By Andrew C. Hall - Hall, Lamb and Hall, P.A.
I have been practicing law for 42 years, and while I think I have seen it all, I am still shocked when I hear of a lawyer who has embezzled or stolen a client’s money. It has become far too frequent an occurrence to discover that a colleague has engaged in misconduct that has cost a lifetime of savings and destroyed the quality of life of the lawyer’s victims.
Some years ago, I handled a case involving a client whose money was embezzled by a solo practitioner through the use of phony mortgages. During that case, a number of transactional lawyers advised me that embezzlement is so common that they will not allow their client’s funds to be held by a solo practitioner. In studying the problem more closely, I learned that the Florida Bar Rules of Professional Conduct has a mechanism in place that is intended to avoid this type of misconduct. But, we know that it still occurs. Rule 4-5.1 of the Rules of Professional Conduct is not given sufficient attention by the practicing bar. Rule 4-5.1 specifically imposes two duties on managers and supervisors of lawyers. Lawyers who, individually or together with others, possess managerial authority in a law firm must take reasonable efforts to ensure that the firm has measures in place to assure that all lawyers conform to the Rules of Professional Conduct. This part of the rule is simple. The management of a law firm must have procedures to ensure that its lawyers behave ethically. A lawyer who supervises another lawyer must make reasonable efforts to assure that the supervised lawyer conforms to the Rules of Professional Conduct. With this rule in place, how was it possible for Scott Rothstein to work behind a sealed enclave in Fort Lauderdale and hide his nefarious deeds from those other lawyers in the firm who have managerial responsibility? The answer is unfortunately too clear. Not enough time was spent on complying with this rule of professional responsibility.
The result of the failure to supervise is costly in every respect. The lawyer’s clients are devastated, both economically and emotionally. However, there is also a toll on the lawyers affiliated with the firm that employed the rogue lawyer. These unsuspecting lawyers have their careers interrupted, and in many cases, their reputations shattered. And of particular importance to the victims is the issue of financial responsibility for the failure to supervise.
There are two legal doctrines that create responsibility for the failure to supervise. The first is vicarious liability. In that circumstance the employer is automatically responsible for the tortuous acts of his employee when those acts are foreseeable and within the ordinary scope of the employee’s duties. But vicarious liability does not attach to intentional acts or of criminal misconduct. Consequently, liability for this type of conduct is usually sought based upon negligent supervision.
Negligent supervision exists where the negligence proximately causes the loss. This doctrine does not exclude intentional acts of misconduct or acts outside of the scope of the employee’s normal responsibilities. What must be proved in negligent supervision is whether the misconduct is foreseeable and the proximate cause of loss. The foreseeable element requires proof of some series of events that would cause a reasonable supervisor to be on notice of the misconduct. Proximate cause requirement, in this context, means that the supervisor could have avoided the loss.
The negligent supervision doctrine applies to the acts of the rogue lawyer guilty of embezzlement, fraud, or theft. Other lawyers that have managerial or supervisory responsibility over the law firm or the rogue lawyer are financially responsible to the victims if their supervision could have made a difference.
When we look at the typical pattern of lawyer misconduct, the first acts are small. The acts of theft usually grow larger as the rogue lawyer becomes more emboldened to commit more egregious acts. The acceleration of theft normally is a result of the rogue lawyer’s greed or by external events that lead him to become more and more desperate. While there may not be liability for the early acts, the later ones are usually discoverable if supervision would have been employed and therefore give rise to liability.
So how is it that whenever a scandal is disclosed, the other lawyers that are part of the association immediately assert, much like Sgt. Schultz in Hogan’s Heroes, “I know nothing, I know nothing?” Because the same lawyers do not realize that their “know nothing” attitude is an admission that they have failed to meet their responsibilities of supervision and by that failure, they have exposed themselves to personal financial responsibility for their rogue colleague. Wouldn’t it be better if we heard: “I did everything I could and I caught it and stopped it from continuing?”
By Andrew C. Hall
Hall, Lamb and Hall, P.A.
2665 S. Bayshore Drive, PH 1
Miami, FL 33133
305-374-5030
www@hlhlawfirm.com
South Florida Legal Guide Midyear 2010