Manufactured Conflicts Get Florida Lawyer Suspended

By Mindy Rattan

A lawyer who tried to get out of a case—without jeopardizing his contingency fee—by creating a conflict with the client was suspended for three years by the Supreme Court of Florida July 5.

The sanction, which was much more severe than the disciplinary referee recommended, demonstrated the court’s intolerance for lawyers looking to advance their own self-interest at the expense of their clients.

Byron Gregory Petersen represented Robert and Wendy Gielchinsky and their companies in numerous litigation, the court said. One case, involving an intellectual property dispute with Vibo Corporation about Bronco-brand cigarettes, settled. Gielchinsky later sued Vibo for breach of the settlement agreement, the court said.

Petersen’s fee agreement in the breach case was modified several times, the court said. The last addendum gave Petersen a percentage of any monetary and of any transfer of assets to the Gielchinskys, with his total recovery not to exceed $5 million. Petersen never told the Gielchinskys they should get another lawyer to review the fee agreement.

The Exit Strategy

Petersen could not simply withdraw from the numerous contingency fee cases he was handling for the Gielchinskys, so he created a conflict of interest with them, the court said, referring to the referee’s report. The referee said that a conflict of interest creates “good cause” to withdraw from a case, while allowing the lawyer to still collect his contingency fees.

The court said the referee found that, to create a conflict of interest, “Petersen fostered an adversarial relationship with the Gielchinskys.” He neglected cases, didn’t keep the Gielchinskys informed, and made misrepresentations to them.

The case against Vibo settled and Petersen filed a charging lien to collect his fee. A Florida trial court heard testimony about the ethics of the fee agreement and concluded Petersen was to receive 15 percent of a $7 million judgment obtained against Vibo, as well as 15 percent of the Gielchinsky’s ownership interest in Bronco cigarettes, up to $5 million, the court said.

In a case where Petersen represented a different Gielchinsky tobacco company in Florida federal court, he tried to withdraw and then collect his contingency fee, the supreme court said. The federal court rejected his attempt because it believed the testimony from Gielchinsky and Petersen’s former paralegal that Petersen took the case on a contingency basis, not on an hourly basis as he claimed, and that Petersen’s own conduct led to his withdrawal. The federal court concluded that “Petersen manufactured conflicts,” the court said.

In a case Petersen filed against a pool company, he collected a $6,500 fee, but “took little or no significant action,” resulting in the dismissal for lack of prosecution, the court said. After the case was reinstated, Petersen tried to withdraw and misrepresented to the court that opposing counsel didn’t object, when he never even informed counsel about a hearing date, the court said. And he misrepresented that the Gielchinkskys didn’t object.

The Verdict

The referee found that Petersen violated multiple ethics rules including the Rules Regulating the Florida Bar 4-1.1 (competence), 4-1.4(a) (communication with client), 4-1.5(a) (fees must be reasonable), 4-1.8(a) (restrictions on entering into a business deal with client), 4-3.3(a)(1) (false statements to court), and 4-8.4(c) (deceit, misrepresentation).

Rule 4-1.8(a) prohibits transactions with clients unless the terms are fair and reasonable and fully disclosed to the client, the client is advised to seek independent counsel, and the client gives written informed consent. The fee agreement gave Petersen a “pecuniary or possessory interest in the [Vibo] litigation that was adverse to the Gielchinskys’ interests,” the court said.

“Contingency fee agreements where a lawyer receives some percentage of the value of a non-monetary asset, like property or intellectual property rights, have a greater potential to result in a lawyer’s interests becoming adverse to those of the client,” the court said. Petersen admitted he never told the Gielchinkskys to seek independent legal advice about the fee agreement, nor did he make sure the agreement was fair.

And the court agreed that a $6,500 fee for doing little to no work is excessive under Rule 4-1.5.

The supreme court agreed with the referee on all counts and deferred to the referee’s assessment that the Gielchinskys and bar witnesses were more credible than Petersen.

The referee recommended a 91-day suspension. The court disagreed and suspended Petersen for three years. The court rejected the cases cited by the referee in favor of those that support more severe discipline.

Chief Justice Charles T. Canady, and Justices Barbara J. Pariente, R. Fred Lewis, Peggy A. Quince, Ricky Polston, Jorge Labarga, and Alan Lawson all concurred with the per curiam opinion.

The case is Fla. Bar v. Petersen , 2018 BL 238051, Fla., SC14-1942, 7/5/18 .

To contact the reporter on this story: Mindy Rattan in Washington at mrattan@bloomberglaw.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bloomberglaw.com

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

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