SUPREME COURT OF ARIZONA
En Banc
In the Matter of a Member of the ) Arizona Supreme Court
State Bar of Arizona, ) No. SB-10-0036-D
)
JEFFREY PHILLIPS, ) Disciplinary Commission
Attorney No. 13362 ) Nos. 05-1161, 05-1888
) 06-1137, 06-1138
) 06-1212, 06-1582
) 07-0085, 07-0176
) 07-0177, 07-0178
) 07-0231, 07-0232
) 07-0239, 07-0275
) 07-0278, 07-0289
) 07-0412, 07-0512
) 07-0569, 07-0628
) 07-0639, 07-0697
) 07-0887, 07-0889
) 07-0890, 07-0891
) 07-0892, 07-0894
) 07-0895, 07-1326
) 07-1342, 07-1461
) 07-1561, 07-1601
) 07-1885, 08-0397
Respondent. )
)
) O P I N I O N
__________________________________)
Disciplinary Action from the Disciplinary Commission
SUSPENSION AND PROBATION ORDERED
________________________________________________________________
OSBORN MALEDON PA Phoenix
By Mark I. Harrison
Sara S. Greene
Mark Hummels
Attorneys for Jeffrey L. Phillips
STATE BAR OF ARIZONA Phoenix
By Steve Little
Attorneys for State Bar of Arizona
________________________________________________________________
P E L A N D E R, Justice
¶1 We granted review in this attorney disciplinary case
to determine whether the Hearing Officer erroneously used a
vicarious liability standard in finding that Petitioner Jeffrey
Phillips violated Arizona Rules of Professional Conduct (“ERs”)
5.1(a) and 5.3(a), and whether the recommended suspension of six
months and one day was appropriate. Although we accept the
Hearing Officer’s determination that Phillips violated ERs
5.1(a) and 5.3(a), we reduce the suspension to six months.
I. Facts and Procedural Background
¶2 Phillips is the founder and managing attorney of
Phillips & Associates (“P&A”), a large law firm based in
Phoenix. A self-styled “consumer law firm,” P&A handles a high
volume of cases, having represented approximately 33,000 clients
between 2004 and 2006. At the time of the disciplinary
proceedings, P&A employed 250 people, including thirty-eight
lawyers. The firm’s practice was limited to criminal defense,
bankruptcy, and personal injury.
¶3 Phillips no longer represents clients, but instead
supervises and manages the firm. His duties include setting
firm policy on billing, accounting, and intake procedures.
Although Phillips has general control over the firm, during the
relevant period he had delegated primary responsibility for the
2
criminal division to Robert Arentz, and for the bankruptcy
division to Robert Teague.
¶4 In 2002, Phillips was the subject of disciplinary
proceedings resulting in his conditionally admitting to
violations of ERs 5.1, 5.3, and 7.1, and agreeing to a censure
and two years’ probation. The judgment and order entered in
2002 included detailed probationary terms relating to the
management of P&A. Those terms required specific changes to
P&A’s intake procedures, accounting procedures, and ethics
training. Among other things, the 2002 order required the
following:
Prior to entering into a written attorney/client
agreement for the firm, an Arizona licensed attorney
must speak with the client and approve the legal fees
to be charged and retention of the Firm [sic] by the
client.
. . .
Bonuses paid to intake personnel cannot be based
exclusively on either the number of clients who retain
the firm or on the amount of fees received from those
clients. The criteria for determining bonuses must be
provided to the intake personnel in writing.
. . .
All attorneys and other billable staff members who
work on criminal cases shall keep contemporaneous time
records to enable the firm to conduct a “backward
glance” at the conclusion of a case in order to
determine whether a refund is due.
. . .
3
The firm shall provide a written accounting of time
spent and fees incurred within 15 days of a request by
a client. When a client terminates the firm’s
representation in a criminal case and the firm has
been permitted to withdraw by the court, the firm
shall, within fifteen (15) days following receipt of
the Order permitting withdrawal, provide to the client
a written accounting of the time spent, fees incurred,
and when appropriate, a refund of unearned fees.
Phillips successfully completed his probation in 2004.
¶5 Between August 2006 and May 2008, the Bar issued a
series of probable cause orders against Phillips and Arentz.
The Bar filed a formal complaint against them in October 2007
and, after several amendments, ultimately charged twenty-two
counts, alleging violations of ERs 1.1, 1.2, 1.3, 1.4, 5.1, 5.3,
7.1, and 8.4.
¶6 A hearing was held over eleven days in 2008. The
Hearing Officer heard testimony from many witnesses, including
former P&A clients, current and former P&A attorneys, and
experts for both Phillips and the Bar.
¶7 In detailed findings of fact, conclusions of law, and
recommendations, the Hearing Officer found that Phillips had
violated ERs 5.1(a), 5.3(a) and 7.1, and Arentz had violated ERs
5.1(a) and (b), 5.3(a) and (b), and 1.5(a). Phillips had a
total of twelve ethical violations and Arentz had nineteen. The
Hearing Officer found that all the clients involved in the
matters giving rise to the allegations were unsophisticated. He
recommended that Arentz be suspended for sixty days, and that
4
Phillips be suspended for six months and one day. The Hearing
Officer also recommended that Phillips and Arentz be placed on
two years’ probation upon reinstatement.
¶8 The Hearing Officer’s findings regarding Phillips’s
ethical violations can be generally categorized as follows:
A. Caseloads of Bankruptcy Attorneys
¶9 The Hearing Officer found that Phillips violated ER
5.1(a) as alleged in Counts 3 and 4, which related to the
caseloads of P&A’s bankruptcy attorneys, each of whom carried as
many as 500 cases at a time. A former P&A attorney testified
that, upon joining the firm, she was immediately responsible for
540 cases. Counts 3 and 4 involved circumstances in which
clients’ needs were not met because of the high volume of cases
assigned to bankruptcy attorneys. In both counts, the Hearing
Officer also found that, because of the number of attorneys
handling a given case, inadequate attention was paid to the
problems presented in the case and the client was confused and
not adequately informed.
¶10 Count 3 specifically involved a breakdown in
communication between the attorney and the client, missed
hearings by the attorney, and a failure to keep the client
reasonably informed. Count 4 involved P&A’s practice of having
one attorney handle all of the firm’s “341 meetings,” which are
short, informal meetings that debtors are required to attend
5
after filing a bankruptcy petition under Chapter 7 or Chapter 13
of the federal Bankruptcy Code. The P&A attorney handled forty
files per day and at times would have six to seven 341 meetings
within thirty minutes. Count 4 included a client’s complaint
that a P&A attorney had missed a 341 meeting and failed to act
with reasonable diligence. The Hearing Officer concluded that
Phillips violated ER 5.1(a) in both counts for establishing and
maintaining a business model in which such ethical violations
were likely to occur.
B. Intake and Retention Procedures
¶11 Another category of violations related to P&A’s intake
and retention procedures. Prospective clients who visit the
firm’s offices do not immediately meet with an attorney.
Instead, they are provided a blank fee agreement and a general
questionnaire. After completing the questionnaire, the
prospective client meets with a P&A legal administrator, a
nonlawyer tasked with retaining clients. Legal administrators
are paid a base salary and monthly bonuses, based in part on the
number of cases that the legal administrator retains. After
obtaining general information from the client, the legal
administrator meets with a lawyer who sets the fee. After the
fee agreement is prepared, the client speaks with a lawyer to
make sure the client understands the fee agreement, who the
lawyer will be, and the scope of P&A’s representation. The
6
Hearing Officer found that this process, known as “closing,” was
often not completed by an attorney knowledgeable in the relevant
practice area.
¶12 On Counts 9, 12, and 17, the Hearing Officer found
P&A’s retention policies, as implemented, impeded potential
clients from obtaining the information needed to make informed
decisions about retention. With respect to Counts 9 and 12, the
Hearing Officer found that a P&A legal administrator gave a
client’s family member unreasonable expectations about the
representation, suggesting that the firm would be able to reduce
the client’s sentence in criminal proceedings.
¶13 In Count 9, the client’s father was told that the firm
should be able to reduce his son’s sentence. An attorney signed
a fee agreement describing the scope of the services as
“mitigation of sentencing.” The client, however, had already
entered into a plea agreement with a stipulated sentence, and no
one at P&A advised the client or his father of the unlikelihood
of mitigating the sentence. Despite the client’s expectations,
the client’s sentence was not reduced.
¶14 In Count 12, a client’s mother signed a fee agreement
after being told by a legal representative that the firm should
be able to help reduce her son’s sentence. As the firm was
aware, however, the client had already stipulated to a
particular sentence. The client’s mother met with a bankruptcy
7
attorney, who did not know what a stipulated plea agreement was.
A criminal attorney did not meet with her until the day of
sentencing, when she was informed that her son would receive the
sentence stipulated in the plea agreement.
¶15 The Hearing Officer found that Phillips and Arentz
violated ERs 5.1(a) and 5.3(a) in both counts because the firm’s
retention practices did not require a knowledgeable attorney to
speak with the potential client before entering into a fee
agreement, and the firm used nonlawyers in its retention
process. Similarly, in Count 17, a client with a suspended
driver’s license met only with a bankruptcy attorney and a legal
administrator before hiring P&A to represent him. The client
wanted to have his license reinstated but also had an
unadjudicated DUI charge. The scope of services set forth in
the fee agreement did not match the client’s expectations. The
firm did not follow the client’s decisions regarding the scope
of the representation, and the firm waited weeks before telling
the client his driver’s license could not be reinstated until
the DUI charge was resolved. The firm also failed to inform the
client prior to retention that the firm could not accomplish his
goals. The Hearing Officer found that both Phillips and Arentz
violated ER 5.1(a).
C. Conduct by Legal Administrators
¶16 The Hearing Officer also found violations of ER 5.3
8
arising from P&A’s providing legal administrators with bonuses
based, in part, on the number of clients retained. Count 8
involved a legal administrator who used “high pressure tactics”
to attempt to dissuade a client from terminating P&A’s
representation. Count 19 involved a client who retained the
firm for defense of a DUI charge and, as the firm was aware, was
also in the process of becoming a United States citizen. When
the client asked to terminate P&A’s representation after meeting
with a legal administrator and a bankruptcy attorney, the client
was subjected to intimidation and false statements from a P&A
employee. At one point, the employee warned the client that he
was “looking to lose his citizenship,” and the employee
insinuated that if the client stopped payment on the retainer
check, the firm could have the police investigate his
immigration status. After making several unsuccessful attempts
to obtain documents he had furnished to P&A, the client was only
able to recover the papers after hiring new counsel.
¶17 Although the P&A employees’ tactics violated P&A’s
policies, the Hearing Officer concluded that Phillips and Arentz
violated ER 5.3(a) in both counts because legal administrators’
bonuses were tied, in part, to client retention. These
incentives provided “the motive for the misconduct.” The words
in the firm’s policy manual prohibiting such conduct were
insufficient to insulate managers and supervisors from ethical
9
responsibility when the actual ongoing practices were to the
contrary.
D. Refund Policy
¶18 In Count 11, the Hearing Officer found that P&A
employees failed to act promptly on a client’s termination
request. The firm took more than five months to refund money to
the client despite repeated requests for a refund. The Hearing
Officer found that both Arentz and Phillips violated ERs 5.1(a)
and 5.3(a) for failing to have practices in place to prevent
difficulty in obtaining a refund.1
E. Disciplinary Commission Decision
¶19 On review, pursuant to Rule 58, Arizona Rules of the
Supreme Court, the Disciplinary Commission considered the
parties’ objections to the Hearing Officer’s decision and held
oral argument. In December 2009, by a vote of 6-2, the
Commission adopted the Hearing Officer’s findings of fact,
conclusions of law, and recommendations. The two dissenting
Commission members found no basis for disturbing the Hearing
Officer’s factual findings but concluded that “the recommended
1
The Hearing Officer also found (in Count 20) that Phillips
negligently violated ER 7.1 by writing and using a materially
misleading television advertisement in 2007 regarding P&A’s DUI
defense services and a new DUI law. But the Hearing Officer
found that violation did not “warrant significant discipline”
because it was neither knowing nor actually injurious; rather,
his recommended sanction was based solely on Phillips’s knowing
violations of ERs 5.1(a) and 5.3(a).
10
discipline is too severe” and that lesser sanctions were
appropriate – suspensions of thirty days for Arentz and ninety
days for Phillips.
¶20 Phillips and Arentz jointly petitioned for review.
This Court granted review on only two discrete issues Phillips
raised: whether the Hearing Officer erroneously applied a
vicarious liability standard in finding ethical violations by
Phillips, and whether the recommended sanction for him is
appropriate. We denied review of any issues raised by Arentz,
thereby leaving undisturbed his sixty-day suspension. The Bar
did not file a cross-petition for review to challenge the
recommended sanction for Arentz. We therefore limit our
discussion to the two issues regarding Phillips on which review
was granted.
II. Managerial and Supervisory Liability
¶21 Phillips first argues that the Hearing Officer used an
improper standard of vicarious liability in finding violations
of ERs 5.1(a) and 5.3(a) because his analysis was based solely
on the ethical breaches of other firm employees. We disagree.
¶22 Ethical Rule 5.1(a) provides that a partner or an
attorney with comparable managerial authority “shall make
reasonable efforts to ensure that the firm has in effect
measures giving reasonable assurance that all lawyers in the
firm conform to the Rules of Professional Conduct.” Similarly,
11
ER 5.3(a) provides that a partner or a lawyer with comparable
managerial authority must make “reasonable efforts to ensure
that the firm has in effect measures giving reasonable
assurances that” nonlawyers employed by the firm or associated
with the lawyer comply with the professional obligations of the
lawyer.
¶23 These duties require not only supervision, but also
that the supervising attorney establish “internal policies and
procedures” providing reasonable assurances that lawyers and
nonlawyers in the firm conform to the Rules of Professional
Conduct. ERs 5.1 cmt. 2; 5.3 cmt. 2. The size of the firm is
relevant in determining what is “reasonable,” and in a large
firm such as P&A, “more elaborate measures may be necessary.”
ER 5.1 cmt. 3.
¶24 The rules imposing managerial and supervisory
obligations, however, do not provide for vicarious liability for
a subordinate’s acts; rather, they “mandate an independent duty
of supervision.” In re Galbasini, 163 Ariz. 120, 124, 786 P.2d
971, 975 (1990). Nor is a supervising attorney of a nonlawyer
assistant “required to guarantee that that assistant will never
engage in conduct that is not compatible with the professional
obligations of the lawyer.” In re Miller, 178 Ariz. 257, 259,
872 P.2d 661, 663 (1994).
¶25 The Hearing Officer expressly recognized these legal
12
principles in his decision and did not apply an incorrect
vicarious liability standard when finding that Phillips violated
ERs 5.1(a) and 5.3(a). Although he found on many of the counts
that P&A attorneys’ and staff members’ conduct violated various
ethical rules, the supervisory and managerial breaches for which
Phillips was found liable under ER 5.1 or 5.3 were independent.
For each violation of ER 5.1 or 5.3, the Hearing Officer found
that Phillips had personally failed to engage in the required
supervision of either lawyers or nonlawyer personnel. Indeed,
on a number of counts (for example, Counts 5 and 6), the Hearing
Officer found that someone at P&A had violated an ethical rule,
but that Phillips had not personally violated the rules
requiring supervision. Had the Hearing Officer or the
Commission applied a vicarious liability standard, Phillips
would have been held liable for those violations as well.
¶26 In contesting the findings that he violated ERs 5.1(a)
and 5.3(a), Phillips refers to the “mountain of undisputed
evidence” adduced at the hearing of P&A’s supervisory efforts
and the “relatively rare” occurrence of ethical breaches by
other P&A employees. But the prior modification of firm
policies, made pursuant to the 2002 judgment and order, did not
alleviate Phillips’s ongoing duty to ensure that his
subordinates complied with the revised policies and ethical
rules. Because the Hearing Officer clearly understood and
13
correctly applied the law by carefully not conflating vicarious
liability with managerial and supervisory liability, we find no
error in his determination, adopted by the Disciplinary
Commission, that Phillips violated ERs 5.1(a) and 5.3(a).
III. Sanction
¶27 We next address Phillips’s argument that the
recommended six-months and one-day suspension was
disproportionate and excessive. We review recommended sanctions
de novo. In re White-Steiner, 219 Ariz. 323, 327 ¶ 25, 198 P.3d
1195, 1199 (2009). Although we independently review a
recommended sanction, we give “serious consideration to the
findings and recommendations” of the Commission. In re Pappas,
159 Ariz. 516, 518, 768 P.2d 1161, 1163 (1988) (citing In re
Neville, 147 Ariz. 106, 108, 708 P.2d 1297, 1299 (1985)).
¶28 “Attorney discipline serves to protect the public, the
legal profession, and the legal system, and to deter other
attorneys from engaging in unprofessional conduct.” In re
White-Steiner, 219 Ariz. at 325 ¶ 9, 198 P.3d at 1197 (citing In
re Scholl, 200 Ariz. 222, 227 ¶ 29, 25 P.3d 710, 715 (2001)).
Another purpose is to instill public confidence in the Bar’s
integrity. In re Horwitz, 180 Ariz. 20, 29, 881 P.2d 352, 361
(1994) (citing In re Loftus, 171 Ariz. 672, 675, 832 P.2d 689,
692 (1992)).
¶29 In determining sanctions, we are guided by the
14
American Bar Association’s Standards for Imposing Lawyer
Sanctions (2005). In re Van Dox, 214 Ariz. 300, 303 ¶ 11, 152
P.3d 1183, 1186 (2007). Several factors are relevant in
determining the appropriate sanction: (1) the duty violated,
(2) the lawyer’s mental state, (3) the potential or actual
injury caused by the lawyer’s conduct, and (4) the existence of
aggravating or mitigating factors. Id. (citing ABA Standard
3.0). We may also consider any similar cases to assess what
sanctions are proportionate to the unethical conduct. Id. at
307 ¶ 39, 152 P.3d at 1190.
A. Duty Violated
¶30 ABA Standard 7.0 provides sanctions for violations of
duties owed as a professional. The Hearing Officer and the
Commission concluded that ABA Standard 7.0 governed this case
because the violations of ERs 5.1 and 5.3 involved duties owed
to the legal profession. Although these violations also
implicate duties owed to the client, ABA Standard 7.0 will guide
our analysis because we find no error on this point and because
Phillips does not challenge the applicability of that standard.
See In re Lenaburg, 177 Ariz. 20, 23, 864 P.2d 1052, 1055 (1993)
(applying ABA Standard 7.0 to supervisory violations); In re
Rice, 173 Ariz. 376, 377, 843 P.2d 1268, 1269 (1992) (same).
B. Mental State
¶31 A lawyer’s mental state affects the appropriate
15
sanction for ethical violations. Intentional or knowing conduct
is sanctioned more severely than negligent conduct because it
threatens more harm. In re White-Steiner, 219 Ariz. at 325
¶ 13, 198 P.3d at 1197.
¶32 ABA Standard 7.0 provides the following guidelines
with regard to sanctions:
7.1 Disbarment is generally appropriate when a lawyer
knowingly engages in conduct that is a violation of a
duty owed as a professional with the intent to obtain
a benefit for the lawyer or another, and causes
serious or potentially serious injury to a client, the
public, or the legal system.
7.2 Suspension is generally appropriate when a lawyer
knowingly engages in conduct that is a violation of a
duty owed as a professional and causes injury or
potential injury to a client, the public, or the legal
system.
7.3 Reprimand is generally appropriate when a lawyer
negligently engages in conduct that is a violation of
a duty owed as a professional and causes injury or
potential injury to a client, the public, or the legal
system.
¶33 The Hearing Officer expressly found that both
Phillips’s and Arentz’s violations of ERs 5.1 and 5.3 were
“knowing.” Although Phillips challenged that finding in his
petition for review, we did not grant review of that issue and,
therefore, accept as established that Phillips knowingly
violated ERs 5.1(a) and 5.3(a).
C. Actual or Potential Injury
¶34 The Hearing Officer found actual injury in each of the
16
client-related counts. P&A clients were misled and improperly
advised by unqualified lawyers, had difficulty obtaining
refunds, and were misinformed about the reasonable objectives of
the representation. Clients were also financially harmed,
having paid unreasonable fees or retainers without a full
understanding of the likely results of the representation. The
record supports these findings.
D. Aggravating and Mitigating Factors
¶35 Because Phillips’s knowing conduct caused actual
injury to clients, we agree with the Hearing Officer that the
presumptive sanction in this case is suspension. See ABA
Standard 7.2. The Hearing Officer and the Commission found the
following aggravating and mitigating factors apply to Phillips:
Aggravating Factors
(1) Prior disciplinary offense
(2) Selfish motive
(3) Multiple offenses
(4) Refusal to acknowledge wrongful nature of conduct
(5) Vulnerability of victim
(6) Substantial experience in the practice of law
Mitigating Factors
(1) Full and free disclosure to the Bar
(2) Delay in disciplinary proceedings
(3) Willingness to remedy practice
(4) Character
¶36 We find none of these findings clearly erroneous. And
we agree with the Hearing Officer that the aggravating and
mitigating factors, in conjunction with Phillips’s knowing
misconduct, further support suspension as an appropriate
17
sanction. See In re Galbasini, 163 Ariz. at 121, 125-26, 786
P.2d at 972, 976-77 (adopting recommended six-month suspension
of attorney for knowingly failing to supervise nonlawyer
employees who engaged in debt collection and improperly
solicited clients in attorney’s name); Davis & Goldberg v. Ala.
State Bar, 676 So. 2d 306, 307-08 (Ala. 1996) (upholding two-
month suspension of two partners for implementing policies
designed to minimize expenses and maximize profits, to clients’
detriment, when firm’s practices resulted in unmanageable
caseloads and permitted nonlawyers to perform legal services);
Att’y Grievance Comm’n of Md. v. Kimmel, 955 A.2d 269, 292-94
(Md. 2008) (holding that violations of ethical rules requiring
adequate supervision warranted a ninety-day suspension when
attorneys had no prior disciplinary record).
E. Proportionality Review
¶37 We may consider the sanctions imposed in similar cases
“‘to preserve some degree of proportionality, ensure that the
sanction fits the offense, and avoid discipline by whim or
caprice.’” In re Dean, 212 Ariz. 221, 225 ¶ 24, 129 P.3d 943,
947 (2006) (quoting In re Struthers, 179 Ariz. 216, 226, 877
P.2d 789, 799 (1994)). The Hearing Officer cited two cases for
comparison purposes, but they are distinguishable and not very
18
helpful.2 Nor have the parties cited any authorities that bear
on whether the recommended length of suspension is appropriate
here. Although we have sometimes engaged in comparative
analysis, see In re Van Dox, 214 Ariz. at 307-08 ¶¶ 39-42, 152
P.3d at 1190-91, we agree with the Hearing Officer that this
case, involving a “consumer law firm” and a high volume
practice, is difficult to compare with others. In any event,
“[p]roportionality review . . . is ‘an imperfect process’” that,
as here, often provides little guidance. In re Dean, 212 Ariz.
at 225 ¶ 24, 129 P.3d at 947 (quoting In re Owens, 182 Ariz.
121, 127, 893 P.2d 1284, 1290 (1995)).
¶38 In assessing the duration of Phillips’s suspension,
however, we must also consider internal proportionality, in
particular the length of his suspension in relation to Arentz’s.
We considered internal proportionality in In re Dean, 212 Ariz.
at 225 ¶ 25, 129 P.3d at 947. That case involved a romantic
relationship between a prosecutor and a superior court judge.
Id. at 221 ¶ 2, 129 P.3d at 943. We reduced from one year to
2
See In re Lenaburg, 177 Ariz. at 24, 864 P.2d at 1156 (imposing
public censure with probation on attorney who negligently
violated ER 5.1, causing lack of communication with clients and
failure to refund fees in four separate cases); In re Rice, 173
Ariz. at 377, 843 P.2d at 1269 (imposing censure and probation
on attorney with no prior disciplinary record who negligently
failed to adequately supervise staff during firm’s rapid
expansion, resulting in sloppy office procedures and
mismanagement).
19
six months the Commission’s recommended suspension for the
prosecutor in part because the judge had not been disciplined.
Id. at 225 ¶ 25, 129 P.3d at 947. The prosecutor’s ethical
violations involved the same conduct as the judge’s, and we
concluded that a reduced sanction for the prosecutor was
warranted to avoid a disparity in treatment. Id. Without
minimizing the seriousness of the attorney’s misconduct, we
determined that “the interests of justice” required
reconsideration of an otherwise suitable sanction. Id.
Although the judge’s immunity from lawyer discipline in that
case had resulted inadvertently from this Court’s prior action,
see id., the rationale employed there also applies here.
¶39 In this case, the Hearing Officer found, and the
Commission affirmed, that Arentz had a total of nineteen ethical
violations (eighteen of which were found to be knowing),
compared to Phillips’s twelve violations (eleven of which were
found to be knowing). The Hearing Officer consistently found
that Arentz, but not Phillips, violated subsection (b) of ERs
5.1 and 5.3 based on Arentz’s having had direct supervisory
authority of P&A’s criminal department.3 Arentz was also
3
Ethical Rule 5.1(b) requires that a lawyer having direct
supervisory authority over another lawyer make “reasonable
efforts to ensure that the other lawyer conforms to the Rules of
Professional Conduct.” Similarly, ER 5.3(b) requires that a
lawyer having direct supervisory authority over a nonlawyer make
20
directly involved in approving excessive fees, as alleged in
Counts 8, 9, and 12, in violation of ER 1.5. In contrast, as
the dissenting Commission members noted, the Hearing Officer did
not find that Phillips had direct personal knowledge of any of
the specific conduct giving rise to the allegations of ER 5.1 or
5.3 violations until after the conduct occurred. Yet Arentz
received a suspension of only sixty days compared to Phillips’s
six-month and one-day suspension. Neither the Hearing Officer
nor the Commission addressed or explained this disparity.
¶40 Moreover, a six-month and one-day suspension is not
actually completed in that time period. Under Rule 65(a),
Arizona Rules of the Supreme Court, any suspension exceeding six
months requires the lawyer to go through formal reinstatement
proceedings. That process extends the effective length of a
suspension considerably. An applicant for formal reinstatement
must provide an array of personal and financial information and
prove by clear and convincing evidence his or her
rehabilitation, compliance with all disciplinary orders and
rules, fitness to practice, and competence. See Ariz. R. Sup.
Ct. 65(a)-(b).
F. Appropriate Sanction
¶41 Although Arentz had more violations than Phillips and
“reasonable efforts to ensure that the person’s conduct is
compatible with the professional obligations of the lawyer.”
21
was more directly involved in the underlying ethical violations
of P&A employees in his department, we conclude Phillips’s
conduct and disciplinary history warrant a more severe sanction
for him than Arentz received. Unlike Phillips, Arentz has no
prior disciplinary record. We take Phillips’s prior
disciplinary record seriously, considering it involved the same
type of supervisory shortcomings at issue here. The goal of
attorney discipline is to protect the public. In re Rivkind,
164 Ariz. 154, 157, 791 P.2d 1037, 1040 (1990). Neither the
Hearing Officer nor the Commission erred in determining that the
2002 discipline did not adequately rehabilitate Phillips and was
insufficient to protect P&A clients.
¶42 We also recognize that Phillips, as managing partner
of a law firm representing more than 10,000 clients per year,
was in a position of greater supervisory authority than Arentz.
Phillips, not Arentz, had full power and control over P&A’s
policies and practices. As such, he was better able to effect
positive change and insist on full compliance with ethics
standards. Conversely, Phillips’s lapses in these areas might
potentially cause greater harm. Phillips’s apparent delegation
of responsibility and hands-off approach does not make his
policies any less of a danger. Indeed, the decisions he makes
directly affect the public, the profession, and the integrity of
the legal system.
22
¶43 Although attorney partners and supervisors are not
guarantors of their employees’ conduct, they must take
reasonable steps to ensure that firm practices, not merely
policies, actually comply with ethical rules binding all lawyers
practicing law in this state. Phillips’s failure to do so,
particularly in view of his disciplinary history, warrants a
significant period of suspension followed by a lengthy probation
term with strict conditions.
¶44 A longer suspension for Phillips is therefore
justified. But we do not believe that a sanction at least six
times harsher than Arentz’s is proportional in this case.4
Rather, as the two dissenting Commission members observed when
recommending a ninety-day suspension for Phillips, a lesser
sanction against him would appropriately address the violations
4
Rule 64(e)(1), Arizona Rules of the Supreme Court, permits a
lawyer who has been suspended for more than six months to apply
for reinstatement no sooner than ninety days prior to the
expiration of the suspension. Rule 65(b)(1), as amended this
year and effective to reinstatement proceedings commencing after
January 1, 2011, provides that a Bar hearing panel will hold a
hearing within 150 days of the filing of the application.
Within thirty days after completing the hearing, the hearing
panel must file a report with this Court containing findings of
facts and recommendations concerning the reinstatement. Ariz.
R. Sup. Ct. 65(b)(3). The Court must “promptly” review the
report and decide whether the applicant is qualified for
reinstatement, a process that typically takes about two months.
Id. at 65(b)(4). Thus, the reinstatement process for Phillips
would, at the very least, last five to six months after his
suspension is complete, effectively extending his suspension to
a total of twelve months, six times longer than Arentz’s
suspension.
23
found here while deterring future misconduct and thereby
protecting the public. We therefore reduce Phillips’s
suspension to six months. In doing so, we do not minimize the
seriousness of Phillips’s misconduct. But we believe a six-
month suspension avoids an unjust disparity in treatment between
him and Arentz.
¶45 The Hearing Officer and the Commission recommended
that Phillips’s two-year probation term and conditions of
probation begin and take effect after Phillips’s suspension is
fully served. We accept that recommendation. Although Phillips
is prohibited from practicing law or holding himself out as an
active attorney during his suspension, he is permitted and
strongly encouraged during that time to work with the Bar to
immediately address the issues and rectify the problems that led
to the violations of ERs 5.1 and 5.3 in this case. Otherwise,
P&A would be left with many of its current problems and no
immediate solution during Phillips’s period of suspension.
¶46 During the suspension, however, Phillips’s name may
not be used in firm advertisements, letterhead, or other
communications.5 Nor is Phillips entitled to receive any income
5
See ERs 5.5(b)(2); 7.1; 7.5(a) and (d); see also State Bar of
Ariz. Comm. on Rules of Prof’l Conduct, Formal Op. 02-07 (2002)
(concluding that a law firm should not continue to use
attorney’s name in the firm name, letterhead, business cards, or
stationary while the attorney is on disability inactive status,
and noting that “a suspended partner’s name must be dropped in
24
generated by the firm during his suspension.6
¶47 In addition to reducing Phillips’s suspension to six
months, we remove from the Commission’s recommended terms of
probation term number 13, which would have permitted the Bar to
send at random times unidentified “testers” to P&A to check the
firm’s compliance with required intake procedures. The Bar did
not request that particular term and, at oral argument in this
Court, acknowledged that it was not warranted. We adopt the
Commission’s probation terms in all other respects, as set forth
in the appendix, as well as the restitution amounts it ordered.
IV. Conclusion
¶48 For the foregoing reasons, we modify the recommended
length of Phillips’s suspension, but otherwise accept the
Commission’s recommendations. The probation terms and
all communications with the public”); Wash. State Bar Ass’n,
Formal Op. 196 (2000) (prohibiting use of suspended lawyer’s
name in firm name or business communications).
6
See ER 5.4(a) (“A lawyer or law firm shall not share legal fees
with a nonlawyer.”); Disciplinary Counsel v. McCord, 905 N.E.2d
1182, 1189 (Ohio 2009) (concluding that lawyer’s receipt of
attorney fees while suspended from practice of law was improper
and actionable as ethics violation); Office of Disciplinary
Counsel v. Jackson, 637 A.2d 615, 620 (Pa. 1994) (noting a
suspended attorney is a “‘non-lawyer’ within the meaning of the
rules”); Comm. on Prof’l Ethics, State Bar of Tex., Op. 592
(2010) (prohibiting a lawyer from sharing legal fees with
suspended attorney); cf. West v. Jayne, 484 N.W.2d 186, 190-91
(Iowa 1992) (allowing lawyer in breach of contract action
against fellow associate to collect portion of fee, but
suggesting that attorney would not be entitled to fees for any
work done after he was suspended from practice of law).
25
conditions prescribed by the Commission as set forth in the
appendix to this opinion shall apply.
_____________________________________
A. John Pelander, Justice
CONCURRING:
_____________________________________
Rebecca White Berch, Chief Justice
_____________________________________
Andrew D. Hurwitz, Vice Chief Justice
_____________________________________
Jon W. Thompson, Judge∗
W E I S B E R G, Judge, concurring in part and dissenting in
part
¶49 As the majority explains, the impact of a suspension
of six months and one day is a great deal more than the impact
of a suspension of only six months. Here, however, even
allowing for the subjectivity that creeps into the “imperfect
process” when considering proportionality, I must respectfully
dissent from the majority’s decision to reduce Phillips’s
suspension from the six months and one day recommended by the
∗
Pursuant to Article 6, Section 3 of the Arizona Constitution,
the Honorable Jon W. Thompson, Judge of the Arizona Court of
Appeals, Division One, was designated to sit on this matter.
26
Hearing Officer. I do so because, unlike the majority, I
conclude that a six-month and one day suspension is internally
proportionate to the two-months suspension meted out to Arentz.
¶50 The majority’s conclusion is understandably not based
on a general proportionality review. Not only is that approach
no longer favored, but it is of little benefit here because
Phillips’s firm is a fairly unique “consumer” law firm with
accordingly tailored practices. The disciplinary cases
referenced by the parties are just not comparable enough to be
helpful.
¶51 In this case, it is enough that Phillips’s violations
are the sort for which the relevant ABA Standard mandates a
suspension. Specifically, ABA Standard 7.2 provides that
“[s]uspension is generally appropriate when a lawyer knowingly
engages in conduct that is a violation of a duty owed as a
professional, and causes injury or potential injury to a client,
the public, or the legal system.” Phillips’s conduct clearly
falls within that described by the ABA Standard. I therefore
consider next whether Phillips’s recommended suspension of six
months and one day would be proportionate to Arentz’s two
months. I conclude it would.
¶52 To begin, Phillips is not being sanctioned for his
second ethics violation. He is being sanctioned for his ethics
violations eighteen through twenty-nine. I am not aware of any
27
other attorney in Arizona who has committed twenty-nine
violations and received only a six-month suspension for his
twenty-ninth. While Arentz was arguably punished too lightly
for having committed nineteen violations, and Phillips’s latest
violations number twelve, Phillips had committed seventeen
earlier violations. This comparison alone supports the
recommended six months and one day suspension.7
¶53 Second, Arentz’s sanction consisting of a two-month
suspension and two years of probation represents his first such
sanction. It is to be hoped and presumed that this sanction
will be sufficient to prevent further violations by him.
Phillips, on the other hand, was punished for his earlier
violations and completed that probationary period.
Unfortunately, he has reoffended multiple times. Thus, a
greater penalty that includes a six-month and one day suspension
is both warranted and proportionate.
¶54 Finally, Arentz committed his ethical violations while
working in a system that was developed, implemented, and
supervised by Phillips. It was Phillips’s decision as to what
P&A resources would be devoted to meet its attorneys’ ethical
responsibilities to their clients. He clearly did not attach
7
I also note that these most recent twelve violations of
Phillips involved separate complaints by nine of P&A’s clients,
while Arentz’s complaints involved only six clients.
28
sufficient importance to those ethical responsibilities. As the
attorney in sole charge of P&A, his fault was therefore far
greater than that of Arentz.
¶55 For the foregoing reasons, and although I concur with
all else in the majority’s opinion, I must respectfully disagree
with its decision to reduce the period of Phillips’s suspension.
_______________________________
SHELDON H. WEISBERG, Judge∗
∗
Pursuant to Article 6, Section 3 of the Arizona Constitution,
the Honorable Sheldon H. Weisberg, Judge of the Arizona Court of
Appeals, Division One, was designated to sit on this matter.
29
APPENDIX
1. Phillips shall refrain from engaging in any conduct
that would violate the Rules of Professional Conduct or other
rules of the Supreme Court of Arizona.
2. Phillips shall contact the director of LOMAP within
thirty (30) days from the filing date of this opinion and shall
schedule and submit to a LOMAP audit within forty-five (45) days
thereafter. Following the audit, the director of LOMAP shall
formulate and include recommendations based on the audit in a
Probation Contract to be executed and implemented by Phillips.
The director of LOMAP shall also monitor the terms of probation.
3. Before entering into any written attorney/client fee
agreement for the firm, an Arizona licensed attorney must speak
with the client and approve the legal fees to be charged and
retention of the firm by the client. The attorney meeting with
the potential client must be knowledgeable in the practice area,
and issues that relate to the retention and retention decision
must be discussed before a decision is made on the retention.
Retention attorneys shall review all paperwork and ensure that
appropriate information is given to the client even if the
client lacks the sophistication or knowledge to ask the right
questions.
4. Any nonlawyer personnel conducting initial
consultations with clients must clearly and affirmatively
identify themselves as nonlawyers to prospective clients.
5. Respondent shall ensure that nonlawyer staff shall not
give legal advice to clients and shall not make predictions or
guarantees as to the outcome of a case.
6. Standard intake forms including a standard fee
agreement shall be utilized. The firm shall participate in fee
arbitration whenever it is requested by the client and the firm
has been unable to resolve the dispute directly with the client.
7. A standardized training manual for intake procedures
shall be provided to each intake employee.
8. Pursuant to ER 5.3, Phillips or other attorneys with
supervisory authority in the firm (over whom Phillips has direct
control) will be responsible for compliance by all intake
personnel and nonlawyer staff with applicable ethical rules.
30
9. When accepting payment of a client’s fees in a form
other than cash, the firm shall not accept payment without
signed, written consent (which may be evidenced by a check,
electronic signature, credit card authorization, or other
writing) from the party making the payment.
10. A one-time ethics training program, not to exceed
three (3) hours, shall be given to all administrative staff
including intake and collection personnel. The program shall be
provided by the director of LOMAP or designee, and shall be
given at a time within the first six (6) months of the
probationary terms and in a manner that does not disrupt the
firm’s practice. The program may be repeated or additional
programs may be given during the probationary period if needed
as determined by the director of LOMAP. The initial program
shall be taped and shown to any new personnel hired during the
probationary period.
11. A one-time Continuing Legal Education ethics program,
not to exceed three (3) hours, shall be given to all attorneys
employed by Phillips’s firm. The program shall be provided by
the director of LOMAP or designee, and shall be given at a time
within the first six (6) months of the probationary period and
in a manner that does not disrupt the firm’s practice. The
program may be repeated or additional programs may be given
during the probationary period. The initial program shall be
taped and shown to any new lawyers hired during the probationary
period.
12. The firm shall utilize a fee review process,
consistent with In re Swartz, 141 Ariz. 266, 686 P.2d 1236
(1984), and ER 1.5, at the conclusion of all cases in order to
determine whether a refund is due. All attorneys and other
billable staff members who work on criminal cases8 shall keep
contemporaneous time records to enable the firm to conduct a
“backward glance” at the conclusion of a case in order to
determine whether a refund is due.
13. The firm shall provide a written accounting of time
spent and fees incurred within fifteen (15) days of request by a
client. When a client terminates the firm’s representation in a
criminal case and the firm has been permitted to withdraw by the
8
The record indicates that P&A has sold its criminal department.
Assuming that P&A no longer offers services in criminal law,
this term and others relating to P&A’s criminal department no
longer apply.
31
court, the firm shall, within fifteen (15) days following
receipt of the Order permitting withdrawal, provide to the
client a written accounting of time spent, fees incurred, and
when appropriate, a refund of any unearned fees.
14. If Phillips’s firm uses client testimonials in
advertisements, the client must acknowledge in writing that he
or she is not receiving any money benefit (or the equivalent)
for the appearance.
15. Phillips shall develop a system in which he is
promptly advised of all client complaint(s) against the firm or
lawyers employed by the firm, which implicate the provisions of
ERs 5.1 and 5.3. Phillips shall document, in writing, his or
the firm’s response to each such complaint, and shall maintain a
file of such complaints and responses.
16. Phillips shall make reasonable and good faith efforts
to ensure compliance with these probation terms and shall
respond directly or through his counsel to inquiries concerning
the implementation and compliance with these probationary terms.
17. Before conducting a screening investigation into any
new complaint(s) relating to practices covered by these terms
and conditions of probation, the State Bar, when appropriate and
consistent with its normal practice, will first attempt to
resolve the complaint(s) through A/CAP and Central Intake, or
will, when appropriate, consistent with its normal practice and
pursuant to Rule 54(b)(1), Arizona Rules of the Supreme Court,
refer the matter for mediation. Nothing in this paragraph is
intended to limit the jurisdiction or power of the State Bar
disciplinary agency.
18. Bonuses to legal administrators shall not be based, in
whole or in part, on the number of clients retained, the amount
of fees generated, the number of clients who cancel, or the
amount of fees refunded.
19. The firm shall keep accurate records for all work done
on a case.
20. Phillips shall pay all costs incurred as a result of
these probationary terms.
21. In the event that Phillips fails to comply with any of
the foregoing conditions and the State Bar receives information
thereof, bar counsel shall file with the imposing entity a
32
Notice of Non-Compliance, pursuant to Rule 60(a)(5), Arizona
Rules of the Supreme Court. The Hearing Officer shall conduct a
hearing within thirty (30) days after receipt of said notice, to
determine whether the terms of probation have been violated and
whether an additional sanction should be imposed. In the event
there is an allegation that any of these terms have been
violated, the burden of proof shall be on the State Bar of
Arizona to prove noncompliance by a preponderance of the
evidence.
33