Court Opinion

ID: 4679351
Source: CourtListenerOpinion
Date Created: 2021-04-21 14:13:33.566563+00
Date Added: 2024-06-11T08:03:50.049231
License: Public Domain

THE STATE OF SOUTH CAROLINA
                       In The Supreme Court

            In the Matter of Peter D. Korn, Respondent

            Appellate Case No. 2021-000025

                             Opinion No. 28021
                 Submitted April 1, 2021 – Filed April 21, 2021

                            PUBLIC REPRIMAND

            Disciplinary Counsel John S. Nichols and Senior
            Assistant Disciplinary Counsel C. Tex Davis Jr., both of
            Columbia, for the Office of Disciplinary Counsel.

            Harvey M. Watson, III, of Ballard & Watson, Attorneys
            at Law, of West Columbia, for Respondent.

PER CURIAM: In this attorney disciplinary matter, Respondent and the Office
of Disciplinary Counsel (ODC) have entered into an Agreement for Discipline by
Consent (Agreement) pursuant to Rule 21 of the Rules for Lawyer Disciplinary
Enforcement (RLDE) contained in Rule 413 of the South Carolina Appellate Court
Rules (SCACR). In the Agreement, Respondent admits misconduct, consents to
either a confidential admonition or a public reprimand, agrees to pay costs, and
agrees to complete the Legal Ethics and Practice Program Ethics School, Trust
Account School, and Advertising School within one year. We accept the
Agreement and issue a public reprimand. The facts, as set forth in the Agreement,
are as follows.

                                       12
                                          I.

                                      Matter A

Respondent has practiced in the default services area for approximately four
decades and opened his own law firm in 1989, which he incorporated as Korn Law
Firm, P.A. (KLF). Respondent and KLF represented lenders in default matters.
Demand for foreclosure legal services ballooned in the late 2000s when a recession
left many lenders with a glut of defaulted mortgages. Respondent grew KLF to
accommodate client demand, and at one time, KLF had approximately 150 firm
employees. The growth was neither controlled nor permanent.

Respondent and KLF hired ABC Legal Services (ABC) in 2009 to coordinate
service of process for the firm's foreclosure litigation cases. KLF needed to serve a
high volume of defendants and ABC's invoices were substantial. KLF and ABC
did not enter into a written agreement for services.

Federal and state efforts to stem the tide of the foreclosure crisis with legislation,
administrative actions, and a state-wide temporary stay of foreclosures slowed
Respondent's business considerably. Respondent reports the national lenders who
dominated his client base instructed KLF to resist reducing its size and overhead
and insisted a renewed deluge of foreclosures was forthcoming. The second wave
never materialized and KLF became crippled by its overhead. Respondent
attempted to keep the firm afloat by leveraging his personal and firm assets, but it
was not enough.

KLF fell behind on many financial obligations including payments to ABC. Email
correspondence between KLF and ABC reflects that KLF was typically
significantly behind in paying ABC and often submitted payments without clearly
identifying the invoices being paid. Despite the late and incomplete payments,
ABC continued to accept work from, and coordinate service for, KLF. In total,
KLF paid ABC approximately $1,600,000 from October 2009 through August
2014, but still owed ABC more than half that amount. Although Respondent
submits some of KLF's clients failed to pay or were late to pay the firm, he
acknowledges the firm's clients generally expected the firm to advance costs and
that the firm was compensated for the costs it incurred in the vast majority of

                                          13
foreclosure actions. The firm simply fell behind in making payments to ABC, and
once it did so, never managed to bring its payments current.

On September 15, 2014, Respondent and KLF entered into an agreement with
Florida-based law firm Butler and Hosch, P.A. (B&H) in which B&H agreed to
assume and complete all of KLF's open files and collect payments due to the firm.
The collected funds were to be used to pay KLF's debts, including its debt to
Synovus Bank (Synovus), which held a protected security interest in KLF's
accounts receivable, other income KLF received in the normal course of business,
and some firm assets. Respondent and most of the KLF employees became
employees of B&H as part of the agreement Respondent and KLF made with
B&H.

On September 19, 2014, Respondent signed a $745,478.08 confession of judgment
in favor of ABC on behalf of KLF. At the time, Respondent was KLF's sole
officer, director, and shareholder. When contacted by the sheriff in an attempt to
collect against the judgment, KLF offered a $10,000 cashier's check as partial
payment. ABC rejected the offer and the sheriff returned the execution nulla bona.

On December 1, 2014, ABC filed a disciplinary complaint against Respondent. On
December 30, 2014, ABC filed a lawsuit against KLF, Respondent, B&H, and
others in federal court. On January 14, 2015, ABC commenced supplemental
proceedings in state court to enforce the judgment. Respondent responded to the
disciplinary complaint on January 20, 2015 alleging that ABC was using the
disciplinary process solely for civil advantage.

The federal court relieved ABC's counsel on July 15, 2015, and directed ABC to
retain new counsel by July 30, 2015. ABC did not retain new counsel, and the case
was dismissed for failure to prosecute by order dated August 17, 2015.

During the supplemental proceedings in state court, Synovus made an appearance
and obtained an order directing KLF to remit funds collected on the firm's accounts
receivable to Synovus. On February 25, 2016, ABC assigned its interest in its
judgment against KLF to Synovus, and Synovus filed notice of the assignment
with the circuit court. Thereafter, on June 8, 2016, the Master-in-Equity held
Robert Hosch of B&H in contempt for exerting control over proceeds from KLF's

                                        14
accounts receivable and ordered him to return $695,000 in funds or pay the same to
Synovus.

Respondent acknowledges he failed to ensure his firm paid ABC for the services it
provided that enabled the firm to continue its foreclosure practice, even though the
firm had, with limited exception, received payment for those very bills from its
clients.

Respondent admits his conduct in this matter violated the following Rules of
Professional Conduct in Rule 407, SCACR: Rule 4.4(a) (respect for rights of third
persons); and Rule 8.4(e) (conduct prejudicial to the administration of justice).

                                     Matter B

KLF represented lender Specialized Loan Servicing, Inc. (SLS) in a condominium
foreclosure action, as well as the Federal Home Loan Mortgage Corporation
(Freddie Mac), to whom SLS had assigned the winning foreclosure bid. The
foreclosure action was finalized in early June 2014, but KLF did not send the deed
and Master's commission to the Master-in-Equity until October 2014. Respondent
does not acknowledge the delay was caused by KLF's cash flow problem, but he
does acknowledge the firm was experiencing a cash flow problem and that the
commission check payable to the Master-in-Equity was issued from B&H's cost
advance account although some KLF accounts were still active at that time.

By this time, Freddie Mac had marketed the condominium and Complainant RB
had contracted to purchase the property. Lawyer signed the purchase contract on
behalf of Freddie Mac. A closing date was scheduled for late October 2014. The
closing was extended, and RB's closing attorney, unaware that the deed had just
been forwarded to the Master-in-Equity, questioned whether a perceived defect in
the foreclosure process had resulted in a title problem. The closing was extended,
but when Freddie Mac still did not have title in late November 2014, Freddie Mac
chose to cancel the contract and the parties agreed RB was entitled to the return of
the $1,000 in earnest money KLF was holding for the transaction. Despite
multiple requests from RB and his realtor, the earnest money was not returned until
late January 2015.

                                         15
RB filed a disciplinary complaint against a different attorney on January 22, 2015.
Based on the investigation of that matter, ODC issued a notice of investigation to
Respondent on June 22, 2015. Respondent responded to the notice of investigation
on August 10, 2015.

Respondent admits his conduct in this matter violated Rule 1.15(d), RPC, Rule
407, SCACR (prompt delivery of trust account funds a third party is entitled to
receive).

                                        II.

Respondent acknowledges his conduct in the above matters violated Rule 7(a)(1),
RLDE, Rule 413, SCACR (a violation of the Rules of Professional Conduct
constitutes grounds for discipline).

Respondent also agrees that within thirty days of the imposition of discipline, he
will pay the costs incurred in the investigation and prosecution of this matter by
ODC and the Commission on Lawyer Conduct (Commission). As a condition of
discipline, Respondent also agrees to complete the Legal Ethics and Practice
Program Ethics School, Trust Account School, and Advertising School within one
year.

                                        III.

We find Respondent's misconduct warrants a public reprimand. Accordingly, we
accept the Agreement and publicly reprimand Respondent for his misconduct.
Within thirty (30) days of the date of this opinion, Respondent shall pay or enter
into a reasonable payment plan with the Commission to pay the costs incurred in
the investigation and prosecution of this matter by ODC and the Commission.
Within one year of the date of this opinion, Respondent shall complete the Legal
Ethics and Practice Program Ethics School, Trust Account School, and Advertising
School.

PUBLIC REPRIMAND.

BEATTY, C.J., KITTREDGE, HEARN, FEW and JAMES, JJ., concur.

                                        16