Case Title: Ohio State Bar Assn. v. Kanter

Citation: 1999-Ohio-122

Docket Number: 19982723

State: ohio

Court: Ohio Supreme Court

Date: 1999-09-22T00:00:00Z

Document:
[Cite as Ohio State Bar Assn. v. Kanter, 86 Ohio St.3d 554, 1999-Ohio-122.] 
 
 
 
 
 
OHIO STATE BAR ASSOCIATION v. KANTER. 
[Cite as Ohio State Bar Assn. v. Kanter (1999), 86 Ohio St.3d 554.] 
Attorneys at law — Misconduct — Two-year suspension — Payment of kickbacks 
by outside counsel to company’s in-house counsel for referrals of company’s 
legal work — Using trust account to receive personal as well as client funds 
and to pay personal bills and business expenses — Lying to disciplinary 
authorities. 
(No. 98-2723 — Submitted May 5, 1999 — Decided September 8, 1999.) 
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and 
Discipline of the Supreme Court, No. 97-48. 
 
On June 25, 1998, relator, Ohio State Bar Association, filed an amended 
complaint charging that respondent, Frederick D. Kanter of Woodmere, Ohio, 
Attorney Registration No. 0014025, violated several Disciplinary Rules while 
representing the Glidden Company (“Glidden”).  Relator also alleged that until 
June 1998, respondent failed to file federal, state, and city tax returns for the years 
1993 through 1996. 
 
In August 1998, a panel of the Board of Commissioners on Grievances and 
Discipline of the Supreme Court (“board”) issued a pretrial order that effectively 
eliminated the count pertaining to respondent’s failure to file timely tax returns.  
The amended complaint, as modified, was then submitted to the panel. 
 
The panel found that for twenty years respondent made referral or kickback 
payments to David M. Linick, the in-house, salaried counsel of Glidden, who 
retained respondent as outside counsel to represent Glidden in various legal 
proceedings.  During that period, respondent usually paid Linick thirty percent of 
each fee he received from Glidden.  The panel specifically found that in August 
1995, Linick hired respondent to represent Glidden, as a tenant, in negotiating an 
 
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early termination of a lease with one of its landlords.  Respondent received a fee of 
$24,000 for his legal work, and shortly thereafter paid Linick $7,200. 
 
The panel further found that in 1993, Linick arranged for Glidden to employ 
respondent on a contingent fee basis to represent Glidden in the defense of a 
preference claim by a Chapter 11 debtor in the United States Bankruptcy Court in 
the state of Washington.  Respondent negotiated a settlement of the preference 
claim, and on August 19, 1993, received $521,000 from Glidden, which he 
deposited in his IOLTA (Interest on Lawyers Trust Account).  That amount 
consisted of $371,645.61 to be paid to the Chapter 11 debtor upon court approval 
of the settlement and respondent’s fee of $150,000.  On September 13, 1993, 
special counsel for the Chapter 11 debtor informed respondent that the bankruptcy 
court had approved the settlement, and from his trust account, respondent paid the 
settlement amount to the Chapter 11 debtor and $60,000 to Linick. 
 
Both before and after the disbursement of the preference settlement, 
respondent used the trust account as a personal and business expense account, 
depositing income from his salaried position at the city of Lyndhurst and paying 
personal bills and business expenses from the account. 
 
The panel also found that during the initial stages of the disciplinary 
proceedings, respondent in a letter to relator’s investigator asserted, “Let me make 
something very clear: Mr. Linick received no monies from me for work related to 
Glidden.”  He later admitted that that statement was false. 
 
The panel concluded that respondent’s conduct violated DR 2-103(B) (a 
lawyer shall not compensate or give anything of value to a person or organization 
to recommend or secure his employment, or as a reward for having made a 
recommendation resulting in his employment), DR 2-107(A) (a division of fees by 
lawyers not in the same firm may be made only with the prior consent of the client 
and only if the division is in proportion to the services performed by each lawyer, 
 
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or each assumes full responsibility, the terms and division and identity of lawyers 
are disclosed in writing to the client, and the total fee is reasonable), DR 9-102 (a 
lawyer shall deposit all client funds in one or more identifiable bank accounts in 
which no funds belonging to lawyer are deposited), and DR 1-102(A)(4) (a lawyer 
shall not engage in conduct involving dishonesty, fraud, deceit, or 
misrepresentation).  The panel recommended that respondent be suspended from 
the practice of law for one year.  The board adopted the findings, conclusions, and 
recommendation of the panel. 
__________________ 
 
Harlan Stone Hertz, Richard Gibbs Johnson and Eugene P. Whetzel, for 
relator. 
 
Richard S. Koblentz and Craig J. Morice, for respondent. 
__________________ 
 
Per Curiam.  This is the third in a series of cases involving a scheme for the 
payment of “kickbacks” by Glidden’s outside counsel to its in-house counsel for 
the referral of the company’s legal work.  In Ohio State Bar Assn. v. Zuckerman 
(1998), 83 Ohio St.3d 148, 699 N.E.2d 40, we disciplined one of Glidden’s outside 
counsel, Richard Zuckerman, for taking part in the program of giving expected 
gifts to Glidden’s inside counsel for the referral of cases.  In Disciplinary Counsel 
v. Linick (1999), 84 Ohio St.3d 489, 705 N.E.2d 667, we suspended Glidden’s in-
house counsel, David M. Linick, for his part in the scheme. 
 
In this case we consider respondent’s kickbacks to Linick, which were more 
substantial than Zuckerman’s “referral” payments.  Having reviewed the record, 
we adopt the board’s findings and conclusions, but not its recommendation. 
 
DR 2-103(B) proscribes a lawyer’s compensating a person or giving a 
person anything of value to recommend or secure employment as an attorney, or 
rewarding a person for having made a recommendation resulting in one’s 
 
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employment as an attorney.  DR 2-107(A) prohibits a division of fees by lawyers 
not in the same firm without, inter alia, the prior consent of the client.  Each of 
these rules precludes the kickbacks arranged by respondent and Linick. 
 
We use the term “kickback” to describe the act of providing agreed payment 
to an official of an organization in consideration for receiving employment by the 
organization in a specific matter.  Kickbacks undermine the lawyer-client 
relationship and the relationship between in-house and outside counsel, as well as 
the integrity and reputation of the legal professionals.  Kickbacks also result in a 
company’s retaining counsel for the wrong reasons and overpaying for the legal 
services that it receives.  An organization should be able to rely on its in-house 
counsel to choose honestly among attorneys by comparing, so far as possible, their 
proposed fees, their reputations, their skills and abilities, and their knowledge of 
the subject area and the law.  As we said in Cincinnati Bar Assn. v. Haas (1998), 
83 Ohio St.3d 302, 304, 699 N.E.2d 919, 920, “when a referral is the result of 
monetary influence, it lacks the reliability of a disinterested recommendation.” 
 
Moreover, concerned as we are with the damage kickbacks cause to clients, 
we are just as concerned with the harm they cause to the integrity of the legal 
profession.  Their very use invokes the image that the law involves manipulation 
by under-the-table deals and that law is not only less than an honorable profession, 
but even less than an honest commercial venture.  We recognize that cost is an 
important factor when an entity selects an attorney.  Yet kickbacks turn the careful 
selection of professionals into secret bidding contests and prevent attorneys from 
competing for legal employment in a fair and corruption-free environment.  We 
strongly disapprove and condemn such practices. 
 
In addition, respondent failed to care for his client’s funds properly.  DR 9-
102 provides that a lawyer shall deposit all client funds in one or more identifiable 
bank accounts in which no funds belonging to the lawyer are deposited.  Here 
 
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respondent wrongfully used his trust account to receive personal as well as client 
funds and to pay personal bills and business expenses.  An attorney’s use of his 
trust account in such a manner violates the Disciplinary Rule.  Dayton Bar Assn. v. 
Rogers (1999), 86 Ohio St.3d 25, 711 N.E.2d 222; Disciplinary Counsel v. Phillips 
(1998), 81 Ohio St.3d 80, 82, 689 N.E.2d 541, 542.1 
 
Finally, respondent’s lies to relator’s investigator at the inception of the case 
violated DR 1-102(A)(4).  In addition, and although the board failed to pursue the 
matter, respondent admitted at oral argument that, as alleged in the amended 
complaint, he failed to file federal and state income tax returns timely for four 
years.  Respondent was not prosecuted by any taxing authority for this failure, but 
on similar occasions we have found that an evasion of tax reporting laws violated 
the Disciplinary Rules.  Disciplinary Counsel v. Massey (1998), 80 Ohio St.3d 605, 
687 N.E.2d 734. 
 
Given respondent’s participation in the kickback scheme, his lying to 
disciplinary authorities during the investigatory process, and his cavalier attitude 
about the use of his trust fund, a more severe sanction is warranted than that 
recommended by the board.  Respondent is hereby suspended from the practice of 
law for two years.  Costs are taxed to respondent. 
Judgment accordingly. 
 
MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY, PFEIFER, COOK and 
LUNDBERG STRATTON, JJ., concur. 
FOOTNOTE: 
1. 
The relator noted that respondent deposited more than $500,000 and kept it 
for nearly a month in his IOLTA (Interest on Lawyers Trust Account).  In this 
case, relator might have questioned whether respondent was derelict in his 
fiduciary duty to Glidden by placing such a substantial amount in an account such 
as an IOLTA, which provides no interest to a client.  An IOLTA is an account 
 
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which a lawyer may “establish * * * for purposes of depositing client funds * * * 
that are nominal in amount or are to be held * * * for a short period of time,” and 
which “[e]ach attorney who receives funds belonging to a client shall * * * 
[e]stablish.”  R.C. 4705.09(A)(1) and (2).  Attorneys have the discretion to 
determine what constitutes a nominal amount and a short period of time, R.C. 
4507.09(A)(3).