Opinion ID: 4510942
Heading Depth: 1
Heading Rank: 1

Heading: Pertinent Background

Text: A. Procedural History of the Attorney-Client Dispute The California disbarment was rooted in the respondent’s representation of Raymond H. Albers, Jr. and his wife, Deanna J. Albers. They had retained the respondent in 1998 to file a civil action in the United States District Court for the Central District of California. The respondent filed the lawsuit, but it was dismissed primarily because of his clients’ lack of standing to sue. Subsequent to the dismissal of their civil action, a disagreement arose regarding the respondent’s fee. The Alberses asserted their statutory right to arbitration before a three-member panel of the Los Angeles County Bar Association. The Association’s arbitration entity, known as “Dispute Resolution Services,” convened a hearing at which the respondent failed to appear personally but was represented by counsel. The result of the evidentiary hearing was an award issued on January 14, 2005, in favor of the Alberses. The arbitration panel determined that the civil action filed by the respondent had no merit, that the Alberses had paid him $735,481.32 in fees and costs, and that these substantial fees could have been avoided if respondent had made an effective pre-filing 5 investigation of his client’s claims and their corresponding lack of authority to file suit. The panel concluded that a pre-filing investigation reasonably should have cost the Alberses only $8,500.00 (based upon 20 hours of work at the undisputed hourly rate of $425.00). The arbitration panel further ruled that the respondent was required to refund the Alberses the sum of $726,981.32. Furthermore, because the respondent had failed to appear personally, in violation of the applicable statute covering fee disputes, the panel also determined that the respondent would not be entitled to contest the award at a trial following arbitration. To illuminate the arguments of Disciplinary Counsel, we summarize the nature of the civil action and why the arbitrators found that the fees billed to Mr. and Mrs. Albers were unconscionable. The Alberses retained the respondent to sue the defendants they allege had illegally sold Internet space on a certain commercial website to the parents of Mr. Albers. The arbitrators determined that one of the key reasons for the collapse of the lawsuit was the respondent’s failure to investigate the case so as to learn of his clients’ lack of standing. The arbitrators reasoned that the high fees could have been avoided because an adequate pre-filing investigation would have obviated the need to expend significantly more billable time.1 1 The arbitration panel was impressed by the following facts revealing why (continued…) 6 The Los Angeles County Superior Court granted the Alberses’ petition to confirm the arbitration award and on February 24, 2012, entered a judgment against the respondent in the total amount of $731,831.25 (inclusive of final arbitration and court costs). The respondent appealed this judgment, but the Court of Appeal of California affirmed the judgment in a detailed opinion of November 6, 2013.2 In the record before us, it is uncontested that the respondent has never satisfied the money judgment. B. Basis for the California Disbarment The disbarment resulted from the following events in the California disciplinary process. These historical details inform our analysis of the issues now before us. (…continued) the Alberses had no authority to file their lawsuit. The judge who dismissed the original complaint found that the two defendants were in bankruptcy and that the Alberses had failed to join certain other indispensible parties. When the respondent filed an amended complaint, it was dismissed for a simple, threshold reason, i.e., the claims were not those of his clients. The Alberses had no fiduciary authority to sue on behalf of the parents of Mr. Albers. His father was deceased, but neither Mr. Albers nor his wife was the Personal Representative of the decedent’s estate (even assuming that anyone had opened an estate). The mother of Mr. Albers was still alive, but had not retained the respondent or granted powerof-attorney to her son or daughter-in-law to file suit on her behalf. 2 Albers v. Naegele, No. B240455, 2013 WL 5945676 (Cal. Ct. App. Nov. 6, 2013) (unpublished). 7 On July 31, 2014, the Office of the Chief Trial Counsel of the State Bar filed a Notice of Disciplinary Charges (“NDC”). That document enumerated three specific charges or Counts: (1) “Unconscionable Fee,” (2) “Failure to Refund Unearned Attorney Fees;” and (3) “Failure to Update Membership Address.” Each Count was accompanied by a narrative explanation of what the respondent did or failed to do constituting the commission of each charge. The NDC specified that any failure to participate in the disciplinary process would result in disbarment. Naegele failed to respond, and the State Bar Court entered a default against him on October 1, 2014. Since the respondent took no steps to have the default vacated, the State Bar successfully petitioned the State Bar Court to disbar him by default, as permitted by Cal. Bar. R. 5.82. One of the three Counts did not survive judicial scrutiny, despite the default. In its decision filed on April 21, 2015, the State Bar Court ordered the respondent’s disbarment, but only based upon two of the three Counts: “Charging an Unconscionable Fee” and “Failure to Update Membership Address.” Explaining why the disbarment could not be predicated upon the remaining charge of “Failure to Refund Unearned Attorney Fees,” the Bar Court concluded that it lacked “the information necessary to determine what portion of respondent’s attorney fees was earned.” The Bar Court elaborated: 8 Count Two – the court does not find respondent culpable of willfully violating Rules of Professional Conduct, rule [sic] 3-700(D)(2) (failing to refund unearned fees), as alleged. The facts supporting Count Two, i.e., that respondent did not earn ‘any part’ of the fees received from his clients, are inconsistent with the facts found in Count One which imply that respondent committed some degree of time and labor, but not to the extent warranting the amount of attorney fees charged and collected. While the State Bar alleged that respondent obtained ‘dismal results,’ it has not been shown by clear and convincing evidence that he failed to perform legal services with competence. Based on the conflicting evidence, it has not been established that respondent did not earn any part of the fees received from his clients, as alleged in Count Two. Accordingly, Count Two is dismissed with prejudice.3 The Supreme Court of California ordered the disbarment, based upon Naegele’s default.