Thursday, October 6, 2016

The Florida Supreme Court has disbarred three attorneys who sold out clients for lucre

The referee found, and we agree, that the PIP lawyers’ secret settlement with Progressive, memorialized in the MOU and the AMOU, was a conflict of interest and an improper aggregate settlement, in violation of Bar Rules 4-1.7(b), 4-1.7(c), and 4-1.8(g). Under the terms of the MOU and AMOU, Progressive paid a lump sum to each of the PIP law firms. The settlement was an aggregate settlement, in that it encompassed both the PIP claims and the bad faith claims, as well as attorney fees and costs. The clients, both those named as plaintiffs in the Goldcoast case and those not named in the case, were required to release their PIP benefit claims and their pending or potential bad faith claims. Progressive offered the PIP law firms collectively $14.5 million. Under the AMOU, $1.75 million of this amount was designated to settle the Goldcoast case, $5.25 million would be paid to Kane & Kane, $4.38 million went to Marks & Fleischer, and a little more than $3 million would be paid to Watson & Lentner. Beyond these distributions, the MOU and AMOU offered no other guidance or restrictions as to how the money would be allocated. Thus, it was left entirely to the PIP lawyers to determine how much each client would receive and how much would be taken as attorney fees. This arrangement created significant conflicts between the PIP lawyers’ interests and those of their clients, and between the PIP lawyers and the bad faith attorneys. The PIP lawyers decided that their clients who were not named in the Goldcoast case, a majority of the clients against Progressive, would be reimbursed for their unpaid medical bills plus interest but would not receive any money for their bad faith claims, even though they were required to release those claims. As a result, the PIP law firms were able to take a substantial amount in attorney fees—Kane & Kane took $4,144,055 in fees and Watson & Lentner took $2,522,792. Only their greed—nothing in the MOU or AMOU—prevented the PIP lawyers from compensating clients for their bad faith claims. Indeed, the referee found: “Therein lies the ultimate conflict. The settlement pitted the lawyers’ interests against the interests of their own clients. The less the clients received, the more the PIP attorneys received.” We agree with the referee that the PIP lawyers’ most egregious violation occurred when they abandoned their clients’ bad faith claims in favor of a greater fee for themselves.

Two were father and son

In addition to their conduct during the Progressive settlement, Charles Kane and Harley Kane continued to engage in further dishonest acts. During the course of the unjust enrichment litigation, both Charles Kane and Harley Kane threatened to withhold compensation from their associates in order to force them to fabricate time records for use in the case. There is also evidence that Harley Kane later altered and inflated these time records. The inflated time sheets were provided to the bad faith attorneys and their counsel during discovery. Harley Kane admitted that the time records produced in discovery were “excessive.”

The referee proposed disbarment of the son and suspensions for the other two.

The court

The referee in this case found that Charles Kane, Harley Kane, and Darin Lentner engaged in egregious misconduct: they secretly negotiated an aggregate settlement that created conflicts of interest between lawyers and clients, and left the bad faith attorneys with no compensation for their significant work in the Goldcoast case; in allocating the settlement funds, they abandoned their PIP clients’ bad faith claims in favor of a greater fee for themselves; and they withheld from clients nearly all the material information about the settlement, entirely to further their own interests. Given their actions, we agree with the referee that Harley Kane should be disbarred. We cannot agree, however, with the referee’s recommendation that Charles Kane and Darin Lentner receive a sanction any less severe. This considerable violation of respondents’ ethical responsibilities to their clients and the legal system, entirely for their own financial interests and at the expense of their clients, warrants disbarment.

The oral arguments are linked here.

A decision in related bankruptcy proceedings is linked here. (Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2016/10/the-florida-supreme-court-has-sanctioned-three-attorneys-the-referee-found-and-we-agree-that-the-pip-lawyers-secret-set.html