be irrelevant. This Hearing Committee will therefore not comment on all of this evidence, but rather only upon that evidence central to its findings of fact.
The facts relating to Count I against Mr. Hackett are essentially undisputed. Mr. Hackett cannot dispute that he failed to segregate the disputed portion of the Cormier fee, $300,000. Instead he makes two legal arguments: First, he argues that pursuant to no agreement with Mr. Oestreicher did he have any obligation to divide the Cormier fee equally with Mr. Oestreicher. Second, he argues that irrespective of whether he owed this obligation, Rules 1.15 and 8.4 (a) and (c) do not apply in this situation because the disputed property was between lawyers, as opposed to a lawyer and his client. These defenses will be discussed infra in the Findings of Law.
The facts relating to Count 11 against Mr. Hackett (and Count I as to Mr. Dunne) are, on the other hand, hotly contested. In particular, Mr. Hackett and Mr. Dunne contest whether they made any knowing misrepresentations to the Court, either in the motion filed by Mr. Dunne on behalf of Mr. Hackett, the supporting affidavit of Mr. Hackett, or Mr. Hackett's testimony before the Court.
The record reveals that there was, in fact, a signed dissolution agreement between Mr. Oestreicher and Mr. Hackett.5 Indeed, along with Messrs. Oestreicher's and Mr. Hackett's signatures, Mr. Dunne's signature also appears on this letter, although there was testimony by James E. Uschold, an associate at Hackett and Dunne, that he signed Mr. Dunne's name for him at the request of Mr. Hackett. (Record Transcript, pp. 212-15).6 ODC takes the position that because this dissolution agreement was signed and because Messrs. Hackett and Dunne allegedly both made representations to the contrary, both are guilty of intentional misrepresentation and of filing a meritless pleading.
More particularly, ODC points out that the Motion and Memorandum to Dissolve TRO drafted by Mr. Dunne is, to say the least, misleading. It suggests that the dissolution agreement relied upon by Mr. Oestreicher in obtaining his TRO was never signed, and that "Mr. Hackett and Mr. Dunne never signed any such agreement with Mr. Oestreicher." (ODC Exhibit 7a). The memorandum states in the next breath, "It is therefore a fraud for Mr. Oestreicher to represent to the court that there is such an agreement between himself, Mr. Hackett and Mr. Dunne." Id.
Attached to this memorandum was Mr. Hackett's affidavit. (ODC Exhibit 7c). In his affidavit, Mr. Hackett does not go so far as to state that there was never any agreement signed, but rather states that the unsigned dissolution agreement which Mr. Oestreicher had introduced to the court had never been signed. (ODC Exhibit 7c, 112).
At the hearing held on the Motion to Dissolve TRO before Judge Bagneris, Mr. Hackett candidly acknowledged that he, Mr. Dunne, and Mr. Oestreicher had, in fact, signed a dissolution agreement, but he testified to his belief that the document provided to the court by Mr. Oestreicher was not an accurate copy of the original. (ODC Exhibit 8a, pp. 21-22). It was established at the hearing before Judge Bagneris that Mr. Hackett was mistaken. It was not established, however, that Mr. Hackett was anything other than mistaken, i.e. that he had made a deliberate misrepresentation to the court.
This was borne out by Judge Bagneris's holding from the bench at the close of the hearing. Judge Bagneris held that "there's no question in this Court's mind that there was reason to issue the TRO and that the dissolution really was meritless and whatever arguments counsel wanted to make could have been made at the time of the Hearing, and more appropriately should have been made at the time of the hearing on the Preliminary Injunction." (ODC Exhibit 8a, p. 30). Judge Bagneris continued, "And because of that, and because this Judge, through its office, told the party who was then representing Mr. Hackett, Mr. Dunn [kd, that if the allegations were found to be meritless sanctions would be imposed and the Court so finds and sanctions the defendant in this matter for $1,000.00." (ODC Exhibit 8a, p. 30).
Thus, the Court clearly found Messrs. Hackett's and Dunne's allegations of fraud against Mr. Oestreicher to be meritless. However, Judge Bagneris did not find Mr. Hackett or Mr. Dunne to be guilty of an intentional misrepresentation. Indeed, inasmuch as Mr. Hackett was testifying under oath, any intentional misrepresentation would have arguably constituted perjury and would surely have brought a greater sanction than the $1,000.00 imposed by the Court.
Nor did ODC present any evidence to this Hearing Committee, other than that described above, to prove that Mr. Hackett or Mr. Dunne were guilty of intentional misrepresentation. Thus, other than the Motion to Dissolve TRO, Mr. Hackett's supporting affidavit, and the transcript from the hearing before Judge Bagneris, ODC presented no affirmative evidence upon which it could be concluded that Messrs. Hackett and Dunne engaged in conduct involving dishonesty, fraud, or deceit.
Of these, only the Motion prepared by Mr. Dunne even comes close on its face to proving this conduct, and this because the supporting memorandum asserts not only that the document submitted by Mr. Oestreicher is not valid, but that "Mr. Hackett and Mr. Dunne never signed any such agreement with Mr. Oestreicher." (ODC Exhibit 7a)(emphasis added). The Hearing Committee is troubled by Mr. Dunne's memorandum, particularly in view of the fact that Mr. Dunne was so brazen as to suggest on this basis that Mr. Oestreicher had committed a fraud on the Court. However, when all of the facts are considered, the Hearing Committee cannot conclude that ODC has proven conduct involving dishonesty, fraud, or deceit, particularly when it is remembered that the ODC bears the burden of proving this conduct by clear and convincing evidence.
In sum, the Hearing Committee concludes that ODC has proven the facts necessary to establish Count I against Mr. Hackett, namely that he did not segregate funds to which Mr. Oestreicher had a claim. This pretermits the legal issue, discussed infra, of whether this constitutes an ethical violation.
The Hearing Committee also finds that ODC has proven the facts necessary to establish part of Count II against Mr. Hackett (and part of Count I against Mr. Dunne), namely that they violated Rule 3.1 in making a meritless and frivolous assertion that Mr. Oestreicher had committed a fraud upon the court. While there is not sufficient basis to conclude that Mr. Hackett or Mr. Dunne were attempting to deceive the court, they knew or reasonably should have known that their argument was wholly without merit. This conclusion is strongly supported by Judge Bagneris's conclusion to this effect.
Messrs. Hackett's and Dunne's strategy was apparently motivated by the exigency of the situation. As Mr. Dunne testified:
It's important to point out, as Mr. Hackett said, this was a rush job. This was chaotic. Everything Mr. Hackett owned had been seized, I mean literally every penny he had, and he wasn't going to have a hearing for ten days on the preliminary injunction, so something had to be done immediately. (Record Transcript, p. 299).
For this reason, Messrs. Hackett and Dunne intentionally played it close to the line so as to make allegations against Mr. Oestreicher that would get them into court immediately to attempt to dissolve the TRO. Again in Mr. Dunne's own words:
We wanted to get his [the judge's] attention because we knew it was very difficult to get a hearing on a motion to dissolve a TRO. Most judges will say wait until the preliminary injunction hearing, which is only ten days from now. We couldn't wait that long, so we had to do something very dramatic to get Judge Bagneris's attention.
(Record Transcript, p. 308).
As is clear from the outcome of the hearing, Messrs. Hackett and Dunne succeeded not only in drawing Judge Bagneris's attention, but also his ire.
Finally, for the reasons already stated, the Hearing Committee does not find that ODC has proven by clear and convincing evidence the remainder of Count II against Mr. Hackett (and Count I against Mr. Dunne), namely that they violated Rule 3.3 by making an intentional misrepresentation to the court or Rule 8.4 by engaging in conduct involving fraud, honesty, or deceit. Accordingly, it is the recommendation of the Hearing Committee that the most serious of the charges leveled against Messrs. Hackett and Dunne be dismissed.
Finding of Law
As outlined above, there are no issues of law outstanding as to Count II against Mr. Hackett and Count I as to Mr. Dunne. The conclusion that they pursued a meritless claim is all that is necessary to find a violation of Rule 3.1, and the conclusion that ODC has failed to prove that they made an intentional misrepresentation or engaged in conduct involving fraud, dishonesty or deceit is all that is necessary to find that there was no violation of Rules 3.3 or 8.4 (C).
This is not the case, however, relative to Count I against Mr. Hackett. As noted above, Mr. Hackett argues that he did not violate Rule 1.15 because he did not have any obligation to divide the Cormier fee equally with Mr. Oestreicher and, irrespective of whether he owed this obligation, Rule 1.15 does not apply in this situation because the disputed property was between lawyers, as opposed to a lawyer and his client.
The Hearing Committee rejects the first argument. In arguing against any obligation to divide the Cormier fee, Mr. Hackett misses the mark. The point is that Mr. Oestreicher felt otherwise and this portion of the fee was therefore clearly disputed. Mr. Hackett's first argument therefore only serves to beg the question of whether there is any ethical duty to segregate this amount of the fee until the dispute between lawyers was resolved.
Mr. Hackett's second argument is more persuasive. He correctly argues that disputes between lawyers which form the basis of civil litigation are generally not appropriate as the basis for ethical complaints. LSBA v. Causey, 440 So.2d 125 (La. 1983). He further argues that because Rule 1.15 falls under the category of "Client-Lawyer Relationship," the duty to safeguard property does not apply where lawyers are arguing over disputed legal fees, particularly where they are still associated in any way.7 ODC responds that Rule 1.15 does not limit itself to property in which a client has an interest, but expressly provides that whenever "another person" claims an interest in property, "the portion in dispute shall be kept separate by the lawyer until the dispute is resolved."
Although a very technical reading of Rule 1.15 supports ODC's argument, the Hearing Committee has not found and ODC has not offered a single case in which a lawyer was found to have violated this rule by failing to segregate the portion of a fee over which lawyers have a dispute. The ODC is therefore necessarily arguing that this is the case in which this Hearing Committee, and ultimately the Disciplinary Board and Supreme Court, should make new law by applying Rule 1.15 in this context. This Hearing Committee respectfully declines ODC's invitation.
We reach this result for several reasons. First, the Rules of Professional Conduct are, in a sense, penal in nature. Because lawyers are subject to discipline where they violate the rules, the rules must clearly give notice of what conduct is proscribed. If ODC's interpretation were followed, this would not be the case.
Second, there is a much more appropriate forum for this dispute. Indeed, the parties are already in litigation as to how the legal fee should be divided. Furthermore, there is a more appropriate vehicle to ensure that the disputed fee is not squandered; indeed, Mr. Oestreicher ably used this vehicle -- injunctive relief -- in this matter so as to freeze Mr. Hackett's funds. This required Mr. Oestreicher to make at least some minimal showing to the court that this relief was necessary. Justice would not be served by providing for the same result without the lawyer in Mr. Oestreicher's position being required to make any showing whatsoever that this relief is necessary.
Third, the underlying rationale of Rule 1.15 is to ensure that a lawyer honors his fiduciary duty. While this sometimes requires a lawyer to segregate property over which a person other than his client, such as a lienholder, asserts an interest, it would not be advanced by applying Rule 1.15 any time a lawyer holds any property over which any other person claims an interest. Taking the ODC's position to its logical extreme, even where a stranger off the street claimed an interest in the lawyer's fountain pen, the lawyer would be obligated to hold this pen in trust until the dispute could be resolved. The Hearing Committee declines to adopt this approach.
Accordingly, the Hearing Committee recommends that Count I against Mr. Hackett be dismissed.
Recommendations of the Hearing Committee
Having found that Mr. Hackett and Mr. Dunne are guilty of making a frivolous claim in violation of Rule 3.1, the question of the appropriate discipline must be addressed. Obviously, the discipline for this transgression should not be nearly as severe as if they had been found guilty of lying to the court.
Aggravating factors include the following: First, they both have substantial experience in the practice of law. Second, they not only pursued a frivolous argument, but it involved meritless allegations of fraud against another officer of the court. Third, at least to some extent, they have refused to acknowledge the wrongful nature of their conduct.
Mitigating factors include the following: First, neither Mr. Hackett nor Mr. Dunne have ever been the subject of any prior discipline. Second, they have already been disciplined with a fairly severe monetary sanction by the court for asserting their meritless claim. Third, they devised their argument in "chaotic" circumstances where Mr. Hackett's assets had been frozen, requiring them to react very quickly. (Record Transcript, p. 220).
The baseline sanction for this conduct suggested by ABA is a formal reprimand, as set forth in Standards For Imposing Lawyer Sanctions 6.23:
6.2 ABUSE OF THE LEGAL PROCESS
Absent aggravating or mitigating circumstances, upon application of the factors set out in Standard 3.0, the following sanctions are generally appropriate in cases involving failure to expedite litigation or bring a meritorious claim, or failure to obey any obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists:
6.23 Reprimand is generally appropriate when a lawyer negligently fails to comply with a court order or rule, and causes injury or potential injury to a client or other party, or causes interference or potential interference with a legal proceeding.
Taking all of the above into consideration, it is the recommendation of this Hearing Committee that Messrs. Hackett and Dunne receive the discipline of a formal reprimand.
WANDA ANDERSON DAVIS,
1 Mr. Oestreicher, for example, appears to have attempted to use these disciplinary proceedings to his tactical advantage in some of the litigation which arose from the same underlying dispute. In a brief filed with the Louisiana Fourth Circuit Court of Appeal even before this hearing had commenced, Mr. Oestreicher misrepresented that the "[t1he Disciplinary Board [had] determined that Hackett violated Rules 3.1, 3.3, 3.3, 5.1(A), (B) and (C), and 8.4(A), (B) and (C) of the Rules of Professional Conduct based on Hackett's fraudulent, dishonest and deceitful conduct." (Record Transcript, p. 188). Subsequently, when the Disciplinary Board pointed out to Mr. Oestreicher that this was incorrect inasmuch as no findings whatsoever had yet to be reached, Mr. Oestreicher wrote to each judge clarifying that none of the charges against Mr. Hackett had been proven and that the first witness had yet even to be called in the disciplinary proceedings. Id.
Based on the figures alleged by ODC, Mr. Hackett's fee of $600,000.00 represents a contingency fee of roughly 50%. ODC did not charge and this Hearing Committee makes no judgment as to whether this fee would violate Rule 1.5 which requires that contingency fees be reasonable. Indeed, this inquiry is uniquely fact specific. See Allen v, United States, 606 F.2d 432 (4th Cir. 1979). This Hearing Committee is compelled to note, however, that taking one-half of a client's settlement in the form of a $600,000 fee is enough to place this at issue.
3 After Oestreicher & Hackett dissolved, Mr. Hackett formed a new law firm with Mr.Dunne. For some period, Mr. Oestreicher shared office space with Messrs. Hackett and Dunne at their new law firm.
4 These charges which comprise Count II against Mr. Hackett comprise Count I against Mr. Dunne. These are the only charges against Mr. Dunne.
5 See ODC Exhibit 8(d). This Hearing Committee expresses no opinion whatsoever as to whether this dissolution agreement is valid and enforceable, an issue which is at the center of civil litigation between these parties.
6 Mr. Dunne himself acknowledged that he gave permission for his name to be signed to documents necessary to continue the line of credit which the Whitney bank had extended to Oestreicher & Hackett. While this would have certainly included the dissolution agreement, Mr. Dunne declined to acknowledge that he had ever given specific authority to anyone to sign his name to this particular document. (Record Transcript, pp. 309-11).
7 Set n. 2, supra, explaining that Mr. Oestreicher continued to share office space with Messrs. Hackett and Dunne after the previous partnership dissolved.
End of Document