Case Title: In the Matter of Zak

Citation: 

Docket Number: SJC-12073

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2017-04-10T00:00:00Z

Document:
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SJC-12073 
 
IN THE MATTER OF DAVID ZAK. 
 
 
April 10, 2017. 
 
 
Attorney at Law, Disciplinary proceeding, Commingling of funds, 
Fee-sharing agreement, Advertising, Disbarment. 
 
 
 
The respondent attorney, David Zak, appeals from a judgment 
of a single justice of this court disbarring him from the 
practice of law.1  We affirm. 
 
 
Background.  Bar counsel filed a seven-count petition for 
discipline with the Board of Bar Overseers (board) against the 
respondent arising out of the respondent's solicitation and 
handling of a substantial number of mortgage loan modification 
cases over more than a four-year period.  See note 10, infra.  
Count one alleged that the respondent made payments to others to 
recommend his services and to solicit professional employment 
for the respondent from prospective clients;2 shared fees with 
nonlawyers;3 failed to instruct and supervise his employees and 
                                                          
 
 
1 This bar discipline appeal is subject to S.J.C. Rule 2:23 
(c), 471 Mass. 1303 (2015).  Pursuant to the rule, we dispense 
with oral argument, and decide the case on the basis of the 
materials filed by the respondent. 
 
 
2 These acts were alleged to be in violations of Mass. R. 
Prof. C. 7.2 (c), as appearing in 430 Mass. 1306 (1999); Mass. 
R. Prof. C. 7.3 (d) & (f), as amended, 431 Mass. 1302 (2000); 
and Mass. R. Prof. C. 8.4 (a), 426 Mass. 1429 (1998). 
 
 
3 This act was alleged to be in violation of Mass. R. Prof. 
C. 5.4 (a), as appearing in 430 Mass. 1303 (1999). 
2 
 
 
 
agents adequately;4 and engaged in the practice of law with a 
person who was not a lawyer.5  Count two charged that the 
respondent made false and misleading advertisements about 
himself, his law firm, and his loan modification services, in 
Massachusetts and other jurisdictions.6  Count three alleged that 
the respondent charged and collected advance fees for loan 
modification services, in violation of Federal and State 
statutes and regulations, and that the fees he charged were 
either excessive or illegal, or both.7  Count four alleged that 
the respondent provided or caused to be provided to clients 
false, deceptive or misleading information about his loan 
modification services.8  Counts five, six, and seven alleged 
misconduct during the respondent's handling of three specific 
loan modification matters, and in connection with bar counsel's 
investigation of complaints filed by those clients. 
 
 
The petition was referred to a special hearing officer.  
After a hearing, at which the respondent was represented by 
counsel, the hearing officer made detailed findings of fact and 
conclusions of law against the respondent on all counts, and 
recommended that the respondent be disbarred.  The hearing 
officer also recommended that the respondent be required to make 
restitution.  The respondent appealed to the board, focusing 
                                                          
 
 
4 This failure was alleged to be in violation of Mass. R. 
Prof. C. 5.3 (a), (b) & (c), 426 Mass. 1408 (1998). 
 
 
5 This act was alleged to be in violation of Mass. R. Prof. 
C. 5.4 (b), as appearing in 430 Mass. 1303 (1999). 
 
 
6 Count two alleged violations of Mass. R. Prof. C. 7.1, as 
appearing in 430 Mass. 1305 (1999); Mass. R. Prof. C. 7.2 (a), 
as appearing in 430 Mass. 1306 (1999); and Mass. R. Prof. C. 8.4 
(c), 426 Mass. 1429 (1998).  The petition for discipline also 
charged violation of the rules of professional conduct in 
Virginia, New York, Pennsylvania, and Rhode Island. 
 
 
7 Count three alleged violations of Mass. R. Prof. C. 1.5 
(a), as appearing in 459 Mass. 1301 (2011).  The petition for 
discipline also charged violation of rules of professional 
conduct of Rhode Island. 
 
 
8 Count four alleged violation of Mass. R. Prof. C. 1.1, 426 
Mass. 1308 (1998); Mass. R. Prof. C. 1.2 (c), 426 Mass. 1310 
(1998); Mass. R. Prof. C. 1.4 (b), 426 Mass. 1314 (1998); Mass. 
R. Prof. C. 5.3 (a) & (b), 426 Mass. 1408 (1998); and Mass. R. 
Prof. C. 8.4 (a) & (c). 
3 
 
 
 
primarily on the disciplinary recommendation.  The board adopted 
the hearing officer's findings of fact and conclusions of law, 
and voted to recommend that the respondent be disbarred.  
Although it declined to recommend that restitution be ordered, 
the board observed that failure to make restitution reflects 
poorly on an attorney's moral fitness to practice law.  The 
board thereafter filed an information in the county court, 
pursuant to S.J.C. 4:01, § 8 (6), as appearing in 453 Mass. 1310 
(2009).  After a hearing, the single justice concluded that the 
special hearing officer's findings were supported by substantial 
evidence, see S.J.C. Rule 4:01, § 8 (5) (a) and (6), and that 
those findings supported the board's conclusions regarding 
violations of the disciplinary rules.  She accepted the 
recommendation of the board as to sanction, and ordered that the 
respondent be disbarred. 
 
 
Discussion.  The respondent does not dispute that he 
engaged in the conduct described in the hearing officer's 
findings, which were adopted by the board.  We have thoroughly 
reviewed the record, and agree with the single justice that 
these findings were supported by substantial evidence.  There is 
no need to repeat the single justice's detailed discussion here.  
Quoting the board, the single justice observed that the 
respondent: 
 
"systematically extracted illegal and excessive fees from 
numerous vulnerable and desperate clients with deceptive 
advertisements, misleading contractual arrangements, and 
deceptive and useless services such as the 'lender benefit 
analysis' and the 'forensic loan audit.'  In addition, he 
engaged in unlawful fee-splitting to provide his partner 
and his employees with the financial incentive to use the 
machinations to enhance his personal financial interest at 
the expense of his clients." 
 
We focus instead on the respondent's claim that this misconduct 
warrants a public reprimand rather than disbarment.  For the 
reasons that follow, we reject that claim and conclude that 
disbarment is appropriate. 
 
 
a.  Specific challenges regarding disciplinary rule 
violations.  For the most part, the respondent does not dispute 
the board's determination that his actions violated numerous 
rules of professional conduct over a period of years.  See notes 
2-8, supra.  He does not, for example, dispute that he paid 
nonlawyers to recommend his services; charged and collected 
excessive fees; failed to return unearned portions of fees; made 
4 
 
 
 
or caused to be made intentionally misleading statements to 
vulnerable clients about the services he could or would provide; 
and with respect to one matter, charged and collected advance 
fees without depositing them in a client trust account and 
commingled personal and client funds.  Instead, he focuses his 
appeal on three aspects of the misconduct determinations.  We 
conclude that the single justice neither erred nor abused her 
discretion in rejecting his claims. 
 
 
1.  Advance fees.  Both State and Federal law prohibits a 
lawyer from charging advance fees for mortgage assistance relief 
services unless the fees are deposited into a client trust 
account.  See 940 Code Mass. Regs. § 25.02 (2) (2007); 12 C.F.R. 
§§ 1015.5 and 1015.7 (2017).  The respondent does not dispute 
either that he charged advance fees or that the advance fees 
were not deposited into a client trust account.  He argues 
instead that his conduct did not violate Mass. R. Prof. C. 1.5, 
as appearing in 459 Mass. 1301 (2011), which he says creates an 
independent right to collect advance fees for legal services.  
The single justice correctly rejected that claim.  Although the 
rule does not categorically proscribe collection of advance 
fees, it expressly prohibits lawyers from "collect[ing] an 
illegal or clearly excessive fee."  Fees charged or collected in 
violation of Federal or State statutes or regulations are 
prohibited under rule 1.5 (a).  See, e.g., Matter of Dialessi-
Lafley, 26 Mass. Att'y Discipline Rep. 133 (2010) (fee illegal 
where it violated Federal statute prohibiting collection of fees 
for acting as representative payee).  There was no error in the 
single justice's determination that the respondent violated rule 
1.5 (a). 
 
 
2.  Compensation.  The respondent does not dispute that, by 
paying nonlawyers (Elizabeth Reed and others) between $1,000 and 
$1,500 for referring clients to him, and encouraging them to 
solicit clients for a fee, he violated Mass. R. Prof. C. 5.4, as 
appearing in 430 Mass. 1303 (1999), multiple times.  He argues 
only that the particular profit-sharing agreement he had with 
Reed -- under which he expressly agreed to share with her the 
fees earned by a business entity and his law firm on loan 
modification cases -- did not violate the rule.  See Mass. R. 
Prof. C. 5.4 (a) (3). 
 
 
The limitations on fee sharing contained in rule 5.4 are 
intended to protect a lawyer's professional independence of 
judgment.  See Mass. R. Prof. C. 5.4, comment 1.  See also 
Restatement (Third) of the Law Governing Lawyers § 10 comment b 
(2000) (person entitled to portion of fee may attempt to 
5 
 
 
 
influence lawyer's services to maximize fees).  The rule also 
recognizes, however, that lawyers may compensate nonlawyer 
employees though a profit-sharing arrangement.  See Mass. R. 
Prof. C. 5.4 (a) (3).  We recognize that there is some support 
in other jurisdictions for the board's determination that, read 
in context, rule 5.4 (a) (3) permits a lawyer to share aggregate 
profits from legal fees with nonlawyer employees, but not 
profits that are tied to specific clients or cases.  See, e.g., 
American Bar Association Standing Comm. on Ethics and Prof. 
Responsibility, Formal Op. 13-464 at 2 (2013) ("exception for 
firm compensation and retirement plans depends on whether the 
profits being shared are 'tied to particular clients or 
particular matters'"), citing E.J. Bennett, E.J. Cohen & M. 
Wittaker, Annotated Model Rules of Prof. C. 461  (7th ed. 2011).  
Contrast In re Disciplinary Proceedings Against Weigel, 342 
Wis. 2d 129, 149-150 (2012) (bonus structure based on net 
profits of specific practice area rather than on net profits of 
firm's entire practice permissible).  We need not, however, 
resolve the issue in this case.  As the single justice observed: 
 
"even if the exception applies to the profit sharing 
agreement, the respondent's undisputed conduct in paying 
Reed, and the agents, $1,000 to $1,500 for each client they 
acquired, and for condoning and encouraging their 
solicitation of potential clients for a fee, itself clearly 
violates Mass. R. Prof. C. 5.4." 
 
The single justice did not err in finding that the respondent 
violated rule 5.4. 
 
 
3.  False advertising.  The respondent did not challenge in 
the county court the board's findings that he violated Mass. R. 
Prof. C. 7.1, as appearing in 430 Mass. 1305 (1999) (prohibiting 
false or misleading communications about lawyer or lawyer's 
services).  The single justice, however, considered the issue 
and properly determined that the respondent violated the rule in 
myriad ways.  The advertisements were made in States where the 
respondent neither was admitted to practice nor had business 
relationships with lawyers who were licensed.  Among other 
things, the advertisements misrepresented that the respondent 
was the only lawyer who knew how to obtain permanent loan 
modifications and that he would obtain trial loan modifications 
within thirty to sixty days, and they failed to acknowledge that 
it is the lender that makes modification decisions.  The 
advertisements additionally misrepresented that the respondent 
"sued the bank in every case," and that he would "pre-qualify" 
clients for Federal mortgages at no cost, when the clients were 
6 
 
 
 
actually charged a substantial fee.  The advertisements also 
omitted other significant and relevant information.  In 
addition, the respondent's Web site misrepresented facts such as 
the respondent's association with established, experienced 
attorneys in other jurisdictions; misstated the jurisdictions in 
which the his firm practiced; and misstated his prior 
employment, experience, training, and his own firm's tenure. 
 
 
The board determined, and the single justice agreed, that 
the advertisements contained false, material, misrepresentations 
of fact that violated rule 7.1 and Mass. R. Prof. C. 7.2 (a), as 
appearing in 430 Mass. 1306 (1999) (communication of services), 
and Mass. R. Prof. C. 8.4 (c), 426 Mass. 1429 (1998) 
(prohibiting dishonesty, fraud, deceit and misrepresentation).  
On the evidence before it, the board was warranted in rejecting 
the respondent's claims -- which he presses on appeal -- that 
the misrepresentations were "mere puffery," or inadvertent or 
sloppy use of language.  As the single justice's decision makes 
plain, there was substantial evidence to support the board's 
determination that the statements included deliberate falsehoods 
concerning the respondent's firm, and the results that he would 
be able to achieve.  There need not be evidence that a client 
was misled or deceived to establish a violation of the rules of 
professional conduct.  See Matter of Angwafo, 453 Mass. 28, 35 
(2009) (reliance not required).9 
 
 
b.  Sanction.  The rules of professional conduct, and the 
disciplinary proceedings that accompany their violation, exist 
to "protect the public and maintain its confidence in the 
integrity of the bar and the fairness and impartiality of our 
legal system."  Matter of Curry, 450 Mass. 503, 520-521 (2008).  
Accordingly, "[t]he appropriate level of discipline is that 
which is necessary to deter other attorneys and to protect the 
public."  Id. at 530.  While that determination ultimately is 
for this court, we, like the single justice, give deference to 
                                                          
 
 
9 We decline to consider the respondent's claim that the 
board erred in allowing bar counsel's prehearing motion to 
establish, on the basis of issue preclusion, certain facts 
concerning the respondent's association with Reed.  See Loan 
Modification Group, Inc. v. Reed, 694 F.3d 145, 147-148 (1st 
Cir. 2012) (jury determined that Reed and respondent agreed to 
enter into loan modification business together; and that 
respondent formed Loan Modification Group, Inc., as entity that 
would conduct "partnership business together with Reed").  The 
respondent did not raise this claim before the single justice.  
See Matter of Hoicka, 442 Mass. 1004, 1007 n.5 (2004). 
7 
 
 
 
"the board's recommendation, its experience, and its expertise 
to try and dispose of disciplinary matters uniformly."  Matter 
of Eisenhauer, 426 Mass. 448, 455, cert. denied, 524 U.S. 919 
(1998).  See Matter of Foley, 439 Mass. 324, 333 (2003).  We 
agree with the single justice that the board's recommended 
sanction of disbarment is appropriate in this case. 
 
 
The respondent's misconduct involved repeated and multiple 
ethical violations in connection with loan modification and 
mortgage foreclosure cases over a number of years.10  We 
acknowledge that a single violation of one of the disciplinary 
rules at issue here might typically result in an admonition, 
public reprimand, or, perhaps, a term suspension.  But it is 
well established that disciplinary violations are not viewed in 
isolation.  We consider instead the "cumulative effect of the 
several violations committed by the respondent."  Matter of 
Palmer, 413 Mass. 33, 38 (1992).  See Matter of Crossen, 450 
Mass. 533, 574 (2008) ("[c]umulative and wide-ranging misconduct 
may warrant the sanction of disbarment, even if the individual 
instances of unethical conduct would not warrant so severe a 
sanction"); Matter of Saab, 406 Mass. 315, 326-327 (1989).  As 
the board observed, "[e]ven minor violations, when aggregated, 
can result in a substantial sanction exceeding what each alone 
would receive." 
 
The repeated nature of the respondent's misconduct, over a 
period of years, involving hundreds of economically, 
educationally, and linguistically disadvantaged clients in 
                                                          
 
 
10 At the hearing before the single justice, it was not 
disputed that the respondent had more than 500 loan modification 
clients; that between forty and sixty of them have filed claims 
with the Attorney General; and that approximately twenty clients 
filed complaints with the Massachusetts Commission Against 
Discrimination.  The respondent's counsel suggested that 
restitution of the amounts at issue would be in the hundreds of 
thousands of dollars. 
 
 
Clients of the respondent who were harmed by his dishonest 
conduct may be able to obtain reimbursement for their losses 
from the Clients' Security Board, established pursuant to S.J.C. 
Rule 4:04, § 1, as amended, 428 Mass. 1301 (1998).  We 
understand that, as a matter of course, the board and bar 
counsel inform victimized clients of that possibility in 
appropriate cases, and we ask that they ensure that the 
appropriate victims in this case are so informed.  We express no 
view here as to whether any such claimants in this case ought to 
be compensated by the Clients' Security Board. 
8 
 
 
 
strained financial circumstances, evidenced by threatened 
foreclosure of their homes, warrants a substantial sanction.  
See Matter of Lupo, 447 Mass. 345, 358 (2006) (pattern of self-
dealing and self-enrichment at expense of elderly, 
unsophisticated and vulnerable warranted indefinite suspension).  
See also Matter of Greene, 476 Mass. 1006, 1010-1011 (2016) 
(accepting board's recommendation of indefinite suspension for 
misconduct in connection with residential mortgage foreclosure 
"rescue transactions").  In addition, the respondent has refused 
to return unearned fees.  See Matter of Sharif, 459 Mass. 558, 
571 (2011) (three-year suspension for conduct including 
intentional misuse of client fees, with aggravating and 
mitigating factors).  Through the date of the hearing before the 
single justice, the respondent continued to practice law, 
notwithstanding the recommendation of disbarment.  Matter of 
Cobb, 445 Mass. 452, 480 (2005).  In at least two matters, the 
respondent advised clients who were not facing foreclosure to 
stop making mortgage payments (in one case, so the client could 
pay the respondent), see Matter of Lupo, supra at 359, and they 
were forced into foreclosure and lost their homes.  See Matter 
of Pike, 408 Mass. 740, 745 (1990). 
 
 
Although there appears to be no Massachusetts case 
involving precisely the same misconduct in connecting with loan 
modification clients, the misconduct in Matter of Cammarano, 29 
Mass. Att'y Discipline Rep. 82 (2013), is similar.  In that 
case, the attorney was indefinitely suspended for misconduct in 
connection with five immigration matters.  Id. at 85.  In each 
matter, the respondent agreed to file certain immigration 
documents, set a flat fee for services, and demanded payment of 
retainers and filing fees before beginning work.  Id. at 88.  In 
each case, the immigration documents either were not filed or 
were returned because the filing fee was incorrect.  Id.  In 
each case, the board found that the respondent intentionally 
misrepresented the status of the matter to the client.  Id.  
Eventually, successor counsel was able to obtain the desired 
result in four of the cases; the fifth case was still pending at 
the time of the hearing.  Id.  The respondent in that case 
refused to refund any portion of the fees.  Id.  The single 
justice concluded an indefinite suspension was warranted 
because: 
 
"the respondent neglected multiple client matters, over a 
period of several years, and deliberately and knowingly 
made misrepresentations to those clients concerning the 
status of their cases.  He drafted fee agreements which, by 
stating that retainers were nonrefundable, on their faces 
9 
 
 
 
violated the rules of professional conduct, and was solely 
responsible for enforcement of his firm's improper no-
refund policy; he has continued to refuse to refund any of 
the fees, notwithstanding the involvement of bar 
counsel. . . . 
 
 
"Considered with the other conduct found by the board, 
see Matter of Palmer, 413 Mass. [at 38] (we consider 'the 
cumulative effect of the several violations committed by 
the respondent'), including the respondent's refusal to 
acknowledge any wrongdoing, his attempts to blame employees 
for his actions, his statements that are inconsistent with 
the record and that the hearing officer found blatantly 
noncredible, and his treatment of particularly vulnerable 
clients, I have little doubt that indefinite suspension is 
the appropriate sanction in this case, in order to preserve 
trust and confidence in the legal profession." 
 
Id. at 105-106.  We agree that the respondent's misconduct in 
this case is comparable to, but more egregious than, the 
attorney's misconduct in Cammarano.  We therefore accept the 
board's recommendation that disbarment is appropriate.11 
 
 
As the hearing officer, the board, and the single justice 
all properly recognized, there were no factors that could be 
weighed in mitigation of the respondent's misconduct.  Factors 
that we have considered as not rising to the level of "special 
                                                          
 
 
11 The single justice additionally found that, with respect 
to one client, the respondent charged a "retainer" rather than a 
"flat fee," and failed to deposit it into his client trust 
account.  He also failed to provide the notices, bills, and 
accountings before withdrawing funds, as required by the rules 
of professional conduct, commingled client funds with his own, 
and converted the funds to his own use.  Although the respondent 
continues to press his claim that the payment was a "flat fee" 
that properly could be deposited into an operating account, the 
hearing officer, the board, and the single justice concluded 
that, based on the language of the fee agreement, the payment 
was a retainer.  On that basis, the single justice reasoned that 
the respondent's deliberate use of those unearned client funds, 
with deprivation resulting and without restitution to the 
client, merits a presumptive sanction of disbarment by itself.  
See, e.g., Matter of Sharif, 459 Mass. 558, 565 (2011).  The 
respondent's unadorned statement in his memorandum that a "flat 
fee" was involved does not rise to the level of appellate 
argument. 
10 
 
 
 
mitigating factors" include a "long and distinguished career of 
public service and . . . many pro bono services," Matter of 
Finneran, 455 Mass. 722, 735 (2010); the absence of "evil motive 
or racial animus," id. at 736; a good reputation in the 
community, Matter of Moore, 442 Mass. 285, 294 (2004); and 
services to an underserved population, id.  Although the 
respondent claims that he helped "hundreds" of clients avoid 
foreclosure, the record does not establish how many or to what 
extent those clients many have been aided, whether they were 
charged excessive fees for services that had little or no value 
to them, or whether the services could have been obtained for 
less or no cost.  In any event, we do not weigh as a factor in 
mitigation that an attorney properly performed legal services 
for some clients.  As the single justice observed, that "is 
simply the type of conduct expected of an ordinary reasonable 
attorney."  See Matter of Dawkins, 412 Mass. 90, 96 (1992), 
S.C., 432 Mass. 1009 (2000) ("we are not so pessimistic about 
the ethics of lawyers as to conclude that a lawyer who conforms 
to the expected standard of conduct in some respects thereby has 
established mitigating circumstances").  Although the respondent 
may have served some clients in accordance with his professional 
obligations, "that fact alone does not overcome the harm he 
visited upon . . . the particular client[s] involved in this 
case."  Id. at 97. 
 
 
Although we see no factors to be weighed in mitigation, 
there are multiple factors that the board properly weighed in 
aggravation.  As the board found, the respondent took advantage 
of economically vulnerable clients; acted for selfish and 
pecuniary reasons; and failed to acknowledge the wrongfulness of 
his conduct.  He has refused to return unearned fees and has 
refused to acknowledge that his actions caused clients harm, 
including the loss of homes through foreclosure.  He also failed 
to comply with discovery orders, both in the disciplinary 
proceeding and in other proceedings.  He has not made 
restitution.  Matter of McCarthy, 23 Mass. Att'y Discipline Rep. 
469, 470 (2007). 
 
 
Conclusion.  The primary factor in bar discipline cases is 
"the effect upon, and perception of, the public and the bar" 
(citation omitted).  Matter of Finnerty, 418 Mass. 821, 829 
(2008).  Considering the extent of the misconduct, weighing the 
presence of the factors in aggravation and the absence of 
factors in mitigation, and giving due deference to the board's 
recommendation, we conclude there was no error in the single 
justice's judgment that disbarment is warranted. 
 
11 
 
 
 
 
 
 
 
 
 
 
Judgment of disbarment  
 
 
 
 
 
 
 
  affirmed. 
 
 
 
The case was submitted on the papers filed, accompanied by 
a memorandum of law. 
 
Gregory M. Sullivan for the respondent.