BAR ASSN. v. RUFFALO

D. D. No. 57.

176 Ohio St. 263 (1964)

MAHONING COUNTY BAR ASSOCIATION v. RUFFALO.

Supreme Court of Ohio.

Decided May 20, 1964.


Attorney(s) appearing for the Case

Mr. David C. Haynes and Mr. Comus M. Beard, for relator.

Mr. John J. Chester and Mr. C. Richard Grieser, for respondent.


Per Curiam.

This proceeding was set in motion in 1962 when the Mahoning County Bar Association filed its written complaint with the Board of Commissioners on Grievances and Discipline, charging John Ruffalo, Jr., an attorney at law of the city of Youngstown admitted to the Bar of Ohio in 1946, with unprofessional and unethical conduct in violation of the Canons of Professional Ethics.

The complaint, consisting of 14 charges, was referred to a three-member hearing panel for the taking of evidence and for report. Upon hearing, the panel concluded that charges numbered 3, 8, 9, 10, 11, 12 and 13 had been proved, and that respondent had violated Canons 10, 27, 29 and 32 of the Canons of Professional Ethics. Based on the findings and conclusions of the panel and the record, the board recommended that respondent be disbarred.

As stated in paragraph five of the syllabus in In re Lieberman (1955), 163 Ohio St. 35, 125 N.E.2d 328, "the degree of proof required in a disbarment proceeding is a preponderance of the evidence." To the same effect see the per curiam opinion in Cleveland Bar Association v. Fleck (1961), 172 Ohio St. 467, 469, 178 N.E.2d 782.

In cases of this kind, the board of commissioners acts for and on behalf of this court. In doing so, it makes recommendations as to the facts which should be found and the action which should be taken by this court. However, this court has full responsibility for determining what the facts are and what action should be taken on those facts.

As to charge No. 8, it is stated in respondent's brief:

"The facts * * * which are alleged in this charge are that respondent `did advance monies to certain clients * * * while their claims were pending, which advances were deducted from any settlements * * * later received in settlement of said claims.' Those facts do not * * * constitute misconduct * * *.

"* * *

"The record shows that respondent did advance monies to certain clients, but with the understanding that such monies were to be repaid irrespective of the outcome of the pending litigation. * * *

"A loan is not a purchase. So long as there is an agreement that the money is a debt and is to be repaid irrespective of the outcome of the case, it is nonsense to claim that the loan or advance amounts to the purchase of an interest in the litigation. Indeed, a contingent fee contract with an assignment to the lawyer (the recovery of which is wholly dependent upon the outcome) comes much closer to the prohibition in this canon [No. 10] than the simple loan or advancement of money. Yet such a fee contract is perfectly valid in the state of Ohio and has been upheld by the courts of Ohio in litigation involving lawyers' claims based upon such contracts. Roberts v. Montgomery, 115 Ohio St. 502, Scheinesohn v. Lemonek, 84 Ohio St. 424, and Cleveland Ry. Co. v. Godfrey, 28 O. L. R., 466 * * *." But cf. Canon 13.

Canon 10 provides:

"The lawyer should not purchase any interest in the subject matter of the litigation which he is conducting." Canon 42 reads:

"A lawyer may not properly agree with a client that the lawyer shall pay or bear the expenses of litigation; he may in good faith advance expenses as a matter of convenience but subject to reimbursement."

It is clear that the word "expenses" appearing after the semicolon refers to "expenses of litigation." It would not include advances of the kind admittedly made by respondent for "living expenses * * * during the period between the filing of and the trial or disposal of the case." See opinion No. 288 of the Legal Ethics Committee of the American Bar Association, 41 A. B. A. Journal, 33, issue of January 1955. We cannot reconcile the majority opinion in People, ex rel. Chicago Bar Association, v. McCallum (1930), 341 Ill. 578, 173 N. E., 827, on this question with Canons 10 and 42.

It is obvious that, where the advancement of living expenses is made, as in the instant case, to enable a disabled client and his family to survive, any agreement by the disabled client to repay them would not have the effect of providing the attorney with any reasonable source of repayment other than the proceeds received on trial or settlement of his client's claim. In effect, the attorney has purchased an interest in the subject matter of the litigation that he is conducting. The canons contemplate that this will be proper only where the advance is for "expenses of litigation."

It may be observed that the cases of Roberts v. Montgomery, supra (115 Ohio St. 502), Scheinesohn v. Lemonek, supra (84 Ohio St. 424), Cleveland Ry. Co. v. Godfrey, supra (28 O. L. R., 466), and Reece v. Kyle (1892), 49 Ohio St. 475, were all decided before this court adopted by rule the Canons of Professional Ethics. In view of the adoption of those canons, those cases would no longer be applicable to the extent that they are inconsistent with provisions of the canons.

As to charge No. 13, the report of the board summarizes the evidence and facts as follows:

"It is charged that the respondent conspired with * * * Orlando and paid Orlando money for preparing lawsuits against the Baltimore & Ohio Railroad which was Orlando's employer.

"The evidence in support of this charge is not in dispute. Orlando worked as an investgator for the respondent from 1953 to July 19, 1962. During this same period he was also an employee of the Baltimore & Ohio Railroad. He was suspended by the railroad on July 21, 1962, on charges of soliciting claims. A hearing was held on these charges but Orlando did not appear because he says he was in the New Castle Hospital. During his employment with the respondent, Orlando was paid $25 a day plus expenses and investigated all of the respondent's railroad cases. He said that he worked an average of ten or fifteen days a month for the respondent. Withholding slips, internal revenue form 1099, were received in evidence * * * and showed the following amounts paid to Orlando by the respondent:

    "1957     -     $2,950.00
    "1958     -      1,250.00
    "1959     -      1,237.37
    "1960     -      3,829.25
    "1961     -      4,716.00

"According to Orlando, respondent paid him in cash for which Orlando said he signed receipts. Orlando said that the respondent kept no records, but paid Orlando on the basis of Orlando's records, but didn't keep these records after his income tax returns were filed * * *. Respondent stated:

"`We worked on that basis for the particular reason that we didn't want this man to be accused of exactly what he was accused of, which he wasn't doing and which he did not do, but the fact was that I was trying to protect him. He was trying to help me as an investigator. He had certain knowledge, certain abilities that I needed, and I was trying to protect him, and that was the reason that we worked this thing out this way. With any other person that has ever done any work for me * * * I have paid him by check, but particularly for security reasons for this man, that was the reason we worked it this way.'

"Later respondent testified that he had no record of payments made to Orlando on his books. He also testified that—

"`* * * as soon as they were examined by the Internal Revenue Department, why, we got rid of them, because we didn't went to keep them, because of the fact we didn't want to involve Mike—' * * *.

"The respondent was ordered by a subpoena issued by the board * * * to produce `all your records, checks, disbursements and receipts of any kind or nature showing payments to Michael Orlando * * * for the years 1957, 1958, 1959, 1960, 1961 and 1962.' Respondent only produced the withholding slips * * *. Respondent was also requested by the chairman of the panel to produce all of his records so that counsel for the relator could determine for themselves whether or not his records contained any entries which would reflect on the payments made by respondent to Orlando * * *. The respondent did not produce his records and refused to comply with the request of the chairman of the panel * * *.

"Although the full extent of Orlando's activities in behalf of the respondent could perhaps be better determined if respondent had submitted his records for examination as requested by the chairman of the panel, there is no dispute about the fact that the respondent did employ Orlando to investigate cases against the Baltimore & Ohio Railroad while Orlando was working for that railroad * * *. Furthermore, the respondent admits that he kept no entries of payments to Orlando so that he would have no record which would disclose the fact that Orlando was employed by the respondent. The panel questioned the respondent at length * * * on his views relating to the practice of employing Orlando to investigate cases against the Baltimore & Ohio, while he was employed by the company. He saw nothing wrong with the practice because he was `doing something altogether different from the type of work he was doing on the railroad' * * *. But he admitted employing Orlando because of the advantages in having a railroad man working for him * * *. He saw no distinction between employing any railroad employee and one who was investigating claims against his own employer, because `our concepts have changed * * *.'"

With respect to this summarization, respondent's brief in this court states:

"As stated by the board, there is no dispute in the evidence with respect to the foregoing charge. The board does indulge in some innuendos, but the facts relevant to this charge are, simply stated, these: Respondent did hire Michael Orlando to investigate lawsuits for him, and some of those lawsuits involved claims against the Baltimore & Ohio Railroad Company. During this time * * * Orlando was an employee of the Baltimore & Ohio Railroad Company, but engaged in train service, that is, the service of a working railroad brakeman. While we do not consider it material, respondent did frankly testify that he kept no entries of payments to Orlando and that payments were made in cash."

Respondent contends that his employment of Orlando to work against the interests of Orlando's employer, B. & O., was proper by reason of the provisions of Section 60, Title 45, U. S. Code, which reads in part:

"Any contract, rule, regulation, or device whatsoever * * * to prevent employees of any common carrier from furnishing voluntarily information * * * as to the facts incident to the injury or death of any employee, shall be void, and whoever * * * shall attempt to prevent any person from furnishing voluntarily such information to a person in interest, or whoever discharges or otherwise disciplines or attempts to discipline any employee for furnishing voluntarily such information to a person in interest, shall, upon conviction * * * be punished * * *." (Emphasis added.)

Obviously this statute would have no application to the instant case. Orlando did not "voluntarily" furnish information. He was paid by defendant to get information.

Respondent's employment of Orlando to work against the interests of his employer, B. & O., so as to benefit respondent and his clients was not an isolated instance. What records respondent was able to produce indicated substantial payments to Orlando in each of five years.

The payment of $4,716 in 1961 was all for work done prior to July 19 of that year.

Respondent now argues that there was nothing wrong with respondent's paying Orlando substantial sums of money to work against the interests of his employer, B. & O., so as to benefit respondent and his clients.

If the respondent did not know that it was wrong to do this, why did he try to cover it up? His testimony that he did this to protect Orlando from charges being made by B. & O. is not convincing testimony that he did not know that this employment of Orlando was wrong.

Why did respondent not produce records to show what the payments were for? The evasive attempts of both Ruffalo and Orlando to explain their lack of records on the basis that they were no longer needed to sustain their income tax returns arouses a strong suspicion that those records contained information which would have been damaging to both Ruffalo and Orlando. Their 1961 income tax returns could not have been filed before January 1962 and were not due until April 1962. In July 1962, B. & O. charged Orlando with soliciting cases against it for Ruffalo. In September 1962, Ruffalo was charged with employing Orlando to solicit cases for him. Ruffalo undoubtedly knew that such charges were being prepared and investigated long before that time. It is difficult to believe that the 1961 federal income tax returns of either Orlando or Ruffalo had been checked by the Internal Revenue Service before July or even September 1962. At that time, they definitely knew that any records showing either of them to be innocent of charges of soliciting would be helpful to both. It is almost impossible to reach any reasonable conclusion that the records of either, at least for 1961, were not destroyed in order to prevent their use against Orlando in the proceedings brought against him by B. & O. and against Ruffalo in the proceedings brought against him.

In our opinion, one who believes that it is proper to employ and pay another to work against the interests of his regular employer is not qualified to be a member of the Ohio Bar. He is even less qualified if he does so, when he knows, as the evidence clearly indicates Ruffalo did know, that it is improper to do so.

This is not the first time that respondent's conduct as a member of the bar has been questioned and found improper. After he was found "guilty of unprofessional conduct in his office as an attorney at law * * * in that he did by and through duly authorized agents and employees solicit professional employment from sundry people" and was disciplined therefor in 1957, he showed a contempt for the court, which made that finding and provided a very lenient discipline for his misconduct. Although he admittedly was well able to pay the costs amounting to several hundreds of dollars and had been ordered by that court to "pay the costs of this proceeding within 30 days," he neglected to make any effort to pay them until shortly before the first hearings in these proceedings more than five years later.

The members of this court are not in agreement as to whether the facts are as the board of commissioners recommended they should be found with respect to some of the other charges against respondent. However, in view of the admitted facts with regard to charges 8 and 13 and the previous judgment of 1957 and the attitude of respondent with respect thereof, we are of the opinion that respondent should be suspended for an indefinite period from the practice of law.

Judgment accordingly.

TAFT, C. J., ZIMMERMAN, MATTHIAS, O'NEILL and KERNS, JJ., concur.

GIBSON, J., concurs in the judgment.

HERBERT, J., dissents.

KERNS, J., of the Second Appellate District, sitting by designation in the place and stead of GRIFFITH, J.

GIBSON, J., concurring. In view of the respondent's right to apply for reinstatement after the passage of two years following the order of suspension, I concur in the judgment of the court. Paragraph 21, Rule XXVII of this court. Because of the nature of the issues decided in the instant case, I believe it desirable to comment briefly upon them.

Since it is evident that basically the court and the board of commissioners treat this as a case of solicitation, the following comments may not be inappropriate.

Although the solicitation of law business does not import venality, criminality, fraudulent practices or moral turpitude, it is inimical to the good reputation of the bar. Solicitation within the meaning of Canon 27 can not be precisely defined in such a way as to apply in every case.

Courts surely are not expected to be ignorant of things that other men well know. Everyone knows that attorneys, for their practice, depend upon friends, clients and former clients, and their activities within the community. Friends, acquaintances, and associates of an attorney have the unquestioned right to praise his legal abilities and to divert to him such clients as they can persuade in a legitimate way to engage his services.

This respondent has pursued the personal injury practice of law successfully and aggressively. We would be naive to say that his enterprise has not occasionally carried him into areas where his activity is subject to criticism. In fact, the record clearly shows that in 1957 he was reprimanded by the Common Pleas Court for unprofessional conduct in soliciting professional employment by and through authorized agents and employees.

Charges No. 8 and No. 9 relate to instances where respondent advanced money to certain clients. Respondent admits that such advances were made but justifies them on the ground that they were made as acts of kindness at a time when these clients were in necessitous circumstances.

Clearly, the existence of an attorney-client relationship does not ipso facto make a loan from a lawyer to his client against public policy or contrary to the Canons of Professional Ethics. Canon 42 expressly recognizes that a lawyer may in good faith advance expenses of litigation as a matter of convenience but subject to reimbursement. Perhaps an occasional advance or loan by a lawyer to his client is not proscribed. At best it is a practice which should be followed infrequently and used with extreme caution because it has long been questioned by the courts and the organized bar. It may well be that the advances made by respondent were of such amounts and frequency, and without a sufficiently clear obligation on the part of the clients to reimburse respondent regardless of recovery, that the finding that respondent is guilty of unprofessional conduct in violation of Canon 10 and Canon 27 is proper.

In charge No. 13, the respondent is accused of conspiring with Michael Orlando and paying Orlando money for preparing lawsuits against the Baltimore & Ohio Railroad, which was Orlando's employer. The evidence shows that Orlando worked for the railroad from 11:00 p. m. to 7:00 a. m., five days a week, and that the daytime was his own without restriction. There is nothing unethical in the employment of an investigator. It can not be inferred from such employment that the attorney is "ambulance chasing." In fact the board did not find that Orlando had been soliciting claims for respondent. It found instead that respondent was guilty of misconduct because he was a party to a transaction which caused Orlando to breach his duty of loyalty to his employer.

The principle that "an agent can not serve two masters" is well established. Certainly an attorney may not ordinarily represent principals with conflicting interests, e. g., vendor and vendee of property. But here the respondent was a principal or master and not the agent or servant. It would appear that the penalty, if any, for a transgression of that principle should be borne by the agent, Orlando. I fail to find any provision in Canon 29 or Canon 32 which would require that a sanction be applied against the respondent, who merely made it possible for Orlando to attempt to serve "possible" conflicting interests.

HERBERT, J., dissenting. I am unable to join in the judgment entered in this cause, basically, for two reasons: (1) the judgment in substance overrules long recognized and established principles of law in Ohio, to wit, Roberts v. Montgomery, 115 Ohio St. 502; Schewesohn v. Lemoneh, 84 Ohio St. 424; Cleveland Ry. Co. v. Godfrey, 28 O. L. R., 466; and Reece v. Kyle, 49 Ohio St. 475; and (2) a recent decision of the Supreme Court of the United States, being Brotherhood of Railroad Trainmen v. Virginia, ex rel. Virginia State Bar (April 20, 1964), 84 S.Ct. 1113.

The per curiam overrules Reece v. Kyle, 49 Ohio St. 475. In that case, Spear, C. J., delivered a scholarly opinion of a unanimous court upon the obstacles that have confronted courts for hundreds of years in Anglo-Saxon judicial history, He pointed out the efforts to throttle the vicious practices of champerty and maintenance but also emphasized the ever-present duty of the courts to protect the weak and dependent from oppression by the powerful. While commenting upon rules necessary to control evils of the past, he warned, in the opinion, at page 487:

"* * * new conditions arisen by reason of which it has become the interest of the powerful to embarrass and hinder the dependent and weak from obtaining speedy justice in the courts."

In the case at bar, respondent, over a period of years, and with a large clientele according to the relator, gave financial aid to three or four needy clients. The importance of financial aid from his lawyer to an injured workman may spell the difference between injustice and justice.

For example, a member of a railroad train crew or yard crew is injured or killed by reason of the negligence of the railroad. The injured man or the dependents, through a fiduciary, contract with a lawyer to represent them in negotiations for settlement or in litigation.

The railroad offers a meager totally inadequate settlement— a small percentage of what a lawful judgment could reasonably be expected. In making this inadequate settlement offer, the claims department of the railroad advises that the railroad can delay final decision for years. In short, the powerful can close the doors of the courts to the weak by reason of the lack of finances of the claimant.

Under the pronouncement in the case at bar, lawyers in Ohio are not permitted to give or loan financial assistance to a client even though the injured employee or the dependents in case of death are in want and hungry.

People, ex rel. Chicago Bar Association, v. McCallum, 341 Ill. 578, 173 N. E., 827, is a case squarely in point.

There, the facts recited in the opinion are amazing. It is well worth reading. The second paragraph of the syllabus states the law of the case in this language:

"Advancing money to indigent client is not against public policy. The practice of advancing money to the injured client with which to pay living expenses or hospital bills during the pendency of a personal injury case and while he is unable to earn anything, may, in a sense, tend to foment litigation by preventing an unjust settlement from necessity, but there is no authority holding that it is against public policy and no reason why it should be so considered, as a man in indigent circumstances thereby may obtain justice where without such aid he would be unable to do so." (Emphasis added.)

Under the holding in the case at bar, the doctrine of the McCallum case cannot be followed in Ohio.

Charge 13 and the facts in support thereof are quite simple. One Orlando was a yard employee of the Baltimore & Ohio Railroad. He released the "air" of incoming trains. He had a regular tour of duty. He performed his duties faithfully and well. He was loyal to his employer in his employment. Respondent employed Orlando during some of his off-duty hours and on his own time to interview witnesses and discover the facts and circumstances surrounding episodes wherein clients of the respondent were injured while in the performance of their railroad duties or were killed by reason of the negligence of the employing railroad.

To establish negligence of a railroad causing such an injury or death, witnesses, who thoroughly understand the intricate and complex construction and operation of railroad mechanical devices and equipment, are essential. Such information and such witnesses are necessary to establish a case, for an injured workman or for the dependents of one killed, by testimony by those familiar with railroading and the operation of trains.

Orlando's employment was not in violation of law. It was thoroughly consistent with enactments of Congress, particularly Section 60, Title 45, U. S. Code, referred to in the per curiam opinion. This law intended to make available information to injured employees and persons in interest. Without the aid of Orlando or some other well-informed person, the respondent would not have the names of necessary witnesses and would be handicapped severely in the presentation of a case of an injured railroad workman or the dependents of one killed by reason of the railroad's negligence. By his extra work, Orlando helped the injured and the dependents of the dead to secure justice. The per curiam says that Orlando was disloyal to his railroad employer, and that respondent was unworthy of being a lawyer because he used witnesses and information secured by Orlando. The respondent was acting under a law enacted by the United States Congress above mentioned and in furtherance of the administration of justice.

Respondent furnished records to the Internal Revenue Service to show his payments to Orlando in order to deduct the same from his own income tax. It seems to me that records that satisfy the Internal Revenue Service were all that respondent was required to keep. It is said that Orlando was disloyal to his railroad employer by furnishing information and evidence that would compel his employer to respond to the requirements of justice. Orlando was acting in pursuance to and in accordance with a congressional enactment. He was at the same time giving an invaluable service to injured railroad workmen and the dependents of the dead who were represented by the respondent.

"A state could not, by invoking the power to regulate the professional conduct of attorneys, infringe in any way the right of individuals and the public to be fairly represented in lawsuits authorized by Congress to effectuate a basic public interest." (Emphasis added.) Brotherhood of Railroad Trainmen v. Virginia, ex rel. Virginia State Bar, supra.

Charge number 13 against the respondent, and the facts offered to substantiate it, appear to me to be clearly contrary to the above-quoted principle of law.


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