In re Petition for Review Against, A13–1912.

Decision Date06 August 2014
Docket NumberNo. A13–1912.,A13–1912.
Citation851 N.W.2d 620
PartiesIn re Petition for REVIEW OF PANEL DECISION AGAINST RESPONDENT, PANEL CASE NO. 35104.
CourtMinnesota Supreme Court

OPINION TEXT STARTS HERE

Syllabus by the Court

A panel of the Lawyers Professional Responsibility Board acted in an arbitrary and capricious manner by bifurcating respondent's misconduct into separate disciplinary matters when the panel found that respondent violated two rules of professional conduct.

Christopher Madel, Emily Cowing, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN, for complainant.

Charles E. Lundberg, Bassford Remele, PA, Minneapolis, MN, for respondent.

Martin A. Cole, Director, Timothy M. Burke, Senior Assistant Director, Office of Lawyers Professional Responsibility, Saint Paul, MN.

OPINION

PER CURIAM.

This case involves a petition for review, filed pursuant to Rule 9( l ), Rules on Lawyers Professional Responsibility (RLPR), of a decision of a panel of the Lawyers Professional Responsibility Board. The Director of the Office of Lawyers Professional Responsibility submitted charges of unprofessional conduct to the panel, alleging that respondent violated Minn. R. Prof. Conduct 1.5(e) and 8.4(c), by entering into an improper referral and fee-splitting arrangement with M.M., an associate in complainant's law firm. The panel determined that the Director should file a disciplinary petition against respondent for the Rule 8.4(c) misconduct, but that respondent should receive a private admonition for the Rule 1.5(e) misconduct. Because the panel's decision to bifurcate respondent's misconduct into separate disciplinary matters was arbitrary and capricious, we grant the petition for review, reverse the admonition, and order the Director to file a supplementary petition for disciplinary action against respondent alleging the Rule 1.5(e) misconduct.

A personal injury law firm (“Law Firm”) filed a complaint with the Director about respondent, who is a plaintiff's personal injury attorney in solo practice. Following an investigation of the complaint, the Director submitted charges of unprofessional conduct to a panel under Rule 9, RLPR. The Director alleged that respondent knowingly assisted M.M., who at the time was an associate at the Law Firm, in improperly keeping referral fees that respondent paid M.M. but that should have gone to the Law Firm. The Director alleged that respondent's conduct violated Minn. R. Prof. Conduct 8.4(c).1 The Director also alleged that respondent failed to disclose to his clients that he was sharing attorney fees with M.M., in violation of Minn. R. Prof. Conduct 1.5(e).2 The panel held an evidentiary hearing pursuant to Rule 9(a)(2), RLPR. Both M.M. and respondent testified at the hearing.3

The evidence presented at the hearing established that M.M. worked at the Law Firm from January 2010 until December 2011. While working at the Law Firm, M.M. staffed the intake call hotline and was responsible for representing clients from intake until the case settled. If the case did not settle, M.M. would pass it on to another attorney to litigate. M.M. testified that he knew the general rules for when the Law Firm would decline to represent a potential client. M.M. also knew that he did not have the authority to make any referrals and that the Law Firm did not make referrals to competitors.

One evening while respondent and M.M. were having drinks, respondent suggested that he would be happy to take any cases that the Law Firm declined, and the two of them came up with a referral plan. As part of the referral plan, M.M. would refer clients to respondent and respondent agreed to give M.M. one-third of the contingency fee received for each referral. M.M. testified that he had numerous drinks that evening and does not remember all of the specifics, but “it was implied that” the fees would be paid to M.M. directly, and that the agreement was to be kept secret from the Law Firm. Respondent denied that M.M. ever told him that the arrangement needed to be a secret.

The record reflects that M.M. referred approximately 100–200 clients to respondent starting in summer 2010 and ending in December 2011. Initially, M.M. referred only cases that the Law Firm would have declined. But as time went on, M.M. began to refer cases that the Law Firm probably would have accepted because the cases had a higher potential economic value.

Respondent represented 23 clients referred by M.M. Once respondent began his representation of a referred client, he would have the client sign a retainer agreement. The agreement stated: “Client(s) is/are aware that [RESPONDENT] may split his contingent fee recovery, if any, with referring attorneys and/or law firms and Client(s) hereby consents to such fee splitting arrangement.” But M.M. was not listed in the retainer agreement, and the retainer agreement did not disclose that M.M. would receive one-third of the contingent fees. In addition to the retainer agreement, respondent also provided each client with a distribution agreement if a claim settled. The distribution agreement itemized all of the distributions from the settlement. Respondent would ask each client whose case settled to sign the distribution agreement when the client received their portion of the settlement proceeds.

Respondent paid M.M. a referral fee in seven cases, all of which involved a settlement. Respondent prepared a distribution agreement for each of the seven cases. In two of the distribution agreements, respondent did not designate that M.M. was receiving a portion of the attorney fees. The remaining five distribution agreements indicated that respondent was splitting his attorney fees with either M.M. or the Law Firm.

Respondent paid M.M. his referral fee directly. Specifically, respondent made the referral checks payable to M.M. with M.M.'s home address listed on the check, and respondent hand-delivered the checks while he and M.M. were having dinner or drinks. M.M. testified that he was aware that these referral fees should have been paid to the Law Firm. But respondent testified that he did not know that M.M. had an obligation to remit referral fees to the Law Firm.

After the hearing, the panel found that as to the alleged Rule 8.4(c) violation, “this is a very difficult examination, largely turning on credibility. But given the totality of the circumstances, the conclusion of the panel is that there is probable cause for a public discipline as to 8.4(c).” Following the panel's decision, the Director filed a petition for disciplinary action against respondent alleging the Rule 8.4(c) violation. 4

With respect to the alleged Rule 1.5(e) violation, the panel concluded that respondent violated the rule and imposed a private admonition. In its written admonition, the panel found that respondent undertook representation of 23 people who M.M. referred to respondent and that respondent and M.M. agreed that respondent would pay M.M. one-third of any attorney fees respondent recovered in any matter M.M. referred to respondent. The panel further found that although respondent's retainer agreements advised his clients that he might share his attorney fees with another lawyer, the retainer agreements did not disclose that M.M. was not a member of respondent's firm, did not disclose that respondent would share his fees with M.M., and did not set forth the exact division of the fees. The panel also found that there were two cases in which respondent disbursed money but neither the retainer agreement nor the distribution agreement informed the client that the attorney fees award would be divided, that M.M. would receive a portion of the attorney fees, or that M.M. was not a member of respondent's firm. The panel concluded that respondent's conduct violated Minn. R. Prof. Conduct 1.5(e), but that the violation was isolated and nonserious.

The Law Firm filed a petition for review of the panel's determination to privately admonish respondent for the Rule 1.5(e) violation with this court pursuant to Rule 9( l ), RLPR. We requested further briefing from the parties as well as the Director. We also ordered the Law Firm to file an amended petition that “does not address what discipline should be imposed on respondent in any public disciplinary matter.” In re Petition for Review of Panel Decision against RESPONDENT, Panel Case No. 35104,No. A13–1912, Order at 2 (Minn. filed Dec. 13, 2013).

I.

Under our attorney discipline system, the Director investigates complaints of attorney misconduct. Rule 8, RLPR. If the Director concludes that public discipline is warranted, the Director submits charges of unprofessional conduct to a panel of the Lawyers Professional Responsibility Board. Rules 8(d)(4), 9(a)(1), RLPR.

The panel makes a determination based on the documents the Director submitted or by conducting a hearing. Rule 9(a)(2), RLPR. The panel must make one of several determinations, which include: (1) “there is not probable cause to believe that public discipline is warranted”; (2) there is “probable cause to believe that public discipline is warranted” and the Director should file a petition for disciplinary action in this court; or (3) “the attorney engaged in conduct that was unprofessional but of an isolated and nonserious nature” and should receive an admonition. Rule 9(j), RLPR.

If the complaining party is not satisfied with the panel's disposition, the party may file a petition for review with our court. Rule 9( l ), RLPR. We review the panel's decision and grant the petition only if we “find[ ] that the Panel acted arbitrarily, capriciously, or unreasonably.” Id. A panel acts arbitrarily, capriciously, or unreasonably if it “relie[s] on factors it is not permitted or intended to consider” or if it “entirely failed to consider an important aspect of the problem.” In re Charges of Unprofessional Conduct Contained in Panel File 98–26, 597 N.W.2d 563, 567 (Minn.1999) (citation omitted) (internal quotation marks omitted).

On appeal to our court, the...

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