File this story under “What were they thinking?” That was my first reaction when I read this disciplinary decision, Cincinnati Bar Association v. Mullaney, in which three lawyers were sanctioned for partnering up with Foreclosure Solutions, a non-lawyer company which referred the lawyers foreclosure cases (yes, that’s right – cases where folks were about to lose their homes!) for $125, then $150 a matter.
Here’s how the scam worked. Foreclosure Solutions advertises itself as a company that helps consumers fight foreclosure. Customers pay between $700 and $1100 for the company’s services, the goal of which is to stall pending foreclosure proceedings while trying to negotiate a settlement with the lender. As part of that fee, Foreclosure Solutions assigns customers an attorney to file the required defenses in court while Foreclosure Solutions personnel continue to renegotiate the loan.
Foreclosure Solutions managed to drum up a substantial amount of business by soliciting customers from foreclosure case dockets and other advertising. Trouble was, Foreclosure Solutions is not a law firm, so it could not sign the court pleadings. For that, the company teamed up with local law firms, including Brooking, Moeves and Halloran, the subject of the ethics complaint. Foreclosure Solutions paid firm lawyers a $125 flat fee (eventually bumped up to $150) to represent its customers in court.
This so-called “representation” consisted of signing and filing the form pleadings prepared by Foreclosure Solutions. The law firm did not exercise independent judgment, investigate proposed defenses (except to ask the clients, through a form letter, whether the clients were aware of a defense) and never met the clients to determine their objectives. Essentially, the firm followed the Foreclosure Solution strategy (devised by non-lawyers) without deviation. By doing little more than signing forms for its $125 fee, the firm was able to process nearly 2000 cases between 2005 and 2006, generating a quarter of a million in revenues.
Needless to say, in most cases, the canned defenses often failed and Foreclosure Solutions was unable to successfully renegotiate a loan modification for clients. As a result, grievances began mounting against the law firm (can’t grieve non-lawyers like Foreclosure Solutions, can you?), with at least 14 filed with the Cincinnati Bar.
A disciplinary action ensued with the grievance committee identifying a number of infractions arising out of the firm’s relationship with Foreclosure Solutions, including failure to disclose a fee splitting arrangement, improperly splitting fees with non-lawyers, and lack of adequate preparation. Ultimately, committee sanctioned the lawyers; with a reprimand issued to a newbie associate, a one year suspension to a seasoned practitioner and a two year ban on practice in Ohio to the firm member who was admitted pro hac vice.
For once, I agree with the bar’s sanctions – these lawyers deserved what they got. But what I can’t understand is how these lawyers didn’t stop to think that what they were doing was wrong. It shouldn’t take familiarity with the ethics code to recognize that a fee of $125 for a case where a person is on the verge of losing their home is just a tad low. Or that failing to even speak to a client before filing a case is just plain wrong.
I know times are hard and that in this economy, many lawyers feel desperate. But desperate times DO NOT demand desperate measures like selling your law license for $150 a pop. And even if doing so enables you to eat in the short run, how could you sleep at night knowing that even one homeowner lost a house on your watch which could have otherwise been saved?
For more on the dangers of dealing with non-lawyer Foreclosure Prevention services companies, see Playing With Fire from the ABA Journal, which includes words of wisdom from fellow blogger and ethics lawyer, Brian Tannenbaum.
[Update (7/22/09) Just came across a post at Exposing the Law School Scam which criticizes the bars for picking on the Foreclosure Prevention programs, saying that at least they’re hiring lawyers. I don’t take issue with the programs themselves. However, if lawyers are going to accept $125 flat fee to handle foreclosure defense cases, then they’d better be prepared to provide zealous representation. If lawyers can ably represent foreclosure defendants for $125, that’s fine. The trouble here is that the lawyers who took the cases did shoddy work and abrogated their responsibility to their clients. That’s their fault, not that of the bar].