In re Complaint as to the Conduct of DANIEL J. GATTI, OSB #731036, Accused.
Argued and Submitted November 8, 2013
On review of the decision of the trial panel of the Disciplinary Board. OSB No. 1060. [*]
Mark J. Fucile, Fucile & Reising LLP, Portland, argued the cause and filed the briefs for the Accused.
Mary A. Cooper, Assistant Disciplinary Counsel, Tigard, argued the cause and filed the brief for the Oregon State Bar.
Peter R. Jarvis, Portland, filed a brief for amicus curiae Peter R. Jarvis.
Before Balmer, Chief Justice, and Walters, Landau, Brewer, and Baldwin, Justices. [**]
The accused is suspended from the practice of law for 90 days, commencing 60 days from the date of the filing of this decision.
Disciplinary proceedings against the accused arose from the accused's joint representation of 15 sexual abuse victims (the Sprauer plaintiffs) in settling claims brought against the Portland Archdiocese and the State of Oregon for the actions of Father Michael Sprauer. All of the Sprauer plaintiffs had, at various times, been incarcerated at the MacLaren Home for Boys, a facility for juvenile offenders, and all alleged that, while there, they had been sexually molested by Father Sprauer, the facility's chaplain. Following a complaint from one of the accused's clients regarding the accused's implementation of those settlements and a two-year investigation by the Bar, a trial panel of the Bar's Disciplinary Board found that the accused had violated the following rules: RPC 1.4(b) (failing to explain matters to the extent reasonably necessary to allow clients to make informed decisions), RPC 1.7(a)(1) (failing to secure clients' informed consent before engaging in representation that constituted a current confict of interest), RPC 1.8(g) (failing to secure clients' informed consent before participating in aggregate settlement of their claims), and RPC 8.4(a)(3) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation that refected adversely on ftness to practice law). As a result of those fndings, the trial panel imposed a six-month suspension from the practice of law as a sanction. Held: The accused violated RPC 1.4(b), RPC 1.7(a)(1), and RPC 1.8(g), but did not violate RPC 8.4(a) (3). A 90-day suspension is an appropriate sanction.
In this lawyer disciplinary proceeding, the Oregon State Bar (Bar) charged Daniel J. Gatti (the accused) with violating the Rules of Professional Conduct (RPC). The Bar's charges were set out in five causes of complaint, all of which arose as a result of settlements that the accused had brokered for a group of clients—all sexual abuse victims—in civil actions brought against the Portland Archdiocese, the State of Oregon, and Father Michael Sprauer.
In January 2013, a disciplinary trial panel determined that the Bar had proved three of the five causes of complaint and that, in engaging in that conduct, the accused had violated four ethical rules—RPC 1.4(b) (failing to explain matters to the extent reasonably necessary to allow clients to make informed decisions), RPC 1.7(a)(1) (failing to secure clients' informed consent before engaging in representation that constituted a current conflict of interest), RPC 1.8(g) (failing to secure clients' informed consent before participating in aggregate settlement of their claims), and RPC 8.4(a)(3) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation that reflected adversely on fitness to practice law). The trial panel did not address the remaining two causes of complaint, but concluded that the accused should be suspended from the active practice of law for six months.
The accused now seeks review of that decision. We review the trial panel determinations de novo. ORS 9.536(2); BR 10.6. For the reasons that follow, we conclude that (1) the Bar met its burden of proof with respect to the three causes of complaint addressed by the trial panel and that the accused violated three of the four rules of professional conduct set out above—RPC 1.4(b), RPC 1.7(a)(1), and RPC 1.8(g); (2) the Bar did not prove that the accused violated RPC 8.4(a)(3); and (3) the accused should be suspended from the practice of law for 90 days.
The following facts are undisputed. During the period roughly spanning 2001 through 2007, the accused represented 15 clients (the Sprauer plaintiffs) in joint actions brought against the Portland Archdiocese and the State of Oregon for the actions of Father Michael Sprauer. All of the Sprauer plaintiffs—among them, Earl New, the complainant in this disciplinary matter—had several things in common: At various times, all had been incarcerated at the MacLaren Home for Boys, a facility for juvenile offenders, and all alleged that, while there, they had been sexually molested by Sprauer, the facility's chaplain.
At the outset of the Sprauer litigation, the accused sent each of the 15 plaintiffs a letter setting out the pros and cons of joint representation and advising them to obtain independent legal advice about whether to have the accused represent them jointly. The accused also provided the plaintiffs with a Joint Representation and Prosecution Agreement (JRA), which they all signed. Among other things, the agreement set out the terms under which the accused would pursue settlement of his clients' claims and addressed his clients' rights and responsibilities in the event that the opposing parties proposed an "aggregate or joint fund" settlement. Specifically, the agreement provided:
"5.2. Client and Attorneys agree that it is generally desirable to conduct settlement negotiations on an individual client basis and will endeavor to do so, with each client's case negotiated separately, based on its own strengths and weaknesses, and not linked to the settlement of any other client's case. No client may interfere with any other client's right to settle. However, client recognizes that it is possible that an aggregate settlement might be in plaintiffs interest, with a single lump sum fund to be shared by all clients, or a joint-fund settlement, with a lump sum to be shared by two or more clients. * * *"
"5.3. In the event of an aggregate or joint fund settlement, the participating clients may decide among themselves as to how the fund shall be allocated. An allocation may not be imposed on any client, except by Arbitration under Section 6 of this Agreement. Attorneys shall have no role whatsoever in the allocation decision, and shall not represent any client in that process. Client may, however, be represented by other counsel. If the participating clients cannot decide upon an allocation, the allocation decision shall be submitted to final and binding arbitration as provided in Section 6 of this Agreement."
In July 2004, the Sprauer plaintiffs' litigation was halted while the Archdiocese filed for bankruptcy protection. In 2005, at the bankruptcy court's direction, the Sprauer plaintiffs and the Archdiocese began a series of mediation meetings. In anticipation of those meetings, the accused sent his clients a letter addressing the conflict that would arise if the Archdiocese assets were less than the total value of the Sprauer plaintiffs' claims:
"The Oregon attorney ethics rules are clear that when the defendant's assets exceed the total value of all claims, there is no conflict of interest. The rules are also clear that when the defendant's assets are known to be less than the total value of all claims, there is a conflict of interest. This conflict allows a lawyer or firm to represent multiple clients on common issues but prevents the lawyer or firm from representing individual clients vis a vis each other in deciding the relative allocation of dollars to be received by each client."
The accused also sent the plaintiffs a second letter setting out the advantages and disadvantages of joint representation and a second JRA containing provisions similar to the first. The second JRA again provided that "an aggregate settlement might be in plaintiff's interest, with a single lump sum to be shared by all clients, " and that the accused would "have no role whatsoever in the allocation decision." The Sprauer plaintiffs also signed the second JRA.
The parties' first mediation meeting took place in September 2005, at which time the Archdiocese offered each of the Sprauer plaintiffs $7, 500 to settle their claims. Plaintiff New was willing to accept that offer. Then, as now, New was serving a 27-year sentence based on his 1994 convictions for burglary, kidnapping, sodomy, and menacing. Acknowledging in a letter to the accused that "I'm your hardest case because a jury would not be sympathetic to me because of my charges, " New indicated that he "would like to accept the offer of $7, 500 and let you take the winning cases to trial." Initially, the accused did not act as New had requested and refused to settle any of the plaintiffs' claims for the sum offered. Later, however, the accused attempted to accept the Archdiocese's $7, 500 offer on New's behalf; the Archdiocese rejected that attempt as untimely.
A second mediation meeting was scheduled for the fall of 2006. In preparation for that meeting, the accused obtained individual minimum settlement offers from each of his clients. The total of those individual minimum settlement offers was $284, 500.
At the mediation, the accused told the two judges who served as mediators that the plaintiffs would settle their cases for $284, 500. Instead of relaying that offer to the Archdiocese, however, mediator Judge Hogan told the Archdiocese that it must pay $600, 000 to settle the plaintiffs' claims. The Archdiocese agreed and Judge Hogan so informed the accused. Neither the Archdiocese nor its attorney had any role in allocating the $600, 000 between the plaintiffs. After the mediation concluded, the attorney for the Archdiocese sent the accused a letter in which she listed the plaintiffs and their respective claim numbers and confirmed "that you have settled all of the above-reference cases with the Archdiocese for the total sum of $600, 000." The accused's office then informed the attorney for the Archdiocese of "plaintiffs' understanding" concerning the "settlement breakdowns" and supplied her with a list of the sums that each plaintiff should receive in settlement of his claims. In accordance with those "settlement breakdowns, " the Archdiocese sent the accused individual settlement agreements and checks. Each plaintiff signed his own settlement agreement and each settlement was separately approved by the bankruptcy court. The individual settlement agreements did not make the agreement of any one plaintiff contingent on the agreement of any other plaintiff.
When later questioned by the Bar about how he had determined the "settlement breakdowns, " the accused explained that, in addition to obtaining minimum settlement authority from each of his clients, he also had obtained their advance consent to disburse any sum that exceeded the total of their minimum settlement offers proportionately. The accused explained that the plaintiffs had agreed that a plaintiff whose minimum settlement offer represented, for example, five percent of the total of the individual minimum settlement offers would receive five percent of any offer exceeding that total.
However, the accused explained, his agreement with New was different. According to the accused, New had agreed to settle his claim for a maximum of $7, 500—an amount that would remain unchanged, even if the Archdiocese offered to settle for more than the total of the plaintiffs' minimum settlement offers. That $7, 500 maximum was acceptable to New, the accused asserted, because (1) New was cognizant of the fact that his claim had little value as a result of his criminal history; (2) New previously had been willing to accept the same sum when the Archdiocese initially offered it; and (3) the accused had agreed not to withhold any attorney fees or costs from New's settlement. When the accused wrote to New informing him of the settlement, he stated that, "with your permission, I was able to settle your case for the $7, 500 you requested. I informed you that I would not be charging you any costs or attorney fees under your unique circumstances."
After the settlement with the Archdiocese was concluded, the accused brought to trial three cases against the State of Oregon. The jury found in favor of two of the plaintiffs—R.S. and R.P.—awarding the pair $590, 000 and $595, 000 respectively, plus punitive damages. In the other case, the jury entered an adverse verdict, apparently as a result of a statute of limitations defense.
Following those verdicts, the accused anticipated that he would be able to settle all of the Sprauer plaintiffs' claims against the state, and, in June 2007, he sent each a letter stating as follows:
"If all of you agreed to settle your cases on the same percentage basis as we did in the past, then I do not have a conflict. When the number is reached, I will need to know if I have your permission to settle for the number that I can extract from them and that you will accept your proportionate share pursuant to the proportionate share that was given in the past. In other words, if your proportionate share came to 10 percent, then you need to say you will take the same proportionate share. If your proportionate share came to 15 percent or any number can be used, then again, I need your permission to settle for that same proportionate share once we find out what the ultimate sum will be. If any of you disagree with this proportionate share analysis, then in that event I would have to resign and I would have a conflict of interest and I would not be able to represent any of you."
New responded promptly with a letter giving the accused permission to "settle for my proportionate share, " while at the same time noting that "I do not remember you mentioning anything about 10 percent or 15 percent when the Church disrespectingly (sic) offered a nuisance settlement on my case[.]"
In July 2007, the accused informed New by mail that he had settled with the state for a total of $1.05 million. The accused wrote that "[a] 11 of you agreed that you would take the same percentage, or more if I could get it, that you accepted from the Portland Archdiocese, " and went on to inform New that he could "expect to receive a check in the approximate sum of $7, 500 within the next 45 days" upon executing and returning a power of attorney to the accused. New responded with a letter informing the accused that he had mailed his power of attorney and thanking the accused for his efforts. New also observed that he was "a little surprised that I only received from the State (after your win in court) the same amount as the Church offered"; he added, however, "but that's what I get for being in jail."
Pursuant to powers of attorney executed by his clients, the accused signed all of their names, save that of N.K., the client who had lost at trial, to a settlement agreement and release prepared by the state's counsel. In the letter accompanying the tender of that release, the accused explained that he had omitted N.K.'s name because he had lost at trial and therefore was not entitled to share in the settlement. The state, however, insisted that N.K. execute the document because it contained, among other things, a provision releasing the right to appeal. Without telling N.K., the accused then signed N.K.'s name to the settlement agreement and returned it to the state's counsel.
In August 2007, the state's counsel issued checks totaling $1.05 million. After depositing those funds in his trust account, the accused disbursed them to all of the Sprauer plaintiffs except for N.K. The accused did not, however, distribute those funds according to the percentages used in the Archdiocese settlement. Instead, according to letters that the accused later wrote to the Bar, the accused divided the total settlement into two pools of funds. The first, approximately $357, 676, he disbursed in two equal sums to the plaintiffs who had prevailed at trial. The second, approximately $692, 323, he appears to have disbursed as follows. For the plaintiffs other than R.S., R.P., and New, the accused apparently calculated the sums that each plaintiff would receive by applying the percentages that the accused had used in distributing the Archdiocese settlement. Because R.S. and R.R had received approximately 20 percent of the Archdiocese settlement, the other plaintiffs' percentages of the Archdiocese settlement totaled approximately 80 percent. That left approximately 20 percent of the second state pool remaining to be allocated. The method that the accused used to allocate those funds is unclear. It appears that the accused allocated additional sums to some of the plaintiffs but not to others and that he allocated $7, 500 to New. On review before this court, the accused does not contend that the plaintiffs actually received the same percentage of the state's settlement as they had received in the Archdiocese settlement. When asked about that at the trial panel hearing, the accused took the position that, if "mathematical errors" were made, he was willing to correct them.
At the time that they received their settlements, none of the plaintiffs objected. Later, however, New filed a complaint with the Bar, claiming that it was prompted both by the accused's failure to respond to New's request for a detailed accounting and by the ...