Swartz, Matter of
| Decision Date | 10 July 1984 |
| Docket Number | No. SB-72-3,SB-72-3 |
| Citation | 141 Ariz. 266,686 P.2d 1236 |
| Parties | In the Matter of a Member of the State Bar of Arizona, John F. SWARTZ, Respondent. |
| Court | Arizona Supreme Court |
Jack C. Cavness, Phoenix, for respondent.
A Local Administrative Committee (Committee) of the State Bar of Arizona filed a complaint on September 8, 1981, alleging that John F. Swartz (respondent) violated Disciplinary Rule 2-106, Code of Professional Responsibility, and Rule 29(b)(1) of the Rules of the Arizona Supreme Court, 17A A.R.S. 1 , by charging a clearly excessive fee. In an amended complaint, the Committee charged that respondent's conduct also violated, inter alia, DR 1-102(A)(5) ().
The Committee held hearings on three separate dates, ending in February, 1982. It concluded that respondent had violated DR 2-106(A) by charging and collecting a clearly excessive fee for the "total representation" of his client. Finding that respondent had attempted to maximize his fee at his client's expense, the Committee further concluded that respondent had violated DR 1-102(A)(5) by consciously and willfully taking advantage of the system for handling third party tort claims of injured workers who have sought benefits under the workmen's compensation system. A majority of the Committee recommended that respondent be suspended from practice.
Respondent objected to the Committee's findings, conclusions and recommendation. The State Bar Disciplinary Board (Board) reviewed the matter and voted to accept the Committee's findings and conclusions, but modified the disciplinary recommendation of the Committee. Respondent objected to the Board's recommendation and the matter was then filed with this court. We have jurisdiction pursuant to Rules 36(d) and 37.
Steven Sarge was injured in a work-related accident on September 7, 1979 when he A.R.S. § 23-1023 permits an injured worker to follow parallel remedies. He may file a workmen's compensation claim and may, while receiving benefits, pursue a tort claim against any person (other than his employer or a co-employee) legally responsible for the injury. Such tort claims are sometimes described as "third party claims." The industrial carrier (in this case the State Compensation Fund (Fund) ) is given a lien against the net recovery on the third party claim for the amount of past benefits paid the injured worker. A.R.S. § 23-1023(C). Any net recovery in excess of the lien is retained by the injured worker, but is to be offset against future benefits which the worker would otherwise receive from the industrial carrier. Id. Thus, if there is no reasonable chance that the net tort recovery will exceed attorney's fees, costs, the workmen's compensation lien and the credit for future benefits, there is no advantage in bringing the tort action, because none of the recovery would inure to the worker's benefit. An exception exists if the attorney for the worker can persuade the industrial carrier to reduce its lien, thus reducing the "nut" which the worker must meet before he may pocket any recovery. According to the evidence, one of the factors the Fund considers in determining whether to reduce its lien claim is a reduction in the amount of the fee to be charged by the attorney for the injured worker.
was hit by a car while setting barricades on the Black Canyon Freeway. Sarge sustained severe, multiple injuries; one leg eventually was amputated. Between September 7 and 13, while Sarge was in intensive care, respondent met with Sarge's mother and brother in the hospital room. They retained respondent to represent Sarge with respect to both a workmen's compensation claim and a personal injury claim against the responsible driver.
Sarge was seriously incapacitated and respondent appropriately established a conservatorship on November 1, 1979. On that date a written fee agreement for the tort claim was made with Sarge's mother and brother; it called for respondent to represent Sarge for a fee equal to one-third of all sums recovered.
The facts surrounding the accident were not disputed. The driver of the vehicle which struck Sarge had been intoxicated. No real defense existed and liability was clear. Punitive damages may have been recoverable. Sarge's injuries were extensive. Although a coverage issue was raised at first, it was soon abandoned, and there was no serious dispute concerning insurance coverage. In fact, the driver was covered by two separate policies, 2 with respective limits of $100,000 and $50,000. Aside from these two policies, there were no significant assets subject to execution or garnishment. Two weeks after respondent entered into the contingent fee agreement, one of the liability carriers offered to pay its $100,000 policy limit; approximately two months later, the second carrier offered its policy limit of $50,000. These settlements were made after minimal negotiation between respondent and representatives of the insurance carriers. It was not necessary for respondent to file the tort action and none was ever filed. Although respondent kept no time records, he testified that effecting the settlement had involved a "tremendous amount of work." A qualified expert witness called by bar counsel reviewed the files of all parties and estimated that respondent could not have spent more than twenty to thirty hours in handling all aspects of the claim.
By the time settlement was achieved it had become clear that the Fund's liability for payment of workmen's compensation benefits, and therefore its statutory lien, would soon exceed the net recovery to Sarge. In fact, at the time the settlement with the insurance carriers was consummated, the Fund's total lien was approximately $90,000. Future benefits payable, reduced to present value, were estimated at
more than $150,000. The proposed settlement distribution was as follows:
Gross settlement: $150,000.00
Attorney's fees (1/3): 50,000.00
Costs: 83.20
Net Proceeds: 99,917.00
As required by A.R.S. § 23-1023(C), the settlement was approved by the Fund. It was also approved by the probate court. Payment of the statutory lien in favor of the Fund consumed all but approximately $10,000 of the net proceeds of settlement. After paying almost $90,000 of the net proceeds to the Fund in satisfaction of its lien and disbursing the fee of $50,000 to himself, respondent retained approximately $10,000 in a trust account. This sum was evidently held for payment of accruing medical expenses and the like. These "excess" funds were credited by the Fund against future benefits and constituted an offset against such benefits. From a practical standpoint, the net result of the settlement was that the Fund got $100,000, respondent received the $50,000 fee, and Sarge received nothing.
In addition to the $50,000 fee which respondent charged and collected on the recovery in the tort claim, respondent requested $1,320 and was awarded $350 in fees by the probate court for work done in the conservatorship proceedings. Respondent also charged and collected 15% of the funds which Sarge received on his workmen's compensation claim until such time as Sarge retained other counsel to represent him in connection with that claim. Respondent testified that his normal charge on workmen's compensation proceedings was 25% and that he reduced his fee to 15% because of the fee which he had received in the tort action.
Respondent and Sarge eventually had a disagreement with regard to both the compensation claim and the tort recovery; Sarge retained counsel and a malpractice action against respondent was filed in Maricopa County Superior Court. Summary judgment was granted against Sarge. The record of that action was admitted in evidence at the Committee hearing. In its findings, the Committee indicated that it had given no weight to that record, the results of the action, nor the testimony of the attorney who had represented Sarge in the malpractice action and who respondent called as a witness in the disciplinary proceedings. During respondent's case-in-chief in the disciplinary proceedings, he called a polygraph examiner to testify to the results of a polygraph test given to respondent at his request. The Committee admitted the results in connection with the issue of whether respondent had attempted to negotiate with the Fund toward compromise of its lien. 3 In its findings, the Committee indicated that it had not considered the polygraph results in reaching its decision.
Respondent contends:
1. He did not charge a clearly excessive fee and the record does not support the conclusion of the Committee that:
Respondent violated DR 2-106(A) by charging and collecting clearly an excessive fee for the total representation of his client.
2. The record does not support the Committee's finding that respondent:
made absolutely no effort to obtain a reduction in the Fund's lien by compromising his attorney's fees or otherwise [with the result that] Sarge personally received nothing from the ... settlement ....
Thus, respondent claims also, the Committee erred in concluding that respondent violated DR 1-102(A)(5) by "consciously and willfully" taking
advantage of the system of allowing attorney's fees for third-party claims in workmen's compensation cases so as to 3. The Committee erred in failing to consider the polygraph examination results in reaching its findings of fact.
maximize his own fees without attempting to obtain any direct monetary benefit to his client.
4. The Committee erred by disregarding the results of the malpractice action and the testimony of Sarge's attorney.
We first note the standard applicable to review of the evidence in disciplinary proceedings. Evidence of misconduct must be clear and convincing in order to support disciplinary action, but need not...
To continue reading
Request your trial
-
Brown & Sturm v. Frederick Rd.
...clients which transcend ordinary business relationships and prohibit the lawyer from taking advantage of the client. In re Swartz, 141 Ariz. 266, 686 P.2d 1236, 1243 (1984) (citations omitted) (emphasis added). The evidence supports a finding that the here was unreasonable, both at its ince......
-
In re Discipline of Dorothy
...purpose is the deterrence of like conduct by other attorneys. Matter of Tidball, 503 N.W.2d 850, 856 (S.D.1993); Matter of Swartz, 141 Ariz. 266, 686 P.2d 1236, 1247 (1984) (citing Matter of Mercer, 126 Ariz. 274, 614 P.2d 816 [¶ 20.] Members of the South Dakota Bar are governed by the Sout......
-
Arden v. State Bar
...in other jurisdictions are in accord. (Committee on Professional Ethics v. Shifley (Iowa 1986) 390 N.W.2d 133, 135; Matter of Swartz (1984) 141 Ariz. 266, 686 P.2d 1236, 1246.)12 At oral argument petitioner suggested his 1972 federal conviction was not found by this court to constitute mora......
-
Attorney Grievance Com'n of Maryland v. Korotki
...173 (1985); F. MacKinnon, Contingent Fees for Legal Services 62-66 (American Bar Foundation 1964). For example, in Matter of Swartz, 141 Ariz. 266, 686 P.2d 1236 (1984), the fee actually produced by a one-third contingency agreement in a personal injury case was held to be clearly excessive......