In re Wray, Supreme Court Case No. 02S00–1511–DI–648

• Decision Date: 27 February 2018
• Docket Number: Supreme Court Case No. 02S00–1511–DI–648
• Citation: 91 N.E.3d 578
• Parties: In the MATTER OF Robert John WRAY, Respondent.
• Court: Indiana Supreme Court

91 N.E.3d 578

In the MATTER OF Robert John WRAY, Respondent.

Supreme Court Case No. 02S00–1511–DI–648

Supreme Court of Indiana.

FILED February 27, 2018

ATTORNEYS FOR RESPONDENT: James P. Fenton, Daniel G. McNamara, Fort Wayne, Indiana

ATTORNEYS FOR INDIANA SUPREME COURT DISCIPLINARY COMMISSION: G. Michael Witte, Executive Director, Rachel B. Gallagher, Staff Attorney, Indianapolis, Indiana

Per Curiam Opinion

Attorney Discipline Action

Per Curiam.

We find that Respondent, Robert John Wray, engaged in attorney misconduct arising from his solicitation of clients through a nonlawyer intermediary. For this misconduct, we conclude that Respondent should be suspended from the practice of law in this state for at least nine months without automatic reinstatement.

This matter is before the Court on the report of the hearing officer appointed by this Court to hear evidence on the Indiana Supreme Court Disciplinary Commission's "Amended Verified Complaint for Disciplinary Action," and on the post-hearing briefing by the parties. Respondent's 1980 admission to this state's bar subjects him to this Court's disciplinary jurisdiction. See IND. CONST. art. 7, § 4.

Procedural Background and Facts

The Commission filed a five-count "Verified Complaint for Disciplinary Action" on November 13, 2015, and later amended that complaint to add a sixth count. As set forth in more detail below, the amended complaint charged Respondent with a wide range of rule violations arising out of his professional relationship with Douglas Stephan, a nonlawyer. Following a hearing, the hearing officer filed a 64–page report finding Respondent committed violations as charged.

Respondent has represented several owners of allegedly defective modular or manufactured homes in actions against the homes' installers, builders, or manufacturers. One of those owners was Stephan, who purchased a home from Joseph Callaghan, d/b/a Fahl Manufactured Homes ("Callaghan"). Respondent and Stephan developed a relationship under which Stephan (through his company Stephan Consulting, Inc., which Respondent helped Stephan incorporate) would solicit other owners to become plaintiffs in Stephan's action and in other actions against Callaghan and other installers, builders, and manufacturers. Typically, Stephan would "cold call" the owners, offer to perform home inspections for them, and then ask those owners to sign an "Investor Agreement" and an "Attorney Agreement," both of which were drafted and/or approved by Respondent and included Respondent's name throughout. The owners, and subsequently Respondent, would sign the Attorney Agreements, frequently without any direct communication with one another or discussion about the merits of the claim.

The Investor Agreements included statements falsely representing that the owners already had entered into fee agreements with Respondent. The Investor Agreements also included several statements that inaccurately described how litigation costs would be advanced and how the risks of litigation would be assumed. For example, the Investor Agreements stated Stephan would advance the costs of litigation in exchange for 50% of the client's net recovery, but aside from the first few cases Stephan did not actually advance these costs.¹ The Attorney Agreements provided that Respondent would receive a contingent fee of between 33% and 50%, and some Attorney Agreements also required a nonrefundable $1,000 retainer for costs.

Respondent entered into contracts with about 118 owners through his relationship with Stephan. One of these clients was David Lomperski, who—in exchange for a reduced contingent fee in his case—agreed to work with Stephan to identify other potential clients. Respondent helped draft an employment and noncompete agreement between Stephan and Lomperski.

The relationship between Respondent and Stephan eventually soured due to a dispute involving the advancement of costs, and Respondent proposed to Lomperski that they work together in the same capacity that Respondent had been working with Stephan. When they met to discuss this, Lomperski secretly recorded the conversation. Respondent also briefly entered into a similar relationship with David Blumenherst, who solicited at least two new clients using the same "Investor Agreement" template Respondent had provided Stephan.

In addition to the misleading representations in the Investor Agreements regarding the advancement of litigation costs, after cases settled Respondent drafted a "Disbursement Authorization and Acknowledgement" form for his clients that in some instances inaccurately reflected the actual distributions and advancement of costs. After the accounting dispute arose between Respondent and Stephan, Respondent represented to clients that he had paid Stephan his share and instructed them not to pay Stephan, when in fact Respondent merely had "allocated" Stephan's share against the amount Respondent believed Stephan owed him.

The Investor Agreements provided that Stephan "shall take the lead in communications with the attorney" and others and purported to grant Stephan the authority to advance the client's claims and to "arrange for settlement." Notwithstandingthis language, Respondent did have a general practice of writing his clients to notify them of significant events in their cases. However, Respondent admitted there often were delays of several months between the time that Stephan had clients execute Attorney Agreements and the time that Respondent eventually received those Agreements, and Respondent admitted further that he never raised the issue of these delays with Stephan. These delays could have led to claims being time-barred, although there is no evidence this occurred in any of the cases.

Several clients testified about what they felt was a lack of adequate communication or explanation from Respondent. Several clients also testified that they agreed to settle a claim against one defendant (Callaghan) based, at least in part, on Respondent's representation that they could recover additional amounts against another defendant (Chilton). However, Chilton would have been among the parties covered by the release in the Callaghan settlement.² The hearing officer found that Respondent misrepresented the viability of a potential claim against Chilton in order to motivate clients to settle claims against Callaghan.

During the Commission's investigation into the events described above, Respondent represented to the Commission that "Stephan Consulting did not ‘solicit’ clients for my law office. Stephan Consulting provided financing and consulting to various homeowners under separate and distinct agreements with homeowners." The hearing officer found this statement was false with respect to both solicitation and financing.

Finally, from 2008 through 2015, Respondent failed to keep adequate trust account records and separate ledgers for each client. Respondent also kept more than a nominal amount of personal funds in his trust account.

Discussion

The Commission alleged, and the hearing officer concluded following an evidentiary hearing, that Respondent violated the following Indiana Rules of Professional Conduct:

1.4(a)(2): Failing to reasonably consult with a client about the means by which the client's objectives are to be accomplished.

1.4(a)(3): Failing to keep a client reasonably informed about the status of a matter.

1.4(a)(4): Failing to comply promptly with a client's reasonable requests for information.

1.5(a): Making an agreement for, charging, or collecting an unreasonable fee or amount for expenses.

1.15(a): Failing to maintain and preserve complete records of client trust account funds.

5.3(b): Failing to make reasonable efforts to ensure that the conduct of a nonlawyer employee over whom the lawyer has direct supervisory authority is compatible with the professional obligations of the lawyer.

5.3(c): Ordering or ratifying the misconduct of nonlawyer assistants, or failing to take reasonable remedial action with respect to the misconduct of nonlawyer assistants under the lawyer's supervision.

5.4(a): Improperly sharing legal fees with a nonlawyer.

7.3(a): Improperly soliciting employment in-person, by phone, or by real time electronic contact from a person with whom the lawyer has no prior relationship when a significant motive is the lawyer's pecuniary gain.

7.3(e): Improperly giving something of value for a recommendation for employment.

7.3(f): Accepting employment when the lawyer knows, or reasonably should know, that the person seeking the lawyer's services does so as a result of lawyer conduct prohibited under Rule 7.3.

8.1(a): Knowingly making a false statement of material fact to the Disciplinary Commission in connection with a disciplinary matter.

8.4(a): Violating the Rules of Professional Conduct through the acts of another.

8.4(c): Engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.

The Commission also alleged, and the hearing officer concluded, that Respondent violated the following Indiana Admission and Discipline Rules:³

23(29)(a)(2): Failing to create, maintain, or retain appropriate trust account records.

23(29)(a)(3): Failing to maintain a ledger with separate records for each client with funds deposited in a trust account.

Respondent has petitioned this Court to review the hearing officer's findings and conclusions. In his petition, Respondent admits the trust account violations but disputes the other charges. The Commission carries the burden of proof to demonstrate attorney misconduct by clear and convincing evidence. See Ind. Admission and Discipline Rule 23(14)(g)(1). We review de novo all matters presented to the Court, including review not only of the hearing officer's report but also of the entire record. See Matter of Wall , 73 N.E.3d 170, 172 (Ind. 2017). While this Court reserves the right to make the ultimate determination, the hearing officer's findings receive emphasis due to the unique opportunity for direct observation of...