In re Zak
| Decision Date | 10 April 2017 |
| Docket Number | SJC-12073 |
| Citation | 73 N.E.3d 262,476 Mass. 1034 |
| Parties | In the MATTER OF David ZAK. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
The case was submitted on the papers filed, accompanied by a memorandum of law.
Gregory M. Sullivan , Malden, for the respondent.
The respondent attorney, David Zak, appeals from a judgment of a single justice of this court disbarring him from the practice of law.1 We affirm.
Background . Bar counsel filed a seven-count petition for discipline with the Board of Bar Overseers (board) against the respondent arising out of the respondent's solicitation and handling of a substantial number of mortgage loan modification cases over more than a four-year period. See note 10, infra . Count one alleged that the respondent made payments to others to recommend his services and to solicit professional employment for the respondent from prospective clients;2 shared fees with nonlawyers;3 failed to instruct and supervise his employees and agents adequately;4 and engaged in the practice of law with a person who was not a lawyer.5 Count two charged that the respondent made false and misleading advertisements about himself, his law firm, and his loan modification services, in Massachusetts and other jurisdictions.6 Count three alleged that the respondent charged and collected advance fees for loan modification services, in violation of Federal and State statutes and regulations, and that the fees he charged were either excessive or illegal, or both.7 Count four alleged that the respondent provided or caused to be provided to clients false, deceptive or misleading information about his loan modification services.8 Counts five, six, and seven alleged misconduct during the respondent's handling of three specific loan modification matters, and in connection with bar counsel's investigation of complaints filed by those clients.
The petition was referred to a special hearing officer. After a hearing, at which the respondent was represented by counsel, the hearing officer made detailed findings of fact and conclusions of law against the respondent on all counts, and recommended that the respondent be disbarred. The hearing officer also recommended that the respondent be required to make restitution. The respondent appealed to the board, focusing primarily on the disciplinary recommendation. The board adopted the hearing officer's findings of fact and conclusions of law, and voted to recommend that the respondent be disbarred.
Although it declined to recommend that restitution be ordered, the board observed that failure to make restitution reflects poorly on an attorney's moral fitness to practice law. The board thereafter filed an information in the county court, pursuant to S.J.C. 4:01, § 8 (6), as appearing in 453 Mass. 1310 (2009). After a hearing, the single justice concluded that the special hearing officer's findings were supported by substantial evidence, see S.J.C. Rule 4:01, § 8 (5) (a) and (6), and that those findings supported the board's conclusions regarding violations of the disciplinary rules. She accepted the recommendation of the board as to sanction, and ordered that the respondent be disbarred.
Discussion . The respondent does not dispute that he engaged in the conduct described in the hearing officer's findings, which were adopted by the board. We have thoroughly reviewed the record, and agree with the single justice that these findings were supported by substantial evidence. There is no need to repeat the single justice's detailed discussion here. Quoting the board, the single justice observed that the respondent:
We focus instead on the respondent's claim that this misconduct warrants a public reprimand rather than disbarment. For the reasons that follow, we reject that claim and conclude that disbarment is appropriate.
a. Specific challenges regarding disciplinary rule violations . For the most part, the respondent does not dispute the board's determination that his actions violated numerous rules of professional conduct over a period of years. See notes 2-8, supra . He does not, for example, dispute that he paid nonlawyers to recommend his services; charged and collected excessive fees; failed to return unearned portions of fees; made or caused to be made intentionally misleading statements to vulnerable clients about the services he could or would provide; and with respect to one matter, charged and collected advance fees without depositing them in a client trust account and commingled personal and client funds. Instead, he focuses his appeal on three aspects of the misconduct determinations. We conclude that the single justice neither erred nor abused her discretion in rejecting his claims.
1. Advance fees . Both State and Federal law prohibits a lawyer from charging advance fees for mortgage assistance relief services unless the fees are deposited into a client trust account. See 940 Code Mass. Regs. § 25.02 (2) (2007); 12 C.F.R. §§ 1015.5 and 1015.7 (2017). The respondent does not dispute either that he charged advance fees or that the advance fees were not deposited into a client trust account. He argues instead that his conduct did not violate Mass. R. Prof. C. 1.5, as appearing in 459 Mass. 1301 (2011), which he says creates an independent right to collect advance fees for legal services. The single justice correctly rejected that claim. Although the rule does not categorically proscribe collection of advance fees, it expressly prohibits lawyers from "collect[ing] an illegal or clearly excessive fee." Fees charged or collected in violation of Federal or State statutes or regulations are prohibited under rule 1.5 (a). See, e.g., Matter of Dialessi-Lafley , 26 Mass. Att'y Discipline Rep. 133 (2010) (). There was no error in the single justice's determination that the respondent violated rule 1.5 (a).
2. Compensation . The respondent does not dispute that, by paying nonlawyers (Elizabeth Reed and others) between $1,000 and $1,500 for referring clients to him, and encouraging them to solicit clients for a fee, he violated Mass. R. Prof. C. 5.4, as appearing in 430 Mass. 1303 (1999), multiple times. He argues only that the particular profit-sharing agreement he had with Reed—under which he expressly agreed to share with her the fees earned by a business entity and his law firm on loan modification cases—did not violate the rule. See Mass. R. Prof. C. 5.4 (a) (3).
The limitations on fee sharing contained in rule 5.4 are intended to protect a lawyer's professional independence of judgment. See Mass. R. Prof. C. 5.4, comment 1. See also Restatement (Third) of the Law Governing Lawyers § 10 comment b (2000) (person entitled to portion of fee may attempt to influence lawyer's services to maximize fees). The rule also recognizes, however, that lawyers may compensate nonlawyer employees though a profit-sharing arrangement. See Mass. R. Prof. C. 5.4 (a) (3). We recognize that there is some support in other jurisdictions for the board's determination that, read in context, rule 5.4 (a) (3) permits a lawyer to share aggregate profits from legal fees with nonlawyer employees, but not profits that are tied to specific clients or cases. See, e.g., American Bar Association Standing Comm. on Ethics and Prof. Responsibility, Formal Op. 13-464 at 2 (2013) (), citing E.J. Bennett, E.J. Cohen & M. Wittaker, Annotated Model Rules of Prof. C. 461 (7th ed. 2011). Contrast In re Disciplinary Proceedings Against Weigel , 342 Wis.2d 129, 149-150, 817 N.W.2d 835 (2012) (). We need not, however, resolve the issue in this case. As the single justice observed:
"even if the exception applies to the profit sharing agreement, the respondent's undisputed conduct in paying Reed, and the agents, $1,000 to $1,500 for each client they acquired, and for condoning and encouraging their solicitation of potential clients for a fee, itself clearly violates Mass. R. Prof. C. 5.4."
The single justice did not err in finding that the respondent violated rule 5.4.
3. False advertising . The respondent did not challenge in the county court the board's findings that he violated Mass. R. Prof. C. 7.1, as appearing in 430 Mass. 1305 (1999) (). The single justice, however, considered the issue and properly determined that the respondent violated the rule in myriad ways. The advertisements were made in States where the respondent neither was admitted to practice nor had business relationships with lawyers who were licensed. Among other things, the advertisements misrepresented that the respondent was the only lawyer who knew how to obtain permanent loan modifications and that he would obtain trial loan modifications within thirty to sixty days, and they failed to acknowledge that it is the lender that makes modification decisions. The advertisements additionally misrepresented that the respondent "sued the bank in every case," and that he would "pre-qualify" clients for Federal mortgages at no cost, when the clients were actually charged a substantial fee. The advertisements also omitted other...
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