Florida Supreme Court suspends two lawyers for conflicts of interest under “hot potato doctrine"
Hello everyone and welcome to this Ethics Alert, which will discuss recent opinion of the Supreme Court of Florida suspending two Florida lawyers for 30 days for violating Bar Rules related to conflicts of interest under what is being called the “hot potato doctrine".
Summary of Case and Underlying MatterThe Florida Supreme Court opinion suspended the two lawyers for 30 days each for seeking payments for their clients from a scientific institute created in a class action tobacco settlement notwithstanding objections from their previous clients. The opinion found that the lawyers violated Florida Bar Rules 4-1.7 (conflict of interest - current clients), and 4-1.9 (conflict of interest - former clients) by seeking relief adverse to the clients* interests. The case involved the so called *hot potato doctrine*, which was established in a March 27, 2014 Florida Supreme Court opinion involving the same lawyers. The 2014 Supreme Court opinion quashed a Third District Court of Appeals opinion reversing a trial court order disqualifying the lawyers on the same underlying facts as the 2018 Bar case. That opinion stated: *Additionally, with this opinion, we ask The Florida Bar to investigate whether any Florida Rules of Professional Conduct were violated during the underlying proceedings or during the presentation of this case to this Court. The case is Patricia Young et al. vs. Norva Achenbauch, et al., Case No. SC12-988, and the March 27, 2014 opinion is here: http://www.floridasupremecourt.org/decisions/2014/sc12-988.pdf
In Young, the Court said that a lawyer who has a conflict of interest between two current clients cannot avoid the current-client conflict rule (4-1.7) by dropping one client *like a hot potato.* Before that opinion, it was argued that a client who a lawyer dropped because of a conflict of interest became a former client under Bar Rule 4-1.9, which is potentially less restrictive.
The underlying litigation began with a putative class-action lawsuit filed by a different lawyer on behalf of a number of flight attendants alleging damages for second hand smoke inhalation. That case settled with no compensation to class members; however, the settlement provided that $300 million would be paid to create a foundation sponsoring scientific research on cigarette smoking. The settlement also allowed individual suits for compensatory damages by class members, as long as those claims were not based on alleged fraud and misrepresentation. The lawyers were among the lawyers who took on individual suits by flight attendants.
Florida Bar MatterThe referee found in his report that the lawyers (and the other lawyers) were *wholly unsuccessful* in the individual cases, partly because class members could not prove causation. The referee also found that, after the unsuccessful lawsuit, the lawyers then turned to *Plan B*, which was to negotiate payments to class members from the foundation. Two of Gerson*s former clients sent letters to the foundation stating they objected to any plan to undercut the foundation*s activities and funding. Hunter, the other lawyer, received an objection from a foundation board member who he had previously represented in one of individual lawsuits, and who was being paid $60,000 annually to serve on the foundation board.
According to the referee*s report, Gerson believed the letters were solicited to stop the petition to approve a distribution from the foundation. Gerson and Hunter then withdrew from representing anyone who had voiced an objection, and filed a petition alleging that the institute had substantially deviated from its approved purpose and had misused settlement funds.
The institute and the objectors then filed a petition to disqualify the lawyers because of a conflict of interest and the disqualification issue was addressed in the Florida Supreme Court*s 2014 opinion, which created the so called *hot potato* doctrine. The referee found that the 2014 opinion was binding in the ethics case; however, the referee recommended only an admonishment, finding that neither lawyer had any prior disciplinary record, the case involved legal issues that were unsettled before the 2014 Supreme Court decision, and the issue of whether the petition sought relief adverse to class members was *fairly debatable.*
The Florida Supreme Court opinion approved the referee*s findings of fact and the recommendation that the lawyers be found guilty of violating Florida Bar Rule 4-1.7; however, the opinion rejected the recommendation that the lawyers be found not guilty of violating Bar Rule 4-1.9, and found both lawyers guilty of violating that rule. The opinion also disapproved the referee*s recommendation of an admonishment and suspended both lawyers for 30 days.