Selling a Cause of Action

The Sixth Circuit announced an interesting decision yesterday. The case is Parker v. Goodman, No. 06-5940. The opinion permits a bankruptcy trustee to sell a cause of action of a debtor in order to realize assets for the benefit of creditors. Here are the facts:

The Debtor filed bankruptcy then had a falling out with his bankruptcy attorney. The debtor sued the bankruptcy attorney for malpractice in Kentucky state court. The debtor's bankruptcy trustee sold the cause of action in the malpractice case to the bankruptcy attorney's malpractice carrier for $10,000.00. The debtor was then enjoined by the bankruptcy court from prosecuting the malpractice case.

Isn't that interesting? Despite Kentucky's strong public policy against selling causes of action, the Sixth Circuit says that it's ok for the bankruptcy trustee to sell the debtor's claim against the attorney because the cause of action is property of the estate and the bankruptcy code, which trumps Kentucky law, gives the trustee the right to sell property of the estate.

But what makes this particularly onerous is that the trustee sold the cause of action to the attorney/defendant's malpractice insurance carrier, arguably for a fraction of its value had the case gone to trial. The malpractice insurance was able to extinguish the claim without the debtor ever having his day in court or even having had a say in the settlement.

Admittedly, the Sixth Circuit gives us an out - the debtor could have contested the actual sale, instead of waiting to contest the injunction against proceeding in state court - but that's of little comfort since the Sixth Circuit basically says that the sale was ok, giving trustees who want to engage in these transactions a green light.

This is another decision that is going to wind up causing issues down the road as a public, already lacking in confidence in the legal profession, will have yet another way to claim that "the lawyers screwed me out of my case." The judges of the Sixth Circuit ought to reconsider their position on this one, after thinking through all of the ramifications.

~Tim

Specialization

Recently, I have had occasion to discuss specialization with attorneys from both Tennessee and Ohio. Readers and clients know that I am a general practice attorney. I am not in the least bit interested in specializing. I am, however, interested in people's opinion on the topic.

One lawyer thinks that, within 10 years, everyone will be a specialist and that attorneys who do not specialize, or who take cases outside their specialty, will be liable for malpractice. My response to that is to say that it won't come to that but, if it does, count me out.

Personally, I think that specialization is bad for the profession and doubly bad for clients. It's bad for the profession because it spells the end of the small town, country lawyer who represents all clients, big and small. The lawyer on the Atticus Finch model. In years past, this was the predominate type of lawyer and in years past, people respected lawyers much more. As firms (and fees) have increased in size, the public's attitude about our profession has changed for the worse. This isn't a coincidence. The big firm specialization model does not breed public confidence. It breeds the idea of law as a business, not a profession. It breeds advertising models in which lawyers appear to be no better than used car salesmen (one ad that I particularly detest shows a lawyer who morphs into a tiger and the same firm has the back of the phone book with an ad that says "As Seen on TV" - are we lawyers or do we sell the Popeil Pocket Fisherman?).

Specialization is also bad for the clients. What happens when a lawyer specializes? Well, his client pool shrinks to encompass only those who need that particular legal specialty. When his client pool shrinks, what does the lawyer do? Well, most likely he relocates to a larger population center where the bigger population means more clients for his particular specialty. Clients who live in smaller communities now must travel longer distances to find a lawyer. Their costs are increased and one reason for that is that the lawyers overhead has increased (it's more expensive in the city). Fewer clients can then find, or afford, legal services. This is a bad thing.

I also tend to think that the lawyers I know who have specialized are not happy people. One reason for that, in my opinion, is that they get bored. Every day is the same thing. One bankruptcy petition looks much like every other. One complaint for divorce or mortgage foreclosure is much the same as any other. People thrive on variety. And people who are constantly learning new things stay sharper than people who are not learning new things.

As a profession, we should resist this urge to specialize. We may make more money, but it's about more than that.

~Tim

Sixth Circuit and Twombly - New Decision

Today the CA6 came out with its first decision regarding pleadings since the Supreme Court's decision in Bell Atlantic v. Twombly. This provides those of us who practice in the Federal District Courts that make up the CA6 (Tennessee, Kentucky, Ohio and Michigan) with the first insight into how the CA6 believes pleadings are effected by Twombly.

The case is Lindsay v. Yates, N0. 06-4430, an appeal from a decision of the Northern District of Ohio. The District Court had dismissed the complaint for failure to plead facts sufficient to establish each element of a primar facie case of racial discrimination. Although the dismissal was pursuant to Federal Rule 12(c), the standard is the same as that for dismissal under 12(b)(6) and arguably Twombly applies. The CA6 had this to say about Twombly, and it's heightened pleading requirements:

Swierkiewicz was discussed extensively by the dissent in the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, __ U.S. __, 127 S. Ct. 1955 (2007). Twombly addressed requirements for pleading an antitrust claim under § 1 of the Sherman Act. The dissent argued that the Twombly majority had devised a “new pleading rule” that called into question the continued vitality of Swierkiewicz. 127 S. Ct. at 1974 (Stevens, J., dissenting). Because the Supreme Court majority distinguished Swierkiewicz and nowhere expressed an intent to overturn it, we have no basis for concluding that Swierkiewicz is no longer good law. Moreover, although this case does not present the question of if, or exactly how, Twombly has changed the pleading requirements of Federal Rule of Civil Procedure 8(a), we note that in Erickson v. Pardus, __ U.S. __, 127 S. Ct. 2197 (2007), decided after Twombly, the Supreme Court reaffirmed that Rule 8(a) “requires only a short and plain statement of the claim showing that the pleader is entitled to relief.” Id. At 2200 (internal quotation marks omitted) (concluding that the petitioner had stated an Eighth Amendment claim where he alleged that prison officials had endangered his life by removing him from hepatitis C medication shortly after he began a year-long treatment regimen, that he was still in need of the treatment, and that prison officials continued to deny him treatment). In any event, for the reasons described infra, we conclude that the Lindsays have pleaded sufficient facts giving rise to a “reasonably founded hope that the discovery process will reveal relevant evidence” to support their claims. Twombly, 127 S. Ct. at 1967 (internal quotation marks omitted).

From this, it seems that the CA6 is willing to provide somewhat less scrutiny to complaints than many think is required by Twombly. They place reliance upon the Erickson case, decided after Twombly, in which the Supreme Court appeared to utilize the old pleading rules, thus the complaint in the instant case was upheld.

I imagine that this is just the first of many cases in which the CA6, and the other circuits, will struggle to define what the exact requirements actually are. Perhaps the Supreme Court will clarify in the upcoming term, or at the very least, the term after that.

~Tim

Virtual Office Space

Being very interested in the concept of virtual offices, since I am running one, I was interested to see an article in the August ABA Journal about yet another lawyer who forgoes the idea of a permanent office in favor of working from home and other handy locations. The lawyer who was the subject of the article started, as I do, working exclusively from home. However, she found some reluctance on the part of her business clients, or potential clients, to retain her once they saw her residential address.

I suppose a big part of our business still favors style over substance. However, there is a cure. A company called Regus has developed a series of "Virtual Offices." These offer you a physical location, usually downtown or in other business friendly locations. For a low price, around $200.00, you get a local phone number, someone to answer that phone, voice mail, mail forwarding and two days a month of time you can actually use the office. Need it more? There is a package that gives you five days a month. And it appears that you can, for additional fees, get time in meeting rooms, etc, on a first come, first served basis.

This would seem to be a perfect place to have to meet clients, conduct depositions and do other tasks that normally require a physical location. I am toying with the idea of getting into one of their buildings in the downtown Nashville area.

The article didn't mention whether anyone had looked at the ethics of these arrangements. At first blush, I think it's ok. It would probably be best if you disclose to the clients what the arrangement is. It might be considered deceitful if you hold out that "This is my office" leading people to believe that you are renting the (expensive) space on a full time basis. And some states have rules regarding lawyers sharing office space with non-lawyers, requiring special action to preserve client confidences, etc. Still, overall, I think it should be ok and that perhaps the various boards should look at the rules and revise them a bit to better fit the modern way of doing business.

I have not yet decided to go this route, but I am considering it. I get quite a few inquiries from Tennessee, but not a lot of conversions. There could be many reasons for this, but one might be not having an office to get the clients into for meetings and to discuss their legal matters. An office with Regus might help that along.

The ABA Article can be read at:

http://www.abajournal.com/magazine/virtual_offices_in_real_space/

~Tim

Ghost Lawyering, Part II

The August ABA Journal contains a thoughtful article on the concept of ghost lawyering, which was the subject a a post here a couple weeks ago. The article details the travails of a New Jersey lawyer who was sanctioned for assisting a pro se litigator by drafting pleadings.

Last May, the ABA issued an opinion that might be of help to attorneys who practice in Model Rule States. The opinion states that ghost lawyering is permissible under the ABA Model Rules, so long as local rules do not prohibit the practice.

The article goes on to discuss the concept of attorneys who draft documents that are filed by other attorneys. This is of particular interest to me, as the largest part of my practice consists of doing exactly that. The article quotes New York University law professor Stephen Gillers, an expert on legal ethics, as saying that lawyers who draft pleadings and briefs for other lawyers don't violate the ethics rules, since the filing attorney takes responsibility for the work. One would hope that Professor Gillers opinion would carry weight with any Board of Professional Responsibility that examines the issue.

Basically, it comes down to this - as lawyers we need to consult the rules of the jurisdiction to make sure that we're on the right side of the (blurry and sometimes shifting) line. My personal opinion is that there is nothing wrong with the practice. Certainly not with respect to my practice of authoring documents that other lawyers file, but also not with respect to the pro se litigants. It is our duty as lawyers to help those in need of legal services. Ghost lawyering for a pro se filer can, in some circumstances, enable someone to put their case before a court when otherwise they would not be able to. To my way of thinking, that is a good thing.

I am going to use a feature of the new blog hosting site I am using and put up an opinion poll on Ghost Lawyering to see what people think of it. You can read the ABA Journal article online at http://www.abajournal.com/magazine/scary_parts_of_ghostwriting/. The article contains a link to the New Jersey decision sanctioning the attorney who engaged in ghost lawyering for the pro se litigant, then vote in the poll on the left hand side of this page to make your opinion known.

~Tim

Even More on Bell Atlantic v. Twombly

We'd all better get used to it - we're going to be dissecting the Twombly (link in Noteworthy Cases) decision for quite some time. This month's discussion comes from a very well written article in the Tennessee Bar Journal. The article contains one of the most clearly stated summaries of Twombly that I have read.

The current issue of the Tennessee Bar Journal can be read online. The article appears at: http://www.tba.org/Journal_Current/tbj-2007_08.html. If you have any trouble accessing it, drop me a note and I will see about getting permission to e-mail it to you.

As the article points out, attorneys and the courts are going to be struggling with Twombly for quite some time. The good news is that Twombly isn't constitutionally based. It was decided only under the Federal Rules of Civil Procedure. That being the case, it doesn't apply to state courts, even those whose Rule 8 is identical to Federal Rule 8, although it does have some persuasive value and you can bet that defendants will be citing Twombly in state court motions to dismiss.

If anyone out there has seen Twombly raised in a state court action, I'd like to hear about it, so drop me a note or post a comment here.

~Tim

No Office

Readers and visitors to my web site know that I am one of a small (so far) group of lawyers who doesn't maintain a physical office. I was perusing old issues of the ABA Journal today and ran across an article from about a year or so ago detailing the efforts of at least one other attorney who is trying that.

Technology, the cell phones, PDA's, laptops and all the widely available wireless access is making it possible for lawyers to work anywhere. Look at my practice. Right now I am living in Ohio, yet handling a small number of matters in Tennessee. The fact that I can have a Tennessee local phone that rings in my home office in Ohio, together with the ability to easily travel back and forth (I am a licensed pilot), with a little creativity on scheduling things in Tennessee so I can accomplish a lot with a fewer number of trip cycles, it is certainly possible to have that kind of practice. Whether it can withstand building up to any sizable volume is an open question. With volume may come an increased number of trips that would make it easier just to live there than here.

Yet, still, the lure of being able to do it this way is attractive and I think that eventually you are going to see growing numbers of lawyers abandoning the traditional practice office for their own versions of the "virtual office." Already we see growth in the business of providing temporary counsel, some even work from home, with companies like Counsel on Call entering the marketplace.

You can read the ABA Journal article at http://www.abajournal.com/magazine/switching_to_house_calls/

~Tim

Role of the Prosecutor

I read an article in a recent Time Magazine (August 6, 2007) regarding prosecutorial misconduct. Apparently a group is forming to attempt to reel in some of the more egregious abuses of the prosecutorial power. And example was given in the article that I found interesting, because I had also recently seen an example.

In the article, they described a situation wherein the prosecutor kept an individual, who had been charged with rape, in jail for nine months. Under the law of that state, that was the period that a prosecutor had to obtain an indictment. In that case, the prosecutor could not obtain an indictment due to some evidentiary problems (basically, the article says the guy didn't do it).

The prosecutor basically became judge, jury and executioner, stating that he would at least keep the guy off the streets for nine months.

Wow, what an abuse of power. It simply isn't the prosecutor's role to make decisions like that. The role of the prosecutor, at least pre-trial, should be to make an evaluation of the evidence to see if the state has a case. I won't go so far as to say that the prosecutor should resolve all doubt in favor of the defendant, but he or she should, in my opinion, at least make certain that an innocent person isn't being charged. Proof of actual innocence should require the prosecutor to release a defendant from confinement.

I actually saw a similar situation in an Ohio county (in which I currently reside). I had a reason to go to the courthouse with a local attorney when he encountered the prosecutor on a criminal matter that he was involved with. A deal had been cut for no jail time, but the prosecutor was resisting bringing the matter to the court for sentencing, which would result in the defendant's release. The prosecutor stated his position that he wanted to keep the defendant in jail for as long as possible to punish her for what she had done.

Pardon me, but I thought the judge made those decisions. Having decided that the defendant deserved probation for the crime, as the prosecutor did when he agreed to the deal, the matter of whether or not that was acceptable should have been left to the judge. The prosecutor, in my opinion, abused the power of his office by slowing the defendant's release.

As we left the courthouse, I told the attorney of my opinion and also that he should consider making a motion to set the sentencing. His response was that if he did that, the prosecutor wouldn't deal with him anymore. I also find that to be repugnant and a violation of the defense attorney's duty to represent the best interest of his client.

So, the question is - what kind of system has evolved here? It seems a bit out of control. It seems like the rule is now guilty until proved innocent. Occasionally, as happened in the Duke Lacrosse case, prosecutors get punished for stepping over the line, but real reform won't come until we, as either a society or we, lawyers, as a profession, get the will to force changes.

I am now stepping off the soapbox.

This is of interest to me since I recently placed my name in the pool for accepting some appointed criminal work in some Tennessee counties. I have, in the past, done quite a bit of criminal trial work and want to get back into it. My "second chair" activities outside the state of Tennessee don't generally involve criminal work.

~Tim

New Blog Site

I have moved my blog over to a new blog hosting site. Of course, if you are reading this, you have already found it. Posts prior to today will continue to be visible at the old site (http://lawyerhatton.spaces.live.com), but all new posts are going to be here.

The reason for this is that this hosting service will integrate better with Google Apps for Domains, which is what I am using to run my web site and office, as well as with Google Analytics and Google Adwords. It may take a while to get the content built up over here, but I think the benefits will outweigh the pain of making the move.

~Tim