Articles Posted in Legal Ethics

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Attorney King approached Terry, a supposed drug dealer, at a strip club. King offered to help Terry launder drug money. Terry, actually a confidential informant, told the police, who arranged several meetings that Terry secretly recorded. Terry told King that he had drugs shipped in from Mexico but that he didn’t sell the product at the “street level.” None Terry's statements were true. King proposed to imitate what he had seen on Breaking Bad: One option was to use a “cash heavy” entertainment business. He also suggested funneling money through his IOLTA trust account used by attorneys to hold client money: King would provide fictitious legal services, deduct payments from the account, and return the remaining money to Terry. They agreed to the IOLTA account approach. Terry gave King $20,000. King promised to deposit it in his IOLTA account. King gave Terry a check for $2,000 in February and another for the same amount in March. King was convicted of two counts of money laundering and one count of attempted money laundering and was sentenced to 44 months in prison. The Sixth Circuit affirmed, rejecting arguments that the introduction of recorded conversations between him and the informant violated his Sixth Amendment right to confront witnesses and that the court improperly allowed the prosecution to ask him about his prior arrest for cocaine possession. View "United States v. King" on Justia Law

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Waldman defrauded Stone more than a decade ago. In Waldman’s first appeal, the Sixth Circuit found ample evidence that Waldman and attorney Atherton defrauded Stone, but vacated the judgment on grounds unrelated to the merits. The district court entered a new judgment, awarding Stone over $1 million in compensatory damages and $2 million in punitive damages. The Sixth Circuit again affirmed that defendants committed fraud, but reduced Stone’s compensatory damages to $650,776, vacated the determination of joint and several liability, and remanded for the limited purpose of apportioning liability. The district court found defendants each 50% responsible for Stone’s damages and reduced the punitive damages to $1.2 million to retain the 2:1 ratio of punitive to compensatory damages. In Waldman’s third appeal, the Sixth Circuit granted Stone’s request for $4,157.50 in sanctions (his attorney’s fees in the third appeal). Waldman’s arguments concerning the award of punitive damages and the ratio were “patently beyond the scope of our limited remand and therefore out of bounds in this appeal” and had been waived; they were legally frivolous. Waldman’s arguments concerning apportionment of responsibility essentially argued, for a third time, that he did not commit fraud, and were also frivolous. His argument that Stone bore some fault for his damages because he should have uncovered Waldman’s fraud sooner was plainly meritless. View "Waldman v. Stone" on Justia Law

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Debtor’s bankruptcy schedules indicated she had $1,500 in a checking account and no cash on hand. The Kentucky Medicare Fraud Unit subsequently searched her home and seized $270,000 in cash. Debtor was indicted for fraudulently claiming Social Security benefits, bankruptcy fraud, and money laundering. Debtor’s mother, Newton, who allegedly lived with Debtor, deposited $51,000 in cash into their joint bank account, then transferred $50,000 to retain a law firm as Debtor’s criminal counsel. Debtor was convicted. The chapter 7 trustee initiated an adversary proceeding to pursue the attorney fee. The bankruptcy court held that the fee was not subject to turnover, acknowledging: "Trustee offered substantial evidence that the Debtor was the source of the $50,000,” which may have been estate property before its transfer, but that the trustee’s “claim to estate property is no greater than the debtor’s claim.” The court held that because the trustee never sought to avoid that transfer under 11 U.S.C. 549, it was not estate property. The Sixth Circuit Bankruptcy Appellate Panel affirmed. The Trustee did not meet her burden of establishing that the attorney fee is property of the estate; fraudulently transferred property only becomes estate property upon avoidance of the transfer. The trustee did not establish that the fee was property of the estate under the Rules of Professional Responsibility. View "In re: Bruner" on Justia Law

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Debtor was unable to pay $70,000 attorney fees accrued over several years. The attorney continued to provide legal services. In May 2008, Debtor gave the attorney possession of the titles to a 1954 MG and a 1977 Ferrari as security. There was no written security agreement. When a bank began putting pressure on Debtor, she turned over possession of the vehicles in 2012. Debtor did not sign over the titles or complete assignment of ownership forms until six days before Debtor’s Chapter 7 bankruptcy filing. The vehicles were not in working order. The attorney had some repairs done and sold the vehicles to a third party for $40,000 in November 2013. Eight months later, the Chapter 7 trustee filed an adversary complaint, 11 U.S.C. 547(b). The bankruptcy court concluded that the attorney did not have a valid or perfected attorney lien under Ohio law and that the transfer occurred within the look-back period for avoidance. The bankruptcy court granted the trustee judgment for $32,000, plus prejudgment interest. The Sixth Circuit Bankruptcy Appellate Panel affirmed, upholding the determination of value. The transfer was preferential; the bankruptcy court found unsecured creditors would receive no distribution, so the attorney received more than he would have in the Chapter 7. View "In re: Hadley" on Justia Law

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Clark sought attorney fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. 2412(d)(2)(A): $6,790.52 in fees for 34.75 attorney hours at an hourly rate of $176.13, plus 6.70 paralegal hours at an hourly rate of $100. The rate exceeded the $125 rate set by the EAJA. Clark argued that her counsel should receive a cost of living adjustment, based on the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) for “Midwest Urban Consumers.” The agency requested that the court award fees at no more than $140, "the current reasonable and customary rate for experienced Social Security practitioners in the Western District of Kentucky." In her reply, Clark attached a declaration from her attorney, stating that he had practiced disability law from his Syracuse, New York, office for several years and provided his firm’s non-contingent hourly rate. Clark cited 2014 Sixth Circuit precedent, concluding that the requested rate of $176.13 was modest and appeared to be reasonable; she argued that other courts have held that the CPI alone was sufficient to justify a rate above the statutory cap. The district court awarded fees at an hourly rate of $140. The Sixth Circuit affirmed; there must be some understanding of the rates charged locally before a court can adjust for cost of living or other factors. View "Clark v. Commissioner of Social Security" on Justia Law

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Coursey’s application for Social Security benefits was denied. He sought judicial review. The district court granted a joint motion to reverse the decision. Coursey sought attorney fees. Although the Equal Access to Justice Act (EAJA), 28 U.S.C. 2412, sets the presumptive maximum hourly rate an attorney may recover at $125. Coursey sought $185.18 per hour. Coursey submitted the Bureau of Labor Statistics’ Consumer Price Index (CPI), which documents that the statutory amount would, when adjusted for the cost of living in the Midwest in 2015, be the equivalent of $185.18. The court concluded that the CPI and the attorney's affidavit were insufficient to justify the requested rate and approved an award of $140 per hour, consistent with recent cases in the district awarding that amount for EAJA attorney-fee requests in Social Security cases. The Sixth Circuit affirmed. A plaintiff seeking an attorney’s fee of greater than $125 per hour must show by competent evidence that the cost of living justifies a higher rate and that the fee is “in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” The court properly relied on evidence, judicial findings in previous cases, that the prevailing market rate for similar services within its venue was $140 per hour. View "Coursey v. Commissioner of Social Security" on Justia Law

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The bankruptcy court imposed Rule 9011 sanctions against attorneys stemming from their representation of debtors in an adversary proceeding in which a creditor and the trustee sought denial of discharge. The attorney filed notice of appeal regarding the sanctions order. The bankruptcy court subsequently set the amount of sanctions and, days later, amended that order and imposed additional sanctions under 28 U.S.C. 1927. The Sixth Circuit Bankruptcy Appellate Panel first denied motions to dismiss an appeal, holding that it had jurisdiction because the amount of sanctions was set forth in a final order. Notice of appeal was timely filed. Resolution of the sanctions issue will have no discernable impact on the pending discharge issue. The Panel subsequently vacated the sanctions order. In seeking the sanctions, the creditor did not comply with Rule 9011’s “safe harbor” notice requirement and the exception to that requirement did not apply. The bankruptcy court also erred as a matter of law in concluding that the attorney’s “shadow representation” of the debtors vexatiously and unreasonably multiplied the proceedings. In a separate opinion, the Panel upheld the bankruptcy court's ultimate denial of discharges. . View "In re: Blasingame" on Justia Law

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Sakhawati, a citizen of Bangladesh, was apparently admitted to the U.S. in 1998, using a passport issued to Nessa. She travelled to Canada and was denied refugee status there in 2003. She was granted asylum and withholding of removal in the U.S. under the name Sakhawati in 2006 after testifying to being kidnapped, forced to marry, and targeted for promoting feminist political views inside Bangladesh. In 2007, DHS appealed and moved to reopen, based on new information showing that that Sakhawati had actually been residing in Canada during the time that she was allegedly being held captive in Bangladesh. On remand, the IJ denied Sakhawati relief, and ordered her removed to Bangladesh. The Sixth Circuit vacated and remanded; a DHS official exercising due diligence could have readily discovered the existence of the Nessa alien file and presented it at Sakhawati’s original hearing. Sakhawati then sought Attorney Fees under the Equal Access to Justice Act, 28 U.S.C. 2412(d). Sakhawati’s counsel, billing at an hourly rate of $190.28, sought $21,248.37 in attorney fees, legal-assistance fees, and expenses for 104.85 hours claimed to have been spent on the matter prior to the Application for Attorney Fees, plus an additional $1,908.20 for 10.00 hours spent preparing the Application and responding to the opposition. The Sixth Circuit awarded a total of $15,653.76 in attorney fees, legal-assistance fees, and expenses. View "Sakhawati v.Lynch" on Justia Law

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One sitting judge and two aspiring Kentucky judges challenged the Commonwealth’s Code of Judicial Conduct clauses prohibiting “campaign[ing] as a member of a political organization,” “endors[ing] . . . a candidate for public office,” “mak[ing] a contribution to a political organization,” making any “commitments” with respect to “cases, controversies, or issues” likely to come before the court, making “false” or “misleading” statements. The sitting judge, previously appointed, made statements regarding being “re-elected,” and concerning penalties for heroin use. A candidate for the judiciary referred to himself as a Republic and his opponents as Democrats. The Third plaintiff wanted to publicly participate in Republican Party functions. The district court struck some of these provisions and upheld others. The Sixth Circuit found contributions, leadership, false statements and endorsement clauses valid. The campaigning, speeches, clauses are unconstitutional. The misleading statements prohibition is valid on its face, but may be unconstitutional as applied to one of the plaintiffs. View "Winter v. Wolnitzek" on Justia Law

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After a jury trial, Stephen Arny, M.D., was convicted of conspiracy to distribute and unlawfully dispense prescription pain medications, 21 U.S.C. 841(a)(1) and 846. Approximately three months later, but before sentencing, Arny secured new counsel, who later moved for a new trial based on trial counsel’s constitutionally ineffective assistance. The district court granted the motion based on its finding that Arny’s Sixth Amendment right to counsel had been violated by counsel’s misrepresentation that the government had stated that another doctor (Saxman) who had worked with Arny and his co-defendants either had a plea deal or would be indicted soon and that her clinic was searched; counsel’s failure to interview Saxman or call her to testify in order to explain the legitimacy of her treatment plans that Arny continued; and counsel’s failure to investigate or interview any of Arny’s patients. The Sixth Circuit affirmed. The affidavits of Saxman and the former patients establish a “reasonable probability that, but for [trial] counsel’s unprofessional errors, the result of the proceeding would have been different.” View "United States v. Arny" on Justia Law