Title: The Florida Bar v. Peter G. Herman

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC17-2050 
____________ 
 
THE FLORIDA BAR, 
Complainant, 
 
vs. 
 
PETER G. HERMAN, 
Respondent. 
 
June 18, 2020 
 
PER CURIAM. 
 
We have for review a referee’s report recommending that Respondent, Peter 
G. Herman, be found guilty of professional misconduct and suspended from the 
practice of law for eighteen months.  We have jurisdiction.  See art. V, § 15, Fla. 
Const.  As discussed below, we remand this case to the referee for further 
proceedings and reconsideration in light of this opinion and for the filing of an 
amended report. 
BACKGROUND 
 
This case arises entirely out of Herman’s personal bankruptcy proceeding.  
More specifically, the case is about certain final disclosures that Herman allegedly 
 
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failed to make in that proceeding.  The disclosures at issue relate to bonus 
compensation that Herman hoped to receive after filing his Chapter 7 bankruptcy 
petition.  In November 2017, The Florida Bar (Bar) filed a complaint with this 
Court alleging that Herman “had an obligation to be forthright” in his bankruptcy 
financial disclosure forms and that he failed to live up to that obligation.1 
The complaint alleged that Herman’s conduct violated the following Rules 
Regulating the Florida Bar (Bar Rules):  3-4.2 (“Violation of the Rules of 
Professional Conduct . . . is a cause for discipline.”); 3-4.3 (“[Acts] contrary to 
honesty and justice may constitute a cause for discipline . . . .”); 4-3.3(a)(1) (“A 
lawyer shall not knowingly . . . make a false statement of fact or law to a tribunal . 
. . .”); 4-3.4(a) (“A lawyer must not . . . unlawfully obstruct another party’s access 
to evidence or . . . conceal a document or other material that a lawyer knows or 
reasonably should know is relevant to a pending or a reasonably foreseeable 
proceeding . . . .”); 4-8.4(a) (“A lawyer shall not . . . violate or attempt to violate 
the Rules of Professional Conduct . . . .”); and 4-8.4(c) (“A lawyer shall not . . . 
engage in conduct involving dishonesty, fraud, deceit, or misrepresentation . . . .”).  
 
1.  The Bar’s complaint also alleged that Herman committed misconduct by failing 
to disclose $46,000 in prepetition transfers to an account beyond his creditors’ 
reach.  The referee recommended that Herman be found not guilty on the transfer-
related charges, and the Bar has not sought review of that recommendation. 
 
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This Court referred the Bar’s complaint to a referee for a hearing and 
recommendation, and the referee made the following findings of fact. 
In December 2011, CIB Marine Capital, LLC (CIB) obtained a deficiency 
judgment of approximately $4.5 million against Herman, based upon the 
nonpayment of a loan that he personally guaranteed for Esquire Ventures, LLC, in 
connection with a real estate investment that failed in 2007.  CIB Marine Capital, 
LLC v. Esquire Ventures, LLC, No. 2009CA010465 (Fla. 19th Cir. Ct. Dec. 9, 
2011).  CIB immediately pursued collection proceedings against Herman on the 
judgment.  Then, on February 18, 2012, Herman filed a petition for Chapter 7 
bankruptcy as a debtor because he did not have the funds available to satisfy the 
judgment that had been levied against him.  In re Herman, 495 B.R. 555 (Bankr. 
S.D. Fla. 2013). 
When Herman initiated his bankruptcy proceeding, he was employed as a 
“director” with Tripp Scott, P.A.  As a director, Herman’s salary was determined 
by Tripp Scott’s compensation committee.  Additionally, he received an annual 
performance bonus.  However, there was no written contract between Herman and 
Tripp Scott regarding this compensation package. 
Prior to filing for bankruptcy, Herman served as co-lead counsel, along with 
another Tripp Scott attorney, in two high-value contingency cases.  The plaintiffs 
in those cases prevailed.  Under the governing fee agreements, Tripp Scott 
 
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received approximately $10 million in combined legal fees.  The law firm received 
the fees after Herman filed his bankruptcy petition, but before March 20, 2012, the 
date Herman filed the financial disclosure schedules at issue in this case. 
 
Beginning in December 2011 and continuing into early January 2012 (i.e., 
before he filed for bankruptcy), Herman had sent approximately six emails to the 
president of Tripp Scott, Edward Pozzuoli, as well as to members of Tripp Scott’s 
compensation committee.  Anticipating that the firm would be receiving its fees 
from the contingency cases, and having heard rumors that fee allocation 
discussions were already underway within the firm, Herman wrote the e-mails to 
advocate his position about how the fees should be distributed.  Among other 
things, Herman expressed that he wanted Tripp Scott to be consistent with its 
historical practices in awarding bonuses.  Ultimately, the compensation committee 
did not allocate bonuses from the fees until August 2012.  Herman’s bonus was 
$2.7 million; however, in light of his ongoing bankruptcy proceeding, those funds 
were placed in trust. 
During Herman’s bankruptcy proceeding, CIB objected to the petition for 
discharge, alleging that Herman had:  (1) intentionally concealed prepetition assets; 
(2) failed to disclose prepetition transfers of assets; and (3) made false oaths in 
connection therewith.  Relevant to this case, CIB claimed that Herman 
intentionally failed to disclose his anticipated bonus from the $10 million fee.  In 
 
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June 2013, the bankruptcy court held a trial on CIB’s and the bankruptcy trustee’s 
objection to Herman’s bankruptcy discharge. 
 
At the conclusion of that trial, the bankruptcy court entered a seventy-one-
page order denying Herman’s petition for discharge.  The court concluded that 
Herman had deliberately concealed his expected bonus share of the $10 million fee 
and that Herman had done so with the intent to hinder, delay, or defraud his 
creditors.  In re Herman, 495 B.R. at 595-97.  The bankruptcy court did not 
consider an advice of counsel defense, because Herman did not timely plead one.  
The United States District Court for the Southern District of Florida affirmed the 
bankruptcy court’s order.  Herman v. CIB Marine Capital, LLC, No. 13-cv-62251-
KMM (S.D. Fla. Sept. 29, 2014).  In light of the nature of the bankruptcy court’s 
findings and the district court’s affirmance, the district court forwarded the matter 
to the U.S. Attorney for the Southern District of Florida and to the Bar. 
 
The hearing on the Bar’s complaint included testimony from Herman’s 
bankruptcy attorney, Bart Houston.  Houston’s testimony centered on two 
particular schedules to Herman’s bankruptcy petition:  schedule B and schedule I.  
Schedule B focuses on property of the estate at the time of the bankruptcy petition.  
Houston testified that his “unequivocal” advice to Herman was that it was 
unnecessary to report an interest in Tripp Scott’s $10 million fee from the 
contingency cases, including an interest in the form of Herman’s expected bonus, 
 
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because the bonus was discretionary and not vested when Herman filed his 
bankruptcy petition.  Schedule I includes question 17, which asks:  “Describe any 
increase or decrease in income reasonably anticipated to occur within the year 
following the filing of [the bankruptcy schedules].”  Houston testified that he chose 
the exact wording in Herman’s response:  “Annual performance bonus (historically 
65,000 – 70,000).”  The referee’s report says:  “Houston explained that he chose 
this methodology in order to put the Trustee on notice that [Herman] could be 
expected to receive an intangible bonus in the next year.”  Herman testified that he 
relied on Houston’s advice in filling out both schedule B and schedule I. 
 
In his Report and Recommendation, the referee recommended that Herman 
be found guilty of violating the Bar rules charged in the complaint.  The referee 
found that, by failing to disclose his expected bonus from Tripp Scott’s $10 million 
fee, Herman intentionally misled the bankruptcy trustee and Herman’s creditors.  
The referee noted that he based this finding not just on the court orders from 
Herman’s bankruptcy proceeding, but also on the evidence and testimony 
presented at the hearing in this case.  The referee rejected Herman’s advice of 
counsel defense, concluding:  “First and arguably foremost, reliance on advice of 
counsel is not available as a defense in a Bar discipline proceeding.”  As a 
sanction, the referee recommended that Herman be suspended for 18 months. 
 
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ANALYSIS 
On review, the Bar argues that the referee’s proposed sanction is too lenient 
and that Herman should instead be disbarred.  Herman in turn challenges the 
referee’s recommended findings and recommendation as to guilt and argues that, in 
any event, the referee’s recommended sanction is too harsh. 
Our decision to remand this case to the referee for further proceedings turns 
on Herman’s advice of counsel defense, so we will start there.  Our most important 
precedent on this issue is Florida Bar v. Adorno, 60 So. 3d 1016 (Fla. 2011), 
which involved alleged violations of the Bar’s conflict of interest rules, its rules 
against dishonesty, and its rule prohibiting excessive attorney’s fees.  We 
concluded that Adorno violated those rules when he secretly settled a putative class 
action solely on behalf of the named plaintiffs and “abandoned” the putative class, 
thereby creating “a windfall for the named plaintiffs and his firm.”  Id. at 1035.  In 
Adorno, we declined even to consider the respondent’s advice of counsel defense.  
We cited our earlier decision in Florida Bar v. St. Louis, 967 So. 2d 108 (Fla. 
2007), for the proposition that advice of counsel “is not a defense available to 
respondents in Florida Bar discipline cases, unless specifically provided for in a 
rule or considered as a matter in mitigation.”  Adorno, 60 So. 3d at 1028.2  We 
 
2.  In Adorno, we erroneously described this as a holding of St. Louis.  The 
relevant passage from St. Louis appears in the opinion’s description of the referee’s 
findings and recommendation, not in the Court’s own analysis, which did not 
 
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observed that Adorno “had the obligation to act to the benefit of the entire class” 
and that he could not avoid a finding of misconduct “by attempting to shift blame 
to others.”  Adorno, 60 So. 3d at 1028. 
While we do not fault the referee for interpreting this Court’s precedent as 
he did, the general principle we articulated in Adorno is not so unyielding as to 
preclude consideration of Herman’s advice of counsel defense in this case.  The 
reason an advice of counsel defense is usually unavailable in Bar discipline 
proceedings is that the Bar rules themselves charge Florida lawyers with 
knowledge of the rules and of “the standards of ethical and professional conduct 
prescribed by this court.”  R. Regulating Fla. Bar 3-4.1.  But here, Herman does 
not claim that he relied on the advice of counsel as to the meaning and 
requirements of any Bar rule.  Nor does this case have anything to do with 
Herman’s work as an attorney serving clients.  Instead, Herman himself was the 
client, and the charges in this case are inextricably intertwined with Herman’s 
obligations under federal bankruptcy law.  The Bar rules at issue did not require of 
Herman anything over and above what federal bankruptcy law already required—
honesty and good faith in completing his bankruptcy schedules.  To the extent that 
federal bankruptcy law permits an advice of counsel defense to negate a finding of 
 
address the advice of counsel defense.  See St. Louis, 967 So. 2d at 118.  This error 
is of no consequence, however, because we stand by the general principle that an 
advice of counsel defense is usually unavailable in Bar discipline proceedings. 
 
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bad intent, we conclude that such a defense should also be available to Herman in 
this Bar discipline proceeding. 
Where the truthfulness of a debtor’s financial disclosures is in dispute, 
federal bankruptcy law includes an “element of mens rea that involves an 
assessment of whether the debtor made the false statement ‘knowingly and 
fraudulently,’ as opposed to carelessly.”  Robinson v. Worley, 849 F.3d 577, 583 
(4th Cir. 2017) (quoting 11 U.S.C. § 727(a)(4)(A) (2012)).  In determining 
culpability, “reliance on counsel generally absolves a debtor of fraudulent intent.”  
Id. at 586.  But there are conditions on the availability of this defense.  The court 
must determine whether the debtor acted in good faith.  To make that showing, the 
“debtor must demonstrate that he provided the attorney with all the necessary facts 
and documentation.”  Id.  And even then, the defense is unavailable if “it should 
have been obvious to the debtor that his attorney was mistaken” or if a disclosure is 
incompatible with the debtor’s own knowledge.  Id.  The advice of counsel defense 
does not negate fraudulent intent “when it is transparently plain that the property 
should be scheduled.”  In re Zizza, 875 F.3d 728, 732 (1st Cir. 2017) (citation 
omitted).  In short, “[a] debtor may rely on the advice of counsel only when the 
advice is reasonable.”  In re Creasy, 138 F. App’x 45, 46 (9th Cir. 2005). 
Herman is entitled to assert the same advice of counsel defense in this Bar 
discipline proceeding, subject to the conditions we have just described.  All of the 
 
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Bar rules at issue in this case prohibit conduct that is knowingly or intentionally 
dishonest.  To establish that Herman is guilty of misconduct, the Bar would have to 
prove by clear and convincing evidence not only that Herman’s bankruptcy 
disclosures were false or misleading, but also that Herman knew that they were 
false or misleading.  Put differently, the Bar would have to prove that Herman’s 
answers to the questions on his bankruptcy schedules were not made in good faith.  
The advice Herman received from counsel, along with whether Herman relied on 
that advice in good faith, is relevant to determining whether the Bar can prove its 
case. 
Without prejudging the merits, we believe that Herman’s advice of counsel 
defense is sufficiently plausible that it cannot be taken off the table without 
consideration by the referee.  Recall that there are two schedules at issue, schedule 
B and schedule I.  Schedule B attempts to identify the property of the bankruptcy 
estate as of the time the bankruptcy petition is filed (here February 2012).  Whether 
something is property of the estate turns on considerations of both state property 
law and federal bankruptcy law.  A key focus of Herman’s bankruptcy case was 
the extent to which Herman’s bonus was discretionary.  Herman argued that the 
bonus was too discretionary for it to be considered property of his bankruptcy 
estate.  The bankruptcy court disagreed, concluding that Tripp Scott’s 
compensation committee “only had discretion to determine what amount, within a 
 
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reasonable range, of the $10 million fee would be paid to the debtor based upon his 
prepetition performance.”  Herman, 495 B.R. at 583. 
This dispute continued into Herman’s Bar discipline proceeding.  The 
referee heard from experts who reached opposite conclusions on whether 
bankruptcy law obligated Herman to disclose on schedule B a potential bonus from 
Tripp Scott’s $10 million fee in the contingency cases.  Herman’s expert testified 
that the bonus was discretionary and a mere expectancy that did not need to be 
disclosed on that schedule.  Relying heavily on the bankruptcy court’s analysis, the 
Bar’s expert witness testified to the contrary.  But he acknowledged that in the 
governing case law “there is some uncertainty as to what the outcome is, not just 
on the law, but on the facts, that you have to look into the practicalities from a 
practice issue of how to respond to the questions.”  The Bar’s expert agreed that it 
was a “fair statement” that the disclosure issue for schedule B “comes down to” 
whether Herman’s bonus was vested or discretionary.  In light of the conflicting 
expert testimony and the acknowledged uncertainty in the case law, Herman 
deserves to have his advice of counsel defense considered. 
The potential merit of Herman’s advice of counsel defense as to schedule I is 
a closer call.  Recall that question 17 of that schedule asks:  “Describe any increase 
or decrease in income reasonably anticipated to occur within the year following the 
 
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filing of [the bankruptcy schedules].”  Herman’s answer on this schedule was: 
“Annual performance bonus (historically 65,000 – 70,000).” 
At the hearing, Bar counsel asked Herman:  “When you wrote that answer to 
that question, you weren’t referencing any of the fees from [one of the contingency 
fee cases], were you?”  Herman responded: 
That’s not true.  First of all, this was written by Mr. Houston.  I 
certainly reviewed it and signed it, no question about that.  However, 
in my practice at Tripp, Scott for 30 years, we’ve always gotten a 
discretionary bonus at the end of the year for whatever work we had 
done.  Some years, we didn’t get bonuses, but if there was going to be 
an award of a bonus, it was usually toward the end of the year.  So, in 
my mind, based on whatever performance and money that would 
come in and would be available for a bonus, that would be considered 
an increase in my salary, an annual performance bonus, and 
parenthetically, the reason that’s parenthetical, is because it says, it 
gave him a clue, that’s what I got in the past, and I would likely get a 
bonus for 2012. 
 
Later at the hearing, in response to a question from his own attorney, Herman 
testified that his bankruptcy counsel had told him that there would be follow-up for 
the trustee to learn more detail about the performance bonus:  “For instance, 
Schedule I, he said, the bonus, likely what will happen is, the trustee will go to 
your employer and come to you and try to figure out what that might be, and that’s 
exactly what happened in this case.” 
 
Bart Houston, Herman’s bankruptcy counsel, also testified about schedule I 
at the hearing.  Consistent with Herman, Houston testified that he had authored 
Herman’s response to question 17.  Houston answered “no” when he was asked 
 
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whether the contingency fee cases had been part of his “thought process” in 
drafting an answer for the schedule.  Houston testified that, because the amount of 
Herman’s bonus was indeterminate, “[y]ou couldn’t really pick one out, so I 
averaged out two or three years and put that number down, and if the trustee 
wanted to take off from there, he had the information to do it.” 
The Bar’s expert faulted Herman’s answer to schedule I, question 17.  But 
the expert’s testimony left doubt as to what level of disclosure would have been 
sufficient.  For example, although the testimony is not entirely clear, the expert 
appeared to indicate that it would have been sufficient for Herman simply to 
answer “annual bonus,” and that the problem with Herman’s answer to question 17 
is that he added the parenthetical “(historically 65,000 – 70,000).”  According to 
the expert, “the way [Herman] answered the question suggested that that was what 
he would get.”  This testimony seemingly ignores the wording of question 17, 
which asks about increases or decreases in income.  Because it is undisputed that 
for 30 years Herman’s income has typically included a performance bonus, an 
answer that conveys information about Herman’s bonus “historically” merely 
provides a baseline from which to measure any such increase or decrease. 
Admittedly, there is a heavy factual component to schedule I, question 17, 
whereas in schedule B the legal issues are more prominent.  That is what makes the 
potential viability of Herman’s advice of counsel defense as to schedule I a closer 
 
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call.  But there are several reasons why the defense cannot be entirely discounted at 
the threshold, without additional consideration and findings by the referee.  First, 
because the amount of Herman’s bonus remained unknown at the relevant time, 
and because the range of the law firm’s discretion was open to dispute, answering 
question 17 required the exercise of some judgment.  Second, the question asks 
about “reasonably anticipated” increases or decreases in income.  Here we observe 
that the referee made ample findings as to Herman’s subjective expectations, but 
none as to the law firm’s perspective (and what it conveyed to Herman) at the time.  
The picture is incomplete without that information.  And finally, the Bar expert’s 
testimony left some doubt as to whether or how far Herman’s answer to question 
17 strayed from the acceptable conventions of bankruptcy practice.  If Herman 
could conceivably have complied with the governing requirements simply by 
answering “annual performance bonus” (and omitting the parenthetical about his 
bonus historically), then Herman’s advice of counsel defense might make a 
difference. 
For the benefit of the referee and the parties, we conclude by commenting on 
two aspects of the referee’s report that might come up again on remand.  First, as a 
partial explanation of his decision not to consider Herman’s advice of counsel 
defense, the referee indicated that Herman negated the defense by conducting his 
own legal research about the requirements of schedule B.  Herman and Houston 
 
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testified that this research consisted mainly of Herman reading a handful of cases 
that Houston provided him.  Without more, we do not see how this “legal research” 
cuts against Herman’s advice of counsel defense—especially considering that the 
defense turns in part on whether the debtor/client’s reliance on counsel was 
reasonable and in good faith. 
Second, we note that the relevant inquiry in this Bar discipline proceeding is 
not the prudence of Herman’s answers on the bankruptcy schedules.  The referee 
here concluded that the conflicting testimony of the “two learned experts” in this 
case “serves only to underscore what the District Court Judge observed in his 
order:  ‘Clearly, the better course of action in the case of a possible difference of 
opinion about the law is to air [sic] on the side of disclosure.’ ”  To respond to 
Herman’s advice of counsel defense and to justify a conclusion that Herman is 
guilty of intentional misconduct, it will not be enough for the Bar to prove that 
Herman did not resolve close calls by erring on the side of disclosure. 
To sum up:  we hold that, under the circumstances here, Herman is entitled 
to present an advice of counsel defense to rebut the charge that he was 
intentionally dishonest in the schedules to his personal bankruptcy petition.  Earlier 
in this opinion we have described the nature of that defense and the preconditions 
to its assertion.  Here the referee declined to consider Herman’s advice of counsel 
defense at all.  And the referee relied significantly (though not exclusively) on a 
 
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bankruptcy court order that also did not consider the defense and that the court 
decided under a lower standard of proof than the clear and convincing evidence 
standard that governs in a Bar discipline case.  Of course, though Herman bears a 
burden of production to come forward with the evidence necessary to support his 
advice of counsel defense, the ultimate burden of proof always remains on the Bar. 
We remand this matter to the referee for further proceedings and 
reconsideration and for the filing of an amended report.  The referee shall file an 
amended report within 90 days from the date of this opinion. 
It is so ordered. 
CANADY, C.J., and POLSTON, LABARGA, LAWSON, and MUÑIZ, JJ., 
concur. 
COURIEL, J., did not participate. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, 
IF FILED, DETERMINED. 
 
Original Proceeding – The Florida Bar 
 
Joshua E. Doyle, Executive Director, Tallahassee, Florida, Patricia Ann Toro 
Savitz, Staff Counsel, and Joi L. Pearsall, Bar Counsel, The Florida Bar, Sunrise, 
Florida, 
 
for Complainant 
 
David B. Rothman and Jeanne T. Melendez of Rothman & Associates, P.A., 
Miami, Florida, 
 
for Respondent