Justia Legal Ethics Opinion Summaries

Articles Posted in US Court of Appeals for the Sixth Circuit
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As special counsel, the law firm of Silverman & Morris recovered $38,000 for the estate in the Village Apothecary bankruptcy proceeding and requested $37,063 in fees. The bankruptcy court, finding that the benefit of the services did not warrant awarding the full amount, halved the award.The Sixth Circuit affirmed. Bankruptcy courts can consider “results obtained” when determining whether fees are reasonable under 11 U.S.C. 330(a)(3) and the bankruptcy court did not abuse its discretion in reducing the fees by half. In determining the amount of reasonable compensation to be awarded to a professional person, the court shall consider the nature, the extent, and the value of such services; section 330(a)(3) instructs the courts to “tak[e] into account all relevant factors, including” the time spent, rates charged, “whether the services were necessary . . . or beneficial at the time at which the service was rendered,” as well as other factors, including “results obtained.” Here, the “results obtained” were minimal. The law firm’s efforts to recover $1.6 million dollars resulted in only $38,000. Had the bankruptcy court awarded the law firm all its fees, it would have left virtually nothing for the estate. View "In re: Village Apothecary, Inc." on Justia Law

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Gayle died in 2006. Attorney Johnston filed Chapter 13 bankruptcy petitions on behalf of Gayle in 2016 and 2018 at the request of Gayle’s daughter, Elizabeth, the Administratrix of her mother’s probate estate. After the dismissal of the 2018 petition, Elizabeth, pro se, filed three Chapter 13 petitions on Gayle’s behalf. The Chapter 13 Trustee sought sanctions against Bagsby after she filed yet another Chapter 13 petition.The bankruptcy court ordered Johnston to show cause why he should not be subject to sanctions for filing the two Chapter 13 petitions on behalf of a deceased person. After a hearing, the bankruptcy court reopened the first two cases and issued sanctions sua sponte against Johnston and Bagsby. The bankruptcy court determined that Johnston failed to conduct any inquiries or legal research, there was no basis in existing law to support a reasonable possibility of success, and the cases were filed for the express purpose of delaying foreclosure actions. The bankruptcy court concluded Johnston violated Rule 9011 of the Federal Rules of Bankruptcy Procedure. The Bankruptcy Appellate Panel and the Sixth Circuit affirmed the sanctions order. Johnson had admitted to the factual findings. The bankruptcy court was not required to find that Johnson acted in bad faith, in a manner “akin to contempt of court,” or with a specific mens rea but only whether Johnston’s conduct was reasonable. View "Johnston v. Hildebrand" on Justia Law

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Lawyers brought claims against schools under the Individuals with Disabilities Education Act (IDEA), 20 U.S.C. 1400. After the claims failed, the schools sought their attorney’s fees from the lawyers under the IDEA’s fee-shifting provision. The School Districts alleged that, during the administrative process, the attorneys presented sloppy pleadings, asserted factually inaccurate or legally irrelevant allegations, and needlessly prolonged the proceedings. The lawyers asked their insurer, Wesco, to pay the fees. Wesco refused on the ground that the requested attorney’s fees fell within the insurance policy’s exclusion for “sanctions.”The Sixth Circuit affirmed summary judgment in favor of Wesco. The IDEA makes attorney misconduct a prerequisite to a fee award against a party’s lawyer, so the policy exclusion applied. The court noted that the legal community routinely describes an attorney’s fees award as a “sanction” when a court grants it because of abusive litigation tactics. View "Wesco Insurance Co. v. Roderick Linton Belfance, LLP" on Justia Law

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NPF sued a franchisee, SY Dawgs, which operated a fast-pitch softball team in the National Pro Fastpitch League, alleging violation of a non-competition agreement. Two-and-a-half years of discovery disputes and repeated sanctions motions followed. The district court imposed sanctions under Federal Rule of Civil Procedure 37 against NPF’s counsel for failure to produce documents and its engagement in other discovery abuses. The Sixth Circuit affirmed the award of sanctions against the individual attorneys who represented NPF, but vacated the award against their law firm. Federal Rule of Civil Procedure 37 does not allow for law-firm sanctions where, as here, the firm was not a party to the lawsuit. View "NPF Franchising, LLC v. SY Dawgs, LLC" on Justia Law

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Attorney Romanzi referred a personal injury case to his employer, the Fieger law firm; meanwhile, creditors were winning default judgments against Romanzi. The case settled for $11.9 million; about $3.55 million was awarded as attorney’s fees after Romanzi quit the firm. Romanzi’s employment at the firm entitled him to a third of the fees. Before Romanzi could claim his due, his creditors forced him into Chapter 7 bankruptcy. The trustee commenced an adversary proceeding against the firm to recover Romanzi’s third of the settlement fees for the bankruptcy estate. The parties agreed to arbitration.Two of the three arbitrators found for the trustee in a single-paragraph decision that was not "reasoned" to the firm’s satisfaction. The district court remanded for clarification rather than vacating the award. On remand, the panel asked for submissions from both parties, which the trustee provided; the firm refused to participate. The arbitrators’ subsequent supplemental award, approved by the district court, awarded the trustee the fees plus interest. The Sixth Circuit affirmed, rejecting arguments that the arbitrators’ original award was compromised according to at least one factor allowing vacation under the Federal Arbitration Act, 9 U.S.C. 10(a); that the act of remanding and the powers exercised by the arbitrators on remand violated the doctrine of functus officio; and that the supplemental award should have been vacated under the section 10(a) factors. The district court’s and panel’s actions fall under the clarification exception to functus officio. View "In re: Romanzi" on Justia Law

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In subsequently-consolidated cases, various relators sued Community Health Systems (CHS) and others, alleging that CHS submitted fraudulent claims for medically unnecessary hospital admissions to federal public-health insurance programs, such as Medicaid and Medicare. Relators’ counsel performed thousands of hours of work in assisting the government with the investigation. Seven years ago, the relators, the government, and CHS entered into a settlement agreement, disposing of the underlying claims. The settlement agreement left undecided the allocation of attorney fees under the False Claims Act (FCA), 31 U.S.C. 3730(d). After settling with all the relators, CHS now claims that the relators are not entitled to attorney fees because the FCA’s first-to-file rule and public-disclosure bar precluded their claims. The district court agreed with CHS.The Sixth Circuit reversed. We CHS cannot now rely on these separate provisions of the FCA as a last-ditch effort to deny attorney fees to the relators. After the global settlement reached pursuant to a collaborative process between the government and relators’ counsel, there is no reason to apply the first-to-file and public-disclosure rules. The court remanded with instructions to the district court to determine an award of reasonable attorney fees to relators’ counsel. View "Cook-Reska v. Community Health Systems, Inc." on Justia Law

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Simpson's insurer, the Fund, paid Simpson’s medical costs ($16,225) arising from a car accident. Simpson hired the Firm to represent her in a personal injury suit. The Fund maintained a right of subrogation and reimbursement. Simpson settled her suit for $30,000. After depositing the settlement funds in a trust account, the Firm paid $9,817.33 to Simpson, $1,000.82 to other lienholders, and $10,152.67 to its own operating account for fees and expenses, offering the Fund $9,029.18. The Fund sued under the Employee Retirement Income Security Act (ERISA) section 502(a)(3), claiming an equitable lien of $16,225. The Firm issued a $9,029.18 check to the Fund, exhausting the settlement funds.The district court issued a TRO requiring the Firm to maintain $7,497.99 in its operating account. The Firm argued that the Fund sought a legal remedy because the Firm no longer possessed the settlement funds; ERISA 502(a)(3) only authorizes equitable remedies. The Fund argued that it sought an equitable remedy because the settlement funds were in the Firm’s possession pursuant to the TRO and cited the lowest intermediate balance test: a defendant fully dissipates a plaintiff’s claimed funds (by spending money from the commingled account to purchase untraceable items) only if the balance in the commingled account dipped to $0 between the date the defendant commingled the funds and the date the plaintiff asserted its right to the funds. The district court granted the Firm summary judgment, reasoning that the Firm dissipated the settlement funds before the TRO issued; the Fund could not point to specific recoverable funds held by the Firm and sought a legal remedy. The Sixth Circuit affirmed, concluding that no issues had been preserved for review. View "Sheet Metal Workers' Health & Welfare Fund of North Carolina v. Law Office of Michael A. DeMayo, LLP" on Justia Law

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Attorney Conn represented Plaintiffs and thousands of other claimants in seeking disability benefits from the Social Security Administration. Conn bribed doctors to certify false applications and bribed an ALJ to approve those applications. After Conn’s scheme was uncovered, the SSA identified over 1,700 applications for redetermination of eligibility. Years of litigation ensued. Both Plaintiffs sought attorney’s fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. 2412(d)(1)(A). Both courts awarded fees less than the amounts requested.The Sixth Circuit vacated the awards. Courts can award attorney’s fees for work performed during “all phases of successful civil litigation addressed by” the EAJA; one district court erred by holding that the EAJA does not authorize fees for work performed after the judgment becomes final. Both district courts abused their discretions by awarding below-market hourly rates. Plaintiffs’ unrefuted evidence established a market range of $205-500 but the courts concluded that the relative simplicity of the actions justified rates of only $125 and $150, although there is no evidence that any lawyer in the relevant communities would accept these rates for any kind of service. The complexity of the action is relevant to determine where the particular attorney’s representation lies along the spectrum of the market for legal services. It cannot be invoked to justify a rate below the established spectrum. View "Doucette v. Commissioner of Social Security" on Justia Law

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Michigan attorneys, like those in most other states, must join an integrated bar association in order to practice law. Taylor, a Michigan attorney, argued that requiring her to join the State Bar of Michigan violates her freedom of association and that the State Bar’s use of part of her mandatory membership dues for advocacy activities violates her freedom of speech. The Seventh Circuit affirmed the rejection of Taylor’s First Amendment claims as foreclosed by two Supreme Court decisions that have not been overruled: Lathrop v. Donohue (1961) Keller v. State Bar of California (1990). The court rejected Taylor's argument that Lathrop and Keller no longer control because of the 2018 decision in Janus v. American Federation of State, County, and Municipal Employees where the Court held that First Amendment challenges to similar union laws are to be analyzed under at least the heightened “exacting scrutiny” standard Even where intervening Supreme Court decisions have undermined the reasoning of an earlier decision, courts must continue to follow the earlier case if it “directly controls” until the Court has overruled it. View "Taylor v. Buchanan" on Justia Law

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The Orlans law firm, sent a letter on law-firm letterhead, stating that Wells Fargo had referred the Garland loan to Orlans for foreclosure but that “[w]hile the foreclosure process ha[d] begun,” “foreclosure prevention alternatives” might still be available if Garland contacted Wells Fargo. The letter explained how to contact Wells Fargo “to attempt to be reviewed for possible alternatives,” the signature was typed and said, “Orlans PC.”Garland says that the letter confused him because he was unsure if it was from an attorney and “raised [his] anxiety” by suggesting “that an attorney may have conducted an independent investigation and substantive legal review ... such that his prospects for avoiding foreclosure were diminished.” Garland alleges that Orlans sent a form of this letter to thousands of homeowners, without a meaningful review of the homeowners’ foreclosure files, so the communications deceptively implied they were from an attorney. The Fair Debt Collection Practices Act (FDCPA) prohibits misleading debt-collection communications that falsely imply they are from an attorney.The Sixth Circuit affirmed the dismissal of the purported class action for lack of jurisdiction. Garland lacks standing. That a statute purports to create a cause of action does not alone create standing. A plaintiff asserting a procedural claim must have suffered a concrete injury; bare allegations of confusion and anxiety do not qualify. Whether from an attorney or not, the letter said nothing implying Garland’s chance of avoiding foreclosure was “diminished.” View "Garland v. Orlans, PC" on Justia Law