By Ryan C. Wood
In a recent Ninth Circuit Bankruptcy Appellate Court decision an interesting issue came up as part of the larger story. The larger story is about a debtor appealing the denial of his homestead exemption to protect equity in his home when filing for bankruptcy. It is a little juicy given the debtor is a license attorney in California, was tried and found guilty after appeal of taking his clients entire financial award in their case to the tune of hundreds of thousands of dollars. Not good. After losing in state court the attorney filed for bankruptcy protection to stop enforcement of the judgment while the judgment was appealed. The judgment amount after various legal maneuvering is now $450,000.00 plus. The short story is the debtor/attorney agreed to waive or not claim a homestead exemption under CCP 704 to make sure his former client/creditor would be paid and have a superior claim to any lien or exemption on the debtor/attorney’s home. The debtor/attorney will have to pay their former client/creditor or lose his home.
Now the more interesting part of the story.
When A Client Accuses An Attorney of Doing Things Without Their Consent
The interesting part of the appeal is the debtor/attorney accusing his attorney of agreeing to various terms and conditions in a stipulation he as the client did not agree to. What? Clients accuse their attorneys after the fact that they did not agree to what the attorney did on their behalf? Yes. This phenomenon usually appear when something does not go the client’s way. Like football, winning heals issues until…… Unfortunately, over the years I have discussed this issue with potential clients over the phone and even an actual client. Generally, as a bankruptcy attorney, I will not get involved in any case if the client accuses the attorney of doing things without their consent. I will take over a case where there are problems in the case independent of what the attorney is doing or not doing. There are of course exceptions, but why get involved in a situation where the client already had problems with their current attorney? If the case facts are solid, then the even with a difficult client, the bankruptcy case should be successful. A discharge or confirmed plan of reorganization then discharge can be obtained even when a client is not exactly cooperative.
In the Ninth Circuit Bankruptcy Appellate Panel case, the Court cited Link v. Wabash R.R. Co., 370 U.S. 626, 634 (1962) as holding clients are bound by the
What Happened In the Link Case?
In Link v. Wabash R.R. Co., 370 U.S. 626, 633-634 (1962), the attorney failed to show up at a pre-trial conference and the Court dismissed the complaint after sua sponte reviewing the record and finding other issues in the case and based upon the totality of the circumstances dismissed the case entirely. The Supreme Court of the United States as part of its holding tells us: “Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent, and is considered to have “notice of all facts, notice of which can be charged upon the attorney.” Smith v. Ayer, 101 U. S. 320, 101 U. S. 326.
So, the key part of the explanation by the Court and holding is each party is considered to have “notice of all facts, notice of which can be charged upon the attorney. Many years ago regarding motions for relief from stay and adequate protection orders, I have clients sign the adequate protection orders to ensure no client can later say I did not agree. Also, the client has to make the payments according to the adequate protection order, so they should be signing the order. Other orders do not require payment and attorneys sign stipulations and orders and entered. I also send emails to clients with documents attached for written approval via email from clients to save to their file. Again, to make sure we are all on the same page. The vast majority of the time bankruptcy attorneys and their clients have no issues and are on the same page to successfully seek relief under the Bankruptcy Code. When things do not go clients way watch out. They may turn on you and claim they did not agree to what you did. Well, the Court says you are bound by what your attorney did, so a malpractice claim is the remedy and not undoing whatever allegedly went wrong in the case. In the Link case the dismissal of the complaint pre-trial could have devasting consequences in the statute of limitations ran out while the present case was pending.
Additional Cited Cases
The Link case provides a few more case about this issue: Smith v. Ayer, 101 U.S. 320; United States ex rel. Reid v. Richmond, 295 F.2d 83, 89-90; Egan v. Teets, 251 F.2d 571, 577 n. 9; United States v. Sorrentino, 175 F.2d 721.
Smith v. Ayer was from 1879 and I did not dig into the holding.
United States ex rel. Reid v. Richmond is more interesting. This was a criminal case, and the client/alleged criminal is trying to throw their attorney under the bus. The Court provides: The trial strategy had much to commend it; that it failed does not mean that it was mistaken. In any event, the failure does not entitle Ried to a second chance. Regrettable as hindsight my prove the choice to have been, Reid must be bound by what his lawyer did and his acquiescence in that course by his owner testimony.
We are provided even more case citations: Egan v. Teets, 9 Cir. 1957, 251 F.2d 571, 577; United States ex rel. Darcy v. Handy, 3 Cir., 203 F.2d 407, 426, certiorari denied, 1953, Maroney v. United States ex rel. Darcy, 346 U.S. 865, 74 S.Ct. 103, 98 L.Ed. 375; Eury v. Huff, 4 Cir., 1944, 141 F.2d 554; see United States v. Bertone, 3 Cir., 1957, 249 F.2d 156, 160; Cruzado v. People of Puerto Rico, 1 Cir., 1954, 210 F.2d 789, 791; United States v. Sorrentino, 3 Cir., 175 F.2d 721, 723, certiorari denied, 1949, 338 U.S. 868, 70 S.Ct. 143, 94 L.Ed. 532; cf. United States v. Liss, 2 Cir. 1939, 105 F.2d 144.
What Are the Exceptions?
When can a client successfully throw their attorney under the bus and the Court actually change something?
Courts talk about gross negligence and there is a way to determine what gross negligence is, but this is just weighing the facts and the discretion of a Court. So that is scary. Courts also discuss recklessness and same story, what is recklessness and it is case by case according to a Court’s discretion.
No abandonment is a different story. When a lawyer is gone or entirely stops acting or working on the case or ignores the case, that is different. A Court should step in and not allow the negative consequences effect the clients case. Allow time for a new attorney to be hired so the client can continue with their case.
Courts discuss the deprivation of due process of the client? Again, this will be case by case and at the discretion of the Court. I can think of all kinds of examples of deprivation of due process that are ignored, especially due process for bankruptcy debtors that have nothing to do with their attorney.
Courts discuss the loss of liberty or property of a client and Courts stepping in to avoid severe consequences and some unjust forfeitures or liberty from their attorney’s extreme misconduct or egregious oversight? I am not sure what this means and it seems like a slippery slope type language. It apparently exists, but all clients when they lose believe the consequences are extreme and egregious.
Courts discuss lack of actual or apparent authority. Okay, so finally a legitimate issue for an attorney and client to have an issue. An attorney’s actions cannot bind the client if the attorney had no right to act on the client’s behalf or have the apparent authority to act on the client’s behalf. How can this happen? Possibly a not clear retention agreement and terms of representation. If a client can actually prove an attorney never provided a stipulation or settlement agreement for the client to review and authorize, then a Court should entertain a client’s argument the client never agreed and undo what was done. There could be some gray area here, so hopefully communications are by email and not only by phone. Even with emails, there can be different interpretations of what was is written. But it is in writing. Well, all of the necessary information may not be in the email writings to prove who is right or wrong when an issue arises. So more is less sometimes and the more communication there is with a client the better to ensure no client can ever accuse their attorney of doing things without their knowledge or consent.
It is just a good practice to email client’s documents in the case even if they do not really need the documents or need to review the documents. Some things are not material. It sets up an expectation and course of conduct between client and attorney. A pattern or habit of client reviewing and commenting and attorney providing clear communication throughout the case. Hopefully if things do not go so well there is clear record of what took place and attorney and client are on the same page; good or bad.