Florida High Court Rejects Strems Bid to Dissolve Suspension; Contempt Petition Filed

By | September 2, 2020

A Florida attorney accused of causing great public harm through a “vast campaign of unprofessional, unethical, and fraudulent conduct,” by way of thousands of insurer lawsuits has lost his latest battle to overturn his suspension and now faces a petition for contempt over alleged violations of the order.

The state’s high court rejected the request of Scot Strems to have his emergency suspension dissolved, accepting the recommendation of court-appointed referee Judge Dawn Denaro that it remain in place. Strems has been fighting allegations by The Florida Bar that he, with his firm, engaged in “mendacious, bad-faith conduct” and made false or fraudulent statements to other parties involved in suits, as well as the court.

The bar has also accused Strems and the Strems Law Firm (SLF) of illegally filing multiple lawsuits on an individual policy claim, delaying and ignoring court deadlines, and violating court orders. Several Florida insurers reported dealings with the firm that aligned with these allegations and a former associate of the firm testified that the firm had filed more than 10,000 suits against Florida property insurance companies.

Strems has denied the bar’s claims and filed a motion to dissolve the emergency suspension on June 26. In that filing, Strems’ attorneys claimed that the misconduct alleged by the bar did not warrant emergency suspension, saying the bar’s petition was “deficient [and] does not demonstrate that Mr. Strems is causing ‘immediate and serious injury to a client or the public.'”

“While the totality of the allegations may justify Bar scrutiny, they fall woefully short of justifying emergency suspension,” the petition said.

The Florida Supreme Court ultimately disagreed, however. Strems is set to start trial for the allegations on Sept. 8.

Petition for Contempt

Meanwhile, the bar is now asking the high court to hold Strems in contempt of the suspension order, claiming in a 30-page petition filed Aug. 27 that Strems has repeatedly and continuously violated the order both “in letter and spirit.”

The Florida Bar’s latest filing claims that Strems’ clients, purportedly overseen now by a spinoff firm known as Property Advocates, P.A., are being harmed by the parties’ conduct.

“Concerted and ongoing efforts by [Strems] and Property Advocates are jeopardizing the interests of their clients and causing an even deeper strain on the resources of the judiciary,” the bar alleges. “In that way these efforts are a continuation of the pattern of misconduct described in the Petition for Emergency Suspension.”

In the contempt petition, the bar levels numerous allegations against Strems and the Property Advocates, which was established in the wake of Strems suspension when he transitioned ownership to SLF associates.

Among the bar’s claims is that Strems has continued to take on new cases as SLF and send letters of representation to insurance companies. These letters have served as SLF’s first notice to the insurers that the firm was involved in the case, the bar says, despite Strems having been ordered to cease accepting new cases and to continue representing existing clients for only 30-days after the June 9 suspension order. The letters to insurers also directed that payments be made to SLF and that the firm be communicated with directly.

“SLF’s letters of representation clearly evidence the firm’s intent to begin settlement discussions with the insurer. … SLF’s letters of representation clearly evidence the firm’s intent to collect insurance proceeds in connection with the firm’s ongoing and future services,” the bar states.

The bar also claims Strems failed to immediately notify clients of his June 9 suspension, as required by the order, and instead waited until July 1 – once ownership had been transitioned to the Property Advocates. In that communication, Strems advised clients that he was no longer involved with or the owner of the firm and advised clients of the new company name.

“Respondent did not notify his clients of his suspension until he had devised a means for transferring those clients to his former associates,” the bar states.

Additionally, the reorganization of SLF to Property Advocates has resulted in “substantial confusion in the courts,” the bar alleges, saying that in a bid to keep its cases moving, Property Advocates has filed numerous “notice of change” documents that are not motions to substitute or withdraw counsel in accordance with Florida law. The bar states the notices of change are also not accompanied by documents from clients authorizing the representation of Property Advocates in their cases, as required by law.

In many of its cases, the bar claims, “there has been no filing at all regarding SLF’s reorganization,” and that SLF remains the counsel of record. If notice of change filings were made, they “almost always occurred after the expiration of the 30-day wind-down period in the suspension order.”

“The Florida Bar cannot presently ascertain the number of cases in which there has been no filing to advise the court or the parties regarding respondent’s suspension or his firm’s reorganization,” the bar states.

The result has led to confusion among the courts, clients and insurers, who have “challenged the authority of Property Advocates to represent SLF’s clients.”

“Beginning shortly after SLF’s transition into the Property Advocates, courts and litigants across the state expressed confusion about whether Property Advocates were in fact authorized to represent its purported clients,” the bar states.

The bar outlines several cases in which Florida courts have issued stays or ordered compliance by Property Advocates to follow the notice requirement laid out in the Strems suspension.

Two such examples include:

  • Citizens Property Insurance Corp. requested a stay in a case until The Property Advocates filed a substitution of counsel with proof of consent by the client and the court grants the substitution request. A Citizens spokesman told Insurance Journal last month the insurer had 802 pending cases with SLF/Property Advocates.
  • Another insurer, Southern Fidelity Insurance Corp., was granted a motion by the court to stay any further litigation involving Property Advocates until an order for substitution of counsel had been entered because Property Advocates had failed to provide the requisite notice to clients and failed to substitute counsel.

Transfer of Firm Ownership

According to the bar petition, Property Advocates has argued that the rule that applies to the sale of law firms is not applicable in its case because the transfer of SLF’s ownership was not a “sale” for purposes of that rule. It also claims clients continue to be represented by “the same licensed members of The Florida Bar” that were in place before, during and after the Strems suspension order was issued.

However, the bar disagrees with its argument, noting that the ownership of SLF “changed hands for value,” specifically for 1 million shares of the firm at .10 per share, triggering obligations to clients that have not been met. The bar also notes that regardless of how Property Advocates defines the transaction with Strems, the firm is still required to protect the client’s interest if their lawyer’s representation is terminated. In that event, the lawyer must give “reasonable notice to the client,” and allow time for the client to employ other counsel, if they chose.

“Accordingly, the unusual fiction put forward by Property Advocates has created a pervasive uncertainty in courtrooms across the state regarding the simple, axiomatic issue of whether Property Advocates is in fact authorized to represent the parties it purports to represent,” the bar states.

Any doubt and confusion could be resolved by “simple written authorization of the firm’s purported clients, but to date The Florida Bar is unaware of any case in which such authorization has been provided,” the bar says, and instead courts and litigants across the state must now “expend considerable time, effort, resources, and money to unwind this fundamental issue.”

Property Advocates, alleges the bar, has failed to properly notify its clients to the ongoing changes and issues and instead has contended “that their clients’ interests are best served by being kept in the dark and forfeiting any opportunity to obtain new counsel.”

Based on a continuation of the pattern of misconduct and violations of the suspension order, the bar has asked the court to hold Strems in contempt of that order, require that clients be sent proper written notices, require that he withdraw or substitute counsel (as necessary) in his clients’ cases and “grant any other relief the court deems appropriate, including but not limited to, disbarment.”

Strems has until Sept. 11 to respond to the bar’s petition.

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

Was this article valuable?

Here are more articles you may enjoy.