SC Lawyer, July 2007, #4. Tangled Webs.

• Author: By John Freeman

South Carolina Lawyer

Ethics Columns.

SC Lawyer, July 2007, #4.

Tangled Webs

South Carolina LawyerJuly 2007Tangled WebsBy John FreemanThe great Scottish poet Sir Walter Scott used memorable imagery when he observed in his poem Marmion, "O, what a tangled web we weave, When first we practise to deceive!" Sir Walter got it right. So did New Hampshire's Supreme Court when, in Astle's Case, 134 N.H. 602, 606, 594 A.2d 167, 170 (1991), it said, "No single transgression reflects more negatively on the legal profession than a lie." Look no further than two recent, related Florida Supreme Court disciplinary cases for proof that big case litigation is fertile breeding grounds for lawyer deception.

Lawyer fraud in litigation can take different forms. Lawyers can lie to each other, as when they try to cheat over discovery. They can also seek to mislead the court. They may try to mislead their own clients and, if attacked ethically for having done so, they may seek to mislead disciplinary authorities. In the Florida cases, the respondent lawyers were involved in all of the above, and violated a number of other ethical rules to boot. The cases are Florida Bar v. Rodriguez, ___ S.E.2d ___, 2007 WL 1285820 (Fla. May 3, 2007), and Florida Bar v. St. Louis, 2007 WL 1285836 (Fla. May 3, 2007). Both lawyers were in the same plaintiffs' firm, and both were caught up in a common fraudulent course of conduct. The facts below are taken principally from the St. Louis decision.

In the early 1990s, Florida farmers were hit with two disasters decimating their crops. The bigger one was Hurricane Andrew. The other was less publicized and less well known. It centered on losses resulting from farmers' use of a defective fungicide manufactured and sold by DuPont called Benlate. When cases first arose in the early 1990s, DuPont paid Benlate claims up to a reported $500 million. It then denied liability based on testing it conducted that supposedly demonstrated Benlate was safe.

The lawyers in Rodriguez and St. Louishad a total of 20 combined Benlate cases against DuPont. Litigating the cases was hard. The court in St. Louis noted, "DuPont vigorously defended itself with carefully calculated strategies and 'scorched earth' discovery tactics." This scorched earth approach evidently involved hiding evidence. DuPont's "scorched earth" approach did not succeed.

According to the Florida Supreme Court, "By 'diligent and extraordinary' efforts, St. Louis discovered a secret Benlate field test DuPont had conducted in 1992 in Costa Rica, in which Benlate had severely damaged the plants. He proved that DuPont had concealed or destroyed all of the physical evidence of that test, and that DuPont had denied under oath that the test even took place."

Upon discovery of DuPont's misconduct, lawyer St. Louis, his firm and his clients were in the driver's seat in their Benlate cases. They had uncovered the first lawyer fraud, the discovery deceit practiced by DuPont and its lawyers on them and other Benlate litigants through concealment and cover-up of the Costa Rica testing failures. Once he uncovered the Costa Rica Benlate testing failure, St. Louis did the right thing: in the biggest of his 20 cases, called the "Davis Tree Farm case," he filed an exhaustive (110-page) motion for sanctions against DuPont seeking to have DuPont's pleadings stricken.

It is clear DuPont had been caught in a very compromising position. After the default motion was taken under advisement, the judge advised the parties she intended to strike all DuPont's pleadings in the Davis Tree Farm case. From this point onward, in terms of ethical behavior, it was all downhill. The misbehavior of St. Louis and Rodriguez after they filed their default motion in the Davis Tree Farm case shows how it is possible to parlay a position of overwhelming litigating power, gained through commendable diligence and effort, into ethical misery.

Spurred by the judge's comment, DuPont commenced negotiating in earnest to settle all of Rodriguez and St. Louis' Benlate cases, including Davis Tree Farm. Settlement figures for all cases, including some plaintiffs' cases having "fatal flaws," were quickly agreed to between DuPont and the plaintiffs' lawyers, with DuPont insisting that the settlement amount each client would receive be kept confidential from the plaintiffs' lawyers' other clients. A 10 percent hold-back of settlement funds from clients for two years was agreed to as a means of enforcing the confidentiality requirement.

Once the client settlement numbers were agreed to, but before the plaintiffs had signed their settlement agreements, DuPont's lawyers demanded a lock-out agreement from the plaintiffs' lawyers barring them from asserting future Benlate claims against DuPont. Such a concession was billed as "DuPont policy" in connection with Benlate settlements. Company policy or not, this demand was, of course, unethical to seek or agree to in light of Rule 5.6(b). St. Louis and Rodriguez properly rejected the unethical demand.

Unfortunately for them, the lawyers and their firm agreed to a secret, disguised lock-out agreement. They accepted DuPont's offer of a payment to them of $6.445 million in exchange for the plaintiffs' firm's agreement not to pursue future claims against DuPont and for the firm to hold itself available to perform future work for DuPont on an hourly basis. DuPont and its adversaries' lawyers then executed a contract reflecting the firm's retention by DuPont. This side-deal was cut before the lawyers' clients signed their settlement agreements.

The court's findings about the lawyer-DuPont retainer agreement are damning: "Although DuPont and [the plaintiffs' lawyers] agreed that payments for work in the future were to be based on the [firm's] standard hourly rate, at no time did St. Louis or DuPont's counsel expect the firm to actually represent DuPont. The true purpose of the engagement agreement was to create the appearance of a conflict so [the lawyers] might circumvent [the anti-lockout rule, Rule 5.6(b)]."

The lawyers' clients were then called on to execute the DuPont Benlate settlement agreements. Here, again, unethical conduct was rife. The lawyers' clients were told if they did not settle, their lawyers would withdraw and assert charging liens. Though each client knew what it was being paid, it was not told what other similarly situated Benlate clients were receiving, in violation of Rule 1.8(g). No client, except for Davis Tree Farm, was told about DuPont's $6+ million payoff to the plaintiffs' lawyers. In other words, except for Davis Tree Farm, when they were induced to sign off on the group settlement, the Benlate clients were not told that their lawyers who were pressuring them to sign the settlement papers had been hired for millions of dollars by DuPont to do little or no future work.

One client smelled a rat. When the suspicious client hired a lawyer to inquire into the DuPont settlement negotiations, the existence of the multi-million dollar DuPont engagement and the written contract evidencing it were hidden from both the client and his inquiring lawyer. The client's inquiring lawyer then filed a grievance, which naturally led to an investigation into the terms of the settlement. The grieving lawyer's inquiry was brushed aside with disdain. St. Louis wrote: "It is disappointing that Mr. Ossinsky would continue to insist that we have withheld some kind of 'documentation' relating to the settlement negotiations; we simply cannot furnish him with what does not exist." Once again, here we have lawyer fraud.

In the course of the ensuing ethics investigation, the contract again was withheld from the ethics investigators. At a meeting with Bar ethics investigators, St. Louis never revealed the existence of the DuPont engagement agreement, even when asked if he or Rodriguez had received money from DuPont. Later, when a judge in a separate Benlate-related case inquired about the existence of the secret DuPont retainer agreement, St. Louis told the judge, falsely, that it had been the subject of "full disclosure to [ethics investigators working on behalf of] the Florida Bar."

A defense raised by St. Louis is worth noting. He contended that agreeing to the DuPont settlement terms was excusable because it amounted to acting in his clients' best interests. Evidently, by this he meant the overall settlement was very favorable to his clients, and would not have occurred but for the secret $6.445 million side deal with DuPont. The court gave this argument short shrift: "As a matter of law, that is not a defense to rule violations."

Rodriguez and St. Louis made millions of dollars personally by taking the side-deal offered them by DuPont. But anyone thinking that ethical sanctions might be a fair trade-off for a multi-million dollar fee should study the two Florida opinions very carefully. The court ordered St. Louis to forfeit to the Florida Bar's Client Security Fund his share of the DuPont fee ($2.277 million), plus interest accrued since receipt of the DuPont money in 1996, plus $72,200 in costs. Rodriguez was ordered to pay disgorgement in a yet-to-be determined amount (around $1.4 million according to a news report), and $45,000 in costs. Rodriguez received a two-year suspension; St. Louis was disbarred. The two plaintiffs' lawyers' lives have been ruined, and deservedly so.

For lawyers Rodriguez and St. Louis, a series of horrible ethics decisions, driven by greed and hubris, transported them from the pinnacle of big-case litigation success to infamy. "O, what a tangled web we weave, When first we practise to deceive!"

Ethics rules for lawyers are less demanding than for corporations, even huge multi-national firms. DuPont and its lawyers got caught engaging in discovery fraud. To further a cover-up, they lured the lawyers who discovered its depredation into further ethical violations by insisting on improper settlement conditions and by making a secret multi-million dollar lock-out payoff. In contrast with Rodriguez and St. Louis, DuPont is doing just fine today. Its market capitalization in late May exceeded $47 billion.