James N. Ellis, Jr., and Nicholas J. Ellis, members of the bar of the Commonwealth and the only partners in the law firm of Ellis & Ellis, appeal from orders of a single justice of this court temporarily suspending them from the practice of law, pursuant to S.J.C. Rule 4:01, § 12A, as appearing in 394 Mass. 1110 (1985) (hereinafter § 12A).
On March 3, 1997, a Worcester County grand jury returned twenty-eight indictments against James N. Ellis, Jr., charging tax evasion, conspiracy to evade income taxes, presentation of false statements to insurance companies in violation of G. L. c. 266, § 111A or § 111B, larceny from insurance companies, and conspiracy to commit fraud or steal money from insurance companies. These indictments cover the years 1985 to 1995, inclusive. On the same day, the same grand jury returned twelve indictments against Nicholas J. Ellis charging him with presenting false statements to insurance companies, larceny from insurance companies, attempted larceny from an insurance company, and conspiracy to commit insurance fraud. These indictments cover the years 1990 to 1993, inclusive.
Early in April, 1997, bar counsel petitioned for the temporary suspension of both lawyers. A single justice of this court held a hearing on the petitions on April 24. On April 30 the single justice entered orders of temporary suspension and stayed the effectiveness of her orders to permit the lawyers to seek relief from the full court. We then stayed the effectiveness of the temporary suspensions and heard oral argument on June 10.
The single justice's orders took note of the pending indictments and of the issuance of warrants authorizing the search of the lawyers' law offices. She stated that the indictments and search warrants themselves "suggest probable cause to support the claim of serious criminal conduct" and concluded that the charges against each lawyer were supported by probable cause. As to James Ellis, the single justice also noted that a Federal court judge had enjoined him and Ellis & Ellis from disposing of any firm assets, except in the regular course of business, until a civil action brought by an insurance company was concluded.
The single justice did not explicitly find, by a preponderance of the evidence, that either lawyer had committed a violation of the Code of Professional Responsibility. Nor did
Section 12A of S.J.C. Rule 4:01, which is set forth in full in the margin,
1. First, we set forth the facts in the record before the single justice that lead us to conclude that an order of temporary suspension of each lawyer should be entered. Our decision is based on the cumulative effect of the following
(a) The indictments, which concern a variety of alleged wrongs, suggest a pattern of unethical conduct in the lawyers' assertion of clients' personal injury claims. The record of the grand jury proceedings is not before us. We do know that a grand jury must at least hear sufficient evidence to establish probable cause to arrest the accused. See Commonwealth v. O'Dell, 392 Mass. 445, 451 (1984); Commonwealth v. Mc-Carthy, 385 Mass. 160, 163 (1982); Commonwealth v. St. Pierre, 377 Mass. 650, 656-657 & n.6 (1979). Probable cause, in the context of a grand jury, means that the grand jury had reasonably trustworthy information sufficient to warrant a prudent person in believing that the accused had committed the offense charged. See Commonwealth v. O'Dell, supra at 450.
Warrants to search the law offices of Ellis & Ellis and its records storage facility were also issued on probable cause, which means that, as to each warrant, the Superior Court judge who authorized their issuance had before her reasonably trustworthy information sufficient to persuade her that a crime had been committed (Commonwealth v. Snow, 363 Mass. 778, 784 ; K.B. Smith, Criminal Practice and Procedure § 193, at 137 [2d ed. 1983 & Supp. 1997]) and that the evidence was probably in the place or places to be searched (Commonwealth v. Upton, 394 Mass. 363, 370 ).
(b) After the search warrants authorizing the search of the law offices of Ellis & Ellis and its storage facility were executed in May, 1996, the Ellises asserted that certain seized documents were protected by the attorney-client privilege and should not be disclosed to the Commonwealth. In response,
The judge tested the applicability of the attorney-client privilege by deciding whether, by a preponderance of the evidence, the Commonwealth had produced "facts sufficient to support a belief by a rational fact-finder that the client alone or in conjunction with his attorney was engaged in the perpetration or attempted perpetration of a crime and the communication was made in furtherance thereof." She ruled that the privilege was inapplicable in many instances. The judge also ruled that the seized documents were not protected from disclosure as opinion work product. She rejected the lawyers' arguments because "[h]ere a prima facie showing has been made that James N. Ellis, Jr., and Nicholas Ellis were participants in the fraud."
On the attorney-client privilege issue, the judge stated the following:
The significance of the judge's conclusions should be measured against the facts that (1) she made her determinations in the absence of a fully adversary hearing and without ruling on matters of credibility and (2) she only ruled that there was evidence that would support the conclusions she recited and that we have just quoted. The statements in bar counsel's briefs that the judge "found" the quoted facts enumerated above is not correct. It is correct, however, that the judge found numerous examples of false presentations of information to insurance companies by clients of Ellis & Ellis. We draw the inference that the lawyers' involvement in presenting these claims was more inappropriate than simply a cavalier indifference to whether the information submitted to insurers was accurate.
(c) On December 12, 1996, a judge in the United States District Court for the District of Massachusetts entered a preliminary order restraining James Ellis and the law firm from disposing of any of their assets, except in the regular course of business. St. Paul Fire & Marine Ins. Co. v. Ellis & Ellis, 951 F.Supp. 5 (D. Mass. 1996). He did so, on the motion of the insurance company, in a civil action by the insurer because he concluded that the insurer had a reasonable likelihood of success "on its claim that Ellis and the firm of which he is a partner are liable to it for payments made by [the insurer] as a result of the defendants' deceptive and likely fraudulent failure to provide information actually known to them that was material to [the insurer's] payment of workers' compensation benefits to a client of the defendants." Id. at 6. In his deposition testimony, James Ellis stated that he and the firm represented a client who had worked successively under two different names and social security numbers for two different employers. The client claimed back injuries on both jobs. James Ellis admitted in his deposition that he had forwarded medical reports to the insurer of the employer in whose employment the second alleged back injury occurred which were inaccurate and incomplete because the client enthad told the doctors treating him for the second claimed injury
(d) At a time when the lawyers were aware that their practices were under public investigation, they undertook to reorganize the firm's operations to continue its activities in the face of mounting legal problems. The plan that they developed, but never implemented, proposed conduct that would have violated ethical rules. Proposed "management and referral agreement[s]" would have transferred a majority of the firm's caseload to individual attorneys and groups of attorneys who were employees of the firm, in effect splitting the firm into separate entities. The new firms would be affiliated entities of the firm and for a period would be subject to the control and direction of the firm. All records of the new firms would be open to inspection by Ellis & Ellis, and each new firm would have to be available monthly to discuss the status of each case referred to it. This level of control would have violated S.J.C. Rule 3:07, Canon 5, DR 5-107, as appearing in 382 Mass. 782 (1981) (avoiding influence by others than the client) and DR 5-101, as appearing in 382 Mass. 779 (1981) (lawyer should exercise independent judgment). More important is the absence of any recognition that a lawyer may withdraw from a representation and transfer a client's case to another lawyer only with the consent of the client. See S.J.C. Rule 3:07, Canon 2, DR 2-110 (A) (2), and DR 2-110 (C) (5), as appearing in 382 Mass. 774 (1981). Moreover, the proposed agreements called for a divison of fees, called referral fees in the agreement, without any provision for client consent after full disclosure of the circumstances. This arrangement would have violated S.J.C. Rule 3:07, Canon 2, DR 2-107 (A), 382 Mass. 773 (1981).
2. With this factual background, we come to the application of appropriate legal principles and to the legal challenges that the lawyers have raised.
The lawyers challenge the proceedings on due process of law grounds. These objections have largely been addressed and rejected in Matter of Kenney, 399 Mass. 431, 435 (1987).
The lawyers claim further that the proceedings are procedurally invalid because decisions should not be made based on evidence to which they did not have access. See Greene v. McElroy, 360 U.S. 474, 496 (1959). As we stated earlier, however, there was adequate evidence in the record before the single justice to prompt us to affirm the orders of temporary suspensions.
Although § 12A does not announce that principles applicable to the issuance of a preliminary injunction should guide the temporary suspension issue, those principles are instructive. See Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-617 (1980). However, as § 12A states, the public interest replaces irreparable harm to the moving party as a factor in deciding whether to grant preliminary relief. See Commonwealth v. Mass. CRINC, 392 Mass. 79, 89-90 (1984). In assessing each party's chances of success in the proceedings,
The lawyers assert that we may not properly rely on indictments and search warrants because they should not be presumed to be regular. They argue that they are based on evidence that was obtained "by means of a privatized prosecutorial apparatus." They refer to the statutorily directed collaboration between (a) the Massachusetts insurance fraud bureau, a private investigative agency funded by two insurance organizations (St. 1990, c. 338, § 1, as amended by St. 1991, c. 99, § 1), and (b) the Attorney General's insurance fraud division, which is funded by assessments against the same insurance organizations (St. 1991, c. 399, § 3, as amended by St. 1995, c. 38, § 210). Assistant attorneys general working in the Attorney General's insurance fraud division will, in a sense, be compensated indirectly from the funds collected pursuant to the assessments. The lawyers base their argument on the principle that the statutory scheme under which the Attorney General's insurance fraud division operates injects private parties' financial interests into the enforcement process, thus depriving the lawyers of their right to a disinterested prosecutor. See Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 808-809 (1987); Marshall v. Jerrico, Inc., 446 U.S. 238, 250 (1980); Commonwealth v. Tabor, 376 Mass. 811, 817-818 (1978); People v. Eubanks, 14 Cal.4th 580, 584, 596 (1996).
Whatever the consequences of that relationship may be in the criminal proceedings against the lawyers, on the record in this civil proceeding we see no impropriety in our relying, in part, both on the fact of the indictments and on the fact of the issuance of the search warrants to decide whether the evidence calls for an order of temporary suspension. We acknowledge that an indictment does not alone justify the temporary suspension of a lawyer's right to practice law. See S.J.C. Rule 4:01, § 12, 365 Mass. 696 (1974). Indeed, our disciplinary procedure does not even compel the temporary suspension of a lawyer who has been convicted of a serious crime. Id.
The evidence before the single justice persuades us that it is more probable than not that the lawyers violated important provisions of that Code. It is true that certain facts that we have recited were not established by a preponderance of the
In a preliminary hearing, the entire controversy cannot be resolved, but we may and do rely on the strength of the preliminary showing of a multitude of probable cause and prima facie conclusions that numerous crimes were committed involving serious ethical violations and that numerous fraudulent claims were presented. As to James Ellis, the Federal judge's determination, based on Ellis's own deposition testimony, that a preliminary injunction should be issued against him and Ellis & Ellis further justifies our conclusion that he (and his firm) engaged in serious unethical conduct.
The fact that violations of ethical standards have been shown likely to have occurred does not end the temporary suspension discussion. We must balance the harm to the lawyers against the public interest in preventing harm to present and future clients and in preventing any other harm that should be guarded against.
The harm to a lawyer that will come from the suspension
The pattern of conduct of the lawyers persuades us that there is a substantial risk of future harm to the public interest, including harm to present and future clients. We are not dealing here with a single instance of misrepresentation of fact to an insurance company. Although collusive wrongdoing between a client and a lawyer of the type involved here is difficult to discover, there are numerous examples of such conduct in the record. The lawyers' willingness to engage in such conduct has led to the indictment of certain of their clients, whom they aided in wrongdoing, and raises serious doubts about their conduct and its impact on their clients if they are allowed to continue to practice law.
3. The orders of temporary suspension are affirmed. A further order shall be entered in the county court pursuant to S.J.C. Rule 4:01, § 17, 365 Mass. 710 (1974).
Section 12A has been amended effective July 1, 1997. The changes are not significant for the purposes of these cases.
Bar counsel proceeded with reasonable dispatch to seek orders of temporary suspension once the lawyers were indicted. The fact that a lawyer has been indicted for wrongs allegedly committed in the practice of law raises a particular concern.