Articles Posted in Legal Ethics

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In 2007, Kaufman filed a class‐action lawsuit based on Amex’s sale of prepaid gift cards. The packaging declared the cards were “good all over.” Kaufman alleged that these cards were not worth their stated value and were not “good all over” because merchants were ill‐equipped to process “split‐tender” transactions when a holder attempted to purchase an item that cost more than the value remaining on his card. After 12 months Amex automatically charged a “monthly service fee” against card balances. Kaufman alleged Amex designed the program to make it difficult to exhaust the cards' balances. Following the denial of Amex’s motion to compel arbitration, settlement negotiations, and the entry of intervenors, the court certified the class for settlement purposes but denied approval of a settlement, citing the inadequacy of the proposed notice. Response to notices of a second proposed settlement was “abysmal.” A supplemental notice program provided notice to 70% of the class; the court again denied approval. After another round of notice, the court granted final approval in 2016, noting the small rate of opt‐outs and objectors. The court awarded $1,000,000 in fees and $40,000 in expenses to the Plaintiffs’ counsel, $250,000 to additional class counsel, and $700,000 in fees to intervenors' counsel: attorneys would receive $1,950,000. The court concluded the total value of the claims was $9.6 million, that, considering the number of claims and the value of supplemental programs, the total benefit to the class was $1.8 million, and that recovering $9.6 million was unlikely. The Seventh Circuit concluded that the court did not abuse its discretion, despite the settlement’s “issues.” View "Goodman v. American Express Travel Related Services Co., Inc." on Justia Law

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DeKelaita provided legal representation for immigrants applying for asylum under 8 U.S.C. 1101(a)(42)(A). Applicants for asylum must sit for an interview with a U.S. Citizenship and Immigration Services officer and must provide a translator if one is needed. DeKelaita’s clients were primarily Assyrian or Chaldean Christians from Muslim‐ruled countries, such as Iraq. Many had suffered persecution, but their eligibility was doubtful because they either had already found refuge in another county or their history failed to meet the requirements for asylum. For at least nine clients, DeKelaita concealed evidence that the applicant had obtained legal status in a safe country or fabricated information about persecution. At the interview DeKelaita was able to ensure that applicants stuck to the script by coaching interpreters. He was convicted of conspiracy to defraud the government and for three false statements he either made or induced on his final (Albqal’s) application. The court vacated the three convictions related to Albqal’s application. The jury unanimously found only one false statement in Albqal’s application, but the court ruled that this statement was immaterial to his receipt of asylum. The court concluded that the government had failed to prove an element of the substantive crimes, leaving only the conspiracy conviction, which the Seventh Circuit affirmed. DeKelaita argued that the government failed to prove an overarching conspiracy. The jury had sufficient evidence to convict DeKelaita for either the charged conspiracy or a subsection of it. View "United States v. Dekelaita" on Justia Law

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Cortina, a now-dissolved corporation, was wholly-owned by the Trust. The Trust’s beneficiaries lived in Illinois when the Trust was established; in the 1980s, they relocated to Arizona. In 2011, the Trust became an Arizona trust. Brook, an Illinois resident, was the president of Cortina and the Trust's trustee. In 2001, Brook retained an Arizona firm to represent Cortina in a lawsuit concerning a ground lease created when Cortina sold land in Arizona. The suit was dismissed in 2002. In 2005, and in 2013, Cortina sought additional legal advice from the firm related to the same lease. In 2014, Cortina requested that the firm initiate a nonjudicial foreclosure on the property. The firm decided that involvement in the foreclosure would pose a conflict of interest and declined the case. Throughout the firm’s 13 years representing Cortina, the parties exchanged phone calls and correspondence between Arizona and Illinois, but all in-person meetings occurred in Arizona. Cortina sued the firm in Illinois alleging legal malpractice, breach of contract, and breach of fiduciary duty. After the district court requested a jurisdictional statement, Cortina substituted Brook as the plaintiff. The Seventh Circuit affirmed dismissal for lack of personal jurisdiction. While the defendants entered into a business relationship with an Illinois plaintiff, the activities were strictly conducted in Arizona. There was no evidence that Defendants reached out to or solicited Cortina, the Trust, or Brook. View "Brook v. McCormley" on Justia Law

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In 2013, an Australian teenager measured his Subway Footlong sandwich, which was 11 inches long. He photographed it alongside a tape measure and posted the photo on Facebook. It went viral. U.S. plaintiffs’ lawyers sued under state consumer-protection laws and sought class certification under FRCP 23. The suits were combined in a multidistrict litigation. Limited discovery established that Subway’s unbaked rolls are uniform; baked rolls rarely fall short of 12 inches. Minor variations occur due to natural variability in the baking process and cannot be prevented. No customer is shorted any food. With no compensable injury, the lawyers sought injunctive relief. Subway agreed to implement measures to ensure, to the extent practicable, that all Footlong sandwiches are at least 12 inches long. The parties agreed to cap class counsel's fees at $525,000. The court preliminarily approved the settlement. A class member and “professional objector to hollow class-action settlements,” argued that the settlement enriched only the lawyers and provided no meaningful benefits to the class. The judge certified the class and approved the settlement. The Seventh Circuit reversed. A class action that “seeks only worthless benefits for the class” and “yields [only] fees for class counsel” is “no better than a racket” and “should be dismissed out of hand.” View "Buren v. Doctor's Associates Inc." on Justia Law

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Watkins sued Trans Union for violating the Fair Credit Reporting Act. Trans Union asserted that attorney Cento should be disqualified from representing Watkins because, more than 10 years ago, Cento earned a living defending Trans Union in hundreds of lawsuits alleging Fair Credit Reporting Act violations. The district court found that Indiana Rule of Professional Conduct 1.9 (Duties to Former Clients) does not require Cento’s disqualification. On interlocutory appeal, the Seventh Circuit affirmed. The facts upon which Watkins’ case will turn—recurrent false collection listings on his credit report, despite multiple requests to remove them—are unique to his claim against Trans Union and are not interwoven with any individual case in which Cento represented Trans Union in the past. in cases involving an organizational client like Trans Union, “general knowledge of the client’s policies and practices ordinarily will not preclude a subsequent representation.” The general knowledge and experience Cento gained while defending Trans Union is not the type of confidential information with which Rule 1.9 is concerned. View "Watkins v. Trans Union, LLC" on Justia Law

Posted in: Legal Ethics

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In a class action against Sears concerning a defect in washing machines, the district court awarded class counsel $4.8 million, 1.75 times the fees counsel originally charged for their work on the case. The court reasoned that the case was unusually complex and had served the public interest and that the attorneys obtained an especially favorable settlement. The amount of damages that the class will receive has not yet been determined. The district court accepted Sears' estimate that the class members would receive no more than $900,000. The Seventh Circuit reversed, noting that the “case wasn’t very complex—it was just about whether or not Sears had sold defective washing machines.” A district court should compare attorney fees to what is actually recovered by the class and presume that fees that exceed the recovery to the class are unreasonable. The presumption is not irrebuttable, but in this case, class counsel failed to prove that a reasonable fee would exceed $2.7 million. View "Barnes v. Sears, Roebuck and Co." on Justia Law

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The U.S. Trustee alleged that Husain’s bankruptcy filings regularly failed to include debtors’ genuine signatures. Bankruptcy Judge Cox of the Northern District of Illinois made extensive findings, disbarred Husain, and ordered him to refund fees to 18 clients. When he did not do so, Judge Cox held him in contempt of court. The court’s Executive Committee affirmed the disbarment and dismissed the appeal from the order holding Husain in contempt but did not transfer the contempt appeal to a single judge, although 28 U.S.C. 158(a) entitles Husain to review by at least one district judge. The Seventh Circuit affirmed the disbarment and remanded the contempt appeal for decision by a single judge. The court noted extensive evidence that Husain submitted false signatures, documents that could not have been honest, and petitions on behalf of ineligible debtors; he omitted assets and lied on the stand during the hearing. The court noted that Husain’s appeal was handled under seal and stated that: There is no secrecy to maintain, no reason to depart from the strong norm that judicial proceedings are open to public view. View "In re: Husain" on Justia Law

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In 2012, Koehn filed a pro se complaint against his former employers. A magistrate held a settlement conference and appointed counsel for Koehn. The parties did not settle. Koehn obtained new counsel. The court held a telephonic status hearing and inquired about settlement negotiations. Defense counsel explained that he was new to the case and that, based on conversations with Defendants’ prior counsel, he believed that Defendants’ insurer had proposed a settlement of about $150,000. Koehn’s counsel stated that she had never heard that figure and that, given that information, a settlement conference might be productive. Defense counsel agreed and the court scheduled a conference. At that conference, Defendants offered less than $75,000, which Koehn had rejected in 2015. Koehn rejected the offer again. When the conference ended, the court stated: “At the conclusion of the jury trial, counsel for the Plaintiff may submit a request for attorney’s fees and costs associated with the unnecessary settlement conference held based upon defense counsel’s representations.” Koehn lost at trial but requested $3,744 in fees and $552.85 in costs associated with the 2016 conference. The district court granted Koehn’s motion; FRCP 16 allows the imposition of sanctions where a party’s failure to timely and candidly communicate a change in settlement posture results in an unnecessary settlement conference. The Seventh Circuit affirmed. Defendants did not participate in the settlement conference in good faith. View "Koehn v. Tobias" on Justia Law

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Murphy was an inmate in the Illinois Vandalia Correctional Center when correctional officers hit him, fracturing his eye socket, and left him in a cell without medical attention. Murphy sued under 42 U.S.C. 1983 and state-law theories. The court reduced a jury award of damages to $307,733.82 and awarded attorney fees under 42 U.S.C. 1988. The Seventh Circuit affirmed with respect to liability, rejecting an argument that state-law sovereign immunity bars the state-law claims. The Illinois doctrine of sovereign immunity does not apply to state-law claims against a state official or employee who has violated statutory or constitutional law. The court reversed and remanded the attorney fee award. Under 42 U.S.C. 1997e(d), the attorney fee award must first be satisfied from up to 25 percent of the damage award, and the district court does not have discretion to reduce that maximum percentage. Murphy then sought attorney fees for the appeal. The Seventh Circuit denied the petition. Murphy’s only success on appeal came on a purely state-law issue affecting damages awarded only under state law; a section 1988(b) award is not appropriate for that work. Plaintiff has already won—in the district court—both damages and a fee award for all of his attorney’s successful efforts thus far under federal law. View "Murphy v. Smith" on Justia Law

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The Blatt firm filed a collection lawsuit against Oliva in the first municipal district of the Circuit Court of Cook County. Oliva resided in Cook County. Under the Seventh Circuit’s 1996 “Newsom” decision, interpreting the Fair Debt Collection Practices Act (FDCPA) venue provision, debt collectors were allowed to file suit in any of Cook County’s municipal districts if the debtor resided in Cook County or signed the underlying contract there. While the Oliva suit was pending, the Seventh Circuit overruled Newsom, with retroactive effect (Suesz, 2014). Blatt voluntarily dismissed the suit. Oliva sued Blatt for violating the FDCPA as newly interpreted by Suesz. The district court granted Blatt summary judgment, finding that it relied on Newsom in good faith and was immune from liability under the FDCPA’s bona fide error defense, 15 U.S.C. 1692k(c). The Seventh Circuit initially affirmed. On rehearing, en banc, the Seventh Circuit vacated. The holding in Suesz was required by the 2010 Supreme Court decision in Jerman v. Carlisle, that the FDCPA’s statutory safe harbor for bona fide mistakes does not apply to mistakes of law. Under Suesz and Jerman, the defendant cannot avoid liability for a violation based on its reliance on circuit precedent or any other bona fide mistake of law. View "Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC" on Justia Law