A New Jersey lawyer was suspended for six months for misrepresenting to clients for about eight years that their arbitration matter “was proceeding apace,” when he actually had never filed their claim. The lawyer also concealed from his firm for almost two years the malpractice suit that the clients later filed, including the default judgment in the clients’ favor. The case shines a light on the drastic lengths to which lawyers can go to cover up a mistake — and how that just makes things worse.
Lack of FINRA finesse
As described in the disciplinary review board’s recommendation, the long nightmare began when a couple retained the lawyer, an associate in a firm, to represent them in an action against their investment advisor. The lawyer filed suit in superior court, which was dismissed by stipulation nine months later, after it was determined that venue was not proper there, and that the claim needed to be submitted to the Financial Industry Regulatory Authority (“FINRA”).
But the lawyer only filed the FINRA claim six years later — and by then, it was too late. The defendant moved to dismiss; the lawyer failed to oppose the motion; and a FINRA arbitration panel dismissed the action. Over the many years, the clients periodically asked the lawyer for information; he repeatedly assured them that the matter was “proceeding apace.”
Eighteen months after the FINRA dismissal, the clients filed a legal malpractice suit against the lawyer and his firm — but the lawyer failed to inform his firm or file an answer. Nonetheless, during the ensuing year, the lawyer communicated with and met with the couple’s malpractice lawyer, still without informing his firm of the ever-deepening trouble.
The malpractice case went to default, with a judgment against the lawyer and his firm for more than $450,000. The lawyer received subpoenas seeking post-default discovery on his firm’s banking information. The lawyer provided some of the information about firm bank accounts, but still without disclosing the nightmare to his firm. To keep checks drawn against the firm account from bouncing, the lawyer deposited $3,500 of his own money.
Finally, six months after the default judgment, the firm’s sole shareholder got notice that the firm’s accounts were subject to a writ of execution. When confronted, the lawyer professed ignorance, saying that this “was the first [he] heard about” a levy, and that he didn’t recall being served with a complaint against the firm.
Finally, after the shareholder pressed him, the lawyer ‘fessed up.
The disciplinary case against the lawyer proceeded on stipulations, in which the lawyer admitted that this long course of conduct violated New Jersey’s versions of Model Rule 1.1 (“Competence”); Model Rule 1.3 (“Diligence”) and Model Rule 8.4(c) (dishonesty, deceit, fraud and misrepresentation).
Remarkably, the district ethics committee recommended only a reprimand. The disciplinary review board, however, recommended a six-month suspension, and the New Jersey Supreme Court accepted the longer recommendation.
Unmentioned in the board’s opinion is the supervision issue, and how an associate’s handling (or non-handling) of a matter could go unexamined for such a long time by anyone with supervisory authority in the firm. Under Model Rule 5.1(b), those with supervisory authority in a firm must make reasonable efforts to ensure that subordinate lawyers conform to the ethics rules.
Most significant, in the malpractice case, the court granted the firm’s motion to vacate the default judgment, and the case was resolved with the firm’s insurance carrier. (The judgment against the lawyer, however, is still in force, according to the review board’s opinion.)
Digging a deeper hole
In discussing the appropriate penalty for the lawyer here, the review board described numerous cases involving lawyers who wove elaborate webs of deceit in order to cover up initial errors, including:
- fabricating a promissory note;
- fabricating a letter from the U.S. Embassy for Sweden, and forging the signature of a fictitious consul;
- fabricating a $600,000 settlement agreement;
- fabricating trial dates;
- fabricating a motion for sanctions and traveling three hours with the client to a non-existent deposition;
- fabricating court notices;
- fabricating court orders and signing the name of a judge;
- preparing fictitious orders of adoption.
And these are just the New Jersey disciplinary cases! There are similar cases involving desperate lawyers in every jurisdiction.
Many of these cases, like the case involving the FINRA claim, started with a simple mistake. And many of them, as with the FINRA claim, could have been substantially fixed at the outset, including through recourse to malpractice insurance. Yet, the lawyers involved plowed on, digging themselves deeper and deeper holes.
Don’t let something like this happen to you. If you make a mistake — as painful as it is — tell someone. Living in an echo chamber of lies never provides a way out.