November 2008

Lawyers’ Fund for Client Protection Report

Report from the quarterly meeting on August 15, 2008

The Lawyers’ Fund for Client Protection Committee meets quarterly to review applications for gifts from the Fund. The Committee is authorized to make gifts less than $25,000 to eligible applicants. On applications for $25,000 or more, the committee makes recommendations to the Board of Governors, who are the Fund’s trustees. At their meeting on August 15, 2008, the Committee conducted the following business.

Courtenay D. Babcock — WSBA No. 22674, of Blaine, suspended for nonpayment of dues 6/12/06, disbarred 3/31/08.

Application A. The applicant hired Mr. Babcock for representation on a personal injury claim on a one-third contingent-fee basis. The fee agreement included a power-of-attorney provision authorizing Mr. Babcock to settle the suit and to endorse any check on the applicant’s behalf. Mr. Babcock repeatedly told the applicant he was working on her case. The applicant moved out of state and when she tried to reach Mr. Babcock by phone, many times his voicemail box was full. She then learned that Mr. Babcock’s office was closed.

Finally, Mr. Babcock contacted the applicant and said that he had been in California dealing with custody of his children, and that he was working out of his home. She contacted the WSBA, and one of the consumer affairs specialists talked to Mr. Babcock, who said that he was planning on settling the applicant’s case in December. Mr. Babcock was suspended from practice at this time. Then the applicant learned that the case had been settled for $13,900 and that a check in that amount, made out to Mr. Babcock and the applicant, had been sent to Mr. Babcock and that it had been cashed.
When the applicant learned this, she filed a report with the police. When Mr. Babcock was contacted by the police, he paid the applicant $4,500. He said he was retaining the balance in trust to pay medical and insurance claims. He never paid her any additional money and never accounted for the balance of her funds. The Committee approved payment to the applicant of $4,767.

Bradley R. Marshall — WSBA No. 15830, of Seattle, suspended 5/10/07.

Applications A, B, and C. Mr. Marshall represented 15 longshoremen in a workplace racial discrimination case, including these applicants. For additional facts, see In re Discipline of Marshall, 160 Wn. 2d 317 (2007).

In 1995, several longshoremen contacted Wayne Perryman, who did business as Consultants Confidential. Mr. Perryman is not a lawyer, but he and the longshoremen signed an agreement that he would prepare a racial discrimination lawsuit for $5,000. They also agreed that Mr. Perryman would act as their representative throughout the case and that they would pay him and his company 10 percent of any settlement. Mr. Perryman contacted Mr. Marshall’s law office and Mr. Marshall became the lead attorney in the case. The parties agreed to mediation, and 14 of the 15 plaintiffs agreed to a settlement of $800,000.

The Supreme Court opinion states that Mr. Marshall retained slightly less than 30 percent for attorney fees, and charged the plaintiffs over $100,000 in costs. It says that Mr. Perryman initially asked for Mr. Marshall to pay him $80,000, or 10 percent of the settlement, but at Mr. Marshall’s urging, he reduced his fee to $70,000 plus costs of $1,459. The Court found that Mr. Marshall had subtracted $108,122.91 from the settlement proceeds for costs. This included $9,473.75 that Mr. Marshall paid to other attorneys for work on the lawsuit. However, the fee agreement provided that any lawyer associated with the lawsuit would be associated without additional expense to the plaintiffs. Therefore, this sum should not have been taken as costs.

In addition, the Court found that Mr. Marshall admitted inflating the costs by $41,000 because of an “accounting mistake.” During the litigation, the plaintiffs had collectively advanced $41,000 to cover costs, with some plaintiffs paying more than others. When the case settled, Mr. Marshall returned to each plaintiff the amount they had paid him for costs. When he obtained the settlement, he paid the costs, but he also considered the return of the $41,000 as an additional cost.

The Court ordered restitution of the $41,000 he overcharged for costs and the $3,473.75 he charged in excess of his agreed fee, totaling $44,473.75. Mr. Marshall has paid no restitution. The Committee determined that each client is entitled to one-fourteenth of $44,473.75, or $3,176.70, and approved payment of that amount to each applicant. The Fund previously approved three similar applications in the same amount.

Thomas P. Sughrua — WSBA No. 14117, of Seattle, interim suspension 12/12/07, disbarred 2/20/08.

Application A. The applicant hired Mr. Sughrua on a one-third contingent-fee basis for representation on a claim arising from a car accident in which she was injured. Mr. Sughrua filed suit in the name of the applicant and her husband. The parties agreed to settle for $40,000. Mr. Sughrua did not give the applicants any accounting for how the proceeds were distributed. He paid himself his fee (one-third of $40,000 equaling $13,333) plus costs (amount unknown except for a filing fee of $110). He paid the applicant $10,000 and paid her (by then) former husband $5,000. Mr. Sughrua was to retain the balance to pay medical fees.

The applicant tried to contact Mr. Sughrua periodically to confirm that the medical fees had been paid, and he would tell her that he was trying to get more on her claim. Subsequently, the applicant was contacted by a collection agency to collect the unpaid medical bills. This was the first time she knew that Mr. Sughrua had not paid the bills. Based on the documentation provided by the applicant, the Committee approved payment of $11,557.

Todd W. Wetsel — WSBA No. 20720, of Vancouver, Washington, and Portland, Oregon, suspended nonpayment of fees 6/13/07, 18-month suspension 9/6/07, resigned in lieu of disbarment 2/25/08.

Application A. The applicants were formerly husband and wife. The husband hired Mr. Wetsel for representation in a marriage dissolution proceeding. The applicants’ house was sold and they disagreed on the disposition of the proceeds. By court order, they each received $150,000, and the balance of $243,371.19 was deposited to Mr. Wetsel’s trust account. The applicants agreed to submit the dispute to mediation, but the husband was unable to reach Mr. Wetsel. He then hired a new lawyer, who was also unable to reach Mr. Wetsel.

A pre-trial settlement conference was held where the applicants agreed to an equal division of the remaining proceeds from the house sale. The husband again tried to reach Mr. Wetsel, who responded with promises to return the file and the funds. He never did. He agreed to meet with the husband, but about 30 minutes before the scheduled meeting, he telephoned saying that he had been in a car accident and was hospitalized. The husband could not reach him after that. He never paid or accounted for the applicants’ funds. The Committee recommended and the trustees approved payment of $42,185.60 to each applicant.

Other Business
The Committee reviewed 42 additional applications that were denied for lack of evidence of dishonest conduct, as fee disputes or claims for malpractice, because restitution was made, for unjust enrichment, or were deferred for further investigation. The trustees deferred action on the 36 Hammer recommendations pending completion of review of all Hammer applications by the Committee.

Restitution
Before payment is made, the applicant must sign a subrogation agreement with the Fund, and the Fund seeks restitution from the lawyers. Because in most cases those lawyers have no assets, the chief avenue of restitution is through court-ordered restitution in criminal cases. Prosecuting attorneys cooperate with the Fund in getting the Fund listed in restitution orders. As of September 1, 2008, seven lawyers were making regular restitution payments to the Fund. The total amount received for fiscal year 2007–2008 is $25,100. This includes $15,260 deposited into the Fund pursuant to a Supreme Court order from abandoned and unidentifiable funds in the trust account of former attorney Barry A. Hammer. 

The Committee chair for 2007–2008 was Kennewick attorney Christopher J. Mertens. WSBA General Counsel Robert Welden is staff liaison to the Committee.