Lawyers Overseeing Lawyers: Can lawyers police themselves? A new look at self-regulation

No country has as many lawyers as the United States – more than 152,000 in California alone – three times as many as in all of France. Nor does any other country rely as heavily on the legal profession to order its affairs. Lawyers run its criminal justice system, prosecute and defend its civil actions, write the contracts for business and individuals, and handle its administrative agencies. They are a majority in Congress and State legislatures (where they write the laws), and on Commissions and Courts (where they interpret them).
Having lawyers participate to such an extent in the workings of society inevitably causes resentment. They wield great power. They speak a language that is often incomprehensible. They often appear arrogant, and they cost a lot of money. It’s hard to have sympathetic feelings towards their profession. That’s nothing new. “The first thing we do, let’s kill all the lawyers,” echoed the same sentiment 400 years ago in Shakespeare’s Henry VI, part 2. The public loves lawyer jokes. There’s even a Web site, www.killalllawyers.com, that specializes in legal humor.
Even with all of the jokes and resentment, the legal profession holds America together. The United States is a nation of laws and without the lawyers it simply wouldn’t work. As a result, every time a lawyer makes an error, either intentionally (commission in legal parlance) or unintentionally (omission), it has consequences. Whether a lawyer steals money, fails to file a lawsuit on time, is negligent in handling a case, or just doesn’t return phone calls, the client is faced with the decision to ignoring the situation, change lawyers, and/or pursue whatever remedies may be available. Each time such an incident occurs, it potentially makes those affected suspicious of the entire legal profession.
Most lawyers are intelligent and dedicated to their profession. Unfortunately their sheer numbers make it inevitable that there will always be some who are lazy, overworked, incompetent, mentally deranged, substance abusers, bigots or criminals. They may mirror the society that produced them.
Insurance agents and brokers are part of that community. It’s a safe bet that any agent reading this has a lawyer – or the agency does – probably a law firm. Lawyers write the agreements that control how the agency works; they act as advisors, and increasingly they’re on call to evaluate error and omission claims and how to avoid them. When a lawyer fails to perform those tasks in accordance with the requisite standards, the agency suffers just as other consumers do.

The trouble(s) with lawyers
The failure of a lawyer to act in accordance with legal standards can be catastrophic. In criminal cases incompetence can literally be a matter of life and death. In civil cases a great deal of money may change hands, or not, depending on how competent the lawyers are. Fortunately instances of such magnitude are rare. In fact, most disputes between attorneys and clients are not over the cases themselves.
“The most common dispute [between lawyers and clients] is over fees,” revealed Suzanne Blonder, associate counsel of HALT, an Organization of Americans for Legal Reform [www.halt.org]. HALT was founded in 1978 as a nonprofit, nonpartisan public interest group and now has more than 50,000 members. It is “dedicated to the principle that all Americans should be able to handle their legal affairs simply, affordably and equitably.” The group works to improve access and reduce costs of the legal system.
Among the costs it watches is attorney fees.
“Fee problems,” Blonder continued, “usually involve questions about what hourly rate is being charged, or, if the amount is appropriate under a contingency fee.”
Lawyers are typically entitled to between 30 and 40 percent of any recovery under such agreements, and when, as sometimes happens, they do little or no work on a case, it causes problems, Blonder noted.
Another frequent source of conflict between lawyers and their clients is “benign neglect.” Such cases don’t involve serious misconduct, but occur when “lawyers have too many cases, and can’t give enough time to each one. They don’t measure up to the level of care required,” Blonder explained. This may also occur when larger firms assign cases to junior associates, who haven’t acquired the knowledge and experience to handle them, resulting in delays and mistakes.
Instances of actual misconduct do occur, however. These frequently involve fraud or theft, most commonly in situations where a lawyer receives a retainer, but does little or no work, or a lawyer takes a client’s money that has been deposited in a trust account for his own use.

How to govern lawyers
Notwithstanding all the disputes and ongoing calls for tort reform, the U.S. legal system will always depend on the lawyers who run it and it will always be faced with what to do when a lawyer fails to live up to the requisite standards.
There are three basic approaches to governing lawyers, according to Blonder. In the most serious cases, criminal sanctions should be imposed. For the majority of disputes, the profession should be regulated. Also, civil actions for damages should be permitted.
Police and prosecutors investigate and indict lawyers in instances of criminal conduct. They only come into the picture in those relatively rare instances when actual criminal conduct appears likely.
The other situations, which Blonder acknowledged comprises a large majority of the complaints against lawyers, are handled by specialized commissions, operating under the mandate of the state court system usually as a state bar association. These bodies are charged with setting qualifications for admission to practice, investigating complaints against attorneys and disciplining those found to have breached the standards of professional conduct. Sanctions run from reprimands and suspensions to temporary or permanent disbarment. If money is involved, all states have client protection funds which can both order the offending lawyer to make restitution and pay the aggrieved client directly.
A civil damage action is independent of any findings by a disciplinary body, although in some circumstances they may have evidentiary value. Like all lawsuits, lawyers’ malpractice actions depend on finding liability on the part of the defendant and determining the amount of damages suffered by the plaintiff. In most cases the accused lawyer will be covered under a professional liability errors and omissions policy.
“We don’t encourage civil lawsuits,” said Blonder, “as the burden of proof is very high.” Essentially the plaintiff has to put on “a trial within a trial.” They have to show that “but for the conduct of their attorney, they would have prevailed,” she continued. “This means that the underlying case, including all the witnesses, has to be presented anew before the jury.”

Does self-regulation work?
Many lawyers think that the self-regulatory system works pretty well. But a number of people disagree.
“Consumers today are still not adequately protected by state systems that investigate only a fraction of cases, almost never impose sanctions, attempt to intimidate and silence victims, hide misconduct behind a veil of secrecy, and often take years to process cases,” Blonder stated in HALT’s 2006 Annual Report on how the legal profession deals with the public.
She charged that after 35 years of ignored calls for reform by her organization, the American Bar Association and ethics scholars across the country, the situation is not getting any better.
HALT has been grading disciplinary systems in all 50 states and the District of Columbia for years and its findings aren’t encouraging. The group has issued what it calls a “scathing indictment of attorney discipline agencies nationwide.” More than half the states received grades below C. Utah flunked outright. No state earned an A. While Connecticut took top honors, it received only a meager B-minus.
During the past four years, the new report indicates, only three states – New Jersey, Tennessee and Pennsylvania – had improved since a 2002 report. Twenty-two states were found to have deteriorated even further: Alabama, Alaska, Arkansas, California, Delaware, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Texas, Utah and Wisconsin.
HALT’s report alleged major deficiencies in several key areas, including a low rate of complaint investigations and lack of formal sanctions.
According to the report, the average state investigates only 58 percent of the complaints it receives, and investigations rarely result in discipline.
What’s more says Bonder, a “whopping” 24 states impose formal public sanctions – disbarments, suspensions and public reprimands – in just five percent of investigated cases.
In addition, many states continue to prohibit the public from attending disciplinary hearings. Hamstrung by rules that require them to keep the process secret, officials refuse to release information about attorneys’ discipline histories. A handful of states still prohibit consumers from disclosing information until the disciplinary body imposes public discipline in the case, HALT contends.
Blonder maintains that “the bar associations are aware of the problems, but they are the only forums of recourse available. In order to weed out the unethical lawyers, people have to file complaints.”
HALT provides assistance for claimants along with advice on how clients can help themselves.
“You need to get it all in writing,” she stressed. Even in cases where verbal agreements have worked in the past they may not do so in the future.
“If you file a complaint, keep it short – one page – be specific.” Bar associations that handle complaints are chronically overworked and understaffed, so it’s important to “get their attention.” There will be time later to elaborate, if the complaint has merit, Blonder advised.
High profile cases make the news
HALT studies are not alone in raising concerns about the deficiencies of the self-regulatory system. The public’s confidence in lawyers is also shaken by high profile legal cases.
This past May a federal grand jury in Los Angeles filed a 20-count indictment against Milberg Weiss Bershad & Schulman, the well-known securities class action firm. Directors and officers liability underwriters have been shaking in their boots for years at the mere mention of the firm and its two best-known members, Melvyn Weiss and William Lerach, who split from Weiss and started his own law firm in 2004. It’s estimated that since 1965 the firm has settled or won damage awards from corporate and individual defendants that exceed $40 billion.
The courtroom accusations stem from charges that the firm paid illegal kickbacks to “clients” who agreed to serve as lead plaintiffs in up to150 class action and shareholder derivative lawsuits the firm brought over the years. The firm and two individual partners, David Bershad and Steven Schulman, are accused of various acts of fraud, conspiracy, money laundering and violations of the RICO statute. They are accused of paying millions in kickbacks – including more than $2 million to attorney, Seymour M. Lazar, who became a lead plaintiff in a number of securities fraud cases.
Milberg Weiss and the accused lawyers have steadfastly denied any violations of law, and have vowed to fight the charges. At a Professional Liability Underwriters Society meeting in 1999 Lerach, who is not involved in the indictments, vigorously defended Milberg Weiss as the necessary “watchdogs” who identify and prevent corporate wrongdoing. But the indictment of his former firm makes it look like they were more interested in being attack dogs than watchdogs.
There is also the civil lawsuit brought by the Independent Federal Fund Oversight Committee (IFFOC) in Kansas. It names the Seventh Circuit Bankruptcy Court, U.S. Bankruptcy Chief Judge Eugene R. Wedoff, a number of federal and state court judges and eight law firms. The suit alleges that they conspired in a $40 million bribery scheme related to the McCook Metals bankruptcy case in Chicago.
It remains to be seen if IFFOC President David Martin Price has any evidence to back up his allegations. But the mere fact that an obscure organization (it has a phone number, but no Web site) can haul all of these lawyers and law firms into court serves to further diminish courts, judges and lawyers in the eyes of the public.

Malpractice suits
Despite Blonder’s caveat about the difficulty of prevailing in malpractice actions against lawyers, they remain numerous enough to cause concern among legal professionals and, of course, make insurance almost mandatory.
While lawyers for states and in class action settlements are pressuring insurance brokers across the country to disclose their fees and commissions, the legal profession faces its own controversy over disclosure. Should a lawyer be required to tell prospective clients that he has – or doesn’t have – malpractice insurance? The American Bar Association has adopted a model disclosure rule, which 12 states have so far adopted. Some other states have similar requirements.
Pennsylvania, Alaska, New Hampshire, Ohio and South Dakota are among the states that now require lawyers to provide written disclosure to clients if they do not carry minimum limits of professional liability insurance. Eleven other jurisdictions require some form of insurance disclosure on their annual registration statements.
In June, California State Bar President John Van de Kamp appointed a task force to study whether lawyers in that state should be required to disclose if they maintain professional liability insurance, and if so, how such a requirement should be accomplished.
California had such a provision until 2000, when it expired. Trial lawyers associations opposed renewal of the disclosure mandate on the grounds that it created too heavy a burden on lawyers, especially solo practitioners and smaller firms.
Burdensome, or not, America’s litigious society means lawsuits will continue to be filed, and those targeted will seek the protection insurance coverage provides to pay for defending themselves and the damages assessed against them.